6-K 1 hsba201508036k3.htm HSBC HOLDINGS INTERIM RESULTS 2015 hsba201508036k3.htm
FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
 
 
For the month of August
HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
 
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F   X              Form 40-F ......
 
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes.......          No    X
 
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ..............).
 
 
 
 

3 August 2015
 
HSBC HOLDINGS PLC
 
2015 INTERIM RESULTS – HIGHLIGHTS

Financial performance
 
·  
Reported profit before tax (‘PBT’) up 10% in the first half of 2015 (‘1H15’) at $13,628m compared with $12,340m in the same period in 2014 (‘1H14’).
 
·  
Adjusted PBT up 2% in 1H15 at $13,002m compared with $12,722m in 1H14, driven by a strong performance in Asia.
 
·  
Earnings per share were $0.48 and dividends per ordinary share were $0.20 (in respect of the period), compared with $0.50 and $0.20 respectively for the equivalent period in 2014. The second interim dividend was $0.10.
 
·  
Adjusted revenue up 4% at $30,772m driven by revenue growth in client-facing GB&M, principally in Equities and Foreign Exchange. Revenue also increased in Principal RBWM and CMB.
 
·  
Adjusted operating expenses up 7% at $17,642m reflecting investment in growth, and regulatory programmes and compliance costs.
 
·  
Strong capital base with a CRD IV end point CET1 capital ratio of 11.6%, up from 11.1% at 31 December 2014.
 
Strategy execution
 
·  
Clearly defined actions to capture value from our global network in a changed world:
 
−  
Growth of 6% in Global business synergies, demonstrating the strength of our universal banking model
−  
Revenue from transaction banking products grew 8% highlighting the value and potential of our international network
−  
Progress on reducing Group RWAs with a $50bn reduction relating mainly to GB&M
−  
Entered into an agreement to sell entire business in Brazil
−  
Commenced initiatives to reduce costs
 
Stuart Gulliver, Group Chief Executive, said:
 
“Our performance in the first half of 2015 demonstrated the underlying strength of our business. Our diversified, universal model enabled the Group to deliver increased profitability in spite of slow global growth. We are executing the actions that we announced at our Investor Update in June and our focus is on making significant progress during the remainder of the year.”
 
   
Half-year to 30 June
   
2015
 
2014
 
Change
   
$m
 
$m
 
%
Income statement and performance measures1
           
Reported profit before tax
 
13,628
 
12,340
 
10.4%
Adjusted profit before tax
 
13,002
 
12,722
 
2.2%
Return on average ordinary shareholders’ equity (annualised)
 
10.6%
 
10.7%
 
(0.1)ppt
Return on average tangible equity (annualised)
 
12.0%
 
12.6%
 
(0.6)ppt
Pre-tax return on average risk-weighted assets (annualised)
 
2.3%
 
2.1%
 
(0.2)ppt
Cost efficiency ratio
 
58.2%
 
58.6%
 
(0.4)ppt
Adjusted jaws
 
(2.9%)
 
n/a
 
n/a

   
At
30 June
2015
 
At
31 December
2014
   
   
%
 
%
   
Capital and balance sheet
           
Common equity tier 1 ratio (transitional)2
 
11.6
 
10.9
   
Common equity tier 1 ratio (end point)2
 
11.6
 
11.1
   
Leverage ratio
 
4.9
 
4.8
   
           
Change
   
$m
 
$m
 
$m
             
Loans and advances to customers
 
953,985
 
974,660
 
(20,675)
Customer accounts
 
1,335,800
 
1,350,642
 
(14,842)
CRD IV risk-weighted assets
 
1,193,154
 
1,219,765
 
 (26,611)
             
   
$bn
 
$bn
 
$bn
             
Leverage exposure measure
 
2,957
 
2,953
 
4
 
 
For footnotes, see page 2.

   
Half-year to 30 June
   
2015
 
2014
   
$m
 
$m
Reported
       
Revenue3
 
32,943
 
31,167
Loan impairment charges and other credit risk provisions
 
(1,439)
 
(1,841)
Operating expenses
 
(19,187)
 
(18,266)
Profit before tax
 
13,628
 
12,340
         
Adjusted
       
Revenue3
 
30,772
 
29,456
Loan impairment charges and other credit risk provisions
 
(1,439)
 
(1,572)
Operating expenses
 
(17,642)
 
(16,436)
Profit before tax
 
13,002
 
12,722
         
Significant items affecting adjusted performance – Gains/(losses)
       
Revenue
       
Debit valuation adjustment on derivative contracts
 
165
 
(155)
Fair value movements on non-qualifying hedges
 
(45)
 
(322)
Releases/(provisions) arising from the ongoing review of compliance with the Consumer Credit Act in the UK
 
12
 
(367)
Gain/(loss) on sale of several tranches of real estate secured accounts in the US
 
17
 
(15)
Gain on sale of shareholding in Bank of Shanghai
 
 
428
Gain on sale arising from HSBC Latin America Holdings UK Limited’s disposal of HSBC Bank (Colombia) S.A.
 
 
18
Gain on the partial sale of shareholding in Industrial Bank
 
1,372
 
         
Operating expenses
       
Restructuring and other related costs
 
(117)
 
(82)
Regulatory provisions in GPB
 
(147)
 
Settlements and provisions in connection with legal matters
 
(1,144)
 
UK customer redress programmes
 
(137)
 
(234)
 
1
Adjusted performance is computed by adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons.
2
From 1 January 2015 the CRD IV transitional CET1 and end point CET1 capital ratios became aligned for HSBC Holdings plc due to the recognition of unrealised gains on investment property and available-for-sale securities.
3
Net operating income before loan impairment charges and other credit risk provision, also referred to as revenue.

This news release is issued by HSBC Holdings plc
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

We only advise on our own life assurance, pensions and unit trusts


 
 
 
 
Group Chairman’s Statement

Statement by Douglas Flint, Group Chairman
 

We have had an encouraging start to 2015 with the interim results once again demonstrating the resilience and balance inherent within HSBC’s geographically diversified universal banking model. Particularly encouraging was the revenue growth from areas we have been investing in to offset the understandable decline in revenues from our run-off portfolios and divestments.
 
We are continuing to invest to capture the opportunities which are arising from changing trade and investment flows and from the clear momentum in greater customer adoption of mobile and digital banking. In the continuing low interest rate environment, it is essential we build these incremental revenues and use technology and process improvement to generate further cost savings to offset the growing expenditure needed to embed regulatory changes and provide greater assurance over financial crime risks. These factors provided much of the context to our Investor Update in June, when Stuart Gulliver and his senior management team laid out very clearly the priorities and objectives being set to build sustainable value for you, our shareholders.
 
Pre-tax profits in the first six months of 2015 on a reported basis of $13.6bn were 10% higher than those delivered in the first half of 2014. On the adjusted basis, which is one of the key metrics used by the Board to assess current management performance, pre-tax profits were 2% better at $13.0bn, with the difference explained by the reconciliations on pages 50 to 55 of the Interim Report 2015. Earnings per share were $0.48, providing more than twice cover for the first two interim dividends per ordinary share in respect of 2015 amounting to $0.20 in aggregate (2014: $0.50 and $0.20, respectively).

The Group’s capital position remains strong, benefiting from a higher than normal scrip dividend take-up in the period and from actions taken to manage down risk-weighted assets. At 30 June 2015, our end point common equity tier 1 ratio stood at 11.6% compared with 11.1% at the beginning of the year and 11.3% a year ago.

In the following pages, Stuart Gulliver, in his ‘Group Chief Executive’s Review’ reflects on the key drivers of first half performance and summarises the actions presented in the Investor Update which underpin the Group’s target to deliver a return on equity in excess of 10% by the end of 2017.

Board oversight of management is now tightly focused on the delivery of the actions set out in this plan and management performance scorecards have been adjusted to reflect this. Initial progress is encouraging with the highlight clearly being the agreement reached for the sale of our Brazilian operations. I want to underscore three points which are crucial to achieving what is a challenging set of objectives.

An ever more connected world needs international banking and within this, a diversified universal banking model promotes revenue synergies and resilience.

What drives HSBC’s rating as one of the two most systemically important banks in the world is the extent to which we do business outside the country from which we are regulated on a consolidated basis; we see this as a strength in a globalised world. As many banks shrink to domestic or regional bases, our international network and product capabilities are demonstrating significant competitive advantages as we pick up cross-border business. This was the key message from our Investor Update and, as Stuart illustrates in his review, the depth and breadth of the network are creating value in terms of revenue growth. In the first half of this year, transaction banking, which captures trade and investment flows, grew revenues by 8%. Further collaboration between our global businesses drove revenue synergies by 6%.

Nothing illustrates the importance of trade corridors better than the focus of China on its ‘One Belt, One Road’ initiative. This, together with the creation of the Asian Infrastructure Investment Bank, led by China but now with 57 founding member states, is planned to create opportunities for infrastructure investment coupled with green technology on a massive global scale. HSBC’s presence along the trade corridor, as well as at both ends, places it in a strong position to partner with participating firms. As investment grows, this will also accelerate the use of the renminbi as a global currency, an area where HSBC is the leading international bank.

The current period also illustrates convincingly the benefits of our international universal banking model and the revenue synergies noted above. A few examples will illustrate the point.

While eurozone anxieties over Greece dampened trade flows and falls in commodity prices led to a lower value of commodity related trade finance, the resultant volatility in foreign exchange led to a greater volume of activity through our dealing rooms. Although equity flows into emerging markets retreated, equity volumes in Hong Kong and mainland China expanded markedly with the Shanghai-Hong Kong stock connect system surpassing all expectations in terms of flows in both directions. As a result, HSBC’s Wealth Management revenues in Hong Kong from equities, mutual funds and asset management increased significantly.
Finally and importantly, the significant progress made in resolution planning, both by international and national regulatory bodies and by firms themselves, means that the contingent risk to home country taxpayers from international business activities has markedly reduced. This should allow international firms like HSBC to grow faster than the economies that host them without undue concerns being raised.

Technology is changing the shape of banking at a rapid pace
 
There is no doubt that banking is in a period of fundamental change as a consequence of technological developments that, firstly, allow storage and analysis of an almost unlimited amount of data and, secondly, allow customers to directly access third party providers when transacting or investing.
 
The opportunities are exciting; the risks are not insignificant.
 
The benefits to customers and society are potentially substantial. Better use of data will allow more accurate knowledge about the customer to be built, leading to improved customer segmentation and therefore less risk of mis-selling in the future. The same data, together with transaction monitoring, will enhance our ability to identify bad actors within the system, so reducing financial crime. A lower cost of delivery will flow through to lower intermediation costs for customers and allow banking services to reach communities currently under-served.
 
The nature, scale and pace of change do, however, pose a number of public policy questions still under review as well as highlighting new risks to financial stability that need to be addressed. The sheer scale of data to be collected and stored demands clarity over responsibility for data security and transparency over who has access to that data and for what purpose. Customers need to understand the value of their data so that they can assess the bargain that is being offered by non-traditional providers in return for their financial footprint. Customers also need to know in a disaggregated service model to whom they should complain if a transaction goes awry. Finally, ever larger digital databases of financial credentials and transaction data will need best-in-class protection from cyber crime. This will require even greater co-operation between the industry and public sector law enforcement and intelligence services than exists today.
 
Restoring trust is essential
 
One of the most encouraging observations in the first half of 2015 was the growing emphasis in public policy and regulatory consultations and proposals on looking forwards not back. Much of the focus was on setting clarity over the behaviours expected of individuals within our industry and of those charged with supervising or providing governance over their activities.
 
We welcomed the ‘Fair and Effective Markets Review’ conducted jointly by the Bank of England, HM Treasury and the Financial Conduct Authority to reinforce confidence in wholesale markets in light of the serious misconduct evidenced in recent years. The consequential creation of an FICC Markets Standards Board to sit alongside the Banking Standards Board which came into being in April is a further contribution to creating a framework capable of reassuring market participants of the integrity of financial markets.
 
The focus of both these bodies, together with the Senior Managers Regime which comes into force next year, is to stress personal accountability for conduct within markets and in relation to consumers of financial products. Recent instances of misconduct have highlighted the inadequacy of legal and regulatory frameworks to attach appropriate sanctions in a timely way to responsible individuals, leaving shareholders to bear the burden of penalties imposed on the employing institutions, in many cases long after the events in question occurred and where the evidence is either insufficient or too dated to pursue the individuals concerned. This is not a sustainable or a desirable model.
 
We absolutely concur, therefore, with this emphasis on personal responsibility and accountability. It is essential that regulatory governance in this area is seen to be transparent, fair and proportionate. However, the potential benefits are significant and we believe that if the clarity intended from the greater focus being given through these initiatives to expected behaviours is achieved, then this, together with the discipline derived from the greater incidence of deferred remuneration, will greatly enhance the prospects for the restoration of trust.
 
That restoration of trust will of course only be earned over time by the actions of firms being increasingly recognised by market participants and consumers as appropriate to the circumstances, balancing the interests of the firm with those of the customer.
 
Again actions speak louder than words. By way of example, in the first half of 2015, measures taken to assist customers in the UK to manage their financial affairs better delivered improved outcomes for customers and reduced a source of recurring frustration. These actions formed part of a comprehensive review of value exchange within RBWM conducted over the past year. As a consequence overdraft fees in the UK fell by some $88m, reflecting lower pricing and fewer instances of unauthorised overdrawn accounts, which was prompted by a new policy of text messaging when customers approached their agreed limits.
 
Three other areas are worthy of comment.
 
Progress on Global Standards and regulatory change
 
We are now firmly in the second phase of the Global Standards initiative, moving from design to implementation and assurance. Virtually all of the recommendations in the Monitor’s initial report have now been actioned with those remaining not due until later this year. Further recommendations for improvement, as they arise from the Monitor’s update reviews, regular regulatory examinations and the work of our own internal audit function, will continue to be incorporated as they arise. Similarly, in the area of regulatory change the focus is now firmly on embedding the changes now finalised.
 
The global functions and our operations and technology teams continued to add resources to meet the demands of the Global Standards programme and of continuing regulatory change. In the first half of 2015, the Group’s headcount increased by some 2,200. Reflecting the prioritisation being given to the above programmes, more than this number were in fact recruited into Compliance, principally in Financial Crime Compliance and to address the regulatory change programmes. As systems are upgraded we should realise planned productivity improvements to release resources currently allocated to manual processes and parallel working.
 
The above comments illustrate how the cost dynamics of our business model are clearly changing, and we are challenging afresh the sustainability of some of our smaller operations in light of the cost burdens they are now facing. This analysis, as was highlighted in the Investor Update, will inform some further streamlining of our geographical footprint over the next few years.
 
UK ring-fencing
 
During the period, the business design of the ring-fenced bank was settled and Birmingham was chosen as its headquarters location. A new HQ building is being constructed which will be available in 2018. Both the ring-fenced bank and the remaining activities outside the ring fence will be served by a new service company which will host shared infrastructure and employees. 22,000 UK employees of our UK bank will migrate to this new employer by the end of this year.
 
Review of headquarters location
 
Following the announcement at the Annual General Meeting that we would embark upon a review of the optimal location for our global headquarters, detailed work has commenced in line with the criteria laid out in the June Investor Update. It remains the Board’s intention to conclude the review by the end of this year.
 
Board changes
 
Since the AGM we have announced two new members of the Board. Irene Lee brings to the Board considerable banking experience and knowledge of Asia and joined the Board on 1 July, having served as a non-executive Director of The Hongkong and Shanghai Banking Corporation Limited and of Hang Seng Bank Limited since 2013 and 2014, respectively.
 
Irene is currently Executive Chairman of Hysan Development Company Limited and a non-executive director of Cathay Pacific Airways Limited, China Light & Power Holdings Limited and Noble Group Limited. She has over 30 years of finance industry experience, having held senior positions in investment banking and fund management in the UK, USA and Australia with the Commonwealth Bank of Australia, SealCorp Holdings Limited and Citibank.
 
Pauline van der Meer Mohr brings to the Board considerable legal and human resources experience and will join the Board on 1 September. Pauline is currently president of the Executive Board of Erasmus University Rotterdam, a role which she has held since 2010. Pauline began her career in the legal profession and held several legal and management positions with the Royal Dutch Shell Group from 1989 to 2004, rising to become HR Director, Information Technology. In 2004, she was appointed group human resources director at TNT NV before moving to become senior executive vice president and head of group human resources at ABN AMRO Bank NV in 2006. Pauline also served as a member of the Dutch Banking Code Monitoring Commission, which was aimed at restoring trust in the Dutch banking sector.
 
Looking forward
 
The environment for banking remains challenging. As Stuart points out in his review, economic conditions remain uncertain in many parts of the world, in particular in the eurozone and in China. On top of this, geopolitical risks are heightened. Regulatory workloads have never been higher as we embed structural change, build systems to respond to demands for greater transparency, and augment stress testing models and reinforce business continuity design as part of recovery and resolution planning. Technology is empowering disruptive business models and facilitating new entrants whilst also offering good opportunities to improve efficiency and build better customer propositions. Responsibilities to protect the financial system from bad actors and from cyber threats are expanding at the same time as concerns are raised over risks of consequential financial exclusion.
 
Yet there are also observable mega-trends supportive of financial system growth. Growing urbanisation across Asia, infrastructure development in both emerging and developed markets, investment in new technology to address environmental efficiency and the development of capital market solutions to add fresh financing capabilities and contribute to the financial needs of an ageing population all have positive implications for the role and profitability of the financial system. Additionally, central banks remain determined to maintain a policy environment that facilitates the resumption of sustainable economic growth.
 
As set out by Stuart in the June Investor Update, our positioning across the major trade and investment corridors of the world is a privileged position from which to plan our future. We have the financial strength and the right people at all levels of the firm to make the most of the opportunities open to us. We look forward to reporting on progress.
 

HSBC HOLDINGS PLC
 
 

 
 
 
Group Chief Executive’s Review

Review by Stuart Gulliver, Group Chief Executive
 
Our performance in the first half of 2015 demonstrated the underlying strength of our business. Our diversified, universal model enabled the Group to deliver increased profitability in spite of slow global growth. In particular, a strong revenue performance across our Asia businesses helped drive increased profits and Global Banking and Markets had a good six months.
 
In June we announced a series of strategic actions to capture the value of our international network in a much changed world. These actions are designed to maximise revenue, significantly reduce our operating expenses and meet our obligations regarding the structure of the Group.
 
We are executing these plans and have significant momentum moving into the second half of the year.
 
First half of 2015
 
Reported profit before tax was $13.6bn, 10% higher than for the equivalent period in 2014.
 
Adjusted pre-tax profit, which excludes the period-on-period effects of currency translation differences and significant items, was $13.0bn, 2% higher than in the first half of 2014. This reflected growth in revenue and lower loan impairment charges, partially offset by increased costs.
 
Global Banking and Markets maintained its good start to the year, especially in our client-facing Markets businesses. Equities and Foreign Exchange were the main drivers of revenue growth.
 
Commercial Banking revenue continued to grow, particularly in Hong Kong and the UK.
 
Principal Retail Banking & Wealth Management generated increased revenue following a strong performance in our Wealth Management business in Asia.
 
There was a 6% increase in revenue arising from cross-selling between our global businesses, demonstrating the strength of our universal banking model.
 
Loan impairment charges continued to fall, driven particularly by reductions in North America and Latin America.
 
Operating expenses increased, although they were broadly flat relative to the second half of 2014, excluding the effect of the UK bank levy.
 
The common equity tier 1 ratio on a CRD IV end point basis was 11.6%.
 
Annualised return on equity was 10.6%, exceeding our target of 10%.
 
Maximising value from our international network
 
We continue to invest in the strategic product areas that benefit most from our international network. The positive impact of this investment was again apparent in the first half of the year.
 
Foreign Exchange revenue grew by 21% compared with the first half of 2014 and Payments and Cash Management revenue increased by 4%.
 
Global Trade & Receivables Finance continued to grow, and HSBC was named ‘Best Trade Bank in the World’, ‘Best Trade Bank in Asia Pacific’ and ‘Best Trade Bank in the Middle East’ in the Trade and Forfaiting Review Excellence Awards 2015.
 
We maintained our leadership position in international renminbi services, growing revenue by 9% compared with the first half of 2014. HSBC also received the Asiamoney ‘Best Overall Offshore RMB Products and Services’ award for the fourth year in a row.
 
In FinanceAsia’s International Banking Awards 2015, HSBC was the winner of the ‘Best Foreign Bank’ awards for China, Indonesia, Malaysia, Vietnam, Korea, Sri Lanka and Bangladesh. HSBC was also named Best Bank in Hong Kong for the 12th consecutive year.
 
Investor Update
 
Our Annual Report and Accounts 2014 outlined some of the considerable changes to our operating environment that have occurred since 2011. In response to these changes the Board set a new Group target of a return on equity of more than 10% by the end of 2017.
 
At our Investor Update in June, we set out the actions that will enable us to meet this goal.
 
We intend to:
 
·  
reduce risk-weighted assets across the Group by at least 25%, re-deploy some of these risk-weighted assets towards higher performing businesses and return Global Banking and Markets to Group target profitability;
 
·  
sell underperforming operations in Turkey and Brazil, and keep our network under review using our six-filter process;
 
·  
exploit the strategic opportunity in the region covered by the North American Free Trade Agreement to rebuild profitability in Mexico and deliver satisfactory returns in the US;
 
·  
set up a UK ring-fenced bank by 2018;
 
·  
realise $4.5-5.0bn in cost savings and return operating expenses to 2014 levels by the end of 2017;
 
·  
deliver revenue growth greater than GDP growth from our international network;
 
·  
capture growth opportunities in Asia, including in China’s Pearl River Delta and the Association of Southeast Asian Nations, and in our Asset Management and Insurance businesses;
 
·  
generate $2.0-2.5bn revenue from our global leadership position in business arising from the internationalisation of the Chinese currency, the renminbi; and
 
·  
complete the implementation of Global Standards, our globally consistent and rigorous financial crime controls.
 
Delivering these actions will create value for our customers and shareholders, and enable us to meet global standards while driving business success. It will also help us to continue to adapt to the structural changes that are asked of us by regulators and legislators.
 
Meeting our targets
 
We will update shareholders on progress in executing these actions every quarter, beginning with our third quarter results in November. Delivery is our number one priority.
 
Work is proceeding on all of our actions, in particular those aimed at reducing risk-weighted assets (‘RWAs’), cutting costs and turning around or disposing of underperforming parts of the business.
 
Reducing RWAs will be a gradual process, but we have made a good start in the first half of the year. We reduced RWAs by $50bn, largely through asset sales in the Global Banking and Markets legacy book, the sale of part of our shareholding in Industrial Bank, and more detailed mapping within RWA calculations and improved recognition of collateral. We have redeployed $30bn RWAs into higher returning areas. I am confident that we will continue to make significant progress on this in the remainder of 2015.
 
Over the next two years we will continue to build our capital base and redeploy some of the RWAs that we take out of the business in line with the priorities we outlined in June.
 
Although we are aiming to ‘pivot’ our business towards profitable growth opportunities in Asia, Asia is not the exclusive focus of reinvestment. In order to maintain broad-based growth and a diversified risk profile, we expect around half of incremental RWAs to be redeployed to Asia, with the rest spread across Europe, the Middle East and North Africa, North America and Mexico. If we cannot find strategic opportunities to deploy capital with a return on equity above 10% we will return the capital to shareholders, subject to regulatory approval.
 
We have commenced our work to reduce costs and expect to be able to demonstrate tangible progress in the coming quarters. Fulfilling these actions will also entail a number of one-off transformation costs, some of which will be incurred during the second half of 2015. We expect the largest portion of these costs to fall in 2016.
 
On 31 July we agreed to sell our Brazil business to Banco Bradesco S.A. for $5.2bn. As we said at our Investor Update, we plan to maintain a modest corporate banking presence in Brazil to serve our international clients in the country. This transaction delivers excellent value for shareholders and represents significant delivery against the actions we announced in June.
 
Summary and outlook
 
We are hopeful for a modest improvement in the world economy in the second half of the year. More accommodating monetary conditions should help the mainland Chinese economy to stabilise after first half challenges. US economic growth is also likely to accelerate. Thanks to lower oil prices, real incomes are rising across much of the eurozone and in the UK. Key uncertainties include the pace of recovery in capital spending, the timing of any US monetary tightening and ongoing challenges in the eurozone.
 
Our performance in July was satisfactory. Our focus is on making significant progress in executing our strategic actions during the remainder of the year.
 

 

 

HSBC HOLDINGS PLC
 
 

 
 
 

   
Half-year to
   
30 June
 
30 June
 
31 December
   
2015
 
2014
 
2014
   
$m
 
$m
 
$m
For the period
           
Profit before tax
 
13,628
 
12,340
 
6,340
Profit attributable to shareholders of the parent company
 
9,618
 
9,746
 
3,942
Dividends declared on ordinary shares
 
5,796
 
5,488
 
3,832
             
At the period end
           
Total shareholders’ equity
 
192,427
 
190,281
 
190,447
Total regulatory capital
 
195,110
 
192,834
 
190,730
Customer accounts
 
1,335,800
 
1,415,705
 
1,350,642
Total assets
 
2,571,713
 
2,753,593
 
2,634,139
Risk-weighted assets
 
1,193,154
 
1,248,572
 
1,219,765
             
   
$
 
$
 
$
Per ordinary share
           
Basic earnings
 
0.48
 
0.50
 
0.19
Dividends1
 
0.30
 
0.29
 
0.20
Net asset value
 
9.11
 
9.64
 
9.24
             
Share information
           
$0.50 ordinary shares in issue
 
19,516m
 
19,071m
 
19,218m
Market capitalisation
 
$175bn
 
$193bn
 
$182bn
Closing market price per share
 
£5.70
 
£5.93
 
£6.09
             
   
Over 1 year
 
Over 3 years
 
Over 5 years
             
Total shareholder return to 30 June 2015
 
101.89
 
119.16
 
119.35
Benchmark: Morgan Stanley Capital International Index Banks
 
99.45
 
152.46
 
158.85
 
1
The dividends per ordinary share of $0.30 shown in the accounts comprise dividends declared during the first half of 2015. This represents the fourth interim dividend for 2014 and the first interim dividend for 2015.
 
Geographical distribution of results
 
Profit/(loss) before tax
 
   
Half-year to
   
30 June 2015
 
30 June 2014
 
31 December 2014
   
$m
 
%
 
$m
 
%
 
$m
 
%
                         
Europe
 
2,205
 
16.2
 
2,258
 
18.3
 
(1,662)
 
(26.2)
Asia
 
9,400
 
69.0
 
7,894
 
64.0
 
6,731
 
106.2
Middle East and North Africa
 
901
 
6.6
 
989
 
8.0
 
837
 
13.2
North America
 
690
 
5.1
 
825
 
6.7
 
592
 
9.3
Latin America
 
432
 
3.1
 
374
 
3.0
 
(158)
 
(2.5)
                         
Profit before tax
 
13,628
 
100.0
 
12,340
 
100.0
 
6,340
 
100.0
                         
Tax expense
 
(2,907)
     
(2,022)
     
(1,953)
   
                         
Profit for the period
 
10,721
     
10,318
     
4,387
   
Profit attributable to shareholders of the parent company
 
9,618
     
9,746
     
3,942
   
Profit attributable to non-controlling interests
 
1,103
     
572
     
445
   

Distribution of results by global business
 
Profit/(loss) before tax
 
   
Half-year to
   
30 June 2015
 
30 June 2014
 
31 December 2014
   
$m
 
%
 
$m
 
%
 
$m
 
%
                         
Retail Banking and Wealth Management1
 
3,362
 
24.7
 
3,002
 
24.4
 
2,579
 
40.7
Commercial Banking1
 
4,523
 
33.2
 
4,814
 
39.0
 
4,000
 
63.1
Global Banking and Markets
 
4,754
 
34.9
 
5,033
 
40.8
 
856
 
13.5
Global Private Banking
 
180
 
1.3
 
364
 
2.9
 
262
 
4.1
Other
 
809
 
5.9
 
(873)
 
(7.1)
 
(1,357)
 
(21.4)
                         
Profit before tax
 
13,628
 
100.0
 
12,340
 
100.0
 
6,340
 
100.0
 
1
In Q2 2015, a portfolio of customers was transferred from CMB to RBWM in Latin America in order to better align the combined banking needs of the customers with our established global businesses. Comparative data have been re-presented accordingly.
 

HSBC HOLDINGS PLC
 
 

 
 
 
Consolidated Income Statement


Consolidated income statement
 
for the half-year to 30 June 2015
 
   
Half-year to
   
                30 June
 
                30 June
 
31 December
   
2015
 
2014
 
2014
   
$m
 
$m
 
$m
             
Interest income
 
24,019
 
25,435
 
25,520
Interest expense
 
(7,575)
 
(8,030)
 
(8,220)
             
Net interest income
 
16,444
 
17,405
 
17,300
             
Fee income
 
9,372
 
10,031
 
9,514
Fee expense
 
(1,647)
 
(1,854)
 
(1,734)
             
Net fee income
 
7,725
 
8,177
 
7,780
             
Trading income excluding net interest income
 
3,520
 
2,362
 
2,491
Net interest income on trading activities
 
1,053
 
913
 
994
             
Net trading income
 
4,573
 
3,275
 
 3,485
             
Changes in fair value of long-term debt issued and related derivatives
 
1,324
 
438
 
70
Net income from other financial instruments designated at fair value
 
1,342
 
1,222
 
743
             
Net income from financial instruments designated at fair value
 
2,666
 
1,660
 
 813
             
Gains less losses from financial investments
 
1,874
 
946
 
389
Dividend income
 
68
 
88
 
223
Net insurance premium income
 
5,607
 
6,137
 
 5,784
Other operating income
 
836
 
538
 
593
             
Total operating income
 
39,793
 
38,226
 
36,367
             
Net insurance claims and benefits paid and movement in liabilities to policyholders
 
(6,850)
 
(7,059)
 
(6,286)
             
Net operating income before loan impairment charges and other credit risk provisions
 
32,943
 
31,167
 
30,081
Loan impairment charges and other credit risk provisions
 
(1,439)
 
(1,841)
 
(2,010)
             
Net operating income
 
31,504
 
29,326
 
28,071
             
Employee compensation and benefits
 
(10,041)
 
(9,978)
 
(10,388)
General and administrative expenses
 
(8,129)
 
(7,127)
 
(11,438)
Depreciation and impairment of property, plant and equipment
 
(604)
 
(712)
 
(670)
Amortisation and impairment of intangible assets
 
(413)
 
(449)
 
(487)
             
Total operating expenses
 
(19,187)
 
(18,266)
 
 (22,983)
             
Operating profit
 
12,317
 
11,060
 
5,088
             
Share of profit in associates and joint ventures
 
1,311
 
1,280
 
1,252
             
Profit before tax
 
13,628
 
12,340
 
6,340
             
Tax expense
 
(2,907)
 
(2,022)
 
(1,953)
             
Profit for the period
 
10,721
 
10,318
 
4,387
             
Profit attributable to shareholders of the parent company
 
9,618
 
9,746
 
3,942
Profit attributable to non-controlling interests
 
1,103
 
572
 
445
             
   
$
 
$
 
$
             
Basic earnings per ordinary share
 
                0.48
 
                0.50
 
                0.19
Diluted earnings per ordinary share
 
                0.48
 
                0.50
 
                0.19


HSBC HOLDINGS PLC
 
 
 
 
 
Consolidated Statement of Comprehensive Income

Consolidated statement of comprehensive income
 
for the half-year to 30 June 2015
 
   
Half-year to
   
                30 June
 
30 June
 
31 December
   
2015
 
2014
 
2014
   
$m
 
$m
 
$m
             
Profit for the period
 
10,721
 
10,318
 
4,387
             
Other comprehensive income/(expense)
           
Items that will be reclassified subsequently to profit or loss when specific conditions
are met:
           
Available-for-sale investments
 
(2,445)
 
958
 
2,014
– fair value gains/(losses)
 
(355)
 
2,183
 
2,611
– fair value gains reclassified to the income statement
 
(2,317)
 
(643)
 
(1,029)
– amounts reclassified to the income statement in respect of impairment losses
 
2
 
15
 
359
– income taxes
 
225
 
(597)
 
73
             
Cash flow hedges
 
(150)
 
(17)
 
205
– fair value gains/(losses)
 
341
 
(44)
 
1,556
– fair value (gains)/losses reclassified to the income statement
 
(538)
 
50
 
(1,294)
– income taxes
 
47
 
(23)
 
(57)
             
Share of other comprehensive income/(expense) of associates and joint ventures
 
2
 
(16)
 
 96
– share for the period
 
2
 
(18)
 
96
– reclassified to income statement on disposal
 
 
2
 
             
Exchange differences
 
(3,267)
 
670
 
(9,573)
– foreign exchange gains reclassified to the income statement on disposal of a foreign operation
 
 
(21)
 
– other exchange differences
 
(3,395)
 
691
 
(9,608)
– income tax attributable to exchange differences
 
128
 
 
35
             
Items that will not be reclassified subsequently to profit or loss:
           
Remeasurement of defined benefit asset/liability
 
(1,680)
 
316
 
1,669
– before income taxes
 
(2,085)
 
421
 
1,998
– income taxes
 
405
 
(105)
 
(329)
             
Other comprehensive income/(expense) for the period, net of tax
 
(7,540)
 
1,911
 
 (5,589)
             
Total comprehensive income/(expense) for the period
 
3,181
 
12,229
 
 (1,202)
             
Attributable to:
           
– shareholders of the parent company
 
2,856
 
11,706
 
 (2,461)
– non-controlling interests
 
325
 
523
 
1,259
             
Total comprehensive income/(expense) for the period
 
3,181
 
12,229
 
 (1,202)


HSBC HOLDINGS PLC
 
 

 
 
 
Consolidated Balance Sheet

Consolidated balance sheet
 
at 30 June 2015
 
   
At
 
At
 
At
   
30 June
 
30 June
 
31 December
   
2015
 
2014
 
2014
   
$m
 
$m
 
$m
Assets
           
Cash and balances at central banks
 
144,324
 
132,137
 
129,957
Items in the course of collection from other banks
 
10,190
 
8,144
 
4,927
Hong Kong Government certificates of indebtedness
 
28,104
 
26,640
 
27,674
Trading assets
 
283,138
 
347,106
 
304,193
Financial assets designated at fair value
 
25,168
 
31,823
 
29,037
Derivatives
 
296,942
 
269,839
 
345,008
Loans and advances to banks
 
109,405
 
127,387
 
112,149
Loans and advances to customers
 
953,985
 
1,047,241
 
974,660
Reverse repurchase agreements – non-trading
 
149,384
 
198,301
 
161,713
Financial investments
 
404,682
 
423,710
 
415,467
Assets held for sale
 
60,929
 
10,248
 
7,647
Prepayments, accrued income and other assets
 
55,489
 
75,520
 
67,529
Current tax assets
 
566
 
1,068
 
1,309
Interests in associates and joint ventures
 
18,705
 
17,497
 
18,181
Goodwill and intangible assets
 
24,913
 
29,740
 
27,577
Deferred tax assets
 
5,789
 
7,192
 
7,111
             
Total assets
 
2,571,713
 
2,753,593
 
2,634,139
             
Liabilities and Equity
           
Liabilities
           
Hong Kong currency notes in circulation
 
28,104
 
26,640
 
27,674
Deposits by banks
 
71,140
 
92,764
 
77,426
Customer accounts
 
1,335,800
 
1,415,705
 
1,350,642
Repurchase agreements – non-trading
 
81,506
 
165,506
 
107,432
Items in the course of transmission to other banks
 
12,711
 
9,936
 
5,990
Trading liabilities
 
181,435
 
228,135
 
190,572
Financial liabilities designated at fair value
 
69,485
 
82,968
 
76,153
Derivatives
 
289,984
 
263,494
 
340,669
Debt securities in issue
 
102,656
 
96,397
 
95,947
Liabilities of disposal groups held for sale
 
53,226
 
12,361
 
6,934
Accruals, deferred income and other liabilities
 
42,224
 
50,882
 
46,462
Current tax liabilities
 
1,322
 
1,434
 
 1,213
Liabilities under insurance contracts
 
69,494
 
75,223
 
 73,861
Provisions
 
5,125
 
4,283
 
4,998
Deferred tax liabilities
 
1,338
 
1,091
 
1,524
Subordinated liabilities
 
24,781
 
28,052
 
26,664
             
Total liabilities
 
2,370,331
 
2,554,871
 
2,434,161
             
Equity
           
Called up share capital
 
9,758
 
9,535
 
9,609
Share premium account
 
12,290
 
11,582
 
11,918
Other equity instruments
 
13,991
 
5,851
 
11,532
Other reserves
 
15,180
 
28,355
 
20,244
Retained earnings
 
141,208
 
134,958
 
137,144
             
Total shareholders’ equity
 
192,427
 
190,281
 
190,447
Non-controlling interests
 
8,955
 
8,441
 
9,531
             
Total equity
 
201,382
 
198,722
 
199,978
             
Total liabilities and equity
 
2,571,713
 
2,753,593
 
2,634,139


HSBC HOLDINGS PLC
 
 

 
 
 
Consolidated Statement of Cash Flows

Consolidated statement of cash flows
 
for the half-year to 30 June 2015
 
   
Half-year to
   
                30 June2015
 
                30 June2014
 
31 December2014
   
$m
 
$m
 
$m
             
Cash flows from operating activities
           
Profit before tax
 
13,628
 
12,340
 
6,340
             
Adjustments for:
           
– net gain from investing activities
 
(1,926)
 
(979)
 
 (949)
– share of profit in associates and joint ventures
 
(1,311)
 
(1,280)
 
 (1,252)
– (gain)/loss on disposal of associates, joint ventures, subsidiaries and businesses
 
                –
 
(18)
 
27
– other non-cash items included in profit before tax
 
4,522
 
4,284
 
 6,978
– change in operating assets
 
12,077
 
(86,266)
 
 112,143
– change in operating liabilities
 
(15,544)
 
59,108
 
 (152,922)
– elimination of exchange differences
 
3,951
 
(5,486)
 
30,057
– dividends received from associates
 
770
 
127
 
630
– contributions paid to defined benefit plans
 
(226)
 
(315)
 
(366)
– tax paid
 
(1,351)
 
(1,358)
 
(2,215)
             
Net cash generated from/(used in) operating activities
 
14,590
 
(19,843)
 
 (1,529)
             
Cash flows from investing activities
           
Purchase of financial investments
 
(211,669)
 
(187,934)
 
 (196,265)
Proceeds from the sale and maturity of financial investments
 
208,637
 
194,335
 
188,502
Purchase of property, plant and equipment
 
(620)
 
(523)
 
 (954)
Proceeds from the sale of property, plant and equipment
 
56
 
55
 
 33
Net cash inflow/(outflow) from disposal of customer and loan portfolios
 
321
 
950
 
 (1,985)
Net purchase of intangible assets
 
(400)
 
(385)
 
 (518)
Net cash inflow/(outflow) from disposal of subsidiaries, businesses, associates and joint ventures
 
7
 
(140)
 
 (102)
Net cash outflow from acquisition of or increase in stake of associates
 
(1)
 
(30)
 
 
       
   
Net cash generated from/(used in) investing activities
 
(3,669)
 
6,328
 
 (11,289)
             
Cash flows from financing activities
           
Issue of ordinary share capital
 
9
 
14
 
253
Net sales/(purchases) of own shares for market-making and investment purposes
 
139
 
(25)
 
 (71)
Issue of other equity instruments
 
2,459
 
 
5,681
Redemption of preference shares and other equity instruments
 
(462)
 
234
 
 (468)
Subordinated loan capital issued
 
1,680
 
3,500
 
  
Subordinated loan capital repaid
 
(778)
 
(3,042)
 
(121)
Dividends paid to ordinary shareholders of the parent company
 
(1,834)
 
(1,755)
 
 (4,856)
Dividends paid to non-controlling interests
 
(386)
 
(350)
 
 (289)
Dividends paid to holders of other equity instruments
 
(428)
 
(287)
 
(286)
       
   
Net cash generated from/(used in) financing activities
 
399
 
(1,711)
 
 (157)
             
Net increase/(decrease) in cash and cash equivalents
 
11,320
 
(15,226)
 
 (12,975)
             
Cash and cash equivalents at the beginning of the period
 
301,301
 
346,281
 
334,498
Exchange differences in respect of cash and cash equivalents
 
(3,829)
 
3,443
 
 (20,222)
             
Cash and cash equivalents at the end of the period
 
308,792
 
334,498
 
 301,301


HSBC HOLDINGS PLC
 
 

 
 
 


HSBC HOLDINGS PLC
 
 
Consolidated Statement of Changes in Equity


Consolidated statement of changes in equity
 
for the half-year to 30 June 2015
 
   
Half-year to 30 June 2015
                   
Other reserves
           
   
Called up
share
capital
 
Share
premium
 
Other equity instru-
ments1
 
 
Retained
earnings
 
Available- for-sale fair value
reserve2
 
Cash flow
hedging
reserve2
 
Foreign exchange
reserve2
 
Merger
reserve
 
Total share-holders equity
 
Non-
controlling
interests
 
Total equity
   
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
                                             
At 1 January 2015
 
9,609
 
11,918
 
11,532
 
137,144
 
2,143
 
58
 
(9,265)
 
27,308
 
190,447
 
9,531
 
199,978
Profit for the period
 
 
 
 
9,618
 
 
 
 
 
9,618
 
1,103
 
10,721
                               
           
Other comprehensive income (net of tax)
 
 
 
 
(1,693)
 
(1,735)
 
(151)
 
(3,183)
 
 
(6,762)
 
(778)
 
(7,540)
available-for-sale investments
 
 
 
 
 
(1,735)
 
 
 
 
(1,735)
 
(710)
 
(2,445)
cash flow hedges
 
 
 
 
 
 
(151)
 
 
 
(151)
 
1
 
(150)
remeasurement of defined benefit asset/liability
 
 
 
 
(1,695)
 
 
 
 
 
(1,695)
 
15
 
(1,680)
share of other comprehensive income of associates and joint ventures
 
 
 
 
2
 
 
 
 
 
2
 
 
2
exchange differences
 
 
 
 
 
 
 
(3,183)
 
 
(3,183)
 
(84)
 
(3,267)
                                             
                                             
Total comprehensive income for the period
 
 
 
 
7,925
 
(1,735)
 
(151)
 
(3,183)
 
 
2,856
 
325
 
3,181
                               
           
Shares issued under employee remuneration and share plans
 
31
 
490
 
 
(512)
 
 
 
 
 
9
 
 
9
Shares issued in lieu of dividends and amounts arising thereon
 
118
 
(118)
 
 
2,242
 
 
 
 
 
2,242
 
 
2,242
Dividends to shareholders
 
 
 
 
(6,224)
 
 
 
 
 
(6,224)
 
(432)
 
(6,656)
Capital securities issued
 
 
 
2,459
 
 
 
 
 
 
2,459
 
 
2,459
Cost of share-based payment arrangements
 
 
 
 
444
 
 
 
 
 
444
 
 
444
Other movements
 
 
 
 
189
 
5
 
 
 
 
194
 
(469)
 
(275)
                                             
At 30 June 2015
 
9,758
 
12,290
 
13,991
 
141,208
 
413
 
(93)
 
(12,448)
 
27,308
 
192,427
 
8,955
 
201,382
 
1
During March 2015, HSBC Holdings issued $2,450m of Perpetual Subordinated Contingent Convertible Capital Securities, after issuance costs of $8m and tax benefits of $17m, which are classified as equity under IFRSs.
2
At 30 June 2015, our operations in Brazil were classified as held for sale (see Note 12 of the interim consolidated financial statements). The cumulative amount of other reserves attributable to these operations were as follows: available-for-sale fair value reserve debit of $65m, cash flow hedging reserve debit of $29m and foreign exchange reserve debit of $1,724m.

 

 
 
 


HSBC HOLDINGS PLC
 
 
Consolidated Statement of Changes in Equity (continued)



Consolidated statement of changes in equity (continued)
 
for the half-year to 30 June 2015 (continued)
 
   
Half-year to 30 June 2014
                   
Other reserves
           
   
Called up share capital
 
Share
premium
 
Other equity instru-ments
 
Retained
earnings
 
Available- for-sale
fair value reserve
 
Cash flow
hedging
reserve
 
Foreign exchange reserve
 
Merger
reserve
 
Total
share-
holders’
equity
 
Non-
controlling
interests
 
Total
equity
   
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
                                             
At 1 January 2014
 
9,415
 
11,135
 
5,851
 
128,728
 
97
 
(121)
 
(542)
 
27,308
 
181,871
 
8,588
 
190,459
Profit for the period
 
 
 
 
9,746
 
 
 
 
 
9,746
 
572
 
10,318
                                             
Other comprehensive income (net of tax)
 
 
 
 
300
 
956
 
(16)
 
720
 
 
1,960
 
(49)
 
1,911
available-for-sale investments
 
 
 
 
 
956
 
 
 
 
956
 
2
 
958
cash flow hedges
 
 
 
 
 
 
(16)
 
 
 
(16)
 
(1)
 
(17)
remeasurement of defined benefit asset/liability
 
 
 
 
316
 
 
 
 
 
316
 
 
316
share of other comprehensive income of associates and joint ventures
 
 
 
 
(16)
 
 
 
 
 
(16)
 
 
(16)
exchange differences
 
 
 
 
 
 
 
720
 
 
720
 
(50)
 
670
                                             
                                             
Total comprehensive income for the period
 
 
 
 
10,046
 
956
 
(16)
 
720
 
 
11,706
 
523
 
12,229
                   
 
 
 
           
Shares issued under employee remuneration and share plans
 
28
 
539
 
 
(553)
 
 
 
 
 
14
 
 
14
Shares issued in lieu of dividends and amounts arising thereon
 
92
 
(92)
 
 
2,111
 
 
 
 
 
2,111
 
 
2,111
Dividends to shareholders
 
 
 
 
(5,774)
 
 
 
 
 
(5,774)
 
(432)
 
(6,206)
Cost of share-based payment arrangements
 
 
 
 
333
 
 
 
 
 
333
 
 
333
Other movements
 
 
 
 
67
 
(39)
 
(8)
 
 
 
20
 
(238)
 
(218)
                                             
At 30 June 2014
 
9,535
 
11,582
 
5,851
 
134,958
 
1,014
 
(145)
 
178
 
27,308
 
190,281
 
8,441
 
198,722

 

 
 
 


HSBC HOLDINGS PLC
 
 
Consolidated Statement of Changes in Equity (continued)



Consolidated statement of changes in equity (continued)
 
for the half-year to 30 June 2015 (continued)
 
   
Half-year to 31 December 2014
                   
Other reserves
           
   
Called up share capital
 
Share
premium
 
Other equity instru-
ments
 
Retained
earnings
 
Available- for-sale
fair value reserve
 
Cash flow
hedging
reserve
 
Foreign exchange reserve
 
Merger
reserve
 
Total
share-
holders’
equity
 
Non-
controlling
interests
 
Total
equity
 
   
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
                                               
At 1 July 2014
 
9,535
 
11,582
 
5,851
 
134,958
 
1,014
 
(145)
 
178
 
27,308
 
190,281
 
8,441
 
198,722
 
Profit for the period
 
 
 
 
3,942
 
 
 
 
 
3,942
 
445
 
4,387
 
                                               
Other comprehensive income (net of tax)
 
 
 
 
1,766
 
1,069
 
205
 
(9,443)
 
 
(6,403)
 
814
 
(5,589)
 
available-for-sale investments
 
 
 
 
 
1,069
 
 
 
 
1,069
 
945
 
2,014
 
cash flow hedges
 
 
 
 
 
 
205
 
 
 
205
 
 
205
 
remeasurement of defined benefit asset/liability
 
 
 
 
1,670
 
 
 
 
 
1,670
 
(1)
 
1,669
 
share of other comprehensive income of associates and joint ventures
 
 
 
 
96
 
 
 
 
 
96
 
 
96
 
exchange differences
 
 
 
 
 
 
 
(9,443)
 
 
(9,443)
 
(130)
 
(9,573)
 
                                               
                                               
Total comprehensive income for period
 
 
 
 
5,708
 
1,069
 
205
 
(9,443)
 
 
(2,461)
 
1,259
 
(1,202)
 
                                               
Shares issued under employee remuneration and share plans
 
32
 
378
 
 
(157)
 
 
 
 
 
253
 
 
253
 
Shares issued in lieu of dividends and amounts arising thereon
 
42
 
(42)
 
 
598
 
 
 
 
 
598
 
 
598
 
Dividends to shareholders
 
 
 
 
(4,119)
 
 
 
 
 
(4,119)
 
(280)
 
(4,399)
 
Capital securities issued
 
 
 
5,681
 
 
 
 
 
 
5,681
 
 
5,681
 
Cost of share-based payment arrangements
 
 
 
 
399
 
 
 
 
 
399
 
 
399
 
Other movements
 
 
 
 
(243)
 
60
 
(2)
 
 
 
(185)
 
111
 
(74)
 
                                               
At 31 December 2014
 
9,609
 
11,918
 
11,532
 
137,144
 
2,143
 
58
 
(9,265)
 
27,308
 
190,447
 
9,531
 
199,978
 

 

 
 
 
Additional Information

1
Basis of preparation and significant accounting policies
 

The basis of preparation and summary of significant accounting policies applicable to the interim consolidated financial statements of HSBC can be found in Note 1 on the Financial Statements in the Interim Report 2015.
 
Compliance with International Financial Reporting Standards
 
The interim consolidated financial statements of HSBC have been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority and IAS 34 ‘Interim Financial Reporting’ as issued by the International Accounting Standards Board (‘IASB’) and as endorsed by the EU. The interim consolidated financial statements should be read in conjunction with the Annual Report and Accounts 2014.
 
At 30 June 2015, there were no unendorsed standards effective for the half-year to 30 June 2015 affecting the interim consolidated financial statements, and there was no difference between IFRSs endorsed 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 2015
 
There were no new standards adopted during the half-year to 30 June 2015. During the period, HSBC applied a number of interpretations and amendments to standards which had an insignificant effect on the interim consolidated financial statements.
 
Accounting policies
 
The accounting policies applied by HSBC for the interim consolidated financial statements are consistent with those described on pages 345 to 457 of the Annual Report and Accounts 2014, as are the methods of computation.
 
Differences between IFRSs and Hong Kong Financial Reporting Standards
 
There are no significant differences between IFRSs and Hong Kong Financial Reporting Standards in terms of their application to HSBC and consequently there would be no significant differences had the interim consolidated financial statements been prepared in accordance with Hong Kong Financial Reporting Standards.
 
2
Tax
 

   
Half-year to
   
30 June
 
30 June
 
31 December
   
2015
 
2014
 
2014
   
$m
 
$m
 
$m
Current tax
           
UK corporation tax charge
 
343
 
165
 
(96)
Overseas tax1
 
2,071
 
1,803
 
2,078
             
   
2,414
 
1,968
 
1,982
Deferred tax
 
493
 
54
 
(29)
             
Tax expense
 
2,907
 
2,022
 
1,953
             
Effective tax rate
 
                21.3%
 
                16.4%
 
30.8%
 
1
Overseas tax included Hong Kong profits tax of $714m (first half of 2014: $589m; second half of 2014: $546m). Subsidiaries in Hong Kong provided for Hong Kong profits tax at the rate of 16.5% (2014: 16.5%) on the profits for the period assessable in Hong Kong. Other overseas subsidiaries and overseas branches provided for taxation at the appropriate rates in the countries in which they operated.
 
Deferred taxation
 
Net deferred tax assets amounted to $4.5bn at 30 June 2015 (30 June 2014: $6.1bn; 31 December 2014: $5.6bn), mainly relating to timing differences in the US. Net deferred tax assets have fallen since 31 December 2014 mainly because the net assets of Brazilian operations were transferred to ‘Held for Sale’ (see Note 12 of the Interim Report 2015).
 

HSBC HOLDINGS PLC
 
 
 
 

 
Additional Information (continued)


 
3
Dividends
 

On 3 August 2015, the Directors declared a second interim dividend in respect of the financial year ending 31 December 2015 of $0.10 per ordinary share, a distribution of approximately $1,954m which will be payable on 2 October 2015. No liability is recognised in the financial statements in respect of this dividend.
 
Dividends to shareholders of the parent company
 
   
Half-year to
   
30 June 2015
 
30 June 2014
 
31 December 2014
   
Per
     
Settled
 
Per
     
Settled
 
Per
     
Settled
   
share
 
Total
 
in scrip
 
share
 
Total
 
in scrip
 
share
 
Total
 
in scrip
   
$
 
$m
 
$m
 
$
 
$m
 
$m
 
$
 
$m
 
$m
                                     
Dividends paid on ordinary shares
                                   
In respect of previous year:
                                   
– fourth interim dividend
 
0.20
 
3,845
 
2,011
 
0.19
 
3,582
 
1,827
 
 
 
In respect of current year:
                                   
– first interim dividend
 
0.10
 
1,951
 
231
 
0.10
 
1,906
 
284
 
 
 
– second interim dividend
 
 
 
 
 
 
 
0.10
 
1,914
 
372
– third interim dividend
 
 
 
 
 
 
 
0.10
 
1,918
 
226
                                     
Total
 
0.30
 
5,796
 
2,242
 
0.29
 
5,488
 
2,111
 
0.20
 
3,832
 
598
Total dividends on preference shares classified as equity (paid quarterly)
 
31.00
 
45
     
31.00
 
45
     
31.00
 
45
   

Total coupons on capital securities classified as equity
 
       
Half-year to
       
30 June 2015
 
30 June 2014
 
31 December 2014
   
First
 
Per security
 
Total
 
Per security
 
Total
 
Per security
 
Total
   
call date
 
$
 
$m
 
$
 
$m
 
$
 
$m
                             
Perpetual subordinated capital securities1
                           
– $2,200m issued at 8.125%
 
Apr 2013
 
1.016
 
89
 
1.016
 
89
 
1.016
 
90
– $3,800m issued at 8.000%
 
Dec 2015
 
1.000
 
152
 
1.000
 
152
 
1.000
 
152
                             
Perpetual subordinated contingent convertible securities2
                           
– $2,250m issued at 6.375%
 
Sep 2024
 
31.875
 
72
 
 
 
 
– $1,500m issued at 5.625%
 
Jan 2020
 
28.125
 
28
 
 
 
 
– €1,500m issued at 5.250%
 
Sep 2022
 
29.396
 
42
 
 
 
 
                             
Total
         
383
     
241
     
242
 
1
Discretionary coupons are paid quarterly on the perpetual subordinated capital securities.
2
Discretionary coupons are paid semi-annually on the perpetual subordinated contingent convertible securities.
 
On 15 July 2015, HSBC paid a further coupon on the $2,200m subordinated capital securities of $0.508 per security, representing a total distribution of $45m. On 17 July 2015, HSBC paid a further coupon on the $1,500m subordinated contingent convertible securities, representing a total distribution of $42m. No liability is recognised in the financial statements in respect of these coupon payments.
 
In March 2015, HSBC issued $2,450m of contingent convertible securities issued at 6.375% which are classified as equity under IFRSs. Discretionary coupons are paid semi-annually on these contingent convertible securities and none were declared in the first half of 2015.
 
Second interim dividend for 2015 on ordinary shares
 
On 3 August 2015, the Directors declared a second interim dividend for 2015 of $0.10 per ordinary share. The second interim dividend will be payable on 2 October 2015 to holders of record on 14 August 2015 on the Principal Register in the United Kingdom, Hong Kong and Bermuda Overseas Branch registers. The dividend will be payable in cash, US dollars, sterling or Hong Kong dollars, or a combination of these currencies, at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 21 September 2015. A scrip dividend will also be offered. Particulars of these arrangements will be sent to shareholders on or about 26 August 2015 and elections must be received by 17 September 2015.
 
The dividend will be payable on ordinary shares held through Euroclear France, the settlement and central depositary system for Euronext Paris, on 2 October 2015 to the holders of record on 14 August 2015. The dividend will be payable by Euroclear France in cash, in euros, at the forward exchange rate quoted by HSBC France on 21 September 2015, or as a scrip dividend. Particulars of these arrangements will be announced through Euronext Paris on 5 August 2015, 20 August 2015 and 21 September 2015.
 
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 2 October 2015 to holders of record on 14 August 2015. The dividend of $0.50 per ADS will be payable by the depositary in cash, in US dollars or as a scrip dividend of new ADSs. Elections must be received by the depositary on or before 11 September 2015. Alternatively, the cash dividend may be invested in additional ADSs for participants in the dividend reinvestment plan operated by the depositary.
 
Ordinary shares will be quoted ex-dividend in London, Hong Kong, Paris and Bermuda on 13 August 2015. The ADSs will be quoted ex-dividend in New York on 12 August 2015.
 
Any person who has acquired ordinary shares registered on the Principal Register in the United Kingdom, the Hong Kong Overseas Branch register or the Bermuda Overseas Branch register but who has not lodged the share transfer with the Principal Registrar, the Hong Kong or Bermuda Branch Registrar should do so before 4.00pm local time on 14 August 2015 in order to receive the dividend.
 
Ordinary shares may not be removed to or from the Principal Register in the United Kingdom, the Hong Kong Overseas Branch register or the Bermuda Overseas Branch register on 14 August 2015. Any person wishing to remove ordinary shares to or from each register must do so before 4.00pm local time on 13 August 2015.
 
Transfers of ADSs must be lodged with the depositary by 12 noon on 14 August 2015 in order to receive the dividend.
 
Dividend on 6.20% non-cumulative US Dollar Preference Shares, Series A (‘Series A Dollar Preference Shares’)
 
In 2005, 1,450,000 Series A Dollar Preference Shares were issued for a consideration of $1,000 each, and Series A American Depositary Shares, each of which represents one-fortieth of a Series A Dollar Preference Share, were listed on the New York Stock Exchange.
 
A non-cumulative fixed-rate dividend of 6.20% per annum is payable on the Series A Dollar Preference Shares on 16 March, 15 June, 15 September and 15 December 2015 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 declared a dividend of $0.3875 per Series A American Depositary Share for the quarter ending 15 September 2015.
 
The dividend will be payable on 15 September 2015 to holders of record on 28 August 2015.
 
Any person who has acquired Series A American Depositary Shares but who has not lodged the transfer documentation with the depositary should do so before 12 noon on 28 August 2015 in order to receive the dividend.
 
On 15 July 2015, HSBC paid a further coupon on the capital securities of $0.508 per security, a distribution of $45m. No liability is recorded in the financial statements in respect of this coupon payment.
 
4
Earnings per share
 

Profit attributable to ordinary shareholders of the parent company
 
   
Half-year to
   
                30 June
 
30 June
 
31 December
   
2015
 
2014
 
2014
   
$m
 
$m
 
$m
             
Profit attributable to shareholders of the parent company
 
9,618
 
9,746
 
3,942
Dividend payable on preference shares classified as equity
 
(45)
 
(45)
 
(45)
Coupon payable on capital securities classified as equity
 
(383)
 
(241)
 
(242)
             
Profit attributable to ordinary shareholders of the parent company
 
9,190
 
9,460
 
3,655

Basic and diluted earnings per share
 
   
Half-year to 30 June 2015
 
Half-year to 30 June 2014
 
Half-year to 31 December 2014
   
Profit
$m
 
Number
of shares
(millions)
 
Amount per share
$
 
Profit
$m
 
Number
of shares
(millions)
 
Amount per share
$
 
Profit
$m
 
Number
of shares
(millions)
 
Amount per share
$
                                     
Basic1
 
9,190
 
19,249
 
0.48
 
9,460
 
18,847
 
0.50
 
3,655
 
18,960
 
0.19
Effect of dilutive potential
ordinary shares
     
68
         
101
         
96