Interim Report - 1 of 24

RNS Number : 1975X

HSBC Holdings PLC

26 August 2015

 



The following regulated information, disseminated pursuant to DTR 6.3.5, comprises the 2015 Interim Report which was sent to shareholders of HSBC Holdings plc on 26 August 2015. A copy of the Interim Report is available at www.hsbc.com/investor-relations/financial-and-regulatory-reports

Overview    1   Who we are    1   Our purpose    2   Highlights    4   Global business snapshot    5   Regional snapshot    6   Group Chairman's Statement    9   Group Chief Executive's Review  11   Strategy update

Interim Management Report  15   Financial summary  33   Global businesses  42   Geographical regions  50   Other information  57   Risk  87   Capital

Financial Statements 101  Financial Statements 107  Notes on the Financial Statements 140  Statement of Directors' Responsibilities 141  Independent Review Report by PricewaterhouseCoopers LLP to HSBC Holdings plc

Additional Information 142  Shareholder information 151  Cautionary statement regarding forward-looking statements 152  Abbreviations 154  Index

The Interim Report 2015 of HSBC Holdings has been prepared in accordance with the requirements of English law, and liability in respect thereof is also governed by English law.

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 classified as equity. The abbreviations '$m' and '$bn' represent millions and billions (thousands of millions) of US dollars, respectively.

Interim financial statements and notes

HSBC's interim consolidated Financial Statements and Notes thereon, as set out on pages 101 to 139, have been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority and International Accounting Standard ('IAS') 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB') and as endorsed by the European Union ('EU'). EU-endorsed International Financial Reporting Standards ('IFRSs') may differ from IFRSs issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the EU.

At 31 December 2014 there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB. The consolidated financial statements of HSBC at 31 December 2014 were therefore prepared in accordance with IFRSs as issued by the IASB and as endorsed by the EU. At 30 June 2015, there were no unendorsed standards effective for the period ended 30 June 2015 affecting these interim consolidated financial statements, and there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC.

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

Reference to 'adjusted' in tables and commentaries indicates that reported results have been adjusted for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period comparisons as described on page 16. The adjusted return on risk-weighted assets is defined and reconciled on page 31.

We have enhanced the Interim Report 2015 to concentrate on events and transactions that are significant to an understanding of the changes in our financial position and performance since the Annual Report and Accounts 2014 and to provide information we consider most relevant to decision-making by users of the document. As a result, our business performance commentary has been streamlined to remove duplication and selected Risk sections and Notes on the Financial Statements have been refined or removed to focus on information that is material in the context of interim reporting.

Who we are

HSBC is one of the largest banking and financial services organisations in the world.

Customers: 48m

Served by: 268,543 employees (259,788 FTE)

Through four global businesses: -  Retail Banking and Wealth Management -  Commercial Banking -  Global Banking and Markets -  Global Private Banking

Located in: 72 countries and territories

Across five geographical regions: -  Europe -  Asia -  Middle East and North Africa -  North America -  Latin America

Offices: Around 6,100

Global headquarters: - London

Market capitalisation: $175bn

Listed on stock exchanges in: -  London -  Hong Kong -  New York -  Paris -  Bermuda

Shareholders: 213,000 in 131 countries and territories

Our purpose Our purpose is to be where the growth is, connecting customers to opportunities, enabling businesses to thrive and economies to prosper, and ultimately helping people to fulfil their hopes and realise their ambitions.

Our strategy ·  A network of businesses connecting the world: HSBC is well positioned to capture the growing international trade and capital flows. Our global reach and range of services place us in a strong position to serve clients as they grow from small enterprises into large multinationals. ·  capture

How we measure performance Highlights of the first half of 2015 are shown on page 2. For further information on our new targets see page 13.

Rewarding performance

Highlights

Profit before tax ·   Reported profit before tax of $13,628m, up $1,288m or 10% compared with 1H14 ·   Increase in adjusted profit before tax of $280m or 2% on 1H14, driven by a strong performance in Asia Revenue ·   Increase in adjusted revenue of $1,316m or 4% on 1H14 ·   Growth in adjusted revenue driven by client-facing GB&M, Principal RBWM and CMB Operating expenses ·   Adjusted operating expenses increased by $1,206m or 7% from higher staff costs  Capital ·   Strong capital base with a common equity tier 1 ratio of 11.6% and two interim dividends declared amounting to $0.20 per ordinary share in respect of the first half of 2015

Clearly defined actions to capture value from our global network in a changed world ·   Growth of 6% in global business revenue synergies, demonstrating the strength of our universal banking model ·   Revenue from transaction banking products grew 8% highlighting the value and potential of our international network ·   Progress on reducing Group RWAs with a $50bn reduction relating mainly to GB&M  ·   Entered into an agreement to sell entire business in Brazil* ·   Commenced initiatives to reduce costs

*We plan to maintain a corporate presence in Brazil to serve our international clients

For the half-year to 30 June 2015

Profit before taxation (reported basis) ($bn)		Adjusted profit (before taxation) ($bn)
At 30 June 2015
Total equity ($bn)		Annualised return on average ordinary shareholders' equity (%)		Total assets ($bn)
Common equity tier 1 ratio (end point) (%)		Risk-weighted assets ($bn)		Pre-tax return on average RWAs (%)

Share information at 30 June 2015

Closing market price

$0.50 ordinary shares in issue 19,516m 30 Jun 2014: 19,071m 31 Dec 2014: 19,218m

Market capitalisation $175bn 30 Jun 2014: $193bn 31 Dec 2014: $182bn

London £5.70 30 Jun 2014: £5.93 31 Dec 2014: £6.09

Hong Kong HK$70.15 30 Jun 2014: HK$78.60 31 Dec 2014: HK$74.00

American Depositary Share $44.81 30 Jun 2014: $50.80 31 Dec 2014: $47.23

Total shareholder return

Over 1 year

Over 3 years

Over 5 years

To 30 June 2015

102

119

119

Benchmark:

- Morgan Stanley Capital International Index Banks

99

152

159

Global Business Snapshot                                                (Comments on adjusted basis)

Retail Banking and Wealth Management ('RBWM')

Profit before taxation ($bn) (Reported: Adjusted)

PBT in Principal RBWM up 2% ·   Total RBWM PBT was broadly in line with 1H14 as PBT growth in Principal RBWM was largely offset by the continued reduction of the US run-off portfolio. ·   The PBT growth in Principal RBWM of $70m or 2% was driven by increased revenues ($472m) and lower LICs ($48m), partly offset by a rise in operating expenses ($445m), notably from higher staff costs. ·   Revenue growth was driven by increased Wealth Management income, notably in Asia.

Commercial Banking ('CMB')

Profit before taxation ($bn) (Reported: Adjusted)

Revenue synergies between CMB & GB&M up 9% ·   PBT was broadly in line with 1H14 as growth in revenues was broadly offset by a rise in LICs from a small number of specific impairments and higher operating expenses. ·   Revenue growth of $320m or 4% was driven by Credit and Lending and Payments and Cash Management balances, notably in Hong Kong and the UK. ·   Revenue synergies arising from the cross-selling to CMB customers of GB&M products was up 9%.

Global Banking and Markets ('GB&M')

Profit before taxation ($bn) (Reported: Adjusted)

Double digit revenue growth ·   PBT increased by $589m or 12% on 1H14 from revenue growth, partly offset by higher costs. ·   Revenue grew by $932m or 10%, driven by client-facing GB&M, notably Equities and Foreign Exchange, and by Balance Sheet Management. ·   RWAs reduced, in part from management actions, of which $14bn related to mitigation in respect of legacy credit.

Global Private Banking ('GPB')

Profit before taxation ($bn) (Reported: Adjusted)

Continued repositioning of the business ·   PBT of $321m was $12m or 4% lower than in 1H14, driven by higher operating expenses of $9m due to the non-recurrence of a provision release in 1H14. ·   Revenue was broadly unchanged as lower revenue from the ongoing repositioning of the business was offset by a rise in client volumes and increased market volatility in Hong Kong, along with the effect of net new money in 2014.

Regional Snapshot                                                             (Comments on adjusted basis)

Europe

Profit before taxation ($bn) (Reported: Adjusted)

Continued investment in regulatory programmes and compliance ·   PBT was $182m or 6% lower than in 1H14 as revenue growth in GB&M was more than offset by increased operating expenses from regulatory programmes and compliance costs. ·   Revenue increased by $463m or 4%, driven by client-facing businesses and Balance Sheet Management in GB&M.

Asia

Profit before taxation ($bn) (Reported: Adjusted)

Revenue growth across all global businesses ·   PBT of $7,989m was $553m or 7% higher than in 1H14 as revenue growth across all the global businesses was partly offset by increased staff costs. ·   Revenue increased by $1,127m or 10%, notably in Hong Kong from Wealth Management products in RBWM and client-facing GB&M.

Middle East and North Africa

Profit before taxation ($bn) (Reported: Adjusted)

Loan impairment charges compared with a net release in 1H14 ·   PBT of $899m was $74m or 8% lower than in 1H14. This was primarily due to an adverse movement in LICs of $82m, reflecting individually assessed impairment charges in 1H15 compared with a net release in 1H14, mainly on UAE-related exposures in CMB and GB&M.

North America

Profit before taxation ($bn) (Reported: Adjusted)

Continued run-off of the CML portfolio ·   PBT of $931m was $106m or 10% lower than in 1H14, driven by lower revenue and higher costs reflecting investment in CMB and GB&M growth initiatives, partly offset by lower LICs. ·   Revenue decreased by $239m or 6%, reflecting the continued run-off and loan sales of the Consumer and Mortgage Lending ('CML') portfolio. ·   LICs decreased by $252m or 62%, primarily as a result of lower levels of delinquency and reduced lending balances in the CML portfolio.

Latin America

Profit before taxation ($bn) (Reported: Adjusted)

Revenue growth driven by CMB ·   PBT was $89m or 26% higher than in 1H14 due to higher revenues and lower LICs, partly offset by higher costs from inflationary pressures. ·   Revenue increased by $83m or 2%, primarily in CMB. ·   LICs reduced by $73m or 9% mainly in RBWM, in Mexico due to lower delinquency rates, and in Brazil mainly due to the non-recurrence of charges related to model changes in 1H14.

 

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