Annual Financial Report - Part 3

RNS Number : 4597C

HSBC Holdings PLC

22 February 2022

 

Financial review

The financial review gives detailed reporting of our financial performance at Group level as well as across our different global businesses and geographical regions.

90 Financial summary

98 Global businesses and geographical regions

117 Reconciliation of alternative performance measures

Expanding opportunities beyond the branches

Mainland China has Asia's largest pool of wealth and is set to become the world's biggest life insurance market by 2030. Pinnacle is therefore critical to our ambition to be one of Asia's leading wealth managers. Colleagues run specialist seminars for our customers, using digital tablets to facilitate visiting them in their homes and offices, and are further supported by an award-winning HSBC River bespoke financial planning mobile app. We have nearly 700 digitally enabled wealth planners across five mainland cities, and are looking to accelerate the trajectory of our hiring towards a target of 3,000 planners, supported by the recent regulatory approval to take full ownership of our life insurance manufacturing joint venture.

Financial summary
	Page
Use of alternative performance measures	90
Future accounting developments	90
Critical accounting estimates and judgements	90
Consolidated income statement	91
Income statement commentary	92
Consolidated balance sheet	95

Use of alternative performance measures

Our reported results are prepared in accordance with IFRSs as detailed in the financial statements starting on page 308.

To measure our performance, we supplement our IFRSs figures with non-IFRSs measures, which 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 117. All alternative performance measures are reconciled to the closest reported performance measure.

The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments' as detailed in Note 10 'Segmental analysis' on page 341.

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 98 to 101 and pages 108 to 113 detail the effects of significant items on each of our global business segments, geographical regions and selected countries/territories in 2021, 2020 and 2019.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2021.

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 2021 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates: • the income statements for 2020 and 2019 at the average rates of exchange for 2021; and • the balance sheets at 31 December 2020 and 31 December 2019 at the prevailing rates of exchange on 31 December 2021. 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.

Future accounting developments

IFRS 17 'Insurance Contracts'

IFRS 17 'Insurance Contracts' was issued in May 2017, with amendments to the standard issued in June 2020. It has been adopted for use in the EU but not yet for use in the UK. The standard sets out the requirements that an entity should apply in accounting for insurance contracts it issues and reinsurance contracts it holds. Following the amendments, IFRS 17 is effective from 1 January 2023. The Group is in the process of implementing IFRS 17. Industry practice and interpretation of the standard are still developing. Therefore, the likely impact of its implementation remains uncertain. We expect to provide an update on the likely impacts on our insurance business at or around our 2022 interim results announcement. For the purpose of planning the Group's financial resources, our initial assumption (based on analysis of the expected 2022 position) is that the accounting changes may result in a reduction in the reported profit of our insurance business by approximately two thirds on the transition to IFRS 17, albeit with a range of expected outcomes. A similar impact is expected on the equity of the insurance business, primarily reflecting the elimination of the present value of in-force business ('PVIF') asset and creation of the contractual service margin (the latter impacting tangible equity). The return on average ordinary shareholders' equity ('RoE') of the insurance business is not expected to be significantly impacted. At 31 December 2021, the equity associated with our insurance manufacturing operations was $17.0bn, including PVIF assets of $9.5bn and an associated deferred tax liability of $1.6bn. These assumptions may change significantly in the period prior to adoption of the standard.

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 323.

• Deferred tax assets: The most significant judgements relate to judgements made in respect of expected future profitability. See Note 1.2(l) on page 327.

• 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 321.

• 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 319.

• 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 319.

• 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 328.

•
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 327.

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
	2021	2020	2019	2018	2017
	$m	$m	$m	$m	$m
Net interest income	26,489	27,578	30,462	30,489	28,176
Net fee income	13,097	11,874	12,023	12,620	12,811
Net income from financial instruments held for trading or managed on a fair value basis	7,744	9,582	10,231	9,531	8,426
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	4,053	2,081	3,478	(1,488)	2,836
Change in fair value of designated debt and related derivatives1	(182)	231	90	(97)	155
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	798	455	812	695	N/A
Gains less losses from financial investments	569	653	335	218	1,150
Net insurance premium income	10,870	10,093	10,636	10,659	9,779
Other operating income/(expense)	502	527	2,957	960	443
Total operating income	63,940	63,074	71,024	63,587	63,776
Net insurance claims and benefits paid and movement in liabilities to policyholders	(14,388)	(12,645)	(14,926)	(9,807)	(12,331)
Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions2	49,552	50,429	56,098	53,780	51,445
Change in expected credit losses and other credit impairment charges	928	(8,817)	(2,756)	(1,767)	N/A
Loan impairment charges and other credit risk provisions	N/A	N/A	N/A	N/A	(1,769)
Net operating income	50,480	41,612	53,342	52,013	49,676
Total operating expenses excluding impairment of goodwill and other intangible assets	(33,887)	(33,044)	(34,955)	(34,622)	(34,849)
Impairment of goodwill and other intangible assets	(733)	(1,388)	(7,394)	(37)	(35)
Operating profit	15,860	7,180	10,993	17,354	14,792
Share of profit in associates and joint ventures	3,046	1,597	2,354	2,536	2,375
Profit before tax	18,906	8,777	13,347	19,890	17,167
Tax expense	(4,213)	(2,678)	(4,639)	(4,865)	(5,288)
Profit for the year	14,693	6,099	8,708	15,025	11,879
Attributable to:
-  ordinary shareholders of the parent company	12,607	3,898	5,969	12,608	9,683
-  preference shareholders of the parent company	7	90	90	90	90
-  other equity holders	1,303	1,241	1,324	1,029	1,025
-  non-controlling interests	776	870	1,325	1,298	1,081
Profit for the year	14,693	6,099	8,708	15,025	11,879

Five-year financial information
	2021	2020	2019	2018	2017
	$	$	$	$	$
Basic earnings per share	0.62	0.19	0.30	0.63	0.48
Diluted earnings per share	0.62	0.19	0.30	0.63	0.48
Dividends per ordinary share (paid in the period)3	0.22	-	0.51	0.51	0.51
	%	%	%	%	%
Dividend payout ratio4	40.3	78.9	100.0	81.0	106.3
Post-tax return on average total assets	0.5	0.2	0.3	0.6	0.5
Return on average ordinary shareholders' equity	7.1	2.3	3.6	7.7	5.9
Return on average tangible equity	8.3	3.1	8.4	8.6	6.8
Effective tax rate	22.3	30.5	34.8	24.5	30.8

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  Includes an interim dividend of $0.07 per ordinary share in respect of the financial year ending 31 December 2021, paid in September 2021, and an interim dividend of $0.15 per ordinary share in respect of the financial year ending 31 December 2020, paid in April 2021.

4  Dividend per ordinary share, in respect of the period, expressed as a percentage of basic earning per share.

Unless stated otherwise, all tables in the Annual Report and Accounts 2021 are presented on a reported basis.

For a summary of our financial performance in 2021, see page 27.

For further financial performance data for each global business and geographical region, see pages 98 to 101 and 106 to 116 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 341.

Income statement commentary

The following commentary compares Group financial performance for the year ended 2021 with 2020.

Net interest income

	Year ended			Quarter ended
	31 Dec	31 Dec	31 Dec	31 Dec	30 Sep	31 Dec
	2021	2020	2019	2021	2021	2020
	$m	$m	$m	$m	$m	$m
Interest income	36,188	41,756	54,695	9,219	9,010	9,301
Interest expense	(9,699)	(14,178)	(24,233)	(2,438)	(2,400)	(2,682)
Net interest income	26,489	27,578	30,462	6,781	6,610	6,619
Average interest-earning assets	2,209,513	2,092,900	1,922,822	2,251,433	2,207,960	2,159,003
	%	%	%	%	%	%
Gross interest yield1	1.64	2.00	2.84	1.62	1.62	1.71
Less: gross interest payable1	(0.53)	(0.81)	(1.48)	(0.52)	(0.53)	(0.60)
Net interest spread2	1.11	1.19	1.36	1.10	1.09	1.11
Net interest margin3	1.20	1.32	1.58	1.19	1.19	1.22

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
		2021			2020			2019
		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		450,678	1,105	0.25	298,255	1,264	0.42	212,920	2,411	1.13
Loans and advances to customers		1,060,658	26,071	2.46	1,046,795	29,391	2.81	1,021,554	35,578	3.48
Reverse repurchase agreements - non-trading		206,246	1,019	0.49	221,901	1,819	0.82	224,942	4,690	2.08
Financial investments		438,840	6,729	1.53	463,542	8,143	1.76	417,939	10,705	2.56
Other interest-earning assets		53,091	1,264	2.38	62,407	1,139	1.83	45,467	1,311	2.88
Total interest-earning assets		2,209,513	36,188	1.64	2,092,900	41,756	2.00	1,922,822	54,695	2.84

Summary of interest expense by type of liability
	2021			2020			2019
	Average balance	Interest expense	Cost	Average balance	Interest expense	Cost	Average balance	Interest expense	Cost
	$m	$m	%	$m	$m	%	$m	$m	%
Deposits by banks1	75,671	198	0.26	65,536	330	0.50	52,515	702	1.34
Customer accounts2	1,362,580	4,099	0.30	1,254,249	6,478	0.52	1,149,483	11,238	0.98
Repurchase agreements - non-trading	114,201	363	0.32	125,376	963	0.77	160,850	4,023	2.50
Debt securities in issue - non-trading	193,137	3,603	1.87	219,610	4,944	2.25	211,229	6,522	3.09
Other interest-bearing liabilities	70,929	1,436	2.02	76,395	1,463	1.92	59,980	1,748	2.91
Total interest-bearing liabilities	1,816,518	9,699	0.53	1,741,166	14,178	0.81	1,634,057	24,233	1.48

1  Including interest-bearing bank deposits only.

2  Including interest-bearing customer accounts only.

Net interest income ('NII') for 2021 was $26.5bn, a decrease of $1.1bn or 4% compared with 2020. This reflected lower average market interest rates across the major currencies compared with 2020. This was partly offset by interest income associated with the increase in average interest-earning assets ('AIEA') of $116.6bn or 5.6%.

Excluding the favourable effects of foreign currency translation differences, net interest income decreased by $1.8bn or 6.2%.

NII for the fourth quarter was $6.8bn, up 2.4% compared with the previous year. The increase was driven by a change in funding composition leading to a reduction of debt securities and an increase in lower-yielding customer deposits. This was partly offset by lower interest income  on AIEA, primarily driven by a shift of balances from financial investments to lower yielding short-term funds, and reduced yields on customer loans. Compared with the previous quarter, NII was up 2.5%. The increase was mainly driven by higher interest rates on other interest-earning assets as well as growth in AIEA.

Net interest margin ('NIM') for 2021 of 1.20% was 12 basis points ('bps') lower compared with 2020 as the reduction in the yield on AIEA of 36bps was partly offset by the fall in funding costs of average interest-bearing liabilities of 28bps. The decrease in NIM in 2021 included the adverse effects of foreign currency translation differences. Excluding this, NIM fell by 11bps.

NIM for the fourth quarter of 2021 was 1.19%, down 3bps year-on-year, predominantly driven by a change in balance sheet composition towards lower yielding short-term funds and loans and advances to banks. NIM remained unchanged compared with the previous quarter.

Interest income for 2021 of $36.2bn decreased by $5.6bn or 13%, primarily due to the lower average interest rates compared with 2020 as the yield on AIEA fell by 36bps. This was partly offset by income from balance sheet growth, predominantly in Asia and the UK. In particular, balances of short-term funds and loans and advances to banks grew by $152.4bn, and loans and advances to customers grew by $13.9bn. The decrease in interest income included $0.9bn from the favourable effects of foreign currency translation differences. Excluding these, interest income decreased by $6.5bn.

Interest income of $9.2bn in the fourth quarter was down $0.1bn year-on-year. The decline was predominantly driven by a change in the balance sheet composition where high-yielding financial investments decreased by $33.8bn, while low-yielding short-term funds and loans and advances to banks increased by $138.8bn. Compared with the previous quarter interest income was up $0.2bn, mainly due to improved yield on other interest-earning assets, as well as growth in AIEA.

Interest expense for 2021 of $9.7bn represented a decrease by $4.5bn or 32% compared with 2020. This reflected a decrease in funding costs of 28bps, mainly arising from lower interest rates paid on interest-bearing customer accounts, debt securities in issue and repurchase agreements. Funding costs further declined due to a change in funding composition from debt securities to low-yielding customer deposits, which grew by $108bn, predominantly in Asia and Europe. The decrease in interest expense included the adverse effects of foreign currency translation differences of $0.3bn. Excluding this, interest expense decreased by $4.8bn.

Interest expense of $2.4bn in the fourth quarter of 2021 was down $0.2bn year-on-year. The decline was predominantly driven by an improved funding mix, with additional funding from lower costing customer accounts, coupled with the impact of lower market interest rates. Compared with the previous quarter, the interest expense was materially unchanged.

Net fee income of $13.1bn was $1.2bn higher than in 2020, and included a favourable impact from foreign currency translation differences of $0.3bn. Net fee income grew in all of our global businesses.

In WPB, net fee income increased by $0.5bn. Fee income grew, mainly in Wealth, as improved market sentiment resulted in increased customer demand. This increase included higher fee income from funds under management, notably in Hong Kong, the UK and France, and from unit trusts in Asia. Cards income grew as spending increased compared with 2020. This also resulted in higher fee expense.

In CMB, net fee income increased by $0.4bn. Fee income increased from credit facilities, as well as from trade products, as global trade volumes recovered during 2021. Income from account services and remittances also rose as customer activity increased.

In GBM, net fee income increased by $0.3bn. This was driven by higher fee income from growth in corporate finance activity and in account services, which included higher activity from transaction banking clients. Fee income also increased in remittances, credit facilities, funds under management and global custody, reflecting a higher level of client activity compared with 2020.

Net income from financial instruments held for trading or managed on a fair value basis of $7.7bn was $1.8bn lower compared with 2020 and included adverse fair value movements on non-qualifying hedges of $0.4bn.

The remaining reduction was mainly in GBM, as 2020 benefited from higher market volatility supporting a particularly strong performance within Global Foreign Exchange and Global Debt Markets, notably in the UK and the US.

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss of $4.1bn, compared with $2.1bn in 2020. This increase primarily reflected favourable equity market performances in France and Hong Kong and higher gains on unit trust assets, supporting insurance and investment contracts. This compared with 2020, which was adversely impacted by the onset of the Covid-19 pandemic.

This favourable 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 was $0.4bn adverse compared with 2020. These movements were driven by the widening of long-term interest rate curves between the periods, driven by the gradual recovery of major economies.

All 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 96.

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss of $0.8bn was $0.3bn higher compared with 2020. This primarily reflected the impact of adverse movements in equity markets in the first half of 2020 following the onset of the Covid-19 pandemic, as well as from favourable equity market movements during 2021.

Gains less losses from financial investments of $0.6bn were $0.1bn lower compared with 2020, primarily reflecting lower gains on the disposal of debt securities.

Net insurance premium income of $10.9bn was $0.8bn higher than in 2020, primarily reflecting higher sales volumes, particularly in France, the UK and Singapore.

Other operating income of $0.5bn was broadly unchanged compared with 2020, as a $0.3bn decrease in net favourable movements in PVIF was broadly offset by the gain on the sale of a property in Germany and the non-recurrence of revaluation losses on investment properties in Hong Kong in 2020.

The change in PVIF included a net reduction of $0.7bn from assumption changes and experience variances, primarily reflecting increased interest rates and the effect of sharing higher investment returns with policyholders in Hong Kong and Singapore. These were partly offset by France where higher interest rates reduced the cost of guarantees. The net reduction due to assumption changes was partly offset by a $0.3bn increase in the value of new business written, primarily in Hong Kong.

PVIF is presented in accordance with IFRS 4 'Insurance Contracts'. As set out in our Annual Report and Accounts 2020, IFRS 17 'Insurance Contracts' is effective from 1 January 2023. Under IFRS 17, there will be no PVIF asset recognised. Instead, the estimated future profit will be included in the measurement of the insurance contract liability as the contractual service margin and gradually recognised in revenue as services are provided over the duration of the insurance contract.

Net insurance claims and benefits paid and movement in liabilities to policyholders was $1.7bn higher, primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk and higher sales volumes, particularly in France and the UK.

Changes in expected credit losses and other credit impairment charges ('ECL') were a net release of $0.9bn, compared with a charge of $8.8bn in 2020. The net release in 2021 reflected an improvement in the economic outlook, notably in the UK, partly offset by an increase in allowances in the fourth quarter, reflecting recent developments in China's commercial real estate sector. This compared with the significant build-up of stage 1 and stage 2 allowances in 2020 due to the worsening economic outlook at the onset of the Covid-19 pandemic. The reduction in ECL also reflected historically low levels of stage 3 charges, although with some normalisation during the fourth quarter, as well as the non-recurrence of a significant charge in 2020 related to a corporate exposure in Singapore.

For further details on the calculation of ECL, including the measurement uncertainties and significant judgements applied to such calculations, the impact of the economic scenarios and management judgemental adjustments, see pages 144 to 152.

Operating expenses - currency translation and significant items
	Year ended
	2021	2020
	$m	$m
Significant items	2,472	3,095
-  customer redress programmes	49	(54)
-  impairment of goodwill and other intangibles	587	1,090
-  past service costs of guaranteed minimum pension benefits equalisation	-	17
-  restructuring and other related costs1	1,836	1,908
-  settlements and provisions in connection with legal and regulatory matters	-	12
-  currency translation on significant items		122
Currency translation		(1,072)
Year ended 31 Dec	2,472	2,023

1  The year ended 2020 included impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment of tangible assets of $197m.

Operating expenses
	Year ended
	2021	2020
	$m	$m
Gross employee compensation and benefits	19,612	19,396
Capitalised wages and salaries	(870)	(1,320)
Goodwill impairment	587	41
Property and equipment	5,145	5,322
Amortisation and impairment of intangibles	1,438	2,519
UK bank levy	116	802
Legal proceedings and regulatory matters	106	289
Other operating expenses1	8,486	7,383
Total operating expenses (reported)	34,620	34,432
Total significant items (including currency translation on significant items)	(2,472)	(3,095)
Currency translation		1,072
Total operating expenses (adjusted)	32,148	32,409

1  Other operating expenses includes professional fees, contractor costs, transaction taxes, marketing and travel. The increase was driven by the spend related to our cost reduction programme, as well as from the growth in investment in technology and regulatory programmes.

Staff numbers (full-time equivalents)
	2021	2020	2019
Global businesses
Wealth and Personal Banking	130,185	135,727	141,341
Commercial Banking	42,969	43,221	44,706
Global Banking and Markets	46,166	46,729	48,859
Corporate Centre	377	382	445
At 31 Dec	219,697	226,059	235,351

Operating expenses of $34.6bn were broadly unchanged compared with 2020. This included the impact of our cost saving initiatives, as well as lower impairments of goodwill and other intangible assets, as 2021 included a $0.6bn impairment of goodwill related to our WPB business in Latin America to reflect the macroeconomic outlook, as well as the impact of foreign exchange rate deterioration and inflationary pressures, notably on our Argentina business. However, 2020 included a $1.3bn impairment of intangible assets, mainly in Europe. There was also a $0.6bn reduction in the UK bank levy due to a change in the basis of calculation to only include the UK balance sheet rather than the global balance sheet, as well as a credit of $0.1bn relating to the 2020 charge.

These decreases were broadly offset by an increase in performance-related pay of $0.7bn as Group performance improved, and by an increase in investment in technology of $0.9bn (gross of cost savings of $0.5bn). The remaining increase primarily reflected inflationary impacts, non-technology investment in regulatory programmes, and business growth notably Asia wealth investment. In addition, there was an adverse impact of foreign currency translation differences of $1.1bn.

In February 2020, we announced a plan to substantially reduce the cost base by 2022 and accelerate the pace of change. We continue to target $5bn to $5.5bn of cost saves for 2020 to 2022, while spending around $7bn in costs to achieve, which are included in restructuring and other related costs. Cumulative costs to achieve spend since the start of the programme in 2020 was $3.6bn, with related saves of $3.3bn. In 2021, the total cost to achieve spend was $1.8bn with saves during the year of $2.2bn.

Share of profit in associates and joint ventures of $3.0bn was $1.4bn higher, primarily reflecting a higher share of profit from The Saudi British Bank ('SABB') due to the non-recurrence of our share of its goodwill impairment charge in 2020, and an increased share of profit from BoCom. Our share of profit also rose from Business Growth Fund in the UK due to a recovery in asset valuations relative to 2020.

At 31 December 2021, 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. The excess of the VIU of BoCom and its carrying value has increased over the period, reflecting the impact of BoCom's performance on the VIU.

For more information, see Note 19: Interests in associates and joint ventures on page 359.

Tax expense

The effective tax rate for 2021 of 22.3% was lower than the 30.5% for 2020. The effective tax rate for 2021 was increased by the impact of substantively enacted legislation to increase the UK statutory tax rate from 1 April 2023. The 2020 effective tax rate was high, due mainly to the non-recognition of deferred tax on losses in the UK and France.

Consolidated balance sheet

Five-year summary consolidated balance sheet
	2021	2020	2019	2018	2017
	$m	$m	$m	$m	$m
Assets
Cash and balances at central banks	403,018	304,481	154,099	162,843	180,624
Trading assets	248,842	231,990	254,271	238,130	287,995
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss	49,804	45,553	43,627	41,111	N/A
Financial assets designated at fair value	N/A	N/A	N/A	N/A	29,464
Derivatives	196,882	307,726	242,995	207,825	219,818
Loans and advances to banks	83,136	81,616	69,203	72,167	90,393
Loans and advances to customers1	1,045,814	1,037,987	1,036,743	981,696	962,964
Reverse repurchase agreements - non-trading	241,648	230,628	240,862	242,804	201,553
Financial investments	446,274	490,693	443,312	407,433	389,076
Other assets	242,521	253,490	230,040	204,115	159,884
Total assets at 31 Dec	2,957,939	2,984,164	2,715,152	2,558,124	2,521,771
Liabilities and equity
Liabilities
Deposits by banks	101,152	82,080	59,022	56,331	69,922
Customer accounts	1,710,574	1,642,780	1,439,115	1,362,643	1,364,462
Repurchase agreements - non-trading	126,670	111,901	140,344	165,884	130,002
Trading liabilities	84,904	75,266	83,170	84,431	184,361
Financial liabilities designated at fair value	145,502	157,439	164,466	148,505	94,429
Derivatives	191,064	303,001	239,497	205,835	216,821
Debt securities in issue	78,557	95,492	104,555	85,342	64,546
Liabilities under insurance contracts	112,745	107,191	97,439	87,330	85,667
Other liabilities	199,994	204,019	194,876	167,574	113,690
Total liabilities at 31 Dec	2,751,162	2,779,169	2,522,484	2,363,875	2,323,900
Equity
Total shareholders' equity	198,250	196,443	183,955	186,253	190,250
Non-controlling interests	8,527	8,552	8,713	7,996	7,621
Total equity at 31 Dec	206,777	204,995	192,668	194,249	197,871
Total liabilities and equity at 31 Dec	2,957,939	2,984,164	2,715,152	2,558,124	2,521,771

1   Net of impairment allowances.

A more detailed consolidated balance sheet is contained in the financial statements on page 310.

Five-year selected financial information
	2021	2020	2019	2018	2017
	$m	$m	$m	$m	$m
Called up share capital	10,316	10,347	10,319	10,180	10,160
Capital resources1	177,786	184,423	172,150	173,238	182,383
Undated subordinated loan capital	1,968	1,970	1,968	1,969	1,969
Preferred securities and dated subordinated loan capital2	28,568	30,721	33,063	35,014	42,147
Risk-weighted assets	838,263	857,520	843,395	865,318	871,337
Total shareholders' equity	198,250	196,443	183,955	186,253	190,250
Less: preference shares and other equity instruments	(22,414)	(22,414)	(22,276)	(23,772)	(23,655)
Total ordinary shareholders' equity	175,836	174,029	161,679	162,481	166,595
Less: goodwill and intangible assets (net of tax)	(17,643)	(17,606)	(17,535)	(22,425)	(21,680)
Tangible ordinary shareholders' equity	158,193	156,423	144,144	140,056	144,915
Financial statistics
Loans and advances to customers as a percentage of customer accounts	61.1%	63.2%	72.0%	72.0%	70.6%
Average total shareholders' equity to average total assets	6.62%	6.46%	6.97%	7.16%	7.33%
Net asset value per ordinary share at year-end ($)3	8.76	8.62	8.00	8.13	8.35
Tangible net asset value per ordinary share at year-end ($)4	7.88	7.75	7.13	7.01	7.26
Tangible net asset value per fully diluted share at year-end ($)	7.84	7.72	7.11	6.98	7.22
Number of $0.50 ordinary shares in issue (millions)	20,632	20,694	20,639	20,361	20,321
Basic number of $0.50 ordinary shares outstanding (millions)	20,073	20,184	20,206	19,981	19,960
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)	20,189	20,272	20,280	20,059	20,065
Closing foreign exchange translation rates to $:
$1: £	0.739	0.732	0.756	0.783	0.740
$1: €	0.880	0.816	0.890	0.873	0.834

1   Capital resources are regulatory total capital, the calculation of which is set out on page 193.

2   Including perpetual preferred securities, details of which can be found in Note 28: Subordinated liabilities on page 370.

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.

4   The definition of tangible net asset value per ordinary share is total ordinary shareholder's equity excluding goodwill, PVIF and other intangible assets (net of deferred tax), divided by the number of basic 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 2020

At 31 December 2021, our total assets were $3.0tn, which were $26bn or 1% lower on a reported basis and $19bn or 1% higher on a constant currency basis.

The decrease in total assets reflected lower derivative assets and a fall in financial investments, in part reflecting a redeployment of our commercial surplus into cash. Reported customer lending balances were $8bn higher, mainly from growth in mortgage balances.

Reported loans and advances to customers as a percentage of customer accounts was 61.1%, which was lower compared with 63.2% at 31 December 2020. This was due to an increase in customer accounts as corporate customers continued to build up liquidity and personal customers grew their savings accounts.

Assets

Cash and balances at central banks increased by $99bn or 32%, mainly in the UK and the US, as we redeployed our commercial surplus to cash to increase liquidity for our clients and as a result of deposit inflows.

Trading assets increased by $17bn or 7%, notably from an increase in equity securities held, particularly in Hong Kong and the US, largely driven by client demand. These were partly offset by a reduction of debt securities in the US.

Derivative assets decreased by $111bn or 36%, primarily in the UK and France. This reflected adverse revaluation movements on interest rate contracts due to higher long-term yield curve rates in most major markets. Foreign exchange contracts also decreased as a result of foreign exchange rate movements in the UK and Hong Kong and lower client demand in the US. The decrease in derivative assets was consistent with the decrease in derivative liabilities, as the underlying risk is broadly matched.

Loans and advances to customers of $1.0tn increased by $8bn on a reported basis, which included adverse effects of foreign currency translation differences of $16bn. On a constant currency basis, customer lending balances were $23bn higher, despite $3bn of loans and advances to customers being reclassified to assets held for sale in the US.

The commentary below is on a constant currency basis.

Customer lending increased in WPB by $27bn to $489bn, mainly from growth in mortgage balances of $23bn, notably in the UK (up $10bn), Hong Kong (up $7bn) and Canada (up $4bn) as housing market activity continued to increase.

In CMB, customer lending of $349bn was $11bn higher, as we grew trade lending by $13bn, reflecting a recovery in global trade volumes, which more than offset a reduction in other term lending.

In GBM, lending of $207bn fell by $14bn, due to a reduction in other term lending mainly in the UK.

Reverse repurchase agreements - non-trading increased by $11bn or 5%, primarily in Asia due to client demand. This was partly offset by the redeployment of our commercial surplus to cash in the US.

There was also an increase in balances eligible for netting in the UK, resulting in an overall balance reduction.

Financial investments decreased by $44bn or 9%, mainly as we reduced our holdings of debt securities and treasury bills through a combination of disposals and maturities. A notable portion of these funds was redeployed into cash as we managed our commercial surplus.

Other assets decreased by $11bn due to lower cash collateral as derivative balances decreased, partly offset by an increase from the reclassification of loans and advances to customers to assets held for sale, reflecting our exit of mass market retail banking in the US.  

Liabilities

Customer accounts of $1.7tn increased by $68bn or 4% on a reported basis, which included adverse effects of foreign currency translation differences of $23bn. On a constant currency basis, customer accounts were $90bn higher, with growth across all of our global businesses, despite a reclassification of $10bn to liabilities of disposal groups held for sale in the US. The increase was primarily in the UK, Hong Kong and the rest of Asia, as corporate customers continued to build up liquidity and personal customers grew their savings as spending remained below pre-pandemic levels.

Deposits by banks increased by $19bn or 23%, primarily in the UK, relating to the utilisation of a Bank of England scheme to provide loans to corporate customers during the year. There were also increases in Hong Kong and the US.

Repurchase agreements - non-trading increased by $15bn or 13%, primarily in Hong Kong, as client demand increased.

Derivative liabilities decreased by $112bn or 37%, which is consistent with the decrease in derivative assets, since the underlying risk is broadly matched.

Other liabilities decreased by $4bn or 2% due to lower cash collateral as derivative balances decreased, partly offset by an increase from a reclassification of customer accounts to liabilities held for sale, reflecting our exit of mass market retail banking in the US.

Equity

Total shareholders' equity, including non-controlling interests, increased by $2bn or 1% compared with 31 December 2020. This reflected the effects of profits generated of $15bn, partly offset by a reduction in other comprehensive income ('OCI') of $5bn, dividend payments and coupon distributions on securities classified as equity of $6bn and a $2bn reduction related to our share buy-back programme. Movements in OCI included fair value losses on debt instruments of $2bn, driven by unrealised losses on fixed rate bonds due to higher long-term yield curve rates, and adverse foreign exchange differences of $2bn.

Risk-weighted assets

Risk-weighted assets ('RWAs') totalled $838.3bn at 31 December 2021, a $19.2bn decrease since 2020. Excluding foreign currency translation differences, RWAs fell by $6.3bn in 2021. This was due to the following movements:

• a $4.7bn asset size increase, mostly caused by CMB and WPB lending growth in Asia, while lending fell in GBM;

• a $8.0bn reduction in RWAs due to changes in asset quality from favourable portfolio mix and credit migration, mostly in CMB and WPB in Asia and North America; and

• a $3.0bn fall in RWAs due to changes in methodology and policy. This was primarily the result of risk parameter refinements in GBM and CMB, partly offset by higher market risk RWAs following our adoption of a Pillar 1 approach to the capitalisation of structural foreign exchange.

•

Customer accounts by country/territory
	2021	2020
	$m	$m
Europe	667,769	629,647
-  UK	535,797	504,275
-  France	56,841	55,111
-  Germany	22,509	21,605
-  Switzerland	10,680	10,102
-  other	41,942	38,554
Asia	792,098	762,406
-  Hong Kong	549,429	531,489
-  Singapore	57,572	55,140
-  mainland China	59,266	56,826
-  Australia	28,240	29,286
-  India	24,507	20,199
-  Malaysia	16,500	15,997
-  Taiwan	15,483	16,041
-  Indonesia	6,019	5,198
-  other	35,082	32,230
Middle East and North Africa (excluding Saudi Arabia)	42,629	41,221
-  United Arab Emirates	20,943	20,974
-  Turkey	4,258	3,987
-  Egypt	6,699	5,659
-  other	10,729	10,601
North America	178,565	182,028
-  US1	111,921	117,485
-  Canada	58,071	56,520
-  other	8,573	8,023
Latin America	29,513	27,478
-  Mexico	23,583	22,220
-  other	5,930	5,258
At 31 Dec	1,710,574	1,642,780

1   At 31 December 2021, customer accounts of $8.8bn relating to the disposal of the US retail banking business met the criteria to be classified as held for sale and are reported within 'Accruals, deferred income and other liabilities' on the balance sheet. Refer to Note 36 on page 387 for further details.

Loans and advances, deposits by currency
	At
	31 Dec 2021
$m	USD	GBP	HKD	EUR	CNY	Others1	Total
Loans and advances to banks	21,474	3,991	524	3,970	6,545	46,632	83,136
Loans and advances to customers	169,055	280,909	223,714	83,457	44,093	244,586	1,045,814
Total loans and advances	190,529	284,900	224,238	87,427	50,638	291,218	1,128,950
Deposits by banks	37,962	20,909	2,757	24,393	5,049	10,082	101,152
Customer accounts	453,864	463,232	318,702	133,604	65,052	276,120	1,710,574
Total deposits	491,826	484,141	321,459	157,997	70,101	286,202	1,811,726
	At
	31 Dec 2020
$m	USD	GBP	HKD	EUR	CNY	Others	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

1   'Others' includes items with no currency information available ($11,028m for loans to banks, $64,491m for loans to customers, $23m for deposits by banks and $5m for customer accounts).

Global businesses and geographical regions
	Page
Summary	98
Reconciliation of reported and adjusted items - global businesses	9 8
Reconciliation of reported and adjusted risk-weighted assets	101
Supplementary tables for WPB and GBM	101
Analysis of reported results by geographical regions	106
Reconciliation of reported and adjusted items - geographical regions	108
Analysis by country	114

.

Summary

The Group Chief Executive, supported by the rest of the Group Executive Committee ('GEC'), reviews operating activity on a number of bases, including by global business and geographical region. Our global businesses - Wealth and Personal Banking, Commerical Banking, and Global Banking and Markets - along with Corporate Centre are our reportable segments under IFRS 8 'Operating Segments' and are presented below and in Note 10: Segmental analysis on page 341.

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. From 2021, the UK bank levy was partially allocated to global businesses, which was previously retained in Corporate Centre. Comparative periods have not been re-presented.

The results of geographical regions are presented on a reported basis on page 106 and an adjusted basis on page 108.

Reconciliation of reported and adjusted items - global businesses

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

	2021
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Revenue1
Reported	22,117	13,431	14,588	(584)	49,552
Significant items	(7)	(16)	414	147	538
-  customer redress programmes	7	(18)	-	-	(11)
-  fair value movements on financial instruments2	-	(1)	19	224	242
-  restructuring and other related costs3	(14)	3	395	(77)	307
Adjusted	22,110	13,415	15,002	(437)	50,090
ECL
Reported	288	300	337	3	928
Adjusted	288	300	337	3	928
Operating expenses
Reported	(16,306)	(7,055)	(10,203)	(1,056)	(34,620)
Significant items	922	82	197	1,271	2,472
-  customer redress programmes	39	1	-	9	49
-  impairment of goodwill and other intangibles	587	-	-	-	587
-  restructuring and other related costs	296	81	197	1,262	1,836
Adjusted	(15,384)	(6,973)	(10,006)	215	(32,148)
Share of profit in associates and joint ventures
Reported	34	1	-	3,011	3,046
Adjusted	34	1	-	3,011	3,046
Profit before tax
Reported	6,133	6,677	4,722	1,374	18,906
Significant items	915	66	611	1,418	3,010
-  revenue	(7)	(16)	414	147	538
-  operating expenses	922	82	197	1,271	2,472
Adjusted	7,048	6,743	5,333	2,792	21,916
Loans and advances to customers (net)
Reported	488,786	349,126	207,162	740	1,045,814
Adjusted	488,786	349,126	207,162	740	1,045,814
Customer accounts
Reported	859,029	506,688	344,205	652	1,710,574
Adjusted	859,029	506,688	344,205	652	1,710,574

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)
	2020
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Revenue1
Reported	21,999	13,294	14,994	142	50,429
Currency translation	560	405	456	(28)	1,393
Significant items	12	19	318	(401)	(52)
-  customer redress programmes	5	16	-	-	21
-  disposals, acquisitions and investment in new businesses	9	-	-	1	10
-  fair value movements on financial instruments2	-	1	2	(267)	(264)
-  restructuring and other related costs3	-	1	307	(138)	170
-  currency translation on significant items	(2)	1	9	3	11
Adjusted	22,571	13,718	15,768	(287)	51,770
ECL
Reported	(2,855)	(4,754)	(1,209)	1	(8,817)
Currency translation	(150)	(235)	(80)	-	(465)
Adjusted	(3,005)	(4,989)	(1,289)	1	(9,282)
Operating expenses
Reported	(15,446)	(6,900)	(10,169)	(1,917)	(34,432)
Currency translation	(432)	(214)	(451)	25	(1,072)
Significant items	435	217	980	1,463	3,095
-  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 costs4	192	165	326	1,225	1,908
-  settlements and provisions in connection with legal and regulatory matters	-	-	2	10	12
-  currency translation on significant items	13	6	75	28	122
Adjusted	(15,443)	(6,897)	(9,640)	(429)	(32,409)
Share of profit in associates and joint ventures
Reported	6	(1)	-	1,592	1,597
Currency translation	1	-	-	132	133
Significant items	-	-	-	462	462
-  impairment of goodwill5	-	-	-	462	462
-  currency translation on significant items	-	-	-	-	-
Adjusted	7	(1)	-	2,186	2,192
Profit/(loss) before tax
Reported	3,704	1,639	3,616	(182)	8,777
Currency translation	(21)	(44)	(75)	129	(11)
Significant items	447	236	1,298	1,524	3,505
-  revenue	12	19	318	(401)	(52)
-  operating expenses	435	217	980	1,463	3,095
-  share of profit in associates and joint ventures	-	-	-	462	462
Adjusted	4,130	1,831	4,839	1,471	12,271
Loans and advances to customers (net)
Reported	469,186	343,182	224,364	1,255	1,037,987
Currency translation	(6,900)	(4,989)	(3,672)	(24)	(15,585)
Adjusted	462,286	338,193	220,692	1,231	1,022,402
Customer accounts
Reported	834,759	470,428	336,983	610	1,642,780
Currency translation	(10,768)	(6,048)	(5,819)	(17)	(22,652)
Adjusted	823,991	464,380	331,164	593	1,620,128

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  In 2020, 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)
	2019
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Revenue1
Reported	25,552	15,256	14,894	396	56,098
Currency translation	358	327	303	22	1,010
Significant items	230	11	85	(999)	(673)
-  customer redress programmes	155	7	-	1	163
-  disposals, acquisitions and investment in new businesses2	52	-	-	(820)	(768)
-  fair value movements on financial instruments3	7	4	84	(179)	(84)
-  currency translation on significant items	16	-	1	(1)	16
Adjusted	26,140	15,594	15,282	(581)	56,435
ECL
Reported	(1,437)	(1,192)	(162)	35	(2,756)
Currency translation	61	(2)	7	3	69
Adjusted	(1,376)	(1,194)	(155)	38	(2,687)
Operating expenses
Reported	(17,351)	(9,905)	(13,790)	(1,303)	(42,349)
Currency translation	(431)	(184)	(337)	(29)	(981)
Significant items	1,959	3,061	4,236	511	9,767
-  costs of structural reform4	-	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	153	33	13	14	213
Adjusted	(15,823)	(7,028)	(9,891)	(821)	(33,563)
Share of profit in associates and joint ventures
Reported	55	-	-	2,299	2,354
Currency translation	(1)	1	1	141	142
Adjusted	54	1	1	2,440	2,496
Profit before tax
Reported	6,819	4,159	942	1,427	13,347
Currency translation	(13)	142	(26)	137	240
Significant items	2,189	3,072	4,321	(488)	9,094
-  revenue	230	11	85	(999)	(673)
-  operating expenses	1,959	3,061	4,236	511	9,767
Adjusted	8,995	7,373	5,237	1,076	22,681
Loans and advances to customers (net)
Reported	443,025	346,105	246,492	1,121	1,036,743
Currency translation	5,855	2,611	1,570	20	10,056
Adjusted	448,880	348,716	248,062	1,141	1,046,799
Customer accounts
Reported	753,769	388,723	295,880	743	1,439,115
Currency translation	4,645	3,410	2,738	17	10,810
Adjusted	758,414	392,133	298,618	760	1,449,925

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

2  Includes $0.8bn dilution gain following the merger of The Saudi British Bank ('SABB') with Alawwal bank.

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.

Reconciliation of reported and adjusted risk-weighted assets

	At 31 Dec 2021
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$bn	$bn	$bn	$bn	$bn
Risk-weighted assets
Reported	178.3	332.9	236.2	90.9	838.3
Adjusted1	178.3	332.9	236.2	90.9	838.3
	At 31 Dec 2020
Risk-weighted assets
Reported	172.8	327.7	265.1	91.9	857.5
Currency translation	(2.7)	(5.3)	(4.1)	(0.8)	(12.9)
Adjusted1	170.1	322.4	261.0	91.1	844.6

	At 31 Dec 2019
Risk-weighted assets
Reported	162.6	325.9	273.4	81.5	843.4
Currency translation	(0.3)	1.5	(0.6)	0.1	0.7
Adjusted1	162.3	327.4	272.8	81.6	844.1

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
	$m	$m	$m	$m	$m
2021
Net operating income before change in expected credit losses and other credit impairment charges2	22,110	16,440	2,625	1,826	1,219
-  net interest income	14,198	11,237	2,316	647	(2)
-  net fee income/(expense)	5,894	4,405	(620)	933	1,176
-  other income	2,018	798	929	246	45
ECL	288	292	(17)	14	(1)
Net operating income	22,398	16,732	2,608	1,840	1,218
Total operating expenses3	(15,384)	(12,401)	(589)	(1,565)	(829)
Operating profit	7,014	4,331	2,019	275	389
Share of profit in associates and joint ventures	34	16	18	-	-
Profit before tax	7,048	4,347	2,037	275	389
2020
Net operating income before change in expected credit losses and other credit impairment charges2	22,571	17,840	1,869	1,789	1,073
-  net interest income	15,470	12,536	2,249	688	(3)
-  net fee income/(expense)	5,519	4,175	(527)	843	1,028
-  other income	1,582	1,129	147	258	48
ECL	(3,005)	(2,866)	(67)	(71)	(1)
Net operating income	19,566	14,974	1,802	1,718	1,072
Total operating expenses	(15,443)	(12,774)	(486)	(1,429)	(754)
Operating profit	4,123	2,200	1,316	289	318
Share of profit in associates and joint ventures	7	6	1	-	-
Profit before tax	4,130	2,206	1,317	289	318

WPB - summary (adjusted basis) (continued)
	Total WPB	Consists of1
		Banking operations	Insurance manufacturing	Global Private Banking	Asset management
	$m	$m	$m	$m	$m
2019
Net operating income before change in expected credit losses and other credit impairment charges2	26,140	20,508	2,663	1,917	1,052
-  net interest income	17,820	14,737	2,179	911	(7)
-  net fee income/(expense)	5,753	4,684	(726)	797	998
-  other income	2,567	1,087	1,210	209	61
ECL	(1,376)	(1,286)	(66)	(24)	-
Net operating income	24,764	19,222	2,597	1,893	1,052
Total operating expenses	(15,823)	(13,085)	(485)	(1,480)	(773)
Operating profit	8,941	6,137	2,112	413	279
Share of profit in associates and joint ventures	54	11	43	-	-
Profit before tax	8,995	6,148	2,155	413	279

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. This differs from the WPB Life insurance manufacturing revenue shown in the managed view of adjusted revenue on page 31, which excludes the impact of Argentina hyperinflation and includes the effect of goodwill adjustments.

3  Operating expenses in Global Private Banking in 2021 included a one-off charge of $0.1bn, which did not meet the criteria to be classified as a significant item.

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. These results are prepared in accordance with current IFRSs which will change following adoption of IFRS 17 'Insurance Contracts', effective from 1 January 2023. Further information about the adoption of IFRS 17 is provided on page 90.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels1, 2
	2021		2020		2019
	WPB	All global businesses	WPB	All global businesses	WPB	All global businesses
	$m	$m	$m	$m	$m	$m
Net interest income	2,316	2,492	2,249	2,414	2,179	2,318
Net fee income/(expense)	(620)	(652)	(527)	(564)	(726)	(750)
-  fee income	105	128	111	132	108	131
-  fee expense	(725)	(780)	(638)	(696)	(834)	(881)
Net income/(expenses) from financial instruments held for trading or managed on a fair value basis	6	-	66	84	(107)	(117)
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss	4,061	4,100	2,066	2,019	3,671	3,654
Gains less losses from financial investments	86	90	13	13	5	5
Net insurance premium income	10,516	10,998	9,822	10,313	10,572	10,932
Other operating income	192	175	333	347	1,801	1,814
Of which: PVIF	100	93	368	381	1,724	1,769
Total operating income	16,557	17,203	14,022	14,626	17,395	17,856
Net insurance claims and benefits paid and movement in liabilities to policyholders	(13,932)	(14,442)	(12,153)	(12,653)	(14,732)	(15,115)
Net operating income before change in expected credit losses and other credit impairment charges3	2,625	2,761	1,869	1,973	2,663	2,741
Change in expected credit losses and other credit impairment charges	(17)	(20)	(67)	(78)	(66)	(70)
Net operating income	2,608	2,741	1,802	1,895	2,597	2,671
Total operating expenses	(589)	(618)	(486)	(514)	(485)	(506)
Operating profit	2,019	2,123	1,316	1,381	2,112	2,165
Share of profit in associates and joint ventures	18	18	1	1	43	43
Profit before tax of insurance manufacturing operations4	2,037	2,141	1,317	1,382	2,155	2,208
Annualised new business premiums of insurance manufacturing operations	2,838	2,892	2,320	2,384	3,348	3,427
Insurance distribution income earned by HSBC bank channels	762	832	751	816	961	1,057

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 2020: $5m favourable (reported: $1,377m), 2019: $73m favourable (reported: $2,135m).

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 2021 of $12m (2020: increase of $5m, 2019: reduction of $1m) and an increase in profit before tax in 2021 of $10m (2020: increase of $12m, 2019: increase 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 $2.1bn increased by $0.8bn or 55% compared with 2020.

Adjusted net operating income before change in expected credit losses and other credit impairment changes was $0.8bn or 40% higher than in 2020. 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 $4.1bn in 2021 compared with $2.0bn in 2020. This increase primarily reflected favourable equity market performance in France and Hong Kong and higher gains on unit trust assets, supporting insurance and investment contracts. This compared with 2020, which was adversely impacted by the onset of the Covid-19 pandemic.

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

• Net insurance premium income of $11bn was $0.7bn higher than in 2020, primarily reflecting higher sales volumes particularly in France, the UK and Singapore.

•
Other operating income of $0.2bn decreased by $0.2bn compared with 2020, mainly from adverse movements in PVIF. This included a reduction of $0.7bn due to assumption changes and experience variances, primarily reflecting increased interest rates and the effect of sharing higher investment returns with policyholders in Hong Kong and Singapore, partly offset in France where higher interest rates reduced the cost of guarantees. The net reduction from assumption changes and experience variances was partly offset by a $0.3bn increase in the value of new business written, primarily in Hong Kong.

• Net insurance claims and benefits paid and movement in liabilities to policyholders was $1.8bn higher, primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk and higher sales volumes, particularly in France and the UK.

Adjusted operating expenses of $0.6bn increased by 20% compared with 2020, 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. Higher ANP during the period reflected improved new business volumes, mainly in Hong Kong.

Insurance distribution income from HSBC channels included $486m (2020: $476m; 2019: $665m) on HSBC manufactured products, for which a corresponding fee expense is recognised within insurance manufacturing, and $346m (2020: $340m; 2019: $392m) on products manufactured by third-party providers. The WPB component of this distribution income was $433m (2020: $428m; 2019: $589m) from HSBC manufactured products and $329m (2020: $323m; 2019: $372m) from third-party products.

WPB: Wealth adjusted revenue by geography

The following table shows the adjusted revenue of our Wealth business by region. Our Wealth business comprises investment distribution, life insurance manufacturing, Global Private Banking and Asset Management.

Wealth adjusted revenue by geography
	2021	2020	2019
	$m	$m	$m
Europe	2,381	1,859	2,402
Asia	5,780	5,246	5,587
MENA	180	163	126
North America	530	520	562
Latin America	252	216	246
Total	9,123	8,004	8,923

WPB: Wealth balances

The following table shows the wealth balances, which include invested assets and wealth deposits. Invested assets comprise customer assets either managed by our Asset Management business or by external third-party investment managers, as well as self-directed investments by our customers.

WPB - reported wealth balances1
	2021	2020
	$bn	$bn
Global Private Banking invested assets	351	326
-  managed by Global Asset Management	67	66
-  external managers, direct securities and other	284	260
Retail invested assets	434	407
-  managed by Global Asset Management	229	219
-  external managers, direct securities and other	205	188
Asset Management third-party distribution	334	317
Reported invested assets1	1,119	1,050
Wealth deposits (Premier, Jade and Global Private Banking)2	551	538
Total reported wealth balances	1,670	1,588

1  Invested 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.

2  Premier, Jade and Global Private Banking deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts balance of $859bn (2020: $835bn) on page 98.

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
	2021	2020
	$bn	$bn
Opening balance	602	506
Net new invested assets	27	53
Net market movements	18	17
Foreign exchange and others	(17)	26
Closing balance	630	602
Asset Management - reported funds under management by geography
	2021	2020
	$bn	$bn
Europe	367	346
Asia	180	176
MENA	5	6
North America	69	65
Latin America	9	9
Closing balance	630	602

At 31 December 2021, Asset Management funds under management amounted to $630bn, an increase of $28bn or 5%. The increase reflected strong net new invested assets, primarily from passive and managed solutions investment products. There was a positive market performance, although this was largely offset by adverse foreign exchange translation.

Global Private Banking: client assets

Global Private Banking client assets comprises invested assets and deposits, 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
	2021	2020
	$bn	$bn
Opening balance	394	361
Net new invested assets	19	3
Increase/(decrease) in deposits	4	3
Net market movements	17	6
Foreign exchange and others	(11)	21
Closing Balance	423	394

Global Private Banking - reported client assets by geography1
	2021	2020
	$bn	$bn
Europe	174	174
Asia	178	176
North America	71	44
Closing balance	423	394

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.  

Retail invested assets

The following table shows the invested assets of our retail customers. These comprise customer assets either managed by our Asset Management business or by external third-party

investment managers as well as self-directed investments by our customers. Retail invested 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.

Retail invested assets
	2021	2020
	$bn	$bn
Opening balance	407	380
Net new invested assets1	26	10
Net market movements	5	5
Foreign exchange and others	(4)	12
Closing balance	434	407
Retail invested assets by geography
	2021	2020
	$bn	$bn
Europe	81	71
Asia	293	281
MENA	4	4
North America	47	42
Latin America	9	9
Closing balance	434	407

1  'Retail net new invested assets' covers nine markets, comprising Hong Kong including Hang Seng Bank (Hong Kong), mainland China, Malaysia, Singapore, HSBC Bank UK, UAE, US, Canada and Mexico. The net new invested assets related to all other geographies is reported in 'exchange and other'.

WPB invested assets

Net new invested assets represents the net customer inflows from retail invested assets, Asset Management third-party distribution and Global Private Banking invested assets. It excludes all

customer deposits. The net new invested assets in the table below is non-additive from the tables above, as net new invested assets managed by Asset Management that is generated by retail clients or Global Private Banking will be recorded in both businesses.

WPB: Invested assets
	2021	2020
	$bn	$bn
Opening balance	1,050	925
Net new invested assets	64	53
Net market movements	33	21
Foreign exchange and others	(28)	51
Closing balance	1,119	1,050
WPB: Net new invested assets by geography
	2021	2020
	$bn	$bn
Europe	17	21
Asia	36	15
MENA	-	-
North America	10	16
Latin America	1	1
Total	64	53

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 2021, we held $10.8tn of assets as custodian, 7% higher than at 31 December 2020. The balance comprised $10.0tn of assets in Securities Services, which were recorded at market value, and $0.8tn of assets in Issuer Services, recorded at book value.

The growth was driven by Securities Services balances, from net client asset inflows, including increases from new client mandates, notably in Asia, the US and the UK, and favourable market movements. These increases were partly offset by the adverse impact of currency translation differences.

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 2021, the value of assets held under administration by the Group amounted to $4.9tn, which was 10% higher than at 31 December 2020. The balance comprised $3.0tn of assets in Securities Services, which were recorded at market value, and $1.9tn of assets in Issuer Services, recorded at book value.

The increase was mainly driven by Securities Services balances, from a net inflow of client assets, particularly in the UK and Hong Kong, and from favourable market movements.

Analysis of reported results by geographical regions

HSBC reported profit/(loss) before tax and balance sheet data
	2021
	Europe	Asia	MENA	North America	Latin America	Intra-HSBC	Total
	$m	$m	$m	$m	$m	$m	$m
Net interest income	6,454	12,596	1,299	2,845	2,195	1,100	26,489
Net fee income	3,882	5,871	774	2,056	514	-	13,097
Net income from financial instruments held for trading or managed on a fair value basis	2,602	3,643	431	426	476	166	7,744
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss	1,670	2,340	-	-	45	(2)	4,053
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss	1,973	(3)	(3)	54	40	(1,263)	798
Other income/(expense)1	3,523	1,316	59	673	(212)	(7,988)	(2,629)
Net operating income before change in expected credit losses and other credit impairment charges2	20,104	25,763	2,560	6,054	3,058	(7,987)	49,552
Change in expected credit losses and other credit impairment charges	1,601	(840)	132	238	(203)	-	928
Net operating income	21,705	24,923	2,692	6,292	2,855	(7,987)	50,480
Total operating expenses excluding impairment of goodwill and other intangible assets	(18,099)	(15,136)	(1,536)	(4,905)	(2,198)	7,987	(33,887)
Impairment of goodwill and other intangible assets	(95)	(24)	(8)	(13)	(593)	-	(733)
Operating profit/(loss)	3,511	9,763	1,148	1,374	64	-	15,860
Share of profit/(loss) in associates and joint ventures	268	2,486	275	-	17	-	3,046
Profit/(loss) before tax	3,779	12,249	1,423	1,374	81	-	18,906
	%	%	%	%	%		%
Share of HSBC's profit before tax	20.0	64.8	7.5	7.3	0.4		100.0
Cost efficiency ratio	90.5	58.8	60.3	81.2	91.3		69.9
Balance sheet data	$m	$m	$m	$m	$m	$m	$m
Loans and advances to customers (net)	397,090	492,525	26,375	108,717	21,107	-	1,045,814
Total assets	1,354,483	1,261,707	70,974	362,150	46,602	(137,977)	2,957,939
Customer accounts	667,769	792,098	42,629	178,565	29,513	-	1,710,574
Risk-weighted assets3	261,115	396,206	60,223	110,412	35,915		838,263
	2020
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 charges2	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 assets3	284,322	384,228	60,181	117,755	35,240	-	857,520

HSBC reported profit/(loss) before tax and balance sheet data (continued)
	2019
	Europe	Asia	MENA	North America	Latin America	Intra-HSBC/global impairment4	Total
	$m	$m	$m	$m	$m	$m	$m
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/(expense) 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 loan impairment (charges)/recoveries and other credit risk provisions2	18,056	30,419	3,710	6,587	3,516	(6,190)	56,098
Change in expected credit losses and other credit impairment (charges)/recoveries	(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 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 assets3	280,983	366,375	57,492	121,953	38,460	-	843,395

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.

4  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.

Reconciliation of reported and adjusted items - geographical regions

Reconciliation of reported and adjusted items
	2021
	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m
Revenue1
Reported2	20,104	25,763	2,560	6,054	3,058	49,552
Significant items2	125	(164)	-	10	5	538
-  customer redress programmes	(11)	-	-	-	-	(11)
-  fair value movements on financial instruments3	226	11	-	5	-	242
-  restructuring and other related costs2,4	(90)	(175)	-	5	5	307
Adjusted2	20,229	25,599	2,560	6,064	3,063	50,090
ECL
Reported	1,601	(840)	132	238	(203)	928
Adjusted	1,601	(840)	132	238	(203)	928
Operating expenses
Reported2	(18,194)	(15,160)	(1,544)	(4,918)	(2,791)	(34,620)
Significant items2	1,367	509	56	432	670	2,472
-  customer redress programmes	49	-	-	-	-	49
-  impairment of goodwill and other intangibles	-	-	-	-	587	587
-  restructuring and other related costs2	1,318	509	56	432	83	1,836
Adjusted2	(16,827)	(14,651)	(1,488)	(4,486)	(2,121)	(32,148)
Share of profit in associates and joint ventures
Reported	268	2,486	275	-	17	3,046
Adjusted	268	2,486	275	-	17	3,046
Profit before tax
Reported	3,779	12,249	1,423	1,374	81	18,906
Significant items	1,492	345	56	442	675	3,010
-  revenue2	125	(164)	-	10	5	538
-  operating expenses2	1,367	509	56	432	670	2,472
Adjusted	5,271	12,594	1,479	1,816	756	21,916
Loans and advances to customers (net)
Reported	397,090	492,525	26,375	108,717	21,107	1,045,814
Adjusted	397,090	492,525	26,375	108,717	21,107	1,045,814
Customer accounts
Reported	667,769	792,098	42,629	178,565	29,513	1,710,574
Adjusted	667,769	792,098	42,629	178,565	29,513	1,710,574

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.

Reconciliation of reported and adjusted items (continued)
	2021
	UK	Hong Kong	Mainland China	US	Mexico
	$m	$m	$m	$m	$m
Revenue1
Reported	16,415	14,463	3,734	4,006	2,341
Significant items	(18)	61	(41)	14	15
-  customer redress programmes	(11)	-	-	-	-
-  fair value movements on financial instruments2	220	7	-	5	-
-  restructuring and other related costs3	(227)	54	(41)	9	15
Adjusted	16,397	14,524	3,693	4,020	2,356
ECL
Reported	1,645	(608)	(89)	205	(224)
Adjusted	1,645	(608)	(89)	205	(224)
Operating expenses
Reported	(14,808)	(7,955)	(2,773)	(3,683)	(1,565)
Significant items	1,193	227	32	355	59
-  customer redress programmes	49	-	-	-	-
-  restructuring and other related costs	1,144	227	32	355	59
Adjusted	(13,615)	(7,728)	(2,741)	(3,328)	(1,506)
Share of profit in associates and joint ventures
Reported	267	16	2,461	-	17
Adjusted	267	16	2,461	-	17
Profit before tax
Reported	3,519	5,916	3,333	528	569
Significant items	1,175	288	(9)	369	74
-  revenue	(18)	61	(41)	14	15
-  operating expenses	1,193	227	32	355	59
Adjusted	4,694	6,204	3,324	897	643
Loans and advances to customers (net)
Reported	306,464	311,947	54,239	52,678	18,043
Adjusted	306,464	311,947	54,239	52,678	18,043
Customer accounts
Reported	535,797	549,429	59,266	111,921	23,583
Adjusted	535,797	549,429	59,266	111,921	23,583

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)
	2020
	Europe	Asia	MENA	North America	Latin America	Total
	$m	$m	$m	$m	$m	$m
Revenue1
Reported2	18,419	26,922	2,628	6,375	3,020	50,429
Currency translation2	1,171	335	(58)	109	(69)	1,393
Significant items2	(233)	(36)	(1)	42	-	(52)
-  customer redress programmes	21	-	-	-	-	21
-  disposals, acquisitions and investment in new businesses	-	-	-	10	-	10
-  fair value movements on financial instruments3	(254)	(5)	-	(2)	(3)	(264)
-  restructuring and other related costs2,4	(9)	(32)	-	35	-	170
-  currency translation on significant items	9	1	(1)	(1)	3	11
Adjusted2	19,357	27,221	2,569	6,526	2,951	51,770
ECL
Reported	(3,751)	(2,284)	(758)	(900)	(1,124)	(8,817)
Currency translation	(337)	(57)	3	(24)	(50)	(465)
Adjusted	(4,088)	(2,341)	(755)	(924)	(1,174)	(9,282)
Operating expenses
Reported 2	(18,874)	(13,662)	(1,586)	(5,307)	(1,938)	(34,432)
Currency translation2	(1,000)	(198)	39	(69)	61	(1,072)
Significant items2	2,335	171	81	603	81	3,095
-  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 costs2,5	1,425	171	19	378	91	1,908
-  settlements and provisions in connection with legal and regulatory matters	12	-	-	-	-	12
-  currency translation on significant items	132	-	(2)	2	(10)	122
Adjusted2	(17,539)	(13,689)	(1,466)	(4,773)	(1,796)	(32,409)
Share of profit/(loss) in associates and joint ventures
Reported	1	1,856	(265)	-	5	1,597
Currency translation	-	133	-	-	-	133
Significant items	-	-	462	-	-	462
-  impairment of goodwill6	-	-	462	-	-	462
-  currency translation on significant items	-	-	-	-	-	-
Adjusted	1	1,989	197	-	5	2,192
Profit/(loss) before tax
Reported	(4,205)	12,832	19	168	(37)	8,777
Currency translation	(166)	213	(16)	16	(58)	(11)
Significant items	2,102	135	542	645	81	3,505
-  revenue2	(233)	(36)	(1)	42	-	(52)
-  operating expenses2	2,335	171	81	603	81	3,095
-  share of profit in associates and joint ventures	-	-	462	-	-	462
Adjusted	(2,269)	13,180	545	829	(14)	12,271
Loans and advances to customers (net)
Reported	408,495	473,165	28,700	107,969	19,658	1,037,987
Currency translation	(9,176)	(4,397)	(1,423)	199	(788)	(15,585)
Adjusted	399,319	468,768	27,277	108,168	18,870	1,022,402
Customer accounts
Reported	629,647	762,406	41,221	182,028	27,478	1,642,780
Currency translation	(12,835)	(6,887)	(1,748)	234	(1,416)	(22,652)
Adjusted	616,812	755,519	39,473	182,262	26,062	1,620,128

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  In 2020, 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
	$m	$m	$m	$m	$m
Revenue1
Reported	13,886	16,345	3,088	4,590	2,234
Currency translation	1,048	(29)	220	-	124
Significant items	(180)	14	(5)	41	(11)
-  customer redress programmes	21	-	-	-	-
-  disposals, acquisitions and investment in new businesses	-	-	-	10	-
-  fair value movements on financial instruments2	(256)	-	(1)	(2)	(1)
-  restructuring and other related costs3	48	15	(4)	33	(12)
-  currency translation on significant items	7	(1)	-	-	2
Adjusted	14,754	16,330	3,303	4,631	2,347
ECL
Reported	(3,256)	(824)	(114)	(622)	(1,050)
Currency translation	(306)	2	(9)	-	(69)
Adjusted	(3,562)	(822)	(123)	(622)	(1,119)
Operating expenses
Reported	(14,855)	(7,312)	(2,211)	(4,194)	(1,376)
Currency translation	(875)	14	(152)	-	(74)
Significant items	1,430	99	20	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	-	-	-	-
-  currency translation on significant items	112	(1)	1	-	-
Adjusted	(14,300)	(7,199)	(2,343)	(3,638)	(1,408)
Share of profit/(loss) in associates and joint ventures
Reported	1	(2)	1,849	-	5
Currency translation	-	-	132	-	-
Adjusted	1	(2)	1,981	-	5
Profit/(loss) before tax
Reported	(4,224)	8,207	2,612	(226)	(187)
Currency translation	(133)	(13)	191	-	(19)
Significant items	1,250	113	15	597	31
-  revenue	(180)	14	(5)	41	(11)
-  operating expenses	1,430	99	20	556	42
Adjusted	(3,107)	8,307	2,818	371	(175)
Loans and advances to customers (net)
Reported	314,530	302,454	46,113	58,082	17,296
Currency translation	(2,764)	(1,741)	1,278	-	(471)
Adjusted	311,766	300,713	47,391	58,082	16,825
Customer accounts
Reported	504,275	531,489	56,826	117,485	22,220
Currency translation	(4,432)	(3,060)	1,575	-	(605)
Adjusted	499,843	528,429	58,401	117,485	21,615

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
	$m	$m	$m	$m	$m	$m
Revenue1
Reported2	18,056	30,419	3,710	6,587	3,516	56,098
Currency translation2	1,353	354	(72)	99	(666)	1,010
Significant items	41	35	(827)	68	10	(673)
-  customer redress programmes	163	-	-	-	-	163
-  disposals, acquisitions and investment in new businesses3	-	-	(828)	59	1	(768)
-  fair value movements on financial investments4	(137)	35	-	9	9	(84)
-  currency translation on significant items	15	-	1	-	-	16
Adjusted2	19,450	30,808	2,811	6,754	2,860	56,435
ECL
Reported	(938)	(724)	(117)	(237)	(740)	(2,756)
Currency translation	(69)	(11)	4	(4)	149	69
Adjusted	(1,007)	(735)	(113)	(241)	(591)	(2,687)
Operating expenses
Reported2,6	(21,759)	(13,297)	(1,549)	(5,583)	(2,389)	(42,349)
Currency translation2	(1,246)	(177)	59	(61)	386	(981)
Significant items6	4,655	127	112	544	367	9,767
-  costs of structural reform5	154	4	-	-	-	158
-  customer redress programmes	1,281	-	-	-	-	1,281
-  goodwill impairment6	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	220	1	-	-	(8)	213
Adjusted2,6	(18,350)	(13,347)	(1,378)	(5,100)	(1,636)	(33,563)
Share of profit/(loss) in associates and joint ventures
Reported	(12)	2,070	283	-	13	2,354
Currency translation	1	142	-	-	(1)	142
Adjusted	(11)	2,212	283	-	12	2,496
Profit/(loss) before tax
Reported6	(4,653)	18,468	2,327	767	400	13,347
Currency translation6	39	308	(9)	34	(132)	240
Significant items6	4,696	162	(715)	612	377	9,094
-  revenue	41	35	(827)	68	10	(673)
-  operating expenses6	4,655	127	112	544	367	9,767
Adjusted	82	18,938	1,603	1,413	645	22,681
Loans and advances to customers (net)
Reported	393,850	477,727	28,556	113,474	23,136	1,036,743
Currency translation	8,549	4,264	(1,482)	1,165	(2,440)	10,056
Adjusted	402,399	481,991	27,074	114,639	20,696	1,046,799
Customer accounts
Reported	528,718	697,358	38,126	146,676	28,237	1,439,115
Currency translation	11,240	4,003	(2,091)	1,183	(3,525)	10,810
Adjusted	539,958	701,361	36,035	147,859	24,712	1,449,925

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 $0.8bn dilution gain following the merger of The Saudi British Bank ('SABB') with Alawwal bank.

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

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

6  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
	$m	$m	$m	$m	$m
Revenue1
Reported	13,538	19,412	3,101	4,638	2,555
Currency translation	1,148	153	219	-	(129)
Significant items	40	26	1	66	7
-  customer redress programmes	162	-	-	-	-
-  disposals, acquisitions and investment in new businesses	-	-	-	59	-
-  fair value movements on financial instruments2	(139)	26	1	7	8
-  currency translation on significant items	17	-	-	-	(1)
Adjusted	14,726	19,591	3,321	4,704	2,433
ECL
Reported	(714)	(459)	(129)	(170)	(491)
Currency translation	(58)	(3)	(9)	-	25
Adjusted	(772)	(462)	(138)	(170)	(466)
Operating expenses
Reported	(16,157)	(6,935)	(2,111)	(4,033)	(1,390)
Currency translation	(1,010)	(51)	(153)	-	71
Significant items	1,941	65	7	93	19
-  costs of structural reform3	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	146	1	1	-	(1)
Adjusted	(15,226)	(6,921)	(2,257)	(3,940)	(1,300)
Share of profit in associates and joint ventures
Reported	(12)	31	2,016	-	13
Currency translation	1	-	143	-	(1)
Adjusted	(11)	31	2,159	-	12
Profit/(loss) before tax
Reported	(3,345)	12,049	2,877	435	687
Currency translation	81	99	200	-	(34)
Significant items	1,981	91	8	159	26
-  revenue	40	26	1	66	7
-  operating expenses	1,941	65	7	93	19
Adjusted	(1,283)	12,239	3,085	594	679
Loans and advances to customers (net)
Reported	303,041	306,964	42,380	63,588	20,426
Currency translation	7,175	(372)	4,054	-	(1,561)
Adjusted	310,216	306,592	46,434	63,588	18,865
Customer accounts
Reported	419,642	499,955	48,323	90,834	23,051
Currency translation	9,935	(606)	4,622	-	(1,762)
Adjusted	429,577	499,349	52,945	90,834	21,289

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.

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
	$m	$m	$m	$m	$m
Europe	1,817	2,893	(299)	(632)	3,779
-  UK1	1,511	2,475	(487)	20	3,519
-  of which: HSBC UK Bank plc (ring-fenced bank)	2,047	2,929	127	(318)	4,785
-  of which: HSBC Bank plc (non-ring-fenced bank)	176	259	220	(17)	638
-  of which: Holdings and other	(712)	(713)	(834)	355	(1,904)
-  France	236	163	(97)	(133)	169
-  Germany	17	82	155	67	321
-  Switzerland	46	10	-	(12)	44
-  other	7	163	130	(574)	(274)
Asia	4,366	2,364	3,193	2,326	12,249
-  Hong Kong	4,076	1,303	920	(383)	5,916
-  Australia	146	132	131	(26)	383
-  India	20	265	593	232	1,110
-  Indonesia	14	12	111	(8)	129
-  mainland China	(95)	288	586	2,554	3,333
-  Malaysia	37	(23)	145	(20)	139
-  Singapore	145	107	231	(13)	470
-  Taiwan	14	16	106	(5)	131
-  other	9	264	370	(5)	638
Middle East and North Africa	194	235	805	189	1,423
-  Egypt	79	42	163	(2)	282
-  UAE	91	3	342	(61)	375
-  Saudi Arabia	17	-	65	274	356
-  other	7	190	235	(22)	410
North America	60	1,023	697	(406)	1,374
-  US	(131)	472	524	(337)	528
-  Canada	141	544	145	(62)	768
-  other	50	7	28	(7)	78
Latin America	(304)	162	326	(103)	81
-  Mexico	305	88	222	(46)	569
-  other2	(609)	74	104	(57)	(488)
Year ended 31 Dec 2021	6,133	6,677	4,722	1,374	18,906

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 of $587m. As per Group accounting policy, HSBC's cash-generating units are based on geographical regions, subdivided by global business. 

Profit/(loss) before tax by country/territory within global businesses (continued)
	Wealth and Personal Banking	Commercial  Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Europe	(680)	(529)	(1,809)	(1,187)	(4,205)
-  UK1	(357)	(543)	(1,769)	(1,555)	(4,224)
-  of which: HSBC UK Bank plc (ring-fenced bank)	113	167	90	(124)	246
-  of which: HSBC Bank plc (non-ring-fenced bank)	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 Banking	Commercial  Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Europe	(841)	(1,324)	(997)	(1,491)	(4,653)
-  UK1	(1,053)	904	(1,217)	(1,979)	(3,345)
-  of which: HSBC UK Bank plc (ring-fenced bank)	(331)	1,555	70	13	1,307
-  of which: HSBC Bank plc (non-ring fenced bank)	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
-  other2	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
-  other2	45	37	257	(2)	337
North America	(573)	855	729	(244)	767
-  US	(277)	386	547	(221)	435
-  Canada	70	427	143	(22)	618
-  other2	(366)	42	39	(1)	(286)
Latin America	264	(103)	328	(89)	400
-  Mexico	311	176	229	(29)	687
-  other2	(47)	(279)	99	(60)	(287)
GBM goodwill impairment2	-	-	(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.

Reconciliation of alternative performance measures
	Page
Use of alternative performance measures	117
Return on average ordinary shareholders' equity and return on average tangible equity	117
Net asset value and tangible net asset value per ordinary share	118
Post-tax return and average total shareholders' equity on average total assets	119
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers	119

Use of alternative performance measures

Our reported results are prepared in accordance with IFRSs as detailed in our financial statements starting on page 308.

As described on page 90, 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 is annualised profit attributable to ordinary shareholders, excluding changes in PVIF and significant items (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. Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been re-presented.

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
	2021	2020	2019
	$m	$m	$m
Profit
Profit attributable to the ordinary shareholders of the parent company	12,607	3,898	5,969
Impairment of goodwill and other intangible assets (net of tax)	608	1,036	7,349
Decrease/(increase) in PVIF (net of tax)	(58)	(253)	(1,248)
Profit attributable to the ordinary shareholders, excluding goodwill, other intangible assets impairment and PVIF	13,157	4,681	12,070
Significant items (net of tax) and other adjustments1	2,086	2,402	2,251
Profit attributable to the ordinary shareholders, excluding goodwill impairment, PVIF and significant items1	15,243	7,083	14,321
Equity
Average total shareholders' equity	199,295	189,719	189,035
Effect of average preference shares and other equity instruments	(22,814)	(22,326)	(23,614)
Average ordinary shareholders' equity	176,481	167,393	165,421
Effect of goodwill, PVIF and other intangibles (net of deferred tax)	(17,705)	(17,292)	(22,574)
Average tangible equity	158,776	150,101	142,847
Fair value of own debt, DVA and other adjustments	1,278	422	1,032
Average tangible equity excluding fair value of own debt, DVA and other adjustments	160,054	150,523	143,879
	%	%	%
Ratio
Return on average ordinary shareholders' equity	7.1	2.3	3.6
Return on average tangible equity	8.3	3.1	8.4
Return on average tangible equity excluding significant items1	9.5	4.7	10.0

1  Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been re-presented.

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 2021
	Wealth and Personal Banking	Commercial Banking	Global Banking and Markets	Corporate Centre	Total
	$m	$m	$m	$m	$m
Profit before tax	6,133	6,677	4,722	1,374	18,906
Tax expense	(1,540)	(1,783)	(1,020)	130	(4,213)
Profit after tax	4,593	4,894	3,702	1,504	14,693
Less attributable to: preference shareholders, other equity holders, non-controlling interests	(735)	(665)	(618)	(68)	(2,086)
Profit attributable to ordinary shareholders of the parent company	3,858	4,229	3,084	1,436	12,607
Increase in PVIF (net of tax)	(65)	4	-	3	(58)
Significant items (net of tax)1	850	51	517	1,269	2,687
Other adjustments	3	(4)	(3)	11	7
Profit attributable to ordinary shareholders, excluding PVIF, significant items1	4,646	4,280	3,598	2,719	15,243
Average tangible shareholders' equity excluding fair value of own debt, DVA and other adjustments	30,587	39,487	41,816	48,164	160,054
Return on average tangible equity excluding significant items (%)1	15.2	10.8	8.6	5.6	9.5
	Year ended 31 Dec 2020
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
Other adjustments	20	(14)	(25)	60	41
Profit attributable to ordinary shareholders, excluding PVIF, significant items and 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

1  Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been re-presented.

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
	2021	2020	2019
	$m	$m	$m
Total shareholders' equity	198,250	196,443	183,955
Preference shares and other equity instruments	(22,414)	(22,414)	(22,276)
Total ordinary shareholders' equity	175,836	174,029	161,679
Goodwill, PVIF and intangible assets (net of deferred tax)	(17,643)	(17,606)	(17,535)
Tangible ordinary shareholders' equity	158,193	156,423	144,144
Basic number of $0.50 ordinary shares outstanding	20,073	20,184	20,206
	$	$	$
Value per share
Net asset value per ordinary share	8.76	8.62	8.00
Tangible net asset value per ordinary share	7.88	7.75	7.13

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
	2021	2020	2019
	$m	$m	$m
Profit after tax	14,693	6,099	8,708
Average total shareholders' equity	199,295	189,719	189,035
Average total assets	3,012,437	2,936,939	2,712,376
Ratio	%	%	%
Post-tax return on average total assets	0.5	0.2	0.3
Average total shareholders' equity to average total assets	6.62	6.46	6.97

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
	2021	2020	2019
	$m	$m	$m
Expected credit losses and other credit impairment charges ('ECL')	928	(8,817)	(2,756)
Currency translation		(465)	69
Adjusted ECL	928	(9,282)	(2,687)
Average gross loans and advances to customers	1,057,412	1,047,114	1,021,238
Currency translation	(8,487)	20,243	22,292
Average gross loans and advances to customers - at most recent balance sheet foreign exchange rates	1,048,925	1,067,357	1,043,530
	%	%	%
Ratio
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers	(0.09)	0.87	0.26

 

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