Half Year Report - 2023 Interim Report - Part 4

HSBC Holdings PLC
01 August 2023
 

Directors' responsibility statement

The Directors1 are required to prepare the condensed consolidated financial statements on a going concern basis unless it is not appropriate. They are satisfied that the Group has the resources to continue in business for the foreseeable future and that the financial statements continue to be prepared on a going concern basis.

The Directors confirm that to the best of their knowledge:

-   the financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB') and IAS 34 'Interim Financial Reporting' as adopted by the European Union, and the Disclosure Guidance and Transparency Rules ('DTR') sourcebook of the UK's Financial Conduct Authority;

-   this Interim Report 2023 gives a true, fair, balanced and understandable view of the assets, liabilities, financial position and profit or loss of the Company; and

-   this Interim Report 2023 includes a fair review of the information required by:

-    DTR 4.2.7R, being an indication of: important events that have occurred during the first six months of the financial year ending 31 December 2023 and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

-    DTR 4.2.8R, being: related party transactions that have taken place in the first six months of the financial year ending 31 December 2023, which have materially affected the financial position or performance of HSBC during that period; and any changes in the related parties transactions described in the Annual Report and Accounts 2022 that could materially affect the financial position or performance of HSBC during the first six months of the financial year ending 31 December 2023.

 

 

 

 

 

 

On behalf of the Board

Mark E Tucker

Group Chairman

1 August 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


1   Mark Tucker*, Geraldine Buckingham†, Rachel Duan†, Georges Elhedery, Carolyn Julie Fairbairn†, James Anthony Forese†, Steven Guggenheimer†, José Antonio Meade Kuribreña†, Kalpana Morparia†, Eileen K Murray†, David Nish† and Noel Quinn.

*   Non-executive Group Chairman † Independent non-executive Director  


Independent review report to HSBC Holdings plc

Report on the interim condensed financial statements

Our conclusion

We have reviewed HSBC Holdings plc's interim condensed financial statements (the 'interim financial statements') in the interim report of HSBC Holdings plc and its subsidiaries (the 'Group') for the six month period ended 30 June 2023 (the 'period').

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting', International Accounting Standard 34, 'Interim Financial Reporting' as issued by the IASB, International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

-   the consolidated balance sheet as at 30 June 2023;

-   the consolidated income statement and the statement of comprehensive income for the period then ended;

-   the consolidated statement of cash flows for the period then ended;

-   the consolidated statement of changes in equity for the period then ended; and

-   the notes to the interim financial statements and certain other information1.

The interim financial statements included in the interim report of the Group have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' , International Accounting Standard 34, 'Interim Financial Reporting' as issued by the IASB, International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ('ISRE (UK) 2410'). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities for the interim condensed financial statements and the review

Our responsibilities and those of the directors

The interim report of the Group, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report of the Group in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the interim report of the Group, including the interim financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

PricewaterhouseCoopers LLP

Chartered Accountants

London

1 August 2023


1     'Certain other information' comprises the following tables: 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' and 'Distribution of financial instruments to which the impairment requirements of IFRS 9 are applied, by credit quality and stage allocation'.


Interim condensed financial statements

 

Contents  

108

Consolidated income statement

109

Consolidated statement of comprehensive income

110

Consolidated balance sheet

111

Consolidated statement of changes in equity

114

Consolidated statement of cash flows

 


Consolidated income statement



Half-year to1



30 Jun

30 Jun



2023

2022


Notes*

$m

$m

Net interest income


                18,264 

                13,385 

-  interest income


                46,955 

                19,788 

-  interest expense


              (28,691)

                 (6,403)

Net fee income

2

                  6,085 

                   6,228 

-  fee income


                  7,947 

                   7,913 

-  fee expense


                (1,862)

                 (1,685)

Net income from financial instruments held for trading or managed on a fair value basis


                  8,112 

                   4,856 

Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss


                  4,304 

              (11,849)

Insurance finance income/(expense)


                (4,234)

                11,773 

Insurance service result


                      524 

                      370 

-  insurance revenue


                  1,104 

                      980 

-  insurance service expense


                    (580)

                     (610)

Gain on acquisitions2

15

                  1,507 

                          - 

Reversal of impairment loss relating to the planned sale of our retail banking operations in France3

15

                  2,130 

                          - 

Other operating income


                      184 

                     (218)

Net operating income before change in expected credit losses and other credit impairment charges4


                36,876 

                24,545 

Change in expected credit losses and other credit impairment charges


                (1,345)

                 (1,087)

Net operating income


                35,531 

                23,458 

Employee compensation and benefits


                (8,954)

                 (8,896)

General and administrative expenses


                (4,912)

                 (5,337)

Depreciation and impairment of property, plant and equipment and right-of-use assets


                    (782)

                 (1,072)

Amortisation and impairment of intangible assets


                    (809)

                     (822)

Total operating expenses


              (15,457)

              (16,127)

Operating profit


                20,074 

                   7,331 

Share of profit in associates and joint ventures


                  1,583 

                   1,449 

Profit before tax


                21,657 

                   8,780 

Tax (charge)/credit


                (3,586)

                      151 

Profit for the period


                18,071 

                   8,931 

Attributable to:




-  ordinary shareholders of the parent company


                16,966 

                   7,966 

-  other equity holders


                      542 

                      626 

-  non-controlling interests


                      563 

                      339 

Profit for the period


                18,071 

                   8,931 



$

$

Basic earnings per ordinary share

4

                     0.86 

                     0.40 

Diluted earnings per ordinary share

4

                     0.86 

                     0.40 





1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2     Provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.

3     Reversal of the $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.

4   Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

*     For Notes on the interim condensed financial statements, see page 115.

 


Consolidated statement of comprehensive income


Half-year to1


30 Jun

30 Jun


2023

2022


$m

$m

Profit for the period

                18,071 

                   8,931 

Other comprehensive income/(expense)



Items that will be reclassified subsequently to profit or loss when specific conditions are met:



Debt instruments at fair value through other comprehensive income

                      549 

                 (6,246)

-  fair value gains/(losses)

                      804 

                 (8,120)

-  fair value gains transferred to the income statement on disposal

                       (63)

                       (52)

-  expected credit (recoveries)/losses recognised in the income statement

                         (3)

                         17

-  income taxes

                    (189)

                   1,909 

Cash flow hedges

                (1,062)

                 (2,063)

-  fair value losses

                (1,700)

                 (1,646)

-  fair value (gains)/losses reclassified to the income statement

                      227 

                 (1,127)

-  income taxes and other movements

                      411 

                      710 

Share of other comprehensive income/(expense) of associates and joint ventures

                      101 

                     (142)

-  share for the period

                      101 

                     (142)

Net finance income/(expense) from insurance contracts2

                    (101)

                   1,360 

-  before income taxes

                    (136)

                   1,833 

-  income taxes

                         35 

                     (473)

Exchange differences

                    (347)

                 (8,382)

Items that will not be reclassified subsequently to profit or loss:



Fair value gains on property revaluation

                           1 

                          - 

Remeasurement of defined benefit asset/(liability)

                    (112)

                         95

-  before income taxes

                    (105)

                     (132)

-  income taxes

                         (7)

                      227 

Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk

                    (653)

                   2,263 

-  before income taxes

                    (867)

                   3,030 

-  income taxes

                      214 

                     (767)

Equity instruments designated at fair value through other comprehensive income

                           7 

                      158 

-  fair value gains

                           7 

                      158 

Effects of hyperinflation

                      578 

                      428 

Other comprehensive expense for the period, net of tax

                (1,039)

              (12,529)

Total comprehensive income/(expense) for the period

                17,032 

                 (3,598)

Attributable to:



-  ordinary shareholders of the parent company

                15,986 

                 (4,405)

-  other equity holders

                      542 

                      626 

-  non-controlling interests

                      504 

                      181 

Total comprehensive income/(expense) for the period

                17,032 

                 (3,598)

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2     Net finance income/(expense) from insurance contracts in other comprehensive income is the amount that offsets the effective interest rate and expected credit losses on supporting assets that have been designated at fair value through other comprehensive income. In the first half of 2023, movements in net finance income/(expense) from insurance contracts of $(101)m (1H22: $1,360m) was booked, and offsetting fair value through other comprehensive income ('OCI') movements on supporting assets of $108m was recorded (1H22: ($1,439m)).


Consolidated balance sheet



At1



30 Jun

31 Dec



2023

2022


Notes*

$m

$m

Assets




Cash and balances at central banks


             307,733 

             327,002 

Items in the course of collection from other banks


                10,649 

                   7,297 

Hong Kong Government certificates of indebtedness


                42,407 

                43,787 

Trading assets


             255,387 

             218,093 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss


             104,303 

             100,101 

Derivatives

8

             272,595 

             284,159 

Loans and advances to banks


             100,921 

             104,475 

Loans and advances to customers


             959,558 

             923,561 

Reverse repurchase agreements - non-trading


             258,056 

             253,754 

Financial investments

9

             407,933 

             364,726 

Assets held for sale


                95,480 

             115,919 

Prepayments, accrued income and other assets


             175,473 

             156,149 

Current tax assets


                  1,262 

                   1,230 

Interests in associates and joint ventures

10

                29,546 

                29,254 

Goodwill and intangible assets


                11,925 

                11,419 

Deferred tax assets


                  8,248 

                   8,360 

Total assets


         3,041,476  

          2,949,286 

Liabilities and equity




Liabilities




Hong Kong currency notes in circulation


                42,407 

                43,787 

Deposits by banks


                68,709 

                66,722 

Customer accounts


         1,595,769  

          1,570,303 

Repurchase agreements - non-trading


             170,110 

             127,747 

Items in the course of transmission to other banks


                10,776 

                   7,864 

Trading liabilities


                81,228 

                72,353 

Financial liabilities designated at fair value


             139,618 

             127,321 

Derivatives

8

             269,560 

             285,762 

Debt securities in issue


                85,471 

                78,149 

Liabilities of disposal groups held for sale


                87,241 

             114,597 

Accruals, deferred income and other liabilities


             155,275 

             134,313 

Current tax liabilities


                  1,921 

                   1,135 

Insurance contract liabilities


             115,756 

             108,816 

Provisions

11

                  1,722 

                   1,958 

Deferred tax liabilities


                      976 

                      972 

Subordinated liabilities


                23,286 

                22,290 

Total liabilities


         2,849,825  

          2,764,089 

Equity




Called up share capital


                10,073 

                10,147 

Share premium account


                14,737 

                14,664 

Other equity instruments


                19,392 

                19,746 

Other reserves


                (9,935)

                 (9,133)

Retained earnings


             149,903 

             142,409 

Total shareholders' equity


             184,170 

             177,833 

Non-controlling interests


                  7,481 

                   7,364 

Total equity


             191,651 

             185,197 

Total liabilities and equity


         3,041,476  

          2,949,286 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

*     For Notes on the interim condensed financial statements, see page 115.


 

 

Consolidated statement of changes in equity






Other reserves





Called up share

capital

and share premium

Other

equity

instru-ments

Retained

earnings

 

Financial assets at FVOCI reserve

Cash
flow
hedging
reserve

Foreign
exchange
reserve

Merger and other

reserves

Insura-nce

finance

reserve1

Total share-holders' equity

Non-
controlling
interests

Total equity


$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2023

        24,811 

      19,746 

     142,409 

        (7,038)

      (3,808)

       (32,575)

      33,209 

          1,079 

    177,833 

              7,364 

  185,197 

Profit for the period

                 - 

               - 

        17,508 

                 - 

               - 

                  - 

                - 

                 - 

       17,508 

                  563 

    18,071 

Other comprehensive income (net of tax)

                 - 

               - 

               (92)

              560 

      (1,077)

             (271)

                  1 

            (101)

           (980)

                   (59)

     (1,039)

-  debt instruments at fair value through other comprehensive income

                 - 

               - 

                 - 

              546 

               - 

                  - 

                - 

                 - 

             546 

                       3 

           549 

-  equity instruments designated at fair value through other comprehensive income

                 - 

               - 

                 - 

                 14 

               - 

                  - 

                - 

                 - 

                14 

                     (7)

                7 

-  cash flow hedges

                 - 

               - 

                 - 

                 - 

      (1,077)

                  - 

                - 

                 - 

       (1,077)

                     15 

     (1,062)

-  changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk

                 - 

               - 

            (654)

                 - 

               - 

                  - 

                - 

                 - 

           (654)

                       1 

        (653)

-  property revaluation

                 - 

               - 

                 - 

                 - 

               - 

                  - 

                  1 

                 - 

                  1 

                     - 

                1 

-  remeasurement of defined benefit asset/liability

                 - 

               - 

            (117)

                 - 

               - 

                  - 

                - 

                 - 

           (117)

                       5 

        (112)

-  share of other comprehensive income of associates and joint ventures

                 - 

               - 

              101 

                 - 

               - 

                  - 

                - 

                 - 

             101 

                     - 

           101 

-  effects of hyperinflation

                 - 

               - 

              578 

                 - 

               - 

                  - 

                - 

                 - 

             578 

                     - 

           578 

-  insurance finance income/

   (expense) recognised in other comprehensive income

                 - 

               - 

                 - 

                 - 

               - 

                  - 

                - 

            (101)

           (101)

                     - 

        (101)

-  exchange differences

                 - 

               - 

                 - 

                 - 

               - 

             (271)

                - 

                 - 

           (271)

                   (76)

        (347)

Total comprehensive income for the period

                 - 

               - 

        17,416 

              560 

      (1,077)

             (271)

                  1 

            (101)

       16,528 

                  504 

    17,032 

Shares issued under employee remuneration and share plans

                 78 

               - 

               (78)

                 - 

               - 

                  - 

                - 

                 - 

                - 

                     - 

              - 

Capital securities issued2

                 - 

        1,996 

                 - 

                 - 

               - 

                  - 

                - 

                 - 

         1,996 

                     - 

       1,996 

Dividends to shareholders

                 - 

               - 

        (7,133)

                 - 

               - 

                  - 

                - 

                 - 

       (7,133)

                (375)

     (7,508)

Redemption of securities3

                 - 

      (2,350)

                 - 

                 - 

               - 

                  - 

                - 

                 - 

       (2,350)

                     - 

     (2,350)

Cost of share-based payment arrangements

                 - 

               - 

              228 

                 - 

               - 

                  - 

                - 

                 - 

             228 

                     - 

           228 

Share buy-back4

                 - 

               - 

        (2,007)

                 - 

               - 

                  - 

                - 

                 - 

       (2,007)

                     - 

     (2,007)

Cancellation of shares

               (79)

               - 

                 - 

                 - 

               - 

                  - 

               79 

                 - 

                - 

                     - 

              - 

Other movements5

                 - 

               - 

            (932)

                   6 

               - 

                  - 

                  1 

                 - 

           (925)

                   (12)

        (937)

At 30 Jun 2023

        24,810 

      19,392 

     149,903 

        (6,472)

      (4,885)

       (32,846)

      33,290 

              978 

    184,170 

              7,481 

  191,651 















 

Consolidated statement of changes in equity (continued)





Other reserves





Called up
share capital
and share premium

Other
equity
 instru-
ments

Retained
earnings

Financial assets at FVOCI reserve

Cash
flow
hedging
reserve

Foreign exchange reserve

Merger and other reserves

Insurance

finance

reserve1

Total
share-
holders'
equity

Non-
controlling
interests

Total
equity


$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 31 Dec 2021 (IFRS 4)

        24,918 

      22,414 

     144,458 

            (634) 

          (197)         

       (22,769)

      30,060 

                 - 

    198,250 

              8,527 

  206,777 

Impact on transition to IFRS 176

                 - 

               - 

        (9,222) 

              683 

               - 

                  - 

                - 

            (696) 

       (9,235)  

            (1,224)           

  (10,459) 

At 1 Jan 2022

        24,918 

      22,414 

     135,236 

                 49 

          (197)         

       (22,769)

      30,060 

            (696) 

    189,015 

              7,303 

  196,318 

Profit for the period

                 - 

               - 

          8,592 

                 - 

               - 

                  - 

                - 

                 - 

         8,592 

                  339 

       8,931 

Other comprehensive income (net of tax)

                 - 

               - 

          2,647 

        (6,062) 

      (2,035)     

         (8,282)

                - 

          1,360 

     (12,372)  

                (157)               

  (12,529) 

-  debt instruments at fair value through other comprehensive income

                 - 

               - 

                 - 

        (6,183) 

               - 

                  - 

                - 

                 - 

       (6,183)  

                   (63)                  

     (6,246)    

-  equity instruments designated at fair value through other comprehensive income

                 - 

               - 

                 - 

              121 

               - 

                  - 

                - 

                 - 

             121 

                     37 

           158 

-  cash flow hedges

                 - 

               - 

                 - 

                 - 

      (2,035)     

                  - 

                - 

                 - 

       (2,035)  

                   (28)                  

     (2,063)    

-  changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk

                 - 

               - 

          2,263 

                 - 

               - 

                  - 

                - 

                 - 

         2,263 

                     - 

       2,263 

-  remeasurement of defined benefit asset/liability

                 - 

               - 

                 98 

                 - 

               - 

                  - 

                - 

                 - 

                98 

                     (3)                    

             95 

-  share of other comprehensive income of associates and joint ventures

                 - 

               - 

            (142) 

                 - 

               - 

                  - 

                - 

                 - 

           (142)  

                     - 

         (142)        

-  effects of hyperinflation

                 - 

               - 

              428 

                 - 

               - 

                  - 

                - 

                 - 

             428 

                     - 

           428 

-  insurance finance income/ (expense) recognised in other comprehensive income

                 - 

               - 

                 - 

                 - 

               - 

                  - 

                - 

          1,360 

         1,360 

                     - 

       1,360 

-  exchange differences

                 - 

               - 

                 - 

                 - 

               - 

         (8,282)

                - 

                 - 

       (8,282)  

                (100)               

     (8,382)    

Total comprehensive income for the period

                 - 

               - 

        11,240 

        (6,062) 

      (2,035)     

         (8,282)

                - 

          1,360 

       (3,779)  

                  181 

     (3,598)    

Shares issued under employee remuneration and share plans

                 65 

               - 

               (65) 

                 - 

               - 

                  - 

                - 

                 - 

                - 

                     - 

              - 

Dividends to shareholders

                 - 

               - 

        (4,202) 

                 - 

               - 

                  - 

                - 

                 - 

       (4,202)  

                (295)               

     (4,497)    

Redemption of securities3

                 - 

          (723)         

                 - 

                 - 

               - 

                  - 

                - 

                 - 

           (723)  

                     - 

         (723)        

Cost of share-based payment arrangements

                 - 

               - 

              177 

                 - 

               - 

                  - 

                - 

                 - 

             177 

                     - 

           177 

Share buy-back4

                 - 

               - 

        (1,000) 

                 - 

               - 

                  - 

                - 

                 - 

       (1,000)  

                     - 

     (1,000)    

Cancellation of shares

            (133) 

               - 

                 - 

                 - 

               - 

                  - 

             133 

                 - 

                - 

                     - 

              - 

Other movements

                 - 

               - 

            (525) 

                   2 

               - 

                  - 

               11 

                 - 

           (512)  

                   (60)                  

         (572)        

At 30 Jun 2022

        24,850 

      21,691 

     140,860 

        (6,011) 

      (2,232)     

       (31,051)

      30,204 

              664 

    178,975 

              7,130 

  186,105 















 

Consolidated statement of changes in equity (continued)





Other reserves





Called up
share capital
and share premium

Other
equity
 instru-
ments

Retained

earnings

Financial assets at FVOCI reserve

Cash
flow
hedging
reserve

Foreign exchange reserve

Merger and other reserves

Insura-nce

finance

reserve1

Total
share-
holders'
equity

Non-
controlling
interests

Total

equity


$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jul 2022

        24,850 

      21,691 

    140,860 

           (6,011)

       (2,232)

       (31,051)

      30,204 

            664 

      178,975 

            7,130 

    186,105 

Profit for the period

                  - 

                - 

         6,967 

                    - 

                - 

                  - 

                - 

                - 

            6,967 

                351 

         7,318 

Other comprehensive income (net of tax)

                  - 

                - 

       (1,244)

           (1,027)

       (1,578)

         (1,524)

            174 

            415 

          (4,784)

                   71

       (4,713)

-  debt instruments at fair value through other comprehensive income

                  - 

                - 

                - 

               (998)

                - 

                  - 

                - 

                - 

              (998)

                   12

           (986)

-  equity instruments designated at fair value through other comprehensive income

                  - 

                - 

                - 

                  (29)

                - 

                  - 

                - 

                - 

                (29)

                 (22)

              (51)

-  cash flow hedges

                  - 

                - 

                - 

                    - 

       (1,578)

                  - 

                - 

                - 

          (1,578)

                 (14)

       (1,592)

-  changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk

                  - 

                - 

           (341)

                    - 

                - 

                  - 

                - 

                - 

              (341)

                   - 

           (341)

-  property revaluation

                  - 

                - 

                - 

                    - 

                - 

                  - 

            174 

                - 

               174 

                106 

             280 

-  remeasurement of defined benefit asset/liability

                  - 

                - 

       (1,127)

                    - 

                - 

                  - 

                - 

                - 

          (1,127)

                     1

       (1,126)

-  share of other comprehensive income of associates and joint ventures

                  - 

                - 

           (225)

                    - 

                - 

                  - 

                - 

                - 

              (225)

                   - 

           (225)

-  effects of hyperinflation

                  - 

                - 

             449 

                    - 

                - 

                  - 

                - 

                - 

               449 

                   - 

             449 

-  insurance finance income/ (expense) recognised in other comprehensive income

                  - 

                - 

                - 

                    - 

                - 

                  - 

                - 

            415 

               415 

                   - 

             415 

-  exchange differences

                  - 

                - 

                - 

                    - 

                - 

         (1,524)

                - 

                - 

          (1,524)

                 (12)

       (1,536)

Total comprehensive income for the period

                  - 

                - 

         5,723 

           (1,027)

       (1,578)

         (1,524)

            174 

            415 

            2,183 

                423 

         2,606 

Shares issued under employee remuneration and share plans

                    2

                - 

                (2)

                    - 

                - 

                  - 

                - 

                - 

                   - 

                   - 

                - 

Dividends to shareholders

                  - 

                - 

       (2,342)

                    - 

                - 

                  - 

                - 

                - 

          (2,342)

              (131)

       (2,473)

Redemption of securities3

                  - 

       (1,945)

             402 

                    - 

                - 

                  - 

                - 

                - 

          (1,543)

                   - 

       (1,543)

Cost of share-based payment arrangements

                  - 

                - 

             223 

                    - 

                - 

                  - 

                - 

                - 

               223 

                   - 

             223 

Transfers7

                  - 

                - 

       (2,499)

                    - 

                - 

                  - 

         2,499 

                - 

                   - 

                   - 

                - 

Cancellation of shares

               (41)

                - 

                - 

                    - 

                - 

                  - 

               41

                - 

                   - 

                   - 

                - 

Other movements

                  - 

                - 

                44

                    - 

                  2

                  - 

            291 

                - 

               337 

                 (57)

             280 

At 31 Dec 2022

        24,811 

      19,746 

    142,409 

           (7,038)

       (3,808)

       (32,575)

      33,209 

         1,079 

      177,833 

            7,364 

    185,197 

1     The insurance finance reserve reflects the unwinding of the discount rate on insurance liabilities for which the OCI option has been elected for our insurance business in France. It is recorded after excluding the amount that offsets the effective interest rate and expected credit losses on supporting assets that have been designated at fair value through other comprehensive income.

2     During 2023, HSBC Holdings issued $2,000m of contingent convertible securities on which there were $4m of external issue costs.

3     During 2023, HSBC Holdings redeemed $2,350m contingent convertible securities. In 2022, HSBC Holdings redeemed €1,500m 5.250% and SGD1,000m 5.875% contingent convertible securities.

4     In February 2022 HSBC announced a share buy-back of up to $1.0bn, which concluded in July 2022. Additionally, in May 2023, HSBC Holdings announced a share buy-back of up to $2.0bn.

5   Includes a payment of $749m (1H22: $435m) to the HSBC Holdings Employee Benefit Trust 2001 (No. 2) to purchase shares in order to settle liabilities on Group share plans.

6   The impact of IFRS 17 on previously reported total equity was $(10,585)m at 30 June 2022 and $(10,831)m at 31 December 2022.

7     Permitted transfers from the merger reserve to retained earnings were made when the investment in HSBC Overseas Holdings (UK) Limited was previously impaired. In 2022, part-reversals of these impairments resulted in transfers from retained earnings back to the merger reserve of $2,499m.

 


Consolidated statement of cash flows


Half-year to1


30 Jun

30 Jun


2023

2022


$m

$m

Profit before tax

                21,657 

                   8,780 

Adjustments for non-cash items:



Depreciation, amortisation and impairment

                  1,591 

                   1,894 

Net loss/(gain) from investing activities

                       (41)

                      173 

Share of profits in associates and joint ventures

                (1,583)

                 (1,449)

(Gain)/loss on disposal of subsidiaries, businesses, associates and joint ventures

                (3,604)

                       (71)

Change in expected credit losses gross of recoveries and other credit impairment charges

                  1,482 

                   1,242 

Provisions including pensions

                      148 

                      201 

Share-based payment expense

                      228 

                      177 

Other non-cash items included in profit before tax

                (1,661)

                         82

Elimination of exchange differences2

                (6,558)

                48,921 

Change in operating assets

              (52,745)

                19,713 

Change in operating liabilities

                72,836 

              (35,752)

Dividends received from associates

                      124 

                         60

Contributions paid to defined benefit plans

                       (87)

                     (102)

Tax paid

                (1,664)

                 (1,264)

Net cash from operating activities

                30,123 

                42,605 

Purchase of financial investments

           (298,182)

           (265,427)

Proceeds from the sale and maturity of financial investments

             263,838 

             247,517 

Net cash flows from the purchase and sale of property, plant and equipment

                    (329)

                     (589)

Net cash flows from purchase/(disposal) of customer deposits and loan portfolios

                         - 

                 (3,756)

Net investment in intangible assets

                (1,123)

                 (1,240)

Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures3

                  1,228 

                     (525)

Net cash from investing activities

              (34,568)

              (24,020)

Issue of ordinary share capital and other equity instruments

                  1,996 

                          - 

Cancellation of shares

                (1,273)

                 (1,840)

Net sales/(purchases) of own shares for market-making and investment purposes

                    (823)

                     (443)

Net cash flow from change in stakes of subsidiaries

                         - 

                     (197)

Redemption of preference shares and other equity instruments

                (2,350)

                     (723)

Subordinated loan capital issued

                  2,744 

                   2,659 

Subordinated loan capital repaid

                (1,044)

                       (11)

Dividends paid to shareholders of the parent company and non-controlling interests

                (7,508)

                 (4,497)

Net cash from financing activities

                (8,258)

                 (5,052)

Net increase in cash and cash equivalents

              (12,703)

                13,533 

Cash and cash equivalents at the beginning of the period

             521,671 

             574,032 

Exchange differences in respect of cash and cash equivalents

                  8,565 

              (40,243)

Cash and cash equivalents at the end of the period4

             517,533 

             547,322 

 

Interest received was $46,817m (1H22: $20,957m), interest paid was $29,222m (1H22: $7,146m) and dividends received (excluding dividends received from associates, which are presented separately above) were $751m (1H22: $800m).

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2     Adjustments to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.

3     The 'Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures' includes $1.2bn of net cash inflow on acquisition of Silicon Valley Bank UK Limited in March 2023.

4   Includes $7.5bn (1H22: $1.7bn) of cash and cash equivalents classified as held for sale.


Notes on the interim condensed financial statements

 

Contents

115

        1

Basis of preparation and material accounting policies


131138

     11

Provisions

117

        2

Net fee income


132

     12

Contingent liabilities, contractual commitments and guarantees

117

        3

Dividends


132

13

Legal proceedings and regulatory matters

118

        4

Earnings per share


134

     14

Transactions with related parties

118

        5

Segmental analysis


135

     15

Assets held for sale, liabilities of disposal groups held for sale and business acquisitions

121

        6

Fair values of financial instruments carried at fair value


126

        7

Fair values of financial instruments not carried at fair value


137

     16

Effects of adoption of IFRS 17

127

        8

Derivatives


140

     17

Events after the balance sheet date

128

        9

Financial investments


140

18

Interim Report 2023 and statutory accounts

128

     10

Interests in associates and joint ventures





 


1

Basis of preparation and material accounting policies



(a)    Compliance with International Financial Reporting Standards

Our interim condensed consolidated financial statements have been prepared on the basis of the policies set out in the 2022 annual financial statements, except for those relating to IFRS 17 'Insurance Contracts' and amendments to IAS 12 'Income Taxes' as set out below. They have also been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB'), IAS 34 'Interim Financial Reporting' as adopted by the EU, and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. Therefore, they include an explanation of events and transactions that are significant to an understanding of the changes in HSBC's financial position and performance since the end of 2022.

These financial statements should be read in conjunction with the Annual Report and Accounts 2022, which was prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements were also prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee. These financial statements should be read in conjunction with the information about the application of IFRS 17 'Insurance Contracts' as set out below and the new policies for insurance contracts as described on pages 7 to 9 of our Report on Transition to IFRS 17 'Insurance Contracts' issued on 2 May 2023.

At 30 June 2023, there were no IFRSs effective for the half-year to 30 June 2023 affecting these financial statements that were not approved for adoption in the UK by the UK Endorsement Board. With the exception of amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules', which is expected to be endorsed by the EU in the second half of 2023, there was no difference between IFRSs adopted by the UK, IFRSs as adopted by the EU, and IFRSs issued by the IASB in terms of their application to HSBC.

Standards applied during the half-year to 30 June 2023

IFRS 17 'Insurance Contracts'

On 1 January 2023, the Group adopted the requirements of IFRS 17 'Insurance Contracts' retrospectively with comparatives restated from the transition date, 1 January 2022. At transition, the Group's total equity reduced by $10,459m. 

On adoption of IFRS 17, balances based on IFRS 4, including the present value of in-force long-term insurance business ('PVIF') asset in relation to the upfront recognition of future profits of in-force insurance contracts, were derecognised. Insurance contract liabilities have been remeasured under IFRS 17 based on groups of insurance contracts, which include the fulfilment cash flows comprising the best estimate of the present value of the future cash flows (for example premiums and payouts for claims, benefits, and expenses), together with a risk adjustment for non-financial risk, as well as the contractual service margin ('CSM'). The CSM represents the unearned profits that will be released and systematically recognised in insurance revenue as services are provided over the expected coverage period.

In addition, the Group has made use of the option under the standard to re-designate certain eligible financial assets held to support insurance contract liabilities, which were predominantly measured at amortised cost, as financial assets measured at fair value through profit or loss, with comparatives restated from the transition date.

 

The key differences between IFRS 4 and IFRS 17 are summarised in the following table:


Balance sheet

Insurance contract liabilities for non-linked life insurance contracts are calculated by local actuarial principles. Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, by reference to the value of the relevant underlying funds or indices. Grouping requirements follow local regulations.

An intangible asset for the PVIF is recognised, representing the upfront recognition of future profits associated with in-force insurance contracts.

Insurance contract liabilities are measured for groups of insurance contracts at current value, comprising the fulfilment cash flows and the CSM.

The fulfilment cash flows comprise the best estimate of the present value of the future cash flows, together with a risk adjustment for non-financial risk.

The CSM represents the unearned profit.

Profit emergence/ recognition

The value of new business is reported as revenue on Day 1 as an increase in PVIF.

The impact of the majority of assumption changes is recognised immediately in the income statement.

Variances between actual and expected cash flows are recognised in the period they arise.

The CSM is systematically recognised in revenue as services are provided over the expected coverage period of the group of contracts (i.e. no Day 1 profit).

Contracts are measured using the general measurement model ('GMM') or the variable fee approach ('VFA') model for insurance contracts with direct participation features upon meeting the eligibility criteria. Under the VFA model, the Group's share of the investment experience and assumption changes are absorbed by the CSM and released over time to profit or loss. For contracts measured under GMM, the Group's share of the investment volatility is recorded in profit or loss as it arises.

Losses from onerous contracts are recognised in the income statement immediately.

Investment return assumptions (discount rate)

PVIF is calculated based on long-term investment return assumptions based on assets held. It therefore includes investment margins expected to be earned in future.

Under the market consistent approach, expected future investment spreads are not included in the investment return assumption. Instead, the discount rate includes an illiquidity premium that reflects the nature of the associated insurance contract liabilities.

Expenses

Total expenses to acquire and maintain the contract over its lifetime are included in the PVIF calculation.

Expenses are recognised across operating expenses and fee expense as incurred and the allowances for those costs released from the PVIF simultaneously.

Projected lifetime expenses that are directly attributable costs are included in the insurance contract liabilities and recognised in the insurance service result.

Non-attributable costs are reported in operating expenses.

Transition

In applying IFRS 17 for insurance contracts retrospectively, the full retrospective approach ('FRA') has been used unless it has been impracticable. When the FRA is impracticable such as when there is a lack of sufficient and reliable data, an entity has an accounting policy choice to use either the modified retrospective approach ('MRA') or the fair value approach ('FVA'). The Group has applied the FRA for new business from 2018 at the earliest, subject to practicability, and the FVA for the majority of contracts for which the FRA is impracticable.

Under the FVA, the valuation of insurance liabilities on transition is based on the applicable requirements of IFRS 13 'Fair Value Measurement'. This requires consideration of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The CSM is calculated as the difference between what a market participant would demand for assuming the unexpired risk associated with insurance contracts, including required profit, and the fulfilment cash flows that are determined using IFRS 17 principles.

In determining the fair value, the Group considered the estimated profit margin that a market participant would demand in return for assuming the insurance liabilities with the consideration of the level of capital that a market participant would be required to hold, and the discount rate with an allowance for an illiquidity premium that takes into account the level of 'matching' between the Group's assets and related liabilities. These assumptions were set taking into account the assumptions that a hypothetical market participant operating in each local jurisdiction would consider.

Amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules'

On 23 May 2023, the IASB issued amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules', which became effective immediately and were approved for adoption by all members of the UK Endorsement Board on 19 July 2023. On 20 June 2023, legislation was substantively enacted in the UK to introduce the OECD's Pillar Two global minimum tax rules and a UK qualified domestic minimum top-up tax, with effect from 1 January 2024. The Group has applied the IAS 12 exception from recognising and disclosing information on associated deferred tax assets and liabilities. As noted above, the EU has not yet endorsed these IAS 12 amendments but is expected to do so in the second half of 2023.

There were no other new standards or amendments to standards that had an effect on these interim condensed financial statements. 

(b)   Use of estimates and judgements

Management believes that the critical accounting estimates and judgements applicable to the Group are those that relate to impairment of amortised cost and FVOCI debt financial assets, the valuation of financial instruments, deferred tax assets, provisions, interests in associates, impairment of goodwill and non-financial assets, post-employment benefit plans, and non-current assets and disposal groups held for sale.

There were no material changes in the current period to any of the critical accounting estimates and judgements disclosed in 2022, which are stated on pages 99 and 337 to 347 of the Annual Report and Accounts 2022.

(c)   Composition of the Group

There were no material changes in the composition of the Group in the half-year to 30 June 2023. For further details of future business acquisitions and disposals, see Note 15 'Assets held for sale, liabilities of disposal groups held for sale and business acquisitions'.

(d)   Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios, as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

(e)   Accounting policies

The accounting policies that we applied for these interim condensed consolidated financial statements are consistent with those described on pages 335 to 348 of the Annual Report and Accounts 2022, as are the methods of computation, with the exception of those relating to IFRS 17 and amendments to IAS 12 as described above.  


2

Net fee income

 


Half-year to1,2


30 Jun

30 Jun


2023

2022


$m

$m

Net fee income by product



Funds under management

                         1,176 

                         1,222 

Cards

                         1,351 

                         1,201 

Credit facilities

                             798 

                             790 

Account services

                             765 

                             720 

Broking income

                             555 

                             707 

Unit trusts

                             386 

                             408 

Underwriting

                             345 

                             257 

Global custody

                             432 

                             471 

Remittances

                             405 

                             394 

Imports/exports

                             328 

                             322 

Insurance agency commission

                             159 

                             162 

Other

                         1,247 

                         1,259 

Fee income

                         7,947 

                         7,913 

Less: fee expense

                       (1,862)

                       (1,685)

Net fee income

                         6,085 

                         6,228 

Net fee income by global business



Wealth and Personal Banking

                         2,694 

                         2,753 

Commercial Banking

                         2,009 

                         1,972 

Global Banking and Markets

                         1,382 

                         1,503 

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 entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.

2     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.


3

Dividends

 

On 1 August 2023, the Directors approved a second interim dividend for 2023 of $0.10 per ordinary share in respect of the financial year ending       31 December 2023. This distribution amounts to approximately $1.974bn and will be payable on 21 September 2023. No liability is recognised in the financial statements in respect of these dividends.


Dividends paid to shareholders of HSBC Holdings plc


Half-year to


30 Jun 2023

30 Jun 2022


Per share

Total

Per share

Total


$

$m

$

$m

Dividends paid on ordinary shares





In respect of previous year:





-  second interim dividend

                           0.23 

                         4,590 

                            0.18 

                         3,576 

In respect of current year:





-  first interim dividend

                           0.10 

                         2,001 

                                - 

                                - 

Total

                           0.33 

                         6,591 

                            0.18 

                         3,576 

Total coupons on capital securities classified as equity


                             542 


                             626 

Dividends to shareholders


                         7,133 


                         4,202 

 


4

Earnings per share

 

Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculated by dividing the basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on conversion of dilutive potential ordinary shares.

Basic and diluted earnings per share


Half-year to1


30 Jun 2023

30 Jun 2022


Profit

Number

of shares

Amount per share

Profit

Number

of shares

Amount per share


$m

(millions)

$

$m

(millions)

$

Basic2

        16,966 

        19,693 

             0.86 

           7,966 

        19,954 

              0.40 

Effect of dilutive potential ordinary shares


               136 



               131 


Diluted2

        16,966 

        19,829 

             0.86 

           7,966 

        20,085 

              0.40 

1   From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2   Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted).

2  


5

Segmental analysis

 

The Group Chief Executive, supported by the rest of the Group Executive Committee ('GEC'), is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments. Global business results are assessed by the CODM on the basis of constant currency performance that removes the effects of currency translation from reported results. Therefore, we disclose these results on a constant currency basis as required by IFRSs. The income statement for the half-year to 30 June 2022 is converted at the average rate of exchange for 2023, and the balance sheets at 30 June 2022 and 31 December 2022 at the prevailing rates of exchange on 30 June 2023.

Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.

Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.

Resegmentation

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 Global Banking customers within our entities in Latin America was transferred from Global Banking and Markets to Commercial Banking for reporting purposes. Comparative data have been re-presented accordingly. Similar smaller transfers from Global Banking and Markets to Commercial Banking were also undertaken within our entities in Australia and Indonesia, where comparative data have not been re-presented.

Our global businesses

We provide a comprehensive range of banking and related financial services to our customers in our three global businesses. The products and services offered to customers are organised by these global businesses:

-   Wealth and Personal Banking ('WPB') provides a full range of retail banking and wealth products to our customers from personal banking to ultra high net worth individuals. Typically, customer offerings include retail banking products, such as current and savings accounts, mortgages and personal loans, credit cards, debit cards and local and international payment services. We also provide wealth management services, including insurance and investment products, global asset management services, investment management and private wealth solutions for customers with more sophisticated and international requirements.

-   Commercial Banking ('CMB') offers a broad range of products and services to serve the needs of our commercial customers, including small and medium-sized enterprises, mid-market enterprises and corporates. These include credit and lending, international trade and receivables finance, treasury management and liquidity solutions (payments and cash management and commercial cards), commercial insurance and investments. CMB also offers customers access to products and services offered by other global businesses, such as Global Banking and Markets, which include foreign exchange products, raising capital on debt and equity markets and advisory services.

-   Global Banking and Markets ('GBM') provides tailored financial solutions to major government, corporate and institutional clients and private investors worldwide. The client-focused business lines deliver a full range of banking capabilities, including financing, advisory and transaction services, a markets business that provides services in credit, rates, foreign exchange, equities, money markets and securities services, and principal investment activities. 

HSBC constant currency profit before tax and balance sheet data


Half-year to 30 Jun 2023


Wealth and Personal Banking

Commercial

Banking3

Global

Banking and

Markets3

Corporate

Centre

Total


$m

$m

$m

$m

$m

Net operating income/(expense) before change in expected credit losses and other credit impairment charges2

                16,200 

                12,216 

                  8,501 

                       (41)

                36,876 

-  external

                12,416 

                12,897 

                13,939 

                (2,376)

                36,876 

-  inter-segment

                  3,784 

                    (681)

                (5,438)

                  2,335 

                         - 

-  of which: net interest income/(expense)4

                10,299 

                  8,375 

                  3,546 

                (3,956)

                18,264 

Change in expected credit losses and other credit impairment charges

                    (502)

                    (704)

                    (136)

                         (3)

                (1,345)

Net operating income/(expense)

                15,698 

                11,512 

                  8,365 

                       (44)

                35,531 

Total operating expenses

                (7,141)

                (3,572)

                (4,785)

                         41 

              (15,457)

Operating profit/(loss)

                  8,557 

                  7,940 

                  3,580 

                         (3)

                20,074 

Share of profit/(loss) in associates and joint ventures

                         35 

                         (1)

                         - 

                  1,549 

                  1,583 

Constant currency profit before tax

                  8,592 

                  7,939 

                  3,580 

                  1,546 

                21,657 


%

%

%

%

%

Share of HSBC's constant currency profit before tax

           39.7    

           36.7    

           16.5    

        7.1         

             100.0            

Constant currency cost efficiency ratio

           44.1    

           29.2    

           56.3    

             100.0            

           41.9    

Constant currency balance sheet data

$m

$m

$m

$m

$m

Loans and advances to customers (net)

             463,836 

             319,246 

             176,182 

                      294 

             959,558 

Interests in associates and joint ventures

                      555 

                         24 

                      107 

                28,860 

                29,546 

Total external assets

             900,370 

             654,474 

         1,342,110  

             144,522 

         3,041,476  

Customer accounts

             809,864 

             472,146 

             313,126 

                      633 

         1,595,769  

 


Half-year to 30 Jun 20221

Net operating income/(expense) before change in expected credit losses and other credit impairment charges2

                10,058 

                   7,055 

                   7,459 

                     (925)

                23,647 

-  external

                   9,665 

                   7,199 

                   8,357 

                 (1,574)

                23,647 

-  inter-segment

                      393 

                     (144)

                     (898)

                      649 

                          - 

-  of which: net interest income/(expense)4

                   6,493 

                   4,817 

                   2,009 

                     (473)

                12,846 

Change in expected credit losses and other credit impairment charges

                     (584)

                     (278)

                     (210)

                          (2)

                 (1,074)

Net operating income/(expense)

                   9,474 

                   6,777 

                   7,249 

                     (927)

                22,573 

Total operating expenses

                 (6,995)

                 (3,345)

                 (4,557)

                     (635)

              (15,532)

Operating profit/(loss)

                   2,479 

                   3,432 

                   2,692 

                 (1,562)

                   7,041 

Share of profit in associates and joint ventures

                            8

                          - 

                          - 

                   1,355 

                   1,363 

Constant currency profit/(loss) before tax

                   2,487 

                   3,432 

                   2,692 

                     (207)

                   8,404 


%

%

%

%

%

Share of HSBC's constant currency profit before tax

           29.6    

           40.8    

           32.0    

                        (2.4)

             100.0            

Constant currency cost efficiency ratio

           69.5    

           47.4    

           61.1    

                        (68.6)

           65.7    

Constant currency balance sheet data

$m

$m

$m

$m

$m

Loans and advances to customers (net)

             482,962 

             354,273 

             200,082 

                      557 

          1,037,874 

Interests in associates and joint ventures

                      487 

                         31

                      104 

                27,468 

                28,090 

Total external assets

             884,333 

             628,040 

          1,330,747 

             167,390 

          3,010,510 

Customer accounts

             846,974 

             491,115 

             332,473 

                      589 

          1,671,151 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2   Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

3     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 entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.

4   Net interest expense recognised in the Corporate Centre includes $3.8bn (1H22: $0.4bn) of interest expense in relation to the internal cost to fund trading and fair value net assets; and the funding cost of foreign exchange swaps in our Markets Treasury function. During 2Q23 we implemented a consistent reporting approach across the 14 most material entities that contribute to our trading and fair value net assets, which resulted in an increase to the 1H23 associated funding costs reported through the intersegment elimination in Corporate Centre of approximately $0.4bn, recognised in 2Q23.

Reported external net operating income is attributed to countries and territories on the basis of the location of the branch responsible for reporting the results or advancing the funds:


Half-year to1


30 Jun 2023

30 Jun 2022


$m

$m

Reported external net operating income by country/territory2

                  36,876 

                  24,545 

-  UK

                    6,762 

                     6,547 

-  Hong Kong

                  10,325 

                     6,471 

-  US

                    2,112 

                     1,964 

-  France

                    4,107 

                        950 

-  other countries/territories

                  13,570 

                     8,613 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2     Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

Constant currency results reconciliation


30 Jun 2023

30 Jun 20221


Reported and constant currency

Constant currency

Currency translation

Reported


$m

$m

$m

$m

Revenue2

                   36,876 

                   23,647 

                        (898)

                   24,545 

ECL

                   (1,345)

                    (1,074)

                            13

                    (1,087)

Operating expenses

                 (15,457)

                 (15,532)

                         595 

                 (16,127)

Share of profit in associates and joint ventures

                     1,583 

                      1,363 

                          (86)

                      1,449 

Profit before tax

                   21,657 

                      8,404 

                        (376)

                      8,780 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

2   Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

Constant currency balance sheet reconciliation


At 30 Jun 2023

At 30 June 20221

At 31 Dec 20221


Reported and constant currency

Constant currency

Currency translation

Reported

Constant currency

Currency translation

Reported


$m

$m

$m

$m

$m

$m

$m

Loans and advances to customers (net)

                   959,558 

            1,037,874 

                  10,853 

            1,027,021 

                936,613 

                  13,052 

                923,561 

Interests in associates and joint ventures

                      29,546 

                  28,090 

                   (1,356)

                  29,446 

                  28,384 

                       (870)

                  29,254 

Total external assets

               3,041,476  

            3,010,510 

                  40,029 

            2,970,481 

            2,995,590 

                  46,304 

            2,949,286 

Customer accounts

               1,595,769  

            1,671,151 

                  19,850 

            1,651,301 

            1,592,396 

                  22,093 

            1,570,303 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

Notable items


Half-year to


30 Jun 2023

30 Jun 2022


$m

$m

Notable items



Revenue



Disposals, acquisitions and related costs1,2

                     3,321 

                        (288)

Fair value movements on financial instruments3

                            15 

                        (371)

Restructuring and other related costs4

                            - 

                            68

Operating expenses



Disposals, acquisitions and related costs

                       (118)

                             - 

Restructuring and other related costs5

                            47 

                    (1,040)

1     Includes the reversal of a $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.

2     Includes the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.

3     Fair value movements on non-qualifying hedges in HSBC Holdings.

4     Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.

5   In 2Q23, we recognised $47m of reversals relating to restructuring provisions recognised during 2022.

 


6

Fair values of financial instruments carried at fair value

 

The accounting policies, control framework and hierarchy used to determine fair values at 30 June 2023 are consistent with those applied for the Annual Report and Accounts 2022.

Financial instruments carried at fair value and bases of valuation



Valuation techniques



Quoted

market price

 Level 1

Using

observable inputs

Level 2

With significant

unobservable inputs

Level 3

Total

Recurring fair value measurements

$m

$m

$m

$m

At 30 Jun 2023





Assets





Trading assets

          177,730 

                73,585 

                             4,072 

     255,387 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

            25,199 

                60,724 

                          18,380 

     104,303 

Derivatives

               2,434 

             268,389 

                             1,772 

     272,595 

Financial investments

          198,345 

                75,332 

                             3,006 

     276,683 

Liabilities





Trading liabilities

            55,039 

                25,738 

                                 451 

        81,228 

Financial liabilities designated at fair value

               1,210 

             128,259 

                          10,149 

     139,618 

Derivatives

               2,856 

             264,389 

                             2,315 

     269,560 


At 31 Dec 20221





Assets





Trading assets

          148,592 

                64,684 

                             4,817 

     218,093 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

            23,146 

                59,548 

                          17,407 

     100,101 

Derivatives

               2,917 

             279,278 

                             1,964 

     284,159 

Financial investments

          181,659 

                71,040 

                             2,961 

     255,660 

Liabilities





Trading liabilities

            44,787 

                27,092 

                                 474 

        72,353 

Financial liabilities designated at fair value

               1,125 

             115,764 

                          10,432 

     127,321 

Derivatives

               2,399 

             280,443 

                             2,920 

     285,762 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

The table below provides the fair value levelling of assets held for sale and liabilities of disposal groups that have been classified as held for sale in accordance with IFRS 5. For further details, see Note 15. 

Financial instruments carried at fair value and bases of valuation - assets and liabilities held for sale



Valuation techniques



Quoted

market price

 Level 1

Using

observable inputs

Level 2

With significant

unobservable inputs

Level 3

Total

Recurring fair value measurements

$m

$m

$m

$m

At 30 Jun 2023





Assets





Trading assets

               2,152 

                      127 

                                    - 

          2,279 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

                      - 

                        15 

                                    - 

                 15 

Derivatives

                      - 

                      585 

                                    - 

              585 

Financial investments

            11,599 

                      520 

                                    - 

        12,119 

Liabilities





Trading liabilities

               1,750 

                      155 

                                    - 

          1,905 

Financial liabilities designated at fair value

                      - 

                         - 

                                    - 

                 - 

Derivatives

                      - 

                      788 

                                    - 

              788 


At 31 Dec 2022





Assets





Trading assets

               2,932 

                      244 

                                    - 

          3,176 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

                      - 

                        14 

                                    47 

                 61 

Derivatives

                      - 

                      866 

                                    - 

              866 

Financial investments

            11,184 

                         - 

                                    - 

        11,184 

Liabilities





Trading liabilities

               2,572 

                      182 

                                    - 

          2,754 

Financial liabilities designated at fair value

                      - 

                  3,523 

                                    - 

          3,523 

Derivatives

                      - 

                      813 

                                    - 

              813 

 


Transfers between Level 1 and Level 2 fair values


Assets

Liabilities


Financial investments

Trading assets

Designated and otherwise mandatorily measured at fair value

Derivatives

Trading liabilities

Designated at fair value

Derivatives


$m

$m

$m

$m

$m

$m

$m

At 30 Jun 2023








Transfers from Level 1 to Level 2

                  5,667 

               4,139 

                                       801 

                       - 

                        41 

                         - 

                       - 

Transfers from Level 2 to Level 1

                  2,432 

               2,495 

                                   1,197 

                       - 

                     147 

                         - 

                       - 









At 31 Dec 2022








Transfers from Level 1 to Level 2

                  4,721 

               5,284 

                                   2,565 

                       - 

                     113 

                         - 

                       - 

Transfers from Level 2 to Level 1

                  8,208 

               5,964 

                                   3,340 

                       - 

                     233 

                         - 

                       - 

 

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.


Fair value adjustments

We adopt the use of fair value adjustments when we take into consideration additional factors not incorporated within the valuation model that would otherwise be considered by a market participant. We classify fair value adjustments as either 'risk-related' or 'model-related'. The majority of these adjustments relate to GBM. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income statement. For example, as models are enhanced, fair value adjustments may no longer be required. Similarly, fair value adjustments will decrease when the related positions are unwound, but this may not result in profit or loss.


Global Banking and Markets fair value adjustments


At 30 Jun 2023

At 31 Dec 2022


GBM

Corporate Centre

GBM

Corporate Centre


$m

$m

$m

$m

Type of adjustment





Risk-related

                 626 

                   50 

                 650 

                    40

-  bid-offer

                 400 

                    - 

                 426 

                    - 

-  uncertainty

                    72 

                      2 

                    86

                    - 

-  credit valuation adjustment

                 195 

                   45 

                 245 

                    35

-  debit valuation adjustment

               (103)

                    - 

               (175)

                    - 

-  funding fair value adjustment

                    62 

                      3 

                    68

                      5

-  other

                    - 

                    - 

                    - 

                    - 

Model-related

                    74 

                    - 

                    61

                    - 

-  model limitation

                    74 

                    - 

                    61

                    - 

-  other

                    - 

                    - 

                    - 

                    - 

Inception profit (Day 1 P&L reserves)1

                    84 

                    - 

                    97

                    - 

Total

                 784 

                   50 

                 808 

                    40

1     See Note 9 on the interim condensed financial statements on page 128.


The reduction in fair value adjustments was predominantly driven by changes to exposure, and tightening of credit and liquidity market spreads, with the reduction in the debit valuation adjustment including a consideration of the overlap with the funding fair value adjustment.


Fair value valuation bases

Financial instruments measured at fair value using a valuation technique with significant unobservable inputs - Level 3


Assets

Liabilities


Financial investments

Trading assets

Designated and otherwise mandatorily measured at fair value through profit or loss

Derivatives

Total

Trading liabilities

Designated at fair value

Derivatives

Total


$m

$m

$m

$m

$m

$m

$m

$m

$m

Private equity including strategic investments

                      679 

                  69 

                                   16,644 

                       - 

    17,392 

                   128 

                        - 

                      - 

           128 

Asset-backed securities

                      371 

               376 

                                            - 

                       - 

           747 

                      - 

                        - 

                      - 

              - 

Structured notes

                         - 

                  - 

                                              3 

                       - 

                3 

                      - 

              10,149 

                      - 

     10,149 

Other derivatives

                         - 

                  - 

                                            - 

                1,772 

       1,772 

                      - 

                        - 

               2,315 

       2,315 

Other portfolios

                  1,956 

           3,627 

                                     1,733 

                       - 

       7,316 

                   323 

                        - 

                      - 

           323 

At 30 Jun 2023

                  3,006 

           4,072 

                                   18,380 

                1,772 

    27,230 

                   451 

              10,149 

               2,315 

     12,915 











Private equity including strategic investments

                      647 

                  19 

                                   15,653 

                       - 

    16,319 

                     92 

                        - 

                      - 

              92 

Asset-backed securities

                      438 

               208 

                                            95 

                       - 

           741 

                      - 

                        - 

                      - 

              - 

Structured notes

                         - 

                  - 

                                            - 

                       - 

              - 

                      - 

              10,432 

                      - 

     10,432 

Other derivatives

                         - 

                  - 

                                            - 

                1,964 

       1,964 

                      - 

                        - 

               2,920 

       2,920 

Other portfolios

                  1,876 

           4,590 

                                     1,659 

                       - 

       8,125 

                   382 

                        - 

                      - 

           382 

At 31 Dec 2022

                  2,961 

           4,817 

                                   17,407 

                1,964 

    27,149 

                   474 

              10,432 

               2,920 

     13,826 

 


The basis for determining the fair value of the financial instruments in the table above is explained on page 366 of the Annual Report and Accounts 2022.


Reconciliation of fair value measurements in Level 3 of the fair value hierarchy

Movement in Level 3 financial instruments


Assets

Liabilities


Financial investments

Trading assets

Designated and otherwise mandatorily measured at fair value through profit or loss

Derivatives

Trading liabilities

Designated at fair value

Derivatives


$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2023

                  2,961 

           4,817 

                      17,407 

               1,964 

                 474 

              10,432 

              2,920 

Total gains or losses recognised in profit or loss

                       (15)

                  65 

                             706 

                   237 

                    25 

                       60 

                  478 

-  net income or losses from financial instruments held for trading or managed on a fair value basis

                         - 

                  65 

                                - 

                   237 

                    25 

                        - 

                  478 

-  changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss

                         - 

                  - 

                             706 

                      - 

                    - 

                       60 

                     - 

-  gains less losses from financial investments held at fair value through other comprehensive income

                       (15)

                  - 

                                - 

                      - 

                    - 

                        - 

                     - 

Total gains or losses recognised in other comprehensive income ('OCI')

                      138 

                  92 

                               11 

                     75 

                    21 

                     323 

                     98 

-  financial investments: fair value gains or losses

                         83 

                  - 

                                - 

                      - 

                    - 

                     234 

                     - 

-  exchange differences

                         55 

                  92 

                               11 

                     75 

                    21 

                       89 

                     98 

Purchases

                      215 

               761 

                         1,660 

                      - 

                 115 

                        - 

                     - 

New issuances

                         - 

                  - 

                                - 

                      - 

                      2 

                 2,313 

                     - 

Sales

                    (122)

         (1,353)

                          (303)

                      - 

               (181)

                        (2)

                     - 

Settlements

                    (202)

             (487)

                          (963)

                (517)

                    (9)

               (1,479)

            (1,164)

Transfers out

                    (108)

             (377)

                          (140)

                   (85)

                  (32)

               (1,821)

                (138)

Transfers in

                      139 

               554 

                                  2 

                     98 

                    36 

                     323 

                  121 

At 30 Jun 2023

                  3,006 

           4,072 

                      18,380 

               1,772 

                 451 

              10,149 

              2,315 

Unrealised gains or losses recognised in profit or loss relating to assets and liabilities held at 30 Jun 2023

                         - 

                (58)

                             232 

                   734 

                    (4)

                  (189)

                (560)

-  net income or losses from financial instruments held for trading or managed on a fair value basis

                         - 

                (58)

                                - 

                   734 

                    (4)

                        - 

                (560)

-  changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss

                         - 

                  - 

                             232 

                      - 

                    - 

                  (189)

                     - 

 

Movement in Level 3 financial instruments (continued)


Assets

Liabilities


Financial investments

Trading assets

Designated and otherwise mandatorily measured at fair value through profit or loss

Derivatives

Trading liabilities

Designated at fair value

Derivatives


$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2022

                   3,389 

         2,662 

                        14,238 

                2,478 

                785 

                7,880 

                3,088 

IFRS 17 impacts

                        (12)

                - 

                           1,468 

                       - 

                    - 

                       - 

                       - 

At 1 Jan 2022 (as restated)

                   3,377 

         2,662 

                        15,706 

                2,478 

                785 

                7,880 

                3,088 

Total gains or losses recognised in profit or loss

                          (7)

             (22)

                              285 

                    408 

                 (45)

              (1,103)

                    165 

-  net income or losses from financial instruments held for trading or managed on a fair value basis

                          - 

             (22)

                                  - 

                    408 

                 (45)

                       - 

                    165 

-  changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss

                          - 

                - 

                              285 

                       - 

                    - 

              (1,103)

                       - 

-  gains less losses from financial investments held at fair value through other comprehensive income

                          (7)

                - 

                                  - 

                       - 

                    - 

                       - 

                       - 

Total losses recognised in other comprehensive income ('OCI')

                     (287)

           (165)

                             (336)

                  (191)

                 (12)

                  (398)

                  (231)

-  financial investments: fair value losses

                     (140)

                - 

                                  - 

                       - 

                    - 

                     (18)

                       - 

-  exchange differences

                     (147)

           (165)

                             (336)

                  (191)

                 (12)

                  (380)

                  (231)

Purchases

                       506 

         1,026 

                           1,704 

                       - 

                   13

                       - 

                       - 

New issuances

                          - 

                - 

                                  - 

                       - 

                      4

                2,511 

                       - 

Sales

                     (186)

           (698)

                             (317)

                       - 

                 (95)

                     (22)

                       - 

Settlements

                     (273)

           (373)

                             (613)

                  (509)

               (636)

                  (723)

                  (580)

Transfers out

                     (489)

           (287)

                               (48)

                  (290)

                    (7)

                  (549)

                  (437)

Transfers in

                          38

            833 

                                 70

                    215 

                344 

                    869 

                    315 

At 30 Jun 2022

                   2,679 

         2,976 

                        16,451 

                2,111 

                351 

                8,465 

                2,320 

Unrealised gains or losses recognised in profit or loss relating to assets and liabilities held at 30 Jun 2022

                          - 

             (37)

                              276 

                    929 

                      1

                    423 

                3,494 

-  net income or losses from financial instruments held for trading or managed on a fair value basis

                          - 

             (37)

                                  - 

                    929 

                      1

                       - 

                3,494 

-  changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss

                          - 

                - 

                              276 

                       - 

                    - 

                    423 

                       - 

 

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.

 


Effect of changes in significant unobservable assumptions to reasonably possible alternatives

The following table shows the sensitivity of Level 3 fair values to reasonably possible alternative assumptions:

Sensitivity of fair values to reasonably possible alternative assumptions


Reflected in profit or loss

Reflected in OCI


Favourable

changes

Unfavourable

changes

Favourable

changes

Unfavourable

changes


$m

$m

$m

$m

Derivatives, trading assets and trading liabilities1

                         332 

                       (434)

                            - 

                            - 

Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss

                     1,009 

                   (1,009)

                            - 

                            - 

Financial investments

                            10 

                          (10)

                            61 

                          (63)

At 30 Jun 2023

                     1,351 

                   (1,453)

                            61 

                          (63)


Derivatives, trading assets and trading liabilities1

                         172 

                       (179)                      

                            - 

                            - 

Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss

                     1,049 

                   (1,047)                  

                            - 

                            - 

Financial investments

                            12 

                            (6)                           

                         140 

                       (141)                      

At 30 Jun 2022

                     1,233 

                   (1,232)                  

                         140 

                       (141)                      


Derivatives, trading assets and trading liabilities1

                         264 

                       (291)                      

                            - 

                            - 

Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss

                         981 

                       (978)                      

                            - 

                            - 

Financial investments

                            11 

                          (11)                         

                            65 

                          (55)                         

At 31 Dec 2022

                     1,256 

                   (1,280)                  

                            65 

                          (55)                         

1     'Derivatives, trading assets and trading liabilities' is presented as one category to reflect the manner in which these financial instruments are risk-managed.

 

The sensitivity analysis aims to measure a range of fair values consistent with the application of a 95% confidence interval. Methodologies take account of the nature of the valuation technique employed, as well as the availability and reliability of observable proxy and historical data.

When the fair value of a financial instrument is affected by more than one unobservable assumption, the table above reflects the most favourable or the most unfavourable change from varying the assumptions individually.


Key unobservable inputs to Level 3 financial instruments

The following table lists key unobservable inputs to Level 3 financial instruments and provides the range of those inputs at 30 June 2023. There has been no change to the key unobservable inputs to Level 3 financial instruments and inter-relationships therein, which are detailed on pages 368 and 369 of the Annual Report and Accounts 2022.

Quantitative information about significant unobservable inputs in Level 3 valuations


Fair value

Valuation techniques

Key unobservable inputs

30 Jun 2023

31 Dec 2022


Assets

Liabilities

Full range of inputs

Full range of

inputs


$m

$m

Lower

Higher

Lower

Higher

Private equity including strategic investments

         17,392 

               128 

See footnote 1

See footnote 1





Asset-backed securities ('ABS')

               747 

                  - 







-  collateralised loan/debt obligation

                  76 

                  - 







Market proxy

Bid quotes

               - 

89

                - 

               92

-  other ABSs

               671 

                  - 

Market proxy

Bid quotes

               - 

98

                - 

               99

Structured notes

                    3 

         10,149 







-  equity-linked notes

                    3 

           6,281 

Model - Option model

Equity volatility

6%

95%

6%

142%

Model - Option model

Equity correlation

22%

99%

32%

99%

-  Foreign exchange ('FX')-linked notes

                  - 

           2,778 

Model - Option model

FX volatility

2%

36%

3%

37%

-  other2

                  - 

           1,090 







Other derivatives

           1,772 

           2,315 







-  interest rate derivatives

               511 

               718 







securitisation swaps

               114 

               160 

Model - Discounted cash flow

Prepayment rate

5%

10%

5%

10%

long-dated swaptions

                  64 

                  75 

Model - Option model

Interest rate volatility

9%

34%

8%

53%

    other2

               333 

               483 







-  FX derivatives

               308 

               388 







FX options

               271 

               318 

Model - Option model

FX volatility

2%

44%

1%

46%

    other2

                  37 

                  70 







-  equity derivatives

               737 

               941 







long-dated single stock options

               520 

               713 

Model - Option model

Equity volatility

7%

77%

7%

153%

    other2

               217 

               228 







-  credit derivatives

               216 

               268 







    other2

               216 

               268 







Other portfolios

           7,316 

               323 







-  repurchase agreements

               763 

               295 

Model - Discounted cash flow

Interest rate curve

0%

10%

1%

9%

-  other2

           6,553 

                  28 







At 30 Jun 2023

         27,230 

         12,915 







1     Given the bespoke nature of the analysis in respect of each private equity holding, it is not practical to quote a range of key unobservable inputs.

2     'Other' includes a range of smaller holdings with multiple inputs.


7

Fair values of financial instruments not carried at fair value

 

The bases for measuring the fair values of loans and advances to banks and customers, financial investments, deposits by banks, customer accounts, debt securities in issue, subordinated liabilities and non-trading repurchase and reverse repurchase agreements are explained on pages 370 and 371 of the Annual Report and Accounts 2022.

Fair values of financial instruments not carried at fair value on the balance sheet


At 30 Jun 2023

At 31 Dec 20221


Carrying

amount

Fair

value

Carrying

amount

Fair

value


$m

$m

$m

$m

Assets





Loans and advances to banks

             100,921 

             100,939 

             104,475 

             104,459 

Loans and advances to customers

             959,558 

             944,187 

             923,561 

             911,898 

Reverse repurchase agreements - non-trading

             258,056 

             258,050 

             253,754 

             253,668 

Financial investments - at amortised cost

             131,250 

             127,779 

             109,066 

             106,412 

Liabilities





Deposits by banks

                68,709 

                68,733 

                66,722 

                66,831 

Customer accounts

         1,595,769  

         1,595,379  

          1,570,303 

          1,570,209 

Repurchase agreements - non-trading

             170,110 

             170,123 

             127,747 

             127,500 

Debt securities in issue

                85,471 

                84,966 

                78,149 

                77,021 

Subordinated liabilities

                23,286 

                24,784 

                22,290 

                22,723 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

Fair values of financial instruments not carried at fair value on the balance sheet - assets and disposal groups held for sale


At 30 Jun 2023

At 31 Dec 2022


Carrying

amount

Fair

value

Carrying

amount

Fair

value


$m

$m

$m

$m

Assets





Loans and advances to banks

                  1,149 

                  1,151 

                      253 

                      257 

Loans and advances to customers

                59,869 

                59,126 

                80,687 

                78,159 

Reverse repurchase agreements - non-trading

                  3,379 

                  3,379 

                   4,646 

                   4,646 

Financial investments - at amortised cost

                  6,744 

                  6,577 

                   6,165 

                   6,042 

Liabilities





Deposits by banks

                      253 

                      253 

                         64

                         64

Customer accounts

                66,154 

                66,543 

                85,274 

                85,303 

Repurchase agreements - non-trading

                  2,615 

                  2,615 

                   3,266 

                   3,266 

Debt securities in issue

                  9,127 

                  8,794 

                12,928 

                12,575 

Subordinated liabilities

                           8 

                           7 

                            8

                            7

 

Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly, their carrying amount is a reasonable approximation of fair value.

 


8

Derivatives

 

Notional contract amounts and fair values of derivatives by product contract type held by HSBC


Notional contract amount

Fair value amount


Assets and liabilities

Assets

Liabilities


Trading

Hedging

Trading

Hedging

Total

Trading

Hedging

Total


$m

$m

$m

$m

$m

$m

$m

$m

Foreign exchange

         9,257,418  

                55,396 

             104,136 

                  1,211 

             105,347 

                96,805 

                      184 

                96,989 

Interest rate

       15,641,544  

             344,757 

             297,598 

                  5,297 

             302,895 

             302,192 

                  4,546 

             306,738 

Equities

             697,994 

                         - 

                15,580 

                         - 

                15,580 

                17,563 

                         - 

                17,563 

Credit

             162,699 

                         - 

                  1,466 

                         - 

                  1,466 

                  1,614 

                         - 

                  1,614 

Commodity and other

                85,366 

                         - 

                  1,976 

                         - 

                  1,976 

                  1,325 

                         - 

                  1,325 

Gross total fair values

       25,845,021  

             400,153 

             420,756 

                  6,508 

             427,264 

             419,499 

                  4,730 

             424,229 

Offset





           (154,669)



           (154,669)

At 30 Jun 2023

       25,845,021  

             400,153 

             420,756 

                  6,508 

             272,595 

             419,499 

                  4,730 

             269,560 










Foreign exchange

         8,434,453  

                38,924 

             122,206 

                      525 

             122,731 

             123,088 

                      166 

             123,254 

Interest rate

       15,213,232  

             276,589 

             285,449 

                  5,066 

             290,515 

             287,876 

                  3,501 

             291,377 

Equities

             570,410 

                         - 

                  9,325 

                         - 

                  9,325 

                  9,176 

                         - 

                  9,176 

Credit

             183,995 

                         - 

                  1,091 

                         - 

                  1,091 

                  1,264 

                         - 

                  1,264 

Commodity and other

                78,414 

                         - 

                  1,484 

                         - 

                  1,484 

                  1,678 

                         - 

                  1,678 

Gross total fair values

       24,480,504  

             315,513 

             419,555 

                  5,591 

             425,146 

             423,082 

                  3,667 

             426,749 

Offset





           (140,987)          



           (140,987)          

At 31 Dec 20221

       24,480,504  

             315,513 

             419,555 

                  5,591 

             284,159 

             423,082 

                  3,667 

             285,762 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.

The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk. Derivative assets and liabilities decreased during 1H23, reflecting changes in yield curves and the market environment.

Derivatives valued using models with unobservable inputs

The following table shows the difference between the fair value at initial recognition, which is the transaction price, and the value that would have been derived had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases.

Unamortised balance of derivatives valued using models with significant unobservable inputs


Half-year to


30 Jun

30 Jun


2023

2022


$m

$m

Unamortised balance at beginning of period

                         97 

                      106 

Deferral on new transactions

                         84 

                      100 

Recognised in the income statement during the period

                    (100)

                       (99)

-  amortisation

                       (53)

                       (61)

-  subsequent to unobservable inputs becoming observable

                       (10)

                          - 

-  maturity, termination or offsetting derivative

                       (37)

                       (38)

Exchange differences

                           3 

                          (8)

Unamortised balance at end of period1

                         84 

                         99

1   This amount is yet to be recognised in the consolidated income statement.

Hedge accounting derivatives

The notional contract amounts of derivatives held for hedge accounting purposes indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk.

Notional contract amounts of derivatives held for hedging purposes by product type


At 30 Jun 2023

At 31 Dec 2022


Cash flow

hedges

Fair value

hedges

Cash flow

hedges

Fair value

hedges


$m

$m

$m

$m

Foreign exchange

                20,927 

                         - 

                   8,781 

                          - 

Interest rate

             166,589 

             178,168 

             114,527 

             162,062 

Total

             187,516 

             178,168 

             123,308 

             162,062 

 

 

The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using forward foreign exchange contracts or by financing with foreign currency borrowings. At 30 June 2023, the notional contract values of outstanding financial instruments designated as hedges of net investments in foreign operations were $34,469m (31 December 2022: $30,143m).

Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 'Financial Instruments'

HSBC has applied both the first set of amendments ('Phase 1') and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39 applicable to hedge accounting. The items in hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance sheet as 'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and advances to customers', 'Debt securities in issue' and 'Deposits by banks'. The notional value of the derivatives impacted by the Ibor reform, including those designated in hedge accounting relationships, is disclosed on page 63 in the section 'Financial instruments impacted by Ibor reform'. For further details on Ibor transition, see 'Ibor transition' under 'Areas of special interest' on page 62.

During 2023, the Group transitioned all of its hedging instruments referencing US dollar Libor. This transition did not necessitate any new approaches compared with the mechanisms used so far for transition, and it will not be necessary to change the transition risk management strategy.

For some of the Ibors included under the 'Other' header in the table below, judgement has been needed to establish whether a transition is required. This is because there are Ibor benchmarks subject to computation improvements and insertion of fallback provisions where their administrators have yet to provide full clarity on whether or when these Ibor benchmarks will be demised.

The notional amounts of interest rate derivatives designated in hedge accounting relationships do not represent the extent of the risk exposure managed by the Group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 amendments and are shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not significant and have not been presented below:

Hedging instrument impacted by Ibor reform


Hedging instrument


Impacted by Ibor reform

Not impacted by Ibor reform

Notional

amount3


1

$

Other2

Total


$m

$m

$m

$m

$m

$m

Fair value hedges

                18,019 

                         - 

                11,804 

                29,823 

                  148,345 

                178,168 

Cash flow hedges

                11,157 

                         - 

                30,469 

                41,626 

                  124,963 

                166,589 

At 30 Jun 2023

                29,176 

                         - 

                42,273 

                71,449 

                  273,308 

                344,757 








Fair value hedges

                12,756 

                  2,015 

                12,643 

                27,414 

                  134,648 

                162,062 

Cash flow hedges

                  8,865 

                         - 

                27,830 

                36,695 

                     77,832 

                114,527 

At 31 Dec 2022

                21,621 

                  2,015 

                40,473 

                64,109 

                  212,480 

                276,589 

                       

1     The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which are 'Fair value hedges' of $18,019m (31 December 2022: $12,756m) and 'Cash flow hedges' of $11,157m (31 December 2022: $8,865m).

2     Other benchmarks impacted by Ibor reform comprise mainly of Canadian dollar offered rate ('CDOR'), Hong Kong interbank offered rate ('HIBOR') and Mexican interbank equilibrium interest rate ('TIIE')-related derivatives.

3     The notional contract amounts of interest rate derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date. They do not represent amounts at risk.


9

Financial investments

 

Carrying amounts of financial investments


30 Jun

31 Dec1


2023

2022


$m

$m

Financial investments measured at fair value through other comprehensive income

             276,683 

             255,660 

-  treasury and other eligible bills

             102,704 

                86,749 

-  debt securities

             172,280 

             167,107 

-  equity securities

                  1,606 

                   1,696 

-  other instruments

                         93 

                      108 

Debt instruments measured at amortised cost

             131,250 

             109,066 

-  treasury and other eligible bills

                30,627 

                34,507 

-  debt securities

             100,623 

                74,559 

At the end of the period

             407,933 

             364,726 

1     From 1 January 2023, we adopted IFRS 17 'Insurance Contracts', which replaced IFRS 4 'Insurance Contracts'. Comparative data have been restated accordingly.


10

Interests in associates and joint ventures

At 30 June 2023, the carrying amount of HSBC's interests in associates and joint ventures was $29,546m (31 December 2022: $29,254m).

Principal associates of HSBC


At 30 Jun 2023

At 31 Dec 2022


Carrying amount

Fair value1

Carrying amount

Fair value1


$m

$m

$m

$m

Bank of Communications Co., Limited

                     23,344 

               9,363 

                   23,307 

               8,141 

Saudi Awwal Bank

                       4,704 

               6,479 

                      4,494 

               6,602 

1   Principal associates are listed on recognised stock exchanges. The fair values are based on the quoted market prices of the shares held (Level 1 in the fair value hierarchy).

Share of profit in associates and joint ventures




Half year to


30 Jun

30 Jun


2023

2022


$m

$m

Bank of Communications Co., Limited

                     1,317 

                      1,344 

Saudi Awwal Bank

                         272 

                         117 

Other associates and joint ventures

                            (6)

                          (12)

Share of profit in associates and joint ventures

                     1,583 

                      1,449 

 

Bank of Communications Co., Limited

The Group's investment in Bank of Communications Co., Limited ('BoCom') is classified as an associate. Significant influence in BoCom was established with consideration of all relevant factors, including representation on BoCom's Board of Directors and participation in a resource and experience sharing agreement ('RES'). Under the RES, HSBC staff have been seconded to assist in the maintenance of BoCom's financial and operating policies. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28 'Investments in Associates and Joint Ventures', whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group's share of BoCom's net assets. An impairment test is required if there is any indication of impairment.

Impairment testing

At 30 June 2023, the fair value of the Group's investment in BoCom had been below the carrying amount for approximately 11 years. As a result, the Group performed an impairment test on the carrying amount, which confirmed that there was no impairment at 30 June 2023 as the recoverable amount as determined by a value-in-use ('VIU') calculation was higher than the carrying value.


At 30 Jun 2023

At 31 Dec 2022


VIU

Carrying value

Fair value

VIU

Carrying value

Fair value


$bn

$bn

$bn

$bn

$bn

$bn

BoCom

                            23.9 

                            23.3 

                               9.4 

                            23.5 

                            23.3 

                               8.1 








The headroom, which is defined as the extent to which the VIU exceeds the carrying value, increased by $0.4bn compared with 31 December 2022. The increase in headroom was principally due to the movement in the discount rate which was market driven, partly offset by revisions to management's best estimates of BoCom's future earnings in the short to medium term.

In future periods, the VIU may increase or decrease depending on the effect of changes to model inputs. The main model inputs are described below and are based on factors observed at the period-end. The factors that could result in a change in the VIU and an impairment include a short-term underperformance by BoCom, a change in regulatory capital requirements, or an increase in uncertainty regarding the future performance of BoCom resulting in a downgrade of the forecast of future asset growth or profitability. An increase in the discount rate could also result in a reduction of VIU and an impairment.

If the Group did not have significant influence in BoCom, the investment would be carried at fair value rather than the current carrying value.

Basis of recoverable amount

The impairment test was performed by comparing the recoverable amount of BoCom, determined by a VIU calculation, with its carrying amount. The VIU calculation uses discounted cash flow projections based on management's best estimates of future earnings available to ordinary shareholders prepared in accordance with IAS 36 'Impairment of Assets'. Significant management judgement is required in arriving at the best estimate.

There are two main components to the VIU calculation. The first component is management's best estimate of BoCom's earnings. Forecast earnings growth over the short to medium term are lower than recent (within the last five years) historical actual growth and reflect the uncertainty arising from the current economic outlook. Reflecting management's intent to continue to retain its investment, earnings beyond the short to medium term are then extrapolated into perpetuity using a long-term growth rate to derive a terminal value, which comprises the majority of the VIU. The second component is the capital maintenance charge ('CMC'), which is management's forecast of the earnings that need to be withheld in order for BoCom to meet capital requirements over the forecast period, meaning that CMC is deducted when arriving at management's estimate of future earnings available to ordinary shareholders. The principal inputs to the CMC calculation include estimates of asset growth, the ratio of risk-weighted assets to total assets and the expected capital requirements. An increase in the CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers other qualitative factors, to ensure that the inputs to the VIU calculation remain appropriate.

Key assumptions in value-in-use calculation

We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:

-   Long-term profit growth rate: 3% (31 December 2022: 3%) for periods after 2026, which does not exceed forecast GDP growth in mainland China and is similar to forecasts by external analysts.

-   Long-term asset growth rate: 3% (31 December 2022: 3%) for periods after 2026, which is the rate that assets are expected to grow to achieve long-term profit growth of 3%.

-   Discount rate: 9.80% (31 December 2022: 10.04%), which is based on a capital asset pricing model ('CAPM'), using market data. The discount rate used is within the range of 8.0% to 9.8% (31 December 2022: 8.4% to 10.4%) indicated by the CAPM, and decreased as a consequence of a market driven reduction in beta. While the CAPM range sits at the lower end of the range adopted by selected external analysts of 8.8% to 13.5% (31 December 2022: 8.8%% to 13.5%), we continue to regard the CAPM range as the most appropriate basis for determining this assumption.

-   Expected credit losses ('ECL') as a percentage of customer advances: ranges from 0.87% to 0.94% (31 December 2022: 0.99% to 1.05%) in the short to medium term, reflecting reported credit experience through the recovery from the Covid-19 pandemic in mainland China. For periods after 2026, the ratio is 0.97% (31 December 2022: 0.97%), which is higher than BoCom's average ECL as a percentage of customer advances in recent years prior to the pandemic.

-   Risk-weighted assets as a percentage of total assets: ranges from 61.0% to 63.7% (31 December 2022: 61.0% to 64.4%) in the short to medium term, reflecting higher risk-weights in the short term followed by an expected reversion to recent historical levels. For periods after 2026, the ratio is 61.0% (31 December 2022: 61.0%), which is similar to BoCom's actual results in recent years.

-   Operating income growth rate: ranges from 1.7% to 9.4% (31 December 2022: 1.9% to 7.7%) in the short to medium term, which is similar to BoCom's actual results in recent years, and is heavily influenced by projections of net interest income in future periods. This reflects BoCom's most recent actual results, global trade tensions and industry developments in mainland China.

-   Cost-income ratio: ranges from 35.5% to 36.8% (31 December 2022: 35.5% to 36.3%) in the short to medium term. These ratios are similar to BoCom's actual results in recent years and forecasts disclosed by external analysts.

-   Effective tax rate: ranges from 5.3% to 15.0% (31 December 2022: 4.4% to 15.0%) in the short to medium term, reflecting BoCom's actual results and an expected increase towards the long-term assumption through the forecast period. For periods after 2026, the rate is 15.0% (31 December 2022: 15.0%), which is higher than the recent historical average, and aligned to the minimum tax rate as proposed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

-   Capital requirements: capital adequacy ratio of 12.5% (31 December 2022: 12.5%) and tier 1 capital adequacy ratio of 9.5% (31 December 2022: 9.5%), based on BoCom's capital risk appetite and capital requirements respectively.

The following table shows the change to each key assumption in the VIU calculation that on its own would reduce the headroom to nil:

Key assumption

Changes to key assumption to reduce headroom to nil

Long-term profit growth rate

Decrease by 13 basis points

Long-term asset growth rate

Increase by 11 basis points

Discount rate

Increase by 17 basis points

Expected credit losses as a percentage of customer advances

Increase by 2 basis points

Risk-weighted assets as a percentage of total assets

Increase by 90 basis points

Operating income growth rate

Decrease by 24 basis points

Cost-income ratio

Increase by 53 basis points

Long-term effective tax rate

Increase by 153 basis points

Capital requirements - capital adequacy ratio

Increase by 18 basis points

Capital requirements - tier 1 capital adequacy ratio

Increase by 162 basis points

 

The following table further illustrates the impact on VIU of reasonably possible changes to key assumptions. This reflects the sensitivity of the VIU to each key assumption on its own and it is possible that more than one favourable and/or unfavourable change may occur at the same time. The selected rates of reasonably possible changes to key assumptions are based on external analysts' forecasts, statutory requirements and other relevant external data sources, which can change period to period.

Sensitivity of VIU to reasonably possible changes in key assumptions


Favourable change

Unfavourable change



Increase in VIU

VIU


Decrease in VIU

VIU


bps

$bn

$bn

bps

$bn

$bn

At 30 Jun 2023






Long-term profit growth rate1

62

 3.1

27.0

(72)

(3.0)

20.9

Long-term asset growth rate1

(72)

3.4

27.3

62

(3.6)

20.3

Discount rate

                              (180)

                                8.2 

                         32.1 

                                     210 

                               (5.3)

                         18.6 

Expected credit losses as a percentage of customer advances

 2023 to 2026: 83

2027 onwards: 91

                                2.0 

                         25.9 

  2023 to 2026: 120

2027 onwards: 104

                               (3.6)

                         20.3 

Risk-weighted assets as a percentage of total assets

                                 (77)

                                0.1 

                         24.0 

                                     280 

                               (2.2)

                         21.7 

Operating income growth rate

                                   56 

                                1.4 

                         25.3 

                                  (116)

                               (2.9)

                         21.0 

Cost-income ratio

                              (131)

                                0.9 

                         24.8 

                                     164 

                               (2.3)

                         21.6 

Long-term effective tax rate

                              (426)

                                1.6 

                         25.5 

                                 1,000 

                               (3.7)

                         20.2 

Capital requirements - capital adequacy ratio

                                   - 

                                  - 

                         23.9 

                                     229 

                               (7.8)

                         16.1 

Capital requirements - tier 1 capital adequacy ratio

                                   - 

                                  - 

                         23.9 

                                     257 

                               (3.9)

                         20.0 








At 31 Dec 2022







Long-term profit growth rate1

 75

 3.6

27.1

(71)

 (2.7)

 20.8

Long-term asset growth rate1

(71)

3.1

26.6

75

(4.1)

19.4

Discount rate

                              (164)                             

                                6.9 

                         30.4 

                                     136 

                               (3.7)                              

                         19.8 

Expected credit losses as a percentage of customer advances

2022 to 2026: 95

2027 onwards: 91

                                1.9 

                         25.4 

2022 to 2026: 120

2027 onwards: 104

                               (2.9)                              

                         20.6 

Risk-weighted assets as a percentage of total assets

                              (118)                             

                                0.1 

                         23.6 

                                     239 

                               (2.3)                              

                         21.2 

Operating income growth rate

                                   44 

                                1.3 

                         24.8 

                                     (83)                                    

                               (2.5)                              

                         21.0 

Cost-income ratio

                              (122)                             

                                1.0 

                         24.5 

                                     174 

                               (2.1)                              

                         21.4 

Long-term effective tax rate

                              (426)                             

                                1.5 

                         25.0 

                                 1,000 

                               (3.6)                              

                         19.9 

Capital requirements - capital adequacy ratio

                                   - 

                                  - 

                         23.5 

                                     191 

                               (6.3)                              

                         17.2 

Capital requirements - tier 1 capital adequacy ratio

                                   - 

                                  - 

                         23.5 

                                     266 

                               (3.2)                              

                         20.3 

1     The reasonably possible ranges of the long-term profit growth rate and long-term asset growth rate assumptions reflect the close relationship between these assumptions, which would result in offsetting changes to each assumption.

Considering the interrelationship of the changes set out in the table above, management estimates that the reasonably possible range of VIU is $16.2bn to $29.3bn (31 December 2022: $16.9bn to $28.7bn). The range is based on impacts set out in the table above arising from the favourable/unfavourable change in the earnings in the short to medium term, the long-term expected credit losses as a percentage of customer advances and a 50bps increase/decrease in the discount rate. All other long-term assumptions, and the basis of the CMC have been kept unchanged when determining the reasonably possible range of the VIU. Impairment, if determined, would be recognised in the income statement. The impact on the Group's CET1 ratio is expected to be minimal in the event of an impairment, as the adverse impact on CET1 capital from the impairment would be offset by the favourable impact from a lower carrying value.

Saudi Awwal Bank

The Group's investment in Saudi Awwal Bank ('SAB') is classified as an associate. HSBC is the largest shareholder in SAB with a shareholding of 31%. Significant influence in SAB is established via representation on the Board of Directors. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28, as described previously for BoCom.

Impairment testing

There were no indicators of impairment at 30 June 2023. The fair value of the Group's investment in SAB of $6.5bn was above the carrying amount of $4.7bn.


11

Provisions

 


Restructuring

costs

Legal proceedings

and regulatory

matters

Customer

remediation

Other

provisions

Total


$m

$m

$m

$m

$m

Provisions (excluding contractual commitments)






At 31 Dec 2022

                         445 

                         409 

                         195 

                         397 

                     1,446 

Additions

                         152 

                            78 

                              9 

                            86 

                         325 

Amounts utilised

                       (147)

                       (171)

                          (35)

                          (34)

                       (387)

Unused amounts reversed

                          (45)

                          (19)

                          (34)

                          (49)

                       (147)

Exchange and other movements

                            23 

                            (6)

                              8 

                              6 

                            31 

At 30 Jun 2023

                         428 

                         291 

                         143 

                         406 

                     1,268 

Contractual commitments1






At 31 Dec 2022





                         512 

Net change in expected credit loss provision and other movements





                          (58)

At 30 Jun 2023





                         454 

Total provisions






At 31 Dec 2022





                     1,958 

At 30 Jun 2023





                     1,722 

1     Contractual commitments include the expected credit loss provision in relation to off-balance sheet financial guarantee contracts and commitments where HSBC has become party to an irrevocable commitment, as defined under IFRS 9 'Financial Instruments'; and provisions for performance and other guarantee contracts.

Further details of 'Legal proceedings and regulatory matters' are set out in Note 13. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim); or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. 'Regulatory matters' refers to investigations, reviews and other actions carried out by, or in response to, the actions of regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.

Customer remediation refers to HSBC's activities to compensate customers for losses or damages associated with a failure to comply with regulations or to treat customers fairly. Customer remediation is often initiated by HSBC in response to customer complaints and/or industry developments in sales practices, and is not necessarily initiated by regulatory action.

For further details of the impact of IFRS 9 on undrawn loan commitments and financial guarantees, presented in 'Contractual commitments', see Note 12. Further analysis of the movement in the expected credit loss provision is disclosed within the 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 78.

Brazil PIS and COFINS tax matters

Beginning in the late 1990s, HSBC Bank Brasil S.A. - Banco Múltiplo ('HSBC Brazil') and other financial services firms brought legal proceedings in Brazil challenging the assessment of PIS and COFINS taxes, which are federal taxes imposed on gross revenues earned by legal entities in Brazil. The Supreme Court of Brazil selected three cases - one involving an insurer, in 2007, and two involving other banks, in 2011 - to set standards that would apply to all of these proceedings. In June 2023, the court ruled against the financial services firms in all three cases. The standards set by the court in this ruling have not yet been applied to HSBC Brazil's legacy cases, liability for which remained with HSBC after the sale of HSBC's operations in Brazil to Bradesco in 2016. There are many factors that may affect the range of outcomes and any resulting financial impact for HSBC. Based upon the information currently available, a provision was recognised in respect of one legacy case. The remaining additional tax liability subject to challenge on all legacy PIS and COFINS cases is up to $0.4bn.

 


12

Contingent liabilities, contractual commitments and guarantees

 


At


30 Jun

31 Dec


2023

2022


$m

$m

Guarantees and other contingent liabilities:



-  financial guarantees

                      18,882 

                      18,783 

-  performance and other guarantees

                      89,758 

                      88,240 

-  other contingent liabilities

                             590 

                             676 

At the end of the period

                    109,230 

                    107,699 

Commitments:1



-  documentary credits and short-term trade-related transactions

                         7,698 

                         8,241 

-  forward asset purchases and forward deposits placed

                      72,340 

                      50,852 

-  standby facilities, credit lines and other commitments to lend

                    793,256 

                    768,761 

At the end of the period

                    873,294 

                    827,854 

1     Includes $649,526m of commitments at 30 June 2023 (31 December 2022: $618,788m), to which the impairment requirements in IFRS 9 are applied where HSBC has become party to an irrevocable commitment.

The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the Group, which represent the maximum amounts at risk should the contracts be fully drawn upon and the clients default. As a significant portion of guarantees and commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 11. The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to HSBC's annual credit review process.

Contingent liabilities arising from legal proceedings and regulatory and other matters against Group companies are excluded from this note but are disclosed in Note 13.

 


13

Legal proceedings and regulatory matters

 

HSBC is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from the matters described below, HSBC considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1 of the Annual Report and Accounts 2022. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 30 June 2023 (see Note 11). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

Bernard L. Madoff Investment Securities LLC

Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Bernard L. Madoff Investment Securities LLC ('Madoff Securities'). Based on information provided by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff. Based on information available to HSBC, the funds' actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud.

US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of transfers from Madoff Securities to HSBC in an amount not specified, and these lawsuits remain pending in the US Bankruptcy Court for the Southern District of New York (the 'US Bankruptcy Court').

Certain Fairfield entities (together, 'Fairfield') (in liquidation since July 2009) have brought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitution of redemption payments. In August 2022, the US District Court for the Southern District of New York affirmed earlier decisions by the US Bankruptcy Court that dismissed the majority of the liquidators' claims (against most of the HSBC companies). In September 2022, the remaining defendants before the US Bankruptcy Court sought leave to appeal and the liquidators filed appeals to the US Court of Appeals for the Second Circuit, which are currently pending. Meanwhile, proceedings before the US Bankruptcy Court with respect to the remaining claims are ongoing.

UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recovery of transfers from Madoff Securities to HSBC. The claim has not yet been served and the amount claimed has not been specified.

Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in liquidation since April 2009) brought an action against HSBC Securities Services Luxembourg ('HSSL') and Bank of Bermuda (Cayman) Limited (now known as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary duty and claiming monetary damages. Following dismissal of Primeo's action by the lower and appellate courts in the Cayman Islands, in 2019, Primeo appealed to the UK Privy Council. During 2021, the UK Privy Council held two separate hearings in connection with Primeo's appeal. Judgment was given against HSBC in respect of the first hearing and judgment is pending in respect of the second hearing.

Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald') (in liquidation since July 2013) brought an action against HSSL before the Luxembourg District Court, seeking restitution of cash and securities that Herald purportedly lost because of Madoff Securities' fraud, or money damages. The Luxembourg District Court dismissed Herald's securities restitution claim, but reserved Herald's cash restitution and money damages claims. Herald has appealed this judgment to the Luxembourg Court of Appeal, where the matter is pending. In late 2018, Herald brought additional claims against HSSL and HSBC Bank plc before the Luxembourg District Court, seeking further restitution and damages.

In October 2009, Alpha Prime Fund Limited ('Alpha Prime') brought an action against HSSL before the Luxembourg District Court, seeking the restitution of securities, or the cash equivalent, or money damages. In December 2018, Alpha Prime brought additional claims seeking damages against various HSBC companies. These matters are currently pending before the Luxembourg District Court.

In December 2014, Senator Fund SPC ('Senator') brought an action against HSSL before the Luxembourg District Court, seeking restitution of securities, or the cash equivalent, or money damages. In April 2015, Senator commenced a separate action against the Luxembourg branch of HSBC Bank plc asserting identical claims. In December 2018, Senator brought additional claims against HSSL and HSBC Bank plc Luxembourg branch, seeking restitution of Senator's securities or money damages. These matters are currently pending before the Luxembourg District Court.

There are many factors that may affect the range of possible outcomes, and any resulting financial impact, of the various Madoff-related proceedings described above, including but not limited to the multiple jurisdictions in which the proceedings have been brought. Based upon the information currently available, management's estimate of the possible aggregate damages that might arise as a result of all claims in the various Madoff-related proceedings is around $600m, excluding costs and interest. Due to uncertainties and limitations of this estimate, any possible damages that might ultimately arise could differ significantly from this amount.

Anti-money laundering and sanctions-related matters

Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf of plaintiffs who are, or are related to, victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act. Nine actions remain pending in federal courts and HSBC's motions to dismiss have been granted in five of these cases. In September 2022 and January 2023, respectively, the appellate courts affirmed the dismissals of two of the cases, and the plaintiffs are seeking review of these decisions by the US Supreme Court. The dismissals in the other cases are subject to appeal. The four remaining actions are at an early stage.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Interbank offered rates investigation and litigation

Euro interest rate derivatives: In December 2016, the European Commission ('EC') issued a decision finding that HSBC, among other banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on HSBC based on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021. In January 2023, the European Court of Justice dismissed an appeal by HSBC and upheld the EC's findings on HSBC's liability. A separate appeal by HSBC concerning the amount of the fine remains pending before the General Court of the European Union.

US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of private lawsuits filed in federal and state courts in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US federal and state laws, including antitrust and racketeering laws and the Commodity Exchange Act ('US CEA'). The lawsuits include individual and putative class actions, most of which have been transferred and/or consolidated for pre-trial purposes before the US District Court for the Southern District of New York. HSBC has reached class settlements with five groups of plaintiffs, and the court has approved these settlements. HSBC has also resolved several of the individual actions, although a number of other US dollar Libor-related actions remain pending.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Foreign exchange-related investigations and litigation

In December 2016, Brazil's Administrative Council of Economic Defense initiated an investigation into the onshore foreign exchange market and identified a number of banks, including HSBC, as subjects of its investigation, which remains ongoing.

In June 2020, the Competition Commission of South Africa, having initially referred a complaint for proceedings before the South African Competition Tribunal in February 2017, filed a revised complaint against 28 financial institutions, including HSBC Bank plc and HSBC Bank USA N.A. ('HSBC Bank USA'), for alleged anti-competitive behaviour in the South African foreign exchange market. In March 2023, HSBC Bank plc's and HSBC Bank USA's applications to dismiss the revised complaint were denied and, in April 2023, HSBC Bank plc and HSBC Bank USA appealed the decision to the South African Competition Appeal Court.

Beginning in 2013, various HSBC companies and other banks have been named as defendants in a number of putative class actions filed in, or transferred to, the US District Court for the Southern District of New York arising from allegations that the defendants conspired to manipulate foreign exchange rates. HSBC has reached class settlements with two groups of plaintiffs, including direct and indirect purchasers of foreign exchange products, and the court has granted final approval of these settlements. A putative class action by a group of retail customers of foreign exchange products remains pending.

In 2018, complaints alleging foreign exchange-related misconduct were filed in the US District Court for the Southern District of New York and the High Court of England and Wales against HSBC and other defendants by certain plaintiffs that opted out of the direct purchaser class action settlement in the US. HSBC has reached a settlement with the plaintiffs to resolve these claims. These matters are now closed. In January 2023, HSBC reached a settlement-in-principle with plaintiffs in Israel to resolve a class action filed in the local courts alleging foreign exchange-related misconduct. The settlement remains subject to the negotiation of definitive documentation and court approval. Lawsuits alleging foreign exchange-related misconduct remain pending against HSBC and other banks in courts in Brazil. It is possible that additional civil actions will be initiated against HSBC in relation to its historical foreign exchange activities.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of the pending matters, which could be significant.

Precious metals fix-related litigation

Gold: Since 2015, numerous putative class actions have been filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs allege that, among other things, from January 2004 to March 2014, the defendants conspired to manipulate the price of gold and gold derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Silver: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2007 to December 2013, the defendants conspired to manipulate the price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In May 2023, the court granted the defendants' motion to dismiss. The plaintiffs have appealed the dismissal, and this appeal remains pending.

In April 2016, two putative class actions were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs in both actions allege that, from January 1999 to August 2014, the defendants conspired to manipulate the price of silver and silver derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Platinum and palladium: HSBC and other members of The London Platinum and Palladium Fixing Company Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2008 to November 2014, the defendants conspired to manipulate the price of platinum group metals and related financial products for their collective benefit in violation of US antitrust laws and the US CEA. In February 2023, the court reversed an earlier dismissal of the plaintiffs' third amended complaint, and this matter is proceeding.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Gilts trading investigation and litigation

Since 2018, the UK Competition and Markets Authority ('CMA') has been investigating HSBC and four other banks for suspected anti-competitive conduct in relation to the historical trading of gilts and related derivatives. In May 2023, the CMA announced its case against HSBC Bank plc and HSBC Holdings, and both HSBC companies are contesting the CMA's allegations.

In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks, were named as defendants in a putative class action filed in the US District Court for the Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market. This matter is at an early stage. It is possible that additional civil actions will be initiated against HSBC in relation to its historical gilts trading activities.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Other regulatory investigations, reviews and litigation

HSBC Holdings and/or certain of its affiliates are subject to a number of other investigations and reviews by various regulators and competition and law enforcement authorities, as well as litigation, in connection with various matters relating to the firm's businesses and operations, including:

-   an investigation by the PRA in connection with depositor protection arrangements in the UK;

-   an investigation by the FCA in connection with collections and recoveries operations in the UK;

-   investigations by prosecuting authorities in Germany and France in connection with the dividend withholding tax treatment of certain trading activities;

-   an investigation by the US Commodity Futures Trading Commission ('CFTC') regarding interest rate swap transactions related to bond issuances, among other things. HSBC has reached a settlement with the CFTC to resolve this investigation, and this matter is now closed;

-   investigations by the CFTC and the US Securities and Exchange Commission ('SEC') concerning compliance with records preservation requirements relating to the use of unapproved electronic messaging platforms for business communications. HSBC has reached settlements with the CFTC and SEC to resolve these investigations, and these matters are now closed;

-   investigations by tax administration, regulatory and law enforcement authorities in various countries in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation;

-   a lawsuit brought in the US District Court for the Northern District of California, by First-Citizens Bank & Trust Company ('First Citizens') against various HSBC companies and seven HSBC US employees who had previously worked for Silicon Valley Bank ('SVB') alleging, among other things, that HSBC conspired with the individual defendants to solicit employees from First Citizens and that the individual defendants took confidential information belonging to SVB and/or First Citizens;

-   litigation brought against various HSBC companies in New York State court relating to residential mortgage-backed securities, based primarily on (a) claims brought against HSBC Bank USA in connection with its role as trustee on behalf of various securitisation trusts; and (b) claims against several HSBC companies seeking to have the defendants repurchase various mortgage loans;

-   a putative class action brought in the US District Court for the Southern District of New York relating to the Mexican government bond market;

-   claims issued by two separate investor groups against HSBC UK Bank plc (as successor to HSBC Private Bank (UK) Limited ('PBGB')) in the High Court of England and Wales in connection with PBGB's role in the development of Eclipse film finance schemes; and

-   two group actions pending in federal courts in the US and a claim issued in the High Court of England and Wales in connection with HSBC Bank plc's role as a correspondent bank to Stanford International Bank Ltd from 2003 to 2009. HSBC Bank plc has reached settlements with the plaintiffs in the US and UK to resolve these claims. The US settlement is subject to court approval and the UK settlement has concluded.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of the pending matters, which could be significant.

 


14

Transactions with related parties

There were no changes in the related party transactions described in the Annual Report and Accounts 2022 that have had a material effect on the financial position or performance of HSBC in the half-year to 30 June 2023. All related party transactions that took place in the half-year to 30 June 2023 were similar in nature to those disclosed in the Annual Report and Accounts 2022.


15

Assets held for sale, liabilities of disposal groups held for sale and business acquisitions

 


At


30 Jun

31 Dec


2023

2022


$m

$m

Disposal groups

                94,995 

             118,055 

Unallocated impairment losses1

                    (298)

                 (2,385)

Non-current assets held for sale2

                      783 

                      249 

Assets held for sale

                95,480 

             115,919 

Liabilities of disposal groups held for sale

                87,241 

             114,597 

1   This represents impairment losses in excess of the carrying value of the non-current assets included in the measurement scope of IFRS 5.  

2   Includes $0.5bn of US commercial real estate loans classified as held for sale at 30 June 2023.

Disposal groups

Planned sale of our retail banking operations in France

On 25 November 2021, HSBC Continental Europe signed a framework agreement with Promontoria MMB SAS ('My Money Group') and its subsidiary Banque des Caraïbes SA, regarding the planned sale of HSBC Continental Europe's retail banking operations in France. The sale, which is subject to information and consultation processes with respective works councils, regulatory approvals and the satisfaction of other relevant conditions, included: HSBC Continental Europe's French retail banking operations; the Crédit Commercial de France ('CCF') brand; and HSBC Continental Europe's 100% ownership interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement.

During 1Q23, the completion of the planned transaction became less certain. This was due to a significant rise in interest rates in France, which is expected to increase the amount of capital required by the buyer on completion. Given the completion of the sale had become less certain, we were required by IFRS 5 to change the accounting classification of our retail banking operations in France to be no longer classified as held for sale, resulting in a $2.1bn reversal of the previously recognised impairment in respect of the sale. The related $0.4bn impairment of goodwill previously recognised was not reversed.

On 14 June 2023, HSBC Continental Europe signed a further memorandum of understanding with the buyer regarding certain potential changes to the terms of the sale, which are designed to enable the buyer to satisfy its future capital requirements and to obtain regulatory approval for the transaction. The potential changes foresee: the retention of $7.5bn of home and other loans by HSBC Continental Europe that were originally planned to transfer as part of the sale, the inclusion in the perimeter for sale of a cash amount equivalent to the carrying value of the retained portfolio of loans, and the setting of the net asset value of the transferred business by reference to relevant prevailing market rates at completion. In addition, depending on the prevailing market rates at completion, HSBC Continental Europe may receive a profit participation interest in exchange for investing capital into the top holding company of My Money Group, such that the aggregate of the actual net asset value delivered at completion and the investment made in the profit participation interest would not exceed €1.768bn. The potential changes also foresee the retention of the CCF brand, the entry into a long-term agreement to license it to the buyer and certain enhancements to the insurance and asset management distribution agreements with the buyer. The transaction remains subject to information and consultation processes with respective works councils and regulatory approvals, and the parties aim to complete on 1 January 2024.

Taking into account the potential changes, the transaction is expected to result in the recognition of a pre-tax loss on sale estimated up to €2.0bn ($2.2bn) upon reclassification of the business as held for sale. This is expected during the second half of 2023 provided sufficient progress is demonstrated to support the appropriate level of probability of successful completion. Once that threshold is achieved, the disposal group will be reclassified as held for sale and will be remeasured at the lower of carrying amount and fair value less costs to sell at each reporting period. Any remaining gains or losses not previously recognised and the reversal of any remaining deferred tax assets and liabilities, will be recognised on completion.

At 30 June 2023, a deferred tax liability of $0.4bn was recognised as a consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible in the French tax return in 2021 but will be accounted for when the disposal group is classified as held for sale in accordance with IFRS 5, at which time the deferred tax liability will reverse.

Agreed sale of our banking business in Canada

On 29 November 2022, HSBC Holdings plc announced that its wholly-owned subsidiary, HSBC Overseas Holdings (UK) Limited, had entered into an agreement for the sale of its banking business in Canada to Royal Bank of Canada. Completion of the transaction is expected to occur in the first quarter of 2024, subject to regulatory and governmental approvals.

The majority of the estimated gain on sale of $5.3bn will be recognised on completion, reduced by earnings recognised by the Group in the period to completion. The estimated pre-tax profit on the sale will be recognised through a combination of the consolidation of HSBC Canada's results into the Group's financial statements (between the 30 June 2022 net asset reference date and until completion), and the remaining gain on sale recognised at completion. There would be no tax on the gain recognised at completion. At 30 June 2023, total assets of $87.2bn and total liabilities of $80.4bn met the criteria to be classified as held for sale in accordance with IFRS 5.

Planned sale of our branch operations in Greece

On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta Bank SA. In the second quarter of 2022, we recognised a loss of $0.1bn, including goodwill impairment, upon reclassification as held for sale in accordance with IFRS 5. At 30 June 2023, the disposal group included $0.3bn of loans and advances to customers and $1.5bn of customer accounts.

 

Planned sale of our business in Russia

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 planned sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). Completion of the transaction is subject to regulatory and governmental approvals. In 2022, a $0.3bn loss on the planned sale was recognised, upon reclassification as held for sale in accordance with IFRS 5. Completion is currently expected to occur in the second half of 2023. At 30 June 2023, the business remained classified as held for sale.

Planned merger of our business Oman

On 15 November 2022, HSBC Bank Oman SAOG entered into a binding merger agreement with Sohar International Bank SAOG, under which the two banks agreed to take the necessary steps to implement a merger by incorporation, whereby HSBC Bank Oman would merge into Sohar International Bank. On 5 February 2023, HSBC Bank Oman received approval from the Central Bank of Oman for the proposed merger. On 20 June 2023, the merger was approved by the shareholders of HSBC Bank Oman and Sohar International Bank through their respective Extraordinary General Meetings. The merger is expected to be completed in the third quarter of  2023. Upon completion of the merger, all of the assets and liabilities of HSBC Bank Oman would be transferred to Sohar International Bank, and HSBC Bank Oman would be dissolved with the shareholders of HSBC Bank Oman entitled to receive consideration in cash and/or shares in Sohar International Bank. In addition, HSBC Bank Middle East Limited is planning to establish a new wholesale banking branch in Oman subject to regulatory approvals. At 30 June 2023, $6.0bn in assets and $5.3bn in liabilities were reclassified as held for sale in accordance with IFRS 5.

 

At 30 June 2023, the major classes of assets and associated liabilities of disposal groups held for sale, including allocated impairment losses, were as follows:


Canada

Oman

Other

Total


$m

$m

$m

$m

Assets of disposal groups held for sale





Cash and balances at central banks

                               3,541 

                                   576 

                               1,109 

                               5,226 

Trading assets

                               2,273 

                                      - 

                                        6 

                               2,279 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

                                      15 

                                      - 

                                      - 

                                      15 

Derivatives

                                   584 

                                      - 

                                        1 

                                   585 

Loans and advances to banks

                                      76 

                                   891 

                                   182 

                               1,149 

Loans and advances to customers 

                             55,932 

                               2,975 

                                   303 

                             59,210 

Reverse repurchase agreements - non-trading

                               3,254 

                                      - 

                                   125 

                               3,379 

Financial investments1

                             17,424 

                               1,418 

                                      21 

                             18,863 

Goodwill

                                   225 

                                      - 

                                      - 

                                   225 

Prepayments, accrued income and other assets

                               3,913 

                                   128 

                                      23 

                               4,064 

Total assets at 30 Jun 2023

                             87,237 

                               5,988 

                               1,770 

                             94,995 






Liabilities of disposal groups held for sale





Trading liabilities

                               1,903 

                                      - 

                                        2 

                               1,905 

Deposits by banks

                                   175 

                                      77 

                                        1 

                                   253 

Customer accounts 

                             59,813 

                               4,878 

                               1,463 

                             66,154 

Repurchase agreements - non-trading

                               2,615 

                                      - 

                                      - 

                               2,615 

Derivatives

                                   788 

                                      - 

                                      - 

                                   788 

Debt securities in issue 

                               9,127 

                                      - 

                                      - 

                               9,127 

Subordinated liabilities

                                        8 

                                      - 

                                      - 

                                        8 

Accruals, deferred income and other liabilities

                               5,975 

                                   383 

                                      33 

                               6,391 

Total liabilities at 30 Jun 2023

                             80,404 

                               5,338 

                               1,499 

                             87,241 






Expected date of completion

First half of 2024

Second half of 2023



Operating segment

All global businesses

All global businesses



1   Includes financial investments measured at fair value through other comprehensive income of $12,119m and debt instruments measured at amortised cost of $6,744m.

Business acquisitions

Silicon Valley Bank UK Limited (now HSBC Innovation Bank Limited)

In March 2023, HSBC UK Bank plc acquired Silicon Valley Bank UK Limited ('SVB UK'), and in June 2023 changed its legal entity name to HSBC Innovation Bank Limited. 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. The provisional gain on acquisition of $1.5bn represents the difference between the consideration paid of £1 and the net assets acquired. This gain could change as further due diligence is performed within 12 months of the acquisition, as allowed by IFRS 3 'Business Combinations'.

HSBC Innovation Bank Limited contributed $146m of revenue and $66m to the Group profit after tax for the period from the 13 March 2023 to 30 June 2023. As per the disclosure requirement set out in IFRS 3 'Business Combinations', if HSBC Innovation Bank Limited had been acquired on 1 January 2023 and included in the Group results, management estimates that for the six months to 30 June 2023 the Group consolidated revenue would have been $37,024m and the Group consolidated profit after tax would have been $18,149m. In determining these, management has assumed that the fair value adjustments that arose on acquisition would have been the same if the acquisition had occurred on 1 January 2023.

 

The details of the business combination are as follows:


At


13 March


2023


$m

Fair value of assets acquired

                11,291 

Fair value of liabilities acquired

                (9,784)

Fair value of net assets acquired

                  1,507 



Provisional gain on acquisition

                  1,507 

Consideration transferred settled in cash

                         - 

Cash and cash equivalents acquired

                  1,243 

Net cash inflow on acquisition

                  1,243 

 


16

Effects of adoption of IFRS 17

On 1 January 2023, the Group adopted IFRS 17 'Insurance Contracts', and as required by the standard applied the requirements retrospectively, with comparatives restated from the transition date, 1 January 2022. Under IFRS 17 there is no PVIF intangible asset recognised. Instead, the measurement of the insurance contract liability is based on groups of insurance contracts and includes fulfilment cash flows, as well as the CSM unearned profit. The impact of transitioning to IFRS 17 on the consolidated financial statements of the Group was a reduction to total equity of $10,459m at 1 January 2022. In contrast to the Group's IFRS 4 accounting where profits are recognised upfront, under IFRS 17 they are deferred within the CSM which is systematically recognised in revenue as services are provided over the expected coverage period of groups of insurance contracts. Losses resulting from the recognition of onerous contracts are not deferred but recognised in the income statement as they arise. The impact on the Group's consolidated balance sheet, income statement and other comprehensive income are set out in the tables below.

Further information about the effect of the adoption of IFRS 17 is provided in Note 1 'Basis of preparation of material accounting policies' on page 115 and in the Report on Transition to IFRS 17 'Insurance Contracts' issued on 2 May 2023.

 


IFRS 17 transition impact on the Group consolidated balance sheet at 1 January 2022


IFRS 4

Removal of PVIF and  IFRS 4

Remeasure-ment effect of IFRS 9 re-designations

IFRS 17

fulfilment cash flows

IFRS 17

CSM

Tax effect

IFRS 17

Total

movements


$m

$m

$m

$m

$m

$m

$m

$m

Assets









Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

      49,804 

                        - 

                  60,991 

                     - 

                    - 

                   - 

       110,795 

              60,991 

Loans and advances to banks

      83,136 

                        - 

                      (569)

                     - 

                    - 

                   - 

         82,567 

                  (569)

Loans and advances to customers

                       1,045,814                      

                        - 

                  (1,280)

                     - 

                    - 

                   - 

   1,044,534  

               (1,280)

Financial investments

   446,274 

                        - 

                (54,269)

                     - 

                    - 

                   - 

       392,005 

            (54,269)

Goodwill and intangible assets

      20,622 

               (9,453)

                           - 

                     - 

                    - 

                   - 

         11,169 

               (9,453)

Deferred tax assets

        4,624 

                        - 

                           - 

                     - 

                    - 

                808 

            5,432 

                     808 

All other assets

                       1,307,665                      

               (4,468)

                           - 

              4,198 

              (105)

                   - 

   1,307,290  

                  (375)

Total assets

                       2,957,939                      

             (13,921)

                    4,873 

              4,198 

              (105)

                808 

   2,953,792  

               (4,147)

Liabilities and equity









Liabilities









Insurance contract liabilities

   112,745 

          (112,745)

                           - 

         109,393 

             9,914 

                   - 

       119,307 

                 6,562 

Deferred tax liabilities

        4,673 

                        - 

                           - 

                     - 

                    - 

          (1,379)

            3,294 

               (1,379)

All other liabilities

                       2,633,744                      

                        78 

                           - 

              1,102 

                 (51)

                   - 

   2,634,873  

                 1,129 

Total liabilities

                       2,751,162                      

          (112,667)

                           - 

         110,495 

             9,863 

          (1,379)

   2,757,474  

                 6,312 

Total shareholders' equity

   198,250 

               92,738 

                    4,558 

          (99,631)

           (8,847)

            1,947 

       189,015 

               (9,235)

Non-controlling interests

        8,527 

                 6,008 

                        315 

            (6,666)

           (1,121)

                240 

            7,303 

               (1,224)

Total equity

   206,777 

               98,746 

                    4,873 

       (106,297)

           (9,968)

            2,187 

       196,318 

            (10,459)

Total liabilities and equity

                       2,957,939                      

             (13,921)

                    4,873 

              4,198 

              (105)

                808 

   2,953,792  

               (4,147)

Transition drivers

Removal of PVIF and IFRS 4 balances

The PVIF intangible asset of $9,453m previously reported under IFRS 4 within 'Goodwill and intangible assets' arose from the upfront recognition of future profits associated with in-force insurance contracts. The PVIF intangible asset is no longer reported following the transition to IFRS 17, as future profits are deferred within the CSM. Other IFRS 4 insurance contract assets (shown above within 'All other assets') and insurance contract liabilities are removed on transition, to be replaced with IFRS 17 balances.

IFRS 9 asset re-designation

Loans and advances of $1,849m and debt securities of $53,201m, both supporting associated insurance liabilities, were re-designated from an amortised cost classification to fair value through profit and loss. Debt securities supporting the associated insurance liabilities of $1,068m were reclassified from fair value through other comprehensive income to fair value through profit or loss. The re-designations were made in order to more closely align the asset accounting with the valuation of the associated insurance liabilities. The re-designation of amortised cost assets generated a net increase to assets of $4,873m because the fair value measurement on transition was higher than the previous amortised cost carrying amount.



 

Recognition of the IFRS 17 fulfilment cash flows

The measurement of the insurance contracts liabilities under IFRS 17 is based on groups of insurance contracts and includes a liability for fulfilling the insurance contracts, such as premiums, expenses, insurance benefits and claims including policyholder returns and the cost of guarantees. These are recorded within the fulfilment cash flow component of the insurance contract liability, together with the risk adjustment for non-financial risk.

Recognition of the IFRS 17 CSM

The CSM is a component of the insurance contract liability and represents the future unearned profit associated with insurance contracts which will be released to the profit and loss over the expected coverage period.

Tax effect

The removal of deferred tax liabilities primarily results from the removal of the associated PVIF intangible asset, and new deferred tax assets are reported, where appropriate, on temporary differences between the new IFRS 17 accounting balances and their associated tax bases.


IFRS 17 transition impact on the reported Group consolidated income statement for the 6 months ended 30 June 2022

 


IFRS 4

Removal of PVIF and  IFRS 4

Remeasure-ment effect of IFRS 9 re-designations

Insurance finance income/expense

IFRS 17 CSM

Onerous contracts

Experience variance and other

Attribut-

able expenses

Tax effect

IFRS 17


$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Net interest income

  14,451 

                -

                  (1,066)

                   - 

                -

                  -

                      - 

                      -

              -

   13,385 

Net fee income

    6,064 

                -

                           - 

                   - 

                -

                  -

                      - 

                   164                  

              -

     6,228 

Net income from financial instruments held for trading or managed on a fair value basis

    4,921 

                -

                        (65)

                   - 

                -

                  -

                      - 

                      -

              -

     4,856 

Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss

  (3,051)

                -

                  (8,798)

                   - 

                -

                  -

                      - 

                      -

              -

                        (11,849)

Net insurance premium income

    7,646 

       (7,646)

                           - 

                   - 

                -

                  -

                      - 

                      -

              -

            - 

Insurance finance income/(expense)

           - 

                -

                           - 

         11,773 




                      -

              -

   11,773 

Insurance service result

           - 

                -

                           - 

                   - 

             459            

             (120)

                     31

                      -

              -

         370 

-  insurance revenue

           - 

                -

                           - 

                   - 

             459            


                   521

                      -

              -

         980 

-  insurance service expense

           - 

                -

                           - 

                   - 


             (120)

                (490)

                      -

              -

       (610)

Other operating income/(loss)

        654 

           (892)


                  52 



                   (32)



       (218)

Total operating income

  30,685 

       (8,538)

                  (9,929)

         11,825 

             459            

             (120)

                      (1)

                   164                  

              -

   24,545 

Net insurance claims and benefits paid and movement in liabilities to policyholders

  (5,449)

         5,449

                           - 

                   - 

                -

                  -

                      - 

                      -

              -

            - 

Net operating income before change in expected credit losses and other credit impairment charges

  25,236 

       (3,089)

                  (9,929)

         11,825 

             459            

             (120)

                      (1)

                   164                  

              -

   24,545 

Change in expected credit losses and other credit impairment charges

  (1,090)

                -

                             3

                   - 

                -

                  -

                      - 

                      -

              -

   (1,087)

Net operating income

  24,146 

       (3,089)

                  (9,926)

         11,825 

             459            

             (120)

                      (1)

                   164                  

              -

   23,458 

Total operating expenses

                        (16,419)


                           - 

                   - 

                -

                  -

                      - 

                   292                  

              -

                        (16,127)

Operating profit

    7,727 

       (3,089)

                  (9,926)

         11,825 

             459            

             (120)

                      (1)

                   456                  

              -

     7,331 

Share of profit in associates and joint ventures

    1,449 

                -

                           - 

                   - 

                -

                  -

                      - 

                      -

              -

     1,449 

Profit before tax

    9,176 

       (3,089)

                  (9,926)

         11,825 

             459            

             (120)

                      (1)

                   456                  

              -

     8,780 

Tax expense

           39 

                -

                           - 

                   - 

                -

                  -

                      - 

                      -

           112          

         151 

Profit for the period

    9,215 

       (3,089)

                  (9,926)

         11,825 

             459            

             (120)

                      (1)

                   456                  

           112          

     8,931 












 


Transition drivers

Removal of IFRS 4-based revenue items

As a result of the removal of the PVIF intangible asset and IFRS 4 results, the associated revenue of $892m for the six months to 30 June 2022 that was previously reported within 'Other operating income' is no longer reported under IFRS 17. This includes the removal of the value of new business and changes to PVIF intangible asset from valuation adjustments and experience variances.

On the implementation of IFRS 17, new income statement line items associated with insurance contract accounting were introduced. Consequently, the previously reported IFRS 4 line items 'Net insurance premium income' and 'Net insurance claims and benefits paid and movement in liabilities to policyholders' were also removed.

IFRS 9 re-designations

Following the re-designation of financial assets supporting associated insurance liabilities to fair value through profit or loss classification, the related income statement reporting also changed. Under our previous IFRS 4-based reporting convention, these assets generated interest income of $1,066m for the six months to 30 June 2022, which is no longer reported in 'Net interest income' under IFRS 17. To the extent that this interest income was shared with policyholders, the corresponding policyholder sharing obligation was previously included within the 'net insurance claims and benefits paid and movement in liabilities to policyholders' line.

Following re-designation to fair value through profit or loss, gains and losses from changes in the fair value of underlying assets, together with interest income earned, are both reported within 'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss'. Similar to an IFRS 4 basis, IFRS 17 accounting provides for an offset. While this offset was reported within the claims line under IFRS 4, under IFRS 17 it is reported within the 'Insurance finance income/(expense)' line described below.

Introduction of IFRS 17 income statement

Insurance finance income/(expense)

Insurance finance income/(expense) of $11,773m for the six months to 30 June 2022 represents the change in the carrying amount of insurance contracts arising from the effect of, and changes in, the time value of money and financial risk. For variable fee approach contracts, which represent more than 90% of HSBC's insurance contracts, the insurance finance income/(expense) includes the changes in the fair value of underlying items (excluding additions and withdrawals). It therefore has an offsetting impact to investment income earned on underlying assets supporting insurance contracts. This includes an offsetting impact to the gains and losses on assets re-designated on transition to fair value through profit or loss, and which is now included in 'Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss'.

CSM

Revenue is recognised for the release of the CSM associated with the in-force business, which was allocated at a rate of approximately 9% during 2022. The CSM release is largely impacted by the constant measure allocation approach for investment services, but may vary over time primarily due to changes in the total amount of CSM reported on the balance sheet from factors such as new business written, changes to levels of actual returns earned on underlying assets, or changes to assumptions.

Onerous contracts

Losses on onerous contracts are taken to the income statement as incurred.

Experience variance and other

'Experience variance and other' represents the expected expenses, claims and recovery of acquisition cash flows, which are reported as part of the insurance revenue. This is offset with the actual expenses and claims incurred in the period and amortisation of acquisition cash flows, which are reported as part of insurance service expense.

Attributable expenses

Directly attributable expenses are the costs associated with originating and fulfilling an identified portfolio of insurance contracts. These costs include distribution fees paid to third parties as part of originating insurance contracts together with appropriate allocations of fixed and variable overheads, which are included within the fulfilment cash flows and are no longer shown on the operating expenses line.

IFRS 17 transition impact on the Group comprehensive income

 


Half year to


31 Dec

31 Dec

30 Jun

30 Jun


2022

2022

2022

2022


IFRS 17

IFRS 4

IFRS 17

IFRS 4


$m

$m

$m

$m

Opening total equity for the period

             186,105  

              196,690  

               196,318 

               206,777 

of which





-  retained earnings

             140,860  

              150,417  

               135,236 

               144,458 

-  financial assets at FVOCI reserve

                 (6,011)

                 (5,354)

                          49 

                      (634)

-  insurance finance reserve

                       664 

                           - 

                     (696)

                           - 

Profit for the period

                   7,318  

                   7,455 

                    8,931 

                    9,215 

Debt instruments at fair value through other comprehensive income

                     (986)

                     (561)

                  (6,246)

                  (4,907)

Equity instruments designated at fair value through other comprehensive income

                       (51)

                        (51)

                        158 

                        158 

Insurance finance income recognised in other comprehensive income

                       415 

                           - 

                    1,360 

                           - 

Other comprehensive expense for the period, net of tax

                 (4,090)

                 (3,990)

                  (7,801)

                  (7,950)

Total comprehensive (expense)/income for the period

                   2,606  

                   2,853 

                  (3,598)

                  (3,484)

Other movements

                 (3,514)

                  (3,515)                 

                  (6,615)

                  (6,603)

Closing total equity for the period

               185,197 

               196,028 

               186,105 

               196,690 

 

Transition drivers

Insurance finance reserve

The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France. Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these insurance contracts is recognised in OCI. At the transition date an insurance finance reserve of $696m was recognised and following transition, gains net of tax of $1,360m were recorded in the six months to 30 June 2022 and $415m for the six-month period to 31 December 2022. An offsetting fair value through other comprehensive income reserve of $683m recorded on transition represents the accumulated fair value movements on assets supporting these insurance liabilities, with associated losses net of tax of $1,439m recorded within the fair value through other comprehensive income reserve for the six months to 30 June 2022 and $459m for the six months to 31 December 2022.


Group's consolidated balance sheet as at the transition date and at 31 December 2022




IFRS 17

IFRS 4


31 Dec

1 Jan

31 Dec

31 Dec


2022

2022

2022

2021


$m

$m

$m

$m

Assets





Cash and balances at central banks

           327,002 

           403,018 

           327,002 

           403,018 

Items in the course of collection from other banks

                7,297 

                4,136 

                 7,297 

                 4,136 

Hong Kong Government certificates of indebtedness

              43,787 

              42,578 

              43,787 

              42,578 

Trading assets

           218,093 

           248,842 

           218,093 

           248,842 

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

           100,101 

           110,795 

              45,063 

              49,804 

Derivatives

           284,159 

           196,882 

           284,146 

           196,882 

Loans and advances to banks

           104,475 

              82,567 

           104,882 

              83,136 

Loans and advances to customers

           923,561 

       1,044,534  

           924,854 

        1,045,814 

Reverse repurchase agreements - non-trading

           253,754 

           241,648 

           253,754 

           241,648 

Financial investments

           364,726 

           392,005 

           425,564 

           446,274 

Assets held for sale

           115,919 

                3,411 

           115,919 

                 3,411 

Prepayments, accrued income and other assets

           156,149 

           136,196 

           156,866 

           136,571 

Current tax assets

                1,230 

                    970 

                 1,230 

                    970 

Interests in associates and joint ventures

              29,254 

              29,609 

              29,254 

              29,609 

Goodwill and intangible assets

              11,419 

              11,169 

              21,321 

              20,622 

Deferred tax assets

                8,360 

                5,432 

                 7,498 

                 4,624 

Total assets

       2,949,286  

       2,953,792  

        2,966,530 

        2,957,939 

Liabilities and equity





Liabilities





Hong Kong currency notes in circulation

              43,787 

              42,578 

              43,787 

              42,578 

Deposits by banks

              66,722 

           101,152 

              66,722 

           101,152 

Customer accounts

       1,570,303  

       1,710,574  

        1,570,303 

        1,710,574 

Repurchase agreements - non-trading

           127,747 

           126,670 

           127,747 

           126,670 

Items in the course of transmission to other banks

                7,864 

                5,214 

                 7,864 

                 5,214 

Trading liabilities

              72,353 

              84,904 

              72,353 

              84,904 

Financial liabilities designated at fair value

           127,321 

           145,503 

           127,327 

           145,502 

Derivatives

           285,762 

           191,064 

           285,764 

           191,064 

Debt securities in issue

              78,149 

              78,557 

              78,149 

              78,557 

Liabilities of disposal groups held for sale

           114,597 

                9,005 

           114,597 

                 9,005 

Accruals, deferred income and other liabilities

           134,313 

           115,900 

           133,240 

           114,773 

Current tax liabilities

                1,135 

                    699 

                 1,135 

                    698 

Insurance contract liabilities

           108,816 

           119,307 

           114,844 

           112,745 

Provisions

                1,958 

                2,566 

                 1,958 

                 2,566 

Deferred tax liabilities

                    972 

                3,294 

                 2,422 

                 4,673 

Subordinated liabilities

              22,290 

              20,487 

              22,290 

              20,487 

Total liabilities

       2,764,089  

       2,757,474  

        2,770,502 

        2,751,162 

Equity





Called up share capital 

              10,147 

              10,316 

              10,147 

              10,316 

Share premium account

              14,664 

              14,602 

              14,664 

              14,602 

Other equity instruments

              19,746 

              22,414 

              19,746 

              22,414 

Other reserves

              (9,133)

                6,447 

               (9,141)

                 6,460 

Retained earnings

           142,409 

           135,236 

           152,068 

           144,458 

Total shareholders' equity

           177,833 

           189,015 

           187,484 

           198,250 

Non-controlling interests

                7,364 

                7,303 

                 8,544 

                 8,527 

Total equity

           185,197 

           196,318 

           196,028 

           206,777 

Total liabilities and equity

       2,949,286  

       2,953,792  

        2,966,530 

        2,957,939 

 


17

Events after the balance sheet date

 

On 28 July 2023, HSBC Continental Europe completed the sale of its branch operations in Greece to Pancreta Bank SA. A loss of $0.1bn, including goodwill impairment, was recognised upon reclassification to held for sale, in accordance with IFRS 5 in the second quarter of 2022.

A second interim dividend for 2023 of $0.10 per ordinary share in respect of the financial year ending 31 December 2023 was approved by the Directors on 1 August 2023, as described in Note 3. On 1 August 2023, HSBC Holdings announced a share buy-back programme to purchase its ordinary shares up to a maximum consideration of $2.0bn, which is expected to commence shortly and complete within three months.


18

Interim Report 2023 and statutory accounts

The information in this Interim Report 2023 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This Interim Report 2023 was approved by the Board of Directors on 1 August 2023. The unaudited interim condensed financial statements included in the Interim Report 2023 have been reviewed by the Group's auditor, PwC, in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. The statutory accounts of HSBC Holdings plc for the year ended 31 December 2022 have been delivered to the Registrar of Companies in England and Wales in accordance with section 447 of the Companies Act 2006. The Group's auditor PricewaterhouseCoopers LLP ('PwC') has reported on those accounts. Its report was unqualified, did not include a reference to any matters to which PwC drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.


Shareholder information

 

Contents

141

        1

Directors' interests


147

     10

Earnings release

143

        2

Employee share plans


147

     11

Final results

145

        3

Share buy-back


147

12

Corporate governance

146

        4

Other equity instruments


148

13

Changes in Directors' details

146

        5

Notifiable interests in share capital


148

14

Going concern basis

146

        6

Dealings in HSBC Holdings listed securities


148

15

Telephone and online share dealing service

147

        7

Second interim dividend for 2023


148

16

Stock symbols

147

        8

Dividend on preference share


148

17

Copies of the Interim Report 2023 and shareholder enquiries and communications

147

        9

Proposed interim dividends for 2023









 


 

1

Directors' interests

According to the register of Directors' interests maintained by HSBC Holdings pursuant to section 352 of the Securities and Futures Ordinance of Hong Kong, at 30 June 2023 the Directors of HSBC Holdings had the following interests, all beneficial unless otherwise stated, in the shares or debentures of HSBC Holdings and its associated corporations:

Directors' interests - shares and debentures


At 1 Jan 2023 or date of appointment, if later

 

At 30 Jun 2023 or date of retirement, if earlier


Total interests

Beneficial

owner

Child

under 18

or spouse

Jointly with another person

Trustee

Total

interests

HSBC Holdings ordinary shares







Geraldine Buckingham1

                    15,000 

            15,000 

                         - 

                         - 

                        - 

                     15,000 

Rachel Duan1

                    15,000 

            15,000 

                         - 

                         - 

                        - 

                     15,000 

Georges Elhedery2 (appointed to the Board on 1 Jan 2023)

                  572,575 

          689,181 

                         - 

                         - 

                        - 

                  689,181 

Dame Carolyn Fairbairn

                    15,000 

            15,000 

                         - 

                         - 

                        - 

                     15,000 

James Forese1

                  115,000 

          115,000 

                         - 

                         - 

                        - 

                  115,000 

Steven Guggenheimer1

                    15,000 

                      - 

                         - 

                15,000 

                        - 

                     15,000 

José Antonio Meade Kuribreña1

                    15,000 

            15,000 

                         - 

                         - 

                        - 

                     15,000 

Kalpana Morparia (appointed to the Board on 1 Mar 2023)

                              - 

                      - 

                         - 

                         - 

                        - 

                              - 

Eileen Murray1

                    75,000 

            75,000 

                         - 

                         - 

                        - 

                     75,000 

David Nish

                    50,000 

                      - 

                50,000 

                         - 

                        - 

                     50,000 

Noel Quinn2

              1,422,650  

      1,620,739  

                         - 

                         - 

                        - 

              1,620,739  

Jackson Tai1,3 (retired on 5 May 2023)

                    66,515 

            32,800 

                11,965 

                21,750 

                        - 

                     66,515 

Mark Tucker

                  307,352 

          307,352 

                         - 

                         - 

                        - 

                  307,352 

1     Geraldine Buckingham has an interest in 3,000, Rachel Duan in 3,000, James Forese in 23,000, Steven Guggenheimer in 3,000, José Antonio Meade Kuribreña in 3,000, Eileen Murray in 15,000 and Jackson Tai had an interest in 13,303 listed American Depositary Shares ('ADSs'), which are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.

2     Executive Directors' other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC Share Plan 2011 are set out on the following pages. At 30 June 2023, the aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee share plans, were: Noel Quinn - 4,892,153 and Georges Elhedery - 1,878,652. Each Director's total interests represents approximately 0.02% of the shares in issue and 0.01% of the shares in issue excluding treasury shares.

3     Jackson Tai's holding included a non-beneficial interest in 11,965 shares of which he is custodian.


HSBC Holdings Savings-Related Share Option Plan (UK)

Currently no executive Directors participate in a Savings-Related Share Option Plan. For further details of the Savings-Related Share Option Plan, see page 143.


HSBC Share Plan 2011

Conditional awards of deferred shares

Vesting of deferred share awards is normally subject to the Director remaining an employee on the vesting date. The awards may vest at an earlier date in certain circumstances. Under the Securities and Futures Ordinance of Hong Kong, interests in conditional share awards are categorised as the interests of the beneficial owner.

Deferred share awards




Date of

award

Year in which

awards may

vest

Awards

held at

Awards made during

the period to 30 Jun 2023

Awards vested during

the period to 30 Jun 2023

Awards

held at

1 Jan 2023

Number

Monetary value

Number

Monetary value

30 Jun 2023



£000


£000


Noel Quinn

27/2/20171

2020-2024

                37,086 

                        - 

                                   - 

            19,097 

                              110 

19,3752

26/2/20183

2021-2025

                64,515 

                        - 

                                   - 

            21,504 

                              122 

              43,011 

25/2/20194

2022-2026

             112,468 

                        - 

                                   - 

              28,117 

                                161

              84,351 

24/2/20205

2023-2027

             201,702 

                        - 

                                   - 

              40,340 

                                231

            161,362 

27/2/20236

2023

                           - 

          170,206 

                          1,077 

          170,206 

                          1,077 

                          - 

Georges Elhedery (appointed 1 Jan 2023)

25/2/20197

2020-2024

                  34,386 

                        - 

                                   - 

            17,193 

                                 99 

                17,193 

24/2/20205

2023-2027

               147,661 

                        - 

                                   - 

            29,532 

                              169 

              118,129 

01/3/20218

2024-2028

               305,523 

                        - 

                                   - 

                        - 

                                   - 

              305,523 

28/2/20229

2025-2029

               273,163 

                        - 

                                   - 

                        - 

                                   - 

              273,163 

27/2/20236

2023

                           - 

          112,568 

                              712 

          112,568 

                              712 

                          - 










1   At the date of the award (27 February 2017), the market value per share was £6.5030. The award will vest in five equal annual tranches. The fourth tranche vested on 13 March 2023 at a market value of £5.7362. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

2   Includes any additional shares arising from dividend equivalents.

3   At the date of the award (26 February 2018), the market value per share was £7.2340. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The third tranche vested on 14 March 2023 at a market value of £5.6710. The closing price of the shares immediately before the date on which the awards were vested was £5.6810.

4   At the date of the award (25 February 2019), the market value per share was £6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The second tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

5   At the date of the award (24 February 2020), the market value per share was £5.6220. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The first tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

6   The non-deferred award vested immediately on 27 February 2023 and was based on the market value of £6.3277. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The closing price of the shares immediately before 27 February 2023 on which the awards were granted was £6.3570. The fair value of the awards granted on 27 February 2023 was £6.3180 based on IFRS 2 accounting standards. The closing price of the shares immediately before the date on which the awards were vested was £6.3570.

7   At the date of the award (25 February 2019), the market value per share was £6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The award will vest in five equal annual tranches. The fourth tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.

8   At the date of the award (1 March 2021), the market value per share was £4.2620. The award will vest in five equal annual tranches commencing in 2024. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.

9   At the date of the award (28 February 2022), the market value per share was £5.3800. The award will vest in five equal annual tranches commencing in 2025. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.

9  


Long-term incentive awards

The long-term incentive award is an award of shares with a three-year performance period. At the end of this performance period and subject to the award terms, the number of shares that vest will be determined based on an assessment against financial and non-financial measures. Subject to that assessment, the shares will vest in five equal annual instalments. On vesting, awards are subject to a retention period of up to one year. Under the Securities and Futures Ordinance of Hong Kong, interests in share awards are categorised as interests of the beneficial owner.

Long-term incentive awards




HSBC Holdings ordinary shares


Date of

award

Year in which

awards may

vest

Awards

held at

Awards made during

the period to 30 Jun 2023

Awards vested during

the period to 30 Jun 2023

Awards

held at


1 Jan 2023

Number

Monetary value

Number

Monetary value

30 Jun 2023




£000


£000


Noel Quinn

1 Mar 20211

2024-2028

      1,118,554  

                         - 

                                   -

                         - 

                                   -

        1,118,554  

28 Feb 20221

2025-2029

          983,339 

                         - 

                                   -

                         - 

                                   -

            983,339 

27 Feb 20232

2026-2030

                        - 

           861,422 

                          5,451 

                         - 

                                   -

            861,422 

Georges Elhedery

28 Feb 20221

2025-2029

          223,989 

                         - 

                                   -

                         - 

                                   -

            223,989 

27 Feb 20232

2026-2030

                        - 

           251,474 

                          1,591 

                         - 

                                   -

            251,474 

1     Awards made on 1 March 2021 were based on the market value of £4.2620, awards made on 28 February 2022 were based on the market value of £5.3800 and awards made on 27 February 2023 were based on the market value of £6.357.

2     The closing price of the shares on the day before the grant date was £6.357. The fair value of the awards was £4.6930 based on IFRS 2 accounting standards.

No Directors held any short position (as defined in the Securities and Futures Ordinance of Hong Kong) in the shares or debentures of HSBC Holdings and its associated corporations. Save as stated in the tables above, none of the Directors had an interest in any shares or debentures of HSBC Holdings or any associates at the beginning or at the end of the period, and none of the Directors or members of their immediate families were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the period.


There have been no changes in the shares or debentures of the Directors from 30 June 2023 to the date of this report.


2

Employee share plans

Share options and discretionary awards of shares are granted under HSBC share plans to help align the interests of employees with those of shareholders. The following are particulars of share options and share awards, including those held by, or to be granted to, employees working under employment contracts that are regarded as 'continuous contracts' for the purposes of the Hong Kong Employment Ordinance, or former employees. The options and share awards were granted for nil consideration. No options or share awards have been granted to substantial shareholders, suppliers of goods or services, or those with an amount in excess of the 1% individual limit for each share plan. No options or share awards were cancelled by HSBC during the six months to 30 June 2023. The options and share awards were granted only to employees. Particulars of options and share awards held by Directors of HSBC Holdings are set out on page 141.

The number of shares available for the grant of options or share awards under each limit set out in the HSBC share plans at the beginning of 1H23 were 1,038,335,768 and 290,981,959. At the end of 1H23, the number of shares available were 1,017,612,461 and 272,087,852 under each limit. The number of shares that may be issued in respect of options or awards granted under all HSBC share plans divided by the weighted average number of shares of the relevant class in issue for 1H23 is 5.02% and 1.34% under each limit set out in the HSBC share plans.

Summaries of the total number of options and share awards granted, exercised/vested or lapsed during 1H23 are shown in the tables below. Further details required to be disclosed pursuant to Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited are available on our website at www.hsbc.com, and on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. Copies may be obtained upon request from the Group Company Secretary and Chief Governance Officer, 8 Canada Square, London E14 5HQ.

All-employee share plans

The HSBC Holdings Savings-Related Share Option Plan (UK) is an all-employee share option plan under which eligible employees have been granted options to acquire HSBC Holdings ordinary shares. The HSBC International Employee Share Purchase Plan was introduced in 2013 and now includes employees based in 31 jurisdictions. No options are granted under this plan but matching share awards are granted in the form of conditional awards that vest after three years. During 2022, approximately 189,000 employees were offered participation in these plans. During 1H23, no employee was offered participation in the plans. No options or awards under these plans are subject to performance targets. 

For options granted under the HSBC Holdings Savings-Related Share Option Plan (UK) employees may make contributions of up to £500 each month over a period of three or five years. The contributions may be used within six months following the third or fifth anniversary of the commencement of the relevant savings contract, at the employee's election, to exercise the options. Alternatively, the employee may elect to have the savings, plus (where applicable) any interest or bonus, repaid in cash. In the case of redundancy, ceasing employment on grounds of injury or disability, retirement, death, the transfer of the employing business to another party, or a change of control of the employing company, options may be exercised before completion of the relevant savings contract. In certain circumstances, the exercise period of options awarded under the all-employee share option plans may be extended; for example, on the death of a participant, the executors may exercise the option up to six months beyond the normal exercise period or, if a participant has chosen to defer up to 12 contributions, the start of the normal exercise period will be delayed by up to 12 months.

Under the HSBC Holdings Savings-Related Share Option Plan (UK) the option exercise price is determined by reference to the average market value of the HSBC Holdings ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20%. The HSBC Holdings Savings-Related Share Option Plan (UK) has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

Under the HSBC International Employee Share Purchase Plan, shares are purchased on behalf of participants (using their own funds) in the market each quarter up to a maximum annual value of £3,000, or equivalent in local currency, per participant. No options are granted under the HSBC International Employee Share Purchase Plan. However, matching awards in the form of conditional share awards are granted to participants for nil consideration at a ratio of one free share for every three purchased. Matching awards vest subject to continued employment and the retention by the participant of the purchased shares for a maximum period of two years and nine months. The HSBC International Employee Share Purchase Plan has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

HSBC Holdings Savings-Related Share Option Plan (UK)




HSBC Holdings ordinary share options

Dates of award

Exercise price (£)

Usually exercisable

1 Jan 2023

Granted

in period

Exercised

in period1

Lapsed

in period

Cancelled in period

30 Jun 2023

from

to

from

to

from

to

21 Sep 2017

27 Sep

2022

(£)

2.6270

(£)

5.9640

1 Nov 2020

28 April 2028

       115,650,723  

                            - 

            2,773,354  

            3,680,465  

                            - 

       109,196,904  

1   The weighted average closing price of the shares immediately before the dates on which options were exercised was £5.9183.

HSBC International Employee Share Purchase Plan - awards of matching shares




HSBC Holdings ordinary shares under award

Dates of award

Purchase price

Usually vesting

1 Jan 2023

Granted

in period

Vested

in period

Lapsed

in period

Cancelled in period

30 Jun 2023

from

to


from

to

2020

2022

£0

2023

2025

             2,347,806  

                             - 

                             - 

                   85,841 

                             - 

             2,261,965  

2020

2022


HK$0

2023

2025

             2,854,482  

                             - 

                             - 

                   75,227 

                             - 

             2,779,255  


11 Jan 20231


£0



                             - 

                 288,546 

                             - 

                   13,386 

                             - 

                 275,160 


11 Jan 20232


HK$0



                             - 

                 301,397 

                             - 

                      8,149 

                             - 

                 293,248 


14 Mar 20233


£0



                             - 

                            42 

                             - 

                             - 

                             - 

                            42 


13 Apr 20234


£0



                             - 

                 277,730 

                             - 

                      7,422 

                             - 

                 270,308 


13 Apr 20235


HK$0



                             - 

                 284,890 

                             - 

                      4,079 

                             - 

                 280,811 

1   The closing price of the shares on the day before the grant date was £5.6410. The fair value of the awards granted was £5.0580 based on IFRS 2 accounting standards.

2   The closing price of the shares on the day before the grant date was HK$53.30. The fair value of the awards granted was £5.0580 based on IFRS 2 accounting standards.

3   The closing price of the shares on the day before the grant date was £5.6810. The fair value of the awards granted was £5.1237 based on IFRS 2 accounting standards.

4   The closing price of the shares on the day before the grant date was £5.6160. The fair value of the awards granted was £4.9941 based on IFRS 2 accounting standards.

5   The closing price of the shares on the day before the grant date was HK$54.75. The fair value of the awards granted was £5.0376 based on IFRS 2 accounting standards.

Awards under HSBC Share Plan 2011

Conditional share awards may be granted on a discretionary basis to employees and former employees. A conditional award of deferred shares defines the number of shares to which the employee will become entitled, which is generally up to three, four, five or seven years from the date of the award, and normally subject to the individual remaining in employment. In some cases, the employee's entitlement depends upon the satisfaction of a performance condition. The long-term incentive awards and fixed pay allowances are incorporated in the HSBC Share Plan 2011. The maximum value of awards or options that may be granted to an employee in any one year under the HSBC Share Plan 2011 is 600% of the employee's annual salary. For the purpose of the limit, any deferred share awards made on or shortly after the commencement of employment or in substitution for all or any part of any bonus to which the employee would otherwise have been entitled, are excluded. Participants do not need to pay any consideration for the grant or vesting of an award. The HSBC Share Plan 2011 has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

HSBC Share Plan 2011 - particulars of awards




HSBC Holdings ordinary shares under award.

Dates of award

Purchase price (£)

Usually vesting

1 Jan 2023

Granted

in period

Vested

in period1

Lapsed in period

Cancelled

in period

30 Jun 2023

from

to


from

to

1 Jan 2013

31 Dec 2022

0

1 Mar 2023

30 Mar 2030

        119,879,459  

                             - 

          43,913,965  

             2,003,869  

                             - 

          73,961,625  


27 Feb 20232

0

27 Feb 2023

30 Mar 2030

                             - 

          59,835,210  

          19,477,610  

                 159,369 

                      7,612 

          40,190,619  


27 Feb 20233

0

27 Feb 2023

30 Mar 2030

                             - 

             3,800,403  

                             - 

                             - 

                             - 

             3,800,403  


20 Mar 20234

0

20 Mar 2023

30 Mar 2030

                             - 

             2,486,251  

                 760,095 

                             - 

                             - 

             1,726,156  


15 May 20235

0

15 May 2023

30 Mar 2029

                             - 

             1,283,921  

                 391,767 

                      1,662 

                             - 

                 890,492 


15 May 20236

0

15 May 2023

30 May 2028

                             - 

                   50,946 

                             - 

                      5,738 

                             - 

                   45,208 


1 Mar 20237

0

1 Mar 2023

31 Aug 2026

                             - 

                 644,298 

                 344,620 

                      1,869 

                             - 

                 297,809 

1   The weighted average closing price of the shares immediately before the dates on which the awards were vested was £5.9679.

2   The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.3180, £5.4370, £5.3450, £5.3110, £5.2410, £5.1860, £5.1300, £5.1050, £5.0570, £4.9310, £4.9210 and £4.6930.

3   The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.3180 and £4.6930. Vesting of these awards, which are made up of LTI awards and retention awards, are subject to satisfaction of performance conditions. LTI awards are subject to a combination of financial and non-financial metrics that are detailed in the Directors' remuneration report in the Annual Report and Accounts. Retention awards are subject to the completion of a strategically important project.

4   The closing price on the day before the grant date was £5.4210. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £5.4170, £4.6650, £4.6620, £4.5830, £4.5540, £4.4480, £4.4460 and £4.0230.

5   The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.1100, £5.5310, £5.2720, £5.2600, £5.1710, £5.1380, £5.0160 and £5.0110.

6   The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the awards is £6.1100. Vesting of these awards, which relate to retention awards, are subject to the satisfaction of performance conditions. These retention awards are subject to the completion of a strategically important project.

7   Relates to the allocation of dividend equivalent shares in relation to eligible awards.

7  


3

Share buy-back

On 10 May 2023, HSBC Holdings commenced a share buy-back programme to purchase its ordinary shares up to a maximum consideration of $2.0bn. As part of the buy-back programme, shares were repurchased on UK trading venues, including London Stock Exchange, Turquoise, Aquis Exchange and Cboe Europe Limited through the BXE and CXE order books, as well as The Stock Exchange of Hong Kong Limited. The purpose of the buy-back programme is to reduce HSBC's number of outstanding ordinary shares.

At 30 June 2023, 83,545,603 ordinary shares had been purchased and cancelled from the UK register, representing a nominal value of $41,772,802 and an aggregate consideration paid by HSBC of £507,452,886. The shares cancelled represented 0.415% of the shares in issue and 0.421% of the shares in issue, excluding treasury shares.

At 30 June 2023, 88,400,000 ordinary shares had been purchased from the Hong Kong register, representing a nominal value of $44,200,000 and an aggregate consideration paid by HSBC of HK$5,269,455,949. The shares purchased represented 0.439% of the shares in issue and 0.446% of the shares in issue, excluding treasury shares. The shares purchased are cancelled in batches, with 74,000,000 shares cancelled at 30 June 2023.

At 30 June 2023, the Company held 325,273,407 shares in treasury which were repurchased during the 2016 buy-back and were not cancelled at the time. All shares repurchased pursuant to subsequent buy-backs have been cancelled. The Board intends to consider the cancellation of the treasury shares in due course.

The table that follows outlines details of the shares purchased and cancelled on a monthly basis during 2023.

Share buy-back - UK venues


Number of shares purchased and cancelled

Highest price

paid per share

Lowest price

paid per share

Average price

paid per share

Aggregate

price paid


£

£

£

£

May 2023

                            31,169,005  

6.2000

                                     5.8710 

                                     6.0716 

                          189,244,725  

Jun 2023

                            52,376,598  

                                     6.1900 

                                     5.8810 

                                     6.0754 

                          318,208,161  

Total

                            83,545,603  




                          507,452,886  







Share buy-back - Hong Kong  venues


Number of shares purchased

Highest price

paid per share

Lowest price

paid per share

Average price

paid per share

Aggregate

price paid


HK$

HK$

HK$

HK$

May 2023

                            37,500,000  

                                   59.9500 

                                   57.2000 

                                   59.0377 

                      2,213,913,666  

Jun 2023

                            50,900,000  

                                   61.4500 

                                   57.1000 

                                   60.0303 

                      3,055,542,283  

Total

                            88,400,000  




                      5,269,455,949  

 


4

Other equity instruments

Additional tier 1 capital - contingent convertible securities

HSBC Holdings continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1 capital securities on an end point basis. These securities are marketed principally and subsequently allotted to corporate investors and fund managers. The net proceeds of the issuances are typically used for HSBC Holdings' general corporate purposes and to further strengthen its capital base to meet requirements under CRR II. These securities bear a fixed rate of interest until their initial call dates. After the initial call dates, if they are not redeemed, the securities will bear interest at rates fixed periodically in advance for five-year periods based on credit spreads, fixed at issuance, above prevailing market rates. Interest on the contingent convertible securities will be due and payable only at the sole discretion of HSBC Holdings, and HSBC Holdings has sole and absolute discretion at all times to cancel for any reason (in whole or part) any interest payment that would otherwise be payable on any payment date. Distributions will not be paid if they are prohibited under UK banking regulations or if the Group has insufficient reserves or fails to meet the solvency conditions defined in the securities' terms.

The contingent convertible securities are undated and are repayable at the option of HSBC Holdings in whole typically at the initial call date or on any fifth anniversary after this date. In addition, the securities are repayable at the option of HSBC Holdings in whole for certain regulatory or tax reasons. Any repayments require the prior consent of the PRA. These securities rank pari passu with HSBC Holdings' sterling preference share and therefore rank ahead of ordinary shares. The contingent convertible securities will be converted into fully paid ordinary shares of HSBC Holdings at a predetermined price, should HSBC's consolidated non-transitional CET1 ratio fall below 7.0%. Therefore, in accordance with the terms of the securities, if HSBC's non-transitional CET1 ratio breaches the 7.0% trigger, the securities will convert into ordinary shares at the fixed contractual conversion prices in the issuance currencies of the relevant securities, equivalent to £2.70 at the prevailing rate of exchange on the issuance date, subject to anti-dilution adjustments. During the first half of 2023, HSBC Holdings issued $2,000m contingent convertible securities and called and repaid $2,350m contingent convertible securities.


5

Notifiable interests in share capital

Between 1 January 2023 and 30 June 2023, HSBC Holdings did not receive any notification of major holdings of voting rights pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules, which had not been amended or withdrawn. No further notifications had been received between 30 June 2023 and 20 July 2023.

Previous notifications received, which have not been amended or withdrawn, are as follows:

-   BlackRock, Inc. gave notice on 3 March 2020 that on 2 March 2020 it had the following: an indirect interest in HSBC Holdings ordinary shares of 1,235,558,490; qualifying financial instruments with 7,294,459 voting rights that may be acquired if the instruments are exercised or converted; and financial instruments with a similar economic effect to qualifying financial instruments, which refer to 2,441,397 voting rights, representing 6.07%, 0.03% and 0.01%, respectively, of the total voting rights at 2 March 2020.

-   Ping An Asset Management Co., Ltd. gave notice on 6 December 2017 that on 4 December 2017 it had an indirect interest in HSBC Holdings ordinary shares of 1,007,946,172, representing 5.04% of the total voting rights at that date.

At 30 June 2023, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong, the following notifications of major holdings have been made to HSBC Holdings and have not been amended or withdrawn:

-   BlackRock, Inc. gave notice on 9 March 2022 that on 4 March 2022 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,701,656,169 shares and a short position of 19,262,061 shares, representing 8.27% and 0.09%, respectively, of the ordinary shares in issue at that date.

-   Ping An Asset Management Co., Ltd. gave notice on 25 September 2020 that on 23 September 2020 it had a long position of 1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00% of the ordinary shares in issue at that date.

-  


6

Dealings in HSBC Holdings listed securities

HSBC has policies and procedures that, except where permitted by statute and regulation, prohibit it undertaking specified transactions in respect of its securities listed on The Stock Exchange of Hong Kong Limited ('HKEx'). Except for dealings as intermediaries or as trustees by subsidiaries of HSBC Holdings, or in relation to the HSBC Holdings ordinary share buy-back, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on HKEx during the half-year ended 30 June 2023.


7

Second interim dividend for 2023

On 1 August 2023, the Directors approved a second interim dividend in respect of the financial year ending 31 December 2023 of $0.10 per ordinary share, a distribution of approximately $1.974bn. The dividend will be payable on 21 September 2023 to holders on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 11 August 2023.

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 September 2023. Particulars of these arrangements will be sent to shareholders on or about 18 August 2023 and changes to currency elections must be received by 7 September 2023. The ordinary shares in London, Hong Kong and Bermuda, and American Depositary Shares ('ADSs') in New York will be quoted ex-dividend on 10 August 2023.

The dividend will be payable on ADSs, each of which represents five ordinary shares, on 21 September 2023 to holders of record on 11 August 2023. The dividend of $0.50 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 1 September 2023.

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 Overseas Branch Registrar or Bermuda Overseas Branch Registrar should do so before 4.00pm local time on 11 August 2023 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 11 August 2023. Any person wishing to remove ordinary shares to or from each register must do so before 4.00pm local time on 10 August 2023.

Transfer of ADSs must be lodged with the depositary by 11.00am on 11 August 2023 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.


8

Dividend on preference share

A quarterly dividend of £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2023 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 15 September 2023 to holders of record on 31 August 2023.


9

Proposed interim dividends for 2023

As previously communicated, given our current returns trajectory, we have established a dividend payout ratio of 50% of reported earnings per share for 2023 and 2024, excluding material significant items (including the planned sale of our retail banking operations in France and the agreed sale of our banking business in Canada). The Group has reverted to a policy of paying quarterly dividends from the first quarter of 2023. The dividend policy has the flexibility to adjust reported earnings per ordinary share ('EPS') for material significant items such as goodwill or intangibles impairments and may be supplemented from time to time by buy-backs or special dividends, should the Group find itself in an excess capital position absent compelling investment opportunities to deploy that excess.

Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of US dollars, pounds sterling or Hong Kong dollars.


10

Earnings release

An earnings release for the three-month period ending 30 September 2023 is expected to be issued on 30 October 2023.


11

Final results

The results for the year to 31 December 2023 are expected to be announced on 21 February 2024.


12

Corporate governance

We are subject to corporate governance requirements in both the UK and Hong Kong. Throughout the six months ended 30 June 2023, we complied with the applicable provisions of the UK Corporate Governance Code, and also the requirements of the Hong Kong Corporate Governance Code. The UK Corporate Governance Code is available at www.frc.org.uk and the Hong Kong Corporate Governance Code is available at www.hkex.com.hk.

Under the Hong Kong Code, the Group Audit Committee should be responsible for the oversight of all risk management and internal control systems, unless expressly addressed by a separate risk committee. Our Group Risk Committee is responsible for oversight of internal control, other than internal financial controls, and risk management systems.

The Board has codified obligations for transactions in Group securities in accordance with the requirements of the Market Abuse Regulation and the rules governing the listing of securities on the HKEx, save that the HKEx has granted waivers from strict compliance with the rules that take into account accepted practices in the UK, particularly in respect of employee share plans.

Following specific enquiries all Directors have confirmed that they have complied with their obligations in respect of transacting in Group securities throughout the period.

There have been no material changes to the information disclosed in the Annual Report and Accounts 2022 in respect of the remuneration of employees, remuneration policies, bonus and share option plans and training schemes. Details of the number of employees are provided on page 33 of the Interim Report 2023.


13

Changes in Directors' details

Changes in current Directors' details since the date of the Annual Report and Accounts 2022, which are required to be disclosed pursuant to Rule 13.51(2) and Rule 13.51B(1) of the Hong Kong Listing Rules, are set out below.

Georges Elhedery

Appointed to the Board on 1 January 2023.

James Anthony Forese

Appointed Chair of the Group Risk Committee and to the Group Audit Committee on 5 May 2023. He also stepped down from the Group Remuneration Committee.

Kalpana Morparia

Appointed to the Board, Group Risk Committee and Nomination & Corporate Governance Committee on 1 March 2023.

Eileen K Murray

Appointed to the Group Remuneration Committee on 5 May 2023.

Jackson Tai

Retired from the Board, Group Risk Committee, Nomination & Corporate Governance Committee and Group Audit Committee on 5 May 2023.


14

Going concern basis

As mentioned in Note 1 'Basis of preparation and material accounting policies' on page 115, the financial statements are prepared on a going concern basis as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include high interest and inflationary stress scenarios that reflect the intensification of ongoing global energy supply issues, the impact of the Russia-Ukraine war, structural changes from the Covid-19 pandemic, and ongoing vulnerabilities in China, as well as the potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

In particular, HSBC's principal activities, business and operating models, strategic direction, and top and emerging risks are addressed in the Overview section. A financial summary, including a review of the consolidated income statement and consolidated balance sheet, is provided in the 'Interim management report' section. HSBC's objectives, policies and processes for managing credit, liquidity and market risk are described in the 'Risk review' section of the Annual Report and Accounts 2022. HSBC's approach to capital management and allocation is described in the 'Treasury risk' section of the Annual Report and Accounts 2022.


15

Telephone and online share dealing service

For shareholders on the Principal Register who are resident in the UK, with a UK postal address, and who hold an HSBC Bank plc personal current account, the HSBC InvestDirect share dealing service is available for buying and selling HSBC Holdings plc ordinary shares. Details are available from: HSBC InvestDirect, Forum 1, Parkway, Whiteley PO15 7PA; or UK telephone: +44 (0) 3456 080848, or from an overseas telephone: +44 (0) 1226 261090; or website: www.hsbc.co.uk/investments/products-and-services/invest-direct.


16

Stock symbols

HSBC Holdings plc ordinary shares trade under the following stock symbols:

London Stock Exchange

HSBA

Hong Kong Stock Exchange

5

New York Stock Exchange (ADS)

HSBC

Bermuda Stock Exchange

HSBC.BH



 


17

Copies of the Interim Report 2023 and shareholder enquiries and communications

Further copies of the Interim Report 2023 may be obtained from Global Communications, HSBC Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; from Communications (Asia), The Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; or from US Communications, HSBC Bank USA, N.A., 1 West 39th Street, 9th Floor, New York, NY 10018, USA. The Interim Report 2023 may also be downloaded from the HSBC website, www.hsbc.com.

Shareholders may at any time choose to receive corporate communications in printed form or to receive notifications of their availability on HSBC's website. To receive notifications of the availability of a corporate communication on HSBC's website by email, or to revoke or amend an instruction to receive such notifications by email, go to www.hsbc.com/ecomms. If you provide an email address to receive electronic communications from HSBC, we will also send notifications of any future dividend entitlements by email. If you received a notification of the availability of this document on HSBC's website and would like to receive a printed copy or, if you would like to receive future corporate communications in printed form, please write or send an email (quoting your shareholder reference number) to the appropriate Registrar at the address given below. Printed copies will be provided without charge.

Any enquiries relating to your shareholdings on the share register (for example transfers of shares, change of name or address, lost share certificates or dividend cheques) should be sent to the Registrar at the address given below. The Registrars offer an online facility, Investor Centre, which enables shareholders to manage their shareholding electronically.

Principal Register

Hong Kong Overseas Branch Register

Bermuda Overseas Branch Register

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol BS99 6ZZ

United Kingdom

Computershare Hong Kong Investor

Services Limited

Rooms 1712-1716, 17th Floor

Hopewell Centre

183 Queen's Road East

Hong Kong

Investor Relations Team

HSBC Bank Bermuda Limited

37 Front Street

Hamilton HM 11

Bermuda

Telephone: +44 (0) 370 702 0137

Email: web.queries@computershare.co.uk

Web: www.investorcentre.co.uk/contactus

Telephone: +852 2862 8555

Email: hsbc.ecom@computershare.com.hk

Web: www.investorcentre.com/hk

Email: hbbm.shareholder.services@hsbc.bm

Web: www.investorcentre.com/bm

 Any enquiries relating to ADSs should be sent to the depositary at:

The Bank of New York Mellon

Shareowner Services

P.O. Box 43006

Providence RI 02940-3078

USA

Telephone (US): +1 877 283 5786

Telephone (international): +1 201 680 6825

Email: shrrelations@cpushareownerservices.com

Web: www.mybnymdr.com



A Chinese translation of this and future documents may be obtained on request from the Registrar. Please also contact the Registrar if you have received a Chinese translation of this document and do not wish to receive such translations in future.

Persons whose shares are held on their behalf by another person may have been nominated to receive communications from HSBC pursuant to section 146 of the UK Companies Act 2006 ('nominated person'). The main point of contact for a nominated person remains the registered shareholder (for example your stockbroker, investment manager, custodian or other person who manages the investment on your behalf). Any changes or queries relating to a nominated person's personal details and holding (including any administration thereof) must continue to be directed to the registered shareholder and not HSBC's Registrar. The only exception is where HSBC, in exercising one of its powers under the UK Companies Act 2006, writes to nominated persons directly for a response.


本中期業績報告及日後的相關文件均備有中譯本,如有需要,請向適當的股份登記處索取。股東如收到本報告的中譯本,但不希望再收取此等中譯本,亦請聯絡股份登記處。

 


Cautionary statement regarding forward-looking statements

This Interim Report 2023 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 (including, without limitation, as a result of the Russia-Ukraine war); the Russia-Ukraine war and its 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 inflationary pressures); 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 (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 development of near risk-free benchmark rates, as well as the transition of legacy Ibor contracts to near risk-free benchmark rates, which continues to expose HSBC to execution risks, including in relation to the effectiveness of its Ibor remediation strategy, and increases 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, particularly with respect to the regulation of financial services, despite the signing of the Trade and Cooperation Agreement between the UK and the EU; 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 with respect to the commitments set forth in our thermal coal phase-out policy and our energy policy and our targets to reduce our on-balance sheet financed emissions in eight high-emitting sectors), which may result in our failure to achieve any of the expected benefits of our strategic priorities; 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 success in adequately integrating SVB UK into our CMB business; changes in our ability to manage third-party, fraud 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 climate-related products consistent with the evolving expectations of our regulators, and our capacity to measure the climate impact from our financing activity (including as a result of data limitations and changes in methodologies), which may affect our ability to achieve our climate ambition, our targets to reduce financed emissions in our high-emitting sectors portfolio and the commitments 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 'Areas of Special Interest' on pages 61 to 63 of this Interim Report 2023.

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 Interim Report 2023 is available in our Annual Report and Accounts for the fiscal year ended 31 December 2022 which was filed with the SEC on Form 20-F on 22 February 2023.

Certain defined terms

Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our' refer to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People's Republic of China is referred to as 'Hong Kong'. When used in the terms 'shareholders' equity' and 'total shareholders' equity', 'shareholders' means holders of HSBC Holdings ordinary shares and those preference shares and capital securities issued by HSBC Holdings classified as equity. The abbreviations '$m', '$bn' and '$tn' represent millions, billions (thousands of millions) and trillions of US dollars, respectively.


Abbreviations


Currencies


£

British pound sterling

CA$

Canadian dollar

Euro

HK$

Hong Kong dollar

RMB

Chinese renminbi

SGD

Singapore dollar

$

United States dollar

Abbreviation


1H22

First half of 2022

1H23

First half of 2023

1Q22

First quarter of 2022

1Q23

First quarter of 2023

2H22

Second half of 2022

2Q22

Second quarter of 2022

2Q23

Second quarter of 2023

4Q22

Fourth quarter of 2022

A


ABS

Asset-backed security

ADS

American Depositary Share

AI

Artificial intelligence

AIEA

Average interest-earning assets

ALCO

Asset and Liability Management Committee

ANP

Annualised new business premiums

ASEAN

Association of Southeast Asian Nations

AT1

Additional tier 1

B


Basel

Basel Committee on Banking Supervision

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

BoE

Bank of England

Bps

Basis points. One basis point is equal to one hundredth of a percentage point

C


CAPM

Capital asset pricing model

CDOR

Canadian dollar offered rate

CEA

Commodity Exchange Act (US)

CET1

Common equity tier 1

CMB

Commercial Banking, a global business

CMC

Capital maintenance charge

CODM

Chief Operating Decision Maker

COFINS

Contribution for the Financing of Social Security, a Brazilian federal corporation tax

CRD IV

Capital Requirements Regulation and Directive

CRR

Customer risk rating

CRR II

Revised Capital Requirements Regulation and Directive, as implemented

CSM

Contractual service margin

D


DPD

Days past due

DPF

Discretionary participation feature of insurance and investment contracts

DVA

Debit valuation adjustment

E


EBA

European Banking Authority

EC

European Commission

ECB

European Central Bank

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.

EEA

European Economic Area

Eonia

Euro Overnight Index Average

EPS

Earnings per ordinary share

ESG

Environmental, social and governance

EU

European Union

Euribor

Euro interbank offered rate

EVE

Economic value of equity

F


FCA

Financial Conduct Authority (UK)

FRB

Federal Reserve Board (US)

FTE

Full-time equivalent staff

FVOCI

Fair value through other comprehensive income

FX

Foreign exchange

G


GAAP

Generally accepted accounting principles

GBM

Global Banking and Markets, a global business

GDP

Gross domestic product

GEC

Group Executive Committee

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

H


HIBOR

Hong Kong interbank offered rate

HKEx

The Stock Exchange of Hong Kong Limited

HKMA

Hong Kong Monetary Authority

Holdings ALCO

HSBC Holdings Asset and Liability Management Committee

Hong Kong

Hong Kong Special Administrative Region of the People's Republic of China

HQLA

High-quality liquid assets

HSBC

HSBC Holdings together with its subsidiary undertakings

HSBC Bank plc

HSBC Bank plc, also known as the non-ring-fenced bank

HSBC Bank Middle East

HSBC Bank Middle East Limited

HSBC Canada

The sub-group, HSBC Bank Canada, HSBC Trust Company Canada, HSBC Mortgage Corporation Canada and HSBC Securities Canada, consolidated for liquidity purposes

HSBC Continental Europe

HSBC Continental Europe

HSBC Holdings

HSBC Holdings plc, the parent company of HSBC

HSBC UK

HSBC UK Bank plc, also known as the ring-fenced bank

HSSL

HSBC Securities Services (Luxembourg)

I


IAS

International Accounting Standards

IASB

International Accounting Standards Board

Ibor

Interbank offered rate

ICAAP

Internal capital adequacy assessment process

IFRSs

International Financial Reporting Standards

ILAAP

Internal liquidity adequacy assessment process

J


JV

Joint venture

L


LCR

Liquidity coverage ratio

Libor

London interbank offered rate

LTI

Long-term incentive

LTV

Loan to value

M


M&A

Mergers and acquisitions

Mainland China

People's Republic of China excluding Hong Kong

and Macau

MENAT

Middle East, North Africa and Türkiye

MREL

Minimum requirement for own funds and eligible liabilities

MSS

Markets and Securities Services, HSBC's capital markets and securities services businesses in Global Banking and Markets



N


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

NSFR

Net stable funding ratio

O


OCI

Other comprehensive income

OECD

Organisation of Economic Co-operation and Development

OTC

Over-the-counter

P


PCAF

Partnership for Carbon Accounting Financials

PD

Probability of default

PIS

Contibution to the Social Integration Programme, a Brazilian federal corporation tax

POCI

Purchased or originated credit-impaired financial assets

PRA

Prudential Regulation Authority (UK)

Premier

HSBC Premier, HSBC's premium personal global banking service

PVIF

Present value of in-force long-term insurance business and long-term investment contracts with DPF

PwC

The member firms of the PwC network, including PricewaterhouseCoopers LLP

R


RFR

Risk-free rate

RoE

Return on average ordinary shareholders' equity

RoTE

Return on average tangible equity

RWA

Risk-weighted asset

S


SAB

Saudi Awwal Bank

SEC

Securities and Exchange Commission (US)

ServCo group

Separately incorporated group of service companies established in response to UK ring-fencing requirements

Sibor

Singapore interbank offered rate

SME

Small and medium-sized enterprise

SOFR

Secured Overnight Financing Rate

SVB UK

Silicon Valley Bank UK Limited, now HSBC Innovation Bank Limited

T


TNFD

Taskforce on Nature-related Financial Disclosures

U


UAE

United Arab Emirates

UK

United Kingdom

UN

United Nations

US

United States of America

V


VaR

Value at risk

VIU

Value in use

W


WPB

Wealth and Personal Banking, a global business

 


 


This document comprises the Interim Report 2023 and information herein has been filed on Form 6-K with the US Securities and Exchange Commission for HSBC Holdings plc and its subsidiary and associated undertakings.

HSBC Holdings plc

Incorporated in England with limited liability. Registered in England: number 617987

Registered Office and Group Head Office

8 Canada Square, London E14 5HQ, United Kingdom

Web: www.hsbc.com

© Copyright HSBC Holdings plc 2023

All rights reserved

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Holdings plc.

Published by Global Finance, HSBC Holdings plc, London

Designed by Superunion, London (cover and 'Overview' section) and by Global Finance, HSBC Holdings plc, London (rest of the Interim Report 2023)

 

 

 

 

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