TIDMHSBA
RNS Number : 5086U
HSBC Holdings PLC
01 August 2022
Independent review report to HSBC Holdings plc
Report on the interim condensed financial statements
Our conclusion
We have reviewed HSBC Holdings plc's interim condensed financial
statements (the 'interim financial statements') in the interim
report of HSBC Holdings plc and its subsidiaries (the 'Group') for
the 6 month period ended 30 June 2022 (the 'period').
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK-adopted
International Accounting Standard 34, 'Interim Financial
Reporting', International Accounting Standard 34, 'Interim
Financial Reporting' as issued by the IASB, International
Accounting Standard 34, 'Interim Financial Reporting' as adopted by
the European Union, and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2022;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated statement of cash flows for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the notes to the interim financial statements and certain other information(1) .
The interim financial statements included in the interim report
of the Group have been prepared in accordance with, UK-adopted
International Accounting Standard 34, 'Interim Financial
Reporting', International Accounting Standard 34, 'Interim
Financial Reporting' as issued by the IASB, International
Accounting Standard 34, 'Interim Financial Reporting' as adopted by
the European Union, and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report of the Group and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the Group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report of the Group, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the interim
report of the Group in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the interim report of the Group,
including the interim financial statements, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report of the Group based on
our review. Our conclusion, including our Conclusions relating to
going concern, is based on procedures that are less extensive than
audit procedures, as described in the Basis for conclusion
paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
1 August 2022
1 'Certain other information' comprises the following tables:
'Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees' and 'Distribution of
financial instruments to which the impairment requirements of IFRS
9 are applied, by credit quality and stage allocation'.
Interim condensed financial
statements
Page
Consolidated income statement 115
---------------------------------------- ----
Consolidated statement of comprehensive
income 116
---------------------------------------- ----
Consolidated balance sheet 117
---------------------------------------- ----
Consolidated statement of cash
flows 118
---------------------------------------- ----
Consolidated statement of changes
in equity 119
---------------------------------------- ----
Consolidated income statement
Half-year to
30 Jun 30 Jun 31 Dec
2022 2021 2021
Notes* $m $m $m
----------------------- ------- -------------------------- ---------------------------- --------------------------
Net interest income 14,451 13,098 13,391
-------------------------------- -------------------------- ---------------------------- --------------------------
- interest income 20,855 17,960 18,228
--------------------------------
- interest expense (6,404) (4,862) (4,837)
-------------------------------- -------------------------- ----------------------------
Net fee income 2 6,064 6,674 6,423
----------------------- ------- -------------------------- ---------------------------- --------------------------
- fee income 7,949 8,458 8,330
--------------------------------
- fee expense (1,885) (1,784) (1,907)
-------------------------------- -------------------------- ----------------------------
Net income from financial
instruments held
for trading or managed on a
fair value basis 4,921 4,184 3,560
-------------------------------- -------------------------- ---------------------------- --------------------------
Net income/(expense) from assets
and liabilities
of insurance businesses,
including related
derivatives, measured at fair
value through
profit or loss (3,051) 2,795 1,258
-------------------------------- -------------------------- ---------------------------- --------------------------
Change in fair value of
designated debt and
related derivatives (158) (67) (115)
-------------------------------- -------------------------- ---------------------------- --------------------------
Changes in fair value of other
financial instruments
mandatorily measured at fair
value through
profit or loss 68 548 250
-------------------------------- -------------------------- ---------------------------- --------------------------
Gains less losses from financial
investments 21 433 136
-------------------------------- -------------------------- ---------------------------- --------------------------
Net insurance premium income 7,646 5,663 5,207
-------------------------------- -------------------------- ---------------------------- --------------------------
Other operating income 723 155 347
-------------------------------- -------------------------- ---------------------------- --------------------------
Total operating income 30,685 33,483 30,457
-------------------------------- -------------------------- ---------------------------- --------------------------
Net insurance claims and
benefits paid and
movement in liabilities to
policyholders (5,449) (7,932) (6,456)
-------------------------------- -------------------------- ---------------------------- --------------------------
Net operating income before
change in expected
credit losses and other credit
impairment charges 25,236 25,551 24,001
-------------------------------- -------------------------- ---------------------------- --------------------------
Change in expected credit losses
and other
credit impairment charges (1,090) 719 209
-------------------------------- -------------------------- ---------------------------- --------------------------
Net operating income 24,146 26,270 24,210
-------------------------------- -------------------------- ---------------------------- --------------------------
Employee compensation and
benefits (9,071) (9,610) (9,132)
-------------------------------- -------------------------- ---------------------------- --------------------------
General and administrative
expenses (5,445) (5,675) (5,917)
-------------------------------- -------------------------- ---------------------------- --------------------------
Depreciation and impairment of
property, plant
and equipment and right-of-use
assets (1,075) (1,160) (1,101)
-------------------------------- -------------------------- ---------------------------- --------------------------
Amortisation and impairment of
intangible assets (828) (642) (796)
-------------------------------- -------------------------- ---------------------------- --------------------------
Goodwill impairment - - (587)
-------------------------------- -------------------------- ---------------------------- --------------------------
Total operating expenses (16,419) (17,087) (17,533)
-------------------------------- -------------------------- ---------------------------- --------------------------
Operating profit 7,727 9,183 6,677
-------------------------------- -------------------------- ---------------------------- --------------------------
Share of profit in associates
and joint ventures 1,449 1,656 1,390
-------------------------------- -------------------------- ---------------------------- --------------------------
Profit before tax 9,176 10,839 8,067
-------------------------------- -------------------------- ---------------------------- --------------------------
Tax credit/(charge) 39 (2,417) (1,796)
-------------------------------- -------------------------- ---------------------------- --------------------------
Profit for the period 9,215 8,422 6,271
-------------------------------- -------------------------- ---------------------------- --------------------------
Attributable to:
----------------------- ------- -------------------------- ---------------------------- --------------------------
- ordinary shareholders of the
parent company 8,289 7,276 5,331
--------------------------------
- preference - 7 -
shareholders of the
parent company
----------------------- -------
- other equity holders 626 666 637
--------------------------------
- non-controlling interests 300 473 303
-------------------------------- -------------------------- ----------------------------
Profit for the period 9,215 8,422 6,271
-------------------------------- -------------------------- ---------------------------- --------------------------
$ $ $
----------------------- ------- -------------------------- ---------------------------- --------------------------
Basic earnings per
ordinary share 4 0.42 0.36 0.26
----------------------- ------- -------------------------- ---------------------------- --------------------------
Diluted earnings per
ordinary share 4 0.41 0.36 0.26
----------------------- ------- -------------------------- ---------------------------- --------------------------
* For Notes on the interim condensed financial statements, see page 110.
Consolidated statement of comprehensive income
Half-year to
30 Jun 30 Jun 31 Dec
2022 2021 2021
$m $m $m
------------------------------ -------------------------- ---------------------------- ----------------------------
Profit for the period 9,215 8,422 6,271
------------------------------ -------------------------- ---------------------------- ----------------------------
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 (4,907) (1,368) (771)
------------------------------ -------------------------- ---------------------------- ----------------------------
- fair value losses (6,328) (1,392) (878)
------------------------------
- fair value gains transferred
to the income statement
on disposal (53) (375) (89)
------------------------------
- expected credit
recoveries/(losses)
recognised
in the income statement 20 (26) (23)
------------------------------
- income taxes 1,454 425 219
------------------------------ -------------------------- ----------------------------
Cash flow hedges (2,063) (238) (426)
------------------------------ -------------------------- ---------------------------- ----------------------------
- fair value gains/(losses) (1,646) 877 (282)
------------------------------
- fair value gains
reclassified to the income
statement (1,127) (1,195) (319)
------------------------------
- income taxes and other
movements 710 80 175
------------------------------ -------------------------- ----------------------------
Share of other comprehensive
income/(expense) of
associates and joint ventures (141) 104 (1)
------------------------------ -------------------------- ---------------------------- ----------------------------
- share for the period (141) 104 (1)
Exchange differences (8,521) (449) (1,944)
Items that will not be
reclassified subsequently
to profit or loss:
------------------------------ -------------------------- ---------------------------- ----------------------------
Remeasurement of defined
benefit asset/(liability) 95 (747) 473
------------------------------ -------------------------- ---------------------------- ----------------------------
- before income taxes (132) (775) 668
------------------------------
- income taxes 227 28 (195)
------------------------------ -------------------------- ----------------------------
Changes in fair value of
financial liabilities
designated at fair value upon
initial recognition
arising from changes in own
credit risk 2,263 155 376
------------------------------ -------------------------- ---------------------------- ----------------------------
- before income taxes 3,030 (2) 514
------------------------------
- income taxes (767) 157 (138)
------------------------------ -------------------------- ----------------------------
Equity instruments designated
at fair value through
other comprehensive income 158 (348) (98)
------------------------------ -------------------------- ---------------------------- ----------------------------
- fair value gains/(losses) 158 (345) (98)
------------------------------
- income taxes - (3) -
------------------------------ -------------------------- ----------------------------
Effects of hyperinflation 417 166 149
------------------------------ -------------------------- ---------------------------- ----------------------------
Other comprehensive expense
for the period, net
of tax (12,699) (2,725) (2,242)
------------------------------ -------------------------- ---------------------------- ----------------------------
Total comprehensive
(expense)/income for the
period (3,484) 5,697 4,029
------------------------------ -------------------------- ---------------------------- ----------------------------
Attributable to:
------------------------------ -------------------------- ---------------------------- ----------------------------
- ordinary shareholders of the
parent company (4,246) 4,612 3,153
------------------------------
- preference shareholders of - 7 -
the parent company
------------------------------
- other equity holders 626 666 637
------------------------------
- non-controlling interests 136 412 239
------------------------------ -------------------------- ----------------------------
Total comprehensive
(expense)/income for the
period (3,484) 5,697 4,029
------------------------------ -------------------------- ---------------------------- ----------------------------
Consolidated balance sheet
At
30 Jun 31 Dec
2022 2021
Notes* $m $m
------------------------------------------------------ ------ ------------------------ -------------------------
Assets
------------------------------------------------------ ------ ------------------------ -------------------------
Cash and balances at central banks 363,608 403,018
------------------------------------------------------ ------ ------------------------ -------------------------
Items in the course of collection from other banks 8,073 4,136
------------------------------------------------------ ------ ------------------------ -------------------------
Hong Kong Government certificates of indebtedness 43,866 42,578
------------------------------------------------------ ------ ------------------------ -------------------------
Trading assets 217,350 248,842
------------------------------------------------------ ------ ------------------------ -------------------------
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 45,873 49,804
------------------------------------------------------ ------ ------------------------ -------------------------
Derivatives 8 262,923 196,882
------------------------------------------------------ ------ ------------------------ -------------------------
Loans and advances to banks 96,429 83,136
------------------------------------------------------ ------ ------------------------ -------------------------
Loans and advances to customers 1,028,356 1,045,814
------------------------------------------------------ ------ ------------------------ -------------------------
Reverse repurchase agreements - non-trading 244,451 241,648
------------------------------------------------------ ------ ------------------------ -------------------------
Financial investments 9 430,796 446,274
------------------------------------------------------ ------ ------------------------ -------------------------
Prepayments, accrued income and other assets 185,823 139,982
------------------------------------------------------ ------ ------------------------ -------------------------
Current tax assets 1,151 970
------------------------------------------------------ ------ ------------------------ -------------------------
Interests in associates and joint ventures 10 29,446 29,609
------------------------------------------------------ ------ ------------------------ -------------------------
Goodwill and intangible assets 21,625 20,622
------------------------------------------------------ ------ ------------------------ -------------------------
Deferred tax assets 5,650 4,624
------------------------------------------------------ ------ ------------------------ -------------------------
Total assets 2,985,420 2,957,939
------------------------------------------------------ ------ ------------------------ -------------------------
Liabilities and equity
------------------------------------------------------ ------ ------------------------ -------------------------
Liabilities
------------------------------------------------------ ------ ------------------------ -------------------------
Hong Kong currency notes in circulation 43,866 42,578
------------------------------------------------------ ------ ------------------------ -------------------------
Deposits by banks 105,275 101,152
------------------------------------------------------ ------ ------------------------ -------------------------
Customer accounts 1,651,301 1,710,574
------------------------------------------------------ ------ ------------------------ -------------------------
Repurchase agreements - non-trading 129,707 126,670
------------------------------------------------------ ------ ------------------------ -------------------------
Items in the course of transmission to other banks 9,673 5,214
------------------------------------------------------ ------ ------------------------ -------------------------
Trading liabilities 80,569 84,904
------------------------------------------------------ ------ ------------------------ -------------------------
Financial liabilities designated at fair value 126,006 145,502
------------------------------------------------------ ------ ------------------------ -------------------------
Derivatives 8 251,469 191,064
------------------------------------------------------ ------ ------------------------ -------------------------
Debt securities in issue 87,944 78,557
------------------------------------------------------ ------ ------------------------ -------------------------
Accruals, deferred income and other liabilities 163,600 123,778
------------------------------------------------------ ------ ------------------------ -------------------------
Current tax liabilities 685 698
------------------------------------------------------ ------ ------------------------ -------------------------
Liabilities under insurance contracts 113,130 112,745
------------------------------------------------------ ------ ------------------------ -------------------------
Provisions 11 1,900 2,566
------------------------------------------------------ ------ ------------------------ -------------------------
Deferred tax liabilities 2,894 4,673
------------------------------------------------------ ------ ------------------------ -------------------------
Subordinated liabilities 20,711 20,487
------------------------------------------------------ ------ ------------------------ -------------------------
Total liabilities 2,788,730 2,751,162
------------------------------------------------------ ------ ------------------------ -------------------------
Equity
------------------------------------------------------ ------ ------------------------ -------------------------
Called up share capital 10,188 10,316
------------------------------------------------------ ------ ------------------------ -------------------------
Share premium account 14,662 14,602
------------------------------------------------------ ------ ------------------------ -------------------------
Other equity instruments 21,691 22,414
------------------------------------------------------ ------ ------------------------ -------------------------
Other reserves (8,576) 6,460
------------------------------------------------------ ------ ------------------------ -------------------------
Retained earnings 150,417 144,458
------------------------------------------------------ ------ ------------------------ -------------------------
Total shareholders' equity 188,382 198,250
------------------------------------------------------ ------ ------------------------ -------------------------
Non-controlling interests 8,308 8,527
------------------------------------------------------ ------ ------------------------ -------------------------
Total equity 196,690 206,777
------------------------------------------------------ ------ ------------------------ -------------------------
Total liabilities and equity 2,985,420 2,957,939
------------------------------------------------------ ------ ------------------------ -------------------------
* For Notes on the interim condensed financial statements, see page 110.
Consolidated statement of cash flows
Half-year to
30 Jun 30 Jun 31 Dec
2022 2021 2021
$m $m $m
------------------------------- -------------------------- ---------------------------- ---------------------------
Profit before tax 9,176 10,839 8,067
------------------------------- -------------------------- ---------------------------- ---------------------------
Adjustments for non-cash items:
------------------------------- -------------------------- ---------------------------- ---------------------------
Depreciation, amortisation and
impairment 1,903 1,802 2,484
------------------------------- -------------------------- ---------------------------- ---------------------------
Net (gain)/loss from investing
activities 174 (485) (162)
------------------------------- -------------------------- ---------------------------- ---------------------------
Share of profits in associates
and joint ventures (1,449) (1,656) (1,390)
------------------------------- -------------------------- ---------------------------- ---------------------------
Gain on acquisition of (71) - -
subsidiary
------------------------------- -------------------------- ---------------------------- ---------------------------
Change in expected credit
losses gross of recoveries
and other credit impairment
charges 1,246 (484) (35)
------------------------------- -------------------------- ---------------------------- ---------------------------
Provisions including pensions 208 301 762
------------------------------- -------------------------- ---------------------------- ---------------------------
Share-based payment expense 177 254 213
------------------------------- -------------------------- ---------------------------- ---------------------------
Other non-cash items included
in profit before
tax (866) 205 305
------------------------------- -------------------------- ---------------------------- ---------------------------
Change in operating assets 15,987 (3,811) (232)
------------------------------- -------------------------- ---------------------------- ---------------------------
Change in operating liabilities (27,501) 49,015 22,161
------------------------------- -------------------------- ---------------------------- ---------------------------
Elimination of exchange
differences(1) 49,417 5,212 13,725
------------------------------- -------------------------- ---------------------------- ---------------------------
Dividends received from
associates 60 10 798
------------------------------- -------------------------- ---------------------------- ---------------------------
Contributions paid to defined
benefit plans (102) (342) (167)
------------------------------- -------------------------- ---------------------------- ---------------------------
Tax paid (1,264) (997) (2,080)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net cash from operating
activities 47,095 59,863 44,449
------------------------------- -------------------------- ---------------------------- ---------------------------
Purchase of financial
investments (271,382) (263,198) (229,844)
------------------------------- -------------------------- ---------------------------- ---------------------------
Proceeds from the sale and
maturity of financial
investments 248,983 298,596 222,594
------------------------------- -------------------------- ---------------------------- ---------------------------
Net cash flows from the
purchase and sale of property,
plant and equipment (590) (375) (711)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net cash flows from
(purchase)/disposal of
customer
and loan portfolios (3,756) 1,063 1,996
------------------------------- -------------------------- ---------------------------- ---------------------------
Net investment in intangible
assets (1,240) (1,011) (1,468)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net cash flow on
(acquisition)/disposal of
subsidiaries,
businesses, associates and
joint ventures (525) (84) (22)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net cash from investing
activities (28,510) 34,991 (7,455)
------------------------------- -------------------------- ---------------------------- ---------------------------
Issue of ordinary share capital - 1,996 -
and other equity
instruments
------------------------------- -------------------------- ---------------------------- ---------------------------
Cancellation of shares (1,840) - (707)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net sales/(purchases) of own
shares for market-making
and investment purposes (443) 1 (1,387)
------------------------------- -------------------------- ---------------------------- ---------------------------
Purchase of non-controlling (197) - -
interest in subsidiary
------------------------------- -------------------------- ---------------------------- ---------------------------
Redemption of preference shares
and other equity
instruments (723) (3,450) -
------------------------------- -------------------------- ---------------------------- ---------------------------
Subordinated loan capital 2,659 - -
issued
------------------------------- -------------------------- ---------------------------- ---------------------------
Subordinated loan capital
repaid (11) (852) (12)
------------------------------- -------------------------- ---------------------------- ---------------------------
Dividends paid to shareholders
of the parent company
and non-controlling interests (4,497) (4,121) (2,262)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net cash from financing
activities (5,052) (6,426) (4,368)
------------------------------- -------------------------- ---------------------------- ---------------------------
Net increase in cash and cash
equivalents 13,533 88,428 32,626
------------------------------- -------------------------- ---------------------------- ---------------------------
Cash and cash equivalents at
the beginning of the
period 574,032 468,323 551,933
------------------------------- -------------------------- ---------------------------- ---------------------------
Exchange differences in respect
of cash and cash
equivalents (40,243) (4,818) (10,527)
------------------------------- -------------------------- ---------------------------- ---------------------------
Cash and cash equivalents at
the end of the period 547,322 551,933 574,032
------------------------------- -------------------------- ---------------------------- ---------------------------
Interest received was $22,011m (1H21: $19,761m; 2H21: $20,414m),
interest paid was $7,146m (1H21: $6,552m; 2H21: $6,143m) and
dividends received (excluding dividends received from associates,
which are presented separately above) were $800m (1H21: $801m;
2H21: $1,097m).
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 2022 24,918 22,414 144,458 (634) (197) (22,769) 30,060 198,250 8,527 206,777
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
Profit for the period - - 8,915 - - - - 8,915 300 9,215
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
Other comprehensive
income (net of tax) - - 2,637 (4,723) (2,035) (8,414) - (12,535) (164) (12,699)
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
* debt instruments at fair value through other
comprehensive income - - - (4,844) - - - (4,844) (63) (4,907)
------------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - 121 - - - 121 37 158
------------------------------------------------------------
- cash flow hedges - - - - (2,035) - - (2,035) (28) (2,063)
------------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value upon initial recognition
arising from changes in own credit risk - - 2,263 - - - - 2,263 - 2,263
------------------------------------------------------------
* remeasurement of defined benefit asset/liability - - 98 - - - - 98 (3) 95
------------------------------------------------------------
* share of other comprehensive income of associates and
joint ventures - - (141) - - - - (141) - (141)
- effects of hyperinflation - - 417 - - - - 417 - 417
------------------------------------------------------------
- exchange differences - - - - - (8,414) - (8,414) (107) (8,521)
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- ---------------------
Total comprehensive
income for the period - - 11,552 (4,723) (2,035) (8,414) - (3,620) 136 (3,484)
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
Shares issued under
employee remuneration
and share plans 65 - (65) - - - - - - -
Dividends to shareholders - - (4,202) - - - - (4,202) (295) (4,497)
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
Redemption of securities - (723) - - - - - (723) - (723)
Cost of share-based
payment arrangements - - 177 - - - - 177 - 177
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
Cancellation of shares(4) (133) - (1,000) - - - 133 (1,000) - (1,000)
Other movements - - (503) 3 - - - (500) (60) (560)
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
At 30 Jun 2022 24,850 21,691 150,417 (5,354) (2,232) (31,183) 30,193 188,382 8,308 196,690
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
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
------------------------------------------------------------ ------------------ ---------------- ------------------- ---------------------- ---------------- ------------------ -------------- -------------------- --------------------- -----------------
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 2021 24,976 22,414 144,319 190 223 (20,839) 26,935 198,218 8,546 206,764
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
Profit for the period - - 5,968 - - - - 5,968 303 6,271
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
Other comprehensive
income
(net of tax) - - 998 (826) (420) (1,930) - (2,178) (64) (2,242)
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
* debt instruments at fair value through other
comprehensive income - - - (754) - - - (754) (17) (771)
------------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - (72) - - - (72) (26) (98)
------------------------------------------------------------
- cash flow hedges - - - - (420) - - (420) (6) (426)
------------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value upon initial recognition
arising from changes in own credit risk - - 376 - - - - 376 - 376
------------------------------------------------------------
* remeasurement of defined benefit asset/liability - - 474 - - - - 474 (1) 473
------------------------------------------------------------
* share of other comprehensive income of associates and
joint ventures - - (1) - - - - (1) - (1)
- effects of hyperinflation - - 149 - - - - 149 - 149
------------------------------------------------------------
- exchange differences - - - - - (1,930) - (1,930) (14) (1,944)
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- ---------------------
Total comprehensive
income for the period - - 6,966 (826) (420) (1,930) - 3,790 239 4,029
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
Shares issued under
employee remuneration
and share plans 2 - (1) - - - - 1 - 1
Dividends to shareholders - - (2,058) - - - - (2,058) (204) (2,262)
Transfers(3) - - (3,065) - - - 3,065 - - -
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
Cost of share-based
payment arrangements - - 213 - - - - 213 - 213
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
Cancellation of shares (60) - (2,004) - - - 60 (2,004) - (2,004)
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
Other movements - - 88 2 - - - 90 (54) 36
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
At 31 Dec 2021 24,918 22,414 144,458 (634) (197) (22,769) 30,060 198,250 8,527 206,777
------------------------------------------------------------ -------------------- ---------------- ------------------- ---------------------- ---------------- ------------------ --------------- --------------------- --------------------- -------------------
1 In 2021, HSBC Holdings issued $2,000m of additional tier 1
instruments on which there were $4m of external issue costs.
2 During 2021, HSBC Holdings redeemed $2,000m 6.875% perpetual
subordinated contingent convertible securities.
3 Permitted transfers from the merger reserve to retained
earnings were made when the investment in HSBC Overseas Holdings
(UK) Limited was previously impaired.
4 HSBC announced a share buy-back of $2.0bn in 2021 which was
completed in April 2022. Additionally, HSBC announced a share
buy-back of up to $1.0bn in February 2022, which concluded on 28
July 2022. At 30 June 2022, 264,942,444 ordinary shares had been
purchased and cancelled, representing a nominal value of $133m,
which has been transferred from share capital to capital redemption
reserve within merger and other reserves.
Notes on the interim condensed financial statements
Page Page
Basis of preparation and significant Interests in associates and
1 accounting policies 121 10 joint ventures 133
------------------------------------ ---- ----------------------------------- ----
2 Net fee income 122 11 Provisions 136
------------------------------------ ---- ----------------------------------- ----
Contingent liabilities, contractual
3 Dividends 122 12 commitments and guarantees 136
------------------------------------ ---- ----------------------------------- ----
Legal proceedings and regulatory
4 Earnings per share 123 13 matters 137
------------------------------------ ---- ----------------------------------- ----
5 Segmental analysis 123 14 Transactions with related parties 139
------------------------------------ ---- ----------------------------------- ----
Fair values of financial instruments
6 carried at fair value 127 15 Business acquisitions and disposals 139
------------------------------------ ---- ----------------------------------- ----
Fair values of financial instruments Events after the balance sheet
7 not carried at fair value 131 16 date 140
------------------------------------ ---- ----------------------------------- ----
Interim Report 2022 and statutory
8 Derivatives 132 17 accounts 140
------------------------------------ ---- ----------------------------------- ----
9 Financial investments 133
------------------------------------ ----
1 Basis of preparation and significant accounting policies
--------------------------------------------------------
(a) Compliance with International Financial Reporting Standards
Our interim condensed consolidated financial statements have
been prepared on the basis of the policies set out in the 2021
annual financial statements and in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the UK, 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 2021.
These financial statements should be read in conjunction with
the Annual Report and Accounts 2021, which were prepared in
accordance with UK-adopted 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.
These financial statements were also prepared in accordance with
International Financial Reporting Standards ('IFRSs') as issued by
the IASB, including interpretations issued by the IFRS
Interpretations Committee.
At 30 June 2022, there were no unendorsed standards effective
for the half-year to 30 June 2022 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.
Standards applied during the half-year to 30 June 2022
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, interests in
associates, impairment of goodwill and non-financial assets, and
post-employment benefit plans. Management's judgement with respect
to the recognition of a deferred tax asset on the historical tax
losses of HSBC Holdings changed during the period and a deferred
tax asset of $1.8bn was recognised at 1H22. Management's view is
that improved profit forecasts for the UK, which reflect higher
market interest rates and expectations of future increases, as well
as the results for 1H22, represent convincing evidence that
sufficient future taxable profits will be available to support
recognition of the deferred tax asset. The improved forecasts
reduced the expected recovery period of these tax losses, reducing
the estimation uncertainty such that recognition of a deferred tax
asset was considered appropriate.
Apart from the above deferred tax matter and estimates relating
to ECL impairment, there were no material changes in the current
period to any of the other critical accounting estimates and
judgements disclosed in 2021, which are stated on pages 90 and 319
of the Annual Report and Accounts 2021.
(c) Composition of the Group
There were no material changes in the composition of the Group
in the half-year to 30 June 2022. For further details of future
business acquisitions and disposals, see Note 15 'Business
acquisitions and disposals'.
(d) Future accounting developments
IFRS 17 'Insurance Contracts' was issued in May 2017, with
amendments to the standard issued in June 2020 and December 2021.
It has been adopted in its entirety for use in the UK. IFRS 17 has
been adopted by the EU subject to certain optional exemptions,
except for the December 2021 requirements which are pending
adoption.
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
will be 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
present value of in-force long-term insurance business ('PVIF')
asset recognised. Instead, 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, 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 318 to 328 of the Annual Report and
Accounts 2021, as are the methods of computation.
2 Net fee income
--------------
Half-year to
30 Jun 30 Jun 31 Dec
2022 2021 2021
$m $m $m
-------------------------------- -------------------------- --------------------------- ---------------------------
Net fee income by product
-------------------------------- -------------------------- --------------------------- ---------------------------
Funds under management 1,224 1,304 1,352
-------------------------------- -------------------------- --------------------------- ---------------------------
Cards 1,201 1,035 1,178
-------------------------------- -------------------------- --------------------------- ---------------------------
Credit facilities 790 827 800
-------------------------------- -------------------------- --------------------------- ---------------------------
Account services 720 714 738
-------------------------------- -------------------------- --------------------------- ---------------------------
Broking income 707 895 706
Unit trusts 408 603 485
-------------------------------- -------------------------- --------------------------- ---------------------------
Underwriting 257 576 441
-------------------------------- -------------------------- --------------------------- ---------------------------
Global custody 471 500 478
-------------------------------- -------------------------- --------------------------- ---------------------------
Remittances 394 361 414
-------------------------------- -------------------------- --------------------------- ---------------------------
Imports/exports 321 300 320
-------------------------------- -------------------------- --------------------------- ---------------------------
Insurance agency commission 163 176 165
-------------------------------- -------------------------- --------------------------- ---------------------------
Other 1,293 1,167 1,253
-------------------------------- -------------------------- --------------------------- ---------------------------
Fee income 7,949 8,458 8,330
-------------------------------- -------------------------- --------------------------- ---------------------------
Less: fee expense (1,885) (1,784) (1,907)
-------------------------------- -------------------------- --------------------------- ---------------------------
Net fee income 6,064 6,674 6,423
-------------------------------- -------------------------- --------------------------- ---------------------------
Net fee income by global
business
-------------------------------- -------------------------- --------------------------- ---------------------------
Wealth and Personal Banking 2,619 3,042 2,852
-------------------------------- -------------------------- --------------------------- ---------------------------
Commercial Banking 1,919 1,786 1,853
-------------------------------- -------------------------- --------------------------- ---------------------------
Global Banking and Markets 1,526 1,857 1,746
Corporate Centre - (11) (28)
-------------------------------- -------------------------- --------------------------- ---------------------------
3 Dividends
---------
On 1 August 2022, the Directors approved an interim dividend for
the 2022 half-year of $0.09 per ordinary share in respect of the
financial year ending 31 December 2022. This distribution amounts
to approximately $1,800m and will be payable on 29 September 2022.
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 2022 30 Jun 2021 31 Dec 2021
----------------------------------------------------------------- -------------------------------------------------------------- ------------------------------------------------------------
Per Total Settled Per Total Settled Per Total Settled
share in scrip share in scrip share in scrip
$ $m $m $ $m $m $ $m $m
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
Dividends paid on
ordinary shares
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
In respect of previous
year:
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
- interim dividend - - - 0.15 3,059 - - - -
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
* second interim dividend 0.18 3,576 - - - - - - -
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
In respect of current
year:
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
- interim dividend - - - - - - 0.07 1,421 -
Total 0.18 3,576 - 0.15 3,059 - 0.07 1,421 -
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
Total dividends on
preference shares
classified as equity
(paid quarterly)(1) - - 4.99 7 - -
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
Total coupons on capital
securities classified
as equity 626 666 637
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
Dividends to shareholders 4,202 3,732 2,058
------------------------------ ---------------- ---------------- ----------------------------- ---------------- ------------------ ------------------------ ---------------- ---------------- ------------------------
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.
Total coupons on capital securities classified as equity
Half-year to
-------------------------------------------------------------------------------
30 Jun 30 Jun 31 Dec
2022 2021 2021
First Per $m $m $m
call date security
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
Perpetual
subordinated
contingent
convertible
securities(1)
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $2,000m
issued at
6.875%(2) Jun 2021 $68.750 - 69 -
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $2,250m
issued at
6.375% Sep 2024 $63.750 72 72 71
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $2,450m
issued at
6.375% Mar 2025 $63.750 78 78 78
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $3,000m
issued at
6.000% May 2027 $60.000 90 90 90
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $2,350m
issued at
6.250% Mar 2023 $62.500 73 73 74
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $1,800m
issued at
6.500% Mar 2028 $65.000 59 59 58
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $1,500m
issued at
4.600% Dec 2030 $46.000 34 35 34
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $1,000m
issued at
4.000%(3) Mar 2026 $40.000 20 - 20
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- $1,000m
issued at
4.700%(4) Mar 2031 $47.000 24 - 24
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- EUR1,500m
issued at
5.250% Sep 2022 EUR52.500 44 47 46
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- EUR1,000m
issued at
6.000% Sep 2023 EUR60.000 33 34 36
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- EUR1,250m
issued at
4.750% July 2029 EUR47.500 34 36 36
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- GBP1,000m
issued at
5.875% Sep 2026 GBP58.750 37 41 39
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- SGD1,000m
issued at
4.700%(5) Jun 2022 SGD47.000 14 18 17
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
- SGD750m
issued at
5.000% Sep 2023 SGD50.000 14 14 14
-------------- ---------- --------- ------------------------- ------------------------- -------------------------
Total 626 666 637
-------------------------- --------- ------------------------- ------------------------- -------------------------
1 Discretionary coupons are paid twice a year on the perpetual
subordinated contingent convertible securities, in denominations of
1,000 per security in each security's issuance currency.
2 This security was called by HSBC Holdings on 15 April 2021 and
was redeemed and cancelled on 1 June 2021.
3 This security was issued by HSBC Holdings on 9 March 2021. The
first call date commences six calendar months prior to the reset
date of 9 September 2026.
4 This security was issued by HSBC Holdings on 9 March 2021. The
first call date commences six calendar months prior to the reset
date of 9 September 2031.
5 This security was called by HSBC Holdings on 4 May 2022 and
was redeemed and cancelled on 8 June 2022.
5
4 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
2022 2021 2021
$m $m $m
----------------------------------------------------- ------------------- --------------------- -------------------
Profit attributable to shareholders of the parent
company 8,915 7,949 5,968
----------------------------------------------------- ------------------- --------------------- -------------------
Dividend payable on preference shares classified as - (7) -
equity
----------------------------------------------------- ------------------- --------------------- -------------------
Coupon payable on capital securities classified as
equity (626) (666) (637)
----------------------------------------------------- ------------------- --------------------- -------------------
Profit attributable to ordinary shareholders of the
parent company 8,289 7,276 5,331
----------------------------------------------------- ------------------- --------------------- -------------------
Basic and diluted earnings per share
Half-year to
------------------------------------------------------------------------------------------------------------------------------------------------------------------
30 Jun 2022 30 Jun 2021 31 Dec 2021
-------------------------------------------------- ------------------------------------------------------- -----------------------------------------------------
Number Amount Amount Amount
of per Number per Number per
Profit shares share Profit of shares share Profit of shares share
$m (millions) $ $m (millions) $ $m (millions) $
----------- -------------- ---------------- ---------------- --------------- ------------------- ----------------- --------------- ----------------- -----------------
Basic(1) 8,289 19,954 0.42 7,276 20,211 0.36 5,331 20,183 0.26
----------- -------------- ---------------- ---------------- --------------- ------------------- ----------------- --------------- ----------------- -----------------
Effect of
dilutive
potential
ordinary
shares 130 97 103
----------- -------------- ---------------- ---------------- --------------- ------------------- ----------------- --------------- ----------------- -----------------
Diluted(1) 8,289 20,084 0.41 7,276 20,308 0.36 5,331 20,286 0.26
----------- -------------- ---------------- ---------------- --------------- ------------------- ----------------- --------------- ----------------- -----------------
1 Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted).
1
5 Segmental analysis
------------------
The Group Chief Executive, supported by the rest of the Group
Executive Committee ('GEC'), is considered the Chief Operating
Decision Maker ('CODM') for the purposes of identifying the Group's
reportable segments. Global business results are assessed by the
CODM on the basis of adjusted performance that removes the effects
of significant items and currency translation from reported
results. Therefore, we disclose these results as required by IFRSs.
The 2021 adjusted performance information is presented on a
constant currency basis. The income statements for the half-years
to 30 June 2021 and 31 December 2021 are converted at the average
rates of exchange for 2022, and the balance sheets at 30 June 2021
and 31 December 2021 at the prevailing rates of exchange on 30 June
2022.
Our operations are closely integrated and, accordingly, the
presentation of data includes internal allocations of certain items
of income and expense. These allocations include the costs of
certain support services and global functions to the extent that
they can be meaningfully attributed to global businesses. While
such allocations have been made on a systematic and consistent
basis, they necessarily involve a degree of subjectivity. Costs
that are not allocated to global businesses are included in
Corporate Centre.
Where relevant, income and expense amounts presented include the
results of inter-segment funding along with inter-company and
inter-business line transactions. All such transactions are
undertaken on arm's length terms. The intra-Group elimination items
for the global businesses are presented in Corporate Centre.
Our global businesses
We provide a comprehensive range of banking and related
financial services to our customers in our three global businesses.
The products and services offered to customers are organised by
these global businesses:
-- Wealth and Personal Banking ('WPB') provides a full range of
retail banking and wealth products to our customers from personal
banking to ultra high net worth individuals. Typically, customer
offerings include retail banking products, such as current and
savings accounts, mortgages and personal loans, credit cards, debit
cards and local and international payment services. We also provide
wealth management services, including insurance and investment
products, global asset management services, investment management
and Private Wealth Solutions for customers with more sophisticated
and international requirements.
-- Commercial Banking ('CMB') offers a broad range of products
and services to serve the needs of our commercial customers,
including small and medium-sized enterprises, mid-market
enterprises and corporates. These include credit and lending,
international trade and receivables finance, treasury management
and liquidity solutions (payments and cash management and
commercial cards), commercial insurance and investments. CMB also
offers customers access to products and services offered by other
global businesses, such as Global Banking and Markets, which
include foreign exchange products, raising capital on debt and
equity markets and advisory services.
-- Global Banking and Markets ('GBM') provides tailored
financial solutions to major government, corporate and
institutional clients and private investors worldwide. The
client-focused business lines deliver a full range of banking
capabilities, including financing, advisory and transaction
services, a markets business that provides services in credit,
rates, foreign exchange, equities, money markets and securities
services, and principal investment activities.
HSBC adjusted profit before tax and balance sheet data
Half-year to 30 Jun 2022
---------------------------------------------------------------------------------------------------------------------------------------------
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) 10,922 7,217 7,841 (290) 25,690
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
- external 10,569 7,281 8,867 (1,027) 25,690
---------------------
- inter-segment 353 (64) (1,026) 737 -
--------------------- --------------------------- -------------------------- -------------------------- ----------------------------
- of which: net
interest
income/(expense) 7,658 5,007 2,296 (496) 14,465
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Change in expected
credit losses and
other credit
impairment
(charges)/recoveries (573) (288) (227) (2) (1,090)
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Net operating income 10,349 6,929 7,614 (292) 24,600
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Total operating
expenses (7,411) (3,351) (4,735) 121 (15,376)
Operating profit 2,938 3,578 2,879 (171) 9,224
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Share of profit in
associates and
joint ventures 8 - - 1,441 1,449
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Adjusted profit
before tax 2,946 3,578 2,879 1,270 10,673
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
% % % % %
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Share of HSBC's
adjusted profit
before
tax 27.6 33.5 27.0 11.9 100.0
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Adjusted cost
efficiency ratio 67.9 46.4 60.4 41.7 59.9
Adjusted balance $m $m $m $m $m
sheet data
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Loans and advances to
customers (net) 475,464 348,253 204,097 542 1,028,356
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Interests in
associates and joint
ventures 484 14 121 28,827 29,446
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Total external assets 882,490 619,490 1,318,425 165,015 2,985,420
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
Customer accounts 836,026 479,680 335,033 562 1,651,301
--------------------- --------------------------- -------------------------- -------------------------- ---------------------------- --------------------------
HSBC adjusted profit before tax and balance sheet data (continued)
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) 10,980 6,353 7,518 (117) 24,734
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
- external 10,782 6,326 8,305 (679) 24,734
-----------------
- inter-segment 198 27 (787) 562 -
----------------- -------------------------- ---------------------------- -------------------------- ----------------------------
- of which: net
interest
income/(expense) 6,807 4,172 1,937 (374) 12,542
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Change in
expected credit
losses and
other credit
impairment
charges 38 228 405 4 675
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Net operating
income/(expense) 11,018 6,581 7,923 (113) 25,409
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Total operating
expenses (7,277) (3,371) (4,724) (148) (15,520)
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Operating
profit/(loss) 3,741 3,210 3,199 (261) 9,889
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Share of profit
in associates
and
joint ventures 10 1 - 1,638 1,649
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Adjusted profit
before tax 3,751 3,211 3,199 1,377 11,538
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
%% %% %
----------------- -------------------------- --------------------------- -------------------------- --------------------------- --------------------------
Share of HSBC's
adjusted profit
before
tax 32.5 27.8 27.7 12.0 100.0
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Adjusted cost
efficiency ratio 66.3 53.1 62.9 (126.5) 62.7
Adjusted balance
sheet data $m $m $m $m $m
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Loans and
advances to
customers (net) 458,573 329,873 205,044 1,065 994,555
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Interests in
associates and
joint
ventures 467 15 121 27,315 27,918
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Total external
assets 859,383 581,741 1,164,916 184,436 2,790,476
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Customer accounts 793,277 455,006 316,865 794 1,565,942
----------------- -------------------------- ---------------------------- -------------------------- ---------------------------- --------------------------
Half-year to 31 Dec 2021
Net operating
income/(expense)
before
change in expected
credit losses and
other credit
impairment
charges(1) 10,439 6,556 6,878 (296) 23,577
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
- external 10,354 6,460 7,676 (913) 23,577
---------------------
- inter-segment 85 96 (798) 617 -
--------------------- -------------------------- -------------------------- --------------------------- ----------------------------
- of which: net
interest
income/(expense) 6,955 4,387 2,032 (353) 13,021
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Change in expected
credit losses and
other credit
impairment
(charges)/recoveries 215 40 (80) (1) 174
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Net operating
income/(expense) 10,654 6,596 6,798 (297) 23,751
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Total operating
expenses (7,574) (3,355) (4,831) 313 (15,447)
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Operating profit 3,080 3,241 1,967 16 8,304
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Share of profit in
associates and
joint ventures 24 - - 1,353 1,377
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Adjusted profit
before tax 3,104 3,241 1,967 1,369 9,681
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
%% %% %
--------------------- -------------------------- ------------------------- --------------------------- --------------------------- --------------------------
Share of HSBC's
adjusted profit
before
tax 32.1 33.5 20.3 14.1 100.0
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Adjusted cost
efficiency ratio 72.6 51.2 70.2 105.7 65.5
Adjusted balance $m $m $m $m $m
sheet data
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Loans and advances to
customers (net) 462,452 332,710 198,854 686 994,702
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Interests in
associates and joint
ventures 490 13 119 27,938 28,560
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Total external assets 889,349 589,834 1,157,478 175,688 2,812,349
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
Customer accounts 820,564 481,781 324,239 590 1,627,174
--------------------- -------------------------- -------------------------- --------------------------- ---------------------------- --------------------------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
Reported external net operating income is attributed to
countries and territories on the basis of the location of the
branch responsible for reporting the results or advancing the
funds:
Half-year to
-------------------------------------------------------------------------
30 Jun 30 Jun 31 Dec
2022 2021 2021
$m $m $m
------------------------------------------- --------------------- ----------------------- -------------------------
Reported external net operating income by
country/territory(1) 25,236 25,551 24,001
------------------------------------------- --------------------- ----------------------- -------------------------
* UK 6,554 5,610 5,299
-------------------------------------------
* Hong Kong 6,837 7,476 6,769
-------------------------------------------
* US 1,964 1,993 1,802
-------------------------------------------
* France 1,158 1,228 951
-------------------------------------------
* other countries/territories 8,723 9,244 9,180
------------------------------------------- --------------------- -----------------------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
Adjusted results reconciliation
Half-year to
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
30 Jun 2022 30 Jun 2021 31 Dec 2021
------------------------------------------------ ----------------------------------------------------------------- --------------------------------------------------------------------
Significant Currency Significant Currency Significant
Adjusted items Reported Adjusted translation items Reported Adjusted translation items Reported
$m $m $m $m $m $m $m $m $m $m $m
----------- ------------ ------------------- ------------- ------------ ------------------ ---------------- ------------- ------------- ----------------- ------------------ --------------
Revenue(1) 25,690 (454) 25,236 24,734 1,069 (252) 25,551 23,577 711 (287) 24,001
----------- ------------ ------------------- ------------- ------------ ------------------ ---------------- ------------- ------------- ----------------- ------------------ --------------
ECL (1,090) - (1,090) 675 44 - 719 174 35 - 209
----------- ------------ ------------------- ------------- ------------ ------------------ ---------------- ------------- ------------- ----------------- ------------------ --------------
Operating
expenses (15,376) (1,043) (16,419) (15,520) (749) (818) (17,087) (15,447) (510) (1,576) (17,533)
----------- ------------ ------------------- ------------- ------------ ------------------ ---------------- ------------- ------------- ----------------- ------------------ --------------
Share of
profit
in
associates
and
joint
ventures 1,449 - 1,449 1,649 7 - 1,656 1,377 13 - 1,390
----------- ------------ ------------------- ------------- ------------ ------------------ ---------------- ------------- ------------- ----------------- ------------------ --------------
Profit
before
tax 10,673 (1,497) 9,176 11,538 371 (1,070) 10,839 9,681 249 (1,863) 8,067
----------- ------------ ------------------- ------------- ------------ ------------------ ---------------- ------------- ------------- ----------------- ------------------ --------------
1 Net operating income before change in expected credit losses
and other credit impairment charges, also referred to as
revenue.
Adjusted balance sheet reconciliation
At 30 At 31 Dec 2021
Jun 2022
-------------------------- ---------------------------------------------------------------------
Reported Currency
and adjusted Adjusted translation Reported
$m $m $m $m
------------------- -------------------------- --------------------- ----------------------- ---------------------
Loans and advances
to customers (net) 1,028,356 994,702 51,112 1,045,814
------------------- -------------------------- --------------------- ----------------------- ---------------------
Interests in
associates and
joint ventures 29,446 28,560 1,049 29,609
------------------- -------------------------- --------------------- ----------------------- ---------------------
Total external
assets 2,985,420 2,812,349 145,590 2,957,939
------------------- -------------------------- --------------------- ----------------------- ---------------------
Customer accounts 1,651,301 1,627,174 83,400 1,710,574
------------------- -------------------------- --------------------- ----------------------- ---------------------
Adjusted profit reconciliation
Half-year to
---------------------------------------------------------------------------------------
30 Jun 30 Jun 31 Dec
2022 2021 2021
$m $m $m
Adjusted profit before tax 10,673 11,538 9,681
----------------------------- ---------------------------- --------------------------- ----------------------------
Significant items (1,497) (1,070) (1,863)
----------------------------- ---------------------------- --------------------------- ----------------------------
- customer redress programmes
(revenue) (14) 18 (7)
-----------------------------
- disposals, acquisitions and (288) - -
investment in new
businesses (revenue)(1)
-----------------------------
- fair value movements on
financial instruments(2) (220) (194) (48)
-----------------------------
- restructuring and other
related costs (revenue)(3) 68 (70) (237)
- customer redress programmes
(operating expenses) 6 (17) (32)
- impairment of goodwill and
other intangible assets (9) - (587)
-----------------------------
- restructuring and other
related costs (operating
expenses) (1,040) (848) (988)
- currency translation on
significant items 41 36
----------------------------- ---------------------------- ---------------------------
Currency translation 371 249
----------------------------- ---------------------------- --------------------------- ----------------------------
Reported profit before tax 9,176 10,839 8,067
----------------------------- ---------------------------- --------------------------- ----------------------------
1 Includes losses from classifying businesses as held-for-sale
as part of a broader restructuring of our European business.
2 Includes fair value movements on non-qualifying hedges and
debt valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in
February 2020, including losses associated with RWA reduction
commitments.
6 Fair values of financial instruments carried at fair value
----------------------------------------------------------
The accounting policies, control framework and hierarchy used to
determine fair values at 30 June 2022 are consistent with those
applied for the Annual Report and Accounts 2021.
Financial instruments carried at fair value and bases of valuation
Valuation techniques
---------------------------------------------------------------------
Quoted Using
market observable With significant
price inputs unobservable
Level Level inputs
1 2 Level 3 Total
Recurring $m $m $m $m
fair value
measurements
------------- ------------------- ----------------------------- -------------------------------------- -------------
At 30 Jun
2022
------------- ------------------- ----------------------------- -------------------------------------- -------------
Assets
------------- ------------------- ----------------------------- -------------------------------------- -------------
Trading
assets 148,156 66,218 2,976 217,350
------------- ------------------- ----------------------------- -------------------------------------- -------------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
profit or
loss 15,558 15,252 15,063 45,873
------------- ------------------- ----------------------------- -------------------------------------- -------------
Derivatives 2,556 258,256 2,111 262,923
------------- ------------------- ----------------------------- -------------------------------------- -------------
Financial
investments 191,631 82,237 2,709 276,577
------------- ------------------- ----------------------------- -------------------------------------- -------------
Liabilities
------------- ------------------- ----------------------------- -------------------------------------- -------------
Trading
liabilities 60,623 19,595 351 80,569
------------- ------------------- ----------------------------- -------------------------------------- -------------
Financial
liabilities
designated
at fair
value 1,135 116,406 8,465 126,006
------------- ------------------- ----------------------------- -------------------------------------- -------------
Derivatives 2,758 246,391 2,320 251,469
------------- ------------------- ----------------------------- -------------------------------------- -------------
At 31 Dec
2021
------------- ------------------- ----------------------------- -------------------------------------- -------------
Assets
------------- ------------------- ----------------------------- -------------------------------------- -------------
Trading
assets 180,423 65,757 2,662 248,842
------------- ------------------- ----------------------------- -------------------------------------- -------------
Financial
assets
designated
and
otherwise
mandatorily
measured at
fair value
through
profit or
loss 17,937 17,629 14,238 49,804
------------- ------------------- ----------------------------- -------------------------------------- -------------
Derivatives 2,783 191,621 2,478 196,882
------------- ------------------- ----------------------------- -------------------------------------- -------------
Financial
investments 247,745 97,838 3,389 348,972
------------- ------------------- ----------------------------- -------------------------------------- -------------
Liabilities
------------- ------------------- ----------------------------- -------------------------------------- -------------
Trading
liabilities 63,437 20,682 785 84,904
------------- ------------------- ----------------------------- -------------------------------------- -------------
Financial
liabilities
designated
at fair
value 1,379 136,243 7,880 145,502
------------- ------------------- ----------------------------- -------------------------------------- -------------
Derivatives 1,686 186,290 3,088 191,064
------------- ------------------- ----------------------------- -------------------------------------- -------------
Transfers between Level 1 and Level 2 fair values
Assets Liabilities
--------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------
Designated
and otherwise
mandatorily Designated
Financial Trading measured at Trading at fair
investments assets fair value Derivatives liabilities value Derivatives
$m $m $m $m $m $m $m
---------- ------------------------ -------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
At 30 Jun
2022
---------- ------------------------ -------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
Transfers
from
Level
1 to
Level 2 2,407 1,937 538 - 55 - -
---------- ------------------------ -------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
Transfers 4,066 3,488 99 - 203 - -
from
Level
2 to
Level 1
---------- ------------------------ -------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
At 31 Dec 2021
---------------------------------------------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
Transfers 8,477 6,553 1,277 103 181 - 212
from
Level
1 to
Level 2
---------- ------------------------ -------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
Transfers 6,007 4,132 768 - 638 - -
from
Level
2 to
Level 1
---------- ------------------------ -------------------- --------------------------------------------- ---------------------- ------------------------ -------------------------- ----------------------
Transfers between levels of the fair value hierarchy are deemed
to occur at the end of each quarterly reporting period. Transfers
into and out of levels of the fair value hierarchy are primarily
attributable to observability of valuation inputs and price
transparency.
Fair value adjustments
We adopt the use of fair value adjustments when we take into
consideration additional factors not incorporated within the
valuation model that would otherwise be considered by a market
participant. We classify fair value adjustments as either
'risk-related' or 'model-related'. The majority of these
adjustments relate to GBM. Movements in the level of fair value
adjustments do not necessarily result in the recognition of profits
or losses within the income statement. For example, as models are
enhanced, fair value adjustments may no longer be required.
Similarly, fair value adjustments will decrease when the related
positions are unwound, but this may not result in profit or
loss.
Global Banking and Markets fair value adjustments
At 30 Jun At 31 Dec
2022 2021
--------------------------------------------- ---------------------------------------------
Corporate Corporate
GBM Centre GBM Centre
$m $m $m $m
------------------------ --------------------- ---------------------- --------------------- ----------------------
Type of adjustment
------------------------ --------------------- ---------------------- --------------------- ----------------------
Risk-related 800 28 868 42
------------------------ --------------------- ---------------------- --------------------- ----------------------
- bid-offer 427 - 412 -
------------------------
- uncertainty 78 1 66 1
------------------------
- credit valuation
adjustment 300 21 228 35
------------------------
- debt valuation
adjustment (204) - (92) -
------------------------
- funding fair value
adjustment 199 6 254 6
------------------------
- other - - - -
------------------------ --------------------- ---------------------- ---------------------
Model-related 61 - 57 -
------------------------ --------------------- ---------------------- --------------------- ----------------------
- model limitation 61 - 57 -
------------------------
- other - - - -
------------------------ --------------------- ---------------------- ---------------------
Inception profit (Day 1
P&L reserves)(1) 99 - 106 -
------------------------ --------------------- ---------------------- --------------------- ----------------------
Total 960 28 1,031 42
------------------------ --------------------- ---------------------- --------------------- ----------------------
1 See Note 8 on the interim condensed financial statements on page 121.
The reduction in fair value adjustments was predominantly driven
by changes in the rates and credit environment.
For further details of our risk-related and model-related
adjustments, see pages 345 and 346 of the Annual Report and
Accounts 2021.
Fair value valuation bases
Financial instruments measured at fair value using a valuation technique
with significant unobservable inputs - Level 3
Assets Liabilities
-------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------
Designated
and otherwise
mandatorily
measured at
fair value Designated
Financial Trading through profit Trading at fair
investments assets or loss Derivatives Total liabilities value Derivatives Total
$m $m $m $m $m $m $m $m $m
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Private
equity
including
strategic
investments 647 90 14,704 - 15,441 91 - - 91
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Asset-backed 468 114 29 - 611 - - - -
securities
Structured
notes - - - - - - 8,465 - 8,465
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Derivatives - - - - - - - - -
with
monolines
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Other
derivatives - - - 2,111 2,111 - - 2,320 2,320
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Other 1,594 2,772 330 - 4,696 260 - - 260
portfolios
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
At 30 Jun
2022 2,709 2,976 15,063 2,111 22,859 351 8,465 2,320 11,136
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Private
equity
including
strategic
investments 544 2 13,732 - 14,278 9 - - 9
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Asset-backed 1,008 132 1 - 1,141 - - - -
securities
Structured
notes - - - - - - 7,879 - 7,879
Other
derivatives - - - 2,478 2,478 - - 3,088 3,088
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
Other 1,837 2,528 505 - 4,870 776 1 - 777
portfolios
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
At 31 Dec
2021 3,389 2,662 14,238 2,478 22,767 785 7,880 3,088 11,753
------------- ---------------------- ------------------------ ----------------------------------------------- -------------------- ------------------- ------------------------ ------------------------ -------------------- --------------------
The basis for determining the fair value of the financial
instruments in the table above is explained on page 347 of the
Annual Report and Accounts 2021.
Reconciliation of fair value measurements in Level 3 of the fair
value hierarchy
Movement in Level 3 financial instruments
Assets Liabilities
------------------------------------------------------------------------------------------------------------ -------------------------------------------------------------------------
Designated
and otherwise
mandatorily
measured
at fair
value through Designated
Financial Trading profit Trading at fair
investments assets or loss Derivatives liabilities value Derivatives
$m $m $m $m $m $m $m
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
At 1 Jan 2022 3,389 2,662 14,238 2,478 785 7,880 3,088
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
Total gains/(losses) recognised
in profit or loss (7) (22) 310 408 (45) (1,103) 165
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (22) - 408 (45) - 165
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 310 - - (1,103) -
-----------------------------------------------------------
* gains less losses from financial investments held at
fair value through other comprehensive income (7) - - - - - -
Total gains/(losses) recognised
in other comprehensive
income ('OCI') (287) (165) (336) (191) (12) (398) (231)
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
* financial investments: fair value losses (140) - - - - (18) -
* exchange differences (147) (165) (336) (191) (12) (380) (231)
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ -------------------------
Purchases 506 1,026 1,707 - 13 - -
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
New issuances - - - - 4 2,511 -
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
Sales (186) (698) (299) - (95) (22) -
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
Settlements (273) (373) (561) (509) (636) (723) (580)
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
Transfers out (501) (287) (36) (290) (7) (549) (437)
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
Transfers in 68 833 40 215 344 869 315
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
At 30 Jun 2022 2,709 2,976 15,063 2,111 351 8,465 2,320
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
Unrealised gains/(losses)
recognised in profit or
loss relating to assets
and liabilities held at
30 Jun 2022 - (37) 291 929 1 423 3,494
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ ------------------------- --------------------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (37) - 929 1 - 3,494
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 291 - - 423 -
----------------------------------------------------------- ------------------------ ----------------------- --------------------------------- ---------------------- ------------------------ -------------------------
At 1 Jan 2021 3,654 2,499 11,477 2,670 162 5,306 4,188
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
Total gains/(losses) recognised
in profit or loss 2 (155) 1,038 195 15 (456) 466
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (155) - 195 15 - 466
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 1,038 - - (456) -
-----------------------------------------------------------
* gains less losses from financial investments held at
fair value through other comprehensive income 2 - - - - - -
Total losses recognised
in other comprehensive
income ('OCI') (391) 23 (114) 23 (3) 2 29
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
(360) - - - - - -
* financial investments: fair value losses
* exchange differences (31) 23 (114) 23 (3) 2 29
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- --------------------------
Purchases 390 1,094 1,631 - 482 - -
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
New issuances - - - - 24 2,725 -
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
Sales (214) (244) (499) - - - -
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
Settlements (177) (494) (436) (359) (8) (896) (1,537)
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
Transfers out (311) (512) (159) (126) (1) (339) (221)
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
Transfers in 290 298 50 274 186 895 496
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
At 30 Jun 2021 3,243 2,509 12,988 2,677 857 7,237 3,421
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
Unrealised gains/(losses)
recognised in profit or
loss relating to assets
and liabilities held at
30 Jun 2021 - (99) 885 175 2 106 (4)
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- -------------------------- -----------------------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (99) - 175 2 - (4)
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 885 - - 106 -
----------------------------------------------------------- ------------------------ ----------------------- -------------------------------- ----------------------- ------------------------- --------------------------
Movement in Level 3 financial instruments (continued)
Assets Liabilities
------------------------------------------------------------------------------------------------------------ -----------------------------------------------------------------------------
Designated
and otherwise
mandatorily
measured
at fair
value through Designated
Financial Trading profit Trading at fair
investments assets or loss Derivatives liabilities value Derivatives
$m $m $m $m $m $m $m
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
At 1 Jul 2021 3,243 2,509 12,988 2,677 857 7,237 3,421
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
Total gains recognised
in profit or loss (12) (223) 715 2,042 1 (380) 2,117
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
* net income from financial instruments held for
trading or managed on a fair value basis - (223) - 2,042 1 - 2,117
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 715 - - (380) -
-----------------------------------------------------------
* gains less losses from financial investments held at
fair value through other comprehensive income (12) - - - - - -
Total gains recognised
in other comprehensive
income ('OCI') (130) (41) (171) (50) (5) (63) (55)
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
- financial investments: (68) - - - - - -
fair value gains
- exchange differences (62) (41) (171) (50) (5) (63) (55)
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- --------------------------
Purchases 635 894 2,061 - 532 1 -
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
New issuances - - - - 11 3,244 -
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
Sales (366) (229) (717) - (4) (27) -
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
Settlements (159) (253) (613) (1,988) (673) (2,026) (2,425)
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
Transfers out (72) (515) (25) (292) (6) (365) (513)
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
Transfers in 250 520 - 89 72 259 543
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
At 31 Dec 2021 3,389 2,662 14,238 2,478 785 7,880 3,088
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
Unrealised gains/(losses)
recognised in profit or
loss relating to assets
and liabilities held at
31 Dec 2021 - (309) 1,509 1,298 - 166 (969)
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- -------------------------- ----------------------
* net income/(losses) from financial instruments held
for trading or managed on a fair value basis - (309) - 1,298 - - (969)
* changes in fair value of other financial instruments
mandatorily measured at fair value through profit or
loss - - 1,509 - - 166 -
----------------------------------------------------------- ----------------------- ----------------------- --------------------------------- ----------------------- ------------------------- --------------------------
Transfers between levels of the fair value hierarchy are deemed
to occur at the end of each quarterly reporting period. Transfers
into and out of levels of the fair value hierarchy are primarily
attributable to observability of valuation inputs and price
transparency.
Effect of changes in significant unobservable assumptions to
reasonably possible alternatives
The following table shows the sensitivity of Level 3 fair values
to reasonably possible alternative assumptions:
Sensitivity of fair values to reasonably possible alternative assumptions
Reflected in Reflected in
profit or loss OCI
-------------------------------------------------------------- ------------------------------------------------------------
Favourable Unfavourable Favourable Unfavourable
changes changes changes changes
$m $m $m $m
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Derivatives,
trading assets
and trading
liabilities(1) 172 (179) - -
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Financial
assets and
liabilities
designated
and otherwise
mandatorily
measured at
fair value
through profit
or loss 979 (977) - -
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Financial
investments 12 (6) 142 (143)
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
At 30 Jun 2022 1,163 (1,162) 142 (143)
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Derivatives,
trading assets
and trading
liabilities(1) 179 (197) - -
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Financial
assets and
liabilities
designated
and otherwise
mandatorily
measured at
fair value
through profit
or loss 795 (793) - -
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Financial
investments 24 (24) 105 (104)
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
At 30 Jun 2021 998 (1,014) 105 (104)
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Derivatives,
trading assets
and trading
liabilities(1) 143 (146) - -
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Financial
assets and
liabilities
designated
and otherwise
mandatorily
measured at
fair value
through profit
or loss 849 (868) - -
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
Financial
investments 20 (20) 113 (112)
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
At 31 Dec 2021 1,012 (1,034) 113 (112)
--------------- ----------------------------- ------------------------------- ----------------------------- -----------------------------
1 'Derivatives, trading assets and trading liabilities' is
presented as one category to reflect the manner in which these
financial instruments are risk-managed.
The sensitivity analysis aims to measure a range of fair values
consistent with the application of a 95% confidence interval.
Methodologies take account of the nature of the valuation technique
employed, as well as the availability and reliability of observable
proxy and historical data.
When the fair value of a financial instrument is affected by
more than one unobservable assumption, the table above reflects the
most favourable or the most unfavourable change from varying the
assumptions individually.
Key unobservable inputs to Level 3 financial instruments
The following table lists key unobservable inputs to Level 3
financial instruments and provides the range of those inputs at 30
June 2022. There has been no change to the key unobservable inputs
to Level 3 financial instruments and inter-relationships therein,
which are detailed on pages 349 and 350 of the Annual Report and
Accounts 2021.
Quantitative information about significant unobservable inputs in Level
3 valuations
Fair value 30 Jun 31 Dec 2021
2022
---------------------------------------- ---------- ------------ ------------- ----------------------------------
Assets Liabilities Full range Full range
of inputs of inputs
------------- ----------------------------------
$m $m Key Lower Higher Lower Higher
Valuation unobservable
techniques inputs
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Private equity See
including strategic footnote See footnote
investments 15,441 91 1 1
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Asset-backed securities 611 -
('ABS')
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
- collateralised 25 - Market Prepayment - -
loan/debt obligation proxy rate
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
Market
proxy Bid quotes - 98 - 100
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
Market
- other ABSs 586 - proxy Bid quotes - 97 - 100
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Loans held for - -
securitisation
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Structured notes - 8,465
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model -
- equity-linked Option Equity
notes - 6,648 model volatility 6% 95% 6% 124%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model -
Option Equity
model correlation 30% 98% 22% 99%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model -
Option FX
* Foreign exchange ('FX')-linked notes - 994 model volatility 3% 40% 1% 99%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
- other - 823
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Derivatives with - - Model - Credit - - - -
monolines Discounted spread
cash flow
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Other derivatives 2,111 2,320
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
- interest rate
derivatives 448 588
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model -
securitisation Discounted Prepayment
swaps 260 367 cash flow rate 5% 10% 5% 10%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model - Interest
Option rate
long-dated swaptions 31 50 model volatility 10% 42% 15% 35%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
other 157 171
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
- FX derivatives 291 354
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model -
Option FX
FX options 112 193 model volatility 1% 40% 1% 99%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
other 179 161
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
- equity derivatives 1,232 1,154
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Model -
long-dated single Option Equity
stock options 537 703 model volatility 6% 124% 4% 138%
------------------------------------------- ---------- ------------ ----- ------ ---------------- ----------------
other 695 451
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
- credit derivatives 140 224
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
other 140 224
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
Other portfolios 4,696 260
Model -
Discounted Interest
- repurchase agreements 993 232 cash flow rate curve 1% 5% 1% 5%
------------------------------------------- ------------ ----- ------ ---------------- ----------------
- other(2) 3,703 28
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
At 30 Jun 2022 22,859 11,136
------------------------------------------- ------------------- ------------------- ---------- ------------ ----- ------ ---------------- ----------------
1 Given the bespoke nature of the analysis in respect of each
private equity holding, it is not practical to quote a range of key
unobservable inputs .
2 'Other' includes a range of smaller holdings.
7 Fair values of financial instruments not carried at fair value
--------------------------------------------------------------
The bases for measuring the fair values of loans and advances to
banks and customers, financial investments, deposits by banks,
customer accounts, debt securities in issue, subordinated
liabilities and non-trading repurchase and reverse repurchase
agreements are explained on pages 350 and 351 of the Annual Report
and Accounts 2021.
Fair values of financial instruments not carried at fair value on the
balance sheet
At 30 Jun 2022 At 31 Dec 2021
------------------------------------------ --------------------------------------------
Carrying Fair Carrying Fair
amount value amount value
$m $m $m $m
---------------------------- -------------------- -------------------- --------------------- ---------------------
Assets
---------------------------- -------------------- -------------------- --------------------- ---------------------
Loans and advances to banks 96,429 96,445 83,136 83,293
---------------------------- -------------------- -------------------- --------------------- ---------------------
Loans and advances to
customers 1,028,356 1,021,944 1,045,814 1,044,575
---------------------------- -------------------- -------------------- --------------------- ---------------------
Reverse repurchase
agreements - non-trading 244,451 244,381 241,648 241,652
---------------------------- -------------------- -------------------- --------------------- ---------------------
Financial investments - at
amortised cost 154,219 148,456 97,302 102,267
---------------------------- -------------------- -------------------- --------------------- ---------------------
Liabilities
---------------------------- -------------------- -------------------- --------------------- ---------------------
Deposits by banks 105,275 105,197 101,152 101,149
---------------------------- -------------------- -------------------- --------------------- ---------------------
Customer accounts 1,651,301 1,651,234 1,710,574 1,710,733
---------------------------- -------------------- -------------------- --------------------- ---------------------
Repurchase agreements -
non-trading 129,707 129,705 126,670 126,670
---------------------------- -------------------- -------------------- --------------------- ---------------------
Debt securities in issue 87,944 85,581 78,557 79,243
---------------------------- -------------------- -------------------- --------------------- ---------------------
Subordinated liabilities 20,711 21,683 20,487 26,206
---------------------------- -------------------- -------------------- --------------------- ---------------------
Other financial instruments not carried at fair value are
typically short term in nature and reprice to current market rates
frequently. Accordingly, their carrying amount is a reasonable
approximation of fair value.
8 Derivatives
-----------
Notional contract amounts and fair values of derivatives by product
contract type held by HSBC
Notional contract Fair value amount
amount
------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Assets and Assets Liabilities
liabilities
------------------------------------------------- ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Trading Hedging Trading Hedging Total Trading Hedging Total
$m $m $m $m $m $m $m $m
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Foreign
exchange 8,856,919 38,611 127,897 2,187 130,084 122,431 247 122,678
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Interest
rate 15,558,726 237,907 220,316 3,620 223,936 220,007 1,181 221,188
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Equities 573,332 - 11,919 - 11,919 10,843 - 10,843
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Credit 199,195 - 3,255 - 3,255 3,321 - 3,321
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Commodity
and
other 102,053 - 1,815 - 1,815 1,525 - 1,525
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Gross
total
fair
values 25,290,225 276,518 365,202 5,807 371,009 358,127 1,428 359,555
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Offset (108,086) (108,086)
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
At 30 Jun
2022 25,290,225 276,518 365,202 5,807 262,923 358,127 1,428 251,469
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Foreign
exchange 7,723,034 43,839 79,801 1,062 80,863 77,670 207 77,877
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Interest
rate 14,470,539 162,921 151,631 1,749 153,380 146,808 966 147,774
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Equities 659,142 - 12,637 - 12,637 14,379 - 14,379
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Credit 190,724 - 2,175 - 2,175 3,151 - 3,151
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Commodity
and
other 74,159 - 1,205 - 1,205 1,261 - 1,261
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Gross
total
fair
values 23,117,598 206,760 247,449 2,811 250,260 243,269 1,173 244,442
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
Offset (53,378) (53,378)
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
At 31 Dec
2021 23,117,598 206,760 247,449 2,811 196,882 243,269 1,173 191,064
---------- --------------------- -------------------------- ----------------------- -------------------------- ----------------------- ----------------------- -------------------------- -----------------------
The notional contract amounts of derivatives held for trading
purposes and derivatives designated in qualifying hedge accounting
relationships indicate the nominal value of transactions
outstanding at the balance sheet date, not amounts at risk.
Derivative assets and liabilities increased during 1H22, reflecting
changes in yield curves and the market environment.
Derivatives valued using models with unobservable inputs
The following table shows the difference between the fair value
at initial recognition, which is the transaction price, and the
value that would have been derived had valuation techniques used
for subsequent measurement been applied at initial recognition,
less subsequent releases.
Unamortised balance of derivatives valued using models with significant
unobservable inputs
Half-year to
30 Jun 30 Jun 31 Dec
2022 2021 2021
$m $m $m
---------------------------- ---------------------------- ---------------------------- ----------------------------
Unamortised balance at
beginning of period 106 104 120
---------------------------- ---------------------------- ---------------------------- ----------------------------
Deferral on new transactions 100 187 124
---------------------------- ---------------------------- ---------------------------- ----------------------------
Recognised in the income
statement during the period (99) (172) (136)
---------------------------- ---------------------------- ---------------------------- ----------------------------
- amortisation (61) (89) (88)
----------------------------
- subsequent to unobservable
inputs becoming observable - (3) (1)
----------------------------
- maturity, termination or
offsetting derivative (38) (80) (47)
---------------------------- ---------------------------- ----------------------------
Exchange differences (8) 1 (2)
---------------------------- ---------------------------- ---------------------------- ----------------------------
Unamortised balance at end
of period(1) 99 120 106
---------------------------- ---------------------------- ---------------------------- ----------------------------
1 This amount is yet to be recognised in the consolidated income statement.
Hedge accounting derivatives
The notional contract amounts of derivatives held for hedge
accounting purposes indicate the nominal value of transactions
outstanding at the balance sheet date, not amounts at risk.
Notional contract amounts of derivatives held for hedging purposes
by product type
At 30 Jun 2022 At 31 Dec 2021
------------------------------------------------- ---------------------------------------------------
Cash Fair
flow value Cash flow Fair value
hedges hedges hedges hedges
$m $m $m $m
-------------- -------------------- --------------------------- --------------------- ----------------------------
Foreign
exchange 12,150 4 17,930 4
-------------- -------------------- --------------------------- --------------------- ----------------------------
Interest rate 100,673 137,234 72,365 90,556
-------------- -------------------- --------------------------- --------------------- ----------------------------
Total 112,823 137,238 90,295 90,560
-------------- -------------------- --------------------------- --------------------- ----------------------------
The Group applies hedge accounting in respect of certain
consolidated net investments. Hedging is undertaken using forward
foreign exchange contracts or by financing with foreign currency
borrowings. At 30 June 2022, the notional contract values of
outstanding financial instruments designated as hedges of net
investments in foreign operations were $26,457m (31 December 2021:
$25,905m).
Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39
'Financial Instruments'
HSBC has applied both the first set of amendments ('Phase 1')
and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39
applicable to hedge accounting. The items in hedge accounting
relationships that are affected by Phase 1 and Phase 2 amendments
are presented in the balance sheet as 'Financial assets designated
and otherwise mandatorily measured at fair value through other
comprehensive income', 'Loans and advances to customers', 'Debt
securities in issue' and 'Deposits by banks'. The notional value of
the derivatives impacted by the Ibor reform, including those
designated in hedge accounting relationships, is disclosed on page
62 in the section 'Financial instruments impacted by Ibor reform'.
For further details on Ibor transition, see 'Areas of special
interest' on page 61.
The most significant Ibor benchmark in which the Group continues
to have hedging instruments is US dollar Libor. During 2022 those
instruments continued to be transitioned. It is expected that the
transition out of US dollar Libor hedging derivatives will be
largely completed by the end of 2022. This transition does not
necessitate any new approaches compared with the mechanisms used so
far for transition and it will not be necessary to change the
transition risk management strategy. There is no significant
judgement required for US dollar Libor to determine whether and
when the transition uncertainty has been resolved.
For some of the Ibors included under the 'Other' header in the
table below, judgement has been needed to establish whether a
transition is required. This is because there are Ibor benchmarks
subject to computation improvements and insertion of fallback
provisions where their administrators have yet to provide full
clarity on whether or when these Ibor benchmarks will be
demised.
The notional amounts of interest rate derivatives designated in
hedge accounting relationships do not represent the extent of the
risk exposure managed by the Group but they are expected to be
directly affected by market-wide Ibor reform and in scope of Phase
1 amendments and are shown in the table below. The cross-currency
swaps designated in hedge accounting relationships and affected by
Ibor reform are not significant and have not been presented
below:
Hedging instrument impacted by Ibor reform
Hedging instrument
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Impacted by Ibor reform
EUR(1) GBP $ Other(2) Total Not impacted
by Ibor Notional
reform amount(3)
$m $m $m $m $m $m $m
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
Fair
value
hedges 9,094 - 7,903 10,461 27,458 109,776 137,234
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
Cash
flow
hedges 6,342 - 100 21,058 27,500 73,173 100,673
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
At 30
Jun
2022 15,436 - 8,003 31,519 54,958 182,949 237,907
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
Fair
value
hedges 6,178 - 18,525 6,615 31,318 59,238 90,556
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
Cash
flow
hedges 7,954 - 100 8,632 16,686 55,679 72,365
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
At 31
Dec
2021 14,132 - 18,625 15,247 48,004 114,917 162,921
------- -------------------------- ----------------------------- ---------------------------- -------------------------- ------------------------ ------------------------ ------------------------
1 The notional contract amounts of euro interest rate
derivatives impacted by Ibor reform mainly comprise hedges with a
Euribor benchmark, which are 'Fair value hedges' of $9,094m (31
December 2021: $6,178m) and 'Cash flow hedges' of $6,342m (31
December 2021: $7,954m).
2 Other benchmarks impacted by Ibor reform comprise mainly of
Canadian dollar offered rate ('CDOR'), Hong Kong interbank offered
rate ('HIBOR') and Mexican interbank equilibrium interest rate
('TIIE') related derivatives.
3 The notional contract amounts of interest rate derivatives
designated in qualifying hedge accounting relationships indicate
the nominal value of transactions outstanding at the balance sheet
date. They do not represent amounts at risk.
9 Financial investments
---------------------
Carrying amounts of financial investments
30 Jun 31 Dec
2022 2021
$m $m
Financial investments measured at fair value through other
comprehensive income 276,577 348,972
----------------------------------------------------------- -------------------------- --------------------------
- treasury and other eligible bills 59,602 100,158
-----------------------------------------------------------
- debt securities 215,163 246,998
-----------------------------------------------------------
- equity securities 1,812 1,770
-----------------------------------------------------------
- other instruments - 46
----------------------------------------------------------- --------------------------
Debt instruments measured at amortised cost 154,219 97,302
----------------------------------------------------------- -------------------------- --------------------------
- treasury and other eligible bills 55,392 21,634
-----------------------------------------------------------
- debt securities 98,827 75,668
----------------------------------------------------------- --------------------------
At the end of the period 430,796 446,274
----------------------------------------------------------- -------------------------- --------------------------
10 Interests in associates and joint ventures
------------------------------------------
At 30 June 2022, the carrying amount of HSBC's interests in
associates and joint ventures was $29,446m (31 December 2021:
$29,609m).
Principal associates of HSBC
At 30 Jun 2022 At 31 Dec 2021
---------------------------------------------- -----------------------------------------------
Carrying Fair Carrying Fair
amount value(1) amount value(1)
$m $m $m $m
--------------------- -------------------------- ------------------ -------------------------- -------------------
Bank of
Communications Co.,
Limited 23,559 9,764 23,616 8,537
--------------------- -------------------------- ------------------ -------------------------- -------------------
The Saudi British
Bank 4,472 6,910 4,426 5,599
--------------------- -------------------------- ------------------ -------------------------- -------------------
1 Principal associates are listed on recognised stock exchanges.
The fair values are based on the quoted market prices of the shares
held (Level 1 in the fair value hierarchy).
Bank of Communications Co., Limited
The Group's investment in Bank of Communications Co., Limited
('BoCom') is classified as an associate. Significant influence in
BoCom was established with consideration of all relevant factors,
including representation on BoCom's Board of Directors and
participation in a resource and experience sharing agreement
('RES'). Under the RES, HSBC staff have been seconded to assist in
the maintenance of BoCom's financial and operating policies.
Investments in associates are recognised using the equity method of
accounting in accordance with IAS 28 whereby the investment is
initially recognised at cost and adjusted thereafter for the
post-acquisition change in the Group's share of BoCom's net assets.
An impairment test is required if there is any indication of
impairment.
Impairment testing
At 30 June 2022, the fair value of the Group's investment in
BoCom had been below the carrying amount for approximately 10
years. As a result, the Group performed an impairment test on the
carrying amount, which confirmed that there was no impairment at 30
June 2022 as the recoverable amount as determined by a value-in-use
('VIU') calculation was higher than the carrying value.
At 30 Jun 2022 At 31 Dec 2021
---------------------------------------------------------------------- ------------------------------------------------------------------------
VIU Carrying Fair Carrying Fair
value value VIU value value
$bn $bn $bn $bn $bn $bn
------ -------------------- ------------------------ ---------------------- --------------------- ------------------------- ----------------------
BoCom 24.3 23.6 9.8 24.8 23.6 8.5
------ -------------------- ------------------------ ---------------------- --------------------- ------------------------- ----------------------
The headroom, which is defined as the extent to which the VIU
exceeds the carrying value, decreased by $0.5bn compared with 31
December 2021. The decrease in headroom was principally due to
revisions to management's best estimates of BoCom's future earnings
in the short to medium term, partly offset by the impact on the VIU
from BoCom's actual performance, which was better than earlier
estimates.
In future periods, the VIU may increase or decrease depending on
the effect of changes to model inputs. The main model inputs are
described below and are based on factors observed at period-end.
The factors that could result in a change in the VIU and an
impairment include a short-term underperformance by BoCom, a change
in regulatory capital requirements, or an increase in uncertainty
regarding the future performance of BoCom resulting in a downgrade
of the forecast of future asset growth or profitability. An
increase in the discount rate could also result in a reduction of
VIU and an impairment. At the point where the carrying value
exceeds the VIU, impairment would be recognised.
If the Group did not have significant influence in BoCom, the
investment would be carried at fair value rather than the current
carrying value.
Basis of recoverable amount
The impairment test was performed by comparing the recoverable
amount of BoCom, determined by a VIU calculation, with its carrying
amount. The VIU calculation uses discounted cash flow projections
based on management's best estimates of future earnings available
to ordinary shareholders prepared in accordance with IAS 36.
Significant management judgement is required in arriving at the
best estimate. There are two main components to the VIU
calculation. The first component is management's best estimate of
BoCom's earnings, which is based on explicit forecasts over the
short to medium term. This results in forecast earnings growth that
is lower than recent historical actual growth and also reflects the
uncertainty arising from the current economic outlook. Reflecting
management's intent to continue to retain its investment, earnings
beyond the short to medium term are then extrapolated into
perpetuity using a long-term growth rate to derive a terminal
value, which comprises the majority of the VIU. The second
component is the capital maintenance charge ('CMC'), which is
management's forecast of the earnings that need to be withheld in
order for BoCom to meet capital requirements over the forecast
period, meaning that CMC is deducted when arriving at management's
estimate of future earnings available to ordinary shareholders. The
principal inputs to the CMC calculation include estimates of asset
growth, the ratio of risk-weighted assets to total assets, and the
expected capital requirements. An increase in the CMC as a result
of a change to these principal inputs would reduce VIU.
Additionally, management considers other qualitative factors, to
ensure that the inputs to the VIU calculation remain
appropriate.
Key assumptions in value-in-use calculation
We used a number of assumptions in our VIU calculation, in
accordance with the requirements of IAS 36:
-- Long-term profit growth rate: 3% (31 December 2021: 3%) for
periods after 2025, which does not exceed forecast GDP growth in
mainland China and is similar to forecasts by external
analysts.
-- Long-term asset growth rate: 3% (31 December 2021: 3%) for
periods after 2025, which is the rate that assets are expected to
grow to achieve long-term profit growth of 3%.
-- Discount rate: 10.03% (31 December 2021: 10.03%), which is
based on a capital asset pricing model ('CAPM'), using market data.
The discount rate used is within the range of 8.2% to 10.2% (31
December 2021: 8.7% to 10.1%) indicated by the CAPM. While the CAPM
range sits at the lower end of the range adopted by selected
external analysts of 9.9% to 13.5% (31 December 2021: 9.9% to
13.5%), we continue to regard the CAPM range as the most
appropriate basis for determining this assumption.
-- Expected credit losses ('ECL') as a percentage of customer
advances: ranges from 0.99% to 1.15% (31 December 2021: 0.98% to
1.12%) in the short to medium term, reflecting reported credit
experience through the ongoing Covid-19 pandemic in mainland China
followed by an expected reversion to recent historical levels. For
periods after 2025, the ratio is 0.97% (31 December 2021: 0.97%),
which is higher than BoCom's average ECL as a percentage of
customer advances in recent years prior to the Covid-19
pandemic.
-- Risk-weighted assets as a percentage of total assets: ranges
from 61.0% to 63.2% (31 December 2021: 61.0% to 62.4%) in the short
to medium term, reflecting reductions that may arise from a
subsequent lowering of ECL and a continuation of the trend of
strong retail loan growth. For periods after 2025, the ratio is
61.0% (31 December 2021: 61.0%). These rates are similar to BoCom's
actual results in recent years and forecasts disclosed by external
analysts.
-- Operating income growth rate: ranges from 4.6% to 7.3% (31
December 2021: 5.1% to 6.2%) in the short to medium term, and is
lower than BoCom's actual results in recent years and the forecasts
disclosed by external analysts, reflecting BoCom's most recent
actual results, global trade tensions and industry developments in
mainland China.
-- Cost-income ratio: ranges from 35.5% to 35.8% (31 December
2021: 35.5% to 36.1%) in the short to medium term. These ratios are
similar to BoCom's actual results in recent years and forecasts
disclosed by external analysts.
-- Effective tax rate: ranges from 7.6% to 15.0% (31 December
2021: 6.8% to 15.0%) in the short to medium term, reflecting
BoCom's actual results and an expected increase towards the
long-term assumption through the forecast period. For periods after
2025, the rate is 15.0% (31 December 2021: 15.0%), which is higher
than the recent historical average, and aligned to the minimum tax
rate as proposed by the OECD/G20 Inclusive Framework on Base
Erosion and Profit Shifting.
-- Capital requirements: capital adequacy ratio of 12.5% (31
December 2021: 12.5%) and tier 1 capital adequacy ratio of 9.5% (31
December 2021: 9.5%), based on BoCom's capital risk appetite and
capital requirements respectively.
The following table shows the change to each key assumption in
the VIU calculation that on its own would reduce the headroom to
nil:
Key assumption Changes to key assumption to reduce
headroom to nil
Decrease by 17 basis points
* Long-term profit growth rate
Increase by 15 basis points
* Long-term asset growth rate
Increase by 23 basis points
* Discount rate
Increase by 2 basis points
* Expected credit losses as a percentage of customer
advances
Increase by 122 basis points
* Risk-weighted assets as a percentage of total assets
Decrease by 31 basis points
* Operating income growth rate
Increase by 70 basis points
* Cost-income ratio
Increase by 203 basis points
* Long-term effective tax rate
Increase by 25 basis points
* Capital requirements - capital adequacy ratio
Increase by 169 basis points
* Capital requirements - tier 1 capital adequacy ratio
=========================================================== ===================================
The following table further illustrates the impact on VIU of
reasonably possible changes to key assumptions. This reflects the
sensitivity of the VIU to each key assumption on its own and it is
possible that more than one favourable and/or unfavourable change
may occur at the same time. The selected rates of reasonably
possible changes to key assumptions are based on external analysts'
forecasts, statutory requirements and other relevant external data
sources, which can change period to period.
Sensitivity of VIU to reasonably possible changes in key assumptions
Favourable change Unfavourable change
-------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------
Increase Decrease
in VIU VIU in VIU VIU
bps $bn $bn bps $bn $bn
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
At 30 Jun 2022
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Long-term asset/profit (75) / 3.3 / 27.6 (4.5) 19.8
growth rate(1) 82 4.0 / 28.3 82 / (75) / (2.9) / 21.4
Discount rate (183) 8.0 32.3 207 (5.2) 19.1
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
2022 to 2022 to
2025: 103 2025: 123
Expected credit
losses as a percentage 2026 onwards: 2026 onwards:
of customer advances 91 1.6 25.9 105 (2.8) 21.5
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Risk-weighted assets
as a percentage
of total assets (110) 0.1 24.4 247 (2.1) 22.2
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Operating income 51 1.2 25.5 (69) (1.7) 22.6
growth rate
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Cost-income ratio (113) 1.1 25.4 188 (2.0) 22.3
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Long-term effective
tax rate (426) 1.5 25.8 1,000 (3.6) 20.7
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Capital requirements
- capital adequacy
ratio - - 24.3 274 (8.8) 15.5
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Capital requirements
- tier 1 capital
adequacy ratio - - 24.3 304 (5.2) 19.1
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
At 31 Dec 2021
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Long-term asset/profit 2.9 / 27.7 / (4.7) / 20.1 /
growth rate(1) (69) / 87 4.2 29.0 87 / (69) (2.7) 22.1
Discount rate (133) 5.4 30.2 207 (5.3) 19.5
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
2021 to 2021 to
2025: 103 2025: 121
Expected credit
losses as a percentage 2026 onwards: 2026 onwards:
of customer advances 91 1.5 26.3 105 (2.7) 22.1
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Risk-weighted assets
as a percentage
of total assets (111) 0.2 25.0 280 (2.1) 22.7
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Operating income 37 1.0 25.8 (58) (1.8) 23.0
growth rate
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Cost-income ratio (152) 1.7 26.5 174 (1.7) 23.1
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Long-term effective
tax rate (104) 0.3 25.1 1,000 (3.6) 21.2
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Capital requirements
- capital adequacy
ratio - - 24.8 325 (10.0) 14.8
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
Capital requirements
- tier 1 capital
adequacy ratio - - 24.8 364 (6.5) 18.3
----------------------- ----------------------------------------- ----------------------------- ------------------------------ ----------------------------------------- ------------------------------------- ------------------------------
1 The reasonably possible ranges of the long-term profit growth
rate and long-term asset growth rate assumptions reflect the close
relationship between these assumptions, which would result in
offsetting changes to each assumption.
Considering the interrelationship of the changes set out in the
table above, management estimates that the reasonably possible
range of VIU is $18.5bn to $29.0bn (31 December 2021: $19.0bn to
$29.3bn). The range is based on impacts set out in the table above
arising from the favourable/unfavourable change in the earnings in
the short to medium term, the long-term expected credit losses as a
percentage of customer advances and a 50bps increase/decrease in
the discount rate. All other long-term assumptions, and the basis
of the CMC have been kept unchanged when determining the reasonably
possible range of the VIU.
The Saudi British Bank
The Group's investment in The Saudi British Bank ('SABB') is
classified as an associate. HSBC is the largest shareholder in SABB
with a shareholding of 31%. Significant influence in SABB is
established via representation on the Board of Directors.
Investments in associates are recognised using the equity method of
accounting in accordance with IAS 28, as described previously for
BoCom.
Impairment testing
There were no indicators of impairment at 30 June 2022. The fair
value of the Group's investment in SABB of $6.9bn was above the
carrying amount of $4.5bn.
11 Provisions
----------
Legal
proceedings
Restructuring and regulatory Customer Other
costs matters remediation provisions Total
$m $m $m $m $m
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Provisions (excluding
contractual
commitments)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2021 383 619 386 558 1,946
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Additions 105 110 34 104 353
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Amounts utilised (147) (275) (49) (132) (603)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Unused amounts reversed (41) (74) (38) (66) (219)
Exchange and other
movements 12 (10) (34) (55) (87)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 30 Jun 2022 312 370 299 409 1,390
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Contractual
commitments(1)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2021 620
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Net change in expected
credit loss
provision and other
movements (110)
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 30 Jun 2022 510
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Total provisions
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 31 Dec 2021 2,566
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
At 30 Jun 2022 1,900
----------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
1 Contractual commitments include the provision for contingent
liabilities measured under IFRS 9 'Financial Instruments' in
respect of financial guarantees and the expected credit loss
provision on off-balance sheet guarantees and commitments.
Further details of 'Legal proceedings and regulatory matters'
are set out in Note 13. Legal proceedings include civil court,
arbitration or tribunal proceedings brought against HSBC companies
(whether by way of claim or counterclaim); or civil disputes that
may, if not settled, result in court, arbitration or tribunal
proceedings. 'Regulatory matters' refers to investigations, reviews
and other actions carried out by, or in response to, the actions of
regulators or law enforcement agencies in connection with alleged
wrongdoing by HSBC.
Customer remediation refers to HSBC's activities to compensate
customers for losses or damages associated with a failure to comply
with regulations or to treat customers fairly. Customer remediation
is often initiated by HSBC in response to customer complaints
and/or industry developments in sales practices, and is not
necessarily initiated by regulatory action. Further details of
customer remediation are set out in this note.
At 30 June 2022, $123m (31 December 2021: $173m) of the customer
remediation provision related to the estimated liability for
redress in respect of the possible mis-selling of payment
protection insurance ('PPI') policies in previous years. Payments
totalling $18m were made during the first six months of 2022, and
the provision was decreased by $16m coupled with favourable foreign
exchange movements of $16m.
At 30 June 2022, a provision of $83m (31 December 2021: $87m)
was held relating to the liability for redress payable to customers
following a review of collections and recoveries practices in the
UK. During the first six months of 2022, redress payments and
incurred operating costs totalled $14m and the provision was
increased by $19m and saw favourable foreign exchange movements of
$9m.
For further details of the impact of IFRS 9 on undrawn loan
commitments and financial guarantees, presented in 'Contractual
commitments', see Note 12. Further analysis of the movement in the
expected credit loss provision is disclosed within the
'Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees' table on page 75.
12 Contingent liabilities, contractual commitments and guarantees
--------------------------------------------------------------
At
---------------------------------------------------------------
30 Jun 31 Dec
2022 2021
$m $m
----------------------------------------------------- ------------------------------ -------------------------------
Guarantees and contingent liabilities:
----------------------------------------------------- ------------------------------ -------------------------------
* financial guarantees 17,586 27,795
----------------------------------------------------- ------------------------------ -------------------------------
- performance and other guarantees 84,103 85,534
----------------------------------------------------- ------------------------------ -------------------------------
- other contingent liabilities 816 858
----------------------------------------------------- ------------------------------ -------------------------------
At the end of the period 102,505 114,187
----------------------------------------------------- ------------------------------ -------------------------------
Commitments:(1)
----------------------------------------------------- ------------------------------ -------------------------------
- documentary credits and short-term trade-related
transactions 9,972 8,827
----------------------------------------------------- ------------------------------ -------------------------------
- forward asset purchases and forward deposits placed 76,144 47,184
----------------------------------------------------- ------------------------------ -------------------------------
- standby facilities, credit lines and other
commitments
to lend 740,313 759,463
----------------------------------------------------- ------------------------------ -------------------------------
At the end of the period 826,429 815,474
----------------------------------------------------- ------------------------------ -------------------------------
1 Includes $633,091m of commitments at 30 June 2022 (31 December
2021: $627,637m), to which the impairment requirements in IFRS 9
are applied where HSBC has become party to an irrevocable
commitment.
The preceding table discloses the nominal principal amounts of
off-balance sheet liabilities and commitments for the Group, which
represent the maximum amounts at risk should the contracts be fully
drawn upon and the clients default. As a significant portion of
guarantees and commitments is expected to expire without being
drawn upon, the total of the nominal principal amounts is not
indicative of future liquidity requirements. The expected credit
loss provision relating to guarantees and commitments under IFRS 9
is disclosed in Note 11.
The majority of the guarantees have a term of less than one
year, while guarantees with terms of more than one year are subject
to HSBC's annual credit review process.
Contingent liabilities arising from legal proceedings and
regulatory and other matters against Group companies are excluded
from this note but are disclosed in Note 13.
13 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 2021. 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 2022 (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
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 Bernard L. Madoff Investment
Securities LLC ('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 Madoff Securities 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.
Following an initial dismissal of certain claims, which was later
reversed on appeal, 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 dismissed certain claims by the Fairfield
liquidators and granted a motion by the liquidators to file amended
complaints. 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 Fairfield liquidators filed amended
complaints on the claims remaining in the US Bankruptcy Court. In
December 2020, the US Bankruptcy Court dismissed the majority of
those claims. In March 2021, the liquidators and defendants
appealed the US Bankruptcy Court's decision to the New York
District Court, and these appeals are currently pending. In May
2022, the liquidators voluntarily dismissed their claims against
HSBC Bank USA N.A. ('HSBC Bank USA') in the US Bankruptcy Court.
Meanwhile, proceedings before the US Bankruptcy Court with respect
to the remaining claims and other HSBC companies that were not
dismissed are ongoing.
UK litigation: The Madoff Securities 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 2022 for
UK-based defendants and November 2022 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. Two hearings before the UK Privy Council took place during
2021. Judgment was given against HSBC in respect of the first
hearing and judgment is pending in respect of the second
hearing.
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 and money damages claims. 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.
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 around $600m, 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. For several
years thereafter, HSBC retained a Skilled Person under section 166
of the Financial Services and Markets Act and an Independent
Consultant under the FRB cease-and-desist order to produce periodic
assessments of the Group's AML and sanctions compliance programme.
The Skilled Person completed its engagement in the second quarter
of 2021, and the FCA determined that no further Skilled Person work
is required. Separately, the Independent Consultant has completed
its latest review pursuant to the FRB cease-and-desist order, which
remains in place. The roles of each of the FCA Skilled Person and
the FRB Independent Consultant are discussed on page 209 of the
Annual Report and Accounts 2021.
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 an early
stage.
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.
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. 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 that was 5% less than the
previously annulled fine, and subsequently withdrew its appeal to
the Court of Justice. HSBC has appealed the EC's June 2021 fining
decision to the General Court, and its appeal to the Court of
Justice on liability also 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.
Singapore interbank offered rate ('Sibor') and Singapore swap
offer rate ('SOR'): In 2016, HSBC and other panel banks were named
as defendants in a putative class action filed in the New York
District Court on behalf of persons who transacted in products
related to the Sibor and SOR benchmark rates. The complaint
alleges, among other things, misconduct related to these benchmark
rates in violation of US antitrust, commodities and racketeering
laws, and state law.
In October 2021, The Hongkong and Shanghai Banking Corporation
Limited reached a settlement in principle with the plaintiffs to
resolve this action, the agreement for which was executed in May
2022. The settlement received preliminary court approval in June
2022, and the final approval hearing is scheduled for November
2022.
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
In December 2021, the EC issued a settlement decision finding
that a number of banks, including HSBC, had engaged in
anti-competitive practices in an online chatroom between 2011 and
2012 in the foreign exchange spot market. The EC imposed a
EUR174.3m fine on HSBC in connection with this matter, which has
been paid.
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 December 2021, a
hearing on HSBC Bank plc's and HSBC Bank USA's applications to
dismiss the revised complaint took place before the South African
Competition Tribunal, where a decision 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 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. The High Court claim
has since been transferred to the Competition Appeals Tribunal and
these matters remain pending. Additionally, lawsuits alleging
foreign exchange-related misconduct remain pending against HSBC and
other banks in courts in Brazil and Israel. It is possible that
additional civil actions will be initiated against HSBC in relation
to its historical foreign exchange activities.
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.
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 with the plaintiffs
to resolve the consolidated action, and the court granted final
approval of the settlement in May 2022.
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, which were consolidated in the New York
District Court, 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. In February
2022, following the conclusion of pre-class certification
discovery, the defendants filed a motion seeking to dismiss the
plaintiffs' antitrust claims, which remains pending.
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.
In December 2018 and June 2019, two further actions were brought
against PBGB in the High Court of England and Wales by multiple
claimants in connection with lending provided by PBGB to third
parties in respect of certain Ingenious film finance schemes in
which the claimants participated. In January 2022, the parties
reached an agreement to resolve these disputes and, in February
2022, the actions against HSBC UK Bank plc (as successor to PBGB)
were discontinued.
In June 2020, two separate claims were issued against HSBC UK
Bank plc (as successor to PBGB) 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) 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.
There are many factors that may affect the range of outcomes,
and the resulting financial impact, of these matters, 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
bond issuances, among other things;
-- investigations by US regulators concerning compliance with
records preservation requirements relating to the use of unapproved
electronic messaging platforms for business communications;
-- an investigation by the PRA in connection with depositor protection arrangements in the UK;
-- an investigation by the FCA in connection with collections
and recoveries operations in the UK;
-- an investigation by the UK Competition and Markets Authority
into potentially anti-competitive arrangements involving historical
trading activities relating to certain UK-based fixed income
products and related financial instruments;
-- 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.
14 Transactions with related parties
---------------------------------
There were no changes in the related party transactions
described in the Annual Report and Accounts 2021 that have had a
material effect on the financial position or performance of HSBC in
the half-year to 30 June 2022. All related party transactions that
took place in the half-year to 30 June 2022 were similar in nature
to those disclosed in the Annual Report and Accounts 2021.
15 Business acquisitions and disposals
-----------------------------------
Business acquisitions
The following recently announced acquisitions form part of our
strategy to become a market leader in Asian wealth management:
-- On 23 December 2021, HSBC Asset Management (India) Private
Ltd, a subsidiary of the Group, entered into an agreement with
L&T Finance Holdings Limited to fully acquire L&T
Investment Management Limited for $0.4bn. Completion is expected to
occur during 4Q22. L&T Investment Management Limited is a
wholly-owned subsidiary of L&T Finance Holdings Limited and the
investment manager of the L&T Mutual Fund, with assets under
management of $8.9bn at 31 May 2022 and over 2.4 million active
folios.
-- On 28 January 2022, HSBC Insurance (Asia-Pacific) Holdings
Limited, a subsidiary of the Group, notified the shareholders of
Canara HSBC Life Insurance Company Limited ('Canara HSBC') of its
intention to increase its shareholding in Canara HSBC up to 49%.
HSBC currently has a 26% shareholding, which is accounted for as an
associate. Any increase in shareholding is subject to agreement
with other shareholders in Canara HSBC, as well as internal and
regulatory approvals. Established in 2008, Canara HSBC is a life
insurance company based in India.
-- On 11 February 2022, HSBC Insurance (Asia-Pacific) Holdings
Limited completed the acquisition of 100% of AXA Insurance Pte
Limited (AXA Singapore) for $0.5bn. A provisional gain on
acquisition of $0.1bn was recorded, reflecting the excess of the
fair value of net assets acquired (gross assets of $4.5bn and gross
liabilities of $3.9bn) over the acquisition price.
-- On 6 April 2022, The Hongkong and Shanghai Banking
Corporation Limited, a subsidiary of the Group, announced it had
increased its shareholding in HSBC Qianhai Securities Limited, a
partially-owned subsidiary, from 51% to 90%.
-- On 23 June 2022, HSBC Insurance (Asia) Limited, a subsidiary
of the Group, acquired the remaining 50% equity interest in HSBC
Life Insurance Company Limited. Headquartered in Shanghai, HSBC
Life Insurance Company Limited offers a comprehensive range of
insurance solutions covering annuity, whole life, critical illness
and unit-linked insurance products.
Business disposals
In 2021 and 2022, 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 planned sales
of our retail banking businesses in France and branch operations in
Greece, as well as the exit of domestic mass market retail banking
in the US. The planned sales in France and Greece are expected to
complete in 2023, and the US exit has since completed.
US retail banking business
On 26 May 2021, we announced our intention to exit our US mass
market retail banking business, including our Personal and Advance
propositions, as well as retail business banking, and rebranding
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. entered into definitive sale agreements with Citizens Bank and
Cathay Bank to sell 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. As
a result of entering into these sale agreements, assets and
liabilities related to the agreements were transferred to held for
sale during the second quarter of 2021.
In February 2022, we completed the sale of the branch disposal
group and recognised a net gain on sale of approximately $0.1bn,
which is subject to customary closing adjustments. Included in the
sale were $2.1bn of loans and advances to customers and $6.9bn of
customer accounts. Certain assets under management associated with
our mass market retail banking operations were also transferred.
The remaining branches not sold or rebranded have been closed.
Planned sale of the retail banking business in France
HSBC Continental Europe signed a framework agreement with
Promontoria MMB SAS ('My Money Group') and its subsidiary Banque
des Caraïbes SA, regarding the planned sale of HSBC Continental
Europe's retail banking business in France.
The sale, which is subject to regulatory approvals and the
satisfaction of other relevant conditions, includes: HSBC
Continental Europe's French retail banking business; the Crédit
Commercial de France ('CCF') brand; and HSBC Continental Europe's
100% ownership interest in HSBC SFH (France) and its 3% ownership
interest in Crédit Logement. The disposal group is currently
expected to be classified as held for sale in 2H22 and the sale
would generate an estimated loss before tax including related
transaction costs for the Group of $2.1bn, together with an
additional $0.5bn impairment of goodwill.
At 30 June 2022, a deferred tax liability of $0.4bn was
recognised as a consequence of the temporary difference in tax and
accounting treatment in respect of the provision for loss on
disposal, which was deductible in the French tax return in 2021 but
will be accounted for when the disposal group is classified as held
for sale in accordance with IFRS 5, at which time the deferred tax
liability will reverse. The vast majority of the estimated loss for
the write-down of the disposal group to fair value less costs to
sell will also be recognised when it is classified as held for
sale. 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 will be recognised at closing, which
is currently anticipated to be in 2023.
At 30 June 2022, the disposal group included total assets of
$25.6bn.
Planned sale of the retail banking business in Greece
On 24 May 2022, HSBC Continental Europe signed a sale and
purchase agreement for the sale of its branch operations in Greece
to Pancreta Bank SA. Completion of the transaction is subject to
regulatory approval and is currently expected to occur in the first
half of 2023. At 30 June 2022, the disposal group included $0.4bn
of loans and advances to customers and $2.3bn of customer accounts
which met the criteria to be classified as held for sale. In 2Q22,
we recognised a loss of $0.1bn, including goodwill impairment, upon
reclassification as held for sale in accordance with IFRS 5.
Planned sale of the business in Russia
Following a strategic review of our business in Russia, HSBC
Europe BV (a wholly-owned subsidiary of HSBC Bank plc) has entered
into an agreement to sell its wholly-owned subsidiary HSBC Bank
(RR) (Limited Liability Company), subject to regulatory
approvals.
16 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 2022 half-year in respect of the
financial year ending 31 December 2022 was approved by the
Directors on 1 August 2022, as described in Note 3.
17 Interim Report 2022 and statutory accounts
------------------------------------------
The information in this Interim Report 2022 is unaudited and
does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006. This Interim Report 2022 was
approved by the Board of Directors on 1 August 2022. The statutory
accounts of HSBC Holdings plc for the year ended 31 December 2021
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 auditor 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 its report and did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Shareholder information
Page Page
1 Directors' interests 131 10 Earnings release 135
----------------------------- ---- ---------------------------------- ----
2 Employee share plans 133 11 Final results 135
----------------------------- ---- ---------------------------------- ----
3 Share buy-back 133 12 Corporate governance 135
----------------------------- ---- ---------------------------------- ----
4 Other equity instruments 134 13 Changes in Directors' details 136
----------------------------- ---- ---------------------------------- ----
Notifiable interests in share
5 capital 134 14 Going concern basis 136
----------------------------- ---- ---------------------------------- ----
Dealings in HSBC Holdings Telephone and online share dealing
6 listed securities 134 15 service 136
----------------------------- ---- ---------------------------------- ----
Interim dividend for the 2022
7 half-year 134 16 Stock symbols 136
----------------------------- ---- ---------------------------------- ----
8 Dividend on preference shares 135 17
----------------------------- ---- ---------------------------------- ----
Copies of the Interim Report
Proposed interim dividends 2022 and shareholder enquiries
9 for 2022 135 and communications 136
----------------------------- ---- ---------------------------------- ----
1 Directors' interests
--------------------
According to the register of Directors' interests maintained by
HSBC Holdings pursuant to section 352 of the Securities and Futures
Ordinance of Hong Kong, at 30 June 2022 the Directors of HSBC
Holdings had the following interests, all beneficial unless
otherwise stated, in the shares or debentures of HSBC Holdings and
its associated corporations:
Directors' interests - shares and debentures
At 1 At 30 Jun 2022 or date of retirement,
Jan 2022 if earlier
or date
of appointment,
if later
Total
interests
-------------------------- ------------------------------------------------------------------------------------------------------------------------------------
Child
under Jointly
Beneficial 18 with another Total
owner or spouse person Trustee interests
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
HSBC Holdings
ordinary shares
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Geraldine
Buckingham(1)
(appointed
to the Board on 1
May 2022) - 15,000 - - - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Rachel Duan(1) - 15,000 - - - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Dame Carolyn
Fairbairn - 15,000 - - - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
James Forese(1) 115,000 115,000 - - - 115,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Steven
Guggenheimer(1) 15,000 - - 15,000 - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Irene Lee (retired
on 29 Apr
2022) 15,000 15,000 - - - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
José Antonio
Meade
Kuribreña(1) 15,000 15,000 - - - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Eileen Murray(1) 75,000 75,000 - - - 75,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
David Nish 50,000 - 50,000 - - 50,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Noel Quinn(2) 1,131,278 1,305,310 - - - 1,305,310
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Ewen Stevenson(2) 838,154 989,735 - - - 989,735
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Jackson Tai(1,3) 66,515 32,800 11,965 21,750 - 66,515
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Mark Tucker 307,352 307,352 - - - 307,352
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
Pauline van der
Meer Mohr
(retired
on 29 Apr 2022) 15,000 15,000 - - - 15,000
------------------ -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- --------------------
1 Geraldine Buckingham has an interest in 3,000, Rachel Duan has
an interest in 3,000, James Forese has an interest in 23,000,
Steven Guggenheimer has an interest in 3,000, José Antonio Meade
Kuribreña has an interest in 3,000, Eileen Murray has an interest
in 15,000 and Jackson Tai has an interest in 13,303 listed American
Depositary Shares ('ADSs'), which are categorised as equity
derivatives under Part XV of the Securities and Futures Ordinance
of Hong Kong. Each ADS represents five HSBC Holdings ordinary
shares.
2 Executive Directors' other interests in HSBC Holdings ordinary
shares arising from the HSBC Holdings Savings-Related Share Option
Plan (UK) and the HSBC Share Plan 2011 are set out on the following
pages. At 30 June 2022, the aggregate interests under the
Securities and Futures Ordinance of Hong Kong in HSBC Holdings
ordinary shares, including interests arising through employee share
plans, were: Noel Quinn - 3,822,453 and Ewen Stevenson - 3,060,950.
Each Director's total interests represents approximately 0.02% of
the shares in issue and 0.02% of the shares in issue excluding
treasury shares.
3 Jackson Tai's holding includes a non-beneficial interest in
11,965 shares of which he is custodian.
HSBC Holdings Savings-Related Share Option Plan (UK)
Currently no executive Directors participate in a
Savings-Related Share Option Plan. For further details on the
Savings-Related Share Option Plan, see page 133.
HSBC Share Plan 2011
Conditional awards of deferred shares
Vesting of deferred share awards is normally subject to the
Director remaining an employee on the vesting date. The awards may
vest at an earlier date in certain circumstances. Under the
Securities and Futures Ordinance of Hong Kong, interests in
conditional share awards are categorised as the interests of the
beneficial owner.
Deferred share awards
HSBC Holdings ordinary shares
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Awards made Awards vested
Awards during during Awards
held the period the period held
at to 30 Jun 2022 to 30 Jun 2022 at
--------------------------------------------------------- ---------------------------------------------------------
Year in 1 Jan Number Monetary Number Monetary 30 Jun
which 2022 value value 2022
awards
Date of may
award vest
GBP000 GBP000
27/2/2017(1) 2020-2024 53,328 - - 18,229 89 36,565(2)
------------- --------------------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
26/2/2018(3) 2021-2025 86,019 - - 21,504 103 64,515
------------- --------------------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
25/2/2019(4) 2022-2026 140,585 - - 28,117 137 112,468
------------- --------------------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
24/2/2020(5) 2023-2027 201,702 - - - - 201,702
------------- --------------------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
Noel Quinn 28/2/2022(6) 2022 - 147,769 795 147,769 795 -
---------- ------------- ---------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
28/5/2019(7) 2020-2025 264,755 - - 74,759 365 189,996
------------- --------------------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
28/5/2019(8) 2022-2026 241,988 - - 48,397 236 193,591
------------- --------------------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
Ewen
Stevenson 28/2/2022(6) 2022 - 90,892 489 90,892 489 -
---------- ------------- ---------- ---------------------------- ------------------------ ------------------------------- ------------------------ ------------------------------- ----------------------------
1 At the date of the award (27 February 2017), the market value
per share was GBP6.5030. The award will vest in five equal annual
tranches. The third tranche vested on 14 March 2022 at a market
value of GBP4.8772. Shares equivalent in number to those that vest
under the award (net of tax liabilities) must be retained for six
months from the vesting date.
2 Includes any additional shares arising from dividend equivalents.
3 At the date of the award (26 February 2018), the market value
per share was GBP7.2340. Shares equivalent in number to those that
vest under the award (net of tax liabilities) must be retained for
one year from the vesting date. The award will vest in five equal
annual tranches. The second tranche vested on 15 March 2022 at a
market value of GBP4.7884.
4 At the date of the award (25 February 2019), the market value
per share was GBP6.2350. Shares equivalent in number to those that
vest under the award (net of tax liabilities) must be retained for
one year from the vesting date. The award will vest in five equal
annual tranches. The first tranche vested on 14 March 2022 at a
market value of GBP4.8772.
5 At the date of the award (24 February 2020), the market value
per share was GBP5.6220. Shares equivalent in number to those that
vest under the award (net of tax liabilities) must be retained for
one year from the vesting date. The award will vest in five equal
annual tranches commencing in March 2023.
6 The non-deferred award vested immediately on 28 February 2022
and was based on the market value of GBP5.3800. Shares equivalent
in number to those that vest under the award (net of tax
liabilities) must be retained for one year from the vesting
date.
7 The award was granted on 28 May 2019 using a market value per
share of GBP6.6430 as at 30 November 2018. Shares equivalent in
number to those that vest under the award (net of tax liabilities)
must be retained for up to one year from the vesting date. The
third tranche vested on 14 March 2022 at a market value of
GBP4.8772. The award replaced the 2015 to 2018 long-term incentive
('LTI') plans forfeited by the Royal Bank of Scotland Group plc
('RBS') (now renamed as NatWest Group plc ('NatWest')), and is
subject to any performance adjustments assessed and disclosed in
the relevant annual report and accounts of NatWest.
8 The award was granted on 28 May 2019 using a market value per
share of GBP6.2350 as at 22 February 2019. Shares equivalent in
number to those that vest under the award (net of tax liabilities)
must be retained for up to one year from the vesting date. The
award will vest in five annual tranches. The first tranche vested
on 14 March 2022 at a market value of GBP4.8772. The award is in
respect of the 2018 performance year granted based on Ewen
Stevenson's maximum opportunity under NatWest's policy and the
outcome of the 2018 scorecard as disclosed in NatWest's Annual
Report and Accounts 2018. The number of shares that vest may be
adjusted based on any 'pre-vest performance test' assessed and
disclosed in NatWest's Annual Report and Accounts.
8
Long-term incentive awards
The long-term incentive award is an award of shares with a
three-year performance period. At the end of this performance
period and subject to the award terms, the number of shares that
vest will be determined based on an assessment against financial
and non-financial measures. Subject to that assessment, the shares
will vest in five equal annual instalments. On vesting, awards are
subject to a retention period of up to one year. Under the
Securities and Futures Ordinance of Hong Kong, interests in share
awards are categorised as interests of the beneficial owner.
Long-term incentive awards
HSBC Holdings ordinary shares
----------------------------------------------------------------------------------------------------------------------------------------------
Awards made Awards vested
Awards during during Awards
held the period the period held
at to 30 Jun 2022 to 30 Jun 2022 at
-------------------------------------------------- --------------------------------------------------
Year 1 Jan Monetary Monetary 30 Jun
in which 2022 value value 2022
Date awards
of may
award(1) vest
Number GBP000 Number GBP000
1 Mar
2021 2024-2028 1,118,554 - - - - 1,118,554
--------- --------------------- ---------------------- ------------------- ----------------------------- ------------------- ----------------------------- --------------
28 Feb
Noel Quinn 2022 2025-2029 - 983,339 5,290 983,339
---------- --------- ---------- ---------------------- ------------------- ----------------------------- ------------------- ----------------------------- --------------
24 Feb
2020 2023-2027 476,757 - - - - 476,757
--------- --------------------- ---------------------- ------------------- ----------------------------- ------------------- ----------------------------- --------------
1 Mar
2021 2024-2028 637,197 - - - - 637,197
--------- --------------------- ---------------------- ------------------- ----------------------------- ------------------- ----------------------------- --------------
Ewen 28 Feb
Stevenson 2022 2025-2029 - 573,674 3,086 573,674
---------- --------- ---------- ---------------------- ------------------- ----------------------------- ------------------- ----------------------------- --------------
1 Awards made on 24 February 2020 were based on the market value
of GBP5.6220, awards made on 1 March 2021 were based on the market
value of GBP4.2620, and awards made on 28 February 2022 were based
on the market value of GBP5.3800.
No Directors held any short position (as defined in the
Securities and Futures Ordinance of Hong Kong) in the shares or
debentures of HSBC Holdings and its associated corporations. Save
as stated in the tables above, none of the Directors had an
interest in any shares or debentures of HSBC Holdings or any
associates at the beginning or at the end of the period, and none
of the Directors or members of their immediate families were
awarded or exercised any right to subscribe for any shares or
debentures in any HSBC corporation during the period.
There have been no changes in the shares or debentures of the
Directors from 30 June 2022 to the date of this report.
2 Employee share plans
--------------------
Share options and discretionary awards of shares are granted
under HSBC share plans to help align the interests of employees
with those of shareholders. The following are particulars of
outstanding share options, including those held by employees
working under employment contracts that are regarded as 'continuous
contracts' for the purposes of the Hong Kong Employment Ordinance.
The options were granted at nil consideration. No options have been
granted to substantial shareholders, suppliers of goods or
services, or in excess of the individual limit for each share plan.
No options were cancelled by HSBC during the period to 30 June
2022.
A summary of the total number of options granted, exercised or
lapsed during the period is shown in the table below. Particulars
of options held by Directors of HSBC Holdings are set out on page
131. Further details required to be disclosed pursuant to Chapter
17 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited are available on our website at
www.hsbc.com, and on the website of The Stock Exchange of Hong Kong
Limited at www.hkex.com.hk. Copies may be obtained upon request
from the Group Company Secretary and Chief Governance Officer, 8
Canada Square, London E14 5HQ.
All-employee share plans
The HSBC Holdings Savings-Related Share Option Plan (UK) is an
all-employee share option plan under which eligible employees have
been granted options to acquire HSBC Holdings ordinary shares. The
HSBC International Employee Share Purchase Plan was introduced in
2013 and now includes employees based in 28 jurisdictions, although
no options are granted under this plan. During 2021, approximately
190,000 employees were offered participation in these plans.
For options granted under the HSBC Holdings Savings-Related
Share Option Plan (UK), employees may make contributions of up to
GBP500 each month over a period of three or five years. The
contributions may be used within six months following the third or
fifth anniversary of the commencement of the relevant savings
contract, at the employee's election, to exercise the options.
Alternatively, the employee may elect to have the savings, plus
(where applicable) any interest or bonus, repaid in cash. In the
case of redundancy, ceasing employment on grounds of injury or
disability, retirement, death, the transfer of the employing
business to another party, or a change of control of the employing
company, options may be exercised before completion of the relevant
savings contract. In certain circumstances, the exercise period of
options awarded under the all-employee share option plans may be
extended; for example, on the death of a participant, the executors
may exercise the option up to six months beyond the normal exercise
period or, if a participant has chosen to defer up to 12
contributions, the start of the normal exercise period will be
delayed by up to 12 months.
Under the HSBC Holdings Savings-Related Share Option Plan (UK),
the option exercise price is determined by reference to the average
market value of the HSBC Holdings ordinary shares on the five
business days immediately preceding the invitation date, then
applying a discount of 20%. The HSBC Holdings Savings-Related Share
Option Plan (UK) has an expiry date of 24 April 2030 (by which time
the plan may be extended with approval from shareholders) unless
the Directors resolve to terminate the plan at an earlier date.
HSBC Holdings all-employee share option plan
HSBC Holdings ordinary share options
--------------------------------------------------------------------------------------------------------------
Dates of Exercise Usually
award price exercisable
---------------- ---------------- ------------------ ---------------- ------------------------------ -------------------- -------------------- ----------------
from to from to from to 1 Jan Granted Exercised Lapsed 30 Jun
2022 in period in period(1) in period 2022
------- ------- ------- ------- ----- ----------- ---------------- ------------------------------ -------------------- -------------------- ----------------
HSBC Savings-Related Share Option
Plan (UK)
---------------- ------------------------------ -------------------- -------------------- ----------------
22 Sep (GBP) (GBP)
22 Sep 1 Nov 30 April
2015 2021 2.6270 5.9640 2020 2027 123,196,850 - 1,533,755 8,078,210 113,584,885
------- ------- ------- ------- ----- ----------- ---------------- ------------------------------ -------------------- -------------------- ----------------
1 The weighted average closing price of the shares immediately
before the dates on which options were exercised was GBP5.1506.
1
3 Share buy-back
--------------
On 20 April 2022, HSBC Holdings completed a share buy-back
programme of its ordinary shares of $0.50 each, which commenced on
26 October 2021. A total of 311,832,807 ordinary shares were
repurchased for cancellation at a volume weighted average price of
GBP4.8128 per ordinary share for a total consideration of
approximately $2bn. On 3 May 2022, HSBC Holdings commenced a new
share buy-back to purchase its ordinary shares up to a maximum
consideration of $1.0bn. This programme concluded on 28 July 2022.
In addition to repurchasing shares on UK trading venues, the second
buy-back also purchased shares on The Stock Exchange of Hong Kong
Limited. The purpose of the buy-back programmes is to reduce HSBC's
number of outstanding ordinary shares.
As at 30 June 2022, 243,996,444 ordinary shares had been
purchased and cancelled from the UK register, representing a
nominal value of $121,998,222 and an aggregate consideration paid
by HSBC of GBP1,247,447,284. The shares cancelled represented 1.20%
of the shares in issue and 1.22% of the shares in issue, excluding
treasury shares.
As at 30 June 2022, 36,827,200 ordinary shares had been
purchased from the Hong Kong register, representing a nominal value
of $18,413,600 and an aggregate consideration paid by HSBC of
HK$1,873,178,838. The shares purchased represented 0.181% of the
shares in issue and 0.184% of the shares in issue, excluding
treasury shares. The shares purchased are cancelled in batches,
with 20,946,000 shares cancelled as at 30 June 2022.
The table that follows outlines details of the shares purchased
and cancelled on a monthly basis during 2022.
Share buy-back
Highest price Lowest price Average price
paid per paid per paid per Aggregate
share share share price paid
-----------------------------------
Number of GBP GBP GBP GBP
shares purchased
and cancelled
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Jan
2022 25,382,519 5.27 4.4555 4.9784 126,363,981
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Feb 19,064,151 5.551 5.153 5.3395 101,793,492
2022
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Mar 72,125,062 5.404 4.4935 4.9129 354,343,000
2022
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Apr 74,894,361 5.41 5.146 5.2608 394,002,122
2022
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
May 21,447,447 5.27 4.78 4.9911 107,047,291
2022
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Jun 31,082,904 5.496 4.978 5.2729 163,897,398
2022
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Total 243,996,444 1,247,447,284
------ ----------------------------------- --------------------------------------------- --------------------------------------------- ----------------------------------------- ---------------------------------
Share buy-back (continued)
Highest price Lowest price Average price
paid per paid per paid per Aggregate
share share share price paid
-------------------------------------
Number of HK$ HK$ HK$ HK$
shares purchased
------ ------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------- ---------------------------------
May
2022 5,244,800 52.85 46.5 50.8537 266,717,438
------ ------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------- ---------------------------------
Jun 31,582,400 52.7 48.25 50.8657 1,606,461,400
2022
------ ------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------- ---------------------------------
Total 36,827,200 1,873,178,838
------ ------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------- ---------------------------------
4 Other equity instruments
------------------------
Additional tier 1 capital - contingent convertible
securities
HSBC Holdings continues to issue contingent convertible
securities that are included in its capital base as fully CRR
II-compliant additional tier 1 capital securities on an end point
basis. These securities are marketed principally and subsequently
allotted to corporate investors and fund managers. The net proceeds
of the issuances are typically used for HSBC Holdings' general
corporate purposes and to further strengthen its capital base to
meet requirements under CRR II. These securities bear a fixed rate
of interest until their initial call dates. After the initial call
dates, if they are not redeemed, the securities will bear interest
at rates fixed periodically in advance for five-year periods based
on credit spreads, fixed at issuance, above prevailing market
rates. Interest on the contingent convertible securities will be
due and payable only at the sole discretion of HSBC Holdings, and
HSBC Holdings has sole and absolute discretion at all times to
cancel for any reason (in whole or part) any interest payment that
would otherwise be payable on any payment date. Distributions will
not be paid if they are prohibited under UK banking regulations or
if the Group has insufficient reserves or fails to meet the
solvency conditions defined in the securities' terms.
The contingent convertible securities are undated and are
repayable at the option of HSBC Holdings in whole typically at the
initial call date or on any fifth anniversary after this date. In
addition, the securities are repayable at the option of HSBC
Holdings in whole for certain regulatory or tax reasons. Any
repayments require the prior consent of the PRA. These securities
rank pari passu with HSBC Holdings' sterling preference share and
therefore rank ahead of ordinary shares. The contingent convertible
securities will be converted into fully paid ordinary shares of
HSBC Holdings at a predetermined price, should HSBC's consolidated
non-transitional CET1 ratio fall below 7.0%. Therefore, in
accordance with the terms of the securities, if HSBC's
non-transitional CET1 ratio breaches the 7.0% trigger, the
securities will convert into ordinary shares at the fixed
contractual conversion prices in the issuance currencies of the
relevant securities, equivalent to GBP2.70 at the prevailing rate
of exchange on the issuance date, subject to anti-dilution
adjustments. During the first half of 2022, HSBC issued no
contingent convertible securities.
5 Notifiable interests in share capital
-------------------------------------
Between 1 January 2022 and 30 June 2022, HSBC Holdings did not
receive any notification of major holdings of voting rights
pursuant to the requirements of Rule 5 of the Disclosure, Guidance
and Transparency Rules. No further notifications had been received
between 30 June 2022 and 20 July 2022.
Previous notifications received are as follows:
-- BlackRock, Inc. gave notice on 3 March 2020 that on 2 March
2020 it had the following: an indirect interest in HSBC Holdings
ordinary shares of 1,235,558,490; qualifying financial instruments
with 7,294,459 voting rights that may be acquired if the
instruments are exercised or converted; and financial instruments
with a similar economic effect to qualifying financial instruments,
which refer to 2,441,397 voting rights, representing 6.07%, 0.03%
and 0.01%, respectively, of the total voting rights at 2 March
2020.
-- Ping An Asset Management Co., Ltd. gave notice on 6 December
2017 that on 4 December 2017 it had an indirect interest in HSBC
Holdings ordinary shares of 1,007,946,172, representing 5.04% of
the total voting rights at that date.
At 30 June 2022, according to the register maintained by HSBC
Holdings pursuant to section 336 of the Securities and Futures
Ordinance of Hong Kong:
-- BlackRock, Inc. gave notice on 9 March 2022 that on 4 March
2022 it had the following interests in HSBC Holdings ordinary
shares: a long position of 1,701,656,169 shares and a short
position of 19,262,061 shares, representing 8.27% and 0.09%,
respectively, of the ordinary shares in issue at that date.
-- Ping An Asset Management Co., Ltd, gave notice on 25
September 2020 that on 23 September 2020 it had a long position of
1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00%
of the ordinary shares in issue at that date.
--
6 Dealings in HSBC Holdings 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, or
in relation to the HSBC Holdings ordinary share buy-back, 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 2022.
7 Interim dividend for the 2022 half-year
---------------------------------------
On 1 August 2022, the Directors approved an interim dividend for
the 2022 half-year of $0.09 per ordinary share in respect of the
financial year ending 31 December 2022. The dividend will be
payable on 29 September 2022 to holders on the Principal Register
in the UK, the Hong Kong Overseas Branch Register or the Bermuda
Overseas Branch Register on 19 August 2022.
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 19 September
2022, or a combination of these currencies. Particulars of these
arrangements will be sent to shareholders on or about 26 August
2022 and changes to currency elections must be received by 15
September 2022. The ordinary shares in London, Hong Kong and
Bermuda, and American Depositary Shares ('ADSs') in New York will
be quoted ex-dividend on 18 August 2022. 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 29 September 2022 to holders of record on
19 August 2022. The dividend of $0.45 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 9 September 2022.
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 19 August 2022
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 19 August 2022.
Any person wishing to remove ordinary shares to or from each
register must do so before 4.00pm local time on 18 August 2022.
Transfer of ADSs must be lodged with the depositary by 11.00am
on 19 August 2022 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.
8 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
2022 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 2022 to holders of record on 31 August 2022.
9 Proposed interim dividends for 2022
-----------------------------------
We announced on 22 February 2022 that the Group was not
intending to pay quarterly dividends during 2022. We now expect to
revert to quarterly dividends in 2023. The Board has adopted a
policy designed to provide sustainable cash dividends, while
retaining the flexibility to invest and grow the business in the
future, supplemented by additional shareholder distributions, if
appropriate. Our target dividend payout ratio is 40% to 55% of
reported earnings per ordinary share ('EPS'), with the flexibility
to adjust EPS for non-cash significant items. Given our current
forecast returns trajectory, we now expect a dividend payout ratio
of around 50% for 2023 and 2024. In line with our dividend policy,
in 2022 we intend to exclude the $1.8bn gain following the
recognition of a deferred tax asset when calculating our dividend
payout ratio. As previously disclosed, we also intend to exclude
the 2H22 forecast loss on the sale of our retail banking operations
in France when calculating our dividend payout ratio.
Dividends are declared in US dollars and, at the election of the
shareholder, paid in cash in one of, or in a combination of, US
dollars, pounds sterling and Hong Kong dollars.
10 Earnings release
----------------
An earnings release for the three-month period ending 30
September 2022 is expected to be issued on 25 October 2022.
11 Final results
-------------
The results for the year to 31 December 2022 are expected to be
announced on 21 February 2023.
12 Corporate governance
--------------------
We are subject to corporate governance requirements in both the
UK and Hong Kong. Throughout the six months ended 30 June 2022, we
complied with the applicable provisions of the UK Corporate
Governance Code, save to the extent referred to in the next
paragraph, 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.
Dame Carolyn Fairbairn was appointed as Chair to the Group
Remuneration Committee on 29 April 2022. In approving Dame Carolyn
Fairbairn's appointment, the Board considered the UK Corporate
Governance Code expectation that the Chair has served at least 12
months as a member on the committee before assuming the position of
Chair. Given her previous experience as both a member and chair of
the remuneration committees of other UK listed companies, the Board
approved the appointment of Dame Carolyn Fairbairn as Chair.
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 2021 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 33 of the Interim Report 2022.
13 Changes in Directors' details
-----------------------------
Changes in current Directors' details since the date of the
Annual Report and Accounts 2021, which are required to be disclosed
pursuant to Rule 13.51(2) and Rule 13.51B(1) of the Hong Kong
Listing Rules, are set out below.
Geraldine Buckingham
Appointed to the Board and the Nomination & Corporate
Governance Committee on 1 May 2022 and appointed to the Group
Remuneration Committee and the Group Risk Committee on 1 June
2022.
Rachel Duan
Appointed to the Group Audit Committee on 1 June 2022.
Dame Carolyn Fairbairn
Appointed as Chair to the Group Remuneration Committee on 29
April 2022.
James Anthony Forese
Stepped down from the Group Audit Committee on 1 June 2022.
Irene Lee
Retired from the Board and the Nomination & Corporate
Governance Committee on 29 April 2022.
Eileen K Murray
Appointed to the Group Audit Committee and stepped down from the
Group Risk Committee on 1 June 2022.
José Antonio Meade Kuribreña
Appointed as Independent non-executive Director with
responsibility for workforce engagement and stepped down from the
Group Risk Committee on 1 June 2022.
Pauline van der Meer Mohr
Retired from the Board, Group Audit Committee, Nomination &
Corporate Governance Committee and Group Remuneration Committee on
29 April 2022.
14 Going concern basis
-------------------
As mentioned in Note 1 'Basis of preparation and significant
accounting policies' on page 110, 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 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 inflationary pressures and uncertainty that the global
Covid-19 pandemic has had on HSBC's operations, as well as the
potential impacts from other top and emerging risks, and the
related impact on profitability, capital and liquidity.
In particular, HSBC's principal activities, business and
operating models, strategic direction, and top and emerging risks
are addressed in the Overview section. A financial summary,
including a review of the consolidated income statement and
consolidated balance sheet, is provided in the 'Interim management
report' section. HSBC's objectives, policies and processes for
managing credit, liquidity and market risk are described in the
'Risk review' section of the Annual Report and Accounts 2021.
HSBC's approach to capital management and allocation is described
in the 'Treasury risk' section of the Annual Report and Accounts
2021.
15 Telephone and online share dealing service
------------------------------------------
For shareholders on the Principal Register who are resident in
the UK, with a UK postal address, and who hold an HSBC Bank plc
personal current account, the HSBC InvestDirect share dealing
service is available for buying and selling HSBC Holdings plc
ordinary shares. Details are available from: HSBC InvestDirect,
Forum 1, Parkway, Whiteley PO15 7PA; or UK telephone: +44 (0) 3456
080848, or from an overseas telephone: +44 (0) 1226 261090; or
website:
www.hsbc.co.uk/investments/products-and-services/invest-direct.
16 Stock symbols
-------------
HSBC Holdings plc ordinary shares trade under the following
stock symbols:
London Stock Exchange HSBA
Hong Kong Stock Exchange 5
New York Stock Exchange (ADS) HSBC
Bermuda Stock Exchange HSBC.BH
17 Copies of the Interim Report 2022 and shareholder enquiries and
communications
---------------------------------------------------------------
Further copies of the Interim Report 2022 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
2022 may also be downloaded from the HSBC website,
www.hsbc.com.
Shareholders may at any time choose to receive corporate
communications in printed form or to receive notifications of their
availability on HSBC's website. To receive notifications of the
availability of a corporate communication on HSBC's website by
email, or to revoke or amend an instruction to receive such
notifications by email, go to www.hsbc.com/ecomms. If you provide
an email address to receive electronic communications from HSBC, we
will also send notifications of any future dividend entitlements by
email. If you received a notification of the availability of this
document on HSBC's website and would like to receive a printed copy
or, if you would like to receive future corporate communications in
printed form, please write or send an email (quoting your
shareholder reference number) to the appropriate Registrar at the
address given below. Printed copies will be provided without
charge.
Any enquiries relating to your shareholdings on the share
register (for example transfers of shares, change of name or
address, lost share certificates or dividend cheques) should be
sent to the Registrar at the address given below. The Registrars
offer an online facility, Investor Centre, which enables
shareholders to manage their shareholding electronically.
Hong Kong Overseas Branch Bermuda Overseas Branch
Principal Register Register Register
Computershare Investor Computershare Hong Kong Investor Relations Team
Services PLC Investor HSBC Bank Bermuda Limited
The Pavilions Services Limited 37 Front Street
Bridgwater Road Rooms 1712-1716, 17th Hamilton HM 11
Bristol BS99 6ZZ Floor Bermuda
United Kingdom Hopewell Centre
183 Queen's Road East
Hong Kong
Telephone: +44 (0) 370 Telephone: +852 2862 8555 Telephone: +1 441 299
702 0137 Email: hsbc.ecom@computershare.com.hk 6737
Email: web.queries@computershare.co.uk Web: www.investorcentre.com/hk Email:
Web: hbbm.shareholder.services@hsbc.bm
www.investorcentre.co.uk/contactus Web: www.investorcentre.com/bm
Any enquiries relating to ADSs should be sent to the depositary
at:
The Bank of New York Mellon Telephone (US): +1 877 283 5786
Shareowner Services Telephone (international): +1 201 680 6825
PO Box 505000 Email: shrrelations@cpushareownerservices.com
Louisville, KY 40233-5000 Web: www.mybnymdr.com
USA
A Chinese translation of this and future documents may be
obtained on request from the Registrar. Please also contact the
Registrar if you have received a Chinese translation of this
document and do not wish to receive such translations in
future.
Persons whose shares are held on their behalf by another person
may have been nominated to receive communications from HSBC
pursuant to section 146 of the UK Companies Act 2006 ('nominated
person'). The main point of contact for a nominated person remains
the registered shareholder (for example your stockbroker,
investment manager, custodian or other person who manages the
investment on your behalf). Any changes or queries relating to a
nominated person's personal details and holding (including any
administration thereof) must continue to be directed to the
registered shareholder and not HSBC's Registrar. The only exception
is where HSBC, in exercising one of its powers under the UK
Companies Act 2006, writes to nominated persons directly for a
response.
Cautionary statement regarding
forward-
looking statements
This Interim Report 2022 contains certain forward-looking
statements with respect to HSBC's: financial condition; results of
operations and business, including the strategic priorities;
financial, investment and capital targets; and ESG targets,
commitments and ambitions described herein.
Statements that are not historical facts, including statements
about HSBC's beliefs and expectations, are forward-looking
statements. Words such as 'may', 'will', 'should', 'expects',
'targets', 'anticipates', 'intends', 'plans', 'believes', 'seeks',
'estimates', 'potential' and 'reasonably possible', or the negative
thereof, other variations thereon or similar expressions are
intended to identify forward-looking statements. These statements
are based on current plans, information, data, estimates and
projections, and therefore undue reliance should not be placed on
them. Forward-looking statements speak only as of the date they are
made. HSBC makes no commitment to revise or update any
forward-looking statements to reflect events or circumstances
occurring or existing after the date of any forward-looking
statements.
Written and/or oral forward-looking statements may also be made
in the periodic reports to the US Securities and Exchange
Commission, summary financial statements to shareholders, proxy
statements, offering circulars and prospectuses, press releases and
other written materials, and in oral statements made by HSBC's
Directors, officers or employees to third parties, including
financial analysts.
Forward-looking statements involve inherent risks and
uncertainties. Readers are cautioned that a number of factors could
cause actual results to differ, in some instances materially, from
those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
-- changes in general economic conditions in the markets in
which we operate, such as new, continuing or deepening recessions,
inflationary pressures and fluctuations in employment and
creditworthy customers beyond those factored into consensus
forecasts (including, without limitation, as a result of the
Russia-Ukraine war and the Covid-19 pandemic); the Covid-19
pandemic and its impact on global economies could have a material
adverse effect on (among other things) our financial condition,
results of operations, prospects, liquidity, capital position and
credit ratings; deviations from the market and economic assumptions
that form the basis for our ECL measurements (including, without
limitation, as a result of the Russia-Ukraine war, inflationary
pressures and the Covid-19 pandemic); potential changes in HSBC's
dividend policy; changes in foreign exchange rates and interest
rates, including the accounting impact resulting from financial
reporting in respect of hyperinflationary economies; volatility in
equity markets; lack of liquidity in wholesale funding or capital
markets, which may affect our ability to meet our obligations under
financing facilities or to fund new loans, investments and
businesses; geopolitical tensions or diplomatic developments
producing social instability or legal uncertainty, such as the
Russia-Ukraine war and the related imposition of sanctions, the
US's approach to strategic competition with China, supply chain
restrictions, claims of human rights violations, diplomatic
tensions, including between China and the US, the UK, the EU,
Australia and India and other countries, and developments in Hong
Kong and Taiwan, alongside other potential areas of tension, which
may affect HSBC by creating regulatory, reputational and market
risks; the efficacy of government, customer and HSBC's actions in
managing and mitigating ESG risks, in particular climate risk,
nature-related risks and human rights risks, and in supporting the
global transition to net zero carbon emissions, each of which can
impact HSBC both directly and indirectly through our customers and
which may cause both idiosyncratic and systemic risks resulting in
potential financial and non-financial impacts; illiquidity and
downward price pressure in national real estate markets; adverse
changes in central banks' policies with respect to the provision of
liquidity support to financial markets; heightened market concerns
over sovereign creditworthiness in over-indebted countries; adverse
changes in the funding status of public or private defined benefit
pensions; societal shifts in customer financing and investment
needs, including consumer perception as to the continuing
availability of credit; exposure to counterparty risk, including
third parties using us as a conduit for illegal activities without
our knowledge; the discontinuation of certain key Ibors and the
development of near risk-free benchmark rates, as well as the
transition of legacy Ibor contracts to near risk-free benchmark
rates, which exposes HSBC to material execution risks, and
increases some financial and non-financial risks; and price
competition in the market segments we serve;
-- changes in government policy and regulation, including the
monetary, interest rate and other policies of central banks and
other regulatory authorities in the principal markets in which we
operate and the consequences thereof (including, without
limitation, actions taken as a result of the Covid-19 pandemic and
the impact of the Russia-Ukraine war on inflation); initiatives to
change the size, scope of activities and interconnectedness of
financial institutions in connection with the implementation of
stricter regulation of financial institutions in key markets
worldwide; revised capital and liquidity benchmarks, which could
serve to deleverage bank balance sheets and lower returns available
from the current business model and portfolio mix; changes to tax
laws and tax rates applicable to HSBC, including the imposition of
levies or taxes designed to change business mix and risk appetite;
the practices, pricing or responsibilities of financial
institutions serving their consumer markets; expropriation,
nationalisation, confiscation of assets and changes in legislation
relating to foreign ownership; the UK's relationship with the EU
following the UK's withdrawal from the EU, which continues to be
characterised by uncertainty despite the signing of the Trade and
Cooperation Agreement between the UK and the EU; passage of the
Hong Kong national security law and restrictions on
telecommunications, as well as the US Hong Kong Autonomy Act, which
have caused tensions between China, the US and the UK; general
changes in government policy that may significantly influence
investor decisions; the costs, effects and outcomes of regulatory
reviews, actions or litigation, including any additional compliance
requirements; and the effects of competition in the markets where
we operate including increased competition from non-bank financial
services companies; and
-- factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan losses
or delinquency, and managing those risks (through account
management, hedging and other techniques); our ability to achieve
our financial, investment, capital and ESG targets, commitments and
ambitions (including with respect to the commitments set forth in
our thermal coal phase-out policy and our targets to reduce our
on-balance sheet financed emissions in the oil and gas, and power
and utilities sectors), which may result in our failure to achieve
any of the expected benefits of our strategic priorities; model
limitations or failure, including, without limitation, the impact
that high inflationary concerns and the consequences of the
Covid-19 pandemic have had on the performance and usage of
financial models, which may require us to hold additional capital,
incur losses and/or use compensating controls, such as judgemental
post-model adjustments, to address model limitations; changes to
the judgements, estimates and assumptions we base our financial
statements on; changes in our ability to meet the requirements of
regulatory stress tests; a reduction in the credit ratings assigned
to us or any of our subsidiaries, which could increase the cost or
decrease the availability of our funding and affect our liquidity
position and net interest margin; changes to the reliability and
security of our data management, data privacy, information and
technology infrastructure, including threats from cyber-attacks,
which may impact our ability to service clients and may result in
financial loss, business disruption and/ or loss of customer
services and data; the accuracy and effective use of data,
including internal management information that may not have been
independently verified; changes in insurance customer behaviour and
insurance claim rates; our dependence on loan payments and
dividends from subsidiaries to meet our obligations; changes in
accounting standards, including the implementation of IFRS 17
'Insurance Contracts', which may have a material impact on the way
we prepare our financial statements and (with respect to IFRS 17)
may negatively affect the profitability of HSBC's insurance
business; changes in our ability to manage third-party, fraud and
reputational risks inherent in our operations; employee misconduct,
which may result in regulatory sanctions and/or reputational or
financial harm; changes in skill requirements, ways of working and
talent shortages, which may affect our ability to recruit and
retain senior management and diverse and skilled personnel; and
changes in our ability to develop sustainable finance and
climate-related products consistent with the evolving expectations
of our regulators, and our capacity to measure the climate impact
from our financing activity (including as a result of data
limitations and changes in methodologies), which may affect our
ability to achieve our climate ambition, our targets to reduce
financed emissions in our oil and gas, and power and utilities
portfolio and the commitments set forth in our thermal coal
phase-out policy, and increase the risk of greenwashing. Effective
risk management depends on, among other things, our ability through
stress testing and other techniques to prepare for events that
cannot be captured by the statistical models it uses; our success
in addressing operational, legal and regulatory, and litigation
challenges; and other risks and uncertainties we identify in 'Top
and emerging risks' on pages 27 to 28 of the Interim Report
2022.
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', '$bn'
and '$tn' represent millions, billions (thousands of millions) and
trillions of US dollars, respectively.
Abbreviations
Currencies
---------------- ----------------------------------------------
GBP British pound sterling
---------------- ----------------------------------------------
CA$ Canadian dollar
---------------- ----------------------------------------------
EUR Euro
---------------- ----------------------------------------------
HK$ Hong Kong dollar
---------------- ----------------------------------------------
RMB Chinese renminbi
---------------- ----------------------------------------------
SGD Singapore dollar
---------------- ----------------------------------------------
$ United States dollar
---------------- ----------------------------------------------
Abbreviation
---------------- ----------------------------------------------
1H21 First half of 2021
---------------- ----------------------------------------------
1H22 First half of 2022
---------------- ----------------------------------------------
1Q21 First quarter of 2021
---------------- ----------------------------------------------
1Q22 First quarter of 2022
---------------- ----------------------------------------------
2H21 Second half of 2021
---------------- ----------------------------------------------
2Q21 Second quarter of 2021
---------------- ----------------------------------------------
2Q22 Second quarter of 2022
---------------- ----------------------------------------------
4Q21 Fourth quarter of 2021
---------------- ----------------------------------------------
A
---------------- ----------------------------------------------
ABS Asset-backed security
---------------- ----------------------------------------------
ADS American Depositary Share
---------------- ----------------------------------------------
AGM Annual General Meeting
---------------- ----------------------------------------------
AIEA Average interest-earning
assets
---------------- ----------------------------------------------
ALCO Asset and Liability Management
Committee
---------------- ----------------------------------------------
AML Anti-money laundering
---------------- ----------------------------------------------
ANP Annualised new business
premiums
---------------- ----------------------------------------------
AT1 Additional tier 1
---------------- ----------------------------------------------
B
---------------- ----------------------------------------------
Basel Basel Committee on Banking
Supervision
---------------- ----------------------------------------------
Basel III Basel Committee's reforms
to strengthen global capital
and liquidity rules
---------------- ----------------------------------------------
Basel 3.1 Outstanding measures to
be implemented from the
Basel III reforms
---------------- ----------------------------------------------
BGF Business Growth Fund, an
investment firm that provides
growth capital for small
and mid-sized businesses
in the UK and Ireland
---------------- ----------------------------------------------
BoCom Bank of Communications Co.,
Limited, one of China's
largest banks
---------------- ----------------------------------------------
BoE Bank of England
---------------- ----------------------------------------------
Bps Basis points. One basis
point is equal to one hundredth
of a percentage point
---------------- ----------------------------------------------
C
---------------- ----------------------------------------------
CAPM Capital asset pricing model
---------------- ----------------------------------------------
CDOR Canadian dollar offered
rate
---------------- ----------------------------------------------
CEA Commodity Exchange Act (US)
---------------- ----------------------------------------------
CET1 Common equity tier 1
---------------- ----------------------------------------------
CMB Commercial Banking, a global
business
---------------- ----------------------------------------------
CMC Capital maintenance charge
---------------- ----------------------------------------------
CODM Chief Operating Decision
Maker
---------------- ----------------------------------------------
CRD IV Capital Requirements Regulation
and Directive
---------------- ----------------------------------------------
CRR Customer risk rating
---------------- ----------------------------------------------
CRR II Revised Capital Requirements
Regulation and Directive,
as implemented
---------------- ----------------------------------------------
D
---------------- ----------------------------------------------
DoJ US Department of Justice
---------------- ----------------------------------------------
DPD Days past due
---------------- ----------------------------------------------
DPF Discretionary participation
feature of insurance and
investment contracts
---------------- ----------------------------------------------
DVA Debt valuation adjustment
---------------- ----------------------------------------------
E
---------------- ----------------------------------------------
EBA European Banking Authority
---------------- ----------------------------------------------
EC European Commission
---------------- ----------------------------------------------
ECB European Central Bank
---------------- ----------------------------------------------
ECL Expected credit losses.
In the income statement,
ECL is recorded as a change
in expected credit losses
and other credit impairment
charges. In the balance
sheet, ECL is recorded as
an allowance for financial
instruments to which only
the impairment requirements
in IFRS 9 are applied.
---------------- ----------------------------------------------
EEA European Economic Area
---------------- ----------------------------------------------
Eonia Euro Overnight Index Average
---------------- ----------------------------------------------
EPC Energy performance certificate
---------------- ----------------------------------------------
EPS Earnings per ordinary share
---------------- ----------------------------------------------
ESG Environmental, social and
governance
---------------- ----------------------------------------------
EU European Union
---------------- ----------------------------------------------
Euribor Euro interbank offered rate
---------------- ----------------------------------------------
EVE Economic value of equity
---------------- ----------------------------------------------
F
---------------- ----------------------------------------------
FCA Financial Conduct Authority
(UK)
---------------- ----------------------------------------------
FRB Federal Reserve Board (US)
---------------- ----------------------------------------------
FTE Full-time equivalent staff
---------------- ----------------------------------------------
FVOCI Fair value through other
comprehensive income
---------------- ----------------------------------------------
FX Foreign exchange
---------------- ----------------------------------------------
G
---------------- ----------------------------------------------
GAAP Generally accepted accounting
principles
---------------- ----------------------------------------------
GBM Global Banking and Markets,
a global business
---------------- ----------------------------------------------
GDP Gross domestic product
---------------- ----------------------------------------------
GEC Group Executive Committee
---------------- ----------------------------------------------
GLCM Global Liquidity and Cash
Management
---------------- ----------------------------------------------
Group HSBC Holdings together with
its subsidiary undertakings
---------------- ----------------------------------------------
GTRF Global Trade and Receivables
Finance
---------------- ----------------------------------------------
H
---------------- ----------------------------------------------
HIBOR Hong Kong interbank offered
rate
---------------- ----------------------------------------------
HKEx The Stock Exchange of Hong
Kong Limited
---------------- ----------------------------------------------
HKMA Hong Kong Monetary Authority
---------------- ----------------------------------------------
HNAH HSBC North America Holdings
Inc.
---------------- ----------------------------------------------
Holdings HSBC Holdings Asset and
ALCO Liability Management Committee
---------------- ----------------------------------------------
Hong Kong Hong Kong Special Administrative
Region of the People's Republic
of China
---------------- ----------------------------------------------
HQLA High-quality liquid assets
---------------- ----------------------------------------------
HSBC HSBC Holdings together with
its subsidiary undertakings
---------------- ----------------------------------------------
HSBC Bank HSBC Bank plc, also known
plc as the non-ring-fenced bank
---------------- ----------------------------------------------
HSBC Bank HSBC Bank Middle East Limited
Middle
East
---------------- ----------------------------------------------
HSBC Canada The sub-group, HSBC Bank
Canada, HSBC Trust Company
Canada, HSBC Mortgage Corporation
Canada and HSBC Securities
Canada, consolidated for
liquidity purposes
---------------- ----------------------------------------------
HSBC Continental HSBC Continental Europe
Europe
---------------- ----------------------------------------------
HSBC Holdings HSBC Holdings plc, the parent
company of HSBC
---------------- ----------------------------------------------
HSBC UK HSBC UK Bank plc, also known
as the ring-fenced bank
---------------- ----------------------------------------------
HSBC USA The sub-group, HSBC USA
Inc and HSBC Bank USA, consolidated
for liquidity purposes
---------------- ----------------------------------------------
HSI HSBC Securities (USA) Inc.
---------------- ----------------------------------------------
HSSL HSBC Securities Services
(Luxembourg)
---------------- ----------------------------------------------
I
---------------- ----------------------------------------------
IAS International Accounting
Standards
---------------- ----------------------------------------------
IASB International Accounting
Standards Board
---------------- ----------------------------------------------
Ibor Interbank offered rate
---------------- ----------------------------------------------
ICAAP Internal capital adequacy
assessment process
---------------- ----------------------------------------------
IFRSs International Financial
Reporting Standards
---------------- ----------------------------------------------
ILAAP Internal liquidity adequacy
assessment process
---------------- ----------------------------------------------
IRB Internal ratings-based
J
---------------- ----------------------------------------------
JV Joint venture
---------------- ----------------------------------------------
L
---------------- ----------------------------------------------
LCR Liquidity coverage ratio
---------------- ----------------------------------------------
LGD Loss given default
---------------- ----------------------------------------------
Libor London interbank offered
rate
---------------- ----------------------------------------------
LTI Long-term incentive
---------------- ----------------------------------------------
LTV Loan to value
---------------- ----------------------------------------------
M
---------------- ----------------------------------------------
Mainland People's Republic of China
China excluding Hong Kong
and Macau
---------------- ----------------------------------------------
MENA Middle East and North Africa
---------------- ----------------------------------------------
MREL Minimum requirement for
own funds and eligible liabilities
---------------- ----------------------------------------------
MSS Markets and Securities Services,
HSBC's capital markets and
securities services businesses
in Global Banking and Markets
---------------- ----------------------------------------------
N
---------------- ----------------------------------------------
Net operating Net operating income before
income change in expected credit
losses and other credit
impairment charges, also
referred to as revenue
---------------- ----------------------------------------------
NII Net interest income
---------------- ----------------------------------------------
NIM Net interest margin
---------------- ----------------------------------------------
NSFR Net stable funding ratio
---------------- ----------------------------------------------
O
---------------- ----------------------------------------------
OCI Other comprehensive income
---------------- ----------------------------------------------
OECD Organisation of Economic
Co-operation and Development
---------------- ----------------------------------------------
OTC Over-the-counter
---------------- ----------------------------------------------
P
---------------- ----------------------------------------------
PBT Profit before tax
---------------- ----------------------------------------------
PD Probability of default
---------------- ----------------------------------------------
POCI Purchased or originated
credit-impaired financial
assets
---------------- ----------------------------------------------
PPI Payment protection insurance
---------------- ----------------------------------------------
PRA Prudential Regulation Authority
(UK)
---------------- ----------------------------------------------
Premier HSBC Premier, HSBC's premium
personal global banking
service
---------------- ----------------------------------------------
PVIF Present value of in-force
long-term insurance business
and long-term investment
contracts with DPF
---------------- ----------------------------------------------
PwC The member firms of the
PwC network, including PricewaterhouseCoopers
LLP
---------------- ----------------------------------------------
R
---------------- ----------------------------------------------
RFR Risk-free rate
---------------- ----------------------------------------------
RNIV Risk not in VaR
---------------- ----------------------------------------------
RoE Return on average ordinary
shareholders' equity
---------------- ----------------------------------------------
RoTE Return on average tangible
equity
---------------- ----------------------------------------------
RWA Risk-weighted asset
---------------- ----------------------------------------------
S
---------------- ----------------------------------------------
SABB The Saudi British Bank
---------------- ----------------------------------------------
SEC Securities and Exchange
Commission (US)
---------------- ----------------------------------------------
ServCo Separately incorporated
group group of service companies
established in response
to UK ring-fencing requirements
---------------- ----------------------------------------------
Sibor Singapore interbank offered
rate
---------------- ----------------------------------------------
SME Small and medium-sized enterprise
---------------- ----------------------------------------------
SOFR Secured Overnight Financing
Rate
---------------- ----------------------------------------------
U
---------------- ----------------------------------------------
UAE United Arab Emirates
---------------- ----------------------------------------------
UK United Kingdom
---------------- ----------------------------------------------
UN United Nations
---------------- ----------------------------------------------
US United States of America
---------------- ----------------------------------------------
V
---------------- ----------------------------------------------
VaR Value at risk
---------------- ----------------------------------------------
VIU Value in use
---------------- ----------------------------------------------
W
---------------- ----------------------------------------------
WPB Wealth and Personal Banking,
a global business
---------------- ----------------------------------------------
Y
---------------- ----------------------------------------------
YTD Year to date
---------------- ----------------------------------------------
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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END
IR FLFFETFILIIF
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