HSBC FINAL INTERVIEW

Question 1

Why do you want to work at HSBC?

Answer 1

• Absolutely loved the internship…
• HSBC’s high quality capital markets operations backed by its strong balance sheet (
• Amazing culture – collaborative and non-hierarchical -> opportunities to learn from very senior people, very willing to help
• Truly global bank across divisions & geographies. HSBC employs a vast range of people from different cultures and bridges cultural gap between east and west (schemes for rotating to different offices)
  (maybe refer to 1. culture, 2. the franchise - global, cap markets, diversity)

Question 2

What makes HSBC a great bank?

Answer 2

• Top quality capital markets division…
• Culture
• Global orientation

Question 3

How have you found the internship

Answer 3

• Overall amazing and novel experiencer
• Environment -> the IB/teamwork culture, collaborative. Loved the team.
• Intellectually stimulating – understanding vs ‘speaking’ the language -> understood very little in the first SSG call

Question 4

What have you learned

Answer 4

• Technical skills -> excel, Bloomberg, understanding ‘the way things are done’, need to be concise, accurate, to the point.
• Technical knowledge
• Proactive – following feedback, in all senses from seeking work plus suggesting new ideas / giving feedback.
  (- precision)

Question 5

What are the key themes in the (investment) banking industry at the moment

Answer 5

• Increasing interest rates (because of inflation - supply side, war in Ukraine & china lockdowns, sticky demand) -> will benefit the retail heavy banks like HSBC (however banks as a whole very tied to the macro conditions), slightly better
• Argument surrounding ‘universal’ banks in terms of different bank arms and geographically
• usability of buffers / AT1?, increase in RWAs

Question 6

What is your outlook on the interest rate and inflationary environment

Answer 6

• Payoff between spiralling inflation and overshooting the path back to 2% inflation for central banks (supply,
• Inflation will be highest in the UK given the …

Question 7

Why do you want to work in Capital Solutions?

Answer 7

• Highly technical and relevant - financial institutions and corporate hybrids (banking regulation is ever evolving) and financial institutions are more integrated into the economy than any other sector
• Opportunity to think more holistically and truly understand the market and translate that to new strategies.

Question 8

Why do you want to work in the Strategic Solutions Group?

Answer 8

• Amazing range of people in terms of experience and expertise
• Central to the higher level thinking within capital markets, different to any other team.

Question 9

Explain how corporate hybrids work

Answer 9

• Equity/debt like instrument – perpetual/very long tenor, deferrable/optional coupons? Reset every 5 years, ‘effective maturity after 25 years… S&P equity cliff with 20 years left for BBB?
• Call/non-call dilemma in current environment, 50% debt/equity credit- > very relevant for leverage metrics and subsequent ratings considerations
• With rates widening and hybrids becoming more expensive, refinancing is more expensive and therefore redemption and then replacing will be more expensive.
• Recent pattern of increased sub-senior spread, particularly for ‘weaker’ names
• Becomes a point where ‘hybrids are not worth it anymore’ e.g. when they are costing >6%
• Casino case study – keeping equity content over rating downgrade (equity cliff at 20 years vs 15 years)
• Veolia case study – loss of equity content following ‘lack of clarity’ around replacing
• KPN case study – redeeming not replacing 50% of stack, but retain equity content on improved credit profile and commitment to hybrids
• Heimstaden case study – tender offer on hybrids, equity raise

Question 10

Tell me what you know about bank capital structure

Answer 10

• Assets on the LHS of the balance sheet, comprised mainly of loans given to clients/customers
• Given the credit risk of all of these assets, find a number for the RWA density and therefore RWA.
• Other side of the B/S looks to protect deposit holders through several layers of capital instruments, the requirements of which are largely tied
• Basel I, II, III – Pillar 1 & 2, CBR, distance to MDA. MREL/TLAC/subordination requirements.
• Covered bonds above deposits.

Question 11

What are the different considerations for getting a credit rating?

Answer 11

• Interest coverage ratio (int. expenses/EBITDA)

- Leverage ratio

Question 12

What work have you enjoyed the most?

Answer 12

• Investor survey feedback followed by tracker -> clearest translation to broad applications – liability management exercises, mandatory convertibles, refinancings, - then tracker is bringing a long term framework to help us

Question 13

What his your biggest strength / weakness?

Answer 13

• can-do mentality towards everything - communicating with people, learning new things, overcoming challenges
• communication, more important than I thought

Question 14

What was the favourite transaction / piece of work?

Answer 14

investor feedback & corp tracker - something more specific?.. corp hybrids case study

Question 15

Question?

Answer 15

At what level does the role become more client facing? How does cap solutions/SSG change in terms of work when there are many different deals happening? How can the team (capital solutions) / SSG as a whole work more effectively?