TIDMHSBA
RNS Number : 3077D
HSBC Holdings PLC
27 October 2020
27 OCTOBER 2020
HSBC HOLDINGS PLC
3Q20 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
"These were promising results against a backdrop of the
continuing impacts of Covid-19 on the global economy. I'm pleased
with the significantly lower credit losses in the quarter, and we
are moving at pace to adapt our business model to a protracted low
interest rate environment. We are accelerating the transformation
of the Group, moving our focus from interest-rate sensitive
business lines towards fee-generating businesses, and further
reducing our operating costs. We also intend to increase our rate
of investment in Asia, particularly in wealth, the Greater Bay
Area, south Asia, trade finance and sustainable finance.
The Group's capital and liquidity ratios strengthened further in
the quarter despite the challenging economic conditions. A decision
on whether to pay a dividend for the 2020 financial year will
depend on economic conditions in early 2021, and be subject to
regulatory consultation. We will seek to pay a conservative
dividend if circumstances allow."
Financial performance (vs. 3Q19)
-- Reported profit after tax down 46% to $2.0bn and reported
profit before tax down 36% to $3.1bn, mainly from lower revenue.
Results in 3Q20 included our share of an impairment of goodwill by
our associate, The Saudi British Bank ('SABB'), of $0.5bn. Adjusted
profit before tax down 21% to $4.3bn.
-- Our operations in Asia continued to perform resiliently with
reported profit before tax in 3Q20 of $3.2bn, despite interest rate
headwinds.
-- Reported revenue down 11% to $11.9bn, reflecting the impact
of interest rate reductions on our deposit franchises across all
global businesses, partly offset by favourable market impacts in
life insurance manufacturing. Reported revenue was also partly
offset by a favourable movement in credit and funding valuation
adjustments and higher revenue in Global Markets.
-- Net interest margin ('NIM') of 1.20%, down 36 basis points
('bps') from 3Q19. NIM was down 13bps from 2Q20, reflecting the
continuing impact of interest rate reductions due to the Covid-19
outbreak.
-- Reported expected credit losses and other credit impairment
charges ('ECL') down $0.1bn to $0.8bn. The 3Q20 charge reflected a
stabilisation of the forward economic outlook from 2Q20, while
wholesale stage 3 charges were in part offset by increased releases
related to historical default cases.
-- Reported operating expenses down 1% and adjusted operating
expenses down 3%, despite continued investment, due to the impact
of our cost-saving initiatives, reduced discretionary expenditure
and a lower performance-related pay accrual.
-- Common equity tier 1 capital ('CET1') ratio of 15.6%, up 0.6%
from 15.0% at 2Q20, reflecting a decrease in RWAs (on a constant
currency basis), capital generation through profits and foreign
currency translation differences.
Financial performance (vs. 9M19)
-- Reported profit after tax down 62% to $5.2bn and reported
profit before tax down 57% to $7.4bn from higher ECL and lower
revenue, partly offset by a fall in operating expenses. Reported
results included a $1.3bn impairment of software intangibles and
the non-recurrence of an $828m dilution gain in 9M19. Adjusted
profit before tax down 44% to $9.9bn.
-- Reported revenue down 9% to $38.7bn, primarily due to the
progressive impact of interest rate reductions across our global
businesses, in part offset by higher revenue in Global Markets.
Adjusted revenue down 6% to $38.5bn.
-- Reported ECL up $5.6bn to $7.6bn, mainly due to the impact of
the Covid-19 outbreak and the forward economic outlook. Allowance
for ECL on loans and advances to customers up from $8.7bn at 31
December 2019 to $13.7bn at 30 September 2020.
-- Reported operating expenses down 3% and adjusted operating
expenses down 4%, as a reduction in the performance-related pay
accrual and lower discretionary expenditure more than offset the
impact of continued investment.
Outlook
-- Geopolitical risk, particularly relating to trade and other
tensions between the US and China, remains heightened. There also
remains uncertainty regarding the UK's withdrawal from the European
Union ('EU'). Trade talks between the UK and the EU are ongoing and
there remains a possibility that there may not be a trade deal
agreed by the end of 2020.
-- We expect lower global interest rates to continue to put
pressure on net interest income. Based on current interest rates,
we expect further net interest income headwinds in 4Q20, with some
stabilisation as we move into 2021.
-- Our ECL charge for 2020 is currently trending towards the
lower end of the $8bn to $13bn range. This latest guidance, which
continues to be subject to a high degree of uncertainty due to
Covid-19 and geopolitical tensions, assumes that the likelihood of
further significant deterioration in the current economic outlook
is low, and that stage 3 impairments from now until the end of 2020
are broadly in line with the average quarterly charge for the year
to date.
-- We expect to reduce the Group's 2022 annual cost base beyond
our original $31bn target, through exceeding our $4.5bn gross cost
savings target. We expect to incur more than $6bn in 'cost to
achieve' expenditure to generate these saves.
-- We expect to exceed our $100bn gross risk-weighted asset
('RWA') reduction target by the end of 2022. This is expected to
allow more resources to be allocated to areas of competitive
advantage, higher returns and growth.
-- We intend to provide a more detailed and updated
transformation plan at our 2020 full-year results, as we finalise
our work on costs, capital and RWA deployment. We also intend to
provide an update on our medium-term financial targets.
-- Based on our results for 2020 and our forecasts for 2021, the
Board will consider whether to pay a conservative dividend for
2020. Any such dividend would be dependent on the economic outlook
in early 2021, and be subject to regulatory consultation. A final
determination is expected to be made and communicated in February
2021 with our 2020 full-year results. We also expect to communicate
our revised policy for dividends for 2021 and beyond at the same
time.
Key financial metrics
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
Footnotes 2020 2019 2020 2020 2019
----------------------------------------- --------- --------- -------- ------ ------ --------
Reported results
----------------------------------------- --------- --------- -------- ------ ------ --------
Reported revenue ($m) 38,672 42,727 11,927 13,059 13,355
----------------------------------------- --------- --------- -------- ------ ------ ------
Reported profit before tax ($m) 7,392 17,244 3,074 1,089 4,837
----------------------------------------- --------- --------- -------- ------ ------ ------
Reported profit after tax ($m) 5,164 13,732 2,039 617 3,795
----------------------------------------- --------- --------- -------- ------ ------ ------
Profit attributable to the ordinary
shareholders of the parent company
($m) 3,336 11,478 1,359 192 2,971
----------------------------------------- --------- --------- -------- ------ ------ ------
Cost efficiency ratio (%) 63.5 59.2 67.4 66.4 61.0
----------------------------------------- --------- --------- -------- ------ ------ ------
Basic earnings per share ($) 0.17 0.57 0.07 0.01 0.15
----------------------------------------- --------- --------- -------- ------ ------ ------
Diluted earnings per share ($) 0.16 0.57 0.07 0.01 0.15
----------------------------------------- --------- --------- -------- ------ ------ ------
Net interest margin (%) 1.35 1.59 1.20 1.33 1.56
----------------------------------------- --------- --------- -------- ------ ------ ------
Alternative performance measures
----------------------------------------- --------- --------- -------- ------ ------ --------
Adjusted revenue ($m) 38,542 41,162 12,065 13,433 13,347
----------------------------------------- --------- --------- -------- ------ ------ ------
Adjusted profit before tax ($m) 9,939 17,693 4,304 2,596 5,418
----------------------------------------- --------- --------- -------- ------ ------ ------
Adjusted cost efficiency ratio
(%) 58.0 56.7 61.4 55.4 57.0
----------------------------------------- --------- --------- -------- ------ ------ ------
Expected credit losses and other
credit impairment charges ('ECL')
(annualised) as % of average gross
loans and advances to customers
(%) 0.96 0.25 0.30 1.49 0.32
----------------------------------------- --------- --------- -------- ------ ------ ------
Return on average ordinary shareholders'
equity (annualised) (%) 2.7 9.2 3.2 0.5 7.0
----------------------------------------- --------- --------- -------- ------ ------ ------
Return on average tangible equity
(annualised) (%) 1 3.5 9.5 2.9 3.5 6.4
----------------------------------------- --------- --------- -------- ------ ------ ------
At
30 Sep 30 Jun 31 Dec
Footnotes 2020 2020 2019
------------------------------------------------- --------- --------- --------- -----------
Balance sheet
------------------------------------------------- --------- --------- --------- -----------
Total assets ($m) 2,955,935 2,922,798 2,715,152
------------------------------------------------- --------- --------- --------- ---------
Net loans and advances to customers ($m) 1,041,340 1,018,681 1,036,743
------------------------------------------------- --------- --------- --------- ---------
Customer accounts ($m) 1,568,714 1,532,380 1,439,115
------------------------------------------------- --------- --------- --------- ---------
Average interest-earning assets, year to date
($m) 2,070,703 2,034,939 1,922,822
------------------------------------------------- --------- --------- --------- ---------
Loans and advances to customers as % of customer
accounts (%) 66.4 66.5 72.0
------------------------------------------------- --------- --------- --------- ---------
Total shareholders' equity ($m) 191,904 187,036 183,955
------------------------------------------------- --------- --------- --------- ---------
Tangible ordinary shareholders' equity ($m) 152,260 147,879 144,144
------------------------------------------------- --------- --------- --------- -----------
Net asset value per ordinary share at period
end ($) 2,3 8.41 8.17 8.00
------------------------------------------------- --------- --------- --------- ---------
Tangible net asset value per ordinary share
at period end ($) 3 7.55 7.34 7.13
------------------------------------------------- --------- --------- --------- ---------
Capital, leverage and liquidity
------------------------------------------------- --------- --------- --------- -----------
Common equity tier 1 capital ratio (%) 4 15.6 15.0 14.7
------------------------------------------------- --------- --------- --------- ---------
Risk-weighted assets ($m) 4 857,024 854,552 843,395
------------------------------------------------- --------- --------- --------- ---------
Total capital ratio (%) 4 21.2 20.7 20.4
------------------------------------------------- --------- --------- --------- ---------
Leverage ratio (%) 4 5.4 5.3 5.3
------------------------------------------------- --------- --------- --------- ---------
High-quality liquid assets (liquidity value)
($bn) 654 654 601
------------------------------------------------- --------- --------- --------- ---------
Liquidity coverage ratio (%) 147 148 150
------------------------------------------------- --------- --------- --------- ---------
Share count
------------------------------------------------- --------- --------- --------- -----------
Period end basic number of $0.50 ordinary shares
outstanding (millions) 20,173 20,162 20,206
------------------------------------------------- --------- --------- --------- ---------
Period end basic number of $0.50 ordinary shares
outstanding and dilutive potential ordinary
shares (millions) 20,227 20,198 20,280
------------------------------------------------- --------- --------- --------- -----------
Average basic number of $0.50 ordinary shares
outstanding (millions) 5 20,164 20,162 20,158
------------------------------------------------- --------- --------- --------- ---------
Dividend per ordinary share (in respect of
the period) ($) 5 - - 0.30
------------------------------------------------- --------- --------- --------- ---------
1 Annualised profit attributable to ordinary shareholders,
excluding impairment of goodwill and other intangible assets and
changes in present value of in-force insurance contracts ('PVIF')
(net of tax), divided by average ordinary shareholders' equity
excluding goodwill, PVIF and other intangible assets (net of
deferred tax).
2 The definition of net asset value per ordinary share is total
shareholders' equity less non-cumulative preference shares and
capital securities, divided by the number of ordinary shares in
issue excluding shares the company has purchased and are held in
treasury.
3 Excludes impact of $0.10 per share dividend in 1Q19, following
a June 2019 change in accounting practice on the recognition of
interim dividends, from the date of declaration to the date of
payment.
4 Unless otherwise stated, regulatory capital ratios and
requirements are calculated in accordance with the transitional
arrangements of the Capital Requirements Regulation in force in the
EU at the time, including the regulatory transitional arrangements
for IFRS 9 'Financial Instruments' in article 473a. The capital
ratios and requirements are reported in accordance with the revised
Capital Requirements Regulation and Directive ('CRR II'), as
implemented. Leverage ratios are calculated using the end point
definition of capital and the IFRS 9 regulatory transitional
arrangements.
5 For these metrics, 31 December 2019 is calculated on a full-year basis.
Contents
Page Page
Summary consolidated balance
Highlights 1 sheet 19
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Key financial metrics 2 Credit risk 19
---- ---------------------------------- ----
Business highlights 3 Capital adequacy 29
---- ---------------------------------- ----
Approach to risk management 3 Leverage 30
-------------------------------------- ---- ---------------------------------- ----
Geopolitical and macroeconomic
risks 3 Risk-weighted assets 30
-------------------------------------- ---- ---------------------------------- ----
Summary information - global
Adjusted performance 5 businesses 32
---- ---------------------------------- ----
Summary information - geographical
Financial performance 7 regions 38
---- ---------------------------------- ----
Cautionary statement regarding
forward-looking statements 16 Dividend on preference shares 43
----
Summary consolidated income statement 18 Terms and abbreviations 44
---- ---------------------------------- ----
HSBC Holdings plc will be conducting a trading update conference
call with analysts and investors today to coincide with the
publication of its Earnings Release. The call will take place at
07.30am GMT. Details of how to participate in the call and the live
audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered
in London. HSBC serves customers worldwide from offices in
64 countries and territories in its geographical regions:
Europe, Asia, North America, Latin America, and Middle East and
North Africa. With assets of $2,956bn at 30 September 2020, HSBC is
one of the world's largest banking and financial services
organisations.
Business highlights
On 18 February, the Group announced a substantial transformation
programme designed to ensure HBSC is fit for the future, with plans
to reshape underperforming businesses, simplify the organisation
and reduce costs. During the third quarter, we continued to make
progress with this programme, including further reducing RWAs in
our Global Banking and Markets ('GBM') business. In addition, we
continued to increase investments in technology to improve the
customer experience and efficiency, including a new digital
multi-currency wallet, launched in Singapore for our Global
Liquidity and Cash Management customers. Also, we launched VisionGo
in Hong Kong, a digital community platform for small businesses and
entrepreneurs, which has already attracted over 8,000 members.
However, given the significant changes in the operating
environment, we intend to accelerate the transformation of the
Group. We expect to reduce the Group's 2022 annual cost base beyond
our original $31bn target, while sustaining investment in our focus
areas. We also expect to exceed our target to reduce RWAs by $100bn
in low-returning areas. This is expected to allow more resources to
be allocated to areas of competitive advantage, higher returns and
growth. We are finalising our work on costs, capital and RWA
deployment and intend to provide a more detailed and updated
transformation plan with our full-year results in February
2021.
We are continuing with the strategic review of our retail
banking operations in France and we will provide an update on our
plans at or before our 2020 full-year results.
In the US, the management team is making good progress in
executing the current business plan at pace. RWAs in our US
business at 3Q20 were 8% lower than at 3Q19. In addition, full-time
equivalent staff ('FTE') were 9% lower than at 31 December 2019 and
80 US retail branches have been successfully closed and
consolidated. However, given the current economic climate, we are
pursuing options to accelerate the transformation of this business
and intend to provide an update at our 2020 full-year results.
Approach to risk management
We have in place a comprehensive risk management framework. We
operate our own wide-ranging stress testing programme, as well as
regulatory driven stress tests, to assess risk impacts of severe,
adverse, but plausible events at legal entity, regional and overall
Group levels. This stress testing programme is a key part of our
capital and liquidity risk management and planning. Stress testing
provides management with key insights into the potential impacts
of, and mitigants to, severely adverse events on the Group, and
provides information to regulators on the Group's financial
stability. Given the nature of the Covid-19 crisis, additional
mitigating actions may be required.
At 30 September 2020, our CET1 ratio was 15.6%, compared with
14.7% at 31 December 2019, and our liquidity coverage ratio ('LCR')
was 147%. Our capital, funding and liquidity positions are expected
to help us to continue supporting our customers throughout the
current geopolitical and macroeconomic uncertainty.
Geopolitical and macroeconomic risks
The Group's results and outlook continue to be impacted by
developments in the external risk environment, including the items
referred to below, which detail the key developments in the third
quarter of 2020. For further information on the risks that the
Group faces, see pages 76 to 83 of the Annual Report and Accounts
2019 and pages 50 to 54 of the Interim Report 2020.
Geopolitical risk to our operations and portfolios
US-China tensions remain heightened. In June 2020, the National
People's Congress of China enacted the Hong Kong national security
law. In response, among other steps, the US President signed into
law the Hong Kong Autonomy Act, and issued Executive Order 13936,
providing authority to impose sanctions against entities and
individuals determined to have undermined Hong Kong's autonomy.
The Hong Kong Autonomy Act also provides authority to impose
secondary sanctions against non-US financial institutions
determined to have knowingly conducted a significant transaction
for any individual or entity subject to primary sanctions under the
act.
On 7 August, the US Department of Treasury imposed sanctions on
11 individuals under Executive Order 13946. Following this, on 14
October 2020, the US State Department released the list of 'Foreign
Persons Materially Contributing to the Failure of the PRC To Meet
Its Obligations Under the Joint Declaration and Basic Law' as
required under the Hong Kong Autonomy Act, which largely overlapped
with the list of persons already designated under Executive Order
13936. Further individuals or entities could be identified under
Executive Order 13936 and/or the Hong Kong Autonomy Act. We are
reviewing the operational impact of these developments. Pursuant to
the Hong Kong Autonomy Act, within 30 to 60 days following the
publication of the 14 October list, the US State Department is
expected to publish a second report listing any non-US financial
institutions that have knowingly conducted a significant
transaction for any individual or entity named in the 14 October
report. This report is the basis for the potential imposition of
secondary sanctions. In addition, the forthcoming US presidential
election is creating further geopolitical uncertainty.
Investor and business sentiment in some sectors in Hong Kong
remains dampened and ongoing tensions could result in an
increasingly fragmented trade and regulatory environment. The
retail and leisure sectors also remain particularly affected by a
decrease in tourism, resulting from both ongoing tensions and the
Covid-19 pandemic. However, the financial services sector in Hong
Kong has remained strong and has benefited from stable liquidity
conditions.
The financial impact to the Group of geopolitical risks in Asia
is heightened due to the strategic importance of the region, and
Hong Kong in particular, in terms of profitability and prospects
for growth. We continue to monitor the situation.
Risks related to Covid-19
After an initial decrease in levels of Covid-19 in the third
quarter in many regions, further waves of infections are now
emerging. While governments in some countries and territories have
continued to ease the broad restrictions that had been imposed to
limit the spread of Covid-19, social distancing and tight border
restrictions remain commonplace, and are limiting the extent and
pace of economic recovery.
The Covid-19 outbreak has led to a significant weakening in GDP
in many of our markets, although regions and sectors have rebounded
to differing levels from their previous low points. Economic
consensus forecasts have stabilised in recent months and monthly
changes to the forecasts have become smaller, while notably the
consensus forecast for UK GDP for 2020 deteriorated in September
2020. However, the economic consensus forecasts for key markets
continue to predict a 'V-shaped' recovery in 2021, albeit there is
wide dispersion in forecast expectations.
While the longer-term effects of the outbreak on businesses are
uncertain, we believe HSBC's financial position allows us to
continue to help support our customers. The management of capital
and liquidity remains a key focus area and is being continually
monitored both at Group and entity levels.
The nature and scale of the Covid-19 crisis has necessitated
strong responses from governments, central banks and regulators,
and the outbreak has also resulted in changes in the behaviours of
our retail and wholesale customers. These factors have impacted the
performance of our expected credit loss models, requiring enhanced
monitoring of model outputs and use of compensating controls,
specifically model adjustments based on the credit expert judgement
of senior risk managers. In addition, we have built up our
operational capacity rapidly in response to government and central
bank support measures aimed at combating the impacts of the
Covid-19 outbreak, and have been responding to complex conduct
considerations and heightened risk of fraud related to these
programmes.
UK withdrawal from the European Union
The UK left the EU on 31 January 2020 and entered a transition
period until 31 December 2020. During the transition period, the UK
continues to be bound by EU laws and regulations. Beyond that date,
there is no certainty on what the future relationship between the
UK and the EU will be. Trade talks are ongoing and there remains a
possibility that there may not be a trade deal agreed by 31
December 2020. This possible outcome is only partly reflected in
our probability-weighted ECL at 3Q20 and, therefore, there is a
risk of additional ECL charges, particularly in the UK in 4Q20, if
the UK and the EU fail to reach a trade agreement.
Our global presence and diversified customer base is expected to
help mitigate the direct impacts on our financial position in a
scenario where the transition period ends without a UK-EU trade
agreement being in place. Our existing footprint in the EU, and in
particular our French subsidiary, provides a strong foundation for
us to build upon, which will be retained regardless of the outcome
of our strategic review of our retail banking operations in France.
As part of our stress testing programme, a number of internal
macroeconomic and event-driven scenarios were assessed to support
our planning for, and evaluation of, the impact of the UK's
withdrawal from the EU without a trade agreement. These stress
scenarios incorporate risks associated with the UK withdrawal from
the EU and the impact of the Covid-19 outbreak. As part of this
analysis, HSBC Bank plc, our non-ring-fenced bank in Europe, and
HSBC UK Bank plc, our ring-fenced bank in Europe, have also
considered a range of internal strategic management actions to
further support our ability to withstand potential shocks. However,
the prospect of exiting the transition period without a trade
agreement is likely to increase market volatility and economic
risk, particularly in the UK, which could adversely impact our
profitability and prospects for growth in this market.
Market environment
Central banks have reduced interest rates in most financial
markets due to the adverse impact on the timelines and the path for
economic recovery from the Covid-19 outbreak, which has in turn
increased the likelihood of negative interest rates. This raises a
number of risks and concerns, such as the readiness of our systems
and processes to accommodate zero or negative rates, the resulting
impacts on customers, regulatory constraints and the financial
implications given the significant impact that prolonged low
interest rates are likely to have on our net interest income. For
some products, we have floored deposit rates at zero or made
decisions not to charge negative rates. This, alongside loans
repriced at lower rates, will result in our commercial margins
being compressed, which is expected to be reflected in our
profitability. The pricing of this risk will need to be carefully
considered. These factors may challenge the long-term profitability
of the banking sector, including HSBC, and will be considered as
part of the Group's transformation programme.
Implications on our financial performance
The above factors continue to cause disruption to economic
activity globally and there could be further adverse impacts on our
income due to lower lending and transaction volumes, and lower
wealth and insurance manufacturing revenue due to equity market
volatility. Lower interest rates globally will negatively impact
net interest income and increase the cost of guarantees for
insurance manufacturing. There could also be adverse impacts on
other assets, such as our investment in Bank of Communications Co.,
Limited ('BoCom'), given the difference between the fair value and
the carrying value of that investment. The excess of the
value-in-use of BoCom and its carrying value has reduced over the
period, increasing the risk of impairment in the future.
There may also be material balance sheet impacts. These may
include downward customer credit rating migration, which could
negatively impact our RWAs and capital position, and potential
liquidity impacts due, among other factors, to increased customer
drawdowns, notwithstanding the significant initiatives that
governments and central banks have put in place to support the
economy following the Covid-19 outbreak.
Adjusted performance
Adjusted performance is computed by adjusting reported results
for the effects of foreign currency translation differences and
significant items, which both distort period-on-period
comparisons.
We consider adjusted performance to provide useful information
for investors by aligning internal and external reporting,
identifying and quantifying items management believes to be
significant, and providing insight into how management assesses
period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements
of the US dollar against most major currencies. We exclude them to
derive constant currency data, allowing us to assess balance sheet
and income statement performance on a like-for-like basis and
understand better the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 9M20 and 3Q20 are computed
by retranslating into US dollars for non-US dollar branches, subsidiaries,
joint ventures and associates:
* the income statements for 9M19 at the average rate of
exchange for 9M20;
* the income statements for quarterly periods at the
average rates of exchange for 3Q20; and
* the closing prior period balance sheets at the
prevailing rates of exchange at 30 September 2020.
No adjustment has been made to the exchange rates used to translate
foreign currency-denominated assets and liabilities into the functional
currencies of any HSBC branches, subsidiaries, joint ventures or associates.
The constant currency data of HSBC's Argentinian subsidiaries have
not been adjusted further for the impacts of hyperinflation. When reference
is made to foreign currency translation differences in tables or commentaries,
comparative data reported in the functional currencies of HSBC's operations
have been translated at the appropriate exchange rates applied in the
current period on the basis described above.
===============================================================================
Significant items
'Significant items' refers collectively to the items that
management and investors would ordinarily identify and consider
separately to improve the understanding of the underlying trends in
the business.
The tables on pages 30 to 39 detail the effects of significant
items on each of our global business segments and geographical
regions during 9M20, 9M19, 3Q20, 2Q20 and 3Q19.
Adjusted performance - foreign currency translation of
significant items
The foreign currency translation differences related to
significant items are presented as a separate component of
significant items. This is considered a more meaningful
presentation as it allows better comparison of period-on-period
movements in performance.
Global business performance
The Group Chief Executive, supported by the rest of the Group
Executive Committee ('GEC') (previously the Group Management
Board), is considered to be the Chief Operating Decision Maker
('CODM') for the purposes of identifying the Group's reportable
segments.
The Group Chief Executive and the rest of the GEC review
operating activity on a number of bases, including by global
business and geographical region. Global businesses are our
reportable segments under IFRS 8 'Operating Segments'. Global
business results are assessed by the CODM on the basis of adjusted
performance, which removes the effects of significant items and
currency translation from reported results. We therefore present
these results on an adjusted basis as required by IFRSs. A
reconciliation of the Group's adjusted results to the Group's
reported results is presented below.
Effective from 2Q20, we made the following realignments within
our internal reporting to the GEC and CODM:
-- We simplified our matrix organisational structure by
combining Global Private Banking and Retail Banking and Wealth
Management to form Wealth and Personal Banking ('WPB').
-- We reallocated our reporting of Balance Sheet Management,
hyperinflation accounting in Argentina and Holdings net interest
expense from Corporate Centre to the global business.
Comparative data have been re-presented accordingly.
Supplementary reconciliations of adjusted to reported results by
global business are presented on pages 30 to 34 for information
purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that
provide breakdowns of adjusted revenue by major product. These
reflect the basis on which revenue performance of the businesses is
assessed and managed.
Reconciliation of reported and adjusted results
Nine months Quarter ended
ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2020 2019 2020 2020 2019
Footnotes $m $m $m $m $m
----------------------------------------- --------- --------- --------- --------- --------- -----------
Revenue
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported 1 38,672 42,727 11,927 13,059 13,355
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation (605) 279 76
----------------------------------------- --------- --------- --------- --------- --------- ---------
Significant items (130) (960) 138 95 (84)
----------------------------------------- --------- --------- --------- --------- --------- ---------
- customer redress programmes 22 118 48 (26) 118
----------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses 8 (823) - 1 4
----------------------------------------- ---------
- fair value movements on financial
instruments 2 (310) (260) (11) 58 (210)
----------------------------------------- ---------
- restructuring and other related
costs 3 150 - 101 58 -
----------------------------------------- ---------
- currency translation of significant
items 5 4 4
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted 38,542 41,162 12,065 13,433 13,347
----------------------------------------- --------- --------- --------- --------- --------- ---------
Change in expected credit losses
and other credit impairment charges
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported (7,643) (2,023) (785) (3,832) (883)
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation 92 (118) 40
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted (7,643) (1,931) (785) (3,950) (843)
----------------------------------------- --------- --------- --------- --------- --------- ---------
Operating expenses
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported (24,568) (25,296) (8,041) (8,675) (8,147)
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation 376 (226) (78)
----------------------------------------- --------- --------- --------- --------- --------- ---------
Significant items 2,215 1,578 630 1,461 620
----------------------------------------- --------- --------- --------- --------- --------- ---------
- costs of structural reform 4 - 126 - - 35
----------------------------------------- ---------
- customer redress programmes 53 1,098 3 49 488
----------------------------------------- ---------
- impairment of goodwill and other
intangibles 1,082 - 57 1,025 -
----------------------------------------- ---------
- restructuring and other related
costs 5 1,072 427 567 335 140
----------------------------------------- ---------
- settlements and provisions in
connection with legal and regulatory
matters 8 (66) 3 4 (64)
----------------------------------------- ---------
- currency translation of significant
items (7) 48 21
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted (22,353) (23,342) (7,411) (7,440) (7,605)
----------------------------------------- --------- --------- --------- --------- --------- ---------
Share of profit in associates and
joint ventures
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported 931 1,836 (27) 537 512
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation (32) 16 7
----------------------------------------- --------- --------- --------- --------- --------- ---------
Significant items 462 - 462 - -
----------------------------------------- --------- --------- --------- --------- --------- ---------
- impairment of goodwill 6 462 - 462 - -
----------------------------------------- ---------
- currency translation of significant - - -
items
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted 1,393 1,804 435 553 519
----------------------------------------- --------- --------- --------- --------- --------- ---------
Profit before tax
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported 7,392 17,244 3,074 1,089 4,837
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation (169) (49) 45
----------------------------------------- --------- --------- --------- --------- --------- ---------
Significant items 2,547 618 1,230 1,556 536
----------------------------------------- --------- --------- --------- --------- --------- ---------
- revenue (130) (960) 138 95 (84)
- operating expenses 2,215 1,578 630 1,461 620
----------------------------------------- ---------
- share in profit of associates
and joint ventures 462 - 462 - -
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted 9,939 17,693 4,304 2,596 5,418
----------------------------------------- --------- --------- --------- --------- --------- ---------
Loans and advances to customers
(net)
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported 1,041,340 1,017,833 1,041,340 1,018,681 1,017,833
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation 24,480 23,303 24,480
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted 1,041,340 1,042,313 1,041,340 1,041,984 1,042,313
----------------------------------------- --------- --------- --------- --------- --------- ---------
Customer accounts
----------------------------------------- --------- --------- --------- --------- --------- -----------
Reported 1,568,714 1,373,741 1,568,714 1,532,380 1,373,741
----------------------------------------- --------- --------- --------- --------- --------- ---------
Currency translation 31,188 32,692 31,188
----------------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted 1,568,714 1,404,929 1,568,714 1,565,072 1,404,929
----------------------------------------- --------- --------- --------- --------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
4 Comprises costs associated with preparations for the UK's exit from the European Union.
5 Includes impairment of software intangible assets of $173m (of
the total software intangible asset impairment of $1,320m) and
impairment of tangible assets of $124m.
6 During the year, The Saudi British Bank ('SABB'), an associate
of HSBC, impaired the goodwill that arose following the merger with
Alawwal bank in 2019. HSBC's post-tax share of the goodwill
impairment was $462m.
Financial performance
Distribution of results by global business
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2020 2019 2020 2020 2019
$m $m $m $m $m
---------------------------------- --------- -------- ------ ------ --------
Adjusted profit/(loss) before tax
---------------------------------- --------- -------- ------ ------ --------
Wealth and Personal Banking 3,121 6,798 1,426 994 1,973
---------------------------------- --------- -------- ------ ------ ------
Commercial Banking 1,360 5,540 1,176 (502) 1,631
---------------------------------- --------- -------- ------ ------ ------
Global Banking and Markets 3,780 3,960 1,232 1,684 1,223
---------------------------------- --------- -------- ------ ------ ------
Corporate Centre 1,678 1,395 470 420 591
---------------------------------- --------- -------- ------ ------ ------
Total 9,939 17,693 4,304 2,596 5,418
---------------------------------- --------- -------- ------ ------ ------
Distribution of results by geographical region
Nine months ended Quarter ended
-------------------------
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2020 2019 2020 2020 2019
$m $m $m $m $m
---------------------------------- ---------- ------- ------ ------- --------
Reported profit/(loss) before tax
---------------------------------- ---------- ------- ------ ------- --------
Europe (2,976) (944) 84 (2,549) (424)
---------------------------------- ---------- ------- ------ ------- ------
Asia 10,556 14,431 3,187 3,629 4,651
---------------------------------- ---------- ------- ------ ------- ------
Middle East and North Africa (326) 2,041 (300) (70) 305
---------------------------------- ---------- ------- ------ ------- ------
North America 16 1,045 (7) 134 299
---------------------------------- ---------- ------- ------ ------- ------
Latin America 122 671 110 (55) 6
---------------------------------- ---------- ------- ------ ------- ------
Total 7,392 17,244 3,074 1,089 4,837
---------------------------------- ---------- ------- ------ ------- ------
Adjusted profit/(loss) before tax
---------------------------------- ---------- ------- ------ ------- --------
Europe (1,561) 295 398 (1,294) 84
---------------------------------- ---------- ------- ------ ------- ------
Asia 10,568 14,509 3,215 3,742 4,695
---------------------------------- ---------- ------- ------ ------- ------
Middle East and North Africa 200 1,226 186 (30) 303
---------------------------------- ---------- ------- ------ ------- ------
North America 588 1,101 375 222 319
---------------------------------- ---------- ------- ------ ------- ------
Latin America 144 562 130 (44) 17
---------------------------------- ---------- ------- ------ ------- ------
Total 9,939 17,693 4,304 2,596 5,418
---------------------------------- ---------- ------- ------ ------- ------
Tables showing adjusted profit before tax by global business and
region are presented to support the commentary on adjusted
performance on the following pages.
The tables on pages 30 to 39 reconcile reported to adjusted
results for each of our global business segments and geographical
regions.
Group
3Q20 compared with 3Q19 - reported results
Movement in reported profit before tax compared with 3Q19
Quarter ended
30 Sep 30 Sep Variance
-----------------
2020 2019 3Q20 vs. 3Q19
$m $m $m %
---------------------------------------- ------- ------- -------- -------
Revenue 11,927 13,355 (1,428) (11)
---------------------------------------- ------- ------- -------- -----
ECL (785) (883) 98 11
---------------------------------------- ------- ------- -------- -----
Operating expenses (8,041) (8,147) 106 1
---------------------------------------- ------- ------- -------- -----
Share of profit from associates and JVs (27) 512 (539) (105)
---------------------------------------- ------- ------- -------- -----
Profit before tax 3,074 4,837 (1,763) (36)
---------------------------------------- ------- ------- -------- -----
Tax expense (1,035) (1,042) 7 1
---------------------------------------- ------- ------- -------- -----
Profit after tax 2,039 3,795 (1,756) (46)
---------------------------------------- ------- ------- -------- -----
Reported profit
Reported profit after tax of $2.0bn was $1.8bn or 46% lower than
in 3Q19.
Reported profit before tax of $3.1bn was $1.8bn or 36% lower,
primarily reflecting a reduction in reported revenue. Reported
revenue fell mainly from the impact of lower interest rates on our
deposit franchises, and lower share of profit from our associate
SABB, reflecting our share of an impairment of the goodwill it
recognised on the completion of the merger with Alawwal bank in
2019. These factors were in part offset by lower reported operating
expenses and a reduction in reported ECL.
Reported profit before tax also included favourable market
impacts in life insurance manufacturing in WPB of $126m (3Q19:
$225m adverse), favourable credit and funding valuation adjustments
in GBM of $32m (3Q19: $160m adverse), and adverse fair value
movements on our long-term debt and associated swaps in Corporate
Centre of $32m (3Q19: $76m favourable).
Reported revenue
Reported revenue of $11.9bn was $1.4bn or 11% lower than in
3Q19. The reduction primarily reflected lower net interest income
as a result of the progressive impact of lower interest rates
across our major markets, notably affecting our deposit franchises
in WPB and in Global Liquidity and Cash Management ('GLCM') in
Commercial Banking ('CMB') and GBM. While we grew average
interest-earning assets compared with 3Q19, interest-bearing
liabilities also increased. As a result, in conjunction with the
rate environment, there continued to be downward pressure on NIM,
which we expect to continue in future quarters. The reduction in
net interest income was partly offset by favourable market impacts
in life insurance manufacturing, compared with adverse movements in
3Q19, following a continued recovery of global equity prices after
the large reductions in 1Q20.
In addition, revenue increased in GBM, despite lower revenue in
GLCM. This was mainly due to a favourable movement in credit and
funding valuation adjustments and higher revenue in Global
Markets.
There was a net adverse movement in significant items of $0.2bn,
which was partly offset by favourable foreign currency translation
differences of $0.1bn. The movement in significant items primarily
related to fair value movements on financial instruments of $0.2bn.
In addition, 3Q20 included restructuring and other related costs of
$0.1bn associated with disposal losses related to the RWA reduction
commitments we made at our business update in February 2020. We
expect to incur additional disposal losses in future quarters as we
progress with these reductions.
Reported ECL
Reported ECL were $0.8bn in 3Q20, $0.1bn lower compared with
3Q19. The charge in 3Q20 reflected the significant build up of
stage 1 and stage 2 allowances in both 1Q20 and 2Q20 to reflect the
worsening forward economic outlook due to the Covid-19 outbreak. In
3Q20, that outlook stabilised, which resulted in stage 1 and stage
2 allowances being broadly unchanged and a significantly lower ECL
charge compared with 2Q20. In addition, the stage 3 charge in 3Q20,
which primarily related to a small number of wholesale exposures,
was partly offset by an increase in releases related to historical
defaulted wholesale exposures.
The estimated impact of the Covid-19 outbreak has been
incorporated in the ECL through additional scenario analysis, which
considered differing severity and duration assumptions relating to
the global pandemic. These included probability-weighted shocks to
annual GDP and consequential impacts on unemployment and other
economic variables, with differing economic recovery assumptions.
Given the severity of the macroeconomic projections and the
complexities of various government measures, which have never been
modelled, additional judgemental adjustments have been made to our
provisions.
For further details on the calculation of ECL, including the
measurement uncertainties and significant judgements applied to
such calculations, the impact of alternative/additional scenarios
and post model-adjustments, see page 21.
Reported operating expenses
Reported operating expenses of $8.0bn were $0.1bn or 1% lower
than in 3Q19 despite the impact of inflation and continued
investment in business growth, including investments in our digital
capabilities. This reflected reductions from our cost-saving
initiatives, a reduction in discretionary expenditure and a lower
performance-related pay accrual.
Significant items were broadly in line with 3Q19. This
included:
-- a $0.5bn fall in customer redress programme costs, primarily
related to the mis-selling of PPI.
This was broadly offset by:
-- higher restructuring and other related costs of $0.4bn,
including a $0.1bn charge related to the impairment of tangible
assets in France and the US; and
-- a 3Q20 charge related to the impairment of intangibles of
$0.1bn, which included the impairment of software intangibles in
the US.
Foreign currency translation differences had an adverse impact
of $0.1bn.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures was
a net loss of $27m in 3Q20, primarily as we recognised our share of
SABB's impairment of the goodwill it recognised on the completion
of its merger with Alawwal bank in 2019. This compared with net
income of $512m in 3Q19.
Group
3Q20 compared with 3Q19 - adjusted results
Movement in adjusted profit before tax compared with 3Q19
Quarter ended
30 Sep 30 Sep Variance
-----------------
2020 2019 3Q20 vs. 3Q19
$m $m $m %
---------------------------------------- ------- ------- --------- ------
Revenue 12,065 13,347 (1,282) (10)
---------------------------------------- ------- ------- --------- ----
ECL (785) (843) 58 7
---------------------------------------- ------- ------- --------- ----
Operating expenses (7,411) (7,605) 194 3
---------------------------------------- ------- ------- --------- ----
Share of profit from associates and JVs 435 519 (84) (16)
---------------------------------------- ------- ------- --------- ----
Profit before tax 4,304 5,418 (1,114) (21)
---------------------------------------- ------- ------- --------- ----
Adjusted profit
Adjusted profit before tax of $4.3bn was $1.1bn or 21% lower
than in 3Q19, primarily reflecting a decline in adjusted revenue
due to interest rate reductions, which affected all global
businesses and particularly our deposit franchises. This was partly
offset by lower adjusted operating expenses and a reduction in
adjusted ECL.
Adjusted revenue
Adjusted revenue of $12.1bn was $1.3bn or 10% lower than in
3Q19, reflecting reductions in WPB and CMB, partly offset by an
increase in GBM.
The reduction in revenue was primarily in net interest income
due to the impact of the interest rate reductions during the first
half of the year, mainly affecting our deposit franchises within
WPB and in GLCM in CMB and GBM. This was partly offset by net
favourable movements in market impacts in life insurance
manufacturing in WPB of $333m due to the continued recovery in
global equity prices following the reductions in 1Q20. In GBM,
Global Markets revenue also increased, reflecting increased market
volatility in our FICC business, and we recorded favourable
movements in credit and funding valuation adjustments of $199m.
Adjusted ECL
Adjusted ECL were $0.8bn in 3Q20, $0.1bn lower than in 3Q19. The
charge in the quarter primarily reflected the significant build up
of stage 1 and stage 2 allowances in both 1Q20 and 2Q20 to reflect
the worsening forward economic outlook due to the Covid-19
outbreak. In 3Q20, that outlook stabilised, which resulted in stage
1 and stage 2 allowances being broadly unchanged and a
significantly lower ECL charge compared with 2Q20. In addition, the
stage 3 charge in 3Q20, which primarily related to a small number
of wholesale exposures across various sectors, was partly offset by
an increase in releases related to historical defaulted wholesale
exposures.
Adjusted operating expenses
Adjusted operating expenses of $7.4bn were $0.2bn or 3% lower
than in 3Q19, notwithstanding the impact of inflation and continued
investment in our digital capabilities. This reflected reductions
from our cost-saving initiatives, lower discretionary expenditure
and a lower performance-related pay accrual.
Adjusted share of profit from associates and JVs
Adjusted share of profit from associates and joint ventures of
$0.4bn decreased by $0.1bn or 16%, primarily from a reduction in
share of profit from BoCom.
Group
9M20 compared with 9M19 - reported results
Movement in reported profit before tax compared with 9M19
Nine months ended
30 Sep 30 Sep Variance
-------------------
2020 2019 9M20 vs. 9M19
$m $m $m %
---------------------------------------- -------- -------- --------- --------
Revenue 38,672 42,727 (4,055) (9)
---------------------------------------- -------- -------- --------- ------
ECL (7,643) (2,023) (5,620) >(200)
---------------------------------------- -------- -------- --------- --------
Operating expenses (24,568) (25,296) 728 3
---------------------------------------- -------- -------- --------- ------
Share of profit from associates and JVs 931 1,836 (905) (49)
---------------------------------------- -------- -------- --------- ------
Profit before tax 7,392 17,244 (9,852) (57)
---------------------------------------- -------- -------- --------- ------
Tax expense (2,228) (3,512) 1,284 37
---------------------------------------- -------- -------- --------- ------
Profit after tax 5,164 13,732 (8,568) (62)
---------------------------------------- -------- -------- --------- ------
Reported profit
Reported profit after tax of $5.2bn was $8.6bn or 62% lower than
in 9M19.
Reported profit before tax of $7.4bn was $9.9bn or 57% lower
than in 9M19, due to a rise in reported ECL, primarily reflecting
the impact of the Covid-19 outbreak on the economic outlook, and
lower reported revenue, mainly due to the impact of interest rate
reductions. Lower revenue also included the non-recurrence of an
$828m dilution gain in 9M19 recognised on the completion of the
merger of our associate SABB with Alawwal bank in Saudi Arabia. In
9M20, we incurred our share of an impairment of goodwill by SABB of
$462m, which contributed to a reduction in reported share of profit
from associates. These factors were in part mitigated by lower
reported operating expenses.
Results in 9M20 included the impact of certain volatile items,
notably adverse movements in market impacts in life insurance
manufacturing in WPB of $218m (9M19: $72m adverse) and adverse
credit and funding valuation adjustments in GBM of $322m (9M19:
$147m adverse). Results also included favourable movements on our
long-term debt and associated swaps in Corporate Centre of $163m
(9M19: $219m favourable). Additionally in 9M19, results included
disposal gains in WPB and CMB of $157m.
Reported operating expenses in 9M20 included a $1.3bn impairment
of capitalised software, with $1.0bn included as a significant item
within 'impairment of goodwill and other intangibles', and $0.2bn
included within 'restructuring and other related costs'. This
primarily related to businesses within HSBC Bank plc, and to a
lesser extent our businesses in the US, reflecting underperformance
and a deterioration in the future forecasts of these businesses,
substantially relating to prior periods in HSBC Bank plc.
Reported revenue
Reported revenue of $38.7bn was $4.1bn or 9% lower than in 9M19,
reflecting the progressive impact of 1Q20 interest rate reductions
on net interest income across our global businesses, most notably
in Retail Banking in WPB and GLCM in CMB and GBM. In addition, the
reduction reflected the effects of a sharp fall in equity markets
and a widening of credit spreads towards the end of 1Q20. There has
been a partial recovery in equity markets and a narrowing of credit
spreads in subsequent quarters. However, this has resulted in
adverse market impacts in life insurance manufacturing in WPB, and
adverse valuation movements in GBM compared with 9M19.
These factors were partly offset by growth in Global Markets
revenue throughout the first nine months, as increased market
volatility supported an improved FICC performance across Foreign
Exchange, Rates and Credit.
Lower reported revenue included net adverse movements in
significant items of $0.8bn primarily from the non-recurrence of a
$0.8bn dilution gain in 9M19, as mentioned above. Significant items
in 9M20 included restructuring and other related costs of $0.2bn
associated with disposal losses related to the RWA reduction
commitments we made at our business update in February. Foreign
currency translation differences resulted in a further adverse
movement of $0.6bn compared with 9M19.
Reported ECL
Reported ECL of $7.6bn were $5.6bn higher than in 9M19, with
increases across all global businesses, primarily from charges
relating to the global impact of the Covid-19 outbreak on the
forward economic outlook.
The ECL charge in 9M20 reflected a significant increase in stage
1 and stage 2 allowances, notably in the first half of the year, to
reflect the deterioration in the forward economic outlook globally
as a result of the Covid-19 outbreak. Economic conditions
subsequently stabilised, and as a result stage 1 and stage 2
allowances were broadly unchanged in 3Q20. Stage 3 charges in 9M20
increased compared with 9M19, with the rise largely related to
wholesale exposures, including a significant stage 3 charge related
to a CMB client in Singapore in 1Q20. Notably, stage 3 charges in
3Q20 were in part offset by an increase in releases related to
historical defaulted wholesale exposures.
Reported operating expenses
Reported operating expenses of $24.6bn were $0.7bn or 3% lower
than in 9M19, primarily reflecting a lower performance-related pay
accrual and a reduction in discretionary expenditure, while we
continued to invest in technology. In addition, the reduction
included favourable foreign currency translation differences of
$0.4bn. This was partly offset by a net adverse movement in
significant items of $0.6bn, which included:
-- a $1.1bn impairment of goodwill and other intangibles in
9M20, primarily capitalised software related to the businesses
within HSBC Bank plc, and to a lesser extent our businesses in the
US. It reflected underperformance and a deterioration in the future
forecasts of these businesses, substantially relating to prior
periods in HSBC Bank plc; and
-- restructuring and other related costs of $1.1bn in 9M20, of
which $0.4bn related to severance, $0.2bn related to an impairment
of software intangibles and $0.1bn related to the impairment of
tangible assets in France and the US. This compared with
restructuring and other related costs of $0.4bn in 9M19. We expect
to incur 'costs to achieve' expenditure of $1.6bn for the 2020 full
year.
This was partly offset by:
-- customer redress programme costs of $0.1bn in 9M20, compared with $1.1bn in 9M19.
Reported share of profit from associates and JVs
Reported income from associates and joint ventures of $0.9bn
decreased by $0.9bn or 49%, primarily reflecting our share of
SABB's impairment of the goodwill it recognised on the completion
of its merger with Alawwal bank in 2019. The remaining reduction
reflected a lower share of profit recognised from our associates
due to the impact of the Covid-19 outbreak and the lower interest
rate environment.
Group
9M20 compared with 9M19 - adjusted results
Movement in adjusted profit before tax compared with 9M19
Nine months ended
---------------------------------------
30 Sep 30 Sep Variance
-------------------
2020 2019 9M20 vs. 9M19
$m $m $m %
---------------------------------------- -------- -------- --------- --------
Revenue 38,542 41,162 (2,620) (6)
---------------------------------------- -------- -------- --------- ------
ECL (7,643) (1,931) (5,712) >(200)
---------------------------------------- -------- -------- --------- --------
Operating expenses (22,353) (23,342) 989 4
---------------------------------------- -------- -------- --------- ------
Share of profit from associates and JVs 1,393 1,804 (411) (23)
---------------------------------------- -------- -------- --------- ------
Profit before tax 9,939 17,693 (7,754) (44)
---------------------------------------- -------- -------- --------- ------
Adjusted profit
Adjusted profit before tax of $9.9bn was $7.8bn or 44% lower
than in 9M19, primarily from a rise in adjusted ECL and a fall in
adjusted revenue. Adjusted ECL increased by $5.7bn, mainly from
charges relating to the global impact of the Covid-19 outbreak on
the forward economic outlook in the first half of 2020. Adjusted
revenue decreased by $2.6bn or 6%, primarily from the progressive
impact of interest rate reductions in all our global businesses,
notably in our deposit franchises, partly offset by higher revenue
from Global Markets. Adjusted operating expenses decreased by
$1.0bn or 4% as we lowered the performance-related pay accrual and
reduced discretionary expenditure while continuing to invest in our
businesses.
Adjusted revenue
Adjusted revenue of $38.5bn was $2.6bn or 6% lower than in 9M19,
reflecting falls in WPB (down $2.4bn) and CMB (down $1.3bn), partly
offset by higher revenue in GBM (up $0.7bn) and Corporate Centre
(up $0.4bn).
The reduction in adjusted revenue reflected the progressive
impact of lower interest rates in many of the key markets in which
we operate. This had an adverse impact on revenue in Retail Banking
within WPB, and in GLCM within CMB and GBM, although we grew
deposit balances across these businesses compared with 30 September
2019. In addition, the fall in revenue reflected the effects of a
sharp fall in equity markets and a widening of credit spreads
towards the end of 1Q20. There has been a partial recovery in
equity markets and a narrowing of credit spreads in subsequent
quarters. However, this resulted in an adverse movement in market
impacts in life insurance manufacturing in WPB of $0.2bn. It also
resulted in an adverse movement in credit and funding valuation
adjustments of $0.2bn and a $0.2bn reduction in revenue in
Principal Investments in GBM.
These reductions were partly offset by higher revenue in Global
Markets as market volatility remained elevated. Revenue also rose
in Corporate Centre.
Revenue relating to Balance Sheet Management ('BSM'), HSBC
Holdings net interest expense and Argentina hyperinflation was
$0.5bn higher, primarily due to disposal gains in BSM. This revenue
is allocated to our global businesses.
Adjusted ECL
Adjusted ECL, which removes the period-on-period effects of
foreign currency translation differences, were $7.6bn, an increase
of $5.7bn from 9M19. This increase occurred in WPB (up $1.6bn), CMB
(up $3.0bn) and GBM (up $1.1bn) and mainly reflected charges
related to the global impact of the Covid-19 outbreak and the
forward economic outlook in all of our global businesses.
The ECL charge in 9M20 reflected a significant increase in stage
1 and stage 2 allowances, notably in the first half of the year, to
reflect the deterioration in the forward economic outlook globally
as a result of the Covid-19 outbreak. Economic conditions
subsequently stabilised and as a result, stage 1 and stage 2
allowances were broadly unchanged in 3Q20. Stage 3 charges in 9M20
increased compared with 9M19, with the rise largely related to
wholesale exposures, including a significant stage 3 charge related
to a CMB client in Singapore in 1Q20. Notably, the stage 3 charge
in 3Q20 was in part offset by an increase in releases related to
historical defaulted wholesale exposures.
Adjusted ECL (annualised) as a percentage of average gross loans
and advances to customers was 0.96%, compared with 0.25% in
9M19.
Adjusted operating expenses
Adjusted operating expenses of $22.4bn were $1.0bn or 4% lower
than in 9M19, as we continued to review and reprioritise costs and
investments to help mitigate revenue headwinds. The decrease
primarily reflected a $0.7bn reduction in performance-related pay
accrual and lower discretionary expenditure, including marketing
(down $0.3bn) and travel costs (down $0.2bn). In addition, our
cost-saving initiatives resulted in a reduction of $0.7bn, of which
$0.6bn related to our cost-to-achieve programme. These decreases
were partly offset by an increase of $0.3bn in investments in
technology to enhance our digital and automation capabilities to
improve how we serve our customers.
The number of employees expressed in full-time equivalent staff
('FTE') at 30 September 2020 was 230,317, a decrease of 5,034
compared with 31 December 2019. The number of contractors at 30
September 2020 was 6,131, a decrease of 1,280 from 31 December
2019.
Adjusted share of profit from associates and JVs
Adjusted share of profit from associates of $1.4bn fell $0.4bn
or 23%, compared with 9M19, primarily reflecting the impact of the
Covid-19 outbreak and the lower interest rate environment on the
share of profit we recognised from our associates.
Wealth and Personal Banking - adjusted results
Management view of adjusted revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
---------------
2020 2019 9M20 vs. 9M19 2020 2020 2019
Footnotes $m $m $m % $m $m $m
------------------------------- --------- ------ ------ --------- ---- ------ ------ --------
Retail Banking 9,895 11,639 (1,744) (15) 2,999 3,133 3,990
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
- net interest income 8,987 10,394 (1,407) (14) 2,686 2,882 3,585
------------------------------- ---------
- non-interest income 908 1,245 (337) (27) 313 251 405
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Wealth Management 5,765 6,491 (726) (11) 2,160 2,214 1,983
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
- investment distribution 2,473 2,541 (68) (3) 872 726 844
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
- life insurance manufacturing 1,188 1,780 (592) (33) 601 800 408
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
- Global Private Banking 1,339 1,410 (71) (5) 418 420 485
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
net interest income 514 668 (154) (23) 142 163 227
------------------------------- ---------
non-interest income 825 742 83 11 276 257 258
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
- asset management 765 760 5 1 269 268 246
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Other 1 356 574 (218) (38) 93 148 171
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Balance Sheet Management,
Holdings interest expense
and Argentina hyperinflation 676 388 288 74 189 248 86
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Net operating income 2 16,692 19,092 (2,400) (13) 5,441 5,743 6,230
------------------------------- --------- ------ ------ --------- ---- ------ ------ ------
RoTE excluding significant
items and UK bank levy
(annualised) (%) 7.6 17.9
------------------------------- --------- ------ ------ --------- ---- ------ ------ --------
1 'Other' includes the distribution and manufacturing (where
applicable) of retail and credit protection insurance, disposal
gains and other
non-product specific income.
2 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
9M20 compared with 9M19
Adjusted profit before tax of $3.1bn was $3.7bn or 54% lower
than in 9M19. This reflected a fall in adjusted revenue and an
increase in adjusted ECL from the impact of the Covid-19 outbreak.
The reduction in revenue was mainly as a result of the fall in
interest rates, which adversely affected deposit margins. There was
lower revenue in life insurance manufacturing, which included
negative market impacts due to a fall in equity markets in 1Q20,
although these losses partly reversed in 2Q20 and 3Q20 as equity
markets recovered.
Adjusted revenue of $16.7bn was $2.4bn or 13% lower, and
included the non-recurrence of 9M19 disposal gains in Argentina and
Mexico of $133m.
In Retail Banking, revenue of $9.9bn was down $1.7bn or 15%.
-- Net interest income was $1.4bn lower due to narrower margins
as global interest rates fell as a result of the Covid-19 outbreak.
This reduction was partly offset by deposit balance growth of $57bn
or 9%, particularly in Hong Kong and the UK, and higher mortgage
lending, mainly in the UK.
-- Non-interest income fell by $0.3bn from lower fee income
earned on unsecured lending products.
In Wealth Management, revenue of $5.8bn was down $0.7bn or
11%.
-- In life insurance manufacturing, revenue fell by $0.6bn or
33%, which included an adverse movement in market impacts of $159m
(an adverse movement of $218m in 9M20 compared with an adverse
movement of $59m in 9M19). The value of new business written fell
by $0.4bn or 37% due to a reduction in volumes resulting from the
Covid-19 outbreak, in part mitigated by continued actions to
support customers by improving our digital channels.
-- In investment distribution, revenue was $0.1bn or 3% lower,
reflecting adverse market conditions in Hong Kong, which resulted
in lower mutual fund sales. This was partly offset by higher
brokerage fees from increased transaction volumes.
-- In Global Private Banking, revenue was $0.1bn or 5% lower, as
net interest income fell as a result of the fall in global interest
rates, although investment revenue increased, reflecting market
volatility and higher fees from advisory and discretionary
mandates.
Adjusted ECL of $2.5bn were $1.6bn higher than in 9M19,
reflecting the global impact of the Covid-19 outbreak on the
forward economic outlook, mainly recorded in the first half of
2020. The increase also included higher charges, notably in the UK,
Asia and the US against unsecured lending, driven by moderate
credit deterioration.
Adjusted operating expenses of $11.0bn were $0.4bn or 3% lower,
as a decrease in performance-related pay accrual and reduced
discretionary expenditure more than offset the impact of inflation
and our continued investment in digital and wealth initiatives.
3Q20 compared with 3Q19
Adjusted profit before tax of $1.4bn was $0.5bn or 28% lower
than in 3Q19. This reflected a $0.8bn or 13% fall in adjusted
revenue due to the impact of lower interest rates in Retail Banking
and Global Private Banking, partly offset by a favourable movement
in market impacts in life insurance manufacturing. The fall in
revenue was partly offset by a $0.2bn or 4% reduction in adjusted
operating expenses, reflecting a lower performance-related pay
accrual and reduced discretionary expenditure, as well as a $0.1bn
reduction in adjusted ECL.
Commercial Banking - adjusted results
Management view of adjusted revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
---------------
2020 2019 9M20 vs. 9M19 2020 2020 2019
Footnotes $m $m $m % $m $m $m
----------------------------- --------- ------ ------ --------- ---- ------ ------ --------
Global Trade and Receivables
Finance 1,321 1,388 (67) (5) 429 432 467
----------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Credit and Lending 4,183 4,072 111 3 1,442 1,394 1,387
----------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Global Liquidity and
Cash Management 3,283 4,497 (1,214) (27) 936 1,034 1,510
----------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Markets products,
Insurance and Investments,
and Other 1 1,231 1,515 (284) (19) 341 421 460
----------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Balance Sheet Management,
Holdings interest
expense and Argentina
hyperinflation 147 (26) 173 >200 17 62 (24)
----------------------------- --------- ------ ------ --------- ---- ------ ------ ------
Net operating income 2 10,165 11,446 (1,281) (11) 3,165 3,343 3,800
----------------------------- --------- ------ ------ --------- ---- ------ ------ ------
RoTE excluding significant
items and UK bank
levy (annualised)
(%) 1.1 14.0
----------------------------- --------- ------ ------ --------- ---- ------ ------ --------
1 Includes revenue from Foreign Exchange, insurance
manufacturing and distribution, interest rate management and Global
Banking products.
2 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
9M20 compared with 9M19
Adjusted profit before tax of $1.4bn was $4.2bn or 75% lower
than in 9M19. Adjusted ECL were higher, reflecting the impact of
the Covid-19 outbreak, and adjusted revenue fell, which was
primarily due to the impact of lower interest rates.
Adjusted revenue of $10.2bn was $1.3bn or 11% lower.
-- In GLCM, revenue decreased by $1.2bn or 27% due to the impact
of the lower global interest rate environment, mainly in Hong Kong
and the UK. This was partly offset by a 15% increase in average
deposit balances, across all regions, particularly in the UK and
the US.
-- In Global Trade and Receivables Finance ('GTRF'), revenue
decreased by $67m or 5% from lower fees and lending balances,
notably in Hong Kong and the UK, reflecting a reduction in global
trade volumes as a result of the Covid-19 outbreak. This was partly
offset by wider margins in Asia and Latin America.
-- In 'Other' products, revenue was $0.3bn lower, reflecting the
impact of lower interest rates on income earned on capital held in
the business, as well as lower revenue from Insurance, Investments
and Markets products. In addition, 9M19 included a disposal gain of
$24m in Latin America.
This was partly offset:
-- In Credit and Lending, revenue increased by $0.1bn or 3%,
reflecting growth in average balances driven by the uptake of
government-backed lending schemes.
Adjusted ECL of $3.9bn were $3.0bn higher than in 9M19. The
increase reflected the global impact of the Covid-19 outbreak on
the forward economic outlook, mainly in the UK and Asia. There were
charges against specific customers in 9M20, particularly in the oil
and gas and wholesale trade sectors, including a significant charge
related to a corporate exposure in Singapore in 1Q20.
Adjusted operating expenses of $4.9bn were $0.1bn or 2% lower,
reflecting a reduction in performance-related pay accrual and as we
maintained control of discretionary expenditure, while we continued
to invest in digital and transaction banking capabilities to
improve customer experience.
In 2020, we delivered around $10bn of RWA reductions as part of
our transformation programme. This partly mitigated growth of $13bn
due to asset quality deterioration.
3Q20 compared with 3Q19
Adjusted profit before tax of $1.2bn was $0.5bn or 28% lower
than in 3Q19, primarily reflecting the impact of lower interest
rates, notably on revenue in GLCM, which fell by $0.6bn. These
decreases were partly offset by a reduction in adjusted operating
expenses of $0.1bn, as we controlled discretionary expenditure
while continuing to invest, and from a reduction of $47m in our
adjusted ECL charge.
Global Banking and Markets - adjusted results
Management view of adjusted revenue
------ ------ --------
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
---------------
2020 2019 9M20 vs. 9M19 2020 2020 2019
Footnotes $m $m $m % $m $m $m
----------------------------- --------- ------ ------ ------- ------ ------ ------ --------
Global Markets 5,859 4,468 1,391 31 1,588 2,177 1,373
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
* FICC 5,209 3,655 1,554 43 1,296 2,107 1,163
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Foreign Exchange 2,683 1,995 688 34 766 803 720
----------------------------- ---------
Rates 1,583 1,175 408 35 232 685 311
----------------------------- ---------
Credit 943 485 458 94 298 619 132
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
* Equities 650 813 (163) (20) 292 70 210
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Securities Services 1 1,353 1,502 (149) (10) 409 444 516
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Global Banking 1 2,897 2,877 20 1 953 1,024 990
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Global Liquidity and
Cash Management 1,552 2,047 (495) (24) 457 494 690
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Global Trade and Receivables
Finance 584 601 (17) (3) 192 204 202
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Principal Investments 40 215 (175) (81) 52 226 94
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Credit and funding
valuation adjustments (322) (153) (169) (110) 32 (9) (167)
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Other 2 (453) (532) 79 15 (153) (145) (201)
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Balance Sheet Management,
Holdings interest
expense and Argentina
hyperinflation 282 79 203 >200 84 108 18
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Net operating income 3 11,792 11,104 688 6 3,614 4,523 3,515
----------------------------- --------- ------ ------ ------- ------ ------ ------ ------
RoTE excluding significant
items and UK bank
levy (annualised)
(%) 6.9 10.0
----------------------------- --------- ------ ------ ------- ------ ------ ------ --------
1 From 1 June 2020, revenue from Issuer Services, previously
reported in Securities Services, was reported within Global
Banking. This resulted in $55m additional revenue being recorded in
Global Banking for 9M20 (3Q20: $40m). Comparatives have not been
restated.
2 'Other' in GBM includes allocated funding costs. Additionally,
within the management view of total operating income, notional tax
credits are allocated to the businesses to reflect the economic
benefit generated by certain activities that are not reflected
within operating income, such as notional credits on income earned
from tax-exempt investments where the economic benefit of the
activity is reflected in tax expense. In order to reflect the total
operating income on an IFRS basis, the offset to these tax credits
is included within 'Other'.
3 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
9M20 compared with 9M19
Adjusted profit before tax of $3.8bn was $0.2bn lower than in
9M19, mainly due to higher adjusted ECL, which reflected the global
impact of the Covid-19 outbreak and included charges relating to
specific exposures. The rise in adjusted ECL was partly offset by
higher adjusted revenue and from lower adjusted operating
expenses.
Adjusted revenue of $11.8bn increased by $0.7bn compared with
9M19, which included adverse movements in credit and funding
valuation adjustments of $0.2bn. We grew adjusted revenue while
reducing adjusted RWAs by $29bn, compared with 30 September
2019.
-- In Global Markets, revenue increased by $1.4bn or 31%, as
higher volatility levels supported an improved FICC performance,
particularly in Credit, in both primary and secondary markets, and
in Foreign Exchange. Rates also had a strong performance due to
increased trading activity in government bonds.
-- In Global Banking, revenue of $2.9bn remained broadly
unchanged. Revenue in capital markets increased and corporate
lending net interest income rose due to higher average balances.
These were offset by lower real estate and structured finance fee
income as well as losses on legacy corporate restructuring
positions.
These were partly offset by:
-- In GLCM, revenue decreased $0.5bn or 24% due to the impact of
lower global interest rates, although average balances grew,
notably in the US, the UK and Asia.
-- In Principal Investments, revenue fell by $0.2bn, reflecting
revaluation losses incurred in 1Q20 as a result of the Covid-19
outbreak, mainly in Europe, which partly reversed in the remainder
of the period.
-- In Securities Services, revenue fell by $0.1bn or 10%, due to
lower interest rates, notably in Asia and Europe, although fees
increased.
-- In GTRF, revenue decreased by $17m or 3%, reflecting lower
fees in Europe, partly offset by higher net interest income in
Asia.
Adjusted ECL were $1.2bn, up $1.1bn compared with 9M19 from
charges relating to the global impact of the Covid-19 outbreak on
the forward economic outlook, and as charges against a small number
of clients in 9M20 were higher than those recorded in 9M19.
Adjusted operating expenses of $6.8bn were $0.2bn or 3% lower,
primarily from a lower performance-related pay accrual, which more
than offset growth in regulatory programme costs and investments in
technology.
In 9M20, RWAs fell by $8bn. We delivered around $30bn of RWA
reductions as part of our transformation programme. This mitigated
growth in RWAs from asset quality deterioration, increased activity
on client facilities and elevated market volatility as a result of
the Covid-19 outbreak, as well as from regulatory changes.
3Q20 compared with 3Q19
Adjusted profit before tax of $1.2bn was unchanged compared with
3Q19.
Adjusted revenue was $0.1bn or 3% higher, reflecting a $0.2bn or
16% increase in Global Markets, as ongoing market volatility
resulted in an improved performance in FICC, and from favourable
movements in credit and funding valuation adjustments of $0.2bn.
This increase was partly offset by the impact of lower global
interest rates, leading to a reduction of $0.2bn in GLCM and $0.1bn
in Securities Services. The increase in adjusted revenue was
largely offset by higher adjusted ECL, which rose by $80m to $100m,
from higher charges against specific customers and provisions
relating to the Covid-19 outbreak, although adjusted operating
expenses remained broadly unchanged.
Corporate Centre - adjusted results
Management view of adjusted revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
---------------
2020 2019 9M20 vs. 9M19 2020 2020 2019
Footnotes $m $m $m % $m $m $m
--------------------------- --------- ------ ------ ------- ------ ------ ------ --------
Central Treasury 1 169 226 (57) (25) (32) (64) 88
--------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Legacy portfolios (20) (124) 104 84 28 43 (41)
--------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Other 2 (256) (582) 326 56 (151) (155) (245)
--------------------------- --------- ------ ------ ------- ------ ------ ------ ------
Net operating income 3 (107) (480) 373 78 (155) (176) (198)
--------------------------- --------- ------ ------ ------- ------ ------ ------ ------
RoTE excluding significant
items and UK bank levy
(annualised) (%) 4.6 1.3
--------------------------- --------- ------ ------ ------- ------ ------ ------ --------
1 Central Treasury includes favourable valuation differences on
issued long-term debt and associated swaps of $163m (9M19: gains of
$219m; 3Q20: losses of $32m; 2Q20: losses of $64m; 3Q19: gains of
$76m).
2 In 2Q20, we began allocating the revenue from BSM, Holdings net interest expense and Argentina hyperinflation out to the global businesses, to align them better with their revenue and expense. The total BSM revenue component of this allocation for 9M20 was $2,206m (9M19: $1,660m; 3Q20: $671m; 2Q20: $783m; 3Q19: $551m).
3 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
9M20 compared with 9M19
Adjusted profit before tax of $1.7bn was $0.3bn higher than in
9M19, and mainly comprised our share of profit in associates and
joint ventures, which decreased by $0.4bn due to the impact of
falling interest rates and the Covid-19 outbreak. This reduction
was more than offset by higher adjusted revenue and lower adjusted
operating expenses.
Adjusted revenue increased by $0.4bn, mainly in 'Other' income,
which increased by $0.3bn due to a net favourable movement of
intersegment eliminations that have no impact on Group results. In
addition, certain funding costs that were retained in Corporate
Centre during 2019 have been allocated to global businesses with
effect from 1 January 2020. Revenue in our legacy portfolios rose
by $0.1bn due to the non-recurrence of portfolio losses in 9M19.
These factors were partly offset by lower favourable fair value
movements of $56m relating to the economic hedging of interest rate
and exchange rate risk on our long-term debt with associated
swaps.
Adjusted operating expenses, which are stated after recovery of
costs from our global businesses, decreased by $0.3bn due to lower
discretionary expenditure.
3Q20 compared with 3Q19
Adjusted profit before tax of $0.5bn was $0.1bn lower than in
3Q19. This was primarily due to a reduction in share of profit from
BoCom, reflecting the impact of the Covid-19 outbreak. In addition,
operating expenses increased by $0.1bn. These factors were partly
offset by higher revenue, which included favourable valuation
movements in legacy credit in 3Q20, compared with adverse movements
in 3Q19.
Balance sheet - 30 September 2020 compared with 30 June 2020
At 30 September 2020, our total assets of $3.0tn were $33bn
higher on a reported basis, and included the favourable effects of
foreign currency translation differences. On a constant currency
basis, our total assets were $37bn lower.
This reduction in total assets, on a constant currency basis,
reflected lower derivative asset balances, notably from adverse
revaluation movements as market volatility fell compared with 30
June 2020. The reduction also included a decline in financial
assets as we decreased our holdings of treasury bills and debt
securities. These were partly offset by a rise in cash and balances
at central banks as we maintained our liquidity to support
customers.
Loans and advances to customers as a percentage of customer
accounts were 66.4%, a decrease of 0.2% compared with 30 June
2020.
Loans and advances to customers
Reported loans and advances to customers of $1.0tn were $23bn
higher, which included favourable effects of foreign currency
translation differences of $23bn. On a constant currency basis,
customer lending balances were broadly in line with 2Q20.
Customer lending increased in WPB by $19bn to $460bn. This was
mainly due to an increase in term lending in Hong Kong (up $11bn),
as customers borrowed to fund investments in initial public
offerings, as well as from higher mortgage balances, mainly in the
UK (up $5bn), as activity in the housing market rose after lockdown
restrictions were eased. In CMB, lending of $344bn was $8bn lower,
mainly from a reduction in term lending in the US, Asia and Europe.
In GBM, lending of $237bn fell by $11bn, mainly from lower term
lending in Asia and the US, partly offset by higher overdraft
balances in the UK.
Customer accounts
Customer accounts of $1.6tn increased by $36bn on a reported
basis, including favourable foreign currency translation
differences of $33bn. On a constant currency basis, customer
accounts were broadly in line with 2Q20 across all of our global
businesses. This reflected customers continuing to hold
consolidated funds. There has been a movement of funds from term
accounts to call accounts as customers show a preference for
liquidity while interest rates are low.
Risk-weighted assets - 30 September 2020 compared with 30 June
2020
Risk-weighted assets ('RWAs') totalled $857.0bn at 30 September
2020, a $2.4bn increase compared with 2Q20. Excluding foreign
currency translation differences, RWAs decreased by $11.8bn.
A $10.8bn decrease in RWAs due to asset size movements reflected
lending reduction of $14.2bn in GBM and CMB, including the effect
of management initiatives, and a fall in market risk RWAs of
$5.3bn. The reduction was partly offset by an $8.9bn increase in
WPB, mostly in short-term lending in Hong Kong.
A $4.3bn reduction in RWAs due to changes in methodology and
policy was primarily due to GBM and CMB initiatives in Asia and
Europe. Changes in asset quality increased RWAs by $3.0bn, which
included the impact of credit migration of $7.3bn, mostly in CMB
and GBM, largely offset by decreases due to changes in portfolio
mix.
Net interest margin
Nine months ended Quarter ended
---------------------------------
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2020 2019 2020 2020 2019
Footnotes $m $m $m $m $m
-------------------------------- --------- --------- --------- --------- --------- -----------
Net interest income 20,959 22,808 6,450 6,897 7,568
-------------------------------- --------- --------- --------- --------- --------- ---------
Average interest-earning assets 2,070,703 1,915,149 2,141,454 2,078,178 1,919,955
-------------------------------- --------- --------- --------- --------- --------- ---------
% % % % %
-------------------------------- --------- --------- --------- --------- --------- -----------
Gross interest yield 1 2.09 2.89 1.76 2.01 2.83
-------------------------------- --------- --------- --------- --------- --------- ---------
Less: cost of funds 1 (0.89) (1.53) (0.68) (0.81) (1.49)
-------------------------------- --------- --------- --------- --------- --------- ---------
Net interest spread 2 1.20 1.36 1.08 1.20 1.34
-------------------------------- --------- --------- --------- --------- --------- ---------
Net interest margin 3 1.35 1.59 1.20 1.33 1.56
-------------------------------- --------- --------- --------- --------- --------- ---------
1 Gross interest yield is the average annualised interest rate
earned on average interest-earning assets ('AIEA'). Cost of funds
is the average annualised interest cost as a percentage of average
interest-bearing liabilities.
2 Net interest spread is the difference between the average
annualised interest rate earned on AIEA, net of amortised premiums
and loan fees, and the average annualised interest rate payable on
average interest-bearing funds.
3 Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Net interest margin ('NIM') of 1.35% was 24 basis points ('bps')
lower compared with 9M19, as the reduction in the yield on AIEA of
80bps was partly offset by the fall in funding cost of average
interest-bearing liabilities of 64bps. The decrease in NIM in 9M20
included the favourable impact of significant items and the adverse
effects of foreign currency translation differences. Excluding
these, NIM fell by 23bps.
NIM for 3Q20 was 1.20%, down 36bps compared with the previous
year, and down 13bps compared with the previous quarter,
predominantly driven by the impact of lower market interest
rates.
Notes
-- Income statement comparisons, unless stated otherwise, are
between the nine-month period ended 30 September 2020 and the
nine-month period ended 30 September 2019. Balance sheet
comparisons, unless otherwise stated, are between balances at 30
September 2020 and the corresponding balances at 30 June 2020.
-- The financial information on which this Earnings Release is
based, and the data set out in the appendix to this statement, are
unaudited and have been prepared in accordance with our significant
accounting policies as described on pages 240 to 251 of our Annual
Report and Accounts 2019.
-- On 31 March 2020, HSBC announced that, in response to a
request from the Bank of England through the UK's Prudential
Regulation Authority ('PRA'), the Board had cancelled the fourth
interim dividend of $0.21 per ordinary share, which was scheduled
to be paid on 14 April 2020. The Board also announced that until
the end of 2020 HSBC will make no quarterly or interim dividend
payments or accruals in respect of ordinary shares. As previously
disclosed on 18 February 2020 in the Annual Report and Accounts
2019, we also plan to suspend share buy-backs in respect of
ordinary shares in 2020 and 2021.
-- Based on our results for 2020 and our forecasts for 2021, the
Board will consider whether to pay a conservative dividend for
2020. Any such dividend would be dependent on the economic outlook
in early 2021, and be subject to regulatory consultation. A final
determination is expected to be made and communicated in February
2021 with our 2020 full-year results. We also expect to communicate
our revised policy for dividends for 2021 and beyond at the same
time.
Cautionary statement regarding forward-looking statements
This Earnings Release 3Q20 contains certain forward-looking
statements with respect to HSBC's: financial condition; results of
operations and business, including the strategic priorities; 2020
financial, investment and capital targets; and ESG
targets/commitments described herein.
Statements that are not historical facts, including statements
about HSBC's beliefs and expectations, are forward-looking
statements. Words such as 'expects', 'targets', 'anticipates',
'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential'
and 'reasonably possible', variations of these words and similar
expressions are intended to identify forward-looking statements.
These statements are based on current plans, information, data,
estimates and projections, and therefore undue reliance should not
be placed on them. Forward-looking statements speak only as of the
date they are made. HSBC makes no commitment to revise or update
any forward-looking statements to reflect events or circumstances
occurring or existing after the date of any forward-looking
statements.
Written and/or oral forward-looking statements may also be made
in the periodic reports to the US Securities and Exchange
Commission, summary financial statements to shareholders, proxy
statements, offering circulars and prospectuses, press releases and
other written materials, and in oral statements made by HSBC's
Directors, officers or employees to third parties, including
financial analysts.
Forward-looking statements involve inherent risks and
uncertainties. Readers are cautioned that a number of factors could
cause actual results to differ, in some instances materially, from
those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
-- changes in general economic conditions in the markets in
which we operate, such as continuing or deepening recessions and
fluctuations in employment and creditworthy customers beyond those
factored into consensus forecasts (including, without limitation,
as a result of the Covid-19 outbreak); the Covid-19 outbreak, which
will have adverse impacts on our income due to lower lending and
transaction volumes, lower wealth and insurance manufacturing
revenue, and lower or negative interest rates in markets where we
operate, as well as, more generally, the potential for material
adverse impacts on our financial condition, results of operations,
prospects, liquidity, capital position and credit ratings;
deviations from the market and economic assumptions that form the
basis for our ECL measurements (including, without limitation, as a
result of the Covid-19 outbreak or the UK's exit from the EU);
potential changes in future dividend policy; changes in foreign
exchange rates and interest rates, including the accounting impact
resulting from financial reporting in respect of hyperinflationary
economies; volatility in equity markets; lack of liquidity in
wholesale funding or capital markets, which may affect our ability
to meet our obligations under financing facilities or to fund new
loans, investments and businesses; geopolitical tensions or
diplomatic developments producing social instability or legal
uncertainty, such as the unrest in Hong Kong, the existing US-China
tensions and the emerging challenges in UK-China relations, which
in turn may affect demand for our products and services and could
result in (among other things) regulatory, reputational and market
risks for HSBC; the efficacy of government, customer, and HSBC's
actions in managing and mitigating climate change, which may cause
both idiosyncratic and systemic risks resulting in potential
financial impacts; illiquidity and downward price pressure in
national real estate markets; adverse changes in central banks'
policies with respect to the provision of liquidity support to
financial markets; heightened market concerns over sovereign
creditworthiness in over-indebted countries; adverse changes in the
funding status of public or private defined benefit pensions;
societal shifts in customer financing and investment needs,
including consumer perception as to the continuing availability of
credit; exposure to counterparty risk, including third parties
using us as a conduit for illegal activities without our knowledge;
the expected discontinuation of certain key Ibors and the
development of alternative risk-free benchmark rates, which may
require us to enhance our capital position and/or position
additional capital in specific subsidiaries; and price competition
in the market segments we serve;
-- changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities in the principal markets in which we
operate and the consequences thereof (including, without
limitation, actions taken as a result of the Covid-19 outbreak);
initiatives to change the size, scope of activities and
interconnectedness of financial institutions in connection with the
implementation of stricter regulation of financial institutions in
key markets worldwide; revised capital and liquidity benchmarks,
which could serve to deleverage bank balance sheets and lower
returns available from the current business model and portfolio
mix; imposition of levies or taxes designed to change business mix
and risk appetite; the practices, pricing or responsibilities of
financial institutions serving their consumer markets;
expropriation, nationalisation, confiscation of assets and changes
in legislation relating to foreign ownership; the UK's exit from
the EU, which may result in a prolonged period of uncertainty,
unstable economic conditions and market volatility, including
currency fluctuations; passage of the Hong Kong national security
law and restrictions on telecommunications, as well as the US Hong
Kong Autonomy Act, which have caused tensions between China, the US
and the UK; general changes in government policy that may
significantly influence investor decisions; the costs, effects and
outcomes of regulatory reviews, actions or litigation, including
any additional compliance requirements; and the effects of
competition in the markets where we operate including increased
competition from non-bank financial services companies; and
-- factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan losses
or delinquency, and managing those risks (through account
management, hedging and other techniques); our ability to achieve
our financial, investment, capital and ESG targets/commitments,
which may result in our failure to achieve any of the expected
benefits of our strategic initiatives; model limitations or
failure, including, without limitation, the impact that the
consequences of the Covid-19 outbreak have had on the performance
and usage of financial models, which may require us to hold
additional capital, incur losses and/or use compensating controls,
such as overlays and overrides, to address model limitations;
changes to the judgements, estimates and assumptions we base our
financial statements on; changes in our ability to meet the
requirements of regulatory stress tests; a reduction in the credit
rating assigned to us or any of our subsidiaries, which could
increase the cost or decrease the availability of our funding and
affect our liquidity position and net interest margin; changes to
the reliability and security of our data management, data privacy,
information and technology infrastructure, including threats from
cyber-attacks, which may impact our ability to service clients and
may result in financial loss, business disruption and/or loss of
customer services and data; changes in insurance customer behaviour
and insurance claim rates; our dependence on loan payments and
dividends from subsidiaries to meet our obligations; changes in
accounting standards, which may have a material impact on the way
we prepare our financial statements; changes in our ability to
manage third-party, fraud and reputational risks inherent in our
operations; employee misconduct, which may result in regulatory
sanctions and/or reputational or financial harm; and changes in
skill requirements, ways of working and talent shortages, which may
affect our ability to recruit and retain senior management and
diverse and skilled personnel. Effective risk management depends
on, among other things, our ability through stress testing and
other techniques to prepare for events that cannot be captured by
the statistical models it uses; and our success in addressing
operational, legal and regulatory, and litigation challenges; and
other risks and uncertainties we identify in 'Top and emerging
risks' on pages 76 to 81 of the Annual Report and Accounts
2019.
For further information contact:
Investor Relations Media Relations
UK - Richard O'Connor UK - Heidi Ashley
Tel: +44 (0) 20 7991 6590 Tel: +44 (0) 20 7992 2045
Hong Kong - Mark Phin Hong Kong - Patrick Humphris
Tel: +852 2822 4908 Tel: +852 2822 2052
Summary consolidated income statement
Nine months Quarter ended
ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2020 2019 2020 2020 2019
$m $m $m $m $m
----------------------------------------------- -------- -------- ------- ------- ---------
Net interest income 20,959 22,808 6,450 6,897 7,568
----------------------------------------------- -------- -------- ------- ------- -------
Net fee income 8,907 9,085 2,981 2,803 2,961
----------------------------------------------- -------- -------- ------- ------- -------
Net income from financial instruments
held for trading or managed on a fair
value basis 7,768 7,877 2,000 2,404 2,546
----------------------------------------------- -------- -------- ------- ------- -------
Net income/(expense) from assets and
liabilities of insurance businesses,
including related derivatives, measured
at fair value through profit or loss (254) 2,318 1,036 2,290 122
----------------------------------------------- -------- -------- ------- ------- -------
Changes in fair value of designated
debt and related derivatives(1) 278 149 81 (49) 61
----------------------------------------------- -------- -------- ------- ------- -------
Changes in fair value of other financial
instruments mandatorily measured at
fair value
through profit or loss 259 617 179 453 160
----------------------------------------------- -------- -------- ------- ------- -------
Gains less losses from financial investments 599 316 133 154 115
----------------------------------------------- -------- -------- ------- ------- -------
Net insurance premium income 7,798 9,047 2,779 2,110 2,724
----------------------------------------------- -------- -------- ------- ------- -------
Other operating income 805 2,935 334 67 863
----------------------------------------------- -------- -------- ------- ------- -------
Total operating income 47,119 55,152 15,973 17,129 17,120
----------------------------------------------- -------- -------- ------- ------- -------
Net insurance claims and benefits paid
and movement in liabilities to policyholders (8,447) (12,425) (4,046) (4,070) (3,765)
----------------------------------------------- -------- -------- ------- ------- -------
Net operating income before change
in expected credit losses and other
credit impairment charges(2) 38,672 42,727 11,927 13,059 13,355
----------------------------------------------- -------- -------- ------- ------- -------
Change in expected credit losses and
other credit impairment charges (7,643) (2,023) (785) (3,832) (883)
Net operating income 31,029 40,704 11,142 9,227 12,472
----------------------------------------------- -------- -------- ------- ------- -------
Total operating expenses excluding
impairment of goodwill and other intangible
assets (23,207) (25,268) (7,968) (7,451) (8,143)
----------------------------------------------- -------- -------- ------- ------- -------
Impairment of goodwill and other intangible
assets (1,361) (28) (73) (1,224) (4)
----------------------------------------------- -------- -------- ------- ------- -------
Operating profit 6,461 15,408 3,101 552 4,325
----------------------------------------------- -------- -------- ------- ------- -------
Share of profit in associates and joint
ventures 931 1,836 (27) 537 512
----------------------------------------------- -------- -------- ------- ------- -------
Profit before tax 7,392 17,244 3,074 1,089 4,837
----------------------------------------------- -------- -------- ------- ------- -------
Tax expense (2,228) (3,512) (1,035) (472) (1,042)
----------------------------------------------- -------- -------- ------- ------- -------
Profit after tax 5,164 13,732 2,039 617 3,795
----------------------------------------------- -------- -------- ------- ------- -------
Attributable to:
----------------------------------------------- -------- -------- ------- ------- ---------
- ordinary shareholders of the parent
company 3,336 11,478 1,359 192 2,971
----------------------------------------------- -------- -------- ------- ------- -------
- preference shareholders of the parent
company 67 67 22 23 22
----------------------------------------------- -------- -------- ------- ------- -------
- other equity holders 1,066 1,148 449 176 484
----------------------------------------------- -------- -------- ------- ------- -------
- non-controlling interests 695 1,039 209 226 318
----------------------------------------------- -------- -------- ------- ------- -------
Profit after tax 5,164 13,732 2,039 617 3,795
----------------------------------------------- -------- -------- ------- ------- -------
$ $ $ $ $
----------------------------------------------- -------- -------- ------- ------- ---------
Basic earnings per share 0.17 0.57 0.07 0.01 0.15
----------------------------------------------- -------- -------- ------- ------- ---------
Diluted earnings per share 0.16 0.57 0.07 0.01 0.15
----------------------------------------------- -------- -------- ------- ------- ---------
Dividend per ordinary share(3) - 0.41 - - 0.10
----------------------------------------------- -------- -------- ------- ------- ---------
% % % % %
----------------------------------------------- -------- -------- ------- ------- ---------
Return on average ordinary shareholders'
equity (annualised) 2.7 9.2 3.2 0.5 7.0
----------------------------------------------- -------- -------- ------- ------- -------
Return on average tangible equity (annualised) 3.5 9.5 2.9 3.5 6.4
----------------------------------------------- -------- -------- ------- ------- -------
Cost efficiency ratio 63.5 59.2 67.4 66.4 61.0
----------------------------------------------- -------- -------- ------- ------- -------
1 The debt instruments, issued for funding purposes, are
designated under the fair value option to reduce an accounting
mismatch.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
3 Dividends recorded in the financial statements are dividends
per ordinary share declared and paid in the period and are not
dividends in respect of, or for, that period.
Summary consolidated balance sheet
At
---------------------------------
30 Sep 30 Jun 31 Dec
2020 2020 2019
$m $m $m
------------------------------------------------------ --------- --------- -----------
Assets
------------------------------------------------------ --------- --------- -----------
Cash and balances at central banks 285,508 249,673 154,099
------------------------------------------------------ --------- --------- ---------
Trading assets 222,355 208,964 254,271
------------------------------------------------------ --------- --------- ---------
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 44,253 41,785 43,627
Derivatives 294,678 313,781 242,995
------------------------------------------------------ --------- --------- ---------
Loans and advances to banks 83,854 77,015 69,203
------------------------------------------------------ --------- --------- ---------
Loans and advances to customers(1) 1,041,340 1,018,681 1,036,743
------------------------------------------------------ --------- --------- ---------
Reverse repurchase agreements - non-trading 221,179 226,345 240,862
------------------------------------------------------ --------- --------- ---------
Financial investments 475,302 494,109 443,312
------------------------------------------------------ --------- --------- ---------
Other assets 287,466 292,445 230,040
------------------------------------------------------ --------- --------- ---------
Total assets 2,955,935 2,922,798 2,715,152
------------------------------------------------------ --------- --------- ---------
Liabilities and equity
------------------------------------------------------ --------- --------- -----------
Liabilities
------------------------------------------------------ --------- --------- -----------
Deposits by banks 91,739 82,715 59,022
------------------------------------------------------ --------- --------- ---------
Customer accounts 1,568,714 1,532,380 1,439,115
------------------------------------------------------ --------- --------- ---------
Repurchase agreements - non-trading 118,844 112,799 140,344
------------------------------------------------------ --------- --------- ---------
Trading liabilities 80,338 79,612 83,170
------------------------------------------------------ --------- --------- ---------
Financial liabilities designated at fair value 156,459 156,608 164,466
------------------------------------------------------ --------- --------- ---------
Derivatives 285,239 303,059 239,497
------------------------------------------------------ --------- --------- ---------
Debt securities in issue 102,406 110,114 104,555
------------------------------------------------------ --------- --------- ---------
Liabilities under insurance contracts 102,708 98,832 97,439
------------------------------------------------------ --------- --------- ---------
Other liabilities 249,227 251,458 194,876
------------------------------------------------------ --------- --------- ---------
Total liabilities 2,755,674 2,727,577 2,522,484
------------------------------------------------------ --------- --------- ---------
Equity
------------------------------------------------------ --------- --------- -----------
Total shareholders' equity 191,904 187,036 183,955
------------------------------------------------------ --------- --------- ---------
Non-controlling interests 8,357 8,185 8,713
------------------------------------------------------ --------- --------- ---------
Total equity 200,261 195,221 192,668
------------------------------------------------------ --------- --------- ---------
Total liabilities and equity 2,955,935 2,922,798 2,715,152
------------------------------------------------------ --------- --------- ---------
1 Net of impairment allowances.
Credit risk
Summary of credit risk
At 30 September 2020, gross loans and advances to customers and
banks of $1,139bn increased by $24.3bn, compared with 31 December
2019. This included adverse foreign exchange movements of
$8.3bn.
Excluding foreign exchange movements, growth was driven by a
$21.4bn increase in personal loans and advances and a $15.3bn
increase in loans and advances to banks. These increases were
partly offset by a $4.1bn decrease in wholesale loans and advances
to customers.
The increase in personal loans and advances to customers was
driven by mortgage growth of $14.6bn, primarily in the UK (up
$8.3bn), Hong Kong (up $2.9bn), Canada (up $1.4bn) and Australia
(up $1.3bn). Other personal lending also grew by $6.8bn. The
decrease in wholesale loans and advances to customers was primarily
driven by a $3.8bn decline in lending to corporate and commercial
customers.
At 30 September 2020, the allowance for ECL of $14.9bn increased
by $5.5bn compared with 31 December 2019, including favourable
foreign exchange movements of $0.3bn. It increased by $0.4bn
compared with 30 June 2020. The $14.9bn allowance comprised $14.0bn
in respect of assets held at amortised cost, $0.8bn in respect of
loan commitments and financial guarantees, and $0.2bn in respect of
debt instruments measured at fair value through other comprehensive
income ('FVOCI').
During the first half of 2020, the Group experienced a
significant increase in allowances for ECL, which subsequently
stabilised during 3Q20. Excluding foreign exchange movements, the
allowance for ECL in relation to loans and advances to customers
increased by $5.2bn from 31 December 2019. This was attributable
to:
-- a $3.7bn increase in wholesale loans and advances to
customers, of which $1.9bn was driven by stages 1 and 2; and
-- a $1.5bn increase in personal loans and advances to
customers, of which $1.2bn was driven by stages 1 and 2.
During the first six months of the year, the Group experienced
significant migrations from stage 1 to stage 2, reflecting a
worsening of the economic outlook. This trend slowed during the
third quarter as forward economic guidance remained broadly stable
in comparison with 30 June 2020, with some regions experiencing
transfers from stage 2 to stage 1.
Stage 3 balances at 30 September 2020 remained broadly stable
compared with 30 June 2020, while benefiting from releases from
historical default cases. As the Covid-19 pandemic continues, there
may be volatility in future stage 3 balances, in particular due to
the expiration of the measures implemented by governments,
regulators and banks to support customers.
The ECL charge for 9M20 was $7.6bn, inclusive of recoveries,
which comprised $5.1bn in respect of wholesale lending (of which
stage 3 and purchased or originated credit impaired ('POCI') was
$2.6bn), $2.3bn in respect of personal lending (of which stage 3
was $0.7bn) and $0.2bn in respect of other financial assets
measured at amortised cost and debt instruments measured at FVOCI.
The 3Q20 ECL charge was $0.8bn, which comprised $0.4bn in respect
of wholesale lending (of which stage 3 and POCI was $0.3bn) and
$0.4bn in respect of personal lending (of which stage 3 was
$0.2bn).
Summary of financial instruments to which the impairment requirements
in IFRS 9 are applied
At 30 Sep 2020 At 31 Dec 2019
Allowance
Gross carrying/nominal Allowance Gross carrying/nominal for
amount for ECL(1) amount ECL(1)
Footnotes $m $m $m $m
-------------------------- --------- ---------------------- ----------- ---------------------- ------------
Loans and advances to
customers
at amortised cost 1,055,042 (13,702) 1,045,475 (8,732)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
- personal 452,101 (4,540) 434,271 (3,134)
-------------------------- ---------
- corporate and commercial 532,842 (8,806) 540,499 (5,438)
-------------------------- ---------
- non-bank financial
institutions 70,099 (356) 70,705 (160)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Loans and advances to
banks at
amortised cost 83,904 (50) 69,219 (16)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Other financial assets
measured
at amortised cost 776,067 (251) 615,179 (118)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
- cash and balances at
central
banks 285,518 (10) 154,101 (2)
-------------------------- ---------
- items in the course of
collection
from other banks 6,165 - 4,956 -
-------------------------- ---------
- Hong Kong Government
certificates
of indebtedness 40,086 - 38,380 -
-------------------------- ---------
- reverse repurchase
agreements
- non-trading 221,179 - 240,862 -
-------------------------- ---------
- financial investments 87,439 (111) 85,788 (53)
-------------------------- ---------
- prepayments, accrued
income and
other assets 2 135,680 (130) 91,092 (63)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Total gross carrying
amount on-balance
sheet 1,915,013 (14,003) 1,729,873 (8,866)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Loans and other
credit-related
commitments 661,611 (654) 600,029 (329)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
- personal 233,797 (43) 223,314 (15)
-------------------------- ---------
- corporate and commercial 288,979 (576) 278,524 (307)
-------------------------- ---------
- financial 138,835 (35) 98,191 (7)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Financial guarantees 18,674 (125) 20,214 (48)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
- personal 745 (1) 804 (1)
-------------------------- ---------
- corporate and commercial 13,623 (115) 14,804 (44)
-------------------------- ---------
- financial 4,306 (9) 4,606 (3)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Total nominal amount
off-balance
sheet 3 680,285 (779) 620,243 (377)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
2,595,298 (14,782) 2,350,116 (9,243)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
Memorandum
Memorandum allowance
allowance for
Fair value for ECL(4) Fair value ECL(4)
$m $m $m $m
-------------------------- --------- ---------------------- ----------- ---------------------- ------------
Debt instruments measured
at fair
value through other
comprehensive
income ('FVOCI') 385,878 (150) 355,664 (166)
-------------------------- --------- ---------------------- ----------- ---------------------- ----------
1 The total ECL is recognised in the loss allowance for the
financial asset unless the total ECL exceeds the gross carrying
amount of the financial asset, in which case the ECL is recognised
as a provision.
2 Includes only those financial instruments that are subject to
the impairment requirements of IFRS 9. 'Prepayments, accrued income
and other assets' as presented within the summary consolidated
balance sheet on page 18 includes both financial and non-financial
assets.
3 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
4 Debt instruments measured at FVOCI continue to be measured at
fair value with the allowance for ECL as a memorandum item. Change
in ECL is recognised in 'Change in expected credit losses and other
credit impairment charges' in the income statement.
Summary of credit risk (excluding debt instruments measured at FVOCI)
by stage distribution and ECL coverage by industry sector at
30 September 2020
Gross carrying/nominal
amount(1) Allowance for ECL ECL coverage %
--------- ---------------------------------- -------- -------
Stage Stage Stage Stage Stage Stage Stage Stage Stage
1 2 3 POCI(2) Total 1 2 3 POCI(2) Total 1 2 3 POCI(2) Total
$m $m $m $m $m $m $m $m $m $m % % % % %
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -------
Loans and
advances
to customers
at amortised
cost 878,558 157,804 18,391 289 1,055,042 (2,020) (4,607) (6,962) (113) (13,702) 0.2 2.9 37.9 39.1 1.3
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 418,670 28,005 5,426 - 452,101 (906) (2,179) (1,455) - (4,540) 0.2 7.8 26.8 - 1.0
--------------------------------------
* corporate and commercial 401,032 119,269 12,253 288 532,842 (1,057) (2,293) (5,344) (112) (8,806) 0.3 1.9 43.6 38.9 1.7
--------------------------------------
* non-bank financial institutions 58,856 10,530 712 1 70,099 (57) (135) (163) (1) (356) 0.1 1.3 22.9 100.0 0.5
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Loans and
advances
to banks
at amortised
cost 81,277 2,627 - - 83,904 (37) (13) - - (50) - 0.5 - - 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Other financial
assets
measured
at amortised
cost 765,993 9,818 254 2 776,067 (105) (51) (95) - (251) - 0.5 37.4 - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Loan and
other credit-related
commitments 606,231 54,185 1,193 2 661,611 (242) (324) (88) - (654) - 0.6 7.4 - 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 230,909 2,634 254 - 233,797 (40) (3) - - (43) - 0.1 - - -
--------------------------------------
* corporate and commercial 241,445 46,595 937 2 288,979 (182) (306) (88) - (576) 0.1 0.7 9.4 - 0.2
--------------------------------------
- financial 133,877 4,956 2 - 138,835 (20) (15) - - (35) - 0.3 - - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Financial
guarantees 13,471 4,926 276 1 18,674 (20) (64) (41) - (125) 0.1 1.3 14.9 - 0.7
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 732 12 1 - 745 - (1) - - (1) - 8.3 - - 0.1
--------------------------------------
* corporate and commercial 9,288 4,060 274 1 13,623 (18) (57) (40) - (115) 0.2 1.4 14.6 - 0.8
--------------------------------------
- financial 3,451 854 1 - 4,306 (2) (6) (1) - (9) 0.1 0.7 100.0 - 0.2
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
At 30 Sep
2020 2,345,530 229,360 20,114 294 2,595,298 (2,424) (5,059) (7,186) (113) (14,782) 0.1 2.2 35.7 38.4 0.6
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Stage 2 days past due analysis at 30 September 2020
Gross carrying/nominal
amount(1) Allowance for ECL ECL coverage %
Of Of Of Of Of
which: which: which: which: which: Of which:
1 to 30 and 1 to 30 and 1 to
Stage 29 > Stage 29 > Stage 29 30 and
2 DPD(3,4) DPD(3,4) 2 DPD(3,4) DPD(3,4) 2 DPD(3,4) > DPD(3,4)
$m $m $m $m $m $m % % %
------------- -------- -------- -------- ------- -------- -------- ------ -------- ----------
Loans and
advances
to customers
at amortised
cost 157,804 2,312 1,740 (4,607) (280) (286) 2.9 12.1 16.4
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
- personal 28,005 1,540 1,211 (2,179) (236) (254) 7.8 15.3 21.0
-------------
- corporate
and
commercial 119,269 743 432 (2,293) (44) (32) 1.9 5.9 7.4
-------------
- non-bank
financial
institutions 10,530 29 97 (135) - - 1.3 - -
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
Loans and
advances
to banks at
amortised
cost 2,627 - - (13) - - 0.5 - -
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
Other
financial
assets
measured at
amortised
cost 9,818 - 8 (51) - - 0.5 - -
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
1 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
3 Days past due ('DPD'). Up-to-date accounts in stage 2 are not shown in amounts presented above.
4 The days past due amounts presented above are on a contractual
basis and include the benefit of any customer relief payment
holidays granted.
Summary of credit risk (excluding debt instruments measured at FVOCI)
by stage distribution and ECL coverage by industry sector at
31 December 2019
Gross carrying/nominal Allowance for ECL ECL coverage
amount(1) %
--------- ------- -------
Stage Stage Stage POCI(2) Total Stage Stage Stage POCI(2) Total Stage Stage Stage POCI(2) Total
1 2 3 1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m % % % % %
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -------
Loans and
advances
to customers
at amortised
cost 951,583 80,182 13,378 332 1,045,475 (1,297) (2,284) (5,052) (99) (8,732) 0.1 2.8 37.8 29.8 0.8
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
- personal 413,669 15,751 4,851 - 434,271 (583) (1,336) (1,215) - (3,134) 0.1 8.5 25.0 - 0.7
--------------------------------------
* corporate and commercial 472,253 59,599 8,315 332 540,499 (672) (920) (3,747) (99) (5,438) 0.1 1.5 45.1 29.8 1.0
--------------------------------------
* non-bank financial institutions 65,661 4,832 212 - 70,705 (42) (28) (90) - (160) 0.1 0.6 42.5 - 0.2
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
Loans and
advances
to banks
at amortised
cost 67,769 1,450 - - 69,219 (14) (2) - - (16) - 0.1 - - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
Other financial
assets measured
at amortised
cost 613,200 1,827 151 1 615,179 (38) (38) (42) - (118) - 2.1 27.8 - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
Loan and
other credit-related
commitments 577,631 21,618 771 9 600,029 (137) (133) (59) - (329) - 0.6 7.7 - 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
- personal 221,490 1,630 194 - 223,314 (13) (2) - - (15) - 0.1 - - -
--------------------------------------
* corporate and commercial 259,138 18,804 573 9 278,524 (118) (130) (59) - (307) - 0.7 10.3 - 0.1
--------------------------------------
- financial 97,003 1,184 4 - 98,191 (6) (1) - - (7) - 0.1 - - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
Financial
guarantees 17,684 2,340 186 4 20,214 (16) (22) (10) - (48) 0.1 0.9 5.4 - 0.2
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
- personal 802 1 1 - 804 (1) - - - (1) 0.1 - - - 0.1
--------------------------------------
* corporate and commercial 12,540 2,076 184 4 14,804 (14) (21) (9) - (44) 0.1 1.0 4.9 - 0.3
--------------------------------------
- financial 4,342 263 1 - 4,606 (1) (1) (1) - (3) - 0.4 100.0 - 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
At 31 Dec
2019 2,227,867 107,417 14,486 346 2,350,116 (1,502) (2,479) (5,163) (99) (9,243) 0.1 2.3 35.6 28.6 0.4
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- ------- ----- ----- ----- ------- -----
Stage 2 days past due analysis at 31 December 2019
Gross carrying/nominal Allowance for ECL ECL coverage %
amount(1)
Of Of Of Of Of Of which:
which: which: which: which: which:
1 to 1 to 1 to
Stage 29 30 and Stage 29 30 and Stage 29 30 and
2 DPD(3) > DPD(3) 2 DPD(3) > DPD(3) 2 DPD(3) > DPD(3)
$m $m $m $m $m $m % % %
------------- -------- -------- -------- ------- -------- -------- ------ -------- ----------
Loans and
advances
to customers
at amortised
cost 80,182 2,471 1,676 (2,284) (208) (247) 2.8 8.4 14.7
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
- personal 15,751 1,804 1,289 (1,336) (178) (217) 8.5 9.9 16.8
-------------
- corporate
and
commercial 59,599 657 385 (920) (30) (30) 1.5 4.6 7.8
-------------
- non-bank
financial
institutions 4,832 10 2 (28) - - 0.6 - -
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
Loans and
advances
to banks at
amortised
cost 1,450 - - (2) - - 0.1 - -
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
Other
financial
assets
measured at
amortised
cost 1,827 14 30 (38) - - 2.1 - -
------------- -------- -------- -------- ------- -------- -------- ------ -------- --------
1 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
3 Days past due ('DPD'). Up-to-date accounts in stage 2 are not shown in amounts presented above.
Measurement uncertainty and sensitivity analysis of ECL
estimates
Methodology
Our methodology in relation to the adoption and generation of
economic scenarios is described on page 92 of the Annual Report and
Accounts 2019. There have been no significant changes during the
3Q20 period. While in keeping with HSBC's methodology, the nature
of the current economic environment has led to extensive
application of management's judgement in determining the range of
possible outcomes, the number and severity of scenarios selected
and the probability weights assigned.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC, with reference to external forecasts specifically
for the purpose of calculating ECL.
Economic activity across our major markets started to recover in
3Q20 as governments eased restrictions that had been imposed
earlier in the year in response to the Covid-19 outbreak. Despite
this recovery, there are continued risks to economic activity,
which remain a source of significant uncertainty. These risks
include the resurgence of Covid-19 cases across multiple markets,
risks arising from the UK's departure from the EU, continued or
escalating US-China tensions and the political situation in Hong
Kong. Management has considered these issues and has reflected the
related economic uncertainty in the choice of scenarios and
probability weights at 3Q20.
Four global scenarios have been used for the purpose of
calculating ECL at 30 September 2020. These are the consensus
Central scenario, the consensus Downside scenario, the consensus
Upside scenario and an alternative Downside scenario. For Hong Kong
and Canada only, the consensus Downside scenario has been replaced
with a more severe scenario to better reflect management's view of
downside risks.
The scenarios used are:
-- The consensus Central scenario: This scenario features a
'V-shaped' shock to economic activity, as characterised by a deep,
initial contraction in GDP in 2020, followed by a sharp recovery in
2021. The Central scenario projects an annual contraction in GDP
across almost all our major markets in 2020, except in mainland
China. The Central scenario assumes that any measures taken during
the forecast period to contain future infections of Covid-19 will
be less stringent than the measures imposed in the first half of
this year, allowing economic activity to rebound and unemployment
to gradually reduce.
-- The consensus Downside scenario: This scenario features a
considerably weaker recovery in economic activity compared with the
Central scenario. In this scenario, there is a strong rise in
unemployment across our key markets and significant contraction in
equity markets and house prices. For Canada and Hong Kong,
management replaced the consensus Downside scenario with a more
severe scenario, which features a sharper downturn in GDP growth
and asset prices, and a further rise in unemployment.
-- The alternative Downside scenario: This scenario is
'U-shaped' and reflects management's view of tail risks and
features an extremely severe and prolonged recession.
-- The consensus Upside scenario: This scenario features a
faster recovery in economic activity in the near term, compared
with the Central scenario, with GDP growth returning to
pre-Covid-19 levels in 2021 in Hong Kong, mainland China, the UK
and the US.
Both the consensus Downside and the alternative Downside
scenarios are global in nature, and while they differ in severity,
they assume that the key risks to HSBC crystallise simultaneously.
For example, the Downside scenarios assume that the UK and EU fail
to agree a trade deal by 31 December 2020, when the transition
period ends, and this occurs in conjunction with a further
deterioration in the other global risks outlined at the start of
this section.
The range of macroeconomic projections across the various
scenarios is shown in the table below:
Forecast range of quarterly worst point of economic measures of key markets
Hong Kong Mainland China UK US
Central
scenario Central Central Central
five- scenario scenario scenario
year Worst five-year Worst five-year Worst five-year Worst
average point average point average point average point
------------- --------- ----------- ---------- ----------- ---------- ------------ ---------- ------------
(0.4) 3.7 to (3.9) (3.2)
to (15.8) (6.1) to (16.7) to (12.6)
GDP growth (4Q20) (4Q21) (4Q20) (4Q20)
rate (%) 2.6 (1Q21) 5.6 (1Q21) 2.5 (1Q21) 2.3 (1Q21)
------------- --------- ----------- ---------- ----------- ---------- ------------ ---------- ------------
5.7 to 5.0 to 7.3 to 8.1 to
Unemployment 8.0 (4Q20) 6.1 (1Q21) 10.5 (4Q20) 13.0 (4Q20)
rate (%) 4.0 (1Q21) 4.3 (1Q22) 5.6 (2Q21) 6.0 (4Q21)
------------- --------- ----------- ---------- ----------- ---------- ------------ ---------- ------------
(2.8) 4.2 to (0.2) 3.4 to
to (26.3) (25.8) to (24.7) (15.6)
House price (4Q20) (4Q20) (4Q20) (1Q21)
growth (%) 1.7 (1Q21) 4.4 (3Q21) 2.5 (2Q21) 3.8 (2Q21)
------------- --------- ----------- ---------- ----------- ---------- ------------ ---------- ------------
Note: The worst point refers to the quarter that is either the
trough or peak in the respective variable. The figures provided
represent the worst point across all scenarios: the consensus
Central, consensus Upside, the consensus Downside, the management
Downside and the alternative Downside.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are
short-term increases or decreases to the ECL at either a customer
or portfolio level to account for late-breaking events, model
deficiencies and expert credit judgement applied following
management review and challenge. We have internal governance in
place to monitor post-model adjustments regularly and, where
possible, to reduce the reliance on these through model
recalibration or redevelopment, as appropriate. Depending on the
path of the Covid-19 outbreak and the shape of the economic
recovery, we continue to anticipate the composition of modelled ECL
and management judgemental adjustments may still be revised
significantly over the remainder of 2020, particularly when the
economy resumes positive GDP growth and the uncertainty over
long-term unemployment abates.
Management judgemental adjustments made in estimating the
reported ECL at 30 September 2020 are set out in the following
table. The table includes adjustments in relation to data and model
limitations resulting from the Covid-19 outbreak, and as a result
of the regular process of model development and implementation. It
shows the adjustments applicable to the scenario-weighted ECL
numbers. Adjustments in relation to Downside scenarios are more
significant, as results are subject to greater uncertainty.
Management judgemental adjustments to ECL(1)
Retail Wholesale Total
$bn $bn $bn
----------------------------------------------- ------ --------- -------
Low-risk counterparties (banks, sovereigns and
government entities) (0.2) (0.9) (1.1)
----------------------------------------------- ------ --------- -----
Corporate lending adjustments - (0.9) (0.9)
----------------------------------------------- ------ --------- -----
Retail lending adjustments 0.3 - 0.3
----------------------------------------------- ------ --------- -----
Retail model default suppression adjustment 1.5 1.5
----------------------------------------------- ------ --------- -----
Total 1.6 (1.8) (0.2)
----------------------------------------------- ------ --------- -----
1 Management judgemental adjustments presented in the table
reflect increases and (decreases) to ECL, respectively.
Management judgemental adjustments at 31 December 2019 were an
increase to ECL of $75m for the wholesale portfolio and $131m for
the retail portfolio. This excludes adjustments for alternative
scenarios.
During 2020, management judgemental adjustments reflected the
volatile economic conditions associated with the Covid-19 pandemic.
Modelled ECL outcomes based on historical relationships generated
overly sensitive ECL outcomes in conditions outside the range of
historical experience. In addition, modelled relationships did not
reflect the effect of country-specific government support measures
and customer relief programmes. The composition of modelled ECL and
management judgemental adjustments changed significantly over 9M20
as certain economic measures, such as GDP growth rate, passed the
expected low point in a number of key markets and returned towards
those reflected in modelled relationships, subject to continued
uncertainty in the recovery paths of different economies. At 3Q20,
retail management judgemental adjustments led to an ECL increase of
$1.6bn, primarily from additional ECL of $1.5bn to reflect the
delaying effect of government support and customer relief measures
on potential defaults (4Q19: $0.1bn increase; 2Q20: $0.6bn
decrease). In the wholesale portfolio, management judgemental
adjustments were an ECL reduction of $1.8bn (4Q19: $0.1bn increase;
2Q20: $3.9bn decrease). The reduction of these adjustments in the
third quarter followed an improvement in macroeconomic assumptions
compared with the previous quarter, with models operating closer to
their calibration range. Overall, the 3Q20 ECL charge remained
stable, reflecting a stabilisation of economic conditions following
the sharp and significant deterioration in 1H20.
The adjustments at 30 September 2020 relating to low-credit-risk
exposures were mainly to highly rated banks, sovereigns and US
government-sponsored entities, where modelled credit factors did
not fully reflect the underlying fundamentals of these entities or
the effect of government support and economic programmes in the
Covid-19 environment.
Adjustments to corporate exposures principally reflect the
outcome of the 'credit experts best estimate' review on wholesale
corporate exposures. Management judgemental adjustments, both
positive and negative, have been made where modelled rating
migration, and ECL outputs based on historical relationships,
produced results that were overly sensitive. This can be the case
when using economic inputs that are well outside the range of
historical experience.
In retail, the adjustment, under low-risk counterparties and
economies, was to reduce ECL on insurance portfolios due to model
over-prediction of downgrades in the bank and sovereign portfolios.
Within retail lending adjustments, one of the main drivers of
adjustments was in relation to addressing risks associated with
customers on payment relief programmes across the markets. There
was also an adjustment made in relation to the UK, where modelled
probability of default outputs for the Downside scenarios were
adjusted to address model limitations, so as to be consistent with
longer-term relationships between unemployment and defaults.
Furthermore, a significant retail model default suppression
adjustment of $1.5bn at 30 September 2020 (31 December 2019: $0)
was applied as defaults remain suppressed due to customer relief
and government support programmes. Retail models are reliant on the
assumption that as macroeconomic conditions deteriorate, defaults
will crystallise. We will continue to monitor the continuation of
customer relief and government support programmes that have
supported stabilised macroeconomic conditions and therefore
suppress retail model defaults. We will adjust the timing of
management judgemental adjustments in retail model default to
ensure appropriate alignment with expected performance taking into
consideration the levels and timing of customer relief and
government support programmes.
Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against
the economic forecasts as part of the ECL governance process by
recalculating the ECL under each scenario described above for
selected portfolios, applying a 100% weighting to each scenario in
turn. The weighting is reflected in both the determination of a
significant increase in credit risk and the measurement of the
resulting ECL.
The ECL calculated for the Upside and Downside scenarios should
not be taken to represent the upper and lower limits of possible
ECL outcomes. The impact of defaults that might occur in the future
under different economic scenarios is captured by recalculating ECL
for loans in stages 1 and 2 at the balance sheet date. The
population of stage 3 loans (in default) at the balance sheet date
is unchanged in these sensitivity calculations. Stage 3 ECL would
only be sensitive to changes in forecasts of future economic
conditions if the loss-given default ('LGD') of a particular
portfolio was sensitive to these changes.
There is a particularly high degree of estimation uncertainty in
numbers representing tail risk scenarios when assigned a 100%
weighting.
For wholesale credit risk exposures, the sensitivity analysis
excludes ECL and financial instruments related to defaulted
obligors because the measurement of ECL is relatively more
sensitive to credit factors specific to the obligor than future
economic scenarios. Therefore, it is impracticable to separate the
effect of macroeconomic factors in individual assessments.
For retail credit risk exposures, the sensitivity analysis
includes ECL for loans and advances to customers related to
defaulted obligors. This is because the retail ECL for secured
mortgage portfolios, including loans in all stages, is sensitive to
macroeconomic variables.
Group ECL sensitivity results
The ECL charge for 9M20 was $7.6bn. The ECL charge, inclusive of
recoveries, comprised $5.1bn in respect of wholesale lending (of
which stage 3 and POCI was $2.6bn), $2.3bn in respect of personal
lending (of which stage 3 was $0.7bn) and $0.2bn in respect of
other financial assets measured at amortised cost and debt
instruments measured at FVOCI. The ECL impact of the scenarios and
judgemental management adjustments are highly sensitive to
movements in economic forecasts, including the efficacy of
government support measures. Based upon the sensitivity tables
presented above, if the Group ECL balance (excluding wholesale
stage 3, which is assessed individually) was estimated solely on
the basis of the Central scenario, Downside scenario or the
alternative Downside scenario at
30 September 2020, it would increase/(decrease) as presented in
the below table.
Retail(1,2) Wholesale(1,3)
Total Group ECL $bn $bn
------------------------------------ ----------- ----------------
Reported ECL 4.2 4.3
------------------------------------ ----------- --------------
Scenarios
------------------------------------ ----------- ----------------
100% consensus Central scenario (0.2) (0.7)
------------------------------------ ----------- --------------
100% consensus Downside scenario(4) 0.5 1.4
------------------------------------ ----------- --------------
100% alternative Downside scenario 1.9 6.7
------------------------------------ ----------- --------------
1 ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2 ECL sensitivity includes only on-balance sheet financial
instruments to which IFRS 9 impairment requirements are
applied.
3 Includes low credit-risk financial instruments, such as debt
instruments at FVOCI, which have high carrying values but low ECL
under all the scenarios.
4 For Hong Kong and Canada, this is the management Downside scenario.
There still remains a significant degree of uncertainty in
relation to the UK economic outlook. If a 100% weight were applied
to the consensus Downside and alternative Downside scenarios for
the UK, respectively, it would result in an increase in ECL of
$0.3bn and $1.3bn in Wholesale and $0.1bn and $0.5bn in Retail.
Personal lending
Total personal lending for loans and advances to customers by stage distribution
Gross carrying amount Allowance for ECL
Stage Stage Stage Total Stage Stage Stage Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
By portfolio
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
First lien residential mortgages 314,755 15,595 3,255 333,605 (118) (253) (414) (785)
- of which:
interest only (including
offset) 29,363 1,563 350 31,276 (11) (20) (81) (112)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
affordability (including US
adjustable rate mortgages) 12,336 2,872 635 15,843 (12) (9) (4) (25)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Other personal lending 103,915 12,410 2,171 118,496 (788) (1,926) (1,041) (3,755)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- other 85,337 7,128 1,417 93,882 (366) (786) (657) (1,809)
---------------------------------
- credit cards 16,494 5,139 690 22,323 (408) (1,122) (367) (1,897)
---------------------------------
- second lien residential
mortgages 616 112 53 781 (2) (9) (10) (21)
---------------------------------
- motor vehicle finance 1,468 31 11 1,510 (12) (9) (7) (28)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 30 Sep 2020 418,670 28,005 5,426 452,101 (906) (2,179) (1,455) (4,540)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
By geography
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
Europe 189,065 8,848 2,576 200,489 (277) (1,130) (808) (2,215)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: UK 153,112 7,603 1,760 162,475 (257) (1,032) (537) (1,826)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Asia 181,399 11,620 867 193,886 (284) (412) (222) (918)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: Hong Kong 127,785 5,363 210 133,358 (73) (266) (58) (397)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
MENA 4,998 418 272 5,688 (53) (115) (173) (341)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
North America 38,059 5,594 1,456 45,109 (103) (181) (139) (423)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Latin America 5,149 1,525 255 6,929 (189) (341) (113) (643)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 30 Sep 2020 418,670 28,005 5,426 452,101 (906) (2,179) (1,455) (4,540)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
By portfolio
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
First lien residential mortgages 312,031 7,077 3,070 322,178 (39) (68) (422) (529)
- of which:
interest only (including
offset) 31,201 1,602 376 33,179 (6) (15) (91) (112)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
affordability (including US
adjustable rate mortgages) 14,222 796 514 15,532 (3) (3) (3) (9)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Other personal lending 101,638 8,674 1,781 112,093 (544) (1,268) (793) (2,605)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- other 77,031 4,575 1,193 82,799 (229) (451) (491) (1,171)
---------------------------------
- credit cards 22,285 3,959 524 26,768 (310) (801) (284) (1,395)
---------------------------------
- second lien residential
mortgages 750 84 55 889 (1) (6) (10) (17)
---------------------------------
- motor vehicle finance 1,572 56 9 1,637 (4) (10) (8) (22)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 31 Dec 2019 413,669 15,751 4,851 434,271 (583) (1,336) (1,215) (3,134)
By geography
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
Europe 186,561 6,854 2,335 195,750 (112) (538) (578) (1,228)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: UK 153,313 5,455 1,612 160,380 (104) (513) (370) (987)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Asia 173,523 5,855 717 180,095 (223) (339) (170) (732)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: Hong Kong 117,013 2,751 189 119,953 (90) (220) (44) (354)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
MENA 5,671 247 299 6,217 (50) (58) (189) (297)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
North America 41,148 1,930 1,238 44,316 (56) (119) (141) (316)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Latin America 6,766 865 262 7,893 (142) (282) (137) (561)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 31 Dec 2019 413,669 15,751 4,851 434,271 (583) (1,336) (1,215) (3,134)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Total wholesale lending for loans and advances to banks and customers
at amortised cost
Gross carrying amount Allowance for ECL
Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- ---------
Corporate and commercial 401,032 119,269 12,253 288 532,842 (1,057) (2,293) (5,344) (112) (8,806)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
- agriculture, forestry
and fishing 5,915 739 315 2 6,971 (15) (24) (148) (1) (188)
------------------------------------------------------------
- mining and quarrying 8,659 3,735 1,306 12 13,712 (46) (106) (432) (12) (596)
------------------------------------------------------------
- manufacture 71,291 23,223 1,620 80 96,214 (158) (332) (761) (39) (1,290)
------------------------------------------------------------
* electricity, gas, steam and air-conditioning supply 12,426 2,294 116 - 14,836 (33) (32) (17) - (82)
------------------------------------------------------------
* water supply, sewerage, waste management and
remediation 2,300 699 43 - 3,042 (9) (15) (22) - (46)
------------------------------------------------------------
* construction 9,358 5,153 693 33 15,237 (29) (109) (390) (32) (560)
------------------------------------------------------------
* wholesale and retail trade, repair of motor vehicles
and motorcycles 66,500 21,778 3,119 12 91,409 (144) (271) (1,856) (3) (2,274)
------------------------------------------------------------
* transportation and storage 20,303 7,209 823 12 28,347 (80) (172) (222) - (474)
------------------------------------------------------------
* accommodation and food 13,899 11,321 473 1 25,694 (60) (232) (111) (1) (404)
------------------------------------------------------------
* publishing, audiovisual and broadcasting 17,041 3,437 161 31 20,670 (47) (99) (33) (5) (184)
------------------------------------------------------------
* real estate 109,113 17,510 1,367 1 127,991 (183) (322) (525) - (1,030)
------------------------------------------------------------
* professional, scientific and technical activities 16,317 8,206 501 31 25,055 (51) (107) (157) (7) (322)
------------------------------------------------------------
* administrative and support services 18,390 7,746 813 73 27,022 (49) (164) (244) (12) (469)
------------------------------------------------------------
* public administration and defence, compulsory social
security 1,890 465 3 - 2,358 (2) (10) (1) - (13)
------------------------------------------------------------
* education 1,530 552 37 - 2,119 (9) (20) (11) - (40)
------------------------------------------------------------
* health and care 4,772 1,268 254 - 6,294 (20) (37) (119) - (176)
------------------------------------------------------------
* arts, entertainment and recreation 1,368 1,182 182 - 2,732 (9) (48) (65) - (122)
------------------------------------------------------------
* other services 11,136 1,471 426 - 13,033 (107) (175) (229) - (511)
------------------------------------------------------------
* activities of households 625 153 - - 778 - (3) - - (3)
------------------------------------------------------------
* extra-territorial organisations and bodies activities 7 - - - 7 - - - - -
------------------------------------------------------------
- government 7,613 1,114 1 - 8,728 (6) (2) (1) - (9)
------------------------------------------------------------
- asset-backed securities 579 14 - - 593 - (13) - - (13)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Non-bank financial institutions 58,856 10,530 712 1 70,099 (57) (135) (163) (1) (356)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Loans and advances to
banks 81,277 2,627 - - 83,904 (37) (13) - - (50)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
At 30 Sep 2020 541,165 132,426 12,965 289 686,845 (1,151) (2,441) (5,507) (113) (9,212)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
By geography
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- ---------
Europe 169,448 39,595 7,013 126 216,182 (553) (1,209) (2,044) (53) (3,859)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
- of which: UK 116,881 28,386 5,104 78 150,449 (443) (971) (1,362) (38) (2,814)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Asia 289,156 58,792 2,729 116 350,793 (327) (447) (1,741) (43) (2,558)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
- of which: Hong Kong 173,104 35,238 990 47 209,379 (177) (272) (521) (24) (994)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
MENA 21,929 10,176 1,879 17 34,001 (76) (232) (1,162) (12) (1,482)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
North America 49,681 18,790 935 - 69,406 (89) (315) (332) - (736)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Latin America 10,951 5,073 409 30 16,463 (106) (238) (228) (5) (577)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
At 30 Sep 2020 541,165 132,426 12,965 289 686,845 (1,151) (2,441) (5,507) (113) (9,212)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Total wholesale lending for loans and advances to banks and customers
at amortised cost (continued)
Gross carrying amount Allowance for ECL
Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- ---------
Corporate and commercial 472,253 59,599 8,315 332 540,499 (672) (920) (3,747) (99) (5,438)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
- agriculture, forestry
and fishing 5,416 1,000 278 2 6,696 (13) (29) (139) (1) (182)
------------------------------------------------------------
- mining and quarrying 9,923 4,189 311 12 14,435 (22) (70) (122) (12) (226)
------------------------------------------------------------
- manufacture 88,138 14,525 1,581 136 104,380 (143) (211) (806) (50) (1,210)
------------------------------------------------------------
* electricity, gas, steam and air-conditioning supply 13,479 1,386 175 - 15,040 (14) (41) (25) - (80)
------------------------------------------------------------
* water supply, sewerage, waste management and
remediation 2,963 508 30 - 3,501 (6) (4) (18) - (28)
------------------------------------------------------------
- construction 10,520 3,883 852 32 15,287 (16) (49) (467) (32) (564)
------------------------------------------------------------
* wholesale and retail trade, repair of motor vehicles
and motorcycles 83,151 9,897 1,625 8 94,681 (111) (137) (934) (2) (1,184)
------------------------------------------------------------
- transportation and
storage 22,604 2,359 588 29 25,580 (42) (37) (158) - (237)
------------------------------------------------------------
- accommodation and
food 20,109 4,284 262 1 24,656 (37) (46) (62) (1) (146)
------------------------------------------------------------
* publishing, audiovisual and broadcasting 18,103 1,706 141 21 19,971 (30) (23) (33) (1) (87)
------------------------------------------------------------
- real estate 122,972 6,450 1,329 1 130,752 (108) (97) (475) - (680)
------------------------------------------------------------
* professional, scientific and technical activities 21,085 2,687 350 - 24,122 (31) (33) (145) - (209)
------------------------------------------------------------
* administrative and support services 21,370 3,817 438 89 25,714 (33) (58) (179) - (270)
------------------------------------------------------------
* public administration and defence, compulsory social
security 1,889 488 - - 2,377 (1) (7) - - (8)
------------------------------------------------------------
- education 1,700 184 16 - 1,900 (7) (5) (6) - (18)
------------------------------------------------------------
- health and care 3,543 811 111 - 4,465 (9) (20) (28) - (57)
------------------------------------------------------------
* arts, entertainment and recreation 2,537 257 30 - 2,824 (6) (8) (11) - (25)
------------------------------------------------------------
- other services 13,143 941 191 1 14,276 (35) (31) (133) - (199)
------------------------------------------------------------
- activities of households 725 66 - - 791 - - - - -
------------------------------------------------------------
* extra-territorial organisations and bodies activities 2 - - - 2 - - - - -
------------------------------------------------------------
- government 8,159 147 7 - 8,313 (6) (2) (6) - (14)
------------------------------------------------------------
- asset-backed securities 722 14 - - 736 (2) (12) - - (14)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
Non-bank financial institutions 65,661 4,832 212 - 70,705 (42) (28) (90) - (160)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
Loans and advances to
banks 67,769 1,450 - - 69,219 (14) (2) - - (16)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
At 31 Dec 2019 605,683 65,881 8,527 332 680,423 (728) (950) (3,837) (99) (5,614)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
By geography
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- ---------
Europe 190,528 20,276 4,671 129 215,604 (318) (458) (1,578) (45) (2,399)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
- of which: UK 131,007 16,253 3,343 79 150,682 (252) (385) (989) (32) (1,658)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
Asia 308,305 32,287 1,419 148 342,159 (228) (253) (986) (38) (1,505)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
- of which: Hong Kong 182,501 23,735 673 48 206,957 (118) (172) (475) (28) (793)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
MENA 25,470 3,314 1,686 18 30,488 (55) (85) (946) (12) (1,098)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
North America 64,501 7,495 458 - 72,454 (45) (96) (141) - (282)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
Latin America 16,879 2,509 293 37 19,718 (82) (58) (186) (4) (330)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
At 31 Dec 2019 605,683 65,881 8,527 332 680,423 (728) (950) (3,837) (99) (5,614)
------------------------------------------------------------ ------- ------ ----- ---- ------- ----- ----- ------- ---- -------
Customer relief programmes
In response to the Covid-19 outbreak, governments and regulators
around the world have introduced a number of support measures for
both personal and wholesale customers in market-wide schemes. The
following table presents the number of personal accounts/wholesale
customers and the associated drawn loan values of customers under
these schemes and HSBC-specific measures for major markets at 30
September 2020. In relation to personal lending, the majority of
relief measures, including payment holidays, relate to existing
lending, while in wholesale lending the relief measures comprise
payment holidays, refinancing of existing facilities and new
lending under government-backed schemes.
At 30 September 2020, the gross carrying value of loans to
personal customers under relief was $14.9bn (2Q20: $26.3bn). This
comprised $11.5bn in relation to mortgages (2Q20: $21.1bn) and
$3.4bn in relation to other personal lending (2Q20: $5.2bn). The
decrease in personal customer relief during the third quarter was
driven by customers exiting relief measures. The gross carrying
value of loans to wholesale customers under relief was $52.3bn
(2Q20: $51.8bn).
Personal lending
Other
Hong major
Extant at 30 September 2020 UK Kong US markets(1,2,3) Total
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s 17 - - 43 60
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 3,692 - - 3,474 7,166
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s 24 - - 92 116
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m 303 - - 2,032 2,335
--------------------------------------------- ---- ------ ------ ----- --------------- ------
HSBC-specific measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s - 3 2 11 16
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 17 1,259 1,016 2,035 4,327
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s - 1 20 37 58
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m - 92 138 824 1,054
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Total personal lending to major markets
under market-wide schemes and HSBC-specific
measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s 17 3 2 54 76
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 3,709 1,259 1,016 5,509 11,493
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s 24 1 20 129 174
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m 303 92 138 2,856 3,389
Market-wide schemes and HSBC-specific
measures - mortgage relief as a proportion
of total mortgages % 2.6 1.4 5.5 7.4 3.5
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes and HSBC-specific
measures - other personal lending
relief as a proportion of total other
personal lending loans and advances % 1.6 0.2 6.2 5.7 3.0
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Wholesale lending
Other
Hong major
Extant at 30 September 2020 UK Kong US markets(1) Total
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers under market-wide
measures 000s 187 5 4 7 203
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Drawn loan value of customers under
market-wide schemes $m 10,265 21,457 1,186 7,246 40,154
--------------------------------------------- ---- ------ ------ ----- --------------- --------
HSBC-specific schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers under HSBC-specific
measures 000s 5 - - 10 15
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Drawn loan value of customers under
HSBC-specific measures $m 4,031 1,274 1,103 5,787 12,195
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Total wholesale lending to major
markets under market-wide schemes
and HSBC-specific measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers(4) 000s 192 5 4 17 218
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value $m 14,296 22,731 2,289 13,033 52,349
Market-wide schemes and HSBC-specific
measures as a proportion of total
wholesale lending loans and advances % 9.8 12.1 5.4 6.8 9.2
--------------------------------------------- ---- ------ ------ ----- --------------- --------
1 Other major markets include Australia, Canada, mainland China,
Egypt, France, Germany, India, Indonesia, Malaysia, Mexico,
Singapore, Switzerland, Taiwan and UAE.
2 In Malaysia, personal lending customers are granted an
automatic moratorium programme for all eligible retail customers.
At 30 September 2020, the number of accounts under this moratorium
was 119,000 with an associated drawn balance of $3,944m.
3 In Mexico, there were 36,000 personal lending accounts under
customer relief with an associated drawn balance of $494m.
4 Within total wholesale customers, there were 2,000 customers
under both market-wide and HSBC-specific schemes.
The initial granting of customer relief does not automatically
trigger a migration to stage 2 or 3. However, information provided
by payment deferrals is considered in the context of other
reasonable and supportable information. This forms part of the
overall assessment for whether there has been a significant
increase in credit risk and credit impairment to identify loans for
which lifetime ECL is appropriate. An extension in payment deferral
does not automatically result in a migration to stage 2 or stage 3.
The key accounting and credit risk judgement to ascertain whether a
significant increase in credit risk has occurred is whether the
economic effects of the Covid-19 outbreak on the customer are
likely to be temporary over the lifetime of the loan, and whether
they indicate that a concession is being made in respect of
financial difficulty that would be consistent with stage 3.
On 2 September 2020, the Hong Kong Monetary Authority announced
that the Pre-approved Principal Payment Holiday Scheme for
Corporate Customers had been extended for a further six months to
April 2021. A summary of the other main market-wide and
HSBC-specific scheme was set out on pages 67 and 68 of the Interim
Report 2020.
Capital adequacy
Capital adequacy metrics
--------
At
30 Sep 30 Jun 31 Dec
2020 2020 2019
------------------------------------------- ------ ------ --------
Risk-weighted assets ('RWAs') ($bn)
------------------------------------------- ------ ------ --------
Credit risk 692.7 686.7 676.6
------------------------------------------- ------ ------ --------
Counterparty credit risk 41.6 43.1 44.1
------------------------------------------- ------ ------ --------
Market risk 31.3 35.2 29.9
------------------------------------------- ------ ------ --------
Operational risk 91.4 89.6 92.8
------------------------------------------- ------ ------ --------
Total risk-weighted assets 857.0 854.6 843.4
------------------------------------------- ------ ------ --------
Capital on a transitional basis ($bn)
------------------------------------------- ------ ------ --------
Common equity tier 1 ('CET1') capital 133.4 128.4 124.0
------------------------------------------- ------ ------ --------
Tier 1 capital 157.4 152.5 148.4
------------------------------------------- ------ ------ --------
Total capital 181.8 177.2 172.2
------------------------------------------- ------ ------ --------
Capital ratios on a transitional basis (%)
------------------------------------------- ------ ------ --------
CET1 15.6 15.0 14.7
------ ------
Tier 1 18.4 17.8 17.6
------------------------------------------- ------ ------
Total capital 21.2 20.7 20.4
------------------------------------------- ------ ------ ------
Capital on an end point basis ($bn)
------------------------------------------- ------ ------ --------
Common equity tier 1 ('CET1') capital 133.4 128.4 124.0
------------------------------------------- ------ ------ --------
Tier 1 capital 154.3 149.4 144.8
------------------------------------------- ------ ------ --------
Total capital 169.2 164.4 159.3
------------------------------------------- ------ ------ --------
Capital ratios on an end point basis (%)
------------------------------------------- ------ ------ --------
CET1 15.6 15.0 14.7
------------------------------------------- ------ ------ ------
Tier 1 18.0 17.5 17.2
------------------------------------------- ------ ------ ------
Total capital 19.7 19.2 18.9
------------------------------------------- ------ ------ ------
Liquidity coverage ratio ('LCR')
------------------------------------------- ------ ------ --------
Total high-quality liquid assets ($bn) 654.2 654.4 601.4
------------------------------------------- ------ ------ --------
Total net cash outflow ($bn) 446.3 442.9 400.5
------------------------------------------- ------ ------ --------
LCR ratio (%) 146.6 147.8 150.2
------------------------------------------- ------ ------ ------
Capital figures and ratios in the table above are calculated in
accordance with the revisions to the Capital Requirements
Regulation and Directive, as implemented ('CRR II'). The table
presents them under the transitional arrangements in CRR II for
capital instruments and after their expiry, known as the end point.
The end point figures in the table above take into account the
regulatory transitional arrangements in CRR II for IFRS 9, which
are more fully described below.
Where applicable, they also reflect government relief schemes
intended to mitigate the impact of the Covid-19 outbreak.
Regulatory transitional arrangements for IFRS 9 'Financial
Instruments'
We have adopted the regulatory transitional arrangements in CRR
II for IFRS 9, including paragraph four of article 473a. Our
capital and ratios are presented under these arrangements
throughout the table above, including in the end point figures.
Without their application, our CET1 ratio would be 15.4%.
The IFRS 9 regulatory transitional arrangements allow banks to
add back to their capital base a proportion (currently 70%) of the
impact that IFRS 9 has upon their loan loss allowances during the
first five years of use. The impact is defined as:
-- the increase in loan loss allowances on day one of IFRS 9 adoption; and
-- any subsequent increase in expected credit losses ('ECL') in
the non-credit-impaired book thereafter.
Any add-back must be tax affected and accompanied by a
recalculation of capital deduction thresholds, exposure and RWAs.
The impact is calculated separately for portfolios using the
standardised ('STD') and internal ratings based ('IRB') approaches.
For IRB portfolios, there is no add-back to capital unless loan
loss allowances exceed regulatory 12-month expected losses.
The EU's CRR 'Quick Fix' relief package enacted in June 2020
increased from 70% to 100% the relief that banks may take for loan
loss allowances recognised since 1 January 2020 on the
non-credit-impaired book.
At 30 September 2020, the add-back to CET1 capital amounted to
$1.5bn under the STD approach with a tax impact of $0.3bn.
Capital
At 30 September 2020, our CET1 ratio was 15.6%, up from 15.0% at
30 June 2020. CET1 capital increased during the quarter by $5.0bn,
mainly as a result of:
-- foreign currency translation differences of $2.8bn;
-- capital generation of $0.9bn through regulatory profits and
an increase of $0.1bn in FVOCI reserves;
-- a $0.4bn fall in the threshold deduction for significant
investments in financial sector entities; and
-- a fall in deductions from CET1 totalling $0.3bn, including
$0.2bn relating to goodwill and intangible assets and $0.1bn to
deferred tax.
The third quarter prudent valuation adjustment deduction of
$1.2bn included a $0.2bn increase arising from additional
uncertainty reserves for exit of over-the-counter derivative
transactions.
Leverage
Leverage ratio(1)
At
30 Sep 30 Jun
2020 2020
Ref Footnotes $bn $bn
*
----- ---------------------------------------------- --------- ----------------- -----------------
20 Tier 1 capital 154.3 149.4
----- ---------------------------------------------- --------- --------------- ---------------
21 Total leverage ratio exposure 2,857.4 2,801.4
----- ---------------------------------------------- --------- --------------- ---------------
% %
----- ---------------------------------------------- --------- ----------------- -----------------
22 Leverage ratio 5.4 5.3
----- ---------------------------------------------- --------- --------------- ---------------
EU-23 Choice of transitional arrangements for the Fully phased-in Fully phased-in
definition of the capital measure
----- ---------------------------------------------- --------- ----------------- -----------------
UK leverage ratio exposure - quarterly average 2 2,569.3 2,565.8
----- ---------------------------------------------- --------- --------------- ---------------
% %
----- ---------------------------------------------- --------- ----------------- -----------------
UK leverage ratio - quarterly average 2 6.0 5.7
----- ---------------------------------------------- --------- --------------- ---------------
UK leverage ratio - quarter end 2 6.1 5.9
----- ---------------------------------------------- --------- --------------- ---------------
* The references identify the lines prescribed in the EBA template.
1 The CRR II regulatory transitional arrangements for IFRS 9 are
applied in both leverage ratio calculations.
2 UK leverage ratio denotes the Group's leverage ratio
calculated under the PRA's UK leverage framework. This measure
excludes qualifying central bank balances and loans under the UK
Bounce Back Loan scheme from the calculation of exposure.
Our leverage ratio calculated in accordance with the Capital
Requirements Regulation in force was 5.4% at 30 September 2020, up
from 5.3% at 30 June 2020, primarily due to an increase in tier 1
capital.
At 30 September 2020, our UK minimum leverage ratio requirement
of 3.25% was supplemented by an additional leverage ratio buffer of
0.7% and a countercyclical leverage ratio buffer of 0.1%. These
additional buffers translated into capital values of $17.7bn and
$1.9bn respectively. We exceeded these leverage requirements.
Risk-weighted assets
RWAs by global business
Corporate
WPB CMB GBM Centre Total
$bn $bn $bn $bn $bn
------------------------- ----- ----- ----- --------- -------
Credit risk 137.8 305.6 169.4 79.9 692.7
------------------------- ----- ----- ----- --------- -----
Counterparty credit risk 0.7 0.2 40.1 0.6 41.6
------------------------- ----- ----- ----- --------- -----
Market risk 1.3 0.7 26.5 2.8 31.3
------------------------- ----- ----- ----- --------- -----
Operational risk 33.4 25.9 31.1 1.0 91.4
------------------------- ----- ----- ----- --------- -----
At 30 Sep 2020 173.2 332.4 267.1 84.3 857.0
------------------------- ----- ----- ----- --------- -----
RWA movement by global business by key driver
Credit risk, counterparty
credit risk and operational
risk
Corporate Market Total
WPB CMB GBM Centre risk RWAs
$bn $bn $bn $bn $bn $bn
--------------------------- ------- ------- ------- --------- ------ --------
RWAs at 1 July 2020 160.6 330.2 247.9 80.7 35.2 854.6
Asset size 8.9 (6.0) (8.2) (0.2) (5.3) (10.8)
--------------------------- ------- ------- ------- --------- ------ ------
Asset quality - 2.1 0.5 0.4 - 3.0
--------------------------- ------- ------- ------- --------- ------ ------
Model updates 0.3 0.1 (0.1) - - 0.3
--------------------------- ------- ------- ------- --------- ------ ------
Methodology and policy (0.5) (1.8) (3.5) 0.1 1.4 (4.3)
--------------------------- ------- ------- ------- --------- ------ ------
Foreign exchange movements 2.6 7.1 4.0 0.5 - 14.2
--------------------------- ------- ------- ------- --------- ------ ------
Total RWA movement 11.3 1.5 (7.3) 0.8 (3.9) 2.4
--------------------------- ------- ------- ------- --------- ------ ------
RWAs at 30 Sep 2020 171.9 331.7 240.6 81.5 31.3 857.0
--------------------------- ------- ------- ------- --------- ------ ------
Risk-weighted assets ('RWAs') rose by $2.4bn during 3Q20,
including an increase of $14.2bn due to foreign currency
translation differences. The $11.8bn decrease (excluding foreign
currency translation differences) comprised the movements described
by the following comments.
Asset size
The $10.8bn decrease in RWAs due to asset size movements was
predominantly due to reductions in GBM and CMB, and a $5.3bn
decrease in market risk RWAs, partly offset by $8.9bn growth in
WPB.
The $8.2bn fall in GBM RWAs included reductions in credit risk
totalling $7.4bn across all major regions, partly as a result of
$2.1bn from active portfolio management measures as well as from
reduced lending. It also included a $0.8bn fall in counterparty
credit risk RWAs, mainly as a result of trade actions in North
America.
The $6.0bn fall in CMB RWAs occurred mainly in North America,
Europe and Asia and reflected both repayments and $1.3bn of
reductions under management initiatives.
Market risk RWAs decreased by $5.3bn, largely due to changes in
market conditions, reduced sovereign exposures and management
initiatives.
These reductions were partly offset by an $8.9bn increase in WPB
RWAs, mostly from short-term lending in Hong Kong.
Asset quality
Changes in asset quality led to an RWA increase of $3.0bn,
mainly in CMB and GBM.
The $2.1bn increase in CMB RWAs was predominantly in Asia,
driven by credit migration. Total credit migration impacts in CMB
during 3Q20 were $4.8bn, but the effects in other regions were
largely offset by decreases due to changes in portfolio mix.
In GBM, the $0.5bn RWA increase was driven by credit rating
migration on derivative transactions in Europe and Asia. Other
credit migration impacts of $2.0bn were mostly offset by decreases
due to changes in portfolio mix.
Model updates
The $0.3bn RWA increase due to model updates mainly related to
North American revolving facilities.
Methodology and policy
The $4.3bn reduction in RWAs due to methodology and policy
changes was primarily due to RWA initiatives in GBM and CMB, mainly
in the form of risk parameter refinements in Asia and Europe, and a
reduction of $0.5bn from the introduction of the new infrastructure
supporting factor under the CRR 'Quick Fix' relief package. A
further RWA decrease of $0.5bn in WPB was largely due to
refinements in the mortgage portfolio.
Partly offsetting these reductions was a $1.4bn increase in
market risk RWAs, largely in relation to risks not captured by
internal models.
Summary information - global businesses
Analysis of significant items by global business is presented
below.
Reconciliation of reported results to adjusted results - global businesses
Nine months ended 30 Sep 2020
-----------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 16,679 10,148 11,695 150 38,672
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 13 17 97 (257) (130)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- customer redress programmes 5 17 - - 22
---------------------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses 8 - - - 8
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 2 - - (62) (248) (310)
---------------------------------------------------------- ---------
- restructuring and other related
costs 3 - - 159 (9) 150
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 16,692 10,165 11,792 (107) 38,542
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (2,545) (3,880) (1,218) - (7,643)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (2,545) (3,880) (1,218) - (7,643)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (11,440) (4,984) (7,565) (579) (24,568)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 412 59 771 973 2,215
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- customer redress programmes 45 1 - 7 53
---------------------------------------------------------- ---------
- impairment of goodwill and other
intangibles 309 44 578 151 1,082
---------------------------------------------------------- ---------
- restructuring and other related
costs 4 58 14 191 809 1,072
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters - - 2 6 8
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (11,028) (4,925) (6,794) 394 (22,353)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 2 - - 929 931
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items - - - 462 462
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- impairment of goodwill 5 - - - 462 462
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 2 - - 1,391 1,393
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 2,696 1,284 2,912 500 7,392
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 425 76 868 1,178 2,547
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- revenue 13 17 97 (257) (130)
---------------------------------------------------------- ---------
- operating expenses 412 59 771 973 2,215
---------------------------------------------------------- ---------
- share of profit in associates and
joint ventures - - - 462 462
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 3,121 1,360 3,780 1,678 9,939
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 459,516 343,702 236,902 1,220 1,041,340
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 459,516 343,702 236,902 1,220 1,041,340
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 793,612 431,021 343,365 716 1,568,714
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 793,612 431,021 343,365 716 1,568,714
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
4 Includes impairment of software intangible assets of $173m (of
the total software intangible asset impairment of $1,320m) and
impairment of tangible assets of $124m.
5 During the year, The Saudi British Bank ('SABB'), an associate
of HSBC, impaired the goodwill that arose following the merger with
Alawwal bank in 2019. HSBC's post-tax share of the goodwill
impairment was $462m.
Reconciliation of reported results to adjusted results - global businesses
(continued)
Nine months ended 30 Sep 2019(1)
-----------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 2
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 19,238 11,576 11,223 690 42,727
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (272) (143) (156) (34) (605)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 126 13 37 (1,136) (960)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* customer redress programmes 108 9 - 1 118
---------------------------------------------------------- ---------
* disposal, acquisitions and investment in new
businesses 4 - - (827) (823)
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 7 4 40 (311) (260)
---------------------------------------------------------- ---------
- currency translation on significant
items 7 - (3) 1 5
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 19,092 11,446 11,104 (480) 41,162
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (1,012) (906) (124) 19 (2,023)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 58 27 7 - 92
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (954) (879) (117) 19 (1,931)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (12,669) (5,139) (7,267) (221) (25,296)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 198 67 73 38 376
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 1,083 45 167 283 1,578
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* costs of structural reform 4 - 4 36 86 126
---------------------------------------------------------- ---------
- customer redress programmes 1,084 15 - (1) 1,098
---------------------------------------------------------- ---------
- restructuring and other related
costs 70 27 131 199 427
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters (66) - - - (66)
---------------------------------------------------------- ---------
* currency translation on significant items (5) (1) - (1) (7)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (11,388) (5,027) (7,027) 100 (23,342)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 50 - - 1,786 1,836
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (2) - - (30) (32)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 48 - - 1,756 1,804
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 5,607 5,531 3,832 2,274 17,244
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (18) (49) (76) (26) (169)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 1,209 58 204 (853) 618
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* revenue 126 13 37 (1,136) (960)
---------------------------------------------------------- ---------
* operating expenses 1,083 45 167 283 1,578
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 6,798 5,540 3,960 1,395 17,693
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 422,503 341,396 252,713 1,221 1,017,833
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 12,094 7,196 5,141 49 24,480
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 434,597 348,592 257,854 1,270 1,042,313
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 718,643 355,293 299,109 696 1,373,741
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 15,195 8,012 7,944 37 31,188
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 733,838 363,305 307,053 733 1,404,929
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
1 A change in reportable segments was made in 2Q20. Comparative
data have been re-presented accordingly.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises costs associated with preparations for the UK's exit from the European Union.
Reconciliation of reported results to adjusted results - global businesses
Quarter ended 30 Sep 2020
-----------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 5,409 3,148 3,510 (140) 11,927
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 32 17 104 (15) 138
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* customer redress programmes 31 17 - - 48
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses 1 - - (1) -
---------------------------------------------------------- ---------
* fair value movements on financial instruments 2 - - 3 (14) (11)
---------------------------------------------------------- ---------
* restructuring and other related costs 3 - - 101 - 101
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 5,441 3,165 3,614 (155) 12,065
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (343) (354) (100) 12 (785)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (343) (354) (100) 12 (785)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (3,871) (1,587) (2,412) (171) (8,041)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 189 (48) 130 359 630
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* customer redress programmes (4) - - 7 3
---------------------------------------------------------- ---------
* impairment of goodwill and other intangibles 224 3 11 (181) 57
---------------------------------------------------------- ---------
* restructuring and other related costs 4 (31) (51) 119 530 567
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters - - - 3 3
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (3,682) (1,635) (2,282) 188 (7,411)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 10 - - (37) (27)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items - - - 462 462
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* impairment of goodwill 5 - - - 462 462
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 10 - - 425 435
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 1,205 1,207 998 (336) 3,074
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 221 (31) 234 806 1,230
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* revenue 32 17 104 (15) 138
---------------------------------------------------------- ---------
* operating expenses 189 (48) 130 359 630
---------------------------------------------------------- ---------
* share of profit in associates and joint ventures - - - 462 462
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 1,426 1,176 1,232 470 4,304
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 459,516 343,702 236,902 1,220 1,041,340
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 459,516 343,702 236,902 1,220 1,041,340
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 793,612 431,021 343,365 716 1,568,714
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 793,612 431,021 343,365 716 1,568,714
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
4 Includes impairment of tangible assets of $124m.
5 During the quarter, The Saudi British Bank ('SABB'), an
associate of HSBC, impaired the goodwill that arose following the
merger with Alawwal bank in 2019. HSBC's post-tax share of the
goodwill impairment was $462m.
Reconciliation of reported results to adjusted results - global businesses
(continued)
Quarter ended 30 June 2020
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 1
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 5,656 3,267 4,240 (104) 13,059
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 113 76 98 (8) 279
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items (26) - 185 (64) 95
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- customer redress programmes (26) - - - (26)
--------------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses - - - 1 1
--------------------------------------------------- ---------
- fair value movements on financial
instruments 2 - - 121 (63) 58
--------------------------------------------------- ---------
- restructuring and other related
costs 3 - - 58 - 58
--------------------------------------------------- ---------
- currency translation on significant
items - - 6 (2) 4
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 5,743 3,343 4,523 (176) 13,433
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (1,094) (2,151) (573) (14) (3,832)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (34) (61) (22) (1) (118)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (1,128) (2,212) (595) (15) (3,950)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (3,745) (1,698) (2,801) (431) (8,675)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (95) (47) (93) 9 (226)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 223 112 650 476 1,461
--------
- customer redress programmes 48 1 - - 49
* impairment of goodwill and other intangibles 85 41 567 332 1,025
--------------------------------------------------- ---------
- restructuring and other related
costs 4 82 63 58 132 335
--------------------------------------------------- ---------
- settlements and provisions in connection
with legal and regulatory matters - - - 4 4
--------------------------------------------------- ---------
- currency translation on significant
items 8 7 25 8 48
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (3,617) (1,633) (2,244) 54 (7,440)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (4) - - 541 537
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation - - - 16 16
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (4) - - 557 553
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit/(loss) before tax
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 813 (582) 866 (8) 1,089
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (16) (32) (17) 16 (49)
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 197 112 835 412 1,556
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- revenue (26) - 185 (64) 95
--------------------------------------------------- ---------
- operating expenses 223 112 650 476 1,461
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 994 (502) 1,684 420 2,596
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 429,487 344,567 243,355 1,272 1,018,681
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 11,162 7,276 4,824 41 23,303
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 440,649 351,843 248,179 1,313 1,041,984
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
--------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 775,870 418,263 337,573 674 1,532,380
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 14,347 9,642 8,674 29 32,692
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 790,217 427,905 346,247 703 1,565,072
--------------------------------------------------- --------- -------- ---------- ------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Fair value movements on financial instruments include
non-qualifying hedges and debt valuation adjustments on
derivatives.
3 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
4 Includes impairment of software intangible assets of $173m.
Reconciliation of reported results to adjusted results - global businesses
(continued)
Quarter ended 30 Sep 2019(1)
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 2
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 6,084 3,764 3,527 (20) 13,355
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 29 26 26 (5) 76
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 117 10 (38) (173) (84)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- customer redress programmes 108 9 - 1 118
---------------------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses 4 - - - 4
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 - - (37) (173) (210)
---------------------------------------------------------- ---------
- currency translation on significant
items 5 1 (1) (1) 4
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 6,230 3,800 3,515 (198) 13,347
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (451) (410) (26) 4 (883)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 24 9 6 1 40
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (427) (401) (20) 5 (843)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (4,241) (1,771) (2,279) 144 (8,147)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (29) (17) (40) 8 (78)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 433 20 47 120 620
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- costs of structural reform 4 - 1 7 27 35
---------------------------------------------------------- ---------
- customer redress programmes 469 16 4 (1) 488
----------------------------------------------------------
- restructuring and other related
costs 13 3 35 89 140
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters (65) - - 1 (64)
---------------------------------------------------------- ---------
- currency translation on significant
items 16 - 1 4 21
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (3,837) (1,768) (2,272) 272 (7,605)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 7 - - 505 512
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation - - - 7 7
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 7 - - 512 519
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 1,399 1,583 1,222 633 4,837
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 24 18 (8) 11 45
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 550 30 9 (53) 536
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- revenue 117 10 (38) (173) (84)
---------------------------------------------------------- ---------
- operating expenses 433 20 47 120 620
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 1,973 1,631 1,223 591 5,418
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 422,503 341,396 252,713 1,221 1,017,833
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 12,094 7,196 5,141 49 24,480
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 434,597 348,592 257,854 1,270 1,042,313
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 718,643 355,293 299,109 696 1,373,741
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 15,195 8,012 7,944 37 31,188
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 733,838 363,305 307,053 733 1,404,929
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
1 A change in reportable segments was made in 2Q20. Comparative
data have been re-presented accordingly.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises costs associated with preparations for the UK's exit from the European Union.
Summary information - geographical regions
Analysis of significant items by geographical regions is
presented below.
Reconciliation of reported results to adjusted results - geographical
regions
Nine months ended 30 Sep 2020
---------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 2 13,465 20,904 2,002 4,887 2,323 38,672
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items (140) (36) (1) 55 (8) (130)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
- customer redress programmes 22 - - - - 22
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses - - - 8 - 8
---------------------------------------------------------- ---------
- fair value movement on financial
instruments 3 (264) (36) (1) (1) (8) (310)
---------------------------------------------------------- ---------
- restructuring and other related
costs 4 102 - - 48 - 150
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 2 13,325 20,868 2,001 4,942 2,315 38,542
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
ECL
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported (3,238) (1,962) (721) (873) (849) (7,643)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted (3,238) (1,962) (721) (873) (849) (7,643)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 2 (13,159) (9,773) (1,192) (3,998) (1,355) (24,568)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items 1,555 48 65 517 30 2,215
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
- customer redress programmes 53 - - - - 53
---------------------------------------------------------- ---------
- impairment of goodwill and
other intangibles 800 - 60 222 - 1,082
---------------------------------------------------------- ---------
- restructuring and other related
costs 5 694 48 5 295 30 1,072
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 8 - - - - 8
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 2 (11,604) (9,725) (1,127) (3,481) (1,325) (22,353)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported (44) 1,387 (415) - 3 931
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items - - 462 - - 462
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
- impairment of goodwill 6 - - 462 - - 462
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted (44) 1,387 47 - 3 1,393
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported (2,976) 10,556 (326) 16 122 7,392
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items 1,415 12 526 572 22 2,547
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
- revenue (140) (36) (1) 55 (8) (130)
---------------------------------------------------------- ---------
- operating expenses 1,555 48 65 517 30 2,215
---------------------------------------------------------- ---------
- share of profit in associates
and joint ventures - - 462 - - 462
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted (1,561) 10,568 200 588 144 9,939
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 398,181 484,125 29,307 110,394 19,333 1,041,340
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 398,181 484,125 29,307 110,394 19,333 1,041,340
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 593,172 732,367 40,815 177,478 24,882 1,568,714
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 593,172 732,367 40,815 177,478 24,882 1,568,714
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Amounts are non-additive across geographical regions due to
inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
5 Includes impairment of software intangible assets of $173m (of
the total software intangible asset impairment of $1,320m) and
impairment of tangible assets of $124m.
6 During the year, The Saudi British Bank ('SABB'), an associate
of HSBC, impaired the goodwill that arose following the merger with
Alawwal bank in 2019. HSBC's post-tax share of the goodwill
impairment was $462m.
Reconciliation of reported results to adjusted results - geographical
regions (continued)
Nine months ended 30 Sep 2019
---------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 2 13,481 23,174 2,946 4,984 2,579 42,727
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation 2 (53) (62) (9) (23) (491) (605)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items (173) 20 (827) 12 8 (960)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
* customer redress programmes 118 - - - - 118
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses - - (828) 4 1 (823)
---------------------------------------------------------- ---------
* fair value movements on financial instruments 3 (295) 20 - 8 7 (260)
---------------------------------------------------------- ---------
* currency translation on significant items 4 - 1 - - 5
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 2 13,255 23,132 2,110 4,973 2,096 41,162
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
ECL
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported (810) (542) (65) (140) (466) (2,023)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation 6 2 (2) 1 85 92
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted (804) (540) (67) (139) (381) (1,931)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 2 (13,633) (9,795) (1,052) (3,799) (1,454) (25,296)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation 2 25 77 15 14 278 376
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items 1,433 72 8 52 13 1,578
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
* costs of structural reform 4 123 3 - - - 126
* customer redress programmes 1,098 - - - - 1,098
---------------------------------------------------------- ---------
* restructuring and other related costs 278 72 8 52 17 427
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters (65) (1) - - - (66)
---------------------------------------------------------- ---------
* currency translation on significant items (1) (2) - - (4) (7)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 2 (12,175) (9,646) (1,029) (3,733) (1,163) (23,342)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 18 1,594 212 - 12 1,836
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation 1 (31) - - (2) (32)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 19 1,563 212 - 10 1,804
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported (944) 14,431 2,041 1,045 671 17,244
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation (21) (14) 4 (8) (130) (169)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Significant items 1,260 92 (819) 64 21 618
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
- revenue (173) 20 (827) 12 8 (960)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
- operating expenses 1,433 72 8 52 13 1,578
Adjusted 295 14,509 1,226 1,101 562 17,693
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 377,153 478,015 28,091 111,963 22,611 1,017,833
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation 20,084 8,204 (701) (420) (2,687) 24,480
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 397,237 486,219 27,390 111,543 19,924 1,042,313
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- -----------
Reported 496,874 672,557 36,768 142,781 24,761 1,373,741
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Currency translation 25,650 10,001 (896) (443) (3,124) 31,188
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
Adjusted 522,524 682,558 35,872 142,338 21,637 1,404,929
---------------------------------------------------------- --------- -------- ------- ------- ------- ------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Amounts are non-additive across geographical regions due to
inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises costs associated with preparations for the UK's exit from the European Union.
Reconciliation of reported results to adjusted results - geographical
regions (continued)
Quarter ended 30 Sep 2020
-------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 4,489 6,324 623 1,482 746 11,927
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 90 (2) - 49 1 138
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- customer redress programmes 48 - - - - 48
- fair value movements on financial
instruments 3 (12) (2) - 2 1 (11)
---------------------------------------------------------- ---------
- restructuring and other related
costs 4 54 - - 47 - 101
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 4,579 6,322 623 1,531 747 12,065
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
ECL
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (353) (144) (110) 14 (192) (785)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted (353) (144) (110) 14 (192) (785)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 (4,058) (3,343) (429) (1,503) (445) (8,041)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 224 30 24 333 19 630
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- customer redress programmes 3 - - - - 3
---------------------------------------------------------- ---------
- impairment of goodwill and
other intangibles (184) - 19 222 - 57
---------------------------------------------------------- ---------
- restructuring and other related
costs 5 402 30 5 111 19 567
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 3 - - - - 3
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 (3,834) (3,313) (405) (1,170) (426) (7,411)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 6 350 (384) - 1 (27)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items - - 462 - - 462
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- impairment of goodwill 6 - - 462 - - 462
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 6 350 78 - 1 435
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 84 3,187 (300) (7) 110 3,074
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 314 28 486 382 20 1,230
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- revenue 90 (2) - 49 1 138
---------------------------------------------------------- ---------
- operating expenses 224 30 24 333 19 630
---------------------------------------------------------- ---------
- share of profit in associates
and joint ventures - - 462 - - 462
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 398 3,215 186 375 130 4,304
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 398,181 484,125 29,307 110,394 19,333 1,041,340
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 398,181 484,125 29,307 110,394 19,333 1,041,340
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 593,172 732,367 40,815 177,478 24,882 1,568,714
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 593,172 732,367 40,815 177,478 24,882 1,568,714
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Amounts are non-additive across geographical regions due to
inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
5 Includes impairment of tangible assets of $124m.
6 During the quarter, The Saudi British Bank ('SABB'), an
associate of HSBC, impaired the goodwill that arose following the
merger with Alawwal bank in 2019. HSBC's post-tax share of the
goodwill impairment was $462m.
Reconciliation of reported to adjusted results - geographical regions
(continued)
Quarter ended 30 Jun 2020
-------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 4,556 7,021 689 1,701 714 13,059
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 200 72 (3) 15 15 279
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 2 64 - 21 8 95
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- customer redress programmes (26) - - - - (26)
---------------------------------------------------------- ---------
- disposals, acquisitions and
investment in new businesses - - - 1 - 1
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 (23) 64 - 10 7 58
---------------------------------------------------------- ---------
- restructuring and other related
costs 4 48 - - 10 - 58
---------------------------------------------------------- ---------
- currency translation on significant
items 3 - - - 1 4
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 4,758 7,157 686 1,737 737 13,433
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
ECL
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (2,017) (818) (278) (379) (340) (3,832)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (84) (13) - (5) (16) (118)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted (2,101) (831) (278) (384) (356) (3,950)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 (5,139) (3,146) (394) (1,188) (430) (8,675)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 (192) (40) 2 (10) (6) (226)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 1,327 16 41 67 10 1,461
---------------------------------------------------------- ---------
- customer redress programmes 49 - - - - 49
---------------------------------------------------------- ---------
- goodwill impairment 984 - 41 - - 1,025
---------------------------------------------------------- ---------
- restructuring and other related
costs 5 239 17 - 68 11 335
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 4 - - - - 4
---------------------------------------------------------- ---------
- currency translation on significant
items 51 (1) - (1) (1) 48
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 (4,004) (3,170) (351) (1,131) (426) (7,440)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 51 572 (87) - 1 537
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 14 - - - 16
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 53 586 (87) - 1 553
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (2,549) 3,629 (70) 134 (55) 1,089
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (74) 33 (1) - (7) (49)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 1,329 80 41 88 18 1,556
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- revenue 2 64 - 21 8 95
---------------------------------------------------------- ---------
- operating expenses 1,327 16 41 67 10 1,461
Adjusted (1,294) 3,742 (30) 222 (44) 2,596
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 378,729 474,739 29,615 115,813 19,785 1,018,681
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 17,452 4,435 (275) 984 707 23,303
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 396,181 479,174 29,340 116,797 20,492 1,041,984
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 562,505 723,072 41,197 180,489 25,117 1,532,380
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 25,896 5,292 (322) 1,132 694 32,692
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 588,401 728,364 40,875 181,621 25,811 1,565,072
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Amounts are non-additive across geographical regions due to
inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
5 Includes impairment of software intangible assets of $173m.
Reconciliation of reported to adjusted results - geographical regions
Quarter ended 30 Sep 2019
-------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 4,229 7,715 703 1,619 679 13,355
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 193 36 (12) (4) (135) 76
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items (66) (20) - 4 (2) (84)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- customer redress programmes 118 - - - - 118
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses - - - 4 - 4
---------------------------------------------------------- ---------
* fair value movements on financial instruments 3 (188) (20) - - (2) (210)
---------------------------------------------------------- ---------
- currency translation on significant
items 4 - - - - 4
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 4,356 7,731 691 1,619 542 13,347
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
ECL
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (274) (282) (16) (80) (231) (883)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (7) (2) (1) - 50 40
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted (281) (284) (17) (80) (181) (843)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 (4,389) (3,305) (358) (1,240) (445) (8,147)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 (183) (4) 8 3 96 (78)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 570 27 3 17 3 620
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- costs of structural reform 4 33 2 - - - 35
---------------------------------------------------------- ---------
- customer redress programmes 488 - - - - 488
---------------------------------------------------------- ---------
- restructuring and other related
costs 89 25 3 18 5 140
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters (64) - - - - (64)
---------------------------------------------------------- ---------
- currency translation on significant
items 24 - - (1) (2) 21
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 (4,002) (3,282) (347) (1,220) (346) (7,605)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 10 523 (24) - 3 512
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 1 7 - - (1) 7
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 11 530 (24) - 2 519
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (424) 4,651 305 299 6 4,837
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 4 37 (5) (1) 10 45
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 504 7 3 21 1 536
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- revenue (66) (20) - 4 (2) (84)
---------------------------------------------------------- ---------
- operating expenses 570 27 3 17 3 620
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 84 4,695 303 319 17 5,418
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 377,153 478,015 28,091 111,963 22,611 1,017,833
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 20,084 8,204 (701) (420) (2,687) 24,480
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 397,237 486,219 27,390 111,543 19,924 1,042,313
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 496,874 672,557 36,768 142,781 24,761 1,373,741
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 25,650 10,001 (896) (443) (3,124) 31,188
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 522,524 682,558 35,872 142,338 21,637 1,404,929
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Amounts are non-additive across geographical regions due to
inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises costs associated with preparations for the UK's exit from the European Union.
Dividend on preference shares
A quarterly dividend of $15.50 per 6.20% non-cumulative US
dollar preference share, Series A ('Series A dollar preference
share'), (equivalent to a dividend of $0.3875 per Series A American
Depositary Share, each of which represents one-fortieth of a Series
A dollar preference share), and GBP0.01 per Series A sterling
preference share is payable on 15 March, 15 June, 15 September and
15 December 2020 for the quarter then ended at the sole and
absolute discretion of the Board of HSBC Holdings plc. Accordingly,
the Board of HSBC Holdings plc has approved a quarterly dividend to
be payable on 15 December 2020 to holders of record on 30 November
2020.
For and on behalf of
HSBC Holdings plc
Aileen Taylor
Group Company Secretary and Chief Governance Officer
The Board of Directors of HSBC Holdings plc as at the date of
this announcement are: Mark Tucker*, Laura Cha , Henri de Castries
,
James Anthony Forese , Steven Guggenheimer , Irene Lee , José
Antonio Meade Kuribreña , Heidi Miller , Eileen K Murray , David
Nish , Noel Quinn, Ewen Stevenson, Jackson Tai and Pauline van der
Meer Mohr .
* Non-executive Group Chairman
Independent non-executive Director
Terms and abbreviations
1H19 First half of 2019
-------------- --------------------------------------------------------------
1H20 First half of 2020
-------------- --------------------------------------------------------------
1Q19 First quarter of 2019
-------------- --------------------------------------------------------------
1Q20 First quarter of 2020
-------------- --------------------------------------------------------------
2Q19 Second quarter of 2019
2Q20 Second quarter of 2020
-------------- --------------------------------------------------------------
3Q19 Third quarter of 2019
-------------- --------------------------------------------------------------
3Q20 Third quarter of 2020
-------------- --------------------------------------------------------------
4Q19 Fourth quarter of 2019
-------------- --------------------------------------------------------------
4Q20 Fourth quarter of 2020
-------------- --------------------------------------------------------------
9M19 Nine months to 30 September 2019
-------------- --------------------------------------------------------------
9M20 Nine months to 30 September 2020
-------------- --------------------------------------------------------------
AIEA Average interest-earning assets
-------------- --------------------------------------------------------------
BoCom Bank of Communications Co., Limited, one of China's largest
banks
-------------- --------------------------------------------------------------
Bps Basis points. One basis point is equal to one-hundredth
of a percentage point
-------------- --------------------------------------------------------------
BSM Balance Sheet Management
-------------- --------------------------------------------------------------
C&L Credit and Lending
-------------- --------------------------------------------------------------
CET1 Common equity tier 1
-------------- --------------------------------------------------------------
CMB Commercial Banking, a global business
-------------- --------------------------------------------------------------
CODM Chief Operating Decision Maker
-------------- --------------------------------------------------------------
Corporate Centre comprises Central Treasury, our legacy
Corporate businesses, interests in our associates and joint ventures,
Centre central stewardship costs and the UK bank levy
-------------- --------------------------------------------------------------
CRR II Revised Capital Requirements Regulation and Directive, as
implemented
-------------- --------------------------------------------------------------
DPD Days past due
-------------- --------------------------------------------------------------
EBA European Banking Authority
-------------- --------------------------------------------------------------
Expected credit losses. In the income statement, ECL is
recorded as a change in expected credit losses and other
credit impairment charges. In the balance sheet, ECL is
recorded as an allowance for financial instruments to which
only the impairment requirements in
ECL IFRS 9 are applied
-------------- --------------------------------------------------------------
ESG Environmental, social and governance
-------------- --------------------------------------------------------------
FTE Full-time equivalent staff
-------------- --------------------------------------------------------------
FVOCI Fair value through other comprehensive income
-------------- --------------------------------------------------------------
GBM Global Banking and Markets, a global business
GEC Group Executive Committee
-------------- --------------------------------------------------------------
GLCM Global Liquidity and Cash Management
-------------- --------------------------------------------------------------
GPB Global Private Banking, a former global business now part
of Wealth and Personal Banking
-------------- --------------------------------------------------------------
Group HSBC Holdings together with its subsidiary undertakings
-------------- --------------------------------------------------------------
GTRF Global Trade and Receivables Finance
-------------- --------------------------------------------------------------
Hong Kong Hong Kong Special Administrative Region of the People's
Republic of China
-------------- --------------------------------------------------------------
HSBC HSBC Holdings together with its subsidiary undertakings
-------------- --------------------------------------------------------------
HSBC Bank HSBC Bank plc, also known as the non-ring-fenced bank
-------------- --------------------------------------------------------------
HSBC Holdings HSBC Holdings plc, the parent company of HSBC
-------------- --------------------------------------------------------------
HSBC UK HSBC UK Bank plc, also known as the ring-fenced bank
-------------- --------------------------------------------------------------
IAS International Accounting Standards
-------------- --------------------------------------------------------------
IFRSs International Financial Reporting Standards
-------------- --------------------------------------------------------------
IRB Internal ratings based
-------------- --------------------------------------------------------------
JV Joint venture
-------------- --------------------------------------------------------------
LCR Liquidity coverage ratio
-------------- --------------------------------------------------------------
LGD Loss given default
-------------- --------------------------------------------------------------
Mainland China People's Republic of China excluding Hong Kong and Macau
-------------- --------------------------------------------------------------
MENA Middle East and North Africa
-------------- --------------------------------------------------------------
Net operating Net operating income before change in expected credit losses
income and other credit impairment charges, also referred to as
revenue
-------------- --------------------------------------------------------------
NIM Net interest margin
-------------- --------------------------------------------------------------
POCI Purchased or originated credit-impaired financial assets
-------------- --------------------------------------------------------------
PRA Prudential Regulation Authority (UK)
-------------- --------------------------------------------------------------
RBWM Retail Banking and Wealth Management, a former global business
now part of Wealth and Personal Banking
-------------- --------------------------------------------------------------
Revenue Net operating income before ECL
-------------- --------------------------------------------------------------
RoE Return on equity
-------------- --------------------------------------------------------------
RoTE Return on average tangible equity
-------------- --------------------------------------------------------------
RWAs Risk-weighted assets
-------------- --------------------------------------------------------------
SABB The Saudi British Bank
-------------- --------------------------------------------------------------
ServCo group Separately incorporated group of service companies set up
in response to UK ring-fencing proposals
-------------- --------------------------------------------------------------
WPB Wealth and Personal Banking, a global business
-------------- --------------------------------------------------------------
$m/$bn/$tn United States dollar millions/billions/trillions. We report
in US dollars
-------------- --------------------------------------------------------------
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3077D_1-2020-10-27.pdf
Registered office and Group Head office: 8 Canada Square,
London, E14 5HQ, United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered
number 617987
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