REG - HSBC Holdings PLC - Half-year Report - Part 3
31/07/2024 16:15
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RNS Number : 5763Y HSBC Holdings PLC 31 July 2024
Wholesale analysis
IFRS 9 ECL sensitivity to future economic conditions(1,2,3)
By geography at 30 Jun 2024(5) Reported Reported Consensus Central scenario allowance for ECL Consensus Upside scenario allowance for ECL Consensus Downside Downside 2 scenario allowance for ECL
Gross carrying amount(4) allowance scenario allowance for ECL
for ECL
$m $m $m $m $m $m
UK 422,340 803 2,455
738 591 989
US 200,895 202
186 187 241 455
Hong Kong 428,358 543 1,199
506 373 741
Mainland China 129,488 179
146 90 314 791
Mexico 35,659
55 51 41 67 229
UAE 56,876
54 52 45 61 104
France 170,093 102
100 88 116 150
Other geographies(6) 451,769 269
242 190 378 875
Total 1,895,479 2,206 2,020 1,604 6,257
2,907
of which:
Stage 1 1,759,826 743
682 535 870 868
Stage 2 135,653 1,463 1,337 1,069 5,389
2,037
By geography at 31 Dec 2023(5)
UK 426,427 820 2,487
754 599 1,041
US 191,104 215 441
199 189 268
Hong Kong 447,480 609 1,393
566 433 807
Mainland China 129,945 258 945
217 142 414
Canada(7) 84,092 89 487
75 56 107
Mexico 30,159 60 226
56 46 73
UAE 52,074 32
32 30 34 40
France 178,827 98 141
102 90 124
Other geographies(6) 450,271 325 882
298 245 410
Total 1,990,378 2,507 2,301 1,829 7,043
3,278
of which:
Stage 1 1,820,843 754 854
702 553 860
Stage 2 169,535 1,753 1,599 1,276 6,189
2,418
1 Allowance for ECL sensitivity includes off-balance sheet financial
instruments. These are subject to significant measurement uncertainty.
2 Includes low credit-risk financial instruments such as debt
instruments at FVOCI, which have high carrying amounts but low ECL under all
the above scenarios.
3 Excludes defaulted obligors. For a detailed breakdown of performing
and non-performing wholesale portfolio exposures, see page 87.
4 Staging refers only to probability-weighted/reported gross carrying
amount. Stage allocation of gross exposures varies by scenario, with higher
allocation to stage 2 under the Downside 2 scenario.
5 Geographies include all legal entities which share a common set of
macroeconomic scenarios for the majority of exposures.
6 Includes small portfolios that use less complex modelling approaches
and are not sensitive to macroeconomic changes.
7 Classified as held for sale at 31 December 2023.
At 30 June 2024, the highest level of 100% scenario-weighted ECL was observed
in the UK and Hong Kong. This higher ECL impact was largely driven by
significant exposure in these regions. In the wholesale portfolio, off-balance
sheet financial instruments have a lower likelihood to be fully converted to a
funded exposure at the point of default, and consequently the ECL sensitivity
impact is lower in relation to its nominal amount when compared with an
on-balance sheet exposure with similar risk profile.
Compared with 31 December 2023, the Downside 2 ECL impact reduced by $0.8bn
mostly due to sale of the Canada business, decrease of exposures in the
performing portfolio in Hong Kong and slower deterioration of the
macroeconomic conditions under this scenario, which led to a reduction of ECL
impact in some markets such as mainland China.
Retail analysis
IFRS 9 ECL sensitivity to future economic conditions(1)
By geography at 30 Jun 2024 Reported gross carrying amount Reported allowance Consensus Central scenario allowance for ECL Consensus Upside scenario allowance for ECL Consensus Downside scenario allowance for ECL Downside 2 scenario allowance for ECL
for ECL
$m $m $m $m $m $m
UK
Mortgages 161,684 162 152 146 169 320
Credit cards 7,448 253 403
249 210 266
Other 8,023 235 315
232 199 260
Mexico
Mortgages 8,315 178 358
168 138 206
Credit cards 2,271 318 400
314 312 319
Other 4,148 443 550
438 428 453
Hong Kong
Mortgages 105,741 2
2 1 2 8
Credit cards 9,169 260 1,096
204 183 318
Other 6,442 110 425
94 86 116
UAE
Mortgages 1,879 16
16 16 16 17
Credit cards 476 26
25 25 26 35
Other 681 20
19 19 20 29
US
Mortgages 15,367 7
7 7 8 14
Credit cards 193 15
15 14 16 16
Other geographies
Mortgages 53,273 155 219
151 145 161
Credit cards 3,618 164 277
158 144 187
Other 2,384 75 111
73 70 78
Total 391,113 2,439 2,319 2,143 4,592
2,622
of which: mortgages
Stage 1 304,217 78 283
67 51 104
Stage 2 39,815 175 343
165 144 187
Stage 3 2,229 267 309
265 259 272
of which: credit cards
Stage 1 18,913 248 630
233 201 290
Stage 2 3,962 597 1,400
540 495 649
Stage 3 300 190 196
190 190 193
of which: others
Stage 1 18,192 223 499
211 188 246
Stage 2 2,875 356 624
344 310 377
Stage 3 611 304 306
304 304 305
IFRS 9 ECL sensitivity to future economic conditions(1,2) (continued)
By geography at 31 Dec 2023 Reported gross carrying amount Reported allowance Consensus Central scenario allowance for ECL Consensus Upside scenario allowance for ECL Consensus Downside scenario allowance Downside 2 scenario allowance for ECL
for ECL for ECL
$m $m $m $m $m $m
UK
Mortgages 161,127 189 334
180 172 201
Credit cards 7,582 344 486
340 302 353
Other 8,183 341 515
333 273 383
Mexico
Mortgages 8,666 188 363
180 150 235
Credit cards 2,445 295 489
286 206 376
Other 4,529 513 731
503 426 600
Hong Kong
Mortgages 106,136 2
2 1 3 5
Credit cards 9,128 287 887
239 214 395
Other 6,269 109 256
100 88 124
UAE
Mortgages 2,001 25
25 25 25 25
Credit cards 471 24
24 22 25 32
Other 721 20
20 19 21 28
France
Mortgages 20,589 50
50 50 51 51
Other 1,328 44
44 43 45 48
US
Mortgages 14,385 8
4 3 4 10
Credit cards 204 15
15 10 15 16
Canada
Mortgages 25,464 67
65 64 70 99
Credit cards 338 13
13 12 16 15
Other 1,368 13
13 12 14 33
Other geographies
Mortgages 55,368 152 198
149 144 158
Credit cards 3,655 173 291
166 151 202
Other 2,416 91 137
86 83 95
Total 442,373 2,962 2,835 2,471 5,049
3,411
of which: mortgages
Stage 1 347,874 101 303
92 77 145
Stage 2 43,451 264 429
249 225 280
Stage 3 2,412 316 352
314 307 322
of which: credit cards
Stage 1 18,557 249 604
232 180 329
Stage 2 4,953 707 1,415
657 546 859
Stage 3 312 193 197
193 192 194
of which: others
Stage 1 19,551 218 501
205 151 272
Stage 2 4,542 540 868
519 423 636
Stage 3 722 373 379
373 370 375
1 Allowance for ECL sensitivities exclude portfolios utilising less
complex modelling approaches.
2 31 December 2023 includes the Canada banking business and the
retained France retail banking operations.
At 30 June 2024, the most significant level of allowance for ECL sensitivity
was observed in the UK, Mexico and Hong Kong. Mortgages reflected the lowest
level of allowance for ECL sensitivity across most markets given the
significant levels of collateral relative to the exposure values. Hong Kong
mortgages had low levels of ECL allowance due to the credit quality of the
portfolio. Credit cards and other unsecured lending across stages 1 and 2 are
more sensitive to economic forecasts and therefore reflected the highest level
of allowance for ECL sensitivity during 2024.
There was reduction in the total sensitivity for ECL allowance in all
scenarios compared with 31 December 2023 due to model updates and scenario
evolution.
There is limited sensitivity in credit cards and other unsecured lending in
stage 3 as levels of loss on defaulted exposures remain materially consistent
through various economic conditions. The alternative downside is from the tail
of the economic distribution where allowance for ECL is more sensitive based
on historical experience.
The reported gross carrying amount by stage is representative of the weighted
scenario allowance for ECL. The allowance for ECL sensitivity to the other
scenarios includes changes in allowance for ECL due to the levels of loss and
the migration of additional lending balances in or out of stage 2.
Group ECL sensitivity results
The ECL impact of the scenarios and management judgemental adjustments are
highly sensitive to movements in economic forecasts. Based upon the
sensitivity tables presented above, if the Group ECL balance (excluding
wholesale stage 3, which is assessed individually) was estimated solely on the
basis of the Central scenario, Upside scenario, Downside 1 scenario or the
Downside 2 scenario at 30 June 2024, it would increase/(decrease) as presented
in the below table.
Retail(1) Wholesale(1)
Total Group ECL at 30 Jun 2024 $bn $bn
Reported ECL 2.4 2.2
Scenarios
100% consensus Central scenario (0.1) (0.2)
100% consensus Upside scenario (0.3) (0.6)
100% consensus Downside scenario 0.2 0.7
100% Downside 2 scenario 2.2 4.1
Total Group ECL at 31 Dec 2023
Reported ECL 3.0 2.5
Scenarios
100% consensus Central scenario (0.1) (0.2)
100% consensus Upside scenario (0.5) (0.7)
100% consensus Downside scenario 0.4 0.8
100% Downside 2 scenario 2.1 4.5
1 On the same basis as retail and wholesale sensitivity analysis.
At 30 June 2024, the Group allowance for ECL decreased in the retail portfolio
by $0.6bn and decreased by $0.3bn in the wholesale portfolio, compared with 31
December 2023. There was reduction in ECL sensitivity across all scenarios as
a result of the sale of our Canada banking business and sale of our retail
banking operations in France during the first half of 2024.
The decrease in the Downside 2 scenario sensitivity within the wholesale
portfolio since 31 December 2023 was also driven by a decrease of exposures in
the performing portfolio in Hong Kong and a slower deterioration of
macroeconomic conditions in some markets, such as mainland China. There was a
modest increase in the Downside 2 scenario sensitivity within the retail
portfolio since 31 December 2023, driven by deterioration of house prices in
Hong Kong and offset by model updates in a number of markets.
Reconciliation of changes in gross carrying/nominal amount and allowances for
loans and advances to banks and customers
The following disclosure provides a reconciliation by stage of the Group's
gross carrying/nominal amount and allowances for loans and advances to banks
and customers, including loan commitments and financial guarantees. Movements
are calculated on a quarterly basis and therefore fully capture stage
movements between quarters. If movements were calculated on a year-to-date
basis they would only reflect the opening and closing position of the
financial instrument.
The transfers of financial instruments represent the impact of stage transfers
upon the gross carrying/nominal amount and associated allowance for ECL.
The net remeasurement of ECL arising from stage transfers represents the
increase or decrease due to these transfers, for example, moving from a
12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net
remeasurement excludes the underlying customer risk rating ('CRR')/probability
of default ('PD') movements of the financial instruments transferring stage.
This is captured, along with other credit quality movements in the 'changes in
risk parameters - credit quality' line item.
Changes in 'Net new and further lending/repayments' represents the impact from
volume movements within the Group's lending portfolio and includes 'New
financial assets originated or purchased', 'assets derecognised (including
final repayments)' and 'changes to risk parameters - further
lending/repayment'.
Reconciliation of changes in gross carrying/nominal amount and allowances for
loans and advances to banks and customers including
loan commitments and financial guarantees
(Reviewed)
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL
$m $m $m $m $m $m $m $m $m $m
At 1 Jan 2024 1,496,805 (1,300) 153,084 (3,102) 20,799 (7,063) 85 (30) 1,670,773 (11,495)
Transfers of financial instruments: (11,716) (774) 4,004 1,428 7,712 (654) - - - -
- transfers from stage 1 to stage 2 (62,466) 226 62,466 (226) - - - - - -
- transfers from stage 2 to stage 1 51,401 (977) (51,401) 977 - - - - - -
- transfers to stage 3 (984) 5 (7,705) 806 8,689 (811) - - - -
- transfers from stage 3 333 (28) 644 (129) (977) 157 - - - -
Net remeasurement of ECL arising from transfer of stage - 647 - (552) - (127) - - - (32)
Net new and further lending/ repayments 44,715 (64) (16,213) 289 (2,949) 587 - (2) 25,553 810
Changes to risk parameters - credit quality - 150 - (685) - (1,197) - (3) - (1,735)
Changes to models used for ECL calculation - 16 - (3) - 22 - - - 35
Assets written off - - - - (1,549) 1,549 - - (1,549) 1,549
Foreign exchange and (57,198) 48 (5,251) 89 (97) (164) - - (62,546) (27)
others(1,2)
At 30 Jun 2024 1,472,606 (1,277) 135,624 (2,536) 23,916 (7,047) 85 (35) 1,632,231 (10,895)
ECL income statement change for the period 749 (951) (715) (5) (922)
Recoveries 126
Others (86)
Total ECL income statement change for the period (882)
At 30 Jun 2024 6 months ended 30 Jun 2024
Gross carrying/nominal amount Allowance for ECL release/(charge)
ECL
$m $m $m
As above 1,632,231 (10,895) (882)
Other financial assets measured at amortised cost 850,367 (158) (77)
Non-trading reverse purchase agreement commitments 73,584 - -
Performance and other guarantees not considered for IFRS 9 - - (94)
Summary of financial instruments to which the impairment requirements in IFRS 2,556,182 (11,053) (1,053)
9 are applied/Summary consolidated income statement
Debt instruments measured at FVOCI 318,238 (96) (13)
Total allowance for ECL/total income statement ECL change for the period n/a (11,149) (1,066)
1 Total includes $2.5bn of gross carrying loans and advances to
customers and banks, which were classified to assets held for sale, and
corresponding allowance for ECL of $42m, reflecting business disposals as
disclosed on page 68.
2 Total includes $35.3bn of nominal amount and $21m of corresponding
allowance for ECL related to derecognition of loan commitments and financial
guarantees following the sale of our banking business in Canada during 1H24.
As shown in the previous table, the allowance for ECL for loans and advances
to customers and banks and relevant loan commitments and financial guarantees
decreased by $600m during the period, from $11,495m at 31 December 2023 to
$10,895m at 30 June 2024.
This decrease was driven by:
- $1,549m of assets written off, $780m of which in relation to Wholesale
and $769m in relation to Personal;
- $810m relating to volume movements, which included the ECL allowance
associated with new originations, assets derecognised and further pending
repayment; and
- $35m relating to changes to models used for ECL calculation.
These were partly offset by:
- $1,735m relating to underlying credit quality changes, including the
credit quality impact of financial instruments transferring between stages;
- $32m relating to the net remeasurement impact of stage transfers; and
- foreign exchange and other movements of $27m.
The ECL charge for the period of $922m presented in the previous table
consisted of $1,735m relating to underlying credit quality changes, including
the credit quality impact of financial instruments transferring between
stages, and $32m relating to the net remeasurement impact of stage transfers.
These were partly offset by $810m relating to underlying net book volume and
$35m relating to changes to models used for ECL calculation.
Reconciliation of changes in gross carrying/nominal amount and allowances for
loans and advances to banks and customers including
loan commitments and financial guarantees (continued)
(Reviewed)
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL
$m $m $m $m $m $m $m $m $m $m
At 1 Jan 2023 1,433,643 (1,257) 177,223 (3,710) 21,207 (6,949) 129 (38) 1,632,202 (11,954)
Transfers of financial instruments: (18,948) (1,048) 10,286 2,228 8,662 (1,180) - - - -
- transfers from stage 1 to (150,728) 442 150,728 (442) - - - - - -
stage 2
- transfers from stage 2 to 133,079 (1,467) (133,079) 1,467 - - - - - -
stage 1
- transfers to stage 3 (1,986) 23 (8,600) 1,379 10,586 (1,402) - - - -
- transfers from stage 3 687 (46) 1,237 (176) (1,924) 222 - - - -
Net remeasurement of ECL arising from transfer of stage - 917 - (973) - (124) - - - (180)
Net new and further 77,693 (185) (36,795) 661 (4,956) 1,117 (36) 3 35,906 1,596
lending/repayments
Changes to risk parameters - credit quality 307 (1,262) (3,896) 21 (4,830)
Changes to models used for ECL calculation - (22) - 46 - 7 - - - 31
Assets written off - - - - (3,922) 3,922 - - (3,922) 3,922
Credit-related modifications that resulted in derecognition - - - - (119) 95 - - (119) 95
Foreign exchange and 4,417 (12) 2,370 (92) (73) (55) (8) (16) 6,706 (175)
others(1)
At 31 Dec 2023 1,496,805 (1,300) 153,084 (3,102) 20,799 (7,063) 85 (30) 1,670,773 (11,495)
ECL income statement change for the period - 1,017 - (1,528) - (2,896) - 24 - (3,383)
Recoveries - - - - - - - - - 268
Other - - - - - - - - - (195)
Total ECL income statement change for the period(2) - - - - - - - - - (3,310)
At 31 Dec 2023 12 months ended 31 Dec 2023
Gross carrying/nominal amount Allowance for ECL charge
ECL
$m $m $m
As above 1,670,773 (11,495) (3,310)
Other financial assets measured at amortised cost 960,271 (422) (35)
Non-trading reverse purchase agreement commitments 69,777 - -
Performance and other guarantees not considered for IFRS 9 - - (44)
Summary of financial instruments to which the impairment requirements in IFRS 2,700,821 (11,917) (3,389)
9 are applied/Summary consolidated income statement
Debt instruments measured at FVOCI 302,348 (97) (58)
Total allowance for ECL/total income statement ECL change for the period n/a (12,014) (3,447)
1 Total includes $7.7bn of gross carrying loans and advances, which
were classified from assets held for sale, and a corresponding allowance for
ECL of $70m, reflecting the planned sale of our retail banking operations in
France no longer meeting the definition of held for sale. For further details,
see 'Assets held for sale' on page 68.
2 The 31 December 2023 total ECL income statement change of $3,310m is
attributable to $1,342m for the six months ended 30 June 2023 and $1,968m to
the six months ended 31 December 2023.
Credit quality of financial instruments
We assess the credit quality of all financial instruments that are subject to
credit risk. The credit quality of financial instruments is a point-in-time
assessment of PD, whereas stages 1 and 2 are determined based on relative
deterioration of credit quality since initial recognition. Accordingly, for
non-credit-impaired financial instruments, there is no direct relationship
between the credit quality assessment and stages 1 and 2, though typically the
lower credit quality bands exhibit a higher proportion in stage 2.
The five credit quality classifications each encompass a range of granular
internal credit rating grades assigned to wholesale and personal lending
businesses and the external ratings attributed by external agencies to debt
securities, as shown in the following table. Personal lending credit quality
is disclosed based on a 12-month point-in-time PD adjusted for multiple
economic scenarios. The credit quality classifications for wholesale lending
are based on internal credit risk ratings.
Credit quality classification
Sovereign debt Other debt Wholesale lending Retail lending
securities securities and derivatives
and bills and bills
External credit External credit Internal credit 12-month Basel Internal credit 12 month probability- weighted PD %
rating rating rating probability of rating
default %
Quality classification(1,2)
Strong BBB and above A- and above CRR 1 to CRR 2 0 - 0.169 Band 1 and 2 0.000 - 0.500
Good BBB- to BB BBB+ to BBB- CRR 3 0.170 - 0.740 Band 3 0.501 - 1.500
Satisfactory BB- to B and unrated BB+ to B and unrated CRR 4 to CRR 5 0.741 - 4.914 Band 4 and 5 1.501 - 20.000
Sub-standard B- to C B- to C CRR 6 to CRR 8 4.915 - 99.999 Band 6 20.001 - 99.999
Credit impaired Default Default CRR 9 to CRR 10 100 Band 7 100
1 Customer risk rating ('CRR').
2 12-month point-in-time probability-weighted probability of default
('PD').
Distribution of financial instruments to which the impairment requirements in
IFRS 9 are applied, by credit quality and stage allocation
(Reviewed)
Gross carrying/nominal amount Allowance Net
for ECL
Strong Good Satisfactory Sub-standard Credit Total
impaired
$m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 509,871 197,438 197,634 21,080 22,744 948,767 (10,510) 938,257
- stage 1 487,521 172,944 154,028 3,450 - 817,943 (1,112) 816,831
- stage 2 22,350 24,494 43,606 17,630 - 108,080 (2,399) 105,681
- stage 3 - - - - 22,662 22,662 (6,964) 15,698
- POCI - - - - 82 82 (35) 47
Loans and advances to banks at amortised cost 92,718 4,734 4,397 219 2 102,070 (13) 102,057
- stage 1 92,620 4,708 3,700 203 - 101,231 (9) 101,222
- stage 2 98 26 697 16 - 837 (2) 835
- stage 3 - - - - 2 2 (2) -
- POCI - - - - - - - -
Other financial assets measured at amortised cost 744,337 68,275 35,731 1,584 440 850,367 (158) 850,209
- stage 1 743,981 67,713 34,870 810 - 847,374 (96) 847,278
- stage 2 356 562 861 774 - 2,553 (26) 2,527
- stage 3 - - - - 440 440 (36) 404
- POCI - - - - - - - -
Loans and other credit-related commitments 417,367 135,294 77,315 7,698 961 638,635 (335) 638,300
- stage 1 413,905 128,479 67,174 2,935 - 612,493 (149) 612,344
- stage 2 3,462 6,815 10,141 4,763 - 25,181 (123) 25,058
- stage 3 - - - - 958 958 (63) 895
- POCI - - - - 3 3 - 3
Financial guarantees 7,501 3,785 4,147 616 294 16,343 (37) 16,306
- stage 1 7,481 3,637 3,282 123 - 14,523 (7) 14,516
- stage 2 20 148 865 493 - 1,526 (12) 1,514
- stage 3 - - - - 294 294 (18) 276
- POCI - - - - - - - -
At 30 Jun 2024 1,771,794 409,526 319,224 31,197 24,441 2,556,182 (11,053) 2,545,129
Debt instruments at FVOCI(1)
- stage 1 303,803 12,674 7,418 - - 323,895 (37) 323,858
- stage 2 48 - 469 2,053 - 2,570 (59) 2,511
- stage 3 - - - - - - - -
- POCI - - - - - - - -
At 30 Jun 2024 303,851 12,674 7,887 2,053 - 326,465 (96) 326,369
1 For the purposes of this disclosure, gross carrying value is defined
as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such, the gross carrying value of debt instruments at FVOCI will
not reconcile to the balance sheet as it excludes fair value gains and losses.
Distribution of financial instruments to which the impairment requirements in
IFRS 9 are applied, by credit quality and stage allocation
(continued)
(Reviewed)
Gross carrying/notional amount
Strong Good Satisfactory Sub- standard Credit impaired Total Allowance for ECL Net
$m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 497,665 206,476 197,582 28,532 19,354 949,609 (11,074) 938,535
- stage 1 478,422 177,410 147,940 5,612 - 809,384 (1,130) 808,254
- stage 2 19,243 29,066 49,642 22,920 - 120,871 (2,964) 117,907
- stage 3 - - - - 19,273 19,273 (6,950) 12,323
- POCI - - - - 81 81 (30) 51
Loans and advances to banks at amortised cost 101,057 4,640 6,363 855 2 112,917 (15) 112,902
- stage 1 101,011 4,631 5,550 287 - 111,479 (10) 111,469
- stage 2 46 9 813 568 - 1,436 (3) 1,433
- stage 3 - - - - 2 2 (2) -
- POCI - - - - - - - -
Other financial assets measured at amortised cost 815,259 80,151 60,197 4,000 664 960,271 (422) 959,849
- stage 1 814,776 78,486 53,095 516 - 946,873 (109) 946,764
- stage 2 483 1,665 7,102 3,484 - 12,734 (132) 12,602
- stage 3 - - - - 664 664 (181) 483
- POCI - - - - - - - -
Loans and other credit-related commitments 436,359 142,500 73,230 7,782 1,144 661,015 (367) 660,648
- stage 1 432,017 135,192 61,213 2,527 - 630,949 (153) 630,796
- stage 2 4,342 7,308 12,017 5,255 - 28,922 (128) 28,794
- stage 3 - - - - 1,140 1,140 (86) 1,054
- POCI - - - - 4 4 - 4
Financial guarantees 7,700 4,146 4,080 699 384 17,009 (39) 16,970
- stage 1 7,497 3,943 3,204 102 - 14,746 (7) 14,739
- stage 2 203 203 876 597 - 1,879 (7) 1,872
- stage 3 - - - - 384 384 (25) 359
- POCI - - - - - - - -
At 31 Dec 2023 1,858,040 437,913 341,452 41,868 21,548 2,700,821 (11,917) 2,688,904
Debt instruments at FVOCI(1)
- stage 1 288,909 12,037 7,579 - - 308,525 (37) 308,488
- stage 2 50 - 318 805 - 1,173 (59) 1,114
- stage 3 - - - - 5 5 (1) 4
- POCI - - - - - - - -
At 31 Dec 2023 288,959 12,037 7,897 805 5 309,703 (97) 309,606
1 For the purposes of this disclosure, gross carrying value is defined
as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such, the gross carrying value of debt instruments at FVOCI
will not reconcile to the balance sheet as it excludes fair value gains and
losses.
Personal lending
This section provides details of the major legal entities, countries and
products that are driving the change observed in personal loans and advances
to customers, with the impact of foreign exchange separately identified.
Additionally, Hong Kong and UK mortgage book
loan-to-value ('LTV') data is provided.
Further product granularity is also provided by stage, with data for major
legal entities presented for loans and advances to customers, loans and other
credit-related commitments and financial guarantees.
At 30 June 2024, total personal lending for loans and advances to customers of
$446.5bn decreased by $1.1bn on a reported basis, compared with 31 December
2023. This included adverse foreign exchange movements of $5.6bn.
On a constant currency basis, the increase of $4.5bn was mainly driven by
growth in HSBC UK (up $2.6bn) and our main entities in the US (up $1.1bn),
Hong Kong (up $0.6bn) and Mexico (up $0.4bn). This was partly offset by a
decrease in Argentina (down $0.3bn) following the classification of our
business as held for sale.
On a reported basis, the allowance for ECL attributable to personal lending,
excluding off-balance sheet loan commitments and guarantees, decreased by
$0.4bn to $2.5bn, compared with 31 December 2023. This was driven by a
resilient performance, and a reduction in credit judgements in the UK in
relation to unemployment and the potential delayed impact of economic
scenarios on unsecured portfolio defaults.
On a constant currency basis, mortgage lending balances increased by $3.2bn to
$360.4bn at 30 June 2024. Mortgages grew by $2.4bn in HSBC UK, $1.1bn in the
United States, $0.7bn in Australia and $0.2bn in Mexico. This was partly
offset by a decrease of $1.0bn in Singapore.
The allowance for ECL attributable to mortgages of $0.5bn decreased by $0.1bn
compared with 31 December 2023.
The quality of both our Hong Kong and UK mortgage books remained high, with
low levels of impairment allowances. The average LTV ratio on new mortgage
lending in Hong Kong was 66%, compared with an estimated 61% for the overall
mortgage portfolio. The average LTV ratio on new lending in the UK was 67%,
compared with an estimated 53% for the overall mortgage portfolio.
On a constant currency basis, other personal lending balances increased by
$1.3bn compared with 31 December 2023. This included an increase of $1.0bn in
Singapore, $0.1bn in HSBC UK, $0.1bn in Taiwan and $0.1bn in Mexico. This was
partly offset by a decrease of $0.3bn in Argentina following the
classification of our business as held for sale.
The allowance for ECL attributable to other personal lending of $2.0bn
decreased by $0.3bn, on a constant currency basis, compared with 31 December
2023. The allowance for ECL attributable to unsecured lending decreased by
$0.2bn and credit cards decreased by $0.1bn.
Total personal lending for loans and advances to customers by stage
distribution
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
By portfolio
First lien residential mortgages 317,924 40,093 2,403 360,420 (85) (174) (269) (528)
- of which: interest only (including offset) 21,611 2,556 151 24,318 (4) (13) (31) (48)
- affordability (including US adjustable rate mortgages) 15,314 420 280 16,014 (3) (1) (8) (12)
Other personal lending 77,729 7,106 1,199 86,034 (466) (945) (551) (1,962)
- second lien residential mortgages 355 13 27 395 - (1) (3) (4)
- guaranteed loans in respect of residential 7,728 223 81 8,032 (2) (5) (17) (24)
property
- other personal lending which is secured 30,324 512 112 30,948 (11) (4) (18) (33)
- credit cards 19,588 3,749 345 23,682 (220) (593) (204) (1,017)
- other personal lending which is unsecured 17,676 2,512 619 20,807 (212) (325) (301) (838)
- motor vehicle finance 2,058 97 15 2,170 (21) (17) (8) (46)
At 30 Jun 2024 395,653 47,199 3,602 446,454 (551) (1,119) (820) (2,490)
By legal entity
HSBC UK Bank plc 146,102 36,331 1,214 183,647 (163) (274) (246) (683)
HSBC Bank plc(1) 23,081 1,468 346 24,895 (22) (23) (103) (148)
The Hongkong and Shanghai Banking Corporation Limited 190,908 7,088 1,072 199,068 (156) (358) (156) (670)
HSBC Bank Middle East Limited 3,307 355 51 3,713 (16) (29) (33) (78)
HSBC North America Holdings Inc. 19,217 513 396 20,126 (5) (11) (14) (30)
Grupo Financiero HSBC, S.A. de C.V. 12,297 1,414 520 14,231 (183) (422) (265) (870)
Other trading entities(1) 741 30 3 774 (6) (2) (3) (11)
At 30 Jun 2024 395,653 47,199 3,602 446,454 (551) (1,119) (820) (2,490)
1 At 31 December 2023, 'Other trading entities' included gross carrying
amount of $9,079m and allowances for ECL of $23m related to Private Banking
entities that were reclassified to HSBC Bank plc to continue the process of
simplifying our structure.
Total personal lending for loans and other credit-related commitments and
financial guarantees by stage distribution
Nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
HSBC UK Bank plc 53,964 524 82 54,570 (7) - (2) (9)
HSBC Bank plc 1,380 5 2 1,387 - - - -
The Hongkong and Shanghai Banking Corporation Limited 186,657 2,818 186 189,661 (3) - - (3)
HSBC Bank Middle East Limited 2,290 7 - 2,297 - - - -
HSBC North America Holdings Inc. 3,738 69 3 3,810 - - - -
HSBC Bank Canada - - - - - - - -
Grupo Financiero HSBC, S.A. de C.V. 4,236 - - 4,236 (22) - - (22)
Other trading entities 2,587 42 2 2,631 (1) - - (1)
At 30 Jun 2024 254,852 3,465 275 258,592 (33) - (2) (35)
Total personal lending for loans and advances to customers by stage
distribution (continued)
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
By portfolio
First lien residential mortgages 320,410 38,287 2,212 360,909 (102) (200) (269) (571)
- of which: interest only (including offset) 21,895 2,923 139 24,957 (4) (27) (31) (62)
- affordability (including US adjustable rate mortgages) 14,380 381 291 15,052 (3) (1) (10) (14)
Other personal lending 76,124 9,196 1,293 86,613 (477) (1,234) (585) (2,296)
- second lien residential mortgages 317 58 21 396 - (3) (5) (8)
- guaranteed loans in respect of residential 8,001 502 90 8,593 (1) (5) (14) (20)
property
- other personal lending which is secured 28,900 424 157 29,481 (13) (5) (24) (42)
- credit cards 19,909 4,419 352 24,680 (236) (697) (203) (1,136)
- other personal lending which is unsecured 17,010 3,582 659 21,251 (212) (505) (331) (1,048)
- motor vehicle finance 1,987 211 14 2,212 (15) (19) (8) (42)
At 31 Dec 2023 396,534 47,483 3,505 447,522 (579) (1,434) (854) (2,867)
By legal entity
HSBC UK Bank plc 146,354 35,190 1,218 182,762 (152) (490) (255) (897)
HSBC Bank plc 14,598 1,747 273 16,618 (24) (22) (91) (137)
The Hongkong and Shanghai Banking Corporation Limited 191,382 7,741 948 200,071 (165) (402) (162) (729)
HSBC Bank Middle East Limited 3,335 397 47 3,779 (19) (33) (36) (88)
HSBC North America Holdings Inc. 18,096 553 364 19,013 (5) (14) (16) (35)
Grupo Financiero HSBC, S.A. de C.V. 12,717 1,740 536 14,993 (197) (463) (273) (933)
Other trading entities 10,052 115 119 10,286 (17) (10) (21) (48)
At 31 Dec 2023 396,534 47,483 3,505 447,522 (579) (1,434) (854) (2,867)
Total personal lending for loans and other credit-related commitments and
financial guarantees by stage distribution (continued)
Nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
HSBC UK Bank plc 52,093 734 88 52,915 (11) - (13)
(2)
HSBC Bank plc 1,630 36 4 1,670 - - - -
The Hongkong and Shanghai Banking Corporation Limited 181,967 2,479 223 184,669 - -
(3) (3)
HSBC Bank Middle East Limited 1,978 7 1 1,986 - - - -
HSBC North America Holdings Inc. 3,695 72 8 3,775 - - - -
HSBC Bank Canada 6,610 113 30 6,753 - - - -
Grupo Financiero HSBC, S.A. de C.V. 4,308 - - 4,308 - -
(8) (8)
Other trading entities 2,008 31 1 2,040 - -
(1) (1)
At 31 Dec 2023 254,289 3,472 355 258,116 (23) - (25)
(2)
Wholesale lending
This section provides further details on the major legal entities, countries
and industries driving the decrease in wholesale loans and advances to
customers and banks, with the impact of foreign exchange separately
identified. Industry granularity is also provided by stage, with legal entity
data presented for loans and advances to customers, banks, other credit
commitments, financial guarantees and similar contracts.
At 30 June 2024, wholesale lending for loans and advances to banks and
customers of $604.4bn decreased by $10.6bn on a reported basis, compared with
31 December 2023. This included adverse foreign exchange movements of
$10.8bn.
On a constant currency basis, the total wholesale lending increase of $0.2bn
was driven by an increase in loans and advances to non-bank financial
institutions, which grew by $5.7bn, including a $2.5bn increase in the UK,
$1.5bn in France and a $1.2bn increase in India.
Corporate and commercial balances increased by $1.9bn. This increase, which
was spread across multiple industries, was partly offset by a decrease of
$2.9bn in 'real estate and construction' exposures driven by repayments.
Additionally, there was a $0.5bn decrease from the reclassification of our
business in Argentina into 'assets held for sale'.
The increase in stage 3 corporate and commercial exposure during the period
was driven by defaults in commercial real estate lending, mainly in Hong Kong.
The associated allowance for ECL for those loans is relatively lower due to
the high collateralisation, with headroom for depreciation.
On a constant currency basis, loans and advances to banks declined by $7.4bn,
including a $4.8bn decrease in Singapore, a $2.5bn decrease in the UK, a
$1.9bn decrease in China and a $0.6bn decrease from the reclassification of
our business in Argentina into 'assets held for sale'. These were partly
offset by a $2.0bn increase in UAE.
On a reported basis, loan commitments and financial guarantees of $396.4bn
decreased by $23.5bn since 31 December 2023. Excluding unfavourable foreign
exchange movements of $7.4bn, loan commitments and financial guarantees
decreased by $16.1bn due to lower exposures with corporate and commercial
customers.
The allowance for ECL attributable to loans and advances to banks and
customers of $8.0bn at 30 June 2024 decreased from $8.2bn at 31 December 2023.
This included adverse foreign exchange movements of $0.2bn.
On a constant currency basis, the wholesale allowance for ECL for loans and
advances to customers decreased by $36m and the allowance for ECL for loans
and advances to banks remained broadly flat.
The allowance for ECL attributable to loan commitments and
financial guarantees at 30 June 2024 decreased to $0.3bn from $0.4bn at
31 December 2023.
Total wholesale lending for loans and advances to banks and customers by stage
distribution
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 346,248 58,178 18,556 82 423,064 (509) (1,245) (5,968) (35) (7,757)
- agriculture, forestry and fishing 5,170 1,761 299 - 7,230 (13) (48) (55) - (116)
- mining and quarrying 6,389 451 325 - 7,165 (10) (9) (54) - (73)
- manufacturing 73,557 11,184 1,624 21 86,386 (91) (171) (773) (18) (1,053)
- electricity, gas, steam and air-conditioning supply 13,884 1,177 214 - 15,275 (14) (14) (92) - (120)
- water supply, sewerage, waste management and remediation 2,735 593 21 - 3,349 (4) (20) (13) - (37)
- real estate and construction 70,855 18,056 8,723 53 97,687 (91) (447) (2,639) (16) (3,193)
- of which: commercial real estate 55,785 15,872 7,080 53 78,790 (67) (414) (2,166) (16) (2,663)
- wholesale and retail trade, repair of motor vehicles and motorcycles 67,879 9,633 2,879 4 80,395 (77) (143) (1,263) (1) (1,484)
- transportation and storage 16,924 3,802 443 - 21,169 (16) (70) (197) - (283)
- accommodation and food 10,489 2,780 1,530 - 14,799 (40) (82) (149) - (271)
- publishing, audiovisual and broadcasting 17,476 1,775 295 - 19,546 (47) (62) (99) - (208)
- professional, scientific and technical activities 23,294 2,792 809 4 26,899 (33) (59) (291) - (383)
- administrative and support services 19,523 2,126 586 - 22,235 (33) (46) (203) - (282)
- public administration and defence, compulsory social security 97 8 - - 105 - - - - -
- education 1,089 224 56 - 1,369 (3) (9) (11) - (23)
- health and care 3,302 638 166 - 4,106 (10) (18) (19) - (47)
- arts, entertainment and recreation 1,094 474 98 - 1,666 (4) (4) (52) - (60)
- other services 6,211 537 286 - 7,034 (22) (30) (55) - (107)
- activities of households 605 7 - - 612 - - - - -
- extra-territorial organisations and bodies activities 90 2 - - 92 - - - - -
- government 5,566 145 202 - 5,913 (1) - (3) - (4)
- asset-backed securities 19 13 - - 32 - (13) - - (13)
Non-bank financial institutions 76,042 2,703 504 - 79,249 (52) (35) (176) - (263)
Loans and advances to banks 101,231 837 2 - 102,070 (9) (2) (2) - (13)
At 30 Jun 2024 523,521 61,718 19,062 82 604,383 (570) (1,282) (6,146) (35) (8,033)
By legal entity
HSBC UK Bank plc 76,357 14,977 3,672 - 95,006 (225) (439) (639) - (1,303)
HSBC Bank plc(1) 86,874 7,864 2,539 43 97,320 (70) (115) (895) (15) (1,095)
The Hongkong and Shanghai Banking Corporation Limited 282,180 30,826 10,876 35 323,917 (172) (543) (3,737) (19) (4,471)
HSBC Bank Middle East Limited 24,285 1,630 814 4 26,733 (24) (13) (444) (1) (482)
HSBC North America Holdings Inc. 32,034 4,378 562 - 36,974 (32) (118) (128) - (278)
Grupo Financiero HSBC, S.A. de C.V. 13,930 1,270 250 - 15,450 (37) (50) (142) - (229)
Other trading entities(1) 7,796 773 349 - 8,918 (10) (4) (161) - (175)
Holding companies, shared service centres and intra-Group eliminations 65 - - - 65 - - - - -
At 30 Jun 2024 523,521 61,718 19,062 82 604,383 (570) (1,282) (6,146) (35) (8,033)
1 At 31 December 2023, Other trading entities included gross carrying
amount of $1,792m and allowances for ECL of $1m related to Private Banking
entities that were reclassified to HSBC Bank plc to continue the process of
simplifying our structure.
Total wholesale lending for loans and other credit-related commitments and
financial guarantees by stage distribution(1)
Nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 233,770 18,131 908 3 252,812 (112) (127) (76) - (315)
Financial 138,394 5,111 69 - 143,574 (11) (8) (3) - (22)
At 30 Jun 2024 372,164 23,242 977 3 396,386 (123) (135) (79) - (337)
By legal entity
HSBC UK Bank plc 34,909 4,896 233 - 40,038 (31) (37) (48) - (116)
HSBC Bank plc 165,863 8,848 262 3 174,976 (19) (25) (17) - (61)
The Hongkong and Shanghai Banking Corporation Limited 68,349 3,860 177 - 72,386 (49) (32) (7) - (88)
HSBC Bank Middle East Limited 6,803 245 26 - 7,074 (6) (12) (4) - (22)
HSBC North America Holdings Inc. 91,810 5,166 213 - 97,189 (18) (29) - - (47)
Grupo Financiero HSBC, S.A. de C.V. 2,765 35 - - 2,800 - - - - -
Other trading entities 1,665 192 66 - 1,923 - - (3) - (3)
At 30 Jun 2024 372,164 23,242 977 3 396,386 (123) (135) (79) - (337)
1 Included in loans and other
credit-related commitments and financial guarantees is $74bn relating to
unsettled reverse repurchase agreements, which once drawn are classified as
'Reverse repurchase agreements - non-trading'.
Total wholesale lending for loans and advances to banks and customers by stage
distribution (continued)
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 342,878 69,738 14,958 81 427,655 (499) (1,500) (5,774) (30) (7,803)
- agriculture, forestry and fishing 5,207 1,662 312 - 7,181 (13) (53) (64) - (130)
- mining and quarrying 6,260 638 325 - 7,223 (7) (11) (83) - (101)
- manufacturing 69,690 13,744 1,877 22 85,333 (89) (194) (839) (21) (1,143)
- electricity, gas, steam and air-conditioning supply 12,817 1,283 255 - 14,355 (14) (17) (88) - (119)
- water supply, sewerage, waste management and remediation 2,753 407 102 - 3,262 (5) (7) (51) - (63)
- real estate and construction 73,701 21,871 5,835 48 101,455 (96) (629) (2,554) (7) (3,286)
- of which: commercial real estate 59,883 19,107 4,552 47 83,589 (73) (603) (2,091) (7) (2,774)
- wholesale and retail trade, repair of motor vehicles and motorcycles 66,083 10,676 2,358 4 79,121 (80) (127) (1,132) (2) (1,341)
- transportation and storage 17,117 3,894 445 - 21,456 (18) (52) (160) - (230)
- accommodation and food 9,681 5,135 1,058 - 15,874 (27) (118) (112) - (257)
- publishing, audiovisual and broadcasting 17,455 2,066 210 - 19,731 (42) (81) (50) - (173)
- professional, scientific and technical activities 22,686 3,327 733 7 26,753 (32) (63) (306) - (401)
- administrative and support services 19,055 2,551 597 - 22,203 (31) (63) (174) - (268)
- public administration and defence, compulsory social security 1,037 5 - - 1,042 - - - - -
- education 1,137 277 46 - 1,460 (3) (8) (4) - (15)
- health and care 3,245 808 183 - 4,236 (9) (21) (26) - (56)
- arts, entertainment and recreation 1,666 196 99 - 1,961 (5) (6) (31) - (42)
- other services 7,065 972 318 - 8,355 (26) (37) (90) - (153)
- activities of households 684 10 - - 694 - - - - -
- extra-territorial organisations and bodies activities 100 1 - - 101 - - - - -
- government 5,420 202 205 - 5,827 (2) - (10) - (12)
- asset-backed securities 19 13 - - 32 - (13) - - (13)
Non-bank financial institutions 69,972 3,650 810 - 74,432 (52) (30) (322) - (404)
Loans and advances to banks 111,479 1,436 2 - 112,917 (10) (3) (2) - (15)
At 31 Dec 2023 524,329 74,824 15,770 81 615,004 (561) (1,533) (6,098) (30) (8,222)
By legal entity
HSBC UK Bank plc 76,793 18,735 3,769 - 99,297 (213) (474) (593) - (1,280)
HSBC Bank plc 82,025 8,452 2,673 40 93,190 (69) (138) (1,035) (7) (1,249)
The Hongkong and Shanghai Banking Corporation Limited 287,876 37,402 7,077 38 332,393 (185) (696) (3,349) (21) (4,251)
HSBC Bank Middle East Limited 21,927 1,598 894 3 24,422 (17) (11) (571) (2) (601)
HSBC North America Holdings Inc. 30,797 5,712 583 - 37,092 (24) (145) (127) - (296)
Grupo Financiero HSBC, S.A. de C.V. 13,714 1,186 382 - 15,282 (39) (56) (231) - (326)
Other trading entities 11,164 1,739 392 - 13,295 (14) (13) (192) - (219)
Holding companies, shared service centres and intra-group eliminations 33 - - - 33 - - - - -
At 31 Dec 2023 524,329 74,824 15,770 81 615,004 (561) (1,533) (6,098) (30) (8,222)
Total wholesale lending for loans and other credit-related commitments and
financial guarantees by stage distribution(1) (continued)
Nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 256,367 22,218 1,066 4 279,655 (126) (125) (107) - (358)
Financial 135,039 5,111 103 - 140,253 (11) (10) (2) - (23)
At 31 Dec 2023 391,406 27,329 1,169 4 419,908 (137) (135) (109) - (381)
By legal entity
HSBC UK Bank plc 31,982 5,760 350 - 38,092 (31) (32) (56) - (119)
HSBC Bank plc 148,980 9,466 310 4 158,760 (20) (27) (27) - (74)
The Hongkong and Shanghai Banking Corporation Limited 70,436 3,975 79 - 74,490 (59) (39) (16) - (114)
HSBC Bank Middle East Limited 6,944 323 56 - 7,323 (4) (1) (3) - (8)
HSBC North America Holdings Inc. 101,067 5,103 248 - 106,418 (14) (27) (1) - (42)
HSBC Bank Canada 28,156 2,461 66 - 30,683 (8) (8) (3) - (19)
Grupo Financiero HSBC, S.A. de C.V. 2,092 34 - - 2,126 (1) - - - (1)
Other trading entities 1,749 207 60 - 2,016 - (1) (3) - (4)
At 31 Dec 2023 391,406 27,329 1,169 4 419,908 (137) (135) (109) - (381)
1 Included in loans and other credit-related commitments and financial
guarantees is $70bn relating to unsettled reverse repurchase agreements, which
once drawn are classified as 'Reverse repurchase agreements - non-trading'.
Commercial real estate
Commercial real estate ('CRE') lending includes the financing of corporate,
institutional and high net worth customers who are investing primarily in
income-producing assets and, to a lesser extent, in their construction and
development. The portfolio is globally diversified with larger concentrations
in Hong Kong, the UK, mainland China and the US.
Our global exposure is centred largely on cities with economic, political or
cultural significance. In more developed markets, our exposure mainly
comprises the financing of investment assets, the redevelopment of existing
stock and the augmentation of both commercial and residential markets to
support economic and population growth. In less developed commercial real
estate markets, our exposures comprise lending for development assets on
relatively short tenors with a particular focus on supporting larger, better
capitalised developers involved in residential construction or assets
supporting economic expansion.
Excluding adverse foreign exchange movements of $0.7bn, commercial real estate
lending decreased by $4.1bn, mainly from $2.4bn in Hong Kong due to loan
repayments.
In the tables below, we have disclosed additional information related to
exposures booked in Hong Kong excluding exposures to mainland China borrowers
by stage and credit quality. These exposures mostly comprise lending to Hong
Kong borrowers and, to a lesser degree, borrowers overseas.
Commercial real estate lending to customers
of which:
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. Grupo Financiero HSBC, S.A. de C.V. Other trading entities Total UK Hong Kong of which: Hong Kong excluding exposure to mainland China borrowers
$m $m $m $m $m $m $m $m $m $m $m
Gross loans and advances
Stage 1 9,800 4,205 38,475 999 1,792 494 20 55,785 10,115 25,694 24,945
Stage 2 3,460 347 10,698 171 1,137 58 1 15,872 3,492 8,854 7,440
Stage 3 499 232 5,934 119 253 22 21 7,080 577 5,566 3,224
POCI - 37 16 - - - - 53 37 16 -
At 30 Jun 2024 13,759 4,821 55,123 1,289 3,182 574 42 78,790 14,221 40,130 35,609
- of which: forborne loans 628 126 2,402 117 453 48 - 3,774 743 2,234
Allowance for ECL (157) (64) (2,295) (30) (101) (11) (5) (2,663) (192) (2,081) (258)
Gross loans and advances
Stage 1 10,304 4,218 41,307 1,126 1,803 685 440 59,883 10,790 28,846 27,560
Stage 2 3,262 400 13,229 189 1,956 70 1 19,107 3,294 10,375 8,681
Stage 3 444 184 3,570 145 166 25 18 4,552 470 3,226 576
POCI - 32 15 - - - - 47 32 15 -
At 31 Dec 2023 14,010 4,834 58,121 1,460 3,925 780 459 83,589 14,586 42,462 36,817
- of which: forborne loans 461 69 2,454 126 433 52 - 3,595 519 2,227
Allowance for ECL (148) (49) (2,399) (55) (98) (15) (10) (2,774) (172) (2,149) (296)
Commercial real estate lending to customers by global business
of which:
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. Grupo Financiero HSBC, S.A. de C.V. Other trading entities Total UK Hong Kong
$m $m $m $m $m $m $m $m $m $m
Wealth and Personal Banking(1) 367 582 79 - 2 - - 1,030 367 79
Commercial Banking 13,392 3,146 36,525 688 3,180 574 42 57,547 13,455 26,768
Global Banking and Markets - 1,093 18,381 601 - - - 20,075 399 13,145
Corporate Centre - - 138 - - - - 138 - 138
At 30 Jun 2024 13,759 4,821 55,123 1,289 3,182 574 42 78,790 14,221 40,130
Wealth and Personal Banking(1) 409 377 66 - 2 - 423 1,277 409 66
Commercial Banking 13,601 3,322 37,826 733 3,923 780 36 60,221 13,686 27,811
Global Banking and Markets - 1,135 20,066 727 - - - 21,928 491 14,444
Corporate Centre - - 163 - - - - 163 - 141
At 31 Dec 2023 14,010 4,834 58,121 1,460 3,925 780 459 83,589 14,586 42,462
1 Comprised exclusively by exposures in Global Private Banking.
Commercial real estate lending to customers by credit quality
of which:
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. Grupo Financiero HSBC, S.A. de C.V. Other trading entities Total UK Hong Kong of which: Hong Kong excluding exposure to mainland China borrowers
$m $m $m $m $m $m $m $m $m $m $m
Strong 4,241 905 10,748 196 23 5 21 16,139 4,464 5,256 5,028
Good 2,578 1,905 16,365 268 638 189 - 21,943 2,633 11,081 10,535
Satisfactory 5,734 1,569 18,747 535 1,463 319 - 28,367 5,777 15,081 14,836
Sub-standard 707 173 3,313 171 805 39 - 5,208 733 3,130 1,986
Credit impaired 499 269 5,950 119 253 22 21 7,133 614 5,582 3,224
At 30 Jun 2024 13,759 4,821 55,123 1,289 3,182 574 42 78,790 14,221 40,130 35,609
Strong 3,940 740 12,394 255 25 65 16 17,435 4,191 6,527 6,118
Good 2,555 2,054 17,777 246 781 130 18 23,561 2,592 12,004 11,262
Satisfactory 6,370 1,642 19,509 634 1,691 500 407 30,753 6,575 16,290 15,759
Sub-standard 701 182 4,856 180 1,262 60 - 7,241 726 4,400 3,102
Credit impaired 444 216 3,585 145 166 25 18 4,599 502 3,241 576
At 31 Dec 2023 14,010 4,834 58,121 1,460 3,925 780 459 83,589 14,586 42,462 36,817
Approximately 60% of the Hong Kong CRE portfolio (excluding exposure to
mainland China borrowers) is secured.
Unsecured exposures are typically granted to strong, listed CRE developers,
which commonly are members of conglomerate groups with diverse cashflows.
There has been relatively little credit deterioration in this portfolio. All
unsecured exposures are performing, with close to 90% rated Strong or Good.
There has been some credit deterioration in the portfolio of secured
exposures, as certain borrowers have sought payment deferrals to accommodate
debt serviceability challenges. Nevertheless, collateral coverage remains
strong. As at 30 June 2024, the weighted average LTV:
- Of performing exposures rated sub-standard was 50%;
-
Of impaired exposures was 55%. This has driven relatively low levels of stage
3 allowance for ECL.
Collateral coverage levels have remained broadly stable during the past six
months despite an observed softening of property valuations. This reflects
generally conservative LTVs at loan inception, providing headroom for
collateral depreciation, as well as a trend of borrower deleveraging and loan
right-sizing at the point of refinance to mitigate against higher interest
rates.
Collateral values are subject to regular assessments and updates in line with
our existing practice. Through ongoing portfolio reviews and stress testing,
vulnerable borrowers, including those with higher loan to value levels, have
been identified and are subject to heightened monitoring and management.
Refinance risk in commercial real estate
Commercial real estate lending tends to require the repayment of a significant
proportion of the principal at maturity. Typically, a customer will arrange
repayment through the acquisition of a new loan to settle the existing debt.
Refinance risk is the risk that a customer, being unable to repay the debt on
maturity, fails to refinance it at commercial terms. We monitor our commercial
real estate portfolio closely, assessing indicators for signs of potential
issues with refinancing.
Commercial real estate gross loans and advances to customers maturity analysis
of which:
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. Grupo Financiero HSBC, S.A. de C.V. Other trading entities Total UK Hong Kong
$m $m $m $m $m $m $m $m $m $m
< 1 year 3,588 1,460 25,383 430 1,499 195 23 32,578 3,854 20,708
1-2 years 4,145 1,100 12,506 158 187 30 4 18,130 4,280 8,449
2-5 years 5,506 1,568 14,791 397 1,484 323 14 24,083 5,556 9,361
> 5 years 520 693 2,443 304 12 26 1 3,999 531 1,612
At 30 Jun 2024 13,759 4,821 55,123 1,289 3,182 574 42 78,790 14,221 40,130
< 1 year 3,553 1,496 25,427 396 1,472 619 437 33,400 3,950 19,887
1-2 years 4,514 474 14,144 175 623 60 2 19,992 4,571 10,923
2-5 years 5,411 2,149 16,052 441 1,814 71 3 25,941 5,520 9,885
> 5 years 532 715 2,498 448 16 30 17 4,256 545 1,767
At 31 Dec 2023 14,010 4,834 58,121 1,460 3,925 780 459 83,589 14,586 42,462
The following table presents the Group's exposure to borrowers classified in
the commercial real estate sector where the ultimate parent is based in
mainland China, as well as all commercial real estate exposures booked on
mainland China balance sheets. The exposures at 30 June 2024 are split by
country/territory and credit quality including allowances for ECL by stage.
Mainland China commercial real estate
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers(1) 4,683 4,250 317 9,250
Guarantees issued and others(2) 82 65 153
6
Total mainland China commercial real estate exposure at 30 Jun 2024 4,765 4,315 323 9,403
Distribution of mainland China commercial real estate exposure by credit
quality
Strong 297 1,669 105 2,071
Good 408 942 - 1,350
Satisfactory 310 1,279 1,638
49
Sub-standard 1,144 167 151 1,462
Credit impaired 2,606 258 2,882
18
At 30 Jun 2024 4,765 4,315 323 9,403
Allowance for ECL by credit quality
Strong - (3) - (3)
Good - (4) - (4)
Satisfactory - (30) - (30)
Sub-standard (103) (28) (18) (149)
Credit impaired (1,721) (88) (3) (1,812)
At 30 Jun 2024 (1,824) (153) (21) (1,998)
Allowance for ECL by stage distribution
Stage 1 - (9) - (9)
Stage 2 (103) (56) (18) (177)
Stage 3 (1,721) (88) (3) (1,812)
At 30 Jun 2024 (1,824) (153) (21) (1,998)
ECL coverage % 38.3 3.5 6.5 21.2
1 Amounts represent gross carrying
amount.
2 Amounts represent nominal amount
for guarantees and other contingent liabilities.
Mainland China commercial real estate (continued)
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers(1) 6,033 4,917 839 11,789
Guarantees issued and others(2) 255 66 37 358
Total mainland China commercial real estate exposure at 31 Dec 2023 6,288 4,983 876 12,147
Distribution of mainland China commercial real estate exposure by credit
quality
Strong 781 1,723 2,510
6
Good 604 953 421 1,978
Satisfactory 679 1,704 261 2,644
Sub-standard 1,298 327 188 1,813
Credit impaired 2,926 276 3,202
-
At 31 Dec 2023 6,288 4,983 876 12,147
Allowance for ECL by credit quality
Strong (3) (3)
- -
Good (5) (6)
- (1)
Satisfactory (27) (30)
(3) -
Sub-standard (66) (87) (16) (169)
Credit impaired (1,726) (125) (1,851)
-
At 31 Dec 2023 (1,795) (247) (17) (2,059)
Allowance for ECL by stage distribution
Stage 1 (10) (10)
- -
Stage 2 (69) (112) (17) (198)
Stage 3 (1,726) (125) (1,851)
-
At 31 Dec 2023 (1,795) (247) (17) (2,059)
ECL coverage % 28.5 5.0 1.9 17.0
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other
contingent liabilities.
Commercial real estate financing refers to lending that focuses on commercial
development and investment in real estate and covers commercial, residential
and industrial assets. The exposures in the table are related to companies
whose primary activities are focused on these activities. The table also
includes financing provided to a corporate or financial entity for the
purchase or financing of a property that supports the overall operations of
the business. Such exposures are outside of our normal definition of
commercial real estate, as applied elsewhere in this report, but are provided
here for a more comprehensive view of our mainland property exposure.
The table above shows 54% ($5.1bn) of total exposure with a credit quality of
'satisfactory' or above, which was lower in proportion compared with 31
December 2023 at 59% ($7.1bn). Total 'credit impaired' exposures have
increased to 31% ($2.9bn) (31 December 2023: 26%, $3.2bn), reflecting
sustained stress in the China commercial real estate market, including
weakness in both property market fundamentals and financing conditions for
borrowers operating in this sector.
Allowances for ECL are substantially against unsecured exposures. For secured
exposures, allowances for ECL are minimal, reflecting the nature and value of
the security held.
Facilities booked in Hong Kong continue to represent the largest proportion of
mainland China commercial real estate exposures, although total exposures
reduced to $4.8bn, down $1.5bn since 31 December 2023, as a result of
de-risking measures, repayments and write-offs. This portfolio remains
relatively higher risk, with 21% (31 December 2023: 33%) of exposure booked
with a credit quality of 'satisfactory' or above and 55% 'credit impaired' (31
December 2023: 47%).
At 30 June 2024, the Group had allowances for ECL of $1.8bn (31 December
2023: $1.8bn) held against mainland China commercial real estate exposures to
companies whose ultimate parent is based in mainland China, which are booked
in Hong Kong. ECL coverage increased to 38% (31 December 2023: 29%).
Approximately 40% ($0.8bn) of the unimpaired exposure in the Hong Kong
portfolio is lending to state-owned enterprises and relatively strong
private-owned enterprises. This is reflected in the relatively low allowance
for ECL in this part of the portfolio.
Market conditions remain subdued as a result of generally weak sentiment and
residential property transaction levels. Performance divergence between
privately-owned enterprises and state-owned enterprises has continued in the
first half of 2024, with state-owned enterprises achieving above-market sales,
and benefiting from market share gains and better access to funding. A series
of policy measures have been introduced by the Chinese government to stabilise
the market, with some initial improvement in sentiment driving an early
rebound in secondary market transactions. We continue to closely monitor
developments in the real estate sector, including the extent to which
government support measures are driving a sustained stabilisation in property
market fundamentals and financing conditions.
The Group has additional exposures to mainland China commercial real estate as
a result of lending to multinational corporates booked outside of mainland
China. These are not incorporated in the table above.
Supplementary information
The following disclosure presents the gross carrying/nominal amount of
financial instruments to which the impairment requirements in IFRS 9 are
applied by global business and the associated allowance for ECL.
Summary of financial instruments to which the impairment requirements in IFRS
9 are applied - by global business
Gross carrying/nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
WPB(1) 552,650 48,019 3,861 - 604,530 (591) (1,156) (846) - (2,593)
CMB 433,623 50,668 16,921 45 501,257 (503) (1,083) (5,253) (21) (6,860)
GBM 695,052 12,609 2,301 37 709,999 (121) (174) (887) (14) (1,196)
Corporate Centre(1) 85,223 174 21 - 85,418 (2) (14) (16) - (32)
Total gross carrying amount on-balance sheet at 30 Jun 2024 1,766,548 111,470 23,104 82 1,901,204 (1,217) (2,427) (7,002) (35) (10,681)
WPB 254,078 3,456 268 - 257,802 (34) - (9) - (43)
CMB 124,304 13,687 754 - 138,745 (87) (108) (66) - (261)
GBM 248,434 9,564 230 3 258,231 (35) (27) (6) - (68)
Corporate Centre 200 - - - 200 - - - - -
Total nominal amount off-balance sheet at 30 Jun 2024 627,016 26,707 1,252 3 654,978 (156) (135) (81) - (372)
WPB 129,090 1,001 - - 130,091 (13) (16) - - (29)
CMB 93,505 1,052 - - 94,557 (11) (18) - - (29)
GBM 90,868 376 - - 91,244 (12) (6) - - (18)
Corporate Centre 2,229 117 - - 2,346 (1) (19) - - (20)
Debt instruments measured at FVOCI at 30 Jun 2024 315,692 2,546 - - 318,238 (37) (59) - - (96)
WPB 630,661 54,069 4,233 - 688,963 (621) (1,551) (977) - (3,149)
CMB 464,893 66,688 12,698 49 544,328 (508) (1,336) (4,995) (23) (6,862)
GBM 696,377 14,247 3,002 32 713,658 (119) (199) (1,161) (7) (1,486)
Corporate Centre 75,805 37 6 - 75,848 (1) (13) - - (14)
Total gross carrying amount on-balance sheet at 31 Dec 2023 1,867,736 135,041 19,939 81 2,022,797 (1,249) (3,099) (7,133) (30) (11,511)
WPB 253,333 3,811 333 - 257,477 (22) - (2) - (24)
CMB 142,206 16,238 877 - 159,321 (100) (101) (102) - (303)
GBM 250,007 10,752 314 4 261,077 (38) (34) (7) - (79)
Corporate Centre 149 - - - 149 - - - - -
Total nominal amount off-balance sheet at 31 Dec 2023 645,695 30,801 1,524 4 678,024 (160) (135) (111) - (406)
WPB 124,747 406 - - 125,153 (14) (17) - - (31)
CMB 86,021 405 - - 86,426 (9) (18) - - (27)
GBM 88,229 173 1 - 88,403 (13) (6) (1) - (20)
Corporate Centre 2,201 165 - - 2,366 (1) (18) - - (19)
Debt instruments measured at FVOCI at 31 Dec 2023 301,198 1,149 1 - 302,348 (37) (59) (1) - (97)
1 With effect from 1 January 2024, following the sale of
our retail banking business in France, we have prospectively reclassified the
$7.6bn portfolio of retained loans from WPB to Corporate Centre.
Wholesale lending - loans and advances to customers at amortised cost by
country/territory
Gross carrying amount Allowance for ECL
Corporate and commercial of which: real estate and construction(1) Non-bank financial institutions Total Corporate and commercial of which: real estate and construction(1) Non-bank financial institutions Total
$m $m $m $m $m $m $m $m
UK 103,684 17,990 20,669 124,353 (1,531) (262) (75) (1,606)
- of which: HSBC UK Bank plc (ring-fenced bank) 79,516 17,318 9,084 88,600 (1,238) (224) (64) (1,302)
- of which: HSBC Bank plc (non-ring-fenced bank)(2) 24,007 672 11,535 35,542 (293) (38) (11) (304)
- of which: Other trading entities(2) 161 - 50 211 - - - -
France 25,859 4,550 7,034 32,893 (586) (45) (19) (605)
Germany 6,860 234 909 7,769 (76) - - (76)
Switzerland 1,231 244 241 1,472 (12) - - (12)
Hong Kong 122,948 46,470 17,244 140,192 (3,367) (2,127) (84) (3,451)
Australia 11,948 4,599 2,173 14,121 (31) (3) - (31)
India 12,415 2,278 6,485 18,900 (46) (6) (7) (53)
Indonesia 3,427 140 361 3,788 (120) (49) - (120)
Mainland China 29,426 6,038 8,230 37,656 (251) (149) (7) (258)
Malaysia 5,867 1,143 250 6,117 (63) (12) - (63)
Singapore 17,249 3,561 1,206 18,455 (343) (63) (1) (344)
Taiwan 4,712 14 62 4,774 - - - -
Egypt 798 37 49 847 (105) (6) - (105)
UAE 13,258 1,865 1,626 14,884 (420) (265) - (420)
US 26,037 4,874 9,952 35,989 (229) (105) (49) (278)
Mexico 11,043 651 1,273 12,316 (224) (10) (5) (229)
Other 26,302 2,999 1,485 27,787 (353) (91) (16) (369)
At 30 Jun 2024 423,064 97,687 79,249 502,313 (7,757) (3,193) (263) (8,020)
UK 105,536 17,852 18,343 123,879 (1,451) (246) (231) (1,682)
- of which: HSBC UK Bank plc (ring-fenced bank) 80,248 17,060 9,372 89,620 (1,212) (212) (66) (1,278)
- of which: HSBC Bank plc (non-ring-fenced bank) 24,791 792 8,971 33,762 (240) (34) (165) (405)
- of which: Other trading entities(2) 497 - - 497 1 - - 1
France 27,017 4,796 5,701 32,718 (636) (53) (18) (654)
Germany 6,667 240 632 7,299 (74) - - (74)
Switzerland 1,168 423 378 1,546 (12) (1) - (12)
Hong Kong 125,340 48,594 19,319 144,659 (3,099) (2,147) (57) (3,156)
Australia 12,685 4,443 1,564 14,249 (49) (1) - (49)
India 10,856 2,083 5,315 16,171 (47) (7) (4) (51)
Indonesia 3,100 162 411 3,511 (136) (58) - (136)
Mainland China 28,655 6,709 7,775 36,430 (313) (212) (11) (324)
Malaysia 5,797 1,137 258 6,055 (69) (15) - (69)
Singapore 15,845 3,458 948 16,793 (321) (40) (1) (322)
Taiwan 4,512 30 81 4,593 - - - -
Egypt 899 45 86 985 (128) (10) (1) (129)
UAE 13,740 1,979 823 14,563 (543) (296) - (543)
US 26,993 5,143 9,155 36,148 (239) (101) (58) (297)
Mexico 11,326 865 1,349 12,675 (320) (19) (5) (325)
Other 27,519 3,496 2,294 29,813 (366) (80) (18) (384)
At 31 Dec 2023 427,655 101,455 74,432 502,087 (7,803) (3,286) (404) (8,207)
1 Real estate lending within this disclosure corresponds
solely to the industry of the borrower. 'Commercial real estate' on page 90
includes borrowers in multiple industries investing in income-producing assets
and, to a lesser extent, their construction and development.
2 At 31 December 2023, 'Other trading entities' included
gross carrying amount of $497m and allowances for ECL of $1m related to the
Private Banking entity that was reclassified to HSBC Bank plc to continue the
process of simplifying our structure.
Personal lending - loans and advances to customers at amortised cost by
country/territory
Gross carrying amount Allowance for ECL
First lien residential mortgages Other personal of which: credit cards Total First lien residential mortgages Other personal of which: credit cards Total
$m $m $m $m $m $m $m $m
UK 169,381 20,056 8,051 189,437 (181) (515) (260) (696)
- of which: HSBC UK Bank plc (ring-fenced bank) 165,794 17,853 7,972 183,647 (176) (507) (258) (683)
- of which: HSBC Bank plc (non-ring-fenced bank)(1) 3,587 2,203 79 5,790 (5) (8) (2) (13)
- of which: Other trading entities(1) - - - - - - - -
France(2) 403 7,023 1 7,426 (12) (11) - (23)
Germany - 132 - 132 - - - -
Switzerland 1,665 4,978 - 6,643 (1) (14) - (15)
Hong Kong 107,456 31,001 9,035 138,457 (2) (390) (259) (392)
Australia 23,193 442 399 23,635 (5) (11) (10) (16)
India 1,820 783 212 2,603 (5) (15) (12) (20)
Indonesia 50 294 132 344 (2) (10) (6) (12)
Mainland China 6,652 820 248 7,472 (6) (44) (34) (50)
Malaysia 2,202 1,955 828 4,157 (20) (69) (34) (89)
Singapore 6,953 6,444 536 13,397 - (41) (18) (41)
Taiwan 5,461 1,430 339 6,891 - (16) (4) (16)
Egypt - 283 68 283 - (1) - (1)
UAE 1,915 1,326 484 3,241 (7) (58) (26) (65)
US 19,479 648 188 20,127 (13) (16) (14) (29)
Mexico 8,341 5,890 2,381 14,231 (179) (691) (306) (870)
Other 5,449 2,529 780 7,978 (95) (60) (34) (155)
At 30 Jun 2024 360,420 86,034 23,682 446,454 (528) (1,962) (1,017) (2,490)
UK 168,469 19,503 8,056 187,972 (209) (697) (339) (906)
- of which: HSBC UK Bank plc (ring-fenced bank) 164,878 17,884 7,975 182,762 (205) (692) (336) (897)
- of which: HSBC Bank plc (non-ring-fenced bank) 3,226 141 81 3,367 (3) (5) (2) (8)
- of which: Other trading entities(1) 365 1,478 - 1,843 (1) - (1) (1)
France(2) 436 7,476 1 7,912 (13) (8) - (21)
Germany - 165 - 165 - - - -
Switzerland 1,770 5,466 - 7,236 (1) (20) - (21)
Hong Kong 107,182 31,248 9,663 138,430 (2) (417) (286) (419)
Australia 23,001 446 396 23,447 (5) (19) (18) (24)
India 1,537 680 185 2,217 (4) (16) (12) (20)
Indonesia 58 288 137 346 (2) (11) (7) (13)
Mainland China 7,503 754 287 8,257 (3) (49) (39) (52)
Malaysia 2,313 2,115 882 4,428 (23) (87) (36) (110)
Singapore 8,151 5,589 521 13,740 - (38) (17) (38)
Taiwan 5,607 1,370 309 6,977 - (17) (4) (17)
Egypt - 341 89 341 - (1) (1) (1)
UAE 1,957 1,325 440 3,282 (10) (62) (24) (72)
US 18,340 673 199 19,013 (15) (19) (14) (34)
Mexico 8,778 6,215 2,465 14,993 (176) (757) (297) (933)
Other 5,807 2,959 1,050 8,766 (108) (78) (42) (186)
At 31 Dec 2023 360,909 86,613 24,680 447,522 (571) (2,296) (1,136) (2,867)
1 At 31 December 2023, 'Other trading entities' included gross carrying
amount of $1,843m and allowances for ECL of $1m related to the Private Banking
entity that was reclassified to HSBC Bank plc to continue the process of
simplifying our structure.
2 Included in other personal lending as at 30 June 2024 is $6,980m (31
December 2023: $7,424m) guaranteed by Crédit Logement.
Treasury risk
97 Overview
97 Treasury risk management
99 Capital risk in the first half of 2024
102 Liquidity and funding risk in the first half of 2024
104 Sources of funding
105 Interest rate risk in the banking book in the first half of 2024
Overview
Treasury risk is the risk of having insufficient capital, liquidity or funding
resources to meet financial obligations and satisfy regulatory requirements,
including the risk of an adverse impact on earnings or capital due to
structural and transactional foreign exchange exposures, as well as changes in
market interest rates, together with pension and insurance risk.
Treasury risk arises from changes to the respective resources and risk
profiles driven by customer behaviour, management decisions or the external
environment.
Approach and policy
Our objective in the management of treasury risk is to maintain appropriate
levels of capital, liquidity, funding, foreign exchange and market risk to
support our business strategy, and meet our regulatory and stress
testing-related requirements.
Our approach to treasury management is driven by our strategic and
organisational requirements, taking into account the regulatory, economic and
commercial environment. We aim to maintain a strong capital and liquidity base
to support the risks inherent in our business and invest in accordance with
our strategy, meeting both consolidated and local regulatory requirements at
all times.
Our policy is underpinned by our risk management framework. The risk
management framework incorporates a number of measures aligned to our
assessment of risks for both internal and regulatory purposes. These risks
include credit, market, operational, pensions, structural and transactional
foreign exchange risk, and interest rate risk in the banking book.
A summary of our current policies and practices regarding the
management of treasury risk is set out on pages 203 to 217 of the Annual
Report and Accounts 2023.
Treasury risk management
Key developments in the first half of 2024
- The Board approved the first interim dividend of $0.10 per share, which
was paid in June 2024. We have successfully concluded the share buy-back
announced for the first quarter of 2024, amounting to $3bn. We also intend to
initiate a further share buy-back of up to $3bn, which we expect to complete
within three months.
- On 1 January 2024, HSBC Continental Europe completed the sale of its
retail banking operations in France, with no material incremental impact on
CET1.
- On 28 March 2024, HSBC completed the sale of HSBC Bank Canada to the
Royal Bank of Canada. The associated gain on sale of $4.8bn added
approximately 0.8 percentage points to the CET1 ratio as of 30 March 2024. In
addition to the interim dividend, following completion of this transaction,
the Board also approved a special dividend of $0.21 per share, paid in June
2024.
- On 9 April 2024, HSBC entered into a binding agreement to sell its
business in Argentina to Grupo Financiero Galicia. The transaction is subject
to conditions, including regulatory approval, and is not expected to have a
significant impact on the Group's CET1 ratio by closing.
For quantitative disclosures on capital ratios,
own funds and RWAs, see pages 99 to 101. For quantitative disclosures on
liquidity and funding metrics, see pages 102 to 104. For quantitative
disclosures on interest rate risk in the banking book, see pages 105 to 106.
Capital, liquidity and funding risk management processes
Assessment and risk appetite
Our capital management policy is supported by a global capital management
framework. The framework sets out our approach to determining key capital risk
appetites including CET1, total capital, minimum requirements for own funds
and eligible liabilities ('MREL'), the leverage ratio and double leverage. Our
internal capital adequacy assessment process ('ICAAP') is an assessment of the
Group's capital position, outlining both regulatory and internal capital
resources and requirements resulting from HSBC's business model, strategy,
risk profile and management, performance and planning, risks to capital, and
the implications of stress testing. Our assessment of capital adequacy is
driven by an assessment of risks. These risks include credit, market,
operational, pensions, insurance, structural foreign exchange, interest rate
risk in the banking book and Group risk. Climate risk is also considered as
part of the ICAAP, and we are continuing to develop our approach. The Group's
ICAAP supports the determination of the consolidated capital risk appetite and
target ratios and enables the assessment and determination of capital
requirements by regulators. Subsidiaries prepare ICAAPs in line with global
guidance, while considering their local regulatory regimes to determine their
own risk appetites and ratios.
HSBC Holdings is the provider of MREL to its subsidiaries, including equity
and non-equity capital. These investments are funded by HSBC Holdings' own
equity capital and MREL-eligible debt. MREL includes own funds and liabilities
that can be written down or converted into capital resources in order to
absorb losses or recapitalise a bank in the event of its failure. In line with
our existing structure and business model, HSBC has three resolution groups -
the European resolution group, the Asian resolution group and the US
resolution group. There are some smaller entities that fall outside these
resolution groups.
HSBC Holdings seeks to maintain a prudent balance between the composition of
its capital and its investments in subsidiaries.
As a matter of long-standing policy, the holding company group retains a
substantial holdings capital buffer comprising cash and other high-quality
liquid assets, which at 30 June 2024 was in excess of $20bn, our target
operating level.
We aim to ensure that management has oversight of our liquidity and funding
risks at Group and entity level through robust governance, in line with our
risk management framework. We manage liquidity and funding risk at an
operating entity level, in accordance with globally consistent policies,
procedures and reporting standards. This ensures that obligations can be met
in a timely manner, in the jurisdiction where they fall due.
Operating entities are required to meet internal minimum requirements and any
applicable regulatory requirements at all times. These requirements are
assessed through our internal liquidity adequacy assessment process ('ILAAP'),
which ensures that operating entities have robust strategies, policies,
processes and systems for the identification, measurement, management and
monitoring of liquidity risk over an appropriate set of time horizons,
including intra-day. The ILAAP informs the validation of risk tolerance and
the setting of risk appetite. It also assesses the capability to manage
liquidity and funding effectively in each major entity. These metrics are set
and managed locally but are subject to robust global review and challenge to
ensure consistency of approach and application of the Group's policies and
controls.
Planning and performance
Capital and RWA plans form part of the annual financial resource plan that is
approved by the Board.
Capital and RWA forecasts are submitted to the Group Executive Committee on a
monthly basis, and capital and RWAs are monitored and managed against the
plan. The responsibility for global capital allocation principles rests with
the Group Chief Financial Officer, supported by the Group Capital Management
Meeting. This is a specialist forum addressing capital management, reporting
into Holdings ALCO.
Through our internal governance processes, we seek to strengthen discipline
over our investment and capital allocation decisions, and to ensure that
returns on investment meet management's objectives. Our strategy is to
allocate capital to businesses and entities to support growth objectives where
returns above internal hurdle levels have been identified, and to meet their
regulatory and economic capital needs. We evaluate and manage business returns
by using a return on average tangible equity measure and a related economic
profit measure.
Funding and liquidity plans also form part of the financial resource plan that
is approved by the Board. The Board-level appetite measures are the liquidity
coverage ratio ('LCR') and net stable funding ratio ('NSFR'), together with an
internal liquidity metric at entity level. In addition, we use a wider set of
measures to manage an appropriate funding and liquidity profile, including
legal entity depositor concentration limits, intra-day liquidity,
forward-looking funding assessments and other key measures.
Risks to capital and liquidity
Outside the stress testing framework, other risks may be identified that have
the potential to affect our RWAs, capital and/or liquidity position. Downside
and Upside scenarios are assessed against our management objectives, and
mitigating actions are assigned as necessary. We closely monitor future
regulatory developments and continue to evaluate the impact of these upon our
capital and liquidity requirements, particularly those related to the UK's
implementation of the outstanding measures to be implemented from the Basel
III reforms ('Basel 3.1').
Regulatory developments
Future changes to our ratios may occur with the implementation of Basel 3.1.
The Prudential Regulation Authority ('PRA') has published its consultation
paper on the UK's implementation, with a proposed implementation date of 1
July 2025. Whilst the PRA is still to release a near final draft of the
remaining parts of Basel 3.1, we continue to assess the impact of the near
final rules.
· For further details, see the 'Regulatory developments' section
in our Pillar 3 Disclosures at 30 June 2024, which is expected to be published
on or around 7 August 2024 at www.hsbc.com/investors
(http://www.hsbc.com/investors) .
Regulatory reporting processes and controls
We are advancing a comprehensive initiative aimed at strengthening our global
processes, enhancing consistency, and improving controls across our regulatory
reporting. This remains a top priority for both HSBC management and regulatory
authorities. This multifaceted programme includes data enhancement,
transformation of the reporting systems, and an uplift to the control
environment over the report production process.
While this programme continues, there may be further impacts on some of our
regulatory ratios, such as the CET1, LCR and NSFR, as we implement recommended
changes and continue to enhance our controls across the process.
Stress testing and recovery and resolution planning
The Group uses stress testing to inform management of the capital and
liquidity needed to withstand internal and external shocks, including a global
economic downturn or a systems failure. Stress testing results are also used
to inform risk mitigation actions, input into global business performance
through tangible equity allocation, and recovery and resolution planning, as
well as to re-evaluate business plans where analysis shows capital, liquidity
and/or returns do not meet their target.
In addition to a range of internal stress tests, we are subject to supervisory
stress testing in many jurisdictions. These include the exercises of the Bank
of England ('BoE'), the US Federal Reserve Board, the European Banking
Authority, the European Central Bank and the Hong Kong Monetary Authority. The
results of regulatory stress testing and our internal stress tests are used
when assessing our internal capital and liquidity requirements through the
ICAAP and ILAAP. The outcomes of stress testing exercises carried out by the
PRA and other regulators feed into the setting of regulatory minimum ratios
and buffers.
We maintain recovery plans for the Group and material entities, which set out
potential options management could take in a range of stress scenarios that
could result in a breach of capital or liquidity buffers. The Group recovery
plan sets out the framework and governance arrangements to support restoring
HSBC to a stable and viable position, and so lowering the probability of
failure from either idiosyncratic company-specific stress or systemic
market-wide issues. Our material entities' recovery plans provide detailed
actions that management would consider taking in a stress scenario should
their positions deteriorate and threaten to breach risk appetite and
regulatory minimum levels. This is to help ensure that HSBC entities can
stabilise their financial position and recover from financial losses in a
stress environment.
The Group also has capabilities, resources, and arrangements in place to
address the unlikely event that HSBC might not be recoverable and would
therefore need to be resolved by regulators. The Group and the BoE publicly
disclosed the status of HSBC's progress against the BoE's Resolvability
Assessment Framework ('RAF') in June 2022, following the submission of HSBC's
inaugural resolvability self-assessment in October 2021. HSBC has continued to
enhance its resolvability capabilities since this time and submitted its
second self-assessment in October 2023. A subsequent update was provided to
the BoE in January 2024. Further public disclosure by the Group and the BoE as
to HSBC's progress against the Resolvability Assessment Framework is expected
to be made in August 2024.
Overall, our recovery and resolution planning helps to safeguard the Group's
financial and operational stability. HSBC is committed to continuing to
enhance its recovery and resolution capabilities, in line with the Group's
preferred resolution strategy and regulatory expectations, including the RAF.
Measurement of interest rate risk in the banking book processes
Assessment and risk appetite
Interest rate risk in the banking book is the risk of an adverse impact to
earnings or capital due to changes in market interest rates. It is generated
by our non-traded assets and liabilities, specifically loans, deposits and
financial instruments that are not held for trading intent or in order to
hedge positions held with trading intent. Interest rate risk that can be
economically hedged is transferred to Global Treasury, with some exceptions.
Hedging is generally executed through interest rate derivatives or fixed-rate
government bonds. Any interest rate risk that Global Treasury cannot
economically hedge is not transferred and remains within the global business
where the risk originates.
Global Treasury uses a number of measures to monitor and control interest rate
risk in the banking book, including:
- banking net interest income sensitivity; and
- economic value of equity sensitivity.
Banking net interest income sensitivity
A principal part of our management of non-traded interest rate risk is to
monitor the sensitivity of expected banking net interest income ('banking
NII') under varying interest rate scenarios (i.e. simulation modelling), where
all other economic variables are held constant. Banking NII sensitivity
measures the sensitivity of NII adjusted for the funding costs of the trading
book and of interest related to AT1 capital. This monitoring is undertaken at
an entity and Group level, where a range of interest rate scenarios are
monitored on a one-year basis.
Banking NII sensitivity figures represent the effect of pro forma movements in
projected yield curves based on a static balance sheet size and structure,
except for certain mortgage products where balances are impacted by interest
rate sensitive prepayments. These sensitivity calculations do not incorporate
actions that would be taken by Global Treasury or in the business that
originates the risk to mitigate the effect of interest rate movements.
The banking NII sensitivity calculations assume that interest rates of all
maturities move by the same amount in the 'up-shock' scenario. The sensitivity
calculations in the 'down-shock' scenarios reflect no floors to the shocked
market rates. However, customer product-specific interest rate floors are
recognised where applicable.
Economic value of equity sensitivity
Economic value of equity ('EVE') measures the present value of our banking
book assets and liabilities excluding equity, based on a run-off balance
sheet. Economic value of equity sensitivity measures the impact to EVE from a
movement in interest rates, including the assumed term profile of non-maturing
deposits having adjusted for stability and price sensitivity. It is measured
and reported as part of our internal risk metrics, regulatory rules (including
the Supervisory Outlier Test) and external Pillar 3 disclosures.
For further details, see the 'Economic value of equity and net
interest income sensitivity' section in our Pillar 3 Disclosures at 30 June
2024, which is expected to be published on or around 7 August 2024 at
www.hsbc.com/investors.
Capital risk in the first half of 2024
Capital overview
Capital and liquidity adequacy metrics
At
30 Jun 2024 31 Dec 2023
Risk-weighted assets ('RWAs') ($bn)
Credit risk 664.1 683.9
Counterparty credit risk 36.8 35.5
Market risk 37.9 37.5
Operational risk 96.3 97.2
Total RWAs 835.1 854.1
Capital on a transitional basis ($bn)
Common equity tier 1 capital 125.3 126.5
Tier 1 capital 144.3 144.2
Total capital 172.1 171.2
Capital ratios on a transitional basis (%)
Common equity tier 1 ratio 15.0 14.8
Tier 1 ratio 17.3 16.9
Total capital ratio 20.6 20.0
Capital on an end point basis ($bn)
Common equity tier 1 capital 125.3 126.5
Tier 1 capital 144.3 144.2
Total capital 168.1 167.1
Capital ratios on an end point basis (%)
Common equity tier 1 ratio 15.0 14.8
Tier 1 ratio 17.3 16.9
Total capital ratio 20.1 19.6
Liquidity coverage ratio ('LCR')
Total high-quality liquid assets ($bn) 646.1 647.5
Total net cash outflow ($bn) 472.3 477.1
LCR (%)(1) 137 136
1 We have enhanced our calculation processes during 1H24. As Group LCR
is reported as a 12-month average, the benefit of these changes will be
recognised incrementally over the coming year starting from 30 June 2024.
References to EU regulations and directives (including technical standards)
should, as applicable, be read as references to the UK's version of such
regulations and directives, as onshored into UK law under the European Union
(Withdrawal) Act 2018, and as may be subsequently amended under UK law.
Capital figures and ratios in the previous table are calculated in accordance
with the regulatory requirements of the Capital Requirements Regulation and
Directive, the CRR II regulation and the Prudential Regulation Authority
('PRA') Rulebook ('CRR II'). The table presents them under the transitional
arrangements in CRR II for capital instruments and after their expiry, known
as the end point.
The liquidity coverage ratio is based on the average value of the preceding 12
months.
Regulatory numbers and ratios are as presented at the date of reporting. Small
changes may exist between these numbers and ratios and those subsequently
submitted in regulatory filings. Where differences are significant, we may
restate in subsequent periods.
Own funds
Own funds disclosure
30 Jun 2024 31 Dec 2023
Ref(*) $m $m
6 Common equity tier 1 capital before regulatory adjustments 164,545 165,868
28 Total regulatory adjustments to common equity tier 1 (39,252) (39,367)
29 Common equity tier 1 capital 125,293 126,501
36 Additional tier 1 capital before regulatory adjustments 19,035 17,732
43 Total regulatory adjustments to additional tier 1 capital (70) (70)
44 Additional tier 1 capital 18,965 17,662
45 Tier 1 capital 144,258 144,163
51 Tier 2 capital before regulatory adjustments 28,914 28,148
57 Total regulatory adjustments to tier 2 capital (1,088) (1,107)
58 Tier 2 capital 27,826 27,041
59 Total capital 172,084 171,204
Capital ratios % %
61 Common equity tier 1 ratio 15.0 14.8
62 Tier 1 ratio 17.3 16.9
63 Total capital ratio 20.6 20.0
* These are references to lines prescribed in the Pillar 3 'Own funds
disclosure' template.
At 30 June 2024, our common equity tier 1 ('CET1') capital ratio increased to
15.0% from 14.8% at 31 December 2023, driven by a decrease in RWAs of $19bn,
and a decline in CET1 capital of $1.2bn. The overall rise in our CET1 ratio
during the period was contributed by:
- a 0.7 percentage point net increase from strategic transactions,
including the gain on disposal of our Canada banking business adjusted for the
$0.21 per share special dividend, the RWAs reduction from our disposals in
France and Canada, which was partially offset by the impairment loss following
the held for sale classification of our business in Argentina;
- a 0.2 percentage point increase from capital generation, mainly
through regulatory profits less dividends, adjusted for the share buy-backs
announced along with our 4Q23 and 1Q24 results;
- a 0.5 percentage point decrease driven by higher RWAs mainly from
asset size movements and model updates, excluding the reduction from our
disposals in France and Canada; and
- a 0.2 percentage point decrease from the adverse impact of foreign
exchange fluctuations and an increase in regulatory deductions.
At 30 June 2024, our Pillar 2A requirement, set by the PRA's Individual
Capital Requirement based on a point-in-time assessment, was equivalent to
2.6% of RWAs, of which 1.5% was met by CET1 capital. Throughout the first half
of 2024, we complied with the PRA's regulatory capital adequacy requirements.
Risk-weighted assets
RWAs by global business
WPB CMB GBM Corporate Total RWAs
Centre
$bn $bn $bn $bn $bn
Credit risk 146.8 301.2 131.8 84.3 664.1
Counterparty credit risk 1.0 0.6 33.2 2.0 36.8
Market risk 1.2 1.2 27.7 7.8 37.9
Operational risk 33.5 32.7 32.4 (2.3) 96.3
At 30 Jun 2024 182.5 335.7 225.1 91.8 835.1
At 31 Dec 2023 192.9 354.5 218.5 88.2 854.1
RWAs by legal entities(1)
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada Grupo Financiero HSBC, S.A. Other trading entities Holding companies, shared service centres and intra-Group eliminations(2) Total RWAs
de C.V.
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
Credit risk 113.2 75.2 315.6 19.1 62.3 - 25.1 45.8 7.8 664.1
Counterparty credit risk 0.2 18.5 10.4 0.7 3.6 - 0.5 2.9 - 36.8
Market risk(3) 0.2 25.5 29.2 2.6 3.7 - 0.8 1.5 3.2 37.9
Operational risk 17.9 17.9 46.0 3.7 7.2 - 4.9 4.8 (6.1) 96.3
At 30 Jun 2024 131.5 137.1 401.2 26.1 76.8 - 31.3 55.0 4.9 835.1
At 31 Dec 2023 129.2 131.5 396.7 24.3 72.2 31.9 32.6 59.6 6.7 854.1
1 Balances are on a third-party Group consolidated basis.
2 Balance at 30 June 2024 includes HSBC Bank Canada operational risk
RWAs due to the averaging calculation and will roll off over future reporting
cycles.
3 Market risk RWAs are non-additive across the legal entities due to
diversification effects within the Group.
RWA movement by global businesses by key driver
Credit risk, counterparty credit risk and operational risk
WPB CMB GBM Corporate Centre Market risk Total RWAs
$bn $bn $bn $bn $bn $bn
RWAs at 1 Jan 2024 191.6 353.5 196.3 75.2 37.5 854.1
Asset size 1.3 4.3 5.6 4.0 6.0 21.2
Asset quality 0.7 1.4 (1.8) (0.5) - (0.2)
Model updates 0.3 0.1 3.3 3.3 - 7.0
Methodology and policy (1.6) 1.4 (0.4) 2.7 - 2.1
Acquisitions and disposals (7.3) (20.5) (2.7) (0.2) (5.6) (36.3)
Foreign exchange movements(1) (3.7) (5.7) (2.9) (0.5) - (12.8)
Total RWA movement (10.3) (19.0) 1.1 8.8 0.4 (19.0)
RWAs at 30 Jun 2024 181.3 334.5 197.4 84.0 37.9 835.1
1 Credit risk foreign exchange movements in this disclosure are
computed by retranslating RWAs into US dollars based on the underlying
transactional currencies and other movements in the table are presented on a
constant currency basis.
RWA movement by legal entities by key driver(1)
Credit risk, counterparty credit risk and operational risk
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada(2) Grupo Financiero HSBC, S.A. Other trading entities Holding companies, shared service centres and intra-Group eliminations(2) Market risk Total RWAs
de C.V.
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
RWAs at 1 Jan 2024 129.0 108.8 369.3 21.5 69.6 31.1 31.9 58.0 (2.6) 37.5 854.1
Asset size 1.8 1.9 2.0 0.9 2.0 - 0.7 6.1 (0.2) 6.0 21.2
Asset quality 0.3 (0.3) 1.1 (0.5) 1.2 - - (2.0) - - (0.2)
Model updates 0.1 1.2 4.1 1.1 0.4 - - 0.1 - - 7.0
Methodology and policy 1.4 5.4 (1.6) 0.5 (0.1) (3.4) - (4.6) 4.5 - 2.1
Acquisitions and disposals - (3.5) 0.2 - - (27.1) - (0.3) - (5.6) (36.3)
Foreign exchange movements(3) (1.3) (1.9) (3.1) - - (0.6) (2.1) (3.8) - - (12.8)
Total RWA movement 2.3 2.8 2.7 2.0 3.5 (31.1) (1.4) (4.5) 4.3 0.4 (19.0)
RWAs at 30 Jun 2024 131.3 111.6 372.0 23.5 73.1 - 30.5 53.5 1.7 37.9 835.1
1 Balances are on a third-party Group consolidated basis.
2 The balance in methodology and policy includes HSBC Bank Canada
operational risk RWAs due to the averaging calculation and will roll off over
future reporting cycles.
3 Credit risk foreign exchange movements in this disclosure are
computed by retranslating the RWAs into US dollars based on the underlying
transactional currencies and other movements in the table are presented on a
constant currency basis.
During the first half of the year, RWAs decreased by $19.0bn, mainly due to
strategic disposals of $36.3bn and foreign currency translation differences of
$12.8bn, which were partially offset by asset size movements of $21.2bn.
Asset size
The $6.0bn increase in market risk RWAs was mainly attributed to a rise in
value at risk, and the incremental risk charge from increased positions,
notably in Asia and HSBC Bank plc.
GBM RWAs increased by $5.6bn, mainly driven by a rise in corporate exposures,
primarily in HSBC Bank plc and higher sovereign exposures in Mexico. Further
RWA increases were largely attributed to mark-to-market movements and organic
growth in counterparty credit risk, notably in Asia and North America.
CMB RWAs rose by $4.3bn, due to an increase in corporate lending, mainly in
HSBC UK Bank plc, Argentina and North America, and higher sovereign exposures
in Argentina.
Corporate Centre RWAs increased by $4.0bn, which was largely driven by a rise
in SAB corporate exposures.
WPB RWAs increased by $1.3bn, primarily due to higher sovereign exposures in
Argentina, and mortgage portfolio growth in North America and HSBC UK.
Asset quality
The $0.2bn fall in RWAs was mainly due to portfolio mix changes, and
favourable credit risk migrations in Argentina and Sri Lanka, which was
largely offset by unfavourable credit risk migrations in Asia.
Model updates
The $7.0bn increase mainly follows a revision to the definition of default in
our PD models for exposures to financial institutions.
Acquisitions and disposals
RWAs decreased by $36.3bn, predominantly from the disposal of our banking
business in Canada and the sale of our retail banking operations in France.
Methodology and policy
Methodology changes and risk parameter refinements mainly in Argentina, HSBC
UK Bank plc and HSBC Bank plc, offset by Asia, led to the RWAs increase of
$2.1bn.
This includes the retained portfolio of our France retail banking operations
transferred from WPB to Corporate Centre.
Leverage ratio(1)
At
30 Jun 2024 31 Dec 2023
$bn $bn
Tier 1 capital (leverage) 144.3 144.2
Total leverage ratio exposure 2,514.5 2,574.8
% %
Leverage ratio 5.7 5.6
1 Leverage ratio calculation is in
line with the PRA's UK leverage rules. This includes IFRS 9 transitional
arrangement and excludes central bank claims.
Our leverage ratio was 5.7% at 30 June 2024, up from 5.6% at 31 December
2023. The reduction in the leverage exposures led to a rise of 0.1 percentage
point in the leverage ratio. This was primarily due to the reduction of the
balance sheet, mainly driven by the disposal of our banking business in Canada
and the sale of our retail banking operations in France.
At 30 June 2024, our UK minimum leverage ratio requirement of 3.25% was
supplemented by a leverage ratio buffer of 1.0%, made up of an additional
leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of
0.3%.
These buffers translated into capital values of $17.6bn and $7.5bn
respectively. We exceeded these leverage requirements throughout 1H24.
Regulatory transitional arrangements for
IFRS 9 'Financial Instruments'
We have adopted the regulatory transitional arrangements of the Capital
Requirements Regulation for IFRS 9, including paragraph four of article 473a.
These allow banks to add back to their capital base a proportion of the impact
that IFRS 9 has upon their loan loss allowances. Our capital and ratios are
presented under these arrangements throughout the tables in this section,
including the end point figures.
Liquidity and funding risk in the first half of 2024
Liquidity metrics
At 30 June 2024, all of the Group's material operating entities were above
regulatory minimum levels.
Each entity maintains sufficient unencumbered liquid assets to comply with
local and regulatory requirements. The liquidity value of these liquid assets
for each entity is shown in the following table along with the individual LCR
levels on a local regulatory requirements basis wherever applicable. Where
local regulatory requirements are not applicable, the PRA LCR is shown. The
local basis may differ from PRA measures due to differences in the way
regulators have implemented the Basel III standards.
Each entity maintains a sufficient stable funding profile and it is assessed
by using the PRA NSFR or other appropriate metrics.
In addition to regulatory metrics, HSBC uses a wide set of measures to manage
its liquidity and funding profile.
The Group liquidity and funding position on an average basis is analysed in
the following sections.
Operating entities' liquidity
At 30 Jun 2024
LCR(6) HQLA Net outflows NSFR(6)
% $bn $bn %
HSBC UK Bank plc (ring-fenced bank)(1) 193 114 59 155
HSBC Bank plc (non-ring-fenced bank)(2) 146 131 90 114
The Hongkong and Shanghai Banking Corporation Limited - Hong Kong branch(3) 195 142 73 127
HSBC Singapore(4) 314 29 9 180
Hang Seng Bank 263 50 19 166
HSBC Bank China 176 25 14 144
HSBC Bank USA 172 81 47 129
HSBC Continental Europe(5) 156 83 53 138
HSBC Bank Middle East - UAE branch 257 14 5 154
HSBC Bank Canada - - - -
HSBC Bank Mexico 160 9 6 124
At 31 Dec 2023
HSBC UK Bank plc (ring-fenced bank)(1) 201 118 59 158
HSBC Bank plc (non-ring-fenced bank)(2) 148 132 89 116
The Hongkong and Shanghai Banking Corporation Limited - Hong Kong branch(3) 192 147 77 127
HSBC Singapore(4) 292 26 9 174
Hang Seng Bank 254 52 21 163
HSBC Bank China 170 24 14 139
HSBC Bank USA 172 82 48 131
HSBC Continental Europe(5) 158 83 52 137
HSBC Bank Middle East - UAE branch 281 13 5 163
HSBC Bank Canada 164 21 13 129
HSBC Bank Mexico 149 8 5 124
1 HSBC UK Bank plc refers to the HSBC UK liquidity group, which
comprises five legal entities: HSBC UK Bank plc, Marks and Spencer Financial
Services plc, HSBC Private Bank (UK) Limited, HSBC Innovation Bank Limited and
HSBC Trust Company (UK) Limited, managed as a single operating entity, in line
with the application of UK liquidity regulation as agreed with the PRA.
2 HSBC Bank plc includes overseas branches and special purpose
entities consolidated by HSBC for financial statements purposes.
3 The Hongkong and Shanghai Banking Corporation Limited - Hong Kong
branch represents the material activities of The Hongkong and Shanghai Banking
Corporation Limited. It is monitored and controlled for liquidity and funding
risk purposes as a stand-alone operating entity.
4 HSBC Singapore includes HSBC Bank (Singapore) Limited and The
Hongkong and Shanghai Banking Corporation Limited - Singapore branch.
Liquidity and funding risk is monitored and controlled at country level in
line with the local regulator's approval.
5 In response to the requirement for an intermediate parent
undertaking in line with EU Capital Requirements Directive ('CRD V'), HSBC
Continental Europe acquired control of HSBC Germany and HSBC Bank Malta on 30
November 2022. The averages for LCR and NSFR include the impact of the
inclusion of the two entities from November 2022.
6 The LCR and NSFR ratios presented in the above table are based on
average values. The LCR is the average of the preceding 12 months. The NSFR is
the average of the preceding four quarters.
Consolidated liquidity metrics
Liquidity coverage ratio
At 30 June 2024, the average high-quality liquid assets ('HQLA') held at
entity level amounted to $780bn (31 December 2023: $795bn), a decrease of
$15bn. The Group consolidation methodology includes a deduction to reflect the
impact of limitations in the transferability of entity liquidity around the
Group. This resulted in an adjustment of $134bn to LCR HQLA and $7bn to LCR
inflows on an average basis.
During 1H24, we enhanced our liquidity consolidation process and revised the
associated provisions originally recognised to address historical limitations.
As Group LCR is reported as a 12-month average, the benefit of these changes
will be recognised incrementally over the coming year starting from 30 June
2024.
At(1)
30 Jun 2024 30 Jun 2023 31 Dec 2023
$bn $bn $bn
High-quality liquid assets (in entities) 780 796 795
Group LCR HQLA(2) 646 631 648
Net outflows(2) 472 478 477
Liquidity coverage ratio (%) 137 132 136
Adjustment for transfer restrictions(2) (141) (172) (154)
1 Group LCR numbers above are based on average month-end values of the
preceding 12 months.
2 These include a total adjustment for transfer restrictions on a 12-month
average basis of $141bn as at 30 June 2024, of which a $134bn deduction
applied to LCR HQLA and $7bn to LCR inflows.
Liquid assets
After the $134bn adjustment, the Group LCR HQLA of $646bn (31 December 2023:
$648bn) was held in a range of asset classes and currencies. Of these, 96%
were eligible as level 1 (31 December 2023: 97%).
The following tables reflect the composition of the liquidity pool by asset
type and currency at 30 June 2024:
Liquidity pool by asset type(1)
Liquidity pool Cash Level 1(2) Level 2(2)
$bn $bn $bn $bn
Cash and balance at central bank 283 283 - -
Central and local government bonds 337 - 316 21
Regional government and public sector entities 2 - 2 -
International organisation and multilateral development banks 14 - 14 -
Covered bonds 8 - 3 5
Other 2 - 1 1
Total at 30 Jun 2024 646 283 336 27
Total at 31 Dec 2023 648 310 317 21
1 Group liquid assets numbers are based on average month-end values
over the preceding 12 months.
2 As defined in EU and PRA regulation, level 1 assets means 'assets of
extremely high liquidity and credit quality', and level 2 assets means 'assets
of high liquidity and credit quality'.
Liquidity pool by currency(1)
$ £ € HK$ Other Total
$bn $bn $bn $bn $bn $bn
Liquidity pool at 30 Jun 2024 188 169 111 52 126 646
Liquidity pool at 31 Dec 2023 184 173 112 51 128 648
1 Group liquid assets numbers are
based on average month-end values over the preceding 12 months.
Sources of funding
Our primary sources of funding are customer current accounts and savings
deposits payable on demand or at short notice. We issue secured and unsecured
wholesale securities to supplement customer deposits, meet regulatory
obligations and to change the currency mix, maturity profile or location of
our liabilities.
The following 'Funding sources' and 'Funding uses' tables provide a view of
how our consolidated balance sheet is funded. In practice, all the principal
operating entities are required to manage liquidity and funding risk on a
stand-alone basis.
The tables analyse our consolidated balance sheet according to the assets that
primarily arise from operating activities and the sources of funding primarily
supporting these activities. Assets and liabilities that do not arise from
operating activities are presented as a net balancing source or deployment of
funds.
In 1H24, the level of customer accounts continued to exceed the level of loans
and advances to customers. The positive funding gap was predominantly deployed
in liquid assets.
Funding sources
At
30 Jun 2024 31 Dec 2023
$m $m
Customer accounts 1,593,834 1,611,647
Deposits by banks 82,435 73,163
Repurchase agreements - non-trading 202,770 172,100
Debt securities in issue 98,158 93,917
Cash collateral, margin and settlement accounts 105,226 85,255
Liabilities of disposal groups held for sale(1) 5,041 108,406
Subordinated liabilities 25,510 24,954
Financial liabilities designated at fair value 140,800 141,426
Insurance contract liabilities 125,252 120,851
Trading liabilities 77,455 73,150
- repos 13,356 12,198
- stock lending 4,566 3,322
- other trading liabilities 59,533 57,630
Total equity 190,414 192,610
Other balance sheet liabilities 328,108 341,198
2,975,003 3,038,677
Funding uses
At
30 Jun 2024 31 Dec 2023
$m $m
Loans and advances to customers 938,257 938,535
Loans and advances to banks 102,057 112,902
Reverse repurchase agreements - non-trading 230,189 252,217
Cash collateral, margin and settlement accounts 105,974 89,911
Assets held for sale(1) 5,821 114,134
Trading assets 331,307 289,159
- reverse repos 14,280 16,575
- stock borrowing 10,541 14,609
- other trading assets 306,486 257,975
Financial investments 467,356 442,763
Cash and balances with central banks 277,112 285,868
Other balance sheet assets 516,930 513,188
2,975,003 3,038,677
1 'Liabilities of disposal groups
held for sale' includes $4.1bn and 'Assets held for sale' includes $5.3bn in
respect of the planned sale of our Argentina business (2023: 'Liabilities of
disposal groups held for sale' includes $82bn and Assets held for sale'
includes $88bn in respect of the planned sale of our banking business in
Canada. 'Liabilities of disposal groups held for sale' includes $26bn and
'Assets of disposal groups held for sale' includes $28bn in respect of the
sale of our retail banking operations in France).
Interest rate risk in the banking book in the first half of 2024
Banking net interest income sensitivity
Banking NII sensitivity analyses the sensitivity of our banking net interest
income to interest rate shocks. This metric, which was introduced in our
Annual Report and Accounts 2023, includes the sensitivity coming from trading
book assets funded by banking book liabilities, as well as the currency
impacts of vanilla foreign exchange swaps to optimise cash management across
the Group. Banking NII sensitivity is therefore a more comprehensive measure
than NII sensitivity, which was disclosed previously. It is aligned with the
presentation of banking net interest income as an alternative performance
measure intended to approximate the Group's banking revenue that is directly
impacted by changes in interest rates.
The following tables set out the assessed impact to a hypothetical base case
projection of our banking NII under an immediate shock of 100bps to the
current market-implied path of interest rates across all currencies on 30 June
2024. For example, Year 3 shows the impact of an immediate rate shock on the
banking NII projected for the third year.
The sensitivities shown represent a hypothetical simulation of income,
assuming a static balance sheet (specifically no assumed migration from
current account to term deposits), and no management actions from Global
Treasury. This also incorporates the effect of hypothetical managed rate
product pricing assumptions, prepayment of mortgages and deposit stability.
The sensitivity calculations exclude pensions, insurance, and interests in
associates.
The sensitivity analysis performed in the case of a down-shock does not
include floors to market rates, and it does not include floors on some
wholesale assets and liabilities. However, floors have been
maintained for deposits and loans to customers where this is contractual or
where negative rates would not be applied.
As market and policy rates move, the degree to which these changes are passed
on to customers will vary based on a number of factors, including the absolute
level of market rates, regulatory and contractual frameworks, and competitive
dynamics. To aid comparability between markets we have simplified the basis of
preparation for our disclosure and have used a 50% pass-on assumption for
major entities on certain interest-bearing deposits. Our pass-through asset
assumptions are largely in line with our contractual agreements or established
market practice, which typically results in a significant portion of interest
rate changes being passed on.
An immediate interest rate rise of 100bps would increase projected banking NII
by $2.2bn. An immediate interest rate fall of 100bps would decrease projected
banking NII by $2.7bn.
The sensitivity of banking NII for 12 months as at 30 June 2024 decreased by
$0.6bn in the plus 100bps parallel shock, and by $0.7bn in the minus 100bps
parallel shock, when compared with 31 December 2023. The drivers of the
reduction in banking NII sensitivity include the increase in stabilisation
activities in line with Group strategy. The currency split of banking NII
sensitivity changes depending on the optimal deployment of cash at a point in
time, which will change period on period.
For further details of measurement of
interest rate risk in the banking book, see page 205 of the Annual Report and
Accounts 2023.
Banking NII sensitivity to an instantaneous change in yield curves (12 months)
- Year 1 sensitivity by currency
Currency
$ HK$ £ € Other Total
$m $m $m $m $m $m
Change in Jul 2024 to Jun 2025 (based on balance sheet at 30 Jun 2024)
+100bps parallel 729 330 283 169 734 2,245
-100bps parallel (781) (364) (424) (194) (887) (2,650)
Change in Jan 2024 to Dec 2024 (based on balance sheet at 31 Dec 2023)
+100bps parallel 343 411 496 285 1,297 2,832
-100bps parallel (494) (493) (602) (304) (1,460) (3,353)
Banking NII sensitivity to an instantaneous down 100bps parallel change in
yield curves - Year 2 and Year 3 sensitivity by currency
Currency
$ HK$ £ € Other Total
$m $m $m $m $m $m
Change in banking NII (based on balance sheet at 30 Jun 2024)
Year 2 (Jul 2025 to Jun 2026) (1,145) (467) (783) (256) (1,262) (3,913)
Year 3 (Jul 2026 to Jun 2027) (1,540) (554) (1,214) (323) (1,361) (4,992)
Change in NII (based on balance sheet at 31 Dec 2023)
Year 2 (Jan 2025 to Dec 2025) (1,015) (693) (938) (333) (1,798) (4,777)
Year 3 (Jan 2026 to Dec 2026) (1,289) (761) (1,439) (405) (1,926) (5,820)
Non-trading portfolios
Value at risk of the non-trading portfolios
Non-trading portfolios comprise of positions that primarily arise from the
interest rate management of our retail and wholesale banking assets and
liabilities, financial investments measured at fair value through other
comprehensive income ('FVOCI') or at amortised cost, and exposures arising
from our insurance operations.
From February 2024, we adopted a methodology change to measure non-trading
value at risk ('VaR') over a 10 day holding period as opposed to 1 day, in
order to better reflect longer average time horizons in the management of
non-trading portfolios compared to trading portfolios. Comparative data at 31
December 2023 and 30 June 2023 has been restated on a 10 day basis
accordingly, using a scalar approach that results in restated numbers being
approximately three times higher than previously reported 1 day basis numbers.
The VaR for non-trading activity has increased to $792m at 30 June 2024,
compared with $577m at 31 December 2023. The increase was primarily due to
higher duration risk exposures in Global Treasury.
The portfolio diversification has decreased from 31 December 2023 but remained
broadly stable on average and reflects the natural offsets in risk measured as
the difference between the portfolio level VaR and the aggregation of VaR at
the asset class level.
Non-trading VaR includes non-trading financial instruments held in portfolios
managed by Markets Treasury. The management of interest rate risk in the
banking book is described further in 'Banking net interest income sensitivity'
on page 105.
The Group non-trading VaR for the half-year to 30 June 2024 is shown in the
following table.
Non-trading VaR, 99% 10 day
Interest rate Credit spread Portfolio diversification(1) Total
$m $m $m $m
Half-year to 30 Jun 2024 682.4 333.2 791.5
(224.1)
Average 740.5 337.2 836.3
(241.4)
Maximum 1,000.6 369.1 1,097.6
Minimum 474.2 324.3 572.2
Half-year to 30 Jun 2023 494.2 266.5 549.9
(210.8)
Average 426.2 218.2 486.8
(157.6)
Maximum 502.5 266.5 587.4
Minimum 344.0 174.5 401.5
Half year to 31 Dec 2023 549.6 356.7 576.7
(329.5)
Average 560.2 312.9 628.6
(244.5)
Maximum 638.6 368.0 709.4
Minimum 504.3 249.9 537.2
1 When VaR is calculated at a portfolio level, natural offsets in risk
can occur when compared with aggregating VaR at the asset class level. This
difference is called portfolio diversification. The asset class VaR maxima and
minima reported in the table occurred on different dates within the reporting
period. For this reason, we do not report an implied portfolio diversification
measure between the maximum (minimum) asset class VaR measures and the maximum
(minimum) total VaR measures in this table.
Non-trading VaR excludes equity risk on securities held at fair value,
non-trading book foreign exchange risk and the risks managed in HSBC Holdings
arising from long-term capital issuance.
HSBC's management of market risk in the non-trading book is described in the
'Treasury risk' section on page 97.
Market risk
Overview
Market risk is the risk of an adverse financial impact on trading activities
arising from changes in market parameters, such as interest rates, foreign
exchange rates, asset prices, volatilities, correlations and credit spreads.
Exposure to market risk is separated into two portfolios: trading portfolios
and non-trading portfolios.
Market risk in the first half of 2024
There were no material changes to the policies and practices for the
management of market risk in the first half of 2024.
· A summary of our current policies and practices for the
management of market risk is set out in 'Market risk management' on page 218
of the Annual Report and Accounts 2023.
Inflation expectations have been in focus during the first half of 2024,
against a backdrop of resilient economic growth and elections in multiple
countries. Central bank policies have diverged, with the US Federal Reserve
holding interest rates unchanged and the Bank of Japan concluding its period
of negative interest rates by raising the overnight interest rate to a range
of about zero to 0.1%, while the ECB and some other European central banks cut
rates in June. After trending upwards until April, government bond yields have
generally fallen in 2Q24, largely driven by lower inflation and expectations
for monetary policy easing by central banks. Japanese government bond yields
have instead risen to the highest in the last decade following the central
bank's historic policy shift. In Europe, the France-Germany yield spread has
widened amid uncertainty from the French legislative elections. Equities have
risen to multiple record highs in the US and in Europe, amid strong corporate
earnings and positive sentiment in the technology sector. Some emerging
markets equities have tended to outperform developed markets during 2Q24,
particularly in Asia. In
foreign exchange markets, the US dollar strengthening has continued, mostly in
line with interest rate differentials. The Yen has weakened to multi-decade
lows against the US dollar. Whilst sentiment has remained resilient in credit
markets, credit spreads widened marginally during June, with a more pronounced
increase for high-yield credit compared to investment grade.
We continued to manage market risk prudently in the first half of 2024. Main
sensitivity exposures and VaR remained within appetite as the business pursued
its core market-making activity in support of our customers. Market risk was
managed using a complementary set of risk measures and limits, including
stress testing and scenario analysis.
Trading portfolios
Value at risk of the trading portfolios
Trading VaR was predominantly generated by Markets and Securities Services.
Trading VaR at $52.7m as of 30 June 2024 has not changed materially compared
with 31 December 2023. Exposures to interest rate risk factors from the Fixed
Income and Foreign Exchange businesses were the main drivers of Trading VaR at
the end of June 2024. Trading VaR peaked in March 2024 and was mainly driven
by:
- Increased contribution of exposures to short-term interest rates for
major currencies.
- The effects of relatively large, short-term interest rate shocks
that are captured in the VaR scenario window.
VaR reduced following hedging activity to manage down exposures to interest
rates across the Markets business.
The Group trading VaR for the half-year is shown in the table below.
Trading VaR, 99% 1 day
Foreign exchange Interest Equity Credit Portfolio Total
and commodity rate spread diversification(1)
$m $m $m $m $m $m
Half-year to 30 Jun 2024 20.6 47.5 15.7 9.9 (41.1) 52.7
Average 15.4 57.1 14.0 10.2 (37.1) 59.7
Maximum 29.8 78.1 17.6 12.7 83.3
Minimum 6.9 42.0 12.7 6.6 45.7
Half-year to 30 Jun 2023 18.9 64.9 23.5 16.1 (55.6) 67.8
Average 16.7 51.9 17.5 11.1 (41.5) 55.7
Maximum 23.5 74.8 23.5 16.1 82.4
Minimum 10.6 33.9 14.9 7.7 42.2
Half-year to 31 Dec 2023 13.4 55.9 15.2 7.2 (38.9) 52.8
Average 15.6 55.9 20.4 12.1 (40.2) 63.8
Maximum 24.6 86.0 27.8 16.5 98.2
Minimum 9.3 25.5 13.4 6.6 34.4
1 Asset class VaR reported in the table above is calculated by using a
500-day historical window. Total VaR, which is utilised for internal risk
management and for regulatory capital, is the maximum of VaR calculated by
using a 250-day historical window and VaR calculated by using a 500-day
historical window. When VaR is calculated at a portfolio level, natural
offsets in risk can occur when compared with aggregating VaR at the asset
class level. This difference is called portfolio diversification. The asset
class VaR maxima and minima reported in the table occurred on different dates
within the reporting period. For this reason, we do not report an implied
portfolio diversification measure between the maximum (minimum) asset class
VaR measures and the maximum (minimum) total VaR measures in this table.
The table below shows trading VaR at a 99% confidence level compared with
trading VaR at a 95% confidence level at 30 June 2024.
This comparison facilitates the benchmarking of the trading VaR, which can be
stated at different confidence levels, with financial institution peers. The
95% VaR is unaudited.
Comparison of trading VaR, 99% 1 day vs trading VaR, 95% 1 day
Trading VaR, Trading VaR,
99% 1 day 95% 1 day
$m $m
Half-year to 30 Jun 2024
52.7 30.9
Average
59.7 37.8
Maximum
83.3 48.9
Minimum
45.7 28.0
Half-year to 30 Jun 2023
67.8 44.5
Average
55.7 34.5
Maximum
82.4 47.8
Minimum
42.2 26.2
Half-year to 31 Dec 2023
52.8 35.3
Average
63.8 39.0
Maximum
98.2 53.3
Minimum
34.4 21.0
Back-testing
We routinely validate the accuracy of our VaR models by back-testing the VaR
metric against both actual and hypothetical profit and loss. Hypothetical
profit and loss excludes non-modelled items such as fees, commissions and
revenue related to intra-day transactions. The hypothetical profit and loss
reflects the profit and loss that would be realised if positions were held
constant from the end of one trading day to the end of the next. This measure
of profit and loss does not align with how risk is dynamically hedged and is
not, therefore, necessarily indicative of the actual performance of the
business.
The number of hypothetical loss back-testing exceptions, together with a
number of other indicators, is used to assess model performance and to
consider whether enhanced internal monitoring of the VaR model is required.
We back-test our VaR at set levels of our Group entity hierarchy.
During the first half of 2024, the Group experienced no back-testing
exceptions on losses against actual and hypothetical profit and losses.
Insurance manufacturing operations risk
Overview
The key risks for our insurance manufacturing operations are market risks, in
particular interest rate, growth asset and credit risks, as well as insurance
underwriting and operational risks. Liquidity risk, while significant for
other parts of the Group, is relatively minor for our insurance operations.
Insurance manufacturing operations risk in the first half of 2024
There have been no material changes to the policies and practices for the
management of risks arising in our insurance operations described in the
Annual Report and Accounts 2023.
A summary of our policies and practices
regarding the risk management of insurance operations, our insurance model and
the main contracts we manufacture is provided on page 233 of the Annual Report
and Accounts 2023.
The risk profile of our insurance manufacturing operations is assessed in the
Group's internal capital adequacy assessment process ('ICAAP'), based on the
financial capacity of the operations to support the risks to which they are
exposed.
Capital adequacy is assessed on both the Group's economic capital basis, and
the relevant local insurance regulatory basis. The Group's economic capital
basis is largely aligned to European Solvency II regulations, other than in
Asia, where it is based on the Hong Kong risk-based capital regulations, which
are effective from 1 July 2024. Risk appetite buffers are set to ensure that
the operations are able to remain solvent on both bases, allowing for
business-as-usual volatility and extreme but plausible stress events. In
addition, the insurance manufacturing operations manage their market,
liquidity, credit, underwriting and non-financial risk exposures to
Board-approved risk appetite limits. Overall, at 30 June 2024, the majority
of the capital and financial risk positions of our insurance operations were
within risk appetite. We continue to monitor these risks closely in the
current volatile economic climate.
The following table shows the composition of assets and liabilities by
contract type.
Balance sheet of insurance manufacturing subsidiaries by type of contract
Life direct participating and investment DPF contracts Life Other Shareholder assets Total
other(1) contracts(2) and liabilities
$m $m $m $m $m
Financial assets 118,296 4,074 5,379 6,858 134,607
- financial assets designated and otherwise mandatorily measured at fair 105,665 3,862 3,990 1,210 114,727
value through profit or loss
- derivatives 170 6 - 4 180
- financial investments - at amortised cost 571 67 1,093 4,106 5,837
- financial assets at fair value through other comprehensive income 8,000 - 6 632 8,638
- other financial assets 3,890 139 290 906 5,225
Insurance contract assets 13 111 - - 124
Reinsurance contract assets - 4,595 - - 4,595
Other assets and investment properties(3) 2,680 277 249 1,855 5,061
Total assets at 30 Jun 2024 120,989 9,057 5,628 8,713 144,387
Liabilities under investment contracts designated at fair value - - 5,109 - 5,109
Insurance contract liabilities 120,558 4,129 - - 124,687
Reinsurance contract liabilities - 696 - - 696
Deferred tax - 12 - 1 13
Other liabilities - - - 6,351 6,351
Total liabilities 120,558 4,837 5,109 6,352 136,856
Total equity - - - 7,531 7,531
Total liabilities and equity at 30 Jun 2024 120,558 4,837 5,109 13,883 144,387
Financial assets 113,605 3,753 5,812 7,696 130,866
- financial assets designated and otherwise mandatorily measured at fair 100,427 3,593 4,177 1,166 109,363
value through profit or loss
- derivatives 258 10 - 6 274
- financial investments - at amortised cost 1,351 67 1,157 4,772 7,347
- financial assets at fair value through other comprehensive income 8,859 - 5 693 9,557
- other financial assets 2,710 83 473 1,059 4,325
Insurance contract assets 13 213 - - 226
Reinsurance contract assets - 4,871 - - 4,871
Other assets and investment properties 2,782 164 35 1,636 4,617
Total assets at 31 Dec 2023 116,400 9,001 5,847 9,332 140,580
Liabilities under investment contracts designated at fair value - - 5,103 - 5,103
Insurance contract liabilities 116,389 3,961 - - 120,350
Reinsurance contract liabilities - 819 - - 819
Deferred tax - 1 - 3 4
Other liabilities - - - 6,573 6,573
Total liabilities 116,389 4,781 5,103 6,576 132,849
Total equity - - - 7,731 7,731
Total liabilities and equity at 31 Dec 2023 116,389 4,781 5,103 14,307 140,580
1 'Life other' mainly includes protection insurance contracts as
well as reinsurance contracts. The reinsurance contracts primarily provide
diversification benefits over the life participating and investment
discretionary participation feature ('DPF') contracts.
2 'Other contracts' includes investment contracts for which HSBC
does not bear significant insurance risk.
3 Following classification of HSBC's operations in Argentina to
assets held for sale, the assets of our Argentinian insurance manufacturing
business of $450m are presented in 'Other assets and investment properties',
and associated liabilities of $359m are presented in 'Other liabilities'.
Directors' responsibility statement
The Directors(1) are required to prepare the interim condensed consolidated
financial statements on a going concern basis unless it is not appropriate.
They are satisfied that the Group has the resources to continue in business
for the foreseeable future and that the financial statements continue to be
prepared on a going concern basis.
The Directors confirm that to the best of their knowledge:
- the financial statements have been prepared in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the UK, IAS 34
'Interim Financial Reporting' as issued by the International Accounting
Standards Board ('IASB') and IAS 34 'Interim Financial Reporting' as adopted
by the European Union, and the Disclosure Guidance and Transparency Rules
('DTR') sourcebook of the UK's Financial Conduct Authority;
- this Interim Report 2024 gives a true, fair, balanced and
understandable view of the assets, liabilities, financial position and profit
or loss of the Company; and
- this Interim Report 2024 includes a fair review of the
information required by:
- DTR 4.2.7R, being an indication of: important events that
have occurred during the first six months of the financial year ending
31 December 2024 and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- DTR 4.2.8R, being: related party transactions that have
taken place in the first six months of the financial year ending
31 December 2024, which have materially affected the financial position or
performance of HSBC during that period; and any changes in the related parties
transactions described in the Annual Report and Accounts 2023 that could
materially affect the financial position or performance of HSBC during the
first six months of the financial year ending 31 December 2024.
On behalf of the Board
Sir Mark E Tucker
Group Chairman
31 July 2024
1 Sir Mark Edward Tucker*, Noel Paul
Quinn, Geraldine Joyce Buckingham(†), Rachel Duan(†), Georges Bahjat
Elhedery, Dame Carolyn Julie Fairbairn(†), James Anthony Forese(†), Ann
Frances Godbehere(†), Steven Craig Guggenheimer(†), Dr José Antonio Meade
Kuribreña(†), Kalpana Jaisingh Morparia(†), Eileen K Murray(†), Brendan
Robert Nelson(†) and Swee Lian Teo(†).
* Non-executive Group Chairman †
Independent non-executive Director
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