FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
 
 
For the month of February
 
HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F X Form 40-F  
 
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes  No X
 
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-   ).
 
 
 
  
 
23 February 2021
 
 
 
HSBC HOLDINGS PLC
 
 
 
2020 RESULTS – HIGHLIGHTS
 
Noel Quinn, Group Chief Executive, said:
 
“In 2020, our people delivered an exceptional level of support for our customers in very tough circumstances, while our strong balance sheet and liquidity gave reassurance to those who rely on us. We achieved this while delivering a solid financial performance in the context of the pandemic – particularly in Asia – and laying firm foundations for our future growth. I am proud of everything our people achieved and grateful for the loyalty of our customers during a very turbulent year.
 
The growth plans we are announcing today aim to establish HSBC as a dynamic, efficient and agile global bank with a digital-first mindset, capable of providing a world-leading service to our customers and strong returns for our investors. We intend to deliver them at pace.”
 
2020 financial performance (vs 2019)
 
Reported profit after tax down 30% to $6.1bn and reported profit before tax down 34% to $8.8bn from higher expected credit losses and other credit impairment charges (‘ECL’) and lower revenue, partly offset by a fall in operating expenses. Reported results in 2020 included a $1.3bn impairment of software intangibles, while reported results in 2019 included a $7.3bn impairment of goodwill. Adjusted profit before tax down 45% to $12.1bn.
 
Reported revenue down 10% to $50.4bn, primarily due to the progressive impact of lower interest rates across our global businesses, in part offset by higher revenue in Global Markets. Adjusted revenue down 8% to $50.4bn.
 
Net interest margin (‘NIM’) of 1.32% in 2020, down 26 basis points (‘bps’) from 2019, due to the impact of lower global interest rates.
 
Reported ECL up $6.1bn to $8.8bn, mainly due to the impact of the Covid-19 outbreak and the forward economic outlook. Allowance for ECL on loans and advances to customers up from $8.7bn at 31 December 2019 to $14.5bn at 31 December 2020.
 
Reported operating expenses down 19% to $34.4bn, mainly due to the non-recurrence of a $7.3bn impairment of goodwill. Adjusted operating expenses down 3% to $31.5bn, as cost-saving initiatives and lower performance-related pay and discretionary expenditure more than offset the growth in investment spend.
 
During 2020, deposits grew by $204bn on a reported basis and $173bn on a constant currency basis, with growth in all global businesses.
 
Common equity tier 1 (‘CET1’) ratio of 15.9%, up 1.2 percentage points from 14.7% at 31 December 2019, which included the impact of the cancellation of the fourth interim dividend of 2019 and changes to the capital treatment of software assets.
 
After considering the requirements set out in the UK Prudential Regulation Authority’s ('PRA') temporary approach to shareholder distributions for 2020, the Board has announced an interim dividend for 2020 of $0.15 per ordinary share, to be paid in cash with no scrip alternative.
 
4Q20 financial performance (vs 4Q19)
 
Reported profit after tax up $6.0bn to $0.9bn and reported profit before tax up $5.3bn to $1.4bn, primarily due to the non-recurrence of a $7.3bn impairment of goodwill in 4Q19. Adjusted profit before tax down 50% to $2.2bn.
 
Reported revenue down 12% and adjusted revenue down 14%, primarily due to the impact of lower global interest rates. NIM of 1.22% in 4Q20 increased by 2bps compared with 3Q20.
 
Reported ECL up 60% to $1.2bn, reflecting UK economic uncertainty and higher charges related to specific exposures in Commercial Banking (‘CMB’).
 
Reported operating expenses down 42% to $9.9bn, due to the non-recurrence of a $7.3bn goodwill impairment. Adjusted operating expenses of $9.1bn down $0.1bn.
 
Outlook and strategic update
 
We recognise a number of fundamental changes, including the prospect of prolonged low interest rates, the significant increase in digital engagement from customers and the enhanced focus on the environment, and we have aligned our strategy accordingly.
 
We intend to increase our focus on areas where we are strongest, increase and accelerate our investments, and continue to progress with the transformation of our underperforming businesses. As part of our climate ambitions, we have also set out our plans to capture the opportunities presented by the transition to a low-carbon economy.
 
We will continue to target an adjusted cost base of $31bn or less in 2022. This reflects a further reduction in our cost base, which has been broadly offset by the adverse impact of foreign currency translation due to the weakening US dollar towards the end of 2020. In addition, we will continue to target a gross risk-weighted assets (‘RWA’) reduction of over $100bn by the end of 2022. We no longer expect to reach our return on average tangible equity (‘RoTE’) target of between 10% and 12% in 2022, as originally planned and will now target a RoTE of greater than or equal to 10% in the medium term.
 
We intend to maintain a CET1 ratio above 14%, managing in the range of 14% to 14.5% in the medium term and managing this range down in the longer term. The Board has adopted a policy to provide sustainable dividends going forward. We intend to transition towards a target payout ratio of between 40% and 55% of reported earnings per ordinary share (‘EPS’) from 2022 onwards, with the flexibility to adjust EPS for non-cash significant items, such as goodwill or intangibles impairments.
 
January trading
 
We have had a good start to 2021, and we are cautiously optimistic for the year ahead.
 

 
Key financial metrics
 
 
 
 
For the year ended
 
Reported results
 
Footnotes
 
2020
 
2019
 
2018
 
Reported revenue ($m)
 
 
50,429 
 
 
56,098 
 
 
53,780 
 
 
Reported profit before tax ($m)
 
 
8,777 
 
 
13,347 
 
 
19,890 
 
 
Reported profit after tax ($m)
 
 
6,099 
 
 
8,708 
 
 
15,025 
 
 
Profit attributable to the ordinary shareholders of the parent company ($m)
 
 
3,898 
 
 
5,969 
 
 
12,608 
 
 
Cost efficiency ratio (%)
 
 
68.3 
 
 
75.5 
 
 
64.4 
 
 
Basic earnings per share ($)
 
 
0.19 
 
 
0.30 
 
 
0.63 
 
 
Diluted earnings per share ($)
 
 
0.19 
 
 
0.30 
 
 
0.63 
 
 
Net interest margin (%)
 
 
1.32 
 
 
1.58 
 
 
1.66 
 
 
Alternative performance measures
 
 
 
 
 
Adjusted revenue ($m)
 
 
50,366 
 
 
54,944 
 
 
52,098 
 
 
Adjusted profit before tax ($m)
 
 
12,149 
 
 
22,149 
 
 
21,199 
 
 
Adjusted cost efficiency ratio (%)
 
 
62.5 
 
 
59.2 
 
 
60.9 
 
 
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers (%)
 
 
0.81 
 
 
0.25 
 
 
0.16 
 
 
Return on average ordinary shareholders’ equity (%)
 
 
2.3 
 
 
3.6 
 
 
7.7 
 
 
Return on average tangible equity (%)
 
1
 
3.1 
 
 
8.4 
 
 
8.6 
 
 
 
 
 
 
 
 
 
At 31 Dec
 
Balance sheet
 
 
2020
 
2019
 
2018
 
Total assets ($m)
 
 
2,984,164 
 
 
2,715,152 
 
 
2,558,124 
 
 
Net loans and advances to customers ($m)
 
 
1,037,987 
 
 
1,036,743 
 
 
981,696 
 
 
Customer accounts ($m)
 
 
1,642,780 
 
 
1,439,115 
 
 
1,362,643 
 
 
Average interest-earning assets ($m)
 
 
2,092,900 
 
 
1,922,822 
 
 
1,839,346 
 
 
Loans and advances to customers as % of customer accounts (%)
 
 
63.2 
 
 
72.0 
 
 
72.0 
 
 
Total shareholders’ equity ($m)
 
 
196,443 
 
 
183,955 
 
 
186,253 
 
 
Tangible ordinary shareholders’ equity ($m)
 
 
156,423 
 
 
144,144 
 
 
140,056 
 
 
Net asset value per ordinary share at period end ($)
 
 
8.62 
 
 
8.00 
 
 
8.13 
 
 
Tangible net asset value per ordinary share at period end ($)
 
2
 
7.75 
 
 
7.13 
 
 
7.01 
 
 
Capital, leverage and liquidity
 
 
 
 
 
Common equity tier 1 capital ratio (%)
 
3
 
15.9 
 
 
14.7 
 
 
14.0 
 
 
Risk-weighted assets ($m)
 
3
 
857,520 
 
 
843,395 
 
 
865,318 
 
 
Total capital ratio (%)
 
3
 
21.5 
 
 
20.4 
 
 
20.0 
 
 
Leverage ratio (%)
 
3
 
5.5 
 
 
5.3 
 
 
5.5 
 
 
High-quality liquid assets (liquidity value) ($bn)
 
 
678 
 
 
601 
 
 
567 
 
 
Liquidity coverage ratio (%)
 
 
139 
 
 
150 
 
 
154 
 
 
Share count
 
 
 
 
 
Period end basic number of $0.50 ordinary shares outstanding (millions)
 
 
20,184 
 
 
20,206 
 
 
19,981 
 
 
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)
 
 
20,272 
 
 
20,280 
 
 
20,059 
 
 
Average basic number of $0.50 ordinary shares outstanding (millions)
 
 
20,169 
 
 
20,158 
 
 
19,896 
 
 
Dividend per ordinary share (in respect of the period) ($)
 
4
 
0.15 
 
 
0.30 
 
 
0.51 
 
 
For reconciliations of our reported results to an adjusted basis, including lists of significant items, see page 85 of the Annual Report and Accounts 2020. Definitions and calculations of other alternative performance measures are included in our ‘Reconciliation of alternative performance measures’ on page 103 of the Annual Report and Accounts 2020.
 
 
1     Profit attributable to ordinary shareholders, excluding impairment of goodwill and other intangible assets and changes in present value of in-force insurance contracts (‘PVIF’) (net of tax), divided by average ordinary shareholders’ equity excluding goodwill, PVIF and other intangible assets (net of deferred tax). 
2     Excludes impact of $0.10 per share dividend in the first quarter of 2019, following a June 2019 change in accounting practice on the recognition of interim dividends, from the date of declaration to the date of payment.
3     Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation in force at the time. These include the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’, which are explained further on page 173 of the Annual Report and Accounts 2020. Leverage ratios are calculated using the end point definition of capital and the IFRS 9 regulatory transitional arrangements. Following the end of the transition period after the UK’s withdrawal from the EU, any reference to EU regulations and directives (including technical standards) should be read as a reference to the UK’s version of such regulation and/or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, as amended.
4     The fourth interim dividend of 2019, of $0.21 per ordinary share, was cancelled in response to a written request from the UK’s Prudential Regulation Authority (‘PRA’). 2019 has been re-presented accordingly.
 
 
 
 

Highlights
 
 
 
 
Year ended 31 Dec
 
 
2020
 
2019
 
 
Footnotes
 
$m
 
$m
 
Reported
 
 
 
 
Revenue
 
1
 
50,429 
 
 
56,098 
 
 
ECL
 
 
(8,817)
 
 
(2,756)
 
 
Operating expenses
 
 
(34,432)
 
 
(42,349)
 
 
Share of profit in associates and joint ventures
 
 
1,597 
 
 
2,354 
 
 
Profit before tax
 
 
8,777 
 
 
13,347 
 
 
Adjusted
 
2
 
 
 
Revenue
 
1
 
50,366 
 
 
54,944 
 
 
ECL
 
 
(8,817)
 
 
(2,627)
 
 
Operating expenses
 
 
(31,459)
 
 
(32,519)
 
 
Share of profit in associates and joint ventures
 
 
2,059 
 
 
2,351 
 
 
Profit before tax
 
 
12,149 
 
 
22,149 
 
 
Significant items affecting adjusted performance
 
 
 
 
Revenue
 
 
 
 
Customer redress programmes
 
 
(21)
 
 
(163)
 
 
Disposals, acquisitions and investment in new businesses
 
 
(10)
 
 
768 
 
 
Fair value movements on financial instruments
 
3
 
264 
 
 
84 
 
 
Restructuring and other related costs
 
4
 
(170)
 
 
— 
 
 
Operating expenses
 
 
 
 
Costs of structural reform
 
5
 
— 
 
 
(158)
 
 
Customer redress programmes
 
 
54 
 
 
(1,281)
 
 
Impairment of goodwill and other intangibles
 
 
(1,090)
 
 
(7,349)
 
 
Past service costs of guaranteed minimum pension benefits equalisation
 
 
(17)
 
 
— 
 
 
Restructuring and other related costs
 
6
 
(1,908)
 
 
(827)
 
 
Settlements and provisions in connection with legal matters and other regulatory matters
 
 
(12)
 
 
61 
 
 
Share of profit in associates and joint ventures
 
 
 
 
Impairment of goodwill
 
 
(462)
 
 
— 
 
 
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Adjusted performance is computed by adjusting reported results for the year-on-year effects of foreign currency translation differences and significant items which distort year-on-year comparisons.
Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.
Comprises costs associated with preparations for the UK’s exit from the European Union.
Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment of tangible assets of $197m.
 
 

Statement by Mark E Tucker, Group Chairman
In 2020, we experienced economic and social upheaval on a scale unseen in living memory. Even before the year began, the external environment was being reshaped by a range of factors – including the impact of trade tensions between the US and China, Brexit, low interest rates and rapid technological development. The spread of the Covid-19 virus made that environment all the more complex and challenging.
 
The Covid-19 pandemic has severely impacted our customers, our colleagues, our shareholders and the communities we serve. The first priority was, and remains, dealing with the public health crisis, but the economic crisis that unfolded simultaneously has also been unprecedented in recent times. The financial services industry has been at the forefront of helping businesses and individuals through the difficulties they have faced, working with governments and regulators towards expected recovery and future growth. I am enormously proud of the professionalism, dedication and energy that my colleagues around the world have demonstrated as they helped ensure our customers received the support they needed – all the while managing their own, at times extremely difficult, situations at home. On behalf of the Board, I would like to express my deepest thanks to them all for the exceptional way they are responding to these most challenging circumstances.
 
Against this backdrop, HSBC demonstrated a resilient performance. Reported profit before tax was $8.8bn, a fall of 34%, and adjusted profit before tax was $12.1bn, down 45%. Within this, Global Banking and Markets performed particularly well, while Asia was once again by far the most profitable region. Deposits also increased significantly across the Group, reinforcing the strength of our funding and liquidity positions.
 
In response to a request from the UK’s Prudential Regulation Authority, we cancelled the fourth interim dividend for 2019. We also announced that, until the end of 2020, we would make no quarterly or interim dividend payments or accruals in respect of ordinary shares. This was a difficult decision and we deeply regret the impact it has had on our shareholders. We are therefore pleased to restart dividend payments at the earliest opportunity. The Board has announced an interim dividend of $0.15 for 2020, and adopted a policy designed to provide sustainable dividends in the future.
 
Board of Directors
 
The confirmation of Noel Quinn as permanent Group Chief Executive underlined the Board’s belief that he is the best person to lead the delivery of the strategic plan. We look forward to working closely with Noel and the management team as they focus on executing our strategic priorities in 2021.
 
Jamie Forese, Steve Guggenheimer and Eileen Murray joined the Board as independent non-executive Directors in 2020. All three have already demonstrated the valuable skills, expertise and experience they bring across a wide range of areas, including technology. We have also announced that Dame Carolyn Fairbairn will join the Board as an independent non-executive Director. Carolyn will bring a wealth of relevant experience, and her appointment will be effective from 1 September 2021.
 
As reported in the Annual Report and Accounts 2019, Sir Jonathan Symonds and Kathleen Casey retired from the Board last year. Today we also announced that Laura Cha will step down from the Board immediately after our 2021 Annual General Meeting (‘AGM’) in May. I would like to thank Jon, Kathy and Laura for the enormous contributions they made to HSBC during their years of service. We are now in the advanced stages of a search for suitable candidates to join and strengthen the Board, and I will update further on the outcome of this search in due course.
 
Like the rest of the Group, the Board had to adapt its ways of working in 2020. We met virtually for much of the year, which brought benefits including less travel and more frequent, shorter meetings. It will be important for us to consider how we retain what has worked well over the last year once restrictions are lifted and it becomes possible to travel once again.
 
The Board enjoys the constructive discussions that we have with shareholders at the AGM in the UK and the Informal Shareholders’ Meeting in Hong Kong, so it was a matter of regret that we did not meet in person in 2020. While we did maintain regular contact with shareholders throughout the year, we will resume our face-to-face engagement with shareholders in the UK, Hong Kong and more widely, as soon as is practicable.
 
External environment
 
After the significant deterioration in global economic conditions in the first half of the year due to the Covid-19 pandemic, there were signs of improvement in the second half, especially in Asia. The most impressive economic recovery has been in China – still the biggest driver of global growth – where international trade is rebounding most strongly. The signing of the Regional Comprehensive Economic Partnership should further boost intra-regional activity across Asia, while the recent political agreement between the EU and China on an investment deal should, once ratified, bolster the already significant two-way investment flows.
 
Covid-19 infection levels remain very high in Europe, the US and Latin America, and new variants of the virus have spread quickly. This has necessitated new lockdown measures in the UK and other countries. While the deployment of multiple vaccines means we are more optimistic about the future, there is clearly still some way to go before life can return to something like normality. Recovery will therefore take longer in these economies, with growth more likely later in 2021 in these economies.
 
The agreement of a trade deal between the UK and EU prior to the end of 2020 provides some certainty for cross-border trade. However, the reduced access for financial services under these new arrangements means that further work is needed to maintain the level playing field that has existed until now. Given the many benefits that the UK financial services industry brings to the UK and EU economies, equivalence must be a key priority for both parties.
 
The geopolitical environment remains challenging – in particular for a global bank like HSBC – and we continue to be mindful of the potential impact that it could have on our strategy. We continue to engage fully and frequently with all governments as we seek to do everything we possibly can to help our customers navigate an increasingly complex world.
 
Capturing future opportunities
 
Given the external environment, it is vital we stay focused on what we can control. The Board is confident there are many opportunities ahead for a bank with HSBC’s competitive strengths. This makes it all the more important that we position ourselves to capture them.
 
While we prioritised supporting our customers and our people during the pandemic, we made good progress against the three strategic priorities announced in February 2020 – reallocating capital from underperforming parts of the business, reducing costs and simplifying the organisation. In particular, the Board worked closely with the management team over the course of the year on plans to accelerate progress and investment in key areas of growth, which include our Asian franchise, our wealth business and new technology across the Group.
 
We are today unveiling the outcome of extensive consultation with our people and customers on the Group’s purpose and values. Being clear about who we are, what we stand for and how this connects to our strategy is an important part of how we align and energise the organisation to create long-term value for all those we work with and for – our investors, customers, employees, suppliers and the communities we serve. The Board fully endorses the outcome of this work.
 
Our commitment to create sustainable value is demonstrated by the new climate ambitions we announced in October 2020. The most significant contribution that HSBC can make to the fight against climate change is to bring our customers with us on the transition to a low-carbon future. Our goal of being net zero for our financed emissions by 2050 sends an important signal to our investors, our customers and our people - if our clients are prepared to change their business models and make that transition, we will help and support them to do so. HSBC was also delighted to be one of the founding signatories of the Terra Carta, which was launched last month by HRH The Prince of Wales’ Sustainable Markets Initiative. Further details about all of the steps we are taking towards a more sustainable future are set out in the ESG review, which for the first time is included within the Annual Report and Accounts 2020.
 
Finally, 2020 underlined once again that our people are the driving force behind our business. I would like to reiterate how enormously grateful I am to my colleagues for the great dedication and care they showed to our customers and to each other during such testing times. Further empowering and enabling them to do their jobs and execute our strategic priorities is the key to our future success.
 
 
 

Review by Noel Quinn, Group Chief Executive
In 2020, HSBC had a very clear mandate – to provide stability in a highly unstable environment for our customers, communities and colleagues. I believe we achieved that in spite of the many challenges presented by the Covid-19 pandemic and heightened geopolitical uncertainty.
 
Our people delivered an exceptional level of support for our customers in very tough circumstances, while our strong balance sheet and liquidity gave reassurance to those who rely on us. We achieved this while delivering a solid financial performance in the context of the pandemic – particularly in Asia – and laying firm foundations for our future growth. I am proud of everything our people achieved and grateful for the loyalty of our customers during a very turbulent year.
 
2020
 
Helping our customers emerge from the Covid-19 pandemic in a sustainable position was our most pressing priority. We did this by equipping our colleagues to work from home at the height of the pandemic, and keeping the vast majority of our branches and all of our contact centres open. Our investment in our digital capabilities – both in 2020 and in previous years – enabled our customers to access more services remotely, and we worked closely with our regulators around the world to open new digital channels in a safe and secure way. In total, we provided more than $26bn of relief to our personal customers and more than $52bn to our wholesale customers, both through government schemes and our own relief initiatives. We also played a vital role in keeping capital flowing for our clients, arranging more than $1.9tn of loan, debt and equity financing for our wholesale customers during 2020.
 
Even in the middle of the pandemic, we continued to look to the future. In October, we announced our ambition to become a net zero bank by 2050, supporting customers through the transition to a low-carbon economy and helping to unlock next-generation climate solutions. If the Covid-19 pandemic provided a shock to the system, a climate crisis has the potential to be much more drastic in its consequences and longevity. We are therefore stepping up support for our clients in a material way, working together to build a thriving low-carbon economy and focusing our business on helping achieve that goal.
 
The actions we outlined in February 2020 are largely on track or ahead of where we intended them to be, despite the complications of the pandemic. We renewed and re-energised the senior management team, with around three-quarters of the Group Executive Committee in post for just over a year or less. Our business is more streamlined than it was a year ago, with three global businesses instead of four and increased back-office consolidation. Costs are down materially, with over $1bn of gross operating costs removed during 2020. We are also already more than half-way towards our target to reduce at least $100bn of gross risk-weighted assets by 2022.
 
Unfortunately, the changed interest-rate environment means we are no longer able to achieve a return on tangible equity of 10% to 12% by 2022. We will now target a return on tangible equity of 10% or above over the medium term.
 
The world around us changed significantly in 2020. Central bank interest rates in many countries fell to record lows. Pandemic-related lockdowns led to a rapid acceleration in the shift from physical to digital banking. Like many businesses, we learned that our people could be just as productive working from home as in the office. Also, as the world resolved to build back responsibly from the pandemic, governments, businesses and customers united to accelerate a low-carbon transition that works for all.
 
All of these things caused us to adjust and reinforce elements of our strategy to fit this new environment. The growth plans that we have developed are a natural progression of our February 2020 plans. They aim to play to our strengths, especially in Asia; to accelerate our technology investment plans to deliver better customer service and increased productivity; to energise our business for growth; and to invest further in our own low-carbon transition and that of our customers. They are also designed to deliver a 10% return on tangible equity over the medium term in the current low interest-rate environment.
 
Our purpose
 
As we charted the next stage of HSBC’s journey, we also reflected on our purpose as a business. We consulted widely both internally and externally, speaking to thousands of colleagues and customers, and looked deeply into our history. The same themes came up again and again.
 
HSBC has always focused on helping customers pursue the opportunities around them, whether as individuals or businesses. Sometimes those opportunities are clear and visible, and sometimes they are far from obvious. Sometimes they arise in the next street, and sometimes on the next continent. Sometimes they exist in the status quo, and sometimes they are a product of great social or economic change. But always, they represent a chance for our customers to grow and to help those close to them – protecting, nurturing, building.
 
'Opening up a world of opportunity' both captures this aim and lays down a challenge for the future. Opportunity never stands still. It changes and evolves with the world around us. It is our job to keep making the most of it, and to find and capture it with a spirit of entrepreneurialism, innovation and internationalism that represents HSBC at its very best. This is the essence of what our plans intend to deliver, and what we intend to keep delivering for our customers, colleagues and communities as we navigate change and complexity together.
 
Financial performance
 
The pandemic inevitably affected our 2020 financial performance. The shutdown of much of the global economy in the first half of the year caused a large rise in expected credit losses, and cuts in central bank interest rates reduced revenue in rate-sensitive business lines. We responded by accelerating the transformation of the Group, further reducing our operating costs and moving our focus from interest-rate sensitive business lines towards fee-generating businesses. Our expected credit losses stabilised in the second half of the year in line with the changed economic outlook, but the revenue environment remained muted.
 
As a consequence, the Group delivered $8.8bn of reported profit before tax, down 34% on 2019, and $12.1bn of adjusted profits, down 45%. Our Asia business was again the major contributor, delivering $13bn of adjusted profit before tax in 2020.
 
Adjusted revenue was 8% lower than in 2019. This was due mainly to the impact of interest rate cuts at the start of the year on our deposit franchises in all three global businesses. By contrast, our Global Markets business benefited from increased customer activity due to market volatility throughout the year, growing adjusted revenue by 27%.
 
We made strong progress in reducing our operating expenses. A combination of our cost-saving programmes, cuts in performance-related pay and lower discretionary spending due to the Covid-19 pandemic helped to reduce our adjusted operating expenses by $1.1bn or 3%.
 
Our investment plans remain essential to the future of the business. We continued to invest heavily in technology while managing costs down, spending $5.5bn during 2020.
 
Our funding, liquidity and capital remain strong. We grew deposits by $173bn on a constant currency basis, with increases across all three global businesses. Our common equity tier one ratio was 15.9% on 31 December 2020.
 
Our shareholders
 
It was a difficult year for our shareholders. The Covid-19 pandemic and the impact of geopolitics weighed heavily on our share price throughout 2020. In March, we cancelled the payment of our fourth interim dividend for 2019 at the request of our lead regulator, and also agreed not to make any quarterly or interim dividend payments until the end of 2020. This particularly affected shareholders who rely on our dividend for income. It was a priority for the management team to get back to being able to pay dividends by the end of the year, and we were pleased to be able to recommend the payment of an interim dividend for 2020.
 
Dividends are hugely important, but so is capacity for growth. To deliver both, we are adopting a new policy designed to provide sustainable dividends, offering good income while giving management the flexibility to reinvest capital to grow the firm over the medium term. We will consider share buy-backs, over time and not in the near term, where no immediate opportunity for capital redeployment exists. We will also no longer offer a scrip dividend option, and will pay dividends entirely in cash.
 
The last 12 months were tough, but I am highly focused on turning our performance around in 2021 and beyond. I strongly believe that the combination of our growth plans and our new dividend policy will unlock greater value for our shareholders in the years to come.
 
Opening up a world of opportunity
 
‘Opening up a world of opportunity’ is more than a purpose – it is a statement of intent. Everything that we plan to do over the next decade is designed to unlock opportunity for our stakeholders, whether customers, colleagues, shareholders or communities. We intend to do this by building a dynamic, efficient and agile global bank with a digital-first mindset, capable of providing a world-leading service to our customers and strong returns for our investors. We will also need to focus intently on the areas where we excel, and to foster a commercial and entrepreneurial culture with a conviction to get things done. We believe we can achieve this in four ways.
 
First, we plan to focus on and invest in the areas in which we are strongest. In Wealth and Personal Banking, we aim to become a market-leader for high net worth and ultra high net worth clients in Asia and the Asian diaspora, and to invest in our biggest retail markets where the opportunity is greatest. In Commercial Banking, we want to remain a global leader in cross-border trade, and to lead the world in serving mid-market corporates internationally. In Global Banking and Markets, we intend to invest to capture trade and capital flows into and across Asia, while connecting global clients to Asia and the Middle East through our international network.
 
Second, we intend to increase the pace at which we digitise HSBC through higher levels of technology investment. This underpins everything that we want to achieve. It is how we intend to win new customers and retain them, to become more agile and efficient, to create richer, seamless customer journeys, and to build strong and innovative partnerships that deliver excellent benefits for our customers. We have an opportunity to meet the growing market need for sophisticated, robust and rapid payment solutions, and to lead our industry in applying digital solutions to analogue services, such as trade. We therefore intend to protect technology investment throughout the cycle, even as we reduce spending elsewhere.
 
Third, we want to energise HSBC for growth through a strong culture, simple ways of working, and by equipping our colleagues with the future skills they need. Giving life to our purpose will be critical to building the dynamic, entrepreneurial and inclusive culture that we want to create, as will removing the remaining structural barriers that sometimes stop our people from delivering for our customers. We need to change the way we hire to build skills and capabilities in areas that are different to what we have needed historically, including data, artificial intelligence, and sustainable business models. Our expanded HSBC University will also help to upskill and reskill our people, while fostering more of the softer skills that technology can never replace.
 
Fourth, we will seek to help our customers and communities to capture the opportunities presented by the transition to a low-carbon economy. Accelerating this transition is the right thing to do for the environment, but also the right thing commercially. We intend to build on our market-leading position in sustainable finance, supporting our clients with $750bn to $1tn of sustainable financing and investment over the next 10 years. We also intend to unlock new climate solutions by building one of the world’s leading climate managers – HSBC Pollination Climate Asset Management – and helping to transform sustainable infrastructure into a global asset class. These will help us achieve our ambition to align our portfolio of financed emissions to the Paris Agreement goal to achieve net zero by 2050.
 
Championing inclusion
 
I believe passionately in building an inclusive organisation in which everyone has the opportunity to fulfil their potential. Failing to do so isn’t just wrong, it is totally self-defeating. It means you don’t get the best out of the talent you have, and sends the wrong signals to the people you want to recruit. An inclusive environment is the foundation of a truly diverse organisation, with all of the rewards that brings.
 
There is much still to do, but we are moving in the right direction. More than 30% of our senior leaders are female, in line with the goal we set to achieve by the end of 2020. I want that number to increase to at least 35% by 2025, and we have a number of initiatives in place to help achieve it. In May, we launched a new global ethnicity inclusion programme to better enable careers and career progression for colleagues from ethnic minorities, and in July, we made a series of commitments to address feedback from Black colleagues in particular. These included a commitment to more than double our number of Black senior leaders by 2025.
 
I am particularly proud that during a difficult year, which included a large-scale redundancy programme, employee sentiment improved within HSBC. Around 71% of my colleagues said that they found HSBC to be a great place to work, up from 66% in 2019. However, the view varies across employees from different groups. We know, for example, that employees with disabilities or who identify as ethnic minorities do not feel as engaged as others. I take these gaps very seriously. Better demographic data globally will help us benchmark and measure our progress more effectively, and we are taking concerted steps to be able to capture that information where possible.
 
2021 outlook
 
We have had a good start to 2021, and I am cautiously optimistic for the year ahead. While a spike in Covid-19 infection rates led to renewed lockdown measures in many places at the start of 2021, the development of multiple vaccines gives us hope that the world will return to some form of normality before long. Nonetheless, we remain reactive to the ebb and flow of the Covid-19 virus and prepared to take further steps to manage the economic impact where necessary.
 
The geopolitical uncertainty that prevailed during 2020 remains a prominent feature of our operating environment. We are hopeful that this will reduce over the course of 2021, but mindful of the potential impact on our business if levels remain elevated. We remain focused on serving the needs of our customers, colleagues and communities in all our markets.
 
Our people
 
I would like to pay tribute to my colleagues and all those who supported them throughout a difficult year. HSBC is a community of around 226,000 colleagues – but it relies just as much on the family, friends and support networks that help them be the best they can be. Our people did extraordinary things in 2020, but it asked a lot of those around them. I am hugely grateful to everyone who helped HSBC – whether directly or indirectly – in supporting our customers, communities and each other over the last 12 months.
 
 
 
 

Financial summary
 
 
 
 
Year ended 31 Dec
 
 
 
2020
 
2019
 
 
Footnotes
 
$m
 
$m
 
For the year
 
 
 
 
Profit before tax
 
 
8,777 
 
 
13,347 
 
 
Profit attributable to:
 
 
 
 
– ordinary shareholders of the parent company
 
 
3,898 
 
 
5,969 
 
 
Dividends declared on ordinary shares
 
1
 
— 
 
 
10,269 
 
 
 
 
 
 
At the year-end
 
 
 
 
Total shareholders’ equity
 
 
196,443 
 
 
183,955 
 
 
Total regulatory capital
 
 
184,423 
 
 
172,150 
 
 
Customer accounts
 
 
1,642,780 
 
 
1,439,115 
 
 
Total assets
 
 
2,984,164 
 
 
2,715,152 
 
 
Risk-weighted assets
 
 
857,520 
 
 
843,395 
 
 
 
 
 
 
Per ordinary share
 
 
$
 
$
 
Basic earnings per share
 
 
0.19 
 
 
0.30 
 
 
Dividend per ordinary share (in respect of the period)
 
 
0.15 
 
 
0.51 
 
 
Net asset value per ordinary share at period end
 
2
 
8.62 
 
 
8.00 
 
 
Tangible net asset value per ordinary share at period end
 
 
7.75 
 
 
7.13 
 
 
 
 
 
 
Share information
 
 
 
 
Number of $0.50 ordinary shares in issue (millions)
 
 
20,694 
 
 
20,639 
 
 
Basic number of $0.50 ordinary shares outstanding (millions)
 
 
20,184 
 
 
20,206 
 
 
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)
 
 
20,272 
 
 
20,280 
 
 
Dividends recorded in the financial statements are dividends per ordinary share declared and paid in the period and are not dividends in respect of, or for, that period.
The definition of net asset value per ordinary share is total shareholders' equity less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue excluding shares the company has purchased and are held in treasury.
 
 
Distribution of results by global business
 
 
Adjusted profit before tax
 
Year ended 31 Dec
 
 
2020
 
20191
 
 
$m
 
%
 
$m
 
%
 
Wealth and Personal Banking
 
4,140 
 
 
34.1 
 
 
8,883 
 
 
40.1 
 
 
Commercial Banking
 
1,868 
 
 
15.4 
 
 
7,170 
 
 
32.4 
 
 
Global Banking and Markets
 
4,830 
 
 
39.7 
 
 
5,172 
 
 
23.4 
 
 
Corporate Centre
 
1,311 
 
 
10.8 
 
 
924 
 
 
4.2 
 
 
Profit before tax
 
12,149 
 
 
100.0 
 
 
22,149 
 
 
100.0 
 
 
 
1 A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311 of the Annual Report and Accounts 2020.
 
 
 
Distribution of results by geographical region
 
 
Reported profit/(loss) before tax
 
Year ended 31 Dec
 
 
2020
 
2019
 
 
$m
 
%
 
$m
 
%
 
Europe
 
(4,205)
 
 
(47.9)
 
 
(4,653)
 
 
(34.9)
 
 
Asia
 
12,832 
 
 
146.2 
 
 
18,468 
 
 
138.4 
 
 
Middle East and North Africa
 
19 
 
 
0.2 
 
 
2,327 
 
 
17.4 
 
 
North America
 
168 
 
 
1.9 
 
 
767 
 
 
5.7 
 
 
Latin America
 
(37)
 
 
(0.4)
 
 
400 
 
 
3.0 
 
 
Global GBM goodwill impairment
 
— 
 
 
— 
 
 
(3,962)
 
 
(29.6)
 
 
Profit before tax
 
8,777 
 
 
100.0 
 
 
13,347 
 
 
100.0 
 
 
 
 

HSBC adjusted profit before tax and balance sheet data
 
 
 
 
2020
 
 
 
Wealth
and
Personal Banking
 
Commercial
Banking
 
Global Banking
and
Markets
 
Corporate
Centre
 
Total
 
 
Footnotes
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net operating income/(expense) before change in expected credit losses and other credit impairment charges
 
1
 
22,013 
 
 
13,312 
 
 
15,303 
 
 
(262)
 
 
50,366 
 
 
– external
 
 
19,990 
 
 
13,741 
 
 
18,162 
 
 
(1,527)
 
 
50,366 
 
 
– inter-segment
 
 
2,023 
 
 
(429)
 
 
(2,859)
 
 
1,265 
 
 
— 
 
 
of which: net interest income/(expense)
 
 
15,090 
 
 
9,317 
 
 
4,518 
 
 
(1,326)
 
 
27,599 
 
 
Change in expected credit losses and other credit impairment charges
 
 
(2,855)
 
 
(4,754)
 
 
(1,209)
 
 
 
 
(8,817)
 
 
Net operating income/(expense)
 
 
19,158 
 
 
8,558 
 
 
14,094 
 
 
(261)
 
 
41,549 
 
 
Total operating expenses
 
 
(15,024)
 
 
(6,689)
 
 
(9,264)
 
 
(482)
 
 
(31,459)
 
 
Operating profit/(loss)
 
 
4,134 
 
 
1,869 
 
 
4,830 
 
 
(743)
 
 
10,090 
 
 
Share of profit in associates and joint ventures
 
 
 
 
(1)
 
 
— 
 
 
2,054 
 
 
2,059 
 
 
Adjusted profit before tax
 
 
4,140 
 
 
1,868 
 
 
4,830 
 
 
1,311 
 
 
12,149 
 
 
 
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC’s adjusted profit before tax
 
 
34.1 
 
 
15.4 
 
 
39.7 
 
 
10.8 
 
 
100.0 
 
 
Adjusted cost efficiency ratio
 
 
68.3 
 
 
50.2 
 
 
60.5 
 
 
(184.0)
 
 
62.5 
 
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
469,186 
 
 
343,182 
 
 
224,364 
 
 
1,255 
 
 
1,037,987 
 
 
Interests in associates and joint ventures
 
 
447 
 
 
14 
 
 
143 
 
 
26,080 
 
 
26,684 
 
 
Total external assets
 
 
881,918 
 
 
570,295 
 
 
1,347,440 
 
 
184,511 
 
 
2,984,164 
 
 
Customer accounts
 
 
834,759 
 
 
470,428 
 
 
336,983 
 
 
610 
 
 
1,642,780 
 
 
Adjusted risk-weighted assets
 
3
 
172,787 
 
 
327,734 
 
 
265,147 
 
 
91,852 
 
 
857,520 
 
 
 
 
 
Footnotes
 
20192
 
Net operating income/(expense) before change in expected credit losses and other credit impairment charges
 
1
 
25,565 
 
 
15,164 
 
 
14,869 
 
 
(654)
 
 
54,944 
 
 
– external
 
 
21,252 
 
 
16,094 
 
 
20,314 
 
 
(2,716)
 
 
54,944 
 
 
– inter-segment
 
 
4,313 
 
 
(930)
 
 
(5,445)
 
 
2,062 
 
 
— 
 
 
of which: net interest income/(expense)
 
 
17,423 
 
 
10,957 
 
 
5,223 
 
 
(3,264)
 
 
30,339 
 
 
Change in expected credit losses and other credit impairment (charges)/recoveries
 
 
(1,348)
 
 
(1,162)
 
 
(153)
 
 
36 
 
 
(2,627)
 
 
Net operating income
 
 
24,217 
 
 
14,002 
 
 
14,716 
 
 
(618)
 
 
52,317 
 
 
Total operating expenses
 
 
(15,388)
 
 
(6,832)
 
 
(9,544)
 
 
(755)
 
 
(32,519)
 
 
Operating profit/(loss)
 
 
8,829 
 
 
7,170 
 
 
5,172 
 
 
(1,373)
 
 
19,798 
 
 
Share of profit in associates and joint ventures
 
 
54 
 
 
— 
 
 
— 
 
 
2,297 
 
 
2,351 
 
 
Adjusted profit before tax
 
 
8,883 
 
 
7,170 
 
 
5,172 
 
 
924 
 
 
22,149 
 
 
 
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC’s adjusted profit before tax
 
 
40.1 
 
 
32.4 
 
 
23.4 
 
 
4.2 
 
 
100.0 
 
 
Adjusted cost efficiency ratio
 
 
60.2 
 
 
45.1 
 
 
64.2 
 
 
(115.4)
 
 
59.2 
 
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
455,618 
 
 
353,781 
 
 
252,131 
 
 
1,166 
 
 
1,062,696 
 
 
Interests in associates and joint ventures
 
 
449 
 
 
14 
 
 
16 
 
 
24,941 
 
 
25,420 
 
 
Total external assets
 
 
793,100 
 
 
523,585 
 
 
1,310,772 
 
 
156,354 
 
 
2,783,811 
 
 
Customer accounts
 
 
768,151 
 
 
397,182 
 
 
304,094 
 
 
780 
 
 
1,470,207 
 
 
Adjusted risk-weighted assets
 
3
 
164,567 
 
 
332,543 
 
 
276,804 
 
 
81,979 
 
 
855,893 
 
 
 
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 
A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311 of the Annual Report and Accounts 2020.
Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.
 
 
 

Consolidated income statement
for the year ended 31 December
 
 
 
2020
 
2019
 
 
Footnotes
 
$m
 
$m
 
Net interest income
 
 
27,578 
 
 
30,462 
 
 
– interest income
 
1,2
 
41,756 
 
 
54,695 
 
 
– interest expense
 
3
 
(14,178)
 
 
(24,233)
 
 
Net fee income
 
 
11,874 
 
 
12,023 
 
 
– fee income
 
 
15,051 
 
 
15,439 
 
 
– fee expense
 
 
(3,177)
 
 
(3,416)
 
 
Net income from financial instruments held for trading or managed on a fair value basis
 
 
9,582 
 
 
10,231 
 
 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
 
 
2,081 
 
 
3,478 
 
 
Changes in fair value of designated debt and related derivatives
 
4
 
231 
 
 
90 
 
 
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
 
 
455 
 
 
812 
 
 
Gains less losses from financial investments
 
 
653 
 
 
335 
 
 
Net insurance premium income
 
 
10,093 
 
 
10,636 
 
 
Other operating income
 
 
527 
 
 
2,957 
 
 
Total operating income
 
 
63,074 
 
 
71,024 
 
 
Net insurance claims and benefits paid and movement in liabilities to policyholders
 
 
(12,645)
 
 
(14,926)
 
 
Net operating income before change in expected credit losses and other credit impairment charges
 
5
 
50,429 
 
 
56,098 
 
 
Change in expected credit losses and other credit impairment charges
 
 
(8,817)
 
 
(2,756)
 
 
Net operating income
 
 
41,612 
 
 
53,342 
 
 
Employee compensation and benefits
 
 
(18,076)
 
 
(18,002)
 
 
General and administrative expenses
 
 
(11,115)
 
 
(13,828)
 
 
Depreciation and impairment of property, plant and equipment and right-of-use assets
 
6
 
(2,681)
 
 
(2,100)
 
 
Amortisation and impairment of intangible assets
 
 
(2,519)
 
 
(1,070)
 
 
Goodwill impairment
 
 
(41)
 
 
(7,349)
 
 
Total operating expenses
 
 
(34,432)
 
 
(42,349)
 
 
Operating profit
 
 
7,180 
 
 
10,993 
 
 
Share of profit in associates and joint ventures
 
 
1,597 
 
 
2,354 
 
 
Profit before tax
 
 
8,777 
 
 
13,347 
 
 
Tax expense
 
 
(2,678)
 
 
(4,639)
 
 
Profit for the year
 
 
6,099 
 
 
8,708 
 
 
Attributable to:
 
 
 
 
– ordinary shareholders of the parent company
 
 
3,898 
 
 
5,969 
 
 
– preference shareholders of the parent company
 
 
90 
 
 
90 
 
 
– other equity holders
 
 
1,241 
 
 
1,324 
 
 
– non-controlling interests
 
 
870 
 
 
1,325 
 
 
Profit for the year
 
 
6,099 
 
 
8,708 
 
 
 
 
$
 
$
 
Basic earnings per ordinary share
 
 
0.19 
 
 
0.30 
 
 
Diluted earnings per ordinary share
 
 
0.19 
 
 
0.30 
 
 
 
1 
Interest income includes $35,293m (2019: $45,708m) of interest recognised on financial assets measured at amortised cost and $5,614m (2019: $8,259m) of interest recognised on financial assets measured at fair value through other comprehensive income.
Interest revenue calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised cost or fair value through other comprehensive income.
Interest expense includes $12,426m (2019: $21,922m) of interest on financial instruments, excluding interest on financial liabilities held for trading or designated or otherwise mandatorily measured at fair value.
The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Includes depreciation of the right-of-use assets of $1,029m (2019: $912m). Right-of-use assets have been recognised from 1 January 2019 following the adoption of IFRS 16. Comparatives have not been restated.
 
 

Consolidated statement of comprehensive income
for the year ended 31 December
 
 
 
2020
 
2019
 
 
 
$m
 
$m
 
Profit for the year
 
 
6,099 
 
 
8,708 
 
 
Other comprehensive income/(expense)
 
 
 
 
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
 
 
 
 
Debt instruments at fair value through other comprehensive income
 
 
1,750 
 
 
1,152 
 
 
– fair value gains/(losses)
 
 
2,947 
 
 
1,793 
 
 
– fair value gains transferred to the income statement on disposal
 
 
(668)
 
 
(365)
 
 
– expected credit (recoveries)/losses recognised in the income statement
 
 
48 
 
 
109 
 
 
– income taxes
 
 
(577)
 
 
(385)
 
 
Cash flow hedges
 
 
471 
 
 
206 
 
 
– fair value gains/(losses)
 
 
(157)
 
 
551 
 
 
– fair value losses/(gains) reclassified to the income statement
 
 
769 
 
 
(286)
 
 
– income taxes
 
 
(141)
 
 
(59)
 
 
Share of other comprehensive income/(expense) of associates and joint ventures
 
 
(73)
 
 
21 
 
 
– share for the year
 
 
(73)
 
 
21 
 
 
Exchange differences
 
 
4,855 
 
 
1,044 
 
 
Items that will not be reclassified subsequently to profit or loss:
 
 
 
 
Remeasurement of defined benefit asset/liability
 
 
834 
 
 
13 
 
 
– before income taxes
 
 
1,223 
 
 
(17)
 
 
– income taxes
 
 
(389)
 
 
30 
 
 
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk
 
 
167 
 
 
(2,002)
 
 
– before income taxes
 
 
190 
 
 
(2,639)
 
 
– income taxes
 
 
(23)
 
 
637 
 
 
Equity instruments designated at fair value through other comprehensive income
 
 
212 
 
 
366 
 
 
– fair value gains/(losses)
 
 
212 
 
 
364 
 
 
– income taxes
 
 
— 
 
 
 
 
Effects of hyperinflation
 
 
193 
 
 
217 
 
 
Other comprehensive income/(expense) for the year, net of tax
 
 
8,409 
 
 
1,017 
 
 
Total comprehensive income for the year
 
 
14,508 
 
 
9,725 
 
 
Attributable to:
 
 
 
 
– ordinary shareholders of the parent company
 
 
12,146 
 
 
6,838 
 
 
– preference shareholders of the parent company
 
 
90 
 
 
90 
 
 
– other equity holders
 
 
1,241 
 
 
1,324 
 
 
– non-controlling interests
 
 
1,031 
 
 
1,473 
 
 
Total comprehensive income for the year
 
 
14,508 
 
 
9,725 
 
 
 
 

Consolidated balance sheet
 
 
 
At
 
31 Dec
 
31 Dec
 
 
2020
 
2019
 
 
$m
 
$m
 
Assets
 
 
 
Cash and balances at central banks
 
304,481 
 
 
154,099 
 
 
Items in the course of collection from other banks
 
4,094 
 
 
4,956 
 
 
Hong Kong Government certificates of indebtedness
 
40,420 
 
 
38,380 
 
 
Trading assets
 
231,990 
 
 
254,271 
 
 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
 
45,553 
 
 
43,627 
 
 
Derivatives
 
307,726 
 
 
242,995 
 
 
Loans and advances to banks
 
81,616 
 
 
69,203 
 
 
Loans and advances to customers
 
1,037,987 
 
 
1,036,743 
 
 
Reverse repurchase agreements – non-trading
 
230,628 
 
 
240,862 
 
 
Financial investments
 
490,693 
 
 
443,312 
 
 
Prepayments, accrued income and other assets
 
156,412 
 
 
136,680 
 
 
Current tax assets
 
954 
 
 
755 
 
 
Interests in associates and joint ventures
 
26,684 
 
 
24,474 
 
 
Goodwill and intangible assets
 
20,443 
 
 
20,163 
 
 
Deferred tax assets
 
4,483 
 
 
4,632 
 
 
Total assets
 
2,984,164 
 
 
2,715,152 
 
 
Liabilities and equity
 
 
 
Liabilities
 
 
 
Hong Kong currency notes in circulation
 
40,420 
 
 
38,380 
 
 
Deposits by banks
 
82,080 
 
 
59,022 
 
 
Customer accounts
 
1,642,780 
 
 
1,439,115 
 
 
Repurchase agreements – non-trading
 
111,901 
 
 
140,344 
 
 
Items in the course of transmission to other banks
 
4,343 
 
 
4,817 
 
 
Trading liabilities
 
75,266 
 
 
83,170 
 
 
Financial liabilities designated at fair value
 
157,439 
 
 
164,466 
 
 
Derivatives
 
303,001 
 
 
239,497 
 
 
Debt securities in issue
 
95,492 
 
 
104,555 
 
 
Accruals, deferred income and other liabilities
 
128,624 
 
 
118,156 
 
 
Current tax liabilities
 
690 
 
 
2,150 
 
 
Liabilities under insurance contracts
 
107,191 
 
 
97,439 
 
 
Provisions
 
3,678 
 
 
3,398 
 
 
Deferred tax liabilities
 
4,313 
 
 
3,375 
 
 
Subordinated liabilities
 
21,951 
 
 
24,600 
 
 
Total liabilities
 
2,779,169 
 
 
2,522,484 
 
 
Equity
 
 
 
Called up share capital
 
10,347 
 
 
10,319 
 
 
Share premium account
 
14,277 
 
 
13,959 
 
 
Other equity instruments
 
22,414 
 
 
20,871 
 
 
Other reserves
 
8,833 
 
 
2,127 
 
 
Retained earnings
 
140,572 
 
 
136,679 
 
 
Total shareholders’ equity
 
196,443 
 
 
183,955 
 
 
Non-controlling interests
 
8,552 
 
 
8,713 
 
 
Total equity
 
204,995 
 
 
192,668 
 
 
Total liabilities and equity
 
2,984,164 
 
 
2,715,152 
 
 
 
 
Consolidated statement of cash flows
for the year ended 31 December
 
 
2020
 
2019
 
 
Footnotes
 
$m
 
$m
 
Profit before tax
 
 
8,777 
 
 
13,347 
 
 
Adjustments for non-cash items:
 
 
 
 
Depreciation, amortisation and impairment
 
 
5,241 
 
 
10,519 
 
 
Net gain from investing activities
 
 
(541)
 
 
(399)
 
 
Share of profits in associates and joint ventures
 
 
(1,597)
 
 
(2,354)
 
 
Gain on disposal of subsidiaries, businesses, associates and joint ventures
 
 
— 
 
 
(929)
 
 
Change in expected credit losses gross of recoveries and other credit impairment charges
 
 
9,096 
 
 
3,012 
 
 
Provisions including pensions
 
 
1,164 
 
 
2,423 
 
 
Share-based payment expense
 
 
433 
 
 
478 
 
 
Other non-cash items included in profit before tax
 
 
(906)
 
 
(2,297)
 
 
Elimination of exchange differences
 
1
 
(25,749)
 
 
(3,742)
 
 
Changes in operating assets and liabilities
 
 
 
 
Change in net trading securities and derivatives
 
 
13,150 
 
 
(18,910)
 
 
Change in loans and advances to banks and customers
 
 
(14,131)
 
 
(53,760)
 
 
Change in reverse repurchase agreements – non-trading
 
 
9,950 
 
 
(7,390)
 
 
Change in financial assets designated and otherwise mandatorily measured at fair value
 
 
(1,962)
 
 
(2,308)
 
 
Change in other assets
 
 
(19,610)
 
 
(21,863)
 
 
Change in deposits by banks and customer accounts
 
 
226,723 
 
 
79,163 
 
 
Change in repurchase agreements – non-trading
 
 
(28,443)
 
 
(25,540)
 
 
Change in debt securities in issue
 
 
(9,075)
 
 
19,268 
 
 
Change in financial liabilities designated at fair value
 
 
(6,630)
 
 
20,068 
 
 
Change in other liabilities
 
 
20,323 
 
 
23,124 
 
 
Dividends received from associates
 
 
761 
 
 
633 
 
 
Contributions paid to defined benefit plans
 
 
(495)
 
 
(533)
 
 
Tax paid
 
 
(4,259)
 
 
(2,267)
 
 
Net cash from operating activities
 
 
182,220 
 
 
29,743 
 
 
Purchase of financial investments
 
 
(496,669)
 
 
(445,907)
 
 
Proceeds from the sale and maturity of financial investments
 
 
476,990 
 
 
413,186 
 
 
Net cash flows from the purchase and sale of property, plant and equipment
 
 
(1,446)
 
 
(1,343)
 
 
Net cash flows from purchase/(disposal) of customer and loan portfolios
 
 
1,362 
 
 
1,118 
 
 
Net investment in intangible assets
 
 
(2,064)
 
 
(2,289)
 
 
Net cash flow from acquisition and disposal of subsidiaries, businesses, associates and joint ventures
 
 
(603)
 
 
(83)
 
 
Net cash from investing activities
 
 
(22,430)
 
 
(35,318)
 
 
Issue of ordinary share capital and other equity instruments
 
 
1,497 
 
 
— 
 
 
Cancellation of shares
 
 
— 
 
 
(1,000)
 
 
Net sales/(purchases) of own shares for market-making and investment purposes
 
 
(181)
 
 
141 
 
 
Redemption of preference shares and other equity instruments
 
 
(398)
 
 
— 
 
 
Subordinated loan capital repaid
 
2
 
(3,538)
 
 
(4,210)
 
 
Dividends paid to shareholders of the parent company and non-controlling interests
 
 
(2,023)
 
 
(9,773)
 
 
Net cash from financing activities
 
 
(4,643)
 
 
(14,842)
 
 
Net increase/(decrease) in cash and cash equivalents
 
 
155,147 
 
 
(20,417)
 
 
Cash and cash equivalents at 1 Jan
 
 
293,742 
 
 
312,911 
 
 
Exchange differences in respect of cash and cash equivalents
 
 
19,434 
 
 
1,248 
 
 
Cash and cash equivalents at 31 Dec
 
3
 
468,323 
 
 
293,742 
 
 
Cash and cash equivalents comprise:
 
 
 
 
– cash and balances at central banks
 
 
304,481 
 
 
154,099 
 
 
– items in the course of collection from other banks
 
 
4,094 
 
 
4,956 
 
 
– loans and advances to banks of one month or less
 
 
51,788 
 
 
41,626 
 
 
– reverse repurchase agreements with banks of one month or less
 
 
65,086 
 
 
65,370 
 
 
– treasury bills, other bills and certificates of deposit less than three months
 
 
30,023 
 
 
20,132 
 
 
– cash collateral and net settlement accounts
 
 
17,194 
 
 
12,376 
 
 
– less: items in the course of transmission to other banks
 
 
(4,343)
 
 
(4,817)
 
 
Cash and cash equivalents at 31 Dec
 
3
 
468,323 
 
 
293,742 
 
 
Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.
2 
Subordinated liabilities changes during the year are attributable to repayments of $(3.5)bn (2019: $(4.2)bn) of securities. Non-cash changes during the year included foreign exchange gains/(losses) of $0.5bn (2019: $0.6bn) and fair value gains/(losses) of $1.1bn (2019: $1.4bn).
3 
At 31 December 2020, $41,912m (2019: $35,735m) was not available for use by HSBC, of which $16,935m (2019: $19,353m) related to mandatory deposits at central banks.
 
 
 
Consolidated statement of changes in equity
for the year ended 31 December
 
 
 
 
 
Other reserves
 
 
 
 
 
Called up share capital and share premium
 
Other equity instru-ments
 
Retained
earnings3,4
 
Financial assets
at
FVOCI
reserve
 
Cash
flow
hedging
reserve
 
Foreign
exchange
reserve
 
Merger
and other
reserves4,5
 
Total share-holders’equity
 
Non-controlling interests
 
Total equity
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 1 Jan 2020
 
24,278 
 
 
20,871 
 
 
136,679 
 
 
(108)
 
 
(2)
 
 
(25,133)
 
 
27,370 
 
 
183,955 
 
 
8,713 
 
 
192,668 
 
 
Profit for the year
 
— 
 
 
— 
 
 
5,229 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
5,229 
 
 
870 
 
 
6,099 
 
 
Other comprehensive income (net of tax)
 
— 
 
 
— 
 
 
1,118 
 
 
1,913 
 
 
459 
 
 
4,758 
 
 
— 
 
 
8,248 
 
 
161 
 
 
8,409 
 
 
– debt instruments at fair value through other comprehensive income
 
— 
 
 
— 
 
 
— 
 
 
1,746 
 
 
— 
 
 
— 
 
 
— 
 
 
1,746 
 
 
 
 
1,750 
 
 
– equity instruments designated at fair value through other comprehensive income
 
— 
 
 
— 
 
 
— 
 
 
167 
 
 
— 
 
 
— 
 
 
— 
 
 
167 
 
 
45 
 
 
212 
 
 
– cash flow hedges
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
459 
 
 
— 
 
 
— 
 
 
459 
 
 
12 
 
 
471 
 
 
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk
 
— 
 
 
— 
 
 
167 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
167 
 
 
— 
 
 
167 
 
 
– remeasurement of defined benefit asset/liability
 
— 
 
 
— 
 
 
831 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
831 
 
 
 
 
834 
 
 
– share of other comprehensive income of associates and joint ventures
 
— 
 
 
— 
 
 
(73)
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
(73)
 
 
— 
 
 
(73)
 
 
– effects of hyperinflation
 
— 
 
 
— 
 
 
193 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
193 
 
 
— 
 
 
193 
 
 
– exchange differences
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
4,758 
 
 
— 
 
 
4,758 
 
 
97 
 
 
4,855 
 
 
Total comprehensive income for the year
 
— 
 
 
— 
 
 
6,347 
 
 
1,913 
 
 
459 
 
 
4,758 
 
 
— 
 
 
13,477 
 
 
1,031 
 
 
14,508 
 
 
Shares issued under employee remuneration and share plans
 
346 
 
 
— 
 
 
(339)
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
 
 
— 
 
 
 
 
Capital securities issued7
 
— 
 
 
1,500 
 
 
(3)
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
1,497 
 
 
— 
 
 
1,497 
 
 
Dividends to shareholders
 
— 
 
 
— 
 
 
(1,331)
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
(1,331)
 
 
(692)
 
 
(2,023)
 
 
Redemption of securities2
 
— 
 
 
— 
 
 
(1,450)
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
(1,450)
 
 
— 
 
 
(1,450)
 
 
Transfers6
 
— 
 
 
— 
 
 
435 
 
 
— 
 
 
— 
 
 
— 
 
 
(435)
 
 
— 
 
 
— 
 
 
— 
 
 
Cost of share-based payment arrangements
 
— 
 
 
— 
 
 
434 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
434 
 
 
— 
 
 
434 
 
 
Other movements
 
— 
 
 
43 
 
 
(200)
 
 
11 
 
 
— 
 
 
— 
 
 
— 
 
 
(146)
 
 
(500)
 
 
(646)
 
 
At 31 Dec 2020
 
24,624 
 
 
22,414 
 
 
140,572 
 
 
1,816 
 
 
457 
 
 
(20,375)
 
 
26,935 
 
 
196,443 
 
 
8,552 
 
 
204,995 
 
 
 
 
Consolidated statement of changes in equity (continued)
 
 
 
 
Other reserves
 
 
 
 
Called up share capital and share premium
 
Other equity instru-ments
 
Retained
earnings2,3
 
Financial
assets at
FVOCI
reserve
 
Cash flow
hedging
reserve
 
Foreign
exchange
reserve
 
Merger
and
other reserves3,4
 
Total share-holders’equity
 
Non- controlling interests
 
Total equity
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 1 Jan 2019
 
23,789 
 
 
22,367 
 
 
138,191 
 
 
(1,532)
 
 
(206)
 
 
(26,133)
 
 
29,777 
 
 
186,253 
 
 
7,996 
 
 
194,249 
 
 
Profit for the year
 
— 
 
 
— 
 
 
7,383 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
7,383 
 
 
1,325 
 
 
8,708 
 
 
Other comprehensive income (net of tax)
 
— 
 
 
— 
 
 
(1,759)
 
 
1,424 
 
 
204 
 
 
1,000 
 
 
— 
 
 
869 
 
 
148 
 
 
1,017 
 
 
– debt instruments at fair value through other comprehensive income
 
— 
 
 
— 
 
 
— 
 
 
1,146 
 
 
— 
 
 
— 
 
 
— 
 
 
1,146 
 
 
 
 
1,152 
 
 
– equity instruments designated at fair value through other comprehensive income
 
— 
 
 
— 
 
 
— 
 
 
278 
 
 
— 
 
 
— 
 
 
— 
 
 
278 
 
 
88 
 
 
366 
 
 
– cash flow hedges
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
204 
 
 
— 
 
 
— 
 
 
204 
 
 
 
 
206 
 
 
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk
 
— 
 
 
— 
 
 
(2,002)
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
(2,002)
 
 
— 
 
 
(2,002)
 
 
– remeasurement of defined benefit asset/liability
 
— 
 
 
— 
 
 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
 
 
 
 
13 
 
 
– share of other comprehensive income of associates and joint ventures
 
— 
 
 
— 
 
 
21 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
21 
 
 
— 
 
 
21 
 
 
– effects of hyperinflation
 
— 
 
 
— 
 
 
217 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
217 
 
 
— 
 
 
217 
 
 
– exchange differences
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
— 
 
 
1,000 
 
 
— 
 
 
1,000 
 
 
44 
 
 
1,044 
 
 
Total comprehensive income for the year
 
— 
 
 
— 
 
 
5,624 
 
 
1,424 
 
 
204 
 
 
1,000 
 
 
— 
 
 
8,252 
 
 
1,473 
 
 
9,725 
 
 
Shares issued under employee remuneration and share plans
 
557 
 
 
— 
 
 
(495)
 
 
— 
 
 
—