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Interest in associates and joint ventures (Tables)
 12 Months Ended
Dec. 31, 2019
Interests In Other Entities [Abstract]  
Disclosure of carrying amount of interests in associates and joint ventures
Carrying amount of HSBC’s interests in associates and joint ventures
 
 
 
2019

2018

 
$m

$m

Interests in associates
24,384

22,244

Interests in joint ventures1
90

163

Interests in associates and joint ventures
24,474

22,407

1
During 2019, HSBC increased its shareholding in HSBC Saudi Arabia, which is now recognised as a subsidiary.
Disclosure of interests in associates
Principal associates of HSBC
 
 
2019
2018
 
 
Carrying amount

Fair value1

Carrying amount

Fair value1

 
 
$m

$m

$m

$m

Bank of Communications Co., Limited
 
18,982

10,054

17,754

10,991

The Saudi British Bank
 
4,370

5,550

3,557

5,222

1
Principal associates are listed on recognised stock exchanges. The fair values are based on the quoted market prices of the shares held (Level 1 in the fair value hierarchy).
 
 
At 31 Dec 2019
 
Footnotes
Country of incorporation and principal place of business
Principal
activity
HSBC’s
interest
%
Bank of Communications Co., Limited
 
People’s Republic of China
Banking services
19.03
The Saudi British Bank
1
Saudi Arabia
Banking services
29.20

1
In June 2019, the merger between The Saudi British Bank (‘SABB’) and Alawwal bank (‘Alawwal’) became effective. The merger involved SABB issuing a fixed number of new shares to Alawwal’s shareholders in exchange for the transfer of Alawwal’s net assets and cancellation of its shares. HSBC’s 40.0% interest in SABB reduced to 29.2% of the combined entity, resulting in a dilution gain of $828m recognised in HSBC’s consolidated income statement. The dilution gain represents the difference between the carrying amount of HSBC’s interest in SABB that was derecognised proportionate to the percentage reduction, and HSBC’s share of the increase in the combined entity’s net assets. The combined entity continues to be an associate of HSBC.
 
At 31 Dec 2019
At 31 Dec 2018
 
VIU

Carrying value

Fair value

VIU

Carrying value

Fair value

 
$bn

$bn

$bn

$bn

$bn

$bn

BoCom
21.5

19.0

10.1

18.0

17.8

11.0

Selected balance sheet information of BoCom
 
 
At 30 Sep
 
 
2019

2018

 
 
$m

$m

Cash and balances at central banks
 
112,239

125,414

Loans and advances to banks and other financial institutions
 
108,026

102,980

Loans and advances to customers
 
730,510

686,951

Other financial assets
 
435,740

408,136

Other assets
 
40,101

42,106

Total assets
 
1,426,616

1,365,587

Deposits by banks and other financial institutions
 
290,492

304,395

Customer accounts
 
868,627

829,539

Other financial liabilities
 
131,772

94,900

Other liabilities
 
23,074

36,332

Total liabilities
 
1,313,965

1,265,166

Total equity
 
112,651

100,421

Selected income statement information of BoCom
 
For the 12 months ended 30 Sep
 
2019

2018

 
$m

$m

Net interest income
20,558

19,295

Net fee and commission income
6,411

6,245

Change in expected credit losses and other credit impairment charges
(7,479
)
(5,602
)
Depreciation and amortisation
(1,934
)
(767
)
Tax expense
(1,636
)
(1,554
)
Profit for the year
11,175

11,116

Other comprehensive income
315

190

Total comprehensive income
11,490

11,306

Dividends received from BoCom
613

611

Associates
The undertakings below are associates and equity accounted.
Associates
% of share class held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Bank of Communications Co., Ltd.
19.03
 
168
Barrowgate Limited
15.31
 
169
BGF Group PLC
24.54
 
170
Bud Financial Limited
8.20
 
1, 171
Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited
26.00
 
172
CFAC Payment Scheme Limited
33.33
 
173
Chemi & Cotex (Rwanda) Limited
33.99
 
1, 174
Chemi & Cotex Kenya Limited
33.99
 
1, 175
Chemi and Cotex Industries Limited
33.99
 
176
EPS Company (Hong Kong) Limited
38.66
 
54
Euro Secured Notes Issuer
16.66
 
177
GIE GNIFI
n/a
 
0, 178
GZHS Research Co Ltd
33.00
(20.50
)
179
Hang Seng Qianhai Fund Management Company Limited
70.00
(43.49
)
1, 12, 180
Icon Brickell LLC(In Liquidation)
n/a
 
0, 182
Jeppe Star Limited
100.00
(33.99
)
183
MENA Infrastructure Fund (GP) Ltd
33.33
 
184
Northstar Trade Finance Inc.
20.08
 
185
Novo Star Limited
33.99
 
186
Quantexa Ltd
10.51
 
187
Services Epargne Entreprise
14.34
 
188
sino AG
24.94
(20.11
)
189
The London Gold Market Fixing Limited
n/a
 
0, 166
The Saudi British Bank
29.20
 
190
Trinkaus Europa Immobilien-Fonds Nr. 7 Frankfurt Mertonviertel KG
n/a
 
0, 43
Vizolution Limited
17.95
 
1, 191
We Trade Innovation Designated Activity Company
8.52
 
1, 192
Footnotes for Note 37

Description of Shares
0
Where an entity is governed by voting rights, HSBC consolidates when it holds – directly or indirectly – the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities, and whether power is held as an agent or principal. HSBC’s consolidation policy is described in Note 1.2(a).
1
Management has determined that these undertakings are excluded from consolidation in the Group accounts as these entities do not meet the definition of subsidiaries in accordance with IFRS. HSBC’s consolidation policy is described in Note 1.2(a).
2
Directly held by HSBC Holdings plc
3
Preference Shares
4
Actions
5
Redeemable Preference Shares
6
GmbH Anteil
7
Limited and Unlimited Liability Shares
8
Liquidating Share Class
9
Nominal Shares
10
Non-Participating Voting Shares
11
Parts
12
Registered Capital Shares
13
Russian Limited Liability Company Shares
14
Stückaktien
Sensitivity of VIU to reasonably possible changes in key assumptions
The following table shows the change to each key assumption in the VIU calculation that on its own would reduce the headroom to nil:
Key assumption
Changes to key assumption to reduce headroom to nil
•
Long-term profit growth rate
•
Decrease by 99 basis points
•
Long-term asset growth rate
•
Increase by 80 basis points

•
Discount rate
•
Increase by 122 basis points

•
Expected credit losses as a percentage of customer advances
•
Increase by 16 basis points

•
Risk-weighted assets as a percentage of total assets
•
Increase by 624 basis points

•
Cost-income ratio
•
Increase by 373 basis points

•
Long-term effective tax rate
•
Increase by 900 basis points
•
Capital requirements – capital adequacy ratio

•
Increase by 118 basis points
•
Capital requirements – tier 1 capital adequacy ratio

•
Increase by 190 basis points

Sensitivity of VIU to reasonably possible changes in key assumptions
 
Favourable change
Unfavourable change
 
 
Increase
in VIU

VIU

 
Decrease
in VIU

VIU

 
bps

$bn

$bn

bps

$bn

$bn

At 31 Dec 2019
 
 
 
 
 
 
Long-term profit growth rate
—

—

21.5

(50
)
(1.3
)
20.2

Long-term asset growth rate
(50
)
1.4

22.9

—

—

21.5

Discount rate
(54
)
1.4

22.9

56

(1.2
)
20.3

Expected credit losses as a percentage of customer advances
2019 to 2023: 90
2024 onwards: 70

1.0

22.5

2019 to 2023: 108
2024 onwards: 81

(1.2
)
20.3

Risk-weighted assets as a percentage of total assets
(96
)
0.4

21.9

12

—

21.5

Cost-income ratio
(175
)
1.0

22.5

95

(1.2
)
20.3

Long-term effective tax rate
(352
)
1.0

22.5

250

(0.7
)
20.8

Earnings in short to medium term – compound annual growth rate1
107

0.5

22.0

(346
)
(2.4
)
19.1

Capital requirements – capital adequacy ratio
—

—

21.5

337

(8.2
)
13.3

Capital requirements – tier 1 capital adequacy ratio
—

—

21.5

322

(6.0
)
15.5

At 31 Dec 2018
 
 
 
 
 
 
Long-term profit growth rate
100

2.6

20.6

(10
)
(0.2
)
17.8

Long-term asset growth rate
(10
)
0.3

18.3

100

(2.8
)
15.3

Discount rate
(142
)
3.2

21.3

28

(0.5
)
17.5

Expected credit losses as a percentage of customer advances
2018 to 2022: 70
2023 onwards: 65

0.9

18.9

2018 to 2022: 83
2023 onwards: 77

(1.0
)
17.0

Risk-weighted assets as a percentage of total assets
(140
)
0.5

18.6

80

(0.3
)
17.8

Cost-income ratio
(160
)
1.1

19.2

200

(1.4
)
16.7

Long-term effective tax rate
(280
)
0.7

18.7

250

(0.6
)
17.5

Earnings in short to medium term – compound annual growth rate1,2
204

1.1

19.1

(366
)
(1.8
)
16.2

Capital requirements – capital adequacy ratio
—

—

18.0

258

(5.0
)
13.0

Capital requirements – tier 1 capital adequacy ratio
—

—

18.0

243

(3.2
)
14.8


1
Based on management’s explicit forecasts over the short to medium term.
2
Amounts at 31 December 2018 have been updated to align with the 2019 approach to describe the impact of the change in isolation.
Summarised aggregate financial information of associates
Reconciliation of BoCom’s total shareholders’ equity to the carrying amount in HSBC’s consolidated financial statements
 
At 30 Sep
 
2019

2018

 
$m

$m

HSBC’s share of total shareholders’ equity
18,509

17,275

Goodwill and other intangible assets
473

479

Carrying amount
18,982

17,754