Report of the Directors | Financial summary
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Financial summary |
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Use of non-GAAP financial measures |
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Critical accounting estimates and judgements |
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Consolidated income statement |
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Group performance by income and expense item |
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Net interest income |
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Net fee income |
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Net trading income |
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Net income/(expense) from financial instruments designated at fair value |
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Gains less losses from financial investments |
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Net insurance premium income |
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Other operating income |
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Net insurance claims and benefits paid and movement in liabilities to policyholders |
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Loan impairment charges and other credit risk provisions |
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Operating expenses |
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Share of profit in associates and joint ventures |
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Tax expense |
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Consolidated balance sheet |
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Movement in 2017 |
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The management commentary included in the Strategic Report, the Report of the Directors: 'Financial Review', together with the 'Employees' and 'Corporate sustainability' sections of 'Corporate Governance' and the 'Directors' Remuneration Report' is presented in compliance with the IFRSs Practice Statement 'Management Commentary' issued by the IASB.
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Use of non-GAAP financial measures |
Our reported results are prepared in accordance with IFRSs as detailed in the Financial Statements starting on page 175.
To measure our performance we also use non-GAAP financial measures, including those derived from our reported results that eliminate factors that distort year-on-year comparisons. The 'adjusted performance' measure used throughout this report is described below, and where others are used they are described. All non-GAAP financial measures are reconciled to the closest reported financial measure.
The global business segmental results on pages 46 to 59 are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments' as detailed in 'Basis of preparation' on page 46.
Adjusted performance
Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort year-on-year comparisons.
Foreign currency translation differences are described below. 'Significant items' refers collectively to the items that management and investors would ordinarily identify and consider separately to understand better the underlying trends in the business.
We consider adjusted performance provides useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant and providing insight into how management assesses year-on-year performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2017. We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and better understand the underlying trends in the business.
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Foreign currency translation differences Foreign currency translation differences for 2017 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates: • the income statements for 2016 and 2015 at the average rates of exchange for 2017; and • the balance sheets at 31 December 2016 and 31 December 2015 at the prevailing rates of exchange on 31 December 2017. No adjustment has been made to the exchange rates used to translate foreign currency denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current period on the basis described above. |
Changes to presentation from 1 January 2017
Own credit spread
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. On 1 January 2017, HSBC adopted the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, the effects of changes in those liabilities' credit risk is presented in other comprehensive income. These requirements were adopted in the separate financial statements of HSBC Holdings plc on 1 January 2016. Refer to 'Compliance with International Financial Reporting Standards' on page 186 for further detail.
Adjusted performance - foreign currency translation of significant items
The foreign currency translation differences related to significant items are presented as a separate component of significant items. This is considered a more meaningful presentation as it allows better comparison of year-on-year movements in performance.
Significant items
The tables on pages 49 to 51 and pages 55 to 57 detail the effects of significant items on each of our global business segments and geographical regions in 2017, 2016 and 2015.
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Critical accounting estimates and judgements |
The results of HSBC reflect the choice of accounting policies, assumptions and estimates that underlie the preparation of HSBC's consolidated financial statements. The significant accounting policies, including the policies which include critical accounting estimates and judgements, are described in Note 1.2 on the Financial Statements. The accounting policies listed below are highlighted as they involve a high degree of uncertainty and have a material impact on the financial statements:
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Impairment of loans and advances: For collective impairment allowances, estimation methods include the use of historical information supplemented by significant management judgement about whether current economic and credit conditions are such that actual incurred losses are likely to be greater or less than experienced in the past. For individually assessed loans, judgements are made about the financial condition of individual borrowers, which can involve a wide range of factors relating to their business and the value of any security. The exercise of judgement requires the use of assumptions that are highly subjective and sensitive, in particular to changes in economic and credit conditions across a large number of geographical areas. See Note 1.2(d) on page 190. |
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Deferred tax assets: The most significant judgements relate to those made in respect of expected future profitability. See Note 1.2(h) on page 194. |
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32 |
HSBC Holdings plc Annual Report and Accounts 2017 |
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Valuation of financial instruments: In determining the fair value of financial instruments a variety of valuation techniques are used, some of which feature significant unobservable inputs and are subject to substantial uncertainty. See Note 1.2(c) on page 189. |
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Impairment of interests in associates: Impairment testing involves significant judgement in determining the value in use, and in particular estimating the present values of cash flows expected to arise from continuing to hold the investment, based on a number of management assumptions. See Note 1.2(a) on page 188. |
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Goodwill impairment: A high degree of uncertainty is involved in estimating the future cash flows of the cash generating units ('CGUs') and the rates used to discount these cash flows. See Note 1.2(a) on page 188. |
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Provisions: A high degree of judgement may be required due to the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. See Note 1.2(i) on page 194. |
Given the inherent uncertainties and the high level of subjectivity involved in the recognition or measurement of the items above, it is possible that the outcomes in the next financial year could differ from the expectations on which management's estimates are based, resulting in the recognition and measurement of materially different amounts from those estimated by management in these Financial Statements.
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Consolidated income statement |
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Summary consolidated income statement |
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2017 |
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2016 |
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2015 |
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2014 |
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2013 |
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$m |
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$m |
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$m |
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$m |
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$m |
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Net interest income |
28,176 |
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29,813 |
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32,531 |
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34,705 |
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35,539 |
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Net fee income |
12,811 |
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12,777 |
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14,705 |
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15,957 |
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16,434 |
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Net trading income |
7,719 |
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9,452 |
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8,723 |
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6,760 |
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8,690 |
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Net income/(expense) from financial instruments designated at fair value |
3,698 |
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(2,666 |
) |
1,532 |
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2,473 |
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768 |
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Gains less losses from financial investments |
1,150 |
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1,385 |
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2,068 |
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1,335 |
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2,012 |
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Dividend income |
106 |
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95 |
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123 |
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311 |
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322 |
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Net insurance premium income |
9,779 |
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9,951 |
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10,355 |
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11,921 |
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11,940 |
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Other operating income/(expense) |
337 |
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(971 |
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1,055 |
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1,131 |
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2,632 |
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Total operating income |
63,776 |
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59,836 |
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71,092 |
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74,593 |
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78,337 |
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Net insurance claims and benefits paid and movement in liabilities to policyholders |
(12,331 |
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(11,870 |
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(11,292 |
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(13,345 |
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(13,692 |
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Net operating income before loan impairment charges and other |
51,445 |
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47,966 |
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59,800 |
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61,248 |
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64,645 |
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Loan impairment charges and other credit risk provisions |
(1,769 |
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(3,400 |
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(3,721 |
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(3,851 |
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(5,849 |
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Net operating income |
49,676 |
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44,566 |
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56,079 |
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57,397 |
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58,796 |
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Total operating expenses |
(34,884 |
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(39,808 |
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(39,768 |
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(41,249 |
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(38,556 |
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Operating profit |
14,792 |
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4,758 |
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16,311 |
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16,148 |
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20,240 |
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Share of profit in associates and joint ventures |
2,375 |
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2,354 |
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2,556 |
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2,532 |
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2,325 |
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Profit before tax |
17,167 |
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7,112 |
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18,867 |
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18,680 |
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22,565 |
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Tax expense |
(5,288 |
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(3,666 |
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(3,771 |
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(3,975 |
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(4,765 |
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Profit for the year |
11,879 |
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3,446 |
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15,096 |
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14,705 |
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17,800 |
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Attributable to: |
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- ordinary shareholders of the parent company |
9,683 |
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1,299 |
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12,572 |
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13,115 |
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15,631 |
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- preference shareholders of the parent company |
90 |
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90 |
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90 |
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90 |
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90 |
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- other equity holders |
1,025 |
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1,090 |
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860 |
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483 |
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483 |
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- non-controlling interests |
1,081 |
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967 |
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1,574 |
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1,017 |
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1,596 |
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Profit for the year |
11,879 |
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3,446 |
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15,096 |
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14,705 |
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17,800 |
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Five-year financial information |
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2017 |
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2016 |
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2015 |
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2014 |
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2013 |
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Footnotes |
$ |
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$ |
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$ |
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$ |
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$ |
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Basic earnings per share |
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0.48 |
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0.07 |
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0.65 |
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0.69 |
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0.84 |
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Diluted earnings per share |
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0.48 |
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0.07 |
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0.64 |
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0.69 |
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0.84 |
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Dividends per ordinary share |
13 |
0.51 |
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0.51 |
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0.50 |
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0.49 |
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0.48 |
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% |
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% |
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% |
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% |
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% |
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Dividend payout ratio |
14 |
106.3 |
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728.6 |
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76.5 |
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71.0 |
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57.1 |
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Post-tax return on average total assets |
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0.5 |
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0.1 |
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0.6 |
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0.5 |
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0.7 |
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Return on average risk-weighted assets |
15 |
2.0 |
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0.7 |
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1.6 |
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1.5 |
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2.0 |
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Return on average ordinary shareholders' equity |
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5.9 |
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0.8 |
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7.2 |
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7.3 |
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9.2 |
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Average foreign exchange translation rates to $: |
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$1: £ |
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0.777 |
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0.741 |
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0.654 |
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0.607 |
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0.639 |
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$1: € |
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0.887 |
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0.904 |
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0.902 |
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0.754 |
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0.753 |
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For footnotes, see page 62.
Unless stated otherwise, all tables in the Annual Report and Accounts 2017 are presented on a reported basis.
For a summary of our financial performance in 2017, see page 14.
For further financial performance data for each global business and geographical region, see pages 46 to 53 and 53 to 59, respectively.
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HSBC Holdings plc Annual Report and Accounts 2017 |
33 |
Report of the Directors | Financial summary
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Group performance by income and expense item |
Net interest income
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2017 |
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2016 |
2015 |
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Footnotes |
$m |
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$m |
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$m |
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Interest income |
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40,995 |
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42,414 |
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47,189 |
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Interest expense |
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(12,819 |
) |
(12,601 |
) |
(14,658 |
) |
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Net interest income |
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28,176 |
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29,813 |
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32,531 |
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Average interest-earning assets |
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1,726,120 |
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1,723,702 |
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1,726,949 |
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% |
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% |
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% |
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Gross interest yield |
16 |
2.37 |
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2.46 |
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2.73 |
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Less: cost of funds |
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(0.88 |
) |
(0.87 |
) |
(1.00 |
) |
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Net interest spread |
17 |
1.49 |
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1.59 |
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1.73 |
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Net interest margin |
18 |
1.63 |
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1.73 |
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1.88 |
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For footnotes, see page 62.
In July 2016, we completed the sale of operations in Brazil. During 2016, we earned net interest income of $0.9bn in Brazil from
average interest earning assets of $25.8bn. In 2016, our net interest margin excluding Brazil was 1.70%.
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Summary of interest income by type of asset |
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2017 |
2016 |
2015 |
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Average balance |
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Interest income |
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Yield |
Average balance |
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Interest income |
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Yield |
Average balance |
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Interest income |
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Yield |
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Footnotes |
$m |
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$m |
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% |
$m |
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$m |
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% |
$m |
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$m |
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% |
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Short-term funds and loans and advances to banks |
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236,126 |
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2,030 |
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0.86 |
203,799 |
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1,510 |
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0.74 |
221,924 |
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2,277 |
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1.03 |
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Loans and advances to customers |
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902,214 |
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28,751 |
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3.19 |
865,356 |
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29,272 |
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3.38 |
909,707 |
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33,104 |
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3.64 |
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Reverse repurchase agreements - non-trading |
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173,760 |
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2,191 |
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1.26 |
168,207 |
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1,227 |
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0.73 |
162,308 |
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1,301 |
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0.80 |
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Financial investments |
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389,807 |
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7,440 |
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1.91 |
430,775 |
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7,248 |
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1.68 |
396,113 |
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7,508 |
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1.90 |
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Other interest-earning assets |
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24,213 |
|
583 |
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2.41 |
55,565 |
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3,157 |
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5.68 |
36,897 |
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2,999 |
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8.13 |
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Total interest-earning assets |
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1,726,120 |
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40,995 |
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2.37 |
1,723,702 |
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42,414 |
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2.46 |
1,726,949 |
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47,189 |
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2.73 |
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Trading assets and financial assets designated at fair value |
19, 20 |
186,673 |
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4,245 |
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2.27 |
179,780 |
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3,897 |
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2.17 |
195,285 |
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4,626 |
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2.37 |
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Impairment allowances |
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(7,841 |
) |
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(9,127 |
) |
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(10,606 |
) |
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Non-interest-earning assets |
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616,688 |
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653,115 |
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682,143 |
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Year ended 31 Dec |
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2,521,640 |
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45,240 |
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1.79 |
2,547,470 |
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46,311 |
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1.82 |
2,593,771 |
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51,815 |
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2.00 |
For footnotes, see page 62.
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Summary of interest expense by type of liability and equity |
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2017 |
2016 |
2015 |
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Average balance |
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Interest expense |
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Cost |
Average balance |
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Interest expense |
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Cost |
Average balance |
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Interest expense |
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Cost |
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Footnotes |
$m |
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$m |
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% |
$m |
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$m |
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% |
$m |
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$m |
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% |
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Deposits by banks |
21 |
47,337 |
|
451 |
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0.95 |
49,782 |
|
342 |
|
0.69 |
55,863 |
|
378 |
|
0.68 |
|
Financial liabilities designated at fair value - own debt issued |
22 |
60,566 |
|
1,261 |
|
2.08 |
62,042 |
|
942 |
|
1.52 |
58,489 |
|
717 |
|
1.23 |
|
Customer accounts |
23 |
1,094,920 |
|
5,405 |
|
0.49 |
1,074,661 |
|
5,492 |
|
0.51 |
1,075,901 |
|
7,401 |
|
0.69 |
|
Repurchase agreements - non-trading |
|
136,561 |
|
1,665 |
|
1.22 |
118,789 |
|
626 |
|
0.53 |
117,947 |
|
355 |
|
0.30 |
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Debt securities in issue |
|
108,677 |
|
3,130 |
|
2.88 |
114,343 |
|
2,807 |
|
2.45 |
129,039 |
|
3,521 |
|
2.73 |
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Other interest-bearing liabilities |
|
7,009 |
|
907 |
|
12.94 |
22,387 |
|
2,392 |
|
10.68 |
28,396 |
|
2,286 |
|
8.05 |
|
Total interest-bearing liabilities |
|
1,455,070 |
|
12,819 |
|
0.88 |
1,442,004 |
|
12,601 |
|
0.87 |
1,465,635 |
|
14,658 |
|
1.00 |
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Trading liabilities and financial liabilities designated at fair value (excluding own debt issued) |
|
153,776 |
|
2,325 |
|
1.51 |
138,486 |
|
1,986 |
|
1.43 |
151,294 |
|
2,071 |
|
1.37 |
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Non-interest bearing current accounts |
|
197,104 |
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184,016 |
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|
190,914 |
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Total equity and other non-interest bearing liabilities |
|
715,690 |
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|
782,964 |
|
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|
785,928 |
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Year ended 31 Dec |
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2,521,640 |
|
15,144 |
|
0.60 |
2,547,470 |
|
14,587 |
|
0.57 |
2,593,771 |
|
16,729 |
|
0.64 |
For footnotes, see page 62.
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34 |
HSBC Holdings plc Annual Report and Accounts 2017 |
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Significant items and currency translation |
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2017 |
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2016 |
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$m |
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$m |
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Significant items |
(108 |
) |
1,110 |
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- customer redress programmes |
(108 |
) |
2 |
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- trading results from disposed-of operations in Brazil |
- |
|
949 |
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- currency translation on significant items |
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|
159 |
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Currency translation |
|
524 |
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Year ended 31 Dec |
(108 |
) |
1,634 |
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Net interest income of $28.2bn decreased by $1.6bn or 5% compared with 2016, including the effects of significant items and foreign currency translation totalling $1.7bn. Excluding the effects of significant items and foreign currency translation, our net interest income remained broadly unchanged from 2016.
Net interest margin of 1.63% was 10 basis points ('bps') lower than in 2016, including the effects of the significant items and foreign currency translation, which decreased net interest margin by 7bps in total. Excluding these factors, net interest margin decreased by 3bps, mainly reflecting the run-off of our US CML portfolio, pressures on asset yields, notably in Europe and Asia, and higher cost of Group debt. These were partly offset by higher yields on surplus liquidity due to US dollar and Hong Kong dollar rate rises.
Interest income
Interest income decreased by $1.4bn compared with 2016, including the adverse effects of the significant items and foreign currency translation totalling $3.7bn. Excluding these, interest income increased by $2.3bn mainly driven by higher income on surplus liquidity and reverse repurchase agreements.
Interest income on short-term funds and financial investments increased by $0.7bn compared with 2016, which included adverse effects of the disposal of our operations in Brazil and currency translation of $0.2bn. Excluding these, interest income on short-term funds and financial investments increased by $0.9bn, primarily in Asia and North America, reflecting the central bank rate rises. This was partly offset by a reduction in Europe, notably due to the base rate cut in the UK in 2016.
Interest income on reverse repurchase agreements - non-trading was $1.0bn higher, driven by increased income in all regions, notably in Asia and North America, reflecting higher balances and increased market rates. This movement is in line with an increase in interest expense on repurchase agreements.
Interest income on loans and advances to customers was marginally higher, excluding the adverse effects of the UK customer redress programme, our sale of operations in Brazil and foreign currency translation totalling $0.7bn, reflecting increases in:
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• |
Asia, mainly due to growth in term lending and mortgage balances, although term lending yields decreased as a result of competitive pressures; and |
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• |
Latin America, notably in Mexico reflecting higher yields on mortgages and term lending driven by central bank rate rises, and growth in mortgage balances. |
These increases were partly offset by lower income in:
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|
• |
North America, primarily as a result of the continuing run-off of the higher-yielding CML portfolio in the US; and |
|
|
|
|
• |
Europe, as the effects of decreased lending yields more than offset balance growth in mortgages, term lending and overdrafts, resulting from lower central bank rates, negative interest rates in continental Europe, and market competition. |
Interest expense
Reported interest expense increased by $0.2bn, including the effects of the disposal of our operations in Brazil in 2016 and foreign currency translation totalling $2.0bn. Excluding these impacts, interest expense was $2.2bn higher, primarily due to increases in interest expense on repurchase agreements and Group debt.
Interest expense on repurchase agreements increased by $1.0bn, in line with the increase in interest income on reverse repurchase agreements, notably in North America reflecting increased balances and higher market rates, and in Europe reflecting increased balances.
Interest expense on debt securities in issue and own debt at fair value was $0.6bn higher. The increase reflected a rise in the cost of funds, although average balances fell as an increase in debt issued by HSBC Holdings to meet regulatory requirements was more than offset by redemptions of senior debt across the Group. The increase in the cost of debt reflected both longer maturities and the structural subordination of our new issuances.
Interest expense on customer accounts was $0.1bn higher, excluding the effects of our sale of operations in Brazil and foreign currency translation, reflecting average balance growth in most of our geographical regions. The net increase also reflects changes in interest rates in key markets, including:
|
|
|
|
• |
rate rises in North America and Mexico; partly offset by, |
|
|
|
|
• |
the 2016 reduction in the UK base rate and negative interest rates in continental Europe on current and savings and deposit accounts; and |
|
|
|
|
• |
central bank rate reductions in Asia, notably in India and Australia, and a change in portfolio mix. |
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
35 |
Report of the Directors | Financial summary
|
|
||||||
|
|
|
|
|
|
|
|
|
Net fee income |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Account services |
2,244 |
|
2,417 |
|
2,745 |
|
|
Funds under management |
2,188 |
|
2,076 |
|
2,570 |
|
|
Cards |
1,994 |
|
1,970 |
|
2,281 |
|
|
Credit facilities |
1,718 |
|
1,795 |
|
1,919 |
|
|
Broking income |
1,191 |
|
1,060 |
|
1,441 |
|
|
Unit trusts |
1,010 |
|
863 |
|
1,007 |
|
|
Underwriting |
829 |
|
705 |
|
762 |
|
|
Remittances |
759 |
|
766 |
|
772 |
|
|
Imports/exports |
736 |
|
820 |
|
971 |
|
|
Global custody |
692 |
|
662 |
|
721 |
|
|
Insurance agency commission |
410 |
|
419 |
|
519 |
|
|
Other |
2,082 |
|
2,116 |
|
2,308 |
|
|
Fee income |
15,853 |
|
15,669 |
|
18,016 |
|
|
Less: fee expense |
(3,042 |
) |
(2,892 |
) |
(3,311 |
) |
|
Year ended 31 Dec |
12,811 |
|
12,777 |
|
14,705 |
|
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
- |
|
271 |
|
|
- trading results from disposed-of operations in Brazil |
- |
|
233 |
|
|
- currency translation on significant items |
|
|
38 |
|
|
Currency translation |
|
|
111 |
|
|
Year ended 31 Dec |
- |
|
382 |
|
Net fee income of $12.8bn was broadly unchanged compared with 2016 and included the disposal of our operations in Brazil which reduced net fee income by $0.2bn, notably fee income from account services and cards. It also included the adverse effects of currency translation of $0.1bn.
Excluding the effects of our sale of operations in Brazil and currency translation, net fee income increased by $0.4bn, mainly due to higher fee income from broking and unit trusts in RBWM and higher fee income from corporate finance (disclosed within 'Other') and underwriting in GB&M.
Fee income from Broking and Unit trusts increased by $0.3bn, largely due to a strong performance in Hong Kong as renewed investor confidence resulted in higher sales of mutual funds and retail securities compared to a weaker performance in 2016.
Fee income from corporate finance and underwriting increased by $0.2bn, reflecting continued momentum across our investment banking products, primarily in the UK, the US and Hong Kong.
Fee income from funds under management rose by $0.1bn, notably in Hong Kong, reflecting higher turnover due to a more favourable equity market environment.
These increases were partly offset by lower fee income from credit facilities, primarily due to lower commercial lending activity in the US in CMB.
In addition, fee expense increased by $0.2bn, in part from cards due to increased customer activity in Hong Kong.
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
Net trading income |
|||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
Footnote |
$m |
|
$m |
|
$m |
|
|
Trading activities |
|
5,990 |
|
8,702 |
|
7,285 |
|
|
Net interest income on trading activities |
|
1,621 |
|
1,386 |
|
1,775 |
|
|
Gain/(loss) on termination of hedges |
|
3 |
|
1 |
|
(11 |
) |
|
Other trading income - hedge ineffectiveness |
|
|
|
|
|
|
|
|
- on cash flow hedges |
|
(5 |
) |
(5 |
) |
15 |
|
|
- on fair value hedges |
|
4 |
|
23 |
|
(11 |
) |
|
Fair value movement on non-qualifying hedges |
24 |
106 |
|
(655 |
) |
(330 |
) |
|
Year ended 31 Dec |
|
7,719 |
|
9,452 |
|
8,723 |
|
For footnotes, see page 62.
|
|
|||||
|
|
|
|
|
|
|
|
Significant items and currency translation |
|||||
|
|
|
2017 |
|
2016 |
|
|
|
Footnote |
$m |
|
$m |
|
|
Significant items |
|
(245 |
) |
(475 |
) |
|
- debit valuation adjustment on derivative contracts |
|
(373 |
) |
26 |
|
|
- fair value movement on non-qualifying hedges |
24 |
128 |
|
(687 |
) |
|
- trading results from disposed-of operations in Brazil |
|
- |
|
179 |
|
|
- currency translation on significant items |
|
|
|
7 |
|
|
Currency translation |
|
|
|
219 |
|
|
Year ended 31 Dec |
|
(245 |
) |
(256 |
) |
For footnotes, see page 62.
|
|
|
|
|
|
|
36 |
HSBC Holdings plc Annual Report and Accounts 2017 |
Net trading income of $7.7bn was $1.7bn lower than in 2016. The net favourable effects of $0.2bn of significant items was largely offset by the adverse effect of currency translation of $0.2bn summarised in the prior table.
The decrease of $1.7bn, excluding the fair value movement on non-qualifying hedges, debit valuation adjustment on derivative contracts, the disposal of our operations in Brazil and currency translation, was primarily driven by:
|
|
|
|
• |
adverse movements on assets held as economic hedges of foreign currency debt designated at fair value of $0.3bn in 2017 compared with favourable movements of $1.6bn in 2016. These |
movements were offset by favourable movements in foreign currency debt designated at fair value in 'Net income/(expense) from financial instruments designated at fair value'; and
|
|
|
|
• |
decreases in GB&M ($0.2bn), notably in Foreign Exchange and Rates, reflecting subdued trading activity in the fourth quarter, partly offset by Credit and Equities, where we gained market share in Prime Financing. We also recorded adverse movements of $262m in credit and funding valuation adjustments compared with adverse movements of $51m in the prior year, primarily relating to movements in our own credit spread on structured liabilities. |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
Net income/(expense) from financial instruments designated at fair value |
|||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
Footnote |
$m |
|
$m |
|
$m |
|
|
Net income/(expense) arising from: |
|
|
|
|
|
|
|
|
Financial assets held to meet liabilities under insurance and investment contracts |
|
3,211 |
|
1,480 |
|
531 |
|
|
Liabilities to customers under investment contracts |
|
(375 |
) |
(218 |
) |
34 |
|
|
HSBC's long-term debt issued and related derivatives |
|
672 |
|
(3,975 |
) |
863 |
|
|
- change in own credit spread on long-term debt (significant item) |
25 |
- |
|
(1,792 |
) |
1,002 |
|
|
- other changes in fair value |
|
672 |
|
(2,183 |
) |
(139 |
) |
|
Other instruments designated at fair value and related derivatives |
|
190 |
|
47 |
|
104 |
|
|
Year ended 31 Dec |
|
3,698 |
|
(2,666 |
) |
1,532 |
|
For footnotes, see page 62.
The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances, and are managed in conjunction with interest rate swaps as part of our interest rate management strategy.
These liabilities are discussed further on page 230.
In accordance with IFRS 9 'Financial Instruments', fair value movements attributable to changes in our own credit spread on our own debt designated at fair value are now reported in other comprehensive income; by contrast, 2016 included adverse movements of $1.8bn in the fair value of our long-term debt reflecting changes in credit spread.
|
|
|||||
|
|
|
|
|
|
|
|
Significant items and currency translation |
|||||
|
|
|
2017 |
|
2016 |
|
|
|
Footnote |
$m |
|
$m |
|
|
Significant items |
|
- |
|
(1,477 |
) |
|
- own credit spread |
25 |
- |
|
(1,792 |
) |
|
- trading results from disposed-of operations in Brazil |
|
- |
|
304 |
|
|
- currency translation on significant items |
|
|
11 |
|
|
|
Currency translation |
|
|
|
(186 |
) |
|
Year ended 31 Dec |
|
- |
|
(1,663 |
) |
For footnotes, see page 62.
Net income from financial instruments designated at fair value was $3.7bn in 2017, compared with a net expense of $2.7bn in 2016. This included a net favourable movement in significant items and currency translation of $1.7bn, primarily due to the effects of adverse fair value movements attributable to changes in our own credit spread on our own debt designated at fair value of $1.8bn in 2016, now reported in other comprehensive income, as mentioned above.
The remaining movement reflected an increase in 'Other changes in fair value' on our long-term debt and related derivatives, which included:
|
|
|
|
• |
favourable movements of $0.3bn compared with adverse movements of $1.6bn in 2016 on foreign currency debt designated at fair value and issued as part of our overall funding strategy (offset in 'Net trading income' by assets held as economic hedges); and |
|
|
|
|
• |
favourable movements of $0.1bn compared with adverse movements of $0.3bn in 2016 relating to the economic hedging of interest and exchange rate risk on our long-term debt, reported in Corporate Centre. |
In addition, net income from financial assets and liabilities from insurance and investment contracts increased by $1.6bn, primarily due to improved equity market performance in Asia and Europe in 2017.
Net income arising from financial assets held to meet liabilities under insurance and investment contracts results in a corresponding movement in liabilities to customers, reflecting the extent to which they participate in the investment performance of the associated asset portfolio. These offsetting movements are recorded in 'Net income/(expense) arising from liabilities to customers under investment contracts' and 'Net insurance claims and benefits paid and movement in liabilities to policyholders'.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
37 |
Report of the Directors | Financial summary
|
|
||||||
|
|
|
|
|
|
|
|
|
Gains less losses from financial investments |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Net gains from disposal |
1,248 |
|
1,421 |
|
2,179 |
|
|
- debt securities |
403 |
|
357 |
|
345 |
|
|
- equity securities |
838 |
|
1,058 |
|
1,829 |
|
|
- other financial investments |
7 |
|
6 |
|
5 |
|
|
Impairment of available-for-sale equity securities |
(98 |
) |
(36 |
) |
(111 |
) |
|
Year ended 31 Dec |
1,150 |
|
1,385 |
|
2,068 |
|
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
434 |
|
648 |
|
|
- gain on disposal of our membership interest in Visa - Europe |
- |
|
584 |
|
|
- gain on disposal of our membership interest in Visa - US |
308 |
|
116 |
|
|
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank |
126 |
|
- |
|
|
- trading results from disposed-of operations in Brazil |
- |
|
1 |
|
|
- currency translation on significant items |
|
|
(53 |
) |
|
Currency translation |
|
|
70 |
|
|
Year ended 31 Dec |
434 |
|
718 |
|
Gains less losses from financial investments of $1.2bn decreased by $0.2bn compared with 2016. This was largely due to a decrease in gains on the disposal of equity securities $0.2bn, notably the non-recurrence of the gain on disposal of our membership interest in Visa Europe of $0.6bn in 2016. This was partly offset by higher gains on disposal resulting from the sale of our shares in Visa Inc. of $0.3bn, compared with $0.1bn in 2016. We also recorded gains on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank ('Techcombank') of $0.1bn in 2017.
In addition, the decrease in gains less losses from financial investments included higher impairments of AFS equity securities in GB&M.
These decreases were partly offset by gains on disposal of debt securities, which included higher gains on disposal of AFS assets in BSM in Corporate Centre, notably in the UK and Hong Kong.
|
|
||||||
|
|
|
|
|
|
|
|
|
Net insurance premium income |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Gross insurance premium income |
10,802 |
|
10,588 |
|
11,012 |
|
|
Reinsurance premiums |
(1,023 |
) |
(637 |
) |
(657 |
) |
|
Year ended 31 Dec |
9,779 |
|
9,951 |
|
10,355 |
|
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
- |
|
420 |
|
|
- trading results from disposed-of operations in Brazil |
- |
|
362 |
|
|
- currency translation on significant items |
|
58 |
|
|
|
Currency translation |
|
(33 |
) |
|
|
Year ended 31 Dec |
- |
|
387 |
|
Net insurance premium income was $0.2bn lower than in 2016, and included reductions due to the disposal of our operations in Brazil ($0.4bn) and minimal currency translation movements.
Excluding these, net insurance premium income increased by $0.2bn due to the following:
|
|
|
|
• |
growth in Hong Kong driven by increased gross premium income, partly offset by the effect of a new reinsurance agreement; |
|
|
|
|
• |
an increase in France, driven by higher volumes of unit-linked products. |
This was partly offset by:
|
|
|
|
• |
lower sales through third-party channels in Singapore. |
|
|
|
|
|
|
|
38 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
||||||
|
|
|
|
|
|
|
|
|
Other operating income |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Rent received |
171 |
|
157 |
|
171 |
|
|
Gains/(losses) recognised on assets held for sale |
214 |
|
(1,949 |
) |
(244 |
) |
|
Gains on investment properties |
48 |
|
4 |
|
61 |
|
|
Gain on disposal of property, plant and equipment, intangible assets and non-financial investments |
46 |
|
35 |
|
53 |
|
|
Change in present value of in-force long-term insurance business |
24 |
|
902 |
|
799 |
|
|
Other |
(166 |
) |
(120 |
) |
215 |
|
|
Year ended 31 Dec |
337 |
|
(971 |
) |
1,055 |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
Change in present value of in-force long-term insurance business |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Value of new business |
919 |
|
900 |
|
809 |
|
|
Expected return |
(599 |
) |
(532 |
) |
(552 |
) |
|
Assumption changes and experience variances |
(280 |
) |
513 |
|
504 |
|
|
Other adjustments |
(16 |
) |
21 |
|
38 |
|
|
Year ended 31 Dec |
24 |
|
902 |
|
799 |
|
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
(160 |
) |
(1,928 |
) |
|
- portfolio disposals |
(158 |
) |
(163 |
) |
|
- gain/(loss) and trading results from disposed-of operations in Brazil |
19 |
|
(1,763 |
) |
|
- investment in new businesses |
(99 |
) |
- |
|
|
- other acquisitions, disposals and dilutions |
78 |
|
- |
|
|
- currency translation on significant items |
|
|
(2 |
) |
|
Currency translation |
|
|
(14 |
) |
|
Year ended 31 Dec |
(160 |
) |
(1,942 |
) |
Other operating income was $0.3bn in 2017, compared with a net expense of $1.0bn in 2016. This was primarily due to net losses recognised on assets held for sale in 2016, most notably a loss of $1.8bn from the disposal of our operations in Brazil. This compared with gains of $0.2bn on assets held for sale in 2017, which included a gain on the sale of our holding in VocaLink in the UK, and a gain on the sale of our operations in Lebanon.
This increase was partly offset by lower favourable movements of $0.9bn in the present value of in-force ('PVIF') long-term insurance business, of which $0.8bn related to 'Assumption changes and experience variances' (for further details, please see Note 20 on the Financial Statements). This reflected:
|
|
|
|
• |
adverse movements in Hong Kong of $0.4bn, reflecting the future sharing of investment returns with policyholders; and |
|
|
|
|
• |
adverse movements in Hong Kong and Singapore of $0.4bn, reflecting adjustments offsetting the impact of regulatory-driven changes in the valuation of liabilities (the corresponding movement is recorded in 'Net insurance claims and benefits paid and movement in liabilities to policyholders'). |
These adverse movements were partly offset by favourable movements in France, due to market-driven changes in interest rate assumptions.
|
|
||||||
|
|
|
|
|
|
|
|
|
Net insurance claims and benefits paid and movement in liabilities to policyholders |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Gross |
13,208 |
|
12,508 |
|
11,872 |
|
|
Less reinsurers' share |
(877 |
) |
(638 |
) |
(580 |
) |
|
Year ended 31 Dec |
12,331 |
|
11,870 |
|
11,292 |
|
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
- |
|
627 |
|
|
- trading results from disposed-of operations in Brazil |
- |
|
538 |
|
|
- currency translation on significant items |
|
|
89 |
|
|
Currency translation |
|
|
(89 |
) |
|
Year ended 31 Dec |
- |
|
538 |
|
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
39 |
Report of the Directors | Financial summary
Net insurance claims and benefits paid and movement in liabilities to policyholders were $0.5bn higher compared with 2016, and included reductions due to the disposal of our operations in Brazil ($0.5bn).
This increase was primarily due to improved returns on financial assets supporting contracts where the policyholder shares the investment risk, reflecting improved equity market performance in Hong Kong and France compared with 2016.
In addition, movements in liabilities to policyholders were higher due to increased premium income.
These increases were partly offset by the impact of regulatory-driven changes in the valuation of liabilities in Hong Kong and Singapore (the corresponding movement is recorded in 'Assumption changes and experience variances' in PVIF).
The gains or losses recognised on the financial assets designated at fair value that are held to support these insurance contract liabilities are reported in 'Net income/(expense) from financial instruments designated at fair value' on page 37.
|
|
||||||
|
|
|
|
|
|
|
|
|
Loan impairment charges and other credit risk provisions |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
New allowances net of allowance releases |
2,636 |
|
3,977 |
|
4,400 |
|
|
Recoveries of amounts previously written off |
(644 |
) |
(627 |
) |
(808 |
) |
|
Loan impairment charges |
1,992 |
|
3,350 |
|
3,592 |
|
|
- individually assessed allowances |
1,114 |
|
1,831 |
|
1,505 |
|
|
- collectively assessed allowances |
878 |
|
1,519 |
|
2,087 |
|
|
Releases of impairment on available-for-sale debt securities |
(190 |
) |
(63 |
) |
(17 |
) |
|
Other credit risk provisions |
(33 |
) |
113 |
|
146 |
|
|
Year ended 31 Dec |
1,769 |
|
3,400 |
|
3,721 |
|
|
Impairment charges on loans and advances to customers as a percentage of average gross loans and advances to customers |
0.22% |
|
0.39% |
|
0.39% |
|
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
- |
|
867 |
|
|
- trading results from disposed-of operations in Brazil |
- |
|
748 |
|
|
- currency translation on significant items |
|
|
119 |
|
|
Currency translation |
|
|
(61 |
) |
|
Year ended 31 Dec |
- |
|
806 |
|
Loan impairment charges and other credit risk provisions ('LICs') of $1.8bn were $1.6bn or 48% lower compared with 2016. This reduction included the favourable effects of the disposal of our operations in Brazil ($0.9bn) in July 2016, which was partly offset by the impact of adverse foreign currency translation. Excluding these factors, LICs decreased by $0.8bn or 32%, driven by lower LICs in our CMB and RBWM businesses.
Individually assessed LICs of $1.1bn were $0.7bn or 39% lower compared with 2016. This included a reduction of $0.2bn following our sale of operations in Brazil.
The remaining variance arose:
|
|
|
|
• |
In CMB (down $0.5bn), notably in North America primarily against exposures in the oil and gas sector, as well as reductions in France, Spain and Singapore, as 2016 included a small number of specific charges in relation to corporate exposures. This was partly offset by higher individually assessed LICs in Hong Kong relating to a small number of customers across various sectors. |
|
|
|
|
• |
In GB&M, individually assessed LICs were broadly unchanged, with LICs in 2017 primarily related to two large corporate exposures in Europe, partly offset by a net release of allowances in the US. In 2016, individually assessed LICs included charges in the US against exposures in the oil and gas sector, as well as a single mining-related corporate client. |
Collectively assessed LICs of $0.9bn were $0.6bn or 42% lower compared with 2016. This included a reduction of $0.6bn following the sale of operations in Brazil and the adverse effects of foreign currency translation of $48m.
The remaining variance arose:
|
|
|
|
• |
In Corporate Centre (down $0.1bn), driven by the run-off of the CML portfolio in the US. |
|
|
|
|
• |
In RBWM (down $0.1bn), notably in Turkey reflecting improved credit quality and lower lending balances, and in the US and Hong Kong from improvements in credit quality. These decreases were partly offset by increased collective allowances in Mexico, reflecting growth in unsecured lending balances and an increase in delinquencies. In addition, we increased collective allowances in the UK against our mortgages and cards exposures, in part offset by a release following the sale of a portfolio of loans. LICs in the UK remain at low levels, representing approximately 10bps of the overall portfolio. |
This was partly offset:
|
|
|
|
• |
In GB&M (up $0.1bn), notably in the UK, as 2016 included net releases of collective allowances. |
|
|
|
|
• |
In CMB (up $38m), notably in Hong Kong in part due to asset growth and an increase in historical loss rates, partly offset by lower charges in the UK relating to reduced exposures in the oil and gas sector. |
In 2017, we recorded higher net releases of impairment allowances against available-for-sale debt securities ($0.2bn). These were primarily related to asset-backed securities in our legacy credit portfolio in Corporate Centre and reflected an improvement in collateral values.
A net release of other credit risk provisions of $33m in 2017 largely related to oil and gas sector exposures in the US and the construction sector in Canada. This compared with a net charge in the prior year in these markets, also related to the oil and gas sector.
|
|
|
|
|
|
|
40 |
HSBC Holdings plc Annual Report and Accounts 2017 |
Operating expenses
|
|
|
|
|
|
|
In addition to detailing operating expense items by category, as set out in the table below, we also categorise operating expenses as follows: |
|
|
• 'Run-the-bank' costs comprise business-as-usual running costs that keep operations functioning at the required quality and standard year on year, maintain IT infrastructure and support revenue growth. Run-the-bank costs are split between front office and back office, reflecting the way the Group is organised into four global businesses ('front office') supported by global functions ('back office'). • 'Change-the-bank' costs comprise expenses relating to the implementation of mandatory regulatory changes and other investment costs incurred relating to projects to change business-as-usual activity to enhance future operating capabilities. |
• 'Costs to achieve' comprise those specific costs relating to the achievement of the strategic actions set out in the Investor Update in June 2015. They comprise costs incurred between 1 July 2015 and 31 December 2017, and do not include ongoing initiatives such as Global Standards. Any costs arising within this category have been incurred as part of a significant transformation programme. Costs to achieve are included within significant items and incorporate restructuring costs that were identified as a separate significant item prior to 1 July 2015. |
|
|
||||||
|
|
|
|
|
|
|
|
|
Operating expenses |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
By expense category |
|
|
|
|||
|
Employee compensation and benefits |
17,315 |
|
18,089 |
|
19,900 |
|
|
Premises and equipment (excluding depreciation and impairment) |
3,530 |
|
3,758 |
|
3,830 |
|
|
General and administrative expenses |
12,177 |
|
12,715 |
|
13,832 |
|
|
Administrative expenses |
33,022 |
|
34,562 |
|
37,562 |
|
|
Depreciation and impairment of property, plant and equipment |
1,166 |
|
1,229 |
|
1,269 |
|
|
Amortisation and impairment of intangible assets |
696 |
|
777 |
|
937 |
|
|
Goodwill impairment |
- |
|
3,240 |
|
- |
|
|
Year ended 31 Dec |
34,884 |
|
39,808 |
|
39,768 |
|
|
|
||||
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
By expense group |
|
|
||
|
Run-the-bank - front office |
14,254 |
|
13,240 |
|
|
Run-the-bank - back office |
12,974 |
|
13,003 |
|
|
Change-the-bank |
2,996 |
|
2,919 |
|
|
Bank levy |
916 |
|
922 |
|
|
Significant items |
3,744 |
|
9,393 |
|
|
Currency translation |
|
|
331 |
|
|
Year ended 31 Dec |
34,884 |
|
39,808 |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
Staff numbers (full-time equivalents) |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
Global businesses |
|
|
|
|||
|
Retail Banking and Wealth Management |
129,402 |
|
124,810 |
|
145,868 |
|
|
Commercial Banking |
44,871 |
|
44,712 |
|
48,651 |
|
|
Global Banking and Markets |
45,725 |
|
46,659 |
|
47,894 |
|
|
Global Private Banking |
7,250 |
|
8,054 |
|
8,513 |
|
|
Corporate Centre |
1,439 |
|
10,940 |
|
4,277 |
|
|
At 31 Dec |
228,687 |
|
235,175 |
|
255,203 |
|
Reported operating expenses of $34.9bn were $4.9bn lower than in 2016. This reflected a reduction in significant items of $5.6bn which included:
|
|
|
|
• |
a $3.2bn write-off of the goodwill in our GPB business in Europe in 2016 (please see Note 20 on the Financial Statements for further details); |
|
|
|
|
• |
a net release of $0.4bn in settlements and provisions in connection with legal matters, compared with charges in 2016 of $0.7bn; |
|
|
|
|
• |
the operating expenses incurred by our Brazil business of $1.1bn in 2016; and |
|
|
|
|
• |
costs to achieve of $3.0bn, compared with $3.1bn in 2016. |
The reduction in reported operating expenses also included the favourable effects of currency translation of $0.3bn.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
41 |
Report of the Directors | Financial summary
|
|
||||
|
|
|
|
|
|
|
Significant items and currency translation |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Significant items |
3,744 |
|
9,393 |
|
|
- costs associated with portfolio disposals |
53 |
|
28 |
|
|
- costs associated with the UK's exit from the EU |
28 |
|
- |
|
|
- costs to achieve |
3,002 |
|
3,118 |
|
|
- costs to establish UK ring-fenced bank |
392 |
|
223 |
|
|
- customer redress programmes |
655 |
|
559 |
|
|
- gain on partial settlement of pension obligation |
(188 |
) |
- |
|
|
- impairment of GPB - Europe goodwill |
- |
|
3,240 |
|
|
- regulatory provisions in GPB |
164 |
|
344 |
|
|
- settlements and provisions in connection with legal matters |
(362 |
) |
681 |
|
|
- trading results from disposed-of operations in Brazil |
- |
|
1,059 |
|
|
- currency translation on significant items |
|
141 |
|
|
|
Currency translation |
|
|
331 |
|
|
Year ended 31 Dec |
3,744 |
|
9,724 |
|
Excluding the significant items and currency translation tabulated above, operating expenses of $31.1bn were $1.1bn higher than in 2016. This increase reflected investments in business growth programmes (up $0.6bn), primarily in RBWM, where investments were partly funded by the proceeds from our disposal of Visa Inc. shares, as well as higher performance-related pay (up $0.4bn). The impact of our cost-saving initiatives more than offset inflation and continued investment in regulatory programmes and compliance.
Our total investment in regulatory programmes and compliance was $3.0bn, up $0.2bn or 7% compared with 2016. This reflected the continued implementation of our Global Standards programme to enhance our financial crime risk controls and capabilities.
In 2017, we realised $2.1bn of cost savings, and achieved annualised run-rate savings of $6.1bn since our Investor Update in June 2015. We have completed our 'costs to achieve' transformation programme, incurring a total cost of $7.0bn since 2015, and continue to realise the benefits of our cost-saving initiatives:
|
|
|
|
• |
In global businesses, savings of $0.6bn reflected the impact of our branch optimisation programme enabled by our digital initiatives as well as transformation of online and mobile banking for corporates. |
|
|
|
|
• |
In Operations and Technology, savings of $1.1bn reflected migrations to lower cost locations, automation, the simplification of our IT structure and the implementation of target operating models. |
|
|
|
|
• |
In our back office functions, savings of $0.4bn were realised as a result of the re-engineering and simplification of processes and the implementation of global operating models. |
The number of employees expressed in FTEs at 31 December 2017 was 228,687, a decrease of 6,488 since 31 December 2016. This included a 18,601 reduction realised across global businesses and global functions from our transformation programme, partly offset by investment in Global Standards of 3,016 FTEs and an increase of 9,097 FTEs, in part attributable to investment for growth.
|
|
|||
|
|
|
|
|
|
Share of profit in associates and joint ventures |
|||
|
|
2017 |
2016 |
2015 |
|
|
$m |
$m |
$m |
|
Share of profit in associates |
2,349 |
2,326 |
2,518 |
|
- Bank of Communications Co., Limited |
1,863 |
1,892 |
2,011 |
|
- The Saudi British Bank |
422 |
415 |
462 |
|
- other |
64 |
19 |
45 |
|
Share of profit in joint ventures |
26 |
28 |
38 |
|
Year ended 31 Dec |
2,375 |
2,354 |
2,556 |
Our share of profit in associates and joint ventures was $2.4bn, an increase of $21m or 1% compared with 2016 and including the adverse effects of currency translation of $33m.
Excluding the effects of currency translation, our share of profit in associates and joint ventures increased by $53m, compared with 2016. This mainly comprised gains from the sale of investments held by Business Growth Fund, a joint venture with other UK banks to support small- and medium-sized enterprises ('SMEs') in the UK.
Our share of profit in our largest associate, BoCom, was $1.9bn. This was broadly unchanged from 2016 after excluding the effects of currency translation. At 31 December 2017, we performed an impairment review of our investment in BoCom and concluded that it was not impaired, based on our value in use calculation (see Note 17 on the Financial Statements for further details).
In future periods, the value in use may increase or decrease depending on the effect of changes to model inputs. It is expected that the carrying amount will increase in 2018 due to retained profits earned by BoCom. At the point where the carrying amount exceeds the value in use, HSBC will determine whether an impairment exists. If so, we would continue to recognise its share
of BoCom's profit or loss, but the carrying amount would be reduced to equal the value in use, with a corresponding reduction in income, unless the market value has increased to a level above the carrying amount.
|
|
|
|
|
|
|
42 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
||||||
|
|
|
|
|
|
|
|
|
Tax expense |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Profit before tax |
17,167 |
|
7,112 |
|
18,867 |
|
|
Tax expense |
(5,288 |
) |
(3,666 |
) |
(3,771 |
) |
|
Profit after tax for the year ended 31 Dec |
11,879 |
|
3,446 |
|
15,096 |
|
|
Effective tax rate |
30.80% |
|
51.55% |
|
19.99% |
|
The effective tax rate for 2017 of 30.8% includes a charge of $1.3bn due to the remeasurement of US deferred tax balances to reflect the reduction in the US federal tax rate from 35% to 21% from 2018. This charge increased the 2017 effective tax rate by 7.5%. The effective tax rate in 2017 was lower than the 51.6% in
2016 as 2016 included the unfavourable impact of a non-deductible goodwill write-down and loss on disposal of operations in Brazil. Further detail is provided in Note 7 on the Financial Statements.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
42 |
Report of the Directors | Financial summary
|
|
|
|
|
Consolidated balance sheet |
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five-year summary consolidated balance sheet |
|||||||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
|
|
Footnote |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Assets |
|
|
|
|
|
|
|||||
|
Cash and balances at central banks |
|
180,624 |
|
128,009 |
|
98,934 |
|
129,957 |
|
166,599 |
|
|
Trading assets |
|
287,995 |
|
235,125 |
|
224,837 |
|
304,193 |
|
303,192 |
|
|
Financial assets designated at fair value |
|
29,464 |
|
24,756 |
|
23,852 |
|
29,037 |
|
38,430 |
|
|
Derivatives |
|
219,818 |
|
290,872 |
|
288,476 |
|
345,008 |
|
282,265 |
|
|
Loans and advances to banks |
|
90,393 |
|
88,126 |
|
90,401 |
|
112,149 |
|
120,046 |
|
|
Loans and advances to customers |
26 |
962,964 |
|
861,504 |
|
924,454 |
|
974,660 |
|
992,089 |
|
|
Reverse repurchase agreements - non-trading |
|
201,553 |
|
160,974 |
|
146,255 |
|
161,713 |
|
179,690 |
|
|
Financial investments |
|
389,076 |
|
436,797 |
|
428,955 |
|
415,467 |
|
425,925 |
|
|
Other assets |
|
159,884 |
|
148,823 |
|
183,492 |
|
161,955 |
|
163,082 |
|
|
Total assets at 31 Dec |
|
2,521,771 |
|
2,374,986 |
|
2,409,656 |
|
2,634,139 |
|
2,671,318 |
|
|
Liabilities and equity |
|
|
|
|
|
|
|||||
|
Liabilities |
|
|
|
|
|
|
|||||
|
Deposits by banks |
|
69,922 |
|
59,939 |
|
54,371 |
|
77,426 |
|
86,507 |
|
|
Customer accounts |
|
1,364,462 |
|
1,272,386 |
|
1,289,586 |
|
1,350,642 |
|
1,361,297 |
|
|
Repurchase agreements - non-trading |
|
130,002 |
|
88,958 |
|
80,400 |
|
107,432 |
|
164,220 |
|
|
Trading liabilities |
|
184,361 |
|
153,691 |
|
141,614 |
|
190,572 |
|
207,025 |
|
|
Financial liabilities designated at fair value |
|
94,429 |
|
86,832 |
|
66,408 |
|
76,153 |
|
89,084 |
|
|
Derivatives |
|
216,821 |
|
279,819 |
|
281,071 |
|
340,669 |
|
274,284 |
|
|
Debt securities in issue |
|
64,546 |
|
65,915 |
|
88,949 |
|
95,947 |
|
104,080 |
|
|
Liabilities under insurance contracts |
|
85,667 |
|
75,273 |
|
69,938 |
|
73,861 |
|
74,181 |
|
|
Other liabilities |
|
113,690 |
|
109,595 |
|
139,801 |
|
121,459 |
|
120,181 |
|
|
Total liabilities at 31 Dec |
|
2,323,900 |
|
2,192,408 |
|
2,212,138 |
|
2,434,161 |
|
2,480,859 |
|
|
Equity |
|
|
|
|
|
|
|||||
|
Total shareholders' equity |
|
190,250 |
|
175,386 |
|
188,460 |
|
190,447 |
|
181,871 |
|
|
Non-controlling interests |
|
7,621 |
|
7,192 |
|
9,058 |
|
9,531 |
|
8,588 |
|
|
Total equity at 31 Dec |
|
197,871 |
|
182,578 |
|
197,518 |
|
199,978 |
|
190,459 |
|
|
Total liabilities and equity at 31 Dec |
|
2,521,771 |
|
2,374,986 |
|
2,409,656 |
|
2,634,139 |
|
2,671,318 |
|
For footnotes, see page 62.
A more detailed consolidated balance sheet is contained in the Financial Statements on page 178.
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five-year selected financial information |
|||||||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Called up share capital |
|
10,160 |
|
10,096 |
|
9,842 |
|
9,609 |
|
9,415 |
|
|
Capital resources |
27, 28 |
182,383 |
|
172,358 |
|
189,833 |
|
190,730 |
|
194,009 |
|
|
Undated subordinated loan capital |
|
1,969 |
|
1,967 |
|
2,368 |
|
2,773 |
|
2,777 |
|
|
Preferred securities and dated subordinated loan capital |
29 |
42,147 |
|
42,600 |
|
42,844 |
|
47,208 |
|
48,114 |
|
|
Risk-weighted assets |
27 |
871,337 |
|
857,181 |
|
1,102,995 |
|
1,219,765 |
|
1,092,653 |
|
|
Financial statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers as a percentage of customer accounts |
|
70.6 |
|
67.7 |
|
71.7 |
|
72.2 |
|
72.9 |
|
|
Average total shareholders' equity to average total assets |
|
7.33 |
|
7.37 |
|
7.31 |
|
7.01 |
|
6.55 |
|
|
Net asset value per ordinary share at year-end ($) |
30 |
8.35 |
|
7.91 |
|
8.73 |
|
9.28 |
|
9.27 |
|
|
Number of $0.50 ordinary shares in issue (millions) |
|
20,321 |
|
20,192 |
|
19,685 |
|
19,218 |
|
18,830 |
|
|
Closing foreign exchange translation rates to $: |
|
|
|
|
|
|
|
|
|
|
|
|
$1: £ |
|
0.740 |
|
0.811 |
|
0.675 |
|
0.642 |
|
0.605 |
|
|
$1: € |
|
0.834 |
|
0.949 |
|
0.919 |
|
0.823 |
|
0.726 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
43 |
HSBC Holdings plc Annual Report and Accounts 2017 |
Movement in 2017
Total assets of $2.5tn were 6% higher than at 31 December 2016 on a reported basis, and 1% higher on a constant currency basis.
We increased the strength of our balance sheet by targeting growth in lending, notably in Asia, where we increased balances by 14% on a constant currency basis, reflecting continued momentum from our initiatives to grow corporate lending in the region. During 2017 we also completed the run-off of our US CML portfolio.
Our ratio of customer advances to customer accounts was 71%, up from 68% at 31 December 2016, reflecting our focus on lending growth. Loans and advances increased on a reported basis by $101bn or 12%, and customer accounts increased by $92bn or 7%.
Assets
Cash and balances at central banks increased by $53bn. This included higher euro-denominated balances in continental Europe, and higher sterling balances in the UK, as we deployed our commercial surplus to maximise returns. This increase was partly offset by a reduction in the US as we redeployed our surplus to maximise returns, notably to reverse repurchase agreements - non-trading.
Trading assets increased by $53bn, notably equity securities, in the UK, reflecting higher client activity in our Equities business, and from increased debt securities in Asia.
Reverse repurchase agreements - non-trading increased by $41bn, notably in Europe and the US, driven by customer demand in our Markets business. In the US, balances also increased as we redeployed our commercial surplus to maximise returns.
Derivative assets decreased by $71bn, primarily reflecting revaluation movements, as a result of changes in yield curves and exchange rates, notably in the UK, Hong Kong and France. These movements were broadly offset by a reduction in derivative liabilities.
Financial investments decreased by $48bn. In the UK this was due to our redeployment of available-for-sale investments into cash to manage our liquidity, as well as for risk management purposes, whereas in Hong Kong this primarily reflected a managed reduction in our commercial surplus.
Loans and advances to customers increased by $101bn compared with 31 December 2016, notably in Asia and Europe. This included:
|
|
|
|
• |
favourable currency translation of $45bn, primarily affecting Europe; partly offset by |
|
|
|
|
• |
the $5bn transfer to 'Assets held for sale', and subsequent disposal, of the US first lien mortgage balance in Corporate Centre. |
Excluding these factors, customer lending balances increased by $62bn or 7%. This growth was primarily in Asia, which contributed $53bn of this increase.
In Asia, lending grew in GB&M (up $24bn) and CMB (up $16bn), particularly in Hong Kong, from increased term lending reflecting our continued focus on loan growth in the region and higher customer demand. Trade lending in Hong Kong contributed $3bn of the increase in CMB, reflecting increased market share, but it was broadly unchanged in GB&M. We also increased balances in RBWM in Asia by $11bn, primarily in mortgages in Hong Kong, where we grew our market share.
In addition, we grew lending in Europe by $10bn, notably in UK mortgages (up $8bn), reflecting our focus on broker originated mortgages. We also grew balances in CMB by $9bn, driven by higher term lending, which more than offset an $8bn fall in GB&M, notably due to a reclassification of short-term balances to reverse repurchase agreements. Balances also decreased in our Global Banking business, as a small number of customers paid down large balances, as well as a reduction in short-term lending.
Liabilities
Customer accounts increased by $92bn on a reported basis, including a favourable foreign currency translation movement of $56bn.
Excluding the effect of currency translation, customer accounts increased by $36bn, notably in RBWM which grew by $28bn. The increase was driven by Hong Kong (up $18bn), reflecting higher customer inflows from surplus liquidity in the region, and the UK (up $6bn), primarily in current accounts. We grew balances in GB&M in France ($5bn) and Germany ($2bn), from higher foreign currency corporate deposits, as we priced competitively to facilitate higher stable funding. In addition we grew CMB balances (up $8bn), notably in the UK, as we won new client mandates and increased balances with existing customers.
These increases were partly offset by a reduction in GB&M in the UK, reflecting a large deposit from 2016 being withdrawn in 2017, as well as an increase in customers who settled their asset and liability balances net, resulting in lower lending and customer accounts. Deposit balances also fell in GPB (down $6bn), partly reflecting the customer repositioning during 2017, as well as active redeployment of clients' deposits to maximise their returns.
Repurchase agreements - non-trading increased by $41bn primarily in the UK and the US, mainly driven by an increased use of repurchase agreements for funding in our Markets business.
Trading liabilities increased by $31bn, notably in the UK and France, the latter reflecting an increase in net short positions.
Derivative liabilities decreased by $63bn, which is in line with the decrease in derivative assets because the underlying risk is broadly matched.
Equity
Total shareholders' equity increased by $14.9bn or 8%. This was driven by the effects of profits generated in the period, a reduction in accumulated foreign exchange losses reflecting the appreciation of the euro and sterling against the US dollar during 2017, and the issue of convertible capital securities. These increases more than offset the effects of dividends paid to shareholders and the $3.0bn share buy-back completed during 2017.
Risk-weighted assets
Risk-weighted assets ('RWAs') were $871.3bn at 31 December 2017, an increase of $14.1bn compared with 31 December 2016. After foreign currency translation differences, RWAs reduced by $13.6bn in 2017. This reflected targeted RWA reduction initiatives of $70.8bn and improvement in asset quality of $4.6bn, less increases due to growth in asset size of $48.4bn, methodology and policy changes of $8.2bn and model updates of $6.2bn.
The RWA initiatives included:
|
|
|
|
• |
$21.3bn from the accelerated sell-down of our consumer mortgage portfolio in the US and our legacy credit book; and |
|
|
|
|
• |
$40.0bn from process improvements, exposure reductions, trade actions and refined calculations. |
Asset size movements principally represent:
|
|
|
|
• |
$40.4bn lending growth, mainly in GB&M and CMB in Asia and Europe; and |
|
|
|
|
• |
new transactions and movements in market parameters increasing counterparty credit risk and market risk by $9.0bn. |
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
44 |
Report of the Directors | Financial summary
|
|
||||
|
|
|
|
|
|
|
Customer accounts by country |
||||
|
|
2017 |
|
2016 |
|
|
|
$m |
|
$m |
|
|
Europe |
505,182 |
|
446,615 |
|
|
- UK |
401,733 |
|
361,278 |
|
|
- France |
45,833 |
|
35,996 |
|
|
- Germany |
17,355 |
|
13,925 |
|
|
- Switzerland |
7,936 |
|
9,474 |
|
|
- other |
32,325 |
|
25,942 |
|
|
Asia |
657,395 |
|
631,723 |
|
|
- Hong Kong |
477,104 |
|
461,626 |
|
|
- mainland China |
45,991 |
|
46,576 |
|
|
- Singapore |
41,144 |
|
39,062 |
|
|
- Australia |
20,212 |
|
18,030 |
|
|
- Malaysia |
14,027 |
|
12,904 |
|
|
- Taiwan |
13,459 |
|
11,731 |
|
|
- India |
13,228 |
|
11,289 |
|
|
- Indonesia |
4,211 |
|
5,092 |
|
|
- other |
28,019 |
|
25,413 |
|
|
Middle East and North Africa (excluding Saudi Arabia) |
34,658 |
|
34,766 |
|
|
- United Arab Emirates |
16,602 |
|
16,532 |
|
|
- Turkey |
3,772 |
|
4,122 |
|
|
- Egypt |
3,912 |
|
3,790 |
|
|
- other |
10,372 |
|
10,322 |
|
|
North America |
143,432 |
|
138,790 |
|
|
- US |
89,887 |
|
88,751 |
|
|
- Canada |
45,510 |
|
42,096 |
|
|
- other |
8,035 |
|
7,943 |
|
|
Latin America |
23,795 |
|
20,492 |
|
|
- Mexico |
17,809 |
|
14,423 |
|
|
- other |
5,986 |
|
6,069 |
|
|
At 31 Dec |
1,364,462 |
|
1,272,386 |
|
|
|
|
|
|
|
|
45 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|
|
|
|
|
Global businesses and geographical regions |
|
|
|
Page |
|
Analysis of adjusted results by global business |
|
|
Reconciliation of reported and adjusted items |
|
|
Reconciliation of reported and adjusted items - global businesses
|
|
|
Supplementary tables for RBWM and GPB |
|
|
Analysis of reported results by geographical regions |
|
|
Reconciliation of reported and adjusted items - geographical regions |
|
|
Analysis of reported results by country |
|
|
|
|
|
|
Summary |
The Group Chief Executive and the rest of the Group Management Board ('GMB') review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating segments'.
|
|
|
|
|
Basis of preparation The Group Chief Executive, supported by the rest of the GMB, is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments. Analysis by global business is considered more prominent than the geographical region view in the way the CODM assesses performance and allocates resources. The global businesses are therefore considered our reportable segments under IFRS 8. |
|
|
|
|
|
Global business results are assessed by the CODM on the basis of adjusted performance that removes the effects of significant items and currency translation from reported results. We therefore present these results on an adjusted basis as required by IFRSs. The 2016 and 2015 adjusted performance information is presented on a constant currency basis as described on page 32. As required by IFRS 8, reconciliations of the total adjusted global business results to the Group reported results are presented on page 46. Supplementary reconciliations from reported to adjusted results by global business are presented on pages 49 to 51 for information purposes. Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to operational business lines and geographical regions. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs which are not allocated to global businesses are included in the Corporate Centre. Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-Group elimination items for the global businesses are presented in the Corporate Centre. The expense of the UK bank levy is included in the Europe geographical region as HSBC regards the levy as a cost of being headquartered in the UK. For the purposes of the presentation by global business, the cost of the levy is included in the Corporate Centre. The results of geographical regions are presented on a reported basis. Geographical information is classified by the location of the principal operations of the subsidiary or, for The Hongkong and Shanghai Banking Corporation, HSBC Bank plc, HSBC Bank Middle East and HSBC Bank USA, by the location of the branch responsible for reporting the results or providing funding. |
A description of the global businesses is provided in the Strategic Report, pages 3 and 18 to 21.
|
|
|
|
|
Analysis of adjusted results by global business |
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HSBC adjusted profit before tax and balance sheet data |
|||||||||||||
|
|
|
2017 |
|||||||||||
|
|
|
Retail |
|
Commercial |
|
Global |
|
Global |
|
Corporate Centre |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Net interest income/(expense) |
|
13,959 |
|
9,062 |
|
4,886 |
|
816 |
|
(439 |
) |
28,284 |
|
|
Net fee income/(expense) |
|
5,156 |
|
3,518 |
|
3,489 |
|
704 |
|
(56 |
) |
12,811 |
|
|
Net trading income |
31 |
453 |
|
539 |
|
5,995 |
|
170 |
|
807 |
|
7,964 |
|
|
Other income |
33 |
719 |
|
104 |
|
721 |
|
13 |
|
908 |
|
2,465 |
|
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
20,287 |
|
13,223 |
|
15,091 |
|
1,703 |
|
1,220 |
|
51,524 |
|
|
- external |
|
17,040 |
|
13,383 |
|
16,378 |
|
1,438 |
|
3,285 |
|
51,524 |
|
|
- inter-segment |
|
3,247 |
|
(160 |
) |
(1,287 |
) |
265 |
|
(2,065 |
) |
- |
|
|
Loan impairment (charges)/recoveries and other credit risk provisions |
|
(980 |
) |
(496 |
) |
(459 |
) |
(16 |
) |
182 |
|
(1,769 |
) |
|
Net operating income |
|
19,307 |
|
12,727 |
|
14,632 |
|
1,687 |
|
1,402 |
|
49,755 |
|
|
Total operating expenses |
|
(12,847 |
) |
(5,947 |
) |
(8,858 |
) |
(1,391 |
) |
(2,097 |
) |
(31,140 |
) |
|
Operating profit/(loss) |
|
6,460 |
|
6,780 |
|
5,774 |
|
296 |
|
(695 |
) |
18,615 |
|
|
Share of profit in associates and joint ventures |
|
18 |
|
- |
|
- |
|
- |
|
2,357 |
|
2,375 |
|
|
Adjusted profit before tax |
|
6,478 |
|
6,780 |
|
5,774 |
|
296 |
|
1,662 |
|
20,990 |
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
Share of HSBC's adjusted profit before tax |
|
30.9 |
|
32.3 |
|
27.5 |
|
1.4 |
|
7.9 |
|
100.0 |
|
|
Adjusted cost efficiency ratio |
|
63.3 |
|
45.0 |
|
58.7 |
|
81.7 |
|
171.9 |
|
60.4 |
|
|
Adjusted balance sheet data |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
|
346,148 |
|
316,533 |
|
252,474 |
|
40,326 |
|
7,483 |
|
962,964 |
|
|
Interests in associates and joint ventures |
|
366 |
|
- |
|
- |
|
- |
|
22,378 |
|
22,744 |
|
|
Total external assets |
|
468,281 |
|
348,243 |
|
980,485 |
|
45,745 |
|
679,017 |
|
2,521,771 |
|
|
Customer accounts |
|
639,592 |
|
362,908 |
|
283,943 |
|
66,512 |
|
11,507 |
|
1,364,462 |
|
|
Adjusted risk-weighted assets |
34 |
121,466 |
|
300,995 |
|
299,272 |
|
16,036 |
|
130,848 |
|
868,617 |
|
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
46 |
Report of the Directors | Global businesses
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HSBC adjusted profit before tax and balance sheet data (continued) |
|||||||||||||
|
|
|
2016 |
|||||||||||
|
|
|
Retail
Banking |
|
Commercial |
|
Global |
|
Global |
|
Corporate Centre |
|
Total |
|
|
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Net interest income |
|
12,919 |
|
8,491 |
|
4,798 |
|
801 |
|
1,170 |
|
28,179 |
|
|
Net fee income/(expense) |
|
4,756 |
|
3,559 |
|
3,394 |
|
749 |
|
(63 |
) |
12,395 |
|
|
Net trading income |
31 |
426 |
|
442 |
|
6,231 |
|
183 |
|
2,426 |
|
9,708 |
|
|
Other income/(expense) |
33 |
441 |
|
127 |
|
292 |
|
15 |
|
(1,867 |
) |
(992 |
) |
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
18,542 |
|
12,619 |
|
14,715 |
|
1,748 |
|
1,666 |
|
49,290 |
|
|
- external |
|
16,052 |
|
12,641 |
|
17,412 |
|
1,487 |
|
1,698 |
|
49,290 |
|
|
- inter-segment |
|
2,490 |
|
(22 |
) |
(2,697 |
) |
261 |
|
(32 |
) |
- |
|
|
Loan impairment charges and other credit risk provisions |
|
(1,142 |
) |
(969 |
) |
(461 |
) |
- |
|
(22 |
) |
(2,594 |
) |
|
Net operating income |
|
17,400 |
|
11,650 |
|
14,254 |
|
1,748 |
|
1,644 |
|
46,696 |
|
|
Total operating expenses |
|
(12,184 |
) |
(5,746 |
) |
(8,745 |
) |
(1,476 |
) |
(1,933 |
) |
(30,084 |
) |
|
Operating profit/(loss) |
|
5,216 |
|
5,904 |
|
5,509 |
|
272 |
|
(289 |
) |
16,612 |
|
|
Share of profit in associates and joint ventures |
|
20 |
|
- |
|
- |
|
- |
|
2,302 |
|
2,322 |
|
|
Adjusted profit before tax |
|
5,236 |
|
5,904 |
|
5,509 |
|
272 |
|
2,013 |
|
18,934 |
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
Share of HSBC's adjusted profit before tax |
|
27.7 |
|
31.2 |
|
29.1 |
|
1.4 |
|
10.6 |
|
100.0 |
|
|
Adjusted cost efficiency ratio |
|
65.7 |
|
45.5 |
|
59.4 |
|
84.4 |
|
116.0 |
|
61.0 |
|
|
Adjusted balance sheet data |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
|
323,986 |
|
294,952 |
|
237,655 |
|
36,972 |
|
12,494 |
|
906,059 |
|
|
Interests in associates and joint ventures |
|
394 |
|
- |
|
- |
|
- |
|
20,340 |
|
20,734 |
|
|
Total external assets |
|
435,839 |
|
320,173 |
|
981,893 |
|
43,234 |
|
708,320 |
|
2,489,459 |
|
|
Customer accounts |
|
611,846 |
|
356,885 |
|
272,159 |
|
72,730 |
|
15,037 |
|
1,328,657 |
|
|
Adjusted risk-weighted assets |
34 |
114,683 |
|
286,912 |
|
307,736 |
|
15,649 |
|
153,324 |
|
878,304 |
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|||||||||||
|
Net interest income |
|
12,299 |
|
8,287 |
|
4,422 |
|
819 |
|
2,167 |
|
27,994 |
|
|
Net fee income/(expense) |
|
5,446 |
|
3,672 |
|
3,514 |
|
939 |
|
(121 |
) |
13,450 |
|
|
Net trading income |
31 |
427 |
|
460 |
|
5,960 |
|
206 |
|
721 |
|
7,774 |
|
|
Other income |
33 |
666 |
|
88 |
|
382 |
|
2 |
|
66 |
|
1,204 |
|
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
18,838 |
|
12,507 |
|
14,278 |
|
1,966 |
|
2,833 |
|
50,422 |
|
|
- external |
|
16,451 |
|
12,585 |
|
16,633 |
|
1,689 |
|
3,064 |
|
50,422 |
|
|
- inter-segment |
|
2,387 |
|
(78 |
) |
(2,355 |
) |
277 |
|
(231 |
) |
- |
|
|
Loan impairment charges and other credit risk provisions |
|
(1,023 |
) |
(1,447 |
) |
(71 |
) |
(11 |
) |
(27 |
) |
(2,579 |
) |
|
Net operating income |
|
17,815 |
|
11,060 |
|
14,207 |
|
1,955 |
|
2,806 |
|
47,843 |
|
|
Total operating expenses |
|
(12,332 |
) |
(5,826 |
) |
(8,903 |
) |
(1,582 |
) |
(2,814 |
) |
(31,457 |
) |
|
Operating profit/(loss) |
|
5,483 |
|
5,234 |
|
5,304 |
|
373 |
|
(8 |
) |
16,386 |
|
|
Share of profit/(loss) in associates and joint ventures |
|
23 |
|
- |
|
(1 |
) |
- |
|
2,387 |
|
2,409 |
|
|
Adjusted profit before tax |
|
5,506 |
|
5,234 |
|
5,303 |
|
373 |
|
2,379 |
|
18,795 |
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
Share of HSBC's adjusted profit before tax |
|
29.3 |
|
27.8 |
|
28.2 |
|
2.0 |
|
12.7 |
|
100.0 |
|
|
Adjusted cost efficiency ratio |
|
65.5 |
|
46.6 |
|
62.4 |
|
80.5 |
|
99.3 |
|
62.4 |
|
|
Adjusted balance sheet data |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
|
313,927 |
|
281,826 |
|
243,662 |
|
42,592 |
|
23,690 |
|
905,697 |
|
|
Interests in associates and joint ventures |
|
391 |
|
- |
|
- |
|
- |
|
18,673 |
|
19,064 |
|
|
Total external assets |
|
422,322 |
|
309,266 |
|
886,750 |
|
51,190 |
|
651,847 |
|
2,321,378 |
|
|
Customer accounts |
|
569,183 |
|
341,717 |
|
256,374 |
|
80,442 |
|
13,956 |
|
1,261,672 |
|
|
Adjusted risk-weighted assets |
34 |
116,047 |
|
282,149 |
|
318,818 |
|
17,661 |
|
313,100 |
|
1,047,775 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
47 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|
|
|
Reconciliation of reported and adjusted items |
(Audited)
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results reconciliation |
|||||||||||||||||||||||
|
|
|
2017 |
2016 |
2015 |
|||||||||||||||||||
|
|
|
Adjusted |
|
Significant items |
|
Reported |
|
Adjusted |
|
Currency translation |
|
Significant items |
|
Reported |
|
Adjusted |
|
Currency translation |
|
Significant items |
|
Reported |
|
|
|
Footnote |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
51,524 |
|
(79 |
) |
51,445 |
|
49,290 |
|
736 |
|
(2,060 |
) |
47,966 |
|
50,422 |
|
3,727 |
|
5,651 |
|
59,800 |
|
|
LICs |
|
(1,769 |
) |
- |
|
(1,769 |
) |
(2,594 |
) |
61 |
|
(867 |
) |
(3,400 |
) |
(2,579 |
) |
(127 |
) |
(1,015 |
) |
(3,721 |
) |
|
Operating expenses |
|
(31,140 |
) |
(3,744 |
) |
(34,884 |
) |
(30,084 |
) |
(331 |
) |
(9,393 |
) |
(39,808 |
) |
(31,457 |
) |
(2,434 |
) |
(5,877 |
) |
(39,768 |
) |
|
Share of profit in associates and joint ventures |
|
2,375 |
|
- |
|
2,375 |
|
2,322 |
|
33 |
|
(1 |
) |
2,354 |
|
2,409 |
|
149 |
|
(2 |
) |
2,556 |
|
|
Profit/(loss) before tax |
|
20,990 |
|
(3,823 |
) |
17,167 |
|
18,934 |
|
499 |
|
(12,321 |
) |
7,112 |
|
18,795 |
|
1,315 |
|
(1,243 |
) |
18,867 |
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance sheet reconciliation |
||||||||||||||||
|
|
2017 |
2016 |
2015 |
|||||||||||||
|
|
Reported and Adjusted |
|
Adjusted |
|
Currency translation |
|
Reported |
|
Adjusted |
|
Currency translation |
|
Brazil operations1 |
|
Reported |
|
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
962,964 |
|
906,059 |
|
(44,555 |
) |
861,504 |
|
905,697 |
|
18,757 |
|
- |
|
924,454 |
|
|
Interests in associates and joint ventures |
22,744 |
|
20,734 |
|
(705 |
) |
20,029 |
|
19,064 |
|
75 |
|
- |
|
19,139 |
|
|
Total external assets |
2,521,771 |
|
2,489,459 |
|
(114,473 |
) |
2,374,986 |
|
2,321,378 |
|
39,164 |
|
49,114 |
|
2,409,656 |
|
|
Customer accounts
|
1,364,462 |
|
1,328,657 |
|
(56,271 |
) |
1,272,386 |
|
1,261,672 |
|
27,914 |
|
- |
|
1,289,586 |
|
|
|
|
|
1 |
Includes effects of foreign currency translation. |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
Adjusted profit reconciliation |
|||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
|
For the year ended 31 Dec |
|
|
|
|
|||
|
Adjusted profit before tax |
|
20,990 |
|
18,934 |
|
18,795 |
|
|
Significant items |
|
(3,823 |
) |
(12,321 |
) |
(1,243 |
) |
|
- customer redress programmes (revenue) |
|
(108 |
) |
2 |
|
(10 |
) |
|
- DVA on derivative contracts |
|
(373 |
) |
26 |
|
230 |
|
|
- fair value movements on non-qualifying hedges |
32 |
128 |
|
(687 |
) |
(327 |
) |
|
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank |
|
126 |
|
- |
|
- |
|
|
- gain on disposal of our membership interest in Visa - Europe |
|
- |
|
584 |
|
- |
|
|
- gain on disposal of our membership interest in Visa - US |
|
308 |
|
116 |
|
- |
|
|
- gain on the partial sale of shareholding in Industrial Bank |
|
- |
|
- |
|
1,372 |
|
|
- gain/(loss) and trading results from disposed-of operations in Brazil |
|
19 |
|
(2,081 |
) |
(13 |
) |
|
- investment in new businesses |
|
(99 |
) |
- |
|
- |
|
|
- other acquisitions, disposals and dilutions |
|
78 |
|
- |
|
- |
|
|
- own credit spread |
25 |
- |
|
(1,792 |
) |
1,002 |
|
|
- portfolio disposals |
|
(158 |
) |
(163 |
) |
(214 |
) |
|
- costs associated with portfolio disposals |
|
(53 |
) |
(28 |
) |
- |
|
|
- costs associated with the UK's exit from the EU |
|
(28 |
) |
- |
|
- |
|
|
- costs to achieve |
|
(3,002 |
) |
(3,118 |
) |
(908 |
) |
|
- costs to establish UK ring-fenced bank |
|
(392 |
) |
(223 |
) |
(89 |
) |
|
- customer redress programmes (operating expenses) |
|
(655 |
) |
(559 |
) |
(541 |
) |
|
- gain on partial settlement of pension obligation |
|
188 |
|
- |
|
- |
|
|
- impairment of GPB - Europe goodwill |
|
- |
|
(3,240 |
) |
- |
|
|
- regulatory provisions in GPB |
|
(164 |
) |
(344 |
) |
(172 |
) |
|
- restructuring and other related costs |
|
- |
|
- |
|
(117 |
) |
|
- settlements and provisions in connection with legal matters |
|
362 |
|
(681 |
) |
(1,649 |
) |
|
- currency translation on significant items |
|
|
|
(133 |
) |
193 |
|
|
Currency translation |
|
|
|
499 |
|
1,315 |
|
|
Reported profit before tax |
|
17,167 |
|
7,112 |
|
18,867 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
48 |
Report of the Directors | Global businesses
|
|
|
|
|
Reconciliation of reported and adjusted items - global businesses |
Supplementary unaudited analysis of significant items by global business is presented below.
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted items |
|||||||||||||
|
|
|
2017 |
|||||||||||
|
|
|
Retail |
|
Commercial |
|
Global |
|
Global |
|
Corporate Centre |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
20,519 |
|
13,120 |
|
14,617 |
|
1,723 |
|
1,466 |
|
51,445 |
|
|
Significant items |
|
(232 |
) |
103 |
|
474 |
|
(20 |
) |
(246 |
) |
79 |
|
|
- customer redress programmes |
|
3 |
|
103 |
|
2 |
|
- |
|
- |
|
108 |
|
|
- DVA on derivative contracts |
|
- |
|
- |
|
373 |
|
- |
|
- |
|
373 |
|
|
- fair value movements on non-qualifying hedges |
32 |
- |
|
- |
|
- |
|
- |
|
(128 |
) |
(128 |
) |
|
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank |
|
- |
|
- |
|
- |
|
- |
|
(126 |
) |
(126 |
) |
|
- gain on disposal of our membership interest in Visa - US |
|
(308 |
) |
- |
|
- |
|
- |
|
- |
|
(308 |
) |
|
- investment in new businesses |
|
- |
|
- |
|
99 |
|
- |
|
- |
|
99 |
|
|
- portfolio disposals |
|
73 |
|
- |
|
- |
|
(20 |
) |
105 |
|
158 |
|
|
- gain on disposal of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
(19 |
) |
(19 |
) |
|
- other acquisitions, disposal and dilutions |
|
- |
|
- |
|
- |
|
- |
|
(78 |
) |
(78 |
) |
|
Adjusted |
|
20,287 |
|
13,223 |
|
15,091 |
|
1,703 |
|
1,220 |
|
51,524 |
|
|
Loan impairment charge and other credit risk provisions ('LICs') |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(980 |
) |
(496 |
) |
(459 |
) |
(16 |
) |
182 |
|
(1,769 |
) |
|
Adjusted |
|
(980 |
) |
(496 |
) |
(459 |
) |
(16 |
) |
182 |
|
(1,769 |
) |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(13,734 |
) |
(6,001 |
) |
(8,723 |
) |
(1,586 |
) |
(4,840 |
) |
(34,884 |
) |
|
Significant items |
|
887 |
|
54 |
|
(135 |
) |
195 |
|
2,743 |
|
3,744 |
|
|
- costs associated with portfolio disposals |
|
- |
|
- |
|
- |
|
31 |
|
22 |
|
53 |
|
|
- costs associated with the UK's exit from the EU |
|
- |
|
1 |
|
8 |
|
- |
|
19 |
|
28 |
|
|
- costs to achieve |
|
270 |
|
44 |
|
240 |
|
3 |
|
2,445 |
|
3,002 |
|
|
- costs to establish UK ring-fenced bank |
|
6 |
|
2 |
|
- |
|
- |
|
384 |
|
392 |
|
|
- customer redress programmes |
|
637 |
|
16 |
|
2 |
|
- |
|
- |
|
655 |
|
|
- gain on partial settlement of pension obligation |
|
(26 |
) |
(9 |
) |
(9 |
) |
(3 |
) |
(141 |
) |
(188 |
) |
|
- regulatory provisions in GPB |
|
- |
|
- |
|
- |
|
164 |
|
- |
|
164 |
|
|
- settlements and provisions in connection with legal matters |
|
- |
|
- |
|
(376 |
) |
- |
|
14 |
|
(362 |
) |
|
Adjusted |
|
(12,847 |
) |
(5,947 |
) |
(8,858 |
) |
(1,391 |
) |
(2,097 |
) |
(31,140 |
) |
|
Share of profit in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
18 |
|
- |
|
- |
|
- |
|
2,357 |
|
2,375 |
|
|
Adjusted |
|
18 |
|
- |
|
- |
|
- |
|
2,357 |
|
2,375 |
|
|
Profit/(loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
5,823 |
|
6,623 |
|
5,435 |
|
121 |
|
(835 |
) |
17,167 |
|
|
Significant items |
|
655 |
|
157 |
|
339 |
|
175 |
|
2,497 |
|
3,823 |
|
|
- revenue |
|
(232 |
) |
103 |
|
474 |
|
(20 |
) |
(246 |
) |
79 |
|
|
- operating expenses |
|
887 |
|
54 |
|
(135 |
) |
195 |
|
2,743 |
|
3,744 |
|
|
Adjusted |
|
6,478 |
|
6,780 |
|
5,774 |
|
296 |
|
1,662 |
|
20,990 |
|
|
|
|
|
|
|
|
49 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted items (continued) |
|||||||||||||
|
|
|
2016 |
|||||||||||
|
|
|
Retail |
|
Commercial |
|
Global |
|
Global |
|
Corporate Centre |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
20,338 |
|
13,405 |
|
15,213 |
|
1,745 |
|
(2,735 |
) |
47,966 |
|
|
Currency translation |
|
(257 |
) |
(242 |
) |
(182 |
) |
(7 |
) |
(48 |
) |
(736 |
) |
|
Significant items |
|
(1,539 |
) |
(544 |
) |
(316 |
) |
10 |
|
4,449 |
|
2,060 |
|
|
- customer redress programmes |
|
- |
|
- |
|
- |
|
(2 |
) |
- |
|
(2 |
) |
|
- DVA on derivative contracts |
|
- |
|
- |
|
(26 |
) |
- |
|
- |
|
(26 |
) |
|
- fair value movements on non-qualifying hedges |
32 |
- |
|
- |
|
- |
|
- |
|
687 |
|
687 |
|
|
- gain on disposal of our membership interest in |
|
(354 |
) |
(230 |
) |
- |
|
- |
|
- |
|
(584 |
) |
|
- gain on disposal of our membership interest in |
|
(72 |
) |
- |
|
- |
|
- |
|
(44 |
) |
(116 |
) |
|
- own credit spread |
25 |
- |
|
- |
|
- |
|
- |
|
1,792 |
|
1,792 |
|
|
- portfolio disposals |
|
- |
|
- |
|
- |
|
26 |
|
137 |
|
163 |
|
|
- loss and trading results from disposed-of operations in Brazil |
|
(987 |
) |
(288 |
) |
(268 |
) |
(12 |
) |
1,828 |
|
273 |
|
|
- currency translation on significant items |
|
(126 |
) |
(26 |
) |
(22 |
) |
(2 |
) |
49 |
|
(127 |
) |
|
Adjusted |
|
18,542 |
|
12,619 |
|
14,715 |
|
1,748 |
|
1,666 |
|
49,290 |
|
|
LICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(1,633 |
) |
(1,272 |
) |
(471 |
) |
1 |
|
(25 |
) |
(3,400 |
) |
|
Currency translation |
|
(45 |
) |
(12 |
) |
(6 |
) |
(1 |
) |
3 |
|
(61 |
) |
|
Significant items |
|
536 |
|
315 |
|
16 |
|
- |
|
- |
|
867 |
|
|
- trading results from disposed-of operations in Brazil |
|
462 |
|
272 |
|
14 |
|
- |
|
- |
|
748 |
|
|
- currency translation on significant items |
|
74 |
|
43 |
|
2 |
|
- |
|
- |
|
119 |
|
|
Adjusted |
|
(1,142 |
) |
(969 |
) |
(461 |
) |
- |
|
(22 |
) |
(2,594 |
) |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(14,138 |
) |
(6,087 |
) |
(9,302 |
) |
(5,074 |
) |
(5,207 |
) |
(39,808 |
) |
|
Currency translation |
|
133 |
|
69 |
|
125 |
|
(8 |
) |
12 |
|
331 |
|
|
Significant items |
|
1,821 |
|
272 |
|
432 |
|
3,606 |
|
3,262 |
|
9,393 |
|
|
- costs associated with portfolio disposals |
|
- |
|
- |
|
- |
|
10 |
|
18 |
|
28 |
|
|
- costs to achieve |
|
393 |
|
62 |
|
233 |
|
6 |
|
2,424 |
|
3,118 |
|
|
- costs to establish UK ring-fenced bank |
|
2 |
|
1 |
|
- |
|
- |
|
220 |
|
223 |
|
|
- customer redress programmes |
|
497 |
|
34 |
|
28 |
|
- |
|
- |
|
559 |
|
|
- impairment of GPB - Europe goodwill |
|
- |
|
- |
|
- |
|
3,240 |
|
- |
|
3,240 |
|
|
- regulatory provisions in GPB |
|
- |
|
- |
|
- |
|
341 |
|
3 |
|
344 |
|
|
- settlements and provisions in connection with legal matters |
|
- |
|
- |
|
94 |
|
- |
|
587 |
|
681 |
|
|
- trading results from disposed-of operations in Brazil |
|
805 |
|
155 |
|
82 |
|
8 |
|
9 |
|
1,059 |
|
|
- currency translation on significant items |
|
124 |
|
20 |
|
(5 |
) |
1 |
|
1 |
|
141 |
|
|
Adjusted |
|
(12,184 |
) |
(5,746 |
) |
(8,745 |
) |
(1,476 |
) |
(1,933 |
) |
(30,084 |
) |
|
Share of profit in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
20 |
|
- |
|
- |
|
- |
|
2,334 |
|
2,354 |
|
|
Currency translation |
|
- |
|
- |
|
- |
|
- |
|
(33 |
) |
(33 |
) |
|
Significant items |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
- currency translation on significant items |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Adjusted |
|
20 |
|
- |
|
- |
|
- |
|
2,302 |
|
2,322 |
|
|
Profit/(loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
4,587 |
|
6,046 |
|
5,440 |
|
(3,328 |
) |
(5,633 |
) |
7,112 |
|
|
Currency translation |
|
(169 |
) |
(185 |
) |
(63 |
) |
(16 |
) |
(66 |
) |
(499 |
) |
|
Significant items |
|
818 |
|
43 |
|
132 |
|
3,616 |
|
7,712 |
|
12,321 |
|
|
- revenue |
|
(1,539 |
) |
(544 |
) |
(316 |
) |
10 |
|
4,449 |
|
2,060 |
|
|
- LICs |
|
536 |
|
315 |
|
16 |
|
- |
|
- |
|
867 |
|
|
- operating expenses |
|
1,821 |
|
272 |
|
432 |
|
3,606 |
|
3,262 |
|
9,393 |
|
|
- share of profit in associates and joint ventures |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
Adjusted |
|
5,236 |
|
5,904 |
|
5,509 |
|
272 |
|
2,013 |
|
18,934 |
|
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
50 |
Report of the Directors | Global businesses
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted items (continued) |
|||||||||||||
|
|
|
2015 |
|||||||||||
|
|
|
Retail |
|
Commercial |
|
Global |
|
Global |
|
Corporate Centre |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
22,624 |
|
14,198 |
|
15,972 |
|
2,076 |
|
4,930 |
|
59,800 |
|
|
Currency translation |
|
(1,486 |
) |
(969 |
) |
(984 |
) |
(55 |
) |
(233 |
) |
(3,727 |
) |
|
Significant items |
|
(2,300 |
) |
(722 |
) |
(710 |
) |
(55 |
) |
(1,864 |
) |
(5,651 |
) |
|
- customer redress programmes |
|
22 |
|
18 |
|
- |
|
(30 |
) |
- |
|
10 |
|
|
- DVA on derivative contracts |
|
- |
|
- |
|
(230 |
) |
- |
|
- |
|
(230 |
) |
|
- fair value movements on non-qualifying hedges |
32 |
- |
|
- |
|
- |
|
- |
|
327 |
|
327 |
|
|
- gain on the partial sale of shareholding in Industrial |
|
- |
|
- |
|
- |
|
- |
|
(1,372 |
) |
(1,372 |
) |
|
- own credit spread |
25 |
- |
|
- |
|
- |
|
- |
|
(1,002 |
) |
(1,002 |
) |
|
- portfolio disposals |
|
- |
|
- |
|
- |
|
- |
|
214 |
|
214 |
|
|
- trading results from disposed-of operations in Brazil |
|
(2,239 |
) |
(712 |
) |
(483 |
) |
(29 |
) |
(69 |
) |
(3,532 |
) |
|
- currency translation on significant items |
|
(83 |
) |
(28 |
) |
3 |
|
4 |
|
38 |
|
(66 |
) |
|
Adjusted |
|
18,838 |
|
12,507 |
|
14,278 |
|
1,966 |
|
2,833 |
|
50,422 |
|
|
LICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(1,878 |
) |
(1,761 |
) |
(47 |
) |
(13 |
) |
(22 |
) |
(3,721 |
) |
|
Currency translation |
|
82 |
|
40 |
|
8 |
|
2 |
|
(5 |
) |
127 |
|
|
Significant items |
|
773 |
|
274 |
|
(32 |
) |
- |
|
- |
|
1,015 |
|
|
- trading results from disposed-of operations in Brazil |
|
731 |
|
262 |
|
(28 |
) |
- |
|
- |
|
965 |
|
|
- currency translation on significant items |
|
42 |
|
12 |
|
(4 |
) |
- |
|
- |
|
50 |
|
|
Adjusted |
|
(1,023 |
) |
(1,447 |
) |
(71 |
) |
(11 |
) |
(27 |
) |
(2,579 |
) |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(15,970 |
) |
(6,852 |
) |
(10,767 |
) |
(1,840 |
) |
(4,339 |
) |
(39,768 |
) |
|
Currency translation |
|
1,119 |
|
403 |
|
768 |
|
29 |
|
115 |
|
2,434 |
|
|
Significant items |
|
2,519 |
|
623 |
|
1,096 |
|
229 |
|
1,410 |
|
5,877 |
|
|
- costs to achieve |
|
153 |
|
163 |
|
69 |
|
16 |
|
507 |
|
908 |
|
|
- costs to establish UK ring-fenced bank |
|
- |
|
- |
|
- |
|
- |
|
89 |
|
89 |
|
|
- customer redress programmes |
|
541 |
|
18 |
|
(19 |
) |
- |
|
1 |
|
541 |
|
|
- regulatory provisions in GPB |
|
- |
|
- |
|
- |
|
171 |
|
1 |
|
172 |
|
|
- restructuring and other related costs |
|
9 |
|
5 |
|
22 |
|
18 |
|
63 |
|
117 |
|
|
- settlements and provisions in connection with legal matters |
|
- |
|
- |
|
949 |
|
- |
|
700 |
|
1,649 |
|
|
- trading results from disposed-of operations in Brazil |
|
1,822 |
|
434 |
|
222 |
|
23 |
|
78 |
|
2,579 |
|
|
- currency translation on significant items |
|
(6 |
) |
3 |
|
(147 |
) |
1 |
|
(29 |
) |
(178 |
) |
|
Adjusted |
|
(12,332 |
) |
(5,826 |
) |
(8,903 |
) |
(1,582 |
) |
(2,814 |
) |
(31,457 |
) |
|
Share of profit in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
23 |
|
- |
|
- |
|
- |
|
2,533 |
|
2,556 |
|
|
Currency translation |
|
- |
|
- |
|
(1 |
) |
- |
|
(148 |
) |
(149 |
) |
|
Significant items |
|
- |
|
- |
|
- |
|
- |
|
2 |
|
2 |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
- currency translation on significant items |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
|
Adjusted |
|
23 |
|
- |
|
(1 |
) |
- |
|
2,387 |
|
2,409 |
|
|
Profit/(loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
4,799 |
|
5,585 |
|
5,158 |
|
223 |
|
3,102 |
|
18,867 |
|
|
Currency translation |
|
(285 |
) |
(526 |
) |
(209 |
) |
(24 |
) |
(271 |
) |
(1,315 |
) |
|
Significant items |
|
992 |
|
175 |
|
354 |
|
174 |
|
(452 |
) |
1,243 |
|
|
- revenue |
|
(2,300 |
) |
(722 |
) |
(710 |
) |
(55 |
) |
(1,864 |
) |
(5,651 |
) |
|
- LICs |
|
773 |
|
274 |
|
(32 |
) |
- |
|
- |
|
1,015 |
|
|
- operating expenses |
|
2,519 |
|
623 |
|
1,096 |
|
229 |
|
1,410 |
|
5,877 |
|
|
- share of profit in associates and joint ventures |
|
- |
|
- |
|
- |
|
- |
|
2 |
|
2 |
|
|
Adjusted |
|
5,506 |
|
5,234 |
|
5,303 |
|
373 |
|
2,379 |
|
18,795 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
51 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted risk-weighted assets |
||||||||||||
|
|
At 31 Dec 2017
|
|||||||||||
|
|
Retail Banking and
Wealth |
|
Commercial |
|
Global |
|
Global Private |
|
Corporate Centre |
|
Total |
|
|
|
$bn |
|
$bn |
|
$bn |
|
$bn |
|
$bn |
|
$bn |
|
|
Risk-weighted assets |
|
|
|
|
|
|
||||||
|
Reported |
121.5 |
|
301.0 |
|
299.3 |
|
16.0 |
|
133.5 |
|
871.3 |
|
|
Disposals |
- |
|
- |
|
- |
|
- |
|
(2.7 |
) |
(2.7 |
) |
|
- Brazil operations |
- |
|
- |
|
- |
|
- |
|
(2.6 |
) |
(2.6 |
) |
|
- Lebanon operations |
- |
|
- |
|
- |
|
- |
|
(0.1 |
) |
(0.1 |
) |
|
Adjusted |
121.5 |
|
301.0 |
|
299.3 |
|
16.0 |
|
130.8 |
|
868.6 |
|
|
|
|
|
|
|
|
|
||||||
|
|
At 31 Dec 2016
|
|||||||||||
|
Risk-weighted assets |
|
|
|
|
|
|
||||||
|
Reported |
115.1 |
|
275.9 |
|
300.4 |
|
15.3 |
|
150.5 |
|
857.2 |
|
|
Currency translation |
3.0 |
|
12.4 |
|
8.0 |
|
0.4 |
|
3.5 |
|
27.3 |
|
|
Disposals |
(3.4 |
) |
(1.4 |
) |
(0.7 |
) |
- |
|
(0.7 |
) |
(6.2 |
) |
|
- Brazil operations |
(3.2 |
) |
(1.0 |
) |
(0.7 |
) |
- |
|
(0.2 |
) |
(5.1 |
) |
|
- Lebanon operations |
(0.2 |
) |
(0.4 |
) |
- |
|
- |
|
(0.5 |
) |
(1.1 |
) |
|
Adjusted |
114.7 |
|
286.9 |
|
307.7 |
|
15.7 |
|
153.3 |
|
878.3 |
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 Dec 2015
|
|||||||||||
|
Risk-weighted assets |
|
|
|
|
|
|
||||||
|
Reported |
130.7 |
|
302.2 |
|
330.3 |
|
18.0 |
|
321.8 |
|
1,103.0 |
|
|
Currency translation |
(1.0 |
) |
(3.5 |
) |
1.4 |
|
(0.1 |
) |
(5.0 |
) |
(8.2 |
) |
|
Disposals |
(13.7 |
) |
(16.5 |
) |
(12.9 |
) |
(0.2 |
) |
(3.7 |
) |
(47.0 |
) |
|
- Brazil operations |
(13.5 |
) |
(16.1 |
) |
(12.9 |
) |
(0.2 |
) |
(3.1 |
) |
(45.8 |
) |
|
- Lebanon operations |
(0.2 |
) |
(0.4 |
) |
- |
|
- |
|
(0.6 |
) |
(1.2 |
) |
|
Adjusted |
116.0 |
|
282.2 |
|
318.8 |
|
17.7 |
|
313.1 |
|
1,047.8 |
|
|
|
|
|
|
Supplementary tables for RBWM and GPB |
A breakdown of RBWM by business unit is presented below to reflect the basis of how the revenue performance of the business units is assessed and managed.
For GPB, a key measure of business performance is client assets, which is presented below.
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
RBWM - adjusted profit before tax data |
|||||||||
|
|
|
Consists of |
|||||||
|
|
|
Total RBWM |
|
Banking operations |
|
Insurance manufacturing |
|
Asset management |
|
|
|
Footnote |
$m |
|
$m |
|
$m |
|
$m |
|
|
Year ended 31 Dec 2017 |
|
|
|
|
|
||||
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
20,287 |
|
17,235 |
|
1,997 |
|
1,055 |
|
|
- net interest income |
|
13,959 |
|
11,947 |
|
2,012 |
|
- |
|
|
- net fee income/(expense) |
|
5,156 |
|
4,642 |
|
(494 |
) |
1,008 |
|
|
- other income |
|
1,172 |
|
646 |
|
479 |
|
47 |
|
|
LICs |
|
(980 |
) |
(980 |
) |
- |
|
- |
|
|
Net operating income |
|
19,307 |
|
16,255 |
|
1,997 |
|
1,055 |
|
|
Total operating expenses |
|
(12,847 |
) |
(11,748 |
) |
(408 |
) |
(691 |
) |
|
Operating profit |
|
6,460 |
|
4,507 |
|
1,589 |
|
364 |
|
|
Income from associates |
|
18 |
|
7 |
|
11 |
|
- |
|
|
Profit before tax |
|
6,478 |
|
4,514 |
|
1,600 |
|
364 |
|
|
|
|
|
|
|
|
||||
|
Year ended 31 Dec 2016 |
|
|
|
|
|
||||
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
18,542 |
|
16,029 |
|
1,526 |
|
987 |
|
|
- net interest income |
|
12,919 |
|
11,015 |
|
1,895 |
|
9 |
|
|
- net fee income/(expense) |
|
4,755 |
|
4,361 |
|
(538 |
) |
932 |
|
|
- other income |
|
868 |
|
653 |
|
169 |
|
46 |
|
|
LICs |
|
(1,142 |
) |
(1,142 |
) |
- |
|
- |
|
|
Net operating income |
|
17,400 |
|
14,887 |
|
1,526 |
|
987 |
|
|
Total operating expenses |
|
(12,181 |
) |
(11,147 |
) |
(374 |
) |
(660 |
) |
|
Operating profit |
|
5,219 |
|
3,740 |
|
1,152 |
|
327 |
|
|
Income from associates |
|
20 |
|
- |
|
20 |
|
- |
|
|
Profit before tax |
|
5,239 |
|
3,740 |
|
1,172 |
|
327 |
|
For footnote, see page 62.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
52 |
Report of the Directors | Global businesses | Geographical regions
Insurance manufacturing
RBWM insurance manufacturing performance reported above excludes insurance manufacturing related adjusted net operating income of $202m (2016: $167m) and adjusted profit before tax of $145m (2016: $117m) contributed by other global businesses.
Of the total RBWM insurance manufacturing adjusted revenue of $1,997m, $1,893m was disclosed within Wealth Management (2016: $1,401m) and $104m within Other (2016: $125m) in the Management view of adjusted revenue on page 18.
Annualised new business premiums of $2,805m (2016: $2,626m) were generated in Insurance manufacturing, of which $2,730m (2016: $2,557m) related to RBWM.
Distribution of insurance products by HSBC channels contributed $1,035m of net fee income (2016: $1,034m) of which RBWM channels earned $911m (2016: $909m). Of this total income, $629m was in respect of HSBC manufactured products (2016: $612m) and a corresponding fee expense is therefore recognised within insurance manufacturing.
|
|
||||||
|
|
|
|
|
|
|
|
|
GPB - reported client assets35 |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$bn |
|
$bn |
|
$bn |
|
|
At 1 Jan |
298 |
|
349 |
|
365 |
|
|
Net new money |
- |
|
(17 |
) |
1 |
|
|
- of which: areas targeted for growth |
15 |
|
2 |
|
14 |
|
|
Value change |
21 |
|
(1 |
) |
1 |
|
|
Disposals |
(10 |
) |
(24 |
) |
- |
|
|
Exchange and other |
21 |
|
(9 |
) |
(18 |
) |
|
At 31 Dec |
330 |
|
298 |
|
349 |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
GPB - reported client assets by geography |
|||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
Footnote |
$bn |
|
$bn |
|
$bn |
|
|
Europe |
|
162 |
|
147 |
|
168 |
|
|
Asia |
|
129 |
|
108 |
|
112 |
|
|
North America |
|
39 |
|
40 |
|
61 |
|
|
Latin America |
|
- |
|
3 |
|
8 |
|
|
Middle East |
36 |
- |
|
- |
|
- |
|
|
At 31 Dec |
|
330 |
|
298 |
|
349 |
|
For footnote, see page 62.
|
|
|
|
|
Analysis of reported results by geographical regions |
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HSBC reported profit/(loss) before tax and balance sheet data |
|||||||||||||||
|
|
|
2017 |
|||||||||||||
|
|
|
Europe |
|
Asia |
|
MENA |
|
North America |
|
Latin America |
|
Intra-HSBC |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Net interest income |
|
6,970 |
|
14,153 |
|
1,752 |
|
3,441 |
|
2,098 |
|
(238 |
) |
28,176 |
|
|
Net fee income |
|
4,161 |
|
5,631 |
|
619 |
|
1,880 |
|
520 |
|
- |
|
12,811 |
|
|
Net trading income |
|
3,425 |
|
2,944 |
|
180 |
|
527 |
|
405 |
|
238 |
|
7,719 |
|
|
Other income |
33 |
2,864 |
|
3,078 |
|
109 |
|
865 |
|
202 |
|
(4,379 |
) |
2,739 |
|
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
17,420 |
|
25,806 |
|
2,660 |
|
6,713 |
|
3,225 |
|
(4,379 |
) |
51,445 |
|
|
Loan impairment charges and other credit risk provisions |
|
(658 |
) |
(570 |
) |
(207 |
) |
189 |
|
(523 |
) |
- |
|
(1,769 |
) |
|
Net operating income |
|
16,762 |
|
25,236 |
|
2,453 |
|
6,902 |
|
2,702 |
|
(4,379 |
) |
49,676 |
|
|
Total operating expenses |
|
(18,665 |
) |
(11,790 |
) |
(1,394 |
) |
(5,305 |
) |
(2,109 |
) |
4,379 |
|
(34,884 |
) |
|
Operating profit/(loss) |
|
(1,903 |
) |
13,446 |
|
1,059 |
|
1,597 |
|
593 |
|
- |
|
14,792 |
|
|
Share of profit in associates and joint ventures |
|
39 |
|
1,883 |
|
442 |
|
4 |
|
7 |
|
- |
|
2,375 |
|
|
Profit/(loss) before tax |
|
(1,864 |
) |
15,329 |
|
1,501 |
|
1,601 |
|
600 |
|
- |
|
17,167 |
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
% |
|
|
|
Share of HSBC's profit before tax |
|
(10.8 |
) |
89.3 |
|
8.7 |
|
9.3 |
|
3.5 |
|
|
|
100.0 |
|
|
Cost efficiency ratio |
|
107.1 |
|
45.7 |
|
52.4 |
|
79.0 |
|
65.4 |
|
|
|
67.8 |
|
|
Balance sheet data |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
|
381,547 |
|
425,971 |
|
28,050 |
|
107,607 |
|
19,789 |
|
- |
|
962,964 |
|
|
Total assets |
|
1,169,515 |
|
1,008,498 |
|
57,469 |
|
391,292 |
|
48,413 |
|
(153,416 |
) |
2,521,771 |
|
|
Customer accounts |
|
505,182 |
|
657,395 |
|
34,658 |
|
143,432 |
|
23,795 |
|
- |
|
1,364,462 |
|
|
Risk-weighted assets |
37 |
311,612 |
|
357,808 |
|
59,196 |
|
131,276 |
|
36,372 |
|
- |
|
871,337 |
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
53 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
HSBC reported profit/(loss) before tax and balance sheet data (continued) |
|
|
|
|
|
||||||||||
|
|
|
2016 |
|||||||||||||
|
|
|
Europe |
|
Asia |
|
MENA |
|
North America |
|
Latin America |
|
Intra-HSBC items |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Net interest income |
|
8,346 |
|
12,490 |
|
1,831 |
|
4,220 |
|
3,006 |
|
(80 |
) |
29,813 |
|
|
Net fee income |
|
4,247 |
|
5,200 |
|
709 |
|
1,898 |
|
723 |
|
- |
|
12,777 |
|
|
Net trading income |
|
4,949 |
|
3,127 |
|
385 |
|
462 |
|
449 |
|
80 |
|
9,452 |
|
|
Other income/(expense) |
33 |
(2,026 |
) |
2,503 |
|
44 |
|
485 |
|
(1,492 |
) |
(3,590 |
) |
(4,076 |
) |
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
15,516 |
|
23,320 |
|
2,969 |
|
7,065 |
|
2,686 |
|
(3,590 |
) |
47,966 |
|
|
Loan impairment charges and other credit risk provisions |
|
(446 |
) |
(677 |
) |
(316 |
) |
(732 |
) |
(1,229 |
) |
- |
|
(3,400 |
) |
|
Net operating income |
|
15,070 |
|
22,643 |
|
2,653 |
|
6,333 |
|
1,457 |
|
(3,590 |
) |
44,566 |
|
|
Total operating expenses |
|
(21,845 |
) |
(10,785 |
) |
(1,584 |
) |
(6,147 |
) |
(3,037 |
) |
3,590 |
|
(39,808 |
) |
|
Operating profit/(loss) |
|
(6,775 |
) |
11,858 |
|
1,069 |
|
186 |
|
(1,580 |
) |
- |
|
4,758 |
|
|
Share of profit/(loss) in associates and joint ventures |
|
1 |
|
1,921 |
|
434 |
|
(1 |
) |
(1 |
) |
- |
|
2,354 |
|
|
Profit/(loss) before tax |
|
(6,774 |
) |
13,779 |
|
1,503 |
|
185 |
|
(1,581 |
) |
- |
|
7,112 |
|
|
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
% |
|
|
|
Share of HSBC's profit before tax |
|
(95.2 |
) |
193.7 |
|
21.1 |
|
2.6 |
|
(22.2 |
) |
|
|
100.0 |
|
|
Cost efficiency ratio |
|
140.8 |
|
46.2 |
|
53.4 |
|
87.0 |
|
113.1 |
|
|
|
83.0 |
|
|
Balance sheet data |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
|
336,670 |
|
365,430 |
|
30,740 |
|
111,710 |
|
16,954 |
|
- |
|
861,504 |
|
|
- reported in held for sale |
|
1,057 |
|
- |
|
474 |
|
2,092 |
|
- |
|
- |
|
3,623 |
|
|
Total assets |
|
1,068,446 |
|
965,730 |
|
60,472 |
|
409,021 |
|
43,137 |
|
(171,820 |
) |
2,374,986 |
|
|
Customer accounts |
|
446,615 |
|
631,723 |
|
34,766 |
|
138,790 |
|
20,492 |
|
- |
|
1,272,386 |
|
|
- reported in held for sale |
|
2,012 |
|
- |
|
701 |
|
- |
|
- |
|
- |
|
2,713 |
|
|
Risk-weighted assets |
37 |
298,384 |
|
333,987 |
|
59,065 |
|
150,714 |
|
34,341 |
|
- |
|
857,181 |
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
2015 |
|||||||||||||
|
Net interest income |
|
9,686 |
|
12,184 |
|
1,849 |
|
4,532 |
|
4,318 |
|
(38 |
) |
32,531 |
|
|
Net fee income |
|
4,702 |
|
6,032 |
|
822 |
|
2,018 |
|
1,131 |
|
- |
|
14,705 |
|
|
Net trading income |
|
3,968 |
|
3,090 |
|
418 |
|
545 |
|
664 |
|
38 |
|
8,723 |
|
|
Other income |
33 |
2,116 |
|
3,997 |
|
90 |
|
562 |
|
479 |
|
(3,403 |
) |
3,841 |
|
|
Net operating income before loan impairment charges and other credit risk provisions |
3 |
20,472 |
|
25,303 |
|
3,179 |
|
7,657 |
|
6,592 |
|
(3,403 |
) |
59,800 |
|
|
Loan impairment charges and other credit risk provisions |
|
(519 |
) |
(693 |
) |
(470 |
) |
(544 |
) |
(1,495 |
) |
- |
|
(3,721 |
) |
|
Net operating income |
|
19,953 |
|
24,610 |
|
2,709 |
|
7,113 |
|
5,097 |
|
(3,403 |
) |
56,079 |
|
|
Total operating expenses |
|
(19,274 |
) |
(10,889 |
) |
(1,721 |
) |
(6,501 |
) |
(4,786 |
) |
3,403 |
|
(39,768 |
) |
|
Operating profit |
|
679 |
|
13,721 |
|
988 |
|
612 |
|
311 |
|
- |
|
16,311 |
|
|
Share of profit/(loss) in associates and joint ventures |
|
9 |
|
2,042 |
|
504 |
|
2 |
|
(1 |
) |
- |
|
2,556 |
|
|
Profit before tax |
|
688 |
|
15,763 |
|
1,492 |
|
614 |
|
310 |
|
- |
|
18,867 |
|
|
|
|
% |
% |
% |
% |
% |
|
% |
|||||||
|
Share of HSBC's profit before tax |
|
3.6 |
|
83.5 |
|
7.9 |
|
3.3 |
|
1.7 |
|
|
|
100.0 |
|
|
Cost efficiency ratio |
|
94.1 |
|
43.0 |
|
54.1 |
|
84.9 |
|
72.6 |
|
|
|
66.5 |
|
|
Balance sheet data |
38 |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Loans and advances to customers (net) |
|
385,037 |
|
356,375 |
|
36,898 |
|
128,851 |
|
17,293 |
|
- |
|
924,454 |
|
|
- reported in held for sale |
|
- |
|
- |
|
- |
|
2,020 |
|
17,001 |
|
- |
|
19,021 |
|
|
Total assets |
|
1,121,401 |
|
889,747 |
|
70,157 |
|
393,960 |
|
86,262 |
|
(151,871 |
) |
2,409,656 |
|
|
Customer accounts |
|
491,520 |
|
598,620 |
|
42,824 |
|
135,152 |
|
21,470 |
|
- |
|
1,289,586 |
|
|
- reported in held for sale |
|
- |
|
- |
|
- |
|
1,588 |
|
15,094 |
|
- |
|
16,682 |
|
|
Risk-weighted assets |
37 |
327,219 |
|
459,680 |
|
70,585 |
|
191,611 |
|
73,425 |
|
- |
|
1,102,995 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
54 |
Report of the Directors | Geographical regions
|
|
|
|
|
Reconciliation of reported and adjusted items - geographical regions |
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted items |
|||||||||||||||||
|
|
|
2017 |
|||||||||||||||
|
|
|
Europe |
|
Asia |
|
MENA |
|
North |
|
Latin |
|
Total |
|
UK |
|
Hong |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
39 |
17,420 |
|
25,806 |
|
2,660 |
|
6,713 |
|
3,225 |
|
51,445 |
|
12,922 |
|
16,117 |
|
|
Significant items |
|
64 |
|
121 |
|
1 |
|
(93 |
) |
(14 |
) |
79 |
|
54 |
|
(51 |
) |
|
- customer redress programmes |
|
108 |
|
- |
|
- |
|
- |
|
- |
|
108 |
|
108 |
|
- |
|
|
- DVA on derivative contracts |
|
211 |
|
123 |
|
1 |
|
34 |
|
4 |
|
373 |
|
179 |
|
43 |
|
|
- fair value movements on non-qualifying hedges |
32 |
(157 |
) |
25 |
|
- |
|
3 |
|
1 |
|
(128 |
) |
(155 |
) |
32 |
|
|
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank |
|
- |
|
(126 |
) |
- |
|
- |
|
- |
|
(126 |
) |
- |
|
(126 |
) |
|
- gain on disposal of our membership interest in Visa - US |
|
- |
|
- |
|
- |
|
(308 |
) |
- |
|
(308 |
) |
- |
|
- |
|
|
- investment in new businesses |
|
- |
|
99 |
|
- |
|
- |
|
- |
|
99 |
|
- |
|
- |
|
|
- portfolio disposals |
|
(20 |
) |
- |
|
- |
|
178 |
|
- |
|
158 |
|
- |
|
- |
|
|
- gain on disposal of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
(19 |
) |
(19 |
) |
- |
|
- |
|
|
- other acquisitions, disposals and dilutions |
|
(78 |
) |
- |
|
- |
|
- |
|
- |
|
(78 |
) |
(78 |
) |
- |
|
|
Adjusted |
39 |
17,484 |
|
25,927 |
|
2,661 |
|
6,620 |
|
3,211 |
|
51,524 |
|
12,976 |
|
16,066 |
|
|
LICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(658 |
) |
(570 |
) |
(207 |
) |
189 |
|
(523 |
) |
(1,769 |
) |
(492 |
) |
(396 |
) |
|
Adjusted |
|
(658 |
) |
(570 |
) |
(207 |
) |
189 |
|
(523 |
) |
(1,769 |
) |
(492 |
) |
(396 |
) |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
39 |
(18,665 |
) |
(11,790 |
) |
(1,394 |
) |
(5,305 |
) |
(2,109 |
) |
(34,884 |
) |
(15,086 |
) |
(6,131 |
) |
|
Significant items |
|
2,804 |
|
640 |
|
34 |
|
200 |
|
66 |
|
3,744 |
|
2,469 |
|
308 |
|
|
- costs associated with portfolio disposals |
|
36 |
|
- |
|
- |
|
17 |
|
- |
|
53 |
|
- |
|
- |
|
|
- costs associated with the UK's exit from the EU |
|
28 |
|
- |
|
- |
|
- |
|
- |
|
28 |
|
18 |
|
- |
|
|
- costs to achieve |
|
1,908 |
|
623 |
|
34 |
|
371 |
|
66 |
|
3,002 |
|
1,766 |
|
291 |
|
|
- costs to establish UK ring-fenced bank |
|
392 |
|
- |
|
- |
|
- |
|
- |
|
392 |
|
392 |
|
- |
|
|
- customer redress programmes |
|
655 |
|
- |
|
- |
|
- |
|
- |
|
655 |
|
655 |
|
- |
|
|
- gain on partial settlement of pension obligation |
|
- |
|
- |
|
- |
|
(188 |
) |
- |
|
(188 |
) |
- |
|
- |
|
|
- regulatory provisions in GPB |
|
147 |
|
17 |
|
- |
|
- |
|
- |
|
164 |
|
- |
|
17 |
|
|
- settlements and provisions in connection with legal matters |
|
(362 |
) |
- |
|
- |
|
- |
|
- |
|
(362 |
) |
(362 |
) |
- |
|
|
Adjusted |
39 |
(15,861 |
) |
(11,150 |
) |
(1,360 |
) |
(5,105 |
) |
(2,043 |
) |
(31,140 |
) |
(12,617 |
) |
(5,823 |
) |
|
Share of profit in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
39 |
|
1,883 |
|
442 |
|
4 |
|
7 |
|
2,375 |
|
38 |
|
8 |
|
|
Adjusted |
|
39 |
|
1,883 |
|
442 |
|
4 |
|
7 |
|
2,375 |
|
38 |
|
8 |
|
|
Profit/(loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(1,864 |
) |
15,329 |
|
1,501 |
|
1,601 |
|
600 |
|
17,167 |
|
(2,618 |
) |
9,598 |
|
|
Significant items |
|
2,868 |
|
761 |
|
35 |
|
107 |
|
52 |
|
3,823 |
|
2,523 |
|
257 |
|
|
- revenue |
|
64 |
|
121 |
|
1 |
|
(93 |
) |
(14 |
) |
79 |
|
54 |
|
(51 |
) |
|
- operating expenses |
|
2,804 |
|
640 |
|
34 |
|
200 |
|
66 |
|
3,744 |
|
2,469 |
|
308 |
|
|
Adjusted |
40 |
1,004 |
|
16,090 |
|
1,536 |
|
1,708 |
|
652 |
|
20,990 |
|
(95 |
) |
9,855 |
|
|
|
|
|
* |
Of which US Principal: adjusted revenue $4,737m (RBWM: $1,194m; CMB: $947m; GB&M $1,951m; GPB: $317m); adjusted LICs $118m; adjusted operating expenses $(3,936)m; adjusted PBT $920m (RBWM: $(58)m; CMB: $432m; GB&M $527m; GPB: $64m); adjusted RWAs (RBWM: $11.0bn; CMB: $25.1bn; GB&M $45.2bn; GPB: $4.2bn; Corporate Centre: $10.0bn). |
|
|
|
|
† |
Of which Mexico: adjusted revenue $2,164m (RBWM: $1,442m; CMB: $350m; GB&M $284m); adjusted LICs $(473)m; adjusted operating expenses $(1,251)m; adjusted PBT $440m (RBWM: $147m; CMB: $105m; GB&M $162m); adjusted RWAs (RBWM: $6.9bn; CMB: $5.9bn; GB&M $8.3bn; Corporate Centre: $2.8bn). |
|
|
|
|
|
|
|
55 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted items (continued) |
|||||||||||||||||
|
|
|
2016 |
|||||||||||||||
|
|
|
Europe |
|
Asia |
|
MENA |
|
North |
|
Latin |
|
Total |
|
UK |
|
Hong |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
39 |
15,516 |
|
23,320 |
|
2,969 |
|
7,065 |
|
2,686 |
|
47,966 |
|
10,893 |
|
14,014 |
|
|
Currency translation |
39 |
(545 |
) |
8 |
|
(363 |
) |
32 |
|
130 |
|
(736 |
) |
(668 |
) |
(53 |
) |
|
Significant items |
|
1,848 |
|
(7 |
) |
(9 |
) |
155 |
|
73 |
|
2,060 |
|
1,898 |
|
(1 |
) |
|
- customer redress programmes |
|
(2 |
) |
- |
|
- |
|
- |
|
- |
|
(2 |
) |
(2 |
) |
- |
|
|
- DVA on derivative contracts |
|
(56 |
) |
(15 |
) |
- |
|
9 |
|
36 |
|
(26 |
) |
(63 |
) |
(22 |
) |
|
- fair value movements on non-qualifying hedges |
32 |
563 |
|
17 |
|
- |
|
107 |
|
- |
|
687 |
|
532 |
|
26 |
|
|
- gain on the disposal of our membership |
|
(573 |
) |
- |
|
(11 |
) |
- |
|
- |
|
(584 |
) |
(441 |
) |
- |
|
|
- gain on disposal of our membership |
|
- |
|
- |
|
- |
|
(116 |
) |
- |
|
(116 |
) |
- |
|
- |
|
|
- own credit spread |
25 |
1,782 |
|
(8 |
) |
- |
|
18 |
|
- |
|
1,792 |
|
1,769 |
|
(5 |
) |
|
- portfolio disposals |
|
26 |
|
- |
|
- |
|
137 |
|
- |
|
163 |
|
- |
|
- |
|
|
- loss and trading results from disposed-of |
|
- |
|
- |
|
- |
|
- |
|
273 |
|
273 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
108 |
|
(1 |
) |
2 |
|
- |
|
(236 |
) |
(127 |
) |
103 |
|
- |
|
|
Adjusted |
39 |
16,819 |
|
23,321 |
|
2,597 |
|
7,252 |
|
2,889 |
|
49,290 |
|
12,123 |
|
13,960 |
|
|
LICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(446 |
) |
(677 |
) |
(316 |
) |
(732 |
) |
(1,229 |
) |
(3,400 |
) |
(245 |
) |
(321 |
) |
|
Currency translation |
|
27 |
|
(3 |
) |
27 |
|
1 |
|
(113 |
) |
(61 |
) |
33 |
|
1 |
|
|
Significant items |
|
- |
|
- |
|
- |
|
- |
|
867 |
|
867 |
|
- |
|
- |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
748 |
|
748 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
- |
|
- |
|
- |
|
- |
|
119 |
|
119 |
|
- |
|
- |
|
|
Adjusted |
|
(419 |
) |
(680 |
) |
(289 |
) |
(731 |
) |
(475 |
) |
(2,594 |
) |
(212 |
) |
(320 |
) |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
39 |
(21,845 |
) |
(10,785 |
) |
(1,584 |
) |
(6,147 |
) |
(3,037 |
) |
(39,808 |
) |
(14,562 |
) |
(5,646 |
) |
|
Currency translation |
39 |
300 |
|
11 |
|
143 |
|
(21 |
) |
(100 |
) |
331 |
|
367 |
|
22 |
|
|
Significant items |
|
6,611 |
|
434 |
|
90 |
|
991 |
|
1,267 |
|
9,393 |
|
2,642 |
|
182 |
|
|
- costs associated with portfolio disposals |
|
28 |
|
- |
|
- |
|
- |
|
- |
|
28 |
|
- |
|
- |
|
|
- costs to achieve |
|
2,098 |
|
476 |
|
103 |
|
402 |
|
39 |
|
3,118 |
|
1,838 |
|
229 |
|
|
- costs to establish UK ring-fenced bank |
|
223 |
|
- |
|
- |
|
- |
|
- |
|
223 |
|
223 |
|
- |
|
|
- customer redress programmes |
|
559 |
|
- |
|
- |
|
- |
|
- |
|
559 |
|
559 |
|
- |
|
|
- impairment of GPB - Europe goodwill |
|
3,240 |
|
- |
|
- |
|
- |
|
- |
|
3,240 |
|
- |
|
- |
|
|
- regulatory provisions in GPB |
|
390 |
|
(46 |
) |
- |
|
- |
|
- |
|
344 |
|
- |
|
(46 |
) |
|
- settlements and provisions in connection |
|
94 |
|
- |
|
- |
|
587 |
|
- |
|
681 |
|
50 |
|
- |
|
|
- trading results from disposed-of operations |
|
- |
|
- |
|
- |
|
- |
|
1,059 |
|
1,059 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
(21 |
) |
4 |
|
(13 |
) |
2 |
|
169 |
|
141 |
|
(28 |
) |
(1 |
) |
|
Adjusted |
39 |
(14,934 |
) |
(10,340 |
) |
(1,351 |
) |
(5,177 |
) |
(1,870 |
) |
(30,084 |
) |
(11,553 |
) |
(5,442 |
) |
|
Share of profit in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
1 |
|
1,921 |
|
434 |
|
(1 |
) |
(1 |
) |
2,354 |
|
1 |
|
22 |
|
|
Currency translation |
|
1 |
|
(34 |
) |
- |
|
- |
|
- |
|
(33 |
) |
1 |
|
(1 |
) |
|
Significant items |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
- |
|
|
- trading results from disposed-of operations |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Adjusted |
|
2 |
|
1,887 |
|
434 |
|
(1 |
) |
- |
|
2,322 |
|
2 |
|
21 |
|
|
Profit/(loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(6,774 |
) |
13,779 |
|
1,503 |
|
185 |
|
(1,581 |
) |
7,112 |
|
(3,913 |
) |
8,069 |
|
|
Currency translation |
|
(217 |
) |
(18 |
) |
(193 |
) |
12 |
|
(83 |
) |
(499 |
) |
(267 |
) |
(31 |
) |
|
Significant items |
|
8,459 |
|
427 |
|
81 |
|
1,146 |
|
2,208 |
|
12,321 |
|
4,540 |
|
181 |
|
|
- revenue |
|
1,848 |
|
(7 |
) |
(9 |
) |
155 |
|
73 |
|
2,060 |
|
1,898 |
|
(1 |
) |
|
- LICs |
|
- |
|
- |
|
- |
|
- |
|
867 |
|
867 |
|
- |
|
- |
|
|
- operating expenses |
|
6,611 |
|
434 |
|
90 |
|
991 |
|
1,267 |
|
9,393 |
|
2,642 |
|
182 |
|
|
- share of profit in associates and joint ventures |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
- |
|
|
Adjusted |
|
1,468 |
|
14,188 |
|
1,391 |
|
1,343 |
|
544 |
|
18,934 |
|
360 |
|
8,219 |
|
|
|
|
|
* |
Of which US Principal: adjusted revenue $4,698m (RBWM: $1,161m; CMB: $981m; GB&M $1,979m; GPB: $303m); adjusted LICs $(503)m; adjusted operating expenses $(3,808)m; adjusted PBT $387m (RBWM: $(81)m; CMB: $341m; GB&M $100m; GPB: $67m); adjusted RWAs (RBWM: $11.0bn; CMB: $26.8bn; GB&M $48.3bn; GPB: $4.1bn; Corporate Centre: $13.6bn). |
|
|
|
|
† |
Of which Mexico: adjusted revenue $1,949m (RBWM: $1,285m; CMB: $336m; GB&M $217m; GPB: $13m); adjusted LICs $(450)m; adjusted operating expenses $(1,225)m; adjusted PBT $274m (RBWM: $100m; CMB: $83m; GB&M $79m; GPB: $5m); adjusted RWAs (RBWM: $6.4bn; CMB: $6.3bn; GB&M $6.7bn; Corporate Centre: $1.7bn). |
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
56 |
Report of the Directors | Geographical regions
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reported and adjusted items (continued) |
|||||||||||||||||
|
|
|
2015 |
|||||||||||||||
|
|
|
Europe |
|
Asia |
|
MENA |
|
North |
|
Latin |
|
Total |
|
UK |
|
Hong |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Revenue |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
39 |
20,472 |
|
25,303 |
|
3,179 |
|
7,657 |
|
6,592 |
|
59,800 |
|
15,493 |
|
15,616 |
|
|
Currency translation |
39 |
(2,263 |
) |
(330 |
) |
(497 |
) |
(30 |
) |
(685 |
) |
(3,727 |
) |
(2,298 |
) |
(74 |
) |
|
Significant items |
|
(611 |
) |
(1,425 |
) |
(10 |
) |
98 |
|
(3,703 |
) |
(5,651 |
) |
(546 |
) |
(1,378 |
) |
|
- customer redress programmes |
|
10 |
|
- |
|
- |
|
- |
|
- |
|
10 |
|
10 |
|
- |
|
|
- DVA on derivative contracts |
|
(95 |
) |
(58 |
) |
(1 |
) |
(21 |
) |
(55 |
) |
(230 |
) |
(78 |
) |
(13 |
) |
|
- fair value movements on non-qualifying hedges |
32 |
200 |
|
2 |
|
- |
|
124 |
|
1 |
|
327 |
|
204 |
|
6 |
|
|
- gain on the partial sale of shareholding in Industrial Bank |
|
- |
|
(1,372 |
) |
- |
|
- |
|
- |
|
(1,372 |
) |
- |
|
(1,372 |
) |
|
- own credit spread |
25 |
(771 |
) |
(3 |
) |
(9 |
) |
(219 |
) |
- |
|
(1,002 |
) |
(731 |
) |
(4 |
) |
|
- portfolio disposals |
|
- |
|
- |
|
- |
|
214 |
|
- |
|
214 |
|
- |
|
- |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
(3,532 |
) |
(3,532 |
) |
- |
|
- |
|
|
- currency translation on significant items |
|
45 |
|
6 |
|
- |
|
- |
|
(117 |
) |
(66 |
) |
49 |
|
5 |
|
|
Adjusted |
39 |
17,598 |
|
23,548 |
|
2,672 |
|
7,725 |
|
2,204 |
|
50,422 |
|
12,649 |
|
14,164 |
|
|
LICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
(519 |
) |
(693 |
) |
(470 |
) |
(544 |
) |
(1,495 |
) |
(3,721 |
) |
(248 |
) |
(155 |
) |
|
Currency translation |
|
24 |
|
11 |
|
47 |
|
(5 |
) |
50 |
|
127 |
|
34 |
|
1 |
|
|
Significant items |
|
- |
|
- |
|
- |
|
- |
|
1,015 |
|
1,015 |
|
- |
|
- |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
965 |
|
965 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
- |
|
- |
|
- |
|
- |
|
50 |
|
50 |
|
- |
|
- |
|
|
Adjusted |
|
(495 |
) |
(682 |
) |
(423 |
) |
(549 |
) |
(430 |
) |
(2,579 |
) |
(214 |
) |
(154 |
) |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
39 |
(19,274 |
) |
(10,889 |
) |
(1,721 |
) |
(6,501 |
) |
(4,786 |
) |
(39,768 |
) |
(15,555 |
) |
(5,686 |
) |
|
Currency translation |
39 |
1,668 |
|
191 |
|
223 |
|
13 |
|
417 |
|
2,434 |
|
1,698 |
|
30 |
|
|
Significant items |
|
2,115 |
|
131 |
|
14 |
|
851 |
|
2,766 |
|
5,877 |
|
1,858 |
|
48 |
|
|
- costs to achieve |
|
600 |
|
122 |
|
14 |
|
103 |
|
69 |
|
908 |
|
536 |
|
43 |
|
|
- costs to establish the UK ring-fenced bank |
|
89 |
|
- |
|
- |
|
- |
|
- |
|
89 |
|
89 |
|
- |
|
|
- customer redress programmes |
|
541 |
|
- |
|
- |
|
- |
|
- |
|
541 |
|
541 |
|
- |
|
|
- regulatory provisions in GPB |
|
172 |
|
- |
|
- |
|
- |
|
- |
|
172 |
|
- |
|
- |
|
|
- restructuring and other related costs |
|
68 |
|
8 |
|
1 |
|
34 |
|
6 |
|
117 |
|
50 |
|
6 |
|
|
- settlements and provisions in connection with legal matters |
|
935 |
|
- |
|
- |
|
714 |
|
- |
|
1,649 |
|
935 |
|
- |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
2,579 |
|
2,579 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
(290 |
) |
1 |
|
(1 |
) |
- |
|
112 |
|
(178 |
) |
(293 |
) |
(1 |
) |
|
Adjusted |
39 |
(15,491 |
) |
(10,567 |
) |
(1,484 |
) |
(5,637 |
) |
(1,603 |
) |
(31,457 |
) |
(11,999 |
) |
(5,608 |
) |
|
Share of profit in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
9 |
|
2,042 |
|
504 |
|
2 |
|
(1 |
) |
2,556 |
|
10 |
|
31 |
|
|
Currency translation |
|
- |
|
(149 |
) |
- |
|
- |
|
- |
|
(149 |
) |
(1 |
) |
- |
|
|
Significant items |
|
- |
|
- |
|
- |
|
- |
|
2 |
|
2 |
|
- |
|
- |
|
|
- trading results from disposed-of operations in Brazil |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
- |
|
|
- currency translation on significant items |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
- |
|
- |
|
|
Adjusted |
|
9 |
|
1,893 |
|
504 |
|
2 |
|
1 |
|
2,409 |
|
9 |
|
31 |
|
|
Profit/(loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
688 |
|
15,763 |
|
1,492 |
|
614 |
|
310 |
|
18,867 |
|
(300 |
) |
9,806 |
|
|
Currency translation |
|
(571 |
) |
(277 |
) |
(227 |
) |
(22 |
) |
(218 |
) |
(1,315 |
) |
(567 |
) |
(43 |
) |
|
Significant items |
|
1,504 |
|
(1,294 |
) |
4 |
|
949 |
|
80 |
|
1,243 |
|
1,312 |
|
(1,330 |
) |
|
- revenue |
|
(611 |
) |
(1,425 |
) |
(10 |
) |
98 |
|
(3,703 |
) |
(5,651 |
) |
(546 |
) |
(1,378 |
) |
|
- LICs |
|
- |
|
- |
|
- |
|
- |
|
1,015 |
|
1,015 |
|
- |
|
- |
|
|
- operating expenses |
|
2,115 |
|
131 |
|
14 |
|
851 |
|
2,766 |
|
5,877 |
|
1,858 |
|
48 |
|
|
- share of profit in associates and joint ventures |
|
- |
|
- |
|
- |
|
- |
|
2 |
|
2 |
|
- |
|
- |
|
|
Adjusted |
|
1,621 |
|
14,192 |
|
1,269 |
|
1,541 |
|
172 |
|
18,795 |
|
445 |
|
8,433 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
57 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|
|
|
Analysis of reported results by country |
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax by priority markets within global businesses |
|
|
|
|
|||||||||
|
|
|
Retail Banking |
|
Commercial |
|
Global |
|
Global |
|
Corporate |
|
|
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Europe |
|
(159 |
) |
1,899 |
|
777 |
|
(231 |
) |
(4,150 |
) |
(1,864 |
) |
|
- UK |
|
(177 |
) |
1,539 |
|
192 |
|
(23 |
) |
(4,149 |
) |
(2,618 |
) |
|
of which: HSBC Holdings |
41 |
(658 |
) |
(372 |
) |
(739 |
) |
(89 |
) |
(3,308 |
) |
(5,166 |
) |
|
- France |
|
(12 |
) |
204 |
|
228 |
|
5 |
|
(156 |
) |
269 |
|
|
- Germany |
|
21 |
|
61 |
|
141 |
|
9 |
|
39 |
|
271 |
|
|
- Switzerland |
|
(2 |
) |
7 |
|
1 |
|
(192 |
) |
2 |
|
(184 |
) |
|
- other |
|
11 |
|
88 |
|
215 |
|
(30 |
) |
114 |
|
398 |
|
|
Asia |
|
5,372 |
|
3,394 |
|
3,135 |
|
285 |
|
3,143 |
|
15,329 |
|
|
- Hong Kong |
|
5,039 |
|
2,460 |
|
1,357 |
|
257 |
|
485 |
|
9,598 |
|
|
- Australia |
|
122 |
|
101 |
|
108 |
|
(1 |
) |
35 |
|
365 |
|
|
- India |
|
21 |
|
159 |
|
362 |
|
- |
|
374 |
|
916 |
|
|
- Indonesia |
|
(24 |
) |
76 |
|
98 |
|
- |
|
30 |
|
180 |
|
|
- mainland China |
|
(44 |
) |
161 |
|
387 |
|
(4 |
) |
1,988 |
|
2,488 |
|
|
- Malaysia |
|
85 |
|
50 |
|
162 |
|
- |
|
28 |
|
325 |
|
|
- Singapore |
|
69 |
|
94 |
|
202 |
|
34 |
|
64 |
|
463 |
|
|
- Taiwan |
|
43 |
|
10 |
|
107 |
|
(1 |
) |
40 |
|
199 |
|
|
- other |
|
61 |
|
283 |
|
352 |
|
- |
|
99 |
|
795 |
|
|
Middle East and North Africa |
|
144 |
|
199 |
|
593 |
|
- |
|
565 |
|
1,501 |
|
|
- Egypt |
|
26 |
|
69 |
|
164 |
|
- |
|
46 |
|
305 |
|
|
- UAE |
|
110 |
|
53 |
|
268 |
|
- |
|
48 |
|
479 |
|
|
- Saudi Arabia |
|
- |
|
- |
|
- |
|
- |
|
441 |
|
441 |
|
|
- other |
|
8 |
|
77 |
|
161 |
|
- |
|
30 |
|
276 |
|
|
North America |
|
305 |
|
932 |
|
671 |
|
67 |
|
(374 |
) |
1,601 |
|
|
- US |
|
166 |
|
435 |
|
494 |
|
66 |
|
(444 |
) |
717 |
|
|
- Canada |
|
61 |
|
453 |
|
132 |
|
- |
|
43 |
|
689 |
|
|
- other |
|
78 |
|
44 |
|
45 |
|
1 |
|
27 |
|
195 |
|
|
Latin America |
|
161 |
|
199 |
|
259 |
|
- |
|
(19 |
) |
600 |
|
|
- Mexico |
|
139 |
|
105 |
|
158 |
|
- |
|
(12 |
) |
390 |
|
|
- other |
|
22 |
|
94 |
|
101 |
|
- |
|
(7 |
) |
210 |
|
|
Year ended 31 Dec 2017 |
|
5,823 |
|
6,623 |
|
5,435 |
|
121 |
|
(835 |
) |
17,167 |
|
|
|
|
|
|
|
|
|
|
||||||
|
Europe |
|
524 |
|
2,129 |
|
1,009 |
|
(3,695 |
) |
(6,741 |
) |
(6,774 |
) |
|
- UK |
|
338 |
|
1,834 |
|
385 |
|
86 |
|
(6,556 |
) |
(3,913 |
) |
|
of which: HSBC Holdings |
41, 42 |
(676 |
) |
(379 |
) |
(425 |
) |
(63 |
) |
(3,748 |
) |
(5,291 |
) |
|
- France |
|
147 |
|
198 |
|
289 |
|
9 |
|
(53 |
) |
590 |
|
|
- Germany |
|
23 |
|
68 |
|
142 |
|
7 |
|
13 |
|
253 |
|
|
- Switzerland |
|
- |
|
9 |
|
- |
|
(493 |
) |
(7 |
) |
(491 |
) |
|
- other |
|
16 |
|
20 |
|
193 |
|
(3,304 |
) |
(138 |
) |
(3,213 |
) |
|
Asia |
|
4,115 |
|
2,920 |
|
3,211 |
|
268 |
|
3,265 |
|
13,779 |
|
|
- Hong Kong |
|
3,796 |
|
2,191 |
|
1,298 |
|
221 |
|
563 |
|
8,069 |
|
|
- Australia |
|
108 |
|
74 |
|
156 |
|
- |
|
31 |
|
369 |
|
|
- India |
|
15 |
|
123 |
|
355 |
|
10 |
|
240 |
|
743 |
|
|
- Indonesia |
|
(9 |
) |
66 |
|
110 |
|
- |
|
11 |
|
178 |
|
|
- mainland China |
|
(72 |
) |
68 |
|
456 |
|
(3 |
) |
2,158 |
|
2,607 |
|
|
- Malaysia |
|
65 |
|
65 |
|
172 |
|
- |
|
53 |
|
355 |
|
|
- Singapore |
|
107 |
|
43 |
|
170 |
|
42 |
|
77 |
|
439 |
|
|
- Taiwan |
|
24 |
|
10 |
|
102 |
|
(1 |
) |
13 |
|
148 |
|
|
- other |
|
81 |
|
280 |
|
392 |
|
(1 |
) |
119 |
|
871 |
|
|
Middle East and North Africa |
|
20 |
|
290 |
|
652 |
|
- |
|
541 |
|
1,503 |
|
|
- Egypt |
|
58 |
|
104 |
|
213 |
|
- |
|
79 |
|
454 |
|
|
- UAE |
|
83 |
|
94 |
|
298 |
|
- |
|
5 |
|
480 |
|
|
- Saudi Arabia |
|
1 |
|
- |
|
- |
|
- |
|
434 |
|
435 |
|
|
- other |
|
(122 |
) |
92 |
|
141 |
|
- |
|
23 |
|
134 |
|
|
North America |
|
64 |
|
648 |
|
259 |
|
90 |
|
(876 |
) |
185 |
|
|
- US |
|
(28 |
) |
336 |
|
86 |
|
67 |
|
(932 |
) |
(471 |
) |
|
- Canada |
|
46 |
|
292 |
|
155 |
|
- |
|
47 |
|
540 |
|
|
- other |
|
46 |
|
20 |
|
18 |
|
23 |
|
9 |
|
116 |
|
|
Latin America |
|
(136 |
) |
59 |
|
309 |
|
9 |
|
(1,822 |
) |
(1,581 |
) |
|
- Mexico |
|
94 |
|
84 |
|
79 |
|
5 |
|
(15 |
) |
247 |
|
|
- other |
|
(230 |
) |
(25 |
) |
230 |
|
4 |
|
(1,807 |
) |
(1,828 |
) |
|
of which: Brazil |
|
(281 |
) |
(139 |
) |
176 |
|
4 |
|
(1,836 |
) |
(2,076 |
) |
|
Year ended 31 Dec 2016 |
|
4,587 |
|
6,046 |
|
5,440 |
|
(3,328 |
) |
(5,633 |
) |
7,112 |
|
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
58 |
Report of the Directors | Geographical regions
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax by priority markets within global businesses (continued) |
|
|
|
||||||||||
|
|
|
Retail Banking |
|
Commercial |
|
Global |
|
Global Private Banking |
|
Corporate Centre |
|
Total |
|
|
|
Footnotes |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
Europe |
|
914 |
|
1,953 |
|
122 |
|
(93 |
) |
(2,208 |
) |
688 |
|
|
- UK |
|
560 |
|
1,722 |
|
(361 |
) |
126 |
|
(2,347 |
) |
(300 |
) |
|
of which: HSBC Holdings |
41, 42 |
(530 |
) |
(399 |
) |
(274 |
) |
(91 |
) |
(2,892 |
) |
(4,186 |
) |
|
- France |
|
357 |
|
130 |
|
84 |
|
14 |
|
54 |
|
639 |
|
|
- Germany |
|
23 |
|
66 |
|
137 |
|
20 |
|
(7 |
) |
239 |
|
|
- Switzerland |
|
- |
|
8 |
|
- |
|
(267 |
) |
43 |
|
(216 |
) |
|
- other |
|
(26 |
) |
27 |
|
262 |
|
14 |
|
49 |
|
326 |
|
|
Asia |
|
4,154 |
|
2,843 |
|
3,653 |
|
252 |
|
4,861 |
|
15,763 |
|
|
- Hong Kong |
|
3,811 |
|
2,317 |
|
1,629 |
|
177 |
|
1,872 |
|
9,806 |
|
|
- Australia |
|
60 |
|
51 |
|
232 |
|
- |
|
30 |
|
373 |
|
|
- India |
|
(25 |
) |
79 |
|
321 |
|
14 |
|
217 |
|
606 |
|
|
- Indonesia |
|
(6 |
) |
(128 |
) |
76 |
|
- |
|
51 |
|
(7 |
) |
|
- mainland China |
|
32 |
|
97 |
|
574 |
|
(3 |
) |
2,360 |
|
3,060 |
|
|
- Malaysia |
|
118 |
|
78 |
|
196 |
|
- |
|
50 |
|
442 |
|
|
- Singapore |
|
105 |
|
81 |
|
193 |
|
65 |
|
63 |
|
507 |
|
|
- Taiwan |
|
10 |
|
17 |
|
113 |
|
- |
|
15 |
|
155 |
|
|
- other |
|
49 |
|
251 |
|
319 |
|
(1 |
) |
203 |
|
821 |
|
|
Middle East and North Africa |
|
(1 |
) |
188 |
|
610 |
|
2 |
|
693 |
|
1,492 |
|
|
- Egypt |
|
50 |
|
92 |
|
179 |
|
- |
|
89 |
|
410 |
|
|
- UAE |
|
85 |
|
(24 |
) |
270 |
|
- |
|
36 |
|
367 |
|
|
- Saudi Arabia |
|
2 |
|
- |
|
- |
|
- |
|
498 |
|
500 |
|
|
- other |
|
(138 |
) |
120 |
|
161 |
|
2 |
|
70 |
|
215 |
|
|
North America |
|
(23 |
) |
445 |
|
444 |
|
59 |
|
(311 |
) |
614 |
|
|
- US |
|
(112 |
) |
194 |
|
319 |
|
64 |
|
(424 |
) |
41 |
|
|
- Canada |
|
57 |
|
240 |
|
101 |
|
- |
|
87 |
|
485 |
|
|
- other |
|
32 |
|
11 |
|
24 |
|
(5 |
) |
26 |
|
88 |
|
|
Latin America |
|
(245 |
) |
156 |
|
329 |
|
3 |
|
67 |
|
310 |
|
|
- Mexico |
|
70 |
|
(8 |
) |
(70 |
) |
(2 |
) |
42 |
|
32 |
|
|
- other |
|
(315 |
) |
164 |
|
399 |
|
5 |
|
25 |
|
278 |
|
|
- of which: Brazil |
|
(344 |
) |
13 |
|
341 |
|
6 |
|
(11 |
) |
5 |
|
|
Year ended 31 Dec 2015 |
|
4,799 |
|
5,585 |
|
5,158 |
|
223 |
|
3,102 |
|
18,867 |
|
For footnotes, see page 62.
|
|
|
|
|
|
|
59 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|
|
|
|
|
Other information |
|
|
|
Page |
|
Funds under management and assets held in custody |
|
|
Taxes paid by region and country |
|
|
Conduct-related matters |
|
|
Carbon dioxide emissions |
|
|
|
|
|
|
Funds under management and assets held in custody |
|
|
|||||
|
|
|
|
|
|
|
|
Funds under management |
|||||
|
|
|
2017 |
|
2016 |
|
|
|
Footnote |
$bn |
|
$bn |
|
|
Funds under management |
43 |
|
|
||
|
At 1 Jan |
|
831 |
|
896 |
|
|
Net new money |
|
2 |
|
(8 |
) |
|
Value change |
|
77 |
|
25 |
|
|
Exchange and other |
|
33 |
|
(40 |
) |
|
Disposals |
|
0 |
|
(42 |
) |
|
At 31 Dec |
|
943 |
|
831 |
|
|
Funds under management by business |
|
|
|
||
|
Global Asset Management |
|
462 |
|
410 |
|
|
Global Private Banking |
|
258 |
|
222 |
|
|
Affiliates |
|
4 |
|
2 |
|
|
Other |
|
219 |
|
197 |
|
|
At 31 Dec |
|
943 |
|
831 |
|
For footnote, see page 62.
Funds under management ('FuM') represents assets managed, either actively or passively, on behalf of our customers. At 31 December 2017, FuM amounted to $943bn, an increase of 13% as a result of favourable market performance and favourable foreign currency movements.
Global Asset Management FuM increased by 13% to $462bn compared with 31 December 2016. Excluding foreign currency movements, FuM increased by 6% primarily as a result of positive market performance, with net new money from our retail and institutional customers mainly from fixed income and multi asset products in Asia and money market solutions in North America, partly offset by net outflows from our customers in Europe.
GPB FuM increased by 16% to $258bn compared with 31 December 2016. Excluding currency translation, FuM increased by 6%, reflecting the market performance and the positive net new money in areas targeted for growth, mainly Hong Kong. This was partly offset by the ongoing repositioning of our client base.
Other FuM, of which the main element is a corporate trust business in Asia, increased by 11% to $219bn.
Assets held in custody43 and under administration
Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. At 31 December 2017, we held assets as custodian of $7.7tn, 24% higher than the $6.3tn held at 31 December 2016. The increase was mainly driven by net asset inflows and favourable foreign exchange movements in Asia and Europe, together with the onboarding of new clients in North America and Asia.
Our Assets Under Administration business, which includes the provision of bond and loan administration services and the valuation of portfolios of securities and other financial assets on behalf of clients, complements the Custody business. At 31 December 2017, the value of assets held under administration by the Group amounted to $3.6tn. This was 19% higher than the $3.0tn held at 31 December 2016. The increase was mainly driven by net asset inflows in Europe and Asia together with favourable foreign exchange movements in Europe.
|
|
|
|
|
Taxes paid by region and country |
The following tables reflect a geographical view of HSBC's operations.
Taxes paid by HSBC relate to HSBC's own tax liabilities including tax on profits earned, employer taxes, bank levy and other duties/levies such as stamp duty. Numbers are reported on a cash flow basis.
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
Taxes paid by country |
|||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
Footnote |
$m |
|
$m |
|
$m |
|
|
Europe |
44 |
3,340 |
|
3,151 |
|
3,644 |
|
|
- UK |
|
2,654 |
|
2,385 |
|
2,526 |
|
|
of which: HSBC Holdings |
|
1,078 |
|
1,253 |
|
1,348 |
|
|
- France |
|
530 |
|
553 |
|
620 |
|
|
- Germany |
|
140 |
|
124 |
|
108 |
|
|
- Switzerland |
|
(67 |
) |
34 |
|
92 |
|
|
- other |
|
83 |
|
55 |
|
298 |
|
|
Asia |
|
2,277 |
|
2,755 |
|
2,780 |
|
|
- Hong Kong |
|
1,043 |
|
1,488 |
|
1,415 |
|
|
- Australia |
|
142 |
|
147 |
|
173 |
|
|
- mainland China |
|
227 |
|
241 |
|
277 |
|
|
- India |
|
297 |
|
315 |
|
285 |
|
|
- Indonesia |
|
84 |
|
46 |
|
70 |
|
|
- Malaysia |
|
81 |
|
99 |
|
92 |
|
|
- Singapore |
|
64 |
|
85 |
|
80 |
|
|
- Taiwan |
|
42 |
|
35 |
|
53 |
|
|
- other |
|
297 |
|
299 |
|
335 |
|
|
Middle East and North Africa |
|
419 |
|
293 |
|
449 |
|
|
- Saudi Arabia |
|
170 |
|
60 |
|
151 |
|
|
- UAE |
|
101 |
|
89 |
|
120 |
|
|
- Egypt |
|
58 |
|
97 |
|
136 |
|
|
- other |
|
90 |
|
47 |
|
42 |
|
|
North America |
|
317 |
|
276 |
|
353 |
|
|
- US |
|
134 |
|
135 |
|
127 |
|
|
- Canada |
|
182 |
|
141 |
|
226 |
|
|
- other |
|
1 |
|
- |
|
- |
|
|
Latin America |
|
443 |
|
965 |
|
1,184 |
|
|
- Mexico |
|
129 |
|
79 |
|
91 |
|
|
- other |
|
314 |
|
886 |
|
1,093 |
|
|
of which: Brazil |
|
36 |
|
658 |
|
735 |
|
|
Year ended 31 Dec |
|
6,796 |
|
7,440 |
|
8,410 |
|
For footnote, see page 62.
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
60 |
Report of the Directors | Other information
|
|
|
|
|
Conduct-related matters |
|
|
||||||
|
|
|
|
|
|
|
|
|
Conduct-related costs included in significant items |
||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
$m |
|
$m |
|
$m |
|
|
Income statement |
|
|
|
|||
|
Net interest income/(expense) |
(108 |
) |
2 |
|
(10 |
) |
|
- customer redress programmes |
(108 |
) |
2 |
|
(10 |
) |
|
Operating expenses |
|
|
|
|||
|
Comprising: |
|
|
|
|
||
|
Legal proceedings and regulatory matters |
(198 |
) |
1,025 |
|
1,821 |
|
|
- regulatory provisions in GPB |
164 |
|
344 |
|
172 |
|
|
- settlements and provisions in connection with legal matters |
(362 |
) |
681 |
|
1,649 |
|
|
Customer redress programmes |
655 |
|
559 |
|
541 |
|
|
Total operating expenses |
457 |
|
1,584 |
|
2,362 |
|
|
Total charge for the year relating to significant items |
565 |
|
1,582 |
|
2,372 |
|
|
- of which: |
|
|
|
|||
|
total provisions charge for the year |
565 |
|
1,584 |
|
2,362 |
|
|
total provisions utilised during the year |
1,136 |
|
2,265 |
|
1,021 |
|
|
Balance sheet at 31 Dec |
|
|
|
|||
|
Total provisions |
2,595 |
|
3,056 |
|
3,926 |
|
|
- legal proceedings and regulatory matters |
1,248 |
|
2,060 |
|
2,729 |
|
|
- customer redress programmes |
1,347 |
|
996 |
|
1,197 |
|
|
Accruals, deferred income and other liabilities |
20 |
|
106 |
|
168 |
|
The table above provides a summary of conduct-related costs incurred and included within significant items (see pages 35 and 42).
The HSBC approach to conduct is designed to ensure that through our actions and behaviours we deliver fair outcomes for our customers and do not disrupt the orderly and transparent operation of financial markets. The Board places a strong emphasis on conduct, requiring adherence to high behavioural standards and adhering to the HSBC Values. Board oversight of conduct matters is provided by the Conduct & Values Committee, which oversees the embedding of HSBC Values and our required global conduct outcomes, and the Remuneration Committee, which considers conduct and compliance-related matters relevant to remuneration. These committees' reports may be found on pages 131 to 133.
The management of business conduct and the steps taken to raise standards are described on page 77 under 'Regulatory compliance risk management'.
Provisions relating to significant items raised for conduct costs in 2017 resulted from the ongoing consequences of a small number of historical events.
Operating expenses included significant items related to conduct matters in respect of legal proceedings and regulatory matters of $(0.2)bn and customer remediation costs of $0.7bn. This included the release of provisions recognised in prior years in relation to the regulatory investigations into HSBC's historical foreign exchange activities giving rise to a civil money penalty order in September 2017 with the Federal Reserve Board, and the three-year deferred prosecution agreement with the US Department of Justice in January 2018. For further details on payment protection insurance and legal proceedings and regulatory matters, see Notes 26 and 34 on the Financial Statements, respectively.
|
|
|
|
|
Carbon dioxide emissions |
We report our carbon emissions with reference to the GHG Protocol including the amendments to Scope 2 Guidance which incorporate market-based emission methodology. We report carbon dioxide emissions resulting from energy use in our buildings and employees' business travel.
In 2017, we collected data on energy use and business travel for our operations in 28 countries, which accounted for approximately 93% of our full-time employees ('FTEs'). To estimate the emissions of our operations in countries where we have operational control
and a small presence, we scale up the emissions data from 93% to 100%.
We then apply emission uplift rates to reflect uncertainty concerning the quality and coverage of emission measurement and estimation. The rates are 4% for electricity, 10% for other energy and 6% for business travel. This is consistent both with the Intergovernmental Panel on Climate Change's Good Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories and our internal analysis of data coverage and quality.
|
|
||||
|
|
|
|
|
|
|
Carbon dioxide emissions in tonnes |
||||
|
|
2017 |
|
2016 |
|
|
Total |
580,000 |
|
617,000 |
|
|
From energy |
473,000 |
|
529,000 |
|
|
From travel |
107,000 |
|
88,000 |
|
|
|
||||
|
|
|
|
|
|
|
Carbon dioxide emissions in tonnes per FTE |
||||
|
|
2017 |
|
2016 |
|
|
Total |
2.49 |
|
2.63 |
|
|
From energy |
2.03 |
|
2.25 |
|
|
From travel |
0.46 |
|
0.38 |
|
The reduction in our carbon emissions continues to be driven by energy efficiency initiatives, as well as our procurement of electricity from renewable sources under Power Purchase Agreements. Travel emissions increased after a record low in 2016.
Our greenhouse gas reporting year runs from October to September. For the year from 1 October 2016 to 30 September 2017, carbon dioxide emissions from our global operations were 580,000 tonnes. Independent assurance of our carbon dioxide emissions will be available in the first half of 2018 on our website.
|
|
|
|
|
|
|
61 |
HSBC Holdings plc Annual Report and Accounts 2017 |
|
|
|
|
|
|
|
Footnotes to strategic report, financial summary, global businesses, geographical regions and other information |
|
|
1 |
Achieved Mexico profit before tax target on a local currency basis; US dollar target set using the 2014 average exchange rate. |
|
2 |
Further detail on the Monitor can be found on page 78. |
|
3 |
Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.
|
|
4 |
'Other personal lending' includes personal non-residential closed-end loans and personal overdrafts. |
|
5 |
'Investment distribution' includes Investments, which comprises mutual funds (HSBC manufactured and third party), structured products and securities trading, and Wealth Insurance distribution, consisting of HSBC manufactured and third-party life, pension and investment insurance products. |
|
6 |
'Other' mainly includes the distribution and manufacturing (where applicable) of retail and credit protection insurance. |
|
7 |
Adjusted return on average risk-weighted assets ('RoRWA') is used to measure the performance of RBWM, CMB, GB&M and GPB. Adjusted RoRWA is calculated using profit before tax and reported average risk-weighted assets at constant currency adjusted for the effects of significant items. |
|
8 |
'Markets products, Insurance and Investments and Other' includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and global banking products. |
|
9 |
In 2017, credit and funding valuation adjustments included an adverse fair value movement of $546m on the tightening of own credit spreads on structured liabilities (2016: adverse fair value movement of $125m; 2015: favourable fair value movement of $163m). |
|
10 |
'Other' in GB&M includes net interest earned on free capital held in the global business not assigned to products, allocated funding costs and gains resulting from business disposals. Within the management view of adjusted revenue, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities which is not reflected within operating income; for example, notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offsets to these tax credits are included within 'Other'. |
|
11 |
Central Treasury includes revenue relating to BSM of $2,688m (2016: $3,007m; 2015: $2,805m), interest expense of $1,275m (2016: $967m; 2015: $696m) and favourable valuation differences on issued long-term debt and associated swaps of $122m (2016: loss of $271m; 2015: loss of $63m). Revenue relating to BSM includes other internal allocations, including notional tax credits to reflect the economic benefit generated by certain activities which is not reflected within operating income, for example notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offsets to these tax credits are included in other Central Treasury. |
|
12 |
Other miscellaneous items in Corporate Centre includes internal allocations relating to Legacy Credit. |
|
13 |
Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of, or for, that year. |
|
14 |
Dividends per ordinary share expressed as a percentage of basic earnings per share. |
|
15 |
Return on average risk-weighted assets is calculated using profit before tax and reported average risk-weighted assets. |
|
16 |
Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA'). |
|
17 |
Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds. |
|
18 |
Net interest margin is net interest income expressed as an annualised percentage of AIEA. |
|
19 |
Interest income on trading assets is reported as 'Net trading income' in the consolidated income statement. |
|
20 |
Interest income on financial assets designated at fair value is reported as 'Net income/(expense) from financial instruments designated at fair value' in the consolidated income statement. |
|
21 |
Including interest-bearing bank deposits only. |
|
22 |
Interest expense on financial liabilities designated at fair value is reported as 'Net income on financial instruments designated at fair value' in the consolidated income statement, other than interest on own debt, which is reported in 'Interest expense'. |
|
23 |
Including interest-bearing customer accounts only. |
|
24 |
Trading income also includes movements on non-qualifying hedges. These hedges are derivatives entered into as part of a documented interest rate management strategy for which hedge accounting was not, nor could be, applied. They are principally cross-currency and interest rate swaps used to economically hedge fixed rate debt issued by HSBC Holdings and floating rate debt issued by HSBC Finance. The size and direction of the changes in the fair value of non-qualifying hedges that are recognised in the income statement can be volatile from year-to-year, but do not alter the cash flows expected as part of the documented interest rate management strategy for both the instruments and the underlying economically hedged assets and liabilities if the derivative is held to maturity. |
|
|
|
|
|
|
|
25 |
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
|
|
26 |
Net of impairment allowances. |
|
27 |
On 1 January 2014, CRD IV came into force and the calculation of capital resources and RWAs for 2014 to 2017 are calculated and presented on this basis. 2013 comparative is on a Basel 2.5 basis. |
|
28 |
Capital resources are regulatory capital, the calculation of which is set out on page 117. |
|
29 |
Including perpetual preferred securities, details of which can be found in Note 27 on the Financial Statements. |
|
30 |
The definition of net asset value per ordinary share is total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue excluding shares the company has purchased and are held in treasury. |
|
31 |
Net trading income includes interest expense relating to the internal funding of trading assets, in GB&M. In the statutory presentation, internal funding in GB&M net trading income is eliminated through Corporate Centre, and in our other global businesses it is eliminated within net interest income.
|
|
32 |
Excludes items where there are substantial offsets in the income statement for the same year. |
|
33 |
'Other income' in this context comprises where applicable net income/expense from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders. |
|
34 |
Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items. |
|
35 |
'Client assets' are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately. The main components of client assets were funds under management ($258bn at 31 December 2017) which were not reported on the Group's balance sheet, and customer deposits ($72bn at 31 December 2017), of which $67bn was reported on the Group's balance sheet and $5bn were off-balance sheet deposits.
|
|
36 |
Client assets related to our Middle East clients are booked across to various other regions, primarily in Europe.
|
|
37 |
Risk-weighted assets are non-additive across geographical regions due to market risk diversification effects within the Group.
|
|
38 |
In the first half of 2015 our operations in Brazil were classified as held for sale. As a result, balance sheet accounts were classified as 'Assets held for sale' and 'Liabilities of disposal groups held for sale'. There was no separate income statement classification. The sale completed on 1 July 2016. |
|
39 |
Amounts are non-additive across geographical regions due to inter-company transactions within the Group. |
|
40 |
Europe's adjusted 2017 profit of $1.0bn includes a number of items incurred centrally on behalf of the Group as a whole, but which are disclosed in the Europe segment, including consolidation adjustments and Holdings costs such as interest costs on Group debt and the UK bank levy. |
|
41 |
Excludes intra-Group dividend income. |
|
42 |
For the purposes of the analysis of reported results by country table, HSBC Holdings profit/(loss) is presented excluding the effect of the early adoption of the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value', which was early adopted in the separate financial statements of HSBC Holdings but not in the consolidated financial statements of HSBC. |
|
43 |
Funds under management and assets held in custody are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager, and these assets are consolidated as Structured entities (see Note 19 on the Financial Statements). |
|
44 |
Taxes paid by HSBC relate to HSBC's own tax liabilities, including tax on profits earned, employer taxes, the UK bank levy and other duties/levies such as stamp duty. Numbers are reported on a cash flow basis. |
|
|
|
|
|
|
|
HSBC Holdings plc Annual Report and Accounts 2017 |
62 |