Douglas Jardine Flint - Group Chairman Stuart T. Gulliver - Chairman of Group Management Board, Group Chief Executive Officer and Executive Director Iain James Mackay - Group Finance Director, Member of Group Management Board and Director

Alastair Ryan - UBS Investment Bank, Research Division Chintan Joshi - Nomura Securities Co. Ltd., Research Division Raul Sinha - JP Morgan Chase & Co, Research Division Chris Manners - Morgan Stanley, Research Division Rohith Chandra-Rajan - Barclays Capital, Research Division Cormac Leech - Liberum Capital Limited, Research Division Ronit Ghose - Citigroup Inc, Research Division Chirantan Barua - Sanford C. Bernstein & Co., LLC., Research Division Christopher Wheeler - Mediobanca Securities, Research Division Arturo de Frias Marques - Grupo Santander, Research Division Thomas Rayner - Exane BNP Paribas, Research Division

Good morning, ladies and gentlemen, and welcome to the Investors and Analysts Conference Call for HSBC Holdings plc's 2012 Interim 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.

Good morning from London, and welcome to our 2012 HSBC Interim Results Webcast and Conference Call. With me are Group Chief Executive, Stuart Gulliver; and Group Finance Director, Iain Mackay. In a moment, Stuart will set out the major points for the first half's performance. Iain will talk through the financial detail, and Stuart will then cover the strategic progress made before opening the call to questions. Stuart, over to you. Stuart T. Gulliver: Thank you, Douglas. You all have seen the report from the United States Senate Permanent Subcommittee on Investigations, which has been extensively covered in the media and which has revealed our past shortcomings in relation to compliance with U.S. regulations, including anti-money-laundering laws and the Office of Foreign Assets Control sanctions. We said in our annual results for 2011 and 2010 that we have been cooperating closely with U.S. authorities, but the subcommittee hearing will have been the first time most of you will have seen the detail. I very much regret HSBC's past failures, and I apologize for them. Our controls should have been stronger and more effective. As you would expect, HSBC has a number of means to discipline people who fall short of our standards, including clawing back bonuses and dismissal, and a number of people have left the company. But I also want to explain what we're doing to make HSBC more resilient and less likely to see a recurrence of these problems. When the new leadership team came in, in 2011, we recognized that immediate action was required. First, we changed our organizational structure. In the past, we were organized along country lines so over 80 separate businesses. Our new structure, with 4 global businesses and 10 global functions plus HSBC technology and services, makes it easier to manage and control the firm. Basic global integration allows for a coordinated and consistent approach to compliance and to risk. We've made HSBC simpler through our Five Filter process. We have announced 36 disposals and closures since the start of 2011, exiting nonstrategic markets and selling businesses and non-core investments. These disposals make the firm more manageable, reduce risk and let us concentrate on our strengths as an internationally connected bank. We have also put a sharper focus on compliance and increased our spending on it to over USD 400 million. Under our new structure, Group Compliance has authority over all personnel all over the world. This puts us in a better position to detect and address compliance risk globally. We are adopting and importing adherence to a single regulatory standard globally that is determined by the highest standard we must apply anywhere, and this will typically be U.S. standards. This means, among other things, that we are maximizing information sharing for risk management purposes across HSBC to the extent permitted by privacy laws. We're also applying a globally consistent approach to Know Your Customer regulations, and all group affiliates are therefore now required to complete due diligence on any other HSBC affiliate with which they have a correspondent banking relationship. We're developing a global risk filter which will standardize which countries are viewed as high risk, and this will become the sixth filter. And we are putting in place a global sanctions policy which will mean that we'll be screening for all illicit actors designated by the Office of Foreign Assets Control in all jurisdictions and in all currencies. We are committed to doing whatever it takes to make sure that the organization is able to detect and prevent unacceptable behavior. Before moving on, please, can I draw your attention to the cautionary slide on forward-looking statements, and I'll now turn to the first half results. Reported profit before tax was USD 12.7 billion, up 11% compared to the first half of 2011. Our underlying profit before tax at $10.6 billion was down around USD 400 million, reflecting a number of notable items, including U.K. customer redress at $1.3 billion and $700 million of provisions for U.S. law enforcement and regulatory matters. First and foremost though, the most important thing I want to highlight in these numbers is that we have generated revenue growth. Underlying revenues are up 4%. We have top line revenue growth. We've also continued to simplify and restructure the business with 19 transactions announced this January 2012 to sell or dispose nonstrategic businesses and investments, bringing the total since the start of 2011 to 36. These transactions release about $55 billion in risk-weighted assets. These disposals are also making HSBC easier to manage and control and so too is the organizational effectiveness program. In the first half, we have achieved some $800 million of sustainable saves, and we've reinvested them into the business, into business growth and into compliance infrastructure. Thanks to the execution of the strategy, we're capturing growth. We've increased revenue by 13% in Hong Kong, where GDP only grew by 0.5%, 13% in the Rest of Asia Pacific and 80% in Latin America, again outgrowing GDP growth rates. The same regions driving the world's economy are also driving our success. This is exactly what we said we wanted to achieve when we launched our strategy back in May 2011. Now Global Banking and Markets has had a strong 6 months. Underlying revenue rose 10%, and PBT was up 7%. This supports our view that our Global Banking and Markets operating model, with its focus on emerging markets and on financing, is substantially different from our competitors. Its performance in the second quarter in particular compares favorably to others. This half, we've also seen strong revenue growth in Commercial Banking which, as I've said before, is our heartland. This has been driven by customer lending in Asia during 2011, and this is exactly what we said we'd deliver as part of the strategy. Our return on average ordinary shareholders' equity was 10.5%. This was down on the same period last year, but that's largely as a result of a higher tax charge. I'll show you later why we think we can target range of 12% to 15% next year. And we've also continued to generate capital, strengthening our core tier 1 ratio to 11.3% from 10.1% at the end of 2011. Earnings per share at $0.45 was slightly lower than the first half of 2011. That decrease is also largely due to the same higher tax charge. The reported cost efficiency ratio was broadly stable at 57.5% but with an underlying ratio of 61%. But around 8 percentage points of that 61% relates to notable items, as Iain will explain later. The geographic spread of our results shows why we're investing in faster-growing regions. Asia has been an absolute powerhouse. Profit before tax was up some $670 million in Hong Kong and $540 million in the Rest of Asia Pacific. Together, they accounted for well over 2/3 of total profit before tax. We have grown revenues, controlled costs and expanded margins. In Latin America, profits were up 3% as we grew revenues and reduced costs. In the Middle East too, profits are up. By contrast, Europe is disappointing. And that's not so much because of the Eurozone but because of customer redress provisions, and that comes across particularly clearly in the U.K. figures. This half, we've made a provision of USD 1.3 billion. This includes $1 billion in relation to payment protection insurance and around $240 million for interest rate protection products. The North American figure reflects provisions for certain U.S. law enforcement and regulatory matters. But on the positive side, our North American loan impairment charges have reduced, reflecting declining balances in run-off portfolios and a stabilization in delinquency rates. Our Canadian business continued to perform very well and which I would remind you is the future model for our U.S. business. Iain will now take you through the financials in more detail. Iain?

Thanks, Stuart. You'll have seen these reported numbers with profit before tax of USD 12.7 billion, which is up compared to the first 6 months of 2011. We've accomplished a great deal during these 6 months with some significant disposals, and the gains in these affect the reported numbers along with movements in fair value and on debt, non-qualifying hedges and notable items. On an underlying basis, profit before tax was USD 10.6 billion, around $400 million -- down around $400 million, that's 3%, on the first half of 2011. Revenue was up 4% on the back of growth in Global Banking and Markets and Commercial Banking, particularly in Asia. We are delivering growth in our key markets, where we focused our investment in line with the strategy. This was offset by higher operating expenses, reflecting significant notable items in the first half and have analyzed these costs later. Meanwhile, on an underlying basis, loan impairment charges were broadly stable compared to the first half of last year. Turning to revenues. 4% underlying growth has been driven by those areas and markets in which we've been investing, in Commercial Banking, for example, where we learned more on Asia. We have achieved a growth in incremental revenues of 16% from the further integration of Commercial Banking and Global Banking and Markets. Global Banking and Markets revenues are also up with growth in rates, foreign exchange, Payments and Cash Management and Balance Sheet Management, again validating our business model. Retail Banking and Wealth Management has increased revenues by 5% in faster-growing regions. In part, this was because of rising interest rates in certain countries, demonstrating the leverage effect of our deposit base. Underlying costs were $1.9 billion higher than the first half of 2011. This reflected $2.6 billion of notable items, and these include a provision of $700 million in respect of certain U.S. law enforcement and regulatory matters, U.K. customer redress provisions of $1.3 billion compared to $611 million from the first half of 2011. Quarter 1 provisions for PPI were $468 million and quarter 2 provisions, $537 million. Restructuring costs were $563 million compared to $477 million for the same period last year. In the first half of the year, we've achieved sustainable cost savings of some USD 800 million. These have broadly been reinvested into those businesses which were identified as priorities in our strategy and into compliance infrastructure. In aggregate, since the start of 2011, we've now achieved $1.7 billion of sustainable savings or $2.7 billion on an annualized basis. We're now above the bottom end of our target range of $2.5 billion to $3.5 billion savings, and the underlying cost efficiency ratio has deteriorated from 5.7% in the first half of 2011 to 61%. But bear in mind that this includes notable items equivalent to 7.9 percentage points on the underlying cost efficiency ratio. This slide shows that operating expenses are broadly stable for the past 6 quarters, excluding notable items, with a slight decrease between the first and second quarters in 2012. The number of people working for HSBC has fallen by 27,000 since the first quarter of 2011. Some 17,500 of these are accounted for through the organizational effectiveness program and the rest, largely through disposals. Turning to credit quality. Loan impairment charges are stable on an underlying basis. There has been a notable reduction in the North America run-off portfolio. The figures for Retail Bank, Wealth Management and Europe have improved thanks to better delinquency and collections performance. The increase in Rest of Asia Pacific includes impairments of a small number of specific corporate exposures, primarily in Australia. Meanwhile, impairment charges have increased in Latin America, particularly in Brazil, reflecting higher consumer lending and delinquency rates. Finally, as Stuart said, the group continues to display capital strength. Core tier 1 capital at the end of June stands at 11.3% as against 10.8% at the end of June 2011. That increase is largely accounted for by the gain on sale and reduction in risk-weighted assets from strategic disposals. We're well positioned with respect to Basel III. Based on our strengths, we expect to be in a good position throughout the transition to full implementation in 2019. Now let me hand you back to Stuart. Stuart T. Gulliver: Thanks, Iain. Our strategy sets the context for everything we're discussing today, and we updated you all in May on the considerable progress that we've made. In the light of that progress, we reaffirmed our 2013 targets, and this slide shows the path towards our targeted return on equity between 12% and 15%. Now evidently, at 10.5%, we have some way to go, but that 12% to 15% target is supported by a target return on risk-weighted assets of between 2.1% and 2.7% based on a core tier 1 ratio of 10.5%. And then, obviously, the target returns will be impacted by evolving regulatory requirements, and return on risk-weighted asset targets will be reviewed accordingly. But on an underlying basis, this half, we have achieved 1.8%. Excluding the U.S. Consumer Finance, Cards and Global Banking and Markets legacy businesses, we were actually at 2.3%, bearing in mind that that included the negative impact of $2.6 billion of notable items in costs. On a regional basis, you can see that Hong Kong, the Rest of Asia Pacific and the Middle East are well above 2.1%. Latin America is not far below it, and both Europe and North America are clearly well below it. These regions are where the notable items and the legacy portfolios are hitting hardest, which is why we're restructuring the firm aggressively in these areas. And this slide is a quick reminder of the geographic spread before we look at the contribution of different businesses in more detail. Commercial Banking delivered a strong performance. Global Banking and Markets was the most profitable of the businesses for this half, with revenue and profits up. Retail Banking and Wealth Management was affected by customer redress and the run-off of the U.S. portfolio. Now let's take each in turn. At our Investor Day, I described Commercial Banking as the flywheel that drives the whole firm. It's an international network giving a level of connectivity that few other international banks can match. That gives us a strong and sustainable competitive advantage. Our investment in faster-growing regions is reflected in the 12% revenue growth Commercial Banking saw in these markets. We generated higher revenues from lending activities and higher deposit balances that reflected growth in our Payments and Cash Management business in the Rest of Asia Pacific. Revenues from global trade and receivables finance increased strongly, up 14%, driven by operations in Hong Kong, up 12%; the Rest of Asia Pacific, up 18%; and Latin America, up 28% as we continue to capitalize on our position as the world's leading trade finance bank. Revenue increased by 16% from the sale of Global Banking and Markets products, notably foreign exchange products, to our Commercial Banking customers. And that success encouraged us in May to increase our target from $1 billion to $2 billion in incremental revenues from the further integration of global businesses over the medium term. Our Commercial Banking business has a very competitive cost position, with an underlying cost efficiency ratio of 46.7%, which includes the impact of customer redress and restructuring costs at 2 percentage points. Moreover, the work we're doing to deliver a globally consistent operating model will enable us to drive further improvement in this cost efficiency ratio. Our Global Banking and Markets business, in a period of uncertainty, had a strong 6 months, with revenues up around 10%. Foreign exchange recorded strong revenues, driven by robust client activity and increased market volatility, which led to an improved trading environment. Rates revenue rose, reflecting strong risk management of our books and their geographic diversification. We also generated higher revenue from PCM with an increase in our customer account balances. And Balance Sheet Management reported high gains on the disposal of available-for-sale debt securities. Foreign exchange, PCM and trade are consistent and growing contributors to overall business and group performance, with revenues up first half on first half and second quarter on second quarter. This reflects that GBM is a customer-driven business, with a strong international network of clients servicing international trade. Now at this point, let me say, as I know you'll ask, that there are a number of ongoing investigations into past submissions of LIBOR and Euribor interest rates. As a panel member, we have been asked to submit information and are cooperating with various authorities around the world. It's too early though to say what the outcome of those investigations will be, and it will be inappropriate to comment further. Meanwhile, for Retail Banking and Wealth Management, it's been 6 months of significant transition as we progressed the reshaping of this business globally to improve returns. We have completed sale of the Cards business and the upstate New York branches. We have completed other disposals and closures, including retail operations in Thailand, Poland, Russia, Georgia and the insurance businesses in Argentina. And we also continue to work towards completing previously announced sales or closures of various Retail Banking and Wealth Management businesses in Canada, Costa Rica, El Salvador, Honduras, Japan, Columbia, Peru, Uruguay and Paraguay and the general insurance businesses in Mexico, Hong Kong, Singapore and Ireland. Alongside this unprecedented level of disposals, we have continued to build our business in faster-growing regions. However, revenue pressures remain in Europe. As a result, we've sought to reduce costs and have succeeded in doing so. Their results have been adversely affected by customer redress costs in the U.K. and other notable items. Market conditions have remained challenging for wealth managers, and deposit spreads remain under pressure. But we retain our target of $4 billion of additional revenues in the medium term because we start from a strong customer base, including 4.3 million Premier customers. We seek to achieve the target through investing in Wealth Management infrastructure and capabilities to generate revenue growth in key product areas, including Life Insurance and investment services. And in the first half, we have demonstrated our ability to grow business in Life Insurance products, primarily in Hong Kong and in Latin America. In our Global Asset Management, funds under management have recorded a net inflow of $13 billion over the same period. To sum up, overall, the first half of 2012 has seen us make substantial and encouraging progress in key areas: increasing revenues, especially in Asia; continued progress against our strategy, making HSBC easier to manage and to control; further sustainable cost savings and much improved capital strength. Looking ahead, economic conditions in Europe and other Western economies will continue to be subdued. Our assumption is that the European leaders will take the necessary measures to preserve the euro, but even so, we expect the Eurozone's economy to contract this year. In the U.S., we anticipate subpar growth this year and next. We also continue to believe that emerging markets will grow at a brisker pace. China will play an important role in this phenomenon. And we remain confident of a soft landing in China, where its leaders' readiness to stimulate the economy means that growth is likely to exceed 8% over the full year. We'll now be very happy to take your questions. And first, our operator will explain the procedure and introduce our first question. Operator?

[Operator Instructions] Our first question comes from Alastair Ryan from UBS. Alastair Ryan - UBS Investment Bank, Research Division: Two things, if I may. First, whether the Mansion House Speech and the White Paper of the end of June have given you enough clarity to start using some of what's now a very strong capital base and that $150 billion of cash on hand that you've built up. And second, within GBM, clearly, very good BSM figure, whether I could invite you to update your guidance on that. And secondly, on the $50 billion of RWAs in the legacy portfolios, how quickly we should anticipate those going away. I know that their value versus hanging around trade off, but clearly, you've quite a P&L to absorb exit cost on what's a fairly material drag on that division. Stuart T. Gulliver: Sure. Look, on the White Paper, I mean, I think you can see that we've briskly grown our loan book in the U.K. in both SMEs and in terms of U.K. mortgage lending. So we have an 11% share of new mortgages in the first half of this year versus a 6% overall market share, and our lending to SMEs is also moving up briskly year-on-year. So you can see capital deployment taking place within the U.K. But obviously that $150 billion represents a capacity that is clearly not fully used, because we would be running at a much lower number. But it doesn't really reflect a -- what it reflects, to be honest, Alastair, is a risk aversion towards other banks rather than a risk aversion to lending business to businesses generally. That risk aversion to lending to other banks comes about because the interbank market is a clean market, and there are very few unencumbered assets now amongst weaker banks, partly exaggerated by or amplified by LTRO and depositor preference in certain countries. So therefore, we end up with a very large deposit base and an imbalance between our risk appetite and the amount of money we have to deploy. So in terms of White Papers and the market settling down, yes, we have capacity to lend to corporates. But I wouldn't look at that whole $150 billion, because by definition, that's part of our liquidity, and a large chunk of that won't eventually be lent into illiquid assets. But you can see growth in balance sheet and in lending in the U.K. in the first half versus last year in all of the numbers. I mean, the thing we would say on the White Paper is generally speaking, we obviously would support better regulation and the whole reform agenda. Actually, we completely recognize the U.K.'s going to see ring fencing. It will be a drag on the position of the U.K. in Global Markets, but we think the White Paper was constructed for us. It was particularly helpful in terms of the definition of PLAC and the fact that it may not be necessary to apply PLAC to our non-U.K. operations. And we're working on the assumption that this will all go through, and we will need to create a ring-fenced and non ring-fenced bank. As to the United States RWAs of $50 billion, I mean we've done a bit of work. We've had BlackRock in to look at the books. And the disposals of those are, as you say, a mathematical equation as indeed they are for the SIVs and conduits. I think that you need to look at this run-off over a couple of years. I don't think it's going to be shorter than that unless we see a strong recovery in the markets, which I don't foresee at this moment in time. I don't know whether, Iain, you might want to add anything in terms of timetables.

No. I mean, certainly, Alastair, I mean, what remains tied up in risk-weighted assets in the CML portfolio is about $130 billion. And as Stuart mentioned, we've done a lot of work in terms of preparing to try and accelerate the exit of that through dispositions. That work's gone reasonably well. Hopefully, we'll be able to give you a little bit more information as we get into the third and fourth quarters. But the intent is clear, that we recognize that we've got the capital and the income statement to support that. So the focus is finding transactions which make some economic sense to us. Stuart T. Gulliver: But the process both for the book in the United States and the existing conduits here in the U.K. has started. And teams of people are in place, and the work streams are live. Alastair Ryan - UBS Investment Bank, Research Division: And on the BSM? Stuart T. Gulliver: Oh. On the BSM, yes, I think that probably, guidance in the kind of, yes, 3.4% to 3.8% type of range for the full year.

Our next question comes from Chintan Joshi from Nomura. Chintan Joshi - Nomura Securities Co. Ltd., Research Division: My first question is on your cost. Clearly, the underlying cost development has been quite good. I'm wondering about half-on-half cost developments on an underlying basis. In the past, you have said that you want to avoid seasonal blips in second half. So should we expect a somewhat even distribution of cost in H2 relative to H1? And I have another question on ROE.

Okay. Well, Chintan, let me take your first question on the cost. I mean, if you take a look at the slide on Page 11, I think that probably best describes to you what we're trying to do here. I mean our focus is very much is driving some productivity in our cost base. We've realized significant sustainable saves. You saw the second half of last year, what we were able to do. We've got a very robust pipeline of sustainable saves, both for the remainder of this year and into next year, that we are going to deliver against. So the focus is on driving that stability within the cost base and the predictability within that cost base. It goes without saying that we've got notable items which are significant. It would be really nice to work through those over the course of the next few quarters and stop talking about them. But the focus here is clear, and what we accomplished in the second half of 2011 will be our focus of attention for the second half of 2012. Chintan Joshi - Nomura Securities Co. Ltd., Research Division: So should I take it that you're trying to manage the business at a run rate of something like $9 billion on an underlying basis?

We're trying to manage the business towards positive jaws. Stuart T. Gulliver: Which we have got on an underlying basis with 8.7% positive jaws at the first half.

And in terms of the overall cost, the focus is on achieving the sustainable saves that we've set out and getting that target around the cost efficiency ratio of 48% to 52%. And therefore, our actions, on a month-by-month, quarter-by-quarter basis, will be dictated by what we need to accomplish that. Chintan Joshi - Nomura Securities Co. Ltd., Research Division: Understood. And my question on ROE is you stated that you hope to achieve your targeted ROE next year. Would that be on a stated basis or on an adjusted basis? And if it is the latter, then what adjustments would you make?

Well, I think, again, I'd get the chart that we've got around I think it's page... Stuart T. Gulliver: Page 17.

17. It sort of guides you to what we've got the propensity to do in existing businesses and recognizing that we've got some fairly significant restructuring to do and are doing in European and U.S. businesses. The number that we've shown you for the first half is on a reported basis. That's how ROE goes, and that's the basis on which we would intend to continue to deliver ROE numbers. But clearly, there are significant items that come through, and we'll provide you with information about those so that you can make the necessary adjustments yourself. But we're going to deliver ROE on a reported basis.

Your next question comes from Raul Sinha from JPMorgan. Raul Sinha - JP Morgan Chase & Co, Research Division: Can I have 2, please? Just the first one on revenues. It's difficult to look at quarter-on-quarter revenues, but it does look like Q2 at the group level overall was a touch weaker probably driven by FX. Now in the past, you've talked about something like a 60-40 split half-on-half on revenues due to seasonality. Should we expect that to continue this year? Or do you think the Q2 performance means that we get less seasonality this year?

I think in terms of giving you a little bit more insight in terms of, of course, the numbers, Raul, if you look in the appendix to the slide pack that we put out, that gives you a little bit more guidance, particularly as it relates to Global Banking and Markets on the management view of net operating income. So hopefully, that will help you. Certainly, there was real strength within the rates business in the first quarter of the year, because you saw a tightening in European spreads. But notwithstanding some widening and more stress in the second quarter, you saw the FX business, the Payments, Cash Management business, Balance Sheet Management continued to perform very strongly in Global Bank and Markets as well as real strength coming through the Commercial Banking business, particularly in Asia and Latin America. So I think Stuart's comments there around the sort of growth we've been able to build in the revenue line in fairly challenging economic conditions, not only in Europe and the U.S. but more widely, is encouraging. So I think we'll probably leave the information at that level just now. Stuart T. Gulliver: I guess just to add a couple of things. I mean, the 60-40 tended to be Global Banking and Markets anyway, not RBWM and CMB. And then as Iain says, GDP growth in Hong Kong was 0.5%, but our PBT was up double digit. Rest of Asia Pacific, GDP on average is kind of 4% to 5%. Our PBT is up double digit. In trade, we've got a 14% growth in trade-related revenues, which is more than twice the rate of growth of global trade. So although the economic condition in the second half may look weaker, we appear to be picking up market share, because we're growing at a faster rate than GDP in a number of places. Raul Sinha - JP Morgan Chase & Co, Research Division: Good. Just second question just on cost. If we look at the breakdown of staff reductions that you've provided very helpfully over the last 6 months, it does look like the reduction in FTE is a lot higher in emerging markets than in Europe, for example, leaving the U.S. aside for a minute. Is there something in that chart that is not representative of the businesses? Or is that a conscious decision in terms of where the costs are?

What's your question? Is it about headcount? Or is it about costs? Raul Sinha - JP Morgan Chase & Co, Research Division: It's about headcount. On Slide 11, you showed the regional FTEs and the reduction in regional FTEs. So we can see in Asia Pacific, for example, FTE is almost down 5,000. In Europe, they're only down 1,800. It does look like your cost -- your FTE reductions are much more in emerging markets than in Europe. Stuart T. Gulliver: Don't forget, we've sold a lot of businesses in the emerging markets. All of that big lift of RBWM and general insurance and so on all comes out of the emerging market piece, all comes out of Asia Pacific. And then we've also sold a bunch of businesses in Latin America and so on. Raul Sinha - JP Morgan Chase & Co, Research Division: Okay. So there's nothing to read into that? Stuart T. Gulliver: There honestly isn't. Everything's done off the Five Filters. It's very objective. It's incredibly well documented as well, because obviously, we need to get the regulators comfortable in every place. So there's nothing you should think about strategically. Actually, the interesting data from a strategic developed world-emerging market point of view is actually where the risk-weighted assets now sit. If you look at developed markets, the high-end risk-weighted assets were $658 billion in the fourth quarter of '11. And now, the low is actually at the end of June this year, which is $586 billion, so $658 billion down to $586 billion. In emerging markets, the low was the first quarter of '11, $490 billion, and it's now at the high, $573 billion in, again, at the end of June this year. So we've taken EM from $490 billion up to $573 billion and the developed markets down from $658 billion to $586 billion. So if you want evidence of the shift to emerging markets, it's probably better shown in risk-weighted assets.

Your next question comes from Chris Manners from Morgan Stanley. Chris Manners - Morgan Stanley, Research Division: I just had a couple of questions for you. Firstly, it was on Hong Kong. It looked like a strong performance there with net interest income outpacing loan growth, and I was just quite interested to see where your outlook was for the margin there. I understand, obviously, you have loan-to-deposit ratio than the competition and should potentially be able to benefit. And secondly, just on the Asian trade finance piece, I mean the 14% growth you're talking about in the trade finance related revenues, again, pretty impressive. I was just wondering about your outlook for that and particularly, just to understand what the competitors were doing. I understand that the European banks had sort of -- well, they're likely to withdraw after the Q1 boost they'd had from the LTRO that they're going sort of backwards again. Wondering if you could comment on that.

Yes. Chris, it's Iain. I'll take the first question. When we look at margin in Hong Kong, it's actually net interest margins remained remarkably stable over the last number of quarters. Now you'll remember that we had a little bit of expansion on HIBOR, which certainly helped a little bit on both the deposits and the asset side in Hong Kong. But overall, the margins have remained remarkably stable, both on the asset and the liability side, over the course of the last 4 or 5 quarters, actually, within the Hong Kong market. Stuart T. Gulliver: The trade story is good. I mean trade revenues are up actually about 16% in faster-growing regions and 12% actually in the developed markets. And you remember, there's an Oliver Wyman survey that said that we -- of bank finance trade, we did actually the largest share of any bank, and that, I think, is continuing to play to our strength. So trade finance revenues have actually grown in the emerging markets about 3x the rate of growth of world trade, and it's actually even true coming out of the U.K. here. I mean we financed exports of more than GBP 1.8 billion from the U.K. to the key emerging markets of China and India, and we think that gives us about 1/4 of all the U.K. exports to those markets, which in itself is up about 28% on the first half of '11. So I think that there is evidence in these numbers of kind of what you're reaching to, which is are we able to pick up market share as some of the European banks disappear. And I think that the evidence I will point to is both in these trade numbers but also in the fact that both in the Rest of Asia Pacific and in Hong Kong, we're growing our business at a faster rate than GDP -- a multiply faster rate actually than GDP plus inflation in those markets. So I think there is evidence, actually, of taking market share, which is why I think our outlook is kind of modestly positive, actually, for the second half. Chris Manners - Morgan Stanley, Research Division: Perfect. That's really helpful. Sorry, Iain, could I just follow up there on the margin point? So would you -- you're sort of indicating you expect it to stay stable as well.

It's been stable thus far. There's nothing that we can see in terms of development in the short term that would suggest otherwise, but I'm not a soothsayer on that one.

The next question comes from Rohith Chandra-Rajan from Barclays. Rohith Chandra-Rajan - Barclays Capital, Research Division: If I could have a couple as well, please. First one is just on the cost saves. So the run rate savings reported today, $2.7 billion, up from $2 billion at the end of last quarter, just wondering if there was any update. Or if that's in line with your expectations for a $3.1 billion run rate for -- at the end of 2012.

Run that one past me again, sorry. Rohith Chandra-Rajan - Barclays Capital, Research Division: So the run rate on cost saves at the moment is $2.7 billion, up from $2 billion last quarter.

Yes. Rohith Chandra-Rajan - Barclays Capital, Research Division: And I think you said at the Strategy Day the expectation for the full year run rate is $3.1 billion. Just wondering if there was any change to that.

Yes. Look, in terms of where we're headed, is absolutely in line with the targets we set at Strategy Day and reaffirmed this year. So we've got $2.5 billion to $3.5 billion. We're above the bottom end of that range. Clearly, we're halfway through a 3-year program so we've got a good deal more to do. Stuart T. Gulliver: But I think you can see we've got traction and our arms around this cost problem, and the underlying costs are evolving and the cost savings are evolving as we said they would. Rohith Chandra-Rajan - Barclays Capital, Research Division: Okay. So no change either in the -- obviously, good progress in terms of achieving the top end of the target range. And no change in your expectation on the phasing, given experience to date?

Not really, no. Stuart T. Gulliver: No. Rohith Chandra-Rajan - Barclays Capital, Research Division: Okay. And then secondly was just to understand the impact to the -- particularly the Cards business going forward. You highlighted the cost income ratio underlying, 53%. Based on the disclosure here on Page 29, that looks like about 53.9% if we exclude the Cards business. I just wanted to check if that was the case. And also, if you could just add a bit of color in terms of NIM progression excluding the Cards business. So it looks down 30 basis points on the reported numbers half-on-half, but I'd just like to understand what the exclusion of the Cards business does to those trends.

Well, let me take the second one first. So in terms of NIM in the North American business, there is a fairly substantial drop-off from the first quarter to the second quarter of this year. That is very much largely accounted for by the fact that we sold and closed the sale on the Cards business in the 1st of May, so we were missing 2 months' worth of margin from the Cards business. So there is a fairly significant and as signaled, expected impact around the disposition of the Cards business. In terms of what you see on Page 28, 29, I think that's the information that we've provided, and that's correct. Stuart T. Gulliver: 38.

38%. Stuart T. Gulliver: Page 38.

Oh, Page 38. Sorry. Stuart T. Gulliver: And just one other point, if I can just jump in. One of the things that you'll see on net interest margin, you've got to also balance it out for why loan LICs are also holding in quite well. We're trying to redirect the firm away from high-risk unsecured lending into more, frankly, secured higher-quality lending. It will, by definition, have a lower net interest margin or spread. But what we then would expect to see is hopefully, we keep more of it actually getting to the bottom line, because our LICs should be less assuming that we've improved the quality of the loan book. So you've got to look at this alongside with the evolution of the LIC trend. Rohith Chandra-Rajan - Barclays Capital, Research Division: Okay. So it's looking at risk-adjusted margin. Stuart T. Gulliver: Yes, precisely.

Our next question comes from Cormac Leech from Liberum. Cormac Leech - Liberum Capital Limited, Research Division: Just a quick question on the Balance Sheet Management. Just following on the earlier question, I think you'd guided that at the full year, you were expecting to see about $3.4 billion to $3.8 billion, and just that implies I think about $1.2 billion to $1.6 billion in the second half. Just wondering what, if any, gains on disposal you may be assuming in those numbers. Stuart T. Gulliver: I'm not assuming any gains on disposals in those numbers. That's why they're set the way they are. What I'm also slightly in giving you a range is assuming that there is a risk that U.K. interest rates go to the 0 band at some point in the second half of the year, and that's part of the reason why -- explains the lower end of that range. Cormac Leech - Liberum Capital Limited, Research Division: Okay, and that's very helpful. And then just looking into next year, if U curves stay where they are currently and you don't have any disposal gains, would you be able to give us some guidance where you think Balance Sheet Management revenues might settle? Stuart T. Gulliver: I think we're getting kind of soothsayeresque again at this point in time. I don't think I want to give guidance that far out. We can do it again at the third quarter.

Your next question comes from Ronit Ghose from Citi. Ronit Ghose - Citigroup Inc, Research Division: Just a couple of questions. Your Asian businesses have clearly done very well in the first half of the year, and what really stood out for me was the Rest of Asia Pacific. And the cost income ratio's, I think second quarter, 47%. Are there any material one-offs in that cost number? Or is this now a kind of steady cruising speed for you? And by contrast, in Latin America, Brazil, unless I'm missing anything, seems to have seen quite big deposit outflows. Their headline number in dollars, U.S. dollars, is down 20% in the first half. And just backing out the currency movement, it looks like it's down 10% in local currency. Is there any color you can give us around that? Am I missing any one-offs? Or has there been a material deposit outflow? And I've got a follow-on on PPI. Stuart T. Gulliver: Okay. On the terms of the cost efficiency ratio for the Rest of Asia Pacific, that is probably the cruising run rate.

There's a little bit of restructuring cost in there, but it's not material. And there is ongoing work there in terms of organizational effectiveness program, but I think it's a reasonable reflection. Ronit Ghose - Citigroup Inc, Research Division: On Brazil?

On Brazil, customer accounts. Stuart T. Gulliver: Actually, what it literally is, is we've issued more securities in Brazil because actually, it's cheaper to fund in the wholesale market than to take customer deposits. So there is a change, you're absolutely correct, but it's actually down to a deliberate AML strategy. Ronit Ghose - Citigroup Inc, Research Division: And so we'd assume what there'd be an outflow of corporate deposits? Or... Stuart T. Gulliver: Yes. I mean the type of deposits we would reprice are likely to be kind of PCM, wholesale type of deposits as opposed to kind of your sticky RBWM ones. Ronit Ghose - Citigroup Inc, Research Division: Right. Right, okay. And just the final question I had was on PPI, just bigger provision here than I'd expected. Just looking at the disclosure given at the back of your release, I think Page 248, 249, looks like the claims to date relative to provisions taken since first half last year, it's about a 43% ratio of claims to provisions, which looks a lot lower than the other U.K. banks who reported, i.e. you've got a lot more provisions than claims. I'm just wondering to what extent the second quarter is a kitchen sinking, a lot of kitchen sinking, like you're taking from the next 6 months, 12 months already.

I think on that front, what is fair to say is that we've taken a view probably around the longer emergence of claims. So we've -- I think the coverage that we're looking at is approximately 12 to 13 months' worth of coverage based on the current rate of incoming claims, both your own outgoing mailing as well as those coming through the claimers' management companies. I think that probably compares fairly favorably with those of some of our competitors, where they're looking at probably 3 to 5 months' worth of coverage within the overall provisions that exist. I mean I think what is fair to say is that we've seen a higher level of incoming claims than we had anticipated certainly when we started looking at this issue around this time last year. And that level of incoming claims has remained at a relatively high level when we would have expected it to start tailing off by this point. Ronit Ghose - Citigroup Inc, Research Division: And just to clarify the 12 to 13 months, are you using the current run rate in the second quarter? Or is that a sort of modeled assumption for them?

It's a combination of both. It's run rate informing, obviously, what we expect, but we've built some assumptions on our end when we would expect to see that current inflow of claims to tail off.

Our next question comes from Chira Barua from Sanford Bernstein. Chirantan Barua - Sanford C. Bernstein & Co., LLC., Research Division: Two questions. The first one's on APAC, a couple of things. APAC, you laid out the strategy of $1 billion in India, Singapore, then Malaysia and Indonesia combined. Could you comment on what's the progress there? And when are we going to see those numbers? And second is on APAC impairments. Those impairments have gone up. You've alluded to something in Australia and India, so if you'd give a little more color or if there are risky markets that you see out there. And I have one on money laundering. Stuart T. Gulliver: Okay. On the bad debt provisions, they're specific to credit. So this -- it is in credit. Chirantan Barua - Sanford C. Bernstein & Co., LLC., Research Division: And what about the PBT numbers in the market?

All right, one second. I think if you go to Page 73 of the interim report, it will give you some guidance on where we are at the half year. If you look at India, we've got $515 million PBT for the first 6 months. If you look at mainland China, excluding associates, so our own bank in China, that's $440 million -- $454 million at the half year. At Singapore and Malaysia together, well, Singapore is $335 million. Malaysia is $288 million. Stuart T. Gulliver: And Indonesia is $175 million. Chirantan Barua - Sanford C. Bernstein & Co., LLC., Research Division: And do you see the progress there in Malaysia and Indonesia continuing on to the second half of the year? Or do you see a slowdown in some of those markets? Stuart T. Gulliver: No, I think that progress will continue in the second half of the year. As I've indicated before, I think we're taking market share off other foreign banks. So Malaysia, Indonesia and Singapore combined are sitting comfortably halfway to the billion. So is India, and China's just a little bit short. So I think there's progress on all of those endeavors. Chirantan Barua - Sanford C. Bernstein & Co., LLC., Research Division: And on money laundering, the $700 million number, could you give us some color on how did you arrive at that number? And when do you see the likely timing for the ruling? Stuart T. Gulliver: The timing is completely at the discretion of the Department of Justice. So we can't give you no further color on that. Remember, it's the Department of Justice together with the OCC and Fed that decide on penalties, not the PCI -- PSI, sorry. And this is our best estimate based on the information we have today. But as we've indicated, the actual number could be materially higher than the provision that we've taken.

Your next question comes from Christopher Wheeler from Mediobanca. Christopher Wheeler - Mediobanca Securities, Research Division: Three questions, the first one on Retail Banking and Wealth Management. You've obviously been very active, as you said you would be at the Investor Day last year, in terms of disposing of businesses and streamlining RBWM. What sort of a -- how far are you through that process now? Is it 60%, 70% or all these and more before you start to just actually, obviously, generate the returns organically from the business? That's the first question. The second one, rather conversely to that one, is on private Wealth Management or Private Banking. There seems to be a number of quite large Wealth Management businesses coming loose at the moment. It's clearly an area which you like, but is it an area where you are looking at acquisitions? Or is it still one where you would prefer to grow organically? And then finally, just a question on, obviously, your sixth filter. You've clearly done a lot of work since, unfortunately, a number of issues have come to light. Could you perhaps just give us a clue as to whether you feel that the worst of those issues is now behind you? I know these things keep popping out from left field, but is there anything else that's really concerning you which may come back as another notable item over the next 18 months? Stuart T. Gulliver: Everything we're concerned about is in Note 25, which is legal disclosure. So there's nothing that's not in that that we're aware off today. As for acquisitions in Private Banking, I think the answer's no. We need to reform -- and this is what Krishna Patel has gone in to do -- our private bank to ensure that some of the issues that arose there in terms of the type of clients whose tax affairs have also caused us embarrassment after the data theft are again brought into the type of business that we wish to conduct. You may have heard me say earlier, one of the disadvantages of making acquisitions is, of course, you buy everybody else's KYC standards, which may not be up to your own. And if you look around at the various problems, legacy problems we have, they're mostly acquisitions: Bital in Mexico, Household, foreclosures and the big bad debts, tax evasion, Republic National Bank of New York. So I don't think you'll see us buying large books of Private Banking business. What you'll see -- Krishna Patel, who's running the private bank, what he's doing is making our existing bank, private bank, fit for purpose. It is an important business for us. You've seen part of the strategy is to focus on wealth and the faster rate of wealth creation in the emerging markets. So it's absolutely a business that's core and central to us, but I don't think it's logical for us to be adding fresh portfolios to what we currently have. And then in terms of RBWM, how far are we through it, I think that the RBWM disposals, we've got a little bit more to do on Life Insurance. And then I think most of the disposals in RBWM will have been announced. There's probably 3 or 4 more still to come. But in terms of our progress through, I think most of this stuff is announced. There's possibly -- so in terms of your percentage way through, we're maybe 60%, 70% of the way through.

Your next question comes from Arturo de Frias from Santander. Arturo de Frias Marques - Grupo Santander, Research Division: Two questions, please, one on capital versus growth and another one on GBM. From your slide on potential impact from Basel III, Slide 14 I think it is, your rise to fully phased in Basel III was with a 10.3% core tier 1 ratio, which is probably the minimum that you would like to have. And that makes me think if, for the next few years, we have to think about an ROE in the region of 11%, 12%, 13%, along those lines. And you are going to spend close to half that, or you are going to distribute close to half that, you are going to be generating internally in the region of 5%, 6% capital per annum. Is that -- are my numbers correct, first of all? Do you think on those numbers the same way? And do you think that's enough to fund growth for HSBC? Because as HSBC sells their unwanted or non-core areas, obviously, what is left should be growing more. So I wonder whether 6% internal capital generation is going to be enough for HSBC for the next let's say 2 to 3 years. And then a question on GBM. You have also a very useful disclosure on Slide 21 looking at the return on risk-weighted assets of GBM excluding the legacy credit portfolio. You're talking about 2.9%. This is pretax, obviously, 2.9% return on risk-weighted assets. But that is still -- I mean after tax, we are talking about 2% return on risk-weighted assets, which is well above most, if not all, your competitors. Do you think this 2% RORWA is sustainable in the medium term?

Yes. So if I -- this is Iain. So if I take the first question around capital, bear in mind that a target that we set out in Strategy Day was to maintain a core tier 1 of 9.5% to 10.5% throughout the transition to full Basel III implementation, so throughout the transition process. We're sitting at 11.3% at the end of June. We would expect to generate capital through ongoing business operations through the remainder of this year. So we'd expect to see that capital ratio, based on everything that we know now, to be a little bit stronger at the end of the year. But recognize also that in 2013, we get about 100 basis points or so knocked straight off that through the implementation of certain aspects of Basel III. So we would fully expect an appropriate tier 1 ratio to be sitting somewhere in the range of 9.5% to 10.5%, probably at the higher end of that, through the transition process. That will be achieved through a number of the mitigating actions that we've described previously. It's the continued rundown of the CML portfolio. Before the first half of this year, it was the disposition of the Cards business, which we've now delivered against and that delivered some 60 basis points of benefit to our core tier 1 ratio. So we'll continue to deliver against the mitigating actions that we've got out there as well as the ongoing capacity to generate significant profit from ongoing operations. So I think in terms of our capital generative ability, we've got few debts there under current operating conditions. The other thing to bear in mind is that through the disposition of the Cards business and a strongly capitalized North American business, we have significant capital surpluses there. Now we recognize that the likelihood of being able to reallocate that capital to other parts of the business will be limited over the course of the next 18, 24 or so months to ensure, from a regulator's perspective, that we've addressed absolutely the shortcomings that have been identified through a number of regulatory actions over the course of the last couple of years. But as we work through those, we would absolutely expect to be able to reallocate some of that capital away from the U.S. business with the approval of a regulator once we've met those requirements. So I think on a capital front, we're very happy with where we sit at the moment. Stuart T. Gulliver: And in Global Banking and Markets, yes, I do think the 2% is actually sustainable. When we analyze the revenues that are at risk because they're involved in structured derivative products that get disadvantaged by Basel 2.5, CRD4 or indeed, Volcker Rule or Dodd-Franks, it's only 14% of revenues. So actually, the majority of this Global Banking and Markets business really is dependent upon GDP growth in the emerging markets and the growing connectivity between the developed world and the emerging markets. It's a good strong debt capital markets and foreign exchange business, it's a traded liquid markets business, and I think that therefore, this is something that we've tried to explain. It's got -- it's a very different business and revenue makeup than some of our competitors. So yes, I do think that we can hit the 2% post tax. So I think that that is -- that 2% number post tax is sustainable.

Our last question is from Tom Rayner from BNP Paribas. Thomas Rayner - Exane BNP Paribas, Research Division: Can I have a last 2? Is that okay? Stuart T. Gulliver: Yes. That's okay, Tom. Thomas Rayner - Exane BNP Paribas, Research Division: Just the first was just really on the revenue again. The -- it sounds just from some of the textual comments that there's still some benefit coming through the numbers from the very vast volume growth you saw in the first half of last year. I think it then slowed down a bit in the second half. And I see that the sort of loan growth constant currency in the first half of this year is running at about 7% annualized. I'm just wondering, given what you said about the mix change, is this enough to sort of be consistent with the sort of underlying revenue growth you saw in the first half, so the 4%. Is that consistent with what you're seeing in terms of volume growth? And I just have a second question on the money laundering, please.

I mean, it is consistent. Stuart T. Gulliver: It is consistent.

Yes. There's -- I think your analysis is... Stuart T. Gulliver: It's spot on. There was a big, as you know, push up to catch up in 2010, 2011. Certainly 2011, that is driving in CMB in particular the kind of net interest margin that you're seeing captured. And I think that the loan growth that we've seen so far is consistent with holding that through into the second half. And as I say, there's a definite kind of market share phenomenon going on as well. Thomas Rayner - Exane BNP Paribas, Research Division: Okay. And just finally on -- just back on the $700 million. I don't know if you can, but I mean in terms of your methodology just coming up with that figure, I know it's based on all the information you have. But I mean have you looked at total transactions and tried to compare what other banks may have paid when they've been in a similar condition? Stuart T. Gulliver: Yes, we have. Yes, we have. Thomas Rayner - Exane BNP Paribas, Research Division: And $700 million is a number that you would hope covers all eventualities. I know you can't be sure about that. But... Stuart T. Gulliver: It's -- what I'd actually say, Tom, is we've analyzed what other banks have paid for similar situations, and we then exercised our own judgment. But remember, this is completely the decision of the Department of Justice, so that's why we said specifically that the actual number could be materially higher.

And we have gone back and analyzed our transactions in terms of a look back at historical operations as it relate to OFAC sanctions. And again, that's some of what has informed how we built this. Stuart T. Gulliver: Thanks very much. Okay. Thank you. Thanks very much, operator.

Thank you. Ladies and gentlemen, that concludes the HSBC Holdings plc Interim Report Call. You may now disconnect.