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HSBC HOLDINGS PLC (NYSE:HSBC)
Q4 2020 Earnings Call
Feb 23, 2021, 2:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Noel Quinn -- Group Chief Executive

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 pre-tax 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 by around $170 billion. This proves two things. This is an incredibly strong and resilient business, particularly in Asia which delivered $13 billion of adjusted profit before tax, but also opportunity exists even in a difficult year. We increased mortgage lending in the U.K. and Hong Kong, we grew our share of trade in Asia despite the fall in volumes. We grew our wealth balances in our target markets. And we made $1 billion of PBT in our India business, which will be hugely important in the years to come.

Third, it was an -- incredibly important to us to resume dividend payments, and we have declared a dividend of $0.15 per share. We are also resetting our dividend policy in the future to strike a balance between providing good income and supporting future growth. In future, we're aiming to deliver sustainable cash dividends while transitioning toward a payout ratio of 40% to 55% from 2022. We're no longer going to offer a scrip dividend, and we'll consider share buybacks beyond the near term where no immediate opportunity for capital redeployment exists. This is a measured policy that gives us the flexibility to invest and grow the business in future.

Clearly, 2020 fundamentally challenged many businesses, so we also embarked on a major exercise to refresh our core purpose as an organization. We consulted widely on this over a number of months, speaking to thousands of colleagues and customers, looking deeply into our history but also assessing the world of the future; and we kept coming back to the same themes. HSBC has always focused on helping customers pursue the opportunities around them whether as individuals, families or businesses. Our renewed purpose, opening up a world of opportunity, both captures this aim and sets a challenge. Opportunity never stands still. It changes and evolves with the world around us. It is our job to keep adapting with it and to find and capture opportunities with the same spirit of entrepreneurialism and innovation that I feel represents HSBC at its very best. We also saw in 2020 the power of an organization that can respond positively and at pace to radical change on a global scale. Hence, you will see a new behavior within our value statements. We get it done. It's deliberately expressed in uncomplicated language. We can talk about what we want to achieve forever, but execution is everything.

Last February, I promised we'd deliver our plans with pace and conviction, which is exactly what we've done. We've taken more than $1 billion of costs out of the business and expect to exceed our $4.5 billion cost-saving target ahead of schedule. And despite the pause in our redundancy program following the COVID-19 outbreak, we've reduced our FTE and contractor head count by around 11,000. In achieving those head counts and cost savings, we created a combined wholesale banking back-office function serving both Commercial Banking and global banking. We merged Wealth and Personal Banking. We reduced our senior management population by 17%. We appointed new people to just under 50% of the top 200 senior positions. We reduced our U.S. branch footprint by more than 30% and cut our U.S. adjusted cost base by 8%. We reduced FTEs in our European non-ring-fenced bank by 6%. And we achieved $52 billion of gross RWA savings in 2020, taking us more than halfway toward our three-year gross risk-weighted asset reduction target in just a single year.

However, given the impacts of low interest rates and COVID, we no longer expect to reach our targeted level of returns by 2022. That said, we recognized the fundamental shifts in our environment in 2020 and reacted to them quickly. The plans we are announcing today will build on this work and enable us to target a return on tangible equity at or above 10% over the medium term. And that's with the assumption that base interest rates remain at today's ultra-low levels.

Ewen will now take you through our results.

Ewen Stevenson -- Group Chief Financial Officer

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 pre-tax profits. This included the second year running of $1 billion of pre-tax 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 toward noninterest income; accelerating our capital allocation, people and investment, toward 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 pre-tax 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 by 1% ex the bank levy, this was mainly driven by a decision to increase the variable pay pool accrual in the quarter which was down 17% year-on-year. And tangible net asset value per share increased by $0.20 in the quarter to $7.75. As you model 2021, please note that the weakening of the U.S. dollar toward the end of 2020 will materially impact both costs and revenues. If you adjusted our 2020 results to average January exchange rates, it would have added $1.6 billion to our revenues and $1.1 billion to our operating costs.

Turning to Slide 9 and looking at fourth quarter adjusted revenues across the three global businesses. In Wealth and Personal Banking, revenues were down 18% on a year ago, with Retail Banking revenues falling by just under $1 billion. This was due largely to the impact of falling interest rates on deposit margins. Wealth Management revenues were down $91 million due to a combination of lower insurance sales and the impact of lower interest rates on private banking deposits. Commercial Banking revenues were 15% lower due mainly to the impact of lower margins on global liquidity and cash management. In Global Banking and Markets, revenues were down 7%, and that's despite another good quarter for Global Markets which saw revenues up 13% even if -- even as we kept value at risk broadly stable.

On Slide 10, net interest income was $6.6 billion. That's up 3% against the third quarter. The net interest margin was 122 basis points, up 2 basis points on the third quarter, reflecting improved liability margins, particularly in the U.S. and Europe. As we look forward, while we expect a soft start for noninterest income -- for net interest income due to the lower short-term HIBOR rates and fewer days this quarter, we expect NIM stabilization and lending volume growth to progressively support net interest income over the remainder of the year.

On the next slide, two core trends to discuss. Firstly, on fee income, we saw greater stability in the fourth quarter, notably in Commercial Banking and Global Banking and Markets, with a small reduction in fees in Wealth and Personal Banking reflecting lower insurance sales and unsecured lending volumes. And secondly, on other noninterest income, it was down $800 million. This reflected a combination of lower interest earned on securities held in the trading book, a reduction in the value of new business written in insurance and lower credit and funding valuation adjustments in Global Banking and Markets. For 2021, we expect customer activity and fee income to recover as economic activity recovers. And we've seen a good start to the year in Hong Kong, but with the impact of new COVID-19 variants, this recovery may be slower than we foresaw a few months ago in areas such as consumer credit. We also expect Global Markets to have trading activity lower than we experienced last year.

On the next slide. ECLs were $1.2 billion or 44 basis points of gross loans in the quarter. Relative to the third quarter, this mainly reflects higher stage three charges and the fact that the third quarter benefited from additional releases. The stage one and two P&L charge for 2020 was around $4.5 billion, including around $300 million incurred in the fourth quarter. We now have stage one and stage two provision balances of $7.9 billion. That's up $3.9 billion in 2020. While we remain cautious on the outlook for credit in 2021, we expect the 2021 ECL charge to be lower than 2020. And we've no update at this point to the guidance we gave you at third quarter, effectively a range of approximately 40 to 60 basis points this year. By 2022, we expect ECLs to have materially reduced from the 81 basis point charge in 2020 toward or even below the lower end of our 30 to 40 basis point normalized range.

Turning to Slide 13. Fourth quarter adjusted operating costs ex the bank levy were $780 million higher than the third quarter. This was driven by targeted technology investment and marketing spend, together with the decision to increase the variable pay pool. For the year as a whole, operating costs were down $1.1 billion or 3%. This included a number of offsetting items. The variable pay pool was down by more than $500 million. COVID-19-impacted cost items like travel and entertainment and marketing were down by around $600 million. And our combined cost programs over 2019 and 2020 delivered in-year savings of $1.4 billion. Offsetting this were various items, including technology -- increased technology investment, up $377 million or 7% on 2019.

For 2021, we expect the bank levy to fall to around $300 million. That's some $500 million lower than 2020. For operating costs ex the bank levy, we're seeking to keep them broadly flat after adjusting for the impact of dollar weakness, with significant cost savings from our ongoing restructuring program offset by a combination of certain costs increasing from COVID-19 lows, together with planned higher investment and growth spend.

On Slide 14. In the first year of our three-year program, we achieved $52 billion of gross risk-weighted asset saves. We're more than halfway toward our $100 billion gross reduction target of low-returning risk-weighted assets. This included a $10 billion reduction in the fourth quarter. We expect to make around a further $30 billion of gross RWA saves in 2021.

On Slide 15, our core Tier 1 ratio at the end of the fourth quarter was 15.9%. That's up 30 basis points in the quarter. This was driven by a combination of RWA reductions on a constant currency basis, profit generation, FX translation differences and 21 basis points of software intangible benefit. On the latter, we expect software intangibles to be reversed out of our core Tier 1 over the next 12 to 18 months. Excluding FX movements, risk-weighted assets fell by $20 billion in the fourth quarter primarily as a result of reduced lending balances.

The planned 2020 interim dividend of $0.15 resulted in a reduction of 40 basis points to our core Tier 1 ratio at the end of 2020.

And with that, back to Noel.

Noel Quinn -- Group Chief Executive

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 three 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 two ways by accelerating our shift toward 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 three 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 will be deployed into businesses in Asia where we already have a strong track record of growth and profitability. And we will also invest in technology to transform our costs. It's a plan capable of delivering returns above the cost of capital and supporting both sustainable dividends and future growth. It is built on the four pillars you see here on Slide 19, and I'll take you through each one in turn.

Slide 20 looks at the first pillar of our plan, driving growth by focusing on our strengths. We're going to stop trying to be everything to everyone. We want to do the things that capitalize on the advantages we have and to do them brilliantly. In Wealth and Personal Banking, we will continue to invest in our scale markets in the U.K. and Hong Kong, but the new story here is Asia wealth. Nuno will talk about this in more detail, but we're going to invest more than $3.5 billion in wealth in Asia in the next five years to achieve three things. We want to serve high-net-worth and ultra high net worth clients in Hong Kong, mainland China, Singapore and Southeast Asia globally. We want to build out our insurance and asset management capabilities across Asia, with organic and inorganic options firmly on the table. And we want to do more with clients who already bank with us, bringing wealth opportunities to our customers in Commercial Banking and Global Banking and Markets. In Commercial Banking, we will continue to be unashamedly and uniquely global. We want to lead the world in cross-border trade and in serving mid-market corporates globally. There are many things that are changing with respect to our strategy and our execution, but this one will remain unchanged. We'll invest around $2 billion to drive customer acquisition, to become a digital leader in our scale markets and to support the three critical product platforms global liquidity and cash management, global trade and receivables finance and foreign exchange.

Global Banking and Markets will retain the capacity to serve clients globally but will invest in the markets that set us apart while also moving the heart of the business to Asia, including leadership. We will use our global network to connect our global banking and market clients to opportunities in Asia, the U.K. and the Middle East where we can add the greatest value. We'll spend around $800 million in GB&M in Asia to build better digital market platforms to support our wealth strategy, to build better market access and execution capabilities for our wholesale clients and to expand our investment banking coverage across Asia. Peter will talk about this in a few minutes. Slide 21 shows where our U.S. and European businesses fit in. Michael Roberts and the U.S. team did a great job in 2020 repositioning the business, closing branches, driving down costs and reducing capital. For the next stage, we will focus the vast majority of our resources into our international corporate and institutional franchise in the U.S. We'll continue to connect our U.S. wholesale clients into our international network, driving revenue growth in other regions.

We'll also defend our strength in U.S. dollar clearing, trade and foreign exchange; and continue to reposition U.S. markets and security services to provide access in a way that uses less capital. In U.S. retail, our focus will be on building an international wealth platform that connects WPB clients across our global network to U.S. wealth opportunities. And we continue to explore organic and inorganic options for our U.S. Retail Banking franchise. For Europe, the story is similar. Nuno and the team laid solid foundations in 2020, removing RWAs and reducing FTEs by 6%. Our strategy remains focused on connecting inbound and outbound international wholesale customers into our network and a wealth business focused on our global booking centers in mainland Europe. We'll keep investing in our transaction banking franchises to better connect issuers and investors into Europe -- in Europe to Asia and continue to reduce or exit sub-scale retail banking and SME portfolios. We are continuing with the strategic review of our Retail Banking operations in France and are in negotiations in relation to a potential sale, although no decision has yet been taken. If any sale is implemented, given the underlying performance of the French retail business, a loss on sale is expected.

Slide 22 looks at the second pillar of our plan, and this is incredibly important. We see our digital agenda as presenting opportunities for both revenue growth and cost efficiency. In the last year, we spent around $5.5 billion on digital and technology. The impact of this is coming through our digital engagement and ratings, in our revenue, in our cost base and in our ability to operate a global business in the middle of COVID. We wouldn't have achieved what we have already done without that historical investment. John will go into more detail about the future investment program, but I want to take a minute or two to talk about how we'll pay for it. We think we need to grow investment by between 7% and 10% on a compound annual basis between 2019 and 2022. To pay for that, we need to reduce the costs of running HSBC by 4% to 5% over the same period. We intend to save $1 billion more on costs than we said last February on a constant currency basis. We'll make our cost programs work harder to deliver between $5 billion and $5.5 billion of savings. And we'll spend around $7 billion to achieve those savings, with at least half of that falling in 2021. We also intend to keep our headline costs broadly stable from 2022 onwards, enabling us to reinvest further savings into the business. Slide 23 is about energizing HSBC for growth, so the culture, the composition and the future skills we need. This is about creating a dynamic, inclusive and entrepreneurial organization. We've already infused the top of the firm with new people and new skills. More than three-quarters of my senior leadership team have been in post for around a year or less. And of the layer below, just under half of the top 200 took up their current roles in 2020. We've also reduced senior management numbers by 17%, removing layers and increasing accountability.

I'm passionate about creating an inclusive organization. That unlocks opportunity for all and fosters the diversity of thought and experience that every business needs. The diversity of our top team is improving, but we want to go further both in terms of gender and ethnicity. We also made good progress improving employee advocacy, but there are gaps among some employee groups that we must bridge. We also need to build skills and capabilities in areas that are different to what we've needed historically, particularly in digital, analytics and sustainability. We can bring some of those in from outside as we have done over the last 12 months, but we also need to train from within, which we're doing through the newly expanded HSBC University, for which I was the Executive Sponsor before I became Group CEO. Slide 24 looks at one of our biggest opportunities and one of our biggest drivers of change, the transition to net 0. We're already a global leader in sustainability, and we want to stay there as the market expands exponentially.

In 2020, we were the biggest underwriter of green, social, sustainability and sustainability-linked bonds for the second year running, doubling the volume we underwrote in 2019. We've already set out some uniquely ambitious plans for a bank of our scale and footprint to reduce emissions in our operations and supply chain to net 0 by 2030 and to align our portfolio of financed emissions to net 0 by 2050 or sooner. In May, we intend to file a resolution to our AGM requesting investor approval for a clear science-based route to a net 0 aligned portfolio. It will commit the bank to ending financing of coal-fired power. It will align our financed emissions to net 0, and it will commit us to evidencing it through very specific milestones and reporting. Let me be clear that we intend and plan to work with all our clients in every sector to map and finance their low carbon transition. We are aligning every part of our business behind that aim both to achieve our net 0 ambition and to capture the commercial opportunity.

So taking all of this in aggregate, what does tomorrow's HSBC look like? We're effectively undertaking three pivots, to Asia, to wealth and to fee income. We'll also continue to grow our global capability in wholesale banking and further leverage our unique capability to service mid-market corporates globally. These are our highest-return, highest-growth opportunities. We expect to move around 8 percentage points of group tangible equity to Asia over the medium to long term, and we're linking this to compensation for the first time. It will explicitly be part of mine and Ewen's scorecards.

We also expect to move around 10 percentage points of tangible equity to Wealth and Personal Banking over the same period, with a broadly equivalent reduction in Global Banking and Markets. The focused investment in wealth, combined with our investment in technology, aims to deliver compound annual revenue growth in the mid-single digits from 2022. That should accelerate the growth of fee income and insurance income from 29% to around 35% of Group revenue over the medium to long term. This is an ambitious plan but a deliverable plan, and we're going to move with pace and determination and belief in our ability to get it done.

I'll now hand over to Peter to talk about our Asia opportunity, Nuno to talk about our pivot to wealth and John to talk about the technology that underpins everything we want to achieve.

Peter Wong -- Deputy Chairman and Chief Executive, The Hongkong and Shanghai Banking Corporation Limited

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, two-thirds 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 five 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 $30 trillion over the next five 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 in the Greater Bay Area, a region with a population of 73 million and GDP of $1.7 trillion. We will hire more than 3,000 wealth managers in China, where we expect the middle class population will double from the current 300 million to 600 million by 2028.

In Singapore, in our Wealth and Personal Banking business, we will increase resources to build on the momentum created by, last year, double-digit AUM growth across Premier and Jade and establish regional wealth management hub for ASEAN and South Asia. Our Global Banking and Markets and consumer -- and Commercial Banking businesses will capitalize on the more than 4,200 multinational corporations that have regional headquarters in Singapore. We already bank some 750 of these. And we will build on this progress by scaling up our coverage teams and product capabilities, including cash, liquidity, risk management, to increase our market share in this space. In India, we will build on our long-standing national and international relationships to accelerate the growth momentum we have already established. Wholesale banking revenue grew by over 20% per annum in the last two years. And we also aim to leverage our unrivaled network to win a larger share of the 18 million nonresident Indian wealth management business across the world.

So how are we going to do this? We will invest an additional $6 billion in the region over the next five years, with half of it in South and Southeast Asia. The investment is mainly in new talent for our Wealth Management and wholesale banking business and improving our technology. Externally, we will enhance our digital capabilities across all markets to deliver a tailored end-to-end customer experience enabling our 14 million clients who use our network to move or invest their capital globally and seamlessly. Internally, we will invest in areas, including data and analytics powered by artificial intelligence and machine learning to anticipate the needs of our customers more effectively and capture a greater share of wallet across retail, commercial and global banking. And we will continue to maximize the revenue-generating potential of our global footprint and product range. Already 55% of our global revenue is driven by cross-border businesses.

In the last 12 months, we have won awards for best global trade finance bank, best digital bank and best regional private bank, among many others. We will continue to invest to capitalize on the huge and growing opportunities in Asia's wealth market and work toward becoming Asia's leading international wholesale bank. Overall, these actions will increase market share and boost our revenue streams, which will generate double-digit PBT growth in Asia over the medium to long term, allowing the region to continue to deliver significant contributions to HSBC Group dividends. This is really an exciting time to be in Asia and really an exciting time to be in HSBC.

And with that, I'll hand over to Nuno. Thank you.

Nuno Matos -- Chief Executive, Wealth and Personal Banking

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 under way. 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 strong presence in the world's Top 8 cross-border wealth hubs. And third, we have unique access to our prospect customers through our leading CMB and GBM businesses and very extensive client base. In 2020, more than 60% of net new money from asset management and private banking came from our wholesale relationships.

So over the next three to five years, we will invest more than $3.5 billion to leverage these advantages and accelerate development of our wealth business, particularly in Asia. Our investments will be focused on two areas: firstly, developing new products, technology and platforms to deliver a leading client experience. We will build digitally enabled financial planning platforms across the client continuum; and scale up our insurance, health and wellness platforms. We will integrate our wealth management capabilities with a mobile-first approach and create a single core banking platform for private banking across Asia and EMEA. We will differentiate our asset management business with a focus on high-value, higher-margin products. And we will deliver high-conviction products in areas like alternatives, ESG and equities. We will deliver bespoke wealth products for our Jade and private banking customers in partnership with Global Banking and Markets. And we will grow and deepen ultra-high-net worth clients through a dedicated client coverage model focusing on Asia and the Middle East and on products which make best use of group's capabilities.

In parallel, two-thirds of our investments will aim to significantly expand our distribution capabilities. These efforts will focus on hiring more than 5,000 customer-facing wealth planners we equipped with remote video capabilities, particularly for our flagship Pinnacle expansion in Mainland China and high-net-worth coverage in Singapore; on significantly growing our private banking reach on Mainland China to 10 cities and more than doubling our Jade customer base in Mainland China and Singapore; and finally, in expanding our asset management footprint in emerging Asia, particularly India and Malaysia. These investments will enable us to grow our AUMs in Asia faster than the market and grow revenues by more than 10% CAGR, significantly increasing the contribution of wealth to our total WPB revenues.

We have strong credentials to deliver on this ambition. Our leadership position in Hong Kong is well known, having delivered strong growth over the last five years and consolidating our Number 1 wealth market share. Our U.K. integrated digital wealth capabilities are now very credible with recent roll-outs of FlexInvest, Well+ and Benefits+. Today, more than 60% of our customers' equity trading in Hong Kong is now done in mobile. We will be leveraging these capabilities to differentiate our wealth proposition in the rest of Asia.

In Mainland China, we are the largest foreign bank. And despite the challenge of the pandemic, we have launched Pinnacle in four cities and obtained the first-ever foreign fintech license in Mainland China. Our hiring plans are well under way. In six months, we have approximately 200 wealth planners; and we will scale up to 3,000 by 2025. And by the way, we are also exceeding our financial targets. Our roll-out of leading advice-led private banking in Mainland China will also benefit from our private bank in Hong Kong, which was recently voted Number 1 for the sixth consecutive year. And in asset management, we will aim to take a majority stake in Jintrust following changes in regulation, and we will execute to become a Top 10 international asset management in Mainland China.

Finally, our global footprint is unique and particularly important in the wealth space, as our client needs increasingly are global, with material expansion in many wealth corridors. We will invest in our booking centers in Singapore, Switzerland, the U.K., Channel Islands and U.S. as key wealth hubs. In India, we will target to be the Number 1 foreign bank for NRIs. And having already leading market share among the overseas Chinese diaspora, as agents, wealth expands cross-border, we are well positioned to grow with it.

I have great confidence in the prospects of our wealth business. The combination of our unique competitive position, our integrated business structure and our investment in people and platforms will deliver solid growth. With our global and Asian position, WPB is well placed and organized to accelerate our wealth growth and deliver at pace; and I look forward to updating you on our progress.

I will now hand over to John.

John Hinshaw -- Group Chief Operating Officer

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 number of people involved in manual work means they can be redeployed into revenue-generating roles and savings can be reinvested back into technology, creating a virtuous circle of digitization that unlocks customer growth. We're also doubling down on our partnerships with big tech firms like Google and Apple, Amazon, Microsoft and Alibaba, as well as many small fintech firms across the globe. For example, we believe HSBC is one of Google Cloud's largest and most engaged financial services clients. And we're working with them on intelligence-led financial crime detection, which will ultimately help protect our revenues.

The next slide contains three examples of how we're using our scale to improve the customer experience and drive revenue growth. We've invested over $1 billion the last few years in our Mobile X platform, which is now a bank in your pocket. And it standardizes our core digital platform across all key markets, but one of the most interesting things about this new platform is the way it's driving personalized interactions. We marketed it extensively in Hong Kong last year and saw record credit card spending, as customers like the improved experience. We've also received app store ratings in many markets that are 4.7 or higher, which is up significantly from prior ratings. We now have 3 million Hong Kong digital customers, which represent 40% of the population. And over 95% of all retail transactions in Hong Kong are done digitally.

Our Global Money Account platform is a great example of how we're taking something developed in one country, in this case the U.S., and deploying it elsewhere. The internationally mobile population requires access to funds in different countries and currencies. I'm personally a great example of that having just recently moved from the U.S. to the U.K. And our product does just that. It enables instant global transfers with our multi-currency card using real-time FX rates. Built on a common platform, it's now being rolled out worldwide. It went live in the U.S. in August, with planned launches this year in the U.K. for expats, in the Middle East, in Singapore and shortly, the rest of the world will follow. And then finally, Kinetic, which is a cloud-based mobile app for our corporate customers that we rolled out in the U.K. And we're using the insights gained so far to see how we can apply the capabilities in Asia and other parts of the world.

Finally, let's get into more details on the opportunities to drive operational efficiencies. Clearly, COVID has transformed the way we've all worked over the past year, and we now have an opportunity to create a lower sustained cost base in both corporate real estate and reduce business travel. We've analyzed our worldwide real estate footprint and anticipate a reduction in the order of 40% over the next several years, while also ensuring our remaining real estate has a lower environmental footprint on the journey to having our operations at net zero by 2030. There are also opportunities to further reduce our workforce performing non-customer-facing functions.

Overall, our workforce numbers are down 11,000 year-on-year despite the fact that we paused redundancies last year, while we assessed the impacts of the pandemic on our customers and our people, but over the next few years through digitizations, we expect the finance function to be reduced by about a third. And we will change the nature of the work the finance teams perform. We'll do this by migrating our analytics and reporting capability to an agile cloud platform. Our technology headcount will be optimized to focus on agile development, and we will reskill our colleagues with the technology skills needed for the future. There's also an opportunity to materially shrink the number of manual processes, which will result in less need for the vast operations function in our bank today which currently spans 74,000 resources. Many of these resources will be reskilled for higher-value customer-engaged opportunities, including data and analytics skills that are in high demand.

Our commitment throughout HSBC is to attract and retain the best and brightest and most diverse colleagues for our journey ahead. Few, if any, other organizations in the world can offer the same breadth of opportunities that HSBC does to apply cutting-edge technology to solve real-life problems and improve people's lives. We're doubling down on creating a diverse and inclusive workforce. I have an entirely new senior management team that is half promoted from within, half recruited externally and has a three quarter female executives. We will continue to do more to improve gender balance and diversity across the broader team.

Thanks for listening. Let me hand back over to Ewen now.

Ewen Stevenson -- Group Chief Financial Officer

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 three 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 planned growth in noninterest income. You've heard from Peter and Nuno our raised aspirations in this respect. We see significant growth opportunities in both Asia wealth and Asia wholesale. And we're committing further material capital, people, technology and investment resources to underpin this.

On operating costs, you've heard today an increased ambition from us. We've raised our 2022 cost reduction target by a further $1 billion, but more importantly we've got growing confidence in a multiyear cost opportunity beyond this and an aspiration to keep costs broadly flat while continuing to achieve healthy revenue growth and jaws. John just talked about this, using technology to transform the whole of our organization, lower front-office distribution costs through increased digital delivery and higher relationship manager productivity, lower commercial real estate costs as we return to work in a very different way and using technology to transform the operations and functional support model, delivering much better customer and control outcomes at a dramatically lower cost. And on capital, we've got a whole bunch of initiatives under way, stripping back the capital allocation to our U.S. and non-ring-fenced bank franchises, including trapped capital currently sitting in the U.S.; improving the optimization of capital across various subsidiaries elsewhere; and investing in our stress-testing capabilities to drive down the aggregate level of stress across the group. That's why we're now guiding to a 14% to 14.5% core Tier 1 ratio rather than the previous 14% to 15%.

And the last building block for our return on tangible equity is an improved rate environment. To be clear: We're not baking this into our base plans. We want to have a business that can generate cost-of-equity returns assuming this rate environment, but I would note that a 100 basis point parallel shift upwards in rates would improve our returns by around 300 basis points within two years.

So on Slide 41 and to conclude before handing back to Noel. We're resetting our operating cost target for 2022 $1 billion lower than previously guided; and post 2022, an ambition to keep costs broadly stable while achieving material revenue growth. Our gross risk-weighted asset target by the end of '22 remains unchanged, at least $100 billion, but with over $50 billion achieved in 2020 and a further $30 billion targeted in 2021, with high confidence in delivery.

A core Tier 1 ratio of 14% or more, with confidence in being able to manage to a 14% to 14.5% range over the medium term. A new dividend policy, all cash going forward, with no scrip alternative; a dividend of $0.15 for 2020 and then transitioning in 2021 toward a payout ratio of 40% to 55% from 2022 onwards. This allows for a powerful combination of both sustainable growth and sustainable dividends. Where we have excess capital in any given year, we will look to buybacks to augment dividends, but please don't model buybacks into your 2021 numbers.

And a return on tangible equity of at least 10% over the medium term, a return that can be delivered in the current rate environment, with material leveraged upside if rates improve; and a return that can be delivered with a set of actions that sit firmly as self-help measures within this management team's control.

And with that, thanks. And over to Noel to conclude.

Noel Quinn -- Group Chief Executive

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.

Richard O'Connor -- Global Head, Investor Relations

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 four or five from the audio line, so over to Sharon, the operator, please.

Questions and Answers:

Operator

[Operator Instructions] Your first question today comes from the line of Martin Leitgeb from Goldman Sachs. Please go ahead. Your line is open.

Martin Leitgeb -- Goldman Sachs -- Analyst

Yes. Good morning and thank you very much for the presentation. 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 five-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? Thank you.

Ewen Stevenson -- Group Chief Financial Officer

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 billion 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 yeah, 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, yeah, 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.

Richard O'Connor -- Global Head, Investor Relations

Next question from the audio lines, please.

Martin Leitgeb -- Goldman Sachs -- Analyst

Thank you.

Operator

Thank you. Your next question comes from the line of Adrian Cighi from Credit Suisse. Please go ahead. Your line is open.

Adrian Cighi -- Credit Suisse -- Analyst

Hello. Thank you very much for taking my questions. I have two questions, one follow-up on capital and one 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? Thank you very much.

Ewen Stevenson -- Group Chief Financial Officer

Yeah. 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 -- yeah, 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 toward 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 one-, three-month HIBOR. So --

Noel Quinn -- Group Chief Executive

Adrian, I'd also add on loan volumes. I think what we saw toward 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 toward the end of last year on getting ready for that upturn.

Adrian Cighi -- Credit Suisse -- Analyst

It's very helpful. Thank you very much.

Richard O'Connor -- Global Head, Investor Relations

Another question from the audios, please.

Operator

Thank you. Your next question comes from Tom Rayner from Numis. Please go ahead. Your line is open.

Tom Rayner -- Numis -- Analyst

Yes. Good morning, everybody. 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 three to four 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. Thank you.

Ewen Stevenson -- Group Chief Financial Officer

Yeah. 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 one and stage two. If you backed that out, we were running in probably the low 40s basis points in 2020, yes. And as we think about '22, there may well be some reserve releases in that guidance, but I do think, as 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.

Tom Rayner -- Numis -- Analyst

Okay. Thank you. 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 acquisitions 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?

Ewen Stevenson -- Group Chief Financial Officer

Yeah --

Noel Quinn -- Group Chief Executive

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.

Ewen Stevenson -- Group Chief Financial Officer

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

Noel Quinn -- Group Chief Executive

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.

Tom Rayner -- Numis -- Analyst

Okay. Thank you very much.

Richard O'Connor -- Global Head, Investor Relations

One more audio question please and we will take written questions. Thanks.

Operator

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

Aman Rakkar -- Barclays Bank PLC -- Analyst

Good morning, gents. Thanks for the questions. 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?

Noel Quinn -- Group Chief Executive

That's not include within our cost targets. Any actions on those two areas will be incremental.

Aman Rakkar -- Barclays Bank PLC -- Analyst

Okay.

Noel Quinn -- Group Chief Executive

Plus there'd be a loss of revenue as well, so you need to take both of those into account.

Aman Rakkar -- Barclays Bank PLC -- Analyst

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?

Noel Quinn -- Group Chief Executive

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. 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 five years in Asia. But Ewen, do you want to add any more?

Ewen Stevenson -- Group Chief Financial Officer

Yeah. 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.

Noel Quinn -- Group Chief Executive

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.

Aman Rakkar -- Barclays Bank PLC -- Analyst

Got it. Thank you very much.

Richard O'Connor -- Global Head, Investor Relations

We've got a couple of questions from Ronit Ghose from Citigroup. 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?

Noel Quinn -- Group Chief Executive

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 three to five 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 banking. 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 banking. 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.

Richard O'Connor -- Global Head, Investor Relations

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?

Noel Quinn -- Group Chief Executive

Ewen, do you want to pick up that?

Ewen Stevenson -- Group Chief Financial Officer

Yeah. 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 one 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 -- yeah, 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.

Richard O'Connor -- Global Head, Investor Relations

Okay, operator, back to the audio lines for two, three questions, please.

Operator

Thank you. Your next question from the phone line comes from Edward Firth from KBW. Please go ahead. Your line is open.

Edward Firth -- Keefe Bruyette & Woods -- Analyst

Yeah. Morning everybody. Thanks very much. 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?

Ewen Stevenson -- Group Chief Financial Officer

Yeah. 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 among that $1.6 billion of revenue uplift, it's roughly half and half across noninterest income and net interest income.

Edward Firth -- Keefe Bruyette & Woods -- Analyst

Okay. Thanks so much.

Richard O'Connor -- Global Head, Investor Relations

Another question from the audio line, please.

Operator

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

Manus Costello -- Autonomous Research -- Analyst

Hi, everyone. 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?

Noel Quinn -- Group Chief Executive

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.

Ewen Stevenson -- Group Chief Financial Officer

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.

Manus Costello -- Autonomous Research -- Analyst

Okay. Thank you very much, guys.

Richard O'Connor -- Global Head, Investor Relations

One more from the audio line, then we got a couple from Hong Kong.

Operator

Thank you. Your next question comes from Raul Sinha from J.P. Morgan. Please go ahead. Your line is open.

Raul Sinha -- J P Morgan -- Analyst

Good morning, everyone. Thanks very much for taking my questions. 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 OK.

Noel Quinn -- Group Chief Executive

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 two 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.

Raul Sinha -- J P Morgan -- Analyst

All right. Thank you. 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.

Ewen Stevenson -- Group Chief Financial Officer

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.

Raul Sinha -- J P Morgan -- Analyst

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...

Ewen Stevenson -- Group Chief Financial Officer

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

Raul Sinha -- J P Morgan -- Analyst

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.

Ewen Stevenson -- Group Chief Financial Officer

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.

Raul Sinha -- J P Morgan -- Analyst

Thanks so much.

Richard O'Connor -- Global Head, Investor Relations

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?

Noel Quinn -- Group Chief Executive

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?

John Hinshaw -- Group Chief Operating Officer

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.

Ewen Stevenson -- Group Chief Financial Officer

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 one-third, 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.

Noel Quinn -- Group Chief Executive

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.

Ewen Stevenson -- Group Chief Financial Officer

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 toward digital.

Richard O'Connor -- Global Head, Investor Relations

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?

Noel Quinn -- Group Chief Executive

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?

Nuno Matos -- Chief Executive, Wealth and Personal Banking

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 six 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, OK? 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.

Noel Quinn -- Group Chief Executive

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?

Peter Wong -- Deputy Chairman and Chief Executive, The Hongkong and Shanghai Banking Corporation Limited

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 two -- 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.

Richard O'Connor -- Global Head, Investor Relations

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

Operator

Thank you. Your next question from the phone line comes from Guy Stebbings from Exane BNP Paribas. Please go ahead. Your line is open.

Guy Stebbings -- Exane BNP Paribas -- Analyst

Hey, good morning gents and thanks for taking the questions. 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, etc., 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. Thanks.

Ewen Stevenson -- Group Chief Financial Officer

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 two 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.

Guy Stebbings -- Exane BNP Paribas -- Analyst

Okay. Thank you.

Richard O'Connor -- Global Head, Investor Relations

We hopefully have time for one more question from the audio lines, please, and then we'll wrap up.

Operator

Thank you. Your final question from the audio lines comes from Fahed Kunwar from Redburn. Please go ahead. Your line is open.

Fahed Kunwar -- Redburn -- Analyst

Hi, thanks for taking my questions and thanks for the details. 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? Thank you.

Noel Quinn -- Group Chief Executive

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?

Ewen Stevenson -- Group Chief Financial Officer

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.

Noel Quinn -- Group Chief Executive

Yes.

Ewen Stevenson -- Group Chief Financial Officer

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.

Fahed Kunwar -- Redburn -- Analyst

Thank you. 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, OK, repricing can hold and stay there with that much liquidity around? Thanks.

Noel Quinn -- Group Chief Executive

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?

Peter Wong -- Deputy Chairman and Chief Executive, The Hongkong and Shanghai Banking Corporation Limited

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.

Richard O'Connor -- Global Head, Investor Relations

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

Noel Quinn -- Group Chief Executive

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.

Ewen Stevenson -- Group Chief Financial Officer

Thanks.

Duration: 113 minutes

Call participants:

Noel Quinn -- Group Chief Executive

Ewen Stevenson -- Group Chief Financial Officer

Peter Wong -- Deputy Chairman and Chief Executive, The Hongkong and Shanghai Banking Corporation Limited

Nuno Matos -- Chief Executive, Wealth and Personal Banking

John Hinshaw -- Group Chief Operating Officer

Richard O'Connor -- Global Head, Investor Relations

Martin Leitgeb -- Goldman Sachs -- Analyst

Adrian Cighi -- Credit Suisse -- Analyst

Tom Rayner -- Numis -- Analyst

Aman Rakkar -- Barclays Bank PLC -- Analyst

Edward Firth -- Keefe Bruyette & Woods -- Analyst

Manus Costello -- Autonomous Research -- Analyst

Raul Sinha -- J P Morgan -- Analyst

Guy Stebbings -- Exane BNP Paribas -- Analyst

Fahed Kunwar -- Redburn -- Analyst

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