Annual Financial Report - 1 of 44

RNS Number : 1022A
HSBC Holdings PLC
27 March 2012
 



This document comprises the Annual Report and Accounts 2011 for HSBC Holdings plc and its subsidiaries. It contains the Report of the Directors and Financial Statements, together with the Independent Auditor's Report thereon, as required by the UK Companies Act 2006. The Annual Review 2011 of HSBC Holdings plc is published as a separate document. The Report of the Directors on pages 2 to 255 and the Directors' Remuneration Report on pages 256 to 274 have each been drawn up in accordance with the requirements of English law, and liability in respect thereof is also governed by English law. In particular, the liability of the Directors for these reports is solely to HSBC Holdings plc.

Additional information, including commentary on 2010 compared with 2009, may be found in the Form 20‑F filed with the US Securities and Exchange Commission and available on www.hsbc.com and www.sec.gov.

Certain defined terms

Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our' refers 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 classified as equity. The abbreviations 'US$m' and 'US$bn' represent millions and billions (thousands of millions) of US dollars, respectively.

Financial statements

The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board ('IASB') and as endorsed by the European Union ('EU'). EU‑endorsed IFRSs may differ from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the EU. At 31 December 2011, there were no unendorsed standards effective for the year ended 31 December 2011 affecting these consolidated and separate financial statements, and there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC's financial statements for the year ended 31 December 2011 are prepared in accordance with IFRSs as issued by the IASB.

We use the US dollar as our presentation currency because the US dollar and currencies linked to it form the major currency bloc in which we transact and fund our business. Unless otherwise stated, the information presented in this document has been prepared in accordance with IFRSs.

When reference to 'underlying' or 'underlying basis' is made in tables or commentaries, comparative information has been expressed at constant currency (see page 16), eliminating the impact of fair value movements in respect of credit spread changes on HSBC's own debt and adjusting for the effects of acquisitions and disposals of subsidiaries and businesses. A reconciliation of reported and underlying profit before tax is presented on page 17.


Contents






Report of the Directors



Overview



Financial highlights ......................................................

2


Group Chairman's Statement .......................................

4


Group Chief Executive's Business Review ....................

7


Principal activities .......................................................

10


Business and operating models .....................................

10


Strategic direction ........................................................

11


Risk .............................................................................

12


HSBC Values ................................................................

13


Key performance indicators .........................................

13





Operating and Financial Review



Financial summary1 .....................................................

16


Global businesses1 .........................................................

43


Products and services ...................................................

44


Geographical regions1 ..................................................

59


Other information .......................................................

94


Risk1 ............................................................................

98


Capital .........................................................................

211





Corporate Governance1



Corporate Governance Report .....................................

218


Biographies of Directors and senior management .........

218


Board of Directors .......................................................

225


Board committees ........................................................

230


Internal control............................................................

240


Going concern basis......................................................

243


Employees ...................................................................

243





Directors' Remuneration Report1 ..............................

256





Financial Statements and Other Information



Statement of Directors' Responsibilities ......................

275


Independent Auditor's Report ......................................

276





Financial Statements1



Financial statements ....................................................

278


Notes on the financial statements ................................

291





Shareholder Information1



Shareholder information ..............................................

414


Cautionary statement regarding forward-looking statements ...................................................................

422


Glossary .......................................................................

423


Index ...........................................................................

432





1. Detailed contents are provided on the referenced pages.




















 




Who we are and what we do

HSBC is one of the world's largest banking and financial services organisations. With around 7,200 offices in both established and faster-growing markets, we aim to be where the growth is, connecting customers to opportunities, enabling businesses to thrive and economies to prosper, and ultimately helping people to fulfil their hopes and realise their ambitions.

 

We serve around 89 million customers through our four global businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. Our network covers 85 countries and territories in six geographical regions: Europe, Hong Kong, Rest of Asia-Pacific, Middle East and North Africa, North America and Latin America. Our aim is to be acknowledged as the world's leading international bank.

 

Listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by over 220,000 shareholders in 132 countries and territories.

 

 

 

 

Highlights

·     Profit before tax up 15% to US$21.9bn on a reported basis.

·     Underlying pre-tax profit down 6% to US$17.7bn.

·     Launched strategy to reshape the Group, improve returns and position for growth.

·     Strong performance in faster-growing regions, with revenue up 12% in Hong Kong, Rest of Asia-Pacific, Latin America and the Middle East and North Africa.

·     Record year in Commercial Banking with profit before tax of US$7.9bn, up 31%.

·     Achieved sustainable cost savings of US$0.9bn with a strong pipeline of further savings.

·     Dividends declared in respect of 2011 US$7.3bn or US$0.41 per ordinary share, up 14% on 2010.

·     Core tier 1 capital ratio 10.1%, down from 10.5% in 2010, largely reflecting the introduction of Basel 2.5.

 

 

Cover image

A Chinese ship in Brazil's largest port, Santos, illustrates the growing trade links between the two countries.
China is today Brazil's largest trading partner, with HSBC financing an increasing share of that trade.


Financial highlights

Earnings per share

US$0.92 - up 26%

2010: US$0.73

2009: US$0.34


Dividends per ordinary share1

US$0.39

2010: US$0.34

2009: US$0.34


Net assets per share

US$8.48 - up 7%

2010: US$7.94

2009: US$7.17






For the year

Profit before taxation

US$21,872m - up 15%

2010: US$19,037m

2009: US$7,079m


Underlying profit before taxation

US$17,696m - down 6%

2010: US$18,925m

 


Total operating income

US$83,461m - up 4%

2010: US$80,014m

2009: US$78,631m

Net operating income before loan impairment charges and other credit risk provisions

US$72,280m - up 6%

2010: US$68,247m

2009: US$66,181m


Profit attributable to the ordinary shareholders of the parent company

US$16,224m - up 27%

2010: US$12,746m

2009: US$5,565m








At the year-end

Loans and advances to
customers

US$940bn - down 2%

2010: US$958bn

2009: US$896bn


Customer accounts

US$1,254bn - up 2%

2010: US$1,228bn

2009: US$1,159bn


Ratio of customer advances to customer accounts

75.0%

2010: 78.1%

2009: 77.3%

Total equity

US$166bn - up 7%

2010: US$155bn

2009: US$136bn


Average total shareholders' equity
to average total assets

5.6%

2010: 5.5%

2009: 4.7%


Risk-weighted assets

US$1,210bn - up 10%

2010: US$1,103bn

2009: US$1,133bn







Capital ratios

Core tier 1 ratio

10.1%

2010: 10.5%

2009: 9.4%


Tier 1 ratio

11.5%

2010: 12.1%

2009: 10.8%


Total capital ratio

14.1%

2010: 15.2%

2009: 13.7%






 


Performance ratios

Credit coverage ratios

Loan impairment charges to
total operating income

13.8%

2010: 16.9%

2009: 31.7%


Loan impairment charges to
average gross customer advances

1.2%

2010: 1.5%

2009: 2.8%


Total impairment allowances to
impaired loans at year-end

42.3%

2010: 43.0% (restated for change in

disclosure policy - see page 105)






Return ratios

Return on average
invested capital
2

10.2%

2010: 8.7%

2009: 4.1%


Return on average ordinary shareholders' equity3

10.9%

2010: 9.5%

2009: 5.1%


Post-tax return on
average total assets

0.6%

2010: 0.6%

2009: 0.3%


Pre-tax return on average risk-weighted assets

1.9%

2010: 1.7%

2009: 0.6%








Efficiency and revenue mix ratios

Cost efficiency ratio4

57.5%

2010: 55.2%

2009: 52.0%


Net interest income to
total operating income

48.7%

2010: 49.3%

2009: 51.8%


Net fee income to
total operating income

20.6%

2010: 21.7%

2009: 22.5%


Net trading income to
total operating income

7.8%

2010: 9.0%

2009: 12.5%








Share information at the year-end





Closing market price

US$0.50 ordinary shares in issue

17,868m

2010: 17,686m

2009: 17,408m


Market
capitalisation

US$136bn

2010: US$180bn

2009: US$199bn


London

£4.91

2010: £6.51
2009: £7.09


Hong Kong

HK$59.00

2010: HK$79.70
2009: HK$89.40


American
Depositary Share5

US$38.10

2010: US$51.04
2009: US$57.09












Total shareholder return6



Over 1 year


Over 3 years


Over 5 years








To 31 December 2011 .....................................


79.1


96.8


78.2

Benchmarks:

 

 

 

 

 

 

- FTSE 1007 ......................................................

 

97.8

 

140.3

 

107.9

- MSCI World7 ..................................................

 

95.7

 

129.4

 

114.9

- MSCI Banks7 ..................................................

 

82.7

 

107.5

 

60.5

For footnotes, see page 95.


 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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