RNS Number : 0798S

HSBC Holdings PLC

06 March 2019

Financial summary
	Page
Use of non-GAAP financial measures	34
Changes to presentation from 1 January 2018	34
Critical accounting estimates and judgements	35
Consolidated income statement	36
Group performance by income and expense item	37
Net interest income	37
Net fee income	39
Net income from financial instruments measured at fair value through profit or loss	40
Gains less losses from financial investments	41
Net insurance premium income	41
Other operating income	42
Net insurance claims and benefits paid and movement in liabilities to policyholders	42
Change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions	44
Operating expenses	44
Share of profit in associates and joint ventures	46
Tax expense	47
Consolidated balance sheet	47
Balance sheet commentary compared with 1 January 2018	48

Use of non-GAAP financial measures

Our reported results are prepared in accordance with IFRSs as detailed in the Financial Statements starting on page

214

To measure our performance we also use non-GAAP financial measures, including those derived from our reported results that eliminate factors that distort year-on-year comparisons. The 'adjusted performance' measure used throughout this report is described below, and where others are used they are described. All non-GAAP financial measures are reconciled to the closest reported financial measure.

The global business segmental results on pages 47 to 55 are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments', as detailed in 'Basis of preparation' on page 47.

Adjusted performance

Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort year-on-year comparisons.

We consider adjusted performance provides useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses year-on-year performance.

Significant items

'Significant items' refers collectively to the items that management and investors would ordinarily identify and consider separately to improve the understanding of the underlying trends in the business.

The tables on pages 50 to 53 and pages 57 to 63 detail the effects of significant items on each of our global business segments and geographical regions in 2018, 2017 and 2016.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2018.

We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and better understand the underlying trends in the business.

Foreign currency translation differences

Foreign currency translation differences for 2018 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:

• the income statements for 2017 and 2016 at the average rates of exchange for 2018; and

• the balance sheets at 31 December 2017 and 31 December 2016 at the prevailing rates of exchange on 31 December 2018.

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 has 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 has been translated at the appropriate exchange rates applied in the current period on the basis described above.

Changes to presentation from 1 January 2018

IFRS 9

HSBC adopted the requirements of IFRS 9 'Financial Instruments' on 1 January 2018, with the exception of the provisions relating to the presentation of gains and losses on financial liabilities designated at fair value, which were adopted on 1 January 2017. The impact of transitioning to IFRS 9 at 1 January 2018 on the consolidated financial statements of HSBC was a decrease in net assets of $1.6bn, arising from:

• a decrease of $2.2bn from additional impairment allowances;

• a decrease of $0.9bn from our associates reducing their net assets;

• an increase of $1.1bn from the remeasurement of financial assets and liabilities as a consequence of classification changes, mainly from revoking fair value accounting designations for certain long-dated issued debt instruments; and

• an increase in net deferred tax assets of $0.4bn.

The effect of IFRS 9 on the carrying value of investments in associates has been updated from the effect disclosed in our Annual Report and Accounts 2017 and in our Report on Transition to IFRS 9 'Financial Instruments' 1 January 2018 as a result of those entities publicly reporting their expected transition impacts. This resulted in a further decrease in net assets of $0.6bn, net of tax.

Refer to 'Standards applied during the year ended 31 December 2018' on page 224 and Note 37 'Effects of reclassification and remeasurement upon adoption of IFRS 9' for further detail.

Income statement presentation

The classification and measurement requirements under IFRS 9, which was adopted from 1 January 2018, is based on an entity's assessment of both the business model for managing the assets and the contractual cash flow characteristics of the assets. The standard contains a classification for items measured mandatorily at fair value through profit and loss as a residual category. Given its residual nature, the presentation of the income statement has been updated to separately present items in this category which are of a dissimilar nature or function, in line with IAS 1 'Presentation of Financial Statements' requirements. Comparative data has been re-presented. There is no net impact on total operating income.

Prior to 2018, foreign exchange exposure on some financial instruments designated at fair value was presented in the same line in the income statement as the underlying fair value movement on these instruments. In 2018, we grouped the entire effect of foreign exchange exposure in the profit and loss and presented it within 'Net trading activities' in 'Net income from financial instruments held for trading or managed on a fair value basis'. Comparative data has been re-presented. There is no net impact on total operating income and the impact on 'changes in fair value of long-term debt and related derivatives' in 2017 was $(517)m (2016: $1,978m; 2015: $110m; 2014: $130m).

IAS 29

From 1 July 2018, Argentina was deemed a hyperinflationary economy for accounting purposes.

The results of HSBC's operations with a functional currency of the Argentine peso have been prepared in accordance with IAS 29 'Financial Reporting in Hyperinflationary Economies' as if the economy had always been hyperinflationary. The results of those operations for the year ended 31 December 2018 are stated in terms of current purchasing power using the Indice de Precios al Consumidor at 31 December 2018, with the corresponding adjustment presented in other comprehensive income ('OCI'). In accordance with IAS 21 'The Effects of Changes in Foreign Exchange Rates', the results have been translated and presented in US dollars at the prevailing rate of exchange on 31 December 2018. The Group's comparative information presented in US dollars has not been restated.

The impact of applying IAS 29 and the hyperinflation provisions of IAS 21 in the current year was a decrease in the Group's profit before tax of $160m, comprising a decrease in revenue of $231m, offset by a decrease in expected credit losses of $8m, and a decrease in operating expenses of $63m.

Critical accounting estimates and judgements

The results of HSBC reflect the choice of accounting policies, assumptions and estimates that underlie the preparation of HSBC's consolidated financial statements. The significant accounting policies, including the policies which include critical accounting estimates and judgements, are described in Note

1.2

on the Financial Statements. The accounting policies listed below are highlighted as they involve a high degree of uncertainty and have a material impact on the financial statements:

• Impairment of amortised cost financial assets and financial assets measured at fair value through other comprehensive income ('FVOCI'): The most significant judgements relate to defining what is considered to be a significant increase in credit risk, determining the lifetime and point of initial recognition of revolving facilities, and in making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective and very sensitive to the risk factors. See Note 1.2(i) on page 230.

• Hedge accounting and the replacement of major interest rate reference rates: The financial markets are going through a significant reform and replacement of the major interest rate reference rates. These interbank offered rates ('Ibors'), such as Libor and Euribor, are currently widely used as benchmarks for a large volume and broad range of financial products and contracts. This results in significant accounting judgement being involved in determining whether certain hedge accounting relationships that hedge variability of cash flows and interest rate risk due to changes in Ibors continue to qualify for hedge accounting as at 31 December 2018. See Note 1.2(h) on page 234.

• Deferred tax assets: The most significant judgements relate to those made in respect of expected future profitability. See Note 1.2(l) on page 234.

• Valuation of financial instruments: In determining the fair value of financial instruments a variety of valuation techniques are used, some of which feature significant unobservable inputs and are subject to substantial uncertainty. See Note 1.2(c) on page 228.

• Impairment of interests in associates: Impairment testing involves significant judgement in determining the value in use, and in particular estimating the present values of cash flows expected to arise from continuing to hold the investment, based on a number of management assumptions. The most significant judgements relate to the impairment testing of our investment in Bank of Communications Co., Limited ('BoCom'). See Note 1.2(a) on page 226.

• Goodwill impairment: A high degree of uncertainty is involved in estimating the future cash flows of the cash-generating units ('CGUs') and the rates used to discount these cash flows. See Note 1.2(a) on page 226.

• Provisions: Significant judgement may be required due to the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. See Note 1.2(m) on page 234.

Given the inherent uncertainties and the high level of subjectivity involved in the recognition or measurement of the items above, it is possible that the outcomes in the next financial year could differ from the expectations on which management's estimates are based, resulting in the recognition and measurement of materially different amounts from those estimated by management in these Financial Statements.

Consolidated income statement

Summary consolidated income statement
		2018		2017		2016		2015		2014
	Footnotes	$m		$m		$m		$m		$m
Net interest income		30,489		28,176		29,813		32,531		34,705
Net fee income		12,620		12,811		12,777		14,705		15,957
Net income from financial instruments held for trading or managed on a fair value basis	44, 45	9,531		8,426		7,521		8,717		6,730
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	45	(1,488	)	2,836		1,262		565		1,865
Change in fair value of long-term debt and related derivatives	44	(97	)	155		(1,997	)	973		638
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	45	695		N/A		N/A		N/A		N/A
Gains less losses from financial investments		218		1,150		1,385		2,068		1,335
Dividend income		75		106		95		123		311
Net insurance premium income		10,659		9,779		9,951		10,355		11,921
Other operating income/(expense)		885		337		(971	)	1,055		1,131
Total operating income		63,587		63,776		59,836		71,092		74,593
Net insurance claims and benefits paid and movement in liabilities to policyholders		(9,807	)	(12,331	)	(11,870	)	(11,292	)	(13,345	)
Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions	26	53,780		51,445		47,966		59,800		61,248
Change in expected credit losses and other credit impairment charges		(1,767	)	N/A		N/A		N/A		N/A
Loan impairment charges and other credit risk provisions		N/A		(1,769	)	(3,400	)	(3,721	)	(3,851	)
Net operating income		52,013		49,676		44,566		56,079		57,397
Total operating expenses		(34,659	)	(34,884	)	(39,808	)	(39,768	)	(41,249	)
Operating profit		17,354		14,792		4,758		16,311		16,148
Share of profit in associates and joint ventures		2,536		2,375		2,354		2,556		2,532
Profit before tax		19,890		17,167		7,112		18,867		18,680
Tax expense		(4,865	)	(5,288	)	(3,666	)	(3,771	)	(3,975	)
Profit for the year		15,025		11,879		3,446		15,096		14,705
Attributable to:
- ordinary shareholders of the parent company		12,608		9,683		1,299		12,572		13,115
- preference shareholders of the parent company		90		90		90		90		90
- other equity holders		1,029		1,025		1,090		860		483
- non-controlling interests		1,298		1,081		967		1,574		1,017
Profit for the year		15,025		11,879		3,446		15,096		14,705

Five-year financial information
		2018	2017	2016	2015	2014
	Footnotes	$	$	$	$	$
Basic earnings per share		0.63	0.48	0.07	0.65	0.69
Diluted earnings per share		0.63	0.48	0.07	0.64	0.69
Dividends per ordinary share	46	0.51	0.51	0.51	0.50	0.49
		%	%	%	%	%
Dividend payout ratio	47	81.0	106.3	728.6	76.5	71.0
Post-tax return on average total assets		0.6	0.5	0.1	0.6	0.5
Return on average risk-weighted assets	48	2.3	2.0	0.7	1.6	1.5
Return on average ordinary shareholders' equity		7.7	5.9	0.8	7.2	7.3
Return on average tangible equity		8.6	6.8	2.6	8.1	8.5

For footnotes, see page 67.

Unless stated otherwise, all tables in the Annual Report and Accounts 2018 are presented on a reported basis.

For a summary of our financial performance in 2018, see page 14.

For further financial performance data for each global business and geographical region, see pages 48 to 53 and 55 to 63, respectively.

Group performance by income and expense item

Net interest income

		2018		2017		2016
	Footnotes	$m		$m		$m
Interest income		49,609		40,995		42,414
Interest expense		(19,120	)	(12,819	)	(12,601	)
Net interest income		30,489		28,176		29,813
Average interest-earning assets		1,839,346		1,726,120		1,723,702
		%		%		%
Gross interest yield	49	2.70		2.37		2.46
Less: cost of funds		(1.21	)	(0.88	)	(0.87	)
Net interest spread	50	1.49		1.49		1.59
Net interest margin	51	1.66		1.63		1.73

For footnotes, see page 67.

Summary of interest income by type of asset
		2018				2017				2016
		Average balance		Interest income	Yield	Average balance		Interest income	Yield	Average balance		Interest income	Yield
	Footnotes	$m		$m	%	$m		$m	%	$m		$m	%
Short-term funds and loans and advances to banks		233,637		2,475	1.06	236,126		2,030	0.86	203,799		1,510	0.74
Loans and advances to customers		972,963		33,285	3.42	902,214		28,751	3.19	865,356		29,272	3.38
Reverse repurchase agreements - non-trading		205,427		3,739	1.82	173,760		2,191	1.26	168,207		1,227	0.73
Financial investments		386,230		9,166	2.37	389,807		7,440	1.91	430,775		7,248	1.68
Other interest-earning assets		41,089		944	2.30	24,213		583	2.41	55,565		3,157	5.68
Total interest-earning assets		1,839,346		49,609	2.70	1,726,120		40,995	2.37	1,723,702		42,414	2.46
Trading assets and financial assets designated and otherwise mandatorily measured at fair value through profit or loss	52,53	195,922		5,215	2.66	N/A		N/A	N/A	N/A		N/A	N/A
Trading assets and financial assets designated at fair value		N/A		N/A	N/A	186,673		4,245	2.27	179,780		3,897	2.17
Expected credit losses provision		(7,816	)			N/A		N/A	N/A	N/A		N/A	N/A
Impairment allowance		N/A		N/A	N/A	(7,841	)			(9,127	)
Non-interest-earning assets		584,524				616,688				653,115
Year ended 31 Dec		2,611,976		54,824	2.10	2,521,640		45,240	1.79	2,547,470		46,311	1.82

For footnotes, see page 67.

Summary of interest expense by type of liability and equity
		2018			2017			2016
		Average balance	Interest expense	Cost	Average balance	Interest expense	Cost	Average balance	Interest expense	Cost
	Footnotes	$m	$m	%	$m	$m	%	$m	$m	%
Deposits by banks	54	44,530	506	1.14	47,337	451	0.95	49,782	342	0.69
Financial liabilities designated at fair value - own debt issued	55	50,840	1,421	2.80	60,566	1,261	2.08	62,042	942	1.52
Customer accounts	56	1,138,620	8,287	0.73	1,094,920	5,405	0.49	1,074,661	5,492	0.51
Repurchase agreements - non-trading		161,204	3,409	2.11	136,561	1,665	1.22	118,789	626	0.53
Debt securities in issue		132,594	4,254	3.21	108,677	3,130	2.88	114,343	2,807	2.45
Other interest-bearing liabilities		53,731	1,243	2.31	7,009	907	12.94	22,387	2,392	10.68
Total interest-bearing liabilities		1,581,519	19,120	1.21	1,455,070	12,819	0.88	1,442,004	12,601	0.87
Trading liabilities and financial liabilities designated at fair value (excluding own debt issued)		142,184	3,524	2.48	153,776	2,325	1.51	138,486	1,986	1.43
Non-interest bearing current accounts		211,815			197,104			184,016
Total equity and other non-interest bearing liabilities		676,458			715,690			782,964
Year ended 31 Dec		2,611,976	22,644	0.87	2,521,640	15,144	0.60	2,547,470	14,587	0.57

For footnotes, see page 67.

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	53	(105	)
- customer redress programmes	53	(108	)
- currency translation on significant items		3
Currency translation		99
Year ended 31 Dec	53	(6	)

Net interest income of $30.5bn increased by $2.3bn or 8% compared with 2017. This included the minimal effects of significant items and foreign currency translation differences.

Net interest margin of 1.66% was 3 basis points ('bps') higher than in 2017. This included the minimal effects of significant items and foreign currency translation differences. The rise in net interest margin mainly reflected the effect of rate rises on asset yields, notably on term lending in Asia and on surplus liquidity in most regions. This was partly offset by the higher cost of customer accounts, notably in Asia and Europe, and the higher cost of debt issued to meet regulatory requirements.

The increase in net interest margin in 2018 includes the fourth-quarter impact of increased liquidity requirements in Europe and the increased cost of customer accounts in Asia.

Interest income

Interest income increased by $8.6bn compared with 2017. This included the minimal adverse effects of significant items and foreign currency translation. The increase in interest income was mainly driven by higher income from lending, surplus liquidity and reverse repurchase agreements.

Interest income on loans and advances to customers increased by $4.5bn compared with 2017. This included the minimal favourable effects of customer redress programmes and foreign currency translation differences, and reflected increases in all regions, notably:

• in Asia, where growth was mainly due to central bank rate rises resulting in higher yields on term lending and mortgages, and volume growth; and

• in Europe, where growth was mainly in the UK, reflecting higher yields on term lending following a central bank rate rise and growth in mortgage balances, although yields decreased.

Interest income on short-term funds and financial investments increased by $2.2bn compared with 2017, which included the adverse effects of customer redress programmes and foreign currency translation differences of $0.1bn. This increase was across all regions, but mainly in Asia and North America, primarily on debt securities, following central bank rate rises.

Interest income on reverse repurchase agreements increased by $1.5bn compared with 2017, notably in North America and Europe, following central bank rate rises.

Interest expense

Reported interest expense increased by $6.3bn, which included the favourable effects of significant items and foreign currency translation differences of $0.1bn. Excluding these impacts, interest expense was $6.4bn higher, primarily due to increases in interest expense on customer accounts, repurchase agreements and debt.

Interest expense on customer accounts was $2.9bn higher. This included the favourable effects of customer redress programmes and foreign currency translation differences of $0.1bn, and reflected average balance growth in most regions. The net increase also reflected changes in interest rates in key markets, including:

• central bank rate rises in Asia, notably in Hong Kong, as well as a change in portfolio mix;

• the 2018 increase in the UK base rate; and

• rate rises in Latin America and North America.

Interest expense on repurchase agreements increased by $1.7bn, broadly in line with the increase in interest income on reverse repurchase agreements, notably in North America and Europe, reflecting increased balances and higher market rates.

Interest expense on debt securities in issue and own debt at fair value was $1.3bn higher. The increase reflected a rise in the external cost of debt, together with an increase in debt issued by HSBC Holdings to meet regulatory requirements.

Net fee income
	2018		2017		2016
	$m		$m		$m
Funds under management	2,221		2,188		2,076
Account services	2,177		2,244		2,417
Cards	1,956		1,994		1,970
Credit facilities	1,723		1,718		1,795
Broking income	1,210		1,191		1,060
Unit trusts	1,038		1,010		863
Remittances	778		759		766
Global custody	736		692		662
Underwriting	723		829		705
Imports/exports	709		736		820
Insurance agency commission	404		410		419
Other	2,369		2,082		2,116
Fee income	16,044		15,853		15,669
Less: fee expense	(3,424	)	(3,042	)	(2,892	)
Year ended 31 Dec	12,620		12,811		12,777

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	-	-
Currency translation		(76	)
Year ended 31 Dec	-	(76	)

Net fee income of $12.6bn was $0.2bn lower compared with 2017 and included the favourable effects of foreign currency translation differences of $0.1bn. This decrease was mainly due to lower fee income from underwriting and corporate finance (disclosed within 'other') in GB&M and an increase in fee expense.

Fee income from underwriting and corporate finance decreased by $0.2bn as a result of lower volumes in investment banking products and reduced client activity, mainly in Europe and North America.

Fee income from cards also decreased, partly due to a reclassification from cards to interbank and clearing fees. This was partly offset by an increase in cards volumes, notably in Hong Kong and the US, from new product launches and campaigns, together with increased activity.

In addition, fee expense increased by $0.4bn, in part from cards due to increased customer activity in Hong Kong.

These factors were partly offset by an increase in Other fee income due in part to an increase in interbank and clearing fees in the UK and Mexico, following the reclassification of interchange fee income from cards with effect from 1 January 2018.

Net income from financial instruments measured at fair value through profit or loss

		2018		2017		2016
	Footnotes	$m		$m		$m
Trading activities	44	7,234		8,131		8,110
Other trading income - hedge ineffectiveness		(45	)	(1	)	18
- on cash flow hedges		(8	)	(5	)	(5	)
- on fair value hedges		(37	)	4		23
Fair value movement on non-qualifying hedges	57	(207	)	106		(655	)
Other instruments designated and managed on a fair value basis and related derivatives		2,549		190		48
Net income from financial instruments held for trading or managed on a fair value basis		9,531		8,426		7,521
Financial assets held to meet liabilities under insurance and investment contracts		(1,585	)	3,211		1,480
Liabilities to customers under investment contracts		97		(375	)	(218	)
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		(1,488	)	2,836		1,262
Changes in fair value of long-term debt and related derivatives	44	(97	)	155		(1,997	)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		695		N/A		N/A
Year ended 31 Dec		8,641		11,417		6,786

For footnotes, see page 67.

Significant items and currency translation
		2018		2017
	Footnotes	$m		$m
Significant items		(108	)	(258	)
- disposals, acquisitions and investment in new businesses		(8	)	-
- fair value movement on financial instruments	57	(100	)	(245	)
- currency translation on significant items				(13	)
Currency translation				(123	)
Year ended 31 Dec		(108	)	(381	)

For footnotes, see page 67.

Net income from financial instruments measured at fair value of $8.6bn was $2.8bn lower than in 2017. This included favourable effects of foreign currency translation differences and significant items relating to favourable fair value movements on financial instruments, including non-qualifying hedges and debit valuation adjustments.

'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' was $1.5bn, compared with net income of $2.8bn in 2017. This decrease primarily reflected unfavourable equity market performance in 2018 compared with 2017 in Hong Kong and France, resulting in revaluation losses on the equity and unit trust assets supporting insurance and investment contracts.

Corresponding movements were recorded in the liabilities to customers, reflecting the extent to which they participate in the investment performance of the associated assets. For investment contracts, the offsetting movements are recorded in 'Liabilities to customers under investment contracts', and for insurance contracts in 'Net insurance claims and benefits paid and movement in liabilities to policyholders'.

'Changes in fair value on long-term debt and related derivatives' were $0.1bn adverse in 2018, compared with favourable movements of $0.2bn in 2017. These movements were driven by changes in interest rates between the periods, notably in US dollars and pounds sterling.

'Net income from financial instruments held for trading or managed on a fair value basis' increased by $1.1bn. This included favourable foreign currency translation differences ($0.1bn), and a favourable movement in significant items ($0.1bn). The increase also included a number of accounting reclassifications under IFRS 9, which comprised:

• a reclassification from 1 January 2018 of net income related to structured notes from 'trading activities' to 'other instruments designated and managed on a fair value basis and related derivatives';

• a change in accounting treatment on 1 January 2018 of issued debt securities, which resulted in the fair value movements relating to changes in credit spreads on structured liabilities being reported in other comprehensive income. This compared with an expense of $0.5bn recognised in 'trading activities' in 2017;

• a reclassification on 1 January 2018 of stock lending and borrowing instruments in Hong Kong from 'amortised cost' to 'held for trading'. This resulted in the income relating to these instruments no longer being recognised in net interest income, and instead being recognised in 'trading activities'. See Note 37 on the Financial Statements for further details.

The favourable effect of these reclassifications, as well as revaluation gains on US dollar-denominated capital in mainland China, were partly offset by a decrease in revenue from trading activities in GB&M. This decrease was primarily in Europe, as our Global Markets business experienced lower client activity, notably in Rates and Credit, which was partly offset by an increase in the US from higher metals and emerging markets trading activity.

We also recorded net adverse movements on derivatives, as well as on the revaluation of foreign exchange positions in France.

'Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss'
- a new financial statement line item under IFRS 9 - recorded revenue of $0.7bn in 2018. This revenue was mainly in the UK, reflecting fair value gains on underlying equities in GB&M and on disposal of investments, notably in Principal Investments, as well as fair value gains on debt securities.

The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances, and are managed in conjunction with interest rate swaps as part of our interest rate management strategy. These liabilities are discussed further on page 45.

Gains less losses from financial investments
	2018		2017		2016
	$m		$m		$m
Net gains from disposal of	218		1,248		1,421
- debt securities	220		403		357
- equity securities	N/A		838		1,058
- other financial investments	(2	)	7		6
Impairment of available-for-sale equity securities	N/A		(98	)	(36	)
Year ended 31 Dec	218		1,150		1,385

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	-	434
- disposals, acquisitions and investment in new businesses	-	434
- currency translation on significant items		-
Currency translation		(17	)
Year ended 31 Dec	-	417

Gains less losses from financial investments of $0.2bn decreased by $0.9bn compared with 2017. Following the implementation of IFRS 9, 'net gains on the disposal of equity securities' and 'impairment of available-for-sale equity securities' are no longer reported within 'gains less losses from financial investments'. These are now reported within 'net income/(expense) from financial instruments measured at fair value through profit or loss'.

Net gains from the disposal of equity securities were $0.8bn in 2017 and included disposals, acquisitions and investment in new businesses of $0.4bn. This comprised a gain on the disposal of our membership interest in Visa Inc. in the US of $0.3bn and gains on the disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank ('Techcombank') of $0.1bn. The remaining balance in 2017 included net gains from the disposal of equity securities in GB&M, mainly in the UK, France and the US.

Net gains from the disposal of debt securities were $0.2bn lower. This reduction was mainly in Corporate Centre and related to net losses on disposals in legacy credit, as well as lower gains on disposals in Balance Sheet Management.

Net insurance premium income

	2018		2017		2016
	$m		$m		$m
Gross insurance premium income	11,338		10,802		10,588
Reinsurance premiums	(679	)	(1,023	)	(637	)
Year ended 31 Dec	10,659		9,779		9,951

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	-	-
Currency translation		(68	)
Year ended 31 Dec	-	(68	)

Net insurance premium income was $0.9bn higher than in 2017, and included the effects of foreign currency translation differences.

The increase in insurance premiums was driven by higher new business volumes, particularly in Hong Kong and France, and lower reinsurance ceded in Hong Kong.

Other operating income

	2018		2017		2016
	$m		$m		$m
Rent received	152		171		157
Gains/(losses) recognised on assets held for sale	12		214		(1,949	)
Gains on investment properties	82		48		4
Gain on disposal of property, plant and equipment, intangible assets and non-financial investments	33		46		35
Change in present value of in-force long-term insurance business	681		24		902
Other	(75	)	(166	)	(120	)
Year ended 31 Dec	885		337		(971	)

Change in present value of in-force long-term insurance business
	2018		2017		2016
	$m		$m		$m
Value of new business	1,117		919		900
Expected return	(719	)	(599	)	(532	)
Assumption changes and experience variances	292		(280	)	513
Other adjustments	(9	)	(16	)	21
Year ended 31 Dec	681		24		902

Significant items and currency translation
	2018		2017
	$m		$m
Significant items	(107	)	(154	)
- disposals, acquisitions and investment in new businesses	(107	)	(160	)
- currency translation on significant items			6
Currency translation			(19	)
Year ended 31 Dec	(107	)	(173	)

Other operating income of $0.9bn in 2018 increased by $0.5bn compared with 2017. This was primarily due to a higher favourable change in the present value of in-force long-term insurance business ('PVIF') in 2018 (up $0.7bn).

This increase in PVIF reflected a favourable movement in 'assumption changes and experience variances' of $0.6bn, from the future sharing of investment returns with policyholders, primarily in Hong Kong. In addition, the value of new business written increased by $0.2bn during 2018 to $1.1bn. For further details, please see Note 21 on the Financial Statements.

Gains on assets held for sale were $0.2bn lower, mainly as gains in 2017 included the sale of our holding in VocaLink in the UK and the sale of our operations in Lebanon.

In Other, we recorded lower losses related to the early redemption of subordinated debt linked to the US run-off portfolio ($0.1bn). In addition, 2018 included the adverse effects of hyperinflation accounting in Argentina ($0.1bn), while 2017 included a $0.1bn charge arising from the opportunity to increase our investment in new businesses.

Net insurance claims and benefits paid and movement in liabilities to policyholders

	2018		2017		2016
	$m		$m		$m
Gross	10,221		13,208		12,508
Less reinsurers' share	(414	)	(877	)	(638	)
Year ended 31 Dec	9,807		12,331		11,870

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	-	-
Currency translation		68
Year ended 31 Dec	-	68

Net insurance claims and benefits paid and movement in liabilities to policyholders were $2.5bn lower than 2017.

This decrease was primarily due to lower returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk. This reflected unfavourable equity market performance in Hong Kong and France compared with favourable performance in 2017 as well as higher claims and benefits paid.

These decreases were partly offset by the impact of higher new business volumes in Hong Kong and France and lower reinsurance ceded in Hong Kong.

The gains or losses recognised on the financial assets measured at fair value through profit and loss that are held to support these insurance contract liabilities are reported in 'Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' on page 39.

Change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions⁵⁸

	2018		2017		2016
	$m		$m		$m
Loans and advances to banks and customers	1,896		1,992		3,350
- new allowances net of allowance releases	2,304		2,636		3,977
- recoveries of amounts previously written off	(408	)	(644	)	(627	)
Loan commitments and guarantees	(3	)	(50	)	63
Other financial assets	(21	)	17		50
Debt instruments measured at fair value through other comprehensive income	(105	)	N/A		N/A
Available-for-sale-debt securities	N/A		(190	)	(63	)
Change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions	1,767		1,769		3,400

For footnotes, see page 67.

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	-	-
Currency translation		56
Year ended 31 Dec	-	56

Changes in expected credit losses and other credit impairment charges ('ECL') of $1.8bn in 2018 mainly reflected charges in RBWM and CMB. These were partly offset by net releases in Corporate Centre and GB&M.

In 2017, loan impairment charges and other credit risk provisions ('LICs') of $1.8bn were primarily in RBWM, CMB and GB&M, partly offset by releases in Corporate Centre. The effects of currency translation between the periods were minimal.

ECL in 2018

In 2018, ECL in RBWM of $1.2bn primarily comprised new allowances in Mexico ($0.4bn), the UK ($0.4bn) and Asia ($0.3bn), and related to unsecured lending balances. The charge in the UK also included charges relating to the current economic uncertainty. The overall allowance for ECL remained broadly unchanged compared with 1 January 2018, as these new allowances broadly offset releases, mainly from write-offs and derecognition of assets.

In CMB, ECL of $0.7bn were predominantly against a small number of specific exposures across various sectors. In Asia, charges of $0.3bn were mainly in Hong Kong, mainland China and Indonesia. In Europe, the charge was primarily in the UK ($0.2bn) against a small number of customers, and reflected the current economic uncertainty. In Middle East and North Africa ('MENA'), ECL of $0.2bn were against a small number of customers in Turkey and the UAE, as well as charges reflecting the challenging economic conditions in Turkey. In Latin America, charges of $0.1bn were driven by Mexico and Argentina. These charges were partly offset by net releases of $0.1bn in North America across various sectors.

In GB&M, a net ECL release of $26m was driven by the US ($0.2bn) relating to a small number of clients, notably within the oil and gas, construction and mining sectors. These releases were partly offset by charges against two large corporate exposures in the UK in the retail and construction sectors.

In Corporate Centre, a net ECL release of $0.1bn related to legacy credit in the UK.

LICs in 2017

In 2017, LICs in RBWM were $1.0bn, of which the largest portion of the charge was in Mexico ($0.4bn), reflecting our strategic growth in unsecured lending, together with an associated rise in delinquency. LICs in the UK were $0.1bn, and in Hong Kong were $0.1bn, primarily relating to our unsecured lending exposure. LICs in RBWM also included charges in MENA of $0.1bn.

In CMB, LICs of $0.5bn were driven by an increase in allowances in Hong Kong ($0.2bn) and in the UK ($0.1bn), related to a small number of clients across various sectors. These charges were partly offset by releases in North America.

In GB&M, LICs of $0.5bn were primarily in the UK ($0.4bn) against specific customers in the construction and retail sectors, and in Hong Kong ($0.1bn) against a small number of exposures. These charges were partly offset by releases in the US, particularly in the oil and gas sector.

In Corporate Centre, a net release of LICs of $0.2bn was mainly related to our legacy credit portfolio in the UK.

Operating expenses

Operating expenses
	2018	2017	2016
	$m	$m	$m
By expense category
Employee compensation and benefits	17,373	17,315	18,089
Premises and equipment (excluding depreciation and impairment)	3,422	3,530	3,758
General and administrative expenses	11,931	12,177	12,715
Administrative expenses	32,726	33,022	34,562
Depreciation and impairment of property, plant and equipment	1,119	1,166	1,229
Amortisation and impairment of intangible assets	814	696	777
Goodwill impairment	-	-	3,240
Year ended 31 Dec	34,659	34,884	39,808

Staff numbers (full-time equivalents)
	2018	2017	2016
Global businesses
Retail Banking and Wealth Management	133,644	129,402	124,810
Commercial Banking	44,805	44,871	44,712
Global Banking and Markets	48,500	45,725	46,659
Global Private Banking	6,819	7,250	8,054
Corporate Centre	1,449	1,439	10,940
At 31 Dec	235,217	228,687	235,175

Significant items and currency translation
	2018	2017
	$m	$m
Significant items	1,669	3,796
- costs to achieve	-	3,002
- costs of structural reform	361	420
- customer redress programmes	146	655
- disposals, acquisitions and investment in new businesses	52	53
- gain on partial settlement of pension obligation	-	(188	)
- past service costs of guaranteed minimum pension benefits equalisation	228	-
- restructuring and other related costs	66	-
- settlements and provisions in connection with legal and regulatory matters	816	(198	)
- currency translation on significant items		52
Currency translation		(143	)
Year ended 31 Dec	1,669	3,653

Reported operating expenses of $34.7bn were $0.2bn lower than in 2017. This reflected a net favourable movement in significant items of $2.1bn, which included:

• the non-recurrence of costs to achieve, which were $3.0bn in 2017; and

• customer redress programme costs of $0.1bn in 2018, compared with $0.7bn in 2017.

These items were partly offset by:

• settlements and provisions in connection with legal and regulatory matters of $0.8bn in 2018, compared with a net release of $0.2bn in 2017;

• a provision in relation to past service costs in connection with guaranteed minimum pension benefits equalisation of $0.2bn; and

• the non-recurrence of gains on the partial settlement of pension obligations of $0.2bn in 2017.

The reduction in reported operating expenses also included an adverse effect of foreign currency translation differences of $0.1bn.

Excluding significant items and foreign currency translation differences, operating expenses of $33.0bn were $1.8bn higher than in 2017. This increase mainly reflected near- and medium- term investments to grow the business ($0.9bn), primarily in RBWM and GB&M. We also increased our investment in productivity programmes ($0.3bn), mainly in Technology and Operations.

Performance-related pay was higher by $0.2bn, and Operations and transaction volume-related operating expenses increased by $0.2bn.

The cost savings from our productivity programmes absorbed the impact of inflation. Our UK bank levy charge remained broadly unchanged, at $964m.

We maintained our momentum in growing the business during 2018.

• In RBWM, we made investments to develop digital capabilities and recruit front-line staff to deliver improved customer service, as well as to grow the business, particularly in the UK, Hong Kong, mainland China (including the Pearl River Delta) and the US.

• In GB&M, we made strategic hires in Global Markets and Global Banking, and continued to invest in mainland China as well as in new digital capabilities and functionalities for Securities Services and Global Liquidity and Cash Management businesses.

• In CMB, we invested in digital offerings to improve customer journeys, such as on-boarding and credit, as well as market-leading innovations including landmark trade transactions on the Voltron and we.trade platforms.

The number of employees expressed in FTEs at 31 December 2018 was 235,217, an increase of 6,530 since 31 December 2017. This was primarily driven by investments in business growth programmes across RBWM, GB&M and CMB. The number of contractors as at 31 December 2018 was 10,854, a decrease of 2,040 from 31 December 2017.

Share of profit in associates and joint ventures
	2018	2017	2016
	$m	$m	$m
Share of profit in associates	2,519	2,349	2,326
- Bank of Communications Co., Limited	2,032	1,863	1,892
- The Saudi British Bank	421	422	415
- other	66	64	19
Share of profit in joint ventures	17	26	28
Year ended 31 Dec	2,536	2,375	2,354

Our share of profit in associates and joint ventures was $2.5bn, an increase of $161m or 7% compared with 2017, and included the favourable effects of foreign currency translation differences of $41m.

Excluding the effects of foreign currency translation differences, our share of profit in associates and joint ventures increased by $120m compared with 2017. This primarily reflected an increase in income from Bank of Communications Co., Limited ('BoCom').

At 31 December 2018, we performed an impairment review of our investment in BoCom and concluded that it was not impaired, based on our value-in-use ('VIU') calculation (for more information on the key assumptions in our VIU calculation, including the sensitivity of the VIU to each key assumption (see Note 18 on the Financial Statements).

As discussed in Note 18 on the Financial Statements, in future periods the VIU may increase or decrease depending on the effect of changes to model inputs. It is expected that the carrying amount will increase due to retained profits earned by BoCom. At the point where the carrying amount exceeds the VIU, impairment would be recognised. We would continue to recognise our share of BoCom's profit or loss, but the carrying amount would be reduced to equal the VIU, with a corresponding reduction in income. An impairment review would continue to be performed at each subsequent reporting period, with the carrying amount and income adjusted accordingly.

Tax expense

	2018		2017		2016
	$m		$m		$m
Profit before tax	19,890		17,167		7,112
Tax expense	(4,865	)	(5,288	)	(3,666	)
Profit after tax for the year ended 31 Dec	15,025		11,879		3,446
Effective tax rate	24.5%		30.8%		51.5%

The effective tax rate for 2018 of 24.5% is lower than the 30.8% for 2017 as 2017 included a charge of $1.3bn due to the remeasurement of US deferred tax balances to reflect the reduction in the US federal tax rate from 35% to 21%.

This charge increased the 2017 effective tax rate by 7.5%.

Further detail is provided in Note 8 on the Financial Statements.

Consolidated balance sheet

Five-year summary consolidated balance sheet
		2018	2017	2016	2015	2014
	Footnotes	$m	$m	$m	$m	$m
Assets
Cash and balances at central banks		162,843	180,624	128,009	98,934	129,957
Trading assets		238,130	287,995	235,125	224,837	304,193
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss		41,111	N/A	N/A	N/A	N/A
Financial assets designated at fair value		N/A	29,464	24,756	23,852	29,037
Derivatives		207,825	219,818	290,872	288,476	345,008
Loans and advances to banks		72,167	90,393	88,126	90,401	112,149
Loans and advances to customers	59	981,696	962,964	861,504	924,454	974,660
Reverse repurchase agreements - non-trading		242,804	201,553	160,974	146,255	161,713
Financial investments		407,433	389,076	436,797	428,955	415,467
Other assets		204,115	159,884	148,823	183,492	161,955
Total assets at 31 Dec		2,558,124	2,521,771	2,374,986	2,409,656	2,634,139
Liabilities and equity
Liabilities
Deposits by banks		56,331	69,922	59,939	54,371	77,426
Customer accounts		1,362,643	1,364,462	1,272,386	1,289,586	1,350,642
Repurchase agreements - non-trading		165,884	130,002	88,958	80,400	107,432
Trading liabilities		84,431	184,361	153,691	141,614	190,572
Financial liabilities designated at fair value		148,505	94,429	86,832	66,408	76,153
Derivatives		205,835	216,821	279,819	281,071	340,669
Debt securities in issue		85,342	64,546	65,915	88,949	95,947
Liabilities under insurance contracts		87,330	85,667	75,273	69,938	73,861
Other liabilities		167,574	113,690	109,595	139,801	121,459
Total liabilities at 31 Dec		2,363,875	2,323,900	2,192,408	2,212,138	2,434,161
Equity
Total shareholders' equity		186,253	190,250	175,386	188,460	190,447
Non-controlling interests		7,996	7,621	7,192	9,058	9,531
Total equity at 31 Dec		194,249	197,871	182,578	197,518	199,978
Total liabilities and equity at 31 Dec		2,558,124	2,521,771	2,374,986	2,409,656	2,634,139

For footnotes, see page 67.

A more detailed consolidated balance sheet is contained in the Financial Statements on page 216.

Five-year selected financial information
		2018		2017		2016		2015		2014
	Footnotes	$m		$m		$m		$m		$m
Called up share capital		10,180		10,160		10,096		9,842		9,609
Capital resources	60	173,238		182,383		172,358		189,833		190,730
Undated subordinated loan capital		1,969		1,969		1,967		2,368		2,773
Preferred securities and dated subordinated loan capital	61	35,014		42,147		42,600		42,844		47,208
Risk-weighted assets		865,318		871,337		857,181		1,102,995		1,219,765
Total shareholders' equity		186,253		190,250		175,386		188,460		190,447
Less: preference shares and other equity instruments		(23,772	)	(23,655	)	(18,515	)	(16,517	)	(12,937	)
Total ordinary shareholders' equity		162,481		166,595		156,871		171,943		177,510
Less: goodwill and intangible assets (net of tax)		(22,425	)	(21,680	)	(19,649	)	(24,626	)	(26,196	)
Tangible ordinary shareholders' equity		140,056		144,915		137,222		147,317		151,314
Financial statistics
Loans and advances to customers as a percentage of customer accounts		72.0%		70.6%		67.7%		71.7%		72.2%
Average total shareholders' equity to average total assets		7.16%		7.33%		7.37%		7.31%		7.01%
Net asset value per ordinary share at year-end ($)	62	8.13		8.35		7.91		8.77		9.28
Tangible net asset value per ordinary share at year-end ($)		7.01		7.26		6.92		7.51		7.91
Number of $0.50 ordinary shares in issue (millions)		20,361		20,321		20,192		19,685		19,218
Basic number of $0.50 ordinary shares outstanding (millions)		19,981		19,960		19,838		19,604		19,119
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)		20,059		20,065		19,933		19,744		19,209
Closing foreign exchange translation rates to $:
$1: £		0.783		0.740		0.811		0.675		0.642
$1: €		0.873		0.834		0.949		0.919		0.823

For footnotes, see page 67.

Balance sheet commentary compared with
1 January 2018

The effect of the adoption of IFRS 9 'Financial Instruments' on 1 January 2018 was a reduction in our total assets of $3.3bn from 31 December 2017, and the reclassification of certain items within the balance sheet. The commentary that follows compares our balance sheet at 31 December 2018 with that at 1 January 2018.

At 31 December 2018, our total assets were $2.6tn, an increase of $40bn or 2% on a reported basis and $118bn or 5% on a constant currency basis. The increase reflected targeted lending growth, notably in Asia.

Our ratio of customer advances to customer accounts was 72%, up from 70% at 1 January 2018.

Assets

Cash and balances at central banks decreased by $18bn or 10% and included an adverse effect of foreign currency translation differences of $7bn. Excluding this, cash and balances at central banks decreased by $11bn, mainly in Europe, reflecting the redeployment of our commercial surplus.

Trading assets decreased by $16bn or 6%, mainly driven by an adverse effect of foreign currency translation differences of $10bn. Excluding this, trading assets decreased by $6bn, reflecting a reduction in equity security holdings, notably in the UK. This was partly offset by increased debt securities and government bonds held in the US and Hong Kong.

Derivative assets decreased by $12bn or 5%, mainly reflecting an adverse effect of foreign currency translation differences of $10bn. Excluding this, derivative assets decreased by $2bn, which is consistent with the decrease in derivative liabilities, since the underlying risk is broadly matched.

'Reverse repurchase agreements - non-trading' increased by $41bn or 20%, notably in the UK and France, mainly driven by customer demand in our Global Markets business. This was partly offset by a reduction in the US, reflecting a decrease in the commercial surplus due to lower customer deposits and the repayment of long-term debt.

Financial investments increased by $24bn or 6%, mainly in Hong Kong due to an increase in investments in government bonds and debt securities. Financial investments were also higher in the US, reflecting increased investment in mortgage-backed securities and corporate bonds.

Loans and advances to customers

Loans and advances to customers increased by $32bn or 3% on a reported basis. This included an adverse effect of foreign currency translation differences of $34bn, resulting in growth of $66bn or 7% on a constant currency basis.

Loans and advances to customers increased by $69bn or 8%, after excluding the effects of foreign currency translation differences, and a reduction in corporate current account balances of $4bn relating to CMB and GB&M customers in the UK that settled their overdraft and deposit balances on a net basis.

This growth was primarily in Asia (up $38bn). The increase in Asia was notably in RBWM (up $15bn) as we continued to increase personal lending, primarily in Hong Kong (up $12bn), reflecting our strategy to maintain our leading position in mortgages and personal lending. Customer lending was also higher in CMB (up $13bn) and GB&M (up $11bn), reflecting higher term lending in Hong Kong resulting from our continued strategic focus on loan growth in the region, as well as from an increase in customer demand.

In Europe, customer lending increased by $20bn, notably in the UK from growth in mortgage balances (up $11bn), due to our focus on broker-originated mortgages. We also grew balances in CMB in the UK (up $6bn), driven by business growth aligned to the Group strategy, which resulted in higher term lending and overdraft balances, primarily to mid-market and commercial real estate clients.

In North America, loans and advances to customers increased by $6bn, primarily in Canada ($5bn) in CMB ($4bn), mainly from new to bank client acquisition and higher facility utilisation on term lending, and in RBWM ($1bn) from increased residential mortgage lending.

Liabilities

'Repurchase agreements - non-trading' increased by $36bn or 28%, primarily in the US and France, mainly driven by the increased use of repurchase agreements for funding in our Global Markets business.

Debt securities in issue increased by $19bn or 28%, notably relating to an increase in commercial paper issuances, primarily US dollar-denominated. In addition, there was an increase in senior MREL issuances in the period as well as sterling- and euro-denominated medium term notes, primarily in the UK.

Derivative liabilities fell by $11bn or 5%, mainly reflecting the adverse effect of foreign currency translation differences of $9bn. Excluding this, derivative liabilities decreased by $2bn, which is consistent with the decrease in derivative assets, since the underlying risk is broadly matched.

Customer accounts

Customer accounts increased by $2bn on a reported basis, including the adverse effect of foreign currency translation differences of $43bn, resulting in growth of $45bn or 3% on a constant currency basis.

Customer accounts rose by $49bn, after excluding the impacts of foreign currency translation differences and a reduction in corporate current account balances of $4bn, relating to CMB and GB&M customers in the UK that settled their overdraft and deposit balances on a net basis.

This growth in customer accounts was notably in Europe (up $29bn). GB&M balances rose by $11bn as we targeted balance growth to support funding in the non-ring-fenced bank, mainly in GLCM in the UK. CMB balances increased by $9bn, notably reflecting growth in GLCM within the UK ring-fenced bank. Customer accounts were also higher in RBWM (up $8bn) mainly in the UK, from higher current accounts and savings balances.

In Asia, we grew customer accounts by $18bn, notably in RBWM (up $10bn) and in GB&M (up $9bn) primarily in savings, reflecting higher customer inflows due to competitive rates.

Customer accounts increased in Latin America (up $4bn), notably in Argentina and Mexico, reflecting higher savings and term deposits, and the impact of currency devaluation on foreign currency deposits booked on our Argentina balance sheet.

These increases were partly offset in North America (down $5bn), notably in CMB (down $2bn) due to balance outflows in Bermuda and a reduction in savings deposits in the US. GB&M balances fell by $2bn driven by a decrease in demand deposits in the US.

Equity

Total shareholders' equity of $186bn decreased by $2bn or 1%. The effects of profits generated in the period ($14bn) and favourable changes in fair value attributable to changes in own credit risk ($3bn) were more than offset by an increase in accumulated foreign exchange losses ($7bn) and dividends paid to shareholders ($12bn).

Risk-weighted assets

Risk-weighted assets ('RWAs') were $865.3bn at 31 December 2018. Excluding the $0.8bn impact of IFRS 9 implementation on 1 January 2018 and foreign currency translation differences, RWAs increased by $16.6bn in 2018. This comprised growth of $27.6bn from asset size and $2.9bn from changes in asset quality. This was partly offset by a $10.0bn fall from changes to methodology and policy and a $3.9bn decrease due to model updates.

Asset size movements principally included:

• a $41.5bn growth predominantly in corporate and mortgage lending across CMB, RBWM and GB&M, most significantly in Asia; and

• a $11.3bn decrease in Corporate Centre RWAs, predominantly due to reductions in legacy portfolios.

Customer accounts by country/territory
	2018	2017
	$m	$m
Europe	503,154	505,182
- UK	399,487	401,733
- France	45,169	45,833
- Germany	16,713	17,355
- Switzerland	6,315	7,936
- other	35,470	32,325
Asia	664,824	657,395
- Hong Kong	484,897	477,104
- mainland China	45,712	45,991
- Singapore	42,323	41,144
- Australia	20,649	20,212
- Malaysia	13,904	14,027
- Taiwan	13,602	13,459
- India	14,210	13,228
- Indonesia	3,810	4,211
- other	25,717	28,019
Middle East and North Africa (excluding Saudi Arabia)	35,408	34,658
- United Arab Emirates	16,583	16,602
- Turkey	4,169	3,772
- Egypt	4,493	3,912
- other	10,163	10,372
North America	133,291	143,432
- US	82,523	89,887
- Canada	43,898	45,510
- other	6,870	8,035
Latin America	25,966	23,795
- Mexico	19,936	17,809
- other	6,030	5,986
At 31 Dec	1,362,643	1,364,462

Loans and advances, Deposits by currency
	At
	31 Dec 2018
$m	USD	GBP	HKD	EUR	CNY	Others⁶³	Total
Loans and advances to banks	23,469	4,351	3,241	3,462	7,418	30,226	72,167
Loans and advances to customers	176,907	243,541	220,458	86,583	29,973	224,234	981,696
Total loans and advances	200,376	247,892	223,699	90,045	37,391	254,460	1,053,863

Deposits by banks	17,802	5,777	3,748	15,923	4,065	9,016	56,331
Customer accounts	348,741	340,244	290,748	116,095	49,596	217,219	1,362,643
Total deposits	366,543	346,021	294,496	132,018	53,661	226,235	1,418,974

For footnotes, see page 67.

Global businesses and geographical regions
	Page
Analysis of adjusted results by global business	51
Reconciliation of reported and adjusted items	52
Reconciliation of reported and adjusted items - global businesses	53
Supplementary tables for RBWM and GPB	56
Analysis of reported results by geographical regions	58
Reconciliation of reported and adjusted items - geographical regions	60
Analysis of reported results by country/territory	66

Summary

(Audited)

The Group Chief Executive and the rest of the Group Management Board ('GMB') review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating Segments'.

Basis of preparation
The Group Chief Executive, supported by the rest of the GMB, is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments. Global business results are assessed by the CODM on the basis of adjusted performance that removes the effects of significant items and currency translation from reported results. We therefore present these results on an adjusted basis as required by IFRSs. The 2017 and 2016 adjusted performance information is presented on a constant currency basis as described on page 34.

As required by IFRS 8, reconciliations of the total adjusted global business results to the Group reported results are presented on page 48. Supplementary reconciliations from reported to adjusted results by global business are presented on pages 50 to 52 for information purposes.
Global business performance is also assessed using return on tangible equity ('RoTE'), excluding significant items and the UK bank levy. A reconciliation of global business RoTE, excluding significant items and the UK bank levy to the Group's RoTE is provided in the reconciliations of non-GAAP financial measures at 31 December 2018.
Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses and geographical regions. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.
The expense of the UK bank levy is included in the Europe geographical region as HSBC regards the levy as a cost of being headquartered in the UK. For the purposes of the presentation by global business, the cost of the levy is included in the Corporate Centre.
The results of geographical regions are presented on a reported basis.
Geographical information is classified by the location of the principal operations of the subsidiary or, for The Hongkong and Shanghai Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank plc, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the branch responsible for reporting the results or providing funding.

A description of the global businesses is provided in the Strategic Report, pages 3 and 18 to 21.

Analysis of adjusted results by global business

(Audited)

HSBC adjusted profit before tax and balance sheet data
		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
Net operating income before change in expected credit losses and other credit impairment charges	26	21,935		14,885		15,512		1,785		(177	)	53,940
- external		17,270		14,652		17,986		1,497		2,535		53,940
- inter-segment		4,665		233		(2,474	)	288		(2,712	)	-
of which: net interest income/(expense)		15,822		10,666		5,259		888		(2,199	)	30,436
Change in expected credit losses and other credit impairment charges		(1,177	)	(739	)	26		8		115		(1,767	)
Net operating income/(expense)		20,758		14,146		15,538		1,793		(62	)	52,173
Total operating expenses		(13,711	)	(6,477	)	(9,460	)	(1,449	)	(1,893	)	(32,990	)
Operating profit/(loss)		7,047		7,669		6,078		344		(1,955	)	19,183
Share of profit in associates and joint ventures		33		-		-		-		2,503		2,536
Adjusted profit before tax		7,080		7,669		6,078		344		548		21,719
		%		%		%		%		%		%
Share of HSBC's adjusted profit before tax		32.6		35.3		28.0		1.6		2.5		100.0
Adjusted cost efficiency ratio		62.5		43.5		61.0		81.2		(1,069.5	)	61.2
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		361,872		333,162		244,978		39,217		2,467		981,696
Interests in associates and joint ventures		397		-		-		-		22,010		22,407
Total external assets		476,784		360,216		1,012,272		43,790		665,062		2,558,124
Customer accounts		640,924		357,596		290,914		64,658		8,551		1,362,643
Adjusted risk-weighted assets (unaudited)	64	126,865		321,244		281,021		16,824		118,550		864,504

		2017
Net operating income before loan impairment charges and other credit risk provisions	26	20,220		13,247		15,285		1,723		1,186		51,661
- external		17,024		13,378		16,557		1,453		3,249		51,661
- inter-segment		3,196		(131	)	(1,272	)	270		(2,063	)	-
of which: net interest income/(expense)		13,927		9,060		4,851		825		(481	)	28,182
Loan impairment charges and other credit risk provisions/(recoveries)		(969	)	(465	)	(446	)	(16	)	183		(1,713	)
Net operating income		19,251		12,782		14,839		1,707		1,369		49,948
Total operating expenses		(12,786	)	(5,953	)	(8,991	)	(1,411	)	(2,090	)	(31,231	)
Operating profit/(loss)		6,465		6,829		5,848		296		(721	)	18,717
Share of profit in associates and joint ventures		14		-		-		-		2,402		2,416
Adjusted profit before tax		6,479		6,829		5,848		296		1,681		21,133
		%		%		%		%		%		%
Share of HSBC's adjusted profit before tax		30.6		32.3		27.7		1.4		8.0		100.0
Adjusted cost efficiency ratio		63.2		44.9		58.8		81.9		176.2		60.5
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		332,261		305,213		244,476		39,597		7,294		928,841
Interests in associates and joint ventures		363		-		-		-		21,656		22,019
Total external assets		451,516		336,163		946,747		46,247		662,364		2,443,037
Customer accounts		621,092		351,617		273,080		64,957		10,883		1,321,629
Adjusted risk-weighted assets (unaudited)	64	118,131		289,824		293,135		15,795		128,795		845,680

For footnotes, see page 67.

HSBC adjusted profit before tax and balance sheet data (continued)
		2016
		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 loan impairment charges and other credit risk provisions	26	18,483		12,656		14,807		1,770		1,544		49,260
- external		16,050		12,656		17,488		1,512		1,554		49,260
- inter-segment		2,433		-		(2,681	)	258		(10	)	-
of which: net interest income		12,906		8,506		4,800		813		1,176		28,201
Loan impairment charges and other credit risk provisions		(1,101	)	(986	)	(461	)	-		(24	)	(2,572	)
Net operating income		17,382		11,670		14,346		1,770		1,520		46,688
Total operating expenses		(12,144	)	(5,747	)	(8,846	)	(1,484	)	(1,926	)	(30,147	)
Operating profit/(loss)		5,238		5,923		5,500		286		(406	)	16,541
Share of profit in associates and joint ventures		20		-		-		-		2,345		2,365
Adjusted profit before tax		5,258		5,923		5,500		286		1,939		18,906
		%		%		%		%		%		%
Share of HSBC's adjusted profit before tax		27.8		31.3		29.1		1.5		10.3		100.0
Adjusted cost efficiency ratio		65.7		45.4		59.7		83.8		124.7		61.2
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		312,393		285,253		230,171		36,222		12,331		876,370
Interests in associates and joint ventures		391		-		-		-		19,635		20,026
Total external assets		421,559		309,905		949,732		43,663		692,740		2,417,599
Customer accounts		595,765		346,746		261,949		71,389		14,344		1,290,193
Adjusted risk-weighted assets (unaudited)	64	111,617		276,705		301,728		15,418		149,680		855,148

For footnotes, see page 67.

Reconciliation of reported and adjusted items

(Audited)

Adjusted results reconciliation
		2018						2017								2016
		Adjusted		Significant items		Reported		Adjusted		Currency translation		Significant items		Reported		Adjusted		Currency translation		Significant items		Reported
	Footnotes	$m		$m		$m		$m		$m		$m		$m		$m		$m		$m		$m
Revenue	26	53,940		(160	)	53,780		51,661		(133	)	(83	)	51,445		49,260		803		(2,097	)	47,966
ECL		(1,767	)	-		(1,767	)	N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
LICs		N/A		N/A		N/A		(1,713	)	(56	)	-		(1,769	)	(2,572	)	(24	)	(804	)	(3,400	)
Operating expenses		(32,990	)	(1,669	)	(34,659	)	(31,231	)	143		(3,796	)	(34,884	)	(30,147	)	(361	)	(9,300	)	(39,808	)
Share of profit in associates and joint ventures		2,536		-		2,536		2,416		(41	)	-		2,375		2,365		(10	)	(1	)	2,354
Profit/(loss) before tax		21,719		(1,829	)	19,890		21,133		(87	)	(3,879	)	17,167		18,906		408		(12,202	)	7,112

For footnotes, see page 67.

Adjusted balance sheet reconciliation
	2018	2017			2016
	Reported and adjusted	Adjusted	Currency translation	Reported	Adjusted	Currency translation		Reported
	$m	$m	$m	$m	$m	$m		$m
Loans and advances to customers (net)	981,696	928,841	34,123	962,964	876,370	(14,866	)	861,504
Interests in associates and joint ventures	22,407	22,019	725	22,744	20,026	3		20,029
Total external assets	2,558,124	2,443,037	78,734	2,521,771	2,417,599	(42,613	)	2,374,986
Customer accounts	1,362,643	1,321,629	42,833	1,364,462	1,290,193	(17,807	)	1,272,386

Adjusted profit reconciliation
		2018		2017		2016
	Footnotes	$m		$m		$m
Year ended 31 Dec
Adjusted profit before tax		21,719		21,133		18,906
Significant items		(1,829	)	(3,879	)	(12,202	)
- customer redress programmes (revenue)		53		(108	)	2
- disposals, acquisitions and investment in new businesses (revenue)		(113	)	274		264
- fair value movements on financial instruments	65, 66	(100	)	(245	)	(2,453	)
- costs of structural reform		(361	)	(420	)	(223	)
- costs to achieve		-		(3,002	)	(3,118	)
- customer redress programmes (operating expenses)		(146	)	(655	)	(559	)
- disposals, acquisitions and investment in new businesses (operating expenses)		(52	)	(53	)	(1,087	)
- disposals, acquisitions and investment in new businesses (LICs)		-		-		(748	)
- gain on partial settlement of pension obligation		-		188		-
- impairment of GPB - Europe goodwill		-		-		(3,240	)
- past service costs of guaranteed minimum pension benefits equalisation		(228	)	-		-
- restructuring and other related costs		(66	)	-		-
- settlements and provisions in connection with legal and other regulatory matters		(816	)	198		(1,025	)
- disposals, acquisitions and investment in new businesses (share of profit in associates and joint ventures)		-		-		(1	)
- currency translation on significant items				(56	)	(14	)
Currency translation				(87	)	408
Reported profit before tax		19,890		17,167		7,112

For footnotes, see page 67.

Reconciliation of reported and adjusted items - global businesses

Supplementary unaudited analysis of significant items by global business is presented below.

		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	26
Reported		21,928		14,938		15,634		1,790		(510	)	53,780
Significant items		7		(53	)	(122	)	(5	)	333		160
- customer redress programmes		-		(53	)	-		-		-		(53	)
- disposals, acquisitions and investment in new businesses		7		-		-		(5	)	111		113
- fair value movements on financial instruments	65	-		-		(122	)	-		222		100
Adjusted		21,935		14,885		15,512		1,785		(177	)	53,940
Change in expected credit losses and other credit impairment charges
Reported		(1,177	)	(739	)	26		8		115		(1,767	)
Adjusted		(1,177	)	(739	)	26		8		115		(1,767	)
Operating expenses
Reported		(13,902	)	(6,480	)	(9,348	)	(1,550	)	(3,379	)	(34,659	)
Significant items		191		3		(112	)	101		1,486		1,669
- costs of structural reform		2		8		41		-		310		361
- customer redress programmes		173		(5	)	(22	)	-		-		146
- disposals, acquisitions and investment in new businesses		-		-		-		52		-		52
- past service costs of guaranteed minimum pension benefits equalisation		-		-		-		-		228		228
- restructuring and other related costs		-		-		-		7		59		66
- settlements and provisions in connection with legal and regulatory matters		16		-		(131	)	42		889		816
Adjusted		(13,711	)	(6,477	)	(9,460	)	(1,449	)	(1,893	)	(32,990	)
Share of profit in associates and joint ventures
Reported		33		-		-		-		2,503		2,536
Adjusted		33		-		-		-		2,503		2,536
Profit/(loss) before tax
Reported		6,882		7,719		6,312		248		(1,271	)	19,890
Significant items		198		(50	)	(234	)	96		1,819		1,829
- revenue		7		(53	)	(122	)	(5	)	333		160
- operating expenses		191		3		(112	)	101		1,486		1,669
Adjusted		7,080		7,669		6,078		344		548		21,719
Loans and advances to customers (net)
Reported		361,872		333,162		244,978		39,217		2,467		981,696
Adjusted		361,872		333,162		244,978		39,217		2,467		981,696
Customer accounts
Reported		640,924		357,596		290,914		64,658		8,551		1,362,643
Adjusted		640,924		357,596		290,914		64,658		8,551		1,362,643

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2017
		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	26
Reported		20,519		13,120		14,617		1,723		1,466		51,445
Currency translation		(67	)	27		181		21		(29	)	133
Significant items		(232	)	100		487		(21	)	(251	)	83
- customer redress programmes		3		103		2		-		-		108
- disposals, acquisitions and investment in new businesses		(235	)	-		99		(20	)	(118	)	(274	)
- fair value movements on financial instruments	65	-		-		373		-		(128	)	245
- currency translation on significant items		-		(3	)	13		(1	)	(5	)	4
Adjusted		20,220		13,247		15,285		1,723		1,186		51,661
LICs
Reported		(980	)	(496	)	(459	)	(16	)	182		(1,769	)
Currency translation		11		31		13		-		1		56
Adjusted		(969	)	(465	)	(446	)	(16	)	183		(1,713	)
Operating expenses
Reported		(13,734	)	(6,001	)	(8,723	)	(1,586	)	(4,840	)	(34,884	)
Currency translation		38		(6	)	(112	)	(18	)	(45	)	(143	)
Significant items		910		54		(156	)	193		2,795		3,796
- costs of structural reform		6		3		8		-		403		420
- costs to achieve		270		44		240		3		2,445		3,002
- customer redress programmes		637		16		2		-		-		655
- disposals, acquisitions and investment in new businesses		-		-		-		31		22		53
- gain on partial settlement of pension obligation		(26	)	(9	)	(9	)	(3	)	(141	)	(188	)
- settlements and provisions in connection with legal and regulatory matters		-		-		(376	)	164		14		(198	)
- currency translation on significant items		23		-		(21	)	(2	)	52		52
Adjusted		(12,786	)	(5,953	)	(8,991	)	(1,411	)	(2,090	)	(31,231	)
Share of profit in associates and joint ventures
Reported		18		-		-		-		2,357		2,375
Currency translation		(4	)	-		-		-		45		41
Adjusted		14		-		-		-		2,402		2,416
Profit/(loss) before tax
Reported		5,823		6,623		5,435		121		(835	)	17,167
Currency translation		(22	)	52		82		3		(28	)	87
Significant items		678		154		331		172		2,544		3,879
- revenue		(232	)	100		487		(21	)	(251	)	83
- operating expenses		910		54		(156	)	193		2,795		3,796
Adjusted		6,479		6,829		5,848		296		1,681		21,133
Loans and advances to customers (net)
Reported		346,148		316,533		252,474		40,326		7,483		962,964
Currency translation		(13,887	)	(11,320	)	(7,998	)	(729	)	(189	)	(34,123	)
Adjusted		332,261		305,213		244,476		39,597		7,294		928,841
Customer accounts
Reported		639,592		362,908		283,943		66,512		11,507		1,364,462
Currency translation		(18,500	)	(11,291	)	(10,863	)	(1,555	)	(624	)	(42,833	)
Adjusted		621,092		351,617		273,080		64,957		10,883		1,321,629

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2016
		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	26
Currency translation
Reported		20,338		13,405		15,213		1,745		(2,735	)	47,966
Currency translation		(374	)	(214	)	(89	)	14		(140	)	(803	)
Significant items		(1,481	)	(535	)	(317	)	11		4,419		2,097
- customer redress programmes		-		-		-		(2	)	-		(2	)
- disposals, acquisitions and investment in new businesses		(1,413	)	(518	)	(268	)	14		1,921		(264	)
- fair value movements on financial instruments	65, 66	-		-		(26	)	-		2,479		2,453
- currency translation on significant items		(68	)	(17	)	(23	)	(1	)	19		(90	)
Adjusted		18,483		12,656		14,807		1,770		1,544		49,260
LICs
Reported		(1,633	)	(1,272	)	(471	)	1		(25	)	(3,400	)
Currency translation		33		(4	)	(5	)	(1	)	1		24
Significant items		499		290		15		-		-		804
- disposals, acquisitions and investment in new businesses		462		272		14		-		-		748
- currency translation on significant items		37		18		1		-		-		56
Adjusted		(1,101	)	(986	)	(461	)	-		(24	)	(2,572	)
Operating expenses
Reported		(14,138	)	(6,087	)	(9,302	)	(5,074	)	(5,207	)	(39,808	)
Currency translation		249		83		16		(19	)	32		361
Significant items		1,745		257		440		3,609		3,249		9,300
- costs of structural reform		2		1		-		-		220		223
- costs to achieve		393		62		233		6		2,424		3,118
- customer redress programmes		497		34		28		-		-		559
- disposals, acquisitions and investment in new businesses		805		155		82		18		27		1,087
- impairment of GPB - Europe goodwill		-		-		-		3,240		-		3,240
- settlements and provisions in connection with legal and regulatory matters		-		-		94		341		590		1,025
- currency translation on significant items		48		5		3		4		(12	)	48
Adjusted		(12,144	)	(5,747	)	(8,846	)	(1,484	)	(1,926	)	(30,147	)
Share of profit in associates and joint ventures
Reported		20		-		-		-		2,334		2,354
Currency translation		-		-		-		-		10		10
Significant items		-		-		-		-		1		1
- disposals, acquisitions and investment in new businesses		-		-		-		-		1		1
- currency translation on significant items		-		-		-		-		-		-
Adjusted		20		-		-		-		2,345		2,365
Profit/(loss) before tax
Reported		4,587		6,046		5,440		(3,328	)	(5,633	)	7,112
Currency translation		(92	)	(135	)	(78	)	(6	)	(97	)	(408	)
Significant items		763		12		138		3,620		7,669		12,202
- revenue		(1,481	)	(535	)	(317	)	11		4,419		2,097
- LICs		499		290		15		-		-		804
- operating expenses		1,745		257		440		3,609		3,249		9,300
- share of profit in associates and joint ventures		-		-		-		-		1		1
Adjusted		5,258		5,923		5,500		286		1,939		18,906
Loans and advances to customers (net)
Reported		306,056		281,930		225,855		35,456		12,207		861,504
Currency translation		6,337		3,323		4,316		766		124		14,866
Adjusted		312,393		285,253		230,171		36,222		12,331		876,370
Customer accounts
Reported		590,502		341,729		256,095		69,850		14,210		1,272,386
Currency translation		5,263		5,017		5,854		1,539		134		17,807
Adjusted		595,765		346,746		261,949		71,389		14,344		1,290,193

For footnotes, see page 67.

Reconciliation of reported and adjusted risk-weighted assets
		At 31 Dec 2018
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$bn		$bn		$bn		$bn		$bn		$bn
Risk-weighted assets
Reported		126.9		321.2		281.0		16.8		119.4		865.3
Disposals		-		-		-		-		(0.8	)	(0.8	)
- operations in Brazil		-		-		-		-		(0.8	)	(0.8	)
Adjusted	64	126.9		321.2		281.0		16.8		118.6		864.5

		At 31 Dec 2017
Risk-weighted assets
Reported		121.5		301.0		299.3		16.0		133.5		871.3
Currency translation		(3.4	)	(11.2	)	(6.1	)	(0.2	)	(2.0	)	(22.9	)
Disposals		-		-		-		-		(2.7	)	(2.7	)
- operations in Brazil		-		-		-		-		(2.6	)	(2.6	)
- operations in Lebanon		-		-		-		-		(0.1	)	(0.1	)
Adjusted	64	118.1		289.8		293.2		15.8		128.8		845.7

		At 31 Dec 2016
Risk-weighted assets
Reported		115.1		275.9		300.4		15.3	150.5		857.2
Currency translation		(0.1	)	2.2		2.0		0.1	(0.1	)	4.1
Disposals		(3.4	)	(1.4	)	(0.7	)	-	(0.7	)	(6.2	)
- operations in Brazil		(3.2	)	(1.0	)	(0.7	)	-	(0.2	)	(5.1	)
- operations in Lebanon		(0.2	)	(0.4	)	-		-	(0.5	)	(1.1	)
Adjusted	64	111.6		276.7		301.7		15.4	149.7		855.1

For footnotes, see page 67.

Supplementary tables for RBWM and GPB

A breakdown of RBWM by business unit is presented below to reflect the basis of how the revenue performance of the business units is assessed and managed.

RBWM - adjusted profit before tax data
		Consists of
		Total RBWM		Banking operations		Insurance manufacturing		Asset management
	Footnotes	$m		$m		$m		$m
Year ended 31 Dec 2018
Net operating income before change in expected credit losses and other credit impairment charges	26	21,935		19,053		1,816		1,066
- net interest income		15,822		13,759		2,063		-
- net fee income/(expense)		5,198		4,723		(579	)	1,054
- other income		915		571		332		12
ECL		(1,177	)	(1,175	)	(2	)	-
Net operating income		20,758		17,878		1,814		1,066
Total operating expenses		(13,711	)	(12,517	)	(472	)	(722	)
Operating profit		7,047		5,361		1,342		344
Share of profit in associates and joint ventures		33		2		31		-
Profit before tax		7,080		5,363		1,373		344

Year ended 31 Dec 2017
Net operating income before loan impairment charges and other credit risk provisions	26	20,220		17,182		1,971		1,067
- net interest income		13,927		11,914		2,013		-
- net fee income/(expense)		5,150		4,628		(498	)	1,020
- other income		1,143		640		456		47
LICs		(969	)	(969	)	-		-
Net operating income		19,251		16,213		1,971		1,067
Total operating expenses		(12,786	)	(11,681	)	(403	)	(702	)
Operating profit		6,465		4,532		1,568		365
Share of profit in associates and joint ventures		14		4		10		-
Profit before tax		6,479		4,536		1,578		365

For footnotes, see page 67.

RBWM insurance manufacturing adjusted revenue of $1,816m (2017: $1,971m) was disclosed within the management view of adjusted revenue on page 18, as follows: Wealth Management $1,656m (2017: $1,870m) and Other $160m (2017: $101m).

RBWM Insurance manufacturing adjusted results

The following table shows the results of our insurance manufacturing operations by income statement line item. It shows the results of insurance manufacturing operations for RBWM and for all global business segments in aggregate, and separately the insurance distribution income earned by HSBC bank channels.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels⁶⁷
		2018				2017
		RBWM		All global businesses		RBWM		All global businesses
	Footnotes	$m		$m		$m		$m
Net interest income		2,063		2,227		2,013		2,193
Net fee income		(579	)	(567	)	(498	)	(485	)
- fee income		182		275		233		330
- fee expense		(761	)	(842	)	(731	)	(815	)
Net income from financial instruments held for trading or managed on a fair value basis		216		204		(37	)	13
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		(1,562	)	(1,578	)	2,878		2,837
Gains less losses from financial investments		59		58		23		31
Net insurance premium income		10,235		10,716		9,470		9,895
Other operating income		712		766		61		97
Of which: PVIF		640		681		11		21
Total operating income		11,144		11,826		13,910		14,581
Net insurance claims and benefits paid and movement in liabilities to policyholders		(9,328	)	(9,786	)	(11,939	)	(12,391	)
Net operating income before change in expected credit losses and other credit impairment charges		1,816		2,040		1,971		2,190
Change in expected credit losses and other credit impairment charges		(2	)	(2	)	-		-
Net operating income		1,814		2,038		1,971		2,190
Total operating expenses		(472	)	(491	)	(403	)	(434	)
Operating profit		1,342		1,547		1,568		1,756
Share of profit in associates and joint ventures		31		31		10		10
Profit before tax of insurance manufacturing operations	68	1,373		1,578		1,578		1,766
Annualised new business premiums of insurance manufacturing operations		3,173		3,252		2,666		2,725
Insurance distribution income earned by HSBC bank channels		945		1,067		908		1,033

For footnotes, see page 67.

Insurance manufacturing

The following commentary, unless otherwise specified, relates to the 'All global businesses' results.

HSBC recognises the present value of long-term in-force insurance contracts and investment contracts with discretionary participation features ('PVIF') as an asset on the balance sheet. The overall balance sheet equity, including PVIF, is therefore a measure of the embedded value in the insurance manufacturing entities, and the movement in this embedded value in the period drives the overall income statement result.

Adjusted profit before tax of $1.6bn decreased by $0.2bn or 11%. This was mainly due to adverse market impacts of $0.3bn in 2018, which primarily reflected unfavourable equity market performance. This compared with favourable market impacts of $0.3bn in 2017. This reduction was partly offset by a $0.2bn increase in the value of new business written, as well as favourable actuarial assumptions and methodology updates of $0.1bn (2017: $0.1bn adverse).

Adjusted revenue was $0.2bn or 6.8% lower than 2017. This reflected the following:

• 'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' of $1.6bn in 2018 compared with net income of $2.8bn in 2017, due to unfavourable equity market performance in Hong Kong and France in 2018 compared with 2017, resulting in revaluation losses on equity and unit trust assets supporting insurance and investment contracts. This negative movement resulted in a corresponding movement in liabilities to policyholders and PVIF (see 'Other operating income' below), reflecting the extent to which policyholders participate in the investment performance of the associated asset portfolio.

• Net insurance premium income of $10.7bn was $0.8bn higher. This was driven by higher new business volumes, particularly in Hong Kong and France, and lower reinsurance ceded in Hong Kong.

• Other operating income of $0.8bn increased by $0.7bn, mainly from favourable movements in PVIF. This reflected an increase in 'assumption changes and experience variances' of $0.6bn, primarily in Hong Kong, from the future sharing of investment returns with policyholders. In addition, the value of new business written increased by $0.2bn to $1.1bn. For further details, please see Note 21 on the Financial Statements.

• Net insurance claims and benefits paid and movement in liabilities to policyholders of $9.8bn were $2.6bn lower than 2017. This was primarily due to lower returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk, partly offset by the impact of higher new business volumes in Hong Kong and France, and lower reinsurance ceded in Hong Kong.

Adjusted operating expenses of $0.5bn increased by $0.1bn or 13% compared with 2017, reflecting investment in core insurance functions and capabilities.

Annualised new business premiums ('ANP') is used to assess new insurance premium generation by the business. It is calculated as 100% of annualised first year regular premiums and 10% of single premiums, before reinsurance ceded. Growth in ANP during the period reflected new business growth, mainly in Hong Kong.

Insurance distribution income from HSBC channels included $663m (2017: $642m) on HSBC manufactured products, for which a corresponding fee expense is recognised within insurance manufacturing, and $404m (2017: $391m) products manufactured by third-party providers. The RBWM component of this distribution income was $588m (2017: $571m) from HSBC manufactured products and $357m (2017: $337m) from third-party products.

For GPB, a key measure of business performance is client assets, which is presented below.

GPB - reported client assets⁶⁹
	2018		2017		2016
	$bn		$bn		$bn
At 1 Jan	330		298		349
Net new money	10		-		(17	)
- of which: areas targeted for growth	15		15		2
Value change	(17	)	21		(1	)
Disposals	-		(10	)	(24	)
Exchange and other	(14	)	21		(9	)
At 31 Dec	309		330		298

GPB - reported client assets by geography
		2018	2017	2016
	Footnotes	$bn	$bn	$bn
Europe		149	161	147
Asia		124	130	108
North America		36	39	40
Latin America		-	-	3
Middle East	70	-	-	-
At 31 Dec		309	330	298

For footnotes, see page 67.

Analysis of reported results by geographical regions

HSBC reported profit/(loss) before tax and balance sheet data
		2018
		Europe		Asia		MENA		North America		Latin America		Intra-HSBC items		Total
	Footnotes	$m		$m		$m		$m		$m		$m		$m
Net interest income		6,841		16,108		1,763		3,521		2,020		236		30,489
Net fee income		3,996		5,676		607		1,854		498		(11	)	12,620
Net income from financial instruments held for trading or managed on a fair value basis		3,942		4,134		285		728		736		(294	)	9,531
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		(789	)	(717	)	-		-		18		-		(1,488	)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		601		(26	)	(1	)	36		27		58		695
Other income	71	3,113		3,609		33		586		(237	)	(5,171	)	1,933
Net operating income before change in expected credit losses and other credit impairment charges/recoveries	26	17,704		28,784		2,687		6,725		3,062		(5,182	)	53,780
Change in expected credit losses and other credit impairment charges/recoveries		(609	)	(602	)	(209	)	223		(570	)	-		(1,767	)
Net operating income		17,095		28,182		2,478		6,948		2,492		(5,182	)	52,013
Total operating expenses		(17,934	)	(12,466	)	(1,357	)	(6,149	)	(1,935	)	5,182		(34,659	)
Operating profit/(loss)		(839	)	15,716		1,121		799		557		-		17,354
Share of profit in associates and joint ventures		24		2,074		436		-		2		-		2,536
Profit/(loss) before tax		(815	)	17,790		1,557		799		559		-		19,890
		%		%		%		%		%				%
Share of HSBC's profit before tax		(4.1	)	89.5		7.8		4.0		2.8				100.0
Cost efficiency ratio		101.3		43.3		50.5		91.4		63.2				64.4
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		373,073		450,545		28,824		108,146		21,108		-		981,696
Total assets		1,150,235		1,047,636		57,455		390,410		51,923		(139,535	)	2,558,124
Customer accounts		503,154		664,824		35,408		133,291		25,966		-		1,362,643
Risk-weighted assets	72	298,056		363,894		56,689		131,582		38,341		-		865,318

For footnotes, see page 67.


HSBC reported profit/(loss) before tax and balance sheet data (continued)
		2017
		Europe		Asia		MENA		North America		Latin America		Intra-HSBC items		Total
	Footnotes	$m		$m		$m		$m		$m		$m		$m
Net interest income		6,970		14,153		1,752		3,441		2,098		(238	)	28,176
Net fee income		4,161		5,631		619		1,880		520		-		12,811
Net income from financial instruments held for trading or managed on a fair value basis	44, 45	4,066		2,929		180		527		486		238		8,426
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		769		2,003		-		-		64		-		2,836
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Other income/(expense)	45, 71	1,454		1,090		109		865		57		(4,379	)	(804	)
Net operating income before loan impairment charges and other credit risk provisions	26	17,420		25,806		2,660		6,713		3,225		(4,379	)	51,445
Loan impairment charges and other credit risk provisions		(658	)	(570	)	(207	)	189		(523	)	-		(1,769	)
Net operating income		16,762		25,236		2,453		6,902		2,702		(4,379	)	49,676
Total operating expenses		(18,665	)	(11,790	)	(1,394	)	(5,305	)	(2,109	)	4,379		(34,884	)
Operating profit/(loss)		(1,903	)	13,446		1,059		1,597		593		-		14,792
Share of profit/(loss) in associates and joint ventures		39		1,883		442		4		7		-		2,375
Profit/(loss) before tax		(1,864	)	15,329		1,501		1,601		600		-		17,167
		%		%		%		%		%				%
Share of HSBC's profit before tax		(10.8	)	89.3		8.7		9.3		3.5				100.0
Cost efficiency ratio		107.1		45.7		52.4		79.0		65.4				67.8
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		381,547		425,971		28,050		107,607		19,789		-		962,964
Total assets		1,169,515		1,008,498		57,469		391,292		48,413		(153,416	)	2,521,771
Customer accounts		505,182		657,395		34,658		143,432		23,795		-		1,364,462
Risk-weighted assets	72	311,612		357,808		59,196		131,276		36,372		-		871,337

		2016
Net interest income		8,346		12,490		1,831		4,220		3,006		(80	)	29,813
Net fee income		4,247		5,200		709		1,898		723		-		12,777
Net income from financial instruments held for trading or managed on a fair value basis	44, 45	3,018		3,127		385		462		449		80		7,521
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		454		445		-		-		363		-		1,262
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Other income	45, 71	(549	)	2,058		44		485		(1,855	)	(3,590	)	(3,407	)
Net operating income before loan impairment charges and other credit risk provisions	26	15,516		23,320		2,969		7,065		2,686		(3,590	)	47,966
Loan impairment charges and other credit risk provisions		(446	)	(677	)	(316	)	(732	)	(1,229	)	-		(3,400	)
Net operating income		15,070		22,643		2,653		6,333		1,457		(3,590	)	44,566
Total operating expenses		(21,845	)	(10,785	)	(1,584	)	(6,147	)	(3,037	)	3,590		(39,808	)
Operating profit		(6,775	)	11,858		1,069		186		(1,580	)	-		4,758
Share of profit/(loss) in associates and joint ventures		1		1,921		434		(1	)	(1	)	-		2,354
Profit before tax		(6,774	)	13,779		1,503		185		(1,581	)	-		7,112
		%		%		%		%		%				%
Share of HSBC's profit before tax		(95.2	)	193.7		21.1		2.6		(22.2	)			100.0
Cost efficiency ratio		140.8		46.2		53.4		87.0		113.1				83.0
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		336,670		365,430		30,740		111,710		16,954		-		861,504
Total assets		1,068,446		965,730		60,472		409,021		43,137		(171,820	)	2,374,986
Customer accounts		446,615		631,723		34,766		138,790		20,492		-		1,272,386
Risk-weighted assets	72	298,384		333,987		59,065		150,714		34,341		-		857,181

For footnotes, see page 67.

Reconciliation of reported and adjusted items - geographical regions

Reconciliation of reported and adjusted items
		2018
		Europe		Asia		MENA		North America*		Latin America^†		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	26
Reported	73	17,704		28,784		2,687		6,725		3,062		53,780
Significant items		98		(38	)	(1	)	95		6		160
- customer redress programmes		(53	)	-		-		-		-		(53	)
- disposals, acquisitions and investment in new businesses		(5	)	-		-		103		15		113
- fair value movements on financial instruments	65	156		(38	)	(1	)	(8	)	(9	)	100
Adjusted	73	17,802		28,746		2,686		6,820		3,068		53,940
Change in expected credit losses and other credit impairment charges
Reported		(609	)	(602	)	(209	)	223		(570	)	(1,767	)
Adjusted		(609	)	(602	)	(209	)	223		(570	)	(1,767	)
Operating expenses
Reported	73	(17,934	)	(12,466	)	(1,357	)	(6,149	)	(1,935	)	(34,659	)
Significant items		677		16		-		976		-		1,669
- costs of structural reform		352		9		-		-		-		361
- customer redress programmes		146		-		-		-		-		146
- disposals, acquisitions and investment in new businesses		52		-		-		-		-		52
- past service costs of guaranteed minimum pension benefits equalisation		228		-		-		-		-		228
- restructuring and other related costs		46		7		-		13		-		66
- settlements and provisions in connection with legal and regulatory matters		(147	)	-		-		963		-		816
Adjusted	73	(17,257	)	(12,450	)	(1,357	)	(5,173	)	(1,935	)	(32,990	)
Share of profit in associates and joint ventures
Reported		24		2,074		436		-		2		2,536
Adjusted		24		2,074		436		-		2		2,536
Profit/(loss) before tax
Reported		(815	)	17,790		1,557		799		559		19,890
Significant items		775		(22	)	(1	)	1,071		6		1,829
- revenue		98		(38	)	(1	)	95		6		160
- operating expenses		677		16		-		976		-		1,669
Adjusted	74	(40	)	17,768		1,556		1,870		565		21,719
Loans and advances to customers (net)
Reported		373,073		450,545		28,824		108,146		21,108		981,696
Adjusted		373,073		450,545		28,824		108,146		21,108		981,696
Customer accounts
Reported		503,154		664,824		35,408		133,291		25,966		1,362,643
Adjusted		503,154		664,824		35,408		133,291		25,966		1,362,643

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2018
		UK		Hong Kong		Mainland China		US*		Mexico^†
	Footnotes	$m		$m		$m		$m		$m
Revenue	26
Reported		13,597		18,231		2,888		4,741		2,294
Significant items		109		5		(1	)	97		(7	)
- customer redress programmes		(53	)	-		-		-		-
- disposals, acquisitions and investment in new businesses		-		-		-		103		-
- fair value movements on financial instruments	65	162		5		(1	)	(6	)	(7	)
Adjusted		13,706		18,236		2,887		4,838		2,287
Change in expected credit losses and other credit impairment charges
Reported		(516	)	(214	)	(143	)	199		(463	)
Adjusted		(516	)	(214	)	(143	)	199		(463	)
Operating expenses
Reported		(14,502	)	(6,539	)	(1,920	)	(4,987	)	(1,303	)
Significant items		531		16		-		919		-
- costs of structural reform		294		9		-		-		-
- customer redress programmes		146		-		-		-		-
- disposals, acquisitions and investment in new businesses		-		-		-		-		-
- past service costs of guaranteed minimum pension benefits equalisation		228		-		-		-		-
- restructuring and other related costs		39		7		-		11		-
- settlements and provisions in connection with legal and regulatory matters		(176	)	-		-		908		-
Adjusted		(13,971	)	(6,523	)	(1,920	)	(4,068	)	(1,303	)
Share of profit in associates and joint ventures
Reported		25		36		2,033		-		-
Adjusted		25		36		2,033		-		-
Profit/(loss) before tax
Reported		(1,396	)	11,514		2,858		(47	)	528
Significant items		640		21		(1	)	1,016		(7	)
- revenue		109		5		(1	)	97		(7	)
- operating expenses		531		16		-		919		-
Adjusted		(756	)	11,535		2,857		969		521
Loans and advances to customers (net)
Reported		287,144		290,547		38,979		64,011		17,895
Adjusted		287,144		290,547		38,979		64,011		17,895
Customer accounts
Reported		399,487		484,897		45,712		82,523		19,936
Adjusted		399,487		484,897		45,712		82,523		19,936

* Of which US (excluding CML run-off portfolio): adjusted revenue $4,792m (RBWM: $1,200m; CMB: $1,016m; GB&M $1,924m; GPB: $259m); adjusted ECL $199m; adjusted operating expenses $(3,996)m; adjusted profit before tax ('PBT') $996m (RBWM: $(180)m; CMB: $473m; GB&M $618m; GPB: $23m); adjusted RWAs (RBWM: $10.6bn; CMB: $27.8bn; GB&M $45.5bn; GPB: $4.1bn; Corporate Centre: $10.2bn).

^†Of which Mexico: adjusted revenue $2,287m (RBWM: $1,508m; CMB: $378m; GB&M $321m); adjusted ECL $(463)m; adjusted operating expenses $(1,303)m; adjusted PBT $521m (RBWM: $194m; CMB: $114m; GB&M $189m); adjusted RWAs (RBWM: $7.0bn; CMB: $6.9bn; GB&M $10.6bn; Corporate Centre: $3.0bn).

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2017
		Europe		Asia		MENA		North America*		Latin America^†		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	26
Reported	73	17,420		25,806		2,660		6,713		3,225		51,445
Currency translation	73	751		(130	)	(75	)	-		(403	)	133
Significant items		66		123		1		(93	)	(14	)	83
- customer redress programmes		108		-		-		-		-		108
- disposals, acquisitions and investment in new businesses		(98	)	(27	)	-		(130	)	(19	)	(274	)
- fair value movements on financial instruments	65	54		148		1		37		5		245
- currency translation on significant items		2		2		-		-		-		4
Adjusted	73	18,237		25,799		2,586		6,620		2,808		51,661
LICs
Reported		(658	)	(570	)	(207	)	189		(523	)	(1,769	)
Currency translation		17		5		3		2		29		56
Adjusted		(641	)	(565	)	(204	)	191		(494	)	(1,713	)
Operating expenses
Reported	73	(18,665	)	(11,790	)	(1,394	)	(5,305	)	(2,109	)	(34,884	)
Currency translation	73	(565	)	65		60		-		287		(143	)
Significant items		2,876		634		28		201		57		3,796
- costs of structural reform		420		-		-		-		-		420
- costs to achieve		1,908		623		34		371		66		3,002
- customer redress programmes		655		-		-		-		-		655
- disposals, acquisitions and investment in new businesses		36		-		-		17		-		53
- gain on partial settlement of pension obligation		-		-		-		(188	)	-		(188	)
- settlements and provisions in connection with legal and regulatory matters		(215	)	17		-		-		-		(198	)
- currency translation on significant items		72		(6	)	(6	)	1		(9	)	52
Adjusted	73	(16,354	)	(11,091	)	(1,306	)	(5,104	)	(1,765	)	(31,231	)
Share of profit in associates and joint ventures
Reported		39		1,883		442		4		7		2,375
Currency translation		-		45		-		-		(4	)	41
Adjusted		39		1,928		442		4		3		2,416
Profit/(loss) before tax
Reported		(1,864	)	15,329		1,501		1,601		600		17,167
Currency translation		203		(15	)	(12	)	2		(91	)	87
Significant items		2,942		757		29		108		43		3,879
- revenue		66		123		1		(93	)	(14	)	83
- operating expenses		2,876		634		28		201		57		3,796
Adjusted		1,281		16,071		1,518		1,711		552		21,133
Loans and advances to customers (net)
Reported		381,547		425,971		28,050		107,607		19,789		962,964
Currency translation		(19,881	)	(8,138	)	(1,177	)	(3,194	)	(1,733	)	(34,123	)
Adjusted		361,666		417,833		26,873		104,413		18,056		928,841
Customer accounts
Reported		505,182		657,395		34,658		143,432		23,795		1,364,462
Currency translation		(26,838	)	(8,991	)	(1,112	)	(3,619	)	(2,273	)	(42,833	)
Adjusted		478,344		648,404		33,546		139,813		21,522		1,321,629

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2017
		UK		Hong Kong		Mainland China		US*		Mexico^†
	Footnotes	$m		$m		$m		$m		$m
Revenue	26
Reported		12,922		16,117		2,379		4,876		2,160
Currency translation		550		(91	)	58		-		(45	)
Significant items		55		(51	)	101		(99	)	5
- customer redress programmes		108		-		-		-		-
- disposals, acquisitions and investment in new businesses		(78	)	(126	)	99		(130	)	-
- fair value movements on financial instruments	65	24		75		2		31		5
- currency translation on significant items		1		-		-		-		-
Adjusted		13,527		15,975		2,538		4,777		2,120
LICs
Reported		(492	)	(396	)	(67	)	108		(473	)
Currency translation		14		3		(3	)	-		9
Adjusted		(478	)	(393	)	(70	)	108		(464	)
Operating expenses
Reported		(15,086	)	(6,131	)	(1,687	)	(4,267	)	(1,297	)
Currency translation		(424	)	34		(35	)	-		25
Significant items		2,537		306		71		119		45
- costs of structural reform		410		-		-		-		-
- costs to achieve		1,766		291		69		290		46
- customer redress programmes		655		-		-		-		-
- disposals, acquisitions and investment in new businesses		-		-		-		17		-
- gain on partial settlement of pension obligation		-		-		-		(188	)	-
- settlements and provisions in connection with legal and regulatory matters		(362	)	17		-		-		-
- currency translation on significant items		68		(2	)	2		-		(1	)
Adjusted		(12,973	)	(5,791	)	(1,651	)	(4,148	)	(1,227	)
Share of profit in associates and joint ventures
Reported		38		8		1,863		-		-
Currency translation		-		-		45		-		-
Adjusted		38		8		1,908		-		-
Profit/(loss) before tax
Reported		(2,618	)	9,598		2,488		717		390
Currency translation		140		(54	)	65		-		(11	)
Significant items		2,592		255		172		20		50
- revenue		55		(51	)	101		(99	)	5
- operating expenses		2,537		306		71		119		45
Adjusted		114		9,799		2,725		737		429
Loans and advances to customers (net)
Reported		295,538		268,966		40,686		65,168		15,172
Currency translation		(16,216	)	(582	)	(2,194	)	-		27
Adjusted		279,322		268,384		38,492		65,168		15,199
Customer accounts
Reported		401,733		477,104		45,991		89,887		17,809
Currency translation		(22,062	)	(1,033	)	(2,481	)	-		32
Adjusted		379,671		476,071		43,510		89,887		17,841

* Of which US (excluding CML run-off portfolio): adjusted revenue $4,737m (RBWM: $1,194m; CMB: $947m; GB&M $1,951m; GPB: $317m); adjusted LICs $118m; adjusted operating expenses $(3,936)m; adjusted PBT $920m (RBWM: $(58)m; CMB: $432m; GB&M $527m; GPB: $64m); adjusted RWAs (RBWM: $11.0bn; CMB: $25.1bn; GB&M $45.2bn; GPB: $4.2bn; Corporate Centre: $10.0bn).

† Of which Mexico: adjusted revenue $2,120m (RBWM: $1,413m; CMB: $342m; GB&M $277m); adjusted LICs $(464)m; adjusted operating expenses $(1,227)m; adjusted PBT $429m (RBWM: $143m; CMB: $103m; GB&M $158m); adjusted RWAs (RBWM: $7.0bn; CMB: $5.9bn; GB&M $8.3bn; Corporate Centre: $2.8bn).

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2016
		Europe		Asia		MENA		North America*		Latin America^†		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	26
Reported	73	15,516		23,320		2,969		7,065		2,686		47,966
Currency translation	73	96		(166	)	(448	)	37		(336	)	(803	)
Significant items		1,774		(10	)	(7	)	155		185		2,097
- customer redress programmes		(2	)	-		-		-		-		(2	)
- disposals, acquisitions and investment in new businesses		(547	)			(11	)	21		273		(264	)
- fair value movements on financial investments	65, 66	2,289		(6	)	-		134		36		2,453
- currency translation on significant items		34		(4	)	4		-		(124	)	(90	)
Adjusted	73	17,386		23,144		2,514		7,257		2,535		49,260
LICs
Reported		(446	)	(677	)	(316	)	(732	)	(1,229	)	(3,400	)
Currency translation		-		1		59		(5	)	(31	)	24
Significant items		-		-		-		-		804		804
- disposals, acquisitions and investment in new businesses		-		-		-		-		748		748
- currency translation on significant items		-		-		-		-		56		56
Adjusted		(446	)	(676	)	(257	)	(737	)	(456	)	(2,572	)
Operating expenses
Reported	73	(21,845	)	(10,785	)	(1,584	)	(6,147	)	(3,037	)	(39,808	)
Currency translation	73	(109	)	72		225		(20	)	207		361
Significant items		6,638		418		71		990		1,183		9,300
- costs of structural reform		223		-		-		-		-		223
- costs to achieve		2,098		476		103		402		39		3,118
- customer redress programmes		559		-		-		-		-		559
- disposals, acquisitions and investment in new businesses		28		-		-		-		1,059		1,087
- impairment of GPB - Europe goodwill		3,240		-		-		-		-		3,240
- settlements and provisions in connection with legal and regulatory matters		484		(46	)	-		587		-		1,025
- currency translation on significant items		6		(12	)	(32	)	1		85		48
Adjusted	73	(15,316	)	(10,295	)	(1,288	)	(5,177	)	(1,647	)	(30,147	)
Share of profit in associates and joint ventures
Reported		1		1,921		434		(1	)	(1	)	2,354
Currency translation		-		10		-		-		-		10
Significant items		-		-		-		-		1		1
- disposals, acquisitions and investment in new businesses		-		-		-		-		1		1
- currency translation on significant items		-		-		-		-		-		-
Adjusted		1		1,931		434		(1	)	-		2,365
Profit/(loss) before tax
Reported		(6,774	)	13,779		1,503		185		(1,581	)	7,112
Currency translation		(13	)	(83	)	(164	)	12		(160	)	(408	)
Significant items		8,412		408		64		1,145		2,173		12,202
- revenue		1,774		(10	)	(7	)	155		185		2,097
- LICs		-		-		-		-		804		804
- operating expenses		6,638		418		71		990		1,183		9,300
- share of profit in associates and joint ventures		-		-		-		-		1		1
Adjusted		1,625		14,104		1,403		1,342		432		18,906
Loans and advances to customers (net)
Reported		336,670		365,430		30,740		111,710		16,954		861,504
Currency translation		17,113		(481	)	(1,370	)	697		(1,093	)	14,866
Adjusted		353,783		364,949		29,370		112,407		15,861		876,370
Customer accounts
Reported		446,615		631,723		34,766		138,790		20,492		1,272,386
Currency translation		21,775		(1,617	)	(1,450	)	842		(1,743	)	17,807
Adjusted		468,390		630,106		33,316		139,632		18,749		1,290,193

For footnotes, see page 67.

Reconciliation of reported and adjusted items (continued)
		2016
		UK		Hong Kong		Mainland China		US*		Mexico^†
	Footnotes	$m		$m		$m		$m		$m
Revenue	26
Reported		10,893		14,014		2,343		5,239		1,963
Currency translation		(209	)	(133	)	(10	)	-		(56	)
Significant items		1,834		(1	)	-		148		-
- customer redress programmes		(2	)	-		-		-		-
- disposals, acquisitions and investment in new businesses		(441	)	-		-		21		-
- fair value movements on financial instruments	65, 66	2,238		(1	)	-		127		-
- currency translation on significant items		39		-		-		-		-
Adjusted		12,518		13,880		2,333		5,387		1,907
LICs
Reported		(245	)	(321	)	(121	)	(631	)	(452	)
Currency translation		12		3		-		-		13
Adjusted		(233	)	(318	)	(121	)	(631	)	(439	)
Operating expenses
Reported		(14,562	)	(5,646	)	(1,507	)	(5,079	)	(1,264	)
Currency translation		106		54		(6	)	-		36
Significant items		2,660		181		54		879		29
- costs of structural reform		223		-		-		-		-
- costs to achieve		1,838		229		54		292		30
- customer redress programmes		559		-		-		-		-
- settlements and provisions in connection with legal and regulatory matters		50		(46	)	-		587		-
- currency translation on significant items		(10	)	(2	)	-		-		(1	)
Adjusted		(11,796	)	(5,411	)	(1,459	)	(4,200	)	(1,199	)
Share of profit in associates and joint ventures
Reported		1		22		1,892		-		-
Currency translation		-		-		10		-		-
Adjusted		1		22		1,902		-		-
Profit/(loss) before tax
Reported		(3,913	)	8,069		2,607		(471	)	247
Currency translation		(91	)	(76	)	(6	)	-		(7	)
Significant items		4,494		180		54		1,027		29
- revenue		1,834		(1	)	-		148		-
- operating expenses		2,660		181		54		879		29
Adjusted		490		8,173		2,655		556		269
Loans and advances to customers (net)
Reported		264,098		230,629		33,303		74,596		12,876
Currency translation		11,660		(2,181	)	133		-		548
Adjusted		275,758		228,448		33,436		74,596		13,424
Customer accounts
Reported		361,278		461,626		46,576		88,751		14,423
Currency translation		15,691		(4,370	)	185		-		613
Adjusted		376,969		457,256		46,761		88,751		15,036

* Of which US (excluding CML run-off portfolio): adjusted revenue $4,698m (RBWM: $1,161m; CMB: $981m; GB&M $1,979m; GPB: $303m); adjusted LICs $(503)m; adjusted operating expenses $(3,808)m; adjusted PBT $387m (RBWM: $(81)m; CMB: $341m; GB&M $100m; GPB: $67m); adjusted RWAs (RBWM: $11.0bn; CMB: $26.8bn; GB&M $48.3bn; GPB: $4.1bn; Corporate Centre: $13.6bn).

† Of which Mexico: adjusted revenue $1,907m (RBWM: $1,256m; CMB: $330m; GB&M $214m; GPB: $13m); adjusted LICs $(439)m; adjusted operating expenses $(1,199)m; adjusted PBT $269m (RBWM: $97m; CMB: $83m; GB&M $78m; GPB: $5m); adjusted RWAs (RBWM: $6.4bn; CMB: $6.3bn; GB&M $6.7bn; Corporate Centre: $1.7bn).

For footnotes, see page 67.

Analysis of reported results by country/territory

Profit/(loss) before tax by country/territory within global businesses
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Europe		440		2,289		690		(122	)	(4,112	)	(815	)
- UK		476		1,901		409		23		(4,205	)	(1,396	)
of which: HSBC Holdings	75	(644	)	(428	)	(394	)	(77	)	(888	)	(2,431	)
- France		(56	)	170		8		16		(101	)	37
- Germany		14		85		99		8		(5	)	201
- Switzerland		(1	)	5		(1	)	(100	)	20		(77	)
- other		7		128		175		(69	)	179		420
Asia		6,190		4,176		3,773		353		3,298		17,790
- Hong Kong		5,951		3,114		1,670		333		446		11,514
- Australia		115		120		185		(1	)	44		463
- India		20		143		387		-		275		825
- Indonesia		(1	)	13		91		-		1		104
- mainland China		(200	)	262		566		(4	)	2,234		2,858
- Malaysia		130		82		132		-		30		374
- Singapore		75		98		230		25		63		491
- Taiwan		55		23		117		-		30		225
- other		45		321		395		-		175		936
Middle East and North Africa		182		108		733		7		527		1,557
- Egypt		34		54		202		-		43		333
- UAE		112		58		296		7		-		473
- Saudi Arabia		-		-		-		-		436		436
- other		36		(4	)	235		-		48		315
North America		(96	)	968		738		11		(822	)	799
- US		(205	)	473		624		23		(962	)	(47	)
- Canada		55		455		139		-		116		765
- other		54		40		(25	)	(12	)	24		81
Latin America		166		178		378		(1	)	(162	)	559
- Mexico		194		114		197		-		23		528
- other		(28	)	64		181		(1	)	(185	)	31
Year ended 31 Dec 2018		6,882		7,719		6,312		248		(1,271	)	19,890

Europe		(159	)	1,899		777		(231	)	(4,150	)	(1,864	)
- UK		(177	)	1,539		192		(23	)	(4,149	)	(2,618	)
of which: HSBC Holdings	75	(658	)	(372	)	(739	)	(89	)	(3,308	)	(5,166	)
- France		(12	)	204		228		5		(156	)	269
- Germany		21		61		141		9		39		271
- Switzerland		(2	)	7		1		(192	)	2		(184	)
- other		11		88		215		(30	)	114		398
Asia		5,372		3,394		3,135		285		3,143		15,329
- Hong Kong		5,039		2,460		1,357		257		485		9,598
- Australia		122		101		108		(1	)	35		365
- India		21		159		362		-		374		916
- Indonesia		(24	)	76		98		-		30		180
- mainland China		(44	)	161		387		(4	)	1,988		2,488
- Malaysia		85		50		162		-		28		325
- Singapore		69		94		202		34		64		463
- Taiwan		43		10		107		(1	)	40		199
- other		61		283		352		-		99		795
Middle East and North Africa		144		199		593		-		565		1,501
- Egypt		26		69		164		-		46		305
- UAE		110		53		268		-		48		479
- Saudi Arabia		-		-		-		-		441		441
- other		8		77		161		-		30		276
North America		305		932		671		67		(374	)	1,601
- US		166		435		494		66		(444	)	717
- Canada		61		453		132		-		43		689
- other		78		44		45		1		27		195
Latin America		161		199		259		-		(19	)	600
- Mexico		139		105		158		-		(12	)	390
- other		22		94		101		-		(7	)	210
Year ended 31 Dec 2017		5,823		6,623		5,435		121		(835	)	17,167

Profit/(loss) before tax by country/territory within global businesses (continued)
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Europe		524		2,129		1,009		(3,695	)	(6,741	)	(6,774	)
- UK		338		1,834		385		86		(6,556	)	(3,913	)
of which: HSBC Holdings	75,76	(676	)	(379	)	(425	)	(63	)	(3,748	)	(5,291	)
- France		147		198		289		9		(53	)	590
- Germany		23		68		142		7		13		253
- Switzerland		-		9		-		(493	)	(7	)	(491	)
- other		16		20		193		(3,304	)	(138	)	(3,213	)
Asia		4,115		2,920		3,211		268		3,265		13,779
- Hong Kong		3,796		2,191		1,298		221		563		8,069
- Australia		108		74		156		-		31		369
- India		15		123		355		10		240		743
- Indonesia		(9	)	66		110		-		11		178
- mainland China		(72	)	68		456		(3	)	2,158		2,607
- Malaysia		65		65		172		-		53		355
- Singapore		107		43		170		42		77		439
- Taiwan		24		10		102		(1	)	13		148
- other		81		280		392		(1	)	119		871
Middle East and North Africa		20		290		652		-		541		1,503
- Egypt		58		104		213		-		79		454
- UAE		83		94		298		-		5		480
- Saudi Arabia		1		-		-		-		434		435
- other		(122	)	92		141		-		23		134
North America		64		648		259		90		(876	)	185
- US		(28	)	336		86		67		(932	)	(471	)
- Canada		46		292		155		-		47		540
- other		46		20		18		23		9		116
Latin America		(136	)	59		309		9		(1,822	)	(1,581	)
- Mexico		94		84		79		5		(15	)	247
- other		(230	)	(25	)	230		4		(1,807	)	(1,828	)
- of which: Brazil		(281	)	(139	)	176		4		(1,836	)	(2,076	)
Year ended 31 Dec 2016		4,587		6,046		5,440		(3,328	)	(5,633	)	7,112

For footnotes, see page 67.

Other information
	Page
Funds under management and assets held in custody	68
Taxes paid by region and country/territory	68
Conduct-related matters	69
Carbon dioxide emissions	69

Funds under management and assets held

in custody

Funds under management
		2018		2017
	Footnotes	$bn		$bn
Funds under management	77
At 1 Jan		943		831
Net new money		22		2
Value change		(37	)	77
Exchange and other		(29	)	33
Disposals		-		-
At 31 Dec		899		943
Funds under management by business
Global Asset Management		444		462
Global Private Banking		241		258
Affiliates		4		4
Other		210		219
At 31 Dec		899		943

For footnotes, see page 67.

Funds under management ('FuM') represents assets managed, either actively or passively, on behalf of our customers. At 31 December 2018, FuM amounted to $899bn, a decrease of 5% primarily reflecting adverse market performance together with adverse foreign exchange movements.

Global Asset Management FuM decreased by 4% to $444bn compared with 31 December 2017. The reduction primarily reflected adverse foreign exchange movements, together with adverse market performance of $14bn. This was partly offset by net new money, primarily from money market solutions across all regions.

GPB FuM decreased by 7% to $241bn compared with 31 December 2017. The reduction reflected adverse market movements of $17bn, together with adverse foreign exchange. This was partly offset by positive net new money, mainly in Hong Kong.

Other FuM, of which the main element is a corporate trust business in Asia, decreased by 4% to $210bn.

Assets held in custody⁷⁷ and under administration

Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. At 31 December 2018, we held assets as custodian of $7.4tn, 4% lower than the $7.7tn held at 31 December 2017. This decrease was mainly driven by adverse foreign exchange movements in Europe and Asia together with adverse market movements in Asia, which was partly offset by incremental assets under custody in North America.

Our Assets Under Administration business, which includes the provision of bond and loan administration services and the valuation of portfolios of securities and other financial assets on behalf of clients, complements the custody business.

At 31 December 2018, the value of assets held under administration by the Group amounted to $3.5tn, which was 2% lower than the $3.6tn held at 31 December 2017. This decrease was mainly driven by adverse foreign exchange movements which were partly offset by a net inflow of new assets in Europe and Asia.

Taxes paid by region and country/territory

The following table reflects a geographical view of HSBC's operations.

Taxes paid by HSBC relate to HSBC's own tax liabilities including tax on profits earned, employer taxes, bank levy and other
duties/levies such as stamp duty. Numbers are reported on a cash flow basis.

Taxes paid by country/territory
	2018		2017		2016
	$m		$m		$m
Europe	3,398		3,340		3,151
- UK	2,693		2,654		2,385
of which: HSBC Holdings	832		1,078		1,253
- France	536		530		553
- Germany	111		140		124
- Switzerland	13		(67	)	34
- other	45		83		55
Asia	2,742		2,277		2,755
- Hong Kong	1,398		1,043		1,488
- Australia	140		142		147
- mainland China	235		227		241
- India	384		297		315
- Indonesia	44		84		46
- Malaysia	94		81		99
- Singapore	88		64		85
- Taiwan	53		42		35
- other	306		297		299
Middle East and North Africa	234		419		293
- Saudi Arabia	-		170		60
- UAE	67		101		89
- Egypt	104		58		97
- other	63		90		47
North America	399		317		276
- US	162		134		135
- Canada	240		182		141
- other	(3	)	1		-
Latin America	281		443		965
- Mexico	90		129		79
- other	191		314		886
of which: Brazil	28		36		658
Year ended 31 Dec	7,054		6,796		7,440

Conduct-related matters

Conduct-related costs included in significant items
	2018		2017		2016
	$m		$m		$m
Income statement
Net interest income/(expense)	53		(108	)	2
- customer redress programmes	53		(108	)	2
Operating expenses	(780	)	(457	)	(1,584	)
- legal proceedings and regulatory matters	(634	)	198		(1,025	)
- customer redress programmes	(146	)	(655	)	(559	)
Total charge for the year relating to significant items	(727	)	(565	)	(1,582	)
Total provisions utilised during the year	1,759		1,136		2,265
Balance sheet at 31 Dec
Total provisions	1,526		2,595		3,056
- legal proceedings and regulatory matters	872		1,248		2,060
- customer redress programmes	654		1,347		996
Accruals, deferred income and other liabilities	8		20		106

The table above provides a summary of conduct-related costs included in significant items (see pages 38 and 43).

The HSBC approach to conduct is designed to ensure that through our actions and behaviours we deliver fair outcomes for our customers, and do not disrupt the orderly and transparent operation of financial markets. The Board places a strong emphasis on conduct, requiring adherence to high behavioural standards and the HSBC Values. The Board oversight of conduct matters was transitioned to the Group Risk Committee following the demise of the Conduct & Values Committee during the first half of 2018. Additionally the Remuneration Committee also considers conduct and compliance-related matters relevant to remuneration. These committees' reports may be found on pages 161 to 164. For information on initiatives implemented in 2018 to raise our standards in relation to the conduct of our business, see page 84 under 'Conduct of business'.

Provisions relating to significant items raised for conduct costs in 2018 resulted from the ongoing consequences of a small number of historical events.

Operating expenses included significant items related to conduct matters in respect of legal proceedings and regulatory matters of $634m and customer remediation costs mainly in respect of the mis-selling of payment protection insurance of $172m. For further details on payment protection insurance and legal proceedings and regulatory matters, see Notes 27 and 35 on the Financial Statements, respectively.

Carbon dioxide emissions

We report our carbon emissions with reference to the GHG Protocol including the amendments to Scope 2 Guidance, which incorporate market-based emission methodology. We report carbon dioxide emissions resulting from energy use in our buildings and employees' business travel.

In 2018, we collected data on energy use and business travel for our operations in 28 countries and territories, which accounted for approximately 93% of our full-time employees ('FTEs'). To estimate the emissions of our operations in countries and territories where we have operational control and a small presence, we scale up the emissions data from 93% to 100%.

We then apply emission uplift rates to reflect uncertainty concerning the quality and coverage of emission measurement and estimation. The rates are 4% for electricity, 10% for other energy and 6% for business travel. This is consistent both with the Intergovernmental Panel on Climate Change's Good Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories and our internal analysis of data coverage and quality.

Carbon dioxide emissions in tonnes
	2018	2017
Total	559,000	580,000
From energy	437,000	473,000
From travel	122,000	107,000

Carbon dioxide emissions in tonnes per FTE
	2018	2017
Total	2.39	2.49
From energy	1.87	2.03
From travel	0.52	0.46

The reduction in our carbon emissions continues to be driven by energy efficiency initiatives, as well as our procurement of electricity from renewable sources under power purchase agreements. Travel emissions increased due to improved business travel data collection.

Our greenhouse gas reporting year runs from October to September. For the year from 1 October 2017 to 30 September 2018, carbon dioxide emissions from our global operations were 559,000 tonnes. Independent assurance of our carbon dioxide emissions will be available in the first half of 2019 on our website.

Footnotes to strategic report, financial summary, global businesses, geographical regions and other information
1	The Group has adopted the EU's regulatory transitional arrangements for IFRS 9 'Financial Instruments'. These apply to reported and adjusted RWAs, regulatory capital and related ratios for 2018 throughout the Annual Report and Accounts, unless otherwise stated.
2	Full-time equivalent staff.
3	Recognised by Euromoney Awards for Excellence 2018.
4	Source: Greenwich Associates - Large Corporate Banking; percentage of large corporates choosing HSBC as their lead international bank.
5	Revenue from international clients is derived from an allocation of adjusted revenue based on internal management information. International clients are businesses and individuals with an international presence.
6	Adjusted basis, geographical view; Group total and regional percentage composition excludes Holdings; regional percentage composition calculated with regional figures that include intra-Group revenue.
7	Our wealth business in Asia includes our asset management business in Asia, our insurance business in Asia, our private banking business Asia and the wealth portion of our RBWM business in Asia.
8	Source for market data is Bank of England mortgage data.
9	Both digital metrics include the following markets: the UK (excluding M&S Bank and John Lewis Finance customers), Hong Kong (excluding Hang Seng customers), Mexico, Malaysia, Singapore, UAE, mainland China, Canada, Australia, the US, France, India, Indonesia, Turkey, Egypt, Argentina, and Taiwan. Digital sales also include M&S Bank customers in the UK. Digitally active customers are defined as percentage of customers who have logged on to HSBC digital channels at least once in the last 90 days. Percentage of sales include the sales of loans and deposits through digital channels.
10	Eight scale markets are UK, Hong Kong, Pearl River Delta, Singapore, Malaysia, Mexico, UAE and Saudi Arabia.
11	Commitment by 2025.
12	Excluding market impact in Insurance, which constitutes P&L impacts resulting from changes in financial market factors as compared with economic conditions in place at the start of the year.
13	Market shares: Saudi Arabia as of September 2018; UAE as of October 2018; HK, Mexico, PRD and Singapore as of November 2018; UK and Malaysia as of December 2018.
14	Revenue growth from international network includes transaction banking revenue growth and international client revenue growth.
15	Transaction banking includes GLCM, GTRF, Securities Services, and FX.
16	Market share data is as of 3Q 2018.
17	Top-three rank or improvement by two ranks; measured by customer recommendation for RBWM and customer satisfaction for CMB among relevant competitors.
18	Customer satisfaction metrics for Pearl River Delta will be available from 2019, therefore they have been excluded from the assessment. Surveys are based on a relevant and representative subset of the market. Data provided by Kantar.
19	Customer satisfaction metrics for Pearl River Delta will be available from 2019, therefore they have been excluded from the assessment. In HK, Singapore, Malaysia, Mexico and UAE, 2017 CMB performance is based on the bank that the customer defines as their main bank, whereas 2018 CMB performance for these markets is based on the bank that the customer defines as the most important. Surveys are based on a relevant and representative subset of the market. Data provided by RFi Group, Kantar and another third-party vendor.
20	Both digital metrics include the following markets: the UK (excluding M&S Bank and John Lewis Finance customers), Hong Kong (excluding Hang Seng customers), Mexico, Malaysia, Singapore, UAE, mainland China, Canada, Australia, the US, France, India, Indonesia, Turkey, Egypt, Argentina, and Taiwan. Digital sales also include M&S Bank customers in the UK. Digitally active customers are defined as percentage of customers who have logged on to HSBC digital channels at least once in the last 90 days. Percent of sales include the sales of loans and deposits through digital channels.
21	Based on Sustainalytics.
22	Costs relating to 'Settlements and provisions in connection with legal and regulatory matters', a significant item in 2018 includes a 1Q18 provision in relation to the US Department of Justice's ('DoJ') civil claims relating to its investigation of HSBC's legacy residential mortgage-backed securities origination and securitisation activities from 2005 to 2007. Refer to Note 35 'Legal proceedings and regulatory matters' for further details.
23	'Other personal lending' includes personal non-residential closed-end loans and personal overdrafts.
24	'Investment distribution' includes Investments, which comprises mutual funds (HSBC manufactured and third party), structured products and securities trading, and Wealth Insurance distribution, consisting of HSBC manufactured and third-party life, pension and investment insurance products.
25	'Other' mainly includes the distribution and manufacturing (where applicable) of retail and credit protection insurance.
26	Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions, also referred to as revenue.
27	Adjusted return on average risk-weighted assets ('Adjusted RoRWA') is a measure used to assess the performance of RBWM, CMB, GB&M and GPB. Adjusted RoRWA is calculated using profit before tax and reported average risk-weighted assets at constant currency adjusted for the effects of significant items.
28	'Markets products, Insurance and Investments and Other' includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and global banking products.
29	From 1 January 2018, the qualifying components according to IFRS 7 'Financial Instruments: Disclosures' of fair value movements relating to changes in credit spreads on structured liabilities, were recorded through other comprehensive income. The residual movements remain in credit and funding valuation adjustments, and comparatives have not been restated.
30	'Other' in GB&M includes net interest earned on free capital held in the global business not assigned to products, allocated funding costs and gains resulting from business disposals. Within the management view of adjusted revenue, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities which is not reflected within operating income; for example, notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offsets to these tax credits are included within 'Other'.
31	Under the old revenue allocation, the 2017 results would have been: Global Markets: $6,840m; FICC: $5,555m; FX: $2,587m; Rates:$2,037m; Credit: $931m; Equities: $1,285m; Securities Services: $1,762m; Global Banking: $3,858m; GLCM: $2,199m; GTRF: $703m; Principal Investments: $322m; Credit and funding valuation adjustments: $(267)m; Other revenue: $(132)m. 2016 numbers have not been re-presented on the new basis.
32	Corporate Centre comprises Central Treasury, including Balance Sheet Management ('BSM'), our legacy businesses, interests in our associates and joint ventures, central stewardship costs and the UK bank levy.
33	Central Treasury includes revenue relating to BSM of $2.5bn (2017: $2.7bn; 2016: $3.0bn), interest expense of $1,267m (2017: $888m; 2016: $707m) and adverse valuation differences on issued long-term debt and associated swaps of $313m (2017: gain of $120m; 2016: loss of $271m). Revenue relating to BSM includes other internal allocations, including notional tax credits to reflect the economic benefit generated by certain activities, which is not reflected within operating income, for example notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offsets to these tax credits are included in other Central Treasury.
34	Other miscellaneous items in Corporate Centre includes internal allocations relating to Legacy Credit.
35	Complaint figures for 2017 restated and weighted by country volumes.
36	OECD, IEA, Investing in Climate, Investment in Growth, July 2017. The OECD estimates that for infrastructure to be consistent with a 2°C scenario, investment needs to amount to $6.9tn per year in the next 15 years, an increase of about 10% in total infrastructure investment from the reference estimate of $6.3tn.
37	Amounts shown in table include green and other sustainable finance loans, which support the transition to the low-carbon economy. The methodology for the quantification of our exposure to higher transition risk sectors will evolve over time as more data becomes available and is incorporated in our risk management systems and processes. Counterparties are allocated to the higher transition risk sectors via a two-step approach: 1 - Where the main business of a group of connected counterparties is in a higher transition risk sector all lending to the group is included irrespective of the sector of each individual obligor within the group. 2 - Where the main business of a group of connected counterparties is not in a higher transition risk sector only lending to individual obligors in the higher transition risk sectors is included. As a result of this methodology, this metric is not directly comparable to other financial statement disclosures.
38	60% of the 2012 annual incentive for Stuart Gulliver and Iain Mackay disclosed in the 2012 Directors' remuneration report was deferred for five years. The vesting of these awards was subject to a service condition and satisfactory completion of the five-year deferred prosecution agreement ('AML DPA') with the US Department of Justice ('DoJ'). The AML DPA condition was satisfied in March 2018 and the awards were released to the executive Directors. For Marc Moses the value of the award attributable to services provided as an executive Director between 1 January 2014 and the vesting date has been included in the table.
39	The first long-term incentive ('LTI') award was made in February 2017, with a performance period ending in 2019. Vesting of the first LTI award will be included in the single figure of remuneration table for the financial year ending 31 December 2019.
40	John Flint succeeded Stuart Gulliver as Group Chief Executive with effect from 21 February 2018 and his remuneration in the single figure table of remuneration is in respect of services provided as an executive Director. For services rendered between 1 January 2018 and 20 February 2018, he received salary of £97,138, fixed pay allowance of £130,236, cash in lieu of pension of £27,999 and an annual incentive award of £272,000.
41	Stuart Gulliver stepped down from the Board on 20 February 2018 and retired from the Group on 11 October 2018. His remuneration in the single figure table of remuneration is in respect of services provided as an executive Director.
42	Iain Mackay stepped down as executive Director and Group Finance Director on 31 December 2018.
43	To meet regulatory deferral requirements for 2018, 60% of the annual incentive award of Stuart Gulliver and Iain Mackay will be deferred in awards linked to HSBC's shares and and will vest in five equal instalments between the third and seventh anniversary of the grant date. On vesting, the awards will be subject to a one-year retention period. The deferred awards are subject to the executive Director maintaining a good leaver status during the deferral period.
44	Prior to 2018, foreign exchange exposure on some financial instruments designated at fair value was presented in the same line in the income statement as the underlying fair value movement on these instruments. In 2018, we grouped the entire effect of foreign exchange exposure in the profit and loss and presented it within 'Net trading activities' in 'Net income from financial instruments held for trading or managed on a fair value basis'. Comparative data has been re-presented. There is no net impact on total operating income and the impact on 'changes in fair value of long-term debt and related derivatives' in 2017 was $(517)m, 2016: $1,978m, 2015: $110m and 2014: $130m.
45	The classification and measurement requirements under IFRS 9, which was adopted from 1 January 2018, are based on an entity's assessment of both the business model for managing the assets and the contractual cash flow characteristics of the assets. The standard contains a classification for items measured mandatorily at fair value through profit or loss as a residual category. Given its residual nature, the presentation of the income statement has been updated to separately present items in this category, which are of a dissimilar nature or function, in line with IAS 1 'Presentation of financial statements' requirements. Comparative data has been re-presented. There is no net impact on total operating income.
46	Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of, or for, that year.
47	Dividends per ordinary share expressed as a percentage of basic earnings per share.
48	Return on average risk-weighted assets is calculated using profit before tax and reported average risk-weighted assets.
49	Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA').
50	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 liabilities.
51	Net interest margin is net interest income expressed as an annualised percentage of AIEA.
52	Interest income on trading assets is reported as 'Net income/(expense) from financial instruments held for trading or managed on a fair value basis' in the consolidated income statement.
53	Interest income on financial assets designated and otherwise mandatorily measured at fair value is reported as 'Net income/(expense) from financial instruments designated at fair value' in the consolidated income statement.
54	Including interest-bearing bank deposits only.
55	Interest expense on financial liabilities designated at fair value is reported as 'Net income on financial instruments designated at fair value' in the consolidated income statement, other than interest on own debt, which is reported in 'Interest expense'.
56	Including interest-bearing customer accounts only.
57	Trading income also includes movements on non-qualifying hedges. These hedges are derivatives entered into as part of a documented interest rate management strategy for which hedge accounting was not, nor could be, applied. They are principally cross-currency and interest rate swaps used to economically hedge fixed-rate debt issued by HSBC Holdings, and up until May 2016 to economically hedge floating rate debt issued by HSBC Finance. The size and direction of the changes in the fair value of non-qualifying hedges that are recognised in the income statement can be volatile from year-to-year, but do not alter the cash flows expected as part of the documented interest rate management strategy for both the instruments and the underlying economically hedged assets and liabilities if the derivative is held to maturity.
58	2018 ECL are prepared on an IFRS 9 basis and 2017/2016 LICs are prepared on an IAS 39 basis and are not comparable.
59	Net of impairment allowances.
60	Capital resources are regulatory capital, the calculation of which is set out on page 148.
61	Including perpetual preferred securities, details of which can be found in Note 28 on the Financial Statements.
62	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. The comparative for 2015 have been re-presented to align with this definition.
63	Others include items with no currency information available ($10,351m for loans to banks, $64,999m for loans to customers, nil for deposits by banks and $29m for customer accounts).
64	Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.
65	Excludes items where there are substantial offsets in the income statement for the same year.
66	'Fair value movements on financial instruments' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt ('own credit spread'). This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, the effects of changes in those liabilities' credit risk is presented in other comprehensive income. These requirements were adopted in the separate financial statements of HSBC Holdings plc on 1 January 2016. Refer to HSBC Holdings plc Annual Report and Accounts 2017 'Compliance with International Financial Reporting Standards' on page 186 for further detail.
67	The results presented for insurance manufacturing operations are shown before elimination of intercompany transactions with HSBC non-insurance operations.
68	The effect on the Insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in a reduction in adjusted revenue in 2018 of $29m and a reduction in PBT in 2018 of $27m. These effects are recorded in 'all global businesses', within Corporate Centre.
69	'Client assets' are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately. The components of client assets were funds under management ($241bn at 31 December 2018), which were not reported on the Group's balance sheet, and customer deposits ($68bn at 31 December 2018), of which $65bn was reported on the Group's balance sheet and $3bn were off-balance sheet deposits.
70	Client assets related to our Middle East clients are booked across to various other regions, primarily in Europe.
71	'Other income' in this context comprises where applicable net income/expense from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.
72	Risk-weighted assets are non-additive across geographical regions due to market risk diversification effects within the Group.
73	Amounts are non-additive across geographical regions due to intercompany transactions within the Group.
74	Europe's adjusted 2018 loss of $40m includes a number of items incurred centrally on behalf of the Group as a whole, but which are disclosed in the Europe segment, including consolidation adjustments and Holdings costs such as interest costs on Group debt and the UK bank levy.
75	Excludes intra-Group dividend income.
76	For the purposes of the analysis of reported results by country/territory table, HSBC Holdings profit/(loss) is presented excluding the effect of the early adoption of the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value', which was early adopted in the separate financial statements of HSBC Holdings but not in the consolidated financial statements of HSBC.
77	Funds under management and assets held in custody are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager, and these assets are consolidated as Structured entities (see Note 20 on the Financial Statements).

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