This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition results of operations capital position and business of the group. These forward-looking statements represent the group's expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our earnings release. Past performance cannot be relied on as a guide to future performance. This presentation contains non-GAAP financial information. Reconciliation of the difference between the non-GAAP financial measurements with the most directly comparable measures under GAAP is provided in the earnings release available at www.hsbc.com. The analyst and investor conference call for HSBC Holdings plc's earnings release for 3Q 2020 will begin in five minutes. [Operator Instructions] This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition results of operations capital position and business of the group. These forward-looking statements represent the group's expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our earnings release. Past performance cannot be relied on as a guide to future performance. This presentation contains non-GAAP financial information. Reconciliation of the difference between the non-GAAP financial measurements with the most directly comparable measures under GAAP is provided in the earnings release available at www.hsbc.com. The analyst and investor conference call for HSBC Holdings plc's earnings release for 3Q 2020 will begin in two minutes. [Operator Instructions] Good morning ladies and gentlemen and welcome to the Investor and Analyst Conference Call for HSBC Holdings Plc's Earnings Release for 3Q 2020. For your information, this conference is being recorded. At this time, I will hand the call over to your host Mr. Noel Quinn, Group Chief Executive.

Thank you, and good morning in London, good afternoon in Hong Kong, and thank you all for joining us. Let me start by saying that I'm pleased with our third quarter performance and the way that our business and our people have continued to respond to a challenging environment. We're doing all we can to support our customers, communities and colleagues through the ebb and flow of COVID restrictions, and are committed to helping them manage the uncertainty that remains. As far as our business is concerned, we are more optimistic than when we last spoke in July. Economic forecasts are looking brighter, particularly in Asia. As you can see from our Q3 results, expected credit losses have now stabilized. And we've got a clear plan to accelerate growth and adapt the business to the ultra-low interest rate environment. Looking further ahead, we are also committed to helping our clients make the transition to a low-carbon economy. You'll have seen our announcement 2 weeks ago that we're aiming to align our financed emissions to the Paris Agreement goal to achieve net zero by 2050 or sooner. The COVID-19 pandemic has been a huge wake-up call for us all. And a climate crisis has the potential to do much more -- has the potential to be much more drastic in its consequences and longevity. We're therefore stepping up support for our clients in a material way, as we work together to build a thriving low-carbon economy and focusing every part of our business on helping achieve that goal. Turning to our third quarter performance. These were promising results, set against the continuing economic impact of COVID-19 with significantly smaller expected credit losses good strategic progress, a growing capital ratio, good customer retention and an improved economic outlook. Our Asia businesses continue…

Thanks, Noel, and good morning or afternoon all. Against the continuing economic impact of COVID-19, these were a decent set of results, which coupled with further good progress against our strategic objectives, additional strengthening in our core Tier 1 ratio and tail risks in aggregate haven't diminished over recent months have Noel and I in a more optimistic mood than last time we spoke at our second quarter results. Post-tax profits of $2 billion, while down 46% versus the third quarter last year were up materially on a weak second quarter. Adjusted revenues were down 10% mainly reflecting the impact of interest rate reductions, which impacted all of our global businesses and particularly our deposit franchises. Near zero interest rates will be a persistent revenue shock to our business over the next few years. We're actively adjusting our business model to address this, building sources of non-interest income, implementing asset side re-pricing where we can, adjusting the revenue model for some product and customer segments and materially reducing our cost structure through digitization and automation. ECLs were significantly lower than the second quarter at $785 million or 30 basis points of gross loans with Stage 1 and Stage 2 allowances broadly unchanged. With ECLs at $7.6 billion for the first nine months we're now guiding to the lower end of our previously announced $8 billion to $13 billion range for the full year. We're continuing to take action on costs. Our adjusted operating costs fell by 3% against the third quarter of last year and down 4% year-to-date. Our balance sheet metrics continue to improve. Our core Tier 1 ratio was up a further 60 basis points to 15.6% in the quarter. And customer deposits and lending were broadly stable from the second quarter with deposits up 12% or $164…

Thank you, Mr. Stevenson. [Operator Instructions] Your first question comes from the line of Raul Sinha from JPMorgan. Please go ahead. Your line is open.

Good morning Ewen.

Good morning.

A couple of questions from my side, I guess starting off, just on the NIM and NII trajectory, a couple of points related to that. One, if you could talk a little bit about the HBAP NIM outlook. Obviously, you had quite a big fall in the quarter. And then related to that, if you could elaborate a little bit in terms of what you expect within your sort of timing assumptions for HIBOR. Are you expecting HIBOR to sort of stabilize around these levels? Or are you still thinking that we're going to converge towards U.S. dollar LIBOR which is obviously some way below where HIBOR is? And the second one I guess, a little bit more broader in terms of the areas where you're tweaking your transformation program and you've obviously talked about that a little bit. I was particularly interested in Wealth Management and insurance in terms of what are the growth initiatives, you can focus to make a meaningful contribution given where your plan was when you announced it and where we are today. You've obviously got a big test in terms of rate-sensitive revenue. So any sort of commentary on Wealth Management and insurance sort of material growth opportunities would be really helpful? Thank you.

Okay. I'll take the second question, but I'll ask Ewen to answer the first part of the question, if that's okay.

Sure. On NIM, Raul, a few things. I mean as you know the HBAP book is relatively short-dated. So we did see a material contraction in HIBOR. I think it was down over 60 basis points quarter-on-quarter. And as a result that translates very quickly within quarter into the net interest margin. As we look out, yes, been here for seven or eight quarters now trying to predict the path of HIBOR has always been difficult. But I think, yes, we do think that we've seen for the time being a bottoming that has been a bit higher so far in October. Again that will translate to a stabilization I think in Hong Kong and possibly a recovery. But if we translate all of that into an outlook for 2021 and at an aggregate level, I think, yes, we're broadly as we sit today comfortable with where consensus is or a range around consensus.

Okay. And with respect to Wealth Management in Asia, we started our journey on that of more rapid expansion actually before we announced the results in February or the update in February. We've been growing our market share in insurance in Hong Kong throughout 2019 and have continued that journey in 2020 and intend to continue to invest in that business. And we're seeing very good results from that activity. We've claimed -- reclaimed a lot of market share on our insurance business in Hong Kong. And we'll continue to invest in that business. We're looking to expand our insurance proposition beyond Hong Kong into other markets Singapore, India and in China. With respect to the broader wealth agenda we again started a program of expansion of our private bank in Asia increase in the number of relationship managers we have on the ground, the product capability in Hong Kong. We want to take that further across into South Asia and into China. And then more recently, we've talked about the investment we've made in Pinnacle which is a Wealth Management platform in China, which is a combination of around about an extra 2000 to 3000 salespeople based in China serving the Wealth Management needs of the China population. We expect to put those people on the ground over the next two to three years. But we're also building a technology platform to provide those salespeople with the product capability to serve the market as well. So we see that as an area of growth and further investment. It will be protect Hong Kong and continue to take market share in Hong Kong, penetrate into China and expand across South Asia.

Given the amount of capital you've built, would you consider inorganic opportunities as well in this area?

I think we always look at both organic and inorganic. You should always base the strategy on an organic plan first which is what we're doing. But we're open-minded as to where the right opportunities for growth will come.

Thank you.

Thank you. We will now take our next question and the question comes from Martin Leitgeb from Goldman Sachs. Please go ahead. Your line is open.

Yes. Good morning. My first question it's in terms of how should we think about capital progression from here. So obviously, the very strong print in terms of a 15.6% or 15.4%, excluding transitional impacts and your comments on dividend being conservative from here. Should -- does that mean that over the near to medium-term we should expect HSBC to run over and above the 14% to 14.5% threshold? Or do you see opportunities either way, either to deploy more for growth or deploy more for returns as and when the economic outlook normalizes? And the second question I was just wondering, if you could give us to see how broad the review or the strategic reviews you're currently undertaking. The strategy laid out back in February obviously was before the pandemic unfolded. How broad the strategic review are you currently undertaking both in terms of potentially investing in lower-return areas, but also with regards to future areas of growth for the group? Thank you.

Okay. I'll take the second question. I'll ask Ewen to cover the first.

Yes. So on capital and how we think about it, Martin, I guess a few things. Firstly, yes, in terms of today's ratio just to put a couple of qualifiers around it. I mean, firstly, in Q4, as you know, yes, we would typically expect core Tier 1 ratio to fall in the fourth quarter for a couple of reasons. Firstly, yes, the earnings are obviously impacted in the fourth quarter by the U.K. bank levy by seasonally lower Global Markets and Wealth revenues. And we signalled, I think as part of my comments earlier that we expect to have a higher CTA charge, cost to achieve, restructuring cost charge in the fourth quarter relative to what we saw the run rate in the first three quarters. And we also do still expect some RWA pressure coming from ratings migration, albeit, yes, we've been continuously surprised this year about, yes, the degree of ratings migration, which has been less than we might have anticipated. Yes, we also get in our ratio some benefit from COVID-19 regulatory relief currently. That's around 20 basis points. But, I think, the regulators are always going to back out of their numbers when they look at our capital ratios and think about excess that we've got. And I think, going into 2021, we're always going to want to have a buffer for contingency, given 2021 will continue to be relatively uncertain, as we sit today. Yes, I do think that if you went back to the start of the year and you think about what we're managing too in our capital base, it's really two things. One is the degree of stress that we're running as a bank. And we do think the restructuring plan that we've announced and the areas that it's targeting is going after some of the highest stress portfolios we have in the bank. So over the next few years, we think, the aggregate level of stress you'll see from us getting reported in the annual stress testing cycle will reduce. And secondly, as I think you're aware, we've been holding excess capital in some of our subsidiaries, for example, in the U.S. And as we continue to restructure, I think, we'll be able to get more of that capital back to the group. So, as a result, yes, we think that we can manage the bank in the medium term to 14% and 14.5%, but I think we should aspire to do better than that. But that aspiration, I think, has to be very much premised over the medium term, with us making serious inroads into reducing the gross level of stress that exists in the bank. I'm confident, we can get there, but I wouldn't bake it into your numbers today.

And on the second part of your question, we recognize that it's -- the lower interest rate environment is a very material drag on revenue and that it will be a harden road to recover that lost revenue. I also fully recognize there's no one silver bullet to addressing that gap. It has to be a combination of growth from new areas of investment, particularly fee income-generating activities, such as I talked about earlier, Wealth in Asia across a broad range, mass-affluent Private Banking and Asset Management Insurance; growth from our Transaction Banking business and the fee income generation from that in foreign exchange trade and payments and cash management; and growth of our balance sheet, particularly in Asia, where I do believe there's still growth potential over the medium term for the asset side of the book; but we're also going to be looking at pricing, pricing of our asset book and pricing of our fee income. I think it's going to be a combination of those activities, coupled with a continued focus on prudent cost management, with an expectation, as Ewen said, to exceed our 2022 target of $31 billion. So it will be a combination of those things. And if I think back to the GFC, there was no one single solution to rebooting revenue post the GFC. It was a combination of things and we're going to be very much focused on those same activities this time around. Next question.

Thank you very much.

Thank you. Your next question comes from the line of Manus Costello from Autonomous. Please go ahead. Your line is open.

Good morning, Manus.

Hi, Manus.

Hi, everybody. I just wanted to ask about the balance sheet and cash. Your cash position has grown again this quarter. You're up $130 billion since the end of last year. I just wondered what can you do to help manage that cash position to help boost the NIM or offset the pressure on the NIM? Or should we assume you're just going to run with structurally very high levels of cash and your liquidity management in the future?

Well, I'll give a quick instinctive reaction to that Manus. I mean, I'm a strong believer in a strong balance sheet and a very liquid balance sheet. So I understand that at the moment, that liquidity is not earning NIM. But in the middle of quite a severe economic crisis, it's good to have a very strong liquidity position and that's been a cornerstone of HSBC for many years. And it then allows us to have the strength to continue to invest in growth of the asset side of the balance sheet, as that growth reemerges in the economy and be cognizant of the fact that Asia seems to be coming out of the COVID crisis faster than the rest of the world. Therefore, I expect growth opportunities to reemerge in Asia. So that -- although that liquidity is not earning money in its own right, it has the potential to earn money for us on the asset side of the balance sheet. And it gives us the comfort to continue to make investment decisions in that we have a strong balance sheet both liquidity and capital. But Ewen, do you want to comment?

Yes. No, I mean, I think managed customer behavior has been exactly what you would have expected it to be so far during the crisis, which both on the retail side and the corporate side a desire to retain liquidity at the moment given all of the uncertainty that exists. Yes, so over the last year, we've built deposits by, I think, it's 12% over $160 billion. Yes, that's not a natural year-on-year growth in our deposit base and reflects very much, I think, customer behavior. So, as people get more comfortable with the trajectory out of COVID-19, I think you'll begin to see that reverse. Yes, on the corporate side, yes, we've already seen relative to the first quarter when a lot of corporates drew down substantially on secured lines they had with us, start to repay those lines. So I think as both consumers and corporates get more confidence back, you'll see those cash balances reducing.

So, it's more about your customers' behavior rather than any Treasury approach that you might take.

Yes.

Correct.

Got it. Thank you.

Thank you. Your next question comes from the line of Aman Rakkar from Barclays. Please go ahead. Your line is open.

Good morning, gents. Yes. Just firstly, just a couple please. Just coming back on NII. So, thanks very much for that comment around consensus next year. I guess, just the kind of implied Q4 exit level probably suggests an annualized number below $25 billion next year. So to kind of get to where the Street is it looks like you're going to be looking to do kind of 3%, 4% loan growth is probably my best estimate for now. Given that you're probably just going to be deleveraging in the U.S. and Europe, interested in what kind of growth you're targeting in terms of loan growth in Asia to kind of deliver those numbers? I know that balances were reasonably robust in Q3. And I guess the second is on ECL. Can I just check is around up circa $1 billion charge the best guess of the kind of underlying ECL for you guys in Q3? And if that's the case, does that potentially imply a number next year that's perhaps closer to $4 billion than the $6 billion that consensus has in next year? I mean, does that number look full to you? Or is it -- is there just too much uncertainty for now? And I -- yes, I'll leave it there. Thank you.

Okay. Well, firstly, on your NII math, we don't disagree with the math at an aggregate level. I – yes, we do anticipate that we -- sort of low to mid single-digit loan growth next year to sort of underpin the comments I made about consensus and NII for next year. The -- yeah, I would -- yeah, the part of your commentary that Europe and the U.S. is deleveraging, I think is only partly correct. I think a lot of the deleveraging that we saw happened in the second quarter. There is the ongoing restructuring that we're doing in the rundown of the RWA books. Not all of that is in lending assets. And we're continuing – yeah, we do expect U.K., Europe, U.S. economies to recover in 2021. And we are seeing consensus forecasts for Asia ex-Japan GDP forecasts are thinking -- are sitting above 5% for both 2021 and 2022. So, we do think yeah, Asia growth again will outperform Western growth. On ECLs consensus, I think, is sitting at about $6.1 billion for 2022. Yeah, when we --sorry, for 2021. When we previously guided on loan loss provisioning, pre-COVID through the cycle we talked about 30 to 40 basis points. Yeah, at 40 basis points at the top end of that you'd get to just over $4 billion. Yeah that feels to me intuitively as we look out a bit low at the moment, equally $6 billion feels a bit high so sort of somewhere between those two numbers. But there is still significant uncertainty out there around 2021. And I would also caveat my comments on ECLs generally around Brexit. I think our comments about towards the lower end of the 8% to 13% range are very much premised on a trade agreement happening. And if a trade agreement didn't happen then I think we would have to adjust up our ECL estimates. You could easily see $0.5 billion to $1 billion of additional ECLs in the fourth quarter if in the next few weeks we didn't have a trade agreement.

Perfect. Thank you.

Thank you. Your next question comes from the line of Jason Napier, UBS. Please go ahead. Your line is open.

Good morning.

Hi, Jason.

Thank you for taking my question. Hi, there. So the first one on loan losses, I'm afraid again. The performance of your loan book has been quite frankly stellar if you look at the stage data with only 6% of retail loans in Stage 2 even and a little over 1% in Stage 3. I wondered did you have any steps that you might be able to share on the extent of any distortion in that that your customers are seeing as a consequence of the support that's around furlough schemes and moratoria and so on? Or is that really just conversational in nature and really that your book is this strong at this stage of the downturn? And then the second question and I appreciate this is an extraordinarily sensitive area, the Hong Kong Autonomy Act. I wondered whether you could share what it is in your view that HSBC needs to do to avoid sanction under that act? It appears that there is some leeway around significant transactions as regards to the sanctioned individuals. What do you see as your responsibilities on that act please?

Okay. Jason, thank you. Let me -- I'll add a couple of comments on the quality of the loan book and then hand to Ewen if he wants to add some comments and then I'll pick up on the Hong Kong Autonomy Act. Firstly, the first thing about the nature of the book is inherently we -- particularly in our consumer banking business, we have a high quality secured book at the heart of what we do. So we're primarily a secured book rather than an unsecured. Clearly we do some unsecured lending for purport. But proportionately we have a much higher percentage of secured lending for example here in the U.K. than the rest of the market. And that's why I think you see a particularly strong performance in our retail book relative to other banks. That would also be true in Hong Kong. What we've also seen some of the government schemes have unwound and payment holidays have unwound. We are seeing a better performance on that unwind of government schemes than we had previously modeled or expected and people are reverting to normal payment patterns at a higher percentage than we had originally modeled. So that's -- they are just some general comments. Ewen?

I add a couple more things on that. The -- yeah, in terms of summary -- yeah, we've obviously got a global portfolio of government support schemes. And I think as we've seen some of them roll-off particularly on the retail side our experience so far Jason has been -- I would describe it as marginally better than what we had modeled. So it has been encouraging signs that yeah the credit assumptions that we've got are holding up. And secondly I think that government support that we've seen I think for the corporate sector, yeah, has bought time for the corporate sector to restructure. It's bought time for the corporate sector to go out and raise debt and equity. So yeah sitting here six months ago, we were far more concerned about downside tail risk than we would be today, yeah, in part because the government support has just allowed people to -- time to restructure their businesses and be better prepared.

And on your second point, Jason, we're confident in our ability to navigate the increasingly complex regulatory environment. And we're committed to complying with the laws and regulations in every market we operate in. We fully acknowledge that there is a level of complexity there today given the geopolitics. But we're confident of our ability to navigate that situation. And I think that's what I'd say to you in regard to the second part of the question.

Thank you.

Thank you. Your next question comes from the line of Edward Firth, ABW [ph]. Please go ahead. Your line is open.

Good morning.

Morning, Edward

Yeah. Just two questions. Again apologies it's back to net interest income. But I was more interested really in the longer term outlook for net interest income rather than like this year next year. And I guess the two questions I had. One, if I look back to sensitivities you've provided us in the past the broadly -- if you look out five years it's about double the one-year impact. Is that still the way we should think about it, or are there things that you can do or have done that can effectively mitigate that so that the bulk of any interest rate impact we should see is broad plus or minus 10 basis points is broadly in there? So that would be my first question. And then the second question is related to that. One of your -- one of the big advantages of HSBC probably for the last 100 years has been loans-to-deposit ratio of around 70%. And I guess it's a bit lower now but it has been a bit higher but that's broadly where you stuck it. And I guess in this environment that means what 30% of your deposits are either making no money or actually loss-making. Is there anything that you think over a two, three, four-year plan that you can do to address that? Is that something that -- I mean could we see that moving up to 80% 90% that sort of level? Or should we -- or is your preference to remain liquid likely to keep that roughly where it is? Sorry that was a long question.

Let me take the second part. The AD ratio, yes at the moment is showing a significant surplus. At different points in the economic cycle that moves around. And if you were to go back a couple of years, you started to see quite significant loan growth with slightly slower deposit growth so you started to see the AD ratio narrow to a degree. As Ewen said earlier, we've had an influx of deposits as customers have borrowed less, spent less and accumulated cash. So you could expect over time that AD ratio to change. But I think we've always as a bank had a history of having a strong liquidity position. So I don't see us really operating at a 90% AD ratio in the future even in great times because we operate in markets around the world that are inherently more volatile. And therefore we believe strongly in having a strong liquidity position to manage through that volatility in difficult times. So you get some movement in the AD ratio going forward, but I don't think you're going to get us operating at a level of 90% on a consistent basis or at any point given the inherent nature of our book of business.

Ed, I think -- your first question I think was around the NII sensitivity tables five years out. The -- yes they do assume a static balance sheet. They do assume no management actions. So I think you should assume that over a 5-year period we would have some capacity to mitigate some of the risks that you see in that interest rate sensitivity table.

And just going back to that point I made if you were going to say, but it depends how you look at that surplus and is it earning money or not. You remember that high liquidity or low AD ratio is giving you access to an inherently higher-return market in Asia and the Middle East. So you don't necessarily deploy all the liquidity to get every last ounce of earnings out of it. But having that liquidity there allows you to access an inherently higher-return market Asia and Middle East, the emerging markets that gives you a higher level of compensation for the amount of lending that you are doing. So you earn it in a different way than full deployment into low-volatility low-return markets. You're getting the earnings in a different way from HSBC.

Okay. So it's not like it's a strategic priority for you to find assets to try and bulk up that balance sheet?

I'd rather find growth, good sustainable revenue growth rather than just buying books of assets for the sake of buying books of assets to use up liquidity. Sustainable revenue growth is what we're motivated to do.

You would know that 20 years ago we tried something like that and it didn't work out so well. So...

I just wanted to see if you want to do this time again.

No.

Thanks so much.

Thank you. We will now take the next question from Tom Rayner from Numis. Please go ahead. Your line is open.

Hi, I just wanted to ask sort of broad strategic questions really and you might sort of kick me on and say wait until the full year. But in terms of what you've said today on the restructuring plan, you're flagging additional cost savings you're flagging additional RWA reduction. I'm just trying to think in terms of the potential impact that that might have on future revenue growth and how important it is for you to be seen -- for HSBC to be seen as still having sort of growth potential almost still being a bank that's in higher-growth markets. You want the market to view you as a potential growth stock. How does that sit with a focus on continuing to look for more cost savings and more RWA reductions? And obviously that comment alluding to Household International is quite interesting because obviously you get too desperate for both when you buy a bad asset as is asked. So that was my first question. And then the second sort of strategic issue again from what you're saying is, all of the investment is being pivoted now by the sound of it towards Asia. If this continues I mean is there a risk at some point, the whole question of domicile and where it makes most sense for HSBC to be domiciled is that going to reemerge? Or is that something that's been talked about discussed and decided on and we're not going to be back there anytime soon?

Yes. Let me -- a couple of comments on that. Let me first of all say I don't think pursuing a more efficient organization necessarily means you cannot produce growth or pursue growth. I think the cost reduction we're going for are good sensible cost reduction ambitions reducing bureaucracy simplifying processes, increasing automation, improving customer experience. All of those things are supportive of a growth agenda as well. So -- and what we've clearly said in this statement that we are going to continue to invest in technology to further digitize the bank. And out of that digitization will come a lower cost base a better customer experience and growth opportunities as you tap more market opportunities. So I don't think they're incompatible. And certainly we don't want to be a growth-only transformation story. We must also be a growth story. And particularly with the footprint that we have as an Asian bank and an international Asian bank that would be part of our agenda. And on domicile, we've said on many occasions we're not revisiting the domicile decision. We believe there's a power in being a global international bank with a strong focus on Asia, a strong focus on the Middle East, a strong business in the UK. We're an international bank bridging east and west and we're not revisiting the domicile decision.

Yes. On -- sort of, going further on RWA reduction Tom, I mean, you can see in the dispersion of returns in our data pack that yes, we've got a lot of capital that's not earning appropriate returns earning well below cost of capital returns. And I think you and everyone else on the call should welcome the fact that we're trying to accelerate that and take more of those assets off our balance sheet, get more capital back as a result of that. And if we can invest that in growth particularly in Asia we're happy to invest it. And if we can't we'll find a way of returning it to shareholders.

Okay. That’s it. Thanks a lot.

Thank you. We will now take our next question from the line of Guy Stebbings, Exane BNP Paribas. Please go ahead. Your line is open.

Good morning. Good afternoon, everyone. Thanks for taking questions.

Good morning, Guy.

Good morning. I just want to come back firstly to capital. I'm specifically trying to size some of the headwinds coming in the fourth quarter. You've called out the typical seasonal impact from the levy and Global Markets being a bit lower plus the higher CTA to come. So perhaps earnings themselves might be a small headwind to capital plus it looks like you're guiding to around about 30 basis points headwind from RWA movement. So just taking that into consideration the CET one position could drop maybe towards 15%. But I think, you previously guided to software intangible benefit of around about 20 basis points. So is it reasonable to think you should still be somewhere above 15% before any possible dividend announcement alongside full year results? And then the second question was just on CP14/20 an introduction of a mortgage store in the UK, which is perhaps quite personal for HSBC given your lower staffing risk weight density. I appreciate you were already expecting the risk weights to move up given some of the other regulatory changes. I think you'd guided to 7% or 8% previously. But given this further move does it change your view at all on UK mortgage book growth in the future? I guess, perversely it could actually incentivize you to tilt the book to higher-margin higher-risk business overtime? Thanks.

Yes. So we've previously guided I think to RWA growth for the full year of, sort of, mid-single digits. If you look today that would imply relatively material RWA growth in the final quarter. Yes that looks to me as I said today at the top end of the range of what we would expect and you would have to see a degree of RWA migration that is substantially higher than we've seen recently. So yes, we could well see a core Tier 1 ratio at the end of the year above 15% I think. The – yes, on your comment on UK mortgages even with those higher risk weights we still think that we make sensible economic returns on the mortgage lending we do in the UK. So, yes, it is a -- the other thing I would say is that the UK is one of those businesses that in the outer years of the plan would have been impacted by output floors. So in some ways this is just an acceleration of that impact of future capital buffers we would have had to build anyway into the UK business.

Okay. Thanks for answer.

Thank you. We will take our last question from Joseph Dickerson from Jefferies. Please go ahead. Your line is open.

Hi. Good morning. Just a couple of quick ones please. Just on the trajectory of getting down to your targeted CET1 range. I guess, how do you think about buybacks in that context particularly in the near-term given the various capital treatment of buybacks and you've done buybacks before. So any thoughts there would be helpful. And then as you seek to move towards some more sustainable sources of non-interest income and deemphasize the deposit spread businesses, you've mentioned that you're reviewing the U.S. business. That obviously -- the last review as already noted on this call happened when rates were higher. I guess is everything on the table as regards the U.S. business notably the retail business which has I believe off the top of my head 50% or lower loan-to-deposit ratio? Thanks.

Ewen will take the first part of the question on CET1 and I'll pick up on the U.S.

Question again on CET1 was?

It was on buyback.

Yes, on buyback. The – yes, as you've said, we're certainly not averse to doing buybacks. I think you should assume what we want to do first is reestablish the dividend set a sensible and sustainable dividend policy for 2021 and beyond. And then, to the extent that there is excess capital on top of that, think about buybacks as part of that. I would caution though that for 2021, in particular, there continues to be meaningful levels of uncertainty around the economic outlook for 2021. So, don't expect us to try to seek to rapidly normalize our capital structure during 2021 until we see genuine sustained and concrete recovery in the global economy and we're through COVID-19 in a very meaningful way.

With respect to the U.S., I just want to reiterate Michael and the team in the U.S., together with Greg and Georges running Global Banking and Markets have really made very strong progress in the first nine months of this year. And I reiterate RWAs well down, adjusted costs down, FTEs down 11%, branches reduced by 30%. So they've made great progress. But they're also very cognizant of the fact that the circumstances are more challenging today than they were in February. And therefore, they're looking at ways to accelerate the road to improve returns. But I won't go into any more detail on that at the moment. We'll do that with our Q4 results. But I'm pleased with what they've achieved so far.

Thanks.

Okay.

That was our final question. I will now hand back for closing remarks.

Thank you. Thank you, Sharon. And I just wanted to say thank you to all of you for dialing in today for your interest in HSBC and your questions. I'd summarize by saying that we are making good progress on our transformation agenda. We are investing in new growth opportunities particularly across Asia. I'm pleased that we were able to produce $3.1 billion of reported profits in Q3, and we were able to finish the quarter with a CET1 ratio of 15.6%. I look forward to speaking to you again at the full year results in February. Thank you.

Thank you, ladies and gentlemen. That concludes the call for HSBC Holdings plc earnings release for 3Q 2020. You may now disconnect.