Annual Financial Report - 4 of 44

RNS Number : 1053A

HSBC Holdings PLC

27 March 2012

 



Consolidated balance sheet

Five-year summary consolidated balance sheet and selected financial information

	At 31 December
	2011 US$m		2010 US$m		2009 US$m		2008 US$m		2007 US$m
ASSETS
Cash and balances at central banks ....................................	129,902		57,383		60,655		52,396		21,765
Trading assets ...................................................................	330,451		385,052		421,381		427,329		445,968
Financial assets designated at fair value .............................	30,856		37,011		37,181		28,533		41,564
Derivatives .......................................................................	346,379		260,757		250,886		494,876		187,854
Loans and advances to banks ............................................	180,987		208,271		179,781		153,766		237,366
Loans and advances to customers37 ...................................	940,429		958,366		896,231		932,868		981,548
Financial investments .......................................................	400,044		400,755		369,158		300,235		283,000
Assets held for sale ...........................................................	39,558		1,991		3,118		2,075		2,804
Other assets ......................................................................	156,973		145,103		146,061		135,387		152,397
Total assets ......................................................................	2,555,579		2,454,689		2,364,452		2,527,465		2,354,266
LIABILITIES AND EQUITY
Liabilities
Deposits by banks .............................................................	112,822		110,584		124,872		130,084		132,181
Customer accounts ............................................................	1,253,925		1,227,725		1,159,034		1,115,327		1,096,140
Trading liabilities ..............................................................	265,192		300,703		268,130		247,652		314,580
Financial liabilities designated at fair value ........................	85,724		88,133		80,092		74,587		89,939
Derivatives .......................................................................	345,380		258,665		247,646		487,060		183,393
Debt securities in issue ......................................................	131,013		145,401		146,896		179,693		246,579
Liabilities under insurance contracts ..................................	61,259		58,609		53,707		43,683		42,606
Liabilities of disposal groups held for sale ..........................	22,200		86		3		-		-
Other liabilities .................................................................	111,971		109,868		148,411		149,150		113,432
Total liabilities .................................................................	2,389,486		2,299,774		2,228,791		2,427,236		2,218,850
Equity
Total shareholders' equity ................................................	158,725		147,667		128,299		93,591		128,160
Non-controlling interests ..................................................	7,368		7,248		7,362		6,638		7,256
Total equity ......................................................................	166,093		154,915		135,661		100,229		135,416
Total equity and liabilities .................................................	2,555,579		2,454,689		2,364,452		2,527,465		2,354,266
Five-year selected financial information
Called up share capital ......................................................	8,934		8,843		8,705		6,053		5,915
Capital resources38,39,40 .....................................................	170,334		167,555		155,729		131,460		152,640
Undated subordinated loan capital .....................................	2,779		2,781		2,785		2,843		2,922
Preferred securities and dated subordinated loan capital41 ..	49,438		54,421		52,126		50,307		49,472
Risk-weighted assets and capital ratios38,39
Risk-weighted assets ..........................................................	1,209,514		1,103,113		1,133,168		1,147,974		1,123,782
	%		%		%		%		%
Core tier 1 ratio ................................................................	10.1		10.5		9.4		7.0		8.1
Total capital ratio ............................................................	14.1		15.2		13.7		11.4		13.6
Financial statistics
Loans and advances to customers as a percentage of customer accounts .........................................................	75.0		78.1		77.3		83.6		89.5
Average total shareholders' equity to average total assets .	5.64		5.53		4.72		4.87		5.69
Net asset value per ordinary share at year-end42 (US$) ......	8.48		7.94		7.17		7.44		10.72
Number of US$0.50 ordinary shares in issue (millions) ......	17,868		17,686		17,408		12,105		11,829
Closing foreign exchange translation rates to US$:
US$1: £ ............................................................................	0.646		0.644		0.616		0.686		0.498
US$1: € ............................................................................	0.773		0.748		0.694		0.717		0.679

For footnotes, see page 95.

A more detailed consolidated balance sheet is contained in the Financial Statements on page 281.

Movement in 2011

Total reported assets were US$2.6 trillion, 4% higher than at 31 December 2010. Excluding the effect of currency movements, total assets increased by 6%.

Strong growth in deposits across most regions enabled us to support our customers' borrowing requirements, leading to significantly higher term lending and mortgage balances in Hong Kong, Rest of Asia-Pacific and the UK. Our strong liquidity position and risk preference also led to a rise in balances at central banks. In addition, the fair value of derivative contracts increased markedly, as the deteriorating economic outlook resulted in a decline in yield curves in major currencies during the latter part of the year. This growth was offset in part by a reduction in net trading assets as we took action to manage our balance sheet more effectively, which resulted in year-end balances being lower than the average for the year.

The following commentary is based on a comparison with the balance sheet at 31 December 2010 as shown on page 35.

Assets

Cash and balances at central banks rose by 129%. The increasingly prominent role played by western central banks in the functioning of the money markets as well as our own risk preference as the eurozone crisis deepened resulted in a larger portion of our excess liquidity being held with central banks in Europe and in North America. The redeployment of funds from maturities and sales of financial investments and strong growth in deposits also contributed to the rise.

Trading assets decreased by 13%. Economic uncertainty led to a decline in market activity. As a result, we reduced our holdings of government and highly-rated corporate debt securities and equity positions, notably in Europe, and did not replace maturities in our reverse repo book. This was partly offset by higher cash collateral posted with external counterparties as the fair value of derivative liabilities rose.

Financial assets designated at fair value declined by 14% as a result of improved netting of assets and the associated non-recourse liabilities. There was a corresponding reduction in 'Financial liabilities designated at fair value'.

Derivative assets increased by 35%, due to a significant rise in the fair value of interest rate contracts in Europe. This was driven by the downward movements of yield curves in major currencies following the global monetary response to continued economic weakness, including quantitative easing measures. The notional value of contracts outstanding also increased, reflecting a higher number of open interest rate and foreign exchange transactions than a year ago. The increase in the fair value of derivative assets was partly offset by higher netting, which rose in line with the increase in fair values.

Loans and advances to banks declined by 11%, as funds from maturing term loans and reverse repo balances, notably in Europe, were redeployed to 'Cash and balances at central banks'. This was offset in part by higher central bank lending in Rest of Asia-Pacific, reflecting strong deposit growth in the region. 

Loans and advances to customers were broadly in line with 2010. Following the announcement of agreements for the sale of 195 non-strategic US branches and our Cards and Retail Services business, we reclassified the related loans and advances to 'Assets held for sale', which, for the purpose of this commentary, is reported within 'Other assets' (see page 86). We also reclassified loans and advances relating to the planned disposals of non-strategic banking operations in Central America, the RBWM business in Thailand and our private banking business in Japan to 'Assets held for sale'.

Excluding the above reclassifications, loans and advances to customers increased by US$30bn compared with 2010, although the pace of growth slowed in the second half of 2011. This reflected targeted loan growth in our CMB and GB&M businesses in Hong Kong and Rest of Asia-Pacific as the economic environment improved and trade flows increased, together with growth as a result of lending campaigns in CMB in the UK and Latin America. Residential mortgage balances also rose significantly in the UK, Hong Kong and Rest of Asia-Pacific due to a strong sales focus and competitive pricing, reflecting the successful implementation of our strategy to reposition RBWM towards higher quality secured lending. This growth was offset in part by a reduction in reverse repo balances in Europe and North America, as a result of lower market activity.

Financial investments were broadly in line with 2010, as Balance Sheet Management continued to hold large portfolios of highly liquid assets. In North America, financial investments rose due to the purchases of government and government agency debt securities. This was partly offset by a reduction in Europe, where a portion of the proceeds from sales and maturities of financial investments were placed at central banks.

Other assets, which, for the purpose of this commentary, includes assets held for sale, increased by 34%, reflecting the reclassification of assets of disposal groups, most notably the loans and advances to customers associated with the non-strategic US branches and our Cards and Retail Services business.

Liabilities

Deposits by banks rose by 4% due to higher placements by other financial institutions with HSBC, primarily in Rest of Asia-Pacific and North America. This was partly offset by a reduction in repo balances as a result of lower market activity.

Customer accounts increased by 4% in highly competitive markets. This was driven by customer acquisition, coupled with targeted deposit gathering campaigns to support growth in lending, most notably in Hong Kong, Rest of Asia-Pacific and in Europe. This was partly offset by the reclassification of deposits of businesses, principally the US branches, to liabilities held-for-sale. Repo balances in Europe also declined, reflecting lower market activity levels, particularly during the latter part of the year.

Trading liabilities fell by 11%. Net short bond and equity positions decreased in line with the reduction in holdings of debt and equity securities, which fell as a result of lower market activity. Repo balances also declined, reflecting lower funding requirements as trading assets fell. These declines were offset in part by a rise in cash collateral posted by external counterparties in line with the increase in the fair value of derivative contracts, notably in Europe.

Financial liabilities designated at fair value were broadly in line with 2010. Debt issuances by HSBC entities in Europe were partly offset by maturities not being replaced in North America as funding requirements reduced in line with the decline in the consumer finance portfolios in run-off. Improved netting of non-recourse liabilities and associated assets led to a further reduction in 'Financial liabilities designated at fair value', with a corresponding decrease in 'Financial assets designated at fair value'.

Derivative businesses are managed within market risk limits and, as a consequence, the increase in the value of Derivative liabilities broadly matched that of 'Derivative assets'.

Debt securities in issue declined by 9%, reflecting the non-replacement of maturing securities in both North America and Europe as a result of lower funding requirements relating to the continued reduction in consumer lending balances and the decline in trading assets, respectively. This was offset in part by new issuances in Latin America and Rest of Asia-Pacific to support balance sheet growth.

Liabilities under insurance contracts grew by 7%, driven by reserves established for new business premiums written, notably in Hong Kong, Brazil, France, the UK and Singapore. This was partly offset by the effect of a fall in equity markets, which resulted in a decline in the fair value of assets held to support unit-linked and investment and insurance contracts with DPF and also in the related liabilities to policyholders, together with reductions due to the non-renewal and transfer to third parties of certain contracts in our Irish businesses and the sale of the motor insurance business in the UK during 2011.

Other liabilities, which, for the purpose of this commentary, includes liabilities of disposal groups, increased by 24% as a result of the reclassification of liabilities of businesses held for sale.

Equity

Total shareholders' equity increased by 9%, driven by profits generated during the year. In addition, the negative balance on the available-for-sale reserve declined from US$4.1bn at 31 December 2010 to US$3.4bn at 31 December 2011, reflecting an improvement in the market value of assets.

Reconciliation of reported and underlying assets and liabilities

	31 December 2011 compared with 31 December 2010
	31 Dec 10               as    reported		Currency translation43		31 Dec 10 at 31 Dec 11     exchange            rates		Under-         lying      change		31 Dec 11               as    reported		Reported      change		Under-         lying      change
HSBC	US$m		US$m		US$m		US$m		US$m		%		%
Cash and balances at central banks ...........	57,383		(590)		56,793		73,109		129,902		126		129
Trading assets .............	385,052		(3,834)		381,218		(50,767)		330,451		(14)		(13)
Financial assets designated at fair value .............	37,011		(937)		36,074		(5,218)		30,856		(17)		(14)
Derivative assets .........	260,757		(3,765)		256,992		89,387		346,379		33		35
Loans and advances to banks ......................	208,271		(5,661)		202,610		(21,623)		180,987		(13)		(11)
Loans and advances to customers ................	958,366		(12,556)		945,810		(5,381)		940,429		(2)		(1)
Financial investments .	400,755		(5,219)		395,536		4,508		400,044		-		1
Other assets ................	147,094		(439)		146,655		49,876		196,531		34		34
Total assets ................	2,454,689		(33,001)		2,421,688		133,891		2,555,579		4		6
Deposits by banks .......	110,584		(1,837)		108,747		4,075		112,822		2		4
Customer accounts ......	1,227,725		(17,065)		1,210,660		43,265		1,253,925		2		4
Trading liabilities ........	300,703		(2,785)		297,918		(32,726)		265,192		(12)		(11)
Financial liabilities designated at fair value .............	88,133		(449)		87,684		(1,960)		85,724		(3)		(2)
Derivative liabilities ....	258,665		(3,710)		254,955		90,425		345,380		34		35
Debt securities in issue	145,401		(1,456)		143,945		(12,932)		131,013		(10)		(9)
Liabilities under insurance contracts .................	58,609		(1,501)		57,108		4,151		61,259		5		7
Other liabilities ...........	109,954		(1,906)		108,048		26,123		134,171		22		24
Total liabilities ...........	2,299,774		(30,709)		2,269,065		120,421		2,389,486		4		5
Total shareholders' equity ......................	147,667		(2,263)		145,404		13,321		158,725		7		9
Non-controlling interests ..................	7,248		(29)		7,219		149		7,368		2		2
Total equity ................	154,915		(2,292)		152,623		13,470		166,093		7		9
									-
Total equity and liabilities .................	2,454,689		(33,001)		2,421,688		133,891		2,555,579		4		6

For footnote, see page 95.

In 2011, the effect of acquisitions was not material.

 

END

 

 

ACSJFMFTMBMTBRT