Annual Financial Report - Part 3

RNS Number : 0463Q

HSBC Holdings PLC

23 February 2021

 

Financial review

77 Financial summary

85 Global businesses and geographical regions

103 Reconciliation of alternative performance measures

World's first corporate bonds to tackle plastic waste

Our green expertise and global connectivity helped Henkel, a leading consumer goods and industrial company, to issue the first ever corporate bonds aimed at tackling plastic waste.

The firm behind well-known brands and products such as Persil detergent, Schwarzkopf shampoo and Loctite adhesives will use the equivalent of $100m raised for projects and expenditures related to its activities to foster a circular economy, which include the development of reusable and recyclable packaging.

We were sole green structuring adviser and sole lead manager on the five-year fixed-rate bonds, which were issued in two tranches. The bonds generated interest from international investors from Japanese insurers to German banks.

Financial summary
	Page
Use of alternative performance measures	77
Changes from 1 January 2020	77
Critical accounting estimates and judgements	77
Consolidated income statement	78
Income statement commentary	80
Consolidated balance sheet	84

Use of alternative performance measures

Our reported results are prepared in accordance with IFRSs as detailed in the financial statements starting on page 278.

To measure our performance, we supplement our IFRS figures with non-IFRS measures that constitute alternative performance measures under European Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with US Securities and Exchange Commission rules and regulations. These measures include those derived from our reported results that eliminate factors that distort year-on-year comparisons. The 'adjusted performance' measure used throughout this report is described below. Definitions and calculations of other alternative performance measures are included in our 'Reconciliation of alternative performance measures' on page 103. All alternative performance measures are reconciled to the closest reported performance measure.

A change in reportable segments was made in 2020 by combining Global Private Banking and Retail Banking and Wealth Management to form Wealth and Personal Banking. We also reallocated our reporting of Markets Treasury, hyperinflation accounting in Argentina and HSBC Holdings net interest expense from Corporate Centre to the global businesses. Comparative data have been re-presented on an adjusted basis in accordance with IFRS 8 'Operating Segments' with the change in reportable segments explained in more detail in Note 10: Segmental analysis on page 311.

Adjusted performance

Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort year-on-year comparisons.

We consider adjusted performance provides useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses year-on-year performance.

Significant items

'Significant items' refers collectively to the items that management and investors would ordinarily identify and consider separately to improve the understanding of the underlying trends in the business.

The tables on pages 85 to 88 and pages 94 to 99 detail the effects of significant items on each of our global business segments, geographical regions and selected countries/territories in 2020, 2019 and 2018.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2020.

We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and better understand the underlying trends in the business.

Foreign currency translation differences Foreign currency translation differences for 2020 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates: • the income statements for 2019 and 2018 at the average rates of exchange for 2020; and • the balance sheets at 31 December 2019 and 31 December 2018 at the prevailing rates of exchange on 31 December 2020.

No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC's Argentinian subsidiaries have not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.

Changes from 1 January 2020

Interest rate benchmark reform - Phase 2

Interest Rate Benchmark Reform Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 issued in August 2020 represents the second phase of the IASB's project on the effects of interest rate benchmark reform, addressing issues affecting financial statements when changes are made to contractual cash flows and hedging relationships as a result of the reform.

Under these amendments, changes made to a financial instrument that are economically equivalent and required by interest rate benchmark reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effective interest rate to be updated to reflect the change in the interest rate benchmark. In addition, hedge accounting will not be discontinued solely because of the replacement of the interest rate benchmark if the hedge meets other hedge accounting criteria.

These amendments apply from 1 January 2021 with early adoption permitted. HSBC has adopted the amendments from 1 January 2020 and has made the additional disclosures as required by the amendments, see pages 112 to 113.

Critical accounting estimates and judgements

The results of HSBC reflect the choice of accounting policies, assumptions and estimates that underlie the preparation of HSBC's consolidated financial statements. The significant accounting policies, including the policies which include critical accounting estimates and judgements, are described in Note 1.2 on the financial statements. The accounting policies listed below are highlighted as they involve a high degree of uncertainty and have a material impact on the financial statements:

• Impairment of amortised cost financial assets and financial assets measured at fair value through other comprehensive income ('FVOCI'): The most significant judgements relate to defining what is considered to be a significant increase in credit risk, determining the lifetime and point of initial recognition of revolving facilities, and making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective and very sensitive to the risk factors. See Note 1.2(i) on page 293.

• Deferred tax assets: The most significant judgements relate to judgements made in respect of expected future profitability. See Note 1.2(l) on page 298.

• Valuation of financial instruments: In determining the fair value of financial instruments a variety of valuation techniques are used, some of which feature significant unobservable inputs and are subject to substantial uncertainty. See Note 1.2(c) on page 291.

• Impairment of interests in associates: Impairment testing involves significant judgement in determining the value in use, and in particular estimating the present values of cash flows expected to arise from continuing to hold the investment, based on a number of management assumptions. The most significant judgements relate to the impairment testing of our investment in Bank of Communications Co., Limited ('BoCom'). See Note 1.2(a) on page 290.

• Impairment of goodwill and non-financial assets: A high degree of uncertainty is involved in estimating the future cash flows of the cash-generating units ('CGUs') and the rates used to discount these cash flows. See Note 1.2(a) on page 290.

• Provisions: Significant judgement may be required due to the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. See Note 1.2(m) on page 298.

• Post-employment benefit plans: The calculation of the defined benefit pension obligation involves the determination of key assumptions including discount rate, inflation rate, pension payments and deferred pensions, pay and mortality. See Note 1.2(k) on page 297.

Given the inherent uncertainties and the high level of subjectivity involved in the recognition or measurement of the items above, it is possible that the outcomes in the next financial year could differ from the expectations on which management's estimates are based, resulting in the recognition and measurement of materially different amounts from those estimated by management in these financial statements.

Consolidated income statement

Summary consolidated income statement
		2020		2019		2018		2017		2016
	Footnotes	$m		$m		$m		$m		$m
Net interest income		27,578		30,462		30,489		28,176		29,813
Net fee income		11,874		12,023		12,620		12,811		12,777
Net income from financial instruments held for trading or managed on a fair value basis		9,582		10,231		9,531		8,426		7,521
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		2,081		3,478		(1,488)		2,836		1,262
Change in fair value of designated debt and related derivatives	1	231		90		(97)		155		(1,997)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		455		812		695		N/A		N/A
Gains less losses from financial investments		653		335		218		1,150		1,385
Net insurance premium income		10,093		10,636		10,659		9,779		9,951
Other operating income/(expense)		527		2,957		960		443		(876)
Total operating income		63,074		71,024		63,587		63,776		59,836
Net insurance claims and benefits paid and movement in liabilities to policyholders		(12,645)		(14,926)		(9,807)		(12,331)		(11,870)
Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions	2	50,429		56,098		53,780		51,445		47,966
Change in expected credit losses and other credit impairment charges		(8,817)		(2,756)		(1,767)		N/A		N/A
Loan impairment charges and other credit risk provisions		N/A		N/A		N/A		(1,769)		(3,400)
Net operating income		41,612		53,342		52,013		49,676		44,566
Total operating expenses excluding impairment of goodwill and other intangible assets		(33,044)		(34,955)		(34,622)		(34,849)		(36,416)
Impairment of goodwill and other intangible assets		(1,388)		(7,394)		(37)		(35)		(3,392)
Operating profit		7,180		10,993		17,354		14,792		4,758
Share of profit in associates and joint ventures		1,597		2,354		2,536		2,375		2,354
Profit before tax		8,777		13,347		19,890		17,167		7,112
Tax expense		(2,678)		(4,639)		(4,865)		(5,288)		(3,666)
Profit for the year		6,099		8,708		15,025		11,879		3,446
Attributable to:
-  ordinary shareholders of the parent company		3,898		5,969		12,608		9,683		1,299
-  preference shareholders of the parent company		90		90		90		90		90
-  other equity holders		1,241		1,324		1,029		1,025		1,090
-  non-controlling interests		870		1,325		1,298		1,081		967
Profit for the year		6,099		8,708		15,025		11,879		3,446

Five-year financial information
		2020		2019		2018		2017		2016
	Footnotes	$		$		$		$		$
Basic earnings per share		0.19		0.30		0.63		0.48		0.07
Diluted earnings per share		0.19		0.30		0.63		0.48		0.07
Dividends per ordinary share	3	-		0.51		0.51		0.51		0.51
		%		%		%		%		%
Dividend payout ratio	4	-		172.2		81.0		106.3		728.6
Post-tax return on average total assets		0.2		0.3		0.6		0.5		0.1
Return on average ordinary shareholders' equity		2.3		3.6		7.7		5.9		0.8
Return on average tangible equity		3.1		8.4		8.6		6.8		2.6
Effective tax rate		30.5		34.8		24.5		30.8		51.5

1  The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.

2  Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions, also referred to as revenue.

3  Dividends recorded in the financial statements are dividends per ordinary share declared and paid in the period and are not dividends in respect of, or for, that period.

4  Dividends per ordinary share expressed as a percentage of basic earnings per share.
Unless stated otherwise, all tables in the Annual Report and Accounts 2020 are presented on a reported basis.

For a summary of our financial performance in 2020, see page 27.

For further financial performance data for each global business and geographical region, see pages 85 to 88 and 92 to 102 respectively. The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments', in Note 10: Segmental analysis on page 311.

Income statement commentary

The following commentary compares Group financial performance for the year ended 2020 with 2019.

Net interest income

		Year ended						Quarter ended
		31 Dec		31 Dec		31 Dec		31 Dec		30 Sep		31 Dec
		2020		2019		2018		2020		2020		2019
	Footnotes	$m		$m		$m		$m		$m		$m
Interest income		41,756		54,695		49,609		9,301		9,455		13,229
Interest expense		(14,178)		(24,233)		(19,120)		(2,682)		(3,005)		(5,575)
Net interest income		27,578		30,462		30,489		6,619		6,450		7,654
Average interest-earning assets		2,092,900		1,922,822		1,839,346		2,159,003		2,141,454		1,945,596
		%		%		%		%		%		%
Gross interest yield	1	2.00		2.84		2.70		1.71		1.76		2.70
Less: gross interest payable	1	(0.81)		(1.48)		(1.21)		(0.60)		(0.68)		(1.34)
Net interest spread	2	1.19		1.36		1.49		1.11		1.08		1.36
Net interest margin	3	1.32		1.58		1.66		1.22		1.20		1.56

1  Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA'). Gross interest payable is the average annualised interest cost as a percentage on average interest-bearing liabilities.

2  Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds.

3  Net interest margin is net interest income expressed as an annualised percentage of AIEA.   

Summary of interest income by type of asset
		2020						2019						2018
		Average balance		Interest income		Yield		Average balance		Interest income		Yield		Average balance		Interest income		Yield
		$m		$m		%		$m		$m		%		$m		$m		%
Short-term funds and loans and advances to banks		298,255		1,264		0.42		212,920		2,411		1.13		233,637		2,475		1.06
Loans and advances to customers		1,046,795		29,391		2.81		1,021,554		35,578		3.48		972,963		33,285		3.42
Reverse repurchase agreements - non-trading		221,901		1,819		0.82		224,942		4,690		2.08		205,427		3,739		1.82
Financial investments		463,542		8,143		1.76		417,939		10,705		2.56		386,230		9,166		2.37
Other interest-earning assets		62,407		1,139		1.83		45,467		1,311		2.88		41,089		944		2.30
Total interest-earning assets		2,092,900		41,756		2.00		1,922,822		54,695		2.84		1,839,346		49,609		2.70

Summary of interest expense by type of liability
		2020						2019						2018
		Average balance		Interest expense		Cost		Average balance		Interest expense		Cost		Average balance		Interest expense		Cost
	Footnotes	$m		$m		%		$m		$m		%		$m		$m		%
Deposits by banks	1	65,536		330		0.50		52,515		702		1.34		44,530		506		1.14
Customer accounts	2	1,254,249		6,478		0.52		1,149,483		11,238		0.98		1,138,620		8,287		0.73
Repurchase agreements - non-trading		125,376		963		0.77		160,850		4,023		2.50		161,204		3,409		2.11
Debt securities in issue - non-trading		219,610		4,944		2.25		211,229		6,522		3.09		183,434		5,675		3.09
Other interest-bearing liabilities		76,395		1,463		1.92		59,980		1,748		2.91		53,731		1,243		2.31
Total interest-bearing liabilities		1,741,166		14,178		0.81		1,634,057		24,233		1.48		1,581,519		19,120		1.21

1  Including interest-bearing bank deposits only.

2  Including interest-bearing customer accounts only.

Net interest income ('NII') for 2020 was $27.6bn, a decrease of $2.9bn or 9.5% compared with 2019. This reflected lower average market interest rates across the major currencies compared with 2019. This was partly offset by interest income associated with the increase in average interest-earning assets ('AIEA') of $170.1bn or 8.8%.

Excluding the favourable impact of significant items and the adverse effects of foreign currency translation differences, net interest income decreased by $2.7bn or 9%.

NII for the fourth quarter of 2020 was $6.6bn, down 13.5% year-on-year, and up 2.6% compared with the previous quarter. The year-on-year decrease was driven by the impact of lower market interest rates predominantly in Asia and North America. This was partly offset by higher NII from growth in AIEA, notably short-term funds and financial investments and predominantly in Asia and Europe. The increase compared with the previous quarter was mainly driven by lower rates on customer deposits and issued debt securities, which were partly offset by lower rates on AIEA.
 

Net interest margin ('NIM') for 2020 of 1.32% was 26 basis points ('bps') lower compared with 2019 as the reduction in the yield on AIEA of 84bps was partly offset by the fall in funding costs of average interest-bearing liabilities of 67bps. The decrease in NIM in 2020 included the favourable impacts of significant items and the adverse effects of foreign currency translation differences. Excluding this, NIM fell by 25bps.

NIM for the fourth quarter of 2020 was 1.22%, down 34bps year-on-year, and up 2bps compared with the previous quarter. The year-on-year decrease was mainly driven by Asia and caused by the impact of lower market interest rates. The increase compared with the previous quarter was driven by a reduction in funding costs of average interest-bearing liabilities of 8bps, which was partly offset by a reduction in the yield on AIEA of 5bps.

Interest income for 2020 of $41.8bn decreased by $12.9bn or 24%, primarily due to the lower average interest rates compared with 2019 as the yield on AIEA fell by 84bps. This was partly offset by income from balance sheet growth, predominantly in Asia and Europe. The balance sheet growth was driven by higher balances in short-term funds and loans and advances to banks and financial investments, which increased by $85.3bn and $45.6bn, respectively. The decrease in interest income included $0.2bn in relation to the favourable impact of significant items and $0.8bn from the adverse effects of foreign currency translation differences. Excluding these, interest income decreased by $12.3bn.

Interest income of $9.3bn in the fourth quarter of 2020 was down $3.9bn year-on-year, and down $0.2bn compared with the previous quarter. The year-on-year decrease was predominantly driven by the impact of lower market interest rates, predominantly in Asia and in North America, although partly offset by growth in AIEA, notably short-term funds and loans and advances to banks and financial investments. The small decrease compared with the previous quarter was mainly driven by reduced rates on financial investments and loans and advances to customers.

Interest expense for 2020 of $14.2bn decreased by $10.1bn or 41% compared with 2019. This reflected the decrease in funding costs of 67bps, mainly arising from lower interest rates paid on interest-bearing liabilities. This was partly offset by higher interest expense from growth in interest-bearing customer accounts, which increased by $104.8bn. The decrease in interest expense included the favourable effects of foreign currency translation differences of $0.5bn. Excluding this, interest expense decreased by $9.6bn.

Interest expense of $2.7bn in the fourth quarter of 2020 was down $2.9bn year-on-year, and down $0.3bn compared with the previous quarter. The year-on-year decrease was predominantly driven by the impact of lower market interest rates, partly offset by growth in interest-bearing customer accounts, which increased by $142.9bn. The small decrease compared with the previous quarter was mainly due to reduced funding costs on customer deposits and debt issuances.

Net fee income of $11.9bn was $0.1bn lower, reflecting reductions in WPB and CMB, partly offset by an increase in GBM.

In WPB, lower fee income reflected a reduction in account services, notably in the UK, due to lower customer activity. Income from credit cards also reduced, as customer spending activity fell across most markets, mainly in Hong Kong, the UK, MENA and the US. Fee income on unit trusts fell, mainly in Hong Kong. These decreases were partly offset by higher income from broking, primarily in Hong Kong, as volatility in the equity markets resulted in increased customer activity. Fee expenses fell as a result of reduced customer activity levels, mainly in cards.

In CMB, trade-related fee income fell, reflecting the reduction in global trade activity, notably in Hong Kong and the UK. Income also fell in remittances due to lower client activity.

In GBM, net fee income was higher, mainly from growth in underwriting fees in the US and the UK. Global custody and broking fees also rose as client activity and turnover of securities increased due to market volatility. These increases were partly offset by a reduction in fee income from credit facilities, notably in the UK, Hong Kong and the US.

Net income from financial instruments held for trading or managed on a fair value basis of $9.6bn was $0.6bn lower and included a loss of $0.3bn from asset disposals relating to our restructuring programme. This was partly offset by favourable fair value movements on non-qualifying hedges of $0.1bn and favourable debit value adjustments of $0.1bn.

The remaining reduction was primarily due to lower trading interest income, reflecting lower market rates. However, other trading income increased in GBM as elevated market volatility and wider spreads supported a strong performance in FICC.

Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss was a net income of $2.1bn, compared with a net income of $3.5bn in 2019. This decrease primarily reflected less favourable equity market performance, compared with 2019 in France and Hong Kong, due to the impact of the Covid-19 outbreak on the equity and unit trust assets supporting insurance and investment contracts. After large losses in the first quarter of 2020, there was a partial recovery in the remainder of the year, resulting in higher revenue in these subsequent quarters during 2020 compared with the equivalent quarters in 2019.

This adverse movement resulted in a corresponding movement in liabilities to policyholders and the present value of in-force long-term insurance business ('PVIF') (see 'Other operating income' below). This reflected the extent to which the policyholders and shareholders respectively participate in the investment performance of the associated assets.

Change in fair value of designated debt and related derivatives of $0.2bn was $0.1bn favourable compared with 2019. The movements were driven by the fall in interest rates between the periods, notably in US dollars and pounds sterling.

The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances and are managed in conjunction with interest rate swaps as part of our interest rate management strategy. These liabilities are discussed further on page 83.

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss of $0.5bn was $0.4bn lower compared with 2019. This primarily reflected adverse movements in equity markets due to the impact of the Covid-19 outbreak.

Gains less losses from financial investments of $0.7bn increased by $0.3bn, reflecting higher gains from the disposal of debt securities in Markets Treasury.

Net insurance premium income of $10.1bn was $0.5bn lower than in 2019, reflecting lower new business volumes, particularly in France and Hong Kong, partly offset by lower reinsurance arrangements in Hong Kong.

Other operating income of $0.5bn decreased by $2.4bn compared with 2019, primarily due to lower favourable changes in PVIF compared with 2019 (down $1.4bn) and also the non-recurrence of a $0.8bn dilution gain in 2019 following the merger of The Saudi British Bank ('SABB') with Alawwal bank in Saudi Arabia.

The change in PVIF included a reduction of $0.8bn due to assumption changes and experience variances, mainly in Hong Kong and France due to the effect of interest rate changes on the valuation of liabilities under insurance contracts. In addition, the value of new business written fell by $0.4bn, primarily in Hong Kong, as sales volumes decreased.

The reduction also reflected the non-recurrence of 2019 gains recognised in Argentina and Mexico.

Net insurance claims and benefits paid and movement in liabilities to policyholders was $2.3bn lower, primarily due to lower returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk. New business volumes were also lower, particularly in Hong Kong and France, partly offset by lower reinsurance arrangements in Hong Kong.

Changes in expected credit losses and other credit impairment charges ('ECL') of $8.8bn were $6.1bn higher compared with 2019 with increases in all global businesses.

The ECL charge in 2020 reflected a significant increase in stage 1 and stage 2 allowances, notably in the first half of the year, to reflect the deterioration in the forward economic outlook globally as a result of the Covid-19 outbreak. The economic outlook stabilised in the second half of 2020 and as a result stage 1 and stage 2 allowances were broadly unchanged at 31 December 2020, compared with 30 June 2020. Stage 3 charges also increased compared with 2019, largely against wholesale exposures, including a significant charge related to a CMB client in Singapore in the first quarter of 2020.

Excluding currency translation differences, ECL as a percentage of average gross loans and advances to customers was 0.81%, compared with 0.25% in 2019.

The estimated impact of the Covid-19 outbreak was incorporated in the ECL through additional scenario analysis, which considered differing severity and duration assumptions relating to the global pandemic. These included probability-weighted shocks to annual GDP and consequential impacts on unemployment and other economic variables, with differing economic recovery assumptions. Given the severity of the macroeconomic projections, and the complexities of the government measures, which have never been modelled, additional judgemental adjustments have been made to our provisions.

While we expect the full year ECL charge for 2021 to be materially lower than in 2020, the outlook is highly uncertain and remains dependent on the future path of the Covid-19 outbreak, including the successful deployment of mass vaccination programmes, and the credit quality of our loan portfolio as government support packages are gradually withdrawn.

For further details on the calculation of ECL, including the measurement uncertainties and significant judgements applied to such calculations, the impact of alternative/additional scenarios and management judgemental adjustments, see pages 127 to 135.

Operating expenses - currency translation and significant items
	2020		2019
	$m		$m
Significant items	2,973		9,607
-  costs of structural reform1	-		158
-  customer redress programmes	(54)		1,281
-  impairment of goodwill and other intangibles	1,090		7,349
-  past service costs of guaranteed minimum pension benefits equalisation	17		-
-  restructuring and other related costs2	1,908		827
-  settlements and provisions in connection with legal and regulatory matters	12		(61)
-  currency translation on significant items			53
Currency translation			223
Year ended 31 Dec	2,973		9,830

1  Comprises costs associated with preparations for the UK's exit from the European Union.

2  Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment of tangible assets of $197m.

Staff numbers (full-time equivalents)
	2020		20191		20181
Global businesses
Wealth and Personal Banking	135,727		141,341		140,666
Commercial Banking	43,221		44,706		45,046
Global Banking and Markets	46,729		48,859		48,970
Corporate Centre	382		445		535
At 31 Dec	226,059		235,351		235,217

1  A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311.

Operating expenses of $34.4bn were $7.9bn lower than in 2019, primarily reflecting the net favourable movements in significant items of $6.6bn, which included:

• the non-recurrence of a $7.3bn impairment of goodwill in 2019, primarily related to lower long-term economic growth assumptions in GBM and CMB, and the planned reshaping of GBM. This compared with a $1.1bn impairment of goodwill and other intangibles in 2020, primarily capitalised software related to the businesses within HSBC Bank plc, and to a lesser extent our businesses in the US. These impairments reflected underperformance and a deterioration in the future forecasts of these businesses, and in the case of HSBC Bank plc substantially relating to prior periods; and

• customer redress programme costs, which were a net release of $0.1bn in 2020, compared with charges of $1.3bn in 2019. 

This was partly offset by:

• restructuring and other related costs of $1.9bn in 2020, of which $0.9bn related to severance, $0.2bn related to an impairment of software intangibles and $0.2bn related to the impairment of tangible assets in France and the US. This compared with restructuring and other related costs of $0.8bn in 2019.

The reduction also included favourable currency translation differences of $0.2bn.

The remaining reduction of $1.1bn reflected a $0.5bn decrease in performance-related pay and lower discretionary expenditure, including marketing (down $0.3bn) and travel costs (down $0.3bn). In addition, our cost-saving initiatives resulted in a reduction of $1.4bn, of which $1.0bn related to our costs to achieve programme, and the UK bank levy was $0.2bn lower than in 2019. These decreases were partly offset by an increase in investments in technology to enhance our digital and automation capabilities to improve how we serve our customers, as well as inflation and volume-related increases. In addition, the 2020 period included impairments of certain real estate assets.

During 2020, we reduced the number of employees expressed in full-time equivalent staff ('FTE') and contractors by 11,011. This included a 9,292 reduction in FTE to 226,059 at 31 December 2020, while the number of contractors reduced by 1,719 to 5,692 at 31 December 2020.

Share of profit in associates and joint ventures of $1.6bn was $0.8bn or 32% lower than in 2019, primarily reflecting our share of an impairment of goodwill by SABB of $0.5bn. This goodwill was recognised by SABB on the completion of its merger with Alawwal bank in 2019. The remaining reduction reflected a lower share of profit recognised from our associates in Asia and MENA due to the impact of the Covid-19 outbreak and the lower interest-rate environment.

At 31 December 2020, we performed an impairment review of our investment in BoCom and concluded that it was not impaired, based on our value-in-use ('VIU') calculations. However, the excess of the VIU of BoCom and its carrying value has reduced over the period, increasing the risk of impairment in the future.

For more information, see Note 18: Interests in associates and joint ventures on page 331.

Tax expense

The effective tax rate for 2020 of 30.5% was lower than the 34.8% effective tax rate for 2019. An impairment of goodwill and non-deductible customer redress charges increased the 2019 effective tax rate. These were not repeated in 2020. Additionally, the non-taxable dilution gain arising on the merger of SABB with Alawwal bank decreased the effective tax rate in 2019. Higher charges in respect of the non-recognition of deferred tax assets, particularly in the UK ($0.4bn) and France ($0.4bn), increased the 2020 effective tax rate.

Consolidated balance sheet

Five-year summary consolidated balance sheet
		2020		2019		2018		2017		2016
	Footnotes	$m		$m		$m		$m		$m
Assets
Cash and balances at central banks		304,481		154,099		162,843		180,624		128,009
Trading assets		231,990		254,271		238,130		287,995		235,125
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss		45,553		43,627		41,111		N/A		N/A
Financial assets designated at fair value		N/A		N/A		N/A		29,464		24,756
Derivatives		307,726		242,995		207,825		219,818		290,872
Loans and advances to banks		81,616		69,203		72,167		90,393		88,126
Loans and advances to customers	1	1,037,987		1,036,743		981,696		962,964		861,504
Reverse repurchase agreements - non-trading		230,628		240,862		242,804		201,553		160,974
Financial investments		490,693		443,312		407,433		389,076		436,797
Other assets		253,490		230,040		204,115		159,884		148,823
Total assets at 31 Dec		2,984,164		2,715,152		2,558,124		2,521,771		2,374,986
Liabilities and equity
Liabilities
Deposits by banks		82,080		59,022		56,331		69,922		59,939
Customer accounts		1,642,780		1,439,115		1,362,643		1,364,462		1,272,386
Repurchase agreements - non-trading		111,901		140,344		165,884		130,002		88,958
Trading liabilities		75,266		83,170		84,431		184,361		153,691
Financial liabilities designated at fair value		157,439		164,466		148,505		94,429		86,832
Derivatives		303,001		239,497		205,835		216,821		279,819
Debt securities in issue		95,492		104,555		85,342		64,546		65,915
Liabilities under insurance contracts		107,191		97,439		87,330		85,667		75,273
Other liabilities		204,019		194,876		167,574		113,690		109,595
Total liabilities at 31 Dec		2,779,169		2,522,484		2,363,875		2,323,900		2,192,408
Equity
Total shareholders' equity		196,443		183,955		186,253		190,250		175,386
Non-controlling interests		8,552		8,713		7,996		7,621		7,192
Total equity at 31 Dec		204,995		192,668		194,249		197,871		182,578
Total liabilities and equity at 31 Dec		2,984,164		2,715,152		2,558,124		2,521,771		2,374,986

1   Net of impairment allowances.

A more detailed consolidated balance sheet is contained in the financial statements on page 280.

Five-year selected financial information
		2020		2019		2018		2017		2016
	Footnotes	$m		$m		$m		$m		$m
Called up share capital		10,347		10,319		10,180		10,160		10,096
Capital resources	1	184,423		172,150		173,238		182,383		172,358
Undated subordinated loan capital		1,970		1,968		1,969		1,969		1,967
Preferred securities and dated subordinated loan capital	2	30,721		33,063		35,014		42,147		42,600
Risk-weighted assets		857,520		843,395		865,318		871,337		857,181
Total shareholders' equity		196,443		183,955		186,253		190,250		175,386
Less: preference shares and other equity instruments		(22,414)		(22,276)		(23,772)		(23,655)		(18,515)
Total ordinary shareholders' equity		174,029		161,679		162,481		166,595		156,871
Less: goodwill and intangible assets (net of tax)		(17,606)		(17,535)		(22,425)		(21,680)		(19,649)
Tangible ordinary shareholders' equity		156,423		144,144		140,056		144,915		137,222
Financial statistics
Loans and advances to customers as a percentage of customer accounts		63.2%		72.0%		72.0%		70.6%		67.7%
Average total shareholders' equity to average total assets		6.46%		6.97%		7.16%		7.33%		7.37%
Net asset value per ordinary share at year-end ($)	3	8.62		8.00		8.13		8.35		7.91
Tangible net asset value per ordinary share at year-end ($)		7.75		7.13		7.01		7.26		6.92
Tangible net asset value per fully diluted share at year-end ($)		7.72		7.11		6.98		7.22		6.88
Number of $0.50 ordinary shares in issue (millions)		20,694		20,639		20,361		20,321		20,192
Basic number of $0.50 ordinary shares outstanding (millions)		20,184		20,206		19,981		19,960		19,838
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)		20,272		20,280		20,059		20,065		19,933
Closing foreign exchange translation rates to $:
$1: £		0.732		0.756		0.783		0.740		0.811
$1: €		0.816		0.890		0.873		0.834		0.949

1   Capital resources are regulatory capital, the calculation of which is set out on page 173.

2   Including perpetual preferred securities, details of which can be found in Note 28: Subordinated liabilities on page 344.

3   The definition of net asset value per ordinary share is total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue, excluding own shares held by the company, including those purchased and held in treasury.

Balance sheet commentary compared with
31 December 2019

At 31 December 2020, our total assets were $3.0tn, an increase of $269bn or 10% on a reported basis and $200bn or 7% on a constant currency basis.

The increase in total assets primarily reflected growth in cash balances, derivative assets and financial investments.

On a reported basis, our ratio of customer advances to customer accounts was 63.2%, compared with 72.0% at 31 December 2019, mainly due to growth in customer accounts.

Assets

Cash and balances at central banks increased by $150bn or 98%, mainly in the UK, France, Hong Kong and North America, as a result of deposit inflows and an increase in the commercial surplus.

Trading assets decreased by $22bn or 9%, notably from a reduction in debt securities held, along with a reduction in bond positions previously used for hedging purposes.

Derivative assets increased by $65bn or 27%, primarily in the UK, France and Hong Kong, reflecting favourable revaluation movements on interest rate contracts as interest rates fell in most major markets. There was also an increase in foreign exchange contracts linked to valuation movements attributable to market conditions. The growth in derivative assets was consistent with the increase in derivative liabilities, as the underlying risk is broadly matched.

Loans and advances to customers of $1.0tn increased by $1bn on a reported basis. This included favourable foreign currency translation differences of $26bn. Excluding the effects of foreign currency translation differences, loans and advances to customers decreased by $25bn or 2%.

The commentary below is on a constant currency basis.

In GBM, customer lending was down $28bn or 11%, while in CMB customer lending was down $11bn or 3%. Despite significant growth in these businesses in the first quarter of 2020 from customers drawing down on credit facilities, balances subsequently reduced as customers made repayments in part due to the uncertain economic outlook.

In GBM, lower lending was mainly from decreases in term lending in Asia, Europe and the US, and also from a decrease in overdrafts in Europe.

In CMB, the decrease in customer lending reflected a reduction in other lending and overdrafts in Asia and North America. In Europe, lending remained relatively flat as lower other lending and overdrafts were almost entirely offset by a rise in term lending.

In WPB, lending increased by $14bn or 3%, notably from mortgage growth in the UK (up $12bn) and in Hong Kong (up $5bn). This was partly offset by a $6bn reduction in credit card balances and overdrafts as customer activity fell as a result of government measures to contain the outbreak of Covid-19.

Financial investments increased by $47bn or 11%, mainly as we redeployed our commercial surplus. We increased our holdings of debt securities and treasury bills and benefited from valuation gains resulting from interest rate reductions. The increases in financial investments were notably observed in Hong Kong, as we increased our holdings of government-issued bonds and bills. These increases were partly offset by lower holdings of debt securities in Canada.

Other assets increased by $23bn due to a $10bn increase in cash collateral balances, mainly in France and Hong Kong as underlying derivative balances grew. Additionally, there were increases in precious metals balances, mainly in the US as we grew our depository.

Liabilities

Customer accounts of $1.6tn increased by $204bn or 14% on a reported basis and included the favourable effect of foreign currency translation differences of $31bn. Excluding this, customer accounts increased by $173bn or 12%.

The commentary below is on a constant currency basis.

Customer accounts increased in all our global businesses and regions. In CMB, balances grew by $73bn, and in GBM, customer accounts increased by $33bn. These increases included the impact of corporate clients consolidating their funds and depositing these into their customer accounts to maintain liquidity, notably in the UK, Hong Kong and the US.

In WPB, customer account balances increased by $67bn, notably in the UK and Hong Kong, reflecting reduced customer spending resulting in larger balances held in current and savings accounts.

Repurchase agreements - non-trading decreased by $28bn or 20%, primarily in the US, in line with our actions to manage our funding requirements across the Group.

Derivative liabilities increased by $64bn or 27%, which is consistent with the increase in derivative assets, since the underlying risk is broadly matched.

Equity

Total shareholders' equity, including non-controlling interests, increased by $12bn or 6% compared with 31 December 2019, reflecting the effects of profits generated of $6.1bn combined with other comprehensive income ('OCI') of $8bn. OCI included fair value gains on debt instruments of $2bn, favourable remeasurement of defined benefit pension obligations of $1bn and foreign exchange differences of $5bn. These increases were partly offset by $2bn of coupon distributions on securities classified as equity and dividends paid by non-controlling interests.

Risk-weighted assets

Risk-weighted assets ('RWAs') totalled $857.5bn at 31 December 2020, a $14.1bn increase since 2019. Excluding foreign currency translation differences, RWAs increased by $1.0bn in 2020, and included the following movements:

• a $9.7bn asset size decrease, largely driven by RWA reductions in CMB and GBM under our transformation programme. This was partly offset by lending growth and increases in counterparty credit risk RWAs due to mark-to-market movements;

• a $24.5bn increase in RWAs due to changes in asset quality, mostly in CMB and GBM. This was largely due to credit migration in Asia, North America and Europe, partly offset by decreases due to portfolio mix changes; and

• a $14.2bn fall in RWAs due to changes in methodology and policy, mostly in GBM and CMB. This included reductions under management initiatives involving risk parameter refinements, improved collateral linkage, and data enhancement, and changes under the CRR 'Quick Fix' relief package. These reductions were partly offset by changes in approach to credit risk exposures.

From a global business perspective, primarily in GBM and CMB, increases from credit migration, lending growth, and market risk volatility were mitigated by reductions of $51.5bn as a result of our transformation programme.

Customer accounts by country/territory
	2020		2019
	$m		$m
Europe	629,647		528,718
-  UK	504,275		419,642
-  France	55,111		47,699
-  Germany	21,605		19,361
-  Switzerland	10,102		6,558
-  other	38,554		35,458
Asia	762,406		697,358
-  Hong Kong	531,489		499,955
-  Singapore	55,140		48,569
-  mainland China	56,826		48,323
-  Australia	29,286		23,191
-  India	20,199		14,935
-  Malaysia	15,997		14,624
-  Taiwan	16,041		14,668
-  Indonesia	5,198		4,732
-  other	32,230		28,361
Middle East and North Africa (excluding Saudi Arabia)	41,221		38,126
-  United Arab Emirates	20,974		17,949
-  Turkey	3,987		3,870
-  Egypt	5,659		5,186
-  other	10,601		11,121
North America	182,028		146,676
-  US	117,485		90,834
-  Canada	56,520		48,425
-  other	8,023		7,417
Latin America	27,478		28,237
-  Mexico	22,220		23,051
-  other	5,258		5,186
At 31 Dec	1,642,780		1,439,115

Loans and advances, deposits by currency
	At
	31 Dec 2020
$m	USD		GBP		HKD		EUR		CNY		Others1		Total
Loans and advances to banks	17,959		3,495		7,155		4,601		6,063		42,343		81,616
Loans and advances to customers	173,117		280,803		222,138		89,851		37,671		234,407		1,037,987
Total loans and advances	191,076		284,298		229,293		94,452		43,734		276,750		1,119,603
Deposits by banks	30,239		7,856		2,884		25,291		4,904		10,906		82,080
Customer accounts	433,647		431,143		310,197		135,851		60,971		270,971		1,642,780
Total deposits	463,886		438,999		313,081		161,142		65,875		281,877		1,724,860
	At
	31 Dec 2019
$m	USD		GBP		HKD		EUR		CNY		Others		Total
Loans and advances to banks	19,386		3,245		6,242		4,266		5,772		30,292		69,203
Loans and advances to customers	177,696		264,029		234,945		84,919		34,338		240,816		1,036,743
Total loans and advances	197,082		267,274		241,187		89,185		40,110		271,108		1,105,946
Deposits by banks	23,508		7,537		1,865		11,154		4,265		10,693		59,022
Customer accounts	360,462		358,764		299,049		122,988		52,216		245,636		1,439,115
Total deposits	383,970		366,301		300,914		134,142		56,481		256,329		1,498,137

1   'Others' includes items with no currency information available ($8,671m for loans to banks, $56,729m for loans to customers, $4m for deposits by banks and $5m for customer accounts).

Global businesses and geographical regions
	Page
Summary	89
Reconciliation of reported and adjusted items - global businesses	89
Reconciliation of reported and adjusted risk-weighted assets	93
Supplementary tables for WPB and GBM	93
Analysis of reported results by geographical regions	97
Reconciliation of reported and adjusted items - geographical regions	99
Analysis by country	105

.

Summary

The Group Chief Executive, supported by the rest of the Group Executive Committee ('GEC') (previously the Group Management

 

Board), reviews operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating Segments' and are presented in Note 10: Segmental analysis on page 311.

Geographical information is classified by the location of the principal operations of the subsidiary or, for The Hongkong and Shanghai Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank plc, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the branch responsible for reporting the results or providing funding.

The expense of the UK bank levy is included in the Europe geographical region as HSBC regards the levy as a cost of being headquartered in the UK. For the purposes of the presentation by global business, the cost of the levy is included in the Corporate Centre.

The results of geographical regions are presented on a reported basis.

Reconciliation of reported and adjusted items - global businesses

Supplementary unaudited analysis of significant items by global business is presented below.

		2020
		Wealth and Personal Banking		Commercial Banking		Global Banking and Markets		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		21,999		13,294		14,994		142		50,429
Significant items		14		18		309		(404)		(63)
-  customer redress programmes		5		16		-		-		21
-  disposals, acquisitions and investment in new businesses		9		-		-		1		10
-  fair value movements on financial instruments	2	-		1		2		(267)		(264)
-  restructuring and other related costs	3	-		1		307		(138)		170
Adjusted		22,013		13,312		15,303		(262)		50,366
ECL
Reported		(2,855)		(4,754)		(1,209)		1		(8,817)
Adjusted		(2,855)		(4,754)		(1,209)		1		(8,817)
Operating expenses
Reported		(15,446)		(6,900)		(10,169)		(1,917)		(34,432)
Significant items		422		211		905		1,435		2,973
-  customer redress programmes		(64)		1		-		9		(54)
-  impairment of goodwill and other intangibles		294		45		577		174		1,090
-  past service costs of guaranteed minimum pension benefits equalisation		-		-		-		17		17
-  restructuring and other related costs	4	192		165		326		1,225		1,908
-  settlements and provisions in connection with legal and regulatory matters		-		-		2		10		12
Adjusted		(15,024)		(6,689)		(9,264)		(482)		(31,459)
Share of profit in associates and joint ventures
Reported		6		(1)		-		1,592		1,597
Significant items		-		-		-		462		462
-  impairment of goodwill	5	-		-		-		462		462
Adjusted		6		(1)		-		2,054		2,059
Profit/(loss) before tax
Reported		3,704		1,639		3,616		(182)		8,777
Significant items		436		229		1,214		1,493		3,372
-  revenue		14		18		309		(404)		(63)
-  operating expenses		422		211		905		1,435		2,973
-  share of profit in associates and joint ventures		-		-		-		462		462
Adjusted		4,140		1,868		4,830		1,311		12,149
Loans and advances to customers (net)
Reported		469,186		343,182		224,364		1,255		1,037,987
Adjusted		469,186		343,182		224,364		1,255		1,037,987
Customer accounts
Reported		834,759		470,428		336,983		610		1,642,780
Adjusted		834,759		470,428		336,983		610		1,642,780

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3  Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

4  Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment of tangible assets of $197m.

5  During the year, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.

Reconciliation of reported and adjusted items (continued)
		20194
		Wealth and Personal Banking		Commercial Banking		Global Banking and Markets		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		25,552		15,256		14,894		396		56,098
Currency translation		(208)		(103)		(107)		(53)		(471)
Significant items		221		11		82		(997)		(683)
-  customer redress programmes		155		7		-		1		163
-  disposals, acquisitions and investment in new businesses		52		-		-		(820)		(768)
-  fair value movements on financial instruments	2	7		4		84		(179)		(84)
-  currency translation on significant items		7		-		(2)		1		6
Adjusted		25,565		15,164		14,869		(654)		54,944
ECL
Reported		(1,437)		(1,192)		(162)		35		(2,756)
Currency translation		89		30		9		1		129
Adjusted		(1,348)		(1,162)		(153)		36		(2,627)
Operating expenses
Reported		(17,351)		(9,905)		(13,790)		(1,303)		(42,349)
Currency translation		135		18		21		49		223
Significant items		1,828		3,055		4,225		499		9,607
-  costs of structural reform	3	-		4		42		112		158
-  customer redress programmes		1,264		17		-		-		1,281
-  goodwill impairment		431		2,956		3,962		-		7,349
-  restructuring and other related costs		180		51		217		379		827
-  settlements and provisions in connection with legal and regulatory matters		(69)		-		2		6		(61)
-  currency translation on significant items		22		27		2		2		53
Adjusted		(15,388)		(6,832)		(9,544)		(755)		(32,519)
Share of profit in associates and joint ventures
Reported		55		-		-		2,299		2,354
Currency translation		(1)		-		-		(2)		(3)
Adjusted		54		-		-		2,297		2,351
Profit before tax
Reported		6,819		4,159		942		1,427		13,347
Currency translation		15		(55)		(77)		(5)		(122)
Significant items		2,049		3,066		4,307		(498)		8,924
-  revenue		221		11		82		(997)		(683)
-  operating expenses		1,828		3,055		4,225		499		9,607
Adjusted		8,883		7,170		5,172		924		22,149
Loans and advances to customers (net)
Reported		443,025		346,105		246,492		1,121		1,036,743
Currency translation		12,593		7,676		5,639		45		25,953
Adjusted		455,618		353,781		252,131		1,166		1,062,696
Customer accounts
Reported		753,769		388,723		295,880		743		1,439,115
Currency translation		14,382		8,459		8,214		37		31,092
Adjusted		768,151		397,182		304,094		780		1,470,207

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3  Comprises costs associated with preparations for the UK's exit from the European Union.

4  A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311.

Reconciliation of reported and adjusted items (continued)
		20184
		Wealth and Personal Banking		Commercial Banking		Global Banking and Markets		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		24,232		14,889		15,754		(1,095)		53,780
Currency translation		(699)		(475)		(590)		(90)		(1,854)
Significant items		18		(40)		(108)		302		172
-  customer redress programmes		-		(53)		-		-		(53)
-  disposals, acquisitions and investment in new businesses		2		-		-		111		113
-  fair value movements on financial instruments	2	16		9		(112)		187		100
-  currency translation on significant items		-		4		4		4		12
Adjusted		23,551		14,374		15,056		(883)		52,098
ECL
Reported		(1,163)		(737)		26		107		(1,767)
Currency translation		91		54		8		(6)		147
Adjusted		(1,072)		(683)		34		101		(1,620)
Operating expenses
Reported		(15,522)		(6,563)		(9,512)		(3,062)		(34,659)
Currency translation		625		255		304		96		1,280
Significant items		283		1		(108)		1,480		1,656
-  costs of structural reform	3	2		8		41		310		361
-  customer redress programmes		172		(5)		(21)		-		146
-  disposals, acquisitions and investment in new businesses		52		-		-		-		52
-  past service costs of guaranteed minimum pension benefits equalisation		-		-		-		228		228
-  restructuring and other related costs		7		-		-		59		66
-  settlements and provisions in connection with legal and regulatory matters		58		-		(132)		890		816
-  currency translation on significant items		(8)		(2)		4		(7)		(13)
Adjusted		(14,614)		(6,307)		(9,316)		(1,486)		(31,723)
Share of profit in associates and joint ventures
Reported		33		-		-		2,503		2,536
Currency translation		(1)		-		-		(91)		(92)
Adjusted		32		-		-		2,412		2,444
Profit/(loss) before tax
Reported		7,580		7,589		6,268		(1,547)		19,890
Currency translation		16		(166)		(278)		(91)		(519)
Significant items		301		(39)		(216)		1,782		1,828
-  revenue		18		(40)		(108)		302		172
-  operating expenses		283		1		(108)		1,480		1,656
Adjusted		7,897		7,384		5,774		144		21,199
Loans and advances to customers (net)
Reported		401,268		333,400		245,525		1,503		981,696
Currency translation		17,963		11,455		7,794		96		37,308
Adjusted		419,231		344,855		253,319		1,599		1,019,004
Customer accounts
Reported		707,773		359,957		294,130		783		1,362,643
Currency translation		22,129		12,594		12,308		48		47,079
Adjusted		729,902		372,551		306,438		831		1,409,722

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3  Comprises costs associated with preparations for the UK's exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.

4  A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311.

Reconciliation of reported and adjusted risk-weighted assets

		At 31 Dec 2020
		Wealth and Personal Banking		Commercial Banking		Global Banking and Markets		Corporate Centre		Total
	Footnotes	$bn		$bn		$bn		$bn		$bn
Risk-weighted assets
Reported		172.8		327.7		265.1		91.9		857.5
Adjusted	1	172.8		327.7		265.1		91.9		857.5
		At 31 Dec 2019
Risk-weighted assets
Reported		162.6		325.9		273.4		81.5		843.4
Currency translation		2.0		6.6		3.4		0.5		12.5
Adjusted	1	164.6		332.5		276.8		82.0		855.9

		At 31 Dec 2018
Risk-weighted assets
Reported		161.8		331.8		297.9		73.8		865.3
Currency translation		2.2		10.3		4.4		0.6		17.5
Disposals		-		-		-		(0.8)		(0.8)
-  operations in Brazil		-		-		-		(0.8)		(0.8)
Adjusted	1	164.0		342.1		302.3		73.6		882.0

1  Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.

Supplementary tables for WPB and GBM

WPB adjusted performance by business unit

A breakdown of WPB by business unit is presented below to reflect the basis of how the revenue performance of the business units is assessed and managed.

WPB - summary (adjusted basis)
		Total WPB		Consists of1
				Banking operations		Insurance manufacturing		Global Private Banking		Asset management
	Footnotes	$m		$m		$m		$m		$m
2020
Net operating income before change in expected credit losses and other credit impairment charges	2	22,013		17,346		1,874		1,745		1,048
-  net interest income		15,090		12,181		2,241		670		(2)
-  net fee income/(expense)		5,408		4,094		(518)		828		1,004
-  other income		1,515		1,071		151		247		46
ECL		(2,855)		(2,707)		(80)		(67)		(1)
Net operating income		19,158		14,639		1,794		1,678		1,047
Total operating expenses		(15,024)		(12,422)		(479)		(1,390)		(733)
Operating profit		4,134		2,217		1,315		288		314
Share of profit in associates and joint ventures		6		5		1		-		-
Profit before tax		4,140		2,222		1,316		288		314
2019
Net operating income before change in expected credit losses and other credit impairment charges	2	25,565		20,024		2,639		1,878		1,024
-  net interest income		17,423		14,371		2,167		891		(6)
-  net fee income/(expense)		5,621		4,582		(717)		784		972
-  other income		2,521		1,071		1,189		203		58
ECL		(1,348)		(1,247)		(80)		(21)		-
Net operating income		24,217		18,777		2,559		1,857		1,024
Total operating expenses		(15,388)		(12,722)		(471)		(1,447)		(748)
Operating profit		8,829		6,055		2,088		410		276
Share of profit in associates and joint ventures		54		11		43		-		-
Profit before tax		8,883		6,066		2,131		410		276

WPB - summary (adjusted basis) (continued)
		Total WPB		Consists of1
				Banking operations		Insurance manufacturing		Global Private Banking		Asset management
	Footnotes	$m		$m		$m		$m		$m
2018
Net operating income before change in expected credit losses and other credit impairment charges	2	23,551		18,860		1,868		1,783		1,040
-  net interest income		16,418		13,477		2,060		884		(3)
-  net fee income/(expense)		5,774		4,594		(593)		743		1,030
-  other income		1,359		789		401		156		13
ECL		(1,072)		(1,079)		(1)		8		-
Net operating income		22,479		17,781		1,867		1,791		1,040
Total operating expenses		(14,614)		(12,023)		(437)		(1,449)		(705)
Operating profit		7,865		5,758		1,430		342		335
Share of profit in associates and joint ventures		32		1		31		-		-
Profit before tax		7,897		5,759		1,461		342		335

1  The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance operations. These eliminations are presented within Banking operations.

2  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue. WPB insurance manufacturing adjusted revenue of $1,874m (2019: $2,639m, 2018: $1,868m) was disclosed within the management view of adjusted revenue on page 31, as follows: Wealth Management $1,816m (2019: $2,464m, 2018: $1,621m) and Other $58m (2019: $175m, 2018: $247m).

WPB insurance manufacturing adjusted results

The following table shows the results of our insurance manufacturing operations by income statement line item. It shows

 

the results of insurance manufacturing operations for WPB and for all global business segments in aggregate, and separately the insurance distribution income earned by HSBC bank channels.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels1, 2
		2020				2019				2018
		WPB		All global businesses		WPB		All global businesses		WPB		All global businesses
	Footnotes	$m		$m		$m		$m		$m		$m
Net interest income		2,241		2,408		2,167		2,308		2,060		2,217
Net fee income/(expense)		(518)		(556)		(717)		(742)		(593)		(567)
-  fee income		110		131		108		130		186		277
-  fee expense		(628)		(687)		(825)		(872)		(779)		(844)
Net income from/(expenses) financial instruments held for trading or managed on a fair value basis		76		95		(82)		(82)		84		27
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		2,182		2,137		3,582		3,565		(1,600)		(1,627)
Gains less losses from financial investments		13		13		5		5		54		56
Net insurance premium income		9,717		10,212		10,398		10,763		10,280		10,824
Other operating income		336		351		1,789		1,805		796		783
Of which: PVIF		370		382		1,718		1,763		678		685
Total operating income		14,047		14,660		17,142		17,622		11,081		11,713
Net insurance claims and benefits paid and movement in liabilities to policyholders		(12,173)		(12,683)		(14,503)		(14,902)		(9,213)		(9,693)
Net operating income before change in expected credit losses and other credit impairment charges	3	1,874		1,977		2,639		2,720		1,868		2,020
Change in expected credit losses and other credit impairment charges		(80)		(92)		(80)		(86)		(1)		(1)
Net operating income		1,794		1,885		2,559		2,634		1,867		2,019
Total operating expenses		(479)		(509)		(471)		(497)		(437)		(462)
Operating profit		1,315		1,376		2,088		2,137		1,430		1,557
Share of profit in associates and joint ventures		1		1		43		43		31		31
Profit before tax of insurance manufacturing operations	4	1,316		1,377		2,131		2,180		1,461		1,588
Annualised new business premiums of insurance manufacturing operations		2,257		2,307		3,324		3,403		3,179		3,255
Insurance distribution income earned by HSBC bank channels		737		801		945		1,041		949		1,040

1  Adjusted results are derived by adjusting for year-on-year effects of foreign currency translation differences, and the effect of significant items that distort year-on-year comparisons. There are no significant items included within insurance manufacturing, and the impact of foreign currency translation on all global businesses' profit before tax is 2019: $45m favourable (reported: $2,135m), 2018: $15m favourable (reported: $1,573m).

2  The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance operations.

3  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

4  The effect on the insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in an increase in adjusted revenue in 2020 of $9m (2019: reduction of $1m, 2018: reduction of $8m) and an increase in profit before tax in 2020 of $12m (2019: increase of $1m, 2018: reduction of $3m). These effects are recorded within 'All global businesses'.

Insurance manufacturing

The following commentary, unless otherwise specified, relates to the 'All global businesses' results.

HSBC recognises the present value of long-term in-force insurance contracts and investment contracts with discretionary participation features ('PVIF') as an asset on the balance sheet. The overall balance sheet equity, including PVIF, is therefore a measure of the embedded value in the insurance manufacturing entities, and the movement in this embedded value in the period drives the overall income statement result.

Adjusted profit before tax of $1.4bn decreased by $0.8bn or 37% compared with 2019.

Net operating income before change in expected credit losses and other credit impairment changes was $0.7bn or 27% lower than in 2019. This reflected the following:

• 'Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss' of $2.1bn in 2020 compared with $3.6bn in 2019. This decrease primarily reflected less favourable equity market performance, compared with 2019 in France and Hong Kong, due to the impact of the Covid-19 outbreak on the equity and unit trust assets supporting insurance and investment contracts. While there was strong investment performance within the portfolio in light of volatile markets during the year, the overall fair value gains were lower compared with 2019.

This adverse movement resulted in a corresponding movement in liabilities to policyholders and PVIF (see 'Other operating income' below). This reflected the extent to which policyholders and shareholders respectively participate in the investment performance of the associated assets.

• Net insurance premium income of $10.2bn was $0.6bn lower than in 2019, primarily reflecting lower new business volumes due to the Covid-19 outbreak, particularly in France and Hong Kong, partly offset by lower reinsurance premiums ceded in Hong Kong.

• Other operating income of $0.4bn decreased by $1.5bn compared with 2019, mainly from adverse movements in PVIF. This included a reduction of $0.8bn due to assumption changes and experience variances, mainly in Hong Kong and France due to the effect of interest rate changes. In addition, the value of new business written fell by $0.4bn, primarily in Hong Kong, as sales volumes decreased.

• Net insurance claims and benefits paid and movement in liabilities to policyholders was $2.2bn lower, primarily due to lower returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk. New business volumes were lower, particularly in Hong Kong and France, partly offset by lower reinsurance arrangements in Hong Kong.

• Change in expected credit losses and other credit impairment charges ('ECL') of $92m was $6m higher compared with 2019, mainly from charges relating to the global impact of the Covid-19 outbreak on the forward economic outlook, partly offset by the ECL release on Argentina sovereign exposure due to the debt restructure in 2020.

Adjusted operating expenses of $0.5bn increased by 2% compared with 2019, reflecting investments in core insurance functions and capabilities during the period.

Annualised new business premiums ('ANP') is used to assess new insurance premium generation by the business. It is calculated as 100% of annualised first year regular premiums and 10% of single premiums, before reinsurance ceded. Lower ANP during the period reflected a reduction in new business volumes, mainly in Hong Kong and France.

Insurance distribution income from HSBC channels included $470m (2019: $658m; 2018: $644m) on HSBC manufactured products, for which a corresponding fee expense is recognised within insurance manufacturing, and $331m (2019: $382m; 2018: $397m) on products manufactured by third-party providers. The WPB component of this distribution income was $423m (2019: $583m; 2018: $575m) from HSBC manufactured products and $314m (2019: $362m; 2018: $374m) from third-party products.

WPB: Client assets and funds under management

The following table shows the client assets and funds under management, including self-directed client investments and execution-only trades, across our WPB global business. Funds under management represents assets managed, either actively or passively, on behalf of our customers.  

WPB - reported client assets and funds under management1
	2020		2019
	$bn		$bn
Global Private Banking client assets	394		361
-  managed by Global Asset Management	66		61
-  external managers, direct securities and other	328		300
Retail wealth balances	407		380
-  managed by Global Asset Management	219		199
-  external managers, direct securities and other	188		181
Asset Management third-party distribution	317		247
Closing balance	1,118		988

1  Client assets and funds distributed and under management are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager. Customer deposits included in client assets are on balance sheet.

WPB wealth balances

The following table shows the consolidated areas of focus across all WPB wealth balances.

WPB wealth balances
	2020		2019
	$bn		$bn
Client assets and funds under management	1,118		988
Premier and Jade deposits1	470		433
Total	1,588		1,421

1  Premier and Jade deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts balance of $835bn on page 85 (31 December 2019: $754bn).

Asset Management: Funds under management

The following table shows the funds under management of our Asset Management business. Funds under management represents assets managed, either actively or passively, on behalf of our customers. Funds under management are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager.  

Asset Management - reported funds under management
	2020		2019		2018
	$bn		$bn		$bn
Opening balance	506		444		462
Net new money	53		30		8
Value change	17		30		(14)
Exchange and other	26		2		(12)
Closing balance	602		506		444
Asset Management - reported funds under management by geography
	2020		2019		2018
	$bn		$bn		$bn
Europe	346		287		235
Asia	176		161		164
MENA	6		6		2
North America	65		44		36
Latin America	9		8		7
Closing balance	602		506		444

At 31 December 2020, Asset Management funds under management amounted to $602bn, an increase of $96bn or 19%. The increase reflected strong net new money, primarily from money market funds and passive investment products. In addition, the growth reflected positive market performance and favourable foreign exchange translation.  

Global Private Banking: client assets

The following table shows the client assets of our Global Private Banking business which are translated at the rates of exchange applicable for their respective year-ends, with the effects of currency translation reported separately .

Global Private Banking - reported client assets1
	2020		2019		2018
	$bn		$bn		$bn
At 1 Jan	361		309		330
Net new money	6		23		10
Value change	6		23		(17)
Disposals	-		-		-
Exchange and other	21		6		(14)
At 31 Dec	394		361		309

Global Private Banking - reported client assets by geography1
	2020		2019		2018
	$bn		$bn		$bn
Europe	174		171		149
Asia	176		151		124
North America	44		39		36
At 31 Dec	394		361		309

1  Client assets are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager. Customer deposits included in these client assets are on balance sheet.

GBM: Securities Services and Issuer Services

Assets held in custody

Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. Assets held in custody are not reported on the Group's balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager . At 31 December 2020, we held $10.0tn of assets as custodian, 17% higher than at 31 December 2019. This increase was driven by favourable market movements and the effect of currency translation differences globally. In addition, there were increases from new client asset inflows, notably in Asia.

 

Assets under administration

Our assets under administration business, which includes the provision of bond and loan administration services, transfer agency services and the valuation of portfolios of securities and other financial assets on behalf of clients, complements the custody business. At 31 December 2020, the value of assets held under administration by the Group amounted to $4.5tn, which was 13% higher than at 31 December 2019. This increase was mainly driven by the favourable effect of currency translation differences in Europe and favourable market movements globally. It also included increases from the onboarding of new client assets, notably in Europe.

Analysis of reported results by geographical regions

HSBC reported profit/(loss) before tax and balance sheet data
		2020
		Europe		Asia		MENA		North America		Latin America		Intra-HSBC		Total
	Footnotes	$m		$m		$m		$m		$m		$m		$m
Net interest income		5,695		14,318		1,465		2,836		1,960		1,304		27,578
Net fee income		3,499		5,418		695		1,795		467		-		11,874
Net income from financial instruments held for trading or managed on a fair value basis		3,266		4,273		402		997		593		51		9,582
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		327		1,699		-		-		55		-		2,081
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		1,747		17		3		2		40		(1,354)		455
Other income/(expense)	1	3,885		1,197		63		745		(95)		(6,936)		(1,141)
Net operating income before change in expected credit losses and other credit impairment charges	2	18,419		26,922		2,628		6,375		3,020		(6,935)		50,429
Change in expected credit losses and other credit impairment charges		(3,751)		(2,284)		(758)		(900)		(1,124)		-		(8,817)
Net operating income		14,668		24,638		1,870		5,475		1,896		(6,935)		41,612
Total operating expenses excluding impairment of goodwill and other intangible assets		(17,860)		(13,584)		(1,521)		(5,081)		(1,933)		6,935		(33,044)
Impairment of goodwill and other intangible assets		(1,014)		(78)		(65)		(226)		(5)		-		(1,388)
Operating profit/(loss)		(4,206)		10,976		284		168		(42)		-		7,180
Share of profit/(loss) in associates and joint ventures		1		1,856		(265)		-		5		-		1,597
Profit/(loss) before tax		(4,205)		12,832		19		168		(37)		-		8,777
		%		%		%		%		%				%
Share of HSBC's profit before tax		(47.9)		146.2		0.2		1.9		(0.4)				100.0
Cost efficiency ratio		102.5		50.7		60.4		83.2		64.2				68.3
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		408,495		473,165		28,700		107,969		19,658		-		1,037,987
Total assets		1,416,111		1,206,404		68,860		373,167		49,703		(130,081)		2,984,164
Customer accounts		629,647		762,406		41,221		182,028		27,478		-		1,642,780
Risk-weighted assets	3	284,322		384,228		60,181		117,755		35,240		-		857,520
		2019
Net interest income		5,601		16,607		1,781		3,241		2,061		1,171		30,462
Net fee income		3,668		5,325		685		1,804		540		1		12,023
Net income from financial instruments held for trading or managed on a fair value basis		3,785		4,735		327		873		883		(372)		10,231
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		1,656		1,803		-		-		14		5		3,478
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		1,516		28		1		31		41		(805)		812
Other income/(expense)	1	1,830		1,921		916		638		(23)		(6,190)		(908)
Net operating income before change in expected credit losses and other credit impairment charges	2	18,056		30,419		3,710		6,587		3,516		(6,190)		56,098
Change in expected credit losses and other credit impairment charges		(938)		(724)		(117)		(237)		(740)		-		(2,756)
Net operating income		17,118		29,695		3,593		6,350		2,776		(6,190)		53,342
Total operating expenses excluding impairment of goodwill and other intangible assets		(19,209)		(13,284)		(1,452)		(5,150)		(2,050)		6,190		(34,955)
Impairment of goodwill and other intangible assets		(2,550)		(13)		(97)		(433)		(339)		(3,962)		(7,394)
Operating profit/(loss)		(4,641)		16,398		2,044		767		387		(3,962)		10,993
Share of profit/(loss) in associates and joint ventures		(12)		2,070		283		-		13		-		2,354
Profit/(loss) before tax		(4,653)		18,468		2,327		767		400		(3,962)		13,347
		%		%		%		%		%				%
Share of HSBC's profit before tax		(34.9)		138.4		17.4		5.7		3.0		(29.6)		100.0
Cost efficiency ratio		120.5		43.7		41.8		84.8		67.9				75.5
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		393,850		477,727		28,556		113,474		23,136		-		1,036,743
Total assets		1,248,205		1,102,805		65,369		377,095		52,879		(131,201)		2,715,152
Customer accounts		528,718		697,358		38,126		146,676		28,237		-		1,439,115
Risk-weighted assets	3	280,983		366,375		57,492		121,953		38,460		-		843,395
HSBC reported profit/(loss) before tax and balance sheet data (continued)
		2018
		Europe		Asia		MENA		North America		Latin America		Intra-HSBC items		Total
	Footnotes	$m		$m		$m		$m		$m		$m		$m
Net interest income		6,841		16,108		1,763		3,521		2,020		236		30,489
Net fee income		3,996		5,676		607		1,854		498		(11)		12,620
Net income from financial instruments held for trading or managed on a fair value basis		3,942		4,134		285		728		736		(294)		9,531
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		(789)		(717)		-		-		18		-		(1,488)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		601		(26)		(1)		36		27		58		695
Other income/(expense)	1	3,113		3,609		33		586		(237)		(5,171)		1,933
Net operating income before loan impairment (charges)/recoveries and other credit risk provisions	2	17,704		28,784		2,687		6,725		3,062		(5,182)		53,780
Change in expected credit losses and other credit impairment (charges)/recoveries		(609)		(602)		(209)		223		(570)		-		(1,767)
Net operating income		17,095		28,182		2,478		6,948		2,492		(5,182)		52,013
Total operating expenses excluding impairment of goodwill and other intangible assets		(17,912)		(12,449)		(1,357)		(6,151)		(1,935)		5,182		(34,622)
Impairment of goodwill and other intangible assets		(22)		(17)		-		2		-		-		(37)
Operating profit/(loss)		(839)		15,716		1,121		799		557		-		17,354
Share of profit  in associates and joint ventures		24		2,074		436		-		2		-		2,536
Profit/(loss) before tax		(815)		17,790		1,557		799		559		-		19,890
		%		%		%		%		%				%
Share of HSBC's profit before tax		(4.1)		89.5		7.8		4.0		2.8				100.0
Cost efficiency ratio		101.3		43.3		50.5		91.4		63.2				64.4
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		373,073		450,545		28,824		108,146		21,108		-		981,696
Total assets		1,150,235		1,047,636		57,455		390,410		51,923		(139,535)		2,558,124
Customer accounts		503,154		664,824		35,408		133,291		25,966		-		1,362,643
Risk-weighted assets	3	298,056		363,894		56,689		131,582		38,341		-		865,318

1  'Other income/(expense)' in this context comprises where applicable net income/expense from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.

2  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

3  Risk-weighted assets are non-additive across geographical regions due to market risk diversification effects within the Group.

Reconciliation of reported and adjusted items - geographical regions

Reconciliation of reported and adjusted items
		2020
		Europe		Asia		MENA		North America		Latin America		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported	2	18,419		26,922		2,628		6,375		3,020		50,429
Significant items		(242)		(37)		-		43		(3)		(63)
-  customer redress programmes		21		-		-		-		-		21
-  disposals, acquisitions and investment in new businesses		-		-		-		10		-		10
-  fair value movements on financial instruments	3	(254)		(5)		-		(2)		(3)		(264)
-  restructuring and other related costs	2,4	(9)		(32)		-		35		-		170
Adjusted	2	18,177		26,885		2,628		6,418		3,017		50,366
ECL
Reported		(3,751)		(2,284)		(758)		(900)		(1,124)		(8,817)
Adjusted		(3,751)		(2,284)		(758)		(900)		(1,124)		(8,817)
Operating expenses
Reported	2	(18,874)		(13,662)		(1,586)		(5,307)		(1,938)		(34,432)
Significant items		2,203		171		83		601		91		2,973
-  customer redress programmes		(54)		-		-		-		-		(54)
-  impairment of goodwill and other intangibles		803		-		64		223		-		1,090
-  past service costs of guaranteed minimum pension benefits equalisation		17		-		-		-		-		17
-  restructuring and other related costs	2,5	1,425		171		19		378		91		1,908
-  settlements and provisions in connection with legal and regulatory matters		12		-		-		-		-		12
Adjusted	2	(16,671)		(13,491)		(1,503)		(4,706)		(1,847)		(31,459)
Share of profit/(loss) in associates and joint ventures
Reported		1		1,856		(265)		-		5		1,597
Significant items		-		-		462		-		-		462
-  impairment of goodwill	6	-		-		462		-		-		462
Adjusted		1		1,856		197		-		5		2,059
Profit/(loss) before tax
Reported		(4,205)		12,832		19		168		(37)		8,777
Significant items		1,961		134		545		644		88		3,372
-  revenue	2	(242)		(37)		-		43		(3)		(63)
-  operating expenses	2	2,203		171		83		601		91		2,973
-  share of profit in associates and joint ventures		-		-		462		-		-		462
Adjusted		(2,244)		12,966		564		812		51		12,149
Loans and advances to customers (net)
Reported		408,495		473,165		28,700		107,969		19,658		1,037,987
Adjusted		408,495		473,165		28,700		107,969		19,658		1,037,987
Customer accounts
Reported		629,647		762,406		41,221		182,028		27,478		1,642,780
Adjusted		629,647		762,406		41,221		182,028		27,478		1,642,780

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Amounts are non-additive across geographical regions due to inter-company transactions within the Group.

3  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

4   Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

5  Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment of tangible assets of $197m.

6  During the year, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in 2019. HSBC's post-tax share of the goodwill impairment was $462m.

Reconciliation of reported and adjusted items (continued)
		2020
		UK		Hong Kong		Mainland China		US		Mexico
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		13,886		16,345		3,088		4,590		2,234
Significant items		(187)		15		(5)		41		(13)
-  customer redress programmes		21		-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		10		-
-  fair value movements on financial instruments	2	(256)		-		(1)		(2)		(1)
-  restructuring and other related costs	3	48		15		(4)		33		(12)
Adjusted		13,699		16,360		3,083		4,631		2,221
ECL
Reported		(3,256)		(824)		(114)		(622)		(1,050)
Adjusted		(3,256)		(824)		(114)		(622)		(1,050)
Operating expenses
Reported		(14,855)		(7,312)		(2,211)		(4,194)		(1,376)
Significant items		1,318		100		19		556		42
-  customer redress programmes		(54)		-		-		-		-
-  impairment of goodwill and other intangibles		650		-		-		223		-
-  past service costs of guaranteed minimum pension benefits equalisation		17		-		-		-		-
-  restructuring and other related costs		693		100		19		333		42
-  settlements and provisions in connection with legal and regulatory matters		12		-		-		-		-
Adjusted		(13,537)		(7,212)		(2,192)		(3,638)		(1,334)
Share of profit/(loss) in associates and joint ventures
Reported		1		(2)		1,849		-		5
Significant items		-		-		-		-		-
-  impairment of goodwill		-		-		-		-		-
Adjusted		1		(2)		1,849		-		5
Profit/(loss) before tax
Reported		(4,224)		8,207		2,612		(226)		(187)
Significant items		1,131		115		14		597		29
-  revenue		(187)		15		(5)		41		(13)
-  operating expenses		1,318		100		19		556		42
-  share of profit in associates and joint ventures		-		-		-		-		-
Adjusted		(3,093)		8,322		2,626		371		(158)
Loans and advances to customers (net)
Reported		314,530		302,454		46,113		58,082		17,296
Adjusted		314,530		302,454		46,113		58,082		17,296
Customer accounts
Reported		504,275		531,489		56,826		117,485		22,220
Adjusted		504,275		531,489		56,826		117,485		22,220

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3  Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.

 

Reconciliation of reported and adjusted items (continued)
		2019
		Europe		Asia		MENA		North America		Latin America		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported	2	18,056		30,419		3,710		6,587		3,516		56,098
Currency translation	2	125		34		(26)		(17)		(613)		(471)
Significant items		30		35		(826)		68		10		(683)
-  customer redress programmes		163		-		-		-		-		163
-  disposals, acquisitions and investment in new businesses		-		-		(828)		59		1		(768)
-  fair value movements on financial instruments	3	(137)		35		-		9		9		(84)
-  currency translation on significant items		4		-		2		-		-		6
Adjusted	2	18,211		30,488		2,858		6,638		2,913		54,944
ECL
Reported		(938)		(724)		(117)		(237)		(740)		(2,756)
Currency translation		(2)		-		2		-		129		129
Adjusted		(940)		(724)		(115)		(237)		(611)		(2,627)
Operating expenses
Reported	2,5	(21,759)		(13,297)		(1,549)		(5,583)		(2,389)		(42,349)
Currency translation	2	(166)		25		28		11		351		223
Significant items	5	4,495		126		112		543		369		9,607
-  costs of structural reform	4	154		4		-		-		-		158
-  customer redress programmes		1,281		-		-		-		-		1,281
-  goodwill impairment	5	2,522		-		97		431		337		7,349
-  restructuring and other related costs		538		123		15		113		38		827
-  settlements and provisions in connection with legal and regulatory matters		(60)		(1)		-		-		-		(61)
-  currency translation on significant items		60		-		-		(1)		(6)		53
Adjusted	5	(17,430)		(13,146)		(1,409)		(5,029)		(1,669)		(32,519)
Share of profit/(loss) in associates and joint ventures
Reported		(12)		2,070		283		-		13		2,354
Currency translation		-		(1)		-		-		(2)		(3)
Adjusted		(12)		2,069		283		-		11		2,351
Profit/(loss) before tax
Reported	5	(4,653)		18,468		2,327		767		400		13,347
Currency translation	5	(43)		58		4		(6)		(135)		(122)
Significant items		4,525		161		(714)		611		379		8,924
-  revenue		30		35		(826)		68		10		(683)
-  operating expenses		4,495		126		112		543		369		9,607
Adjusted	5	(171)		18,687		1,617		1,372		644		22,149
Loans and advances to customers (net)
Reported		393,850		477,727		28,556		113,474		23,136		1,036,743
Currency translation		18,021		9,114		(537)		964		(1,609)		25,953
Adjusted		411,871		486,841		28,019		114,438		21,527		1,062,696
Customer accounts
Reported		528,718		697,358		38,126		146,676		28,237		1,439,115
Currency translation		22,977		10,172		(731)		979		(2,305)		31,092
Adjusted		551,695		707,530		37,395		147,655		25,932		1,470,207

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2   Amounts are non-additive across geographical regions due to inter-company transactions within the Group.

3  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

4  Comprises costs associated with preparations for the UK's exit from the European Union.

5  Amounts are non-additive across geographical regions due to goodwill impairment recognised on the Global Banking and Markets cash-generating unit, which is monitored on a global basis.

Reconciliation of reported and adjusted items (continued)
		2019
		UK		Hong Kong		Mainland China		US		Mexico
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		13,538		19,412		3,101		4,638		2,555
Currency translation		65		192		-		-		(256)
Significant items		29		26		1		66		7
-  customer redress programmes		162		-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		59		-
-  fair value movements on financial instruments	2	(139)		26		1		7		8
-  currency translation on significant items		6		-		-		-		(1)
Adjusted		13,632		19,630		3,102		4,704		2,306
ECL
Reported		(714)		(459)		(129)		(170)		(491)
Currency translation		(2)		(4)		-		-		49
Adjusted		(716)		(463)		(129)		(170)		(442)
Operating expenses
Reported		(16,157)		(6,935)		(2,111)		(4,033)		(1,390)
Currency translation		(63)		(66)		(5)		-		141
Significant items		1,805		65		6		93		18
-  costs of structural reform	3	101		4		-		-		-
-  customer redress programmes		1,281		-		-		-		-
-  restructuring and other related costs		405		61		6		93		20
-  settlements and provisions in connection with legal and regulatory matters		8		(1)		-		-		-
-  currency translation on significant items		10		1		-		-		(2)
Adjusted		(14,415)		(6,936)		(2,110)		(3,940)		(1,231)
Share of profit/(loss) in associates and joint ventures
Reported		(12)		31		2,016		-		13
Currency translation		-		1		1		-		(2)
Adjusted		(12)		32		2,017		-		11
Profit/(loss) before tax
Reported		(3,345)		12,049		2,877		435		687
Currency translation		-		123		(4)		-		(68)
Significant items		1,834		91		7		159		25
-  revenue		29		26		1		66		7
-  operating expenses		1,805		65		6		93		18
Adjusted		(1,511)		12,263		2,880		594		644
Loans and advances to customers (net)
Reported		303,041		306,964		42,380		63,588		20,426
Currency translation		9,925		1,403		2,802		-		(1,033)
Adjusted		312,966		308,367		45,182		63,588		19,393
Customer accounts
Reported		419,642		499,955		48,323		90,834		23,051
Currency translation		13,744		2,286		3,194		-		(1,166)
Adjusted		433,386		502,241		51,517		90,834		21,885

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3  Comprises costs associated with preparations for the UK's exit from the European Union.
 

Reconciliation of reported and adjusted items (continued)
		2018
		Europe		Asia		MENA		North America		Latin America		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported	2	17,704		28,784		2,687		6,725		3,062		53,780
Currency translation	2	(760)		(263)		(37)		(57)		(803)		(1,854)
Significant items		105		(35)		(1)		97		6		172
-  customer redress programmes		(53)		-		-		-		-		(53)
-  disposals, acquisitions and investment in new businesses		(5)		-		-		103		15		113
-  fair value movements on financial investments	3	156		(38)		(1)		(8)		(9)		100
-  currency translation on significant items		7		3		-		2		-		12
Adjusted	2	17,049		28,486		2,649		6,765		2,265		52,098
ECL
Reported		(609)		(602)		(209)		223		(570)		(1,767)
Currency translation		5		6		17		(2)		121		147
Adjusted		(604)		(596)		(192)		221		(449)		(1,620)
Operating expenses
Reported	2	(17,934)		(12,466)		(1,357)		(6,149)		(1,935)		(34,659)
Currency translation	2	530		185		47		33		551		1,280
Significant items		664		16		-		976		-		1,656
-  costs of structural reform	4	352		9		-		-		-		361
-  customer redress programmes		146		-		-		-		-		146
-  disposals, acquisitions and investment in new businesses		52		-		-		-		-		52
-  past service costs of guaranteed minimum pension benefits equalisation		228		-		-		-		-		228
-  restructuring and other related costs		46		7		-		13		-		66
-  settlements and provisions in connection with legal and regulatory matters		(147)		-		-		963		-		816
-  currency translation on significant items		(13)		-		-		-		-		(13)
Adjusted	2	(16,740)		(12,265)		(1,310)		(5,140)		(1,384)		(31,723)
Share of profit in associates and joint ventures
Reported		24		2,074		436		-		2		2,536
Currency translation		(1)		(90)		-		-		(1)		(92)
Adjusted		23		1,984		436		-		1		2,444
Profit/(loss) before tax
Reported		(815)		17,790		1,557		799		559		19,890
Currency translation		(226)		(162)		27		(26)		(132)		(519)
Significant items		769		(19)		(1)		1,073		6		1,828
-  revenue		105		(35)		(1)		97		6		172
-  operating expenses		664		16		-		976		-		1,656
Adjusted		(272)		17,609		1,583		1,846		433		21,199
Loans and advances to customers (net)
Reported		373,073		450,545		28,824		108,146		21,108		981,696
Currency translation		26,141		10,289		(521)		2,957		(1,558)		37,308
Adjusted		399,214		460,834		28,303		111,103		19,550		1,019,004
Customer accounts
Reported		503,154		664,824		35,408		133,291		25,966		1,362,643
Currency translation		34,940		12,491		(632)		3,094		(2,814)		47,079
Adjusted		538,094		677,315		34,776		136,385		23,152		1,409,722

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2   Amounts are non-additive across geographical regions due to inter-company transactions within the Group.

3  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

4  Comprises costs associated with preparations for the UK's exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.

 

Reconciliation of reported and adjusted items (continued)
		2018
		UK		Hong Kong		Mainland China		US		Mexico
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		13,597		18,231		2,888		4,741		2,294
Currency translation		(616)		191		(120)		-		(232)
Significant items		115		5		(1)		97		(7)
-  customer redress programmes		(53)		-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		103		-
-  fair value movements on financial instruments	2	162		5		(1)		(6)		(7)
-  currency translation on significant items		6		-		-		-		-
Adjusted		13,096		18,427		2,767		4,838		2,055
ECL
Reported		(516)		(214)		(143)		199		(463)
Currency translation		4		(3)		1		-		45
Adjusted		(512)		(217)		(142)		199		(418)
Operating expenses
Reported		(14,502)		(6,539)		(1,920)		(4,987)		(1,303)
Currency translation		425		(69)		76		-		131
Significant items		519		16		-		919		-
-  costs of structural reform	3	294		9		-		-		-
-  customer redress programmes		146		-		-		-		-
-  past service costs of guaranteed minimum pension benefits equalisation		228		-		-		-		-
-  restructuring and other related costs		39		7		-		11		-
-  settlements and provisions in connection with legal and regulatory matters		(176)		-		-		908		-
-  currency translation on significant items		(12)		-		-		-		-
Adjusted		(13,558)		(6,592)		(1,844)		(4,068)		(1,172)
Share of profit in associates and joint ventures
Reported		25		36		2,033		-		-
Currency translation		(1)		-		(90)		-		-
Adjusted		24		36		1,943		-		-
Profit/(loss) before tax
Reported		(1,396)		11,514		2,858		(47)		528
Currency translation		(188)		119		(133)		-		(56)
Significant items		634		21		(1)		1,016		(7)
-  revenue		115		5		(1)		97		(7)
-  operating expenses		519		16		-		919		-
Adjusted		(950)		11,654		2,724		969		465
Loans and advances to customers (net)
Reported		287,144		290,547		38,979		64,011		17,895
Currency translation		19,928		2,945		2,068		-		(180)
Adjusted		307,072		293,492		41,047		64,011		17,715
Customer accounts
Reported		399,487		484,897		45,712		82,523		19,936
Currency translation		27,720		4,915		2,426		-		(195)
Adjusted		427,207		489,812		48,138		82,523		19,741

1  Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

2  Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3  Comprises costs associated with preparations for the UK's exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.

Analysis by country

Profit/(loss) before tax by country/territory within global businesses
		Wealth and Personal Banking		Commercial Banking		Global Banking and Markets		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m
Europe		(680)		(529)		(1,809)		(1,187)		(4,205)
-  UK	1	(357)		(543)		(1,769)		(1,555)		(4,224)
-  of which: HSBC UK Bank plc (RFB)		113		167		90		(124)		246
-  of which: HSBC Bank plc (NRFB)		109		36		(1,030)		(454)		(1,339)
-  of which: Holdings and other		(579)		(746)		(829)		(977)		(3,131)
-  France		(340)		(168)		(347)		(310)		(1,165)
-  Germany		17		16		197		(15)		215
-  Switzerland		(2)		(4)		-		(10)		(16)
-  other		2		170		110		703		985
Asia		5,031		1,944		4,002		1,855		12,832
-  Hong Kong		4,927		1,787		1,674		(181)		8,207
-  Australia		108		76		138		(7)		315
-  India		16		187		593		228		1,024
-  Indonesia		(6)		(14)		147		(13)		114
-  mainland China		(34)		295		506		1,845		2,612
-  Malaysia		8		33		141		(55)		127
-  Singapore		45		(644)		239		(12)		(372)
-  Taiwan		9		18		104		(2)		129
-  other		(42)		206		460		52		676
Middle East and North Africa		(15)		(120)		478		(324)		19
-  Egypt		68		46		185		(1)		298
-  UAE		(21)		(210)		102		(39)		(168)
-  Saudi Arabia		21		-		26		(264)		(217)
-  other		(83)		44		165		(20)		106
North America		(449)		366		712		(461)		168
-  US		(547)		139		573		(391)		(226)
-  Canada		52		225		100		(67)		310
-  other		46		2		39		(3)		84
Latin America		(183)		(22)		233		(65)		(37)
-  Mexico		(115)		(106)		59		(25)		(187)
-  other		(68)		84		174		(40)		150
Year ended 31 Dec 2020		3,704		1,639		3,616		(182)		8,777

1   UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies ('ServCo Group').

Profit/(loss) before tax by country/territory within global businesses (continued)
		Wealth and Personal Banking3		Commercial  Banking3		Global Banking and Markets3		Corporate Centre3		Total
	Footnotes	$m		$m		$m		$m		$m
Europe		(841)		(1,324)		(997)		(1,491)		(4,653)
-  UK	1	(1,053)		904		(1,217)		(1,979)		(3,345)
-  of which: HSBC UK Bank plc (RFB)		(331)		1,555		70		13		1,307
-  of which: HSBC Bank plc (NRFB)		245		278		(186)		(467)		(130)
-  of which: Holdings and other		(967)		(929)		(1,101)		(1,525)		(4,522)
-  France		55		120		(65)		(74)		36
-  Germany		18		46		95		2		161
-  Switzerland		93		7		(3)		(6)		91
-  other	2	46		(2,401)		193		566		(1,596)
Asia		7,715		4,519		4,083		2,151		18,468
-  Hong Kong		7,220		3,242		1,729		(142)		12,049
-  Australia		130		127		199		(12)		444
-  India		67		201		533		205		1,006
-  Indonesia		20		55		127		14		216
-  mainland China		(73)		317		512		2,121		2,877
-  Malaysia		102		73		189		(22)		342
-  Singapore		154		105		250		(31)		478
-  Taiwan		43		25		97		(4)		161
-  other		52		374		447		22		895
Middle East and North Africa		254		212		761		1,100		2,327
-  Egypt		73		81		245		11		410
-  UAE		139		94		246		(54)		425
-  Saudi Arabia		(3)		-		13		1,145		1,155
-  other	2	45		37		257		(2)		337
North America		(573)		855		729		(244)		767
-  US		(277)		386		547		(221)		435
-  Canada		70		427		143		(22)		618
-  other	2	(366)		42		39		(1)		(286)
Latin America		264		(103)		328		(89)		400
-  Mexico		311		176		229		(29)		687
-  other	2	(47)		(279)		99		(60)		(287)
GBM goodwill impairment	2	-		-		(3,962)		-		(3,962)
Year ended 31 Dec 2019		6,819		4,159		942		1,427		13,347

1  UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies ('ServCo Group').

2  Includes the impact of goodwill impairment. As per Group accounting policy, HSBC's cash-generating units are based on geographical regions subdivided by global business, except for Global Banking and Markets, for which goodwill is monitored on a global basis.

3  A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311.

Profit/(loss) before tax by country/territory within global businesses (continued)
		Wealth and Personal Banking2		Commercial  Banking2		Global Banking and Markets2		Corporate Centre2		Total
	Footnotes	$m		$m		$m		$m		$m
Europe		134		1,798		147		(2,894)		(815)
-  UK	1	256		1,393		(175)		(2,870)		(1,396)
-  of which: HSBC UK Bank plc (RFB)		602		967		4		(191)		1,382
-  of which: HSBC Bank plc (NRFB)		618		1,408		839		(787)		2,078
-  of which: Holdings and other		(964)		(982)		(1,018)		(1,892)		(4,856)
-  France		(42)		163		7		(91)		37
-  Germany		26		92		116		(33)		201
-  Switzerland		(76)		5		(2)		(4)		(77)
-  other		(30)		145		201		104		420
Asia		7,025		4,475		4,097		2,193		17,790
-  Hong Kong		6,673		3,291		1,768		(218)		11,514
-  Australia		120		137		212		(6)		463
-  India		36		157		433		199		825
-  Indonesia		7		21		97		(21)		104
-  mainland China		(195)		282		592		2,179		2,858
-  Malaysia		145		89		137		3		374
-  Singapore		125		127		266		(27)		491
-  Taiwan		60		29		138		(2)		225
-  other		54		342		454		86		936
Middle East and North Africa		251		142		769		395		1,557
-  Egypt		51		63		215		4		333
-  UAE		142		65		307		(41)		473
-  Saudi Arabia		-		-		-		436		436
-  other		58		14		247		(4)		315
North America		37		1,036		901		(1,175)		799
-  US		(106)		498		734		(1,173)		(47)
-  Canada		99		489		187		(10)		765
-  other		44		49		(20)		8		81
Latin America		133		138		354		(66)		559
-  Mexico		214		119		204		(9)		528
-  other		(81)		19		150		(57)		31
Year ended 31 Dec 2018		7,580		7,589		6,268		(1,547)		19,890

1  UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies ('ServCo Group').

2  A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10: Segmental analysis on page 311.

Reconciliation of alternative performance measures
	Page
Use of alternative performance measures	108
Return on average ordinary shareholders' equity and return on average tangible equity	108
Net asset value and tangible net asset value per ordinary share	109
Post-tax return and average total shareholders' equity on average total assets	110
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers	110

Use of alternative performance measures

Our reported results are prepared in accordance with IFRSs as detailed in our financial statements starting on page 278.

As described on page 77, we use a combination of reported and alternative performance measures, including those derived from our reported results that eliminate factors that distort year-on-year comparisons. These are considered alternative performance measures (non-GAAP financial measures).

The following information details the adjustments made to the reported results and the calculation of other alternative performance measures. All alternative performance measures are reconciled to the closest reported performance measure.

Return on average ordinary shareholders' equity and return on average tangible equity

Return on average ordinary shareholders' equity ('RoE') is computed by taking profit attributable to the ordinary shareholders of the parent company ('reported results'), divided by average ordinary shareholders' equity ('reported equity') for the period. The adjustment to reported results and reported equity excludes amounts attributable to non-controlling interests and holders of preference shares and other equity instruments.

Return on average tangible equity ('RoTE') is computed by adjusting reported results for the movements in the present value of in-force long-term insurance business ('PVIF') and for impairment of goodwill and other intangible assets (net of tax), divided by average reported equity adjusted for goodwill, intangibles and PVIF for the period.

Return on average tangible equity excluding significant items and UK bank levy is annualised profit attributable to ordinary shareholders, excluding changes in PVIF, significant items and bank levy (net of tax), divided by average tangible shareholders' equity excluding fair value of own debt, debt valuation adjustment ('DVA') and other adjustments for the period.

We provide RoTE ratios in addition to RoE as a way of assessing our performance, which is closely aligned to our capital position.

Return on average ordinary shareholders' equity and return on average tangible equity
	2020		2019		2018
	$m		$m		$m
Profit
Profit attributable to the ordinary shareholders of the parent company	3,898		5,969		12,608
Impairment of goodwill and other intangible assets (net of tax)	1,036		7,349		-
Increase/(decrease) in PVIF (net of tax)	(253)		(1,248)		(506)
Profit attributable to the ordinary shareholders, excluding goodwill impairment and PVIF	4,681		12,070		12,102
Significant items (net of tax) and UK bank levy	2,402		2,251		2,590
Profit attributable to the ordinary shareholders, excluding goodwill impairment, PVIF, significant items and UK bank levy	7,083		14,321		14,692
Equity
Average total shareholders' equity	189,719		189,035		186,979
Effect of average preference shares and other equity instruments	(22,326)		(23,614)		(23,496)
Average ordinary shareholders' equity	167,393		165,421		163,483
Effect of goodwill, PVIF and other intangibles (net of deferred tax)	(17,292)		(22,574)		(22,102)
Average tangible equity	150,101		142,847		141,381
Fair value of own debt, DVA and other adjustments	422		1,032		2,439
Average tangible equity excluding fair value of own debt, DVA and other adjustments	150,523		143,879		143,820
	%		%		%
Ratio
Return on average ordinary shareholders' equity	2.3		3.6		7.7
Return on average tangible equity	3.1		8.4		8.6
Return on average tangible equity excluding significant items and UK bank levy	4.7		10.0		10.2

The following table details the adjustments made to reported results by global business:

Return on average tangible equity by global business
	Year ended 31 Dec 2020
	Wealth and Personal Banking		Commercial Banking		Global Banking and Markets		Corporate Centre		Total
	$m		$m		$m		$m		$m
Profit before tax	3,704		1,639		3,616		(182)		8,777
Tax expense	(509)		(661)		(977)		(531)		(2,678)
Profit after tax	3,195		978		2,639		(713)		6,099
Less attributable to: preference shareholders, other equity holders, non-controlling interests	(736)		(673)		(784)		(8)		(2,201)
Profit attributable to ordinary shareholders of the parent company	2,459		305		1,855		(721)		3,898
Increase in PVIF (net of tax)	(242)		(10)		-		(1)		(253)
Significant items (net of tax) and UK bank levy	190		208		958		2,041		3,397
Markets Treasury allocation and other adjustments	20		(14)		(25)		60		41
Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy	2,427		489		2,788		1,379		7,083
Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments	26,551		37,826		41,566		44,580		150,523
Return on average tangible equity excluding significant items and UK bank levy (%)	9.1		1.3		6.7		3.1		4.7
	Year ended 31 Dec 2019
Profit before tax	6,819		4,159		942		1,427		13,347
Tax expense	(720)		(1,502)		(460)		(1,957)		(4,639)
Profit after tax	6,099		2,657		482		(530)		8,708
Less attributable to: preference shareholders, other equity holders, non-controlling interests	(1,279)		(846)		(784)		170		(2,739)
Profit attributable to ordinary shareholders of the parent company	4,820		1,811		(302)		(360)		5,969
Increase in PVIF (net of tax)	(1,207)		(40)		-		(1)		(1,248)
Significant items (net of tax) and UK bank levy	1,641		3,036		4,218		702		9,597
Markets Treasury allocation and other adjustments	1		-		-		2		3
Profit attributable to ordinary shareholders, excluding PVIF, significant items and bank levy	5,255		4,807		3,916		343		14,321
Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments	26,627		36,856		39,999		40,397		143,879
Return on average tangible equity excluding significant items and UK bank levy (%)	19.7		13.0		9.8		0.8		10.0

Net asset value and tangible net asset value per ordinary share

Net asset value per ordinary share is total shareholders' equity less non-cumulative preference shares and capital securities ('total ordinary shareholders' equity'), divided by the number of ordinary shares in issue excluding shares that the company has purchased and are held in treasury.

Tangible net asset value per ordinary share is total ordinary shareholders' equity excluding goodwill, PVIF and other intangible assets (net of deferred tax) ('tangible ordinary shareholders' equity'), divided by the number of basic ordinary shares in issue excluding shares that the company has purchased and are held in treasury.

Net asset value and tangible net asset value per ordinary share
	2020		2019		2018
	$m		$m		$m
Total shareholders' equity	196,443		183,955		186,253
Preference shares and other equity instruments	(22,414)		(22,276)		(23,772)
Total ordinary shareholders' equity	174,029		161,679		162,481
Goodwill, PVIF and intangible assets (net of deferred tax)	(17,606)		(17,535)		(22,425)
Tangible ordinary shareholders' equity	156,423		144,144		140,056
Basic number of $0.50 ordinary shares outstanding	20,184		20,206		19,981
	$		$		$
Value per share
Net asset value per ordinary share	8.62		8.00		8.13
Tangible net asset value per ordinary share	7.75		7.13		7.01

Post-tax return and average total shareholders' equity on average total assets

Post-tax return on average total assets is profit after tax divided by average total assets for the period.

 

Average total shareholders' equity to average total assets is average total shareholders' equity divided by average total assets for the period.

Post-tax return and average total shareholders' equity on average total assets
	2020		2019		2018
	$m		$m		$m
Profit after tax	6,099		8,708		15,025
Average total shareholders' equity	189,719		189,035		186,979
Average total assets	2,936,939		2,712,376		2,611,976
Ratio	%		%		%
Post-tax return on average total assets	0.2		0.3		0.6
Average total shareholders' equity to average total assets	6.46		6.97		7.16

Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers

Expected credit losses and other credit impairment charges ('ECL') as % of average gross loans and advances to customers is the annualised adjusted ECL divided by adjusted average gross loans and advances to customers for the period.

 

The adjusted numbers are derived by adjusting reported ECL and loans and advances to customers for the effects of foreign currency translation differences.

Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers (%)
	2020		2019		2018
	$m		$m		$m
Expected credit losses and other credit impairment charges ('ECL')	(8,817)		(2,756)		(1,767)
Currency translation			129		147
Adjusted ECL	(8,817)		(2,627)		(1,620)
Average gross loans and advances to customers	1,047,114		1,021,238		982,409
Currency translation	36,702		38,167		14,911
Average gross loans and advances to customers - at most recent balance sheet foreign exchange rates	1,083,816		1,059,405		997,320
Ratio	%		%		%
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers	0.81		0.25		0.16

 

END

 

 

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