REG - HSBC Holdings PLC - HSBC Holdings 2023 Results
21/02/2024 07:00
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RNS Number : 8448D HSBC Holdings PLC 21 February 2024
21 February 2024
HSBC HOLDINGS PLC
2023 RESULTS - HIGHLIGHTS
Noel Quinn, Group Chief Executive, said:
"Our record profit performance in 2023 enabled us to reward our shareholders
with our highest full-year dividend since 2008, three share buy-backs last
year totalling $7bn, and a further share buy-back of up to $2bn. This
reflected four years of hard work and the strength of our balance sheet in a
higher interest rate environment.
We have a strong platform for growth with the opportunities that exist within
our two home markets and across our international wholesale, market-leading
transaction banking, and wealth management businesses. We are focused on
capturing these growth opportunities, improving our earnings sustainability
and targeting mid-teens returns in 2024."
2023 financial performance (vs 2022)
- Profit before tax rose by $13.3bn to $30.3bn, primarily reflecting
revenue growth. This included a favourable year-on-year impact of $2.5bn
relating to the sale of our retail banking operations in France, which
completed on 1 January 2024, and a $1.6bn provisional gain recognised on the
acquisition of Silicon Valley Bank UK Limited ('SVB UK') in 2023. These were
partly offset by the recognition of an impairment charge in 2023 of $3.0bn
relating to the investment in our associate, Bank of Communications Co.,
Limited ('BoCom'), which followed the reassessment of our accounting
value-in-use. On a constant currency basis, profit before tax increased by
$13.8bn to $30.3bn. Profit after tax increased by $8.3bn to $24.6bn.
- Revenue rose by $15.4bn or 30% to $66.1bn, including growth in net
interest income ('NII') of $5.4bn, with rises in all of our global businesses
due to the higher interest rate environment. Non-interest income increased by
$10.0bn, reflecting a rise in trading and fair value income of $6.4bn, mainly
in Global Banking and Markets. The associated funding costs reported in NII
grew by $6.2bn. The increase also included the impact of the strategic
transactions referred to above, partly offset by disposal losses of $1.0bn
relating to repositioning and risk management activities in our
hold-to-collect-and-sell portfolio.
- Net interest margin ('NIM') of 1.66% increased by 24 basis points
('bps'), reflecting higher interest rates.
- Expected credit losses and other credit impairment charges ('ECL')
were $3.4bn, a reduction of $0.1bn. The net charge in 2023 primarily comprised
stage 3 charges, notably related to mainland China commercial real estate
sector exposures. It also reflected continued economic uncertainty, rising
interest rates and inflationary pressures. ECL were 33bps of average gross
loans, including a 3bps reduction due to the inclusion of loans and advances
classified as held for sale.
- Operating expenses fell by $0.6bn or 2% to $32.1bn, mainly due to
the non-recurrence of restructuring and other related costs following the
completion of our cost to achieve programme at the end of 2022. This more than
offset higher technology costs, inflationary pressures and an increase in
performance-related pay. We also incurred a higher UK bank levy and a charge
relating to the Federal Deposit Insurance Corporation ('FDIC') special
assessment in the US. Target basis operating expenses rose by 6%. This is
measured on a constant currency basis, excluding notable items and the impact
of the acquisition of SVB UK and related investments internationally. It also
excludes the impact of retranslating the prior year results of
hyperinflationary economies at constant currency.
- Customer lending balances rose by $15bn on a reported basis, but
fell by $3bn on a constant currency basis. Growth included a $7.8bn
reclassification of secured loans in France from held for sale, an addition of
$8bn from the acquisition of SVB UK, and higher mortgage balances in HSBC UK
and Hong Kong. These increases were more than offset by a reduction in
wholesale term lending, notably in Asia, and from business divestments in Oman
and New Zealand.
- Customer accounts rose by $41bn on a reported basis, and $13bn on a
constant currency basis, primarily in Wealth and Personal Banking, reflecting
growth in Asia, partly offset by reductions in HSBC UK, reflecting cost of
living pressures and the competitive environment, despite an increase of $6bn
from the acquisition of SVB UK. There was also a reduction due to the sale of
our business in Oman.
- Common equity tier 1 ('CET1') capital ratio of 14.8% rose by 0.6
percentage points, as capital generation was partly offset by dividends and
share buy-backs.
- The Board has approved a fourth interim dividend of $0.31 per share,
resulting in a total for 2023 of $0.61 per share. We also intend to initiate a
share buy-back of up to $2.0bn, which we expect to complete by our first
quarter 2024 results announcement.
4Q23 financial performance (vs 4Q22)
- Reported profit before tax down $4.1bn to $1.0bn. The reduction
included the recognition of an impairment charge in 4Q23 of $3.0bn relating to
the investment in our associate BoCom, and the impact of a 4Q23 impairment
relating to the sale of our retail banking operations in France of $2.0bn as
we reclassified these operations as held for sale. On a constant currency
basis, profit before tax down $4.0bn to $1.0bn. Reported profit after tax down
$4.4bn to $0.2bn.
- Reported revenue down 11% to $13.0bn, due the impact of 4Q23
impairment relating to the sale of our retail banking operations in France, as
mentioned above, disposal losses relating to repositioning and risk management
activities in our hold-to-collect and sell portfolio and the impact of
hyperinflationary accounting in Argentina. These factors were in part offset
by revenue growth in Global Payments Solutions, Capital Markets and Advisory
and Markets and Securities Services ('MSS').
- Reported ECL down $0.4bn to $1.0bn. The charge in 4Q23 included
$0.2bn of charges relating to exposures in the mainland China commercial real
estate sector.
- Reported operating expenses down 2% to $8.6bn, as lower
restructuring expenses following the completion of our cost-saving programme
at the end of 2022, more than offset growth from a higher UK bank levy, the
FDIC special assessment in the US, the impact of rising inflation and higher
performance-related pay.
Outlook
- We continue to target a return on average tangible equity ('RoTE')
in the mid-teens for 2024, excluding the impact of notable items (see page 25
of our Annual Report and Accounts 2023 for information on our RoTE target for
2024). Our guidance reflects our current outlook for the global macroeconomic
environment, including customer and financial markets activity.
- Based upon our current forecasts, we expect banking NII of at least
$41bn for 2024. This guidance reflects our current modelling of a number of
market dependent factors, including market-implied interest rates (as of
mid-February 2024), as well as customer behaviour and activity levels, which
we would also expect to impact our non-interest income. We do not reconcile
our forward guidance on banking NII to reported NII.
- While our outlook for loan growth remains cautious for the first
half of 2024, we continue to expect year-on-year customer lending percentage
growth in the mid-single digits over the medium to long term.
- Given continued uncertainty in the forward economic outlook, we
expect ECL charges as a percentage of average gross loans to be around 40bps
in 2024 (including customer lending balances transferred to held for sale). We
continue to expect our ECL charges to normalise towards a range of 30bps to
40bps of average loans over the medium to long term.
- We retain a Group-wide focus on cost discipline. We are targeting
cost growth of approximately 5% for 2024 compared with 2023, on a target
basis. This target reflects our current business plan for 2024, and includes
an increase in staff compensation, higher technology spend and investment for
growth and efficiency, in part mitigated by cost savings from actions taken
during 2023.
- Our cost target basis for 2024 excludes the impact of the disposal
of our retail banking business in France and the planned disposal of our
banking business in Canada from the 2023 baseline. Our cost target basis is
measured on a constant currency basis and excludes notable items and the
impact of retranslating the prior year results of hyperinflationary economies
at constant currency. We do not reconcile our forward guidance on target basis
costs to reported operating expenses.
- We intend to continue to manage the CET1 capital ratio within our
medium-term target range of 14% to 14.5%.
- Our dividend payout ratio target remains at 50% for 2024, excluding
material notable items and related impacts. We have announced a further share
buy-back of up to $2.0bn. Further buy-backs remain subject to appropriate
capital levels.
Key financial metrics
For the year ended
Reported results 2023 2022(1) 2021
Profit before tax ($m) 30,348 17,058 18,906
Profit after tax ($m) 24,559 16,249 14,693
Cost efficiency ratio (%) 48.5 64.6 69.9
Net interest margin (%) 1.66 1.42 1.20
Basic earnings per share ($) 1.15 0.72 0.62
Diluted earnings per share ($) 1.14 0.72 0.62
Dividend per ordinary share (in respect of the period) ($) 0.61 0.32 0.25
Dividend payout ratio (%)(2) 50 44 40
Alternative performance measures
Constant currency profit before tax ($m) 30,348 16,541 17,400
Constant currency cost efficiency ratio (%) 48.5 64.8 70.0
Expected credit losses and other credit impairment charges ('ECL') as % of 0.36 0.36 (0.07)
average gross loans and advances to customers (%)
Expected credit losses and other credit impairment charges ('ECL') as % of 0.33 0.35 (0.07)
average gross loans and advances to customers, including held for sale (%)
Basic earnings per share excluding material notable items and related impacts 1.22 N/A N/A
($)
Return on average ordinary shareholders' equity (%) 13.6 9.0 7.1
Return on average tangible equity (%) 14.6 10.0 8.3
Return on average tangible equity excluding strategic transactions and 15.6 11.3 N/A
impairment of BoCom (%)
Target basis operating expenses ($m) 31,614 29,811 N/A
At 31 December
Balance sheet 2023 2022(1) 2021
Total assets ($m) 3,038,677 2,949,286 2,957,939
Net loans and advances to customers ($m) 938,535 923,561 1,045,814
Customer accounts ($m) 1,611,647 1,570,303 1,710,574
Average interest-earning assets ($m) 2,161,746 2,143,758 2,209,513
Loans and advances to customers as % of customer accounts (%) 58.2 58.8 61.1
Total shareholders' equity ($m) 185,329 177,833 198,250
Tangible ordinary shareholders' equity ($m) 155,710 146,927 158,193
Net asset value per ordinary share at period end ($) 8.82 8.01 8.76
Tangible net asset value per ordinary share at period end ($) 8.19 7.44 7.88
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)(3) 14.8 14.2 15.8
Risk-weighted assets ($m)(3,4) 854,114 839,720 838,263
Total capital ratio (%)(3,4) 20.0 19.3 21.2
Leverage ratio (%)(3,4) 5.6 5.8 5.2
High-quality liquid assets (liquidity value) ($m)(4,5) 647,505 647,046 688,209
Liquidity coverage ratio (%)(4,5) 136 132 139
Net stable funding ratio (%)(4,5) 133 136 N/A
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions) 19,006 19,739 20,073
Period end basic number of $0.50 ordinary shares outstanding and dilutive 19,135 19,876 20,189
potential ordinary shares (millions)
Average basic number of $0.50 ordinary shares outstanding (millions) 19,478 19,849 20,197
For reconciliation and analysis of our reported results on a constant currency
basis, including lists of notable items, see page 111 of the Annual Report and
Accounts 2023. Definitions and calculations of other alternative performance
measures are included in 'Reconciliation of alternative performance measures'
on page 130 of the Annual Report and Accounts 2023.
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly. Comparative data for
the year ended 31 December 2021 are prepared on an IFRS 4 basis.
2 In 2023, our dividend payout ratio was adjusted for material notable
items and related impacts, including all associated income statement impacts
relating to those items. In 2022, our dividend payout ratio was adjusted for
the loss on classification to held for sale of our retail banking business in
France, items relating to the planned sale of our banking business in Canada,
and the recognition of certain deferred tax assets. No items were adjusted for
in 2021.
3 Unless otherwise stated, regulatory capital ratios and requirements are
based on the transitional arrangements of the Capital Requirements Regulation
in force at the time. References to EU regulations and directives (including
technical standards) should, as applicable, be read as references to the UK's
version of such regulation or directive, as onshored into UK law under the
European Union (Withdrawal) Act 2018, and as may be subsequently amended under
UK law.
4 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.
5 The liquidity coverage ratio is based on the average value of the
preceding 12 months. The net stable funding ratio is based on the average
value of four preceding quarters.
Highlights
Year ended 31 Dec
2023 2022¹
$m $m
Reported
Revenue(2,3,4,5) 66,058 50,620
Change in expected credit losses and other credit impairment charges (3,447) (3,584)
Operating expenses (32,070) (32,701)
Share of profit in associates and joint ventures less impairment(9) (193) 2,723
Profit before tax 30,348 17,058
Tax charge (5,789) (809)
Profit after tax 24,559 16,249
Constant currency(6)
Revenue(2,3,4,5) 66,058 49,871
Change in expected credit losses and other credit impairment charges (3,447) (3,630)
Operating expenses (32,070) (32,302)
Share of profit in associates and joint ventures less impairment(9) (193) 2,602
Profit before tax 30,348 16,541
Tax charge (5,789) (649)
Profit after tax 24,559 15,892
Notable items
Revenue
Disposals, acquisitions and related costs(3,4,5) 1,298 (2,737)
Fair value movements on financial instruments(7) 14 (618)
Restructuring and other related costs(8) - (247)
Disposal losses on Markets Treasury repositioning (977) -
Operating expenses
Disposals, acquisitions and investment in new businesses (321) (18)
Restructuring and other related costs(9) 136 (2,882)
Impairment of interest in associate(10) (3,000) -
Tax
Tax credit on notable items 207 1,026
Recognition of losses - 2,333
Uncertain tax positions 427 (142)
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the year ended 31
December 2022 have been restated accordingly.
2 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
3 Includes losses from classifying businesses as held for sale as part of
a broader restructuring of our European business which includes the impact of
the sale of our retail banking operations in France.
4 Includes fair value movements on the foreign exchange hedging of the
expected proceeds from the planned sale of our banking business in Canada.
5 Includes the provisional gain of $1.6bn recognised in respect of the
acquisition of SVB UK in 1Q23.
6 Constant currency performance is computed by adjusting reported results
of comparative periods for the effects of foreign currency translation
differences, which distort period-on-period comparisons.
7 Fair value movements on non-qualifying hedges in HSBC Holdings.
8 Comprises gains and losses relating to the business update in February
2020, including losses associated with the RWA reduction programme.
9 Amounts in 2023 relate to reversals of restructuring provisions
recognised during 2022.
10 Relates to an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom. See Note 18 on page 391 of our Annual Report and
Accounts 2023.
Statement by Mark E Tucker, Group Chairman
The global economy performed better than expected in 2023, but growth remained
sluggish and the economic environment was challenging for many of our
customers. Although inflation fell globally, core inflation levels and
interest rates remained elevated. There was also significant variability in
growth from market to market and increased volatility within the banking
sector. Our core purpose of 'opening up a world of opportunity' underlines our
focus on helping our customers and clients to navigate this complexity and
access growth, wherever it is.
Many of our customers and colleagues are living through very difficult times.
Higher interest rates have had a significant impact on businesses and
households, and we will remain conscious of this with interest rates expected
to begin to fall back in 2024. The wars between Russia and Ukraine, and now
between Israel and Hamas, are absolutely devastating. Our thoughts are with
all those impacted, including our colleagues in those parts of the world, and
their families and friends. Their resilience, professionalism and care for one
another during these most testing of times has been, and is, exceptional.
Progress and performance
Turning to our performance, I want to again pay tribute to my colleagues. The
record profit performance that we delivered in 2023 was supported by the
impact of interest rates on our strong balance sheet, but it was also
testament to the tireless efforts of our people around the world. I would like
to thank them sincerely for their hard work, dedication and commitment to
serving our customers.
In 2023, reported profit before tax was $30.3bn, which was an increase of
$13.3bn compared with 2022. This was due mainly to higher revenue and a number
of notable items. Our three global businesses delivered good revenue growth,
and we ended the year with strong capital, funding and liquidity positions.
We remain committed to sharing the benefits of our improved performance with
our shareholders. The Board approved a fourth quarterly dividend of $0.31 per
share, bringing the total dividend for 2023 to $0.61 per share. Furthermore,
in 2023 we announced three share buy-backs worth a total of $7bn and, today,
have announced a further share buy-back of up to $2bn.
The planned sale of our banking operations in Canada received final approval
from the Canadian government at the end of last year. Subject to completion of
the transaction, which is expected in the first quarter of 2024, the Board
will consider a special dividend of $0.21 per share, to be paid in the first
half of 2024, as a priority use of the proceeds.
With this anticipated transaction and the completion of the sale of our retail
banking business in France last month, our focus has moved to investing for
growth, while maintaining efficiency. Two examples of growth opportunities
last year were the agreed acquisition of Citi's retail wealth business in
mainland China, which will help accelerate our Wealth strategy, and the
acquisition of SVB UK, following the difficulties experienced by its US parent
entity. Acquiring SVB UK was opportunistic, but the deal made excellent
strategic sense for HSBC, and it also helped to protect clients, safeguard
jobs and maintain financial stability.
Technology and sustainability are two of the trends transforming banking and
the world around us. The opportunities from generative AI are among the most
transformative within my working life. We are actively exploring a number of
use cases, while also working to manage the associated risks.
Meanwhile the global climate challenge is becoming increasingly acute. Our
presence in many of the sectors and markets where the need to reduce emissions
is the greatest provides us with an opportunity to work with our clients to
help address it. This is set out in our first net zero transition plan. The
Board discussed and contributed to the net zero transition plan in depth. We
believe that it is a realistic and ambitious assessment of the long-term
journey ahead, as we continue to work with our clients on their transitions to
a low-carbon future. It is clear there will be many uncertainties and
dependencies, and that our approach will need to continue to evolve with the
real world around us.
Board operations
Our work on sustainability was one of the many topics discussed with our
shareholders at our 2023 Annual General Meeting ('AGM') in May. Ahead of that,
Noel and I were pleased to meet with Hong Kong shareholders at our Informal
Shareholders' Meeting. At both meetings, we also discussed the resolutions
that were requisitioned by shareholders on the Group's strategy and dividend
policy. Shareholders expressed strong support for the Group's current strategy
by voting overwhelmingly with the Board and against these resolutions at the
AGM. This enabled the Board, my colleagues and our shareholders to focus on
our shared objectives of serving our customers, driving stronger performance,
and creating more value for our investors.
In 2023, the Board held meetings in London, Birmingham, Hong Kong, Paris, New
York, Mumbai and Delhi. We also returned to Beijing and Shanghai last month.
On each occasion, the Board engaged with clients, colleagues, government
officials and regulators - with these discussions underlining that HSBC
continues to have a key role connecting the world's trade and finance hubs.
There were a number of changes to the composition of the Board last year. At
the 2023 AGM, we said farewell to Jackson Tai, who made an important,
extensive and lasting contribution to the success of HSBC during his time as a
non-executive Director. His leadership in strengthening risk and conduct
governance and oversight was particularly critical through a period of
significant change. We also announced in December that David Nish intends to
retire from the Board at the 2024 AGM. David has made an invaluable
contribution to the Board over the past eight years, particularly in recent
years as Chair of the Group Audit Committee and as Senior Independent
Director. I would like to thank him warmly for his consistent counsel and
guidance.
I am pleased that Kalpana Morparia, Ann Godbehere, Brendan Nelson and Swee
Lian Teo joined the Board during 2023. Each of them brings experience and
expertise that is an asset to the Board. Specifically, Ann's extensive
public-listed company board experience means that she is ideally placed to
take over as Senior Independent Director, while Brendan's UK and international
financial expertise and significant experience as audit chair at UK-listed
companies will be particularly valuable as he takes over leadership of the
Group Audit Committee.
Macroeconomic outlook
Looking ahead, 2024 is likely to be another eventful year. The slowing of
inflation in the second half of 2023 means that monetary tightening now
appears to be coming to an end. However, current inflation levels in many
economies remain above their targets. As central banks continue to try to
bridge this gap, voters head to the polls in a significant number of countries
across the globe. The timing and outcomes of these elections will impact the
decision making of governments and have geopolitical, as well as fiscal,
implications. We will monitor the results closely, and take a long-term view
of strategy, purpose and capital allocation, while cognisant of any short-term
challenges.
Among these potential challenges are the increased uncertainties due to wars
in Europe and the Middle East, and disruption to global trade and supply
chains caused by these and attacks on shipping in the Red Sea. However, we
remain cautiously optimistic about economic prospects for 2024. We expect
growth to slow in the first half of the year and recover thereafter. We also
expect the variable economic growth that has characterised recent years to
continue.
The economies of south and south-east Asia carry good economic momentum into
2024. India and Vietnam are currently among the fastest-growing economies in
the world, benefiting from competitive labour costs, supportive policies and
changing supply chains. Chinese companies are among those increasingly looking
towards these and other markets, as China's economic transformation towards
high-quality growth and domestic consumption continues.
China's recovery after reopening was bumpier than expected, but its economy
grew in line with its annual target of around 5% in 2023. We expect this to be
maintained in 2024, with recently announced policy measures to support the
property sector and local government debt gradually flowing through to the
wider economy. Hong Kong's growth has moved along at a slower but healthy pace
and is likely to remain in line with pre-pandemic levels.
As Asia continues to grow, a significant opportunity is emerging to connect it
to another high-growth region. The Middle East region performed very well
economically in 2023 and the outlook remains strong for 2024, notwithstanding
the risks arising from conflicts in the region. As countries like Saudi Arabia
and the UAE continue to diversify their economies, new opportunities are
created to connect them to Asia, and Asia to them.
The US economy grew more quickly than expected in 2023 in the face of higher
interest rates. Growth is likely to be lower in 2024, although it should
remain higher than in Europe where growth remains subdued. The UK economy,
which entered a technical recession at the end of 2023, has nonetheless been
resilient. Headline inflation should fall in the first half of the year, with
core inflation following by the end of 2024. This will of course determine the
pace of interest rate cuts.
I would like to end by reiterating my thanks to my colleagues for all that
they have done, and all that they continue to do, for HSBC. Their tireless
efforts are reflected by our improved financial performance and increased
returns for shareholders in 2023 - and I look forward to them securing the
foundations for our future success.
Mark E Tucker
Group Chairman
21 February 2024
Review by Noel Quinn, Group Chief Executive
2023 was a very good year for HSBC. I would like to start by paying tribute to
my colleagues for all that they did last year, and in the preceding three
years. As I have said before, they have fully embraced our core purpose of
'opening up a world of opportunity' in all they do - from helping clients and
customers to expand to new markets or move overseas, to digitising our
business and helping our people to be their best, to our ongoing work on the
transition to net zero.
Our performance last year was great credit to them. We delivered strong
revenue growth across all three global businesses, supported by higher
interest rates, which enabled us to deliver our best return on average
tangible equity in more than a decade. As well as improving financial
performance, our strategy is increasing shareholder returns. I am pleased that
we have rewarded our shareholders for their loyalty with the highest full-year
dividend per share since 2008, as well as three share buy-backs in 2023
totalling $7bn. In total, we returned $19bn to shareholders by way of dividend
and share buy-backs in respect of 2023. In addition, we have today announced a
further share buy-back of up to $2bn.
As we move into 2024, I am confident that there are opportunities ahead for us
and our clients that can help us to sustain our good performance going into
the next phase of the interest rate cycle.
The environment does, however, remain challenging. The wars in Europe and the
Middle East are beyond comprehension on a human level, and my thoughts remain
with all those impacted. Both conflicts also still have the potential to
escalate further. That would first and foremost deepen the humanitarian
crisis, but also likely lead to another wave of market and economic turmoil.
Interest rates are expected to fall this year, which we believe should in turn
help to increase economic activity. The outlook currently remains uncertain,
however, and many of our customers remain concerned about their finances. In
the midst of these challenges, we will stay focused on what we are here to do
- which is to serve our customers and clients, and help them with any
financial difficulties they face.
Financial performance
Our results are a testament to the way we stayed focused in 2023. Reported
profit before tax was $30.3bn, which was $13.3bn higher than in 2022. This
included a number of notable items, including a favourable year-on-year impact
of $2.5bn relating to the sale of our retail banking operations in France and
a $1.6bn provisional gain on the acquisition of SVB UK. These were offset by a
valuation adjustment of $3.0bn relating to our investment in BoCom, which
followed the reassessment of our accounting value-in-use in line with recent
market developments in mainland China. This adjustment has no material impact
on our capital, capital ratio and distribution capacity, and therefore no
impact on our share buy-backs or dividends. We remain confident in the
resilience of the Chinese economy, and the growth opportunities in mainland
China over the medium to long term.
Reported revenue grew by 30% or $15.4bn, driven by an increase in net interest
income of $5.4bn from all three global businesses. Non-interest income
increased by $10bn, reflecting increased trading and fair value income of
$6.4bn, mainly in Global Banking and Markets, and the favourable year-on-year
impact from the impairment relating to the sale of our retail banking
operations in France and provisional gain on the acquisition of SVB UK.
In 2023, we delivered a return on average tangible equity of 14.6%, or 15.6%
excluding strategic transactions and the impairment on our investment in
BoCom.
Our three global businesses performed well. In Commercial Banking, profit
before tax was up by 76% to $13.3bn on a constant currency basis, driven by
revenue increases across all our main legal entities. Within this, Global
Payments Solutions revenue increased by 78% or $5.4bn on a constant currency
basis, driven by higher margins reflecting higher interest rates and
repricing. Fee income increased by 4% due to growth in transaction banking and
higher volumes in cards and international payments, while our trade business
performed well relative to the market and we increased our market share.
Global Banking and Markets delivered profit before tax of $5.9bn, up 26%
compared with 2022, on a constant currency basis. Revenue grew by 10% on a
constant currency basis, due to higher net interest income in Global Payments
Solutions and Securities Services. In Wealth and Personal Banking, profit
before tax of $11.5bn was $6.1bn higher than in 2022, on a constant currency
basis. Revenue was up by 31% or $6.4bn on a constant currency basis,
reflecting growth in Personal Banking and in Wealth, as well as the positive
year-on-year impact relating to the sale of our French retail banking
business. Within this, Wealth revenue of $7.5bn was up 8% or $0.6bn on a
constant currency basis, with good growth in private banking and asset
management.
Reported costs for 2023 were down by 2% compared with the previous year, as
lower restructuring costs offset higher technology spending, inflation, higher
performance-related pay and levies. On a target basis, costs increased by 6%,
which was 1% higher than previously guided due to levies including a charge
relating to the FDIC special assessment levy in the US. Our reported
cost-efficiency ratio improved to 48.5% from 64.6% in 2022, supported by
higher net interest income.
Our 2023 reported ECL charge of $3.4bn was $0.1bn lower than in 2022. This
primarily comprised stage 3 net charges, notably related to mainland China
commercial real estate sector exposures, and reflected the continued
uncertainty within the global economy. After good capital generation in 2023,
we ended the year with a CET1 ratio of 14.8%. We are able to pay a fourth
interim dividend of $0.31 per share, bringing the total 2023 dividend to $0.61
per share, which is the highest since 2008.
From transform to sustain and grow
Looking forward, supportive interest rates and good underlying business growth
have given us strong momentum. We continue to target a mid-teens return on
average tangible equity. We are also, however, mindful of the interest rate
cycle and the subsequent impact on net interest income. In 2023, we increased
the size and duration of our structural hedges to reduce the sensitivity of
banking net interest income to interest rate movements and help stabilise
future earnings. We also see a number of growth opportunities within our
strategy that play to our strengths.
The first is to further grow our international businesses, which remains our
biggest differentiator and growth opportunity. International expansion remains
a core strategy for corporates and institutions seeking to develop and expand,
especially the mid-market corporates that HSBC is very well-positioned to
serve. Rather than de-globalising, we are seeing the world re-globalise, as
supply chains change and intra-regional trade flows increase. Our
international network and presence in markets that are benefiting like the
ASEAN region and Mexico help us to capitalise on these trends. As a result,
our market-leading trade franchise facilitated more than $850bn of trade in
2023, while we are the second biggest payments company by revenue and we
processed around $500tn of payments electronically in 2023. This helped to
grow wholesale multi-jurisdictional client revenue from customers who bank
with us in more than one market, by 29% in 2023. With multi-jurisdictional
corporate customers in Commercial Banking generating around five times as much
client revenue as an average domestic customer, we continue to focus on
growing this further, especially in the mid-market segment where we have a
competitive advantage and there is still potential to further extend our
market leadership.
The second is to diversify our revenue. Building our wealth business to meet
the rising demand for wealth management services, especially in Asia, has been
a strategic priority. Last year, we attracted net new invested assets of
$84bn, following $80bn in 2022 and $64bn in 2021, underlining the traction
that we have gained. Our agreement to acquire Citi's retail wealth management
portfolio in mainland China helps accelerate our plans. Another trend is the
increasing demand for seamless, integrated, cross-border banking services,
which innovation is helping us to deliver. We now have 1.3 million Global
Money customers, up from 550,000 in 2022, and grew revenue from Wealth and
Personal Banking international customers by 41% last year, from $7.2bn to
$10.2bn. Critically, there was a 43% increase in new-to-bank international
customers compared with 2022, driven by the new international proposition that
we launched and continue to develop. As in wholesale, these international
customers generate higher revenue, bringing in around three times as much as
average domestic-only customers.
The third is continued growth in our two home markets. Our business is built
on two very deep pools of liquidity in Hong Kong and the UK, which underpin
our exceptional balance sheet strength and, therefore, all that we do as a
business. Hong Kong and the UK are both also very profitable, well-connected
markets. We are well positioned to capitalise on our positions as the number
one bank in Hong Kong and a leading bank in the UK. Hong Kong's connectivity,
both globally and to mainland China, are helping us to grow our franchise. We
have increased our market share in trade in Hong Kong by 6.6 percentage points
over the last three years, according to HKMA data. Meanwhile new-to-bank
customers in Hong Kong increased by 36% over the same period as we have
capitalised on the return of visitors from mainland China. In the UK, we have
good traction in Commercial Banking and continue to grow market share in
Wealth and Personal Banking. We are the leading bank for UK large corporates,
with more than 70% market penetration last year, according to Coalition
Greenwich. Euromoney also named us as the best bank in the UK for small and
medium-sized enterprises, as digitisation helped to grow new-to-bank clients
through Kinetic. We also increased our market share of UK mortgage stock, from
7.4% in 2020 to 8% in 2023, according to Bank of England data. As economic
conditions improve and we continue to invest, we are confident in our ability
to grow further in these critical markets.
We have also continued to diversify our profit generation geographically
across multiple markets. The positions that we have as a leading foreign bank
in mainland China, India, Singapore, the UAE, Saudi Arabia and Mexico - all of
which are also well connected to our international network - mean we are well
placed to capture opportunities in these fast-growing economies. This was
again evident as they all grew reported profits significantly in 2023, with
mainland China (excluding associates), India, and Singapore each contributing
in excess of $1bn of profits to the Group.
It is critical that we maintain tight cost discipline. This was challenging in
2023 in a high inflation environment, and will likely remain so in 2024. At
the same time, we need to invest in growth, so we remain very focused on
maintaining tight underlying costs. The sale of our French retail banking
operations completed on 1 January 2024, and the planned sale of our banking
business in Canada remains due to complete in the first quarter of 2024. A
number of smaller exits remain underway as we continue to look at
opportunities to reshape our portfolio. At the same time, our acquisition of
SVB UK enabled us to create a bigger, new proposition in HSBC Innovation
Banking, which combines deep sector specialisms with our balance sheet
strength and global reach, ensuring we continue our long history of supporting
entrepreneurs.
Driving cost savings enables us to invest in technology, which is the fourth
opportunity. The digitisation of our business continues to improve customer
experience and increase efficiency. Using AI to help price complex structural
options in our Foreign Exchange business has cut execution times down from
hours to minutes. We have also identified hundreds of opportunities to
leverage generative AI, and will focus our efforts on use cases with tangible
benefits for the Group and our customers.
Innovation also creates new avenues for growth. We recently launched Zing,
which is our open market mobile platform focused on cross-border payments,
initially available in the UK. It offers similar capabilities as Global Money
does to our international Wealth and Personal Banking customers, but is
targeted at non-HSBC customers and allows us to drive growth beyond our
traditional customer footprint.
Underpinning all of this is our work to build a stronger performance culture,
improve colleague experience and prepare our workforce for the future. This is
important because achieving our ambitions depends on our 220,000 colleagues
feeling motivated and believing in our strategy. In our most recent staff
survey, I was pleased that the number of colleagues seeing the positive impact
of our strategy in 2023 was up 11 percentage points on 2020, which is also
above the financial services sector benchmark.
Finally, helping to finance the substantial investment needs of our customers
in the transition to net zero is a growing commercial opportunity, as well as
a necessity to mitigate rising financial and wider societal risks. Our first
net zero transition plan shows how we intend to finance and support the
transition to net zero and collaborate globally to help enable change at
scale. It also sets out our roadmap for implementing net zero, which we will
do by supporting our customers, embedding net zero into the way we operate and
partnering for systemic change. We understand that our approach - including
our own transition plan - will need to evolve over time to keep pace with both
the evolving science and real economy decarbonisation across the sectors and
geographies we serve.
Thank you
On a personal note, one of the most enjoyable parts of 2023 for me was
spending time with many of my colleagues around the world. Reconnecting with
them, and seeing first-hand their passion for serving our customers, pride in
HSBC and ambitions for the future, was energising and inspiring. Leading HSBC
is a privilege, and my colleagues are the main reason why.
2023 was a very good year for HSBC. We now have an opportunity to ensure that
it becomes part of a longer-term trend of ongoing good performance and to
secure the foundations for future success. I am confident that we have the
opportunities, the platform and the team to enable us to get it done.
Noel Quinn
Group Chief Executive
21 February 2024
Financial summary
Year ended 31 December
2023 2022¹
$m $m
For the year
Profit before tax 30,348 17,058
Profit attributable to:
- ordinary shareholders of the parent company 22,432 14,346
Dividends on ordinary shares 10,492 5,330
At 31 December
2023 2022
$m $m
Total shareholders' equity 185,329 177,833
Total regulatory capital 171,204 162,423
Customer accounts 1,611,647 1,570,303
Total assets 3,038,677 2,949,286
Risk-weighted assets 854,114 839,720
Per ordinary share $ $
Basic earnings per share 1.15 0.72
Dividend per ordinary share (in respect of the period) 0.61 0.32
Dividends per ordinary share (paid in the period) 0.53 0.27
Net asset value per ordinary share at period end(2) 8.82 8.01
Tangible net asset value per ordinary share at period end(3) 8.19 7.44
Share information
Number of $0.50 ordinary shares in issue (millions) 19,263 20,294
Basic number of $0.50 ordinary shares outstanding (millions) 19,006 19,739
Basic number of $0.50 ordinary shares outstanding and dilutive potential 19,135 19,876
ordinary shares (millions)
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the year ended 31
December 2022 have been restated accordingly.
2 The definition of net asset value per ordinary share is total
shareholders' equity, less non-cumulative preference shares and capital
securities, divided by the number of ordinary shares in issue, excluding own
shares held by the company, including those purchased and held in treasury.
3 The definition of tangible net asset value per ordinary share is total
ordinary shareholders' equity excluding goodwill and other intangible assets
(net of deferred tax), divided by the number of basic ordinary shares in
issue, excluding own shares held by the company, including those purchased and
held in treasury.
Distribution of results by global business
Constant currency profit/(loss) before tax
Year ended 31 Dec
2023 2022(1)
$m % $m %
Wealth and Personal Banking 11,544 38.0 5,480 33.1
Commercial Banking(2) 13,280 43.8 7,527 45.6
Global Banking and Markets(2) 5,924 19.5 4,689 28.3
Corporate Centre (400) (1.3) (1,155) (7.0)
Profit before tax 30,348 100.0 16,541 100.0
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the year ended 31
December 2022 have been restated accordingly.
2 In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers' respective
needs, a portfolio of our customers within our entities in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
Distribution of results by legal entity
Reported profit/(loss) before tax
Year ended 31 Dec
2023 2022(1)
$m % $m %
HSBC UK Bank plc 8,270 27.2 4,487 26.3
HSBC Bank plc 2,639 8.7 (1,395) (8.2)
The Hongkong and Shanghai Banking Corporation Limited 16,167 53.3 12,899 75.6
HSBC Bank Middle East Limited 1,239 4.1 728 4.3
HSBC North America Holdings Inc. 518 1.7 705 4.1
HSBC Bank Canada 871 2.9 832 4.9
Grupo Financiero HSBC, S.A. de C.V. 805 2.6 583 3.4
Other trading entities(2) 2,359 7.8 1,432 8.4
- of which: other Middle East entities (including Oman, Türkiye, Egypt and 748 2.5 655 3.8
Saudi Arabia)
- of which: Saudi Awwal Bank 538 1.8 342 2.0
Holding companies, shared service centres and intra-Group eliminations (2,520) (8.3) (3,213) (18.8)
Profit before tax 30,348 100.0 17,058 100.0
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the year ended 31
December 2022 have been restated accordingly.
2 Other trading entities includes the results of entities located in Oman,
Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi
Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited.
Supplementary analysis is provided on page 130 in the Annual Report and
Accounts 2023 for a fuller picture of the MENAT regional performance.
HSBC constant currency profit before tax and balance sheet data
2023
Wealth and Commercial Banking(3) Global Banking and Markets(3) Corporate Centre Total
Personal
Banking
$m $m $m $m $m
Net operating income/(expense) before change in expected credit losses and 27,275 22,867 16,115 (199) 66,058
other credit impairment charges(2)
- external 19,107 24,209 28,021 (5,279) 66,058
- inter-segment 8,168 (1,342) (11,906) 5,080 -
of which: net interest income/(expense)(5) 20,492 17,147 7,141 (8,984) 35,796
Change in expected credit losses and other credit impairment charges (1,058) (2,062) (326) (1) (3,447)
Net operating income/(expense) 26,217 20,805 15,789 (200) 62,611
Total operating expenses (14,738) (7,524) (9,865) 57 (32,070)
Operating profit/(loss) 11,479 13,281 5,924 (143) 30,541
Share of profit in associates and joint ventures less impairment(6) 65 (1) - (257) (193)
Constant currency profit/(loss) before tax 11,544 13,280 5,924 (400) 30,348
% % % % %
Share of HSBC's constant currency profit before tax 38.0 43.8 19.5 (1.3) 100.0
Constant currency cost efficiency ratio 54.0 32.9 61.2 28.6 48.5
Constant currency balance sheet data $m $m $m $m $m
Loans and advances to customers (net) 454,878 309,422 173,966 269 938,535
Interests in associates and joint ventures 551 28 111 26,654 27,344
Total external assets 937,079 632,406 1,331,395 137,797 3,038,677
Customer accounts 804,863 475,666 330,522 596 1,611,647
Constant currency risk-weighted assets(4) 192,938 354,541 218,488 88,147 854,114
2022(1)
Net operating income/(expense) before change in expected credit losses and 20,884 16,283 14,602 (1,898) 49,871
other credit impairment charges(2)
- external 18,299 16,973 18,744 (4,145) 49,871
- inter-segment 2,585 (690) (4,142) 2,247 -
of which: net interest income/(expense)(5) 15,971 11,763 4,696 (2,668) 29,762
Change in expected credit losses and other credit impairment charges (1,186) (1,862) (573) (9) (3,630)
Net operating income/(expense) 19,698 14,421 14,029 (1,907) 46,241
Total operating expenses (14,248) (6,894) (9,338) (1,822) (32,302)
Operating profit/(loss) 5,450 7,527 4,691 (3,729) 13,939
Share of profit in associates and joint ventures 30 - (2) 2,574 2,602
Constant currency profit/(loss) before tax 5,480 7,527 4,689 (1,155) 16,541
% % % % %
Share of HSBC's constant currency profit before tax 33.1 45.6 28.3 (7.0) 100.0
Constant currency cost efficiency ratio 68.2 42.3 64.0 (96.0) 64.8
Constant currency balance sheet data $m $m $m $m $m
Loans and advances to customers (net) 434,122 316,863 190,202 361 941,548
Interests in associates and joint ventures 514 33 93 28,143 28,783
Total external assets 893,867 620,193 1,341,575 152,049 3,007,684
Customer accounts 793,310 472,424 332,303 458 1,598,495
Constant currency risk-weighted assets(4) 184,519 344,217 225,836 88,496 843,068
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2 Net operating income/(expense) before change in expected credit
losses and other credit impairment charges, also referred to as revenue.
3 In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers' respective
needs, a portfolio of our customers within our entities in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
4 Constant currency risk-weighted assets are calculated using reported
risk-weighted assets adjusted for the effects of currency translation
differences.
5 Net interest expense recognised in the Corporate Centre includes
$8.7bn (2022: $2.5bn) of interest expense in relation to the internal cost to
fund trading and fair value net assets; and the funding cost of foreign
exchange swaps in our Markets Treasury function. In the second quarter of
2023, we implemented a consistent reporting approach across the most material
entities that contribute to our trading and fair value net assets, which
resulted in an increase to the associated funding costs reported through the
intersegment elimination in Corporate Centre.
6 Includes an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom. See Note 18 on page 391 of the Annual Report and
Accounts 2023.
Consolidated income statement
for the year ended 31 December 2023
2023 2022(1)
$m $m
Net interest income 35,796 30,377
- interest income(2,3) 100,868 52,826
- interest expense(4) (65,072) (22,449)
Net fee income 11,845 11,770
- fee income 15,616 15,124
- fee expense (3,771) (3,354)
Net income from financial instruments held for trading or managed on a fair 16,661 10,278
value basis
Net income/(expense) from assets and liabilities of insurance businesses, 7,887 (13,831)
including related derivatives, measured at fair value through profit or loss
Insurance finance (expense)/income (7,809) 13,799
Insurance service result 1,078 809
- insurance revenue 2,259 1,977
- insurance service expense (1,181) (1,168)
Gain on acquisition(5) 1,591 -
(Impairment)/reversal of impairment relating to the sale of our retail banking 150 (2,316)
operations in France(6)
Other operating (expense)/income(7) (1,141) (266)
Net operating income before change in expected credit losses and other credit 66,058 50,620
impairment charges(8)
Change in expected credit losses and other credit impairment charges (3,447) (3,584)
Net operating income 62,611 47,036
Employee compensation and benefits (18,220) (18,003)
General and administrative expenses (10,383) (10,848)
Depreciation and impairment of property, plant and equipment and right-of-use (1,640) (2,149)
assets(9)
Amortisation and impairment of intangible assets (1,827) (1,701)
Total operating expenses (32,070) (32,701)
Operating profit 30,541 14,335
Share of profit in associates and joint ventures 2,807 2,723
Impairment of interest in associate (3,000) -
Profit before tax 30,348 17,058
Tax expense (5,789) (809)
Profit for the year 24,559 16,249
Attributable to:
- ordinary shareholders of the parent company 22,432 14,346
- other equity holders 1,101 1,213
- non-controlling interests 1,026 690
Profit for the year 24,559 16,249
$ $
Basic earnings per ordinary share 1.15 0.72
Diluted earnings per ordinary share 1.14 0.72
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2 Interest income includes $88,657m (2022: $45,994m) of interest
recognised on financial assets measured at amortised cost and $12,134m (2022:
$6,293m) of interest recognised on financial assets measured at fair value
through other comprehensive income.
3 Interest income is calculated using the effective interest method
and comprises mainly interest recognised on financial assets measured at
either amortised cost or fair value through other comprehensive income.
4 Interest expense includes $62,095m (2022: $20,798m) of interest on
financial instruments, excluding interest on debt instruments issued by HSBC
for funding purposes that are designated under the fair value option to reduce
an accounting mismatch and on derivatives managed in conjunction with those
debt instruments included in interest expense.
5 Provisional gain recognised in respect of the acquisition of SVB UK.
6 In the fourth quarter of 2023, an impairment loss of $2.0bn was
recognised relating to the sale of our retail banking operations in France.
This largely offset the $2.1bn recognised in the first quarter of 2023 on the
reversal of the held for sale classification at that time. In 2023, a total
net $0.1bn of credit was recognised in other operating income, reflecting the
net asset value disposed under the final terms of sale. The $0.4bn impairment
of goodwill recognised in the third quarter in 2022 has not been reversed.
7 Other operating (expense)/income includes a loss on net monetary
positions of $1,667m (2022: $678m) as a result of applying IAS 29 'Financial
Reporting in Hyperinflationary Economies' and the disposal losses on
capitalised Markets Treasury repositioning of $977m in 2023.
8 Net operating income before change in expected credit losses and
other credit impairment charges also referred to as revenue.
9 Includes depreciation of the right-of-use assets of $663m (2022: $717m).
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023 2022¹
$m $m
Profit for the year 24,559 16,249
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific
conditions are met:
Debt instruments at fair value through other comprehensive income 2,599 (7,232)
- fair value gains/(losses) 2,381 (9,618)
- fair value losses/(gains) transferred to the income statement on disposal 905 (18)
- expected credit (recoveries)/losses recognised in the income statement 59 56
- income taxes (746) 2,348
Cash flow hedges 2,953 (3,655)
- fair value gains/(losses) 2,534 (4,207)
- fair value (gains)/losses reclassified to the income statement 1,463 (758)
- income taxes (1,044) 1,310
Share of other comprehensive income/(expense) of associates and joint ventures 47 (367)
- share for the year 47 (367)
Net finance income/(expenses) from insurance contracts (364) 1,775
- before income taxes (491) 2,393
- income taxes 127 (618)
Exchange differences (204) (9,918)
Items that will not be reclassified subsequently to profit or loss:
Fair value gains on property revaluation 1 280
Remeasurement of defined benefit liability (314) (1,031)
- before income taxes (413) (1,723)
- income taxes 99 692
Changes in fair value of financial liabilities designated at fair value upon (1,219) 1,922
initial recognition arising from changes in own credit risk
- before income taxes (1,617) 2,573
- income taxes 398 (651)
Equity instruments designated at fair value through other comprehensive income (120) 107
- fair value gains/(losses) (120) 107
Effects of hyperinflation 1,604 877
Other comprehensive income/(expense) for the year, net of tax 4,983 (17,242)
Total comprehensive income/(expense) for the year 29,542 (993)
Attributable to:
- ordinary shareholders of the parent company 27,397 (2,810)
- other equity holders 1,101 1,213
- non-controlling interests 1,044 604
Total comprehensive income/(expense) for the year 29,542 (993)
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
Consolidated balance sheet
at 31 December 2023
At(1)
31 Dec 31 Dec
2023 2022
$m $m
Assets
Cash and balances at central banks 285,868 327,002
Items in the course of collection from other banks 6,342 7,297
Hong Kong Government certificates of indebtedness 42,024 43,787
Trading assets 289,159 218,093
Financial assets designated and otherwise mandatorily measured at fair value 110,643 100,101
through profit or loss
Derivatives 229,714 284,159
Loans and advances to banks 112,902 104,475
Loans and advances to customers 938,535 923,561
Reverse repurchase agreements - non-trading 252,217 253,754
Financial investments 442,763 364,726
Assets held for sale 114,134 115,919
Prepayments, accrued income and other assets 165,255 156,149
Current tax assets 1,536 1,230
Interests in associates and joint ventures 27,344 29,254
Goodwill and intangible assets 12,487 11,419
Deferred tax assets 7,754 8,360
Total assets 3,038,677 2,949,286
Liabilities
Hong Kong currency notes in circulation 42,024 43,787
Deposits by banks 73,163 66,722
Customer accounts 1,611,647 1,570,303
Repurchase agreements - non-trading 172,100 127,747
Items in the course of transmission to other banks 7,295 7,864
Trading liabilities 73,150 72,353
Financial liabilities designated at fair value 141,426 127,321
Derivatives 234,772 285,762
Debt securities in issue 93,917 78,149
Liabilities of disposal groups held for sale 108,406 114,597
Accruals, deferred income and other liabilities 136,606 134,313
Current tax liabilities 2,777 1,135
Insurance contract liabilities 120,851 108,816
Provisions 1,741 1,958
Deferred tax liabilities 1,238 972
Subordinated liabilities 24,954 22,290
Total liabilities 2,846,067 2,764,089
Equity
Called up share capital 9,631 10,147
Share premium account 14,738 14,664
Other equity instruments 17,719 19,746
Other reserves (8,907) (9,133)
Retained earnings 152,148 142,409
Total shareholders' equity 185,329 177,833
Non-controlling interests 7,281 7,364
Total equity 192,610 185,197
Total liabilities and equity 3,038,677 2,949,286
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the year ended 31
December 2022 have been restated accordingly.
Consolidated statement of changes in equity
for the year ended 31 December 2023
Other reserves
Called up Other Financial Cash Foreign Merger Insurance Retained earnings Total Non- Total
share capital equity assets at flow exchange and other finance (1,4) share- controlling equity
and share instru-ments FVOCI hedging reserve reserves(1,2) reserve(3) holders' interests
premium reserve reserve equity
$m $m $m $m $m $m $m $m $m $m $m
At 1 Jan 2023 24,811 19,746 (7,038) (3,808) (32,575) 33,209 1,079 142,409 177,833 7,364 185,197
Profit for the year - - - - - - - 23,533 23,533 1,026 24,559
Other comprehensive income (net of tax) - - 2,402 3,030 (211) 1 (371) 114 4,965 18 4,983
- debt instruments at fair value through other comprehensive income - - 2,574 - - - - - 2,574 25 2,599
- equity instruments designated at fair value through other - - (93) - - - - - (93) (27) (120)
comprehensive
income
- cash flow hedges - - - 2,919 - - - - 2,919 34 2,953
- changes in fair value of financial liabilities designated at fair - - - - - - - (1,220) (1,220) 1 (1,219)
value
upon initial recognition arising from changes in own credit risk
- property revaluation - - - - - 1 - - 1 - 1
- remeasurement of defined benefit asset/liability - - - - - - - (317) (317) 3 (314)
- share of other comprehensive income of associates and joint - - - - - - - 47 47 - 47
ventures
- effects of hyperinflation - - - - - - - 1,604 1,604 - 1,604
- insurance finance income/(expense) recognised in other - - - - - - (364) - (364) - (364)
comprehensive
income
- exchange differences - - (79) 111 (211) - (7) - (186) (18) (204)
Total comprehensive income for the year - - 2,402 3,030 (211) 1 (371) 23,647 28,498 1,044 29,542
Shares issued under employee remuneration and share plans 79 - - - - - - (79) - - -
Capital securities issued(5) - 1,996 - - - - - - 1,996 - 1,996
Dividends to shareholders - - - - - - - (11,593) (11,593) (603) (12,196)
Redemption of securities(6) - (4,023) - - - - - 20 (4,003) - (4,003)
Transfers(7) - - - - - (5,130) - 5,130 - - -
Cost of share-based payment arrangements - - - - - - - 482 482 - 482
Share buy-back(8) - - - - - - - (7,025) (7,025) - (7,025)
Cancellation of shares (521) - - - - 521 - - - - -
Other movements - - 1,129 (255) (967) - 77 (843) (859) (524) (1,383)
At 31 Dec 2023 24,369 17,719 (3,507) (1,033) (33,753) 28,601 785 152,148 185,329 7,281 192,610
Consolidated statement of changes in equity (continued)
for the year ended 31 December 2022
Other reserves
Called up share capital and share premium Other Financial assets at FVOCI reserve Cash flow Foreign Merger Insurance Retained Total Non- Total
earnings
equity hedging exchange and other reserves(1,2) finance
share- controlling equity
(1,4)
instru-ments reserve reserve reserve(3) holders' interests
equity
$m $m $m $m $m $m $m $m $m $m $m
At 31 Dec 2021 (IFRS 4) 24,918 22,414 (634) (197) (22,769) 30,060 - 144,458 198,250 8,527 206,777
Impact on transition to IFRS 17(9) - - 683 - - - (696) (9,222) (9,235) (1,224) (10,459)
At 1 Jan 2022 24,918 22,414 49 (197) (22,769) 30,060 (696) 135,236 189,015 7,303 196,318
Profit for the year - - - - - - - 15,559 15,559 690 16,249
Other comprehensive income (net of tax) - - (7,089) (3,613) (9,806) 174 1,775 1,403 (17,156) (86) (17,242)
- debt instruments at fair value through other comprehensive income - - (7,181) - - - - - (7,181) (51) (7,232)
- equity instruments designated at fair value through other - - 92 - - - - - 92 15 107
comprehensive
income
- cash flow hedges - - - (3,613) - - - - (3,613) (42) (3,655)
- changes in fair value of financial liabilities designated at fair - - - - - - - 1,922 1,922 - 1,922
value
upon initial recognition arising from changes in own credit risk
- property revaluation - - - - - 174 - - 174 106 280
- remeasurement of defined benefit asset/liability - - - - - - - (1,029) (1,029) (2) (1,031)
- share of other comprehensive income of associates and joint ventures - - - - - - (367) (367) - (367)
- effects of hyperinflation - - - - - - - 877 877 - 877
- insurance finance income/(expense) recognised in other comprehensive - - - - - - 1,775 - 1,775 - 1,775
income
- exchange differences - - - - (9,806) - - - (9,806) (112) (9,918)
Total comprehensive income for the year - - (7,089) (3,613) (9,806) 174 1,775 16,962 (1,597) 604 (993)
Shares issued under employee remuneration and share plans 67 - - - - - - (67) - - -
Dividends to shareholders - - - - - - - (6,544) (6,544) (426) (6,970)
Redemption of securities - (2,668) - - - - - 402 (2,266) - (2,266)
Transfers - - - - - 2,499 - (2,499) - - -
Cost of share-based payment arrangements - - - - - - - 400 400 - 400
Share buy-back - - - - - - - (1,000) (1,000) - (1,000)
Cancellation of shares (174) - - - - 174 - - - - -
Other movements - - 2 2 - 302 - (481) (175) (117) (292)
At 31 Dec 2022 24,811 19,746 (7,038) (3,808) (32,575) 33,209 1,079 142,409 177,833 7,364 185,197
1 Cumulative goodwill amounting to $5,138m was charged against
reserves in respect of acquisitions of subsidiaries prior to 1 January 1998,
including $3,469m charged against the merger reserve arising on the
acquisition of HSBC Bank plc. The balance of $1,669m was charged against
retained earnings.
2 Statutory share premium relief under section 131 of the Companies
Act 1985 was taken in respect of the acquisition of HSBC Bank plc in 1992,
HSBC Continental Europe in 2000 and HSBC Finance Corporation in 2003, and the
shares issued were recorded at their nominal value only. In HSBC's
consolidated financial statements, the fair value differences of $8,290m in
respect of HSBC Continental Europe and $12,768m in respect of HSBC Finance
Corporation were recognised in the merger reserve. The merger reserve created
on the acquisition of HSBC Finance Corporation subsequently became attached to
HSBC Overseas Holdings (UK) Limited, following a number of intra-Group
reorganisations. During 2009, pursuant to section 131 of the Companies Act
1985, statutory share premium relief was taken in respect of the rights issue
and $15,796m was recognised in the merger reserve.
3 The insurance finance reserve reflects the impact of the adoption of
the other comprehensive income option for our insurance business in France.
Underlying assets supporting these contracts are measured at fair value
through other comprehensive income. Under this option, only the amount that
matches income or expenses recognised in profit or loss on underlying items is
included in finance income or expenses, resulting in the elimination of income
statement accounting mismatches. The remaining amount of finance income or
expenses for these insurance contracts is recognised in other comprehensive
income ('OCI').
4 At 31 December 2023, retained earnings included 256,289,431 treasury
shares (2022: 554,452,437). These include treasury shares held within HSBC's
insurance business's retirement funds for the benefit of policyholders or
beneficiaries within employee trusts for the settlement of shares expected to
be delivered under employee share schemes or bonus plans, and the
market-making activities in Markets and Securities Services.
5 In March 2023, HSBC Holdings issued $2,000m 8.000% contingent
convertible securities on which there were $4m of external issue costs.
6 In March 2023, HSBC Holdings redeemed $2,350m 6.250% contingent
convertible securities. In September 2023, HSBC Holdings further redeemed
€1,000m 6.000% and SGD750m 5.000% contingent convertible securities.
7 At 31 December 2023, an impairment of $5,512m of HSBC Overseas
Holdings (UK) Limited was recognised, resulting in a permitted transfer of
$5,130m from the merger reserve to retained earnings and a realisation of
$382m shared-based payment reserve within retained earnings.
8 In May 2023, HSBC Holdings announced a share buy-back of up to
$2.0bn, which was completed in July 2023. In August 2023, HSBC Holdings
announced another share buy-back of up to $2.0bn, which was completed in
October 2023. In October 2023, HSBC Holdings further announced a share
buy-back of up to $3.0bn, which was completed in February 2024.
9 The impact of IFRS 17 on previously reported total equity was
$(10,831)m at 31 December 2022.
Consolidated statement of cash flows
for the year ended 31 December 2023
2023 2022(1)
$m $m
Profit before tax 30,348 17,058
Adjustments for non-cash items:
Depreciation, amortisation and impairment 3,466 3,850
Net loss/(gain) from investing activities 1,213 11
Share of profit in associates and joint ventures (2,807) (2,723)
Impairment of interest in associate 3,000 -
(Gain)/loss on acquisition/disposal of subsidiaries, businesses, associates (1,775) 2,554
and joint ventures
Change in expected credit losses gross of recoveries and other credit 3,717 3,898
impairment charges
Provisions including pensions 266 638
Share-based payment expense 482 400
Other non-cash items included in profit before tax (4,299) (774)
Elimination of exchange differences(2) (10,678) 48,718
Changes in operating assets and liabilities
Change in net trading securities and derivatives (63,247) 20,166
Change in loans and advances to banks and customers (14,145) 31,649
Change in reverse repurchase agreements - non-trading (2,095) (23,405)
Change in financial assets designated and otherwise mandatorily measured at (9,994) 14,164
fair value
Change in other assets(3) (10,254) (12,858)
Change in deposits by banks and customer accounts 45,021 (91,194)
Change in repurchase agreements - non-trading 43,366 4,344
Change in debt securities in issue 11,945 12,518
Change in financial liabilities designated at fair value 10,097 (13,654)
Change in other liabilities 8,742 6,021
Dividends received from associates 1,067 944
Contributions paid to defined benefit plans (208) (194)
Tax paid (4,117) (2,776)
Net cash from operating activities 39,111 19,355
Purchase of financial investments(3) (563,561) (511,097)
Proceeds from the sale and maturity of financial investments(3) 504,174 492,624
Net cash flows from the purchase and sale of property, plant and equipment (1,145) (1,284)
Net cash flows from disposal of loan portfolio and customer accounts 623 (3,530)
Net investment in intangible assets (2,550) (3,125)
Net cash flow from (acquisition)/disposal of subsidiaries, businesses, (453) (989)
associates and joint ventures(4)
Net cash from investing activities (62,912) (27,401)
Issue of ordinary share capital and other equity instruments 1,996 -
Cancellation of shares (5,812) (2,285)
Net sales/(purchases) of own shares for market-making and investment purposes (614) (91)
Net cash flow from change in stake of subsidiaries (19) (197)
Redemption of preference shares and other equity instruments (4,003) (2,266)
Subordinated loan capital issued 5,237 7,300
Subordinated loan capital repaid(5) (2,147) (1,777)
Dividends paid to shareholders of the parent company and non-controlling (12,196) (6,970)
interests
Net cash from financing activities (17,558) (6,286)
Net increase/(decrease) in cash and cash equivalents (41,359) (14,332)
Cash and cash equivalents at 1 Jan 521,671 574,032
Exchange differences in respect of cash and cash equivalents 10,621 (38,029)
Cash and cash equivalents at 31 Dec(6) 490,933 521,671
Cash and cash equivalents comprise:
- cash and balances at central banks 285,868 327,002
- items in the course of collection from other banks 6,342 7,297
- loans and advances to banks of one month or less 76,620 72,295
- reverse repurchase agreements with banks of one month or less 64,341 68,682
- treasury bills, other bills and certificates of deposit less than three 33,303 26,727
months
- cash collateral and net settlement accounts 15,819 19,445
- cash and cash equivalents held for sale(7) 15,935 8,087
- less: items in the course of transmission to other banks (7,295) (7,864)
Cash and cash equivalents at 31 Dec(6) 490,933 521,671
Interest received was $98,910m (2022: $55,664m), interest paid was $65,980m
(2022: $22,856m) and dividends received (excluding dividends received from
associates, which are presented separately above) were $1,869m (2022:
$1,638m).
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2 Adjustment to bring changes between opening and closing balance sheet
amounts to average rates. This is not done on a line-by-line basis, as details
cannot be determined without unreasonable expense.
3 Post adoption of IFRS 17 'Insurance Contracts', certain assets have
been reclassified from 'Investing activities' to 'Operating activities'. The
comparative data have not been re-presented.
4 The 'Net cash flow on (acquisition)/disposal of subsidiaries,
businesses, associates and joint ventures' includes $1.2bn of net cash inflows
from the acquisition of Silicon Valley Bank UK Limited in March 2023.
5 Subordinated liabilities changes during the year are attributable to
repayments of $(2.1)bn (2022: $(1.8)bn) of securities. Non-cash changes during
the year included foreign exchange gains/(losses) of $0.6bn (2022: $(1.1)bn)
and fair value gains/(losses) of $0.8bn (2022: $(3.1)bn).
6 At 31 December 2023, $61.8bn (2022: $59.3bn) was not available for use
by HSBC due to a range of restrictions, including currency exchange and other
restrictions.
7 Includes $5.6bn (2022: $6.5bn) of cash and balances at central banks,
$0.2bn (2022: $1.3bn) of reverse repurchase agreements with banks of one month
or less, $10.5bn (2022: $0.2bn) of loans and advances to banks of one month or
less and items in the course of transmission to other banks $(0.4)bn (2022:
$(0.2)bn).
1 Basis of preparation and material accounting policies
The basis of preparation and summary of material accounting policies
applicable to the consolidated financial statements of HSBC and the separate
financial statements of HSBC Holdings can be found in Note 1, or the relevant
Note, in the Financial Statements in the Annual Report and Accounts 2023.
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC and the separate financial
statements of HSBC Holdings comply with UK-adopted international accounting
standards and with the requirements of the Companies Act 2006, and have also
applied international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. These
financial statements are also prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board ('IFRS Accounting Standards'), including interpretations
issued by the IFRS Interpretations Committee, as there are no applicable
differences from IFRS Accounting Standards for the periods presented. There
were no unendorsed standards effective for the year ended 31 December 2023
affecting these consolidated and separate financial statements.
Standards adopted during the year ended 31 December 2023
IFRS 17 'Insurance Contracts'
On 1 January 2023, the Group adopted the requirements of IFRS 17 'Insurance
Contracts' retrospectively with comparatives restated from the transition
date, 1 January 2022. At transition, the Group's total equity reduced by
$10,459m.
On adoption of IFRS 17, balances based on IFRS 4, including the present value
of in-force long-term insurance business ('PVIF') asset in relation to the
upfront recognition of future profits of in-force insurance contracts, were
derecognised. Insurance contract liabilities have been remeasured under
IFRS 17 based on groups of insurance contracts, which include the fulfilment
cash flows comprising the best estimate of the present value of the future
cash flows (for example premiums and payouts for claims, benefits and
expenses), together with a risk adjustment for non-financial risk, as well as
the contractual service margin ('CSM'). The CSM represents the unearned
profits that will be released and systematically recognised in insurance
revenue as services are provided over the expected coverage period.
In addition, the Group has made use of the option under the standard to
re-designate certain eligible financial assets held to support insurance
contract liabilities, which were predominantly measured at amortised cost, as
financial assets measured at fair value through profit or loss, with
comparatives restated from the transition date. The effects of adoption of
IFRS 17 are set out in Note 38 of the Annual Report and Accounts 2023 with a
description of the policy in Note 1.2(j) of the Annual Report and Accounts
2023.
(b) Differences between IFRS Accounting Standards and Hong Kong Financial
Reporting Standards
There are no significant differences between IFRS Accounting Standards and
Hong Kong Financial Reporting Standards in terms of their application to HSBC,
and consequently there would be no significant differences had the financial
statements been prepared in accordance with Hong Kong Financial Reporting
Standards. The 'Notes on the financial statements', taken together with the
'Report of the Directors' in the Annual Report and Accounts 2023, include the
aggregate of all disclosures necessary to satisfy IFRS Accounting Standards
and Hong Kong Financial Reporting Standards.
(c) Going concern
The financial statements are prepared on a going concern basis, as the
Directors are satisfied that the Group and parent company have the resources
to continue in business for the foreseeable future. In making this assessment,
the Directors have considered a wide range of information relating to present
and future conditions, including future projections of profitability,
liquidity, capital requirements and capital resources.
These considerations include stressed scenarios that reflect the uncertainty
in the macroeconomic environment following rising inflation, slower Chinese
economic activity, and disrupted supply chains as a result of the ongoing
Russia-Ukraine and Israel-Hamas wars. They also included other top and
emerging risks, including climate change, as well as the related impacts on
profitability, capital and liquidity.
2 Tax
Tax expense
2023 2022
$m $m
Current tax(1) 5,718 2,984
- for this year 5,737 3,264
- adjustments in respect of prior years (19) (280)
Deferred tax 71 (2,175)
- origination and reversal of temporary differences 19 (2,278)
- effect of changes in tax rates 17 (293)
- adjustments in respect of prior years 35 396
Year ended 31 Dec(2) 5,789 809
1 Current tax included Hong Kong profits tax of $1,328m (2022: $604m). The
Hong Kong tax rate applying to the profits of subsidiaries assessable in Hong
Kong was 16.5% (2022: 16.5%).
2 In addition to amounts recorded in the income statement, a tax credit of
$41m (2022: credit of $145m) was recorded directly to equity.
Tax reconciliation
The tax charged to the income statement differs from the tax charge that would
apply if all profits had been taxed at the UK corporation tax rate as follows:
2023 2022
$m % $m %
Profit before tax 30,348 17,058
Tax expense
Taxation at UK corporation tax rate of 23.5% (2022: 19.0%) 7,132 23.5 3,241 19.0
Impact of differently taxed overseas profits in overseas locations (612) (2.0) 459 2.7
UK banking surcharge 350 1.2 283 1.7
Items increasing tax charge in 2023:
- impairment of interest in associate 705 2.3 - -
- local taxes and overseas withholding taxes 419 1.4 346 2.0
- impacts of hyperinflation 348 1.1 171 1.0
- other permanent disallowables 227 0.7 363 2.1
- bank levy 112 0.4 59 0.3
- impact of changes in tax rates 17 0.1 (293) (1.7)
- adjustments in respect of prior period 16 0.1 116 0.7
- tax impact of sale of French retail banking business - - 115 0.7
Items reducing tax charge in 2023:
- non-taxable income and gains (1,189) (3.9) (825) (4.8)
- effect of profits in associates and joint ventures (571) (1.9) (504) (3.1)
- movements in provisions for uncertain tax positions (472) (1.6) 27 0.2
- accounting gain on acquisition of SVB UK (442) (1.5) - -
- deductions for AT1 coupon payments (229) (0.7) (246) (1.4)
- movements in unrecognised deferred tax (22) (0.1) (2,503) (14.7)
Year ended 31 December 5,789 19.1 809 4.7
The Group's profits are taxed at different rates depending on the country or
territory in which the profits arise. The key applicable tax rates for 2023
include Hong Kong (16.5%), the US (21%) and the UK (23.5%). If the Group's
profits were taxed at the statutory rates of the countries in which the
profits arose, then the tax rate for the year would have been 22.6% (2022:
23.3%).
The effective tax rate for the year of 19.1% was higher than in the previous
year (2022: 4.7%). The effective tax rate for the year was increased by 2.3%
by the non-taxable impairment of the Group's interest in BoCom, reduced by
1.6% by the release of provisions for uncertain tax positions and reduced by
1.5% by the non-taxable accounting gain on the acquisition of SVB UK. The
effective tax rate for 2022 was reduced by 14.7% as a result of the
recognition of previously unrecognised losses in the UK of $2.2bn and France
of $0.3bn, in light of improved forecast profitability.
On 20 June 2023, legislation was substantively enacted in the UK to introduce
the 'Pillar Two' global minimum tax model rules of the OECD's Inclusive
Framework on Base Erosion and Profit Shifting ('BEPS') and a UK qualified
domestic minimum top-up tax, with effect from 1 January 2024. Under these
rules, a top-up tax liability arises where the effective tax rate of the
Group's operations in a jurisdiction, calculated using principles set out in
the Pillar Two legislation, is below 15%. Any resulting tax is payable by HSBC
Holdings plc, being the Group's ultimate parent, to HMRC. In response to the
OECD's Pillar Two global minimum tax rules, many national governments have
announced their intention to introduce domestic minimum tax rules that are
closely aligned to the OECD's Pillar Two model rules. Where such qualifying
domestic minimum tax rules are introduced, they may be expected to have the
effect of increasing local tax liabilities to the 15%minimum rate, eliminating
the top-up tax liability payable in the UK by HSBC Holdings plc in such cases.
Based on the Group's forecasts, top-up tax liabilities are expected to arise
in approximately 10 jurisdictions as a result of low or 0% statutory tax
rates, in particular in respect of the Group's banking operations in Bermuda
and the Channel Islands. Additionally, the application of local tax laws in
Hong Kong and mainland China, particularly with regard to the non-taxation of
dividend income and income on government bonds, has typically resulted in
effective tax rates of below 15%. This is expected to create future top-up tax
liabilities in these jurisdictions, which have statutory tax rates of16.5% and
25%, respectively. The application of the Pillar Two global minimum tax rules
and the introduction of new domestic minimum tax regimes are currently
forecast to increase the Group's annual effective tax rate by around 0.5 and
1.0 percentage points.
Accounting for taxes involves some estimation because tax law is uncertain and
its application requires a degree of judgement, which authorities may dispute.
Liabilities are recognised based on best estimates of the probable outcome,
taking into account external advice where appropriate. Exposures relating to
legacy tax cases were reassessed during 2023, resulting in a credit of $472m
to the income statement. We do not expect significant liabilities to arise in
excess of the amounts provided. HSBC only recognises current and deferred tax
assets where recovery is probable.
Movement of deferred tax assets and liabilities
Loan Unused tax Financial assets at FVOCI Cash flow hedges Retirement obligations Other Total
impairment losses and
provisions tax credits
$m $m $m $m $m $m $m
Assets 1,062 4,397 850 1,271 - 3,048 10,628
Liabilities - - - - (1,673) (1,567) (3,240)
At 1 Jan 2023 1,062 4,397 850 1,271 (1,673) 1,481 7,388
Income statement (39) 102 541 1 (114) (562) (71)
Other comprehensive income - - (598) (974) 99 399 (1,074)
Foreign exchange and other adjustments 135 45 83 121 (126) 15 273
At 31 Dec 2023 1,158 4,544 876 419 (1,814) 1,333 6,516
Assets(1) 1,158 4,544 876 419 - 2,933 9,930
Liabilities(1) - - - - (1,814) (1,600) (3,414)
Assets(2) 1,151 2,001 382 154 - 1,744 5,432
Liabilities(2) - - - - (2,819) (475) (3,294)
At 1 Jan 2022 1,151 2,001 382 154 (2,819) 1,269 2,138
Income statement 7 2,425 (1,127) 1 217 652 2,175
Other comprehensive income - - 2,281 1,159 692 (1,260) 2,872
Foreign exchange and other adjustments (96) (29) (686) (43) 237 820 203
At 31 Dec 2022 1,062 4,397 850 1,271 (1,673) 1,481 7,388
Assets(1) 1,062 4,397 850 1,271 - 3,048 10,628
Liabilities(1) - - - - (1,673) (1,567) (3,240)
1 After netting off balances within countries, the balances as
disclosed in the accounts are as follows: deferred tax assets of $7,754m
(2022: $8,360m) and deferred tax liabilities of $1,238m (2022: $972m).
2 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. We have restated 2022 comparative data.
In applying judgement in recognising deferred tax assets, management has
assessed all relevant information, including future business profit
projections and the track record of meeting forecasts. Management's assessment
of the likely availability of future taxable profits against which to recover
deferred tax assets is based on the most recent financial forecasts approved
by management, which cover a five-year period and are extrapolated where
necessary, and takes into consideration the reversal of existing taxable
temporary differences and past business performance. When forecasts are
extrapolated beyond five years, a number of different scenarios are
considered, reflecting different downward risk adjustments, in order to assess
the sensitivity of our recognition and measurement conclusions in the context
of such longer-term forecasts.
The Group's net deferred tax asset of $6.5bn (2022: $7.4bn) included $3.3bn
(2022: $4.0bn) of deferred tax assets relating to the UK, $3.1bn (2022:
$3.3bn) of deferred tax assets relating to the US and a net deferred asset of
$0.9bn (2022: $1.0bn) in France.
The UK deferred tax asset of $3.3bn excluded a $1.9bn deferred tax liability
arising on the UK pension scheme surplus, the reversal of which is not taken
into account when estimating future taxable profits. The UK deferred tax
assets are supported by forecasts of taxable profit, also taking into
consideration the history of profitability in the relevant businesses. The
majority of the deferred tax asset relates to tax attributes which do not
expire and are forecast to be recovered within four years and as such are less
sensitive to changes in long-term profit forecasts.
The net US deferred tax asset of $3.1bn included $1.3bn related to US tax
losses, of which $1.0bn expire in 10 to 15 years. Management expects the US
deferred tax asset to be substantially recovered within 14 years, with the
majority recovered in the first nine years.
The net deferred tax asset in France of $0.9bn included $0.7bn related to tax
losses, which are expected to be substantially recovered within
12 years.
Unrecognised deferred tax
The amount of gross temporary differences, unused tax losses and tax credits
for which no deferred tax asset is recognised in the balance sheet was $10.4bn
(2022: $9.2bn). This amount included unused US state tax losses of $4.0bn
(2022: $4.1bn) which are forecast to expire before they are recovered and
unused UK tax losses of $4.5bn (2022: $3.5bn), which arose prior to 1 April
2017 and can only be recovered against future taxable profits of HSBC
Holdings. No deferred tax was recognised on these losses due to the absence of
convincing evidence regarding the availability of sufficient future taxable
profits against which to recover them. Deferred tax asset recognition is
reassessed at each balance sheet date based on the available evidence. Of the
total amounts unrecognised, $5.1bn (2022: $3.6bn) had no expiry date, $0.5bn
(2022: $1.2bn) was scheduled to expire within 10 years and the remaining
balance is expected to expire after 10 years.
Deferred tax is not recognised in respect of the Group's investments in
subsidiaries and branches where HSBC is able to control the timing of
remittance or other realisation and where remittance or realisation is not
probable in the foreseeable future. The aggregate temporary differences
relating to unrecognised deferred tax liabilities arising on investments in
subsidiaries and branches was $14.4bn (2022: $11.7bn) and the corresponding
unrecognised deferred tax liability was $0.7bn (2022: $0.7bn).
3 Dividends
Dividends to shareholders of the parent company
2023 2022
Per Total Per Total
share share
$ $m $ $m
Dividends paid on ordinary shares
In respect of previous year:
- second interim dividend 0.23 4,589 0.18 3,576
In respect of current year:
- first interim dividend 0.10 2,001 0.09 1,754
- second interim dividend 0.10 1,956 - -
- third interim dividend 0.10 1,946 - -
Total 0.53 10,492 0.27 5,330
Total coupons on capital securities classified as equity 1,101 1,214
Dividends to shareholders 11,593 6,544
On 4 January 2024, HSBC paid a coupon on its €1,250m subordinated capital
securities, representing a total distribution of €30m ($33m). No liability
was recorded in the balance sheet at 31 December 2023 in respect of this
coupon payment.
The distributable reserves of HSBC Holdings at 31 December 2023 were $30.9bn,
a $4.3bn decrease since 2022, primarily driven by $18.6bn in ordinary
dividend, additional tier 1 coupon and share buy-back payments, offset by
profits generated and other reserve movements of $14.3bn. Distributable
reserves are sensitive to impairments of investments in subsidiaries to the
extent they are not offset by the realisation of related reserves. The
impairment of BoCom in 2023 did not impact distributable reserves, as its
intermediate parent and direct subsidiary of HSBC Holdings, HSBC Asia Holdings
Limited, was not impaired.
Fourth interim dividend for 2023
On 21 February 2024, the Directors approved a fourth interim dividend in
respect of the financial year ended 31 December 2023 of $0.31 per ordinary
share, a distribution of approximately $5,913m. The fourth interim dividend
for 2023 will be payable on 25 April 2024 to holders on the Principal Register
in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas
Branch Register on 8 March 2024. No liability was recorded in the financial
statements in respect of the fourth interim dividend for 2023.
The dividend will be payable in US dollars, or in pounds sterling or Hong Kong
dollars at the forward exchange rates quoted by HSBC Bank plc in London at or
about 11.00am on 15 April 2024. The ordinary shares in London, Hong Kong and
Bermuda, and American Depositary Shares ('ADSs') in New York will be quoted
ex-dividend on 7 March 2024.
The default currency on the Principal Register in the UK is pounds sterling,
and dividends can also be paid in Hong Kong dollars or US dollars, or a
combination of these currencies. International shareholders can register to
join the Global Dividend Service to receive dividends in their local
currencies. Please register and read the terms and conditions at
www.investorcentre.co.uk. UK shareholders can also register their sterling
bank mandates at www.investorcentre.co.uk.
The default currency on the Hong Kong Overseas Branch Register is Hong Kong
dollars, and dividends can also be paid in US dollars or pounds sterling, or a
combination of these currencies. Shareholders can arrange for direct credit of
Hong Kong dollar cash dividends into their bank account, or arrange to send US
dollar or pounds sterling cheques to the credit of their bank account.
Shareholders can register for these services at www.investorcentre.com/hk.
Shareholders can also download a dividend currency election form from
www.hsbc.com/dividends, www.investorcentre.com/hk, or www.hkexnews.hk.
The default currency on the Bermuda Overseas Branch Register is US dollars,
and dividends can also be paid in Hong Kong dollars or pounds sterling, or a
combination of these currencies. Shareholders can change their dividend
currency election by contacting the Bermuda investor relations team.
Shareholders can download a dividend currency election form from
www.hsbc.com/dividends.
Changes to currency elections must be received by 11 April 2024 to be
effective for this dividend.
The dividend will be payable on ADSs, each of which represents five ordinary
shares, on 25 April 2024 to holders of record on 8 March 2024. The dividend
of $1.55 per ADS will be payable by the depositary in US dollars.
Alternatively, the cash dividend may be invested in additional ADSs by
participants in the dividend reinvestment plan operated by the depositary,
elections must be received by 4 April 2024.
Any person who has acquired ordinary shares registered on the Principal
Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda
Overseas Branch Register but who has not lodged the share transfer with the
Principal Registrar in the UK, Hong Kong or Bermuda Overseas Branch Registrar
should do so before 4.00pm local time on 8 March 2024 in order to receive the
dividend.
Ordinary shares may not be removed from or transferred to the Principal
Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda
Overseas Branch Register on 8 March 2024. Any person wishing to remove
ordinary shares to or from each register must do so before 4.00pm local time
on 7 March 2024.
Transfers of ADSs must be lodged with the depositary by 11.00am on 8 March
2024 in order to receive the dividend. ADS holders who receive a cash dividend
will be charged a fee, which will be deducted by the depositary, of $0.005 per
ADS per cash dividend.
4 Earnings per share
Basic earnings per ordinary share is calculated by dividing the profit
attributable to ordinary shareholders of the parent company by the weighted
average number of ordinary shares outstanding, excluding own shares held.
Diluted earnings per ordinary share is calculated by dividing the basic
earnings, which require no adjustment for the effects of dilutive potential
ordinary shares, by the weighted average number of ordinary shares
outstanding, excluding own shares held, plus the weighted average number of
ordinary shares that would be issued on conversion of dilutive potential
ordinary shares.
Basic and diluted earnings per share
2023 2022¹
Profit Number of shares Per share Profit Number of shares Per share
$m (millions) $ $m (millions) $
Basic(2) 22,432 19,478 1.15 14,346 19,849 0.72
Effect of dilutive potential ordinary shares 122 137
Diluted(2) 22,432 19,600 1.14 14,346 19,986 0.72
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
2 Weighted average number of ordinary shares outstanding (basic) or
assuming dilution (diluted).
The number of anti-dilutive employee share options excluded from the weighted
average number of dilutive potential ordinary shares was
23 million (2022: 9.4million).
5 Constant currency balance sheet reconciliation
At
31 Dec 2023 31 Dec 2022(1)
Reported and constant currency Constant currency Currency translation Reported
$m $m $m $m
Loans and advances to customers (net) 938,535 941,548 (17,987) 923,561
Interests in associates and joint ventures 27,344 28,783 471 29,254
Total external assets 3,038,677 3,007,684 (58,398) 2,949,286
Customer accounts 1,611,647 1,598,495 (28,192) 1,570,303
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data for the financial year
ended 31 December 2022 have been restated accordingly.
6 Reported and constant currency results(1)
Year ended
2023 2022(2)
$m $m
Revenue(3)
Reported 66,058 50,620
Currency translation 0 (749)
Constant currency 66,058 49,871
Change in expected credit losses and other credit impairment charges
Reported (3,447) (3,584)
Currency translation 0 (46)
Constant currency (3,447) (3,630)
Operating expenses
Reported (32,070) (32,701)
Currency translation 0 399
Constant currency (32,070) (32,302)
Share of profit in associates and joint ventures less impairment
Reported(4) (193) 2,723
Currency translation 0 (121)
Constant currency (193) 2,602
Profit before tax
Reported 30,348 17,058
Currency translation 0 (517)
Constant currency 30,348 16,541
1 In the current period constant currency results are equal to
reported as there is no currency translation.
2 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
3 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
4 Includes an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom. See Note 18 on page 391 of the Annual Report and
Accounts 2023.
Notable items
Year ended
2023 2022
$m $m
Revenue
Disposals, acquisitions and related costs(1,2,3) 1,298 (2,737)
Fair value movements on financial instruments(4) 14 (618)
Restructuring and other related costs(5) - (247)
Disposal losses on Markets Treasury repositioning (977) -
Operating expenses
Disposals, acquisitions and related costs (321) (18)
Restructuring and other related costs(6) 136 (2,882)
Impairment of interest in associate(7) (3,000) -
Tax
Tax credit on notable items 207 1,026
Recognition of losses - 2,333
Uncertain tax positions 427 (142)
1 Includes losses from classifying businesses as held for sale as part
of a broader restructuring of our European business which includes the impact
of the sale of our retail banking operations in France.
2 Includes fair value movements on the foreign exchange hedging of the
expected proceeds from the planned sale of our banking operations in
Canada.
3 Includes the provisional gain of $1.6bn recognised in respect of the
acquisition of SVB UK.
4 Fair value movements on non-qualifying hedges in HSBC Holdings.
5 Comprises gains and losses relating to the business update in February
2020, including losses associated with the RWA reduction programme.
6 Amounts in 2023 relate to reversals of restructuring provisions
recognised during 2022.
7 Relates to an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom. See Note 18 on page 391 of the Annual Report and
Accounts 2023.
7 Contingent liabilities, contractual commitments and guarantees
2023 2022
$m $m
Guarantees and other contingent liabilities:
- financial guarantees 17,009 18,783
- performance and other guarantees 94,277 88,240
- other contingent liabilities 636 676
At 31 Dec 111,922 107,699
Commitments(1):
- documentary credits and short-term trade-related transactions 7,818 8,241
- forward asset purchases and forward deposits placed 78,535 50,852
- standby facilities, credit lines and other commitments to lend 810,797 768,761
At 31 Dec 897,150 827,854
1 Includes $661,015m of commitments at 31 December 2023 (31 December
2022: $618,788m), to which the impairment requirements in IFRS 9 are applied
where HSBC has become party to an irrevocable commitment.
The preceding table discloses the nominal principal amounts of off-balance
sheet liabilities and commitments for the Group, which represent the maximum
amounts at risk should the contracts be fully drawn upon and the clients
default. As a significant portion of guarantees and commitments are expected
to expire without being drawn upon, the total of the nominal principal amounts
is not indicative of future liquidity requirements. The expected credit loss
provision relating to guarantees and commitments under IFRS 9 is disclosed in
Note 28 of the Annual Report and Accounts 2023.
The majority of the guarantees have a term of less than one year, while
guarantees with terms of more than one year are subject to HSBC's annual
credit review process.
Contingent liabilities arising from legal proceedings, regulatory and other
matters against Group companies are excluded from this note but are disclosed
in Notes 28 and 36 of the Annual Report and Accounts 2023.
Financial Services Compensation Scheme
The Financial Services Compensation Scheme ('FSCS') provides compensation, up
to certain limits, to eligible customers of financial services firms that are
unable, or likely to be unable, to pay claims against them. The FSCS may
impose a further levy on the Group to the extent the industry levies imposed
to date are not sufficient to cover the compensation due to customers in any
future possible collapse. The ultimate FSCS levy to the industry as a result
of a collapse cannot be estimated reliably. It is dependent on various
uncertain factors including the potential recovery of assets by the FSCS,
changes in the level of protected products (including deposits and
investments) and the population of FSCS members at the time.
Associates
HSBC's share of associates' contingent liabilities, contractual commitments
and guarantees amounted to $69.9bn at 31 December 2023 (2022: $64.8bn). No
matters arose where HSBC was severally liable.
8 Legal proceedings and regulatory matters
HSBC is party to legal proceedings and regulatory matters in a number of
jurisdictions arising out of its normal business operations. Apart from the
matters described below, HSBC considers that none of these matters are
material. The recognition of provisions is determined in accordance with the
accounting policies set out in Note 1 of our Annual Report and Accounts 2023.
While the outcomes of legal proceedings and regulatory matters are inherently
uncertain, management believes that, based on the information available to it,
appropriate provisions have been made in respect of these matters as at 31
December 2023 (see Note 28 of our Annual Report and Accounts 2023). Where an
individual provision is material, the fact that a provision has been made is
stated and quantified, except to the extent that doing so would be seriously
prejudicial. Any provision recognised does not constitute an admission of
wrongdoing or legal liability. It is not practicable to provide an aggregate
estimate of potential liability for our legal proceedings and regulatory
matters as a class of contingent liabilities.
Bernard L. Madoff Investment Securities LLC
Various non-US HSBC companies provided custodial, administration and similar
services to a number of funds incorporated outside the US whose assets were
invested with Bernard L. Madoff Investment Securities LLC ('Madoff
Securities'). Based on information provided by Madoff Securities as at 30
November 2008, the purported aggregate value of these funds was $8.4bn,
including fictitious profits reported by Madoff. Based on information
available to HSBC, the funds' actual transfers to Madoff Securities minus
their actual withdrawals from Madoff Securities during the time HSBC serviced
the funds are estimated to have totalled approximately $4bn. Various HSBC
companies have been named as defendants in lawsuits arising out of Madoff
Securities' fraud.
US litigation: The Madoff Securities Trustee has brought lawsuits against
various HSBC companies and others, seeking recovery of alleged transfers from
Madoff Securities to HSBC in the amount of $543m (plus interest), and these
lawsuits remain pending in the US Bankruptcy Court for the Southern District
of New York (the 'US Bankruptcy Court').
Certain Fairfield entities (together, 'Fairfield') (in liquidation) have
brought a lawsuit in the US against fund shareholders, including HSBC
companies that acted as nominees for clients, seeking restitution of
redemption payments in the amount of $382m (plus interest). Fairfield's claims
against most of the HSBC companies have been dismissed by the US Bankruptcy
Court and the US District Court for the Southern District of New York, but
remain pending on appeal before the US Court of Appeals for the Second
Circuit. Fairfield's claims against HSBC Private Bank (Suisse) SA and HSBC
Securities Services Luxembourg ('HSSL') have not been dismissed and their
appeals are also pending before the US Court of Appeals for the Second
Circuit. Meanwhile, proceedings before the US Bankruptcy Court with respect to
the claims against HSBC Private Bank (Suisse) SA and HSSL are ongoing.
UK litigation: The Madoff Securities Trustee has filed a claim against various
HSBC companies in the High Court of England and Wales, seeking recovery of
transfers from Madoff Securities to HSBC. The claim has not yet been served
and the amount claimed has not been specified.
Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in
liquidation) brought an action against HSSL and Bank of Bermuda (Cayman)
Limited (now known as HSBC Cayman Limited), alleging breach of contract and
breach of fiduciary duty and claiming damages. Following dismissal of Primeo's
action by the Grand Court and Court of Appeal of the Cayman Islands, in 2019,
Primeo appealed to the Judicial Committee of the Privy Council. In November
2023, the Privy Council issued a judgment upholding the dismissal of Primeo's
claims. This matter is now closed.
Luxembourg litigation: In 2009, Herald Fund SPC ('Herald') (in liquidation)
brought an action against HSSL before the Luxembourg District Court, seeking
restitution of cash and securities in the amount of $2.5bn (plus interest), or
damages in the amount of $2bn (plus interest). In 2018, HSBC Bank plc was
added to the claim and Herald increased the amount of the alleged damages
claim to $5.6bn (plus interest). The Luxembourg District Court has dismissed
Herald's securities restitution claim, but reserved Herald's cash restitution
and damages claims. Herald has appealed this dismissal to the Luxembourg Court
of Appeal, where the matter is pending.
Beginning in 2009, various HSBC companies have been named as defendants in a
number of actions brought by Alpha Prime Fund Limited ('Alpha Prime') in the
Luxembourg District Court seeking damages for alleged breach of contract and
negligence in the amount of $1.16bn (plus interest). These matters are
currently pending before the Luxembourg District Court.
Beginning in 2014, HSSL and the Luxembourg branch of HSBC Bank plc have been
named as defendants in a number of actions brought by Senator Fund SPC
('Senator') before the Luxembourg District Court seeking restitution of
securities in the amount of $625m (plus interest), or damages in the amount of
$188m (plus interest). These matters are currently pending before the
Luxembourg District Court.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of the pending matters, including the timing or
any possible impact on HSBC, which could be significant.
US Anti-Terrorism Act litigation
Since November 2014, a number of lawsuits have been filed in federal courts in
the US against various HSBC companies and others on behalf of plaintiffs who
are, or are related to, alleged victims of terrorist attacks in the Middle
East. In each case, it is alleged that the defendants aided and abetted the
unlawful conduct of various sanctioned parties in violation of the US
Anti-Terrorism Act, or provided banking services to customers alleged to have
connections to terrorism financing. Seven actions, which seek damages for
unspecified amounts, remain pending and HSBC's motions to dismiss have been
granted in three of these cases. These dismissals are subject to appeals
and/or the plaintiffs re-pleading their claims. The four other actions are at
an early stage.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Interbank offered rates investigation and litigation
Euro interest rate derivatives: In December 2016, the European Commission
('EC') issued a decision finding that HSBC, among other banks, engaged in
anti-competitive practices in connection with the pricing of euro interest
rate derivatives, and the EC imposed a fine on HSBC based on a one-month
infringement in 2007. The fine was annulled in 2019 and a lower fine was
imposed in 2021. In January 2023, the European Court of Justice dismissed an
appeal by HSBC and upheld the EC's findings on HSBC's liability. A separate
appeal by HSBC concerning the amount of the fine remains pending before the
General Court of the European Union.
US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named
as defendants in a number of individual and putative class action lawsuits
filed in federal and state courts in the US with respect to the setting of US
dollar Libor. The complaints assert claims under various US federal and state
laws, including antitrust and racketeering laws and the Commodity Exchange Act
('US CEA'). HSBC has concluded class settlements with five groups of
plaintiffs, and several class action lawsuits brought by other groups of
plaintiffs have been voluntarily dismissed. A number of individual US dollar
Libor-related actions seeking damages for unspecified amounts remain pending.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of the pending matters, including the timing or
any possible impact on HSBC, which could be significant.
Foreign exchange-related investigations and litigation
In December 2016, Brazil's Administrative Council of Economic Defense
initiated an investigation into the onshore foreign exchange market and
identified a number of banks, including HSBC, as subjects of its
investigation, which remains ongoing.
Since 2017, HSBC Bank plc, among other financial institutions, has been
defending a complaint filed by the Competition Commission of South Africa
before the South African Competition Tribunal for alleged anti-competitive
behaviour in the South African foreign exchange market. In 2020, a revised
complaint was filed which also named HSBC Bank USA N.A. ('HSBC Bank USA') as a
defendant. In January 2024, the South African Competition Appeal Court
dismissed HSBC Bank USA from the revised complaint, but denied HSBC Bank plc's
application to dismiss. The Competition Commission has appealed the dismissal
of HSBC Bank USA to the Constitutional Court of South Africa.
Since 2015, various HSBC companies and other banks have been named as
defendants in a putative class action in the US District Court for the
Southern District of New York filed by a group of retail customers who dealt
in foreign exchange products. The plaintiffs allege that the defendants
conspired to manipulate foreign exchange rates and seek damages for
unspecified amounts. This action has been dismissed but remains pending on
appeal.
In January 2023, HSBC Bank plc and HSBC Holdings reached a
settlement-in-principle with plaintiffs in Israel to resolve a class action
filed in the local courts alleging foreign exchange-related misconduct. The
settlement remains subject to court approval. Lawsuits alleging foreign
exchange-related misconduct remain pending against HSBC and other banks in
courts in Brazil.
In February 2024, HSBC Bank plc and HSBC Holdings were joined to an existing
claim brought in the UK Competition Appeals Tribunal against various other
banks alleging historical anti-competitive behaviour in the foreign exchange
market and seeking damages for unspecified amounts. This matter is at an early
stage. It is possible that additional civil actions will be initiated against
HSBC in relation to its historical foreign exchange activities.
There are many factors that may affect the range of outcomes, and the
resulting financial impact, of the pending matters, which could be
significant.
Precious metals fix-related litigation
US litigation: HSBC and other members of The London Silver Market Fixing
Limited are defending a class action pending in the US District Court for the
Southern District of New York alleging that, from January 2007 to December
2013, the defendants conspired to manipulate the price of silver and silver
derivatives for their collective benefit in violation of US antitrust laws,
the US CEA and New York state law. In May 2023, this action, which seeks
damages for unspecified amounts, was dismissed but remains pending on appeal.
HSBC and other members of The London Platinum and Palladium Fixing Company
Limited are defending a class action pending in the US District Court for the
Southern District of New York alleging that, from January 2008 to November
2014, the defendants conspired to manipulate the price of platinum group
metals and related financial products for their collective benefit in
violation of US antitrust laws and the US CEA. In February 2023, the court
reversed an earlier dismissal of the plaintiffs' third amended complaint and
this action, which seeks damages for unspecified amounts, is proceeding.
Canada litigation: HSBC and other financial institutions are defending
putative class actions filed in the Ontario and Quebec Superior Courts of
Justice alleging that the defendants conspired to manipulate the price of
silver, gold and related derivatives in violation of the Canadian Competition
Act and common law. These actions each seek CA$1bn in damages plus CA$250m in
punitive damages. Two of the actions are proceeding and the others have been
stayed.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Tax-related investigations
Various tax administration, regulatory and law enforcement authorities around
the world are conducting investigations in connection with allegations of tax
evasion or tax fraud, money laundering and unlawful cross-border banking
solicitation. HSBC continues to cooperate with these investigations.
In March 2023, the French National Financial Prosecutor announced an
investigation into a number of banks, including HSBC Continental Europe and
the Paris branch of HSBC Bank plc, in connection with alleged tax fraud
related to the dividend withholding tax treatment of certain trading
activities. HSBC Bank plc and HSBC Germany also continue to cooperate with
investigations by the German public prosecutor into numerous financial
institutions and their employees, in connection with the dividend withholding
tax treatment of certain trading activities.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Gilts trading investigation and litigation
Since 2018, the UK Competition and Markets Authority ('CMA') has been
investigating HSBC and four other banks for suspected anti-competitive conduct
in relation to the historical trading of gilts and related derivatives. In May
2023, the CMA announced its case against HSBC Bank plc and HSBC Holdings; both
HSBC companies are contesting the CMA's allegations.
In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks,
were named as defendants in a putative class action filed in the US District
Court for the Southern District of New York by plaintiffs alleging
anti-competitive conduct in the gilts market and seeking damages for
unspecified amounts. In September 2023, the defendants filed a motion to
dismiss which remains pending. It is possible that additional civil actions
will be initiated against HSBC in relation to its historical gilts trading
activities.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
UK depositor protection arrangements investigation
In January 2022, the UK Prudential Regulation Authority ('PRA') commenced an
investigation into HSBC Bank plc's and HSBC UK Bank plc's compliance with
depositor protection arrangements under the Financial Services Compensation
Scheme in the UK. In January 2024, the PRA concluded its investigation and
imposed a £57m fine on HSBC Bank plc and HSBC UK Bank plc, which has been
paid, and this matter is now closed.
UK collections and recoveries investigation
Since 2019, the FCA has been investigating HSBC Bank plc's, HSBC UK Bank plc's
and Marks and Spencer Financial Services plc's compliance with regulatory
standards relating to collections and recoveries operations in the UK between
2017 and 2018. HSBC continues to cooperate with this investigation.
There are many factors that may affect the range of outcomes, and the
resulting financial impact, of this matter, which could be significant.
Korean short selling investigation
In December 2023, the Korean Securities and Futures Commission issued a
decision to impose a fine on The Hongkong and Shanghai Banking Corporation
Limited in connection with trades in breach of Korean short selling rules and
to refer the case to the Korean Prosecutors' Office for investigation.
There are many factors that may affect the range of outcomes, and the
resulting financial impact, of this matter, which could be significant.
Silicon Valley Bank ('SVB') litigation
In May 2023, First-Citizens Bank & Trust Company ('First Citizens')
brought a lawsuit in the US District Court for the Northern District of
California against various HSBC companies and seven US-based HSBC employees
who had previously worked for SVB. The lawsuit seeks $1bn in damages and
alleges, among other things, that the various HSBC companies conspired with
the individual defendants to solicit employees from First Citizens and that
the individual defendants took confidential information belonging to SVB
and/or First Citizens. In January 2024, the court denied the defendants'
motion to dismiss in part and granted it in part, and directed the plaintiff
to amend its complaint to specify its allegations as to each defendant. In
February 2024, First Citizens filed its amended complaint. This action is
ongoing.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of this matter, including the timing or any
possible impact on HSBC, which could be significant.
Film Finance litigation
In June 2020, two separate investor groups issued claims against HSBC UK Bank
plc (as successor to HSBC Private Bank (UK) Limited ('PBGB')) in the High
Court of England and Wales seeking damages for unspecified amounts in
connection with PBGB's role in the development of Eclipse film finance
schemes. These actions are ongoing.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
US mortgage securitisation litigation
Beginning in 2014, a number of lawsuits were filed in various state and
federal courts in the US against HSBC Bank USA, as a trustee of more than 280
mortgage securitisation trusts, seeking unspecified damages for losses in
collateral value allegedly sustained by the trusts. HSBC Bank USA has reached
settlements with a number of plaintiffs to resolve nearly all of these
lawsuits. The remaining two actions are pending in a New York state court.
HSBC Bank USA and certain of its affiliates continue to defend a mortgage loan
repurchase action seeking unspecified damages and specific performance brought
by the trustee of a mortgage securitisation trust in New York state court.
There are many factors that may affect the range of outcomes, and the
resulting financial impact, of the pending matters, which could be
significant.
Mexican government bond litigation
HSBC Mexico S.A. and other banks are named as defendants in a consolidated
putative class action pending in the US District Court for the Southern
District of New York alleging anti-competitive conduct in the Mexican
government bond market between 2006 and 2017 and seeking damages for
unspecified amounts. In February 2024, the US Court of Appeals for the Second
Circuit reversed an earlier dismissal of this lawsuit and this matter is
proceeding.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of this matter, including the timing or any
possible impact on HSBC, which could be significant.
Stanford litigation
Since 2009, HSBC Bank plc has been named as a defendant in numerous claims
filed in courts in the UK and the US arising from the collapse of Stanford
International Bank Ltd, for which it was a correspondent bank from 2003 to
2009. In February 2023, HSBC Bank plc reached settlements with the plaintiffs
to resolve these claims. The US settlement is subject to court approval and
the UK settlement has concluded.
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are also subject to a number of
other enquiries and examinations, requests for information, investigations and
reviews by various regulators and competition and law enforcement authorities,
as well as legal proceedings including litigation, arbitration and other
contentious proceedings, in connection with various matters arising out of
their ordinary course businesses and operations.
At the present time, HSBC does not expect the ultimate resolution of any of
these matters to be material to the Group's financial position; however, given
the uncertainties involved in legal proceedings and regulatory matters, there
can be no assurance regarding the eventual outcome of a particular matter or
matters.
9 Impairment of interest in associate
We maintain a 19.03% interest in BoCom. Since our investment in 2004, BoCom
has grown its business significantly to the extent that it has recently been
designated as a global systemically important bank ('GSIB').
For accounting purposes, the balance sheet carrying value attributed to BoCom
represents our share of its net assets. We perform quarterly impairment tests
incorporating a value-in-use calculation, recognising the gap between this
carrying value and the fair value (based on the list share price). We have
previously disclosed that the excess of the value-in-use calculation over its
carrying value has been marginal in recent years, and that reasonably possible
changes in assumptions could generate an impairment.
Recent macroeconomic, policy and industry factors resulted in a wider range of
reasonably possible value-in-use outcomes for our BoCom valuation. At 31
December 2023, the Group performed an impairment test on the carrying value
which resulted in an impairment of $3.0bn, as the recoverable amount as
determined by a value-in-use calculation was lower than the carrying value.
Our value-in-use calculation uses both historical experience and market
participant views to estimate future cash flows, relevant discount rates and
associated capital assumptions.
This impairment will have no material impact on HSBC's capital, capital ratios
or distribution capacity, and therefore no impact on dividends or share
buy-backs. The insignificant impact on HSBC's capital and CET1 ratio is due to
the compensating release of regulatory capital deductions to offset the
impairment charge.
We remain strategically committed to mainland China as demonstrated by our
recent announcements to acquire Citi's retail wealth management portfolio and
the investments made into mainland China in recent years. BoCom remains a
strong partner in China, and we remain focused on maximising the mutual value
of our partnership. Our positive views on the medium- and long-term structural
growth opportunities in mainland China are unchanged.
For further details, see Note 18: Interests in associates and joint ventures
on page 391 of our Annual Report and Accounts 2023.
10 Events after the balance sheet date
On 1 January 2024, HSBC Continental Europe completed the sale of its retail
banking business in France to CCF, a subsidiary of Promontoria MMB SAS ('My
Money Group'). The sale also included HSBC Continental Europe's 100% ownership
interest in HSBC SFH (France) and its 3% ownership interest in Crédit
Logement. In the fourth quarter of 2023, a loss of $2.0bn was recognised upon
reclassification to held for sale, in accordance with IFRS 5, which net of the
$2.1bn partial reversal of impairment recognised in the first quarter of 2023,
gave rise to a net reversal of impairment recognised in the year of $0.1bn.
On 30 January 2024, the PRA concluded its investigation into HSBC Bank plc's
and HSBC UK Bank plc's compliance with depositor protection arrangements under
the Financial Services Compensation Scheme in the UK. The PRA imposed a fine
of $73m (£57m) on these entities, which was fully provided for as at 31
December 2023, and has now been paid.
On 31 January 2024, HSBC Global Asset Management Limited, through its indirect
subsidiary HSBC Global Asset Management Singapore Limited, completed the
acquisition of the Asia-Pacific-focused real estate investment manager
Silkroad Property Partners Pte Ltd. HSBC Global Asset Management Limited also
acquired Silkroad's affiliated General Partner entities as part of the
transaction.
On 6 February 2024, HSBC Europe B.V., an indirect subsidiary of HSBC Holdings
plc, signed an agreement to sell HSBC Bank Armenia CJSC, its wholly-owned
subsidiary, to Ardshinbank CJSC subject to regulatory approvals. The
transaction is expected to complete within the next 12 months.
A fourth interim dividend for 2023 of $0.31 per ordinary share (a distribution
of approximately $5,913m) was approved by the Directors after 31 December
2023. On 21 February 2024, HSBC Holdings announced a share buy-back programme
to purchase its ordinary shares up to a maximum consideration of $2.0bn, which
is expected to commence shortly and complete by our first quarter 2024 results
announcement. HSBC Holdings called $2,500m 3.803% and $500m floating rate
senior unsecured debt securities on 25 January 2024. These securities are
expected to be redeemed and cancelled on 11 March 2024. These accounts were
approved by the Board of Directors on 21 February 2024 and authorised for
issue.
11 Capital structure
Capital ratios
At 31 Dec
2023 2022
% %
Transitional basis
Common equity tier 1 ratio 14.8 14.2
Tier 1 ratio 16.9 16.6
Total capital ratio 20.0 19.3
End point basis
Common equity tier 1 ratio 14.8 14.2
Tier 1 ratio 16.9 16.6
Total capital ratio 19.6 18.7
Total regulatory capital and risk-weighted assets
At 31 Dec
2023 2022
$m $m
Transitional basis
Common equity tier 1 capital 126,501 119,291
Additional tier 1 capital 17,662 19,776
Tier 2 capital 27,041 23,356
Total regulatory capital 171,204 162,423
Risk-weighted assets 854,114 839,720
End point basis
Common equity tier 1 capital 126,501 119,291
Additional tier 1 capital 17,662 19,776
Tier 2 capital 22,894 18,091
Total regulatory capital 167,057 157,158
Risk-weighted assets 854,114 839,720
Leverage ratio(1)
At 31 Dec
2023 2022
$bn $bn
Tier 1 capital 144.2 139.1
Total leverage ratio exposure 2,574.8 2,417.2
% %
Leverage ratio 5.6 5.8
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.
12 Statutory accounts
The information in this news release does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006 ('the Act'). The
statutory accounts for the year ended 31 December 2023 will be delivered to
the Registrar of Companies in England and Wales in accordance with section
441 of the Act. The auditor has reported on those accounts. Its report was
unqualified and did not contain a statement under section 498(2) or (3) of the
Act.
13 Dealings in HSBC Holdings plc listed securities
The Group has policies and procedures that, except where permitted by statute
and regulation, prohibit specified transactions in respect of its securities
listed on The Stock Exchange of Hong Kong Limited. Except for dealings as
intermediaries or as trustees by subsidiaries of HSBC Holdings, and purchases
by HSBC Holdings under the share buy-back programme, neither HSBC Holdings nor
any of its subsidiaries has purchased, sold or redeemed any of its securities
listed on The Stock Exchange of Hong Kong Limited during the year ended
31 December 2023.
14 Interim dividends for 2024
For the financial year 2023, the Group reverted to paying quarterly dividends,
and achieved a dividend payout ratio of 50% of reported earnings per ordinary
share ('EPS'), in line with our published target for 2023 and 2024. EPS for
this purpose excludes material notable items and related impacts (including
those associated with the sale of our retail banking operations in France, the
agreed sale of our banking business in Canada and our acquisition of SVB UK).
The Board has adopted a dividend policy designed to provide sustainable cash
dividends, while retaining the flexibility to invest and grow the business in
the future, supplemented by additional shareholder distributions, if
appropriate.
Dividends are approved in US dollars and, at the election of the shareholder,
paid in cash in one of, or in a combination of, US dollars, pounds sterling
and Hong Kong dollars.
15 Earnings releases and interim results
First and third quarter results for 2024 will be released on 30 April 2024 and
29 October 2024, respectively. The interim results for the six months to 30
June 2024 will be issued on 31 July 2024.
16 Corporate governance codes
HSBC is subject to corporate governance requirements in both the UK and Hong
Kong. During 2023, HSBC complied with the provisions and requirements of both
the UK and Hong Kong Corporate Governance Codes.
Under the Hong Kong Code, the audit committee should be responsible for the
oversight of all risk management and internal control systems. HSBC's Group
Risk Committee is responsible for oversight of internal control, other than
internal control over financial reporting, and risk management systems. This
is permitted under the UK Corporate Governance Code.
HSBC Holdings has codified obligations for transactions in Group securities in
accordance with the requirements of the UK Market Abuse Regulation and the
rules governing the listing of securities on HKEx. The Group has been granted
certain waivers by HKEx from strict compliance with rules that take into
account accepted practices in the UK, particularly in respect of employee
share plans. During the year, all Directors were reminded of their obligations
in respect of transacting in HSBC Group securities. Following specific enquiry
all Directors have confirmed that they have complied with their obligations.
The Group Audit Committee has reviewed and provided assurance to the HSBC
Holdings Board on the publication of the Annual Report and Accounts 2023.
The Directors of HSBC Holdings plc as at the date of this announcement
comprise:
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(†), David Thomas
Nish(†), and Swee Lian Teo(†).
* Non-executive Group Chairman
† Independent non-executive Director
17 Board composition
As announced on Wednesday, 6 December 2023, and following receipt of
regulatory approval, Brendan Nelson has succeeded David Nish as Chair of the
Group Audit Committee with effect from today's date. The Company also
announces that Ann Godbehere has been appointed as a member of the Group Audit
Committee with effect from today's date.
As detailed in 'Board and Group Executive committees and working groups' on
page 252 of the Annual Report and Accounts 2023, the Board has taken the
decision to establish a Group Technology Committee ('GTC'), effective 1 March
2024. The GTC will have responsibility for oversight of Technology-related
matters across the Group, and the full terms of reference can be found on
hsbc.com. The membership of the GTC will be Eileen Murray (Chair), Steven
Guggenheimer, Swee Lian Teo, Kalpana Morparia and Brendan Nelson. As a result
of the establishment of the GTC, the Technology Governance Working Group will
be demised with effect from 1 March 2024.
18 Cautionary statement regarding forward-looking statements
This news release may contain projections, estimates, forecasts, targets,
commitments, ambitions, opinions, prospects, results, returns and
forward-looking statements with respect to the financial condition, results of
operations, capital position, ESG related matters, strategy and business of
the Group which can be identified by the use of forward-looking terminology
such as 'may', 'will', 'should', 'expect', 'anticipate', 'project',
'estimate', 'seek', 'intend', 'target', 'plan', 'believe', 'potential' or
'reasonably possible', or the negatives thereof or other variations thereon or
comparable terminology (together, 'forward-looking statements'), including the
strategic priorities and any financial, investment and capital targets and any
ESG targets, commitments and ambitions described herein.
Any such forward-looking statements are not a reliable indicator of future
performance, as they may involve significant stated or implied assumptions and
subjective judgements which may or may not prove to be correct. There can be
no assurance that any of the matters set out in forward-looking statements are
attainable, will actually occur or will be realised or are complete or
accurate. The assumptions and judgements may prove to be incorrect and involve
known and unknown risks, uncertainties, contingencies and other important
factors, many of which are outside the control of the Group.
Actual achievements, results, performance or other future events or conditions
may differ materially from those stated, implied and/or reflected in any
forward-looking statements due to a variety of risks, uncertainties and other
factors (including without limitation those which are referable to general
market or economic conditions, regulatory changes, increased volatility in
interest rates and inflation levels and other macroeconomic risks,
geopolitical tensions such as the Russia-Ukraine war and the Israel-Hamas war
and potential further escalations, specific economic developments, such as the
uncertain performance of the commercial real estate sector in mainland China,
or as a result of data limitations and changes in applicable methodologies in
relation to ESG related matters).
Any such forward-looking statements are based on the beliefs, expectations and
opinions of the Group at the date the statements are made, and the Group does
not assume, and hereby disclaims, any obligation or duty to update, revise or
supplement them if circumstances or management's beliefs, expectations or
opinions should change. For these reasons, recipients should not place
reliance on, and are cautioned about relying on, any forward-looking
statements. No representations or warranties, expressed or implied, are given
by or on behalf of the Group as to the achievement or reasonableness of any
projections, estimates, forecasts, targets, commitments, ambitions, prospects
or returns contained herein.
Additional detailed information concerning important factors, including but
not limited to ESG related factors, that could cause actual results to differ
materially from this news release is available in our Annual Report and
Accounts for the fiscal year ended 31 December 2023 which we expect to file
with the U.S. Securities and Exchange Commission on Form 20-F on or around 22
February 2024.
19 Use of alternative performance measures
This news release contains non-IFRS measures used by management internally
that constitute alternative performance measures under European Securities and
Markets Authority guidance and non-GAAP financial measures defined in and
presented in accordance with US Securities and Exchange Commission rules and
regulations ('alternative performance measures'). The primary alternative
performance measures we use are presented on a 'constant currency' basis which
is computed by adjusting reported results for the effects of foreign currency
translation differences, which distort period-on-period comparisons. We
consider constant currency performance to provide useful information for
investors by aligning internal and external reporting, and reflecting how
management assesses period-on-period performance. We separately disclose
'notable items', which are components of our income statement that management
would consider as outside the normal course of business and generally
non-recurring in nature. Reconciliations between alternative performance
measures and the most directly comparable measures under IFRS are provided in
our Annual Report and Accounts 2023, which is available at www.hsbc.com.
20 Certain defined terms
Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc
and 'HSBC', the 'Group', 'we', 'us' and 'our' refer to HSBC Holdings together
with its subsidiaries. Within this document the Hong Kong Special
Administrative Region of the People's Republic of China is referred to as
'Hong Kong'. When used in the terms 'shareholders' equity' and 'total
shareholders' equity', 'shareholders' means holders of HSBC Holdings ordinary
shares and those preference shares and capital securities issued by HSBC
Holdings classified as equity. The abbreviations '$m', '$bn' and '$tn'
represent millions, billions (thousands of millions) and trillions of US
dollars, respectively.
21 For further information contact:
Media Relations Investor Relations
UK - Gillian James UK - Neil Sankoff
Telephone: +44 (0)7584 404 238 Telephone: +44 (0) 20 7991 5072
Email: pressoffice@hsbc.com Email: investorrelations@hsbc.com
UK - Kirsten Smart Hong Kong - Yafei Tian
Telephone: +44 (0)7725 733 311 Telephone: +852 2899 8909
Email: pressoffice@hsbc.com Email: investorrelations@hsbc.com.hk
Hong Kong - Aman Ullah
Telephone: +852 3941 1120
Email: aspmediarelations@hsbc.com.hk
22 Registered Office and Group Head Office
8 Canada Square
London E14 5HQ
United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered number 617987
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