TIDMHSBA
RNS Number : 6572W
HSBC Holdings PLC
27 April 2021
27 APRIL 2021
HSBC HOLDINGS PLC
1Q21 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
"We had a good start to the year in support of our customers,
while achieving materially enhanced returns for our shareholders. I
am pleased with our revenue and cost performance, but particularly
with our significantly lower expected credit losses. Global Banking
and Markets had a good quarter, and we saw solid business growth in
strategic areas, including Asia Wealth and trade finance, and
mortgages in Hong Kong and the UK. We also strengthened our lending
pipelines in our retail and wholesale businesses.
The execution of our growth and transformation plans is
proceeding well. We made further progress in reducing both costs
and risk-weighted assets, and launched new products and
capabilities in areas of strength.
The economic outlook has improved, although uncertainties
remain. We carry good momentum into the second quarter, while
maintaining conservative positions on capital, funding, liquidity
and credit."
Financial performance (vs. 1Q20)
-- Reported profit after tax up 82% to $4.6bn and reported
profit before tax up 79% to $5.8bn. Reduced revenue continued to
reflect low interest rates. This impact was partly offset as 1Q20
included materially adverse market impacts in life insurance
manufacturing and valuations in Global Banking and Markets ('GBM').
In addition, there were releases of allowances for expected credit
losses in the quarter, reflecting the improved economic outlook.
Adjusted profit before tax up 109% to $6.4bn.
-- All regions profitable in 1Q21, notably HSBC UK Bank plc
reported pre-tax profits of over $1.0bn in the quarter. While there
continues to be interest rate headwinds, expected credit losses and
other credit impairment charges ('ECL') fell, reflecting the
improved economic outlook.
-- Reported revenue down 5% to $13.0bn due to the impact of 2020
interest rate reductions in all global businesses. This was partly
offset by market impacts in life insurance manufacturing and
valuations in GBM.
-- Net interest margin ('NIM') of 1.21%, down 33 basis points
('bps') from 1Q20. NIM broadly stable with 4Q20.
-- Reported ECL were a net release of $0.4bn, compared with a
$3.0bn charge in 1Q20. The net release in 1Q21 primarily reflected
an improvement in the economic outlook from 2020. Stage 3 ECL were
lower, in part as 1Q20 included a large charge related to a
corporate exposure in Singapore.
-- Reported operating expenses up 9% from higher restructuring and other related costs from our transformation programme and increased investment in technology. Adjusted operating expenses up 3% due to a higher performance-related pay accrual, partly offset by the impact of our cost-saving initiatives.
-- Lending increased by $2bn on a reported basis and $6bn on a
constant currency basis in the quarter. Lending growth was in
Wealth and Personal Banking ('WPB'), notably mortgages in the UK
and Hong Kong, and in Commercial Banking ('CMB') in areas of
strategic focus.
-- Return on average tangible equity ('RoTE') (annualised) of
10.2%, up 6.0 percentage points from 1Q20.
-- Common equity tier 1 ('CET1') capital ratio of 15.9%, unchanged from 31 December 2020.
Outlook
-- The economic outlook has improved, giving us increasing
confidence in our revenue growth plans. While early signs are
positive, with evidence of growth in strategic areas, including
improved lending pipelines, there remain uncertainties.
-- Our 1Q21 results were favourably impacted by net ECL
releases, particularly in the UK, reflecting improved economic
forecasts. There remains a high degree of uncertainty as countries
emerge from the pandemic at different speeds and as government
support measures unwind. Based on the current consensus economic
forecasts trajectory, we expect our ECL charge for 2021 to be below
the medium-term range of 30bps to 40bps of average loans that we
indicated at our 2020 annual results.
-- We expect mid-single-digit percentage growth in customer
lending during 2021. This growth remains highly dependent on the
speed at which economies recover from the Covid-19 pandemic,
together with the duration of various government support measures
and restrictions.
-- We continue to make progress against the strategic plan we
announced in February 2021, which responds to the fundamental
changes in our operating environment and aligns to our refreshed
purpose, values and ambition. We expect to provide an update at our
2021 interim results in August.
-- As indicated at our 2020 annual results in February 2021, we
do not intend to pay quarterly dividends during 2021. The Group
will consider whether to announce an interim dividend at our 2021
half-year results in August.
Key financial metrics
Quarter ended
31 Mar 31 Dec 31 Mar
Footnotes 2021 2020 2020
--------------------------------------------------- --------- ------ ------ --------
Reported results
--------------------------------------------------- --------- ------ ------ --------
Reported revenue ($m) 12,986 11,757 13,686
--------------------------------------------------- --------- ------ ------ ------
Reported profit before tax ($m) 5,779 1,385 3,229
--------------------------------------------------- --------- ------ ------ ------
Reported profit after tax ($m) 4,568 935 2,508
--------------------------------------------------- --------- ------ ------ ------
Profit attributable to the ordinary shareholders
of the parent company ($m) 3,880 562 1,785
--------------------------------------------------- --------- ------ ------ ------
Cost efficiency ratio (%) 65.7 83.9 57.4
--------------------------------------------------- --------- ------ ------ ------
Basic earnings per share ($) 0.19 0.03 0.09
--------------------------------------------------- --------- ------ ------ ------
Diluted earnings per share ($) 0.19 0.03 0.09
--------------------------------------------------- --------- ------ ------ ------
Net interest margin (%) 1.21 1.22 1.54
--------------------------------------------------- --------- ------ ------ ------
Alternative performance measures
--------------------------------------------------- --------- ------ ------ --------
Adjusted revenue ($m) 13,273 12,025 13,713
--------------------------------------------------- --------- ------ ------ ------
Adjusted profit before tax ($m) 6,390 2,248 3,063
--------------------------------------------------- --------- ------ ------ ------
Adjusted cost efficiency ratio (%) 61.8 77.0 58.2
--------------------------------------------------- --------- ------ ------ ------
Expected credit losses and other credit impairment
charges ('ECL') (annualised) as % of average
gross loans and advances to customers (%) (0.17) 0.45 1.15
--------------------------------------------------- --------- ------ ------ ------
Return on average ordinary shareholders' equity
(annualised) (%) 9.0 1.3 4.4
--------------------------------------------------- --------- ------ ------ ------
Return on average tangible equity (annualised)
(%) 1 10.2 1.9 4.2
--------------------------------------------------- --------- ------ ------ ------
At
---------------------------------
31 Mar 31 Dec 31 Mar
Footnotes 2021 2020 2020
------------------------------------------------- --------- --------- --------- -----------
Balance sheet
------------------------------------------------- --------- --------- --------- -----------
Total assets ($m) 2,958,629 2,984,164 2,917,810
------------------------------------------------- --------- --------- --------- ---------
Net loans and advances to customers ($m) 1,040,207 1,037,987 1,040,282
------------------------------------------------- --------- --------- --------- ---------
Customer accounts ($m) 1,650,019 1,642,780 1,440,529
------------------------------------------------- --------- --------- --------- ---------
Average interest-earning assets, year to date
($m) 2,178,918 2,092,900 1,991,702
------------------------------------------------- --------- --------- --------- ---------
Loans and advances to customers as % of customer
accounts (%) 63.0 63.2 72.2
------------------------------------------------- --------- --------- --------- ---------
Total shareholders' equity ($m) 199,210 196,443 189,771
------------------------------------------------- --------- --------- --------- ---------
Tangible ordinary shareholders' equity ($m) 157,357 156,423 150,019
------------------------------------------------- --------- --------- --------- -----------
Net asset value per ordinary share at period
end ($) 8.64 8.62 8.30
------------------------------------------------- --------- --------- --------- ---------
Tangible net asset value per ordinary share
at period end ($) 7.78 7.75 7.44
------------------------------------------------- --------- --------- --------- ---------
Capital, leverage and liquidity
------------------------------------------------- --------- --------- --------- -----------
Common equity tier 1 capital ratio (%) 2 15.9 15.9 14.6
------------------------------------------------- --------- --------- --------- ---------
Risk-weighted assets ($m) 2 846,835 857,520 857,078
------------------------------------------------- --------- --------- --------- ---------
Total capital ratio (%) 2 21.6 21.5 20.3
------------------------------------------------- --------- --------- --------- ---------
Leverage ratio (%) 2 5.4 5.5 5.3
------------------------------------------------- --------- --------- --------- ---------
High-quality liquid assets (liquidity value)
($bn) 695 678 617
------------------------------------------------- --------- --------- --------- ---------
Liquidity coverage ratio (%) 143 139 156
------------------------------------------------- --------- --------- --------- ---------
Share count
------------------------------------------------- --------- --------- --------- -----------
Period end basic number of $0.50 ordinary shares
outstanding (millions) 20,226 20,184 20,172
------------------------------------------------- --------- --------- --------- ---------
Period end basic number of $0.50 ordinary shares
outstanding and dilutive potential ordinary
shares (millions) 20,335 20,272 20,245
------------------------------------------------- --------- --------- --------- -----------
Average basic number of $0.50 ordinary shares
outstanding (millions) 20,191 20,169 20,161
------------------------------------------------- --------- --------- --------- ---------
Dividend per ordinary share (in respect of
the period) ($) - 0.15 -
------------------------------------------------- --------- --------- --------- ---------
For reconciliation of our reported results to an adjusted basis,
including lists of significant items, see page 6. Definitions and
calculations of other alternative performance measures are included
in our 'Reconciliation of alternative performance measures' on page
30.
1 Profit attributable to ordinary shareholders, excluding
impairment of goodwill and other intangible assets and changes in
present value of in-force insurance contracts ('PVIF') (net of
tax), divided by average ordinary shareholders' equity excluding
goodwill, PVIF and other intangible assets (net of deferred
tax).
2 Unless otherwise stated, regulatory capital ratios and
requirements are based on the transitional arrangements of the
Capital Requirements Regulation in force at the time. These include
the regulatory transitional arrangements for IFRS 9 'Financial
Instruments', which are explained further on page 28. Leverage
ratios are calculated using the end point definition of capital and
the IFRS 9 regulatory transitional arrangements. Following the end
of the transition period after the UK's withdrawal from the EU, any
reference to EU regulations and directives (including technical
standards) should be read as a reference to the UK's version of
such regulation and/or directive, onshored into UK law under the
European Union (Withdrawal) Act 2018, as amended.
Contents
Page Page
Highlights 1 Summary consolidated income statement 21
---- ------------------------------------- ----
Summary consolidated balance
Key financial metrics 2 sheet 22
-------------------------------- ---- ------------------------------------- ----
Business highlights 3 Credit risk 22
---- ------------------------------------- ----
Approach to risk management 3 Capital adequacy 34
-------------------------------- ---- ------------------------------------- ----
Risks related to Covid-19 4 Leverage 35
-------------------------------- ---- ------------------------------------- ----
Geopolitical and macroeconomic
risks 5 Risk-weighted assets 35
-------------------------------- ---- ------------------------------------- ----
UK withdrawal from the European Reconciliation of alternative
Union 5 performance measures 36
-------------------------------- ---- ------------------------------------- ----
Adjusted performance 6 Dividend on preference shares 46
-------------------------------- ---- ------------------------------------- ----
Investor relations / media relations
Financial performance 7 contacts 46
Cautionary statement regarding
forward-looking statements 19 Terms and abbreviations 47
-------------------------------- ---- ------------------------------------- ----
HSBC Holdings plc will be conducting a trading update conference
call with analysts and investors today to coincide with the
publication of its Earnings Release. The call will take place at
07.30am BST. Details of how to participate in the call and the live
audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered
in London. HSBC serves customers worldwide from offices in
64 countries and territories in its geographical regions:
Europe, Asia, North America, Latin America, and Middle East and
North Africa. With assets of $2,959bn at 31 March 2021, HSBC is one
of the world's largest banking and financial services
organisations.
Business highlights
On 23 February 2021, we announced the next phase of our
strategic plan, which responds to the fundamental changes in the
operating environment and aligns to our refreshed purpose, 'Opening
up a world of opportunity', as well as to our values and
ambition.
Our strategy centres around four key areas:
-- focusing on our strengths and investing in the areas where we
see significant opportunities for growth;
-- digitising at scale by increasing our investment in
technology to improve how we serve customers and increase
efficiency;
-- energising for growth, through a strong culture, simple ways
of working, and by equipping staff with the future skills they
need; and
-- helping our customers and communities to capture the
opportunities presented by the transition to a low-carbon
economy.
In 1Q21, we saw good progress in our Wealth business, increasing
Wealth balances in the quarter by 3% to over $1.6tn, which included
net new money in Global Private Banking of $13bn and in Asset
Management of $11bn.
In France, as part of our strategic review of our retail banking
operations, we are continuing with negotiations in relation to a
potential sale, although no decision has yet been taken. If any
sale is implemented, given the underlying performance of these
operations, a loss on sale is expected. In the US, we continue to
explore both organic and inorganic options for our retail banking
franchise.
We continue to work towards our environmental, social and
governance ('ESG') agenda, including our climate commitments
announced in 2020. We are proposing a climate change resolution at
our Annual General Meeting, which focuses on actions we propose to
take in connection with our ambition to align our provision of
finance with a net zero outcome by 2050. The resolution includes a
commitment to publish and implement a policy to phase out the
financing of coal-fired power and thermal coal mining by 2030 in EU
and OECD markets, and by 2040 in other markets. For the purposes of
the resolution, 'finance' and 'financing' means providing project
finance or direct lending to, or underwriting capital markets
transactions for, corporate clients of our Global Banking and
Commercial Banking businesses. In addition, as part of our
increasing engagement on climate, in April 2021 we became a
founding signatory to the Net Zero Banking Alliance.
We will continue to target an adjusted cost base of $31bn or
less in 2022 and plan to deliver $5bn to $5.5bn of cost saves for
2020 to 2022, while spending $7bn in costs to achieve. We also
continue to target a gross RWA reduction of more than $100bn by the
end of 2022. We will target a RoTE of greater than or equal to 10%
in the medium term (defined as a period of three to four years),
while maintaining a CET1 ratio above 14%, managing in the range of
14% to 14.5% in the medium term. We also announced our updated
dividend policy, which included our intention to transition towards
a target payout ratio of between 40% and 55% of reported earnings
per share ('EPS') from 2022 onwards, with the flexibility to adjust
EPS for non-cash significant items such as goodwill or intangibles
impairments.
Approach to risk management
We have in place a comprehensive risk management framework
covering the whole organisation and incorporating all risk types,
which is underpinned by our culture and values. This outlines the
key principles, policies and practices that we employ in managing
material risks, both financial and non-financial. We operate a
wide-ranging stress testing programme, which is a key part of our
risk management and capital and liquidity planning. Stress testing
provides management with key insights into the impacts of severely
adverse events on the Group, and provides confidence to regulators
on the Group's financial stability.
At 31 March 2021, our CET1 ratio was 15.9%, unchanged from 31
December 2020, and our liquidity coverage ratio ('LCR') was 143%.
Our capital, funding and liquidity positions are expected to help
us to continue supporting our customers throughout the current
geopolitical and macroeconomic uncertainty.
Risks related to Covid-19
The Covid-19 outbreak and its effect on the global economy have
continued to impact our customers and our performance, and the
future effects of the pandemic remain uncertain. The outbreak
necessitated governments to respond at unprecedented levels to
protect
public health, support local economies and protect livelihoods.
It has affected regions at different times and to varying degrees
as it has developed.
The varying government support measures and restrictions in
response to the outbreak have created additional challenges, given
the rapid pace of change and significant operational demands. The
speed at which countries and territories are able to return to
pre-Covid-19 levels of economic activity will vary based on the
levels of continuing government support offered, the level of
infection, and access to and ability to roll out vaccines. Renewed
outbreaks, including as a result of the emergence of new variants
of the virus, emphasise the ongoing threat of Covid-19. We continue
to monitor the situation.
The development of Covid-19 vaccines has raised hopes of
widespread immunisation being achieved across developed countries
by the end of 2021 and government restrictions being lifted.
However, there is significant divergence in the speed at which
vaccines have been deployed. While some developed countries have
managed to offer vaccines to a large proportion of their respective
populations quickly, others have lagged. Many less developed
countries have struggled to secure supplies and are only just
beginning their vaccination programmes. There remains uncertainty
regarding the efficacy and side effects of the vaccines over
various time horizons. Tensions have been evident and may continue
to persist as countries compete for access to the array of vaccines
either under development, pending approval or already approved.
The outbreak has also resulted in changes in the behaviours of
our retail and wholesale customers, leading some to require payment
holidays and others to miss or delay payments on loan balances.
Together, these factors have impacted the performance of our ECL
models, requiring enhanced monitoring of model outputs and use of
compensating controls. These include management judgemental
adjustments based on the expert judgement of senior credit risk
managers and the recalibration of key loss models to take into
account the impacts of Covid-19 on critical model inputs. In
addition, we have been responding to complex conduct considerations
and heightened risk of fraud related to the varying government
support measures and restrictions. The continued economic
uncertainty from the Covid-19 outbreak could adversely impact our
revenue assumptions, notably volume growth.
Geopolitical and macroeconomic risks
The geopolitical and economic landscape continues to be
dominated by the Covid-19 pandemic, and this is likely to remain a
key driver throughout 2021. The trade and regulatory environment is
increasingly fragmented as markets lay out recovery plans from the
Covid-19 outbreak and look to strengthen supply chain networks.
Heightened geopolitical tensions will continue to impact business
sentiment, while the relationship between the UK and the EU may
take time to settle following the UK's departure from the EU,
despite the conclusion of a Trade and Cooperation Agreement at the
end of 2020. Interest rates remain at historically low levels,
although hopes for an economic recovery led by vaccine programmes
have contributed to a rise in interest rate yields and a steepening
of yield curves in our major markets in early 2021. Despite central
bank rates remaining largely unchanged during the first quarter of
2021, the probability of interest rates falling into negative
territory has receded. The steepening of yield curves has led to
some changes in our interest rate risk profile particularly as the
duration of our mortgage portfolios has extended.
Potential changes to tax legislation and tax rates in the
countries in which we operate could increase the Group's effective
tax rate in future periods as governments in many countries seek
revenue sources to pay for the Covid-19 support packages that they
have implemented. Additionally, an OECD initiative to introduce a
global minimum tax rate is gaining momentum and could significantly
increase the Group's tax cost if implemented.
Geopolitical tensions could have potential ramifications for the
Group and its customers. Evolving developments in Hong Kong, US
policy on strategic Chinese industries, claims of human rights
violations and other potential areas of tension may affect the
Group in terms of the impact of sanctions, as well as regulatory,
reputational and market risks. The US has imposed a range of
sanctions and trade restrictions on Chinese persons and companies.
Certain US measures are of particular relevance, including the Hong
Kong Autonomy Act. China has subsequently announced a number of
sanctions and trade restrictions that target or provide authority
to target foreign officials and companies, including those in the
US, UK and EU. How the US-China relationship will evolve over the
coming months is as yet unclear. The US has recently indicated that
it will cooperate with China on issues of mutual interest, such as
climate change, but has also pledged to partner with its allies to
confront China on certain issues. We continue to monitor the
situation.
Business sentiment in some sectors in Hong Kong remains
dampened, although the financial services sector has remained
strong and has benefited from stable liquidity conditions.
The financial impact to the Group of geopolitical risks in Asia
is heightened due to the strategic importance of the region, and
Hong Kong in particular, in terms of profitability and prospects
for growth.
UK withdrawal from the European Union
The EU and the UK agreed a Trade and Cooperation Agreement just
before the end of the transition period on 31 December 2020. The
agreement mainly focuses on goods and services but also covers a
wide range of other areas, including competition, state aid, tax,
fisheries, transport, data and security. It addressed financial
services in a limited manner and, as a result, did not change
HSBC's planning in relation to the UK's withdrawal from the EU.
The EU and UK agreed through a joint declaration to establish
structured regulatory cooperation on financial services, with the
aim of establishing a durable and stable relationship between
autonomous jurisdictions.
Bilateral discussions to agree a memorandum of understanding to
establish the framework for this cooperation have now concluded at
a technical level and will be formalised in due course.
Once approved, the memorandum of understanding is expected to
create the framework for voluntary regulatory cooperation in
financial services between the UK and EU through the establishment
of a Joint UK-EU Financial Regulatory Forum, which will provide a
platform within which both parties will be able to discuss
financial services-related issues including future equivalence
determinations.
Our global presence and diversified customer base should help
mitigate the direct impacts on our financial position of the
absence of a comprehensive agreement on financial services between
the UK and EU. Our existing wholesale and markets footprint in the
EU, and in particular our subsidiary in France, provides a strong
foundation for us to build upon. Over the medium to long term the
UK's withdrawal from the EU may impact markets and increase
economic risk, particularly in the UK, which could adversely impact
our profitability and prospects for growth in this market.
For further information on the risks that the Group faces, see
pages 110 to 117 of the Annual Report and Accounts 2020.
Adjusted performance
Adjusted performance is computed by adjusting reported results
for the effects of foreign currency translation differences and
significant items, which both distort period-on-period
comparisons.
We consider adjusted performance to provide useful information
for investors by aligning internal and external reporting,
identifying and quantifying items management believes to be
significant, and providing insight into how management assesses
period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements
of the US dollar against most major currencies. We exclude them to
derive constant currency data, allowing us to assess balance sheet
and income statement performance on a like-for-like basis and
understand better the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 1Q21 are computed by retranslating
into US dollars for non-US dollar branches, subsidiaries, joint ventures
and associates:
* the income statements for 4Q20 and 1Q20 at the
average rate of exchange for 1Q21; and
* the closing prior period balance sheets at the
prevailing rates of exchange at 31 March 2021.
No adjustment has been made to the exchange rates used to translate
foreign currency-denominated assets and liabilities into the functional
currencies of any HSBC branches, subsidiaries, joint ventures or associates.
The constant currency data of HSBC's Argentinian subsidiaries have
not been adjusted further for the impacts of hyperinflation. When reference
is made to foreign currency translation differences in tables or commentaries,
comparative data reported in the functional currencies of HSBC's operations
have been translated at the appropriate exchange rates applied in the
current period on the basis described above.
================================================================================
Significant items
'Significant items' refers collectively to the items that
management and investors would ordinarily identify and consider
separately to improve the understanding of the underlying trends in
the business.
The tables on pages 33 to 38 detail the effects of significant
items on each of our global business segments and geographical
regions during 1Q21, 4Q20 and 1Q20.
Adjusted performance - foreign currency translation of
significant items
The foreign currency translation differences related to
significant items are presented as a separate component of
significant items. This is considered a more meaningful
presentation as it allows better comparison of period-on-period
movements in performance.
Global business performance
The Group Chief Executive, supported by the rest of the Group
Executive Committee ('GEC') (previously the Group Management
Board), is considered to be the Chief Operating Decision Maker
('CODM') for the purposes of identifying the Group's reportable
segments.
The Group Chief Executive and the rest of the GEC review
operating activity on a number of bases, including by global
business and geographical region. Global businesses are our
reportable segments under IFRS 8 'Operating Segments'. Global
business results are assessed by the CODM on the basis of adjusted
performance, which removes the effects of significant items and
currency translation from reported results. We therefore present
these results on an adjusted basis as required by IFRSs.
A reconciliation of the Group's adjusted results to the Group's
reported results is presented below. Supplementary reconciliations
of adjusted to reported results by global business are presented on
pages 33 to 35 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that
provide breakdowns of adjusted revenue by major product. These
reflect the basis on which revenue performance of the businesses is
assessed and managed.
With effect from the first quarter of 2021, the Global Banking
and Markets management view of adjusted revenue has been revised to
align with changes to the management responsibilities of the
business and how we assess business performance. Comparative data
have been re-presented accordingly. Refer to page 11 for the
updated financial performance summary.
Reconciliation of reported and adjusted results
Quarter ended
31 Mar 31 Dec 31 Mar
2021 2020 2020
Footnotes $m $m $m
------------------------------------------------- --------- --------- --------- -----------
Revenue
------------------------------------------------- --------- --------- --------- -----------
Reported 1 12,986 11,757 13,686
------------------------------------------------- --------- --------- --------- ---------
Currency translation 204 393
------------------------------------------------- --------- --------- --------- ---------
Significant items 287 64 (366)
------------------------------------------------- --------- --------- --------- ---------
- customer redress programmes (18) (1) -
------------------------------------------------- ---------
- disposals, acquisitions and investment in
new businesses - 2 7
------------------------------------------------- ---------
- fair value movements on financial instruments 2 239 46 (357)
------------------------------------------------- ---------
- restructuring and other related costs 3 66 20 (9)
------------------------------------------------- ---------
- currency translation of significant items (3) (7)
------------------------------------------------- --------- --------- --------- ---------
Adjusted 13,273 12,025 13,713
------------------------------------------------- --------- --------- --------- ---------
Change in expected credit losses and other
credit impairment charges
------------------------------------------------- --------- --------- --------- -----------
Reported 435 (1,174) (3,026)
------------------------------------------------- --------- --------- --------- ---------
Currency translation (27) (91)
------------------------------------------------- --------- --------- --------- ---------
Adjusted 435 (1,201) (3,117)
------------------------------------------------- --------- --------- --------- ---------
Operating expenses
------------------------------------------------- --------- --------- --------- -----------
Reported (8,527) (9,864) (7,852)
------------------------------------------------- --------- --------- --------- ---------
Currency translation (165) (307)
------------------------------------------------- --------- --------- --------- ---------
Significant items 324 774 176
- customer redress programmes (10) (107) 1
------------------------------------------------- ---------
- impairment of goodwill and other intangibles - 8 -
------------------------------------------------- ---------
- restructuring and other related costs 334 836 170
------------------------------------------------- ---------
- past service costs of guaranteed minimum
pension benefits equalisation - 17 -
------------------------------------------------- ---------
- settlements and provisions in connection
with legal and regulatory matters - 4 1
------------------------------------------------- ---------
- currency translation of significant items 16 4
------------------------------------------------- --------- --------- --------- ---------
Adjusted (8,203) (9,255) (7,983)
------------------------------------------------- --------- --------- --------- ---------
Share of profit in associates and joint ventures
------------------------------------------------- --------- --------- --------- -----------
Reported 885 666 421
------------------------------------------------- --------- --------- --------- ---------
Currency translation 13 29
Adjusted 885 679 450
------------------------------------------------- --------- --------- --------- ---------
Profit before tax
------------------------------------------------- --------- --------- --------- -----------
Reported 5,779 1,385 3,229
------------------------------------------------- --------- --------- --------- ---------
Currency translation 25 24
------------------------------------------------- --------- --------- --------- ---------
Significant items 4 611 838 (190)
------------------------------------------------- --------- --------- --------- ---------
- revenue 287 64 (366)
- operating expenses 324 774 176
Adjusted 6,390 2,248 3,063
------------------------------------------------- --------- --------- --------- ---------
Loans and advances to customers (net)
------------------------------------------------- --------- --------- --------- -----------
Reported 1,040,207 1,037,987 1,040,282
------------------------------------------------- --------- --------- --------- ---------
Currency translation (4,061) 60,888
------------------------------------------------- --------- --------- --------- ---------
Adjusted 1,040,207 1,033,926 1,101,170
------------------------------------------------- --------- --------- --------- ---------
Customer accounts
------------------------------------------------- --------- --------- --------- -----------
Reported 1,650,019 1,642,780 1,440,529
------------------------------------------------- --------- --------- --------- ---------
Currency translation (5,187) 75,026
------------------------------------------------- --------- --------- --------- ---------
Adjusted 1,650,019 1,637,593 1,515,555
------------------------------------------------- --------- --------- --------- ---------
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 Tax on significant items, at reported rates of foreign
exchange, was a charge of $74m in 1Q21 (4Q20: $381m charge, 1Q20:
$4m credit). 4Q20 included tax-only significant item charges of
$117m.
Financial performance
Distribution of results by global business
Quarter ended
31 Mar 31 Dec 31 Mar
2021 2020 2020
$m $m $m
---------------------------------- ------ ------ --------
Adjusted profit/(loss) before tax
---------------------------------- ------ ------ --------
Wealth and Personal Banking 1,914 1,028 688
---------------------------------- ------ ------ ------
Commercial Banking 1,806 518 673
---------------------------------- ------ ------ ------
Global Banking and Markets 1,935 1,055 874
---------------------------------- ------ ------ ------
Corporate Centre 735 (353) 828
---------------------------------- ------ ------ ------
Total 6,390 2,248 3,063
---------------------------------- ------ ------ ------
Distribution of results by geographical region
Quarter ended
31 Mar 31 Dec 31 Mar
2021 2020 2020
$m $m $m
---------------------------------- ------ ------- --------
Reported profit/(loss) before tax
---------------------------------- ------ ------- --------
Europe 997 (1,229) (511)
---------------------------------- ------ ------- ------
Asia 3,758 2,276 3,740
---------------------------------- ------ ------- ------
Middle East and North Africa 337 345 44
---------------------------------- ------ ------- ------
North America 484 152 (111)
---------------------------------- ------ ------- ------
Latin America 203 (159) 67
---------------------------------- ------ ------- ------
Total 5,779 1,385 3,229
---------------------------------- ------ ------- ------
Adjusted profit/(loss) before tax
---------------------------------- ------ ------- --------
Europe 1,509 (673) (713)
---------------------------------- ------ ------- ------
Asia 3,793 2,420 3,703
---------------------------------- ------ ------- ------
Middle East and North Africa 348 366 37
---------------------------------- ------ ------- ------
North America 522 228 (5)
---------------------------------- ------ ------- ------
Latin America 218 (93) 41
---------------------------------- ------ ------- ------
Total 6,390 2,248 3,063
---------------------------------- ------ ------- ------
Tables showing adjusted profit before tax by global business and
region are presented to support the commentary on adjusted
performance on the following pages.
The tables on pages 33 to 38 reconcile reported to adjusted
results for each of our global business segments and geographical
regions.
Group
1Q21 compared with 1Q20 - reported results
Movement in reported profit before tax compared with 1Q20
Quarter ended
31 Mar 31 Mar Variance
-----------------
2021 2020 1Q21 vs. 1Q20
$m $m $m %
---------------------------------------- ------- ------- -------- -------
Revenue 12,986 13,686 (700) (5)
---------------------------------------- ------- ------- -------- -----
ECL 435 (3,026) 3,461 114
---------------------------------------- ------- ------- -------- -----
Operating expenses (8,527) (7,852) (675) (9)
---------------------------------------- ------- ------- -------- -----
Share of profit from associates and JVs 885 421 464 110
---------------------------------------- ------- ------- -------- -----
Profit before tax 5,779 3,229 2,550 79
---------------------------------------- ------- ------- -------- -----
Tax expense (1,211) (721) (490) (68)
---------------------------------------- ------- ------- -------- -----
Profit after tax 4,568 2,508 2,060 82
---------------------------------------- ------- ------- -------- -----
Reported profit
Reported profit after tax of $4.6bn was $2.1bn or 82% higher
than in 1Q20, while reported profit before tax of $5.8bn was $2.6bn
or 79% higher.
Reported revenue fell, reflecting the continued impact of lower
global interest rates, despite the favourable impact on certain
volatile items in WPB and GBM after the material adverse
mark-to-market losses in 1Q20. This reduction was more than offset
by a net release of reported ECL in 1Q21 due to an improvement in
the forward economic outlook, mainly in the UK, compared with the
significant build-up of stage 1 and stage 2 allowances in 1Q20, and
as our share of profit from associates and joint ventures in
Corporate Centre increased. Reported operating expenses rose due to
higher restructuring and other related costs and continued
investment in our digital capabilities.
The net favourable mark-to-market movements discussed above
resulted primarily from materially adverse movements in 1Q20. These
included:
-- In WPB, there were favourable market impacts in life
insurance manufacturing of $76m in 1Q21. This compared with
materially adverse market impacts of $689m in 1Q20.
-- In GBM, Markets and Securities Services ('MSS') included
favourable credit and funding valuation adjustments of $33m and
favourable bid-offer adjustments of $18m in 1Q21. This compared
with adverse credit and funding valuation adjustments of $346m and
adverse bid-offer adjustments of $310m in 1Q20. In Principal
Investments, income of $173m in 1Q21 compared with losses of $235m
in 1Q20.
These were partly offset:
-- In Corporate Centre, the 1Q21 period included adverse fair
value movements on our long-term debt and associated swaps of $28m,
compared with favourable movements of $259m in 1Q20.
The increase in reported profit also included a net adverse
movement in significant items of $0.8bn, primarily related to fair
value movements on financial instruments and higher restructuring
and other related costs.
Reported revenue
Reported revenue of $13.0bn was $0.7bn or 5% lower than in 1Q20.
The reduction primarily reflected a fall in net interest income as
a result of the impact of lower global interest rates, notably
affecting our deposit franchises in WPB and in Global Liquidity and
Cash Management ('GLCM') in CMB and GBM. While we grew average
interest-earning assets compared with 1Q20, interest-bearing
liabilities also increased, resulting in continued downward
pressure on NIM.
These reductions were partly offset by market impacts in life
insurance manufacturing, notably as 1Q20 included materially
adverse movements, as discussed above. In GBM, revenue increased in
MSS as favourable movements in credit and funding valuation
adjustments and in bid-offer adjustments were partly offset by
lower trading volatility in 1Q21. GBM revenue also benefited from
valuation gains in Principal Investments, compared with losses in
1Q20.
There was a net adverse movement in significant items of $0.7bn,
which was partly offset by favourable foreign currency translation
differences of $0.4bn. The movement in significant items primarily
related to fair value movements on financial instruments of $0.6bn.
In addition, 1Q21 included restructuring and other related costs of
$0.1bn associated with disposal losses related to our RWA reduction
commitments. We expect to incur additional disposal losses in
future quarters as we progress with these reductions.
Reported ECL
Reported ECL were a net release of $0.4bn in 1Q21, which
compared with a charge of $3.0bn in 1Q20. The net release in 1Q21
reflected an improvement in the economic outlook, notably in the
UK. This compared with the significant build-up of stage 1 and
stage 2 allowances in 1Q20 due to the worsening economic outlook at
the onset of the Covid-19 outbreak. In addition, stage 3 charges
were lower, in part as 1Q20 included a significant charge related
to a corporate exposure in Singapore.
While we expect the full-year ECL charge for 2021 to be
materially lower than in 2020, there remains a high degree of
uncertainty as countries emerge from the pandemic at different
speeds and as government support measures unwind. Based on the
current consensus economic forecasts trajectory, we expect our ECL
charge for 2021 to be below the medium-term range of 30bps to 40bps
of average loans that we indicated at our 2020 annual results.
For further details on the calculation of ECL, including the
measurement uncertainties and significant judgements applied to
such calculations, the impact of additional scenarios and post
model-adjustments, see page 20.
Reported operating expenses
Reported operating expenses of $8.5bn were $0.7bn or 9% higher
than in 1Q20. The increase included adverse foreign currency
translation differences of $0.3bn and an adverse movement in
significant items of $0.1bn. Significant items largely comprised an
increase of $0.2bn in restructuring and other related costs, of
which $0.1bn related to severance payments.
The remaining increase reflected higher performance-related pay,
which is accrued based on the profile of our profit performance,
and continued investment in technology, including investments in
our digital capabilities. These increases were partly offset by
reductions from our cost-saving initiatives of $0.4bn during
1Q21.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of
$0.9bn was $0.5bn higher than in 1Q20. This reflected an increased
share of profit from Bank of Communications Co., Limited ('BoCom')
and a recovery in asset valuations of a UK associate relative to
1Q20.
In relation to BoCom, we continue to be subject to a risk of
impairment in the carrying value of our investment. For further
details of our impairment review process, see page 311 of our
Annual Report and Accounts 2020.
Tax expense
The effective tax rate for 1Q21 of 21.0% was lower than 22.3% in
1Q20, as 1Q20 included a charge arising from the remeasurement of
deferred tax balances due to the cancellation of the planned
reduction in the UK corporation tax rate from 19% to 17% from 1
April 2020 and from a greater adverse impact of the non-recognition
of deferred tax on losses arising during the period.
It was announced in the UK Budget on 3 March 2021 that the main
rate of UK corporation tax will increase with effect from 1 April
2023. The Group's UK deferred tax assets and liabilities will be
remeasured to reflect this increase when the Finance Act 2021 is
substantively enacted, which is expected to be either the second or
third quarter of 2021. Based on the closing balances at 31 March
2021, this remeasurement would result in an increase in the Group's
net deferred tax liability of approximately $150m, the majority of
which would be recorded in other comprehensive income.
Deferred tax balances will be remeasured if and when changes to
statutory tax rates are substantively enacted in other
jurisdictions in the year. In particular, President Biden's Made in
America Tax Plan, published in April 2021, proposes an increase in
the US federal rate of corporation tax from 21% to 28%.
Group
1Q21 compared with 1Q20 - adjusted results
Movement in adjusted profit before tax compared with 1Q20
Quarter ended
31 Mar 31 Mar Variance
-----------------------------
2021 2020 1Q21 vs. 1Q20
$m $m $m %
---------------------------------------- ------- ------- ----- ----------------------
Revenue 13,273 13,713 (440) (3)
---------------------------------------- ------- ------- ----- --------------------
ECL 435 (3,117) 3,552 114
---------------------------------------- ------- ------- ----- --------------------
Operating expenses (8,203) (7,983) (220) (3)
---------------------------------------- ------- ------- ----- --------------------
Share of profit from associates and JVs 885 450 435 97
---------------------------------------- ------- ------- ----- --------------------
Profit before tax 6,390 3,063 3,327 109
---------------------------------------- ------- ------- ----- --------------------
Adjusted profit
Adjusted profit before tax of $6.4bn was $3.3bn higher than in
1Q20.
Adjusted revenue fell, mainly reflecting the continued impact of
lower global interest rates, despite the favourable impact of
certain volatile items in WPB and GBM after the large
mark-to-market losses incurred in 1Q20. However, this decrease was
more than offset by a net release of adjusted ECL in 1Q21 due to an
improvement in the forward economic outlook, mainly in the UK,
compared with the significant build-up of stage 1 and stage 2
allowances in 1Q20. Adjusted operating expenses were higher, while
our share of profit from associates and joint ventures
increased.
Adjusted revenue
Adjusted revenue of $13.3bn was $0.4bn or 3% lower than in 1Q20.
The reduction was primarily in net interest income due to the
impact of lower global interest rates, mainly affecting our deposit
franchises within WPB and in GLCM in CMB and GBM. These decreases
were partly offset by net favourable movements in market impacts in
life insurance manufacturing in WPB of $790m, notably as 1Q20
included materially adverse movements reflecting the sharp fall in
equity markets in March 2020. In GBM, MSS revenue increased,
reflecting a net favourable movement in credit and funding
valuation adjustments of $397m and favourable bid-offer adjustments
of $18m (1Q20: $310m adverse), partly offset by lower volatility
resulting in a comparatively muted trading performance in 1Q21. In
addition, GBM revenue benefited from favourable revaluations in
Principal Investments, compared with losses in 1Q20.
Adjusted ECL
Adjusted ECL were a net release of $0.4bn in 1Q21, compared with
a charge of $3.1bn in 1Q20. The net release in 1Q21 was across all
global businesses and reflected an improvement in the economic
outlook, notably in the UK. This compared with the build-up of
stage 1 and stage 2 allowances in 1Q20 due to the worsening
economic outlook at the onset of the Covid-19 outbreak. Stage 3
charges also fell, in part due to a significant charge in 1Q20
related to a corporate exposure in Singapore.
Adjusted operating expenses
Adjusted operating expenses of $8.2bn were $0.2bn or 3% higher
than in 1Q20, reflecting a higher performance-related pay accrual
and continued investment in technology, including our digital
capabilities. These were partly offset by the effects of our
cost-saving initiatives and lower marketing and travel costs.
We expect adjusted costs for 2021, excluding the UK bank levy,
to be broadly in line with 2020, but reserve the option to adjust
our performance-related pay accrual to reflect the performance of
the Group.
The number of employees expressed in full-time equivalent staff
('FTE') at 31 March 2021 was 224,652, a decrease of 1,407 compared
with 31 December 2020. The number of contractors at 31 March 2021
was 7,005, an increase of 1,313 compared with 31 December 2020.
Adjusted share of profit from associates and JVs
Adjusted share of profit from associates and joint ventures of
$0.9bn increased by $0.4bn or 97%. This reflected an increased
share of profit from BoCom and a recovery in asset valuations of a
UK associate relative to 1Q20.
Wealth and Personal Banking - adjusted results
Management view of adjusted revenue(1)
Quarter ended
---------------------------------------------------
31 Mar 31 Dec 31 Mar Variance
---------------------------
2021 2020 2020 1Q21 vs. 1Q20
Footnotes $m $m $m $m %
----------------------------------- --------- ------ ------ ------ ----- --------------------
Wealth 2,382 2,070 1,448 934 65
----------------------------------- --------- ------ ------ ------ ----- ------------------
- investment distribution 1,025 742 900 125 14
----------------------------------- --------- ------------------
- life insurance manufacturing 568 630 (224) 792 >200
----------------------------------- --------- --------------------
- Global Private Banking 488 412 530 (42) (8)
----------------------------------- --------- ------------------
- net interest income 156 158 221 (65) (29)
----------------------------------- --------- ------------------
- non-interest income 332 254 309 23 7
----------------------------------- --------- ------------------
- asset management 301 286 242 59 24
----------------------------------- --------- ------ ------ ------ ----- ------------------
Personal Banking 3,051 3,101 3,941 (890) (23)
----------------------------------- --------- ------ ------ ------ ----- ------------------
- net interest income 2,703 2,773 3,583 (880) (25)
----------------------------------- --------- ------------------
- non-interest income 348 328 358 (10) (3)
----------------------------------- --------- ------ ------ ------ ----- ------------------
Other 2 261 226 383 (122) (32)
----------------------------------- --------- ------ ------ ------ ----- ------------------
Net operating income 3 5,694 5,397 5,772 (78) (1)
----------------------------------- --------- ------ ------ ------ ----- ------------------
RoTE excluding significant items
and UK bank levy (annualised) (%) 18.8 2.1
----------------------------------- --------- ------ ------ ------ ----- --------------------
1 With effect from the first quarter of 2021, certain items
within the management view of adjusted revenue have been renamed.
'Wealth Management' has been renamed 'Wealth' and 'Retail Banking'
has been renamed 'Personal Banking'.
2 'Other' includes the distribution and manufacturing (where
applicable) of retail and credit protection insurance, disposal
gains and other
non-product specific income. It also includes Markets Treasury,
HSBC Holdings interest expense and Argentina hyperinflation.
3 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
1Q21 compared with 1Q20
Adjusted profit before tax of $1.9bn was $1.2bn higher than in
1Q20. This reflected a net release in adjusted ECL as the economic
outlook improved, compared with the build-up of allowances in 1Q20.
The impact of lower global interest rates resulted in a decrease in
net interest income, which was largely offset by an increase in
Wealth revenue due to a net favourable movement of $790m in market
impacts in insurance and growth in investment distribution.
Adjusted revenue of $5.7bn was $0.1bn or 1% lower.
In Personal Banking, revenue of $3.1bn was down $0.9bn or
23%.
-- Net interest income was $0.9bn lower due to narrower margins
as global interest rates fell in 2020 as a result of the Covid-19
outbreak. This reduction was partly mitigated by deposit balance
growth of $61bn or 9% across all markets, particularly in the UK
and Hong Kong, and higher mortgage lending of $23bn or 7%, mainly
in the UK.
-- Non-interest income fell by $10m or 3%, as since March 2020
we moved from charging fees on unarranged overdrafts to an
interest-based charging model, consistent with market practice.
In Wealth, revenue of $2.4bn was up $0.9bn or 65%.
-- In life insurance manufacturing, revenue was $0.8bn higher,
which included a net favourable movement in market impacts of
$790m, primarily as 1Q20 included a materially adverse movement of
$714m reflecting the sharp fall in equity markets in March 2020
(1Q21 included a favourable movement of $76m). The value of new
business written was stable compared with 1Q20, as we broadened how
we engage with customers, including through our improved digital
capabilities, to mitigate the ongoing impact of the Covid-19
pandemic.
-- In investment distribution, revenue was $0.1bn or 14% higher,
reflecting strong equity market conditions in Hong Kong, which
resulted in growth in brokerage fees as transaction volumes
increased by 75% and higher mutual fund sales.
These were partly offset:
-- In Global Private Banking, revenue was $42m or 8% lower, as
net interest income fell by $65m or 29% as a result of the impact
of lower global interest rates. This was partly offset by growth in
non-interest income of $23m or 7%, as investment revenue increased
reflecting market volatility and higher fees from advisory and
discretionary mandates.
Adjusted ECL were a net release of $18m, compared with a charge
of $1.1bn in 1Q20. ECL in 1Q21 reflected a release of allowances as
the economic outlook improved, notably in the UK. This compared
with the significant build-up of allowances in 1Q20 as a result of
the adverse economic outlook due to the Covid-19 outbreak. Stage 3
charges in 1Q21 remained broadly consistent with the average
quarterly charge during 2020, as a reduction in unsecured lending
balances was offset by a slight deterioration in credit
quality.
Adjusted operating expenses of $3.8bn were $0.1bn or 4% lower,
as a reduction in discretionary expenditure more than offset the
impact of inflation and our continued investment in digital and
wealth initiatives.
Commercial Banking - adjusted results
Management view of adjusted revenue
Quarter ended
-------------------------------------------------
31 31 31 Variance
Mar Dec Mar
----------------------------
2021 2020 2020 1Q21 vs. 1Q20
Footnotes $m $m $m $m %
-------------------------------------------------- --------- ----- ----- ----- ----- ---------------------
Global Trade and Receivables Finance 455 429 482 (27) (6)
-------------------------------------------------- --------- ----- ----- ----- ----- -------------------
Credit and Lending 1,468 1,490 1,436 32 2
-------------------------------------------------- --------- ----- ----- ----- ----- -------------------
Global Liquidity and Cash Management 862 912 1,357 (495) (36)
-------------------------------------------------- --------- ----- ----- ----- ----- -------------------
Markets products, Insurance and
Investments, and Other 1 546 375 583 (37) (6)
-------------------------------------------------- --------- ----- ----- ----- ----- -------------------
* of which: share of revenue from Markets and
Securities Services and Banking products 259 235 268 (9) (3)
-------------------------------------------------- --------- ----- ----- ----- ----- -------------------
Net operating income 2 3,331 3,206 3,858 (527) (14)
-------------------------------------------------- --------- ----- ----- ----- ----- -------------------
RoTE excluding significant items
and UK bank levy (annualised) (%) 11.5 2.7
-------------------------------------------------- --------- ----- ----- ----- ----- ---------------------
1 Includes CMB's share of revenue from the sale of Markets and
Securities Services and Banking products to CMB customers. GBM's
share of revenue from the sale of these products to CMB customers
is included within the corresponding lines of the GBM management
view of adjusted revenue. Also includes allocated revenue from
Markets Treasury, HSBC Holdings interest expense and Argentina
hyperinflation.
2 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
1Q21 compared with 1Q20
Adjusted profit before tax of $1.8bn was $1.1bn higher than in
1Q20, primarily from lower adjusted ECL, as 1Q21 included a partial
release of the build-up of allowances during 2020, and as 1Q20
included a significant charge related to a corporate exposure in
Singapore. This was partly offset by a decline in adjusted revenue,
mainly due to the impact of lower global interest rates.
Adjusted revenue of $3.3bn was $0.5bn or 14% lower.
-- In GLCM, revenue decreased by $0.5bn or 36%, reflecting the
impact of lower global interest rates, mainly in Hong Kong and the
UK. This was partly offset by a 22% increase in average deposit
balances, with growth across all regions, particularly in the UK,
Hong Kong and the US.
-- In Global Trade and Receivables Finance ('GTRF'), revenue
decreased by $27m or 6% from lower fees and lending balances,
notably in Asia and the UK, reflecting the continued impact of
reduced global trade volumes as a result of the Covid-19
outbreak.
-- In Markets products, Insurance and Investments, and Other,
revenue reduced by $37m or 6%, reflecting the impact of lower
global interest rates on income earned on capital held in the
business.
These decreases were partly offset:
-- In Credit and Lending, revenue increased by $32m or 2%,
reflecting growth in average balances driven by the uptake of
government-backed lending schemes.
Adjusted ECL were a net release of $0.2bn, compared with a
charge of $1.4bn in 1Q20. ECL in 1Q21 reflected a release of stage
1 and stage 2 allowances as the economic outlook improved, notably
in the UK. This compared with the significant build-up of stage 1
and stage 2 allowances in 1Q20 as a result of the adverse economic
outlook due to the Covid-19 outbreak. The reduction in ECL also
included lower stage 3 charges, mainly as 1Q20 included a
significant charge related to a corporate exposure in
Singapore.
Adjusted operating expenses of $1.8bn were broadly unchanged.
This was driven by continued cost discipline, partly offset by an
increase in the performance-related pay accrual while we continued
to invest in our digital and transactional banking
capabilities.
Global Banking and Markets - adjusted results
Management view of adjusted revenue(1)
Quarter ended
---------------------------------------------------
31 Mar 31 Dec 31 Mar Variance
---------------------------
2021 2020 2020 1Q21 vs. 1Q20
Footnotes $m $m $m $m %
--------------------------------------- --------- ------ ------ ------ ----- --------------------
Markets and Securities Services 2,492 1,945 2,349 143 6
--------------------------------------- --------- ------ ------ ------ ----- ------------------
- Securities Services 452 442 528 (76) (14)
--------------------------------------- --------- ------------------
- Global Debt Markets 396 119 261 135 52
--------------------------------------- --------- ------------------
- Global Foreign Exchange 952 830 1,390 (438) (32)
--------------------------------------- --------- ------------------
- Equities 419 304 270 149 55
--------------------------------------- --------- ------------------
- Securities Financing 240 178 264 (24) (9)
--------------------------------------- --------- ------------------
- Credit and funding valuation
adjustments 33 72 (364) 397 109
--------------------------------------- --------- ------ ------ ------ ----- ------------------
Banking 1,630 1,590 1,785 (155) (9)
--------------------------------------- --------- ------ ------ ------ ----- ------------------
- Global Trade and Receivables
Finance 178 169 173 5 3
--------------------------------------- --------- ------------------
- Global Liquidity and Cash Management 444 469 615 (171) (28)
--------------------------------------- --------- ------------------
- Credit and Lending 654 658 669 (15) (2)
--------------------------------------- --------- ------------------
- Capital Markets and Advisory 291 256 145 146 101
--------------------------------------- --------- ------------------
- Other 2 63 38 183 (120) (66)
--------------------------------------- --------- ------ ------ ------ ----- ------------------
GBM Other 170 39 (238) 408 171
--------------------------------------- --------- ------ ------ ------ ----- ------------------
- Principal Investments 173 72 (240) 413 172
--------------------------------------- --------- ------------------
- Other 3 (3) (33) 2 (5) >(200)
--------------------------------------- --------- ------ ------ ------ ----- --------------------
Net operating income 4 4,292 3,574 3,896 396 10
--------------------------------------- --------- ------ ------ ------ ----- ------------------
RoTE excluding significant items
and UK bank levy (annualised) (%) 12.1 6.3
--------------------------------------- --------- ------ ------ ------ ----- --------------------
1 With effect from the first quarter of 2021, management view of
adjusted revenue has been revised to align with changes to the
management responsibilities of the business and how we assess
business performance. Comparative data have been re-presented
accordingly.
2 Includes portfolio management, earnings on capital and other
capital allocations on all Banking products.
3 Includes notional tax credits and Markets Treasury, HSBC
Holdings interest expense and Argentina hyperinflation.
4 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
1Q21 compared with 1Q20
Adjusted profit before tax of $1.9bn was $1.1bn higher than in
1Q20. This mainly reflected lower adjusted ECL, as 1Q21 included a
partial release of the build-up of allowances from 2020, as well as
an increase in adjusted revenue.
Adjusted revenue of $4.3bn increased by $0.4bn compared with
1Q20.
-- In Markets and Securities Services, revenue increased by
$0.1bn or 6% due to favourable movements in credit and funding
valuation adjustments of $0.4bn and as 1Q20 included a $310m
adverse bid-offer adjustment. Revenue in Global Debt Markets and
Equities increased, particularly in wealth and private credit,
reflecting robust client activity. These increases more than offset
lower revenue in Global Foreign Exchange, which was in the context
of a particularly strong performance in 1Q20. Securities Services
revenue fell by $0.1bn or 14% due to lower interest rates, notably
in Asia and Europe, while fees were up 6%, mainly in Asia.
-- In Banking, revenue decreased by $0.2bn or 9%, mainly in
GLCM, which fell by $0.2bn or 28% due to the impact of lower global
interest rates, although average balances grew, notably in the US,
the UK and Asia. The reduction in 'Other' reflected the
non-recurrence of gains in 1Q20 due to widening credit spreads on
portfolio hedges. These decreases were partly offset by an increase
in Capital Markets and Advisory due to a strong performance in
equity underwriting, leveraged finance and advisory in 1Q21, as we
grew investment banking fees, and from the non-recurrence of
mark-to-market losses on syndicated positions in 1Q20.
-- In GBM Other, Principal Investments revenue increased by
$0.4bn, reflecting revaluation gains on a number of funds in 1Q21,
and as 1Q20 included large revaluation losses incurred as a result
of the Covid-19 outbreak, mainly in Europe.
Adjusted ECL were a net release of $0.2bn, compared with a
charge of $0.6bn in 1Q20. ECL in 1Q21 reflected a release of
allowances as the economic outlook improved. This compared with the
significant build-up of allowances in 1Q20 as a result of the
Covid-19 outbreak.
Adjusted operating expenses of $2.5bn were $85m or 3% higher, as
reductions related to our cost-saving initiatives were more than
offset by increased performance-related pay of approximately $100m,
which is accrued based on the profile of our profit performance,
and higher regulatory costs of around $50m.
At 31 March 2021, our cumulative GBM RWA reductions as part of
our transformation programme, which included accelerated saves in
4Q19, were $54bn (31 December 2020: $47bn). This mitigated RWA
growth from asset quality deterioration, elevated market volatility
and regulatory changes that have occurred since the start of the
programme in January 2020.
Corporate Centre - adjusted results
Management view of adjusted revenue
Quarter ended
-----------------------------------------
31 Mar 31 Dec 31 Mar Variance
-----------------
2021 2020 2020 1Q21 vs. 1Q20
Footnotes $m $m $m $m %
----------------------------------- --------- ------ ------ ------ ------- --------
Central Treasury 1 (28) (12) 265 (293) (111)
----------------------------------- --------- ------ ------ ------ ------- ------
Legacy portfolios 9 3 (93) 102 110
----------------------------------- --------- ------ ------ ------ ------- ------
Other 2 (25) (143) 15 (40) >(200)
----------------------------------- --------- ------ ------ ------ ------- --------
Net operating income 3 (44) (152) 187 (231) (124)
----------------------------------- --------- ------ ------ ------ ------- ------
RoTE excluding significant items
and UK bank levy (annualised) (%) 7.4 4.8
----------------------------------- --------- ------ ------ ------ ------- --------
1 Central Treasury includes valuation differences on issued
long-term debt and associated swaps (1Q21: losses of $28m; 4Q20:
losses of $12m; 1Q20: gains of $259m).
2 Revenue from Markets Treasury, HSBC Holdings net interest
expense and Argentina hyperinflation are allocated out to the
global businesses, to align them better with their revenue and
expense. The total Markets Treasury revenue component of this
allocation for 1Q21 was $805m (4Q20: $609m; 1Q20: $781m).
3 'Net operating income' means net operating income before
change in expected credit losses and other credit impairment
charges (also referred to as 'revenue').
1Q21 compared with 1Q20
Adjusted profit before tax of $0.7bn was $0.1bn lower than in
1Q20 due to a fall in adjusted revenue and higher adjusted
operating expenses, partly offset by higher income from the share
of profit from associates and joint ventures.
Adjusted revenue decreased by $0.2bn, mainly in Central
Treasury, from a net adverse fair value movement of $287m relating
to the economic hedging of interest rate and exchange rate risk on
our long-term debt with associated swaps. This was partly offset by
higher revenue from our legacy portfolios, as 1Q20 included
valuation losses as a result of the Covid-19 outbreak.
Adjusted operating expenses, which are stated after recovery of
costs from our global businesses, increased by $0.3bn due to a
higher performance-related pay accrual.
Adjusted share of profit from associates and joint ventures of
$0.9bn increased by $0.4bn. This reflected increases in Asia of
$0.2bn, as our share of profit from BoCom grew, and in Europe of
$0.2bn, mainly from a UK associate reflecting a recovery in asset
valuations relative to 1Q20.
Group
1Q21 compared with 4Q20 - reported results
Movement in reported profit before tax compared with 4Q20
Quarter ended
31 Mar 31 Dec Variance
-----------------
2021 2020 1Q21 vs. 4Q20
$m $m $m %
---------------------------------------- ------- ------- ------- --------
Revenue 12,986 11,757 1,229 10
---------------------------------------- ------- ------- ------- ------
ECL 435 (1,174) 1,609 137
---------------------------------------- ------- ------- ------- ------
Operating expenses (8,527) (9,864) 1,337 14
---------------------------------------- ------- ------- ------- ------
Share of profit from associates and JVs 885 666 219 33
---------------------------------------- ------- ------- ------- ------
Profit before tax 5,779 1,385 4,394 >200
---------------------------------------- ------- ------- ------- --------
Tax expense (1,211) (450) (761) (169)
---------------------------------------- ------- ------- ------- ------
Profit after tax 4,568 935 3,633 >200
---------------------------------------- ------- ------- ------- --------
Reported profit
Reported profit after tax of $4.6bn was $3.6bn higher than in
4Q20.
Reported profit before tax of $5.8bn was $4.4bn higher than in
4Q20, driven by lower reported ECL, primarily as 1Q21 included a
net release of ECL allowances due to an improvement in the economic
outlook, compared with a net ECL charge in 4Q20. In addition,
reported operating expenses were lower, primarily as 4Q20 included
the UK bank levy, and reported revenue increased.
Results in 1Q21 included an adverse movement of certain volatile
items, notably favourable movements in market impacts in life
insurance manufacturing in WPB of $76m (4Q20: $298m favourable) and
favourable credit and funding valuation adjustments in GBM of $33m
(4Q20: $70m favourable). Results also included adverse movements on
our long-term debt and associated swaps in Corporate Centre of $28m
(4Q20: $12m adverse).
Reported profit before tax included a favourable movement of
$0.2bn in significant items, mainly due to lower restructuring and
other related costs partly offset by adverse fair value movements
on financial instruments.
Reported revenue
Reported revenue of $13.0bn was $1.2bn or 10% higher than in
4Q20, primarily reflecting increases in GBM and WPB.
In GBM, growth was driven by MSS, reflecting a seasonal increase
in client activity relative to 4Q20, while in WPB, the increase was
mainly due to higher investment distribution revenue.
The change in reported revenue also included net adverse
movements in significant items of $0.2bn, driven by a net adverse
fair value movement on financial instruments of $0.2bn. Foreign
currency translation differences resulted in a favourable effect on
the movement of reported revenue of $0.2bn.
Reported ECL
Reported ECL were a net release of $0.4bn in 1Q21, compared with
a charge of $1.2bn in 4Q20. The release in 1Q21 reflected an
improvement in the economic outlook, notably in the UK. There were
also lower stage 3 charges in 1Q21 compared with 4Q20.
Reported operating expenses
Reported operating expenses of $8.5bn were $1.3bn or 14% lower
than in 4Q20, primarily due to the UK bank levy charge of $0.8bn
recorded in 4Q20 and a net favourable movement of $0.5bn in
significant items. These were driven by a reduction of $0.5bn in
restructuring and other related costs.
This reduction was partly offset by adverse foreign currency
translation differences of $0.2bn.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of
$0.9bn increased by $0.2bn or 33%, primarily reflecting profit
growth from BoCom.
Group
1Q21 compared with 4Q20 - adjusted results
Movement in adjusted profit before tax compared with 4Q20
Quarter ended
-----------------------------------
31 Mar 31 Dec Variance
-----------------
2021 2020 1Q21 vs. 4Q20
$m $m $m %
---------------------------------------- ------- ------- --------- ------
Revenue 13,273 12,025 1,248 10
---------------------------------------- ------- ------- --------- ----
ECL 435 (1,201) 1,636 136
---------------------------------------- ------- ------- --------- ----
Operating expenses (8,203) (9,255) 1,052 11
---------------------------------------- ------- ------- --------- ----
Share of profit from associates and JVs 885 679 206 30
---------------------------------------- ------- ------- --------- ----
Profit before tax 6,390 2,248 4,142 184
---------------------------------------- ------- ------- --------- ----
Adjusted profit
Adjusted profit before tax of $6.4bn was $4.1bn higher than in
4Q20, driven by lower ECL, primarily as 1Q21 included a net release
of ECL allowances due to an improvement in the forward economic
outlook, compared with a net ECL charge in 4Q20. In addition,
adjusted operating expenses were lower as 4Q20 included the UK bank
levy, while adjusted revenue increased.
Adjusted revenue
Adjusted revenue of $13.3bn was $1.2bn or 10% higher than in
4Q20, reflecting increases in GBM (up $0.7bn) and WPB (up
$0.3bn).
In GBM, the revenue increase was driven by MSS, reflecting a
seasonal increase in client activity and higher volatility. In
Banking, performance was broadly unchanged as an increase in
Capital Markets and Advisory fees and a favourable movement on
portfolio hedges after a tightening of credit spreads in 4Q20 were
offset by lower net interest income in Credit and Lending as
balances fell.
In WPB, the increase reflected seasonally higher investment
distribution revenue compared with 4Q20 and higher investment
revenue in Global Private Banking, partly offset by a reduction in
life insurance manufacturing, as a net adverse movement in market
impacts of $0.2bn was in part mitigated by a rise in the value of
new business.
These increases were in part offset by the continued impact of
lower interest rates in many of the key markets in which we
operate, which had an adverse impact on net interest income in
Personal Banking within WPB, and in GLCM within CMB and GBM.
Adjusted ECL
Adjusted ECL were a net release of $0.4bn in 1Q21, compared with
a charge of $1.2bn in 4Q20. The release in 1Q21 reflected an
improvement in the economic outlook, notably in the UK. There were
also lower stage 3 charges in 1Q21 compared with 4Q20.
Adjusted operating expenses
Adjusted operating expenses of $8.2bn were $1.1bn or 11% lower,
primarily as 4Q20 included the UK bank levy charge of $0.8bn.
The decrease also reflected the continued impact of our cost
reduction programme of $0.1bn, a non-recurrence of commercial real
estate impairment charges of $0.2bn and a $0.1bn reduction in
marketing and travel costs. These decreases were partly offset by
an increase of $0.2bn in investments in technology to enhance our
digital and automation capabilities to improve how we serve our
customers.
Adjusted share of profit from associates and JVs
Adjusted share of profit from associates and joint ventures of
$0.9bn increased by $0.2bn or 30% compared with 4Q20, primarily
reflecting profit growth from BoCom.
Balance sheet - 31 March 2021 compared with 31 December 2020
At 31 March 2021, our total assets of $3.0tn were $26bn lower on
a reported basis and included adverse effects of foreign currency
translation differences of $11bn. On a constant currency basis, our
total assets were $14bn lower.
The decrease in total assets on a constant currency basis
reflected lower derivative asset balances due to adverse
revaluation movements on interest rate contracts. In addition,
there were decreases in reverse repurchase agreements and financial
investments as we redeployed our commercial surplus into cash,
which increased by $83bn. Other assets also increased due to the
seasonal reduction in settlement accounts at 31 December 2020, as
clients settled trades prior to the year end.
Reported loans and advances to customers as a percentage of
customer accounts was 63.0%, which was broadly unchanged compared
with 31 December 2020.
Loans and advances to customers
Reported loans and advances to customers of $1.0tn were $2bn
higher, which included adverse effects of foreign currency
translation differences of $4bn. On a constant currency basis,
customer lending balances were $6bn higher.
Customer lending increased in WPB by $6bn to $474bn, reflecting
higher mortgage balances, notably in the UK (up $2bn), Canada (up
$1bn) and Hong Kong (up $1bn) as activity in housing markets
globally continued to increase. There was also an increase in term
lending
in Hong Kong (up $3bn), driven by higher secured lending and as
customers borrowed to fund investments in initial public offerings.
In CMB, customer lending of $344bn was $2bn higher, reflecting
growth in trade and term balances in Asia, partly offset by a
reduction of term balances in the UK. In GBM, customer lending of
$221bn fell by $2bn, as customers repaid their credit facilities,
primarily in the UK.
Customer accounts
Customer accounts of $1.7tn increased by $7bn on a reported
basis, including adverse foreign currency translation differences
of $5bn. On a constant currency basis, customer accounts were $12bn
higher, with growth across all of our global businesses. The
increase was primarily in WPB in the UK, as Covid-19 restrictions
continued to result in lower consumer spending and higher deposit
and savings balances.
There continued to be a movement of funds from term accounts to
call accounts as customers showed a preference for liquidity while
interest rates are low.
Risk-weighted assets - 31 March 2021 compared with 31 December
2020
Risk-weighted assets ('RWAs') totalled $846.8bn at 31 March
2021, a $10.7bn decrease compared with 31 December 2020. Excluding
foreign currency translation differences, RWAs decreased by $6.0bn,
reflecting the following movements:
-- a $3.6bn reduction in RWAs due to updates to methodology and
models. Risk parameter refinements in GBM and CMB drove a $2.2bn
decrease due to changes in methodology and policy. A recently
implemented model under market risk was the main factor behind a
$1.4bn reduction from model updates; and
-- a $3.0bn fall in RWAs due to changes in asset quality. This
was primarily driven by favourable portfolio mix changes across the
global businesses, most significantly in North America.
The RWA impacts of asset size movements largely offset each
other across the global businesses. A reduction in GBM credit risk
RWAs of $2.8bn was largely due to management initiatives, and a
$2.9bn fall in market risk RWAs followed emerging market bond
portfolio actions and a fall in foreign exchange risk. These
reductions were partly offset in the other global businesses by
lending growth in Asia, and a rise in sovereign and money market
exposures.
Net interest margin
Quarter ended
---------------------------------
31 Mar 31 Dec 31 Mar
2021 2020 2020
Footnotes $m $m $m
-------------------------------- --------- --------- --------- -----------
Net interest income 6,514 6,619 7,612
-------------------------------- --------- --------- --------- ---------
Average interest-earning assets 2,178,918 2,159,003 1,991,702
-------------------------------- --------- --------- --------- ---------
% % %
-------------------------------- --------- --------- --------- -----------
Gross interest yield 1 1.67 1.71 2.55
-------------------------------- --------- --------- --------- ---------
Less: gross interest payable 1 (0.56) (0.60) (1.19)
-------------------------------- --------- --------- --------- ---------
Net interest spread 2 1.11 1.11 1.36
-------------------------------- --------- --------- --------- ---------
Net interest margin 3 1.21 1.22 1.54
-------------------------------- --------- --------- --------- ---------
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 of
average interest-bearing liabilities.
2 Net interest spread is the difference between the average
annualised interest rate earned on AIEA, net of amortised premiums
and loan fees, and the average annualised interest rate payable on
average interest-bearing funds.
3 Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Net interest margin ('NIM') of 1.21% was 33 basis points ('bps')
lower compared with 1Q20, as the market interest rates-driven
reduction in the yield on AIEA of 88bps was partly offset by the
fall in funding cost of average interest-bearing liabilities of
63bps. Excluding the impact of foreign currency translation
differences, NIM fell by 31bps.
NIM was down 1bp compared with the previous quarter,
predominantly driven by increased balances in low-yielding
short-term funds and loans to banks, as well as further market
interest rate reductions predominantly in Asia.
Notes
-- Income statement comparisons, unless stated otherwise, are
between the quarter ended 31 March 2021 and the quarter ended
31 March 2020. Balance sheet comparisons, unless otherwise
stated, are between balances at 31 March 2021 and the corresponding
balances at 31 December 2020.
-- The financial information on which this Earnings Release is
based, and the data set out in the appendix to this statement, are
unaudited and have been prepared in accordance with our significant
accounting policies as described on pages 288 to 299 of our Annual
Report and Accounts 2020.
-- On 23 February 2021, the Directors approved an interim
dividend for 2020 of $0.15 per ordinary share. The interim dividend
will be payable on 29 April 2021 in cash in US dollars, or in
sterling or Hong Kong dollars at exchange rates determined on 19
April 2021.
-- As previously disclosed on 23 February 2021 in the Annual
Report and Accounts 2020, in December 2020, the PRA announced that
it intends to transition back to its standard approach to capital
setting and shareholder distributions through 2021. In the
meantime, for 2021 dividends the PRA is content for appropriately
prudent dividends to be accrued but not paid out. The PRA aims to
provide a further update ahead of the 2021 half-year results of
large UK banks. The Group will not pay quarterly dividends during
2021 but will consider whether to announce an interim dividend at
the 2021 half-year results in August. The Group will review whether
to revert to paying quarterly dividends at or ahead of its 2021
results announcement in February 2022.
--
Cautionary statement regarding forward-looking statements
This Earnings Release 1Q21 contains certain forward-looking
statements with respect to HSBC's financial condition; results of
operations and business, including the strategic priorities;
financial, investment and capital targets; and ESG
targets/commitments described herein.
Statements that are not historical facts, including statements
about HSBC's beliefs and expectations, are forward-looking
statements. Words such as 'will', 'should', 'expects', 'targets',
'anticipates', 'intends', 'plans', 'believes', 'seeks',
'estimates', 'potential' and 'reasonably possible', variations of
these words and similar expressions are intended to identify
forward-looking statements. These statements are based on current
plans, information, data, estimates and projections, and therefore
undue reliance should not be placed on them. Forward-looking
statements speak only as of the date they are made. HSBC makes no
commitment to revise or update any forward-looking statements to
reflect events or circumstances occurring or existing after the
date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made
in the periodic reports to the US Securities and Exchange
Commission, summary financial statements to shareholders, proxy
statements, offering circulars and prospectuses, press releases and
other written materials, and in oral statements made by HSBC's
Directors, officers or employees to third parties, including
financial analysts.
Forward-looking statements involve inherent risks and
uncertainties. Readers are cautioned that a number of factors could
cause actual results to differ, in some instances materially, from
those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
-- changes in general economic conditions in the markets in
which we operate, such as continuing or deepening recessions and
fluctuations in employment and creditworthy customers beyond those
factored into consensus forecasts (including, without limitation,
as a result of the Covid-19 pandemic); the Covid-19 pandemic, which
is expected to continue to have adverse impacts on our income due
to lower lending and transaction volumes, lower wealth and
insurance manufacturing revenue, and lower or negative interest
rates in markets where we operate, as well as, more generally, the
potential for material adverse impacts on our financial condition,
results of operations, prospects, liquidity, capital position and
credit ratings; deviations from the market and economic assumptions
that form the basis for our ECL measurements (including, without
limitation, as a result of the Covid-19 pandemic or the UK's exit
from the EU); potential changes in dividend policy; changes in
foreign exchange rates and interest rates, including the accounting
impact resulting from financial reporting in respect of
hyperinflationary economies; volatility in equity markets; lack of
liquidity in wholesale funding or capital markets, which may affect
our ability to meet our obligations under financing facilities or
to fund new loans, investments and businesses; geopolitical
tensions or diplomatic developments producing social instability or
legal uncertainty, such as the unrest in Hong Kong, the continuing
US-China tensions and the emerging challenges in UK-China
relations, which in turn may affect demand for our products and
services and could result in (among other things) regulatory,
reputational and market risks for HSBC; the efficacy of government,
customer, and HSBC's actions in managing and mitigating climate
change and in supporting the global transition to net zero carbon
emissions, which may cause both idiosyncratic and systemic risks
resulting in potential financial and non-financial impacts;
illiquidity and downward price pressure in national real estate
markets; adverse changes in central banks' policies with respect to
the provision of liquidity support to financial markets; heightened
market concerns over sovereign creditworthiness in over-indebted
countries; adverse changes in the funding status of public or
private defined benefit pensions; societal shifts in customer
financing and investment needs, including consumer perception as to
the continuing availability of credit; exposure to counterparty
risk, including third parties using us as a conduit for illegal
activities without our knowledge; the expected discontinuation of
certain key Ibors and the development of near risk-free benchmark
rates, which may result in (among other things) regulatory
compliance, legal, conduct, financial, resilience and operational
risks for HSBC; and price competition in the market segments we
serve;
-- changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities in the principal markets in which we
operate and the consequences thereof (including, without
limitation, actions taken as a result of the Covid-19 pandemic);
initiatives to change the size, scope of activities and
interconnectedness of financial institutions in connection with the
implementation of stricter regulation of financial institutions in
key markets worldwide; revised capital and liquidity benchmarks,
which could serve to deleverage bank balance sheets and lower
returns available from the current business model and portfolio
mix; imposition of levies or taxes designed to change business mix
and risk appetite; changes to tax law and tax rates; the practices,
pricing or responsibilities of financial institutions serving their
consumer markets; expropriation, nationalisation, confiscation of
assets and changes in legislation relating to foreign ownership;
the UK's exit from the EU, which may result in a prolonged period
of uncertainty, unstable economic conditions and market volatility,
including currency fluctuations; the imposition of a number of
sanctions and trade restrictions by China and the US, including the
US Hong Kong Autonomy Act, which continues to cause tensions
between China and the US; general changes in government policy that
may significantly influence investor decisions; the costs, effects
and outcomes of regulatory reviews, actions or litigation,
including any additional compliance requirements; and the effects
of competition in the markets where we operate including increased
competition from non-bank financial services companies; and
-- factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan losses
or delinquency, and managing those risks (through account
management, hedging and other techniques); our ability to achieve
our financial, investment, capital and ESG targets/commitments that
we set or adhere to, which may result in our failure to achieve any
of the expected benefits of our strategic priorities; model
limitations or failure, including, without limitation, the impact
that the consequences of the Covid-19 pandemic have had on the
performance and usage of financial models, which may require us to
hold additional capital, incur losses and/or use compensating
controls, including management judgemental adjustments based on the
expert judgement of senior credit risk managers to address model
limitations; changes to the judgements, estimates and assumptions
we base our financial statements on; changes in our ability to meet
the requirements of regulatory stress tests; a reduction in the
credit ratings assigned to us or any of our subsidiaries, which
could increase the cost or decrease the availability of our funding
and affect our liquidity position and net interest margin; changes
to the reliability and security of our data management, data
privacy, information and technology infrastructure, including
threats from cyber-attacks, which may impact our ability to service
clients and may result in financial loss, business disruption
and/or loss of customer services and data; changes in insurance
customer behaviour and insurance claim rates; our dependence on
loan payments and dividends from subsidiaries to meet our
obligations; changes in accounting standards, which may have a
material impact on the way we prepare our financial statements;
changes in our ability to manage third-party, fraud and
reputational risks inherent in our operations; employee misconduct,
which may result in regulatory sanctions and/or reputational or
financial harm; changes in skill requirements, ways of working and
talent shortages, which may affect our ability to recruit and
retain senior management and diverse and skilled personnel; and
changes in our ability to develop sustainable finance products and
our capacity to measure the climate impact from our financing
activity, which may affect our ability to achieve our climate
ambition. Effective risk management depends on, among other things,
our ability through stress testing and other techniques to prepare
for events that cannot be captured by the statistical models it
uses; and our success in addressing operational, legal and
regulatory, and litigation challenges; and other risks and
uncertainties we identify in 'Top and emerging risks' on pages 110
to 115 of the Annual Report and Accounts 2020.
--
Summary consolidated income statement
Quarter ended
31 Mar 31 Dec 31 Mar
2021 2020 2020
$m $m $m
--------------------------------------------------------- ------- ------- ---------
Net interest income 6,514 6,619 7,612
--------------------------------------------------------- ------- ------- -------
Net fee income 3,463 2,967 3,123
--------------------------------------------------------- ------- ------- -------
Net income from financial instruments held for
trading or managed on a fair value basis 2,409 1,814 3,364
--------------------------------------------------------- ------- ------- -------
Net income/(expense) from assets and liabilities
of insurance businesses, including related derivatives,
measured at fair value through profit or loss 1,164 2,335 (3,580)
--------------------------------------------------------- ------- ------- -------
Changes in fair value of designated debt and related
derivatives(1) (113) (47) 246
--------------------------------------------------------- ------- ------- -------
Changes in fair value of other financial instruments
mandatorily measured at fair value through profit
or loss 257 196 (373)
--------------------------------------------------------- ------- ------- -------
Gains less losses from financial investments 307 54 312
--------------------------------------------------------- ------- ------- -------
Net insurance premium income 2,877 2,295 2,910
--------------------------------------------------------- ------- ------- -------
Other operating income/(expense) (73) (278) 404
--------------------------------------------------------- ------- ------- -------
Total operating income 16,805 15,955 14,018
--------------------------------------------------------- ------- ------- -------
Net insurance claims and benefits paid and movement
in liabilities to policyholders (3,819) (4,198) (332)
--------------------------------------------------------- ------- ------- -------
Net operating income before change in expected
credit losses and other credit impairment charges(2) 12,986 11,757 13,686
--------------------------------------------------------- ------- ------- -------
Change in expected credit losses and other credit
impairment charges 435 (1,174) (3,026)
Net operating income 13,421 10,583 10,660
--------------------------------------------------------- ------- ------- -------
Total operating expenses (8,527) (9,864) (7,852)
Operating profit 4,894 719 2,808
--------------------------------------------------------- ------- ------- -------
Share of profit in associates and joint ventures 885 666 421
--------------------------------------------------------- ------- ------- -------
Profit before tax 5,779 1,385 3,229
--------------------------------------------------------- ------- ------- -------
Tax expense (1,211) (450) (721)
--------------------------------------------------------- ------- ------- -------
Profit after tax 4,568 935 2,508
--------------------------------------------------------- ------- ------- -------
Attributable to:
--------------------------------------------------------- ------- ------- ---------
- ordinary shareholders of the parent company 3,880 562 1,785
--------------------------------------------------------- ------- ------- -------
- preference shareholders of the parent company 7 23 22
--------------------------------------------------------- ------- ------- -------
- other equity holders 454 175 441
--------------------------------------------------------- ------- ------- -------
- non-controlling interests 227 175 260
--------------------------------------------------------- ------- ------- -------
Profit after tax 4,568 935 2,508
--------------------------------------------------------- ------- ------- -------
$ $ $
--------------------------------------------------------- ------- ------- ---------
Basic earnings per share 0.19 0.03 0.09
--------------------------------------------------------- ------- ------- ---------
Diluted earnings per share 0.19 0.03 0.09
--------------------------------------------------------- ------- ------- ---------
Dividend per ordinary share (paid in the period) - - -
--------------------------------------------------------- ------- ------- -------
% % %
--------------------------------------------------------- ------- ------- ---------
Return on average ordinary shareholders' equity
(annualised) 9.0 1.3 4.4
--------------------------------------------------------- ------- ------- -------
Return on average tangible equity (annualised) 10.2 1.9 4.2
--------------------------------------------------------- ------- ------- -------
Cost efficiency ratio 65.7 83.9 57.4
--------------------------------------------------------- ------- ------- -------
1 The debt instruments, issued for funding purposes, are
designated under the fair value option to reduce an accounting
mismatch.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
Summary consolidated balance sheet
At
31 Mar 31 Dec
2021 2020
$m $m
------------------------------------------------------ --------- -----------
Assets
------------------------------------------------------ --------- -----------
Cash and balances at central banks 384,448 304,481
------------------------------------------------------ --------- ---------
Trading assets 249,031 231,990
------------------------------------------------------ --------- ---------
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 46,829 45,553
Derivatives 241,048 307,726
------------------------------------------------------ --------- ---------
Loans and advances to banks 83,873 81,616
------------------------------------------------------ --------- ---------
Loans and advances to customers(1) 1,040,207 1,037,987
------------------------------------------------------ --------- ---------
Reverse repurchase agreements - non-trading 190,260 230,628
------------------------------------------------------ --------- ---------
Financial investments 451,207 490,693
------------------------------------------------------ --------- ---------
Other assets 271,726 253,490
------------------------------------------------------ --------- ---------
Total assets 2,958,629 2,984,164
------------------------------------------------------ --------- ---------
Liabilities and equity
------------------------------------------------------ --------- -----------
Liabilities
------------------------------------------------------ --------- -----------
Deposits by banks 86,743 82,080
------------------------------------------------------ --------- ---------
Customer accounts 1,650,019 1,642,780
------------------------------------------------------ --------- ---------
Repurchase agreements - non-trading 107,896 111,901
------------------------------------------------------ --------- ---------
Trading liabilities 85,755 75,266
------------------------------------------------------ --------- ---------
Financial liabilities designated at fair value 151,673 157,439
------------------------------------------------------ --------- ---------
Derivatives 229,599 303,001
------------------------------------------------------ --------- ---------
Debt securities in issue 96,039 95,492
------------------------------------------------------ --------- ---------
Liabilities under insurance contracts 107,910 107,191
------------------------------------------------------ --------- ---------
Other liabilities 235,279 204,019
------------------------------------------------------ --------- ---------
Total liabilities 2,750,913 2,779,169
------------------------------------------------------ --------- ---------
Equity
------------------------------------------------------ --------- -----------
Total shareholders' equity 199,210 196,443
------------------------------------------------------ --------- ---------
Non-controlling interests 8,506 8,552
------------------------------------------------------ --------- ---------
Total equity 207,716 204,995
------------------------------------------------------ --------- ---------
Total liabilities and equity 2,958,629 2,984,164
------------------------------------------------------ --------- ---------
1 Net of impairment allowances.
Credit risk
Summary of credit risk
At 31 March 2021, gross loans and advances to customers and
banks of $1,138bn increased by $3.6bn, compared with
31 December 2020. This included adverse foreign exchange
movements of $4.6bn.
Excluding foreign exchange movements, growth was driven by a
$5.3bn increase in personal loans and advances to customers and a
$3.2bn increase in loans and advances to banks. Wholesale loans and
advances to customers decreased by $0.3bn.
The increase in personal loans and advances to customers was
driven by mortgage growth of $3.9bn, mainly in the UK (up $2.0bn),
Canada (up $0.8bn) and Hong Kong (up $0.7bn). Personal loans and
overdrafts increased by $3.1bn, mainly in Hong Kong (up $3.5bn).
This was partly offset by a decrease of $1.7bn in credit cards,
mainly in the UK (down $0.8bn) and Hong Kong (down $0.4bn).
During the first three months of 2021, the Group experienced a
release in allowances for ECL, which was driven by improving
economic forecasts. Excluding foreign exchange movements, the
allowance for ECL in relation to loans and advances to customers
decreased by $0.8bn from 31 December 2020. This was attributable
to:
-- a $0.5bn decrease in wholesale loans and advances to
customers, of which $0.4bn was driven by stages 1 and 2; and
-- a $0.3bn decrease in personal loans and advances to
customers, of which $0.3bn was driven by stages 1 and 2.
At 31 March 2021, the allowance for ECL of $14.6bn decreased by
$1.1bn compared with 31 December 2020, including favourable foreign
exchange movements of $0.1bn. The $14.6bn allowance comprised
$13.8bn in respect of assets held at amortised cost, $0.7bn in
respect of loan commitments and financial guarantees, and $0.1bn in
respect of debt instruments measured at fair value through other
comprehensive income ('FVOCI').
Stage 3 balances at 31 March 2021 remained broadly stable
compared with 31 December 2020.
The ECL release for the first three months of 2021 was $435m,
inclusive of recoveries. This comprised: $383m in respect of
wholesale lending, of which the stage 3 and purchased or originated
credit impaired ('POCI') charge was $180m; $36m in respect of
personal lending, of which the stage 3 charge was $117m; and $16m
in respect of other financial assets measured at amortised cost and
debt instruments measured at FVOCI. There remains a high degree of
uncertainty in relation to ECL as countries emerge from the
Covid-19 pandemic at different speeds and as government support
measures unwind.
Summary of financial instruments to which the impairment requirements
in IFRS 9 are applied
At 31 Mar 2021 At 31 Dec 2020
Gross carrying/ Gross carrying/ Allowance
nominal Allowance nominal for
amount for ECL(1) amount ECL(1)
Footnotes $m $m $m $m
--------------------------------------- --------- --------------- ----------- --------------- ------------
Loans and advances to customers
at amortised cost 1,053,790 (13,583) 1,052,477 (14,490)
--------------------------------------- --------- --------------- ----------- --------------- ----------
- personal 465,440 (4,359) 460,809 (4,731)
--------------------------------------- ---------
- corporate and commercial 523,933 (9,014) 527,088 (9,494)
--------------------------------------- ---------
- non-bank financial institutions 64,417 (210) 64,580 (265)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Loans and advances to banks at
amortised cost 83,903 (30) 81,658 (42)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Other financial assets measured
at amortised cost 835,330 (179) 772,408 (175)
--------------------------------------- --------- --------------- ----------- --------------- ----------
- cash and balances at central
banks 384,454 (6) 304,486 (5)
--------------------------------------- ---------
- items in the course of collection
from other banks 5,162 - 4,094 -
--------------------------------------- ---------
- Hong Kong Government certificates
of indebtedness 41,020 - 40,420 -
--------------------------------------- ---------
- reverse repurchase agreements
- non-trading 190,260 - 230,628 -
--------------------------------------- ---------
- financial investments 90,347 (89) 88,719 (80)
--------------------------------------- ---------
- prepayments, accrued income and
other assets 2 124,087 (84) 104,061 (90)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Total gross carrying amount on-balance
sheet 1,973,023 (13,792) 1,906,543 (14,707)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Loans and other credit-related
commitments 667,066 (578) 659,783 (734)
--------------------------------------- --------- --------------- ----------- --------------- ----------
- personal 235,631 (29) 236,170 (40)
--------------------------------------- ---------
- corporate and commercial 293,574 (520) 299,802 (650)
--------------------------------------- ---------
- financial 137,861 (29) 123,811 (44)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Financial guarantees 26,843 (87) 18,384 (125)
--------------------------------------- --------- --------------- ----------- --------------- ----------
- personal 894 (1) 900 (1)
--------------------------------------- ---------
- corporate and commercial 20,900 (78) 12,946 (114)
--------------------------------------- ---------
- financial 5,049 (8) 4,538 (10)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Total nominal amount off-balance
sheet 3 693,909 (665) 678,167 (859)
--------------------------------------- --------- --------------- ----------- --------------- ----------
2,666,932 (14,457) 2,584,710 (15,566)
--------------------------------------- --------- --------------- ----------- --------------- ----------
Memorandum
Memorandum allowance
allowance for
Fair value for ECL(4) Fair value ECL(4)
$m $m $m $m
--------------------------------------- --------- --------------- ----------- --------------- ------------
Debt instruments measured at fair
value through other comprehensive
income ('FVOCI') 358,643 (118) 399,717 (141)
--------------------------------------- --------- --------------- ----------- --------------- ----------
1 The total ECL is recognised in the loss allowance for the
financial asset unless the total ECL exceeds the gross carrying
amount of the financial asset, in which case the ECL is recognised
as a provision.
2 Includes only those financial instruments that are subject to
the impairment requirements of IFRS 9. 'Prepayments, accrued income
and other assets' as presented within the summary consolidated
balance sheet on page 17 includes both financial and non-financial
assets.
3 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
4 Debt instruments measured at FVOCI continue to be measured at
fair value with the allowance for ECL as a memorandum item. Change
in ECL is recognised in 'Change in expected credit losses and other
credit impairment charges' in the income statement.
Summary of credit risk (excluding debt instruments measured at FVOCI)
by stage distribution and ECL coverage by industry sector at
31 March 2021
Gross carrying/nominal Allowance for ECL ECL coverage %
amount(1)
--------- ---------------------------------- -------- -------
Stage Stage Stage POCI(2) Total Stage Stage Stage POCI(2) Total Stage Stage Stage POCI(2) Total
1 2 3 1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m % % % % %
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -------
Loans and
advances
to customers
at amortised
cost 875,622 158,654 19,248 266 1,053,790 (1,659) (4,494) (7,343) (87) (13,583) 0.2 2.8 38.1 32.7 1.3
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 436,056 23,455 5,929 - 465,440 (688) (2,184) (1,487) - (4,359) 0.2 9.3 25.1 - 0.9
--------------------------------------
* corporate and commercial 381,031 129,852 12,785 265 523,933 (931) (2,251) (5,746) (86) (9,014) 0.2 1.7 44.9 32.5 1.7
--------------------------------------
* non-bank financial institutions 58,535 5,347 534 1 64,417 (40) (59) (110) (1) (210) 0.1 1.1 20.6 100.0 0.3
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Loans and
advances
to banks
at amortised
cost 82,645 1,258 - - 83,903 (24) (6) - - (30) - 0.5 - - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Other financial
assets
measured
at amortised
cost 830,993 4,137 158 42 835,330 (81) (48) (41) (9) (179) - 1.2 25.9 21.4 -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Loan and
other credit-related
commitments 615,857 50,279 929 1 667,066 (221) (282) (75) - (578) - 0.6 8.1 - 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 233,453 2,043 135 - 235,631 (27) (1) (1) - (29) - - 0.7 - -
--------------------------------------
* corporate and commercial 248,982 43,853 738 1 293,574 (185) (268) (67) - (520) 0.1 0.6 9.1 - 0.2
--------------------------------------
- financial 133,422 4,383 56 - 137,861 (9) (13) (7) - (29) - 0.3 12.5 - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Financial
guarantees 22,701 3,881 260 1 26,843 (22) (43) (22) - (87) 0.1 1.1 8.5 - 0.3
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 865 28 1 - 894 - (1) - - (1) - 3.6 - - 0.1
--------------------------------------
* corporate and commercial 17,639 3,016 244 1 20,900 (19) (38) (21) - (78) 0.1 1.3 8.6 - 0.4
--------------------------------------
- financial 4,197 837 15 - 5,049 (3) (4) (1) - (8) 0.1 0.5 6.7 - 0.2
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
At 31 Mar
2021 2,427,818 218,209 20,595 310 2,666,932 (2,007) (4,873) (7,481) (96) (14,457) 0.1 2.2 36.3 31.0 0.5
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Stage 2 days past due analysis at 31 March 2021
Gross carrying/nominal Allowance for ECL ECL coverage %
amount(1)
1 to 30 and 1 to 30 and 1 to
Stage 29 > Stage 29 > Stage 29 30 and
2 Up-to-date DPD(3,4) DPD(3,4) 2 Up-to-date DPD(3,4) DPD(3,4) 2 Up-to-date DPD(3,4) > DPD(3,4)
$m $m $m $m $m $m $m $m % % % %
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- ----------
Loans and
advances
to customers
at
amortised
cost 158,654 155,314 1,834 1,506 (4,494) (3,984) (226) (284) 2.8 2.6 12.3 18.9
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
- personal 23,455 21,027 1,282 1,146 (2,184) (1,751) (181) (252) 9.3 8.3 14.1 22.0
-------------
- corporate
and
commercial 129,852 128,945 551 356 (2,251) (2,174) (45) (32) 1.7 1.7 8.2 9.0
-------------
- non-bank
financial
institutions 5,347 5,342 1 4 (59) (59) - - 1.1 1.1 - -
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
Loans and
advances
to banks at
amortised
cost 1,258 1,258 - - (6) (6) - - 0.5 0.5 - -
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
Other
financial
assets
measured
at amortised
cost 4,137 4,129 4 4 (48) (48) - - 1.2 1.2 - -
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
1 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
3 Days past due ('DPD').
4 The days past due amounts presented above are on a contractual
basis and include the benefit of any customer relief payment
holidays granted.
Summary of credit risk (excluding debt instruments measured at FVOCI)
by stage distribution and ECL coverage by industry sector at
31 December 2020
Gross carrying/nominal Allowance for ECL ECL coverage
amount(1) %
--------- -------- -------
Stage Stage Stage POCI(2) Total Stage Stage Stage POCI(2) Total Stage Stage Stage POCI(2) Total
1 2 3 1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m % % % % %
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -------
Loans and
advances
to customers
at amortised
cost 869,920 163,185 19,095 277 1,052,477 (1,974) (4,965) (7,439) (112) (14,490) 0.2 3.0 39.0 40.4 1.4
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 430,134 25,064 5,611 - 460,809 (827) (2,402) (1,502) - (4,731) 0.2 9.6 26.8 - 1.0
--------------------------------------
* corporate and commercial 387,563 126,287 12,961 277 527,088 (1,101) (2,444) (5,837) (112) (9,494) 0.3 1.9 45.0 40.4 1.8
--------------------------------------
* non-bank financial institutions 52,223 11,834 523 - 64,580 (46) (119) (100) - (265) 0.1 1.0 19.1 - 0.4
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Loans and
advances
to banks
at amortised
cost 79,654 2,004 - - 81,658 (33) (9) - - (42) - 0.4 - - 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Other financial
assets measured
at amortised
cost 768,216 3,975 177 40 772,408 (80) (44) (42) (9) (175) - 1.1 23.7 22.5 -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Loan and
other credit-related
commitments 604,485 54,217 1,080 1 659,783 (290) (365) (78) (1) (734) - 0.7 7.2 100.0 0.1
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 234,337 1,681 152 - 236,170 (39) (1) - - (40) - 0.1 - - -
--------------------------------------
* corporate and commercial 253,062 45,851 888 1 299,802 (236) (338) (75) (1) (650) 0.1 0.7 8.4 100.0 0.2
--------------------------------------
- financial 117,086 6,685 40 - 123,811 (15) (26) (3) - (44) - 0.4 7.5 - -
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Financial
guarantees 14,090 4,024 269 1 18,384 (37) (62) (26) - (125) 0.3 1.5 9.7 - 0.7
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
- personal 872 26 2 - 900 - (1) - - (1) - 3.8 - - 0.1
--------------------------------------
* corporate and commercial 9,536 3,157 252 1 12,946 (35) (54) (25) - (114) 0.4 1.7 9.9 - 0.9
--------------------------------------
- financial 3,682 841 15 - 4,538 (2) (7) (1) - (10) 0.1 0.8 6.7 - 0.2
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
At 31 Dec
2020 2,336,365 227,405 20,621 319 2,584,710 (2,414) (5,445) (7,585) (122) (15,566) 0.1 2.4 36.8 38.2 0.6
-------------------------------------- --------- ------- ------ ------- --------- ------- ------- ------- ------- -------- ----- ----- ----- ------- -----
Stage 2 days past due analysis at 31 December 2020
Gross carrying/nominal Allowance for ECL ECL coverage %
amount(1)
30 30
1 to and 1 to and 1 to 30
Stage 29 > Stage 29 > Stage 29 and
2 Up-to-date DPD(3,4) DPD(3,4) 2 Up-to-date DPD(3,4) DPD(3,4) 2 Up-to-date DPD(3,4) > DPD(3,4)
$m $m $m $m $m $m $m $m % % % %
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- ----------
Loans and
advances
to customers
at amortised
cost 163,185 159,367 2,052 1,766 (4,965) (4,358) (275) (332) 3.0 2.7 13.4 18.8
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
- personal 25,064 22,250 1,554 1,260 (2,402) (1,895) (227) (280) 9.6 8.5 14.6 22.2
-------------
- corporate
and
commercial 126,287 125,301 489 497 (2,444) (2,344) (48) (52) 1.9 1.9 9.8 10.5
-------------
- non-bank
financial
institutions 11,834 11,816 9 9 (119) (119) - - 1.0 1.0 - -
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
Loans and
advances
to banks at
amortised
cost 2,004 2,004 - - (9) (9) - - 0.4 0.4 - -
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
Other
financial
assets
measured at
amortised
cost 3,975 3,963 3 9 (44) (44) - - 1.1 1.1 - -
------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ----- ---------- -------- --------
1 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
3 Days past due ('DPD').
4 The days past due amounts presented above are on a contractual
basis and include the benefit of any customer relief payment
holidays granted.
Measurement uncertainty and sensitivity analysis of ECL
estimates
Methodology
Four economic scenarios have been used to capture the
exceptional nature of the current economic environment and to
articulate management's view of the range of potential outcomes.
Three of these scenarios are drawn from consensus forecasts and
distributional estimates. The nature of the current economic
environment has led management to choose an additional scenario to
represent its view of severe downside risks. Scenarios produced to
calculate ECL are aligned to HSBC's top and emerging risks.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC, with reference to external forecasts specifically
for the purpose of calculating ECL.
The world economy is expected to return to growth in 2021
following an unprecedented contraction in 2020. Across our key
markets, those that put in place significant domestic restrictions
have either begun to - or are expected to be able to - relax
restrictions as vaccinations progress while other countries will
benefit from the global recovery in economic activity. Early data
from vaccination programmes have been encouraging and these
programmes are expected to be successful at significantly reducing
hospitalisations and deaths across our key markets, enabling
economies to re-open and some resumption of travel. Differences
across markets in the speed and scale of economic recovery reflect
timing differences in the progression of the Covid-19 outbreak,
national level differences in restrictions imposed, the coverage
achieved by vaccination programmes and the scale of support
measures introduced by governments. The emergence of new variants
that reduce the efficacy of vaccines remains a risk.
Economic forecasts are subject to a high degree of uncertainty
in the current environment. While risks to the economic outlook are
dominated by the progression and management of the pandemic and
vaccine roll-out, geopolitical risks also present downside threats.
These risks include: continued differences between the US and China
over a range of issues, dampened business sentiment in Hong Kong
and the evolution of the UK's relationship with the EU.
Four global scenarios have been used for the purpose of
calculating ECL at 31 March 2021. These are the consensus Central
scenario, the consensus Upside scenario, the consensus Downside
scenario and an additional Downside scenario.
The scenarios used are:
-- The consensus Central scenario: This scenario features
recovery in economic activity in 2021, supported by a successful
roll-out of vaccination programmes across several of our major
markets. Government support programmes will continue to assist
labour markets, households and firms, while economic activity and
unemployment recover back to their pre-Covid-19 levels.
-- The consensus Upside scenario: This scenario features a
faster recovery in economic activity in the near term, compared
with the Central scenario, with GDP growth returning to
pre-Covid-19 levels in 2021 in Hong Kong, mainland China, the UK
and the US.
-- The consensus Downside scenario: This scenario features a
considerably weaker recovery in economic activity compared with the
Central scenario. In this scenario, growth remains weak,
unemployment rates stay elevated and equity markets and house
prices contract.
-- The additional Downside scenario: This scenario reflects
management's view of tail risks and features a second severe and
prolonged recession.
Both the consensus Downside and the additional Downside
scenarios are global in nature, and while they differ in severity,
they assume that the key risks to HSBC, listed above, crystallise
simultaneously.
The range of macroeconomic projections across the various
scenarios is shown in the table below:
Macroeconomic projections in key markets
Central scenario Consensus Upside Consensus Downside Additional Downside
Five-year Five-year Five-year Five-year
average 2021 2022 2023 average Best outcome average Worst outcome average Worst outcome
------------- --------- ----- ---- ---- --------- ------------- --------- -------------- --------- --------------
Hong Kong
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
GDP growth
rate
(%) 2.9 4.4 3.3 2.6 4.9 9.9 (1Q22) 0.9 (2.0) (1Q22) 1.1 (9.1) (1Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
Unemployment
rate (%) 4.3 6.5 4.5 4.0 3.9 3.2 (4Q22) 5.0 7.9 (2Q21) 5.9 8.1 (2Q21)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
House price
growth (%) 2.7 (1.8) 2.3 5.2 4.1 7.6 (1Q22) 0.0 (8.3) (1Q22) (1.6) (18.3) (1Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
Mainland
China
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
GDP growth
rate
(%) 5.0 8.4 5.4 5.3 7.0 10.2 (3Q22) 3.4 (2.3) (4Q21) 3.2 (9.2) (1Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
Unemployment
rate (%) 3.9 3.9 3.9 4.0 3.8 3.5 (1Q22) 4.0 4.1 (1Q23) 5.2 5.8 (4Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
House price
growth (%) 4.6 4.6 5.0 5.0 6.5 13.1 (1Q22) 3.6 0.0 (1Q22) (1.5) (21.2) (1Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
UK
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
GDP growth
rate
(%) 3.7 4.5 5.3 2.2 5.2 19.2 (2Q21) 2.0 (0.1) (1Q23) 2.7 (2.3) (3Q21)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
Unemployment
rate (%) 5.3 6.1 5.8 5.3 4.8 4.2 (1Q23) 6.0 7.8 (4Q21) 8.0 9.1 (3Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
House price
growth (%) 1.9 1.2 1.1 2.4 3.4 7.1 (4Q22) (0.8) (9.3) (1Q22) 0.4 (14.9) (1Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
US
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
GDP growth
rate
(%) 3.1 4.8 3.6 2.4 4.4 12.6 (2Q21) 2.0 1.0 (1Q23) 1.7 (4.7) (2Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
Unemployment
rate (%) 4.6 5.9 4.8 4.3 3.8 2.8 (1Q23) 5.3 7.2 (4Q21) 8.8 10.6 (1Q23)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
House price
growth (%) 4.6 5.1 5.6 4.3 5.2 8.1 (2Q22) 3.7 2.6 (2Q22) 2.2 (7.9) (1Q22)
------------- --------- ----- ---- ---- --------- ---- ------- --------- ----- ------- --------- ------ ------
Note: The 'worst' or the 'best' outcome refers to the quarter
that is either the trough or peak in the respective variable, in
the first two years of the scenario.
Scenario weights are consistent with those applied at 31
December 2020 with the exception of the UK and US. The UK consensus
Central scenario probability weighting has increased to 45% (31
December 2020: 40%) with a corresponding decrease in the consensus
Downside scenario to 35% (31 December 2020: 40%). The US Central
scenario probability weighting has increased to 70% (31 December
2020: 65%) with a corresponding decrease in the consensus Downside
scenario to 20% (31 December 2020: 25%). Progress in vaccinating
national populations, accompanied by a decline in recorded Covid-19
cases, led to management attaching greater probability to the
Central scenario in both these markets.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are
typically short-term increases or decreases to the ECL at either a
customer or portfolio level to account for late-breaking events,
model deficiencies and other assessments applied during management
review and challenge.
At 31 March 2021, management judgements were applied to reflect
credit risk dynamics not captured by our models. The drivers of the
management judgemental adjustments continue to evolve with the
economic environment. We have internal governance in place to
monitor management judgemental adjustments regularly and, where
possible, to reduce the reliance on these through model
recalibration or redevelopment, as appropriate.
Wider-ranging model changes will take time to develop and need
observable loss data on which models can be developed. Models will
be revisited over time once the longer-term impacts of the Covid-19
outbreak are observed. Therefore, we continue to anticipate
significant management judgemental adjustments for the foreseeable
future.
Management judgemental adjustments made in estimating the
reported ECL at 31 March 2021 are set out in the following table.
The table includes adjustments in relation to data and model
limitations resulting from the pandemic, and as a result of the
regular process of model development and implementation. It shows
the adjustments applicable to the scenario-weighted ECL
numbers.
Management judgemental adjustments to ECL at 31 March 2021(1)
Retail Wholesale Total
$bn $bn $bn
Low-risk counterparties (banks, sovereigns and
government entities) 0.1 (0.9) (0.8)
-------------------------------------------------- ------ --------- -----
Corporate lending adjustments 1.0 1.0
-------------------------------------------------- ------ --------- -----
Retail lending probability of default adjustments (0.1) (0.1)
-------------------------------------------------- ------ --------- -----
Retail model default suppression adjustment 0.8 0.8
-------------------------------------------------- ------ --------- -----
Other retail lending adjustments 0.7 0.7
-------------------------------------------------- ------ --------- -----
Total 1.5 - 1.5
-------------------------------------------------- ------ --------- -----
Management judgemental adjustments to ECL at 31 December 2020(1)
Retail Wholesale Total
$bn $bn $bn
Low-risk counterparties (banks, sovereigns and
government entities) - (0.7) (0.7)
-------------------------------------------------- ------ --------- -----
Corporate lending adjustments 0.5 0.5
-------------------------------------------------- ------ --------- -----
Retail lending probability of default adjustments (0.8) (0.8)
-------------------------------------------------- ------ --------- -----
Retail model default suppression adjustment 1.9 1.9
-------------------------------------------------- ------ --------- -----
Other retail lending adjustments 0.4 0.4
-------------------------------------------------- ------ --------- -----
Total 1.5 (0.2) 1.3
-------------------------------------------------- ------ --------- -----
1 Management judgemental adjustments presented in the table
reflect increases or (decreases) to ECL, respectively.
In the wholesale portfolio, management judgemental adjustments
were an ECL increase of $30m (31 December 2020: $0.2bn
decrease).
The adjustments relating to low-credit-risk exposures decreased
ECL by $0.9bn at 31 March 2021 (31 December 2020: $0.7bn decrease).
These were mainly to highly rated banks, sovereigns and US
government-sponsored entities, where modelled credit factors did
not fully reflect the underlying fundamentals of these entities or
the effect of government support and economic programmes in the
Covid-19 environment.
Adjustments to corporate exposures increased ECL by $1bn at 31
March 2021 (31 December 2020: $0.5bn increase). These principally
reflected the outcome of management judgements for high-risk and
vulnerable sectors in some of our key markets, supported by credit
experts' input, quantitative analyses and benchmarks.
Considerations included potential default suppression in some
sectors due to continued government intervention and late-breaking
idiosyncratic developments. The increase in adjustment impact
relative to
31 December 2020 was mostly driven by management judgements as a
result of further improvement of macroeconomic scenarios and
increased dislocation of modelled outcomes to management
expectations for high-risk sectors.
In the retail portfolio, management judgemental adjustments were
an ECL increase of $1.5bn at 31 March 2021 (31 December 2020:
$1.5bn increase).
The retail model default suppression adjustment increased ECL by
$0.8bn (31 December 2020: $1.9bn increase). This was applied in
several economies as customer relief and government support
programmes continue to suppress defaults. The level of adjustment
decreased during the period given the improvement in macroeconomic
forecasts. Retail models are reliant on the assumption that, as
macroeconomic conditions deteriorate, defaults will crystallise. We
will monitor the continuation of customer relief and government
support programmes that have stabilised macroeconomic conditions
and therefore suppressed retail model defaults.
The retail lending probability of default adjustments decreased
ECL by $0.1bn (31 December 2020: $0.8bn decrease). These related to
severe projections of macroeconomic variables that are outside the
historical observations on which IFRS 9 models have been built and
calibrated to operate. This has resulted in a lower adjustment
during the period given the moderation of economic forecasts, which
are now within the historical observations, primarily in the
UK.
Other retail lending adjustments increased ECL by $0.7bn (31
December 2020: $0.4bn increase). These were applied to reflect
credit experts' input, quantitative analyses and benchmarks on
increased levels of risk for customers in high-risk segments, those
who remain in or have recently exited customer support programmes
and all other data and model adjustments.
Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against
the economic forecasts as part of the ECL governance process by
recalculating the ECL under each scenario described above for
selected portfolios, applying a 100% weighting to each scenario in
turn. The weighting is reflected in both the determination of a
significant increase in credit risk and the measurement of the
resulting ECL.
The ECL calculated for the Upside and Downside scenarios should
not be taken to represent the upper and lower limits of possible
ECL outcomes. The impact of defaults that might occur in the future
under different economic scenarios is captured by recalculating ECL
for loans in stages 1 and 2 at the balance sheet date. The
population of stage 3 loans (in default) at the balance sheet date
is unchanged in these sensitivity calculations. Stage 3 ECL would
only be sensitive to changes in forecasts of future economic
conditions if the loss-given default of a particular portfolio was
sensitive to these changes.
There is a particularly high degree of estimation uncertainty in
numbers representing tail risk scenarios when assigned a 100%
weighting.
For wholesale credit risk exposures, the sensitivity analysis
excludes ECL for financial instruments related to defaulted
obligors because the measurement of ECL is relatively more
sensitive to credit factors specific to the obligor than future
economic scenarios. Therefore, it is impracticable to separate the
effect of macroeconomic factors in individual assessments.
For retail credit risk exposures, the sensitivity analysis
includes ECL for loans and advances to customers related to
defaulted obligors. This is because the retail ECL for secured
mortgage portfolios, including loans in all stages, is sensitive to
macroeconomic variables.
Group ECL sensitivity results
The ECL impact of the scenarios and judgemental management
adjustments are highly sensitive to movements in economic
forecasts, including the efficacy of government support measures.
Based upon the sensitivity tables presented below, if the Group ECL
balance (excluding wholesale stage 3, which is assessed
individually) was estimated solely on the basis of the Central
scenario, Upside scenario, Downside scenario or the additional
Downside scenario at 31 March 2021, it would increase/(decrease) as
presented in the below table.
Retail(1,2) Wholesale(3)
Total Group ECL at 31 March 2021 $bn $bn
---------------------------------- ----------- --------------
Reported ECL 4.1 4.0
---------------------------------- ----------- ------------
Scenarios
---------------------------------- ----------- --------------
100% consensus Central scenario (0.4) (0.8)
---------------------------------- ----------- ------------
100% consensus Upside scenario (0.8) (1.6)
---------------------------------- ----------- ------------
100% consensus Downside scenario 0.2 0.8
---------------------------------- ----------- ------------
100% additional Downside scenario 1.1 4.8
---------------------------------- ----------- ------------
Retail(1,2) Wholesale(3)
Total Group ECL at 31 December 2020 $bn $bn
------------------------------------ ----------- --------------
Reported ECL 4.5 4.5
------------------------------------ ----------- ------------
Scenarios
------------------------------------ ----------- --------------
100% consensus Central scenario (0.3) (0.9)
------------------------------------ ----------- ------------
100% consensus Upside scenario (1.0) (2.0)
------------------------------------ ----------- ------------
100% consensus Downside scenario 0.3 1.0
------------------------------------ ----------- ------------
100% additional Downside scenario 1.3 5.9
------------------------------------ ----------- ------------
1 ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2 ECL sensitivity includes only on-balance sheet financial
instruments to which IFRS 9 impairment requirements are
applied.
3 Includes low credit-risk financial instruments, such as debt
instruments at FVOCI, which have high carrying values but low ECL
under all the scenarios.
At 31 March 2021, Group ECL sensitivity decreased across all
scenarios compared with 31 December 2020, driven by the improvement
of macroeconomic forecasts.
There still remains a significant degree of uncertainty in
relation to the UK economic outlook. If a 100% weight were applied
to the consensus Downside and additional Downside scenarios for the
UK, respectively, it would result in an increase in ECL of $0.3bn
and $1.4bn in the wholesale portfolio and $0.2bn and $0.6bn in the
retail portfolio.
Personal lending
Total personal lending for loans and advances to customers by stage distribution
Gross carrying amount Allowance for ECL
Stage Stage Stage Total Stage Stage Stage Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
By portfolio
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
First lien residential mortgages 342,012 11,171 3,713 356,896 (105) (184) (446) (735)
- of which:
interest only (including
offset) 29,291 2,521 322 32,134 (6) (28) (87) (121)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
affordability (including US
adjustable rate mortgages) 13,603 1,851 655 16,109 (13) (10) (4) (27)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Other personal lending 94,044 12,284 2,216 108,544 (583) (2,000) (1,041) (3,624)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- other 76,323 6,924 1,559 84,806 (278) (824) (661) (1,763)
---------------------------------
- credit cards 15,781 5,126 600 21,507 (294) (1,158) (364) (1,816)
---------------------------------
- second lien residential
mortgages 579 86 50 715 (4) (9) (10) (23)
---------------------------------
- motor vehicle finance 1,361 148 7 1,516 (7) (9) (6) (22)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 31 Mar 2021 436,056 23,455 5,929 465,440 (688) (2,184) (1,487) (4,359)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
By geography
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
Europe 202,553 9,600 2,450 214,603 (198) (1,182) (777) (2,157)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: UK 166,910 8,262 1,723 176,895 (173) (1,149) (508) (1,830)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Asia 180,019 8,624 1,607 190,250 (178) (420) (281) (879)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: Hong Kong 121,375 5,469 231 127,075 (84) (267) (49) (400)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
MENA 4,864 375 241 5,480 (45) (93) (146) (284)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
North America 41,961 3,909 1,326 47,196 (91) (183) (135) (409)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Latin America 6,659 947 305 7,911 (176) (306) (148) (630)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 31 Mar 2021 436,056 23,455 5,929 465,440 (688) (2,184) (1,487) (4,359)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Total personal lending for loans and advances to customers by stage distribution
(continued)
Gross carrying amount Allowance for ECL
Stage Stage Stage Total Stage Stage Stage Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
By portfolio
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
First lien residential mortgages 336,666 12,233 3,383 352,282 (125) (188) (442) (755)
- of which:
interest only (including
offset) 29,143 3,074 351 32,568 (9) (19) (88) (116)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
affordability (including US
adjustable rate mortgages) 13,265 2,209 606 16,080 (11) (11) (5) (27)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Other personal lending 93,468 12,831 2,228 108,527 (702) (2,214) (1,060) (3,976)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- other 74,174 7,288 1,489 82,951 (305) (914) (665) (1,884)
---------------------------------
- credit cards 17,327 5,292 680 23,299 (386) (1,281) (380) (2,047)
---------------------------------
- second lien residential
mortgages 593 100 51 744 (3) (9) (10) (22)
---------------------------------
- motor vehicle finance 1,374 151 8 1,533 (8) (10) (5) (23)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 31 Dec 2020 430,134 25,064 5,611 460,809 (827) (2,402) (1,502) (4,731)
By geography
--------------------------------- ------- ------ ----- ------- ----- ------- ------- ---------
Europe 200,120 11,032 2,511 213,663 (247) (1,271) (826) (2,344)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: UK 163,338 9,476 1,721 174,535 (223) (1,230) (545) (1,998)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Asia 178,175 7,969 1,169 187,313 (234) (446) (241) (921)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
- of which: Hong Kong 118,252 5,133 206 123,591 (102) (237) (48) (387)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
MENA 4,879 403 251 5,533 (54) (112) (152) (318)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
North America 40,387 4,613 1,378 46,378 (93) (200) (132) (425)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Latin America 6,573 1,047 302 7,922 (199) (373) (151) (723)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
At 31 Dec 2020 430,134 25,064 5,611 460,809 (827) (2,402) (1,502) (4,731)
--------------------------------- ------- ------ ----- ------- ----- ------- ------- -------
Total wholesale lending for loans and advances to banks and customers
at amortised cost
Gross carrying amount Allowance for ECL
Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- ---------
Corporate and commercial 381,031 129,852 12,785 265 523,933 (931) (2,251) (5,746) (86) (9,014)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
- agriculture, forestry
and fishing 6,443 1,002 341 1 7,787 (15) (42) (149) (1) (207)
------------------------------------------------------------
- mining and quarrying 8,808 3,050 572 16 12,446 (31) (88) (157) (12) (288)
------------------------------------------------------------
- manufacture 64,862 24,549 2,013 81 91,505 (147) (337) (932) (38) (1,454)
------------------------------------------------------------
* electricity, gas, steam and air-conditioning supply 13,359 2,131 71 - 15,561 (18) (27) (29) - (74)
------------------------------------------------------------
* water supply, sewerage, waste management and
remediation 2,860 398 52 - 3,310 (6) (5) (24) - (35)
------------------------------------------------------------
* construction 9,545 4,432 740 4 14,721 (37) (92) (393) (4) (526)
------------------------------------------------------------
* wholesale and retail trade, repair of motor vehicles
and motorcycles 64,205 24,949 3,144 11 92,309 (159) (297) (2,002) (2) (2,460)
------------------------------------------------------------
* transportation and storage 19,039 8,778 779 11 28,607 (51) (143) (233) - (427)
------------------------------------------------------------
* accommodation and food 8,560 17,216 627 1 26,404 (88) (346) (141) (1) (576)
------------------------------------------------------------
* publishing, audiovisual and broadcasting 16,274 3,195 141 34 19,644 (32) (71) (32) (4) (139)
------------------------------------------------------------
* real estate 105,007 20,584 1,807 1 127,399 (168) (264) (686) - (1,118)
------------------------------------------------------------
* professional, scientific and technical activities 16,637 6,556 586 31 23,810 (50) (146) (209) (8) (413)
------------------------------------------------------------
* administrative and support services 18,100 7,239 906 66 26,311 (58) (157) (295) (16) (526)
------------------------------------------------------------
* public administration and defence, compulsory social
security 1,496 572 3 - 2,071 (1) (6) (1) - (8)
------------------------------------------------------------
* education 1,435 563 29 - 2,027 (9) (17) (6) - (32)
------------------------------------------------------------
* health and care 4,211 872 267 8 5,358 (12) (21) (122) - (155)
------------------------------------------------------------
* arts, entertainment and recreation 825 1,870 300 - 2,995 (8) (71) (77) - (156)
------------------------------------------------------------
* other services 10,748 1,097 406 - 12,251 (37) (109) (257) - (403)
------------------------------------------------------------
* activities of households 815 140 - - 955 - - - - -
------------------------------------------------------------
* extra-territorial organisations and bodies activities 3 - - - 3 - - - - -
------------------------------------------------------------
- government 7,386 645 1 - 8,032 (4) (1) (1) - (6)
------------------------------------------------------------
- asset-backed securities 413 14 - - 427 - (11) - - (11)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
Non-bank financial institutions 58,535 5,347 534 1 64,417 (40) (59) (110) (1) (210)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
Loans and advances to
banks 82,645 1,258 - - 83,903 (24) (6) - - (30)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
At 31 Mar 2021 522,211 136,457 13,319 266 672,253 (995) (2,316) (5,856) (87) (9,254)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
By geography
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- ---------
Europe 152,882 49,615 6,407 103 209,007 (515) (1,248) (1,949) (24) (3,736)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
- of which: UK 101,781 40,653 4,645 54 147,133 (468) (1,097) (1,189) (9) (2,763)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
Asia 283,731 60,661 3,501 103 347,996 (236) (408) (2,110) (45) (2,799)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
- of which: Hong Kong 156,750 42,785 1,668 44 201,247 (125) (265) (787) (22) (1,199)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
MENA 24,017 7,500 1,903 30 33,450 (82) (187) (1,186) (12) (1,467)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
North America 51,608 13,640 859 - 66,107 (98) (229) (272) - (599)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
Latin America 9,973 5,041 649 30 15,693 (64) (244) (339) (6) (653)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
At 31 Mar 2021 522,211 136,457 13,319 266 672,253 (995) (2,316) (5,856) (87) (9,254)
------------------------------------------------------------ ------- ------- ------ ---- ------- ----- ------- ------- ---- -------
Total wholesale lending for loans and advances to banks and customers
at amortised cost (continued)
Gross carrying amount Allowance for ECL
Stage Stage Stage POCI Total Stage Stage Stage POCI Total
1 2 3 1 2 3
$m $m $m $m $m $m $m $m $m $m
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- ---------
Corporate and commercial 387,563 126,287 12,961 277 527,088 (1,101) (2,444) (5,837) (112) (9,494)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
- agriculture, forestry
and fishing 6,087 1,026 331 1 7,445 (12) (45) (149) (1) (207)
------------------------------------------------------------
- mining and quarrying 7,429 3,705 797 16 11,947 (33) (112) (209) (11) (365)
------------------------------------------------------------
- manufacture 68,179 23,564 2,076 87 93,906 (201) (442) (905) (40) (1,588)
------------------------------------------------------------
* electricity, gas, steam and air-conditioning supply 14,240 1,907 53 - 16,200 (25) (40) (8) - (73)
------------------------------------------------------------
* water supply, sewerage, waste management and
remediation 2,874 253 47 - 3,174 (8) (7) (22) - (37)
------------------------------------------------------------
- construction 9,368 4,455 773 4 14,600 (42) (118) (426) (4) (590)
------------------------------------------------------------
* wholesale and retail trade, repair of motor vehicles
and motorcycles 65,937 21,518 3,196 12 90,663 (174) (326) (2,029) (3) (2,532)
------------------------------------------------------------
- transportation and
storage 19,510 9,143 769 11 29,433 (90) (163) (240) - (493)
------------------------------------------------------------
- accommodation and
food 10,616 14,918 536 1 26,071 (76) (285) (129) (1) (491)
------------------------------------------------------------
* publishing, audiovisual and broadcasting 17,019 2,796 131 33 19,979 (45) (85) (39) (20) (189)
------------------------------------------------------------
- real estate 102,933 22,186 1,907 1 127,027 (169) (260) (738) - (1,167)
------------------------------------------------------------
* professional, scientific and technical activities 17,162 6,379 498 33 24,072 (56) (149) (185) (8) (398)
------------------------------------------------------------
* administrative and support services 17,085 8,361 907 70 26,423 (66) (153) (291) (24) (534)
------------------------------------------------------------
* public administration and defence, compulsory social
security 1,530 475 3 - 2,008 (2) (11) (1) - (14)
------------------------------------------------------------
- education 1,402 691 29 - 2,122 (12) (20) (9) - (41)
------------------------------------------------------------
- health and care 4,049 1,192 261 8 5,510 (21) (45) (120) - (186)
------------------------------------------------------------
* arts, entertainment and recreation 1,631 1,570 236 - 3,437 (9) (62) (87) - (158)
------------------------------------------------------------
- other services 11,380 1,320 410 - 13,110 (54) (105) (249) - (408)
------------------------------------------------------------
- activities of households 660 142 - - 802 - (1) - - (1)
------------------------------------------------------------
* extra-territorial organisations and bodies activities 10 - - - 10 - - - - -
------------------------------------------------------------
- government 7,866 671 1 - 8,538 (6) (2) (1) - (9)
------------------------------------------------------------
- asset-backed securities 596 15 - - 611 - (13) - - (13)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Non-bank financial institutions 52,223 11,834 523 - 64,580 (46) (119) (100) - (265)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Loans and advances to
banks 79,654 2,004 - - 81,658 (33) (9) - - (42)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
At 31 Dec 2020 519,440 140,125 13,484 277 673,326 (1,180) (2,572) (5,937) (112) (9,801)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
By geography
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- ---------
Europe 156,474 51,708 6,531 109 214,822 (589) (1,400) (2,097) (51) (4,137)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
- of which: UK 104,534 40,454 4,712 53 149,753 (536) (1,234) (1,320) (33) (3,123)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Asia 279,985 58,159 3,443 106 341,693 (337) (383) (2,040) (43) (2,803)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
- of which: Hong Kong 156,817 39,257 1,637 45 197,756 (162) (260) (751) (23) (1,196)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
MENA 24,753 7,893 1,952 30 34,628 (91) (216) (1,205) (12) (1,524)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
North America 46,852 18,220 913 - 65,985 (77) (302) (281) - (660)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Latin America 11,376 4,145 645 32 16,198 (86) (271) (314) (6) (677)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
At 31 Dec 2020 519,440 140,125 13,484 277 673,326 (1,180) (2,572) (5,937) (112) (9,801)
------------------------------------------------------------ ------- ------- ------ ---- ------- ------- ------- ------- ----- -------
Customer relief programmes
In response to the Covid-19 outbreak, governments and regulators
around the world introduced a number of support measures for both
personal and wholesale customers in market-wide schemes. The
following table presents the number of personal accounts/wholesale
customers and the associated drawn loan values of customers under
these schemes and HSBC-specific measures for major markets at 31
March 2021. In relation to personal lending, the majority of relief
measures, including payment holidays, relate to existing lending,
while in wholesale lending the relief measures comprise payment
holidays, refinancing of existing facilities and new lending under
government-backed schemes.
At 31 March 2021, the gross carrying value of loans to personal
customers under relief was $3.3bn (31 December 2020: $5.5bn). This
comprised $2.8bn in relation to mortgages (31 December 2020:
$4.7bn) and $0.5bn in relation to other personal lending (31
December 2020: $0.9bn). The decrease in personal customer relief
during the first quarter was driven by customers exiting relief
measures. The gross carrying value of loans to wholesale customers
under relief was $35.9bn (31 December 2020: $35.3bn). We continue
to monitor the recoverability of loans granted under customer
relief programmes, including loans to a small number of customers
that were subsequently found to be ineligible for such relief. The
ongoing performance of such loans remains an area of uncertainty
at
31 March 2021.
Personal lending
Other
Hong major
Extant at 31 March 2021 UK Kong US markets(1,2,3) Total
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s 4 - - 2 6
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 891 - - 267 1,158
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s 13 - - 23 36
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m 117 - - 267 384
--------------------------------------------- ---- ------ ------ ----- --------------- ------
HSBC-specific measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s - 2 2 1 5
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 2 827 749 66 1,644
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s - - 4 7 11
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m - 42 54 51 147
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Total personal lending to major markets
under market-wide schemes and HSBC-specific
measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s 4 2 2 3 11
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 893 827 749 333 2,802
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s 13 - 4 30 47
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m 117 42 54 318 531
Market-wide schemes and HSBC-specific
measures - mortgage relief as a proportion
of total mortgages % 0.6 0.9 4.1 0.4 0.8
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes and HSBC-specific
measures - other personal lending
relief as a proportion of total other
personal lending loans and advances % 0.6 0.1 2.7 0.6 0.5
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Wholesale lending
Other
Hong major
Extant at 31 March 2021 UK Kong US markets(1) Total
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers under market-wide
measures 000s 241 3 4 5 253
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Drawn loan value of customers under
market-wide schemes $m 14,412 11,036 1,294 5,513 32,255
--------------------------------------------- ---- ------ ------ ----- --------------- --------
HSBC-specific schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers under HSBC-specific
measures 000s - - - - -
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Drawn loan value of customers under
HSBC-specific measures $m 380 - 781 2,480 3,641
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Total wholesale lending to major
markets under market-wide schemes
and HSBC-specific measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers 000s 241 3 4 5 253
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value $m 14,792 11,036 2,075 7,993 35,896
Market-wide schemes and HSBC-specific
measures as a proportion of total
wholesale lending loans and advances % 10.4 6.1 5.6 4.2 6.5
--------------------------------------------- ---- ------ ------ ----- --------------- --------
1 Other major markets include Australia, Canada, mainland China,
Egypt, France, Germany, India, Indonesia, Malaysia, Mexico,
Singapore, Switzerland, Taiwan and UAE.
2 In Malaysia, personal lending customers are granted an
automatic moratorium programme for all eligible retail customers.
At 31 March 2021, the number of accounts under this moratorium was
23,000 with an associated drawn balance of $361m.
3 In Mexico, at 31 March 2021, there were 2,000 personal lending
accounts under customer relief with an associated drawn balance of
$55m.
Personal lending (continued)
Other
Hong major
Extant at 31 December 2020 UK Kong US markets(1,2,3) Total
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s 6 - - 5 11
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 1,412 - - 908 2,320
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s 15 - - 28 43
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m 140 - - 386 526
--------------------------------------------- ---- ------ ------ ----- --------------- ------
HSBC-specific measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s - 3 2 3 8
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 7 1,124 864 360 2,355
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s - 1 6 18 25
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m - 75 67 182 324
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Total personal lending to major markets
under market-wide schemes and HSBC-specific
measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of accounts in mortgage customer
relief 000s 6 3 2 8 19
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in mortgage
customer relief $m 1,419 1,124 864 1,268 4,675
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Number of accounts in other personal
lending customer relief 000s 15 1 6 46 68
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of accounts in other
personal lending customer relief $m 140 75 67 568 850
Market-wide schemes and HSBC-specific
measures - mortgage relief as a proportion
of total mortgages % 0.9 1.2 4.7 1.6 1.4
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Market-wide schemes and HSBC-specific
measures - other personal lending
relief as a proportion of total other
personal lending loans and advances % 0.7 0.2 3.1 1.1 0.8
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Wholesale lending (continued)
Other
Hong major
Extant at 31 December 2020 UK Kong US markets(1) Total
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Market-wide schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers under market-wide
measures 000s 226 3 3 5 237
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of customers under
market-wide schemes $m 13,517 10,622 1,043 6,017 31,199
--------------------------------------------- ---- ------ ------ ----- --------------- ------
HSBC-specific schemes
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers under HSBC-specific
measures 000s - - - - -
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value of customers under
HSBC-specific measures $m 349 - 924 2,869 4,142
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Total wholesale lending to major
markets under market-wide schemes
and HSBC-specific measures
--------------------------------------------- ---- ------ ------ ----- --------------- --------
Number of customers 000s 226 3 3 5 237
--------------------------------------------- ---- ------ ------ ----- --------------- ------
Drawn loan value $m 13,866 10,622 1,967 8,886 35,341
Market-wide schemes and HSBC-specific
measures as a proportion of total
wholesale lending loans and advances % 9.6 5.9 5.2 4.6 6.4
--------------------------------------------- ---- ------ ------ ----- --------------- ------
1 Other major markets include Australia, Canada, mainland China,
Egypt, France, Germany, India, Indonesia, Malaysia, Mexico,
Singapore, Switzerland, Taiwan and UAE.
2 In Malaysia, personal lending customers are granted an
automatic moratorium programme for all eligible retail customers.
At 31 December 2020,
the number of accounts under this moratorium was 26,000 with an
associated drawn balance of $452m.
3 In Mexico, at 31 December 2020, there were 16,000 personal
lending accounts under customer relief with an associated drawn
balance of $233m.
The initial granting of customer relief does not automatically
trigger a migration to stage 2 or stage 3. However, information
provided by payment deferrals is considered in the context of other
reasonable and supportable information. This forms part of the
overall assessment for whether there has been a significant
increase in credit risk and credit impairment to identify loans for
which lifetime ECL is appropriate. An extension in payment deferral
does not automatically result in a migration to stage 2 or stage 3.
The key accounting and credit risk judgement to ascertain whether a
significant increase in credit risk has occurred is whether the
economic effects of the Covid-19 on the customer are likely to be
temporary over the lifetime of the loan, and whether they indicate
that a concession is being made in respect of financial difficulty
that would be consistent with stage 3.
On 4 March 2021, the Hong Kong Monetary Authority, together with
the Banking Sector SME Lending Coordination Mechanism, announced
that the Pre-approved Principal Payment Holiday Scheme for
corporate customers will be extended for another six months to
October 2021.
Capital adequacy
Capital adequacy metrics
--------
At
31 Mar 31 Dec
2021 2020
------------------------------------------- ------ --------
Risk-weighted assets ('RWAs') ($bn)
------------------------------------------- ------ --------
Credit risk 687.0 691.9
------------------------------------------- ------ --------
Counterparty credit risk 41.4 42.8
------------------------------------------- ------ --------
Market risk 24.7 28.5
------------------------------------------- ------ --------
Operational risk 93.7 94.3
------------------------------------------- ------ --------
Total risk-weighted assets 846.8 857.5
------------------------------------------- ------ --------
Capital on a transitional basis ($bn)
------------------------------------------- ------ --------
Common equity tier 1 ('CET1') capital 134.5 136.1
------------------------------------------- ------ --------
Tier 1 capital 160.2 160.2
------------------------------------------- ------ --------
Total capital 183.1 184.4
------------------------------------------- ------ --------
Capital ratios on a transitional basis (%)
------------------------------------------- ------ --------
CET1 15.9 15.9
------ ------
Tier 1 18.9 18.7
------------------------------------------- ------ ------
Total capital 21.6 21.5
------------------------------------------- ------ ------
Capital on an end point basis ($bn)
------------------------------------------- ------ --------
Common equity tier 1 ('CET1') capital 134.5 136.1
------------------------------------------- ------ --------
Tier 1 capital 158.9 158.5
------------------------------------------- ------ --------
Total capital 172.8 173.2
------------------------------------------- ------ --------
Capital ratios on an end point basis (%)
------------------------------------------- ------ --------
CET1 15.9 15.9
------------------------------------------- ------ ------
Tier 1 18.8 18.5
------------------------------------------- ------ ------
Total capital 20.4 20.2
------------------------------------------- ------ ------
Liquidity coverage ratio ('LCR')
------------------------------------------- ------ --------
Total high-quality liquid assets ($bn) 695.1 677.9
------------------------------------------- ------ --------
Total net cash outflow ($bn) 487.0 487.3
------------------------------------------- ------ --------
LCR ratio (%) 142.7 139.1
------------------------------------------- ------ ------
Following the end of the transition period following the UK's
withdrawal from the EU, any reference to EU regulations and
directives (including technical standards) should be read as a
reference to the UK's version of such regulation or directive, as
onshored into UK law under the European Union (Withdrawal) Act
2018, as amended. Capital figures and ratios in the previous table
are calculated in accordance with the revised Capital Requirements
Regulation and Directive, as implemented ('CRR II'). The table
presents them under the transitional arrangements in CRR II for
capital instruments and after their expiry, known as the end point.
The end point figures in the table above include the benefit of the
regulatory transitional arrangements in CRR II for IFRS 9, which
are more fully described below.
Where applicable, they also reflect government relief schemes
intended to mitigate the impact of the Covid-19 outbreak.
We have adopted the regulatory transitional arrangements in CRR
II for IFRS 9, including paragraph four of article 473a. Our
capital and ratios are presented under these arrangements
throughout the table above, including in the end point figures.
Without their application, our CET1 ratio would be 15.8%. At 31
March 2021, the add-back to CET1 capital amounted to $1.2bn under
the standardised ('STD') approach with a tax impact of $0.3bn.
For further details, refer to our Pillar 3 Disclosures at 31
March 2021, which are expected to be published on or around 7 May
2021.
Capital
At 31 March 2021, our CET1 ratio of 15.9% was unchanged from 31
December 2020, reflecting a fall in RWAs, offset by a decrease in
CET1 capital during the quarter by $1.6bn. The fall in CET1 was
mainly as a result of:
-- a $1.2bn decrease in FVOCI reserves due to increasing yields;
-- a fall of $1.1bn due to foreign currency translation differences;
-- an increase of $1.0bn in deductions for significant
investments in financial sector entities and intangible assets;
-- a $0.7bn decrease in the IFRS 9 transitional add-back and a
$0.3bn higher deduction for excess expected loss; and
-- a $0.8bn foreseeable dividend deduction, which is a quarter
of the 2020 dividend. This will be adjusted during the rest of 2021
based on various factors, including regulatory guidance.
This decrease in CET1 capital was partly offset by capital
generation of $3.5bn through profits net of dividends paid on other
equity instruments.
Leverage
Leverage ratio(1)
At
31 Mar 31 Dec
2021 2020
Ref Footnotes $bn $bn
*
----- ---------------------------------------------- --------- ----------------- -----------------
20 Tier 1 capital 158.9 158.5
----- ---------------------------------------------- --------- --------------- ---------------
21 Total leverage ratio exposure 2,930.2 2,897.1
----- ---------------------------------------------- --------- --------------- ---------------
% %
----- ---------------------------------------------- --------- ----------------- -----------------
22 Leverage ratio 5.4 5.5
----- ---------------------------------------------- --------- --------------- ---------------
EU-23 Choice of transitional arrangements for the Fully phased-in Fully phased-in
definition of the capital measure
----- ---------------------------------------------- --------- ----------------- -----------------
UK leverage ratio exposure - quarterly average 2 2,559.1 2,555.5
----- ---------------------------------------------- --------- --------------- ---------------
% %
----- ---------------------------------------------- --------- ----------------- -----------------
UK leverage ratio - quarterly average 2 6.2 6.1
----- ---------------------------------------------- --------- --------------- ---------------
UK leverage ratio - quarter end 2 6.3 6.2
----- ---------------------------------------------- --------- --------------- ---------------
* The references identify the lines prescribed in the EBA template.
1 The CRR II regulatory transitional arrangements for IFRS 9 are applied in both leverage ratio calculations.
2 UK leverage ratio denotes the Group's leverage ratio
calculated under the PRA's UK leverage framework. This measure
excludes from the calculation of exposure qualifying central bank
balances and loans under the UK Bounce Back Loan scheme.
Our leverage ratio calculated in accordance with the Capital
Requirements Regulation was 5.4% at 31 March 2021, down from 5.5%
at 31 December 2020, primarily due to an increase in the leverage
exposure.
At 31 March 2021, our UK minimum leverage ratio requirement of
3.25% was supplemented by an additional leverage ratio buffer of
0.7% and a countercyclical leverage ratio buffer of 0.1%. These
additional buffers translated into capital values of $17.5bn and
$1.8bn respectively. We exceeded these leverage requirements.
Risk-weighted assets
RWAs by global business
Corporate
WPB CMB GBM Centre Total
$bn $bn $bn $bn $bn
------------------------- ----- ----- ----- --------- -------
Credit risk 136.0 299.5 162.9 88.6 687.0
------------------------- ----- ----- ----- --------- -----
Counterparty credit risk 0.5 0.4 39.6 0.9 41.4
------------------------- ----- ----- ----- --------- -----
Market risk 1.0 0.3 20.1 3.3 24.7
------------------------- ----- ----- ----- --------- -----
Operational risk 34.4 26.6 32.0 0.7 93.7
------------------------- ----- ----- ----- --------- -----
At 31 Mar 2021 171.9 326.8 254.6 93.5 846.8
------------------------- ----- ----- ----- --------- -----
RWA movement by global business by key driver
Credit risk, counterparty
credit risk and operational
risk
Corporate Market Total
WPB CMB GBM Centre risk RWAs
$bn $bn $bn $bn $bn $bn
--------------------------- ------- ------- ------- --------- ------ --------
RWAs at 1 Jan 2021 171.2 326.8 242.2 88.8 28.5 857.5
Asset size 0.3 2.4 (2.8) 3.6 (2.9) 0.6
--------------------------- ------- ------- ------- --------- ------ ------
Asset quality (1.5) (0.2) (0.5) (0.8) - (3.0)
--------------------------- ------- ------- ------- --------- ------ ------
Model updates - (0.1) (0.1) - (1.2) (1.4)
--------------------------- ------- ------- ------- --------- ------ ------
Methodology and policy 1.9 (0.7) (2.6) (1.1) 0.3 (2.2)
--------------------------- ------- ------- ------- --------- ------ ------
Foreign exchange movements (1.0) (1.7) (1.7) (0.3) - (4.7)
--------------------------- ------- ------- ------- --------- ------ ------
Total RWA movement (0.3) (0.3) (7.7) 1.4 (3.8) (10.7)
--------------------------- ------- ------- ------- --------- ------ ------
RWAs at 31 Mar 2021 170.9 326.5 234.5 90.2 24.7 846.8
--------------------------- ------- ------- ------- --------- ------ ------
Risk-weighted assets ('RWAs') fell by $10.7bn during 1Q21,
including a decrease of $4.7bn due to foreign currency translation
differences. The $6.0bn decrease (excluding foreign currency
translation differences) comprised the movements described by the
commentary below.
As measured from 1 January 2020 to 31 March 2021, our cumulative
RWA reductions as part of our transformation programme were
$60.9bn. In addition, we made accelerated transformation saves of
$9.6bn in 4Q19.
Asset size
The $0.6bn increase in RWAs due to asset size movements included
growth in Corporate Centre, CMB and WPB, partly offset by
reductions in GBM and market risk RWAs.
The $3.6bn increase in Corporate Centre RWAs was mostly in North
America and Asia, driven by a rise in sovereign and money market
exposures.
CMB RWAs grew by $2.4bn, mainly due to corporate loan growth in
Asia, partly offset by lower lending in Europe. The $0.3bn increase
in WPB RWAs was mostly from short-term lending in Hong Kong.
The $2.8bn fall in GBM included reductions in credit risk RWAs
totalling $1.5bn, largely due to management actions in Europe,
North America and Asia, partly offset by lending growth in Asia. A
$1.3bn fall in counterparty credit risk RWAs was mainly due to
management initiatives in Europe and North America, and
mark-to-market movements across all regions.
A reduction in market risk RWAs of $2.9bn included the effects
of risk mitigation actions on the emerging markets bond portfolio
and a fall in foreign exchange risk.
Asset quality
Changes in asset quality led to an RWA decrease of $3.0bn across
the global businesses.
RWAs fell by $1.5bn in WPB and $0.8bn in Corporate Centre,
mostly from favourable portfolio mix changes in North America,
largely around sovereign and mortgage exposures.
The $0.2bn decrease in CMB RWAs included a drop of $0.6bn in
North America, largely due to corporate portfolio mix changes. A
partly offsetting increase of $0.4bn in Asia was primarily driven
by credit migration, largely in Hong Kong.
In GBM, the $0.5bn RWA reduction was mainly caused by portfolio
mix changes in North America and Asia, partly offset by credit
rating migration in Hong Kong and Europe.
Model updates
The $1.4bn RWA reduction due to model updates predominantly
related to a recently implemented market risk model for an options
portfolio.
Methodology and policy
The $2.2bn reduction in RWAs due to methodology and policy
changes was almost entirely in the form of risk parameter
refinements in GBM and CMB, mainly in Europe and Asia. Changes to
real estate, Market Treasury and other allocation methodologies
were the drivers of the $1.9bn increase in WPB RWAs and the $1.1bn
decrease in Corporate Centre, with further offsets across CMB and
GBM.
Reconciliation of alternative performance measures
Use of alternative performance measures
Our reported results are prepared in accordance with IFRSs as
detailed in our financial statements starting on page 278 of the
Annual Report and Accounts 2020. We use a combination of reported
and alternative performance measures, including those derived from
our reported results that eliminate factors that distort
period-on-period 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 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 UK
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
Quarter ended
31 Mar 31 Dec 31 Mar
2021 2020 2020
Footnotes $m $m $m
-------------------------------------------------- --------- -------- -------- ----------
Profit
-------------------------------------------------- --------- -------- -------- ----------
Profit attributable to the ordinary shareholders
of the parent company 3,880 562 1,785
-------------------------------------------------- --------- -------- -------- --------
Impairment of intangible assets (net of tax) 1 - (120) -
-------------------------------------------------- --------- -------- -------- --------
Increase in PVIF (net of tax) 60 309 (254)
-------------------------------------------------- --------- -------- -------- --------
Profit attributable to the ordinary shareholders,
excluding goodwill, other intangible assets
impairment and PVIF 3,940 751 1,531
-------------------------------------------------- --------- -------- -------- --------
Significant items (net of tax), UK bank levy
and other adjustments 683 11
-------------------------------------------------- --------- -------- -------- ----------
Profit attributable to the ordinary shareholders,
excluding goodwill impairment, PVIF, significant
items and UK bank levy 4,623 1,542
-------------------------------------------------- --------- -------- -------- ----------
Equity
-------------------------------------------------- --------- -------- -------- ----------
Average ordinary shareholders' equity 174,923 171,774 164,566
-------------------------------------------------- --------- -------- -------- --------
Effect of goodwill, PVIF and other intangibles
(net of deferred tax) (17,523) (17,465) (17,484)
-------------------------------------------------- --------- -------- -------- --------
Average tangible equity 157,400 154,309 147,082
-------------------------------------------------- --------- -------- -------- --------
Fair value of own debt, DVA and other adjustments 1,641 (373)
-------------------------------------------------- --------- -------- -------- --------
Average tangible equity excluding fair value
of own debt, DVA and other adjustments 159,041 146,709
-------------------------------------------------- --------- -------- -------- --------
Ratio % % %
-------------------------------------------------- --------- -------- -------- ----------
Return on average ordinary shareholders' equity
(annualised) 9.0 1.3 4.4
-------------------------------------------------- --------- -------- -------- --------
Return on tangible equity (annualised) 10.2 1.9 4.2
-------------------------------------------------- --------- -------- -------- --------
Return on tangible equity excluding significant
items and UK bank levy (annualised) 11.8 4.2
-------------------------------------------------- --------- -------- -------- --------
1 Includes the recognition of deferred tax relating to the
impairment of intangible assets during 2020.
Return on average tangible equity by global business
Quarter ended 31 Mar 2021
Global
Wealth Banking
and Personal Commercial and Corporate
Banking Banking Markets Centre Total
$m $m $m $m $m
----------------------------------------------- ------------- ---------- -------- --------- ---------
Profit before tax 1,845 1,821 1,829 284 5,779
----------------------------------------------- ------------- ---------- -------- --------- -------
Tax expense (409) (520) (448) 166 (1,211)
----------------------------------------------- ------------- ---------- -------- --------- -------
Profit after tax 1,436 1,301 1,381 450 4,568
----------------------------------------------- ------------- ---------- -------- --------- -------
Less attributable to: preference shareholders,
other equity holders, non-controlling
interests (182) (179) (188) (139) (688)
----------------------------------------------- ------------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders
of the parent company 1,254 1,122 1,193 311 3,880
----------------------------------------------- ------------- ---------- -------- --------- -------
Increase in PVIF (net of tax) 54 9 - (3) 60
----------------------------------------------- ------------- ---------- -------- --------- -------
Significant items (net of tax) and
UK bank levy 55 (16) 87 411 537
----------------------------------------------- ------------- ---------- -------- --------- -------
Other adjustments 1 (1) - 146 146
----------------------------------------------- ------------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders,
excluding PVIF, significant items
and UK bank levy 1,364 1,114 1,280 865 4,623
----------------------------------------------- ------------- ---------- -------- --------- -------
Average tangible shareholders' equity
excluding fair value of own debt,
DVA and other adjustments 29,357 39,394 42,909 47,381 159,041
----------------------------------------------- ------------- ---------- -------- --------- -------
RoTE excluding significant items and
UK bank levy (annualised) (%) 18.8 11.5 12.1 7.4 11.8
----------------------------------------------- ------------- ---------- -------- --------- -------
Quarter ended 31 Mar 2020
----------------------------------------------- ---------------------------------------------------------
Profit before tax 678 659 1,048 844 3,229
----------------------------------------------- ------------- ---------- -------- --------- -------
Tax expense 79 (215) (157) (428) (721)
----------------------------------------------- ------------- ---------- -------- --------- -------
Profit after tax 757 444 891 416 2,508
----------------------------------------------- ------------- ---------- -------- --------- -------
Less attributable to: preference shareholders,
other equity holders, non-controlling
interests (204) (199) (159) (161) (723)
----------------------------------------------- ------------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders
of the parent company 553 245 732 255 1,785
----------------------------------------------- ------------- ---------- -------- --------- -------
Increase in PVIF (net of tax) (235) (16) - (3) (254)
----------------------------------------------- ------------- ---------- -------- --------- -------
Significant items (net of tax) and
UK bank levy 12 2 (125) (72) (183)
----------------------------------------------- ------------- ---------- -------- --------- -------
Other adjustments (192) 25 19 342 194
----------------------------------------------- ------------- ---------- -------- --------- -------
Profit attributable to ordinary shareholders,
excluding PVIF, significant items
and UK bank levy 138 256 626 522 1,542
----------------------------------------------- ------------- ---------- -------- --------- -------
Average tangible shareholders' equity
excluding fair value of own debt,
DVA and other adjustments 25,956 37,668 39,771 43,314 146,709
----------------------------------------------- ------------- ---------- -------- --------- -------
RoTE excluding significant items and
UK bank levy (annualised) (%) 2.1 2.7 6.3 4.8 4.2
----------------------------------------------- ------------- ---------- -------- --------- -------
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
-------- -------- ----------
Quarter ended
------------------------------
31 Mar 31 Dec 31 Mar
2021 2020 2020
$m $m $m
------------------------------------------------------ -------- -------- ----------
Total shareholders' equity 199,210 196,443 189,771
------------------------------------------------------ -------- -------- --------
Preference shares and other equity instruments (24,414) (22,414) (22,319)
------------------------------------------------------ -------- -------- --------
Total ordinary shareholders' equity 174,796 174,029 167,452
------------------------------------------------------ -------- -------- --------
Goodwill, PVIF and intangible assets (net of deferred
tax) (17,439) (17,606) (17,433)
------------------------------------------------------ -------- -------- --------
Tangible ordinary shareholders' equity 157,357 156,423 150,019
------------------------------------------------------ -------- -------- --------
Basic number of $0.50 ordinary shares outstanding 20,226 20,184 20,172
------------------------------------------------------ -------- -------- --------
$ $ $
------------------------------------------------------ -------- -------- ----------
Value per share
------------------------------------------------------ -------- -------- ----------
Net asset value per ordinary share 8.64 8.62 8.30
------------------------------------------------------ -------- -------- --------
Tangible net asset value per ordinary share 7.78 7.75 7.44
------------------------------------------------------ -------- -------- --------
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
Quarter ended
---------------------------------
31 Mar 31 Dec 31 Mar
2021 2020 2020
$m $m $m
--------------------------------------------------- --------- --------- -----------
Expected credit losses and other credit impairment
charges ('ECL') 435 (1,174) (3,026)
--------------------------------------------------- --------- --------- ---------
Currency translation (27) (91)
--------------------------------------------------- --------- --------- ---------
Adjusted ECL 435 (1,201) (3,117)
--------------------------------------------------- --------- --------- ---------
Average gross loans and advances to customers 1,053,134 1,053,760 1,040,282
--------------------------------------------------- --------- --------- ---------
Currency translation (2,085) 12,534 49,283
--------------------------------------------------- --------- --------- ---------
Average gross loans and advances to customers - at
most recent balance sheet foreign exchange rates 1,051,049 1,066,294 1,089,565
Ratio % % %
--------------------------------------------------- --------- --------- -----------
Expected credit losses and other credit impairment
charges as % of average gross loans and advances
to customers (0.17) 0.45 1.15
--------------------------------------------------- --------- --------- ---------
Summary information - global businesses
Analysis of significant items by global business is presented
below.
Reconciliation of reported and adjusted items - global businesses
Quarter ended 31 Mar 2021
-------------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Revenue 1
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported 5,693 3,349 4,215 (271) 12,986
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Significant items 1 (18) 77 227 287
-------------------------------------- --------- --------- ---------- -------- --------- ---------
- customer redress programmes 1 (19) - - (18)
- fair value movements on financial
instruments 2 - (1) 12 228 239
-------------------------------------- ---------
- restructuring and other related
costs 3 - 2 65 (1) 66
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Adjusted 5,694 3,331 4,292 (44) 13,273
-------------------------------------- --------- --------- ---------- -------- --------- ---------
ECL
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported 18 230 190 (3) 435
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Adjusted 18 230 190 (3) 435
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Operating expenses
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported (3,874) (1,759) (2,576) (318) (8,527)
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Significant items 68 3 29 224 324
-------------------------------------- --------- --------- ---------- -------- --------- ---------
- customer redress programmes (12) - - 2 (10)
- restructuring and other related
costs 80 3 29 222 334
Adjusted (3,806) (1,756) (2,547) (94) (8,203)
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Share of profit in associates and
joint ventures
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported 8 1 - 876 885
Adjusted 8 1 - 876 885
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Profit before tax
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported 1,845 1,821 1,829 284 5,779
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Significant items 69 (15) 106 451 611
-------------------------------------- --------- --------- ---------- -------- --------- ---------
- revenue 1 (18) 77 227 287
-------------------------------------- ---------
- operating expenses 68 3 29 224 324
Adjusted 1,914 1,806 1,935 735 6,390
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Loans and advances to customers (net)
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported 474,260 343,623 221,223 1,101 1,040,207
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Adjusted 474,260 343,623 221,223 1,101 1,040,207
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Customer accounts
-------------------------------------- --------- --------- ---------- -------- --------- -----------
Reported 842,532 470,872 335,823 792 1,650,019
-------------------------------------- --------- --------- ---------- -------- --------- ---------
Adjusted 842,532 470,872 335,823 792 1,650,019
-------------------------------------- --------- --------- ---------- -------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
Reconciliation of reported and adjusted items - global businesses (continued)
Quarter ended 31 Dec 2020
-----------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 5,320 3,146 3,299 (8) 11,757
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 79 59 56 10 204
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items (2) 1 219 (154) 64
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* customer redress programmes - (1) - - (1)
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses 1 - - 1 2
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 2 - 1 64 (19) 46
---------------------------------------------------------- ---------
- restructuring and other related
costs 3 - 1 148 (129) 20
---------------------------------------------------------- ---------
- currency translation on significant
items (3) - 7 (7) (3)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 5,397 3,206 3,574 (152) 12,025
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (310) (874) 9 1 (1,174)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (5) (20) (2) - (27)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (315) (894) 7 1 (1,201)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (4,006) (1,916) (2,604) (1,338) (9,864)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (61) (33) (60) (11) (165)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 8 155 138 473 774
---------------------------------------------------------- ---------
- customer redress programmes (109) - - 2 (107)
---------------------------------------------------------- ---------
- impairment of goodwill and other
intangibles (15) 1 (1) 23 8
---------------------------------------------------------- ---------
- past service costs of guaranteed
minimum pension benefits equalisation - - - 17 17
---------------------------------------------------------- ---------
- restructuring and other related
costs 134 151 135 416 836
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters - - - 4 4
---------------------------------------------------------- ---------
* currency translation on significant items (2) 3 4 11 16
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (4,059) (1,794) (2,526) (876) (9,255)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 4 (1) - 663 666
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 1 1 - 11 13
Adjusted 5 - - 674 679
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 1,008 355 704 (682) 1,385
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 14 7 (6) 10 25
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 6 156 357 319 838
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* revenue (2) 1 219 (154) 64
---------------------------------------------------------- ---------
* operating expenses 8 155 138 473 774
Adjusted 1,028 518 1,055 (353) 2,248
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 469,186 343,182 224,364 1,255 1,037,987
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (1,229) (1,300) (1,527) (5) (4,061)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 467,957 341,882 222,837 1,250 1,033,926
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 834,759 470,428 336,983 610 1,642,780
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (2,172) (1,164) (1,847) (4) (5,187)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 832,587 469,264 335,136 606 1,637,593
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
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 - global businesses (continued)
Quarter ended 31 Mar 2020
-----------------------------------------------------
Wealth Global
and Banking
Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $m $m $m $m $m
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Revenue 1
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 5,614 3,733 3,945 394 13,686
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 151 125 145 (28) 393
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 7 - (194) (179) (366)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
- - - - -
* customer redress programmes
---------------------------------------------------------- ---------
* disposals, acquisitions and investment in new
businesses 7 - - - 7
---------------------------------------------------------- ---------
* fair value movements on financial instruments 2 - - (186) (171) (357)
---------------------------------------------------------- ---------
* restructuring and other related costs - - - (9) (9)
---------------------------------------------------------- ---------
- currency translation on significant
items - - (8) 1 (7)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 5,772 3,858 3,896 187 13,713
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
ECL
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (1,108) (1,375) (545) 2 (3,026)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (26) (50) (15) - (91)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (1,134) (1,425) (560) 2 (3,117)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Operating expenses
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (3,824) (1,699) (2,352) 23 (7,852)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (130) (63) (127) 13 (307)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 8 2 17 149 176
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* customer redress programmes 1 - - - 1
---------------------------------------------------------- ---------
* restructuring and other related costs 7 2 14 147 170
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters - - 2 (1) 1
---------------------------------------------------------- ---------
- currency translation on significant
items - - 1 3 4
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (3,946) (1,760) (2,462) 185 (7,983)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Share of profit in associates and
joint ventures
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported (4) - - 425 421
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation - - - 29 29
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted (4) - - 454 450
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 678 659 1,048 844 3,229
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation (5) 12 3 14 24
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Significant items 15 2 (177) (30) (190)
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
* revenue 7 - (194) (179) (366)
---------------------------------------------------------- ---------
* operating expenses 8 2 17 149 176
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 688 673 874 828 3,063
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Loans and advances to customers (net)
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 425,692 350,638 262,670 1,282 1,040,282
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 28,561 19,227 13,012 88 60,888
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 454,253 369,865 275,682 1,370 1,101,170
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Customer accounts
---------------------------------------------------------- --------- -------- ---------- ------- --------- -----------
Reported 749,294 379,842 310,977 416 1,440,529
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Currency translation 34,114 21,318 19,533 61 75,026
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
Adjusted 783,408 401,160 330,510 477 1,515,555
---------------------------------------------------------- --------- -------- ---------- ------- --------- ---------
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.
Reconciliation of reported and adjusted risk-weighted assets
The following table reconciles reported and adjusted
risk-weighted assets ('RWAs').
Reconciliation of reported and adjusted risk-weighted assets
At 31 Mar 2021
-------------------------------------------------------
Global
Wealth Banking
and Personal Commercial and Corporate
Banking Banking Markets Centre Total
Footnotes $bn $bn $bn $bn $bn
------------------------ ----------- ------------- ---------- -------- --------- -------
Risk-weighted assets
------------------------ ----------- ------------- ---------- -------- --------- -------
Reported 171.9 326.8 254.6 93.5 846.8
Adjusted 1 171.9 326.8 254.6 93.5 846.8
------------------------ ----------- ------------- ---------- -------- --------- -----
At 31 Dec 2020
------------------------ -----------
Risk-weighted assets
------------------------ ----------- ------------- ---------- -------- --------- -------
Reported 172.8 327.7 265.1 91.9 857.5
------------------------ ----------- ------------- ---------- -------- --------- -----
Currency translation (1.0) (1.7) (1.7) (0.3) (4.7)
------------------------ ----------- ------------- ---------- -------- --------- -----
Adjusted 1 171.8 326.0 263.4 91.6 852.8
------------------------ ----------- ------------- ---------- -------- --------- -----
At 31 Mar 2020
------------------------ -----------
Risk-weighted assets
------------------------ ----------- ------------- ---------- -------- --------- -------
Reported 161.1 326.6 285.4 84.0 857.1
------------------------ ----------- ------------- ---------- -------- --------- -----
Currency translation 6.7 18.0 9.9 1.2 35.8
------------------------ ----------- ------------- ---------- -------- --------- -----
Adjusted 1 167.8 344.6 295.3 85.2 892.9
------------------------ ----------- ------------- ---------- -------- --------- -----
1 Adjusted risk-weighted assets are calculated using reported
risk-weighted assets adjusted for the effects of currency
translation differences and significant items.
Summary information - geographical regions
Analysis of significant items by geographical regions is
presented below.
Reconciliation of reported results to adjusted results - geographical
regions
Quarter ended 31 Mar 2021
---------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Revenue 1
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 2 5,052 6,774 632 1,549 712 12,986
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Significant items 2 235 (24) - - 6 287
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
- customer redress programmes (18) - - - - (18)
- fair value movements on financial
instruments 3 236 2 - - 1 239
------------------------------------ ---------
- restructuring and other related
costs 2,4 17 (26) - - 5 66
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Adjusted 2 5,287 6,750 632 1,549 718 13,273
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
ECL
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 337 (32) 55 104 (29) 435
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Adjusted 337 (32) 55 104 (29) 435
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Operating expenses
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 2 (4,527) (3,694) (388) (1,169) (482) (8,527)
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Significant items 2 277 59 11 38 9 324
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
- customer redress programmes (10) - - - - (10)
- restructuring and other related
costs 2 287 59 11 38 9 334
Adjusted 2 (4,250) (3,635) (377) (1,131) (473) (8,203)
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Share of profit in associates
and joint ventures
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 135 710 38 - 2 885
Adjusted 135 710 38 - 2 885
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Profit before tax
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 997 3,758 337 484 203 5,779
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Significant items 512 35 11 38 15 611
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
- revenue 2 235 (24) - - 6 287
------------------------------------ ---------
- operating expenses 2 277 59 11 38 9 324
Adjusted 1,509 3,793 348 522 218 6,390
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Loans and advances to customers
(net)
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 405,493 478,477 28,176 108,751 19,310 1,040,207
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Adjusted 405,493 478,477 28,176 108,751 19,310 1,040,207
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Customer accounts
------------------------------------ --------- ------- ------- ------ -------- -------- -----------
Reported 643,162 756,498 41,916 182,576 25,867 1,650,019
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
Adjusted 643,162 756,498 41,916 182,576 25,867 1,650,019
------------------------------------ --------- ------- ------- ------ -------- -------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Amounts are non-additive across geographical regions due to
inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments
we made at our business update in February 2020.
Reconciliation of reported to adjusted results - geographical regions
(continued)
Quarter ended 31 Dec 2020
-------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 4,954 6,018 626 1,488 697 11,757
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 171 40 5 12 (12) 204
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 2 (108) - - (14) 6 64
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- customer redress programmes (1) - - - - (1)
---------------------------------------------------------- ---------
- disposals, acquisitions and
investment in new businesses - - - 2 - 2
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 10 31 1 (1) 5 46
---------------------------------------------------------- ---------
- restructuring and other related
costs 2,4 (111) (32) - (13) - 20
---------------------------------------------------------- ---------
- currency translation on significant
items 2 (6) 1 (1) (2) 1 (3)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 5,017 6,058 631 1,486 691 12,025
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
ECL
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (513) (322) (37) (27) (275) (1,174)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (27) 1 (1) - - (27)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted (540) (321) (38) (27) (275) (1,201)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 (5,715) (3,889) (394) (1,309) (583) (9,864)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 (149) (32) (2) (7) 13 (165)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 2 667 124 19 85 59 774
----------------------------------------------------------
- customer redress programmes (107) - - - - (107)
---------------------------------------------------------- ---------
- impairment of goodwill and
other intangibles 3 - 4 1 - 8
---------------------------------------------------------- ---------
* past service costs of guaranteed minimum pension
benefits equalisation 17 - - - - 17
---------------------------------------------------------- ---------
- restructuring and other related
costs 2 731 123 14 83 61 836
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 4 - - - - 4
---------------------------------------------------------- ---------
- currency translation on significant
items 2 19 1 1 1 (2) 16
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 (5,197) (3,797) (377) (1,231) (511) (9,255)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 45 469 150 - 2 666
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 11 - - - 13
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 47 480 150 - 2 679
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (1,229) 2,276 345 152 (159) 1,385
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (3) 20 2 5 1 25
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 559 124 19 71 65 838
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- revenue 2 (108) - - (14) 6 64
----------------------------------------------------------
- operating expenses 2 667 124 19 85 59 774
Adjusted (673) 2,420 366 228 (93) 2,248
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 408,495 473,165 28,700 107,969 19,658 1,037,987
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (754) (2,973) (319) 663 (678) (4,061)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 407,741 470,192 28,381 108,632 18,980 1,033,926
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 629,647 762,406 41,221 182,028 27,478 1,642,780
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation - (4,559) (387) 781 (1,022) (5,187)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 629,647 757,847 40,834 182,809 26,456 1,637,593
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
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.
Reconciliation of reported to adjusted results - geographical regions
(continued)
Quarter ended 31 Mar 2020
-------------------------------------------------------
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Revenue 1
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 4,420 7,559 690 1,704 863 13,686
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 342 137 (15) 26 (70) 393
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items (236) (100) (1) (15) (14) (366)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- disposals, acquisitions and
investment in new businesses - - - 7 - 7
---------------------------------------------------------- ---------
- fair value movements on financial
instruments 3 (229) (98) (1) (13) (16) (357)
---------------------------------------------------------- ---------
- restructuring and other related
costs - - - (9) - (9)
---------------------------------------------------------- ---------
- currency translation on significant
items (7) (2) - - 2 (7)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 4,526 7,596 674 1,715 779 13,713
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
ECL
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (868) (1,000) (333) (508) (317) (3,026)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (69) (38) 1 (7) 22 (91)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted (937) (1,038) (332) (515) (295) (3,117)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Operating expenses
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 2 (3,962) (3,284) (369) (1,307) (480) (7,852)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 2 (290) (73) 8 (15) 36 (307)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items 58 1 - 117 - 176
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- customer redress programmes 1 - - - - 1
---------------------------------------------------------- ---------
- restructuring and other related
costs 53 1 - 116 - 170
---------------------------------------------------------- ---------
* settlements and provisions in connection with legal
and regulatory matters 1 - - - - 1
---------------------------------------------------------- ---------
- currency translation on significant
items 3 - - 1 - 4
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 2 (4,194) (3,356) (361) (1,205) (444) (7,983)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Share of profit in associates
and joint ventures
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (101) 465 56 - 1 421
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (7) 36 - - - 29
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted (108) 501 56 - 1 450
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Profit/(loss) before tax
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported (511) 3,740 44 (111) 67 3,229
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation (24) 62 (6) 4 (12) 24
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Significant items (178) (99) (1) 102 (14) (190)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
- revenue (236) (100) (1) (15) (14) (366)
---------------------------------------------------------- ---------
- operating expenses 58 1 - 117 - 176
---------------------------------------------------------- ---------
Adjusted (713) 3,703 37 (5) 41 3,063
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Loans and advances to customers
(net)
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 386,221 481,512 29,651 122,858 20,040 1,040,282
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 38,303 14,924 (528) 5,998 2,191 60,888
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 424,524 496,436 29,123 128,856 22,231 1,101,170
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Customer accounts
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- -----------
Reported 531,992 690,917 40,553 153,893 23,174 1,440,529
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Currency translation 53,333 14,485 (805) 6,167 1,846 75,026
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
Adjusted 585,325 705,402 39,748 160,060 25,020 1,515,555
---------------------------------------------------------- --------- ------- ------- ------ ------- ------- ---------
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.
Dividend on preference shares
A quarterly dividend of GBP0.01 per Series A sterling preference
share is payable on 15 March, 15 June, 15 September and 15 December
2021 for the quarter then ended at the sole and absolute discretion
of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC
Holdings plc has approved a quarterly dividend to be payable on 15
June 2021 to holders of record on 31 May 2021.
For and on behalf of
HSBC Holdings plc
Aileen Taylor
Group Company Secretary and Chief Governance Officer
The Board of Directors of HSBC Holdings plc as at the date of
this announcement are: Mark Tucker*, Laura Cha , Henri de Castries
,
James Anthony Forese , Steven Guggenheimer , Irene Lee , José
Antonio Meade Kuribreña , Heidi Miller , Eileen K Murray , David
Nish , Noel Quinn, Ewen Stevenson, Jackson Tai and Pauline van der
Meer Mohr .
* Non-executive Group Chairman
Independent non-executive Director
Investor relations / media relations contacts
For further information contact:
Investor Relations Media Relations
UK - Richard O'Connor UK - Heidi Ashley
Tel: +44 (0) 20 7991 6590 Tel: +44 (0) 20 7992 2045
Hong Kong - Mark Phin Hong Kong - Patrick Humphris
Tel: +852 2822 4908 Tel: +852 2822 2052
Terms and abbreviations
1Q21 First quarter of 2021
-------------- ------------------------------------------------------------
1Q20 First quarter of 2020
-------------- ------------------------------------------------------------
4Q20 Fourth quarter of 2020
-------------- ------------------------------------------------------------
AIEA Average interest-earning assets
-------------- ------------------------------------------------------------
BoCom Bank of Communications Co., Limited, one of China's largest
banks
-------------- ------------------------------------------------------------
Bps Basis points. One basis point is equal to one-hundredth
of a percentage point
-------------- ------------------------------------------------------------
C&L Credit and Lending
-------------- ------------------------------------------------------------
CET1 Common equity tier 1
-------------- ------------------------------------------------------------
CMB Commercial Banking, a global business
-------------- ------------------------------------------------------------
CODM Chief Operating Decision Maker
-------------- ------------------------------------------------------------
Corporate Corporate Centre comprises Central Treasury, our legacy
Centre businesses, interests in our associates and joint ventures,
central stewardship costs and the UK bank levy
-------------- ------------------------------------------------------------
CRR II Revised Capital Requirements Regulation and Directive, as
implemented
-------------- ------------------------------------------------------------
DPD Days past due
-------------- ------------------------------------------------------------
DVA Debt valuation adjustment
-------------- ------------------------------------------------------------
EBA European Banking Authority
-------------- ------------------------------------------------------------
ECL Expected credit losses. In the income statement, ECL is
recorded as a change in expected credit losses and other
credit impairment charges. In the balance sheet, ECL is
recorded as an allowance for financial instruments to which
only the impairment requirements in
IFRS 9 are applied
-------------- ------------------------------------------------------------
EPS Earnings per share
-------------- ------------------------------------------------------------
ESG Environmental, social and governance
-------------- ------------------------------------------------------------
FTE Full-time equivalent staff
-------------- ------------------------------------------------------------
FVOCI Fair value through other comprehensive income
-------------- ------------------------------------------------------------
GBM Global Banking and Markets, a global business
-------------- ------------------------------------------------------------
GEC Group Executive Committee
-------------- ------------------------------------------------------------
GLCM Global Liquidity and Cash Management
-------------- ------------------------------------------------------------
Group HSBC Holdings together with its subsidiary undertakings
-------------- ------------------------------------------------------------
GTRF Global Trade and Receivables Finance
-------------- ------------------------------------------------------------
Hong Kong Hong Kong Special Administrative Region of the People's
Republic of China
-------------- ------------------------------------------------------------
HSBC HSBC Holdings together with its subsidiary undertakings
-------------- ------------------------------------------------------------
HSBC Bank HSBC Bank plc, also known as the non-ring-fenced bank
-------------- ------------------------------------------------------------
HSBC Holdings HSBC Holdings plc, the parent company of HSBC
-------------- ------------------------------------------------------------
HSBC UK HSBC UK Bank plc, also known as the ring-fenced bank
-------------- ------------------------------------------------------------
IAS International Accounting Standards
-------------- ------------------------------------------------------------
Ibor Interbank offered rate
-------------- ------------------------------------------------------------
IFRSs International Financial Reporting Standards
-------------- ------------------------------------------------------------
IRB Internal ratings-based
-------------- ------------------------------------------------------------
JV Joint venture
-------------- ------------------------------------------------------------
LCR Liquidity coverage ratio
-------------- ------------------------------------------------------------
LGD Loss given default
-------------- ------------------------------------------------------------
Mainland China People's Republic of China excluding Hong Kong and Macau
-------------- ------------------------------------------------------------
MENA Middle East and North Africa
-------------- ------------------------------------------------------------
MSS Markets and Securities Services
-------------- ------------------------------------------------------------
Net operating Net operating income before change in expected credit losses
income and other credit impairment charges, also referred to as
revenue
-------------- ------------------------------------------------------------
NIM Net interest margin
-------------- ------------------------------------------------------------
POCI Purchased or originated credit-impaired financial assets
-------------- ------------------------------------------------------------
PRA Prudential Regulation Authority (UK)
-------------- ------------------------------------------------------------
PVIF Present value of in-force insurance contracts
-------------- ------------------------------------------------------------
Revenue Net operating income before ECL
-------------- ------------------------------------------------------------
RoE Return on average ordinary shareholders' equity
-------------- ------------------------------------------------------------
RoTE Return on average tangible equity
-------------- ------------------------------------------------------------
RWAs Risk-weighted assets
-------------- ------------------------------------------------------------
SABB The Saudi British Bank
-------------- ------------------------------------------------------------
ServCo group Separately incorporated group of service companies set up
in response to UK ring-fencing proposals
-------------- ------------------------------------------------------------
WPB Wealth and Personal Banking, a global business
-------------- ------------------------------------------------------------
$m/$bn/$tn United States dollar millions/billions/trillions. We report
in US dollars
-------------- ------------------------------------------------------------
Registered office and Group Head office:
8 Canada Square
London
E14 5HQ
United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability
Registered number 617987
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/6572W_1-2021-4-26.pdf
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END
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