RNS Number : 6487F
HSBC Holdings PLC
11 March 2020
 
 

Financial review

 

47 Financial summary

56 Global businesses and geographical regions

72 Other information

73 Risk

152 Capital

Supporting the transition to a low-carbon economy

We acted as a mandated lead arranger in the refinancing of the £2.5bn Beatrice offshore wind farm off the north-east coast of Scotland, which is jointly owned by UK energy firm SSE, Danish fund manager Copenhagen Infrastructure Partners and Edinburgh-based energy firm Red Rock Power Limited, a subsidiary of Beijing-headquartered SDIC Power.

To encourage low-carbon electricity generation and ensure progress towards carbon neutrality by 2050, the UK government awarded Beatrice a 15-year contract for difference, a mechanism in which public funding underpins power revenues that could otherwise fluctuate with swings in electricity prices.

Beatrice is one of the largest wind farms globally with a capacity of 580MW, which is capable of powering approximately 450,000 homes.

Financial summary

 

Page

Use of non-GAAP financial measures

47

Changes from 1 January 2019

 

47

Critical accounting estimates and judgements

47

Consolidated income statement

48

Income statement commentary

49

Consolidated balance sheet

52

Use of non-GAAP financial measures

Our reported results are prepared in accordance with IFRSs as detailed in the financial statements starting on page

229

.

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

The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments', as detailed in Note 10: Segmental analysis on page 263.

Adjusted performance

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

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

Significant items

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

The tables on pages 56 to 59 and pages 63 to 68 detail the effects of significant items on each of our global business segments and geographical regions in 2019, 2018 and 2017.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2019.

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

Foreign currency translation differences

Foreign currency translation differences for 2019 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:

•    the income statements for 2018 and 2017 at the average rates of exchange for 2019; and

•    the balance sheets at 31 December 2018 and 31 December 2017 at the prevailing rates of exchange on 31 December 2019.

No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC's Argentinian subsidiaries have not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.

 

Changes from 1 January 2019

IFRS 16 'Leases'

On 1 January 2019, HSBC adopted the requirements of IFRS 16 'Leases' retrospectively, with the cumulative effect of initially applying the standard recognised as an adjustment to the opening balance of retained earnings at that date. Comparatives were not restated. The adoption of the standard increased assets by $5bn and increased financial liabilities by the same amount with no effect on net assets or retained earnings.

Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 'Financial Instruments'

Amendments to IFRS 9 and IAS 39 issued in September 2019 modify specific hedge accounting requirements so that entities apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows of the hedging instrument are based is not altered as a result of interest rate benchmark reform. These amendments apply from 1 January 2020 with early adoption permitted. HSBC has adopted the amendments that apply to IAS 39 from 1 January 2019 and has made the additional disclosures as required by the amendments.

Critical accounting estimates and judgements

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

1.2

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

•    Impairment of amortised cost financial assets and financial assets measured at fair value through other comprehensive income ('FVOCI'): The most significant judgements relate to defining what is considered to be a significant increase in credit risk, determining the lifetime and point of initial recognition of revolving facilities, and making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective and very sensitive to the risk factors. See Note 1.2(i) on page 246.

•    Deferred tax assets: The most significant judgements relate to judgements made in respect of expected future profitability. See Note 1.2(l) on page 250.

•    Valuation of financial instruments: In determining the fair value of financial instruments a variety of valuation techniques are used, some of which feature significant unobservable inputs and are subject to substantial uncertainty. See Note 1.2(c) on page 244.

•    Impairment of interests in associates: Impairment testing involves significant judgement in determining the value in use, and in particular estimating the present values of cash flows expected to arise from continuing to hold the investment, based on a number of management assumptions. The most significant judgements relate to the impairment testing of our investment in Bank of Communications Co., Limited ('BoCom'). See Note 1.2(a) on page 242.

•    Goodwill impairment: A high degree of uncertainty is involved in estimating the future cash flows of the cash-generating units ('CGUs') and the rates used to discount these cash flows. See Note 1.2(a) on page 242.

•    Provisions: Significant judgement may be required due to the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. See Note 1.2(m) on page 250.

•    Post-employment benefit plans: The calculation of the defined benefit pension obligation involves the determination of key assumptions including discount rate, inflation rate, pension payments and deferred pensions, pay and mortality. See Note 1.2(k) on page 249.

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

Consolidated income statement

Summary consolidated income statement

 

 

2019

2018

2017

2016

2015

 

Footnotes

$m

$m

$m

$m

$m

Net interest income

 

30,462

 

30,489

 

28,176

 

29,813

 

32,531

 

Net fee income

 

12,023

 

12,620

 

12,811

 

12,777

 

14,705

 

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

 

10,231

 

9,531

 

8,426

 

7,521

 

8,717

 

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

)

2,836

 

1,262

 

565

 

Change in fair value of designated debt and related derivatives

1

90

 

(97

)

155

 

(1,997

)

973

 

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

 

812

 

695

 

N/A

N/A

N/A

Gains less losses from financial investments

 

335

 

218

 

1,150

 

1,385

 

2,068

 

Net insurance premium income

 

10,636

 

10,659

 

9,779

 

9,951

 

10,355

 

Other operating income/(expense)

 

2,957

 

960

 

443

 

(876

)

1,178

 

Total operating income

 

71,024

 

63,587

 

63,776

 

59,836

 

71,092

 

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

 

(14,926

)

(9,807

)

(12,331

)

(11,870

)

(11,292

)

Net operating income before change in expected credit losses and other
credit impairment charges/Loan impairment charges and other credit risk provisions

2

56,098

 

53,780

 

51,445

 

47,966

 

59,800

 

Change in expected credit losses and other credit impairment charges
 

 

(2,756

)

(1,767

)

N/A

N/A

N/A

Loan impairment charges and other credit risk provisions

 

N/A

N/A

(1,769

)

(3,400

)

(3,721

)

Net operating income

 

53,342

 

52,013

 

49,676

 

44,566

 

56,079

 

Total operating expenses excluding goodwill impairment

 

(35,000

)

(34,659

)

(34,884

)

(36,568

)

(39,768

)

Goodwill impairment

 

(7,349

)

-

 

-

 

(3,240

)

-

 

Operating profit

 

10,993

 

17,354

 

14,792

 

4,758

 

16,311

 

Share of profit in associates and joint ventures

 

2,354

 

2,536

 

2,375

 

2,354

 

2,556

 

Profit before tax

 

13,347

 

19,890

 

17,167

 

7,112

 

18,867

 

Tax expense

 

(4,639

)

(4,865

)

(5,288

)

(3,666

)

(3,771

)

Profit for the year

 

8,708

 

15,025

 

11,879

 

3,446

 

15,096

 

Attributable to:

 

 

 

 

 

 

-  ordinary shareholders of the parent company

 

5,969

 

12,608

 

9,683

 

1,299

 

12,572

 

-  preference shareholders of the parent company

 

90

 

90

 

90

 

90

 

90

 

-  other equity holders

 

1,324

 

1,029

 

1,025

 

1,090

 

860

 

-  non-controlling interests

 

1,325

 

1,298

 

1,081

 

967

 

1,574

 

Profit for the year

 

8,708

 

15,025

 

11,879

 

3,446

 

15,096

 

Five-year financial information

 

 

2019

2018

2017

2016

2015

 

Footnotes

$

$

$

$

$

Basic earnings per share

 

0.30

 

0.63

 

0.48

 

0.07

 

0.65

 

Diluted earnings per share

 

0.30

 

0.63

 

0.48

 

0.07

 

0.64

 

Dividends per ordinary share

3

0.51

 

0.51

 

0.51

 

0.51

 

0.50

 

 

 

%

%

%

%

%

Dividend payout ratio

4

172.2

 

81.0

 

106.3

 

728.6

 

76.5

 

Post-tax return on average total assets

 

0.3

 

0.6

 

0.5

 

0.1

 

0.6

 

Return on average ordinary shareholders' equity

 

3.6

 

7.7

 

5.9

 

0.8

 

7.2

 

Return on average tangible equity

 

8.4

 

8.6

 

6.8

 

2.6

 

8.1

 

Effective tax rate

 

34.8

 

24.5

 

30.8

 

51.5

 

19.99

 

For footnotes, see page 55.

Unless stated otherwise, all tables in the Annual Report and Accounts 2019 are presented on a reported basis.

For a summary of our financial performance in 2019, see page 27.

For further financial performance data for each global business and geographical region, see pages 56 to 59 and 61 to 69, respectively. The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments', in Note 10: Segmental analysis on page 263.

Income statement commentary

The following commentary compares Group financial performance for the years ended 2019 with 2018.

Net interest income

 

 

2019

2018

2017

 

Footnotes

$m

$m

$m

Interest income

 

54,695

 

49,609

 

40,995

 

Interest expense

 

(24,233

)

(19,120

)

(12,819

)

Net interest income

 

30,462

 

30,489

 

28,176

 

Average interest-earning assets

 

1,922,822

 

1,839,346

 

1,726,120

 

 

 

%

%

%

Gross interest yield

5

2.84

 

2.70

 

2.37

 

Less: cost of funds

5

(1.48

)

(1.21

)

(0.88

)

Net interest spread

6

1.36

 

1.49

 

1.49

 

Net interest margin

7

1.58

 

1.66

 

1.63

 

For footnotes, see page 55.

Summary of interest income by type of asset

 

 

2019

2018

2017

 

 

Average
balance

Interest
income

Yield

Average
balance

Interest
income

Yield

Average
balance

Interest
income

Yield

 

 

$m

$m

%

$m

$m

%

$m

$m

%

Short-term funds and loans and advances to banks

 

212,920

 

2,411

 

1.13

 

233,637

 

2,475

 

1.06

 

236,126

 

2,030

 

0.86

 

Loans and advances to customers

 

1,021,554

 

35,578

 

3.48

 

972,963

 

33,285

 

3.42

 

902,214

 

28,751

 

3.19

 

Reverse repurchase agreements - non-trading

 

224,942

 

4,690

 

2.08

 

205,427

 

3,739

 

1.82

 

173,760

 

2,191

 

1.26

 

Financial investments

 

417,939

 

10,705

 

2.56

 

386,230

 

9,166

 

2.37

 

389,807

 

7,440

 

1.91

 

Other interest-earning assets

 

45,467

 

1,311

 

2.88

 

41,089

 

944

 

2.30

 

24,213

 

583

 

2.41

 

Total interest-earning assets

 

1,922,822

 

54,695

 

2.84

 

1,839,346

 

49,609

 

2.70

 

1,726,120

 

40,995

 

2.37

 

Summary of interest expense by type of liability and equity

 

 

2019

2018

2017

 

 

Average
balance

Interest
expense

Cost

Average
balance

Interest
expense

Cost

Average
balance

Interest
expense

Cost

 

Footnotes

$m

$m

%

$m

$m

%

$m

$m

%

Deposits by banks

8

52,515

 

702

 

1.34

 

44,530

 

506

 

1.14

 

47,337

 

451

 

0.95

 

Customer accounts

9

1,149,483

 

11,238

 

0.98

 

1,138,620

 

8,287

 

0.73

 

1,094,920

 

5,405

 

0.49

 

Repurchase agreements - non-trading

 

160,850

 

4,023

 

2.50

 

161,204

 

3,409

 

2.11

 

136,561

 

1,665

 

1.22

 

Debt securities in issue - non-trading

10

211,229

 

6,522

 

3.09

 

183,434

 

5,675

 

3.09

 

169,243

 

4,391

 

2.59

 

Other interest-bearing liabilities

 

59,980

 

1,748

 

2.91

 

53,731

 

1,243

 

2.31

 

7,009

 

907

 

12.94

 

Total interest-bearing liabilities

 

1,634,057

 

24,233

 

1.48

 

1,581,519

 

19,120

 

1.21

 

1,455,070

 

12,819

 

0.88

 

For footnotes, see page 55.

Net interest income ('NII') of $30.5bn was broadly unchanged compared with 2018. Interest income associated with the increase in average interest-earning assets ('AIEA') of 5% was offset by higher funding costs, reflecting higher average interest rates compared with the previous year.

Excluding the adverse effects of significant items and foreign currency translation differences, NII increased by $1.0bn.

Net interest margin ('NIM') of 1.58% was 8 basis points ('bps') lower than in 2018 as the higher yield on AIEA of 14bps was offset by the rise in funding costs of average interest-bearing liabilities of 27bps.

The decrease in NIM in 2019 included the adverse effects of foreign currency translation differences and significant items. Excluding these, NIM fell by 6bps.

Interest income increased by $5.1bn or 10% compared with 2018, benefiting from growth in AIEA of 5% and higher average interest rates compared with the previous year, with the yield on AIEA increasing by 14bps.

Interest income on loans and advances to customers increased by $2.3bn. This was mainly driven by higher average interest rates compared with the previous year, with yields increasing by 6bps and 5% volume growth in AIEA, notably in term lending in Asia, and growth in mortgages in Asia and Europe.

Interest income on short-term funds and financial investments increased by $1.5bn, reflecting higher average interest rates compared with the previous year.

The increase in interest income included $1.6bn in relation to the adverse effects of significant items and foreign currency translation. Excluding these, interest income increased by $6.7bn.

Interest expense increased by $5.1bn or 27% compared with 2018. This reflects growth in average interest-bearing liabilities of 3% and an increase in funding cost of 27bps, predominantly in customer accounts.

Interest expense on interest-bearing customer accounts was $3.0bn higher, mainly in Asia, reflecting higher average interest rates compared with the previous year together with an increase in customer accounts, primarily towards term deposits.

Interest expense on debt securities in issue was $0.8bn higher. This was mainly as a result of debt issuances by HSBC Holdings to meet regulatory requirements, which contributed $0.5bn towards the increase.

The increase in interest expense included the favourable effects of significant items and foreign currency translation differences of $0.6bn. Excluding these impacts, interest expense was $5.7bn higher.

Net fee income of $12.0bn was $0.6bn lower compared with 2018, including adverse foreign currency translation differences of $0.3bn. The remaining reduction primarily reflected lower net fee income in RBWM and GB&M.

In RBWM, the reduction reflected lower fees from broking and unit trusts in Hong Kong due to lower volumes as investor confidence was weaker compared with a strong 2018. In addition, funds under management fees also reduced, reflecting a change in mix of clients' investments to lower risk and lower margin products.

In GB&M, net fee income was lower, mainly in the UK and the US. This was primarily due to lower corporate finance fees, which reflected reduced client activity. This was partly offset by higher underwriting fees, notably in Asia, France and the US, from higher volumes.

Net income from financial instruments held for trading or managed on a fair value basis increased by $0.7bn and included a favourable fair value movement on non-qualifying hedges of $0.3bn, offset by adverse movements in foreign currency translation differences of $0.5bn.

The increase was mainly in Asia, notably in Hong Kong, reflecting favourable market conditions and increased client activity in our Rates, Credit and Equities businesses, and from gains in Balance Sheet Management ('BSM') on funding swaps due to favourable movements on yield curves. In Latin America, income in BSM increased, primarily from gains on debt securities in Argentina and a favourable impact of hyperinflation, as well as increased client activity in GB&M in Mexico. Income increased in the US from increased client activity on US Treasuries and emerging markets interest rate swaps, partly offset by lower revenue from precious metals trading.

In the UK, income fell as subdued market conditions resulted in lower Global Markets revenue, notably in Rates, Credit and Equities.

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss was $3.5bn, compared with a net expense of $1.5bn in 2018. This increase primarily reflected more favourable equity market performance in Hong Kong and France, resulting in revaluation gains on the equity and unit trust assets supporting insurance and investment contracts.

This positive movement resulted in a corresponding movement in liabilities to policyholders and the present value of in-force long-term insurance business (see 'Other operating income' below), reflecting the extent to which the policyholders and shareholders respectively participate in the investment performance of the associated assets.

Change in fair value of designated debt and related derivatives were $0.1bn favourable in 2019, compared with adverse movements of $0.1bn in 2018. These movements were driven by changes in interest rates between the periods, notably in US dollars and pounds sterling.

The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances, and are managed in conjunction with interest rate swaps as part of our interest rate management strategy. These liabilities are discussed further on page 53.

Gains less losses from financial investments of $0.3bn increased by $0.1bn compared with 2018, reflecting higher gains from the disposal of debt securities.

Net insurance premium income was broadly unchanged compared with 2018, and included adverse effects of foreign currency translation differences. Excluding these, the increase of $0.2bn reflected higher new business volumes, particularly in Hong Kong, Singapore and UK, partly offset by higher reinsurance ceded in Hong Kong.

Other operating income of $2.9bn in 2019 increased by $2.0bn compared with 2018. This was primarily due to a higher favourable change in the present value of in-force long-term insurance business ('PVIF') in 2019 (up $1.1bn), and a $0.8bn dilution gain in 2019 following the merger of The Saudi British Bank with Alawwal bank in Saudi Arabia.

This increase in PVIF reflected a favourable movement in 'assumption changes and experience variances' of $1.1bn. This was primarily in Hong Kong due to the effect of interest rate changes on the valuation of the liabilities under insurance contracts, which has a corresponding increase in 'net insurance claims and benefits paid and movement in liabilities to policyholders'. For further details, see Note 21 on the financial statements.

In 2019, we recognised a gain in Argentina following the sale of a stake in the payment processing company Prisma Medios de Pago S.A., and a gain in Mexico associated with the launch of a merchant acquiring services joint venture with Global Payments Inc. By contrast, 2018 included a loss of $0.1bn on the early redemption of subordinated debt linked to the US run-off portfolio.

Net insurance claims and benefits paid and movement in liabilities to policyholders were $5.1bn higher, primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk, and the impact of higher new business volumes, particularly in Hong Kong and Singapore. These were partly offset by the impact of higher reinsurance ceded in Hong Kong.

Changes in expected credit losses and other credit impairment charges ('ECL') of $2.8bn were $1.0bn higher compared with 2018. This was mainly driven by higher charges in CMB, RBWM and GB&M. ECL in 2019 included a charge to reflect the economic outlook in Hong Kong, as well as a partial release of allowances related to UK economic uncertainty. See page 95 for more information on the impact of alternative/additional scenarios. The effects of foreign currency translation differences between the periods were minimal.

•    In CMB, ECL charges of $1.2bn were $0.5bn higher reflecting increases in Europe and Hong Kong, while the previous year benefited from net releases in North America that did not recur. The movements were partly offset by a reduction in ECL charges in MENA.

•    In RBWM, ECL charges of $1.4bn were $0.3bn higher, driven by increased ECL related to unsecured lending, notably in the US, Mexico, and Hong Kong. In addition, ECL in 2019 included charges in Argentina related to government bond exposures in our insurance business.

•    In GB&M, net ECL charges of $0.2bn compared with a net release of $31m in 2018. Releases in the previous period more than offset ECL charges and primarily related to a small number of clients within the oil and gas sector in the US.

•    In Corporate Centre, net ECL charges of $7m compared with a net release of $119m in 2018. The ECL in 2019 included charges related to BSM's exposure to government bonds in Argentina. There were also lower net releases recorded in 2019 related to our legacy portfolios in the UK, compared with 2018.

On a constant currency basis, ECL as a percentage of average gross loans and advances to customers was 0.27%, compared with 0.17% in 2018.

Operating expenses - currency translation and significant items

 

2019

2018

 

$m

$m

Significant items

9,554

 

1,644

 

-  costs of structural reform

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 and regulatory matters

(61

)

816

 

-  currency translation on significant items

 

(25

)

Currency translation

 

1,109

 

Year ended 31 Dec

9,554

 

2,753

 

Staff numbers (full-time equivalents)

 

2019

2018

2017

Global businesses

 

 

 

Retail Banking and Wealth Management

134,296

 

133,644

 

129,402

 

Commercial Banking

44,503

 

44,805

 

44,871

 

Global Banking and Markets

48,459

 

48,500

 

45,725

 

Global Private Banking

6,767

 

6,819

 

7,250

 

Corporate Centre

 

 

 

1,326

 

1,449

 

1,439

 

At 31 Dec

235,351

 

235,217

 

228,687

 

Operating expenses of $42.3bn were $7.7bn or 22% higher than in 2018 and included favourable foreign currency translation differences of $1.1bn, which were more than offset by net adverse movements in significant items of $7.9bn.

Significant items included:

•    a $7.3bn impairment of goodwill, which included $4.0bn related to our global GB&M business, resulting from an update in long-term assumptions and the planned reshaping of the business, and $2.5bn in our CMB business in Europe, $0.4bn in GPB in North America, and $0.4bn in CMB in Latin America and MENA reflecting lower long-term economic growth rate assumptions. For further details, see Note 21 on the financial statements;

•    customer redress programme costs of $1.3bn in 2019, $1.2bn of which related to the mis-selling of payment protection insurance ('PPI') mainly driven by a higher than expected increase in the volume of complaints prior to the deadline in August 2019. This compared with $0.1bn in 2018. For further details, see Note 10 on the financial statements; and

•    restructuring and other related costs of $0.8bn in 2019, which included $753m of severance costs arising from cost efficiency measures across our global businesses and functions. We expect annualised cost savings from these measures to be approximately equal to 2019 severance costs.

These were partly offset by:

•    the non-recurrence of settlements and provisions in connection with legal and regulatory matters of $0.8bn in 2018;

•    lower costs of structural reform of $0.2bn, which included costs associated with the UK's withdrawal from the European Union; and

•    the non-recurrence of a provision in relation to past service costs of guaranteed minimum pension obligations in 2018 of $0.2bn.

Excluding significant items and foreign currency translation differences, operating expenses of $32.8bn were $0.9bn or 2.8% higher than in 2018. The increase primarily reflected investments to grow the business (up $0.4bn), notably in RBWM and CMB, as well as continued investment in digital capabilities across all of our global businesses.

Volume-related growth increased operating expenses by $0.2bn, and the UK bank levy of $988m was $24m higher than in 2018.

The impact of our cost-saving efficiencies broadly offset inflation.

The number of employees expressed in full-time equivalent staff ('FTEs') at 31 December 2019 was 235,351, an increase of 134 from 31 December 2018. This largely reflected an increase in FTEs associated with our investment initiatives, which was broadly offset by reductions following our restructuring programmes. The number of contractors at 31 December 2019 was 7,411, a decrease of 3,443 from 31 December 2018.

The 2020 business update sets a target of reducing adjusted operating expenses to $31bn or lower by 2022. To achieve this reduction, we expect to incur restructuring costs of $6bn during the period to 2022.

Share of profit in associates and joint ventures was $2.4bn, a decrease of $0.2bn or 7% compared with 2018, and included the adverse effects of foreign currency translation differences of $90m.

Excluding the effects of foreign currency translation differences, our share of profit in associates and joint ventures decreased by $92m compared with 2018. This reflected lower income from The Saudi British Bank due to higher ECL charges and other expenses relating to the merger with Alawwal bank, partly offset by higher income from BoCom.

At 31 December 2019, we performed an impairment review of our investment in BoCom and concluded that it was not impaired, based on our value-in-use ('VIU') calculation. For more information on the key assumptions in our VIU calculation, including the sensitivity of the VIU to each key assumption, see Note 18 on the financial statements.

Tax expense of $4.6bn was $0.2bn lower than in 2018.

The effective tax rate for 2019 of 34.8% was higher than the 24.5% for 2018 due to the impairment of goodwill in 2019, which is not deductible for tax purposes.

 

This impairment charge increased the 2019 effective tax rate by 12.3%.

Further details are provided in Note 7 on the financial statements.

Consolidated balance sheet

Five-year summary consolidated balance sheet

 

 

2019

2018

2017

2016

2015

 

Footnotes

$m

$m

$m

$m

$m

Assets

 

 

 

 

 

 

Cash and balances at central banks

 

154,099

 

162,843

 

180,624

 

128,009

 

98,934

 

Trading assets

 

254,271

 

238,130

 

287,995

 

235,125

 

224,837

 

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

 

43,627

 

41,111

 

N/A

N/A

N/A

Financial assets designated at fair value

 

N/A

N/A

29,464

 

24,756

 

23,852

 

Derivatives

 

242,995

 

207,825

 

219,818

 

290,872

 

288,476

 

Loans and advances to banks

 

69,203

 

72,167

 

90,393

 

88,126

 

90,401

 

Loans and advances to customers

11

1,036,743

 

981,696

 

962,964

 

861,504

 

924,454

 

Reverse repurchase agreements - non-trading

 

240,862

 

242,804

 

201,553

 

160,974

 

146,255

 

Financial investments

 

443,312

 

407,433

 

389,076

 

436,797

 

428,955

 

Other assets

 

230,040

 

204,115

 

159,884

 

148,823

 

183,492

 

Total assets at 31 Dec

 

2,715,152

 

2,558,124

 

2,521,771

 

2,374,986

 

2,409,656

 

Liabilities and equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deposits by banks

 

59,022

 

56,331

 

69,922

 

59,939

 

54,371

 

Customer accounts

 

1,439,115

 

1,362,643

 

1,364,462

 

1,272,386

 

1,289,586

 

Repurchase agreements - non-trading

 

140,344

 

165,884

 

130,002

 

88,958

 

80,400

 

Trading liabilities

 

83,170

 

84,431

 

184,361

 

153,691

 

141,614

 

Financial liabilities designated at fair value

 

164,466

 

148,505

 

94,429

 

86,832

 

66,408

 

Derivatives

 

239,497

 

205,835

 

216,821

 

279,819

 

281,071

 

Debt securities in issue

 

104,555

 

85,342

 

64,546

 

65,915

 

88,949

 

Liabilities under insurance contracts

 

97,439

 

87,330

 

85,667

 

75,273

 

69,938

 

Other liabilities

 

194,876

 

167,574

 

113,690

 

109,595

 

139,801

 

Total liabilities at 31 Dec

 

2,522,484

 

2,363,875

 

2,323,900

 

2,192,408

 

2,212,138

 

Equity

 

 

 

 

 

 

Total shareholders' equity

 

183,955

 

186,253

 

190,250

 

175,386

 

188,460

 

Non-controlling interests

 

8,713

 

7,996

 

7,621

 

7,192

 

9,058

 

Total equity at 31 Dec

 

192,668

 

194,249

 

197,871

 

182,578

 

197,518

 

Total liabilities and equity at 31 Dec

 

2,715,152

 

2,558,124

 

2,521,771

 

2,374,986

 

2,409,656

 

For footnotes, see page 55.

A more detailed consolidated balance sheet is contained in the financial statements on page 231.

Five-year selected financial information

 

 

2019

2018

2017

2016

2015

 

Footnotes

$m

$m

$m

$m

$m

Called up share capital

 

10,319

 

10,180

 

10,160

 

10,096

 

9,842

 

Capital resources

12

172,150

 

173,238

 

182,383

 

172,358

 

189,833

 

Undated subordinated loan capital

 

1,968

 

1,969

 

1,969

 

1,967

 

2,368

 

Preferred securities and dated subordinated loan capital

13

33,063

 

35,014

 

42,147

 

42,600

 

42,844

 

Risk-weighted assets

 

843,395

 

865,318

 

871,337

 

857,181

 

1,102,995

 

Total shareholders' equity

 

183,955

 

186,253

 

190,250

 

175,386

 

188,460

 

Less: preference shares and other equity instruments

 

(22,276

)

(23,772

)

(23,655

)

(18,515

)

(16,517

)

Total ordinary shareholders' equity

 

161,679

 

162,481

 

166,595

 

156,871

 

171,943

 

Less: goodwill and intangible assets (net of tax)

 

(17,535

)

(22,425

)

(21,680

)

(19,649

)

(24,626

)

Tangible ordinary shareholders' equity

 

144,144

 

140,056

 

144,915

 

137,222

 

147,317

 

Financial statistics

 

 

 

 

 

 

Loans and advances to customers as a percentage of customer accounts

 

72.0%

72.0%

70.6%

67.7%

71.7%

Average total shareholders' equity to average total assets

 

6.97%

7.16%

7.33%

7.37%

7.31%

Net asset value per ordinary share at year-end ($)

14

8.00

 

8.13

 

8.35

 

7.91

 

8.77

 

Tangible net asset value per ordinary share at year-end ($)

 

7.13

 

7.01

 

7.26

 

6.92

 

7.51

 

Tangible net asset value per fully diluted share at year-end ($)

 

 

7.11

 

6.98

 

7.22

 

6.88

 

7.46

 

Number of $0.50 ordinary shares in issue (millions)

 

20,639

 

20,361

 

20,321

 

20,192

 

19,685

 

Basic number of $0.50 ordinary shares outstanding (millions)

 

20,206

 

19,981

 

19,960

 

19,838

 

19,604

 

Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)

 

20,280

 

20,059

 

20,065

 

19,933

 

19,744

 

Closing foreign exchange translation rates to $:

 

 

 

 

 

 

$1: £

 

0.756

 

0.783

 

0.740

 

0.811

 

0.675

 

$1: €

 

0.890

 

0.873

 

0.834

 

0.949

 

0.919

 

For footnotes, see page 55.

Balance sheet commentary compared with 
31 December 2018

At 31 December 2019, our total assets were $2.7tn, an increase of $157bn or 6% on a reported basis and $126bn or 5% on a constant currency basis.

Our ratio of customer advances to customer accounts of 72.0% was unchanged from 31 December 2018.

Assets

Loans and advances to customers of $1.0tn increased by $55bn or 6% on a reported basis. This included a favourable effect of foreign currency translation differences of $13bn, resulting in growth of $42bn or 4% on a constant currency basis, which was mainly due to continued growth in Asia and Europe, notably in Hong Kong and the UK.

Customer lending in Asia increased by $25bn, with growth in all global businesses. The increase in RBWM (up $13bn) reflected growth in Hong Kong (up $8bn) and Australia (up $3bn), primarily due to increased mortgage lending. In GPB (up $6bn), the increase was mainly in Hong Kong, driven by growth in marketable securities-backed lending transactions, and in Singapore from increased term lending. Lending growth in GB&M (up $4bn) and CMB (up $3bn) reflected higher corporate term lending from our continued strategic focus on loan growth in the region, as well as from an increase in customer demand.

In Europe, customer lending increased by $12bn, notably in HSBC UK (up $11bn). This primarily reflected growth in mortgage balances in RBWM (up $9bn) due to our continued focus on broker-originated mortgages, and in CMB (up $2bn) where term lending increased.

Cash and balances at central banks decreased by $9bn or 5% and included a favourable effect of foreign currency translation differences of $1bn. Excluding this, cash and balances at central banks decreased by $10bn, mainly in the US, reflecting the redeployment of our commercial surplus.

Trading assets increased by $16bn or 7%, which included a favourable effect of foreign currency translation differences of $3bn. Excluding this, trading assets increased by $13bn due to an increase in equity security holdings, notably in Hong Kong, the US and the UK, in part due an increase in client activity compared with 2018. This was partly offset by a decrease in debt securities held in the US.

Derivative assets increased by $35bn or 17% and included a favourable effect of foreign currency translation differences of $5bn. Excluding this, derivative assets increased by $31bn, primarily from mark-to-market gains in the UK. The increase in derivative assets was consistent with the increase in derivative liabilities as the underlying risk is broadly matched.

Financial investments increased by $36bn or 9%, which included a favourable effect of foreign currency translation differences of $3bn. Excluding this, financial investments increased by $33bn, mainly due to an increase in debt securities, notably in the UK, and to a lesser extent in Singapore and the US. This was partly offset by a decrease in investments in government bonds in Hong Kong.

Liabilities

Customer accounts of $1.4tn increased by $76bn or 6% on a reported basis, including the favourable effect of foreign currency translation differences of $17bn. On a constant currency basis, current accounts increased by $59bn or 4%, with growth across all regions, mainly in Asia, Europe and North America.

In Asia, we grew customer accounts by $30bn or 4%, notably in RBWM (up $20bn) and CMB (up $5bn), primarily from an increase in time deposits, reflecting higher customer inflows due to competitive rates. Growth in GB&M (up $5bn) was mainly in Singapore as we continued to target this market for growth.

Customer accounts increased in Europe by $13bn. This was driven by growth in RBWM (up $11bn), mainly due to higher savings balances, notably in the UK, and in CMB (up $10bn), reflecting growth in Global Liquidity and Cash Management ('GLCM'). These increases were partly offset by a decrease in GB&M balances (down $9bn) mainly in the UK in GLCM.

In North America, customer accounts increased by $11bn, notably in RBWM (up $7bn) reflecting growth in savings and deposits from recent promotions. Growth in CMB (up $7bn), was notably in the US from an increase in demand deposits.

Repurchase agreements - non-trading decreased by $26bn or 15%, primarily in the US from a decreased use of repurchase agreements for funding in our Global Markets business.

Financial liabilities designated at fair value were $16bn or 11% higher. This was mainly due to increased issuances of senior debt during the year by HSBC Holdings and increased issuances of structured notes in the UK and France.

Derivative liabilities increased by $34bn or 16%, including a favourable effect of foreign currency translation differences of $5bn. Excluding this, derivative liabilities increased by $29bn, which is consistent with the increase in derivative assets, since the underlying risk is broadly matched.

Debt securities in issue rose by $19bn or 23%, reflecting an increase in certificates of deposits, primarily in Europe, Asia and North America. This was partly offset by a decrease in commercial paper, notably in the UK, and a decrease in medium term notes in North America.

Equity

Total shareholders' equity of $184bn decreased by $2bn or 1%. The reduction was mainly due to dividends paid to shareholders of $12bn and adverse movements of $2bn related to fair value attributable to changes in own credit risk. These reductions were partly offset by profits generated in the period of $7bn, shares issued in lieu of dividends of $3bn and a $1bn decrease in accumulated foreign exchange losses.

Risk-weighted assets

Risk-weighted assets ('RWAs') totalled $843.4bn at 31 December 2019, a $21.9bn decrease. Excluding foreign currency translation differences, RWAs decreased by $26.9bn in 2019.

A $32.2bn decrease in RWAs as a result of methodology and policy changes was mostly due to management initiatives in CMB and GB&M, including risk parameter refinements, a change to our best estimate of expected loss on corporate exposures, and securitisation transactions. A $7.7bn decrease due to model updates included global corporate model changes in CMB and GB&M, and changes to Private Banking credit risk models in Asia and North America. A $9.0bn increase in RWAs due to asset size movements predominantly reflected RWA increases due to lending growth of $26.2bn, which were partly offset by reductions due to active portfolio management of $17.2bn. Changes in asset quality caused a $3.7bn rise in RWAs.

-  other

35,458

 

35,470

 

Asia

697,358

 

664,824

 

-  Hong Kong

499,955

 

484,897

 

-  Singapore

48,569

 

42,323

 

-  mainland China

48,323

 

45,712

 

-  Australia

23,191

 

20,649

 

-  India

14,935

 

14,210

 

-  Malaysia

14,624

 

13,904

 

-  Taiwan

14,668

 

13,602

 

-  Indonesia

4,732

 

3,810

 

-  other

28,361

 

25,717

 

Middle East and North Africa (excluding Saudi Arabia)

38,126

 

35,408

 

-  United Arab Emirates

17,949

 

16,583

 

-  Turkey

3,870

 

4,169

 

-  Egypt

5,186

 

4,493

 

-  other

11,121

 

10,163

 

North America

146,676

 

133,291

 

-  US

90,834

 

82,523

 

-  Canada

48,425

 

43,898

 

-  other

7,417

 

6,870

 

Latin America

28,237

 

25,966

 

-  Mexico

23,051

 

19,936

 

-  other

5,186

 

6,030

 

At 31 Dec

1,439,115

 

1,362,643

 

 

Loans and advances, deposits by currency

 

At

 

31 Dec 2019

$m

USD

GBP

HKD

EUR

CNY

Others15

Total

Loans and advances to banks

19,386

 

3,245

 

6,242

 

4,266

 

5,772

 

30,292

 

69,203

 

Loans and advances to customers

177,696

 

264,029

 

234,945

 

84,919

 

34,338

 

240,816

 

1,036,743

 

Total loans and advances

197,082

 

267,274

 

241,187

 

89,185

 

40,110

 

271,108

 

1,105,946

 

 

 

 

 

 

 

 

 

Deposits by banks

23,508

 

7,537

 

1,865

 

11,154

 

4,265

 

10,693

 

59,022

 

Customer accounts

360,462

 

358,764

 

299,049

 

122,988

 

52,216

 

245,636

 

1,439,115

 

Total deposits

383,970

 

366,301

 

300,914

 

134,142

 

56,481

 

256,329

 

1,498,137

 

 

 

 

 

 

 

 

 

 

At

 

31 Dec 2018

$m

USD

GBP

HKD

EUR

CNY

Others15

Total

Loans and advances to banks

23,469

 

4,351

 

3,241

 

3,462

 

7,418

 

30,226

 

72,167

 

Loans and advances to customers

176,907

 

243,541

 

220,458

 

86,583

 

29,973

 

224,234

 

981,696

 

Total loans and advances

200,376

 

247,892

 

223,699

 

90,045

 

37,391

 

254,460

 

1,053,863

 

 

 

 

 

 

 

 

 

Deposits by banks

17,802

 

5,777

 

3,748

 

15,923

 

4,065

 

9,016

 

56,331

 

Customer accounts

348,741

 

340,244

 

290,748

 

116,095

 

49,596

 

217,219

 

1,362,643

 

Total deposits

366,543

 

346,021

 

294,496

 

132,018

 

53,661

 

226,235

 

1,418,974

 

Footnotes to financial summary

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/Loan impairment charges and other credit risk provisions, also referred to as revenue.

3   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.

4   Dividends per ordinary share expressed as a percentage of basic earnings per share.

5   Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA'). Cost of funds is the average annualised interest cost as a percentage on average interest-bearing liabilities.

6   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.

7   Net interest margin is net interest income expressed as an annualised percentage of AIEA.

8   Including interest-bearing bank deposits only.

9   Including interest-bearing customer accounts only.

10  'Financial liabilities designated at fair value - own debt issued' and 'Debt securities' lines have been merged into one new line: 'Debt securities in issue - non-trading'. Interest expense on financial liabilities designated at fair value is reported as 'Net income/ (expense) from financial instruments held for trading or managed on a fair value basis' in the consolidated income statement, other than interest on own debt, which is reported in 'Interest expense'.

11 Net of impairment allowances.

12 Capital resources are regulatory capital, the calculation of which is set out on page 152.

13 Including perpetual preferred securities, details of which can be found in Note 28 on the financial statements.

14 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.

15 'Others' includes items with no currency information available ($9,334m for loans to banks, $62,037m for loans to customers, $15m for deposits by banks and $33m for customer accounts).

Global businesses and

geographical regions

 

Page

Reconciliation of reported and adjusted items - global businesses

 

56

Supplementary global business disclosures

 

60

Analysis of reported results by geographical regions

62

Reconciliation of reported and adjusted items - geographical regions

64

Analysis by country

70

Summary

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

Segments' and are presented in Note 10: Segmental analysis on page 263.

Geographical information is classified by the location of the principal operations of the subsidiary or, for The Hongkong and Shanghai Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank plc, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the branch responsible for reporting the results or providing funding.

The expense of the UK bank levy is included in the Europe geographical region as HSBC regards the levy as a cost of being headquartered in the UK. For the purposes of the presentation by global business, the cost of the levy is included in the Corporate Centre.

The results of geographical regions are presented on a reported basis.

Reconciliation of reported and adjusted items - global businesses

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

 

 

2019

 

 

Retail Banking and Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

 

Reported

 

23,192

 

15,285

 

14,840

 

1,848

 

933

 

56,098

 

Significant items

 

208

 

7

 

76

 

-

 

(980

)

(689

)

-  customer redress programmes

 

156

 

7

 

-

 

-

 

-

 

163

 

-  disposals, acquisitions and investment in new businesses

 

52

 

-

 

-

 

-

 

(820

)

(768

)

-  fair value movements on financial instruments
 

2

-

 

-

 

76

 

-

 

(160

)

(84

)

Adjusted

 

23,400

 

15,292

 

14,916

 

1,848

 

(47

)

55,409

 

ECL

 

 

 

 

 

 

 

Reported

 

(1,390

)

(1,184

)

(153

)

(22

)

(7

)

(2,756

)

Adjusted

 

(1,390

)

(1,184

)

(153

)

(22

)

(7

)

(2,756

)

Operating expenses

 

 

 

 

 

 

 

Reported

 

(15,429

)

(9,829

)

(13,640

)

(1,817

)

(1,634

)

(42,349

)

Significant items

 

1,412

 

3,028

 

4,223

 

393

 

498

 

9,554

 

-  costs of structural reform

3

-

 

4

 

42

 

-

 

112

 

158

 

-  customer redress programmes

 

1,264

 

17

 

-

 

-

 

-

 

1,281

 

-  goodwill impairment

 

-

 

2,956

 

3,962

 

431

 

-

 

7,349

 

-  restructuring and other related costs

 

148

 

51

 

217

 

32

 

379

 

827

 

-  settlements and provisions in connection with legal and regulatory matters

 

-

 

-

 

 

(70

)

7

 

(61

)

Adjusted

 

(14,017

)

(6,801

)

(9,417

)

(1,424

)

(1,136

)

(32,795

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

 

Reported

 

55

 

-

 

-

 

-

 

2,299

 

2,354

 

Adjusted

 

55

 

-

 

-

 

-

 

2,299

 

2,354

 

Profit before tax

 

 

 

 

 

 

 

Reported

 

6,428

 

4,272

 

1,047

 

9

 

1,591

 

13,347

 

Significant items

 

1,620

 

3,035

 

4,299

 

393

 

(482

)

8,865

 

-  revenue

 

208

 

7

 

76

 

-

 

(980

)

(689

)

-  operating expenses

 

1,412

 

3,028

 

4,223

 

393

 

498

 

9,554

 

Adjusted

 

8,048

 

7,307

 

5,346

 

402

 

1,109

 

22,212

 

Loans and advances to customers (net)

 

 

 

 

 

 

 

Reported

 

395,393

 

346,060

 

246,266

 

47,593

 

1,431

 

1,036,743

 

Adjusted

 

395,393

 

346,060

 

246,266

 

47,593

 

1,431

 

1,036,743

 

Customer accounts

 

 

 

 

 

 

 

Reported

 

689,283

 

386,522

 

292,284

 

62,943

 

8,083

 

1,439,115

 

Adjusted

 

689,283

 

386,522

 

292,284

 

62,943

 

8,083

 

1,439,115

 

 

For footnotes, see page 71.

 

Reconciliation of reported and adjusted items (continued)

 

 

2018

 

 

Retail
Banking and
Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

 

Reported

 

21,928

 

14,938

 

15,634

 

1,790

 

(510

)

53,780

 

Currency translation

 

(562

)

(423

)

(489

)

(28

)

(115

)

(1,617

)

Significant items

 

8

 

(50

)

(120

)

(5

)

335

 

168

 

-  customer redress programmes

 

-

 

(53

)

-

 

-

 

-

 

(53

)

-  disposals, acquisitions and investment in new businesses

 

7

 

-

 

-

 

(5

)

111

 

113

 

-  fair value movements on financial instruments
 

2

-

 

-

 

(122

)

-

 

222

 

100

 

-  currency translation on significant items

 

1

 

3

 

2

 

-

 

2

 

8

 

Adjusted

 

21,374

 

14,465

 

15,025

 

1,757

 

(290

)

52,331

 

ECL

 

 

 

 

 

 

 

Reported

 

(1,177

)

(739

)

26

 

8

 

115

 

(1,767

)

Currency translation

 

43

 

27

 

5

 

(1

)

4

 

78

 

Adjusted

 

(1,134

)

(712

)

31

 

7

 

119

 

(1,689

)

Operating expenses

 

 

 

 

 

 

 

Reported

 

(13,902

)

(6,480

)

(9,348

)

(1,550

)

(3,379

)

(34,659

)

Currency translation

 

467

 

203

 

287

 

28

 

124

 

1,109

 

Significant items

 

180

 

2

 

(109

)

97

 

1,474

 

1,644

 

-  costs of structural reform

3

2

 

8

 

41

 

-

 

310

 

361

 

-  customer redress programmes

 

173

 

(5

)

(22

)

-

 

-

 

146

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

-

 

52

 

-

 

52

 

-  past service costs of guaranteed minimum pension benefits equalisation

 

-

 

-

 

-

 

-

 

228

 

228

 

-  restructuring and other related costs

 

-

 

-

 

-

 

7

 

59

 

66

 

-  settlements and provisions in connection with legal and regulatory matters

 

16

 

-

 

(131

)

42

 

889

 

816

 

-  currency translation on significant items

 

(11

)

(1

)

3

 

(4

)

(12

)

(25

)

Adjusted

 

(13,255

)

(6,275

)

(9,170

)

(1,425

)

(1,781

)

(31,906

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

 

Reported

 

33

 

-

 

-

 

-

 

2,503

 

2,536

 

Currency translation

 

-

 

-

 

-

 

-

 

(90

)

(90

)

Adjusted

 

33

 

-

 

-

 

-

 

2,413

 

2,446

 

Profit/(loss) before tax

 

 

 

 

 

 

 

Reported

 

6,882

 

7,719

 

6,312

 

248

 

(1,271

)

19,890

 

Currency translation

 

(52

)

(193

)

(197

)

(1

)

(77

)

(520

)

Significant items

 

188

 

(48

)

(229

)

92

 

1,809

 

1,812

 

-  revenue

 

8

 

(50

)

(120

)

(5

)

335

 

168

 

-  operating expenses

 

180

 

2

 

(109

)

97

 

1,474

 

1,644

 

Adjusted

 

7,018

 

7,478

 

5,886

 

339

 

461

 

21,182

 

Loans and advances to customers (net)

 

 

 

 

 

 

 

Reported

 

361,872

 

333,162

 

244,978

 

39,217

 

2,467

 

981,696

 

Currency translation

 

6,045

 

3,937

 

2,147

 

385

 

66

 

12,580

 

Adjusted

 

367,917

 

337,099

 

247,125

 

39,602

 

2,533

 

994,276

 

Customer accounts

 

 

 

 

 

 

 

Reported

 

640,924

 

357,596

 

290,914

 

64,658

 

8,551

 

1,362,643

 

Currency translation

 

8,248

 

4,678

 

3,670

 

395

 

104

 

17,095

 

Adjusted

 

649,172

 

362,274

 

294,584

 

65,053

 

8,655

 

1,379,738

 

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)

 

 

2017

 

 

Retail

Banking and

Wealth

Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

 

Reported

 

20,519

 

13,120

 

14,617

 

1,723

 

1,466

 

51,445

 

Currency translation

 

(578

)

(336

)

(264

)

(5

)

(161

)

(1,344

)

Significant items

 

(233

)

99

 

470

 

(20

)

(244

)

72

 

-  customer redress programmes

 

3

 

103

 

2

 

-

 

-

 

108

 

-  disposals, acquisitions and investment in new businesses

 

(235

)

-

 

99

 

(20

)

(118

)

(274

)

-  fair value movements on financial instruments

 

2

-

 

-

 

373

 

-

 

(128

)

245

 

-  currency translation on significant items

 

(1

)

(4

)

(4

)

-

 

2

 

(7

)

Adjusted

 

19,708

 

12,883

 

14,823

 

1,698

 

1,061

 

50,173

 

LICs

 

 

 

 

 

 

 

Reported

 

(980

)

(496

)

(459

)

(16

)

182

 

(1,769

)

Currency translation

 

39

 

28

 

20

 

(1

)

(3

)

83

 

Adjusted

 

(941

)

(468

)

(439

)

(17

)

179

 

(1,686

)

Operating expenses

 

 

 

 

 

 

 

Reported

 

(13,734

)

(6,001

)

(8,723

)

(1,586

)

(4,840

)

(34,884

)

Currency translation

 

471

 

178

 

133

 

9

 

124

 

915

 

Significant items

 

877

 

53

 

(119

)

193

 

2,706

 

3,710

 

-  costs of structural reform

3

6

 

3

 

8

 

-

 

403

 

420

 

-  costs to achieve

 

270

 

44

 

240

 

3

 

2,445

 

3,002

 

-  customer redress programmes

 

637

 

16

 

2

 

-

 

-

 

655

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

-

 

31

 

22

 

53

 

-  gain on partial settlement of pension obligation

 

(26

)

(9

)

(9

)

(3

)

(141

)

(188

)

-  settlements and provisions in connection with legal and regulatory matters

 

-

 

-

 

(376

)

164

 

14

 

(198

)

-  currency translation on significant items

 

(10

)

(1

)

16

 

(2

)

(37

)

(34

)

Adjusted

 

(12,386

)

(5,770

)

(8,709

)

(1,384

)

(2,010

)

(30,259

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

 

Reported

 

18

 

-

 

-

 

-

 

2,357

 

2,375

 

Currency translation

 

(6

)

-

 

-

 

-

 

(41

)

(47

)

Adjusted

 

12

 

-

 

-

 

-

 

2,316

 

2,328

 

Profit/(loss) before tax

 

 

 

 

 

 

 

Reported

 

5,823

 

6,623

 

5,435

 

121

 

(835

)

17,167

 

Currency translation

 

(74

)

(130

)

(111

)

3

 

(81

)

(393

)

Significant items

 

644

 

152

 

351

 

173

 

2,462

 

3,782

 

-  revenue

 

(233

)

99

 

470

 

(20

)

(244

)

72

 

-  operating expenses

 

877

 

53

 

(119

)

193

 

2,706

 

3,710

 

Adjusted

 

6,393

 

6,645

 

5,675

 

297

 

1,546

 

20,556

 

Loans and advances to customers (net)

 

 

 

 

 

 

 

Reported

 

346,148

 

316,533

 

252,474

 

40,326

 

7,483

 

962,964

 

Currency translation

 

(8,380

)

(7,663

)

(5,584

)

(313

)

(101

)

(22,041

)

Adjusted

 

337,768

 

308,870

 

246,890

 

40,013

 

7,382

 

940,923

 

Customer accounts

 

 

 

 

 

 

 

Reported

 

639,592

 

362,908

 

283,943

 

66,512

 

11,507

 

1,364,462

 

Currency translation

 

(10,150

)

(6,420

)

(7,309

)

(1,021

)

(490

)

(25,390

)

Adjusted

 

629,442

 

356,488

 

276,634

 

65,491

 

11,017

 

1,339,072

 

For footnotes, see page 71.

Reconciliation of reported and adjusted risk-weighted assets

 

 

At 31 Dec 2019

 

 

Retail

Banking and

Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global Private
Banking

Corporate Centre

Total

 

Footnotes

$bn

$bn

$bn

$bn

$bn

$bn

Risk-weighted assets

 

 

 

 

 

 

 

Reported

 

134.0

 

316.7

 

258.2

 

14.0

 

120.5

 

843.4

 

Adjusted

4

134.0

 

316.7

 

258.2

 

14.0

 

120.5

 

843.4

 

 

 

 

 

 

 

 

 

 

 

At 31 Dec 2018

Risk-weighted assets

 

 

 

 

 

 

 

Reported

 

126.9

 

321.2

 

281.0

 

16.8

 

119.4

 

865.3

 

Currency translation

 

0.7

 

3.4

 

1.1

 

0.1

 

0.4

 

5.7

 

Disposals

 

-

 

-

 

-

 

-

 

(0.8

)

(0.8

)

-  operations in Brazil

 

-

 

-

 

-

 

-

 

(0.8

)

(0.8

)

Adjusted

4

127.6

 

324.6

 

282.1

 

16.9

 

119.0

 

870.2

 

 

 

 

At 31 Dec 2017

Risk-weighted assets

 

 

 

 

 

 

 

Reported

 

121.5

 

301.0

 

299.3

 

16.0

 

133.5

 

871.3

 

Currency translation

 

(2.5

)

(8.0

)

(4.6

)

(0.1

)

(1.4

)

(16.6

)

Disposals

 

-

 

-

 

-

 

-

 

(2.6

)

(2.6

)

-  operations in Brazil

 

-

 

-

 

-

 

-

 

(2.6

)

(2.6

)

Adjusted

4

119.0

 

293.0

 

294.7

 

15.9

 

129.5

 

852.1

 

For footnotes, see page 71.

Supplementary global business disclosures

RBWM: Insurance manufacturing adjusted results

The following table shows the results of our insurance manufacturing operations by income statement line item. It shows

 

the results of insurance manufacturing operations for RBWM and for all global business segments in aggregate, and separately the insurance distribution income earned by HSBC bank channels.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels5

 

 

2019

2018

2017

 

 

RBWM

All global businesses

RBWM

All global businesses

RBWM

All global businesses

 

Footnotes

$m

$m

$m

$m

$m

$m

Net interest income

 

2,131

 

2,306

 

2,026

 

2,196

 

1,977

 

2,174

 

Net fee income

 

(690

)

(739

)

(569

)

(558

)

(489

)

(496

)

- fee income

 

104

 

129

 

181

 

274

 

232

 

330

 

- fee expense

 

(794

)

(868

)

(750

)

(832

)

(721

)

(826

)

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

 

(44

)

(29

)

(521

)

167

 

(51

)

1

 

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

 

3,568

 

3,554

 

(897

)

(1,559

)

2,830

 

2,771

 

Gains less losses from financial investments

 

5

 

5

 

58

 

57

 

23

 

31

 

Net insurance premium income

 

10,054

 

10,718

 

10,054

 

10,541

 

9,312

 

9,938

 

Other operating income

 

1,765

 

1,787

 

709

 

767

 

62

 

96

 

of which: PVIF

 

1,696

 

1,749

 

637

 

679

 

12

 

22

 

Total operating income

 

16,789

 

17,602

 

10,860

 

11,611

 

13,664

 

14,515

 

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

 

(14,192

)

(14,891

)

(9,079

)

(9,596

)

(11,732

)

(12,323

)

Net operating income before change in expected credit losses and other credit impairment charges

1

2,597

 

2,711

 

1,781

 

2,015

 

1,932

 

2,192

 

ECL

 

(104

)

(115

)

(2

)

(1

)

-

 

-

 

Net operating income

 

2,493

 

2,596

 

1,779

 

2,014

 

1,932

 

2,192

 

Total operating expenses

 

(520

)

(505

)

(455

)

(478

)

(388

)

(422

)

Operating profit

 

1,973

 

2,091

 

1,324

 

1,536

 

1,544

 

1,770

 

Share of profit in associates and joint ventures

 

44

 

44

 

31

 

32

 

10

 

10

 

Profit before tax of insurance manufacturing operations

6

2,017

 

2,135

 

1,355

 

1,568

 

1,554

 

1,780

 

Annualised new business premiums of insurance manufacturing operations

 

3,296

 

3,382

 

3,153

 

3,231

 

2,647

 

2,706

 

Insurance distribution income earned by HSBC bank channels

 

913

 

1,039

 

923

 

1,039

 

889

 

1,012

 

For footnotes, see page 71.

Insurance manufacturing

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

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

Adjusted profit before tax of $2.1bn increased by $0.6bn or 36%. This was mainly due to favourable market impacts of $0.1bn in 2019, primarily driven by strong equity market performance in Hong Kong, compared with adverse market impacts of $(0.3)bn in 2018. It also reflected a $0.1bn increase in the value of new business written.

Net operating income before change in expected credit losses and other credit impairment charges was $0.7bn or 35% higher than 2018. This reflected the following:

•    'Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' of $3.6bn compared with a net expense of $1.6bn in 2018, due to favourable equity market performance in Hong Kong and France in 2019 compared with 2018, resulting in revaluation gains on equity and unit trust assets supporting insurance and investment contracts. This positive movement resulted in a corresponding movement in liabilities to policyholders and PVIF (see 'Other operating income' below), reflecting the extent to which the policyholders and shareholders respectively participate in the investment performance of the associated assets portfolio.

•    'Net insurance premium income' of $10.7bn was $0.2bn higher. This was driven by higher new business volumes across all entities, and particularly in Hong Kong, Singapore and UK, partly offset by higher reinsurance ceded in Hong Kong.

•    'Other operating income' of $1.8bn increased by $1.0bn. This increase in PVIF reflected a favourable movement in 'assumption changes and experience variances' of $1.1bn, primarily in Hong Kong due to the effect of interest rate changes on the valuation of the liabilities under insurance contracts. In addition, the value of new business written increased by $0.1bn to $1.2bn. For further details, see Note 21 on the financial statements.

•    'Net insurance claims and benefits paid and movement in liabilities to policyholders' of $14.9bn were $5.3bn higher than 2018. This increase was primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk and the impact of higher new business volumes, particularly in Hong Kong and Singapore. This was partly offset by the impact of higher reinsurance ceded in Hong Kong.

Adjusted ECL of $0.1bn in 2019 primarily related to government bond exposures in Argentina.

Adjusted operating expenses of $0.5bn increased by $27m or 6% compared with 2018, reflecting investment in core insurance functions and capabilities, including preparation for the implementation of IFRS 17 'Insurance Contracts'.

Annualised new business premiums ('ANP') is used to assess new insurance premium generation by the business. It is calculated as 100% of annualised first year regular premiums and 10% of single premiums, before reinsurance ceded. Growth in ANP during the period reflected new business growth in most entities, with the main contribution coming from Hong Kong, mainland China and the UK.

Insurance distribution income from HSBC channels included $665m (2018: $651m) on HSBC manufactured products, for which a corresponding fee expense is recognised within insurance manufacturing, and $375m (2018: $389m) on products manufactured by third-party providers. The RBWM component of this distribution income was $589m (2018: $581m) from HSBC manufactured products and $325m (2018: $343m) from third-party products.

 

Asset Management: Funds under management

The following table shows the funds under management of our Asset Management business.

Asset Management - reported funds under management7

 

2019

2018

2017

 

$bn

$bn

$bn

Opening balance

444

 

462

 

410

 

Net new money

30

 

8

 

8

 

Value change

30

 

(14

)

24

 

Exchange and other

2

 

(12

)

20

 

Closing balance

506

 

444

 

462

 

 

 

 

 

 

 

 

 

Asset Management - reported funds under management by geography

 

2019

2018

2017

 

$bn

$bn

$bn

Europe

287

 

235

 

249

 

Asia

161

 

164

 

168

 

MENA

6

 

2

 

1

 

North America

44

 

36

 

37

 

Latin America

8

 

7

 

7

 

Closing balance

506

 

444

 

462

 

For footnotes, see page 71.

Funds under management represents assets managed, either actively or passively, on behalf of our customers. At 31 December 2019, Asset Management funds under management amounted to $506bn, an increase of $62bn or 14%. The increase reflected positive market performance and foreign exchange, together with strong net new money, primarily from money market solutions and discretionary products, notably in the UK.

GB&M: Securities Services

Assets held in custody7

Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. At 31 December 2019, we held $8.5tn of assets as custodian, 16% higher than at 31 December 2018. This increase was driven by the onboarding of assets for new clients globally, and the incremental net asset inflows for existing clients together with favourable market movements mainly in Asia.

Assets under administration

Our assets under administration business, which includes the provision of bond and loan administration services, transfer agency services and the valuation of portfolios of securities and other financial assets on behalf of clients, complements the custody business. At 31 December 2019, the value of assets held

under administration by the Group amounted to $4.0tn, which was 20% higher than at 31 December 2018. This increase was mainly driven by the onboarding of significant new client assets in Europe, together with incremental net assets inflows for existing clients in both Europe and Asia.

GPB client assets

The following table shows the client assets of our GPB business.

GPB - reported client assets

 

2019

2018

2017

 

$bn

$bn

$bn

At 1 Jan

309

 

330

 

298

 

Net new money

23

 

10

 

-

 

Value change

23

 

(17

)

21

 

Disposals

-

 

-

 

-

 

Exchange and other

6

 

(14

)

11

 

At 31 Dec

361

 

309

 

330

 

 

GPB - reported client assets by geography

 

 

2019

2018

2017

 

Footnotes

$bn

$bn

$bn

Europe

 

171

 

149

 

161

 

Asia

 

151

 

124

 

130

 

North America

 

39

 

36

 

39

 

Latin America

 

-

 

-

 

-

 

Middle East

8

-

 

-

 

-

 

At 31 Dec

 

361

 

309

 

330

 

For footnotes, see page 71.

Analysis of reported results by geographical regions

 

HSBC reported profit/(loss) before tax and balance sheet data

 

 

2019

 

 

Europe

Asia

MENA

North America

Latin America

Intra-HSBC/ Global impairment

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

$m

Net interest income

 

5,601

 

16,607

 

1,781

 

3,241

 

2,061

 

1,171

 

30,462

 

Net fee income

 

3,668

 

5,325

 

685

 

1,804

 

540

 

1

 

12,023

 

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

 

3,785

 

4,735

 

327

 

873

 

883

 

(372

)

10,231

 

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

 

1,656

 

1,803

 

-

 

-

 

14

 

5

 

3,478

 

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

 

1,516

 

28

 

1

 

31

 

41

 

(805

)

812

 

Other income/(expense)

9

1,830

 

1,921

 

916

 

638

 

(23

)

(6,190

)

(908

)

Net operating income before change in
expected credit losses and other credit
impairment charges

1

18,056

 

30,419

 

3,710

 

6,587

 

3,516

 

(6,190

)

56,098

 

Change in expected credit losses and other credit
impairment charges

 

(938

)

(724

)

(117

)

(237

)

(740

)

-

 

(2,756

)

Net operating income

 

17,118

 

29,695

 

3,593

 

6,350

 

2,776

 

(6,190

)

53,342

 

Total operating expenses excluding goodwill impairment

 

(19,237

)

(13,297

)

(1,452

)

(5,152

)

(2,052

)

6,190

 

(35,000

)

Goodwill impairment

 

(2,522

)

-

 

(97

)

(431

)

(337

)

(3,962

)

(7,349

)

Operating profit/(loss)

 

(4,641

)

16,398

 

2,044

 

767

 

387

 

(3,962

)

10,993

 

Share of profit/(loss) in associates and joint ventures

 

(12

)

2,070

 

283

 

-

 

13

 

-

 

2,354

 

Profit/(loss) before tax

 

(4,653

)

18,468

 

2,327

 

767

 

400

 

(3,962

)

13,347

 

 

 

%

%

%

%

%

 

%

Share of HSBC's profit before tax

 

(34.9

)

138.4

 

17.4

 

5.7

 

3.0

 

 

100.0

 

Cost efficiency ratio

 

120.5

 

43.7

 

41.8

 

84.8

 

67.9

 

 

75.5

 

Balance sheet data

 

$m

$m

$m

$m

$m

$m

$m

Loans and advances to customers (net)

 

393,850

 

477,727

 

28,556

 

113,474

 

23,136

 

-

 

1,036,743

 

Total assets

 

1,248,205

 

1,102,805

 

65,369

 

377,095

 

52,879

 

(131,201

)

2,715,152

 

Customer accounts

 

528,718

 

697,358

 

38,126

 

146,676

 

28,237

 

-

 

1,439,115

 

Risk-weighted assets

10

280,983

 

366,375

 

57,492

 

121,953

 

38,460

 

-

 

843,395

 

HSBC reported profit/(loss) before tax and balance sheet data (continued)

 

 

 

 

 

 

 

2018

 

 

Europe

Asia

MENA

North America

Latin

America

Intra-HSBC

items

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

$m

Net interest income

 

6,841

 

16,108

 

1,763

 

3,521

 

2,020

 

236

 

30,489

 

Net fee income

 

3,996

 

5,676

 

607

 

1,854

 

498

 

(11

)

12,620

 

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

 

3,942

 

4,134

 

285

 

728

 

736

 

(294

)

9,531

 

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

 

(789

)

(717

)

-

 

-

 

18

 

-

 

(1,488

)

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

 

601

 

(26

)

(1

)

36

 

27

 

58

 

695

 

Other income/(expense)

9

3,113

 

3,609

 

33

 

586

 

(237

)

(5,171

)

1,933

 

Net operating income before change in

expected credit losses and other credit

impairment charges/recoveries

 

1

17,704

 

28,784

 

2,687

 

6,725

 

3,062

 

(5,182

)

53,780

 

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

 

(609

)

(602

)

(209

)

223

 

(570

)

-

 

(1,767

)

Net operating income

 

17,095

 

28,182

 

2,478

 

6,948

 

2,492

 

(5,182

)

52,013

 

Total operating expenses

 

(17,934

)

(12,466

)

(1,357

)

(6,149

)

(1,935

)

5,182

 

(34,659

)

Operating profit/(loss)

 

(839

)

15,716

 

1,121

 

799

 

557

 

-

 

17,354

 

Share of profit in associates and joint ventures

 

24

 

2,074

 

436

 

-

 

2

 

-

 

2,536

 

Profit/(loss) before tax

 

(815

)

17,790

 

1,557

 

799

 

559

 

-

 

19,890

 

 

 

%

%

%

%

%

 

%

Share of HSBC's profit before tax

 

(4.1

)

89.5

 

7.8

 

4.0

 

2.8

 

 

100.0

 

Cost efficiency ratio

 

101.3

 

43.3

 

50.5

 

91.4

 

63.2

 

 

64.4

 

Balance sheet data

 

$m

$m

$m

$m

$m

$m

$m

Loans and advances to customers (net)

 

373,073

 

450,545

 

28,824

 

108,146

 

21,108

 

-

 

981,696

 

Total assets

 

1,150,235

 

1,047,636

 

57,455

 

390,410

 

51,923

 

(139,535

)

2,558,124

 

Customer accounts

 

503,154

 

664,824

 

35,408

 

133,291

 

25,966

 

-

 

1,362,643

 

Risk-weighted assets

10

298,056

 

363,894

 

56,689

 

131,582

 

38,341

 

-

 

865,318

 

 

 

 

 

 

 

 

 

 

 

 

2017

Net interest income

 

6,970

 

14,153

 

1,752

 

3,441

 

2,098

 

(238

)

28,176

 

Net fee income

 

4,161

 

5,631

 

619

 

1,880

 

520

 

-

 

12,811

 

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

11,12

4,066

 

2,929

 

180

 

527

 

486

 

238

 

8,426

 

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

 

769

 

2,003

 

-

 

-

 

64

 

-

 

2,836

 

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

 

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Other income

9,12

1,454

 

1,090

 

109

 

865

 

57

 

(4,379

)

(804

)

Net operating income before loan impairment charges/recoveries and other credit risk provisions

1

17,420

 

25,806

 

2,660

 

6,713

 

3,225

 

(4,379

)

51,445

 

Loan impairment (charges)/recoveries and other credit risk provisions

 

(658

)

(570

)

(207

)

189

 

(523

)

-

 

(1,769

)

Net operating income

 

16,762

 

25,236

 

2,453

 

6,902

 

2,702

 

(4,379

)

49,676

 

Total operating expenses

 

(18,665

)

(11,790

)

(1,394

)

(5,305

)

(2,109

)

4,379

 

(34,884

)

Operating profit/(loss)

 

(1,903

)

13,446

 

1,059

 

1,597

 

593

 

-

 

14,792

 

Share of profit/(loss) in associates and joint ventures

 

39

 

1,883

 

442

 

4

 

7

 

-

 

2,375

 

Profit/(loss) before tax

 

(1,864

)

15,329

 

1,501

 

1,601

 

600

 

-

 

17,167

 

 

 

%

%

%

%

%

 

%

Share of HSBC's profit before tax

 

(10.8

)

89.3

 

8.7

 

9.3

 

3.5

 

 

100.0

 

Cost efficiency ratio

 

107.1

 

45.7

 

52.4

 

79.0

 

65.4

 

 

67.8

 

Balance sheet data

 

$m

$m

$m

$m

$m

$m

$m

Loans and advances to customers (net)

 

381,547

 

425,971

 

28,050

 

107,607

 

19,789

 

-

 

962,964

 

Total assets

 

1,169,515

 

1,008,498

 

57,469

 

391,292

 

48,413

 

(153,416

)

2,521,771

 

Customer accounts

 

505,182

 

657,395

 

34,658

 

143,432

 

23,795

 

-

 

1,364,462

 

Risk-weighted assets

10

311,612

 

357,808

 

59,196

 

131,276

 

36,372

 

-

 

871,337

 

 

For footnotes, see page 71.

Reconciliation of reported and adjusted items - geographical regions

 

Reconciliation of reported and adjusted items

 

 

2019

 

 

Europe

Asia

MENA

North
America

Latin
America

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

 

Reported

11

18,056

 

30,419

 

3,710

 

6,587

 

3,516

 

56,098

 

Significant items

 

26

 

35

 

(828

)

68

 

10

 

(689

)

-  customer redress programmes

 

163

 

-

 

-

 

-

 

-

 

163

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

(828

)

59

 

1

 

(768

)

-  fair value movements on financial instruments
 

2

(137

)

35

 

-

 

9

 

9

 

(84

)

Adjusted

11

18,082

 

30,454

 

2,882

 

6,655

 

3,526

 

55,409

 

ECL

 

 

 

 

 

 

 

Reported

 

(938

)

(724

)

(117

)

(237

)

(740

)

(2,756

)

Adjusted

 

(938

)

(724

)

(117

)

(237

)

(740

)

(2,756

)

Operating expenses

 

 

 

 

 

 

 

Reported

11, 14

(21,759

)

(13,297

)

(1,549

)

(5,583

)

(2,389

)

(42,349

)

Significant items

14

4,435

 

126

 

112

 

544

 

375

 

9,554

 

-  costs of structural reform

3

154

 

4

 

-

 

-

 

-

 

158

 

-  customer redress programmes

 

1,281

 

-

 

-

 

-

 

-

 

1,281

 

-  goodwill impairment

14

2,522

 

-

 

97

 

431

 

337

 

7,349

 

-  restructuring and other related costs

 

538

 

123

 

15

 

113

 

38

 

827

 

-  settlements and provisions in connection with legal and regulatory matters

 

(60

)

(1

)

-

 

-

 

-

 

(61

)

Adjusted
 

14

(17,324

)

(13,171

)

(1,437

)

(5,039

)

(2,014

)

(32,795

)

Share of profit/(loss) in associates and joint ventures

 

 

 

 

 

 

 

Reported

 

(12

)

2,070

 

283

 

-

 

13

 

2,354

 

Adjusted

 

(12

)

2,070

 

283

 

-

 

13

 

2,354

 

Profit/(loss) before tax

 

 

 

 

 

 

 

Reported

14

(4,653

)

18,468

 

2,327

 

767

 

400

 

13,347

 

Significant items

14

4,461

 

161

 

(716

)

612

 

385

 

8,865

 

-  revenue

 

26

 

35

 

(828

)

68

 

10

 

(689

)

-  operating expenses

14

4,435

 

126

 

112

 

544

 

375

 

9,554

 

Adjusted

 

(192

)

18,629

 

1,611

 

1,379

 

785

 

22,212

 

Loans and advances to customers (net)

 

 

 

 

 

 

 

Reported

 

393,850

 

477,727

 

28,556

 

113,474

 

23,136

 

1,036,743

 

Adjusted

 

393,850

 

477,727

 

28,556

 

113,474

 

23,136

 

1,036,743

 

Customer accounts

 

 

 

 

 

 

 

Reported

 

528,718

 

697,358

 

38,126

 

146,676

 

28,237

 

1,439,115

 

Adjusted

 

528,718

 

697,358

 

38,126

 

146,676

 

28,237

 

1,439,115

 

For footnotes, see page 71. 

Reconciliation of reported and adjusted items (continued)

 

 

2019

 

 

UK

Hong
Kong

Mainland China

US

Mexico

 

Footnotes

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

Reported

 

13,538

 

19,412

 

3,101

 

4,638

 

2,555

 

Significant items

 

23

 

26

 

1

 

66

 

8

 

-  customer redress programmes

 

162

 

-

 

-

 

-

 

-

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

-

 

59

 

-

 

-  fair value movements on financial instruments

2

(139

)

26

 

1

 

7

 

8

 

Adjusted

 

13,561

 

19,438

 

3,102

 

4,704

 

2,563

 

ECL

 

 

 

 

 

 

Reported

 

(714

)

(459

)

(129

)

(170

)

(491

)

Adjusted

 

(714

)

(459

)

(129

)

(170

)

(491

)

Operating expenses

 

 

 

 

 

 

Reported

 

(16,157

)

(6,935

)

(2,111

)

(4,033

)

(1,390

)

Significant items

 

1,795

 

64

 

6

 

93

 

20

 

-  costs of structural reform

3

101

 

4

 

-

 

-

 

-

 

-  customer redress programmes

 

1,281

 

-

 

-

 

-

 

-

 

-  restructuring and other related costs

 

405

 

61

 

6

 

93

 

20

 

-  settlements and provisions in connection with legal and regulatory matters

 

8

 

(1

)

-

 

-

 

-

 

Adjusted

 

(14,362

)

(6,871

)

(2,105

)

(3,940

)

(1,370

)

Share of profit/(loss) in associates and joint ventures

 

 

 

 

 

 

Reported

 

(12

)

31

 

2,016

 

-

 

13

 

Adjusted

 

(12

)

31

 

2,016

 

-

 

13

 

Profit/(loss) before tax

 

 

 

 

 

 

Reported

 

(3,345

)

12,049

 

2,877

 

435

 

687

 

Significant items

 

1,818

 

90

 

7

 

159

 

28

 

-  revenue

 

23

 

26

 

1

 

66

 

8

 

-  operating expenses

 

1,795

 

64

 

6

 

93

 

20

 

Adjusted

 

(1,527

)

12,139

 

2,884

 

594

 

715

 

Loans and advances to customers (net)

 

 

 

 

 

 

Reported

 

303,041

 

306,964

 

42,380

 

63,588

 

20,426

 

Adjusted

 

303,041

 

306,964

 

42,380

 

63,588

 

20,426

 

Customer accounts

 

 

 

 

 

 

Reported

 

419,642

 

499,955

 

48,323

 

90,834

 

23,051

 

Adjusted

 

419,642

 

499,955

 

48,323

 

90,834

 

23,051

 

For footnotes, see page 71.

 

Reconciliation of reported and adjusted items (continued)

 

 

 

 

 

 

 

 

 

2018

 

 

Europe

Asia

MENA

North
America

Latin
America

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

 

11

17,704

 

28,784

 

2,687

 

6,725

 

3,062

 

53,780

 

Currency translation

11

(914

)

(316

)

(18

)

(40

)

(389

)

(1,617

)

Significant items

 

103

 

(36

)

(1

)

97

 

5

 

168

 

 

(53

)

-

 

-

 

-

 

-

 

(53

)

-  disposals, acquisitions and investment in new businesses

 

(5

)

-

 

-

 

103

 

15

 

113

 

2

156

 

(38

)

(1

)

(8

)

(9

)

100

 

-  currency translation on significant items

 

5

 

2

 

-

 

2

 

(1

)

8

 

Adjusted

11

16,893

 

28,432

 

2,668

 

6,782

 

2,678

 

52,331

 

Change in expected credit losses and other credit impairment charges

 

 

 

 

 

 

 

 

(609

)

(602

)

(209

)

223

 

(570

)

(1,767

)

Currency translation

 

12

 

5

 

9

 

(1

)

53

 

78

 

Adjusted

 

(597

)

(597

)

(200

)

222

 

(517

)

(1,689

)

Operating expenses

 

 

 

 

 

 

 

11

(17,934

)

(12,466

)

(1,357

)

(6,149

)

(1,935

)

(34,659

)

Currency translation

11

664

 

175

 

23

 

23

 

284

 

1,109

 

Significant items

 

652

 

16

 

-

 

976

 

-

 

1,644

 

3

352

 

9

 

-

 

-

 

-

 

361

 

-  customer redress programmes

 

146

 

-

 

-

 

-

 

-

 

146

 

-  disposals, acquisitions and investment in new businesses

 

52

 

-

 

-

 

-

 

-

 

52

 

 

228

 

-

 

-

 

-

 

-

 

228

 

-  restructuring and other related costs

 

46

 

7

 

-

 

13

 

-

 

66

 

-  settlements and provisions in connection with legal and regulatory matters

 

(147

)

 

-

 

963

 

-

 

816

 

 

(25

)

-

 

-

 

-

 

-

 

(25

)

Adjusted

11

(16,618

)

(12,275

)

(1,334

)

(5,150

)

(1,651

)

(31,906

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

 

 

24

 

2,074

 

436

 

-

 

2

 

2,536

 

Currency translation

 

-

 

(89

)

-

 

-

 

(1

)

(90

)

Adjusted

 

24

 

1,985

 

436

 

-

 

1

 

2,446

 

Profit/(loss) before tax

 

 

 

 

 

 

 

Reported

 

(815

)

17,790

 

1,557

 

799

 

559

 

19,890

 

Currency translation

 

(238

)

(225

)

14

 

(18

)

(53

)

(520

)

Significant items

 

755

 

(20

)

(1

)

1,073

 

5

 

1,812

 

-  revenue

 

103

 

(36

)

(1

)

97

 

5

 

168

 

-  operating expenses

 

652

 

16

 

-

 

976

 

-

 

1,644

 

Adjusted

 

(298

)

17,545

 

1,570

 

1,854

 

511

 

21,182

 

Loans and advances to customers (net)

 

 

 

 

 

 

 

Reported

 

373,073

 

450,545

 

28,824

 

108,146

 

21,108

 

981,696

 

Currency translation

 

8,887

 

1,875

 

(84

)

2,067

 

(165

)

12,580

 

Adjusted

 

381,960

 

452,420

 

28,740

 

110,213

 

20,943

 

994,276

 

Customer accounts

 

 

 

 

 

 

 

Reported

 

503,154

 

664,824

 

35,408

 

133,291

 

25,966

 

1,362,643

 

Currency translation

 

12,796

 

3,016

 

58

 

2,163

 

(938

)

17,095

 

Adjusted

 

515,950

 

667,840

 

35,466

 

135,454

 

25,028

 

1,379,738

 

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)

 

 

2018

 

 

UK

Hong
Kong

Mainland China

US

Mexico

 

Footnotes

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

Reported

 

13,597

 

18,231

 

2,888

 

4,741

 

2,294

 

Currency translation

 

(713

)

6

 

(125

)

-

 

(1

)

Significant items

 

114

 

5

 

(1

)

97

 

(8

)

-  customer redress programmes

 

(53

)

-

 

-

 

-

 

-

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

-

 

103

 

-

 

-  fair value movements on financial instruments

2

162

 

5

 

(1

)

(6

)

(7

)

-  currency translation on significant items

 

5

 

-

 

-

 

-

 

(1

)

Adjusted

 

12,998

 

18,242

 

2,762

 

4,838

 

2,285

 

Change in expected credit losses and other credit impairment charges

 

 

 

 

 

 

Reported

 

(516

)

(214

)

(143

)

199

 

(463

)

Currency translation

 

9

 

(1

)

4

 

-

 

-

 

Adjusted

 

(507

)

(215

)

(139

)

199

 

(463

)

Operating expenses

 

 

 

 

 

 

Reported

 

(14,502

)

(6,539

)

(1,920

)

(4,987

)

(1,303

)

Currency translation

 

494

 

(2

)

81

 

-

 

-

 

Significant items

 

511

 

15

 

-

 

920

 

-

 

-  costs of structural reform

3

294

 

9

 

-

 

-

 

-

 

-  customer redress programmes

 

146

 

-

 

-

 

-

 

-

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

-

 

-

 

-

 

-  past service costs of guaranteed minimum pension benefits equalisation
 

 

228

 

-

 

-

 

-

 

-

 

-  restructuring and other related costs

 

39

 

7

 

-

 

11

 

-

 

-  settlements and provisions in connection with legal and regulatory matters

 

(176

)

-

 

-

 

908

 

-

 

-  currency translation on significant items

 

(20

)

(1

)

-

 

1

 

-

 

Adjusted

 

(13,497

)

(6,526

)

(1,839

)

(4,067

)

(1,303

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

Reported

 

25

 

36

 

2,033

 

-

 

-

 

Currency translation

 

(1

)

-

 

(90

)

-

 

-

 

Adjusted

 

24

 

36

 

1,943

 

-

 

-

 

Profit/(loss) before tax

 

 

 

 

 

 

Reported

 

(1,396

)

11,514

 

2,858

 

(47

)

528

 

Currency translation

 

(211

)

3

 

(130

)

-

 

(1

)

Significant items

 

625

 

20

 

(1

)

1,017

 

(8

)

-  revenue

 

114

 

5

 

(1

)

97

 

(8

)

-  operating expenses

 

511

 

15

 

-

 

920

 

-

 

Adjusted

 

(982

)

11,537

 

2,727

 

970

 

519

 

Loans and advances to customers (net)

 

 

 

 

 

 

Reported

 

287,144

 

290,547

 

38,979

 

64,011

 

17,895

 

Currency translation

 

10,190

 

1,609

 

(477

)

-

 

763

 

Adjusted

 

297,334

 

292,156

 

38,502

 

64,011

 

18,658

 

Customer accounts

 

 

 

 

 

 

Reported

 

399,487

 

484,897

 

45,712

 

82,523

 

19,936

 

Currency translation

 

14,173

 

2,686

 

(559

)

-

 

856

 

Adjusted

 

413,660

 

487,583

 

45,153

 

82,523

 

20,792

 

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)

 

 

2017

 

 

Europe

Asia

MENA

North
America

Latin
America

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

 

11

17,420

 

25,806

 

2,660

 

6,713

 

3,225

 

51,445

 

Currency translation

11

(165

)

(418

)

(93

)

(36

)

(661

)

(1,344

)

Significant items

 

61

 

118

 

1

 

(94

)

(14

)

72

 

-  customer redress programmes

 

108

 

-

 

-

 

-

 

-

 

108

 

-  disposals, acquisitions and investment in new businesses

 

(98

)

(27

)

-

 

(130

)

(19

)

(274

)

-  fair value movements on financial investments

2

54

 

148

 

1

 

37

 

5

 

245

 

-  currency translation on significant items

 

(3

)

(3

)

-

 

(1

)

-

 

(7

)

Adjusted

11

17,316

 

25,506

 

2,568

 

6,583

 

2,550

 

50,173

 

LICs

 

 

 

 

 

 

 

 

(658

)

(570

)

(207

)

189

 

(523

)

(1,769

)

Currency translation

 

26

 

9

 

5

 

-

 

43

 

83

 

Adjusted

 

(632

)

(561

)

(202

)

189

 

(480

)

(1,686

)

Operating expenses

 

-

 

-

 

-

 

-

 

-

 

-

 

11

(18,665

)

(11,790

)

(1,394

)

(5,305

)

(2,109

)

(34,884

)

Currency translation

11

135

 

229

 

87

 

21

 

472

 

915

 

Significant items

 

2,810

 

622

 

25

 

199

 

54

 

3,710

 

-  costs of structural reform

3

420

 

-

 

-

 

-

 

-

 

420

 

-  costs to achieve

 

1,908

 

623

 

34

 

371

 

66

 

3,002

 

-  customer redress programmes

 

655

 

-

 

-

 

-

 

-

 

655

 

-  disposals, acquisitions and investment in new businesses

 

36

 

-

 

-

 

17

 

-

 

53

 

-  gain on partial settlement of pension obligations

 

-

 

-

 

-

 

(188

)

-

 

(188

)

-  settlements and provisions in connection with legal and regulatory matters

 

(215

)

17

 

-

 

-

 

-

 

(198

)

-  currency translation on significant items

 

6

 

(18

)

(9

)

(1

)

(12

)

(34

)

Adjusted

11

(15,720

)

(10,939

)

(1,282

)

(5,085

)

(1,583

)

(30,259

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

 

 

39

 

1,883

 

442

 

4

 

7

 

2,375

 

Currency translation

 

(2

)

(40

)

-

 

-

 

(5

)

(47

)

Adjusted

 

37

 

1,843

 

442

 

4

 

2

 

2,328

 

Profit/(loss) before tax

 

 

 

 

 

 

 

 

(1,864

)

15,329

 

1,501

 

1,601

 

600

 

17,167

 

Currency translation

 

(6

)

(220

)

(1

)

(15

)

(151

)

(393

)

Significant items

 

2,871

 

740

 

26

 

105

 

40

 

3,782

 

-  revenue

 

61

 

118

 

1

 

(94

)

(14

)

72

 

-  operating expenses

 

2,810

 

622

 

25

 

199

 

54

 

3,710

 

Adjusted

 

1,001

 

15,849

 

1,526

 

1,691

 

489

 

20,556

 

Loans and advances to customers (net)

 

 

 

 

 

 

 

Reported

 

381,547

 

425,971

 

28,050

 

107,607

 

19,789

 

962,964

 

Currency translation

 

(11,204

)

(6,374

)

(1,328

)

(1,373

)

(1,762

)

(22,041

)

Adjusted

 

370,343

 

419,597

 

26,722

 

106,234

 

18,027

 

940,923

 

Customer accounts

 

 

 

 

 

 

 

Reported

 

505,182

 

657,395

 

34,658

 

143,432

 

23,795

 

1,364,462

 

Currency translation

 

(14,581

)

(5,882

)

(963

)

(1,555

)

(2,409

)

(25,390

)

Adjusted

 

490,601

 

651,513

 

33,695

 

141,877

 

21,386

 

1,339,072

 

For footnotes, see page 71.

 

Reconciliation of reported and adjusted items (continued)

 

 

 

2017

 

 

UK

Hong
Kong

Mainland China

US

Mexico

 

Footnotes

$m

$m

$m

$m

$m

Revenue

1

 

 

 

 

 

Reported

 

12,922

 

16,117

 

2,379

 

4,876

 

2,160

 

Currency translation

 

(129

)

(87

)

(52

)

-

 

(47

)

Significant items

 

50

 

(52

)

100

 

(99

)

5

 

-  customer redress programmes

 

108

 

-

 

-

 

-

 

-

 

-  disposals, acquisitions and investment in new businesses

 

(78

)

(126

)

99

 

(130

)

-

 

-  fair value movements on financial instruments

2

24

 

75

 

2

 

31

 

5

 

-  currency translation on significant items

 

(4

)

(1

)

(1

)

-

 

-

 

Adjusted

 

12,843

 

15,978

 

2,427

 

4,777

 

2,118

 

LICs

 

 

 

 

 

 

Reported

 

(492

)

(396

)

(67

)

108

 

(473

)

Currency translation

 

21

 

4

 

1

 

-

 

11

 

Adjusted

 

(471

)

(392

)

(66

)

108

 

(462

)

Operating expenses

 

 

 

 

 

 

Reported

 

(15,086

)

(6,131

)

(1,687

)

(4,267

)

(1,297

)

Currency translation

 

100

 

31

 

39

 

-

 

25

 

Significant items

 

2,476

 

306

 

68

 

119

 

46

 

-  costs of structural reform

3

410

 

-

 

-

 

-

 

-

 

-  costs to achieve

 

1,766

 

291

 

69

 

290

 

46

 

-  customer redress programmes

 

655

 

-

 

-

 

-

 

-

 

-  disposals, acquisitions and investment in new businesses

 

-

 

-

 

-

 

17

 

-

 

-  gain on partial settlement of pension obligations

 

-

 

-

 

-

 

(188

)

-

 

-  settlements and provisions in connection with legal and regulatory matters

 

(362

)

17

 

-

 

-

 

-

 

-  currency translation on significant items

 

7

 

(2

)

(1

)

-

 

-

 

Adjusted

 

(12,510

)

(5,794

)

(1,580

)

(4,148

)

(1,226

)

Share of profit in associates and joint ventures

 

 

 

 

 

 

Reported

 

38

 

8

 

1,863

 

-

 

-

 

Currency translation

 

(1

)

-

 

(40

)

-

 

-

 

Adjusted

 

37

 

8

 

1,823

 

-

 

-

 

Profit/(loss) before tax

 

 

 

 

 

 

Reported

 

(2,618

)

9,598

 

2,488

 

717

 

390

 

Currency translation

 

(9

)

(52

)

(52

)

-

 

(11

)

Significant items

 

2,526

 

254

 

168

 

20

 

51

 

-  revenue

 

50

 

(52

)

100

 

(99

)

5

 

-  operating expenses

 

2,476

 

306

 

68

 

119

 

46

 

Adjusted

 

(101

)

9,800

 

2,604

 

737

 

430

 

Loans and advances to customers (net)

 

 

 

 

 

 

Reported

 

295,538

 

268,966

 

40,686

 

65,168

 

15,172

 

Currency translation

 

(6,336

)

904

 

(2,666

)

1

 

679

 

Adjusted

 

289,202

 

269,870

 

38,020

 

65,169

 

15,851

 

Customer accounts

 

 

 

 

 

 

Reported

 

401,733

 

477,104

 

45,991

 

89,887

 

17,809

 

Currency translation

 

(8,593

)

1,605

 

(3,013

)

-

 

798

 

Adjusted

 

393,140

 

478,709

 

42,978

 

89,887

 

18,607

 

For footnotes, see page 71.

Analysis by country

 

Profit/(loss) before tax by country/territory within global businesses

 

 

Retail Banking
and Wealth
Management

Commercial
Banking

Global
Banking
and Markets

Global
Private
Banking

Corporate
Centre


 
Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Europe

 

(760

)

(889

)

(474

)

72

 

(2,602

)

(4,653

)

-  UK

12

(815

)

1,365

 

(650

)

(44

)

(3,201

)

(3,345

)

-  of which: HSBC UK Bank plc (RFB)

 

 

(399

)

1,497

 

70

 

16

 

123

 

1,307

 

-  HSBC Bank plc (NRFB)

 

202

 

271

 

(223

)

39

 

(419

)

(130

)

-  Holdings and other

 

(618

)

(403

)

(497

)

(99

)

(2,905

)

(4,522

)

-  France

 

45

 

119

 

(66

)

9

 

(71

)

36

 

-  Germany

 

6

 

37

 

74

 

7

 

37

 

161

 

-  Switzerland

 

(1

)

7

 

(3

)

90

 

(2

)

91

 

-  other

13

5

 

(2,417

)

171

 

10

 

635

 

(1,596

)

Asia

 

6,935

 

4,266

 

3,793

 

381

 

3,093

 

18,468

 

-  Hong Kong

 

6,550

 

3,107

 

1,663

 

366

 

363

 

12,049

 

-  Australia

 

121

 

108

 

168

 

(1

)

48

 

444

 

-  India

 

48

 

181

 

466

 

-

 

311

 

1,006

 

-  Indonesia

 

12

 

49

 

123

 

-

 

32

 

216

 

-  mainland China

 

(74

)

296

 

498

 

(5

)

2,162

 

2,877

 

-  Malaysia

 

85

 

66

 

184

 

-

 

7

 

342

 

-  Singapore

 

114

 

80

 

219

 

22

 

43

 

478

 

-  Taiwan

 

41

 

23

 

91

 

-

 

6

 

161

 

-  other

 

38

 

356

 

381

 

(1

)

121

 

895

 

Middle East and North Africa

 

190

 

174

 

722

 

1

 

1,240

 

2,327

 

-  Egypt

 

44

 

65

 

222

 

-

 

79

 

410

 

-  UAE

 

127

 

91

 

241

 

1

 

(35

)

425

 

-  Saudi Arabia

 

(3

)

-

 

13

 

-

 

1,145

 

1,155

 

-  other

13

22

 

18

 

246

 

-

 

51

 

337

 

North America

 

(219

)

807

 

608

 

(445

)

16

 

767

 

-  US

 

(323

)

365

 

452

 

(14

)

(45

)

435

 

-  Canada

 

44

 

406

 

120

 

-

 

48

 

618

 

-  other

13

60

 

36

 

36

 

(431

)

13

 

(286

)

Latin America

 

282

 

(86

)

360

 

-

 

(156

)

400

 

-  Mexico

 

279

 

166

 

217

 

-

 

25

 

687

 

-  other

13

3

 

(252

)

143

 

-

 

(181

)

(287

)

GB&M goodwill impairment

13

-

 

-

 

(3,962

)

-

 

-

 

(3,962

)

Year ended 31 Dec 2019

 

 

6,428

 

4,272

 

1,047

 

9

 

1,591

 

13,347

 

For footnotes, see page 71.

 

Profit/(loss) before tax by country/territory within global businesses (continued)

 

 

 

 

 

Retail Banking
and Wealth
Management

Commercial
 Banking

Global
Banking
and Markets

Global Private Banking

Corporate

Centre

Total

 

Footnotes

$m

$m

$m

$m

$m

$m

Europe

 

440

 

2,289

 

690

 

(122

)

(4,112

)

(815

)

-  UK

12

476

 

1,901

 

409

 

23

 

(4,205

)

(1,396

)

-  of which: HSBC UK Bank plc (RFB)

 

 

539

 

934

 

4

 

38

 

(133

)

1,382

 

-  HSBC Bank plc (NRFB)

 

548

 

1,394

 

795

 

60

 

(719

)

2,078

 

-  Holdings and other

 

(611

)

(427

)

(390

)

(75

)

(3,353

)

(4,856

)

-  France

 

(56

)

170

 

8

 

16

 

(101

)

37

 

-  Germany

 

14

 

85

 

99

 

8

 

(5

)

201

 

-  Switzerland

 

(1

)

5

 

(1

)

(100

)

20

 

(77

)

-  other

 

7

 

128

 

175

 

(69

)

179

 

420

 

Asia

 

6,190

 

4,176

 

3,773

 

353

 

3,298

 

17,790

 

-  Hong Kong

 

5,951

 

3,114

 

1,670

 

333

 

446

 

11,514

 

-  Australia

 

115

 

120

 

185

 

(1

)

44

 

463

 

-  India

 

20

 

143

 

387

 

-

 

275

 

825

 

-  Indonesia

 

(1

)

13

 

91

 

-

 

1

 

104

 

-  mainland China

 

(200

)

262

 

566

 

(4

)

2,234

 

2,858

 

-  Malaysia

 

130

 

82

 

132

 

-

 

30

 

374

 

-  Singapore

 

75

 

98

 

230

 

25

 

63

 

491

 

-  Taiwan

 

55

 

23

 

117

 

-

 

30

 

225

 

-  other

 

45

 

321

 

395

 

-

 

175

 

936

 

Middle East and North Africa

 

182

 

108

 

733

 

7

 

527

 

1,557

 

-  Egypt

 

34

 

54

 

202

 

-

 

43

 

333

 

-  UAE

 

112

 

58

 

296

 

7

 

-

 

473

 

-  Saudi Arabia

 

-

 

-

 

-

 

-

 

436

 

436

 

-  other

 

36

 

(4

)

235

 

-

 

48

 

315

 

North America

 

(96

)

968

 

738

 

11

 

(822

)

799

 

-  US

 

(205

)

473

 

624

 

23

 

(962

)

(47

)

-  Canada

 

55

 

455

 

139

 

-

 

116

 

765

 

-  other

 

54

 

40

 

(25

)

(12

)

24

 

81

 

Latin America

 

166

 

178

 

378

 

(1

)

(162

)

559

 

-  Mexico

 

194

 

114

 

197

 

-

 

23

 

528

 

-  other

 

(28

)

64

 

181

 

(1

)

(185

)

31

 

Year ended 31 Dec 2018

Year ended 31 Dec

6,882

 

7,719

 

6,312

 

248

 

(1,271

)

19,890

 

 

Europe

 

(159

)

1,899

 

777

 

(231

)

(4,150

)

(1,864

)

-  UK

12

(177

)

1,539

 

192

 

(23

)

(4,149

)

(2,618

)

-  of which: HSBC UK Bank plc (RFB)

 

 

NA

NA

NA

NA

NA

NA

-  HSBC Bank plc (NRFB)

 

413

 

1,911

 

889

 

63

 

(1,224

)

2,052

 

-  Holdings and other

 

(590

)

(372

)

(697

)

(86

)

(2,925

)

(4,670

)

-  France

 

(12

)

204

 

228

 

5

 

(156

)

269

 

-  Germany

 

21

 

61

 

141

 

9

 

39

 

271

 

-  Switzerland

 

(2

)

7

 

1

 

(192

)

2

 

(184

)

-  other

 

11

 

88

 

215

 

(30

)

114

 

398

 

Asia

 

5,372

 

3,394

 

3,135

 

285

 

3,143

 

15,329

 

-  Hong Kong

 

5,039

 

2,460

 

1,357

 

257

 

485

 

9,598

 

-  Australia

 

122

 

101

 

108

 

(1

)

35

 

365

 

-  India

 

21

 

159

 

362

 

-

 

374

 

916

 

-  Indonesia

 

(24

)

76

 

98

 

-

 

30

 

180

 

-  mainland China

 

(44

)

161

 

387

 

(4

)

1,988

 

2,488

 

-  Malaysia

 

85

 

50

 

162

 

-

 

28

 

325

 

-  Singapore

 

69

 

94

 

202

 

34

 

64

 

463

 

-  Taiwan

 

43

 

10

 

107

 

(1

)

40

 

199

 

-  other

 

61

 

283

 

352

 

-

 

99

 

795

 

Middle East and North Africa

 

144

 

199

 

593

 

-

 

565

 

1,501

 

-  Egypt

 

26

 

69

 

164

 

-

 

46

 

305

 

-  UAE

 

110

 

53

 

268

 

-

 

48

 

479

 

-  Saudi Arabia

 

-

 

-

 

-

 

-

 

441

 

441

 

-  other

 

8

 

77

 

161

 

-

 

30

 

276

 

North America

 

305

 

932

 

671

 

67

 

(374

)

1,601

 

-  US

 

166

 

435

 

494

 

66

 

(444

)

717

 

-  Canada

 

61

 

453

 

132

 

-

 

43

 

689

 

-  other

 

78

 

44

 

45

 

1

 

27

 

195

 

Latin America

 

161

 

199

 

259

 

-

 

(19

)

600

 

-  Mexico

 

139

 

105

 

158

 

-

 

(12

)

390

 

-  other

 

22

 

94

 

101

 

-

 

(7

)

210

 

Year ended 31 Dec 2017

 

5,823

 

6,623

 

5,435

 

121

 

(835

)

17,167

 

For footnotes, see page 71.

Footnotes to global businesses and

geographical regions

1   Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions, also referred to as revenue.

2   Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.

3   Comprises costs associated with preparations for the UK's exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.

4   Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.

5   The results presented for insurance manufacturing operations are shown before elimination of intercompany transactions with HSBC non-insurance operations.

6   The effect on the Insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in a reduction in adjusted revenue in 2019 of $3m (2018: $29m) and a reduction in PBT in 2019 of $3m (2018: $27m). These effects are recorded in 'all global businesses' within Corporate Centre.

7   Funds under management and assets held in custody are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager.              

8   Client assets related to our Middle East clients are booked across various other regions, primarily in Europe.

9   'Other income' in this context comprises where applicable net income/expense from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.

10  Risk-weighted assets are non-additive across geographical regions due to market risk diversification effects within the Group.

11 Amounts are non-additive across geographical regions due to intercompany transactions within the Group.

12 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies ('ServCo Group').

13  Includes the impact of goodwill impairment. As per Group accounting policy, HSBC's cash-generating units are based on geographical regions subdivided by global business, except for Global Banking and Markets, for which goodwill is monitored on a global basis.

14  Amounts are non-additive across geographical regions due to goodwill impairment recognised on the Global Banking and Markets cash-generating unit, which is monitored on a global basis.

Other information

 

Page

Taxes paid by region and country/territory

73

Carbon dioxide emissions

73

Taxes paid by region and country/territory

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

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

Taxes paid by country/territory

 

 

2019

2018

2017

 

 

$m

$m

$m

Europe

 

3,077

 

3,398

 

3,340

 

-  UK

 

2,468

 

2,693

 

2,654

 

-  of which: HSBC Holdings

 

889

 

832

 

1,078

 

-  France

 

476

 

536

 

530

 

-  Germany

 

116

 

111

 

140

 

-  Switzerland

 

(7

)

13

 

(67

)

-  other

 

24

 

45

 

83

 

Asia

 

1,487

 

2,742

 

2,277

 

-  Hong Kong

 

248

 

1,398

 

1,043

 

-  Australia

 

180

 

140

 

142

 

-  mainland China

 

76

 

235

 

227

 

-  India

 

398

 

384

 

297

 

-  Indonesia

 

50

 

44

 

84

 

-  Malaysia

 

119

 

94

 

81

 

-  Singapore

 

104

 

88

 

64

 

-  Taiwan

 

68

 

53

 

42

 

-  other

 

244

 

306

 

297

 

Middle East and North Africa

 

313

 

234

 

419

 

-  Saudi Arabia

 

-

 

-

 

170

 

-  UAE

 

66

 

67

 

101

 

-  Egypt

 

136

 

104

 

58

 

-  Turkey

 

42

 

-

 

-

 

-  other

 

69

 

63

 

90

 

North America

 

314

 

399

 

317

 

-  US

 

152

 

162

 

134

 

-  Canada

 

162

 

240

 

182

 

-  other

 

-

 

(3

)

1

 

Latin America

 

400

 

281

 

443

 

-  Mexico

 

179

 

90

 

129

 

-  Argentina

 

188

 

163

 

278

 

-  other

 

33

 

191

 

314

 

-  of which: Brazil

 

21

 

28

 

36

 

Year ended 31 Dec

 

5,591

 

7,054

 

6,796