Report of the Directors (Tables)

12 Months Ended

Dec. 31, 2017

Report Of The Directors Strategic Report [Abstract]

Analysis of adjusted results by global business

Retail Banking and Wealth Management (‘RBWM’)	Commercial Banking (‘CMB’)	Global Banking and Markets (‘GB&M’)	Global Private Banking (‘GPB’)
We help millions of people across the world to manage their finances, buy their homes, and save and invest for the future. Our Insurance and Asset Management businesses support all our global businesses in meeting their customers’ needs.	We support approximately 1.7 million business customers in 53 countries and territories with banking products and services to help them operate and grow. Our customers range from small enterprises focused primarily on their domestic markets, through to large companies operating globally.	We provide financial services and products to companies, governments and institutions. Our comprehensive range of products and solutions, across capital financing, advisory and transaction banking services, can be combined and customised to meet clients’ specific objectives.	We help high net worth individuals and their families to grow, manage and preserve their wealth.
Adjusted profit before tax<>
(2016: $5.2bn)	(2016: $5.9bn)	(2016: $5.5bn)	(2016: $0.3bn)
$6.5bn	$6.8bn	$5.8bn	$0.3bn
Adjusted risk-weighted assets<>
(31 Dec 2016: $114.7bn)	(31 Dec 2016: $286.9bn)	(31 Dec 2016: $307.7bn)	(31 Dec 2016: $15.7bn)
$121.5bn	$301.0bn	$299.3bn	$16.0bn

<>Our global businesses are presented on an adjusted basis, which is consistent with the way in which we assess the performance of our global businesses. 

Delivery against Group financial targets

Return on equity 5.9% Adjusted jaws<> +1% Dividends per ordinary share in respect of 2017 $0.51

					2017 vs 2016
Management view of adjusted revenue<>	Footnotes	2017 $m	2016 $m	2015 $m	$m		%
Net operating income	3
Retail Banking		13,495	12,695	12,508	800		6	%
– current accounts, savings and deposits		6,344	5,213	4,814	1,131		22	%
– personal lending		7,151	7,482	7,694	(331	)	(4	)%
mortgages		2,337	2,546	2,648	(209	)	(8	)%
credit cards		2,899	3,034	3,218	(135	)	(4	)%
other personal lending	4	1,915	1,902	1,828	13		1	%
Wealth Management		6,224	5,292	5,748	932		18	%
– investment distribution	5	3,276	2,904	3,230	372		13	%
– life insurance manufacturing		1,893	1,401	1,544	492		35	%
– asset management		1,055	987	974	68		7	%
Other	6	568	555	582	13		2	%
Year ended 31 Dec		20,287	18,542	18,838	1,745		9	%
Adjusted RoRWA (%)	7	5.5	4.6	4.8

ÑFor footnotes, see page 85.

					2017 vs 2016
Management view of adjusted revenue<>	Footnotes	2017 $m	2016 $m	2015 $m	$m		%
Net operating income	3
Global Trade and Receivables Finance		1,817	1,838	2,039	(21	)	(1	)%
Credit and Lending		5,061	5,009	4,934	52		1	%
Global Liquidity and Cash Management		4,783	4,247	4,077	536		13	%
Markets products, Insurance and Investments and Other	8	1,562	1,525	1,457	37		2	%
Year ended 31 Dec		13,223	12,619	12,507	604		5	%
Adjusted RoRWA (%)	7	2.3	2.1	1.9

ÑFor footnotes, see page

							2017 vs 2016
Management view of adjusted revenue<>	Footnotes	2017 $m		2016 $m		2015 $m	$m		%
Net operating income	3
Global Markets		6,689		6,656		6,010	33		—	%
Foreign Exchange		2,568		2,764		2,658	(196	)	(7	)%
Rates		1,970		2,120		1,404	(150	)	(7	)%
Credit		900		781		606	119		15	%
– FICC		5,438		5,665		4,668	(227	)	(4	)%
– Equities		1,251		991		1,342	260		26	%
Global Banking		3,807		3,791		3,757	16		—	%
Global Liquidity and Cash Management		2,197		1,885		1,744	312		17	%
Securities Services		1,746		1,561		1,600	185		12	%
Global Trade and Receivables Finance		700		689		682	11		2	%
Principal Investments		318		226		226	92		41	%
Credit and funding valuation adjustments	9	(262	)	(51	)	186	(211	)	(414	)%
Other	10	(104	)	(42	)	73	(62	)	(148	)%
Year ended 31 Dec		15,091		14,715		14,278	376		3	%
Adjusted RoRWA (%)	7	1.9		1.7		1.5

ÑFor footnotes, see page 85.

					2017 vs 2016
Management view of adjusted revenue<>	Footnotes	2017 $m	2016 $m	2015 $m	$m		%
Net operating income	3
Investment revenue		693	733	902	(40	)	(5	)%
Lending		387	411	411	(24	)	(6	)%
Deposit		401	342	354	59		17	%
Other		222	262	299	(40	)	(15	)%
Year ended 31 Dec		1,703	1,748	1,966	(45	)	(3	)%
Adjusted RoRWA (%)	7	1.8	1.6	2.1

ÑFor footnotes, see page 85.

								2017 vs 2016
Management view of adjusted revenue<>	Footnotes	2017 $m		2016 $m		2015 $m		$m		%
Net operating income	3
Central Treasury	11	1,340		1,454		1,760		(114	)	(8	)%
Legacy portfolios		8		724		1,233		(716	)	(99	)%
– US run-off portfolio		40		692		1,165		(652	)	(94	)%
– Legacy credit		(32	)	32		68		(64	)	(200	)%
Other	12	(128	)	(512	)	(160	)	384		(75	)%
Year ended 31 Dec		1,220		1,666		2,833		(446	)	(27	)%

ÑFor footnotes, see page 85.

HSBC Holdings plc 21

HSBC adjusted profit before tax and balance sheet data
		2017
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Net interest income/(expense)		13,959		9,062		4,886		816		(439	)	28,284
Net fee income/(expense)		5,156		3,518		3,489		704		(56	)	12,811
Net trading income	31	453		539		5,995		170		807		7,964
Other income	33	719		104		721		13		908		2,465
Net operating income before loan impairment charges and other credit risk provisions	3	20,287		13,223		15,091		1,703		1,220		51,524
– external		17,040		13,383		16,378		1,438		3,285		51,524
– inter-segment		3,247		(160	)	(1,287	)	265		(2,065	)	—
Loan impairment (charges)/recoveries and other credit risk provisions		(980	)	(496	)	(459	)	(16	)	182		(1,769	)
Net operating income		19,307		12,727		14,632		1,687		1,402		49,755
Total operating expenses		(12,847	)	(5,947	)	(8,858	)	(1,391	)	(2,097	)	(31,140	)
Operating profit/(loss)		6,460		6,780		5,774		296		(695	)	18,615
Share of profit in associates and joint ventures		18		—		—		—		2,357		2,375
Adjusted profit before tax		6,478		6,780		5,774		296		1,662		20,990
		%		%		%		%		%		%
Share of HSBC’s adjusted profit before tax		30.9		32.3		27.5		1.4		7.9		100.0
Adjusted cost efficiency ratio		63.3		45.0		58.7		81.7		171.9		60.4
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		346,148		316,533		252,474		40,326		7,483		962,964
Interests in associates and joint ventures		366		—		—		—		22,378		22,744
Total external assets		468,281		348,243		980,485		45,745		679,017		2,521,771
Customer accounts		639,592		362,908		283,943		66,512		11,507		1,364,462
Adjusted risk-weighted assets	34	121,466		300,995		299,272		16,036		130,848		868,617

HSBC adjusted profit before tax and balance sheet data (continued)
		2016
		Retail Banking and Wealth Management		Commercial Banking		Global Banking and Markets		Global Private Banking		Corporate Centre		Total
	Footnotes	$m		$m		$m		$m		$m		$m
Net interest income		12,919		8,491		4,798		801		1,170		28,179
Net fee income/(expense)		4,756		3,559		3,394		749		(63	)	12,395
Net trading income	31	426		442		6,231		183		2,426		9,708
Other income/(expense)	33	441		127		292		15		(1,867	)	(992	)
Net operating income before loan impairment charges and other credit risk provisions	3	18,542		12,619		14,715		1,748		1,666		49,290
– external		16,052		12,641		17,412		1,487		1,698		49,290
– inter-segment		2,490		(22	)	(2,697	)	261		(32	)	—
Loan impairment charges and other credit risk provisions		(1,142	)	(969	)	(461	)	—		(22	)	(2,594	)
Net operating income		17,400		11,650		14,254		1,748		1,644		46,696
Total operating expenses		(12,184	)	(5,746	)	(8,745	)	(1,476	)	(1,933	)	(30,084	)
Operating profit/(loss)		5,216		5,904		5,509		272		(289	)	16,612
Share of profit in associates and joint ventures		20		—		—		—		2,302		2,322
Adjusted profit before tax		5,236		5,904		5,509		272		2,013		18,934
		%		%		%		%		%		%
Share of HSBC’s adjusted profit before tax		27.7		31.2		29.1		1.4		10.6		100.0
Adjusted cost efficiency ratio		65.7		45.5		59.4		84.4		116.0		61.0
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		323,986		294,952		237,655		36,972		12,494		906,059
Interests in associates and joint ventures		394		—		—		—		20,340		20,734
Total external assets		435,839		320,173		981,893		43,234		708,320		2,489,459
Customer accounts		611,846		356,885		272,159		72,730		15,037		1,328,657
Adjusted risk-weighted assets	34	114,683		286,912		307,736		15,649		153,324		878,304

		2015
Net interest income		12,299		8,287		4,422		819		2,167		27,994
Net fee income/(expense)		5,446		3,672		3,514		939		(121	)	13,450
Net trading income	31	427		460		5,960		206		721		7,774
Other income	33	666		88		382		2		66		1,204
Net operating income before loan impairment charges and other credit risk provisions	3	18,838		12,507		14,278		1,966		2,833		50,422
– external		16,451		12,585		16,633		1,689		3,064		50,422
– inter-segment		2,387		(78	)	(2,355	)	277		(231	)	—
Loan impairment charges and other credit risk provisions		(1,023	)	(1,447	)	(71	)	(11	)	(27	)	(2,579	)
Net operating income		17,815		11,060		14,207		1,955		2,806		47,843
Total operating expenses		(12,332	)	(5,826	)	(8,903	)	(1,582	)	(2,814	)	(31,457	)
Operating profit/(loss)		5,483		5,234		5,304		373		(8	)	16,386
Share of profit/(loss) in associates and joint ventures		23		—		(1	)	—		2,387		2,409
Adjusted profit before tax		5,506		5,234		5,303		373		2,379		18,795
		%		%		%		%		%		%
Share of HSBC’s adjusted profit before tax		29.3		27.8		28.2		2.0		12.7		100.0
Adjusted cost efficiency ratio		65.5		46.6		62.4		80.5		99.3		62.4
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		313,927		281,826		243,662		42,592		23,690		905,697
Interests in associates and joint ventures		391		—		—		—		18,673		19,064
Total external assets		422,322		309,266		886,750		51,190		651,847		2,321,378
Customer accounts		569,183		341,717		256,374		80,442		13,956		1,261,672
Adjusted risk-weighted assets	34	116,047		282,149		318,818		17,661		313,100		1,047,775

Reconciliation of reported and adjusted items

Adjusted results reconciliation
		2017						2016								2015
		Adjusted		Significant items		Reported		Adjusted		Currency translation		Significant items		Reported		Adjusted		Currency translation		Significant items		Reported
	Footnote	$m		$m		$m		$m		$m		$m		$m		$m		$m		$m		$m
Revenue	3	51,524		(79	)	51,445		49,290		736		(2,060	)	47,966		50,422		3,727		5,651		59,800
LICs		(1,769	)	—		(1,769	)	(2,594	)	61		(867	)	(3,400	)	(2,579	)	(127	)	(1,015	)	(3,721	)
Operating expenses		(31,140	)	(3,744	)	(34,884	)	(30,084	)	(331	)	(9,393	)	(39,808	)	(31,457	)	(2,434	)	(5,877	)	(39,768	)
Share of profit in associates and joint ventures		2,375		—		2,375		2,322		33		(1	)	2,354		2,409		149		(2	)	2,556
Profit/(loss) before tax		20,990		(3,823	)	17,167		18,934		499		(12,321	)	7,112		18,795		1,315		(1,243	)	18,867

Adjusted balance sheet reconciliation
	2017	2016				2015
	Reported and Adjusted	Adjusted	Currency translation		Reported	Adjusted	Currency translation	Brazil operations1	Reported
	$m	$m	$m		$m	$m	$m	$m	$m
Loans and advances to customers (net)	962,964	906,059	(44,555	)	861,504	905,697	18,757	—	924,454
Interests in associates and joint ventures	22,744	20,734	(705	)	20,029	19,064	75	—	19,139
Total external assets	2,521,771	2,489,459	(114,473	)	2,374,986	2,321,378	39,164	49,114	2,409,656
Customer accounts	1,364,462	1,328,657	(56,271	)	1,272,386	1,261,672	27,914	—	1,289,586

1 Includes effects of foreign currency translation.

Adjusted profit reconciliation
		2017		2016		2015
	Footnotes	$m		$m		$m
For the year ended 31 Dec
Adjusted profit before tax		20,990		18,934		18,795
Significant items		(3,823	)	(12,321	)	(1,243	)
– customer redress programmes (revenue)		(108	)	2		(10	)
– DVA on derivative contracts		(373	)	26		230
– fair value movements on non-qualifying hedges	32	128		(687	)	(327	)
– gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank		126		—		—
– gain on disposal of our membership interest in Visa – Europe		—		584		—
– gain on disposal of our membership interest in Visa – US		308		116		—
– gain on the partial sale of shareholding in Industrial Bank		—		—		1,372
– gain/(loss) and trading results from disposed-of operations in Brazil		19		(2,081	)	(13	)
– investment in new businesses		(99	)	—		—
– other acquisitions, disposals and dilutions		78		—		—
– own credit spread	25	—		(1,792	)	1,002
– portfolio disposals		(158	)	(163	)	(214	)
– costs associated with portfolio disposals		(53	)	(28	)	—
– costs associated with the UK’s exit from the EU		(28	)	—		—
– costs to achieve		(3,002	)	(3,118	)	(908	)
– costs to establish UK ring-fenced bank		(392	)	(223	)	(89	)
– customer redress programmes (operating expenses)		(655	)	(559	)	(541	)
– gain on partial settlement of pension obligation		188		—		—
– impairment of GPB – Europe goodwill		—		(3,240	)	—
– regulatory provisions in GPB		(164	)	(344	)	(172	)
– restructuring and other related costs		—		—		(117	)
– settlements and provisions in connection with legal matters		362		(681	)	(1,649	)
– currency translation on significant items				(133	)	193
Currency translation				499		1,315
Reported profit before tax		17,167		7,112		18,867