TIDMHSBA
RNS Number : 0463Q
HSBC Holdings PLC
23 February 2021
Financial review
77 Financial summary
85 Global businesses and geographical regions
103 Reconciliation of alternative performance measures
World's first corporate bonds to tackle plastic waste
Our green expertise and global connectivity helped Henkel, a
leading consumer goods and industrial company, to issue the first
ever corporate bonds aimed at tackling plastic waste.
The firm behind well-known brands and products such as Persil
detergent, Schwarzkopf shampoo and Loctite adhesives will use the
equivalent of $100m raised for projects and expenditures related to
its activities to foster a circular economy, which include the
development of reusable and recyclable packaging.
We were sole green structuring adviser and sole lead manager on
the five-year fixed-rate bonds, which were issued in two tranches.
The bonds generated interest from international investors from
Japanese insurers to German banks.
Financial summary
Page
Use of alternative performance
measures 77
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Changes from 1 January 2020 77
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Critical accounting estimates
and judgements 77
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Consolidated income statement 78
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Income statement commentary 80
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Consolidated balance sheet 84
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Use of alternative performance measures
Our reported results are prepared in accordance with IFRSs as
detailed in the financial statements starting on page 278.
To measure our performance, we supplement our IFRS figures with
non-IFRS measures that constitute alternative performance measures
under European Securities and Markets Authority guidance and
non-GAAP financial measures defined in and presented in accordance
with US Securities and Exchange Commission rules and regulations.
These measures include those derived from our reported results that
eliminate factors that distort year-on-year comparisons. The
'adjusted performance' measure used throughout this report is
described below. Definitions and calculations of other alternative
performance measures are included in our 'Reconciliation of
alternative performance measures' on page 103. All alternative
performance measures are reconciled to the closest reported
performance measure.
A change in reportable segments was made in 2020 by combining
Global Private Banking and Retail Banking and Wealth Management to
form Wealth and Personal Banking. We also reallocated our reporting
of Markets Treasury, hyperinflation accounting in Argentina and
HSBC Holdings net interest expense from Corporate Centre to the
global businesses. Comparative data have been re-presented on an
adjusted basis in accordance with IFRS 8 'Operating Segments' with
the change in reportable segments explained in more detail in Note
10: Segmental analysis on page 311.
Adjusted performance
Adjusted performance is computed by adjusting reported results
for the effects of foreign currency translation differences and
significant items, which both distort year-on-year comparisons.
We consider adjusted performance provides useful information for
investors by aligning internal and external reporting, identifying
and quantifying items management believes to be significant, and
providing insight into how management assesses year-on-year
performance.
Significant items
'Significant items' refers collectively to the items that
management and investors would ordinarily identify and consider
separately to improve the understanding of the underlying trends in
the business.
The tables on pages 85 to 88 and pages 94 to 99 detail the
effects of significant items on each of our global business
segments, geographical regions and selected countries/territories
in 2020, 2019 and 2018.
Foreign currency translation differences
Foreign currency translation differences reflect the movements
of the US dollar against most major currencies during 2020.
We exclude them to derive constant currency data, allowing us to
assess balance sheet and income statement performance on a
like-for-like basis and better understand the underlying trends in
the business.
Foreign currency translation differences
Foreign currency translation differences
for 2020 are computed by retranslating
into US dollars for non-US dollar
branches, subsidiaries, joint ventures
and associates:
* the income statements for 2019 and 2018 at the
average rates of exchange for 2020; and
* the balance sheets at 31 December 2019 and 31
December 2018 at the prevailing rates of exchange on
31 December 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.
============================================
Changes from 1 January 2020
Interest rate benchmark reform - Phase 2
Interest Rate Benchmark Reform Phase 2: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16 issued in August 2020 represents
the second phase of the IASB's project on the effects of interest
rate benchmark reform, addressing issues affecting financial
statements when changes are made to contractual cash flows and
hedging relationships as a result of the reform.
Under these amendments, changes made to a financial instrument
that are economically equivalent and required by interest rate
benchmark reform do not result in the derecognition or a change in
the carrying amount of the financial instrument, but instead
require the effective interest rate to be updated to reflect the
change in the interest rate benchmark. In addition, hedge
accounting will not be discontinued solely because of the
replacement of the interest rate benchmark if the hedge meets other
hedge accounting criteria.
These amendments apply from 1 January 2021 with early adoption
permitted. HSBC has adopted the amendments from 1 January 2020 and
has made the additional disclosures as required by the amendments,
see pages 112 to 113.
Critical accounting estimates and
judgements
The results of HSBC reflect the choice of accounting policies,
assumptions and estimates that underlie the preparation of HSBC's
consolidated financial statements. The significant accounting
policies, including the policies which include critical accounting
estimates and judgements, are described in Note 1.2 on the
financial statements. The accounting policies listed below are
highlighted as they involve a high degree of uncertainty and have a
material impact on the financial statements:
-- Impairment of amortised cost financial assets and financial
assets measured at fair value through other comprehensive income
('FVOCI'): The most significant judgements relate to defining what
is considered to be a significant increase in credit risk,
determining the lifetime and point of initial recognition of
revolving facilities, and making assumptions and estimates to
incorporate relevant information about past events, current
conditions and forecasts of economic conditions. A high degree of
uncertainty is involved in making estimations using assumptions
that are highly subjective and very sensitive to the risk factors.
See Note 1.2(i) on page 293.
-- Deferred tax assets: The most significant judgements relate
to judgements made in respect of expected future profitability. See
Note 1.2(l) on page 298.
-- Valuation of financial instruments: In determining the fair
value of financial instruments a variety of valuation techniques
are used, some of which feature significant unobservable inputs and
are subject to substantial uncertainty. See Note 1.2(c) on page
291.
-- Impairment of interests in associates: Impairment testing
involves significant judgement in determining the value in use, and
in particular estimating the present values of cash flows expected
to arise from continuing to hold the investment, based on a number
of management assumptions. The most significant judgements relate
to the impairment testing of our investment in Bank of
Communications Co., Limited ('BoCom'). See Note 1.2(a) on page
290.
-- Impairment of goodwill and non-financial assets: A high
degree of uncertainty is involved in estimating the future cash
flows of the cash-generating units ('CGUs') and the rates used to
discount these cash flows. See Note 1.2(a) on page 290.
-- Provisions: Significant judgement may be required due to the
high degree of uncertainty associated with determining whether a
present obligation exists, and estimating the probability and
amount of any outflows that may arise. See Note 1.2(m) on page
298.
-- Post-employment benefit plans: The calculation of the defined
benefit pension obligation involves the determination of key
assumptions including discount rate, inflation rate, pension
payments and deferred pensions, pay and mortality. See Note 1.2(k)
on page 297.
Given the inherent uncertainties and the high level of
subjectivity involved in the recognition or measurement of the
items above, it is possible that the outcomes in the next financial
year could differ from the expectations on which management's
estimates are based, resulting in the recognition and measurement
of materially different amounts from those estimated by management
in these financial statements.
Consolidated income statement
Summary consolidated income statement
2020 2019 2018 2017 2016
Footnotes $m $m $m $m $m
---------------------------------------------- --------- -------- -------- -------- -------- ----------
Net interest income 27,578 30,462 30,489 28,176 29,813
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net fee income 11,874 12,023 12,620 12,811 12,777
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net income from financial instruments
held for trading or managed on a fair
value basis 9,582 10,231 9,531 8,426 7,521
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net income/(expense) from assets and
liabilities of insurance businesses,
including related derivatives, measured
at fair value through profit or loss 2,081 3,478 (1,488) 2,836 1,262
---------------------------------------------- --------- -------- -------- -------- -------- --------
Change in fair value of designated
debt and related derivatives 1 231 90 (97) 155 (1,997)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Changes in fair value of other financial
instruments mandatorily measured at
fair value through profit or loss 455 812 695 N/A N/A
---------------------------------------------- --------- -------- -------- -------- -------- ----------
Gains less losses from financial investments 653 335 218 1,150 1,385
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net insurance premium income 10,093 10,636 10,659 9,779 9,951
---------------------------------------------- --------- -------- -------- -------- -------- --------
Other operating income/(expense) 527 2,957 960 443 (876)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Total operating income 63,074 71,024 63,587 63,776 59,836
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net insurance claims and benefits paid
and movement in liabilities to policyholders (12,645) (14,926) (9,807) (12,331) (11,870)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net operating income before change
in expected credit losses and other
credit impairment charges/Loan impairment
charges and other credit risk provisions 2 50,429 56,098 53,780 51,445 47,966
---------------------------------------------- --------- -------- -------- -------- -------- --------
Change in expected credit losses and
other credit impairment charges (8,817) (2,756) (1,767) N/A N/A
---------------------------------------------- --------- -------- -------- -------- -------- ----------
Loan impairment charges and other credit
risk provisions N/A N/A N/A (1,769) (3,400)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Net operating income 41,612 53,342 52,013 49,676 44,566
---------------------------------------------- --------- -------- -------- -------- -------- --------
Total operating expenses excluding
impairment of goodwill and other intangible
assets (33,044) (34,955) (34,622) (34,849) (36,416)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Impairment of goodwill and other intangible
assets (1,388) (7,394) (37) (35) (3,392)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Operating profit 7,180 10,993 17,354 14,792 4,758
---------------------------------------------- --------- -------- -------- -------- -------- --------
Share of profit in associates and joint
ventures 1,597 2,354 2,536 2,375 2,354
---------------------------------------------- --------- -------- -------- -------- -------- --------
Profit before tax 8,777 13,347 19,890 17,167 7,112
---------------------------------------------- --------- -------- -------- -------- -------- --------
Tax expense (2,678) (4,639) (4,865) (5,288) (3,666)
---------------------------------------------- --------- -------- -------- -------- -------- --------
Profit for the year 6,099 8,708 15,025 11,879 3,446
---------------------------------------------- --------- -------- -------- -------- -------- --------
Attributable to:
---------------------------------------------- --------- -------- -------- -------- -------- ----------
- ordinary shareholders of the parent
company 3,898 5,969 12,608 9,683 1,299
---------------------------------------------- --------- -------- -------- -------- -------- --------
- preference shareholders of the parent
company 90 90 90 90 90
---------------------------------------------- --------- -------- -------- -------- -------- --------
- other equity holders 1,241 1,324 1,029 1,025 1,090
---------------------------------------------- --------- -------- -------- -------- -------- --------
- non-controlling interests 870 1,325 1,298 1,081 967
---------------------------------------------- --------- -------- -------- -------- -------- --------
Profit for the year 6,099 8,708 15,025 11,879 3,446
---------------------------------------------- --------- -------- -------- -------- -------- --------
Five-year financial information
2020 2019 2018 2017 2016
Footnotes $ $ $ $ $
----------------------------------------- --------- ---- ----- ---- ----- -------
Basic earnings per share 0.19 0.30 0.63 0.48 0.07
----------------------------------------- --------- ---- ----- ---- ----- -----
Diluted earnings per share 0.19 0.30 0.63 0.48 0.07
----------------------------------------- --------- ---- ----- ---- ----- -----
Dividends per ordinary share 3 - 0.51 0.51 0.51 0.51
----------------------------------------- --------- ---- ----- ---- ----- -----
% % % % %
----------------------------------------- --------- ---- ----- ---- ----- -------
Dividend payout ratio 4 - 172.2 81.0 106.3 728.6
----------------------------------------- --------- ---- ----- ---- ----- -----
Post-tax return on average total assets 0.2 0.3 0.6 0.5 0.1
----------------------------------------- ---------
Return on average ordinary shareholders'
equity 2.3 3.6 7.7 5.9 0.8
----------------------------------------- --------- ---- ----- ---- ----- -----
Return on average tangible equity 3.1 8.4 8.6 6.8 2.6
----------------------------------------- --------- ---- ----- ---- ----- -----
Effective tax rate 30.5 34.8 24.5 30.8 51.5
----------------------------------------- --------- ---- ----- ---- ----- -----
1 The debt instruments, issued for funding purposes, are
designated under the fair value option to reduce an accounting
mismatch.
2 Net operating income before change in expected credit losses
and other credit impairment charges/Loan impairment charges and
other credit risk provisions, also referred to as revenue.
3 Dividends recorded in the financial statements are dividends
per ordinary share declared and paid in the period and are not
dividends in respect of, or for, that period.
4 Dividends per ordinary share expressed as a percentage of basic earnings per share.
Unless stated otherwise, all tables in the Annual Report and
Accounts 2020 are presented on a reported basis.
For a summary of our financial performance in 2020, see page
27.
For further financial performance data for each global business
and geographical region, see pages 85 to 88 and 92 to 102
respectively. The global business segmental results are presented
on an adjusted basis in accordance with IFRS 8 'Operating
Segments', in Note 10: Segmental analysis on page 311.
Income statement commentary
The following commentary compares Group financial performance
for the year ended 2020 with 2019.
Net interest income
Year ended Quarter ended
31 Dec 31 Dec 31 Dec 31 Dec 30 Sep 31 Dec
2020 2019 2018 2020 2020 2019
Footnotes $m $m $m $m $m $m
----------------------------- --------- --------- --------- --------- --------- --------- -----------
Interest income 41,756 54,695 49,609 9,301 9,455 13,229
----------------------------- --------- --------- --------- --------- --------- --------- ---------
Interest expense (14,178) (24,233) (19,120) (2,682) (3,005) (5,575)
----------------------------- --------- --------- --------- --------- --------- --------- ---------
Net interest income 27,578 30,462 30,489 6,619 6,450 7,654
----------------------------- --------- --------- --------- --------- --------- --------- ---------
Average interest-earning
assets 2,092,900 1,922,822 1,839,346 2,159,003 2,141,454 1,945,596
----------------------------- --------- --------- --------- --------- --------- --------- ---------
% % % % % %
----------------------------- --------- --------- --------- --------- --------- --------- -----------
Gross interest yield 1 2.00 2.84 2.70 1.71 1.76 2.70
----------------------------- --------- --------- --------- --------- --------- --------- ---------
Less: gross interest payable 1 (0.81) (1.48) (1.21) (0.60) (0.68) (1.34)
----------------------------- --------- --------- --------- --------- --------- --------- ---------
Net interest spread 2 1.19 1.36 1.49 1.11 1.08 1.36
----------------------------- --------- --------- --------- --------- --------- --------- ---------
Net interest margin 3 1.32 1.58 1.66 1.22 1.20 1.56
----------------------------- --------- --------- --------- --------- --------- --------- ---------
1 Gross interest yield is the average annualised interest rate
earned on average interest-earning assets ('AIEA'). Gross interest
payable is the average annualised interest cost as a percentage on
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.
Summary of interest income by type of asset
2020 2019 2018
Average Interest Average Interest Average Interest
balance income Yield balance income Yield balance income Yield
$m $m % $m $m % $m $m %
----------------- --------- -------- ----- --------- -------- ----- --------- -------- -------
Short-term funds
and
loans and
advances to
banks 298,255 1,264 0.42 212,920 2,411 1.13 233,637 2,475 1.06
------------------ --------- -------- ----- --------- -------- ----- --------- -------- -----
Loans and advances
to
customers 1,046,795 29,391 2.81 1,021,554 35,578 3.48 972,963 33,285 3.42
------------------ --------- -------- ----- --------- -------- ----- --------- -------- -----
Reverse repurchase
agreements
- non-trading 221,901 1,819 0.82 224,942 4,690 2.08 205,427 3,739 1.82
------------------ --------- -------- ----- --------- -------- ----- --------- -------- -----
Financial
investments 463,542 8,143 1.76 417,939 10,705 2.56 386,230 9,166 2.37
------------------ --------- -------- ----- --------- -------- ----- --------- -------- -----
Other
interest-earning
assets 62,407 1,139 1.83 45,467 1,311 2.88 41,089 944 2.30
------------------ --------- -------- ----- --------- -------- ----- --------- -------- -----
Total
interest-earning
assets 2,092,900 41,756 2.00 1,922,822 54,695 2.84 1,839,346 49,609 2.70
------------------ --------- -------- ----- --------- -------- ----- --------- -------- -----
Summary of interest expense by type of liability
2020 2019 2018
Average Interest Average Interest Average Interest
balance expense Cost balance expense Cost balance expense Cost
Footnotes $m $m % $m $m % $m $m %
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ------
Deposits by banks 1 65,536 330 0.50 52,515 702 1.34 44,530 506 1.14
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ----
Customer accounts 2 1,254,249 6,478 0.52 1,149,483 11,238 0.98 1,138,620 8,287 0.73
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ----
Repurchase
agreements
- non-trading 125,376 963 0.77 160,850 4,023 2.50 161,204 3,409 2.11
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ----
Debt securities
in issue
- non-trading 219,610 4,944 2.25 211,229 6,522 3.09 183,434 5,675 3.09
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ----
Other
interest-bearing
liabilities 76,395 1,463 1.92 59,980 1,748 2.91 53,731 1,243 2.31
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ----
Total
interest-bearing
liabilities 1,741,166 14,178 0.81 1,634,057 24,233 1.48 1,581,519 19,120 1.21
----------------- --------- --------- -------- ---- --------- -------- ---- --------- -------- ----
1 Including interest-bearing bank deposits only.
2 Including interest-bearing customer accounts only.
Net interest income ('NII') for 2020 was $27.6bn, a decrease of
$2.9bn or 9.5% compared with 2019. This reflected lower average
market interest rates across the major currencies compared with
2019. This was partly offset by interest income associated with the
increase in average interest-earning assets ('AIEA') of $170.1bn or
8.8%.
Excluding the favourable impact of significant items and the
adverse effects of foreign currency translation differences, net
interest income decreased by $2.7bn or 9%.
NII for the fourth quarter of 2020 was $6.6bn, down 13.5%
year-on-year, and up 2.6% compared with the previous quarter. The
year-on-year decrease was driven by the impact of lower market
interest rates predominantly in Asia and North America. This was
partly offset by higher NII from growth in AIEA, notably short-term
funds and financial investments and predominantly in Asia and
Europe. The increase compared with the previous quarter was mainly
driven by lower rates on customer deposits and issued debt
securities, which were partly offset by lower rates on AIEA.
Net interest margin ('NIM') for 2020 of 1.32% was 26 basis
points ('bps') lower compared with 2019 as the reduction in the
yield on AIEA of 84bps was partly offset by the fall in funding
costs of average interest-bearing liabilities of 67bps. The
decrease in NIM in 2020 included the favourable impacts of
significant items and the adverse effects of foreign currency
translation differences. Excluding this, NIM fell by 25bps.
NIM for the fourth quarter of 2020 was 1.22%, down 34bps
year-on-year, and up 2bps compared with the previous quarter. The
year-on-year decrease was mainly driven by Asia and caused by the
impact of lower market interest rates. The increase compared with
the previous quarter was driven by a reduction in funding costs of
average interest-bearing liabilities of 8bps, which was partly
offset by a reduction in the yield on AIEA of 5bps.
Interest income for 2020 of $41.8bn decreased by $12.9bn or 24%,
primarily due to the lower average interest rates compared with
2019 as the yield on AIEA fell by 84bps. This was partly offset by
income from balance sheet growth, predominantly in Asia and Europe.
The balance sheet growth was driven by higher balances in
short-term funds and loans and advances to banks and financial
investments, which increased by $85.3bn and $45.6bn, respectively.
The decrease in interest income included $0.2bn in relation to the
favourable impact of significant items and $0.8bn from the adverse
effects of foreign currency translation differences. Excluding
these, interest income decreased by $12.3bn.
Interest income of $9.3bn in the fourth quarter of 2020 was down
$3.9bn year-on-year, and down $0.2bn compared with the previous
quarter. The year-on-year decrease was predominantly driven by the
impact of lower market interest rates, predominantly in Asia and in
North America, although partly offset by growth in AIEA, notably
short-term funds and loans and advances to banks and financial
investments. The small decrease compared with the previous quarter
was mainly driven by reduced rates on financial investments and
loans and advances to customers.
Interest expense for 2020 of $14.2bn decreased by $10.1bn or 41%
compared with 2019. This reflected the decrease in funding costs of
67bps, mainly arising from lower interest rates paid on
interest-bearing liabilities. This was partly offset by higher
interest expense from growth in interest-bearing customer accounts,
which increased by $104.8bn. The decrease in interest expense
included the favourable effects of foreign currency translation
differences of $0.5bn. Excluding this, interest expense decreased
by $9.6bn.
Interest expense of $2.7bn in the fourth quarter of 2020 was
down $2.9bn year-on-year, and down $0.3bn compared with the
previous quarter. The year-on-year decrease was predominantly
driven by the impact of lower market interest rates, partly offset
by growth in interest-bearing customer accounts, which increased by
$142.9bn. The small decrease compared with the previous quarter was
mainly due to reduced funding costs on customer deposits and debt
issuances.
Net fee income of $11.9bn was $0.1bn lower, reflecting
reductions in WPB and CMB, partly offset by an increase in GBM.
In WPB, lower fee income reflected a reduction in account
services, notably in the UK, due to lower customer activity. Income
from credit cards also reduced, as customer spending activity fell
across most markets, mainly in Hong Kong, the UK, MENA and the US.
Fee income on unit trusts fell, mainly in Hong Kong. These
decreases were partly offset by higher income from broking,
primarily in Hong Kong, as volatility in the equity markets
resulted in increased customer activity. Fee expenses fell as a
result of reduced customer activity levels, mainly in cards.
In CMB, trade-related fee income fell, reflecting the reduction
in global trade activity, notably in Hong Kong and the UK. Income
also fell in remittances due to lower client activity.
In GBM, net fee income was higher, mainly from growth in
underwriting fees in the US and the UK. Global custody and broking
fees also rose as client activity and turnover of securities
increased due to market volatility. These increases were partly
offset by a reduction in fee income from credit facilities, notably
in the UK, Hong Kong and the US.
Net income from financial instruments held for trading or
managed on a fair value basis of $9.6bn was $0.6bn lower and
included a loss of $0.3bn from asset disposals relating to our
restructuring programme. This was partly offset by favourable fair
value movements on non-qualifying hedges of $0.1bn and favourable
debit value adjustments of $0.1bn.
The remaining reduction was primarily due to lower trading
interest income, reflecting lower market rates. However, other
trading income increased in GBM as elevated market volatility and
wider spreads supported a strong performance in FICC.
Net income/(expense) from assets and liabilities of insurance
businesses, including related derivatives, measured at fair value
through profit or loss was a net income of $2.1bn, compared with a
net income of $3.5bn in 2019. This decrease primarily reflected
less favourable equity market performance, compared with 2019 in
France and Hong Kong, due to the impact of the Covid-19 outbreak on
the equity and unit trust assets supporting insurance and
investment contracts. After large losses in the first quarter of
2020, there was a partial recovery in the remainder of the year,
resulting in higher revenue in these subsequent quarters during
2020 compared with the equivalent quarters in 2019.
This adverse movement resulted in a corresponding movement in
liabilities to policyholders and the present value of in-force
long-term insurance business ('PVIF') (see 'Other operating income'
below). This reflected the extent to which the policyholders and
shareholders respectively participate in the investment performance
of the associated assets.
Change in fair value of designated debt and related derivatives
of $0.2bn was $0.1bn favourable compared with 2019. The movements
were driven by the fall in interest rates between the periods,
notably in US dollars and pounds sterling.
The majority of our financial liabilities designated at fair
value are fixed-rate, long-term debt issuances and are managed in
conjunction with interest rate swaps as part of our interest rate
management strategy. These liabilities are discussed further on
page 83.
Changes in fair value of other financial instruments mandatorily
measured at fair value through profit or loss of $0.5bn was $0.4bn
lower compared with 2019. This primarily reflected adverse
movements in equity markets due to the impact of the Covid-19
outbreak.
Gains less losses from financial investments of $0.7bn increased
by $0.3bn, reflecting higher gains from the disposal of debt
securities in Markets Treasury.
Net insurance premium income of $10.1bn was $0.5bn lower than in
2019, reflecting lower new business volumes, particularly in France
and Hong Kong, partly offset by lower reinsurance arrangements in
Hong Kong.
Other operating income of $0.5bn decreased by $2.4bn compared
with 2019, primarily due to lower favourable changes in PVIF
compared with 2019 (down $1.4bn) and also the non-recurrence of a
$0.8bn dilution gain in 2019 following the merger of The Saudi
British Bank ('SABB') with Alawwal bank in Saudi Arabia.
The change in PVIF included a reduction of $0.8bn due to
assumption changes and experience variances, mainly in Hong Kong
and France due to the effect of interest rate changes on the
valuation of liabilities under insurance contracts. In addition,
the value of new business written fell by $0.4bn, primarily in Hong
Kong, as sales volumes decreased.
The reduction also reflected the non-recurrence of 2019 gains
recognised in Argentina and Mexico.
Net insurance claims and benefits paid and movement in
liabilities to policyholders was $2.3bn lower, primarily due to
lower returns on financial assets supporting contracts where the
policyholder is subject to part or all of the investment risk. New
business volumes were also lower, particularly in Hong Kong and
France, partly offset by lower reinsurance arrangements in Hong
Kong.
Changes in expected credit losses and other credit impairment
charges ('ECL') of $8.8bn were $6.1bn higher compared with 2019
with increases in all global businesses.
The ECL charge in 2020 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. The economic outlook
stabilised in the second half of 2020 and as a result stage 1 and
stage 2 allowances were broadly unchanged at 31 December 2020,
compared with 30 June 2020. Stage 3 charges also increased compared
with 2019, largely against wholesale exposures, including a
significant charge related to a CMB client in Singapore in the
first quarter of 2020.
Excluding currency translation differences, ECL as a percentage
of average gross loans and advances to customers was 0.81%,
compared with 0.25% in 2019.
The estimated impact of the Covid-19 outbreak was 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
the government measures, which have never been modelled, additional
judgemental adjustments have been made to our provisions.
While we expect the full year ECL charge for 2021 to be
materially lower than in 2020, the outlook is highly uncertain and
remains dependent on the future path of the Covid-19 outbreak,
including the successful deployment of mass vaccination programmes,
and the credit quality of our loan portfolio as government support
packages are gradually withdrawn.
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 management judgemental adjustments, see pages 127 to 135.
Operating expenses - currency translation and significant items
2020 2019
$m $m
------------------------------------------------------------ ----- -------
Significant items 2,973 9,607
------------------------------------------------------------ ----- -----
- costs of structural reform(1) - 158
------------------------------------------------------------
- customer redress programmes (54) 1,281
------------------------------------------------------------
- impairment of goodwill and other intangibles 1,090 7,349
------------------------------------------------------------
- past service costs of guaranteed minimum pension benefits
equalisation 17 -
------------------------------------------------------------
- restructuring and other related costs(2) 1,908 827
------------------------------------------------------------
- settlements and provisions in connection with legal
and regulatory matters 12 (61)
------------------------------------------------------------
- currency translation on significant items 53
------------------------------------------------------------ ----- -----
Currency translation 223
------------------------------------------------------------ ----- -----
Year ended 31 Dec 2,973 9,830
------------------------------------------------------------ ----- -----
1 Comprises costs associated with preparations for the UK's exit from the European Union.
2 Includes impairment of software intangible assets of $189m (of
the total software intangible asset impairment of $1,347m) and
impairment of tangible assets of $197m.
Staff numbers (full-time equivalents)
2020 2019(1) 2018(1)
---------------------------- ------- ------- ---------
Global businesses
---------------------------- ------- ------- ---------
Wealth and Personal Banking 135,727 141,341 140,666
---------------------------- ------- ------- -------
Commercial Banking 43,221 44,706 45,046
---------------------------- ------- ------- -------
Global Banking and Markets 46,729 48,859 48,970
---------------------------- ------- ------- -------
Corporate Centre 382 445 535
---------------------------- ------- ------- -------
At 31 Dec 226,059 235,351 235,217
---------------------------- ------- ------- -------
1 A change in reportable segments was made in 2020. Comparative
data have been re-presented accordingly. For further guidance, see
Note 10: Segmental analysis on page 311.
Operating expenses of $34.4bn were $7.9bn lower than in 2019,
primarily reflecting the net favourable movements in significant
items of $6.6bn, which included:
-- the non-recurrence of a $7.3bn impairment of goodwill in
2019, primarily related to lower long-term economic growth
assumptions in GBM and CMB, and the planned reshaping of GBM. This
compared with a $1.1bn impairment of goodwill and other intangibles
in 2020, primarily capitalised software related to the businesses
within HSBC Bank plc, and to a lesser extent our businesses in the
US. These impairments reflected underperformance and a
deterioration in the future forecasts of these businesses, and in
the case of HSBC Bank plc substantially relating to prior periods;
and
-- customer redress programme costs, which were a net release of
$0.1bn in 2020, compared with charges of $1.3bn in 2019.
This was partly offset by:
-- restructuring and other related costs of $1.9bn in 2020, of
which $0.9bn related to severance, $0.2bn related to an impairment
of software intangibles and $0.2bn related to the impairment of
tangible assets in France and the US. This compared with
restructuring and other related costs of $0.8bn in 2019.
The reduction also included favourable currency translation
differences of $0.2bn.
The remaining reduction of $1.1bn reflected a $0.5bn decrease in
performance-related pay and lower discretionary expenditure,
including marketing (down $0.3bn) and travel costs (down $0.3bn).
In addition, our cost-saving initiatives resulted in a reduction of
$1.4bn, of which $1.0bn related to our costs to achieve programme,
and the UK bank levy was $0.2bn lower than in 2019. These decreases
were partly offset by an increase in investments in technology to
enhance our digital and automation capabilities to improve how we
serve our customers, as well as inflation and volume-related
increases. In addition, the 2020 period included impairments of
certain real estate assets.
During 2020, we reduced the number of employees expressed in
full-time equivalent staff ('FTE') and contractors by 11,011. This
included a 9,292 reduction in FTE to 226,059 at 31 December 2020,
while the number of contractors reduced by 1,719 to 5,692 at 31
December 2020.
Share of profit in associates and joint ventures of $1.6bn was
$0.8bn or 32% lower than in 2019, primarily reflecting our share of
an impairment of goodwill by SABB of $0.5bn. This goodwill was
recognised by SABB on the completion of its merger with Alawwal
bank in 2019. The remaining reduction reflected a lower share of
profit recognised from our associates in Asia and MENA due to the
impact of the Covid-19 outbreak and the lower interest-rate
environment.
At 31 December 2020, we performed an impairment review of our
investment in BoCom and concluded that it was not impaired, based
on our value-in-use ('VIU') calculations. However, the excess of
the VIU of BoCom and its carrying value has reduced over the
period, increasing the risk of impairment in the future.
For more information, see Note 18: Interests in associates and
joint ventures on page 331.
Tax expense
The effective tax rate for 2020 of 30.5% was lower than the
34.8% effective tax rate for 2019. An impairment of goodwill and
non-deductible customer redress charges increased the 2019
effective tax rate. These were not repeated in 2020. Additionally,
the non-taxable dilution gain arising on the merger of SABB with
Alawwal bank decreased the effective tax rate in 2019. Higher
charges in respect of the non-recognition of deferred tax assets,
particularly in the UK ($0.4bn) and France ($0.4bn), increased the
2020 effective tax rate.
Consolidated balance sheet
Five-year summary consolidated balance sheet
2020 2019 2018 2017 2016
Footnotes $m $m $m $m $m
-------------------------------------- --------- --------- --------- --------- --------- -----------
Assets
-------------------------------------- --------- --------- --------- --------- --------- -----------
Cash and balances at central banks 304,481 154,099 162,843 180,624 128,009
-------------------------------------- --------- --------- --------- --------- --------- ---------
Trading assets 231,990 254,271 238,130 287,995 235,125
-------------------------------------- --------- --------- --------- --------- --------- ---------
Financial assets designated and
otherwise mandatorily measured
at fair value through profit or
loss 45,553 43,627 41,111 N/A N/A
-------------------------------------- --------- --------- --------- --------- --------- -----------
Financial assets designated at
fair value N/A N/A N/A 29,464 24,756
-------------------------------------- --------- --------- --------- --------- --------- ---------
Derivatives 307,726 242,995 207,825 219,818 290,872
-------------------------------------- --------- --------- --------- --------- --------- ---------
Loans and advances to banks 81,616 69,203 72,167 90,393 88,126
-------------------------------------- --------- --------- --------- --------- --------- ---------
Loans and advances to customers 1 1,037,987 1,036,743 981,696 962,964 861,504
-------------------------------------- --------- --------- --------- --------- --------- ---------
Reverse repurchase agreements
- non-trading 230,628 240,862 242,804 201,553 160,974
-------------------------------------- --------- --------- --------- --------- --------- ---------
Financial investments 490,693 443,312 407,433 389,076 436,797
-------------------------------------- --------- --------- --------- --------- --------- ---------
Other assets 253,490 230,040 204,115 159,884 148,823
-------------------------------------- --------- --------- --------- --------- --------- ---------
Total assets at 31 Dec 2,984,164 2,715,152 2,558,124 2,521,771 2,374,986
-------------------------------------- --------- --------- --------- --------- --------- ---------
Liabilities and equity
-------------------------------------- --------- --------- --------- --------- --------- -----------
Liabilities
-------------------------------------- --------- --------- --------- --------- --------- -----------
Deposits by banks 82,080 59,022 56,331 69,922 59,939
-------------------------------------- --------- --------- --------- --------- --------- ---------
Customer accounts 1,642,780 1,439,115 1,362,643 1,364,462 1,272,386
-------------------------------------- --------- --------- --------- --------- --------- ---------
Repurchase agreements - non-trading 111,901 140,344 165,884 130,002 88,958
-------------------------------------- --------- --------- --------- --------- --------- ---------
Trading liabilities 75,266 83,170 84,431 184,361 153,691
-------------------------------------- --------- --------- --------- --------- --------- ---------
Financial liabilities designated
at fair value 157,439 164,466 148,505 94,429 86,832
-------------------------------------- --------- --------- --------- --------- --------- ---------
Derivatives 303,001 239,497 205,835 216,821 279,819
-------------------------------------- --------- --------- --------- --------- --------- ---------
Debt securities in issue 95,492 104,555 85,342 64,546 65,915
-------------------------------------- --------- --------- --------- --------- --------- ---------
Liabilities under insurance contracts 107,191 97,439 87,330 85,667 75,273
-------------------------------------- --------- --------- --------- --------- --------- ---------
Other liabilities 204,019 194,876 167,574 113,690 109,595
-------------------------------------- --------- --------- --------- --------- --------- ---------
Total liabilities at 31 Dec 2,779,169 2,522,484 2,363,875 2,323,900 2,192,408
-------------------------------------- --------- --------- --------- --------- --------- ---------
Equity
-------------------------------------- --------- --------- --------- --------- --------- -----------
Total shareholders' equity 196,443 183,955 186,253 190,250 175,386
-------------------------------------- --------- --------- --------- --------- --------- ---------
Non-controlling interests 8,552 8,713 7,996 7,621 7,192
-------------------------------------- --------- --------- --------- --------- --------- ---------
Total equity at 31 Dec 204,995 192,668 194,249 197,871 182,578
-------------------------------------- --------- --------- --------- --------- --------- ---------
Total liabilities and equity at
31 Dec 2,984,164 2,715,152 2,558,124 2,521,771 2,374,986
-------------------------------------- --------- --------- --------- --------- --------- ---------
1 Net of impairment allowances.
A more detailed consolidated balance sheet is contained in the
financial statements on page 280.
Five-year selected financial information
2020 2019 2018 2017 2016
Footnotes $m $m $m $m $m
------------------------------------- --------- ---------- ---------- ---------- ---------- ----------
Called up share capital 10,347 10,319 10,180 10,160 10,096
------------------------------------- --------- -------- -------- -------- -------- --------
Capital resources 1 184,423 172,150 173,238 182,383 172,358
------------------------------------- --------- -------- -------- -------- -------- --------
Undated subordinated loan capital 1,970 1,968 1,969 1,969 1,967
------------------------------------- --------- -------- -------- -------- -------- --------
Preferred securities and dated
subordinated loan capital 2 30,721 33,063 35,014 42,147 42,600
------------------------------------- --------- -------- -------- -------- -------- --------
Risk-weighted assets 857,520 843,395 865,318 871,337 857,181
------------------------------------- --------- -------- -------- -------- --------
Total shareholders' equity 196,443 183,955 186,253 190,250 175,386
------------------------------------- --------- -------- -------- -------- -------- --------
Less: preference shares and other
equity instruments (22,414) (22,276) (23,772) (23,655) (18,515)
------------------------------------- --------- -------- -------- -------- -------- --------
Total ordinary shareholders' equity 174,029 161,679 162,481 166,595 156,871
------------------------------------- --------- -------- -------- -------- -------- --------
Less: goodwill and intangible
assets (net of tax) (17,606) (17,535) (22,425) (21,680) (19,649)
------------------------------------- --------- -------- -------- -------- -------- --------
Tangible ordinary shareholders'
equity 156,423 144,144 140,056 144,915 137,222
Financial statistics
------------------------------------- --------- ---------- ---------- ---------- ---------- ----------
Loans and advances to customers
as a percentage of customer accounts 63.2% 72.0% 72.0% 70.6% 67.7%
------------------------------------- --------- ---------- ---------- ---------- ---------- ----------
Average total shareholders' equity
to average total assets 6.46% 6.97% 7.16% 7.33% 7.37%
------------------------------------- --------- ---------- ---------- ---------- ---------- ----------
Net asset value per ordinary share
at year-end ($) 3 8.62 8.00 8.13 8.35 7.91
------------------------------------- --------- -------- -------- -------- -------- --------
Tangible net asset value per ordinary
share at year-end ($) 7.75 7.13 7.01 7.26 6.92
------------------------------------- --------- -------- -------- -------- -------- --------
Tangible net asset value per fully
diluted share at year-end ($) 7.72 7.11 6.98 7.22 6.88
------------------------------------- --------- -------- -------- -------- -------- --------
Number of $0.50 ordinary shares
in issue (millions) 20,694 20,639 20,361 20,321 20,192
------------------------------------- --------- -------- -------- -------- -------- --------
Basic number of $0.50 ordinary
shares outstanding (millions) 20,184 20,206 19,981 19,960 19,838
------------------------------------- --------- -------- -------- -------- -------- --------
Basic number of $0.50 ordinary
shares outstanding and dilutive
potential ordinary shares (millions) 20,272 20,280 20,059 20,065 19,933
------------------------------------- --------- -------- -------- -------- -------- --------
Closing foreign exchange translation
rates to $:
------------------------------------- --------- ---------- ---------- ---------- ---------- ----------
$1: GBP 0.732 0.756 0.783 0.740 0.811
------------------------------------- --------- -------- -------- -------- -------- --------
$1: EUR 0.816 0.890 0.873 0.834 0.949
------------------------------------- --------- -------- -------- -------- -------- --------
1 Capital resources are regulatory capital, the calculation of which is set out on page 173.
2 Including perpetual preferred securities, details of which can
be found in Note 28: Subordinated liabilities on page 344.
3 The definition of net asset value per ordinary share is total
shareholders' equity, less non-cumulative preference shares and
capital securities, divided by the number of ordinary shares in
issue, excluding own shares held by the company, including those
purchased and held in treasury.
Balance sheet commentary compared with
31 December 2019
At 31 December 2020, our total assets were $3.0tn, an increase
of $269bn or 10% on a reported basis and $200bn or 7% on a constant
currency basis.
The increase in total assets primarily reflected growth in cash
balances, derivative assets and financial investments.
On a reported basis, our ratio of customer advances to customer
accounts was 63.2%, compared with 72.0% at 31 December 2019, mainly
due to growth in customer accounts.
Assets
Cash and balances at central banks increased by $150bn or 98%,
mainly in the UK, France, Hong Kong and North America, as a result
of deposit inflows and an increase in the commercial surplus.
Trading assets decreased by $22bn or 9%, notably from a
reduction in debt securities held, along with a reduction in bond
positions previously used for hedging purposes.
Derivative assets increased by $65bn or 27%, primarily in the
UK, France and Hong Kong, reflecting favourable revaluation
movements on interest rate contracts as interest rates fell in most
major markets. There was also an increase in foreign exchange
contracts linked to valuation movements attributable to market
conditions. The growth in derivative assets was consistent with the
increase in derivative liabilities, as the underlying risk is
broadly matched.
Loans and advances to customers of $1.0tn increased by $1bn on a
reported basis. This included favourable foreign currency
translation differences of $26bn. Excluding the effects of foreign
currency translation differences, loans and advances to customers
decreased by $25bn or 2%.
The commentary below is on a constant currency basis.
In GBM, customer lending was down $28bn or 11%, while in CMB
customer lending was down $11bn or 3%. Despite significant growth
in these businesses in the first quarter of 2020 from customers
drawing down on credit facilities, balances subsequently reduced as
customers made repayments in part due to the uncertain economic
outlook.
In GBM, lower lending was mainly from decreases in term lending
in Asia, Europe and the US, and also from a decrease in overdrafts
in Europe.
In CMB, the decrease in customer lending reflected a reduction
in other lending and overdrafts in Asia and North America. In
Europe, lending remained relatively flat as lower other lending and
overdrafts were almost entirely offset by a rise in term
lending.
In WPB, lending increased by $14bn or 3%, notably from mortgage
growth in the UK (up $12bn) and in Hong Kong (up $5bn). This was
partly offset by a $6bn reduction in credit card balances and
overdrafts as customer activity fell as a result of government
measures to contain the outbreak of Covid-19.
Financial investments increased by $47bn or 11%, mainly as we
redeployed our commercial surplus. We increased our holdings of
debt securities and treasury bills and benefited from valuation
gains resulting from interest rate reductions. The increases in
financial investments were notably observed in Hong Kong, as we
increased our holdings of government-issued bonds and bills. These
increases were partly offset by lower holdings of debt securities
in Canada.
Other assets increased by $23bn due to a $10bn increase in cash
collateral balances, mainly in France and Hong Kong as underlying
derivative balances grew. Additionally, there were increases in
precious metals balances, mainly in the US as we grew our
depository.
Liabilities
Customer accounts of $1.6tn increased by $204bn or 14% on a
reported basis and included the favourable effect of foreign
currency translation differences of $31bn. Excluding this, customer
accounts increased by $173bn or 12%.
The commentary below is on a constant currency basis.
Customer accounts increased in all our global businesses and
regions. In CMB, balances grew by $73bn, and in GBM, customer
accounts increased by $33bn. These increases included the impact of
corporate clients consolidating their funds and depositing these
into their customer accounts to maintain liquidity, notably in the
UK, Hong Kong and the US.
In WPB, customer account balances increased by $67bn, notably in
the UK and Hong Kong, reflecting reduced customer spending
resulting in larger balances held in current and savings
accounts.
Repurchase agreements - non-trading decreased by $28bn or 20%,
primarily in the US, in line with our actions to manage our funding
requirements across the Group.
Derivative liabilities increased by $64bn or 27%, which is
consistent with the increase in derivative assets, since the
underlying risk is broadly matched.
Equity
Total shareholders' equity, including non-controlling interests,
increased by $12bn or 6% compared with 31 December 2019, reflecting
the effects of profits generated of $6.1bn combined with other
comprehensive income ('OCI') of $8bn. OCI included fair value gains
on debt instruments of $2bn, favourable remeasurement of defined
benefit pension obligations of $1bn and foreign exchange
differences of $5bn. These increases were partly offset by $2bn of
coupon distributions on securities classified as equity and
dividends paid by non-controlling interests.
Risk-weighted assets
Risk-weighted assets ('RWAs') totalled $857.5bn at 31 December
2020, a $14.1bn increase since 2019. Excluding foreign currency
translation differences, RWAs increased by $1.0bn in 2020, and
included the following movements:
-- a $9.7bn asset size decrease, largely driven by RWA
reductions in CMB and GBM under our transformation programme. This
was partly offset by lending growth and increases in counterparty
credit risk RWAs due to mark-to-market movements;
-- a $24.5bn increase in RWAs due to changes in asset quality,
mostly in CMB and GBM. This was largely due to credit migration in
Asia, North America and Europe, partly offset by decreases due to
portfolio mix changes; and
-- a $14.2bn fall in RWAs due to changes in methodology and
policy, mostly in GBM and CMB. This included reductions under
management initiatives involving risk parameter refinements,
improved collateral linkage, and data enhancement, and changes
under the CRR 'Quick Fix' relief package. These reductions were
partly offset by changes in approach to credit risk exposures.
From a global business perspective, primarily in GBM and CMB,
increases from credit migration, lending growth, and market risk
volatility were mitigated by reductions of $51.5bn as a result of
our transformation programme.
Customer accounts by country/territory
2020 2019
$m $m
------------------------------------------------------ --------- -----------
Europe 629,647 528,718
------------------------------------------------------ --------- ---------
- UK 504,275 419,642
------------------------------------------------------
- France 55,111 47,699
------------------------------------------------------
- Germany 21,605 19,361
------------------------------------------------------
- Switzerland 10,102 6,558
------------------------------------------------------
- other 38,554 35,458
------------------------------------------------------ --------- ---------
Asia 762,406 697,358
------------------------------------------------------ --------- ---------
- Hong Kong 531,489 499,955
------------------------------------------------------
- Singapore 55,140 48,569
------------------------------------------------------
- mainland China 56,826 48,323
------------------------------------------------------
- Australia 29,286 23,191
------------------------------------------------------
- India 20,199 14,935
------------------------------------------------------
- Malaysia 15,997 14,624
------------------------------------------------------
- Taiwan 16,041 14,668
------------------------------------------------------
- Indonesia 5,198 4,732
------------------------------------------------------
- other 32,230 28,361
------------------------------------------------------ --------- ---------
Middle East and North Africa (excluding Saudi Arabia) 41,221 38,126
------------------------------------------------------ --------- ---------
- United Arab Emirates 20,974 17,949
------------------------------------------------------
- Turkey 3,987 3,870
------------------------------------------------------
- Egypt 5,659 5,186
------------------------------------------------------
- other 10,601 11,121
------------------------------------------------------ --------- ---------
North America 182,028 146,676
------------------------------------------------------ --------- ---------
- US 117,485 90,834
------------------------------------------------------
- Canada 56,520 48,425
------------------------------------------------------
- other 8,023 7,417
------------------------------------------------------ --------- ---------
Latin America 27,478 28,237
------------------------------------------------------ --------- ---------
- Mexico 22,220 23,051
------------------------------------------------------
- other 5,258 5,186
------------------------------------------------------ --------- ---------
At 31 Dec 1,642,780 1,439,115
------------------------------------------------------ --------- ---------
Loans and advances, deposits by currency
At
31 Dec 2020
------------------------------------------------------------------
$m USD GBP HKD EUR CNY Others(1) Total
------------------------- ------- ------- ------- ------- ------ --------- -----------
Loans and advances to
banks 17,959 3,495 7,155 4,601 6,063 42,343 81,616
------------------------- ------- ------- ------- ------- ------ --------- ---------
Loans and advances to
customers 173,117 280,803 222,138 89,851 37,671 234,407 1,037,987
------------------------- ------- ------- ------- ------- ------ --------- ---------
Total loans and advances 191,076 284,298 229,293 94,452 43,734 276,750 1,119,603
------------------------- ------- ------- ------- ------- ------ --------- ---------
Deposits by banks 30,239 7,856 2,884 25,291 4,904 10,906 82,080
------------------------- ------- ------- ------- ------- ------ --------- ---------
Customer accounts 433,647 431,143 310,197 135,851 60,971 270,971 1,642,780
------------------------- ------- ------- ------- ------- ------ --------- ---------
Total deposits 463,886 438,999 313,081 161,142 65,875 281,877 1,724,860
------------------------- ------- ------- ------- ------- ------ --------- ---------
At
31 Dec 2019
------------------------------------------------------------------
$m USD GBP HKD EUR CNY Others Total
------------------------- ------- ------- ------- ------- ------ --------- -----------
Loans and advances to
banks 19,386 3,245 6,242 4,266 5,772 30,292 69,203
------------------------- ------- ------- ------- ------- ------ --------- ---------
Loans and advances to
customers 177,696 264,029 234,945 84,919 34,338 240,816 1,036,743
------------------------- ------- ------- ------- ------- ------ --------- ---------
Total loans and advances 197,082 267,274 241,187 89,185 40,110 271,108 1,105,946
------------------------- ------- ------- ------- ------- ------ --------- ---------
Deposits by banks 23,508 7,537 1,865 11,154 4,265 10,693 59,022
------------------------- ------- ------- ------- ------- ------ --------- ---------
Customer accounts 360,462 358,764 299,049 122,988 52,216 245,636 1,439,115
------------------------- ------- ------- ------- ------- ------ --------- ---------
Total deposits 383,970 366,301 300,914 134,142 56,481 256,329 1,498,137
------------------------- ------- ------- ------- ------- ------ --------- ---------
1 'Others' includes items with no currency information available
($8,671m for loans to banks, $56,729m for loans to customers, $4m
for deposits by banks and $5m for customer accounts).
Global businesses and
geographical regions
Page
Summary 89
------------------------------------ ----
Reconciliation of reported and
adjusted items - global businesses 89
------------------------------------ ----
Reconciliation of reported and
adjusted risk-weighted assets 93
------------------------------------ ----
Supplementary tables for WPB
and GBM 93
------------------------------------ ----
Analysis of reported results
by geographical regions 97
------------------------------------ ----
Reconciliation of reported and
adjusted items - geographical
regions 99
------------------------------------ ----
Analysis by country 105
------------------------------------ ----
.
Summary
The Group Chief Executive, supported by the rest of the Group
Executive Committee ('GEC') (previously the Group Management
Board), reviews operating activity on a number of bases,
including by global business and geographical region. Global
businesses are our reportable segments under IFRS 8 'Operating
Segments' and are presented in Note 10: Segmental analysis on page
311.
Geographical information is classified by the location of the
principal operations of the subsidiary or, for The Hongkong and
Shanghai Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank
plc, HSBC Bank Middle East Limited and HSBC Bank USA, by the
location of the branch responsible for reporting the results or
providing funding.
The expense of the UK bank levy is included in the Europe
geographical region as HSBC regards the levy as a cost of being
headquartered in the UK. For the purposes of the presentation by
global business, the cost of the levy is included in the Corporate
Centre.
The results of geographical regions are presented on a reported
basis.
Reconciliation of reported and adjusted items - global businesses
Supplementary unaudited analysis of significant items by global
business is presented below.
2020
------------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 21,999 13,294 14,994 142 50,429
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items 14 18 309 (404) (63)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- customer redress programmes 5 16 - - 21
---------------------------------------------------------- ---------
- disposals, acquisitions
and investment in new businesses 9 - - 1 10
---------------------------------------------------------- ---------
- fair value movements on
financial instruments 2 - 1 2 (267) (264)
---------------------------------------------------------- ---------
- restructuring and other
related costs 3 - 1 307 (138) 170
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 22,013 13,312 15,303 (262) 50,366
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported (2,855) (4,754) (1,209) 1 (8,817)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted (2,855) (4,754) (1,209) 1 (8,817)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported (15,446) (6,900) (10,169) (1,917) (34,432)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items 422 211 905 1,435 2,973
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- customer redress programmes (64) 1 - 9 (54)
----------------------------------------------------------
- impairment of goodwill and
other intangibles 294 45 577 174 1,090
---------------------------------------------------------- ---------
* past service costs of guaranteed minimum pension
benefits equalisation - - - 17 17
---------------------------------------------------------- ---------
- restructuring and other
related costs 4 192 165 326 1,225 1,908
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters - - 2 10 12
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted (15,024) (6,689) (9,264) (482) (31,459)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 6 (1) - 1,592 1,597
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items - - - 462 462
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- impairment of goodwill 5 - - - 462 462
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 6 (1) - 2,054 2,059
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 3,704 1,639 3,616 (182) 8,777
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items 436 229 1,214 1,493 3,372
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- revenue 14 18 309 (404) (63)
- operating expenses 422 211 905 1,435 2,973
---------------------------------------------------------- ---------
- share of profit in associates
and joint ventures - - - 462 462
Adjusted 4,140 1,868 4,830 1,311 12,149
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 469,186 343,182 224,364 1,255 1,037,987
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 469,186 343,182 224,364 1,255 1,037,987
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 834,759 470,428 336,983 610 1,642,780
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 834,759 470,428 336,983 610 1,642,780
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
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
and gains relating to the business update in February 2020.
4 Includes impairment of software intangible assets of $189m (of
the total software intangible asset impairment of $1,347m) and
impairment of tangible assets of $197m.
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 and adjusted items (continued)
2019(4)
------------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 25,552 15,256 14,894 396 56,098
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation (208) (103) (107) (53) (471)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items 221 11 82 (997) (683)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- customer redress programmes 155 7 - 1 163
---------------------------------------------------------- ---------
- disposals, acquisitions
and investment in new businesses 52 - - (820) (768)
---------------------------------------------------------- ---------
- fair value movements on
financial instruments 2 7 4 84 (179) (84)
---------------------------------------------------------- ---------
- currency translation on
significant items 7 - (2) 1 6
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 25,565 15,164 14,869 (654) 54,944
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported (1,437) (1,192) (162) 35 (2,756)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation 89 30 9 1 129
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted (1,348) (1,162) (153) 36 (2,627)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported (17,351) (9,905) (13,790) (1,303) (42,349)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation 135 18 21 49 223
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items 1,828 3,055 4,225 499 9,607
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- costs of structural reform 3 - 4 42 112 158
---------------------------------------------------------- ---------
- customer redress programmes 1,264 17 - - 1,281
- goodwill impairment 431 2,956 3,962 - 7,349
---------------------------------------------------------- ---------
- restructuring and other
related costs 180 51 217 379 827
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters (69) - 2 6 (61)
---------------------------------------------------------- ---------
- currency translation on
significant items 22 27 2 2 53
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted (15,388) (6,832) (9,544) (755) (32,519)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 55 - - 2,299 2,354
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation (1) - - (2) (3)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 54 - - 2,297 2,351
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Profit before tax
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 6,819 4,159 942 1,427 13,347
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation 15 (55) (77) (5) (122)
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Significant items 2,049 3,066 4,307 (498) 8,924
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
- revenue 221 11 82 (997) (683)
---------------------------------------------------------- ---------
- operating expenses 1,828 3,055 4,225 499 9,607
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 8,883 7,170 5,172 924 22,149
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 443,025 346,105 246,492 1,121 1,036,743
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation 12,593 7,676 5,639 45 25,953
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 455,618 353,781 252,131 1,166 1,062,696
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- -------- --------- -----------
Reported 753,769 388,723 295,880 743 1,439,115
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Currency translation 14,382 8,459 8,214 37 31,092
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
Adjusted 768,151 397,182 304,094 780 1,470,207
---------------------------------------------------------- --------- -------- ---------- -------- --------- ---------
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 costs associated with preparations for the UK's exit from the European Union.
4 A change in reportable segments was made in 2020. Comparative
data have been re-presented accordingly. For further guidance, see
Note 10: Segmental analysis on page 311.
Reconciliation of reported and adjusted items (continued)
2018(4)
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 24,232 14,889 15,754 (1,095) 53,780
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (699) (475) (590) (90) (1,854)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 18 (40) (108) 302 172
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- customer redress programmes - (53) - - (53)
---------------------------------------------------------- ---------
- disposals, acquisitions and
investment in new businesses 2 - - 111 113
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 2 16 9 (112) 187 100
---------------------------------------------------------- ---------
- currency translation on significant
items - 4 4 4 12
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 23,551 14,374 15,056 (883) 52,098
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (1,163) (737) 26 107 (1,767)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 91 54 8 (6) 147
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (1,072) (683) 34 101 (1,620)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (15,522) (6,563) (9,512) (3,062) (34,659)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 625 255 304 96 1,280
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 283 1 (108) 1,480 1,656
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- costs of structural reform 3 2 8 41 310 361
---------------------------------------------------------- ---------
- customer redress programmes 172 (5) (21) - 146
---------------------------------------------------------- ---------
- disposals, acquisitions and
investment in new businesses 52 - - - 52
---------------------------------------------------------- ---------
* past service costs of guaranteed minimum pension
benefits equalisation - - - 228 228
---------------------------------------------------------- ---------
* restructuring and other related costs 7 - - 59 66
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 58 - (132) 890 816
---------------------------------------------------------- ---------
* currency translation on significant items (8) (2) 4 (7) (13)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (14,614) (6,307) (9,316) (1,486) (31,723)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 33 - - 2,503 2,536
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (1) - - (91) (92)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 32 - - 2,412 2,444
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 7,580 7,589 6,268 (1,547) 19,890
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 16 (166) (278) (91) (519)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 301 (39) (216) 1,782 1,828
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- revenue 18 (40) (108) 302 172
---------------------------------------------------------- ---------
- operating expenses 283 1 (108) 1,480 1,656
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 7,897 7,384 5,774 144 21,199
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 401,268 333,400 245,525 1,503 981,696
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 17,963 11,455 7,794 96 37,308
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 419,231 344,855 253,319 1,599 1,019,004
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 707,773 359,957 294,130 783 1,362,643
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 22,129 12,594 12,308 48 47,079
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 729,902 372,551 306,438 831 1,409,722
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
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 costs associated with preparations for the UK's exit
from the European Union, costs to establish the UK ring-fenced bank
(including the UK ServCo group) and costs associated with
establishing an intermediate holding company in Hong Kong.
4 A change in reportable segments was made in 2020. Comparative
data have been re-presented accordingly. For further guidance, see
Note 10: Segmental analysis on page 311.
Reconciliation of reported and adjusted risk-weighted assets
At 31 Dec 2020
-------------------------------------------------------
Global
Wealth Banking
and Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $bn $bn $bn $bn $bn
--------------------- --------- ------------- ---------- -------- --------- -------
Risk-weighted assets
--------------------- --------- ------------- ---------- -------- --------- -------
Reported 172.8 327.7 265.1 91.9 857.5
--------------------- --------- ---------- -------- --------- -----
Adjusted 1 172.8 327.7 265.1 91.9 857.5
--------------------- --------- ------------- ---------- -------- --------- -----
At 31 Dec 2019
--------------------- ---------
Risk-weighted assets
--------------------- --------- ------------- ---------- -------- --------- -------
Reported 162.6 325.9 273.4 81.5 843.4
--------------------- --------- ------------- ---------- -------- --------- -----
Currency translation 2.0 6.6 3.4 0.5 12.5
--------------------- --------- ------------- ---------- -------- --------- -----
Adjusted 1 164.6 332.5 276.8 82.0 855.9
--------------------- --------- ------------- ---------- -------- --------- -----
At 31 Dec 2018
Risk-weighted assets
----------------------- ----- ----- ----- ----- -------
Reported 161.8 331.8 297.9 73.8 865.3
----------------------- ----- ----- ----- ----- -----
Currency translation 2.2 10.3 4.4 0.6 17.5
----------------------- ----- ----- ----- ----- -----
Disposals - - - (0.8) (0.8)
----------------------- ----- ----- ----- ----- -----
- operations in Brazil - - - (0.8) (0.8)
----------------------- ----- ----- ----- ----- -----
Adjusted 1164.0 342.1 302.3 73.6 882.0
----------------------- ----- ----- ----- ----- -----
1 Adjusted risk-weighted assets are calculated using reported
risk-weighted assets adjusted for the effects of currency
translation differences and significant items.
Supplementary tables for WPB and GBM
WPB adjusted performance by business unit
A breakdown of WPB by business unit is presented below to
reflect the basis of how the revenue performance of the business
units is assessed and managed.
WPB - summary (adjusted basis)
Consists of(1)
----------------------------------------------------
Global
Total Banking Insurance Private Asset
WPB operations manufacturing Banking management
Footnotes $m $m $m $m $m
----------------------------------- --------- -------- ----------- -------------- -------- -------------
2020
----------------------------------- --------- -------- ----------- -------------- -------- -------------
Net operating income before change
in expected credit losses and
other credit impairment charges 2 22,013 17,346 1,874 1,745 1,048
----------------------------------- --------- -------- ----------- -------------- -------- -----------
- net interest income 15,090 12,181 2,241 670 (2)
----------------------------------- ---------
- net fee income/(expense) 5,408 4,094 (518) 828 1,004
----------------------------------- ---------
- other income 1,515 1,071 151 247 46
----------------------------------- --------- -------- ----------- -------------- -------- -----------
ECL (2,855) (2,707) (80) (67) (1)
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Net operating income 19,158 14,639 1,794 1,678 1,047
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Total operating expenses (15,024) (12,422) (479) (1,390) (733)
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Operating profit 4,134 2,217 1,315 288 314
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Share of profit in associates
and joint ventures 6 5 1 - -
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Profit before tax 4,140 2,222 1,316 288 314
----------------------------------- --------- -------- ----------- -------------- -------- -----------
2019
----------------------------------- --------- -------- ----------- -------------- -------- -------------
Net operating income before
change in expected credit losses
and other credit impairment
charges 2 25,565 20,024 2,639 1,878 1,024
----------------------------------- --------- -------- ----------- -------------- -------- -----------
- net interest income 17,423 14,371 2,167 891 (6)
----------------------------------- ---------
- net fee income/(expense) 5,621 4,582 (717) 784 972
----------------------------------- ---------
- other income 2,521 1,071 1,189 203 58
----------------------------------- --------- -------- ----------- -------------- -------- -----------
ECL (1,348) (1,247) (80) (21) -
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Net operating income 24,217 18,777 2,559 1,857 1,024
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Total operating expenses (15,388) (12,722) (471) (1,447) (748)
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Operating profit 8,829 6,055 2,088 410 276
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Share of profit in associates
and joint ventures 54 11 43 - -
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Profit before tax 8,883 6,066 2,131 410 276
----------------------------------- --------- -------- ----------- -------------- -------- -----------
WPB - summary (adjusted basis) (continued)
Consists of(1)
----------------------------------------------------
Global
Total Banking Insurance Private Asset
WPB operations manufacturing Banking management
Footnotes $m $m $m $m $m
----------------------------------- --------- -------- ----------- -------------- -------- -------------
2018
----------------------------------- --------- -------- ----------- -------------- -------- -------------
Net operating income before change
in expected credit losses and
other credit impairment charges 2 23,551 18,860 1,868 1,783 1,040
----------------------------------- --------- -------- ----------- -------------- -------- -----------
- net interest income 16,418 13,477 2,060 884 (3)
----------------------------------- ---------
- net fee income/(expense) 5,774 4,594 (593) 743 1,030
----------------------------------- ---------
- other income 1,359 789 401 156 13
----------------------------------- --------- -------- ----------- -------------- -------- -----------
ECL (1,072) (1,079) (1) 8 -
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Net operating income 22,479 17,781 1,867 1,791 1,040
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Total operating expenses (14,614) (12,023) (437) (1,449) (705)
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Operating profit 7,865 5,758 1,430 342 335
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Share of profit in associates
and joint ventures 32 1 31 - -
----------------------------------- --------- -------- ----------- -------------- -------- -----------
Profit before tax 7,897 5,759 1,461 342 335
----------------------------------- --------- -------- ----------- -------------- -------- -----------
1 The results presented for insurance manufacturing operations
are shown before elimination of inter-company transactions with
HSBC non-insurance operations. These eliminations are presented
within Banking operations.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as revenue.
WPB insurance manufacturing adjusted revenue of $1,874m (2019:
$2,639m, 2018: $1,868m) was disclosed within the management view of
adjusted revenue on page 31, as follows: Wealth Management $1,816m
(2019: $2,464m, 2018: $1,621m) and Other $58m (2019: $175m, 2018:
$247m).
WPB insurance manufacturing adjusted results
The following table shows the results of our insurance
manufacturing operations by income statement line item. It
shows
the results of insurance manufacturing operations for WPB and
for all global business segments in aggregate, and separately the
insurance distribution income earned by HSBC bank channels.
Adjusted results of insurance manufacturing operations and insurance
distribution income earned by HSBC bank channels(1, 2)
2020 2019 2018
All All
All global global global
WPB businesses WPB businesses WPB businesses
Footnotes $m $m $m $m $m $m
--------------------------- --------- -------- ----------- -------- ----------- ------- -------------
Net interest income 2,241 2,408 2,167 2,308 2,060 2,217
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net fee income/(expense) (518) (556) (717) (742) (593) (567)
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
- fee income 110 131 108 130 186 277
--------------------------- ---------
- fee expense (628) (687) (825) (872) (779) (844)
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net income from/(expenses)
financial
instruments held for
trading or
managed on a fair value
basis 76 95 (82) (82) 84 27
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net income/(expense) from
assets
and liabilities of
insurance businesses,
including related
derivatives,
measured at fair value
through
profit or loss 2,182 2,137 3,582 3,565 (1,600) (1,627)
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Gains less losses from
financial
investments 13 13 5 5 54 56
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net insurance premium
income 9,717 10,212 10,398 10,763 10,280 10,824
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Other operating income 336 351 1,789 1,805 796 783
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Of which: PVIF 370 382 1,718 1,763 678 685
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Total operating income 14,047 14,660 17,142 17,622 11,081 11,713
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net insurance claims and
benefits
paid and movement in
liabilities
to policyholders (12,173) (12,683) (14,503) (14,902) (9,213) (9,693)
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net operating income before
change
in expected credit losses
and other
credit impairment charges 3 1,874 1,977 2,639 2,720 1,868 2,020
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Change in expected credit
losses
and other credit
impairment charges (80) (92) (80) (86) (1) (1)
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Net operating income 1,794 1,885 2,559 2,634 1,867 2,019
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Total operating expenses (479) (509) (471) (497) (437) (462)
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Operating profit 1,315 1,376 2,088 2,137 1,430 1,557
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Share of profit in
associates and
joint ventures 1 1 43 43 31 31
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
Profit before tax of
insurance
manufacturing operations 4 1,316 1,377 2,131 2,180 1,461 1,588
Annualised new business
premiums
of insurance manufacturing
operations 2,257 2,307 3,324 3,403 3,179 3,255
Insurance distribution
income earned
by HSBC bank channels 737 801 945 1,041 949 1,040
--------------------------- --------- -------- ----------- -------- ----------- ------- -----------
1 Adjusted results are derived by adjusting for year-on-year
effects of foreign currency translation differences, and the effect
of significant items that distort year-on-year comparisons. There
are no significant items included within insurance manufacturing,
and the impact of foreign currency translation on all global
businesses' profit before tax is 2019: $45m favourable (reported:
$2,135m), 2018: $15m favourable (reported: $1,573m).
2 The results presented for insurance manufacturing operations
are shown before elimination of inter-company transactions with
HSBC non-insurance operations.
3 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
4 The effect on the insurance manufacturing operations of
applying hyperinflation accounting in Argentina resulted in an
increase in adjusted revenue in 2020 of $9m (2019: reduction of
$1m, 2018: reduction of $8m) and an increase in profit before tax
in 2020 of $12m (2019: increase of $1m, 2018: reduction of $3m).
These effects are recorded within 'All global businesses'.
Insurance manufacturing
The following commentary, unless otherwise specified, relates to
the 'All global businesses' results.
HSBC recognises the present value of long-term in-force
insurance contracts and investment contracts with discretionary
participation features ('PVIF') as an asset on the balance sheet.
The overall balance sheet equity, including PVIF, is therefore a
measure of the embedded value in the insurance manufacturing
entities, and the movement in this embedded value in the period
drives the overall income statement result.
Adjusted profit before tax of $1.4bn decreased by $0.8bn or 37%
compared with 2019.
Net operating income before change in expected credit losses and
other credit impairment changes was $0.7bn or 27% lower than in
2019. This reflected the following:
-- 'Net income from assets and liabilities of insurance
businesses, including related derivatives, measured at fair value
through profit or loss' of $2.1bn in 2020 compared with $3.6bn in
2019. This decrease primarily reflected less favourable equity
market performance, compared with 2019 in France and Hong Kong, due
to the impact of the Covid-19 outbreak on the equity and unit trust
assets supporting insurance and investment contracts. While there
was strong investment performance within the portfolio in light of
volatile markets during the year, the overall fair value gains were
lower compared with 2019.
This adverse movement resulted in a corresponding movement in
liabilities to policyholders and PVIF (see 'Other operating income'
below). This reflected the extent to which policyholders and
shareholders respectively participate in the investment performance
of the associated assets.
-- Net insurance premium income of $10.2bn was $0.6bn lower than
in 2019, primarily reflecting lower new business volumes due to the
Covid-19 outbreak, particularly in France and Hong Kong, partly
offset by lower reinsurance premiums ceded in Hong Kong.
-- Other operating income of $0.4bn decreased by $1.5bn compared
with 2019, mainly from adverse movements in PVIF. This included a
reduction of $0.8bn due to assumption changes and experience
variances, mainly in Hong Kong and France due to the effect of
interest rate changes. In addition, the value of new business
written fell by $0.4bn, primarily in Hong Kong, as sales volumes
decreased.
-- Net insurance claims and benefits paid and movement in
liabilities to policyholders was $2.2bn lower, primarily due to
lower returns on financial assets supporting contracts where the
policyholder is subject to part or all of the investment risk. New
business volumes were lower, particularly in Hong Kong and France,
partly offset by lower reinsurance arrangements in Hong Kong.
-- Change in expected credit losses and other credit impairment
charges ('ECL') of $92m was $6m higher compared with 2019, mainly
from charges relating to the global impact of the Covid-19 outbreak
on the forward economic outlook, partly offset by the ECL release
on Argentina sovereign exposure due to the debt restructure in
2020.
Adjusted operating expenses of $0.5bn increased by 2% compared
with 2019, reflecting investments in core insurance functions and
capabilities during the period.
Annualised new business premiums ('ANP') is used to assess new
insurance premium generation by the business. It is calculated as
100% of annualised first year regular premiums and 10% of single
premiums, before reinsurance ceded. Lower ANP during the period
reflected a reduction in new business volumes, mainly in Hong Kong
and France.
Insurance distribution income from HSBC channels included $470m
(2019: $658m; 2018: $644m) on HSBC manufactured products, for which
a corresponding fee expense is recognised within insurance
manufacturing, and $331m (2019: $382m; 2018: $397m) on products
manufactured by third-party providers. The WPB component of this
distribution income was $423m (2019: $583m; 2018: $575m) from HSBC
manufactured products and $314m (2019: $362m; 2018: $374m) from
third-party products.
WPB: Client assets and funds under management
The following table shows the client assets and funds under
management, including self-directed client investments and
execution-only trades, across our WPB global business. Funds under
management represents assets managed, either actively or passively,
on behalf of our customers.
WPB - reported client assets and funds under management(1)
2020 2019
$bn $bn
------------------------------------------------------ ----- ------
Global Private Banking client assets 394 361
------------------------------------------------------ ----- ----
* managed by Global Asset Management 66 61
------------------------------------------------------
* external managers, direct securities and other 328 300
------------------------------------------------------ ----- ----
Retail wealth balances 407 380
------------------------------------------------------ ----- ----
* managed by Global Asset Management 219 199
------------------------------------------------------
* external managers, direct securities and other 188 181
------------------------------------------------------ ----- ----
Asset Management third-party distribution 317 247
------------------------------------------------------ ----- ----
Closing balance 1,118 988
------------------------------------------------------ ----- ----
1 Client assets and funds distributed and under management are
not reported on the Group's balance sheet, except where it is
deemed that we are acting as principal rather than agent in our
role as investment manager. Customer deposits included in client
assets are on balance sheet.
WPB wealth balances
The following table shows the consolidated areas of focus across
all WPB wealth balances.
WPB wealth balances
2020 2019
$bn $bn
----------------------------------------- ----- -------
Client assets and funds under management 1,118 988
----------------------------------------- ----- -----
Premier and Jade deposits(1) 470 433
----------------------------------------- ----- -----
Total 1,588 1,421
----------------------------------------- ----- -----
1 Premier and Jade deposits, which include Prestige deposits in
Hang Seng Bank, form part of the total WPB customer accounts
balance of $835bn on page 85 (31 December 2019: $754bn).
Asset Management: Funds under management
The following table shows the funds under management of our
Asset Management business. Funds under management represents assets
managed, either actively or passively, on behalf of our customers.
Funds under management are not reported on the Group's balance
sheet, except where it is deemed that we are acting as principal
rather than agent in our role as investment manager.
Asset Management - reported funds under management
2020 2019 2018
$bn $bn $bn
------------------------------------------ ------- ------ -----------
Opening balance 506 444 462
------------------------------------------ ------- ------ ---------
Net new money 53 30 8
------------------------------------------ ------- ------ ---------
Value change 17 30 (14)
------------------------------------------ ------- ------ ---------
Exchange and other 26 2 (12)
------------------------------------------ -------
Closing balance 602 506 444
------------------------------------------ ------- ------ ---------
Asset Management - reported funds under management by geography
2020 2019 2018
$bn $bn $bn
------------------------------------------ ------- ------ -----------
Europe 346 287 235
------------------------------------------ ------- ------ ---------
Asia 176 161 164
------------------------------------------ ------- ------ ---------
MENA 6 6 2
------------------------------------------ ------- ------ ---------
North America 65 44 36
------------------------------------------ ------- ------ ---------
Latin America 9 8 7
------------------------------------------ ------- ------ ---------
Closing balance 602 506 444
------------------------------------------ ------- ------ ---------
At 31 December 2020, Asset Management funds under management
amounted to $602bn, an increase of $96bn or 19%. The increase
reflected strong net new money, primarily from money market funds
and passive investment products. In addition, the growth reflected
positive market performance and favourable foreign exchange
translation.
Global Private Banking: client assets
The following table shows the client assets of our Global
Private Banking business which are translated at the rates of
exchange applicable for their respective year-ends, with the
effects of currency translation reported separately .
Global Private Banking - reported client assets(1)
2020 2019 2018
$bn $bn $bn
---------------------------------- ----- ----- ---------
At 1 Jan 361 309 330
---------------------------------- ----- ----- -------
Net new money 6 23 10
---------------------------------- ----- ----- -------
Value change 6 23 (17)
---------------------------------- ----- ----- -------
Disposals - - -
---------------------------------- ----- ----- -------
Exchange and other 21 6 (14)
---------------------------------- ----- ----- -------
At 31 Dec 394 361 309
---------------------------------- ----- ----- -------
Global Private Banking - reported client assets by geography(1)
2020 2019 2018
$bn $bn $bn
--------------------------------------- --------- -------- ----------
Europe 174 171 149
--------------------------------------- --------- -------- --------
Asia 176 151 124
--------------------------------------- --------- -------- --------
North America 44 39 36
--------------------------------------- --------- -------- --------
At 31 Dec 394 361 309
--------------------------------------- --------- -------- --------
1 Client assets are not reported on the Group's balance sheet,
except where it is deemed that we are acting as principal rather
than agent in our role as investment manager. Customer deposits
included in these client assets are on balance sheet.
GBM: Securities Services and Issuer Services
Assets held in custody
Custody is the safekeeping and servicing of securities and other
financial assets on behalf of clients. Assets held in custody are
not reported on the Group's balance sheet, except where it is
deemed that we are acting as principal rather than agent in our
role as investment manager . At 31 December 2020, we held $10.0tn
of assets as custodian, 17% higher than at 31 December 2019. This
increase was driven by favourable market movements and the effect
of currency translation differences globally. In addition, there
were increases from new client asset inflows, notably in Asia.
Assets under administration
Our assets under administration business, which includes the
provision of bond and loan administration services, transfer agency
services and the valuation of portfolios of securities and other
financial assets on behalf of clients, complements the custody
business. At 31 December 2020, the value of assets held under
administration by the Group amounted to $4.5tn, which was 13%
higher than at 31 December 2019. This increase was mainly driven by
the favourable effect of currency translation differences in Europe
and favourable market movements globally. It also included
increases from the onboarding of new client assets, notably in
Europe.
Analysis of reported results by geographical regions
HSBC reported profit/(loss) before tax and balance sheet data
2020
-------------------------------------------------------------------------
North Latin
Europe Asia MENA America America Intra-HSBC Total
Footnotes $m $m $m $m $m $m $m
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Net interest income 5,695 14,318 1,465 2,836 1,960 1,304 27,578
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net fee income 3,499 5,418 695 1,795 467 - 11,874
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net income from
financial
instruments held for
trading or managed
on
a fair value basis 3,266 4,273 402 997 593 51 9,582
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net income from
assets
and liabilities of
insurance
businesses,
including
related derivatives,
measured at fair
value
through profit and
loss 327 1,699 - - 55 - 2,081
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Changes in fair value
of other financial
instruments
mandatorily measured
at fair value
through
profit or loss 1,747 17 3 2 40 (1,354) 455
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Other
income/(expense) 1 3,885 1,197 63 745 (95) (6,936) (1,141)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net operating income
before change in
expected credit
losses
and other credit
impairment charges 2 18,419 26,922 2,628 6,375 3,020 (6,935) 50,429
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Change in expected
credit
losses and other
credit
impairment charges (3,751) (2,284) (758) (900) (1,124) - (8,817)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net operating income 14,668 24,638 1,870 5,475 1,896 (6,935) 41,612
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Total operating
expenses
excluding impairment
of goodwill and
other
intangible assets (17,860) (13,584) (1,521) (5,081) (1,933) 6,935 (33,044)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Impairment of
goodwill
and other intangible
assets (1,014) (78) (65) (226) (5) - (1,388)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Operating
profit/(loss) (4,206) 10,976 284 168 (42) - 7,180
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Share of
profit/(loss)
in associates and
joint
ventures 1 1,856 (265) - 5 - 1,597
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Profit/(loss) before
tax (4,205) 12,832 19 168 (37) - 8,777
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
% % % % % %
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Share of HSBC's
profit
before tax (47.9) 146.2 0.2 1.9 (0.4) 100.0
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Cost efficiency ratio 102.5 50.7 60.4 83.2 64.2 68.3
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Balance sheet data $m $m $m $m $m $m $m
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Loans and advances to
customers (net) 408,495 473,165 28,700 107,969 19,658 - 1,037,987
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Total assets 1,416,111 1,206,404 68,860 373,167 49,703 (130,081) 2,984,164
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Customer accounts 629,647 762,406 41,221 182,028 27,478 - 1,642,780
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Risk-weighted assets 3 284,322 384,228 60,181 117,755 35,240 - 857,520
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
2019
-------------------------------------------------------------------------
Net interest income 5,601 16,607 1,781 3,241 2,061 1,171 30,462
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net fee income 3,668 5,325 685 1,804 540 1 12,023
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net income from
financial
instruments held for
trading or managed
on
a fair value basis 3,785 4,735 327 873 883 (372) 10,231
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net income from
assets
and liabilities of
insurance
businesses,
including
related derivatives,
measured at fair
value
through profit and
loss 1,656 1,803 - - 14 5 3,478
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Changes in fair value
of other financial
instruments
mandatorily measured
at fair value
through
profit or loss 1,516 28 1 31 41 (805) 812
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Other
income/(expense) 1 1,830 1,921 916 638 (23) (6,190) (908)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net operating income
before change in
expected credit
losses
and other credit
impairment charges 2 18,056 30,419 3,710 6,587 3,516 (6,190) 56,098
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Change in expected
credit
losses and other
credit
impairment charges (938) (724) (117) (237) (740) - (2,756)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net operating income 17,118 29,695 3,593 6,350 2,776 (6,190) 53,342
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Total operating
expenses
excluding impairment
of goodwill and
other
intangible assets (19,209) (13,284) (1,452) (5,150) (2,050) 6,190 (34,955)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Impairment of
goodwill
and other intangible
assets (2,550) (13) (97) (433) (339) (3,962) (7,394)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Operating
profit/(loss) (4,641) 16,398 2,044 767 387 (3,962) 10,993
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Share of
profit/(loss)
in associates and
joint
ventures (12) 2,070 283 - 13 - 2,354
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Profit/(loss) before
tax (4,653) 18,468 2,327 767 400 (3,962) 13,347
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
% % % % % %
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Share of HSBC's
profit
before tax (34.9) 138.4 17.4 5.7 3.0 (29.6) 100.0
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Cost efficiency ratio 120.5 43.7 41.8 84.8 67.9 75.5
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Balance sheet data $m $m $m $m $m $m $m
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Loans and advances to
customers (net) 393,850 477,727 28,556 113,474 23,136 - 1,036,743
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Total assets 1,248,205 1,102,805 65,369 377,095 52,879 (131,201) 2,715,152
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Customer accounts 528,718 697,358 38,126 146,676 28,237 - 1,439,115
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Risk-weighted assets 3 280,983 366,375 57,492 121,953 38,460 - 843,395
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
HSBC reported profit/(loss) before tax and balance sheet data (continued)
2018
-------------------------------------------------------------------------
North Latin Intra-HSBC
Europe Asia MENA America America items Total
Footnotes $m $m $m $m $m $m $m
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Net interest income 6,841 16,108 1,763 3,521 2,020 236 30,489
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net fee income 3,996 5,676 607 1,854 498 (11) 12,620
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net income from
financial
instruments held for
trading or managed
on
a fair value basis 3,942 4,134 285 728 736 (294) 9,531
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net income/(expense)
from assets and
liabilities
of insurance
businesses,
including related
derivatives,
measured at fair
value
through profit and
loss (789) (717) - - 18 - (1,488)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Changes in fair value
of other financial
instruments
mandatorily measured
at fair value
through
profit or loss 601 (26) (1) 36 27 58 695
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Other
income/(expense) 1 3,113 3,609 33 586 (237) (5,171) 1,933
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net operating income
before loan
impairment
(charges)/recoveries
and other credit
risk
provisions 2 17,704 28,784 2,687 6,725 3,062 (5,182) 53,780
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Change in expected
credit
losses and other
credit
impairment
(charges)/recoveries (609) (602) (209) 223 (570) - (1,767)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Net operating income 17,095 28,182 2,478 6,948 2,492 (5,182) 52,013
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Total operating
expenses
excluding impairment
of goodwill and
other
intangible assets (17,912) (12,449) (1,357) (6,151) (1,935) 5,182 (34,622)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Impairment of
goodwill
and other intangible
assets (22) (17) - 2 - - (37)
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Operating
profit/(loss) (839) 15,716 1,121 799 557 - 17,354
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Share of profit in
associates
and joint ventures 24 2,074 436 - 2 - 2,536
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Profit/(loss) before
tax (815) 17,790 1,557 799 559 - 19,890
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
% % % % % %
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Share of HSBC's
profit
before tax (4.1) 89.5 7.8 4.0 2.8 100.0
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Cost efficiency ratio 101.3 43.3 50.5 91.4 63.2 64.4
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Balance sheet data $m $m $m $m $m $m $m
--------------------- --------- --------- --------- ------- ------- -------- ---------- -----------
Loans and advances to
customers (net) 373,073 450,545 28,824 108,146 21,108 - 981,696
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Total assets 1,150,235 1,047,636 57,455 390,410 51,923 (139,535) 2,558,124
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Customer accounts 503,154 664,824 35,408 133,291 25,966 - 1,362,643
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
Risk-weighted assets 3 298,056 363,894 56,689 131,582 38,341 - 865,318
--------------------- --------- --------- --------- ------- ------- -------- ---------- ---------
1 'Other income/(expense)' in this context comprises where
applicable net income/expense from other financial instruments
designated at fair value, gains less losses from financial
investments, dividend income, net insurance premium income and
other operating income less net insurance claims and benefits paid
and movement in liabilities to policyholders.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
3 Risk-weighted assets are non-additive across geographical
regions due to market risk diversification effects within the
Group.
Reconciliation of reported and adjusted items - geographical regions
Reconciliation of reported and adjusted items
2020
----------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 2 18,419 26,922 2,628 6,375 3,020 50,429
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items (242) (37) - 43 (3) (63)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- customer redress programmes 21 - - - - 21
---------------------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses - - - 10 - 10
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 (254) (5) - (2) (3) (264)
---------------------------------------------------------- ---------
- restructuring and other related
costs 2,4 (9) (32) - 35 - 170
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 2 18,177 26,885 2,628 6,418 3,017 50,366
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
ECL
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported (3,751) (2,284) (758) (900) (1,124) (8,817)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted (3,751) (2,284) (758) (900) (1,124) (8,817)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 2 (18,874) (13,662) (1,586) (5,307) (1,938) (34,432)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 2,203 171 83 601 91 2,973
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
* customer redress programmes (54) - - - - (54)
---------------------------------------------------------- ---------
* impairment of goodwill and other intangibles 803 - 64 223 - 1,090
---------------------------------------------------------- ---------
- past service costs of guaranteed
minimum pension benefits equalisation 17 - - - - 17
---------------------------------------------------------- ---------
* restructuring and other related costs 2,5 1,425 171 19 378 91 1,908
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 12 - - - - 12
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 2 (16,671) (13,491) (1,503) (4,706) (1,847) (31,459)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Share of profit/(loss) in associates
and joint ventures
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 1 1,856 (265) - 5 1,597
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items - - 462 - - 462
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- impairment of goodwill 6 - - 462 - - 462
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 1 1,856 197 - 5 2,059
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported (4,205) 12,832 19 168 (37) 8,777
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 1,961 134 545 644 88 3,372
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
* revenue 2 (242) (37) - 43 (3) (63)
* operating expenses 2 2,203 171 83 601 91 2,973
---------------------------------------------------------- ---------
* share of profit in associates and joint ventures - - 462 - - 462
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted (2,244) 12,966 564 812 51 12,149
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 408,495 473,165 28,700 107,969 19,658 1,037,987
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 408,495 473,165 28,700 107,969 19,658 1,037,987
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 629,647 762,406 41,221 182,028 27,478 1,642,780
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 629,647 762,406 41,221 182,028 27,478 1,642,780
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
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
and gains relating to the business update in February 2020.
5 Includes impairment of software intangible assets of $189m (of
the total software intangible asset impairment of $1,347m) and
impairment of tangible assets of $197m.
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 and adjusted items (continued)
2020
-----------------------------------------------
Hong Mainland
UK Kong China US Mexico
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Revenue 1
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 13,886 16,345 3,088 4,590 2,234
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items (187) 15 (5) 41 (13)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
* customer redress programmes 21 - - - -
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses - - - 10 -
---------------------------------------------------------- ---------
* fair value movements on financial instruments 2 (256) - (1) (2) (1)
---------------------------------------------------------- ---------
* restructuring and other related costs 3 48 15 (4) 33 (12)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 13,699 16,360 3,083 4,631 2,221
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
ECL
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported (3,256) (824) (114) (622) (1,050)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted (3,256) (824) (114) (622) (1,050)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Operating expenses
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported (14,855) (7,312) (2,211) (4,194) (1,376)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items 1,318 100 19 556 42
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
* customer redress programmes (54) - - - -
---------------------------------------------------------- ---------
* impairment of goodwill and other intangibles 650 - - 223 -
---------------------------------------------------------- ---------
* past service costs of guaranteed minimum pension
benefits equalisation 17 - - - -
---------------------------------------------------------- ---------
* restructuring and other related costs 693 100 19 333 42
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 12 - - - -
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted (13,537) (7,212) (2,192) (3,638) (1,334)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Share of profit/(loss) in associates
and joint ventures
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 1 (2) 1,849 - 5
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items - - - - -
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
- impairment of goodwill - - - - -
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 1 (2) 1,849 - 5
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported (4,224) 8,207 2,612 (226) (187)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items 1,131 115 14 597 29
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
* revenue (187) 15 (5) 41 (13)
* operating expenses 1,318 100 19 556 42
---------------------------------------------------------- ---------
- - - - -
* share of profit in associates and joint ventures
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted (3,093) 8,322 2,626 371 (158)
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 314,530 302,454 46,113 58,082 17,296
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 314,530 302,454 46,113 58,082 17,296
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Customer accounts
---------------------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 504,275 531,489 56,826 117,485 22,220
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 504,275 531,489 56,826 117,485 22,220
---------------------------------------------------------- --------- -------- ------- -------- ------- -------
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
and gains relating to the business update in February 2020.
Reconciliation of reported and
adjusted items (continued)
-------- -------- ------- ------- ------- -----------
2019
----------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 2 18,056 30,419 3,710 6,587 3,516 56,098
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 2 125 34 (26) (17) (613) (471)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 30 35 (826) 68 10 (683)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- customer redress programmes 163 - - - - 163
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses - - (828) 59 1 (768)
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 (137) 35 - 9 9 (84)
---------------------------------------------------------- ---------
- currency translation on significant
items 4 - 2 - - 6
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 2 18,211 30,488 2,858 6,638 2,913 54,944
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
ECL
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported (938) (724) (117) (237) (740) (2,756)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation (2) - 2 - 129 129
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted (940) (724) (115) (237) (611) (2,627)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 2,5 (21,759) (13,297) (1,549) (5,583) (2,389) (42,349)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 2 (166) 25 28 11 351 223
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 5 4,495 126 112 543 369 9,607
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
* costs of structural reform 4 154 4 - - - 158
---------------------------------------------------------- ---------
- customer redress programmes 1,281 - - - - 1,281
---------------------------------------------------------- ---------
* goodwill impairment 5 2,522 - 97 431 337 7,349
---------------------------------------------------------- ---------
* restructuring and other related costs 538 123 15 113 38 827
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters (60) (1) - - - (61)
---------------------------------------------------------- ---------
- currency translation on significant
items 60 - - (1) (6) 53
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 5 (17,430) (13,146) (1,409) (5,029) (1,669) (32,519)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Share of profit/(loss) in associates
and joint ventures
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported (12) 2,070 283 - 13 2,354
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation - (1) - - (2) (3)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted (12) 2,069 283 - 11 2,351
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 5 (4,653) 18,468 2,327 767 400 13,347
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 5 (43) 58 4 (6) (135) (122)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 4,525 161 (714) 611 379 8,924
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- revenue 30 35 (826) 68 10 (683)
---------------------------------------------------------- ---------
- operating expenses 4,495 126 112 543 369 9,607
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 5 (171) 18,687 1,617 1,372 644 22,149
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 393,850 477,727 28,556 113,474 23,136 1,036,743
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 18,021 9,114 (537) 964 (1,609) 25,953
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 411,871 486,841 28,019 114,438 21,527 1,062,696
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 528,718 697,358 38,126 146,676 28,237 1,439,115
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 22,977 10,172 (731) 979 (2,305) 31,092
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 551,695 707,530 37,395 147,655 25,932 1,470,207
---------------------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
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.
5 Amounts are non-additive across geographical regions due to
goodwill impairment recognised on the Global Banking and Markets
cash-generating unit, which is monitored on a global basis.
Reconciliation of reported and adjusted items (continued)
2019
-----------------------------------------------
Hong Mainland
UK Kong China US Mexico
Footnotes $m $m $m $m $m
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Revenue 1
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported 13,538 19,412 3,101 4,638 2,555
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation 65 192 - - (256)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Significant items 29 26 1 66 7
------------------------------------------------ --------- -------- ------- -------- ------- -------
- customer redress programmes 162 - - - -
------------------------------------------------ ---------
- disposals, acquisitions and investment
in new businesses - - - 59 -
------------------------------------------------ ---------
- fair value movements on financial instruments 2 (139) 26 1 7 8
------------------------------------------------ ---------
- currency translation on significant
items 6 - - - (1)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted 13,632 19,630 3,102 4,704 2,306
------------------------------------------------ --------- -------- ------- -------- ------- -------
ECL
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported (714) (459) (129) (170) (491)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation (2) (4) - - 49
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted (716) (463) (129) (170) (442)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Operating expenses
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported (16,157) (6,935) (2,111) (4,033) (1,390)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation (63) (66) (5) - 141
------------------------------------------------ --------- -------- ------- -------- ------- -------
Significant items 1,805 65 6 93 18
------------------------------------------------ --------- -------- ------- -------- ------- -------
- costs of structural reform 3 101 4 - - -
------------------------------------------------ ---------
- customer redress programmes 1,281 - - - -
------------------------------------------------ ---------
- restructuring and other related costs 405 61 6 93 20
------------------------------------------------ ---------
- settlements and provisions in connection
with legal and regulatory matters 8 (1) - - -
------------------------------------------------ ---------
- currency translation on significant
items 10 1 - - (2)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted (14,415) (6,936) (2,110) (3,940) (1,231)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Share of profit/(loss) in associates
and joint ventures
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported (12) 31 2,016 - 13
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation - 1 1 - (2)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted (12) 32 2,017 - 11
------------------------------------------------ --------- -------- ------- -------- ------- -------
Profit/(loss) before tax
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported (3,345) 12,049 2,877 435 687
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation - 123 (4) - (68)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Significant items 1,834 91 7 159 25
------------------------------------------------ --------- -------- ------- -------- ------- -------
- revenue 29 26 1 66 7
------------------------------------------------ ---------
- operating expenses 1,805 65 6 93 18
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted (1,511) 12,263 2,880 594 644
------------------------------------------------ --------- -------- ------- -------- ------- -------
Loans and advances to customers (net)
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported 303,041 306,964 42,380 63,588 20,426
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation 9,925 1,403 2,802 - (1,033)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted 312,966 308,367 45,182 63,588 19,393
------------------------------------------------ --------- -------- ------- -------- ------- -------
Customer accounts
------------------------------------------------ --------- -------- ------- -------- ------- ---------
Reported 419,642 499,955 48,323 90,834 23,051
------------------------------------------------ --------- -------- ------- -------- ------- -------
Currency translation 13,744 2,286 3,194 - (1,166)
------------------------------------------------ --------- -------- ------- -------- ------- -------
Adjusted 433,386 502,241 51,517 90,834 21,885
------------------------------------------------ --------- -------- ------- -------- ------- -------
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 costs associated with preparations for the UK's exit from the European Union.
Reconciliation of reported and adjusted items (continued)
2018
----------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Revenue 1
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 2 17,704 28,784 2,687 6,725 3,062 53,780
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 2 (760) (263) (37) (57) (803) (1,854)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 105 (35) (1) 97 6 172
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- customer redress programmes (53) - - - - (53)
-------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses (5) - - 103 15 113
-------------------------------------------- ---------
- fair value movements on financial
investments 3 156 (38) (1) (8) (9) 100
-------------------------------------------- ---------
- currency translation on significant
items 7 3 - 2 - 12
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 2 17,049 28,486 2,649 6,765 2,265 52,098
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
ECL
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported (609) (602) (209) 223 (570) (1,767)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 5 6 17 (2) 121 147
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted (604) (596) (192) 221 (449) (1,620)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Operating expenses
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 2 (17,934) (12,466) (1,357) (6,149) (1,935) (34,659)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 2 530 185 47 33 551 1,280
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 664 16 - 976 - 1,656
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- costs of structural reform 4 352 9 - - - 361
-------------------------------------------- ---------
- customer redress programmes 146 - - - - 146
-------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses 52 - - - - 52
-------------------------------------------- ---------
- past service costs of guaranteed
minimum pension benefits equalisation 228 - - - - 228
-------------------------------------------- ---------
* restructuring and other related costs 46 7 - 13 - 66
-------------------------------------------- ---------
- settlements and provisions in
connection with legal and regulatory
matters (147) - - 963 - 816
-------------------------------------------- ---------
- currency translation on significant
items (13) - - - - (13)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 2 (16,740) (12,265) (1,310) (5,140) (1,384) (31,723)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Share of profit in associates and
joint ventures
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 24 2,074 436 - 2 2,536
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation (1) (90) - - (1) (92)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 23 1,984 436 - 1 2,444
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Profit/(loss) before tax
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported (815) 17,790 1,557 799 559 19,890
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation (226) (162) 27 (26) (132) (519)
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Significant items 769 (19) (1) 1,073 6 1,828
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
- revenue 105 (35) (1) 97 6 172
-------------------------------------------- ---------
- operating expenses 664 16 - 976 - 1,656
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted (272) 17,609 1,583 1,846 433 21,199
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Loans and advances to customers
(net)
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 373,073 450,545 28,824 108,146 21,108 981,696
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 26,141 10,289 (521) 2,957 (1,558) 37,308
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 399,214 460,834 28,303 111,103 19,550 1,019,004
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Customer accounts
-------------------------------------------- --------- -------- -------- ------- ------- ------- -----------
Reported 503,154 664,824 35,408 133,291 25,966 1,362,643
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Currency translation 34,940 12,491 (632) 3,094 (2,814) 47,079
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
Adjusted 538,094 677,315 34,776 136,385 23,152 1,409,722
-------------------------------------------- --------- -------- -------- ------- ------- ------- ---------
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, costs to establish the UK ring-fenced bank
(including the UK ServCo group) and costs associated with
establishing an intermediate holding company in Hong Kong.
Reconciliation of reported and adjusted items (continued)
2018
-----------------------------------------------
Hong Mainland
UK Kong China US Mexico
Footnotes $m $m $m $m $m
------------------------------------------- --------- -------- ------- -------- ------- ---------
Revenue 1
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 13,597 18,231 2,888 4,741 2,294
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation (616) 191 (120) - (232)
------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items 115 5 (1) 97 (7)
------------------------------------------- --------- -------- ------- -------- ------- -------
- customer redress programmes (53) - - - -
------------------------------------------- ---------
- disposals, acquisitions and investment
in new businesses - - - 103 -
------------------------------------------- ---------
- fair value movements on financial
instruments 2 162 5 (1) (6) (7)
------------------------------------------- ---------
- currency translation on significant
items 6 - - - -
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 13,096 18,427 2,767 4,838 2,055
------------------------------------------- --------- -------- ------- -------- ------- -------
ECL
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported (516) (214) (143) 199 (463)
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation 4 (3) 1 - 45
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted (512) (217) (142) 199 (418)
------------------------------------------- --------- -------- ------- -------- ------- -------
Operating expenses
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported (14,502) (6,539) (1,920) (4,987) (1,303)
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation 425 (69) 76 - 131
------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items 519 16 - 919 -
------------------------------------------- --------- -------- ------- -------- ------- -------
- costs of structural reform 3 294 9 - - -
------------------------------------------- ---------
- customer redress programmes 146 - - - -
------------------------------------------- ---------
- past service costs of guaranteed
minimum pension benefits equalisation 228 - - - -
------------------------------------------- ---------
- restructuring and other related costs 39 7 - 11 -
------------------------------------------- ---------
- settlements and provisions in connection
with legal and regulatory matters (176) - - 908 -
------------------------------------------- ---------
- currency translation on significant
items (12) - - - -
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted (13,558) (6,592) (1,844) (4,068) (1,172)
------------------------------------------- --------- -------- ------- -------- ------- -------
Share of profit in associates and joint
ventures
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 25 36 2,033 - -
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation (1) - (90) - -
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 24 36 1,943 - -
------------------------------------------- --------- -------- ------- -------- ------- -------
Profit/(loss) before tax
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported (1,396) 11,514 2,858 (47) 528
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation (188) 119 (133) - (56)
------------------------------------------- --------- -------- ------- -------- ------- -------
Significant items 634 21 (1) 1,016 (7)
------------------------------------------- --------- -------- ------- -------- ------- -------
- revenue 115 5 (1) 97 (7)
------------------------------------------- ---------
- operating expenses 519 16 - 919 -
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted (950) 11,654 2,724 969 465
------------------------------------------- --------- -------- ------- -------- ------- -------
Loans and advances to customers (net)
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 287,144 290,547 38,979 64,011 17,895
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation 19,928 2,945 2,068 - (180)
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 307,072 293,492 41,047 64,011 17,715
------------------------------------------- --------- -------- ------- -------- ------- -------
Customer accounts
------------------------------------------- --------- -------- ------- -------- ------- ---------
Reported 399,487 484,897 45,712 82,523 19,936
------------------------------------------- --------- -------- ------- -------- ------- -------
Currency translation 27,720 4,915 2,426 - (195)
------------------------------------------- --------- -------- ------- -------- ------- -------
Adjusted 427,207 489,812 48,138 82,523 19,741
------------------------------------------- --------- -------- ------- -------- ------- -------
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 costs associated with preparations for the UK's exit
from the European Union, costs to establish the UK ring-fenced bank
(including the UK ServCo group) and costs associated with
establishing an intermediate holding company in Hong Kong.
Analysis by country
Profit/(loss) before tax by country/territory within global businesses
Wealth
and Global
Personal Commercial Banking Corporate
Banking Banking and Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------- --------- --------- ---------- ------------ --------- ---------
Europe (680) (529) (1,809) (1,187) (4,205)
---------------------------------------- --------- --------- ---------- ------------ --------- -------
- UK 1 (357) (543) (1,769) (1,555) (4,224)
---------------------------------------- ---------
* of which: HSBC UK Bank plc (RFB) 113 167 90 (124) 246
---------------------------------------- ---------
* of which: HSBC Bank plc (NRFB) 109 36 (1,030) (454) (1,339)
---------------------------------------- ---------
* of which: Holdings and other (579) (746) (829) (977) (3,131)
---------------------------------------- ---------
- France (340) (168) (347) (310) (1,165)
---------------------------------------- ---------
- Germany 17 16 197 (15) 215
---------------------------------------- ---------
- Switzerland (2) (4) - (10) (16)
---------------------------------------- ---------
- other 2 170 110 703 985
---------------------------------------- --------- --------- ---------- ------------ --------- -------
Asia 5,031 1,944 4,002 1,855 12,832
---------------------------------------- --------- --------- ---------- ------------ --------- -------
- Hong Kong 4,927 1,787 1,674 (181) 8,207
---------------------------------------- ---------
- Australia 108 76 138 (7) 315
---------------------------------------- ---------
- India 16 187 593 228 1,024
---------------------------------------- ---------
- Indonesia (6) (14) 147 (13) 114
---------------------------------------- ---------
- mainland China (34) 295 506 1,845 2,612
---------------------------------------- ---------
- Malaysia 8 33 141 (55) 127
---------------------------------------- ---------
- Singapore 45 (644) 239 (12) (372)
---------------------------------------- ---------
- Taiwan 9 18 104 (2) 129
---------------------------------------- ---------
- other (42) 206 460 52 676
---------------------------------------- --------- --------- ---------- ------------ --------- -------
Middle East and North Africa (15) (120) 478 (324) 19
---------------------------------------- --------- --------- ---------- ------------ --------- -------
- Egypt 68 46 185 (1) 298
---------------------------------------- ---------
- UAE (21) (210) 102 (39) (168)
---------------------------------------- ---------
- Saudi Arabia 21 - 26 (264) (217)
---------------------------------------- ---------
- other (83) 44 165 (20) 106
---------------------------------------- --------- --------- ---------- ------------ --------- -------
North America (449) 366 712 (461) 168
---------------------------------------- --------- --------- ---------- ------------ --------- -------
- US (547) 139 573 (391) (226)
---------------------------------------- ---------
- Canada 52 225 100 (67) 310
---------------------------------------- ---------
- other 46 2 39 (3) 84
---------------------------------------- --------- --------- ---------- ------------ --------- -------
Latin America (183) (22) 233 (65) (37)
---------------------------------------- --------- --------- ---------- ------------ --------- -------
- Mexico (115) (106) 59 (25) (187)
---------------------------------------- ---------
- other (68) 84 174 (40) 150
---------------------------------------- --------- --------- ---------- ------------ --------- -------
Year ended 31 Dec 2020 3,704 1,639 3,616 (182) 8,777
---------------------------------------- --------- --------- ---------- ------------ --------- -------
1 UK includes results from the ultimate holding company, HSBC
Holdings plc, and the separately incorporated group of service
companies ('ServCo Group').
Profit/(loss) before tax by country/territory within global
businesses (continued)
---------- ---------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking(3) Banking(3) Markets(3) Centre(3) Total
Footnotes $m $m $m $m $m
------------------------------------- --------- ----------- ----------- ----------- ---------- ---------
Europe (841) (1,324) (997) (1,491) (4,653)
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
- UK 1 (1,053) 904 (1,217) (1,979) (3,345)
------------------------------------- ---------
- of which: HSBC UK Bank plc
(RFB) (331) 1,555 70 13 1,307
------------------------------------- ---------
* of which: HSBC Bank plc (NRFB) 245 278 (186) (467) (130)
------------------------------------- ---------
* of which: Holdings and other (967) (929) (1,101) (1,525) (4,522)
------------------------------------- ---------
- France 55 120 (65) (74) 36
------------------------------------- ---------
- Germany 18 46 95 2 161
------------------------------------- ---------
- Switzerland 93 7 (3) (6) 91
------------------------------------- ---------
- other 2 46 (2,401) 193 566 (1,596)
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
Asia 7,715 4,519 4,083 2,151 18,468
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
- Hong Kong 7,220 3,242 1,729 (142) 12,049
------------------------------------- ---------
- Australia 130 127 199 (12) 444
------------------------------------- ---------
- India 67 201 533 205 1,006
------------------------------------- ---------
- Indonesia 20 55 127 14 216
------------------------------------- ---------
- mainland China (73) 317 512 2,121 2,877
------------------------------------- ---------
- Malaysia 102 73 189 (22) 342
------------------------------------- ---------
- Singapore 154 105 250 (31) 478
------------------------------------- ---------
- Taiwan 43 25 97 (4) 161
------------------------------------- ---------
- other 52 374 447 22 895
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
Middle East and North Africa 254 212 761 1,100 2,327
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
- Egypt 73 81 245 11 410
------------------------------------- ---------
- UAE 139 94 246 (54) 425
------------------------------------- ---------
- Saudi Arabia (3) - 13 1,145 1,155
------------------------------------- ---------
- other 2 45 37 257 (2) 337
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
North America (573) 855 729 (244) 767
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
- US (277) 386 547 (221) 435
------------------------------------- ---------
- Canada 70 427 143 (22) 618
------------------------------------- ---------
- other 2 (366) 42 39 (1) (286)
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
Latin America 264 (103) 328 (89) 400
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
- Mexico 311 176 229 (29) 687
------------------------------------- ---------
- other 2 (47) (279) 99 (60) (287)
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
GBM goodwill impairment 2 - - (3,962) - (3,962)
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
Year ended 31 Dec 2019 6,819 4,159 942 1,427 13,347
------------------------------------- --------- ----------- ----------- ----------- ---------- -------
1 UK includes results from the ultimate holding company, HSBC
Holdings plc, and the separately incorporated group of service
companies ('ServCo Group').
2 Includes the impact of goodwill impairment. As per Group
accounting policy, HSBC's cash-generating units are based on
geographical regions subdivided by global business, except for
Global Banking and Markets, for which goodwill is monitored on a
global basis.
3 A change in reportable segments was made in 2020. Comparative
data have been re-presented accordingly. For further guidance, see
Note 10: Segmental analysis on page 311.
Profit/(loss) before tax by country/territory within global businesses
(continued)
Wealth Global
and Banking
Personal Commercial and Corporate
Banking(2) Banking(2) Markets(2) Centre(2) Total
Footnotes $m $m $m $m $m
--------------------------------------- --------- ---------- ----------- ---------- ---------- ---------
Europe 134 1,798 147 (2,894) (815)
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
- UK 1 256 1,393 (175) (2,870) (1,396)
--------------------------------------- ---------
* of which: HSBC UK Bank plc (RFB) 602 967 4 (191) 1,382
--------------------------------------- ---------
* of which: HSBC Bank plc (NRFB) 618 1,408 839 (787) 2,078
--------------------------------------- ---------
* of which: Holdings and other (964) (982) (1,018) (1,892) (4,856)
--------------------------------------- ---------
- France (42) 163 7 (91) 37
--------------------------------------- ---------
- Germany 26 92 116 (33) 201
--------------------------------------- ---------
- Switzerland (76) 5 (2) (4) (77)
--------------------------------------- ---------
- other (30) 145 201 104 420
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
Asia 7,025 4,475 4,097 2,193 17,790
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
- Hong Kong 6,673 3,291 1,768 (218) 11,514
--------------------------------------- ---------
- Australia 120 137 212 (6) 463
--------------------------------------- ---------
- India 36 157 433 199 825
--------------------------------------- ---------
- Indonesia 7 21 97 (21) 104
--------------------------------------- ---------
- mainland China (195) 282 592 2,179 2,858
--------------------------------------- ---------
- Malaysia 145 89 137 3 374
--------------------------------------- ---------
- Singapore 125 127 266 (27) 491
--------------------------------------- ---------
- Taiwan 60 29 138 (2) 225
--------------------------------------- ---------
- other 54 342 454 86 936
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
Middle East and North Africa 251 142 769 395 1,557
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
- Egypt 51 63 215 4 333
--------------------------------------- ---------
- UAE 142 65 307 (41) 473
--------------------------------------- ---------
- Saudi Arabia - - - 436 436
--------------------------------------- ---------
- other 58 14 247 (4) 315
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
North America 37 1,036 901 (1,175) 799
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
- US (106) 498 734 (1,173) (47)
--------------------------------------- ---------
- Canada 99 489 187 (10) 765
--------------------------------------- ---------
- other 44 49 (20) 8 81
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
Latin America 133 138 354 (66) 559
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
- Mexico 214 119 204 (9) 528
--------------------------------------- ---------
- other (81) 19 150 (57) 31
Year ended 31 Dec 2018 7,580 7,589 6,268 (1,547) 19,890
--------------------------------------- --------- ---------- ----------- ---------- ---------- -------
1 UK includes results from the ultimate holding company, HSBC
Holdings plc, and the separately incorporated group of service
companies ('ServCo Group').
2 A change in reportable segments was made in 2020. Comparative
data have been re-presented accordingly. For further guidance, see
Note 10: Segmental analysis on page 311.
Reconciliation of alternative performance
measures
Page
Use of alternative performance
measures 108
----------------------------------------- ----
Return on average ordinary shareholders'
equity and return on average
tangible equity 108
----------------------------------------- ----
Net asset value and tangible
net asset value per ordinary
share 109
----------------------------------------- ----
Post-tax return and average total
shareholders' equity on average
total assets 110
----------------------------------------- ----
Expected credit losses and other
credit impairment charges as
% of average gross loans and
advances to customers 110
----------------------------------------- ----
Use of alternative performance measures
Our reported results are prepared in accordance with IFRSs as
detailed in our financial statements starting on page 278.
As described on page 77, we use a combination of reported and
alternative performance measures, including those derived from our
reported results that eliminate factors that distort year-on-year
comparisons. These are considered alternative performance measures
(non-GAAP financial measures).
The following information details the adjustments made to the
reported results and the calculation of other alternative
performance measures. All alternative performance measures are
reconciled to the closest reported performance measure.
Return on average ordinary shareholders'
equity and return on average tangible
equity
Return on average ordinary shareholders' equity ('RoE') is
computed by taking profit attributable to the ordinary shareholders
of the parent company ('reported results'), divided by average
ordinary shareholders' equity ('reported equity') for the period.
The adjustment to reported results and reported equity excludes
amounts attributable to non-controlling interests and holders of
preference shares and other equity instruments.
Return on average tangible equity ('RoTE') is computed by
adjusting reported results for the movements in the present value
of in-force long-term insurance business ('PVIF') and for
impairment of goodwill and other intangible assets (net of tax),
divided by average reported equity adjusted for goodwill,
intangibles and PVIF for the period.
Return on average tangible equity excluding significant items
and UK bank levy is annualised profit attributable to ordinary
shareholders, excluding changes in PVIF, significant items and bank
levy (net of tax), divided by average tangible shareholders' equity
excluding fair value of own debt, debt valuation adjustment ('DVA')
and other adjustments for the period.
We provide RoTE ratios in addition to RoE as a way of assessing
our performance, which is closely aligned to our capital
position.
Return on average ordinary shareholders' equity and return on average
tangible equity
2020 2019 2018
$m $m $m
-------------------------------------------------------- -------- -------- ----------
Profit
-------------------------------------------------------- -------- -------- ----------
Profit attributable to the ordinary shareholders
of the parent company 3,898 5,969 12,608
-------------------------------------------------------- -------- -------- --------
Impairment of goodwill and other intangible assets
(net of tax) 1,036 7,349 -
-------------------------------------------------------- -------- -------- --------
Increase/(decrease) in PVIF (net of tax) (253) (1,248) (506)
-------------------------------------------------------- -------- -------- --------
Profit attributable to the ordinary shareholders,
excluding goodwill impairment and PVIF 4,681 12,070 12,102
-------------------------------------------------------- -------- -------- --------
Significant items (net of tax) and UK bank levy 2,402 2,251 2,590
-------------------------------------------------------- -------- -------- --------
Profit attributable to the ordinary shareholders,
excluding goodwill impairment, PVIF, significant
items and UK bank levy 7,083 14,321 14,692
-------------------------------------------------------- -------- -------- --------
Equity
-------------------------------------------------------- -------- -------- ----------
Average total shareholders' equity 189,719 189,035 186,979
-------------------------------------------------------- -------- -------- --------
Effect of average preference shares and other equity
instruments (22,326) (23,614) (23,496)
-------------------------------------------------------- -------- -------- --------
Average ordinary shareholders' equity 167,393 165,421 163,483
-------------------------------------------------------- -------- -------- --------
Effect of goodwill, PVIF and other intangibles (net
of deferred tax) (17,292) (22,574) (22,102)
-------------------------------------------------------- -------- -------- --------
Average tangible equity 150,101 142,847 141,381
-------------------------------------------------------- -------- -------- --------
Fair value of own debt, DVA and other adjustments 422 1,032 2,439
-------------------------------------------------------- -------- -------- --------
Average tangible equity excluding fair value of own
debt, DVA and other adjustments 150,523 143,879 143,820
-------------------------------------------------------- -------- -------- --------
% % %
-------------------------------------------------------- -------- -------- ----------
Ratio
-------------------------------------------------------- -------- -------- ----------
Return on average ordinary shareholders' equity 2.3 3.6 7.7
-------------------------------------------------------- -------- -------- --------
Return on average tangible equity 3.1 8.4 8.6
-------------------------------------------------------- -------- -------- --------
Return on average tangible equity excluding significant
items and UK bank levy 4.7 10.0 10.2
-------------------------------------------------------- -------- -------- --------
The following table details the adjustments made to reported
results by global business:
Return on average tangible equity by global business
Year ended 31 Dec 2020
-----------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
$m $m $m $m $m
----------------------------------------------- --------- ---------- -------- --------- ---------
Profit before tax 3,704 1,639 3,616 (182) 8,777
----------------------------------------------- --------- ---------- -------- --------- -------
Tax expense (509) (661) (977) (531) (2,678)
----------------------------------------------- --------- ---------- -------- --------- -------
Profit after tax 3,195 978 2,639 (713) 6,099
----------------------------------------------- --------- ---------- -------- --------- -------
Less attributable to: preference shareholders,
other equity holders, non-controlling
interests (736) (673) (784) (8) (2,201)
----------------------------------------------- --------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders
of the parent company 2,459 305 1,855 (721) 3,898
----------------------------------------------- --------- ---------- -------- --------- -------
Increase in PVIF (net of tax) (242) (10) - (1) (253)
----------------------------------------------- --------- ---------- -------- --------- -------
Significant items (net of tax) and
UK bank levy 190 208 958 2,041 3,397
----------------------------------------------- --------- ---------- -------- --------- -------
Markets Treasury allocation and other
adjustments 20 (14) (25) 60 41
----------------------------------------------- --------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders,
excluding PVIF, significant items
and UK bank levy 2,427 489 2,788 1,379 7,083
----------------------------------------------- --------- ---------- -------- --------- -------
Average tangible shareholders' equity
excluding fair value of own debt,
DVA and other adjustments 26,551 37,826 41,566 44,580 150,523
----------------------------------------------- --------- ---------- -------- --------- -------
Return on average tangible equity
excluding significant items and UK
bank levy (%) 9.1 1.3 6.7 3.1 4.7
----------------------------------------------- --------- ---------- -------- --------- -------
Year ended 31 Dec 2019
-----------------------------------------------
Profit before tax 6,819 4,159 942 1,427 13,347
----------------------------------------------- --------- ---------- -------- --------- -------
Tax expense (720) (1,502) (460) (1,957) (4,639)
----------------------------------------------- --------- ---------- -------- --------- -------
Profit after tax 6,099 2,657 482 (530) 8,708
----------------------------------------------- --------- ---------- -------- --------- -------
Less attributable to: preference shareholders,
other equity holders, non-controlling
interests (1,279) (846) (784) 170 (2,739)
----------------------------------------------- --------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders
of the parent company 4,820 1,811 (302) (360) 5,969
----------------------------------------------- --------- ---------- -------- --------- -------
Increase in PVIF (net of tax) (1,207) (40) - (1) (1,248)
----------------------------------------------- --------- ---------- -------- --------- -------
Significant items (net of tax) and
UK bank levy 1,641 3,036 4,218 702 9,597
----------------------------------------------- --------- ---------- -------- --------- -------
Markets Treasury allocation and other
adjustments 1 - - 2 3
----------------------------------------------- --------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders,
excluding PVIF, significant items
and bank levy 5,255 4,807 3,916 343 14,321
----------------------------------------------- --------- ---------- -------- --------- -------
Average tangible shareholders' equity
excluding fair value of own debt,
DVA and other adjustments 26,627 36,856 39,999 40,397 143,879
----------------------------------------------- --------- ---------- -------- --------- -------
Return on average tangible equity
excluding significant items and UK
bank levy (%) 19.7 13.0 9.8 0.8 10.0
----------------------------------------------- --------- ---------- -------- --------- -------
Net asset value and tangible net
asset value per ordinary share
Net asset value per ordinary share is total shareholders' equity
less non-cumulative preference shares and capital securities
('total ordinary shareholders' equity'), divided by the number of
ordinary shares in issue excluding shares that the company has
purchased and are held in treasury.
Tangible net asset value per ordinary share is total ordinary
shareholders' equity excluding goodwill, PVIF and other intangible
assets (net of deferred tax) ('tangible ordinary shareholders'
equity'), divided by the number of basic ordinary shares in issue
excluding shares that the company has purchased and are held in
treasury.
Net asset value and tangible net asset value per ordinary share
2020 2019 2018
$m $m $m
------------------------------------------------------ -------- -------- ----------
Total shareholders' equity 196,443 183,955 186,253
------------------------------------------------------ -------- -------- --------
Preference shares and other equity instruments (22,414) (22,276) (23,772)
------------------------------------------------------ -------- -------- --------
Total ordinary shareholders' equity 174,029 161,679 162,481
------------------------------------------------------ -------- -------- --------
Goodwill, PVIF and intangible assets (net of deferred
tax) (17,606) (17,535) (22,425)
------------------------------------------------------ -------- -------- --------
Tangible ordinary shareholders' equity 156,423 144,144 140,056
------------------------------------------------------ -------- -------- --------
Basic number of $0.50 ordinary shares outstanding 20,184 20,206 19,981
------------------------------------------------------ -------- -------- --------
$ $ $
------------------------------------------------------ -------- -------- ----------
Value per share
------------------------------------------------------ -------- -------- ----------
Net asset value per ordinary share 8.62 8.00 8.13
------------------------------------------------------ -------- -------- --------
Tangible net asset value per ordinary share 7.75 7.13 7.01
------------------------------------------------------ -------- -------- --------
Post-tax return and average total
shareholders'
equity on average total assets
Post-tax return on average total assets is profit after tax
divided by average total assets for the period.
Average total shareholders' equity to average total assets is
average total shareholders' equity divided by average total assets
for the period.
Post-tax return and average total shareholders' equity on average total
assets
2020 2019 2018
$m $m $m
---------------------------------------------------- --------- --------- -----------
Profit after tax 6,099 8,708 15,025
---------------------------------------------------- --------- --------- ---------
Average total shareholders' equity 189,719 189,035 186,979
---------------------------------------------------- --------- --------- ---------
Average total assets 2,936,939 2,712,376 2,611,976
---------------------------------------------------- --------- --------- ---------
Ratio % % %
---------------------------------------------------- --------- --------- -----------
Post-tax return on average total assets 0.2 0.3 0.6
---------------------------------------------------- --------- --------- ---------
Average total shareholders' equity to average total
assets 6.46 6.97 7.16
---------------------------------------------------- --------- --------- ---------
Expected credit losses and other
credit impairment charges as % of
average gross loans and advances
to customers
Expected credit losses and other credit impairment charges
('ECL') as % of average gross loans and advances to customers is
the annualised adjusted ECL divided by adjusted average gross loans
and advances to customers for the period.
The adjusted numbers are derived by adjusting reported ECL and
loans and advances to customers for the effects of foreign currency
translation differences.
Expected credit losses and other credit impairment charges as % of average
gross loans and advances to customers (%)
2020 2019 2018
$m $m $m
--------------------------------------------------- --------- --------- ---------
Expected credit losses and other credit impairment
charges ('ECL') (8,817) (2,756) (1,767)
--------------------------------------------------- --------- --------- -------
Currency translation 129 147
--------------------------------------------------- --------- --------- -------
Adjusted ECL (8,817) (2,627) (1,620)
--------------------------------------------------- --------- --------- -------
Average gross loans and advances to customers 1,047,114 1,021,238 982,409
--------------------------------------------------- --------- --------- -------
Currency translation 36,702 38,167 14,911
--------------------------------------------------- --------- --------- -------
Average gross loans and advances to customers - at
most recent balance sheet foreign exchange rates 1,083,816 1,059,405 997,320
--------------------------------------------------- --------- --------- -------
Ratio % % %
--------------------------------------------------- --------- --------- ---------
Expected credit losses and other credit impairment
charges as % of average gross loans and advances
to customers 0.81 0.25 0.16
--------------------------------------------------- --------- --------- -------
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END
ACSEAEADASPFEFA
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February 23, 2021 11:30 ET (16:30 GMT)
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