Good morning to everybody in London, and good afternoon to everybody in Hong Kong. We have two objectives today. The first is to take you through our Q4 and full year results for 2020. And the second is to update you on progress against the changed agenda we shared with you last February and the additional actions we are taking to deliver returns above the cost of capital. I'll start with a few reflections on the year just gone. Ewen will then take you through our full year and fourth quarter results. Then myself, Peter Wong, Nuno Matos and John Hinshaw will share key details of our future plan. Ewen will then return to cover the financial implications of that plan. Let me start with 2020. First and most importantly, our people provided amazing support to our customers and the communities we serve throughout the world. We provided more than $52 billion of wholesale lending support through government schemes and moratoria; more than $26 billion of additional relief for personal customers; and more than $1.9 trillion of loan, debt and equity support for our wholesale customers. However, the numbers don't do justice to the efforts and energies that went into delivering them. My colleagues acted with great purpose on a global scale. They broke down silos. They innovated, and they delivered repeatedly in the toughest of circumstances. They were customer centric in the truest sense of the term. And our customer scores in the U.K., Hong Kong, the U.S., the Middle East and Mexico bear these out. Second, the economic impact of COVID-19 hit our profitability, but we still delivered $12.1 billion of adjusted pretax profits and $8.8 billion of reported profit before tax. We also finished the year with a strong capital base of 15.9% and increased our liquidity…

Thanks, Noel. And good morning or afternoon, all. A few quick words on the full year 2020 results. The combined impact of COVID-19 and ultra-low interest rates significantly impacted our reported profit before tax, down 34% from the prior year to $8.8 billion. On the positive side, our Asian business held up well with $13 billion of adjusted pretax profits. This included the second year running of $1 billion of pretax profits from our Indian franchise and further market share gains in our trade franchise in the region. We did a good job of controlling operating costs, down $1.1 billion or 3%, well ahead of what we'd promised we'd achieve a year ago. We achieved exceptional growth in our deposit franchise, up $173 billion in the year or some 12%. And we strengthened our core capital base, with our core Tier 1 ratio up 120 basis points to 15.9%. As we move into 2021, it's the interest rate environment that's most negatively impacting our returns outlook. And it's why we're shifting our revenue mix towards noninterest income; accelerating our capital allocation, people and investment, towards Asia; and investing in a multiyear technology plan to significantly improve productivity. Turning to Slide 8. On the fourth quarter, it was a solid set of results with reported pretax profits of $1.4 billion. Adjusted revenues were down 14% on last year's fourth quarter, mainly driven by the progressive impact of ultra-low interest rates. Expected credit losses were 44 basis points or $1.2 billion in the quarter. This compares to 26 basis points or just under $700 million in the fourth quarter of last year. Total ECLs for the full year were $8.8 billion, at the lower end of our targeted $8 billion to $13 billion full year range. While operating costs were up Q4-on-Q4…

Thanks, Ewen. So last February, we announced a series of actions to make HSBC fit for the future. And we remain committed to delivering them, but there were 3 fundamental shifts in 2020 that we must reflect in our plans for the future. First, the interest rate environment changed dramatically. We lost around $5.3 billion of net interest income or more than 2 percentage points of RoTE, and we don't expect rates to rebound anytime soon. We reacted to this in 2 ways by accelerating our shift towards noninterest income, including earned fee income; and cutting our costs further and faster to compensate for lost revenue. Second, the shift to digital was accelerated by the impact of lockdown. As the pandemic took hold, our customers' digital engagement increased dramatically. We were already investing heavily in digital and technology, but we responded by rapidly accelerating the digitization of our business. Third, COVID-19 has made everyone aware of how fragile the global economy is to an external event, and as a consequence, environmental issues have taken on a renewed importance. Thankfully, we were already working on the next phase of our successful journey with respect to sustainability. And we announced an ambitious new climate plan in October of last year. The low carbon transition is the most transformative trend of our time; and it presents an unmissable commercial opportunity for a bank of our size, geography and profile. So these 3 trends and the decisive action we took to meet them form the basis for much of what you're going to hear over the next 30 minutes. We have a plan that we think can deliver at least 10% return on tangible equity over the medium term. It will transfer material amounts of capital from low-return markets to higher-return markets. That capital…

Thank you, Noel. I want to start by saying I'm very excited about Asia's growth, and HSBC is uniquely positioned to capitalize on the opportunities. Economically, Asia is outperforming the rest of the world. It contributed 71% of global growth in 2019 and is expected to account for almost half of global GDP in -- by 2025. The key story in Asia is rapid wealth creation. By 2030, 2/3 of the world's middle class will be in Asia, up from just over 50% today, driving strong growth in consumer spending. And this will promote trade. PwC forecasts the trade flows in Asia will grow 25% faster than the rest of the world over the next 5 years. For HSBC, the opportunities lie not just in helping sustainable growth, supporting trade and managing the wealth within the region but also in using our unique global footprint to connect the rest of the world to Asia; and vice versa. We are already a leader in Asia. We operate in 19 markets across the region, covering 98% of Asia's GDP. For the majority of our markets, our history goes back 140 to 150 years. Therefore, we know the customers, their cultures. We know the regulators, and we know the business flows. And when it comes to global connectivity, our international competitors lack our footprint and deep connection to Asia, and our Asian competitors lack our international network. Within Asia, Hong Kong, mainland China, Southeast Asia and India will drive our growth. These markets will benefit from an expected doubling of asset under management in Asia to USD 30 trillion over the next 5 years. To expand our businesses, we will continue to strengthen our position in Hong Kong, our market-leading digital products in particular; and leverage our strengths to capitalize on the opportunities…

Thank you, Peter. Last year, we created Wealth and Personal Banking. And we brought together our mass affluent, asset management, insurance and private banking businesses into one integrated business, allowing for a significant acceleration of our wealth strategy. Last year, this business generated close to $8 billion in highly accretive wealth revenues, with more than 50% being fee revenue. Our wealth expansion is well underway. We've made the necessary structural changes. The plans are well defined. We have bold but achievable ambitions; and we are in full execution mode, particularly in Asia but also in our global wealth hubs. And that's what I would like to talk about today. We believe that wealth management is one of the most compelling opportunities for growth in financial services today. The affluent and high-net-worth population expansion, low rates for longer and the capital-light profile of this business makes it very attractive. And while the opportunity is global, Asia is no doubt the fastest-growing region for wealth assets. In this context, HSBC is perfectly placed to capture this opportunity. We have a compelling starting point with 4 million customers and $1.6 trillion of wealth balances, making us a leading international wealth manager. The lion's share is in Asia, accounting for more than 65% of our wealth revenues. We are the second largest wealth manager in Asia, leveraging the strength of our brand which is built on a 155-year heritage of serving customers and the full capabilities of a universal bank. Last year, we grew our global wealth balances by more than $160 billion at double-digit growth. Second, as the wealth opportunity becomes truly global, our international network gives us the ability to deliver transactional banking and wealth management services in the most relevant markets to our international-oriented affluent and high-net-worth customers. We have a…

Thanks, Nuno. I want to expand upon what you've heard today and describe how technology will be a differentiator for the group. Our focus is to shift away from costs across the bank that aren't adding value to customers and to make investments that drive revenue growth and a better customer experience, but first, let me explain digital business services. You probably knew it as HOST in the past, which stood for HSBC Operations, Services and Technology. It's my view that this was a fragmented approach to our task at hand, which is digitizing our business end to end. Thus, we are digital. We're focused on improving our business results. And we're a services-based organization, digital business services. The first slide explains our approach. You probably won't be surprised that we've spent more on technology, especially given increased customer demand due to COVID, but more importantly than the amount we're spending is that we're developing technology in a fundamentally different way. Our approach to building technology platforms has shifted from building bespoke local solutions to leveraging our scale. We will build once and deploy globally. We're also laser focused on reducing the bank's costs by digitizing end-to-end processes and eliminating manual work. To do this, we're dissolving the boundaries between the front, middle and back offices so work is processed with limited or ideally no manual touch points. In 2020, for example, we processed 7.6 billion payments as a bank, and they were worth $563 trillion. And we increased our no touch rate on those transactions to 96%, but we can do even better. Our aim is to get above 99% no touch rate in the next several years. And to get those last few percentage points, we're going to need to digitize the most complex payment processes. Reducing the…

Thanks, John. On Slide 40. Our refreshed plan seeks to build returns that are at or above the cost of capital and to do so in an environment where rates broadly stay at today's levels, providing leveraged upside of higher-rates return in the coming years. In order to do this, there's broadly 3 buckets of return upside: firstly, things that we just expect to happen irrespective of management intervention. In this bucket, I'd put two things, the normalization of ECL charges that I talked about earlier and the lowering of the bank levy from this year onwards. Together, these should add around 300 basis points of RoTE over the next few years. Secondly are the actions we talked about across revenues, costs and capital. Together, we think these plans can drive an incremental 400 basis points of return on tangible equity over the coming years. On revenues, a few things that contribute to this; firstly, the achievement of a better mix of higher-returning lending relationships. This was a core part of what we announced in February last year, the shifting of capital from certain lower-returning Western clients to the East. We made very good progress on the shift out of the West in 2020 with material gross risk-weighted asset reductions in our U.S. and non-ring-fenced bank franchises, but COVID-19 did slow the reallocation of capital to the East relative to what we expected to do last year. However, as Peter has just set out, we continue to be massive bulls on the high-growth and return potential across our Asian franchises. Over the medium term, we've an ambition to have Asia represent around 50% of our tangible equity. That's up from 42% today, with much of the remaining 50% of our capital linked to Asia. And secondly on revenues is our…

Thanks, Ewen. So to wrap up. We will significantly increase the group's capital and resource allocation to faster-growing higher-return markets. We will capitalize on the opportunity offered by our network and our franchise to drive growth from fee-generating products in wealth and platform businesses in wholesale banking. We will leverage technology to transform our cost position, offering significantly higher operating leverage and freeing up resources for investment. And we expect all this to deliver returns above the cost of capital while driving revenue growth principally from Asia. Through our new dividend policy, we aim to deliver both sustainable dividends and sustainable growth. And as a final comment: In 2020, we executed against our promises, and in 2021, we will do the same. We will get it done. With that, we'd be happy to take your questions.

Thanks, Noel. And good morning, good afternoon, everybody. We've got a combination of questions, mainly audio questions from telephone lines but also some written questions from the video webcast. We'll start off with 4 or 5 from the audio line, so over to Sharon, the operator, please.

[Operator Instructions]. Your first question today comes from the line of Martin Leitgeb from Goldman Sachs.

The first question is just on capital. And I'm just trying to understand the moving parts in terms of capital progression from here because, on one hand, it's a very strong capital print this quarter, so 15.9%. And the guidance in terms of capital headwinds, so Basel III and software intangibles -- so that still implies just around -- I mean, if we were just to back aside Basel III for now, around 10 billion to 15 billion excess capital spot versus your 14% to 14.5% target range. I'm just trying to square that up with your mid-single digits asset growth ambitions; your investments plan which is over a 5-year period, I understand; and the dividend payout guidance not capturing 2021. Is it right to have significant headroom here in terms of capital, whether that could mean either faster growth, whether that's organically or inorganically? Or is there anything I'm missing in terms of the potential headwinds? And the second question. I was just wondering on rate sensitivity. And thank you for the disclosure on Slide 69 with a parallel shift in yield curve. Could you help us quantify the impacts of from -- purely arising from the steepening of the yield curve that we have seen, obviously, over the last couple of weeks, months in U.S. dollar but also in sterling? Is there fairly unlimited impacts arising from this steepening of the yield curve given limited patches, in particular in Hong Kong? Or is there a more meaningful impact coming?

Okay, well, look, I'll start off on the first question, Martin. On -- yes, maybe to deal with it through risk-weighted assets. I mean, if you -- we obviously finished the year at just over $850 billion of risk-weighted assets. We are telegraphing an expectation of loan growth in sort of mid-single digits over the next few years. I think, for this year, it's probably going to be back-end weighted as various economies recover from COVID. You -- we have around $10 billion of regulatory pressures this year; and in total about $40 to $50 billion if you go through '22, '23, including the impact of Basel. We've got an RWA run-down program that's still got $50 billion to go. That largely offsets that $30 billion this year and, call it, another $20 billion next year. And then on top of that, which has surprised us, but yes, we've had meaningful credit rating migration during 2020. There was about $30 billion of credit migration. We're anticipating that to be less in 2021. It could be materially less, depending on how economies recover, and then a decent amount of that reverse out in '22 onwards. So when you put all that together, we are anticipating risk-weighted asset growth. On distributions, we do expect to be above the 40% to 55% payout ratio in 2021 and then migrating within that payout ratio thereafter. As I said, no buybacks this year, but it's certainly something that we've used in the past. As you know, we do see them as a legitimate means of capital management. And if we have excess capital in '22 and beyond, it's certainly something we'll consider. Then on rate sensitivity, yes, the steepening of the yield curve in the U.S. dollar provides some support but not material support. We're far more sensitive to the near end of the curve.

Your next question comes from the line of Adrian Cighi from Crédit Suisse.

I have two questions, 1 follow-up on capital and 1 on net interest income. On capital, just to understand: You've very helpfully outlined the risk-weighted asset bridge, but is there in your capital target any sort of part of that surplus capital, as it were, earmarked for potential opportunities? And could you maybe outline how much you're thinking and over what period of time? And then on net interest income, you've had a NIM contribution of 5 basis points from the liability side. Can you give us any insights how much of that is sort of recurring and how much more you could do from either changing liability mix or repricing going forward? And then on loan volumes, you've sort of shown a decline on a quarter-on-quarter basis from the development despite a weaker U.S. dollar. You expect mid-single digit going forward. Sort of where do you expect this to come from?

Yes. So on capital, we're not allocating or precisely allocating any amount to inorganic, but within that dividend policy of the 40% to 55% payout ratio, we are giving ourselves some flexibility to do bolt-on acquisitions. And I use the word bolt-on quite carefully, so don't expect us going out and doing material M&A anytime soon, but if we see things that we can bolt on that accelerate our strategy in some of the areas we've talked about today, we'll certainly consider it. On yes, net interest income then, generally I think, Q4, there was the repayment of the Ant IPO in Hong Kong, which I think had a material impact on lending volumes together with a traditional cramming down of corporate borrowings towards year-end. So I wouldn't read too much into Q4 of last year. On net interest income for this year, we do expect on the positive side some asset growth, as I said, a bias to the second half. I think the news flow out of the U.K. yesterday was very positive. Vaccination programs now started in Hong Kong. You'll have your own forecast for China, but we see significant growth opportunity, I think, in Asia coming out of COVID; and continue to see a significant opportunity here in the U.K. in mortgages, for example, where we've been consistently running at about a 10% market share during the year last year. On both the liability side and the asset side, we see some repricing opportunity. Dollar weakness should add about $800 million or so to noninterest income this year. And offsetting that, obviously when you look at our roll-forward interest tables, we're going to have some headwinds from the lower interest rates from last year. And we've currently got a very weak HIBOR, so -- and you know that we're very, very sensitive to 1-, 3-month HIBOR, so...

Adrian, I'd also add on loan volumes. I think what we saw towards the end of last year, particularly in Asia, was a lot of customers, wholesale customers, positioning themselves with facilities available to fund future growth but not yet drawing down on those facilities. So I think they're ready with their balance sheets to take advantage of an upturn. And they're waiting to see that upturn come as we start to see the world come out of the COVID crisis, hopefully, on the back of the vaccination program, but there was certainly a lot of activity towards the end of last year on getting ready for that upturn.

Thank you.

Your next question comes from Tom Rayner from Numis.

A couple, please. First one, on the impairment guidance for 2022 either at the bottom end or below the 30 to 40 basis point range. Can I ask if you're factoring in anything significant in terms of releases from the stage 1 and 2 reserves or whether that sort of 2022 number is going to be representative of the sort of through-the-cycle rate? And then a second question, please, just on sort of distributions. You mentioned obviously share buybacks are a possibility but in the medium term. I noticed that, the medium term, you define as 3 to 4 years, so just wondering whether you're effectively ruling out buybacks for both this year and next year or whether that's reading too much into the terminology. And I'm assuming that, over and above the maximum dividend payout, it'll be the 14% to 14.5% target range on equity Tier 1 that sort of calibrates your maximum distribution potential.

Yes, thanks, Tom, for picking me up on the use of the term medium. So I'll be more careful going forward, but no, we've only ruled out buybacks in 2021. So I wasn't intending to also put a block on us participating in buybacks in 2022. On impairment guidance, we've talked in the past about a normalized range of 30 to 40 basis points through the cycle. We were obviously, well, more than double the top end of that in 2020. Included in that was a very significant buildup of stage 1 and stage 2. If you backed that out, we were running in probably the low 40s in 2020, yes. And as we think about '22, there may well be some reserve releases in that guidance, but I do think, if the world is recovering out of COVID, we should be able to operate at or below 30 basis points for '22 onwards for a few years until the cycle turns again.

Okay. And just on the other question, thanks for the clarification on the 2022. The total distributions, I know you're leaving room for some bolt-on acquisition, as you said, in your 55% maximum payout. I'm just thinking. If there aren't any acquisition opportunities at all, would you be prepared to distribute everything else that kept you within the 14% to the 14.5% target range on your common equity Tier 1?

Yes...

Tom, the important thing is the first call on any excess capital will be to try and use it to drive growth but profitable growth in our strategically important markets in a focused way. And then if we can't -- if we don't see opportunity for growth, then we do reserve the option of buybacks, but I think it's too early to make that call at this point in time. So I think we'll -- clearly love to use the capital in profitable growth in the focused areas and resort to of buybacks if we don't have a realistic opportunity for profitable deployment.

Yes. And also remember, Tom, what I was talking about in one of the previous questions is, yes, there will not be -- there will still be some decent amount of RWA inflation in both '22 and '23 coming from regulatory change.

I think the important change we've made with this dividend policy is to provide an opportunity to both generate strong return and strong growth for the bank. And that's what we try to position with the dividend policy going forward.

Your next question comes from the line of Aman Rakkar from Barclays.

So just a couple, please. Can I just confirm quickly on the cost targets that you've given in 2022? Does it include anything for French retail and the North American retail business that's currently under review? Or should we be looking to kind of adjust those targets incrementally for anything that may or may not get announced?

That's not include within our cost targets. Any actions on those 2 areas will be incremental. Plus there'd be a loss of revenue as well, so you need to take both of those into account.

Okay, perfect. Okay, cool. Can I just ask then on costs, cost management more broadly then? I mean, how are we thinking about the costs, managing that cost base? I mean, are you looking to target jaws -- as well as given the kind of absolute cost target, if the revenue environment doesn't come through, are you looking to manage it on a jaws basis? Should we be looking at cost-income ratios? I mean, how are you thinking about cost flex if the revenues don't come through?

I'll give you a couple of comments first and then I'll ask Ewen to go into more detail, but we're targeting an absolute cost number in the medium term. And on a constant currency basis, that is now $30 billion. And when we talked a year ago, we talked about $31 billion in 2022. We're now talking $30 billion on a constant currency basis in the medium term, but that is also having taken into account our willingness to invest, so that $30 billion is post investment. And clearly, we're investing in the business because we see growth opportunities and we believe that it's right for the bank to invest in those growth opportunities. Now clearly that's a dynamic we have to keep under watch as to how much growth is starting to return into the economy and how much growth we should be investing in, but that target absolute number we've given you is on the assumption of growth and on the assumption of investing in growth and in total around about $6 billion over the next 5 years in Asia. But Ewen, do you want to add any more?

Yes. I mean I actually think we've done a pretty good job on costs over the last couple of years. Remember, in 2018, we grew our cost base by about 5.5% in that year. Last year, we shrank it by 3%, so that's an 8.5 percentage point delta in the cost run rate. As Noel said, I mean, I think it really -- we're not targeting either jaws -- or what we're targeting is to get returns up materially, and in order to do that, we need to control costs well. John talked about, earlier, growing confidence internally about a very material productivity uplift that we can get from the investment in technology; and that gets you on a very virtuous circle. The more productivity you drive, the more affordability you have to invest, but I mean, also, I think, over the last couple of years, what you've also seen is we've been flexible. We've seen growth come down, revenue projections come down. We've adjusted our cost trajectory. So we think we have got decent amount of growth ahead of us, so we think the cost plans that we set out are realistic for that cost for that revenue trajectory, but if things change, we'll change our cost plan.

And the other important thing. When you look at the slides, you'll notice that, although the number in absolute terms remains the same from 2022 onwards at about $30 billion on a constant currency basis, $31 billion on an FX-adjusted basis, the nature of that cost changes. So you're seeing a higher proportion of that cost base going into investment in technology. That's the red part of that bar chart. And you're seeing the BAU run costs, the operating costs, become a smaller percentage of that total cost base. And that, for me, is where we then start to get the payback in terms of return on capital because we're deploying more of our investment into taking out bad costs, investing in the good costs that can drive revenue and drive enhanced customer experience. And that's the balancing act that we're trying to achieve.

We've got a couple of questions from Ronit Ghose from Citigroup. And the first one is on the wealth business. "The wealth business in Hong Kong has -- I noticed, has been very strong. Why do you think your wealth business in Asia excluding Hong Kong has been less strong? And what should we do incrementally about it?"

I think it's a great question. And to be honest, I don't think we've invested enough in it outside of Hong Kong and outside of China in the past. And that's why, over the next 3 to 5 years, we're embarking upon a material investment program, 50% of which will be deployed outside of Hong Kong and China. So that's an important aspect of why we think we can succeed. The other thing I'd say on success is we're investing on a platform that is already very, very successful in Hong Kong, so we're taking the learnings from there and taking them elsewhere. And we're taking the clients that we fostered in Asia in our Commercial Banking and global banking business and we're working -- and we're taking those clients into our wealth business. So we're investing on an already successful platform. Just to give you some statistics from 2020: 60% of the private banking net new money that came into the private bank last year came from our wholesale banking relationships, Commercial Banking and global bank, yes. And 75% of the net new money from our asset management business last year came from those same very -- those same sources, Commercial Banking and global bank, yes. Now across Asia, including South and Southeast Asia, we have a very successful commercial and global banking business, which we're also investing in. And we see that as a source of growth for our wealth business as we put resources on the ground and as we enhance our product capability in wealth, in asset management and insurance. So that's why I think we can drive growth at a faster rate than we have done historically.

And the second question is more of a technical question, again from Ronit with Citi. Given your strong capital position, why are you not paying quarterly dividends this year, please?

Ewen, do you want to pick up that?

Yes. Look, I mean, I think, a couple of reasons. I mean, firstly, on our side, just caution. I mean I would note that we're coming out of a "1 in 100 year" recessionary event and we're not out of it yet. So we're pretty pleased with how we managed our capital resources last year, but we do see value in having strong capital ratios at the moment as we recover out of COVID. I think, secondly, also just from a regulatory perspective, you would all know that the annual cyclical scenario didn't get run by the Bank of England at the back end of last year. We are sort of in the middle of running that stress test at the moment. And yes, I think the news coming out of the U.K. overnight was pretty positive around COVID. So we're not expecting any surprises out of that, but I think we'll take, yes, and we'll pay one interim dividend this year, in the middle of the year, if we can. And then we'll revisit the approach to quarterly versus semiannual dividends next year.

Okay, operator, back to the audio lines for 2, 3 questions, please.

Your next question from the phone line comes from Edward Firth from KBW.

Ewen, I just sort of had a quick question really on the targets. And in particular, I can't remember the exact words you used, but you said that, if we were to redo our forecast for the current exchange rate, we should add about $1 billion of costs for 2021. Does the same go for revenue? And I'm thinking obviously about consensus, but obviously the revenue you mentioned was about $1.6 billion higher, yes, would have been, if you had it at the current exchange rates, so should we be thinking about that when we're looking at our forecasts for '21 as well?

Yes. Well, when we looked at consensus, it was obviously hard for us to know whether or not a weakening dollar had been picked up. We thought it probably hadn't in most people's forecasts that we published a few weeks ago, but as I said, if you were to use average January exchange rates for last year, revenues would have been $1.6 billion higher and costs would have been $1.1 billion higher. So as you work your numbers, I think you definitely have to think about the impact of the weak dollar. It also impacts why we're sticking with a $31 billion cost target for '22, which we think is $1 billion harder than what it was previously. And amongst that $1.6 billion of revenue uplift, it's roughly half and half across noninterest income and net interest income.

Your next question comes from Manus Costello from Autonomous.

I wanted to ask a couple of questions on the commercial bank, please. If I look this year, it only delivered a 1% RoTE. And if I normalize for provisions, maybe you get that up to 7% or 8%. It's the biggest consumer of RWAs in the group divisionally. And it will be the biggest consumer of tangible equity, so what's constraining the commercial bank in terms of its RoTE? And how are you planning to focus on that specifically? And then also specifically on the commercial bank, are you still planning to recycle the RWAs out of U.S. GBM and into U.S. commercial? And if so, why? Would it not be better to think about a restructuring of that U.S. commercial business and maybe adding that to your capital returns plan?

Manus, thank you. Firstly, the Commercial Banking RoTE in 2020 was impacted by two things: firstly, the IFRS line provisions, which you've drawn attention to, and you would need to normalize for that. And secondly, the impact of lower interest rates on what is a very liquid balance sheet in Commercial Banking. So it -- the -- it's had a material impact on the revenue of Commercial Banking in 2020. Now we're looking to reposition that aspect of the revenue decline by a greater focus on fee income; a greater focus on repricing some of the asset book; and driving greater collaboration with some of the GB&M fee income product range, which we've had a very successful track record of doing, particularly in 2020, cross-selling more capital market opportunities to CMB clients, more trade-generated fee income products to CMB clients and more M&A activity as well. We were particularly successful on -- in the U.K. and in Asia, but it's still early days on that transition into a low interest rate environment, rebooting other sources of revenue and fee income for Commercial Banking. With respect to the commercial bank in the U.S. Actually, pre COVID, that was generating good returns both within the U.S. And when you add in cross-border referrals to other parts of the world, the inherent return from our Commercial Banking clients in the U.S. was strong. So I don't think strategically that is an underperforming business the way we have an underperforming business in Retail Banking in the U.S. It's one that we think can continue to generate good returns going forward as the economies normalize after COVID.

Yes. Manus, maybe just one other thing to -- as you model it too. I think customer activity was pretty muted in a number of areas, so you'll see in some of the fee income lines they were pretty depressed last year. And again, we would expect those to recover as activity recovers.

Your next question comes from Raul Sinha from JPMorgan.

Perhaps if I can start on the tangible equity allocation slide again. I'm just trying to understand this 2 percentage point shift per year that you're talking about to get to about 50% Asia over time long term. What are the constraints to going faster than that? Do you think that's the sort of addressable market? And obviously, your franchise measures are obviously very strong. So is that the fastest you can go within the addressable market in Asia? Or are there other constraints that we can't really think of right now which might be weighing or maybe some conservatism in there? And also, does that assume the U.S. is sold in terms of your sort of target mix of the businesses? And I've got a second one, on NIM, if that's okay.

Let me just clarify a couple of comments on the reallocation of tangible equity. What we talked about was a reallocation of around about 800 basis points essentially from West to East. We also said there was a reallocation of tangible equity by business line as well, and that's about 1,000 basis points or 10 percentage point shift out of Global Banking and Markets utilizing that equity into other business lines such as wealth and Commercial Banking. And those 2 things obviously overlap to a degree. It's coming from the West, principally out of Global Banking and Markets in the U.S. and continental Europe, which are low-return markets for us relative to the return opportunity in Asia. So we're in the process of, as we said, running-down parts of our book in the U.S. and Europe and reinvesting those saved RWAs into Asia. And that's got to be done in an orderly manner. It can't be -- and we've made good progress on that, 50% of gross RWA savings in the first year alone. So I think you should view it as we're pulling the RWAs out of a lower-return business, Global Banking and Markets, in lower-return geographies, Europe and the U.S.; and redeploying into Asia, in wealth and Commercial Banking and in global banking in Asia.

Got it. The second one, I guess, was more on NIM. And I wonder if Ewen wants to have a start with this one. I was just wondering if you think HBAP NIM has now stabilized. It was only down 2 basis points in the last quarter.

Well, I mean, as you know, Raul, the HBAP NIM is very short dated in both the asset and liability side. So both sides effectively reprice by either on a 1- or 3-month basis. And it's highly dependent on the path of near-term HIBOR, which continues to be very volatile. So I would be hesitant to say that we've reached the bottom. I mean certainly, so far this year, HIBOR has been very, very weak. And I think we're more optimistic that there is some upside during the year, but I'm not going to predict the path of HIBOR and say that we're -- there's no further weakness in NIM, as a result, in HBAP.

Got it, Ewen, but if I look at Slide 45, where you've got your HIBOR assumptions laid out, I think you've got 43 basis points on HIBOR from 12 basis points and then rising up...

Yes, no -- but I'd note it's also been 13 basis points so far in Q1. So...

Right. And I was just wondering whether other factors apart from HIBOR might be more at play here, but it sounds like HIBOR is still the main driver.

HIBOR is still -- we've repriced most of the liabilities at this point. There's probably some models, but the biggest driver of that NIM will be the trajectory of HIBOR this year.

We've got a couple of written questions, which I'll read out. Raul, just to say the total equity reallocation is organic. A couple of questions, one of which in the form of Manulife in Hong Kong: How do we measure the success of your digital investments in terms of increased revenues, costs or risk management? What are the sort of metrics we should measure the success of your digital investments, please?

I mean it's a great question. And I think we need to do more on disclosure on the return we're getting on those digital investments. I mean we measure that internally. We have every project tracked, understanding the digital penetration rate the automation was taking place, but I think we should share more of that information with you as we go forward. John, is there anything you'd like to add?

Yes, a couple thoughts. I mean, one, we have a technology strategy that spans the bank that is aligned with every single business objective both on the revenue side and the cost side and the risk management side. I think your question went and asked about all three. And it was a very extensive process and an ongoing process to tick and tie all of those. So when you hear Peter talk about growth in Asia, there's technology that underpins that. When you hear Nuno talk about the wealth program, that's all connected to the technology objectives. When you hear our cost targets, there are specific technology objectives to take those costs out. And we are investing a lot in operational resilience as well from the risk management perspective. So as Noel says, we've got all that internally, happy to share that as appropriate in more detail.

Yes. I mean, if I sort of look at what we're doing in finance, for -- as an example. It really depends on the project and the metrics, so we're putting all of our reporting onto the cloud and creating a single data set as part of that over the next few years. We've done liquidity reporting over the last year or so. We're just starting on risk-weighted assets in one of the markets at the moment, yes. We're processing 18x more data 8x faster, so a 150x improvement. We've taken out a whole bunch of manual intervention, so the control environment is materially improved. And we think, when we finish that project, we'll be able to take costs down and finance by 1/3, but the main benefits are going to be much, much better MI; much better reporting; and a much better control environment, together with the significant uplift in productivity. So we're tracking all of the above on that project.

Let me give you a couple of facts just quickly, but these are the sort of things we should probably share more regularly with you. 90% of our personal banking transactions globally are on a digital platform. We had 1.28 billion log-ins to our personal banking mobile apps in 2020. We had over 10.5 million chat conversations with our personal banking customers last year online. We had nearly 120,000 downloads of the HSBCnet corporate treasury mobile app, which we recently developed and upgraded in 2020. That represented around about 150% improvement year-on-year on its utilization rates. Now that's -- they're the sort of things that we're tracking on how digital investment is transforming the way we do business, but we'll come back to you and share more information on future updates.

Yes. And I think the only thing to add to that, the other side of it is also a very meaningful shift that obviously got accelerated last year and a reduction in traditional banking. So cash transactions across the ATMs and branches were down 25% last year. Contact center volumes and what we describe as traditional contact center conversations were down 11%. So one thing COVID has done, I think, has dramatically shift away from some of the old-economy stuff towards digital.

And the second question from the written questions is from Yafei Tian from Citigroup in Hong Kong. "Can you size a bit better for us the opportunity in Pinnacle; and wealth investments, particularly in the Greater Bay Area? Are we talking about hundreds of millions of dollars, billions of dollars? Can you give a bit of quantification there, please?"

Nuno, do you want to pick up some of your thoughts? And it's still early days on Pinnacle, but do you want to share some of the early results and what you're seeing?

Sure, sure. So in mainland China, as we know, we launched the Pinnacle wealth venture. We started with the first foreign fintech license in mainland China, by the way. In the first 6 months, we hired 200 wealth planners. They are very well equipped and trained. They are performing above expectations at this moment both in terms of value of new business and ticket size. We expect to scale up by 3,000 by 2025 and cover 10 cities. And by the way, this year, we expect to scale up that number by another 600. We believe we can do it. And what I would like to call the attention is this is not just an insurance strategy. This is a wealth strategy, okay? And that's the way we are actually growing in Southeast Asia and mainland China. It's a non-mass-market, nonbranch-based strategy. It's a digital-enabled strategy with personal wealth planners.

And Peter, do you -- is there anything that you can share with us on what you see as the opportunity for wealth in China for HSBC, particularly in the Greater Bay Area?

On February, in February, there was an MOU signed between PBOC, SAFE, CBIRC, between them; and also with Hong Kong and Macau. What the MOU is about is about mutual investment between the Greater Bay Area and Hong Kong. And that will have substantial potential for us. The Pinnacle project that we're doing right now is actually also getting ready for that because, when the investment -- when the mutual investment is pushed between the 2 -- is pushed between Greater Bay Area and Hong Kong -- we're the leading bank in Hong Kong with the quality products, and we're also the leading foreign bank in China. And so the Pinnacle will work very well with the strategy because there will be selling wealth planning in the Greater Bay Area.

Okay. We've got time for 1 or 2 more from the audio lines, so back to you, operator, please.

Your next question from the phone line comes from Guy Stebbings from Exane BNP Paribas.

The first one was just on NII and building on some of your previous comments, the first part being on interest-earning assets. If we take the Q4 position, adjust for FX then reflect some loan growth as you suggested for later this year, would it be fair to assume interest-earning assets should be up quite meaningfully versus the Q4 position at least in dollar terms, perhaps mid-single digit? And then on the NIM, obviously it grew in Q4, but you pointed to some headwinds from HIBOR, et cetera, but if one was to assume sort of mid-single-digit reduction in NIM from here, given that interest-earning asset finance growth, it would seem to point to a 3%, 4% uplift to consensus NII in 2021. I'm just trying to get a sense as to whether that sounds reasonable or whether I'm being a bit optimistic given where HIBOR is and the sort of back-end nature of the loan growth this year. And then just a quick follow-up on RWAs. Thank you very much for the disclosure on the $40 billion to $50 billion regulatory headwinds. I'm just wondering whether you might be able to break that down at all between FRTB, other Basel III components and other regulatory changes. And is there anything sort of beyond 2023 we should be factoring in, obviously, at the upward floor burn? I just want to check. Anything sort of residual beyond that 5%, you would expect to be much less in magnitude.

Yes. So on upward floors, yes, that will have an impact on us under current modeling in about 2027, '28, but it's a long time away and we would expect to have done work on how would we mitigate some of that impact. So I think I've given you all of the inputs out to '23. I'm not going to comment on the individual breakdown of all of that into its subcomponent parts, but on net interest income: Yes, relative to consensus, I guess, just 2 things I'd note. One is I don't think consensus says it was modeled or, as we disclosed, included the impact of dollar weakness, which we think would have added about $800 million. So I don't know where that was in your numbers. And I think we are more optimistic, as you would expect us to be, but probably more optimistic than consensus which had quite low loan growth this year, but some of the other headwinds, I think, would act as a partial pathway to some of that.

Your final question from the audio lines comes from Fahed Kunwar from Redburn.

Just two quick ones, I guess, tangentially on this. So the first one is your rate sensitivity on a 12 months basis has gone up. It looks like it's pretty much all in the U.K. Can I just understand what's really driven that; and why you don't think your U.S. rate sensitivity would have gone up as well, and in Hong Kong as well, of course? And my second question was just an earlier answer you gave on the commercial that we've spoken about, asset repricing as being one of the pillars of revenue growth. Normally when we've seen excess liquidity, we've seen the opposite in the sense that actually competition brings margins down. Can I just understand? Like what are you seeing on the ground of underlying asset margin competition given, I guess, very high liquidity across the board from all of your peers both global and local?

Well, just we are seeing some early signs of asset repricing taking place, particularly in Asia. I don't want to overpromise on the quantum of that, but we are seeing some early signs of that in the second half of last year. And so we do believe that is a viable option for mitigating some of the overall pressures on NIM from lower interest rates. And Ewen?

I think in the U.K., again in the mortgage market, actually we've seen better spreads. And actually, our share of new business has gone up, and so yes.

Yes.

I mean we're not -- it's not on the come. We are actually seeing improved asset-side margins in a number of parts of the business at the moment, yes. On the interest rate sensitivity in the U.K., I think it was mainly driven by higher short-term asset and liabilities balances, particularly on the liabilities side which has gone up materially. If you look at the liquidity in the U.K., it's very, very strong at the moment.

Can I actually follow up? How do you reconcile, I guess, looking ahead, the high liquidity you're talking about in the U.K. and obviously in Asia with sustainable asset repricing? What do you think is different this time for us to kind of think, okay, repricing can hold and stay there with that much liquidity around?

I mean I went through the GFC and life after the GFC, and we saw asset repricing taking place there as well. And I think, Peter, your track record in Asia of dealing with low interest rates environment post GFC. Do you just want to share some of your thoughts about how you've handled that in the past?

Yes. Remember, back in -- after the Lehman crisis, the interest rate scenario was extremely low. However, we were able to -- between 2010 to 2019, our total income went up on a compounded basis by 6%. If we look at 2016 to 2019, it would be 9%. So we are constantly dealing with low interest rate environment and we're able to reprice our asset portfolio and also change the mix of our deposit portfolio.

Okay, back to you, Noel, to sum up. Thank you.

Well, thank you very much for your questions and for taking the time to be with us. I just want to remind you of some of the key messages we shared with you earlier in the morning. First, we have executed our promises in 2020, and second, we will do the same again in 2021. We're pleased that we've been able to reactivate dividends, and we've tried to position the new dividend policy to be able to support both good yield and good growth. And for that growth, we're willing to invest in the businesses. We're confident in our ability to drive growth even in a low interest rate environment, and we're willing to invest to make it happen. And that investment program is material and is different from what we've done in the past. We look forward to discussing our plans with you and our progress over the coming weeks and months. Richard and the team are available to you if you have any further questions, but in the meantime, stay safe. And have a good day or good evening, wherever you are. Thank you very much.

Thanks.