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 February
 
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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes  No X
 
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-   ).
 
 
 
  
 
18 February 2020
 
HSBC HOLDINGS PLC
 
2019 RESULTS – HIGHLIGHTS
 
 
Noel Quinn, Group Chief Executive, said:
 
“The Group’s 2019 performance was resilient, however parts of our business are not delivering acceptable returns. We are therefore outlining a revised plan to increase returns for investors, create the capacity for future investment, and build a platform for sustainable growth. We have already begun to implement this plan, which my management team and I are committed to executing at pace.”
 
 
2019 financial performance (vs 2018)
 
Reported profit attributable to ordinary shareholders down 53% to $6.0bn, materially impacted by a goodwill impairment of $7.3bn. Reported profit before tax down 33% to $13.3bn. Reported revenue up 4% and reported operating expenses up 22% due to a goodwill impairment of $7.3bn.
 
Goodwill impairment of $7.3bn, primarily $4.0bn related to Global Banking and Markets (‘GB&M’) and $2.5bn in Commercial Banking (‘CMB’) in Europe. This reflected lower long-term economic growth rate assumptions, and additionally for GB&M, the planned reshaping of the business.
 
Adjusted revenue up 5.9% to $55.4bn and adjusted profit before tax up 5% to $22.2bn, reflecting good revenue growth in Retail Banking and Wealth Management (‘RBWM’), Global Private Banking (‘GPB’) and CMB, together with improved cost control.
 
Adjusted revenue in Asia up 7% to $30.5bn and adjusted profit before tax up 6% to $18.6bn. Within this, there was a resilient performance by Hong Kong, with adjusted profit before tax up 5% to $12.1bn.
 
Adjusted expected credit losses and other credit impairment charges (‘ECL’) up $1.1bn to $2.8bn from higher charges in CMB and RBWM.
 
Positive adjusted jaws of 3.1%, reflecting improving cost discipline. Adjusted operating expense growth of 2.8%, well below the growth rate in 2018 (compared with 2017).
 
Return on average tangible equity (‘RoTE’) down 20 basis points (‘bps’) to 8.4%, supported by a resilient Hong Kong performance.
 
Earnings per share of $0.30, including a $0.36 per share impact of the goodwill impairment. Dividends per share in respect of 2019 of $0.51.
 
We continue to monitor the recent coronavirus outbreak, which is causing economic disruption in Hong Kong and mainland China and may impact performance in 2020.
 
4Q19 financial performance (vs 4Q18)
 
Reported loss before tax of $3.9bn, impacted by a goodwill impairment of $7.3bn and a $1.0bn UK bank levy charge. Reported revenue up 5% and reported operating expenses up 86% due to a goodwill impairment of $7.3bn.
 
Adjusted revenue up 9% to $13.6bn and adjusted profit before tax up 29% to $4.3bn. Adjusted profit before tax in Hong Kong up 3% to $2.6bn.
 
Adjusted costs of $9.1bn, up 3% or $0.3bn, reflecting ongoing cost discipline. Common equity tier 1 (‘CET1’) ratio improved by 40bps from 3Q19 to 14.7%, driven by risk-weighted asset (‘RWA’) reductions of $22bn in 4Q19.
 
Update on the Group Chief Executive process
 
The process for appointing a permanent Group Chief Executive is ongoing and we expect to make an appointment within the 6 to 12 months initially outlined.
 
2020 business update
 
Alongside the publication of our full-year results, we today update you on our plans to improve the Group’s returns by 2022 to allow us to meet our growth ambition and sustain our current dividend policy. We intend to reduce capital and costs in our underperforming businesses to enable continued investment in businesses with stronger returns and growth prospects, including in RBWM and in all our businesses in Asia. We also plan to simplify our complex organisational structure, including a reduction in Group and central costs, while improving the capital efficiency of the Group.
 
The Group will target:
 
a gross RWA reduction of over $100bn by the end of 2022, with these RWAs to be reinvested, resulting in broadly flat RWAs between 2019 and 2022;
 
a reduced adjusted cost base of $31bn or below in 2022, underpinned by a new cost reduction plan of $4.5bn; and
 
a reported RoTE in the range of 10% to 12% in 2022, with the full benefit of our cost reductions and redeployed RWAs flowing into subsequent years.
 
We intend to sustain the dividend and maintain a CET1 ratio in the range of 14% to 15%, and plan to be at the top end of this range by the end of 2021.
 
We plan to suspend share buy-backs for 2020 and 2021, given the high level of restructuring expected to be undertaken over the next two years. We intend to return to neutralising scrip dividend issuance from 2022 onwards.
 
Specifically, each business will focus on the following:
 
 
 
European business (excluding HSBC UK)
 
We plan to reduce RWAs by around 35% by the end of 2022 through a focus on clients that value our international banking capabilities, reducing capital deployed to our Rates businesses, and exiting capital and leverage intensive product lines – including G10 long-term derivative market making in the UK. We intend to focus our UK investment banking activities on supporting UK mid-market clients and international corporate clients through our London hub. We also intend to reduce our sales and trading and equity research in Europe and transition our structured products capabilities from the UK to Asia.

 
 
US business
 
Our aim is to reposition our US business as an international client-focused corporate bank, with a targeted retail offering. We intend to consolidate select Fixed Income activities with those in London to maximise global scale, and reduce the RWAs associated with our US Global Markets business by around 45%. We aim to reinvest these RWAs into CMB and RBWM. We also intend to reduce operating expenses by 10% to 15%, and refocus Retail Banking to serve globally mobile clients, invest in digital and unsecured lending. We aim to reduce our US branch network by around 30% and embark on a programme to consolidate middle and back office activities and streamline functions to simplify our US business and lower costs.
 
 
Global Banking and Markets
 
Our aim is for GB&M to support corporate and institutional clients with global operations who value our international network. We plan to accelerate investments in Asia and the Middle East and shift more resources to those regions, while continuing to strengthen our transaction banking and financing capabilities. We intend to strengthen our investment banking capabilities in Asia and the Middle East, while maintaining a global investment banking hub in London. We also aim to build leading emerging markets and financing capabilities in Global Markets, and enhance our institutional clients business. This remodelling of GB&M will be underpinned by continued investment in digital systems and solutions.
 
 
 
Group-wide simplification
 
We intend to implement a number of changes, with the aim of creating a simpler and more efficient organisation, including:
 
consolidating the back and middle office to a single model for CMB and Global Banking;
 
consolidating RBWM and GPB into a new Wealth and Personal Banking (‘WPB’) division;
 
reducing geographic reports from seven to four at Group Executive level; and
 
reorganising the global functions and head office to match the new structure.
 
To achieve our targets, we expect to incur restructuring costs of around $6bn and asset disposal costs of around $1.2bn during the period to 2022, with the majority of restructuring costs incurred in 2020 and 2021.
 
 

Key financial metrics
 
 
 
 
For the year ended
 
Reported results
 
2019
 
2018
 
2017
 
Reported revenue ($m)1
 
56,098
 
 
53,780
 
 
51,445
 
 
Reported profit before tax ($m)2
 
13,347
 
 
19,890
 
 
17,167
 
 
Reported profit after tax ($m)2
 
8,708
 
 
15,025
 
 
11,879
 
 
Profit attributable to the ordinary shareholders of the parent company ($m)2
 
5,969
 
 
12,608
 
 
9,683
 
 
Basic earnings per share ($)2
 
0.30
 
 
0.63
 
 
0.48
 
 
Diluted earnings per share ($)2
 
0.30
 
 
0.63
 
 
0.48
 
 
Return on average ordinary shareholders’ equity (%)2
 
3.6
 
 
7.7
 
 
5.9
 
 
Return on average tangible equity (%)
 
8.4
 
 
8.6
 
 
6.8
 
 
Net interest margin (%)
 
1.58
 
 
1.66
 
 
1.63
 
 
Adjusted results3
 
 
 
 
Adjusted revenue ($m)1
 
55,409
 
 
52,331
 
 
50,173
 
 
Adjusted profit before tax ($m)
 
22,212
 
 
21,182
 
 
20,556
 
 
Adjusted jaws (%)
 
3.1
 
 
(1.2
 
)
 
1.0
 
 
Cost efficiency ratio (%)
 
59.2
 
 
61.0
 
 
60.3
 
 
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers (%)
 
0.27
 
 
0.17
 
 
0.18
 
 
 
 
 
 
 
At 31 Dec
 
Balance sheet
 
2019
 
2018
 
2017
 
Total assets ($m)
 
2,715,152
 
 
2,558,124
 
 
2,521,771
 
 
Net loans and advances to customers ($m)
 
1,036,743
 
 
981,696
 
 
962,964
 
 
Customer accounts ($m)
 
1,439,115
 
 
1,362,643
 
 
1,364,462
 
 
Average interest-earning assets ($m)
 
1,922,822
 
 
1,839,346
 
 
1,726,120
 
 
Loans and advances to customers as % of customer accounts (%)
 
72.0
 
 
72.0
 
 
70.6
 
 
Total shareholders’ equity ($m)
 
183,955
 
 
186,253
 
 
190,250
 
 
Tangible ordinary shareholders’ equity ($m)
 
144,144
 
 
140,056
 
 
144,915
 
 
Net asset value per ordinary share at period end ($)4
 
8.00
 
 
8.13
 
 
8.35
 
 
Tangible net asset value per ordinary share at period end ($)
 
7.13
 
 
7.01
 
 
7.26
 
 
Capital, leverage and liquidity
 
 
 
 
Common equity tier 1 capital ratio (%)5
 
14.7
 
 
14.0
 
 
14.5
 
 
Risk-weighted assets ($m)5
 
843,395
 
 
865,318
 
 
871,337
 
 
Total capital ratio (%)5
 
20.4
 
 
20.0
 
 
20.9
 
 
Leverage ratio (%)5
 
5.3
 
 
5.5
 
 
5.6
 
 
High-quality liquid assets (liquidity value) ($bn)
 
601
 
 
567
 
 
513
 
 
Liquidity coverage ratio (%)
 
150
 
 
154
 
 
142
 
 
Share count
 
 
 
 
Period end basic number of $0.50 ordinary shares outstanding (millions)
 
20,206
 
 
19,981
 
 
19,960
 
 
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)
 
20,280
 
 
20,059
 
 
20,065
 
 
Average basic number of $0.50 ordinary shares outstanding (millions)
 
20,158
 
 
19,896
 
 
19,972
 
 
Dividend per ordinary share (in respect of the period) ($)
 
0.51
 
 
0.51
 
 
0.51
 
 
 
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
 
Includes the impact of a $7.3bn goodwill impairment in 2019.
 
Adjusted performance is computed by adjusting reported results for the year-on-year effects of foreign currency translation differences and significant items which distort year-on-year comparisons.
 
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.
 
Unless otherwise stated, regulatory capital ratios and requirements are calculated in accordance with the transitional arrangements of the Capital Requirements Regulation in force in the EU at the time, including the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’ in article 473a. The capital ratios and requirements at 31 December 2019 are reported in accordance with the revised Capital Requirements Regulation and Directive (‘CRR II’), as implemented, whereas prior periods apply the Capital Requirements Regulation and Directive (‘CRD IV’). Leverage ratios are calculated using the end point definition of capital.
 
 
 
Highlights
 
 
 
 
 
Year ended 31 Dec
 
 
 
2019
 
2018
 
 
 
$m
 
$m
 
Reported
 
 
 
 
Revenue1
 
 
56,098
 
 
53,780
 
 
Change in expected credit losses and other credit impairment charges
 
 
(2,756
 
)
 
(1,767
 
)
 
Operating expenses
 
 
(42,349
 
)
 
(34,659
 
)
 
Profit before tax
 
 
13,347
 
 
19,890
 
 
Adjusted2
 
 
 
 
Revenue1
 
 
55,409
 
 
52,331
 
 
Change in expected credit losses and other credit impairment charges
 
 
(2,756
 
)
 
(1,689
 
)
 
Operating expenses
 
 
(32,795
 
)
 
(31,906
 
)
 
Profit before tax
 
 
22,212
 
 
21,182
 
 
Significant items affecting adjusted performance
 
 
 
 
Revenue
 
 
 
 
Customer redress programmes
 
 
(163
 
)
 
53
 
 
Disposals, acquisitions and investment in new businesses
 
 
768
 
 
(113
 
)
 
Fair value movements on financial instruments3
 
 
84
 
 
(100
 
)
 
Operating expenses
 
 
 
 
Costs of structural reform4
 
 
(158
 
)
 
(361
 
)
 
Customer redress programmes
 
 
(1,281
 
)
 
(146
 
)
 
Disposals, acquisitions and investment in new businesses
 
 
 
 
(52
 
)
 
Goodwill impairment
 
 
(7,349
 
)
 
 
 
Past service costs of guaranteed minimum pension benefits equalisation
 
 
 
 
(228
 
)
 
Restructuring and other related costs
 
 
(827
 
)
 
(66
 
)
 
Settlements and provisions in connection with legal matters and other regulatory matters
 
 
61
 
 
(816
 
)
 
 
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
 
Adjusted performance is computed by adjusting reported results for the year-on-year effects of foreign currency translation differences and significant items which distort year-on-year comparisons.
 
Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.
 
Comprises costs associated with preparations for the UK’s exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.
 
 
 
 
 
Statement by Mark E Tucker, Group Chairman
 
 
At the time of our interim results, I said that the external environment was becoming increasingly complex and challenging. As our 2019 results demonstrate, this has proven to be the case.
 
An impairment of historical goodwill caused our reported profit before tax to fall by 33%, but the strength and resilience of our business model delivered an adjusted profit before tax of $22.2bn, up 5%. Retail Banking and Wealth Management, Commercial Banking and Global Private Banking performed well, while our leading transaction banking franchise again demonstrated the effectiveness of our global network. This, alongside the Group’s capital strength, has given the Board the confidence to approve an unchanged dividend of $0.51 for 2019.
 
Strategy
 
At the time of Noel Quinn’s appointment as interim Group Chief Executive in August 2019, the Board gave him full authority to address areas of weakness, improve performance and create capacity to invest. Since then, he has worked closely with the Board to begin delivering against this mandate. The Board has endorsed a plan that aims to reallocate capital to areas that can deliver stronger returns, to reduce costs across the Group, and to simplify the business.
 
Even in this increasingly challenging competitive environment, there are many opportunities for a bank of HSBC’s scale and reach. We have made a good start in capturing these opportunities, but we need to go further and faster to capitalise fully on our heritage, network and financial strength. We are intent on driving through the necessary change at pace.
 
Board of Directors
 
Our previous Group Chief Executive, John Flint, left the Group in August 2019. I am very grateful to John for his personal commitment and dedication, and for the significant contribution that he made over his long career at HSBC. Noel Quinn joined the Board as interim Group Chief Executive in August 2019. The process for appointing a permanent Group Chief Executive is ongoing and we expect to make an appointment in accordance with our original timetable.
 
José Antonio Meade Kuribreña joined the Board as an independent non-executive Director in March 2019.
 
Jonathan Evans (Lord Evans of Weardale) retired from the Board in April 2019. Marc Moses stepped down as an executive Director and Group Chief Risk Officer at the end of December 2019. Sir Jonathan Symonds stepped down as Deputy Group Chairman and Senior Independent Director today, and is replaced in the role of Senior Independent Director by David Nish. Kathleen Casey has informed the Board that she will not stand for re-election at the next AGM, in April 2020.
 
Jonathan, Marc, Jon and Kathy have all made formidable and invaluable contributions to the work of the Board and they leave with our profound thanks and gratitude.
 
The global economy
 
HSBC is a global bank, albeit one closely associated with mainland China, Hong Kong and the UK. Each of these continues to face major challenges.
 
We continue to monitor the coronavirus outbreak very closely. Our priority is always the well-being of our customers and staff, and we will continue to do all we can to ensure their safety and support them through this difficult time.
 
Social unrest in Hong Kong has weighed on the local economy and caused significant disruption. We deplore all violence and support a peaceful resolution under the framework of ‘one country, two systems’. I am enormously proud of the dedication and perseverance of our people in Hong Kong, who have continued to support our customers to their utmost ability in spite of the difficulties they have faced.
 
Now that the UK has officially left the EU, negotiations can begin on their future relationship. This has provided some certainty, but no trade negotiation is ever straightforward. It is essential that the eventual agreement protects and fosters the many benefits that financial services provide to both the UK and the EU. At the same time as remaining close to Europe, the UK must also strengthen its links with other key partners, including the US, China and south-east Asia. We look forward to working with governments to help achieve this.
 
The macroeconomic environment as a whole remains uncertain. As a result of the impact of the coronavirus outbreak, we have lowered our expectations for growth in the Asian economy in 2020. The main impact will be in the first quarter, but we expect some improvement as the virus becomes contained. The agreement of a ‘phase one’ trade deal between China and the US is a positive step, but we remain cautious about the prospects for a wider-ranging agreement given disagreements that still exist, particularly over technology. We expect growth in the US to be resilient, but slower than in 2019.
 
Overall, we expect global growth to stabilise over the course of 2020, albeit at a slightly lower rate than in recent years. This underlines the need to make the most of the opportunities ahead.
 
Serving all our stakeholders
 
HSBC has long recognised its responsibilities to its stakeholders. Being a responsible corporate citizen is a principle that must sit at the heart of any sustainable business. I welcome the renewed focus and debate around corporate purpose in the media and elsewhere over the last 12 months. We are committed to creating long-term value for all those we work with and for – our investors, customers, employees, suppliers and the communities we serve.
 
Business also has a critical role to play in the transition to a low-carbon future, and we believe that we have an opportunity to be a leader. Sustainability features prominently in our strategy, as well as in the way we run the business. We are absolutely committed to working closely with our customers, regulators and governments to accelerate progress towards a cleaner and more sustainable world. The steps we are taking to achieve this are outlined in our ESG Update, which is also published today.
 
Our people are the driving force behind HSBC’s success. 2019 was a challenging year, throughout which the professionalism and expertise of our people were always to the fore in even the most testing circumstances. I am very grateful to them for their hard work and their commitment to our customers, and each other.
 
 
 
 
 
Review by Noel Quinn, Group Chief Executive
 
 
HSBC exists for a clear purpose – to connect customers to opportunities. We want to be where the growth is, enabling businesses to thrive and economies to prosper, and helping people to fulfil their hopes and realise their ambitions.
 
For 155 years, this purpose has underpinned all that we do, and it continues to guide us as we seek to adapt HSBC to changing customer expectations in an evolving economic, political and digital landscape.
 
HSBC possesses a number of advantages that set us apart from our competitors. We have an extensive international footprint with excellent access to faster-growing areas in Asia and the Middle East; a market-leading transaction banking franchise connecting customers to opportunities around the world; and full-scale retail banking operations in Hong Kong, the UK and Mexico, with a premier international wealth proposition.
 
In 2018, we began a programme of investment to build on these strengths, with our customers at the centre. We have since invested more than $8.6bn – of which $4.5bn was in 2019 – to connect more customers to our international network, to provide a better service through improved digital capabilities, and to make it easier for our customers to bank with us. This has enhanced the service we offer, helping to attract new customers and capture market share in our major markets and from our international network.
 
This was evident in a resilient performance in 2019. A strong first half, particularly in Asia, was tempered by the impact of worsening global economic conditions, geopolitical uncertainty and a lower interest rate outlook in the second half of the year. Much of our business held up well, particularly in Asia and the markets served by our international network. However, underperformance in other areas acted as a drag on the returns of the Group.
 
As we pursue our plan to deliver greater value for our customers and shareholders, we will continue to seek to grow the parts of the business where we are strongest. However, given the changed economic environment, we must also act decisively to reshape areas of persistent underperformance, particularly in Global Banking and Markets in Europe and the US. We also aim to simplify the Group to accelerate the pace of change and reduce the size of its cost base. This should create a leaner, simpler and more competitive Group that is better positioned to deliver higher returns for investors.
 
Financial performance
 
Group reported profit before tax was down 33% compared with 2018, due to a goodwill impairment of $7.3bn. This arose from an update to long-term economic growth assumptions, which impacted a number of our businesses, and from the planned reshaping of Global Banking and Markets. Adjusted profit before tax increased by 5%, reflecting revenue growth in three of our four global businesses. Disciplined cost management helped secure positive adjusted jaws of 3.1%, despite continued heavy investment in growth and technology. Our Group return on average tangible equity – our headline measure – fell from 8.6% in 2018 to 8.4%.
 
We delivered good revenue growth in our targeted areas. Our Hong Kong business and our UK ring-fenced bank, HSBC UK, showed great resilience to produce adjusted revenue growth of 7% and 3% respectively, despite the uncertainty affecting both places during 2019. Our businesses in Mexico, India, the ASEAN region and mainland China also performed well. The biggest areas of underperformance were our businesses in the US and our European non-ring-fenced bank, both of which saw a reduction in revenue and profit before tax.
 
Retail Banking and Wealth Management had a good year, delivering adjusted revenue growth of 9%. This reflected the impact of investment in improved customer service and growth, which helped us win new customers, increase deposits, and grow lending in our major markets, particularly mortgage lending in the UK and Hong Kong. Our Wealth business also benefited from favourable market impacts in Insurance.
 
Commercial Banking grew adjusted revenue by 6%, with increases in all major products and regions. Investment in new platforms, digital capabilities and increased lending improved our ability to attract new customers and capitalise on wider margins, particularly in Global Liquidity and Cash Management and Credit and Lending.
 
Global Banking and Markets had a challenging year in which economic uncertainty led to reduced client activity, particularly in Europe and the US. Despite this, adjusted revenue was just 1% lower than 2018 due to strong performances from our transaction banking businesses.
 
Global Private Banking continued to benefit from close collaboration with our other global businesses, attracting $23bn of net new money and increasing adjusted revenue by 5%.
 
2020 outlook
 
Since the start of January, the coronavirus outbreak has created significant disruption for our staff, suppliers and customers, particularly in mainland China and Hong Kong. We understand the difficulties this poses and have put measures in place to support them through this challenging time. Depending on how the situation develops, there is the potential for any associated economic slowdown to impact our expected credit losses in Hong Kong and mainland China. Longer term, it is also possible that we may see revenue reductions from lower lending and transaction volumes, and further credit losses stemming from disruption to customer supply chains. We continue to monitor the situation closely.
 
Reshaping for sustainable growth
 
Our immediate aims are to increase returns, create the capacity to invest in the future, and build a platform for sustainable growth. We intend to do this in three ways.
 
First, we plan to materially reshape the underperforming areas of the Group. Around 30% of our capital is currently allocated to businesses that are delivering returns below their cost of equity, largely in Global Banking and Markets in Europe and the US. We intend to focus these businesses on our strengths as a leading international bank and to simplify our footprint, exiting businesses where necessary and reducing both risk-weighted assets and costs.
 
Second, we aim to reduce Group costs by increasing efficiencies, sharing capabilities and investing in automation and digitisation.
 
Third, we intend to simplify HSBC to increase the pace of execution and agility. This includes changing our matrix structure and reducing fragmentation, simplifying the geographical organisation of the Group, and combining Retail Banking and Wealth Management and Global Private Banking to create one of the world’s largest wealth management businesses.
 
In total, we are targeting more than $100bn of gross risk-weighted asset reductions, a reduced cost base of $31bn or lower, and a Group return on average tangible equity of 10% to 12% in 2022. We aim to reinvest the risk-weighted assets saved into higher-growth, higher-returning opportunities in other parts of the business. We intend to do these things while sustaining the dividend and maintaining a CET1 ratio of 14% to 15%. This is described in detail on pages 12 and 13 of our Annual Report and Accounts 2019.
 
Since my appointment in August, we have reduced Group risk-weighted assets and FTE headcount, and slowed our cost growth considerably. We also began the run-down of risk-weighted assets in our European business in the fourth quarter of 2019. We will provide an update on our progress as we report future results.
 
Connecting customers to opportunities
 
The investment we are making in growth, technology and innovation is improving our service to customers and connecting them to opportunities around the world.
 
For our retail customers, we introduced more than 160 new digital features in 2019 to make everyday banking easier, including improved digital account opening, loan and mortgage applications, and instant money transfers.
 
In Hong Kong, we have made it simpler and faster for our Hong Kong customers to make payments through our redesigned PayMe app, and launched PayMe for Business, expanding the PayMe ecosystem for the 1.9 million individual account holders who use it as part of their daily lives.
 
Global Banking and Markets launched MyDeal in 2019 to make the deal execution process in our primary capital markets business more efficient for our clients. Our Global Private Banking business also launched a new online investment services portal to give our customers more control over the service they receive.
 
Commercial Banking launched Serai in 2019 to simplify international trade for SMEs with global trade ambitions. It provides both a digital lending product and a networking platform to match buyers and sellers and build trusted business relationships. We also remained at the forefront of international efforts to commercialise blockchain technology to make trade finance easier, faster and safer for businesses. As part of this, we completed 11 letters of credit transactions using blockchain technology in 2019, including the first cross-border transaction in China.
 
Our people
 
It was a great honour to be asked to lead HSBC on an interim basis and I am grateful to John Flint for making the transition as smooth as possible. John was an excellent servant of HSBC for more than 30 years and leaves with our good wishes.
 
I am proud to work with all of my colleagues across 64 countries and territories who serve HSBC and its customers with exceptional dedication. I am particularly grateful to colleagues in Hong Kong, mainland China and the UK for their professionalism and application during recent periods of high uncertainty. I thank them sincerely for their service and support.
 
 
 
 
 
 
 
 
 
Financial summary
 
 
 
 
Year ended 31 Dec
 
 
 
2019
 
2018
 
 
 
$m
 
$m
 
For the year
 
 
 
 
Profit before tax
 
 
13,347
 
 
19,890
 
 
Profit attributable to:
 
 
 
 
– ordinary shareholders of the parent company
 
 
5,969
 
 
12,608
 
 
Dividends declared on ordinary shares
 
 
10,269
 
 
10,187
 
 
At the year-end
 
 
 
 
Total shareholders’ equity
 
 
183,955
 
 
186,253
 
 
Total regulatory capital
 
 
172,150
 
 
173,238
 
 
Customer accounts
 
 
1,439,115
 
 
1,362,643
 
 
Total assets
 
 
2,715,152
 
 
2,558,124
 
 
Risk-weighted assets
 
 
843,395
 
 
865,318
 
 
Per ordinary share
 
 
$
 
$
 
Basic earnings
 
 
0.30
 
 
0.63
 
 
Dividends1
 
 
0.51
 
 
0.51
 
 
Net asset value2
 
 
8.00
 
 
8.13
 
 
Tangible net asset value
 
 
7.13
 
 
7.01
 
 
Share information
 
 
 
 
Number of $0.50 ordinary shares in issue (millions)
 
 
20,639
 
 
20,361
 
 
Basic number of $0.50 ordinary shares outstanding (millions)
 
 
20,206
 
 
19,981
 
 
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)
 
 
20,280
 
 
20,059
 
 
 
Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of, or for, that year.
 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 own shares held by the company, including those purchased and held in treasury.
 
 
 
 
Distribution of results by global business
 
Adjusted profit before tax
 
 
Year ended 31 Dec
 
 
2019
 
2018
 
 
$m
 
%
 
$m
 
%
 
Retail Banking and Wealth Management
 
8,048
 
 
36.2
 
 
7,018
 
 
33.1
 
 
Commercial Banking
 
7,307
 
 
32.9
 
 
7,478
 
 
35.3
 
 
Global Banking and Markets
 
5,346
 
 
24.1
 
 
5,886
 
 
27.8
 
 
Global Private Banking
 
402
 
 
1.8
 
 
339
 
 
1.6
 
 
Corporate Centre
 
1,109
 
 
5.0
 
 
461
 
 
2.2
 
 
Profit before tax
 
22,212
 
 
100.0
 
 
21,182
 
 
100.0
 
 

 
 
 
Distribution of results by geographical region

Reported profit/(loss) before tax
 

Year ended 31 Dec
 
 
2019
 
2018
 
 
 
$m
 
%
 
$m
 
%
 
Europe
 
(4,653
 
)
 
(34.9
 
)
 
(815
 
)
 
(4.1
 
)
 
Asia
 
18,468
 
 
138.4
 
 
17,790
 
 
89.5
 
 
Middle East and North Africa
 
2,327
 
 
17.4
 
 
1,557
 
 
7.8
 
 
North America
 
767
 
 
5.7
 
 
799
 
 
4.0
 
 
Latin America
 
400
 
 
3.0
 
 
559
 
 
2.8
 
 
Global GB&M goodwill impairment
 
(3,962
 
)
 
(29.6
 
)
 
 
 
 
 
Profit before tax
 
13,347
 
 
100.0
 
 
19,890
 
 
100.0
 
 

 
 
 
HSBC adjusted profit before tax and balance sheet data
 
 
 
 
2019
 
 
 
Retail Banking
and Wealth
Management
 
Commercial
Banking
 
Global
Banking and
Markets
 
Global
Private
Banking
 
Corporate Centre
 
Total
 
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net operating income before change in expected credit losses and other credit impairment charges1
 
 
23,400
 
 
15,292
 
 
14,916
 
 
1,848
 
 
(47
 
)
 
55,409
 
 
– external
 
 
17,026
 
 
14,805
 
 
18,517
 
 
1,445
 
 
3,616
 
 
55,409
 
 
– inter-segment
 
 
6,374
 
 
487
 
 
(3,601
 
)
 
403
 
 
(3,663
 
)
 
 
 
of which: net interest income/(expense)
 
 
16,525
 
 
11,226
 
 
5,601
 
 
879
 
 
(3,612
 
)
 
30,619
 
 
Change in expected credit losses and other credit impairment charges
 
 
(1,390
 
)
 
(1,184
 
)
 
(153
 
)
 
(22
 
)
 
(7
 
)
 
(2,756
 
)
 
Net operating income/(expense)
 
 
22,010
 
 
14,108
 
 
14,763
 
 
1,826
 
 
(54
 
)
 
52,653
 
 
Total operating expenses
 
 
(14,017
 
)
 
(6,801
 
)
 
(9,417
 
)
 
(1,424
 
)
 
(1,136
 
)
 
(32,795
 
)
 
Operating profit/(loss)
 
 
7,993
 
 
7,307
 
 
5,346
 
 
402
 
 
(1,190
 
)
 
19,858
 
 
Share of profit in associates and joint ventures
 
 
55
 
 
 
 
 
 
 
 
2,299
 
 
2,354
 
 
Adjusted profit before tax
 
 
8,048
 
 
7,307
 
 
5,346
 
 
402
 
 
1,109
 
 
22,212
 
 
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC’s adjusted profit before tax
 
 
36.2
 
 
32.9
 
 
24.1
 
 
1.8
 
 
5.0
 
 
100.0
 
 
Adjusted cost efficiency ratio
 
 
59.9
 
 
44.5
 
 
63.1
 
 
77.1
 
 
(2,417.0
 
)
 
59.2
 
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
395,393
 
 
346,060
 
 
246,266
 
 
47,593
 
 
1,431
 
 
1,036,743
 
 
Interests in associates and joint ventures
 
 
449
 
 
 
 
 
 
 
 
24,025
 
 
24,474
 
 
Total external assets
 
 
526,621
 
 
367,509
 
 
1,066,584
 
 
52,224
 
 
702,214
 
 
2,715,152
 
 
Customer accounts
 
 
689,283
 
 
386,522
 
 
292,284
 
 
62,943
 
 
8,083
 
 
1,439,115
 
 
Adjusted risk-weighted assets (unaudited)2
 
 
134,027
 
 
316,710
 
 
258,177
 
 
14,029
 
 
120,452
 
 
843,395
 
 
 
 
 
 
2018
 
Net operating income before change in expected credit losses and other credit impairment charges1
 
 
21,374
 
 
14,465
 
 
15,025
 
 
1,757
 
 
(290
 
)
 
52,331
 
 
– external
 
 
16,794
 
 
14,226
 
 
17,554
 
 
1,474
 
 
2,283
 
 
52,331
 
 
– inter-segment
 
 
4,580
 
 
239
 
 
(2,529
 
)
 
283
 
 
(2,573
 
)
 
 
 
of which: net interest income/(expense)
 
 
15,432
 
 
10,380
 
 
5,122
 
 
873
 
 
(2,189
 
)
 
29,618
 
 
Change in expected credit losses and other credit impairment (charges)/recoveries
 
 
(1,134
 
)
 
(712
 
)
 
31
 
 
7
 
 
119
 
 
(1,689
 
)
 
Net operating income
 
 
20,240
 
 
13,753
 
 
15,056
 
 
1,764
 
 
(171
 
)
 
50,642
 
 
Total operating expenses
 
 
(13,255
 
)
 
(6,275
 
)
 
(9,170
 
)
 
(1,425
 
)
 
(1,781
 
)
 
(31,906
 
)
 
Operating profit/(loss)
 
 
6,985
 
 
7,478
 
 
5,886
 
 
339
 
 
(1,952
 
)
 
18,736
 
 
Share of profit in associates and joint ventures
 
 
33
 
 
 
 
 
 
 
 
2,413
 
 
2,446
 
 
Adjusted profit before tax
 
 
7,018
 
 
7,478
 
 
5,886
 
 
339
 
 
461
 
 
21,182
 
 
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC’s adjusted profit before tax
 
 
33.1
 
 
35.3
 
 
27.8
 
 
1.6
 
 
2.2
 
 
100.0
 
 
Adjusted cost efficiency ratio
 
 
62.0
 
 
43.4
 
 
61.0
 
 
81.1
 
 
(614.1
 
)
 
61.0
 
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
367,917
 
 
337,099
 
 
247,125
 
 
39,602
 
 
2,533
 
 
994,276
 
 
Interests in associates and joint ventures
 
 
398
 
 
 
 
 
 
 
 
21,903
 
 
22,301
 
 
Total external assets
 
 
482,967
 
 
364,638
 
 
1,025,737
 
 
45,520
 
 
670,333
 
 
2,589,195
 
 
Customer accounts
 
 
649,172
 
 
362,274
 
 
294,584
 
 
65,053
 
 
8,655
 
 
1,379,738
 
 
Adjusted risk-weighted assets (unaudited)2
 
 
127,593
 
 
324,587
 
 
282,143
 
 
16,913
 
 
118,952
 
 
870,188
 
 
 
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.
 
 
 
 
 
Consolidated income statement
 
 
for the year ended 31 December
 
 
2019
 
2018
 
 
$m
 
$m
 
Net interest income
 
30,462
 
 
30,489
 
 
– interest income1,2
 
54,695
 
 
49,609
 
 
– interest expense3
 
(24,233
 
)
 
(19,120
 
)
 
Net fee income
 
12,023
 
 
12,620
 
 
– fee income
 
15,439
 
 
16,044
 
 
– fee expense
 
(3,416
 
)
 
(3,424
 
)
 
Net income from financial instruments held for trading or managed on a fair value basis
 
10,231
 
 
9,531
 
 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
 
3,478
 
 
(1,488
 
)
 
Changes in fair value of designated debt and related derivatives4
 
90
 
 
(97
 
)
 
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
 
812
 
 
695
 
 
Gains less losses from financial investments
 
335
 
 
218
 
 
Net insurance premium income
 
10,636
 
 
10,659
 
 
Other operating income
 
2,957
 
 
960
 
 
Total operating income
 
71,024
 
 
63,587
 
 
Net insurance claims and benefits paid and movement in liabilities to policyholders
 
(14,926
 
)
 
(9,807
 
)
 
Net operating income before change in expected credit losses and other credit impairment charges5
 
56,098
 
 
53,780
 
 
Change in expected credit losses and other credit impairment charges
 
(2,756
 
)
 
(1,767
 
)
 
Net operating income
 
53,342
 
 
52,013
 
 
Employee compensation and benefits
 
(18,002
 
)
 
(17,373
 
)
 
General and administrative expenses
 
(13,828
 
)
 
(15,353
 
)
 
Depreciation and impairment of property, plant and equipment and right-of-use assets6
 
(2,100
 
)
 
(1,119
 
)
 
Amortisation and impairment of intangible assets
 
(1,070
 
)
 
(814
 
)
 
Goodwill impairment
 
(7,349
 
)
 
 
 
Total operating expenses
 
(42,349
 
)
 
(34,659
 
)
 
Operating profit
 
10,993
 
 
17,354
 
 
Share of profit in associates and joint ventures
 
2,354
 
 
2,536
 
 
Profit before tax
 
13,347
 
 
19,890
 
 
Tax expense
 
(4,639
 
)
 
(4,865
 
)
 
Profit for the year
 
8,708
 
 
15,025
 
 
Attributable to:
 
 
 
– ordinary shareholders of the parent company
 
5,969
 
 
12,608
 
 
– preference shareholders of the parent company
 
90
 
 
90
 
 
– other equity holders
 
1,324
 
 
1,029
 
 
– non-controlling interests
 
1,325
 
 
1,298
 
 
Profit for the year
 
8,708
 
 
15,025
 
 
 
$
 
$
 
Basic earnings per ordinary share
 
0.30
 
 
0.63
 
 
Diluted earnings per ordinary share
 
0.30
 
 
0.63
 
 
 
1 
Interest income includes $45,708m (2018: $42,130m) of interest recognised on financial assets measured at amortised cost and $8,259m (2018: $7,020m) of interest recognised on financial assets measured at fair value through other comprehensive income.
Interest revenue calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised cost or fair value through other comprehensive income.
Interest expense includes $21,922m (2018: $16,972m) of interest on financial instruments, excluding interest on financial liabilities held for trading or designated or otherwise mandatorily measured at fair value.
The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Includes depreciation of the right-of-use assets of $912m (2018: $0m). Right-of-use assets have been recognised from 1 January 2019 following the adoption of IFRS 16. Comparatives have not been restated.
 
 
 
 
 
Consolidated statement of comprehensive income
 
 
for the year ended 31 December
 

 
2019
 
2018
 
 
 
$m
 
$m
 
Profit for the year
 
 
8,708
 
 
15,025
 
 
Other comprehensive income/(expense)
 
 
 
 
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
 
 
 
 
Debt instruments at fair value through other comprehensive income
 
 
1,152
 
 
(243
 
)
 
– fair value gains/(losses)
 
 
1,793
 
 
(168
 
)
 
– fair value gains transferred to the income statement on disposal
 
 
(365
 
)
 
(95
 
)
 
– expected credit recoveries/(losses) recognised in the income statement
 
 
109
 
 
(94
 
)
 
– income taxes
 
 
(385
 
)
 
114
 
 
Cash flow hedges
 
 
206
 
 
19
 
 
– fair value gains/(losses)
 
 
551
 
 
(267
 
)
 
– fair value losses/(gains) reclassified to the income statement
 
 
(286
 
)
 
317
 
 
– income taxes
 
 
(59
 
)
 
(31
 
)
 
Share of other comprehensive income/(expense) of associates and joint ventures
 
 
21
 
 
(64
 
)
 
– share for the year
 
 
21
 
 
(64
 
)
 
Exchange differences
 
 
1,044
 
 
(7,156
 
)
 
– other exchange differences
 
 
1,044
 
 
(7,156
 
)
 
Items that will not be reclassified subsequently to profit or loss:
 
 
 
 
Remeasurement of defined benefit asset/liability
 
 
13
 
 
(329
 
)
 
– before income taxes
 
 
(17
 
)
 
(388
 
)
 
– income taxes
 
 
30
 
 
59
 
 
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk
 
 
(2,002
 
)
 
2,847
 
 
– before income taxes
 
 
(2,639
 
)
 
3,606
 
 
– income taxes
 
 
637
 
 
(759
 
)
 
Equity instruments designated at fair value through other comprehensive income
 
 
366
 
 
(27
 
)
 
– fair value gains/(losses)
 
 
364
 
 
(71
 
)
 
– income taxes
 
 
2
 
 
44
 
 
Effects of hyperinflation
 
 
217
 
 
283
 
 
Other comprehensive income/(expense) for the year, net of tax
 
 
1,017
 
 
(4,670
 
)
 
Total comprehensive income for the year
 
 
9,725
 
 
10,355
 
 
Attributable to:
 
 
 
 
– ordinary shareholders of the parent company
 
 
6,838
 
 
8,083
 
 
– preference shareholders of the parent company
 
 
90
 
 
90
 
 
– other equity holders
 
 
1,324
 
 
1,029
 
 
– non-controlling interests
 
 
1,473
 
 
1,153
 
 
Total comprehensive income for the year
 
 
9,725
 
 
10,355
 
 
 
 
 
 
 
 
Consolidated balance sheet
 
 
 
 
At
 
 
31 Dec
 
31 Dec
 
 
2019
 
2018
 
 
$m
 
$m
 
Assets
 
 
 
Cash and balances at central banks
 
154,099
 
 
162,843
 
 
Items in the course of collection from other banks
 
4,956
 
 
5,787
 
 
Hong Kong Government certificates of indebtedness
 
38,380
 
 
35,859
 
 
Trading assets
 
254,271
 
 
238,130
 
 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
 
43,627
 
 
41,111
 
 
Derivatives
 
242,995
 
 
207,825
 
 
Loans and advances to banks
 
69,203
 
 
72,167
 
 
Loans and advances to customers
 
1,036,743
 
 
981,696
 
 
Reverse repurchase agreements – non-trading
 
240,862
 
 
242,804
 
 
Financial investments
 
443,312
 
 
407,433
 
 
Prepayments, accrued income and other assets
 
136,680
 
 
110,571
 
 
Current tax assets
 
755
 
 
684
 
 
Interests in associates and joint ventures
 
24,474
 
 
22,407
 
 
Goodwill and intangible assets
 
20,163
 
 
24,357
 
 
Deferred tax assets
 
4,632
 
 
4,450
 
 
Total assets
 
2,715,152
 
 
2,558,124
 
 
Liabilities and equity
 
 
 
Liabilities
 
 
 
Hong Kong currency notes in circulation
 
38,380
 
 
35,859
 
 
Deposits by banks
 
59,022
 
 
56,331
 
 
Customer accounts
 
1,439,115
 
 
1,362,643
 
 
Repurchase agreements – non-trading
 
140,344
 
 
165,884
 
 
Items in the course of transmission to other banks
 
4,817
 
 
5,641
 
 
Trading liabilities
 
83,170
 
 
84,431
 
 
Financial liabilities designated at fair value
 
164,466
 
 
148,505
 
 
Derivatives
 
239,497
 
 
205,835
 
 
Debt securities in issue
 
104,555
 
 
85,342
 
 
Accruals, deferred income and other liabilities
 
118,156
 
 
97,380
 
 
Current tax liabilities
 
2,150
 
 
718
 
 
Liabilities under insurance contracts
 
97,439
 
 
87,330
 
 
Provisions
 
3,398
 
 
2,920
 
 
Deferred tax liabilities
 
3,375
 
 
2,619
 
 
Subordinated liabilities
 
24,600
 
 
22,437
 
 
Total liabilities
 
2,522,484
 
 
2,363,875
 
 
Equity
 
 
 
Called up share capital
 
10,319
 
 
10,180
 
 
Share premium account
 
13,959
 
 
13,609
 
 
Other equity instruments
 
20,871
 
 
22,367
 
 
Other reserves
 
2,127
 
 
1,906
 
 
Retained earnings
 
136,679
 
 
138,191
 
 
Total shareholders’ equity
 
183,955
 
 
186,253
 
 
Non-controlling interests
 
8,713
 
 
7,996
 
 
Total equity
 
192,668
 
 
194,249
 
 
Total liabilities and equity
 
2,715,152
 
 
2,558,124
 
 
 
 
 
 
 
 
Consolidated statement of cash flows
 
for the year ended 31 December
 
 
 
2019
 
2018
 
 
 
$m
 
$m
 
Profit before tax
 
 
13,347
 
 
19,890
 
 
Adjustments for non-cash items:
 
 
 
 
Depreciation, amortisation and impairment1
 
 
10,519
 
 
1,933
 
 
Net gain from investing activities
 
 
(399
 
)
 
(126
 
)
 
Share of profits in associates and joint ventures
 
 
(2,354
 
)
 
(2,536
 
)
 
Gain on disposal of subsidiaries, businesses, associates and joint ventures
 
 
(929
 
)
 
 
 
Change in expected credit losses gross of recoveries and other credit impairment charges
 
 
3,012
 
 
2,280
 
 
Provisions including pensions
 
 
2,423
 
 
1,944
 
 
Share-based payment expense
 
 
478
 
 
450
 
 
Other non-cash items included in profit before tax
 
 
(2,297
 
)
 
(1,303
 
)
 
Elimination of exchange differences2
 
 
(3,742
 
)
 
4,930
 
 
Changes in operating assets and liabilities
 
 
 
 
Change in net trading securities and derivatives
 
 
(18,910
 
)
 
20,855
 
 
Change in loans and advances to banks and customers
 
 
(53,760
 
)
 
(44,071
 
)
 
Change in reverse repurchase agreements – non-trading
 
 
(7,390
 
)
 
(25,399
 
)
 
Change in financial assets designated and otherwise mandatorily measured at fair value
 
 
(2,308
 
)
 
(1,515
 
)
 
Change in other assets
 
 
(21,863
 
)
 
6,766
 
 
Change in deposits by banks and customer accounts
 
 
79,163
 
 
(5,745
 
)
 
Change in repurchase agreements – non-trading
 
 
(25,540
 
)
 
35,882
 
 
Change in debt securities in issue
 
 
19,268
 
 
18,806
 
 
Change in financial liabilities designated at fair value
 
 
20,068
 
 
4,500
 
 
Change in other liabilities
 
 
23,124
 
 
(2,187
 
)
 
Dividends received from associates
 
 
633
 
 
910
 
 
Contributions paid to defined benefit plans
 
 
(533
 
)
 
(332
 
)
 
Tax paid
 
 
(2,267
 
)
 
(3,417
 
)
 
Net cash from operating activities
 
 
29,743
 
 
32,515
 
 
Purchase of financial investments
 
 
(445,907
 
)
 
(399,458
 
)
 
Proceeds from the sale and maturity of financial investments
 
 
413,186
 
 
386,056
 
 
Net cash flows from the purchase and sale of property, plant and equipment
 
 
(1,343
 
)
 
(1,196
 
)
 
Net cash flows from purchase/(disposal) of customer and loan portfolios
 
 
1,118
 
 
(204
 
)
 
Net investment in intangible assets
 
 
(2,289
 
)
 
(1,848
 
)
 
Net cash flow on disposal of subsidiaries, businesses, associates and joint ventures
 
 
(83
 
)
 
4
 
 
Net cash from investing activities
 
 
(35,318
 
)
 
(16,646
 
)
 
Issue of ordinary share capital and other equity instruments
 
 
 
 
6,001
 
 
Cancellation of shares
 
 
(1,000
 
)
 
(1,998
 
)
 
Net sales of own shares for market-making and investment purposes
 
 
141
 
 
133
 
 
Redemption of preference shares and other equity instruments
 
 
 
 
(6,078
 
)
 
Subordinated loan capital repaid3
 
 
(4,210
 
)
 
(4,077
 
)
 
Dividends paid to shareholders of the parent company and non-controlling interests
 
 
(9,773
 
)
 
(10,762
 
)
 
Net cash from financing activities
 
 
(14,842
 
)
 
(16,781
 
)
 
Net decrease in cash and cash equivalents
 
 
(20,417
 
)
 
(912
 
)
 
Cash and cash equivalents at 1 Jan4
 
 
312,911
 
 
323,718
 
 
Exchange differences in respect of cash and cash equivalents
 
 
1,248
 
 
(9,895
 
)
 
Cash and cash equivalents at 31 Dec4, 5
 
 
293,742
 
 
312,911
 
 
Cash and cash equivalents comprise:
 
 
 
 
– cash and balances at central banks
 
 
154,099
 
 
162,843
 
 
– items in the course of collection from other banks
 
 
4,956
 
 
5,787
 
 
– loans and advances to banks of one month or less
 
 
41,626
 
 
39,460
 
 
– reverse repurchase agreements with banks of one month or less
 
 
65,370
 
 
74,702
 
 
– treasury bills, other bills and certificates of deposit less than three months
 
 
20,132
 
 
21,685
 
 
– cash collateral and net settlement accounts
 
 
12,376
 
 
14,075
 
 
– less: items in the course of transmission to other banks
 
 
(4,817
 
)
 
(5,641
 
)
 
Cash and cash equivalents at 31 Dec4, 5
 
 
293,742
 
 
312,911
 
 
 
The impact of the right-of-use assets recognised under IFRS 16 at the beginning of 2019 is not recognised in 2018. This also includes the impact of a $7.3bn goodwill impairment in 2019.
Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.
3 
Subordinated liabilities changes during the year are attributable to repayments of $(4.2)bn (2018: $(4.1)bn) of securities. Non-cash changes during the year included foreign exchange gains/(losses) of $0.6bn (2018: $(0.6)bn) and fair value gains/(losses) of $1.4bn (2018: $(1.4)bn).
In 2019, HSBC included settlement accounts with bank counterparties of one month or less on a net basis. Comparatives have been re-presented and also include the net impact of other cash equivalents not previously included in cash and cash equivalents. The net effect of these changes increased cash and cash equivalents by $11.8bn in 2018.
5 
At 31 December 2019, $35,735m (2018: $26,282m) was not available for use by HSBC, of which $19,353m (2018: $19,755m) related to mandatory deposits at central banks.
 
 
 
 
 
Consolidated statement of changes in equity
 
 
for the year ended 31 December
 
 
 
 
 
Other reserves
 
 
 
 
 
Called up
share capital
and share
premium
 
Other
equity
instru-ments
 
Retained
earnings3,4
 
Financial
assets at
FVOCI reserve
 
Cash flow
hedging
reserve
 
Foreign
exchange
reserve
 
Merger
and other
reserves4,6
 
Totalshare-
holders’
equity
 
Non-
controlling
interests
 
Total
equity
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 1 Jan 2019
 
23,789
 
 
22,367
 
 
138,191
 
 
(1,532
 
)
 
(206
 
)
 
(26,133
 
)
 
29,777
 
 
186,253
 
 
7,996
 
 
194,249
 
 
Profit for the year
 
 
 
 
 
7,383
 
 
 
 
 
 
 
 
 
 
7,383
 
 
1,325
 
 
8,708
 
 
Other comprehensive income(net of tax)
 
 
 
 
 
(1,759
 
)
 
1,424
 
 
204
 
 
1,000
 
 
 
 
869
 
 
148
 
 
1,017
 
 
– debt instruments at fair value through other comprehensive income
 
 
 
 
 
 
 
1,146
 
 
 
 
 
 
 
 
1,146
 
 
6
 
 
1,152
 
 
– equity instruments designated at fair value through other comprehensive income
 
 
 
 
 
 
278
 
 
 
 
 
 
 
 
278
 
 
88
 
 
366
 
 
– cash flow hedges
 
 
 
 
 
 
 
 
 
204
 
 
 
 
 
 
204
 
 
2
 
 
206
 
 
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk
 
 
 
 
 
(2,002
 
)
 
 
 
 
 
 
 
 
 
(2,002
 
)
 
 
 
(2,002
 
)
 
– remeasurement of defined benefit asset/liability
 
 
 
 
 
5
 
 
 
 
 
 
 
 
 
 
5
 
 
8
 
 
13
 
 
– share of other comprehensive income of associates and joint ventures
 
 
 
 
 
21
 
 
 
 
 
 
 
 
 
 
21
 
 
 
 
21
 
 
– effects of hyperinflation
 
 
 
 
 
217
 
 
 
 
 
 
 
 
 
 
217
 
 
 
 
217
 
 
– exchange differences
 
 
 
 
 
 
 
 
 
 
 
1,000
 
 
 
 
1,000
 
 
44
 
 
1,044
 
 
Total comprehensive income for the year
 
 
 
 
 
5,624
 
 
1,424
 
 
204
 
 
1,000
 
 
 
 
8,252
 
 
1,473
 
 
9,725
 
 
Shares issued under employee remuneration and share plans
 
557
 
 
 
 
(495
 
)
 
 
 
 
 
 
 
 
 
62
 
 
 
 
62
 
 
Shares issued in lieu of dividends and amounts arising thereon
 
 
 
 
 
2,687
 
 
 
 
 
 
 
 
 
 
2,687
 
 
 
 
2,687
 
 
Dividends to shareholders
 
 
 
 
 
(11,683
 
)
 
 
 
 
 
 
 
 
 
(11,683
 
)
 
(777
 
)
 
(12,460
 
)
 
Redemption of securities2
 
 
 
(1,496
 
)
 
(12
 
)
 
 
 
 
 
 
 
 
 
(1,508
 
)
 
 
 
(1,508
 
)
 
Transfers7
 
 
 
 
 
2,475
 
 
 
 
 
 
 
 
(2,475
 
)
 
 
 
 
 
 
 
Cost of share-based payment arrangements
 
 
 
 
 
478
 
 
 
 
 
 
 
 
 
 
478
 
 
 
 
478
 
 
Cancellation of shares9
 
(68
 
)
 
 
 
(1,000
 
)
 
 
 
 
 
 
 
68
 
 
(1,000
 
)
 
 
 
(1,000
 
)
 
Other movements
 
 
 
 
 
414
 
 
 
 
 
 
 
 
 
 
414
 
 
21
 
 
435
 
 
At 31 Dec 2019
 
24,278
 
 
20,871
 
 
136,679
 
 
(108
 
)
 
(2
 
)
 
(25,133
 
)
 
27,370
 
 
183,955
 
 
8,713
 
 
192,668
 
 
 
 
 
Consolidated statement of changes in equity (continued)
 
 
 
 
 
Other reserves
 
 
 
 
 
Called up
share capital
and share
premium
 
Other
equity
instru-
ments
 
Retained
earnings3,4
 
Financial
assets at
FVOCI reserve5
 
Cash flow
hedging
reserve
 
Foreign
exchange
reserve
 
Merger
and other
reserves4,6
 
Total
share-
holders’
equity
 
Non-
controlling
interests
 
Total
equity
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 31 Dec 2017
 
20,337
 
 
22,250
 
 
139,999
 
 
(350
 
)
 
(222
 
)
 
(19,072
 
)
 
27,308
 
 
190,250
 
 
7,621
 
 
197,871
 
 
Impact on transition to IFRS 910
 
 
 
 
 
(585
 
)
 
(1,021
 
)
 
 
 
 
 
 
 
(1,606
 
)
 
(41
 
)
 
(1,647
 
)
 
At 1 Jan 2018
 
20,337
 
 
22,250
 
 
139,414
 
 
(1,371
 
)
 
(222
 
)
 
(19,072
 
)
 
27,308
 
 
188,644
 
 
7,580
 
 
196,224
 
 
Profit for the year
 
 
 
 
 
13,727