This presentation and subsequent discussions 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 Annual Reports and Accounts. Past performance cannot be relied on as a guide to future performance. This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial measures to the most directly comparable measures under GAAP are provided in the reconciliations of non-GAAP financial measures supplement available at www.hsbc.com. [Operator Instructions] Good morning, ladies and gentlemen, and welcome to the Investors and Analysts Conference Call for HSBC Holdings plc's 2013 Annual Results. For your information, this conference is being recorded. At this time, I will hand the call over to your host, Mr. Douglas Flint, Group Chairman. Please go ahead.

Good morning from London, good evening to everyone in Hong Kong, and welcome to our 2013 HSBC Annual Results Conference Call. As has been said, I'm Douglas Flint, the Group Chairman. With me are Stuart Gulliver, the Group Chief Executive; and Iain MacKay, the Group Finance Director. Before we start, I'd like to say a word on behalf of the board. The -- we consider HSBC to have delivered a solid financial performance in 2013 with good momentum in areas of targeted investment. The group's capital position strengthened further during 2013. The core tier 1 ratio improved to 13.6% compared with 12.3% at the start of the year. Our estimated CRD IV end-point-basis common equity tier 1 ratio also improved to 10.9%. The first implementation phase of the strategy that Stuart set out in May 2011 has now come to an end. The results that we have announced today flow in large part from the repositioning of the group and from enhanced risk controls given effect over the last 3 years. This progress, together with a strong capital position, has allowed the board to increase the dividends per ordinary share in respect to the year by 9%. Stuart will now talk you through the highlights for the year. Iain will take a detailed look at financial performance. And finally, Stuart will cover the next phase of the strategy. Stuart?

Thanks, Douglas. I'll start by pulling out the key points. As Douglas said, our performance in 2013 was influenced by the strategic measures that we have taken since the start of 2011. The full year profit before tax was $22.6 billion in 2013, up 9% on 2012. Underlying profit before tax was $21.6 billion, an increase of 41%. And the reported return on average ordinary shareholders' equity was 9.2%, up from 8.4% in 2012. As Douglas indicated, we remain one of the best-capitalized banks in the world, with a core tier 1 ratio of 13.6% and an estimated CRD IV end-point-basis common equity tier 1 ratio of 10.9%. We, therefore, remain well placed to meet expected future capital requirements notwithstanding a continually evolving regulatory environment. The advances-to-deposit ratio remains robust at 72.9%. And we also continue to demonstrate our ability to generate capital, which allows us to increase dividends for the year by 9% to $0.49 per share, in line with our progressive dividend policy. This cements our status as one of the highest dividend payers in the FTSE. We will talk later about the strategic highlights of the last 3 years, as well as priorities for the 3 years ahead. Turning now to Slide 4. This slide lays out the financial highlights that I've just discussed. The additional point to note here is the cost efficiency ratio which improved to 59.6%. And as we explained in May at our investor update, we've modified the cost efficiency target for the next 3 years to mid 50s to more appropriately reflect the composition of the group's profit. Earnings per share also increased from $0.74 in 2012 to $0.84 in 2013. Turning to regional and business contribution. Underlying profits were higher than 2012 in 5 out of the 6 regions. In Hong…

Thanks, Stuart. This slide shows the reported results. I'm going to highlight a few key points. Reported revenues were down compared to 2012. This was driven principally by lower net gains from disposals and reclassifications, mainly as 2012 included gains from the disposal of the U.S. Cards and Retail Services business of $3.1 billion and the disposal of an investment in Ping An of $3 billion. Operating expenses were down $4.4 billion, mainly reflecting the non-recurrence of the provision for U.S. anti-money laundering, Bank Secrecy Act and foreign -- Office of Foreign Asset Control investigations; lower charges relating to U.K. customer redress programs; and lower restructuring and related costs. Loan impairment charges improved significantly, particularly in the U.S. where we continue to run-off our Consumer Mortgage and Lending portfolio. As you'd expect, the contribution from associates fell as a result of the sale of our shareholding in Ping An last year and the reclassification of Industrial Bank as a financial investment. Turning to Slide 7. Let's look briefly at the discrete fourth quarter, where reported profit before tax decreased by 11% compared to the fourth quarter of 2012. Excluding movements in the fair value of own debt and the impact of any gains or losses in disposals, as well as the operating results, revenue increased. This was driven by Global Banking and Markets and Commercial Banking but partially offset by lower revenue in Retail Bank and Wealth Management and Global Private Banking. Loan impairment charges improved significantly, particularly in Commercial Banking in Europe and in the U.S. runoff portfolio. Whilst operating costs were lower as a result of the non-recurrence of fines and penalties, lower customer redress and decreased restructuring and related costs, these were partially offset by the increased U.K. bank levy. More detail now on the underlying numbers,…

Thanks, Iain. So 2013 marked the final year of the first implementation period of the strategy that I outlined back in May of 2011. And you'll recall that our strategy aims to capitalize on 2 major trends: the continuing growth of international trading capital flows; and wealth creation, particularly in Asia, the Middle East and Latin America. Over the last 3 years, we've put this strategy into action pursuing more effective capital deployments, greater organization efficiency and better returns. And it's worth restating that we've already replaced approximately 1/3 of the reduction in total revenue that came about from disposals. And as I explained earlier, we have a firm grip on costs and have demonstrated our ability to grow the business. The group today is leaner than in 2011, with strong potential for growth. 2014 marks the beginning of the next phase of the implementation of our strategy, and there are 3 priorities for the next phase, as we announced at the investor update last May. It's important to stress that these 3 priorities are absolutely equal and we will pursue each of them with equal intensity. First, we aim to grow the business and dividends. So we're going to continue to invest in organic growth opportunities that are aligned to our strategy, consistent with our risk appetite and which add value to the group. In particular, we'll increase collaboration between our businesses, further improve connectivity between regions and build on our core strengths. In doing so, we're going to aim to capitalize on our global footprint, particularly in our leading business areas such as trade finance, payments and cash management and foreign exchange. We will also continue to invest in high-growth markets such as the Pearl River Delta and ASEAN, and improve our position in highly connected developed markets…

[Operator Instructions] We will take our first question today from Chira Barua from Sanford Bernstein. Chirantan Barua - Sanford C. Bernstein & Co., LLC., Research Division: I have 3 quick questions. The first one is on the PRA floors. It almost sounds like under-cyclical capital already kicking in. It would be great if you could give us some idea around which floors -- regions, businesses that these floors really backed. And the second one, Stuart, is on Hong Kong outlook. You've given your guidance on greater volatility and how some emerging markets are impacted, others are not. Not too many transactions happening in Hong Kong at the moment in the property space. It would be great to get 2014 outlook. And the last one is on BSM as well, if you have any updated guidance on BSM and how you're going to deploy a huge amount of cash which is on your balance sheet.

Sure. Let me take BSM. We'll do it in reverse order. So BSM, I think, guidance is $2.5 billion for 2014. I mean curves again have flattened out. You had a little bit of steepness, and then they flattened back again. We're going to clearly keep the book short. We're not sure at what point short-term rates start to back up. We don't want to be caught with assets that actually we are having to fund at higher running rates. So $2.5 billion is guidance for 2014. We're still at this inflection point. We saw some -- we saw effectively a sell-off in the kind of long end, so the curve steepening from the long end. We haven't seen any movement at the short end, but that clearly is something we're going to navigate quite carefully. Hong Kong, I think the property market in Hong Kong will remain softer in 2014. The government restrictions were there to take the heat out of the property market. They haven't really changed. Volumes, as you say, remain reasonably low in the property market. And we don't see that particularly changing during the course of 2014. So I think it will be a soft property market. But remember, LTVs on the book in Hong Kong overall are kind of sub 40%, and therefore, I'm not concerned from a credit quality point of view and a bad debt point of view. And actually, the volume of activity in terms of mortgages has dropped a little bit, but we haven't seen a significant impact in terms of the P&L of the Retail Banking and Wealth Management business. Actually, from an equity capital markets point of view, there's actually quite a significant M&A pipeline, a corporate finance pipeline, actually in Hong Kong for this year. So I think that, actually, we may ironically see an offset from any softness in the mortgage part of Retail Banking in Hong Kong coming through in terms of the corporate finance IPO type of pipeline, which actually will support the wealth part of Retail Banking and Wealth Management. So Hong Kong outlook, yes, property market soft, but overall I'd still think that we will be able to see growth in PBT and our operation in Hong Kong. And I'll hand over to Iain on the PRA floors.

Okay. As you'll recall, we certainly saw a couple of PRA floors introduced in 2013, probably the most notable of which was on sovereigns outside the European economic area. What we referred to with respect to the first quarter is largely with respect to corporate portfolios and mostly within the developed economies of U.K., Europe and U.S., which again the PRA has indicated their intent to implement the -- a loss given default floor of 45%. That's driven particularly by the concern around the level of data that the PRA would like to see in terms of how we support and develop the internal ratings-based models. So clearly, from our standpoint, in mitigating some of this impact, we continue to drive down on the granularity of that data, but this again is principally focused on corporate portfolios in the developed markets.

We will take our next question from Chintan Joshi from Nomura.

You've already discussed a little bit in your opening remarks, but my first question is on asset quality. That what kind of impact are you seeing from the January FX volatility we've seen? And if you could specify areas of concern for you. And I've got 2 more.

Okay, we haven't seen any particular credit issues arising out of the FX volatility that's taken place in Brazil, India, Indonesia or Argentina. Did you...

Sorry, no. You broke off towards the end, so...

So there has been no impact on the credit quality of our loan book from FX volatility so far this year in Brazil, India, Indonesia or Argentina.

And what are your expectations going forward?

Our expectations are that, depending on how that volatility continues throughout the year, we may see some impact in terms of bad debt, most likely actually through CMB and SMEs, but it really depends on what happens in the balance of the year. We have been very conservative in terms of our exposure to Global Banking and Markets clients and, therefore, have made absolutely sure that they clearly have borrowed. If they borrowed foreign currency, they have foreign currency revenues. What you may find is that, actually, as the GDP slows, some of the smaller customers are impacted by the GDP slowing, not directly by the FX but by the second order impact. That tends to be what happens when you have these kind of sharp currency moves unless they are corrected reasonably quickly, but again we have no line of sight to that at the moment to be adjusting any kind of loan impairment charges.

My second question is on trade finance. You do report it in a couple of different areas. Holistically, how do you see trade finance margins having developed in Q4? And also, if you could give us some indication of what current level of profitability is in that business in terms of ROE.

Okay. So our volume of lending in trade finance increased by about 20% over 2012, driven mainly by Hong Kong, Rest of Asia-Pacific. The margins in 2013 were quite a bit lower, but actually, we started to see that decline in margin bottom out. So this is subtle point I'm going to make. So the rates of margin compression has slowed into the third and fourth quarter. It hasn't stopped and gone back in the other direction, but the rate at which margins were being squeezed have slowed down. And this remains actually a very profitable business for us with a substantial ROE. I don't know if -- Iain, if we have a RWA number on this.

We don't disclose that separately.

We don't disclose it separately. But it's a great business. And really, what should we think about, what we've done is, the revenue is broadly unchanged versus 2012, it's because we pumped volumes up by 20%, which offset the margin decline.

And I think, I mean, broadly, if you think about returns on this one, Chintan, the targeted returns on risk-weighted assets for the commercial bank ranges from 2.2 up to 2.5. Given the capital intensity of this business, the returns within the -- in the global trade receivables financing business is quite strong in that range.

Okay. My final is, I mean, there a lot of notable items. Or even outside the notable items, there is a lot of nonrecurring impact to revenues and cost. I just wanted to ask you, how do you see kind of current underlying adjusted, if you may, revenue growth, cost growth kind of year-on-year; and also what your expectations are for the coming year?

That's a new question from you, Chintan. Thank you. Well, firstly enough, I would actually say there are many, many fewer notable items in these numbers than has been the case in 2012 or 2011, largely as we've moved into the latter stages of the reshaping of the business under the strategy. We've provided sort of the key elements that sit within the underlying numbers. Again, the underlying numbers are only excluding 3 issues: fair value of own debt, the currency effects and the impact of acquisitions and dispositions. And those are the reconciling items. But broadly within that, we're slowly, I hope, working towards the end of what we see from a PPI perspective. Stuart made some remarks around how we've repositioned some of the incentives within the Retail Banking and Wealth Management business to improve the quality of the earnings in that respect going forward. I think, from a litigation standpoint, there's very detailed disclosure of this in Note 43 of the financials, as well as in the provisions note in Note 31. So again, I think litigation and the risk of litigation is an ongoing feature of any banking business at this point. We've never really broken that out as notable items in the past, but we gave you some fairly detailed disclosures as to that which we've incurred this year. If look at the revenue line, we've taken some losses as we've run-down the CML portfolio in the U.S., and I gave you some details of that in the revenue walk. And really, from a cost perspective, it's about litigation and it's about customer redress, where again we've given you some of the detail of that in the financials. But going beyond that, I would say we've got a set of numbers here that are beginning to migrate to something that looks more like the normal.

And if you look into it, I mean, kind of revenue growth is about 3%. And I'll also say, bear in mind, we've sold 63 businesses that most are seen sort of kind of not focused on. So we've sold an awful lot of revenue. So when you actually look at the revenue numbers and say, well, there's no revenue growth here, people aren't really taking count of the fact that we actually sold substantial amounts of revenue as we've sold businesses that were not strategically logical, portfolios of assets put sale for 6 filters, and obviously have released risk-weighted assets through that which we've been able to redeploy in growing revenues which are logical within our GBM, RBWM, CMB, Private Banking businesses, which actually logically should actually have a higher valuation.

So would you venture some expectations we should set for the next year?

No, not really. And I think that the -- if you think about the guidance that Stuart provides here and the outlook around GDP development, it -- and we've talked about this in numerous occasions in the past, it tends to be a reasonable indicator of our opportunity for growth within those markets.

We will take our next question from Alastair Ryan from Bank of America.

Yes, so there's 3 from me. First, I mean, back to the all-favorite regulation and its never-ending development. So since last May, you've probably $50 billion or $60 billion more of risk-weighted assets with these new floors that are coming in than you'd reasonably expected to have, and you're running a higher reported common equity tier 1 than your goals, significantly in excess of 10% versus the goal of in excess of 10%, and likely to be building further as you run-off legacy portfolios and retain profits. So can you work us back to whether the 12% to 15% target is -- that you set and reiterated last May is still a reasonable one? Because -- just because the rules keep changing at quite a rapid pace. Second thing, the restatement of repos makes the margin very difficult to read period-over-period. Can you -- from your commentary, it sounds like the margin has stabilized, group net interest margin. Can you just walk us through that, please? And third, on BoCom, as I found it on Page 510, which probably is a new record in for HSBC, and the -- and are you basically telling us that unless the share price goes up, you'll have to reverse out the profits that you have accrued this year, which just proves just a nonintuitive accounting piece?

Okay. So let me take up on the regulatory capital point, and then we'll work through the repos and BoCom. So you're right in what you're setting out as a sort of question, and actually, it's not one that we can easily answer because until we have specific clarity, and this comes from the PRA, about what our end-state tier 1 capital ratio is, we have no choice but to continue to build our capital up. And there's kind of several points under that. One, we clearly are building capital up. I mean, if look at the $10.1 billion added to our tier 1 capital ratio, $9.2 billion is paid in dividends. So clearly, we don't have a problem building up to a higher number. But then you get to the second point, which is, well, can you get the 12% to 15% ROE if the E is now substantially higher than your assumption? And the obvious answer to that will be, no, we won't be able to. Depending on what actually that eventual E is, what I think I'm confident of saying, Alastair, is that no matter what the E is, we'll generate a return above our cost of equity. But whether the 15% becomes impossible to do and it becomes 12% or something similar, we just don't know because, absolutely, there are 2 things going on here. RWA density, for want of a better expression, keeps changing. Floors keep being introduced, and there are some more floors coming in the first quarter on corporate books, which Iain can talk about. And we actually don't know what the end number is. So until we get specificity around all of that and we know what the E is, then only at that point can we revisit the ROE target. But again, what it -- we do have the ability as HSBC to do is we don't need to raise equity or raise capital to get to these new whatever the tier 1 ratio they require us to have as because, clearly, we are generating substantial amounts of retained earnings and substantial amounts of PBT. But you're right, I don't know at this point in time whether the 12% to 15% is a reasonable number because I don't know what the E is going to be.

Yes. And Alastair, if you think about the operational measures at the business level that we use here, it's return on risk-weighted assets. In the year, we generated return on risk-weighted assets of 2%, which is up on last year. You take out the effect of the legacy assets in Global Banking and Markets and the runoff portfolios in the U.S. consumer business, you have 2.2%, which is very much in the range that we set for the group that triangulates to the lower end of the 12% to 15% range. So just on an operational level, you can see your way to the lower end, but that excludes obviously consideration of how equity develops. And that's the big uncertainty, as Stuart laid out. In terms of looking at NIMs, the -- with or without the impact of repos within the numbers, we saw net interest margin stabilizing in the second half of the year, particularly towards the end of the year. The rate of decline, as Stuart mentioned, has reduced significantly. This is all good news, but I would call it stability as opposed to recovery. So if look at where NIM is at the end of 2013 versus '12, we still have not recovered where we were at the end of 2012 and have some way to go in that regard. Looking at BoCom, again, you've got the prosaic elements of equity accounting under international accounting standards here, where we've got a market value in BoCom which has traded well below book value of BoCom in our accounting value now for the better part of 2 years. And as a consequence of which, and we do this for all our positions on a very regular basis, is reevaluate the accounting against the equity method using a value-in-use model. What we're really saying to you here is that we believe there is some point during 2014 where the carrying value is likely to exceed our value in use, and at that point, we would reverse out our share of the revenues and the profits of BoCom. That's what it boils down to. It in no way sort of has an adverse effect on cash or capital but certainly has an impact on reported profits probably for the second half of this year.

So just a last stupid part of that question then. Do you -- you'll stop accruing BoCom's profits, or you'll take a hit on the book value of it.

That -- no. What you will do is you'll actually continue to accrue the profits and you'll take out the reverse out of those profits to the extent that the carrying value exceeds the value in use. Now bear in mind this is driven largely by market value. So to the extent that market values recovered, then our assessment of impairment will change. So this is not a irreversible change, this is just a reflection, on an ongoing basis, of our accounting value versus that of the value in use.

We will take our next question from Raul Sinha from JPMorgan. Raul Sinha - JP Morgan Chase & Co, Research Division: Can I just follow up on the last one? And then I've got 2 separate ones. Just on the BoCom accounting impact, I do get the fact that obviously it has no impact on cash flow or capital, but is that a broader point to think about your dividend payout ratio while excluding the share of contribution from BoCom going forward just given that -- this volatility that causes to your earnings stream? Do you think that will be a reasonably way to look at your dividend payout ratio going forward?

No, I wouldn't. I don't see BoCom having any adverse effect on dividend-paying capability at all. The actual cash realized from BoCom in the form of dividends to us is a very, very small amount for the group on an ongoing basis. It's actually one of the features that drives the carrying value. Obviously, dividends would be a deduction from carrying value, so it's one of the things that continues to drive up carrying value against our value in use. So no, I would not reflect on this is having an adverse impact on the dividend-paying capability of the group at all. Raul Sinha - JP Morgan Chase & Co, Research Division: And then just 2 other questions. If -- just wanting to tap if you could share with us your estimate or your thoughts on what your Pillar 2A buffer might be. Some of the other U.K. banks have obviously given that number to us recently, so I was wondering if you might be able to do that as well. And then...

We're not inclined to provide that, Raul. That really is actually confidential between the PRA and the bank. And I believe that 1 or 2 of our competitors are to appeal to the PRA for a special permission to release that to you. We have a strong capital position, as Stuart mentioned. We generate capital, to very significant degree, on a quarter-by-quarter basis as supporting strong dividend payments to the shareholder base. Our capital position common equity tier 1 at 10.9% is certainly above our current understanding of what the PRA would require of us, substantially above that. But what we are not clear on, and this was the point that Stuart was making, is we don't know where the endpoint on this is. So as the EBA finalizes ITS and RTS on the implementation of CRD IV and the PRA then interpret that for application in the United Kingdom, the interaction of the various buffers, as we work through the transitional period, and the size of those buffers is actually what we need to understand. So we'll continue to work through the consultation process, as the PRA is ready to engage in that. And hopefully, as 2014 rolls on, we'll be able to give greater guidance to the marketplace about where we think that endpoint ultimately is and, going to an earlier question, hopefully inform where we think that has any impact on our ability to generate returns on equity and wider dividend distribution. It's an area where there's a lack of clarity right now. And at this stage, we don't particularly feel that it would be beneficial to any to do some gross speculation as to where it might end up. Raul Sinha - JP Morgan Chase & Co, Research Division: Okay. And then, I get all the commentary about redeploying your capital into higher risk -- return on risk-weighted assets. And obviously, that's a very sensible strategy across the group. I'm just a little bit worried about the fungibility of your capital across subsidiaries. And I was wondering if you can comment on the excess capital that is now in the U.S. and what your -- what you might or might not be able to do in terms of redeploying that into higher return on RWAs.

Okay, yes, absolutely, Raul. I think you follow the way in which we manage capital distribution within the group. The subsidiaries around the world return their surplus capital to us in the form of dividends. That then supports the dividend to the shareholder of HSBC Holdings plc, as well as supporting the redistribution of some of that capital back into the businesses to support growth in the various geographies through the legal entities in each of the markets in which we operate. So that practice has not changed. I mean, clearly, our subsidiaries around the various parts of the world are having to deal with how their local regulators implement Basel III as well, but in the round, that approach to capital management will remain absolutely consistent going forward. When you talk specifically to the United States, as we've mentioned in the past, we believe we've got substantial surplus capital there, but we've also got a couple of businesses on which we're very focused on growing. Commercial Banking is at the forefront of that, supported by Global Banking and Markets. And as we've deployed to the major metropolitan and industrial centers, particularly in the West Coast of the U.S. and in the Midwest, we've seen the opportunity to grow the Commercial Banking business. That's come through. The early stages of that is beginning to come through the numbers in the United States. And we'll continue to deploy surplus capital to the development of those businesses, as well as the restructuring of the Retail Banking and Wealth Management business. So there is an opportunity to deploy some of that surplus capital, but as we work through the results of the Comprehensive Capital Analysis and Review with the Federal Reserve, hopefully, in the years ahead, we'll find a way to release some of that surplus capital, which we believe exists, back to the parent for deployment to other businesses around the world. Raul Sinha - JP Morgan Chase & Co, Research Division: Is there a specific catalyst, Iain, that you think might be the point at which we can expect a decision to be taken in the U.S. on redeployment of that capital or dividend?

Well, I think the outcome of the CCAR review by the Fed is important. We'll hear about that towards the end of March. Again, we carry very, very strong total capital ratios in the U.S. They are just under the 27% mark. Overall, we've got a core tier 1 ratio of in excess of 13%, nearly 14%, in the U.S. So we believe, on a quantitative basis, we'll be in good shape. On a qualitative basis, which by the way is the basis on which a number of our peers in the U.S. have been challenged in terms of the overall process, the quality and the granularity of the data, like our peers, we would expect to be given a list of things the Fed would like to see us improve on. But I think, beyond CCAR, it is demonstrating the sustainability of profits coming through the U.S. business. It's continuing to make progress in the run-down of the finance company legacy assets, which the team and the finance companies have done a great job of over the course of the last 12 to 18 months, and then continue to make progress against the various regulatory matters, which we're in the process of investing quite significantly in, the DPA being one, but the continued focus on improving processes as it relates to mortgage lending and foreclosures would be another. So we're going to make progress on those 3 fronts, in my view. And until we've made some significant progress on the DPA, I think it's unlikely we'll be given the right dividend surplus out to the parent. Raul Sinha - JP Morgan Chase & Co, Research Division: And then, sorry, just to clarify, the DPA is still December 2017.

Yes, that's right.

Yes.

We will take our next question from Dominic Chan from BNP Paribas.

Stuart, it looks like the momentum for net fee income and insurance partner in the fourth quarter slowed down quite substantially in the fourth quarter last year, in particular in Europe and Rest of Asia-Pacific. I'm just wondering the reason behind the slowdown in the fourth quarter. And what do you think, the momentum going into the current year?

I think -- Dominic, I think, certainly as it relates to fee income, I don't think that's necessarily the case. I mean, what we did see in the fourth quarter was some slowing certainly in terms of Global Banking and Markets, in the rates business, where we saw revenues a little bit slower. I think, when we -- when you look at overall revenue development, we certainly saw the impact of the continued runoff and disposition of real estate tranches within the U.S. portfolio. You see the impact of DVA, but that's considerably less than was the case in the same quarter last year. I think, broadly speaking, fee income has held fairly steady. And we've seen an impact in terms of fourth quarter revenues in the other operating income line and on the trading income, as I mentioned. But overall, fee incomes remain reasonably, reasonably steady. It's a little bit down in Private Banking, and that's driven principally by the repositioning within the global private bank that we're in the throes of doing, but in round, fee incomes remain fairly stable.

We will take our next question from Rohith Chandra-Rajan from Barclays.

Just one fairly general question, actually, just in terms of growth opportunities for 2014. You sort of note the volatility in selected emerging markets and -- but believe also the GDP forecast unchanged. Just wondering what your sort of current perception is of growth opportunities within the return targets for 2014 versus 2013. So how you -- how would you compare growth opportunities in the 2 years?

I think you've got to basically go by geography and then by businesses in geographies. There's no rising tide that's going to lift these boats. So if you look at where I think there'll be greater growth this year versus last, I think the U.K., for us, with U.K. GDP at 2.6%, one of our 2 home markets. We have a substantial footprint here. The competitive landscape should enable us to take market share in Commercial Banking, Global Banking and Markets and indeed in Retail Banking. You've seen that in our lending to SMEs. You've seen that in our Global Banking and Markets business and its market share in debt capital markets and foreign exchange and so on. And you've actually seen it in Retail Banking with mortgages, and CMB with lending to international SMEs. I think, if you look around the world, I still think China is going to do 7% to 7.5% GDP growth, which will power the Pearl River Delta in Hong Kong. The ASEAN countries, particularly Malaysia and Singapore, should have reasonable GDP growth; Indonesia obviously needs to get through its election. Mexico, with the PEMEX reformed, we think it's probably a 4%, 5% GDP growth this year, and therefore we can see substantial opportunities there. And then if you look at particular initiatives, for us, trade -- we don't think global trade goes into reverse. We think that some of the margin compression -- or we see or know that some of the margin compression is actually moving through, i.e. it's kind of bottoming out. The volume growth that we've seen is appropriate to our market share in that regard. I still think RMB internationalization is a big macro play that will benefit this bank. I think the fact, the RMB, it weakened by 1%,…

We will take our next question from Tom Rayner from BNP Paribas.

Just 2, please. The first one, just to clarify, the 25 to 35 basis points you flagged up from the floors, that is incremental to the 33 billion increase in RWAs in '13, which was partly driven by the 45% floor. Is that correct?

Yes, yes, Tom.

Yes.

That is correct. Okay, just sort of following from that, that sort of gives you, if I factor that in and sort of pro forma start point of about 10.5%, 10.6% fully loaded, and we don't know Pillar 2A, but if we had to guess at it, we could, I think, make a case that you'll go to -- capital ratio is going to be somewhere north of 12%, maybe closer to 13%. And I'm just wondering if, with that in mind, you can sort of update us on your thinking about the payout. Because I know you focus on the sort of 53%, net of scrip, as a percentage of sort of earnings before variable pay, but we're up to 57% now on a sort of traditional dividend payout. And could you just sort of update us, with that sort of in mind, that whole capital accretion augment, please?

But -- so Tom, do you know something that we don't?

Possibly.

We probably should have a chat, in that case. If you've got particular inroads at the PRA, we'd certainly like to learn about those. I'm not going to speculate on where this has ended up because I -- we just do not know how the capital requirements are going to develop in terms of interaction of buffers, the implementation of buffers over the course of the next 2 to 3 years. I think what is perhaps interesting is that the PRA has taken a view that they will in effect take all of the transitional arrangements and move them back to the -- beginning of 2014. So getting to an endpoint on a PRA basis is actually a little bit easier to the extent there are any transitional arrangements that actually are disadvantageous to us to the tune of about 10 basis points. So you're starting point of 10.5% to 10.6% probably makes sense at an endpoint common equity tier 1 January 1, 2014, but where we end up, with the consideration of Pillar 2A, Pillar 2B, the implementation of a PRA buffer, countercyclical buffer, sector capital requirements, your guess is as good as mine. So I can't really dig into your question a little bit further because you're guessing.

Okay. But these -- I mean, it sounds as if the payout is the thing which would flex, if something had to flex.

Look, again, this year, we generated -- excluding the dividend, we generated $10.1 billion worth of capital, okay? We've got a distribution in terms of how we've used that or deploy that with 53% returned -- retained for the future strength of the group, 35% back to shareholders and 12% allocated to variable compensation. The capital-generative ability of the operations around the group is what is important here. So going back to Stuart's earlier statement: We don't have any particular concerns about the ability to generate capital to fund dividends to the shareholders going forward. I think the question and perhaps the -- where this comes to cups [ph] is around where the endpoint capital or equity requirements and our ability to generate a 12% to 15% return in equity, not necessarily whether we're able to generate sufficient returns and capital to continue to build dividends.

We will take our next question from Rohit (sic) [Ronit] Ghose from Citigroup.

It's Ronit from Citigroup. Just a couple of questions, to follow up. First of all, on Hong Kong, there was very strong loan growth in the first half last year for you, and there seems to be a bit of a slowdown in the second half. I was wondering if you could put some more color or commentary around that. And vice versa, deposit growth seems to have picked up in the second half. My second question is on GBM. If I go line by line, the rates business in Q4 has had a very tough quarter. And I know several of the peers have had a tough quarter as well. I was wondering if you could put some more color around, I'm assuming this is still, the European rates business. And by contrast, equities looks like -- unless I got my numbers wrong, it looks like it's had a very -- we -- for a fourth quarter, your equity business had a very good quarter. Is there anything on that as well? And the final question is really on maybe a more big picture question on China: We're seeing a tightening in the shadow banking sector in terms of, from a policy perspective, non-bank credit is down mid teens, about 14%, 15%, in January year-on-year. Do you see any risk of a spillover from that into either your mainland operations or into your Hong Kong operations?

Okay. So China and [indiscernible] first? Yes, I -- actually, let me just touch on 2 of the pieces, and then I'll let Iain deal with Hong Kong loan growth, although that's probably the HKMA's cooling measures as they came out in the property market. Flow banking markets fourth quarter rates, it's the same as everyone else's fourth quarter rates in the European rates business. The equity stuff is stronger in the fourth quarter because we built, actually, a very substantially successful business in Hong Kong, mostly, in terms of the -- in terms of equity. So there was actually quite a lot of activity fourth quarter Hong Kong that actually explains the equity number. And I'll let Iain go into a bit more detail on GBM and Hong Kong loan growth. As for shadow banking, it's very, very hard to tell actually the size and scale of the issue relative to a country with $4 trillion of reserves and a centrally planned economic platform as to whether -- and where most of the banks are still state owned and indeed the local governments can simply start up a local government bond market, the bonds bought by the insurance companies and pension funds domestically, as to how real a problem this is. The Western media clearly would like to see China have a problem, but actually, we're pretty confident in the 7% to 7.5% GDP growth. And right now, if you look at our exposure in China, we have exposure to the Chinese state-owned banks. Our exposure to corporates and SOEs is quite modest. And most of our China business is actually the high-quality Hong Kong developers that have gone north of the border and multinationals coming into China. So we're very aware of this issue and we're very aware of concerns around it, but I don't at the moment, in terms of China, think there's a particular concern that we are overly focused on beyond logical risk management.

Okay, in terms of Hong Kong loan growth, I think 2 or 3 contributors here. The property lending continue to develop. So both from a residential and from a commercial real estate perspective, we continue to grow. I think, certainly as the year progressed, we did see -- begin to see some cooling in the residential market on the back of some of the measures -- the further measures taken by the HKMA to try and cool things off on that front, principally with respect to introduction of a floor, an RWA floor of 15%, on new business. We continued to see reasonably good progression on credits we like within the commercial real estate space across Hong Kong. And we saw the trade and finance -- in the trade and receivables finance business, the volumes that we saw, and also this is fairly short term in nature, and the margins took some compression, we saw some fairly significant step-up in volumes in terms of the trade and receivables financing in that respect. But overall, that's really what drove lending in Hong Kong over the course of 2013 versus 2012. If you go through the line-by-line on sort of a management view of operating income within the Global Banking and Markets business 2013 over 2012, credit had a strong year. We were about $300 million ahead in it. The rates business was actually pretty much of a same story as it was in 2012. And you'll reflect in 2012 that we took a significant benefit in the first half of last -- of 2012 on the back of LTRO and tightening spreads in that business. But overall, the rates business held up pretty well. We did see a weaker fourth quarter but generally in line with what we saw in the marketplace overall. Foreign exchange, very much the same as with last year. The performance was very consistent. And as Stuart said, the equities business continues to perform particularly well, with a really strong year there particularly in Asia Pacific. Capital financing, steady growth versus last year. Payments and cash management, steady growth. Security services, pretty much of a sameness with the previous year. And then Balance Sheet Management, as we previously guided, down about 600 million on 2012, very much in-line. So that's a broad view of what you saw happening in Global Banking and Markets year-on-year.

Just a very quick follow-up on Hong Kong. I mean, if I look at the second half of the year versus the first half growth rates, not just, obviously in RBWM but also, I think, in CMB, you've seen a slowdown in growth. And I think you've seen a slowdown in growth versus the broader market, based on HKMA numbers. And I don't know if there's anything company specific above and beyond the slowdown in Hong Kong in the second half of the year.

No, don't think so. I mean, certainly, what you saw in retail bank Wealth Management was the slowing effect of HKMA measures. We talked about that. The market as a whole saw slower -- much slower rates of -- and volumes in the global trade and receivables financing business, in line with, if you like, economic development that we saw in that area in the second half of the year. But I wouldn't point to anything particularly idiosyncratic at all.

We will take our next question from Fahed Kunwar from Redburn.

I had a few questions on margin and the irritating U.K. regulation. The first question, well, linked to the 2, but thinking about the total capital requirement in the U.K., obviously, CRD IV said that 1.5% AT1 needs to be in issue, and you've seen a lot of European peers issuing those. And because of your kind of high or low loan-to-deposit ratio, issuing those, what kind of impact do you see that having on margin? And also having to issue kind of, whatever the numbers, 4% to 5% on tier 2, that you have the issue, do you see the issuance of those impacting margins? And would that mean your -- you'd let your loan-to-deposit ratio run up or other unsecured funding would be left to mature -- yes?

Okay, so it depends really, again, on the future shape of regulation within the U.K. and, perhaps more specifically, the ring fence bank in the U.K. You're actually right, there's a requirement around 1.5% of tier 1 instruments and 2% of tier 2 instruments, but you'll recall already that we've got tier 1 and tier 2 instruments in issue, the eligibility of some of which will dissipate over the coming 10 years as those amortize out under Basel II transitional requirements. But when we go to the market, and we have gone to the market in 2013, with Basel III-compliant tier 2 instruments and our pricing on that was very, very competitive, I mean, again, we saw pricing at spreads that in no way erodes our margin in this respect. So it will be -- and we're talking about funding today that we can deploy into the market profitably. The question will become relevant at the point in which we've got to issue into the market a much higher proportion than we currently have issued and which we therefore against -- as you rightly pointed out, against the strong deposit base we've got, which would make it much more difficult to deploy profitably. But the extent at which that would be necessary remains, frankly, impossible to determine at this point until we get better clarity on ring fence banking regulation in the U.K.

My second question was from your 10.5% starting point. I appreciate we have no idea what the end number will be, but the number is probably upward. It seems like the dividend payout ratio won't be kind of flexed to get to that higher capital level. Would you considering -- how are you thinking about potentially higher capital numbers, without knowing them, when you're looking at growing your RWAs? I mean, one of your peers is talking about focusing on lower risk-weighted-asset businesses to help grow that capital ratio, and by definition, I guess that means lower-margin businesses. How do you think about your risk-weighted asset growth in the context of potentially higher core tier 1 requirements?

In a manner that's entirely consistent with how we've thought about it in the last 3 years, which is on a risk-adjusted-revenue basis. So we've focused on returning risk-weighted assets to target within the ranges that we've talked about at the investor updates and that we disclose in the financials. So we have progressively, over the course of the last 2 years, moved within line with our risk appetite to a lower risk position, but that in no way precludes our ability to deploy risk-weighted assets profitably within the ranges that we've targeted for the business.

We will take our next question from John-Paul Crutchley from UBS.

All, JP here. Just a couple of quick ones, maybe just a follow-on on the capital debate. I guess I must drop out the juxtaposition, actually, of where you are and clearly facing the uncertain [indiscernible] in terms of capital versus the announcement that came out of Citigroup on Friday afternoon or Friday evening talking about taking their tier 1 capital ratio target down to 9.5% from 10%, actually reducing that. And I guess the question is, when you're having the debate or discussion with regulators and, therefore, a group like yourself which is clearly operating on a much broader global stage than just a pure U.K., to what degree does the old chestnut of level playing fields and actually trying to maintaining the common standards actually come into that debate? Or are we essentially just pursuing a U.K.-led agenda here? And the second and perhaps more prosaic question was just on the Investment Bank: I wondered if you could just comment on where we should expect the normal seasonal balance in the rates and FX business, particularly in Q1, that we've normally seen in previous years.

On the Global Banking and Markets business, there does appear to be seasonality to it. And then regulation. Douglas has been sitting here drinking coffee, so he's going to -- he has this absolute question...

Douglas here has a doctorate in this one now. He'll go into detail, but yes, JP, there is seasonality and there is seasonality, yes. And it's there again.

Yes, okay. Okay, understood.

I think, as -- what's plaintive at the moment in global regulation is, while everybody stands up and embraces the concept of a single framework for regulation, what you're seeing is increasingly, and for obvious reasons, the 'balkanization' of capital regimes to set the particular shape of the markets where the regulators have again understandably a primary concern against their own political environment and their own taxpayer risks. So I think it's very difficult. I don't think you would get a recognition from a regulator anywhere around the world that what they've got a responsibility to do is to create or contribute to a level playing field. I think they've got -- I think they all believe in a set of minimum standards. They believe in as much harmonization as possible that if they think there are steps necessary to protect their own market or to shape the banking system within their region or market in a particular way, they will do so. And I think the stuff that came out from the Fed in the last couple of weeks on foreign banking organizations, I thought, say that very, very clearly, very articulate in terms of why it was important. And the impact on the global economy was mentioned as being something they had taken into account but haven't necessarily found it compelling to be a level playing field, but for the reasons it's saying it's important for the global market that we protect the U.S. system. And you can see why people would think like that. So yes, I think we're going to see -- increasingly see differentials between markets, and that's just life.

We will take our next question from Mike Trippitt from Numis Securities.

I understand the frustrations about an ROE target when we don't know what the E is going to be, but I just wonder if I could pick up on Iain's comments, I think, in an answer to a couple of questions ago on return on risk assets and just get your sort of thoughts around confidence levels still to get into that. Are you at the bottom of that 2.2% to 2.6% range? And I think, at the time, middle of last year, you said there's really -- you're not assuming any tailwind effect from rising rates in your target range. And we've got impairments at fairly low levels. So I just wanted to understand what really drives the business on into the -- sort of up to the sort of 2.6% level. I mean, I know, with the GBM, you're there, by the looks of it, but in Commercial Banking, a way to go yet. So I just -- if you could give your thoughts around that particularly given in the light of risk-weighted-asset floors and also just where we are in the cycle.

Yes. Mike, I think it's a good question. I think, from -- if you look at the progression in risk-weighted assets over the course of the last couple of years, the businesses are making progress quarter-over-quarter in terms of pricing business comprehensively. We've moved the return on risk-weighted assets from 1.8% -- this is on a reported basis, from 1.8% to 2% this year. On an underlying basis, it's also 2%, but if you pull out the effect of the legacy runoff portfolios in GB&M and the consumer portfolios in the U.S., that gets us to a 2.2%. And this is really a question of working one deal at a time and looking at the growth opportunities by market, differentiated by market, as Stuart described earlier, and pricing to these returns. I think, what the businesses have improved, we've improved the ability within the businesses to have transparency around the risk-weighted assets and, therefore, the pricing to achieve the return on those risk-weighted assets at a much more granular level within the business. And we continue to work on that with each of the global businesses in terms of building a more granular understanding of what really drives, a, the risk-weighted assets; and then obviously one thing in which we'd always be very conscious is how you price in the marketplace competitively to achieve some of those returns. So it's not -- again, it's not one story that -- it's not a particular rising tide that lifts all boats, but it's step by step by step, deal by deal to work through this improving the granularity and visibility to data and then pricing competitively in the marketplace. So the progress over the course of the last couple of years is encouraging and we just have to keep building on that.

And then if I could just push you a little bit on the Commercial Banking business, though, which is sort of sitting below your target range. Is it -- can you give us some sort of calibration about, say, if we were to get -- go back to a more normalized -- or we talk about a bottoming out on trade finance margins, if they start to normalize again, what impact do you think that will have on return on RWAs?

I mean, clearly, the spread compression that we saw, particularly in Asia, in the first half of this year was marked. And I think one of the answers to an earlier question was that we still haven't seen the level of pricing that we saw at the end of 2012 in that particular space. So we're seeing stabilization coming in. I think perhaps one of the factors that is a particular benefit to HSBC is that, as we see some of the liquidity move out of those markets, and some of the uncertainty around EM which is certainly promulgated and promoted by the press, we continue to see growth opportunities across the significant majority of our markets in the emerging markets, whether it's Asia or further afield. And as that pricing stabilizes, our liquidity helps us take share, equally sure in LatAm. So we -- yes, the compression has a significant effect on margins in -- and particularly on CMB, in 2013, but we'll build recovery from there as margins stabilize. And it's not in our plans, but as we see interest rates, hopefully, improve over the next 18 to 24 months, that will continue to filter through.

We will take our next question from Vincent Chang from Goldman Sachs.

My question is others categories, which is on Page 92 of the annual report. I noticed last quarter's -- the first 9 months of the year, the pretax profit was $66 million, and it became minus $2,145 million for the full year. So I'm just wondering if you can give us a breakdown on the quarter-by-quarter movements in these categories. And then also clarify, is that $1.4 billion Panama disposal gain booked under this category?

No, the Panama gain is booked by -- in each business, in each global business. So it was split between commercial bank, Global Banking and Markets and retail bank Wealth Management, so this is not booked within other. In terms of the development of operating income, I think one of the most significant features is that the bank levy is booked in other in terms of operating expense, and that's in the fourth quarter. And the other is the movement in fair value of own debt. Those are the key differentiating features. In terms of, shall we say, ongoing revenues and expenses, fairly consistent.

Yes, okay, the bank levy is $900 million. The sale of debt is roughly $200 million, I suppose. But the movement like $2.2 billion. I'm wondering if there's -- if I missed anything there.

So the fair value of own debt for the quarter was $530 million, okay? The bank levy was $907 million. And ongoing operating expenses were very consistent across the quarters, about $450 million, so last year. So yes, nothing -- so in comparison to last year, we'd be paying 100 [ph] Industrial Bank. So that didn't come through again, yes. So there was no -- there was a lower dividend on the Industrial Bank in the third quarter of this year.

It's the fourth quarter. The -- there's no Industrial Bank dividend in the fourth quarter because we've reclassified that.

We will take our next question from Christopher Wheeler from Mediobanca.

Two quick questions. The first one is on Slide 17, Stuart, the strategic priorities for '14, '16. You talk about redesigning key processes. I know, talking to John Flint, that you're redesigning, reworking the retail platform. Could you also just tell us, are you working on the other 2 major business platforms, commercial and obviously Global Banking and Markets? And will there be a cost to getting to the $2 billion to $3 billion of additional cost savings you're planning on? And the final question, just real quickly, where are you in the de-risking of the European Global Private Banking business? Obviously, you're now keeping Monaco, you told us that last quarter. How far are we along the road to really getting the business into the shape you want where you feel very, very comfortable with it within the terms of the six filter?

Okay, so Commercial Banking will have the same program that John's spoken to you about in Retail Banking and Wealth Management, which Simon Cooper can give you a deep dive on. But again, Commercial Banking does not run as a single global business really until Alan Keir began to get a grip on it in the last couple of 3 years. So there are still significant opportunities to harmonize processes and procedures and to get kind of the economies of scale that a firm of our size should have. So again, in CMB, you've multiple Internet platforms, just as you have in Retail Banking and Wealth Management. They're just very simple things, obvious things, like that where we can get costs out. Global Banking and Markets, less so. It's been run as a global business since actually about -- certainly since about 2003. So actually, there's less process synergy that necessary can come out of Global Banking and Markets that's more advanced in that regard. As for the private bank...

Sorry, sorry, again, if I could ask, Stuart, is there a cost to the 2, so this $2 billion to $3 billion savings? Or will it be lost in the normal day-to-day costs of the 2 businesses?

I'd expect there's been losses in the normal day-to-day cost of the 2 businesses. There were [indiscernible] restructuring charge, I mean, related to this. And then, on Private Banking, I mean, the bulk of the restructuring of the European or the Swiss business is behind us. The business that we've restructured is obviously the Republic one. So we bought Republic Bank of New York. It had a client base that actually did not have a great deal of synergy with the rest of the HSBC group. And what I want to see going forward, and there's a great example in 2013, as I said earlier, $5 billion AUM coming from introductions from Commercial Banking to the private bank. I want basically the client base to be the client base that we always had in Singapore and Hong Kong in the private bank of the Hongkong and Shanghai Banking Corporation or actually the private bank of what used to be British bank of the Middle East in Geneva, which was the wealthy clients that we had in other parts of the bank in the Middle East or in Asia Pacific. So the bulk of the restructuring of the Swiss piece is behind us. We remain committed to our Private Banking business. We remain committed to actually Switzerland, which is a core proposition, but what I would expect to find is that, our own clients, if you like -- inform most of our Private Banking clients that most of our focus will be on onshore, and where we have an offshore proposition, it's on a tax transparent basis, i.e. it's on a disclosed funds basis. So I think that you should expect to see improvement in 2014 in the PBT of the private bank from where we stand here. Thanks very much indeed. Thank you, all, for your interest.

Thank you.

Thank you, ladies and gentlemen. That concludes the HSBC Holdings plc Annual Results Call. You may now disconnect.