TIDMHSBA
RNS Number : 2416R
HSBC Holdings PLC
28 October 2019
Click on, or paste the following links into your web browser, to
view the associated PDF documents.
http://www.rns-pdf.londonstockexchange.com/rns/2416R_1-2019-10-27.pdf
http://www.rns-pdf.londonstockexchange.com/rns/2416R_2-2019-10-27.pdf
HSBC HOLDINGS PLC
3Q19 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
"Parts of our business, especially Asia, held up well in a
challenging environment in the third quarter. However, in some
parts, performance was not acceptable, principally business
activities within continental Europe, the non-ring-fenced bank in
the UK, and the US. Our previous plans are no longer sufficient to
improve performance for these businesses, given the softer outlook
for revenue growth. We are therefore accelerating plans to remodel
them, and move capital into higher growth and return
opportunities."
Highlights
-- Reported profit before tax in Asia up 4% to $4.7bn in 3Q19,
with a resilient performance in Hong Kong.
-- Growth in both loans and advances to customers and customer
accounts, up 4% and 2% respectively on a reported basis compared
with 3Q18, and up 7% and 5% on a constant currency basis.
-- Commercial Banking ('CMB') and Retail Banking delivered
revenue growth compared with 3Q18. Continued momentum in Global
Private Banking ('GPB') with net new money of $19bn in 9M19.
Performance in Retail Banking and Wealth Management ('RBWM') in
HSBC UK in 3Q19 was adversely impacted by additional customer
redress charges.
-- Global Banking and Markets ('GB&M') performance continued
to reflect low levels of client activity in Global Markets,
although our transaction banking franchises delivered a resilient
performance. In 3Q19, GB&M's adjusted revenue in Asia increased
by 9% compared with 3Q18 and represented over 50% of total GB&M
adjusted revenue.
-- Continued strong capital levels, with common equity tier 1
('CET1') ratio of 14.3%, including the completion of a $1bn share
buy-back.
Financial performance (vs. 3Q18)
-- Profit attributable to ordinary shareholders in 3Q19 down 24%
to $3.0bn, reflecting challenging market conditions. Return on
tangible equity (annualised) ('RoTE') for 3Q19 of 6.4%.
-- Reported profit before tax down 18% to $4.8bn, which included
additional customer redress provisions of $606m and $120m of
severance costs. Adjusted profit before tax down 12% to $5.3bn.
-- Reported revenue down 3% to $13.4bn, due to lower client
activity in Global Markets, compared with a strong 3Q18. In RBWM,
continued growth in Retail Banking was broadly offset in insurance
manufacturing due to higher adverse market impacts of $177m, while
revenue increased in CMB and GPB. Adjusted revenue down 2% to
$13.3bn.
-- The reduction in revenue included an adverse movement in
credit and funding valuation adjustments in GB&M of $196m,
while the adverse impact of hyperinflation accounting in Argentina
in 3Q19 was $132m, compared with $304m in 3Q18.
-- Reported operating expenses up 2% due to significant items.
Adjusted operating expenses up 0.8%, reflecting cost discipline
while continuing to invest.
-- Reported change in expected credit losses ('ECL') increased
by $0.4bn, mainly on unsecured lending in RBWM and higher charges
in CMB in the UK and Hong Kong. ECL in 3Q19 included a charge to
reflect the economic outlook in Hong Kong.
Financial performance (vs. 9M18)
-- Reported profit before tax up 4% to $17.2bn, including an
$828m dilution gain recognised in Saudi Arabia, customer redress
provisions of $1.2bn, and $407m of severance costs. Adjusted profit
before tax up $50m to $17.9bn.
-- Reported revenue up 4%. Adjusted revenue up 4.8%, which
reflected strong performances in RBWM and CMB, notably in the first
half of 2019. Adjusted revenue in GB&M down 7% from lower
market activity due to ongoing economic uncertainty.
-- Reported operating expenses down 1%. Adjusted operating
expenses up 2.6%, which is a slower growth rate than the 5.6% at
FY18 (compared with FY17) while we have continued to invest. 9M19
positive adjusted jaws of 2.2%.
-- Earnings per share of 57 cents. 9M19 RoTE (annualised) of 9.5%.
Outlook
-- The revenue environment is more challenging than in the first
half of 2019, and the outlook for revenue growth is softer than we
anticipated at the half-year. As a result, we no longer expect to
reach our RoTE target of more than 11% in 2020.
-- We will act to rebalance our capital away from low-return
businesses and adjust the cost base in line with the actions we
take.
-- These actions, or any continuing deterioration in the revenue
environment, could result in significant charges in 4Q19 and
subsequent periods, including the possible impairment of goodwill
and additional restructuring charges.
-- Addressing low-return businesses and reducing risk-weighted
assets ('RWAs') will allow redeployment of capital and resources
into higher growth and return opportunities.
-- We intend to sustain the dividend and maintain a CET1 ratio of above 14%.
Registered office and Group Head office: 8 Canada Square ,
London, E14 5HQ, United Kingdom Web: www.hsbc.com
Incorporated in England with limited liability. Registered
number 617987
Key financial metrics
Nine months ended
Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
Reported results
Reported revenue ($m) 42,727 41,085 13,355 14,944 13,798
Reported profit before tax ($m) 17,244 16,634 4,837 6,194 5,922
Reported profit after tax ($m) 13,732 12,932 3,795 5,027 4,516
Profit attributable to the ordinary
shareholders of the parent company
($m) 11,478 11,071 2,971 4,373 3,899
Basic earnings per share ($) 0.57 0.56 0.15 0.22 0.19
Diluted earnings per share ($) 0.57 0.55 0.15 0.22 0.19
Return on average ordinary shareholders'
equity (annualised) (%) 9.2 9.0 7.0 10.5 9.6
Return on average tangible equity
(annualised) (%) 9.5 10.1 6.4 11.7 10.9
Net interest margin (%) 1.59 1.67
Adjusted results
Adjusted revenue ($m) 41,762 39,868 13,267 13,881 13,486
Adjusted profit before tax ($m) 17,864 17,814 5,348 6,101 6,092
Adjusted jaws (%) 2.2 (2.4)
Adjusted cost efficiency ratio (%) 56.8 57.9 56.9 57.3 55.5
Expected credit losses and other credit
impairment charges ('ECL') as % of
average gross loans and advances to
customers (%) 0.27 0.12 0.34 0.22 0.20
At
Footnotes 30 Sep 30 Jun 31 Dec
2019 2019 2018
Balance sheet
Total assets ($m) 2,728,347 2,751,273 2,558,124
Net loans and advances to customers ($m) 1,017,833 1,021,632 981,696
Customer accounts ($m) 1,373,741 1,380,124 1,362,643
Average interest-earning assets, year to date ($m) 1,915,149 1,912,708 1,839,346
Loans and advances to customers as % of customer
accounts (%) 74.1 74.0 72.0
Total shareholders' equity ($m) 189,517 192,676 186,253
Tangible ordinary shareholders' equity ($m) 141,831 145,441 140,056
Net asset value per ordinary share
at period end ($) 18.21 8.35 8.13
Tangible net asset value per ordinary share at period
end ($) 7.02 7.19 7.01
Capital, leverage and liquidity
Common equity tier 1 capital ratio
(%) 214.3 14.3 14.0
Risk-weighted assets ($m) 2865,238 885,971 865,318
Total capital ratio (%) 220.2 20.1 20.0
Leverage ratio (%) 25.4 5.4 5.5
High-quality liquid assets (liquidity value) ($bn) 513 533 567
Liquidity coverage ratio (%) 136 136 154
Share count
Period end basic number of $0.50 ordinary shares
outstanding (millions) 20,191 20,221 19,981
Period end basic number of $0.50 ordinary shares
outstanding and dilutive potential ordinary shares
(millions) 20,267 20,286 20,059
Average basic number of $0.50 ordinary shares outstanding
(millions) 20,149 20,124 19,896
Dividend per ordinary share (in respect of the period)
($) 0.30 0.30 0.51
1 The definition of net asset value per ordinary share is total
shareholders' equity less non-cumulative preference shares and
capital securities, divided by the number of ordinary shares in
issue excluding shares the company has purchased and are held in
treasury.
2 Unless otherwise stated, regulatory capital ratios and
requirements are calculated in accordance with the transitional
arrangements of the Capital Requirements Regulation in force in the
EU at the time, including the regulatory transitional arrangements
for IFRS 9 'Financial Instruments' in article 473a. The capital
ratios and requirements at 30 September 2019 and 30 June 2019 apply
the revisions to the Capital Requirements Regulation ('CRR II'),
whereas prior periods apply the Capital Requirements Regulation and
Directive ('CRD IV'). Leverage ratios are calculated using the end
point definition of capital.
Contents
Highlights
Page Page
1 Minimum requirement for own funds 29
and eligible liabilities
Key financial metrics 2 Summary information - global businesses 31
Summary information - geographical
Adjusted performance 3 regions 34
Financial performance commentary 5 Appendix - selected information 37
Cautionary statement regarding - Reconciliation of reported to
forward-looking statements 14 adjusted results - global businesses 37
Summary consolidated income - Reconciliation of reported and
statement 15 adjusted risk-weighted assets 42
Summary consolidated balance 16 - Reconciliation of reported to
sheet adjusted results - geographical
regions and
Credit risk 17 selected countries/territories 42
Capital adequacy 25 Third interim dividend for 2019 52
Leverage 26 Terms and abbreviations 53
Risk-weighted assets 27
HSBC Holdings plc will be conducting a trading update conference
call with analysts and investors today to coincide with the
publication of its Earnings Release. The call will take place at
07.30am GMT. Details of how to participate in the call and the live
audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered
in London. HSBC serves customers worldwide from offices in
65 countries and territories in our geographical regions:
Europe, Asia, North America, Latin America, and Middle East and
North Africa. With assets of $2,728bn at 30 September 2019, HSBC is
one of the world's largest banking and financial services
organisations.
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.
Significant items
'Significant items' refers collectively to the items that
management and investors would ordinarily identify and consider
separately to understand better the underlying trends in the
business.
The tables on pages 37 to 51 detail the effects of significant
items on each of our global business segments and geographical
regions during 9M19, 3Q19 and 3Q18.
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.
Customer redress provisions
Customer redress charges of $606m in 3Q19 included provisions
for payment protection insurance ('PPI') of $388m as well as other
customer redress programmes, notably in HSBC UK Bank plc. The
increase in PPI provisions was mainly driven by the volume of
information requests and inbound complaints received in the period
to 29 August 2019, which significantly exceeded that forecast at 30
June 2019 (for further information, see page 103 of our Interim
Report 2019). This was partly offset by the lower quality of the
information requests. Other customer redress provisions include
amounts recognised in respect of fees, charges and interest arising
from collection and recovery activities.
The customer redress provisions include significant judgement in
respect of the assumptions used and represent the best estimates at
the reporting date. The assumptions used will continue to be
reviewed and this may result in changes to the amounts provided in
future reporting periods.
Global business performance
The Group Chief Executive, supported by the rest of the Group
Management Board ('GMB'), 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 GMB 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 37 to 41 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that
provide breakdowns of adjusted revenue by major product. These
reflect the basis on which revenue performance of the businesses is
assessed and managed.
Reconciliation of reported and adjusted results
Nine months
ended Quarter ended
Footnotes 30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
Revenue
Reported 142,727 41,085 13,355 14,944 13,798
Currency translation (1,514) (208) (355)
Significant items (965) 297 (88) (855) 43
- customer redress programmes 118 (46) 118 - (827) -
(823) 142 4 (28) - 43
(260) 195 (210) - -
6
- disposals, acquisitions and investment
in new businesses
- fair value movement on financial
instruments 2
- currency translation of significant
items
Adjusted 41,762 39,868 13,267 13,881 13,486
Change in expected credit losses and other
credit impairment charges
Reported (2,023) (914) (883) (555) (507)
Currency translation 68 10 18
Adjusted (2,023) (846) (883) (545) (489)
Operating expenses
Reported (25,296) (25,515) (8,147) (8,927) (7,966)
Currency translation 1,030 176 261
Significant items 1,585 1,382 599 800 218
- cost of structural reform 3126 300 35 38 89
1,098 162 488 554 62
- 427 54 - 140 51
(66) 51 (64) 237 27
840 (2) (1)
(25) (27) (10)
- customer redress programmes
- disposals, acquisitions and investment
in new businesses
- restructuring and other related costs
- settlements and provisions in connection
with legal and regulatory matters
- currency translation of significant
items
Adjusted (23,711) (23,103) (7,548) (7,951) (7,487)
Share of profit in associates and joint
ventures
Reported 1,836 1,978 512 732 597
Currency translation (83) (16) (15)
Adjusted 1,836 1,895 512 716 582
Profit before tax
Reported 17,244 16,634 4,837 6,194 5,922
Currency translation (499) (38) (91)
Significant items 620 1,679 511 (55) 261
- revenue (965) 297 (88) (855) 43
1,585 1,382 599 800 218
- operating expenses
Adjusted 17,864 17,814 5,348 6,101 6,092
Loans and advances to customers (net)
Reported 1,017,833 981,460 1,017,833 1,021,632 981,460
Currency translation (26,630) (19,742) (26,630)
Adjusted 1,017,833 954,830 1,017,833 1,001,890 954,830
Customer accounts
Reported 1,373,741 1,345,375 1,373,741 1,380,124 1,345,375
Currency translation (33,300) (25,198) (33,300)
Adjusted 1,373,741 1,312,075 1,373,741 1,354,926 1,312,075
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
debit value adjustments ('DVA') on derivative contracts.
3 Comprises costs associated with preparations for the UK's exit
from the European Union, costs to establish the UK ring-fenced bank
(including the UK ServCo group) and costs associated with
establishing an intermediate holding company in Hong Kong.
Financial performance commentary
Distribution of results by global business
Nine months ended
Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
Adjusted profit before tax
Retail Banking and Wealth Management 6,137 5,661 1,696 2,195 2,072
Commercial Banking 5,657 5,811 1,632 1,979 1,837
Global Banking and Markets 4,065 5,196 1,241 1,183 1,765
Global Private Banking 319 280 123 98 93
Corporate Centre 1,686 866 656 646 325
Total 17,864 17,814 5,348 6,101 6,092
Distribution of results by geographical region
Nine months ended
Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
Reported profit/(loss) before tax
Europe (944) 744 (424) (506) 634
Asia 14,431 13,839 4,651 4,774 4,459
Middle East and North Africa 2,041 1,158 305 1,271 322
North America 1,045 509 299 367 467
Latin America 671 384 6 288 40
Total 17,244 16,634 4,837 6,194 5,922
Adjusted profit before tax
Europe 313 1,115 52 157 812
Asia 14,525 13,597 4,658 4,803 4,422
Middle East and North Africa 1,221 1,165 308 452 329
North America 1,109 1,558 321 403 469
Latin America 696 379 9 286 60
Total 17,864 17,814 5,348 6,101 6,092
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 37 to 51 reconcile reported to adjusted
results for each of our global business segments and geographical
regions.
Group
3Q19 compared with 3Q18 - reported results
Quarter ended
30 Sep 30 Sep Variance
2019 2018
$m $m
3Q19 vs. 3Q18
$m %
Revenue 13,355 13,798 (443) (3)
ECL (883) (507) (376) (74)
Operating expenses (8,147) (7,966) (181) (2)
Share of profit from associates and JVs 512 597 (85) (14)
Profit before tax 4,837 5,922 (1,085) (18)
Tax expense (1,042) (1,406) 364 26
Profit after tax 3,795 4,516 (721) (16)
Reported profit
Reported profit after tax of $3.8bn was $0.7bn or 16% lower than
in 3Q18, reflecting challenging market conditions.
Reported profit before tax of $4.8bn was $1.1bn or 18% lower
than in 3Q18. The 3Q19 results included a provision of $0.6bn in
respect of customer redress programmes and $140m of restructuring
and other related costs, of which $120m related to severance.
Reported results also included adverse credit and funding valuation
adjustments in GB&M of $160m (3Q18: $36m favourable), adverse
market impacts in insurance manufacturing in RBWM of $225m (3Q18:
$48m adverse), and favourable valuation differences on long-term
debt and associated swaps in Corporate Centre of $76m (3Q18: $15m
adverse). The effects of hyperinflation accounting in Argentina
resulted in a $67m decrease in profit before tax, compared with a
$145m decrease in 3Q18.
The reduction in reported profit before tax reflected lower
revenue, primarily as GB&M generated less income in Global
Markets from reduced client activity due to ongoing economic
uncertainty, which compared with a strong 3Q18. This decrease was
partly offset by higher revenue in CMB, mainly reflecting higher
balances in Credit and Lending ('C&L') and Global Liquidity and
Cash Management
('GLCM'). In RBWM, growth in our Retail Banking business was
broadly offset by adverse market impacts on insurance
manufacturing. In addition, ECL increased in both RBWM and CMB.
Excluding net adverse movements in significant items of $0.3bn
and adverse foreign currency translation differences of $0.1bn,
profit before tax decreased by $0.7bn or 12%.
Reported revenue
Reported revenue of $13.4bn was $0.4bn or 3% lower than in
3Q18.
The reduction in reported revenue included adverse foreign
currency translation differences of $0.4bn, partly offset by a net
favourable movement in significant items of $0.1bn, primarily from
favourable fair value movements on financial instruments.
Excluding foreign currency translation differences and
significant items, revenue decreased by $0.2bn or 2%.
Reported ECL
Reported ECL of $0.9bn were $0.4bn higher than in 3Q18, with
increases in RBWM driven by higher impairments on unsecured lending
in the UK, the US, Hong Kong and Mexico, and also in CMB reflecting
higher charges in the UK and Hong Kong.
The effect of foreign currency translation differences between
the periods was minimal.
Reported operating expenses
Reported operating expenses of $8.1bn was $0.2bn or 2% higher
than in 3Q18. This was driven by higher charges associated with
customer redress programmes, of which $388m related to additional
charges for the mis-selling of PPI, and $140m for restructuring and
other related costs arising from cost efficiency measures across
our global businesses and functions. The increase also reflected
expenditure from near- and medium-term investments to grow the
business.
The increase in operating expenses was partly offset by a
reduction in performance-related pay and the favourable effect of
foreign currency translation differences of $0.3bn.
Excluding significant items and foreign currency translation
differences, operating expenses increased by $0.1bn or 1%.
Reported share of profit from associates and JVs
Reported income from associates of $0.5bn decreased by $0.1bn or
14%, mainly from a reduction in income from The Saudi British Bank
('SABB') as a result of higher ECL charges and other expenses
relating to the merger with Alawwal bank, based on its latest
published results.
Third interim dividend for 2019
On 2 October 2019, the Board announced a third interim dividend
for 2019 of $0.10 per ordinary share in respect of the period.
Further details are set out at the end of this release.
Group
3Q19 compared with 3Q18 - adjusted results
Quarter ended
30 Sep 30 Sep Variance
2019 2018
$m $m
3Q19 vs. 3Q18
$m %
Revenue 13,267 13,486 (219) (2)
ECL (883) (489) (394) (81)
Operating expenses (7,548) (7,487) (61) (1)
Share of profit from associates and JVs 512 582 (70) (12)
Profit before tax 5,348 6,092 (744) (12)
Adjusted profit before tax
On an adjusted basis, profit before tax of $5.3bn was $0.7bn or
12% lower than in 3Q18. This was primarily from lower revenue in
GB&M due to reduced client activity resulting from ongoing
economic uncertainty compared with a strong 3Q18, as well as higher
ECL in both RBWM and CMB.
The effects of hyperinflation accounting in Argentina resulted
in a $67m decrease in profit before tax, compared with $145m in
3Q18.
Adjusted revenue
Adjusted revenue of $13.3bn was $0.2bn or 2% lower than in 3Q18,
mainly in GB&M, while there was a favourable movement in
revenue in Corporate Centre and higher revenue in CMB.
-- In GB&M, revenue decreased by $0.6bn or 15%, which
included a net adverse movement on credit and funding valuation
adjustments of $196m. Revenue was $0.4bn lower in Global Markets
from reduced client activity, reflecting economic uncertainty,
compared with a strong 3Q18. In Global Banking, revenue increased
as we grew lending balances and benefited from wider credit spreads
on portfolio hedges, partly offset by prior year gains on corporate
restructuring and lower event-driven revenue. Investment in GLCM,
Securities Services and Global Trade and Receivables Finance
('GTRF') supported continued momentum as we delivered single-digit
growth in average balances.
-- In RBWM, revenue was broadly unchanged. In Retail Banking,
higher revenue (up $0.1bn) reflected balance growth in lending and
deposits, primarily in the UK and Hong Kong, while revenue growth
in investment distribution was driven by higher sales of mutual
funds and FX products. These increases were broadly offset by
adverse market impacts in insurance manufacturing in 3Q19 of $225m
(3Q18: $48m adverse).
-- In CMB, revenue increased by $0.1bn or 4%, primarily in
C&L from balance sheet growth of 5%, with increases in all
regions. In GLCM, revenue increased as we benefited from wider
margins, notably in Hong Kong, and higher average balances in North
America and the UK.
-- In GPB, revenue increased by $45m or 11%, mainly in Asia from
growth in investment and lending revenue.
-- In Corporate Centre, a net favourable movement in revenue of
$194m mainly reflected a favourable effect of hyperinflation
accounting in Argentina of $172m, and favourable movements of $91m
relating to the economic hedging of interest rate and exchange rate
risk on our long-term debt with long-term derivatives. Balance
Sheet Management ('BSM') also recorded higher revenue, although
this was partly offset by lower revenue in legacy credit due to
higher losses on portfolio disposals.
Adjusted ECL
Adjusted ECL of $0.9bn were $0.4bn higher due to increased
charges in RBWM and CMB. In addition, ECL in 3Q19 included a charge
to reflect the economic outlook in Hong Kong. In 3Q19, adjusted ECL
as a percentage of average gross loans and advances to customers
was 0.34%, compared with 0.20% at 3Q18.
In RBWM, ECL were $0.4bn, an increase of $0.2bn, mainly against
unsecured lending in the UK, the US, Hong Kong and Mexico.
In CMB, ECL rose by $0.2bn to $0.4bn. The increase reflected
higher ECL in the UK and Hong Kong, which included charges related
to specific customers. This increase was partly offset by lower ECL
in MENA.
ECL remain sensitive to forward economic guidance, which has the
potential to result in significant additional charges, given the
current level of uncertainty in a number of the markets in which we
operate.
Adjusted operating expenses
Adjusted operating expenses of $7.5bn were $0.1bn or 1% higher
than in 3Q18. This included an increase in costs from investments
(up
$0.1bn), notably from near- and medium-term investments to grow
the business, mainly in RBWM and CMB, and continued investment in
digital across all global businesses. These increases were partly
offset by a $0.2bn reduction in performance-related pay.
Adjusted share of profit from associates and JVs
Adjusted share of income from associates of $0.5bn was $70m or
12% lower than in 3Q18, mainly from a reduction in income from SABB
as a result of higher ECL charges and other expenses relating to
the merger with Alawwal bank, based on its latest published
results.
Group
9M19 compared with 9M18 - reported results Nine months ended
30 Sep 30 Sep Variance
2019 2018
$m $m
9M19 vs. 9M18
$m %
Revenue 42,727 41,085 1,642 4
ECL (2,023) (914) (1,109) >(100)
Operating expenses (25,296) (25,515) 219 1
Share of profit from associates and JVs 1,836 1,978 (142) (7)
Profit before tax 17,244 16,634 610 4
Tax expense (3,512) (3,702) 190 5
Profit after tax 13,732 12,932 800 6
Reported profit
Reported profit after tax of $13.7bn was $0.8bn or 6% higher
than in 9M18.
Reported profit before tax of $17.2bn was $0.6bn or 4% higher,
mainly due to revenue growth, notably in the first half of the
year. This increase in revenue was in RBWM from balance sheet
growth and the impact of previous interest rate increases on
margins in Retail Banking, and in CMB from growth across all our
major products, while in GB&M revenue fell. Revenue growth
included an $828m dilution gain recognised on the completion of the
merger of SABB with Alawwal bank in Saudi Arabia, the
non-recurrence of a 9M18 adverse swap mark-to-market loss of $177m
on a bond reclassification in Corporate Centre, and 9M19 disposal
gains in RBWM and CMB of $157m.
Profit growth was adversely impacted by higher ECL, largely from
an increase in charges against a small number of exposures in CMB
and GB&M, as well as an increase in RBWM. Operating expenses
also rose.
Results in 9M19 included additional customer redress provisions
of $1.2bn, restructuring and other related costs of $427m, of
which
$407m related to severance, adverse credit and funding valuation
adjustments in GB&M of $147m (9M18: $4m adverse), and adverse
market impacts in insurance manufacturing in RBWM of $72m (9M18:
$140m adverse). The effects of hyperinflation accounting in
Argentina resulted in a $129m decrease in profit before tax,
compared with a $145m decrease in 9M18.
Excluding net favourable movements in significant items of
$1.1bn and adverse foreign currency translation differences of
$0.5bn, profit before tax increased by $50m.
Reported revenue
Reported revenue of $42.7bn was $1.6bn or 4% higher than in
9M18, reflecting growth in RBWM and CMB, as discussed above, and in
Corporate Centre, partly offset by lower revenue in GB&M.
Net favourable movements in significant items of $1.3bn, which
largely comprised the $828m dilution gain recognised on the merger
of SABB with Alawwal bank and favourable fair value movements on
financial instruments of $0.5bn, were more than offset by adverse
foreign currency translation differences of $1.5bn.
Excluding significant items and currency translation
differences, revenue increased by $1.9bn or 5%.
Reported ECL
Reported ECL of $2.0bn were $1.1bn higher than in 9M18,
primarily driven by increased charges against specific exposures in
CMB and GB&M. This also included favourable foreign currency
translation differences of $68m.
Reported operating expenses
Reported operating expenses of $25.3bn were $0.2bn or 1% lower
than in 9M18 and included favourable foreign currency translation
differences of $1.0bn, partly offset by net adverse movements in
significant items of $0.2bn, which included:
-- customer redress programme costs of $1.1bn, of which $1.0bn
related to PPI, compared with $0.2bn in 9M18; and
-- restructuring and other related costs of $0.4bn, which
included $407m of severance costs. These were partly offset by:
-- the non-recurrence of settlements and provisions in
connection with legal and regulatory matters of $0.8bn in 9M18;
and
-- structural reform costs of $0.1bn, compared with $0.3bn in 9M18.
Excluding significant items and foreign currency translation
differences, operating expenses increased by $0.6bn or 3%.
Reported share of profit from associates and JVs
Reported share of profit in associates of $1.8bn was $0.1bn or
7% lower than in 9M18. This included adverse foreign currency
translation differences of $83m. The reduction also reflected lower
share of profit from SABB as a result of higher ECL charges and
other expenses relating to the merger with Alawwal bank, partly
offset by higher income from Bank of Communications Co., Limited
('BoCom').
Tax expense
The effective tax rate for 9M19 of 20.4% was lower than the
22.3% for 9M18. The 9M18 period contained a non-deductible
regulatory settlement. The rate at 9M19 was reduced due to a change
in profit mix and a non-taxable dilution gain in 1H19, partly
offset by non- recognition of UK tax losses and non-deductible UK
customer redress expenses.
Group
9M19 compared with 9M18 - adjusted results Nine months ended
30 Sep 30 Sep Variance
2019 2018
$m $m
9M19 vs. 9M18
$m %
Revenue 41,762 39,868 1,894 5
ECL (2,023) (846) (1,177) >(100)
Operating expenses (23,711) (23,103) (608) (3)
Share of profit from associates and JVs 1,836 1,895 (59) (3)
Profit before tax 17,864 17,814 50 0
Adjusted profit before tax
Adjusted profit before tax of $17.9bn was marginally higher than
in 9M18 (up $0.1bn).
Adjusted revenue increased by $1.9bn, primarily reflecting
growth in RBWM and CMB, although revenue in GB&M fell. The
increase in revenue was broadly offset by higher adjusted ECL (up
$1.2bn) and a rise in adjusted operating expenses of $0.6bn, which
included investments to grow the business and investments in
digital capabilities.
The effects of hyperinflation accounting in Argentina resulted
in a $129m decrease in profit before tax, compared with a $145m
decrease in 9M18.
Adjusted revenue
Adjusted revenue of $41.8bn was $1.9bn or 5% higher than in
9M18, reflecting continued growth in RBWM and CMB, notably in the
first half of 2019. Adjusted revenue also increased in GPB and
Corporate Centre. These increases were partly offset by lower
revenue in GB&M.
-- In RBWM, revenue increased by $1.3bn or 8%, mainly in Retail
Banking, reflecting growth in deposit and lending balances,
primarily in Hong Kong and the UK. We also benefited from wider
margins due to previous interest rate rises. In Wealth Management,
revenue growth reflected higher insurance manufacturing revenue,
which included favourable actuarial assumption changes of $0.1bn
and lower adverse market impact of $67m, as 9M19 recorded an
adverse movement of $72m compared with an adverse movement of
$140m in 9M18. These increases were partly offset by lower
investment distribution revenue.
-- In CMB, revenue increased by $0.8bn or 8%, with growth in all
major products and regions. Growth was primarily in GLCM, arising
from wider deposit margins, notably in Hong Kong and the UK, and in
Latin America from wider margins and growth in average deposit
balances. Revenue increased in C&L due to balance sheet growth
in most markets, partly offset by margin compression.
-- In GB&M, revenue decreased by $0.8bn or 7%, mainly in
Global Markets as economic uncertainty resulted in lower market
activity, and in Global Banking as 9M18 benefited from gains on
corporate lending restructuring. These decreases were partly offset
by continued momentum in our transaction banking products as we
increased client mandates and grew balances.
-- In GPB, revenue increased by $0.1bn or 5%, mainly reflecting
growth in investment revenue and lending revenue, primarily in
Asia. These increases were partly offset by lower deposit revenue,
notably in the US.
-- In Corporate Centre, revenue increased by $0.6bn. This was
mainly in Central Treasury from favourable fair value movements in
9M19 of $0.2bn relating to the economic hedging of interest rate
and exchange rate risk on our long-term debt with long-term
derivatives (9M18: $0.2bn adverse), and from a non-repeat of a 9M18
swap mark-to-market loss on a bond reclassification of $177m. In
addition, the adverse impact of hyperinflation accounting in
Argentina was lower than in 9M18. These movements were partly
offset by lease expenses of $127m following the adoption of IFRS 16
'Leases', which were recorded within operating expenses in
9M18.
Adjusted ECL
Adjusted ECL of $2.0bn were $1.2bn higher than in 9M18.
-- In CMB, ECL increased by $0.6bn, primarily in the UK and Hong Kong.
-- In GB&M, ECL of $0.1bn primarily related to a specific
corporate exposure in Europe. This compared with net releases of
$0.1bn in 9M18, mainly in the US against exposures in the oil and
gas sector.
-- In RBWM, ECL of $1.0bn increased by $0.2bn compared with
9M18, notably against unsecured lending, mainly in the UK, the US
and Mexico.
-- In Corporate Centre, there was an adverse movement of $0.1bn,
reflecting lower net releases in 9M19 mainly related to our legacy
portfolios.
Adjusted ECL as a percentage of average gross loans and advances
to customers was 0.27%, compared with 0.12% at 9M18.
Adjusted operating expenses
Adjusted operating expenses of $23.7bn were $0.6bn or 3% higher
than in 9M18. This increase included higher expenditure on
investments (up $0.4bn), notably investments to grow the business,
mainly in RBWM and CMB, as well as continued investment in our
digital capabilities across all global businesses. In addition,
volume-related growth increased by $0.1bn. Cost inflation was
broadly offset by the impact of our cost-saving efficiencies.
The number of employees expressed in full-time equivalent staff
at 30 September 2019 was 237,412, an increase of 2,195 from 31
December 2018. This was primarily driven by investments in business
growth programmes, notably in RBWM and CMB. Additionally, the
number of contractors at 30 September 2019 was 9,045, a decrease of
1,809 from 31 December 2018.
The effect of hyperinflation accounting in Argentina resulted in
an increase in adjusted operating expenses of $105m compared with
9M18.
Adjusted share of profit from associates and JVs
Adjusted share of income from associates of $1.8bn was $0.1bn or
3% lower than in 9M18 as a result of higher ECL charges and other
expenses relating to the merger with Alawwal bank, partly offset by
higher income from BoCom.
Retail Banking and Wealth Management 9M19 compared with 9M18 -
adjusted results
Management view of adjusted revenue
Nine months ended
Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
9M19 vs. 9M18
Footnotes $m %
Retail Banking 11,850 10,963 887 8 3,981 3,943 3,832
- current accounts, savings and
deposits 7,067 6,048 1,019 17 2,422 2,423 2,285
- personal lending 4,783 4,915 (132) (3) 1,559 1,520 1,547
mortgages 1,218 1,455 (237) (16) 379 396 408
2,187 2,087 100 5 711 677 691
1,378 1,373 5 0 469 447 448
credit cards
other personal lending
Wealth Management 5,090 4,867 223 5 1,476 1,695 1,570
- investment distribution 2,549 2,656 (107) (4) 839 849 792
1,778 1,421 357 25 395 586 522
763 790 (27) (3) 242 260 256
- life insurance manufacturing
- asset management
Other 1607 463 144 31 171 231 222
Net operating income 217,547 16,293 1,254 8 5,628 5,869 5,624
RoTE excluding significant items
and UK bank levy (annualised) (%) 19.3 22.8
1 'Other' includes the distribution and manufacturing (where
applicable) of retail and credit protection insurance, disposal
gains and
other non-product specific income.
2 'Net operating income' means net operating income before
changes in expected credit losses and other credit impairment
charges (also referred to as 'Revenue').
Adjusted profit before tax of $6.1bn was $0.5bn or 8% higher
than in 9M18. This increase reflected strong balance sheet growth
and the impact of previous interest rate increases on margins in
Retail Banking, higher revenue in life insurance manufacturing, and
disposal gains in Argentina and Mexico. This was partly offset by
increased adjusted operating expenses driven by higher staff costs
and inflation, together with strategic investments.
RBWM's reported results include customer redress programme
costs, notably in respect of the mis-selling of PPI. These are
excluded from our adjusted performance.
Adjusted revenue of $17.5bn was $1.3bn or 8% higher, which
included disposal gains in Argentina and Mexico of $133m.
-- In Retail Banking, revenue of $11.9bn was up $0.9bn or 8%.
The increase reflected deposit balance growth of $33bn or 5%,
particularly in Hong Kong and the UK, and lending balance growth of
$31bn or 9% compared with 9M18, notably in mortgages in Hong Kong
and the UK. In addition, revenue benefited from the impact of
previous interest rate increases.
-- In Wealth Management, revenue of $5.1bn was up $0.2bn or 5%,
reflecting higher life insurance manufacturing revenue (up $0.4bn
or 25%), driven by growth in the value of new business written (up
$0.1bn or 15%), favourable actuarial assumption changes of $0.1bn
and lower adverse market impacts of $67m, as 9M19 recorded an
adverse movement of $72m compared with an adverse movement of $140m
in 9M18. This was partly offset by lower investment distribution
revenue (down $0.1bn or 4%), driven by less favourable market
conditions in Hong Kong, compared with 9M18, and a change in the
product mix of clients' investments to lower risk and lower margin
products.
Adjusted ECL were $1.0bn, up 24% from 9M18, reflecting our
strategy to grow unsecured lending, notably in the UK, the US and
Mexico. In addition, ECL in 9M19 included charges related to the
current economic uncertainties in the UK and Hong Kong. The net
write-off in 9M19 remained stable compared with 9M18.
Adjusted operating expenses of $10.5bn were $0.6bn or 6% higher.
This was mainly driven by higher staff costs and inflation (up
$0.2bn), particularly in Asia, to support business growth and the
impact of investment in strategic initiatives (up $0.1bn) to grow
the Wealth Management business in Asia, enhance digital
capabilities, and drive growth in key markets through lending.
Commercial Banking
9M19 compared with 9M18 - adjusted results
Management view of adjusted revenue
Nine months ended
Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
9M19 vs. 9M18
Footnotes $m %
Global Trade and Receivables Finance 1,402 1,360 42 3 464 465 455
Credit and Lending 4,113 3,843 270 7 1,367 1,363 1,293
Global Liquidity and Cash Management 4,554 4,130 424 10 1,506 1,519 1,446
Markets products, Insurance
and Investments, and Other 11,538 1,459 79 5 454 492 459
Net operating income 211,607 10,792 815 8 3,791 3,839 3,653
RoTE excluding significant items
and UK bank levy (annualised) (%) 13.0 14.5
1 Includes revenue from Foreign Exchange, insurance
manufacturing and distribution, interest rate management and Global
Banking products.
2 'Net operating income' means net operating income before
changes in expected credit losses and other credit
impairment charges (also referred to as 'Revenue').
Adjusted profit before tax of $5.7bn was $0.2bn or 3% lower than
in 9M18. Adjusted revenue growth across all products, notably in
GLCM and C&L, was more than offset by higher adjusted ECL
charges and higher adjusted operating expenses, as we continued to
invest.
Adjusted revenue of $11.6bn was $0.8bn or 8% higher, with growth
in all regions, particularly in our largest markets, Hong Kong (up
8%) and the UK (up 8%), and across all major products.
-- In GLCM, revenue was $0.4bn or 10% higher, with growth in all
regions. The increase was mainly in Hong Kong and the UK, primarily
reflecting wider margins, and in Latin America from wider margins
and growth in average deposit balances.
-- In C&L, revenue growth of $0.3bn or 7% reflected
continued lending growth in all regions, partly offset by the
effects of margin compression.
-- In GTRF, revenue increased by $42m or 3%, with growth across
all regions except Asia. The increase was mainly from higher
volumes in the UK, fee growth in MENA and wider margins in
Asia.
-- Revenue growth in 'Other' products included a disposal gain of $24m in Latin America.
Corporate customer value from our international subsidiary
banking proposition grew by 8%. (This relates to corporate client
income, covering all CMB products, as well as total income from
GB&M synergy products, including FX and debt capital markets,
used by international CMB subsidiaries. This measure differs from
reported revenue in that it excludes Business Banking and Other and
internal cost of funds.)
Adjusted ECL of $0.9bn were $0.6bn higher than in 9M18, driven
by an increase in the UK, partly offset by a reduction in MENA. In
addition, there were ECL charges in 9M19, notably in Asia, compared
with 9M18 where we recorded minimal charges in Hong Kong and net
releases in North America.
Adjusted operating expenses of $5.0bn were $0.3bn or 7% higher,
reflecting increased investment in digital capabilities (up
$0.2bn), including Real Time Payments, which provides clients with
a faster, simpler and more secure payment experience.
Global Banking and Markets
9M19 compared with 9M18 - adjusted results
Management view of adjusted revenue
Nine months ended
Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
9M19 vs. 9M18
Footnotes $m %
Global Markets 4,514 5,182 (668) (13) 1,352 1,405 1,745
- FICC 3,696 4,216 (520) (12) 1,145 1,173 1,465
Foreign Exchange 2,021 2,319 (298) (13) 713 602 812
1,189 1,226 (37) (3) 300 392 404
486 671 (185) (28) 132 179 249
Rates
Credit
- Equities 818 966 (148) (15) 207 232 280
Securities Services 1,512 1,439 73 5 509 518 491
Global Banking 2,921 3,067 (146) (5) 989 990 957
Global Liquidity and Cash Management 2,080 1,905 175 9 692 693 671
Global Trade and Receivables Finance 610 589 21 4 202 198 211
Principal Investments 215 278 (63) (23) 93 38 108
Credit and funding valuation adjustments (147) (4) (143) >(100) (160) (32) 36
Other 1(529) (470) (59) (13) (207) (218) (149)
Net operating income 211,176 11,986 (810) (7) 3,470 3,592 4,070
RoTE excluding significant items
and UK bank levy (annualised) (%) 9.6 12.5
1 'Other' in GB&M includes allocated funding costs and gains
resulting from business disposals. Within the management view of
total operating income, notional tax credits are allocated to the
businesses to reflect the economic benefit generated by certain
activities that is not reflected within operating income, such as
notional credits on income earned from tax-exempt investments where
the economic benefit of the activity is reflected in tax expense.
In order to reflect the total operating income on an IFRS basis,
the offset to these tax credits is included within 'Other'.
2 'Net operating income' means net operating income before
changes in expected credit losses and other credit
impairment charges (also referred to as 'Revenue').
Adjusted profit before tax of $4.1bn was $1.1bn lower than in
9M18, mainly due to lower revenue in Global Markets, as economic
uncertainty resulted in reduced market activity. In addition, ECL
charges increased by $0.2bn, compared with a net release in
9M18.
Adjusted revenue of $11.2bn fell by $0.8bn compared with 9M18,
and included higher adverse movements on credit and funding
valuation adjustments of $143m.
-- Global Markets revenue decreased by $0.7bn or 13%, driven by
low market volatility, reduced client activity due to ongoing
economic uncertainty and continued spread compression.
-- Global Banking revenue fell $0.1bn or 5%, reflecting a
non-repeat of gains in 9M18 on corporate lending restructuring,
lower event- driven activity and the impact of tightening credit
spreads on portfolio hedges. These reductions were partly offset by
higher lending revenue as we continued to grow balances, notably in
Asia.
-- Revenue grew in our transaction banking products. GLCM
revenue rose by $0.2bn or 9%, primarily driven by higher average
deposit balances and wider margins. Securities Services revenue
increased by $0.1bn or 5% from continued growth in average assets
under custody (up 5%) and average assets under administration (up
7%) from increased client mandates, as well as higher interest
rates. GTRF revenue increased by $21m or 4% from growth in lending
and higher fees from commodity and structured trade deals,
particularly in MENA.
Adjusted ECL were $0.1bn, up $217m compared with 9M18. The
charges in 9M19 primarily related to a specific corporate exposure
in Europe, compared with net releases in 9M18 that were largely
related to exposures within the oil and gas sector in the US.
Adjusted operating expenses of $7.0bn were $0.1bn or 2% higher,
as we invested in GLCM and Securities Services to support business
growth as well as in regulatory programmes.
Global Private Banking
9M19 compared with 9M18 - adjusted results
Management view of adjusted revenue
Nine months ended
Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
9M19 vs. 9M18
Footnotes $m %
Investment revenue 589 544 45 8 207 197 164
Lending 313 290 23 8 109 107 94
Deposit 352 366 (14) (4) 112 118 124
Other 142 134 8 6 44 49 45
Net operating income 11,396 1,334 62 5 472 471 427
RoTE excluding significant items
and UK bank levy (annualised) (%) 12.1 10.9
1 'Net operating income' means net operating income before
changes in expected credit losses and other credit
impairment charges (also referred to as 'Revenue').
Adjusted profit before tax of $0.3bn increased by $39m or 14%
compared with 9M18, reflecting higher adjusted revenue in Asia
where we continued to invest in business growth initiatives, partly
offset by higher adjusted ECL.
Adjusted revenue of $1.4bn increased by $62m or 5%, mainly
reflecting growth in Asia.
-- Investment revenue increased by $45m or 8%, mainly in Asia
from higher brokerage and trading revenue and from increased
annuity fee income as a result of growth in discretionary client
mandates.
-- Lending revenue was $23m or 8% higher, with growth in Asia
and most of our markets in Europe, with the exception of the UK,
which was adversely affected by margin compression.
-- Deposit revenue fell by $14m or 4%, as lower revenue in the
US from compressed margins and repositioning actions was partly
offset by growth in Asia from balance growth and wider margins.
In 9M19, we attracted $19bn of net new money inflows, mainly in
Asia and Europe.
Adjusted ECL were $25m, mainly in the UK. This compared with a
net release of $16m in 9M18, mainly in the UK, the US and
France.
Adjusted operating expenses of $1.1bn were $18m or 2% lower.
This was mainly due to reductions in Europe and the US following
actions to mitigate lower revenue, and a partial release of a
provision associated with the wind-down of our operations in
Monaco. These reductions were partly offset by an increase in Asia,
driven by investments to support business growth.
Corporate Centre
9M19 compared with 9M18 - adjusted results
Management view of adjusted revenue
Nine months ended
Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
9M19 vs. 9M18
Footnotes $m %
Central Treasury 1881 242 639 >100 313 263 91
Legacy portfolios (124) (78) (46) (59) (40) (13) 25
Other (721) (701) (20) (3) (367) (140) (404)
Net operating income 236 (537) 573 >100 (94) 110 (288)
RoTE excluding significant items
and UK bank levy (annualised) (%) (3.6) (4.8)
1 Central Treasury includes revenue relating to BSM in 9M19 of
$1.8bn (9M18: $1.8bn; 3Q19: $626m; 2Q19: $586m; 3Q18: $528m),
interest expense in 9M19 of $1.0bn (9M18: $978m; 3Q19: $321m; 2Q19:
$348m; 3Q18: $358m) and favourable valuation differences on issued
long-term debt and associated swaps in 9M19 of $219m (9M18: adverse
$380m; 3Q19: favourable $76m; 2Q19: favourable $93m; 3Q18: adverse
$15m). Revenue relating to BSM includes other internal allocations
to reflect the economic benefit generated by certain activities,
which is not reflected within operating income, such as notional
credits on income earned from tax-exempt investments where the
economic benefit of the activity is reflected in tax expense. In
order to reflect the total operating income on an IFRS basis, the
offset to these tax credits is included in other Central
Treasury.
2 'Net operating income' means net operating income before
changes in expected credit losses and other credit
impairment charges (also referred to as 'Revenue').
Adjusted profit before tax of $1.7bn was $0.8bn higher than in
9M18.
Adjusted revenue was $0.6bn favourable compared with 9M18,
largely reflecting higher revenue in Central Treasury. Central
Treasury revenue of $0.9bn was $0.6bn higher than in 9M18. This
included:
-- favourable fair value movements relating to the economic
hedging of interest rate and exchange rate risk on our long-term
debt with long-term derivatives of $219m in 9M19, compared with
adverse movements of $203m in 9M18; and
-- the non-recurrence of a $177m loss in 9M18 arising from
adverse swap mark-to-market movements following a bond
reclassification under IFRS 9 'Financial Instruments'.
Other income decreased by $20m. In 9M19, this included $127m of
lease expenses following the adoption of IFRS 16 'Leases' from
1 January 2019. In 9M18, lease expenses were recorded within
operating expenses. This decrease was broadly offset by a lower
adverse impact of hyperinflation accounting in Argentina.
A net release of adjusted ECL of $19m compared with a net
release of $113m in 9M18, mainly relating to our legacy
portfolios.
Adjusted operating expenses of $0.2bn decreased by $0.4bn or
74%. This partly reflected a change in the allocation of certain
costs to global businesses, which reduced costs retained in
Corporate Centre, as well as the impact of the adoption of IFRS 16
'Leases'. In addition, costs relating to legacy portfolios reduced,
while 9M18 also included a $41m charge in relation to the 2017 UK
bank levy.
Adjusted share of income from associates of $1.8bn decreased by
$0.1bn or 5%, primarily due to a lower share of profit from
SABB.
Balance sheet - 30 September 2019 compared with 30 June 2019
At 30 September 2019, our total assets of $2.7tn were $23bn
lower on a reported basis. On a constant currency basis, our total
assets were $30bn higher, reflecting targeted lending growth,
notably in Asia.
Loans and advances to customers as a percentage of customer
accounts were 74%, which was in line with the prior quarter.
Loans and advances to customers
Reported loans and advances to customers were $3.8bn lower. This
included adverse effects of foreign currency translation
differences of
$19.7bn. On a constant currency basis, customer lending
increased by $15.9bn or 2%.
Customer lending growth was primarily in Asia (up $9.8bn),
reflecting an increase in GB&M (up $6.8bn), due to higher term
lending from our continued strategic focus on growth throughout
Asia. Customer lending increased in RBWM by $3.8bn, primarily in
Hong Kong (up
$3.0bn), where we maintained a leading position in mortgages.
This was partly offset by a decrease in CMB (down $1.8bn).
In Europe, customer lending increased by $6.6bn, with HSBC UK up
$2.8bn, primarily reflecting growth in mortgage balances (up
$2.0bn), due to our focus on broker-originated mortgages. We
also increased lending to our corporate clients within HSBC UK
mainly through term lending. The remaining increase in Europe
primarily reflected growth in the UK in GB&M.
Customer accounts
Customer accounts fell by $6.4bn on a reported basis, including
adverse foreign currency translation differences of $25.2bn. On a
constant currency basis, customer accounts increased by $18.8bn or
1%.
On an adjusted basis, customer accounts increased in Europe by
$9.2bn. This was driven by an increase in CMB and RBWM balances,
notably in HSBC UK (up $5.7bn) within current accounts and savings.
In addition, current accounts increased in GB&M mainly in the
UK.
Customer accounts also increased in North America (up $7.9bn),
primarily in GB&M (up $3.9bn), reflecting an increase in
interest-bearing demand deposits, and in CMB (up $2.1bn), from an
increase mainly in time deposits. In addition, customer accounts
grew in RBWM (up
$1.7bn), reflecting an increase in savings deposits arising from
promotional rates.
Risk-weighted assets
Risk-weighted assets ('RWAs') totalled $865.2bn at 30 September
2019, a $20.8bn decrease during 3Q19. This included a decrease
of
$12.8bn due to foreign currency translation differences. The
$8.0bn decrease (excluding foreign currency translation
differences) comprised reductions of $14.4bn due to methodology and
policy changes and $1.5bn due to model updates, partly offset by
increases of
$4.9bn from changes in asset quality and of $3bn from asset size
growth.
The decrease due to methodology and policy changes included a
$7.0bn reduction from risk parameter refinements and improved
collateral recognition and a $6.3bn impact from a change to our
best estimate of expected loss on corporate exposures. The increase
due to asset quality changes included growth of $2.4bn caused by
the effect of the credit downgrade of Argentina, as well as changes
in the portfolio mix of GB&M assets. Asset size movements
included $4.7bn lending growth in CMB and RBWM and a $2.4bn
increase in market risk RWAs, partly offset by a $3.7bn fall in
Corporate Centre exposures.
Net interest margin
Nine months ended Full year to
30 Sep 30 Sep 31 Dec
2019 2018 2018
$m $m $m
Footnotes
Net interest income 22,808 22,780 30,489
Average interest-earning assets 1,915,149 1,827,337 1,839,346
% % %
Gross interest yield 12.89 2.64 2.70
Less: cost of funds 1(1.53) (1.13) (1.21)
Net interest spread 21.36 1.51 1.49
Net interest margin 31.59 1.67 1.66
1 Gross interest yield is the average annualised interest rate
earned on average interest-earning assets ('AIEA'). Cost of funds
is the average annualised interest cost as a percentage on average
interest-bearing liabilities.
2 Net interest spread is the difference between the average
annualised interest rate earned on AIEA, net of amortised premiums
and loan fees, and the average annualised interest rate payable on
average interest-bearing funds.
3 Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Net interest income for 9M19 was $22.8bn, broadly unchanged
compared with 9M18. This reflected higher yields and an increase in
average interest-earning assets ('AIEA'), offset by increased
funding costs.
The Group's net interest margin ('NIM') in 9M19 was 1.59%, which
was 8 basis points ('bps') lower compared with 9M18. The decline in
NIM reflected an increase in net funding costs of 7bps and 1bp
impact of significant items.
Notes
-- Income statement comparisons, unless stated otherwise, are
between the quarter ended 30 September 2019 and the quarter ended
30 September 2018. Balance sheet comparisons, unless otherwise
stated, are between balances at 30 September 2019 and the
corresponding balances at 30 June 2019.
-- 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 HSBC's
significant accounting policies as described on pages 224 to 237 of
our Annual Report and Accounts 2018.
-- The Board has adopted a policy of paying quarterly interim
dividends on ordinary shares. Under this policy, it is intended to
have a pattern of three equal interim dividends with a variable
fourth interim dividend. Dividends are declared in US dollars and,
at the election of the shareholder, paid in cash in one of, or in a
combination of, US dollars, sterling and Hong Kong dollars or,
subject to the Board's determination that a scrip dividend is to be
offered in respect of that dividend, may be satisfied in whole or
in part by the issue of new shares in lieu of a cash dividend.
Cautionary statement regarding forward-looking statements
This Earnings Release contains certain forward-looking
statements with respect to HSBC's financial condition, results of
operations, capital position and business.
Statements that are not historical facts, including statements
about HSBC's beliefs, targets and expectations, are forward-looking
statements. Words such as 'expects', 'targets', 'anticipates',
'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential'
and 'reasonably possible', variations of these words and similar
expressions are intended to identify forward-looking statements.
These statements are based on current plans, 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 beyond those factored into consensus
forecasts; changes in foreign exchange rates and interest rates;
volatility in equity markets; lack of liquidity in wholesale
funding markets; 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;
consumer perception as to the continuing availability of credit and
price competition in the market segments we serve; and deviations
from the market and economic assumptions that form the basis for
our ECL measurements;
-- changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities; initiatives to change the size, scope
of activities and interconnectedness of financial institutions in
connection with the implementation of stricter regulation of
financial institutions in key markets worldwide; revised capital
and liquidity benchmarks, which could serve to deleverage bank
balance sheets and lower returns available from the current
business model and portfolio mix; imposition of levies or taxes
designed to change business mix and risk appetite; the practices,
pricing or responsibilities of financial institutions serving their
consumer markets; expropriation, nationalisation, confiscation of
assets and changes in legislation relating to foreign ownership;
changes in bankruptcy legislation in the principal markets in which
we operate and the consequences thereof; general changes in
government policy that may significantly influence investor
decisions; extraordinary government actions as a result of current
market turmoil; other unfavourable political or diplomatic
developments producing social instability or legal uncertainty,
which in turn may affect demand for our products and services; the
costs, effects and outcomes of product 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, including securities firms; 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). 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; our success
in addressing operational, legal and regulatory, and litigation
challenges; and the other risks and uncertainties we identify in
'Top and emerging risks' on pages 69 to 73 of the Annual Report and
Accounts 2018 and on pages 16 and 17 of the Interim Report
2019.
For further information contact:
Investor Relations Media Relations
UK - Richard O'Connor UK - Heidi Ashley
Tel: +44 (0) 20 7991 6590 Tel: +44 (0) 20 7992 2045
Hong Kong - Mark Phin Hong Kong - Patrick Humphris
Tel: +852 2822 4908 Tel: +852 2822 2052
Summary consolidated income statement
Nine months
ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2019 2018 2019 2019 2018
$m $m $m $m $m
Net interest income 22,808 22,780 7,568 7,772 7,680
Net fee income 9,085 9,793 2,961 3,098 3,026
Net income from financial instruments
held for trading or managed on a fair
value basis 7,877 7,485 2,546 2,450 2,602
Net income/(expense) from assets and liabilities
of insurance businesses, including related
derivatives, measured at fair value through
profit or loss 2,318 (44) 122 486 178
Changes in fair value of designated debt
and related derivatives(1) 149 (129) 61 77 (3)
Changes in fair value of other financial
instruments mandatorily measured at fair
value through profit or loss 617 541 160 187 196
Gains less losses from financial investments 316 161 115 102 37
Net insurance premium income 9,047 8,488 2,724 3,027 2,712
Other operating income 2,935 569 863 1,214 169
Total operating income 55,152 49,644 17,120 18,413 16,597
Net insurance claims and benefits paid
and movement in liabilities to policyholders (12,425) (8,559) (3,765) (3,469) (2,799)
Net operating income before change in
expected credit losses and other credit
impairment charges(2) 42,727 41,085 13,355 14,944 13,798
Change in expected credit losses and other
credit impairment charges (2,023) (914) (883) (555) (507)
Net operating income 40,704 40,171 12,472 14,389 13,291
Total operating expenses (25,296) (25,515) (8,147) (8,927) (7,966)
Operating profit 15,408 14,656 4,325 5,462 5,325
Share of profit in associates and joint
ventures 1,836 1,978 512 732 597
Profit before tax 17,244 16,634 4,837 6,194 5,922
Tax expense (3,512) (3,702) (1,042) (1,167) (1,406)
Profit after tax 13,732 12,932 3,795 5,027 4,516
Attributable to:
- ordinary shareholders of the parent
company 11,478 11,071 2,971 4,373 3,899
- preference shareholders of the parent
company 67 67 22 23 22
- other equity holders 1,148 795 484 254 264
- non-controlling interests 1,039 999 318 377 331
Profit after tax 13,732 12,932 3,795 5,027 4,516
$ $ $ $ $
Basic earnings per share 0.57 0.56 0.15 0.22 0.19
Diluted earnings per share 0.57 0.55 0.15 0.22 0.19
Dividend per ordinary share (in respect
of the period) 0.30 0.30 0.10 0.10 0.10
% % % % %
Return on average ordinary shareholders'
equity (annualised) 9.2 9.0 7.0 10.5 9.6
Return on average tangible equity (annualised) 9.5 10.1 6.4 11.7 10.9
Cost efficiency ratio 59.2 62.1 61.0 59.7 57.7
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
30 Sep 30 Jun 31 Dec
2019 2019 2018
$m $m $m
Assets
Cash and balances at central banks 151,185 171,090 162,843
Trading assets 243,905 271,424 238,130
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 41,410 41,043 41,111
Derivatives 283,945 233,621 207,825
Loans and advances to banks 70,799 82,397 72,167
Loans and advances to customers 1,017,833 1,021,632 981,696
Reverse repurchase agreements - non-trading 214,837 233,079 242,804
Financial investments 429,501 428,101 407,433
Other assets 274,932 268,886 204,115
Total assets 2,728,347 2,751,273 2,558,124
Liabilities and equity
Liabilities
Deposits by banks 63,439 71,051 56,331
Customer accounts 1,373,741 1,380,124 1,362,643
Repurchase agreements - non-trading 135,581 184,497 165,884
Trading liabilities 89,378 94,149 84,431
Financial liabilities designated at fair value 164,698 165,104 148,505
Derivatives 278,374 229,903 205,835
Debt securities in issue 98,486 103,663 85,342
Liabilities under insurance contracts 94,867 93,794 87,330
Other liabilities 231,996 228,114 167,574
Total liabilities 2,530,560 2,550,399 2,363,875
Equity
Total shareholders' equity 189,517 192,676 186,253
Non-controlling interests 8,270 8,198 7,996
Total equity 197,787 200,874 194,249
Total liabilities and equity 2,728,347 2,751,273 2,558,124
Credit risk
A summary of our current policies and practices for the
management of credit risk is set out in 'Credit risk management' on
page 79 of the Annual Report and Accounts 2018.
Summary of credit risk
Summary of financial instruments to which the impairment
requirements in IFRS 9 are applied
At 30 Sep 2019 At 31 D ec 2018
Gross carrying/ Allowance Gross carrying/ Allowance
nominal for nominal for
amount amount
$m ECL(1) $m ECL(1)
Footnotes $m $m
Loans and advances to customers at
amortised cost 1,026,414 (8,581) 990,321 (8,625)
- personal 415,294 (3,041) 394,337 (2,947)
538,021 (5,400) 534,577 (5,552)
73,099 (140) 61,407 (126)
- corporate and commercial
- non-bank financial institutions
Loans and advances to banks at amortised
cost 70,827 (28) 72,180 (13)
Other financial assets measured at
amortised cost 623,938 (108) 582,917 (55)
- cash and balances at central banks 151,187 (2) 162,845 (2)
7,288 - 5,787 -
36,306 - 35,859 -
214,837 - (41) 242,804 - (18)
83,856 (65) 62,684 (35)
130,464 72,938
- items in the course of collection
from other banks
- Hong Kong Government certificates
of indebtedness
- reverse repurchase agreements -
non-trading
- financial investments
- prepayments, accrued income
and other assets 2
Total gross carrying amount on-balance
sheet 1,721,179 (8,717) 1,645,418 (8,693)
Loans and other credit-related commitments 626,618 (325) 592,008 (325)
- personal 216,567 (10) 207,351 (13)
269,891 (307) 271,022 (305)
140,160 (8) 113,635 (7)
- corporate and commercial
- financial
Financial guarantees 20,009 (52) 23,518 (93)
- personal 837 - (49) 927 (1)
14,783 (3) 17,355 (85)
4,389 5,236 (7)
- corporate and commercial
- financial
Total nominal amount off-balance
sheet 3646,627 (377) 615,526 (418)
2,367,806 (9,094) 2,260,944 (9,111)
Memorandum Fair value Memorandum Fair value
allowance for ECL(4) allowance for ECL(4)
$m $m $m $m
Debt instruments measured at fair
value through other comprehensive
income ('FVOCI') 343,960 (95) 343,110 (84)
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 16 includes both financial and non-financial
assets.
3 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
4 Debt instruments measured at FVOCI continue to be measured at
fair value with the allowance for ECL as a memorandum item. Change
in ECL is recognised in 'Change in expected credit losses and other
credit impairment charges' in the income statement.
Summary of credit risk (excluding debt instruments measured at
FVOCI) by stage distribution and ECL coverage by industry sector at
30 September 2019
395,532 15,007 4,755 415,294 (580) (1,276) (1,185) (3,041) 0.1 8.5 24.9 0.7
476,420 53,032 8,202 538,021 (677) (878) (3,675) (5,400) 0.1 1.7 44.8 1.0
- 367 - (170) - 46.3
- personal 69,112 3,662 325 - 73,099 (45) (21) (74) - (140) 0.1 0.6 22.8 - 0.2
- corporate
and
commercial
- non-bank
financial
institutions
Loans and
advances
to banks
at amortised
cost 70,569 258 - - 70,827 (27) (1) - - (28) - 0.4 - - -
Other financial
assets
measured
at amortised
cost 621,710 2,079 145 4 623,938 (36) (29) (43) - (108) - 1.4 29.7 - -
Loan and
other
credit-related
commitments 603,254 22,632 726 6 626,618 (132) (133) (60) - (325) - 0.6 8.3 - 0.1
- personal 833 3 1 - 837 - - - - - - - - - -
12,605 2,012 162 4 14,783 (17) (26) (6) - (49) 0.1 1.3 3.7 - 0.3
4,170 217 2 - 4,389 (2) - (1) - (3) - - 50.0 - 0.1
- corporate
and commercial
- financial
Stage 2 days past due analysis at 30 September 2019
Gross carrying/nominal amount(1) Allowance for ECL ECL
coverage %
Of which: Of which: Of which: Of which: Of which: Of
which: 1 to 29 30 and > 1 to 29 30 and > 1 to 29 30 and
>
Stage 2 DPD(3) DPD(3) Stage 2 DPD(3) DPD(3) Stage 2 DPD(3)
Loans and advances DPD(3)
to customers at $m $m $m $m $m $m % % %
amortised cost
71,701 2,248 1,513 (2,175) (210) (226) 3.0 9.3 14.9
Loans and advances
to banks at amortised
cost 258 - - (1) - - 0.4 - -
Other financial
assets measured
at amortised cost 2,079 17 26 (29) - - 1.4 - -
1 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
3 Days past due ('DPD'). Up-to-date accounts in Stage 2 are not shown in amounts presented above.
Summary of credit risk (excluding debt instruments measured at
FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2018
Gross carrying/nominal amount(1) Allowance for ECL
ECL coverage
%
Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage POCI(2) Total Stage Stage 2 POCI(2) Total
2 Stage 3 1 Stage 3
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and
advances
to
customers at
amortised
cost 915,188 61,786 13,023 324 990,321 (1,276) (2,108) (5,047) (194) (8,625) 0.1 3.4 38.8 59.9 0.9
Loans and
advances
to
banks at
amortised
cost 71,873 307 - - 72,180 (11) (2) - - (13) - 0.7 - - -
Other
financial
assets
measured at
amortised
cost 581,118 1,673 126 - 582,917 (27) (6) (22) - (55) - 0.4 17.5 - -
Loan and
other
credit-
related
commitments 569,250 21,839 912 7 592,008 (143) (139) (43) - (325) - 0.6 4.7 - 0.1
- personal 205,183 1,760 408 - 207,351 (12) (1) - - (13) - 0.1 - - -
251,478 19,034 503 7 271,022 (126) (136) (43) - (305) 0.1 0.7 8.5 - 0.1
112,589 1,045 1 - 113,635 (5) (2) - - (7) - 0.2 - - -
- corporate
and commercial
- financial
Financial guarantees 20,884 2,334 297 3 23,518 (19) (29) (45) -
(93) 0.1 1.2 15.2 - 0.4
- personal 920 3 4 - 927 (1) - - - (1) 0.1 - - - 0.1
15,011 2,053 288 3 17,355 (16) (25) (44) - (85) 0.1 1.2 15.3 - 0.5
4,953 278 5 - 5,236 (2) (4) (1) - (7) - 1.4 20.0 - 0.1
- corporate
and commercial
- financial
At 31 Dec 2018 2,158,313 87,939 14,358 334 2,260,944 (1,476)
(2,284)
(5,157) (194) (9,111) 0.1 2.6 35.9 58.1 0.4
Stage 2 days past due analysis at 31 December 2018
Gross carrying/nominal amount(1) Allowance for ECL ECL coverage
%
Of which: Of which: Of which: Of which: Of which: Of which:
30 and 30 and 30 and
1 to 29 > 1 to 29 > 1 to 29 >
Stage DPD(3) DPD(3) Stage DPD(3) DPD(3) Stage DPD(3) DPD(3)
2 2 2
$m $m $m $m $m $m % % %
Loans and advances
to
customers at amortised
cost 61,786 2,554 1,914 (2,108) (204) (254) 3.4 8.0 13.3
- personal 15,075 1,807 1,383 (1,265) (165) (220) 8.4 9.1 15.9
44,779 737 485 (812) (39) (34) 1.8 5.3 7.0
1,932 10 46 (31) - - 1.6 - -
- corporate and
commercial
- non-bank financial
institutions
Loans and advances
to banks at
amortised cost 307 - - (2) - - 0.7 - -
Other financial
assets measured
at amortised cost 1,673 10 26 (6) - - 0.4 - -
1 Represents the maximum amount at risk should the contracts be
fully drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
3 Days past due ('DPD'). Up-to-date accounts in Stage 2 are not shown in amounts presented above.
Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
The following disclosure provides a reconciliation by stage of
the Group's gross carrying/nominal amount and allowances for loans
and advances to banks and customers, including loan commitments and
financial guarantees. Movements are calculated on a quarterly basis
and therefore fully capture stage movements between quarters. If
movements were calculated on a year-to-date basis they would only
reflect the opening and closing position of the financial
instrument.
The transfers of financial instruments represents the impact of
stage transfers upon the gross carrying/nominal amount and
associated allowance for ECL.
The net remeasurement of ECL arising from stage transfers
represents the increase or decrease due to these transfers, for
example, moving from a 12-month (stage 1) to a lifetime (stage 2)
ECL measurement basis. Net remeasurement excludes the underlying
customer risk rating ('CRR')/probability of default ('PD')
movements of the financial instruments transferring stage. This is
captured, along with other credit quality movements in the 'changes
in risk parameters - credit quality' line item.
Changes in 'New financial assets originated or purchased',
'assets derecognised (including final repayments)' and 'changes to
risk parameters - further lending/repayments' represent the impact
from volume movements within the Group's lending portfolio.
Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross Gross Gross Gross Gross carrying/ carrying/ carrying/
carrying/ carrying/
nominal Allowance nominal Allowance nominal Allowance
nominal Allowance nominal Allowance amount for ECL amount
for ECL amount for ECL amount for ECL amount for ECL
At 1 Jan 2019 $m $m $m $m $m $m $m $m $m $m
Transfers of 1,511,839 (1,449) 86,241 (2,278) 14,232 (5,135) 334 (194)
financial 1,612,646 (9,056)
instruments (30,224) (399) 26,379 845 3,845 (446) - - - -
Net remeasurement
of ECL arising - 506 - (498) - (91) - - - (83)
from transfer of
stage
New financial
assets
originated or
purchased 378,176 (404) - - - - 99 (21) 378,275 (425)
Assets derecognised
(including final
repayments) (260,857) 86 (14,700) 346 (2,017) 537 (23) 10 (277,597) 979
Changes to risk
parameters -
further
lending/repayments (33,379) 218 (65) 116 584 (89) 16 16 (32,844) 261
Changes in risk
parameters -
credit
quality - (87) - (923) - (1,922) - (38) - (2,970)
Changes to model
used for ECL
calculation - (2) - 1 - 3 - - - 2
Assets written
off - - - - (1,927) 1,927 (54) 54 (1,981) 1,981
Credit-related
modifications that
resulted in
derecognition - - - - (211) 111 - - (211) 111
Foreign exchange (27,078) 38 (1,688) 52 (336) 108 (8) 5 (29,110) 203
Others (842) 12 656 4 3 (3) 13 (2) (170) 11
At 30 Sep 2019 1,537,635 (1,481) 96,823 (2,335) 14,173 (5,000) 377 (170) 1,649,008 (8,986)
ECL income
statement
change for the
period 317 (958) (1,562) (33) (2,236)
Recoveries 290
Others (37)
Total ECL income
statement change
for the period (1,983)
Nine months
At 30 Sep 2019 ended
30 Sep 2019
Gross carrying/ Allowance
nominal for ECL charge
amount ECL $m
$m $m
As above 1,649,008 (8,986) (1,983)
Other financial assets measured at amortised
cost 623,938 (108) (27)
Non-trading reverse purchase agreement commitments 94,860 - -
Summary of financial instruments to which
the impairment requirements in IFRS 9 are
applied/Summary consolidated income statement 2,367,806 (9,094) (2,010)
Debt instruments measured at FVOCI 343,960 (95) (13)
Total allowance for ECL/total income statement
ECL change for the period n/a (9,189) (2,023)
As shown in the above table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments and
financial guarantees decreased $70m during the period from $9,056m
at 31 December 2018 to $8,986m at 30 September 2019.
This decrease was primarily driven by:
-- $815m relating to volume movements, which included the ECL
allowance associated with new originations, assets derecognised and
further lending/repayments;
-- $1,981m of assets written off; and
-- foreign exchange and all other movements of $327m. These
decreases were partly offset by increases of:
-- $2,970m relating to underlying credit quality changes,
including the credit quality impact of financial instruments
transferring between stages; and
-- $83m relating to the net remeasurement impact of stage transfers.
The ECL charge for the period of $2,236m presented in the above
table consisted of $2,970m relating to underlying credit quality
changes, including the credit quality impact of financial
instruments transferring between stage and $83m relating to the net
remeasurement impact of stage transfers. This was partly offset by
$815m relating to underlying net book volume movements and $2m in
changes to models used for ECL calculation.
Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees(1)
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross Gross Gross Gross Gross
carrying/ carrying/ carrying/ carrying/ carrying/
nominal Allowance nominal Allowance nominal Allowance nominal Allowance nominal Allowance
amount for ECL amount for ECL amount for ECL amount for ECL amount for
ECL
$m $m $m $m $m $m $m $m $m $m
At 1 Jan
2018 1,446,857 (1,469) 102,032 (2,406) 15,083 (5,722) 1,042 (242) 1,565,014 (9,839)
Transfers of
financial
instruments (8,747) (685) 3,582 1,185 5,165 (500) - - - -
- transfers from
stage 1 to stage
2 (84,181) 319 84,181 (319) - - - - - -
- transfers from
stage 2 to stage
1
- transfers to
stage 3
- transfers from
stage 3 77,325 (999) (77,325) 999 - - - -
(2,250) 35 (4,439) 607 - 6,689 - (642) - - - -
359 (40) 1,165 (102) (1,524) 142 - - - -
Net remeasurement
of ECL
arising from
transfer of stage - 620 - (605) - (103) - - - (88)
Net new lending
and further
lending/repayments 126,868 (512) (16,162) 564 (2,902) 733 (587) 42 107,217 827
Changes in risk
parameters -
credit quality - 423 - (1,087) - (2,238) - (51) - (2,953)
Changes to models
used for ECL - - - - - - - - - -
calculation
Assets written
off - - - - (2,568) 2,552 (1) 1 (2,569) 2,553
Foreign exchange (52,983) 76 (2,863) 99 (636) 232 (26) 6 (56,508) 413
Other (156) 98 (348) (28) 90 (89) (94) 50 (508) 31
At 31 Dec 2018 1,511,839 (1,449) 86,241 (2,278) 14,232 (5,135) 334 (194) 1,612,646 (9,056)
ECL income
statement
change for the
period 531 (1,128) (1,608) (9) (2,214)
Recoveries 408
Others (87)
Total ECL income
statement change
for the period (1,893)
At 31 Dec 2018
12 months ended
31 Dec 2018
Gross carrying/
nominal Allowance ECL charge
amount for ECL
$m $m $m
As above 1,612,646 (9,056) (1,893)
Other financial assets measured at amortised
cost 582,917 (55) 21
Non-trading reverse purchase agreement commitments 65,381 - -
Summary of financial instruments to which the
impairment requirements in IFRS 9 are applied/Summary
consolidated income statement 2,260,944 (9,111) (1,872)
Debt instruments measured at FVOCI 343,110 (84) 105
Total allowance for ECL/total income statement
ECL charge for the period n/a (9,195) (1,767)
1 The 31 December 2018 comparative 'Reconciliation of changes in
gross carrying/nominal amount and allowances for loans and advances
to banks and customers' disclosure presents 'New financial assets
originated or purchased', 'Assets derecognised (including final
repayments)' and 'Changes to risk parameters - further
lending/repayments' under 'Net new lending and further
lending/repayments'. To provide greater granularity, these amounts
have been separately presented in the 30 September 2019 disclosure.
The 31 December 2018 total ECL income statement change of $1,893m
is attributable to $1,030m for the nine months ended 30 September
2018 and $863m for the three months ended 31 December 2018.
Personal lending
Total personal lending for loans and advances to customers by
stage distribution
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 297,169 6,457 2,996 306,622 (43) (67) (412) (522)
- of which: interest only
(including offset) 29,699 1,603 342 31,644 (6) (16) (83) (105)
- affordability (including
US adjustable rate mortgages) 14,357 763 521 15,641 (4) (3) (8) (15)
Other personal lending 98,363 8,550 1,759 108,672 (537) (1,209) (773) (2,519)
At 30 Sep 2019 395,532 15,007 4,755 415,294 (580) (1,276) (1,185) (3,041)
By geography
Europe 171,537 6,537 2,112 180,186 (108) (510) (483) (1,101)
- of which: UK 140,072 5,223 1,418 146,713 (100) (481) (275) (856)
Asia 171,814 5,263 752 177,829 (214) (325) (177) (716)
- of which: Hong Kong 117,267 2,589 243 120,099 (85) (205) (43) (333)
MENA 5,536 261 383 6,180 (58) (63) (252) (373)
North America 40,054 1,954 1,236 43,244 (54) (104) (138) (296)
Latin America 6,591 992 272 7,855 (146) (274) (135) (555)
At 30 Sep 2019 395,532 15,007 4,755 415,294 (580) (1,276) (1,185) (3,041)
By portfolio
First lien residential mortgages 284,103 6,286 2,944 293,333 (41) (62) (432) (535)
- of which: interest only
(including offset) 31,874 1,324 338 33,536 (3) (13) (92) (108)
- affordability (including
US adjustable rate mortgages) 16,110 1,065 507 17,682 (3) (4) (5) (12)
Other personal lending 90,578 8,789 1,637 101,004 (493) (1,203) (716) (2,412)
At 31 Dec 2018 374,681 15,075 4,581 394,337 (534) (1,265) (1,148) (2,947)
By geography
Europe 169,782 5,731 2,051 177,564 (105) (453) (450) (1,008)
- of which: UK 139,237 4,308 1,315 144,860 (93) (421) (219) (733)
Asia 155,661 5,413 693 161,767 (207) (353) (180) (740)
- of which: Hong Kong 104,909 2,715 169 107,793 (71) (220) (39) (330)
MENA 5,565 350 411 6,326 (61) (70) (263) (394)
North America 38,283 2,552 1,186 42,021 (29) (90) (142) (261)
Latin America 5,390 1,029 240 6,659 (132) (299) (113) (544)
At 31 Dec 2018 374,681 15,075 4,581 394,337 (534) (1,265) (1,148) (2,947)
Wholesale lending
Total wholesale lending for loans and advances to banks and
customers at amortised cost
Gross carrying Allowance for
Stage amount Stage POCI Total Stage ECL POCI Total
1 2 Stage 3 $m $m 1 Stage 2 Stage $m $m
$m $m $m 367 538,021 $m 3 (170) (5,400)
Corporate and 476,420 53,032 8,202 (677) $m $m
commercial (878) (3,675)
- 73,099 - (140)
69,112 3,662 325 (45)
Non-bank financial (21) (74)
institutions
Loans and advances
to banks 70,569 258 - - 70,827 (27) (1) - - (28)
At 30 Sep 2019 616,101 56,952 8,527 367 681,947 (749) (900) (3,749) (170) (5,568)
By geography
Europe 189,113 20,006 4,451 143 213,713 (351) (496) (1,461) (79) (2,387)
- of which: UK 131,801 16,329 3,151 41 151,322 (285) (433) (911) (29) (1,658)
Asia 320,343 25,287 1,437 160 347,227 (226) (209) (1,018) (40) (1,493)
- of which: Hong
Kong 194,794 16,694 670 57 212,215 (127) (123) (492) (33) (775)
MENA 26,094 2,565 1,885 53 30,597 (53) (70) (987) (47) (1,157)
North America 63,118 8,018 457 - 71,593 (41) (89) (114) - (244)
Latin America 17,433 1,076 297 11 18,817 (78) (36) (169) (4) (287)
At 30 Sep 2019 616,101 56,952 8,527 367 681,947 (749) (900) (3,749) (170) (5,568)
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 481,262 44,779 8,212 324 534,577 (698) (812) (3,848) (194) (5,552)
- agriculture, forestry
and fishing 5,361 1,102 236 2 6,701 (15) (34) (117) (1) (167)
- mining and quarrying 12,094 1,717 359 2 14,172 (29) (51) (94) (2) (176)
- manufacture 92,606 11,404 1,569 125 105,704 (132) (156) (791) (83) (1,162)
- electricity, gas,
steam and air-
conditioning
supply 14,522 1,422 40 60 16,044 (18) (60) (15) (54) (147)
- water supply,
sewerage, waste
management and remediation 3,335 164 24 - 3,523 (5) (2) (17) - (24)
- construction 12,919 1,116 1,168 51 15,254 (27) (41) (524) (44) (636)
- wholesale and
retail trade, repair
of motor vehicles
and motorcycles 83,751 12,225 1,652 37 97,665 (115) (128) (968) (7) (1,218)
- transportation
and storage 23,327 1,825 351 38 25,541 (37) (46) (82) (1) (166)
- accommodation
and food 19,385 1,889 270 3 21,547 (43) (41) (83) (1) (168)
- publishing, audiovisual
and broadcasting 19,758 1,224 189 1 21,172 (42) (16) (84) - (142)
- real estate 116,132 5,985 1,115 1 123,233 (97) (80) (594) - (771)
- professional,
scientific and technical
activities 21,282 941 350 - 22,573 (29) (29) (113) - (171)
- administrative
and support services 22,820 1,843 437 3 25,103 (41) (48) (166) (1) (256)
- public administration
and defence, compulsory
social security 1,425 30 8 - 1,463 (1) (3) (5) - (9)
- education 1,713 102 14 - 1,829 (11) (7) (6) - (24)
- health and care 3,710 457 141 - 4,308 (10) (16) (33) - (59)
- arts, entertainment
and recreation 4,326 676 39 - 5,041 (9) (9) (15) - (33)
- other services 13,259 411 242 1 13,913 (31) (31) (140) - (202)
- activities of
households 770 59 1 - 830 - - - - -
- extra-territorial
organisations and
bodies activities 49 3 7 - 59 - - (1) - (1)
- government 7,905 168 - - 8,073 (6) (1) - - (7)
- asset-backed securities 813 16 - - 829 - (13) - - (13)
Non-bank financial
institutions 59,245 1,932 230 - 61,407 (44) (31) (51) - (126)
Loans and advances
to banks 71,873 307 - - 72,180 (11) (2) - - (13)
At 31 Dec 2018 612,380 47,018 8,442 324 668,164 (753) (845) (3,899) (194) (5,691)
By geography
Europe 190,387 19,073 4,233 150 213,843 (366) (529) (1,598) (102) (2,595)
- of which: UK 133,004 15,370 2,928 8 151,310 (313) (471) (998) - (1,782)
Asia 314,591 17,729 1,736 92 334,148 (179) (121) (1,040) (36) (1,376)
- of which: Hong
Kong 194,186 8,425 729 69 203,409 (99) (54) (413) (35) (601)
MENA 25,684 2,974 1,769 53 30,480 (73) (77) (974) (46) (1,170)
North America 62,631 6,928 314 - 69,873 (37) (107) (101) - (245)
Latin America 19,087 314 390 29 19,820 (98) (11) (186) (10) (305)
At 31 Dec 2018 612,380 47,018 8,442 324 668,164 (753) (845) (3,899) (194) (5,691)
Capital adequacy
Key metrics (KM1/IFRS9-FL)
At
30 Sep 30 Jun 31 Mar 31 Dec 30 Sep
Ref* 2019 2019 2019 2018 2018
Footnotes
Available capital ($bn) 1
1 Common equity tier 1 ('CET1') capital 123.8 126.9 125.8 121.0 123.1
CET1 capital as if IFRS 9 transitional
2 arrangements had not been applied 122.9 126.0 124.9 120.0 122.1
3 Tier 1 capital 149.7 152.8 151.8 147.1 149.3
Tier 1 capital as if IFRS 9 transitional
4 arrangements had not been applied 148.8 151.9 150.9 146.1 148.3
5 Total capital 175.1 178.3 177.8 173.2 178.1
Total capital as if IFRS 9 transitional
6 arrangements had not been applied 174.2 177.4 176.9 172.2 177.1
Risk-weighted assets ('RWAs') ($bn)
7 Total RWAs 865.2 886.0 879.5 865.3 862.7
Total RWAs as if IFRS 9 transitional
8 arrangements had not been applied 864.7 885.5 878.9 864.7 862.1
Capital ratios (%) 1
9 CET1 14.3 14.3 14.3 14.0 14.3
10 CET1 as if IFRS 9 transitional arrangements 14.2 14.2 14.2 13.9 14.2
had not been applied
11 Tier 1 17.3 17.2 17.3 17.0 17.3
Tier 1 as if IFRS 9 transitional
12 arrangements had not been applied 17.2 17.2 17.2 16.9 17.2
13 Total capital 20.2 20.1 20.2 20.0 20.7
Total capital as if IFRS 9 transitional
14 arrangements had not been applied 20.1 20.0 20.1 19.9 20.6
Additional CET1 buffer requirements as a
percentage of RWAs (%)
Capital conservation buffer requirement 2.50 2.50 2.50 1.88 1.88
Countercyclical buffer requirement 0.69 0.68 0.67 0.56 0.45
Bank G-SIB and/or D-SIB additional requirements 2.00 2.00 2.00 1.50 1.50
Total bank CET1 specific buffer requirements 5.19 5.18 5.17 3.94 3.83
Total capital requirement (%) 2
Total capital requirement 11.0 11.0 11.0 10.9 11.5
CET1 available after meeting the bank's minimum
capital requirements 8.1 8.1 8.1 7.9 7.8
Leverage ratio 3
Total leverage ratio exposure measure
15 ($bn) 2,708.2 2,786.5 2,735.2 2,614.9 2,676.4
16 Leverage ratio (%) 5.4 5.4 5.4 5.5 5.4
Leverage ratio as if IFRS 9 transitional
arrangements had not been applied
17 (%) 5.4 5.3 5.4 5.5 5.4
Liquidity coverage ratio ('LCR') 4
Total high-quality liquid assets ($bn) 513.2 532.8 535.4 567.2 533.2
Total net cash outflow ($bn) 378.0 391.0 374.8 368.7 334.1
LCR ratio (%) 135.8 136.3 142.9 153.8 159.6
* The references in this table and other tables within this
section identify the lines prescribed in the relevant European
Banking Authority ('EBA') template where applicable and where there
is a value.
1 Capital figures and ratios at 30 September 2019 and 30 June
2019 are calculated in accordance with the revisions to the Capital
Requirements Regulation ('CRR II') on a transitional basis. Prior
period capital figures and ratios are reported under the Capital
Requirements Regulation and Directive ('CRD IV') on a transitional
basis.
2 Total capital requirement is defined as the sum of Pillar 1
and Pillar 2A capital requirements set by the UK's Prudential
Regulation Authority ('PRA'). The minimum requirements represent
the total capital requirement to be met by CET1.
3 Leverage ratios at 30 September 2019 and 30 June 2019 are
calculated using the CRR II end point basis for additional tier 1
capital. Prior period leverage ratios are calculated using the CRD
IV end point basis for capital.
4 The EU's regulatory transitional arrangements for IFRS 9 in
article 473a of the Capital Requirements Regulation do not apply to
liquidity coverage measures. LCR is calculated as at the end of
each period rather than using average values. For further details,
refer to page 68 of the Interim Report 2019.
We have adopted the regulatory transitional arrangements for
IFRS 9 'Financial Instruments', including paragraph four within
article 473a of the Capital Requirements Regulation, published by
the European Union ('EU') on 27 December 2017. These transitional
arrangements permit banks to add back to their capital base a
proportion of the impact that IFRS 9 has upon their loan loss
allowances during the first five years of use. The proportion that
banks may add back starts at 95% in 2018, and reduces to 25% by
2022. The impact of IFRS 9 on loan loss allowances is defined
as:
-- the increase in loan loss allowances on day one of IFRS 9 adoption; and
-- any subsequent increase in expected credit losses ('ECL') in
the non-credit-impaired book thereafter.
The impact is calculated separately for portfolios using the
standardised ('STD') and internal ratings based ('IRB') approaches.
For IRB portfolios, there is no add-back to capital unless loan
loss allowances exceed regulatory 12-month expected losses. Any
add-back must be tax affected and accompanied by a recalculation of
capital deduction thresholds, exposure and RWAs.
In the current period, the add-back to the capital base amounted
to $1.0bn under the STD approach with a tax impact of $0.2bn and a
capital deduction threshold impact of $0.1bn. This resulted in a
net add-back of $0.9bn.
Capital
Own funds disclosure
At
30 Sep 30 Jun
2019 2019
Ref $m $m
6 Common equity tier 1 capital before regulatory adjustments 159,771 161,348
28 Total regulatory adjustments to common equity tier (35,980) (34,399)
1
29 Common equity tier 1 capital 123,791 126,949
36 Additional tier 1 capital before regulatory adjustments 25,946 25,938
43 Total regulatory adjustments to additional tier 1 (60) (60)
capital
44 Additional tier 1 capital 25,886 25,878
45 Tier 1 capital 149,677 152,827
51 Tier 2 capital before regulatory adjustments 26,725 26,625
57 Total regulatory adjustments to tier 2 capital (1,279) (1,193)
58 Tier 2 capital 25,446 25,432
59 Total capital 175,123 178,259
At 30 September 2019, our common equity tier 1 ('CET1') capital
ratio remained unchanged from 30 June 2019 at 14.3%. Our CET1
capital decreased by $3.2bn during the quarter, mainly as a result
of:
-- foreign currency translation differences of $2.6bn;
-- a provision of $1.0bn for share buy-backs; and
-- other movements totalling $1.1bn, including a $0.5bn increase
in the deduction for significant investments. These decreases were
partly offset by capital generation of $1.6bn through profits, net
of cash and scrip dividends.
Leverage
Leverage ratio
At
30 Sep 30 Jun
2019 2019
Ref $bn $bn
Footnotes
20 Tier 1 capital 146.2 149.3
21 Total leverage ratio exposure 2,708.2 2,786.5
% %
22 Leverage ratio 5.4 5.4
EU-23 Choice of transitional arrangements for the definition Fully phased-in Fully phased-in
of the capital measure
UK leverage ratio exposure - quarterly
average 1 2,570.7 2,550.1
% %
UK leverage ratio - quarterly average 1 5.7 5.8
UK leverage ratio - quarter end 1 5.8 5.8
1 UK leverage ratio denotes the Group's leverage ratio
calculated under the PRA's UK leverage framework and excludes
qualifying central bank balances from the calculation of
exposure.
Our leverage ratio calculated in accordance with the Capital
Requirements Regulation was 5.4% at 30 September 2019, unchanged
from 30 June 2019. The decrease in total leverage ratio exposure
was primarily due to the impact of foreign currency translation
differences on balance sheet exposure and a fall in securities
financing transactions.
At 30 September 2019, 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 0.2%. These
additional buffers translated into capital values of $17.6bn and
$6.0bn respectively. We exceeded these leverage requirements.
Risk-weighted assets
Overview of RWAs (OV1)
30 Sep 30 Jun 30 Sep
2019 2019 2019
Capital
requirement(1)
RWAs RWAs $bn
Ref Footnotes $bn $bn
1 Credit risk (excluding counterparty credit risk) 636.6 657.3 50.9
2 - standardised approach 129.3 134.8 10.3
31.0 31.1 2.5
476.3 491.4 38.1
3 - foundation internal ratings based ('IRB')
approach
4 - advanced IRB approach
6 Counterparty credit risk 49.6 50.5 3.9
7 - mark-to-market 23.4 26.8 1.9
20.4 17.4 1.6
0.5 0.5 -
5.3 5.8 0.4
10 - internal model method ('IMM')
11 - risk exposure amount for contributions
to the default fund of a central counterparty
12 - credit valuation adjustment
13 Settlement risk 0.2 0.1 -
14 Securitisation exposures in the non-trading 6.9 7.4 0.6
book
15 - IRB method 2.2 2.5 0.2
1.0 1.2 0.1
1.3 2.0 0.1
2.4 1.7 0.2
17 - IRB internal assessment approach
18 - standardised approach
14a - exposures subject to the new securitisation 2
framework
19 Market risk 36.9 34.8 2.9
20 - standardised approach 8.1 4.3 0.6
28.8 30.5 2.3
21 - internal models approach ('IMA')
23 Operational risk 91.1 91.1 7.3
25 - standardised approach 91.1 91.1 7.3
27 Amounts below the thresholds for deduction 43.9 44.8 3.5
(subject to 250% risk weight)
29 Total 865.2 886.0 69.1
1 'Capital requirement' in this and subsequent tables represents
the minimum capital charge set at 8% of RWAs by article 92 of the
Capital Requirements Regulation.
2 On 1 January 2019, a new securitisation framework came into
force in the EU for new transactions. Existing positions are
subject to 'grandfathering' provisions and will transfer to the new
framework on 1 January 2020. Our exposures subject to the
approaches under the new framework at 30 September 2019 include
$551m under the external ratings-based approach, $1,065m under the
internal assessment approach, and $745m under the standardised
approach.
RWAs by global business
Corporate
RBWM CMB GB&M GPB Centre Total
$bn $bn $bn $bn $bn $bn
Credit risk 100.1 292.9 166.8 13.2 114.4 687.4
Counterparty credit risk - - 48.3 0.2 1.3 49.8
Market risk - - 30.8 - 6.1 36.9
Operational risk 27.8 24.4 30.9 2.8 5.2 91.1
At 30 Sep 2019 127.9 317.3 276.8 16.2 127.0 865.2
RWAs by geographical region
North Latin America
Europe Asia MENA America $bn Total
$bn $bn $bn $bn $bn
Footnotes
Credit risk 210.3 293.2 47.8 105.0 31.1 687.4
Counterparty credit risk 28.2 10.4 1.4 8.2 1.6 49.8
Market risk 1 29.1 21.6 1.6 6.2 2.1 36.9
Operational risk 27.4 39.5 6.7 11.7 5.8 91.1
At 30 Sep 2019 295.0 364.7 57.5 131.1 40.6 865.2
1 RWAs are non-additive across geographical regions due to
market risk diversification effects within the Group.
RWA movement by global business by key driver
Credit risk, counterparty credit
risk and operational risk
Corporate Market Total
RBWM CMB GB&M GPB Centre risk RWAs
$bn $bn $bn $bn $bn $bn $bn
RWAs at 1 Jul 2019 129.0 327.6 252.2 16.5 125.9 34.8 886.0
Asset size 2.3 2.4 (0.2) (0.2) (3.7) 2.4 3.0
Asset quality 0.2 1.5 2.7 (0.1) 0.4 0.2 4.9
Model updates (0.5) (0.2) (0.8) - - - (1.5)
Methodology and policy (1.2) (7.7) (4.6) 0.1 (0.5) (0.5) (14.4)
Foreign exchange movements (1.9) (6.3) (3.3) (0.1) (1.2) - (12.8)
Total RWA movement (1.1) (10.3) (6.2) (0.3) (5.0) 2.1 (20.8)
RWAs at 30 Sep 2019 127.9 317.3 246.0 16.2 120.9 36.9 865.2
RWA movement by geographical region by key driver
Credit risk, counterparty credit
risk and operational risk
North Latin Market Total
Europe Asia MENA America America risk RWAs
$bn $bn $bn $bn $bn $bn $bn
RWAs at 1 Jul 2019 280.8 351.0 55.9 124.9 38.6 34.8 886.0
Asset size 0.6 0.6 0.1 (0.5) (0.2) 2.4 3.0
Asset quality 0.7 0.5 (0.1) 1.3 2.3 0.2 4.9
Model updates (1.0) (0.5) - - - - (1.5)
Methodology and policy (8.1) (5.1) (0.2) (0.5) - (0.5) (14.4)
Foreign exchange movements (7.1) (3.4) 0.2 (0.3) (2.2) - (12.8)
Total RWA movement (14.9) (7.9) - - (0.1) 2.1 (20.8)
RWAs at 30 Sep 2019 265.9 343.1 55.9 124.9 38.5 36.9 865.2
RWAs
Risk-weighted assets ('RWAs') fell by $20.8bn during 3Q19,
including a reduction of $12.8bn due to foreign currency
translation differences. The $8.0bn decrease (excluding foreign
currency translation differences) comprised reductions of $14.4bn
due to methodology and policy changes and $1.5bn due to model
updates, partly offset by growth of $4.9bn from changes in asset
quality and of $3.0bn from asset size.
Asset size
The $3.0bn increase due to asset size movements was driven by
lending growth of $2.4bn in CMB and $2.3bn in RBWM, primarily in
North America, Asia and Europe, and a $2.4bn increase in market
risk levels. This growth was partly offset by a $3.7bn fall in RWAs
within Corporate Centre, mainly in Asia.
Asset quality
The $4.9bn increase as a result of changes in asset quality
mainly comprised a $2.4bn increase due to the impact of the credit
downgrade of Argentina, and a $2.4bn rise in Europe and North
America due to changes in the portfolio mix of GB&M assets.
Model updates
The $1.5bn reduction in RWAs from model updates included the
effect of extending counterparty credit risk models to GB&M
exposures in France, and updates to UK retail models and to
corporate models in Asia.
Methodology and policy
The $14.4bn fall in RWAs due to methodology and policy changes
was mainly due to risk parameter refinements and improved
collateral recognition, which reduced RWAs by $7.0bn, and a change
to our best estimate of expected loss on corporate exposures, which
reduced RWAs by $6.3bn, primarily in CMB's UK portfolio.
RWA flow statements of credit risk exposures under IRB
approach(1) (CR8)
Capital
RWAs requirement
Ref $bn $bn
1 RWAs at 1 Jul 2019 522.5 41.8
2 Asset size 0.8 0.1
3 Asset quality 4.4 0.4
4 Model updates (0.5) -
5 Methodology and policy (9.9) (0.9)
7 Foreign exchange movements (10.0) (0.8)
9 RWAs at 30 Sep 2019 507.3 40.6
1 Securitisation positions are not included in this table.
RWAs under the IRB approach fell by $15.2bn during 3Q19,
including a decrease of $10.0bn due to foreign currency translation
differences. The $5.2bn reduction (excluding foreign currency
translation differences) was primarily due to methodology and
policy-driven decreases of $9.9bn, partly offset by asset quality
growth of $4.4bn.
Asset quality
The $4.4bn growth in RWAs from asset quality included a $1.6bn
increase due to the impact of the credit downgrade of Argentina and
a
$2.4bn rise due to changes in the portfolio mix of GB&M
assets.
Methodology and policy
The $9.9bn decrease from methodology and policy changes
primarily comprised a reduction in RWAs of $6.3bn from a change to
our best estimate of expected loss on corporate exposures and
reductions due to risk parameter refinements.
RWA flow statements of counterparty credit risk exposures under
the IMM (CCR7)
Capital
RWAs requirement
Ref $bn $bn
1 RWAs at 1 Jul 2019 21.5 1.7
2 Asset size 0.7 0.1
4 Model updates 2.8 0.2
9 RWAs at 30 Sep 2019 25.0 2.0
RWAs under the IMM grew by $3.5bn in 3Q19 due to the extension
of counterparty credit models to France of $2.8bn, and asset size
increases of $0.7bn.
RWA flow statements of market risk exposures under the IMA
(MR2-B)
Stressed Capital
VaR VaR IRC Other Total requirement
Ref $bn $bn $bn $bn RWAs $bn
$bn
1 RWAs at 1 Jul 2019 6.5 9.4 11.1 3.5 30.5 2.4
2 Movement in risk levels (0.4) (0.6) (0.5) 0.3 (1.2) (0.1)
4 Methodology and policy (0.1) (0.2) - (0.2) (0.5) -
8 RWAs at 30 Sep 2019 6.0 8.6 10.6 3.6 28.8 2.3
RWAs under the IMA decreased by $1.7bn, comprising reductions in
risk levels of $1.2bn, and decreases due to methodology and policy
changes of $0.5bn. The reduction in risk levels was largely caused
by a $1.2bn decrease in modelled RWAs as a result of decreased debt
securities exposures in Europe and North America.
Minimum requirement for own funds and eligible liabilities
From 1 January 2019, a requirement was introduced for total
loss-absorbing capacity ('TLAC'), as defined in the final standards
adopted by the Financial Stability Board. In the EU, TLAC
requirements were implemented via CRR II, which came into force in
June 2019 and included a new framework on minimum requirement for
own funds and eligible liabilities ('MREL').
MREL includes own funds and liabilities that can be written down
or converted into capital resources in order to absorb losses or
recapitalise a bank in the event of its failure. The new framework
is complemented by disclosure requirements. As the specific EU
format is yet to be agreed, the disclosures are based on the
formats provided in the Basel Committee Standards for Pillar 3
disclosures.
In line with our existing structure and business model, we have
three resolution groups - namely the European resolution group, the
Asian resolution group and the US resolution group. Smaller
entities outside these resolution groups can be separately
resolved.
The following table summarises key metrics for each of the
Group's three resolution groups.
Key metrics of the resolution groups (KM2)
Resolution groups
European(1) Asian(2) US(3)
At 30 At 30 At 30 At 30 At 30 At 30
Sep Jun Sep Jun Sep Jun
2019 2019 2019 2019 2019 2019
Total loss absorbing capacity ('TLAC')
1 available ($m) 95,474 97,256 97,244 97,040 30,184 31,739
Fully loaded ECL accounting model
1a TLAC available ($m) 95,282 97,055 97,244 97,040 N/A N/A
Total RWAs at the level of the resolution
2 group ($m) 316,766 321,149 370,590 371,100 139,016 140,762
TLAC as a percentage of RWA (row1/row2)
3 (%) 30.1 30.3 26.2 26.1 21.7 22.5
Fully loaded ECL accounting model
TLAC as a percentage of fully loaded
3a ECL accounting model RWA (%) 30.1 30.2 26.2 26.1 N/A N/A
Leverage exposure measure at the
4 level of the resolution group ($m) 1,132,679 1,176,134 1,024,554 1,041,168 372,556 362,621
TLAC as a percentage of leverage
5 exposure measure (row1/row4) (%) 8.4 8.3 9.5 9.3 8.1 8.8
Fully loaded ECL accounting model
TLAC as a percentage of fully loaded
ECL accounting model leverage exposure
5a measure (%) 8.4 8.3 9.5 9.3 N/A N/A
6a Does the subordination exemption
in the antepenultimate paragraph No No No No No No
of section 11 of the FSB TLAC term
sheet apply?
6b Does the subordination exemption
in the penultimate paragraph of No No No No No No
section 11 of the FSB TLAC term
sheet apply?
6c If the capped subordination exemption
applies, the amount of funding issued
that ranks pari passu with excluded
liabilities and that is recognised N/A N/A N/A N/A N/A N/A
as external TLAC, divided by funding
issued that ranks pari passu with
excluded liabilities and that would
be recognised as external TLAC if
no cap was applied (%)
1 The European resolution group reports in accordance with the
applicable provisions of the Capital Requirements Regulation as
amended by CRR II. Unless otherwise stated, all figures are
calculated using the EU's regulatory transitional arrangements for
IFRS 9 in article 473a of the Capital Requirements Regulation.
2 Reporting for the Asian resolution group follows the Hong Kong
Monetary Authority regulatory rules. IFRS 9 has been implemented
but no regulatory transitional arrangements apply.
3 Reporting for the US resolution group is prepared in
accordance with local regulatory rules. The US accounting standard
for current expected credit losses corresponding to IFRS 9 is not
yet effective. Leverage exposure and ratio are calculated under the
US supplementary leverage ratio rules.
Disclosure of the main features of capital and other loss
absorbing instruments for the resolution groups is published on our
website,
www.hsbc.com/investors/fixed-income-investors/regulatory-capital-securities.
For further details on the Group's MREL and resolution groups,
refer to page 40 of the Group's Pillar 3 Disclosures at 30 June
2019 document.
Summary information - global businesses
HSBC adjusted profit before tax
Nine months ended 30 Sep 2019
Retail Global
Banking Banking Global
and Wealth Commercial and Markets Private Corporate
Management Banking $m Banking Centre Total
Footnotes $m $m $m $m $m
Net operating income before change
in expected credit losses
and other credit impairment charges
1 17,547 11,607 11,176 1,396 36 41,762
of which: net interest income/(expense) 12,339 8,461 4,224 662 (2,760) 22,926
Change in expected credit losses and
other credit impairment (charges)/
recoveries (989) (907) (121) (25) 19 (2,023)
Net operating income 16,558 10,700 11,055 1,371 55 39,739
Total operating expenses (10,472) (5,043) (6,990) (1,052) (154) (23,711)
Operating profit/(loss) 6,086 5,657 4,065 319 (99) 16,028
Share of profit in associates and
joint ventures 51 - - - 1,785 1,836
Adjusted profit before tax 6,137 5,657 4,065 319 1,686 17,864
% % % % % %
Share of HSBC's adjusted profit before
tax 34.3 31.7 22.8 1.8 9.4 100.0
Adjusted cost efficiency ratio 59.7 43.4 62.5 75.4 427.8 56.8
Nine months ended 30 Sep 2018
Net operating income/(expense)
before change in expected credit
losses and other credit impairment
charges 1 16,293 10,792 11,986 1,334 (537) 39,868
of which: net interest income/(expense) 11,397 7,623 3,700 654 (1,407) 21,967
Change in expected credit losses
and other credit impairment (charges)/
recoveries (797) (274) 96 16 113 (846)
Net operating income 15,496 10,518 12,082 1,350 (424) 39,022
Total operating expenses (9,856) (4,707) (6,886) (1,070) (584) (23,103)
Operating profit 5,640 5,811 5,196 280 (1,008) 15,919
Share of profit in associates
and joint ventures 21 - - - 1,874 1,895
Adjusted profit before tax 5,661 5,811 5,196 280 866 17,814
% % % % % %
Share of HSBC's adjusted profit
before tax 31.8 32.6 29.2 1.6 4.9 100.0
Adjusted cost efficiency ratio 60.5 43.6 57.5 80.2 (108.8) 57.9
For footnotes, see page 32.
HSBC adjusted profit before tax (continued)
Quarter ended 30 Sep 2019
Retail Global
Banking Banking Global
and Wealth Commercial and Markets Private Corporate
Management Banking $m Banking Centre Total
Footnotes $m $m $m $m $m
Net operating income/(expense)
before change in expected
credit losses and other credit
impairment charges 1 5,628 3,791 3,470 472 (94) 13,267
of which: net interest income/(expense) 4,184 2,808 1,363 221 (890) 7,686
Change in expected credit losses
and other credit impairment
(charges)/recoveries (449) (413) (26) (6) 11 (883)
Net operating income/(expense) 5,179 3,378 3,444 466 (83) 12,384
Total operating expenses (3,491) (1,746) (2,203) (343) 235 (7,548)
Operating profit 1,688 1,632 1,241 123 152 4,836
Share of profit in associates
and joint ventures 8 - - - 504 512
Adjusted profit before tax 1,696 1,632 1,241 123 656 5,348
% % % % % %
Share of HSBC's adjusted profit
before tax 31.7 30.5 23.2 2.3 12.3 100.0
Adjusted cost efficiency ratio 62.0 46.1 63.5 72.7 250.0 56.9
Quarter ended 30 Jun 2019
Net operating income before
change in expected credit losses
and other credit impairment
charges 1 5,869 3,839 3,592 471 110 13,881
of which: net interest income/(expense) 4,133 2,814 1,424 224 (925) 7,670
Change in expected credit losses
and other credit impairment
(charges)/recoveries (231) (244) (56) (16) 2 (545)
Net operating income 5,638 3,595 3,536 455 112 13,336
Total operating expenses (3,475) (1,616) (2,353) (357) (150) (7,951)
Operating profit/(loss) 2,163 1,979 1,183 98 (38) 5,385
Share of profit in associates
and joint ventures 32 - - - 684 716
Adjusted profit before tax 2,195 1,979 1,183 98 646 6,101
% % % % % %
Share of HSBC's adjusted profit
before tax 36.0 32.4 19.4 1.6 10.6 100.0
Adjusted cost efficiency ratio 59.2 42.1 65.5 75.8 136.4 57.3
Quarter ended 30 Sep 2018
Net operating income/(expense)
before change in expected credit
losses and other credit impairment
charges 1 5,624 3,653 4,070 427 (288) 13,486
of which: net interest income/(expense) 4,008 2,637 1,315 218 (686) 7,492
Change in expected credit losses
and other credit impairment
(charges)/recoveries (283) (237) (8) 11 28 (489)
Net operating income/(expense) 5,341 3,416 4,062 438 (260) 12,997
Total operating expenses (3,273) (1,579) (2,297) (345) 7 (7,487)
Operating profit/(loss) 2,068 1,837 1,765 93 (253) 5,510
Share of profit in associates
and joint ventures 4 - - - 578 582
Adjusted profit before tax 2,072 1,837 1,765 93 325 6,092
% % % % % %
Share of HSBC's adjusted profit
before tax 34.0 30.2 29.0 1.5 5.3 100.0
Adjusted cost efficiency ratio 58.2 43.2 56.4 80.8 2.4 55.5
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
'revenue'.
Global Private Banking - reported client assets(1)
Quarter ended
30 Sep 30 Jun 30 Sep
2019 2019 2018
$bn $bn $bn
Opening balance 341 335 330
Net new money 5 4 2
Value change (2) 1 (3)
Disposals - - -
Exchange and other (6) 1 (3)
Closing balance 338 341 326
Global Private Banking - reported client assets by
geography(1)
Quarter ended
30 Sep 30 Jun 30 Sep
2019 2019 2018
$bn $bn $bn
Footnotes
Europe 155 160 158
Asia 143 143 129
North America 40 38 39
Latin America - - -
Middle East 2- - -
Closing balance 338 341 326
1 Client assets are translated at the rates of exchange
applicable for their respective period-ends, with the effects of
currency translation reported separately. The main components of
client assets are funds under management, which are not reported on
the Group's balance sheet, and customer deposits, which are
reported on the Group's balance sheet.
2 'Middle East' is an offshore business, therefore client assets
are booked across to various regions, primarily in Europe.
Summary information - geographical regions
HSBC reported profit/(loss) before tax
Nine months ended 30 Sep 2019
North Latin Intra-HSBC
Europe Asia MENA America America items Total
$m $m $m $m $m $m $m
Net interest income 4,251 12,394 1,349 2,461 1,546 807 22,808
Net fee income 2,744 4,105 491 1,347 398 - 9,085
Net income from financial
instruments held for
trading or managed on
a fair value basis 2,995 3,660 252 652 597 (279) 7,877
Net income from assets
and liabilities of insurance
businesses, including
related derivatives,
measured at fair value
through profit or loss 1,262 1,082 - - (26) - 2,318
Changes in fair value
of other financial instruments
mandatorily measured
at fair value through
profit or loss 1,051 15 - 24 55 (528) 617
Other income/(expense)(1) 1,178 1,918 854 500 9 (4,437) 22
Net operating income
before change in expected
credit losses and other
credit impairment charges(2) 13,481 23,174 2,946 4,984 2,579 (4,437) 42,727
Change in expected credit
losses and other credit
impairment charges (810) (542) (65) (140) (466) - (2,023)
Net operating income 12,671 22,632 2,881 4,844 2,113 (4,437) 40,704
Total operating expenses (13,633) (9,795) (1,052) (3,799) (1,454) 4,437 (25,296)
Operating profit/(loss) (962) 12,837 1,829 1,045 659 - 15,408
Share of profit in associates
and joint ventures 18 1,594 212 - 12 - 1,836
Profit/(loss) before
tax (944) 14,431 2,041 1,045 671 - 17,244
% % % % % %
Share of HSBC's profit
before tax (5.5) 83.7 11.8 6.1 3.9 100.0
Cost efficiency ratio 101.1 42.3 35.7 76.2 56.4 59.2
Nine months ended 30 Sep 2018
Net interest income 5,212 11,976 1,332 2,632 1,450 178 22,780
Net fee income 3,086 4,477 463 1,397 370 - 9,793
Net income from financial
instruments held for
trading or managed on a
fair value basis 3,048 3,070 197 651 523 (4) 7,485
Net income from assets
and liabilities of insurance
businesses, including related
derivatives, measured
at fair value through profit
or loss (36) (14) - - 6 - (44)
Changes in fair value of
other financial instruments
mandatorily measured at
fair value through profit
or
loss 696 (26) 2 30 17 (178) 541
Other income/(expense)(1) 1,702 2,418 25 442 (247) (3,810) 530
Net operating income before
change in expected credit
losses and other credit
impairment charges(2) 13,708 21,901 2,019 5,152 2,119 (3,814) 41,085
Change in expected credit
losses and other credit
impairment (charges)/recoveries (187) (405) (203) 264 (383) - (914)
Net operating income 13,521 21,496 1,816 5,416 1,736 (3,814) 40,171
Total operating expenses (12,798) (9,263) (1,009) (4,907) (1,352) 3,814 (25,515)
Operating profit 723 12,233 807 509 384 - 14,656
Share of profit in associates
and joint ventures 21 1,606 351 - - - 1,978
Profit before tax 744 13,839 1,158 509 384 - 16,634
% % % % % %
Share of HSBC's profit
before tax 4.5 83.2 6.9 3.1 2.3 100.0
Cost efficiency ratio 93.4 42.3 50.0 95.2 63.8 62.1
For footnotes, see page
36.
HSBC reported profit/(loss) before tax (continued)
Quarter ended 30 Sep 2019
North Latin Intra-HSBC
Europe Asia MENA America America items Total
$m $m $m $m $m $m $m
Net interest income 942 4,212 452 776 470 716 7,568
Net fee income 875 1,340 165 444 137 - 2,961
Net income from financial
instruments held for
trading or managed on
a fair value basis 1,158 1,308 77 240 194 (431) 2,546
Net income from assets
and liabilities of insurance
businesses, including
related derivatives,
measured at fair value
through profit or loss 206 (35) - - (49) - 122
Changes in fair value
of other financial instruments
mandatorily measured
at fair value through
profit or loss 455 1 (1) 9 (20) (284) 160
Other income/(expense)(1) 593 889 10 150 (53) (1,591) (2)
Net operating income
before change in expected
credit losses and other
credit impairment charges(2) 4,229 7,715 703 1,619 679 (1,590) 13,355
Change in expected credit
losses and other credit
impairment charges (274) (282) (16) (80) (231) - (883)
Net operating income 3,955 7,433 687 1,539 448 (1,590) 12,472
Total operating expenses (4,389) (3,305) (358) (1,240) (445) 1,590 (8,147)
Operating profit/(loss) (434) 4,128 329 299 3 - 4,325
Share of profit in associates
and joint ventures 10 523 (24) - 3 - 512
Profit/(loss) before
tax (424) 4,651 305 299 6 - 4,837
% % % % % %
Share of HSBC's profit
before tax (8.8) 96.2 6.3 6.2 0.1 100.0
Cost efficiency ratio 103.8 42.8 50.9 76.6 65.5 61.0
Quarter ended 30 June 2019
Net interest income 1,785 4,186 460 832 568 (59) 7,772
Net fee income 958 1,356 167 479 138 - 3,098
Net income from financial
instruments held for
trading or managed on a
fair value basis 630 1,143 71 194 188 224 2,450
Net income from assets
and liabilities of insurance
businesses, including related
derivatives, measured
at fair value through profit
or loss 309 169 - - 8 - 486
Changes in fair value of
other financial instruments
mandatorily measured at
fair value through profit
or
loss 305 6 2 13 28 (167) 187
Other income/(expense)(1) 660 780 841 171 (1) (1,500) 951
Net operating income before
change in expected credit
losses and other credit
impairment charges(2) 4,647 7,640 1,541 1,689 929 (1,502) 14,944
Change in expected credit
losses and other credit
impairment charges (233) (102) (43) (57) (120) - (555)
Net operating income 4,414 7,538 1,498 1,632 809 (1,502) 14,389
Total operating expenses (4,926) (3,359) (349) (1,265) (530) 1,502 (8,927)
Operating profit/(loss) (512) 4,179 1,149 367 279 - 5,462
Share of profit in associates
and joint ventures 6 595 122 - 9 - 732
Profit/(loss) before tax (506) 4,774 1,271 367 288 - 6,194
% % % % % %
Share of HSBC's profit
before tax (8.2) 77.2 20.5 5.9 4.6 100.0
Cost efficiency ratio 106.0 44.0 22.6 74.9 57.1 59.7
For footnotes, see page
36.
HSBC reported profit/(loss) before tax (continued)
Quarter ended 30 Sep 2018
North Latin Intra-HSBC
Europe Asia MENA America America items Total
$m $m $m $m $m $m $m
Net interest income 1,685 4,155 468 885 411 76 7,680
Net fee income 976 1,338 143 467 102 - 3,026
Net income from financial
instruments held for trading
or
managed on a fair value basis 1,122 1,089 50 195 139 7 2,602
Net income from assets and
liabilities of insurance businesses,
including related derivatives,
measured at fair value through
profit or loss 105 65 - - 8 - 178
Changes in fair value of other
financial instruments
mandatorily measured at fair
value through profit or loss 272 (10) 3 11 7 (87) 196
Other income/(expense)(1) 677 752 (1) 182 (144) (1,350) 116
Net operating income before
change in expected credit
losses and other credit impairment
charges(2) 4,837 7,389 663 1,740 523 (1,354) 13,798
Change in expected credit
losses and other credit impairment
(charges)/recoveries - (289) (100) 30 (148) - (507)
Net operating income 4,837 7,100 563 1,770 375 (1,354) 13,291
Total operating expenses (4,206) (3,153) (323) (1,303) (335) 1,354 (7,966)
Operating profit 631 3,947 240 467 40 - 5,325
Share of profit in associates
and joint ventures 3 512 82 - - - 597
Profit before tax 634 4,459 322 467 40 - 5,922
% % % % % %
Share of HSBC's profit before
tax 10.7 75.3 5.4 7.9 0.7 100.0
Cost efficiency ratio 87.0 42.7 48.7 74.9 64.1 57.7
1 Other income in this context comprises where applicable
changes in fair value of long-term debt and related derivatives,
gains less losses from financial investments, dividend income, net
insurance premium income and other operating income less net
insurance claims and benefits paid and movement in liabilities to
policyholders.
2 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
'revenue'.
Appendix - selected information
Analysis of significant items by global business, geographical
regions and countries/territories is presented below.
Reconciliation of reported results to adjusted results - global
businesses
Nine months ended 30
Sep 2019
Retail
Banking Global
and Wealth Commercial Banking Global Corporate
Private
Management Banking and Markets Centre Total
Banking
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 17,434 11,598 11,143 1,396 1,156 42,727
Significant items 113 9 33 - (1,120) (965)
Adjusted 17,547 11,607 11,176 1,396 36 41,762
ECL
Reported (989) (907) (121) (25) 19 (2,023)
Adjusted (989) (907) (121) (25) 19 (2,023)
Operating expenses
Reported (11,605) (5,089) (7,156) (1,006) (440) (25,296)
Significant items 1,133 46 166 (46) 286 1,585
Adjusted (10,472) (5,043) (6,990) (1,052) (154) (23,711)
Share of profit in associates
and joint ventures
Reported 51 - - - 1,785 1,836
Adjusted 51 - - - 1,785 1,836
Profit before tax
Reported 4,891 5,602 3,866 365 2,520 17,244
Significant items 1,246 55 199 (46) (834) 620
Adjusted 6,137 5,657 4,065 319 1,686 17,864
Loans and advances to customers
(net)
Reported 376,312 341,339 252,462 46,132 1,588 1,017,833
Adjusted 376,312 341,339 252,462 46,132 1,588 1,017,833
Customer accounts
Reported 655,592 353,037 295,900 61,464 7,748 1,373,741
Adjusted 655,592 353,037 295,900 61,464 7,748 1,373,741
For footnotes, see page 41.
Reconciliation of reported results to adjusted results - global
businesses (continued)
Nine months ended 30 Sep 2018
Retail
Banking Commercial Global Global Corporate
and Wealth Banking Banking Private Centre Total
Management and Markets Banking
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 16,818 11,235 12,522 1,361 (851) 41,085
Currency translation (532) (399) (466) (27) (90) (1,514)
Significant items 7 (44) (70) - 404 297
Adjusted 16,293 10,792 11,986 1,334 (537) 39,868
ECL
Reported (838) (295) 90 16 113 (914)
Currency translation 41 21 6 - - 68
Adjusted (797) (274) 96 16 113 (846)
Operating expenses
Reported (10,457) (4,906) (7,077) (1,195) (1,880) (25,515)
Currency translation 435 188 272 27 108 1,030
Significant items 166 11 (81) 98 1,188 1,382
- costs of structural
reform 3 3 5 27 - 265 300
- customer redress programmes 156 6 - - - 162
- disposals, acquisitions and
investment in new businesses - - - 54 - 54
- restructuring and other related
costs - - - 7 44 51
- settlements and provisions
in connection with legal and
regulatory matters 16 - (110) 42 892 840
- currency translation on significant
items (9) - 2 (5) (13) (25)
Adjusted (9,856) (4,707) (6,886) (1,070) (584) (23,103)
Share of profit in associates
and joint ventures
Reported 21 - - - 1,957 1,978
Currency translation - - - - (83) (83)
Adjusted 21 - - - 1,874 1,895
Profit/(loss) before tax
Reported 5,544 6,034 5,535 182 (661) 16,634
Currency translation (56) (190) (188) - (65) (499)
Significant items 173 (33) (151) 98 1,592 1,679
Adjusted 5,661 5,811 5,196 280 866 17,814
Loans and advances to
customers (net)
Reported 356,453 332,649 250,674 39,210 2,474 981,460
Currency translation (11,327) (8,369) (6,005) (807) (122) (26,630)
Adjusted 345,126 324,280 244,669 38,403 2,352 954,830
Customer accounts
Reported 636,603 352,477 285,525 63,717 7,053 1,345,375
Currency translation (13,959) (8,826) (8,583) (1,652) (280) (33,300)
Adjusted 622,644 343,651 276,942 62,065 6,773 1,312,075
For footnotes, see page
41.
Quarter ended
30 Sep 2019
Retail
Banking Global
and Wealth Commercial Banking Global Corporate
Private
Management Banking and Markets Banking Centre Total
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 5,515 3,782 3,507 472 79 13,355
Significant items 113 9 (37) - (173) (88)
Adjusted 5,628 3,791 3,470 472 (94) 13,267
ECL
Reported (449) (413) (26) (6) 11 (883)
Adjusted (449) (413) (26) (6) 11 (883)
Operating expenses
Reported (3,966) (1,765) (2,249) (284) 117 (8,147)
Significant items 475 19 46 (59) 118 599
Adjusted (3,491) (1,746) (2,203) (343) 235 (7,548)
Share of profit in associates
and joint ventures
Reported 8 - - - 504 512
Adjusted 8 - - - 504 512
Profit before tax
Reported 1,108 1,604 1,232 182 711 4,837
Significant items 588 28 9 (59) (55) 511
Adjusted 1,696 1,632 1,241 123 656 5,348
Loans and advances to customers
(net)
Reported 376,312 341,339 252,462 46,132 1,588 1,017,833
Adjusted 376,312 341,339 252,462 46,132 1,588 1,017,833
Customer accounts
Reported 655,592 353,037 295,900 61,464 7,748 1,373,741
Adjusted 655,592 353,037 295,900 61,464 7,748 1,373,741
For footnotes, see page 41.
Reconciliation of reported results to adjusted results - global
businesses (continued)
Quarter ended 30 June 2019
Retail
Banking Commercial Global Global Corporate
and Wealth Banking Banking Private Centre Total
Management and Markets Banking
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 5,948 3,895 3,621 474 1,006 14,944
Currency translation (79) (56) (46) (3) (24) (208)
Significant items - - 17 - (872) (855)
- disposals, acquisitions and
investment in new businesses - - - - (827) (827)
- fair value movement
on financial instruments 2 - - 17 - (45) (28)
- currency translation on significant - - - - - -
items
Adjusted 5,869 3,839 3,592 471 110 13,881
ECL
Reported (238) (247) (55) (17) 2 (555)
Currency translation 7 3 (1) 1 - 10
Adjusted (231) (244) (56) (16) 2 (545)
Operating expenses
Reported (4,131) (1,662) (2,467) (370) (297) (8,927)
Currency translation 80 24 45 2 25 176
Significant items 576 22 69 11 122 800
- costs of structural
reform 3 - 2 16 - 20 38
- customer redress programmes 559 (1) (4) - - 554
- restructuring and other related
costs 42 22 57 12 104 237
- settlements and provisions
in connection with legal and
regulatory matters - - - (1) (1) (2)
- currency translation on significant
items (25) (1) - - (1) (27)
Adjusted (3,475) (1,616) (2,353) (357) (150) (7,951)
Share of profit in associates
and joint ventures
Reported 30 - - - 702 732
Currency translation 2 - - - (18) (16)
Adjusted 32 - - - 684 716
Profit before tax
Reported 1,609 1,986 1,099 87 1,413 6,194
Currency translation 10 (29) (2) - (17) (38)
Significant items 576 22 86 11 (750) (55)
Adjusted 2,195 1,979 1,183 98 646 6,101
Loans and advances to
customers (net)
Reported 376,126 347,387 250,790 45,806 1,523 1,021,632
Currency translation (7,831) (6,510) (4,630) (725) (46) (19,742)
Adjusted 368,295 340,877 246,160 45,081 1,477 1,001,890
Customer accounts
Reported 660,588 358,735 289,950 62,235 8,616 1,380,124
Currency translation (10,447) (6,676) (6,529) (1,225) (321) (25,198)
Adjusted 650,141 352,059 283,421 61,010 8,295 1,354,926
For footnotes, see page
41.
Quarter ended 30 Sep 2018
Retail
Banking Commercial Global Global Corporate
and Wealth Banking Banking Private Centre Total
Management and Markets Banking
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 5,760 3,750 4,192 432 (336) 13,798
Currency translation (136) (97) (114) (5) (3) (355)
Significant items - - (8) - 51 43
Adjusted 5,624 3,653 4,070 427 (288) 13,486
ECL
Reported (295) (240) (7) 12 23 (507)
Currency translation 12 3 (1) (1) 5 18
Adjusted (283) (237) (8) 11 28 (489)
Operating expenses
Reported (3,437) (1,625) (2,375) (408) (121) (7,966)
Currency translation 103 43 71 7 37 261
Significant items 61 3 7 56 91 218
- costs of structural
reform 3 2 3 11 - 73 89
- customer redress programmes 62 - - - - 62
- disposals, acquisitions and
investment in new businesses - - - 51 - 51
- restructuring and other related
costs - - - 7 20 27
- settlements and provisions
in connection with legal and
regulatory matters - - (2) 1 - (1)
- currency translation on significant
items (3) - (2) (3) (2) (10)
Adjusted (3,273) (1,579) (2,297) (345) 7 (7,487)
Share of profit in associates
and joint ventures
Reported 4 - - - 593 597
Currency translation - - - - (15) (15)
Adjusted 4 - - - 578 582
Profit before tax
Reported 2,032 1,885 1,810 36 159 5,922
Currency translation (21) (51) (44) 1 24 (91)
Significant items 61 3 (1) 56 142 261
Adjusted 2,072 1,837 1,765 93 325 6,092
Loans and advances to
customers (net)
Reported 356,453 332,649 250,674 39,210 2,474 981,460
Currency translation (11,327) (8,369) (6,005) (807) (122) (26,630)
Adjusted 345,126 324,280 244,669 38,403 2,352 954,830
Customer accounts
Reported 636,603 352,477 285,525 63,717 7,053 1,345,375
Currency translation (13,959) (8,826) (8,583) (1,652) (280) (33,300)
Adjusted 622,644 343,651 276,942 62,065 6,773 1,312,075
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 DVA on derivative contracts.
3 Comprises costs associated with preparations for the UK's exit
from the European Union, costs to establish the UK ring-fenced bank
(including the UK ServCo group) and costs associated with
establishing an intermediate holding company in Hong Kong.
Reconciliation of reported and adjusted risk-weighted assets
Retail
Banking Commercial Global Corporate
and Wealth Banking Banking Global Centre Total
Management Private and Markets
Banking
$bn $bn $bn $bn $bn $bn
Risk-weighted assets
Reported 127.9 317.3 276.8 16.2 127.0 865.2
Disposals - - - - (0.8) (0.8)
- operations in Brazil - - - - (0.8) (0.8)
Adjusted 127.9 317.3 276.8 16.2 126.2 864.4
At 30 Jun 2019
Risk-weighted assets
Reported 129.0 327.6 284.5 16.5 128.4 886.0
Currency translation (1.9) (6.3) (3.3) (0.1) (1.2) (12.8)
Disposals - - - - (0.8) (0.8)
- operations in Brazil - - - - (0.8) (0.8)
Adjusted 127.1 321.3 281.2 16.4 126.4 872.4
At 30 Sep 2018
Risk-weighted assets
Reported 125.0 317.1 277.5 16.3 126.8 862.7
Currency translation (2.4) (7.9) (3.8) (0.3) (0.8) (15.2)
Disposals - - - - (2.7) (2.7)
- operations in Brazil - - - - (2.7) (2.7)
Adjusted 122.6 309.2 273.7 16.0 123.3 844.8
Reconciliation of reported results to adjusted results -
geographical regions and selected countries/territories
Nine months ended 30 Sep 2019
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 213,481 23,174 2,946 4,984 2,579 42,727
Significant items (177) 20 (828) 12 8 (965)
- customer redress programmes 118 - - - - 118
- (295) - 20 (828) 4 1 (823)
- 8 7 (260)
- disposals, acquisitions and
investment in new businesses
- fair value movement
on financial instruments 3
Adjusted 213,304 23,194 2,118 4,996 2,587 41,762
ECL
Reported (810) (542) (65) (140) (466) (2,023)
Adjusted (810) (542) (65) (140) (466) (2,023)
Operating expenses
Reported 2(13,633) (9,795) (1,052) (3,799) (1,454) (25,296)
Significant items 1,434 74 8 52 17 1,585
- costs of structural
reform 4123 3 - - - 126
1,098 - 72 - 8 - 52 - 17 1,098
278 427
(1) - - -
(65) (66)
- customer redress programmes
- restructuring and other related
costs
- settlements and provisions
in connection with legal and
regulatory matters
Adjusted 2(12,199) (9,721) (1,044) (3,747) (1,437) (23,711)
Share of profit in associates
and joint ventures
Reported 18 1,594 212 - 12 1,836
Adjusted 18 1,594 212 - 12 1,836
Profit/(loss) before tax
Reported (944) 14,431 2,041 1,045 671 17,244
Significant items 1,257 94 (820) 64 25 620
- revenue (177) 20 (828) 12 8 (965)
1,434 74 8 52 17 1,585
- operating expenses
Adjusted 313 14,525 1,221 1,109 696 17,864
Loans and advances to customers
(net)
Reported 377,153 478,015 28,091 111,963 22,611 1,017,833
Adjusted 377,153 478,015 28,091 111,963 22,611 1,017,833
Customer accounts
Reported 496,874 672,557 36,768 142,781 24,761 1,373,741
Adjusted 496,874 672,557 36,768 142,781 24,761 1,373,741
For footnotes, see page 51.
Nine months ended 30
Sep 2019
Hong Mainland
UK Kong China US Mexico
Footnotes $m $m $m $m $m
Revenue 1
Reported 9,857 14,831 2,386 3,534 1,919
Significant items (177) 16 - 10 6
Adjusted 9,680 14,847 2,386 3,544 1,925
ECL
Reported (647) (341) (101) (102) (346)
Adjusted (647) (341) (101) (102) (346)
Operating expenses
Reported (11,321) (5,083) (1,565) (2,954) (1,029)
Significant items 1,403 40 2 39 8
Adjusted (9,918) (5,043) (1,563) (2,915) (1,021)
Share of profit in associates
and joint ventures
Reported 19 29 1,547 - 12
Adjusted 19 29 1,547 - 12
Profit/(loss) before tax
Reported (2,092) 9,436 2,267 478 556
Significant items 1,226 56 2 49 14
Adjusted (866) 9,492 2,269 527 570
Loans and advances to customers (net)
Reported 289,491 307,828 41,024 65,985 19,853
Adjusted 289,491 307,828 41,024 65,985 19,853
Customer accounts
Reported 395,536 487,347 43,111 89,742 19,938
Adjusted 395,536 487,347 43,111 89,742 19,938
For footnotes, see page 51.
Reconciliation of reported results to adjusted results -
geographical regions and selected countries/territories
(continued)
Nine months ended 30 Sep 2018
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 2 13,708 21,901 2,019 5,152 2,119 41,085
Currency translation 2 (889) (314) (29) (40) (302) (1,514)
Significant items 204 (36) (1) 96 34 297
Adjusted 2 13,023 21,551 1,989 5,208 1,851 39,868
ECL
Reported (187) (405) (203) 264 (383) (914)
Currency translation 13 6 11 (1) 39 68
Adjusted (174) (399) (192) 263 (344) (846)
Operating expenses
Reported 2 (12,798) (9,263) (1,009) (4,907) (1,352) (25,515)
Currency translation 2 641 176 26 23 224 1,030
Significant items 403 8 - 971 - 1,382
- costs of structural
reform 4 295 5 - - - 300
- customer redress programmes 162 - - - - 162
- disposals, acquisitions and
investment in new businesses 54 - - - - 54
- restructuring and other related
costs 40 3 - 8 - 51
- settlements and provisions
in connection with legal and
regulatory matters (123) - - 963 - 840
- currency translation on significant
items (25) - - - - (25)
Adjusted 2 (11,754) (9,079) (983) (3,913) (1,128) (23,103)
Share of profit in associates
and joint ventures
Reported 21 1,606 351 - - 1,978
Currency translation (1) (82) - - - (83)
Adjusted 20 1,524 351 - - 1,895
Profit before tax
Reported 744 13,839 1,158 509 384 16,634
Currency translation (236) (214) 8 (18) (39) (499)
Significant items 607 (28) (1) 1,067 34 1,679
Adjusted 1,115 13,597 1,165 1,558 379 17,814
Loans and advances to
customers (net)
Reported 380,496 444,168 28,968 106,522 21,306 981,460
Currency translation (20,174) (4,317) 350 (883) (1,606) (26,630)
Adjusted 360,322 439,851 29,318 105,639 19,700 954,830
Customer accounts
Reported 502,369 651,772 35,997 131,078 24,159 1,345,375
Currency translation (26,622) (4,344) 676 (946) (2,064) (33,300)
Adjusted 475,747 647,428 36,673 130,132 22,095 1,312,075
For footnotes, see page
51.
Nine months ended 30 Sep 2018
Hong Kong Mainland
UK China(5) US(5) Mexico(5)
Footnotes $m $m $m $m $m
Revenue 1
Reported 10,726 13,870 2,228 3,652 1,698
Currency translation (710) 3 (112) - (18)
Significant items 206 11 (1) 97 (4)
Adjusted 10,222 13,884 2,115 3,749 1,676
ECL
Reported (112) (112) (87) 222 (330)
Currency translation 9 - 4 - 4
Adjusted (103) (112) (83) 222 (326)
Operating expenses
Reported (10,130) (4,831) (1,427) (4,018) (959)
Currency translation 492 (2) 72 - 10
Significant items 263 8 - 916 -
Adjusted (9,375) (4,825) (1,355) (3,102) (949)
Share of profit in associates and
joint ventures
Reported 21 26 1,578 - -
Currency translation (1) - (82) - -
Adjusted 20 26 1,496 - -
Profit/(loss) before tax
Reported 505 8,953 2,292 (144) 409
Currency translation (210) 1 (118) - (4)
Significant items 469 19 (1) 1,013 (4)
Adjusted 764 8,973 2,173 869 401
Loans and advances to customers
(net)
Reported 295,398 284,956 39,779 62,617 18,147
Currency translation (15,608) (571) (1,490) - (898)
Adjusted 279,790 284,385 38,289 62,617 17,249
Customer accounts
Reported 398,920 478,214 41,489 79,699 19,044
Currency translation (21,078) (958) (1,554) - (943)
Adjusted 377,842 477,256 39,935 79,699 18,101
For footnotes, see page
51.
Reconciliation of reported results to adjusted results -
geographical regions and selected countries/territories
(continued)
Quarter ended
30 Sep 2019
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 2 4,229 7,715 703 1,619 679 13,355
Significant items (70) (20) - 4 (2) (88)
Adjusted 2 4,159 7,695 703 1,623 677 13,267
ECL
Reported (274) (282) (16) (80) (231) (883)
Adjusted (274) (282) (16) (80) (231) (883)
Operating expenses
Reported 2 (4,389) (3,305) (358) (1,240) (445) (8,147)
Significant items 546 27 3 18 5 599
Adjusted 2 (3,843) (3,278) (355) (1,222) (440) (7,548)
Share of profit in associates
and joint ventures
Reported 10 523 (24) - 3 512
Adjusted 10 523 (24) - 3 512
Profit/(loss) before tax
Reported (424) 4,651 305 299 6 4,837
Significant items 476 7 3 22 3 511
Adjusted 52 4,658 308 321 9 5,348
Loans and advances to customers
(net)
Reported 377,153 478,015 28,091 111,963 22,611 1,017,833
Adjusted 377,153 478,015 28,091 111,963 22,611 1,017,833
Customer accounts
Reported 496,874 672,557 36,768 142,781 24,761 1,373,741
Adjusted 496,874 672,557 36,768 142,781 24,761 1,373,741
For footnotes, see page 51.
Quarter ended
30 Sep 2019
Hong Mainland
UK Kong China US Mexico
Footnotes $m $m $m $m $m
Revenue 1
Reported 3,099 4,896 788 1,136 648
Significant items (67) (13) (1) 3 (1)
Adjusted 3,032 4,883 787 1,139 647
ECL
Reported (218) (207) (34) (66) (148)
Adjusted (218) (207) (34) (66) (148)
Operating expenses
Reported (3,731) (1,678) (527) (965) (343)
Significant items 593 19 - 13 3
Adjusted (3,138) (1,659) (527) (952) (340)
Share of profit in associates
and joint ventures
Reported 11 6 516 - 3
Adjusted 11 6 516 - 3
Profit/(loss) before tax
Reported (839) 3,017 743 105 160
Significant items 526 6 (1) 16 2
Adjusted (313) 3,023 742 121 162
Loans and advances to customers (net)
Reported 289,491 307,828 41,024 65,985 19,853
Adjusted 289,491 307,828 41,024 65,985 19,853
Customer accounts
Reported 395,536 487,347 43,111 89,742 19,938
Adjusted 395,536 487,347 43,111 89,742 19,938
For footnotes, see page 51.
Reconciliation of reported to adjusted results - geographical
regions and selected countries/territories (continued)
Quarter ended 30 Jun 2019
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 2 4,647 7,640 1,541 1,689 929 14,944
Currency translation 2 (159) (28) 7 5 (43) (208)
Significant items (48) 13 (828) 4 4 (855)
Adjusted 2 4,440 7,625 720 1,698 890 13,881
ECL
Reported (233) (102) (43) (57) (120) (555)
Currency translation 4 1 - - 5 10
Adjusted (229) (101) (43) (57) (115) (545)
Operating expenses
Reported 2 (4,926) (3,359) (349) (1,265) (530) (8,927)
Currency translation 2 148 19 (2) (3) 24 176
Significant items 719 39 4 30 8 800
- costs of structural
reform 4 38 - - - - 38
- customer redress programmes 554 - - - - 554
- restructuring and other related
costs 154 41 4 29 9 237
- settlements and provisions
in connection with legal and
regulatory matters (1) (1) - - - (2)
- currency translation on significant
items (26) (1) - 1 (1) (27)
Adjusted 2 (4,059) (3,301) (347) (1,238) (498) (7,951)
Share of profit in associates
and joint ventures
Reported 6 595 122 - 9 732
Currency translation (1) (15) - - - (16)
Adjusted 5 580 122 - 9 716
Profit/(loss) before tax
Reported (506) 4,774 1,271 367 288 6,194
Currency translation (8) (23) 5 2 (14) (38)
Significant items 671 52 (824) 34 12 (55)
Adjusted 157 4,803 452 403 286 6,101
Loans and advances to
customers (net)
Reported 383,363 473,627 28,509 112,693 23,440 1,021,632
Currency translation (12,791) (5,366) 114 (487) (1,212) (19,742)
Adjusted 370,572 468,261 28,623 112,206 22,228 1,001,890
Customer accounts
Reported 504,386 677,289 36,593 135,400 26,456 1,380,124
Currency translation (16,686) (6,368) 194 (520) (1,818) (25,198)
Adjusted 487,700 670,921 36,787 134,880 24,638 1,354,926
For footnotes, see page
51.
Reconciliation of reported to adjusted results - geographical
regions and selected countries/territories (continued)
Quarter ended 30 Jun 2019
Hong Kong Mainland
UK China US Mexico
Footnotes $m $m $m $m $m
Revenue 1
Reported 3,257 4,915 792 1,206 614
Currency translation (151) 6 (21) (1) (10)
Significant items (47) 8 - 3 2
Adjusted 3,059 4,929 771 1,208 606
ECL
Reported (139) (34) (27) (26) (100)
Currency translation 5 - (1) 1 2
Adjusted (134) (34) (28) (25) (98)
Operating expenses
Reported (4,139) (1,733) (539) (978) (352)
Currency translation 143 (2) 14 - 6
Significant items 671 13 2 23 3
- costs of structural reform 4 26 - - - -
- customer redress programmes 554 - - - -
- restructuring and other related costs 118 15 2 23 3
- settlements and provisions in connection
with legal and regulatory matters (1) (1) - - -
- currency translation on significant
items (26) (1) - - -
Adjusted (3,325) (1,722) (523) (955) (343)
Share of profit in associates and joint
ventures
Reported 5 17 570 - 9
Currency translation (1) 1 (15) - -
Adjusted 4 18 555 - 9
Profit/(loss) before tax
Reported (1,016) 3,165 796 202 171
Currency translation (4) 5 (23) - (2)
Significant items 624 21 2 26 5
Adjusted (396) 3,191 775 228 174
Loans and advances to customers
(net)
Reported 291,955 304,431 42,657 67,039 20,135
Currency translation (9,113) (1,168) (1,634) 2 (552)
Adjusted 282,842 303,263 41,023 67,041 19,583
Customer accounts
Reported 398,857 487,948 45,409 82,260 20,437
Currency translation (12,447) (1,867) (1,739) - (553)
Adjusted 386,410 486,081 43,670 82,260 19,884
For footnotes, see page
51.
Reconciliation of reported to adjusted results - geographical
regions and selected countries/territories (continued)
Quarter ended 30 Sep 2018
North Latin
Europe Asia MENA America America Total
Footnotes $m $m $m $m $m $m
Revenue 1
Reported 2 4,837 7,389 663 1,740 523 13,798
Currency translation 2 (270) (34) 8 (5) (68) (355)
Significant items 58 (16) 1 - - 43
Adjusted 2 4,625 7,339 672 1,735 455 13,486
ECL
Reported - (289) (100) 30 (148) (507)
Currency translation - - - - 18 18
Adjusted - (289) (100) 30 (130) (489)
Operating expenses
Reported 2 (4,206) (3,153) (323) (1,303) (335) (7,966)
Currency translation 2 184 21 (2) 2 70 261
Significant items 206 7 - 5 - 218
- costs of structural
reform 4 86 3 - - - 89
- customer redress programmes 62 - - - - 62
- disposals, acquisitions and
investment in new businesses 51 - - - - 51
- restructuring and other related
costs 19 3 - 5 - 27
- settlements and provisions
in connection with legal and
regulatory matters (3) 2 - - - (1)
- currency translation on significant
items (9) (1) - - - (10)
Adjusted 2 (3,816) (3,125) (325) (1,296) (265) (7,487)
Share of profit in associates
and joint ventures
Reported 3 512 82 - - 597
Currency translation - (15) - - - (15)
Adjusted 3 497 82 - - 582
Profit before tax
Reported 634 4,459 322 467 40 5,922
Currency translation (86) (28) 6 (3) 20 (91)
Significant items 264 (9) 1 5 - 261
Adjusted 812 4,422 329 469 60 6,092
Loans and advances to
customers (net)
Reported 380,496 444,168 28,968 106,522 21,306 981,460
Currency translation (20,174) (4,317) 350 (883) (1,606) (26,630)
Adjusted 360,322 439,851 29,318 105,639 19,700 954,830
Customer accounts
Reported 502,369 651,772 35,997 131,078 24,159 1,345,375
Currency translation (26,622) (4,344) 676 (946) (2,064) (33,300)
Adjusted 475,747 647,428 36,673 130,132 22,095 1,312,075
For footnotes, see page
51.
Reconciliation of reported results to adjusted results -
geographical regions and selected countries/territories
(continued)
Quarter ended 30 Sep 2018
Mainland
UK Hong Kong China(5) US(5) Mexico(5)
Footnotes $m $m $m $m $m
Revenue 1
Reported 3,913 4,715 769 1,230 590
Currency translation (234) 10 (22) - (14)
Significant items 59 3 - - -
Adjusted 3,738 4,728 747 1,230 576
ECL
Reported 44 (92) (52) 25 (135)
Currency translation (2) - 1 - 3
Adjusted 42 (92) (51) 25 (132)
Operating expenses
Reported (3,362) (1,652) (480) (1,029) (314)
Currency translation 152 (3) 14 - 8
Significant items 138 7 - 4 -
- costs of structural reform 4 75 3 - - -
- customer redress programmes 62 - - - -
- restructuring and other related
costs 11 3 - 4 -
- settlements and provisions in connection
with legal and regulatory matters (2) 1 - - -
- currency translation on significant
items (8) - - - -
Adjusted (3,072) (1,648) (466) (1,025) (306)
Share of profit in associates and
joint ventures
Reported 3 6 505 - -
Currency translation - (1) (15) - -
Adjusted 3 5 490 - -
Profit before tax
Reported 598 2,977 742 226 141
Currency translation (84) 6 (22) - (3)
Significant items 197 10 - 4 -
Adjusted 711 2,993 720 230 138
Loans and advances to customers
(net)
Reported 295,398 284,956 39,779 62,617 18,147
Currency translation (15,608) (571) (1,490) - (898)
Adjusted 279,790 284,385 38,289 62,617 17,249
Customer accounts
Reported 398,920 478,214 41,489 79,699 19,044
Currency translation (21,078) (958) (1,554) - (943)
Adjusted 377,842 477,256 39,935 79,699 18,101
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 intra-Group transactions.
3 Includes fair value movements on non-qualifying hedges and DVA on derivative contracts.
4 Comprises costs associated with preparations for the UK's exit
from the European Union, costs to establish the UK ring-fenced bank
(including the UK ServCo group) and costs associated with
establishing an intermediate holding company in Hong Kong.
5 9M18 and 3Q18 comparative data has been re-presented from the
previously disclosed to align the basis of presentation to the
correct reporting period.
Third interim dividend for 2019
On 2 October 2019, the Directors declared a third interim
dividend in respect of 2019 of $0.10 per ordinary share. The
ordinary shares in London, Hong Kong, Paris and Bermuda, and the
American Depositary Shares ('ADSs') in New York, was quoted
ex-dividend on
10 October 2019. The dividend will be payable on 20 November
2019 to holders of record on 11 October 2019.
The dividend will be payable in US dollars, sterling or Hong
Kong dollars, or a combination of these currencies, at the forward
exchange rates quoted by HSBC Bank plc in London at or about
11.00am on 11 November 2019. A scrip dividend will also be offered.
Particulars of these arrangements were sent to shareholders on 23
October 2019 and elections must be received by 7 November 2019.
The dividend will be payable on ordinary shares held through
Euroclear France, the settlement and central depositary system for
Euronext Paris, on 20 November 2019 to the holders of record on 11
October 2019. The dividend will be payable in US dollars or as a
scrip dividend. Particulars of these arrangements were announced
through Euronext Paris on 3 October 2019, 18 October 2019 and
another announcement will be made through Euronext Paris on 21
November 2019.
The dividend will be payable on ADSs, each of which represents
five ordinary shares, on 20 November 2019 to holders of record on
11 October 2019. The dividend of $0.50 per ADS will be payable by
the depositary in US dollars or as a scrip dividend of new ADSs.
Particulars of these arrangements were sent to holders on 23
October 2019 and elections will be required to be made by 1
November 2019. Alternatively, the cash dividend may be invested in
additional ADSs by participants in the dividend reinvestment plan
operated by the depositary.
Any person who has acquired ordinary shares registered on the
Principal Register in the UK, the Hong Kong Overseas Branch
Register or the Bermuda Overseas Branch Register but who has not
lodged the share transfer with the Principal Registrar, the Hong
Kong or Bermuda Branch Registrar should have done so before 4.00pm
local time on 11 October 2019 in order to receive the dividend.
Ordinary shares may not be removed from or transferred to the
Principal Register in the UK, the Hong Kong Overseas Branch
Register or the Bermuda Overseas Branch Register on 11 October
2019. Any person wishing to remove ordinary shares to or from each
register must have done so before 4.00pm local time on 10 October
2019.
Transfers of ADSs must have been lodged with the depositary by
11.00am local time on 11 October 2019 in order to receive the
dividend.
ADS dividend fee
As previously disclosed in our Interim Report 2019, in order to
cover costs associated with the management of the American
Depositary Receipt programme, which was previously covered by fees
generated from issuance and cancellation, a dividend fee will be
introduced on cash dividends paid on ADSs, in line with common
market practice. ADS holders who receive a cash dividend will be
charged a fee, which will be deducted by the depositary, of $0.005
per ADS per cash dividend. This will commence from the 2019 third
interim cash dividend payment payable on 20 November 2019.
Dividend on preference shares
A quarterly dividend of $15.50 per 6.20% non-cumulative US
dollar preference share, Series A ('Series A dollar preference
share'), (equivalent to a dividend of $0.3875 per Series A American
Depositary Share, each of which represents one-fortieth of a Series
A dollar preference share), and GBP0.01 per Series A sterling
preference share is payable on 15 March, 15 June, 15 September and
15 December 2019 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 declared that a quarterly
dividend be payable on 16 December 2019 to holders of record on 29
November 2019.
For and on behalf of HSBC Holdings plc
Richard Gray
Group Company Secretary
The Board of Directors of HSBC Holdings plc as at the date of
this announcement are: Mark Tucker*, Noel Quinn, Kathleen Casey ,
Laura Cha , Henri de Castries , Irene Lee , José Meade , Heidi
Miller , Marc Moses, David Nish , Ewen Stevenson, Jonathan Symonds
, Jackson Tai and Pauline van der Meer Mohr .
* Non-executive Group Chairman
Independent non-executive Director
Terms and abbreviations
3Q19 Third quarter of 2019
2Q19 Second quarter of 2019
3Q18 Third quarter of 2018
9M19 Nine months to 30 September 2019
9M18 Nine months to 30 September 2018
ADS American Depositary Share
AIEA Average interest-earning assets
BoCom Bank of Communications Co., Limited, one of China's largest banks
Bps Basis points. One basis point is equal to one-hundredth of a
percentage point
BSM Balance Sheet Management
C&L Credit and Lending
CET1 Common equity tier 1
CMB Commercial Banking, a global business
CODM Chief Operating Decision Maker
Corporate Centre Corporate Centre comprises Central Treasury,
including Balance Sheet Management, our legacy businesses,
interests in our associates and joint ventures, central stewardship
costs and the UK bank levy
CRD IV Capital Requirements Regulation and Directive
CRR Customer risk rating
CRR II Revisions to the Capital Requirements Regulation
DPD Days past due
D-SIB Domestic systemically important bank
DVA Debit value adjustments
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
FVOCI Fair value through other comprehensive income
GB&M Global Banking and Markets, a global business
GLCM Global Liquidity and Cash Management
GMB Group Management Board
GPB Global Private Banking, a global business
Group HSBC Holdings together with its subsidiary undertakings
G-SIB Global systemically important bank
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
HSBC Holdings HSBC Holdings plc, the parent company of HSBC HSBC UK
HSBC UK Bank plc
IAS International Accounting Standards
IFRSs International Financial Reporting Standards
IMA Internal models approach
IMM Internal model method
IRB Internal ratings based
IRC Incremental risk charge
Jaws Adjusted jaws measures the difference between the rates of
change in adjusted revenue and adjusted operating
expenses JV Joint venture
LCR Liquidity coverage ratio
Legacy credit A portfolio of assets comprising Solitaire Funding
Limited, securities investment conduits, asset-backed securities
trading portfolios, credit correlation portfolios and derivative
transactions entered into directly with monoline insurers
Mainland China People's Republic of China excluding Hong Kong
MENA Middle East and North Africa
MREL EU minimum requirements for own funds and eligible liabilities
Net operating income Net operating income before change in
expected credit losses and other credit impairment charges/Loan
impairment charges and other credit provisions, also referred to as
revenue
NIM Net interest margin
PBT Profit before tax
PD Probability of default
POCI Purchased or originated credit-impaired
PPI Payment protection insurance
PRA Prudential Regulation Authority (UK)
RBWM Retail Banking and Wealth Management, a global business
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 TLAC Total loss-absorbing capacity
$m/$bn/$tn United States dollar millions/billions/trillions. We
report in US dollars VaR Value at risk
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRTQDLFLKBFLFBB
(END) Dow Jones Newswires
October 28, 2019 03:00 ET (07:00 GMT)
Hsbc (LSE:HSBA)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Hsbc (LSE:HSBA)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
