FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549

 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
For the month of October 2019

Commission File Number: 001-14930

HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F   X             Form 40-F ......
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ______



 
 
 
This Report on Form 6-K with respect to our quarterly results for the three-month and nine-month period ended September 30, 2019 is hereby incorporated by reference in the following HSBC Holdings plc registration statements: Registration Statements on Form F-3 (Nos. 333-92024, 333-135007, 333-158065, 333-180288, 333-202420, 333-223191) and Registration Statement on Form F-4 (No. 333-126531).

                                                                                       
Neither our website referred to herein, nor any of the information contained on our website, is incorporated by reference in the Form 6-K







hsbclogo4.jpg

28 OCTOBER 2019
HSBC HOLDINGS PLC

3Q19 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
“Parts of our business, especially Asia, held up well in a challenging environment in the third quarter. However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US. Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth. We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities.”
Highlights
Reported profit before tax in Asia up 4% to $4.7bn in 3Q19, with a resilient performance in Hong Kong.
Growth in both loans and advances to customers and customer accounts, up 4% and 2% respectively on a reported basis compared with 3Q18, and up 7% and 5% on a constant currency basis.
Commercial Banking (‘CMB’) and Retail Banking delivered revenue growth compared with 3Q18. Continued momentum in Global Private Banking (‘GPB’) with net new money of $19bn in 9M19. Performance in Retail Banking and Wealth Management (‘RBWM’) in HSBC UK in 3Q19 was adversely impacted by additional customer redress charges.
Global Banking and Markets (‘GB&M’) performance continued to reflect low levels of client activity in Global Markets, although our transaction banking franchises delivered a resilient performance. In 3Q19, GB&M’s adjusted revenue in Asia increased by 9% compared with 3Q18 and represented over 50% of total GB&M adjusted revenue.
Continued strong capital levels, with common equity tier 1 (‘CET1’) ratio of 14.3%, including the completion of a $1bn share
buy-back.
Financial performance (vs. 3Q18)
Profit attributable to ordinary shareholders in 3Q19 down 24% to $3.0bn, reflecting challenging market conditions. Return on tangible equity (annualised) (‘RoTE’) for 3Q19 of 6.4%.
Reported profit before tax down 18% to $4.8bn, which included additional customer redress provisions of $606m and $120m of severance costs. Adjusted profit before tax down 12% to $5.3bn.
Reported revenue down 3% to $13.4bn, due to lower client activity in Global Markets, compared with a strong 3Q18. In RBWM, continued growth in Retail Banking was broadly offset in insurance manufacturing due to higher adverse market impacts of $177m, while revenue increased in CMB and GPB. Adjusted revenue down 2% to $13.3bn.
The reduction in revenue included an adverse movement in credit and funding valuation adjustments in GB&M of $196m, while the adverse impact of hyperinflation accounting in Argentina in 3Q19 was $132m, compared with $304m in 3Q18.
Reported operating expenses up 2% due to significant items. Adjusted operating expenses up 0.8%, reflecting cost discipline while continuing to invest.
Reported change in expected credit losses (‘ECL’) increased by $0.4bn, mainly on unsecured lending in RBWM and higher charges in CMB in the UK and Hong Kong. ECL in 3Q19 included a charge to reflect the economic outlook in Hong Kong.
Financial performance (vs. 9M18)
Reported profit before tax up 4% to $17.2bn, including an $828m dilution gain recognised in Saudi Arabia, customer redress provisions of $1.2bn, and $407m of severance costs. Adjusted profit before tax up $50m to $17.9bn.
Reported revenue up 4%. Adjusted revenue up 4.8%, which reflected strong performances in RBWM and CMB, notably in the first half of 2019. Adjusted revenue in GB&M down 7% from lower market activity due to ongoing economic uncertainty.
Reported operating expenses down 1%. Adjusted operating expenses up 2.6%, which is a slower growth rate than the 5.6% at FY18 (compared with FY17) while we have continued to invest. 9M19 positive adjusted jaws of 2.2%.
Earnings per share of 57 cents. 9M19 RoTE (annualised) of 9.5%.
Outlook
The revenue environment is more challenging than in the first half of 2019, and the outlook for revenue growth is softer than we anticipated at the half-year. As a result, we no longer expect to reach our RoTE target of more than 11% in 2020.
We will act to rebalance our capital away from low-return businesses and adjust the cost base in line with the actions we take.
These actions, or any continuing deterioration in the revenue environment, could result in significant charges in 4Q19 and subsequent periods, including the possible impairment of goodwill and additional restructuring charges.
Addressing low-return businesses and reducing risk-weighted assets (‘RWAs’) will allow redeployment of capital and resources into higher growth and return opportunities.
We intend to sustain the dividend and maintain a CET1 ratio of above 14%.



Registered office and Group Head office: 8 Canada Square , London, E14 5HQ, United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered number 617987


Earnings Release – 3Q19

Key financial metrics

Nine months ended
Quarter ended

30 Sep

30 Sep

30 Sep

30 Jun

30 Sep


2019

2018

2019

2019

2018

Reported results
 
 
 
 
 
Reported revenue ($m)
42,727

41,085

13,355

14,944

13,798

Reported profit before tax ($m)
17,244

16,634

4,837

6,194

5,922

Reported profit after tax ($m)
13,732

12,932

3,795

5,027

4,516

Profit attributable to the ordinary shareholders of the parent company ($m)
11,478

11,071

2,971

4,373

3,899

Basic earnings per share ($)
0.57

0.56

0.15

0.22

0.19

Diluted earnings per share ($)
0.57

0.55

0.15

0.22

0.19

Return on average ordinary shareholders' equity (annualised) (%)
9.2

9.0

7.0

10.5

9.6

Return on average tangible equity (annualised) (%)
9.5

10.1

6.4

11.7

10.9

Net interest margin (%)
1.59
1.67

 
 
 
Adjusted results
 
 
 
 
 
Adjusted revenue ($m)
41,762
39,868

13,267

13,881

13,486

Adjusted profit before tax ($m)
17,864
17,814

5,348

6,101

6,092

Adjusted jaws (%)
2.2
 
(2.4
)
 
 
Adjusted cost efficiency ratio (%)
56.8

57.9

56.9

57.3

55.5

Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers (%)
0.27

0.12

0.34

0.22

0.20

 
 
At
 
 
30 Sep

30 Jun

31 Dec

 
Footnotes
2019

2019

2018

Balance sheet
 
 
 
 
Total assets ($m)
 
2,728,347

2,751,273

2,558,124

Net loans and advances to customers ($m)
 
1,017,833

1,021,632

981,696

Customer accounts ($m)
 
1,373,741

1,380,124

1,362,643

Average interest-earning assets, year to date ($m)
 
1,915,149

1,912,708

1,839,346

Loans and advances to customers as % of customer accounts (%)
 
74.1

74.0

72.0

Total shareholders’ equity ($m)
 
189,517

192,676

186,253

Tangible ordinary shareholders’ equity ($m)
 
141,831

145,441

140,056

Net asset value per ordinary share at period end ($)
1
8.21

8.35

8.13

Tangible net asset value per ordinary share at period end ($)
 
7.02

7.19

7.01

Capital, leverage and liquidity
 
 
 
 
Common equity tier 1 capital ratio (%)
2
14.3

14.3

14.0

Risk-weighted assets ($m)
2
865,238

885,971

865,318

Total capital ratio (%)
2
20.2

20.1

20.0

Leverage ratio (%)
2
5.4

5.4

5.5

High-quality liquid assets (liquidity value) ($bn)
 
513

533

567

Liquidity coverage ratio (%)
 
136

136

154

Share count
 
 
 
 
Period end basic number of $0.50 ordinary shares outstanding (millions)
 
20,191

20,221

19,981

Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)
 
20,267

20,286

20,059

Average basic number of $0.50 ordinary shares outstanding (millions)
 
20,149

20,124

19,896

Dividend per ordinary share (in respect of the period) ($)
 
0.30

0.30

0.51

1
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.
2
Unless otherwise stated, regulatory capital ratios and requirements are calculated in accordance with the transitional arrangements of the Capital Requirements Regulation in force in the EU at the time, including the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’ in article 473a. The capital ratios and requirements at 30 September 2019 and 30 June 2019 apply the revisions to the Capital Requirements Regulation (‘CRR II’), whereas prior periods apply the Capital Requirements Regulation and Directive (‘CRD IV’). Leverage ratios are calculated using the end point definition of capital.


2
HSBC Holdings plc Earnings Release 3Q19


Contents
 
Page
 
 
Page
Highlights
 
Minimum requirement for own funds and eligible liabilities
Key financial metrics
 
Summary information – global businesses

Adjusted performance
 
Summary information – geographical regions






Financial performance commentary
 
Appendix – selected information

















Cautionary statement regarding forward-looking statements
 
– Reconciliation of reported to adjusted results – global businesses





























Summary consolidated income statement
 
– Reconciliation of reported and adjusted risk-weighted assets































Summary consolidated balance sheet
 
– Reconciliation of reported to adjusted results – geographical regions and selected countries/territories



















Credit risk
 
Capital adequacy
 
Third interim dividend for 2019
Leverage
 
Terms and abbreviations
Risk-weighted assets
 
 
 
HSBC Holdings plc will be conducting a trading update conference call with analysts and investors today to coincide with the publication of its Earnings Release. The call will take place at 07.30am GMT. Details of how to participate in the call and the live audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in
65 countries and territories in our geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of $
2,728bn at 30 September 2019, HSBC is one of the world’s largest banking and financial services organisations.
Adjusted performance
Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort period-on-period comparisons.
We consider adjusted performance to provide 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 period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US dollar against most major currencies. 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 understand better the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 9M19 and 3Q19 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
the income statements for 9M18 at the average rates of exchange for 9M19;
the income statements for quarterly periods at the average rates of exchange for 3Q19; and
the closing prior period balance sheets at the prevailing rates of exchange on 30 September 2019.
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. The constant currency data of HSBC’s Argentinian subsidiaries have not been adjusted further for the impacts of hyperinflation. 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.
Significant items
‘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.
The tables on pages 38 to 52 detail the effects of significant items on each of our global business segments and geographical regions during 9M19, 3Q19 and 3Q18.
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 period-on-period movements in performance.
Customer redress provisions
Customer redress charges of $606m in 3Q19 included provisions for payment protection insurance (‘PPI’) of $388m as well as other customer redress programmes, notably in HSBC UK Bank plc. The increase in PPI provisions was mainly driven by the volume of information requests and inbound complaints received in the period to 29 August 2019, which significantly exceeded that forecast at 30 June 2019 (for further information, see page 103 of our Interim Report 2019). This was partly offset by the lower quality of the information requests. Other customer redress provisions include amounts recognised in respect of fees, charges and interest arising from collection and recovery activities.
The customer redress provisions include significant judgement in respect of the assumptions used and represent the best estimates at the reporting date. The assumptions used will continue to be reviewed and this may result in changes to the amounts provided in future reporting periods.

HSBC Holdings plc Earnings Release 3Q19
3


Earnings Release – 3Q19

Global business performance
The Group Chief Executive, supported by the rest of the Group Management Board (‘GMB’), is considered to be the Chief Operating Decision Maker (‘CODM’) for the purposes of identifying the Group‘s reportable segments.
The Group Chief Executive and the rest of the 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’. Global business results are assessed by the CODM on the basis of adjusted performance, which 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.
A reconciliation of the Group’s adjusted results to the Group’s reported results is presented below. Supplementary reconciliations of adjusted to reported results by global business are presented on pages 38 to 42 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that provide breakdowns of adjusted revenue by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed.
Reconciliation of reported and adjusted results
 
 
Nine months ended
Quarter ended
 
 
30 Sep

30 Sep

30 Sep

30 Jun

30 Sep

 
 
2019

2018

2019

2019

2018

 
Footnotes
$m

$m

$m

$m

$m

Revenue
 
 
 
 
 
 
Reported
1
42,727

41,085

13,355

14,944

13,798

Currency translation
 


(1,514
)


(208
)
(355
)
Significant items
 
(965
)
297

(88
)
(855
)
43

– customer redress programmes
 
118

(46
)
118



– disposals, acquisitions and investment in new businesses
 
(823
)
142

4

(827
)

– fair value movement on financial instruments
2
(260
)
195

(210
)
(28
)
43

– currency translation of significant items
 


6





Adjusted
 
41,762

39,868

13,267

13,881

13,486

Change in expected credit losses and other credit impairment charges
 










Reported
 
(2,023
)
(914
)
(883
)
(555
)
(507
)
Currency translation
 


68



10

18

Adjusted
 
(2,023
)
(846
)
(883
)
(545
)
(489
)
Operating expenses
 
 
 
 
 
 
Reported
 
(25,296
)
(25,515
)
(8,147
)
(8,927
)
(7,966
)
Currency translation
 


1,030



176

261

Significant items
 
1,585

1,382

599

800

218

– cost of structural reform
3
126

300

35

38

89

– customer redress programmes
 
1,098

162

488

554

62

– disposals, acquisitions and investment in new businesses
 

54




51

– restructuring and other related costs
 
427

51

140

237

27

– settlements and provisions in connection with legal and regulatory matters
 
(66
)
840

(64
)
(2
)
(1
)
– currency translation of significant items
 


(25
)


(27
)
(10
)
Adjusted
 
(23,711
)
(23,103
)
(7,548
)
(7,951
)
(7,487
)
Share of profit in associates and joint ventures
 










Reported
 
1,836

1,978

512

732

597

Currency translation
 


(83
)


(16
)
(15
)
Adjusted
 
1,836

1,895

512

716

582

Profit before tax
 










Reported
 
17,244

16,634

4,837

6,194

5,922

Currency translation
 


(499
)


(38
)
(91
)
Significant items
 
620

1,679

511

(55
)
261

– revenue
 
(965
)
297

(88
)
(855
)
43

– operating expenses
 
1,585

1,382

599

800

218

Adjusted
 
17,864

17,814

5,348

6,101

6,092

Loans and advances to customers (net)
 
 
 
 
 
 
Reported
 
1,017,833

981,460

1,017,833

1,021,632

981,460

Currency translation
 
 
(26,630
)
 
(19,742
)
(26,630
)
Adjusted
 
1,017,833

954,830

1,017,833

1,001,890

954,830

Customer accounts
 
 
 
 
 
 
Reported
 
1,373,741

1,345,375

1,373,741

1,380,124

1,345,375

Currency translation
 
 
(33,300
)
 
(25,198
)
(33,300
)
Adjusted
 
1,373,741

1,312,075

1,373,741

1,354,926

1,312,075

1
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.
2
Includes fair value movements on non-qualifying hedges and debit value adjustments (‘DVA’) on derivative contracts.
3
Comprises costs associated with preparations for the UK’s exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.


4
HSBC Holdings plc Earnings Release 3Q19


Financial performance commentary
Distribution of results by global business
 
 
Nine months ended
Quarter ended
 
30 Sep

30 Sep

30 Sep

30 Jun

30 Sep

 
2019

2018

2019

2019

2018

 
$m

$m

$m

$m

$m

Adjusted profit before tax
 
 
 
 
 
Retail Banking and Wealth Management
6,137

5,661

1,696

2,195

2,072

Commercial Banking
5,657

5,811

1,632

1,979

1,837

Global Banking and Markets
4,065

5,196

1,241

1,183

1,765

Global Private Banking
319

280

123

98

93

Corporate Centre
1,686

866

656

646

325

Total
17,864

17,814

5,348

6,101

6,092

Distribution of results by geographical region
 
Nine months ended
Quarter ended
 
30 Sep

30 Sep

30 Sep

30 Jun

30 Sep

 
2019

2018

2019

2019

2018

 
$m

$m

$m

$m

$m

Reported profit/(loss) before tax
 
 
 
 
 
Europe
(944
)
744

(424
)
(506
)
634

Asia
14,431

13,839

4,651

4,774

4,459

Middle East and North Africa
2,041

1,158

305

1,271

322

North America
1,045

509

299

367

467

Latin America
671

384

6

288

40

Total
17,244

16,634

4,837

6,194

5,922

Adjusted profit before tax
 
 
 
 
 
Europe
313

1,115

52

157

812

Asia
14,525

13,597

4,658

4,803

4,422

Middle East and North Africa
1,221

1,165

308

452

329

North America
1,109

1,558

321

403

469

Latin America
696

379

9

286

60

Total
17,864

17,814

5,348

6,101

6,092

Tables showing adjusted profit before tax by global business and region are presented to support the commentary on adjusted performance on the following pages.
The tables on pages 38 to 52 reconcile reported to adjusted results for each of our global business segments and geographical regions.
Group
3Q19 compared with 3Q18 – reported results
 
 
Quarter ended
 
30 Sep

30 Sep

Variance
 
2019

2018

3Q19 vs. 3Q18
 
$m

$m

$m

%

Revenue
13,355

13,798

(443
)
(3
)
ECL
(883
)
(507
)
(376
)
(74
)
Operating expenses
(8,147
)
(7,966
)
(181
)
(2
)
Share of profit from associates and JVs
512

597

(85
)
(14
)
Profit before tax
4,837

5,922

(1,085
)
(18
)
Tax expense
(1,042
)
(1,406
)
364

26

Profit after tax
3,795

4,516

(721
)
(16
)
Reported profit
Reported profit after tax of $3.8bn was $0.7bn or 16% lower than in 3Q18, reflecting challenging market conditions.
Reported profit before tax of $4.8bn was $1.1bn or 18% lower than in 3Q18. The 3Q19 results included a provision of $0.6bn in respect of customer redress programmes and $140m of restructuring and other related costs, of which $120m related to severance. Reported results also included adverse credit and funding valuation adjustments in GB&M of $160m (3Q18: $36m favourable), adverse market impacts in insurance manufacturing in RBWM of $225m (3Q18: $48m adverse), and favourable valuation differences on long-term debt and associated swaps in Corporate Centre of $76m (3Q18: $15m adverse). The effects of hyperinflation accounting in Argentina resulted in a $67m decrease in profit before tax, compared with a $145m decrease in 3Q18.
The reduction in reported profit before tax reflected lower revenue, primarily as GB&M generated less income in Global Markets from reduced client activity due to ongoing economic uncertainty, which compared with a strong 3Q18. This decrease was partly offset by higher revenue in CMB, mainly reflecting higher balances in Credit and Lending (‘C&L’) and Global Liquidity and Cash Management

HSBC Holdings plc Earnings Release 3Q19
5


Earnings Release – 3Q19

(‘GLCM’). In RBWM, growth in our Retail Banking business was broadly offset by adverse market impacts on insurance manufacturing. In addition, ECL increased in both RBWM and CMB.
Excluding net adverse movements in significant items of $0.3bn and adverse foreign currency translation differences of $0.1bn, profit before tax decreased by $0.7bn or 12%.
Reported revenue
Reported revenue of $13.4bn was $0.4bn or 3% lower than in 3Q18.
The reduction in reported revenue included adverse foreign currency translation differences of $0.4bn, partly offset by a net favourable movement in significant items of $0.1bn, primarily from favourable fair value movements on financial instruments.
Excluding foreign currency translation differences and significant items, revenue decreased by $0.2bn or 2%.
Reported ECL
Reported ECL of $0.9bn were $0.4bn higher than in 3Q18, with increases in RBWM driven by higher impairments on unsecured lending in the UK, the US, Hong Kong and Mexico, and also in CMB reflecting higher charges in the UK and Hong Kong.
The effect of foreign currency translation differences between the periods was minimal.
Reported operating expenses
Reported operating expenses of $8.1bn was $0.2bn or 2% higher than in 3Q18. This was driven by higher charges associated with customer redress programmes, of which $388m related to additional charges for the mis-selling of PPI, and $140m for restructuring and other related costs arising from cost efficiency measures across our global businesses and functions. The increase also reflected expenditure from near- and medium-term investments to grow the business.
The increase in operating expenses was partly offset by a reduction in performance-related pay and the favourable effect of foreign currency translation differences of $0.3bn.
Excluding significant items and foreign currency translation differences, operating expenses increased by $0.1bn or 1%.
Reported share of profit from associates and JVs
Reported income from associates of $0.5bn decreased by $0.1bn or 14%, mainly from a reduction in income from The Saudi British Bank (‘SABB’) as a result of higher ECL charges and other expenses relating to the merger with Alawwal bank, based on its latest published results.
Third interim dividend for 2019
On 2 October 2019, the Board announced a third interim dividend for 2019 of $0.10 per ordinary share in respect of the period. Further details are set out at the end of this release.
Group
3Q19 compared with 3Q18 – adjusted results
 
 
Quarter ended
 
30 Sep

30 Sep

Variance
 
2019

2018

3Q19 vs. 3Q18
 
$m

$m

$m

%

Revenue
13,267

13,486

(219
)
(2
)
ECL
(883
)
(489
)
(394
)
(81
)
Operating expenses
(7,548
)
(7,487
)
(61
)
(1
)
Share of profit from associates and JVs
512

582

(70
)
(12
)
Profit before tax
5,348

6,092

(744
)
(12
)
Adjusted profit before tax
On an adjusted basis, profit before tax of $5.3bn was $0.7bn or 12% lower than in 3Q18. This was primarily from lower revenue in GB&M due to reduced client activity resulting from ongoing economic uncertainty compared with a strong 3Q18, as well as higher ECL in both RBWM and CMB.
The effects of hyperinflation accounting in Argentina resulted in a $67m decrease in profit before tax, compared with $145m in 3Q18.
Adjusted revenue
Adjusted revenue of $13.3bn was $0.2bn or 2% lower than in 3Q18, mainly in GB&M, while there was a favourable movement in revenue in Corporate Centre and higher revenue in CMB.
In GB&M, revenue decreased by $0.6bn or 15%, which included a net adverse movement on credit and funding valuation adjustments of $196m. Revenue was $0.4bn lower in Global Markets from reduced client activity, reflecting economic uncertainty, compared with a strong 3Q18. In Global Banking, revenue increased as we grew lending balances and benefited from wider credit spreads on portfolio hedges, partly offset by prior year gains on corporate restructuring and lower event-driven revenue. Investment in GLCM, Securities Services and Global Trade and Receivables Finance (‘GTRF’) supported continued momentum as we delivered single-digit growth in average balances.
In RBWM, revenue was broadly unchanged. In Retail Banking, higher revenue (up $0.1bn) reflected balance growth in lending and deposits, primarily in the UK and Hong Kong, while revenue growth in investment distribution was driven by higher sales of mutual funds and FX products. These increases were broadly offset by adverse market impacts in insurance manufacturing in 3Q19 of $225m (3Q18: $48m adverse).
In CMB, revenue increased by $0.1bn or 4%, primarily in C&L from balance sheet growth of 5%, with increases in all regions. In GLCM, revenue increased as we benefited from wider margins, notably in Hong Kong, and higher average balances in North America and the UK.

6
HSBC Holdings plc Earnings Release 3Q19


In GPB, revenue increased by $45m or 11%, mainly in Asia from growth in investment and lending revenue.
In Corporate Centre, a net favourable movement in revenue of $194m mainly reflected a favourable effect of hyperinflation accounting in Argentina of $172m, and favourable movements of $91m relating to the economic hedging of interest rate and exchange rate risk on our long-term debt with long-term derivatives. Balance Sheet Management (‘BSM’) also recorded higher revenue, although this was partly offset by lower revenue in legacy credit due to higher losses on portfolio disposals.
Adjusted ECL
Adjusted ECL of $0.9bn were $0.4bn higher due to increased charges in RBWM and CMB. In addition, ECL in 3Q19 included a charge to reflect the economic outlook in Hong Kong. In 3Q19, adjusted ECL as a percentage of average gross loans and advances to customers was 0.34%, compared with 0.20% at 3Q18.
In RBWM, ECL were $0.4bn, an increase of $0.2bn, mainly against unsecured lending in the UK, the US, Hong Kong and Mexico.
In CMB, ECL rose by $0.2bn to $0.4bn. The increase reflected higher ECL in the UK and Hong Kong, which included charges related to specific customers. This increase was partly offset by lower ECL in MENA.
ECL remain sensitive to forward economic guidance, which has the potential to result in significant additional charges, given the current level of uncertainty in a number of the markets in which we operate.
Adjusted operating expenses
Adjusted operating expenses of $7.5bn were $0.1bn or 1% higher than in 3Q18. This included an increase in costs from investments (up $0.1bn), notably from near- and medium-term investments to grow the business, mainly in RBWM and CMB, and continued investment in digital across all global businesses. These increases were partly offset by a $0.2bn reduction in performance-related pay.
Adjusted share of profit from associates and JVs
Adjusted share of income from associates of $0.5bn was $70m or 12% lower than in 3Q18, mainly from a reduction in income from SABB as a result of higher ECL charges and other expenses relating to the merger with Alawwal bank, based on its latest published results.
Group
9M19 compared with 9M18 – reported results
 
 
Nine months ended

 
30 Sep

30 Sep

Variance
 
2019

2018

9M19 vs. 9M18
 
$m

$m

$m

%

Revenue
42,727

41,085

1,642

4

ECL
(2,023
)
(914
)
(1,109
)
>(100)

Operating expenses
(25,296
)
(25,515
)
219

1

Share of profit from associates and JVs
1,836

1,978

(142
)
(7
)
Profit before tax
17,244

16,634

610

4

Tax expense
(3,512
)
(3,702
)
190

5

Profit after tax
13,732

12,932

800

6

Reported profit
Reported profit after tax of $13.7bn was $0.8bn or 6% higher than in 9M18.
Reported profit before tax of $17.2bn was $0.6bn or 4% higher, mainly due to revenue growth, notably in the first half of the year. This increase in revenue was in RBWM from balance sheet growth and the impact of previous interest rate increases on margins in Retail Banking, and in CMB from growth across all our major products, while in GB&M revenue fell. Revenue growth included an $828m dilution gain recognised on the completion of the merger of SABB with Alawwal bank in Saudi Arabia, the non-recurrence of a 9M18 adverse swap mark-to-market loss of $177m on a bond reclassification in Corporate Centre, and 9M19 disposal gains in RBWM and CMB of $157m.
Profit growth was adversely impacted by higher ECL, largely from an increase in charges against a small number of exposures in CMB and GB&M, as well as an increase in RBWM. Operating expenses also rose.
Results in 9M19 included additional customer redress provisions of $1.2bn, restructuring and other related costs of $427m, of which $407m related to severance, adverse credit and funding valuation adjustments in GB&M of $147m (9M18: $4m adverse), and adverse market impacts in insurance manufacturing in RBWM of $72m (9M18: $140m adverse). The effects of hyperinflation accounting in Argentina resulted in a $129m decrease in profit before tax, compared with a $145m decrease in 9M18.
Excluding net favourable movements in significant items of $1.1bn and adverse foreign currency translation differences of $0.5bn, profit before tax increased by $50m.
Reported revenue
Reported revenue of $42.7bn was $1.6bn or 4% higher than in 9M18, reflecting growth in RBWM and CMB, as discussed above, and in Corporate Centre, partly offset by lower revenue in GB&M.
Net favourable movements in significant items of $1.3bn, which largely comprised the $828m dilution gain recognised on the merger of SABB with Alawwal bank and favourable fair value movements on financial instruments of $0.5bn, were more than offset by adverse foreign currency translation differences of $1.5bn.
Excluding significant items and currency translation differences, revenue increased by $1.9bn or 5%.
Reported ECL
Reported ECL of $2.0bn were $1.1bn higher than in 9M18, primarily driven by increased charges against specific exposures in CMB and GB&M. This also included favourable foreign currency translation differences of $68m.

HSBC Holdings plc Earnings Release 3Q19
7


Earnings Release – 3Q19

Reported operating expenses
Reported operating expenses of $25.3bn were $0.2bn or 1% lower than in 9M18 and included favourable foreign currency translation differences of $1.0bn, partly offset by net adverse movements in significant items of $0.2bn, which included:
customer redress programme costs of $1.1bn, of which $1.0bn related to PPI, compared with $0.2bn in 9M18; and
restructuring and other related costs of $0.4bn, which included $407m of severance costs.
These were partly offset by:
the non-recurrence of settlements and provisions in connection with legal and regulatory matters of $0.8bn in 9M18; and
structural reform costs of $0.1bn, compared with $0.3bn in 9M18.
Excluding significant items and foreign currency translation differences, operating expenses increased by $0.6bn or 3%.
Reported share of profit from associates and JVs
Reported share of profit in associates of $1.8bn was $0.1bn or 7% lower than in 9M18. This included adverse foreign currency translation differences of $83m. The reduction also reflected lower share of profit from SABB as a result of higher ECL charges and other expenses relating to the merger with Alawwal bank, partly offset by higher income from Bank of Communications Co., Limited (‘BoCom’).
Tax expense
The effective tax rate for 9M19 of 20.4% was lower than the 22.3% for 9M18. The 9M18 period contained a non-deductible regulatory settlement. The rate at 9M19 was reduced due to a change in profit mix and a non-taxable dilution gain in 1H19, partly offset by non-recognition of UK tax losses and non-deductible UK customer redress expenses.
Group
9M19 compared with 9M18 – adjusted results
 
 
Nine months ended
 
30 Sep

30 Sep

Variance
 
2019

2018

9M19 vs. 9M18
 
$m

$m

$m

%

Revenue
41,762

39,868

1,894

5

ECL
(2,023
)
(846
)
(1,177
)
>(100)

Operating expenses
(23,711
)
(23,103
)
(608
)
(3
)
Share of profit from associates and JVs
1,836

1,895

(59
)
(3
)
Profit before tax
17,864

17,814

50

0

Adjusted profit before tax
Adjusted profit before tax of $17.9bn was marginally higher than in 9M18 (up $0.1bn).
Adjusted revenue increased by $1.9bn, primarily reflecting growth in RBWM and CMB, although revenue in GB&M fell. The increase in revenue was broadly offset by higher adjusted ECL (up $1.2bn) and a rise in adjusted operating expenses of $0.6bn, which included investments to grow the business and investments in digital capabilities.
The effects of hyperinflation accounting in Argentina resulted in a $129m decrease in profit before tax, compared with a $145m decrease in 9M18.
Adjusted revenue
Adjusted revenue of $41.8bn was $1.9bn or 5% higher than in 9M18, reflecting continued growth in RBWM and CMB, notably in the first half of 2019. Adjusted revenue also increased in GPB and Corporate Centre. These increases were partly offset by lower revenue in GB&M.
In RBWM, revenue increased by $1.3bn or 8%, mainly in Retail Banking, reflecting growth in deposit and lending balances, primarily in Hong Kong and the UK. We also benefited from wider margins due to previous interest rate rises. In Wealth Management, revenue growth reflected higher insurance manufacturing revenue, which included favourable actuarial assumption changes of $0.1bn and lower adverse market impact of $67m, as 9M19 recorded an adverse movement of $72m compared with an adverse movement of $140m in 9M18. These increases were partly offset by lower investment distribution revenue.
In CMB, revenue increased by $0.8bn or 8%, with growth in all major products and regions. Growth was primarily in GLCM, arising from wider deposit margins, notably in Hong Kong and the UK, and in Latin America from wider margins and growth in average deposit balances. Revenue increased in C&L due to balance sheet growth in most markets, partly offset by margin compression.
In GB&M, revenue decreased by $0.8bn or 7%, mainly in Global Markets as economic uncertainty resulted in lower market activity, and in Global Banking as 9M18 benefited from gains on corporate lending restructuring. These decreases were partly offset by continued momentum in our transaction banking products as we increased client mandates and grew balances.
In GPB, revenue increased by $0.1bn or 5%, mainly reflecting growth in investment revenue and lending revenue, primarily in Asia. These increases were partly offset by lower deposit revenue, notably in the US.
In Corporate Centre, revenue increased by $0.6bn. This was mainly in Central Treasury from favourable fair value movements in 9M19 of $0.2bn relating to the economic hedging of interest rate and exchange rate risk on our long-term debt with long-term derivatives (9M18: $0.2bn adverse), and from a non-repeat of a 9M18 swap mark-to-market loss on a bond reclassification of $177m. In addition, the adverse impact of hyperinflation accounting in Argentina was lower than in 9M18. These movements were partly offset by lease expenses of $127m following the adoption of IFRS 16 ‘Leases’, which were recorded within operating expenses in 9M18.

8
HSBC Holdings plc Earnings Release 3Q19


Adjusted ECL
Adjusted ECL of $2.0bn were $1.2bn higher than in 9M18.
In CMB, ECL increased by $0.6bn, primarily in the UK and Hong Kong.
In GB&M, ECL of $0.1bn primarily related to a specific corporate exposure in Europe. This compared with net releases of $0.1bn in 9M18, mainly in the US against exposures in the oil and gas sector.
In RBWM, ECL of $1.0bn increased by $0.2bn compared with 9M18, notably against unsecured lending, mainly in the UK, the US and Mexico.
In Corporate Centre, there was an adverse movement of $0.1bn, reflecting lower net releases in 9M19 mainly related to our legacy portfolios.
Adjusted ECL as a percentage of average gross loans and advances to customers was 0.27%, compared with 0.12% at 9M18.
Adjusted operating expenses
Adjusted operating expenses of $23.7bn were $0.6bn or 3% higher than in 9M18. This increase included higher expenditure on investments (up $0.4bn), notably investments to grow the business, mainly in RBWM and CMB, as well as continued investment in our digital capabilities across all global businesses. In addition, volume-related growth increased by $0.1bn. Cost inflation was broadly offset by the impact of our cost-saving efficiencies.
The number of employees expressed in full-time equivalent staff at 30 September 2019 was 237,412, an increase of 2,195 from 31 December 2018. This was primarily driven by investments in business growth programmes, notably in RBWM and CMB. Additionally, the number of contractors at 30 September 2019 was 9,045, a decrease of 1,809 from 31 December 2018.
The effect of hyperinflation accounting in Argentina resulted in an increase in adjusted operating expenses of $105m compared with 9M18.
Adjusted share of profit from associates and JVs
Adjusted share of income from associates of $1.8bn was $0.1bn or 3% lower than in 9M18 as a result of higher ECL charges and other expenses relating to the merger with Alawwal bank, partly offset by higher income from BoCom.
Retail Banking and Wealth Management
9M19 compared with 9M18 – adjusted results
Management view of adjusted revenue
 
 
Nine months ended
Quarter ended
 
 
30 Sep

30 Sep

Variance
30 Sep

30 Jun

30 Sep

 
 
2019

2018

9M19 vs. 9M18
2019

2019

2018

 
Footnotes
$m

$m

$m

%

$m

$m

$m

Retail Banking
 
11,850

10,963

887

8

3,981

3,943

3,832

– current accounts, savings and deposits
 
7,067

6,048

1,019

17

2,422

2,423

2,285

– personal lending
 
4,783

4,915

(132
)
(3
)
1,559

1,520

1,547

    mortgages
 
1,218

1,455

(237
)
(16
)
379

396

408

    credit cards
 
2,187

2,087

100

5

711

677

691

    other personal lending
 
1,378

1,373

5

0

469

447

448

Wealth Management
 
5,090

4,867

223

5

1,476

1,695

1,570

– investment distribution
 
2,549

2,656

(107
)
(4
)
839

849

792

– life insurance manufacturing
 
1,778

1,421

357

25

395

586

522

– asset management
 
763

790

(27
)
(3
)
242

260

256

Other
1
607

463

144

31

171

231

222

Net operating income
2
17,547

16,293

1,254

8

5,628

5,869

5,624

RoTE excluding significant items and UK bank levy (annualised) (%)

 
19.3

22.8

 
 
 
 
 
1
‘Other’ includes the distribution and manufacturing (where applicable) of retail and credit protection insurance, disposal gains and other
non-product specific income.
2
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $6.1bn was $0.5bn or 8% higher than in 9M18. This increase reflected strong balance sheet growth and the impact of previous interest rate increases on margins in Retail Banking, higher revenue in life insurance manufacturing, and disposal gains in Argentina and Mexico. This was partly offset by increased adjusted operating expenses driven by higher staff costs and inflation, together with strategic investments.
RBWM’s reported results include customer redress programme costs, notably in respect of the mis-selling of PPI. These are excluded from our adjusted performance.
Adjusted revenue of $17.5bn was $1.3bn or 8% higher, which included disposal gains in Argentina and Mexico of $133m.
In Retail Banking, revenue of $11.9bn was up $0.9bn or 8%. The increase reflected deposit balance growth of $33bn or 5%, particularly in Hong Kong and the UK, and lending balance growth of $31bn or 9% compared with 9M18, notably in mortgages in Hong Kong and the UK. In addition, revenue benefited from the impact of previous interest rate increases.
In Wealth Management, revenue of $5.1bn was up $0.2bn or 5%, reflecting higher life insurance manufacturing revenue (up $0.4bn or 25%), driven by growth in the value of new business written (up $0.1bn or 15%), favourable actuarial assumption changes of $0.1bn and lower adverse market impacts of $67m, as 9M19 recorded an adverse movement of $72m compared with an adverse movement of $140m in 9M18. This was partly offset by lower investment distribution revenue (down $0.1bn or 4%), driven by less favourable market conditions in Hong Kong, compared with 9M18, and a change in the product mix of clients’ investments to lower risk and lower margin products.

HSBC Holdings plc Earnings Release 3Q19
9


Earnings Release – 3Q19

Adjusted ECL were $1.0bn, up 24% from 9M18, reflecting our strategy to grow unsecured lending, notably in the UK, the US and Mexico. In addition, ECL in 9M19 included charges related to the current economic uncertainties in the UK and Hong Kong. The net write-off in 9M19 remained stable compared with 9M18.
Adjusted operating expenses of $10.5bn were $0.6bn or 6% higher. This was mainly driven by higher staff costs and inflation (up $0.2bn), particularly in Asia, to support business growth and the impact of investment in strategic initiatives (up $0.1bn) to grow the Wealth Management business in Asia, enhance digital capabilities, and drive growth in key markets through lending.
Commercial Banking
9M19 compared with 9M18 – adjusted results
Management view of adjusted revenue
 
 
Nine months ended
Quarter ended
 
 
30 Sep

30 Sep

Variance
30 Sep

30 Jun

30 Sep

 
 
2019

2018

9M19 vs. 9M18
2019

2019

2018

 
Footnotes
$m

$m

$m

%
$m

$m

$m

Global Trade and Receivables Finance
 
1,402

1,360

42

3
464

465

455

Credit and Lending
 
4,113

3,843

270

7
1,367

1,363

1,293

Global Liquidity and Cash Management
 
4,554

4,130

424

10
1,506

1,519

1,446

Markets products, Insurance and Investments, and Other
1
1,538

1,459

79

5
454

492

459

Net operating income

2
11,607

10,792

815

8
3,791

3,839

3,653

RoTE excluding significant items and UK bank levy (annualised) (%)

 
13.0

14.5

 
 
 
 
 
1
Includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and Global Banking products.
2
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $5.7bn was $0.2bn or 3% lower than in 9M18. Adjusted revenue growth across all products, notably in GLCM and C&L, was more than offset by higher adjusted ECL charges and higher adjusted operating expenses, as we continued to invest.
Adjusted revenue of $11.6bn was $0.8bn or 8% higher, with growth in all regions, particularly in our largest markets, Hong Kong (up 8%) and the UK (up 8%), and across all major products.
In GLCM, revenue was $0.4bn or 10% higher, with growth in all regions. The increase was mainly in Hong Kong and the UK, primarily reflecting wider margins, and in Latin America from wider margins and growth in average deposit balances.
In C&L, revenue growth of $0.3bn or 7% reflected continued lending growth in all regions, partly offset by the effects of margin compression.
In GTRF, revenue increased by $42m or 3%, with growth across all regions except Asia. The increase was mainly from higher volumes in the UK, fee growth in MENA and wider margins in Asia.
Revenue growth in ‘Other’ products included a disposal gain of $24m in Latin America.
Corporate customer value from our international subsidiary banking proposition grew by 8%. (This relates to corporate client income, covering all CMB products, as well as total income from GB&M synergy products, including FX and debt capital markets, used by international CMB subsidiaries. This measure differs from reported revenue in that it excludes Business Banking and Other and internal cost of funds.)
Adjusted ECL of $0.9bn were $0.6bn higher than in 9M18, driven by an increase in the UK, partly offset by a reduction in MENA. In addition, there were ECL charges in 9M19, notably in Asia, compared with 9M18 where we recorded minimal charges in Hong Kong and net releases in North America.
Adjusted operating expenses of $5.0bn were $0.3bn or 7% higher, reflecting increased investment in digital capabilities (up $0.2bn), including Real Time Payments, which provides clients with a faster, simpler and more secure payment experience.

10
HSBC Holdings plc Earnings Release 3Q19


Global Banking and Markets
9M19 compared with 9M18 – adjusted results
Management view of adjusted revenue
 
 
Nine months ended
Quarter ended
 
 
30 Sep

30 Sep

Variance
30 Sep

30 Jun

30 Sep

 
 
2019

2018

9M19 vs. 9M18
2019

2019

2018

 
Footnotes
$m

$m

$m

%

$m

$m

$m

Global Markets
 
4,514

5,182

(668
)
(13
)
1,352

1,405

1,745

– FICC
 
3,696

4,216

(520
)
(12
)
1,145

1,173

1,465

Foreign Exchange
 
2,021

2,319

(298
)
(13
)
713

602

812

Rates
 
1,189

1,226

(37
)
(3
)
300

392

404

Credit
 
486

671

(185
)
(28
)
132

179

249

– Equities
 
818

966

(148
)
(15
)
207

232

280

Securities Services
 
1,512

1,439

73

5

509

518

491

Global Banking
 
2,921

3,067

(146
)
(5
)
989

990

957

Global Liquidity and Cash Management
 
2,080

1,905

175

9

692

693

671

Global Trade and Receivables Finance
 
610

589

21

4

202

198

211

Principal Investments
 
215

278

(63
)
(23
)
93

38

108

Credit and funding valuation adjustments
 
(147
)
(4
)
(143
)
>(100)

(160
)
(32
)
36

Other
1
(529
)
(470
)
(59
)
(13
)
(207
)
(218
)
(149
)
Net operating income
2
11,176

11,986

(810
)
(7
)
3,470

3,592

4,070

RoTE excluding significant items and UK bank levy (annualised) (%)
 
9.6

12.5

 
 
 
 
 
1
‘Other’ in GB&M includes allocated funding costs and gains resulting from business disposals. Within the management view of total operating income, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities that is not reflected within operating income, such as 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 offset to these tax credits is included within ‘Other’.
2
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $4.1bn was $1.1bn lower than in 9M18, mainly due to lower revenue in Global Markets, as economic uncertainty resulted in reduced market activity. In addition, ECL charges increased by $0.2bn, compared with a net release in 9M18.
Adjusted revenue of $11.2bn fell by $0.8bn compared with 9M18, and included higher adverse movements on credit and funding valuation adjustments of $143m.
Global Markets revenue decreased by $0.7bn or 13%, driven by low market volatility, reduced client activity due to ongoing economic uncertainty and continued spread compression.
Global Banking revenue fell $0.1bn or 5%, reflecting a non-repeat of gains in 9M18 on corporate lending restructuring, lower event-driven activity and the impact of tightening credit spreads on portfolio hedges. These reductions were partly offset by higher lending revenue as we continued to grow balances, notably in Asia.
Revenue grew in our transaction banking products. GLCM revenue rose by $0.2bn or 9%, primarily driven by higher average deposit balances and wider margins. Securities Services revenue increased by $0.1bn or 5% from continued growth in average assets under custody (up 5%) and average assets under administration (up 7%) from increased client mandates, as well as higher interest rates. GTRF revenue increased by $21m or 4% from growth in lending and higher fees from commodity and structured trade deals, particularly in MENA.
Adjusted ECL were $0.1bn, up $217m compared with 9M18. The charges in 9M19 primarily related to a specific corporate exposure in Europe, compared with net releases in 9M18 that were largely related to exposures within the oil and gas sector in the US.
Adjusted operating expenses of $7.0bn were $0.1bn or 2% higher, as we invested in GLCM and Securities Services to support business growth as well as in regulatory programmes.
Global Private Banking
9M19 compared with 9M18 – adjusted results
Management view of adjusted revenue
 
 
Nine months ended
Quarter ended
 
 
30 Sep

30 Sep

Variance
30 Sep

30 Jun

30 Sep

 
 
2019

2018

9M19 vs. 9M18
2019

2019

2018

 
Footnotes
$m

$m

$m

%

$m

$m

$m

Investment revenue
 
589

544

45

8

207

197

164

Lending
 
313

290

23

8

109

107

94

Deposit
 
352

366

(14
)
(4
)
112

118

124

Other
 
142

134

8

6

44

49

45

Net operating income
1
1,396

1,334

62

5

472

471

427

RoTE excluding significant items and UK bank levy (annualised) (%)
 
12.1

10.9

 
 
 
 
 
1
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $0.3bn increased by $39m or 14% compared with 9M18, reflecting higher adjusted revenue in Asia where we continued to invest in business growth initiatives, partly offset by higher adjusted ECL.

HSBC Holdings plc Earnings Release 3Q19
11


Earnings Release – 3Q19

Adjusted revenue of $1.4bn increased by $62m or 5%, mainly reflecting growth in Asia.
Investment revenue increased by $45m or 8%, mainly in Asia from higher brokerage and trading revenue and from increased annuity fee income as a result of growth in discretionary client mandates.
Lending revenue was $23m or 8% higher, with growth in Asia and most of our markets in Europe, with the exception of the UK, which was adversely affected by margin compression.
Deposit revenue fell by $14m or 4%, as lower revenue in the US from compressed margins and repositioning actions was partly offset by growth in Asia from balance growth and wider margins.
In 9M19, we attracted $19bn of net new money inflows, mainly in Asia and Europe.
Adjusted ECL were $25m, mainly in the UK. This compared with a net release of $16m in 9M18, mainly in the UK, the US and France.
Adjusted operating expenses of $1.1bn were $18m or 2% lower. This was mainly due to reductions in Europe and the US following actions to mitigate lower revenue, and a partial release of a provision associated with the wind-down of our operations in Monaco. These reductions were partly offset by an increase in Asia, driven by investments to support business growth.
Corporate Centre
9M19 compared with 9M18 – adjusted results
Management view of adjusted revenue
 
 
Nine months ended
Quarter ended
 
 
30 Sep

30 Sep

Variance
30 Sep

30 Jun

30 Sep

 
 
2019

2018

9M19 vs. 9M18
2019

2019

2018

 
Footnotes
$m

$m

$m

%

$m

$m

$m

Central Treasury
1
881

242

639

>100

313

263

91

Legacy portfolios
 
(124
)
(78
)
(46
)
(59
)
(40
)
(13
)
25

Other
 
(721
)
(701
)
(20
)
(3
)
(367
)
(140
)
(404
)
Net operating income
2
36

(537
)
573

>100

(94
)
110

(288
)
RoTE excluding significant items and UK bank levy (annualised) (%)
 
(3.6)

(4.8
)
 
 
 
 
 
1
Central Treasury includes revenue relating to BSM in 9M19 of $1.8bn (9M18: $1.8bn; 3Q19: $626m; 2Q19: $586m; 3Q18: $528m), interest expense in 9M19 of $1.0bn (9M18: $978m; 3Q19: $321m; 2Q19: $348m; 3Q18: $358m) and favourable valuation differences on issued long-term debt and associated swaps in 9M19 of $219m (9M18: adverse $380m; 3Q19: favourable $76m; 2Q19: favourable $93m; 3Q18: adverse $15m). Revenue relating to BSM includes other internal allocations to reflect the economic benefit generated by certain activities, which is not reflected within operating income, such as 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 offset to these tax credits is included in other Central Treasury.
2
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $1.7bn was $0.8bn higher than in 9M18.
Adjusted revenue was $0.6bn favourable compared with 9M18, largely reflecting higher revenue in Central Treasury.
Central Treasury revenue of $0.9bn was $0.6bn higher than in 9M18. This included:
favourable fair value movements relating to the economic hedging of interest rate and exchange rate risk on our long-term debt with long-term derivatives of $219m in 9M19, compared with adverse movements of $203m in 9M18; and
the non-recurrence of a $177m loss in 9M18 arising from adverse swap mark-to-market movements following a bond reclassification under IFRS 9 ‘Financial Instruments’.
Other income decreased by $20m. In 9M19, this included $127m of lease expenses following the adoption of IFRS 16 ‘Leases’ from
1 January 2019. In 9M18, lease expenses were recorded within operating expenses. This decrease was broadly offset by a lower adverse impact of hyperinflation accounting in Argentina.
A net release of adjusted ECL of $19m compared with a net release of $113m in 9M18, mainly relating to our legacy portfolios.
Adjusted operating expenses of $0.2bn decreased by $0.4bn or 74%. This partly reflected a change in the allocation of certain costs to global businesses, which reduced costs retained in Corporate Centre, as well as the impact of the adoption of IFRS 16 ‘Leases’. In addition, costs relating to legacy portfolios reduced, while 9M18 also included a $41m charge in relation to the 2017 UK bank levy.
Adjusted share of income from associates of $1.8bn decreased by $0.1bn or 5%, primarily due to a lower share of profit from SABB.
Balance sheet – 30 September 2019 compared with 30 June 2019
At 30 September 2019, our total assets of $2.7tn were $23bn lower on a reported basis. On a constant currency basis, our total assets were $30bn higher, reflecting targeted lending growth, notably in Asia.
Loans and advances to customers as a percentage of customer accounts were 74%, which was in line with the prior quarter.
Loans and advances to customers
Reported loans and advances to customers were $3.8bn lower. This included adverse effects of foreign currency translation differences of $19.7bn. On a constant currency basis, customer lending increased by $15.9bn or 2%.
Customer lending growth was primarily in Asia (up $9.8bn), reflecting an increase in GB&M (up $6.8bn), due to higher term lending from our continued strategic focus on growth throughout Asia. Customer lending increased in RBWM by $3.8bn, primarily in Hong Kong (up $3.0bn), where we maintained a leading position in mortgages. This was partly offset by a decrease in CMB (down $1.8bn).
In Europe, customer lending increased by $6.6bn, with HSBC UK up $2.8bn, primarily reflecting growth in mortgage balances (up $2.0bn), due to our focus on broker-originated mortgages. We also increased lending to our corporate clients within HSBC UK mainly through term lending. The remaining increase in Europe primarily reflected growth in the UK in GB&M.

12
HSBC Holdings plc Earnings Release 3Q19


Customer accounts
Customer accounts fell by $6.4bn on a reported basis, including adverse foreign currency translation differences of $25.2bn. On a constant currency basis, customer accounts increased by $18.8bn or 1%.
On an adjusted basis, customer accounts increased in Europe by $9.2bn. This was driven by an increase in CMB and RBWM balances, notably in HSBC UK (up $5.7bn) within current accounts and savings. In addition, current accounts increased in GB&M mainly in the UK.
Customer accounts also increased in North America (up $7.9bn), primarily in GB&M (up $3.9bn), reflecting an increase in interest-bearing demand deposits, and in CMB (up $2.1bn), from an increase mainly in time deposits. In addition, customer accounts grew in RBWM (up $1.7bn), reflecting an increase in savings deposits arising from promotional rates.
Risk-weighted assets
Risk-weighted assets (‘RWAs’) totalled $865.2bn at 30 September 2019, a $20.8bn decrease during 3Q19. This included a decrease of $12.8bn due to foreign currency translation differences. The $8.0bn decrease (excluding foreign currency translation differences) comprised reductions of $14.4bn due to methodology and policy changes and $1.5bn due to model updates, partly offset by increases of $4.9bn from changes in asset quality and of $3bn from asset size growth.
The decrease due to methodology and policy changes included a $7.0bn reduction from risk parameter refinements and improved collateral recognition and a $6.3bn impact from a change to our best estimate of expected loss on corporate exposures. The increase due to asset quality changes included growth of $2.4bn caused by the effect of the credit downgrade of Argentina, as well as changes in the portfolio mix of GB&M assets. Asset size movements included $4.7bn lending growth in CMB and RBWM and a $2.4bn increase in market risk RWAs, partly offset by a $3.7bn fall in Corporate Centre exposures.
Net interest margin

 
Nine months ended
Full year to


 
30 Sep

30 Sep

31 Dec


 
2019

2018

2018


Footnotes
$m

$m

$m

Net interest income
 
22,808

22,780

30,489

Average interest-earning assets
 
1,915,149

1,827,337

1,839,346


 
%

%

%

Gross interest yield
1
2.89

2.64

2.70

Less: cost of funds
1
(1.53
)
(1.13
)
(1.21
)
Net interest spread
2
1.36

1.51

1.49

Net interest margin
3
1.59

1.67

1.66

1
Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Cost of funds is the average annualised interest cost as a percentage on average interest-bearing liabilities.
2
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.
3
Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Net interest income for 9M19 was $22.8bn, broadly unchanged compared with 9M18. This reflected higher yields and an increase in average interest-earning assets (‘AIEA’), offset by increased funding costs.
The Group’s net interest margin (’NIM’) in 9M19 was 1.59%, which was 8 basis points (‘bps’) lower compared with 9M18. The decline in NIM reflected an increase in net funding costs of 7bps and 1bp impact of significant items.
Return on Equity and Return on Tangible Equity
We provide Return on Tangible Equity (‘RoTE’) in addition to Return on Equity (‘RoE’) as a way of assessing our performance which is closely aligned to our capital position.
RoTE is computed by adjusting reported ‘profit attributable to the ordinary shareholders of the parent company’ for the post-tax movements in the present value of in-force long-term insurance business (‘PVIF’) and adjusting the reported equity for goodwill, intangibles and PVIF, net of deferred tax. The adjustment to reported results and reported equity excludes amounts attributable to other equity instrument holders and non-controlling interests.
For our global businesses, we provide RoTE excluding significant items and the UK bank levy which is more closely aligned to the basis on which the global business performance is assessed by the Chief Operating Decision Maker (further information on the basis of preparation for our global businesses is provided on
page 47 of the
Annual Report and Accounts 2018).
RoTE excluding significant items and UK bank levy is computed by adjusting ‘profit attributable to the ordinary shareholders, excluding PVIF’ for significant items (net of tax) and the bank levy, and adjusting the ‘average tangible equity’ for the change in fair value on our long-term debt attributable to credit spread through other comprehensive income (‘fair value of own debt’), and debit valuation adjustments (‘DVA’).
The following table details the adjustments made to the reported results and equity:
Return on Equity and Return on Tangible Equity
 
Nine months ended
Quarter ended
 
30 Sep

30 Sep

30 Sep

30 Jun

30 Sep

 
2019

2018

2019

2019

2018

 
$m

$m

$m

$m

$m

Profit
 
 
 
 
 
Profit attributable to the ordinary shareholders of the parent company
11,478

11,071

2,971

4,373

3,899

Increase in PVIF (net of tax)
(1,290
)
(317
)
(652
)
(192
)
(75
)
Profit attributable to the ordinary shareholders, excluding PVIF
10,188

10,754

2,319

4,181

3,824

Significant items (net of tax) and bank levy
608

1,602

 
 
 
Profit attributable to the ordinary shareholders, excluding PVIF, significant items and UK bank levy
10,796

12,356

 
 
 
Equity
 
 
 
 
 
Average ordinary shareholders’ equity
165,954

164,290

167,347

166,747

161,406

Effect of goodwill, PVIF and other intangibles (net of deferred tax)
(23,191
)
(22,037
)
(23,688
)
(23,202
)
(22,036
)
Average tangible equity
142,763

142,253

143,659

143,545

139,370

Fair value of own debt, DVA and other adjustments
529

2,495



 


Average tangible equity excluding fair value of own debt, DVA and other adjustments
143,292

144,748



 
 
 
%

%

%

%

%

Ratio
 
 
 
 
 
Return on equity
9.2

9.0

7.0

10.5

9.6

Return on tangible equity (annualised)
9.5

10.1

6.4

11.7

10.9

Return on tangible equity excluding significant items and UK bank levy (annualised)
10.1

11.4





 
Return on tangible equity by global business
 
Nine months ended 30 Sep 2019
 
Retail Banking and Wealth Management

Commercial Banking

Global Banking and Markets

Global Private Banking

Corporate Centre

Total

 
$m

$m

$m

$m

$m

$m

Profit before tax
4,891

5,602

3,866

365

2,520

17,244

Tax expense
(801
)
(1,190
)
(766
)
(64
)
(691
)
(3,512
)
Profit after tax
4,090

4,412

3,100

301

1,829

13,732

Less attributable to: preference shareholders, other equity holders, non-controlling interests
(656
)
(652
)
(465
)
(14
)
(467
)
(2,254
)
Profit attributable to ordinary shareholders of the parent company
3,434

3,760

2,635

287

1,362

11,478

Increase in PVIF (net of tax)
(1,238
)
(51
)

1

(2
)
(1,290
)
Significant items (net of tax) and UK bank levy
911

40

148

(37
)
(614
)
448

Balance Sheet Management allocation and other adjustments
406

432

677

49

(1,404
)
160

Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy
3,513

4,181

3,460

300

(658
)
10,796

Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments
24,310

43,134

48,206

3,305

24,337

143,292

RoTE excluding significant items and UK bank levy (annualised) (%)
19.3

13.0

9.6

12.1

(3.6)

10.1

 
 
Nine months ended 30 Sep 2018
Profit before tax
5,544

6,034

5,535

182

(661
)
16,634

Tax expense
(983
)
(1,272
)
(1,212
)
(28
)
(207
)
(3,702
)
Profit after tax
4,561

4,762

4,323

154

(868
)
12,932

Less attributable to: preference shareholders, other equity holders, non-controlling interests
(630
)
(642
)
(429
)
(19
)
(141
)
(1,861
)
Profit attributable to ordinary shareholders of the parent company
3,931

4,120

3,894

135

(1,009
)
11,071

Increase in PVIF (net of tax)
(300
)
(16
)

(1
)

(317
)
Significant items (net of tax) and UK bank levy
134

(25
)
(110
)
81

1,522

1,602

Balance Sheet Management allocation and other adjustments
399

418

641

61

(1,519
)

Profit attributable to ordinary shareholders, excluding PVIF, significant items and bank levy
4,164

4,497

4,425

276

(1,006
)
12,356

Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments
24,462

41,324

47,340

3,392

28,230

144,748

RoTE excluding significant items and UK bank levy (annualised) (%)
22.8

14.5

12.5

10.9

(4.8)

11.4



HSBC Holdings plc Earnings Release 3Q19
13


Earnings Release – 3Q19

Notes
Income statement comparisons, unless stated otherwise, are between the quarter ended 30 September 2019 and the quarter ended
30 September
2018. Balance sheet comparisons, unless otherwise stated, are between balances at 30 September 2019 and the corresponding balances at 30 June 2019.
The financial information on which this Earnings Release is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with HSBC’s significant accounting policies as described on pages 224 to 237 of our Annual Report and Accounts 2018.
The Board has adopted a policy of paying quarterly interim dividends on ordinary shares. Under this policy, it is intended to have a pattern of three equal interim dividends with a variable fourth interim dividend. Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, sterling and Hong Kong dollars or, subject to the Board’s determination that a scrip dividend is to be offered in respect of that dividend, may be satisfied in whole or in part by the issue of new shares in lieu of a cash dividend.

14
HSBC Holdings plc Earnings Release 3Q19


Cautionary statement regarding forward-looking statements
This Earnings Release contains certain forward-looking statements with respect to HSBC’s financial condition, results of operations, capital position and business.
Statements that are not historical facts, including statements about HSBC’s beliefs, targets and expectations, are forward-looking statements. Words such as ‘expects’, ‘targets’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC’s Directors, officers or employees to third parties, including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks’ policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; consumer perception as to the continuing availability of credit and price competition in the market segments we serve; and deviations from the market and economic assumptions that form the basis for our ECL measurements;
changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks, which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty, which in turn may affect demand for our products and services; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and
factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; our success in addressing operational, legal and regulatory, and litigation challenges; and the other risks and uncertainties we identify in ‘Top and emerging risks’ on pages 69 to 73 of the Annual Report and Accounts 2018 and on pages 16 and 17 of the Interim Report 2019.
For further information contact:
Investor Relations
Media Relations
UK – Richard O’Connor
UK – Heidi Ashley
Tel: +44 (0) 20 7991 6590
Tel: +44 (0) 20 7992 2045
 
 
Hong Kong – Mark Phin
Hong Kong – Patrick Humphris
Tel: +852 2822 4908
Tel: +852 2822 2052

HSBC Holdings plc Earnings Release 3Q19
15


Earnings Release – 3Q19

Summary consolidated income statement
 
Nine months ended
Quarter ended
 
30 Sep

30 Sep

30 Sep

30 Jun

30 Sep

 
2019

2018

2019

2019

2018

 
$m

$m

$m

$m

$m

Net interest income
22,808

22,780

7,568

7,772

7,680

Net fee income
9,085

9,793

2,961

3,098

3,026

Net income from financial instruments held for trading or managed on a fair value basis
7,877

7,485

2,546

2,450

2,602

Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
2,318

(44
)
122

486

178

Changes in fair value of designated debt and related derivatives1
149

(129
)
61

77

(3
)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
617

541

160

187

196

Gains less losses from financial investments
316

161

115

102

37

Net insurance premium income
9,047

8,488

2,724

3,027

2,712

Other operating income
2,935

569

863

1,214

169

Total operating income
55,152

49,644

17,120

18,413

16,597

Net insurance claims and benefits paid and movement in liabilities to policyholders
(12,425
)
(8,559
)
(3,765
)
(3,469
)
(2,799
)
Net operating income before change in expected credit losses and other credit impairment charges2
42,727

41,085

13,355

14,944

13,798

Change in expected credit losses and other credit impairment charges
(2,023
)
(914
)
(883
)
(555
)
(507
)
Net operating income
40,704

40,171

12,472

14,389

13,291

Total operating expenses
(25,296
)
(25,515
)
(8,147
)
(8,927
)
(7,966
)
Operating profit
15,408

14,656

4,325

5,462

5,325

Share of profit in associates and joint ventures
1,836

1,978

512

732

597

Profit before tax
17,244

16,634

4,837

6,194

5,922

Tax expense
(3,512
)
(3,702
)
(1,042
)
(1,167
)
(1,406
)
Profit after tax
13,732

12,932

3,795

5,027

4,516

Attributable to:
 
 
 
 
 
– ordinary shareholders of the parent company
11,478

11,071

2,971

4,373

3,899

– preference shareholders of the parent company
67

67

22

23

22

– other equity holders
1,148

795

484

254

264

– non-controlling interests
1,039

999

318

377

331

Profit after tax
13,732

12,932

3,795

5,027

4,516


$

$

$

$

$

Basic earnings per share
0.57

0.56

0.15

0.22

0.19

Diluted earnings per share
0.57

0.55

0.15

0.22

0.19

Dividend per ordinary share (in respect of the period)
0.30

0.30

0.10

0.10

0.10


%

%

%

%

%

Return on average ordinary shareholders’ equity (annualised)
9.2

9.0

7.0

10.5

9.6

Return on average tangible equity (annualised)
9.5

10.1

6.4

11.7

10.9

Cost efficiency ratio
59.2

62.1

61.0

59.7

57.7

1
The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
2
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.

16
HSBC Holdings plc Earnings Release 3Q19


Summary consolidated balance sheet
 
At
 
30 Sep

30 Jun

31 Dec

 
2019

2019

2018

 
$m

$m

$m

Assets
 
 
 
Cash and balances at central banks
151,185

171,090

162,843

Trading assets
243,905

271,424

238,130

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
41,410

41,043

41,111

Derivatives
283,945

233,621

207,825

Loans and advances to banks
70,799

82,397

72,167

Loans and advances to customers
1,017,833

1,021,632

981,696

Reverse repurchase agreements – non-trading
214,837

233,079

242,804

Financial investments
429,501

428,101

407,433

Other assets
274,932

268,886

204,115

Total assets
2,728,347

2,751,273

2,558,124

Liabilities and equity






Liabilities






Deposits by banks
63,439

71,051

56,331

Customer accounts
1,373,741

1,380,124

1,362,643

Repurchase agreements – non-trading
135,581

184,497

165,884

Trading liabilities
89,378

94,149

84,431

Financial liabilities designated at fair value
164,698

165,104

148,505

Derivatives
278,374

229,903

205,835

Debt securities in issue
98,486

103,663

85,342

Liabilities under insurance contracts
94,867

93,794

87,330

Other liabilities
231,996

228,114

167,574

Total liabilities
2,530,560

2,550,399

2,363,875

Equity




 
Total shareholders’ equity
189,517

192,676

186,253

Non-controlling interests
8,270

8,198

7,996

Total equity
197,787

200,874

194,249

Total liabilities and equity
2,728,347

2,751,273

2,558,124



HSBC Holdings plc Earnings Release 3Q19
17


Earnings Release – 3Q19

Credit risk
A summary of our current policies and practices for the management of credit risk is set out in ‘Credit risk management’ on page 79 of the Annual Report and Accounts 2018.
Summary of credit risk
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
 
 
At 30 Sep 2019
 At 31 Dec 2018
 
 
Gross carrying/nominal amount

Allowance for ECL1

Gross carrying/nominal amount

Allowance for
ECL1

 
Footnotes
$m

$m

$m

$m

Loans and advances to customers at amortised cost
 
1,026,414

(8,581
)
990,321

(8,625
)
– personal
 
415,294

(3,041
)
394,337

(2,947
)
– corporate and commercial
 
538,021

(5,400
)
534,577

(5,552
)
– non-bank financial institutions
 
73,099

(140
)
61,407

(126
)
Loans and advances to banks at amortised cost
 
70,827

(28
)
72,180

(13
)
Other financial assets measured at amortised cost
 
623,938

(108
)
582,917

(55
)
– cash and balances at central banks
 
151,187

(2
)
162,845

(2
)
– items in the course of collection from other banks
 
7,288


5,787


– Hong Kong Government certificates of indebtedness
 
36,306


35,859


– reverse repurchase agreements – non-trading
 
214,837


242,804


– financial investments
 
83,856

(41
)
62,684

(18
)
– prepayments, accrued income and other assets
2
130,464

(65
)
72,938

(35
)
Total gross carrying amount on-balance sheet
 
1,721,179

(8,717
)
1,645,418

(8,693
)
Loans and other credit-related commitments
 
626,618

(325
)
592,008

(325
)
– personal
 
216,567

(10
)
207,351

(13
)
– corporate and commercial
 
269,891

(307
)
271,022

(305
)
– financial
 
140,160

(8
)
113,635

(7
)
Financial guarantees
 
20,009

(52
)
23,518

(93
)
– personal
 
837


927

(1
)
– corporate and commercial
 
14,783

(49
)
17,355

(85
)
– financial
 
4,389

(3
)
5,236

(7
)
Total nominal amount off-balance sheet
3
646,627

(377
)
615,526

(418
)
 
 
2,367,806

(9,094
)
2,260,944

(9,111
)
 
 
 
 
 
 
 
 
Fair value

Memorandum allowance for ECL4

Fair value

Memorandum allowance for ECL4

 
 
$m

$m

$m

$m

Debt instruments measured at fair value through other comprehensive income (‘FVOCI’)
 
343,960

(95
)
343,110

(84
)
1
The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.
2
Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’ as presented within the summary consolidated balance sheet on page 17 includes both financial and non-financial assets.
3
Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
4
Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.


18
HSBC Holdings plc Earnings Release 3Q19


Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
30 September 2019
 
Gross carrying/nominal amount1
 
Allowance for ECL
 
ECL coverage %
 
 
Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1
Stage 2
Stage 3
POCI2
Total
 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

%
%
%
%
%
Loans and advances to customers at amortised cost
941,064

71,701

13,282

367

1,026,414

(1,302
)
(2,175
)
(4,934
)
(170
)
(8,581
)
0.1
3.0
37.1
46.3
0.8
– personal
395,532

15,007

4,755


415,294

(580
)
(1,276
)
(1,185
)

(3,041
)
0.1
8.5
24.9
0.7
– corporate and commercial
476,420

53,032

8,202

367

538,021

(677
)
(878
)
(3,675
)
(170
)
(5,400
)
0.1
1.7
44.8
46.3
1.0
– non-bank financial institutions
69,112

3,662

325


73,099

(45
)
(21
)
(74
)

(140
)
0.1
0.6
22.8
0.2
Loans and advances to banks at amortised cost
70,569

258



70,827

(27
)
(1
)


(28
)
0.4
Other financial assets measured at amortised cost
621,710

2,079

145

4

623,938

(36
)
(29
)
(43
)

(108
)
1.4
29.7
Loan and other credit-related commitments
603,254

22,632

726

6

626,618

(132
)
(133
)
(60
)

(325
)
0.6
8.3
0.1
– personal
214,369

1,826

372


216,567

(9
)
(1
)


(10
)
0.1
– corporate and commercial
249,830

19,706

349

6

269,891

(117
)
(130
)
(60
)

(307
)
0.7
17.2
0.1
– financial
139,055

1,100

5


140,160

(6
)
(2
)


(8
)
0.2
Financial guarantees
17,608

2,232

165

4

20,009

(19
)
(26
)
(7
)

(52
)
0.1
1.2
4.2
0.3
– personal
833

3

1


837






– corporate and commercial
12,605

2,012

162

4

14,783

(17
)
(26
)
(6
)

(49
)
0.1
1.3
3.7
0.3
– financial
4,170

217

2


4,389

(2
)

(1
)

(3
)
50.0
0.1
At 30 Sep 2019
2,254,205

98,902

14,318

381

2,367,806

(1,516
)
(2,364
)
(5,044
)
(170
)
(9,094
)
0.1
2.4
35.2
44.6
0.4
Stage 2 days past due analysis at 30 September 2019
 
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
 
 
Of which:

Of which:

 
Of which:

Of which:

 
Of which:
Of which:
 
Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2
1 to 29
 DPD3
30 and > DPD3
 
$m

$m

$m

$m

$m

$m

%
%
%
Loans and advances to customers at amortised cost
71,701

2,248

1,513

(2,175
)
(210
)
(226
)
3.0
9.3
14.9
– personal
15,007

1,750

1,191

(1,276
)
(181
)
(206
)
8.5
10.3
17.3
– corporate and commercial
53,032

490

310

(878
)
(29
)
(20
)
1.7
5.9
6.5
– non-bank financial institutions
3,662

8

12

(21
)


0.6
Loans and advances to banks at amortised cost
258



(1
)


0.4
Other financial assets measured at amortised cost
2,079

17

26

(29
)


1.4
1
Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2
Purchased or originated credit-impaired ('POCI').
3
Days past due ('DPD'). Up-to-date accounts in Stage 2 are not shown in amounts presented above.


HSBC Holdings plc Earnings Release 3Q19
19


Earnings Release – 3Q19

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2018
 
Gross carrying/nominal amount1
 
Allowance for ECL
 
ECL coverage %
 
 
Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1
Stage 2
Stage 3
POCI2
Total
 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

%
%
%
%
%
Loans and advances to customers at amortised cost
915,188

61,786

13,023

324

990,321

(1,276
)
(2,108
)
(5,047
)
(194
)
(8,625
)
0.1
3.4
38.8
59.9
0.9
– personal
374,681

15,075

4,581


394,337

(534
)
(1,265
)
(1,148
)

(2,947
)
0.1
8.4
25.1
0.7
– corporate and commercial
481,262

44,779

8,212

324

534,577

(698
)
(812
)
(3,848
)
(194
)
(5,552
)
0.1
1.8
46.9
59.9
1.0
– non-bank financial institutions
59,245

1,932

230


61,407

(44
)
(31
)
(51
)

(126
)
0.1
1.6
22.2
0.2
Loans and advances to banks at amortised cost
71,873

307



72,180

(11
)
(2
)


(13
)
0.7
Other financial assets measured at amortised cost
581,118

1,673

126


582,917

(27
)
(6
)
(22
)

(55
)
0.4
17.5
Loan and other credit-related commitments
569,250

21,839

912

7

592,008

(143
)
(139
)
(43
)

(325
)
0.6
4.7
0.1
– personal
205,183

1,760

408


207,351

(12
)
(1
)


(13
)
0.1
– corporate and commercial
251,478

19,034

503

7

271,022

(126
)
(136
)
(43
)

(305
)
0.1
0.7
8.5
0.1
– financial
112,589

1,045

1


113,635

(5
)
(2
)


(7
)
0.2
Financial guarantees
20,884

2,334

297

3

23,518

(19
)
(29
)
(45
)

(93
)
0.1
1.2
15.2
0.4
– personal
920

3

4


927

(1
)



(1
)
0.1
0.1
– corporate and commercial
15,011

2,053

288

3

17,355

(16
)
(25
)
(44
)

(85
)
0.1
1.2
15.3
0.5
– financial
4,953

278

5


5,236

(2
)
(4
)
(1
)

(7
)
1.4
20.0
0.1
At 31 Dec 2018
2,158,313

87,939

14,358

334

2,260,944

(1,476
)
(2,284
)
(5,157
)
(194
)
(9,111
)
0.1
2.6
35.9
58.1
0.4
Stage 2 days past due analysis at 31 December 2018
 
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
 
 
Of which:

Of which:

 
Of which:

Of which:

 
Of which:
Of which:
 
Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2
1 to 29
 DPD3
30 and > DPD3
 
$m

$m

$m

$m

$m

$m

%
%
%
Loans and advances to customers at amortised cost
61,786

2,554

1,914

(2,108
)
(204
)
(254
)
3.4
8.0
13.3
– personal
15,075

1,807

1,383

(1,265
)
(165
)
(220
)
8.4
9.1
15.9
– corporate and commercial
44,779

737

485

(812
)
(39
)
(34
)
1.8
5.3
7.0
– non-bank financial institutions
1,932

10

46

(31
)


1.6
Loans and advances to banks at amortised cost
307



(2
)


0.7
Other financial assets measured at amortised cost
1,673

10

26

(6
)


0.4
1
Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2
Purchased or originated credit-impaired ('POCI').
3
Days past due ('DPD'). Up-to-date accounts in Stage 2 are not shown in amounts presented above.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
The following disclosure provides a reconciliation by stage of the Group’s gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. Movements are calculated on a quarterly basis and therefore fully capture stage movements between quarters. If movements were calculated on a year-to-date basis they would only reflect the opening and closing position of the financial instrument.
The transfers of financial instruments represents the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL.
The net remeasurement of ECL arising from stage transfers represents the increase or decrease due to these transfers, for example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net remeasurement excludes the underlying customer risk rating (‘CRR’)/probability of default (‘PD’) movements of the financial instruments transferring stage. This is captured, along with other credit quality movements in the ‘changes in risk parameters – credit quality’ line item.
Changes in ‘New financial assets originated or purchased’, ‘assets derecognised (including final repayments)’ and ‘changes to risk parameters – further lending/repayments’ represent the impact from volume movements within the Group’s lending portfolio.

20
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees

 
Non-credit impaired
Credit impaired
 
 
Stage 1
Stage 2
Stage 3
POCI
Total
 
Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2019
1,511,839

(1,449
)
86,241

(2,278
)
14,232

(5,135
)
334

(194
)
1,612,646

(9,056
)
Transfers of financial instruments
(30,224
)
(399
)
26,379

845

3,845

(446
)




– transfers from stage 1 to stage 2
(77,755
)
353

77,755

(353
)






– transfers from stage 2 to stage 1
48,061

(768
)
(48,061
)
768







– transfers to stage 3
(825
)
50

(3,906
)
497

4,731

(547
)




– transfers from stage 3
295

(34
)
591

(67
)
(886
)
101





Net remeasurement of ECL arising from transfer of stage

506


(498
)

(91
)



(83
)
New financial assets originated or purchased
378,176

(404
)




99

(21
)
378,275

(425
)
Assets derecognised (including final repayments)
(260,857
)
86

(14,700
)
346

(2,017
)
537

(23
)
10

(277,597
)
979

Changes to risk parameters – further lending/repayments
(33,379
)
218

(65
)
116

584

(89
)
16

16

(32,844
)
261

Changes in risk parameters – credit quality

(87
)

(923
)

(1,922
)

(38
)

(2,970
)
Changes to model used for ECL calculation

(2
)

1


3




2

Assets written off




(1,927
)
1,927

(54
)
54

(1,981
)
1,981

Credit-related modifications that resulted in derecognition




(211
)
111



(211
)
111

Foreign exchange
(27,078
)
38

(1,688
)
52

(336
)
108

(8
)
5

(29,110
)
203

Others
(842
)
12

656

4

3

(3
)
13

(2
)
(170
)
11

At 30 Sep 2019
1,537,635

(1,481
)
96,823

(2,335
)
14,173

(5,000
)
377

(170
)
1,649,008

(8,986
)
ECL income statement change for the period


317



(958
)


(1,562
)


(33
)


(2,236
)
Recoveries


















290

Others


















(37
)
Total ECL income statement change for the period


















(1,983
)
 
At 30 Sep 2019
Nine months ended 30 Sep 2019

 
Gross carrying/nominal amount

Allowance for ECL

ECL charge

 
$m

$m

$m

As above
1,649,008

(8,986
)
(1,983
)
Other financial assets measured at amortised cost
623,938

(108
)
(27
)
Non-trading reverse purchase agreement commitments
94,860



Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement
2,367,806

(9,094
)
(2,010
)
Debt instruments measured at FVOCI
343,960

(95
)
(13
)
Total allowance for ECL/total income statement ECL change for the period
n/a

(9,189
)
(2,023
)
As shown in the above table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees decreased $70m during the period from $9,056m at 31 December 2018 to $8,986m at 30 September 2019.
This decrease was primarily driven by:
$815m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further lending/repayments;
$1,981m of assets written off; and
foreign exchange and all other movements of $327m.
These decreases were partly offset by increases of:
$2,970m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages; and
$83m relating to the net remeasurement impact of stage transfers.
The ECL charge for the period of $2,236m presented in the above table consisted of $2,970m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage and $83m relating to the net remeasurement impact of stage transfers. This was partly offset by $815m relating to underlying net book volume movements and $2m in changes to models used for ECL calculation.

HSBC Holdings plc Earnings Release 3Q19
21


Earnings Release – 3Q19

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees1
 
Non-credit impaired
Credit impaired
 
 
Stage 1
Stage 2
Stage 3
POCI
Total
 
Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2018
1,446,857

(1,469
)
102,032

(2,406
)
15,083

(5,722
)
1,042

(242
)
1,565,014

(9,839
)
Transfers of financial instruments
(8,747
)
(685
)
3,582

1,185

5,165

(500
)




– transfers from stage 1 to stage 2
(84,181
)
319

84,181

(319
)






– transfers from stage 2 to stage 1
77,325

(999
)
(77,325
)
999







– transfers to stage 3
(2,250
)
35

(4,439
)
607

6,689

(642
)




– transfers from stage 3
359

(40
)
1,165

(102
)
(1,524
)
142





Net remeasurement of ECL arising from transfer of stage

620


(605
)

(103
)



(88
)
Net new lending and further lending/repayments
126,868

(512
)
(16,162
)
564

(2,902
)
733

(587
)
42

107,217

827

Changes in risk parameters – credit quality

423


(1,087
)

(2,238
)

(51
)

(2,953
)
Changes to models used for ECL calculation










Assets written off




(2,568
)
2,552

(1
)
1

(2,569
)
2,553

Foreign exchange
(52,983
)
76

(2,863
)
99

(636
)
232

(26
)
6

(56,508
)
413

Other
(156
)
98

(348
)
(28
)
90

(89
)
(94
)
50

(508
)
31

At 31 Dec 2018
1,511,839

(1,449
)
86,241

(2,278
)
14,232

(5,135
)
334

(194
)
1,612,646

(9,056
)
ECL income statement change for the period
 
531

 
(1,128
)
 
(1,608
)
 
(9
)
 
(2,214
)
Recoveries
 
 
 
 
 
 
 
 
 
408

Others
 
 
 
 
 
 
 
 
 
(87
)
Total ECL income statement change for the period
 
 
 
 
 
 
 
 
 
(1,893
)
 
At 31 Dec 2018
12 months ended
31 Dec 2018

 
Gross carrying/nominal amount

Allowance for ECL

ECL charge

 
$m

$m

$m

As above
1,612,646

(9,056
)
(1,893
)
Other financial assets measured at amortised cost
582,917

(55
)
21

Non-trading reverse purchase agreement commitments
65,381



Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement
2,260,944

(9,111
)
(1,872
)
Debt instruments measured at FVOCI
343,110

(84
)
105

Total allowance for ECL/total income statement ECL charge for the period
n/a

(9,195
)
(1,767
)
1
The 31 December 2018 comparative ‘Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers‘ disclosure presents ‘New financial assets originated or purchased’, ‘Assets derecognised (including final repayments)’ and ‘Changes to risk parameters – further lending/repayments’ under ‘Net new lending and further lending/repayments’. To provide greater granularity, these amounts have been separately presented in the 30 September 2019 disclosure. The 31 December 2018 total ECL income statement change of $1,893m is attributable to $1,030m for the nine months ended 30 September 2018 and $863m for the three months ended 31 December 2018.

22
HSBC Holdings plc Earnings Release 3Q19


Personal lending
Total personal lending for loans and advances to customers by stage distribution

Gross carrying amount
Allowance for ECL
 
Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

 
$m

$m

$m

$m

$m

$m

$m

$m

By portfolio
 
 
 
 
 
 
 
 
First lien residential mortgages
297,169

6,457

2,996

306,622

(43
)
(67
)
(412
)
(522
)
– of which: interest only (including offset)
29,699

1,603

342

31,644

(6
)
(16
)
(83
)
(105
)
– affordability (including US adjustable rate mortgages)
14,357

763

521

15,641

(4
)
(3
)
(8
)
(15
)
Other personal lending
98,363

8,550

1,759

108,672

(537
)
(1,209
)
(773
)
(2,519
)
– other
75,312

4,678

1,189

81,179

(231
)
(472
)
(481
)
(1,184
)
– credit cards
20,764

3,728

507

24,999

(299
)
(724
)
(275
)
(1,298
)
– second lien residential mortgages
772

89

55

916

(1
)
(6
)
(11
)
(18
)
– motor vehicle finance
1,515

55

8

1,578

(6
)
(7
)
(6
)
(19
)
At 30 Sep 2019
395,532

15,007

4,755

415,294

(580
)
(1,276
)
(1,185
)
(3,041
)
By geography
 
 
 
 
 
 
 
 
Europe
171,537

6,537

2,112

180,186

(108
)
(510
)
(483
)
(1,101
)
– of which: UK

140,072

5,223

1,418

146,713

(100
)
(481
)
(275
)
(856
)
Asia
171,814

5,263

752

177,829

(214
)
(325
)
(177
)
(716
)
– of which: Hong Kong

117,267

2,589

243

120,099

(85
)
(205
)
(43
)
(333
)
MENA
5,536

261

383

6,180

(58
)
(63
)
(252
)
(373
)
North America
40,054

1,954

1,236

43,244

(54
)
(104
)
(138
)
(296
)
Latin America
6,591

992

272

7,855

(146
)
(274
)
(135
)
(555
)
At 30 Sep 2019
395,532

15,007

4,755

415,294

(580
)
(1,276
)
(1,185
)
(3,041
)
By portfolio
 
 
 
 
 
 
 
 
First lien residential mortgages
284,103

6,286

2,944

293,333

(41
)
(62
)
(432
)
(535
)
– of which: interest only (including offset)
31,874

1,324

338

33,536

(3
)
(13
)
(92
)
(108
)
– affordability (including US adjustable rate mortgages)
16,110

1,065

507

17,682

(3
)
(4
)
(5
)
(12
)
Other personal lending
90,578

8,789

1,637

101,004

(493
)
(1,203
)
(716
)
(2,412
)
– other
67,196

4,400

1,121

72,717

(214
)
(435
)
(465
)
(1,114
)
– credit cards
20,932

4,259

453

25,644

(272
)
(756
)
(233
)
(1,261
)
– second lien residential mortgages
1,022

100

57

1,179

(2
)
(9
)
(13
)
(24
)
– motor vehicle finance
1,428

30

6

1,464

(5
)
(3
)
(5
)
(13
)
At 31 Dec 2018
374,681

15,075

4,581

394,337

(534
)
(1,265
)
(1,148
)
(2,947
)
By geography
















Europe
169,782

5,731

2,051

177,564

(105
)
(453
)
(450
)
(1,008
)
– of which: UK

139,237

4,308

1,315

144,860

(93
)
(421
)
(219
)
(733
)
Asia
155,661

5,413

693

161,767

(207
)
(353
)
(180
)
(740
)
– of which: Hong Kong

104,909

2,715

169

107,793

(71
)
(220
)
(39
)
(330
)
MENA
5,565

350

411

6,326

(61
)
(70
)
(263
)
(394
)
North America
38,283

2,552

1,186

42,021

(29
)
(90
)
(142
)
(261
)
Latin America
5,390

1,029

240

6,659

(132
)
(299
)
(113
)
(544
)
At 31 Dec 2018
374,681

15,075

4,581

394,337

(534
)
(1,265
)
(1,148
)
(2,947
)



HSBC Holdings plc Earnings Release 3Q19
23


Earnings Release – 3Q19

Wholesale lending
Total wholesale lending for loans and advances to banks and customers at amortised cost
 
Gross carrying amount
Allowance for ECL
 
Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial
476,420

53,032

8,202

367

538,021

(677
)
(878
)
(3,675
)
(170
)
(5,400
)
– agriculture, forestry and fishing

5,835

744

269

2

6,850

(16
)
(32
)
(135
)
(1
)
(184
)
– mining and quarrying

10,982

2,848

273

12

14,115

(25
)
(65
)
(115
)
(7
)
(212
)
– manufacture
92,424

12,161

1,632

163

106,380

(139
)
(210
)
(803
)
(90
)
(1,242
)
– electricity, gas, steam and air-conditioning supply

12,351

1,547

151


14,049

(14
)
(38
)
(22
)

(74
)
– water supply, sewerage, waste management and remediation

2,823

451

27


3,301

(6
)
(3
)
(18
)

(27
)
– construction
11,094

3,313

845

65

15,317

(18
)
(48
)
(472
)
(64
)
(602
)
– wholesale and retail trade, repair of motor vehicles and motorcycles

84,317

11,570

1,784

16

97,687

(108
)
(116
)
(990
)
(7
)
(1,221
)
– transportation and storage

22,054

2,161

482

32

24,729

(46
)
(36
)
(112
)

(194
)
– accommodation and food

20,126

3,608

253

1

23,988

(47
)
(42
)
(72
)
(1
)
(162
)
– publishing, audiovisual and broadcasting

21,915

1,400

123


23,438

(40
)
(23
)
(26
)

(89
)
– real estate
118,481

6,428

1,255

1

126,165

(107
)
(102
)
(438
)

(647
)
– professional, scientific and technical activities

21,521

1,965

350


23,836

(30
)
(35
)
(129
)

(194
)
– administrative and support services

21,430

2,865

413

75

24,783

(23
)
(44
)
(174
)

(241
)
– public administration and defence, compulsory social security

1,363

245



1,608

(1
)
(10
)


(11
)
– education
1,464

185

39


1,688

(8
)
(6
)
(8
)

(22
)
– health and care
3,869

576

104


4,549

(10
)
(20
)
(33
)

(63
)
– arts, entertainment and recreation

2,362

238

25


2,625

(7
)
(9
)
(9
)

(25
)
– other services
12,789

474

171


13,434

(27
)
(25
)
(114
)

(166
)
– activities of households

638

65



703






– extra-territorial organisations and bodies activities

1




1






– government
7,887

175

6


8,068

(5
)
(1
)
(5
)

(11
)
– asset-backed securities
694

13



707


(13
)


(13
)
Non-bank financial institutions
69,112

3,662

325


73,099

(45
)
(21
)
(74
)

(140
)
Loans and advances to banks
70,569

258



70,827

(27
)
(1
)


(28
)
At 30 Sep 2019
616,101

56,952

8,527

367

681,947

(749
)
(900
)
(3,749
)
(170
)
(5,568
)
By geography
 
 
 
 
 
 
 
 
 
 
Europe
189,113

20,006

4,451

143

213,713

(351
)
(496
)
(1,461
)
(79
)
(2,387
)
– of which: UK
131,801

16,329

3,151

41

151,322

(285
)
(433
)
(911
)
(29
)
(1,658
)
Asia
320,343

25,287

1,437

160

347,227

(226
)
(209
)
(1,018
)
(40
)
(1,493
)
– of which: Hong Kong

194,794

16,694

670

57

212,215

(127
)
(123
)
(492
)
(33
)
(775
)
MENA
26,094

2,565

1,885

53

30,597

(53
)
(70
)
(987
)
(47
)
(1,157
)
North America
63,118

8,018

457


71,593

(41
)
(89
)
(114
)

(244
)
Latin America
17,433

1,076

297

11

18,817

(78
)
(36
)
(169
)
(4
)
(287
)
At 30 Sep 2019
616,101

56,952

8,527

367

681,947

(749
)
(900
)
(3,749
)
(170
)
(5,568
)

24
HSBC Holdings plc Earnings Release 3Q19


Total wholesale lending for loans and advances to banks and customers at amortised cost (continued)
 
Gross carrying amount
Allowance for ECL
 
Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial
481,262

44,779

8,212

324

534,577

(698
)
(812
)
(3,848
)
(194
)
(5,552
)
– agriculture, forestry and fishing

5,361

1,102

236

2

6,701

(15
)
(34
)
(117
)
(1
)
(167
)
– mining and quarrying

12,094

1,717

359

2

14,172

(29
)
(51
)
(94
)
(2
)
(176
)
– manufacture
92,606

11,404

1,569

125

105,704

(132
)
(156
)
(791
)
(83
)
(1,162
)
– electricity, gas, steam and air-conditioning supply

14,522

1,422

40

60

16,044

(18
)
(60
)
(15
)
(54
)
(147
)
– water supply, sewerage, waste management and remediation

3,335

164

24


3,523

(5
)
(2
)
(17
)

(24
)
– construction
12,919

1,116

1,168

51

15,254

(27
)
(41
)
(524
)
(44
)
(636
)
– wholesale and retail trade, repair of motor vehicles and motorcycles

83,751

12,225

1,652

37

97,665

(115
)
(128
)
(968
)
(7
)
(1,218
)
– transportation and storage

23,327

1,825

351

38

25,541

(37
)
(46
)
(82
)
(1
)
(166
)
– accommodation and food

19,385

1,889

270

3

21,547

(43
)
(41
)
(83
)
(1
)
(168
)
– publishing, audiovisual and broadcasting

19,758

1,224

189

1

21,172

(42
)
(16
)
(84
)

(142
)
– real estate
116,132

5,985

1,115

1

123,233

(97
)
(80
)
(594
)

(771
)
– professional, scientific and technical activities

21,282

941

350


22,573

(29
)
(29
)
(113
)

(171
)
– administrative and support services

22,820

1,843

437

3

25,103

(41
)
(48
)
(166
)
(1
)
(256
)
– public administration and defence, compulsory social security

1,425

30

8


1,463

(1
)
(3
)
(5
)

(9
)
– education
1,713

102

14


1,829

(11
)
(7
)
(6
)

(24
)
– health and care
3,710

457

141


4,308

(10
)
(16
)
(33
)

(59
)
– arts, entertainment and recreation

4,326

676

39


5,041

(9
)
(9
)
(15
)

(33
)
– other services
13,259

411

242

1

13,913

(31
)
(31
)
(140
)

(202
)
– activities of households

770

59

1


830






– extra-territorial organisations and bodies activities

49

3

7


59



(1
)

(1
)
– government
7,905

168



8,073

(6
)
(1
)


(7
)
– asset-backed securities
813

16



829


(13
)


(13
)
Non-bank financial institutions
59,245

1,932

230


61,407

(44
)
(31
)
(51
)

(126
)
Loans and advances to banks
71,873

307



72,180

(11
)
(2
)


(13
)
At 31 Dec 2018
612,380

47,018

8,442

324

668,164

(753
)
(845
)
(3,899
)
(194
)
(5,691
)
By geography




















Europe
190,387

19,073

4,233

150

213,843

(366
)
(529
)
(1,598
)
(102
)
(2,595
)
– of which: UK
133,004

15,370

2,928

8

151,310

(313
)
(471
)
(998
)

(1,782
)
Asia
314,591

17,729

1,736

92

334,148

(179
)
(121
)
(1,040
)
(36
)
(1,376
)
– of which: Hong Kong

194,186

8,425

729

69

203,409

(99
)
(54
)
(413
)
(35
)
(601
)
MENA
25,684

2,974

1,769

53

30,480

(73
)
(77
)
(974
)
(46
)
(1,170
)
North America
62,631

6,928

314


69,873

(37
)
(107
)
(101
)

(245
)
Latin America
19,087

314

390

29

19,820

(98
)
(11
)
(186
)
(10
)
(305
)
At 31 Dec 2018
612,380

47,018

8,442

324

668,164

(753
)
(845
)
(3,899
)
(194
)
(5,691
)


HSBC Holdings plc Earnings Release 3Q19
25


Earnings Release – 3Q19

Capital adequacy
Key metrics (KM1/IFRS9–FL)
 
 
 
At
 
 
 
30 Sep

30 Jun

31 Mar

31 Dec

30 Sep

Ref*
 
Footnotes
2019

2019

2019

2018

2018

 
Available capital ($bn)
1
 
 
 
 
 
1
Common equity tier 1 (‘CET1’) capital
 
123.8

126.9

125.8

121.0

123.1

2
CET1 capital as if IFRS 9 transitional arrangements had not been applied
 
122.9

126.0

124.9

120.0

122.1

3
Tier 1 capital
 
149.7

152.8

151.8

147.1

149.3

4
Tier 1 capital as if IFRS 9 transitional arrangements had not been applied
 
148.8

151.9

150.9

146.1

148.3

5
Total capital
 
175.1

178.3

177.8

173.2

178.1

6
Total capital as if IFRS 9 transitional arrangements had not been applied
 
174.2

177.4

176.9

172.2

177.1

 
Risk-weighted assets (‘RWAs’) ($bn)
 
 
 
 
 
 
7
Total RWAs
 
865.2

886.0

879.5

865.3

862.7

8
Total RWAs as if IFRS 9 transitional arrangements had not been applied
 
864.7

885.5

878.9

864.7

862.1

 
Capital ratios (%)
1
 
 
 
 
 
9
CET1
 
14.3

14.3

14.3

14.0

14.3

10
CET1 as if IFRS 9 transitional arrangements had not been applied
 
14.2

14.2

14.2

13.9

14.2

11
Tier 1
 
17.3

17.2

17.3

17.0

17.3

12
Tier 1 as if IFRS 9 transitional arrangements had not been applied
 
17.2

17.2

17.2

16.9

17.2

13
Total capital
 
20.2

20.1

20.2

20.0

20.7

14
Total capital as if IFRS 9 transitional arrangements had not been applied
 
20.1

20.0

20.1

19.9

20.6

 
Additional CET1 buffer requirements as a percentage of RWAs (%)
 
 
 
 
 
 
 
Capital conservation buffer requirement
 
2.50

2.50

2.50

1.88

1.88

 
Countercyclical buffer requirement
 
0.69

0.68

0.67

0.56

0.45

 
Bank G-SIB and/or D-SIB additional requirements
 
2.00

2.00

2.00

1.50

1.50

 
Total bank CET1 specific buffer requirements
 
5.19

5.18

5.17

3.94

3.83

 
Total capital requirement (%)
2
 
 
 
 
 
 
Total capital requirement
 
11.0

11.0

11.0

10.9

11.5

 
CET1 available after meeting the bank’s minimum capital requirements
 
8.1

8.1

8.1

7.9

7.8

 
Leverage ratio
3
 
 
 
 
 
15
Total leverage ratio exposure measure ($bn)
 
2,708.2

2,786.5

2,735.2

2,614.9

2,676.4

16
Leverage ratio (%)
 
5.4

5.4

5.4

5.5

5.4

17
Leverage ratio as if IFRS 9 transitional arrangements had not been applied (%)
 
5.4

5.3

5.4

5.5

5.4

 
Liquidity coverage ratio (‘LCR’)
4

 
 
 
 
 
Total high-quality liquid assets ($bn)
 
513.2

532.8

535.4

567.2

533.2

 
Total net cash outflow ($bn)
 
378.0

391.0

374.8

368.7

334.1

 
LCR ratio (%)
 
135.8

136.3

142.9

153.8

159.6

*
The references in this table and other tables within this section identify the lines prescribed in the relevant European Banking Authority (‘EBA’) template where applicable and where there is a value.
1
Capital figures and ratios at 30 September 2019 and 30 June 2019 are calculated in accordance with the revisions to the Capital Requirements Regulation (‘CRR II’) on a transitional basis. Prior period capital figures and ratios are reported under the Capital Requirements Regulation and Directive (‘CRD IV’) on a transitional basis.
2
Total capital requirement is defined as the sum of Pillar 1 and Pillar 2A capital requirements set by the UK’s Prudential Regulation Authority (‘PRA’). The minimum requirements represent the total capital requirement to be met by CET1.
3
Leverage ratios at 30 September 2019 and 30 June 2019 are calculated using the CRR II end point basis for additional tier 1 capital. Prior period leverage ratios are calculated using the CRD IV end point basis for capital.
4
The EU’s regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation do not apply to liquidity coverage measures. LCR is calculated as at the end of each period rather than using average values. For further details, refer to page 68 of the Interim Report 2019.
We have adopted the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’, including paragraph four within article 473a of the Capital Requirements Regulation, published by the European Union (‘EU’) on 27 December 2017. These transitional arrangements permit banks to add back to their capital base a proportion of the impact that IFRS 9 has upon their loan loss allowances during the first five years of use. The proportion that banks may add back starts at 95% in 2018, and reduces to 25% by 2022. The impact of IFRS 9 on loan loss allowances is defined as:
the increase in loan loss allowances on day one of IFRS 9 adoption; and
any subsequent increase in expected credit losses (‘ECL’) in the non-credit-impaired book thereafter.
The impact is calculated separately for portfolios using the standardised (‘STD’) and internal ratings based (‘IRB’) approaches. For IRB portfolios, there is no add-back to capital unless loan loss allowances exceed regulatory 12-month expected losses. Any add-back must be tax affected and accompanied by a recalculation of capital deduction thresholds, exposure and RWAs.
In the current period, the add-back to the capital base amounted to $1.0bn under the STD approach with a tax impact of $0.2bn and a capital deduction threshold impact of $0.1bn. This resulted in a net add-back of $0.9bn.

26
HSBC Holdings plc Earnings Release 3Q19


Capital
Own funds disclosure
 
 
At
 
 
30 Sep

30 Jun

 
 
2019

2019

Ref
 
$m

$m

6
Common equity tier 1 capital before regulatory adjustments
159,771

161,348

28
Total regulatory adjustments to common equity tier 1
(35,980
)
(34,399
)
29
Common equity tier 1 capital
123,791

126,949

36
Additional tier 1 capital before regulatory adjustments
25,946

25,938

43
Total regulatory adjustments to additional tier 1 capital
(60
)
(60
)
44
Additional tier 1 capital
25,886

25,878

45
Tier 1 capital
149,677

152,827

51
Tier 2 capital before regulatory adjustments
26,725

26,625

57
Total regulatory adjustments to tier 2 capital
(1,279
)
(1,193
)
58
Tier 2 capital
25,446

25,432

59
Total capital
175,123

178,259

At 30 September 2019, our common equity tier 1 (‘CET1’) capital ratio remained unchanged from 30 June 2019 at 14.3%.
Our CET1 capital decreased by $3.2bn during the quarter, mainly as a result of:
foreign currency translation differences of $2.6bn;
a provision of $1.0bn for share buy-backs; and
other movements totalling $1.1bn, including a $0.5bn increase in the deduction for significant investments.
These decreases were partly offset by capital generation of $1.6bn through profits, net of cash and scrip dividends.
Leverage
Leverage ratio
 
 
 
At
 
 
 
30 Sep

30 Jun

 
 
 
2019

2019

Ref
 
Footnotes
$bn

$bn

20
Tier 1 capital
 
146.2

149.3

21
Total leverage ratio exposure
 
2,708.2

2,786.5

 
 
 
%

%

22
Leverage ratio
 
5.4

5.4

EU-23
Choice of transitional arrangements for the definition of the capital measure
 
Fully phased-in

Fully phased-in

 
UK leverage ratio exposure – quarterly average
1
2,570.7

2,550.1

 
 
 
%

%

 
UK leverage ratio – quarterly average
1
5.7

5.8

 
UK leverage ratio – quarter end
1
5.8

5.8

1
UK leverage ratio denotes the Group’s leverage ratio calculated under the PRA’s UK leverage framework and excludes qualifying central bank balances from the calculation of exposure.
Our leverage ratio calculated in accordance with the Capital Requirements Regulation was 5.4% at 30 September 2019, unchanged from 30 June 2019. The decrease in total leverage ratio exposure was primarily due to the impact of foreign currency translation differences on balance sheet exposure and a fall in securities financing transactions.
At 30 September 2019, our UK minimum leverage ratio requirement of 3.25% was supplemented by an additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of 0.2%. These additional buffers translated into capital values of $17.6bn and $6.0bn respectively. We exceeded these leverage requirements.

HSBC Holdings plc Earnings Release 3Q19
27


Earnings Release – 3Q19

Risk-weighted assets
Overview of RWAs (OV1)
 
 
 
30 Sep

30 Jun

30 Sep

 
 
 
2019

2019

2019

 
 
 
RWAs

RWAs

Capital
requirement
1

Ref
 
Footnotes
$bn

$bn

$bn

1
Credit risk (excluding counterparty credit risk)
 
636.6

657.3

50.9

2
– standardised approach
 
129.3

134.8

10.3

3
– foundation internal ratings based (‘IRB’) approach
 
31.0

31.1

2.5

4
– advanced IRB approach
 
476.3

491.4

38.1

6
Counterparty credit risk
 
49.6

50.5

3.9

7
– mark-to-market
 
23.4

26.8

1.9

10
– internal model method (‘IMM’)
 
20.4

17.4

1.6

11
– risk exposure amount for contributions to the default fund of a central counterparty
 
0.5

0.5


12
– credit valuation adjustment
 
5.3

5.8

0.4

13
Settlement risk
 
0.2

0.1


14
Securitisation exposures in the non-trading book
 
6.9

7.4

0.6

15
– IRB method
 
2.2

2.5

0.2

17
– IRB internal assessment approach
 
1.0

1.2

0.1

18
– standardised approach
 
1.3

2.0

0.1

14a
– exposures subject to the new securitisation framework
2
2.4

1.7

0.2

19
Market risk
 
36.9

34.8

2.9

20
– standardised approach
 
8.1

4.3

0.6

21
– internal models approach (‘IMA’)
 
28.8

30.5

2.3

23
Operational risk
 
91.1

91.1

7.3

25
– standardised approach
 
91.1

91.1

7.3

27
Amounts below the thresholds for deduction (subject to 250% risk weight)
 
43.9

44.8

3.5

29
Total
 
865.2

886.0

69.1

1
‘Capital requirement’ in this and subsequent tables represents the minimum capital charge set at 8% of RWAs by article 92 of the Capital Requirements Regulation.
2
On 1 January 2019, a new securitisation framework came into force in the EU for new transactions. Existing positions are subject to ‘grandfathering’ provisions and will transfer to the new framework on 1 January 2020. Our exposures subject to the approaches under the new framework at 30 September 2019 include $551m under the external ratings-based approach, $1,065m under the internal assessment approach, and $745m under the standardised approach.
RWAs by global business

RBWM

CMB

GB&M

GPB

Corporate
Centre

Total


$bn

$bn

$bn

$bn

$bn

$bn

Credit risk
100.1

292.9

166.8

13.2

114.4

687.4

Counterparty credit risk


48.3

0.2

1.3

49.8

Market risk


30.8


6.1

36.9

Operational risk
27.8

24.4

30.9

2.8

5.2

91.1

At 30 Sep 2019
127.9

317.3

276.8

16.2

127.0

865.2

RWAs by geographical region


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$bn

$bn

$bn

$bn

$bn

$bn

Credit risk

210.3

293.2

47.8

105.0

31.1

687.4

Counterparty credit risk

28.2

10.4

1.4

8.2

1.6

49.8

Market risk
1
29.1

21.6

1.6

6.2

2.1

36.9

Operational risk

27.4

39.5

6.7

11.7

5.8

91.1

At 30 Sep 2019

295.0

364.7

57.5

131.1

40.6

865.2

1
RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.

28
HSBC Holdings plc Earnings Release 3Q19


RWA movement by global business by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
RBWM

CMB

GB&M

GPB

Corporate
Centre

Market risk

Total RWAs

 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

RWAs at 1 Jul 2019
129.0

327.6

252.2

16.5

125.9

34.8

886.0

Asset size
2.3

2.4

(0.2
)
(0.2
)
(3.7
)
2.4

3.0

Asset quality
0.2

1.5

2.7

(0.1
)
0.4

0.2

4.9

Model updates
(0.5
)
(0.2
)
(0.8
)



(1.5
)
Methodology and policy
(1.2
)
(7.7
)
(4.6
)
0.1

(0.5
)
(0.5
)
(14.4
)
Foreign exchange movements
(1.9
)
(6.3
)
(3.3
)
(0.1
)
(1.2
)

(12.8
)
Total RWA movement
(1.1
)
(10.3
)
(6.2
)
(0.3
)
(5.0
)
2.1

(20.8
)
RWAs at 30 Sep 2019
127.9

317.3

246.0

16.2

120.9

36.9

865.2

RWA movement by geographical region by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
Europe

Asia

MENA

North
America

Latin
America

Market risk

Total RWAs

 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

RWAs at 1 Jul 2019
280.8

351.0

55.9

124.9

38.6

34.8

886.0

Asset size
0.6

0.6

0.1

(0.5
)
(0.2
)
2.4

3.0

Asset quality
0.7

0.5

(0.1
)
1.3

2.3

0.2

4.9

Model updates
(1.0
)
(0.5
)




(1.5
)
Methodology and policy
(8.1
)
(5.1
)
(0.2
)
(0.5
)

(0.5
)
(14.4
)
Foreign exchange movements
(7.1
)
(3.4
)
0.2

(0.3
)
(2.2
)

(12.8
)
Total RWA movement
(14.9
)
(7.9
)


(0.1
)
2.1

(20.8
)
RWAs at 30 Sep 2019
265.9

343.1

55.9

124.9

38.5

36.9

865.2

RWAs
Risk-weighted assets (‘RWAs’) fell by $20.8bn during 3Q19, including a reduction of $12.8bn due to foreign currency translation differences. The $8.0bn decrease (excluding foreign currency translation differences) comprised reductions of $14.4bn due to methodology and policy changes and $1.5bn due to model updates, partly offset by growth of $4.9bn from changes in asset quality and of $3.0bn from asset size.
Asset size
The $3.0bn increase due to asset size movements was driven by lending growth of $2.4bn in CMB and $2.3bn in RBWM, primarily in North America, Asia and Europe, and a $2.4bn increase in market risk levels. This growth was partly offset by a $3.7bn fall in RWAs within Corporate Centre, mainly in Asia.
Asset quality
The $4.9bn increase as a result of changes in asset quality mainly comprised a $2.4bn increase due to the impact of the credit downgrade of Argentina, and a $2.4bn rise in Europe and North America due to changes in the portfolio mix of GB&M assets.
Model updates
The $1.5bn reduction in RWAs from model updates included the effect of extending counterparty credit risk models to GB&M exposures in France, and updates to UK retail models and to corporate models in Asia.
Methodology and policy
The $14.4bn fall in RWAs due to methodology and policy changes was mainly due to risk parameter refinements and improved collateral recognition, which reduced RWAs by $7.0bn, and a change to our best estimate of expected loss on corporate exposures, which reduced RWAs by $6.3bn, primarily in CMB’s UK portfolio.
RWA flow statements of credit risk exposures under IRB approach1 (CR8)
 
 
RWAs

Capital
requirement

Ref
 
$bn

$bn

1
RWAs at 1 Jul 2019
522.5

41.8

2
Asset size
0.8

0.1

3
Asset quality
4.4

0.4

4
Model updates
(0.5
)

5
Methodology and policy
(9.9
)
(0.9
)
7
Foreign exchange movements
(10.0
)
(0.8
)
9
RWAs at 30 Sep 2019
507.3

40.6

1
Securitisation positions are not included in this table.
RWAs under the IRB approach fell by $15.2bn during 3Q19, including a decrease of $10.0bn due to foreign currency translation differences. The $5.2bn reduction (excluding foreign currency translation differences) was primarily due to methodology and policy-driven decreases of $9.9bn, partly offset by asset quality growth of $4.4bn.


HSBC Holdings plc Earnings Release 3Q19
29


Earnings Release – 3Q19

Asset quality
The $4.4bn growth in RWAs from asset quality included a $1.6bn increase due to the impact of the credit downgrade of Argentina and a $2.4bn rise due to changes in the portfolio mix of GB&M assets.
Methodology and policy
The $9.9bn decrease from methodology and policy changes primarily comprised a reduction in RWAs of $6.3bn from a change to our best estimate of expected loss on corporate exposures and reductions due to risk parameter refinements.
RWA flow statements of counterparty credit risk exposures under the IMM (CCR7)
 
 
RWAs

Capital requirement

Ref
 
$bn

$bn

1
RWAs at 1 Jul 2019
21.5

1.7

2
Asset size
0.7

0.1

4
Model updates
2.8

0.2

9
RWAs at 30 Sep 2019
25.0

2.0

RWAs under the IMM grew by $3.5bn in 3Q19 due to the extension of counterparty credit models to France of $2.8bn, and asset size increases of $0.7bn.
RWA flow statements of market risk exposures under the IMA (MR2–B)
 
 
VaR

Stressed
VaR

IRC

Other

Total RWAs

Capital requirement

Ref
 
$bn

$bn

$bn

$bn

$bn

$bn

1
RWAs at 1 Jul 2019
6.5

9.4

11.1

3.5

30.5

2.4

2
Movement in risk levels
(0.4
)
(0.6
)
(0.5
)
0.3

(1.2
)
(0.1
)
4
Methodology and policy
(0.1
)
(0.2
)

(0.2
)
(0.5
)

8
RWAs at 30 Sep 2019
6.0

8.6

10.6

3.6

28.8

2.3

RWAs under the IMA decreased by $1.7bn, comprising reductions in risk levels of $1.2bn, and decreases due to methodology and policy changes of $0.5bn. The reduction in risk levels was largely caused by a $1.2bn decrease in modelled RWAs as a result of decreased debt securities exposures in Europe and North America.
Minimum requirement for own funds and eligible liabilities
From 1 January 2019, a requirement was introduced for total loss-absorbing capacity (‘TLAC’), as defined in the final standards adopted by the Financial Stability Board. In the EU, TLAC requirements were implemented via CRR II, which came into force in June 2019 and included a new framework on minimum requirement for own funds and eligible liabilities (‘MREL’).
MREL includes own funds and liabilities that can be written down or converted into capital resources in order to absorb losses or recapitalise a bank in the event of its failure. The new framework is complemented by disclosure requirements. As the specific EU format is yet to be agreed, the disclosures are based on the formats provided in the Basel Committee Standards for Pillar 3 disclosures.
In line with our existing structure and business model, we have three resolution groups – namely the European resolution group, the Asian resolution group and the US resolution group. Smaller entities outside these resolution groups can be separately resolved.
The following table summarises key metrics for each of the Group’s three resolution groups.

30
HSBC Holdings plc Earnings Release 3Q19


Key metrics of the resolution groups (KM2)
 
 
Resolution groups
 
 
European1
Asian2
US3
 
 
At
30 Sep 2019
At
30 Jun
2019
At
30 Sep 2019
At
30 Jun 2019
At
30 Sep 2019

At
30 Jun
2019
1
Total loss absorbing capacity ('TLAC') available ($m)
95,474
97,256
97,244
97,040
30,184

31,739
1a
Fully loaded ECL accounting model TLAC available ($m)
95,282
97,055
97,244
97,040
N/A

N/A
2
Total RWAs at the level of the resolution group ($m)
316,766
321,149
370,590
371,100
139,016

140,762
3
TLAC as a percentage of RWA (row1/row2) (%)
30.1
30.3
26.2
26.1
21.7

22.5
3a
Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%)
30.1
30.2
26.2
26.1
N/A

N/A
4
Leverage exposure measure at the level of the resolution group ($m)
1,132,679
1,176,134
1,024,554
1,041,168
372,556

362,621
5
TLAC as a percentage of leverage exposure measure (row1/row4) (%)
8.4
8.3
9.5
9.3
8.1

8.8
5a
Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model leverage exposure measure (%)
8.4
8.3
9.5
9.3
N/A

N/A
6a
Does the subordination exemption in the antepenultimate paragraph of section 11 of the FSB TLAC term sheet apply?
No
No
No
No
No

No
6b
Does the subordination exemption in the penultimate paragraph of section 11 of the FSB TLAC term sheet apply?
No
No
No
No
No

No
6c
If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%)
N/A
N/A
N/A
N/A
N/A

N/A
1
The European resolution group reports in accordance with the applicable provisions of the Capital Requirements Regulation as amended by
CRR II. Unless otherwise stated, all figures are calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation.
2
Reporting for the Asian resolution group follows the Hong Kong Monetary Authority regulatory rules. IFRS 9 has been implemented but no regulatory transitional arrangements apply.
3
Reporting for the US resolution group is prepared in accordance with local regulatory rules. The US accounting standard for current expected credit losses corresponding to IFRS 9 is not yet effective. Leverage exposure and ratio are calculated under the US supplementary leverage ratio rules.
Disclosure of the main features of capital and other loss absorbing instruments for the resolution groups is published on our website, www.hsbc.com/investors/fixed-income-investors/regulatory-capital-securities.
For further details on the Group’s MREL and resolution groups, refer to page 40 of the Group’s Pillar 3 Disclosures at 30 June 2019 document.

HSBC Holdings plc Earnings Release 3Q19
31


Earnings Release – 3Q19

Summary information – global businesses
HSBC adjusted profit before tax
 
 
Nine months ended 30 Sep 2019
 
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 
Footnotes
$m

$m

$m

$m

$m

$m

Net operating income before change in expected credit losses and other credit impairment charges
1
17,547

11,607

11,176

1,396

36

41,762

of which: net interest income/(expense)
 
12,339

8,461

4,224

662

(2,760
)
22,926

Change in expected credit losses and other credit impairment (charges)/recoveries
 
(989
)
(907
)
(121
)
(25
)
19

(2,023
)
Net operating income
 
16,558

10,700

11,055

1,371

55

39,739

Total operating expenses
 
(10,472
)
(5,043
)
(6,990
)
(1,052
)
(154
)
(23,711
)
Operating profit/(loss)
 
6,086

5,657

4,065

319

(99
)
16,028

Share of profit in associates and joint ventures
 
51




1,785

1,836

Adjusted profit before tax
 
6,137

5,657

4,065

319

1,686

17,864

 
 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
 
34.3

31.7

22.8

1.8

9.4

100.0

Adjusted cost efficiency ratio
 
59.7

43.4

62.5

75.4

427.8

56.8

 
 
Nine months ended 30 Sep 2018
Net operating income/(expense) before change in expected credit losses and other credit impairment charges
1
16,293

10,792

11,986

1,334

(537
)
39,868

of which: net interest income/(expense)
 
11,397

7,623

3,700

654

(1,407
)
21,967

Change in expected credit losses and other credit impairment (charges)/recoveries
 
(797
)
(274
)
96

16

113

(846
)
Net operating income
 
15,496

10,518

12,082

1,350

(424
)
39,022

Total operating expenses
 
(9,856
)
(4,707
)
(6,886
)
(1,070
)
(584
)
(23,103
)
Operating profit
 
5,640

5,811

5,196

280

(1,008
)
15,919

Share of profit in associates and joint ventures
 
21




1,874

1,895

Adjusted profit before tax
 
5,661

5,811

5,196

280

866

17,814

 
 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
 
31.8

32.6

29.2

1.6

4.9

100.0

Adjusted cost efficiency ratio
 
60.5

43.6

57.5

80.2

(108.8
)
57.9

For footnotes, see page 32.
    

32
HSBC Holdings plc Earnings Release 3Q19


HSBC adjusted profit before tax (continued)
 
 
Quarter ended 30 Sep 2019
 
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 
Footnotes
$m

$m

$m

$m

$m

$m

Net operating income/(expense) before change in expected credit losses and other credit impairment charges
1
5,628

3,791

3,470

472

(94
)
13,267

of which: net interest income/(expense)
 
4,184

2,808

1,363

221

(890
)
7,686

Change in expected credit losses and other credit impairment (charges)/recoveries
 
(449
)
(413
)
(26
)
(6
)
11

(883
)
Net operating income/(expense)
 
5,179

3,378

3,444

466

(83
)
12,384

Total operating expenses
 
(3,491
)
(1,746
)
(2,203
)
(343
)
235

(7,548
)
Operating profit
 
1,688

1,632

1,241

123

152

4,836

Share of profit in associates and joint ventures
 
8




504

512

Adjusted profit before tax
 
1,696

1,632

1,241

123

656

5,348

 
 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
 
31.7

30.5

23.2

2.3

12.3

100.0

Adjusted cost efficiency ratio
 
62.0

46.1

63.5

72.7

250.0

56.9

 
 
Quarter ended 30 Jun 2019
Net operating income before change in expected credit losses and other credit impairment charges
1
5,869

3,839

3,592

471

110

13,881

of which: net interest income/(expense)
 
4,133

2,814

1,424

224

(925
)
7,670

Change in expected credit losses and other credit impairment (charges)/recoveries
 
(231
)
(244
)
(56
)
(16
)
2

(545
)
Net operating income
 
5,638

3,595

3,536

455

112

13,336

Total operating expenses
 
(3,475
)
(1,616
)
(2,353
)
(357
)
(150
)
(7,951
)
Operating profit/(loss)
 
2,163

1,979

1,183

98

(38
)
5,385

Share of profit in associates and joint ventures
 
32




684

716

Adjusted profit before tax
 
2,195

1,979

1,183

98

646

6,101

 
 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
 
36.0

32.4

19.4

1.6

10.6

100.0

Adjusted cost efficiency ratio
 
59.2

42.1

65.5

75.8

136.4

57.3

 
 
Quarter ended 30 Sep 2018
Net operating income/(expense) before change in expected credit losses and other credit impairment charges
1
5,624

3,653

4,070

427

(288
)
13,486

of which: net interest income/(expense)
 
4,008

2,637

1,315

218

(686
)
7,492

Change in expected credit losses and other credit impairment (charges)/recoveries
 
(283
)
(237
)
(8
)
11

28

(489
)
Net operating income/(expense)
 
5,341

3,416

4,062

438

(260
)
12,997

Total operating expenses
 
(3,273
)
(1,579
)
(2,297
)
(345
)
7

(7,487
)
Operating profit/(loss)
 
2,068

1,837

1,765

93

(253
)
5,510

Share of profit in associates and joint ventures
 
4




578

582

Adjusted profit before tax
 
2,072

1,837

1,765

93

325

6,092

 
 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
 
34.0

30.2

29.0

1.5

5.3

100.0

Adjusted cost efficiency ratio
 
58.2

43.2

56.4

80.8

2.4

55.5

1
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.

HSBC Holdings plc Earnings Release 3Q19
33


Earnings Release – 3Q19

Global Private Banking – reported client assets1
 
Quarter ended
 
30 Sep

30 Jun

30 Sep

 
2019

2019

2018

 
$bn

$bn

$bn

Opening balance
341

335

330

Net new money
5

4

2

Value change
(2
)
1

(3
)
Disposals



Exchange and other
(6
)
1

(3
)
Closing balance
338

341

326

Global Private Banking – reported client assets by geography1
 
 
Quarter ended
 
 
30 Sep

30 Jun

30 Sep

 
 
2019

2019

2018

 
Footnotes
$bn

$bn

$bn

Europe
 
155

160

158

Asia
 
143

143

129

North America
 
40

38

39

Latin America
 



Middle East
2



Closing balance
 
338

341

326

1
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 are funds under management, which are not reported on the Group’s balance sheet, and customer deposits, which are reported on the Group’s balance sheet.
2
‘Middle East’ is an offshore business, therefore client assets are booked across to various regions, primarily in Europe.

34
HSBC Holdings plc Earnings Release 3Q19


Summary information – geographical regions
HSBC reported profit/(loss) before tax
 
Nine months ended 30 Sep 2019
 
Europe

Asia

MENA

North America

Latin
 America

Intra-HSBC
items

Total

 
$m

$m

$m

$m

$m

$m

$m

Net interest income
4,251

12,394

1,349

2,461

1,546

807

22,808

Net fee income
2,744

4,105

491

1,347

398


9,085

Net income from financial instruments held for trading or managed on a fair value basis
2,995

3,660

252

652

597

(279
)
7,877

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
1,262

1,082



(26
)

2,318

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
1,051

15


24

55

(528
)
617

Other income/(expense)1
1,178

1,918

854

500

9

(4,437
)
22

Net operating income before change in expected credit losses and other credit impairment charges2
13,481

23,174

2,946

4,984

2,579

(4,437
)
42,727

Change in expected credit losses and other credit impairment charges
(810
)
(542
)
(65
)
(140
)
(466
)

(2,023
)
Net operating income
12,671

22,632

2,881

4,844

2,113

(4,437
)
40,704

Total operating expenses
(13,633
)
(9,795
)
(1,052
)
(3,799
)
(1,454
)
4,437

(25,296
)
Operating profit/(loss)
(962
)
12,837

1,829

1,045

659


15,408

Share of profit in associates and joint ventures
18

1,594

212


12


1,836

Profit/(loss) before tax
(944
)
14,431

2,041

1,045

671


17,244

 
%

%

%

%

%



%

Share of HSBC’s profit before tax
(5.5
)
83.7

11.8

6.1

3.9



100.0

Cost efficiency ratio
101.1

42.3

35.7

76.2

56.4



59.2

 
 
 
 
 
 
 
 
 
Nine months ended 30 Sep 2018
Net interest income
5,212

11,976

1,332

2,632

1,450

178

22,780

Net fee income
3,086

4,477

463

1,397

370


9,793

Net income from financial instruments held for trading or managed on a fair value basis
3,048

3,070

197

651

523

(4
)
7,485

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
(36
)
(14
)


6


(44
)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
696

(26
)
2

30

17

(178
)
541

Other income/(expense)1
1,702

2,418

25

442

(247
)
(3,810
)
530

Net operating income before change in expected credit losses and other credit impairment charges2
13,708

21,901

2,019

5,152

2,119

(3,814
)
41,085

Change in expected credit losses and other credit impairment (charges)/recoveries
(187
)
(405
)
(203
)
264

(383
)

(914
)
Net operating income
13,521

21,496

1,816

5,416

1,736

(3,814
)
40,171

Total operating expenses
(12,798
)
(9,263
)
(1,009
)
(4,907
)
(1,352
)
3,814

(25,515
)
Operating profit
723

12,233

807

509

384


14,656

Share of profit in associates and joint ventures
21

1,606

351




1,978

Profit before tax
744

13,839

1,158

509

384


16,634

 
%

%

%

%

%



%

Share of HSBC’s profit before tax
4.5

83.2

6.9

3.1

2.3



100.0

Cost efficiency ratio
93.4

42.3

50.0

95.2

63.8



62.1

For footnotes, see page 36.

HSBC Holdings plc Earnings Release 3Q19
35


Earnings Release – 3Q19

HSBC reported profit/(loss) before tax (continued)
 
Quarter ended 30 Sep 2019
 
Europe

Asia

MENA

North America

Latin
America

Intra-HSBC
items

Total

 
$m

$m

$m

$m

$m

$m

$m

Net interest income
942

4,212

452

776

470

716

7,568

Net fee income
875

1,340

165

444

137


2,961

Net income from financial instruments held for trading or managed on a fair value basis
1,158

1,308

77

240

194

(431
)
2,546

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
206

(35
)


(49
)

122

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
455

1

(1
)
9

(20
)
(284
)
160

Other income/(expense)1
593

889

10

150

(53
)
(1,591
)
(2
)
Net operating income before change in expected credit losses and other credit impairment charges2
4,229

7,715

703

1,619

679

(1,590
)
13,355

Change in expected credit losses and other credit impairment charges
(274
)
(282
)
(16
)
(80
)
(231
)

(883
)
Net operating income
3,955

7,433

687

1,539

448

(1,590
)
12,472

Total operating expenses
(4,389
)
(3,305
)
(358
)
(1,240
)
(445
)
1,590

(8,147
)
Operating profit/(loss)
(434
)
4,128

329

299

3


4,325

Share of profit in associates and joint ventures
10

523

(24
)

3


512

Profit/(loss) before tax
(424
)
4,651

305

299

6


4,837

 
%

%

%

%

%

 
%

Share of HSBC’s profit before tax
(8.8
)
96.2

6.3

6.2

0.1

 
100.0

Cost efficiency ratio
103.8

42.8

50.9

76.6

65.5

 
61.0

 
 
 
 
 
 
 
 
 
Quarter ended 30 June 2019
Net interest income
1,785

4,186

460

832

568

(59
)
7,772

Net fee income
958

1,356

167

479

138


3,098

Net income from financial instruments held for trading or managed on a fair value basis
630

1,143

71

194

188

224

2,450

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
309

169



8


486

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
305

6

2

13

28

(167
)
187

Other income/(expense)1
660

780

841

171

(1
)
(1,500
)
951

Net operating income before change in expected credit losses and other credit impairment charges2
4,647

7,640

1,541

1,689

929

(1,502
)
14,944

Change in expected credit losses and other credit impairment charges
(233
)
(102
)
(43
)
(57
)
(120
)

(555
)
Net operating income
4,414

7,538

1,498

1,632

809

(1,502
)
14,389

Total operating expenses
(4,926
)
(3,359
)
(349
)
(1,265
)
(530
)
1,502

(8,927
)
Operating profit/(loss)
(512
)
4,179

1,149

367

279


5,462

Share of profit in associates and joint ventures
6

595

122


9


732

Profit/(loss) before tax
(506
)
4,774

1,271

367

288


6,194

 
%

%

%

%

%

 
%

Share of HSBC’s profit before tax
(8.2
)
77.2

20.5

5.9

4.6



100.0

Cost efficiency ratio
106.0

44.0

22.6

74.9

57.1

 
59.7

For footnotes, see page 36.

36
HSBC Holdings plc Earnings Release 3Q19


HSBC reported profit/(loss) before tax (continued)
 
Quarter ended 30 Sep 2018
 
Europe

Asia

MENA

North America

Latin
 America

Intra-HSBC
items

Total

 
$m

$m

$m

$m

$m

$m

$m

Net interest income
1,685

4,155

468

885

411

76

7,680

Net fee income
976

1,338

143

467

102


3,026

Net income from financial instruments held for trading or managed on a fair value basis
1,122

1,089

50

195

139

7

2,602

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
105

65



8


178

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
272

(10
)
3

11

7

(87
)
196

Other income/(expense)1
677

752

(1
)
182

(144
)
(1,350
)
116

Net operating income before change in expected credit losses and other credit impairment charges2
4,837

7,389

663

1,740

523

(1,354
)
13,798

Change in expected credit losses and other credit impairment (charges)/recoveries

(289
)
(100
)
30

(148
)

(507
)
Net operating income
4,837

7,100

563

1,770

375

(1,354
)
13,291

Total operating expenses
(4,206
)
(3,153
)
(323
)
(1,303
)
(335
)
1,354

(7,966
)
Operating profit
631

3,947

240

467

40


5,325

Share of profit in associates and joint ventures
3

512

82




597

Profit before tax
634

4,459

322

467

40


5,922

 
%

%

%

%

%



%

Share of HSBC’s profit before tax
10.7

75.3

5.4

7.9

0.7



100.0

Cost efficiency ratio
87.0

42.7

48.7

74.9

64.1



57.7

1
Other income in this context comprises where applicable changes in fair value of long-term debt and related derivatives, 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.
2
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.


HSBC Holdings plc Earnings Release 3Q19
37


Earnings Release – 3Q19

Appendix – selected information
Analysis of significant items by global business, geographical regions and countries/territories is presented below.
Reconciliation of reported results to adjusted results – global businesses


Nine months ended 30 Sep 2019


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate Centre

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
 
Reported
 
17,434

11,598

11,143

1,396

1,156

42,727

Significant items

113

9

33


(1,120
)
(965
)
– customer redress programmes

109

9




118

– disposals, acquisitions and investment in new businesses

4




(827
)
(823
)
– fair value movement on financial instruments
2


33


(293
)
(260
)
Adjusted

17,547

11,607

11,176

1,396

36

41,762

ECL













Reported

(989
)
(907
)
(121
)
(25
)
19

(2,023
)
Adjusted

(989
)
(907
)
(121
)
(25
)
19

(2,023
)
Operating expenses













Reported

(11,605
)
(5,089
)
(7,156
)
(1,006
)
(440
)
(25,296
)
Significant items

1,133

46

166

(46
)
286

1,585

– costs of structural reform
3

4

37


85

126

– customer redress programmes

1,083

15




1,098

– restructuring and other related costs

50

27

129

20

201

427

– settlements and provisions in connection with legal and regulatory matters




(66
)

(66
)
Adjusted

(10,472
)
(5,043
)
(6,990
)
(1,052
)
(154
)
(23,711
)
Share of profit in associates and joint ventures













Reported

51




1,785

1,836

Adjusted

51




1,785

1,836

Profit before tax













Reported

4,891

5,602

3,866

365

2,520

17,244

Significant items

1,246

55

199

(46
)
(834
)
620

– revenue

113

9

33


(1,120
)
(965
)
– operating expenses

1,133

46

166

(46
)
286

1,585

Adjusted

6,137

5,657

4,065

319

1,686

17,864

Loans and advances to customers (net)













Reported

376,312

341,339

252,462

46,132

1,588

1,017,833

Adjusted

376,312

341,339

252,462

46,132

1,588

1,017,833

Customer accounts













Reported

655,592

353,037

295,900

61,464

7,748

1,373,741

Adjusted

655,592

353,037

295,900

61,464

7,748

1,373,741

For footnotes, see page 42.


38
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported results to adjusted results – global businesses (continued)
 
 
Nine months ended 30 Sep 2018
 
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total

 
Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
 
Reported
 
16,818

11,235

12,522

1,361

(851
)
41,085

Currency translation
 
(532
)
(399
)
(466
)
(27
)
(90
)
(1,514
)
Significant items
 
7

(44
)
(70
)

404

297

– customer redress programmes
 

(46
)



(46
)
– disposal, acquisitions and investment in new businesses
 
7




135

142

– fair value movement on financial instruments
2


(73
)

268

195

– currency translation on significant items
 

2

3


1

6

Adjusted
 
16,293

10,792

11,986

1,334

(537
)
39,868

ECL
 
 
 
 
 
 
 
Reported
 
(838
)
(295
)
90

16

113

(914
)
Currency translation
 
41

21

6



68

Adjusted
 
(797
)
(274
)
96

16

113

(846
)
Operating expenses
 
 
 
 
 
 
 
Reported
 
(10,457
)
(4,906
)
(7,077
)
(1,195
)
(1,880
)
(25,515
)
Currency translation
 
435

188

272

27

108

1,030

Significant items
 
166

11

(81
)
98

1,188

1,382

– costs of structural reform
3
3

5

27


265

300

– customer redress programmes
 
156

6




162

– disposals, acquisitions and investment in new businesses
 



54


54

– restructuring and other related costs
 



7

44

51

– settlements and provisions in connection with legal and regulatory matters
 
16


(110
)
42

892

840

– currency translation on significant items
 
(9
)

2

(5
)
(13
)
(25
)
Adjusted
 
(9,856
)
(4,707
)
(6,886
)
(1,070
)
(584
)
(23,103
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
Reported
 
21




1,957

1,978

Currency translation
 




(83
)
(83
)
Adjusted
 
21




1,874

1,895

Profit/(loss) before tax
 
 
 
 
 
 
 
Reported
 
5,544

6,034

5,535

182

(661
)
16,634

Currency translation
 
(56
)
(190
)
(188
)

(65
)
(499
)
Significant items
 
173

(33
)
(151
)
98

1,592

1,679

– revenue
 
7

(44
)
(70
)

404

297

– operating expenses
 
166

11

(81
)
98

1,188

1,382

Adjusted
 
5,661

5,811

5,196

280

866

17,814

Loans and advances to customers (net)
 
 
 
 
 
 
 
Reported
 
356,453

332,649

250,674

39,210

2,474

981,460

Currency translation
 
(11,327
)
(8,369
)
(6,005
)
(807
)
(122
)
(26,630
)
Adjusted
 
345,126

324,280

244,669

38,403

2,352

954,830

Customer accounts
 
 
 
 
 
 
 
Reported
 
636,603

352,477

285,525

63,717

7,053

1,345,375

Currency translation
 
(13,959
)
(8,826
)
(8,583
)
(1,652
)
(280
)
(33,300
)
Adjusted
 
622,644

343,651

276,942

62,065

6,773

1,312,075

For footnotes, see page 42.


HSBC Holdings plc Earnings Release 3Q19
39


Earnings Release – 3Q19

Reconciliation of reported results to adjusted results – global businesses (continued)


Quarter ended 30 Sep 2019


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate Centre

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported
 
5,515

3,782

3,507

472

79

13,355

Significant items

113

9

(37
)

(173
)
(88
)
– customer redress programmes

109

9




118

– disposals, acquisitions and investment in new businesses

4





4

– fair value movement on financial instruments
2


(37
)

(173
)
(210
)
Adjusted

5,628

3,791

3,470

472

(94
)
13,267

ECL













Reported

(449
)
(413
)
(26
)
(6
)
11

(883
)
Adjusted

(449
)
(413
)
(26
)
(6
)
11

(883
)
Operating expenses













Reported

(3,966
)
(1,765
)
(2,249
)
(284
)
117

(8,147
)
Significant items

475

19

46

(59
)
118

599

– costs of structural reform
3


8


27

35

– customer redress programmes

468

16

4



488

– restructuring and other related costs

7

3

34

6

90

140

– settlements and provisions in connection with legal and regulatory matters




(65
)
1

(64
)
Adjusted

(3,491
)
(1,746
)
(2,203
)
(343
)
235

(7,548
)
Share of profit in associates and joint ventures













Reported

8




504

512

Adjusted

8




504

512

Profit before tax













Reported

1,108

1,604

1,232

182

711

4,837

Significant items

588

28

9

(59
)
(55
)
511

– revenue

113

9

(37
)

(173
)
(88
)
– operating expenses

475

19

46

(59
)
118

599

Adjusted

1,696

1,632

1,241

123

656

5,348

Loans and advances to customers (net)













Reported

376,312

341,339

252,462

46,132

1,588

1,017,833

Adjusted

376,312

341,339

252,462

46,132

1,588

1,017,833

Customer accounts













Reported

655,592

353,037

295,900

61,464

7,748

1,373,741

Adjusted

655,592

353,037

295,900

61,464

7,748

1,373,741

For footnotes, see page 42.


40
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported results to adjusted results – global businesses (continued)
 
 
Quarter ended 30 June 2019
 
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate Centre

Total

 
Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
 
Reported
 
5,948

3,895

3,621

474

1,006

14,944

Currency translation
 
(79
)
(56
)
(46
)
(3
)
(24
)
(208
)
Significant items
 


17


(872
)
(855
)
– disposals, acquisitions and investment in new businesses
 




(827
)
(827
)
– fair value movement on financial instruments
2


17


(45
)
(28
)
– currency translation on significant items
 






Adjusted
 
5,869

3,839

3,592

471

110

13,881

ECL
 












Reported
 
(238
)
(247
)
(55
)
(17
)
2

(555
)
Currency translation
 
7

3

(1
)
1


10

Adjusted
 
(231
)
(244
)
(56
)
(16
)
2

(545
)
Operating expenses
 












Reported
 
(4,131
)
(1,662
)
(2,467
)
(370
)
(297
)
(8,927
)
Currency translation
 
80

24

45

2

25

176

Significant items
 
576

22

69

11

122

800

– costs of structural reform
3

2

16


20

38

– customer redress programmes
 
559

(1
)
(4
)


554

– restructuring and other related costs
 
42

22

57

12

104

237

– settlements and provisions in connection with legal and regulatory matters
 



(1
)
(1
)
(2
)
– currency translation on significant items
 
(25
)
(1
)


(1
)
(27
)
Adjusted
 
(3,475
)
(1,616
)
(2,353
)
(357
)
(150
)
(7,951
)
Share of profit in associates and joint ventures
 












Reported
 
30




702

732

Currency translation
 
2




(18
)
(16
)
Adjusted
 
32




684

716

Profit before tax
 












Reported
 
1,609

1,986

1,099

87

1,413

6,194

Currency translation
 
10

(29
)
(2
)

(17
)
(38
)
Significant items
 
576

22

86

11

(750
)
(55
)
– revenue
 


17


(872
)
(855
)
– operating expenses
 
576

22

69

11

122

800

Adjusted
 
2,195

1,979

1,183

98

646

6,101

Loans and advances to customers (net)
 











Reported
 
376,126

347,387

250,790

45,806

1,523

1,021,632

Currency translation
 
(7,831
)
(6,510
)
(4,630
)
(725
)
(46
)
(19,742
)
Adjusted
 
368,295

340,877

246,160

45,081

1,477

1,001,890

Customer accounts
 












Reported
 
660,588

358,735

289,950

62,235

8,616

1,380,124

Currency translation
 
(10,447
)
(6,676
)
(6,529
)
(1,225
)
(321
)
(25,198
)
Adjusted
 
650,141

352,059

283,421

61,010

8,295

1,354,926

For footnotes, see page 42.


HSBC Holdings plc Earnings Release 3Q19
41


Earnings Release – 3Q19

Reconciliation of reported results to adjusted results – global businesses (continued)


Quarter ended 30 Sep 2018


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported

5,760

3,750

4,192

432

(336
)
13,798

Currency translation

(136
)
(97
)
(114
)
(5
)
(3
)
(355
)
Significant items



(8
)

51

43

– fair value movement on financial instruments
2


(8
)

51

43

– currency translation on significant items







Adjusted

5,624

3,653

4,070

427

(288
)
13,486

ECL













Reported

(295
)
(240
)
(7
)
12

23

(507
)
Currency translation

12

3

(1
)
(1
)
5

18

Adjusted

(283
)
(237
)
(8
)
11

28

(489
)
Operating expenses













Reported

(3,437
)
(1,625
)
(2,375
)
(408
)
(121
)
(7,966
)
Currency translation

103

43

71

7

37

261

Significant items

61

3

7

56

91

218

– costs of structural reform
3
2

3

11


73

89

– customer redress programmes

62





62

– disposals, acquisitions and investment in new businesses




51


51

– restructuring and other related costs




7

20

27

– settlements and provisions in connection with legal and regulatory matters



(2
)
1


(1
)
– currency translation on significant items

(3
)

(2
)
(3
)
(2
)
(10
)
Adjusted

(3,273
)
(1,579
)
(2,297
)
(345
)
7

(7,487
)
Share of profit in associates and joint ventures













Reported

4




593

597

Currency translation





(15
)
(15
)
Adjusted

4




578

582

Profit before tax













Reported

2,032

1,885

1,810

36

159

5,922

Currency translation

(21
)
(51
)
(44
)
1

24

(91
)
Significant items

61

3

(1
)
56

142

261

– revenue



(8
)

51

43

– operating expenses

61

3

7

56

91

218

Adjusted

2,072

1,837

1,765

93

325

6,092

Loans and advances to customers (net)













Reported

356,453

332,649

250,674

39,210

2,474

981,460

Currency translation

(11,327
)
(8,369
)
(6,005
)
(807
)
(122
)
(26,630
)
Adjusted

345,126

324,280

244,669

38,403

2,352

954,830

Customer accounts













Reported

636,603

352,477

285,525

63,717

7,053

1,345,375

Currency translation

(13,959
)
(8,826
)
(8,583
)
(1,652
)
(280
)
(33,300
)
Adjusted

622,644

343,651

276,942

62,065

6,773

1,312,075

1
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.
2
Includes fair value movements on non-qualifying hedges and DVA on derivative contracts.
3
Comprises costs associated with preparations for the UK’s exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.



42
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported and adjusted risk-weighted assets
 
At 30 Sep 2019
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total

 
$bn

$bn

$bn

$bn

$bn

$bn

Risk-weighted assets
 
 
 
 
 
 
Reported
127.9

317.3

276.8

16.2

127.0

865.2

Disposals




(0.8
)
(0.8
)
– operations in Brazil




(0.8
)
(0.8
)
Adjusted
127.9

317.3

276.8

16.2

126.2

864.4

 
 
 
 
 
 
 
 
At 30 Jun 2019
Risk-weighted assets
 
 
 
 
 
 
Reported
129.0

327.6

284.5

16.5

128.4

886.0

Currency translation
(1.9
)
(6.3
)
(3.3
)
(0.1
)
(1.2
)
(12.8
)
Disposals




(0.8
)
(0.8
)
– operations in Brazil




(0.8
)
(0.8
)
Adjusted
127.1

321.3

281.2

16.4

126.4

872.4

 
 
 
 
 
 
 
 
At 30 Sep 2018
Risk-weighted assets
 
 
 
 
 
 
Reported
125.0

317.1

277.5

16.3

126.8

862.7

Currency translation
(2.4
)
(7.9
)
(3.8
)
(0.3
)
(0.8
)
(15.2
)
Disposals




(2.7
)
(2.7
)
– operations in Brazil




(2.7
)
(2.7
)
Adjusted
122.6

309.2

273.7

16.0

123.3

844.8

Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories


Nine months ended 30 Sep 2019


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported
2
13,481

23,174

2,946

4,984

2,579

42,727

Significant items

(177
)
20

(828
)
12

8

(965
)
– customer redress programmes

118





118

– disposals, acquisitions and investment in new businesses



(828
)
4

1

(823
)
– fair value movement on financial instruments
3
(295
)
20


8

7

(260
)
Adjusted
2
13,304

23,194

2,118

4,996

2,587

41,762

ECL













Reported

(810
)
(542
)
(65
)
(140
)
(466
)
(2,023
)
Adjusted

(810
)
(542
)
(65
)
(140
)
(466
)
(2,023
)
Operating expenses













Reported
2
(13,633
)
(9,795
)
(1,052
)
(3,799
)
(1,454
)
(25,296
)
Significant items

1,434

74

8

52

17

1,585

– costs of structural reform
4
123

3




126

– customer redress programmes

1,098





1,098

– restructuring and other related costs

278

72

8

52

17

427

– settlements and provisions in connection with legal and regulatory matters

(65
)
(1
)



(66
)
Adjusted
2
(12,199
)
(9,721
)
(1,044
)
(3,747
)
(1,437
)
(23,711
)
Share of profit in associates and joint ventures













Reported

18

1,594

212


12

1,836

Adjusted

18

1,594

212


12

1,836

Profit/(loss) before tax













Reported

(944
)
14,431

2,041

1,045

671

17,244

Significant items

1,257

94

(820
)
64

25

620

– revenue

(177
)
20

(828
)
12

8

(965
)
– operating expenses

1,434

74

8

52

17

1,585

Adjusted

313

14,525

1,221

1,109

696

17,864

Loans and advances to customers (net)













Reported

377,153

478,015

28,091

111,963

22,611

1,017,833

Adjusted

377,153

478,015

28,091

111,963

22,611

1,017,833

Customer accounts













Reported

496,874

672,557

36,768

142,781

24,761

1,373,741

Adjusted

496,874

672,557

36,768

142,781

24,761

1,373,741

For footnotes, see page 52.

HSBC Holdings plc Earnings Release 3Q19
43


Earnings Release – 3Q19

Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories (continued)
 


Nine months ended 30 Sep 2019
 
 
UK

Hong
Kong

Mainland China

US

Mexico

 
Footnotes
$m

$m

$m

$m

$m

Revenue
1










Reported
 
9,857

14,831

2,386

3,534

1,919

Significant items
 
(177
)
16


10

6

– customer redress programmes
 
117





– disposals, acquisitions and investment in new businesses
 



4


– fair value movement on financial instruments
3
(294
)
16


6

6

Adjusted
 
9,680

14,847

2,386

3,544

1,925

ECL
 










Reported
 
(647
)
(341
)
(101
)
(102
)
(346
)
Adjusted
 
(647
)
(341
)
(101
)
(102
)
(346
)
Operating expenses
 










Reported
 
(11,321
)
(5,083
)
(1,565
)
(2,954
)
(1,029
)
Significant items
 
1,403

40

2

39

8

– costs of structural reform
4
86

3




– customer redress programmes
 
1,098





– restructuring and other related costs
 
219

38

2

39

8

– settlements and provisions in connection with legal and regulatory matters
 

(1
)



Adjusted
 
(9,918
)
(5,043
)
(1,563
)
(2,915
)
(1,021
)
Share of profit in associates and joint ventures
 










Reported
 
19

29

1,547


12

Adjusted
 
19

29

1,547


12

Profit/(loss) before tax
 










Reported
 
(2,092
)
9,436

2,267

478

556

Significant items
 
1,226

56

2

49

14

– revenue
 
(177
)
16


10

6

– operating expenses
 
1,403

40

2

39

8

Adjusted
 
(866
)
9,492

2,269

527

570

Loans and advances to customers (net)
 










Reported
 
289,491

307,828

41,024

65,985

19,853

Adjusted
 
289,491

307,828

41,024

65,985

19,853

Customer accounts
 










Reported
 
395,536

487,347

43,111

89,742

19,938

Adjusted
 
395,536

487,347

43,111

89,742

19,938

For footnotes, see page 52.


44
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories (continued)


Nine months ended 30 Sep 2018


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported
2
13,708

21,901

2,019

5,152

2,119

41,085

Currency translation
2
(889
)
(314
)
(29
)
(40
)
(302
)
(1,514
)
Significant items

204

(36
)
(1
)
96

34

297

– customer redress programmes

(46
)




(46
)
– disposals, acquisitions and investment in new businesses




103

39

142

– fair value movement on financial instruments
3
246

(37
)
(1
)
(7
)
(6
)
195

– currency translation on significant items

4

1



1

6

Adjusted
2
13,023

21,551

1,989

5,208

1,851

39,868

ECL













Reported

(187
)
(405
)
(203
)
264

(383
)
(914
)
Currency translation

13

6

11

(1
)
39

68

Adjusted

(174
)
(399
)
(192
)
263

(344
)
(846
)
Operating expenses













Reported
2
(12,798
)
(9,263
)
(1,009
)
(4,907
)
(1,352
)
(25,515
)
Currency translation
2
641

176

26

23

224

1,030

Significant items

403

8


971


1,382

– costs of structural reform
4
295

5




300

– customer redress programmes

162





162

– disposals, acquisitions and investment in new businesses

54





54

– restructuring and other related costs
 
40

3


8


51

– settlements and provisions in connection with legal and regulatory matters

(123
)


963


840

– currency translation on significant items

(25
)




(25
)
Adjusted
2
(11,754
)
(9,079
)
(983
)
(3,913
)
(1,128
)
(23,103
)
Share of profit in associates and joint ventures













Reported

21

1,606

351



1,978

Currency translation

(1
)
(82
)



(83
)
Adjusted

20

1,524

351



1,895

Profit before tax













Reported

744

13,839

1,158

509

384

16,634

Currency translation

(236
)
(214
)
8

(18
)
(39
)
(499
)
Significant items

607

(28
)
(1
)
1,067

34

1,679

– revenue

204

(36
)
(1
)
96

34

297

– operating expenses

403

8


971


1,382

Adjusted

1,115

13,597

1,165

1,558

379

17,814

Loans and advances to customers (net)













Reported

380,496

444,168

28,968

106,522

21,306

981,460

Currency translation

(20,174
)
(4,317
)
350

(883
)
(1,606
)
(26,630
)
Adjusted

360,322

439,851

29,318

105,639

19,700

954,830

Customer accounts













Reported

502,369

651,772

35,997

131,078

24,159

1,345,375

Currency translation

(26,622
)
(4,344
)
676

(946
)
(2,064
)
(33,300
)
Adjusted

475,747

647,428

36,673

130,132

22,095

1,312,075

For footnotes, see page 52.



HSBC Holdings plc Earnings Release 3Q19
45


Earnings Release – 3Q19

Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories (continued)


Nine months ended 30 Sep 2018


UK

Hong
Kong

Mainland China5

US5

Mexico5


Footnotes
$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
Reported
 
10,726

13,870

2,228

3,652

1,698

Currency translation
 
(710
)
3

(112
)

(18
)
Significant items
 
206

11

(1
)
97

(4
)
– customer redress programmes
 
(46
)




– disposals, acquisitions and investment in new businesses
 



103


– fair value movement on financial instruments
3
248

11

(1
)
(6
)
(4
)
– currency translation on significant items
 
4





Adjusted
 
10,222

13,884

2,115

3,749

1,676

ECL
 










Reported
 
(112
)
(112
)
(87
)
222

(330
)
Currency translation
 
9


4


4

Adjusted
 
(103
)
(112
)
(83
)
222

(326
)
Operating expenses
 










Reported
 
(10,130
)
(4,831
)
(1,427
)
(4,018
)
(959
)
Currency translation
 
492

(2
)
72


10

Significant items
 
263

8


916


– costs of structural reform
4
253

5




– customer redress programmes
 
162





– restructuring and other related costs
 
32

3


7


– settlements and provisions in connection with legal and regulatory matters
 
(166
)


908


– currency translation on significant items
 
(18
)


1


Adjusted
 
(9,375
)
(4,825
)
(1,355
)
(3,102
)
(949
)
Share of profit in associates and joint ventures
 










Reported
 
21

26

1,578



Currency translation
 
(1
)

(82
)


Adjusted
 
20

26

1,496



Profit/(loss) before tax
 










Reported
 
505

8,953

2,292

(144
)
409

Currency translation
 
(210
)
1

(118
)

(4
)
Significant items
 
469

19

(1
)
1,013

(4
)
– revenue
 
206

11

(1
)
97

(4
)
– operating expenses
 
263

8


916


Adjusted
 
764

8,973

2,173

869

401

Loans and advances to customers (net)
 










Reported
 
295,398

284,956

39,779

62,617

18,147

Currency translation
 
(15,608
)
(571
)
(1,490
)

(898
)
Adjusted
 
279,790

284,385

38,289

62,617

17,249

Customer accounts
 










Reported
 
398,920

478,214

41,489

79,699

19,044

Currency translation
 
(21,078
)
(958
)
(1,554
)

(943
)
Adjusted
 
377,842

477,256

39,935

79,699

18,101

For footnotes, see page 52.


46
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories (continued)
 


Quarter ended 30 Sep 2019


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported
2
4,229

7,715

703

1,619

679

13,355

Significant items
 
(70
)
(20
)

4

(2
)
(88
)
– customer redress programmes
 
118





118

– disposals, acquisitions and investment in new businesses
 



4


4

– fair value movement on financial instruments
3
(188
)
(20
)


(2
)
(210
)
Adjusted
2
4,159

7,695

703

1,623

677

13,267

ECL
 






Reported
 
(274
)
(282
)
(16
)
(80
)
(231
)
(883
)
Adjusted
 
(274
)
(282
)
(16
)
(80
)
(231
)
(883
)
Operating expenses
 






Reported
2
(4,389
)
(3,305
)
(358
)
(1,240
)
(445
)
(8,147
)
Significant items
 
546

27

3

18

5

599

– costs of structural reform
4
33

2




35

– customer redress programmes
 
488





488

– restructuring and other related costs
 
89

25

3

18

5

140

– settlements and provisions in connection with legal and regulatory matters
 
(64
)




(64
)
Adjusted
2
(3,843
)
(3,278
)
(355
)
(1,222
)
(440
)
(7,548
)
Share of profit in associates and joint ventures
 






Reported
 
10

523

(24
)

3

512

Adjusted
 
10

523

(24
)

3

512

Profit/(loss) before tax
 






Reported
 
(424
)
4,651

305

299

6

4,837

Significant items
 
476

7

3

22

3

511

– revenue
 
(70
)
(20
)

4

(2
)
(88
)
– operating expenses
 
546

27

3

18

5

599

Adjusted
 
52

4,658

308

321

9

5,348

Loans and advances to customers (net)
 












Reported
 
377,153

478,015

28,091

111,963

22,611

1,017,833

Adjusted
 
377,153

478,015

28,091

111,963

22,611

1,017,833

Customer accounts
 












Reported
 
496,874

672,557

36,768

142,781

24,761

1,373,741

Adjusted
 
496,874

672,557

36,768

142,781

24,761

1,373,741

For footnotes, see page 52.







HSBC Holdings plc Earnings Release 3Q19
47


Earnings Release – 3Q19

Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories (continued)
 


Quarter ended 30 Sep 2019
 
 
UK

Hong
Kong

Mainland China

US

Mexico

 
Footnotes
$m

$m

$m

$m

$m

Revenue
1










Reported
 
3,099

4,896

788

1,136

648

Significant items
 
(67
)
(13
)
(1
)
3

(1
)
– customer redress programmes
 
117





– disposals, acquisitions and investment in new businesses
 



4


– fair value movement on financial instruments
3
(184
)
(13
)
(1
)
(1
)
(1
)
Adjusted
 
3,032

4,883

787

1,139

647

ECL
 










Reported
 
(218
)
(207
)
(34
)
(66
)
(148
)
Adjusted
 
(218
)
(207
)
(34
)
(66
)
(148
)
Operating expenses
 










Reported
 
(3,731
)
(1,678
)
(527
)
(965
)
(343
)
Significant items
 
593

19


13

3

– costs of structural reform
4
27

2




– customer redress programmes
 
488





– restructuring and other related costs
 
77

17


13

3

– settlements and provisions in connection with legal and regulatory matters
 
1





Adjusted
 
(3,138
)
(1,659
)
(527
)
(952
)
(340
)
Share of profit in associates and joint ventures
 










Reported
 
11

6

516


3

Adjusted
 
11

6

516


3

Profit/(loss) before tax
 










Reported
 
(839
)
3,017

743

105

160

Significant items
 
526

6

(1
)
16

2

– revenue
 
(67
)
(13
)
(1
)
3

(1
)
– operating expenses
 
593

19


13

3

Adjusted
 
(313
)
3,023

742

121

162

Loans and advances to customers (net)
 










Reported
 
289,491

307,828

41,024

65,985

19,853

Adjusted
 
289,491

307,828

41,024

65,985

19,853

Customer accounts
 










Reported
 
395,536

487,347

43,111

89,742

19,938

Adjusted
 
395,536

487,347

43,111

89,742

19,938

For footnotes, see page 52.


48
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported to adjusted results – geographical regions and selected countries/territories (continued)
 
 
Quarter ended 30 Jun 2019
 
 
Europe

Asia

MENA

North
America

Latin
America

Total

 
Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
 
Reported
2
4,647

7,640

1,541

1,689

929

14,944

Currency translation
2
(159
)
(28
)
7

5

(43
)
(208
)
Significant items
 
(48
)
13

(828
)
4

4

(855
)
– disposals, acquisitions and investment in new businesses
 


(828
)

1

(827
)
– fair value movement on financial instruments
3
(47
)
13


4

2

(28
)
– currency translation on significant items
 
(1
)



1


Adjusted
2
4,440

7,625

720

1,698

890

13,881

ECL
 
 
 
 
 
 
 
Reported
 
(233
)
(102
)
(43
)
(57
)
(120
)
(555
)
Currency translation
 
4

1



5

10

Adjusted
 
(229
)
(101
)
(43
)
(57
)
(115
)
(545
)
Operating expenses
 
 
 
 
 
 
 
Reported
2
(4,926
)
(3,359
)
(349
)
(1,265
)
(530
)
(8,927
)
Currency translation
2
148

19

(2
)
(3
)
24

176

Significant items
 
719

39

4

30

8

800

– costs of structural reform
4
38





38

– customer redress programmes
 
554





554

– restructuring and other related costs

 
154

41

4

29

9

237

– settlements and provisions in connection with legal and regulatory matters
 
(1
)
(1
)



(2
)
– currency translation on significant items
 
(26
)
(1
)

1

(1
)
(27
)
Adjusted
2
(4,059
)
(3,301
)
(347
)
(1,238
)
(498
)
(7,951
)
Share of profit in associates and joint ventures
 












Reported
 
6

595

122


9

732

Currency translation
 
(1
)
(15
)



(16
)
Adjusted
 
5

580

122


9

716

Profit/(loss) before tax
 












Reported
 
(506
)
4,774

1,271

367

288

6,194

Currency translation
 
(8
)
(23
)
5

2

(14
)
(38
)
Significant items
 
671

52

(824
)
34

12

(55
)
– revenue
 
(48
)
13

(828
)
4

4

(855
)
– operating expenses
 
719

39

4

30

8

800

Adjusted
 
157

4,803

452

403

286

6,101

Loans and advances to customers (net)
 
 
 
 
 
 
 
Reported
 
383,363

473,627

28,509

112,693

23,440

1,021,632

Currency translation
 
(12,791
)
(5,366
)
114

(487
)
(1,212
)
(19,742
)
Adjusted
 
370,572

468,261

28,623

112,206

22,228

1,001,890

Customer accounts
 












Reported
 
504,386

677,289

36,593

135,400

26,456

1,380,124

Currency translation
 
(16,686
)
(6,368
)
194

(520
)
(1,818
)
(25,198
)
Adjusted
 
487,700

670,921

36,787

134,880

24,638

1,354,926

For footnotes, see page 52.


HSBC Holdings plc Earnings Release 3Q19
49


Earnings Release – 3Q19

Reconciliation of reported to adjusted results – geographical regions and selected countries/territories (continued)
 
 
 
Quarter ended 30 Jun 2019
 
 
UK

Hong
Kong

Mainland China

US

Mexico

 
Footnotes
$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
Reported
 
3,257

4,915

792

1,206

614

Currency translation
 
(151
)
6

(21
)
(1
)
(10
)
Significant items
 
(47
)
8


3

2

– fair value movement on financial instruments
3
(46
)
7


4

2

– currency translation on significant items
 
(1
)
1


(1
)

Adjusted
 
3,059

4,929

771

1,208

606

ECL
 










Reported
 
(139
)
(34
)
(27
)
(26
)
(100
)
Currency translation
 
5


(1
)
1

2

Adjusted
 
(134
)
(34
)
(28
)
(25
)
(98
)
Operating expenses
 










Reported
 
(4,139
)
(1,733
)
(539
)
(978
)
(352
)
Currency translation
 
143

(2
)
14


6

Significant items
 
671

13

2

23

3

– costs of structural reform
4
26





– customer redress programmes
 
554





– restructuring and other related costs
 
118

15

2

23

3

– settlements and provisions in connection with legal and regulatory matters
 
(1
)
(1
)



– currency translation on significant items
 
(26
)
(1
)



Adjusted
 
(3,325
)
(1,722
)
(523
)
(955
)
(343
)
Share of profit in associates and joint ventures
 










Reported
 
5

17

570


9

Currency translation
 
(1
)
1

(15
)


Adjusted
 
4

18

555


9

Profit/(loss) before tax
 










Reported
 
(1,016
)
3,165

796

202

171

Currency translation
 
(4
)
5

(23
)

(2
)
Significant items
 
624

21

2

26

5

– revenue
 
(47
)
8


3

2

– operating expenses
 
671

13

2

23

3

Adjusted
 
(396
)
3,191

775

228

174

Loans and advances to customers (net)
 










Reported
 
291,955

304,431

42,657

67,039

20,135

Currency translation
 
(9,113
)
(1,168
)
(1,634
)
2

(552
)
Adjusted
 
282,842

303,263

41,023

67,041

19,583

Customer accounts
 










Reported
 
398,857

487,948

45,409

82,260

20,437

Currency translation
 
(12,447
)
(1,867
)
(1,739
)

(553
)
Adjusted
 
386,410

486,081

43,670

82,260

19,884

For footnotes, see page 52.


50
HSBC Holdings plc Earnings Release 3Q19


Reconciliation of reported to adjusted results – geographical regions and selected countries/territories (continued)
 


Quarter ended 30 Sep 2018


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
 
Reported
2
4,837

7,389

663

1,740

523

13,798

Currency translation
2
(270
)
(34
)
8

(5
)
(68
)
(355
)
Significant items
 
58

(16
)
1



43

– fair value movement on financial instruments
3
59

(17
)
1



43

– currency translation on significant items
 
(1
)
1





Adjusted
2
4,625

7,339

672

1,735

455

13,486

ECL
 
 
 
 
 
 
 
Reported
 

(289
)
(100
)
30

(148
)
(507
)
Currency translation
 




18

18

Adjusted
 

(289
)
(100
)
30

(130
)
(489
)
Operating expenses
 
 
 
 
 
 
 
Reported
2
(4,206
)
(3,153
)
(323
)
(1,303
)
(335
)
(7,966
)
Currency translation
2
184

21

(2
)
2

70

261

Significant items
 
206

7


5


218

– costs of structural reform
4
86

3




89

– customer redress programmes
 
62





62

– disposals, acquisitions and investment in new businesses
 
51





51

– restructuring and other related costs
 
19

3


5


27

– settlements and provisions in connection with legal and regulatory matters
 
(3
)
2




(1
)
– currency translation on significant items
 
(9
)
(1
)



(10
)
Adjusted
2
(3,816
)
(3,125
)
(325
)
(1,296
)
(265
)
(7,487
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
Reported
 
3

512

82



597

Currency translation
 

(15
)



(15
)
Adjusted
 
3

497

82



582

Profit before tax
 
 
 
 
 
 
 
Reported
 
634

4,459

322

467

40

5,922

Currency translation
 
(86
)
(28
)
6

(3
)
20

(91
)
Significant items
 
264

(9
)
1

5


261

– revenue
 
58

(16
)
1



43

– operating expenses
 
206

7


5


218

Adjusted
 
812

4,422

329

469

60

6,092

Loans and advances to customers (net)
 
 
 
 
 
 
 
Reported
 
380,496

444,168

28,968

106,522

21,306

981,460

Currency translation
 
(20,174
)
(4,317
)
350

(883
)
(1,606
)
(26,630
)
Adjusted
 
360,322

439,851

29,318

105,639

19,700

954,830

Customer accounts
 
 
 
 
 
 
 
Reported
 
502,369

651,772

35,997

131,078

24,159

1,345,375

Currency translation
 
(26,622
)
(4,344
)
676

(946
)
(2,064
)
(33,300
)
Adjusted
 
475,747

647,428

36,673

130,132

22,095

1,312,075

For footnotes, see page 52.


HSBC Holdings plc Earnings Release 3Q19
51


Earnings Release – 3Q19

Reconciliation of reported results to adjusted results – geographical regions and selected countries/territories (continued)


Quarter ended 30 Sep 2018


UK

Hong Kong

Mainland China5

US5

Mexico5


Footnotes
$m

$m

$m

$m

$m

Revenue
1
 
 
 
 
 
Reported
 
3,913

4,715

769

1,230

590

Currency translation
 
(234
)
10

(22
)

(14
)
Significant items
 
59

3




– fair value movement on financial instruments
3
59

4




– currency translation on significant items
 

(1
)



Adjusted
 
3,738

4,728

747

1,230

576

ECL
 










Reported
 
44

(92
)
(52
)
25

(135
)
Currency translation
 
(2
)

1


3

Adjusted
 
42

(92
)
(51
)
25

(132
)
Operating expenses
 










Reported
 
(3,362
)
(1,652
)
(480
)
(1,029
)
(314
)
Currency translation
 
152

(3
)
14


8

Significant items
 
138

7


4


– costs of structural reform
4
75

3




– customer redress programmes
 
62





– restructuring and other related costs
 
11

3


4


– settlements and provisions in connection with legal and regulatory matters
 
(2
)
1




– currency translation on significant items
 
(8
)




Adjusted
 
(3,072
)
(1,648
)
(466
)
(1,025
)
(306
)
Share of profit in associates and joint ventures
 










Reported
 
3

6

505



Currency translation
 

(1
)
(15
)


Adjusted
 
3

5

490



Profit before tax
 










Reported
 
598

2,977

742

226

141

Currency translation
 
(84
)
6

(22
)

(3
)
Significant items
 
197

10


4


– revenue
 
59

3




– operating expenses
 
138

7


4


Adjusted
 
711

2,993

720

230

138

Loans and advances to customers (net)
 
 
 






Reported
 
295,398

284,956

39,779

62,617

18,147

Currency translation
 
(15,608
)
(571
)
(1,490
)

(898
)
Adjusted
 
279,790

284,385

38,289

62,617

17,249

Customer accounts
 










Reported
 
398,920

478,214

41,489

79,699

19,044

Currency translation
 
(21,078
)
(958
)
(1,554
)

(943
)
Adjusted
 
377,842

477,256

39,935

79,699

18,101

1
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.
2
Amounts are non-additive across geographical regions due to intra-Group transactions.
3
Includes fair value movements on non-qualifying hedges and DVA on derivative contracts.
4
Comprises costs associated with preparations for the UK’s exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.
5
9M18 and 3Q18 comparative data has been re-presented from the previously disclosed to align the basis of presentation to the correct reporting period.




52
HSBC Holdings plc Earnings Release 3Q19


Third interim dividend for 2019
On 2 October 2019, the Directors declared a third interim dividend in respect of 2019 of $0.10 per ordinary share. The ordinary shares in London, Hong Kong, Paris and Bermuda, and the American Depositary Shares (‘ADSs’) in New York, was quoted ex-dividend on 10 October 2019. The dividend will be payable on 20 November 2019 to holders of record on 11 October 2019.
The dividend will be payable in US dollars, sterling or Hong Kong dollars, or a combination of these currencies, at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 11 November 2019. A scrip dividend will also be offered. Particulars of these arrangements were sent to shareholders on 23 October 2019 and elections must be received by 7 November 2019.
The dividend will be payable on ordinary shares held through Euroclear France, the settlement and central depositary system for Euronext Paris, on 20 November 2019 to the holders of record on 11 October 2019. The dividend will be payable in US dollars or as a scrip dividend. Particulars of these arrangements were announced through Euronext Paris on 3 October 2019, 18 October 2019 and another announcement will be made through Euronext Paris on 21 November 2019.
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 20 November 2019 to holders of record on 11 October 2019. The dividend of $0.50 per ADS will be payable by the depositary in US dollars or as a scrip dividend of new ADSs. Particulars of these arrangements were sent to holders on 23 October 2019 and elections will be required to be made by 1 November 2019. Alternatively, the cash dividend may be invested in additional ADSs by participants in the dividend reinvestment plan operated by the depositary.
Any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register but who has not lodged the share transfer with the Principal Registrar, the Hong Kong or Bermuda Branch Registrar should have done so before 4.00pm local time on 11 October 2019 in order to receive the dividend.
Ordinary shares may not be removed from or transferred to the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 11 October 2019. Any person wishing to remove ordinary shares to or from each register must have done so before 4.00pm local time on 10 October 2019.
Transfers of ADSs must have been lodged with the depositary by 11.00am local time on 11 October 2019 in order to receive the dividend.
ADS dividend fee
As previously disclosed in our Interim Report 2019, in order to cover costs associated with the management of the American Depositary Receipt programme, which was previously covered by fees generated from issuance and cancellation, a dividend fee will be introduced on cash dividends paid on ADSs, in line with common market practice. ADS holders who receive a cash dividend will be charged a fee, which will be deducted by the depositary, of $0.005 per ADS per cash dividend. This will commence from the 2019 third interim cash dividend payment payable on 20 November 2019.
Dividend on preference shares
A quarterly dividend of $15.50 per 6.20% non-cumulative US dollar preference share, Series A (‘Series A dollar preference share’), (equivalent to a dividend of $0.3875 per Series A American Depositary Share, each of which represents one-fortieth of a Series A dollar preference share), and £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2019 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has declared that a quarterly dividend be payable on 16 December 2019 to holders of record on 29 November 2019.


For and on behalf of
HSBC Holdings plc


Richard Gray
Group Company Secretary


The Board of Directors of HSBC Holdings plc as at the date of this announcement are: Mark Tucker*, Noel Quinn, Kathleen Casey, Laura Cha, Henri de Castries, Irene Lee, José Meade, Heidi Miller, Marc Moses, David Nish, Ewen Stevenson, Jonathan Symonds, Jackson Taiand Pauline van der Meer Mohr.
*
Non-executive Group Chairman
Independent non-executive Director


HSBC Holdings plc Earnings Release 3Q19
53


Earnings Release – 3Q19

Terms and abbreviations
3Q19
Third quarter of 2019
2Q19
Second quarter of 2019
3Q18
Third quarter of 2018
9M19
Nine months to 30 September 2019

9M18
Nine months to 30 September 2018

ADS
American Depositary Share
AIEA
Average interest-earning assets

BoCom
Bank of Communications Co., Limited, one of China’s largest banks

Bps

Basis points. One basis point is equal to one-hundredth of a percentage point

BSM
Balance Sheet Management
C&L
Credit and Lending
CET1
Common equity tier 1
CMB
Commercial Banking, a global business
CODM
Chief Operating Decision Maker
Corporate Centre
Corporate Centre comprises Central Treasury, including Balance Sheet Management, our legacy businesses, interests in our associates and joint ventures, central stewardship costs and the UK bank levy

CRD IV
Capital Requirements Regulation and Directive
CRR
Customer risk rating
CRR II
Revisions to the Capital Requirements Regulation
DPD
Days past due
D-SIB
Domestic systemically important bank
DVA
Debit value adjustments
EBA
European Banking Authority
ECL
Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied
FVOCI
Fair value through other comprehensive income
GB&M
Global Banking and Markets, a global business
GLCM

Global Liquidity and Cash Management

GMB
Group Management Board
GPB
Global Private Banking, a global business
Group
HSBC Holdings together with its subsidiary undertakings
G-SIB
Global systemically important bank
GTRF

Global Trade and Receivables Finance
Hong Kong
Hong Kong Special Administrative Region of the People’s Republic of China

HSBC
HSBC Holdings together with its subsidiary undertakings

HSBC Bank

HSBC Bank plc

HSBC Holdings
HSBC Holdings plc, the parent company of HSBC
HSBC UK
HSBC UK Bank plc
IAS
International Accounting Standards
IFRSs
International Financial Reporting Standards
IMA
Internal models approach
IMM
Internal model method
IRB
Internal ratings based
IRC
Incremental risk charge
Jaws
Adjusted jaws measures the difference between the rates of change in adjusted revenue and adjusted operating expenses
JV
Joint venture
LCR
Liquidity coverage ratio
Legacy credit
A portfolio of assets comprising Solitaire Funding Limited, securities investment conduits, asset-backed securities trading portfolios, credit correlation portfolios and derivative transactions entered into directly with monoline insurers
Mainland China
People’s Republic of China excluding Hong Kong

MENA
Middle East and North Africa
MREL
EU minimum requirements for own funds and eligible liabilities
Net operating income
Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit provisions, also referred to as revenue

NIM
Net interest margin
PBT
Profit before tax
PD
Probability of default
POCI
Purchased or originated credit-impaired
PPI
Payment protection insurance
PRA
Prudential Regulation Authority (UK)
RBWM
Retail Banking and Wealth Management, a global business
Revenue
Net operating income before ECL
RoE
Return on average ordinary shareholders’ equity
RoTE
Return on average tangible equity
RWAs
Risk-weighted assets
SABB
The Saudi British Bank
ServCo group
Separately incorporated group of service companies set up in response to UK ring-fencing proposals

TLAC
Total loss-absorbing capacity

$m/$bn/$tn
United States dollar millions/billions/trillions. We report in US dollars
VaR
Value at risk

54
HSBC Holdings plc Earnings Release 3Q19




Paste the following link into your web browser, to view the associated PDF document.
https://www.rns-pdf.londonstockexchange.com/rns/2416R_1-2019-10-27.pdf?_ga=2.84971865.1955168446.1572255467-596322488.1556878357




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                
                                    
HSBC Holdings plc

 
By:
/s/ Ewen Stevenson
 
Name: Ewen Stevenson
 
Title: Group Chief Financial Officer

Date: 28 October 2019