REG - HSBC Holdings PLC - HSBC Holdings PLC 3Q23 Earnings Release
30/10/2023 07:15
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RNS Number : 6241R HSBC Holdings PLC 29 October 2023
30 OCTOBER 2023
HSBC HOLDINGS PLC
3Q23 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
"We have had three consecutive quarters of strong financial performance and
are on track to achieve our mid-teens return on tangible equity target for
2023. There was good broad-based growth across all businesses and geographies,
supported by the interest rate environment. Our Wealth business also gained
further traction, attracting $34bn of net new invested assets in the quarter
and growing wealth balances by 12% compared with last year. We are pleased to
again reward our shareholders. We have now announced three share buy-backs in
2023 totalling up to $7bn, as well as three quarterly dividends which total
$0.30 per share. This underlines the substantial distribution capacity that we
have, even as we continue to invest in growth."
Financial performance (3Q23 vs. 3Q22)
- Profit before tax rose by $4.5bn to $7.7bn, reflecting the positive
impact of a higher interest rate environment. The increase was in part due to
a $2.3bn impairment in 3Q22 relating to the planned sale of our retail banking
operations in France, of which $2.1bn was reversed in 1Q23 as the completion
of the transaction became less certain. We now expect to reclassify these
operations to held for sale in 4Q23, at which point the impairment would be
reinstated. On a constant currency basis, profit before tax increased by
$4.6bn to $7.7bn. Reported profit after tax increased by $3.6bn to $6.3bn.
- Revenue increased by $4.7bn or 40% to $16.2bn, as the higher
interest rate environment supported growth in net interest income in all of
our global businesses, and non-interest income increased. On a constant
currency basis, revenue rose by 40% to $16.2bn.
- Non-interest income increased by $3.4bn or 97% to $6.9bn primarily
due to the non-recurrence of the impairment relating to the sale of our retail
banking operations in France referred to above. The increase also included a
rise in the revenue offset driven by higher central costs of funding Global
Banking and Markets ('GBM') trading activity. These increases were partly
offset by disposal losses of $0.6bn relating to repositioning and risk
management activities in our hold-to-collect-and-sell portfolio in certain key
legal entities. On a constant currency basis, non-interest income rose by 93%
to $6.9bn.
- Net interest margin ('NIM') of 1.70% increased by 19 basis points
('bps') compared with 3Q22, and decreased by 2bps compared with 2Q23, notably
reflecting an increase in customers migrating their deposits to term products,
particularly in Asia.
- Expected credit losses and other credit impairment charges ('ECL')
of $1.1bn were broadly in line with 3Q22. The 3Q23 charge primarily comprised
stage 3 charges, including $0.5bn relating to the commercial real estate
sector in mainland China.
- Operating expenses of $8.0bn were $0.2bn or 2% higher than in 3Q22.
The growth was primarily due to higher technology costs, the impacts of rising
inflation and an increase in the performance-related pay accrual. These
increases were partly offset by lower restructuring and other related costs
following the completion of our cost-saving programme at the end of 2022.
- Customer lending balances decreased by $24bn compared with 2Q23. On
a constant currency basis, lending balances decreased by $5bn, reflecting a
reduction in Commercial Banking ('CMB') as demand in Asia remained muted,
although mortgage balances in Wealth and Personal Banking ('WPB') were higher,
notably in Asia and the UK.
- Customer accounts decreased by $33bn compared with 2Q23. On a
constant currency basis, customer accounts were stable.
- Common equity tier 1 ('CET1') capital ratio of 14.9% increased by
0.2 percentage points compared with 2Q23, driven by capital generation and
lower risk-weighted assets ('RWAs'), partly offset by the dividend accrual and
the share buy-back announced at 2Q23.
- The Board has approved a third interim dividend of $0.10 per share.
We also intend to initiate a further share buy-back of up to $3bn, which we
expect to commence shortly and complete by our 2023 full-year results
announcement on 21 February 2024. This is expected to have a 0.4 percentage
point impact on our CET1 capital ratio.
- From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated.
For further details of our adoption of IFRS 17, see page 4.
Financial performance (9M23 vs. 9M22)
- Profit before tax increased by $17.4bn to $29.4bn, reflecting a
continued benefit from higher interest rates. The increase was in part due to
a $2.3bn impairment in 9M22 relating to the planned disposal of our retail
banking operations in France, of which $2.1bn was reversed in 9M23 as the sale
became less certain. In addition, in 9M23 we recognised a provisional gain of
$1.6bn on the acquisition of Silicon Valley Bank UK Limited ('SVB UK'). On a
constant currency basis, profit before tax increased by $17.8bn to $29.4bn.
Profit after tax increased by $12.7bn to $24.3bn.
- Revenue increased by $17.0bn or 47% to $53.0bn, including the
favourable impact of the transactions referred to above. The increase also
reflected a $6.1bn rise in net interest income, with growth in all of our
global businesses. On a constant currency basis, revenue increased by 51% to
$53bn.
- NIM of 1.70% increased by 37bps compared with 9M22.
- ECL were $2.4bn, compared with charges of $2.2bn in 9M22. Both
periods included allowances relating to the commercial real estate sector in
mainland China, which were $0.8bn in 9M23. The charge in 9M22 benefited from
releases of Covid-19-related allowances. ECL charges were 32bps of average
gross loans, including loans and advances classified as held for sale.
- Operating expenses decreased by $0.5bn or 2% to $23.4bn, mainly due
to lower restructuring and other related costs following the completion of our
cost-saving programme at the end of 2022. This was partly offset by higher
technology costs, the impacts of rising inflation, an increase in
performance-related pay accrual, and severance costs of $0.2bn. Target basis
operating expenses rose by $1.1bn or 5%.
Outlook
- We remain committed to targeting a return on average tangible equity
('RoTE') in the mid-teens for 2023 and 2024, which excludes the impact of
material acquisitions and disposals.
- We continue to expect net interest income in 2023 to be above $35bn,
and the funding costs reported in net interest income that are used to
generate trading and fair value income to be in excess of $7bn.
As interest rates have increased, we have taken actions to manage our exposure
to the changing interest rate environment. During 3Q23, Markets Treasury
incurred disposal losses of $0.6bn relating to repositioning and risk
management activities. These actions are accretive to net interest income and
reduce the consumption of the Group's financial resources. We expect to
continue these activities into 4Q23, and incur further losses of approximately
$0.4bn. The losses associated with these disposals are already recognised in
equity in the 'debt instruments at fair value through other comprehensive
income' reserve, and do not materially impact our CET1 capital.
- We continue to expect ECL charges of around 40bps of average gross
loans in 2023 (including lending balances transferred to held for sale). We
continue to monitor risks related to our exposures in mainland China's
commercial real estate sector closely, and there remains a degree of
uncertainty in the forward economic outlook, particularly in the UK. Over the
medium to long term, we continue to use a range of 30bps to 40bps of average
gross loans for planning our ECL charges.
- Reported operating expenses in 9M23 fell by 2% compared with 9M22.
Against our cost target basis of around 3% growth in 2023 compared with 2022
(2022: $29.8bn), we now expect an additional increase of approximately 1% due
to increased technology and operations expenditure, which we no longer expect
to mitigate. We will also consider a potential increase in performance-related
pay based on the out-turn of our performance and ongoing execution of our
strategy in 4Q23, which would result in a further rise of around 1% in our
operating expenses.
Our cost target basis of around 3% growth excludes the incremental costs due
to the impact of acquiring SVB UK and related international investments, which
we continue to expect will add approximately 1% to the Group's cost base in
2023. Our cost target basis is measured on a constant currency basis and
excludes notable items and the impact of retranslating the results of
hyperinflationary economies at constant currency. For further details, see
page 4.
- We intend to manage the CET1 ratio within our medium-term target
range of 14% to 14.5%, and we aim to manage this range down in the long term.
In addition, our dividend payout ratio is 50% for 2023 and 2024, excluding
material notable items. We have announced a third interim dividend of $0.10
per share and intend to initiate a further share buy-back of up to $3bn, which
we expect to commence shortly and complete by our 2023 full-year results
announcement on 21 February 2024. Further buy-backs will be subject to
appropriate capital levels.
Contents
1 Group Chief Executive statement 22 - Credit risk
1 Financial performance (3Q23 vs. 3Q22) 32 - Capital risk
1 Financial performance (9M23 vs. 9M22) 36 Alternative performance measures
2 Outlook 36 - Use of alternative performance measures
3 Business highlights 36 - Return on equity/return on average tangible equity
4 Financial summary 37 - Net asset value and tangible net asset value per ordinary share
4 - Basis of preparation 38 - Expected credit losses and other credit impairment charges as
% of average gross loans and advances to customers
5 - Constant currency performance
5 - Disposal groups and business acquisitions 38 - Target basis operating expenses
7 - Key financial metrics 39 - Earnings per share excluding material notable items and related
impacts
8 - Summary consolidated income statement
9 - Distribution of results by global business and legal entity 39 - Reported and constant currency results
10 - Income statement commentary 52 Additional information
14 - Summary consolidated balance sheet 52 - Dividends
15 - Balance sheet commentary 53 - Investor relations/media relations contacts
16 - Global businesses 53 - Cautionary statement regarding forward-looking statements
22 Risk 53 - Abbreviations
22 - Managing risk
Presentation to investors and analysts
HSBC Holdings plc will be conducting a trading update conference call with
analysts and investors today to coincide with the publication of its Earnings
Release. The call will take place at 07.45am GMT. Details of how to
participate in the call and the live audio webcast can be found at
www.hsbc.com/investors.
About HSBC
HSBC Holdings plc, the parent company of HSBC, is headquartered in London.
HSBC serves customers worldwide from offices in 62 countries and territories.
With assets of $3,021bn at 30 September 2023, HSBC is one of the world's
largest banking and financial services organisations.
Business highlights
Our strategy
HSBC's purpose is 'Opening up a world of opportunity'. Our strategy aims to
deliver against our purpose and our ambition of being the preferred
international financial partner for our clients. It has four key pillars:
- focus on our strengths - investing in the areas where we see
significant opportunities for growth;
- digitise at scale - increasing our investment in technology to
improve how we serve customers and increase efficiency;
- energise for growth - building a strong culture, introducing simpler
ways of working, and by equipping staff with the future skills they need; and
- transition to net zero - becoming a net zero bank and helping our
customers capture the opportunities presented by the transition to a net zero
future.
Our strategy is based on transforming our business and services to customers
to create a strengthened platform for enhanced growth and returns on a
sustainable basis. Our strong performance in the 9M23 period demonstrates our
broad-based profit generation around the world and our diversified business
model, supported by increased interest rates. We have continued to make
improvements to our business across geographies, products and services to help
ensure we create value in the future and deliver strong returns for our
investors.
In 9M23, we delivered a reported profit before tax of $29.4bn, an increase of
$17.4bn compared with 9M22, and a RoTE of 19.7%, or 17.1% excluding strategic
transactions. We have now also announced three share buy-backs in 2023,
totalling up to $7bn, as well as three interim dividends totalling $0.30 per
ordinary share.
We remain focused on investing and growing in our areas of strength. We have
continued to demonstrate progress in executing our wealth strategy, notably in
Asia. Wealth balances at 30 September 2023 were $1.6tn, excluding balances
held for sale, an increase of 12% compared with the same period in the
previous year. Within this, we attracted net new invested assets of $67bn in
the first nine months of 2023, around half of which was achieved in 3Q23, with
$42bn booked in Asia. In addition, our insurance business in Hong Kong
continued to grow with insurance manufacturing new business contractual
service margin increasing by 40% in 9M23 to $1.1bn. In Asia and the UK, we
grew our mortgage lending balances by a combined $11bn compared with 3Q22. In
wholesale transaction banking, which represents a cornerstone of our
international connectivity, we increased revenue by 50% to $20.2bn, primarily
due to growth in net interest income from higher interest rates.
We continue to make good progress on our strategic transactions, including the
plan to sell our retail banking operations in France and our banking business
in Canada, as we reshape the organisation to focus on our international
customer base. During 3Q23, we completed the sale of our operations in Greece
and Oman, and entered into an agreement to sell our New Zealand retail
mortgage loan portfolio. In addition, in October 2023, we announced the
purchase of Citi's retail wealth management portfolio in mainland China,
comprising approximately $3.6bn in assets under management and deposits (as of
August 2023), and the associated wealth customers.
For further details of these transactions, see 'Disposal groups and business
acquisitions' on page 5.
ESG update
We continue to work through the implementation of our net zero strategy,
including working to embed processes to help operationalise our net zero
targets and related policies. We are also continuing to work on producing our
own net zero transition plan, including considering recent guidance as
appropriate.
Financial summary
Basis of preparation
IFRS 17 'Insurance Contracts'
On 1 January 2023, HSBC adopted IFRS 17 'Insurance Contracts'. As required by
the standard, the Group applied the requirements retrospectively with
comparative data previously published under IFRS 4 'Insurance Contracts'
restated from the 1 January 2022 transition date. Under IFRS 17 there is no
present value of in-force business ('PVIF') asset recognised up front. Instead
the measurement of the insurance contract liability takes into account
fulfilment cash flows and a contractual service margin ('CSM') representing
the unearned profit. In contrast to the Group's previous IFRS 4 accounting
where profits are recognised up front, under IFRS 17 they are deferred and
systematically recognised in revenue as services are provided over the life of
the contract. The CSM also includes attributable cost, which had previously
been expensed as incurred and which is now incorporated within the insurance
liability measurement and recognised over the life of the contract.
In conjunction with the implementation of IFRS 17, the Group has made use of
the option to redesignate to fair value through profit or loss assets that
were previously held at amortised cost totalling $55.1bn, and assets
previously held at fair value through other comprehensive income totalling
$1.1bn. The redesignation of amortised cost assets generated a net increase to
assets of $4.9bn because the fair value measurement on transition was higher
than the previous amortised cost carrying amount.
The impact of the transition was a reduction of $0.8bn on the Group's 9M22
reported revenue and a reduction of $0.3bn on 9M22 reported profit before tax.
The impact of the transition in the full-year 2022 period was a reduction of
$1.1bn on the Group's reported revenue and a reduction of $0.5bn on the
reported profit before tax. The Group's total equity on 1 January 2022 reduced
by $10.5bn to $196.3bn on the transition, and tangible equity reduced by
$2.4bn to $155.8bn. For further details, see our Report on Transition to IFRS
17 'Insurance Contracts' at www.hsbc.com/investors and page 137 of the Interim
Report 2023.
Changes to our reporting framework
On 1 January 2023, we updated our financial reporting framework. We no longer
report 'adjusted' results, which exclude the impact of both foreign currency
translation differences and significant items. Instead, we compute constant
currency performance by adjusting comparative reported results only for the
effects of foreign currency translation differences between the relevant
periods. This will enable users to understand the impact of foreign currency
translation differences on the Group's 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. While our primary segmental reporting by global
business remains unchanged, effective from 1 January 2023, the Group changed
the supplementary presentation of results from geographical regions to main
legal entities to better reflect the Group's structure.
Cost target
At our full-year 2022 results, we set a target for our 'adjusted' operating
expenses growth for 2023 compared with 2022. Under our new reporting framework
we no longer present 'adjusted' results. The exception to this is for
operating expenses, where our 'target basis' will adjust reported results for
notable items and the period-on-period effects of foreign currency translation
differences. We also exclude the impact of retranslating comparative period
financial information at the latest rates of foreign exchange in
hyperinflationary economies, which is not within our control. We consider that
this measure provides useful information to investors by quantifying and
excluding the items that management considered when setting and assessing
cost-related targets. In our target basis, we also exclude the costs related
to the acquisition of SVB UK and related investments internationally, which
are expected to add approximately 1% to our cost growth compared with 2022.
Our 2022 baseline for operating expenses on this basis is $29.8bn, which has
been retranslated at the average rates of foreign exchange for the year to 30
September 2023 for the 9M22 period, with 4Q22 retranslated at the average
rates of foreign exchange for the month of September 2023.
Dividends
Given our current returns trajectory, we are targeting a dividend payout ratio
of 50% for 2023 and 2024. For the purposes of computing our dividend payout
ratio target, we exclude from earnings per share material notable items,
comprising the impacts of the planned sale of our retail banking operations in
France, the agreed sale of our banking business in Canada and the provisional
gain following the acquisition of SVB UK. We also exclude HSBC Bank Canada's
financial results from the 30 June 2022 net asset reference date until
completion, as the gain on sale will be recognised through a combination of
the consolidation of HSBC Bank Canada's results in the Group's results since
this date, and the remaining gain on sale recognised at completion. We remain
committed to considering the payment of a special dividend of $0.21 per share
as a priority use of the proceeds from the completion of our sale of our
banking business in Canada, in the first half of 2024.
Resegmentation
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 Global Banking customers within our entities in Latin America
was transferred from GBM to CMB for reporting purposes. Comparative data have
been re-presented accordingly. Similar smaller transfers from GBM to CMB were
also undertaken within our entities in Australia and Indonesia, where
comparative data have not been re-presented.
Notes
- Income statement comparisons, unless stated otherwise, are between
the nine-month period ended 30 September 2023 and the nine-month period ended
30 September 2022. Balance sheet comparisons, unless otherwise stated, are
between balances at 30 September 2023 and the corresponding balances at 30
June 2023.
- The financial information on which this Earnings Release 3Q23
is based is unaudited. Other than the adoption of IFRS 17 described above, it
has been prepared in accordance with our material accounting policies
as described on pages 335 to 348 of our Annual Report and Accounts 2022.
Constant currency performance
Constant currency performance 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.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US
dollar against most major currencies. We exclude them to derive constant
currency data, allowing us to assess balance sheet and income statement
performance on a like-for-like basis and to better understand the underlying
trends in the business.
Foreign currency translation differences for 9M23 and 3Q23 are computed
by retranslating into US dollars for non-US dollar branches, subsidiaries,
joint ventures and associates:
- the income statements for 9M22 at the average rate of exchange for 9M23;
- the income statements for the quarterly periods at the average rate of
exchange for 3Q23; and
- the closing prior period balance sheets at the prevailing rates of
exchange at 30 September 2023.
No adjustment has been made to the exchange rates used to translate foreign
currency-denominated assets and liabilities into the functional currencies of
any HSBC branches, subsidiaries, joint ventures or associates. The constant
currency data of HSBC's Argentina subsidiaries have not been adjusted further
for the impacts of hyperinflation. Since 1 June 2022, Türkiye has been
deemed a hyperinflationary economy for accounting purposes. HSBC has an
operating entity in Türkiye and the constant currency data have not been
adjusted further for the impacts of hyperinflation. When reference is made to
foreign currency translation differences in tables or commentaries,
comparative data reported in the functional currencies of HSBC's operations
have been translated at the appropriate exchange rates applied in the current
period on the basis described above.
Notable items
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.
The tables on pages 40 to 50 detail the effects of notable items on each of
our global business segments and legal entities during 9M23, 9M22, 3Q23, 2Q23
and 3Q22.
Global business performance
The Group Chief Executive, supported by the rest of the Group Executive
Committee ('GEC'), is considered to be the Chief Operating Decision Maker
('CODM') for the purposes of identifying the Group's reportable segments.
The Group Chief Executive and the rest of the GEC review operating activity on
a number of bases, including by global business and legal entities. Our global
businesses - Wealth and Personal Banking, Commercial Banking and Global
Banking and Markets - along with Corporate Centre are our reportable segments
under IFRS 8 'Operating Segments'. Global business results are assessed by the
CODM on the basis of constant currency performance, which removes the effects
of currency translation impacts from reported results. Therefore, we present
these results on a constant currency basis.
As required by IFRS 8, reconciliations of the constant currency results to the
Group's reported results are presented on page 39. Supplementary
reconciliations of constant currency to reported results by global business
are presented on pages 40 to 44 for information purposes.
Management view of revenue on a constant currency basis
Our global business segment commentary includes tables that provide breakdowns
of revenue on a constant currency basis by major product. These reflect the
basis on which revenue performance of the businesses is assessed and managed.
Disposal groups and business acquisitions
France
On 20 September 2023, following completion of the information and consultation
processes of their respective works councils, HSBC Continental Europe,
Promontoria MMB SAS ('My Money Group') and its subsidiary Banque des Caraïbes
SA signed a binding framework agreement reflecting revised terms for the
planned sale of HSBC Continental Europe's retail banking operations in France.
This followed from the signing of a further memorandum of understanding with
the buyer in June 2023 regarding certain changes to the terms of the sale,
which are designed to enable the buyer to satisfy its future capital
requirements and to obtain regulatory approval for the transaction. These
changes foresee: the retention of $7.4bn of home and other loans by HSBC
Continental Europe that were originally planned to transfer as part of the
sale, the inclusion in the perimeter for sale of a cash amount equivalent to
the carrying value of the retained portfolio of loans, and the setting of the
net asset value of the transferred business by reference to relevant
prevailing market rates at completion. In addition, depending on the
prevailing market rates at completion, HSBC Continental Europe may receive a
profit participation interest in exchange for investing capital into the top
holding company of My Money Group, such that the aggregate of the actual net
asset value delivered at completion and the investment made in the profit
participation interest would not exceed €1.768bn. The changes also foresee
the retention of the CCF brand, the entry into a long-term agreement to
license it to the buyer and certain enhancements to the insurance and asset
management distribution agreements with the buyer.
Taking into account the previously mentioned changes, the transaction is
expected to result in the recognition of a pre-tax loss on sale estimated up
to $2.2bn at reclassification of the business as held for sale, when the
required level of probability of successful completion is met, as required by
IFRS 5. The reinstatement of the impairment is expected to have an adverse
impact of approximately 0.3 percentage points on our CET1 ratio. This is
expected to occur during the fourth quarter of 2023 upon obtaining the
necessary regulatory approvals, and would result in the reclassification of
the disposal group as held for sale and its remeasurement at the lower of the
carrying amount and fair value less costs to sell at each reporting period.
Any remaining gains or losses not previously recognised, as well as the
reversal of any remaining deferred tax assets and liabilities, will be
recognised on completion. The transaction remains subject to regulatory
approvals and the parties aim to complete on 1 January 2024.
At 30 September 2023, a deferred tax liability of $0.4bn continued to be
recognised as a consequence of the temporary difference in tax and accounting
treatment in respect of the provision for loss on disposal, which was
deductible in the French tax return in 2021 but will be accounted for when the
disposal group is classified as held for sale in accordance with IFRS 5, at
which time the deferred tax liability will reverse.
Silicon Valley Bank UK Limited
In March 2023, HSBC UK Bank plc acquired SVB UK, and in June 2023 changed its
legal entity name to HSBC Innovation Bank Limited. The acquisition was funded
from existing resources and brought the staff, assets and liabilities of SVB
UK into the HSBC portfolio.
On acquisition, we performed a preliminary assessment of the fair value of the
assets and liabilities purchased. We established an opening balance sheet on
13 March 2023 and applied the result of the fair value assessment, which
resulted in a reduction in net assets of $0.2bn. The provisional gain on
acquisition of $1.5bn represents the difference between the consideration paid
of £1 and the net assets acquired. Further due diligence has been performed
post-acquisition, resulting in the recognition of an additional gain of $0.1bn
at 30 September 2023, as required by IFRS 3 'Business Combinations'.
Canada
In November 2022, we announced the planned sale of our banking business in
Canada. Completion of the transaction is expected to occur in the first
quarter of 2024, subject to governmental approvals. The estimated gain on sale
of $5.5bn (as at 30 September 2023) will be recognised through a combination
of the consolidation of HSBC Canada's results into the Group's financial
statements from 30 September 2023 until completion, and the remaining gain on
sale recognised at completion. There would be no tax on the gain recognised at
completion. The gain on sale is expected to have a favourable impact of
approximately 1.3 percentage points on our CET1 ratio. At 30 September 2023,
total assets of $84.1bn and total liabilities of $78.3bn met the criteria to
be classified as held for sale in accordance with IFRS 5.
We remain committed to considering the payment of a special dividend of $0.21
per share as a priority use of the proceeds from the sale of our banking
business in Canada in the first half of 2024. The remaining proceeds will
accrue into CET1 capital in consideration for organic growth and investment,
and we intend to use any excess capital to supplement share buy-backs.
Other disposals and acquisitions
In June 2022, we announced the planned sale of our wholly-owned subsidiary in
Russia, HSBC Bank (RR) (Limited Liability Company). Completion of the
transaction is subject to governmental approvals, and is now expected in the
first half of 2024. In 2022, a $0.3bn loss on the planned sale was recognised,
upon reclassification as held for sale in accordance with IFRS 5. The
transaction long-stop date has been extended and as at 30 September 2023, the
disposal group remained classified as held for sale.
In November 2022, HSBC Bank Oman SAOG entered into a binding merger agreement
with Sohar International Bank SAOG, under which the two banks agreed to take
the necessary steps to implement a merger by incorporation, whereby HSBC Bank
Oman would merge into Sohar International Bank. Following regulatory and
shareholder approvals, the merger was completed in August 2023 by way of
dissolution and transfer of all of the assets and liabilities of HSBC Bank
Oman to Sohar International Bank, with the shareholders of HSBC Bank Oman
receiving the consideration in cash and shares in Sohar International Bank.
Separately, HSBC Bank Middle East Limited is planning to establish a new
wholesale banking branch in Oman subject to regulatory approvals.
In August 2023, the Hongkong and Shanghai Banking Corporation Limited (acting
through its New Zealand branch) entered into an agreement with Pepper New
Zealand Limited, a wholly-owned subsidiary of Pepper Money Limited, to sell
its New Zealand retail mortgage loan portfolio. At 30 September 2023, the
carrying value of the portfolio reclassified to held for sale stood at $0.9bn,
and a loss of $0.1bn was recognised. The transaction is expected to complete
in 4Q23.
In October 2023, HSBC Bank (China) Company Limited, a wholly-owned subsidiary
of HSBC Holdings plc, entered into an agreement to acquire Citi's retail
wealth management portfolio in mainland China. The portfolio comprises
approximately $3.6bn in assets under management and deposits (as of August
2023), and the associated wealth customers. Upon completion, the acquired
business will be integrated into HSBC Bank China's WPB operations. The
transaction is expected to complete in the first half of 2024.
Key financial metrics
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
Reported results
Profit before tax ($m) 29,371 12,009 7,714 8,771 3,229
Profit after tax ($m) 24,337 11,588 6,266 7,045 2,657
Cost efficiency ratio (%) 44.2 66.3 49.3 47.1 67.7
Net interest margin (%) 1.70 1.33 1.70 1.72 1.51
Basic earnings per share ($) 1.15 0.50 0.29 0.34 0.10
Diluted earnings per share ($) 1.14 0.50 0.29 0.34 0.10
Dividend per ordinary share (in respect of the period) ($) 0.30 0.09 0.10 0.10 -
Alternative performance measures
Constant currency profit before tax ($m) 29,371 11,528 7,714 8,698 3,124
Constant currency cost efficiency ratio (%) 44.2 66.5 49.3 47.1 68.3
Expected credit losses and other credit impairment charges (annualised) as % 0.34 0.29 0.45 0.38 0.43
of average gross loans and advances to customers (%)
Expected credit losses and other credit impairment charges (annualised) as % 0.32 0.29 0.42 0.36 0.42
of average gross loans and advances to customers, including held for sale (%)
Basic earnings per share excluding material notable items and related impacts 0.97 0.49 0.27 0.34 0.20
($)
Return on average ordinary shareholders' equity (annualised) (%) 18.3 8.4 13.5 15.9 5.2
Return on average tangible equity (annualised) (%) 19.7 9.4 14.6 17.1 6.8
Return on average tangible equity excluding strategic transactions 17.1 11.0 14.3 17.3 11.9
(annualised) (%)
Target basis operating expenses ($m) 23,134 21,995 7,815 7,811 7,312
At
30 Sep 30 Jun 31 Dec
2023 2023 2022
Balance sheet
Total assets ($m) 3,020,611 3,041,476 2,949,286
Net loans and advances to customers ($m) 935,750 959,558 923,561
Customer accounts ($m) 1,563,127 1,595,769 1,570,303
Average interest-earning assets, year to date ($m) 2,160,881 2,162,662 2,143,754
Loans and advances to customers as % of customer accounts (%) 59.9 60.1 58.8
Total shareholders' equity ($m) 182,720 184,170 177,833
Tangible ordinary shareholders' equity ($m) 153,447 153,234 146,927
Net asset value per ordinary share at period end ($) 8.56 8.44 8.01
Tangible net asset value per ordinary share at period end ($) 7.96 7.84 7.44
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)(1,2) 14.9 14.7 14.2
Risk-weighted assets ($m)(1,2) 840,049 859,545 839,720
Total capital ratio (%)(1,2) 19.7 19.8 19.3
Leverage ratio (%)(1,2) 5.7 5.8 5.8
High-quality liquid assets (liquidity value) ($m)(2,3) 641,068 631,213 647,046
Liquidity coverage ratio (%)(2,3) 134 132 132
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions) 19,275 19,534 19,739
Period end basic number of $0.50 ordinary shares outstanding and dilutive 19,433 19,679 19,876
potential ordinary shares (millions)
Average basic number of $0.50 ordinary shares outstanding (millions) 19,596 19,693 19,849
For reconciliation and analysis of our reported results on a constant currency
basis, including lists of notable items, see page 39. Definitions and
calculations of other alternative performance measures are included in
'Alternative performance measures' on page 36.
1 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.
2 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 will restate in subsequent periods.
3 The liquidity coverage ratio is based on the average month-end value
over the preceding 12 months.
Summary consolidated income statement
Nine months ended(1) Quarter ended(1)
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Net interest income 27,512 21,391 9,248 9,305 8,006
Net fee income 9,088 9,080 3,003 3,081 2,852
Net income from financial instruments held for trading or managed on a fair 12,564 7,615 4,452 3,999 2,758
value basis
Net income/(expense) from assets and liabilities of insurance businesses, 1,738 (16,112) (2,566) 411 (4,262)
including related derivatives, measured at fair value through profit or loss
Insurance finance (expense)/income (1,703) 15,952 2,531 (323) 4,179
Insurance service result 696 570 172 242 200
Gain on acquisitions(2) 1,593 - 86 (4) -
Impairment loss relating to the planned sale of our retail banking operations 2,130 (2,301) - - (2,301)
in France(3)
Other operating (expense)/income (581) (142) (765) (6) 76
Net operating income before change in expected credit losses and other credit 53,037 36,053 16,161 16,705 11,508
impairment charges(4)
Change in expected credit losses and other credit impairment charges (2,416) (2,155) (1,071) (913) (1,068)
Net operating income 50,621 33,898 15,090 15,792 10,440
Total operating expenses excluding impairment of goodwill and other intangible (23,720) (23,837) (7,967) (8,165) (7,786)
assets
Impairment of goodwill and other intangible assets 295 (83) (1) 294 (7)
Operating profit 27,196 9,978 7,122 7,921 2,647
Share of profit in associates and joint ventures 2,175 2,031 592 850 582
Profit before tax 29,371 12,009 7,714 8,771 3,229
Tax expense (5,034) (421) (1,448) (1,726) (572)
Profit after tax 24,337 11,588 6,266 7,045 2,657
Attributable to:
- ordinary shareholders of the parent company 22,585 9,968 5,619 6,639 2,002
- other equity holders 976 1,089 434 124 463
- non-controlling interests 776 531 213 282 192
Profit after tax 24,337 11,588 6,266 7,045 2,657
$ $ $ $ $
Basic earnings per share 1.15 0.50 0.29 0.34 0.10
Diluted earnings per share 1.14 0.50 0.29 0.34 0.10
Dividend per ordinary share (paid in the period) 0.43 0.27 0.10 0.33 0.09
% % % % %
Return on average ordinary shareholders' equity (annualised) 18.3 8.4 13.5 15.9 5.2
Return on average tangible equity (annualised) 19.7 9.4 14.6 17.1 6.8
Cost efficiency ratio 44.2 66.3 49.3 47.1 67.7
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
2 Provisional gain recognised in respect of the acquisition of SVB UK.
3 In 3Q22, an impairment loss of $2.3bn was recognised relating to the
planned sale of our retail banking operations in France. In 1Q23, a reversal
of $2.1bn (excluding goodwill of $0.4bn) was recognised, as the business is no
longer classified as held for sale.
4 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Distribution of results by global business and legal entity
Distribution of results by global business
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Constant currency revenue(1)
Wealth and Personal Banking 22,919 13,992 6,719 7,203 3,934
Commercial Banking(2) 17,640 11,496 5,424 5,504 4,441
Global Banking and Markets(2) 12,388 11,253 3,887 4,017 3,794
Corporate Centre 90 (1,519) 131 (117) (594)
Total 53,037 35,222 16,161 16,607 11,575
Constant currency profit/(loss) before tax
Wealth and Personal Banking 11,369 2,600 2,777 3,327 113
Commercial Banking(2) 10,787 5,532 2,848 3,110 2,100
Global Banking and Markets(2) 4,904 4,114 1,324 1,498 1,421
Corporate Centre 2,311 (718) 765 763 (510)
Total 29,371 11,528 7,714 8,698 3,124
1 Constant currency net operating income before change in expected
credit losses and other credit impairment charges including the effects of
foreign currency translation differences, also referred to as constant
currency revenue.
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 markets 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
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Reported profit/(loss) before tax
HSBC UK Bank plc 6,569 3,347 1,778 1,660 1,077
HSBC Bank plc 4,405 (1,039) 907 784 (1,291)
The Hongkong and Shanghai Banking Corporation Limited 15,000 9,146 4,083 5,068 3,412
HSBC Bank Middle East Limited 1,023 549 350 296 171
HSBC North America Holdings Inc. 886 621 185 394 197
HSBC Bank Canada 695 613 220 236 228
Grupo Financiero HSBC, S.A. de C.V. 658 443 222 221 204
Other trading entities(1) 1,740 994 458 789 462
- of which: other Middle East entities (including Oman, Türkiye, Egypt and 542 506 120 281 242
Saudi
Arabia)
- of which: Saudi Awwal Bank 391 209 118 162 93
Holding companies, shared service centres and intra-Group eliminations (1,605) (2,665) (489) (677) (1,231)
Total 29,371 12,009 7,714 8,771 3,229
Constant currency profit/(loss) before tax
HSBC UK Bank plc 6,569 3,319 1,778 1,677 1,160
HSBC Bank plc 4,405 (1,086) 907 788 (1,381)
The Hongkong and Shanghai Banking Corporation Limited 15,000 8,888 4,083 5,023 3,357
HSBC Bank Middle East Limited 1,023 551 350 297 172
HSBC North America Holdings Inc. 886 620 185 394 197
HSBC Bank Canada 695 585 220 236 222
Grupo Financiero HSBC, S.A. de C.V. 658 509 222 228 242
Other trading entities(1) 1,740 842 458 734 388
- of which: other Middle East entities (including Oman, Türkiye, Egypt and 542 384 120 260 187
Saudi Arabia)
- of which: Saudi Awwal Bank 391 209 118 162 93
Holding companies, shared service centres and intra-Group eliminations (1,605) (2,700) (489) (679) (1,233)
Total 29,371 11,528 7,714 8,698 3,124
1 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 51 for a fuller picture of the
MENAT regional performance.
Tables showing constant currency profit before tax by global business and
legal entity are presented to support the commentary on constant currency
performance on pages 11 and 12.
The tables on pages 40 to 50 reconcile reported to constant currency results
for each of our global business segments and legal entities.
Income statement commentary
Group
3Q23 compared with 3Q22 - reported results
Movement in reported profit compared with 3Q22
Quarter ended
30 Sep 30 Sep Variance
2023 2022 3Q23 vs. 3Q22 Impact of FX
$m $m $m % %
Revenue 16,161 11,508 4,653 40 1
ECL (1,071) (1,068) (3) - 3
Operating expenses (7,968) (7,793) (175) (2) 1
Share of profit/(loss) from associates and JVs 592 582 10 2 (5)
Profit before tax 7,714 3,229 4,485 >100 (8)
Tax expense (1,448) (572) (876) >(100)
Profit after tax 6,266 2,657 3,609 >100
Notable items
Quarter ended
30 Sep 30 Sep
2023 2022
$m $m
Revenue
Disposals, acquisitions and related costs 310 (2,378)
Fair value movements on financial instruments(1) - (282)
Restructuring and other related costs - (31)
Disposal losses on Markets Treasury repositioning (578) -
Currency translation on revenue notable items - (120)
Operating expenses
Disposals, acquisitions and related costs (79) (9)
Restructuring and other related costs 30 (682)
Currency translation on operating expenses notable items - (26)
1 Fair value movements on non-qualifying hedges in HSBC Holdings.
Reported profit
Reported profit after tax of $6.3bn was $3.6bn higher than in 3Q22.
Reported profit before tax of $7.7bn was $4.5bn higher. The increase was
mainly driven by growth in net interest income, reflecting the impact of
interest rate rises, and from the non-recurrence of a $2.3bn impairment in
3Q22 relating to the planned sale of our retail banking operations in France.
Reported ECL charges remained broadly stable. Reported operating expenses rose
by 2%, as higher technology costs and increased performance-related pay
accrual were largely offset by a reduction in restructuring and other related
costs following the completion of our cost-reduction programme at the end of
2022.
Reported revenue
Reported revenue of $16.2bn was $4.7bn or 40% higher, which included the
non-recurrence of an impairment relating to the planned sale of our retail
banking operations in France. The rise also reflected the impact of interest
rate rises, mainly in Global Payments Solutions ('GPS') in Commercial Banking
('CMB') and Global Banking and Markets ('GBM'), and in Personal Banking in
Wealth and Personal Banking ('WPB'). There were also gains on foreign exchange
hedges relating to the planned sale of our banking business in Canada.
These increases were partly offset by lower revenue in Equities and Global
Foreign Exchange in GBM, compared with a strong 3Q22 which benefited from
higher levels of client activity and a favourable trading environment.
Additionally, revenue fell in Markets Treasury from lower net interest income
due to the impact of rising interest rates on our funding costs and flattening
yield curves. Markets Treasury also incurred disposal losses of $0.6bn
relating to repositioning and risk management activities in our
hold-to-collect-and-sell portfolio in certain key legal entities. These
actions are accretive to net interest income and reduce the consumption of the
Group's financial resources. Markets Treasury revenue is allocated to our
global businesses.
Reported ECL
Reported ECL of $1.1bn remained broadly stable compared with 3Q22. In 3Q23,
ECL primarily comprised stage 3 charges, including $0.5bn relating to the
commercial real estate sector in mainland China. The ECL charge in 3Q22
related to heightened economic uncertainty, inflation and rising interest
rates, as well as from ongoing developments in the commercial real estate
sector in mainland China.
Reported operating expenses
Reported operating expenses of $8.0bn were $0.2bn or 2% higher. This mainly
reflected higher technology costs, the impacts of rising inflation, and a
higher performance-related pay accrual, as well as an adverse impact of
foreign currency translation differences between the periods of $0.1bn. These
increases were partly offset by a reduction in restructuring and other related
costs following the completion of our cost-saving programme, which concluded
at the end of 2022, and the effects of our continued cost discipline.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of $0.6bn was $10m
or 2% higher, primarily driven by a higher share of profit from Saudi Awwal
Bank ('SAB'), formerly The Saudi British Bank.
Third interim dividend for 2023
On 30 October 2023, the Board announced a third interim dividend for 2023 of
$0.10 per ordinary share. For further details, see page 52.
Group
3Q23 compared with 3Q22 - constant currency basis
Movement in profit before tax compared with 3Q22 - on a constant currency
basis
Quarter ended
30 Sep 30 Sep Variance
2023 2022 3Q23 vs. 3Q22
$m $m $m %
Revenue 16,161 11,575 4,586 40
ECL (1,071) (1,103) 32 3
Operating expenses (7,968) (7,902) (66) (1)
Share of profit from associates and JVs 592 554 38 7
Profit before tax 7,714 3,124 4,590 >100
Profit before tax of $7.7bn was $4.6bn higher than in 3Q22 on a constant
currency basis. Revenue increased by $4.6bn or 40%, mainly due to higher net
interest income and the non-recurrence of the impairment relating to the
planned sale of our retail banking operations in France in 3Q22, as described
above. ECL charges of $1.1bn were broadly stable, while operating expenses
increased by $0.1bn or 1%, mainly driven by growth in technology costs, the
impacts of rising inflation, and a higher performance-related pay accrual,
partly offset by a reduction in restructuring and other related costs
following the completion of our cost-saving programme at the end of 2022. The
impact of retranslating the previous year results of our operations in
hyperinflationary economies at 3Q23 average rates of foreign exchange resulted
in cost growth of $128m.
Group
9M23 compared with 9M22 - reported results
Movement in reported profit compared with 9M22
Nine months ended
30 Sep 30 Sep Variance Impact of FX
2023 2022 9M23 vs. 9M22
$m $m $m % %
Revenue 53,037 36,053 16,984 47 (4)
ECL (2,416) (2,155) (261) (12) 1
Operating expenses (23,425) (23,920) 495 2 (2)
Share of profit from associates and JVs 2,175 2,031 144 7 (6)
Profit before tax 29,371 12,009 17,362 >100 (10)
Tax expense (5,034) (421) (4,613) >(100)
Profit after tax 24,337 11,588 12,749 >100
Notable items
Nine months ended
30 Sep 30 Sep
2023 2022
$m $m
Revenue
Disposals, acquisitions and related costs 3,631 (2,666)
Fair value movements on financial instruments(1) 15 (653)
Restructuring and other related costs - 37
Disposal losses on Markets Treasury repositioning (578) -
Currency translation on revenue notable items - (105)
Operating expenses
Disposals, acquisitions and related costs (197) (9)
Restructuring and other related costs 77 (1,722)
Currency translation on operating expenses notable items - 5
1 Fair value movements on non-qualifying hedges in HSBC Holdings.
Reported profit
Reported profit after tax of $24.3bn was $12.7bn higher than in 9M22. This
included a higher tax expense, in part from the non-recurrence of a $1.8bn
gain in 9M22 due to the recognition of a deferred tax asset from historical
tax losses in HSBC Holdings.
Reported profit before tax of $29.4bn was $17.4bn higher. This was primarily
driven by an increase in revenue due to growth in net interest income,
reflecting the impact of interest rate rises. It also included the impact of
an impairment of $2.3bn in 9M22 relating to the planned disposal of our retail
banking operations in France, of which $2.1bn was reversed in 9M23 as the sale
became less certain. In addition, there was a provisional gain of $1.6bn
recognised on the acquisition of SVB UK in 9M23. Reported operating expenses
decreased, primarily reflecting a reduction in restructuring and other related
costs following the completion of our cost-saving programme at the end of
2022, which mitigated higher technology spend, an increase in the
performance-related pay accrual and the impact of inflation. Reported ECL of
$2.4bn increased by $0.3bn and included charges relating to exposures against
the commercial real estate sector in mainland China.
Reported revenue
Reported revenue of $53.0bn was $17.0bn or 47% higher, which included the
impacts of an impairment in 9M22 and a subsequent reversal in 9M23 relating to
the planned sale of our retail banking operations in France. It also included
a provisional gain on the acquisition of SVB UK, as described above.
The growth also reflected the impact of interest rate rises, mainly in GPS in
CMB and GBM, Personal Banking and Global Private Banking in WPB, as well as
Securities Services in GBM. There was also a good performance in our insurance
business in WPB, and in Capital Markets and Advisory in GBM, while the
increase in revenue in Corporate Centre was driven by Central Treasury, mainly
due to the non-recurrence of adverse fair value movements on financial
instruments.
These increases were partly offset by lower Credit and Lending revenue in CMB,
mainly driven by lower balances and margin compression, and in GBM, reflecting
weaker client demand. In Equities in GBM, revenue fell due to lower client
activity. Revenue also reduced in Markets Treasury due to the impact of rising
interest rates on our funding costs and flattening yield curves. Markets
Treasury also incurred losses on asset disposals of $0.6bn relating to
repositioning and risk management activities in our hold-to-collect-and-sell
portfolio in certain key legal entities. These actions are accretive to net
interest income and reduce the consumption of the Group's financial resources.
This revenue is allocated to our global businesses.
Reported ECL
Reported ECL of $2.4bn were $0.3bn higher. Both periods included charges
relating to the commercial real estate sector in mainland China, which were
$0.8bn in 9M23, and charges in the UK due to increased economic uncertainty,
inflation and rising interest rates. The charge in 9M22 of $2.2bn benefited
from the release of Covid-19-related allowances.
For further details of the calculation of ECL, including the measurement
uncertainties and significant judgements applied to such calculations, the
impact of the economic scenarios and management judgemental adjustments, see
pages 25 to 29.
Reported operating expenses
Reported operating expenses of $23.4bn were $0.5bn or 2% lower, including
favourable foreign currency translation differences between the periods of
$0.5bn. There were lower restructuring and other related costs following the
completion of our cost-saving programme, which concluded at the end of 2022, a
$0.2bn reduction due to a reversal of historical asset impairments, and the
effects of our continued cost discipline. These reductions were offset by
increases in technology costs, the impacts of rising inflation, a higher
performance-related pay accrual and severance payments recorded in the first
half of 2023.
The number of employees expressed in full-time equivalent staff ('FTE') at 30
September 2023 was 221,275, an increase of 2,076 compared with 31 December
2022. The number of contractors at 30 September 2023 was 5,045, a decrease of
1,002 due to the completion of our cost-saving programme.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of $2.2bn was
$0.1bn or 7% higher, primarily from an increase in the share of profit from
SAB.
Tax expense
Tax in 9M23 was a charge of $5.0bn, representing an effective tax rate of
17.1%, which was higher than the effective tax rate of 3.5% for 9M22. The
effective tax rate for 9M23 was reduced by 1.5 percentage points by the
non-taxable provisional gain on the acquisition of SVB UK and by 1.4
percentage points by the release of provisions for uncertain tax positions.
The effective tax rate for 9M22 was reduced by 15.8 percentage points by the
recognition of a deferred tax asset on historical tax losses of HSBC Holdings
as a result of improved profit forecasts for the UK tax group. Excluding these
items, the effective tax rates were 20.1% for 9M23 and 19.3% for 9M22.
Return on average tangible equity
In 9M23, our annualised RoTE was 19.7%. Excluding the impact of the reversal
of an impairment relating to the planned sale of our retail banking operations
in France and the provisional gain of $1.6bn on the acquisition of SVB UK,
annualised RoTE was 17.1%.
Group
9M23 compared with 9M22 - constant currency basis
Movement in profit before tax compared with 9M22 - on a constant currency
basis
Nine months ended
30 Sep 30 Sep Variance
2023 2022 9M23 vs. 9M22
$m $m $m %
Revenue 53,037 35,222 17,815 51
ECL (2,416) (2,177) (239) (11)
Operating expenses (23,425) (23,434) 9 -
Share of profit from associates and JVs 2,175 1,917 258 13
Profit before tax 29,371 11,528 17,843 >100
Profit before tax of $29.4bn was $17.8bn higher than in 9M22 on a constant
currency basis. Revenue increased by $17.8bn or 51%, primarily reflecting
growth in net interest income from the impact of global interest rate rises.
The increase included the impact of an impairment in 9M22, and a subsequent
reversal in 9M23, relating to the planned sale of our retail banking
operations in France. It also included a provisional gain on the acquisition
of SVB UK. In addition, share of profit from associates and JVs increased by
$0.3bn, reflecting an increase in the share of profit from SAB and Bank of
Communications Co., Limited ('BoCom'). Operating expenses were stable, as
lower restructuring and other related costs following the completion of our
cost-saving programme were offset mainly by increases in technology costs, the
impacts of rising inflation, and a higher performance-related pay accrual. ECL
were $0.2bn higher. Both periods included charges relating to the commercial
real estate sector in mainland China, which were $0.8bn in 9M23, as well as
charges in the UK due to increased economic uncertainty, inflation and rising
interest rates. The charge in 9M22 benefited from the release of
Covid-19-related allowances.
Net interest margin
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Net interest income 27,512 21,391 9,248 9,305 8,006
Average interest-earning assets 2,160,881 2,153,101 2,157,370 2,172,324 2,110,419
% % % % %
Gross interest yield(1) 4.59 2.10 5.00 4.59 2.65
Less: gross interest payable(1) (3.35) (0.92) (3.80) (3.33) (1.36)
Net interest spread(2) 1.24 1.18 1.20 1.26 1.29
Net interest margin(3) 1.70 1.33 1.70 1.72 1.51
1 Gross interest yield is the average annualised interest rate earned
on average interest-earning assets ('AIEA'). Gross interest payable is the
average annualised interest cost as a percentage of average interest-bearing
liabilities.
2 Net interest spread is the difference between the average annualised
interest rate earned on AIEA, net of amortised premiums and loan fees, and the
average annualised interest rate payable on average interest-bearing funds.
3 Net interest margin is net interest income expressed as an
annualised percentage of AIEA.
Net interest margin
Net interest margin ('NIM') for 9M23 of 1.70% was 37 basis points ('bps')
higher compared with 9M22, driven by the rise in the yield on AIEA of 249bps.
This was partly offset by the rise in the funding costs of average
interest-bearing liabilities of 243bps. The increase in NIM in 9M23 included
the unfavourable impact of foreign currency translation differences. Excluding
this, NIM increased by 40bps.
NIM for 3Q23 was 1.70%, up 19bps year-on-year, and down 2bps compared with the
previous quarter. The reduction compared with 2Q23 reflected continuing
customer deposit migration, particularly in Asia. There was a greater increase
in the funding costs of average interest-bearing liabilities than in the yield
on interest-earning assets.
Net interest income
Net interest income ('NII') for 9M23 was $27.5bn, an increase of $6.1bn or 29%
compared with 9M22. This reflected higher average market interest rates across
the major currencies compared with 9M22.
Excluding the unfavourable impact of foreign currency translation differences,
NII increased by $6.7bn or 32%.
NII for 3Q23 was $9.2bn, up 15% compared with 3Q22, and down 2% compared with
2Q23. The increase compared with 3Q22 was driven by the impact of higher
yields on our asset book, notably in the UK and our main legal entities in
Asia. This was partly offset by higher funding costs across our liability
book, which included the impact of deposit migration in our main legal
entities in Asia and Europe. The reduction compared with 2Q23 was driven by
higher funding costs on liabilities compared with the interest earned on AIEA.
Interest income and interest expense
Interest income for 9M23 of $74.2bn increased by $40.3bn compared with 9M22,
primarily due to higher market interest rates. The change in interest income
included an adverse impact of foreign currency translation differences of
$1.0bn, excluding which interest income increased by $41.3bn.
Interest income of $27.2bn in 3Q23 was up $13.1bn compared with 3Q22, and up
$2.3bn compared with 2Q23, both due to higher market interest rates.
Interest expense for 9M23 of $46.6bn increased by $34.2bn compared with 9M22.
This reflected an increase in funding costs of 243bps, mainly due to the
impact of higher interest rates, as well as from customer deposit migration,
notably in Asia. The rise in interest expense included the favourable effects
of foreign currency translation differences of $0.4bn. Excluding this,
interest expense increased by $34.6bn.
Interest expense of $18.0bn in 3Q23 was up $11.9bn compared with 3Q22, and up
$2.4bn compared with 2Q23.
Banking net interest income
Banking net interest income is an alternative performance measure, and is
defined as Group net interest income after deducting:
- the internal cost to fund trading and fair value net assets for
which associated revenue is reported in 'Net income from financial instruments
held for trading or managed on a fair value basis', also referred to as
'trading and fair value income'. These funding costs reflect proxy overnight
or term interest rates as applied by internal funds transfer pricing;
- the funding costs of foreign exchange swaps in Markets Treasury,
where an offsetting income or loss is recorded in trading and fair value
income. These instruments are used to manage foreign currency deployment and
funding in our entities; and
- third-party net interest income in our insurance business.
In our segmental disclosures, the funding costs of trading and fair value net
assets are predominantly recorded in GBM in 'net income from financial
instruments held for trading or managed on a fair value basis'. On
consolidation, this funding is eliminated in Corporate Centre, resulting in an
increase in the funding costs reported in net interest income with an
equivalent offsetting increase in 'net income from financial instruments held
for trading or managed on a fair value basis' in this segment. During 2Q23 we
implemented a consistent reporting approach across the 14 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 of approximately $0.4bn,
recognised in 2Q23. In the consolidated Group results, the cost to fund these
trading and fair value net assets is reported in net interest income.
Banking NII, which is derived by deducting the centrally allocated funding
costs to generate trading and fair value income, was $33.3bn in 9M23. The
funding costs were $6.1bn, an increase of $4.9bn compared with 9M22, notably
due to higher interest rates. Banking net interest income also deducts
third-party net interest income related to our insurance business, which was
$0.3bn in 9M23, broadly stable compared with 9M22.
The internally allocated funding costs incurred in 9M23 to generate trading
and fair value income related to trading, fair value and associated net asset
balances predominantly in GBM. At 30 September 2023, these stood at
approximately $130bn.
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$bn $bn $bn $bn $bn
Net interest income 27.5 21.4 9.2 9.3 8.0
Banking book funding costs used to generate 'net income from financial 6.1 1.2 2.4 2.4 0.8
instruments held for trading or managed on a fair value basis'
Third-party net interest income from insurance (0.3) (0.3) (0.1) (0.1) (0.1)
Banking net interest income 33.3 22.3 11.5 11.6 8.7
Summary consolidated balance sheet
At(1)
30 Sep 30 Jun 31 Dec
2023 2023 2022
$m $m $m
Assets
Cash and balances at central banks 298,779 307,733 327,002
Trading assets 249,189 255,387 218,093
Financial assets designated and otherwise mandatorily measured at fair value 102,778 104,303 100,101
through profit or loss
Derivatives 273,070 272,595 284,159
Loans and advances to banks 107,103 100,921 104,475
Loans and advances to customers 935,750 959,558 923,561
Reverse repurchase agreements - non-trading 249,092 258,056 253,754
Financial investments 427,575 407,933 364,726
Assets held for sale 85,833 95,480 115,919
Other assets 291,442 279,510 257,496
Total assets 3,020,611 3,041,476 2,949,286
Liabilities and equity
Liabilities
Deposits by banks 72,219 68,709 66,722
Customer accounts 1,563,127 1,595,769 1,570,303
Repurchase agreements - non-trading 181,146 170,110 127,747
Trading liabilities 79,810 81,228 72,353
Financial liabilities designated at fair value 141,482 139,618 127,321
Derivatives 265,679 269,560 285,762
Debt securities in issue 89,107 85,471 78,149
Insurance contract liabilities 112,963 115,756 108,816
Liabilities of disposal groups held for sale 78,299 87,241 114,597
Other liabilities 246,939 236,363 212,319
Total liabilities 2,830,771 2,849,825 2,764,089
Equity
Total shareholders' equity 182,720 184,170 177,833
Non-controlling interests 7,120 7,481 7,364
Total equity 189,840 191,651 185,197
Total liabilities and equity 3,020,611 3,041,476 2,949,286
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been
restated accordingly.
Balance sheet commentary
Balance sheet - 30 September 2023 compared with 30 June 2023
At 30 September 2023, our total assets of $3.0tn were $21bn lower on a
reported basis and included unfavourable effects of foreign currency
translation differences of $59bn. On a constant currency basis, total assets
were $39bn higher, mainly driven by growth in financial investments and an
increase in settlement accounts. These were partly offset by a decrease in
assets held for sale, lower loans and advances to customers, and a reduction
in reverse repurchase agreements.
Loans and advances to customers as a percentage of customer accounts was
59.9%, which was lower than 60.1% at 30 June 2023.
Combined view of customer lending and customer deposits
At
30 Sep 30 Jun 31 Dec
2023 2023 2022
$m $m $m
Loans and advances to customers 935,750 959,558 923,561
- of which: HSBC Innovation Bank Limited (formerly SVB UK) 7,333 7,040 -
Loans and advances to customers of disposal groups reported in 'Assets held 55,951 59,210 80,576
for sale'
- banking business in Canada 54,602 55,932 55,197
- retail banking operations in France - - 25,029
- other 1,349 3,278 350
Non-current assets held for sale 1,292 659 112
Combined customer lending 992,993 1,019,427 1,004,249
Currency translation - (19,220) (4,982)
Combined customer lending at constant currency 992,993 1,000,207 999,267
Customer accounts 1,563,127 1,595,769 1,570,303
- of which: HSBC Innovation Bank Limited (formerly SVB UK) 6,033 7,220 -
Customer accounts reported in 'Liabilities of disposal groups held for sale' 59,250 66,154 85,274
- banking business in Canada 59,247 59,813 60,606
- retail banking operations in France - - 22,348
- other 3 6,341 2,320
Combined customer deposits 1,622,377 1,661,923 1,655,577
Currency translation - (30,854) (8,156)
Combined customer deposits at constant currency 1,622,377 1,631,069 1,647,421
Loans and advances to customers
Loans and advances to customers of $0.9tn were $24bn lower on a reported
basis. This included the adverse effects of foreign currency translation
differences of $19bn, excluding which customer lending balances decreased by
$5bn.
In WPB, customer lending increased by $2bn, primarily from mortgage balance
growth in HSBC UK, Hong Kong, the US and Mexico. This was partly offset by the
reclassification of $0.8bn to held for sale from the planned sale of the New
Zealand retail mortgage loan portfolio.
In CMB, customer lending was $6bn lower due to decreases in our legal entity
in Hong Kong, HSBC Bank plc and in the US, reflecting softer demand from
customers due to higher interest rates and economic uncertainty.
In GBM, lending fell by $1bn from a decrease in term lending balances in our
legal entity in Hong Kong.
While our near-term outlook on lending growth remains cautious, we expect
mid-single-digit percentage annual loan growth in the medium to long term.
Customer accounts
Customer accounts of $1.6tn reduced by $33bn on a reported basis. This
included the adverse effects of foreign currency translation differences of
$31bn, excluding which customer accounts fell by $2bn.
In WPB, customer accounts fell by $3bn, mainly due to decreases in HSBC UK
reflecting the higher cost of living and competitive pressures, partly offset
by increases in our legal entities in Australia and mainland China.
In CMB, the reduction in customer accounts of $2bn reflected net outflows in
our legal entity in mainland China and in HSBC UK.
In GBM, customer accounts increased by $4bn, reflecting balance growth in HSBC
Bank plc due to an increase in term deposits and interest-bearing balances,
partly offset by lower interest-bearing and non-interest-bearing balances in
our legal entities in Singapore, Hong Kong and mainland China.
Financial investments
As part of our interest rate hedging strategy, we hold a portfolio of debt
instruments, reported within financial investments, which are classified as
hold-to-collect-and-sell. As a result, the change in value of these
instruments is recognised through 'debt instruments at fair value through
other comprehensive income' in equity.
At 30 September 2023, we had recognised a pre-tax cumulative unrealised loss
reserve through other comprehensive income of $5.9bn related to these
hold-to-collect-and-sell positions. This reflected a $0.3bn pre-tax gain in
3Q23, inclusive of movements on related fair value hedges. The gain in 3Q23
includes a reduction in unrealised losses due to the disposal of securities as
part of repositioning actions taken in this portfolio of $0.6bn, which is
described in further detail below. Overall, the Group is positively exposed to
rising interest rates through net interest income, although there is an
adverse impact on our capital base in the early stages of a rising interest
rate environment due to the fair value of hold-to-collect-and-sell
instruments.
Over time, these adverse movements will unwind as the instruments reach
maturity, although not all will necessarily be held to maturity.
As interest rates have increased, we have taken actions to manage our exposure
to the changing interest rate environment. During 3Q23, Markets Treasury
incurred disposal losses of $0.6bn, reported in other operating income,
relating to repositioning and risk management activities in our
hold-to-collect-and-sell portfolio in certain key legal entities. These
actions are accretive to net interest income and reduce the consumption of the
Group's financial resources. The losses in the income statement associated
with these disposals are already recognised in equity, as described above.
We also hold a portfolio of financial investments measured at amortised cost,
which are classified as hold-to-collect. At 30 September 2023, there was a
cumulative unrecognised loss of $4.4bn. Within this, $3.5bn related to debt
instruments held to manage our interest rate exposure, representing a $0.7bn
deterioration during 3Q23.
Risk-weighted assets - 30 September 2023 compared with 30 June 2023
Risk-weighted assets ('RWAs') reduced by $19.5bn during the quarter. Excluding
a decrease of $12.5bn from foreign currency translation differences, RWAs fell
by $7.0bn, reflecting:
- a $4.7bn decrease mainly due to credit risk parameter refinements
notably in Asia, HSBC Bank plc and SAB;
- a $3.3bn decline from strategic disposals, primarily due to the sale
of our Oman business; and
- a $1.4bn decline due to mark-to-market movements from counterparty
credit risk, mainly in HSBC Bank plc, Asia and Mexico.
These were partly offset by:
- a $2.0bn increase from portfolio mix changes and unfavourable credit
risk rating migrations, primarily in HSBC UK, HSBC Bank plc, Asia and the US;
and
- a $1.4bn rise in credit risk mainly due to higher sovereign
exposures and mortgage growth, which was partly offset by a fall in customer
lending.
Global businesses
Wealth and Personal Banking - constant currency basis
Management view of revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2023 2022 9M23 vs. 9M22 2023 2023 2022
$m $m $m % $m $m $m
Wealth 5,815 5,172 643 12 1,894 1,957 1,787
- investment distribution 1,964 1,917 47 2 683 643 653
- Global Private Banking 1,716 1,488 228 15 575 572 546
net interest income 876 667 209 31 296 289 280
non-interest income 840 821 19 2 279 283 266
- life insurance 1,186 928 258 28 311 425 276
- asset management 949 839 110 13 325 317 312
Personal Banking 15,499 10,873 4,626 43 5,282 5,252 4,374
- net interest income 14,517 9,891 4,626 47 4,960 4,899 4,034
- non-interest income 982 982 - - 322 353 340
Other(1) 1,605 (2,053) 3,658 >100 (457) (6) (2,227)
- of which: impairment (loss)/reversal relating to the planned sale of our 2,034 (2,349) 4,383 >100 - 14 (2,349)
retail banking operations in France
Net operating income(2) 22,919 13,992 8,927 64 6,719 7,203 3,934
RoTE (annualised)(3) (%) 37.3 9.5
1 'Other' includes Markets Treasury, HSBC Holdings interest expense
and hyperinflation. It also includes the distribution and manufacturing (where
applicable) of retail and credit protection insurance, disposal gains and
other non-product-specific income.
2 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
3 RoTE (annualised) in 9M23 included a 6.6 percentage point favourable
impact from the reversal of the impairment losses relating to the planned sale
of our retail banking operations in France.
Notable items
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Sep
2023 2022 2023 2022
$m $m $m $m
Revenue
Disposals, acquisitions and related costs 2,034 (2,205) - (2,205)
Fair value movements on financial instruments - - - -
Restructuring and other related costs - 98 - 5
Disposal losses on Markets Treasury repositioning (253) - (253) -
Currency translation on revenue notable items - (144) - (143)
Operating expenses
Disposals, acquisitions and related costs (26) (4) (3) (4)
Restructuring and other related costs 16 (175) 16 (62)
Currency translation on operating expenses notable items - 3 - (3)
9M23 compared with 9M22
Profit before tax of $11.4bn was $8.8bn higher than in 9M22 on a constant
currency basis. The growth in revenue reflected higher Personal Banking net
interest income of $4.6bn due to wider margins as interest rates rose, and an
increase in wealth revenue of $0.6bn. The increase also included the $4.4bn
impact of an impairment in 9M22 relating to the planned disposal of our retail
banking operations in France, and its subsequent partial reversal in 9M23 as
the sale became less certain. ECL fell by $0.2bn, while operating expenses
grew by $0.4bn.
Revenue of $22.9bn was $8.9bn or 64% higher on a constant currency basis. This
was driven by growth in Personal Banking net interest income of $4.6bn from
wider margins, supported by an increase in lending, a $0.3bn increase in life
insurance revenue, and a rise of $0.2bn in Global Private Banking net interest
income. In addition, 'Other' revenue included the impact of an impairment in
9M22 relating to the planned sale of our retail banking operations in France,
and its subsequent reversal in 9M23, partly offset by a reduction in revenue
allocated from Corporate Centre of $0.9bn, including losses on Markets
Treasury repositioning.
In Wealth, revenue of $5.8bn was up $0.6bn or 12%.
- Life insurance revenue rose by $0.3bn or 28%. The increase was
mainly driven by favourable net investment returns of $0.2bn and an increase
of $0.1bn in the net insurance service result after adverse assumption
changes. In addition, insurance manufacturing new business contractual service
margin(1) written of $1.3bn in 9M23 was up $0.4bn or 42%, mainly in Hong Kong
due in part to the mainland China border reopening and the launch of new
products in 9M23.
- Global Private Banking revenue was $0.2bn or 15% higher due to the
positive impact of rising interest rates on net interest income.
- Asset management revenue was $0.1bn or 13% higher, driven by an
increase in assets under management of 13%, and from positive market
movements.
In Personal Banking, revenue of $15.5bn was up $4.6bn or 43%.
- Net interest income was $4.6bn or 47% higher due to wider margins
from interest rate rises. This was supported by lending growth in HSBC UK, and
in our main legal entities in Asia, Mexico and the US. Mortgage lending rose
in our main legal entity in Asia by $6bn and in HSBC UK by $5bn. Unsecured
lending increased by $3bn, notably in Mexico and Hong Kong, partly offset by
the closure of the John Lewis cards portfolio. Deposit balances fell by $11bn,
mainly in HSBC UK and our main entity in the US, partly offset by growth in
our main legal entities in Asia, the UAE and the Channel Islands.
Other revenue increased by $3.7bn, mainly due to the $4.4bn impact of an
impairment relating to the planned sale of our retail banking operations in
France in 9M22, and its subsequent reversal in 9M23. This was partly offset by
a $0.5bn reduction from Markets Treasury allocated revenue, including disposal
losses on repositioning, an increase in HSBC Holdings interest expense of
$0.2bn, and an adverse impact of $0.2bn due to hyperinflationary accounting.
ECL were $0.7bn, compared with $0.9bn in 9M22 on a constant currency basis, as
the credit performance in 9M23 remained resilient, with delinquencies and
write-offs remaining broadly stable, despite a significant rise in
inflationary pressures. The charges in 9M22 reflected heightened levels of
uncertainty and inflationary pressures.
Operating expenses of $10.9bn were 3% higher on a constant currency basis,
reflecting continued investments, notably in wealth in Asia, higher technology
spend and the impact of higher inflation. These were partly offset by a
reduction of restructuring and other related costs following the completion of
our cost-saving programme at the end of 2022, ongoing cost discipline and a
$0.1bn reversal related to historical asset impairments.
3Q23 compared with 3Q22
Profit before tax of $2.8bn was $2.7bn higher than in 3Q22 on a constant
currency basis. This was driven by a $2.8bn increase in revenue as 3Q22
included an impairment of $2.3bn following the classification of our retail
banking business in France as held for sale on 30 September 2022. There was
also strong growth in Personal Banking net interest income of $0.9bn, due to
wider margins from rising interest rates and lending growth. This was partly
offset by a reduction in revenue allocated from Markets Treasury, mainly due
to disposal losses on repositioning. ECL of $0.2bn were $0.1bn lower.
Operating expenses of $3.7bn were $0.2bn or 6% higher, mainly due to increased
technology spend and inflationary pressures, which were in part mitigated by
the benefits of our cost-saving initiatives.
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Under IFRS 17, the future profits from
new business are capitalised in the contractual service margin, and not
recognised immediately in the income statement, as was the case for the value
of new business measure under IFRS 4.
Commercial Banking - constant currency basis
Management view of revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2023 2022 9M23 vs. 9M22 2023 2023 2022
$m $m $m % $m $m $m
Global Trade and Receivables Finance 1,546 1,579 (33) (2) 520 510 527
Credit and Lending 4,084 4,360 (276) (6) 1,339 1,372 1,453
Global Payments Solutions 9,166 4,320 4,846 >100 3,199 3,037 1,968
GBM products, Insurance and Investments, and Other(1) 2,844 1,237 1,607 >100 366 585 493
- of which: share of revenue from Markets and Securities Services and 981 901 80 9 323 319 309
Banking products
- of which: provisional gain on the acquisition of Silicon Valley Bank UK 1,593 - 1,593 >100 86 - -
Limited
Net operating income(2) 17,640 11,496 6,144 53 5,424 5,504 4,441
RoTE (annualised)(3) (%) 25.8 13.3
1 Includes CMB's share of revenue from the sale of Markets and
Securities Services and Banking products to CMB customers. GBM's share of
revenue from the sale of these products to CMB customers is included within
the corresponding lines of the GBM management view of revenue. Also includes
allocated revenue from Markets Treasury, HSBC Holdings interest expense and
hyperinflation.
2 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
3 RoTE (annualised) in 9M23 included a 4.3 percentage point favourable
impact from the provisional gain on the acquisition of SVB UK.
Notable items
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Sep
2023 2022 2023 2022
$m $m $m $m
Revenue
Disposals, acquisitions and related costs 1,593 - 86 -
Fair value movements on financial instruments - - - -
Restructuring and other related costs - (1) - (1)
Disposal losses on Markets Treasury repositioning (190) (190)
Currency translation on revenue notable items - - - 1
Operating expenses
Disposals, acquisitions and related costs (30) - (15) -
Restructuring and other related costs 30 (124) 1 (58)
Currency translation on operating expenses notable items - - - (1)
9M23 compared with 9M22
Profit before tax of $10.8bn was $5.3bn higher than in 9M22 on a constant
currency basis. This was driven by an increase in revenue across all our main
legal entities, primarily from a $4.8bn increase in GPS net interest income.
It also included a provisional gain of $1.6bn from HSBC UK's acquisition of
SVB UK. These increases were partly offset by a higher ECL charge and a rise
in operating expenses.
Revenue of $17.6bn was $6.1bn or 53% higher on a constant currency basis.
- In GPS, revenue increased by $4.8bn, with growth in all main legal
entities, driven by an increase in margins reflecting interest rate rises and
repricing actions, while average balances were broadly stable despite a
market-wide reduction in the UK as customers used their surplus liquidity.
There was also an 8% increase in fee income, notably in cards and payments,
with growth across most of our main legal entities, notably in Asia and the
UK.
- In Global Trade and Receivables Finance, revenue was down 2%, driven
by lower average balances in our main legal entity in Asia, reflecting the
softer trade cycle, partly offset by growth in our main legal entity in the UK
as margins improved. In addition, there was a 2% increase in fee income.
- In Credit and Lending, revenue decreased by $0.3bn or 6%, notably in
our main legal entities in Asia and Europe, primarily due to margin
compression and lower balances, reflecting softer demand from customers across
these markets.
- In GBM products, Insurance and Investments, and Other, revenue
increased by $1.6bn, driven by incremental revenue from HSBC Innovation
Banking, which included the provisional gain of $1.6bn on the acquisition of
SVB UK, comprising the preliminary gain on acquisition of $1.5bn in 1Q23 and
an additional gain of $0.1bn recognised in 3Q23. There was a 9% increase in
collaboration revenue from GBM products, notably Foreign Exchange, and higher
interest on capital held in the business of $0.5bn. These increases were
partly offset by a reduction of income allocated from Markets Treasury of
$0.5bn, including disposal losses on repositioning, higher HSBC Holdings
interest expense of $0.3bn, and the adverse impacts of hyperinflationary
accounting of $0.2bn.
ECL were a charge of $1.4bn, compared with a charge of $1.0bn in 9M22 on a
constant currency basis. The increase of $0.4bn compared with 9M22 reflected
the release of Covid-19-related allowances in the previous year. ECL in both
periods reflected charges relating to the commercial real estate sector in
mainland China and charges in the UK due to economic uncertainty.
Operating expenses of $5.5bn were higher on a constant currency basis. The
increase reflected incremental costs in HSBC Innovation Banking of $0.2bn
following the acquisition and integration of SVB UK, a higher
performance-related pay accrual, ongoing investment in technology and
inflationary impacts. These increases were in part mitigated by the impact of
continued strategic cost-saving initiatives.
3Q23 compared with 3Q22
Profit before tax of $2.8bn was $0.7bn or 36% higher than in 3Q22 on a
constant currency basis, primarily due to an increase in revenue in GPS,
driven by higher net interest income from the positive impact of interest rate
rises and repricing actions. ECL were broadly unchanged, with 3Q23 reflecting
charges against the commercial real estate sector in mainland China. Operating
expenses were $0.2bn higher, mainly driven by incremental costs relating to
HSBC Innovation Banking of $0.1bn, continued investments in technology and an
increase in the performance-related pay accrual.
Global Banking and Markets - constant currency basis
Management view of revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2023 2022 9M23 vs. 9M22 2023 2023 2022
$m $m $m % $m $m $m
Markets and Securities Services 6,921 6,955 (34) - 2,158 2,171 2,297
- Securities Services 1,835 1,456 379 26 615 619 523
- Global Debt Markets 746 532 214 40 158 238 110
- Global Foreign Exchange 3,153 3,198 (45) (1) 928 990 1,061
- Equities 403 867 (464) (54) 167 92 272
- Securities Financing 815 706 109 15 302 252 248
- Credit and funding valuation adjustments (31) 196 (227) >(100) (12) (20) 83
Banking 6,431 4,800 1,631 34 2,158 2,135 1,703
- Global Trade and Receivables Finance 505 505 - - 164 161 173
- Global Payments Solutions 3,324 1,841 1,483 81 1,127 1,120 798
- Credit and Lending 1,493 1,697 (204) (12) 506 486 527
- Capital Markets and Advisory 812 606 206 34 254 253 182
- Other(1) 297 151 146 97 107 115 23
GBM Other (964) (502) (462) (1) (429) (289) (206)
- Principal Investments 14 58 (44) (76) 1 17 (20)
- Other(2) (978) (560) (418) (75) (430) (306) (186)
Net operating income(3) 12,388 11,253 1,135 10 3,887 4,017 3,794
RoTE (annualised) (%) 12.9 11.6
1 Includes portfolio management, earnings on capital and other capital
allocations on all Banking products.
2 Includes notional tax credits and Markets Treasury, HSBC Holdings
interest expense and hyperinflation.
3 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
Notable items
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Sep
2023 2022 2023 2022
$m $m $m $m
Revenue
Disposals, acquisitions and related costs - - - -
Fair value movements on financial instruments - - - -
Restructuring and other related costs - (61) - (35)
Disposal losses on Markets Treasury repositioning (135) (135)
Currency translation on revenue notable items - 1 - -
Operating expenses
Disposals, acquisitions and related costs 3 - - -
Restructuring and other related costs 4 (137) 4 (50)
Currency translation on operating expenses notable items - - - (3)
9M23 compared with 9M22
Profit before tax of $4.9bn was $0.8bn or 19% higher than in 9M22 on a
constant currency basis. This was driven by an increase in revenue of $1.1bn
or 10%, notably from higher net interest income in GPS and Securities
Services. Operating expenses increased by $0.4bn or 5%.
Revenue of $12.4bn was $1.1bn or 10% higher on a constant currency basis.
In Markets and Securities Services ('MSS'), revenue was marginally lower by
$34m.
- In Securities Services, revenue grew by $0.4bn or 26% due to higher
net interest income as global interest rates rose.
- In Global Debt Markets, revenue increased by $0.2bn or 40% from
favourable primary market conditions, leading to higher secondary volumes and
a better trading performance. The 9M22 period was impacted by lower primary
activity and client flow due to uncertainty and challenging market conditions.
- In Global Foreign Exchange, revenue decreased by $45m or 1% compared
with a very strong 9M22. The 9M23 period reflected continued elevated client
activity and trading performance as we captured the benefit of market-wide
volatility relating to interest rate and inflation rate differentials.
- In Equities, revenue fell by $0.5bn or 54% in the context of a
strong 9M22, and was due to lower client activity as a result of reduced
market volatility.
- In Securities Financing, revenue increased by $0.1bn or 15%, driven
by increased client flow and the onboarding of new clients as a result of
investment-led growth.
In Banking, revenue increased by $1.6bn or 34%.
- In GPS, revenue increased by $1.5bn or 81%, driven by margin growth
from rising global interest rates and business pricing actions.
- In Capital Markets and Advisory, revenue increased by $0.2bn or 34%,
benefiting from increased financing activities and higher interest rates,
against a backdrop of a smaller global market fee pool.
- In Credit and Lending, revenue decreased by $0.2bn or 12% due to
weaker client demand.
In GBM Other, there was a $0.5bn reduction in revenue allocated from Corporate
Centre, mainly due to disposal losses on Markets Treasury repositioning and
higher HSBC Holdings interest expense.
ECL of $0.3bn in 9M23 were broadly stable compared with 9M22 on a constant
currency basis.
Operating expenses of $7.2bn increased by $0.4bn or 5% on a constant currency
basis due to the impact of inflation, which was in part mitigated by business
actions.
3Q23 compared with 3Q22
Profit before tax of $1.3bn was $0.1bn or 7% lower than in 3Q22 on a constant
currency basis. Revenue was $0.1bn or 2% higher, mainly from increased revenue
in GPS reflecting the impact of rising interest rates. Revenue in Capital
Markets and Advisory rose due to higher financing activity and growth in
Issuer Services from higher interest rates. This was partly offset by a
decrease in MSS revenue, primarily in Equities and Global Foreign Exchange,
compared with a strong 3Q22 which benefited from higher levels of client
activity and a favourable trading environment. In addition, there was a lower
allocation of revenue from Markets Treasury. ECL of $0.2bn were higher than in
3Q22. Operating expenses were $0.1bn or 5% higher due to the impact of
inflation and an increase in the performance-related pay accrual.
Corporate Centre - constant currency basis
Management view of revenue
Nine months ended Quarter ended
30 Sep 30 Sep Variance 30 Sep 30 Jun 30 Sep
2023 2022 9M23 vs. 9M22 2023 2023 2022
$m $m $m % $m $m $m
Central Treasury(1) 98 (730) 828 >100 17 (21) (352)
Legacy portfolios (4) (1) (3) >(100) 7 (9) (7)
Other(2,3) (4) (788) 784 99 107 (87) (235)
Net operating income(4) 90 (1,519) 1,609 >100 131 (117) (594)
RoTE (annualised) (%) 7.3 2.3
1 Central Treasury comprises valuation differences on issued long-term
debt and associated swaps and fair value movements on financial instruments.
2 Other comprises consolidation adjustments, funding charges on property
and technology assets, revaluation gains and losses on investment properties
and property disposals, gains and losses on certain planned disposals, and
other revenue items not allocated to global businesses.
3 Revenue from Markets Treasury, HSBC Holdings net interest expense
and hyperinflation are allocated out to the global businesses, to align them
better with their revenue and expense. The total Markets Treasury revenue
component of this allocation for 9M23 was $(47)m (9M22: $1,159m;
3Q23: $(497)m; 2Q23: $183m; 3Q22: $337m).
4 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
Notable items
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Sep
2023 2022 2023 2022
$m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) 4 (461) 224 (173)
Fair value movements on financial instruments(2) 15 (653) - (282)
Restructuring and other related costs - 1 - -
Disposal losses on Markets Treasury repositioning - -
Currency translation on revenue notable items - 38 - 22
Operating expenses
Disposals, acquisitions and related costs (144) (5) (61) (5)
Restructuring and other related costs 27 (1,286) 9 (512)
Currency translation on operating expenses notable items - 2 - (19)
1 Includes fair value movements on the foreign exchange hedging of the
expected proceeds from the agreed sale of our banking operations in
Canada.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
9M23 compared with 9M22
Profit before tax of $2.3bn compared with a loss before tax of $0.7bn in 9M22
on a constant currency basis. This increase mainly reflected higher revenue
and lower restructuring and other related costs, together with an increase in
the share of profit from associates and joint ventures.
Revenue was $1.6bn higher on a constant currency basis. This reflected the
non-recurrence of adverse fair value movements on financial instruments,
favourable valuation differences on long-term debt and associated swaps in
Central Treasury, and valuation gains on structural hedging. In addition, the
increase reflected the impacts of the restructuring of our business in Europe,
including the non-recurrence of 9M22 losses associated with the completed sale
of our branch operations in Greece and lower losses related to the planned
disposal of our operations in Russia.
Operating expenses decreased by $1.2bn on a constant currency basis, primarily
driven by the non-recurrence of restructuring and other related costs
following the completion of our cost-saving programme at the end of 2022.
These were partly offset by certain costs related to the planned disposals of
our retail banking operations in France and our banking business in Canada.
Share of profit from associates and joint ventures of $2.1bn increased by
$0.2bn or 12% on a constant currency basis, primarily driven by an increase in
the share of profit from SAB and BoCom.
3Q23 compared with 3Q22
Profit before tax of $0.8bn compared with a loss before tax of $0.5bn in 3Q22
on a constant currency basis. This was driven by higher revenue due to the
non-recurrence of adverse fair value movements on financial instruments, and
fair value gains in 3Q23 relating to the foreign exchange hedging of the
expected proceeds from the agreed sale of our banking operations in Canada.
Higher revenue also reflected the non-recurrence of impacts from the
restructuring of our business in Europe. Lower operating expenses were due to
a reduction in restructuring and other related costs following the completion
of our cost-saving programme at the end of 2022.
Risk
Managing risk
Global economic activity was resilient during the first half of 2023 as a
result of a buoyant services sector. However, prospects for GDP growth in the
second half of 2023 have weakened due to tight financial conditions and rising
geopolitical risks, which are having an adverse impact on international trade.
Concerns have increased regarding the near- and medium-term economic prospects
for major European economies, such as Germany, and Asian economies like China,
which may affect neighbouring markets. We are closely monitoring developments
in the Israel-Hamas war. Our immediate focus has been on the safety of our
colleagues and operations, and seeking to manage associated impacts on our
customers and business. While the global economy has largely adapted to the
repercussions of the Russia-Ukraine war, any further escalation in this
conflict as well as in the Middle East, could have additional economic, social
and political consequences.
The relationships between China and several countries, including the US and
the UK, remain complex. The US, the UK, the EU and other countries have
imposed various sanctions and trade restrictions on Chinese persons and
companies. In response, China has imposed sanctions and introduced new laws
and trade restrictions that could impact the Group and its customers. Efforts
across a variety of sectors have been undertaken to decrease vulnerabilities
to geopolitical shocks through de-risking supply chains. Further sanctions or
counter-sanctions, whether in connection with Russia or China, may affect the
Group and its customers by creating regulatory, reputational and market risks.
Central banks in key developed markets continued to tighten monetary policy in
the third quarter of 2023, although some are now expected to hold rates at
current levels as they assess the prospects for disinflation. Monetary
policies of developed and emerging market central banks are beginning to
diverge on interest rates, with some emerging market central banks starting to
ease their monetary policy, while major developed market central banks are
either continuing to raise policy rates or signalling their intent to keep
policy restrictive for an extended period in the face of high and persistent
core inflation. Recent market volatility and heightened geopolitical risks may
create further inflationary headwinds, particularly on energy prices.
Fiscal policies are likely to remain supportive of growth in both developed
and emerging markets, as demand increases for public spending on items
including social welfare, defence and decarbonisation initiatives. Against a
backdrop of slower economic growth, volatile energy prices and high interest
rates, this could increase the strains on highly indebted sovereigns,
corporates and households in both emerging and developed markets.
The mainland China commercial real estate sector performance has continued to
deteriorate over 2023, as a sustained recovery failed to materialise following
government measures introduced in the fourth quarter of 2022. The government
measures announced in August 2023 have not yet translated into a meaningful
rebound in property market fundamentals, although they are expected to drive
gradual stabilisation and improvement in sentiment among home buyers. While
improved sentiment should eventually increase residential transaction levels
and improve developers' financial conditions, any recovery is likely to be
prolonged, particularly in the absence of direct fiscal stimulus and while
financing conditions remain constrained. Despite some improvement in onshore
liquidity, offshore financing conditions remain particularly challenging.
There also remains the potential for a further deterioration in credit
conditions during the last three months of the year given the continued
uncertainty around liquidity support for state-owned enterprises and ongoing
weakness in property market fundamentals. Borrowers are therefore subject to a
high degree of performance uncertainty and offshore refinancing risk. We
continue to closely monitor, and seek to proactively manage, the potential
implications of the prolonged recovery of the real estate sector and the
overall Chinese economic outlook for our customers and our business.
We continue to closely monitor the impact of the increasing cost of living on
our retail customers. Our primary concern is to ensure that we offer the right
support to our customers in line with regulatory, government and wider
stakeholder expectations, and following the adoption of the UK government's
Mortgage Charter released in June 2023. For further details in relation to the
full range of support available to our UK customers, see www.hsbc.co.uk.
We are engaging closely with our key regulators to help ensure we continue to
meet their expectations of financial institutions' activities during times of
market volatility.
In addition, management adjustments to ECL were applied to reflect persisting
uncertainty in certain sectors, driven by inflation, interest rate volatility
and other macroeconomic risks, which were not fully captured by our models.
We continue to monitor, and seek to manage, the potential implications of all
the above developments on our customers and our business. While the financial
performance of our operations varied in different geographies, our balance
sheet and liquidity remained strong.
At 30 September 2023, our CET1 ratio increased to 14.9%, from 14.7% at 30 June
2023, and our liquidity coverage ratio ('LCR') was 134%.
Credit risk
Summary of credit risk
At 30 September 2023, gross loans and advances to customers and banks of
$1,054bn increased by $14.6bn on a reported basis compared with 31 December
2022. This included adverse foreign exchange movements of $7.5bn. In addition,
the increase included:
- an increase in personal loans and advances to customers of $21.1bn
in France, mainly due to the reclassification of balances from 'assets held
for sale', as the completion of the planned sale of our retail banking
operations in the country has become less certain and no longer meets the
definition of held for sale; and
- an increase in wholesale loans and advances to customers of $7.4bn
from the acquisition of SVB UK.
Excluding these factors, loans and advances to customers and banks decreased
by $6.4bn, mainly driven by wholesale loans and advances to customers in Asia
(down $16.3bn) and in the UK (down $3.2bn). This was partly offset by higher
personal loans and advances to customers in Asia (up $4.4bn) and in the UK (up
$3.9bn), and by higher loans and advances to banks in Asia (up $4.4bn).
At 30 September 2023, the allowance for ECL of $12.2bn comprised $11.7bn in
respect of assets held at amortised cost, $0.4bn in respect of loan
commitments and financial guarantees, and $0.1bn in respect of debt
instruments measured at fair value through other comprehensive income
('FVOCI').
Excluding foreign exchange movements, the allowance for ECL in relation to
loans and advances to customers decreased by $0.2bn. This was attributable to:
- a $0.2bn decrease in wholesale loans and advances to customers,
which included a $0.4bn decrease in stages 1 and 2, offset by a $0.2bn
increase in stage 3, which included the write-offs recognised during the
period; and
- broadly unchanged allowances for ECL in personal loans and advances
to customers across all stages.
The ECL charge for the first nine months of 2023 was $2.4bn, inclusive of
recoveries. This was driven by stage 3 charges, notably in the mainland China
commercial real estate sector, as well as continued economic uncertainty and
inflationary pressures. The ECL charge comprised: $1.7bn in respect of
wholesale lending, of which the stage 3 charge was $1.5bn, and $0.7bn in
respect of personal lending, of which the stage 3 charge was $0.5bn.
Summary of financial instruments to which the impairment requirements in IFRS
9 are applied
At 30 Sep 2023 At 31 Dec 2022
Gross carrying/nominal amount Allowance for Gross carrying/nominal amount Allowance for
ECL(1) ECL(1)
$m $m $m $m
Loans and advances to customers at amortised cost 946,961 (11,211) 935,008 (11,447)
Loans and advances to banks at amortised cost 107,213 (110) 104,544 (69)
Other financial assets measured at amortised cost 956,446 (361) 954,934 (493)
- cash and balances at central banks 298,780 (1) 327,005 (3)
- items in the course of collection from other banks 6,698 - 7,297 -
- Hong Kong Government certificates of indebtedness 41,834 - 43,787 -
- reverse repurchase agreements - non-trading 249,092 - 253,754 -
- financial investments 137,822 (23) 109,086 (20)
- assets held for sale(2) 73,245 (266) 102,556 (415)
- other assets(3) 148,975 (71) 111,449 (55)
Total gross carrying amount on-balance sheet 2,010,620 (11,682) 1,994,486 (12,009)
Loan and other credit-related commitments 647,486 (346) 618,788 (386)
Financial guarantees 16,540 (46) 18,783 (52)
Total nominal amount off-balance sheet(4) 664,026 (392) 637,571 (438)
2,674,646 (12,074) 2,632,057 (12,447)
Fair Memorandum allowance for ECL(5) Fair Memorandum
value value
allowance for ECL(5)
$m $m $m $m
Debt instruments measured at fair value through other comprehensive income 298,200 (73) 265,147 (126)
('FVOCI')
1 The total ECL is recognised in the loss allowance for the financial
asset unless the total ECL exceeds the gross carrying amount of the financial
asset, in which case the ECL is recognised as a provision.
2 Includes $71,648m gross carrying amounts and $262m allowances for
ECL related to the planned sale of our banking business in Canada
(31 December 2022: $74,482m and $254m), and nil gross carrying amounts and
nil allowances for ECL related to the planned sale of our retail banking
operations in France (31 December 2022: $25,267m and $92m).
3 Includes only those financial instruments that are subject to the
impairment requirements of IFRS 9. 'Other assets' as presented within the
summary consolidated balance sheet on page 14 comprises both financial and
non-financial assets, including cash collateral and settlement accounts.
4 Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair
value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in 'Change in expected credit losses and other credit impairment
charges' in the income statement.
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage
distribution and ECL coverage at 30 September 2023
Gross carrying/nominal amount(1) Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and advances to customers at amortised 795,001 132,619 19,251 90 946,961 (1,116) (3,100) (6,972) (23) (11,211) 0.1 2.3 36.2 25.6 1.2
cost
Loans and advances to banks at amortised cost 106,411 721 81 - 107,213 (14) (34) (62) - (110) - 4.7 76.5 - 0.1
Other financial assets measured at amortised 944,822 11,120 504 - 956,446 (105) (125) (131) - (361) - 1.1 26.0 - -
cost
Loan and other credit-related commit-ments 610,261 35,731 1,491 3 647,486 (131) (136) (79) - (346) - 0.4 5.3 - 0.1
Financial guarantees 14,574 1,735 231 - 16,540 (8) (12) (26) - (46) 0.1 0.7 11.3 - 0.3
At 30 Sep 2023 181,926 21,558 93 (1,374) (3,407) (7,270) (23) (12,074) 0.1 1.9 33.7 24.7 0.5
2,471,069 2,674,646
1 Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage
distribution and ECL coverage at 31 December 2022
Gross carrying/nominal amount(1) Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and advances to customers at amortised 776,299 139,076 19,504 129 935,008 (1,092) (3,488) (6,829) (38) (11,447) 0.1 2.5 35.0 29.5 1.2
cost
Loans and advances to banks at amortised cost 102,723 1,739 82 - 104,544 (18) (29) (22) - (69) - 1.7 26.8 - 0.1
Other financial assets measured at amortised 938,798 15,339 797 - 954,934 (95) (165) (233) - (493) - 1.1 29.2 - 0.1
cost
Loan and other credit-related commit-ments 583,383 34,033 1,372 - 618,788 (141) (180) (65) - (386) - 0.5 4.7 - 0.1
Financial guarantees 16,071 2,463 249 - 18,783 (6) (13) (33) - (52) - 0.5 13.3 - 0.3
At 31 Dec 2022 192,650 22,004 129 (1,352) (3,875) (7,182) (38) (12,447) 0.1 2.0 32.6 29.5 0.5
2,417,274 2,632,057
1 Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
Measurement uncertainty and sensitivity analysis of ECL estimates
The recognition and measurement of ECL involves the use of significant
judgement and estimation. We form multiple economic scenarios based on
economic forecasts, apply these assumptions to credit risk models to estimate
future credit losses, and probability-weight the results to determine an
unbiased ECL estimate. Management judgemental adjustments are used to address
late-breaking events, data and model limitations, model deficiencies and
expert credit judgements.
At 30 September 2023, management recognised an improvement of the economic
outlook in most markets with the exception of Hong Kong and mainland China
where the post-Covid-19 pandemic recovery has weakened. Deviations from
standard weightings are enacted when management believes its view of the
economic outlook and risk distribution differs materially from the consensus
views on which scenarios are constructed. The probability weightings assigned
to the Central scenario for each of our major markets remained at the standard
weight of 75%.
Methodology
At 30 September 2023, four economic scenarios were used to capture the current
economic environment and to articulate management's view of the range of risks
and potential outcomes. Each scenario is updated with new forecasts and
estimates every quarter.
The Upside, Central and Downside scenarios are drawn from external consensus
forecasts, market data and distributional estimates of the entire range of
economic outcomes. The fourth scenario, the Downside 2, represents
management's view of severe downside risks.
Scenarios produced to calculate ECL are aligned to HSBC's top and emerging
risks.
Description of economic scenarios
GDP growth forecasts improved for most of our major markets during 3Q23,
following better-than-expected growth in the first half of 2023.
In North America and Europe, economic growth has proved more resilient to
higher inflation and interest rates than was previously expected. Consumption
spending in particular has continued to grow despite the squeeze on real
disposable income, while employment demand has also remained strong.
Forecasters have raised their near-term growth expectations, and forecast
dispersion and other measures of uncertainty have reduced.
Despite the improvement in short-term forecasts, the outlook is for growth to
remain weak as the lagged effects of high inflation and higher interest rates
are expected to slow both household demand and business investment, while
unemployment is forecast to rise moderately.
In Hong Kong and mainland China, growth forecasts have been lowered. The
economic recoveries that initially followed the reopening of these markets
post-Covid-19 pandemic have weakened. In mainland China, the residential
property sector poses an ongoing policy challenge for authorities, after
several major real estate companies succumbed to financial distress that has
precipitated a widespread loss of confidence. Forecasts for mainland China and
Hong Kong are conditioned on the effective deployment of additional policy
support.
Globally, inflation is slowing as energy and food price rises have eased back.
Supply chain constraints, a key driver of inflation through 2022, have also
moderated and tightness in the labour market is easing. Significantly, major
central banks are now forecast to be close to ending the current monetary
tightening cycle, with interest rates expected to be near their peak. In
contrast, weak consumption in mainland China has caused inflation to drop
sharply and the central bank has eased monetary policy in response.
The most significant forecast changes in 3Q23 were to house price
expectations. Across most of our major markets, higher interest rates and the
ensuing squeeze on real household incomes have significantly weakened demand,
and transaction levels have fallen. The UAE is a notable exception, as the
resumption of population growth in the aftermath of the Covid-19 pandemic has
driven a sharp reacceleration in price growth.
Risks to the Central scenario are captured in the outer scenarios. The Upside
and Downside scenarios are constructed to reflect the economic consequences
from the crystallisation of a number of macroeconomic and financial risks.
Sources of forecast uncertainty include inflation, energy prices and the
outlook for monetary policy. Geopolitical risks also present downside threats.
These include the risk of an escalation of the Russia-Ukraine war and
continued differences between the US and China over a range of strategic
issues.
The four global scenarios used for calculating ECL at 30 September 2023 were:
- The consensus Central scenario: This scenario features a slowdown in
growth over the remainder of 2023 and into early 2024. Unemployment is
forecast to rise gradually amid weaker economic activity. Inflation is
expected to fall slowly back to central bank targets by early 2025, and
interest rates are expected to remain high through this period. Interest rates
stay above their pre-Covid-19 pandemic levels over the entire forecast
horizon.
- The consensus Upside scenario: This scenario incorporates the
de-escalation of geopolitical tensions and a loosening of financial
conditions. In this scenario, growth accelerates, inflation falls at a faster
rate than in the Central scenario and unemployment declines. This enables
central banks to lower interest rates more quickly than in the Central
scenario. The pricing of assets, including housing, rises more quickly than in
the Central scenario.
- The consensus Downside scenario: This scenario features weaker
economic activity compared with the Central scenario, driven by a supply shock
that causes a rise in inflation and interest rates above the Central forecast.
In this scenario, GDP contracts, unemployment rises, financial conditions
tighten, and equity markets and house prices fall. Other downside risk themes
include a weaker-than-expected recovery in mainland China, with negative
implications for global growth.
- The Downside 2 scenario: This scenario reflects management's view of
the tail end of the economic distribution. It incorporates the simultaneous
crystallisation of a number of risks that drive inflation and interest rates
substantially higher than in the Central scenario in the near term. The
narrative features an escalation of geopolitical risks and worsening of supply
chain disruptions. As a result, inflation and interest rates are expected to
rise significantly initially, causing a deep global recession and further
stress in the banking sector. Unemployment increases rapidly, asset prices
fall sharply, and defaults rise significantly.
Both the consensus Downside and the Downside 2 scenarios are global in scope,
and while they differ in severity, they assume that the key risks to HSBC,
listed above, crystallise simultaneously.
The following tables describe key macroeconomic variables in the consensus
Central scenario, consensus Upside scenario, consensus Downside scenario and
Downside 2 scenario.
Consensus Central scenario
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP (annual average growth rate, %)
2023 0.2 1.8 4.4 5.2 1.5 0.6 2.9 3.0
2024 0.4 0.6 3.1 4.6 0.8 1.0 3.6 1.7
2025 1.6 2.1 3.0 4.6 2.1 1.6 4.1 2.2
2026 1.8 2.1 2.7 4.4 2.0 1.6 3.8 2.3
2027 1.6 2.1 2.6 3.9 1.9 1.5 3.4 2.3
5-year average(1) 1.3 1.8 3.0 4.4 1.8 1.4 3.7 2.1
Unemployment rate (%)
2023 4.2 3.8 3.1 5.2 5.4 7.2 2.6 2.9
2024 4.6 4.5 3.0 5.2 6.1 7.3 2.5 3.3
2025 4.2 4.4 3.0 5.1 5.7 7.2 2.5 3.5
2026 4.1 4.2 3.0 5.1 5.6 7.2 2.5 3.4
2027 4.1 4.1 3.0 5.1 5.5 7.1 2.5 3.4
5-year average(1) 4.2 4.2 3.0 5.1 5.7 7.2 2.5 3.4
House prices (annual average growth rate, %)
2023 (0.1) 3.1 (8.6) (1.5) (8.1) 0.1 15.8 10.7
2024 (4.7) 0.2 (3.6) 0.7 (4.2) 0.1 10.7 6.2
2025 0.4 2.2 3.6 0.7 3.1 2.7 4.9 4.2
2026 2.5 2.5 3.0 2.8 3.7 3.9 3.4 3.9
2027 3.0 2.4 3.3 3.9 2.4 4.1 3.2 3.9
5-year average(1) 0.4 1.9 1.3 2.1 1.0 2.6 5.6 4.7
Inflation (annual average growth rate, %)
2023 7.3 4.1 2.3 0.8 3.7 5.1 3.3 5.7
2024 3.0 2.6 2.3 2.0 2.4 2.5 2.6 4.2
2025 2.1 2.3 2.2 2.1 2.0 2.0 2.1 3.6
2026 2.0 2.2 2.2 2.0 2.1 1.9 2.1 3.5
2027 2.2 2.2 2.4 2.1 2.1 1.9 2.1 3.5
5-year average(1) 2.4 2.4 2.3 2.0 2.2 2.2 2.2 3.7
1 The five-year average is calculated over a projected period of 20
quarters from 4Q23 to 3Q28.
Consensus Upside scenario (4Q23-3Q28)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (%, start-to-peak)(1) 10.7 (3Q28) 15.0 (3Q28) 22.7 (3Q28) 30.9 (3Q28) 15.2 (3Q28) 10.7 (3Q28) 28.5 (3Q28) 17.2 (3Q28)
Unemployment rate (%, min)(2) 3.1 (1Q25) 3.1 (2Q24) 2.3 (2Q24) 4.7 (2Q24) 4.9 (3Q25) 6.2 (3Q25) 1.9 (2Q24) 2.6 (2Q24)
House price index (%, start-to-peak)(1) 11.0 (3Q28) 19.5 (3Q28) 18.3 (3Q28) 18.2 (3Q28) 16.9 (3Q28) 18.5 (3Q28) 32.9 (3Q28) 30.3 (3Q28)
Inflation rate (YoY % change, min)(3) 1.2 (2Q24) 1.1 (3Q24) 0.7 (3Q24) 0.0 (3Q24) 0.9 (4Q24) 1.0 (3Q24) 1.3 (4Q24) 2.7 (4Q24)
1 Cumulative change to the highest level of the series during the
20-quarter projection.
2 Lowest projected unemployment rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.
Consensus Downside scenario (4Q23-3Q28)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (%, start-to-trough)(1) (1.1) (4Q24) (1.8) (3Q24) (1.6) (4Q24) (1.7) (2Q24) (2.1) (4Q24) (0.3) (2Q24) 0.1 (4Q23) (0.6) (2Q24)
Unemployment rate (%, max)(2) 5.7 (4Q24) 6.2 (2Q24) 4.7 (1Q25) 6.8 (2Q25) 7.7 (2Q24) 8.4 (2Q24) 3.8 (2Q24) 4.3 (2Q24)
House price index (%, start-to-trough)(1) (12.1) (2Q25) (3.7) (4Q24) (9.6) (1Q24) (6.3) (4Q25) (14.4) (4Q24) (1.0) (2Q24) 0.2 (4Q23) 1.1 (4Q23)
Inflation rate (YoY % change, max)(3) 5.1 (3Q24) 3.9 (3Q24) 4.3 (2Q24) 4.0 (2Q24) 3.5 (2Q24) 4.7 (4Q23) 4.0 (4Q23) 6.4 (2Q24)
1 Cumulative change to the lowest level of the series during the
20-quarter projection.
2 The highest projected unemployment rate in the scenario.
3 The highest projected year-on-year percentage change in inflation in
the scenario.
Downside 2 scenario (4Q23-3Q28)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (%, start-to-trough)(1) (8.4) (4Q24) (4.9) (4Q24) (9.1) (4Q24) (7.3) (3Q24) (5.9) (4Q24) (7.1) (1Q25) (6.4) (1Q25) (8.4) (4Q24)
Unemployment rate (%, max)(2) 9.6 (1Q25) 9.6 (3Q25) 6.5 (3Q24) 6.9 (2Q25) 11.9 (4Q24) 10.2 (4Q25) 4.2 (2Q24) 5.4 (2Q25)
House price index (%, start-to-trough)(1) (32.8) (4Q25) (17.1) (3Q24) (23.4) (1Q27) (28.2) (4Q25) (42.5) (2Q25) (12.4) (1Q26) (3.2) (2Q25) 1.1 (4Q23)
Inflation rate (YoY % change, max)(3) 9.7 (1Q24) 4.3 (1Q24) 4.7 (2Q24) 5.1 (2Q24) 5.3 (1Q24) 8.5 (1Q24) 4.2 (4Q23) 6.6 (2Q24)
1 Cumulative change to the lowest level of the series during the
20-quarter projection.
2 The highest projected unemployment rate in the scenario.
3 The highest projected year-on-year percentage change in inflation
in the scenario.
The following table describes the probabilities assigned in each scenario.
Scenario weightings, %
Standard weights UK US Hong Mainland China Canada France UAE Mexico
Kong
3Q23
Upside 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Central 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
Downside 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Downside 2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
4Q22
Upside 10.0 5.0 5.0 20.0 20.0 5.0 5.0 5.0 5.0
Central 75.0 60.0 70.0 55.0 55.0 70.0 60.0 70.0 70.0
Downside 10.0 25.0 20.0 20.0 20.0 15.0 25.0 20.0 20.0
Downside 2 5.0 10.0 5.0 5.0 5.0 10.0 10.0 5.0 5.0
At 30 September 2023, the consensus Upside and Central scenarios for all
markets had a combined weighting of 85%. At 31 December 2022, mainland China,
Hong Kong and the US each had a combined weighting of 75% for the consensus
Upside and Central scenarios. The UK had a combined weighting of 65%.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are typically
short-term increases or decreases to the modelled ECL at either a customer,
segment or portfolio level to account for late-breaking events, model and data
limitations and deficiencies, and expert credit judgement applied following
management review and challenge. This includes refining model inputs and
outputs and using adjustments to ECL based on management judgement and higher
level quantitative analysis for impacts that are difficult to model. The
effects of management judgemental adjustments are considered for both balances
and ECL when determining whether or not a significant increase in credit risk
has occurred and is allocated to a stage where appropriate. This is in
accordance with the internal adjustments framework.
Management judgemental adjustments are reviewed under the governance process
for IFRS 9 (as detailed in the section 'Credit risk management' on page 145 of
the Annual Report and Accounts 2022).
Review and challenge focuses on the rationale and quantum of the adjustments
with a further review carried out by the second line of defence where
significant. For some management judgemental adjustments, internal frameworks
establish the conditions under which these adjustments should no longer be
required and as such are considered as part of the governance process. This
internal governance process allows management judgemental adjustments to be
reviewed regularly and, where possible, to reduce the reliance on these
through model recalibration or redevelopment, as appropriate. The drivers of
management judgemental adjustments continue to evolve with the economic
environment and as new risks emerge.
At 30 September 2023, management judgemental adjustments decreased by $0.3bn
compared with 31 December 2022. Adjustments reflected the uncertainty related
to high inflation, elevated interest rates and sector-specific risks.
Management judgemental adjustments made in estimating the scenario-weighted
reported ECL at 30 September 2023 are set out in the following table.
Management judgemental adjustments to ECL at 30 September 2023(1)
Retail Wholesale Total
$bn $bn $bn
Banks, sovereigns, government entities and low-risk counterparties - - -
Corporate lending adjustments 0.1 0.1
Retail lending inflation-related adjustments 0.1 0.1
Other macroeconomic-related adjustments 0.2 0.2
Other retail lending adjustments 0.1 0.1
Total 0.4 0.1 0.5
Management judgemental adjustments to ECL at 31 December 2022(1)
Retail Wholesale Total
$bn $bn $bn
Banks, sovereigns, government entities and low-risk counterparties - -
Corporate lending adjustments 0.5 0.5
Retail lending inflation-related adjustments 0.1 0.1
Other macroeconomic-related adjustments 0.1 0.1
Other retail lending adjustments 0.2 0.2
Total 0.3 0.5 0.8
1 Management judgemental adjustments presented in the table reflect
increases or (decreases) to ECL, respectively.
In the wholesale portfolio, management judgemental adjustments were an
increase to modelled ECL of $0.1bn at 30 September 2023 (31 December 2022:
$0.5bn increase). These were mainly corporate lending adjustments, of which
the highest increase to modelled ECL was observed in Hong Kong to reflect the
uncertainty of the exposure to higher-risk mainland China commercial real
estate. Other adjustments were made to reflect operational adjustments and
interest rate risks not yet captured in data and models. The decrease in
adjustments to ECL compared with 31 December 2022 is attributed to a
crystallisation of existing risks at that date through downgrades, and an
improved reflection of emerging risks in macroeconomic scenarios and modelled
outcomes.
In the retail portfolio, management judgemental adjustments were an increase
to modelled ECL of $0.4bn at 30 September 2023 (31 December 2022: $0.3bn
increase). Retail lending inflation-related adjustments were broadly unchanged
compared with 31 December 2022. Other macroeconomic-related adjustments
increased, and were predominantly in the UK to align the timing of expected
defaults within model outputs to the management expectations of actual
defaults, given stable portfolio performance. Other retail lending adjustments
in relation to data, model and management judgemental adjustments reduced.
Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against the economic
forecasts as part of the ECL governance process by recalculating the ECL under
each scenario described above for selected portfolios, applying a 100%
weighting to each scenario in turn. The weighting is reflected in both the
determination of a significant increase in credit risk and the measurement of
the resulting ECL.
The ECL calculated for the Upside and Downside scenarios should not be taken
to represent the upper and lower limits of possible ECL outcomes. The impact
of defaults that might occur in the future under different economic scenarios
is captured by recalculating ECL for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in numbers
representing more severe risk scenarios when assigned a 100% weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes ECL and
financial instruments related to defaulted (stage 3) obligors. The measurement
of stage 3 ECL is relatively more sensitive to credit factors specific to the
obligor than future economic scenarios, and therefore the effect of
macroeconomic factors are not necessarily the key consideration when
performing individual assessments of ECL for obligors in default. Loans to
defaulted obligors are a small portion of the overall wholesale lending
exposure, even if representing the majority of the allowance for ECL. Due to
the range and specificity of the credit factors to which the ECL is sensitive,
it is not possible to provide a meaningful alternative sensitivity analysis
for a consistent set of risks across all defaulted obligors.
For retail credit risk exposures, the sensitivity analysis includes ECL for
loans and advances to customers related to defaulted obligors. This is because
the retail ECL for secured mortgage portfolios including loans in all stages
is sensitive to macroeconomic variables.
Group ECL sensitivity results
The ECL impact of the scenarios and judgemental management adjustments are
highly sensitive to movements in economic forecasts. If the Group ECL balance
(excluding wholesale stage 3, which is assessed individually) was estimated
solely on the basis of the consensus Central scenario, consensus Upside
scenario, consensus Downside scenario or the Downside 2 scenario at 30
September 2023, it would increase/(decrease) as presented in the below
sensitivity table.
Retail(1) Wholesale(2)
Total Group ECL at 30 September 2023 $bn $bn
Reported ECL 2.9 2.6
Scenarios
100% consensus Central scenario (0.1) (0.3)
100% consensus Upside scenario (0.5) (0.8)
100% consensus Downside scenario 0.4 0.6
100% Downside 2 scenario 2.1 6.3
Total Group ECL at 31 December 2022
Reported ECL 3.0 3.1
Scenarios
100% consensus Central scenario (0.2) (0.5)
100% consensus Upside scenario (0.6) (1.1)
100% consensus Downside scenario 0.4 0.8
100% Downside 2 scenario 1.8 5.5
1 ECL sensitivities exclude portfolios utilising less complex
modelling approaches.
2 Includes low credit-risk financial instruments, such as debt
instruments at FVOCI, which have high carrying values but low ECL under all
the scenarios.
At 30 September 2023, the Group ECL decreased by $0.1bn in the retail
portfolio and decreased by $0.5bn in the wholesale portfolio, compared with 31
December 2022.
In both the retail and wholesale portfolios, the reduction in Central and
Upside ECL sensitivity was due to higher weightings being assigned to these
scenarios, which reduced reported ECL at 30 September 2023. The increase in
the Downside 2 scenario sensitivity since 31 December 2022 has been driven by
uncertainty in relation to elevated inflation and higher interest rates. The
Downside 2 scenario sensitivity increased across different geographies in the
retail and wholesale portfolios.
Personal lending
Total personal lending for loans and advances to customers by stage
distribution
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
By legal entity
HSBC UK Bank plc 132,003 39,740 1,032 172,775 (150) (599) (224) (973)
HSBC Bank plc 23,771 3,085 307 27,163 (14) (23) (96) (133)
The Hongkong and Shanghai Banking Corporation Limited 188,983 6,902 944 196,829 (152) (392) (160) (704)
HSBC Bank Middle East Limited 3,504 189 68 3,761 (28) (23) (39) (90)
HSBC North America Holdings Inc. 17,589 668 371 18,628 (7) (12) (10) (29)
Grupo Financiero HSBC, S.A. de C.V. 12,342 1,259 474 14,075 (207) (392) (232) (831)
Other trading entities 11,459 327 278 12,064 (31) (36) (79) (146)
At 30 Sep 2023 389,651 52,170 3,474 445,295 (589) (1,477) (840) (2,906)
By legal entity
HSBC UK Bank plc 128,590 37,394 1,012 166,996 (135) (688) (227) (1,050)
HSBC Bank plc 6,377 740 127 7,244 (10) (18) (38) (66)
The Hongkong and Shanghai Banking Corporation Limited 185,723 8,698 1,117 195,538 (138) (362) (187) (687)
HSBC Bank Middle East Limited 3,657 184 86 3,927 (26) (37) (52) (115)
HSBC North America Holdings Inc. 16,906 375 270 17,551 (12) (23) (6) (41)
Grupo Financiero HSBC, S.A. de C.V. 9,542 1,099 377 11,018 (213) (331) (194) (738)
Other trading entities 11,882 376 350 12,608 (27) (45) (101) (173)
At 31 Dec 2022 362,677 48,866 3,339 414,882 (561) (1,504) (805) (2,870)
At 30 September 2023, total personal lending for loans and advances to
customers of $445bn increased by $30.4bn compared with 31 December 2022.
Excluding adverse foreign exchange movements of $0.2bn, the increase was
primarily due to $21.1bn from the recognition of our retail banking operations
in France being no longer classified as held for sale. In addition, personal
lending increased by $5.1bn in Hong Kong, $3.9bn in the UK, $1.8bn in Mexico
and $1.2bn in Australia. These were partly offset by a decrease of $1.2bn from
the sale of our operations in Oman and a $1.0bn decrease from the sale of our
retail mortgage loan portfolio in New Zealand, which included a
reclassification to 'assets held for sale' of $0.8bn.
Wholesale lending
Total wholesale lending for loans and advances to banks and customers at
amortised cost
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
By legal entity
HSBC UK Bank plc 69,948 19,977 3,869 - 93,794 (189) (527) (608) - (1,324)
HSBC Bank plc 83,013 9,609 2,497 36 95,155 (59) (182) (932) - (1,173)
The Hongkong and Shanghai Banking Corporation Limited 282,230 40,995 7,550 51 330,826 (197) (674) (3,554) (22) (4,447)
HSBC Bank Middle East Limited 21,789 1,549 762 3 24,103 (18) (14) (615) (1) (648)
HSBC North America Holdings Inc. 29,280 6,388 319 - 35,987 (24) (187) (43) - (254)
Grupo Financiero HSBC, S.A. de C.V. 12,219 1,445 372 - 14,036 (34) (59) (223) - (316)
Other trading entities 13,243 1,207 489 - 14,939 (20) (14) (219) - (253)
Holding companies, shared service centres and intra-Group eliminations 39 - - - 39 - - - - -
At 30 Sep 2023 511,761 81,170 15,858 90 608,879 (541) (1,657) (6,194) (23) (8,415)
By legal entity
HSBC UK Bank plc 64,930 18,856 4,439 28 88,253 (165) (445) (643) (1) (1,254)
HSBC Bank plc 83,174 9,175 2,631 3 94,983 (56) (181) (1,075) - (1,312)
The Hongkong and Shanghai Banking Corporation Limited 292,022 50,708 6,934 80 349,744 (216) (1,074) (3,125) (24) (4,439)
HSBC Bank Middle East Limited 21,922 1,777 946 4 24,649 (11) (21) (684) (3) (719)
HSBC North America Holdings Inc. 30,816 6,861 211 - 37,888 (24) (194) (22) - (240)
Grupo Financiero HSBC, S.A. de C.V. 9,969 1,979 399 - 12,347 (48) (62) (225) - (335)
Other trading entities 13,512 2,593 687 14 16,806 (29) (36) (272) (10) (347)
Holding companies, shared service centres and intra-Group eliminations - - - - - - - - - -
At 31 Dec 2022 516,345 91,949 16,247 129 624,670 (549) (2,013) (6,046) (38) (8,646)
Stage 2 wholesale lending balances in the Hongkong and Shanghai Banking
Corporation Limited of $41.0bn decreased by $9.7bn compared with 31 December
2022. This is due to de-risking measures and repayments in the commercial real
estate portfolio, in addition to further downgrades to stage 3.
Commercial real estate
The following table presents the Group's exposure to borrowers classified in
the commercial real estate sector where the ultimate parent is based in
mainland China, as well as all commercial real estate exposures booked on
mainland China balance sheets. The exposures at 30 September 2023 are split
by country/territory and credit quality including allowances for ECL by stage.
Mainland China commercial real estate
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers(1) 7,242 4,795 944 12,981
Guarantees issued and others(2) 262 351 654
41
Total mainland China commercial real estate exposure at 30 Sep 2023 7,504 5,146 985 13,635
Distribution of mainland China commercial real estate exposure by credit
quality
Strong 1,197 1,748 111 3,056
Good 643 946 431 2,020
Satisfactory 925 1,689 233 2,847
Sub-standard 1,485 520 191 2,196
Credit impaired 3,254 243 3,516
19
At 30 Sep 2023 7,504 5,146 985 13,635
Allowance for ECL by credit quality
Strong - (3) - (3)
Good - (5) (1) (6)
Satisfactory (3) (27) - (30)
Sub-standard (97) (98) (17) (212)
Credit impaired (1,931) (88) - (2,019)
At 30 Sep 2023 (2,031) (221) (18) (2,270)
Allowance for ECL by stage distribution
Stage 1 (1) (8) (1) (10)
Stage 2 (99) (125) (17) (241)
Stage 3 (1,931) (88) - (2,019)
At 30 Sep 2023 (2,031) (221) (18) (2,270)
ECL coverage % 27.1 4.3 1.8 16.6
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent
liabilities.
Mainland China commercial real estate (continued)
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers(1) 9,129 5,752 860 15,741
Guarantees issued and others(2) 249 755 18 1,022
Total mainland China commercial real estate exposure at 31 Dec 2022 9,378 6,507 878 16,763
Distribution of mainland China commercial real estate exposure by credit
quality
Strong 1,425 2,118 220 3,763
Good 697 1,087 370 2,154
Satisfactory 1,269 2,248 77 3,594
Sub-standard 2,887 779 193 3,859
Credit impaired 3,100 275 18 3,393
At 31 Dec 2022 9,378 6,507 878 16,763
Allowance for ECL by credit quality
Strong (5) (5)
- -
Good (8) (9)
- (1)
Satisfactory (20) (81) (101)
-
Sub-standard (458) (42) (503)
(3)
Credit impaired (1,268) (105) (1,373)
-
At 31 Dec 2022 (1,746) (241) (1,991)
(4)
Allowance for ECL by stage distribution
Stage 1 (9) (11)
(1) (1)
Stage 2 (477) (127) (607)
(3)
Stage 3 (1,268) (105) (1,373)
-
At 31 Dec 2022 (1,746) (241) (1,991)
(4)
ECL coverage % 18.6 3.7 0.5 11.9
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent
liabilities.
Commercial real estate financing refers to lending that focuses on commercial
development and investment in real estate and covers commercial, residential
and industrial assets. Commercial real estate financing can also be provided
to a corporate or financial entity for the purchase or financing of a property
which supports the overall operations of the business.
The exposures in the table are related to companies whose primary activities
are focused on residential, commercial and mixed-use real estate activities.
Lending is generally focused on tier 1 and 2 cities. The table above shows 58%
of total exposure with a credit quality of 'satisfactory' or above, which was
broadly unchanged compared with 31 December 2022. Total 'credit impaired'
exposures have nevertheless increased to 26% (31 December 2022: 20%),
reflecting sustained stress in the mainland China commercial real estate
market, including weakness in both property market fundamentals and financing
conditions for borrowers operating in this sector.
Allowances for ECL are substantially against unsecured exposures. For secured
exposures, allowances for ECL are minimal, reflecting the nature and value of
the security held.
Facilities booked in Hong Kong continue to represent the largest proportion of
mainland China commercial real estate exposures, although total exposures
reduced to $7.5bn, down $1.9bn since 31 December 2022, as a result of
de-risking measures and repayments. This portfolio remains relatively higher
risk, with 37% of exposure booked with a credit quality of 'satisfactory' or
above (31 December 2022: 36%) and 43% 'credit impaired' (31 December 2022:
33%). This reflected a further credit deterioration during the 9M23 period. At
30 September 2023, the Group had allowances for ECL of $2.0bn held against
mainland China commercial real estate exposures booked in Hong Kong (31
December 2022: $1.7bn).
Approximately half of the unimpaired exposure in the Hong Kong portfolio is
lending to state-owned enterprises and relatively strong private-owned
enterprises. This is reflected in the relatively low ECL allowance in this
part of the portfolio. Market conditions are likely to remain stressed with a
protracted and uncertain recovery as sentiment and domestic residential demand
remain weak. There is potential for a further deterioration in credit
conditions during the last three months of the year given the continued
uncertainty around liquidity support and ongoing weakness in property market
fundamentals.
The Group has additional exposures to mainland China commercial real estate as
a result of lending to multinational corporates booked outside of mainland
China. These are not incorporated in the table above.
Capital risk
Capital overview
Capital adequacy metrics
At
30 Sep 30 Jun
2023 2023
Risk-weighted assets ('RWAs') ($bn)
Credit risk 674.9 690.5
Counterparty credit 36.9 38.6
Market risk 42.7 43.0
Operational risk 85.5 87.4
Total risk-weighted assets 840.0 859.5
Capital on a transitional basis ($bn)
Common equity tier 1 ('CET1') capital 124.8 126.4
Tier 1 capital 142.5 145.8
Total capital 165.5 170.0
Capital ratios on a transitional basis (%)
Common equity tier 1 ratio 14.9 14.7
Tier 1 ratio 17.0 17.0
Total capital ratio 19.7 19.8
Capital on an end point basis ($bn)
Common equity tier 1 ('CET1') capital 124.8 126.4
Tier 1 capital 142.5 145.8
Total capital 161.8 165.9
Capital ratios on an end point basis (%)
Common equity tier 1 ratio 14.9 14.7
Tier 1 ratio 17.0 17.0
Total capital ratio 19.3 19.3
Liquidity coverage ratio ('LCR')
Total high-quality liquid assets ($bn) 641.1 631.2
Total net cash outflow ($bn) 476.8 477.7
LCR (%) 134 132
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.
Capital figures and ratios in the above table are calculated in accordance
with the Capital Requirements Regulation, as implemented. The table presents
them under the transitional arrangements of the Capital Requirements
Regulation for capital instruments and after their expiry, known as the end
point.
The liquidity coverage ratio is based on the average month-end value over the
preceding 12 months.
Regulatory numbers and ratios are as presented at the date of reporting. Small
changes may exist between these numbers and ratios and those subsequently
submitted in regulatory filings. Where differences are significant, we will
restate in subsequent periods.
Capital
At 30 September 2023, our CET1 capital ratio increased to 14.9% from 14.7% at
30 June 2023, reflecting a decrease in RWAs of $19.5bn, partly offset by a
decline in CET1 capital of $1.6bn.
The impact on the CET1 ratio of these changes were as follows:
- a 0.2 percentage point increase from capital generation, mainly
through profits less dividends, adjusted for the share buy-back announced at
our 2Q23 results;
- a 0.1 percentage point increase from the fall in the underlying
RWAs, primarily driven by strategic disposals including the sale of our Oman
business; and
- a 0.1 percentage point reduction due to an increase in regulatory
deductions, primarily for intangible assets, excess expected loss and
non-performing exposures.
Foreign exchange movements reduced CET1 capital by $2.0bn and RWAs by $12.5bn,
contributing to a minimal decrease in the CET1 ratio.
Our Pillar 2A requirement, set by the Prudential Regulation Authority's
('PRA') Individual Capital Requirement based on a point-in-time assessment,
was equivalent to 2.6% of RWAs, of which 1.5% was required to be met by CET1.
Throughout 3Q23 we complied with the PRA's regulatory capital adequacy
requirement.
Leverage
Leverage ratio(1)
At
30 Sep 30 Jun
2023 2023
$bn $bn
Tier 1 capital (leverage) 142.5 145.8
Total leverage ratio exposure 2,478.3 2,497.9
% %
Leverage ratio 5.7 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.
Our leverage ratio was 5.7% at 30 September 2023, down from 5.8% at 30 June
2023, due to a reduction in tier 1 capital. This was partly offset by a
decrease in the leverage exposure, which was primarily due to foreign currency
translation movements.
At 30 September 2023, our UK minimum leverage ratio requirement of 3.25% was
supplemented by a leverage ratio buffer of 0.9%, which consists of an
additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio
buffer of 0.2%. These buffers translated into capital values of $17.3bn and
$5.0bn respectively. We exceeded these leverage requirements throughout 3Q23.
Risk-weighted assets
RWAs by global business
WPB CMB GBM Corporate Total
Centre
RWAs
$bn $bn $bn $bn $bn
Credit risk 150.6 314.5 131.9 77.9 674.9
Counterparty credit risk 1.2 0.8 33.0 1.9 36.9
Market risk 1.4 1.1 27.1 13.1 42.7
Operational risk 30.9 26.5 28.7 (0.6) 85.5
At 30 Sep 2023 184.1 342.9 220.7 92.3 840.0
At 30 Jun 2023 186.6 353.8 227.0 92.1 859.5
RWAs by legal entities(1)
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada Grupo Financiero HSBC, S.A. Other trading entities Holding companies, shared service centres and intra-Group eliminations Total
de C.V.
RWAs
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
Credit risk 106.9 70.0 312.8 17.1 59.3 26.7 24.8 49.3 8.0 674.9
Counterparty credit risk 0.2 18.2 9.3 0.8 3.3 0.5 0.6 4.0 - 36.9
Market risk(2) 0.1 21.7 24.3 3.7 3.7 1.0 0.7 2.9 9.0 42.7
Operational risk 15.2 14.4 39.2 3.0 7.4 3.0 4.7 5.2 (6.6) 85.5
At 30 Sep 2023 122.4 124.3 385.6 24.6 73.7 31.2 30.8 61.4 10.4 840.0
At 30 Jun 2023 125.7 127.4 391.5 24.2 73.1 31.4 30.7 66.3 11.3 859.5
1 Balances are on a third-party Group consolidated basis.
2 Market risk RWAs are non-additive across the principal entities due
to diversification effects within the Group.
RWA movement by global business by key driver
Credit risk, counterparty credit risk Market Total
and operational risk risk RWAs
WPB CMB GBM Corporate
Centre
$bn $bn $bn $bn $bn $bn
RWAs at 1 July 2023 185.3 352.4 199.8 79.0 43.0 859.5
Asset size 2.0 (2.8) (0.6) 1.4 (0.3) (0.3)
Asset quality 1.0 1.1 (0.3) 0.2 - 2.0
Model updates (0.4) (0.1) (0.2) - - (0.7)
Methodology and policy (0.4) (0.7) (2.4) (1.2) - (4.7)
Acquisitions and disposals (1.2) (1.5) (0.7) 0.1 - (3.3)
Foreign exchange movements(1) (3.6) (6.6) (2.0) (0.3) - (12.5)
Total RWA movement (2.6) (10.6) (6.2) 0.2 (0.3) (19.5)
RWAs at 30 Sep 2023 182.7 341.8 193.6 79.2 42.7 840.0
1 Credit risk foreign exchange movements in this disclosure are computed
by retranslating the RWAs into US dollars based on the underlying
transactional currencies.
RWA movement by legal entities by key driver(1)
Credit risk, counterparty credit risk and operational risk
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada Grupo Financiero HSBC, S.A. Other trading entities Holding companies, shared service centres and intra-Group eliminations Market risk Total RWAs
de C.V.
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
RWAs at 1 July 2023 125.5 106.4 367.9 21.6 70.0 30.7 30.0 62.6 1.8 43.0 859.5
Asset size 0.7 (0.2) (2.5) (0.4) (0.4) (0.1) 0.3 2.6 - (0.3) (0.3)
Asset quality 1.7 0.5 (0.7) (0.4) 0.4 0.2 0.2 0.1 - - 2.0
Model updates (0.1) (0.4) (0.2) 0.1 - - - (0.1) - - (0.7)
Methodology and policy (0.5) (1.1) (1.7) - - (0.1) - (0.9) (0.4) - (4.7)
Acquisitions and disposals - (0.2) - - - - - (3.2) 0.1 - (3.3)
Foreign exchange movements(2) (5.0) (2.4) (1.5) - - (0.5) (0.4) (2.6) (0.1) - (12.5)
Total RWA movement (3.2) (3.8) (6.6) (0.7) - (0.5) 0.1 (4.1) (0.4) (0.3) (19.5)
RWAs at 30 Sep 2023 122.3 102.6 361.3 20.9 70.0 30.2 30.1 58.5 1.4 42.7 840.0
1 Balances are on a third-party Group consolidated basis.
2 Credit risk foreign exchange movements in this disclosure are
computed by retranslating the RWAs into US dollars based on the underlying
transactional currencies.
RWAs fell by $19.5bn during 3Q23, including a decrease of $12.5bn due to
foreign currency translation differences. The additional $7.0bn reduction in
RWAs was predominantly attributed to the sale of our Oman business and changes
in methodology and policy, which was partly offset by asset quality movements.
Asset size
The $2.8bn fall in CMB RWAs reflected lower customer lending, mainly in Hong
Kong and the US, partly offset by a rise in corporate loans in HSBC UK and
increased sovereign exposures mainly in Asia.
GBM RWAs decreased by $0.6bn, mainly in HSBC Bank plc, Asia and Mexico, as a
result of mark-to-market movements and matured derivatives in counterparty
credit risk. These movements were partly offset by higher sovereign exposures,
notably in Asia and HSBC Bank plc, and a rise in corporate exposures, mainly
in HSBC Bank plc and Asia.
The $0.3bn decrease in market risk RWAs was mainly attributed to a fall in
equity dividend risk, interest rate risk in bond exposures, and lower foreign
exchange exposures. This decrease was largely offset by a rise in value at
risk following the implementation of a new stressed value at risk model and
heightened market volatility.
WPB RWAs rose by $2.0bn, mainly due to mortgage growth in HSBC UK, Hong Kong,
the US and Mexico, and higher sovereign exposures, mainly in Asia and other
trading entities.
Corporate Centre RWAs increased by $1.4bn, which was largely driven by a rise
in corporate exposures in SAB.
Asset quality
Portfolio mix changes and unfavourable credit risk rating migrations were the
main drivers of asset quality movements, mainly in HSBC UK, HSBC Bank plc,
Asia and the US, contributing to an overall $2.0bn rise in RWAs.
Model updates
The $0.7bn fall in RWAs was driven by a change in our risk approach to
multilateral development banks' exposures, following approval from the PRA.
Methodology and policy
Credit risk parameter refinements mainly in Asia, HSBC Bank plc and SAB led to
an RWA reduction of $4.7bn.
Acquisitions and disposals
RWAs decreased by $3.3bn due to strategic disposals including the sale of our
Oman business.
Regulatory and other developments
In September 2023, the PRA announced changes to the UK implementation of Basel
3.1 with a new proposed implementation date of 1 July 2025. For further
details related to the November 2022 consultation, see page 6 of our Pillar 3
Disclosures at 31 December 2022. We are currently assessing the impact of the
consultation paper and the associated implementation challenges (including
data provision) on our RWAs upon initial implementation. We will update as
soon as practicable after the final rules are announced. The RWA output floor
under Basel 3.1 is now proposed to be subject to a four-and-a-half year
transitional provision. Any impact from the output floor would be towards the
end of the transition period.
Regulatory transitional arrangements for IFRS 9 'Financial Instruments'
We have adopted the regulatory transitional arrangements of the Capital
Requirements Regulation for IFRS 9, including paragraph four of article 473a.
These allow banks to add back to their capital base a proportion of the impact
that IFRS 9 has upon their loan loss allowances. Our capital and ratios are
presented under these arrangements throughout the tables in this section,
including the end point figures.
For further details, see our Pillar 3 Disclosures at 30 September 2023, which
is expected to be published on or around 6 November 2023 at
www.hsbc.com/investors.
Alternative performance measures
Use of alternative performance measures
Our reported results are prepared in accordance with IFRSs as detailed in our
financial statements starting on page 324 of our Annual Report and Accounts
2022. We use a combination of reported and alternative performance measures,
including those derived from our reported results that eliminate factors that
distort period-on-period comparisons. These are considered alternative
performance measures (non-GAAP financial measures).
The following information details the adjustments made to the reported results
and the calculation of other alternative performance measures. All alternative
performance measures are reconciled to the closest reported performance
measure.
On 1 January 2023, HSBC adopted IFRS 17 'Insurance Contracts'. As required by
the standard, the Group applied the requirements retrospectively with
comparative data previously published under IFRS 4 'Insurance Contracts'
restated from the 1 January 2022 transition date.
Return on average ordinary shareholders' equity and return on average tangible
equity
Return on average ordinary shareholders' equity ('RoE') is computed by taking
profit attributable to the ordinary shareholders of the parent company
('reported results'), divided by average ordinary shareholders' equity
('reported equity') for the period. The adjustment to reported results and
reported equity excludes amounts attributable to non-controlling interests and
holders of preference shares and other equity instruments.
Return on average tangible equity ('RoTE') is computed by adjusting reported
results for impairment of goodwill and other intangible assets (net of tax),
divided by average reported equity adjusted for goodwill and intangibles for
the period.
We provide RoTE ratios in addition to RoE as a way of assessing our
performance, which is closely aligned to our capital position.
Return on average ordinary shareholders' equity and return on average tangible
equity
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Profit
Profit attributable to the ordinary shareholders of the parent company 22,585 9,968 5,619 6,639 2,002
Impairment of goodwill and other intangible assets (net of tax) 36 480 7 11 443
Profit attributable to the ordinary shareholders, excluding goodwill and other 22,621 10,448 5,626 6,650 2,445
intangible assets impairment
Impact of strategic transactions(1,2) (3,215) 1,852 (86) 11 1,852
Profit attributable to the ordinary shareholders, excluding goodwill, other 19,406 12,300 5,540 6,661 4,297
intangible assets impairment and strategic transactions
Equity
Average ordinary shareholders' equity 164,642 159,305 164,890 167,740 152,978
Effect of goodwill and other intangibles (net of deferred tax) (11,376) (10,693) (11,549) (11,394) (10,522)
Average tangible equity 153,266 148,612 153,341 156,346 142,456
Average impact of strategic transactions (1,910) 463 (38) (1,572) 926
Average tangible equity excluding strategic transactions 151,356 149,075 153,303 154,774 143,382
Ratio % % % % %
Return on average ordinary shareholders' equity (annualised) 18.3 8.4 13.5 15.9 5.2
Return on average tangible equity (annualised) 19.7 9.4 14.6 17.1 6.8
Return on average tangible equity excluding strategic transactions 17.1 11.0 14.3 17.3 11.9
(annualised)
1 Includes $1.9bn (net of tax) impairment loss relating to the planned
sale of the retail banking operations in France recognised in 3Q22, fair value
changes recognised in 4Q22, and the subsequent reversal of the impairment in
1Q23 of $1.6bn (net of tax) as the business is no longer classified as held
for sale.
2 Includes the provisional gain of $1.6bn recognised in respect of the
acquisition of SVB UK.
Return on average tangible equity by global business
Nine months ended 30 Sep 2023
Wealth and Personal Commercial Global Corporate Total
Banking
Centre
Banking(1) Banking and
Markets(1)
$m $m $m $m $m
Profit before tax 11,369 10,787 4,904 2,311 29,371
Tax expense (2,242) (2,193) (925) 326 (5,034)
Profit after tax 9,127 8,594 3,979 2,637 24,337
Less attributable to: preference shareholders, other equity holders, (744) (419) (413) (176) (1,752)
non-controlling interests
Profit attributable to ordinary shareholders of the parent company 8,383 8,175 3,566 2,461 22,585
Other adjustments (160) 256 119 (179) 36
Profit attributable to ordinary shareholders 8,223 8,431 3,685 2,282 22,621
Average tangible shareholders' equity 29,466 43,679 38,200 41,921 153,266
RoTE (%) (annualised) 37.3 25.8 12.9 7.3 19.7
Nine months ended 30 Sep 2022
Profit before tax 2,742 5,599 4,295 12,009
(627)
Tax expense (1,331) 2,043
(518) (615) (421)
Profit after tax 2,224 4,268 3,680 1,416 11,588
Less attributable to: preference shareholders, other equity holders, (1,620)
non-controlling interests (533) (301) (375) (411)
Profit attributable to ordinary shareholders of the parent company 1,691 3,967 3,305 1,005 9,968
Other adjustments 437 226 188 480
(371)
Profit attributable to ordinary shareholders 2,128 4,193 3,493 634 10,448
Average tangible shareholders' equity(2) 30,097 42,233 40,169 36,113 148,612
RoTE (%) (annualised) 9.5 13.3 11.6 2.3 9.4
1 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 markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
2 From 1 January 2023, we have revised our methodology for allocating
tangible equity to the global businesses following a review of capital
consumption drivers. Comparative data have been re-presented accordingly.
Net asset value and tangible net asset value per ordinary share
Net asset value per ordinary share is total shareholders' equity less
non-cumulative preference shares and capital securities ('total ordinary
shareholders' equity'), divided by the number of ordinary shares in issue
excluding shares that the company has purchased and are held in treasury.
Tangible net asset value per ordinary share is total ordinary shareholders'
equity excluding goodwill and other intangible assets (net of deferred tax)
('tangible ordinary shareholders' equity'), divided by the number of basic
ordinary shares in issue excluding shares that the company has purchased and
are held in treasury.
Net asset value and tangible net asset value per ordinary share
At
30 Sep 30 Jun 30 Sep
2023 2023 2022
$m $m $m
Total shareholders' equity 182,720 184,170 168,417
Preference shares and other equity instruments (17,719) (19,392) (19,746)
Total ordinary shareholders' equity 165,001 164,778 148,671
Goodwill and intangible assets (net of deferred tax) (11,554) (11,544) (10,237)
Tangible ordinary shareholders' equity 153,447 153,234 138,434
Basic number of $0.50 ordinary shares outstanding 19,275 19,534 19,738
Value per share $ $ $
Net asset value per ordinary share 8.56 8.44 7.53
Tangible net asset value per ordinary share 7.96 7.84 7.01
Expected credit losses and other credit impairment charges as % of average
gross loans and advances to customers
Expected credit losses and other credit impairment charges ('ECL') as % of
average gross loans and advances to customers is the annualised constant
currency ECL divided by constant currency average gross loans and advances to
customers for the period. The constant currency numbers are derived by
adjusting reported ECL and average loans and advances to customers for the
effects of foreign currency translation differences.
Expected credit losses and other credit impairment charges as % of average
gross loans and advances to customers
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Expected credit losses and other credit impairment charges ('ECL') (2,416) (2,155) (1,071) (913) (1,068)
Currency translation - (22) - (1) (35)
Constant currency (2,416) (2,177) (1,071) (914) (1,103)
Average gross loans and advances to customers 957,080 1,034,256 959,129 973,174 1,007,217
Currency translation (9,594) (21,600) (9,719) (16,693) 12,005
Constant currency 947,486 1,012,656 949,410 956,481 1,019,222
Average gross loans and advances to customers, including held for sale 1,020,441 1,040,926 1,017,351 1,031,316 1,019,345
Currency translation (9,850) (20,788) (10,305) (17,212) 12,987
Constant currency 1,010,591 1,020,138 1,007,046 1,014,104 1,032,332
Ratios % % % % %
Expected credit losses and other credit impairment charges (annualised) as % 0.34 0.29 0.45 0.38 0.43
of average gross loans and advances to customers
Expected credit losses and other credit impairment charges (annualised) as % 0.32 0.29 0.42 0.36 0.42
of average gross loans and advances to customers, including held for sale
Target basis operating expenses
Target basis operating expenses is computed by excluding the impact of notable
items and foreign exchange translation impacts from reported results. We also
exclude the impact of retranslating comparative period financial information
at the latest rates of foreign exchange in hyperinflationary economies, which
we consider to be outside of our control. Our target basis also excludes the
impact of the acquisition of SVB UK and related investments internationally,
which are expected to add approximately 1% to our cost growth in 2023 compared
with 2022. We consider this measure to provide useful information to investors
by quantifying and excluding the notable items that management considered when
setting and assessing cost-related targets.
Target basis operating expenses
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Reported operating expenses 23,425 23,920 7,968 7,871 7,792
Notable items (120) (1,731) (48) (9) (691)
- disposals, acquisitions and related costs (197) (9) (78) (57) (9)
- restructuring and other related costs 77 (1,722) 30 48 (682)
Excluding the impact of SVB UK and related international investments (172) - (105) (67) -
Currency translation(1) (480) (47) 83
Excluding the impact of retranslating prior period costs of hyperinflationary 285 63 128
economies at constant currency FX
Target basis operating expenses 23,134 21,995 7,815 7,811 7,312
1 Currency translation on reported operating expenses, excluding
currency translation on notable items.
Earnings per share excluding material notable items and related impacts
Basic earnings per ordinary share excluding material notable items and related
impacts is calculated by dividing the profit attributable to ordinary
shareholders of the parent company, excluding the impacts of material M&A
transactions and the 9M22 deferred tax adjustment in HSBC Holdings, by the
weighted average number of ordinary shares outstanding, excluding own shares
held. In determining this measure, we exclude HSBC Bank Canada's financial
results from the 30 June 2022 net asset reference date onwards, as a component
of the gain on sale will be recognised through the consolidation of HSBC Bank
Canada's results in the Group's results, with the remainder recognised at
completion.
Earnings per share excluding material notable items and related impacts
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Profit attributable to shareholders of company 23,561 11,057 6,053 6,763 2,465
Coupon payable on capital securities classified as equity (976) (1,089) (434) (124) (463)
Profit attributable to ordinary shareholders of company 22,585 9,968 5,619 6,639 2,002
Provisional gain on acquisition of SVB UK (1,593) - (86) 4 -
Impairment loss relating to the planned sale of our retail banking operations (1,622) 1,852 - 7 1,852
in France (net of tax)
Impact of the agreed sale of our banking business in Canada(1) (439) - (376) 55 -
Recognition of a deferred tax asset from historical tax losses in HSBC - (2,082) - - -
Holdings
Profit attributable to ordinary shareholders of company excluding material 18,931 9,738 5,157 6,705 3,854
notable items and related impacts
Number of shares
Average basic number of ordinary shares (millions) 19,596 19,886 19,404 19,662 19,752
Basic earnings per share excluding material notable items and related impacts 0.97 0.49 0.27 0.34 0.20
Basic earnings per share 1.15 0.50 0.29 0.34 0.10
1 Represents the earnings recognised by the banking business in
Canada, net of gains and losses on foreign exchange hedges held at Group
level, that will reduce the gain on sale recognised by the Group on
completion.
Reported and constant currency results
Reported and constant currency results(1)
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Revenue(2)
Reported 53,037 36,053 16,161 16,705 11,508
Currency translation (831) (98) 67
Constant currency 53,037 35,222 16,161 16,607 11,575
Change in expected credit losses and other credit impairment charges
Reported (2,416) (2,155) (1,071) (913) (1,068)
Currency translation (22) (1) (35)
Constant currency (2,416) (2,177) (1,071) (914) (1,103)
Operating expenses
Reported (23,425) (23,920) (7,968) (7,871) (7,793)
Currency translation 486 47 (109)
Constant currency (23,425) (23,434) (7,968) (7,824) (7,902)
Share of profit in associates and joint ventures
Reported 2,175 2,031 592 850 582
Currency translation (114) (21) (28)
Constant currency 2,175 1,917 592 829 554
Profit before tax
Reported 29,371 12,009 7,714 8,771 3,229
Currency translation (481) (73) (105)
Constant currency 29,371 11,528 7,714 8,698 3,124
Profit after tax
Reported 24,337 11,588 6,266 7,045 2,657
Currency translation (370) (54) (70)
Constant currency 24,337 11,218 6,266 6,991 2,587
Loans and advances to customers (net)
Reported 935,750 966,220 935,750 959,558 966,220
Currency translation 32,656 (19,220) 32,656
Constant currency 935,750 998,876 935,750 940,338 998,876
Customer accounts
Reported 1,563,127 1,567,267 1,563,127 1,595,769 1,567,267
Currency translation 54,173 (30,854) 54,173
Constant currency 1,563,127 1,621,440 1,563,127 1,564,915 1,621,440
1 In the current period, constant currency results are equal to
reported as there is no currency translation.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1,2,3) 3,631 (2,666) 310 (241) (2,378)
Fair value movements on financial instruments(4) 15 (653) - - (282)
Restructuring and other related costs(5) - 37 - - (31)
Disposal losses on Markets Treasury repositioning (578) - (578) - -
Operating expenses
Disposals, acquisitions and related costs (197) (9) (79) (57) (9)
Restructuring and other related costs(6) 77 (1,722) 30 47 (682)
Tax
Tax (charge)/credit on notable items (374) 930 127 (8) 688
Recognition of losses - 2,082 - - -
Uncertain tax positions 427 (317) - - -
1 Includes losses from classifying businesses as held for sale as part
of a broader restructuring of our European business, of which $2.3bn relates
to the planned sale of our retail banking operations in France. In 1Q23, a
reversal of $2.1bn (excluding goodwill of $0.4bn) was recognised, as the
business is no longer classified as held for sale.
2 Includes fair value movements on the foreign exchange hedging of the
expected proceeds from the agreed 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 Relates to reversals of restructuring provisions recognised during
2022.
Summary information - global businesses
Supplementary analysis of constant currency results and notable items by
global business
Constant currency results(1)
Nine months ended 30 Sep 2023
Wealth and Commercial Global Corporate Total
Personal
Centre
Banking Banking(2) Banking and
Markets(2)
$m $m $m $m $m
Revenue(3) 22,919 17,640 12,388 90 53,037
ECL (738) (1,372) (302) (4) (2,416)
Operating expenses (10,858) (5,480) (7,182) 95 (23,425)
Share of profit in associates and joint ventures 46 (1) - 2,130 2,175
Profit before tax 11,369 10,787 4,904 2,311 29,371
Loans and advances to customers (net) 455,354 307,048 173,064 284 935,750
Customer accounts 792,928 459,945 309,785 469 1,563,127
1 In the current period, constant currency results are equal to
reported as there is no currency translation.
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 markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
3 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items
Nine months ended 30 Sep 2023
Wealth and Personal Banking Commercial Banking Global Corporate Centre Total
Banking and Markets
$m $m $m $m $m
Notable items
Revenue
Disposals, acquisitions and related costs(1,2) 2,034 1,593 - 4 3,631
Fair value movements on financial instruments(3) - - - 15 15
Disposal losses on Markets Treasury repositioning (253) (190) (135) - (578)
Operating expenses
Disposals, acquisitions and related costs (26) (30) 3 (144) (197)
Restructuring and other related costs(4) 16 30 4 27 77
1 Includes the reversal of a $2.1bn impairment loss relating to the
planned sale of the retail banking operations in France, which is no longer
classified as held for sale.
2 Includes the provisional gain of $1.6bn recognised in respect of the
acquisition of SVB UK.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
4 Amounts in 2023 relate to reversals of restructuring provisions
recognised during 2022.
Reconciliation of reported results to constant currency results - global
businesses (continued)
Nine months ended 30 Sep 2022
Wealth and Personal Banking Commercial Global Banking and Markets(1) Corporate Total
Centre
Banking(1)
$m $m $m $m $m
Revenue(2)
Reported 14,269 11,707 11,564 (1,487) 36,053
Currency translation (277) (211) (311) (32) (831)
Constant currency 13,992 11,496 11,253 (1,519) 35,222
ECL
Reported (869) (955) (328) (3) (2,155)
Currency translation (45) - 21 2 (22)
Constant currency (914) (955) (307) (1) (2,177)
Operating expenses
Reported (10,680) (5,153) (6,941) (1,146) (23,920)
Currency translation 180 144 109 53 486
Constant currency (10,500) (5,009) (6,832) (1,093) (23,434)
Share of profit in associates and joint ventures
Reported 22 - - 2,009 2,031
Currency translation - - - (114) (114)
Constant currency 22 - - 1,895 1,917
Profit/(loss) before tax
Reported 2,742 5,599 4,295 (627) 12,009
Currency translation (142) (67) (181) (91) (481)
Constant currency 2,600 5,532 4,114 (718) 11,528
Loans and advances to customers (net)
Reported 430,524 339,284 196,062 350 966,220
Currency translation 18,497 10,001 4,143 15 32,656
Constant currency 449,021 349,285 200,205 365 998,876
Customer accounts
Reported 778,969 465,216 322,663 419 1,567,267
Currency translation 25,270 16,845 12,021 37 54,173
Constant currency 804,239 482,061 334,684 456 1,621,440
1 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 markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items (continued)
Nine months ended 30 Sep 2022
Wealth and Personal Banking Commercial Banking Global Banking and Markets Corporate Total
Centre
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) (2,205) - - (461) (2,666)
Fair value movements on financial instruments(2) - - - (653) (653)
Restructuring and other related costs(3) 98 (1) (61) 1 37
Operating expenses
Disposals, acquisitions and related costs (4) - - (5) (9)
Restructuring and other related costs (175) (124) (137) (1,286) (1,722)
1 Includes losses from classifying businesses as held for sale as part
of a broader restructuring of our European business, of which $2.3bn relates
to the planned sale of the retail banking operations in France.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in
February 2020, including losses associated with the RWA reduction programme.
Constant currency results(1)
Quarter ended 30 Sep 2023
Wealth and Personal Banking Commercial Global Banking and Markets(2) Corporate Total
Centre
Banking(2)
$m $m $m $m $m
Revenue(3) 6,719 5,424 3,887 131 16,161
ECL (236) (668) (166) (1) (1,071)
Operating expenses (3,717) (1,908) (2,397) 54 (7,968)
Share of profit in associates and joint ventures 11 - - 581 592
Profit before tax 2,777 2,848 1,324 765 7,714
Loans and advances to customers (net) 455,354 307,048 173,064 284 935,750
Customer accounts 792,928 459,945 309,785 469 1,563,127
1 In the current period, constant currency results are equal to
reported as there is no currency translation.
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 markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
3 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items
Quarter ended 30 Sep 2023
Wealth and Personal Banking Commercial Banking Global Corporate Centre Total
Banking and Markets
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs - 86 - 224 310
Disposal losses on Markets Treasury repositioning (253) (190) (135) - (578)
Operating expenses
Disposals, acquisitions and related costs (3) (15) - (61) (79)
Restructuring and other related costs(1) 16 1 4 9 30
1 Relates to reversals of restructuring provisions recognised during 2022.
Reconciliation of reported results to constant currency results - global
businesses (continued)
Quarter ended 30 Jun 2023
Wealth and Commercial Global Corporate Total
Personal
Centre
Banking Banking(1) Banking and
Markets(1)
$m $m $m $m $m
Revenue(2)
Reported 7,217 5,541 4,061 (114) 16,705
Currency translation (14) (37) (44) (3) (98)
Constant currency 7,203 5,504 4,017 (117) 16,607
ECL
Reported (256) (553) (104) - (913)
Currency translation - (1) - - (1)
Constant currency (256) (554) (104) - (914)
Operating expenses
Reported (3,658) (1,860) (2,417) 64 (7,871)
Currency translation 20 21 2 4 47
Constant currency (3,638) (1,839) (2,415) 68 (7,824)
Share of profit in associates and joint ventures
Reported 18 (1) - 833 850
Currency translation - - - (21) (21)
Constant currency 18 (1) - 812 829
Profit before tax
Reported 3,321 3,127 1,540 783 8,771
Currency translation 6 (17) (42) (20) (73)
Constant currency 3,327 3,110 1,498 763 8,698
Loans and advances to customers (net)
Reported 463,836 319,246 176,182 294 959,558
Currency translation (10,475) (6,368) (2,373) (4) (19,220)
Constant currency 453,361 312,878 173,809 290 940,338
Customer accounts
Reported 809,864 472,146 313,126 633 1,595,769
Currency translation (14,155) (9,817) (6,864) (18) (30,854)
Constant currency 795,709 462,329 306,262 615 1,564,915
1 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 markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 30 Jun 2023
Wealth and Personal Commercial Banking Global Corporate Total
Banking Banking and Markets Centre
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs 13 (4) - (250) (241)
Operating expenses
Disposals, acquisitions and related costs (2) (15) - (40) (57)
Restructuring and other related costs(1) - 29 - 18 47
1 Relates to reversals of restructuring provisions recognised during
2022.
Reconciliation of reported results to constant currency results - global
businesses (continued)
Quarter ended 30 Sep 2022
Wealth and Commercial Global Corporate Total
Personal
Centre
Banking Banking(1) Banking and
Markets(1)
$m $m $m $m $m
Revenue(2)
Reported 3,947 4,383 3,771 (593) 11,508
Currency translation (13) 58 23 (1) 67
Constant currency 3,934 4,441 3,794 (594) 11,575
ECL
Reported (298) (676) (94) - (1,068)
Currency translation (32) (1) (3) 1 (35)
Constant currency (330) (677) (97) 1 (1,103)
Operating expenses
Reported (3,464) (1,668) (2,205) (456) (7,793)
Currency translation (41) 4 (71) (1) (109)
Constant currency (3,505) (1,664) (2,276) (457) (7,902)
Share of profit in associates and joint ventures
Reported 14 - - 568 582
Currency translation - - - (28) (28)
Constant currency 14 - - 540 554
Profit/(loss) before tax
Reported 199 2,039 1,472 (481) 3,229
Currency translation (86) 61 (51) (29) (105)
Constant currency 113 2,100 1,421 (510) 3,124
Loans and advances to customers (net)
Reported 430,524 339,284 196,062 350 966,220
Currency translation 18,497 10,001 4,143 15 32,656
Constant currency 449,021 349,285 200,205 365 998,876
Customer accounts
Reported 778,969 465,216 322,663 419 1,567,267
Currency translation 25,270 16,845 12,021 37 54,173
Constant currency 804,239 482,061 334,684 456 1,621,440
1 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 markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 30 Sep 2022
Wealth and Personal Commercial Banking Global Corporate Total
Banking Banking and Markets Centre
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) (2,205) - - (173) (2,378)
Fair value movements on financial instruments(2) - - - (282) (282)
Restructuring and other related costs(3) 5 (1) (35) - (31)
Operating expenses
Disposals, acquisitions and related costs (4) - - (5) (9)
Restructuring and other related costs (62) (58) (50) (512) (682)
1 Includes losses from classifying businesses as held for sale as part
of the broader restructuring of our European business, of which $2.3bn relates
to the planned sale of the retail banking operations in France.
2 Fair value movements on non-qualifying hedges in HSBC Holdings and
debit valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in
February 2020, including losses associated with the RWA reduction programme.
Reconciliation of reported risk-weighted assets to constant currency
risk-weighted assets
The following table reconciles reported and constant currency RWAs.
Reconciliation of reported risk-weighted assets to constant currency
risk-weighted assets
At 30 Sep 2023
Wealth and Personal Banking Commercial Global Corporate Total
Centre
Banking Banking and Markets
$bn $bn $bn $bn $bn
Risk-weighted assets
Reported 184.1 342.9 220.7 92.3 840.0
Constant currency 184.1 342.9 220.7 92.3 840.0
At 30 Jun 2023
Risk-weighted assets
Reported 186.6 353.8 227.0 92.1 859.5
Currency translation
(4.0) (7.7) (2.4) (0.6) (14.7)
Constant currency 182.6 346.1 224.6 91.5 844.8
At 31 Mar 2023
Risk-weighted assets
Reported 181.4 353.1 225.2 94.7 854.4
Currency translation
(2.8) (6.7) (3.2) (0.9) (13.6)
Constant currency 178.6 346.4 222.0 93.8 840.8
Summary information - legal entity
Supplementary analysis of constant currency results and notable items by legal
entity
Legal entity results(1)
Nine months ended 30 Sep 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo- HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(2) Holding Total
ration Limited Financiero
HSBC, S.A. companies,
de C.V.
shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(3) 10,397 9,146 24,253 1,836 3,136 1,501 2,427 3,288 (2,947) 53,037
ECL (476) (153) (1,204) (6) (47) (31) (422) (107) 30 (2,416)
Operating expenses (3,352) (4,536) (9,875) (807) (2,203) (775) (1,356) (1,836) 1,315 (23,425)
Share of profit/(loss) in associates and joint ventures - (52) 1,826 - - - 9 395 (3) 2,175
Profit/(loss) before tax 6,569 4,405 15,000 1,023 886 695 658 1,740 (1,605) 29,371
Loans and advances to customers (net) 257,289 109,244 453,443 18,508 53,186 - 24,702 19,377 1 935,750
Customer accounts(4) 324,526 269,493 766,225 31,030 99,427 - 28,412 43,911 103 1,563,127
1 In the current period, constant currency results are equal to
reported, as there is no currency translation.
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.
These entities had an aggregated impact on Group reported profit before tax of
$933m. Supplementary analysis is provided on page 51 to give a fuller picture
of the MENAT regional performance.
3 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
4 In 3Q23, $11.4bn of customer accounts were transferred from HSBC Bank
plc to other trading entities as a result of intra-Group restructuring.
Notable items
Nine months ended 30 Sep 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo- HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
ration Limited Financiero
HSBC, S.A. companies,
de C.V.
shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1,2) 1,593 2,098 - - - - - - (60) 3,631
Fair value movements on financial instruments(3) - - - - - - - - 15 15
Restructuring and other related costs(4) - 361 - - - - - - (361) -
Disposal losses on Markets Treasury repositioning (145) (94) (339) - - - - - - (578)
Operating expenses
Disposals, acquisitions and related costs (29) (68) - - (5) (81) - - (14) (197)
Restructuring and other related costs(5) 13 16 8 1 2 - 6 2 29 77
1 Includes the reversal of a $2.1bn impairment loss relating to the
planned sale of the retail banking operations in France, which is no longer
classified as held for sale.
2 Includes the provisional gain of $1.6bn recognised in respect of the
acquisition of SVB UK.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
4 Gain recognised as a result of intra-Group restructuring.
5 Relates to reversals of restructuring provisions recognised during
2022.
Legal entity results (continued)
Nine months ended 30 Sep 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(1) Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(2)
Reported 7,142 3,913 18,127 1,245 3,147 1,428 1,956 2,467 (3,372) 36,053
Currency translation (26) (77) (278) 2 - (65) 278 (517) (148) (831)
Constant currency 7,116 3,836 17,849 1,247 3,147 1,363 2,234 1,950 (3,520) 35,222
ECL
Reported (327) (237) (1,189) 58 (21) (64) (334) (46) 5 (2,155)
Currency translation (29) 18 2 - - 2 (46) 30 1 (22)
Constant currency (356) (219) (1,187) 58 (21) (62) (380) (16) 6 (2,177)
Operating expenses
Reported (3,468) (4,683) (9,633) (754) (2,505) (751) (1,187) (1,642) 703 (23,920)
Currency translation 27 10 133 - (1) 35 (166) 335 113 486
Constant currency (3,441) (4,673) (9,500) (754) (2,506) (716) (1,353) (1,307) 816 (23,434)
Share of profit/(loss) in associates and joint ventures
Reported - (32) 1,841 - - - 8 215 (1) 2,031
Currency translation - 2 (115) - - - - - (1) (114)
Constant currency - (30) 1,726 - - - 8 215 (2) 1,917
Profit/(loss) before tax
Reported 3,347 (1,039) 9,146 549 621 613 443 994 (2,665) 12,009
Currency translation (28) (47) (258) 2 (1) (28) 66 (152) (35) (481)
Constant currency 3,319 (1,086) 8,888 551 620 585 509 842 (2,700) 11,528
Loans and advances to customers (net)
Reported 227,527 86,795 478,865 20,384 56,781 55,177 19,988 20,703 - 966,220
Currency translation 22,134 7,573 617 32 - 870 3,113 (1,683) - 32,656
Constant currency 249,661 94,368 479,482 20,416 56,781 56,047 23,101 19,020 - 998,876
Customer accounts
Reported 317,964 240,807 756,033 28,486 98,403 59,385 23,888 42,300 1 1,567,267
Currency translation 30,932 21,382 2,638 51 - 937 3,721 (5,487) (1) 54,173
Constant currency 348,896 262,189 758,671 28,537 98,403 60,322 27,609 36,813 - 1,621,440
1 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.
These entities had an aggregated impact on Group reported profit before tax of
$715m and constant currency profit before tax of $593m. Supplementary analysis
is provided on page 51 to give a fuller picture of the MENAT regional
performance.
2 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items (continued)
Nine months ended 30 Sep 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) - (2,231) - - - - - - (435) (2,666)
Fair value movements on financial instruments(2) - - - - - - - - (653) (653)
Restructuring and other related costs(3) 1 (35) - - 87 - (2) - (14) 37
Operating expenses
Disposals, acquisitions and related costs - (9) - - - - - - - (9)
Restructuring and other related costs (328) (382) (402) (33) (223) (36) (66) (84) (168) (1,722)
1 Includes losses from classifying businesses as held for sale as part of
a broader restructuring of our European business, of which $2.3bn relates to
the planned sale of the retail banking operations in France.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in February
2020, including losses associated with the RWA reduction programme.
Legal entity results(1) (continued)
Quarter ended 30 Sep 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo- HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(2) Holding Total
ration Limited Financiero
HSBC, S.A. companies,
de C.V.
shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(3) 3,008 2,443 7,720 638 994 493 853 1,071 (1,059) 16,161
ECL (58) (80) (748) (6) 15 (20) (158) (36) 20 (1,071)
Operating expenses (1,172) (1,447) (3,368) (282) (824) (253) (476) (697) 551 (7,968)
Share of profit/(loss) in associates and joint ventures - (9) 479 - - - 3 120 (1) 592
Profit/(loss) before tax 1,778 907 4,083 350 185 220 222 458 (489) 7,714
Loans and advances to customers (net) 257,289 109,244 453,443 18,508 53,186 - 24,702 19,377 1 935,750
Customer accounts(4) 324,526 269,493 766,225 31,030 99,427 - 28,412 43,911 103 1,563,127
1 In the current period, constant currency results are equal to reported,
as there is no currency translation.
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.
These entities had an aggregated impact on Group reported profit before tax of
$238m. Supplementary analysis is provided on page 51 to give a fuller picture
of the MENAT regional performance.
3 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
4 In 3Q23, $11.4bn of customer accounts were transferred from HSBC Bank
plc to other trading entities as a result of intra-Group restructuring.
Notable items (continued)
Quarter ended 30 Sep 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo- HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
ration Limited Financiero
HSBC, S.A. companies,
de C.V.
shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs 86 (3) - - - - - - 227 310
Restructuring and other related costs(1) - 361 - - - - - - (361) -
Disposal losses on Markets Treasury repositioning (145) (94) (339) - - - - - - (578)
Operating expenses
Disposals, acquisitions and related costs (14) (23) - - (3) (27) - - (12) (79)
Restructuring and other related costs(2) 13 16 8 1 2 - 6 2 (18) 30
1 Gain recognised as a result of intra-Group restructuring.
2 Relates to reversals of restructuring provisions recognised during 2022.
Legal entity results (continued)
Quarter ended 30 Jun 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(1) Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(2)
Reported 3,114 2,271 8,199 574 1,059 508 826 1,285 (1,131) 16,705
Currency translation 33 12 (42) 1 (1) - 29 (126) (4) (98)
Constant currency 3,147 2,283 8,157 575 1,058 508 855 1,159 (1,135) 16,607
ECL
Reported (257) (55) (389) (7) (33) (10) (136) (36) 10 (913)
Currency translation (3) - (2) - - 1 (4) 11 (4) (1)
Constant currency (260) (55) (391) (7) (33) (9) (140) (25) 6 (914)
Operating expenses
Reported (1,197) (1,432) (3,423) (271) (632) (262) (473) (627) 446 (7,871)
Currency translation (13) (7) 19 - 1 (1) (18) 62 4 47
Constant currency (1,210) (1,439) (3,404) (271) (631) (263) (491) (565) 450 (7,824)
Share of profit/(loss) in associates and joint ventures
Reported - - 681 - - - 4 167 (2) 850
Currency translation - (1) (20) - - - - (2) 2 (21)
Constant currency - (1) 661 - - - 4 165 - 829
Profit/(loss) before tax
Reported 1,660 784 5,068 296 394 236 221 789 (677) 8,771
Currency translation 17 4 (45) 1 - - 7 (55) (2) (73)
Constant currency 1,677 788 5,023 297 394 236 228 734 (679) 8,698
Loans and advances to customers (net)
Reported 266,694 112,408 464,546 18,804 53,410 - 24,507 19,189 - 959,558
Currency translation (11,285) (4,001) (2,589) (4) - - (439) (902) - (19,220)
Constant currency 255,409 108,407 461,957 18,800 53,410 - 24,068 18,287 - 940,338
Customer accounts
Reported 345,835 282,041 775,430 31,262 99,303 - 28,402 33,313 183 1,595,769
Currency translation (14,634) (10,683) (3,304) (11) - - (509) (1,713) - (30,854)
Constant currency 331,201 271,358 772,126 31,251 99,303 - 27,893 31,600 183 1,564,915
1 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. These
entities had an aggregated impact on Group reported profit before tax of $443m
and constant currency profit before tax of $422m. Supplementary analysis is
provided on page 51 to give a fuller picture of the MENAT regional
performance.
2 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 30 Jun 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs (4) (6) - - - - - - (231) (241)
Operating expenses
Disposals, acquisitions and related costs (7) (20) - - (1) (27) - - (2) (57)
Restructuring and other related costs(1) - - - - - - - - 47 47
1 Relates to reversals of restructuring provisions recognised during 2022.
Legal entity results (continued)
Quarter ended 30 Sep 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(1) Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(2)
Reported 2,485 87 6,813 445 1,007 509 691 977 (1,506) 11,508
Currency translation 190 15 (45) 1 - (13) 129 (218) 8 67
Constant currency 2,675 102 6,768 446 1,007 496 820 759 (1,498) 11,575
ECL
Reported (279) 15 (661) (10) - (33) (91) (12) 3 (1,068)
Currency translation (21) (3) (4) 1 - 1 (17) 9 (1) (35)
Constant currency (300) 12 (665) (9) - (32) (108) (3) 2 (1,103)
Operating expenses
Reported (1,129) (1,389) (3,230) (264) (810) (248) (399) (596) 272 (7,793)
Currency translation (86) (101) 21 (1) - 6 (75) 136 (9) (109)
Constant currency (1,215) (1,490) (3,209) (265) (810) (242) (474) (460) 263 (7,902)
Share of profit/(loss) in associates and joint ventures
Reported - (4) 490 - - - 3 93 - 582
Currency translation - (1) (27) - - - 1 (1) - (28)
Constant currency - (5) 463 - - - 4 92 - 554
Profit/(loss) before tax
Reported 1,077 (1,291) 3,412 171 197 228 204 462 (1,231) 3,229
Currency translation 83 (90) (55) 1 - (6) 38 (74) (2) (105)
Constant currency 1,160 (1,381) 3,357 172 197 222 242 388 (1,233) 3,124
Loans and advances to customers (net)
Reported 227,527 86,795 478,865 20,384 56,781 55,177 19,988 20,703 - 966,220
Currency translation 22,134 7,573 617 32 - 870 3,113 (1,683) - 32,656
Constant currency 249,661 94,368 479,482 20,416 56,781 56,047 23,101 19,020 - 998,876
Customer accounts
Reported 317,964 240,807 756,033 28,486 98,403 59,385 23,888 42,300 1 1,567,267
Currency translation 30,932 21,382 2,638 51 - 937 3,721 (5,487) (1) 54,173
Constant currency 348,896 262,189 758,671 28,537 98,403 60,322 27,609 36,813 - 1,621,440
1 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. These
entities had an aggregated impact on Group reported profit before tax of $335m
and constant currency profit before tax of $280m. Supplementary analysis is
provided on page 51 to give a fuller picture of the MENAT regional
performance.
2 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 30 Sep 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) - (1,953) - - - - - - (425) (2,378)
Fair value movements on financial instruments(2) - - - - - - - - (282) (282)
Restructuring and other related costs(3) - (14) (4) - (9) - (1) - (3) (31)
Operating expenses
Disposals, acquisitions and related costs - (9) - - - - - - - (9)
Restructuring and other related costs (116) (132) (175) (14) (97) (14) (30) (45) (59) (682)
1 Includes losses from classifying businesses as held for sale as part of
the broader restructuring of our European business, of which $2.3bn relates to
the planned sale of the retail banking operations in France.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in February
2020, including losses associated with the RWA reduction programme.
Middle East, North Africa and Türkiye supplementary information
The following tables show the results of our Middle East, North Africa and
Türkiye business operations on a regional basis (including results of all the
legal entities operating in the region and our share of the results of Saudi
Awwal Bank). They also show the profit before tax of each of the global
businesses.
Middle East, North Africa and Türkiye regional performance
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Revenue(1) 2,748 2,126 895 955 788
Change in expected credit losses and other credit impairment charges (16) 43 (13) 4 (6)
Operating expenses (1,188) (1,137) (414) (399) (381)
Share of profit from associates and joint ventures 391 209 118 162 92
Profit before tax 1,935 1,241 586 722 493
Loans and advances to customers (net)(2) 21,392 27,676 21,392 21,901 27,676
Customer accounts(2) 40,745 43,937 40,744 40,480 43,937
1 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
2 In 2Q23, loans and advances to customers of $2,975m were classified as
'Assets held for sale' and customer accounts of $4,878m were classified as
'Liabilities of disposal groups held for sale' in respect of the planned
merger of our business in Oman. The merger was subsequently completed in
August 2023.
Profit before tax by global business
Nine months ended Quarter ended
30 Sep 30 Sep 30 Sep 30 Jun 30 Sep
2023 2022 2023 2023 2022
$m $m $m $m $m
Wealth and Personal Banking 486 223 185 160 109
Commercial Banking 369 219 93 157 99
Global Banking and Markets 821 660 250 275 218
Corporate Centre 259 139 58 130 67
Total 1,935 1,241 586 722 493
Additional information
Dividends
Second interim dividend for 2023
On 1 August 2023, the Directors approved a second interim dividend for 2023 of
$0.10 per ordinary share, which was paid on 21 September 2023 in cash. The
sterling and Hong Kong dollar amounts of approximately £0.07978 and
HK$0.783202 were calculated using the forward exchange rates quoted by HSBC
Bank plc in London at or about 11.00am on 11 September 2023.
Third interim dividend for 2023
On 30 October 2023, the Directors approved a third interim dividend in respect
of the financial year ended 31 December 2023 of $0.10 per ordinary share, a
distribution of approximately $1.946bn. The dividend will be payable on 21
December 2023 to holders of record on the Principal Register in the UK, the
Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on
10 November 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 11 December 2023. The ordinary shares in London, Hong Kong
and Bermuda, and American Depositary Shares ('ADSs') in New York will be
quoted ex-dividend on 9 November 2023.
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 cheques to the credit of their bank account. Shareholders can register
for these services at www.investorcentre.com/hk
(http://www.investorcentre.com/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
election by contacting the Bermuda investor relations team.
Particulars of these arrangements will be sent to shareholders on or about 17
November 2023 and changes to currency elections must be received by 7 December
2023.
The dividend will be payable on ADSs, each of which represents five ordinary
shares, on 21 December 2023 to holders of record on 10 November 2023. The
dividend of $0.50 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 1 December 2023.
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 10 November 2023 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 10 November 2023. Any person wishing to remove
ordinary shares to or from each register must do so before 4.00pm local time
on 9 November 2023.
Transfers of ADSs must be lodged with the depositary by 11.00am on 10 November
2023 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.
Dividend on preference shares
A quarterly dividend of £0.01 per Series A sterling preference share is
payable on 15 March, 15 June, 15 September and 15 December 2023 for the
quarter then ended at the sole and absolute discretion of the Board of HSBC
Holdings plc. Accordingly, the Board of HSBC Holdings plc has approved a
quarterly dividend to be payable on 15 December 2023 to holders of record on
30 November 2023.
Cancellation of treasury shares
On 30 October 2023, the Directors approved the cancellation of 325,273,407
ordinary shares held in treasury. A further announcement will follow once the
treasury shares are cancelled.
For and on behalf of
HSBC Holdings plc
Aileen Taylor
Group Company Secretary and Chief Governance Officer
The Board of Directors of HSBC Holdings plc as at the date of this
announcement comprises: Mark Tucker*, Geraldine Buckingham(†), Rachel
Duan(†), Georges Elhedery, Carolyn Julie Fairbairn(†), James Anthony
Forese(†), Ann Godbehere(†), Steven Guggenheimer(†), José Antonio Meade
Kuribreña(†), Kalpana Morparia(†), Eileen K Murray(†), Brendan
Nelson(†), David Nish(†), Noel Quinn and Swee Lian Teo(†).
* Non-executive Group Chairman
† Independent non-executive Director
Investor relations/media relations contacts
For further information contact:
Investor relations Media relations
UK - Richard O'Connor UK - Gillian James
Telephone: +44 (0)7909 873 681 Telephone: +44 (0)7584 404 238
Email: investorrelations@hsbc.com Email: pressoffice@hsbc.com
Hong Kong - Yafei Tian UK - Kirsten Smart
Telephone: +852 2899 8909 Telephone: +44 (0)7725 733 311
Email: investorrelations@hsbc.com.hk Email: pressoffice@hsbc.com
Hong Kong - Aman Ullah
Telephone: +852 3941 1120
Email: aspmediarelations@hsbc.com.hk
Cautionary statement regarding forward-looking statements
This Earnings Release 3Q23 contains certain forward-looking statements with
respect to HSBC's: financial condition; results of operations and business,
including the strategic priorities; financial, investment and capital targets;
and ESG targets, commitments and ambitions described herein.
Statements that are not historical facts, including statements about HSBC's
beliefs and expectations, are forward-looking statements. Words such as 'may',
'will', 'should', 'expects', 'targets', 'anticipates', 'intends', 'plans',
'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', or
the negative thereof, other variations thereon or similar expressions are
intended to identify forward-looking statements. These statements are based on
current plans, information, data, estimates and projections, and therefore
undue reliance should not be placed on them. Forward-looking statements speak
only as of the date they are made. HSBC makes no commitment to revise or
update any forward-looking statements to reflect events or circumstances
occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the
periodic reports to the US Securities and Exchange Commission, summary
financial statements to shareholders, proxy statements, offering circulars and
prospectuses, press releases and other written materials, and in oral
statements made by HSBC's Directors, officers or employees to third parties,
including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers
are cautioned that a number of factors could cause actual results to differ,
in some instances materially, from those anticipated or implied in any
forward-looking statement.
These include, but are not limited to:
- changes in general economic conditions in the markets in which we
operate, such as new, continuing or deepening recessions, prolonged
inflationary pressures and fluctuations in employment levels and the
creditworthiness of customers beyond those factored into consensus forecasts
(including, without limitation, as a result of the Russia-Ukraine war); the
Russia-Ukraine war and its impact on global economies and the markets where
HSBC operates, which could have a material adverse effect on (among other
things) our financial condition, results of operations, prospects, liquidity,
capital position and credit ratings; deviations from the market and economic
assumptions that form the basis for our ECL measurements (including, without
limitation, as a result of the Russia-Ukraine war, inflationary pressures and
ongoing developments in the commercial real estate sector in mainland China);
potential changes in HSBC's dividend policy; changes and volatility in foreign
exchange rates and interest rates levels, including the accounting impact
resulting from financial reporting in respect of hyperinflationary economies;
volatility in equity markets; lack of liquidity in wholesale funding or
capital markets, which may affect our ability to meet our obligations under
financing facilities or to fund new loans, investments and businesses;
geopolitical tensions or diplomatic developments producing social instability
or legal uncertainty, such as the Russia-Ukraine war or the Israel-Hamas war
(including the continuation and escalation thereof) and the related imposition
of sanctions and trade restrictions, supply chain restrictions and
disruptions, sustained increases in energy prices and key commodity prices,
claims of human rights violations, diplomatic tensions, including between
China and the US, the UK, the EU, India and other countries, and developments
in Hong Kong and Taiwan, alongside other potential areas of tension, which may
adversely affect HSBC by creating regulatory, reputational and market risks;
the efficacy of government, customer, and HSBC's actions in managing and
mitigating ESG risks, in particular climate risk, nature-related risks and
human rights risks, and in supporting the global transition to net zero carbon
emissions, each of which can impact HSBC both directly and indirectly through
our customers and which may result in potential financial and non-financial
impacts; illiquidity and downward price pressure in national real estate
markets; adverse changes in central banks' policies with respect to the
provision of liquidity support to financial markets; heightened market
concerns over sovereign creditworthiness in over-indebted countries; adverse
changes in the funding status of public or private defined benefit pensions;
societal shifts in customer financing and investment needs, including consumer
perception as to the continuing availability of credit; exposure to
counterparty risk, including third parties using us as a conduit for illegal
activities without our knowledge; the discontinuation of certain key Ibors and
the development of near risk-free benchmark rates, as well as the transition
of legacy Ibor contracts to near risk-free benchmark rates, which continues to
expose HSBC to execution risks, including in relation to the effectiveness of
its Ibor remediation strategy, and increases some financial and non-financial
risks; and price competition in the market segments we serve;
- changes in government policy and regulation, including the monetary,
interest rate and other policies of central banks and other regulatory
authorities in the principal markets in which we operate and the consequences
thereof (including, without limitation, actions taken as a result of the
impact of the Russia-Ukraine war on inflation); initiatives to change the
size, scope of activities and interconnectedness of financial institutions in
connection with the implementation of stricter regulation of financial
institutions in key markets worldwide; revised capital and liquidity
benchmarks, which could serve to deleverage bank balance sheets and lower
returns available from the current business model and portfolio mix; changes
to tax laws and tax rates applicable to HSBC, including the imposition of
levies or taxes designed to change business mix and risk appetite; the
practices, pricing or responsibilities of financial institutions serving their
consumer markets; expropriation, nationalisation, confiscation of assets and
changes in legislation relating to foreign ownership; the UK's relationship
with the EU, which continues to be characterised by uncertainty and political
disagreement, particularly with respect to the regulation of financial
services, despite the signing of the Trade and Cooperation Agreement between
the UK and the EU; changes in UK macroeconomic and fiscal policy, which may
result in fluctuations in the value of the pound sterling; general changes in
government policy that may significantly influence investor decisions; the
costs, effects and outcomes of regulatory reviews, actions or litigation,
including any additional compliance requirements; and the effects of
competition in the markets where we operate including increased competition
from non-bank financial services companies; and
- factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan losses or
delinquency, and managing those risks (through account management, hedging and
other techniques); our ability to achieve our financial, investment, capital
and ESG targets, commitments and ambitions (including with respect to the
commitments set forth in our thermal coal phase-out policy and our energy
policy and our targets to reduce our on-balance sheet financed emissions in
eight high-emitting sectors), which may result in our failure to achieve any
of the expected benefits of our strategic priorities; model limitations or
failure, including, without limitation, the impact that high inflationary
pressures and rising interest rates have had on the performance and usage of
financial models, which may require us to hold additional capital, incur
losses and/or use compensating controls, such as judgemental post-model
adjustments, to address model limitations; changes to the judgements,
estimates and assumptions we base our financial statements on; changes in our
ability to meet the requirements of regulatory stress tests; a reduction in
the credit ratings assigned to us or any of our subsidiaries, which could
increase the cost or decrease the availability of our funding and affect our
liquidity position and net interest margin; changes to the reliability and
security of our data management, data privacy, information and technology
infrastructure, including threats from cyber-attacks, which may impact our
ability to service clients and may result in financial loss, business
disruption and/or loss of customer services and data; the accuracy and
effective use of data, including internal management information that may not
have been independently verified; changes in insurance customer behaviour and
insurance claim rates; our dependence on loan payments and dividends from
subsidiaries to meet our obligations; changes in our reporting frameworks and
accounting standards, which have had and may continue to have a material
impact on the way we prepare our financial statements; our success in
adequately integrating SVB UK into our CMB business; changes in our ability to
manage third-party, fraud and reputational risks inherent in our operations;
employee misconduct, which may result in regulatory sanctions and/or
reputational or financial harm; changes in skill requirements, ways of working
and talent shortages, which may affect our ability to recruit and retain
senior management and diverse and skilled personnel; and changes in our
ability to develop sustainable finance and climate-related products consistent
with the evolving expectations of our regulators, and our capacity to measure
the climate impact from our financing activity (including as a result of data
limitations and changes in methodologies), which may affect our ability to
achieve our climate ambition, our targets to reduce financed emissions in our
high-emitting sectors portfolio and the commitments set forth in our thermal
coal phase-out policy and our energy policy, and increase the risk of
greenwashing. Effective risk management depends on, among other things, our
ability through stress testing and other techniques to prepare for events that
cannot be captured by the statistical models it uses; our success in
addressing operational, legal and regulatory, and litigation challenges; and
other risks and uncertainties we identify in 'Managing risk' on page 22 of
this Earnings Release 3Q23.
Additional detailed information concerning important factors, including but
not limited to ESG-related factors, that could cause actual results to differ
materially from those anticipated or implied in any forward-looking statement
in this Earnings Release 3Q23 is available in our Annual Report and Accounts
for the fiscal year ended 31 December 2022, which was filed with the SEC on
Form 20-F on 22 February 2023.
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
Abbreviations
1Q22 First quarter of 2022
1Q23 First quarter of 2023
2Q22 Second quarter of 2022
2Q23 Second quarter of 2023
3Q22 Third quarter of 2022
3Q23 Third quarter of 2023
4Q22 Fourth quarter of 2022
4Q23 Fourth quarter of 2023
9M22 Nine months to 30 September 2022
9M23 Nine months to 30 September 2023
AIEA Average interest-earning assets
Basel III Basel Committee's reforms to strengthen global capital and liquidity rules
Basel 3.1 Outstanding measures to be implemented from the Basel III reforms
BoCom Bank of Communications Co., Limited, one of China's largest banks
Bps Basis points. One basis point is equal to one-hundredth of a percentage point
CET1 Common equity tier 1
CMB Commercial Banking, a global business
CODM Chief Operating Decision Maker
Corporate Centre Corporate Centre comprises Central Treasury, our legacy businesses, interests
in our associates and joint ventures, central stewardship costs and
consolidation adjustments
CSM Contractual service margin
EBA European Banking Authority
ECL Expected credit losses. In the income statement, ECL is recorded as a change
in expected credit losses and other credit impairment charges. In the balance
sheet, ECL is recorded as an allowance for financial instruments to which only
the impairment requirements in
IFRS 9 are applied
ESG Environmental, social and governance
EU European Union
FTE Full-time equivalent staff
FVOCI Fair value through other comprehensive income
FX Foreign exchange
GAAP Generally accepted accounting principles
GBM Global Banking and Markets, a global business
GDP Gross domestic product
GEC Group Executive Committee
GPS Global Payments Solutions, the business formerly known as Global Liquidity and
Cash Management
Group HSBC Holdings together with its subsidiary undertakings
GTRF Global Trade and Receivables Finance
Hong Kong Hong Kong Special Administrative Region of the People's Republic of China
HSBC HSBC Holdings together with its subsidiary undertakings
HSBC Bank plc HSBC Bank plc, also known as the non-ring-fenced bank
HSBC Holdings HSBC Holdings plc, the parent company of HSBC
HSBC UK HSBC UK Bank plc, also known as the ring-fenced bank
IAS International Accounting Standards
Ibor Interbank offered rate
IFRSs International Financial Reporting Standards
JV Joint venture
LCR Liquidity coverage ratio
Libor London interbank offered rate
Long term For our strategic goals, we define long term as five to six years, commencing
1 January 2020
Mainland China People's Republic of China excluding Hong Kong and Macau
Medium term For our strategic goals, we define medium term as three to five years,
commencing 1 January 2020
MENAT Middle East, North Africa and Türkiye
MSS Markets and Securities Services, HSBC's capital markets and securities
services businesses in Global Banking and Markets
Net operating income Net operating income before change in expected credit losses and other credit
impairment charges, also referred to as revenue
NII Net interest income
NIM Net interest margin
POCI Purchased or originated credit-impaired financial assets
PRA Prudential Regulation Authority (UK)
Revenue Net operating income before ECL
RoE Return on average ordinary shareholders' equity
RoTE Return on average tangible equity
RWA Risk-weighted asset
SAB Saudi Awwal Bank, which was formed from the merger between The Saudi British
Bank and Alawwal Bank
SVB UK Silicon Valley Bank UK Limited, now HSBC Innovation Bank Limited
UAE United Arab Emirates
UK United Kingdom
US United States of America
WPB Wealth and Personal Banking, a global business
$m/$bn/$tn United States dollar millions/billions/trillions. We report in US dollars
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