REG - HSBC Holdings PLC - HSBC HOLDINGS PLC INTERIM RESULTS 2023
01/08/2023 07:00
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RNS Number : 8066H HSBC Holdings PLC 01 August 2023
HSBC HOLDINGS PLC
2023 INTERIM RESULTS - HIGHLIGHTS
Noel Quinn, Group Chief Executive, said:
"We have delivered a strong first half performance and are confident of
achieving our revised mid-teens return on tangible equity target in 2023 and
2024. There was good broad-based profit generation around the world, higher
revenue in our global businesses driven by strong net interest income, and
continued tight cost control. I am also pleased that we can reward our
shareholders with a second interim dividend of $0.10 per share and a second
share buy-back in 2023 of up to $2bn, with substantial further distribution
capacity still expected ahead.
There is still much work to do, especially given the many challenges in the
global economy, but I am confident about the future as we move further into
the next phase of our strategy and focus on opportunities to drive value
creation, diversify our revenue and retain tight cost control."
Financial performance (1H23 vs 1H22)
- Profit before tax rose by $12.9bn to $21.7bn. This included a $2.1bn
reversal of an impairment relating to the planned sale of our retail banking
operations in France and a provisional gain of $1.5bn on the acquisition of
Silicon Valley Bank UK Limited ('SVB UK'). On a constant currency basis,
profit before tax increased by $13.3bn to $21.7bn. Reported profit after tax
increased by $9.1bn to $18.1bn.
- Revenue increased by $12.3bn to $36.9bn. The increase was driven by
higher net interest income in all of our global businesses due to interest
rate rises. It also included the impacts related to the planned sale in France
and the acquisition in the UK. On a constant currency basis, revenue rose by
$13.2bn to $36.9bn.
- Net interest margin ('NIM') of 1.70% increased by 46 basis points
('bps').
- Expected credit losses and other credit impairment charges ('ECL')
of $1.3bn reflected a more stable outlook in most markets, although
inflationary pressures remain. The 1H23 charge included $0.3bn relating to the
commercial real estate sector in mainland China and charges in Commercial
Banking ('CMB') in the UK. The 1H22 charge of $1.1bn reflected heightened
economic uncertainty, mainly due to the Russia-Ukraine war and inflationary
pressures, and also included $0.3bn relating to the commercial real estate
sector in mainland China, partly offset by releases of Covid-19-related
allowances.
- Operating expenses of $15.5bn were $0.7bn or 4% lower than in 1H22,
primarily due to lower restructuring and other related costs following the
completion of our cost-saving programme at the end of 2022 and from a $0.2bn
impact from a reversal of historical asset impairments. This was partly offset
by higher technology costs, an increase in performance-related pay, severance
of $0.2bn in 1H23 and the effects of rising inflation. Target basis operating
expenses rose by 4.3%.
- Customer lending balances increased by $36bn since 31 December 2022.
On a constant currency basis, lending balances grew by $23bn, mainly due to
the reclassification of balances associated with our retail banking operations
in France from held for sale during the period, and $7bn of additional
balances following our acquisition of SVB UK during 1Q23. These were partly
offset by the reclassification of our business in Oman as held for sale, which
resulted in a $3bn reduction. Excluding these factors, customer lending fell,
reflecting weaker customer demand for wholesale lending, notably in Hong Kong
and Europe.
- Customer accounts increased by $25bn since 31 December 2022. On a
constant currency basis, customer accounts increased by $3bn, mainly due to
the reclassification of balances associated with our retail banking operations
in France from held for sale during the period. In addition, our acquisition
of SVB UK resulted in growth of $7bn, and in 1H23, we reclassified our
business in Oman as held for sale, resulting in a $5bn reduction. Excluding
these factors, deposits fell, reflecting reductions in Wealth and Personal
Banking ('WPB') and CMB in HSBC UK, as well as in Global Banking and Markets
('GBM').
- Annualised return on average tangible equity ('RoTE') of 22.4%
compared with 10.6% in 1H22. Excluding the annualised impacts related to the
planned sale in France and the acquisition in the UK, annualised RoTE was
18.5%.
- Common equity tier 1 ('CET1') capital ratio of 14.7% increased by
0.5 percentage points compared with 4Q22, which was driven by capital
generation net of the dividend accrual, and included an approximately 0.3
percentage point impact from the reversal of an impairment on the planned sale
of our retail banking operations in France and the provisional gain on the
acquisition of SVB UK. This was partly offset by increased risk-weighted
assets ('RWAs') and the impact of the share buy-back announced with our 1Q23
results in May 2023.
- The Board has approved a second interim dividend of $0.10 per share.
We also intend to initiate a further share buy-back of up to $2bn, which we
expect to commence shortly and complete within three months.
Financial performance (2Q23 vs 2Q22)
- Reported profit before tax increased by $4.1bn to $8.8bn.
- Revenue rose by $4.5bn to $16.7bn, with growth across all of our
global businesses, primarily reflecting interest rate rises. There were good
performances in insurance in WPB and in Debt Capital Markets in GBM, which
offset reductions in Global Foreign Exchange and Equities.
- NIM of 1.72% increased by 3bps, compared with 1Q23.
- ECL of $0.9bn increased by $0.5bn. ECL in 2Q23 included $0.3bn of
charges in the commercial real estate sector in mainland China, and $0.3bn in
the UK, mainly in CMB.
- Operating expenses of $7.9bn fell by $0.1bn. This was driven by
lower restructuring and other related costs following the completion of our
cost-saving programme at the end of 2022 and the reversal of historical asset
impairments. This reduction was partly offset by $0.2bn of severance costs
incurred in 2Q23, as well as higher technology spend, an increase in our
performance-related pay accrual and the effects of rising inflation.
- Customer lending decreased by $9bn compared with 31 March 2023,
which included a reduction of $3bn related to a reclassification of our
business in Oman to held for sale. The remaining reduction was mainly in GBM
in HSBC Bank plc, reflecting client deleveraging and weaker demand as interest
rates rose.
- Customer accounts decreased by $18bn compared with 31 March 2023,
which included a reduction of $5bn related to the reclassification of our
business in Oman to held for sale. The remaining reduction was in GBM in
Europe, as corporate customers used deposits to pay down their loans, and in
HSBC UK, reflecting higher cost of living and competitive pressures.
Outlook for 2023
- Our strategy has enabled us to further strengthen our balance sheet,
providing us with a good platform for growth in the current interest rate
cycle, while maintaining cost discipline. This has given us the confidence to
revise our returns guidance for 2023 and 2024. Based on the current path
implied by the market for global policy rates, we are now targeting a RoTE in
the mid-teens for 2023 and 2024, which excludes the impact of material
acquisitions and disposals.
- Given the current market consensus for global central bank rates, we
have raised our 2023 full-year guidance for net interest income to above
$35bn. While the interest rate outlook remains positive, we expect continued
migration to term deposits as short-term interest rates rise.
- We continue to expect ECL charges of around 40bps of average gross
loans in 2023 (including lending balances transferred to held for sale). There
remains a degree of uncertainty in the forward economic outlook, particularly
in the UK, and we are monitoring risks related to our exposures in mainland
China's commercial real estate sector. Over the medium to long term, we
continue to use a range of 30bps to 40bps of average loans for planning our
ECL charges.
- We remain highly focused on maintaining cost discipline. We continue
to target operating expense growth of approximately 3% for 2023, excluding the
impact of foreign currency translation differences, notable items and the
impact of retranslating the 2022 results of hyperinflationary economies at
constant currency. Our target also excludes the impact of our acquisition of
SVB UK, and the related investments internationally, which are expected to add
approximately 1% to the Group's operating expenses. In 2Q23, we incurred
severance costs of $0.2bn, with the benefits expected to be realised towards
the end of 2023 and into 2024.
- 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 second interim dividend of $0.10
per share and intend to initiate a further share buy-back of up to $2bn, which
we expect to commence shortly and complete within three months. Further
buy-backs for 2023 and beyond will be subject to appropriate capital levels.
-
Key financial metrics
Half-year to
30 Jun 30 Jun
2023 2022
Reported results
Profit before tax ($m) 21,657 8,780
Profit after tax ($m) 18,071 8,931
Cost efficiency ratio (%) 41.9 65.7
Net interest margin (%) 1.70 1.24
Basic earnings per share ($) 0.86 0.40
Diluted earnings per share ($) 0.86 0.40
Dividend per ordinary share (in respect of the period) ($) 0.20 0.09
Alternative performance measures
Constant currency profit before tax ($m) 21,657 8,404
Constant currency cost efficiency ratio (%) 41.9 65.7
Expected credit losses and other credit impairment charges (annualised) as % 0.28 0.21
of average gross loans and advances to customers (%)
Expected credit losses and other credit impairment charges ('ECL') 0.26 0.21
(annualised) as % of average gross loans and advances to customers, including
held for sale (%)
Basic earnings per share excluding material notable items ($)(1) 0.70 0.29
Return on average ordinary shareholders' equity (annualised) (%) 20.8 9.9
Return on average tangible equity (annualised) (%) 22.4 10.6
Return on average tangible equity excluding strategic transactions 18.5 10.6
(annualised) (%)(2)
Target basis operating expenses ($m)(3) 15,319 14,683
At
30 Jun 31 Dec
2023 2022
Balance sheet
Total assets ($m) 3,041,476 2,949,286
Net loans and advances to customers ($m) 959,558 923,561
Customer accounts ($m) 1,595,769 1,570,303
Average interest-earning assets, year to date ($m) 2,162,662 2,143,754
Loans and advances to customers as % of customer accounts (%) 60.1 58.8
Total shareholders' equity ($m) 184,170 177,833
Tangible ordinary shareholders' equity ($m) 153,234 146,927
Net asset value per ordinary share at period end ($) 8.44 8.01
Tangible net asset value per ordinary share at period end ($) 7.84 7.44
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)(4,5) 14.7 14.2
Risk-weighted assets ($m)(4,5) 859,545 839,720
Total capital ratio (%)(4,5) 19.8 19.3
Leverage ratio (%)(4,5) 5.8 5.8
High-quality liquid assets (liquidity value, average) ($bn)(5,6) 631 647
Liquidity coverage ratio (average) (%)(5,6) 132 132
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions) 19,534 19,739
Period end basic number of $0.50 ordinary shares outstanding and dilutive 19,679 19,876
potential ordinary shares (millions)
Average basic number of $0.50 ordinary shares outstanding (millions) 19,693 19,849
For reconciliations of our reported results to a constant currency basis,
including lists of notable items, see page 39 of the Interim Report 2023.
Definitions and calculations of other alternative performance measures are
included in our 'Reconciliation of alternative performance measures' on page
57 of the Interim Report 2023.
1 At 2Q23, earnings per share included the impact of the provisional gain
recognised in respect of the acquisition of SVB UK of $0.08 (2Q22: nil); the
reversal of the impairment loss related to the planned sale of our retail
banking operations in France of $0.08 (2Q22: nil); and the agreed sale of our
banking business in Canada of $nil (2Q22: $nil). Additionally, the earnings
per share at 2Q22 included the impact of the recognition of certain tax assets
of $0.11.
2 Excludes impacts of the reversal of the impairment loss of $1.6bn (net
of tax) relating to the planned sale of our retail banking operations in
France, which is no longer classified as held for sale, and the provisional
gain of $1.5bn recognised in respect of the acquisition of SVB UK, both
recognised in 1Q23.
3 Excluding the impact of retranslating prior year costs of
hyperinflationary economies at constant currency.
4 Unless otherwise stated, regulatory capital ratios and requirements
are based on the transitional arrangements of the Capital Requirements
Regulation in force at the time. At 30 June 2023, the IFRS 9 add-back to CET1
capital was immaterial. 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.
5 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.
6 The liquidity coverage ratio is based on the average month-end value
over the preceding 12 months.
Highlights
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Reported
Revenue(1,2,3) 36,876 24,545
Change in expected credit losses and other credit impairment charges (1,345) (1,087)
Operating expenses (15,457) (16,127)
Share of profit in associates and joint ventures 1,583 1,449
Profit before tax 21,657 8,780
Tax (charge)/credit (3,586) 151
Profit after tax 18,071 8,931
Constant currency(4)
Revenue(1,2,3) 36,876 23,647
Change in expected credit losses and other credit impairment charges (1,345) (1,074)
Operating expenses (15,457) (15,532)
Share of profit in associates and joint ventures 1,583 1,363
Profit before tax 21,657 8,404
Tax (charge)/credit (3,586) 227
Profit after tax 18,071 8,631
Notable items
Revenue
Disposals, acquisitions and related costs(2,3) 3,321 (288)
Fair value movements on financial instruments(5) 15 (371)
Restructuring and other related costs(6) - 68
Operating expenses
Disposals, acquisitions and related costs (118) -
Restructuring and other related costs(7) 47 (1,040)
Tax
Tax (charge)/credit on notable items (500) 242
Recognition of losses - 2,082
Uncertain tax positions 427 (317)
1 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
2 Includes the reversal of $2.1bn impairment loss relating to the planned
sale of our retail banking operations in France, which is no longer classified
as held for sale.
3 Includes the provisional gain of $1.5bn recognised in respect of the
acquisition of SVB UK in 1Q23.
4 Constant currency performance is computed by adjusting reported results
of comparative periods for the effects of foreign currency translation
differences, which distort period-on-period comparisons.
5 Fair value movements on non-qualifying hedges in HSBC Holdings.
6 Comprises gains and losses relating to the business update in February
2020, including losses associated with the RWA reduction programme.
7 In 2Q23, we recognised $47m of reversals relating to restructuring
provisions recognised during 2022.
Review by Noel Quinn, Group Chief Executive
By the time we completed the first phase of our strategy at the end of 2022,
the changes we had made were delivering an improved financial performance. Six
months into 2023, our financial performance has continued to improve, aided by
the interest rate environment. As we move further into the next phase of our
strategy focused on value creation, I am optimistic about our ability to
continue to deliver strong returns for our investors.
Our purpose of 'opening up a world of opportunity' underpins everything we do
for our customers, colleagues and the communities we serve. In the first half
of 2023, we continued to deliver on that promise by launching new products and
services, and developing our capabilities to meet the international needs of
our diverse customer base. From the new international proposition for Wealth
and Personal Banking customers launched in March and the continued development
of our Global Money and Global Wallet products, to the digitisation of
international account opening and the globally connected HSBC Innovation
Banking business launched in June, there are many examples of how my
colleagues are truly living our purpose.
Many of these achievements contributed to our strong first-half performance,
as we saw continued good revenue growth across all our global businesses,
supported by higher interest rates. We delivered a strong annualised return on
tangible equity of 22.4%, including the reversal of an impairment relating to
the planned sale of our retail banking operations in France and a provisional
gain on the acquisition of SVB UK, both of which were reported in the first
quarter. Excluding them, we achieved an annualised return on tangible equity
of 18.5%. Our strategy is working. The Board, my colleagues and our
shareholders are all focused on the shared objectives of supporting our
customers, driving stronger performance and creating more value for our
investors.
The biggest challenge we all face remains the uncertainty within the external
environment. High inflation remains a significant concern for many of our
customers. Even though headline inflation rates are now falling in most
countries, they remain persistently high in some markets. In the UK, we have
seen limited signs of stress in the mortgage book, although we are acutely
aware of the day-to-day financial challenges that some of our customers face.
With more mortgage customers due to roll off fixed-term deals in the next six
months, and further rate rises expected, tougher times are ahead. We will
continue to communicate regularly with our customers, listen to their
concerns, seek to offer them help should they want it and ensure they are
aware of the range of products available to them.
Across the global economy, growth remains uneven. China's reopening at the
start of the year lifted both its economy and the prospects for global GDP
growth in 2023, although weaker recent data underlines that its recovery may
be slower than previously expected. Other parts of Asia, such as India and the
ASEAN region, are growing robustly, as is the Middle East.
From transformation to value creation
At the end of 2022, we completed the first phase of our strategy. As a result
of the work done to transform HSBC, including to reposition our portfolio,
create broad-based profit generation, maintain strong cost discipline and
introduce a sustainable dividend, we built a strong platform for growth. This
work helped to put HSBC on track to achieve a return on tangible equity of
12%+ in 2023.
In the first half of 2023, our strategic approach has changed from
transformation to value creation. While there have been - and will continue to
be - opportunities to further simplify HSBC, we have shifted our focus to
driving growth, while maintaining strong returns.
First, we have further leveraged our international connectivity. Our ability
to connect the world's major trading and investment blocs has always been, and
remains, our greatest strength. In the first-half, our wholesale cross-border
client business increased by around 50%, with growth across all regions, due
mainly to rising interest rates. In Wealth and Personal Banking, we now have
6.3 million international customers, which is up 8% on the same period last
year. There was also strong revenue growth in global transaction banking,
which was up by 63%. Within global transaction banking, there were good
performances in Foreign Exchange and in Global Payments Solutions, due to
higher rates. Trade was slightly down in line with global trade volumes,
although HSBC was recently named 'Best Bank for Trade Finance' by Euromoney
for the second year in a row, while also being named 'Best Bank in Asia'.
Second, we made further progress towards the redeployment of capital from less
strategic or low-connectivity businesses into high-growth international
opportunities. We are pleased to have agreed revised terms for the sale of our
French retail banking operations, which we now expect to complete in early
2024. The sale of our banking operations in Canada also remains on track to
complete in early 2024. We have also completed the disposal of our Greek
business, and announced the planned exit of Russia, a change to the nature of
our presence in Oman, and the wind-down of Wealth and Personal Banking in New
Zealand.
At the same time, we are investing in growth in a strategic and targeted way.
We have invested further in our Wealth business in Asia. We now have a total
of 1,400 digitally enabled wealth planners in our Pinnacle business in
mainland China, while we launched Global Private Banking in India in July. In
June, following our acquisition of SVB UK, we also launched a new
strengthened, globally connected proposition - HSBC Innovation Banking.
Through it, we are building similar businesses to the former SVB UK in the US,
Hong Kong and Israel, and using our international network and balance sheet
strength to offer new opportunities to expand globally to our clients in the
technology and life sciences sectors.
Third, we are working to diversify our revenue. A key strategic priority has
been to grow fee income by investing in our Wealth business, especially in
Asia. We saw the continuing benefit of this in the first-half as we grew net
new invested assets by $34bn, of which $27bn were in Asia. Fee income in
Commercial Banking, which is another priority area, was also up in the
first-half by 6%, while collaboration revenue from referrals between our
global businesses also increased by 5%.
Fourth, we have maintained tight cost discipline. Costs of $15.5bn in the
first-half were $0.7bn or 4% lower than the same period last year, primarily
due to lower restructuring costs following the end of our cost-saving
programme at the end of 2022. On the basis of our target to limit cost growth
to around 3% in 2023, operating expenses increased by 4% in the first-half,
including the expected severance costs booked in the second quarter. We remain
committed to disciplined cost management.
Fifth, we have reinvested cost savings in technology. Spending on technology
increased by 12.8% in the first-half, and now accounts for almost a quarter of
total operating expenses. Delivering faster services, reducing friction and
offering more competitive products has been critical to improving the customer
experience. For example, we have now migrated over 26,000 business customers
in Hong Kong and the UK to our next generation digital trade platform, which
is enabling us to future-proof a market-leading business.
Investing in technology is also key to enhancing our capabilities and building
the bank of the future. We now have a range of 'test and learn' use cases for
generative AI across HSBC, and are in the process of scaling those up. Last
month, HSBC became the first bank to join BT's and Toshiba's quantum-secured
metro network employing quantum technology for secure transmission of data,
which will enable us to evaluate how best to use this technology against
future cyber threats. We are also pleased to be working with the Hong Kong
Monetary Authority on two pilots to test the e-HKD in a new payments ecosystem
and to trial tokenised deposits.
Finally, we continued to build on our position as an enabler of the net zero
transition by supporting our customers' transition plans. In the first-half,
we provided and facilitated $45bn of sustainable finance and investments,
which consisted of capital markets financing and lending to clients as we
continued to work closely with them on their transitions. This included a
number of key deals in Asia and the Middle East. We have also continued to
help unlock new climate solutions, including through our Climate Tech Venture
Capital strategy. HSBC was named 'Best Bank for Sustainable Finance in Asia'
by Euromoney for the sixth consecutive year.
Translating into strong financial performance
Our strong first-half featured good broad-based profit generation around the
world. There was also higher revenue in our global businesses driven by strong
net interest income, supported by continued tight cost control. We achieved an
annualised return on tangible equity of 22.4%, or 18.5% excluding the two
material notable items reported with our first quarter results.
Profit before tax for the first half of 2023 was $21.7bn, which was an
increase of $12.9bn on the first half of 2022. This included a $2.1bn reversal
of an impairment relating to the planned sale of our retail banking operations
in France and a provisional gain of $1.5bn on the acquisition of SVB UK.
Profit after tax increased by $9.1bn to $18.1bn.
Revenue increased by $12.3bn to $36.9bn, driven mainly by higher net interest
income in all three global businesses due to interest rate rises. It also
included gains related to the two aforementioned transactions in the first
quarter.
Expected credit losses and other credit impairment charges were $1.3bn, which
was a $0.3bn increase on the first half of 2022.
Our CET1 ratio at the end of the first-half was 14.7%. We have announced a
second interim dividend of $0.10 per share, further to the $0.10 per share
dividend already paid in respect of the first quarter. We are also announcing
a second share buy-back of up to $2bn. We continue to expect to have
substantial distribution capacity going forward.
Our strong performance in the first half of 2023 and our continued strategic
progress mean that we now expect to achieve a return on tangible equity in the
mid-teens for 2023 and 2024.
Thank you to my colleagues
Over the last six months, I had the opportunity to spend time with colleagues
in France, Hong Kong, mainland China, Mexico, Saudi Arabia, the United Arab
Emirates and the UK. I have been constantly impressed by their commitment,
dedication and tireless efforts to support our customers - all of which are
evident in our many achievements. I am especially grateful to those colleagues
who have faced serious challenges so far this year, including the earthquakes
in Türkiye in February and, of course, the ongoing cost of living crisis in
many markets.
Overall, we have delivered a strong first-half performance and are confident
of delivering our revised return on tangible equity target for 2023 and 2024.
I am also pleased that we can reward our shareholders with strong capital
returns, with substantial further distribution capacity still expected ahead.
There is still much work to do, especially given the many challenges in the
global economy, but I am confident about our future as we move further into
the next phase of our strategy and focus on opportunities to drive value
creation, diversify our revenue and retain tight cost control.
Noel Quinn
Group Chief Executive
1 August 2023
Financial summary
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
For the period
Profit before tax 21,657 8,780
Profit attributable to:
- ordinary shareholders of the parent company 16,966 7,966
Dividends on ordinary shares(1) 6,591 3,576
At the period end
Total shareholders' equity 184,170 178,975
Total regulatory capital 170,021 158,519
Customer accounts 1,595,769 1,651,301
Total assets 3,041,476 2,970,481
Risk-weighted assets 859,545 851,743
Per ordinary share $ $
Basic earnings 0.86 0.40
Dividend per ordinary share (paid in the period)(1) 0.33 0.18
Net asset value(2) 8.44 7.94
1 The $0.33 dividend paid during the period consisted of a second
interim dividend of $0.23 per ordinary share in respect of the financial year
ended 31 December 2022 paid in April 2023 and a first interim dividend of
$0.10 per ordinary share in respect of the financial year ending 31 December
2023.
2 The definition of net asset value per ordinary share is total
shareholders equity, less non-cumulative preference shares and capital
securities, divided by the number of ordinary shares in issue, excluding own
shares held by the company, including those purchased and held in treasury.
Distribution of results by global business
Constant currency profit before tax
Half-year to
30 Jun 2023 30 Jun 2022
$m % $m %
Wealth and Personal Banking 8,592 39.7 2,487 29.6
Commercial Banking(1) 7,939 36.7 3,432 40.8
Global Banking and Markets(1) 3,580 16.5 2,692 32.0
Corporate Centre 1,546 7.1 (207) (2.4)
Profit before tax 21,657 100.0 8,404 100.0
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 entities in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
Distribution of results by legal entity
Reported profit/(loss) before tax
Half-year to
30 Jun 2023 30 Jun 2022
$m % $m %
HSBC UK Bank plc 4,791 22.1 2,270 25.9
HSBC Bank plc 3,498 16.2 252 2.9
The Hongkong and Shanghai Banking Corporation Limited 10,917 50.4 5,734 65.3
HSBC Bank Middle East Limited 673 3.1 378 4.3
HSBC North America Holdings Inc. 701 3.2 424 4.8
HSBC Bank Canada 475 2.2 385 4.4
Grupo Financiero HSBC, S.A. de C.V. 436 2.0 239 2.7
Other trading entities(1) 1,282 5.9 532 6.1
- of which: other Middle East entities (including Oman, Türkiye, Egypt and 420 1.9 264 3.0
Saudi Arabia)
- of which: Saudi Awwal Bank 272 1.3 117 1.3
Holding companies, shared service centres and intra-Group eliminations (1,116) (5.1) (1,434) (16.4)
Profit before tax 21,657 100.0 8,780 100.0
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 56 in the Interim Report 2023 for a
fuller picture of the MENAT regional performance.
HSBC constant currency profit before tax and balance sheet data
Half-year to 30 Jun 2023
Wealth and Personal Banking Commercial Global Corporate Centre Total
Banking(4) Banking and
Markets(4)
$m $m $m $m $m
Net operating income/(expense) before change in expected credit losses and 16,200 12,216 8,501 (41) 36,876
other credit impairment charges(2)
- external 12,416 12,897 13,939 (2,376) 36,876
- inter-segment 3,784 (681) (5,438) 2,335 -
- of which: net interest income/(expense)(5) 10,299 8,375 3,546 (3,956) 18,264
Change in expected credit losses and other credit impairment (502) (704) (136) (3) (1,345)
(charges)/recoveries
Net operating income/(expense) 15,698 11,512 8,365 (44) 35,531
Total operating expenses (7,141) (3,572) (4,785) 41 (15,457)
Operating profit/(loss) 8,557 7,940 3,580 (3) 20,074
Share of profit in associates and joint ventures 35 (1) - 1,549 1,583
Constant currency profit before tax 8,592 7,939 3,580 1,546 21,657
% % % % %
Share of HSBC's constant currency profit before tax 39.7 36.7 16.5 7.1 100.0
Constant currency cost efficiency ratio 44.1 29.2 56.3 100.0 41.9
Constant currency balance sheet data $m $m $m $m $m
Loans and advances to customers (net) 463,836 319,246 176,182 294 959,558
Interests in associates and joint ventures 555 24 107 28,860 29,546
Total external assets 900,370 654,474 1,342,110 144,522 3,041,476
Customer accounts 809,864 472,146 313,126 633 1,595,769
Constant currency risk-weighted assets(3) 186,564 353,805 227,024 92,152 859,545
Half-year to 30 Jun 2022(1)
Net operating income before change in expected credit losses and other credit 10,058 7,055 7,459 (925) 23,647
impairment charges(2)
- external 9,665 7,199 8,357 (1,574) 23,647
- inter-segment 393 (144) (898) 649 -
- of which: net interest income/(expense)(5) 6,493 4,817 2,009 (473) 12,846
Change in expected credit losses and other credit impairment charges (584) (278) (210) (2) (1,074)
Net operating income/(expense) 9,474 6,777 7,249 (927) 22,573
Total operating expenses (6,995) (3,345) (4,557) (635) (15,532)
Operating profit/(loss) 2,479 3,432 2,692 (1,562) 7,041
Share of profit in associates and joint ventures 8 - - 1,355 1,363
Constant currency profit/(loss) before tax 2,487 3,432 2,692 (207) 8,404
% % % % %
Share of HSBC's constant currency profit before tax 29.6 40.8 32.0 (2.4) 100.0
Constant currency cost efficiency ratio 69.5 47.4 61.1 (68.6) 65.7
Constant currency balance sheet data $m $m $m $m $m
Loans and advances to customers (net) 482,962 354,273 200,082 557 1,037,874
Interests in associates and joint ventures 487 31 104 27,468 28,090
Total external assets 884,333 628,040 1,330,747 167,390 3,010,510
Customer accounts 846,974 491,115 332,473 589 1,671,151
Constant currency risk-weighted assets(3) 187,357 347,619 232,158 82,424 849,558
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
3 Constant currency risk-weighted assets are calculated using reported
risk-weighted assets adjusted for the effects of currency translation
differences.
4 In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers' respective
needs, a portfolio of our customers within our entities in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
5 Net interest expense recognised in the Corporate Centre includes $3.8bn
(1H22: $0.4bn) of interest expense in relation to the internal cost to fund
trading and fair value net assets; and the funding cost of foreign exchange
swaps in our Markets Treasury function. 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 1H23 associated funding costs reported through the
intersegment elimination in Corporate Centre of approximately $0.4bn,
recognised in 2Q23.
Consolidated income statement
Half-year to(1)
30 Jun 30 Jun
2023 2022
$m $m
Net interest income 18,264 13,385
- interest income 46,955 19,788
- interest expense (28,691) (6,403)
Net fee income 6,085 6,228
- fee income 7,947 7,913
- fee expense (1,862) (1,685)
Net income from financial instruments held for trading or managed on a fair 8,112 4,856
value basis
Net income/(expense) from assets and liabilities of insurance businesses, 4,304 (11,849)
including related derivatives, measured at fair value through profit or loss
Insurance finance income/(expense) (4,234) 11,773
Insurance service result 524 370
- insurance revenue 1,104 980
- insurance service expense (580) (610)
Gain on acquisitions(2) 1,507 -
Reversal of impairment loss relating to the planned sale of our retail banking 2,130 -
operations in France(3)
Other operating income 184 (218)
Net operating income before change in expected credit losses and other credit 36,876 24,545
impairment charges(4)
Change in expected credit losses and other credit impairment charges (1,345) (1,087)
Net operating income 35,531 23,458
Employee compensation and benefits (8,954) (8,896)
General and administrative expenses (4,912) (5,337)
Depreciation and impairment of property, plant and equipment and right-of-use (782) (1,072)
assets
Amortisation and impairment of intangible assets (809) (822)
Total operating expenses (15,457) (16,127)
Operating profit 20,074 7,331
Share of profit in associates and joint ventures 1,583 1,449
Profit before tax 21,657 8,780
Tax (charge)/credit (3,586) 151
Profit for the period 18,071 8,931
Attributable to:
- ordinary shareholders of the parent company 16,966 7,966
- other equity holders 542 626
- non-controlling interests 563 339
Profit for the period 18,071 8,931
$ $
Basic earnings per ordinary share 0.86 0.40
Diluted earnings per ordinary share 0.86 0.40
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 of $1.5bn recognised in respect of the acquisition
of SVB UK.
3 Reversal of the $2.1bn impairment loss relating to the planned sale
of our retail banking operations in France, which 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.
Consolidated statement of comprehensive income
Half-year to(1)
30 Jun 30 Jun
2023 2022
$m $m
Profit for the period 18,071 8,931
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific
conditions are met:
Debt instruments at fair value through other comprehensive income 549 (6,246)
- fair value gains/(losses) 804 (8,120)
- fair value gains transferred to the income statement on disposal (63) (52)
- expected credit (recoveries)/losses recognised in the income statement (3) 17
- income taxes (189) 1,909
Cash flow hedges (1,062) (2,063)
- fair value losses (1,700) (1,646)
- fair value (gains)/losses reclassified to the income statement 227 (1,127)
- income taxes and other movements 411 710
Share of other comprehensive income/(expense) of associates and joint ventures 101 (142)
- share for the period 101 (142)
Net finance income/(expense) from insurance contracts(2) (101) 1,360
- before income taxes (136) 1,833
- income taxes 35 (473)
Exchange differences (347) (8,382)
Items that will not be reclassified subsequently to profit or loss:
Fair value gains on property revaluation 1 -
Remeasurement of defined benefit asset/(liability) (112) 95
- before income taxes (105) (132)
- income taxes (7) 227
Changes in fair value of financial liabilities designated at fair value upon (653) 2,263
initial recognition arising from changes in own credit risk
- before income taxes (867) 3,030
- income taxes 214 (767)
Equity instruments designated at fair value through other comprehensive income 7 158
- fair value gains 7 158
Effects of hyperinflation 578 428
Other comprehensive expense for the period, net of tax (1,039) (12,529)
Total comprehensive income/(expense) for the period 17,032 (3,598)
Attributable to:
- ordinary shareholders of the parent company 15,986 (4,405)
- other equity holders 542 626
- non-controlling interests 504 181
Total comprehensive income/(expense) for the period 17,032 (3,598)
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
2 Net finance income/(expense) from insurance contracts in other
comprehensive income is the amount that offsets the effective interest rate
and expected credit losses on supporting assets that have been designated at
fair value through other comprehensive income. In the first half of 2023,
movements in net finance income/(expense) from insurance contracts of $(101)m
(1H22: $1,360m was booked, and offsetting fair value through other
comprehensive income ('OCI') movements on supporting assets of $108m was
recorded (1H22: (1,439)m).
Consolidated balance sheet
At(1)
30 Jun 31 Dec
2023 2022
$m $m
Assets
Cash and balances at central banks 307,733 327,002
Items in the course of collection from other banks 10,649 7,297
Hong Kong Government certificates of indebtedness 42,407 43,787
Trading assets 255,387 218,093
Financial assets designated and otherwise mandatorily measured at fair value 104,303 100,101
through profit or loss
Derivatives 272,595 284,159
Loans and advances to banks 100,921 104,475
Loans and advances to customers 959,558 923,561
Reverse repurchase agreements - non-trading 258,056 253,754
Financial investments 407,933 364,726
Assets held for sale 95,480 115,919
Prepayments, accrued income and other assets 175,473 156,149
Current tax assets 1,262 1,230
Interests in associates and joint ventures 29,546 29,254
Goodwill and intangible assets 11,925 11,419
Deferred tax assets 8,248 8,360
Total assets 3,041,476 2,949,286
Liabilities and equity
Liabilities
Hong Kong currency notes in circulation 42,407 43,787
Deposits by banks 68,709 66,722
Customer accounts 1,595,769 1,570,303
Repurchase agreements - non-trading 170,110 127,747
Items in the course of transmission to other banks 10,776 7,864
Trading liabilities 81,228 72,353
Financial liabilities designated at fair value 139,618 127,321
Derivatives 269,560 285,762
Debt securities in issue 85,471 78,149
Liabilities of disposal groups held for sale 87,241 114,597
Accruals, deferred income and other liabilities 155,275 134,313
Current tax liabilities 1,921 1,135
Insurance contract liabilities 115,756 108,816
Provisions 1,722 1,958
Deferred tax liabilities 976 972
Subordinated liabilities 23,286 22,290
Total liabilities 2,849,825 2,764,089
Equity
Called up share capital 10,073 10,147
Share premium account 14,737 14,664
Other equity instruments 19,392 19,746
Other reserves (9,935) (9,133)
Retained earnings 149,903 142,409
Total shareholders' equity 184,170 177,833
Non-controlling interests 7,481 7,364
Total equity 191,651 185,197
Total liabilities and equity 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.
Consolidated statement of changes in equity
Other reserves
Called up share Other Retained Cash Foreign Merger and other Insurance Total share-holders' equity Non- Total equity
flow
exchange
controlling
capital equity earnings Financial assets at FVOCI reserve
hedging
reserve reserves finance
interests
reserve
and share premium instru-ments reserve(1)
$m $m $m $m $m $m $m $m $m $m $m
At 1 Jan 2023 24,811 19,746 142,409 (7,038) (3,808) (32,575) 33,209 1,079 177,833 7,364 185,197
Profit for the period - - 17,508 - - - - - 17,508 563 18,071
Other comprehensive income (net of tax) - - (92) 560 (1,077) (271) 1 (101) (980) (59) (1,039)
- debt instruments at fair value through other comprehensive income - - - 546 - - - - 546 3 549
- equity instruments designated at fair value through other comprehensive - - - 14 - - - - 14 (7) 7
income
- cash flow hedges - - - - (1,077) - - - (1,077) 15 (1,062)
- changes in fair value of financial liabilities designated at fair value - - (654) - - - - - (654) 1 (653)
upon initial recognition arising from changes in own credit risk
- property revaluation - - - - - - 1 - 1 - 1
- remeasurement of defined benefit asset/liability - - (117) - - - - - (117) 5 (112)
- share of other comprehensive income of associates and joint ventures - - 101 - - - - - 101 - 101
- effects of hyperinflation - - 578 - - - - - 578 - 578
- insurance finance income/ - - - - - - - (101) (101) - (101)
(expense) recognised in other comprehensive income
- exchange differences - - - - - (271) - - (271) (76) (347)
Total comprehensive income for the period - - 17,416 560 (1,077) (271) 1 (101) 16,528 504 17,032
Shares issued under employee remuneration and share plans 78 - (78) - - - - - - - -
Capital securities issued(2) - 1,996 - - - - - - 1,996 - 1,996
Dividends to shareholders - - (7,133) - - - - - (7,133) (375) (7,508)
Redemption of securities(3) - (2,350) - - - - - - (2,350) - (2,350)
Cost of share-based payment arrangements - - 228 - - - - - 228 - 228
Share buy-back(4) - - (2,007) - - - - - (2,007) - (2,007)
Cancellation of shares (79) - - - - - 79 - - - -
Other movements(5) - - (932) 6 - - 1 - (925) (12) (937)
At 30 Jun 2023 24,810 19,392 149,903 (6,472) (4,885) (32,846) 33,290 978 184,170 7,481 191,651
Consolidated statement of changes in equity (continued)
Other reserves
Called up Other Retained Financial assets at FVOCI reserve Cash Foreign exchange reserve Merger and other reserves Insurance Total Non- Total
share-
controlling
equity
share capital equity earnings flow finance
holders'
interests
equity
and share premium instru- hedging reserve(1)
ments reserve
$m $m $m $m $m $m $m $m $m $m $m
At 31 Dec 2021 (IFRS 4) 24,918 22,414 144,458 (634) (197) (22,769) 30,060 - 198,250 8,527 206,777
Impact on transition to IFRS 17(6) - - (9,222) 683 - - - (696) (9,235) (1,224) (10,459)
At 1 Jan 2022 24,918 22,414 135,236 49 (197) (22,769) 30,060 (696) 189,015 7,303 196,318
Profit for the period - - 8,592 - - - - - 8,592 339 8,931
Other comprehensive income (net of tax) - - 2,647 (6,062) (2,035) (8,282) - 1,360 (12,372) (157) (12,529)
- debt instruments at fair value through other - - - (6,183) - - - - (6,183) (63) (6,246)
comprehensive income
- equity instruments designated at fair value through - - - 121 - - - - 121 37 158
other comprehensive
income
- cash flow hedges - - - - (2,035) - - - (2,035) (28) (2,063)
- changes in fair value of financial liabilities - - 2,263 - - - - - 2,263 - 2,263
designated at fair value
upon initial recognition arising from changes in own
credit risk
- remeasurement of defined benefit asset/liability - - 98 - - - - - 98 95
(3)
- share of other comprehensive income of associates - - (142) - - - - - (142) - (142)
and joint ventures
- effects of hyperinflation - - 428 - - - - - 428 - 428
- insurance finance income/ (expense) recognised in - - - - - - - 1,360 1,360 - 1,360
other comprehensive
income
- exchange differences - - - - - (8,282) - - (8,282) (100) (8,382)
Total comprehensive income for the period - - 11,240 (6,062) (2,035) (8,282) - 1,360 (3,779) 181 (3,598)
Shares issued under employee remuneration and 65 - (65) - - - - - - - -
share plans
Dividends to shareholders - - (4,202) - - - - - (4,202) (295) (4,497)
Redemption of securities(3) - (723) - - - - - - (723) - (723)
Cost of share-based payment arrangements - - 177 - - - - - 177 - 177
Share buy-back(4) - - (1,000) - - - - - (1,000) - (1,000)
Cancellation of shares (133) - - - - - 133 - - - -
Other movements - - (525) 2 - - 11 - (512) (60) (572)
At 30 Jun 2022 24,850 21,691 140,860 (6,011) (2,232) (31,051) 30,204 664 178,975 7,130 186,105
Consolidated statement of changes in equity (continued)
Other reserves
Called up Other Retained Financial assets at FVOCI reserve Cash Foreign exchange reserve Merger and other reserves Insurance Total Non- Total
share-
controlling
equity
share capital equity earnings flow finance
holders'
interests
equity
and share premium instru- hedging reserve(1)
ments reserve
$m $m $m $m $m $m $m $m $m $m $m
At 1 Jul 2022 24,850 21,691 140,860 (6,011) (2,232) (31,051) 30,204 664 178,975 7,130 186,105
Profit for the period - - 6,967 - - - - - 6,967 351 7,318
Other comprehensive income (net of tax) - - (1,244) (1,027) (1,578) (1,524) 174 415 (4,784) 71 (4,713)
- debt instruments at fair value through other comprehensive income - - - (998) - - - - (998) 12 (986)
- equity instruments designated at fair value through other comprehensive - - - (29) - - - - (29) (22) (51)
income
- cash flow hedges - - - - (1,578) - - - (1,578) (14) (1,592)
- changes in fair value of financial liabilities designated at fair value - - (341) - - - - - (341) - (341)
upon initial recognition arising from changes in own credit risk
- property revaluation - - - - - - 174 - 174 106 280
- remeasurement of defined benefit asset/liability - - (1,127) - - - - - (1,127) 1 (1,126)
- share of other comprehensive income of associates and joint ventures - - (225) - - - - - (225) - (225)
- effects of hyperinflation - - 449 - - - - - 449 - 449
- insurance finance income/ (expense) recognised in other comprehensive - - - - - - - 415 415 - 415
income
- exchange differences - - - - - (1,524) - - (1,524) (12) (1,536)
Total comprehensive income for the period - - 5,723 (1,027) (1,578) (1,524) 174 415 2,183 423 2,606
Shares issued under employee remuneration and share plans 2 - (2) - - - - - - - -
Dividends to shareholders - - (2,342) - - - - - (2,342) (131) (2,473)
Redemption of securities(3) - (1,945) 402 - - - - - (1,543) - (1,543)
Cost of share-based payment arrangements - - 223 - - - - - 223 - 223
Transfers(7) - - (2,499) - - - 2,499 - - - -
Cancellation of shares(4) (41) - - - - - 41 - - - -
Other movements - - 44 - 2 - 291 - 337 (57) 280
At 31 Dec 2022 24,811 19,746 142,409 (7,038) (3,808) (32,575) 33,209 1,079 177,833 7,364 185,197
1 The insurance finance reserve reflects the unwinding of the discount
rate on insurance liabilities for which the OCI option has been elected for
our insurance business in France. It is recorded after excluding the amount
that offsets the effective interest rate and expected credit losses on
supporting assets that have been designated at fair value through other
comprehensive income.
2 During 2023, HSBC Holdings issued $2,000m of contingent convertible
securities on which there were $4m of external issue costs.
3 During 2023, HSBC Holdings redeemed $2,350m contingent convertible
securities. In 2022, HSBC Holdings redeemed €1,500m 5.250% and SGD1,000m
5.875% contingent convertible securities.
4 In February 2022 HSBC announced a share buy-back of up to $1.0bn,
which concluded in July 2022. Additionally, in May 2023, HSBC Holdings
announced a share buy-back of up to $2.0bn.
5 Includes a payment of $749m (1H22: $435m) to the HSBC Holdings Employee
Benefit Trust 2001 (No. 2) to purchase shares in order to settle liabilities
on Group share plans.
6 The impact of IFRS 17 on previously reported total equity was
$(10,585)m at 30 June 2022 and $(10,831)m at 31 December 2022.
7 Permitted transfers from the merger reserve to retained earnings
were made when the investment in HSBC Overseas Holdings (UK) Limited was
previously impaired. In 2022, part-reversals of these impairments resulted in
transfers from retained earnings back to the merger reserve of $2,499m.
Consolidated statement of cash flows
Half-year to(1)
30 Jun 30 Jun
2023 2022
$m $m
Profit before tax 21,657 8,780
Adjustments for non-cash items:
Depreciation, amortisation and impairment 1,591 1,894
Net loss/(gain) from investing activities (41) 173
Share of profits in associates and joint ventures (1,583) (1,449)
(Gain)/loss on disposal of subsidiaries, businesses, associates and joint (3,604) (71)
ventures
Change in expected credit losses gross of recoveries and other credit 1,482 1,242
impairment charges
Provisions including pensions 148 201
Share-based payment expense 228 177
Other non-cash items included in profit before tax (1,661) 82
Elimination of exchange differences(2) (6,558) 48,921
Change in operating assets (52,745) 19,713
Change in operating liabilities 72,836 (35,752)
Dividends received from associates 124 60
Contributions paid to defined benefit plans (87) (102)
Tax paid (1,664) (1,264)
Net cash from operating activities 30,123 42,605
Purchase of financial investments (298,182) (265,427)
Proceeds from the sale and maturity of financial investments 263,838 247,517
Net cash flows from the purchase and sale of property, plant and equipment (329) (589)
Net cash flows from purchase/(disposal) of customer deposits and loan - (3,756)
portfolios
Net investment in intangible assets (1,123) (1,240)
Net cash flow on (acquisition)/disposal of subsidiaries, businesses, 1,228 (525)
associates and joint ventures(3)
Net cash from investing activities (34,568) (24,020)
Issue of ordinary share capital and other equity instruments 1,996 -
Cancellation of shares (1,273) (1,840)
Net sales/(purchases) of own shares for market-making and investment purposes (823) (443)
Net cash flow from change in stakes of subsidiaries - (197)
Redemption of preference shares and other equity instruments (2,350) (723)
Subordinated loan capital issued 2,744 2,659
Subordinated loan capital repaid (1,044) (11)
Dividends paid to shareholders of the parent company and non-controlling (7,508) (4,497)
interests
Net cash from financing activities (8,258) (5,052)
Net increase in cash and cash equivalents (12,703) 13,533
Cash and cash equivalents at the beginning of the period 521,671 574,032
Exchange differences in respect of cash and cash equivalents 8,565 (40,243)
Cash and cash equivalents at the end of the period 517,533 547,322
Interest received was $46,817m (1H22: $20,957m), interest paid was $29,222m
(1H22: $7,146m) and dividends received (excluding dividends received from
associates, which are presented separately above) were $751m (1H22: $800m).
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
2 Adjustments to bring changes between opening and closing balance
sheet amounts to average rates. This is not done on a line-by-line basis, as
details cannot be determined without unreasonable expense.
3 The 'Net cash flow on (acquisition)/disposal of subsidiaries,
businesses, associates and joint ventures' includes $1.2bn of net cash inflow
on acquisition of Silicon Valley Bank UK Limited in March 2023.
4 Includes $7.5bn (1H22: $1.7bn) of cash and cash equivalents classified
as held for sale.
1 Basis of preparation and significant accounting policies
(a) Compliance with International Financial Reporting Standards
Our interim condensed consolidated financial statements have been prepared on
the basis of the policies set out in the 2022 annual financial statements,
except for those relating to IFRS 17 'Insurance Contracts' and amendments to
IAS 12 'Income Taxes'. They have also been prepared in accordance with IAS 34
'Interim Financial Reporting' as adopted by the UK, IAS 34 'Interim Financial
Reporting' as issued by the International Accounting Standards Board ('IASB'),
IAS 34 'Interim Financial Reporting' as adopted by the EU, and the Disclosure
Guidance and Transparency Rules sourcebook of the UK's Financial Conduct
Authority. Therefore, they include an explanation of events and transactions
that are significant to an understanding of the changes in HSBC's financial
position and performance since the end of 2022.
These financial statements should be read in conjunction with the Annual
Report and Accounts 2022, which was prepared in accordance with UK-adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
These financial statements were also prepared in accordance with International
Financial Reporting Standards ('IFRSs') as issued by the IASB, including
interpretations issued by the IFRS Interpretations Committee. These financial
statements should be read in conjunction with the information about the
application of IFRS 17 'Insurance Contracts' as set out below and the new
policies for insurance contracts as described on pages 7 to 9 of our Report on
Transition to IFRS 17 'Insurance Contracts' issued on 2 May 2023.
At 30 June 2023, there were no IFRSs effective for the half-year to 30 June
2023 affecting these financial statements that were not approved for adoption
in the UK by the UK Endorsement Board. With the exception of amendments to IAS
12 'International Tax Reform - Pillar Two Model Rules', which is expected to
be endorsed by the EU in the second half of 2023, there was no difference
between IFRSs adopted by the UK, IFRSs as adopted by the EU, and IFRSs issued
by the IASB in terms of their application to HSBC.
Standards applied during the half-year to 30 June 2023
IFRS 17 'Insurance Contracts'
On 1 January 2023, the Group adopted the requirements of IFRS 17 'Insurance
Contracts' retrospectively with comparatives restated from the transition
date, 1 January 2022. At transition, the Group's total equity reduced by
$10,459m.
On adoption of IFRS 17, balances based on IFRS 4, including the present value
of in-force long-term insurance business ('PVIF') asset in relation to the
upfront recognition of future profits of in-force insurance contracts, were
derecognised. Insurance contract liabilities have been remeasured under
IFRS 17 based on groups of insurance contracts, which include the fulfilment
cash flows comprising the best estimate of the present value of the future
cash flows (for example premiums and payouts for claims, benefits, and
expenses), together with a risk adjustment for non-financial risk, as well as
the contractual service margin ('CSM'). The CSM represents the unearned
profits that will be released and systematically recognised in insurance
revenue as services are provided over the expected coverage period.
In addition, the Group has made use of the option under the standard to
re-designate certain eligible financial assets held to support insurance
contract liabilities, which were predominantly measured at amortised cost, as
financial assets measured at fair value through profit or loss, with
comparatives restated from the transition date.
The key differences between IFRS 4 and IFRS 17 are summarised in the following
table:
IFRS 4 IFRS 17
Balance sheet - Insurance contract liabilities for non-linked life insurance contracts - Insurance contract liabilities are measured for groups of insurance
are calculated by local actuarial principles. Liabilities under unit-linked contracts at current value, comprising the fulfilment cash flows and the CSM.
life insurance contracts are at least equivalent to the surrender or transfer
value, by reference to the value of the relevant underlying funds or indices. - The fulfilment cash flows comprise the best estimate of the present
Grouping requirements follow local regulations. value of the future cash flows, together with a risk adjustment for
non-financial risk.
- An intangible asset for the PVIF is recognised, representing the upfront
recognition of future profits associated with in-force insurance contracts. - The CSM represents the unearned profit.
-
Profit emergence/ recognition - The value of new business is reported as revenue on Day 1 as an increase - The CSM is systematically recognised in revenue as services are provided
in PVIF. over the expected coverage period of the group of contracts (i.e. no Day 1
profit).
- The impact of the majority of assumption changes is recognised
immediately in the income statement. - Contracts are measured using the general measurement model ('GMM') or
the variable fee approach ('VFA') model for insurance contracts with direct
- Variances between actual and expected cash flows are recognised in the participation features upon meeting the eligibility criteria. Under the VFA
period they arise. model, the Group's share of the investment experience and assumption changes
are absorbed by the CSM and released over time to profit or loss. For
contracts measured under GMM, the Group's share of the investment volatility
is recorded in profit or loss as it arises.
- Losses from onerous contracts are recognised in the income statement
immediately.
Investment return assumptions (discount rate) - PVIF is calculated based on long-term investment return assumptions - Under the market consistent approach, expected future investment spreads
based on assets held. It therefore includes investment margins expected to be are not included in the investment return assumption. Instead, the discount
earned in future. rate includes an illiquidity premium that reflects the nature of the
associated insurance contract liabilities.
Expenses - Total expenses to acquire and maintain the contract over its lifetime - Projected lifetime expenses that are directly attributable costs are
are included in the PVIF calculation. included in the insurance contract liabilities and recognised in the insurance
service result.
- Expenses are recognised across operating expenses and fee expense as
incurred and the allowances for those costs released from the PVIF - Non-attributable costs are reported in operating expenses.
simultaneously.
There were no other new standards or amendments to standards that had an
effect on these interim condensed financial statements.
(b) Use of estimates and judgements
Management believes that the critical accounting estimates and judgements
applicable to the Group are those that relate to impairment of amortised cost
and FVOCI debt financial assets, the valuation of financial instruments,
deferred tax assets, provisions, interests in associates, impairment of
goodwill and non-financial assets, post-employment benefit plans, and
non-current assets and disposal groups held for sale.
There were no material changes in the current period to any of the critical
accounting estimates and judgements disclosed in 2022, which are stated on
pages 99 and 337 to 347 of the Annual Report and Accounts 2022.
(c) Composition of the Group
There were no material changes in the composition of the Group in the
half-year to 30 June 2023. For further details of future business acquisitions
and disposals, see Note 15 'Assets held for sale, liabilities of disposal
groups held for sale and business acquisitions' in the Interim Report 2023.
(d) Going concern
The financial statements are prepared on a going concern basis, as the
Directors are satisfied that the Group and parent company have the resources
to continue in business for the foreseeable future. In making this assessment,
the Directors have considered a wide range of information relating to present
and future conditions, including future projections of profitability, cash
flows, capital requirements and capital resources. These considerations
include stressed scenarios, as well as considering potential impacts from
other top and emerging risks, and the related impact on profitability, capital
and liquidity.
(e) Accounting policies
The accounting policies that we applied for these interim condensed
consolidated financial statements are consistent with those described on pages
335 to 348 of the Annual Report and Accounts 2022, as are the methods of
computation, with the exception of those relating to IFRS 17 and amendments to
IAS 12 as described above.
2 Dividends
On 1 August 2023, the Directors approved a second interim dividend for 2023 of
$0.10 per ordinary share in respect of the financial year ending 31 December
2023. This distribution amounts to approximately $1.974bn and will be payable
on 21 September 2023. No liability is recognised in the financial statements
in respect of these dividends.
Dividends paid to shareholders of HSBC Holdings plc
Half-year to
30 Jun 2023 30 Jun 2022
Per share Total Per share Total
$ $m $ $m
Dividends paid on ordinary shares
In respect of previous year:
- second interim dividend 0.23 4,590 0.18 3,576
In respect of current year:
- first interim dividend 0.10 2,001 - -
Total 0.33 6,591 0.18 3,576
Total coupons on capital securities classified as equity 542 626
Dividends to shareholders 7,133 4,202
Second interim dividend for 2023
On 1 August 2023, the Directors approved a second interim dividend in respect
of the financial year ending 31 December 2023 of $0.10 per ordinary share, a
distribution of approximately $1.974bn. The dividend will be payable on 21
September 2023 to holders on the Principal Register in the UK, the Hong Kong
Overseas Branch Register or the Bermuda Overseas Branch Register on 11 August
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 September 2023. Particulars of these arrangements will be
sent to shareholders on or about 18 August 2023 and changes to currency
elections must be received by 7 September 2023. The ordinary shares in London,
Hong Kong and Bermuda, and American Depositary Shares ('ADSs') in New York
will be quoted ex-dividend on 10 August 2023.
The dividend will be payable on ADSs, each of which represents five ordinary
shares, on 21 September 2023 to holders of record on 11 August 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 September 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 Overseas Branch Registrar or Bermuda
Overseas Branch Registrar should do so before 4.00pm local time on 11 August
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 11 August 2023. Any person wishing to remove
ordinary shares to or from each register must do so before 4.00pm local time
on 10 August 2023.
Transfer of ADSs must be lodged with the depositary by 11.00am on 11 August
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 share
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 September 2023 to holders of record on
31 August 2023.
3 Earnings per share
Basic earnings per ordinary share is calculated by dividing the profit
attributable to ordinary shareholders of the parent company by the weighted
average number of ordinary shares outstanding, excluding own shares held.
Diluted earnings per ordinary share is calculated by dividing the basic
earnings, which require no adjustment for the effects of dilutive potential
ordinary shares, by the weighted average number of ordinary shares
outstanding, excluding own shares held, plus the weighted average number of
ordinary shares that would be issued on conversion of dilutive potential
ordinary shares.
Basic and diluted earnings per share
Half-year to(1)
30 Jun 2023 30 Jun 2022
Profit Number Amount per share Profit Number Amount per share
of shares of shares
$m (millions) $ $m (millions) $
Basic(2) 16,966 19,693 0.86 7,966 19,954 0.40
Effect of dilutive potential ordinary shares 136 - 131
Diluted(2) 16,966 19,829 0.86 7,966 20,085 0.40
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
2 Weighted average number of ordinary shares outstanding (basic) or
assuming dilution (diluted).
4 Constant currency balance sheet reconciliation
At
30 Jun 2023 At 30 June 2022(1) At 31 Dec 2022(1)
Reported and constant currency Constant currency Currency translation Reported Constant currency Currency translation Reported
$m $m $m $m $m $m $m
Loans and advances to customers (net) 959,558 1,037,874 10,853 1,027,021 936,613 13,052 923,561
Interests in associates and joint ventures 29,546 28,090 (1,356) 29,446 28,384 (870) 29,254
Total external assets 3,041,476 3,010,510 40,029 2,970,481 2,995,590 46,304 2,949,286
Customer accounts 1,595,769 1,671,151 19,850 1,651,301 1,592,396 22,093 1,570,303
Customer accounts
1 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
5 Reported and constant currency results(1)
Half-year to(2)
30 Jun 30 Jun
2023 2022
$m $m
Revenue(3)
Reported 36,876 24,545
Currency translation (898)
Constant currency 36,876 23,647
Change in expected credit losses and other credit impairment charges
Reported (1,345) (1,087)
Currency translation 13
Constant currency (1,345) (1,074)
Operating expenses
Reported (15,457) (16,127)
Currency translation 595
Constant currency (15,457) (15,532)
Share of profit in associates and joint ventures
Reported 1,583 1,449
Currency translation (86)
Constant currency 1,583 1,363
Profit before tax
Reported 21,657 8,780
Currency translation (376)
Constant currency 21,657 8,404
Profit after tax
Reported 18,071 8,931
Currency translation (300)
Constant currency 18,071 8,631
1 In the current period constant currency results are equal to
reported as there is no currency translation.
2 From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which
replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated
accordingly.
3 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Revenue
Disposals, acquisitions and related costs(1,2) 3,321 (288)
Fair value movements on financial instruments(3) 15 (371)
Restructuring and other related costs(4) - 68
Operating expenses
Disposals, acquisitions and related costs (118) -
Restructuring and other related costs(5) 47 (1,040)
Tax
Tax (charge)/credit on notable items (500) 242
Recognition of losses - 2,082
Uncertain tax positions 427 (317)
1 Includes the reversal of $2.1bn impairment loss relating to the
planned sale of our retail banking operations in France, which is no longer
classified as held for sale.
2 Includes the provisional gain of $1.5bn recognised in respect of the
acquisition of SVB UK.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
4 Comprises gains and losses relating to the business update in
February 2020, including losses associated with the RWA reduction programme.
5 In 2Q23 we recognised $47m of reversals relating to restructuring
provisions recognised during 2022.
6 Contingent liabilities, contractual commitments and guarantees
At
30 Jun 31 Dec
2023 2022
$m $m
Guarantees and other contingent liabilities:
- financial guarantees 18,882 18,783
- performance and other guarantees 89,758 88,240
- other contingent liabilities 590 676
At the end of the period 109,230 107,699
Commitments:(1)
- documentary credits and short-term trade-related transactions 7,698 8,241
- forward asset purchases and forward deposits placed 72,340 50,852
- standby facilities, credit lines and other commitments to lend 793,256 768,761
At the end of the period 873,294 827,854
1 Includes $649,526m of commitments at 30 June 2023 (31 December 2022:
$618,788m), to which the impairment requirements in IFRS 9 are applied where
HSBC has become party to an irrevocable commitment.
Contingent liabilities arising from legal proceedings and regulatory and other
matters against Group companies are excluded from this note but are disclosed
in Note 7 below and Notes 11 and 13 of the Interim Report 2023.
7 Legal proceedings and regulatory matters
HSBC is party to legal proceedings and regulatory matters in a number of
jurisdictions arising out of its normal business operations. Apart from the
matters described below, HSBC considers that none of these matters are
material. The recognition of provisions is determined in accordance with the
accounting policies set out in Note 1 of the Annual Report and Accounts 2022.
While the outcomes of legal proceedings and regulatory matters are inherently
uncertain, management believes that, based on the information available to it,
appropriate provisions have been made in respect of these matters as at 30
June 2023 (see Note 11 of the Interim Report 2023). Where an individual
provision is material, the fact that a provision has been made is stated and
quantified, except to the extent that doing so would be seriously prejudicial.
Any provision recognised does not constitute an admission of wrongdoing or
legal liability. It is not practicable to provide an aggregate estimate
of potential liability for our legal proceedings and regulatory matters as a
class of contingent liabilities.
Bernard L. Madoff Investment Securities LLC
Various non-US HSBC companies provided custodial, administration and similar
services to a number of funds incorporated outside the US whose assets were
invested with Bernard L. Madoff Investment Securities LLC ('Madoff
Securities'). Based on information provided by Madoff Securities as at 30
November 2008, the purported aggregate value of these funds was $8.4bn,
including fictitious profits reported by Madoff. Based on information
available to HSBC, the funds' actual transfers to Madoff Securities minus
their actual withdrawals from Madoff Securities during the time HSBC serviced
the funds are estimated to have totalled approximately $4bn. Various HSBC
companies have been named as defendants in lawsuits arising out of Madoff
Securities' fraud.
US litigation: The Madoff Securities Trustee has brought lawsuits against
various HSBC companies and others, seeking recovery of transfers from Madoff
Securities to HSBC in an amount not specified, and these lawsuits remain
pending in the US Bankruptcy Court for the Southern District of New York (the
'US Bankruptcy Court').
Certain Fairfield entities (together, 'Fairfield') (in liquidation since July
2009) have brought a lawsuit in the US against fund shareholders, including
HSBC companies that acted as nominees for clients, seeking restitution of
redemption payments. In August 2022, the US District Court for the Southern
District of New York affirmed earlier decisions by the US Bankruptcy Court
that dismissed the majority of the liquidators' claims (against most of the
HSBC companies). In September 2022, the remaining defendants before the US
Bankruptcy Court sought leave to appeal and the liquidators filed appeals to
the US Court of Appeals for the Second Circuit, which are currently pending.
Meanwhile, proceedings before the US Bankruptcy Court with respect to the
remaining claims are ongoing.
UK litigation: The Madoff Securities Trustee has filed a claim against various
HSBC companies in the High Court of England and Wales, seeking recovery of
transfers from Madoff Securities to HSBC. The claim has not yet been served
and the amount claimed has not been specified.
Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in
liquidation since April 2009) brought an action against HSBC Securities
Services Luxembourg ('HSSL') and Bank of Bermuda (Cayman) Limited (now known
as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary
duty and claiming monetary damages. Following dismissal of Primeo's action by
the lower and appellate courts in the Cayman Islands, in 2019, Primeo appealed
to the UK Privy Council. During 2021, the UK Privy Council held two separate
hearings in connection with Primeo's appeal. Judgment was given against HSBC
in respect of the first hearing and judgment is pending in respect of the
second hearing.
Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald') (in
liquidation since July 2013) brought an action against HSSL before the
Luxembourg District Court, seeking restitution of cash and securities that
Herald purportedly lost because of Madoff Securities' fraud, or money damages.
The Luxembourg District Court dismissed Herald's securities restitution claim,
but reserved Herald's cash restitution and money damages claims. Herald has
appealed this judgment to the Luxembourg Court of Appeal, where the matter is
pending. In late 2018, Herald brought additional claims against HSSL and HSBC
Bank plc before the Luxembourg District Court, seeking further restitution and
damages.
In October 2009, Alpha Prime Fund Limited ('Alpha Prime') brought an action
against HSSL before the Luxembourg District Court, seeking the restitution of
securities, or the cash equivalent, or money damages. In December 2018, Alpha
Prime brought additional claims seeking damages against various HSBC
companies. These matters are currently pending before the Luxembourg District
Court.
In December 2014, Senator Fund SPC ('Senator') brought an action against HSSL
before the Luxembourg District Court, seeking restitution of securities, or
the cash equivalent, or money damages. In April 2015, Senator commenced a
separate action against the Luxembourg branch of HSBC Bank plc asserting
identical claims. In December 2018, Senator brought additional claims against
HSSL and HSBC Bank plc Luxembourg branch, seeking restitution of Senator's
securities or money damages. These matters are currently pending before the
Luxembourg District Court.
There are many factors that may affect the range of possible outcomes, and any
resulting financial impact, of the various Madoff-related proceedings
described above, including but not limited to the multiple jurisdictions in
which the proceedings have been brought. Based upon the information currently
available, management's estimate of the possible aggregate damages that might
arise as a result of all claims in the various Madoff-related proceedings is
around $600m, excluding costs and interest. Due to uncertainties and
limitations of this estimate, any possible damages that might ultimately arise
could differ significantly from this amount.
Anti-money laundering and sanctions-related matters
Since November 2014, a number of lawsuits have been filed in federal courts in
the US against various HSBC companies and others on behalf of plaintiffs who
are, or are related to, victims of terrorist attacks in the Middle East. In
each case, it is alleged that the defendants aided and abetted the unlawful
conduct of various sanctioned parties in violation of the US Anti-Terrorism
Act. Nine actions remain pending in federal courts and HSBC's motions to
dismiss have been granted in five of these cases. In September 2022 and
January 2023, respectively, the appellate courts affirmed the dismissals of
two of the cases, and the plaintiffs are seeking review of these decisions by
the US Supreme Court. The dismissals in the other cases are subject to appeal.
The four remaining actions are at an early stage.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Interbank offered rates investigation and litigation
Euro interest rate derivatives: In December 2016, the European Commission
('EC') issued a decision finding that HSBC, among other banks, engaged in
anti-competitive practices in connection with the pricing of euro interest
rate derivatives, and the EC imposed a fine on HSBC based on a one-month
infringement in 2007. The fine was annulled in 2019 and a lower fine was
imposed in 2021. In January 2023, the European Court of Justice dismissed an
appeal by HSBC and upheld the EC's findings on HSBC's liability. A separate
appeal by HSBC concerning the amount of the fine remains pending before the
General Court of the European Union.
US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named
as defendants in a number of private lawsuits filed in federal and state
courts in the US with respect to the setting of US dollar Libor. The
complaints assert claims under various US federal and state laws, including
antitrust and racketeering laws and the Commodity Exchange Act ('US CEA'). The
lawsuits include individual and putative class actions, most of which have
been transferred and/or consolidated for pre-trial purposes before the US
District Court for the Southern District of New York. HSBC has reached class
settlements with five groups of plaintiffs, and the court has approved these
settlements. HSBC has also resolved several of the individual actions,
although a number of other US dollar Libor-related actions remain pending.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Foreign exchange-related investigations and litigation
In December 2016, Brazil's Administrative Council of Economic Defense
initiated an investigation into the onshore foreign exchange market and
identified a number of banks, including HSBC, as subjects of its
investigation, which remains ongoing.
In June 2020, the Competition Commission of South Africa, having initially
referred a complaint for proceedings before the South African Competition
Tribunal in February 2017, filed a revised complaint against 28 financial
institutions, including HSBC Bank plc and HSBC Bank USA N.A. ('HSBC Bank
USA'), for alleged anti-competitive behaviour in the South African foreign
exchange market. In March 2023, HSBC Bank plc's and HSBC Bank USA's
applications to dismiss the revised complaint were denied and, in April 2023,
HSBC Bank plc and HSBC Bank USA appealed the decision to the South African
Competition Appeal Court.
Beginning in 2013, various HSBC companies and other banks have been named as
defendants in a number of putative class actions filed in, or transferred to,
the US District Court for the Southern District of New York arising from
allegations that the defendants conspired to manipulate foreign exchange
rates. HSBC has reached class settlements with two groups of plaintiffs,
including direct and indirect purchasers of foreign exchange products, and the
court has granted final approval of these settlements. A putative class action
by a group of retail customers of foreign exchange products remains pending.
In 2018, complaints alleging foreign exchange-related misconduct were filed in
the US District Court for the Southern District of New York and the High Court
of England and Wales against HSBC and other defendants by certain plaintiffs
that opted out of the direct purchaser class action settlement in the US. HSBC
has reached a settlement with the plaintiffs to resolve these claims. These
matters are now closed. In January 2023, HSBC reached a
settlement-in-principle with plaintiffs in Israel to resolve a class action
filed in the local courts alleging foreign exchange-related misconduct. The
settlement remains subject to the negotiation of definitive documentation and
court approval. Lawsuits alleging foreign exchange-related misconduct remain
pending against HSBC and other banks in courts in Brazil. It is possible that
additional civil actions will be initiated against HSBC in relation to its
historical foreign exchange activities.
There are many factors that may affect the range of outcomes, and the
resulting financial impact, of the pending matters, which could be
significant.
Precious metals fix-related litigation
Gold: Since 2015, numerous putative class actions have been filed in the
Ontario and Quebec Superior Courts of Justice against various HSBC companies
and other financial institutions. The plaintiffs allege that, among other
things, from January 2004 to March 2014, the defendants conspired to
manipulate the price of gold and gold derivatives in violation of the Canadian
Competition Act and common law. These actions are ongoing.
Silver: HSBC and other members of The London Silver Market Fixing Limited are
defending a class action pending in the US District Court for the Southern
District of New York alleging that, from January 2007 to December 2013, the
defendants conspired to manipulate the price of silver and silver derivatives
for their collective benefit in violation of US antitrust laws, the US CEA and
New York state law. In May 2023, the court granted the defendants' motion to
dismiss. The plaintiffs have appealed the dismissal, and this appeal remains
pending.
In April 2016, two putative class actions were filed in the Ontario and Quebec
Superior Courts of Justice against various HSBC companies and other financial
institutions. The plaintiffs in both actions allege that, from January 1999 to
August 2014, the defendants conspired to manipulate the price of silver and
silver derivatives in violation of the Canadian Competition Act and common
law. These actions are ongoing.
Platinum and palladium: HSBC and other members of The London Platinum and
Palladium Fixing Company Limited are defending a class action pending in the
US District Court for the Southern District of New York alleging that, from
January 2008 to November 2014, the defendants conspired to manipulate the
price of platinum group metals and related financial products for their
collective benefit in violation of US antitrust laws and the US CEA. In
February 2023, the court reversed an earlier dismissal of the plaintiffs'
third amended complaint, and this matter is proceeding.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Gilts trading investigation and litigation
Since 2018, the UK Competition and Markets Authority ('CMA') has been
investigating HSBC and four other banks for suspected anti-competitive conduct
in relation to the historical trading of gilts and related derivatives. In May
2023, the CMA announced its case against HSBC Bank plc and HSBC Holdings, and
both HSBC companies are contesting the CMA's allegations.
In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks,
were named as defendants in a putative class action filed in the US District
Court for the Southern District of New York by plaintiffs alleging
anti-competitive conduct in the gilts market. This matter is at an early
stage. It is possible that additional civil actions will be initiated against
HSBC in relation to its historical gilts trading activities.
Based on the facts currently known, it is not practicable at this time for
HSBC to predict the resolution of these matters, including the timing or any
possible impact on HSBC, which could be significant.
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are subject to a number of
other investigations and reviews by various regulators and competition and law
enforcement authorities, as well as litigation, in connection with various
matters relating to the firm's businesses and operations, including:
- an investigation by the PRA in connection with depositor protection
arrangements in the UK;
- an investigation by the FCA in connection with collections and
recoveries operations in the UK;
- investigations by prosecuting authorities in Germany and France in
connection with the dividend withholding tax treatment of certain trading
activities;
- an investigation by the US Commodity Futures Trading Commission
('CFTC') regarding interest rate swap transactions related to bond issuances,
among other things. HSBC has reached a settlement with the CFTC to resolve
this investigation, and this matter is now closed;
- investigations by the CFTC and the US Securities and Exchange
Commission ('SEC') concerning compliance with records preservation
requirements relating to the use of unapproved electronic messaging platforms
for business communications. HSBC has reached settlements with the CFTC and
SEC to resolve these investigations, and these matters are now closed;
- investigations by tax administration, regulatory and law enforcement
authorities in various countries in connection with allegations of tax evasion
or tax fraud, money laundering and unlawful cross-border banking solicitation;
- a lawsuit brought in the US District Court for the Northern District
of California, by First-Citizens Bank & Trust Company ('First Citizens')
against various HSBC companies and seven HSBC US employees who had previously
worked for Silicon Valley Bank ('SVB') alleging, among other things, that HSBC
conspired with the individual defendants to solicit employees from First
Citizens and that the individual defendants took confidential information
belonging to SVB and/or First Citizens;
- litigation brought against various HSBC companies in New York State
court relating to residential mortgage-backed securities, based primarily on
(a) claims brought against HSBC Bank USA in connection with its role as
trustee on behalf of various securitisation trusts; and (b) claims against
several HSBC companies seeking to have the defendants repurchase various
mortgage loans;
- a putative class action brought in the US District Court for the
Southern District of New York relating to the Mexican government bond market;
- claims issued by two separate investor groups against HSBC UK Bank
plc (as successor to HSBC Private Bank (UK) Limited ('PBGB')) in the High
Court of England and Wales in connection with PBGB's role in the development
of Eclipse film finance schemes; and
- two group actions pending in federal courts in the US and a claim
issued in the High Court of England and Wales in connection with HSBC Bank
plc's role as a correspondent bank to Stanford International Bank Ltd from
2003 to 2009. HSBC Bank plc has reached settlements with the plaintiffs in the
US and UK to resolve these claims. The US settlement is subject to court
approval and the UK settlement has concluded.
There are many factors that may affect the range of outcomes, and the
resulting financial impact, of the pending matters, which could be
significant.
8 Events after the balance sheet date
On 28 July 2023 HSBC Continental Europe completed the sale of its branch
operations in Greece to Pancreta Bank SA. A loss of $0.1bn, including goodwill
impairment was recognised upon reclassification to held for sale in accordance
with IFRS 5 in the second quarter of 2022.
A second interim dividend for 2023 of $0.10 per ordinary share in respect of
the financial year ending 31 December 2023 was approved by the Directors on
1 August 2023, as described in Note 2. On 1 August 2023, HSBC Holdings
announced a share buy-back programme to purchase its ordinary shares up to a
maximum consideration of $2.0bn, which is expected to commence shortly and
complete within three months.
9 Capital structure
Capital ratios
At
30 Jun 31 Dec
2023 2022
% %
Transitional basis
Common equity tier 1 ratio 14.7 14.2
Tier 1 ratio 17.0 16.6
Total capital ratio 19.8 19.3
End point basis
Common equity tier 1 ratio 14.7 14.2
Tier 1 ratio 17.0 16.6
Total capital ratio 19.3 18.7
Total regulatory capital and risk-weighted assets
At
30 Jun 31 Dec
2023 2022
$m $m
Transitional basis
Common equity tier 1 capital 126,418 119,291
Additional tier 1 capital 19,382 19,776
Tier 2 capital 24,221 23,356
Total regulatory capital 170,021 162,423
Risk-weighted assets 859,545 839,720
End point basis
Common equity tier 1 capital 126,418 119,291
Additional tier 1 capital 19,382 19,776
Tier 2 capital 20,091 18,091
Total regulatory capital 165,891 157,158
Risk-weighted assets 859,545 839,720
Leverage ratio(1)
At
30 Jun 31 Dec
2023 2022
$bn $bn
Tier 1 capital (leverage) 145.8 139.1
Total leverage ratio exposure 2,497.9 2,417.2
% %
Leverage ratio 5.8 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. At 30 June 2023, the IFRS 9 add-back to CET1 capital and the related
tax charge were immaterial.
Unless otherwise stated, all figures are calculated using the EU's regulatory
transitional arrangements for IFRS 9 'Financial Instruments' in article 473a
of the Capital Requirements Regulation.
10 Statutory accounts
The information in this media release is unaudited and does not constitute
statutory accounts within the meaning of section 434 of the Companies Act
2006. The statutory accounts of HSBC Holdings plc for the year ended 31
December 2022 have been delivered to the Registrar of Companies in England and
Wales in accordance with section 447 of the Companies Act 2006. The Group's
auditor, PricewaterhouseCoopers LLP ('PwC') has reported on those accounts.
Its report was unqualified, did not include a reference to any matters to
which PwC drew attention by way of emphasis without qualifying its report and
did not contain a statement under section 498(2) or (3) of the Companies Act
2006.
The information in this media release does not constitute the unaudited
interim condensed financial statements which are contained in the Interim
Report 2023. The Interim Report 2023 was approved by the Board of Directors on
1 August 2023. The unaudited interim condensed financial statements included
in the Interim Report 2023 have been reviewed by the Group's auditor, PwC, in
accordance with International Standard on Review Engagements (UK) 2410,
'Review of Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Financial Reporting Council for use in the United
Kingdom. The full report of its review, which was unmodified, is included in
the Interim Report 2023.
11 Dealings in HSBC Holdings listed securities
HSBC has policies and procedures that, except where permitted by statute and
regulation, prohibit it undertaking specified transactions in respect of its
securities listed on The Stock Exchange of Hong Kong Limited ('HKEx'). Except
for dealings as intermediaries or as trustees by subsidiaries of HSBC
Holdings, or in relation to the HSBC Holdings ordinary share buy-back, neither
HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any
of its securities listed on HKEx during the half-year ended 30 June 2023.
12 Earnings release and final results
An earnings release for the three-month period ending 30 September 2023 is
expected to be issued on 30 October 2023. The results for the year to 31
December 2023 are expected to be announced on 21 February 2024.
13 Corporate governance
We are subject to corporate governance requirements in both the UK and Hong
Kong. Throughout the six months ended 30 June 2023, we complied with the
applicable provisions of the UK Corporate Governance Code, and also the
requirements of the Hong Kong Corporate Governance Code. The UK Corporate
Governance Code is available at www.frc.org.uk and the Hong Kong Corporate
Governance Code is available at www.hkex.com.hk.
Under the Hong Kong Code, the Group Audit Committee should be responsible for
the oversight of all risk management and internal control systems, unless
expressly addressed by a separate risk committee. Our Group Risk Committee is
responsible for oversight of internal control, other than internal financial
controls, and risk management systems.
The Board has codified obligations for transactions in Group securities in
accordance with the requirements of the Market Abuse Regulation and the rules
governing the listing of securities on the HKEx, save that the HKEx has
granted waivers from strict compliance with the rules that take into account
accepted practices in the UK, particularly in respect of employee share
plans.
Following specific enquiries all Directors have confirmed that they have
complied with their obligations in respect of transacting in Group securities
throughout the period.
There have been no material changes to the information disclosed in the Annual
Report and Accounts 2022 in respect of the remuneration of employees,
remuneration policies, bonus and share option plans and training schemes.
Details of the number of employees are provided on page 33 of the Interim
Report 2023.
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(†), Steven
Guggenheimer(†), José Antonio Meade Kuribreña(†), Kalpana Morparia(†),
Eileen K Murray(†), David Nish(†) and Noel Quinn.
* Non-executive Group Chairman
† Independent non-executive Director
14 Interim Report 2023
The Interim Report 2023 will be made available to shareholders on or about 18
August 2023. Copies of the Interim Report 2023 and this news release may be
obtained from Global Communications, HSBC Holdings plc, 8 Canada Square,
London E14 5HQ, United Kingdom; from Communications (Asia), The Hongkong and
Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; or
from US Communications, HSBC Bank USA, N.A., 1 West 39th Street, 9th Floor,
New York, NY 10018, USA. The Interim Report 2023 and this news release may
also be downloaded from the HSBC website, www.hsbc.com.
A Chinese translation of the Interim Report 2023 is available upon request
from Computershare Hong Kong Investor Services Limited, Rooms 1712-1716, 17th
Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong.
The Interim Report 2023 will be available on The Stock Exchange of Hong Kong
Limited's website www.hkex.com.hk.
15 Cautionary statement regarding forward-looking statements
This news release may contain projections, estimates, forecasts, targets,
commitments, ambitions, opinions, prospects, results, returns and
forward-looking statements with respect to the financial condition, results of
operations, capital position, strategy and business of the Group which can be
identified by the use of forward-looking terminology such as 'may', 'will',
'should', 'expect', 'anticipate', 'project', 'estimate', 'seek', 'intend',
'target' or 'believe' or the negatives thereof or other variations thereon or
comparable terminology (together, 'forward-looking statements'), including the
strategic priorities and any financial, investment and capital targets and ESG
targets/commitments described herein.
Any such forward-looking statements are not a reliable indicator of future
performance, as they may involve significant stated or implied assumptions and
subjective judgements which may or may not prove to be correct. There can be
no assurance that any of the matters set out in forward-looking statements are
attainable, will actually occur or will be realised or are complete or
accurate. The assumptions and judgments may prove to be incorrect and involve
known and unknown risks, uncertainties, contingencies and other important
factors, many of which are outside the control of the Group. Actual
achievements, results, performance or other future events or conditions may
differ materially from those stated, implied and/or reflected in any
forward-looking statements due to a variety of risks, uncertainties and other
factors (including without limitation those which are referable to general
market or economic conditions, regulatory changes, increased volatility in
interest rates and inflation levels and other macroeconomic risks,
geopolitical tensions such as the Russia-Ukraine war or as a result of data
limitations and changes in applicable methodologies in relation to ESG related
matters).
Any such forward-looking statements are based on the beliefs, expectations and
opinions of the Group at the date the statements are made, and the Group does
not assume, and hereby disclaims, any obligation or duty to update, revise or
supplement them if circumstances or management's beliefs, expectations or
opinions should change. For these reasons, recipients should not place
reliance on, and are cautioned about relying on, any forward-looking
statements. No representations or warranties, expressed or implied, are given
by or on behalf of the Group as to the achievement or reasonableness of any
projections, estimates, forecasts, targets, prospects or returns contained
herein.
Additional detailed information concerning important factors, including but
not limited to ESG related factors, that could cause actual results to differ
materially from this news release is available in our Annual Report and
Accounts 2022 for the fiscal year ended 31 December 2022 filed with the
Securities and Exchange Commission (the 'SEC') on Form 20-F on 22 February
2023, our 1Q 2023 Earnings Release furnished to the SEC on Form 6-K on 2 May
2023, and our Interim Report 2023 for the six months ended 30 June 2023 which
we expect to furnish to the SEC on Form 6-K on or around 1 August 2023.
16 Use of alternative performance measures
This news release contains non-IFRS measures used by management internally
that constitute alternative performance measures under European Securities and
Markets Authority guidance and non-GAAP financial measures defined in and
presented in accordance with US Securities and Exchange Commission rules and
regulations ('alternative performance measures'). The primary alternative
performance measures we use are presented on a 'constant currency' basis which
is computed by adjusting reported results for the effects of foreign currency
translation differences,
which distort period-on-period comparisons. We consider constant currency
performance to provide useful information for investors by aligning internal
and external reporting, and reflecting how management assesses
period-on-period performance. We separately disclose 'notable items', which
are components of our income statement that management would consider as
outside the normal course of business and generally non-recurring in nature.
Reconciliations between alternative performance measures and the most directly
comparable measures under IFRS are provided in our Interim Report 2023, which
is available at www.hsbc.com (http://www.hsbc.com) .
17 Certain defined terms
Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc
and 'HSBC', the 'Group', 'we', 'us' and 'our' refer to HSBC Holdings together
with its subsidiaries. Within this document the Hong Kong Special
Administrative Region of the People's Republic of China is referred to as
'Hong Kong'. When used in the terms 'shareholders' equity' and 'total
shareholders' equity', 'shareholders' means holders of HSBC Holdings ordinary
shares and those preference shares and capital securities issued by HSBC
Holdings classified as equity. The abbreviations '$m' and '$bn' represent
millions and billions (thousands of millions) of US dollars, respectively.
18 Investor Relations / Media Relations contacts
For further information contact:
Investor Relations Media Relations
UK - Richard O'Connor UK - Gillian James
Telephone: +44 (0)20 7991 6590 Telephone: +44 (07584 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 3491 1120
Email: aspmediarelations@hsbc.com.hk
Registered Office and Group Head Office
8 Canada Square
London E14 5HQ
United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered number 617987
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