00:00I kind of start by saying let's go back to banking, but at the same time, you also have to straddle and understand and navigate some of these geopolitical tensions between D.C., between China, between D.C. and Europe.
00:11So what's the most complicated thing for you right now?
00:14Probably the pace of change, as you said.
00:16Every week there's something else that you have to factor into how we run the business.
00:21Look, we've been around for 160 years.
00:23We're pretty good at this.
00:24We've managed through several world wars.
00:27We've managed through lots of geopolitical tensions.
00:30So we're a very strong institution, very large balance sheet, lots of liquidity, fortress balance sheet as well.
00:36But I do think it's the pace of change and how we help our clients navigate through that pace of change.
00:42Will tariffs be different in 2026 to 2025?
00:45It seems that, you know, we were very worried about what tariffs would do.
00:48I'm sure a lot of clients were calling you up saying, how do I navigate this?
00:52They're changing the supply chains.
00:53Then we forgot about it, saying, OK, we're over the worst.
00:56And now they're back at the forefront.
00:57Yeah, no, you're right.
00:58In fact, I was amazed at how resilient the supply chains were.
01:03I mean, all the Liberation Day chaos that came after us.
01:06And I was, in fact, traveling then.
01:08And there was nothing but calls.
01:11Yeah, exactly right.
01:12And so now people, to your point, got used to it.
01:16I think the supply chains have been reordered a bit.
01:18I think, you know, in fact, trade last year was up, which most people don't realize.
01:23You know, it's $37 billion.
01:25It was up by $2.5 trillion.
01:26And you could see that what was happening, people just got used to it and accepted the fact that it was going to be, on average, 15% to 70% tariffs.
01:35Now this is yet more surprise, more chaos, more unpredictability, I think, put into the system.
01:42This one, however, is not just a Liberation Day.
01:44It's obviously politically driven, and that's a little bit different.
01:47What's the risk to HSBC and the wider banking sector?
01:49Look, I think, again, the risks are really more for our clients.
01:54You know, it's not a big risk for us.
01:55I think we'll be able to get through it.
01:57It's really trying to help clients who, in particular European clients, who sell into the United States, because this is all levied against, of course, European countries.
02:05And that's going to be challenging for them.
02:06You know, they've accepted the 15% tariff, although, of course, some negotiations seem to be stalled.
02:12And then on top of this, whether it's 10 or up to 25, it's quite a lot.
02:16And so for them, most of whom have very sizable operations in the U.S., that tends to be the largest operations outside of the home market,
02:25sometimes even more than the home market.
02:27Think of the Swiss companies here.
02:29So I think it's going to be quite a challenge, and so we'll try to help them figure that out.
02:33It stresses cash flow.
02:35It stresses just revenue.
02:37You know, in a time where, you know, debt is rising in most corporations around the world, that could be problematic as well.
02:45Michael, HSBC shares now trading around all-time highs.
02:48We like that.
02:49How higher can they go?
02:51I hope a lot higher.
02:52So, you know, we're very pleased with the progression in the share price.
02:56And I think it reflects, as you mentioned earlier, the transformation that we went through.
02:59It's really paying the dividends, we thought.
03:02As George has said many times, you know, we're going to hit the numbers.
03:04We've told the street.
03:06And they could see that not only is this an efficiency play, which it was, it really is making HSBC a better organization.
03:13The more agile, more customer-centric, less complex, which was always really the challenge for HSBC.
03:19And so we hope, I don't know where it's going to go, I hope investors see the value and the benefits and it keeps going up.
03:25I think there's more buy than sells, which we'd love to see.
03:28So we hope it goes much higher.
03:29I mean, you must have celebrated in December.
03:31I think you became a 200 billion pound bank.
03:33We did.
03:34Is 300 billion next?
03:35I'm hoping so, yeah.
03:37I think that's the trajectory.
03:38I mean, if you could see, to your point, from 200 to where we are today, 266, 270, to get to 300 is certainly within reach.
03:46And that's where we want to be.
03:47We are one of the most important global banks in the world.
03:51We operate 55 countries, $3.3 trillion worth of balance sheet.
03:55That really, in our opinion, given where we think we can generate the profit, really deserves a much higher rate of interest.
04:01Is that it for restructuring?
04:03I think we've gone through much of it.
04:05You know, there's some trailing issues we're going through, which is always the case.
04:09But the bulk of it, yes.
04:10And the CIB, which I manage, is the largest part of that restructuring.
04:14And I could say we've gone through a very, very quick organizational change for such a big organization.
04:20That was the focus very intentionally.
04:23Did we want to go through a quick series of changes because we did not want to drag it on?
04:28Bad for clients, bad for employees, bad for everyone.
04:30And so the bulk of that is certainly done.
04:33I was going to ask actually about morale.
04:34So is it better just to get done quickly so that then people feel better?
04:39And so how's morale right now?
04:40Look, I think morale has rebounded.
04:42And like George has said, you know, that toughest thing is to say goodbye to some very long-time colleagues and friends.
04:49That's been done.
04:50That was done early in the process.
04:51So we can really safely say we're looking really to the future.
04:55And I think that is what builds better morale, when people know the transformation's over.
05:00But I think they're very excited, actually.
05:02They're excited about the pace we've used to change the organization.
05:06They're excited about the direction.
05:07They're excited about the stock price.
05:09They're excited about some of the things we're doing, which really, I think, paint a very positive picture.
05:14But they don't like the uncertainty.
05:17And so that's why we went so quickly is to get rid of that uncertainty.
05:19Michael, talk to me a little bit.
05:20I mean, here we have a lot of U.S. tech firms.
05:22We talk a lot about AI.
05:24Talk to me about quantum tech and how you're expecting that to transform HSBC.
05:27Yeah, you know, we did have a joint venture with or a joint initiative with IBM really to develop quantum computing,
05:34which we did sort of as initially to look at how we could match buyers and sellers in the bond market
05:40and to give better accuracy and predictability on where we should actually try to sell our bonds.
05:45It actually did improve it.
05:47So it's just a first initiative, something that we think has value,
05:51because I do think quantum computing will become more and more a part of how banks trade.
05:56It's a big part of how we manage our cybersecurity, by the way.
05:59So it's already embedded in our cybersecurity.
06:02But now we're taking to more of a revenue generation type of activity.
06:07It's a first, so I don't want to get too excited about it.
06:10We have more to do.
06:11But we were very excited with the results.
06:14And, you know, IBM has been a great partner in that as well.
06:16Michael, if this is successful, like how large could it be?
06:19Like how much of a transformation could this actually be for HSBC and the sector?
06:23Yeah, I mean, if you think, without doubt, most trading will be on a tokenized basis.
06:28It will be on an AI basis.
06:30You're just adding a layer of quantum computing to make it that much more efficient.
06:34So trading of all asset classes, I mean, none will be immune.
06:38It's going to go through a fundamental change.
06:40And I think probably after AI and after tokenization, you'll see quantum coming.
06:44What are you expecting from AI?
06:46AI will be quite significant.
06:49So I think you'll see, you know, we do a lot of algorithmic trading already.
06:52I think, you know, you'll have agents to agents start doing trading in the not too distant future.
06:57I think you'll look at different asset classes.
06:59Again, none are immune from that.
07:00And I do think it will speed up trading.
07:02I think it will make it more accurate.
07:04I think it will quickly become the way that most firms trade.
07:08And so we're in the process, like I'm sure many institutions are really embedding that into our trading.
07:13Yeah.
07:13Are staff anxious about it?
07:15Because it feels like when you speak to a lot of employees, they're worried that their job will disappear.
07:20Yeah.
07:20And so I don't know how you manage that.
07:22I think it's a bit of both.
07:23Yeah.
07:23And we need to show that it's not just about, you know, staff reductions or staff efficiencies.
07:28It's really about us being more efficient in general, serving clients better.
07:31I think it's about us really using the capacities that we create through AI to allow staff to do other things.
07:39And it's banks are built on process and procedures.
07:42I mean, they're the perfect, you know, user of AI going forward.
07:46And I really hope we can just free up all that time.
07:49And I don't think it will lead to massive layoffs.
07:52I don't think it will lead to massive change in how we do things other than us to make it more efficient.
07:57For instance, our bankers today spend far too much time on administrative details.
08:02If we can free up that time, I could put them more to work going to see clients really bringing value to those clients.
08:08And, Michael, for the next couple of years, I mean, do you see these are huge investments, right?
08:11They are, yeah.
08:11So you have to upgrade systems, change systems.
08:14Does that mean that you'll hire a little bit less, that there's less young staff coming in, you know, until the cost adjusts?
08:21You know, like, I think that's a great question.
08:23And that's one that I personally am very focused on.
08:26We are an apprenticeship culture.
08:27So you have to bring in younger people to give them the tools, the experience to do well.
08:33So I think there's going to be a lot of balance in between then.
08:36Yes, you could take one road to say we're going to just maximize efficiencies, not hire anyone, save a bunch of money, and plow it back in AI.
08:43Certainly there will be some of that.
08:45But at the same time, we really need to focus on making sure we bring in the young people to build for the future.
08:51And so there's going to be a lot of balance between the two.
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