Annual Financial Report - 2 o

RNS Number : 2897J

HSBC Holdings PLC

30 March 2010

 



For the year

·     Total operating income down by 11 per cent to US$78,631 million (2008: US$88,571 million).

·     Net operating income before loan impairment charges and other credit risk provisions down by 19 per cent to US$66,181 million (2008: US$81,682 million).

·     Underlying group pre-tax profit up by US$15,308 million to US$13,286 million.

·     Group pre-tax profit down by 24 per cent to US$7,079 million (2008: US$9,307 million).

·     Profit attributable to shareholders of the parent company up by 2 per cent to US$5,834 million (2008: US$5,728 million).

·     Return on average shareholders' equity of 5.1 per cent (2008: 4.7 per cent).

·     Earnings per ordinary share down by 17 per cent to US$0.34 (2008: US$0.41).

At the year-end

·     Total equity up by 35 per cent to US$135,661 million (2008: US$100,229 million).

·     Loans and advances to customers down by 4 per cent to US$896,231 million (2008: US$932,868 million).

·     Customer accounts up by 4 per cent to US$1,159 billion (2008: US$1,115 billion).

·     Ratio of customer advances to customer accounts 77.3 per cent (2008: 83.6 per cent).

·     Risk-weighted assets down by 1 per cent to US$1,133 billion (2008: US$1,148 billion).

Dividends and capital position

·     Total dividends declared in respect of 2009 of US$0.34 per ordinary share, a decrease of 47 per cent on dividends for 2008; fourth interim dividend for 2009 of US$0.10 per ordinary share, no change from 2008.

·     Core tier 1 ratio of 9.4 per cent and tier 1 ratio of 10.8 per cent.

Rights issue

·     In April 2009, HSBC Holdings raised £12.5 billion (US$17.8 billion), net of expenses, by way of a fully underwritten rights issue, offering its shareholders 5 new ordinary shares for every 12 ordinary shares at a price of 254 pence per new ordinary share. 

Dividends per ordinary share1 (US dollars)		Earnings per ordinary share (US dollars)

For footnotes, see page 5.

Capital and performance ratios

	2009		2008
	%		%
Capital ratios
Core tier 1 ratio .....................................................................................................................	9.4		7.0
Tier 1 ratio ............................................................................................................................	10.8		8.3
Total capital ratio .................................................................................................................	13.7		11.4
Performance ratios
Return on average invested capital2 ........................................................................................	4.1		4.0
Return on average total shareholders' equity3 ........................................................................	5.1		4.7
Post-tax return on average total assets ..................................................................................	0.27		0.26
Post-tax return on average risk-weighted assets .....................................................................	0.58		0.55
Credit coverage ratios
Loan impairment charges as a percentage of total operating income .....................................	31.72		27.24
Loan impairment charges as a percentage of average gross customer advances .......................	2.82		2.45
Total impairment allowances outstanding as a percentage of impaired loans at the year-end ..	83.2		94.3
Efficiency and revenue mix ratios
Cost efficiency ratio4
- reported ..........................................................................................................................	52.0		60.1
- excluding goodwill impairment5 .......................................................................................	52.0		47.2
As a percentage of total operating income:
- net interest income .........................................................................................................	51.8		48.1
- net fee income ................................................................................................................	22.5		22.6
- net trading income ..........................................................................................................	12.5		7.4
Financial ratios
Loans and advances to customers as a percentage of customer accounts .................................	77.3		83.6
Average total shareholders' equity to average total assets ......................................................	4.72		4.87

Share information at the year-end

	2009		2008
US$0.50 ordinary shares in issue (million) .............................................................................	17,408		12,105
Market capitalisation (billion) ...............................................................................................	US$199		US$114
Closing market price per ordinary share:6
- London ...........................................................................................................................	£7.09		£5.77
- Hong Kong .....................................................................................................................	HK$89.40		HK$67.81
Closing market price per American Depositary Share7 ...........................................................	US$57.09		US$44.15

	Over 1 year		Over 3 years		Over 5 years
HSBC total shareholder return to 31 December 20098 ................................	128.3		103.6		120.6
Benchmarks:
- FTSE 1009 ..........................................................................................	127.3		98.0		135.4
- MSCI World10 .....................................................................................	116.7		103.6		134.9
- MSCI Banks11 ......................................................................................	125.2		70.6		92.3

Return on average invested capital (per cent)		Cost efficiency ratio (per cent)

For footnotes, see page 5.

Five‑year comparison

	2009		2008		2007		2006		2005
	US$m		US$m		US$m		US$m		US$m
For the year
Net interest income ............................	40,730		42,563		37,795		34,486		31,334
Other operating income ......................	37,901		46,008		49,806		35,584		30,370
Loan impairment charges and other credit risk provisions ......................	(26,488)		(24,937)		(17,242)		(10,573)		(7,801)
Total operating expenses ...................	(34,395)		(49,099)		(39,042)		(33,553)		(29,514)
Profit before tax ................................	7,079		9,307		24,212		22,086		20,966
Profit attributable to shareholders of the parent company	5,834		5,728		19,133		15,789		15,081
Dividends1 ..........................................	5,639		11,301		10,241		8,769		7,750
At the year-end
Called up share capital ........................	8,705		6,053		5,915		5,786		5,667
Total shareholders' equity ..................	128,299		93,591		128,160		108,352		92,432
Capital resources12,13 ..........................	155,729		131,460		152,640		127,074		105,449
Customer accounts .............................	1,159,034		1,115,327		1,096,140		896,834		739,419
Undated subordinated loan capital .......	2,785		2,843		2,922		3,219		3,474
Preferred securities and dated subordinated loan capital14 ..............	52,126		50,307		49,472		42,642		35,856
Loans and advances to customers15 .....	896,231		932,868		981,548		868,133		740,002
Total assets ........................................	2,364,452		2,527,465		2,354,266		1,860,758		1,501,970
	US$		US$		US$		US$		US$
Per ordinary share
Basic earnings16 ..................................	0.34		0.41		1.44		1.22		1.18
Diluted earnings16 ...............................	0.34		0.41		1.42		1.21		1.17
Basic earnings excluding goodwill impairment5,16	0.34		1.19		1.44		1.22		1.18
Dividends ...........................................	0.34		0.93		0.87		0.76		0.69
Net asset value at year-end17 ..............	7.17		7.44		10.72		9.24		8.03
Share information
US$0.50 ordinary shares in issue (millions).................................	17,408		12,105		11,829		11,572		11,334
	%		%		%		%		%
Financial ratios
Dividend payout ratio18
- reported16 ..................................................................................................	100.0		226.8		60.4		62.3		58.5
- excluding goodwill impairment5,16 ..............................................................	100.0		78.2		60.4		62.3		58.5
Post-tax return on average total assets	0.27		0.26		0.97		1.00		1.06
Return on average total shareholders' equity	5.1		4.7		15.9		15.7		16.8
Loans and advances to customers as a percentage of customer accounts	77.3		83.6		89.5		96.8		100.1
Average total shareholders' equity to average total assets	4.72		4.87		5.69		5.97		5.96
Capital ratios12
Tier 1 ratio .........................................	10.8		8.3		9.3		9.4		9.0
Total capital ratio ...............................	13.7		11.4		13.6		13.5		12.8
Foreign exchange translation rates to US$
Closing - £:US$1 ...............................	0.616		0.686		0.498		0.509		0.581
- €:US$1 ...............................	0.694		0.717		0.679		0.759		0.847
Average - £:US$1	0.641		0.545		0.500		0.543		0.550
- €:US$1 ...............................	0.719		0.684		0.731		0.797		0.805

For footnotes, see page 5.

Consolidated Financial Statements

The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board ('IASB') and as endorsed by the European Union ('EU'). EU‑endorsed IFRSs may differ from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the EU. At 31 December 2009, there were no unendorsed standards effective for the year ended 31 December 2009 affecting these consolidated and separate financial statements, and there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC's financial statements for the year ended 31 December 2009 are prepared in accordance with IFRSs as issued by the IASB.

HSBC uses the US dollar as its presentation currency because the US dollar and currencies linked to it form the major currency bloc in which HSBC transacts and funds its business. Unless otherwise stated, the information presented in this document has been prepared in accordance with IFRSs.

When reference to 'underlying' or 'underlying basis' is made in tables or commentaries, comparative information has been expressed at constant currency (see page 21), eliminating the impact of fair value movements in respect of credit spread changes on HSBC's own debt and adjusting for the effects of acquisitions and disposals. A reconciliation of reported and underlying profit before tax is presented on page 22.

Footnotes to Financial Highlights

  1 Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of, or for, that year. The third interim dividend for 2008 of US$0.18 was paid on 14 January 2009. The fourth interim dividend for 2008 of US$0.10 was paid on 6 May 2009. First, second and third interim dividends for 2009, each of US$0.08 per ordinary share, were paid on 8 July 2009, 7 October 2009 and 13 January 2010, respectively. Note 12 on the Financial Statements provides more information on the dividends declared in 2009. On 1 March 2010 the Directors declared a fourth interim dividend for 2009 of US$0.10 per ordinary share in lieu of a final dividend, which will be payable to ordinary shareholders on 5 May 2010 in cash in US dollars, or in pounds sterling or Hong Kong dollars at exchange rates to be determined on 26 April 2010, with a scrip dividend alternative. The reserves available for distribution at 31 December 2009 were US$34,460 million.

Quarterly dividends of US$15.50 per 6.20 per cent non-cumulative Series A US dollar preference share, equivalent to a dividend of US$0.3875 per Series A ADS, each of which represents one-fortieth of a Series A dollar preference share, were paid on 16 March 2009, 15 June 2009, 15 September 2009 and 15 December 2009.
Quarterly coupons of 8.125 per cent capital securities of US$0.508 were paid on 15 January 2009, 15 April 2009, 15 July 2009 and 15 October 2009.

  2 The definition of return on average invested capital and a reconciliation to the equivalent GAAP measures are set out on page 19.

  3 The return on average total shareholders' equity is defined as profit attributable to shareholders of the parent company divided by average total shareholders' equity.

  4 The cost efficiency ratio is defined as total operating expenses divided by net operating income before loan impairment charges and other credit risk provisions.

  5 In 2008 an impairment charge of US$10,564 million to fully write off goodwill in Personal Financial Services in North America was reported in total operating expenses. This amount is excluded from total operating expenses to calculate the ratio.

  6 The prices of HSBC Holdings ordinary shares and American Depositary Shares ('ADS') have been adjusted for the 5-for-12 rights issue completed in April 2009.

  7 Each ADS represents five ordinary shares.

  8 Total shareholder return is defined on page 19.

  9  The Financial Times Stock Exchange 100 Index.

10  The Morgan Stanley Capital International World Index.

11 The Morgan Stanley Capital International World Bank Index

12 The calculation of capital resources, capital ratios and risk-weighted assets for 2009 and 2008 is on a Basel II basis. 2005 to 2007 comparatives are on a Basel I basis.

13 Capital resources are total regulatory capital, the calculation of which is set out on page 289.

14 Includes perpetual preferred securities, details of which can be found in Note 32 on the Financial Statements.

15 Net of impairment allowances.

16 The effect of the bonus element of the rights issue (Note 13 on the Financial Statements) has been included within the basic and diluted earnings per share.

17 The definition of net asset value per share is total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue.

18 Dividends per ordinary share expressed as a percentage of earnings per ordinary share.

The Annual Report and Accounts 2009 contains certain forward-looking statements with respect to the financial condition, results of operations and business of HSBC.

Statements that are not historical facts, including statements about HSBC's beliefs and expectations, are forward-looking statements. Words such as 'expects', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, 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, and it should not be assumed that they have been revised or updated in the light of new information or future events.

Written and/or oral forward-looking statements may also be made in the periodic reports to the United States 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 factors include, among others:

·     changes in general economic conditions in the markets in which HSBC operates, such as:

-     continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts;

-     changes in foreign exchange rates, in both market exchange rates (for example, between the US dollar and pound sterling) and government-established exchange rates (for example, between the Hong Kong dollar and US dollar);

-     the timing of interest rate rises in countries which have reduced policy rates to close to zero and more general volatility in interest rates;

-     volatility in equity markets, including in the smaller and less liquid trading markets in Asia and Latin America;

-     lack of liquidity in wholesale funding markets;

-     illiquidity and downward price pressure in national real estate markets, particularly consumer-owned real estate markets;

-     the ease with which central banks which have provided liquidity support to financial markets through quantitative easing and extended liquidity schemes are able to withdraw such support and the timing of any withdrawal;

-     heightened market concerns over sovereign creditworthiness in over-indebted countries;

-     the impact of lower than expected investment returns on the funding of private and public sector defined benefit pensions;

-     the effect of unexpected changes in actuarial assumptions on longevity which would influence the funding of private and public sector defined benefit pensions; and

-     consumer perception as to the continuing availability of credit, and price competition in the market segments served by HSBC.

·     changes in government policy and regulation, including:

-     the monetary, interest rate and other policies of central banks and other regulatory authorities, including the UK Financial Services Authority, the Bank of England, the Hong Kong Monetary Authority, the US Federal Reserve, the US Securities and Exchange Commission, the US Office of the Comptroller of the Currency, the European Central Bank, the People's Bank of China and the central banks of other leading economies and markets where HSBC operates;

-     initiatives to change the size, scope of activities and interconnectedness of financial institutions following consideration of the regulatory consultations currently under way;

-     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;

-     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;

-     changes in bankruptcy legislation in the principal markets in which HSBC operates and the consequences thereof;

-     general changes in government policy that may significantly influence investor decisions, in particular in markets in which HSBC operates, including financial institutions newly taken into state ownership on a full or partial basis;

-     extraordinary government actions as a result of current market turmoil;

-     other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for HSBC's products and services;

-    the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; and

-     the effects of competition in the markets where HSBC operates including increased competition from non-bank financial services companies, including securities firms.

·     factors specific to HSBC:

-     the success of HSBC in adequately identifying the risks it faces, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, HSBC's ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and

-     the success of HSBC in addressing operational, legal and regulatory, and litigation challenges.

 

END

 

 

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