TIDMHSBA
RNS Number : 1589H
HSBC Holdings PLC
02 August 2021
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2 AUGUST 2021
HSBC HOLDINGS PLC
2021 INTERIM RESULTS - HIGHLIGHTS
Noel Quinn, Group Chief Executive, said:
"These are good results that reflect the return of growth in our
main markets and marked progress in the execution of our strategy.
We were profitable in every region in the first half of the year,
supported by the release of expected credit loss provisions. Our
lending pipeline began to translate into business growth in the
second quarter and we further strengthened that pipeline during the
half. This performance enables us to pay an interim dividend for
the first six months of 2021.
I'm pleased with the momentum generated around our growth and
transformation plans, with good delivery against all four pillars
of our strategy. In particular, we have taken firm steps to define
the future of our US and continental Europe businesses, and further
enhanced our global Wealth capabilities.
We are focused on executing the growth and transformation plans
we announced in February."
Financial performance (1H21 vs 1H20)
-- Reported profit after tax increased by $5.3bn to $8.4bn and
reported profit before tax increased by $6.5bn to $10.8bn. A fall
in revenue reflected 2020 interest rate reductions and lower
Markets and Securities Services ('MSS') revenue relative to a
strong 1H20. This was more than offset by releases in our expected
credit losses and other credit impairment charges ('ECL'). Reported
profit in 1H20 included an impairment of software intangibles of
$1.2bn, mainly in Europe.
-- All regions profitable in 1H21, notably HSBC UK Bank plc
reported profit before tax of over $2.1bn in the period. Despite
interest rate headwinds, there was continued strength in Asia and a
material recovery in profitability in all other regions, reflecting
a net release in ECL as the economic outlook improved.
-- Reported revenue down 4% to $25.6bn , primarily reflecting
2020 interest rate reductions and lower MSS revenue in Global
Banking and Markets ('GBM'). These reductions were partly offset by
net favourable movements in market impacts in life insurance
manufacturing and valuation adjustments in GBM.
-- In 1H21, lending increased by $21.5bn on a reported basis,
reflecting growth in Wealth and Personal Banking ('WPB') and
Commercial Banking ('CMB'). Deposits grew by $26.3bn on a reported
basis, with increases in all global businesses.
-- Net interest margin ('NIM') of 1.21% in 1H21, down 22 basis
points ('bps') from 1H20. NIM in 2Q21 of 1.20% remained stable
compared with 1Q21.
-- Reported ECL were a net release of $0.7bn, compared with a
$6.9bn charge in 1H20. The net release in 1H21 primarily reflected
an improvement in the economic outlook since 2020. The reduction
also reflected low levels of stage 3 charges in 1H21, as well as
the non-recurrence of a large charge in 1H20 related to a corporate
exposure in Singapore.
-- Reported and adjusted operating expenses increased 3%,
primarily due to a higher performance-related pay accrual as
profitability improved, as well as continued investment, partly
offset by the impact of our cost-saving initiatives.
-- Return on average tangible equity ('RoTE') (annualised) of
9.4%, up 5.6 percentage points compared with 1H20.
-- Common equity tier 1 ('CET1') ratio of 15.6%, down 0.3
percentage points from 31 December 2020, reflecting an increase in
RWAs from lending growth and a decrease in CET1 capital including
the impact of foreseeable dividends.
-- The Board has announced an interim dividend for 1H21 of $0.07
per ordinary share, to be paid in cash with no scrip
alternative.
Financial performance (2Q21 vs 2Q20)
-- Reported profit after tax up $3.2bn to $3.9bn and reported
profit before tax up $4.0bn to $5.1bn . Reported revenue was down
4%, mainly due to lower revenue in MSS, as well as the impact of
lower interest rates. This was more than offset by net releases in
reported ECL and lower reported operating expenses.
Outlook for 2021
-- The execution of our strategy continues at pace, including
the announcement of transactions in relation to our retail
operations in France and mass market retail operations in the
US.
-- Despite continued revenue headwinds, notably in fixed income
markets relative to strong comparative periods, as well as low
interest rates and Covid-19 impacts, there are emerging signs of
unsecured personal lending and commercial lending growth. We expect
mid-single-digit lending growth for the full year, which is
expected to translate into low-single-digit RWA growth as we
progress with our RWA reduction actions.
-- Given current consensus economics and default experience, ECL
charges for 2021 are expected to be materially lower than our
medium-term range of 30bps to 40bps of average loans and possibly a
net release for the year. Uncertainty remains as countries emerge
from the pandemic at different speeds, government support measures
unwind and new virus strains test the efficacy of vaccination
programmes. To reflect this uncertainty, at 30 June 2021 around
$2.4bn remained of the stage 1 and stage 2 ECL allowance uplift we
made during 2020.
-- Our cost reduction programme remains on track. We expect
adjusted operating expenses for 2021 to be broadly in line with
2020, excluding the benefit from a reduced bank levy. This remains
subject to final decisions on performance-related pay, which will
primarily reflect the performance of the Group.
-- The Group maintains a strong capital position and is well
placed to fund growth and step up capital returns. Reflecting the
current improved economic outlook and operating environment in many
of our markets, we now expect to move to within our target dividend
payout ratio range of 40% to 55% of reported earnings per ordinary
share in 2021.
Key financial metrics
Half-year to
---------------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
---------------------------------------------------------- --------- --------- -----------
Reported results
---------------------------------------------------------- --------- --------- -----------
Reported revenue ($m) 25,551 26,745 23,684
---------------------------------------------------------- --------- --------- -----------
Reported profit before tax ($m) 10,839 4,318 4,459
---------------------------------------------------------- --------- --------- -----------
Reported profit after tax ($m) 8,422 3,125 2,974
---------------------------------------------------------- --------- --------- -----------
Profit attributable to the ordinary shareholders
of the parent company ($m) 7,276 1,977 1,921
---------------------------------------------------------- --------- --------- -----------
Cost efficiency ratio (%) 66.9 61.8 75.6
---------------------------------------------------------- --------- --------- -----------
Basic earnings per share ($) 0.36 0.10 0.10
---------------------------------------------------------- --------- --------- -----------
Diluted earnings per share ($) 0.36 0.10 0.09
---------------------------------------------------------- --------- --------- -----------
Net interest margin (%)(1) 1.21 1.43 1.32
---------------------------------------------------------- --------- --------- ---------
Alternative performance measures
---------------------------------------------------------- --------- --------- -----------
Adjusted revenue ($m) 25,797 27,597 24,523
---------------------------------------------------------- --------- --------- -----------
Adjusted profit before tax ($m) 11,950 5,654 6,680
---------------------------------------------------------- --------- --------- -----------
Adjusted cost efficiency ratio (%) 62.9 56.9 69.1
---------------------------------------------------------- --------- --------- -----------
Annualised expected credit losses and other credit
impairment charges ('ECL') as a % of average gross
loans and advances to customers (%) (0.14) 1.34 0.38
---------------------------------------------------------- --------- --------- ---------
Return on average ordinary shareholders' equity
(annualised) (%) 8.4 2.4 2.3
---------------------------------------------------------- --------- --------- -----------
Return on average tangible equity (annualised)
(%)(1,2) 9.4 3.8 3.1
---------------------------------------------------------- --------- --------- -----------
At
---------------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
---------------------------------------------------------- --------- --------- -----------
Balance sheet
---------------------------------------------------------- --------- --------- -----------
Total assets ($m) 2,976,005 2,922,798 2,984,164
---------------------------------------------------------- --------- --------- -----------
Net loans and advances to customers ($m) 1,059,511 1,018,681 1,037,987
---------------------------------------------------------- --------- --------- -----------
Customer accounts ($m) 1,669,091 1,532,380 1,642,780
---------------------------------------------------------- --------- --------- -----------
Average interest-earning assets ($m)(1) 2,188,991 2,034,939 2,092,900
---------------------------------------------------------- --------- --------- -----------
Loans and advances to customers as % of customer
accounts (%) 63.5 66.5 63.2
---------------------------------------------------------- --------- --------- ---------
Total shareholders' equity ($m) 198,218 187,036 196,443
---------------------------------------------------------- --------- --------- -----------
Tangible ordinary shareholders' equity ($m) 157,985 147,879 156,423
---------------------------------------------------------- --------- --------- -----------
Net asset value per ordinary share at period end
($)(3) 8.69 8.17 8.62
---------------------------------------------------------- --------- --------- -----------
Tangible net asset value per ordinary share at
period end ($) 7.81 7.34 7.75
---------------------------------------------------------- --------- --------- -----------
Capital, leverage and liquidity
---------------------------------------------------------- --------- --------- -----------
Common equity tier 1 capital ratio (%)(4) 15.6 15.0 15.9
---------------------------------------------------------- --------- --------- ---------
Risk-weighted assets ($m)(4) 862,292 854,552 857,520
---------------------------------------------------------- --------- --------- ---------
Total capital ratio (%)(4) 21.0 20.7 21.5
---------------------------------------------------------- --------- --------- -----------
Leverage ratio (%)(4) 5.3 5.3 5.5
---------------------------------------------------------- --------- --------- -----------
High-quality liquid assets (liquidity value) ($bn) 659 654 678
---------------------------------------------------------- --------- --------- -----------
Liquidity coverage ratio (%) 134 148 139
---------------------------------------------------------- --------- --------- ---------
Share count
---------------------------------------------------------- --------- --------- -----------
Period end basic number of $0.50 ordinary shares
outstanding (millions) 20,223 20,162 20,184
---------------------------------------------------------- --------- --------- ---------
Period end basic number of $0.50 ordinary shares
outstanding and dilutive potential ordinary shares
(millions) 20,315 20,198 20,272
---------------------------------------------------------- --------- --------- ---------
Average basic number of $0.50 ordinary shares outstanding
(millions) 20,211 20,162 20,176
---------------------------------------------------------- --------- --------- ---------
Dividend per ordinary share (in respect of the
period) ($) 0.07 - 0.15
---------------------------------------------------------- --------- --------- ---------
For reconciliations of our reported results to an adjusted
basis, including lists of significant items, see page 35 of the
Interim report 2021. Definitions and calculation of other
alternative performance measures are included in our
'Reconciliation of alternative performance measures' on page 52 of
the Interim report 2021.
1 For these metrics, half-year to 31 December 2020 is calculated
on a full-year basis and not a 2H20 basis.
2 Profit attributable to ordinary shareholders, excluding
impairment of goodwill and other intangible assets and changes in
present value of in-force insurance contracts ('PVIF') (net of
tax), divided by average ordinary shareholders' equity excluding
goodwill, PVIF and other intangible assets (net of deferred
tax).
3 The definition of net asset value per ordinary share is total
shareholders' equity less non-cumulative preference shares and
capital securities, divided by the number of ordinary shares in
issue excluding shares the company has purchased and are held in
treasury.
4 Unless otherwise stated, regulatory capital ratios and
requirements are based on the transitional arrangements of the
Capital Requirements Regulation in force at the time. These include
the regulatory transitional arrangements for IFRS 9 'Financial
Instruments', which are explained further on page 88 of the Interim
Report 2021. Leverage ratios are calculated using the end point
definition of capital and the IFRS 9 regulatory transitional
arrangements. Following the end of the transition period after the
UK's withdrawal from the EU, any reference to EU regulations and
directives (including technical standards) should be read as a
reference to the version onshored into UK law under the European
Union (Withdrawal) Act 2018, as amended.
Highlights
Half-year to
30 Jun 30 Jun
2021 2020
$m $m
------------------------------------------------------------- -------- ----------
Reported
------------------------------------------------------------- -------- ----------
Revenue(1) 25,551 26,745
------------------------------------------------------------- -------- --------
Change in expected credit losses and other credit impairment
charges 719 (6,858)
------------------------------------------------------------- -------- --------
Operating expenses (17,087) (16,527)
------------------------------------------------------------- -------- --------
Share of profit in associates and joint ventures 1,656 958
------------------------------------------------------------- -------- --------
Profit before tax 10,839 4,318
------------------------------------------------------------- -------- --------
Adjusted(2)
------------------------------------------------------------- -------- ----------
Revenue(1) 25,797 27,597
------------------------------------------------------------- -------- --------
Change in expected credit losses and other credit impairment
charges 719 (7,287)
------------------------------------------------------------- -------- --------
Operating expenses (16,222) (15,705)
------------------------------------------------------------- -------- --------
Share of profit in associates and joint ventures 1,656 1,049
------------------------------------------------------------- -------- --------
Profit before tax 11,950 5,654
Significant items affecting adjusted performance
------------------------------------------------------------- -------- ----------
Revenue
------------------------------------------------------------- -------- ----------
Customer redress programmes 18 26
------------------------------------------------------------- -------- --------
Disposals, acquisitions and investment in new businesses -- (8)
------------------------------------------------------------- -------- --------
Fair value movements on financial instruments(3) (194) 299
------------------------------------------------------------- -------- --------
Restructuring and other related costs(4) (70) (49)
------------------------------------------------------------- -------- --------
Operating expenses
Customer redress programmes (17) (50)
------------------------------------------------------------- -------- --------
Impairment of goodwill and other intangibles -- (1,025)
------------------------------------------------------------- -------- --------
Restructuring and other related costs (848) (505)
------------------------------------------------------------- -------- --------
Settlements and provisions in connection with legal and
regulatory matters -- (5)
------------------------------------------------------------- -------- --------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Adjusted performance is computed by adjusting reported results
for the period-on-period effects of foreign currency translation
differences and significant items which distort period-on-period
comparisons.
3 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments
and gains we made at our business update in February 2020.
Review by Noel Quinn, Group Chief Executive
In February this year, we launched an updated purpose for HSBC.
'Opening up a world of opportunity' was the product of wide
consultation with our colleagues and customers around the world.
Since then, I have spoken with thousands of my colleagues across
HSBC to discuss how we live that purpose every day.
I have been excited by the energy of those conversations. Our
purpose and the values that underpin it - we value difference, we
succeed together, we take responsibility, and we get it done - have
resonated strongly, not just as a means of guiding our behaviour,
but in articulating what our people want us to be as a business.
Many expressed great pride in our heritage and culture, but also
belief in the need to adapt to meet present and future challenges.
Above all though, there was a strong desire to learn from and embed
the lessons of the past 18 months, which is a conviction that my
senior management team and I all share.
This spirit was evident in a good first-half performance. The
customer-centricity that characterised our response to the Covid-19
pandemic remained to the fore, driven by increased collaboration
and the benefits of our continued digital investment. This enabled
us not just to better serve our existing customers, but also to
attract new clients, win new mandates and strengthen our lending
pipelines. We also generated strong momentum behind our growth and
transformation plans, with good delivery against all four pillars -
focus on our strengths, digitise at scale, energise for growth, and
transition to net zero.
Our biggest challenge has remained the Covid-19 pandemic, which
continues to threaten our customers, colleagues and communities.
This was especially true in India, where the devastating spread of
the Delta variant was a stark reminder of the danger that the virus
continues to pose. India is both a growth market and an important
service hub for the Group, and around 39,000 of our people are
based there. While measures were already in place to enable a large
majority of these colleagues to work from home, we took urgent
steps to help them and their dependants to receive a vaccine, and
provided financial support to local organisations delivering the
relief effort on the ground. Operationally, we were able to
maintain an unbroken service due to the continuity measures in
place since March 2020. This was a testament both to the
extraordinary efforts of our people, and the resilience of our
systems and processes.
We received a strong endorsement of our recent progress in May,
through the upgrade of our MSCI ESG rating from 'average' to
'leader'. Among other things, MSCI recognised the significant
increase in our employee engagement and talent development scores
during 2020; the extensive involvement of our Board in
incorporating climate considerations into our business strategy;
our strong performance in customer complaints handling and
financial education; and our achievement of the highest possible
rating for corporate governance. We will work hard to maintain this
rating in the coming quarters.
Financial performance
Recovering economic growth in many of our main markets had a
positive impact on our first-half financial performance. The
improved economic outlook enabled us to begin releasing expected
credit losses, which was the main driver of our improved
profitability. The adverse impact of central bank interest rate
cuts in 2020 continued to flow through to our interest-rate
sensitive business lines, although our net interest income has now
stabilised. A combination of increased fee income and
cost-programme savings helped to compensate for the resulting
reduction in revenue, and we strengthened our lending pipelines in
our retail and wholesale businesses in the first half of the
year.
As a consequence, the Group delivered $10.8bn of reported profit
before tax, up 151% on the first half of 2020, and $12bn of
adjusted profits, up 111%. We were profitable in every region in
the first six months of the year.
Adjusted revenue was 7% lower than the same period last year.
This was due mainly to the impact of interest rate cuts during 2020
on our deposit franchises in all three global businesses. However,
our lending pipeline began to translate into business growth in the
second quarter and we further strengthened that pipeline during the
half-year.
Our cost reduction programmes continued to mitigate the cost of
increased technology investment, although our adjusted operating
expenses rose by 3% due to an increase in performance-related pay.
We spent around $3.0bn on technology in the first half of the year,
up 4% on the same period last year.
Our funding, liquidity and capital remain strong. We grew
deposits by $27bn on a constant currency basis, with growth in all
three global businesses. Our common equity tier one ratio was 15.6%
on 30 June 2021. As a consequence, we are able to pay an interim
dividend of $0.07 per ordinary share for the first half of the
year.
Focus on our strengths
We made good progress in restructuring our portfolio of
businesses in the first half of the year, investing in businesses
that we intend to grow and withdrawing from areas in which we lack
the scale to compete.
In particular, we took firm steps to resolve the future of our
businesses in the US and continental Europe. In the US, we entered
into agreements to sell our mass market retail business in the
country, and in continental Europe, we entered into a memorandum of
understanding with My Money Group aimed at selling our retail
banking activities in France. Both of these followed a period of
extensive strategic review, and are important milestones in the
transformation of the Group. They will help enable both our US and
continental Europe businesses to become more focused, simpler and
sustainably profitable, and to better serve the international needs
of our wholesale and wealth management customers.
In Asia, we continued to put in place the building blocks for
future growth. We further grew our Pinnacle digital wealth
management business in mainland China, recruiting more than 350 new
wealth managers and accelerating our coverage expansion to five
cities - Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou. We
also improved our ability to serve the wealth needs of customers in
Asia and the Asian diaspora by expanding our digital wealth
capabilities in Hong Kong, Malaysia and Singapore, and reorganising
our wealth businesses in continental Europe and the US to better
connect international customers to the global wealth opportunity.
The benefits of our investment in Asia wealth were evident in the
first six months of 2021 through strong customer acquisition,
increased fee income and significant growth in wealth balances.
Digitise at scale
Our technology investment continues to improve the experiences
of our customers and colleagues, and to boost efficiency while
reducing our cost base. In the first half of the year, we launched
a number of new, scalable digital capabilities for our customers
and rolled out more of our existing capabilities to new
markets.
For our personal customers, our digital Global Money Account
allows our international customers to hold, manage and send funds
in various currencies without paying any fees. Having launched this
successfully in the US in 2020, we expanded it successfully into
the UAE and Singapore in the first half of the year, with more to
follow during 2021.
For our business customers, we launched HSBC Global Wallet, a
new multi-currency digital wallet which allows businesses to hold,
send and receive cash in multiple currencies using a single global
account. Launched initially for customers in Singapore, the UK and
the US, we intend to roll out new features and currencies to the
platform in the second half of the year.
We also launched HSBC Kinetic for business customers in the UK.
Kinetic is designed to be a truly mobile-first banking service, as
opposed to a bank account with mobile features. Built on insights
from more than 3,000 small business owners, it allows customers to
manage their finances entirely through their smartphone. More than
10,000 businesses have now signed up, benefiting from online
onboarding in 15 minutes, the ability to apply for lending products
with instant lending decisions, and a number of critical insight
capabilities.
Energise for growth
We are seeking to energise HSBC for growth through a strong
sense of purpose and simpler ways of working, and by equipping our
colleagues with the future skills they need. This includes
embedding the lessons of the past 18 months to help build a
dynamic, entrepreneurial and inclusive culture.
We are moving to a hybrid working model wherever possible,
giving our people the flexibility to work in a way that suits both
them and their customers. We will need less office space as a
result, and we have plans to reduce our global office footprint by
more than 3.6 million square feet - or around 20% - by the end of
2021. We are also relocating three of our global business CEOs to
Asia on a permanent basis, taking them closer to our customers and
to the core of our business.
We continue to simplify the organisation wherever we can. In the
first half, we reduced the number of full-time equivalent employees
by around 3,500. We also announced changes to our senior leadership
bands to help ensure clarity of scope and accountability, and to
empower our leaders to make decisions to accelerate our
transformation and drive growth.
I am conscious that our current operating environment remains
challenging for many colleagues and their families. While our
employee engagement scores have remained above pre-pandemic levels,
we have continued to see a rise in fatigue and anxiety among
employees. To help tackle this, we have provided a variety of
well-being resources to support our people, including mindfulness
training. This is something that I continue to monitor closely,
particularly as our people adapt to our new hybrid working
model.
Transition to net zero
We took a number of important steps towards our net zero
ambitions in the first half of the year, and strengthened our
position as a market leader of sustainable finance.
I was particularly pleased that 99.7% of our shareholders backed
our special resolution on climate change at our AGM in May. This
was a strong endorsement of our climate strategy, which has at its
core a commitment to support our customers on their transitions to
a low-carbon future. The resolution commits us to setting out the
next steps in our transition, including through short- and
medium-term sector-based targets; to phasing out financing of coal
power and thermal coal mining by 2030 in EU and OECD countries, and
by 2040 globally; and to reporting annually on our progress. Above
all, it signals a unity of purpose between our business and our
investors, which is vital as we confront the shared challenge of
the low-carbon transition.
I have always said that partnership lies at the heart of the
low-carbon transition. Part of our approach has been to attempt to
forge new partnerships to find new solutions and accelerate
progress, whether with our customers, governments or our peers in
the banking sector. In April, we became a founding member of the
Net-Zero Banking Alliance ('NZBA'), which aims to deliver the
banking sector's ambition to align its climate commitments with the
Paris Agreement goals in a collaborative, rigorous and transparent
way. Through the NZBA, we also joined the Glasgow Financial
Alliance for Net Zero, which combines the leading initiatives
across the financial system to accelerate the transition to net
zero emissions by 2050 at the latest.
In May, we launched a five-year partnership with World Resources
Institute and WWF, backed by $100m of philanthropic funding from
HSBC. The Climate Solutions Partnership seeks to unlock barriers to
finance for companies and projects that tackle climate change,
bringing emerging climate solutions to commercial viability and
scale. By combining our resources, knowledge and insight with our
partners on the ground, we are aiming to make a real-world impact
in a targeted way, with a focus on scaling up climate innovation
and nature-based solutions, and helping to transition the energy
sector in Asia towards renewables.
We strengthened our position in the ESG bond market in the first
half, participating in more issuances than in the whole of 2020.
First-half mandates included the world's first sovereign
sustainable sukuk bond; the first sovereign green bonds issued by
the UK and Canada; and a pioneering sustainability-linked bond for
an energy company with the cost of financing tied to the reduction
of its entire carbon footprint, including the emissions of products
sold.
Our people
None of the achievements of the last six months would have been
possible without the commitment and hard work of my colleagues. I
do not underestimate the challenges that many still face as a
consequence of the Covid-19 pandemic, which remains a presence in
all of our lives. I am especially grateful to my colleagues in
parts of the world where Covid-19 remains prevalent, and who have
continued to go to extraordinary lengths for their customers and
colleagues in extremely challenging circumstances.
We have had a good start to the year, but there is much more to
do to deliver our ambitions for HSBC. We have a firm platform on
which to build over the remainder of 2021.
Financial summary
Half-year to
---------------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
$m $m $m
---------------------------------------------------- --------- --------- -----------
For the period
---------------------------------------------------- --------- --------- -----------
Profit before tax 10,839 4,318 4,459
---------------------------------------------------- --------- --------- ---------
Profit attributable to:
---------------------------------------------------- --------- --------- -----------
- ordinary shareholders of the parent company 7,276 1,977 1,921
---------------------------------------------------- --------- --------- ---------
Dividends on ordinary shares(1) 3,059 -- --
---------------------------------------------------- --------- --------- ---------
At the period end
---------------------------------------------------- --------- --------- -----------
Total shareholders' equity 198,218 187,036 196,443
---------------------------------------------------- --------- --------- ---------
Total regulatory capital 181,122 177,242 184,423
---------------------------------------------------- --------- --------- ---------
Customer accounts 1,669,091 1,532,380 1,642,780
---------------------------------------------------- --------- --------- ---------
Total assets 2,976,005 2,922,798 2,984,164
---------------------------------------------------- --------- --------- ---------
Risk-weighted assets 862,292 854,552 857,520
---------------------------------------------------- --------- --------- ---------
Per ordinary share $ $ $
---------------------------------------------------- --------- --------- -----------
Basic earnings 0.36 0.10 0.10
---------------------------------------------------- --------- --------- ---------
Dividend per ordinary share (paid in the period)(1) 0.15 -- --
---------------------------------------------------- --------- --------- ---------
Net asset value(2) 8.69 8.17 8.62
---------------------------------------------------- --------- --------- ---------
1 Interim dividend of $0.15 per ordinary share in respect of the
financial year ending 31 December 2020, paid in April 2021.
2 The definition of net asset value per ordinary share is total
shareholders equity, less non-cumulative preference shares and
capital securities, divided by the number of ordinary shares in
issue, excluding own shares held by the company, including those
purchased and held in treasury.
Distribution of results by global business
Adjusted profit before tax
Half-year to
---------------------------------------------
30 Jun 2021 30 Jun 2020 31 Dec 2020
$m % $m % $m %
---------------------------- ------ ----- ------ ----- ------ -------
Wealth and Personal Banking 3,864 32.3 1,663 29.4 2,478 37.1
---------------------------- ------ ----- ------ ----- ------ -----
Commercial Banking 3,376 28.3 118 2.1 1,732 25.9
---------------------------- ------ ----- ------ ----- ------ -----
Global Banking and Markets 3,307 27.7 2,566 45.4 2,312 34.6
---------------------------- ------ ----- ------ ----- ------ -----
Corporate Centre 1,403 11.7 1,307 23.1 158 2.4
---------------------------- ------ ----- ------ ----- ------ -----
Profit before tax 11,950 100.0 5,654 100.0 6,680 100.0
---------------------------- ------ ----- ------ ----- ------ -----
Distribution of results by geographical region
Reported profit/(loss) before
tax
------ ----- ------- ------ ------- --------
Half-year to
-------------------------------------------------
30 Jun 2021 30 Jun 2020 31 Dec 2020
$m % $m % $m %
------------------------------ ------ ----- ------- ------ ------- --------
Europe 1,968 18.2 (3,060) (70.9) (1,145) (25.7)
------------------------------ ------ ----- ------- ------ ------- ------
Asia 6,936 64.0 7,369 170.7 5,463 122.5
------------------------------ ------ ----- ------- ------ ------- ------
Middle East and North Africa 723 6.7 (26) (0.6) 45 1.0
------------------------------ ------ ----- ------- ------ ------- ------
North America 805 7.4 23 0.5 145 3.3
------------------------------ ------ ----- ------- ------ ------- ------
Latin America 407 3.7 12 0.3 (49) (1.1)
Profit before tax 10,839 100.0 4,318 100.0 4,459 100.0
------------------------------ ------ ----- ------- ------ ------- ------
HSBC adjusted profit before tax and balance sheet data
Half-year to 30 Jun 2021
------------------------------------------------------------
Global
Wealth Banking
and Personal Commercial and Corporate
Banking Banking Markets Centre Total
$m $m $m $m $m
Net operating income/(expense) before
change in expected credit losses and
other credit impairment charges(1) 11,401 6,651 7,878 (133) 25,797
---------------------------------------------- ------------- ---------- --------- --------- ---------
- external 11,168 6,626 8,631 (628) 25,797
----------------------------------------------
- inter-segment 233 25 (753) 495 -
---------------------------------------------- ------------- ---------- --------- --------- ---------
of which: net interest income/(expense) 7,067 4,366 2,024 (378) 13,079
---------------------------------------------- ------------- ---------- --------- --------- ---------
Change in expected credit losses and
other credit impairment (charges)/recoveries 52 249 414 4 719
---------------------------------------------- ------------- ---------- --------- --------- ---------
Net operating income 11,453 6,900 8,292 (129) 26,516
---------------------------------------------- ------------- ---------- --------- --------- ---------
Total operating expenses (7,600) (3,525) (4,985) (112) (16,222)
---------------------------------------------- ------------- ---------- --------- --------- ---------
Operating profit 3,853 3,375 3,307 (241) 10,294
---------------------------------------------- ------------- ---------- --------- --------- ---------
Share of profit in associates and joint
ventures 11 1 -- 1,644 1,656
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted profit before tax 3,864 3,376 3,307 1,403 11,950
---------------------------------------------- ------------- ---------- --------- --------- ---------
% % % % %
---------------------------------------------- ------------- ---------- --------- --------- -----------
Share of HSBC's adjusted profit before
tax 32.3 28.3 27.7 11.7 100.0
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted cost efficiency ratio 66.7 53.0 63.3 (84.2) 62.9
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted balance sheet data $m $m $m $m $m
---------------------------------------------- ------------- ---------- --------- --------- -----------
Loans and advances to customers (net) 491,320 350,945 216,098 1,148 1,059,511
---------------------------------------------- ------------- ---------- --------- --------- ---------
Interests in associates and joint ventures 478 15 128 28,088 28,709
---------------------------------------------- ------------- ---------- --------- --------- ---------
Total external assets 912,479 624,042 1,258,694 180,790 2,976,005
---------------------------------------------- ------------- ---------- --------- --------- ---------
Customer accounts 841,257 485,689 341,242 903 1,669,091
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted risk-weighted assets(2) 184,973 332,084 255,158 90,077 862,292
---------------------------------------------- ------------- ---------- --------- --------- ---------
Half-year to 30 Jun 2020
Net operating income before change
in expected credit losses and other
credit impairment charges(1) 11,694 7,326 8,574 3 27,597
------------------------------------------- ------- ------- --------- --------- ---------
- external 10,071 7,742 10,511 (727) 27,597
-------------------------------------------
- inter-segment 1,623 (416) (1,937) 730 -
------------------------------------------- ------- ------- --------- --------- ---------
of which: net interest income/(expense) 8,331 5,080 2,435 (804) 15,042
------------------------------------------- ------- ------- --------- --------- ---------
Change in expected credit losses and
other credit impairment charges (2,328) (3,751) (1,195) (13) (7,287)
------------------------------------------- ------- ------- --------- --------- ---------
Net operating income/(expense) 9,366 3,575 7,379 (10) 20,310
------------------------------------------- ------- ------- --------- --------- ---------
Total operating expenses (7,695) (3,457) (4,813) 260 (15,705)
------------------------------------------- ------- ------- --------- --------- ---------
Operating profit/(loss) 1,671 118 2,566 250 4,605
------------------------------------------- ------- ------- --------- --------- ---------
Share of profit in associates and joint
ventures (8) -- -- 1,057 1,049
------------------------------------------- ------- ------- --------- --------- ---------
Adjusted profit before tax 1,663 118 2,566 1,307 5,654
------------------------------------------- ------- ------- --------- --------- ---------
% % % % %
------------------------------------------- ------- ------- --------- --------- -----------
Share of HSBC's adjusted profit before
tax 29.4 2.1 45.4 23.1 100.0
------------------------------------------- ------- ------- --------- --------- ---------
Adjusted cost efficiency ratio 65.8 47.2 56.1 (8,666.7) 56.9
------------------------------------------- ------- ------- --------- --------- ---------
Adjusted balance sheet data $m $m $m $m $m
------------------------------------------- ------- ------- --------- --------- -----------
Loans and advances to customers (net) 456,263 362,094 254,126 1,365 1,073,848
------------------------------------------- ------- ------- --------- --------- ---------
Interests in associates and joint ventures 428 15 140 25,659 26,242
------------------------------------------- ------- ------- --------- --------- ---------
Total external assets 856,599 579,865 1,472,925 173,932 3,083,321
------------------------------------------- ------- ------- --------- --------- ---------
Customer accounts 810,137 441,427 357,082 738 1,609,384
------------------------------------------- ------- ------- --------- --------- ---------
Adjusted risk-weighted assets(2) 168,309 347,910 286,594 85,332 888,145
------------------------------------------- ------- ------- --------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Adjusted risk-weighted assets are calculated using reported
risk-weighted assets adjusted for the effects of currency
translation differences and significant items.
HSBC adjusted profit before tax and balance sheet data (continued)
Half-year to 31 Dec 2020
------------------------------------------------------------
Global
Wealth Banking
and Personal Commercial and Corporate
Banking Banking Markets Centre Total
$m $m $m $m $m
---------------------------------------------- ------------- ---------- --------- --------- -----------
Net operating income/(expense) before
change in expected credit losses and
other credit impairment charges(1) 11,019 6,489 7,323 (308) 24,523
---------------------------------------------- ------------- ---------- --------- --------- ---------
- external 10,534 6,468 8,257 (736) 24,523
----------------------------------------------
- inter-segment 485 21 (934) 428 --
---------------------------------------------- ------------- ---------- --------- --------- ---------
of which: net interest income/(expense) 7,231 4,545 2,184 (533) 13,427
---------------------------------------------- ------------- ---------- --------- --------- ---------
Change in expected credit losses and
other credit impairment (charges)/recoveries (685) (1,265) (95) 14 (2,031)
---------------------------------------------- ------------- ---------- --------- --------- ---------
Net operating income/(expense) 10,334 5,224 7,228 (294) 22,492
---------------------------------------------- ------------- ---------- --------- --------- ---------
Total operating expenses (7,871) (3,491) (4,916) (673) (16,951)
---------------------------------------------- ------------- ---------- --------- --------- ---------
Operating profit/(loss) 2,463 1,733 2,312 (967) 5,541
---------------------------------------------- ------------- ---------- --------- --------- ---------
Share of profit in associates and joint
ventures 15 (1) - 1,125 1,139
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted profit before tax 2,478 1,732 2,312 158 6,680
---------------------------------------------- ------------- ---------- --------- --------- ---------
% % % % %
---------------------------------------------- ------------- ---------- --------- --------- -----------
Share of HSBC's adjusted profit before
tax 37.1 25.9 34.6 2.4 100.0
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted cost efficiency ratio 71.4 53.8 67.1 (218.5) 69.1
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted balance sheet data $m $m $m $m $m
---------------------------------------------- ------------- ---------- --------- --------- -----------
Loans and advances to customers (net) 469,218 342,951 223,395 1,254 1,036,818
---------------------------------------------- ------------- ---------- --------- --------- ---------
Interests in associates and joint ventures 446 14 141 26,261 26,862
---------------------------------------------- ------------- ---------- --------- --------- ---------
Total external assets 882,042 570,369 1,342,544 186,633 2,981,588
---------------------------------------------- ------------- ---------- --------- --------- ---------
Customer accounts 834,376 470,686 335,977 609 1,641,648
---------------------------------------------- ------------- ---------- --------- --------- ---------
Adjusted risk-weighted assets(2) 172,272 327,025 263,959 91,582 854,838
---------------------------------------------- ------------- ---------- --------- --------- ---------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Adjusted risk-weighted assets are calculated using reported
risk-weighted assets adjusted for the effects of currency
translation differences and significant items.
Consolidated income statement
Half-year to
------------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
$m $m $m
--------------------------------------------------------- -------- -------- ----------
Net interest income 13,098 14,509 13,069
--------------------------------------------------------- -------- -------- --------
- interest income 17,960 23,000 18,756
---------------------------------------------------------
- interest expense (4,862) (8,491) (5,687)
--------------------------------------------------------- -------- -------- --------
Net fee income 6,674 5,926 5,948
--------------------------------------------------------- -------- -------- --------
- fee income 8,458 7,480 7,571
---------------------------------------------------------
- fee expense (1,784) (1,554) (1,623)
--------------------------------------------------------- -------- -------- --------
Net income from financial instruments held for
trading or managed on a fair value basis 4,184 5,768 3,814
--------------------------------------------------------- -------- -------- --------
Net income/(expense) from assets and liabilities
of insurance businesses, including related derivatives,
measured at fair value through profit or loss 2,795 (1,290) 3,371
--------------------------------------------------------- -------- -------- --------
Change in fair value of designated debt and related
derivatives (67) 197 34
--------------------------------------------------------- -------- -------- --------
Changes in fair value of other financial instruments
mandatorily measured at fair value through profit
or loss 548 80 375
--------------------------------------------------------- -------- -------- --------
Gains less losses from financial investments 433 466 187
--------------------------------------------------------- -------- -------- --------
Net insurance premium income 5,663 5,020 5,073
--------------------------------------------------------- -------- -------- --------
Other operating income 155 471 56
--------------------------------------------------------- -------- -------- --------
Total operating income 33,483 31,147 31,927
--------------------------------------------------------- -------- -------- --------
Net insurance claims and benefits paid and movement
in liabilities to policyholders (7,932) (4,402) (8,243)
--------------------------------------------------------- -------- -------- --------
Net operating income before change in expected
credit losses and other credit impairment charges 25,551 26,745 23,684
--------------------------------------------------------- -------- -------- --------
Change in expected credit losses and other credit
impairment charges 719 (6,858) (1,959)
--------------------------------------------------------- -------- -------- --------
Net operating income 26,270 19,887 21,725
--------------------------------------------------------- -------- -------- --------
Employee compensation and benefits (9,610) (8,514) (9,562)
--------------------------------------------------------- -------- -------- --------
General and administrative expenses (5,675) (4,918) (6,197)
--------------------------------------------------------- -------- -------- --------
Depreciation and impairment of property, plant
and equipment and right-of-use assets (1,160) (1,209) (1,472)
--------------------------------------------------------- -------- -------- --------
Amortisation and impairment of intangible assets (642) (1,845) (674)
--------------------------------------------------------- -------- -------- --------
Goodwill impairment - (41) -
--------------------------------------------------------- -------- -------- --------
Total operating expenses (17,087) (16,527) (17,905)
--------------------------------------------------------- -------- -------- --------
Operating profit 9,183 3,360 3,820
--------------------------------------------------------- -------- -------- --------
Share of profit in associates and joint ventures 1,656 958 639
--------------------------------------------------------- -------- -------- --------
Profit before tax 10,839 4,318 4,459
--------------------------------------------------------- -------- -------- --------
Tax expense (2,417) (1,193) (1,485)
--------------------------------------------------------- -------- -------- --------
Profit for the period 8,422 3,125 2,974
--------------------------------------------------------- -------- -------- --------
Attributable to:
--------------------------------------------------------- -------- -------- ----------
- ordinary shareholders of the parent company 7,276 1,977 1,921
---------------------------------------------------------
- preference shareholders of the parent company 7 45 45
---------------------------------------------------------
- other equity holders 666 617 624
---------------------------------------------------------
- non-controlling interests 473 486 384
--------------------------------------------------------- -------- -------- --------
Profit for the period 8,422 3,125 2,974
--------------------------------------------------------- -------- -------- --------
$ $ $
--------------------------------------------------------- -------- -------- ----------
Basic earnings per ordinary share 0.36 0.10 0.10
--------------------------------------------------------- -------- -------- --------
Diluted earnings per ordinary share 0.36 0.10 0.09
--------------------------------------------------------- -------- -------- --------
Consolidated statement of comprehensive income
Half-year to
---------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
$m $m $m
----------------------------------------------------------- ------- ------- ---------
Profit for the period 8,422 3,125 2,974
----------------------------------------------------------- ------- ------- -------
Other comprehensive income/(expense)
----------------------------------------------------------- ------- ------- ---------
Items that will be reclassified subsequently to
profit or loss when specific conditions are met:
----------------------------------------------------------- ------- ------- ---------
Debt instruments at fair value through other comprehensive
income (1,368) 1,747 3
----------------------------------------------------------- ------- ------- -------
- fair value gains/(losses) (1,392) 2,654 293
-----------------------------------------------------------
- fair value gains transferred to the income statement
on disposal (375) (454) (214)
-----------------------------------------------------------
- expected credit recoveries/(losses) recognised
in the income statement (26) 109 (61)
-----------------------------------------------------------
- income taxes 425 (562) (15)
----------------------------------------------------------- ------- ------- -------
Cash flow hedges (238) 476 (5)
----------------------------------------------------------- ------- ------- -------
- fair value gains/(losses) 877 255 (412)
-----------------------------------------------------------
- fair value losses/(gains) reclassified to the
income statement (1,195) 364 405
-----------------------------------------------------------
- income taxes and other movements 80 (143) 2
----------------------------------------------------------- ------- ------- -------
Share of other comprehensive income/(expense) of
associates and joint ventures 104 (115) 42
----------------------------------------------------------- ------- ------- -------
- share for the period 104 (115) 42
-----------------------------------------------------------
Exchange differences (449) (4,552) 9,407
----------------------------------------------------------- ------- ------- -------
Items that will not be reclassified subsequently
to profit or loss:
----------------------------------------------------------- ------- ------- ---------
Remeasurement of defined benefit asset/(liability) (747) 1,182 (348)
----------------------------------------------------------- ------- ------- -------
- before income taxes (775) 1,703 (480)
-----------------------------------------------------------
- income taxes 28 (521) 132
----------------------------------------------------------- ------- ------- -------
Changes in fair value of financial liabilities
designated at fair value upon initial recognition
arising from changes in own credit risk 155 2,354 (2,187)
----------------------------------------------------------- ------- ------- -------
- before income taxes (2) 2,936 (2,746)
-----------------------------------------------------------
- income taxes 157 (582) 559
----------------------------------------------------------- ------- ------- -------
Equity instruments designated at fair value through
other comprehensive income (348) (123) 335
----------------------------------------------------------- ------- ------- -------
- fair value gains/(losses) (345) (122) 334
-----------------------------------------------------------
- income taxes (3) (1) 1
----------------------------------------------------------- ------- ------- -------
Effects of hyperinflation 166 72 121
----------------------------------------------------------- ------- ------- -------
Other comprehensive income/(expense) for the period,
net of tax (2,725) 1,041 7,368
----------------------------------------------------------- ------- ------- -------
Total comprehensive income for the period 5,697 4,166 10,342
----------------------------------------------------------- ------- ------- -------
Attributable to:
----------------------------------------------------------- ------- ------- ---------
- ordinary shareholders of the parent company 4,612 3,043 9,103
-----------------------------------------------------------
- preference shareholders of the parent company 7 45 45
-----------------------------------------------------------
- other equity holders 666 617 624
-----------------------------------------------------------
- non-controlling interests 412 461 570
----------------------------------------------------------- ------- ------- -------
Total comprehensive income for the period 5,697 4,166 10,342
----------------------------------------------------------- ------- ------- -------
Consolidated balance sheet
At
----------------------
30 Jun 31 Dec
2021 2020
$m $m
------------------------------------------------------ --------- -----------
Assets
------------------------------------------------------ --------- -----------
Cash and balances at central banks 393,559 304,481
------------------------------------------------------ --------- ---------
Items in the course of collection from other banks 9,406 4,094
------------------------------------------------------ --------- ---------
Hong Kong Government certificates of indebtedness 41,880 40,420
------------------------------------------------------ --------- ---------
Trading assets 260,250 231,990
------------------------------------------------------ --------- ---------
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 49,120 45,553
------------------------------------------------------ --------- ---------
Derivatives 209,516 307,726
------------------------------------------------------ --------- ---------
Loans and advances to banks 86,886 81,616
------------------------------------------------------ --------- ---------
Loans and advances to customers 1,059,511 1,037,987
------------------------------------------------------ --------- ---------
Reverse repurchase agreements - non-trading 201,714 230,628
------------------------------------------------------ --------- ---------
Financial investments 434,576 490,693
------------------------------------------------------ --------- ---------
Prepayments, accrued income and other assets 175,155 156,412
------------------------------------------------------ --------- ---------
Current tax assets 405 954
------------------------------------------------------ --------- ---------
Interests in associates and joint ventures 28,709 26,684
------------------------------------------------------ --------- ---------
Goodwill and intangible assets 20,703 20,443
------------------------------------------------------ --------- ---------
Deferred tax assets 4,615 4,483
------------------------------------------------------ --------- ---------
Total assets 2,976,005 2,984,164
------------------------------------------------------ --------- ---------
Liabilities and equity
------------------------------------------------------ --------- -----------
Liabilities
------------------------------------------------------ --------- -----------
Hong Kong currency notes in circulation 41,880 40,420
------------------------------------------------------ --------- ---------
Deposits by banks 100,448 82,080
------------------------------------------------------ --------- ---------
Customer accounts 1,669,091 1,642,780
------------------------------------------------------ --------- ---------
Repurchase agreements - non-trading 112,798 111,901
------------------------------------------------------ --------- ---------
Items in the course of transmission to other banks 15,100 4,343
------------------------------------------------------ --------- ---------
Trading liabilities 89,637 75,266
------------------------------------------------------ --------- ---------
Financial liabilities designated at fair value 151,686 157,439
------------------------------------------------------ --------- ---------
Derivatives 200,156 303,001
------------------------------------------------------ --------- ---------
Debt securities in issue 84,218 95,492
------------------------------------------------------ --------- ---------
Accruals, deferred income and other liabilities 164,800 128,624
------------------------------------------------------ --------- ---------
Current tax liabilities 929 690
------------------------------------------------------ --------- ---------
Liabilities under insurance contracts 110,572 107,191
------------------------------------------------------ --------- ---------
Provisions 2,814 3,678
------------------------------------------------------ --------- ---------
Deferred tax liabilities 4,338 4,313
------------------------------------------------------ --------- ---------
Subordinated liabilities 20,774 21,951
------------------------------------------------------ --------- ---------
Total liabilities 2,769,241 2,779,169
------------------------------------------------------ --------- ---------
Equity
------------------------------------------------------ --------- -----------
Called up share capital 10,376 10,347
------------------------------------------------------ --------- ---------
Share premium account 14,600 14,277
------------------------------------------------------ --------- ---------
Other equity instruments 22,414 22,414
------------------------------------------------------ --------- ---------
Other reserves 6,509 8,833
------------------------------------------------------ --------- ---------
Retained earnings 144,319 140,572
------------------------------------------------------ --------- ---------
Total shareholders' equity 198,218 196,443
------------------------------------------------------ --------- ---------
Non-controlling interests 8,546 8,552
------------------------------------------------------ --------- ---------
Total equity 206,764 204,995
------------------------------------------------------ --------- ---------
Total liabilities and equity 2,976,005 2,984,164
------------------------------------------------------ --------- ---------
Consolidated statement of cash flows
Half-year to
---------------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
$m $m $m
------------------------------------------------------- --------- --------- -----------
Profit before tax 10,839 4,318 4,459
------------------------------------------------------- --------- --------- ---------
Adjustments for non-cash items:
------------------------------------------------------- --------- --------- -----------
Depreciation, amortisation and impairment 1,802 3,095 2,146
------------------------------------------------------- --------- --------- ---------
Net gain from investing activities (485) (405) (136)
------------------------------------------------------- --------- --------- ---------
Share of profits in associates and joint ventures (1,656) (958) (639)
-------------------------------------------------------
Change in expected credit losses gross of recoveries
and other credit impairment charges (484) 6,875 2,221
------------------------------------------------------- --------- --------- ---------
Provisions including pensions 301 277 887
------------------------------------------------------- --------- --------- ---------
Share-based payment expense 254 195 238
------------------------------------------------------- --------- --------- ---------
Other non-cash items included in profit before
tax 205 (718) (188)
------------------------------------------------------- --------- --------- ---------
Change in operating assets (3,811) 11,185 (23,788)
------------------------------------------------------- --------- --------- ---------
Change in operating liabilities 49,015 134,734 68,164
------------------------------------------------------- --------- --------- ---------
Elimination of exchange differences(1) 5,212 3,775 (29,524)
------------------------------------------------------- --------- --------- ---------
Dividends received from associates 10 120 641
------------------------------------------------------- --------- --------- ---------
Contributions paid to defined benefit plans (342) (335) (160)
------------------------------------------------------- --------- --------- ---------
Tax paid (997) (2,373) (1,886)
------------------------------------------------------- --------- --------- ---------
Net cash from operating activities 59,863 159,785 22,435
------------------------------------------------------- --------- --------- ---------
Purchase of financial investments (263,198) (271,830) (224,839)
------------------------------------------------------- --------- --------- ---------
Proceeds from the sale and maturity of financial
investments 298,596 225,733 251,257
------------------------------------------------------- --------- --------- ---------
Net cash flows from the purchase and sale of property,
plant and equipment (375) (447) (999)
------------------------------------------------------- --------- --------- ---------
Net cash flows from purchase of customer and loan
portfolios 1,063 244 1,118
------------------------------------------------------- --------- --------- ---------
Net investment in intangible assets (1,011) (957) (1,107)
------------------------------------------------------- --------- --------- ---------
Net cash flow on (purchase)/disposal of subsidiaries,
businesses, associates and joint ventures (84) (409) (194)
------------------------------------------------------- --------- --------- ---------
Net cash from investing activities 34,991 (47,666) 25,236
------------------------------------------------------- --------- --------- ---------
Issue of ordinary share capital and other equity
instruments 1,996 -- 1,497
Net sales/(purchases) of own shares for market-making
and investment purposes 1 (48) (133)
------------------------------------------------------- --------- --------- ---------
Redemption of preference shares and other equity
instruments (3,450) (398) --
------------------------------------------------------- --------- --------- ---------
Subordinated loan capital repaid (852) (1,538) (2,000)
------------------------------------------------------- --------- --------- ---------
Dividends paid to shareholders of the parent company
and non-controlling interests (4,121) (1,204) (819)
------------------------------------------------------- --------- --------- ---------
Net cash from financing activities (6,426) (3,188) (1,455)
------------------------------------------------------- --------- --------- ---------
Net increase/(decrease) in cash and cash equivalents 88,428 108,931 46,216
------------------------------------------------------- --------- --------- ---------
Cash and cash equivalents at the beginning of the
period 468,323 293,742 395,218
------------------------------------------------------- --------- --------- ---------
Exchange differences in respect of cash and cash
equivalents (4,818) (7,455) 26,889
------------------------------------------------------- --------- --------- ---------
Cash and cash equivalents at the end of the period 551,933 395,218 468,323
------------------------------------------------------- --------- --------- ---------
Interest received was $19,761m (1H20: $25,159m; 2H20: $20,419m),
interest paid was $6,552m (1H20: $10,573m; 2H20: $7,167m) and
dividends received (excluding dividends received from associates,
which are presented separately above) were $801m (1H20: $447m;
2H20: $711m).
1 Adjustments to bring changes between opening and closing
balance sheet amounts to average rates. This is not done on a
line-by-line basis, as details cannot be determined without
unreasonable expense.
Consolidated statement of changes in equity
Other reserves
---------------------------------------
Called
up
share
capital Financial Cash Merger
and Other assets flow Foreign and Total Non-
share equity Retained at FVOCI hedging exchange other share-holders' controlling Total
premium instru-ments earnings reserve reserve reserve reserves equity interests equity
$m $m $m $m $m $m $m $m $m $m
At 1 Jan 2021 24,624 22,414 140,572 1,816 457 (20,375) 26,935 196,443 8,552 204,995
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Profit for the period -- -- 7,949 -- -- -- -- 7,949 473 8,422
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Other comprehensive
income (net of tax) -- -- (337) (1,629) (234) (464) -- (2,664) (61) (2,725)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
* debt instruments at fair value through other
comprehensive income -- -- -- (1,351) -- -- -- (1,351) (17) (1,368)
------------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income -- -- -- (278) -- -- -- (278) (70) (348)
------------------------------------------------------------
- cash flow hedges -- -- -- -- (234) -- -- (234) (4) (238)
------------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value upon initial recognition
arising from changes in own credit risk -- - -- 155 -- -- -- -- 155 -- 155
------------------------------------------------------------
* remeasurement of defined benefit asset/liability -- -- (762) -- -- -- -- (762) 15 (747)
------------------------------------------------------------
* share of other comprehensive income of associates and
joint ventures -- -- 104 -- -- -- -- 104 -- 104
- effects of hyperinflation -- -- 166 -- -- -- -- 166 -- 166
------------------------------------------------------------
- exchange differences -- -- - -- -- (464) -- (464) 15 (449)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Total comprehensive
income for the period -- -- 7,612 (1,629) (234) (464) -- 5,285 412 5,697
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Shares issued under
employee remuneration
and share plans 352 -- (335) -- -- -- -- 17 -- 17
Capital securities
issued(1) -- 2,000 (4) -- -- -- -- 1,996 -- 1,996
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Dividends to shareholders -- -- (3,732) -- -- -- -- (3,732) (389) (4,121)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Redemption of securities(2) -- (2,000) -- -- -- -- -- (2,000) -- (2,000)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Cost of share-based
payment arrangements -- -- 254 -- -- -- -- 254 -- 254
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Other movements -- -- (48) 3 -- -- -- (45) (29) (74)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
At 30 Jun 2021 24,976 22,414 144,319 190 223 (20,839) 26,935 198,218 8,546 206,764
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
At 1 Jan 2020 24,278 20,871 136,679 (108) (2) (25,133) 27,370 183,955 8,713 192,668
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Profit for the period -- -- 2,639 -- -- -- -- 2,639 486 3,125
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Other comprehensive
income (net of tax) -- -- 3,506 1,654 465 (4,559) -- 1,066 (25) 1,041
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
* debt instruments at fair value through other
comprehensive income -- -- -- 1,735 -- -- -- 1,735 12 1,747
------------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income -- -- -- (81) -- -- -- (81) (42) (123)
------------------------------------------------------------
- cash flow hedges -- -- -- -- 465 - -- 465 11 476
------------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value upon initial recognition
arising from changes in own credit risk -- -- 2,354 -- -- -- -- 2,354 -- 2,354
------------------------------------------------------------
* remeasurement of defined benefit asset/liability -- -- 1,195 -- -- -- -- 1,195 (13) 1,182
------------------------------------------------------------
* share of other comprehensive income of associates and
joint ventures -- -- (115) -- -- -- -- (115) -- (115)
------------------------------------------------------------
- effects of hyperinflation -- -- 72 -- - - -- 72 -- 72
------------------------------------------------------------
- exchange differences -- -- -- -- - (4,559) -- (4,559) 7 (4,552)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Total comprehensive
income for the period -- -- 6,145 1,654 465 (4,559) -- 3,705 461 4,166
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Shares issued under
employee remuneration
and share plans 336 -- (329) -- -- -- -- 7 -- 7
Dividends to shareholders -- -- (662) -- -- -- -- (662) (542) (1,204)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Cost of share-based
payment arrangements -- -- 195 -- -- -- -- 195 -- 195
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Other movements -- 43 (219) 12 -- -- -- (164) (447) (611)
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
At 30 Jun 2020 24,614 20,914 141,809 1,558 463 (29,692) 27,370 187,036 8,185 195,221
------------------------------------------------------------ ------- ------------ -------- ---------- ------- -------- -------- -------------- ----------- -------
Consolidated statement of changes in equity (continued)
Other reserves
--------------------------------------
Called
up
share
capital Other Financial Cash Merger Total
and equity assets flow Foreign and share- Non-
share instru- Retained at FVOCI hedging exchange other holders' controlling Total
premium ments earnings reserve reserve reserve reserves equity interests equity
$m $m $m $m $m $m $m $m $m $m
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- ---------
At 1 Jul 2020 24,614 20,914 141,809 1,558 463 (29,692) 27,370 187,036 8,185 195,221
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Profit for the period -- -- 2,590 -- -- -- -- 2,590 384 2,974
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Other comprehensive
income
(net of tax) -- -- (2,388) 259 (6) 9,317 -- 7,182 186 7,368
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
* debt instruments at fair value through other
comprehensive income -- -- -- 11 -- -- -- 11 (8) 3
------------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income -- -- -- 248 -- -- -- 248 87 335
------------------------------------------------------------
- cash flow hedges -- -- -- -- (6) -- -- (6) 1 (5)
------------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value upon initial recognition
arising from changes in own credit risk -- -- (2,187) -- -- -- -- (2,187) -- (2,187)
------------------------------------------------------------
* remeasurement of defined benefit asset/liability -- -- (364) -- -- -- -- (364) 16 (348)
------------------------------------------------------------
* share of other comprehensive income of associates and
joint ventures -- -- 42 -- - -- -- -- 42 -- 42
------------------------------------------------------------
- effects of hyperinflation -- -- 121 -- -- -- -- 121 -- 121
------------------------------------------------------------
--
- exchange differences -- -- -- -- -- 9,317 - 9,317 90 9,407
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Total comprehensive
income for the period -- -- 202 259 (6) 9,317 -- 9,772 570 10,342
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Shares issued under
employee remuneration
and share plans 10 -- (10) -- -- -- -- -- -- --
Capital securities
issued(1) -- 1,500 (3) -- -- -- -- 1,497 -- 1,497
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Dividends to shareholders -- -- (669) -- -- -- -- (669) (150) (819)
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
--
Redemption of securities(2) -- -- (1,450) - -- -- -- (1,450) -- (1,450)
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Transfers(3) -- -- 435 -- -- -- (435) -- -- --
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Cost of share-based
payment arrangements -- -- 239 - -- -- -- -- 239 -- 239
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
Other movements -- -- 19 (1) -- -- -- 18 (53) (35)
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
At 31 Dec 2020 24,624 22,414 140,572 1,816 457 (20,375) 26,935 196,443 8,552 204,995
------------------------------------------------------------ ------- ------- -------- --------- ------- -------- -------- -------- ----------- -------
1 During 2021, HSBC Holdings issued $2,000m of Additional Tier1
instruments on which there were $4m of external issue costs. In
2020, HSBC Holdings issued 1,500m of perpetual subordinated
contingent convertible securities.
2 During 2021, HSBC Holdings redeemed $2,000m 6.875% perpetual
subordinated contingent convertible securities. In 2020, HSBC
Holdings called and later redeemed 1,450m 6.20% non-cumulative US
dollar preference shares.
3 Permitted transfers from the merger reserve to retained
earnings were made when the investment in HSBC Overseas Holdings
(UK) Limited was previously impaired. In 2020, an additional
impairment of $435m was recognised and a permitted transfer of this
amount was made from the merger reserve to retained earnings.
1 Basis of preparation and significant accounting policies
--------------------------------------------------------
(a) Compliance with International Financial Reporting Standards
Our interim condensed financial statements have been prepared on
the basis of the policies set out in the 2020 annual financial
statements and in accordance with UK adopted IAS 34 'Interim
Financial Reporting', IAS 34 'Interim Financial Reporting' as
issued by the International Accounting Standards Board ('IASB'),
IAS 34 'Interim Financial Reporting' as adopted by the EU and the
Disclosure Guidance and Transparency Rules sourcebook of the UK's
Financial Conduct Authority. Therefore, they include an explanation
of events and transactions that are significant to an understanding
of the changes in HSBC's financial position and performance since
the end of 2020. These financial statements should be read in
conjunction with the Annual Report and Accounts 2020, which were
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
and International Financial Reporting Standards ('IFRSs') as issued
by the IASB, including interpretations issued by the IFRS
Interpretations Committee.
At 30 June 2021, there were no unendorsed standards effective
for the half-year to 30 June 2021 affecting these financial
statements, and there was no difference between IFRSs adopted by
the UK, IFRSs as adopted by the EU and IFRSs issued by the IASB in
terms of their application to HSBC.
The financial statements for HSBC for the year ended 31 December
2021 will be prepared in accordance with IFRS as adopted by the UK,
international financial reporting standards adopted by the EU and
IFRSs as issued by the IASB, including interpretations issued by
the IFRS Interpretations Committee.
Standards applied during the half-year to 30 June 2021
There were no new standards or amendments to standards that had
an effect on these interim condensed financial statements.
(b) Use of estimates and judgements
Management believes that our critical accounting estimates and
judgements are those that relate to impairment of amortised cost
and FVOCI debt financial assets, the valuation of financial
instruments, deferred tax assets, provisions for liabilities,
defined benefit obligations, interests in associates, impairment of
non-financial assets and post-employment benefits. There were no
changes in the current period to the critical accounting estimates
and judgements applied in 2020, which are stated on pages 77 and
289 of the Annual Report and Accounts 2020.
(c) Composition of the Group
There were no material changes in the composition of the Group
in the half-year to 30 June 2021. For further details of future
business disposals, see Note 8 'Business disposals'.
(d) Future accounting developments
IFRS 17 'Insurance Contracts' was issued in May 2017, with
amendments to the standard issued in June 2020. It has not been
adopted for use in the UK or in the EU. The standard sets out the
requirements that an entity should apply in accounting for
insurance contracts it issues and reinsurance contracts it holds.
Following the amendments, IFRS 17 is effective from 1 January 2023.
The Group is in the process of implementing IFRS 17. Industry
practice and interpretation of the standard are still developing.
Therefore, the likely impact of its implementation remains
uncertain. However, compared with the Group's current accounting
policy for insurance, there will be no PVIF asset recognised;
rather the estimated future profit will be included in the
measurement of the insurance contract liability as the contractual
service margin and gradually recognised in revenue as services are
provided over the duration of the insurance contract.
(e) Going concern
The financial statements are prepared on a going concern basis,
as the Directors are satisfied that the Group and parent company
have the resources to continue in business for the foreseeable
future. In making this assessment, the Directors have considered a
wide range of information relating to present and future
conditions, including future projections of profitability, cash
flows, capital requirements and capital resources. These
considerations include stressed scenarios that reflect the
continuing uncertainty that the global Covid-19 pandemic has had on
HSBC's operations, as well as considering potential impacts from
other top and emerging risks, and the related impact on
profitability, capital and liquidity.
(f) Accounting policies
The accounting policies that we applied for these interim
condensed consolidated financial statements are consistent with
those described on pages 288 to 299 of the Annual Report and
Accounts 2020, as are the methods of computation.
2 Dividends
---------
On 2 August 2021, the Directors approved an interim dividend for
the 2021 half-year of $0.07 per ordinary share in respect of the
financial year ending 31 December 2021. This distribution amounts
to approximately $1,430m and will be payable on 30 September 2021.
No liability is recognised in the financial statements in respect
of these dividends.
Dividends paid to shareholders of HSBC Holdings plc
Half-year to
------------------------------------------------------------------------
30 Jun 2021 30 Jun 2020 31 Dec 2020
Settled Settled
Per in Per in Per Settled
share Total scrip share Total scrip share Total in scrip
$ $m $m $ $m $m $ $m $m
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
Dividends paid on ordinary
shares
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
In respect of previous year:
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
- fourth interim dividend 0.15 3,059 -- -- -- -- -- -- --
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- -------
In respect of current year:
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
-- -- -- -- -- -- -- -- --
* first interim dividend
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- -------
-- -- -- -- -- -- -- -- --
* second interim dividend
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- -------
-- -- -- -- -- -- -- -- --
* third interim dividend
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- -------
Total 0.15 3,059 -- -- -- -- -- -- --
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- -------
Total dividends on preference
shares classified as equity
(paid quarterly)(1) 4.99 7 31.00 45 31.00 45
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
Total coupons on capital
securities classified as
equity 666 617 624
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
Dividends to shareholders 3,732 662 669
------------------------------ ------ ----- ------- ------ ----- ------- ------ ----- ---------
1 HSBC Holdings called $1,450m 6.20% non-cumulative US dollar
preference shares on 10 December 2020. The security was redeemed
and cancelled on 13 January 2021.
Interim dividend for the 2021 half-year
On 2 August 2021, the Directors approved an interim dividend for
the 2021 half-year of $0.07 per ordinary share in respect of the
financial year ending 31 December 2021. The dividend will be
payable on 30 September 2021 to holders on the Principal Register
in the UK, the Hong Kong Overseas Branch Register or the Bermuda
Overseas Branch Register on 20 August 2021.
The dividend will be payable in US dollars, or in pounds
sterling or Hong Kong dollars at the forward exchange rates quoted
by HSBC Bank plc in London at or about 11.00am on 20 September
2021, or a combination of these currencies. Particulars of these
arrangements will be sent to shareholders on or about 27 August
2021 and changes to currency elections must be received by 16
September 2021. The ordinary shares in London, Hong Kong and
Bermuda, and American Depositary Shares ('ADSs') in New York will
be quoted ex-dividend on 19 August 2021. As announced on 23
February 2021, the Group has decided to discontinue the scrip
dividend option.
The dividend will be payable on ADSs, each of which represents
five ordinary shares, on 30 September 2021 to holders of record
on
20 August 2021. The dividend of $0.35 per ADS will be payable by
the depositary in US dollars. Alternatively, the cash dividend may
be invested in additional ADSs by participants in the dividend
reinvestment plan operated by the depositary. Elections must be
received by 10 September 2021.
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 in the UK,
Hong Kong Overseas Branch Registrar or Bermuda Overseas Branch
registrar should do so before 4.00pm local time on 20 August 2021
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 20 August 2021.
Any person wishing to remove ordinary shares to or from each
register must do so before 4.00pm local time on 19 August 2021.
Transfer of ADSs must be lodged with the depositary by 11.00am
on 20 August 2021 in order to receive the dividend. 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.
Dividend on preference share
A quarterly dividend of GBP0.01 per Series A sterling preference
share is payable on 15 March, 15 June, 15 September and 15 December
2021 for the quarter then ended at the sole and absolute discretion
of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC
Holdings plc has approved a quarterly dividend to be payable on 15
September 2021 to holders of record on 31 August 2021.
3 Earnings per share
------------------
Basic earnings per ordinary share is calculated by dividing the
profit attributable to ordinary shareholders of the parent company
by the weighted average number of ordinary shares outstanding,
excluding own shares held. Diluted earnings per ordinary share is
calculated by dividing the basic earnings, which require no
adjustment for the effects of dilutive potential ordinary shares,
by the weighted average number of ordinary shares outstanding,
excluding own shares held, plus the weighted average number of
ordinary shares that would be issued on conversion of dilutive
potential ordinary shares.
Profit attributable to ordinary shareholders of the parent company
Half-year to
------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
$m $m $m
---------------------------------------------------------- ------ ------ --------
Profit attributable to shareholders of the parent company 7,949 2,639 2,590
---------------------------------------------------------- ------ ------ ------
Dividend payable on preference shares classified as
equity (7) (45) (45)
---------------------------------------------------------- ------ ------ ------
Coupon payable on capital securities classified as equity (666) (617) (624)
---------------------------------------------------------- ------ ------ ------
Profit attributable to ordinary shareholders of the
parent company 7,276 1,977 1,921
---------------------------------------------------------- ------ ------ ------
Basic and diluted earnings per share
Half-year to
------------------------------------------------------------------------------------
30 Jun 2021 30 Jun 2020 31 Dec 2020
Amount Amount Amount
Number per Number per Number per
Profit of shares share Profit of shares share Profit of shares share
$m (millions) $ $m (millions) $ $m (millions) $
---------------- ------ ---------- ------ ------ ---------- ------ ------ ---------- --------
Basic(1) 7,276 20,211 0.36 1,977 20,162 0.10 1,921 20,176 0.10
---------------- ------ ---------- ------ ------ ---------- ------ ------ ---------- ------
Effect of
dilutive
potential
ordinary shares 97 58 63
---------------- ------ ---------- ------ ------ ---------- ------ ------ ---------- --------
Diluted(1) 7,276 20,308 0.36 1,977 20,220 0.10 1,921 20,239 0.09
---------------- ------ ---------- ------ ------ ---------- ------ ------ ---------- ------
1 Weighted average number of ordinary shares outstanding (basic)
or assuming dilution (diluted).
4 Adjusted balance sheet reconciliation
-------------------------------------
At
----------------------------------------------------------
30 Jun 2021 31 Dec 2020
------------
Reported and Adjusted Currency translation
adjusted Reported
$m $m $m $m
-------------------------------- ------------ --------- -------------------- -----------
Loans and advances to customers
(net) 1,059,511 1,036,818 1,169 1,037,987
-------------------------------- ------------ --------- -------------------- ---------
Interests in associates
and joint ventures 28,709 26,862 (178) 26,684
-------------------------------- ------------ --------- -------------------- ---------
Total external assets 2,976,005 2,981,588 2,576 2,984,164
-------------------------------- ------------ --------- -------------------- ---------
Customer accounts 1,669,091 1,641,648 1,132 1,642,780
-------------------------------- ------------ --------- -------------------- ---------
5 Reconciliation of reported and adjusted items
---------------------------------------------
Half-year to
------------------------------
30 Jun 30 Jun 31 Dec
2021 2020 2020
$m $m $m
------------------------------------------------------ -------- -------- ----------
Revenue(1)
------------------------------------------------------ -------- -------- ----------
Reported 25,551 26,745 23,684
------------------------------------------------------ -------- -------- --------
Currency translation 1,117 630
------------------------------------------------------ -------- -------- --------
Significant items 246 (265) 209
------------------------------------------------------ -------- -------- --------
- customer redress programmes (18) (26) 47
------------------------------------------------------
- disposals, acquisitions and investment in new
businesses -- 8 2
------------------------------------------------------
- fair value movements on financial instruments(2) 194 (299) 35
------------------------------------------------------
- restructuring and other related costs(3) 70 49 121
------------------------------------------------------
- currency translation on significant items 3 4
------------------------------------------------------ -------- -------- --------
Adjusted 25,797 27,597 24,523
------------------------------------------------------ -------- -------- --------
ECL
------------------------------------------------------ -------- -------- ----------
Reported 719 (6,858) (1,959)
------------------------------------------------------ -------- -------- --------
Currency translation (429) (72)
------------------------------------------------------ -------- -------- --------
Adjusted 719 (7,287) (2,031)
------------------------------------------------------ -------- -------- --------
Operating expenses
------------------------------------------------------ -------- -------- ----------
Reported (17,087) (16,527) (17,905)
------------------------------------------------------ -------- -------- --------
Currency translation (887) (471)
------------------------------------------------------ -------- -------- --------
Significant items 865 1,709 1,425
------------------------------------------------------ -------- -------- --------
- customer redress programmes 17 50 (104)
- impairment of goodwill and other intangibles -- 1,025 65
------------------------------------------------------
- past service costs of guaranteed minimum pension
benefits equalisation -- -- 17
------------------------------------------------------
- restructuring and other related costs 848 505 1,403
------------------------------------------------------
- settlements and provisions in connection with
legal and regulatory matters -- 5 7
------------------------------------------------------
- currency translation on significant items -- 124 37
------------------------------------------------------ -------- -------- --------
Adjusted (16,222) (15,705) (16,951)
------------------------------------------------------ -------- -------- --------
Share of profit in associates and joint ventures
------------------------------------------------------ -------- -------- ----------
Reported 1,656 958 639
------------------------------------------------------ -------- -------- --------
Currency translation 91 38
------------------------------------------------------ -------- -------- --------
Significant items -- -- 462
------------------------------------------------------ -------- -------- --------
- impairment of goodwill(4) -- -- 462
Adjusted 1,656 1,049 1,139
------------------------------------------------------ -------- -------- --------
Profit before tax
------------------------------------------------------ -------- -------- ----------
Reported 10,839 4,318 4,459
------------------------------------------------------ -------- -------- --------
Currency translation (108) 125
------------------------------------------------------ -------- -------- --------
Significant items 1,111 1,444 2,096
------------------------------------------------------ -------- -------- --------
- revenue 246 (265) 209
------------------------------------------------------
- operating expenses 865 1,709 1,425
------------------------------------------------------
- share of profit in associates and joint ventures(4) -- -- 462
------------------------------------------------------ -------- -------- --------
Adjusted 11,950 5,654 6,680
------------------------------------------------------ -------- -------- --------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
2 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
3 Comprises losses associated with the RWA reduction commitments
and gains relating to the business update in February 2020.
4 During the six months to 31 December 2020, The Saudi British
Bank ('SABB'), an associate of HSBC, impaired the goodwill that
arose following the merger with Alawwal bank in 2019. HSBC's
post-tax share of the goodwill impairment was $462m.
6 Contingent liabilities, contractual commitments and guarantees
--------------------------------------------------------------
At
------------------
30 Jun 31 Dec
2021 2020
$m $m
------------------------------------------------------------ ------- ---------
Guarantees and contingent liabilities:
------------------------------------------------------------ ------- ---------
- financial guarantees 27,274 18,384
------------------------------------------------------------ ------- -------
* performance and other guarantees 80,641 78,114
------------------------------------------------------------ ------- -------
* other contingent liabilities 838 1,219
------------------------------------------------------------ ------- -------
At the end of the period 108,753 97,717
------------------------------------------------------------ ------- -------
Commitments:(1)
------------------------------------------------------------ ------- ---------
* documentary credits and short-term trade-related
transactions 9,201 7,178
------------------------------------------------------------ ------- -------
* forward asset purchases and forward deposits placed 72,916 66,506
------------------------------------------------------------ ------- -------
* standby facilities, credit lines and other
commitments to lend 764,768 771,086
------------------------------------------------------------ ------- -------
At the end of the period 846,885 844,770
------------------------------------------------------------ ------- -------
1 Includes $661,373m of commitments at 30 June 2021 (31 December
2020: $659,783m), to which the impairment requirements in IFRS 9
are applied where HSBC has become party to an irrevocable
commitment.
Contingent liabilities arising from legal proceedings and
regulatory and other matters against Group companies are excluded
from this note but are disclosed in Note 7 below and Notes 11 and
13 of the Interim Report 2021.
7 Legal proceedings and regulatory matters
----------------------------------------
HSBC is party to legal proceedings and regulatory matters in a
number of jurisdictions arising out of its normal business
operations. Apart from the matters described below, HSBC considers
that none of these matters are material. The recognition of
provisions is determined in accordance with the accounting policies
set out in Note 1 of the Annual Report and Accounts 2020. While the
outcomes of legal proceedings and regulatory matters are inherently
uncertain, management believes that, based on the information
available to it, appropriate provisions have been made in respect
of these matters as at 30 June 2021 (see Note 11). Where an
individual provision is material, the fact that a provision has
been made is stated and quantified, except to the extent that doing
so would be seriously prejudicial. Any provision recognised does
not constitute an admission of wrongdoing or legal liability. It is
not practicable to provide an aggregate estimate of potential
liability for our legal proceedings and regulatory matters as a
class of contingent liabilities.
Bernard L. Madoff Investment Securities LLC
Bernard L. Madoff ('Madoff') was arrested in December 2008 and
later pleaded guilty to running a Ponzi scheme. His firm, Bernard
L. Madoff Investment Securities LLC ('Madoff Securities'), is being
liquidated in the US by a trustee (the 'Trustee').
Various non-US HSBC companies provided custodial, administration
and similar services to a number of funds incorporated outside the
US whose assets were invested with Madoff Securities. Based on
information provided by Madoff Securities as at 30 November 2008,
the purported aggregate value of these funds was $8.4bn, including
fictitious profits reported by Madoff.
Based on information available to HSBC, the funds' actual
transfers to Madoff Securities minus their actual withdrawals from
Madoff Securities during the time HSBC serviced the funds are
estimated to have totalled approximately $4bn. Various HSBC
companies have been named as defendants in lawsuits arising out of
Madoff Securities' fraud.
US litigation: The Trustee has brought lawsuits against various
HSBC companies and others in the US Bankruptcy Court for the
Southern District of New York (the 'US Bankruptcy Court'), seeking
recovery of transfers from Madoff Securities to HSBC in an amount
not yet pleaded or determined. HSBC and other parties to the
actions have moved to dismiss the Trustee's claims. The US
Bankruptcy Court granted HSBC's motion to dismiss with respect to
certain of the Trustee's claims in November 2016. In February 2019,
the US Court of Appeals for the Second Circuit (the 'Second Circuit
Court of Appeals') reversed that dismissal. Following the US
Supreme Court's denial of certiorari in June 2020, the cases were
remanded to the US Bankruptcy Court, where they are now
pending.
Fairfield Sentry Limited, Fairfield Sigma Limited and Fairfield
Lambda Limited (together, 'Fairfield') (in liquidation since July
2009) have brought a lawsuit in the US against fund shareholders,
including HSBC companies that acted as nominees for clients,
seeking restitution of redemption payments. In December 2018, the
US Bankruptcy Court issued an opinion, which ruled in favour of the
defendants' motion to dismiss in respect of certain claims by the
liquidators for Fairfield and granted a motion by the liquidators
to file amended complaints. As a result of that opinion, all claims
against one of the HSBC companies, and certain claims against the
remaining HSBC defendants, were dismissed. In May 2019, the
liquidators appealed certain issues from the US Bankruptcy Court to
the US District Court for the Southern District of New York (the
'New York District Court') and these appeals remain pending.
In January 2020, the liquidators filed amended complaints on the
claims remaining in the US Bankruptcy Court. In December 2020, the
US Bankruptcy Court granted in part and denied in part motions
filed by the defendants, including HSBC, to dismiss the amended
complaints. In March 2021, the liquidators and defendants appealed
the US Bankruptcy Court's decision, and these appeals are currently
pending. Meanwhile, proceedings before the US Bankruptcy Court with
respect to the remaining claims that were not dismissed are
ongoing.
UK litigation: The Trustee has filed a claim against various
HSBC companies in the High Court of England and Wales, seeking
recovery of transfers from Madoff Securities to HSBC in an amount
not yet pleaded or determined. The deadline for service of the
claim has been extended to September 2021 for UK-based defendants
and November 2021 for all other defendants.
Cayman Islands litigation: In February 2013, Primeo Fund
('Primeo') (in liquidation since April 2009) brought an action
against HSBC Securities Services Luxembourg ('HSSL') and Bank of
Bermuda (Cayman) Limited (now known as HSBC Cayman Limited),
alleging breach of contract and breach of fiduciary duty and
claiming damages and equitable compensation. The trial concluded in
February 2017 and, in August 2017, the court dismissed all claims
against the defendants. In September 2017, Primeo appealed to the
Court of Appeal of the Cayman Islands and, in June 2019, the Court
of Appeal of the Cayman Islands dismissed Primeo's appeal. In
August 2019, Primeo filed a notice of appeal to the UK Privy
Council. The first of two possible hearings before the UK Privy
Council took place during April 2021, where judgment is
pending.
Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald')
(in liquidation since July 2013) brought an action against HSSL
before the Luxembourg District Court, seeking restitution of cash
and securities that Herald purportedly lost because of Madoff
Securities' fraud, or money damages. The Luxembourg District Court
dismissed Herald's securities restitution claim, but reserved
Herald's cash restitution claim and its claim for money damages.
Herald has appealed this judgment to the Luxembourg Court of
Appeal, where the matter is pending. In late 2018, Herald brought
additional claims against HSSL and HSBC Bank plc before the
Luxembourg District Court, seeking further restitution and
damages.
In October 2009, Alpha Prime Fund Limited ('Alpha Prime')
brought an action against HSSL before the Luxembourg District
Court, seeking the restitution of securities, or the cash
equivalent, or money damages. In December 2018, Alpha Prime brought
additional claims before the Luxembourg District Court seeking
damages against various HSBC companies. These matters are currently
pending before the Luxembourg District Court.
In December 2014, Senator Fund SPC ('Senator') brought an action
against HSSL before the Luxembourg District Court, seeking
restitution of securities, or the cash equivalent, or money
damages. In April 2015, Senator commenced a separate action against
the Luxembourg branch of HSBC Bank plc asserting identical claims
before the Luxembourg District Court. In December 2018, Senator
brought additional claims against HSSL and HSBC Bank plc Luxembourg
branch before the Luxembourg District Court, seeking restitution of
Senator's securities or money damages. These matters are currently
pending before the Luxembourg District Court.
Ireland litigation: In November 2013, Defender Limited brought
an action against HSBC Institutional Trust Services (Ireland)
Limited ('HTIE') and others, based on allegations of breach of
contract and claiming damages and indemnification for fund losses.
The trial commenced in October 2018. In December 2018, the Irish
High Court issued a judgment in HTIE's favour on a preliminary
issue, holding that Defender Limited had no effective claim against
HTIE. This judgment concluded the trial without further issues in
dispute being heard. In February 2019, Defender Limited appealed
the decision. In July 2020, the Irish Supreme Court ruled in part
in favour of Defender Limited and returned the case to the High
Court for further proceedings. In April 2021, the parties reached
an agreement to resolve the dispute and, in May 2021, the action
against HTIE was discontinued.
There are many factors that may affect the range of possible
outcomes, and any resulting financial impact, of the various
Madoff-related proceedings described above, including but not
limited to the multiple jurisdictions in which the proceedings have
been brought. Based upon the information currently available,
management's estimate of the possible aggregate damages that might
arise as a result of all claims in the various Madoff-related
proceedings is up to or exceeding $500m, excluding costs and
interest. Due to uncertainties and limitations of this estimate,
any possible damages that might ultimately arise could differ
significantly from this amount.
Anti-money laundering and sanctions-related matters
In December 2012, HSBC Holdings entered into a number of
agreements, including an undertaking with the UK Financial Services
Authority (replaced with a Direction issued by the UK Financial
Conduct Authority ('FCA') in 2013 and again in 2020) as well as a
cease-and-desist order with the US Federal Reserve Board ('FRB'),
both of which contained certain forward-looking anti-money
laundering ('AML') and sanctions-related obligations. HSBC also
agreed to retain an independent compliance monitor (who was, for
FCA purposes, a 'Skilled Person' under section 166 of the Financial
Services and Markets Act and, for FRB purposes, an 'Independent
Consultant') to produce periodic assessments of the Group's AML and
sanctions compliance programme. In 2020, HSBC's engagement with the
independent compliance monitor, acting in his roles as both Skilled
Person and Independent Consultant, concluded. The role of FCA
Skilled Person was assigned to a new individual in the second
quarter of 2020. Separately, in early 2021, a new FRB Independent
Consultant was appointed pursuant to the cease-and-desist order.
The roles of each of the FCA Skilled Person and the FRB Independent
Consultant are discussed on page 188 of the Annual Report and
Accounts 2020.
The FCA is conducting an investigation into HSBC Bank plc's and
HSBC UK Bank plc's compliance with UK money laundering regulations
and financial crime systems and controls requirements. HSBC
continues to cooperate with the FCA's investigation, which is at or
nearing completion.
Since November 2014, a number of lawsuits have been filed in
federal courts in the US against various HSBC companies and others
on behalf of plaintiffs who are, or are related to, victims of
terrorist attacks in the Middle East. In each case, it is alleged
that the defendants aided and abetted the unlawful conduct of
various sanctioned parties in violation of the US Anti-Terrorism
Act. Currently, nine actions remain pending in federal courts in
New York or the District of Columbia. The courts have granted
HSBC's motions to dismiss in five of these cases. Appeals remain
pending in two cases, and the remaining three dismissals are also
subject to appeal. The four remaining actions are at a very early
stage.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
London interbank offered rates, European interbank offered rates
and other benchmark interest rate investigations and litigation
Euro interest rate derivatives: In December 2016, the European
Commission ('EC') issued a decision finding that HSBC, among other
banks, engaged in anti-competitive practices in connection with the
pricing of euro interest rate derivatives in early 2007. The EC
imposed a fine on HSBC based on a one-month infringement. HSBC
appealed the decision and, in September 2019, the General Court of
the European Union (the 'General Court') issued a decision largely
upholding the EC's findings on liability but annulling the fine.
HSBC and the EC both appealed the General Court's decision to the
European Court of Justice (the 'Court of Justice'). In June 2021,
the EC adopted a new fining decision for an amount which was 5%
less than the previously annulled fine, and subsequently withdrew
its appeal to the Court of Justice. HSBC's appeal remains
pending.
US dollar Libor: Beginning in 2011, HSBC and other panel banks
have been named as defendants in a number of private lawsuits filed
in the US with respect to the setting of US dollar Libor. The
complaints assert claims under various US laws, including US
antitrust and racketeering laws, the US Commodity Exchange Act ('US
CEA') and state law. The lawsuits include individual and putative
class actions, most of which have been transferred and/or
consolidated for pre-trial purposes before the New York District
Court. HSBC has reached class settlements with five groups of
plaintiffs, and the court has approved these settlements. HSBC has
also resolved several of the individual actions, although a number
of other US dollar Libor-related actions remain pending against
HSBC in the New York District Court and the Second Circuit Court of
Appeals.
Intercontinental Exchange ('ICE') Libor: Between January and
March 2019, HSBC and other panel banks were named as defendants in
three putative class actions filed in the New York District Court
on behalf of persons and entities who purchased instruments paying
interest indexed to US dollar ICE Libor from a panel bank. The
complaints allege, among other things, misconduct related to the
suppression of this benchmark rate in violation of US antitrust and
state law. In July 2019, the three putative class actions were
consolidated, and the plaintiffs filed a consolidated amended
complaint. In March 2020, the court granted the defendants' joint
motion to dismiss in its entirety. This matter is on appeal.
Singapore interbank offered rate ('Sibor'), Singapore swap offer
rate ('SOR') and Australia bank bill swap rate ('BBSW'):
In July and August 2016, HSBC and other panel banks were named
as defendants in two putative class actions filed in the New York
District Court on behalf of persons who transacted in products
related to the Sibor, SOR and BBSW benchmark rates. The complaints
allege, among other things, misconduct related to these benchmark
rates in violation of US antitrust, commodities and racketeering
laws, and state law.
In the Sibor/SOR litigation, in March 2021, following an appeal
by the plaintiffs, the Second Circuit Court of Appeals reversed the
dismissal of the plaintiffs' third amended complaint and remanded
the case to the New York District Court where it remains pending
against the defendants, including The Hongkong and Shanghai Banking
Corporation Limited.
In the BBSW litigation, in November 2018, the court dismissed
all foreign defendants, including all the HSBC entities, on
personal jurisdiction grounds. In April 2019, the plaintiffs filed
an amended complaint, which the defendants moved to dismiss. In
February 2020, the court again dismissed the plaintiffs' amended
complaint against all the HSBC entities.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
Foreign exchange-related investigations and litigation
Since at least 2014, the EC has been conducting an investigation
into trading activities by a number of banks, including HSBC, in
the foreign exchange spot market. HSBC is cooperating with this
investigation.
In January 2018, following the conclusion of the US Department
of Justice's ('DoJ') investigation into HSBC's historical foreign
exchange activities, HSBC Holdings entered into a three-year
deferred prosecution agreement with the Criminal Division of the
DoJ (the 'FX DPA'), regarding fraudulent conduct in connection with
two particular transactions in 2010 and 2011. In January 2021, the
FX DPA expired and, in July 2021, the DoJ filed a motion to dismiss
the charges deferred by the FX DPA, which remains pending.
In December 2016, Brazil's Administrative Council of Economic
Defense initiated an investigation into the onshore foreign
exchange market and identified a number of banks, including HSBC,
as subjects of its investigation.
In June 2020, the Competition Commission of South Africa, having
initially referred a complaint for proceedings before the South
African Competition Tribunal in February 2017, filed a revised
complaint against 28 financial institutions, including HSBC Bank
plc and HSBC Bank USA, for alleged anti-competitive behaviour in
the South African foreign exchange market. In August 2020, HSBC
Bank plc and HSBC Bank USA filed an application to dismiss the
revised complaint, which remains pending.
Beginning in 2013, various HSBC companies and other banks have
been named as defendants in a number of putative class actions
filed in, or transferred to, the New York District Court arising
from allegations that the defendants conspired to manipulate
foreign exchange rates. HSBC has reached class settlements with two
groups of plaintiffs, including direct and indirect purchasers of
foreign exchange products, and the court has granted final approval
of these settlements. A putative class action by a group of retail
customers of foreign exchange products remains pending.
In September 2018, various HSBC companies and other banks were
named as defendants in two motions for certification of class
actions filed in Israel alleging foreign exchange-related
misconduct. In July 2019, the Tel Aviv Court allowed the plaintiffs
to consolidate their claims and, in September 2019, the plaintiffs
filed a motion for certification of the consolidated class action.
In August 2020, HSBC Bank plc filed a motion to dismiss and, in
January 2021, HSBC Holdings filed a motion seeking to challenge the
service of the motion for certification on defendants outside
Israel. These motions remain pending.
In November and December 2018, complaints alleging foreign
exchange-related misconduct were filed in the New York District
Court and the High Court of England and Wales against HSBC and
other defendants by certain plaintiffs that opted out of the direct
purchaser class action settlement in the US. These matters remain
pending. Additionally, in May 2021, two civil actions were filed in
Brazil alleging foreign exchange-related misconduct by various
banks, including HSBC, for the period from 2007 to 2013. HSBC has
not yet been served with these actions. It is possible that
additional civil actions will be initiated against HSBC in relation
to its historical foreign exchange activities.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
Precious metals fix-related litigation
Gold: Beginning in March 2014, numerous putative class actions
were filed in the New York District Court and the US District
Courts for the District of New Jersey and the Northern District of
California, naming HSBC and other members of The London Gold Market
Fixing Limited as defendants. The complaints, which were
consolidated in the New York District Court, allege that, from
January 2004 to June 2013, the defendants conspired to manipulate
the price of gold and gold derivatives for their collective benefit
in violation of US antitrust laws, the US CEA and New York state
law. In October 2020, HSBC reached a settlement in principle with
the plaintiffs to resolve the consolidated action. The settlement
remains subject to court approval.
Beginning in December 2015, numerous putative class actions
under Canadian law were filed in the Ontario and Quebec Superior
Courts of Justice against various HSBC companies and other
financial institutions. The plaintiffs allege that, among other
things, from January 2004 to March 2014, the defendants conspired
to manipulate the price of gold and gold derivatives in violation
of the Canadian Competition Act and common law. These actions are
ongoing.
Silver: Beginning in July 2014, numerous putative class actions
were filed in federal district courts in New York, naming HSBC and
other members of The London Silver Market Fixing Limited as
defendants. The complaints allege that, from January 2007 to
December 2013, the defendants conspired to manipulate the price of
silver and silver derivatives for their collective benefit in
violation of US antitrust laws, the US CEA and New York state law.
The actions were consolidated in the New York District Court, and
discovery is proceeding.
In April 2016, two putative class actions under Canadian law
were filed in the Ontario and Quebec Superior Courts of Justice
against various HSBC companies and other financial institutions.
The plaintiffs in both actions allege that, from January 1999 to
August 2014, the defendants conspired to manipulate the price of
silver and silver derivatives in violation of the Canadian
Competition Act and common law. These actions are ongoing.
Platinum and palladium: Between late 2014 and early 2015,
numerous putative class actions were filed in the New York District
Court, naming HSBC and other members of The London Platinum and
Palladium Fixing Company Limited as defendants. The complaints
allege that, from January 2008 to November 2014, the defendants
conspired to manipulate the price of platinum group metals ('PGM')
and PGM-based financial products for their collective benefit in
violation of US antitrust laws and the US CEA. In March 2020, the
court granted the defendants' motion to dismiss the plaintiffs'
third amended complaint but granted the plaintiffs leave to
re-plead certain claims. The plaintiffs have filed an appeal.
Based on the facts currently known, it is not practicable at
this time for HSBC to predict the resolution of these matters,
including the timing or any possible impact on HSBC, which could be
significant.
Film finance litigation
In July and November 2015, two actions were brought by
individuals against HSBC Private Bank (UK) Limited ('PBGB') in the
High Court of England and Wales seeking damages on various alleged
grounds, including breach of duty to the claimants, in connection
with their participation in certain Ingenious film finance schemes.
These actions are ongoing.
In December 2018, a separate action was brought against PBGB in
the High Court of England and Wales by multiple claimants seeking
damages for alleged unlawful means conspiracy and dishonest
assistance in connection with lending provided by PBGB to third
parties in respect of certain Ingenious film finance schemes in
which the claimants participated. In June 2019, a similar claim was
issued against PBGB in the High Court of England and Wales by
additional claimants. These actions are ongoing.
In June 2020, two separate claims were issued against HSBC UK
Bank plc (as successor to PBGB's business) in the High Court of
England and Wales by two separate groups of investors in Eclipse
film finance schemes in connection with PBGB's role in the
development of such schemes. These actions are ongoing.
In April 2021, HSBC UK Bank plc (as successor to PBGB's
business) was served with a claim issued in the High Court of
England and Wales in connection with PBGB's role in the development
of the Zeus film finance schemes. This action is at an early
stage.
It is possible that additional actions or investigations will be
initiated against HSBC UK Bank plc as a result of PBGB's historical
involvement in the provision of certain film finance-related
services.
Based on the facts currently known, it is not practicable to
predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are subject to a
number of other investigations and reviews by various regulators
and competition and law enforcement authorities, as well as
litigation, in connection with various matters relating to the
firm's businesses and operations, including:
-- investigations by tax administration, regulatory and law
enforcement authorities in Argentina, India and elsewhere in
connection with allegations of tax evasion or tax fraud, money
laundering and unlawful cross-border banking solicitation;
-- an investigation by the US Commodity Futures Trading
Commission regarding interest rate swap transactions related to,
among other things, bond issuances;
-- an investigation by the FCA in connection with collections
and recoveries operations in the UK;
-- an investigation by the UK Competition and Markets Authority
concerning the financial services sector;
-- a putative class action brought in the New York District
Court relating to the Mexican government bond market;
-- two group actions pending in the US courts and a claim issued
in the High Court of England and Wales in connection with HSBC Bank
plc's role as a correspondent bank to Stanford International Bank
Ltd from 2003 to 2009; and
-- litigation brought against various HSBC companies in the US
courts relating to residential mortgage-backed securities, based
primarily on (a) claims brought against HSBC Bank USA in connection
with its role as trustee on behalf of various securitisation
trusts; and (b) claims against several HSBC companies seeking that
the defendants repurchase various mortgage loans.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, which could
be significant.
8 Business disposals
------------------
In the first half of 2021, we accelerated the pace of execution
on our strategic ambition to be the preferred international
financial partner for our clients with the announcements of the
potential sale of our retail banking businesses in France, as well
as the exit of domestic mass market retail banking in the US.
Potential sale of the retail banking business in France
On 18 June 2021, HSBC Continental Europe signed a memorandum of
understanding with Promontoria MMB SAS ('My Money Group'), its
subsidiary Banque des Caraïbes SA and My Money Bank, regarding the
potential sale of HSBC Continental Europe's retail banking business
in France.
The potential sale includes: HSBC Continental Europe's French
retail banking business; the Crédit Commercial de France ('CCF')
brand; and, subject to the satisfaction of relevant conditions,
HSBC Continental Europe's 100% ownership interest in HSBC SFH
(France) and its 3% ownership interest in Crédit Logement. The sale
would generate an estimated loss before tax including related
transaction costs for the Group of $2.3bn, together with an
additional $0.7bn impairment of goodwill.
There would be no immediate tax benefit recognised in respect of
the sale loss nor impairment. The vast majority of the estimated
loss for the write-down of the disposal group to fair value less
costs to sell will be recognised when it is classified as held for
sale in accordance with IFRS 5, which is currently anticipated to
be in 2022. Subsequently, the disposal group classified as held for
sale will be remeasured at the lower of carrying amount and fair
value less costs to sell at each reporting period. Any remaining
gain or loss not previously recognised shall be recognised at the
date of derecognition, which is currently anticipated to be in the
first half of 2023.
At 30 June 2021, the value of the total assets of the business
to be sold was $28.2bn, including $25.6bn of loans and advances to
customers, and the value of customer accounts were $23.5bn.
US retail banking business
On 26 May 2021, we announced that we will exit our US mass
market retail banking business, including our Personal and Advance
propositions, as well as retail business banking, and will rebrand
approximately 20 to 25 of our retail branches into international
wealth centres to serve our Premier and Jade customers. In
conjunction with the execution of this strategy, HSBC Bank USA,
N.A. has entered into definitive sale agreements with Citizens Bank
and Cathay Bank to sell approximately 90 of our retail branches
along with substantially all residential mortgage, unsecured and
retail business banking loans and all deposits in our branch
network not associated with our Premier, Jade and Private Banking
customers. Certain assets under management associated with our mass
market retail banking business will also be transferred. The
remaining branches not sold or rebranded will be closed.
The sales are expected to close by the first quarter of 2022,
subject to regulatory approval, and are not expected to impact
results materially. At 30 June 2021, loans and advances to
customers of $2.6bn and customer accounts of $9.9bn related to
these transactions met the criteria to be classified as held for
sale.
9 Events after the balance sheet date
-----------------------------------
In its assessment of events after the balance sheet date, HSBC
has considered and concluded that no material events have occurred
resulting in adjustments to the financial statements.
An interim dividend for the 2021 half-year in respect of the
financial year ending 31 December 2021 was approved by the
Directors on 2 August 2021, as described in Note 2.
10 Capital structure
-----------------
Capital ratios
------ --------
At
----------------
30 Jun 31 Dec
2021 2020
% %
--------------------------- ------ --------
Transitional basis
--------------------------- ------ --------
Common equity tier 1 ratio 15.6 15.9
--------------------------- ------ ------
Tier 1 ratio 18.4 18.7
--------------------------- ------ ------
Total capital ratio 21.0 21.5
--------------------------- ------ ------
End point basis
--------------------------- ------ --------
Common equity tier 1 ratio 15.6 15.9
--------------------------- ------ --------
Tier 1 ratio 18.2 18.5
--------------------------- ------ --------
Total capital ratio 19.8 20.2
--------------------------- ------ --------
Total regulatory capital and risk-weighted assets
------- ---------
At
------------------
30 Jun 31 Dec
2021 2020
$m $m
-------------------------------------------------- ------- ---------
Transitional basis
-------------------------------------------------- ------- ---------
Common equity tier 1 capital 134,606 136,050
-------------------------------------------------- ------- -------
Additional tier 1 capital 23,729 24,123
-------------------------------------------------- ------- -------
Tier 2 capital 22,787 24,250
-------------------------------------------------- ------- -------
Total regulatory capital 181,122 184,423
-------------------------------------------------- ------- -------
Risk-weighted assets 862,292 857,520
-------------------------------------------------- ------- -------
End point basis
-------------------------------------------------- ------- ---------
Common equity tier 1 capital 134,606 136,050
-------------------------------------------------- ------- -------
Additional tier 1 capital 22,423 22,411
-------------------------------------------------- ------- -------
Tier 2 capital 13,662 14,743
-------------------------------------------------- ------- -------
Total regulatory capital 170,691 173,204
-------------------------------------------------- ------- -------
Risk-weighted assets 862,292 857,520
-------------------------------------------------- ------- -------
Leverage ratio(1)
At
------------------------------------
30 Jun 31 Dec
2021 2020
Ref* $bn $bn
----- ------------------------------------------------------ ----------------- -----------------
20 Tier 1 capital 157.0 158.5
----- ------------------------------------------------------ --------------- ---------------
21 Total leverage ratio exposure 2,968.5 2,897.1
----- ------------------------------------------------------ --------------- ---------------
% %
----- ------------------------------------------------------ ----------------- -----------------
22 Leverage ratio 5.3 5.5
----- ------------------------------------------------------ --------------- ---------------
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(2) 2,535.1 2,555.5
----- ------------------------------------------------------ --------------- ---------------
% %
----- ------------------------------------------------------ ----------------- -----------------
UK leverage ratio - quarterly average(2) 6.3 6.1
----- ------------------------------------------------------ --------------- ---------------
UK leverage ratio - quarter end(2) 6.2 6.2
----- ------------------------------------------------------ --------------- ---------------
* The references identify the lines prescribed in the EBA template.
1 The CRR II regulatory transitional arrangements for IFRS 9 are applied in both leverage ratio calculations.
2 UK leverage ratio denotes the Group's leverage ratio
calculated under the PRA's UK leverage framework. This measure
excludes from the calculation of exposure qualifying central bank
balances and loans under the UK Bounce Back Loan Scheme.
Unless otherwise stated, all figures are calculated using the
EU's regulatory transitional arrangements for IFRS 9 'Financial
Instruments' in article 473a of the Capital Requirements
Regulation.
11 Statutory accounts
------------------
The information in this media release does not constitute
statutory accounts within the meaning of section 434 of the
Companies Act 2006. The statutory accounts for the year ended 31
December 2020 have been delivered to the Registrar of Companies in
England and Wales in accordance with section 447 of the Companies
Act 2006. The Group's auditors, PricewaterhouseCoopers LLP ('PwC'),
has reported on those accounts. Its report was unqualified, did not
include a reference to any matters to which PwC drew attention by
way of emphasis without qualifying their report and did not contain
a statement under section 498(2) or (3) of the Companies Act
2006.
The information in this media release does not constitute the
unaudited interim condensed financial statements which are
contained in the Interim Report 2021. The Interim Report 2021 was
approved by the Board of Directors on 2 August 2021. The unaudited
interim condensed financial statements have been reviewed by the
Group's auditor, PwC, in accordance with the guidance contained in
the International Standard on Review Engagements (UK and Ireland)
2410: Review of Interim Financial Information Performed by the
Independent Auditor of the Entity issued by the Auditing Practices
Board. The full report of its review, which was unmodified, is
included in the Interim Report 2021.
12 Dealings in HSBC Holdings plc listed securities
-----------------------------------------------
HSBC has policies and procedures that, except where permitted by
statute and regulation, prohibit it undertaking specified
transactions in respect of its securities listed on The Stock
Exchange of Hong Kong Limited ('HKEx'). Except for dealings as
intermediaries or as trustees by subsidiaries of HSBC Holdings,
neither HSBC Holdings nor any of its subsidiaries has purchased,
sold or redeemed any of its securities listed on HKEx during the
half-year ended 30 June 2021.
13 Earnings release and final results
----------------------------------
An earnings release for the three-month period ending 30
September 2021 is expected to be issued on 25 October 2021. The
results for the year to 31 December 2021 are expected to be
announced on 22 February 2022.
14 Corporate governance
--------------------
We are subject to corporate governance requirements in both the
UK and Hong Kong. Throughout the six months ended 30 June 2021, we
complied with the applicable provisions of the UK Corporate
Governance Code and also the requirements of the Hong Kong
Corporate Governance Code. The UK Corporate Governance Code is
available at www.frc.org.uk and the Hong Kong Corporate Governance
Code is available at www.hkex.com.hk.
Under the Hong Kong Code, the Group Audit Committee should be
responsible for the oversight of all risk management and internal
control systems, unless expressly addressed by a separate risk
committee. Our Group Risk Committee is responsible for oversight of
internal control, other than internal financial controls, and risk
management systems.
The Board has codified obligations for transactions in Group
securities in accordance with the requirements of the Market Abuse
Regulation and the rules governing the listing of securities on the
HKEx, save that the HKEx has granted waivers from strict compliance
with the rules that take into account accepted practices in the UK,
particularly in respect of employee share plans.
Following specific enquiries all Directors have confirmed that
they have complied with their obligations in respect of transacting
in Group securities throughout the period.
There have been no material changes to the information disclosed
in the Annual Report and Accounts 2020 in respect of the
remuneration of employees, remuneration policies, bonus and share
option plans and training schemes. Details of the number of
employees are provided on page 31 of the Interim Report 2021.
The Board of Directors of HSBC Holdings plc as at the date of
this announcement comprises:
Mark Tucker*, James Anthony Forese , Steven Guggenheimer , Irene
Lee , José Antonio Meade Kuribreña , Eileen K Murray , David Nish ,
Noel Quinn, Ewen Stevenson, Jackson Tai and Pauline van der Meer
Mohr .
* Non-executive Group Chairman
Independent non-executive Director
15 Interim Report 2021
-------------------
The Interim Report 2021 will be made available to shareholders
on or about 27 August 2021. Copies of the Interim Report 2021 and
this Media Release may be obtained from Global Communications, HSBC
Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; from
Communications (Asia), The Hongkong and Shanghai Banking
Corporation Limited, 1 Queen's Road Central, Hong Kong; or from US
Communications, HSBC Bank USA, N.A., 1 West 39th Street, 9th Floor,
New York, NY 10018, USA. The Interim Report 2021 and this News
Release may also be downloaded from the HSBC website,
www.hsbc.com.
A Chinese translation of the Interim Report 2021 is available
upon request from Computershare Hong Kong Investor Services
Limited, Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's
Road East, Hong Kong.
The Interim Report 2021 will be available on The Stock Exchange
of Hong Kong Limited's website www.hkex.com.hk.
16 Cautionary statement regarding forward-looking statements
---------------------------------------------------------
This news release may contain projections, estimates, forecasts,
targets, opinions, prospects, results, returns and forward-looking
statements with respect to the financial condition, results of
operations, capital position, strategy and business of the Group
which can be identified by the use of forward-looking terminology
such as 'may', 'will', 'should', 'expect', 'anticipate', 'project',
'estimate', 'seek', 'intend', 'target' or 'believe' or the
negatives thereof or other variations thereon or comparable
terminology (together, 'forward-looking statements'), including the
strategic priorities and any financial, investment and capital
targets and ESG targets/commitments described herein.
Any such forward-looking statements are not a reliable indicator
of future performance, as they may involve significant stated or
implied assumptions and subjective judgements which may or may not
prove to be correct. There can be no assurance that any of the
matters set out in forward-looking statements are attainable, will
actually occur or will be realised or are complete or accurate. The
assumptions and judgments may prove to be incorrect and involve
known and unknown risks, uncertainties, contingencies and other
important factors, many of which are outside the control of the
Group. Actual achievements, results, performance or other future
events or conditions may differ materially from those stated,
implied and/or reflected in any forward-looking statements due to a
variety of risks, uncertainties and other factors (including
without limitation those which are referable to general market
conditions, regulatory changes or Covid-19).
Any such forward-looking statements are based on the beliefs,
expectations and opinions of the Group at the date the statements
are made, and the Group does not assume, and hereby disclaims, any
obligation or duty to update, revise or supplement them if
circumstances or management's beliefs, expectations or opinions
should change. For these reasons, recipients should not place
reliance on, and are cautioned about relying on, any
forward-looking statements. No representations or warranties,
expressed or implied, are given by or on behalf of the Group as to
the achievement or reasonableness of any projections, estimates,
forecasts, targets, prospects or returns contained herein.
Additional detailed information concerning important factors
that could cause actual results to differ materially from this news
release is available in our Annual Report and Accounts 2020 for the
fiscal year ended 31 December 2020 filed with the Securities and
Exchange Commission (the 'SEC') on Form 20-F on 24 February 2021,
our 1Q 2021 Earnings Release furnished to the SEC on Form 6-K on 27
April 2021, and our Interim Report 2021 for the six months ended 30
June 2021 which we expect to furnish to the SEC on Form 6-K on or
around 2 August 2021.
17 Use of alternative performance measures
---------------------------------------
This news release contains non-IFRS measures used by management
internally that constitute alternative performance measures under
European Securities and Markets Authority guidance and non-GAAP
financial measures defined in and presented in accordance with SEC
rules and regulations ('alternative performance measures'). The
primary alternative performance measures we use are presented on an
'adjusted performance' basis which is computed by adjusting
reported results for the period-on-period effects of foreign
currency translation differences and significant items which
distort period-on-period comparisons. Significant items are those
items which management and investors would ordinarily identify and
consider separately when assessing performance in order to better
understand the underlying trends in the business. Reconciliations
between alternative performance measures and the most directly
comparable measures under IFRS are provided in our 2020 Form 20-F,
which is available at www.hsbc.com .
18 Certain defined terms
---------------------
Unless the context requires otherwise, 'HSBC Holdings' means
HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our'
refer to HSBC Holdings together with its subsidiaries. Within this
document the Hong Kong Special Administrative Region of the
People's Republic of China is referred to as 'Hong Kong'. When used
in the terms 'shareholders' equity' and 'total shareholders'
equity', 'shareholders' means holders of HSBC Holdings ordinary
shares and those preference shares and capital securities issued by
HSBC Holdings classified as equity. The abbreviations '$m'and '$bn'
represent millions and billions (thousands of millions) of US
dollars, respectively.
19 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 - Jessica Lee
Tel: +852 2822 4908 Tel: +852 2822 1268
20 Registered Office and Group Head Office
---------------------------------------
8 Canada Square
London E14 5HQ
United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered
number 617987
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