REG - HSBC Holdings PLC - HSBC Holdings 1Q24 earnings release
30/04/2024 07:00
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RNS Number : 4963M HSBC Holdings PLC 30 April 2024
30 APRIL 2024
HSBC HOLDINGS PLC
1Q24 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
"I'm pleased with our start to 2024. We completed the sale of our Canada
business and agreed the sale of our Argentina business, both of which allow us
to focus on markets with higher value international opportunities. Our good
profit performance of $12.7bn in the first quarter has enabled us to continue
the trend of rewarding our shareholders. We have announced a total of $8.8bn
of distributions, consisting of a first interim dividend for 2024 of $0.10 per
share, a special dividend of $0.21 per share from the Canada sale proceeds,
and a new share buy-back of up to $3bn. Our 2024 guidance remains unchanged,
including a mid-teens return on average tangible equity and continued cost
discipline."
Financial performance (1Q24 vs. 1Q23)
- Profit before tax decreased by $0.2bn to $12.7bn. This included a
$4.8bn gain following the completion of the disposal of our banking business
in Canada, inclusive of fair value gains on the hedging of the sale proceeds,
partly offset by a $1.1bn impairment recognised in 1Q24 following the
classification of our business in Argentina as held for sale. The reduction in
profit before tax also reflected the non-recurrence of a $2.1bn reversal in
1Q23 of an impairment relating to the sale of our retail banking operations in
France, which was subsequently reinstated in 4Q23 prior to completion, and a
$1.5bn gain recognised in 1Q23 on the acquisition of Silicon Valley Bank UK
Limited ('SVB UK').
- On a constant currency basis, profit before tax decreased by $0.3bn to
$12.7bn. Reported profit after tax decreased by $0.2bn to $10.8bn.
- Revenue increased by $0.6bn or 3% to $20.8bn, including the
acquisition and disposal impacts of the strategic transactions described
above. Revenue growth also reflected the impact of higher customer activity in
our Wealth products in Wealth and Personal Banking ('WPB'), and in Equities
and Securities Financing in Global Banking and Markets ('GBM'), which in part
mitigated a reduction in Foreign Exchange revenue, compared with a strong
1Q23.
- Net interest income ('NII') of $8.7bn fell by $0.3bn, primarily
reflecting deposit migration. Non-interest income increased by $0.9bn,
reflecting a rise in trading income of $1.3bn, mainly in GBM. The associated
funding costs reported in NII grew by $1.3bn. In addition, fee income grew by
5%. On a constant currency basis, revenue rose by 3% to $20.8bn.
- Net interest margin ('NIM') of 1.63% decreased by 6 basis points
('bps') compared with 1Q23. NIM increased by 11bps compared with 4Q23,
reflecting the impact of hyperinflation and currency devaluation in Argentina,
partly offset by higher funding costs of liabilities.
- ECL of $0.7bn were $0.3bn higher than in 1Q23. The 1Q24 charge
primarily comprised stage 3 charges in both WPB and our wholesale businesses,
while the 1Q23 charge reflected a favourable change in economic assumptions
and lower stage 3 charges. Annualised ECL as a percentage of gross loans and
advances to customers was 30bps in 1Q24, including held for sale balances.
- Operating expenses of $8.2bn were $0.6bn or 7% higher than in 1Q23.
The growth was primarily due to continued investment in technology, the
impacts of inflation and a higher performance-related pay accrual which
reflected a change in the expected quarterly phasing of the
performance-related pay pool relative to 1Q23. While target basis operating
expenses rose by 7%, we are reconfirming our cost growth guidance of
approximately 5% for 2024 compared with 2023 on this basis. Target basis
operating expenses are measured on a constant currency basis, excluding
notable items, the impact of retranslating the results of hyperinflationary
economies at constant currency, and the direct costs from the sales of our
France retail banking operations and our banking business in Canada.
- Customer lending balances decreased by $5bn compared with 4Q23. On a
constant currency basis, lending balances increased by $5bn, including growth
in Commercial Banking ('CMB') and GBM, notably in HSBC Bank plc, while
mortgage balances increased in WPB in HSBC UK.
- Customer accounts decreased by $41bn compared with 4Q23. On a constant
currency basis, customer accounts fell by $24bn, mainly in our legal entity in
Hong Kong, notably reflecting the impact of customer deleveraging and
competitive pressures in CMB and GBM, and outflows into wealth products in
WPB.
- Common equity tier 1 ('CET1') capital ratio of 15.2% increased by 0.4
percentage points compared with 4Q23, driven by capital generation, the net
beneficial impact of strategic transactions on CET1 and risk-weighted assets
('RWAs'), partly offset by the foreseeable dividend accrual, including the
special dividend of $0.21 per share following the completion of the sale of
our banking business in Canada, and the share buy-back announced at our 2023
year-end results.
- The Board has approved a first interim dividend of $0.10 per share. In
addition, following the completion of the sale of our banking business in
Canada, the Board has approved a special dividend of $0.21 per share, payable
in June 2024, alongside the first interim dividend. After completing the $2bn
buy-back announced at our full year 2023 results, we now intend to initiate a
share buy-back of up to $3bn, which we expect to have a 0.4 percentage point
impact on the CET1 capital ratio. We plan for this buy-back to commence
shortly after the annual general meeting ('AGM') in May 2024.
Outlook
- Our guidance remains unchanged from that set out at our full-year
results on 21 February 2024. We continue to target a return on average
tangible equity ('RoTE'), excluding the impact of notable items, in the
mid-teens for 2024, with banking net interest income ('banking NII') of at
least $41bn, dependent on the path of interest rates globally. We are
reconfirming our cost growth guidance of approximately 5% for 2024 compared
with 2023, on a target basis, and ECL charges as a percentage of average gross
loans of around 40bps in 2024.
- Our guidance reflects our current outlook for the global macroeconomic
environment, including customer and financial markets activity. This includes
our modelling of a number of market dependent factors, such as market-implied
interest rates (as of early April 2024), as well as customer behaviour and
activity levels.
- We intend to manage our CET1 capital ratio within our medium-term
target range of 14% to 14.5%, with a dividend payout ratio target of 50% for
2024, excluding material notable items and related impacts.
Note: we do not reconcile our forward guidance on RoTE excluding notable
items, target basis operating expense, dividend payout ratio excluding
material notable items and related impacts or banking NII to their reported
equivalent measures.
Contents
1 Group Chief Executive statement 22 Supplementary financial information
1 Financial performance (1Q24 vs. 1Q23) 22 - Reported and constant currency results
1 Outlook 23 - Global businesses
2 Business highlights 26 - Legal entities
3 Financial summary 30 - Strategic transactions supplementary analysis
3 - Key financial measures: basis of preparation 31 Alternative performance measures
3 - Constant currency performance 31 - Use of alternative performance measures
4 - Disposal groups and business acquisitions 31 - Alternative performance measure definitions
6 - Key financial metrics 35 Risk
7 - Summary consolidated income statement 35 - Managing risk
8 - Distribution of results by global business and legal entity 36 - Credit risk
9 - Income statement commentary 47 - Capital risk
14 - Summary consolidated balance sheet 49 - Regulatory and other developments
14 - Balance sheet commentary 50 Additional information
16 Global businesses 50 - Dividends
16 - Wealth and Personal Banking - constant currency basis 51 - Investor relations/media relations contacts
17 - Commercial Banking - constant currency basis 51 - Cautionary statement regarding forward-looking statements
19 - Global Banking and Markets - constant currency basis 53 - Abbreviations
20 - Corporate Centre - constant currency basis
Presentation to investors and analysts
HSBC Holdings plc will be conducting a trading update conference call with
analysts and investors today to coincide with the publication of its Earnings
Release. The call will take place at 07.45am BST. Details of how to
participate in the call and the live audio webcast can be found at
www.hsbc.com/investors.
About HSBC
HSBC Holdings plc, the parent company of HSBC, is headquartered in London.
With assets of $3.0tn at 31 March 2024, HSBC is one of the world's largest
banking and financial services organisations.
Business highlights
Our strategy
HSBC's purpose is 'Opening up a world of opportunity'. We continue to
implement our strategy across four strategic pillars aligned to our purpose,
values and ambition. Our strategic pillars remain:
- Focus - maintain leadership in scale markets, double-down on
international connectivity, diversify our revenue and maintain cost discipline
and reshape our portfolio;
- Digitise - deliver seamless customer experience, ensure resilience
and security, embrace disruptive technologies and partner with innovators, and
automate and simplify at scale;
- Energise - inspire leaders to drive performance and delivery, unlock
our edge to enable success, deliver a unique and exceptional colleague
experience and prepare our workforce for the future;
- Transition - support our customers, embed net zero into the way we
operate, partner for systemic change, become net zero in our own operations
and supply chain by 2030, and our financed emissions by 2050.
The Group continues to target a RoTE in the mid-teens for 2024, excluding
notable items. However, we are mindful of the interest rate cycle and
subsequent impact on NII and are focused on actions and initiatives to reduce
the sensitivity of our earnings to interest rate movements. These include a
number of growth opportunities within our strategy that play to our strengths.
These opportunities include further growing our international businesses,
diversification of our revenue, including building our wealth business,
especially in Asia, continuing to grow in our home markets in Hong Kong and
the UK, and also the diversification of our profit generation across the other
markets in which we operate. We have continued to demonstrate progress during
1Q24. We generated $6.7bn from transaction banking during 1Q24, which was 1%
higher than in 1Q23, driven by revenue growth in Global Payments Solutions
('GPS') in both CMB and GBM, across both NII and fees, which was broadly
offset by lower revenue in Global Foreign Exchange in the context of a strong
1Q23. At 31 March 2024, wealth balances were $1.8tn, an increase of 10%
compared with the same period last year. Within this we have attracted net new
invested assets of $27bn in the first three months of 2024, with $19bn booked
in Asia. In addition, our insurance business continued to grow, with insurance
manufacturing new business contractual service margin in WPB of $0.8bn, up 87%
compared with 1Q23. In Hong Kong and the UK, we grew mortgage lending balances
by a combined $9bn since 31 March 2023.
We remain focused on maintaining tight cost discipline and generating cost
savings that will help enable us to invest in technology to improve customer
experience while also increasing efficiency. We also have an ambition to build
a stronger performance culture, improving our colleague experience and
preparing our workforce for the future. Finally, we also see significant
commercial opportunities in helping to finance the new economy and in
supporting the significant investment needs of our customers in the transition
to net zero, as well as the importance of helping to mitigate the rising
financial and wider societal risks posed by climate change.
We continue to make good progress on our strategic transactions. In 1Q24, we
completed the sales of our retail banking operations in France and our banking
business in Canada, as we reshape the organisation to focus on our
international customer base. In addition, we announced the planned sales of
our business in Argentina and our operations in Armenia, and we expect to
complete the planned sale of our business in Russia in the second quarter of
2024.
For further details of these transactions, see 'Disposal groups and business
acquisitions' on page 4.
ESG update
In January 2024, we published our first net zero transition plan, which is an
important milestone in our journey to achieving our net zero ambition -
helping our people, customers, investors and other stakeholders to understand
our long-term vision, the challenges, uncertainties and dependencies that
exist, the progress we are making and what we plan to do in the future. The
plan includes details on our approach to sector transitions, and on our
implementation plan to embed net zero across key areas of our organisation.
Financial summary
Key financial measures: basis of preparation
Return on average tangible equity
From 1 January 2024, we have revised the adjustments made to RoTE in 2023 from
excluding the impact of strategic transactions and the impairment of our
investment in Bank of Communications Co., Limited ('BoCom'), to excluding all
notable items in 2024. This is intended to improve alignment with the
treatment of notable items in our other income statement disclosures. The
calculation for RoTE excluding notable items adjusts the 'profit attributable
to the ordinary shareholders, excluding goodwill and other intangible assets
impairment' for the post-tax impact of notable items. It also adjusts the
'average tangible equity' for the post-tax impact of notable items in each
period, which remain as adjusting items for all relevant periods within that
calendar year. For a reconciliation from reported RoTE to RoTE excluding
notable items, see page 32. On this basis, we continue to target a RoTE in the
mid-teens for 2024. We do not reconcile our forward RoTE guidance to the
equivalent reported measure.
Target basis operating expenses
Target basis operating expenses is computed by excluding the direct cost
impact of our France retail banking operations and Canada banking business
disposals from the 2023 baseline. It is measured on a constant currency basis
and excludes notable items and the impact of retranslating the prior year
results of hyperinflationary economies at constant currency, which we consider
to be outside of our control. We consider target basis operating expenses to
provide useful information to investors by quantifying and excluding the
notable items that management considered when setting and assessing
cost-related targets. For a reconciliation from reported operating expenses to
target basis operating expenses, see page 33.
In 2024, we will target growth of approximately 5% compared with 2023 on a
target basis. This target reflects our current business plan for 2024, and
includes an increase in staff compensation, higher technology spend and
investment for growth and efficiency, in part mitigated by cost savings from
actions taken during 2023. We do not reconcile our forward target basis
operating expenses guidance to the reported operating expenses.
Dividend payout ratio target basis
Given our current returns trajectory, we are targeting a dividend payout ratio
of 50% for 2024. For the purposes of computing our dividend payout ratio
target, we exclude from earnings per share material notable items and related
impacts. Material notable items are a subset of notable items for which
categorisation is dependent on the nature of each item in conjunction with the
financial impact on the Group's income statement. Material notable items
comprise the impacts of the sales of our banking business in Canada and our
retail banking operations in France, the gain following the acquisition of SVB
UK, and the impacts of the planned sale of our business in Argentina. We also
exclude HSBC Bank Canada's financial results from the 30 June 2022 net asset
reference date until completion, as the gain on sale was recognised through a
combination of the consolidation of HSBC Bank Canada's results in the Group's
results since this date, and the remaining gain on sale was recognised at
completion, inclusive of the recycling of related reserves and fair value
gains on related hedges. Following the completion of the sale of our banking
business in Canada, the Board has approved a special dividend of $0.21 per
share, payable in June 2024, alongside the first interim dividend.
For the planned sale of our business in Argentina, there is a mechanism by
which the loss on sale will vary by changes in the net asset value of HSBC
Argentina, and in the fair value of consideration including price adjustments
and migration costs (see page 4 for details). No additional related impacts
have been identified, and the ongoing profits from HSBC Argentina will not be
excluded from our dividend payout ratio target basis.
For a reconciliation of basic earnings per share to basic earnings per share
excluding material notable items and related impacts, see page 34. We do not
reconcile our forward dividend payout ratio, excluding material notable items
and related impacts guidance to the reported dividend payout ratio.
Notes
- Income statement comparisons, unless stated otherwise, are between
the quarter ended 31 March 2024 and the quarter ended 31 March 2023. Balance
sheet comparisons, unless otherwise stated, are between balances at 31 March
2024 and the corresponding balances at 31 December 2023.
- The financial information on which this Earnings Release 1Q24
is based is unaudited. It has been prepared in accordance with our material
accounting policies as described on pages 341 to 354 of our Annual Report and
Accounts 2023.
Constant currency performance
Constant currency performance is computed by adjusting reported results for
the effects of foreign currency translation differences, which distort
period-on-period comparisons.
We consider constant currency performance to provide useful information for
investors by aligning internal and external reporting, and reflecting how
management assesses period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US
dollar against most major currencies. We exclude them to derive constant
currency data, allowing us to assess balance sheet and income statement
performance on a like-for-like basis and to better understand the underlying
trends in the business.
Foreign currency translation differences for 1Q24 are computed
by retranslating into US dollars for non-US dollar branches, subsidiaries,
joint ventures and associates:
- the income statements for 4Q23 and 1Q23 at the average rate of exchange
for 1Q24;
- the closing prior period balance sheets at the prevailing rates of
exchange at 31 March 2024.
No adjustment has been made to the exchange rates used to translate foreign
currency-denominated assets and liabilities into the functional currencies of
any HSBC branches, subsidiaries, joint ventures or associates. The constant
currency data of HSBC's Argentina subsidiaries and operating entity in
Türkiye has not been adjusted further for the impacts of hyperinflation. When
reference is made to foreign currency translation differences in tables or
commentaries, comparative data reported in the functional currencies of HSBC's
operations have been translated at the appropriate exchange rates applied in
the current period on the basis described above.
Notable items
We separately disclose 'notable items', which are components of our income
statement that management would consider as outside the normal course of
business and generally non-recurring in nature. Certain notable items are
classified as 'material notable items', which are a subset of notable items.
Categorisation as a material notable item is dependent on the nature of each
item in conjunction with the financial impact on the Group's income statement.
We exclude material notable items when computing our dividend payout ratio
target basis.
The tables on pages 23 to 29 detail the effects of notable items on each of
our global business segments and legal entities during 1Q24, 4Q23 and 1Q23.
Global business performance
The Group Chief Executive, supported by the rest of the Group Executive
Committee ('GEC'), is considered to be the Chief Operating Decision Maker
('CODM') for the purposes of identifying the Group's reportable segments.
The Group Chief Executive and the rest of the GEC review operating activity on
a number of bases, including by global business and legal entities. Our global
businesses - Wealth and Personal Banking, Commercial Banking and Global
Banking and Markets - along with Corporate Centre - are our reportable
segments under IFRS 8 'Operating Segments'. Global business results are
assessed by the CODM on the basis of constant currency performance, which
removes the effects of currency translation impacts from reported results.
Therefore, we present these results on a constant currency basis.
As required by IFRS 8, reconciliations of the constant currency results to the
Group's reported results are presented on page 22. Supplementary
reconciliations of constant currency to reported results by global business
are presented on pages 23 to 25 for information purposes.
Management view of revenue on a constant currency basis
Our global business segment commentary includes tables that provide breakdowns
of revenue on a constant currency basis by major product. These reflect the
basis on which revenue performance of the businesses is assessed and managed.
Disposal groups and business acquisitions
France retail banking operations
On 1 January 2024, HSBC Continental Europe completed the sale of its retail
banking operations in France to CCF, a subsidiary of Promontoria MMB SAS ('My
Money Group'). The sale also included HSBC Continental Europe's 100% ownership
interest in HSBC SFH (France) and its 3% ownership interest in Crédit
Logement.
Upon completion and in accordance with the terms of the sale, HSBC Continental
Europe received a €0.1bn ($0.1bn) profit participation interest in the
ultimate holding company of My Money Group. The associated impacts on initial
recognition of this stake at fair value were recognised as part of the pre-tax
loss on disposal in 2023, upon the reclassification of the disposal group as
held for sale. In accordance with the terms of the sale, HSBC Continental
Europe retained a portfolio of €7.1bn ($7.8bn) consisting of home and
certain other loans, in respect of which it may consider on-sale opportunities
at a suitable time, and the CCF brand, which it licensed to the buyer under a
long-term licence agreement. Additionally, HSBC Continental Europe's
subsidiaries, HSBC Assurances Vie (France) and HSBC Global Asset Management
(France), have entered into distribution agreements with the buyer. Ongoing
costs associated with the retention of the home and certain other loans, net
of income on distribution agreements and the brand licence, are estimated to
have an after-tax loss impact of €0.1bn ($0.1bn) in 2024 based on expected
funding rates.
The customer lending balances and associated income statement impacts of the
portfolio of retained loans, together with the profit participation interest
and the licence agreement of the CCF brand, were reclassified from WPB to
Corporate Centre, with effect from 1 January 2024.
Canada banking business
On 28 March 2024, HSBC Overseas Holdings (UK) Limited, a direct subsidiary of
HSBC Holdings plc, completed the sale of HSBC Bank Canada to the Royal Bank of
Canada.
The completion of the transaction resulted in a gain on sale of $4.8bn
inclusive of recycling of $0.6bn in foreign currency translation reserve
losses and $0.4bn in other reserves losses. The gain on sale also included
$0.3bn in fair value gains recognised on the related foreign exchange hedges
in the first quarter of 2024. There was no tax on the gain recognised at
completion due to the substantial shareholding exemption rule in the UK.
Following the completion of this transaction, the Board has approved a special
dividend of $0.21 per share, payable in June 2024 alongside the first interim
dividend.
Argentina business
On 9 April 2024, HSBC Latin America B.V. entered into a binding agreement to
sell its business in Argentina to Grupo Financiero Galicia ('Galicia').
Galicia will acquire all of HSBC Argentina's business covering banking, asset
management and insurance, together with $100m of subordinated debt issued by
HSBC Argentina and held by HSBC Latin America Holdings (UK) Limited for a base
consideration of $550m. The consideration will be adjusted for the results of
the business and fair value gains or losses on HSBC Argentina's securities
portfolios during the period between 31 December 2023 and closing.
HSBC expects to receive the purchase consideration in a combination of cash,
loan notes and Galicia's American Depositary Receipts ('ADRs'), with ADRs
accounting for around half of the consideration received and representing less
than a 10% economic interest in Galicia. The transaction is subject to
conditions, including regulatory approval, and is expected to be completed
within the next 12 months.
At 31 March 2024, given the advanced stage of agreement on deal terms and that
completion was expected within 12 months, our investment in HSBC Argentina met
the criteria to be classified as held for sale in accordance with IFRS 5. As a
result, we classified total assets of $5.1bn and total liabilities of $3.5bn
to held for sale, and recognised a $1.1bn pre-tax loss in the first quarter of
2024. There was no tax deduction on the loss recognised. At closing,
cumulative foreign currency translation reserves and other reserves will
recycle to the income statement. At 31 March 2024, foreign currency
translation reserve losses stood at $4.9bn and other reserve gains at $0.1bn.
Between signing and closing, the loss on sale will vary by changes in the net
asset value of the disposed business and associated hyperinflation and foreign
currency translation, and the fair value of consideration including price
adjustments and migration costs.
Other disposals
On 30 June 2022, following a strategic review of our business in Russia, HSBC
Europe BV (a wholly-owned subsidiary of HSBC Bank plc) entered into an
agreement for the sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited
Liability Company). As at 31 December 2023, following US sanctions designation
of the buyer, the sale had become less certain. As a result, the business was
no longer classified as held for sale, the previously recognised loss has been
reversed, and a broadly offsetting charge relating to recoverability was
recognised in the fourth quarter of 2023. During the first quarter of 2024,
following the receipt of government and regulatory approvals, the held for
sale classification was reinstated. The reinstatement of held for sale did not
have a material impact. The transaction is now expected to complete in the
second quarter of 2024 and at completion, foreign currency translation reserve
losses of approximately $0.1bn will be recognised in the income statement.
On 6 February 2024, following a strategic review of our operations in Armenia,
HSBC Europe BV reached an agreement for the sale of HSBC Bank Armenia to
Ardshinbank. This resulted in a loss on classification to held for sale of
$0.1bn. The transaction is subject to regulatory approvals. As part of this
transaction, all staff members of HSBC Armenia will transfer to Ardshinbank at
completion, and the transfer will include all customer relationships held by
HSBC Armenia at that time. The transaction is expected to complete within 12
months.
On 13 November 2023, the Hongkong and Shanghai Banking Corporation Limited
(acting through its Mauritius branch) entered into an agreement with ABSA Bank
(Mauritius) Limited, a wholly-owned subsidiary of ABSA Bank Group Limited, to
sell its Wealth and Personal Banking business. The sale is expected to
complete in the second half of 2024 subject to regulatory approvals.
Acquisitions
In March 2023, HSBC UK Bank plc acquired SVB UK. In June 2023, we changed its
legal entity name to HSBC Innovation Bank Limited and launched HSBC Innovation
Banking ('IVB') to deliver a globally connected, specialised banking
proposition to support innovation businesses and their investors. The
acquisition was funded from existing resources and brought the staff, assets
and liabilities of SVB UK into the HSBC portfolio. On acquisition, we
performed a preliminary assessment of the fair value of the assets and
liabilities purchased. We established an opening balance sheet on 13 March
2023 and applied the result of the fair value assessment, which resulted in a
reduction in net assets of $0.2bn. We recognised a provisional gain on
acquisition of $1.5bn in 1Q23, based on rates of foreign exchange prevailing
in 1Q23, representing the difference between the consideration paid of £1 and
the net assets acquired. Subsequently, further due diligence was performed
post-acquisition and we recognised an additional gain of $0.1bn at 30
September 2023, as required by IFRS 3 'Business Combinations', resulting in a
gain on acquisition for the year ended 31 December 2023 of $1.6bn. No further
adjustments were made to the gain on acquisition during the first quarter of
2024, which is now final.
In October 2023, HSBC Global Asset Management Singapore Limited entered into
an agreement to acquire 100% of the shares of Silkroad Property Partners Pte
Ltd ('Silkroad') and for HSBC Global Asset Management Limited to acquire
Silkroad's affiliated General Partner entities. Silkroad is a Singapore
headquartered Asia-Pacific-focused, real estate investment manager. The
acquisition was completed on 31 January 2024.
In October 2023, HSBC Bank (China) Company Limited, a wholly-owned subsidiary
of The Hongkong and Shanghai Banking Corporation Limited, entered into an
agreement to acquire Citibank China's retail wealth management portfolio in
mainland China. The portfolio comprises assets under management and deposits
and the associated wealth customers. Upon completion, the acquired business
will be integrated into HSBC Bank China's Wealth and Personal Banking
operations. The transaction is expected to complete in the first half of 2024.
Impact of strategic transactions
To aid the understanding of our results, we separately disclose, in selected
tables, the impact of strategic transactions classified as material notable
items on the results of the Group and our global businesses. Material notable
items are a subset of notable items and categorisation is dependent on the
financial impact on the Group's income statement. At 1Q24, the disclosure
includes the impacts of the disposal of our retail banking operations in
France, our banking business in Canada and the planned sale of our business in
Argentina. The disclosure also includes the impact of our acquisition of SVB
UK and income statement results of IVB. The impacts quoted include the gains
or losses on classification to held for sale or acquisition and all other
related notable items. Once a transaction has completed, the impact will also
include the operating income statement results of each business, which are not
classified as notable items, where there are results in one period but not in
another, providing the impact of the acquisition or disposal on the results.
We have also included strategic transaction supplementary analysis on
page 30.
Key financial metrics
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
Reported results
Profit before tax ($m) 12,650 977 12,886
Profit after tax ($m) 10,837 222 11,026
Cost efficiency ratio (%) 39.3 66.4 37.6
Net interest margin (%) 1.63 1.52 1.69
Basic earnings per share ($) 0.54 (0.01) 0.52
Diluted earnings per share ($) 0.54 (0.01) 0.52
Dividend per ordinary share (in respect of the period) ($)(1) 0.10 0.31 0.10
Alternative performance measures
Constant currency profit before tax ($m) 12,650 863 12,931
Constant currency cost efficiency ratio (%) 39.3 66.9 37.4
Expected credit losses and other credit impairment charges (annualised) as % 0.31 0.40 0.18
of average gross loans and advances to customers (%)
Expected credit losses and other credit impairment charges (annualised) as % 0.30 0.38 0.17
of average gross loans and advances to customers, including held for sale (%)
Basic earnings per share excluding material notable items and related impacts 0.34 0.25 0.36
($)
Return on average ordinary shareholders' equity (annualised) (%) 24.0 (0.4) 25.5
Return on average tangible equity (annualised) (%) 26.1 (0.4) 27.4
Return on average tangible equity excluding notable items (annualised) (%) 16.4 12.8 18.4
Target basis operating expenses ($m) 7,939 8,415 7,394
At
31 Mar 31 Dec 31 Mar
2024 2023 2023
Balance sheet
Total assets ($m) 3,000,517 3,038,677 2,989,696
Net loans and advances to customers ($m) 933,125 938,535 963,394
Customer accounts ($m) 1,570,164 1,611,647 1,604,099
Average interest-earning assets, year to date ($m) 2,140,446 2,164,324 2,152,893
Loans and advances to customers as % of customer accounts (%) 59.4 58.2 60.1
Total shareholders' equity ($m) 191,186 185,329 190,095
Tangible ordinary shareholders' equity ($m) 162,008 155,710 159,458
Net asset value per ordinary share at period end ($) 9.28 8.82 8.65
Tangible net asset value per ordinary share at period end ($) 8.67 8.19 8.08
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)(2) 15.2 14.8 14.7
Risk-weighted assets ($m)(2,3) 832,633 854,114 854,434
Total capital ratio (%)(2,3) 20.7 20.0 19.8
Leverage ratio (%)(2,3) 5.7 5.6 5.8
High-quality liquid assets (liquidity value) ($m)(3,4) 645,789 647,505 634,889
Liquidity coverage ratio (%)(3,4) 136 136 132
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions) 18,687 19,006 19,736
Period end basic number of $0.50 ordinary shares outstanding and dilutive 18,838 19,135 19,903
potential ordinary shares (millions)
Average basic number of $0.50 ordinary shares outstanding (millions) 18,823 19,130 19,724
For reconciliation and analysis of our reported results on a constant currency
basis, including lists of notable items, see page 22. Definitions and
calculations of other alternative performance measures are included in
'Alternative performance measures' on page 31.
1 The amount for the quarter ended 31 March 2024 excludes the special
dividend of $0.21 per ordinary share arising from the proceeds of the sale of
our banking business in Canada to Royal Bank of Canada.
2 Unless otherwise stated, regulatory capital ratios and requirements are
based on the transitional arrangements of the Capital Requirements Regulation
in force at the time. References to EU regulations and directives (including
technical standards) should, as applicable, be read as references to the UK's
version of such regulation or directive, as onshored into UK law under the
European Union (Withdrawal) Act 2018, and as may be subsequently amended under
UK law.
3 Regulatory numbers and ratios are as presented at the date of
reporting. Small changes may exist between these numbers and ratios and those
subsequently submitted in regulatory filings. Where differences are
significant, we may restate in subsequent periods.
4 The liquidity coverage ratio is based on the average value of the
preceding 12 months.
Summary consolidated income statement
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Net interest income 8,653 8,284 8,959
Net fee income 3,146 2,757 3,004
Net income from financial instruments held for trading or managed on a fair 5,406 4,097 4,112
value basis(1)
Net income from assets and liabilities of insurance businesses, including 1,292 6,149 3,894
related derivatives, measured at fair value through profit or loss
Insurance finance expense (1,327) (6,106) (3,912)
Insurance service result 306 382 284
Gain on acquisition(2) - (2) 1,511
Net gain/(impairment) on sale of business operations(3) 3,417 (1,980) 2,130
Other operating (expense)/income (141) (560) 189
Net operating income before change in expected credit losses and other credit 20,752 13,021 20,171
impairment charges(4)
Change in expected credit losses and other credit impairment charges (720) (1,031) (432)
Net operating income 20,032 11,990 19,739
Total operating expenses excluding impairment of goodwill and other intangible (8,150) (8,635) (7,588)
assets
(Impairment)/reversal of impairment of goodwill and other intangible assets (1) (10) 2
Operating profit 11,881 3,345 12,153
Share of profit in associates and joint ventures 769 632 733
Impairment of interest in associate - (3,000) -
Profit before tax 12,650 977 12,886
Tax expense (1,813) (755) (1,860)
Profit after tax 10,837 222 11,026
Attributable to:
- ordinary shareholders of the parent company 10,183 (153) 10,327
- other equity holders 401 125 418
- non-controlling interests 253 250 281
Profit after tax 10,837 222 11,026
$ $ $
Basic earnings per share 0.54 (0.01) 0.52
Diluted earnings per share 0.54 (0.01) 0.52
Dividend per ordinary share (paid in the period) - 0.10 -
% % %
Return on average ordinary shareholders' equity (annualised) 24.0 (0.4) 25.5
Return on average tangible equity (annualised) 26.1 (0.4) 27.4
Cost efficiency ratio 39.3 66.4 37.6
1 Includes a $255m gain (4Q23: $245m loss; 1Q23: $57m loss) on the
foreign exchange hedging of the proceeds from the sale of our banking business
in Canada.
2 Gain recognised in respect of the acquisition of SVB UK. In December
2023, a true-up adjustment was made which resulted in a decrease in the gain.
3 In the first quarter of 2024, a gain of $4.6bn inclusive of the
recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn
of other reserves recycling losses on the sale of our banking business in
Canada, and an impairment loss of $1.1bn relating to the planned sale of our
business in Argentina was recognised. In the first quarter of 2023, the $2.1bn
reversal of the held for sale classification was recognised which was largely
offset by an impairment loss of $2.0bn recognised in the fourth quarter of
2023 relating to the sale of our retail banking operations in France.
4 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Distribution of results by global business and legal entity
Distribution of results by global business
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Constant currency revenue(1)
Wealth and Personal Banking 7,164 4,253 9,013
Commercial Banking(2) 5,532 5,095 6,709
Global Banking and Markets(2) 4,455 3,666 4,402
Corporate Centre(3) 3,601 (270) 101
Total 20,752 12,744 20,225
Constant currency profit/(loss) before tax
Wealth and Personal Banking 3,181 180 5,324
Commercial Banking(2) 3,280 2,454 4,883
Global Banking and Markets(2) 2,025 955 1,990
Corporate Centre(3) 4,164 (2,726) 734
Total 12,650 863 12,931
1 Constant currency net operating income before change in expected
credit losses and other credit impairment charges including the effects of
foreign currency translation differences, also referred to as constant
currency revenue.
2 In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers' respective
needs, a portfolio of our customers within our markets in Latin America was
transferred from GBM to CMB for reporting purposes. Comparative data have been
re-presented accordingly.
3 With effect from 1 January 2024, following the sale of our retail
banking business in France, we have prospectively reclassified the portfolio
of retained loans, profit participation interest and licence agreement of the
CCF brand from WPB to Corporate Centre.
Distribution of results by legal entity
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Reported profit/(loss) before tax
HSBC UK Bank plc 1,811 1,701 3,131
HSBC Bank plc 697 (1,766) 2,714
The Hongkong and Shanghai Banking Corporation Limited 5,457 1,167 5,849
HSBC Bank Middle East Limited 283 216 377
HSBC North America Holdings Inc. 253 (368) 307
HSBC Bank Canada 186 176 239
Grupo Financiero HSBC, S.A. de C.V. 186 147 215
Other trading entities(1) 390 619 493
- of which: other Middle East entities (including Oman, Türkiye, Egypt and 214 206 139
Saudi Arabia)
- of which: Saudi Awwal Bank 145 147 110
Holding companies, shared service centres and intra-Group eliminations 3,387 (915) (439)
Total 12,650 977 12,886
Constant currency profit/(loss) before tax
HSBC UK Bank plc 1,811 1,739 3,266
HSBC Bank plc 697 (1,786) 2,756
The Hongkong and Shanghai Banking Corporation Limited 5,457 1,155 5,776
HSBC Bank Middle East Limited 283 216 377
HSBC North America Holdings Inc. 253 (368) 307
HSBC Bank Canada 186 178 239
Grupo Financiero HSBC, S.A. de C.V. 186 152 236
Other trading entities(1) 390 488 411
- of which: other Middle East entities (including Oman, Türkiye, Egypt and 214 184 130
Saudi Arabia)
- of which: Saudi Awwal Bank 145 148 110
Holding companies, shared service centres and intra-Group eliminations(2) 3,387 (911) (437)
Total 12,650 863 12,931
1 Other trading entities includes the results of entities located in Oman
(pre merger with Sohar International Bank SAOG in August 2023), Türkiye,
Egypt and Saudi Arabia (including our share of the results of Saudi Awwal
Bank) which do not consolidate into HSBC Bank Middle East Limited.
Supplementary analysis is provided on page 29 for a fuller picture of the
Middle East, North Africa and Türkiye ('MENAT') regional performance.
2 Includes a $4.8bn gain on disposal of our banking business in
Canada, inclusive of a $0.3bn gain on the foreign exchange hedging of the sale
proceeds, the recycling of $0.6bn in foreign currency translation reserve
losses and $0.4bn of other reserves recycling losses. This is partly offset by
a $1.1bn impairment recognised in relation to the planned sale of our business
in Argentina.
Tables showing constant currency profit before tax by global business and
legal entity are presented to support the commentary on constant currency
performance on pages 10 and 12.
The tables on pages 23 to 29 reconcile reported to constant currency results
for each of our global business segments and legal entities.
Income statement commentary
1Q24 compared with 1Q23 - reported results
Movement in reported profit compared with 1Q23
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Mar of which strategic transactions(1)
2024 2023
$m $m $m % $m
Revenue 20,752 20,171 581 3 260
ECL (720) (432) (288) (67)
20
Operating expenses (8,151) (7,586) (565) (7)
57
Share of profit/(loss) from associates and JVs 769 733 36 5
-
Profit before tax 12,650 12,886 (236) (2) 337
Tax expense (1,813) (1,860) 47 3
Profit after tax 10,837 11,026 (189) (2)
1 For details, see 'Impact of strategic transactions' on page 5.
Notable items
Quarter ended
31 Mar 31 Mar
2024 2023
$m $m
Revenue
Disposals, acquisitions and related costs 3,732 3,562
Fair value movements on financial instruments(1) - 15
Currency translation on revenue notable items - 92
Operating expenses
Disposals, acquisitions and related costs (63) (61)
Restructuring and other related costs 13 -
Currency translation on operating expenses notable items - (1)
1 Fair value movements on non-qualifying hedges in HSBC Holdings.
Reported profit
Reported profit before tax of $12.7bn was $0.2bn lower. The decrease included
a $4.8bn gain on the disposal of our banking business in Canada, inclusive of
fair value gains on the hedging of the sale proceeds, partly offset by a
$1.1bn impairment recognised in 1Q24 following the classification of our
business in Argentina as held for sale. The reduction in profit before tax
also reflected the non-recurrence of a $2.1bn reversal in 1Q23 of an
impairment relating to the sale of our retail banking operations in France,
which was subsequently reinstated in 4Q23 prior to completion, and a $1.5bn
gain recognised in 1Q23 on the acquisition of SVB UK. Reported ECL charges
were $0.3bn higher than in 1Q23, with the charge in 1Q24 primarily comprising
stage 3 charges. Reported operating expenses rose by 7% due to higher
technology costs, the impacts of inflation and an increased
performance-related pay accrual relative to 1Q23.
Reported profit after tax of $10.8bn was $0.2bn lower than in 1Q23.
Reported revenue
Reported revenue of $20.8bn was $0.6bn or 3% higher. The increase included a
$4.8bn gain on the disposal of our banking business in Canada, inclusive of
fair value gains on the hedging of the sale proceeds, which was broadly offset
by the period-on-period impacts of a $1.1bn impairment recognised in 1Q24
following the classification of our business in Argentina as held for sale,
the non-recurrence of a $2.1bn reversal in 1Q23 of an impairment relating to
the sale of our retail banking operations in France, and a $1.5bn gain
recognised in 1Q23 on the acquisition of SVB UK, as described above.
The remaining increase in revenue reflected higher wealth revenue in WPB,
notably from a strong performance in Global Private Banking, as well as
revenue growth in Equities and Securities Financing in GBM, as market
sentiment improved. These factors were partly offset by a reduction in revenue
in Global Foreign Exchange in GBM, which compared with a strong 1Q23.
NII also fell compared with 1Q23, reflecting the impact of customers migrating
their deposits to higher interest-bearing term and savings accounts. This was
in part mitigated by higher NII in Markets Treasury due to the impact of the
repositioning actions in relation to our hedging portfolio carried out in
2023. Markets Treasury revenue is allocated to our global businesses.
Reported ECL
Reported ECL of $0.7bn were $0.3bn higher than in 1Q23. In 1Q24, ECL primarily
comprised stage 3 charges in both WPB and our wholesale businesses. ECL in WPB
included a $0.2bn charge in Mexico, which was $0.1bn higher than in 1Q23,
reflecting growth in lending during 2023. The ECL charge in 1Q23 reflected a
favourable change in economic assumptions and lower stage 3 charges.
For further details of the calculation of ECL, including the measurement
uncertainties and significant judgements applied to such calculations, the
impact of the economic scenarios and management judgemental adjustments, see
pages 38 to 44.
Reported operating expenses
Reported operating expenses of $8.2bn were $0.6bn or 7% higher. This mainly
reflected continued investment in technology, the impacts of inflation, as
well as a higher performance-related pay accrual, which reflects a change in
the expected quarterly phasing of the performance-related pay pool relative to
1Q23. In addition, 1Q24 included a rise of $0.1bn due to the additional costs
of IVB, a $0.1bn increase relating to the Bank of England levy and the
incremental cost
of the Federal Deposit Insurance Corporation ('FDIC') special assessment in the US to reflect the FDIC's revised estimated losses. These increases were partly offset by the effects of our continued cost discipline.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of $0.8bn was $36m
or 5% higher. This included a higher share of profit from Saudi Awwal Bank
('SAB'), formerly The Saudi British Bank.
Tax expense
Tax in 1Q24 was a charge of $1.8bn, representing an effective tax rate of
14.3%, which was 0.1 percentage points lower than the effective tax rate of
14.4% for 1Q23. The effective tax rate for 1Q24 was reduced by the non-taxable
gain on the sale of our banking business in Canada and increased by the
non-deductible loss recorded on the planned sale of the Group's business in
Argentina. The effective rate for 1Q24 was below the Pillar 2 Global Minimum
Tax ('GMT') rate of 15% because the gain on the sale of our banking business
in Canada is excluded when calculating the Group's GMT liability. The
effective rate for 1Q23 was reduced by the release of provisions for uncertain
tax positions and by the non-taxable provisional gain on the acquisition of
SVB UK. Excluding these items, the effective tax rates were 19.5% for 1Q24 and
20.9% for 1Q23.
First interim dividend for 2024 and special dividend
On 30 April 2024, the Board announced a first interim dividend for 2024 of
$0.10 per ordinary share. In addition, following the completion of the sale of
our banking business in Canada, the Board has approved a special dividend of
$0.21 per ordinary share, payable in June 2024, alongside the first interim
dividend. For further details, see page 50.
1Q24 compared with 1Q23 - constant currency basis
Movement in profit before tax compared with 1Q23 - on a constant currency
basis
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Mar of which strategic transactions(1)
2024 2023
$m $m $m % $m
Revenue 20,752 20,225 527 3 171
ECL (720) (428) (292) (68)
22
Operating expenses (8,151) (7,568) (583) (8)
59
Share of profit from associates and JVs 769 702 67 10
-
Profit before tax 12,650 12,931 (281) (2) 252
1 For details, see 'Impact of strategic transactions' on page 5.
Profit before tax of $12.7bn was $0.3bn lower than in 1Q23, on a constant
currency basis, as growth in revenue was more than offset by higher operating
expenses and a rise in ECL charges.
Revenue increased by $0.5bn or 3%, and included a $4.8bn gain on the disposal
of our banking business in Canada, inclusive of fair value gains on the
hedging of the sale proceeds. This gain was broadly offset by the period-on
period impacts of a $1.1bn impairment recognised in 1Q24 following the
classification of our business in Argentina as held for sale, the
non-recurrence of a $2.1bn reversal in 1Q23 of an impairment relating to the
sale of our retail banking operations in France, and a $1.6bn gain recognised
on the acquisition of SVB UK. The remaining increase reflected revenue growth
in Wealth in WPB and in Equities and Securities Financing in GBM, partly
offset by lower revenue in Global Foreign Exchange and a reduction in NII.
ECL charges of $0.7bn were $0.3bn higher, with the 1Q24 charge primarily
related to stage 3 charges in both WPB, notably in Mexico, and in our
wholesale businesses.
Operating expenses increased by $0.6bn or 8%, mainly driven by continued
investment in technology, the impacts of inflation and a higher
performance-related pay accrual, as well as a $0.1bn increase from the Bank of
England levy and an incremental cost associated with the FDIC special
assessment in the US. It also included a rise of $0.1bn due to the additional
costs of IVB. The impact of retranslating the prior year results of our
operations in hyperinflationary economies at 1Q24 average rates of foreign
exchange resulted in cost growth of $0.1bn.
1Q24 compared with 4Q23 - reported results
Movement in reported profit compared with 4Q23
Quarter ended
Variance
1Q24 vs. 4Q23
31 Mar 31 Dec of which strategic transactions(1)
2024 2023
$m $m $m % $m
Revenue 20,752 13,021 7,731 59 5,983
ECL (720) (1,031) 311 30 -
Operating expenses (8,151) (8,645) 494 6 136
Share of profit from associates and JVs less impairment 769 (2,368) 3,137 >100 -
Profit before tax 12,650 977 11,673 >100 6,119
Tax expense (1,813) (755) (1,058) >(100)
Profit after tax 10,837 222 10,615 >100
1 For details, see 'Impact of strategic transactions' on page 5.
Notable items
Quarter ended
31 Mar 31 Dec
2024 2023
$m $m
Revenue
Disposals, acquisitions and related costs 3,732 (2,333)
Fair value movements on financial instruments(1) - (1)
Disposal losses on Markets Treasury repositioning - (399)
Currency translation on revenue notable items - (23)
Operating expenses
Disposals, acquisitions and related costs (63) (124)
Restructuring and other related costs 13 59
Currency translation on operating expenses notable items - 1
Share of profit in associates and joint ventures
Impairment of interest in associate - (3,000)
Currency translation on associate notable items - (17)
1 Fair value movements on non-qualifying hedges in HSBC Holdings.
Reported profit
Reported profit before tax of $12.7bn was $11.7bn higher. The increase
reflected higher revenue, which included a $4.8bn gain on the disposal of our
banking business in Canada, inclusive of fair value gains on the hedging of
the sale proceeds, and the impact of the non-recurrence of a $2.0bn impairment
loss in 4Q23 relating to the sale of our retail banking operations in France,
which were partly offset by a $1.1bn impairment recognised in 1Q24 following
the classification of our business in Argentina as held for sale. Reported
share of profit from associates and JVs also increased as 4Q23 included an
impairment charge of $3.0bn relating to our investment in BoCom due to a
reduction to the accounting value-in-use of the investment. In addition,
reported operating expenses and reported ECL decreased.
Reported profit after tax of $10.8bn was $10.6bn higher than in 4Q23.
Reported revenue
Reported revenue of $20.8bn was $7.7bn or 59% higher, which included a gain on
the disposal of our banking business in Canada and the non-recurrence of an
impairment loss in 4Q23 relating to the sale of our retail banking operations
in France, partly offset by an impairment recognised in 1Q24 following the
classification of our business in Argentina as held for sale, as described
above.
The growth also reflected higher NII, mainly due to the impact of
hyperinflation in Argentina. There was a good performance in Wealth in WPB,
including in our insurance business, Global Private Banking and investment
distribution, in part due to a seasonal increase in the first quarter. Revenue
increased in GBM, notably in Equities and Global Debt Markets, as market
sentiment and client activity improved.
Revenue increased in Markets Treasury mainly due to the non-recurrence of
losses on asset disposals of $0.4bn in 4Q23 relating to repositioning and risk
management activities in our hold-to-collect-and-sell portfolio in certain key
legal entities.
Reported ECL
Reported ECL charges of $0.7bn were $0.3bn lower. This included lower stage 3
charges, notably in CMB, reflecting a reduction in charges relating to the
commercial real estate sector in mainland China. ECL in WPB included a $0.2bn
charge in Mexico, with our credit metrics remaining stable.
Reported operating expenses
Reported operating expenses of $8.2bn were $0.5bn or 6% lower, including
favourable foreign currency translation differences between the periods of
$0.1bn. The reduction reflected lower levies, as 4Q23 included the UK bank
levy charge of $0.3bn, which included adjustments relating to prior years, and
a $0.2bn charge in the US relating to the FDIC special assessment. This
compared with a $0.1bn aggregate charge in 1Q24 which related to the Bank of
England levy and an incremental FDIC special assessment charge. There was also
a reduction in the performance-related pay accrual, although technology spend
increased.
The number of employees expressed in full-time equivalent staff ('FTE') at 31
March 2024 was 214,400, a decrease of 6,461 compared with 31 December 2023,
primarily reflecting the completion of the sale of our banking business in
Canada and our retail banking operations in France. The number of contractors
at 31 March 2024 was 4,263, a decrease of 413.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of $0.8bn was
$3.1bn higher, as 4Q23 included an impairment charge of $3.0bn relating to our
investment in BoCom due to a reduction in the accounting value-in-use of the
investment.
1Q24 compared with 4Q23 - constant currency basis
Movement in profit before tax compared with 4Q23 - on a constant currency
basis
Quarter ended
Variance
1Q24 vs. 4Q23
31 Mar 31 Dec of which strategic transactions(1)
2024 2023
$m $m $m % $m
Revenue 20,752 12,744 8,008 63 6,004
ECL (720) (968) 248 26 -
Operating expenses (8,151) (8,530) 379 4 139
Share of profit from associates and JVs less impairment 769 (2,383) 3,152 132 -
Profit before tax 12,650 863 11,787 >200 6,143
1 For details, see 'Impact of strategic transactions' on page 5.
Profit before tax of $12.7bn was $11.8bn higher than in 4Q23 on a constant
currency basis.
Revenue increased by $8.0bn or 63%, and included a $4.8bn gain on the disposal
of our banking business in Canada, inclusive of fair value gains on the
hedging of the sale proceeds, and the non-recurrence in 4Q23 of a $2.1bn
impairment loss relating to the sale of our retail banking operations in
France, partly offset by a $1.1bn impairment recognised in 1Q24 following the
classification of our business in Argentina as held for sale. Revenue also
reflected growth in NII, including the impact of hyperinflation in Argentina,
compounded by the impact of retranslating the results of hyperinflationary
economies at constant currency.
Share of profit from associates and JVs increased by $3.2bn, as 4Q23 included
an impairment charge of $3.0bn relating to our investment in BoCom due to a
reduction in the accounting value-in-use of the investment. Operating expenses
decreased by $0.4bn, primarily as 4Q23 included the UK bank levy charge and
the impact of the FDIC special assessment in the US. There was also a
reduction in the performance-related pay accrual, although technology spend
increased. ECL charges were $0.2bn lower, primarily due to a reduction in
stage 3 charges in CMB, from lower charges in relation to the commercial real
estate sector in mainland China.
Net interest income
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Interest income 28,265 26,714 22,092
Interest expense (19,612) (18,430) (13,133)
Net interest income 8,653 8,284 8,959
Average interest-earning assets 2,140,446 2,164,324 2,152,893
% % %
Gross interest yield(1) 5.31 4.90 4.16
Less: gross interest payable(1) (4.10) (3.83) (2.91)
Net interest spread(2) 1.21 1.07 1.25
Net interest margin(3) 1.63 1.52 1.69
1 Gross interest yield is the average annualised interest rate earned
on average interest-earning assets ('AIEA'). Gross interest payable is the
average annualised interest cost as a percentage of average interest-bearing
liabilities.
2 Net interest spread is the difference between the average annualised
interest rate earned on AIEA, net of amortised premiums and loan fees, and the
average annualised interest rate payable on average interest-bearing funds.
3 Net interest margin is net interest income expressed as an
annualised percentage of AIEA.
Net interest income
NII in 1Q24 was $8.7bn, up $0.4bn compared with 4Q23, and down $0.3bn compared
with 1Q23. The increase of $0.4bn was predominantly due to non-recurrence of
the adverse impact in 4Q23 from devaluation of the Argentinian peso and the
reclassification related to cash flow hedge in the first nine months of 2023.
Excluding the impact of these items, there was a decrease in NII due to higher
interest expense across our liabilities. The decrease of $0.3bn compared with
1Q23 was predominantly driven by our main legal entities in Asia and Europe
where higher interest expense across our liabilities included the impact of
deposit migration, partly offset by HSBC UK where interest income grew by more
than interest expense.
Net interest margin
NIM in 1Q24 of 1.63% was up 11bps compared with 4Q23, and down 6bps compared
with 1Q23. The increase compared with 4Q23 was predominantly due to
non-recurrence of the adverse impact from devaluation of the Argentinian peso
and the reclassification related to cash flow hedge in the first nine months
of 2023. Excluding the impact of these items, there was a decrease in NIM
predominantly driven by our main legal entities in Asia and Europe, partly
offset by an increase in NIM in HSBC UK. The decrease of 6bps compared with
1Q23 was predominantly driven by the impact of higher funding costs across our
liabilities, which included the impact of deposit migration in our main legal
entities in Asia and Europe.
Interest income and interest expense
Interest income in 1Q24 of $28.3bn increased by $1.6bn compared with 4Q23 and
increased by $6.2bn compared with 1Q23. The increase of $1.6bn was
predominantly due to the non-recurrence of the one-off items mentioned above
in the NII section and a rise in yield on AIEA, offset by a decline in AIEA
balances. The increase of $6.2bn compared with 1Q23 was predominantly driven
by the impact of higher market interest rates.
The change in interest income in 1Q24 compared with 1Q23 included an adverse
impact of foreign currency translation differences of $0.2bn. After excluding
foreign currency translation differences, interest income increased by $6.4bn.
Interest expense in 1Q24 of $19.6bn increased by $1.2bn compared with 4Q23 and
increased by $6.5bn compared with 1Q23. The increase of $1.1bn was due to a
rise in yield on average interest-bearing liabilities ('AIBL') along with an
increase in AIBL balances. The increase of $6.5bn compared with 1Q23 was
mainly due to the impact of higher interest rates on our liabilities which
included the impact of deposit migration, notably in Asia and Europe.
The rise in interest expense in 1Q24 compared with 1Q23 included the
favourable effects of foreign currency translation differences of $0.1bn.
Excluding foreign currency translation differences, interest expense increased
by $6.6bn.
Banking net interest income
Banking NII is an alternative performance measure, and is defined as Group NII
after deducting:
- the internal cost to fund trading and fair value net assets for
which associated revenue is reported in 'Net income from financial instruments
held for trading or managed on a fair value basis', also referred to as
'trading and fair value income'. These funding costs reflect proxy overnight
or term interest rates as applied by internal funds transfer pricing;
- the funding costs of foreign exchange swaps in Markets Treasury,
where an offsetting income or loss is recorded in trading and fair value
income. These instruments are used to manage foreign currency deployment and
funding in our entities; and
- third-party NII in our insurance business.
In our segmental disclosures, the funding costs of trading and fair value net
assets are predominantly recorded in GBM in 'net income from financial
instruments held for trading or managed on a fair value basis'. On
consolidation, this funding is eliminated in Corporate Centre, resulting in an
increase in the funding costs reported in NII with an equivalent offsetting
increase in 'net income from financial instruments held for trading or managed
on a fair value basis' in this segment. In the consolidated Group results, the
cost to fund these trading and fair value net assets is reported in NII.
Banking NII was $11.3bn in 1Q24. The funding costs associated with generating
trading and fair value income were $2.7bn, an increase of $1.3bn compared with
1Q23, notably due to higher interest rates. Banking NII also deducts
third-party NII related to our insurance business, which was $0.1bn in 1Q24,
broadly stable compared with 1Q23.
The internally allocated funding costs incurred in 1Q24 to generate trading
and fair value income related to trading, fair value and associated net asset
balances predominantly in GBM. At 31 March 2024, these stood at approximately
$187bn.
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$bn $bn $bn
Net interest income 8.7 8.3 9.0
Banking book funding costs used to generate 'net income from financial 2.7 2.5 1.4
instruments held for trading or managed on a fair value basis'
Third-party net interest income from insurance (0.1) (0.1) (0.1)
Banking net interest income 11.3 10.7 10.3
Summary consolidated balance sheet
At
31 Mar 31 Dec
2024 2023
$m $m
Assets
Cash and balances at central banks 275,943 285,868
Trading assets 321,540 289,159
Financial assets designated and otherwise mandatorily measured at fair value 113,478 110,643
through profit or loss
Derivatives 229,713 229,714
Loans and advances to banks 121,456 112,902
Loans and advances to customers 933,125 938,535
Reverse repurchase agreements - non-trading 250,496 252,217
Financial investments 457,592 442,763
Assets held for sale 5,158 114,134
Other assets 292,016 262,742
Total assets 3,000,517 3,038,677
Liabilities
Deposits by banks 77,982 73,163
Customer accounts 1,570,164 1,611,647
Repurchase agreements - non-trading 226,168 172,100
Trading liabilities 77,263 73,150
Financial liabilities designated at fair value 144,803 141,426
Derivatives 231,218 234,772
Debt securities in issue 101,444 93,917
Insurance contract liabilities 122,496 120,851
Liabilities of disposal groups held for sale 4,588 108,406
Other liabilities 246,014 216,635
Total liabilities 2,802,140 2,846,067
Equity
Total shareholders' equity 191,186 185,329
Non-controlling interests 7,191 7,281
Total equity 198,377 192,610
Total liabilities and equity 3,000,517 3,038,677
Balance sheet commentary
Balance sheet - 31 March 2024 compared with 31 December 2023
At 31 March 2024, our total assets of $3.0tn were $38bn lower on a reported
basis and included unfavourable effects of foreign currency translation
differences of $33bn. On a constant currency basis, total assets were broadly
stable as the reduction in assets held for sale balances following the
completion of the sale of our retail operations in France and the sale of our
banking business in Canada were mostly offset by growth in trading assets, a
seasonal increase in settlement accounts and higher financial investments
balances.
Loans and advances to customers as a percentage of customer accounts were
59.4%, compared with 58.2% at 31 December 2023.
Combined view of customer lending and customer deposits
At
31 Mar 31 Dec
2024 2023
$m $m
Loans and advances to customers 933,125 938,535
Loans and advances to customers of disposal groups reported in 'Assets held 1,855 73,285
for sale'
- banking business in Canada - 56,129
- retail banking operations in France - 16,902
- business in Argentina 1,241 -
- other 613 254
Non-current assets held for sale 189 92
Combined customer lending 935,168 1,011,912
Currency translation - (11,891)
Combined customer lending at constant currency 935,168 1,000,021
Customer accounts 1,570,164 1,611,647
Customer accounts reported in 'Liabilities of disposal groups held for sale' 3,659 85,950
- banking business in Canada - 63,001
- retail banking operations in France - 22,307
- business in Argentina 2,559 -
- other 1,100 643
Combined customer deposits 1,573,823 1,697,597
Currency translation - (19,525)
Combined customer deposits at constant currency 1,573,823 1,678,073
Loans and advances to customers
Loans and advances to customers of $0.9tn were $5bn lower on a reported basis.
This included the adverse effects of foreign currency translation differences
of $10bn, excluding which customer lending balances increased by $5bn. The
increase primarily reflected growth in CMB, notably in HSBC Bank plc, and in
GBM, while mortgage balances also increased in WPB in HSBC UK.
In WPB, customer lending decreased by $7bn. This primarily reflected the $8bn
transfer to Corporate Centre of a portfolio of home and certain other loans
retained following the sale of our retail banking operations in France. This
was partly offset by growth in mortgage lending balances in HSBC UK of $1bn.
In CMB, customer lending increased by $3bn. This was driven by growth in term
lending in HSBC Bank plc and in our legal entities in mainland China,
Singapore, India, Mexico and Australia, as well as an increase in overdraft
balances in HSBC Bank plc. This was partly offset by lower term lending
balances in our legal entity in Hong Kong and also in HSBC UK.
In GBM, lending increased by $1bn, primarily reflecting higher overdraft
balances, notably in HSBC Bank plc, and term lending growth in India and
Singapore.
In Corporate Centre, the increase in customer lending balances of $8bn
reflected the transfer of balances from WPB, as mentioned above.
We continue to expect mid-single digit annual percentage customer lending
growth over the medium to long term. However, we expect demand to remain
subdued in the near term.
Customer accounts
Customer accounts of $1.6tn reduced by $41bn on a reported basis. This
included the adverse effects of foreign currency translation differences of
$17bn, excluding which customer accounts fell by $24bn.
In WPB, customer accounts fell by $7bn, mainly due to decreases in our legal
entity in Hong Kong which primarily reflected outflows into Wealth products
due to an improvement in market sentiment, as well as a reduction in money
market term deposit balances. In addition, we classified to 'assets held for
sale' $1bn of customer accounts associated with the planned disposal of our
business in Argentina. These reductions were partly offset by increases in
term deposit balances in our legal entities in Singapore and mainland China,
and in HSBC Bank plc. In HSBC UK, customer accounts were stable, as seasonal
tax payments in January were offset by balance growth in February and March.
In CMB, the reduction in customer accounts of $14bn reflected net outflows in
our legal entity in Hong Kong as customers deleverage and the impact of
competitive pressures, lower balances in HSBC UK due to seasonality and
market-wide tightening of liquidity, as well as the impact of repricing
actions in our legal entity in the US. In addition, we classified to 'assets
held for sale' $1bn of customer accounts associated with the planned disposal
of our business in Argentina.
In GBM, customer accounts decreased by $3bn, primarily reflecting customer
deleveraging and the impact of competitive pressures in our legal entity in
Hong Kong, competitive pressures in mainland China and the impact of repricing
actions in Singapore and the US.
Financial investments
As part of our interest rate hedging strategy, we hold a portfolio of debt
instruments, reported within financial investments, which are classified as
hold-to-collect-and-sell. As a result, the change in value of these
instruments is recognised through 'debt instruments at fair value through
other comprehensive income' in equity.
At 31 March 2024, we had recognised a pre-tax cumulative unrealised loss
reserve through other comprehensive income of $4.1bn related to these
hold-to-collect-and-sell positions. This reflected a $0.2bn pre-tax loss in
1Q24, inclusive of movements on related fair value hedges. Overall, the Group
is positively exposed to rising interest rates through NII, although there is
an adverse impact on our capital base in the early stages of a rising interest
rate environment due to the fair value of hold-to-collect-and-sell
instruments. Over time, these adverse movements will unwind as the instruments
reach maturity, although not all will necessarily be held to maturity.
We also hold a portfolio of financial investments measured at amortised cost,
which are classified as hold-to-collect. At 31 March 2024, there was a
cumulative unrecognised loss of $2.6bn. Within this, $1.8bn related to debt
instruments held to manage our interest rate exposure, representing a $0.8bn
deterioration during 1Q24.
Risk-weighted assets - 31 March 2024 compared with 31 December 2023
Risk-weighted assets ('RWAs') reduced by $21.5bn during 1Q24. Excluding a
decrease of $8.9bn from foreign currency translation differences, RWAs fell by
$12.6bn, reflecting:
- a $36.2bn decline primarily due to a fall of $32.7bn from the
disposal of our banking business in Canada, including the impact of foreign
exchange hedges on the sale proceeds, and the sale of our retail banking
operations in France.
This was partly offset by:
- a $14.4bn increase mainly driven by higher value at risk, increased
corporate lending, notably in HSBC Bank plc and SAB, and a temporary increase
from the Canada business sale proceeds. Additionally there was an increase due
to higher securities financing exposures in counterparty credit risk;
- a $7.3bn increase mainly from unfavourable credit risk rating
migrations and portfolio mix changes in CMB in Asia; and
- a $1.9bn increase due to methodology changes and credit risk
parameter refinements notably in HSBC Bank plc and the Middle East.
-
Global businesses
Wealth and Personal Banking - constant currency basis
Results - on a constant currency basis
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions(1)
2024 2023 2023 Total
$m $m $m $m % $m
Revenue(1) 7,164 4,253 9,013 (1,849) (21) (2,076)
ECL (301) (289) (243) (58) (24)
-
Operating expenses (3,695) (3,803) (3,463) (232) (7) 145
Share of profit/(loss) from associates and JVs 13 19 17 (4) (24)
-
Profit before tax 3,181 180 5,324 (2,143) (40) (1,931)
1 4Q23 includes an impairment loss of $2.1bn relating to the sale of our
retail banking operations in France. This largely offset the $2.0bn reversal
of the held for sale classification recognised in 1Q23, which was
subsequently reinstated in 4Q23 prior to completion. For further details, see
'Impact of strategic transactions' on page 5.
Management view of revenue
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions
2024 2023 2023
$m $m $m $m % $m
Wealth 2,192 1,691 1,956 236 12 (11)
- investment distribution 720 567 636 84 13 (11)
- Global Private Banking 672 539 578 94 16
-
net interest income 297 281 298 (1) -
-
non-interest income 375 258 280 95 34
-
- life insurance 466 255 437 29 7
-
- asset management 334 330 305 29 10
-
Personal Banking 4,868 4,971 4,986 (118) (2) (44)
- net interest income 4,549 4,613 4,678 (129) (3) (28)
- non-interest income 319 358 308 11 4 (15)
Other(1) 104 (2,409) 2,071 (1,967) (95) (2,021)
- of which: impairment (loss)/reversal relating to the planned sale of our 53 (2,050) 2,044 (1,991) (97) (1,991)
retail banking operations in France
Net operating income(2) 7,164 4,253 9,013 (1,849) (21) (2,076)
RoTE (annualised)(3) (%) 29.4 28.5 50.2
1 'Other' includes Markets Treasury, HSBC Holdings interest expense
and hyperinflation. It also includes the distribution and manufacturing (where
applicable) of retail and credit protection insurance, disposal gains and
other non-product-specific income.
2 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
3 RoTE (annualised) in 1Q23 included a 21.3 percentage point
favourable impact from the reversal of the impairment losses relating to the
planned sale of our retail banking operations in France. RoTE for the 31
December 2023 period represents the full-year RoTE for 2023.
Notable items
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue
Disposals, acquisitions and related costs 53 (2,030) 2,021
Disposal losses on Markets Treasury repositioning - (138) -
Currency translation on revenue notable items - (20) 23
Operating expenses
Disposals, acquisitions and related costs (1) (27) (21)
Restructuring and other related costs 2 4 -
Currency translation on operating expenses notable items - - -
1Q24 compared with 1Q23
Profit before tax of $3.2bn was $2.1bn lower than in 1Q23 on a constant
currency basis. The reduction was driven by the non-recurrence of a $2.0bn
reversal in 1Q23 of an impairment relating to the planned sale of our retail
banking operations in France, although it was subsequently reinstated in 4Q23
and the sale completed on 1 January 2024. NII was stable compared with 1Q23,
while fee income increased by 10%. Operating expenses grew by $0.2bn and there
was an increase in ECL of $0.1bn.
Revenue of $7.2bn was $1.8bn or 21% lower on a constant currency basis. This
included the non-recurrence of a $2.0bn reversal in 1Q23 mentioned above,
included within 'Other'. Wealth performed strongly, up $0.2bn, mainly due to a
rise of $0.1bn in Global Private Banking non-net interest income and $0.1bn in
investment distribution, as well as growth in asset management and life
insurance. This was partly offset by a reduction in Personal Banking NII of
$0.1bn, primarily from margin compression, although there was balance sheet
growth across a number of our entities.
In Wealth, revenue of $2.2bn was up $0.2bn or 12%.
- Global Private Banking revenue was $0.1bn or 16% higher due to
strong performance in brokerage and trading in Asia.
- Investment distribution revenue grew by $0.1bn or 13% driven by
mutual funds, structured products and bonds.
- Asset management revenue was $29m or 10% higher, driven by strong
flows in 2023 and positive market movements, resulting in an 11% growth in
assets under management.
- Life insurance revenue rose by $29m or 7%. The increase was mainly
driven by an increase in contractual service margin ('CSM') earnings, largely
due to growth in the CSM balance, reflecting increased sales during 2023 and
into 1Q24. New business CSM of $0.8bn was 87% higher than in 1Q23, mainly in
Hong Kong.
In Personal Banking, revenue of $4.9bn was down $0.1bn or 2%.
- NII was $0.1bn or 3% lower due to narrower margins and the disposal
of our retail banking operations in France. Compared with 1Q23, lending
balances fell due to the sale of our retail banking operations in France,
partly offset by growth in HSBC UK and our main legal entities in Asia, Mexico
and the US. Unsecured lending balances increased by $1bn, notably in the UK,
Mexico, Hong Kong, Taiwan and India, partly offset by a reduction due to the
sale of our retail banking operations in France and the divestment of our
business in Oman. Deposit balances fell by $32bn, mainly due to the impact of
the retail banking operations sale in France. Declines in HSBC UK and our main
entity in Hong Kong were partly offset by growth in our main legal entities in
mainland China, Singapore, Australia, Taiwan and the Channel Islands.
Other revenue decreased by $2.0bn, mainly due to the non-recurrence of a
$2.0bn reversal in 1Q23 mentioned above. The reduction in revenue also
included a $0.1bn adverse impact of hyperinflation.
ECL were $0.3bn, an increase of $0.1bn compared with 1Q23 on a constant
currency basis. ECL in 1Q24 included a $0.2bn charge in Mexico, which was $49m
higher than in 1Q23, reflecting growth in lending during 2023. Our credit
metrics remained stable, despite continuing inflationary pressures.
Operating expenses of $3.7bn were 7% higher on a constant currency basis,
reflecting continued investments, notably in wealth in Asia, higher technology
spend, a higher performance-related pay accrual relative to 1Q23, and the
impact of inflation. These were partly offset by ongoing cost discipline.
Commercial Banking - constant currency basis
Results - on a constant currency basis
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions(1)
2024 2023 2023 Total
$m $m $m $m % $m
Revenue 5,532 5,095 6,709 (1,177) (18) (1,405)
ECL (380) (665) (149) (231) >(100)
22
Operating expenses (1,872) (1,976) (1,677) (195) (12) (68)
Share of profit/(loss) from associates and JVs - - - - -
-
Profit before tax 3,280 2,454 4,883 (1,603) (33) (1,451)
1 1Q23 includes a gain of $1.6bn recognised in respect of the acquisition
of SVB UK. For further details, see 'Impact of strategic transactions' on page
5.
Management view of revenue
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions
2024 2023 2023
$m $m $m $m % $m
Global Trade and Receivables Finance 497 477 499 (2) -
1
Credit and Lending 1,382 1,248 1,352 30 2
75
Global Payments Solutions 3,077 3,171 2,885 192 7
44
GBM products, Insurance and Investments, and Other(1) 576 199 1,973 (1,397) (71) (1,525)
- of which: share of revenue from Markets and Securities Services and 328 321 338 (10) (3)
Banking products 7
- of which: gain on the acquisition of Silicon Valley Bank UK Limited - (2) 1,577 (1,577) (100) (1,577)
Net operating income(2) 5,532 5,095 6,709 (1,177) (18) (1,405)
- of which: transaction banking(3) 3,808 3,899 3,628 180 5
RoTE (annualised)(4) (%) 21.8 23.4 36.1
1 Includes a gain on the acquisition of SVB UK and CMB's share of
revenue from the sale of Markets and Securities Services and Banking products
to CMB customers. GBM's share of revenue from the sale of these products to
CMB customers is included within the corresponding lines of the GBM management
view of revenue. Also includes allocated revenue from Markets Treasury, HSBC
Holdings interest expense and hyperinflation.
2 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
3 Transaction banking comprises Global Trade and Receivables Finance,
Global Payments Solutions and CMB's share of Global Foreign Exchange (shown
within 'share of revenue from Markets and Securities Services and Banking
products').
4 RoTE (annualised) in 1Q23 included a 13.3 percentage point favourable
impact of the provisional gain on the acquisition of Silicon Valley Bank UK
Limited. RoTE for the 31 December 2023 period represents the full-year RoTE
for 2023.
Notable items
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue
Disposals, acquisitions and related costs - (2) 1,511
Disposal losses on Markets Treasury repositioning - (126) -
Currency translation on revenue notable items - - 66
Operating expenses
Disposals, acquisitions and related costs (1) (25) -
Restructuring and other related costs 1 2 -
Currency translation on operating expenses notable items - - -
1Q24 compared with 1Q23
Profit before tax of $3.3bn was $1.6bn lower than in 1Q23 on a constant
currency basis. This was largely due to the non-recurrence of a $1.6bn gain
recognised in 1Q23 on the acquisition of SVB UK, partly offset by incremental
IVB revenue following the acquisition and integration of SVB UK.
Revenue of $5.5bn was $1.2bn or 18% lower on a constant currency basis.
- In GPS, revenue increased by $0.2bn, with growth in all main legal
entities, including incremental IVB revenue. This was driven by an increase in
margins reflecting interest rate rises and repricing actions. Average balances
were marginally lower reflecting global tightening of liquidity, notably in
our legal entities in the UK and Asia. There was also a 4% increase in fee
income as business initiatives drove growth in transaction banking including
higher volumes and international payments, notably in our main legal entities
in the US and Asia.
- In Global Trade and Receivables Finance, revenue was stable
reflecting improved margins which were offset by the impacts from the softer
trade cycle in Asia.
- In Credit and Lending, revenue increased by $30m or 2%, primarily
due to incremental IVB revenue. This was partly offset by margin compression
and lower balances, notably in 2023, reflecting softer demand from customers,
notably in our legal entity in Asia.
- In GBM products, Insurance and Investments, and Other, revenue
decreased by $1.4bn, largely due to the non-recurrence of a $1.6bn gain
recognised in 1Q23 on the acquisition of SVB UK and adverse impacts of
hyperinflationary accounting of $0.2bn. These adverse impacts were partly
offset by higher revenues from Markets Treasury and interest income on own
capital.
ECL charges of $0.4bn were $0.2bn higher than in 1Q23 on a constant currency
basis given benign credit conditions in 1Q23, including a net release of stage
1 and stage 2 allowances reflecting a favourable shift in economic
assumptions, notably in our main legal entity in Asia.
Operating expenses of $1.9bn were $0.2bn or 12% higher than in 1Q23, on a
constant currency basis. The increase reflected incremental costs in IVB of
$0.1bn following the acquisition and integration of SVB UK, a higher
performance-related pay accrual relative to 1Q23, ongoing investment in
technology and inflationary impacts. These increases were in part mitigated by
the impact of continued strategic cost-saving initiatives.
Global Banking and Markets - constant currency basis
Results - on a constant currency basis
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions(1)
2024 2023 2023 Total
$m $m $m $m % $m
Revenue 4,455 3,666 4,402 53 1
-
ECL (33) (16) (31) (2) (6)
-
Operating expenses (2,397) (2,695) (2,381) (16) (1)
-
Share of profit/(loss) from associates and JVs - - - - -
-
Profit before tax 2,025 955 1,990 35 2
-
1 For further details, see 'Impact of strategic transactions' on page 5.
There was no impact resulting from strategic transactions for GBM in 1Q24.
Management view of revenue
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions(7)
2024 2023 2023
$m $m $m $m % $m
Markets and Securities Services 2,454 2,062 2,518 (64) (3)
-
- Securities Services 564 565 558 6 1
-
- Global Debt Markets 324 77 354 (30) (8)
-
- Global Foreign Exchange 971 963 1,201 (230) (19)
-
- Equities 257 149 144 113 78
-
- Securities Financing 367 304 261 106 41
-
- Credit and funding valuation adjustments (29) 4 - (29) n/a
-
Banking 2,191 2,110 2,127 64 3
-
- Global Trade and Receivables Finance 176 163 177 (1) (1)
-
- Global Payments Solutions 1,162 1,157 1,073 89 8
-
- Credit and Lending 453 479 499 (46) (9)
-
- Investment Banking(1) 279 223 310 (31) (10)
-
- Other(2) 121 88 68 53 78
-
GBM Other (190) (506) (243) 53 22
-
- Principal Investments (5) (18) (5) - -
-
- Other(3) (185) (488) (238) 53 22
-
Net operating income(4) 4,455 3,666 4,402 53 1
-
- of which: transaction banking(5) 2,873 2,848 3,009 (136) (5)
RoTE (annualised) (%)(6) 15.1 11.4 15.5
1 From 1 January 2024, we renamed 'Capital Markets and Advisory' as
'Investment Banking' to better reflect our purpose and offering.
2 Includes portfolio management, earnings on capital and other capital
allocations on all Banking products.
3 Includes notional tax credits and Markets Treasury, HSBC Holdings
interest expense and hyperinflation.
4 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
5 Transaction banking comprises Securities Services, Global Foreign
Exchange (net of revenue shared with CMB), Global Trade and Receivables
Finance and GPS.
6 RoTE for the 31 December 2023 period represents the full-year RoTE for
2023.
7 There was no impact resulting from strategic transactions for GBM in
1Q24.
Notable items
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue
Disposal losses on Markets Treasury repositioning - (135) -
Currency translation on revenue notable items - - -
Operating expenses
Disposals, acquisitions and related costs - - 3
Restructuring and other related costs 2 17 -
Currency translation on operating expenses notable items - 1 -
1Q24 compared with 1Q23
Profit before tax of $2.0bn was $35m or 2% higher than in 1Q23 on a constant
currency basis. Revenue increased marginally by 1% while operating expenses
and ECL remained broadly stable compared with prior year.
In Markets and Securities Services ('MSS'), revenue was $0.1bn or 3% lower.
- Global Debt Markets revenue fell by $30m or 8%. Lower secondary
client activity reflected market outlook uncertainty, partly offset by
increased primary market activity at the beginning of the quarter.
- Global Foreign Exchange revenue fell by $0.2bn or 19% compared with
a strong 1Q23, as the uncertain outlook affected client flows and risk
management activity.
- Equities revenue increased by $0.1bn or 78% reflecting strong client
activity as market sentiment improved. In contrast, 1Q23 had considerably
weaker performance as increasing interest rates reduced clients' risk
appetite.
- Securities Financing revenue increased by $0.1bn or 41%, driven by
new clients on-boarding resulting in increased flows, including in prime
finance.
In Banking, revenue increased by $0.1bn or 3%.
- GPS revenue increased by $0.1bn or 8%, driven by margin growth from
rising global interest rates and business pricing actions.
- Investment Banking revenue, which includes Issuer Services,
decreased by $31m or 10%, notably as the prior year included a small number of
large transactions.
- Credit and Lending revenue decreased by $46m or 9% as the business
continued to experience weaker client demand.
GBM Other revenue increased by $53m or 22% compared with prior year.
ECL of $33m in 1Q24 were broadly stable compared with 1Q23 on a constant
currency basis.
Operating expenses of $2.4bn increased marginally by $16m or 1% on a constant
currency basis due to the impact of inflation and a higher performance-related
pay accrual relative to 1Q23, which were in part mitigated by business
actions.
Corporate Centre - constant currency basis
Results - on a constant currency basis
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions(1)
2024 2023 2023 Total
$m $m $m $m % $m
Revenue 3,601 (270) 101 3,500 >100 3,652
ECL (6) 2 (5) (1) (20)
-
Operating expenses (187) (56) (47) (140) >(100) (18)
Share of profit/(loss) from associates and JVs less impairment 756 (2,402) 685 71 10
-
Profit before tax 4,164 (2,726) 734 3,430 >100 3,634
1 For further details, see 'Impact of strategic transactions' on page 5.
Management view of revenue
Quarter ended
Variance
1Q24 vs. 1Q23
31 Mar 31 Dec 31 Mar of which strategic transactions
2024 2023 2023
$m $m $m $m % $m
Central Treasury(1) 9 1 101 (92) -
-
Legacy portfolios 10 6 (2) 12 >100
-
Other(2,3) 3,582 (277) 2 3,580 >100 3,652
- of which: gain on the sale of our banking business in Canada and 4,789 (245) (57) 4,846 >100 4,846
associated hedges(4)
- of which: impairment loss relating to the planned sale of our business in (1,137) - - (1,137) >100 (1,137)
Argentina
Net operating income(5) 3,601 (270) 101 3,500 >100 3,652
RoTE (annualised) (%)(6) 36.6 (1.0) 11.1
1 Central Treasury comprises valuation differences on issued long-term
debt and associated swaps and fair value movements on financial instruments.
2 Other comprises gains and losses on certain planned disposals, funding
charges on property and technology assets, revaluation gains and losses on
investment properties and property disposals, as well as consolidation
adjustments and other revenue items not allocated to global businesses.
3 Revenue from Markets Treasury, HSBC Holdings net interest expense
and hyperinflation are allocated out to the global businesses, to align them
better with their revenue and expense. The total Markets Treasury revenue
component of this allocation for 1Q24 was $484m (1Q23: $214m; 4Q23: $(142)m).
4 Includes fair value gains/(losses) on the foreign exchange hedging of
the proceeds of the sale and the recycling of reserves.
5 'Net operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also referred to
as 'revenue').
6 RoTE for the 31 December 2023 period represents the full-year RoTE for
2023.
Notable items
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue
Disposals, acquisitions and related costs(1) 3,679 (301) 30
Fair value movements on financial instruments(2) - (1) 15
Currency translation on revenue notable items - (3) 3
Operating expenses
Disposals, acquisitions and related costs (61) (72) (43)
Restructuring and other related costs 8 36 -
Currency translation on operating expenses notable items - - (1)
Share of profit in associates and joint ventures less impairment
Impairment of interest in associate - (3,000) -
Currency translation on associate notable items - (17) -
1 Includes fair value movements on the foreign exchange hedging of the
proceeds of the sale of our banking business in Canada and recycling of
reserves.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
1Q24 compared with 1Q23
Profit before tax of $4.2bn was $3.4bn higher than in 1Q23 on a constant
currency basis. This increase included a $4.8bn gain in 1Q24 following the
sale of our banking business in Canada, inclusive of fair value gains on the
hedging of the sale proceeds and recycling of related reserves. This was
partly offset by a $1.1bn impairment recognised following the classification
of our business in Argentina as held for sale.
Revenue of $3.6bn was $3.5bn higher on a constant currency basis, which
included a $4.8bn gain on the sale of our banking business in Canada, as
mentioned above. These factors were partly offset by a $1.1bn impairment
recognised following the classification of our business in Argentina as held
for sale, adverse fair value movements on financial instruments in Central
Treasury and structural hedges, and the non-recurrence of a 1Q23 favourable
impact following the reversal of an impairment related to the sale of our
France retail banking operations. In addition, 1Q24 included an impairment of
$0.1bn following the classification of our operations in Armenia to held for
sale.
Operating expenses increased by $0.1bn on a constant currency basis, including
a charge in the US related to the incremental cost of the FDIC special
assessment, as well as an increase associated with disposals, acquisitions and
related costs.
Share of profit from associates and joint ventures of $0.8bn increased by
$0.1bn or 10% which included an increase in share of profit from SAB.
Supplementary financial information
Reported and constant currency results
Reported and constant currency results(1)
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue(2)
Reported 20,752 13,021 20,171
Currency translation (277) 54
Constant currency 20,752 12,744 20,225
Change in expected credit losses and other credit impairment charges
Reported (720) (1,031) (432)
Currency translation 63 4
Constant currency (720) (968) (428)
Operating expenses
Reported (8,151) (8,645) (7,586)
Currency translation 115 18
Constant currency (8,151) (8,530) (7,568)
Share of profit in associates and joint ventures
Reported 769 (2,368) 733
Currency translation (15) (31)
Constant currency 769 (2,383) 702
Profit before tax
Reported 12,650 977 12,886
Currency translation (114) 45
Constant currency 12,650 863 12,931
Profit after tax
Reported 10,837 222 11,026
Currency translation (51) 48
Constant currency 10,837 171 11,074
Loans and advances to customers (net)
Reported 933,125 938,535 963,394
Currency translation (10,055) (85)
Constant currency 933,125 928,480 963,309
Customer accounts
Reported 1,570,164 1,611,647 1,604,099
Currency translation (17,361) (1,379)
Constant currency 1,570,164 1,594,286 1,602,720
1 In the current period, constant currency results are equal to
reported as there is no currency translation.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue
Disposals, acquisitions and related costs(1,2,3) 3,732 (2,333) 3,562
Fair value movements on financial instruments(4) - (1) 15
Disposal losses on Markets Treasury repositioning - (399) -
Operating expenses
Disposals, acquisitions and related costs (63) (124) (61)
Restructuring and other related costs(5) 13 59 -
Impairment of interest in associate(6) - (3,000) -
Tax
Tax (charge)/credit on notable items 8 581 (492)
Uncertain tax positions - - 427
1 Includes the impacts of the sale of our retail banking operations in
France.
2 Includes a gain of $1.5bn recognised in respect of the acquisition of
SVB UK.
3 Includes a $4.8bn gain on disposal of our banking business in Canada,
inclusive of a $0.3bn gain on the foreign exchange hedging of the sale
proceeds, the recycling of $0.6bn in foreign currency translation reserve
losses and $0.4bn of other reserves recycling losses. This is partly offset by
a $1.1bn impairment recognised in relation to the planned sale of our business
in Argentina.
4 Fair value movements on non-qualifying hedges in HSBC Holdings.
5 Relates to reversals of restructuring provisions recognised during 2022.
6 Relates to an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom.
Global businesses
Supplementary analysis of constant currency results and notable items by
global business
Constant currency results
Quarter ended 31 Mar 2024
Wealth and Commercial Global Corporate Total
Personal
Banking Banking Banking and Centre(1)
Markets
$m $m $m $m $m
Revenue(2) 7,164 5,532 4,455 3,601 20,752
ECL (301) (380) (33) (6) (720)
Operating expenses (3,695) (1,872) (2,397) (187) (8,151)
Share of profit in associates and joint ventures 13 - - 756 769
Profit before tax 3,181 3,280 2,025 4,164 12,650
Loans and advances to customers (net) 443,516 308,596 173,186 7,827 933,125
Customer accounts 790,715 456,286 322,773 390 1,570,164
1 With effect from 1 January 2024, following the sale of our retail
banking business in France, we have prospectively reclassified the portfolio
of retained loans, profit participation interest and licence agreement of the
CCF brand from WPB to Corporate Centre.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items
Quarter ended 31 Mar 2024
Wealth and Personal Banking Commercial Banking Global Corporate Centre Total
Banking and Markets
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) 53 - - 3,679 3,732
Operating expenses
Disposals, acquisitions and related costs (1) (1) - (61) (63)
Restructuring and other related costs(2) 2 1 2 8 13
1 Includes a $4.8bn gain on disposal of our banking business in Canada,
inclusive of a $0.3bn gain on the foreign exchange hedging of the sale
proceeds, the recycling of $0.6bn in foreign currency translation reserve
losses and $0.4bn of other reserves recycling losses. This is partly offset by
a $1.1bn impairment recognised in relation to the planned sale of our business
in Argentina.
2 Relates to reversals of restructuring provisions recognised during 2022.
Constant currency results (continued)
Quarter ended 31 Mar 2023
Wealth and Personal Banking Commercial Global Banking and Markets(1) Corporate Total
Centre
Banking(1)
$m $m $m $m $m
Revenue(2)
Reported 8,983 6,675 4,440 73 20,171
Currency translation 30 34 (38) 28 54
Constant currency 9,013 6,709 4,402 101 20,225
ECL
Reported (246) (151) (32) (3) (432)
Currency translation 3 2 1 (2) 4
Constant currency (243) (149) (31) (5) (428)
Operating expenses
Reported (3,483) (1,712) (2,368) (23) (7,586)
Currency translation 20 35 (13) (24) 18
Constant currency (3,463) (1,677) (2,381) (47) (7,568)
Share of profit in associates and joint ventures
Reported 17 - - 716 733
Currency translation - - - (31) (31)
Constant currency 17 - - 685 702
Profit before tax
Reported 5,271 4,812 2,040 763 12,886
Currency translation 53 71 (50) (29) 45
Constant currency 5,324 4,883 1,990 734 12,931
Loans and advances to customers (net)
Reported 455,266 323,268 184,492 368 963,394
Currency translation 2,417 (1,149) (1,350) (3) (85)
Constant currency 457,683 322,119 183,142 365 963,309
Customer accounts
Reported 809,830 471,187 322,443 639 1,604,099
Currency translation 1,232 (590) (2,025) 4 (1,379)
Constant currency 811,062 470,597 320,418 643 1,602,720
1 In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers' respective
needs, a portfolio of our customers within our markets in Latin America was
transferred from GBM to CMB for reporting purposes.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 31 Mar 2023
Wealth and Personal Banking Commercial Banking Global Banking and Markets Corporate Total
Centre
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1,2) 2,021 1,511 - 30 3,562
Fair value movements on financial instruments(3) - - - 15 15
Operating expenses
Disposals, acquisitions and related costs (21) - 3 (43) (61)
1 Includes the reversal of a $2.1bn impairment loss relating to the
sale of our retail banking operations in France, recognised in 3Q22, which was
no longer classified as held for sale in 1Q23.
2 Includes a gain of $1.5bn recognised in respect of the acquisition
of SVB UK.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
Constant currency results (continued)
Quarter ended 31 Dec 2023
Wealth and Commercial Global Corporate Total
Personal
Centre
Banking Banking(1) Banking and
Markets(1)
$m $m $m $m $m
Revenue(2)
Reported 4,356 5,227 3,727 (289) 13,021
Currency translation (103) (132) (61) 19 (277)
Constant currency 4,253 5,095 3,666 (270) 12,744
ECL
Reported (320) (690) (24) 3 (1,031)
Currency translation 31 25 8 (1) 63
Constant currency (289) (665) (16) 2 (968)
Operating expenses
Reported (3,880) (2,044) (2,683) (38) (8,645)
Currency translation 77 68 (12) (18) 115
Constant currency (3,803) (1,976) (2,695) (56) (8,530)
Share of profit in associates and joint ventures
Reported 19 - - (2,387) (2,368)
Currency translation - - - (15) (15)
Constant currency 19 - - (2,402) (2,383)
Profit/(loss) before tax
Reported 175 2,493 1,020 (2,711) 977
Currency translation 5 (39) (65) (15) (114)
Constant currency 180 2,454 955 (2,726) 863
Loans and advances to customers (net)
Reported 454,878 309,422 173,966 269 938,535
Currency translation (4,724) (3,351) (1,976) (4) (10,055)
Constant currency 450,154 306,071 171,990 265 928,480
Customer accounts
Reported 804,863 475,666 330,522 596 1,611,647
Currency translation (7,233) (4,931) (5,191) (6) (17,361)
Constant currency 797,630 470,735 325,331 590 1,594,286
1 In the first quarter of 2023, following an internal review to assess
which global businesses were best suited to serve our customers' respective
needs, a portfolio of our customers within our markets in Latin America was
transferred from GBM to CMB for reporting purposes.
2 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 31 Dec 2023
Wealth and Personal Commercial Banking Global Corporate Total
Banking Banking and Markets Centre
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1,2) (2,030) (2) - (301) (2,333)
Fair value movements on financial instruments(3) - - - (1) (1)
Disposal losses on Markets Treasury repositioning (138) (126) (135) - (399)
Operating expenses
Disposals, acquisitions and related costs (27) (25) - (72) (124)
Restructuring and other related costs(4) 4 2 17 36 59
Impairment of interest in associate(5) - - - (3,000) (3,000)
1 Includes the impact of the sale of our retail banking operations in
France.
2 Includes fair value movements on the foreign exchange hedging of the
proceeds from the sale of our banking business in Canada.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
4 Amounts relate to reversals of restructuring provisions recognised
during 2022.
5 Relates to an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom.
Reconciliation of reported risk-weighted assets to constant currency
risk-weighted assets
The following table reconciles reported and constant currency RWAs.
Reconciliation of reported risk-weighted assets to constant currency
risk-weighted assets
At 31 Mar 2024
Wealth and Personal Banking Commercial Global Corporate Total
Centre
Banking Banking and Markets
$bn $bn $bn $bn $bn
Risk-weighted assets
Reported 182.2 337.8 222.7 89.9 832.6
Constant currency 182.2 337.8 222.7 89.9 832.6
At 31 Dec 2023
Risk-weighted assets
Reported 192.9 354.5 218.5 88.2 854.1
Currency translation (10.7)
(2.5) (4.7) (2.9) (0.6)
Constant currency 190.4 349.8 215.6 87.6 843.4
At 31 Mar 2023
Risk-weighted assets
Reported 181.4 353.1 225.2 94.7 854.4
Currency translation (10.2)
(1.9) (4.5) (2.7) (1.1)
Constant currency 179.5 348.6 222.5 93.6 844.2
Legal entities
Supplementary analysis of constant currency results and notable items by legal
entity
Legal entity results(1)
Quarter ended 31 Mar 2024
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo- HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(2) Holding Total
ration Limited Financiero
HSBC, S.A. companies,
de C.V.
shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(3) 3,091 2,307 8,469 620 1,086 462 888 790 3,039 20,752
ECL (52) (66) (271) (55) 7 (40) (176) (68) 1 (720)
Operating expenses (1,228) (1,554) (3,352) (282) (840) (236) (530) (477) 348 (8,151)
Share of profit/(loss) in associates and joint ventures - 10 611 - - - 4 145 (1) 769
Profit before tax 1,811 697 5,457 283 253 186 186 390 3,387 12,650
Loans and advances to customers (net) 268,477 107,995 449,043 20,732 54,941 - 27,581 4,356 - 933,125
Customer accounts 333,416 290,613 776,288 33,397 95,407 - 31,244 9,726 73 1,570,164
1 In the current period, constant currency results are equal to
reported, as there is no currency translation.
2 Other trading entities includes the results of entities located in
Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi
Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. These
entities had an aggregated impact on Group reported profit before tax of
$359m. Supplementary analysis is provided on page 29 to give a fuller picture
of the MENAT regional performance.
3 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items
Quarter ended 31 Mar 2024
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo- HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
ration Limited Financiero
HSBC, S.A. companies,
de C.V.
shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1) - (16) - - - - - - 3,748 3,732
Operating expenses
Disposals, acquisitions and related costs - (5) - - (7) (36) - - (15) (63)
Restructuring and other related costs(2) 3 9 - - - - - - 1 13
1 Includes a $4.8bn gain on disposal of our banking business in Canada,
inclusive of a $0.3bn gain on the foreign exchange hedging of the sale
proceeds, the recycling of $0.6bn in foreign currency translation reserve
losses and $0.4bn of other reserves recycling losses. This is partly offset by
a $1.1bn impairment recognised in relation to the planned sale of our business
in Argentina.
2 Relates to reversals of restructuring provisions recognised during 2022.
Legal entity results (continued)
Quarter ended 31 Mar 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(1) Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(2)
Reported 4,275 4,432 8,334 624 1,083 500 748 932 (757) 20,171
Currency translation 184 85 (75) - - 1 73 (234) 20 54
Constant currency 4,459 4,517 8,259 624 1,083 501 821 698 (737) 20,225
ECL
Reported (161) (18) (67) 7 (29) (1) (128) (35) - (432)
Currency translation (7) (2) 3 - - - (13) 21 2 4
Constant currency (168) (20) (64) 7 (29) (1) (141) (14) 2 (428)
Operating expenses
Reported (983) (1,657) (3,084) (254) (747) (260) (407) (512) 318 (7,586)
Currency translation (42) (41) 31 - - (1) (40) 130 (19) 18
Constant currency (1,025) (1,698) (3,053) (254) (747) (261) (447) (382) 299 (7,568)
Share of profit/(loss) in associates and joint ventures
Reported - (43) 666 - - - 2 108 - 733
Currency translation - - (32) - - - 1 1 (1) (31)
Constant currency - (43) 634 - - - 3 109 (1) 702
Profit before tax
Reported 3,131 2,714 5,849 377 307 239 215 493 (439) 12,886
Currency translation 135 42 (73) - - - 21 (82) 2 45
Constant currency 3,266 2,756 5,776 377 307 239 236 411 (437) 12,931
Loans and advances to customers (net)
Reported 258,758 117,858 468,924 18,829 54,374 - 22,728 21,923 - 963,394
Currency translation 5,511 320 (5,392) 16 - - 1,943 (2,482) (1) (85)
Constant currency 264,269 118,178 463,532 18,845 54,374 - 24,671 19,441 (1) 963,309
Customer accounts
Reported 343,803 281,557 778,853 30,994 101,537 - 27,153 40,041 161 1,604,099
Currency translation 7,322 2,480 (6,633) 28 - - 2,321 (6,897) - (1,379)
Constant currency 351,125 284,037 772,220 31,022 101,537 - 29,474 33,144 161 1,602,720
1 Other trading entities includes the results of entities located in
Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of
Saudi Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited.
These entities had an aggregated impact on Group reported profit before tax of
$249m and constant currency profit before tax of $240m. Supplementary analysis
is provided on page 29 to give a fuller picture of the MENAT regional
performance.
2 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 31 Mar 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1,2,3) 1,511 2,107 - - - - - - (56) 3,562
Fair value movements on financial instruments(4) - - - - - - - - 15 15
Operating expenses
Disposals, acquisitions and related costs (8) (25) - - (1) (27) - - - (61)
1 Includes the reversal of a $2.1bn impairment loss recognised in 3Q22
relating to the sale of our retail banking operations in France.
2 Includes a gain of $1.5bn recognised in respect of the acquisition of
SVB UK.
3 Includes fair value movements on the foreign exchange hedging of the
proceeds from the sale of our banking business in Canada.
4 Fair value movements on non-qualifying hedges in HSBC Holdings.
Legal entity results (continued)
Quarter ended 31 Dec 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities(1) Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue(2)
Reported 3,008 143 7,646 589 727 465 886 1,441 (1,884) 13,021
Currency translation 67 12 7 - - 6 30 (418) 19 (277)
Constant currency 3,075 155 7,653 589 727 471 916 1,023 (1,865) 12,744
ECL
Reported (47) (59) (437) (84) (47) (15) (274) (172) 104 (1,031)
Currency translation (1) - - - - (1) (10) 73 2 63
Constant currency (48) (59) (437) (84) (47) (16) (284) (99) 106 (968)
Operating expenses
Reported (1,260) (1,850) (3,520) (289) (1,048) (274) (470) (799) 865 (8,645)
Currency translation (28) (32) (5) - - (3) (15) 214 (16) 115
Constant currency (1,288) (1,882) (3,525) (289) (1,048) (277) (485) (585) 849 (8,530)
Share of profit/(loss) in associates and joint ventures
Reported - - (2,522) - - - 5 149 - (2,368)
Currency translation - - (14) - - - - - (1) (15)
Constant currency - - (2,536) - - - 5 149 (1) (2,383)
Profit/(loss) before tax
Reported 1,701 (1,766) 1,167 216 (368) 176 147 619 (915) 977
Currency translation 38 (20) (12) - - 2 5 (131) 4 (114)
Constant currency 1,739 (1,786) 1,155 216 (368) 178 152 488 (911) 863
Loans and advances to customers (net)
Reported 270,208 95,750 455,315 20,072 54,829 - 26,410 15,951 - 938,535
Currency translation (2,457) (1,755) (5,114) - - - 490 (1,218) (1) (10,055)
Constant currency 267,751 93,995 450,201 20,072 54,829 - 26,900 14,733 (1) 928,480
Customer accounts
Reported 339,611 274,733 801,430 31,341 99,607 - 29,423 35,326 176 1,611,647
Currency translation (3,089) (4,240) (7,387) - - - 546 (3,190) (1) (17,361)
Constant currency 336,522 270,493 794,043 31,341 99,607 - 29,969 32,136 175 1,594,286
1 Other trading entities includes the results of entities located in
Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi
Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. These
entities had an aggregated impact on Group reported profit before tax of $353m
and constant currency profit before tax of $332m. Supplementary analysis is
provided on page 29 to give a fuller picture of the MENAT regional
performance.
2 Net operating income before change in expected credit losses and other
credit impairment charges, also referred to as revenue.
Notable items (continued)
Quarter ended 31 Dec 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Other trading entities Holding Total
Shanghai Financiero
Banking HSBC, S.A. companies,
Corporation de C.V.
Limited shared
service
centres and
intra-Group
eliminations
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs(1,2) (2) (2,112) - - - - - - (219) (2,333)
Fair value movements on financial instruments(3) - - - - - - - - (1) (1)
Disposal losses on Markets Treasury repositioning - - (134) (20) (246) - - - 1 (399)
Operating expenses
Disposals, acquisitions and related costs (16) (43) - - (6) (34) - - (25) (124)
Restructuring and other related costs(4) 7 14 2 1 8 - - - 27 59
Impairment of interest in associate(5) - - (3,000) - - - - - - (3,000)
1 Includes an impairment loss of $2.0bn recognised in relation to the sale
of our retail banking operations in France.
2 Includes fair value movements on the foreign exchange hedging of the
proceeds from the sale of our banking business in Canada.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
4 Balances relate to reversals of restructuring provisions recognised
during 2022.
5 Includes an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom.
Middle East, North Africa and Türkiye supplementary information
The following tables show the reported results of our Middle East, North
Africa and Türkiye business operations on a regional basis (including results
of all the legal entities operating in the region and our share of the results
of Saudi Awwal Bank). They also show the profit before tax of each of the
global businesses.
Middle East, North Africa and Türkiye regional performance
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Revenue(1) 961 940 899
Change in expected credit losses and other credit impairment charges (58) (117) (8)
Operating expenses (407) (404) (374)
Share of profit in associates and joint ventures 145 147 110
Profit before tax 641 566 627
Loans and advances to customers (net)(2) 23,449 22,766 25,160
Customer accounts(2) 40,905 40,708 45,830
1 Net operating income before change in expected credit losses and
other credit impairment charges, also referred to as revenue.
2 In the second quarter of 2023, loans and advances to customers of
$2,975m were classified as 'Assets held for sale', and customer accounts of
$4,878m were classified as 'Liabilities of disposal groups held for sale' in
respect of the planned merger of our business in Oman. The merger was
subsequently completed in August 2023.
Profit before tax by global business
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Wealth and Personal Banking 171 126 141
Commercial Banking 80 31 119
Global Banking and Markets 291 283 296
Corporate Centre 99 126 71
Total 641 566 627
Strategic transactions supplementary analysis
The following table presents the selected impacts of strategic transactions to
the Group and our global business segments. These comprise the strategic
transactions where the financial impacts of the acquisition or disposal have
qualified for material notable item treatment in our results. Material notable
items are a subset of notable items and categorisation is dependent on the
financial impact on the Group's income statement. At 1Q24, the disclosure
includes the impacts of the disposal of our retail banking operations in
France, our banking business in Canada and the planned sale of our business in
Argentina. The disclosure also includes the impact of our acquisition of SVB
UK and income statement results of IVB. The impacts quoted include the gains
or losses on classification to held for sale or acquisition and all other
related notable items. Once a transaction has completed, the impact will also
include the operating income statement results of each business, which are not
classified as notable items, where there are results in one period but not in
another, providing the impact of the acquisition or disposal on the results.
Constant currency results
Quarter ended 31 Mar 2024
Wealth and Commercial Global Corporate Total
Personal
Centre
Banking Banking Banking and
Markets
$m $m $m $m $m
Revenue 50 179 - 3,686 3,915
ECL - (3) - - (3)
Operating expenses (5) (76) - (61) (142)
Share of profit in associates and joint ventures - - - - -
Profit before tax 45 100 - 3,625 3,770
- HSBC Innovation Banking(1) - 100 - - 100
- Retail banking operations in France 45 - - (1) 44
- Banking business in Canada - - - 4,763 4,763
- Business in Argentina - - - (1,137) (1,137)
Quarter ended 31 Mar 2023
Revenue 2,125 1,584 - 34 3,743
ECL - (25) - -
(25)
Operating expenses (150) (8) - (43)
(201)
Share of profit in associates and joint ventures - - - - -
Profit/(loss) before tax 1,975 1,551 - (9) 3,517
- HSBC Innovation Banking(1) - 1,551 - (8) 1,543
- Retail banking operations in France 1,975 - - 84 2,059
- Banking business in Canada - - - (85)
(85)
- Business in Argentina - - - - -
1 Includes the impact of our acquisition of SVB UK, which in June 2023
changed its legal entity name to HSBC Innovation Bank Limited.
Alternative performance measures
Use of alternative performance measures
Our reported results are prepared in accordance with IFRS Accounting Standards
as detailed in our financial statements starting on page 329 of our Annual
Report and Accounts 2023. We use a combination of reported and alternative
performance measures, including those derived from our reported results that
eliminate factors that distort period-on-period comparisons. These are
considered alternative performance measures (non-GAAP financial measures).
The following information details the adjustments made to the reported results
and the calculation of other alternative performance measures. All alternative
performance measures are reconciled to the closest reported performance
measure.
Alternative performance measure definitions
Alternative performance measure Definition
Return on average ordinary shareholders' equity ('RoE') Profit attributable to the ordinary shareholders
Average ordinary shareholders' equity
Return on average tangible equity ('RoTE') Profit attributable to the ordinary shareholders, excluding impairment of
goodwill and other intangible assets
Average ordinary shareholders' equity adjusted for goodwill and intangibles
Return on average tangible equity ('RoTE') excluding notable items Profit attributable to the ordinary shareholders, excluding impairment of
goodwill, other intangible assets, and notable items(1)
Average ordinary shareholders' equity adjusted for goodwill and intangibles,
and notable items(1)
Net asset value per ordinary share Total ordinary shareholders' equity(2)
Basic number of ordinary shares in issue excluding treasury shares
Tangible net asset value per ordinary share Tangible ordinary shareholders' equity(3)
Basic number of ordinary shares in issue excluding treasury shares
Expected credit losses and other credit impairment charges ('ECL') as % of Annualised constant currency ECL(4)
average gross loans and advances to customers
Con
sta
nt
cur
ren
cy
ave
rag
e
gro
ss
loa
ns
and
adv
anc
es
to
cus
tom
ers
(4)
Expected credit losses and other credit impairment charges ('ECL') as % of Annualised constant currency ECL(4)
average gross loans and advances to customers, including held for sale
Constant currency average gross loans and advances to customers, including
held for sale(4)
Target basis operating expenses Reported operating expenses excluding notable items, foreign exchange
translation and other excluded items(5)
Basic earnings per share excluding material notable items and related impacts Profit attributable to ordinary shareholders excluding material notable items
and related impacts(6)
Wei
ght
ed
ave
rag
e
num
ber
of
ord
ina
ry
sha
res
out
sta
ndi
ng,
exc
lud
ing
own
sha
res
hel
d
1 For details of notable items please refer to Supplementary financial
information on page 22.
2 Total ordinary shareholders' equity is total shareholders' equity
less non-cumulative preference shares and capital securities.
3 Tangible ordinary shareholders' equity is total ordinary
shareholders' equity excluding goodwill and other intangible assets (net of
deferred tax).
4 The constant currency numbers are derived by adjusting reported ECL
and average loans and advances to customers for the effects of foreign
currency translation differences.
5 Includes impact of re-translating comparative period financial
information at the latest rates of foreign exchange in hyperinflationary
economies, which we consider to be outside of our control, and the impact of
the sale of our retail banking operations in France and banking business in
Canada.
6 For details of material notable items and related impacts, please refer
to page 34.
Return on average ordinary shareholders' equity, return on average tangible
equity and return on average tangible equity excluding notable items
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Profit/(loss) after tax
Profit/(loss) attributable to the ordinary shareholders of the parent company 10,183 (153) 10,327
Impairment of goodwill and other intangible assets (net of tax) 110 7 18
Profit/(loss) attributable to the ordinary shareholders, excluding goodwill 10,293 (146) 10,345
and other intangible assets impairment
Impact of notable items(1) (3,800) 5,210 (3,469)
Profit attributable to the ordinary shareholders, excluding goodwill, other 6,493 5,064 6,876
intangible assets impairment and notable items
Equity
Average ordinary shareholders' equity 170,539 166,305 164,395
Effect of goodwill and other intangibles (net of deferred tax) (11,680) (11,726) (11,202)
Average tangible equity 158,859 154,579 153,193
Average impact of notable items 135 2,212 (1,277)
Average tangible equity excluding notable items 158,994 156,791 151,916
Ratio % % %
Return on average ordinary shareholders' equity (annualised) 24.0 (0.4) 25.5
Return on average tangible equity (annualised) 26.1 (0.4) 27.4
Return on average tangible equity excluding notable items (annualised) 16.4 12.8 18.4
1 For details of notable items please refer to Supplementary financial
information on page 22.
From 2024, we have revised the adjustments made to return on average tangible
equity ('RoTE') to exclude all notable items, improving alignment with the
treatment of notable items in our other income statement disclosures.
Comparatives have been re-presented. On this basis, we continue to target a
RoTE in the mid-teens for 2024.
Return on average tangible equity by global business
Quarter ended 31 Mar 2024
Wealth and Personal Commercial Global Corporate Total
Banking
Banking Banking and Centre(1)
Markets
$m $m $m $m $m
Profit before tax 3,181 3,280 2,025 4,164 12,650
Tax expense (601) (815) (322) (75) (1,813)
Profit after tax 2,580 2,465 1,702 4,089 10,837
Less attributable to: preference shareholders, other equity holders, (247) (132) (232) (43) (655)
non-controlling interests
Profit attributable to ordinary shareholders of the parent company 2,333 2,333 1,470 4,046 10,183
Other adjustments (100) 70 (77) 217 110
Profit attributable to ordinary shareholders 2,233 2,403 1,394 4,264 10,293
Average tangible shareholders' equity 30,561 44,396 37,007 46,895 158,859
RoTE (%) (annualised) 29.4 21.8 15.1 36.6 26.1
Quarter ended 31 Mar 2023
Profit before tax 5,271 4,812 2,040 763 12,886
Tax expense (1,172) 569 (1,860)
(792) (465)
Profit after tax 4,099 4,020 1,575 1,332 11,026
Less attributable to: preference shareholders, other equity holders,
non-controlling interests (247) (175) (209) (68) (699)
Profit attributable to ordinary shareholders of the parent company 3,852 3,845 1,366 1,264 10,327
Other adjustments 3 92 132 18
(209)
Profit attributable to ordinary shareholders 3,855 3,937 1,498 1,055 10,345
Average tangible shareholders' equity 31,129 44,188 39,174 38,702 153,193
RoTE (%) (annualised) 50.2 36.1 15.5 11.1 27.4
1 With effect from 1 January 2024, following the sale of our retail
banking business in France, we have prospectively reclassified the portfolio
of retained loans, profit participation interest and licence agreement of the
CCF brand from WPB to Corporate Centre.
Net asset value and tangible net asset value per ordinary share
At
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Total shareholders' equity 191,186 185,329 190,095
Preference shares and other equity instruments (17,719) (17,719) (19,392)
Total ordinary shareholders' equity 173,467 167,610 170,703
Goodwill and intangible assets (net of deferred tax) (11,459) (11,900) (11,245)
Tangible ordinary shareholders' equity 162,008 155,710 159,458
Basic number of $0.50 ordinary shares outstanding 18,687 19,006 19,736
Value per share $ $ $
Net asset value per ordinary share 9.28 8.82 8.65
Tangible net asset value per ordinary share 8.67 8.19 8.08
ECL and other credit impairment charges as % of average gross loans and
advances to customers, and ECL and other credit impairment charges as % of
average gross loans and advances to customers, including held for sale
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Expected credit losses and other credit impairment charges ('ECL') (720) (1,031) (432)
Currency translation - 63 4
Constant currency (720) (968) (428)
Average gross loans and advances to customers 946,835 948,286 955,030
Currency translation (5,082) 1,708 4,008
Constant currency 941,753 949,994 959,038
Average gross loans and advances to customers, including held for sale 984,580 1,013,178 1,023,531
Currency translation (6,004) 707 4,198
Constant currency 978,576 1,013,885 1,027,729
Ratios % % %
Expected credit losses and other credit impairment charges (annualised) as % 0.31 0.40 0.18
of average gross loans and advances to customers
Expected credit losses and other credit impairment charges (annualised) as % 0.30 0.38 0.17
of average gross loans and advances to customers, including held for sale
Target basis operating expenses
Target basis operating expenses for 2024 and for the 2023 comparative periods
differ from what we disclosed in our 2023 results, when we were comparing
against 2022 operating expenses. The 2023 target basis excluded the impact of
incremental costs associated with the acquisition of SVB UK, and the related
investments, whereas the 2024 target basis excludes the costs associated with
our retail banking operations in France and our banking business in Canada.
The exclusion of notable items and the impact of retranslating prior year
results of hyperinflationary economies at constant currency are excluded in
2024, which is consistent with the 2023 basis of preparation. We consider
target basis operating expenses to provide useful information to investors by
quantifying and excluding the notable items that management considered when
setting and assessing cost-related targets.
Target basis operating expenses
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Reported operating expenses 8,151 8,645 7,586
Notable items (50) (65) (61)
- Disposals, acquisitions and related costs (63) (124) (61)
- Restructuring and other related costs 13 59 -
Excluding the impact of the sale of our retail banking operations in France (162) (261) (243)
and banking business in Canada(1)
Currency translation(2) (115) (18)
Excluding the impact of retranslating prior period costs of hyperinflationary 211 130
economies at constant currency foreign exchange rate
Target basis operating expenses 7,939 8,415 7,394
1 This represents the business as usual costs which are not classified
as notable items relating to our retail banking operations in France and
banking business in Canada. This does not include the disposal costs which
relate to these transactions.
2 Currency translation on reported operating expenses, excluding
currency translation on notable items.
Basic earnings per share excluding material notable items and related impacts
Material notable items are a subset of notable items. Material notable items
are components of our income statement that management would consider as
outside the normal course of business and generally non-recurring in nature,
which are excluded from our dividend payout ratio calculation and our earnings
per share measure, along with related impacts. Categorisation as a material
notable item is dependent on the nature of each item in conjunction with the
financial impact on the Group's income statement.
Related impacts include those items that do not qualify for designation as
notable items but whose adjustment is considered by management to be
appropriate for the purposes of determining the basis for our dividend payout
ratio calculation.
Material notable items in 1Q24 and in 2023 included the planned sale of our
business in Argentina, the sale of our retail banking operations in France,
the sale of our banking business in Canada, the gain following the acquisition
of SVB UK and the impairment of our investment in BoCom. In determining this
measure, we also excluded HSBC Bank Canada's financial results from the 30
June 2022 net asset reference date until completion of the sale, as the gain
on sale was recognised through a combination of the consolidation of HSBC Bank
Canada's results in the Group's results since this date, and the remaining
gain on sale was recognised at completion. For the planned sale of our
business in Argentina, there is a mechanism by which the loss on sale will
vary by changes in the net asset value of HSBC Argentina, and in the fair
value of consideration including price adjustments and migration costs (see
page 4 for details). No additional related impacts have been identified, and
the ongoing profits from HSBC Argentina will not be excluded from our basic
earnings per share excluding material notable items and related impacts.
Basic earnings per share excluding material notable items and related impacts
Quarter ended
31 Mar 31 Dec 31 Mar
2024 2023 2023
$m $m $m
Profit attributable to shareholders of company 10,584 (28) 10,745
Coupon payable on capital securities classified as equity (401) (125) (418)
Profit attributable to ordinary shareholders of company 10,183 (153) 10,327
Impairment of interest in associate(1) - 3,000 -
Gain on acquisition of SVB UK - 44 (1,511)
Impact of the sale of our retail banking operations in France (net of tax) (52) 1,737 (1,636)
Impact of the sale of our banking business in Canada(2) (4,942) 119 (109)
Impairment loss relating to the planned sale of our business in Argentina 1,137 - -
Profit attributable to ordinary shareholders of company excluding material 6,326 4,747 7,071
notable items and related impacts
Number of shares
Weighted average basic number of ordinary shares (millions) 18,823 19,130 19,724
Basic earnings per share ($) 0.54 (0.01) 0.52
Basic earnings per share excluding material notable items and related impacts 0.34 0.25 0.36
($)
1 Represents an impairment loss of $3.0bn recognised in respect of the
Group's investment in BoCom.
2 Represents gain on sale of business in Canada recognised on
completion, inclusive of the recycling of losses in foreign currency
translation reserves and other reserves, and gain on the foreign exchange
hedging of the sale proceeds.
Risk
Managing risk
HSBC's operations are subject to changes in economic and financial conditions
as well as geopolitical developments that could have a material impact on the
Group's operations and financial risks. We continuously review these factors
in all of our key markets and conduct regular reviews of economic risks and
expectations.
In 1Q24, global activity indicators suggest a modest improvement in the global
growth outlook since the end of 2023, led by the US and supported by
increasing policy stimulus from mainland China. Manufacturing data has
improved, suggesting an uptick in output, and there are also signs of a
revival in global trade growth. However, inflation and interest rate
expectations remain key uncertainties that could impact our business and risk
profile. Inflationary pressures eased in 1Q24 in several of our key markets as
energy and food prices stabilised. However, inflation was higher-than-expected
in the US in recent months, suggesting a downward adjustment may not be as
smooth as previously anticipated. Consequently, expectations for interest rate
cuts in 2024 have been lowered, with rates likely to stay higher for longer
than had been anticipated or even increased further, given the inflation
uncertainty. In mainland China and some other emerging markets, interest rate
reductions have already been enacted in support of growth.
Geopolitical tensions could impact the Group's operations and its risk profile
and continue to be a source of significant uncertainty, including the ongoing
Russia-Ukraine and Israel-Hamas wars, as well as the potential for further
escalation within the Middle East. The recent escalation in tensions between
Israel and Iran has led to renewed volatility in energy prices and increased
uncertainty in the region. The attacks on commercial shipping in the Red Sea
continue, contributing to higher shipping costs. Despite countermeasures to
improve security, these attacks have led to a disruption in supply chains and,
coupled with the risk of an increase in oil prices, they have the potential to
halt or reverse the recent decline in inflation.
Fiscal policy, deficits and public indebtedness also influence our risk
profile. Public spending as a proportion of GDP is likely to remain high for
most of our key economies with elevated spending focused on social welfare,
defence and climate transition initiatives. Against a backdrop of slower
economic growth and expectations for a high interest rate environment
continuing for longer than previously anticipated, elevated borrowing costs
could increase and adversely impact the fiscal responses of highly-indebted
sovereign issuers.
Sanctions and trade restrictions are monitored closely given the pace of
change and complexity associated with them. The US, the UK and the EU, as well
as other countries, have imposed significant sanctions and trade restrictions
against Russia, with new sanctions added during 2024 by the US, the UK and the
EU. There is a possibility that additional sanctions may be imposed on Iran in
response to any further escalation in tensions between Israel and Iran,
including additional US secondary sanctions, and which could increase the risk
within our operations. As noted in the Annual Report and Accounts 2023, the
new secondary sanctions regime introduced by the US in December 2023 gives the
US broad discretion to impose severe sanctions on non-US banks that are
knowingly, or even unknowingly, engaged in certain transactions or services
involving Russia's military-industrial base. The broad scope of the
discretionary powers embedded in the regime creates challenges associated with
the detection or prevention of third-party activities beyond our control.
Additionally, the imposition of such sanctions under the new regime against
any non-US HSBC entity could result in significant adverse commercial,
operational and reputational consequences for HSBC.
Strategic competition has the potential to impact the Group's operations and
financial risks. The relationships between China and several other countries,
including the US and the UK, remain complex. The US, the UK, the EU and other
countries have imposed various sanctions and trade restrictions on Chinese
individuals and companies and it is expected that additional sanctions related
to Chinese imports of Iranian oil may be enacted in the second quarter of
2024. In response to earlier measures, China has imposed its own sanctions,
trade restrictions and law enforcement measures on persons and entities in
other countries. Supply chains remain vulnerable to a deterioration in these
bilateral relationships and this has resulted in efforts to de-risk certain
sectors with the reshoring of manufacturing activities, but the approach of
countries to strategic competition and engagement with China continues to
develop. Further sanctions or counter-sanctions may adversely affect the
Group, its customers and various markets.
Political changes may also have implications for policy. Many countries held
elections during 1Q24 and several major markets, including the US, are
expected to hold elections over the remainder of the year. This may result in
uncertainty in some markets as governments revise their policies to address
domestic political priorities.
The real estate sector faces challenges in many of our major markets, with
some weakness observed in residential and commercial real estate investment
and market sentiment. While mainland China reported an improvement in GDP, its
commercial real estate sector continued to deteriorate in 1Q24 and signs of a
material or sustained recovery have yet to emerge. Market data continues to
reflect reduced investment and weak market sentiment in the short term,
although the sector is expected to stabilise during the course of 2024. In
1Q24, Chinese authorities promised to bolster support for property developers
in addition to fiscal and monetary support for the economy, including specific
measures to stimulate housing demand. We continue to closely monitor, and seek
to proactively manage, the potential implications of the real estate downturn
for our customers and commercial real estate portfolios.
All the above risks could have an impact on our retail customers and we
continue to closely monitor the impact of inflation and the increased cost of
living. We want to ensure that we offer the right support to our customers in
line with regulatory, government and wider stakeholder expectations. As noted
in the Annual Report and Accounts 2023, we have adopted the UK government's
Mortgage Charter released in June 2023.
We engage closely with key regulators so that we continue to meet their
expectations for the activities of financial institutions during times of
market volatility.
In addition, management adjustments to ECL were applied to reflect persisting
uncertainty in certain sectors, driven by inflation, interest rate volatility
and other macroeconomic risks, which were not fully captured by our models.
We are committed to using artificial intelligence ethically and responsibly,
including embedding effective governance and controls into our risk management
processes.
We continue to monitor, and seek to manage, the potential implications of all
the above developments on our customers and our business. While the financial
performance of our operations varied in different geographies, our balance
sheet and liquidity remained strong.
At 31 March 2024, our CET1 ratio increased to 15.2%, from 14.8% at 31 December
2023, and our liquidity coverage ratio ('LCR') was 136%.
Credit risk
Summary of credit risk
At 31 March 2024, gross loans and advances to customers and banks of $1,065bn
increased by $3bn on a reported basis compared with 31 December 2023. Loans
and advances to customers decreased by $5bn while loans and advances to banks
increased by $8bn. This included total adverse foreign exchange movements of
$13bn.
Excluding foreign exchange movements, the underlying increase of $16bn was
driven by loans and advances to banks of $11bn, in Europe (up $9bn), Middle
East (up $3bn) and Latin America (down $1bn).
Underlying loans and advances to customers grew by $5bn mainly from wholesale
loans and advances to customers in Europe (up $3bn) and Middle East (up $1bn);
and personal loans and advances to customers in the UK (up $2bn) offset by
decreases in Asia (down $1bn).
Loans and advances to banks and customers included a $2bn decrease due to the
reclassification of our business in Argentina and our operations in Armenia to
assets held for sale.
At 31 March 2024, the allowance for ECL of $11.6bn comprised $11.1bn in
respect of assets held at amortised cost, $0.4bn in respect of loan
commitments and financial guarantees, and $0.1bn in respect of debt
instruments measured at fair value through other comprehensive income
('FVOCI').
Excluding foreign exchange movements, the allowance for ECL in relation to
loans and advances to customers remained stable. This was attributable to:
- a $0.1bn increase in wholesale loans and advances to customers,
which included a $0.2bn increase in stage 3, offset by a $0.1bn decrease in
stages 1 and 2; and
- a $0.1bn decrease in personal loans and advances to customers,
observed in stages 1 and 2.
The ECL charge for the first three months of 2024 was $0.7bn (1Q23: $0.4bn),
inclusive of recoveries. The ECL charge comprised: $0.3bn in respect of
wholesale lending, of which the stage 3 charge was $0.2bn, $0.3bn in respect
of personal lending, of which the stage 3 charge was $0.3bn, and $0.1bn in
respect of other assets and debt instruments measured at FVOCI. Although the
mainland China commercial real estate sector continued to deteriorate in 1Q24,
the impact on the Stage 3 ECL charge was not significant during this quarter.
Personal lending charges were in line with previous performance.
Summary of financial instruments to which the impairment requirements in IFRS
9 are applied
At 31 Mar 2024 At 31 Dec 2023
Gross carrying/nominal amount Allowance for Gross carrying/nominal amount Allowance for
ECL(1) ECL(1)
$m $m $m $m
Loans and advances to customers at amortised cost 944,061 (10,936) 949,609 (11,074)
Loans and advances to banks at amortised cost 121,468 (12) 112,917 (15)
Other financial assets measured at amortised cost 879,719 (160) 960,271 (422)
- cash and balances at central banks 275,943 - 285,868 -
- items in the course of collection from other banks 6,764 - 6,342 -
- Hong Kong Government certificates of indebtedness 42,758 - 42,024 -
- reverse repurchase agreements - non-trading 250,496 - 252,217 -
- financial investments 152,003 (16) 148,346 (20)
- assets held for sale(2) 4,216 (59) 103,186 (324)
- other assets(3) 147,539 (85) 122,288 (78)
Total gross carrying amount on-balance sheet 1,945,248 (11,108) 2,022,797 (11,511)
Loan and other credit-related commitments 635,485 (334) 661,015 (367)
Financial guarantees 16,394 (41) 17,009 (39)
Total nominal amount off-balance sheet(4) 651,879 (375) 678,024 (406)
2,597,127 (11,483) 2,700,821 (11,917)
Fair value Memorandum allowance for ECL(5) Fair value Memorandum
allowance for ECL(5)
$m $m $m $m
Debt instruments measured at fair value through other comprehensive income 305,109 (128) 302,348 (97)
('FVOCI')
1 The total ECL is recognised in the loss allowance for the financial
asset unless the total ECL exceeds the gross carrying amount of the financial
asset, in which case the ECL is recognised as a provision.
2 At 31 March 2024, the gross carrying amount comprised $2,391m of loans
and advances to customers and banks (31 December 2023: $84,074m) and $1,825m
of other financial assets at amortised cost (31 December 2023: $19,112m)
mainly from Argentina ($3.2bn) and Armenia ($0.6bn). The corresponding
allowance for ECL comprised $47m of loans and advances to customers and banks
(31 December 2023: $303m) and $12m of other financial assets at amortised cost
(31 December 2023: $21m). The significant reduction is due to the completion
of the sales of our banking business in Canada and our retail banking
operations in France during the quarter.
3 Includes only those financial instruments that are subject to the
impairment requirements of IFRS 9. 'Other assets' as presented within the
summary consolidated balance sheet on page 14 comprises both financial and
non-financial assets, including cash collateral and settlement accounts.
4 Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair
value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in 'Change in expected credit losses and other credit impairment
charges' in the income statement.
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage
distribution and ECL coverage at 31 March 2024
Gross carrying/nominal amount(1) Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and advances to customers at amortised 813,450 109,277 21,253 81 944,061 (1,131) (2,732) (7,044) (29) (10,936) 0.1 2.5 33.1 35.8 1.2
cost
Loans and advances to banks at amortised cost 120,635 831 2 - 121,468 (8) (2) (2) - (12) - 0.2 100.0 - -
Other financial assets measured at amortised 875,715 3,825 176 3 879,719 (97) (26) (37) - (160) - 0.7 21.0 - -
cost
Loan and other credit-related commit-ments 611,969 22,473 1,039 4 635,485 (140) (111) (83) - (334) - 0.5 8.0 - 0.1
Financial guarantees 14,629 1,446 319 - 16,394 (8) (7) (26) - (41) 0.1 0.5 8.2 - 0.3
At 31 Mar 2024 137,852 22,789 88 (1,384) (2,878) (7,192) (29) (11,483) 0.1 2.1 31.6 33.0 0.4
2,436,398 2,597,127
1 Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage
distribution and ECL coverage at 31 December 2023
Gross carrying/nominal amount(1) Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total Stage 1 Stage 2 Stage 3 POCI(2) Total
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and advances to customers at amortised 809,384 120,871 19,273 81 949,609 (1,130) (2,964) (6,950) (30) (11,074) 0.1 2.5 36.1 37.0 1.2
cost
Loans and advances to banks at amortised cost 111,479 1,436 2 - 112,917 (10) (3) (2) - (15) - 0.2 100.0 - -
Other financial assets measured at amortised 946,873 12,734 664 - 960,271 (109) (132) (181) - (422) - 1.0 27.3 - -
cost
Loan and other credit-related commit-ments 630,949 28,922 1,140 4 661,015 (153) (128) (86) - (367) - 0.4 7.5 - 0.1
Financial guarantees 14,746 1,879 384 - 17,009 (7) (7) (25) - (39) - 0.4 6.5 - 0.2
At 31 Dec 2023 165,842 21,463 85 (1,409) (3,234) (7,244) (30) (11,917) 0.1 2.0 33.8 35.3 0.4
2,513,431 2,700,821
1 Represents the maximum amount at risk should the contracts be fully
drawn upon and clients default.
2 Purchased or originated credit-impaired ('POCI').
Measurement uncertainty and sensitivity analysis of ECL estimates
The recognition and measurement of ECL involves the use of significant
judgement and estimation. We form multiple economic scenarios based on
economic forecasts, apply these assumptions to credit risk models to estimate
future credit losses, and probability weight the results to determine an
unbiased ECL estimate.
Management assessed the current economic environment, reviewed the latest
economic forecasts and discussed key risks before selecting the economic
scenarios and their weightings.
Scenarios were constructed and continue to reflect the latest geopolitical
developments in relation to both the Israel-Hamas and Russia-Ukraine wars.
Macroeconomic risks relating to an increase in policy rates and higher
inflation across all our major markets are captured in the two downside
scenarios.
Management judgemental adjustments are used where modelled allowance for ECL
does not fully reflect the identified risks and related uncertainty, or to
capture significant late-breaking events.
Methodology
At 31 March 2024, four economic scenarios were used to capture the current
economic environment and to articulate management's view of the range of risks
and potential outcomes. Each scenario is updated with new forecasts and
estimates every quarter.
The Upside, Central and Downside scenarios are drawn from external consensus
forecasts, market data and distributional estimates of the entire range of
economic outcomes. The fourth scenario, the Downside 2, represents
management's view of severe downside risks.
Scenarios produced to calculate ECL are aligned to HSBC's top and emerging
risks.
Description of economic scenarios
In the Central scenario, GDP growth forecasts have improved modestly in the
first quarter of 2024, relative to the fourth quarter of 2023, led by the US.
The exceptions were France and Canada, which saw small downward revisions.
Despite the improvement in the forecasts, GDP growth in North America and
Europe in 2024 is still expected to be slower relative to 2023. The slowdown
is expected to be the consequence of the lagged effects of higher interest
rates and inflation. Elevated interest rates and higher price levels are
expected to continue to squeeze household finances and corporate margins,
while limiting appetite for new borrowing. Unemployment is also expected to
rise across most markets, and only fall gradually from 2025 onwards.
In Hong Kong and mainland China, annual GDP growth is also expected to be
slower in 2024 relative to 2023, as their economies endure the effects of the
decline in real estate markets and expected weak global trade growth. A
steeper downturn is expected to be avoided, however, as the authorities in
mainland China increase fiscal and monetary support. An increase in tourism
(particularly from mainland China visitors) is also expected to provide
support to the Hong Kong economy. Unemployment in both markets is forecast to
remain stable.
Inflation continues to broadly slow in several of our key markets, as energy
and food price rises have stabilised, while the supply chain disruptions that
caused the inflationary impulse in 2022 have diminished. In the forecast,
lower wage growth and services price inflation are expected to drive inflation
lower. In contrast, strong food price declines in mainland China have caused
inflation to drop sharply, but the effect is expected to be temporary in the
forecast.
Lower inflation this year enables major central banks to start reducing policy
rates. The Federal Reserve, the Bank of England and the ECB are all expected
to make incremental cuts to policy rates from mid-2024 onwards. Other key
markets, including China and Mexico, are also expected to see rates fall. In
the longer term, interest rates across our key markets are forecast to settle
at a higher level than in recent years.
House prices are forecast to decline again this year in the UK, Hong Kong,
France and Canada, as high interest costs weigh on borrowing. In mainland
China, prices are also expected to decline as transaction volumes remain
subdued but further policy support should stabilise conditions in the sector
from 2025. Prices are expected to rise further in the US and UAE, underpinned
by tight supply and strong demand, respectively.
Risks to the Central scenario are captured in the outer scenarios. The Upside
and Downside scenarios are constructed to reflect the economic consequences
from the crystallisation of a number of macroeconomic and financial risks.
Sources of forecast uncertainty include geopolitical tensions, inflation, and
the outlook for monetary policy. In particular, the scenarios explore the
possibility that interest rates move higher than is forecast in the Central
scenario.
As the geopolitical environment remains volatile and complex, risks include a
broader and more prolonged conflict in the Middle East, a potential escalation
in the Russia-Ukraine war, and continued differences between the US and China
over a range of strategic issues. Elections in major economies could also
cause significant policy discontinuities, leading to trade frictions, higher
costs, and market instability.
The four global scenarios used for calculating ECL at 31 March 2024 were:
- The consensus Central scenario: This scenario features a slowdown in
global growth in 2024 before a gradual pick-up over the remainder of the
forecast horizon. Growth rates remain below the pre-Covid-19 pandemic average.
Unemployment is forecast to rise gradually amid weaker economic activity, but
is set to remain low by historic standards. Inflation is expected to fall
slowly back to central bank targets by early 2025, and interest rates are
expected to remain high through this period. Interest rates stay above their
pre-pandemic levels over the entire forecast horizon.
- The consensus Upside scenario: This scenario incorporates the
de-escalation of geopolitical tensions and a loosening of financial
conditions. In this scenario, growth accelerates, inflation falls at a faster
rate than in the Central scenario and unemployment declines. This enables
central banks to lower interest rates more quickly than in the Central
scenario. Asset prices, including housing, rise more quickly than in the
Central scenario.
- The consensus Downside scenario: This scenario features weaker
economic activity compared with the Central scenario, driven by a supply shock
that causes a rise in inflation and interest rates above the Central forecast.
In this scenario, GDP contracts, unemployment rises, financial conditions
tighten, and equity markets and house prices fall. Other downside risk themes
include a weaker-than-expected recovery in mainland China, with negative
implications for global growth.
- The Downside 2 scenario: This scenario reflects management's view of
the tail end of the economic distribution. It incorporates the simultaneous
crystallisation of a number of risks that leads to a deep global recession.
The narrative features an escalation of geopolitical risks and worsening of
supply chain disruptions that cause inflation and interest rates to rise
initially. Unemployment also increases rapidly, asset prices fall, and
defaults rise significantly. As recession takes hold, commodity prices correct
and inflation falls.
Both the consensus Downside and the Downside 2 scenarios are global in scope,
and while they differ in severity, they assume that the key risks to HSBC,
listed above, crystallise simultaneously.
The following tables describe key macroeconomic variables in the consensus
Central scenario, consensus Upside scenario, consensus Downside scenario and
Downside 2 scenario.
Consensus Central scenario 2Q24-1Q29 (as at 1Q24)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP (annual average growth rate, %)
2024 0.3 2.0 2.7 4.7 0.5 0.7 3.7 2.2
2025 1.2 1.7 2.8 4.4 1.8 1.3 3.9 2.0
2026 1.6 2.0 2.6 4.2 2.0 1.5 3.8 2.3
2027 1.6 1.9 2.6 3.9 2.0 1.4 3.4 2.3
2028 1.5 1.9 2.5 3.8 1.9 1.3 3.2 2.4
5-year average(1) 1.3 1.9 2.7 4.2 1.7 1.3 3.6 2.2
Unemployment rate (%)(2)
2024 4.2 4.2 2.9 5.1 6.4 7.5 2.6 2.8
2025 4.4 4.2 2.9 5.2 6.2 7.4 2.6 3.3
2026 4.2 3.9 3.1 5.2 5.8 7.1 2.6 3.4
2027 4.2 3.9 3.1 5.1 5.6 6.9 2.6 3.4
2028 4.1 3.9 3.1 5.2 5.6 6.7 2.6 3.4
5-year average(1) 4.2 4.0 3.0 5.1 5.9 7.1 2.6 3.3
House prices (annual average growth rate, %)
2024 (1.5) 3.9 (12.5) (2.5) (5.3) (1.7) 12.3 7.1
2025 0.3 2.7 (1.6) 0.0 3.3 2.6 7.0 4.2
2026 2.1 3.1 2.7 0.8 3.5 3.8 4.4 3.9
2027 3.7 3.8 2.8 2.2 2.2 4.2 2.8 4.0
2028 3.0 3.1 3.0 3.3 2.4 3.8 2.2 3.9
5-year average(1) 1.7 3.1 (0.3) 1.1 1.4 2.9 5.0 4.4
Inflation (annual average growth rate, %)
2024 2.8 2.7 2.2 0.9 2.5 2.5 2.5 4.2
2025 2.1 2.3 2.1 1.7 2.1 1.9 2.1 3.6
2026 2.0 2.3 2.2 2.0 2.1 1.8 2.2 3.5
2027 2.1 2.2 2.2 1.9 2.1 1.8 2.0 3.5
2028 2.1 2.2 2.2 1.9 2.1 1.8 2.0 3.4
5-year average(1) 2.2 2.3 2.2 1.8 2.1 1.9 2.1 3.6
Central bank policy rate (annual average, %)
2024 5.0 5.0 5.4 3.9 4.7 3.6 5.0 10.6
2025 4.1 3.9 4.3 4.0 3.8 2.5 4.0 8.6
2026 3.7 3.6 4.0 4.1 3.3 2.3 3.6 7.8
2027 3.6 3.6 3.9 4.3 3.1 2.3 3.6 7.6
2028 3.5 3.6 3.9 4.5 3.1 2.4 3.6 7.8
5-year average(1) 3.9 3.8 4.2 4.2 3.5 2.5 3.9 8.3
1 The five-year average is calculated over a projected period of 20
quarters from 2Q24 to 1Q29.
2 The forecast for UK unemployment is conditioned on the revised
history published by the Office for National Statistics ('ONS') on 13 February
2024. Consistent with the ONS guidance, we have been cautious in the
interpretation of recent quarterly changes and have used a suite of indicators
to evaluate conditions in the labour market for the purposes of calculating
allowance for ECL in 1Q24.
Consensus Central scenario 2024-2028 (as at 4Q23)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP (annual average growth rate, %)
2024 0.3 1.0 2.6 4.5 0.8 0.8 3.7 1.9
2025 1.2 1.8 2.7 4.4 2.0 1.5 4.0 2.2
2026 1.7 2.1 2.6 4.3 2.0 1.6 3.8 2.3
2027 1.6 2.0 2.6 3.8 2.0 1.5 3.4 2.4
2028 1.6 2.0 2.6 3.9 2.0 1.5 3.4 2.4
5-year average(1) 1.3 1.8 2.6 4.2 1.7 1.4 3.6 2.2
Unemployment rate (%)
2024 4.7 4.3 3.0 5.2 6.2 7.5 2.6 2.9
2025 4.6 4.2 3.0 5.1 5.9 7.3 2.6 2.9
2026 4.3 4.0 3.2 5.1 5.7 7.0 2.6 2.9
2027 4.2 4.0 3.2 5.1 5.7 6.8 2.6 2.9
2028 4.2 4.0 3.2 5.1 5.7 6.8 2.6 2.9
5-year average(1) 4.4 4.1 3.1 5.1 5.8 7.1 2.6 2.9
House prices (annual average growth rate, %)
2024 (5.5) 2.9 (6.6) (0.6) (4.8) (1.0) 12.6 6.5
2025 0.1 2.7 (0.7) 1.1 2.2 2.4 7.7 4.2
2026 3.5 3.1 2.6 2.6 2.8 4.0 4.4 4.2
2027 3.0 2.7 2.8 4.0 2.4 4.4 2.6 4.0
2028 3.0 2.1 3.0 4.5 2.8 4.0 2.3 4.0
5-year average(1) 0.8 2.7 0.2 2.3 1.1 2.8 5.9 4.6
Inflation (annual average growth
rate, %)
2024 3.2 2.7 2.1 1.8 2.6 2.7 2.3 4.2
2025 2.2 2.2 2.1 2.0 2.1 1.8 2.2 3.6
2026 2.2 2.3 2.2 2.1 2.1 1.7 2.1 3.5
2027 2.3 2.2 2.4 2.0 2.1 1.9 2.1 3.5
2028 2.3 2.2 2.4 2.0 2.1 2.1 2.1 3.5
5-year average 2.4 2.3 2.2 2.0 2.2 2.0 2.1 3.7
Central bank policy rate (annual average, %)
2024 5.0 5.0 5.4 4.1 4.7 3.6 5.1 10.4
2025 4.3 4.0 4.4 4.2 3.9 2.8 4.1 8.6
2026 3.9 3.7 4.1 4.4 3.4 2.6 3.7 7.9
2027 3.8 3.7 4.1 4.6 3.2 2.6 3.7 7.9
2028 3.7 3.8 4.1 4.8 3.3 2.7 3.8 8.1
5-year average(1) 4.1 4.1 4.4 4.4 3.7 2.9 4.1 8.6
1 The five-year average is calculated over a projected period of 20
quarters from 1Q24 to 4Q28.
Consensus Upside scenario 2Q24-1Q29 (as at 1Q24)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level 11.5 (1Q29) 14.2 (1Q29) 21.6 (1Q29) 29.8 (1Q29) 15.0 (1Q29) 9.5 (1Q29) 28.1 (1Q29) 16.6 (1Q29)
(%, start-to-peak)(1)
Unemployment rate 2.8 (2Q25) 3.1 (4Q25) 2.4 (4Q24) 4.8 (1Q26) 5.1 (1Q26) 6.3 (1Q26) 2.0 (1Q26) 2.4 (4Q24)
(%, min)(2)
House price index 17.4 (1Q29) 26.0 (1Q29) 17.8 (1Q29) 12.8 (1Q29) 21.9 (1Q29) 21.1 (1Q29) 30.0 (1Q29) 28.9 (1Q29)
(%, start-to-peak)(1)
Inflation rate 0.9 (2Q25) 1.2 (1Q25) 0.6 (1Q25) (0.5) (3Q24) 0.9 (1Q25) 1.3 (1Q25) 1.3 (2Q25) 2.5 (2Q25)
(YoY % change, min)(3)
Central bank policy rate 3.5 (4Q28) 3.5 (3Q27) 4.0 (3Q27) 3.9 (4Q24) 3.0 (3Q27) 2.3 (3Q26) 3.6 (3Q27) 7.3 (3Q25)
(%, min)(2)
1 Cumulative change to the highest level of the series during the
20-quarter projection.
2 Lowest projected unemployment or policy rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.
Consensus Upside scenario 2024-2028 (as at 4Q23)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level 10.8 (4Q28) 14.3 (4Q28) 21.8 (4Q28) 30.4 (4Q28) 14.9 (4Q28) 10.4 (4Q28) 30.7 (4Q28) 17.8 (4Q28)
(%, start-to-peak)(1)
Unemployment rate 3.1 (4Q24) 3.1 (2Q25) 2.4 (3Q24) 4.8 (4Q25) 5.1 (4Q25) 6.2 (4Q25) 2.0 (4Q25) 2.4 (3Q24)
(%, min)(2)
House price index 13.0 (4Q28) 21.9 (4Q28) 17.9 (4Q28) 19.7 (4Q28) 21.0 (4Q28) 19.6 (4Q28) 34.2 (4Q28) 30.6 (4Q28)
(%, start-to-peak)(1)
Inflation rate 1.3 (2Q25) 1.4 (1Q25) 0.3 (4Q24) 0.6 (3Q24) 1.1 (1Q25) 1.5 (3Q24) 1.4 (1Q25) 2.7 (1Q25)
(YoY % change, min)(3)
Central bank policy rate 3.7 (3Q28) 3.7 (2Q27) 4.1 (1Q27) 4.0 (2Q24) 3.2 (2Q27) 2.6 (2Q26) 3.7 (1Q27) 7.8 (2Q25)
(%, min)(2)
1 Cumulative change to the highest level of the series during the
20-quarter projection.
2 Lowest projected unemployment or policy rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.
Consensus Downside scenario 2Q24-1Q29 (as at 1Q24)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (0.7) (4Q25) (0.9) (4Q24) (1.3) (2Q25) (1.3) (2Q24) (1.2) (3Q24) (0.2) (4Q24) 0.8 (2Q24) (0.2) (1Q25)
(%, start-to-trough)(1)
Unemployment rate 6.3 (4Q25) 5.5 (1Q25) 4.8 (1Q26) 7.0 (1Q26) 7.6 (4Q24) 8.5 (1Q25) 3.7 (1Q26) 4.1 (1Q26)
(%, max)(2)
House price index (9.3) (4Q25) (1.4) (1Q25) (10.4) (1Q25) (9.5) (1Q26) (10.9) (2Q25) (0.5) (3Q24) (0.3) (2Q24) 0.8 (2Q24)
(%, start-to-trough)(1)
Inflation rate 3.9 (4Q24) 3.2 (1Q25) 3.6 (1Q25) 2.9 (1Q25) 3.0 (2Q24) 3.7 (4Q24) 2.7 (2Q24) 6.1 (1Q25)
(YoY % change, max)(3)
Central bank policy rate 5.6 (2Q24) 5.7 (2Q24) 6.1 (2Q24) 4.0 (4Q24) 5.9 (2Q24) 4.1 (2Q24) 5.7 (2Q24) 11.8 (4Q24)
(%, max)(2)
1 Cumulative change to the lowest level of the series during the
20-quarter projection.
2 The highest projected unemployment or policy rate in the scenario.
3 The highest projected year-on-year percentage change in inflation in
the scenario.
Consensus Downside scenario 2024-2028 (as at 4Q23)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (1.0) (2Q25) (1.4) (3Q24) (1.6) (3Q25) (1.5) (1Q24) (1.7) (3Q24) (0.3) (2Q24) 1.4 (1Q24) (0.3) (4Q24)
(%, start-to-trough)(1)
Unemployment rate 6.4 (1Q25) 5.6 (4Q24) 4.7 (4Q25) 6.9 (4Q25) 7.4 (3Q24) 8.5 (4Q24) 3.7 (4Q25) 3.5 (4Q25)
(%, max)(2)
House price index (12.0) (2Q25) (1.3) (3Q24) (9.6) (4Q24) (7.1) (3Q25) (12.0) (3Q25) (1.2) (3Q24) 0.3 (1Q24) 1.2 (1Q24)
(%, start-to-trough)(1)
Inflation rate 4.1 (1Q24) 3.5 (4Q24) 3.8 (3Q24) 3.5 (4Q24) 3.4 (2Q24) 3.8 (2Q24) 3.0 (1Q24) 6.5 (4Q24)
(YoY % change, max)(3)
Central bank policy rate 5.7 (1Q24) 5.6 (1Q24) 6.0 (1Q24) 4.1 (3Q24) 5.6 (1Q24) 4.2 (1Q24) 5.7 (1Q24) 12.0 (3Q24)
(%, max)(2)
1 Cumulative change to the highest level of the series during the
20-quarter projection.
2 Lowest projected unemployment or policy rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.
Downside 2 scenario 2Q24-1Q29 (as at 1Q24)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (8.9) (3Q25) (4.5) (2Q25) (7.8) (2Q25) (7.1) (1Q25) (5.3) (3Q25) (7.4) (2Q25) (6.9) (3Q25) (8.7) (4Q25)
(%, start-to-trough)(1)
Unemployment rate 8.2 (4Q25) 9.2 (3Q25) 6.3 (1Q25) 7.1 (1Q26) 11.9 (2Q25) 10.4 (1Q26) 4.6 (4Q24) 5.4 (3Q25)
(%, max)(2)
House price index (33.1) (2Q26) (17.6) (1Q25) (32.8) (4Q26) (26.4) (2Q26) (39.6) (3Q25) (16.0) (3Q26) (13.2) (3Q26) 0.8 (2Q24)
(%, start-to-trough)(1)
Inflation rate 10.4 (3Q24) 4.6 (4Q24) 4.2 (1Q25) 5.4 (1Q25) 5.1 (4Q24) 8.7 (3Q24) 3.5 (3Q24) 6.5 (1Q25)
(YoY % change, max)(3)
Central bank policy rate 6.0 (2Q24) 6.0 (2Q24) 6.4 (2Q24) 4.5 (4Q24) 6.0 (2Q24) 5.2 (2Q24) 6.1 (2Q24) 12.6 (4Q24)
(%, max)(2)
1 Cumulative change to the lowest level of the series during the
20-quarter projection.
2 The highest projected unemployment or policy rate in the scenario.
3 The highest projected year-on-year percentage change in inflation
in the scenario.
Downside 2 scenario 2024-2028 (as at 4Q23)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (8.8) (2Q25) (4.6) (1Q25) (8.2) (1Q25) (6.4) (1Q25) (4.8) (1Q25) (6.6) (1Q25) (4.9) (2Q25) (8.1) (2Q25)
(%, start-to-trough)(1)
Unemployment rate 8.4 (2Q25) 9.3 (2Q25) 6.4 (4Q24) 7.0 (4Q25) 11.9 (1Q25) 10.2 (4Q25) 4.3 (3Q24) 4.9 (2Q25)
(%, max)(2)
House price index (30.2) (4Q25) (14.7) (4Q24) (32.8) (3Q26) (25.5) (4Q25) (42.7) (2Q25) (14.5) (2Q26) (2.9) (4Q25) 1.2 (1Q24)
(%, start-to-trough)(1)
Inflation rate 10.1 (2Q24) 4.8 (2Q24) 4.1 (3Q24) 4.1 (4Q24) 5.4 (2Q24) 8.6 (2Q24) 3.5 (2Q24) 7.0 (4Q24)
(YoY % change, max)(3)
Central bank policy rate (%, max)(2) 6.0 (1Q24) 6.1 (1Q24) 6.4 (1Q24) 4.8 (3Q24) 5.8 (1Q24) 5.2 (1Q24) 6.1 (1Q24) 12.7 (3Q24)
1 Cumulative change to the highest level of the series during the
20-quarter projection.
2 Lowest projected unemployment or policy rate in the scenario.
3 Lowest projected year-on-year percentage change in inflation in the
scenario.
The following table describes the probabilities assigned in each scenario.
Scenario weightings, %
Standard weights UK US Hong Mainland China Canada France UAE Mexico
Kong
1Q24
Upside 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Central 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
Downside 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Downside 2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
4Q23
Upside 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Central 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
Downside 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Downside 2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
At 31 March 2024, scenario weights are consistent with those applied at 31
December 2023. The consensus Upside and Central scenarios for all key markets
have a combined weighting of 85%, with the remaining 15% assigned to the two
downside scenarios. Management assessed that forecast dispersion around the
consensus estimate had remained stable and that market measures of volatility
had stayed low. Risks were deemed to be adequately reflected in outer
scenarios at their calibrated probability.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are typically
short-term increases or decreases to the modelled allowance for ECL at either
a customer, segment or portfolio level where management believes allowances do
not sufficiently reflect the credit risk/expected credit losses at the
reporting date. These can relate to risks or uncertainties that are not
reflected in the models and/or to any late-breaking events with significant
uncertainty, subject to management review and challenge.
This includes refining model inputs and outputs and using adjustments to ECL
based on management judgement and quantitative analysis for impacts that are
difficult to model.
The effects of management judgemental adjustments are considered for both
balances and allowance for ECL when determining whether or not a significant
increase in credit risk has occurred and is allocated to a stage where
appropriate. This is in accordance with the internal adjustments framework.
Management judgemental adjustments are reviewed under the governance process
for IFRS 9 (as detailed in the section 'Credit risk management' on page 147 of
the Annual Report and Accounts 2023).
Review and challenge focuses on the rationale and quantum of the adjustments
with a further review carried out by the second line of defence where
significant. For some management judgemental adjustments, internal frameworks
establish the conditions under which these adjustments should no longer be
required and as such are considered as part of the governance process. This
internal governance process allows management judgemental adjustments to be
reviewed regularly and, where possible, to reduce the reliance on these
through model recalibration or redevelopment, as appropriate.
The drivers of management judgemental adjustments continue to evolve with the
economic environment and as new risks emerge.
In addition to management judgemental adjustments there are also 'Other
adjustments', which are made to address process limitations and data/model
deficiencies.
'Management judgemental adjustments' and 'Other adjustments' constitute the
total value of adjustments to modelled allowance for ECL. For the wholesale
portfolio, defaulted exposures are assessed individually and management
judgemental adjustments are made only to the performing portfolio.
At 31 March 2024, there was a $0.2bn reduction in management judgemental
adjustments compared with 31 December 2023.
Management judgemental adjustments made in estimating the scenario-weighted
reported allowance for ECL at 31 March 2024 are set out in the following
table.
Management judgemental adjustments to ECL at 31 March 2024(1,2)
Retail Wholesale(3) Total
$bn $bn $bn
Modelled ECL (A)(4) 2.7 2.2 4.9
Banks, sovereigns, government entities and low-risk counterparties 0.0 0.0
Corporate lending adjustments 0.2 0.2
Inflation related adjustments 0.1 0.1
Other credit judgements 0.2 0.2
Total management judgemental adjustments (B)(5) 0.3 0.2 0.5
Other adjustments (C)(6) (0.1) 0.0 (0.1)
Final ECL (A + B + C)(7) 2.9 2.3 5.2
Management judgemental adjustments to ECL at 31 December 2023(1,2)
Retail Wholesale(3) Total
$bn $bn $bn
Modelled ECL (A)(4) 2.6 2.4 5.0
Banks, sovereigns, government entities and low-risk counterparties 0.0 0.0
Corporate lending adjustments 0.1 0.1
Inflation-related adjustments 0.1 0.1
Other credit judgements 0.5 0.5
Total management judgemental adjustments (B)(5) 0.6 0.1 0.7
Other adjustments (C)(6) 0.0 0.0 0.0
Final ECL (A + B + C)(7) 3.2 2.5 5.7
1 Management judgemental adjustments presented in the table reflect
increases or (decreases) to allowance for ECL, respectively.
2 31 March 2024 excludes the Canada banking business, the sale of which
completed on 28 March 2024. 31 December 2023 includes the Canada banking
business. 31 March 2024 includes the retained portfolio following the sale of
retail banking operations in France, which completed on 1 January 2024.
31 December 2023 includes all France retail banking operations.
3 The wholesale portfolio corresponds to adjustments to the performing
portfolio (stage 1 and stage 2).
4 (A) refers to probability-weighted allowance for ECL before any
adjustments are applied.
5 (B) refers to adjustments that are applied where management believes
allowance for ECL does not sufficiently reflect the credit risk/expected
credit losses of any given portfolio at the reporting date. These can relate
to risks or uncertainties that are not reflected in the model and/or to any
late-breaking events.
6 (C) refers to adjustments to allowance for ECL made to address process
limitations and data/model deficiencies.
7 As presented within our internal credit risk governance (see page 147 of
the Annual Report and Accounts 2023).
At 31 March 2024, wholesale management judgemental adjustments were an
increase to allowance for ECL of $0.2bn (31 December 2023: $0.1bn increase),
mostly to reflect heightened uncertainty in specific sectors and geographies,
including adjustments to exposures to the real estate sectors in mainland
China, Hong Kong, the UK and the US.
In the retail portfolio, management judgemental adjustments were an increase
to modelled ECL of $0.3bn at 31 March 2024 (31 December 2023: $0.6bn
increase). Other credit judgements increased allowance for ECL by $0.2bn (31
December 2023: $0.5bn). These adjustments were primarily to capture the
remaining potential delayed impact of economic scenarios on unsecured
portfolio defaults in the UK and unemployment uncertainty. The decrease in
management judgemental adjustments to allowances compared with 31 December
2023 was primarily attributed to the UK where performance continued to remain
resilient and adjustments were recalibrated to consider restatements of
historical unemployment levels and Mexico where modelled ECL increases were
offset by reduced levels of adjustments. Inflation-related adjustments were
broadly unchanged compared with 31 December 2023.
Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against the economic
forecasts as part of the ECL governance process by recalculating the ECL under
each scenario described above for selected portfolios, applying a 100%
weighting to each scenario in turn. The weighting is reflected in both the
determination of a significant increase in credit risk and the measurement of
the resulting ECL.
The ECL calculated for the Upside and Downside scenarios should not be taken
to represent the upper and lower limits of possible ECL outcomes. The impact
of defaults that might occur in the future under different economic scenarios
is captured by recalculating ECL for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in numbers
representing more severe risk scenarios when assigned a 100% weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes
allowance for ECL and financial instruments related to defaulted (stage 3)
obligors. The measurement of stage 3 ECL is relatively more sensitive to
credit factors specific to the obligor than future economic scenarios, and
therefore the effect of macroeconomic factors are not necessarily the key
consideration when performing individual assessments of ECL for obligors in
default. Loans to defaulted obligors are a small portion of the overall
wholesale lending exposure, even if representing the majority of the allowance
for ECL. Due to the range and specificity of the credit factors to which the
ECL is sensitive, it is not possible to provide a meaningful alternative
sensitivity analysis for a consistent set of risks across all defaulted
obligors.
For retail credit risk exposures, the sensitivity analysis includes ECL
allowance for loans and advances to customers related to defaulted obligors.
This is because the retail ECL allowance for secured mortgage portfolios
including loans in all stages is sensitive to macroeconomic variables.
Group ECL sensitivity results
The allowance for ECL of the scenarios and management judgemental adjustments
is highly sensitive to movements in economic forecasts. If the Group allowance
for ECL balance was estimated solely on the basis of the Central scenario,
Downside scenario or the Downside 2 scenario at 31 March 2024, it would
increase/(decrease) as presented in the below table.
Retail Wholesale(1)
Total Group ECL at 31 March 2024(2,3) $bn $bn
Reported ECL 2.7 2.3
Scenarios
100% consensus Central scenario (0.1) (0.2)
100% consensus Upside scenario (0.6) (0.6)
100% consensus Downside scenario 0.4 0.7
100% Downside 2 scenario 2.2 4.1
Total Group ECL at 31 December 2023(2,3)
Reported ECL 3.0 2.5
Scenarios
100% consensus Central scenario (0.1) (0.2)
100% consensus Upside scenario (0.5) (0.7)
100% consensus Downside scenario 0.4 0.8
100% Downside 2 scenario 2.1 4.5
1 Includes low credit-risk financial instruments, such as debt
instruments at FVOCI, which have high carrying values but low ECL under all
the scenarios.
2 ECL sensitivities exclude portfolios utilising less complex
modelling approaches for the retail portfolio and excludes defaulted obligors
for the wholesale portfolio.
3 31 March 2024 excludes the Canada banking business, the sale of
which completed on 28 March 2024. 31 December 2023 includes the Canada banking
business. 31 March 2024 includes the retained portfolio following the sale of
retail banking operations in France, which completed on 1 January 2024. 31
December 2023 includes all France retail banking operations.
At 31 March 2024, the Group allowance for ECL, subject to this sensitivity
analysis, decreased by $0.3bn in the retail portfolio and decreased by $0.2bn
in the wholesale portfolio, compared with 31 December 2023.
In both the retail and wholesale portfolios, the reduction in sensitivity
since 31 December 2023 was primarily a result of the sale of our Canada
banking business and sale of our retail banking operations in France during
the first quarter of 2024.
Personal lending
Total personal lending for loans and advances to customers at amortised cost
by stage distribution
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
By legal entity
HSBC UK Bank plc 147,267 33,998 1,204 182,469 (136) (442) (252) (830)
HSBC Bank plc(1) 23,236 1,404 402 25,042 (24) (28) (112) (164)
The Hongkong and Shanghai Banking Corporation Limited 189,526 6,812 1,039 197,377 (172) (375) (163) (710)
HSBC Bank Middle East Limited 3,288 384 55 3,727 (17) (33) (35) (85)
HSBC North America Holdings Inc. 18,605 530 336 19,471 (5) (12) (15) (32)
Grupo Financiero HSBC, S.A. de C.V. 13,306 1,580 558 15,444 (248) (434) (280) (962)
Other trading entities(1) 727 30 3 760 (5) (1) (2) (8)
At 31 Mar 2024 395,955 44,738 3,597 444,290 (607) (1,325) (859) (2,791)
By legal entity
HSBC UK Bank plc 146,354 35,190 1,218 182,762 (152) (490) (255) (897)
HSBC Bank plc 14,598 1,747 273 16,618 (24) (22) (91) (137)
The Hongkong and Shanghai Banking Corporation Limited 191,382 7,741 948 200,071 (165) (402) (162) (729)
HSBC Bank Middle East Limited 3,335 397 47 3,779 (19) (33) (36) (88)
HSBC North America Holdings Inc. 18,096 553 364 19,013 (5) (14) (16) (35)
Grupo Financiero HSBC, S.A. de C.V. 12,717 1,740 536 14,993 (197) (463) (273) (933)
Other trading entities 10,052 115 119 10,286 (17) (10) (21) (48)
At 31 Dec 2023 396,534 47,483 3,505 447,522 (579) (1,434) (854) (2,867)
1 At 31 December 2023, Other trading entities included gross carrying
amount of $9,079m and allowances for ECL of $23m related to Private Banking
entities that were reclassified to HSBC Bank plc to continue the process of
simplifying our structure.
Wholesale lending
Total wholesale lending for loans and advances to banks and customers at
amortised cost by stage distribution
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
By legal entity
HSBC UK Bank plc 76,165 15,269 3,689 - 95,123 (220) (395) (643) - (1,258)
HSBC Bank plc(1) 97,222 8,779 2,758 40 108,799 (68) (128) (1,043) (7) (1,246)
The Hongkong and Shanghai Banking Corporation Limited 285,936 33,144 9,087 38 328,205 (168) (699) (3,437) (20) (4,324)
HSBC Bank Middle East Limited 25,215 1,491 895 3 27,604 (13) (8) (584) (2) (607)
HSBC North America Holdings Inc. 31,705 4,653 587 - 36,945 (30) (122) (131) - (283)
Grupo Financiero HSBC, S.A. de C.V. 14,338 1,244 315 - 15,897 (23) (49) (191) - (263)
Other trading entities(1) 7,482 789 327 - 8,598 (10) (7) (158) - (175)
Holding companies, shared service centres and intra-Group eliminations 67 1 - - 68 - (1) - - (1)
At 31 Mar 2024 538,130 65,370 17,658 81 621,239 (532) (1,409) (6,187) (29) (8,157)
By legal entity
HSBC UK Bank plc 76,793 18,735 3,769 - 99,297 (213) (474) (593) - (1,280)
HSBC Bank plc 82,025 8,452 2,673 40 93,190 (69) (138) (1,035) (7) (1,249)
The Hongkong and Shanghai Banking Corporation Limited 287,876 37,402 7,077 38 332,393 (185) (696) (3,349) (21) (4,251)
HSBC Bank Middle East Limited 21,927 1,598 894 3 24,422 (17) (11) (571) (2) (601)
HSBC North America Holdings Inc. 30,797 5,712 583 - 37,092 (24) (145) (127) - (296)
Grupo Financiero HSBC, S.A. de C.V. 13,714 1,186 382 - 15,282 (39) (56) (231) - (326)
Other trading entities 11,164 1,739 392 - 13,295 (14) (13) (192) - (219)
Holding companies, shared service centres and intra-Group eliminations 33 - - - 33 - - - - -
At 31 Dec 2023 524,329 74,824 15,770 81 615,004 (561) (1,533) (6,098) (30) (8,222)
1 At 31 December 2023, Other trading entities included gross carrying
amount of $1,792m and allowances for ECL of $1m related to Private Banking
entities that were reclassified to HSBC Bank plc to continue the process of
simplifying our structure.
Commercial real estate
The following table presents the Group's exposure to borrowers classified in
the commercial real estate sector where the ultimate parent is based in
mainland China, as well as all commercial real estate exposures booked on
mainland China balance sheets. The exposures and allowances for ECL at
31 March 2024 are split by country/territory and credit quality.
Additionally, allowances for ECL are split by stage.
Mainland China commercial real estate
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers(1) 5,429 4,711 441 10,581
Guarantees issued and others(2) 65 150
77 8
Total mainland China commercial real estate exposure at 31 Mar 2024 5,506 4,776 449 10,731
Distribution of mainland China commercial real estate exposure by credit
quality
Strong 363 1,915 113 2,391
Good 622 886 - 1,508
Satisfactory 508 1,405 152 2,065
Sub-standard 1,190 205 166 1,561
Credit impaired 2,823 365 3,206
18
At 31 Mar 2024 5,506 4,776 449 10,731
Allowance for ECL by credit quality
Strong - (5) - (5)
Good - (4) - (4)
Satisfactory - (23) - (23)
Sub-standard (77) (31) (15) (123)
Credit impaired (1,713) (188) (6) (1,907)
At 31 Mar 2024 (1,790) (251) (21) (2,062)
Allowance for ECL by stage distribution
Stage 1 - (11) - (11)
Stage 2 (77) (52) (15) (144)
Stage 3 (1,713) (188) (6) (1,907)
At 31 Mar 2024 (1,790) (251) (21) (2,062)
ECL coverage % 32.5 5.3 4.7 19.2
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent
liabilities.
Mainland China commercial real estate (continued)
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers(1) 6,033 4,917 839 11,789
Guarantees issued and others(2) 255 66 37 358
Total mainland China commercial real estate exposure at 31 Dec 2023 6,288 4,983 876 12,147
Distribution of mainland China commercial real estate exposure by
credit quality
Strong 781 1,723 2,510
6
Good 604 953 421 1,978
Satisfactory 679 1,704 261 2,644
Sub-standard 1,298 327 188 1,813
Credit impaired 2,926 276 3,202
-
At 31 Dec 2023 6,288 4,983 876 12,147
Allowance for ECL by credit quality
Strong (3) (3)
- -
Good (5) (6)
- (1)
Satisfactory (27) (30)
(3) -
Sub-standard (66) (87) (16) (169)
Credit impaired (1,726) (125) (1,851)
-
At 31 Dec 2023 (1,795) (247) (17) (2,059)
Allowance for ECL by stage distribution
Stage 1 (10) (10)
- -
Stage 2 (69) (112) (17) (198)
Stage 3 (1,726) (125) (1,851)
-
At 31 Dec 2023 (1,795) (247) (17) (2,059)
ECL coverage % 28.5 5.0 1.9 17.0
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent
liabilities.
Commercial real estate financing refers to lending that focuses on commercial
development and investment in real estate and covers commercial, residential
and industrial assets. The exposures in the table are related to companies
whose primary activities are focused on these activities. The table also
includes financing provided to a corporate or financial entity for the
purchase or financing of a property that supports the overall operations of
the business. Such exposures are outside of our normal definition of
commercial real estate, as applied elsewhere in this report, but are provided
here for a more comprehensive view of our mainland China property exposure.
The table above shows 56% ($6bn) of total exposure with a credit quality of
'satisfactory' or above, which was lower in proportion compared with 31
December 2023 (59%, $7.1bn). Total 'credit impaired' exposures increased to
30% ($3.2bn) (31 December 2023: 26%, $3.2bn), reflecting sustained stress in
the China commercial real estate market, including weakness in both property
market fundamentals and financing conditions for borrowers operating in this
sector.
Allowances for ECL are substantially against unsecured exposures. For secured
exposures, allowances for ECL are minimal, reflecting the nature and value of
the security held.
Facilities booked in Hong Kong continued to represent the largest proportion
of mainland China commercial real estate exposures, although total exposures
reduced to $5.5bn, down $0.8bn since 31 December 2023, as a result of
de-risking measures, repayments and write-offs. This portfolio remains
relatively higher risk, with 27% (31 December 2023: 33%) of exposure booked
with a credit quality of 'satisfactory' or above and 51% 'credit impaired' (31
December 2023: 47%).
At 31 March 2024, the Group had allowances for ECL of $1.8bn (31 December
2023: $1.8bn) held against commercial real estate exposures to companies whose
ultimate parent is based in mainland China, which are booked in Hong Kong. ECL
coverage increased to 32.5% (31 December 2023: 28.5%), reflecting repayments
during the quarter.
Approximately 45% of the unimpaired exposure in the Hong Kong portfolio is
lending to state-owned enterprises and relatively strong private-owned
enterprises. This is reflected in the relatively low allowance for ECL in this
part of the portfolio.
Market conditions remain subdued as a result of weak sentiment and residential
property transaction levels. While this is likely to continue in the near
term, the property sector is expected to stabilise during the course of 2024,
underpinned by a recovery in contracted sales once government policies have
started to take effect. However, the divergence between privately-owned
enterprises and state-owned enterprises is likely to continue, with
state-owned enterprises achieving above-market sales, and benefiting from
market share gains and better access to funding.
The Group has additional exposures to mainland China commercial real estate as
a result of lending to multinational corporates booked outside of mainland
China, which is not incorporated in the table above.
Capital risk
Capital overview
Capital adequacy metrics
At
31 Mar 31 Dec
2024 2023
Risk-weighted assets ('RWAs') ($bn)
Credit risk 663.6 683.9
Counterparty credit 36.7 35.5
Market risk 36.6 37.5
Operational risk 95.7 97.2
Total risk-weighted assets 832.6 854.1
Capital on a transitional basis ($bn)
Common equity tier 1 ('CET1') capital 126.3 126.5
Tier 1 capital 144.1 144.2
Total capital 172.5 171.2
Capital ratios on a transitional basis (%)
Common equity tier 1 ratio 15.2 14.8
Tier 1 ratio 17.3 16.9
Total capital ratio 20.7 20.0
Capital on an end point basis ($bn)
Common equity tier 1 ('CET1') capital 126.3 126.5
Tier 1 capital 144.1 144.2
Total capital 168.5 167.1
Capital ratios on an end point basis (%)
Common equity tier 1 ratio 15.2 14.8
Tier 1 ratio 17.3 16.9
Total capital ratio 20.2 19.6
Liquidity coverage ratio ('LCR')
Total high-quality liquid assets ($bn) 645.8 647.5
Total net cash outflow ($bn) 473.8 477.1
LCR (%) 136 136
References to EU regulations and directives (including technical standards)
should, as applicable, be read as references to the UK's version of such
regulation or directive, as onshored into UK law under the European Union
(Withdrawal) Act 2018, and as may be subsequently amended under UK law.
Capital figures and ratios in the previous table are calculated in accordance
with the regulatory requirements of the Capital Requirements Regulation and
Directive, the CRR II regulation and the Prudential Regulation Authority UK
('PRA') Rulebook ('CRR II'). The table presents them under the transitional
arrangements in CRR II for capital instruments and after their expiry, known
as the end point.
The liquidity coverage ratio is based on the average value of the preceding 12
months.
Regulatory numbers and ratios are as presented at the date of reporting. Small
changes may exist between these numbers and ratios and those subsequently
submitted in regulatory filings. Where differences are significant, we may
restate in subsequent periods.
Capital
At 31 March 2024, our CET1 capital ratio increased to 15.2% from 14.8% at 31
December 2023, reflecting a decrease in RWAs of $21.5bn, and a decline in CET1
capital of $0.2bn.
The key drivers impacting the CET1 ratio were:
- a 0.7 percentage point increase from strategic transactions,
including the gain on disposal of our Canada banking business adjusted for the
$0.21 per share special dividend, the RWA reduction from our disposals in
France and Canada, which was partially offset by the impairment loss following
the held for sale classification of our business in Argentina;
- a 0.2 percentage point increase from capital generation, mainly
through regulatory profits less dividends, adjusted for the share buy-back
announced at our 2023 year end results;
- a 0.4 percentage point decrease was driven by higher underlying
RWAs, excluding the reduction from our disposals in France and Canada; and
- a 0.2 percentage point decrease from the adverse impact of foreign
exchange fluctuations and an increase in regulatory deductions.
Our Pillar 2A requirement at 31 March 2024, as per the PRA's Individual
Capital Requirement based on a point-in-time assessment, was equivalent to
2.6% of RWAs, of which 1.5% was required to be met by CET1. Throughout 1Q24,
we complied with the PRA's regulatory capital adequacy requirement.
Leverage
Leverage ratio(1)
At
31 Mar 31 Dec
2024 2023
$bn $bn
Tier 1 capital (leverage) 144.1 144.2
Total leverage ratio exposure 2,528.0 2,574.8
% %
Leverage ratio 5.7 5.6
1 Leverage ratio calculation is in line with the PRA's UK leverage
rules. This includes IFRS 9 transitional arrangement and excludes central bank
claims.
Our leverage ratio was 5.7% at 31 March 2024, up from 5.6% at 31 December
2023. The reduction in the leverage exposures led to a rise of 0.1 percentage
point in the leverage ratio, primarily due to a decline in the balance sheet.
The decline in the balance sheet was mainly driven by the completion of the
sale of our banking business in Canada and the sale of our retail banking
operations in France.
At 31 March 2024, our UK minimum leverage ratio requirement of 3.25% was
supplemented by a leverage ratio buffer of 1.0%, which consists of an
additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio
buffer of 0.3%. These buffers translated into capital values of $17.7bn and
$7.6bn, respectively. We exceeded these leverage requirements throughout 1Q24.
Risk-weighted assets
RWAs by global business
WPB CMB GBM Corporate Total
Centre
RWAs
$bn $bn $bn $bn $bn
Credit risk 146.3 303.5 130.6 83.2 663.6
Counterparty credit risk 1.2 0.9 32.5 2.1 36.7
Market risk 1.3 1.0 27.4 6.9 36.6
Operational risk 33.4 32.4 32.2 (2.3) 95.7
At 31 Mar 2024 182.2 337.8 222.7 89.9 832.6
At 31 Dec 2023 192.9 354.5 218.5 88.2 854.1
RWAs by legal entities(1)
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada(3) Grupo Financiero HSBC, S.A. Other trading entities Holding companies, shared service centres and intra-Group eliminations Total
de C.V.
RWAs
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
Credit risk 110.7 75.8 318.9 18.2 61.2 - 26.7 43.2 8.9 663.6
Counterparty credit risk 0.2 18.2 9.5 0.6 3.2 - 0.8 4.2 - 36.7
Market risk(2) 0.1 25.8 27.2 2.4 3.7 0.5 0.7 1.6 3.1 36.6
Operational risk 17.8 18.0 46.1 3.7 7.2 3.4 5.3 5.2 (11.0) 95.7
At 31 Mar 2024 128.8 137.8 401.7 24.9 75.3 3.9 33.5 54.2 1.0 832.6
At 31 Dec 2023 129.2 131.5 396.7 24.3 72.2 31.9 32.6 59.6 6.7 854.1
1 Balances are on a third-party Group consolidated basis.
2 Market risk RWAs are non-additive across the legal entities due to
diversification effects within the Group.
3 The remaining RWA balance in HSBC Bank Canada results from averaging
and will roll off over future reporting cycles.
RWA movement by global business by key driver
Credit risk, counterparty credit risk Market Total
and operational risk risk RWAs
WPB CMB GBM Corporate
Centre
$bn $bn $bn $bn $bn $bn
RWAs at 1 Jan 2024 191.6 353.5 196.3 75.2 37.5 854.1
Asset size 0.1 0.2 4.2 5.2 4.7 14.4
Asset quality 0.6 6.2 0.5 - - 7.3
Model updates - - - - - -
Methodology and policy (1.8) 1.2 (0.7) 3.2 - 1.9
Acquisitions and disposals (7.3) (20.4) (2.6) (0.3) (5.6) (36.2)
Foreign exchange movements(1) (2.3) (3.9) (2.4) (0.3) - (8.9)
Total RWA movement (10.7) (16.7) (1.0) 7.8 (0.9) (21.5)
RWAs at 31 Mar 2024 180.9 336.8 195.3 83.0 36.6 832.6
1 Credit risk foreign exchange movements in this disclosure are computed
by retranslating RWAs into US dollars based on the underlying transactional
currencies.
RWA movement by legal entities by key driver(1)
Credit risk, counterparty credit risk and operational risk
HSBC UK Bank plc HSBC Bank plc(3) The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada(4) Grupo Financiero HSBC, S.A. Other trading entities Holding companies, shared service centres and intra-Group eliminations Market risk(5) Total RWAs
de C.V.
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
RWAs at 1 Jan 2024 129.0 108.8 369.3 21.5 69.6 31.1 31.9 58.0 (2.6) 37.5 854.1
Asset size 0.4 2.9 1.4 0.6 0.8 - 0.4 2.8 0.4 4.7 14.4
Asset quality (0.2) 0.1 6.7 - 1.0 - - (0.3) - - 7.3
Model updates - - - - - - - - - - -
Methodology and policy 0.7 5.2 (0.2) 0.5 0.2 - - (4.6) 0.1 - 1.9
Acquisitions and disposals - (3.5) - - - (27.1) - - - (5.6) (36.2)
Foreign exchange movements(2) (1.2) (1.5) (2.7) (0.1) - (0.6) 0.5 (3.3) - - (8.9)
Total RWA movement (0.3) 3.2 5.2 1.0 2.0 (27.7) 0.9 (5.4) 0.5 (0.9) (21.5)
RWAs at 31 Mar 2024 128.7 112.0 374.5 22.5 71.6 3.4 32.8 52.6 (2.1) 36.6 832.6
1 Balances are on a third-party Group consolidated basis.
2 Credit risk foreign exchange movements in this disclosure are
computed by retranslating RWAs into US dollars based on the underlying
transactional currencies.
3 Asset size movement includes a temporary RWA increase from the sale
proceeds of our Canada banking business.
4 The remaining RWA balance in HSBC Bank Canada results from averaging
and will roll off over future reporting cycles.
5 Market risk includes HSBC Bank Canada RWAs of $0.5bn, resulting from
value at risk calculations which are expected to roll off in 2Q24.
RWAs fell by $21.5bn during 1Q24, including a decrease of $8.9bn due to
foreign currency translation differences. The remaining $12.6bn reduction in
RWAs was predominantly attributed to the impact of the disposals of our France
retail banking operations and Canada banking business, which was partly offset
by asset size and asset quality movements.
Asset size
Corporate Centre RWAs increased by $5.2bn, which was largely driven by higher
securities financing exposures in counterparty credit risk, a temporary RWA
increase from the sale proceeds of our Canada banking business and a rise in
SAB corporate exposures.
The $4.7bn increase in market risk RWAs was mainly attributed to a rise in
value at risk driven by heightened market volatility.
GBM RWAs increased by $4.2bn, primarily due to a rise in corporate exposures,
mainly in HSBC Bank plc and higher sovereign exposures in Mexico. Further RWA
increase was largely attributed to higher securities financing exposures in
counterparty credit risk, notably in Asia and HSBC Bank plc.
CMB RWAs rose by $0.2bn due to an increase in corporate lending, mainly in
HSBC Bank plc, Argentina, Mexico and North America, which was largely offset
by a fall in Asia.
WPB RWAs increased by $0.1bn, mainly due to movements in mortgage portfolio
across our main legal entities.
Asset quality
The $7.3bn rise in RWAs was mainly due to unfavourable credit risk rating
migrations and portfolio mix changes in CMB in Asia.
Methodology and policy
Methodology changes and credit risk parameter refinements mainly in HSBC Bank
plc and the Middle East led to the RWA increase of $1.9bn. This includes the
retained portfolio of our France retail banking operations, transferred from
WPB to Corporate Centre.
Acquisitions and disposals
RWAs decreased by $36.2bn due to disposals completing in the period -
primarily the disposal of our banking business in Canada, amounting to $32.7bn
including the impact from the foreign exchange hedges for the Canada sale
proceeds, and the sale of our retail banking operations in France.
Regulatory and other developments
The PRA is expected to release their near final draft of the remaining parts
of Basel 3.1 in 2Q24, however in preparation we are assessing the impact of
the Basel 3.1 UK consultation paper released in November 2022 and the
associated implementation challenges (including data provision) on our RWAs
upon initial implementation, which is expected to be 1 July 2025. The RWA
output floor under Basel 3.1 is proposed to be subject to a
four-and-a-half-year transitional provision. Any impact from the output floor
is expected to be towards the end of the transition period.
The work by Basel on climate-related financial risks across all three pillars
of regulation, supervision and disclosure is ongoing. The initial work by
Basel concluded that climate risk drivers, including physical and transition
risks, can be captured in traditional financial risk categories such as
credit, market, operational and liquidity risks. As part of its wider efforts
to improve ESG risk coverage, Basel published a consultation paper in November
2023 on a Pillar 3 disclosures framework for climate-related financial risks
with a proposed effective date of 1 January 2026.
Legal proceedings and regulatory matters
As disclosed on page 419 of the Annual Report and Accounts 2023, in December
2023, the Korean Securities and Futures Commission fined The Hongkong and
Shanghai Banking Corporation Limited in connection with trades carried out in
breach of Korean short selling rules and referred the case to the Korean
Prosecutors' Office for investigation. In March 2024, the Korean Prosecutors'
Office issued a criminal indictment against The Hongkong and Shanghai Banking
Corporation Limited and three current and former employees. The Hongkong and
Shanghai Banking Corporation Limited will defend the action. There are many
factors that may affect the range of outcomes of this matter which could be
significant.
Regulatory transitional arrangements for IFRS 9 'Financial Instruments'
We have adopted the regulatory transitional arrangements of the Capital
Requirements Regulation for IFRS 9, including paragraph four of article 473a.
These allow banks to add back to their capital base a proportion of the impact
that IFRS 9 has upon their loan loss allowances. Our capital and ratios are
presented under these arrangements throughout the tables in this section,
including the end point figures.
For further details, see our Pillar 3 Disclosures at 31 March 2024, which is
expected to be published on or around 8 May 2024 at www.hsbc.com/investors.
Additional information
Dividends
Fourth interim dividend for 2023
On 21 February 2024, the Directors approved a fourth interim dividend for 2023
of $0.31 per ordinary share, which was paid on 25 April 2024 in cash. The
sterling and Hong Kong dollar amounts of approximately £0.248286 and
HK$2.426355 were calculated using the forward exchange rates quoted by HSBC
Bank plc in London at or about 11.00am on 15 April 2024.
First interim dividend for 2024 and special dividend
On 30 April 2024, the Directors approved a first interim dividend in respect
of the financial year ended 31 December 2024 of $0.10 per ordinary share, a
distribution of approximately $1.88bn. The Directors also approved a special
dividend of $0.21 per ordinary share arising from the proceeds of the sale of
the HSBC banking business in Canada to Royal Bank of Canada which completed on
28 March 2024, a distribution of approximately $3.95bn. The combined dividend
of $0.31 per ordinary share (the 'dividend') will be payable on 21 June 2024
to holders of record on the Principal Register in the UK, the Hong Kong
Overseas Branch Register or the Bermuda Overseas Branch Register on 10 May
2024.
The dividend will be payable in US dollars, or in pounds sterling or Hong Kong
dollars at the forward exchange rates quoted by HSBC Bank plc in London at or
about 11.00am on 11 June 2024. The ordinary shares in London, Hong Kong and
Bermuda, and American Depositary Shares ('ADSs') in New York will be quoted
ex-dividend on 9 May 2024.
The default currency on the Principal Register in the UK is pounds sterling,
and dividends can also be paid in Hong Kong dollars or US dollars, or a
combination of these currencies. International shareholders can register to
join the Global Dividend Service to receive dividends in their local
currencies. Please register and read the terms and conditions at
www.investorcentre.co.uk. UK shareholders can also register their sterling
bank mandates at www.investorcentre.co.uk.
The default currency on the Hong Kong Overseas Branch Register is Hong Kong
dollars, and dividends can also be paid in US dollars or pounds sterling, or a
combination of these currencies. Shareholders can arrange for direct credit of
Hong Kong dollar cash dividends into their bank account, or arrange to send US
dollar or pound sterling cheques to the credit of their bank account.
Shareholders can register for these services at www.investorcentre.com/hk.
Shareholders can also download a dividend currency election form from
www.hsbc.com/dividends, www.investorcentre.com/hk, or www.hkexnews.hk.
The default currency on the Bermuda Overseas Branch Register is US dollars,
and dividends can also be paid in Hong Kong dollars or pounds sterling, or a
combination of these currencies. Shareholders can change their dividend
currency election by contacting the Bermuda investor relations team.
Shareholders can download a dividend currency election form from
www.hsbc.com/dividends.
Changes to currency elections must be received by 6 June 2024 to be effective
for this dividend.
The dividend will be payable on ADSs, each of which represents five ordinary
shares, on 21 June 2024 to holders of record on 10 May 2024. The dividend of
$1.55 per ADS will be payable by the depositary in US dollars. Alternatively,
the cash dividend may be invested in additional ADSs by participants in the
dividend reinvestment plan operated by the depositary. Elections must be
received by 31 May 2024.
Any person who has acquired ordinary shares registered on the Principal
Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda
Overseas Branch Register but who has not lodged the share transfer with the
Principal Registrar in the UK, Hong Kong or Bermuda Overseas Branch Registrar
should do so before 4.00pm local time on 10 May 2024 in order to receive the
dividend.
Ordinary shares may not be removed from or transferred to the Principal
Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda
Overseas Branch Register on 10 May 2024. Any person wishing to remove ordinary
shares to or from each register must do so before 4.00pm local time on 9 May
2024.
Transfers of ADSs must be lodged with the depositary by 11.00am on 10 May 2024
in order to receive the dividend. ADS holders who receive a cash dividend will
be charged a fee, which will be deducted by the depositary, of $0.005 per ADS
per cash dividend.
Dividend on preference shares
A quarterly dividend of £0.01 per Series A sterling preference share is
payable on 15 March, 17 June, 16 September and 16 December 2024 for the
quarter then ended at the sole and absolute discretion of the Board of HSBC
Holdings plc. Accordingly, the Board of HSBC Holdings plc has approved a
quarterly dividend to be payable on 17 June 2024 to holders of record on 31
May 2024.
For and on behalf of
HSBC Holdings plc
Aileen Taylor
Group Company Secretary and Chief Governance Officer
The Board of Directors of HSBC Holdings plc as at the date of this
announcement comprises: Mark Edward Tucker*, Geraldine Joyce Buckingham(†),
Rachel Duan(†), Georges Bahjat Elhedery, Dame Carolyn Julie Fairbairn(†),
James Anthony Forese(†), Ann Frances Godbehere(†), Steven Craig
Guggenheimer(†), Dr José Antonio Meade Kuribreña(†), Kalpana Jaisingh
Morparia(†), Eileen K Murray(†), Brendan Robert Nelson(†), David Thomas
Nish(†), Noel Paul Quinn and Swee Lian Teo(†).
* Non-executive Group Chairman
† Independent non-executive Director
Investor relations/media relations contacts
For further information contact:
Investor relations Media relations
UK - Neil Sankoff UK - Gillian James
Telephone: +44 (0) 20 7991 5072 Telephone: +44 (0)7584 404 238
Email: investorrelations@hsbc.com Email: pressoffice@hsbc.com
Hong Kong - Yafei Tian UK - Kirsten Smart
Telephone: +852 2899 8909 Telephone: +44 (0)7725 733 311
Email: investorrelations@hsbc.com.hk Email: pressoffice@hsbc.com
Hong Kong - Aman Ullah
Telephone: +852 3941 1120
Email: aspmediarelations@hsbc.com.hk
Cautionary statement regarding forward-looking statements
This Earnings Release 1Q24 contains certain forward-looking statements with
respect to HSBC's: financial condition; results of operations and business,
including the strategic priorities; financial, investment and capital targets;
and ESG targets, commitments and ambitions described herein.
Statements that are not historical facts, including statements about HSBC's
beliefs and expectations, are forward-looking statements. Words such as 'may',
'will', 'should', 'expects', 'targets', 'anticipates', 'intends', 'plans',
'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', or
the negative thereof, other variations thereon or similar expressions are
intended to identify forward-looking statements. These statements are based on
current plans, information, data, estimates and projections, and therefore
undue reliance should not be placed on them. Forward-looking statements speak
only as of the date they are made. HSBC makes no commitment to revise or
update any forward-looking statements to reflect events or circumstances
occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the
periodic reports to the US Securities and Exchange Commission, summary
financial statements to shareholders, proxy statements, offering circulars and
prospectuses, press releases and other written materials, and in oral
statements made by HSBC's Directors, officers or employees to third parties,
including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers
are cautioned that a number of factors could cause actual results to differ,
in some instances materially, from those anticipated or implied in any
forward-looking statement.
These include, but are not limited to:
- changes in general economic conditions in the markets in which we
operate, such as new, continuing or deepening recessions, prolonged
inflationary pressures and fluctuations in employment levels and the
creditworthiness of customers beyond those factored into consensus forecasts;
the Russia-Ukraine war and the Israel-Hamas war and their impact on global
economies and the markets where HSBC operates, which could have a material
adverse effect on (among other things) our financial condition, results of
operations, prospects, liquidity, capital position and credit ratings;
deviations from the market and economic assumptions that form the basis for
our ECL measurements (including, without limitation, as a result of the
Russia-Ukraine war and the Israel-Hamas war, inflationary pressures, commodity
price changes, and ongoing developments in the commercial real estate sector
in mainland China); potential changes in HSBC's dividend policy; changes and
volatility in foreign exchange rates and interest rates levels, including the
accounting impact resulting from financial reporting in respect of
hyperinflationary economies; volatility in equity markets; lack of liquidity
in wholesale funding or capital markets, which may affect our ability to meet
our obligations under financing facilities or to fund new loans, investments
and businesses; geopolitical tensions or diplomatic developments producing
social instability or legal uncertainty, such as the Russia-Ukraine war or the
Israel-Hamas war (including the continuation and escalation thereof) and the
related imposition of sanctions and trade restrictions, supply chain
restrictions and disruptions, sustained increases in energy prices and key
commodity prices, claims of human rights violations, diplomatic tensions,
including between China and the US, the UK, the EU, India and other countries,
and developments in Hong Kong and Taiwan, alongside other potential areas of
tension, which may adversely affect HSBC by creating regulatory, reputational
and market risks; the efficacy of government, customer, and HSBC's actions in
managing and mitigating ESG risks, in particular climate risk, nature-related
risks and human rights risks, and in supporting the global transition to net
zero carbon emissions, each of which can impact HSBC both directly and
indirectly through our customers and which may result in potential financial
and non-financial impacts; illiquidity and downward price pressure in national
real estate markets; adverse changes in central banks' policies with respect
to the provision of liquidity support to financial markets; heightened market
concerns over sovereign creditworthiness in over-indebted countries; adverse
changes in the funding status of public or private defined benefit pensions;
societal shifts in customer financing and investment needs, including consumer
perception as to the continuing availability of credit; exposure to
counterparty risk, including third parties using us as a conduit for illegal
activities without our knowledge; the discontinuation of certain key Ibors and
the transition of the remaining legacy Ibor contracts to near risk-free
benchmark rates, which continues to expose HSBC to some financial and
non-financial risks; and price competition in the market segments we serve;
- changes in government policy and regulation, including the monetary,
interest rate and other policies of central banks and other regulatory
authorities in the principal markets in which we operate and the consequences
thereof (including, without limitation, actions taken as a result of the
impact of the Russia-Ukraine war on inflation); initiatives to change the
size, scope of activities and interconnectedness of financial institutions in
connection with the implementation of stricter regulation of financial
institutions in key markets worldwide; revised capital and liquidity
benchmarks, which could serve to deleverage bank balance sheets and lower
returns available from the current business model and portfolio mix; changes
to tax laws and tax rates applicable to HSBC, including the imposition of
levies or taxes designed to change business mix and risk appetite; the
practices, pricing or responsibilities of financial institutions serving their
consumer markets; expropriation, nationalisation, confiscation of assets and
changes in legislation relating to foreign ownership; the UK's relationship
with the EU, which continues to be characterised by uncertainty and political
disagreement, despite the signing of the Trade and Cooperation Agreement
between the UK and the EU, particularly with respect to the potential
divergence of UK and EU law on the regulation of financial services; changes
in government approach and regulatory treatment in relation to ESG disclosures
and reporting requirements, and the current lack of a single standardised
regulatory approach to ESG across all sectors and markets; changes in UK
macroeconomic and fiscal policy, which may result in fluctuations in the value
of the pound sterling; general changes in government policy that may
significantly influence investor decisions; the costs, effects and outcomes of
regulatory reviews, actions or litigation, including any additional compliance
requirements; and the effects of competition in the markets where we operate
including increased competition from non-bank financial services companies;
and
- factors specific to HSBC, including our success in adequately
identifying the risks we face, such as the incidence of loan losses or
delinquency, and managing those risks (through account management, hedging and
other techniques); our ability to achieve our financial, investment, capital
and ESG targets, commitments and ambitions (including the positions set forth
in our thermal coal phase-out policy and our energy policy and our targets to
reduce our on-balance sheet financed emissions and, where applicable,
facilitated emissions in our portfolio of selected high-emitting sectors),
which may result in our failure to achieve any of the expected benefits of our
strategic priorities; evolving regulatory requirements and the development of
new technologies, including artificial intelligence, affecting how we manage
model risk; model limitations or failure, including, without limitation, the
impact that high inflationary pressures and rising interest rates have had on
the performance and usage of financial models, which may require us to hold
additional capital, incur losses and/or use compensating controls, such as
judgemental post-model adjustments, to address model limitations; changes to
the judgements, estimates and assumptions we base our financial statements on;
changes in our ability to meet the requirements of regulatory stress tests; a
reduction in the credit ratings assigned to us or any of our subsidiaries,
which could increase the cost or decrease the availability of our funding and
affect our liquidity position and net interest margin; changes to the
reliability and security of our data management, data privacy, information and
technology infrastructure, including threats from cyber-attacks, which may
impact our ability to service clients and may result in financial loss,
business disruption and/or loss of customer services and data; the accuracy
and effective use of data, including internal management information that may
not have been independently verified; changes in insurance customer behaviour
and insurance claim rates; our dependence on loan payments and dividends from
subsidiaries to meet our obligations; changes in our reporting frameworks and
accounting standards, which have had and may continue to have a material
impact on the way we prepare our financial statements; our ability to
successfully execute planned strategic acquisitions and disposals; our success
in adequately integrating acquired businesses into our business, including the
integration of SVB UK into our CMB business; changes in our ability to manage
third-party, fraud, financial crime and reputational risks inherent in our
operations; employee misconduct, which may result in regulatory sanctions
and/or reputational or financial harm; changes in skill requirements, ways of
working and talent shortages, which may affect our ability to recruit and
retain senior management and diverse and skilled personnel; and changes in our
ability to develop sustainable finance and ESG-related products consistent
with the evolving expectations of our regulators, and our capacity to measure
the environmental and social impacts from our financing activity (including as
a result of data limitations and changes in methodologies), which may affect
our ability to achieve our ESG ambitions, targets and commitments, including
our net zero ambition, our targets to reduce on-balance sheet financed
emissions and, where applicable, facilitated emissions in our portfolio of
selected high-emitting sectors and the positions set forth in our thermal coal
phase-out policy and our energy policy, and increase the risk of greenwashing.
Effective risk management depends on, among other things, our ability through
stress testing and other techniques to prepare for events that cannot be
captured by the statistical models it uses; our success in addressing
operational, legal and regulatory, and litigation challenges; and other risks
and uncertainties we identify in 'Managing risk' on page 35 of this Earnings
Release 1Q24.
Additional detailed information concerning important factors, including but
not limited to ESG-related factors, that could cause actual results to differ
materially from those anticipated or implied in any forward-looking statement
in this Earnings Release 1Q24 is available in our Annual Report and Accounts
for the fiscal year ended 31 December 2023, which was filed with the SEC on
Form 20-F on 22 February 2024.
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
Abbreviations
1Q23 First quarter of 2023
1Q24 First quarter of 2024
2Q24 Second quarter of 2024
4Q23 Fourth quarter of 2023
ADR American Depositary Receipt
ADS American Depositary Share
AIBL Average interest-bearing liabilities
AIEA Average interest-earning assets
Banking NII Banking net interest income
Basel III Basel Committee's reforms to strengthen global capital and liquidity rules
Basel 3.1 Outstanding measures to be implemented from the Basel III reforms
BoCom Bank of Communications Co., Limited, one of China's largest banks
Bps Basis points. One basis point is equal to one-hundredth of a percentage point
CET1 Common equity tier 1
CMB Commercial Banking, a global business
CODM Chief Operating Decision Maker
Corporate Centre Corporate Centre comprises Central Treasury, our legacy businesses, interests
in our associates and joint ventures, central stewardship costs and
consolidation adjustments
CSM Contractual service margin
EBA European Banking Authority
ECL Expected credit losses. In the income statement, ECL is recorded as a change
in expected credit losses and other credit impairment charges. In the balance
sheet, ECL is recorded as an allowance for financial instruments to which only
the impairment requirements in IFRS 9 are applied
ESG Environmental, social and governance
EU European Union
FDIC Federal Deposit Insurance Corporation
FTE Full-time equivalent staff
FVOCI Fair value through other comprehensive income
FX Foreign exchange
GAAP Generally accepted accounting principles
GBM Global Banking and Markets, a global business
GDP Gross domestic product
GEC Group Executive Committee
GMT Pillar 2 Global Minimum Tax
GPS Global Payments Solutions, the business formerly known as Global Liquidity and
Cash Management
Group HSBC Holdings together with its subsidiary undertakings
GTRF Global Trade and Receivables Finance
Hong Kong Hong Kong Special Administrative Region of the People's Republic of China
HSBC HSBC Holdings together with its subsidiary undertakings
HSBC Bank plc HSBC Bank plc, also known as the non-ring-fenced bank
HSBC Holdings HSBC Holdings plc, the parent company of HSBC
HSBC UK HSBC UK Bank plc, also known as the ring-fenced bank
IAS International Accounting Standards
Ibor Interbank offered rate
IFRSs International Financial Reporting Standards
IVB HSBC Innovation Banking
JV Joint venture
LCR Liquidity coverage ratio
Long term For our financial targets, we define long term as five to six years,
commencing 1 January 2024
Mainland China People's Republic of China excluding Hong Kong and Macau
Medium term For our financial targets, we define medium term as three to four years,
commencing 1 January 2024
MENAT Middle East, North Africa and Türkiye
MSS Markets and Securities Services, HSBC's capital markets and securities
services businesses in Global Banking and Markets
Net operating income Net operating income before change in expected credit losses and other credit
impairment charges, also referred to as revenue
NII Net interest income
NIM Net interest margin
ONS Office for National Statistics
POCI Purchased or originated credit-impaired financial assets
PRA Prudential Regulation Authority (UK)
Revenue Net operating income before ECL
RoE Return on average ordinary shareholders' equity
RoTE Return on average tangible equity
RWA Risk-weighted asset
SAB Saudi Awwal Bank, which was formed from the merger between The Saudi British
Bank and Alawwal Bank
SVB UK Silicon Valley Bank UK Limited, now HSBC Innovation Bank Limited
UAE United Arab Emirates
UK United Kingdom
US United States of America
WPB Wealth and Personal Banking, a global business
$m/$bn/$tn United States dollar millions/billions/trillions. We report in US dollars
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