Annual Financial Report - 2 of 9

RNS Number : 6487F

HSBC Holdings PLC

11 March 2020

 

 

Financial review

47 Financial summary

56 Global businesses and geographical regions

72 Other information

73 Risk

152 Capital

Supporting the transition to a low-carbon economy

We acted as a mandated lead arranger in the refinancing of the £2.5bn Beatrice offshore wind farm off the north-east coast of Scotland, which is jointly owned by UK energy firm SSE, Danish fund manager Copenhagen Infrastructure Partners and Edinburgh-based energy firm Red Rock Power Limited, a subsidiary of Beijing-headquartered SDIC Power.

To encourage low-carbon electricity generation and ensure progress towards carbon neutrality by 2050, the UK government awarded Beatrice a 15-year contract for difference, a mechanism in which public funding underpins power revenues that could otherwise fluctuate with swings in electricity prices.

Beatrice is one of the largest wind farms globally with a capacity of 580MW, which is capable of powering approximately 450,000 homes.

Financial summary
	Page
Use of non-GAAP financial measures	47
Changes from 1 January 2019	47
Critical accounting estimates and judgements	47
Consolidated income statement	48
Income statement commentary	49
Consolidated balance sheet	52

Use of non-GAAP financial measures

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

229

.

To measure our performance, we also use non-GAAP financial measures, including 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, and where others are used they are described. All non-GAAP financial measures are reconciled to the closest reported financial 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 263.

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 56 to 59 and pages 63 to 68 detail the effects of significant items on each of our global business segments and geographical regions in 2019, 2018 and 2017.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2019.

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 2019 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates: •   the income statements for 2018 and 2017 at the average rates of exchange for 2019; and •   the balance sheets at 31 December 2018 and 31 December 2017 at the prevailing rates of exchange on 31 December 2019. No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC's Argentinian subsidiaries have not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.

Changes from 1 January 2019

IFRS 16 'Leases'

On 1 January 2019, HSBC adopted the requirements of IFRS 16 'Leases' retrospectively, with the cumulative effect of initially applying the standard recognised as an adjustment to the opening balance of retained earnings at that date. Comparatives were not restated. The adoption of the standard increased assets by $5bn and increased financial liabilities by the same amount with no effect on net assets or retained earnings.

Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 'Financial Instruments'

Amendments to IFRS 9 and IAS 39 issued in September 2019 modify specific hedge accounting requirements so that entities apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows of the hedging instrument are based is not altered as a result of interest rate benchmark reform. These amendments apply from 1 January 2020 with early adoption permitted. HSBC has adopted the amendments that apply to IAS 39 from 1 January 2019 and has made the additional disclosures as required by the amendments.

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 246.

•   Deferred tax assets: The most significant judgements relate to judgements made in respect of expected future profitability. See Note 1.2(l) on page 250.

•   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 244.

•   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 242.

•   Goodwill impairment: 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 242.

•   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 250.

•   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 249.

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
		2019		2018		2017		2016		2015
	Footnotes	$m		$m		$m		$m		$m
Net interest income		30,462		30,489		28,176		29,813		32,531
Net fee income		12,023		12,620		12,811		12,777		14,705
Net income from financial instruments held for trading or managed on a fair value basis		10,231		9,531		8,426		7,521		8,717
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		3,478		(1,488	)	2,836		1,262		565
Change in fair value of designated debt and related derivatives	1	90		(97	)	155		(1,997	)	973
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		812		695		N/A		N/A		N/A
Gains less losses from financial investments		335		218		1,150		1,385		2,068
Net insurance premium income		10,636		10,659		9,779		9,951		10,355
Other operating income/(expense)		2,957		960		443		(876	)	1,178
Total operating income		71,024		63,587		63,776		59,836		71,092
Net insurance claims and benefits paid and movement in liabilities to policyholders		(14,926	)	(9,807	)	(12,331	)	(11,870	)	(11,292	)
Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions	2	56,098		53,780		51,445		47,966		59,800
Change in expected credit losses and other credit impairment charges		(2,756	)	(1,767	)	N/A		N/A		N/A
Loan impairment charges and other credit risk provisions		N/A		N/A		(1,769	)	(3,400	)	(3,721	)
Net operating income		53,342		52,013		49,676		44,566		56,079
Total operating expenses excluding goodwill impairment		(35,000	)	(34,659	)	(34,884	)	(36,568	)	(39,768	)
Goodwill impairment		(7,349	)	-		-		(3,240	)	-
Operating profit		10,993		17,354		14,792		4,758		16,311
Share of profit in associates and joint ventures		2,354		2,536		2,375		2,354		2,556
Profit before tax		13,347		19,890		17,167		7,112		18,867
Tax expense		(4,639	)	(4,865	)	(5,288	)	(3,666	)	(3,771	)
Profit for the year		8,708		15,025		11,879		3,446		15,096
Attributable to:
-  ordinary shareholders of the parent company		5,969		12,608		9,683		1,299		12,572
-  preference shareholders of the parent company		90		90		90		90		90
-  other equity holders		1,324		1,029		1,025		1,090		860
-  non-controlling interests		1,325		1,298		1,081		967		1,574
Profit for the year		8,708		15,025		11,879		3,446		15,096

Five-year financial information
		2019		2018		2017		2016		2015
	Footnotes	$		$		$		$		$
Basic earnings per share		0.30		0.63		0.48		0.07		0.65
Diluted earnings per share		0.30		0.63		0.48		0.07		0.64
Dividends per ordinary share	3	0.51		0.51		0.51		0.51		0.50
		%		%		%		%		%
Dividend payout ratio	4	172.2		81.0		106.3		728.6		76.5
Post-tax return on average total assets		0.3		0.6		0.5		0.1		0.6
Return on average ordinary shareholders' equity		3.6		7.7		5.9		0.8		7.2
Return on average tangible equity		8.4		8.6		6.8		2.6		8.1
Effective tax rate		34.8		24.5		30.8		51.5		19.99

For footnotes, see page 55.

Unless stated otherwise, all tables in the Annual Report and Accounts 2019 are presented on a reported basis.

For a summary of our financial performance in 2019, see page 27.

For further financial performance data for each global business and geographical region, see pages 56 to 59 and 61 to 69, 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 263.

Income statement commentary

The following commentary compares Group financial performance for the years ended 2019 with 2018.

Net interest income

		2019		2018		2017
	Footnotes	$m		$m		$m
Interest income		54,695		49,609		40,995
Interest expense		(24,233	)	(19,120	)	(12,819	)
Net interest income		30,462		30,489		28,176
Average interest-earning assets		1,922,822		1,839,346		1,726,120
		%		%		%
Gross interest yield	5	2.84		2.70		2.37
Less: cost of funds	5	(1.48	)	(1.21	)	(0.88	)
Net interest spread	6	1.36		1.49		1.49
Net interest margin	7	1.58		1.66		1.63

For footnotes, see page 55.

Summary of interest income by type of asset
		2019						2018						2017
		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		212,920		2,411		1.13		233,637		2,475		1.06		236,126		2,030		0.86
Loans and advances to customers		1,021,554		35,578		3.48		972,963		33,285		3.42		902,214		28,751		3.19
Reverse repurchase agreements - non-trading		224,942		4,690		2.08		205,427		3,739		1.82		173,760		2,191		1.26
Financial investments		417,939		10,705		2.56		386,230		9,166		2.37		389,807		7,440		1.91
Other interest-earning assets		45,467		1,311		2.88		41,089		944		2.30		24,213		583		2.41
Total interest-earning assets		1,922,822		54,695		2.84		1,839,346		49,609		2.70		1,726,120		40,995		2.37

Summary of interest expense by type of liability and equity
		2019						2018						2017
		Average balance		Interest expense		Cost		Average balance		Interest expense		Cost		Average balance		Interest expense		Cost
	Footnotes	$m		$m		%		$m		$m		%		$m		$m		%
Deposits by banks	8	52,515		702		1.34		44,530		506		1.14		47,337		451		0.95
Customer accounts	9	1,149,483		11,238		0.98		1,138,620		8,287		0.73		1,094,920		5,405		0.49
Repurchase agreements - non-trading		160,850		4,023		2.50		161,204		3,409		2.11		136,561		1,665		1.22
Debt securities in issue - non-trading	10	211,229		6,522		3.09		183,434		5,675		3.09		169,243		4,391		2.59
Other interest-bearing liabilities		59,980		1,748		2.91		53,731		1,243		2.31		7,009		907		12.94
Total interest-bearing liabilities		1,634,057		24,233		1.48		1,581,519		19,120		1.21		1,455,070		12,819		0.88

For footnotes, see page 55.

Net interest income ('NII') of $30.5bn was broadly unchanged compared with 2018. Interest income associated with the increase in average interest-earning assets ('AIEA') of 5% was offset by higher funding costs, reflecting higher average interest rates compared with the previous year.

Excluding the adverse effects of significant items and foreign currency translation differences, NII increased by $1.0bn.

Net interest margin ('NIM') of 1.58% was 8 basis points ('bps') lower than in 2018 as the higher yield on AIEA of 14bps was offset by the rise in funding costs of average interest-bearing liabilities of 27bps.

The decrease in NIM in 2019 included the adverse effects of foreign currency translation differences and significant items. Excluding these, NIM fell by 6bps.

Interest income increased by $5.1bn or 10% compared with 2018, benefiting from growth in AIEA of 5% and higher average interest rates compared with the previous year, with the yield on AIEA increasing by 14bps.

Interest income on loans and advances to customers increased by $2.3bn. This was mainly driven by higher average interest rates compared with the previous year, with yields increasing by 6bps and 5% volume growth in AIEA, notably in term lending in Asia, and growth in mortgages in Asia and Europe.

Interest income on short-term funds and financial investments increased by $1.5bn, reflecting higher average interest rates compared with the previous year.

The increase in interest income included $1.6bn in relation to the adverse effects of significant items and foreign currency translation. Excluding these, interest income increased by $6.7bn.

Interest expense increased by $5.1bn or 27% compared with 2018. This reflects growth in average interest-bearing liabilities of 3% and an increase in funding cost of 27bps, predominantly in customer accounts.

Interest expense on interest-bearing customer accounts was $3.0bn higher, mainly in Asia, reflecting higher average interest rates compared with the previous year together with an increase in customer accounts, primarily towards term deposits.

Interest expense on debt securities in issue was $0.8bn higher. This was mainly as a result of debt issuances by HSBC Holdings to meet regulatory requirements, which contributed $0.5bn towards the increase.

The increase in interest expense included the favourable effects of significant items and foreign currency translation differences of $0.6bn. Excluding these impacts, interest expense was $5.7bn higher.

Net fee income of $12.0bn was $0.6bn lower compared with 2018, including adverse foreign currency translation differences of $0.3bn. The remaining reduction primarily reflected lower net fee income in RBWM and GB&M.

In RBWM, the reduction reflected lower fees from broking and unit trusts in Hong Kong due to lower volumes as investor confidence was weaker compared with a strong 2018. In addition, funds under management fees also reduced, reflecting a change in mix of clients' investments to lower risk and lower margin products.

In GB&M, net fee income was lower, mainly in the UK and the US. This was primarily due to lower corporate finance fees, which reflected reduced client activity. This was partly offset by higher underwriting fees, notably in Asia, France and the US, from higher volumes.

Net income from financial instruments held for trading or managed on a fair value basis increased by $0.7bn and included a favourable fair value movement on non-qualifying hedges of $0.3bn, offset by adverse movements in foreign currency translation differences of $0.5bn.

The increase was mainly in Asia, notably in Hong Kong, reflecting favourable market conditions and increased client activity in our Rates, Credit and Equities businesses, and from gains in Balance Sheet Management ('BSM') on funding swaps due to favourable movements on yield curves. In Latin America, income in BSM increased, primarily from gains on debt securities in Argentina and a favourable impact of hyperinflation, as well as increased client activity in GB&M in Mexico. Income increased in the US from increased client activity on US Treasuries and emerging markets interest rate swaps, partly offset by lower revenue from precious metals trading.

In the UK, income fell as subdued market conditions resulted in lower Global Markets revenue, notably in Rates, Credit and Equities.

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss was $3.5bn, compared with a net expense of $1.5bn in 2018. This increase primarily reflected more favourable equity market performance in Hong Kong and France, resulting in revaluation gains on the equity and unit trust assets supporting insurance and investment contracts.

This positive movement resulted in a corresponding movement in liabilities to policyholders and the present value of in-force long-term insurance business (see 'Other operating income' below), reflecting 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 were $0.1bn favourable in 2019, compared with adverse movements of $0.1bn in 2018. These movements were driven by changes in interest rates between the periods, notably in US dollars and pounds sterling.

The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances, and are managed in conjunction with interest rate swaps as part of our interest rate management strategy. These liabilities are discussed further on page 53.

Gains less losses from financial investments of $0.3bn increased by $0.1bn compared with 2018, reflecting higher gains from the disposal of debt securities.

Net insurance premium income was broadly unchanged compared with 2018, and included adverse effects of foreign currency translation differences. Excluding these, the increase of $0.2bn reflected higher new business volumes, particularly in Hong Kong, Singapore and UK, partly offset by higher reinsurance ceded in Hong Kong.

Other operating income of $2.9bn in 2019 increased by $2.0bn compared with 2018. This was primarily due to a higher favourable change in the present value of in-force long-term insurance business ('PVIF') in 2019 (up $1.1bn), and a $0.8bn dilution gain in 2019 following the merger of The Saudi British Bank with Alawwal bank in Saudi Arabia.

This increase in PVIF reflected a favourable movement in 'assumption changes and experience variances' of $1.1bn. This was primarily in Hong Kong due to the effect of interest rate changes on the valuation of the liabilities under insurance contracts, which has a corresponding increase in 'net insurance claims and benefits paid and movement in liabilities to policyholders'. For further details, see Note 21 on the financial statements.

In 2019, we recognised a gain in Argentina following the sale of a stake in the payment processing company Prisma Medios de Pago S.A., and a gain in Mexico associated with the launch of a merchant acquiring services joint venture with Global Payments Inc. By contrast, 2018 included a loss of $0.1bn on the early redemption of subordinated debt linked to the US run-off portfolio.

Net insurance claims and benefits paid and movement in liabilities to policyholders were $5.1bn 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 the impact of higher new business volumes, particularly in Hong Kong and Singapore. These were partly offset by the impact of higher reinsurance ceded in Hong Kong.

Changes in expected credit losses and other credit impairment charges ('ECL') of $2.8bn were $1.0bn higher compared with 2018. This was mainly driven by higher charges in CMB, RBWM and GB&M. ECL in 2019 included a charge to reflect the economic outlook in Hong Kong, as well as a partial release of allowances related to UK economic uncertainty. See page 95 for more information on the impact of alternative/additional scenarios. The effects of foreign currency translation differences between the periods were minimal.

•   In CMB, ECL charges of $1.2bn were $0.5bn higher reflecting increases in Europe and Hong Kong, while the previous year benefited from net releases in North America that did not recur. The movements were partly offset by a reduction in ECL charges in MENA.

•   In RBWM, ECL charges of $1.4bn were $0.3bn higher, driven by increased ECL related to unsecured lending, notably in the US, Mexico, and Hong Kong. In addition, ECL in 2019 included charges in Argentina related to government bond exposures in our insurance business.

•   In GB&M, net ECL charges of $0.2bn compared with a net release of $31m in 2018. Releases in the previous period more than offset ECL charges and primarily related to a small number of clients within the oil and gas sector in the US.

•   In Corporate Centre, net ECL charges of $7m compared with a net release of $119m in 2018. The ECL in 2019 included charges related to BSM's exposure to government bonds in Argentina. There were also lower net releases recorded in 2019 related to our legacy portfolios in the UK, compared with 2018.

On a constant currency basis, ECL as a percentage of average gross loans and advances to customers was 0.27%, compared with 0.17% in 2018.

Operating expenses - currency translation and significant items
	2019		2018
	$m		$m
Significant items	9,554		1,644
-  costs of structural reform	158		361
-  customer redress programmes	1,281		146
-  disposals, acquisitions and investment in new businesses	-		52
-  goodwill impairment	7,349		-
-  past service costs of guaranteed minimum pension benefits equalisation	-		228
-  restructuring and other related costs	827		66
-  settlements and provisions in connection with legal and regulatory matters	(61	)	816
-  currency translation on significant items			(25	)
Currency translation			1,109
Year ended 31 Dec	9,554		2,753

Staff numbers (full-time equivalents)
	2019		2018		2017
Global businesses
Retail Banking and Wealth Management	134,296		133,644		129,402
Commercial Banking	44,503		44,805		44,871
Global Banking and Markets	48,459		48,500		45,725
Global Private Banking	6,767		6,819		7,250
Corporate Centre	1,326		1,449		1,439
At 31 Dec	235,351		235,217		228,687

Operating expenses of $42.3bn were $7.7bn or 22% higher than in 2018 and included favourable foreign currency translation differences of $1.1bn, which were more than offset by net adverse movements in significant items of $7.9bn.

Significant items included:

•   a $7.3bn impairment of goodwill, which included $4.0bn related to our global GB&M business, resulting from an update in long-term assumptions and the planned reshaping of the business, and $2.5bn in our CMB business in Europe, $0.4bn in GPB in North America, and $0.4bn in CMB in Latin America and MENA reflecting lower long-term economic growth rate assumptions. For further details, see Note 21 on the financial statements;

•   customer redress programme costs of $1.3bn in 2019, $1.2bn of which related to the mis-selling of payment protection insurance ('PPI') mainly driven by a higher than expected increase in the volume of complaints prior to the deadline in August 2019. This compared with $0.1bn in 2018. For further details, see Note 10 on the financial statements; and

•   restructuring and other related costs of $0.8bn in 2019, which included $753m of severance costs arising from cost efficiency measures across our global businesses and functions. We expect annualised cost savings from these measures to be approximately equal to 2019 severance costs.

These were partly offset by:

•   the non-recurrence of settlements and provisions in connection with legal and regulatory matters of $0.8bn in 2018;

•   lower costs of structural reform of $0.2bn, which included costs associated with the UK's withdrawal from the European Union; and

•   the non-recurrence of a provision in relation to past service costs of guaranteed minimum pension obligations in 2018 of $0.2bn.

Excluding significant items and foreign currency translation differences, operating expenses of $32.8bn were $0.9bn or 2.8% higher than in 2018. The increase primarily reflected investments to grow the business (up $0.4bn), notably in RBWM and CMB, as well as continued investment in digital capabilities across all of our global businesses.

Volume-related growth increased operating expenses by $0.2bn, and the UK bank levy of $988m was $24m higher than in 2018.

The impact of our cost-saving efficiencies broadly offset inflation.

The number of employees expressed in full-time equivalent staff ('FTEs') at 31 December 2019 was 235,351, an increase of 134 from 31 December 2018. This largely reflected an increase in FTEs associated with our investment initiatives, which was broadly offset by reductions following our restructuring programmes. The number of contractors at 31 December 2019 was 7,411, a decrease of 3,443 from 31 December 2018.

The 2020 business update sets a target of reducing adjusted operating expenses to $31bn or lower by 2022. To achieve this reduction, we expect to incur restructuring costs of $6bn during the period to 2022.

Share of profit in associates and joint ventures was $2.4bn, a decrease of $0.2bn or 7% compared with 2018, and included the adverse effects of foreign currency translation differences of $90m.

Excluding the effects of foreign currency translation differences, our share of profit in associates and joint ventures decreased by $92m compared with 2018. This reflected lower income from The Saudi British Bank due to higher ECL charges and other expenses relating to the merger with Alawwal bank, partly offset by higher income from BoCom.

At 31 December 2019, we performed an impairment review of our investment in BoCom and concluded that it was not impaired, based on our value-in-use ('VIU') calculation. For more information on the key assumptions in our VIU calculation, including the sensitivity of the VIU to each key assumption, see Note 18 on the financial statements.

Tax expense of $4.6bn was $0.2bn lower than in 2018.

The effective tax rate for 2019 of 34.8% was higher than the 24.5% for 2018 due to the impairment of goodwill in 2019, which is not deductible for tax purposes.

This impairment charge increased the 2019 effective tax rate by 12.3%.

Further details are provided in Note 7 on the financial statements.

Consolidated balance sheet

Five-year summary consolidated balance sheet
		2019		2018		2017		2016		2015
	Footnotes	$m		$m		$m		$m		$m
Assets
Cash and balances at central banks		154,099		162,843		180,624		128,009		98,934
Trading assets		254,271		238,130		287,995		235,125		224,837
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss		43,627		41,111		N/A		N/A		N/A
Financial assets designated at fair value		N/A		N/A		29,464		24,756		23,852
Derivatives		242,995		207,825		219,818		290,872		288,476
Loans and advances to banks		69,203		72,167		90,393		88,126		90,401
Loans and advances to customers	11	1,036,743		981,696		962,964		861,504		924,454
Reverse repurchase agreements - non-trading		240,862		242,804		201,553		160,974		146,255
Financial investments		443,312		407,433		389,076		436,797		428,955
Other assets		230,040		204,115		159,884		148,823		183,492
Total assets at 31 Dec		2,715,152		2,558,124		2,521,771		2,374,986		2,409,656
Liabilities and equity
Liabilities
Deposits by banks		59,022		56,331		69,922		59,939		54,371
Customer accounts		1,439,115		1,362,643		1,364,462		1,272,386		1,289,586
Repurchase agreements - non-trading		140,344		165,884		130,002		88,958		80,400
Trading liabilities		83,170		84,431		184,361		153,691		141,614
Financial liabilities designated at fair value		164,466		148,505		94,429		86,832		66,408
Derivatives		239,497		205,835		216,821		279,819		281,071
Debt securities in issue		104,555		85,342		64,546		65,915		88,949
Liabilities under insurance contracts		97,439		87,330		85,667		75,273		69,938
Other liabilities		194,876		167,574		113,690		109,595		139,801
Total liabilities at 31 Dec		2,522,484		2,363,875		2,323,900		2,192,408		2,212,138
Equity
Total shareholders' equity		183,955		186,253		190,250		175,386		188,460
Non-controlling interests		8,713		7,996		7,621		7,192		9,058
Total equity at 31 Dec		192,668		194,249		197,871		182,578		197,518
Total liabilities and equity at 31 Dec		2,715,152		2,558,124		2,521,771		2,374,986		2,409,656

For footnotes, see page 55.

A more detailed consolidated balance sheet is contained in the financial statements on page 231.

Five-year selected financial information
		2019		2018		2017		2016		2015
	Footnotes	$m		$m		$m		$m		$m
Called up share capital		10,319		10,180		10,160		10,096		9,842
Capital resources	12	172,150		173,238		182,383		172,358		189,833
Undated subordinated loan capital		1,968		1,969		1,969		1,967		2,368
Preferred securities and dated subordinated loan capital	13	33,063		35,014		42,147		42,600		42,844
Risk-weighted assets		843,395		865,318		871,337		857,181		1,102,995
Total shareholders' equity		183,955		186,253		190,250		175,386		188,460
Less: preference shares and other equity instruments		(22,276	)	(23,772	)	(23,655	)	(18,515	)	(16,517	)
Total ordinary shareholders' equity		161,679		162,481		166,595		156,871		171,943
Less: goodwill and intangible assets (net of tax)		(17,535	)	(22,425	)	(21,680	)	(19,649	)	(24,626	)
Tangible ordinary shareholders' equity		144,144		140,056		144,915		137,222		147,317
Financial statistics
Loans and advances to customers as a percentage of customer accounts		72.0%		72.0%		70.6%		67.7%		71.7%
Average total shareholders' equity to average total assets		6.97%		7.16%		7.33%		7.37%		7.31%
Net asset value per ordinary share at year-end ($)	14	8.00		8.13		8.35		7.91		8.77
Tangible net asset value per ordinary share at year-end ($)		7.13		7.01		7.26		6.92		7.51
Tangible net asset value per fully diluted share at year-end ($)		7.11		6.98		7.22		6.88		7.46
Number of $0.50 ordinary shares in issue (millions)		20,639		20,361		20,321		20,192		19,685
Basic number of $0.50 ordinary shares outstanding (millions)		20,206		19,981		19,960		19,838		19,604
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)		20,280		20,059		20,065		19,933		19,744
Closing foreign exchange translation rates to $:
$1: £		0.756		0.783		0.740		0.811		0.675
$1: €		0.890		0.873		0.834		0.949		0.919

For footnotes, see page 55.

Balance sheet commentary compared with 
31 December 2018

At 31 December 2019, our total assets were $2.7tn, an increase of $157bn or 6% on a reported basis and $126bn or 5% on a constant currency basis.

Our ratio of customer advances to customer accounts of 72.0% was unchanged from 31 December 2018.

Assets

Loans and advances to customers of $1.0tn increased by $55bn or 6% on a reported basis. This included a favourable effect of foreign currency translation differences of $13bn, resulting in growth of $42bn or 4% on a constant currency basis, which was mainly due to continued growth in Asia and Europe, notably in Hong Kong and the UK.

Customer lending in Asia increased by $25bn, with growth in all global businesses. The increase in RBWM (up $13bn) reflected growth in Hong Kong (up $8bn) and Australia (up $3bn), primarily due to increased mortgage lending. In GPB (up $6bn), the increase was mainly in Hong Kong, driven by growth in marketable securities-backed lending transactions, and in Singapore from increased term lending. Lending growth in GB&M (up $4bn) and CMB (up $3bn) reflected higher corporate term lending from our continued strategic focus on loan growth in the region, as well as from an increase in customer demand.

In Europe, customer lending increased by $12bn, notably in HSBC UK (up $11bn). This primarily reflected growth in mortgage balances in RBWM (up $9bn) due to our continued focus on broker-originated mortgages, and in CMB (up $2bn) where term lending increased.

Cash and balances at central banks decreased by $9bn or 5% and included a favourable effect of foreign currency translation differences of $1bn. Excluding this, cash and balances at central banks decreased by $10bn, mainly in the US, reflecting the redeployment of our commercial surplus.

Trading assets increased by $16bn or 7%, which included a favourable effect of foreign currency translation differences of $3bn. Excluding this, trading assets increased by $13bn due to an increase in equity security holdings, notably in Hong Kong, the US and the UK, in part due an increase in client activity compared with 2018. This was partly offset by a decrease in debt securities held in the US.

Derivative assets increased by $35bn or 17% and included a favourable effect of foreign currency translation differences of $5bn. Excluding this, derivative assets increased by $31bn, primarily from mark-to-market gains in the UK. The increase in derivative assets was consistent with the increase in derivative liabilities as the underlying risk is broadly matched.

Financial investments increased by $36bn or 9%, which included a favourable effect of foreign currency translation differences of $3bn. Excluding this, financial investments increased by $33bn, mainly due to an increase in debt securities, notably in the UK, and to a lesser extent in Singapore and the US. This was partly offset by a decrease in investments in government bonds in Hong Kong.

Liabilities

Customer accounts of $1.4tn increased by $76bn or 6% on a reported basis, including the favourable effect of foreign currency translation differences of $17bn. On a constant currency basis, current accounts increased by $59bn or 4%, with growth across all regions, mainly in Asia, Europe and North America.

In Asia, we grew customer accounts by $30bn or 4%, notably in RBWM (up $20bn) and CMB (up $5bn), primarily from an increase in time deposits, reflecting higher customer inflows due to competitive rates. Growth in GB&M (up $5bn) was mainly in Singapore as we continued to target this market for growth.

Customer accounts increased in Europe by $13bn. This was driven by growth in RBWM (up $11bn), mainly due to higher savings balances, notably in the UK, and in CMB (up $10bn), reflecting growth in Global Liquidity and Cash Management ('GLCM'). These increases were partly offset by a decrease in GB&M balances (down $9bn) mainly in the UK in GLCM.

In North America, customer accounts increased by $11bn, notably in RBWM (up $7bn) reflecting growth in savings and deposits from recent promotions. Growth in CMB (up $7bn), was notably in the US from an increase in demand deposits.

Repurchase agreements - non-trading decreased by $26bn or 15%, primarily in the US from a decreased use of repurchase agreements for funding in our Global Markets business.

Financial liabilities designated at fair value were $16bn or 11% higher. This was mainly due to increased issuances of senior debt during the year by HSBC Holdings and increased issuances of structured notes in the UK and France.

Derivative liabilities increased by $34bn or 16%, including a favourable effect of foreign currency translation differences of $5bn. Excluding this, derivative liabilities increased by $29bn, which is consistent with the increase in derivative assets, since the underlying risk is broadly matched.

Debt securities in issue rose by $19bn or 23%, reflecting an increase in certificates of deposits, primarily in Europe, Asia and North America. This was partly offset by a decrease in commercial paper, notably in the UK, and a decrease in medium term notes in North America.

Equity

Total shareholders' equity of $184bn decreased by $2bn or 1%. The reduction was mainly due to dividends paid to shareholders of $12bn and adverse movements of $2bn related to fair value attributable to changes in own credit risk. These reductions were partly offset by profits generated in the period of $7bn, shares issued in lieu of dividends of $3bn and a $1bn decrease in accumulated foreign exchange losses.

Risk-weighted assets

Risk-weighted assets ('RWAs') totalled $843.4bn at 31 December 2019, a $21.9bn decrease. Excluding foreign currency translation differences, RWAs decreased by $26.9bn in 2019.

A $32.2bn decrease in RWAs as a result of methodology and policy changes was mostly due to management initiatives in CMB and GB&M, including risk parameter refinements, a change to our best estimate of expected loss on corporate exposures, and securitisation transactions. A $7.7bn decrease due to model updates included global corporate model changes in CMB and GB&M, and changes to Private Banking credit risk models in Asia and North America. A $9.0bn increase in RWAs due to asset size movements predominantly reflected RWA increases due to lending growth of $26.2bn, which were partly offset by reductions due to active portfolio management of $17.2bn. Changes in asset quality caused a $3.7bn rise in RWAs.

-  other	35,458		35,470
Asia	697,358		664,824
-  Hong Kong	499,955		484,897
-  Singapore	48,569		42,323
-  mainland China	48,323		45,712
-  Australia	23,191		20,649
-  India	14,935		14,210
-  Malaysia	14,624		13,904
-  Taiwan	14,668		13,602
-  Indonesia	4,732		3,810
-  other	28,361		25,717
Middle East and North Africa (excluding Saudi Arabia)	38,126		35,408
-  United Arab Emirates	17,949		16,583
-  Turkey	3,870		4,169
-  Egypt	5,186		4,493
-  other	11,121		10,163
North America	146,676		133,291
-  US	90,834		82,523
-  Canada	48,425		43,898
-  other	7,417		6,870
Latin America	28,237		25,966
-  Mexico	23,051		19,936
-  other	5,186		6,030
At 31 Dec	1,439,115		1,362,643

Loans and advances, deposits by currency
	At
	31 Dec 2019
$m	USD		GBP		HKD		EUR		CNY		Others15		Total
Loans and advances to banks	19,386		3,245		6,242		4,266		5,772		30,292		69,203
Loans and advances to customers	177,696		264,029		234,945		84,919		34,338		240,816		1,036,743
Total loans and advances	197,082		267,274		241,187		89,185		40,110		271,108		1,105,946
Deposits by banks	23,508		7,537		1,865		11,154		4,265		10,693		59,022
Customer accounts	360,462		358,764		299,049		122,988		52,216		245,636		1,439,115
Total deposits	383,970		366,301		300,914		134,142		56,481		256,329		1,498,137
	At
	31 Dec 2018
$m	USD		GBP		HKD		EUR		CNY		Others15		Total
Loans and advances to banks	23,469		4,351		3,241		3,462		7,418		30,226		72,167
Loans and advances to customers	176,907		243,541		220,458		86,583		29,973		224,234		981,696
Total loans and advances	200,376		247,892		223,699		90,045		37,391		254,460		1,053,863
Deposits by banks	17,802		5,777		3,748		15,923		4,065		9,016		56,331
Customer accounts	348,741		340,244		290,748		116,095		49,596		217,219		1,362,643
Total deposits	366,543		346,021		294,496		132,018		53,661		226,235		1,418,974

Footnotes to financial summary

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

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

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

4  Dividends per ordinary share expressed as a percentage of basic earnings per share.

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

6  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.

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

8  Including interest-bearing bank deposits only.

9  Including interest-bearing customer accounts only.

10  'Financial liabilities designated at fair value - own debt issued' and 'Debt securities' lines have been merged into one new line: 'Debt securities in issue - non-trading'. Interest expense on financial liabilities designated at fair value is reported as 'Net income/ (expense) from financial instruments held for trading or managed on a fair value basis' in the consolidated income statement, other than interest on own debt, which is reported in 'Interest expense'.

11 Net of impairment allowances.

12 Capital resources are regulatory capital, the calculation of which is set out on page 152.

13 Including perpetual preferred securities, details of which can be found in Note 28 on the financial statements.

14 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.

15 'Others' includes items with no currency information available ($9,334m for loans to banks, $62,037m for loans to customers, $15m for deposits by banks and $33m for customer accounts).

Global businesses and geographical regions
	Page
Reconciliation of reported and adjusted items - global businesses	56
Supplementary global business disclosures	60
Analysis of reported results by geographical regions	62
Reconciliation of reported and adjusted items - geographical regions	64
Analysis by country	70

Summary

The Group Chief Executive and the rest of the Group Management Board ('GMB') review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating

Segments' and are presented in Note 10: Segmental analysis on page 263.

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

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

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

Reconciliation of reported and adjusted items - global businesses

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

		2019
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported		23,192		15,285		14,840		1,848		933		56,098
Significant items		208		7		76		-		(980	)	(689	)
-  customer redress programmes		156		7		-		-		-		163
-  disposals, acquisitions and investment in new businesses		52		-		-		-		(820	)	(768	)
-  fair value movements on financial instruments	2	-		-		76		-		(160	)	(84	)
Adjusted		23,400		15,292		14,916		1,848		(47	)	55,409
ECL
Reported		(1,390	)	(1,184	)	(153	)	(22	)	(7	)	(2,756	)
Adjusted		(1,390	)	(1,184	)	(153	)	(22	)	(7	)	(2,756	)
Operating expenses
Reported		(15,429	)	(9,829	)	(13,640	)	(1,817	)	(1,634	)	(42,349	)
Significant items		1,412		3,028		4,223		393		498		9,554
-  costs of structural reform	3	-		4		42		-		112		158
-  customer redress programmes		1,264		17		-		-		-		1,281
-  goodwill impairment		-		2,956		3,962		431		-		7,349
-  restructuring and other related costs		148		51		217		32		379		827
-  settlements and provisions in connection with legal and regulatory matters		-		-		2		(70	)	7		(61	)
Adjusted		(14,017	)	(6,801	)	(9,417	)	(1,424	)	(1,136	)	(32,795	)
Share of profit in associates and joint ventures
Reported		55		-		-		-		2,299		2,354
Adjusted		55		-		-		-		2,299		2,354
Profit before tax
Reported		6,428		4,272		1,047		9		1,591		13,347
Significant items		1,620		3,035		4,299		393		(482	)	8,865
-  revenue		208		7		76		-		(980	)	(689	)
-  operating expenses		1,412		3,028		4,223		393		498		9,554
Adjusted		8,048		7,307		5,346		402		1,109		22,212
Loans and advances to customers (net)
Reported		395,393		346,060		246,266		47,593		1,431		1,036,743
Adjusted		395,393		346,060		246,266		47,593		1,431		1,036,743
Customer accounts
Reported		689,283		386,522		292,284		62,943		8,083		1,439,115
Adjusted		689,283		386,522		292,284		62,943		8,083		1,439,115

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)
		2018
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported		21,928		14,938		15,634		1,790		(510	)	53,780
Currency translation		(562	)	(423	)	(489	)	(28	)	(115	)	(1,617	)
Significant items		8		(50	)	(120	)	(5	)	335		168
-  customer redress programmes		-		(53	)	-		-		-		(53	)
-  disposals, acquisitions and investment in new businesses		7		-		-		(5	)	111		113
-  fair value movements on financial instruments	2	-		-		(122	)	-		222		100
-  currency translation on significant items		1		3		2		-		2		8
Adjusted		21,374		14,465		15,025		1,757		(290	)	52,331
ECL
Reported		(1,177	)	(739	)	26		8		115		(1,767	)
Currency translation		43		27		5		(1	)	4		78
Adjusted		(1,134	)	(712	)	31		7		119		(1,689	)
Operating expenses
Reported		(13,902	)	(6,480	)	(9,348	)	(1,550	)	(3,379	)	(34,659	)
Currency translation		467		203		287		28		124		1,109
Significant items		180		2		(109	)	97		1,474		1,644
-  costs of structural reform	3	2		8		41		-		310		361
-  customer redress programmes		173		(5	)	(22	)	-		-		146
-  disposals, acquisitions and investment in new businesses		-		-		-		52		-		52
-  past service costs of guaranteed minimum pension benefits equalisation		-		-		-		-		228		228
-  restructuring and other related costs		-		-		-		7		59		66
-  settlements and provisions in connection with legal and regulatory matters		16		-		(131	)	42		889		816
-  currency translation on significant items		(11	)	(1	)	3		(4	)	(12	)	(25	)
Adjusted		(13,255	)	(6,275	)	(9,170	)	(1,425	)	(1,781	)	(31,906	)
Share of profit in associates and joint ventures
Reported		33		-		-		-		2,503		2,536
Currency translation		-		-		-		-		(90	)	(90	)
Adjusted		33		-		-		-		2,413		2,446
Profit/(loss) before tax
Reported		6,882		7,719		6,312		248		(1,271	)	19,890
Currency translation		(52	)	(193	)	(197	)	(1	)	(77	)	(520	)
Significant items		188		(48	)	(229	)	92		1,809		1,812
-  revenue		8		(50	)	(120	)	(5	)	335		168
-  operating expenses		180		2		(109	)	97		1,474		1,644
Adjusted		7,018		7,478		5,886		339		461		21,182
Loans and advances to customers (net)
Reported		361,872		333,162		244,978		39,217		2,467		981,696
Currency translation		6,045		3,937		2,147		385		66		12,580
Adjusted		367,917		337,099		247,125		39,602		2,533		994,276
Customer accounts
Reported		640,924		357,596		290,914		64,658		8,551		1,362,643
Currency translation		8,248		4,678		3,670		395		104		17,095
Adjusted		649,172		362,274		294,584		65,053		8,655		1,379,738

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)
		2017
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported		20,519		13,120		14,617		1,723		1,466		51,445
Currency translation		(578	)	(336	)	(264	)	(5	)	(161	)	(1,344	)
Significant items		(233	)	99		470		(20	)	(244	)	72
-  customer redress programmes		3		103		2		-		-		108
-  disposals, acquisitions and investment in new businesses		(235	)	-		99		(20	)	(118	)	(274	)
-  fair value movements on financial instruments	2	-		-		373		-		(128	)	245
-  currency translation on significant items		(1	)	(4	)	(4	)	-		2		(7	)
Adjusted		19,708		12,883		14,823		1,698		1,061		50,173
LICs
Reported		(980	)	(496	)	(459	)	(16	)	182		(1,769	)
Currency translation		39		28		20		(1	)	(3	)	83
Adjusted		(941	)	(468	)	(439	)	(17	)	179		(1,686	)
Operating expenses
Reported		(13,734	)	(6,001	)	(8,723	)	(1,586	)	(4,840	)	(34,884	)
Currency translation		471		178		133		9		124		915
Significant items		877		53		(119	)	193		2,706		3,710
-  costs of structural reform	3	6		3		8		-		403		420
-  costs to achieve		270		44		240		3		2,445		3,002
-  customer redress programmes		637		16		2		-		-		655
-  disposals, acquisitions and investment in new businesses		-		-		-		31		22		53
-  gain on partial settlement of pension obligation		(26	)	(9	)	(9	)	(3	)	(141	)	(188	)
-  settlements and provisions in connection with legal and regulatory matters		-		-		(376	)	164		14		(198	)
-  currency translation on significant items		(10	)	(1	)	16		(2	)	(37	)	(34	)
Adjusted		(12,386	)	(5,770	)	(8,709	)	(1,384	)	(2,010	)	(30,259	)
Share of profit in associates and joint ventures
Reported		18		-		-		-		2,357		2,375
Currency translation		(6	)	-		-		-		(41	)	(47	)
Adjusted		12		-		-		-		2,316		2,328
Profit/(loss) before tax
Reported		5,823		6,623		5,435		121		(835	)	17,167
Currency translation		(74	)	(130	)	(111	)	3		(81	)	(393	)
Significant items		644		152		351		173		2,462		3,782
-  revenue		(233	)	99		470		(20	)	(244	)	72
-  operating expenses		877		53		(119	)	193		2,706		3,710
Adjusted		6,393		6,645		5,675		297		1,546		20,556
Loans and advances to customers (net)
Reported		346,148		316,533		252,474		40,326		7,483		962,964
Currency translation		(8,380	)	(7,663	)	(5,584	)	(313	)	(101	)	(22,041	)
Adjusted		337,768		308,870		246,890		40,013		7,382		940,923
Customer accounts
Reported		639,592		362,908		283,943		66,512		11,507		1,364,462
Currency translation		(10,150	)	(6,420	)	(7,309	)	(1,021	)	(490	)	(25,390	)
Adjusted		629,442		356,488		276,634		65,491		11,017		1,339,072

For footnotes, see page 71.

Reconciliation of reported and adjusted risk-weighted assets
		At 31 Dec 2019
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$bn		$bn		$bn		$bn		$bn		$bn
Risk-weighted assets
Reported		134.0		316.7		258.2		14.0		120.5		843.4
Adjusted	4	134.0		316.7		258.2		14.0		120.5		843.4
		At 31 Dec 2018
Risk-weighted assets
Reported		126.9		321.2		281.0		16.8		119.4		865.3
Currency translation		0.7		3.4		1.1		0.1		0.4		5.7
Disposals		-		-		-		-		(0.8	)	(0.8	)
-  operations in Brazil		-		-		-		-		(0.8	)	(0.8	)
Adjusted	4	127.6		324.6		282.1		16.9		119.0		870.2

		At 31 Dec 2017
Risk-weighted assets
Reported		121.5		301.0		299.3		16.0		133.5		871.3
Currency translation		(2.5	)	(8.0	)	(4.6	)	(0.1	)	(1.4	)	(16.6	)
Disposals		-		-		-		-		(2.6	)	(2.6	)
-  operations in Brazil		-		-		-		-		(2.6	)	(2.6	)
Adjusted	4	119.0		293.0		294.7		15.9		129.5		852.1

For footnotes, see page 71.

Supplementary global business disclosures

RBWM: 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 RBWM and for all global business segments in aggregate, and separately the insurance distribution income earned by HSBC bank channels.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels5
		2019				2018				2017
		RBWM		All global businesses		RBWM		All global businesses		RBWM		All global businesses
	Footnotes	$m		$m		$m		$m		$m		$m
Net interest income		2,131		2,306		2,026		2,196		1,977		2,174
Net fee income		(690	)	(739	)	(569	)	(558	)	(489	)	(496	)
- fee income		104		129		181		274		232		330
- fee expense		(794	)	(868	)	(750	)	(832	)	(721	)	(826	)
Net income from financial instruments held for trading or managed on a fair value basis		(44	)	(29	)	(521	)	167		(51	)	1
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss		3,568		3,554		(897	)	(1,559	)	2,830		2,771
Gains less losses from financial investments		5		5		58		57		23		31
Net insurance premium income		10,054		10,718		10,054		10,541		9,312		9,938
Other operating income		1,765		1,787		709		767		62		96
of which: PVIF		1,696		1,749		637		679		12		22
Total operating income		16,789		17,602		10,860		11,611		13,664		14,515
Net insurance claims and benefits paid and movement in liabilities to policyholders		(14,192	)	(14,891	)	(9,079	)	(9,596	)	(11,732	)	(12,323	)
Net operating income before change in expected credit losses and other credit impairment charges	1	2,597		2,711		1,781		2,015		1,932		2,192
ECL		(104	)	(115	)	(2	)	(1	)	-		-
Net operating income		2,493		2,596		1,779		2,014		1,932		2,192
Total operating expenses		(520	)	(505	)	(455	)	(478	)	(388	)	(422	)
Operating profit		1,973		2,091		1,324		1,536		1,544		1,770
Share of profit in associates and joint ventures		44		44		31		32		10		10
Profit before tax of insurance manufacturing operations	6	2,017		2,135		1,355		1,568		1,554		1,780
Annualised new business premiums of insurance manufacturing operations		3,296		3,382		3,153		3,231		2,647		2,706
Insurance distribution income earned by HSBC bank channels		913		1,039		923		1,039		889		1,012

For footnotes, see page 71.

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 $0.6bn or 36%. This was mainly due to favourable market impacts of $0.1bn in 2019, primarily driven by strong equity market performance in Hong Kong, compared with adverse market impacts of $(0.3)bn in 2018. It also reflected a $0.1bn increase in the value of new business written.

Net operating income before change in expected credit losses and other credit impairment charges was $0.7bn or 35% higher than 2018. 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 $3.6bn compared with a net expense of $1.6bn in 2018, due to favourable equity market performance in Hong Kong and France in 2019 compared with 2018, resulting in revaluation gains on equity and unit trust assets supporting insurance and investment contracts. This positive movement resulted in a corresponding movement in liabilities to policyholders and PVIF (see 'Other operating income' below), reflecting the extent to which the policyholders and shareholders respectively participate in the investment performance of the associated assets portfolio.

•   'Net insurance premium income' of $10.7bn was $0.2bn higher. This was driven by higher new business volumes across all entities, and particularly in Hong Kong, Singapore and UK, partly offset by higher reinsurance ceded in Hong Kong.

•   'Other operating income' of $1.8bn increased by $1.0bn. This increase in PVIF reflected a favourable movement in 'assumption changes and experience variances' of $1.1bn, primarily in Hong Kong due to the effect of interest rate changes on the valuation of the liabilities under insurance contracts. In addition, the value of new business written increased by $0.1bn to $1.2bn. For further details, see Note 21 on the financial statements.

•   'Net insurance claims and benefits paid and movement in liabilities to policyholders' of $14.9bn were $5.3bn higher than 2018. This increase was primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk and the impact of higher new business volumes, particularly in Hong Kong and Singapore. This was partly offset by the impact of higher reinsurance ceded in Hong Kong.

Adjusted ECL of $0.1bn in 2019 primarily related to government bond exposures in Argentina.

Adjusted operating expenses of $0.5bn increased by $27m or 6% compared with 2018, reflecting investment in core insurance functions and capabilities, including preparation for the implementation of IFRS 17 'Insurance Contracts'.

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. Growth in ANP during the period reflected new business growth in most entities, with the main contribution coming from Hong Kong, mainland China and the UK.

Insurance distribution income from HSBC channels included $665m (2018: $651m) on HSBC manufactured products, for which a corresponding fee expense is recognised within insurance manufacturing, and $375m (2018: $389m) on products manufactured by third-party providers. The RBWM component of this distribution income was $589m (2018: $581m) from HSBC manufactured products and $325m (2018: $343m) from third-party products.

Asset Management: Funds under management

The following table shows the funds under management of our Asset Management business.

Asset Management - reported funds under management7
	2019		2018		2017
	$bn		$bn		$bn
Opening balance	444		462		410
Net new money	30		8		8
Value change	30		(14	)	24
Exchange and other	2		(12	)	20
Closing balance	506		444		462
Asset Management - reported funds under management by geography
	2019		2018		2017
	$bn		$bn		$bn
Europe	287		235		249
Asia	161		164		168
MENA	6		2		1
North America	44		36		37
Latin America	8		7		7
Closing balance	506		444		462

For footnotes, see page 71.

Funds under management represents assets managed, either actively or passively, on behalf of our customers. At 31 December 2019, Asset Management funds under management amounted to $506bn, an increase of $62bn or 14%. The increase reflected positive market performance and foreign exchange, together with strong net new money, primarily from money market solutions and discretionary products, notably in the UK.

GB&M: Securities Services

Assets held in custody⁷

Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. At 31 December 2019, we held $8.5tn of assets as custodian, 16% higher than at 31 December 2018. This increase was driven by the onboarding of assets for new clients globally, and the incremental net asset inflows for existing clients together with favourable market movements mainly in Asia.

Assets under administration

Our assets under administration business, which includes the provision of bond and loan administration services, transfer agency services and the valuation of portfolios of securities and other financial assets on behalf of clients, complements the custody business. At 31 December 2019, the value of assets held

under administration by the Group amounted to $4.0tn, which was 20% higher than at 31 December 2018. This increase was mainly driven by the onboarding of significant new client assets in Europe, together with incremental net assets inflows for existing clients in both Europe and Asia.

GPB client assets

The following table shows the client assets of our GPB business.

GPB - reported client assets
	2019		2018		2017
	$bn		$bn		$bn
At 1 Jan	309		330		298
Net new money	23		10		-
Value change	23		(17	)	21
Disposals	-		-		-
Exchange and other	6		(14	)	11
At 31 Dec	361		309		330

GPB - reported client assets by geography
		2019		2018		2017
	Footnotes	$bn		$bn		$bn
Europe		171		149		161
Asia		151		124		130
North America		39		36		39
Latin America		-		-		-
Middle East	8	-		-		-
At 31 Dec		361		309		330

For footnotes, see page 71.

Analysis of reported results by geographical regions

HSBC reported profit/(loss) before tax and balance sheet data
		2019
		Europe		Asia		MENA		North America		Latin America		Intra-HSBC/ Global impairment		Total
	Footnotes	$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 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)	9	1,830		1,921		916		638		(23	)	(6,190	)	(908	)
Net operating income before change in expected credit losses and other credit impairment charges	1	18,056		30,419		3,710		6,587		3,516		(6,190	)	56,098
Change in expected credit losses and other credit impairment charges		(938	)	(724	)	(117	)	(237	)	(740	)	-		(2,756	)
Net operating income		17,118		29,695		3,593		6,350		2,776		(6,190	)	53,342
Total operating expenses excluding goodwill impairment		(19,237	)	(13,297	)	(1,452	)	(5,152	)	(2,052	)	6,190		(35,000	)
Goodwill impairment		(2,522	)	-		(97	)	(431	)	(337	)	(3,962	)	(7,349	)
Operating profit/(loss)		(4,641	)	16,398		2,044		767		387		(3,962	)	10,993
Share of profit/(loss) in associates and joint ventures		(12	)	2,070		283		-		13		-		2,354
Profit/(loss) before tax		(4,653	)	18,468		2,327		767		400		(3,962	)	13,347
		%		%		%		%		%				%
Share of HSBC's profit before tax		(34.9	)	138.4		17.4		5.7		3.0				100.0
Cost efficiency ratio		120.5		43.7		41.8		84.8		67.9				75.5
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		393,850		477,727		28,556		113,474		23,136		-		1,036,743
Total assets		1,248,205		1,102,805		65,369		377,095		52,879		(131,201	)	2,715,152
Customer accounts		528,718		697,358		38,126		146,676		28,237		-		1,439,115
Risk-weighted assets	10	280,983		366,375		57,492		121,953		38,460		-		843,395
HSBC reported profit/(loss) before tax and balance sheet data (continued)
		2018
		Europe		Asia		MENA		North America		Latin America		Intra-HSBC items		Total
	Footnotes	$m		$m		$m		$m		$m		$m		$m
Net interest income		6,841		16,108		1,763		3,521		2,020		236		30,489
Net fee income		3,996		5,676		607		1,854		498		(11	)	12,620
Net income from financial instruments held for trading or managed on a fair value basis		3,942		4,134		285		728		736		(294	)	9,531
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		(789	)	(717	)	-		-		18		-		(1,488	)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		601		(26	)	(1	)	36		27		58		695
Other income/(expense)	9	3,113		3,609		33		586		(237	)	(5,171	)	1,933
Net operating income before change in expected credit losses and other credit impairment charges/recoveries	1	17,704		28,784		2,687		6,725		3,062		(5,182	)	53,780
Change in expected credit losses and other credit impairment (charges)/recoveries		(609	)	(602	)	(209	)	223		(570	)	-		(1,767	)
Net operating income		17,095		28,182		2,478		6,948		2,492		(5,182	)	52,013
Total operating expenses		(17,934	)	(12,466	)	(1,357	)	(6,149	)	(1,935	)	5,182		(34,659	)
Operating profit/(loss)		(839	)	15,716		1,121		799		557		-		17,354
Share of profit in associates and joint ventures		24		2,074		436		-		2		-		2,536
Profit/(loss) before tax		(815	)	17,790		1,557		799		559		-		19,890
		%		%		%		%		%				%
Share of HSBC's profit before tax		(4.1	)	89.5		7.8		4.0		2.8				100.0
Cost efficiency ratio		101.3		43.3		50.5		91.4		63.2				64.4
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		373,073		450,545		28,824		108,146		21,108		-		981,696
Total assets		1,150,235		1,047,636		57,455		390,410		51,923		(139,535	)	2,558,124
Customer accounts		503,154		664,824		35,408		133,291		25,966		-		1,362,643
Risk-weighted assets	10	298,056		363,894		56,689		131,582		38,341		-		865,318
		2017
Net interest income		6,970		14,153		1,752		3,441		2,098		(238	)	28,176
Net fee income		4,161		5,631		619		1,880		520		-		12,811
Net income from financial instruments held for trading or managed on a fair value basis	11,12	4,066		2,929		180		527		486		238		8,426
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss		769		2,003		-		-		64		-		2,836
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Other income	9,12	1,454		1,090		109		865		57		(4,379	)	(804	)
Net operating income before loan impairment charges/recoveries and other credit risk provisions	1	17,420		25,806		2,660		6,713		3,225		(4,379	)	51,445
Loan impairment (charges)/recoveries and other credit risk provisions		(658	)	(570	)	(207	)	189		(523	)	-		(1,769	)
Net operating income		16,762		25,236		2,453		6,902		2,702		(4,379	)	49,676
Total operating expenses		(18,665	)	(11,790	)	(1,394	)	(5,305	)	(2,109	)	4,379		(34,884	)
Operating profit/(loss)		(1,903	)	13,446		1,059		1,597		593		-		14,792
Share of profit/(loss) in associates and joint ventures		39		1,883		442		4		7		-		2,375
Profit/(loss) before tax		(1,864	)	15,329		1,501		1,601		600		-		17,167
		%		%		%		%		%				%
Share of HSBC's profit before tax		(10.8	)	89.3		8.7		9.3		3.5				100.0
Cost efficiency ratio		107.1		45.7		52.4		79.0		65.4				67.8
Balance sheet data		$m		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		381,547		425,971		28,050		107,607		19,789		-		962,964
Total assets		1,169,515		1,008,498		57,469		391,292		48,413		(153,416	)	2,521,771
Customer accounts		505,182		657,395		34,658		143,432		23,795		-		1,364,462
Risk-weighted assets	10	311,612		357,808		59,196		131,276		36,372		-		871,337

For footnotes, see page 71.

Reconciliation of reported and adjusted items - geographical regions

Reconciliation of reported and adjusted items
		2019
		Europe		Asia		MENA		North America		Latin America		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported	11	18,056		30,419		3,710		6,587		3,516		56,098
Significant items		26		35		(828	)	68		10		(689	)
-  customer redress programmes		163		-		-		-		-		163
-  disposals, acquisitions and investment in new businesses		-		-		(828	)	59		1		(768	)
-  fair value movements on financial instruments	2	(137	)	35		-		9		9		(84	)
Adjusted	11	18,082		30,454		2,882		6,655		3,526		55,409
ECL
Reported		(938	)	(724	)	(117	)	(237	)	(740	)	(2,756	)
Adjusted		(938	)	(724	)	(117	)	(237	)	(740	)	(2,756	)
Operating expenses
Reported	11, 14	(21,759	)	(13,297	)	(1,549	)	(5,583	)	(2,389	)	(42,349	)
Significant items	14	4,435		126		112		544		375		9,554
-  costs of structural reform	3	154		4		-		-		-		158
-  customer redress programmes		1,281		-		-		-		-		1,281
-  goodwill impairment	14	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	)
Adjusted	14	(17,324	)	(13,171	)	(1,437	)	(5,039	)	(2,014	)	(32,795	)
Share of profit/(loss) in associates and joint ventures
Reported		(12	)	2,070		283		-		13		2,354
Adjusted		(12	)	2,070		283		-		13		2,354
Profit/(loss) before tax
Reported	14	(4,653	)	18,468		2,327		767		400		13,347
Significant items	14	4,461		161		(716	)	612		385		8,865
-  revenue		26		35		(828	)	68		10		(689	)
-  operating expenses	14	4,435		126		112		544		375		9,554
Adjusted		(192	)	18,629		1,611		1,379		785		22,212
Loans and advances to customers (net)
Reported		393,850		477,727		28,556		113,474		23,136		1,036,743
Adjusted		393,850		477,727		28,556		113,474		23,136		1,036,743
Customer accounts
Reported		528,718		697,358		38,126		146,676		28,237		1,439,115
Adjusted		528,718		697,358		38,126		146,676		28,237		1,439,115

For footnotes, see page 71.  

Reconciliation of reported and adjusted items (continued)
		2019
		UK		Hong Kong		Mainland China		US		Mexico
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		13,538		19,412		3,101		4,638		2,555
Significant items		23		26		1		66		8
-  customer redress programmes		162		-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		59		-
-  fair value movements on financial instruments	2	(139	)	26		1		7		8
Adjusted		13,561		19,438		3,102		4,704		2,563
ECL
Reported		(714	)	(459	)	(129	)	(170	)	(491	)
Adjusted		(714	)	(459	)	(129	)	(170	)	(491	)
Operating expenses
Reported		(16,157	)	(6,935	)	(2,111	)	(4,033	)	(1,390	)
Significant items		1,795		64		6		93		20
-  costs of structural reform	3	101		4		-		-		-
-  customer redress programmes		1,281		-		-		-		-
-  restructuring and other related costs		405		61		6		93		20
-  settlements and provisions in connection with legal and regulatory matters		8		(1	)	-		-		-
Adjusted		(14,362	)	(6,871	)	(2,105	)	(3,940	)	(1,370	)
Share of profit/(loss) in associates and joint ventures
Reported		(12	)	31		2,016		-		13
Adjusted		(12	)	31		2,016		-		13
Profit/(loss) before tax
Reported		(3,345	)	12,049		2,877		435		687
Significant items		1,818		90		7		159		28
-  revenue		23		26		1		66		8
-  operating expenses		1,795		64		6		93		20
Adjusted		(1,527	)	12,139		2,884		594		715
Loans and advances to customers (net)
Reported		303,041		306,964		42,380		63,588		20,426
Adjusted		303,041		306,964		42,380		63,588		20,426
Customer accounts
Reported		419,642		499,955		48,323		90,834		23,051
Adjusted		419,642		499,955		48,323		90,834		23,051

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)
		2018
		Europe		Asia		MENA		North America		Latin America		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported	11	17,704		28,784		2,687		6,725		3,062		53,780
Currency translation	11	(914	)	(316	)	(18	)	(40	)	(389	)	(1,617	)
Significant items		103		(36	)	(1	)	97		5		168
-  customer redress programmes		(53	)	-		-		-		-		(53	)
-  disposals, acquisitions and investment in new businesses		(5	)	-		-		103		15		113
-  fair value movements on financial instruments	2	156		(38	)	(1	)	(8	)	(9	)	100
-  currency translation on significant items		5		2		-		2		(1	)	8
Adjusted	11	16,893		28,432		2,668		6,782		2,678		52,331
Change in expected credit losses and other credit impairment charges
Reported		(609	)	(602	)	(209	)	223		(570	)	(1,767	)
Currency translation		12		5		9		(1	)	53		78
Adjusted		(597	)	(597	)	(200	)	222		(517	)	(1,689	)
Operating expenses
Reported	11	(17,934	)	(12,466	)	(1,357	)	(6,149	)	(1,935	)	(34,659	)
Currency translation	11	664		175		23		23		284		1,109
Significant items		652		16		-		976		-		1,644
-  costs of structural reform	3	352		9		-		-		-		361
-  customer redress programmes		146		-		-		-		-		146
-  disposals, acquisitions and investment in new businesses		52		-		-		-		-		52
-  past service costs of guaranteed minimum pension benefits equalisation		228		-		-		-		-		228
-  restructuring and other related costs		46		7		-		13		-		66
-  settlements and provisions in connection with legal and regulatory matters		(147	)			-		963		-		816
-  currency translation on significant items		(25	)	-		-		-		-		(25	)
Adjusted	11	(16,618	)	(12,275	)	(1,334	)	(5,150	)	(1,651	)	(31,906	)
Share of profit in associates and joint ventures
Reported		24		2,074		436		-		2		2,536
Currency translation		-		(89	)	-		-		(1	)	(90	)
Adjusted		24		1,985		436		-		1		2,446
Profit/(loss) before tax
Reported		(815	)	17,790		1,557		799		559		19,890
Currency translation		(238	)	(225	)	14		(18	)	(53	)	(520	)
Significant items		755		(20	)	(1	)	1,073		5		1,812
-  revenue		103		(36	)	(1	)	97		5		168
-  operating expenses		652		16		-		976		-		1,644
Adjusted		(298	)	17,545		1,570		1,854		511		21,182
Loans and advances to customers (net)
Reported		373,073		450,545		28,824		108,146		21,108		981,696
Currency translation		8,887		1,875		(84	)	2,067		(165	)	12,580
Adjusted		381,960		452,420		28,740		110,213		20,943		994,276
Customer accounts
Reported		503,154		664,824		35,408		133,291		25,966		1,362,643
Currency translation		12,796		3,016		58		2,163		(938	)	17,095
Adjusted		515,950		667,840		35,466		135,454		25,028		1,379,738

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)
		2018
		UK		Hong Kong		Mainland China		US		Mexico
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		13,597		18,231		2,888		4,741		2,294
Currency translation		(713	)	6		(125	)	-		(1	)
Significant items		114		5		(1	)	97		(8	)
-  customer redress programmes		(53	)	-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		103		-
-  fair value movements on financial instruments	2	162		5		(1	)	(6	)	(7	)
-  currency translation on significant items		5		-		-		-		(1	)
Adjusted		12,998		18,242		2,762		4,838		2,285
Change in expected credit losses and other credit impairment charges
Reported		(516	)	(214	)	(143	)	199		(463	)
Currency translation		9		(1	)	4		-		-
Adjusted		(507	)	(215	)	(139	)	199		(463	)
Operating expenses
Reported		(14,502	)	(6,539	)	(1,920	)	(4,987	)	(1,303	)
Currency translation		494		(2	)	81		-		-
Significant items		511		15		-		920		-
-  costs of structural reform	3	294		9		-		-		-
-  customer redress programmes		146		-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		-		-
-  past service costs of guaranteed minimum pension benefits equalisation		228		-		-		-		-
-  restructuring and other related costs		39		7		-		11		-
-  settlements and provisions in connection with legal and regulatory matters		(176	)	-		-		908		-
-  currency translation on significant items		(20	)	(1	)	-		1		-
Adjusted		(13,497	)	(6,526	)	(1,839	)	(4,067	)	(1,303	)
Share of profit in associates and joint ventures
Reported		25		36		2,033		-		-
Currency translation		(1	)	-		(90	)	-		-
Adjusted		24		36		1,943		-		-
Profit/(loss) before tax
Reported		(1,396	)	11,514		2,858		(47	)	528
Currency translation		(211	)	3		(130	)	-		(1	)
Significant items		625		20		(1	)	1,017		(8	)
-  revenue		114		5		(1	)	97		(8	)
-  operating expenses		511		15		-		920		-
Adjusted		(982	)	11,537		2,727		970		519
Loans and advances to customers (net)
Reported		287,144		290,547		38,979		64,011		17,895
Currency translation		10,190		1,609		(477	)	-		763
Adjusted		297,334		292,156		38,502		64,011		18,658
Customer accounts
Reported		399,487		484,897		45,712		82,523		19,936
Currency translation		14,173		2,686		(559	)	-		856
Adjusted		413,660		487,583		45,153		82,523		20,792

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)
		2017
		Europe		Asia		MENA		North America		Latin America		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Revenue	1
Reported	11	17,420		25,806		2,660		6,713		3,225		51,445
Currency translation	11	(165	)	(418	)	(93	)	(36	)	(661	)	(1,344	)
Significant items		61		118		1		(94	)	(14	)	72
-  customer redress programmes		108		-		-		-		-		108
-  disposals, acquisitions and investment in new businesses		(98	)	(27	)	-		(130	)	(19	)	(274	)
-  fair value movements on financial investments	2	54		148		1		37		5		245
-  currency translation on significant items		(3	)	(3	)	-		(1	)	-		(7	)
Adjusted	11	17,316		25,506		2,568		6,583		2,550		50,173
LICs
Reported		(658	)	(570	)	(207	)	189		(523	)	(1,769	)
Currency translation		26		9		5		-		43		83
Adjusted		(632	)	(561	)	(202	)	189		(480	)	(1,686	)
Operating expenses		-		-		-		-		-		-
Reported	11	(18,665	)	(11,790	)	(1,394	)	(5,305	)	(2,109	)	(34,884	)
Currency translation	11	135		229		87		21		472		915
Significant items		2,810		622		25		199		54		3,710
-  costs of structural reform	3	420		-		-		-		-		420
-  costs to achieve		1,908		623		34		371		66		3,002
-  customer redress programmes		655		-		-		-		-		655
-  disposals, acquisitions and investment in new businesses		36		-		-		17		-		53
-  gain on partial settlement of pension obligations		-		-		-		(188	)	-		(188	)
-  settlements and provisions in connection with legal and regulatory matters		(215	)	17		-		-		-		(198	)
-  currency translation on significant items		6		(18	)	(9	)	(1	)	(12	)	(34	)
Adjusted	11	(15,720	)	(10,939	)	(1,282	)	(5,085	)	(1,583	)	(30,259	)
Share of profit in associates and joint ventures
Reported		39		1,883		442		4		7		2,375
Currency translation		(2	)	(40	)	-		-		(5	)	(47	)
Adjusted		37		1,843		442		4		2		2,328
Profit/(loss) before tax
Reported		(1,864	)	15,329		1,501		1,601		600		17,167
Currency translation		(6	)	(220	)	(1	)	(15	)	(151	)	(393	)
Significant items		2,871		740		26		105		40		3,782
-  revenue		61		118		1		(94	)	(14	)	72
-  operating expenses		2,810		622		25		199		54		3,710
Adjusted		1,001		15,849		1,526		1,691		489		20,556
Loans and advances to customers (net)
Reported		381,547		425,971		28,050		107,607		19,789		962,964
Currency translation		(11,204	)	(6,374	)	(1,328	)	(1,373	)	(1,762	)	(22,041	)
Adjusted		370,343		419,597		26,722		106,234		18,027		940,923
Customer accounts
Reported		505,182		657,395		34,658		143,432		23,795		1,364,462
Currency translation		(14,581	)	(5,882	)	(963	)	(1,555	)	(2,409	)	(25,390	)
Adjusted		490,601		651,513		33,695		141,877		21,386		1,339,072

For footnotes, see page 71.

Reconciliation of reported and adjusted items (continued)
		2017
		UK		Hong Kong		Mainland China		US		Mexico
	Footnotes	$m		$m		$m		$m		$m
Revenue	1
Reported		12,922		16,117		2,379		4,876		2,160
Currency translation		(129	)	(87	)	(52	)	-		(47	)
Significant items		50		(52	)	100		(99	)	5
-  customer redress programmes		108		-		-		-		-
-  disposals, acquisitions and investment in new businesses		(78	)	(126	)	99		(130	)	-
-  fair value movements on financial instruments	2	24		75		2		31		5
-  currency translation on significant items		(4	)	(1	)	(1	)	-		-
Adjusted		12,843		15,978		2,427		4,777		2,118
LICs
Reported		(492	)	(396	)	(67	)	108		(473	)
Currency translation		21		4		1		-		11
Adjusted		(471	)	(392	)	(66	)	108		(462	)
Operating expenses
Reported		(15,086	)	(6,131	)	(1,687	)	(4,267	)	(1,297	)
Currency translation		100		31		39		-		25
Significant items		2,476		306		68		119		46
-  costs of structural reform	3	410		-		-		-		-
-  costs to achieve		1,766		291		69		290		46
-  customer redress programmes		655		-		-		-		-
-  disposals, acquisitions and investment in new businesses		-		-		-		17		-
-  gain on partial settlement of pension obligations		-		-		-		(188	)	-
-  settlements and provisions in connection with legal and regulatory matters		(362	)	17		-		-		-
-  currency translation on significant items		7		(2	)	(1	)	-		-
Adjusted		(12,510	)	(5,794	)	(1,580	)	(4,148	)	(1,226	)
Share of profit in associates and joint ventures
Reported		38		8		1,863		-		-
Currency translation		(1	)	-		(40	)	-		-
Adjusted		37		8		1,823		-		-
Profit/(loss) before tax
Reported		(2,618	)	9,598		2,488		717		390
Currency translation		(9	)	(52	)	(52	)	-		(11	)
Significant items		2,526		254		168		20		51
-  revenue		50		(52	)	100		(99	)	5
-  operating expenses		2,476		306		68		119		46
Adjusted		(101	)	9,800		2,604		737		430
Loans and advances to customers (net)
Reported		295,538		268,966		40,686		65,168		15,172
Currency translation		(6,336	)	904		(2,666	)	1		679
Adjusted		289,202		269,870		38,020		65,169		15,851
Customer accounts
Reported		401,733		477,104		45,991		89,887		17,809
Currency translation		(8,593	)	1,605		(3,013	)	-		798
Adjusted		393,140		478,709		42,978		89,887		18,607

For footnotes, see page 71.

Analysis by country

Profit/(loss) before tax by country/territory within global businesses
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Europe		(760	)	(889	)	(474	)	72		(2,602	)	(4,653	)
-  UK	12	(815	)	1,365		(650	)	(44	)	(3,201	)	(3,345	)
-  of which: HSBC UK Bank plc (RFB)		(399	)	1,497		70		16		123		1,307
-  HSBC Bank plc (NRFB)		202		271		(223	)	39		(419	)	(130	)
-  Holdings and other		(618	)	(403	)	(497	)	(99	)	(2,905	)	(4,522	)
-  France		45		119		(66	)	9		(71	)	36
-  Germany		6		37		74		7		37		161
-  Switzerland		(1	)	7		(3	)	90		(2	)	91
-  other	13	5		(2,417	)	171		10		635		(1,596	)
Asia		6,935		4,266		3,793		381		3,093		18,468
-  Hong Kong		6,550		3,107		1,663		366		363		12,049
-  Australia		121		108		168		(1	)	48		444
-  India		48		181		466		-		311		1,006
-  Indonesia		12		49		123		-		32		216
-  mainland China		(74	)	296		498		(5	)	2,162		2,877
-  Malaysia		85		66		184		-		7		342
-  Singapore		114		80		219		22		43		478
-  Taiwan		41		23		91		-		6		161
-  other		38		356		381		(1	)	121		895
Middle East and North Africa		190		174		722		1		1,240		2,327
-  Egypt		44		65		222		-		79		410
-  UAE		127		91		241		1		(35	)	425
-  Saudi Arabia		(3	)	-		13		-		1,145		1,155
-  other	13	22		18		246		-		51		337
North America		(219	)	807		608		(445	)	16		767
-  US		(323	)	365		452		(14	)	(45	)	435
-  Canada		44		406		120		-		48		618
-  other	13	60		36		36		(431	)	13		(286	)
Latin America		282		(86	)	360		-		(156	)	400
-  Mexico		279		166		217		-		25		687
-  other	13	3		(252	)	143		-		(181	)	(287	)
GB&M goodwill impairment	13	-		-		(3,962	)	-		-		(3,962	)
Year ended 31 Dec 2019		6,428		4,272		1,047		9		1,591		13,347

For footnotes, see page 71.

Profit/(loss) before tax by country/territory within global businesses (continued)
		Retail Banking and Wealth Management		Commercial  Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Europe		440		2,289		690		(122	)	(4,112	)	(815	)
-  UK	12	476		1,901		409		23		(4,205	)	(1,396	)
-  of which: HSBC UK Bank plc (RFB)		539		934		4		38		(133	)	1,382
-  HSBC Bank plc (NRFB)		548		1,394		795		60		(719	)	2,078
-  Holdings and other		(611	)	(427	)	(390	)	(75	)	(3,353	)	(4,856	)
-  France		(56	)	170		8		16		(101	)	37
-  Germany		14		85		99		8		(5	)	201
-  Switzerland		(1	)	5		(1	)	(100	)	20		(77	)
-  other		7		128		175		(69	)	179		420
Asia		6,190		4,176		3,773		353		3,298		17,790
-  Hong Kong		5,951		3,114		1,670		333		446		11,514
-  Australia		115		120		185		(1	)	44		463
-  India		20		143		387		-		275		825
-  Indonesia		(1	)	13		91		-		1		104
-  mainland China		(200	)	262		566		(4	)	2,234		2,858
-  Malaysia		130		82		132		-		30		374
-  Singapore		75		98		230		25		63		491
-  Taiwan		55		23		117		-		30		225
-  other		45		321		395		-		175		936
Middle East and North Africa		182		108		733		7		527		1,557
-  Egypt		34		54		202		-		43		333
-  UAE		112		58		296		7		-		473
-  Saudi Arabia		-		-		-		-		436		436
-  other		36		(4	)	235		-		48		315
North America		(96	)	968		738		11		(822	)	799
-  US		(205	)	473		624		23		(962	)	(47	)
-  Canada		55		455		139		-		116		765
-  other		54		40		(25	)	(12	)	24		81
Latin America		166		178		378		(1	)	(162	)	559
-  Mexico		194		114		197		-		23		528
-  other		(28	)	64		181		(1	)	(185	)	31
Year ended 31 Dec 2018	Year ended 31 Dec	6,882		7,719		6,312		248		(1,271	)	19,890

Europe		(159	)	1,899		777		(231	)	(4,150	)	(1,864	)
-  UK	12	(177	)	1,539		192		(23	)	(4,149	)	(2,618	)
-  of which: HSBC UK Bank plc (RFB)		NA		NA		NA		NA		NA		NA
-  HSBC Bank plc (NRFB)		413		1,911		889		63		(1,224	)	2,052
-  Holdings and other		(590	)	(372	)	(697	)	(86	)	(2,925	)	(4,670	)
-  France		(12	)	204		228		5		(156	)	269
-  Germany		21		61		141		9		39		271
-  Switzerland		(2	)	7		1		(192	)	2		(184	)
-  other		11		88		215		(30	)	114		398
Asia		5,372		3,394		3,135		285		3,143		15,329
-  Hong Kong		5,039		2,460		1,357		257		485		9,598
-  Australia		122		101		108		(1	)	35		365
-  India		21		159		362		-		374		916
-  Indonesia		(24	)	76		98		-		30		180
-  mainland China		(44	)	161		387		(4	)	1,988		2,488
-  Malaysia		85		50		162		-		28		325
-  Singapore		69		94		202		34		64		463
-  Taiwan		43		10		107		(1	)	40		199
-  other		61		283		352		-		99		795
Middle East and North Africa		144		199		593		-		565		1,501
-  Egypt		26		69		164		-		46		305
-  UAE		110		53		268		-		48		479
-  Saudi Arabia		-		-		-		-		441		441
-  other		8		77		161		-		30		276
North America		305		932		671		67		(374	)	1,601
-  US		166		435		494		66		(444	)	717
-  Canada		61		453		132		-		43		689
-  other		78		44		45		1		27		195
Latin America		161		199		259		-		(19	)	600
-  Mexico		139		105		158		-		(12	)	390
-  other		22		94		101		-		(7	)	210
Year ended 31 Dec 2017		5,823		6,623		5,435		121		(835	)	17,167

For footnotes, see page 71.

Footnotes to global businesses and geographical regions

1  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.

2  Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.

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

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

5  The results presented for insurance manufacturing operations are shown before elimination of intercompany transactions with HSBC non-insurance operations.

6  The effect on the Insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in a reduction in adjusted revenue in 2019 of $3m (2018: $29m) and a reduction in PBT in 2019 of $3m (2018: $27m). These effects are recorded in 'all global businesses' within Corporate Centre.

7  Funds under management and 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. 

8  Client assets related to our Middle East clients are booked across various other regions, primarily in Europe.

9  'Other income' 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.

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

11 Amounts are non-additive across geographical regions due to intercompany transactions within the Group.

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

13  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.

14  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.

Other information
	Page
Taxes paid by region and country/territory	73
Carbon dioxide emissions	73

Taxes paid by region and country/territory

The following table reflects a geographical view of HSBC's operations.

Taxes paid by HSBC relate to HSBC's own tax liabilities including tax on profits earned, employer taxes, the bank levy and other 
duties/levies such as stamp duty. Numbers are reported on a cash flow basis.

Taxes paid by country/territory
		2019		2018		2017
		$m		$m		$m
Europe		3,077		3,398		3,340
-  UK		2,468		2,693		2,654
-  of which: HSBC Holdings		889		832		1,078
-  France		476		536		530
-  Germany		116		111		140
-  Switzerland		(7	)	13		(67	)
-  other		24		45		83
Asia		1,487		2,742		2,277
-  Hong Kong		248		1,398		1,043
-  Australia		180		140		142
-  mainland China		76		235		227
-  India		398		384		297
-  Indonesia		50		44		84
-  Malaysia		119		94		81
-  Singapore		104		88		64
-  Taiwan		68		53		42
-  other		244		306		297
Middle East and North Africa		313		234		419
-  Saudi Arabia		-		-		170
-  UAE		66		67		101
-  Egypt		136		104		58
-  Turkey		42		-		-
-  other		69		63		90
North America		314		399		317
-  US		152		162		134
-  Canada		162		240		182
-  other		-		(3	)	1
Latin America		400		281		443
-  Mexico		179		90		129
-  Argentina		188		163		278
-  other		33		191		314
-  of which: Brazil		21		28		36
Year ended 31 Dec		5,591		7,054		6,796

The tax we paid during 2019 was lower than in 2018 due to differences in the timing of payments, particularly in Hong Kong.

Further details on our approach to tax are provided on page 25.

Carbon dioxide emissions

We report our carbon emissions following the Greenhouse Gas Protocol, which incorporates the scope 2 market-based emission methodology. We report carbon dioxide emissions resulting from energy use in our buildings and employees' business travel.

In 2019, we collected data on energy use and business travel for our operations in 28 countries and territories, which accounted for approximately 94% of our FTEs. To estimate the emissions of our operations in countries and territories where we have operational control and a small presence, we scale up the emissions data from 94% to 100%.

We then apply emission uplift rates to reflect uncertainty concerning the quality and coverage of emission measurement and estimation. The rates are 4% for electricity, 10% for other energy and 6% for business travel. This is consistent both with the Intergovernmental Panel on Climate Change's Good Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories and our internal analysis of data coverage and quality.

Further details on our methodology can be found in our 'CO2 Emissions Reporting Guidance 2019' on our website at www.hsbc.com/our-approach/esg-information/esg-reporting-and-policies as relevant environmental key facts.

 

Carbon dioxide emissions in tonnes
	2019		2018
Total	530,000		559,000
From energy1	414,000		437,000
Included energy UK	10,400		9,700
From travel1	116,000		122,000

1  Our carbon dioxide reporting year runs from October to September. PwC provided limited assurance over our carbon dioxide emissions in accordance with International Standard on Assurance Engagement 3000 (Revised) 'Assurance Engagements other than Audits and Reviews of Historical Financial Information'. This can be found on our website at www.hsbc.com/our-approach/esg-information/esg-reporting-and-policies.

Carbon dioxide emissions in tonnes per FTE
	2019		2018
Total	2.26		2.39
From energy	1.76		1.87
From travel	0.5		0.52

The reduction in our carbon emissions continues to be driven by energy efficiency initiatives, as well as our procurement of electricity from renewable sources under power purchase agreements.

Energy consumption in GWh
	2019		2018
Total Group	1,050		1,092
UK only	281		279

As energy takes 78% of our carbon emissions, we continue to focus on energy reduction and efficiency projects. During 2019, we implemented over 810 energy conservation measures that amount to an estimated energy avoidance in excess of 22M kWh.

 

END

 

 

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