Annual Financial Report - 9 of 60

RNS Number : 1491D

HSBC Holdings PLC

25 March 2014

 



Reconciliation of RoRWA measures

Performance Management

We target a return on average ordinary shareholders' equity of 12%-15%. For internal management purposes we monitor global businesses and geographical regions by pre-tax return on RWAs, a metric which combines return on equity and regulatory capital efficiency objectives.

In addition to measuring return on average risk-weighted assets ('RoRWA') we measure our performance internally using the non-GAAP measure of underlying RoRWA, which is underlying profit before tax as a percentage of average risk-weighted assets adjusted for the effects of foreign currency translation differences and business disposals. Underlying RoRWA adjusts performance for certain items which distort year-on-year performance as explained on page 47.

We also present the non-GAAP measure of underlying RoRWA adjusted for the effect of operations which are not regarded as contributing to the longer-term performance of the Group. These include the run-off portfolios and the CRS business which was sold in 2012.

The CRS average RWAs in the table below represent the average of the associated operational risk RWAs that were not immediately released on disposal and have not already been adjusted as part of the underlying RoRWA calculation. The 2012 pre-tax loss for CRS primarily relates to litigation expenses incurred after the sale of the business that have not been adjusted as part of the underlying RoRWA calculation.

Reconciliation of underlying RoRWA (excluding run-off portfolios and Card and Retail Services)

	2013						2012
	Pre-tax        return		Average       RWAs36		RoRWA                 37		Pre-tax          return		Average        RWAs36		RoRWA                 37
	US$m		US$bn		%		US$m		US$bn		%
Reported ...................................................	22,565		1,104		2.0		20,649		1,172		1.8
Underlying37 .............................................	21,586		1,088		2.0		15,286		1,078		1.4
Run-off portfolios ....................................	68		124		0.1		(1,624)		166		(1.0)
Legacy credit in GB&M ........................	185		33		0.6		(274)		45		(0.6)
US CML and other38 .............................	(117)		91		(0.1)		(1,350)		121		(1.1)
Card and Retail Services ............................	-		4		-		(150)		5		(3.0)
Underlying (excluding run-off portfolios and Card and Retail Services) .................	21,518		960		2.2		17,060		906		1.9

Reconciliation of reported and underlying average risk-weighted assets

	Year ended 31 December
	2013		2012		Change
	US$bn		US$bn		%
Average reported RWAs36 ............................................................................	1,104		1,172		(6)
Currency translation adjustment32 ................................................................	-		(6)
Acquisitions, disposals and dilutions ..............................................................	(16)		(88)
Average underlying RWAs36 .........................................................................	1,088		1,078		1

For footnotes, see page 132.

 

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