Good morning, ladies and gentlemen. And welcome to the Investor and Analyst Conference Call for HSBC Holdings plc's Annual Results 2018. For your information, this conference is being recorded. At this time, I will hand the call over to your host, Mr. John Flint, Group Chief Executive.

Good afternoon from Hong Kong, good morning in London, and welcome to our 2018 HSBC Annual Results Call. With me today is Ewen Stevenson, Group Chief Financial Officer. I'll start by putting the results in the context of our strategy and broader vision for the bank before Ewen takes a look at the numbers, and I'll finish by talking a little bit more about 2019. In June, I outlined eight strategic priorities to get the organization growing again and create value for shareholders. Those priorities focus on delivering growth from areas of strength, particularly from our Asia franchise. They commit us to redeploying capital to higher return businesses and the turnaround of our U.S. business, but they also aim to fundamentally change some elements of the bank, so we can compete in the long term and serve our customers better. In particular, we are focused on improving our digital services and future capabilities. We are also committed to improving our ESG performance and creating stronger, healthier relationships with all of our stakeholders. This includes all 235,000 people who work for HSBC. Helping our people be at their best is the critical enabler of our business strategy and absolutely fundamental delivering our financial targets. If we can do all that, and I'm confident that we can, then the financial outcomes should be a return on tangible equity above 11% and a stable dividend. We made encouraging progress against seven of our eight strategic priorities in 2018. We've accelerated growth from Asia and our international network. We've established the U.K. ring-fence bank, grown our U.K. customer base and increased our U.K. market share. We've also delivered more sustainable financing and continued to be a leading player in helping clients make the low carbon transition. The U.S. turnaround is our most challenging strategic…

Thanks, John. Good morning or afternoon all. Particular thanks to those of you in London, happen to be up early today. It's a pleasure to be presenting my first full set of full year results at HSBC. And despite a softer fourth quarter, it's a good set of full year numbers. John just talked about the strategic progress we made last year, and you can also see this reflected in our financial performance. Underpinning our business strategy is a clear set of financial objectives. We're targeting growth where we've sustainable competitive advantage. We're investing both to support that growth and to accelerate our digital transformation. And we're also actively managing our capital base as we transition to higher returns, sustaining our dividend, keeping a healthy core Tier 1 ratio and funding our growth aspirations. A few numbers for you for full year 2018. Reported revenues were $53.8 billion, some $2.3 billion or 5% higher than 2017. Reported pretax profits were $19.9 billion, 16% higher than the previous year. On an adjusted basis, revenues were up 4%, and pretax profits were up 3%. Our return on tangible equity was up 180 basis points to 8.6%, and earnings per share were up more than 30% to $0.63. Adjusted loan growth was 8%, while RWA growth was 2%. Our core equity Tier 1 ratio was 14% at year end. We declared a final dividend of $0.21, representing a stable full year dividend of $0.51. Slide 4 breaks down our full year revenue performance in more detail. While total adjusted revenue growth was 4%, this masks much stronger underlying growth in the areas we've targeted. Looking at are four global business is in turn. Retail Banking and Wealth Management had a very good year with particularly strong growth in Hong Kong and the U.K.…

Ewen, thank you. So we have taken the first steps in getting HSBC back to growth. We're doing what we set out to deliver: growing revenues from areas of strength, using capital more efficiently and investing in the future of the business while empowering our people. This is reflected in a good set of numbers for 2018. As I said earlier, the outlook for 2019 has softened. Uncertainty and risk in the global economy is higher, relating mainly to the U.K. economy, global trade tensions and the future part of interest rates. This is yet to translate into higher credit losses, but that could change if the global economy deteriorates further. We made a good start to 2019, but we remain alert to the downside risks of the current economic environment. And we will be proactive in managing costs and investment to meet any risks to revenue growth. We remain committed to the plan that we outlined last June. The strategy is working, and the long-term drivers of revenue growth remains strong. The fundamentals of growth in Asia are sound. We expect China to avoid a hard landing and continue growing. And while barriers to trade are increasing in parts of the world, they're also falling rapidly in others, especially Asia. We're also at the heart of financing the low carbon transition, one of the biggest drivers of global investment this century. At the same time, we have a business that is diversified, resilient and well-placed to navigate the risks inherent in today's world. So HSBC is in a good position. I'm encouraged by our progress and looking forward to the year ahead. We remain focused on growing returns, creating value for shareholders and meeting our return on tangible equity target of greater than 11% by 2020. We will now take questions. The operator will explain the procedure and introduce the first question. Operator?

Thank you, Mr. Flint. [Operator Instructions] We would now take our first question from Magdalena Stoklosa from Morgan Stanley. Your line is now open.

Thank you very much.

Morning…

Good morning. I will - I have two questions. One is about the revenues within the retail division, and that's Page 5 I will be referring to. And the second one is a little bit - is on NII. So let me start with the Page 5. Ewen, could you give us a sense what it would take to reverse some of the kind of the negative delta that we have seen within the Insurance Manufacturing and Wealth Management? Of course, you have talked about the market impact, but of course, I'm sure there's also a big transactional impact there as well. So could you give us a sense of how - of the moving parts of those two revenue sources, particularly with the year-to-date market trends and what you're seeing kind of in Asia transactionally? So that's one. And two, I will try to draw you on the NII discussion because we are - of course, there's a lot of moving parts, as you've mentioned in your remarks. But of course, year-to-date, particularly, they all look more challenging. So we've got the flatter curve, the absolute levels of HIBOR - the HIBOR, LIBOR spread, the mix shift and, of course, not even mentioning the good old kind of assets, asset spread competition across your key markets. But you still kind of mentioned that you think your NII is going to grow slightly. But how should we think about, particularly Hong Kong and U.K., in U.K. margins in that context of what's been happening kind of year-to-date? Thank you.

Thank you. So I think John is going to take your first question on Insurance Manufacturing.

Yeah. Magdalena, hi. It's John. Thanks for the questions. So Page 5, at the top bar, the Insurance Manufacturing market impacts and then the one below that is the Wealth Management excluding market impacts. So to the extent that there was any lower customer activity, you can read that into the $51 million number. The big number on top, the 205 is the effect of the previous accounting for insurance. So we present value enforce all of the contracts. And in substance, when risk assets fall in value, we take losses to the P&L. And when risk assets drives in value, we take profits through the P&L. The vast majority of that negative adjustment in the fourth quarter, the $205 million, was driven by weakness in the equity markets, predominantly in Hong Kong. Now when we do actually disclose that sensitivity somewhere, I can't remember which page, but we can put you to that there later. And given what's happened to equity markets since the start of the year, I think it's reasonable to kind of read across a lot of that will have been reversed to the course of this year already, but it still remains subject to any future movements in markets. So it really is market driven not primarily customer-driven. Ewen, on the NIM?

Okay. On NIM, I didn't mean to convey that I was overwhelmingly negative. I just sort of wasn't going to forecast it. The NIM in Q4 was 163 basis points. And as we look out in 2019 and you'll obviously - we had a run rate numbers almost, yeah, we're continuing to see some benefit come through from rate rises in 2018. We continue to see a mixed shift going on because we're growing, lending faster than deposits, which is obviously beneficial to NIM in some markets. That's clearly the case like the U.K. where we continue to have excess funding position in our ring-fenced bank. I talked about earlier the fact that we've done the liquidity repositioning in the non-ring-fenced bank that we had to do in the second half because, effectively, ring-fencing created a funding surplus inside the ring-fence and liquidity deficit outside the ring-fence that we had to address. We're obviously continuing to build up our MREL stack that will have some impact on margins, and I'm not going to predict, yes, what will happen when asset liability spreads. But yes, there's a bunch of pluses. There is some neutral factors. There is some negative factors in that. But I think the main underlying driver of net interest income growth in 2019 will be no different to what we saw in 2018, i.e., it will be driven by underlying volume growth that we see. And we continue to be reasonably positive about the volume growth that we're going to be able to put on in various markets.

Okay, perfect. Thank you very much.

Thanks, Magdalena.

Our next question today comes from Chris Manners from Barclays Research. Your line is now open.

Hi, Chris.

Hi, Ewen. How are you doing?

Very well. Thanks.

And well, thanks very much for your first set of results at HSBC. So just sort of two questions, if I may. The first one is on, sorry to bring it back, is the net interest margin again. Maybe if you could talk a little bit about the U.K. dynamics. You obviously have a lot of surplus liquidity in your ring-fenced bank. But then, when we look at some of the offers that you have out there, like the 1.6% and one year fixed-rate bond, it does look like you're sort of paying up in certain segments. And so just maybe trying to understand a little bit more about the U.K. net interest margin and how you expect that to develop? And the second question was on the sort of revenue outlook. When we look where consensus is, and it's about $57.5 billion of revenue for 2019. And if we look at your revenue you just printed for the year of $54 billion, we re-profile it for current FX, that would probably get you down to about 52.5. That looks to me that you probably need about 10% revenue growth to get to where consensus is? Do you think that's achievable? And it's just trying to work out what parts of the business might be able to grow at that pace and what parts might struggle? Thank you.

Okay. Well, on U.K., look, I wouldn't read, over-read into the fact that we have a short term deposit offer at on the U.K. market at the moment. The overall funding spreads in the U.K., funding spreads in the U.K. continue to be - we have one of the lowest funding cost in the U.K. We continue to enjoy a significant funding surplus. I think we are sensitive to the fact when we look at future deposit pressures in the U.K., the fact that term funding scheme has got over $120 billion of funding out in the market, we obviously didn't take any of that. That, as you know, about three to four years of funding growth in the U.K. So understanding price elasticity is stuff that we'll do ever so often. Yes, that offer out of the market. I think at the moment, in totality has less than one basis point impact on our net interest margin in the U.K. On the revenue outlook, a couple of things. Firstly, I mean, if you look at Slide 4 on full year adjusted revenue performance, you'll see any number of those line items, the red bars, they're volatile items that we would expect some or much of that to turn around in 2019 depending on how much of that you want to take. I think that provides about 2% to 3% of underlying revenue growth support into '19. As I said, we continue to be reasonably positive on loan growth in 2019. I think you can run your own analysis on what you think will happen to NIM. I don't think that gets us to close to double-digit revenue growth in '19. But so consensus, if you're saying it's a $57 billion feels a bit high in that respect, then worth implying 10% revenue growth.

Okay. That basically makes lots of sense. To get to the sort of lower baseline to get that 10% revenue growth, what I was doing is taking your sort of Q4 adjusted FX revenues, the ones that you re-profile for the rest of the year, which got me to about 52.5 rather than the 54 reported. That's how I got to that number.

Yes. But I think, equally, you probably need to adjust consensus somewhat for FX as well because I don't think consensus has been adjusted for the same FX, which may be you take $1.5 billion consensus for that as well.

Cool. Okay, that makes a lot of sense. Thanks, Ewen.

Thanks, Chris.

Our next question today comes from Alastair Ryan from Bank of America. Your line is open.

Hi, Alastair.

Afternoon. Welcome. One on Hong Kong and one Global Banking and Markets, please. On Hong Kong, there's quite material slowdown in both loans and current and savings account in the market in Hong Kong. You had good momentum in the fourth quarter, but does that catch you up into Q1? It looks cyclical rather than permanent, but it is quite material. So things are sort of going backwards rather than forwards at present, is that your experience as well? And then Global Banking and Markets, were there anything wrong you'd called out in the fourth quarter? I mean, rates and credits were very poor. And those are naturally volatile items, but they are sort of particularly weak this quarter. Was there anything you'd call out or that was just - that was just a market in and round with sort of the income mix of GB&M? Thank you.

Alastair, it's John. I'll start, and Ewen will chip in. Hong Kong balance sheet, so we saw an obviously very, very strong year in Hong Kong last year. Revenue was up 14%, really good balance sheet growth. We saw that moderate towards the end of the year. Just checking in with the team, early part of yesterday for the first part of the year, it's fine actually. So I think your question kind of suggested that there was going to be a drop off into the beginning of this year from where we were last year. And I'm not aware that that's what we've seen. But I do think we should expect to see a reflection of that, a lower rate of asset this year than we enjoyed last year. I think the other thing to note whenever we think about Hong Kong is just the state of the HIBOR, LIBOR basis, which is very wide at the moment, kind of wide for quite a while now. And there's nothing in the market other than the fact that we're close to the top of the TT [ph] band that suggest, other than that, nothing that suggested that's going to narrow in the short term. That's for Hong Kong. With respect to GB&M, I think worth remembering, we had a really strong third quarter and the fourth quarter was weak by kind of any measure. But relative to the third quarter, it looked extraordinarily weak because we had a great quarter in Q3, much of that was driven by FX. I'm not sure we've got any called wrong. I don't think there any big market positions in the fourth quarter that we've got wrong. Our results in the fourth quarter kind of stacked up with the other Europeans. We're quite a long way behind the Americans, driven mostly by equities. But our equity franchise is small relative to the Americans. The Americans outperformed. So I think it's just one of those quarter. I don't think there was anything particular.

No, I think, as you know, Alistair, is that the mix of our GB&M business is different to others given that we have more transactional-related business in there. And if you look at the underlying trends in some of the transactional businesses last year, they continue to be very positive. FX, Security Services, Global Liquidity and Cash Management all had double-digit growth rates. So while the overall market franchise for the full year was down 7%, I think in terms of revenues, the Global Banking and Markets in totality was up one. And Samir and the team did that while managing our RWAs down by 4% too. So they did well.

That clear. Thanks very much.

Thank you.

Next question today comes from Tom Rayner from Numis. Please ask your question.

Hi, Tom.

Thank you. Hi. Good morning, Ewen. Good morning, John. Good afternoon, where we are. Couple, please. Just to stick on the NIM, one final NIM question maybe. I think if I miss out Q3 - can you hear me?

Yes.

Yes. So I think the Q3 NIM was 169, so that's fallen to 163 in Q4. I think there was also a basis point in there with the hyperinflation, that would have been 162. It's quite a big drop in the quarter. Could you just help us understand how that splits down between the liquidity issue in the U.K. and maybe some other competitive issue in Hong Kong? And then I've got a second question on the ECL, please. I can give you that now or wait.

Yes. There were a few things going on Q4 NIM. There was liquidity buildup going on in the non-ring-fenced bank, partly in anticipation of Brexit. So if anything, yes, we're over liquefied in the normal things bank at the moment and will continue to be so. There was a bit of NIM pressure on the deposit side in Hong Kong. And there was slightly lower balances in Global Banking and Markets and some of the Global Liquidity and Cash Management over to our products. But the biggest swing, I think, were the first two things I talked about. In terms of where to from here, I wouldn't view that drop as something we view as that we would anticipate seeing in Q1.

Okay. All right, thanks. The second one, when you talk of normalizing charge, the sort of low end of the 30 to 40 basis point range, which I think is fairly in line with what consensus expects over the next two to three years. Have you - when you talk about the ECL charges going to, are you thinking about any additional buildup in the coverage on Stage 1 and Stage 2 as things normalize? So maybe something...

I mean…

The charge higher…

You all may noted had the charge yet, but we provided some additional disclosure on Pages 98 and 99 of the Annual Report.

Can you give that right now?

You will see in there, yes, what our economic scenarios are for the U.K. We've also taken an economic scenario on trade description. Yes, as we look at - when we guide to higher ECL charges the next couple of years, I think we're just being prudent. If you back out the additional U.K. overlay we took 18 points for the full year, it was about 16 basis points, ex that. There's a long way to go from there to get to the low end of the 30 to 40 basis point range. Yes, those overlays, when you look at the U.K. overlays, we've got $400 million in total, which certainly, to date, is higher than U.K. peers, so even though we've got a smaller book. And if you look in last year's stress test results, actually a less stressed book than others. So we feel that we are being appropriately conservative there. And we can even imagine scenarios in the U.K. where we get to softer visions of Brexit would cause us to revisit that overlay and write some good back during the year. So yes, they normalize. But how quickly they normalize, I don't know. The only place is we talked about earlier that we're seeing any softness at the moment in credit is the U.K., and most of that's not to do with Brexit.

Okay. Lovely, thanks a lot. That's helpful.

Thanks, Tom.

Next question comes from Ronit Ghose from Citi. Your line is open.

Morning.

Great. Thanks. Hi, thanks. It's three quick questions, please. Just if I can go back to NIM. So the standalone exit run rate, the 162 basis points in the fourth quarter, and if assuming rates don't change from here, are there any positives that I should be thinking about the year ahead? I know you don't want to guide explicitly, and are there positives - I can think of lots of negatives that I need to add to the 62 exit run rate. But what are the positives I should be thinking of? Is question number one. Question number two is on buybacks. I think that you said that you'd like - you're hoping to neutralize the scrip dividend. But can I just - could just clarify what your plans are on the buyback? That would be great. And thirdly, circling back to - you called out John, January started well. How much of this is simply a reversal of marks in the tough end of the year November, December going positive in GB&M in Q1? Or is there anything else you want to call out about January going well? Thank you.

Do you want to do buybacks, John? I'll come back to the other two...

Sure. I'll do buybacks, and then talk about January, December things. And then we'll come back to you for the - to NIM again since you're so good at this now.

I know you love NIM so.

Yes. Buybacks, so I think what we're saying is our policy towards buybacks has not changed. What we intend to do is neutralize the scrip take-up, and over time, use buybacks to keep the share count broadly stable. At this point, I don't want to get drawn into a conversation about the timing of the next buyback. But the policy remains the same, message [ph] is the same. We want to keep the share count broadly stable over the medium term. So that's buybacks. With respect to what we've seen in January, fairly, there is and there's clearly some element of revenue slipping out of December into January. Outside of that, I would say January has been a solid month. We're seeing lower levels of credit demand in some parts of the group than at the same time last year. So we note that. I think for the retail investors in Asia, they're a big part of our revenue base. Their core investing activity is holding up well, but they're equity broking activity is low, for example. So there are definitely some signs that customer's confidence is in some way impacted by the trade tensions on the uncertain outlook. But the balance sheet is holding up well. No issues as Ewen has already indicated from a credit perspective. And yes, there's definitely some slip of revenues out of December into January, both the Retail business and I think, to some extent, also in Global Markets as well.

Yes, and sort of positive things on NIM that I report, too. We still are getting some benefit from that rate rises that happened in '18. I think we still do anticipate some further rate rises in '19, albeit at a slower rate than what we may have anticipated one or two quarters ago. We are getting benefit in terms of mix shift going on. In several markets, we're growing, lending faster than deposits. We've got, as you can see from our liquidity metrics in most markets, still pretty liquid in most markets, and therefore, we can continue to sustain that for a while. The only thing I would say is they're not - I wouldn't be too negatives on top of each other, i.e., if you're going to see margin pressure, it's probably because asset quality trends are benign. And therefore, yes, take the two together. But if you're going to take a harsh view on margin pressure, then I think you do need to slow down and organization of the ECL charges as part of that because the two go hand-in-hand with each other.

Sure. Thanks for that. I'm just thinking I'm circling back to your earlier comments about moderate or modest NII growth, because I've got 162 exit run rate, given you started the year in Q1 at 167 or so, and then you had rate rises during the year, so let's just assume there aren't rate rises from here, then I'm looking at year-on-year quite a big delta on NIMs. So I'm struggling to get even moderate NII growth. I guess, it goes back to what we decide is moderate at that point. That's it. Yes, I guess, it circles back to what Chris was saying before about consensus looks quite punchy right now on NII?

Well, again, I sort of go back to the fact that we grew average interest-earning assets last year by 7%. NIM expanded by three basis points. And we grew net interest income accordingly. The growth and underlying volume growth will be a key support for net interest income growth in 2019. And we are positioned in a bunch of markets that are growing. Last year, we grew in top line revenues. Just as a reminder, in Hong Kong at 14%, and Mainland China were at 14%, Retail Banking at 13%, Commercial Banking at 12%. There is very few other banks in the U.K. that are achieving that.

Great, great. No, I mean, obviously, you had a strong tailwind going into last year, and you started the year strong into the volumes and NIMs. But given where we are today, I guess, you're looking at more like low single digit NII growth based on your comments. So you then need pretty strong non-NII growth to get to the kind of previous guidance of mid-single-digit revenue growth?

Those are your comments, not mine.

Indeed. Indeed. Is there - can I have a quick supplementary, just going back to cost because I know - I know we don't want to get too hung up on jaws, particularly on a short-term basis. But based on my comments that just made of low singles to NII growth and it's going to be a challenge to get to mid-single-digit revenue growth. What kind of - can you just elaborate a bit more what you're doing sort of levers you can pull on cost, John and Ewen?

Yes, sure. So I think worth remembering that we start this year in a fundamentally different position with respect to jaws than when we started last year. So we transitioned from '17 into '18 moving away from a CTA budget of $3 billion to zero. So we spent pretty much all of '18 chasing the jaws discipline. And the plan was to get to land positive jaws in December. And for the reasons we just stepped through, we missed it. But the way that we planned this year, we're not going to be chasing jaws, I would expect to see quite a different start to the year from a jaws' perspective. Now we are noting that the revenue outlook is a little more difficult than it was at this point last year. So as Ewen indicated in his remarks, we are facing some of the planned investments that we've contemplated probably three to six months ago. We're not changing how we plan to invest or what we prioritize, but we'll phase it and we'll defer some of the spend. So that's what we're doing now effectively. We'll still be investing more this year probably than we invested last year. But the rate of growth will moderate in line with what we see is the revenue outlook.

Great. Thanks, John.

Thank you.

Next question comes from Joseph Dickerson from Jeffries. Your line is now open.

Hi. Good morning, guys.

Hi, Joseph.

Hi. A couple of quick things, if I may. Just on the comment around the U.K. softness. How broad-based is that? And one of your competitors have reported last week got very close to your heart, Ewen, who lends to one out of every two corporates in the U.K., but not indicate that there was a broad-based deterioration outside of a few single names here and there. So how broad-based does the U.K.? And what are the mechanics between the $165 million effectively Brexit top-ups, I mean, what's top-up and why not 100 or 500 - I mean, what drives that calculation thereon? Number one. And then number two, I think alluded to, but could you just clarify, I mean, it looks to me like there was just under $400 million in Q4 quarter-on-quarter swing in low-quality revenues, notably in GB&M around principal investments and credit and funding valuation adjustment. So since you've been already discussing the start to the year, could you just discuss what drove the Q4 result there and how we might think about that having started the year? Thanks.

Yes. Look, on softness, I would sort of echo the comments from my - the bank that's close to my heart - I reported last week, we don't see that as a broad-based deterioration at the moment. It is quite concentrated on a few sectors, high street retailers, risk-driven change and the like, some of the government contractors. So very, very specific at the moment, not broad-based. The $165 million charge is, I mean, as you know, under IFRS 9, with forward economic guidance, we need to construct a set of forward economic forecast, which we do in our Annual Report. We then need the probability widened what we've done this quarter because of Brexit and because of the - yes, it's hard to call a central economic scenario at the moment in the U.K. So we broaden out the probabilities across a range of scenarios. Obviously, the skew is to the downside, and that creates the need for that additional overlay. You can put different probabilities in and no doubt, as the year progresses, we will get a different probabilities depending on the future of the Brexit negotiations. Yes, there were negative funding and credit valuation adjustments in Q4. And those - and there were swings in principal investments. So you should assume that they are not repeated so far in 2019.

Thanks. I guess, I'd also ask, John, you mentioned the fundamentals of Asian growth are sound, I think along those lines. But what gives you conviction? What really drives that comment?

Well, there's nothing fundamentally that's changed other than, I guess, the injection of trade tensions between China and the U.S., which are not to be diminished in any way. They are significant, and they are causing customers to pause. But otherwise, the demographic trends that underpin Asia's growth, the emerging middle class, the very high savings rates, et cetera, all of those drivers remain intact. And we've got a strategically privileged position for that, particularly in Hong Kong and Greater China. So yes, we're not - it remains sound. I think we're looking at slightly lower rates of growth this year in Asia than we saw last year. But otherwise, we're talking about another year of growth.

Great. Thanks.

Next question comes from Chris Cant from Autonomous Research. Your line is now open.

Hi, Chris.

Morning. Thank you for taking my questions. I just have two quick ones, please. I appreciate your guide on NIM. But obviously, you made reference to the HIBOR, LIBOR gap. I was wondering if you could just give us a sense of how you think about the sensitivity to changes in that gap if we do see that move over the course of the year, just sort of a rough for the somewhat be really helpful. And you also talked in your opening remarks about flexing cost growth given the softer revenue outlook, just looking at your consensus - consensus looking for about 4% cost growth in 2019, do you think you can do better than that potentially given that you just did about 6% cost growth year-over-year into 2018, 4% already seem to give you some credit for slower cost growth. I'm just wondering how you're thinking about the cost number if that's a scenario focus for you? Thank you.

Yes. Chris, hi. It's John's. So I'll do the first on HIBOR, LIBOR. So yes, the HIBOR, LIBOR basis is kind of round about a 100 basis point in the one month at the moment and that's wide as it's been. We either need to see intervention, i.e., the exchange rate move through the top of the band and Hong Kong dollars ran to the system that way. That's either going to happen either through FX demand or through IPO activity in the Hong Kong market, which will often great liquidity squeezes. I think we need to see some revolutionary in the U.S. China trade tensions before we see Hong Kong's, China IPO pipeline open back up again, so a lot of the things to watch for. We do show NII sensitivity in our appendices. If Hong Kong dollars 100 basis point uplift show closing that basis on the full year would benefit us to the tune of US$700 million to US$800 million, it's that kind of order of magnitude. So it is material. And at the moment, I don't think that basis will widen from here. I don't think it will deteriorate or get any worse than 100. That would be my view. But if it were to close, on a full year basis, it's kind of $700 million to $800 million number, as indicated in the table, somewhere in our annual report.

Yes. On the cost growth, Chris, it's sort of a real luxury to me being at HSBC and being able to talk about cost growth, something I wasn't used to in my previous role. So can we manage cost below 4% growth? Yes. I think the trade-off we're constantly debating internally is we can continue to pace the growth of investment growth, consistent with headcount growth, consistent with what we see going on in terms of underlying volume and revenue growth. And to the extent we've already started so far this year with a much more prudent view on pace of investment growth and pace on headcount in the areas that we want to grow into, consistent with more uncertain revenue outlook. As that revenue outlook firms out one way or the other, I think we'll dictate the pace of cost growth.

Okay. Thank you.

Next question comes from Ed Firth from KBW. Your line is now open.

Morning.

Morning, everybody. Just a very quick question, actually back on revenue. I said I've got a lot of mixed messages about revenue growth in terms of one-offs and in terms of underlying drivers, et cetera. So can I just ask you a simpler question, which is if we look at a 2019, are you expecting revenue growth to be better or worse than 2018?

Okay. So I'm not sure if that's a simple question. But as I say, that if you look at Slide 4 in our pack and the red bars, I think you could easily convince yourself that there's underlying 2% to 3% revenue growth just on the reversal of one-offs, so volatile items in '18. And then on top of that, yes, underlying volume growth, and we spent a long time on this call talking about our confidence in volume growth. And then I've spent a long time telling I'm not going to guide on NIM. So, yes, if you take all that together, yes, we think you get decent levels of income revenue growth in 2019. But I think - I think the other thing we're signaling is there's two idiosyncratic events out there that we don't control. One is the outcome of Brexit negotiations, and the other is the outcome of U.S.-China trade discussions. The deltas around those are not insignificant, particularly around the first one. So we are injecting an element of caution into anyone's ability to forecast at the moment.

Okay. Yes. I know, Ewen, I'm sorry, but it sounds to me if I'm looking at Slide 4 as a sort of where we end up focusing is the basis for our outlook that you would expect revenue growth in 2019 to be better than 2018. Because you've got - I mean, the one-off is red almost. If you took out the red, you're almost double your revenue growth.

Yes, just be careful because those reds, you wouldn't plan for them to be reds in the same way again, but equally, they could be. So for example, the insurance manufacturing market impacts, if there is a scenario in which risk assets deteriorate, equity markets correct again through the year, it will be red again. Year-to-date, clearly it's been positive because markets are up. So it's - I not completely understand what you're trying to read from this. I just - don't be too mechanical about it.

No, what I'm saying is the reds, I guess, we can expect a unforcastable, unforcastable by me anyway…

Exactly…

So we're left with the blues. And my impression of what you're saying is you expect the blues, order of magnitude, to be not dissimilar this year. But sounds quite optimistic to me given the poor environment?

Was that a question or a statement?

Yes, that was a question.

Well, you would expect us to be optimistic, but I do think you have got some capacity to forecast the blues, so we're not going to forecast it for you.

Okay. Thanks so much.

Thank you.

Your next question comes from David Lock from Deutsche Bank. Your line is now open.

Hi, David.

Afternoon. And I've got a couple, please, and then a clarification. And the first one, just on the loan growth expectations. Apologies, I missed - if I've missed it on the call. But you previously pointed to mid-single-digit growth that you were talking about some headwinds to that on this call. I just wondered if you could clarify whether you're still - at still the medium-term target to have mid-single-digit loan growth within the organization? And then secondly, on the January comment, I'm conscious that the first quarter last year was particularly strong in Wealth Management. So I wonder if you could give any further color on the kind of revenue trends you're seeing, and which areas have been particularly strong in January, as it would help kind of frame how we're thinking about cost jaws in the first quarter of the year? And then the final kind of clarification, really, just on the scrip. There was lowest - there was a lower scrip take-up in 2018. Would it be prudent, therefore for us on - us in the market just to think about a lower buyback results in that? Or you're really thinking about buybacks as sort of conforming to the average scrip take-up, which is been, I think, around 25% over the last years? Thank you.

Yes. On the last one, we think of - our commitment has been naturalization. So if it is 15% scrip take-up, we would think of lower numbers obviously. On loan growth, Q4 was just over 5% annualized, which gets you into your sort of mid-range. I think depending on economic scenarios, we can get more bullish in there. But depending on - yes, we'll see but as we keep referring to our two biggest markets, Hong Kong and the U.K., and the U.K. in particular, is facing some quite broad economic scenarios at the moment, so difficult to predict. On January, John, on Wealth Management?

Yes. On the Wealth Management, probably three things to think about. One, the markets has been favorable so far. So the red bars, there'll be some reversal of that. In terms of underlying customer activity, I think I indicated earlier the core savings activity, mutual fund investing, insurance policy investing, that's holding up really well. Where we're seeing customers a little bit less active is in things like foreign exchange and equities, which they're the smaller pieces of the revenue pie for us. But there's definitely lower customer activity, indicating I think lower customer confidence and inability to decide what the trend in equity markets is. So we're definitely seen that to date. Yes, six weeks in, it looks okay. At this point, it still looks reasonably solid.

Okay. Thank you.

Thanks, David.

Thank you, David.

We will take our last question today from Martin Leitgeb from Goldman Sachs. Your line is now open.

Hi, Martin.

Yes. Good morning. Good morning, Ewen and John. Two questions from my side. And the first one on growth and just the mix of growth going forward and in light of the weakening global growth outlook, I was just wondering if your expectation of the growth mix often in terms of geographic mix that the growth comes from, obviously previously you mentioned Hong Kong, Asia, the U.K., or in terms of product since - the split between loan growth and maybe Wealth Management. Has anything changed in terms of your expectation how the contribution of that growth stacks up? And the second question related to that, in terms of U.K. ring-fenced bank, obviously, you saw a nice acceleration of loan growth, I think in particular in the second half 2018. And I was just wondering, has that reached now kind of a steady state level in terms of your growth ambitions from here or could that be one of the levels potentially to compensate potentially some weaker growth elsewhere actually and obviously mark uncertainty to what you would assess over time? Thank you.

Yes. Look, on the U.K., yes, if we choose to grow in the U.K., we continue to think we've got the capacity to take share both in retail and in commercial. Over the last few years, as you all know, we were not a significant player a few years back in broker channel, which is about two thirds of all mortgage origination. We've rebuilt access to the brokers. Last year we grew mortgages in the U.K. by about 10%. We shifted stock share from 6.1% up to 6.6%. We've got a low double-digit share of current accounts. We can continue to take decent share, which is if we choose to take it. And similarly, in commercial, we do think that we've got an advantage position in relation to customers who want to trade internationally. So under whatever Brexit scenario you come up with, we do think that we've got a set of core competencies that will advantage us relative to others. Yes, on geographic mix, product mix, globally, I don't think we're trying to signal any significant change in terms of how we're thinking about the business, where we think growth will come from, just to repeat. Yes, we clearly got areas that we are competitively advantaged, U.K., Hong Kong, Asia, international trade and the like. You so that in the growth that we achieved in 2018, no reason to think that we're going to continue to be advantaged in most areas and will be able to continue to take share.

Very good. Thank you very much.

Thanks, Martin, for the question. And thank you all for dialing in. That's the last question I think we've got on the list today and I think we're out of time as well. So to all of you who have dialed in today thank you very much for your time and any further questions, let us know, the team will do their best to help with any answers.

Thanks, everyone.

Thank you.

Thank you, ladies and gentlemen. That concludes the call for HSBC Holdings plc annual results 2018. You may now disconnect.