FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
For the month of October 2020

Commission File Number: 001-14930

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


 
This Report on Form 6-K with respect to our quarterly results for the three-month and nine month period ended September 30, 2020 is hereby incorporated by reference in the following HSBC Holdings plc registration statements: Registration Statements on Form F-3 (Nos. 333-92024, 333-135007, 333-158065, 333-180288, 333-202420, 333-223191) and Registration Statement on Form F-4 (No. 333-126531).

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



image1.jpg
27 OCTOBER 2020
HSBC HOLDINGS PLC
3Q20 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
“These were promising results against a backdrop of the continuing impacts of Covid-19 on the global economy. I'm pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment. We are accelerating the transformation of the Group, moving our focus from interest-rate sensitive business lines towards fee-generating businesses, and further reducing our operating costs. We also intend to increase our rate of investment in Asia, particularly in wealth, the Greater Bay Area, south Asia, trade finance and sustainable finance.
The Group’s capital and liquidity ratios strengthened further in the quarter despite the challenging economic conditions. A decision on whether to pay a dividend for the 2020 financial year will depend on economic conditions in early 2021, and be subject to regulatory consultation. We will seek to pay a conservative dividend if circumstances allow.”
Financial performance (vs. 3Q19)
•Reported profit after tax down 46% to $2.0bn and reported profit before tax down 36% to $3.1bn, mainly from lower revenue. Results in 3Q20 included our share of an impairment of goodwill by our associate, The Saudi British Bank ('SABB'), of $0.5bn. Adjusted profit before tax down 21% to $4.3bn.
•Our operations in Asia continued to perform resiliently with reported profit before tax in 3Q20 of $3.2bn, despite interest rate headwinds.
•Reported revenue down 11% to $11.9bn, reflecting the impact of interest rate reductions on our deposit franchises across all global businesses, partly offset by favourable market impacts in life insurance manufacturing. Reported revenue was also partly offset by a favourable movement in credit and funding valuation adjustments and higher revenue in Global Markets.
•Net interest margin ('NIM') of 1.20%, down 36 basis points ('bps') from 3Q19. NIM was down 13bps from 2Q20, reflecting the continuing impact of interest rate reductions due to the Covid-19 outbreak.
•Reported expected credit losses and other credit impairment charges (‘ECL’) down $0.1bn to $0.8bn. The 3Q20 charge reflected a stabilisation of the forward economic outlook from 2Q20, while wholesale stage 3 charges were in part offset by increased releases related to historical default cases.
•Reported operating expenses down 1% and adjusted operating expenses down 3%, despite continued investment, due to the impact of our cost-saving initiatives, reduced discretionary expenditure and a lower performance-related pay accrual.
•Common equity tier 1 capital (‘CET1’) ratio of 15.6%, up 0.6% from 15.0% at 2Q20, reflecting a decrease in RWAs (on a constant currency basis), capital generation through profits and foreign currency translation differences.
Financial performance (vs. 9M19)
•Reported profit after tax down 62% to $5.2bn and reported profit before tax down 57% to $7.4bn from higher ECL and lower revenue, partly offset by a fall in operating expenses. Reported results included a $1.3bn impairment of software intangibles and the non-recurrence of an $828m dilution gain in 9M19. Adjusted profit before tax down 44% to $9.9bn.
•Reported revenue down 9% to $38.7bn, primarily due to the progressive impact of interest rate reductions across our global businesses, in part offset by higher revenue in Global Markets. Adjusted revenue down 6% to $38.5bn.
•Reported ECL up $5.6bn to $7.6bn, mainly due to the impact of the Covid-19 outbreak and the forward economic outlook. Allowance for ECL on loans and advances to customers up from $8.7bn at 31 December 2019 to $13.7bn at 30 September 2020.
•Reported operating expenses down 3% and adjusted operating expenses down 4%, as a reduction in the performance-related pay accrual and lower discretionary expenditure more than offset the impact of continued investment.
Outlook
•Geopolitical risk, particularly relating to trade and other tensions between the US and China, remains heightened. There also remains uncertainty regarding the UK's withdrawal from the European Union ('EU'). Trade talks between the UK and the EU are ongoing and there remains a possibility that there may not be a trade deal agreed by the end of 2020.
•We expect lower global interest rates to continue to put pressure on net interest income. Based on current interest rates, we expect further net interest income headwinds in 4Q20, with some stabilisation as we move into 2021.
•Our ECL charge for 2020 is currently trending towards the lower end of the $8bn to $13bn range. This latest guidance, which continues to be subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assumes that the likelihood of further significant deterioration in the current economic outlook is low, and that stage 3 impairments from now until the end of 2020 are broadly in line with the average quarterly charge for the year to date.
•We expect to reduce the Group's 2022 annual cost base beyond our original $31bn target, through exceeding our $4.5bn gross cost savings target. We expect to incur more than $6bn in ‘cost to achieve’ expenditure to generate these saves.
•We expect to exceed our $100bn gross risk-weighted asset ('RWA') reduction target by the end of 2022. This is expected to allow more resources to be allocated to areas of competitive advantage, higher returns and growth.
•We intend to provide a more detailed and updated transformation plan at our 2020 full-year results, as we finalise our work on costs, capital and RWA deployment. We also intend to provide an update on our medium-term financial targets.
•Based on our results for 2020 and our forecasts for 2021, the Board will consider whether to pay a conservative dividend for 2020. Any such dividend would be dependent on the economic outlook in early 2021, and be subject to regulatory consultation. A final determination is expected to be made and communicated in February 2021 with our 2020 full-year results. We also expect to communicate our revised policy for dividends for 2021 and beyond at the same time.







Earnings Release – 3Q20
Key financial metrics
Nine months endedQuarter ended
30 Sep30 Sep30 Sep30 Jun30 Sep
Footnotes20202019202020202019
Reported results
Reported revenue ($m)38,672 42,727 11,927 13,059 13,355 
Reported profit before tax ($m)7,392 17,244 3,074 1,089 4,837 
Reported profit after tax ($m)5,164 13,732 2,039 617 3,795 
Profit attributable to the ordinary shareholders of the parent company ($m)3,336 11,478 1,359 192 2,971 
Cost efficiency ratio (%)63.5 59.2 67.4 66.4 61.0 
Basic earnings per share ($)0.17 0.570.07 0.01 0.15 
Diluted earnings per share ($)0.16 0.570.07 0.01 0.15 
Net interest margin (%)1.351.59 1.20 1.33 1.56 
Alternative performance measures
Adjusted revenue ($m)38,54241,162 12,065 13,433 13,347 
Adjusted profit before tax ($m)9,93917,693 4,304 2,596 5,418 
Adjusted cost efficiency ratio (%)58.056.7 61.4 55.4 57.0 
Expected credit losses and other credit impairment charges (‘ECL’) (annualised) as % of average gross loans and advances to customers (%)0.96 0.25 0.30 1.49 0.32 
Return on average ordinary shareholders' equity (annualised) (%)2.7 9.2 3.2 0.5 7.0 
Return on average tangible equity (annualised) (%)13.5 9.5 2.9 3.5 6.4 
At
30 Sep30 Jun31 Dec
Footnotes202020202019
Balance sheet
Total assets ($m)2,955,935 2,922,798 2,715,152 
Net loans and advances to customers ($m)1,041,340 1,018,681 1,036,743 
Customer accounts ($m)1,568,714 1,532,380 1,439,115 
Average interest-earning assets, year to date ($m)2,070,703 2,034,939 1,922,822 
Loans and advances to customers as % of customer accounts (%)66.4 66.5 72.0 
Total shareholders’ equity ($m)191,904 187,036 183,955 
Tangible ordinary shareholders’ equity ($m)152,260147,879144,144
Net asset value per ordinary share at period end ($)2,38.418.17 8.00 
Tangible net asset value per ordinary share at period end ($)37.557.34 7.13 
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)415.6 15.0 14.7 
Risk-weighted assets ($m)4857,024 854,552 843,395 
Total capital ratio (%)421.2 20.7 20.4 
Leverage ratio (%)45.4 5.3 5.3 
High-quality liquid assets (liquidity value) ($bn)654 654 601 
Liquidity coverage ratio (%)147 148 150 
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions)20,17320,162 20,206 
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)20,22720,19820,280
Average basic number of $0.50 ordinary shares outstanding (millions)520,164 20,162 20,158 
Dividend per ordinary share (in respect of the period) ($)5— — 0.30 
1    Annualised profit attributable to ordinary shareholders, excluding impairment of goodwill and other intangible assets and changes in present value of in-force insurance contracts (‘PVIF’) (net of tax), divided by average ordinary shareholders’ equity excluding goodwill, PVIF and other intangible assets (net of deferred tax).
2    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.
3    Excludes impact of $0.10 per share dividend in 1Q19, following a June 2019 change in accounting practice on the recognition of interim dividends, from the date of declaration to the date of payment.
4    Unless otherwise stated, regulatory capital ratios and requirements are calculated in accordance with the transitional arrangements of the Capital Requirements Regulation in force in the EU at the time, including the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’ in article 473a. The capital ratios and requirements are reported in accordance with the revised Capital Requirements Regulation and Directive (‘CRR II’), as implemented. Leverage ratios are calculated using the end point definition of capital and the IFRS 9 regulatory transitional arrangements.
5    For these metrics, 31 December 2019 is calculated on a full-year basis.
2
HSBC Holdings plc Earnings Release 3Q20

Contents
Page
Page
HighlightsCredit risk
Key financial metricsCapital adequacy
Business highlightsLeverage
Approach to risk managementRisk-weighted assets
Geopolitical and macroeconomic risksSummary information – global businesses
Adjusted performanceReconciliation of reported and adjusted risk-weighted assets
Financial performanceSummary information – geographical regions
Cautionary statement regarding forward-looking statementsDividend on preference shares
Summary consolidated income statementTerms and abbreviations
Summary consolidated balance sheet
HSBC Holdings plc will be conducting a trading update conference call with analysts and investors today to coincide with the publication of its Earnings Release. The call will take place at 07.30am GMT. Details of how to participate in the call and the live audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in
64 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of $2,956bn at 30 September 2020, HSBC is one of the world’s largest banking and financial services organisations.
Business highlights
On 18 February, the Group announced a substantial transformation programme designed to ensure HBSC is fit for the future, with plans to reshape underperforming businesses, simplify the organisation and reduce costs. During the third quarter, we continued to make progress with this programme, including further reducing RWAs in our Global Banking and Markets ('GBM') business. In addition, we continued to increase investments in technology to improve the customer experience and efficiency, including a new digital multi-currency wallet, launched in Singapore for our Global Liquidity and Cash Management customers. Also, we launched VisionGo in Hong Kong, a digital community platform for small businesses and entrepreneurs, which has already attracted over 8,000 members.
However, given the significant changes in the operating environment, we intend to accelerate the transformation of the Group. We expect to reduce the Group's 2022 annual cost base beyond our original $31bn target, while sustaining investment in our focus areas. We also expect to exceed our target to reduce RWAs by $100bn in low-returning areas. This is expected to allow more resources to be allocated to areas of competitive advantage, higher returns and growth. We are finalising our work on costs, capital and RWA deployment and intend to provide a more detailed and updated transformation plan with our full-year results in February 2021.
We are continuing with the strategic review of our retail banking operations in France and we will provide an update on our plans at or before our 2020 full-year results.
In the US, the management team is making good progress in executing the current business plan at pace. RWAs in our US business at 3Q20 were 8% lower than at 3Q19. In addition, full-time equivalent staff ('FTE') were 9% lower than at 31 December 2019 and 80 US retail branches have been successfully closed and consolidated. However, given the current economic climate, we are pursuing options to accelerate the transformation of this business and intend to provide an update at our 2020 full-year results.
Approach to risk management
We have in place a comprehensive risk management framework. We operate our own wide-ranging stress testing programme, as well as regulatory driven stress tests, to assess risk impacts of severe, adverse, but plausible events at legal entity, regional and overall Group levels. This stress testing programme is a key part of our capital and liquidity risk management and planning. Stress testing provides management with key insights into the potential impacts of, and mitigants to, severely adverse events on the Group, and provides information to regulators on the Group's financial stability. Given the nature of the Covid-19 crisis, additional mitigating actions may be required.
At 30 September 2020, our CET1 ratio was 15.6%, compared with 14.7% at 31 December 2019, and our liquidity coverage ratio ('LCR') was 147%. Our capital, funding and liquidity positions are expected to help us to continue supporting our customers throughout the current geopolitical and macroeconomic uncertainty.
Geopolitical and macroeconomic risks
The Group’s results and outlook continue to be impacted by developments in the external risk environment, including the items referred to below, which detail the key developments in the third quarter of 2020. For further information on the risks that the Group faces, see pages 76 to 83 of the Annual Report and Accounts 2019 and pages 50 to 54 of the Interim Report 2020.
Geopolitical risk to our operations and portfolios
US-China tensions remain heightened. In June 2020, the National People's Congress of China enacted the Hong Kong national security law. In response, among other steps, the US President signed into law the Hong Kong Autonomy Act, and issued Executive Order 13936, providing authority to impose sanctions against entities and individuals determined to have undermined Hong Kong’s autonomy.
The Hong Kong Autonomy Act also provides authority to impose secondary sanctions against non-US financial institutions determined to have knowingly conducted a significant transaction for any individual or entity subject to primary sanctions under the act.
HSBC Holdings plc Earnings Release 3Q20
3

Earnings Release – 3Q20
On 7 August, the US Department of Treasury imposed sanctions on 11 individuals under Executive Order 13946. Following this, on 14 October 2020, the US State Department released the list of ‘Foreign Persons Materially Contributing to the Failure of the PRC To Meet Its Obligations Under the Joint Declaration and Basic Law’ as required under the Hong Kong Autonomy Act, which largely overlapped with the list of persons already designated under Executive Order 13936. Further individuals or entities could be identified under Executive Order 13936 and/or the Hong Kong Autonomy Act. We are reviewing the operational impact of these developments. Pursuant to the Hong Kong Autonomy Act, within 30 to 60 days following the publication of the 14 October list, the US State Department is expected to publish a second report listing any non-US financial institutions that have knowingly conducted a significant transaction for any individual or entity named in the 14 October report. This report is the basis for the potential imposition of secondary sanctions. In addition, the forthcoming US presidential election is creating further geopolitical uncertainty.
Investor and business sentiment in some sectors in Hong Kong remains dampened and ongoing tensions could result in an increasingly fragmented trade and regulatory environment. The retail and leisure sectors also remain particularly affected by a decrease in tourism, resulting from both ongoing tensions and the Covid-19 pandemic. However, the financial services sector in Hong Kong has remained strong and has benefited from stable liquidity conditions.
The financial impact to the Group of geopolitical risks in Asia is heightened due to the strategic importance of the region, and Hong Kong in particular, in terms of profitability and prospects for growth. We continue to monitor the situation.
Risks related to Covid-19
After an initial decrease in levels of Covid-19 in the third quarter in many regions, further waves of infections are now emerging. While governments in some countries and territories have continued to ease the broad restrictions that had been imposed to limit the spread of Covid-19, social distancing and tight border restrictions remain commonplace, and are limiting the extent and pace of economic recovery.
The Covid-19 outbreak has led to a significant weakening in GDP in many of our markets, although regions and sectors have rebounded to differing levels from their previous low points. Economic consensus forecasts have stabilised in recent months and monthly changes to the forecasts have become smaller, while notably the consensus forecast for UK GDP for 2020 deteriorated in September 2020. However, the economic consensus forecasts for key markets continue to predict a 'V-shaped' recovery in 2021, albeit there is wide dispersion in forecast expectations.
While the longer-term effects of the outbreak on businesses are uncertain, we believe HSBC's financial position allows us to continue to help support our customers. The management of capital and liquidity remains a key focus area and is being continually monitored both at Group and entity levels.
The nature and scale of the Covid-19 crisis has necessitated strong responses from governments, central banks and regulators, and the outbreak has also resulted in changes in the behaviours of our retail and wholesale customers. These factors have impacted the performance of our expected credit loss models, requiring enhanced monitoring of model outputs and use of compensating controls, specifically model adjustments based on the credit expert judgement of senior risk managers. In addition, we have built up our operational capacity rapidly in response to government and central bank support measures aimed at combating the impacts of the Covid-19 outbreak, and have been responding to complex conduct considerations and heightened risk of fraud related to these programmes.
UK withdrawal from the European Union
The UK left the EU on 31 January 2020 and entered a transition period until 31 December 2020. During the transition period, the UK continues to be bound by EU laws and regulations. Beyond that date, there is no certainty on what the future relationship between the UK and the EU will be. Trade talks are ongoing and there remains a possibility that there may not be a trade deal agreed by 31 December 2020. This possible outcome is only partly reflected in our probability-weighted ECL at 3Q20 and, therefore, there is a risk of additional ECL charges, particularly in the UK in 4Q20, if the UK and the EU fail to reach a trade agreement.
Our global presence and diversified customer base is expected to help mitigate the direct impacts on our financial position in a scenario where the transition period ends without a UK-EU trade agreement being in place. Our existing footprint in the EU, and in particular our French subsidiary, provides a strong foundation for us to build upon, which will be retained regardless of the outcome of our strategic review of our retail banking operations in France. As part of our stress testing programme, a number of internal macroeconomic and event-driven scenarios were assessed to support our planning for, and evaluation of, the impact of the UK’s withdrawal from the EU without a trade agreement. These stress scenarios incorporate risks associated with the UK withdrawal from the EU and the impact of the Covid-19 outbreak. As part of this analysis, HSBC Bank plc, our non-ring-fenced bank in Europe, and HSBC UK Bank plc, our ring-fenced bank in Europe, have also considered a range of internal strategic management actions to further support our ability to withstand potential shocks. However, the prospect of exiting the transition period without a trade agreement is likely to increase market volatility and economic risk, particularly in the UK, which could adversely impact our profitability and prospects for growth in this market.
Market environment
Central banks have reduced interest rates in most financial markets due to the adverse impact on the timelines and the path for economic recovery from the Covid-19 outbreak, which has in turn increased the likelihood of negative interest rates. This raises a number of risks and concerns, such as the readiness of our systems and processes to accommodate zero or negative rates, the resulting impacts on customers, regulatory constraints and the financial implications given the significant impact that prolonged low interest rates are likely to have on our net interest income. For some products, we have floored deposit rates at zero or made decisions not to charge negative rates. This, alongside loans repriced at lower rates, will result in our commercial margins being compressed, which is expected to be reflected in our profitability. The pricing of this risk will need to be carefully considered. These factors may challenge the long-term profitability of the banking sector, including HSBC, and will be considered as part of the Group’s transformation programme.
4
HSBC Holdings plc Earnings Release 3Q20
    

Implications on our financial performance
The above factors continue to cause disruption to economic activity globally and there could be further adverse impacts on our income due to lower lending and transaction volumes, and lower wealth and insurance manufacturing revenue due to equity market volatility. Lower interest rates globally will negatively impact net interest income and increase the cost of guarantees for insurance manufacturing. There could also be adverse impacts on other assets, such as our investment in Bank of Communications Co., Limited ('BoCom'), given the difference between the fair value and the carrying value of that investment. The excess of the value-in-use of BoCom and its carrying value has reduced over the period, increasing the risk of impairment in the future.
There may also be material balance sheet impacts. These may include downward customer credit rating migration, which could negatively impact our RWAs and capital position, and potential liquidity impacts due, among other factors, to increased customer drawdowns, notwithstanding the significant initiatives that governments and central banks have put in place to support the economy following the Covid-19 outbreak.
Adjusted performance
Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort period-on-period comparisons.
We consider adjusted performance to provide useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US dollar against most major currencies. We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and understand better the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 9M20 and 3Q20 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
•the income statements for 9M19 at the average rate of exchange for 9M20;
•the income statements for quarterly periods at the average rates of exchange for 3Q20; and
•the closing prior period balance sheets at the prevailing rates of exchange at 30 September 2020.
No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC’s Argentinian subsidiaries have not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC’s operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.
Significant items
‘Significant items’ refers collectively to the items that management and investors would ordinarily identify and consider separately to improve the understanding of the underlying trends in the business.
The tables on pages 31 to 41 detail the effects of significant items on each of our global business segments and geographical regions during 9M20, 9M19, 3Q20, 2Q20 and 3Q19.
Adjusted performance – foreign currency translation of significant items
The foreign currency translation differences related to significant items are presented as a separate component of significant items. This is considered a more meaningful presentation as it allows better comparison of period-on-period movements in performance.
Global business performance
The Group Chief Executive, supported by the rest of the Group Executive Committee (‘GEC’) (previously the Group Management Board), is considered to be the Chief Operating Decision Maker (‘CODM’) for the purposes of identifying the Group‘s reportable segments.
The Group Chief Executive and the rest of the GEC review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 ‘Operating Segments’. Global business results are assessed by the CODM on the basis of adjusted performance, which removes the effects of significant items and currency translation from reported results. We therefore present these results on an adjusted basis as required by IFRSs. A reconciliation of the Group’s adjusted results to the Group’s reported results is presented below.
Effective from 2Q20, we made the following realignments within our internal reporting to the GEC and CODM:
•We simplified our matrix organisational structure by combining Global Private Banking and Retail Banking and Wealth Management to form Wealth and Personal Banking ('WPB').
•We reallocated our reporting of Balance Sheet Management, hyperinflation accounting in Argentina and Holdings net interest expense from Corporate Centre to the global business.
Comparative data have been re-presented accordingly. Supplementary reconciliations of adjusted to reported results by global business are presented on pages 31 to 36 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that provide breakdowns of adjusted revenue by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed.
HSBC Holdings plc Earnings Release 3Q20
5

Earnings Release – 3Q20
Reconciliation of reported and adjusted results
Nine months endedQuarter ended
30 Sep30 Sep30 Sep30 Jun30 Sep
20202019202020202019
Footnotes$m$m$m$m$m
Revenue
Reported138,672 42,727 11,927 13,059 13,355 
Currency translation(605)279 76 
Significant items(130)(960)138 95 (84)
– customer redress programmes 22 118 48 (26)118 
– disposals, acquisitions and investment in new businesses 8 (823)— 1 4 
– fair value movements on financial instruments2(310)(260)(11)58 (210)
– restructuring and other related costs3150 — 101 58 — 
– currency translation of significant items5 4 4 
Adjusted38,542 41,162 12,065 13,433 13,347 
Change in expected credit losses and other credit impairment charges
Reported (7,643)(2,023)(785)(3,832)(883)
Currency translation92 (118)40 
Adjusted(7,643)(1,931)(785)(3,950)(843)
Operating expenses
Reported(24,568)(25,296)(8,041)(8,675)(8,147)
Currency translation376 (226)(78)
Significant items2,215 1,578 630 1,461 620 
– costs of structural reform4— 126 — — 35 
– customer redress programmes53 1,098 3 49 488 
– impairment of goodwill and other intangibles1,082 — 57 1,025 — 
– restructuring and other related costs51,072 427 567 335 140 
– settlements and provisions in connection with legal and regulatory matters8 (66)3 4 (64)
– currency translation of significant items(7)48 21 
Adjusted(22,353)(23,342)(7,411)(7,440)(7,605)
Share of profit in associates and joint ventures
Reported 931 1,836 (27)537 512 
Currency translation(32)16 7 
Significant items462 — 462 — — 
– impairment of goodwill6462 — 462 — — 
– currency translation of significant items— — — 
Adjusted1,393 1,804 435 553 519 
Profit before tax
Reported 7,392 17,244 3,074 1,089 4,837 
Currency translation(169)(49)45 
Significant items2,547 618 1,230 1,556 536 
– revenue(130)(960)138 95 (84)
– operating expenses2,215 1,578 630 1,461 620 
– share in profit of associates and joint ventures462 — 462 — — 
Adjusted 9,939 17,693 4,304 2,596 5,418 
Loans and advances to customers (net)
Reported 1,041,340 1,017,833 1,041,340 1,018,681 1,017,833 
Currency translation24,480 23,303 24,480 
Adjusted1,041,340 1,042,313 1,041,340 1,041,984 1,042,313 
Customer accounts
Reported 1,568,714 1,373,741 1,568,714 1,532,380 1,373,741 
Currency translation31,188 32,692 31,188 
Adjusted1,568,714 1,404,929 1,568,714 1,565,072 1,404,929 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
4    Comprises costs associated with preparations for the UK’s exit from the European Union.
5    Includes impairment of software intangible assets of $173m (of the total software intangible asset impairment of $1,320m) and impairment of tangible assets of $124m.
6    During the year, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.

6
HSBC Holdings plc Earnings Release 3Q20
    

Financial performance
Distribution of results by global business
Nine months ended
Quarter ended
30 Sep30 Sep30 Sep30 Jun30 Sep
20202019202020202019
$m$m$m$m$m
Adjusted profit/(loss) before tax
Wealth and Personal Banking3,121 6,798 1,426 994 1,973 
Commercial Banking1,360 5,540 1,176 (502)1,631 
Global Banking and Markets3,780 3,960 1,232 1,684 1,223 
Corporate Centre1,678 1,395 470 420 591 
Total9,939 17,693 4,304 2,596 5,418 
Distribution of results by geographical region
Nine months ended
Quarter ended
30 Sep30 Sep30 Sep30 Jun30 Sep
20202019202020202019
$m$m$m$m$m
Reported profit/(loss) before tax
Europe(2,976)(944)84 (2,549)(424)
Asia10,556 14,431 3,187 3,629 4,651 
Middle East and North Africa(326)2,041 (300)(70)305 
North America16 1,045 (7)134 299 
Latin America122 671 110 (55)6 
Total7,392 17,244 3,074 1,089 4,837 
Adjusted profit/(loss) before tax
Europe(1,561)295 398 (1,294)84 
Asia10,568 14,509 3,215 3,742 4,695 
Middle East and North Africa200 1,226 186 (30)303 
North America588 1,101 375 222 319 
Latin America144 562 130 (44)17 
Total
9,939 17,693 4,304 2,596 5,418 
Tables showing adjusted profit before tax by global business and region are presented to support the commentary on adjusted performance on the following pages.
The tables on pages 31 to 41 reconcile reported to adjusted results for each of our global business segments and geographical regions.
Group
3Q20 compared with 3Q19 – reported results
Movement in reported profit before tax compared with 3Q19
Quarter ended
30 Sep30 SepVariance
202020193Q20 vs. 3Q19
$m$m$m%
Revenue11,927 13,355 (1,428)(11)
ECL(785)(883)98 11 
Operating expenses(8,041)(8,147)106 1 
Share of profit from associates and JVs(27)512 (539)(105)
Profit before tax3,074 4,837 (1,763)(36)
Tax expense(1,035)(1,042)7 1 
Profit after tax2,039 3,795 (1,756)(46)

Reported profit
Reported profit after tax of $2.0bn was $1.8bn or 46% lower than in 3Q19.
Reported profit before tax of $3.1bn was $1.8bn or 36% lower, primarily reflecting a reduction in reported revenue. Reported revenue fell mainly from the impact of lower interest rates on our deposit franchises, and lower share of profit from our associate SABB, reflecting our share of an impairment of the goodwill it recognised on the completion of the merger with Alawwal bank in 2019. These factors were in part offset by lower reported operating expenses and a reduction in reported ECL.
Reported profit before tax also included favourable market impacts in life insurance manufacturing in WPB of $126m (3Q19: $225m adverse), favourable credit and funding valuation adjustments in GBM of $32m (3Q19: $160m adverse), and adverse fair value movements on our long-term debt and associated swaps in Corporate Centre of $32m (3Q19: $76m favourable).
Reported revenue
Reported revenue of $11.9bn was $1.4bn or 11% lower than in 3Q19. The reduction primarily reflected lower net interest income as a result of the progressive impact of lower interest rates across our major markets, notably affecting our deposit franchises in WPB and in Global Liquidity and Cash Management ('GLCM') in Commercial Banking ('CMB') and GBM. While we grew average interest-earning assets compared with 3Q19, interest-bearing liabilities also increased. As a result, in conjunction with the rate environment, there
HSBC Holdings plc Earnings Release 3Q20
7

Earnings Release – 3Q20
continued to be downward pressure on NIM, which we expect to continue in future quarters. The reduction in net interest income was partly offset by favourable market impacts in life insurance manufacturing, compared with adverse movements in 3Q19, following a continued recovery of global equity prices after the large reductions in 1Q20.
In addition, revenue increased in GBM, despite lower revenue in GLCM. This was mainly due to a favourable movement in credit and funding valuation adjustments and higher revenue in Global Markets.
There was a net adverse movement in significant items of $0.2bn, which was partly offset by favourable foreign currency translation differences of $0.1bn. The movement in significant items primarily related to fair value movements on financial instruments of $0.2bn. In addition, 3Q20 included restructuring and other related costs of $0.1bn associated with disposal losses related to the RWA reduction commitments we made at our business update in February 2020. We expect to incur additional disposal losses in future quarters as we progress with these reductions.
Reported ECL
Reported ECL were $0.8bn in 3Q20, $0.1bn lower compared with 3Q19. The charge in 3Q20 reflected the significant build up of stage 1 and stage 2 allowances in both 1Q20 and 2Q20 to reflect the worsening forward economic outlook due to the Covid-19 outbreak. In 3Q20, that outlook stabilised, which resulted in stage 1 and stage 2 allowances being broadly unchanged and a significantly lower ECL charge compared with 2Q20. In addition, the stage 3 charge in 3Q20, which primarily related to a small number of wholesale exposures, was partly offset by an increase in releases related to historical defaulted wholesale exposures.
The estimated impact of the Covid-19 outbreak has been incorporated in the ECL through additional scenario analysis, which considered differing severity and duration assumptions relating to the global pandemic. These included probability-weighted shocks to annual GDP and consequential impacts on unemployment and other economic variables, with differing economic recovery assumptions. Given the severity of the macroeconomic projections and the complexities of various government measures, which have never been modelled, additional judgemental adjustments have been made to our provisions.
For further details on the calculation of ECL, including the measurement uncertainties and significant judgements applied to such calculations, the impact of alternative/additional scenarios and post model-adjustments, see page 22.
Reported operating expenses
Reported operating expenses of $8.0bn were $0.1bn or 1% lower than in 3Q19 despite the impact of inflation and continued investment in business growth, including investments in our digital capabilities. This reflected reductions from our cost-saving initiatives, a reduction in discretionary expenditure and a lower performance-related pay accrual.
Significant items were broadly in line with 3Q19. This included:
•a $0.5bn fall in customer redress programme costs, primarily related to the mis-selling of PPI.
This was broadly offset by:
•higher restructuring and other related costs of $0.4bn, including a $0.1bn charge related to the impairment of tangible assets in France and the US; and
•a 3Q20 charge related to the impairment of intangibles of $0.1bn, which included the impairment of software intangibles in the US.
Foreign currency translation differences had an adverse impact of $0.1bn.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures was a net loss of $27m in 3Q20, primarily as we recognised our share of SABB's impairment of the goodwill it recognised on the completion of its merger with Alawwal bank in 2019. This compared with net income of $512m in 3Q19.
Group
3Q20 compared with 3Q19 – adjusted results
Movement in adjusted profit before tax compared with 3Q19
Quarter ended
30 Sep30 SepVariance
202020193Q20 vs. 3Q19
$m$m$m%
Revenue12,065 13,347 (1,282)(10)
ECL(785)(843)58 7 
Operating expenses(7,411)(7,605)194 3 
Share of profit from associates and JVs435 519 (84)(16)
Profit before tax4,304 5,418 (1,114)(21)
Adjusted profit
Adjusted profit before tax of $4.3bn was $1.1bn or 21% lower than in 3Q19, primarily reflecting a decline in adjusted revenue due to interest rate reductions, which affected all global businesses and particularly our deposit franchises. This was partly offset by lower adjusted operating expenses and a reduction in adjusted ECL.
Adjusted revenue
Adjusted revenue of $12.1bn was $1.3bn or 10% lower than in 3Q19, reflecting reductions in WPB and CMB, partly offset by an increase in GBM.
The reduction in revenue was primarily in net interest income due to the impact of the interest rate reductions during the first half of the year, mainly affecting our deposit franchises within WPB and in GLCM in CMB and GBM. This was partly offset by net favourable movements in market impacts in life insurance manufacturing in WPB of $333m due to the continued recovery in global equity prices following the reductions in 1Q20. In GBM, Global Markets revenue also increased, reflecting increased market volatility in our FICC business, and we recorded favourable movements in credit and funding valuation adjustments of $199m.
8
HSBC Holdings plc Earnings Release 3Q20
    

Adjusted ECL
Adjusted ECL were $0.8bn in 3Q20, $0.1bn lower than in 3Q19. The charge in the quarter primarily reflected the significant build up of stage 1 and stage 2 allowances in both 1Q20 and 2Q20 to reflect the worsening forward economic outlook due to the Covid-19 outbreak. In 3Q20, that outlook stabilised, which resulted in stage 1 and stage 2 allowances being broadly unchanged and a significantly lower ECL charge compared with 2Q20. In addition, the stage 3 charge in 3Q20, which primarily related to a small number of wholesale exposures across various sectors, was partly offset by an increase in releases related to historical defaulted wholesale exposures.
Adjusted operating expenses
Adjusted operating expenses of $7.4bn were $0.2bn or 3% lower than in 3Q19, notwithstanding the impact of inflation and continued investment in our digital capabilities. This reflected reductions from our cost-saving initiatives, lower discretionary expenditure and a lower performance-related pay accrual.
Adjusted share of profit from associates and JVs
Adjusted share of profit from associates and joint ventures of $0.4bn decreased by $0.1bn or 16%, primarily from a reduction in share of profit from BoCom.
Group
9M20 compared with 9M19 – reported results
Movement in reported profit before tax compared with 9M19
Nine months ended
30 Sep30 SepVariance
202020199M20 vs. 9M19
$m$m$m%
Revenue38,672 42,727 (4,055)(9)
ECL(7,643)(2,023)(5,620)>(200)
Operating expenses(24,568)(25,296)728 3 
Share of profit from associates and JVs931 1,836 (905)(49)
Profit before tax7,392 17,244 (9,852)(57)
Tax expense(2,228)(3,512)1,284 37 
Profit after tax5,164 13,732 (8,568)(62)
Reported profit
Reported profit after tax of $5.2bn was $8.6bn or 62% lower than in 9M19.
Reported profit before tax of $7.4bn was $9.9bn or 57% lower than in 9M19, due to a rise in reported ECL, primarily reflecting the impact of the Covid-19 outbreak on the economic outlook, and lower reported revenue, mainly due to the impact of interest rate reductions. Lower revenue also included the non-recurrence of an $828m dilution gain in 9M19 recognised on the completion of the merger of our associate SABB with Alawwal bank in Saudi Arabia. In 9M20, we incurred our share of an impairment of goodwill by SABB of $462m, which contributed to a reduction in reported share of profit from associates. These factors were in part mitigated by lower reported operating expenses.
Results in 9M20 included the impact of certain volatile items, notably adverse movements in market impacts in life insurance manufacturing in WPB of $218m (9M19: $72m adverse) and adverse credit and funding valuation adjustments in GBM of $322m (9M19: $147m adverse). Results also included favourable movements on our long-term debt and associated swaps in Corporate Centre of $163m (9M19: $219m favourable). Additionally in 9M19, results included disposal gains in WPB and CMB of $157m.
Reported operating expenses in 9M20 included a $1.3bn impairment of capitalised software, with $1.0bn included as a significant item within 'impairment of goodwill and other intangibles', and $0.2bn included within 'restructuring and other related costs'. This primarily related to businesses within HSBC Bank plc, and to a lesser extent our businesses in the US, reflecting underperformance and a deterioration in the future forecasts of these businesses, substantially relating to prior periods in HSBC Bank plc.
Reported revenue
Reported revenue of $38.7bn was $4.1bn or 9% lower than in 9M19, reflecting the progressive impact of 1Q20 interest rate reductions on net interest income across our global businesses, most notably in Retail Banking in WPB and GLCM in CMB and GBM. In addition, the reduction reflected the effects of a sharp fall in equity markets and a widening of credit spreads towards the end of 1Q20. There has been a partial recovery in equity markets and a narrowing of credit spreads in subsequent quarters. However, this has resulted in adverse market impacts in life insurance manufacturing in WPB, and adverse valuation movements in GBM compared with 9M19.
These factors were partly offset by growth in Global Markets revenue throughout the first nine months, as increased market volatility supported an improved FICC performance across Foreign Exchange, Rates and Credit.
Lower reported revenue included net adverse movements in significant items of $0.8bn primarily from the non-recurrence of a $0.8bn dilution gain in 9M19, as mentioned above. Significant items in 9M20 included restructuring and other related costs of $0.2bn associated with disposal losses related to the RWA reduction commitments we made at our business update in February. Foreign currency translation differences resulted in a further adverse movement of $0.6bn compared with 9M19.
Reported ECL
Reported ECL of $7.6bn were $5.6bn higher than in 9M19, with increases across all global businesses, primarily from charges relating to the global impact of the Covid-19 outbreak on the forward economic outlook.
The ECL charge in 9M20 reflected a significant increase in stage 1 and stage 2 allowances, notably in the first half of the year, to reflect the deterioration in the forward economic outlook globally as a result of the Covid-19 outbreak. Economic conditions subsequently stabilised, and as a result stage 1 and stage 2 allowances were broadly unchanged in 3Q20. Stage 3 charges in 9M20 increased compared with 9M19, with the rise largely related to wholesale exposures, including a significant stage 3 charge related to a CMB client in Singapore in 1Q20. Notably, stage 3 charges in 3Q20 were in part offset by an increase in releases related to historical defaulted wholesale exposures.
HSBC Holdings plc Earnings Release 3Q20
9

Earnings Release – 3Q20
Reported operating expenses
Reported operating expenses of $24.6bn were $0.7bn or 3% lower than in 9M19, primarily reflecting a lower performance-related pay accrual and a reduction in discretionary expenditure, while we continued to invest in technology. In addition, the reduction included favourable foreign currency translation differences of $0.4bn. This was partly offset by a net adverse movement in significant items of $0.6bn, which included:
•a $1.1bn impairment of goodwill and other intangibles in 9M20, primarily capitalised software related to the businesses within HSBC Bank plc, and to a lesser extent our businesses in the US. It reflected underperformance and a deterioration in the future forecasts of these businesses, substantially relating to prior periods in HSBC Bank plc; and
•restructuring and other related costs of $1.1bn in 9M20, of which $0.4bn related to severance, $0.2bn related to an impairment of software intangibles and $0.1bn related to the impairment of tangible assets in France and the US. This compared with restructuring and other related costs of $0.4bn in 9M19. We expect to incur ‘costs to achieve’ expenditure of $1.6bn for the 2020 full year.
This was partly offset by:
•customer redress programme costs of $0.1bn in 9M20, compared with $1.1bn in 9M19.
Reported share of profit from associates and JVs
Reported income from associates and joint ventures of $0.9bn decreased by $0.9bn or 49%, primarily reflecting our share of SABB's impairment of the goodwill it recognised on the completion of its merger with Alawwal bank in 2019. The remaining reduction reflected a lower share of profit recognised from our associates due to the impact of the Covid-19 outbreak and the lower interest rate environment.
Group
9M20 compared with 9M19 – adjusted results
Movement in adjusted profit before tax compared with 9M19
Nine months ended
30 Sep30 SepVariance
202020199M20 vs. 9M19
$m$m$m%
Revenue38,542 41,162 (2,620)(6)
ECL(7,643)(1,931)(5,712)>(200)
Operating expenses(22,353)(23,342)989 4 
Share of profit from associates and JVs1,393 1,804 (411)(23)
Profit before tax9,939 17,693 (7,754)(44)
Adjusted profit
Adjusted profit before tax of $9.9bn was $7.8bn or 44% lower than in 9M19, primarily from a rise in adjusted ECL and a fall in adjusted revenue. Adjusted ECL increased by $5.7bn, mainly from charges relating to the global impact of the Covid-19 outbreak on the forward economic outlook in the first half of 2020. Adjusted revenue decreased by $2.6bn or 6%, primarily from the progressive impact of interest rate reductions in all our global businesses, notably in our deposit franchises, partly offset by higher revenue from Global Markets. Adjusted operating expenses decreased by $1.0bn or 4% as we lowered the performance-related pay accrual and reduced discretionary expenditure while continuing to invest in our businesses.
Adjusted revenue
Adjusted revenue of $38.5bn was $2.6bn or 6% lower than in 9M19, reflecting falls in WPB (down $2.4bn) and CMB (down $1.3bn), partly offset by higher revenue in GBM (up $0.7bn) and Corporate Centre (up $0.4bn).
The reduction in adjusted revenue reflected the progressive impact of lower interest rates in many of the key markets in which we operate. This had an adverse impact on revenue in Retail Banking within WPB, and in GLCM within CMB and GBM, although we grew deposit balances across these businesses compared with 30 September 2019. In addition, the fall in revenue reflected the effects of a sharp fall in equity markets and a widening of credit spreads towards the end of 1Q20. There has been a partial recovery in equity markets and a narrowing of credit spreads in subsequent quarters. However, this resulted in an adverse movement in market impacts in life insurance manufacturing in WPB of $0.2bn. It also resulted in an adverse movement in credit and funding valuation adjustments of $0.2bn and a $0.2bn reduction in revenue in Principal Investments in GBM.
These reductions were partly offset by higher revenue in Global Markets as market volatility remained elevated. Revenue also rose in Corporate Centre.
Revenue relating to Balance Sheet Management (‘BSM’), HSBC Holdings net interest expense and Argentina hyperinflation was $0.5bn higher, primarily due to disposal gains in BSM. This revenue is allocated to our global businesses.
Adjusted ECL
Adjusted ECL, which removes the period-on-period effects of foreign currency translation differences, were $7.6bn, an increase of $5.7bn from 9M19. This increase occurred in WPB (up $1.6bn), CMB (up $3.0bn) and GBM (up $1.1bn) and mainly reflected charges related to the global impact of the Covid-19 outbreak and the forward economic outlook in all of our global businesses.
The ECL charge in 9M20 reflected a significant increase in stage 1 and stage 2 allowances, notably in the first half of the year, to reflect the deterioration in the forward economic outlook globally as a result of the Covid-19 outbreak. Economic conditions subsequently stabilised and as a result, stage 1 and stage 2 allowances were broadly unchanged in 3Q20. Stage 3 charges in 9M20 increased compared with 9M19, with the rise largely related to wholesale exposures, including a significant stage 3 charge related to a CMB client in Singapore in 1Q20. Notably, the stage 3 charge in 3Q20 was in part offset by an increase in releases related to historical defaulted wholesale exposures.
Adjusted ECL (annualised) as a percentage of average gross loans and advances to customers was 0.96%, compared with 0.25% in 9M19.

10
HSBC Holdings plc Earnings Release 3Q20
    

Adjusted operating expenses
Adjusted operating expenses of $22.4bn were $1.0bn or 4% lower than in 9M19, as we continued to review and reprioritise costs and investments to help mitigate revenue headwinds. The decrease primarily reflected a $0.7bn reduction in performance-related pay accrual and lower discretionary expenditure, including marketing (down $0.3bn) and travel costs (down $0.2bn). In addition, our cost-saving initiatives resulted in a reduction of $0.7bn, of which $0.6bn related to our cost-to-achieve programme. These decreases were partly offset by an increase of $0.3bn in investments in technology to enhance our digital and automation capabilities to improve how we serve our customers.
The number of employees expressed in full-time equivalent staff (‘FTE’) at 30 September 2020 was 230,317, a decrease of 5,034 compared with 31 December 2019. The number of contractors at 30 September 2020 was 6,131, a decrease of 1,280 from 31 December 2019.
Adjusted share of profit from associates and JVs
Adjusted share of profit from associates of $1.4bn fell $0.4bn or 23%, compared with 9M19, primarily reflecting the impact of the Covid-19 outbreak and the lower interest rate environment on the share of profit we recognised from our associates.
Wealth and Personal Banking – adjusted results
Management view of adjusted revenue
Nine months endedQuarter ended
30 Sep30 SepVariance30 Sep30 Jun30 Sep
202020199M20 vs. 9M19202020202019
Footnotes$m$m$m%$m$m$m
Retail Banking9,895 11,639 (1,744)(15)2,999 3,133 3,990 
– net interest income8,987 10,394 (1,407)(14)2,686 2,882 3,585 
– non-interest income908 1,245 (337)(27)313 251 405 
Wealth Management5,765 6,491 (726)(11)2,160 2,214 1,983 
– investment distribution 2,473 2,541 (68)(3)872 726 844 
– life insurance manufacturing1,188 1,780 (592)(33)601 800 408 
– Global Private Banking1,339 1,410 (71)(5)418 420 485 
net interest income514 668 (154)(23)142 163 227 
non-interest income825 742 83 11 276 257 258 
– asset management765 760 5 1 269 268 246 
Other1356 574 (218)(38)93 148 171 
Balance Sheet Management, Holdings interest expense and Argentina hyperinflation676 388 288 74 189 248 86 
Net operating income216,692 19,092 (2,400)(13)5,441 5,743 6,230 
RoTE excluding significant items and UK bank levy (annualised) (%)7.617.9 
1    ‘Other’ includes the distribution and manufacturing (where applicable) of retail and credit protection insurance, disposal gains and other
non-product specific income.
2    ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
9M20 compared with 9M19
Adjusted profit before tax of $3.1bn was $3.7bn or 54% lower than in 9M19. This reflected a fall in adjusted revenue and an increase in adjusted ECL from the impact of the Covid-19 outbreak. The reduction in revenue was mainly as a result of the fall in interest rates, which adversely affected deposit margins. There was lower revenue in life insurance manufacturing, which included negative market impacts due to a fall in equity markets in 1Q20, although these losses partly reversed in 2Q20 and 3Q20 as equity markets recovered.
Adjusted revenue of $16.7bn was $2.4bn or 13% lower, and included the non-recurrence of 9M19 disposal gains in Argentina and Mexico of $133m.
In Retail Banking, revenue of $9.9bn was down $1.7bn or 15%.
•Net interest income was $1.4bn lower due to narrower margins as global interest rates fell as a result of the Covid-19 outbreak. This reduction was partly offset by deposit balance growth of $57bn or 9%, particularly in Hong Kong and the UK, and higher mortgage lending, mainly in the UK.
•Non-interest income fell by $0.3bn from lower fee income earned on unsecured lending products.
In Wealth Management, revenue of $5.8bn was down $0.7bn or 11%.
•In life insurance manufacturing, revenue fell by $0.6bn or 33%, which included an adverse movement in market impacts of $159m (an adverse movement of $218m in 9M20 compared with an adverse movement of $59m in 9M19). The value of new business written fell by $0.4bn or 37% due to a reduction in volumes resulting from the Covid-19 outbreak, in part mitigated by continued actions to support customers by improving our digital channels.
•In investment distribution, revenue was $0.1bn or 3% lower, reflecting adverse market conditions in Hong Kong, which resulted in lower mutual fund sales. This was partly offset by higher brokerage fees from increased transaction volumes.
•In Global Private Banking, revenue was $0.1bn or 5% lower, as net interest income fell as a result of the fall in global interest rates, although investment revenue increased, reflecting market volatility and higher fees from advisory and discretionary mandates.
Adjusted ECL of $2.5bn were $1.6bn higher than in 9M19, reflecting the global impact of the Covid-19 outbreak on the forward economic outlook, mainly recorded in the first half of 2020. The increase also included higher charges, notably in the UK, Asia and the US against unsecured lending, driven by moderate credit deterioration.
Adjusted operating expenses of $11.0bn were $0.4bn or 3% lower, as a decrease in performance-related pay accrual and reduced discretionary expenditure more than offset the impact of inflation and our continued investment in digital and wealth initiatives.
HSBC Holdings plc Earnings Release 3Q20
11

Earnings Release – 3Q20
3Q20 compared with 3Q19
Adjusted profit before tax of $1.4bn was $0.5bn or 28% lower than in 3Q19. This reflected a $0.8bn or 13% fall in adjusted revenue due to the impact of lower interest rates in Retail Banking and Global Private Banking, partly offset by a favourable movement in market impacts in life insurance manufacturing. The fall in revenue was partly offset by a $0.2bn or 4% reduction in adjusted operating expenses, reflecting a lower performance-related pay accrual and reduced discretionary expenditure, as well as a $0.1bn reduction in adjusted ECL.
Commercial Banking – adjusted results
Management view of adjusted revenue
Nine months endedQuarter ended
30 Sep30 SepVariance30 Sep30 Jun30 Sep
202020199M20 vs. 9M19202020202019
Footnotes$m$m$m%$m$m$m
Global Trade and Receivables Finance 1,321 1,388 (67)(5)429 432 467 
Credit and Lending 4,183 4,072 111 3 1,442 1,394 1,387 
Global Liquidity and Cash Management3,283 4,497 (1,214)(27)936 1,034 1,510 
Markets products, Insurance and Investments, and Other11,231 1,515 (284)(19)341 421 460 
Balance Sheet Management, Holdings interest expense and Argentina hyperinflation147 (26)173 >20017 62 (24)
Net operating income210,165 11,446 (1,281)(11)3,165 3,343 3,800 
RoTE excluding significant items and UK bank levy (annualised) (%)1.1 14.0 
1    Includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and Global Banking products.
2    ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
9M20 compared with 9M19
Adjusted profit before tax of $1.4bn was $4.2bn or 75% lower than in 9M19. Adjusted ECL were higher, reflecting the impact of the Covid-19 outbreak, and adjusted revenue fell, which was primarily due to the impact of lower interest rates.
Adjusted revenue of $10.2bn was $1.3bn or 11% lower.
•In GLCM, revenue decreased by $1.2bn or 27% due to the impact of the lower global interest rate environment, mainly in Hong Kong and the UK. This was partly offset by a 15% increase in average deposit balances, across all regions, particularly in the UK and the US.
•In Global Trade and Receivables Finance ('GTRF'), revenue decreased by $67m or 5% from lower fees and lending balances, notably in Hong Kong and the UK, reflecting a reduction in global trade volumes as a result of the Covid-19 outbreak. This was partly offset by wider margins in Asia and Latin America.
•In ‘Other’ products, revenue was $0.3bn lower, reflecting the impact of lower interest rates on income earned on capital held in the business, as well as lower revenue from Insurance, Investments and Markets products. In addition, 9M19 included a disposal gain of $24m in Latin America.
This was partly offset:
•In Credit and Lending, revenue increased by $0.1bn or 3%, reflecting growth in average balances driven by the uptake of government-backed lending schemes.
Adjusted ECL of $3.9bn were $3.0bn higher than in 9M19. The increase reflected the global impact of the Covid-19 outbreak on the forward economic outlook, mainly in the UK and Asia. There were charges against specific customers in 9M20, particularly in the oil and gas and wholesale trade sectors, including a significant charge related to a corporate exposure in Singapore in 1Q20.
Adjusted operating expenses of $4.9bn were $0.1bn or 2% lower, reflecting a reduction in performance-related pay accrual and as we maintained control of discretionary expenditure, while we continued to invest in digital and transaction banking capabilities to improve customer experience.
In 2020, we delivered around $10bn of RWA reductions as part of our transformation programme. This partly mitigated growth of $13bn due to asset quality deterioration.
3Q20 compared with 3Q19
Adjusted profit before tax of $1.2bn was $0.5bn or 28% lower than in 3Q19, primarily reflecting the impact of lower interest rates, notably on revenue in GLCM, which fell by $0.6bn. These decreases were partly offset by a reduction in adjusted operating expenses of $0.1bn, as we controlled discretionary expenditure while continuing to invest, and from a reduction of $47m in our adjusted ECL charge.
12
HSBC Holdings plc Earnings Release 3Q20
    

Global Banking and Markets – adjusted results
Management view of adjusted revenue
Nine months endedQuarter ended
30 Sep30 SepVariance30 Sep30 Jun30 Sep
202020199M20 vs. 9M19202020202019
Footnotes$m$m$m%$m$m$m
Global Markets5,859 4,468 1,391 31 1,588 2,177 1,373 
– FICC5,209 3,655 1,554 43 1,296 2,107 1,163 
Foreign Exchange2,683 1,995 688 34 766 803 720 
Rates1,583 1,175 408 35 232 685 311 
Credit943 485 458 94 298 619 132 
– Equities 650 813 (163)(20)292 70 210 
Securities Services11,353 1,502 (149)(10)409 444 516 
Global Banking12,897 2,877 20 1 953 1,024 990 
Global Liquidity and Cash Management1,552 2,047 (495)(24)457 494 690 
Global Trade and Receivables Finance584 601 (17)(3)192 204 202 
Principal Investments40 215 (175)(81)52 226 94 
Credit and funding valuation adjustments(322)(153)(169)(110)32 (9)(167)
Other2(453)(532)79 15 (153)(145)(201)
Balance Sheet Management, Holdings interest expense and Argentina hyperinflation282 79 203 >20084 108 18 
Net operating income311,792 11,104 688 6 3,614 4,523 3,515 
RoTE excluding significant items and UK bank levy (annualised) (%)6.910.0 
1    From 1 June 2020, revenue from Issuer Services, previously reported in Securities Services, was reported within Global Banking. This resulted in $55m additional revenue being recorded in Global Banking for 9M20 (3Q20: $40m). Comparatives have not been restated.
2    ‘Other’ in GBM includes allocated funding costs. Additionally, within the management view of total operating income, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities that are not reflected within operating income, such as notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included within ‘Other’.
3    ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
9M20 compared with 9M19
Adjusted profit before tax of $3.8bn was $0.2bn lower than in 9M19, mainly due to higher adjusted ECL, which reflected the global impact of the Covid-19 outbreak and included charges relating to specific exposures. The rise in adjusted ECL was partly offset by higher adjusted revenue and from lower adjusted operating expenses.
Adjusted revenue of $11.8bn increased by $0.7bn compared with 9M19, which included adverse movements in credit and funding valuation adjustments of $0.2bn. We grew adjusted revenue while reducing adjusted RWAs by $29bn, compared with 30 September 2019.
•In Global Markets, revenue increased by $1.4bn or 31%, as higher volatility levels supported an improved FICC performance, particularly in Credit, in both primary and secondary markets, and in Foreign Exchange. Rates also had a strong performance due to increased trading activity in government bonds.
•In Global Banking, revenue of $2.9bn remained broadly unchanged. Revenue in capital markets increased and corporate lending net interest income rose due to higher average balances. These were offset by lower real estate and structured finance fee income as well as losses on legacy corporate restructuring positions.
These were partly offset by:
•In GLCM, revenue decreased $0.5bn or 24% due to the impact of lower global interest rates, although average balances grew, notably in the US, the UK and Asia.
•In Principal Investments, revenue fell by $0.2bn, reflecting revaluation losses incurred in 1Q20 as a result of the Covid-19 outbreak, mainly in Europe, which partly reversed in the remainder of the period.
•In Securities Services, revenue fell by $0.1bn or 10%, due to lower interest rates, notably in Asia and Europe, although fees increased.
•In GTRF, revenue decreased by $17m or 3%, reflecting lower fees in Europe, partly offset by higher net interest income in Asia.
Adjusted ECL were $1.2bn, up $1.1bn compared with 9M19 from charges relating to the global impact of the Covid-19 outbreak on the forward economic outlook, and as charges against a small number of clients in 9M20 were higher than those recorded in 9M19.
Adjusted operating expenses of $6.8bn were $0.2bn or 3% lower, primarily from a lower performance-related pay accrual, which more than offset growth in regulatory programme costs and investments in technology.
In 9M20, RWAs fell by $8bn. We delivered around $30bn of RWA reductions as part of our transformation programme. This mitigated growth in RWAs from asset quality deterioration, increased activity on client facilities and elevated market volatility as a result of the Covid-19 outbreak, as well as from regulatory changes.
3Q20 compared with 3Q19
Adjusted profit before tax of $1.2bn was unchanged compared with 3Q19.
Adjusted revenue was $0.1bn or 3% higher, reflecting a $0.2bn or 16% increase in Global Markets, as ongoing market volatility resulted in an improved performance in FICC, and from favourable movements in credit and funding valuation adjustments of $0.2bn. This increase was partly offset by the impact of lower global interest rates, leading to a reduction of $0.2bn in GLCM and $0.1bn in Securities Services. The increase in adjusted revenue was largely offset by higher adjusted ECL, which rose by $80m to $100m, from higher charges against specific customers and provisions relating to the Covid-19 outbreak, although adjusted operating expenses remained broadly unchanged.
HSBC Holdings plc Earnings Release 3Q20
13

Earnings Release – 3Q20
Corporate Centre – adjusted results
Management view of adjusted revenue
Nine months endedQuarter ended
30 Sep30 SepVariance30 Sep30 Jun30 Sep
202020199M20 vs. 9M19202020202019
Footnotes$m$m$m%$m$m$m
Central Treasury1169 226 (57)(25)(32)(64)88 
Legacy portfolios(20)(124)104 84 28 43 (41)
Other2(256)(582)326 56 (151)(155)(245)
Net operating income3(107)(480)373 78 (155)(176)(198)
RoTE excluding significant items and UK bank levy (annualised) (%)4.61.3 
1    Central Treasury includes favourable valuation differences on issued long-term debt and associated swaps of $163m (9M19: gains of $219m; 3Q20: losses of $32m; 2Q20: losses of $64m; 3Q19: gains of $76m).
2     In 2Q20, we began allocating the revenue from BSM, Holdings net interest expense and Argentina hyperinflation out to the global businesses, to align them better with their revenue and expense. The total BSM revenue component of this allocation for 9M20 was $2,206m (9M19: $1,660m; 3Q20: $671m; 2Q20: $783m; 3Q19: $551m).
3     ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
9M20 compared with 9M19
Adjusted profit before tax of $1.7bn was $0.3bn higher than in 9M19, and mainly comprised our share of profit in associates and joint ventures, which decreased by $0.4bn due to the impact of falling interest rates and the Covid-19 outbreak. This reduction was more than offset by higher adjusted revenue and lower adjusted operating expenses.
Adjusted revenue increased by $0.4bn, mainly in 'Other' income, which increased by $0.3bn due to a net favourable movement of intersegment eliminations that have no impact on Group results. In addition, certain funding costs that were retained in Corporate Centre during 2019 have been allocated to global businesses with effect from 1 January 2020. Revenue in our legacy portfolios rose by $0.1bn due to the non-recurrence of portfolio losses in 9M19. These factors were partly offset by lower favourable fair value movements of $56m relating to the economic hedging of interest rate and exchange rate risk on our long-term debt with associated swaps.
Adjusted operating expenses, which are stated after recovery of costs from our global businesses, decreased by $0.3bn due to lower discretionary expenditure.
3Q20 compared with 3Q19
Adjusted profit before tax of $0.5bn was $0.1bn lower than in 3Q19. This was primarily due to a reduction in share of profit from BoCom, reflecting the impact of the Covid-19 outbreak. In addition, operating expenses increased by $0.1bn. These factors were partly offset by higher revenue, which included favourable valuation movements in legacy credit in 3Q20, compared with adverse movements in 3Q19.
Balance sheet – 30 September 2020 compared with 30 June 2020
At 30 September 2020, our total assets of $3.0tn were $33bn higher on a reported basis, and included the favourable effects of foreign currency translation differences. On a constant currency basis, our total assets were $37bn lower.
This reduction in total assets, on a constant currency basis, reflected lower derivative asset balances, notably from adverse revaluation movements as market volatility fell compared with 30 June 2020. The reduction also included a decline in financial assets as we decreased our holdings of treasury bills and debt securities. These were partly offset by a rise in cash and balances at central banks as we maintained our liquidity to support customers.
Loans and advances to customers as a percentage of customer accounts were 66.4%, a decrease of 0.2% compared with 30 June 2020.
Loans and advances to customers
Reported loans and advances to customers of $1.0tn were $23bn higher, which included favourable effects of foreign currency translation differences of $23bn. On a constant currency basis, customer lending balances were broadly in line with 2Q20.
Customer lending increased in WPB by $19bn to $460bn. This was mainly due to an increase in term lending in Hong Kong (up $11bn), as customers borrowed to fund investments in initial public offerings, as well as from higher mortgage balances, mainly in the UK (up $5bn), as activity in the housing market rose after lockdown restrictions were eased. In CMB, lending of $344bn was $8bn lower, mainly from a reduction in term lending in the US, Asia and Europe. In GBM, lending of $237bn fell by $11bn, mainly from lower term lending in Asia and the US, partly offset by higher overdraft balances in the UK.
Customer accounts
Customer accounts of $1.6tn increased by $36bn on a reported basis, including favourable foreign currency translation differences of $33bn. On a constant currency basis, customer accounts were broadly in line with 2Q20 across all of our global businesses. This reflected customers continuing to hold consolidated funds. There has been a movement of funds from term accounts to call accounts as customers show a preference for liquidity while interest rates are low.
Risk-weighted assets – 30 September 2020 compared with 30 June 2020
Risk-weighted assets (‘RWAs’) totalled $857.0bn at 30 September 2020, a $2.4bn increase compared with 2Q20. Excluding foreign currency translation differences, RWAs decreased by $11.8bn.
A $10.8bn decrease in RWAs due to asset size movements reflected lending reduction of $14.2bn in GBM and CMB, including the effect of management initiatives, and a fall in market risk RWAs of $5.3bn. The reduction was partly offset by an $8.9bn increase in WPB, mostly in short-term lending in Hong Kong.
A $4.3bn reduction in RWAs due to changes in methodology and policy was primarily due to GBM and CMB initiatives in Asia and Europe. Changes in asset quality increased RWAs by $3.0bn, which included the impact of credit migration of $7.3bn, mostly in CMB and GBM, largely offset by decreases due to changes in portfolio mix.
14
HSBC Holdings plc Earnings Release 3Q20
    

Net interest margin
Nine months endedQuarter ended
30 Sep30 Sep30 Sep 30 Jun30 Sep
20202019202020202019
Footnotes$m$m$m$m$m
Net interest income20,959 22,808 6,450 6,897 7,568 
Average interest-earning assets2,070,703 1,915,149 2,141,454 2,078,178 1,919,955 
%%%%%
Gross interest yield12.09 2.89 1.76 2.01 2.83 
Less: cost of funds1(0.89)(1.53)(0.68)(0.81)(1.49)
Net interest spread21.20 1.36 1.08 1.20 1.34 
Net interest margin31.35 1.59 1.20 1.33 1.56 
1    Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Cost of funds is the average annualised interest cost as a percentage of average interest-bearing liabilities.
2    Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds.
3    Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Net interest margin ('NIM') of 1.35% was 24 basis points (‘bps’) lower compared with 9M19, as the reduction in the yield on AIEA of 80bps was partly offset by the fall in funding cost of average interest-bearing liabilities of 64bps. The decrease in NIM in 9M20 included the favourable impact of significant items and the adverse effects of foreign currency translation differences. Excluding these, NIM fell by 23bps.
NIM for 3Q20 was 1.20%, down 36bps compared with the previous year, and down 13bps compared with the previous quarter, predominantly driven by the impact of lower market interest rates.
Return on Equity and Return on Tangible Equity
We provide Return on Tangible Equity (‘RoTE’) in addition to Return on Equity (‘RoE’) as a way of assessing our performance which is closely aligned to our capital position.
RoTE is computed by adjusting reported ‘profit attributable to the ordinary shareholders of the parent company’ for the post-tax movements in the present value of in-force long-term insurance business (‘PVIF’) and adjusting the reported equity for goodwill, intangibles and PVIF, net of deferred tax. The adjustment to reported results and reported equity excludes amounts attributable to other equity instrument holders and non-controlling interests.
For our global businesses, we provide RoTE excluding significant items and the UK bank levy which is more closely aligned to the basis on which the global business performance is assessed by the Chief Operating Decision Maker (further information on the basis of preparation for our global businesses is provided on page 263 of the Annual Report and Accounts 2019).
RoTE excluding significant items and UK bank levy is computed by adjusting ‘profit attributable to the ordinary shareholders, excluding PVIF’ for significant items (net of tax) and the bank levy, and adjusting the ‘average tangible equity’ for the change in fair value on our long-term debt attributable to credit spread through other comprehensive income (‘fair value of own debt’), and debt valuation adjustments (‘DVA’).
The following table details the adjustments made to the reported results and equity:
Return on Equity and Return on Tangible Equity
Nine months endedQuarter ended
30 Sep30 Sep30 Sep30 Jun30 Sep
20202019202020202019
$m$m$m$m$m
Profit
Profit attributable to the ordinary shareholders of the parent company3,336 11,478 1,359 192 2,971 
Impairment of goodwill and other intangible assets (net of tax)1,156 — 2 1,154 — 
Increase in PVIF (net of tax)(562)(1,290)(252)(56)(652)
Profit attributable to the ordinary shareholders, excluding goodwill, other intangible assets impairment and PVIF3,930 10,188 1,109 1,290 2,319 
Significant items (net of tax) and bank levy1,505 608 
Profit attributable to the ordinary shareholders, excluding goodwill impairment, PVIF, significant items and UK bank levy5,435 10,796 
Equity
Average ordinary shareholders’ equity165,934 165,954 167,151 166,084 167,347 
Effect of goodwill, PVIF and other intangibles (net of deferred tax)(17,234)(23,191)(17,081)(17,136)(23,688)
Average tangible equity148,700 142,763 150,070 148,948 143,659 
Fair value of own debt, DVA and other adjustments(260)529 
Average tangible equity excluding fair value of own debt, DVA and other adjustments148,440 143,292 
%%%%%
Ratio
Return on average ordinary shareholder’s equity (annualised)2.7 9.2 3.2 0.5 7.0 
Return on tangible equity (annualised)3.5 9.5 2.9 3.5 6.4 
Return on tangible equity excluding significant items and UK bank levy (annualised)4.910.1

HSBC Holdings plc Earnings Release 3Q20
15

Earnings Release – 3Q20
Return on Tangible Equity by global business
Nine months ended 30 Sep 2020
Wealth
and Personal
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate
Centre		Total
$m$m$m$m$m
Profit before tax2,696 1,284 2,912 500 7,392 
Tax expense(492)(527)(1,093)(116)(2,228)
Profit after tax2,204 757 1,819 384 5,164 
Less attributable to: preference shareholders, other equity holders, non-controlling interests(543)(492)(498)(295)(1,828)
Profit attributable to ordinary shareholders of the parent company1,661 265 1,321 89 3,336 
Increase in PVIF (net of tax)(544)(16)— (2)(562)
Significant items (net of tax) and UK bank levy346 64 818 1,040 2,268 
Balance Sheet Management allocation and other adjustments15 (8)(12)398 393 
Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy1,478 305 2,127 1,525 5,435 
Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments25,998 37,519 41,114 43,809 148,440 
RoTE excluding significant items and UK bank levy (annualised) (%)7.6 1.1 6.9 4.6 4.9 
Nine months ended 30 Sep 2019
Profit before tax5,607 5,531 3,832 2,274 17,244 
Tax expense(766)(1,030)(392)(1,324)(3,512)
Profit after tax4,841 4,501 3,440 950 13,732 
Less attributable to: preference shareholders, other equity holders, non-controlling interests(885)(660)(592)(117)(2,254)
Profit attributable to ordinary shareholders of the parent company3,956 3,841 2,848 833 11,478 
Increase in PVIF (net of tax)(1,236)(46)— (8)(1,290)
Significant items (net of tax) and UK bank levy858 45 158 (613)448 
Balance Sheet Management allocation and other adjustments(3)2 — 161 160 
Profit attributable to ordinary shareholders, excluding PVIF, significant items and bank levy3,575 3,842 3,006 373 10,796 
Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments26,714 36,691 40,226 39,661 143,292 
RoTE excluding significant items and UK bank levy (annualised) (%)17.9 14.0 10.0 1.3 10.1 
Notes
•    Income statement comparisons, unless stated otherwise, are between the nine-month period ended 30 September 2020 and the nine-month period ended 30 September 2019. Balance sheet comparisons, unless otherwise stated, are between balances at 30 September 2020 and the corresponding balances at 30 June 2020.
•    The financial information on which this Earnings Release is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with our significant accounting policies as described on pages 240 to 251 of our Annual Report and Accounts 2019.
•    On 31 March 2020, HSBC announced that, in response to a request from the Bank of England through the UK's Prudential Regulation Authority (‘PRA’), the Board had cancelled the fourth interim dividend of $0.21 per ordinary share, which was scheduled to be paid on 14 April 2020. The Board also announced that until the end of 2020 HSBC will make no quarterly or interim dividend payments or accruals in respect of ordinary shares. As previously disclosed on 18 February 2020 in the Annual Report and Accounts 2019, we also plan to suspend share buy-backs in respect of ordinary shares in 2020 and 2021.
•    Based on our results for 2020 and our forecasts for 2021, the Board will consider whether to pay a conservative dividend for 2020. Any such dividend would be dependent on the economic outlook in early 2021, and be subject to regulatory consultation. A final determination is expected to be made and communicated in February 2021 with our 2020 full-year results. We also expect to communicate our revised policy for dividends for 2021 and beyond at the same time.
Cautionary statement regarding forward-looking statements
This Earnings Release 3Q20 contains certain forward-looking statements with respect to HSBC’s: financial condition; results of operations and business, including the strategic priorities; 2020 financial, investment and capital targets; and ESG targets/commitments described herein.
Statements that are not historical facts, including statements about HSBC’s beliefs and expectations, are forward-looking statements. Words such as ‘expects’, ‘targets’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, information, data, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC’s Directors, officers or employees to third parties, including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. These include, but are not limited to:
16
HSBC Holdings plc Earnings Release 3Q20
    

•changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment and creditworthy customers beyond those factored into consensus forecasts (including, without limitation, as a result of the Covid-19 outbreak); the Covid-19 outbreak, which will have adverse impacts on our income due to lower lending and transaction volumes, lower wealth and insurance manufacturing revenue, and lower or negative interest rates in markets where we operate, as well as, more generally, the potential for material adverse impacts on our financial condition, results of operations, prospects, liquidity, capital position and credit ratings; deviations from the market and economic assumptions that form the basis for our ECL measurements (including, without limitation, as a result of the Covid-19 outbreak or the UK's exit from the EU); potential changes in future dividend policy; changes in foreign exchange rates and interest rates, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding or capital markets, which may affect our ability to meet our obligations under financing facilities or to fund new loans, investments and businesses; geopolitical tensions or diplomatic developments producing social instability or legal uncertainty, such as the unrest in Hong Kong, the existing US-China tensions and the emerging challenges in UK-China relations, which in turn may affect demand for our products and services and could result in (among other things) regulatory, reputational and market risks for HSBC; the efficacy of government, customer, and HSBC's actions in managing and mitigating climate change, which may cause both idiosyncratic and systemic risks resulting in potential financial impacts; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks’ policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; societal shifts in customer financing and investment needs, including consumer perception as to the continuing availability of credit; exposure to counterparty risk, including third parties using us as a conduit for illegal activities without our knowledge; the expected discontinuation of certain key Ibors and the development of alternative risk-free benchmark rates, which may require us to enhance our capital position and/or position additional capital in specific subsidiaries; and price competition in the market segments we serve;
•changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which we operate and the consequences thereof (including, without limitation, actions taken as a result of the Covid-19 outbreak); initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks, which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; the UK’s exit from the EU, which may result in a prolonged period of uncertainty, unstable economic conditions and market volatility, including currency fluctuations; passage of the Hong Kong national security law and restrictions on telecommunications, as well as the US Hong Kong Autonomy Act, which have caused tensions between China, the US and the UK; general changes in government policy that may significantly influence investor decisions; the costs, effects and outcomes of regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies; and
•factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques); our ability to achieve our financial, investment, capital and ESG targets/commitments, which may result in our failure to achieve any of the expected benefits of our strategic initiatives; model limitations or failure, including, without limitation, the impact that the consequences of the Covid-19 outbreak have had on the performance and usage of financial models, which may require us to hold additional capital, incur losses and/or use compensating controls, such as overlays and overrides, to address model limitations; changes to the judgements, estimates and assumptions we base our financial statements on; changes in our ability to meet the requirements of regulatory stress tests; a reduction in the credit rating assigned to us or any of our subsidiaries, which could increase the cost or decrease the availability of our funding and affect our liquidity position and net interest margin; changes to the reliability and security of our data management, data privacy, information and technology infrastructure, including threats from cyber-attacks, which may impact our ability to service clients and may result in financial loss, business disruption and/or loss of customer services and data; changes in insurance customer behaviour and insurance claim rates; our dependence on loan payments and dividends from subsidiaries to meet our obligations; changes in accounting standards, which may have a material impact on the way we prepare our financial statements; changes in our ability to manage third-party, fraud and reputational risks inherent in our operations; employee misconduct, which may result in regulatory sanctions and/or reputational or financial harm; and changes in skill requirements, ways of working and talent shortages, which may affect our ability to recruit and retain senior management and diverse and skilled personnel. Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in ‘Top and emerging risks’ on pages 76 to 81 of the Annual Report and Accounts 2019.


For further information contact:
Investor RelationsMedia Relations
UK – Richard O’ConnorUK – Heidi Ashley
Tel: +44 (0) 20 7991 6590 Tel: +44 (0) 20 7992 2045
Hong Kong – Mark PhinHong Kong – Patrick Humphris
Tel: +852 2822 4908Tel: +852 2822 2052

HSBC Holdings plc Earnings Release 3Q20
17

Earnings Release – 3Q20
Summary consolidated income statement
Nine months endedQuarter ended
30 Sep30 Sep30 Sep30 Jun30 Sep
20202019202020202019
$m$m$m$m$m
Net interest income20,959 22,808 6,450 6,897 7,568 
Net fee income8,907 9,085 2,981 2,803 2,961 
Net income from financial instruments held for trading or managed on a fair value basis7,768 7,877 2,000 2,404 2,546 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss(254)2,318 1,036 2,290 122 
Changes in fair value of designated debt and related derivatives1
278 149 81 (49)61 
Changes in fair value of other financial instruments mandatorily measured at fair value
through profit or loss		259 617 179 453 160 
Gains less losses from financial investments599 316 133 154 115 
Net insurance premium income7,798 9,047 2,779 2,110 2,724 
Other operating income805 2,935 334 67 863 
Total operating income47,119 55,152 15,973 17,129 17,120 
Net insurance claims and benefits paid and movement in liabilities to policyholders(8,447)(12,425)(4,046)(4,070)(3,765)
Net operating income before change in expected credit losses and other credit impairment charges2
38,672 42,727 11,927 13,059 13,355 
Change in expected credit losses and other credit impairment charges(7,643)(2,023)(785)(3,832)(883)
Net operating income31,029 40,704 11,142 9,227 12,472 
Total operating expenses excluding impairment of goodwill and other intangible assets(23,207)(25,268)(7,968)(7,451)(8,143)
Impairment of goodwill and other intangible assets(1,361)(28)(73)(1,224)(4)
Operating profit6,461 15,408 3,101 552 4,325 
Share of profit in associates and joint ventures931 1,836 (27)537 512 
Profit before tax7,392 17,244 3,074 1,089 4,837 
Tax expense(2,228)(3,512)(1,035)(472)(1,042)
Profit after tax5,164 13,732 2,039 617 3,795 
Attributable to:
– ordinary shareholders of the parent company3,336 11,478 1,359 192 2,971 
– preference shareholders of the parent company67 67 22 23 22 
– other equity holders1,066 1,148 449 176 484 
– non-controlling interests695 1,039 209 226 318 
Profit after tax5,164 13,732 2,039 617 3,795 
$$$$$
Basic earnings per share0.170.570.07 0.01 0.15
Diluted earnings per share0.160.570.07 0.01 0.15
Dividend per ordinary share3
— 0.41— — 0.10
%%%%%
Return on average ordinary shareholders’ equity (annualised)2.7 9.2 3.2 0.5 7.0 
Return on average tangible equity (annualised)3.5 9.5 2.9 3.5 6.4 
Cost efficiency ratio63.5 59.2 67.4 66.4 61.0 
1    The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    Dividends recorded in the financial statements are dividends per ordinary share declared and paid in the period and are not dividends in respect of, or for, that period.
18
HSBC Holdings plc Earnings Release 3Q20
    

Summary consolidated balance sheet
At
30 Sep30 Jun31 Dec
202020202019
$m$m$m
Assets
Cash and balances at central banks285,508 249,673 154,099 
Trading assets222,355 208,964 254,271 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss44,253 41,785 43,627 
Derivatives294,678 313,781 242,995 
Loans and advances to banks83,854 77,015 69,203 
Loans and advances to customers1
1,041,340 1,018,681 1,036,743 
Reverse repurchase agreements – non-trading221,179 226,345 240,862 
Financial investments475,302 494,109 443,312 
Other assets287,466 292,445 230,040 
Total assets2,955,935 2,922,798 2,715,152 
Liabilities and equity
Liabilities
Deposits by banks91,739 82,715 59,022 
Customer accounts1,568,714 1,532,380 1,439,115 
Repurchase agreements – non-trading118,844 112,799 140,344 
Trading liabilities80,338 79,612 83,170 
Financial liabilities designated at fair value156,459 156,608 164,466 
Derivatives285,239 303,059 239,497 
Debt securities in issue102,406 110,114 104,555 
Liabilities under insurance contracts102,708 98,832 97,439 
Other liabilities249,227 251,458 194,876 
Total liabilities2,755,674 2,727,577 2,522,484 
Equity
Total shareholders’ equity191,904 187,036 183,955 
Non-controlling interests8,357 8,185 8,713 
Total equity200,261 195,221 192,668 
Total liabilities and equity2,955,935 2,922,798 2,715,152 
1    Net of impairment allowances.
Credit risk
Summary of credit risk
At 30 September 2020, gross loans and advances to customers and banks of $1,139bn increased by $24.3bn, compared with
31 December 2019. This included adverse foreign exchange movements of $8.3bn.
Excluding foreign exchange movements, growth was driven by a $21.4bn increase in personal loans and advances and a $15.3bn increase in loans and advances to banks. These increases were partly offset by a $4.1bn decrease in wholesale loans and advances to customers.
The increase in personal loans and advances to customers was driven by mortgage growth of $14.6bn, primarily in the UK (up $8.3bn), Hong Kong (up $2.9bn), Canada (up $1.4bn) and Australia (up $1.3bn). Other personal lending also grew by $6.8bn. The decrease in wholesale loans and advances to customers was primarily driven by a $3.8bn decline in lending to corporate and commercial customers.
At 30 September 2020, the allowance for ECL of $14.9bn increased by $5.5bn compared with 31 December 2019, including favourable foreign exchange movements of $0.3bn. It increased by $0.4bn compared with 30 June 2020. The $14.9bn allowance comprised $14.0bn in respect of assets held at amortised cost, $0.8bn in respect of loan commitments and financial guarantees, and $0.2bn in respect of debt instruments measured at fair value through other comprehensive income (‘FVOCI’).
During the first half of 2020, the Group experienced a significant increase in allowances for ECL, which subsequently stabilised during 3Q20. Excluding foreign exchange movements, the allowance for ECL in relation to loans and advances to customers increased by $5.2bn from 31 December 2019. This was attributable to:
•a $3.7bn increase in wholesale loans and advances to customers, of which $1.9bn was driven by stages 1 and 2; and
•a $1.5bn increase in personal loans and advances to customers, of which $1.2bn was driven by stages 1 and 2.
During the first six months of the year, the Group experienced significant migrations from stage 1 to stage 2, reflecting a worsening of the economic outlook. This trend slowed during the third quarter as forward economic guidance remained broadly stable in comparison with 30 June 2020, with some regions experiencing transfers from stage 2 to stage 1.
Stage 3 balances at 30 September 2020 remained broadly stable compared with 30 June 2020, while benefiting from releases from historical default cases. As the Covid-19 pandemic continues, there may be volatility in future stage 3 balances, in particular due to the expiration of the measures implemented by governments, regulators and banks to support customers.
The ECL charge for 9M20 was $7.6bn, inclusive of recoveries, which comprised $5.1bn in respect of wholesale lending (of which stage 3 and purchased or originated credit impaired ('POCI') was $2.6bn), $2.3bn in respect of personal lending (of which stage 3 was $0.7bn) and $0.2bn in respect of other financial assets measured at amortised cost and debt instruments measured at FVOCI. The 3Q20 ECL charge was $0.8bn, which comprised $0.4bn in respect of wholesale lending (of which stage 3 and POCI was $0.3bn) and $0.4bn in respect of personal lending (of which stage 3 was $0.2bn).
HSBC Holdings plc Earnings Release 3Q20
19

Earnings Release – 3Q20
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
At 30 Sep 2020At 31 Dec 2019
Gross carrying/nominal amount
Allowance for ECL1
Gross carrying/nominal amount
Allowance for
ECL1
Footnotes$m$m$m$m
Loans and advances to customers at amortised cost1,055,042 (13,702)1,045,475 (8,732)
– personal452,101 (4,540)434,271 (3,134)
– corporate and commercial532,842 (8,806)540,499 (5,438)
– non-bank financial institutions70,099 (356)70,705 (160)
Loans and advances to banks at amortised cost83,904 (50)69,219 (16)
Other financial assets measured at amortised cost776,067 (251)615,179 (118)
– cash and balances at central banks285,518 (10)154,101 (2)
– items in the course of collection from other banks6,165 — 4,956 — 
– Hong Kong Government certificates of indebtedness40,086 — 38,380 — 
– reverse repurchase agreements – non-trading221,179 — 240,862 — 
– financial investments87,439 (111)85,788 (53)
– prepayments, accrued income and other assets2135,680 (130)91,092 (63)
Total gross carrying amount on-balance sheet1,915,013 (14,003)1,729,873 (8,866)
Loans and other credit-related commitments661,611 (654)600,029 (329)
– personal233,797 (43)223,314 (15)
– corporate and commercial288,979 (576)278,524 (307)
– financial138,835 (35)98,191 (7)
Financial guarantees18,674 (125)20,214 (48)
– personal745 (1)804 (1)
– corporate and commercial13,623 (115)14,804 (44)
– financial4,306 (9)4,606 (3)
Total nominal amount off-balance sheet3680,285 (779)620,243 (377)
2,595,298 (14,782)2,350,116 (9,243)
Fair value
Memorandum allowance for ECL4
Fair value
Memorandum
allowance for
ECL4
$m$m$m$m
Debt instruments measured at fair value through other comprehensive income (‘FVOCI’)385,878 (150)355,664 (166)
1    The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.
2    Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’ as presented within the summary consolidated balance sheet on page 19 includes both financial and non-financial assets.
3    Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
4    Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.
20
HSBC Holdings plc Earnings Release 3Q20
    

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
30 September 2020
Gross carrying/nominal amount1
Allowance for ECLECL coverage %
Stage 1Stage 2Stage 3
POCI2
TotalStage 1Stage 2Stage 3
POCI2
TotalStage 1Stage 2Stage 3
POCI2
Total
$m$m$m$m$m$m$m$m$m$m%%%%%
Loans and advances to customers at amortised cost878,558 157,804 18,391 289 1,055,042 (2,020)(4,607)(6,962)(113)(13,702)0.2 2.9 37.9 39.1 1.3 
– personal418,670 28,005 5,426 — 452,101 (906)(2,179)(1,455)— (4,540)0.2 7.8 26.8 — 1.0 
– corporate and commercial401,032 119,269 12,253 288 532,842 (1,057)(2,293)(5,344)(112)(8,806)0.3 1.9 43.6 38.9 1.7 
– non-bank financial institutions58,856 10,530 712 1 70,099 (57)(135)(163)(1)(356)0.1 1.3 22.9 100.0 0.5 
Loans and advances to banks at amortised cost81,277 2,627 — — 83,904 (37)(13)— — (50)— 0.5 — — 0.1 
Other financial assets measured at amortised cost765,993 9,818 254 2 776,067 (105)(51)(95)— (251)— 0.5 37.4 — — 
Loan and other credit-related commitments606,231 54,185 1,193 2 661,611 (242)(324)(88)— (654)— 0.6 7.4 — 0.1 
– personal230,909 2,634 254 — 233,797 (40)(3)— — (43)— 0.1 — — — 
– corporate and commercial241,445 46,595 937 2 288,979 (182)(306)(88)— (576)0.1 0.7 9.4 — 0.2 
– financial133,877 4,956 2 — 138,835 (20)(15)— — (35)— 0.3 — — — 
Financial guarantees13,471 4,926 276 1 18,674 (20)(64)(41)— (125)0.1 1.3 14.9 — 0.7 
– personal732 12 1 — 745 — (1)— — (1)— 8.3 — — 0.1 
– corporate and commercial9,288 4,060 274 1 13,623 (18)(57)(40)— (115)0.2 1.4 14.6 — 0.8 
– financial3,451 854 1 — 4,306 (2)(6)(1)— (9)0.1 0.7 100.0 — 0.2 
At 30 Sep 20202,345,530 229,360 20,114 294 2,595,298 (2,424)(5,059)(7,186)(113)(14,782)0.1 2.2 35.7 38.4 0.6 
Stage 2 days past due analysis at 30 September 2020
Gross carrying/nominal amount1
Allowance for ECLECL coverage %
Of which:Of which:Of which:Of which:Of which:Of which:
Stage 2
1 to 29
 DPD3,4
30 and > DPD3,4
Stage 2
1 to 29
 DPD3,4
30 and > DPD3,4
Stage 2
1 to 29
 DPD3,4
30 and > DPD3,4
$m$m$m$m$m$m%%%
Loans and advances to customers at amortised cost157,804 2,312 1,740 (4,607)(280)(286)2.9 12.1 16.4 
– personal28,005 1,540 1,211 (2,179)(236)(254)7.8 15.3 21.0 
– corporate and commercial119,269 743 432 (2,293)(44)(32)1.9 5.9 7.4 
– non-bank financial institutions10,530 29 97 (135)— — 1.3 — — 
Loans and advances to banks at amortised cost2,627 — — (13)— — 0.5 — — 
Other financial assets measured at amortised cost9,818 — 8 (51)— — 0.5 — — 
1    Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2    Purchased or originated credit-impaired ('POCI').
3    Days past due ('DPD'). Up-to-date accounts in stage 2 are not shown in amounts presented above.
4    The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.
HSBC Holdings plc Earnings Release 3Q20
21

Earnings Release – 3Q20
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2019
Gross carrying/nominal amount1
Allowance for ECLECL coverage %
Stage 1Stage 2Stage 3
POCI2
TotalStage 1Stage 2Stage 3
POCI2
TotalStage 1Stage 2Stage 3
POCI2
Total
$m$m$m$m$m$m$m$m$m$m%%%%%
Loans and advances to customers at amortised cost951,583 80,182 13,378 332 1,045,475 (1,297)(2,284)(5,052)(99)(8,732)0.1 2.8 37.8 29.8 0.8 
– personal413,669 15,751 4,851 — 434,271 (583)(1,336)(1,215)— (3,134)0.1 8.5 25.0 — 0.7 
– corporate and commercial472,253 59,599 8,315 332 540,499 (672)(920)(3,747)(99)(5,438)0.1 1.5 45.1 29.8 1.0 
– non-bank financial institutions65,661 4,832 212 — 70,705 (42)(28)(90)— (160)0.1 0.6 42.5 — 0.2 
Loans and advances to banks at amortised cost67,769 1,450 — — 69,219 (14)(2)— — (16)— 0.1 — — — 
Other financial assets measured at amortised cost613,200 1,827 151 1 615,179 (38)(38)(42)— (118)— 2.1 27.8 — — 
Loan and other credit-related commitments577,631 21,618 771 9 600,029 (137)(133)(59)— (329)— 0.6 7.7 — 0.1 
– personal221,490 1,630 194 — 223,314 (13)(2)— — (15)— 0.1 — — — 
– corporate and commercial259,138 18,804 573 9 278,524 (118)(130)(59)— (307)— 0.7 10.3 — 0.1 
– financial97,003 1,184 4 — 98,191 (6)(1)— — (7)— 0.1 — — — 
Financial guarantees17,684 2,340 186 4 20,214 (16)(22)(10)— (48)0.1 0.9 5.4 — 0.2 
– personal802 1 1 — 804 (1)— — — (1)0.1 — — — 0.1 
– corporate and commercial12,540 2,076 184 4 14,804 (14)(21)(9)— (44)0.1 1.0 4.9 — 0.3 
– financial4,342 263 1 — 4,606 (1)(1)(1)— (3)— 0.4 100.0 — 0.1 
At 31 Dec 20192,227,867 107,417 14,486 346 2,350,116 (1,502)(2,479)(5,163)(99)(9,243)0.1 2.3 35.6 28.6 0.4 
Stage 2 days past due analysis at 31 December 2019
Gross carrying/nominal amount1
Allowance for ECLECL coverage %
Of which:Of which:Of which:Of which:Of which:Of which:
Stage 2
1 to 29
 DPD3
30 and > DPD3
Stage 2
1 to 29
 DPD3
30 and > DPD3
Stage 2
1 to 29
 DPD3
30 and > DPD3
$m$m$m$m$m$m%%%
Loans and advances to customers at amortised cost80,182 2,471 1,676 (2,284)(208)(247)2.8 8.4 14.7 
– personal15,751 1,804 1,289 (1,336)(178)(217)8.5 9.9 16.8 
– corporate and commercial59,599 657 385 (920)(30)(30)1.5 4.6 7.8 
– non-bank financial institutions4,832 10 2 (28)— — 0.6 — — 
Loans and advances to banks at amortised cost1,450 — — (2)— — 0.1 — — 
Other financial assets measured at amortised cost1,827 14 30 (38)— — 2.1 — — 
1    Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2    Purchased or originated credit-impaired ('POCI').
3    Days past due ('DPD'). Up-to-date accounts in stage 2 are not shown in amounts presented above.
Measurement uncertainty and sensitivity analysis of ECL estimates
Methodology
Our methodology in relation to the adoption and generation of economic scenarios is described on page 92 of the Annual Report and Accounts 2019. There have been no significant changes during the 3Q20 period. While in keeping with HSBC’s methodology, the nature of the current economic environment has led to extensive application of management’s judgement in determining the range of possible outcomes, the number and severity of scenarios selected and the probability weights assigned.
Description of economic scenarios
The economic assumptions presented in this section have been formed by HSBC, with reference to external forecasts specifically for the purpose of calculating ECL.
Economic activity across our major markets started to recover in 3Q20 as governments eased restrictions that had been imposed earlier in the year in response to the Covid-19 outbreak. Despite this recovery, there are continued risks to economic activity, which remain a source of significant uncertainty. These risks include the resurgence of Covid-19 cases across multiple markets, risks arising from the UK's departure from the EU, continued or escalating US-China tensions and the political situation in Hong Kong. Management has considered these issues and has reflected the related economic uncertainty in the choice of scenarios and probability weights at 3Q20.
Four global scenarios have been used for the purpose of calculating ECL at 30 September 2020. These are the consensus Central scenario, the consensus Downside scenario, the consensus Upside scenario and an alternative Downside scenario. For Hong Kong and Canada only, the consensus Downside scenario has been replaced with a more severe scenario to better reflect management's view of downside risks.
22
HSBC Holdings plc Earnings Release 3Q20
    

The scenarios used are:
•The consensus Central scenario: This scenario features a ‘V-shaped’ shock to economic activity, as characterised by a deep, initial contraction in GDP in 2020, followed by a sharp recovery in 2021. The Central scenario projects an annual contraction in GDP across almost all our major markets in 2020, except in mainland China. The Central scenario assumes that any measures taken during the forecast period to contain future infections of Covid-19 will be less stringent than the measures imposed in the first half of this year, allowing economic activity to rebound and unemployment to gradually reduce.
•The consensus Downside scenario: This scenario features a considerably weaker recovery in economic activity compared with the Central scenario. In this scenario, there is a strong rise in unemployment across our key markets and significant contraction in equity markets and house prices. For Canada and Hong Kong, management replaced the consensus Downside scenario with a more severe scenario, which features a sharper downturn in GDP growth and asset prices, and a further rise in unemployment.
•The alternative Downside scenario: This scenario is ‘U-shaped’ and reflects management’s view of tail risks and features an extremely severe and prolonged recession.
•The consensus Upside scenario: This scenario features a faster recovery in economic activity in the near term, compared with the Central scenario, with GDP growth returning to pre-Covid-19 levels in 2021 in Hong Kong, mainland China, the UK and the US.
Both the consensus Downside and the alternative Downside scenarios are global in nature, and while they differ in severity, they assume that the key risks to HSBC crystallise simultaneously. For example, the Downside scenarios assume that the UK and EU fail to agree a trade deal by 31 December 2020, when the transition period ends, and this occurs in conjunction with a further deterioration in the other global risks outlined at the start of this section.
The range of macroeconomic projections across the various scenarios is shown in the table below:
Forecast range of quarterly worst point of economic measures of key markets
Hong KongMainland ChinaUKUS
Central scenario five-
year average		Worst pointCentral scenario five-year averageWorst pointCentral scenario five-year averageWorst pointCentral scenario five-year averageWorst point
GDP growth rate (%)2.6(0.4) to (15.8)
(4Q20) (1Q21)		5.63.7 to (6.1)
(4Q21) (1Q21)		2.5(3.9) to (16.7)
(4Q20) (1Q21)		2.3(3.2) to (12.6)
(4Q20) (1Q21)
Unemployment rate (%)4.05.7 to 8.0 (4Q20) (1Q21)4.35.0 to 6.1 (1Q21) (1Q22)5.67.3 to 10.5 (4Q20) (2Q21)6.08.1 to 13.0 (4Q20) (4Q21)
House price growth (%)1.7(2.8) to (26.3)
(4Q20) (1Q21)		4.44.2 to (25.8)
(4Q20) (3Q21)		2.5(0.2) to (24.7)
(4Q20) (2Q21)		3.83.4 to (15.6)
(1Q21) (2Q21)
Note: The worst point refers to the quarter that is either the trough or peak in the respective variable. The figures provided represent the worst point across all scenarios: the consensus Central, consensus Upside, the consensus Downside, the management Downside and the alternative Downside.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are short-term increases or decreases to the ECL at either a customer or portfolio level to account for late-breaking events, model deficiencies and expert credit judgement applied following management review and challenge. We have internal governance in place to monitor post-model adjustments regularly and, where possible, to reduce the reliance on these through model recalibration or redevelopment, as appropriate. Depending on the path of the Covid-19 outbreak and the shape of the economic recovery, we continue to anticipate the composition of modelled ECL and management judgemental adjustments may still be revised significantly over the remainder of 2020, particularly when the economy resumes positive GDP growth and the uncertainty over long-term unemployment abates.
Management judgemental adjustments made in estimating the reported ECL at 30 September 2020 are set out in the following table. The table includes adjustments in relation to data and model limitations resulting from the Covid-19 outbreak, and as a result of the regular process of model development and implementation. It shows the adjustments applicable to the scenario-weighted ECL numbers. Adjustments in relation to Downside scenarios are more significant, as results are subject to greater uncertainty.
Management judgemental adjustments to ECL1
RetailWholesaleTotal
$bn$bn$bn
Low-risk counterparties (banks, sovereigns and government entities)(0.2)(0.9)(1.1)
Corporate lending adjustments— (0.9)(0.9)
Retail lending adjustments0.3 — 0.3 
Retail model default suppression adjustment1.5 1.5 
Total1.6 (1.8)(0.2)
1    Management judgemental adjustments presented in the table reflect increases and (decreases) to ECL, respectively.
Management judgemental adjustments at 31 December 2019 were an increase to ECL of $75m for the wholesale portfolio and $131m for the retail portfolio. This excludes adjustments for alternative scenarios.
During 2020, management judgemental adjustments reflected the volatile economic conditions associated with the Covid-19 pandemic. Modelled ECL outcomes based on historical relationships generated overly sensitive ECL outcomes in conditions outside the range of historical experience. In addition, modelled relationships did not reflect the effect of country-specific government support measures and customer relief programmes. The composition of modelled ECL and management judgemental adjustments changed significantly over 9M20 as certain economic measures, such as GDP growth rate, passed the expected low point in a number of key markets and returned towards those reflected in modelled relationships, subject to continued uncertainty in the recovery paths of different economies. At 3Q20, retail management judgemental adjustments led to an ECL increase of $1.6bn, primarily from additional ECL of $1.5bn to reflect the delaying effect of government support and customer relief measures on potential defaults (4Q19: $0.1bn increase; 2Q20: $0.6bn decrease). In the wholesale portfolio, management judgemental adjustments were an ECL reduction of $1.8bn (4Q19: $0.1bn increase; 2Q20: $3.9bn decrease). The reduction of these adjustments in the third quarter followed an improvement in macroeconomic
HSBC Holdings plc Earnings Release 3Q20
23

Earnings Release – 3Q20
assumptions compared with the previous quarter, with models operating closer to their calibration range. Overall, the 3Q20 ECL charge remained stable, reflecting a stabilisation of economic conditions following the sharp and significant deterioration in 1H20.
The adjustments at 30 September 2020 relating to low-credit-risk exposures were mainly to highly rated banks, sovereigns and US government-sponsored entities, where modelled credit factors did not fully reflect the underlying fundamentals of these entities or the effect of government support and economic programmes in the Covid-19 environment.
Adjustments to corporate exposures principally reflect the outcome of the ‘credit experts best estimate’ review on wholesale corporate exposures. Management judgemental adjustments, both positive and negative, have been made where modelled rating migration, and ECL outputs based on historical relationships, produced results that were overly sensitive. This can be the case when using economic inputs that are well outside the range of historical experience.
In retail, the adjustment, under low-risk counterparties and economies, was to reduce ECL on insurance portfolios due to model over-prediction of downgrades in the bank and sovereign portfolios. Within retail lending adjustments, one of the main drivers of adjustments was in relation to addressing risks associated with customers on payment relief programmes across the markets. There was also an adjustment made in relation to the UK, where modelled probability of default outputs for the Downside scenarios were adjusted to address model limitations, so as to be consistent with longer-term relationships between unemployment and defaults.
Furthermore, a significant retail model default suppression adjustment of $1.5bn at 30 September 2020 (31 December 2019: $0) was applied as defaults remain suppressed due to customer relief and government support programmes. Retail models are reliant on the assumption that as macroeconomic conditions deteriorate, defaults will crystallise. We will continue to monitor the continuation of customer relief and government support programmes that have supported stabilised macroeconomic conditions and therefore suppress retail model defaults. We will adjust the timing of management judgemental adjustments in retail model default to ensure appropriate alignment with expected performance taking into consideration the levels and timing of customer relief and government support programmes.
Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against the economic forecasts as part of the ECL governance process by recalculating the ECL under each scenario described above for selected portfolios, applying a 100% weighting to each scenario in turn. The weighting is reflected in both the determination of a significant increase in credit risk and the measurement of the resulting ECL.
The ECL calculated for the Upside and Downside scenarios should not be taken to represent the upper and lower limits of possible ECL outcomes. The impact of defaults that might occur in the future under different economic scenarios is captured by recalculating ECL for loans in stages 1 and 2 at the balance sheet date. The population of stage 3 loans (in default) at the balance sheet date is unchanged in these sensitivity calculations. Stage 3 ECL would only be sensitive to changes in forecasts of future economic conditions if the loss-given default (‘LGD’) of a particular portfolio was sensitive to these changes.
There is a particularly high degree of estimation uncertainty in numbers representing tail risk scenarios when assigned a 100% weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes ECL and financial instruments related to defaulted obligors because the measurement of ECL is relatively more sensitive to credit factors specific to the obligor than future economic scenarios. Therefore, it is impracticable to separate the effect of macroeconomic factors in individual assessments.
For retail credit risk exposures, the sensitivity analysis includes ECL for loans and advances to customers related to defaulted obligors. This is because the retail ECL for secured mortgage portfolios, including loans in all stages, is sensitive to macroeconomic variables.
Group ECL sensitivity results
The ECL charge for 9M20 was $7.6bn. The ECL charge, inclusive of recoveries, comprised $5.1bn in respect of wholesale lending (of which stage 3 and POCI was $2.6bn), $2.3bn in respect of personal lending (of which stage 3 was $0.7bn) and $0.2bn in respect of other financial assets measured at amortised cost and debt instruments measured at FVOCI. The ECL impact of the scenarios and judgemental management adjustments are highly sensitive to movements in economic forecasts, including the efficacy of government support measures. Based upon the sensitivity tables presented above, if the Group ECL balance (excluding wholesale stage 3, which is assessed individually) was estimated solely on the basis of the Central scenario, Downside scenario or the alternative Downside scenario at
30 September 2020, it would increase/(decrease) as presented in the below table.
Retail1,2
Wholesale1,3
Total Group ECL$bn $bn
Reported ECL4.2 4.3 
Scenarios
100% consensus Central scenario(0.2)(0.7)
100% consensus Downside scenario4
0.5 1.4 
100% alternative Downside scenario1.9 6.7 
1    ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2    ECL sensitivity includes only on-balance sheet financial instruments to which IFRS 9 impairment requirements are applied.
3    Includes low credit-risk financial instruments, such as debt instruments at FVOCI, which have high carrying values but low ECL under all the scenarios.
4    For Hong Kong and Canada, this is the management Downside scenario.
There still remains a significant degree of uncertainty in relation to the UK economic outlook. If a 100% weight were applied to the consensus Downside and alternative Downside scenarios for the UK, respectively, it would result in an increase in ECL of $0.3bn and $1.3bn in Wholesale and $0.1bn and $0.5bn in Retail.
24
HSBC Holdings plc Earnings Release 3Q20
    

Personal lending
Total personal lending for loans and advances to customers by stage distribution
Gross carrying amountAllowance for ECL
Stage 1Stage 2Stage 3TotalStage 1Stage 2Stage 3Total
$m$m$m$m$m$m$m$m
By portfolio
First lien residential mortgages314,755 15,595 3,255 333,605 (118)(253)(414)(785)
– of which:
interest only (including offset)		29,363 1,563 350 31,276 (11)(20)(81)(112)
affordability (including US adjustable rate mortgages)12,336 2,872 635 15,843 (12)(9)(4)(25)
Other personal lending103,915 12,410 2,171 118,496 (788)(1,926)(1,041)(3,755)
– other85,337 7,128 1,417 93,882 (366)(786)(657)(1,809)
– credit cards16,494 5,139 690 22,323 (408)(1,122)(367)(1,897)
– second lien residential mortgages616 112 53 781 (2)(9)(10)(21)
– motor vehicle finance1,468 31 11 1,510 (12)(9)(7)(28)
At 30 Sep 2020418,670 28,005 5,426 452,101 (906)(2,179)(1,455)(4,540)
By geography
Europe189,065 8,848 2,576 200,489 (277)(1,130)(808)(2,215)
– of which: UK153,112 7,603 1,760 162,475 (257)(1,032)(537)(1,826)
Asia181,399 11,620 867 193,886 (284)(412)(222)(918)
– of which: Hong Kong127,785 5,363 210 133,358 (73)(266)(58)(397)
MENA4,998 418 272 5,688 (53)(115)(173)(341)
North America38,059 5,594 1,456 45,109 (103)(181)(139)(423)
Latin America5,149 1,525 255 6,929 (189)(341)(113)(643)
At 30 Sep 2020418,670 28,005 5,426 452,101 (906)(2,179)(1,455)(4,540)
By portfolio
First lien residential mortgages312,031 7,077 3,070 322,178 (39)(68)(422)(529)
– of which:
interest only (including offset)		31,201 1,602 376 33,179 (6)(15)(91)(112)
affordability (including US adjustable rate mortgages)14,222 796 514 15,532 (3)(3)(3)(9)
Other personal lending101,638 8,674 1,781 112,093 (544)(1,268)(793)(2,605)
– other77,031 4,575 1,193 82,799 (229)(451)(491)(1,171)
– credit cards22,285 3,959 524 26,768 (310)(801)(284)(1,395)
– second lien residential mortgages750 84 55 889 (1)(6)(10)(17)
– motor vehicle finance1,572 56 9 1,637 (4)(10)(8)(22)
At 31 Dec 2019413,669 15,751 4,851 434,271 (583)(1,336)(1,215)(3,134)
By geography
Europe186,561 6,854 2,335 195,750 (112)(538)(578)(1,228)
– of which: UK153,313 5,455 1,612 160,380 (104)(513)(370)(987)
Asia173,523 5,855 717 180,095 (223)(339)(170)(732)
– of which: Hong Kong117,013 2,751 189 119,953 (90)(220)(44)(354)
MENA5,671 247 299 6,217 (50)(58)(189)(297)
North America41,148 1,930 1,238 44,316 (56)(119)(141)(316)
Latin America6,766 865 262 7,893 (142)(282)(137)(561)
At 31 Dec 2019413,669 15,751 4,851 434,271 (583)(1,336)(1,215)(3,134)

HSBC Holdings plc Earnings Release 3Q20
25

Earnings Release – 3Q20
Total wholesale lending for loans and advances to banks and customers at amortised cost
Gross carrying amountAllowance for ECL
Stage 1Stage 2Stage 3POCITotalStage 1Stage 2Stage 3POCITotal
$m$m$m$m$m$m$m$m$m$m
Corporate and commercial401,032 119,269 12,253 288 532,842 (1,057)(2,293)(5,344)(112)(8,806)
– agriculture, forestry and fishing5,915 739 315 2 6,971 (15)(24)(148)(1)(188)
– mining and quarrying8,659 3,735 1,306 12 13,712 (46)(106)(432)(12)(596)
– manufacture71,291 23,223 1,620 80 96,214 (158)(332)(761)(39)(1,290)
– electricity, gas, steam and air-conditioning supply12,426 2,294 116 — 14,836 (33)(32)(17)— (82)
– water supply, sewerage, waste management and remediation2,300 699 43 — 3,042 (9)(15)(22)— (46)
– construction9,358 5,153 693 33 15,237 (29)(109)(390)(32)(560)
– wholesale and retail trade, repair of motor vehicles and motorcycles66,500 21,778 3,119 12 91,409 (144)(271)(1,856)(3)(2,274)
– transportation and storage20,303 7,209 823 12 28,347 (80)(172)(222)— (474)
– accommodation and food13,899 11,321 473 1 25,694 (60)(232)(111)(1)(404)
– publishing, audiovisual and broadcasting17,041 3,437 161 31 20,670 (47)(99)(33)(5)(184)
– real estate109,113 17,510 1,367 1 127,991 (183)(322)(525)— (1,030)
– professional, scientific and technical activities16,317 8,206 501 31 25,055 (51)(107)(157)(7)(322)
– administrative and support services18,390 7,746 813 73 27,022 (49)(164)(244)(12)(469)
– public administration and defence, compulsory social security1,890 465 3 — 2,358 (2)(10)(1)— (13)
– education1,530 552 37 — 2,119 (9)(20)(11)— (40)
– health and care4,772 1,268 254 — 6,294 (20)(37)(119)— (176)
– arts, entertainment and recreation1,368 1,182 182 — 2,732 (9)(48)(65)— (122)
– other services11,136 1,471 426 — 13,033 (107)(175)(229)— (511)
– activities of households625 153 — — 778 — (3)— — (3)
– extra-territorial organisations and bodies activities7 — — — 7 — — — — — 
– government7,613 1,114 1 — 8,728 (6)(2)(1)— (9)
– asset-backed securities579 14 — — 593 — (13)— — (13)
Non-bank financial institutions58,856 10,530 712 1 70,099 (57)(135)(163)(1)(356)
Loans and advances to banks81,277 2,627 — — 83,904 (37)(13)— — (50)
At 30 Sep 2020541,165 132,426 12,965 289 686,845 (1,151)(2,441)(5,507)(113)(9,212)
By geography
Europe169,448 39,595 7,013 126 216,182 (553)(1,209)(2,044)(53)(3,859)
– of which: UK116,881 28,386 5,104 78 150,449 (443)(971)(1,362)(38)(2,814)
Asia289,156 58,792 2,729 116 350,793 (327)(447)(1,741)(43)(2,558)
– of which: Hong Kong173,104 35,238 990 47 209,379 (177)(272)(521)(24)(994)
MENA21,929 10,176 1,879 17 34,001 (76)(232)(1,162)(12)(1,482)
North America49,681 18,790 935 — 69,406 (89)(315)(332)— (736)
Latin America10,951 5,073 409 30 16,463 (106)(238)(228)(5)(577)
At 30 Sep 2020541,165 132,426 12,965 289 686,845 (1,151)(2,441)(5,507)(113)(9,212)

26
HSBC Holdings plc Earnings Release 3Q20
    

Total wholesale lending for loans and advances to banks and customers at amortised cost (continued)
Gross carrying amountAllowance for ECL
Stage 1Stage 2Stage 3POCITotalStage 1Stage 2Stage 3POCITotal
$m$m$m$m$m$m$m$m$m$m
Corporate and commercial472,253 59,599 8,315 332 540,499 (672)(920)(3,747)(99)(5,438)
– agriculture, forestry and fishing5,416 1,000 278 2 6,696 (13)(29)(139)(1)(182)
– mining and quarrying9,923 4,189 311 12 14,435 (22)(70)(122)(12)(226)
– manufacture88,138 14,525 1,581 136 104,380 (143)(211)(806)(50)(1,210)
– electricity, gas, steam and air-conditioning
supply		13,479 1,386 175 — 15,040 (14)(41)(25)— (80)
– water supply, sewerage, waste management and remediation2,963 508 30 — 3,501 (6)(4)(18)— (28)
– construction10,520 3,883 852 32 15,287 (16)(49)(467)(32)(564)
– wholesale and retail trade, repair of motor vehicles and motorcycles83,151 9,897 1,625 8 94,681 (111)(137)(934)(2)(1,184)
– transportation and storage22,604 2,359 588 29 25,580 (42)(37)(158)— (237)
– accommodation and food20,109 4,284 262 1 24,656 (37)(46)(62)(1)(146)
– publishing, audiovisual and broadcasting18,103 1,706 141 21 19,971 (30)(23)(33)(1)(87)
– real estate122,972 6,450 1,329 1 130,752 (108)(97)(475)— (680)
– professional, scientific and technical activities21,085 2,687 350 — 24,122 (31)(33)(145)— (209)
– administrative and support services21,370 3,817 438 89 25,714 (33)(58)(179)— (270)
– public administration and defence, compulsory social security1,889 488 — — 2,377 (1)(7)— — (8)
– education1,700 184 16 — 1,900 (7)(5)(6)— (18)
– health and care3,543 811 111 — 4,465 (9)(20)(28)— (57)
– arts, entertainment and recreation2,537 257 30 — 2,824 (6)(8)(11)— (25)
– other services13,143 941 191 1 14,276 (35)(31)(133)— (199)
– activities of households725 66 — — 791 — — — — — 
– extra-territorial organisations and bodies activities2 — — — 2 — — — — — 
– government8,159 147 7 — 8,313 (6)(2)(6)— (14)
– asset-backed securities722 14 — — 736 (2)(12)— — (14)
Non-bank financial institutions65,661 4,832 212 — 70,705 (42)(28)(90)— (160)
Loans and advances to banks67,769 1,450 — — 69,219 (14)(2)— — (16)
At 31 Dec 2019605,683 65,881 8,527 332 680,423 (728)(950)(3,837)(99)(5,614)
By geography
Europe190,528 20,276 4,671 129 215,604 (318)(458)(1,578)(45)(2,399)
– of which: UK131,007 16,253 3,343 79 150,682 (252)(385)(989)(32)(1,658)
Asia308,305 32,287 1,419 148 342,159 (228)(253)(986)(38)(1,505)
– of which: Hong Kong182,501 23,735 673 48 206,957 (118)(172)(475)(28)(793)
MENA25,470 3,314 1,686 18 30,488 (55)(85)(946)(12)(1,098)
North America64,501 7,495 458 — 72,454 (45)(96)(141)— (282)
Latin America16,879 2,509 293 37 19,718 (82)(58)(186)(4)(330)
At 31 Dec 2019605,683 65,881 8,527 332 680,423 (728)(950)(3,837)(99)(5,614)
HSBC Holdings plc Earnings Release 3Q20
27

Earnings Release – 3Q20
Customer relief programmes
In response to the Covid-19 outbreak, governments and regulators around the world have introduced a number of support measures for both personal and wholesale customers in market-wide schemes. The following table presents the number of personal accounts/wholesale customers and the associated drawn loan values of customers under these schemes and HSBC-specific measures for major markets at 30 September 2020. In relation to personal lending, the majority of relief measures, including payment holidays, relate to existing lending, while in wholesale lending the relief measures comprise payment holidays, refinancing of existing facilities and new lending under government-backed schemes.
At 30 September 2020, the gross carrying value of loans to personal customers under relief was $14.9bn (2Q20: $26.3bn). This comprised $11.5bn in relation to mortgages (2Q20: $21.1bn) and $3.4bn in relation to other personal lending (2Q20: $5.2bn). The decrease in personal customer relief during the third quarter was driven by customers exiting relief measures. The gross carrying value of loans to wholesale customers under relief was $52.3bn (2Q20: $51.8bn).
Personal lending
Extant at 30 September 2020UKHong KongUS
Other major
markets1,2,3
Total
Market-wide schemes
Number of accounts in mortgage customer relief000s17——4360 
Drawn loan value of accounts in mortgage customer relief$m3,692——3,4747,166 
Number of accounts in other personal lending customer relief000s24——92116 
Drawn loan value of accounts in other personal lending customer relief$m303——2,0322,335 
HSBC-specific measures
Number of accounts in mortgage customer relief000s—321116 
Drawn loan value of accounts in mortgage customer relief$m171,2591,0162,0354,327 
Number of accounts in other personal lending customer relief000s—1203758 
Drawn loan value of accounts in other personal lending customer relief$m—921388241,054 
Total personal lending to major markets under market-wide schemes and HSBC-specific measures
Number of accounts in mortgage customer relief000s17 3 2 54 76 
Drawn loan value of accounts in mortgage customer relief$m3,709 1,259 1,016 5,509 11,493 
Number of accounts in other personal lending customer relief000s24 1 20 129 174 
Drawn loan value of accounts in other personal lending customer relief$m303 92 138 2,856 3,389 
Market-wide schemes and HSBC-specific measures – mortgage relief as a proportion of total mortgages%2.61.45.57.43.5
Market-wide schemes and HSBC-specific measures – other personal lending relief as a proportion of total other personal lending loans and advances%1.60.26.25.73.0
Wholesale lending
Extant at 30 September 2020UKHong KongUS
Other major
markets1
Total
Market-wide schemes
Number of customers under market-wide measures000s187547203
Drawn loan value of customers under market-wide schemes$m10,26521,4571,1867,24640,154
HSBC-specific schemes
Number of customers under HSBC-specific measures000s5——1015
Drawn loan value of customers under HSBC-specific measures$m4,0311,2741,1035,78712,195
Total wholesale lending to major markets under market-wide schemes and HSBC-specific measures
Number of customers4
000s192 5 4 17 218 
Drawn loan value$m14,296 22,731 2,289 13,033 52,349 
Market-wide schemes and HSBC-specific measures as a proportion of total wholesale lending loans and advances%9.812.15.46.89.2
1    Other major markets include Australia, Canada, mainland China, Egypt, France, Germany, India, Indonesia, Malaysia, Mexico, Singapore, Switzerland, Taiwan and UAE.
2    In Malaysia, personal lending customers are granted an automatic moratorium programme for all eligible retail customers. At 30 September 2020, the number of accounts under this moratorium was 119,000 with an associated drawn balance of $3,944m.
3    In Mexico, there were 36,000 personal lending accounts under customer relief with an associated drawn balance of $494m.
4    Within total wholesale customers, there were 2,000 customers under both market-wide and HSBC-specific schemes.
The initial granting of customer relief does not automatically trigger a migration to stage 2 or 3. However, information provided by payment deferrals is considered in the context of other reasonable and supportable information. This forms part of the overall assessment for whether there has been a significant increase in credit risk and credit impairment to identify loans for which lifetime ECL is appropriate. An extension in payment deferral does not automatically result in a migration to stage 2 or stage 3. The key accounting and credit risk judgement to ascertain whether a significant increase in credit risk has occurred is whether the economic effects of the Covid-19 outbreak on the customer are likely to be temporary over the lifetime of the loan, and whether they indicate that a concession is being made in respect of financial difficulty that would be consistent with stage 3.
On 2 September 2020, the Hong Kong Monetary Authority announced that the Pre-approved Principal Payment Holiday Scheme for Corporate Customers had been extended for a further six months to April 2021. A summary of the other main market-wide and HSBC-specific scheme was set out on pages 67 and 68 of the Interim Report 2020.
28
HSBC Holdings plc Earnings Release 3Q20
    

Capital adequacy
Capital adequacy metrics
At
30 Sep30 Jun31 Dec
202020202019
Risk-weighted assets ('RWAs') ($bn)
Credit risk692.7 686.7676.6
Counterparty credit risk41.6 43.144.1
Market risk31.3 35.229.9
Operational risk91.4 89.692.8
Total risk-weighted assets857.0 854.6843.4
Capital on a transitional basis ($bn)
Common equity tier 1 (‘CET1’) capital133.4 128.4124.0
Tier 1 capital157.4 152.5148.4
Total capital181.8 177.2172.2
Capital ratios on a transitional basis (%)
CET115.6 15.0 14.7 
Tier 118.4 17.8 17.6 
Total capital21.2 20.7 20.4 
Capital on an end point basis ($bn)
Common equity tier 1 (‘CET1’) capital133.4 128.4124.0
Tier 1 capital154.3 149.4144.8
Total capital169.2 164.4159.3
Capital ratios on an end point basis (%)
CET115.6 15.0 14.7 
Tier 118.0 17.5 17.2 
Total capital19.7 19.2 18.9 
Liquidity coverage ratio (‘LCR’)
Total high-quality liquid assets ($bn)654.2 654.4601.4
Total net cash outflow ($bn)446.3 442.9400.5
LCR ratio (%)146.6 147.8 150.2 
Capital figures and ratios in the table above are calculated in accordance with the revisions to the Capital Requirements Regulation and Directive, as implemented (‘CRR II’). The table presents them under the transitional arrangements in CRR II for capital instruments and after their expiry, known as the end point. The end point figures in the table above take into account the regulatory transitional arrangements in CRR II for IFRS 9, which are more fully described below.
Where applicable, they also reflect government relief schemes intended to mitigate the impact of the Covid-19 outbreak.
Regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’
We have adopted the regulatory transitional arrangements in CRR II for IFRS 9, including paragraph four of article 473a. Our capital and ratios are presented under these arrangements throughout the table above, including in the end point figures. Without their application, our CET1 ratio would be 15.4%.
The IFRS 9 regulatory transitional arrangements allow banks to add back to their capital base a proportion (currently 70%) of the impact that IFRS 9 has upon their loan loss allowances during the first five years of use. The impact is defined as:
•the increase in loan loss allowances on day one of IFRS 9 adoption; and
•any subsequent increase in expected credit losses (‘ECL’) in the non-credit-impaired book thereafter.
Any add-back must be tax affected and accompanied by a recalculation of capital deduction thresholds, exposure and RWAs. The impact is calculated separately for portfolios using the standardised (‘STD’) and internal ratings based (‘IRB’) approaches. For IRB portfolios, there is no add-back to capital unless loan loss allowances exceed regulatory 12-month expected losses.
The EU’s CRR ‘Quick Fix’ relief package enacted in June 2020 increased from 70% to 100% the relief that banks may take for loan loss allowances recognised since 1 January 2020 on the non-credit-impaired book.
At 30 September 2020, the add-back to CET1 capital amounted to $1.5bn under the STD approach with a tax impact of $0.3bn.
Capital
At 30 September 2020, our CET1 ratio was 15.6%, up from 15.0% at 30 June 2020. CET1 capital increased during the quarter by $5.0bn, mainly as a result of:
•foreign currency translation differences of $2.8bn;
•capital generation of $0.9bn through regulatory profits and an increase of $0.1bn in FVOCI reserves;
•a $0.4bn fall in the threshold deduction for significant investments in financial sector entities; and
•a fall in deductions from CET1 totalling $0.3bn, including $0.2bn relating to goodwill and intangible assets and $0.1bn to deferred tax.
The third quarter prudent valuation adjustment deduction of $1.2bn included a $0.2bn increase arising from additional uncertainty reserves for exit of over-the-counter derivative transactions.
HSBC Holdings plc Earnings Release 3Q20
29

Earnings Release – 3Q20
Leverage
Leverage ratio1
At
30 Sep30 Jun
20202020
Ref*
Footnotes$bn$bn
20
Tier 1 capital
154.3 149.4 
21
Total leverage ratio exposure
2,857.4 2,801.4 
%%
22
Leverage ratio
5.4 5.3 
EU-23
Choice of transitional arrangements for the definition of the capital measure
Fully phased-inFully phased-in
UK leverage ratio exposure – quarterly average22,569.3 2,565.8 
%%
UK leverage ratio – quarterly average26.0 5.7 
UK leverage ratio – quarter end 26.1 5.9 
*    The references identify the lines prescribed in the EBA template.
1    The CRR II regulatory transitional arrangements for IFRS 9 are applied in both leverage ratio calculations.
2    UK leverage ratio denotes the Group’s leverage ratio calculated under the PRA’s UK leverage framework. This measure excludes qualifying central bank balances and loans under the UK Bounce Back Loan scheme from the calculation of exposure.
Our leverage ratio calculated in accordance with the Capital Requirements Regulation in force was 5.4% at 30 September 2020, up from 5.3% at 30 June 2020, primarily due to an increase in tier 1 capital.
At 30 September 2020, our UK minimum leverage ratio requirement of 3.25% was supplemented by an additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of 0.1%. These additional buffers translated into capital values of $17.7bn and $1.9bn respectively. We exceeded these leverage requirements.
Risk-weighted assets
RWAs by global business
WPBCMBGBMCorporate
Centre		Total
$bn$bn$bn$bn$bn
Credit risk137.8 305.6 169.4 79.9 692.7 
Counterparty credit risk0.7 0.2 40.1 0.6 41.6 
Market risk1.3 0.7 26.5 2.8 31.3 
Operational risk33.4 25.9 31.1 1.0 91.4 
At 30 Sep 2020173.2 332.4 267.1 84.3 857.0 
RWA movement by global business by key driver
Credit risk, counterparty credit risk and operational risk
WPBCMBGBMCorporate
Centre		Market riskTotal RWAs
$bn$bn$bn$bn$bn$bn
RWAs at 1 July 2020160.6 330.2 247.9 80.7 35.2 854.6 
Asset size8.9 (6.0)(8.2)(0.2)(5.3)(10.8)
Asset quality— 2.1 0.5 0.4 — 3.0 
Model updates0.3 0.1 (0.1)— — 0.3 
Methodology and policy
(0.5)(1.8)(3.5)0.1 1.4 (4.3)
Foreign exchange movements2.6 7.1 4.0 0.5 — 14.2 
Total RWA movement11.3 1.5 (7.3)0.8 (3.9)2.4 
RWAs at 30 Sep 2020171.9 331.7 240.6 81.5 31.3 857.0 
Risk-weighted assets (‘RWAs’) rose by $2.4bn during 3Q20, including an increase of $14.2bn due to foreign currency translation differences. The $11.8bn decrease (excluding foreign currency translation differences) comprised the movements described by the following comments.
Asset size
The $10.8bn decrease in RWAs due to asset size movements was predominantly due to reductions in GBM and CMB, and a $5.3bn decrease in market risk RWAs, partly offset by $8.9bn growth in WPB.
The $8.2bn fall in GBM RWAs included reductions in credit risk totalling $7.4bn across all major regions, partly as a result of $2.1bn from active portfolio management measures as well as from reduced lending. It also included a $0.8bn fall in counterparty credit risk RWAs, mainly as a result of trade actions in North America.
The $6.0bn fall in CMB RWAs occurred mainly in North America, Europe and Asia and reflected both repayments and $1.3bn of reductions under management initiatives.
Market risk RWAs decreased by $5.3bn, largely due to changes in market conditions, reduced sovereign exposures and management initiatives.
These reductions were partly offset by an $8.9bn increase in WPB RWAs, mostly from short-term lending in Hong Kong.
30
HSBC Holdings plc Earnings Release 3Q20
    

Asset quality
Changes in asset quality led to an RWA increase of $3.0bn, mainly in CMB and GBM.
The $2.1bn increase in CMB RWAs was predominantly in Asia, driven by credit migration. Total credit migration impacts in CMB during 3Q20 were $4.8bn, but the effects in other regions were largely offset by decreases due to changes in portfolio mix.
In GBM, the $0.5bn RWA increase was driven by credit rating migration on derivative transactions in Europe and Asia. Other credit migration impacts of $2.0bn were mostly offset by decreases due to changes in portfolio mix.
Model updates
The $0.3bn RWA increase due to model updates mainly related to North American revolving facilities.
Methodology and policy
The $4.3bn reduction in RWAs due to methodology and policy changes was primarily due to RWA initiatives in GBM and CMB, mainly in the form of risk parameter refinements in Asia and Europe, and a reduction of $0.5bn from the introduction of the new infrastructure supporting factor under the CRR ‘Quick Fix’ relief package. A further RWA decrease of $0.5bn in WPB was largely due to refinements in the mortgage portfolio.
Partly offsetting these reductions was a $1.4bn increase in market risk RWAs, largely in relation to risks not captured by internal models.
Summary information – global businesses
Analysis of significant items by global business is presented below.
Reconciliation of reported results to adjusted results – global businesses
Nine months ended 30 Sep 2020
Wealth and
Personal
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate
Centre		Total
Footnotes$m$m$m$m$m
Revenue1
Reported16,679 10,148 11,695 150 38,672 
Significant items13 17 97 (257)(130)
– customer redress programmes5 17 — — 22 
– disposals, acquisitions and investment in new businesses8 — — — 8 
– fair value movements on financial instruments2— — (62)(248)(310)
– restructuring and other related costs3— — 159 (9)150 
Adjusted16,692 10,165 11,792 (107)38,542 
ECL
Reported(2,545)(3,880)(1,218)— (7,643)
Adjusted(2,545)(3,880)(1,218)— (7,643)
Operating expenses
Reported(11,440)(4,984)(7,565)(579)(24,568)
Significant items412 59 771 973 2,215 
– customer redress programmes45 1 — 7 53 
– impairment of goodwill and other intangibles309 44 578 151 1,082 
– restructuring and other related costs458 14 191 809 1,072 
– settlements and provisions in connection with legal and regulatory matters— — 2 6 8 
Adjusted(11,028)(4,925)(6,794)394 (22,353)
Share of profit in associates and joint ventures
Reported2 — — 929 931 
Significant items— — — 462 462 
– impairment of goodwill5— — — 462 462 
Adjusted2 — — 1,391 1,393 
Profit before tax
Reported2,696 1,284 2,912 500 7,392 
Significant items425 76 868 1,178 2,547 
– revenue13 17 97 (257)(130)
– operating expenses412 59 771 973 2,215 
– share of profit in associates and joint ventures— — — 462 462 
Adjusted3,121 1,360 3,780 1,678 9,939 
Loans and advances to customers (net)
Reported459,516 343,702 236,902 1,220 1,041,340 
Adjusted459,516 343,702 236,902 1,220 1,041,340 
Customer accounts
Reported793,612 431,021 343,365 716 1,568,714 
Adjusted793,612 431,021 343,365 716 1,568,714 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
4    Includes impairment of software intangible assets of $173m (of the total software intangible asset impairment of $1,320m) and impairment of tangible assets of $124m.
5    During the year, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.
HSBC Holdings plc Earnings Release 3Q20
31

Earnings Release – 3Q20
Reconciliation of reported results to adjusted results – global businesses (continued)
Nine months ended 30 Sep 20191
Wealth and
Personal
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate
Centre		Total
Footnotes$m$m$m$m$m
Revenue2
Reported19,238 11,576 11,223 690 42,727 
Currency translation(272)(143)(156)(34)(605)
Significant items126 13 37 (1,136)(960)
– customer redress programmes108 9 — 1 118 
– disposal, acquisitions and investment in new businesses
4 — — (827)(823)
– fair value movements on financial instruments37 4 40 (311)(260)
– currency translation on significant items7 — (3)1 5 
Adjusted19,092 11,446 11,104 (480)41,162 
ECL
Reported(1,012)(906)(124)19 (2,023)
Currency translation58 27 7 — 92 
Adjusted(954)(879)(117)19 (1,931)
Operating expenses
Reported(12,669)(5,139)(7,267)(221)(25,296)
Currency translation198 67 73 38 376 
Significant items1,083 45 167 283 1,578 
– costs of structural reform4— 4 36 86 126 
– customer redress programmes1,084 15 — (1)1,098 
– restructuring and other related costs70 27 131 199 427 
– settlements and provisions in connection with legal and regulatory matters(66)— — — (66)
– currency translation on significant items(5)(1)— (1)(7)
Adjusted(11,388)(5,027)(7,027)100 (23,342)
Share of profit in associates and joint ventures
Reported50 — — 1,786 1,836 
Currency translation(2)— — (30)(32)
Adjusted48 — — 1,756 1,804 
Profit before tax
Reported5,607 5,531 3,832 2,274 17,244 
Currency translation(18)(49)(76)(26)(169)
Significant items1,209 58 204 (853)618 
– revenue126 13 37 (1,136)(960)
– operating expenses1,083 45 167 283 1,578 
Adjusted6,798 5,540 3,960 1,395 17,693 
Loans and advances to customers (net)
Reported422,503 341,396 252,713 1,221 1,017,833 
Currency translation12,094 7,196 5,141 49 24,480 
Adjusted434,597 348,592 257,854 1,270 1,042,313 
Customer accounts
Reported718,643 355,293 299,109 696 1,373,741 
Currency translation15,195 8,012 7,944 37 31,188 
Adjusted733,838 363,305 307,053 733 1,404,929 
1    A change in reportable segments was made in 2Q20. Comparative data have been re-presented accordingly.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4    Comprises costs associated with preparations for the UK’s exit from the European Union.

32
HSBC Holdings plc Earnings Release 3Q20
    

Reconciliation of reported results to adjusted results – global businesses
Quarter ended 30 Sep 2020
Wealth and
Personal
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate
Centre		Total
Footnotes$m$m$m$m$m
Revenue
1
Reported 5,409 3,148 3,510 (140)11,927 
Significant items32 17 104 (15)138 
– customer redress programmes31 17 — — 48 
– disposals, acquisitions and investment in new businesses1 — — (1)— 
– fair value movements on financial instruments
2
— — 3 (14)(11)
– restructuring and other related costs3— — 101 — 101 
Adjusted 5,441 3,165 3,614 (155)12,065 
ECL
Reported (343)(354)(100)12 (785)
Adjusted(343)(354)(100)12 (785)
Operating expenses
Reported (3,871)(1,587)(2,412)(171)(8,041)
Significant items189 (48)130 359 630 
– customer redress programmes(4)— — 7 3 
– impairment of goodwill and other intangibles224 3 11 (181)57 
– restructuring and other related costs4(31)(51)119 530 567 
– settlements and provisions in connection with legal and regulatory matters— — — 3 3 
Adjusted (3,682)(1,635)(2,282)188 (7,411)
Share of profit in associates and joint ventures
Reported 10 — — (37)(27)
Significant items— — — 462 462 
– impairment of goodwill5— — — 462 462 
Adjusted10 — — 425 435 
Profit/(loss) before tax
Reported1,205 1,207 998 (336)3,074 
Significant items221 (31)234 806 1,230 
– revenue 32 17 104 (15)138 
– operating expenses189 (48)130 359 630 
– share of profit in associates and joint ventures— — — 462 462 
Adjusted 1,426 1,176 1,232 470 4,304 
Loans and advances to customers (net)
Reported 459,516 343,702 236,902 1,220 1,041,340 
Adjusted459,516 343,702 236,902 1,220 1,041,340 
Customer accounts
Reported 793,612 431,021 343,365 716 1,568,714 
Adjusted793,612 431,021 343,365 716 1,568,714 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
3    Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
4    Includes impairment of tangible assets of $124m.
5    During the quarter, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.
HSBC Holdings plc Earnings Release 3Q20
33

Earnings Release – 3Q20
Reconciliation of reported results to adjusted results – global businesses (continued)
Quarter ended 30 June 2020
Wealth and
Personal
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate
Centre		Total
Footnotes$m$m$m$m$m
Revenue1
Reported 5,656 3,267 4,240 (104)13,059 
Currency translation113 76 98 (8)279 
Significant items(26)— 185 (64)95 
– customer redress programmes(26)— — — (26)
– disposals, acquisitions and investment in new businesses— — — 1 1 
– fair value movements on financial instruments2— — 121 (63)58 
– restructuring and other related costs3— — 58 — 58 
– currency translation on significant items— — 6 (2)4 
Adjusted 5,743 3,343 4,523 (176)13,433 
ECL
Reported (1,094)(2,151)(573)(14)(3,832)
Currency translation(34)(61)(22)(1)(118)
Adjusted(1,128)(2,212)(595)(15)(3,950)
Operating expenses
Reported (3,745)(1,698)(2,801)(431)(8,675)
Currency translation(95)(47)(93)9 (226)
Significant items223 112 650 476 1,461 
– customer redress programmes48 1 — — 49 
– impairment of goodwill and other intangibles85 41 567 332 1,025 
– restructuring and other related costs482 63 58 132 335 
– settlements and provisions in connection with legal and regulatory matters— — — 4 4 
– currency translation on significant items8 7 25 8 48 
Adjusted (3,617)(1,633)(2,244)54 (7,440)
Share of profit in associates and joint ventures
Reported (4)— — 541 537 
Currency translation— — — 16 16 
Adjusted(4)— — 557 553 
Profit/(loss) before tax
Reported813 (582)866 (8)1,089 
Currency translation(16)(32)(17)16 (49)
Significant items197 112 835 412 1,556 
– revenue (26)— 185 (64)95 
– operating expenses223 112 650 476 1,461 
Adjusted 994 (502)1,684 420 2,596 
Loans and advances to customers (net)
Reported 429,487 344,567 243,355 1,272 1,018,681 
Currency translation11,162 7,276 4,824 41 23,303 
Adjusted440,649 351,843 248,179 1,313 1,041,984 
Customer accounts
Reported 775,870 418,263 337,573 674 1,532,380 
Currency translation14,347 9,642 8,674 29 32,692 
Adjusted790,217 427,905 346,247 703 1,565,072 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.
3    Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
4    Includes impairment of software intangible assets of $173m.
34
HSBC Holdings plc Earnings Release 3Q20
    

Reconciliation of reported results to adjusted results – global businesses (continued)
Quarter ended 30 Sep 20191
Wealth and
Personal
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate
Centre		Total
Footnotes$m$m$m$m$m
Revenue
2
Reported 6,084 3,764 3,527 (20)13,355 
Currency translation29 26 26 (5)76 
Significant items117 10 (38)(173)(84)
– customer redress programmes108 9 — 1 118 
– disposals, acquisitions and investment in new businesses4 — — — 4 
– fair value movements on financial instruments
3
— — (37)(173)(210)
– currency translation on significant items5 1 (1)(1)4 
Adjusted 6,230 3,800 3,515 (198)13,347 
ECL
Reported (451)(410)(26)4 (883)
Currency translation24 9 6 1 40 
Adjusted(427)(401)(20)5 (843)
Operating expenses
Reported (4,241)(1,771)(2,279)144 (8,147)
Currency translation(29)(17)(40)8 (78)
Significant items433 20 47 120 620 
– costs of structural reform
4
— 1 7 27 35 
– customer redress programmes469 16 4 (1)488 
– restructuring and other related costs13 3 35 89 140 
– settlements and provisions in connection with legal and regulatory matters(65)— — 1 (64)
– currency translation on significant items16 — 1 4 21 
Adjusted (3,837)(1,768)(2,272)272 (7,605)
Share of profit in associates and joint ventures
Reported 7 — — 505 512 
Currency translation— — — 7 7 
Adjusted7 — — 512 519 
Profit before tax
Reported1,399 1,583 1,222 633 4,837 
Currency translation24 18 (8)11 45 
Significant items550 30 9 (53)536 
– revenue 117 10 (38)(173)(84)
– operating expenses433 20 47 120 620 
Adjusted 1,973 1,631 1,223 591 5,418 
Loans and advances to customers (net)
Reported 422,503 341,396 252,713 1,221 1,017,833 
Currency translation12,094 7,196 5,141 49 24,480 
Adjusted434,597 348,592 257,854 1,270 1,042,313 
Customer accounts
Reported 718,643 355,293 299,109 696 1,373,741 
Currency translation15,195 8,012 7,944 37 31,188 
Adjusted733,838 363,305 307,053 733 1,404,929 
1    A change in reportable segments was made in 2Q20. Comparative data have been re-presented accordingly.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4    Comprises costs associated with preparations for the UK’s exit from the European Union.
HSBC Holdings plc Earnings Release 3Q20
35

Earnings Release – 3Q20

Reconciliation of reported and adjusted risk-weighted assets
The following table reconciles reported and adjusted risk-weighted assets (‘RWAs’).
Reconciliation of reported and adjusted risk-weighted assets
At 30 September 2020

Wealth
and Private
Banking		Commercial
Banking		Global
Banking and
Markets		Corporate CentreTotal
Footnotes$bn$bn$bn$bn$bn
Risk-weighted assets
Reported173.2 332.4 267.1 84.3 857.0 
Adjusted1173.2 332.4 267.1 84.3 857.0 
At 30 June 2020
Risk-weighted assets
Reported161.8 330.9 277.6 84.3 854.6 
Currency translation2.6 7.1 4.0 0.5 14.2 
Adjusted1164.4 338.0 281.6 84.8 868.8 
At 30 September 2019
Risk-weighted assets
Reported161.6 328.0 294.6 81.0 865.2 
Currency translation1.1 5.5 1.8 0.5 8.9 
Disposals
– operations in Brazil(0.8)(0.8)
Adjusted1162.7 333.5 296.4 80.7 873.3 
1    Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.
36
HSBC Holdings plc Earnings Release 3Q20
    

Summary information – geographical regions
Analysis of significant items by geographical regions is presented below.
Reconciliation of reported results to adjusted results – geographical regions
Nine months ended 30 Sep 2020
EuropeAsiaMENANorth
America		Latin
America		Total
Footnotes$m$m$m$m$m$m
Revenue1
Reported213,465 20,904 2,002 4,887 2,323 38,672 
Significant items(140)(36)(1)55 (8)(130)
– customer redress programmes22 — — — — 22 
– disposals, acquisitions and investment in new businesses— — — 8 — 8 
– fair value movement on financial instruments3(264)(36)(1)(1)(8)(310)
– restructuring and other related costs4102 — — 48 — 150 
Adjusted213,325 20,868 2,001 4,942 2,315 38,542 
ECL
Reported(3,238)(1,962)(721)(873)(849)(7,643)
Adjusted(3,238)(1,962)(721)(873)(849)(7,643)
Operating expenses
Reported2(13,159)(9,773)(1,192)(3,998)(1,355)(24,568)
Significant items1,555 48 65 517 30 2,215 
– customer redress programmes53 — — — — 53 
– impairment of goodwill and other intangibles800 — 60 222 — 1,082 
– restructuring and other related costs5694 48 5 295 30 1,072 
– settlements and provisions in connection with legal and regulatory matters8 — — — — 8 
Adjusted2(11,604)(9,725)(1,127)(3,481)(1,325)(22,353)
Share of profit in associates and joint ventures
Reported(44)1,387 (415)— 3 931 
Significant items— — 462 — — 462 
– impairment of goodwill6— — 462 — — 462 
Adjusted(44)1,387 47 — 3 1,393 
Profit/(loss) before tax
Reported(2,976)10,556 (326)16 122 7,392 
Significant items1,415 12 526 572 22 2,547 
– revenue(140)(36)(1)55 (8)(130)
– operating expenses1,555 48 65 517 30 2,215 
– share of profit in associates and joint ventures— — 462 — — 462 
Adjusted(1,561)10,568 200 588 144 9,939 
Loans and advances to customers (net)
Reported398,181 484,125 29,307 110,394 19,333 1,041,340 
Adjusted398,181 484,125 29,307 110,394 19,333 1,041,340 
Customer accounts
Reported593,172 732,367 40,815 177,478 24,882 1,568,714 
Adjusted593,172 732,367 40,815 177,478 24,882 1,568,714 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
5    Includes impairment of software intangible assets of $173m (of the total software intangible asset impairment of $1,320m) and impairment of tangible assets of $124m.
6    During the year, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.

HSBC Holdings plc Earnings Release 3Q20
37

Earnings Release – 3Q20
Reconciliation of reported results to adjusted results – geographical regions (continued)
Nine months ended 30 Sep 2019
EuropeAsiaMENANorth
America		Latin
America		Total
Footnotes$m$m$m$m$m$m
Revenue1
Reported213,481 23,174 2,946 4,984 2,579 42,727 
Currency translation2(53)(62)(9)(23)(491)(605)
Significant items(173)20 (827)12 8 (960)
– customer redress programmes118 — — — — 118 
– disposals, acquisitions and investment in new businesses— — (828)4 1 (823)
– fair value movements on financial instruments3(295)20 — 8 7 (260)
– currency translation on significant items4 — 1 — — 5 
Adjusted213,255 23,132 2,110 4,973 2,096 41,162 
ECL
Reported(810)(542)(65)(140)(466)(2,023)
Currency translation6 2 (2)1 85 92 
Adjusted(804)(540)(67)(139)(381)(1,931)
Operating expenses
Reported2(13,633)(9,795)(1,052)(3,799)(1,454)(25,296)
Currency translation225 77 15 14 278 376 
Significant items1,433 72 8 52 13 1,578 
– costs of structural reform4123 3 — — — 126 
– customer redress programmes1,098 — — — — 1,098 
– restructuring and other related costs278 72 8 52 17 427 
– settlements and provisions in connection with legal and regulatory matters(65)(1)— — — (66)
– currency translation on significant items(1)(2)— — (4)(7)
Adjusted2(12,175)(9,646)(1,029)(3,733)(1,163)(23,342)
Share of profit in associates and joint ventures
Reported18 1,594 212 — 12 1,836 
Currency translation1 (31)— — (2)(32)
Adjusted19 1,563 212 — 10 1,804 
Profit/(loss) before tax
Reported(944)14,431 2,041 1,045 671 17,244 
Currency translation(21)(14)4 (8)(130)(169)
Significant items1,260 92 (819)64 21 618 
– revenue(173)20 (827)12 8 (960)
– operating expenses1,433 72 8 52 13 1,578 
Adjusted295 14,509 1,226 1,101 562 17,693 
Loans and advances to customers (net)
Reported377,153 478,015 28,091 111,963 22,611 1,017,833 
Currency translation20,084 8,204 (701)(420)(2,687)24,480 
Adjusted397,237 486,219 27,390 111,543 19,924 1,042,313 
Customer accounts
Reported496,874 672,557 36,768 142,781 24,761 1,373,741 
Currency translation25,650 10,001 (896)(443)(3,124)31,188 
Adjusted522,524 682,558 35,872 142,338 21,637 1,404,929 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4    Comprises costs associated with preparations for the UK’s exit from the European Union.
38
HSBC Holdings plc Earnings Release 3Q20
    

Reconciliation of reported results to adjusted results – geographical regions (continued)
Quarter ended 30 Sep 2020
EuropeAsiaMENANorth
America		Latin
America		Total
Footnotes$m$m$m$m$m$m
Revenue1
Reported24,489 6,324 623 1,482 746 11,927 
Significant items90 (2)— 49 1 138 
– customer redress programmes48 — — — — 48 
– fair value movements on financial instruments3(12)(2)— 2 1 (11)
– restructuring and other related costs454 — — 47 — 101 
Adjusted24,579 6,322 623 1,531 747 12,065 
ECL
Reported (353)(144)(110)14 (192)(785)
Adjusted(353)(144)(110)14 (192)(785)
Operating expenses
Reported2(4,058)(3,343)(429)(1,503)(445)(8,041)
Significant items224 30 24 333 19 630 
– customer redress programmes3 — — — — 3 
– impairment of goodwill and other intangibles(184)— 19 222 — 57 
– restructuring and other related costs5402 30 5 111 19 567 
– settlements and provisions in connection with legal and regulatory matters3 — — — — 3 
Adjusted2(3,834)(3,313)(405)(1,170)(426)(7,411)
Share of profit in associates and joint ventures
Reported 6 350 (384)— 1 (27)
Significant items— — 462 — — 462 
– impairment of goodwill6— — 462 — — 462 
Adjusted6 350 78 — 1 435 
Profit/(loss) before tax
Reported84 3,187 (300)(7)110 3,074 
Significant items314 28 486 382 20 1,230 
– revenue 90 (2)— 49 1 138 
– operating expenses224 30 24 333 19 630 
– share of profit in associates and joint ventures— — 462 — — 462 
Adjusted 398 3,215 186 375 130 4,304 
Loans and advances to customers (net)
Reported398,181 484,125 29,307 110,394 19,333 1,041,340 
Adjusted398,181 484,125 29,307 110,394 19,333 1,041,340 
Customer accounts
Reported593,172 732,367 40,815 177,478 24,882 1,568,714 
Adjusted593,172 732,367 40,815 177,478 24,882 1,568,714 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
5    Includes impairment of tangible assets of $124m.
6    During the quarter, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.
HSBC Holdings plc Earnings Release 3Q20
39

Earnings Release – 3Q20
Reconciliation of reported to adjusted results – geographical regions (continued)
Quarter ended 30 Jun 2020
EuropeAsiaMENANorth
America		Latin
America		Total
Footnotes$m$m$m$m$m$m
Revenue1
Reported24,556 7,021 689 1,701 714 13,059 
Currency translation2200 72 (3)15 15 279 
Significant items2 64 — 21 8 95 
– customer redress programmes(26)— — — — (26)
– disposals, acquisitions and investment in new businesses— — — 1 — 1 
– fair value movements on financial instruments3(23)64 — 10 7 58 
– restructuring and other related costs448 — — 10 — 58 
– currency translation on significant items3 — — — 1 4 
Adjusted24,758 7,157 686 1,737 737 13,433 
ECL
Reported (2,017)(818)(278)(379)(340)(3,832)
Currency translation(84)(13)— (5)(16)(118)
Adjusted(2,101)(831)(278)(384)(356)(3,950)
Operating expenses
Reported2(5,139)(3,146)(394)(1,188)(430)(8,675)
Currency translation2(192)(40)2 (10)(6)(226)
Significant items1,327 16 41 67 10 1,461 
– customer redress programmes49 — — — — 49 
– goodwill impairment984 — 41 — — 1,025 
– restructuring and other related costs5239 17 — 68 11 335 
– settlements and provisions in connection with legal and regulatory matters4 — — — — 4 
– currency translation on significant items51 (1)— (1)(1)48 
Adjusted2(4,004)(3,170)(351)(1,131)(426)(7,440)
Share of profit in associates and joint ventures
Reported 51 572 (87)— 1 537 
Currency translation2 14 — — — 16 
Adjusted53 586 (87)— 1 553 
Profit/(loss) before tax
Reported(2,549)3,629 (70)134 (55)1,089 
Currency translation(74)33 (1)— (7)(49)
Significant items1,329 80 41 88 18 1,556 
– revenue 2 64 — 21 8 95 
– operating expenses1,327 16 41 67 10 1,461 
Adjusted (1,294)3,742 (30)222 (44)2,596 
Loans and advances to customers (net)
Reported 378,729 474,739 29,615 115,813 19,785 1,018,681 
Currency translation17,452 4,435 (275)984 707 23,303 
Adjusted396,181 479,174 29,340 116,797 20,492 1,041,984 
Customer accounts
Reported 562,505 723,072 41,197 180,489 25,117 1,532,380 
Currency translation25,896 5,292 (322)1,132 694 32,692 
Adjusted588,401 728,364 40,875 181,621 25,811 1,565,072 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments we made at our business update in February 2020.
5    Includes impairment of software intangible assets of $173m.
40
HSBC Holdings plc Earnings Release 3Q20
    

Reconciliation of reported to adjusted results – geographical regions
Quarter ended 30 Sep 2019
EuropeAsiaMENANorth
America		Latin
America		Total
Footnotes$m$m$m$m$m$m
Revenue1
Reported24,229 7,715 703 1,619 679 13,355 
Currency translation2193 36 (12)(4)(135)76 
Significant items(66)(20)— 4 (2)(84)
– customer redress programmes118— — — — 118
– disposals, acquisitions and investment in new businesses— — — 4 — 4 
– fair value movements on financial instruments3(188)(20)— — (2)(210)
– currency translation on significant items4 — — — — 4 
Adjusted24,356 7,731 691 1,619 542 13,347 
ECL
Reported (274)(282)(16)(80)(231)(883)
Currency translation(7)(2)(1)— 50 40 
Adjusted(281)(284)(17)(80)(181)(843)
Operating expenses
Reported2(4,389)(3,305)(358)(1,240)(445)(8,147)
Currency translation2(183)(4)8 3 96 (78)
Significant items570 27 3 17 3 620 
– costs of structural reform433 2 — — — 35 
– customer redress programmes488 — — — — 488 
– restructuring and other related costs89 25 3 18 5 140 
– settlements and provisions in connection with legal and regulatory matters(64)— — — — (64)
– currency translation on significant items24 — — (1)(2)21 
Adjusted2(4,002)(3,282)(347)(1,220)(346)(7,605)
Share of profit in associates and joint ventures
Reported 10 523 (24)— 3 512 
Currency translation1 7 — — (1)7 
Adjusted11 530 (24)— 2 519 
Profit/(loss) before tax
Reported(424)4,651 305 299 6 4,837 
Currency translation4 37 (5)(1)10 45 
Significant items504 7 3 21 1 536 
– revenue (66)(20)— 4 (2)(84)
– operating expenses570 27 3 17 3 620 
Adjusted 84 4,695 303 319 17 5,418 
Loans and advances to customers (net)
Reported 377,153 478,015 28,091 111,963 22,611 1,017,833 
Currency translation20,084 8,204 (701)(420)(2,687)24,480 
Adjusted397,237 486,219 27,390 111,543 19,924 1,042,313 
Customer accounts
Reported 496,874 672,557 36,768 142,781 24,761 1,373,741 
Currency translation25,650 10,001 (896)(443)(3,124)31,188 
Adjusted522,524 682,558 35,872 142,338 21,637 1,404,929 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3    Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4    Comprises costs associated with preparations for the UK’s exit from the European Union.
HSBC Holdings plc Earnings Release 3Q20
41

Earnings Release – 3Q20
Dividend on preference shares
A quarterly dividend of $15.50 per 6.20% non-cumulative US dollar preference share, Series A (‘Series A dollar preference share’), (equivalent to a dividend of $0.3875 per Series A American Depositary Share, each of which represents one-fortieth of a Series A dollar preference share), and £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2020 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has approved a quarterly dividend to be payable on 15 December 2020 to holders of record on 30 November 2020.


For and on behalf of
HSBC Holdings plc


Aileen Taylor
Group Company Secretary and Chief Governance Officer


The Board of Directors of HSBC Holdings plc as at the date of this announcement are: Mark Tucker*, Laura Cha†, Henri de Castries†,
James Anthony Forese†, Steven Guggenheimer†, Irene Lee†, José Antonio Meade Kuribreña†, Heidi Miller†, Eileen K Murray†, David Nish†, Noel Quinn, Ewen Stevenson, Jackson Tai† and Pauline van der Meer Mohr†.
*    Non-executive Group Chairman
†    Independent non-executive Director

42
HSBC Holdings plc Earnings Release 3Q20
    

Terms and abbreviations
1H19First half of 2019
1H20First half of 2020
1Q19First quarter of 2019
1Q20First quarter of 2020
2Q19Second quarter of 2019
2Q20Second quarter of 2020
3Q19Third quarter of 2019
3Q20Third quarter of 2020
4Q19Fourth quarter of 2019
4Q20Fourth quarter of 2020
9M19Nine months to 30 September 2019
9M20Nine months to 30 September 2020
AIEAAverage interest-earning assets
BoComBank of Communications Co., Limited, one of China's largest banks
BpsBasis points. One basis point is equal to one-hundredth of a percentage point
BSMBalance Sheet Management
C&LCredit and Lending
CET1Common equity tier 1
CMBCommercial Banking, a global business
CODMChief Operating Decision Maker
Corporate CentreCorporate Centre comprises Central Treasury, our legacy businesses, interests in our associates and joint ventures, central stewardship costs and the UK bank levy
CRR IIRevised Capital Requirements Regulation and Directive, as implemented
DPDDays past due
EBAEuropean Banking Authority
ECLExpected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in
IFRS 9 are applied
ESGEnvironmental, social and governance
FTEFull-time equivalent staff
FVOCIFair value through other comprehensive income
GBMGlobal Banking and Markets, a global business
GECGroup Executive Committee
GLCMGlobal Liquidity and Cash Management
GPBGlobal Private Banking, a former global business now part of Wealth and Personal Banking
GroupHSBC Holdings together with its subsidiary undertakings
GTRFGlobal Trade and Receivables Finance
Hong KongHong Kong Special Administrative Region of the People’s Republic of China
HSBCHSBC Holdings together with its subsidiary undertakings
HSBC BankHSBC Bank plc, also known as the non-ring-fenced bank
HSBC HoldingsHSBC Holdings plc, the parent company of HSBC
HSBC UKHSBC UK Bank plc, also known as the ring-fenced bank
IASInternational Accounting Standards
IFRSsInternational Financial Reporting Standards
IRBInternal ratings based
JVJoint venture
LCRLiquidity coverage ratio
LGDLoss given default
Mainland ChinaPeople’s Republic of China excluding Hong Kong and Macau
MENAMiddle East and North Africa
Net operating incomeNet operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue
NIMNet interest margin
POCIPurchased or originated credit-impaired financial assets
PRAPrudential Regulation Authority (UK)
RBWMRetail Banking and Wealth Management, a former global business now part of Wealth and Personal Banking
RevenueNet operating income before ECL
RoEReturn on equity
RoTEReturn on average tangible equity
RWAsRisk-weighted assets
SABBThe Saudi British Bank
ServCo groupSeparately incorporated group of service companies set up in response to UK ring-fencing proposals
WPBWealth and Personal Banking, a global business
$m/$bn/$tnUnited States dollar millions/billions/trillions. We report in US dollars
Registered office and Group Head office: 8 Canada Square, London, E14 5HQ, United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered number 617987
Paste the following link into your web browser, to view the associated PDF document.
https://www.hsbc.com/-/files/hsbc/investors/hsbc-results/2020/3q/hsbc-holdings-plc/201027-3q-2020-data-pack.pdf

HSBC Holdings plc Earnings Release 3Q20
43

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
                         
HSBC Holdings plc
By:
/s/ Ewen Stevenson
Name:
Ewen Stevenson
Title:
Group Chief Financial Officer

 
Date: October 27, 2020