Report of the Directors (Tables)

12 Months Ended

Dec. 31, 2018

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 38 million customers across the world to manage their finances, buy their homes, and save and invest for the future. Our HSBC Premier and Advance propositions are aimed at mass affluent and emerging affluent customers who value international connectivity. For customers with simpler banking needs, we offer a full range of products and services reflecting local requirements.	We support approximately 1.5 million business customers in 53 countries and territories, ranging from small enterprises focused primarily on their domestic markets, through to large companies operating globally. Our services include working capital, term loans, payment services and international trade facilitation, as well as expertise in mergers and acquisitions, and access to financial markets.	We serve approximately 4,100 clients in more than 50 countries and territories. We support major government, corporate and institutional clients worldwide. Our product specialists continue to deliver a comprehensive range of transaction banking, financing, advisory, capital markets and risk management services.	We serve high net worth and ultra high net worth individuals and families, including those with international banking needs. Services provided include Investment Management, which includes advisory and brokerage services, and Private Wealth Solutions, which comprises trusts and estate planning, to protect and preserve wealth for future generations.
Adjusted profit before tax<>
(2017: $6.5bn)	(2017: $6.8bn)	(2017: $5.8bn)	(2017: $0.3bn)
$7.1bn	$7.7bn	$6.1bn	$0.3bn
Adjusted risk-weighted assets<>
(31 Dec 2017: $118.1bn)	(31 Dec 2017: $289.8bn)	(31 Dec 2017: $293.2bn)	(31 Dec 2017: $15.8bn)
$126.9bn	$321.2bn	$281.0bn	$16.8bn

<>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 tangible equity <> 8.6% Target: >11% by 2020	Adjusted jaws<> (1.2)% Target: positive	Dividends per ordinary share in respect of 2018 $0.51 Target: sustain
(2017: 6.8%)

ÑFor further details, see page 17.

Management view of adjusted revenue<>	Footnotes	2018 $m	2017 $m	2016 $m	2018 vs 2017
					$m		%
Retail Banking		15,262	13,456	12,690	1,806		13
Current accounts, savings and deposits		8,534	6,296	5,186	2,238		36
Personal lending		6,728	7,160	7,504	(432	)	(6	)
– mortgages		1,937	2,372	2,585	(435	)	(18	)
– credit cards		2,880	2,886	3,018	(6	)	—
– other personal lending	23	1,911	1,902	1,901	9		—
Wealth Management		6,104	6,215	5,230	(111	)	(2	)
– investment distribution	24	3,383	3,279	2,902	104		3
– life insurance manufacturing		1,656	1,870	1,362	(214	)	(11	)
– asset management		1,065	1,066	966	(1	)	—
Other	25	569	549	563	20		4
Net operating income	26	21,935	20,220	18,483	1,715		8
Adjusted RoRWA (%)	27	5.8	5.6	4.7
RoTE excluding significant items and UK bank levy (%)		21.0	21.6	16.3

ÑFor footnotes, see page 89.

Management view of adjusted revenue<>	Footnotes	2018 $m	2017 $m	2016 $m	2018 vs 2017
					$m	%
Global Trade and Receivables Finance		1,865	1,821	1,833	44	2
Credit and Lending		5,342	5,101	5,053	241	5
Global Liquidity and Cash Management		5,802	4,775	4,249	1,027	22
Markets products, Insurance and Investments and Other	28	1,876	1,550	1,521	326	21
Net operating income	26	14,885	13,247	12,656	1,638	12
Adjusted RoRWA (%)	27	2.5	2.4	2.2
RoTE excluding significant items and UK bank levy (%)		14.0	14.0	13.0

ÑFor footnotes, see page 89.

Management view of adjusted revenue<>	Footnotes	2018 $m		2017 $m		2016 $m		2018 vs 2017
								$m		%
Global Markets		6,490		7,009		6,731		(519	)	(7	)
– FICC		5,271		5,714		5,720		(443	)	(8	)
Foreign Exchange		3,022		2,622		2,777		400		15
Rates		1,482		2,147		2,148		(665	)	(31	)
Credit		767		945		795		(178	)	(19	)
– Equities		1,219		1,295		1,011		(76	)	(6	)
Securities Services		1,973		1,772		1,577		201		11
Global Banking		4,115		4,048		3,819		67		2
Global Liquidity and Cash Management		2,645		2,213		1,884		432		20
Global Trade and Receivables Finance		809		757		689		52		7
Principal Investments		224		327		221		(103	)	(31	)
Credit and funding valuation adjustments	29	(183	)	(262	)	(55	)	79		30
Other	30,31	(561	)	(579	)	(59	)	18		3
Net operating income	26,31	15,512		15,285		14,807		227		1
Adjusted RoRWA (%)	27	2.1		2.0		1.8
RoTE excluding significant items and UK bank levy (%)		10.5		10.6		10.2

ÑFor footnotes, see page 89.

Management view of adjusted revenue<>	Footnotes	2018 $m	2017 $m	2016 $m	2018 vs 2017
					$m		%
Investment revenue		717	700	738	17		2
Lending		391	393	420	(2	)	(1	)
Deposit		497	404	345	93		23
Other		180	226	267	(46	)	(20	)
Net operating income	26	1,785	1,723	1,770	62		4
Adjusted RoRWA (%)	27	2.1	1.9	1.7
RoTE excluding significant items and UK bank levy (%)		9.9	7.1	5.6

ÑFor footnotes, see page 89.

Management view of adjusted revenue<>	Footnotes	2018 $m		2017 $m		2016 $m		2018 vs 2017
								$m		%
Central Treasury	33	662		1,728		1,706		(1,066	)	(62	)
Legacy portfolios		(93	)	(26	)	26		(67	)	>(100)
Other	34	(746	)	(516	)	(188	)	(230	)	(45	)
Net operating income	26	(177	)	1,186		1,544		(1,363	)	(115	)
RoTE excluding significant items and UK bank levy (%)		(5.7	)%	(5.2	)%	(1.9	)%

ÑFor footnotes, see page 89.

HSBC adjusted profit before tax and balance sheet data
		2018
		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 operating income before change in expected credit losses and other credit impairment charges	26	21,935		14,885		15,512		1,785		(177	)	53,940
– external		17,270		14,652		17,986		1,497		2,535		53,940
– inter-segment		4,665		233		(2,474	)	288		(2,712	)	—
of which: net interest income/(expense)		15,822		10,666		5,259		888		(2,199	)	30,436
Change in expected credit losses and other credit impairment charges		(1,177	)	(739	)	26		8		115		(1,767	)
Net operating income/(expense)		20,758		14,146		15,538		1,793		(62	)	52,173
Total operating expenses		(13,711	)	(6,477	)	(9,460	)	(1,449	)	(1,893	)	(32,990	)
Operating profit/(loss)		7,047		7,669		6,078		344		(1,955	)	19,183
Share of profit in associates and joint ventures		33		—		—		—		2,503		2,536
Adjusted profit before tax		7,080		7,669		6,078		344		548		21,719
		%		%		%		%		%		%
Share of HSBC’s adjusted profit before tax		32.6		35.3		28.0		1.6		2.5		100.0
Adjusted cost efficiency ratio		62.5		43.5		61.0		81.2		(1,069.5	)	61.2
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		361,872		333,162		244,978		39,217		2,467		981,696
Interests in associates and joint ventures		397		—		—		—		22,010		22,407
Total external assets		476,784		360,216		1,012,272		43,790		665,062		2,558,124
Customer accounts		640,924		357,596		290,914		64,658		8,551		1,362,643
Adjusted risk-weighted assets (unaudited)	64	126,865		321,244		281,021		16,824		118,550		864,504

		2017
Net operating income before loan impairment charges and other credit risk provisions	26	20,220		13,247		15,285		1,723		1,186		51,661
– external		17,024		13,378		16,557		1,453		3,249		51,661
– inter-segment		3,196		(131	)	(1,272	)	270		(2,063	)	—
of which: net interest income/(expense)		13,927		9,060		4,851		825		(481	)	28,182
Loan impairment charges and other credit risk provisions/(recoveries)		(969	)	(465	)	(446	)	(16	)	183		(1,713	)
Net operating income		19,251		12,782		14,839		1,707		1,369		49,948
Total operating expenses		(12,786	)	(5,953	)	(8,991	)	(1,411	)	(2,090	)	(31,231	)
Operating profit/(loss)		6,465		6,829		5,848		296		(721	)	18,717
Share of profit in associates and joint ventures		14		—		—		—		2,402		2,416
Adjusted profit before tax		6,479		6,829		5,848		296		1,681		21,133
		%		%		%		%		%		%
Share of HSBC’s adjusted profit before tax		30.6		32.3		27.7		1.4		8.0		100.0
Adjusted cost efficiency ratio		63.2		44.9		58.8		81.9		176.2		60.5
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		332,261		305,213		244,476		39,597		7,294		928,841
Interests in associates and joint ventures		363		—		—		—		21,656		22,019
Total external assets		451,516		336,163		946,747		46,247		662,364		2,443,037
Customer accounts		621,092		351,617		273,080		64,957		10,883		1,321,629
Adjusted risk-weighted assets (unaudited)	64	118,131		289,824		293,135		15,795		128,795		845,680

For footnotes, see page 89.

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 operating income before loan impairment charges and other credit risk provisions	26	18,483		12,656		14,807		1,770		1,544		49,260
– external		16,050		12,656		17,488		1,512		1,554		49,260
– inter-segment		2,433		—		(2,681	)	258		(10	)	—
of which: net interest income		12,906		8,506		4,800		813		1,176		28,201
Loan impairment charges and other credit risk provisions		(1,101	)	(986	)	(461	)	—		(24	)	(2,572	)
Net operating income		17,382		11,670		14,346		1,770		1,520		46,688
Total operating expenses		(12,144	)	(5,747	)	(8,846	)	(1,484	)	(1,926	)	(30,147	)
Operating profit/(loss)		5,238		5,923		5,500		286		(406	)	16,541
Share of profit in associates and joint ventures		20		—		—		—		2,345		2,365
Adjusted profit before tax		5,258		5,923		5,500		286		1,939		18,906
		%		%		%		%		%		%
Share of HSBC’s adjusted profit before tax		27.8		31.3		29.1		1.5		10.3		100.0
Adjusted cost efficiency ratio		65.7		45.4		59.7		83.8		124.7		61.2
Adjusted balance sheet data		$m		$m		$m		$m		$m		$m
Loans and advances to customers (net)		312,393		285,253		230,171		36,222		12,331		876,370
Interests in associates and joint ventures		391		—		—		—		19,635		20,026
Total external assets		421,559		309,905		949,732		43,663		692,740		2,417,599
Customer accounts		595,765		346,746		261,949		71,389		14,344		1,290,193
Adjusted risk-weighted assets (unaudited)	64	111,617		276,705		301,728		15,418		149,680		855,148

For footnotes, see page 89.

Reconciliation of reported and adjusted items

Adjusted results reconciliation
		2018						2017								2016
		Adjusted		Significant items		Reported		Adjusted		Currency translation		Significant items		Reported		Adjusted		Currency translation		Significant items		Reported
	Footnotes	$m		$m		$m		$m		$m		$m		$m		$m		$m		$m		$m
Revenue	26	53,940		(160	)	53,780		51,661		(133	)	(83	)	51,445		49,260		803		(2,097	)	47,966
ECL		(1,767	)	—		(1,767	)	N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A
LICs		N/A		N/A		N/A		(1,713	)	(56	)	—		(1,769	)	(2,572	)	(24	)	(804	)	(3,400	)
Operating expenses		(32,990	)	(1,669	)	(34,659	)	(31,231	)	143		(3,796	)	(34,884	)	(30,147	)	(361	)	(9,300	)	(39,808	)
Share of profit in associates and joint ventures		2,536		—		2,536		2,416		(41	)	—		2,375		2,365		(10	)	(1	)	2,354
Profit/(loss) before tax		21,719		(1,829	)	19,890		21,133		(87	)	(3,879	)	17,167		18,906		408		(12,202	)	7,112

For footnotes, see page 89.

Adjusted balance sheet reconciliation
	2018	2017			2016
	Reported and adjusted	Adjusted	Currency translation	Reported	Adjusted	Currency translation		Reported
	$m	$m	$m	$m	$m	$m		$m
Loans and advances to customers (net)	981,696	928,841	34,123	962,964	876,370	(14,866	)	861,504
Interests in associates and joint ventures	22,407	22,019	725	22,744	20,026	3		20,029
Total external assets	2,558,124	2,443,037	78,734	2,521,771	2,417,599	(42,613	)	2,374,986
Customer accounts	1,362,643	1,321,629	42,833	1,364,462	1,290,193	(17,807	)	1,272,386

Adjusted profit reconciliation
		2018		2017		2016
	Footnotes	$m		$m		$m
Year ended 31 Dec
Adjusted profit before tax		21,719		21,133		18,906
Significant items		(1,829	)	(3,879	)	(12,202	)
– customer redress programmes (revenue)		53		(108	)	2
– disposals, acquisitions and investment in new businesses (revenue)		(113	)	274		264
– fair value movements on financial instruments	65, 66	(100	)	(245	)	(2,453	)
– costs of structural reform		(361	)	(420	)	(223	)
– costs to achieve		—		(3,002	)	(3,118	)
– customer redress programmes (operating expenses)		(146	)	(655	)	(559	)
– disposals, acquisitions and investment in new businesses (operating expenses)		(52	)	(53	)	(1,087	)
– disposals, acquisitions and investment in new businesses (LICs)		—		—		(748	)
– gain on partial settlement of pension obligation		—		188		—
– impairment of GPB – Europe goodwill		—		—		(3,240	)
– past service costs of guaranteed minimum pension benefits equalisation		(228	)	—		—
– restructuring and other related costs		(66	)	—		—
– settlements and provisions in connection with legal and other regulatory matters		(816	)	198		(1,025	)
– disposals, acquisitions and investment in new businesses (share of profit in associates and joint ventures)		—		—		(1	)
– currency translation on significant items				(56	)	(14	)
Currency translation				(87	)	408
Reported profit before tax		19,890		17,167		7,112

For footnotes, see page 89.