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 August
 
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-   ).
 
 
 
 6 August 2018
 
 
 
HSBC HOLDINGS PLC
 
 
 
2018 INTERIM RESULTS - HIGHLIGHTS
 
 
 
 
 
 
Financial Performance
 
●    Reported revenue of $27.3bn was 4% higher, with growth in all of our global businesses. This was mainly driven by higher deposit margins and balance growth in RBWM, and GLCM growth within CMB, mainly in Hong Kong, as well as the favourable effects of currency translation. These increases were partly offset by lower revenue in Corporate Centre. Adjusted revenue of $27.5bn was 2% higher, excluding the effects of currency translation and movements in significant items.
 
●    Reported operating expenses of $17.5bn were 7% higher, primarily reflecting investments to grow the business, mainly in RBWM and GB&M, and continued investment in digital across all our global businesses. Adjusted operating expenses of $16.4bn were 8% higher, excluding the effects of currency translation and movements in significant items.
 
●    Reported profit before tax of $10.7bn was 5% higher, reflecting a net favourable movement in significant items and favourable currency translation. Adjusted profit before tax of $12.1bn was 2% lower, as revenue growth and lower expected credit losses were partly offset by higher operating expenses.
 
●    Lending growth in 1H18 was $43bn, increasing net loans and advances to customers by 5% since 1 January 2018.
 
●    Strong capital base with a common equity tier 1 ('CET1') ratio of 14.2% and a CRD IV leverage ratio of 5.4%.
 
 
 
 
John Flint, Group Chief Executive, said:
 
"We are taking firm steps to deliver the strategy we outlined in June. Today's results, which are in line with our expectations, show strong revenue growth in our global businesses. This is creating room to invest while maintaining our commitment to full-year positive adjusted jaws. We are investing to win new customers, increase our market share, and lay the foundations for consistent growth in profits and returns."
 
 
 
 
Financial highlights and key ratios
 
 
 
 
 
 
 
Half-year to 30 Jun
 
 
 
2018
 
2017
 
Change
 
 
Footnotes
 
$m
 
$m
 
%
 
Reported profit before tax
 
 
10,712
 
10,243
 
4.58
 
Adjusted profit before tax
 
1
 
12,139
 
12,364
 
(1.82)
 
 
 
%
 
%
 
 
Return on average ordinary shareholders' equity (annualised)
 
 
8.7
 
8.8
 
 
Adjusted jaws
 
2
 
(5.6)
 
 
 
 
For footnotes, see page 7.
 
We use adjusted performance to understand the underlying trends in the business. The main differences between reported and
adjusted are foreign currency translation and significant items.
 
 
 
 
Capital and balance sheet3
 
 
 
 
 
 
 
At
 
 
 
30 Jun
 
31 Dec
 
Change
 
 
 
2018
 
2017
 
 
 
Footnote
 
%
 
%
 
 
Common equity tier 1 ratio
 
4
 
14.2
 
14.5
 
 
Leverage ratio
 
4
 
5.4
 
5.6
 
 
 
 
$m
 
$m
 
$m
 
Loans and advances to customers
 
 
973,443
 
962,964
 
10,479
 
Customer accounts
 
 
1,356,307
 
1,364,462
 
(8,155)
 
Risk-weighted assets
 
4
 
865,467
 
871,337
 
(5,870)
 
 
For footnotes, see page 7.
 
 
 
 
 
 
Highlights
 
 
 
 
 
Half-year to 30 Jun
 
 
 
2018
 
2017
 
 
Footnote
 
$m
 
$m
 
Reported
 
 
 
 
Revenue
 
5
 
27,287
 
26,166
 
Change in expected credit losses and other credit impairment charges
 
 
(407)
 
N/A
 
Loan impairment charges and other credit risk provisions
 
 
N/A
 
(663)
 
Operating expenses
 
 
(17,549)
 
(16,443)
 
Profit before tax
 
 
10,712
 
10,243
 
Adjusted
 
 
 
 
Revenue
 
5
 
27,535
 
26,957
 
Change in expected credit losses and other credit impairment charges
 
 
 
(407)
 
N/A
 
Loan impairment charges and other credit risk provisions
 
 
N/A
 
(657)
 
Operating expenses
 
 
(16,370)
 
(15,195
 
Profit before tax
 
 
12,139
 
12,364
 
 
 
 
 
Significant items affecting adjusted performance
 
 
 
 
Revenue
 
 
 
 
Customer redress programmes
 
 
(54)
 
(299)
 
Disposals, acquisitions and investment in new businesses
 
 
(145)
 
348
 
Fair value movements on financial instruments
 
 
(152)
 
(245)
 
Operating expenses
 
 
 
 
Costs to achieve
 
 
-
 
(1,670)
 
Costs of structural reform
 
 
(211)
 
(180)
 
Restructuring and other related costs
 
 
(24)
 
-
 
Settlements and provisions in connection with legal and regulatory matters
 
 
(841)
 
322
 
 
For footnotes, see page 7.
 
 
 
 
Statement by Mark E Tucker, Group Chairman
 
 
At the start of the year, I spoke of the Board's focus on enhancing HSBC's performance and reputation. The Group has made a good start in both regards.
 
The strength of our global businesses underlines the potential of the Group to make further revenue and market share gains, and provides room to invest in revenue growth, resilience, and technology to support our customers. These are all necessary to further strengthen HSBC's reputation among our many stakeholders.
 
The strategy that John Flint, the Group Chief Executive, unveiled in June is designed to unlock this potential. We have created a strategy that builds on past achievements to improve the Group's competitiveness and increase value for shareholders. It focuses on areas where HSBC is already strong, but which also hold the greatest capacity for revenue growth and value creation. This demonstrates the many competitive advantages the Group already enjoys.
 
Investing in the future of the business is a key pillar of the bank's strategy. No business can hope to thrive unless it anticipates and adapts to the changes around it. Technological change, in particular, will only accelerate in the coming years. Being able to invest thoughtfully and at scale at this point in the cycle will differentiate future winners from the rest of the industry.
 
This edge was evident in the first half of 2018. Our award-winning PayMe app acquired its millionth user and is now an established part of the daily lives of people and business in Hong Kong. In May, HSBC executed the first ever live trade finance transaction using scalable blockchain technology, making an important breakthrough in an area previously rich in potential but low on delivery. In July, we announced an expansion of our use of Google Cloud technology, increasing access to some of the leading machine learning and data analytics technology in the world. These are just a few examples of how we are marrying emerging technology with the needs and expectations of our customers.
 
We are also investing to keep our customers safe. Both the Board and management remain unequivocally committed to safeguarding our clients and delivering industry-leading financial crime standards. This is a permanent priority for everyone at HSBC.
 
Our global businesses continue to benefit from the economic growth trends we identified at our 2017 Annual Results presentation. The diversity of the Group underpins our ability to manage the external environment effectively. We remain cautiously optimistic for global growth in the remainder of the year. In particular, the fundamentals of Asia remain strong despite rising concerns around the future of international trade and protectionism.
 
The Board has appointed Jonathan Symonds as the Deputy Group Chairman of HSBC Holdings plc. Jon already serves as the senior independent director. He takes up this new role today and steps down as Chairman of HSBC Bank plc. I am delighted that Jon has agreed to support me in this new capacity.
 
I am very grateful to all our people for the excellent work that they do in service of the bank, our customers and each other. Our results for the first half demonstrate that the Group has strong foundations. I have every confidence that we will build on them further.
 
 
 
 
 
 
Review by John Flint, Group Chief Executive
 
 
In June this year, I announced eight strategic priorities for the bank between now and 2020. These have two aims - to get HSBC back to growth and to create value.
 
We will seek to achieve these aims by increasing returns from the Group's areas of strength, particularly in Asia and across our network; turning around low-return businesses of high strategic importance, particularly in the United States; investing in building a bank for the future with the customer at its centre; and making it easier for our colleagues to do their jobs.
 
Our first-half performance both reflected these intentions and met our expectations. We grew reported and adjusted revenue in our four global businesses relative to the same period last year, creating the room to invest at the start of this strategy phase while remaining committed to achieving full-year positive adjusted jaws.
 
Our investment in the first half included hiring more front-line staff in our strongest businesses and expanding our digital capabilities in core markets, both of which will improve the service we offer customers. Our first-half reported and adjusted operating expenses rose as a consequence, which contributed to a drop in adjusted profit before tax. We continued to benefit from a low credit-loss environment in the first half.
 
Retail Banking and Wealth Management, and Commercial Banking were again our strongest performing businesses. Both continued to gain from a positive interest rate environment, and used the benefits of past investment to grow lending and deposit balances, particularly in Asia and the UK.
 
Strong adjusted revenue growth in Commercial Banking was supported by our leading transaction banking capabilities. Global Liquidity and Cash Management had another excellent six months, and Global Trade and Receivables Finance made further progress in its core markets.
 
Adjusted revenue growth in Retail Banking and Wealth Management was underpinned by higher retail deposit balances and strong Wealth Management product sales in Hong Kong. We also grew our share of the UK mortgage market.
 
Global Banking and Markets had a steady first half. Strong performances from Global Liquidity and Cash Management, Securities Services and Foreign Exchange more than covered the impact of lower client activity in Rates and Credit.
 
Global Private Banking enjoyed a successful six months, growing adjusted revenue and attracting net new money through collaboration with our other global businesses.
 
HSBC UK Bank plc - our UK ring-fenced bank - commenced business on 1 July, six months ahead of the legal deadline. Ringfencing presents a major opportunity to get closer to our 14.5 million personal and business customers in the UK.
 
HSBC is a strong business with a number of clear commercial advantages. In particular, we are a leading international bank with a network that gives us unparalleled access to high-growth markets, particularly in Asia and the Middle East. Our aim for this next strategy phase is to build on these strengths to grow profits consistently, leading to the creation of value for shareholders. With a period of significant restructuring now behind us, and with monetary policy in the US-dollar bloc normalising, it is now time to realise the potential of the Group.
 
 
 
 
 
 
 
 
Financial summary
 
 
 
 
 
Half-year to
 
 
 
30 Jun
 
30 Jun
 
31 Dec
 
 
 
2018
 
2017
 
2017
 
 
Footnote
 
$m
 
$m
 
$m
 
For the period
 
 
 
 
 
Profit before tax
 
 
10,712
 
10,243
 
6,924
 
Profit attributable to:
 
 
 
 
 
-  ordinary shareholders of the parent company
 
 
7,173
 
6,999
 
2,684
 
Dividends declared on ordinary shares
 
 
6,204
 
6,174
 
4,019
 
At the period end
 
 
 
 
 
Total shareholders' equity
 
 
183,607
 
188,396
 
190,250
 
Total regulatory capital
 
 
176,610
 
183,892
 
182,383
 
Customer accounts
 
 
1,356,307
 
1,311,958
 
1,364,462
 
Total assets
 
 
2,607,314
 
2,492,443
 
2,521,771
 
Risk-weighted assets
 
 
865,467
 
876,118
 
871,337
 
Per ordinary share
 
 
$
 
$
 
$
 
Basic earnings
 
 
0.36
 
0.35
 
0.13
 
Dividends
 
6
 
0.31
 
0.31
 
0.20
 
Net asset value
 
 
8.10
 
8.30
 
8.35
 
Share information
 
 
 
 
 
Number of $0.50 ordinary shares in issue (millions)
 
 
19,963
 
20,376
 
20,321
 
 
For footnote, see page 7.
 
Distribution of results by global business
 
 
 
Adjusted profit/(loss) before tax
 
 
 
 
 
 
 
 
Half-year to
 
 
30 Jun 2018
 
30 Jun 2017
 
31 Dec 2017
 
 
$m
 
%
 
$m
 
%
 
$m
 
%
 
Retail Banking and Wealth Management
 
3,630
 
29.9
 
3,397
 
 
3,137
 
34.4
 
Commercial Banking
 
4,111
 
33.9
 
3,564
 
 
3,373
 
37.0
 
Global Banking and Markets
 
3,568
 
29.4
 
3,543
 
 
2,387
 
26.2
 
Global Private Banking
 
190
 
1.6
 
144
 
 
152
 
1.7
 
Corporate Centre
 
640
 
5.2
 
1,716
 
 
76
 
0.7
 
Profit before tax
 
12,139
 
100.0
 
12,364
 
 
9,125
 
100.0
 
 
 
Distribution of results by geographical region
 
 
 
Reported profit/(loss) before tax
 
 
 
 
 
 
 
 
Half-year to
 
 
30 Jun 2018
 
30 Jun 2017
 
31 Dec 2017
 
 
$m
 
%
 
$m
 
%
 
$m
 
%
 
Europe
 
110
 
1.0
 
572
 
5.6
 
(2,436)
 
(35.3)
 
Asia
 
9,380
 
87.6
 
7,630
 
74.5
 
7,699
 
111.2
 
Middle East and North Africa
 
836
 
7.8
 
804
 
7.8
 
697
 
10.1
 
North America
 
42
 
0.4
 
953
 
9.3
 
648
 
9.4
 
Latin America
 
344
 
3.2
 
284
 
2.8
 
316
 
4.6
 
Profit before tax
 
10,712
 
100.0
 
10,243
 
100.0
 
6,924
 
100.0
 
 
 
 
HSBC adjusted profit before tax and balance sheet data
 
 
 
Half-year to 30 Jun 2018
 
 
 
RetailBanking andWealthManagement
 
CommercialBanking
 
GlobalBanking andMarkets
 
GlobalPrivateBanking
 
Corporate Centre
 
Total
 
 
Footnote
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net operating income/(expense) before change in expected credit losses and other credit impairment charges 
7
 
11,065
 
7,439
 
8,265
 
929
 
(163)
 
27,535
 
-  external
 
 
9,092
 
7,319
 
9,498
 
800
 
826
 
27,535
 
-  inter-segment
 
 
1,973
 
120
 
(1,233)
 
129
 
(989
 
-
 
of which: net interest income/(expense)
 
 
7,661
 
5,189
 
2,489
 
446
 
(731)
 
15,054
 
Change in expected credit losses and other credit impairment charges 
 
(543)
 
(55)
 
97
 
4
 
90
 
(407)
 
Net operating income
 
 
10,522
 
7,384
 
8,362
 
933
 
(73)
 
27,128
 
Total operating expenses
 
 
(6,909)
 
(3,273)
 
(4,794)
 
(743)
 
(651)
 
(16,370)
 
Operating profit/(loss)
 
 
3,613
 
4,111
 
3,568
 
190
 
(724)
 
10,758
 
Share of profit/(loss) in associates and joint ventures
 
 
17
 
-
 
-
 
-
 
1,364
 
1,381
 
Adjusted profit before tax
 
 
3,630
 
4,111
 
3,568
 
190
 
640
 
12,139
 
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
 
 
29.9
 
33.9
 
29.4
 
1.6
 
5.2
 
100.0
 
Adjusted cost efficiency ratio
 
 
62.4
 
44.0
 
58.0
 
80.0
 
(399.4)
 
59.5
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
351,114
 
329,300
 
250,058
 
40,902
 
2,069
 
973,443
 
Interests in associates and joint ventures
 
 
391
 
-
 
-
 
-
 
22,181
 
22,572
 
Total external assets
 
 
474,507
 
363,939
 
1,054,181
 
46,133
 
668,554
 
2,607,314
 
Customer accounts
 
 
635,598
 
355,650
 
291,711
 
63,593
 
9,755
 
1,356,307
 
Adjusted risk-weighted assets
 
 
124,059
 
315,064
 
284,553
 
16,984
 
122,158
 
862,818
 
 
 
 
 
Half-year to 30 Jun 2017
 
Net operating income before loan impairment charges and other credit risk provisions
 
7
 
10,283
 
 
6,622
 
 
8,192
 
 
874
 
 
986
 
 
26,957
 
 
-  external
 
 
8,825
 
 
6,679
 
 
8,727
 
 
733
 
 
1,993
 
 
26,957
 
 
-  inter-segment
 
 
1,458
 
 
(57
 
)
 
(535
 
)
 
141
 
 
(1,007
 
)
 
-
 
 
of which: net interest income
 
 
6,920
 
 
4,423
 
 
2,307
 
 
407
 
 
103
 
 
14,160
 
 
Loan impairment (charges)/recoveries and othercredit risk provisions
 
 
(565
 
)
 
(109
 
)
 
(40
 
)
 
(1
 
)
 
58
 
 
(657
 
)
 
Net operating income
 
 
9,718
 
 
6,513
 
 
8,152
 
 
873
 
 
1,044
 
 
26,300
 
 
Total operating expenses
 
 
(6,311
 
)
 
(2,949
 
)
 
(4,609
 
)
 
(729
 
)
 
(597
 
)
 
(15,195
 
)
 
Operating profit
 
 
3,407
 
 
3,564
 
 
3,543
 
 
144
 
 
447
 
 
11,105
 
 
Share of profit/(loss) in associates and joint ventures
 
 
(10
 
)
 
-
 
 
-
 
 
-
 
 
1,269
 
 
1,259
 
 
Adjusted profit before tax
 
 
3,397
 
 
3,564
 
 
3,543
 
 
144
 
 
1,716
 
 
12,364
 
 
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
 
 
27.5
 
 
28.8
 
 
28.7
 
 
1.2
 
 
13.8
 
 
100.0
 
 
Adjusted cost efficiency ratio
 
 
61.4
 
 
44.5
 
 
56.3
 
 
83.4
 
 
60.5
 
 
56.4
 
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
324,604
 
 
304,204
 
 
244,144
 
 
38,436
 
 
7,753
 
 
919,141
 
 
Interests in associates and joint ventures
 
 
378
 
 
-
 
 
-
 
 
-
 
 
20,929
 
 
21,307
 
 
Total external assets
 
 
440,751
 
 
331,670
 
 
1,030,547
 
 
44,769
 
 
648,313
 
 
2,496,050
 
 
Customer accounts
 
 
618,263
 
 
341,681
 
 
268,447
 
 
68,214
 
 
14,778
 
 
1,311,383
 
 
Adjusted risk-weighted assets
 
 
115,676
 
 
287,965
 
 
305,511
 
 
16,455
 
 
142,497
 
 
868,104
 
 
 
For footnote, see page 7.
 
HSBC adjusted profit before tax and balance sheet data (continued)
 
 
 
 
Half-year to 31 Dec 2017
 
 
 
RetailBanking andWealthManagement
 
CommercialBanking
 
GlobalBanking andMarkets
 
GlobalPrivateBanking
 
Corporate Centre
 
Total
 
 
Footnote
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net operating income/(expense) before loan impairment charges and other credit risk provisions
 
7
 
10,280
 
6,883
 
7,386
 
866
 
323
 
25,738
 
-  external
 
 
8,487
 
6,978
 
8,126
 
734
 
1,413
 
25,738
 
-  inter-segment
 
 
1,793
 
(95)
 
(740)
 
132
 
(1,090)
 
-
 
of which: net interest income/(expense)
 
 
7,249
 
4,814
 
2,655
 
428
 
(583)
 
14,563
 
Loan impairment (charges)/recoveries and other credit risk provisions
 
 
(415)
 
(382)
 
(432)
 
(16)
 
132
 
(1,113)
 
Net operating income
 
 
9,865
 
6,501
 
6,954
 
850
 
455
 
24,625
 
Total operating expenses
 
 
(6,755
 
(3,128
 
(4,567
 
(698
 
(1,582)
 
(16,730)
 
Operating profit/(loss)
 
 
3,110
 
3,373
 
2,387
 
152
 
(1,127)
 
7,895
 
Share of profit in associates and joint ventures
 
 
27
 
-
 
-
 
-
 
1,203
 
1,230
 
Adjusted profit before tax
 
 
3,137
 
3,373
 
2,387
 
152
 
76
 
9,125
 
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
 
 
34.4
 
37.0
 
26.2
 
1.7
 
0.7
 
100.0
 
Adjusted cost efficiency ratio
 
 
65.7
 
45.4
 
61.8
 
80.6
 
489.8
 
65.0
 
Adjusted balance sheet data
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Loans and advances to customers (net)
 
 
338,511
 
310,087
 
247,805
 
39,763
 
7,379
 
943,545
 
Interests in associates and joint ventures
 
 
363
 
-
 
-
 
-
 
22,121
 
22,484
 
Total external assets
 
 
458,384
 
341,091
 
962,267
 
45,330
 
670,727
 
2,477,799
 
Customer accounts
 
 
628,854
 
356,542
 
277,751
 
65,446
 
11,070
 
1,339,663
 
Adjusted risk-weighted assets
 
 
119,548
 
294,714
 
295,670
 
15,893
 
129,133
 
854,958
 
 
 
 
 
 
 
Footnotes to pages 1 to 7
 
1
 
Adjusted performance is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons.
 
2
 
Includes UK bank levy.
 
 
3
 
The 2017 comparatives do not reflect the adoption of IFRS 9. As such these are not directly comparable to the 2018 disclosure which is prepared on an IFRS 9 basis.
 
4
 
Calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation. Figures at 31 December 2017 are reported under IAS 39.
 
5
 
Net operating income before change in expected credit losses and other credit impairment charges/Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.
 
6
 
The dividends per ordinary share of $0.31 shown in the accounts comprise dividends declared during the first half of 2018. This represents the fourth interim dividend for 2017 and the first interim dividend for 2018.
 
7
 
Net operating income before change in expected credit losses and other credit impairment charges/Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.
 
 
 
 
 
 
 
Consolidated income statement
 
 
Half-year to
 
 
30 Jun
 
30 Jun
 
31 Dec
 
 
2018
 
2017
 
2017
 
 
$m
 
$m
 
$m
 
Net interest income
 
15,100
 
13,777
 
14,399
 
-  interest income
 
23,422
 
19,727
 
21,268
 
-  interest expense
 
(8,322)
 
(5,950)
 
(6,869)
 
Net fee income
 
6,767
 
6,491
 
6,320
 
-  fee income
 
8,469
 
7,906
 
7,947
 
-  fee expense
 
(1,702)
 
(1,415)
 
(1,627)
 
Net income from financial instruments held for trading or managed on a fair value basis10, 11
 
4,883
 
4,232
 
4,194
 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss10
 
(222)
 
1,499
 
1,337
 
Changes in fair value of long-term debt and related derivatives11
 
(126)
 
204
 
(49)
 
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss10
 
345
 
N/A
 
N/A
 
Gains less losses from financial investments
 
124
 
691
 
459
 
Dividend income
 
41
 
49
 
57
 
Net insurance premium income
 
5,776
 
4,811
 
4,968
 
Other operating income/(expense)
 
359
 
526
 
(189)
 
Total operating income
 
33,047
 
32,280
 
31,496
 
Net insurance claims and benefits paid and movement in liabilities to policyholders
 
(5,760)
 
(6,114)
 
(6,217)
 
Net operating income before change in expected credit losses and other credit impairment charges
 
27,287
 
26,166
 
25,279
 
Change in expected credit losses and other credit impairment charges
 
(407
 
N/A
 
N/A
 
Loan impairment charges and other credit risk provisions
 
N/A
 
(663)
 
(1,106)
 
Net operating income
 
26,880
 
25,503
 
24,173
 
Employee compensation and benefits
 
(8,836)
 
(8,680)
 
(8,635)
 
General and administrative expenses
 
(7,767)
 
(6,900)
 
(8,807)
 
Depreciation and impairment of property, plant and equipment
 
(568)
 
(567)
 
(599)
 
Amortisation and impairment of intangible assets and goodwill
 
(378)
 
(296)
 
(400)
 
Total operating expenses
 
(17,549)
 
(16,443)
 
(18,441)
 
Operating profit
 
9,331
 
9,060
 
5,732
 
Share of profit in associates and joint ventures
 
1,381
 
1,183
 
1,192
 
Profit before tax
 
10,712
 
10,243
 
6,924
 
Tax expense
 
(2,296)
 
(2,195)
 
(3,093)
 
Profit for the period
 
8,416
 
8,048
 
3,831
 
Attributable to:
 
 
 
 
-  ordinary shareholders of the parent company
 
7,173
 
6,999
 
2,684
 
-  preference shareholders of the parent company
 
45
 
45
 
45
 
-  other equity holders
 
530
 
466
 
559
 
-  non-controlling interests
 
668
 
538
 
543
 
Profit for the period
 
8,416
 
8,048
 
3,831
 
 
$
 
$
 
$
 
Basic earnings per ordinary share
 
0.36
 
0.35
 
0.13
 
Diluted earnings per ordinary share
 
0.36
 
0.35
 
0.13
 
 
For footnotes, see page 14.
 
 
 
 
 
 
 
Consolidated statement of comprehensive income
 
 
Half-year to
 
 
30 Jun
 
30 Jun
 
31 Dec
 
 
2018
 
2017
 
2017
 
 
$m
 
$m
 
$m
 
Profit for the period
 
8,416
 
8,048
 
3,831
 
Other comprehensive income/(expense)
 
 
 
 
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
 
 
 
 
Available-for-sale investments
 
N/A
 
484
 
(338)
 
-  fair value gains/(losses)
 
N/A
 
1,447
 
(220
 
-  fair value gains reclassified to the income statement
 
N/A
 
(848)
 
(185)
 
-  amounts reclassified to the income statement in respect of impairment losses
 
N/A
 
20
 
73
 
-  income taxes
 
N/A
 
(135
 
(6)
 
Debt instruments at fair value through other comprehensive income
 
(265
 
N/A
 
N/A
 
-  fair value losses
 
(658
 
N/A
 
N/A
 
-  fair value gains transferred to the income statement on disposal
 
329
 
N/A
 
N/A
 
-  expected credit losses recognised in income statement
 
(91
 
N/A
 
N/A
 
-  income taxes
 
155
 
N/A
 
N/A
 
Cash flow hedges
 
(68)
 
24
 
(216)
 
-  fair value losses
 
(276)
 
(881)
 
(165)
 
-  fair value gains/(losses) reclassified to the income statement
 
184
 
894
 
(61)
 
-  income taxes
 
24
 
11
 
10
 
Share of other comprehensive expense of associates and joint ventures
 
(57)
 
(6)
 
(37)
 
-  share for the period
 
(57)
 
(6
 
(37)
 
Exchange differences
 
(4,252)
 
5,269
 
3,808
 
-  other exchange differences
 
(4,252)
 
5,270
 
3,669
 
-  income tax attributable to exchange differences
 
-
 
(1)
 
139
 
Items that will not be reclassified subsequently to profit or loss:
 
 
 
 
Remeasurement of defined benefit asset/liability
 
297
 
1,708
 
711
 
-  before income taxes1
 
421
 
2,253
 
1,187
 
-  income taxes
 
(124)
 
(545)
 
(476)
 
Changes in fair value of financial liabilities designated at fair value due to movement in own credit risk 
1,345
 
(1,156)
 
(868)
 
-  before income taxes
 
1,653
 
(1,398)
 
(1,011)
 
-  income taxes
 
(308)
 
242
 
143
 
Equity instruments designated at fair value through other comprehensive income
 
(30)
 
N/A
 
N/A
 
-  fair value losses
 
(26)
 
N/A
 
N/A
 
-  income taxes
 
(4)
 
N/A
 
N/A
 
Other comprehensive income/(expense) for the period, net of tax
 
(3,030)
 
6,323
 
3,060
 
Total comprehensive income for the period
 
5,386
 
14,371
 
6,891
 
Attributable to:
 
 
 
 
-  ordinary shareholders of the parent company
 
4,229
 
13,241
 
5,673
 
-  preference shareholders of the parent company
 
45
 
45
 
45
 
-  other equity holders
 
530
 
466
 
559
 
-  non-controlling interests
 
582
 
619
 
614
 
Total comprehensive income for the period
 
5,386
 
14,371
 
6,891
 
 
For footnote, see page 14.
 
 
 
 
 
 
 
Consolidated balance sheet
 
 
At
 
 
30 Jun
 
1 Jan
 
31 Dec
 
 
2018
 
20189
 
2017
 
 
$m
 
$m
 
$m
 
Assets
 
 
 
 
Cash and balances at central banks
 
189,842
 
 
180,624
 
Items in the course of collection from other banks
 
8,081
 
 
6,628
 
Hong Kong Government certificates of indebtedness
 
35,754
 
 
34,186
 
Trading assets
 
247,892
 
 
287,995
 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
 
40,678
 
 
N/A
 
Financial assets designated at fair value
 
N/A
 
N/A
 
29,464
 
Derivatives
 
227,972
 
 
219,818
 
Loans and advances to banks
 
83,924
 
 
90,393
 
Loans and advances to customers
 
973,443
 
 
962,964
 
Reverse repurchase agreements - non-trading
 
208,104
 
 
201,553
 
Financial investments
 
386,436
 
 
389,076
 
Prepayments, accrued income and other assets
 
153,048
 
 
67,191
 
Current tax assets
 
1,106
 
 
1,006
 
Interests in associates and joint ventures
 
22,572
 
 
22,744
 
Goodwill and intangible assets
 
23,722
 
 
23,453
 
Deferred tax assets
 
4,740
 
 
4,676
 
Total assets
 
2,607,314
 
 
2,521,771
 
Liabilities and equity
 
 
 
 
Liabilities
 
 
 
 
Hong Kong currency notes in circulation
 
35,754
 
 
34,186
 
Deposits by banks
 
64,792
 
 
69,922
 
Customer accounts
 
1,356,307
 
 
1,364,462
 
Repurchase agreements - non-trading
 
158,295
 
 
130,002
 
Items in the course of transmission to other banks
 
8,086
 
 
6,850
 
Trading liabilities2, 3
 
83,845
 
 
184,361
 
Financial liabilities designated at fair value
 
151,985
 
 
94,429
 
Derivatives
 
222,961
 
 
216,821
 
Debt securities in issue
 
81,708
 
 
64,546
 
Accruals, deferred income and other liabilities
 
134,774
 
 
45,907
 
Current tax liabilities
 
1,609
 
 
928
 
Liabilities under insurance contracts
 
86,918
 
 
85,667
 
Provisions
 
4,199
 
 
4,011
 
Deferred tax liabilities
 
2,183
 
 
1,982
 
Subordinated liabilities
 
22,604
 
 
19,826
 
Total liabilities
 
2,416,020
 
 
2,323,900
 
Equity
 
 
 
 
Called up share capital
 
10,159
 
 
10,160
 
Share premium account
 
9,774
 
 
10,177
 
Other equity instruments
 
20,573
 
 
22,250
 
Other reserves
 
2,193
 
 
7,664
 
Retained earnings
 
140,908
 
 
139,999
 
Total shareholders' equity
 
183,607
 
 
190,250
 
Non-controlling interests
 
7,687
 
 
7,621
 
Total equity
 
191,294
 
 
197,871
 
Total liabilities and equity
 
2,607,314
 
 
2,521,771
 
 
For footnotes, see page 14.
 
 
 
 
 
Consolidated statement of cash flows
 
 
Half-year to
 
 
30 Jun
 
30 Jun
 
31 Dec
 
 
2018
 
2017
 
2017
 
 
$m
 
$m
 
$m
 
Profit before tax
 
10,712
 
10,243
 
6,924
 
Adjustments for non-cash items:
 
 
 
 
Depreciation and amortisation
 
946
 
863
 
999
 
Net gain from investing activities
 
85
 
(764)
 
(388)
 
Share of profit in associates and joint ventures
 
(1,381)
 
(1,183)
 
(1,192)
 
Loss on disposal of associates, joint ventures, subsidiaries and businesses
 
-
 
(79)
 
-
 
Change in expected credit losses gross of recoveries and other credit impairment charges
 
680
 
N/A
 
N/A
 
Loan impairment losses gross of recoveries and other credit risk provisions
 
N/A
 
1,018
 
1,585
 
Provisions including pensions
 
1,244
 
186
 
731
 
Share-based payment expense
 
274
 
267
 
233
 
Other non-cash items included in profit before tax
 
(899)
 
(157)
 
(224)
 
Change in operating assets 
(89,986)
 
(115,324)
 
(53,715)
 
Change in operating liabilities 
84,594
 
109,828
 
54,080
 
Elimination of exchange differences4
 
(11,816)
 
(16,208)
 
(5,081)
 
Dividends received from associates 
126
 
589
 
151
 
Contributions paid to defined benefit plans 
(103)
 
(351)
 
(334
 
Tax paid
 
(1,116)
 
(810)
 
(2,365
 
Net cash from operating activities
 
(6,640
 
(11,882)
 
1,404
 
Purchase of financial investments
 
(227,256
 
(175,346)
 
(181,918
 
Proceeds from the sale and maturity of financial investments
 
225,295
 
233,711
 
184,641
 
Net cash flows from the purchase and sale of property, plant and equipment
 
(520)
 
(314)
 
(853)
 
Net cash inflow from disposal of customer and loan portfolios
 
(542)
 
5,044
 
1,712
 
Net investment in intangible assets
 
(751
 
(514)
 
(771)
 
Net cash inflow on disposal of subsidiaries, businesses, associates and joint ventures
 
(19
 
141
 
24
 
Net cash from investing activities
 
(3,793
 
62,722
 
2,835
 
Issue of ordinary share capital and other equity instruments
 
4,150
 
3,727
 
1,469
 
Cancellation of shares
 
(986)
 
(1,000)
 
(2,000)
 
Net (purchases)/sales of own shares for market-making and investment purposes
 
43
 
(49)
 
(18)
 
Redemption of preference shares and other equity instruments
 
(6,078)
 
-
 
-
 
Subordinated loan capital repaid
 
(4,020)
 
(520)
 
(3,054)
 
Dividends paid to shareholders of the parent company and non-controlling interests 
(4,965)
 
(3,266)
 
(5,739)
 
Net cash from financing activities
 
(11,856)
 
(1,108)
 
(9,342)
 
Net increase/(decrease) in cash and cash equivalents
 
(22,289)
 
49,732
 
(5,103)
 
Cash and cash equivalents at the beginning of the period
 
337,412
 
274,550
 
335,828
 
Exchange differences in respect of cash and cash equivalents
 
(5,415)
 
11,546
 
6,687
 
Cash and cash equivalents at the end of the period
 
309,708
 
335,828
 
337,412
 
 
For footnote, see page 14.
 
 
 
 
Consolidated statement of changes in equity
 
 
 
 
 
Other reserves
 
 
 
 
 
Called up share capital and share premium5
 
Other equityinstru-ments6,7
 
Retainedearnings
 
  Financial assets at FVOCI reserve8 
Cashflowhedgingreserve
 
Foreignexchangereserve
 
Mergerreserve
 
Total share-holders' equity
 
Non-controllinginterests
 
Total equity
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 31 Dec 2017
 
20,337
 
22,250
 
139,999
 
(350)
 
(222)
 
(19,072)
 
27,308
 
190,250
 
7,621
 
197,871
 
Impact on transition to IFRS 9
 
-
 
-
 
(585)
 
(1,021)
 
-
 
-
 
-
 
(1,606)
 
(41)
 
(1,647)
 
At 1 Jan 2018
 
20,337
 
22,250
 
139,414
 
(1,371)
 
(222)
 
(19,072)
 
27,308
 
188,644
 
7,580
 
196,224
 
Profit for the period
 
-
 
-
 
7,748
 
-
 
-
 
-
 
-
 
7,748
 
668
 
8,416
 
Other comprehensive income (net of tax)
 
-
 
-
 
1,589
 
(273)
 
(66)
 
(4,194)
 
-
 
(2,944)
 
(86)
 
(3,030)
 
-  debt instruments at fair value through other comprehensive income
 
-
 
-
 
-
 
(264)
 
-
 
-
 
-
 
(264)
 
(1)
 
(265)
 
-  equity instruments designated at fair value through other comprehensive income
 
-
 
-
 
-
 
(9)
 
-
 
-
 
-
 
(9)
 
(21)
 
(30)
 
-  cash flow hedges
 
-
 
-
 
-
 
-
 
(66)
 
-
 
-
 
(66)
 
(2)
 
(68)
 
-  changes in fair value of financial liabilities designated at fair value arising from changes in own credit risk
 
-
 
-
 
1,346
 
-
 
-
 
-
 
-
 
1,346
 
(1)
 
1,345
 
-  remeasurement of defined benefit asset/liability
 
-
 
-
 
300
 
-
 
-
 
-
 
-
 
300
 
(3)
 
297
 
-  share of other comprehensive income of associates and joint ventures
 
-
 
-
 
(57
 
-
 
-
 
-
 
-
 
(57)
 
-
 
(57)
 
-  exchange differences
 
-
 
-
 
-
 
-
 
-
 
(4,194)
 
-
 
(4,194)
 
(58)
 
(4,252)
 
Total comprehensive income for the period
 
-
 
-
 
9,337
 
(273)
 
(66)
 
(4,194)
 
-
 
4,804
 
582
 
5,386
 
Shares issued under employee remuneration and share plans
 
582
 
-
 
(570)
 
-
 
-
 
-
 
-
 
12
 
-
 
12
 
Shares issued in lieu of dividends and amounts arising thereon
 
-
 
-
 
606
 
-
 
-
 
-
 
-
 
606
 
-
 
606
 
Capital securities issued
 
-
 
4,150
 
-
 
-
 
-
 
-
 
-
 
4,150
 
-
 
4,150
 
Dividends to shareholders
 
-
 
-
 
(6,904)
 
-
 
-
 
-
 
-
 
(6,904)
 
(461)
 
(7,365)
 
Redemption of securities
 
-
 
(5,827
 
(237
 
-
 
-
 
-
 
-
 
(6,064)
 
-
 
(6,064)
 
Cost of share-based payment arrangements
 
-
 
-
 
274
 
-
 
-
 
-
 
-
 
274
 
-
 
274
 
Cancellation of shares
 
(986)
 
-
 
(1,014)
 
-
 
-
 
-
 
-
 
(2,000)
 
-
 
(2,000)
 
Other movements
 
-
 
-
 
2
 
83
 
-
 
-
 
-
 
85
 
(14)
 
71
 
At 30 Jun 2018
 
19,933
 
20,573
 
140,908
 
(1,561)
 
(288)
 
(23,266)
 
27,308
 
183,607
 
7,687
 
191,294
 
Consolidated statement of changes in equity (continued)
 
 
 
 
 
Other reserves
 
 
 
 
 
Called upshare capital and share premium
 
Other equity instru-ments6
 
Retainedearnings
 
Available- for-salefair valuereserve
 
Cashflowhedgingreserve
 
Foreign exchange reserve
 
Mergerreserve
 
Totalshare-holders'equity
 
Non-controllinginterests
 
Totalequity
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 1 Jan 2017
 
22,715
 
17,110
 
136,795
 
(477)
 
(27)
 
(28,038)
 
27,308
 
175,386
 
7,192
 
182,578
 
Profit for the period
 
-
 
-
 
7,510
 
-
 
-
 
-
 
-
 
7,510
 
538
 
8,048
 
Other comprehensive income (net of tax)
 
-
 
-
 
536
 
468
 
16
 
5,222
 
-
 
6,242
 
81
 
6,323
 
-  available-for-sale investments
 
-
 
-
 
-
 
468
 
-
 
-
 
-
 
468
 
16
 
484
 
-  cash flow hedges
 
-
 
-
 
-
 
-
 
16
 
-
 
-
 
16
 
8
 
24
 
-  changes in fair value of financial liabilities designated at fair value due to movement in own credit risk
 
-
 
-
 
(1,156)
 
-
 
-
 
-
 
-
 
(1,156)
 
-
 
(1,156)
 
-  remeasurement of defined benefit asset/liability1
 
-
 
-
 
1,698
 
-
 
-
 
-
 
-
 
1,698
 
10
 
1,708
 
-  share of other comprehensive income of associates and joint ventures
 
-
 
-
 
(6)
 
-
 
-
 
-
 
-
 
(6)
 
-
 
(6)
 
-  exchange differences
 
-
 
-
 
-
 
-
 
-
 
5,222
 
-
 
5,222
 
47
 
5,269
 
Total comprehensive income for the period
 
-
 
-
 
8,046
 
468
 
16
 
5,222
 
-
 
13,752
 
619
 
14,371
 
Shares issued under employee remuneration and share plans
 
542
 
-
 
(535)
 
-
 
-
 
-
 
-
 
7
 
-
 
7
 
Shares issued in lieu of dividends and amounts arising thereon
 
-
 
-