HSBC
Holdings plc
Interim
Report 2024
In fulfilment of its obligations
under sections 4.2.2, 6.3.3(2) and 6.3.5(1) of the Disclosure
Guidance and Transparency Rules, HSBC Holdings plc (the "Company")
hereby releases the unedited full text of
its 2024 Interim Report (the "Interim
Report") for the half-year ended 30 June 2024.
The document is now available on the
Company's website at:
https://www.hsbc.com/investors/results-and-announcements/all-reporting/group
HSBC
Holdings plc
Interim
Report 2024
Opening up a world of
opportunity
Our ambition is to be the
preferred
international financial partner for our clients.
Our purpose, ambition and values
reflect our
strategy and support our focus on execution.
Read more on our values on
page 6.
Overview
1
Performance in 1H24
2
Highlights
4
Who we are
5
Group Chief Executive's review
8
Our strategy
11 ESG
overview
12 Financial
overview
18 Global
businesses
25 Risk overview
Interim management report
28
Financial summary
39 Global
businesses
50 Legal
entities
56
Reconciliation of alternative
performance measures
62
Risk
62 - Key
developments in the first half
of 2024
62 -
Geopolitical and macroeconomic
risk
64 - Credit
risk
97 - Treasury
risk
107 - Market risk
108 - Insurance manufacturing
operations risk
110 Directors' responsibility
statement
Interim condensed consolidated financial
statements
111
Independent review report to HSBC
Holdings plc
113 Interim
condensed consolidated
financial statements
120 Notes on
the interim condensed
consolidated financial statements
Additional information
142 Shareholder information
149
Forward-looking statements
150
Certain defined terms
151
Abbreviations
A
reminder
The currency we report in is US
dollars.
Use
of alternative performance measures
We supplement our IFRS Accounting
Standards figures with non-IFRS Accounting Standards measures used
by management internally that constitute alternative performance
measures under European Securities and Markets Authority guidance
and non-GAAP financial measures defined in and presented in
accordance with US Securities and Exchange Commission rules and
regulations. These measures are highlighted with the following
symbol: 
Further explanation may be
found on pages 14 and 29.
Cover image: Opening up a world of
opportunity
We connect people, capital and ideas
across the world.
By unlocking the true power of our international networks,
we are able to deliver our purpose of opening up a world
of opportunity.
HSBC is one of the world's
leading
international banks.
We have a clear strategy to deliver
revenue
and profit growth, enhance customer service
and improve returns to shareholders.
Financial performance
indicators
Our financial performance indicators
demonstrate our continued focus on the delivery of sustainable
returns for our shareholders. They also provide insight into the
performance that has driven the outcomes of our financial
targets.
Read more on our financial
performance in
1H24 on pages 2 and 14.
For an explanation of performance against
our key Group financial targets, see page 12.
For a reconciliation of return on average
tangible
equity excluding notable items to return on equity, constant
currency profit before tax excluding notable items to reported
profit before tax and target basis operating expenses to reported
operating expenses, see page 60.
For our financial targets we
define medium
term as three to four years and long term as
five to six years, commencing 1 January 2024.
Return on average tangible equity
(annualised)
21.4%
(1H23: 22.4%)
Return on average tangible equity
excluding notable items of
17.0% (1H23: 18.5%)
Profit before tax
$21.6bn
(1H23: $21.7bn)
Constant currency profit before tax excluding notable
items
$18.1bn
(1H23: $18.4bn)
Operating expenses
$16.3bn
(1H23: $15.5bn)
Target basis operating
expenses
up 7% to $16.1bn
Common equity tier 1 capital ratio
15.0%
(1H23: 14.7%)
Second interim dividend per share
$0.10
(2023 second interim dividend per
share: $0.10
Strategic performance
indicators
Our strategy supports our ambition of
being the preferred international financial partner for our
clients. We are committed to building a business
for the long term, developing relationships that last.
Read more on our strategy on
pages 8 to
10.
Read more on
multi-jurisdictional client revenue
on page 61.
Read more on our approach to
ESG on page 11.
Net
new invested assets
$32bn
Generated in 1H24, of which
$38bn
were in Asia.
(1H23: $34bn generated, of which
$27bn were in Asia)
Digitally active Commercial
Banking customers
84%
(1H23: 82%)
Wholesale multi-jurisdictional
client revenue
61%
Wholesale client revenue generated by
clients banking with us across multiple markets.
(31 December 2023: 61%)
Gender diversity
34.4%
Women in senior leadership
roles.
(31 December 2023: 34.1%)
Sustainable finance and investment
$339.9bn
Cumulative total provided and
facilitated
since January 2020.
(31 December 2023:
$294.4bn)
Highlights
Financial performance was stable
compared with 1H23.
We are now targeting a mid-teens
return on average
tangible equity, excluding notable
items, for both 2024 and 2025.
Financial performance in
1H24
- Profit before tax of $21.6bn
was stable compared with 1H23, including a $0.2bn net favourable revenue impact of notable
items relating to gains and losses recognised on certain strategic
transactions. Profit after tax of
$17.7bn was $0.4bn or 2% lower compared with
1H23.
- In
1H24, we completed the disposal of our banking business in Canada,
recognising a gain of $4.8bn. We also recognised an impairment of
$1.2bn following the classification of our business in Argentina as
held for sale. Results in 1H23 included the impact of a $2.1bn
reversal of an impairment relating to the sale of our retail
banking operations in France and a $1.5bn gain recognised on the
acquisition of Silicon Valley Bank UK Limited ('SVB
UK').
- Constant currency profit
before tax excluding notable items was stable at $18.1bn compared
with 1H23, as revenue growth and
lower expected credit losses and other impairment charges ('ECL')
were offset by a rise in operating expenses.
- Revenue rose by $0.4bn or 1%
to $37.3bn compared with 1H23, including the gains and losses on certain strategic
transactions described above. Net interest income ('NII') fell by
$1.4bn, as growth in HSBC UK and a number of other
markets was more than offset by reductions due to business
disposals, deposit migration, and redeployment into the trading
book in HSBC Bank plc and our main entity in Hong Kong. The
increase in funding costs associated with funding the trading book
resulted in an increase in banking net interest income ('banking
NII') of $0.3bn or 1%.
-
Revenue growth also reflected the
impact of higher customer activity in our Wealth products in Wealth
and Personal Banking ('WPB'), and in Equities and Securities
Financing in Global Banking and Markets ('GBM'). Constant currency revenue excluding notable
items rose by 2% to $33.7bn, primarily due to growth in
Wealth in WPB, in Equities and Securities Financing in GBM, as well
as an increase in Global Payment Solutions ('GPS').
- Net interest margin ('NIM')
of 1.62% decreased by 8 basis points ('bps') compared with
1H23, reflecting a rise in the
funding cost of average interest-bearing liabilities.
- ECL charges were $1.1bn, a
reduction of $0.3bn compared with 1H23. The reduction
reflected a release of stage 3 allowances in GBM in HSBC Bank plc,
lower ECL in Commercial Banking ('CMB') in HSBC UK, and lower
charges in the commercial real estate sector in mainland China. In
WPB, ECL charges were broadly stable as a release of allowances in
the UK was offset by higher charges in Mexico, reflecting
unemployment trends and growth in our unsecured portfolio.
Annualised ECL were 22bps of average gross loans,
including a 4bps reduction due to the inclusion of loans and
advances classified as held for sale.
- Operating expenses of $16.3bn
were $0.8bn or 5% higher than in 1H23, mainly due to higher technology spend and investment,
inflationary pressures and an increase in the performance-related
pay accrual. Target basis
operating expenses
rose by 7%
compared with 1H23. This is measured
on a constant currency basis, excluding notable items, the impact
of retranslating the prior year results of hyperinflationary
economies at constant currency, and the direct costs from the sales
of our France retail banking operations and our banking business in
Canada.
- Customer lending balances of
$938bn were stable on a reported basis, and increased by $12bn on a constant currency basis, compared
with 31 December 2023.
Growth included higher balances in HSBC Bank plc in both CMB and
GBM, and higher term lending in CMB in our entities in mainland
China and India. In addition, mortgage balances increased in HSBC
UK in WPB.
- Customer accounts of $1.6tn
fell by $18bn on a reported basis, and increased by $3bn on a constant currency basis compared
with 31 December 2023, notably in GBM reflecting growth in
time deposit balances in Asia. The increase in GBM included a
short-term deposit from a single corporate customer.
- Common equity tier 1 ('CET1')
capital ratio of 15.0% rose by 0.2 percentage points compared with
4Q23, driven by a reduction in
risk-weighted assets ('RWAs'), partly offset by a reduction in our
CET1 capital.
- The
Board has approved a second
interim dividend of $0.10 per share. We also intend to
initiate a share buy-back of up to
$3bn, which we expect to complete within three
months.
Financial performance in
2Q24
- Reported profit before tax
increased by $0.1bn to $8.9bn compared with 2Q23,
due to a lower ECL charge, which more than offset
higher operating expenses and lower revenue. On a constant currency basis, profit before
tax increased by $0.4bn or 4%.
- Revenue fell by $0.2bn to
$16.5bn compared with 2Q23, notably
as 2Q23 included the operating results of France and Canada for
which sales completed in 1Q24. In addition, 2Q24 included a loss
related to the recycling of reserves following the completion of
the sale of our business in Russia. This was partly offset by
growth in Securities Financing and Equities in GBM and from Wealth
in WPB.
- ECL of $0.3bn decreased by
$0.6bn, reflecting lower charges in
2Q24 in the commercial real estate sector in mainland China,
compared with 2Q23, as well as a reduction in charges in HSBC UK,
and the release of stage 3 allowances in GBM in HSBC Bank
plc.
- Operating expenses of $8.1bn
rose by $0.3bn or 3%, due to higher
technology costs, including investment, the 2Q23 reversal of
historical asset impairments, which did not recur, and inflationary
impacts. This was partly offset by reductions following the
completion of disposals in Canada and France.
- Customer lending increased by
$5bn compared with 1Q24 on a reported basis
and by $8bn on a constant currency basis. The
growth was mainly from CMB, notably in our entities in mainland
China and India, and in WPB from mortgage balance growth in HSBC UK
and our entity in the US.
- Customer accounts increased
by $24bn compared with 1Q24 on a reported basis
and by $27bn on a constant currency basis. The
increase was across all businesses, primarily in Asia. The increase
included a short-term deposit from a single corporate
customer.
-
- We will now target a return
on average tangible equity ('RoTE'), excluding the impact of
notable items, in the mid-teens for both 2024 and
2025.
- Based upon our current forecasts, we expect banking NII of around $43bn in
2024. This guidance remains dependent
on the path of interest rates globally.
- While loan growth was 1% in 1H24, revenue has continued to
benefit from elevated interest rates. Over the medium to long term, we continue to
expect mid-single digit year-on-year percentage growth in customer
lending.
- We are reiterating our cost
growth guidance of approximately 5% for 2024
compared with 2023, on a target basis, and now
expect ECL charges as a percentage
of average gross loans in 2024 to be within our medium-term
planning range of 30bps to 40bps (including customer lending
balances transferred to held for sale).
- Our
guidance reflects our current outlook for the global macroeconomic
environment, including customer and financial markets activity.
This includes our modelling of a number of market dependent
factors, such as market-implied interest rates (as
of mid-July 2024), as well as customer
behaviour and activity levels.
- We intend to manage our CET1
capital ratio within our medium-term target range of 14% to 14.5%,
with a dividend payout ratio target basis of 50% for
2024, which excludes material
notable items and related impacts.
- Note: we do not reconcile our forward guidance on RoTE
excluding notable items, target basis operating expenses, dividend
payout ratio target basis or banking NII to their equivalent
reported measures.
Reshaping the Group for
growth
- We continue to make progress
on reshaping the Group. In 1H24, we
completed the sales of our retail banking operations in France, our
banking business in Canada, and our business in Russia. We
also completed the acquisition of SilkRoad Property Partners Group
in Singapore and Citi's retail wealth management portfolio in
mainland China. In addition, we announced the planned sales of our
business in Argentina and our operations in
Armenia.
- In January 2024, we completed
the sale of our retail banking operations in France.
The sale also included HSBC Continental Europe's
100% ownership interest in HSBC SFH (France) and its 3% ownership
interest in Crédit Logement.
In accordance with the terms of the sale, we retained a €7.1bn
($7.6bn) portfolio of home and other loans.
- In March 2024, we completed
the sale of HSBC Bank Canada to the Royal Bank of
Canada. The completion of the
transaction resulted in a $4.8bn gain
on sale, inclusive of the recycling of foreign currency
translation and other reserves losses. Following
completion of the sale, the Board approved a special dividend of
$0.21 per share, which was paid on 21 June 2024.
- During 2Q24, we completed the
sale of our business in Russia and
recognised foreign currency translation reserve losses of
approximately $0.1bn.
- During 2Q24, we entered into
a binding agreement to sell our business in Argentina
to Grupo Financiero Galicia. In 1Q24, our
investment in HSBC Argentina was classified as held for sale, and
we recognised a $1.2bn pre-tax loss. At closing, cumulative foreign
currency translation reserves and other reserves will recycle to
the income statement. At 30 June 2024, these reserve losses stood
at $5.0bn. We are working towards completing the sale in the second
half of 2024.
- We
also entered into an agreement for
the sale of our operations in Armenia. This transaction is
subject to regulatory approvals and is expected to be completed in
the second half of 2024.
- In
January 2024, we acquired SilkRoad
Property Partners Group - expanding our real estate
investment capabilities in Asia-Pacific, aligning with our ambition
of becoming a top direct real estate investment manager in the
region.
- In June 2024, we completed
the acquisition of Citi's retail wealth management portfolio in
mainland China. This portfolio
complements our growing set of wealth businesses and our ambition
to be the leading international wealth manager for mass affluent
and high net worth individuals in mainland China.
Acquisitions and disposals that are
classified as material notable items form part of 'strategic
transactions' and their impacts are called out separately in our
financial reporting. Read more on the
financial impact of our strategic transactions on pages
14 and 42.
Transition to net zero
- As
part of our ambition to support customers in their transition to
net zero and a sustainable future, we aim to provide and facilitate
$750bn to $1tn of sustainable finance and investments by 2030. In
1H24, we provided and facilitated $45.5bn of sustainable finance
and investments, bringing our cumulative amount since
1 January 2020 to $339.9bn.
- In
recognition of the ongoing support for our clients through
sustainable finance, we have been awarded 'The World's Best Bank
for Sustainable Finance', 'Asia's Best Bank for Sustainable
Finance', 'Middle East's Best Bank for Sustainable Finance' and
'Best ESG Bank' in Mexico by Euromoney in the Awards for Excellence
2024.
- HSBC
Asset Management continues to develop innovative products that aim
to provide customers with access to markets and asset classes
linked to different areas of sustainability. The HSBC Sustainable
Development Bank Bond ETF, which was launched in 1H24, provides an
investment opportunity in debt issued by multilateral development
banks to finance environmental and socially responsible projects
aimed at encouraging economic development in poorer
nations.
Build inclusion and resilience
- We
are committed to rewarding colleagues responsibly, recognising
their success, and supporting our colleagues to grow. At a time
when cost of living pressures have continued to be felt around the
world, rewarding responsibly is an important part of our
proposition for colleagues and we are committed to improving transparency around how we make pay
decisions. To build on this in 2024, we have introduced a new
variable pay structure for around 145,000 junior and middle
management colleagues, providing more clarity around variable pay
levels while retaining flexibility to differentiate outcomes for
performance. We established Living Wage benchmarks in all markets
in which we operate and have been certified by the Fair Wage
Network as a global Living Wage employer in 2024.
- Developing the skills and learning opportunities for our
colleagues helps them to fulfil their potential and achieve their
career goals. In 2024, we have expanded our enterprise skills
academies, which focus on building skills across a range of areas,
including sustainability, wealth, and technology.
Who we are
HSBC is one of the largest banking
and financial services
organisations in the world. We aim to create long-term
value for our shareholders and capture opportunity.
Our values
Our strategy
For further details on
progress made in each of our strategic areas, see pages
8 to 10.
Group Chief Executive's
review
|
Noel Quinn
Group Chief Executive
|
|
Our strong first half performance is
further
evidence
that our strategy is working and
delivering sustainable,
profitable growth.
|
|
|
|
|
|
|
Return on average tangible equity
(annualised)
21.4%
(1H23: 22.4%)
Reported revenue
$37.3bn
(1H23: $36.9bn)
After achieving a record profit performance in 2023, we had a
strong first half financial performance that reflected our strategy
execution and revenue diversification over the past five years. We
remain confident that we can deliver attractive returns, even in a
lower interest rate environment, as a result of macroeconomic
trends that play to our strengths, market-leading businesses
connecting high-growth markets that we are continuing to invest in,
and ongoing cost discipline. As a result, we are providing new
guidance of a mid-teens return on average tangible equity,
excluding the impact of notable items, in 2025.
Over the last 18 months, HSBC's
business model has delivered our highest return on average tangible
equity for more than a decade. We continued to perform well in our
home markets of Hong Kong and the UK - the two pillars upon which
our bank is built. The international wholesale banking business
that we have built on top of these pillars is mature and
differentiated, and has substantial scale. It remains our biggest
competitive advantage and is supported by leading transaction
banking products and services in global trade, payments and foreign
exchange. Finally, we are growing and investing in our
international retail and wealth business to sit alongside this,
which is helping to diversify revenue.
Each of these strengths contributed
to a good revenue performance in the first half of 2024, supported
by higher interest rates. Our strategy is working and providing
attractive returns for our shareholders. We have announced a second
interim dividend of $0.10 per share, further to the first interim
dividend of $0.10 per share and the special dividend of $0.21 paid
in June. We are also today announcing a share buy-back of up to
$3bn, further to the now completed $3bn share buy-back announced at
our first quarter results. This means that we are announcing a
further $4.8bn in distributions with these results, taking the
amount of capital distributed in respect of the last 18 months to
$34.4bn.
As we look ahead, the path of
interest rates and the outcomes of elections are amongst the
factors that will shape the global operating environment. The
progress that has been made reducing inflation has enabled central
banks to start cutting interest rates. Although we expect a
cautious approach, we have reduced our sensitivity to interest
rates. 2024 will also be the biggest election year on record, as
more than 4 billion people have an opportunity to go to the polls.
The US election result will be watched particularly closely
considering the potential for policy change based on the result and
the impact this could have beyond its borders. We will continue to
monitor these situations.
Continued strong financial performance
The first half saw another strong
profit performance, driven by growth in our scale businesses and in
areas where we have been investing. There was strong revenue growth
in Wealth, transaction banking revenue remained stable and
wholesale lending increased again in the second quarter, on a
constant currency basis, after growing in the first
quarter.
"I have always been immensely
proud of the heritage of this bank and the strategic role it plays
in the world. My aim when I took this job was to deliver financial
performance to match our standing. Working together, I believe we
have done that and created a strong platform for
growth."
Profit before tax for the first half
was $21.6bn, which was stable compared with the first half of 2023.
This included a $4.8bn gain on the sale of our banking operations
in Canada, partly offset by a $1.2bn impairment related to the
planned sale of our banking operations in Argentina, which was
announced in the first half. The prior year also included a $2.1bn
reversal of an impairment relating to the sale of our retail
banking operations in France and a $1.5bn gain recognised on the
acquisition of SVB UK.
Revenue increased by $0.4bn or 1% to
$37.3bn, including the aforementioned acquisition and disposal
impacts, driven mainly by higher banking net interest income. We
achieved an annualised return on average tangible equity of 21.4%,
or 17% excluding notable items.
Our three global businesses continued
to perform well. In Wealth and Personal Banking, profit before tax
of $6.5bn was $2.2bn lower than in 2023 on a constant currency
basis, primarily due to the non-recurrence of a $2.1bn reversal
last year of an impairment relating to the sale of our retail
banking operations in France and $0.1bn of profit before tax in the
prior period from our Canadian banking operations. Wealth revenue
of $4.3bn was 12% higher than the first half of last year, driven
by increases in investment distribution and Global Private Banking,
as well as growth in asset management and life
insurance.
In Commercial Banking, profit before
tax of $6.5bn was down by $1.5bn on a constant currency basis,
primarily due to the non-recurrence of a $1.6bn gain last year on
the acquisition of SVB UK. Overall performance remained good, with
revenue benefiting from the higher rates environment, growth in
transaction banking and higher collaboration revenue.
Global Banking and Markets delivered
a good performance. Revenue grew by 5% on a constant currency
basis, with good growth in areas like Equities and Securities
Financing, while still benefiting from the interest rate
environment.
First half operating expenses of
$16.3bn were around 5% higher than in 2023, mainly due to higher
technology costs including investments, inflationary pressures and
different phasing of the accrual of performance-related pay
compared with 2023. On a target basis, operating expenses were 7%
higher than the same period last year. As we expect the overall
amount of performance-related pay for 2024 not to be materially
different to 2023, we expect lower performance-related pay accrual
in the second half. We are therefore reconfirming our cost growth
guidance of approximately 5% for 2024 compared with 2023, on a
target basis.
ECL and other credit impairment
charges for the first half were $1.1bn, which was a $0.3bn decrease
on the first half of 2023. We now expect ECLs as a percentage of
average gross loans in 2024 to be back within our medium-term
planning range of 30bps to 40bps. Our CET1 ratio at the end of the
first half was 15.0%.
Our first half banking net interest
income performance and the improved net interest income outlook
mean that we are upgrading our 2024 banking net interest income
guidance from at least $41bn to around $43bn.
Further opportunities to grow revenue
We also expect to deliver a return on
average tangible equity in the mid-teens for 2024 and 2025,
excluding the impact of notable items. Clearly there are downside
risks to net interest income when interest rates fall, but we're
confident that we have the levers to achieve these
targets.
The first lever is leveraging our
international connectivity. We have a strong international
wholesale franchise. After a softer year in 2023, international
trade volumes are forecast to grow more quickly this year and next.
As the world's leading trade finance bank and the third-largest
bank for global foreign exchange revenue since 2021, we expect to
capitalise on this. To illustrate this growth potential, we grew
wholesale multi-jurisdictional client revenue by 4% in the first
half of 2024, on a constant currency basis and excluding HSBC Bank
Canada, from $9.4bn to $9.7bn.
Increasing global mobility amongst
retail customers is also driving demand for innovative cross-border
banking solutions. This helped us to grow international customers
within Wealth and Personal Banking by 11%, bringing the total to 7m
customers. Revenue from these customers also grew by 6% in the
first half. We believe that there is still significant untapped
potential amongst international wholesale and retail
customers.
The second lever is maintaining our
leadership in our home markets. Our leading businesses in Hong Kong
and the UK - two of the biggest global financial centres - both
grew profits before tax in the first half, helped by their strong
international connectivity with the rest of the Group. In Hong
Kong, our scale and connectivity are delivering good profitability
and enabling us to capture new opportunities. In the first half,
345,000 new-to-bank customers opened accounts as we continued to
capitalise on the significant inflows into Hong Kong as customers
seek higher yields and quality products. In the UK, we grew
international customers by 8% to 2.7m, underlining the
differentiated nature of our UK business compared to other UK
banks. Signs of economic recovery were also underlined by growth in
customer lending of 2% compared with the first half of 2023. We
remain confident in our ability to grow further in these two
critical markets.
Future growth levers
In
the first half of 2024, we continued
to build new sources of value creation.
We attracted
$32.4bn
of net new invested assets in
Wealth.
We increased new to bank
customers
in Hong Kong by
77%
The third lever is investing to
diversify revenue. Over the last five years, we have taken a number
of actions to reduce our sensitivity to interest rates and create
the bank of the future. Building our wealth business, especially in
Asia, to capitalise on increasing affluence has been one of the key
priorities. As a result of this, wealth revenue was up 12% in the
first half, while we attracted $32.4bn of net new invested assets.
Payments is another fee-based business that we are investing in to
capitalise on the expected increase in global payments revenue. We
are the number two bank globally by payments revenue, up from top
four in 2022, with a market share of 4.8% in 2023 compared
with 3.6% in the prior year. HSBC was also named 'World's Best Bank
for Payments and Treasury' by Euromoney, which was one of 33 awards
given to the bank in 2024 that also included 'Best Bank in Asia'
and 'World's Best Bank for Sustainable Finance'.
Through HSBC Innovation Banking, we
are building a global proposition that can help us to become known
as the go-to bank for innovation companies. Revenue from the new
proposition increased by 4% in the second quarter and we have
onboarded almost 600 new-to-bank innovation companies globally
since the acquisition of SVB UK.
Thank you
As I prepare to hand on the
leadership of HSBC to Georges Elhedery in September, I would
like to place on record what an enormous privilege it has been to
lead this great institution. I never imagined when I started my
career 37 years ago that I would have the honour of becoming Group
Chief Executive. I have always been immensely proud of the heritage
of this bank and the strategic role it plays in the world. My aim
when I took this job was to deliver financial performance to match
our standing. Working together, I believe we have done that and
created a strong platform for growth.
The success of our transformation
programme is evident in the improved returns that we have
delivered. Since I became Group Chief Executive, we have returned
$36bn of dividends and $18bn of share buy-backs to our
shareholders, inclusive of the distributions we have announced with
these results, while also successfully navigating the global
pandemic.
This would not have been possible
without the support and backing of the Board, my Group Executive
Committee colleagues and, of course, the whole HSBC team. I have
been very fortunate to work with many talented, dedicated and
committed people during my career. I would like to thank them
wholeheartedly for their friendship and partnership - and I wish
continued success to Georges, and to all those who will write the
next chapter in the story of this great bank.
Noel
Quinn
Group Chief Executive
31 July 2024
Our strategy
We are implementing our strategy
across the four strategic pillars
aligned to our purpose, values and
ambition.
Our strategy remains anchored around
our four strategic pillars: 'Focus', 'Digitise', 'Energise' and
'Transition'.
We delivered a good set of results in
1H24, driven by our strategy that benefited from rates staying
higher for longer, and the progress we made in diversifying into
alternative sources of revenue.
Our reported revenue was $37.3bn, up
1% compared with 1H23, and up 3% on a constant currency basis,
excluding notable items and the impact of strategic transactions.
Our reported profit before tax was $21.6bn, and we achieved a RoTE
of 21.4%, or 17.0% excluding notable items.
We remain committed to maintaining
cost discipline, reconfirming our existing 2024 target of
approximately 5% cost growth compared with 2023, on a target
basis.
Focus
Capture growth from diversified
revenue streams
We aim to build resilience by growing
less capital intensive, fee income generating businesses such as
wealth and transaction banking.
Wealth
Our strategic focus continues to
centre on capturing the growing global wealth opportunity,
especially in Asia. Our wealth revenue rose 12% from $3.9bn in 1H23
to $4.3bn in 1H24. In particular, the fee and other income
component of revenue increased by 14% from $3.1bn to $3.5bn. Net
new invested assets in Asia rose from $27bn in 1H23 to $38bn in
1H24, an increase of 43%. In addition, we saw strong growth in our
private banking and insurance businesses. Private banking revenue
increased by 16%, reaching $1.3bn in 1H24. Insurance new business
contractual service margin was $1.3bn in 1H24, a 77% increase
compared with the same period last year.
Transaction banking
We have a leading proposition in
transaction banking, supported by our capabilities in payments,
global trade, foreign exchange and securities services. In 1H24, we
continued to invest and cement our leadership position. Transaction
banking revenue remained stable, at $13.2bn in 1H24. Our Global
Payments Solutions ('GPS') business expanded further. Market share
by GPS revenue increased by 1.3 percentage points from 3.5% in 2022
to 4.8% in 2023, taking our ranking from a top 4 bank globally in
2022 to second globally in 20231. GPS fee and other
income - an important source of diversification for us - increased
by 4% from 1H23 to $1.1bn in 1H24. Moreover in trade, we were
ranked first globally in 2023, based on trade revenue1.
In foreign exchange ('FX'), we were ranked third globally by
revenue in 20231, a position we have held since
2021.
$4.3bn
Global wealth revenue, up 12%
compared with 1H23
$38bn
Asia net new invested assets, up
43%
since 1H23
4.8%
GPS revenue market share1,
up
1.3 percentage points between
2022 and 2023
#1
Ranking by global trade
revenue1
1 Source:
Coalition Greenwich Competitor Analytics - FY23
Focus continued
Continue driving strong profit
generation in our home markets
We continue to strengthen our scale
positions in our home markets: Hong Kong and the UK - two of the
leading global financial centres. They provide us with deep
liquidity pools, which underpin our strong balance
sheet.
Hong
Kong
Our strategy remains focused on
driving growth from our scale position. In 1H24, profit before tax
for our business in Hong Kong reached $6.1bn, an increase of 1% on
a constant currency basis compared with the same period last
year.
The market is seeing good inflows
from customers seeking investment opportunities. Our scale and
connectivity position us well
to capture this customer inflow. We had 345,000 new to bank
customers in 1H24, an increase of 77% compared with 1H23. As a
result, we saw strong inflows into both deposits and investments.
Customer deposits rose by 2% from 1H23, taking our deposit balance
to $544bn. Net new invested assets also increased by 12% since 1H23
to $19bn.
UK
HSBC UK continued to cement our scale
positions in WPB and CMB in the UK market. Our profit before tax
was $3.7bn in 1H24, an 11% increase compared with 1H23, excluding a
$1.6bn SVB UK acquisition gain recognised in 1H23. In 1H23, HSBC UK
profit before tax was $4.9bn on a constant currency
basis.
With the UK economy showing continued
resilience with signs of growth, we are well positioned to
capitalise on the opportunity. This is evident in our strong loan
growth of 2% since 1H23, taking our loan balance to $270bn. Our
mortgage market share1 reached 8.1% as of May 2024, a
gain of 0.3 percentage points compared with May 2023. In addition,
we saw continued traction in our WPB international proposition,
with international active customers reaching
2.7m in 1H24, an 8% increase compared with 1H23.
345,000
New to bank customers in Hong
Kong,
up 77% since 1H23
$19bn
Net new invested assets in Hong
Kong,
up 12% compared with 1H23
$270bn
HSBC UK's loans and advances,
up 2% since 1H23
8.1%
HSBC UK's mortgage market
share1,
up 0.3 percentage points from May 2023
1 Bank of
England data
Double down on international
connectivity
International connectivity continues
to be at the heart of our business. We take advantage of our
network to help enable our strong international wholesale business
to capitalise on recovering global trade and capital flows, while
building market-leading WPB international propositions.
International trade volumes and
capital flows are expected to rebound. We have a strong wholesale
international proposition to capitalise on this trend. Wholesale
multi-jurisdictional client revenue1 increased 4% from
$9.4bn in 1H23 to $9.7bn in 1H24. We also continued to generate
more revenue with multi-jurisdictional corporate clients, and in
CMB this is approximately five times that of a domestic
customer.
Within WPB, in response to the trend
of growing global mobility, we continued to build propositions
where we can benefit
from our distinctive international capabilities. As a result of our
strategy, we had 7m international customers2 in 1H24,
who generate on average three times the revenue compared to that of
a domestic customer. WPB revenue from international customers
increased by 6% from $5.1bn in 1H23 to $5.4bn in 1H24.
1 Growth
presented on a constant currency basis, excluding HSBC Bank Canada.
For further information and the basis of preparation for wholesale
multi-jurisdictional client revenue,
see page 61.
2 WPB
international customers include multi-jurisdictional, non-resident,
and resident foreigner clients, excludes Canada.
4%
Increase in wholesale client revenue
from multi-jurisdictional clients compared with
1H231
6%
Increase in WPB revenue from
international customers compared with 1H23
Digitise
Improve customer experience while
investing in innovation
In 1H24, we remained focused on our
goal to become a digital-first bank. Customer adoption of our
digital services continued to rise. In CMB, 83.9% of customers were
digitally active as of May 2024, an increase of 1.2 percentage
points since May 2023. Our net promoter score for onboarding
wholesale international clients in 1H24 improved by 10 points
compared with 1H23. At 55.6%, more than half of WPB customers were
mobile active in 1H24, an increase of 4.1 percentage points from
1H23. Furthermore, a total of 80% of WPB's international
accounts1 were opened via digital journeys in 1H24, an
increase of 34 percentage points from 1H23.
We have also continued to embrace
innovative and disruptive technologies including artificial
intelligence ('Al'), blockchain, and quantum computing to enhance
our services, strengthen security and deliver commercial
value.
HSBC has been using AI for over a
decade and has over 500 AI solutions in production across the bank
today. In 1H24, we continued to invest in solutions leveraging AI.
AI has helped us in our fight against financial crime by reducing
the processing time required to analyse billions of transactions
across millions of accounts from several weeks to a few days.
Adoption of our AI Markets product, a digital service that utilises
natural language processing to enrich the way investors interact
with global markets, has continued to increase.
We invested in HK-based AI company
Fano Labs, which specialises in natural language processing of
local languages like Cantonese, and are developing solutions
leveraging their technology in our contact centres to reduce manual
processes, more accurately analyse data and deliver personalised
customer services. With generative AI we have several use cases
that we are beginning to deploy across the back office, including
software developer tooling and digital assistants for
employees.
Earlier this year we delivered the
world's largest, and first ever multi-currency, natively digital
bond issuance on our HSBC Orion platform in Hong Kong2.
More than 50 investors invested in these blockchain-based bonds,
and we have seen repo trading and regular secondary liquidity. We
also extended our existing institutional offering in tokenised
gold, successfully implementing it for Hong Kong retail customers.
In Singapore, we invested in Marketnode, a partnership to
co-develop a multi-asset digital infrastructure.
We are testing quantum technology for
solving complex computational problems
and enhancing cyber resilience. We recently piloted our first
application of quantum-secure technology for buying and selling
tokenised physical gold, which successfully demonstrated the
viability of deploying these advanced technologies to help protect
digital assets from future quantum computing attacks.
1 Refers to pre-departure
international accounts
2 Source: HKMA
Energise
Inspire a dynamic culture
We are opening up a world of
opportunity for our colleagues by building an inclusive
organisation that empowers and energises them. We are building a
stronger performance culture, improving colleague experience and
preparing our workforce for the future.
We remain focused on our ambition to
create a diverse and inclusive environment across our organisation.
To achieve greater diversity across our senior leadership
population, we have achieved 34.4% female representation in senior
leadership positions by the end of 1H24, and are on track to
achieve our target of 35% by 2025¹.
In 2022, we set a Group-wide
ethnicity strategy to better represent the communities we serve. We
are making good progress against this, with 3.1% of senior
leadership roles in the UK and US held by colleagues of Black
heritage in 1H24, against a goal of 3.4% by 2025. We are also on
track to double the number of Black heritage colleagues in senior
leadership roles globally by 2025, having increased 65% since 2020.
We remain focused on increasing representation across our global
workforce, including Asian heritage representation. At the end of
1H24, 38.5% of our senior leaders have self-identified as being
from an Asian heritage background.
We continue to offer development
programmes to our most senior leaders who are essential to the
execution of our strategy, focused on providing greater clarity and
alignment with our ambitions. In 2024, our Managing Director
Leadership Programme has been enhanced with greater capacity
alongside new masterclass topics and the introduction of an
internal business faculty.
1 Data
excludes Saudi Arabia due to local data collection
restrictions.
In the following 'ESG overview' section, we
outline how we put our purpose and values into practice.
Transition
Support the transition to net
zero
In 2020, we set out our ambition to
become a net zero bank by 2050. Since then, we have taken a number
of steps to execute on our ambition and manage climate risks. We
published our first net zero transition plan in January 2024, and
we have made progress in supporting our customers through their
transition journey, embedding net zero into the way we operate and
partnering for systemic change.
As part of our ambition to align our
financed emissions to achieve net zero by 2050, we have set
on-balance sheet or combined financed emissions targets for a
number of emissions-intensive sectors.
To support our customers through the transition to net zero and to
a sustainable future, in 2020 we set out an ambition to provide and
facilitate $750bn to $1tn of sustainable finance and investments by
2030. We provided and facilitated $45.5bn of sustainable finance
and investments in 1H24, bringing our cumulative total since
January 2020 to $339.9bn.
We continued to support our clients
in their transition journey. In 1H24, HSBC Innovation Banking acted
as a lead arranger in a $100m credit facility for US-based Electric
Hydrogen to support their manufacturing and deployment of the
company's electrolyser
plants. HSBC also acted as a joint
bookrunner for a $1.7bn social bond that is intended to provide
funding for new and existing government-led projects under Chile's
sustainable bond framework seeking to address social needs in the
Republic.
For further details on our
climate ambition, see the following 'ESG overview'
section.
ESG overview
We are committed to embedding strong
environmental,
social and governance principles in
the way we do business.
Our approach
Our approach to ESG is shaped by our
purpose and values, and a desire to create sustainable long-term
value for our stakeholders. As an international bank with
significant breadth and scale, we understand that we can have a
significant impact in helping to tackle ESG challenges and realise
opportunities. We also recognise the complexity of ESG issues. Our
ESG efforts are focused on the areas that align most closely to our
strategy, purpose and values, and where we can help make a
significant difference: the transition to net zero, building
inclusion and resilience, and acting responsibly.
Transition to net zero
We are progressing with the
implementation of our net zero transition plan, which we published
in January this year. Our implementation plan sets out how we are
embedding net zero: into the way that we support our customers,
into the way that we operate as an organisation and into how we
partner externally in support of systemic change.
We continue to scale and innovate in
our sustainable finance and investment products and services to
support our customers' transitions.
We have established a new business,
HSBC Infrastructure Finance, to focus on infrastructure
financing and project finance advisory opportunities associated
with the transition to a net zero global economy. The business
will support our clients with project development and establish
additional partnerships in both the public and private
sectors.
For our small and medium-sized
enterprise ('SME') customers, HSBC UK has partnered with carbon
management company Greenly to support clients to measure their
carbon footprint by enabling them to identify their main sources of
carbon emissions and spot opportunities to reduce them. This is an
important step for SMEs when developing a transition
plan.
During the first half of the year,
HSBC Asset Management Alternatives further enhanced its Energy
Transition proposition with the launch of the Red Hexagon Energy
Transition Asia Fund, which will invest in the direct equity of a
targeted portfolio of businesses that own, develop and operate
energy transition infrastructure assets.
Embedding net zero across our
business is an ongoing process. Our bank-wide, three-year
sustainability execution programme is underway to enable the
delivery of our sustainability agenda, focused on our net zero
ambition and regulatory requirements.
We continue to work on scaling and
evolving our net zero capabilities across the bank, which includes
embedding net zero into our culture.
We continue to work with the public
sector, industry, civil society and peers to help shape effective
policies, regulations and standards, and to help develop insights
and learning.
For example, this year we
collaborated with Repower, a global non-profit initiative, to
publish the 'Financing the clean re-powering of coal power' white
paper. The paper seeks to raise awareness of the potential to
eliminate emissions from existing coal-fired power plants while
supporting a just transition for communities by investing in clean
energy resources on the same sites.
Build inclusion and resilience
Our inclusion strategy enables HSBC
to be an organisation that values difference and encourages
colleagues to embrace diverse perspectives. We remain on track
against our gender and ethnicity senior leadership ambitions,
with 34.4%¹ of senior leadership roles being held by women globally
and 3.1% held by Black heritage colleagues in the UK and US
combined at 1H24.
To better reflect the communities we
serve, we have enabled 93% of colleagues to disclose their
ethnicity, where legally permissible. At the end of 1H24, 65% of
our colleagues have chosen to do so.
We have continued to offer colleagues
the opportunity to develop their skills while ensuring we build a
pipeline of talent to support our strategic priorities. The
Sustainability Academy aids in upskilling colleagues for the
transition to net zero, focusing on capability building across key
employee groups who are supporting customers.
We have continued to encourage our
colleagues to participate in external certifications to deepen
their expertise. At the end of 1H24, 110 colleagues have started or
completed the Imperial College Sustainability Programme, and 29
colleagues have started the Oxford University Sustainable Finance
Programme.
We have continued to expand our
Accelerating Wealth Programme to more internal and external
applicants, to support the expansion of our services, particularly
in Asia. The programme offers a skills-based development plan for
colleagues who are looking to pursue a career in wealth management.
Our technology transformation skills programme aims to ensure we
attract, develop and retain the skilled talent we need to execute
the strategy.
We drive inclusion for our customers
by identifying and addressing barriers to finance and financial
markets. We aim to simplify the banking experience by providing
tools to help customers manage their finances more easily, as well
as provide education and support to help them make the most of
their money. We also offer social-linked financial products that
aim to help clients improve their societal outcomes. We engage with
the communities we operate within through philanthropic giving,
disaster relief and volunteering.
Act
responsibly
Our purpose-led conduct approach
guides us to do the right thing and to focus on the impact we
have for our customers and the financial markets in which we
operate. It is incorporated into the way we design, approve,
market and manage products and services. It complements our purpose
and values and, together with more formal policies and the tools we
have to do our jobs, provides an enterprise-wide, outcome-focused
conduct method.
1 Data
excludes Saudi Arabia due to local data restrictions.
Financial overview
In assessing the Group's financial
performance, management uses a range
of financial measures that focus on the delivery of sustainable
returns for
our shareholders and maintaining our financial strength.
Financial performance in 1H24
demonstrated the execution of our strategy and strengthened
platform for growth, supported by the continued higher global
interest rate environment.
This section sets out our key Group
financial targets and the progress we made towards these during
1H24, and - where relevant - our expectations for the rest of 2024
and beyond. We also include a more detailed table covering further
key financial metrics that we consider insightful for understanding
the Group's performance.
The Group financial results that
follow provide more detailed insight into the performance that has
driven the outcomes of our financial targets. It covers income
statement performance on both a reported and constant currency
basis, and the main factors impacting the strength of our balance
sheet, capital and liquidity position.
Return on average tangible equity
excluding notable items (annualised)
17.0%
(1H23: 18.5%)
In 1H24, RoTE (annualised) was 21.4%,
a decrease of 1.0 percentage point from 1H23.
For the purposes of measuring
performance against our Group target, we adjust RoTE to exclude
notable items. From 1 January 2024, we revised the adjustments
made to RoTE from excluding only the impact of strategic
transactions and the impairment of BoCom, to exclude all notable
items. This was intended to improve alignment with the treatment of
notable items in our other income statement disclosures. RoTE
excluding notable items has been re-presented for 1H23 on the
revised basis
and we no longer disclose RoTE excluding strategic transactions and
the impairment
of BoCom.
RoTE excluding notable items
(annualised) was 17.0%, a decrease of 1.5 percentage points
compared with 1H23. We are now targeting a RoTE excluding notable
items
in the mid-teens for both 2024 and 2025.
Our guidance reflects our current
outlook
for the global macroeconomic environment, including customer and
financial markets activity. This includes our modelling of a number
of market dependent factors, such as market-implied interest rates
(as of mid-July 2024).
Target basis operating expenses
$16.1bn
(1H23: $15.0bn)
In 1H24, target basis cost growth was
7% compared with 1H23. This primarily
reflected higher investment spend, notably
in technology, inflationary pressures and
an increase in our performance-related pay accrual of $0.3bn, which
reflects a change in the phasing of the performance-related pay
pool relative to 1H23.
In 2024, our cost growth guidance is
approximately 5% compared with 2023,
on a target basis (2023: $31.0bn). This guidance reflects our
current business plan for 2024, and includes an increase in staff
compensation, higher technology spend and investment for growth and
efficiency, in part mitigated by cost savings from actions taken
during 2023.
Our target basis operating expenses
for 2024 excludes the direct cost impact of the disposals in France
and Canada from the 2023 baseline. It is measured on a constant
currency basis and excludes notable items and the impact of
retranslating the prior year results of hyperinflationary economies
at constant currency.
Capital and dividend policy
CET1
ratio
15.0%
Second interim dividend per ordinary share in respect of
2024
$0.10
At 30 June 2024, our CET1 capital
ratio
was 15.0%, up 0.2 percentage points from 31 December 2023.
This was driven by
a reduction in RWAs, partly offset by a reduction in our CET1
capital. We intend to continue to manage the CET1 ratio to within
our medium-term target range of 14% to 14.5%.
Alongside our 1H24 results, the Board
has announced a second interim dividend of $0.10 per ordinary
share. Given our returns trajectory, we continue to target a
dividend payout ratio target basis of 50% for 2024. For the
purposes of computing our dividend payout ratio target basis, we
exclude from earnings per share material notable items and related
impacts. See page 60 for our calculation of earnings per
share.
Key financial metrics
|
|
Half-year
to
|
|
Reported results
|
30 Jun 2024
|
30 Jun
2023
|
|
Profit before tax ($m)
|
21,556
|
21,657
|
|
Profit after tax ($m)
|
17,665
|
18,071
|
|
Cost efficiency ratio (%)
|
43.7
|
41.9
|
|
Net interest margin (%)
|
1.62
|
1.70
|
|
Basic earnings per share
($)
|
0.89
|
0.86
|
|
Diluted earnings per share
($)
|
0.88
|
0.86
|
|
Dividend per ordinary share (in
respect of the period) ($)1
|
0.20
|
0.20
|
|
Alternative performance measures
|
|
|
|
Constant currency profit before tax
($m)
|
21,556
|
21,472
|
|
Constant currency cost efficiency
ratio (%)
|
43.7
|
41.8
|
|
Constant currency revenue excluding
notable items ($m)
|
33,721
|
33,075
|
|
Constant currency profit before tax
excluding notable items ($m)
|
18,067
|
18,117
|
|
Constant currency revenue excluding
notable items and strategic transactions ($m)
|
33,543
|
32,462
|
|
Constant currency profit before tax
excluding notable items and strategic transactions ($m)
|
17,975
|
17,969
|
|
Expected credit losses and other
credit impairment charges (annualised) as % of average gross loans
and advances to customers (%)
|
0.23
|
0.28
|
|
Expected credit losses and other
credit impairment charges (annualised) as % of average gross loans
and advances to customers, including held for sale (%)
|
0.22
|
0.26
|
|
Basic earnings per share excluding
material notable items and related impacts ($)
|
0.68
|
0.70
|
|
Return on average ordinary
shareholders' equity (annualised) (%)
|
19.8
|
20.8
|
|
Return on average tangible equity
(annualised) (%)
|
21.4
|
22.4
|
|
Return on average tangible equity
excluding notable items (annualised) (%)
|
17.0
|
18.5
|
|
Target basis operating expenses
($m)
|
16,052
|
14,983
|
|
|
At
|
|
Balance sheet
|
30 Jun 2024
|
31 Dec
2023
|
|
Total assets ($m)
|
2,975,003
|
3,038,677
|
|
Net loans and advances to customers
($m)
|
938,257
|
938,535
|
|
Customer accounts ($m)
|
1,593,834
|
1,611,647
|
|
Average interest-earning assets, year
to date ($m)
|
2,097,866
|
2,161,746
|
|
Loans and advances to customers as %
of customer accounts (%)
|
58.9
|
58.2
|
|
Total shareholders' equity
($m)
|
183,293
|
185,329
|
|
Tangible ordinary shareholders'
equity ($m)
|
153,109
|
155,710
|
|
Net asset value per ordinary share at
period end ($)
|
8.97
|
8.82
|
|
Tangible net asset value per ordinary
share at period end ($)
|
8.35
|
8.19
|
|
Capital, leverage and liquidity
|
|
|
|
Common equity tier 1 capital ratio
(%)2
|
15.0
|
14.8
|
|
Risk-weighted assets
($m)2,3
|
835,118
|
854,114
|
|
Total capital ratio
(%)2,3
|
20.6
|
20.0
|
|
Leverage ratio
(%)2,3
|
5.7
|
5.6
|
|
High-quality liquid assets (liquidity
value, average) ($m)3,4
|
646,052
|
647,505
|
|
Liquidity coverage ratio (average)
(%)3,4,5
|
137
|
136
|
|
Share count
|
|
|
|
Period end basic number of $0.50
ordinary shares outstanding (millions)
|
18,330
|
19,006
|
|
Period end basic number of $0.50
ordinary shares outstanding and dilutive potential ordinary shares
(millions)
|
18,456
|
19,135
|
|
Average basic number of $0.50
ordinary shares outstanding (millions)
|
18,666
|
19,478
|
For reconciliations of our reported results
to a constant currency basis, including lists of notable items, see
page 40. For detail on other alternative performance measures,
including definitions and calculations, see 'Reconciliation of
alternative performance measures' on pages 56 to 61.
1 Dividend
per ordinary share for the half year to 30 June 2024 excludes the
special dividend of $0.21 per ordinary share arising from the
proceeds of the sale of our banking business in Canada to Royal
Bank of Canada.
2 Unless
otherwise stated, regulatory capital ratios and requirements are
based on the transitional arrangements of the Capital Requirements
Regulation in force at the time. References to EU regulations and
directives (including technical standards) should, as applicable,
be read as references to the UK's version of such regulation or
directive, as onshored into UK law under the European Union
(Withdrawal) Act 2018, and as may be subsequently amended under UK
law.
3 Regulatory
numbers and ratios are as presented at the date of reporting. Small
changes may exist between these numbers and ratios and those
subsequently submitted in regulatory filings. Where differences are
significant, we may restate in subsequent periods.
4 The
liquidity coverage ratio is based on the average value of the
preceding 12 months.
5 We
have enhanced our calculation processes during 1H24. As Group LCR
is reported as a 12-month average, the benefit of these changes
will be recognised incrementally over the coming year starting from
30 June 2024.
Impact of strategic transactions
To aid the understanding of our
results, we separately disclose the impact of strategic
transactions classified as material notable items on the results of
the Group and our global businesses. Material notable items are a
subset of notable items and categorisation is dependent on the
nature of each item in conjunction with the financial impact on the
Group's income statement. At 1H24, strategic transactions
classified as material notable items comprise the disposal of our
retail banking operations in France, our banking business in
Canada, the planned sale of our business in Argentina and the
acquisition of SVB UK.
The impacts quoted include the gains
or losses on classification to held for sale or on acquisition and
all other related notable items. They also include the distorting
impact between the periods of the operating income statement
results related to acquisitions and disposals that affect
period-on-period comparisons. It is computed by including the
operating income statement results of each business in any period
for which there are no results in the comparative period. We
consider the monthly impacts of distorting income statement results
when calculating the impact of strategic transactions. See page 42
for supplementary analysis of the impact of strategic
transactions.
Constant currency
performance
Constant currency performance is
computed by adjusting reported results of comparative periods for
the effects of foreign currency translation differences, which
distort period-on-period comparisons.
We consider constant currency
performance to provide useful information for investors by aligning
internal and external reporting, and reflecting how management
assesses period-on-period performance.
Notable items
We separately disclose 'notable
items', which are components of our income statement that
management would consider as outside the normal course of business
and generally non-recurring in nature. From 1H24, we now disclose
'profit before tax excluding notable items' and 'revenue excluding
notable items'. We have introduced these new measures due to the
significant impact of notable items on the Group's results. We
consider profit before tax excluding notable items and revenue
excluding notable items as useful information in understanding
period-on-period performance.
From 1H24, we also adjust our
constant currency revenue and profit before tax excluding notable
items for the distorting income statement results when calculating
the impact of strategic transactions.
Certain notable items are classified
as 'material notable items', which are a subset of notable items.
Categorisation as a material notable item is dependent on the
nature of each item in conjunction with the financial impact on the
Group's income statement.
The tables on pages 40 to 43 and
pages 52 to 55 detail the effects of notable items on each of our
global business segments and legal entities during 1H24 and
1H23.
Management view of revenue on a constant currency
basis
Our global business segment
commentary includes tables that provide breakdowns of revenue on a
constant currency basis by major product. These reflect the basis
on which revenue performance of the businesses is assessed and
managed.
Global Trade Solutions
During 2Q24, we renamed our Global
Trade and Receivables Finance business as Global Trade Solutions
('GTS'), to better reflect our broad suite of products and the
focus we place on serving our clients globally.
Reported results
1H24 compared with 1H23 - reported
performance
|
|
Half-year
to
|
Variance
|
|
Reported results
|
|
|
1H24 vs
1H23
|
|
30 Jun 2024
|
30 Jun
2023
|
|
|
of which strategic
transactions1
|
|
$m
|
$m
|
$m
|
%
|
$m
|
|
Net
operating income before change in expected credit losses and other
credit impairment charges ('revenue')
|
37,292
|
36,876
|
416
|
1
|
(92)
|
|
ECL
|
(1,066)
|
(1,345)
|
279
|
21
|
27
|
|
Net
operating income
|
36,226
|
35,531
|
695
|
2
|
(65)
|
|
Total operating expenses
|
(16,296)
|
(15,457)
|
(839)
|
(5)
|
388
|
|
Operating profit/(loss)
|
19,930
|
20,074
|
(144)
|
(1)
|
323
|
|
Share of profit in associates and
joint ventures
|
1,626
|
1,583
|
43
|
3
|
-
|
|
Profit before tax
|
21,556
|
21,657
|
(101)
|
-
|
323
|
|
Tax income/(expense)
|
(3,891)
|
(3,586)
|
(305)
|
(9)
|
|
|
Profit/(loss) after tax
|
17,665
|
18,071
|
(406)
|
(2)
|
|
|
|
|
|
|
|
|
|
Revenue excluding notable items
|
33,721
|
33,540
|
181
|
1
|
|
|
Profit before tax excluding notable items
|
18,067
|
18,392
|
(325)
|
(2)
|
|
1 For details, see 'Impact of
strategic transactions' on page 42.
|
|
Half-year
to
|
|
|
30 Jun 2024
|
30 Jun
2023
|
|
Notable items
|
$m
|
$m
|
|
Revenue
|
|
|
|
Disposals, acquisitions and related
costs
|
3,571
|
3,321
|
|
Fair value movements on financial
instruments1
|
-
|
15
|
|
Currency translation on revenue
notable items
|
-
|
91
|
|
Operating expenses
|
|
|
|
Disposals, acquisitions and related
costs
|
(101)
|
(118)
|
|
Restructuring and other related
costs
|
19
|
47
|
|
Currency translation on operating
expenses notable items
|
-
|
1
|
1 Fair value movements on
non-qualifying hedges in HSBC Holdings.
Reported results continued
Reported profit
Reported profit before tax of
$21.6bn
was stable compared with 1H23. The 1H24 period included a $4.8bn
gain following the completion of the disposal of our banking
business in Canada, inclusive of fair value gains on related
hedging and recycling of related reserves, partly offset by a
$1.2bn impairment recognised following the classification of our
business in Argentina
as held for sale. It also included the non-recurrence of a $2.1bn
reversal in 1H23 of an impairment relating to the sale of our
retail banking operations in France, which was subsequently
reinstated in 4Q23 prior to completion, and a $1.5bn gain
recognised
on the acquisition of SVB UK.
Reported profit after tax of $17.7bn
was $0.4bn or 2% lower compared with 1H23.
Reported revenue
Reported revenue of $37.3bn was
$0.4bn or 1% higher. The increase included a $4.8bn gain in 1H24 on
the disposal of our banking business in Canada, inclusive of fair
value gains on related hedging and recycling of related reserves,
which was broadly offset by the period-on-period impacts of a
$1.2bn impairment recognised in 1H24 following the classification
of our business in Argentina as held for sale, the non-recurrence
of a $2.1bn reversal in 1H23 of an impairment relating to the sale
of our retail banking operations in France, and a $1.5bn gain
recognised in 1H23 on the acquisition of SVB UK, as described
above.
The increase also reflected revenue
growth in Equities and Securities Financing in GBM as market
sentiment improved, as well as higher wealth revenue in WPB, with
growth in all products.
Revenue also increased in Markets
Treasury, driven by higher NII due to reinvestments in our
portfolio at higher yields, partly offset by a fall in trading
income due to lower interest rate volatility in Asia compared with
1H23. Markets Treasury revenue is allocated to our global
businesses.
These factors were partly offset by a
reduction in Global Foreign Exchange revenue in GBM due to lower
customer activity compared with a strong 1H23. Credit and Lending
revenue decreased in CMB, primarily driven by margin compression,
and in GBM, reflecting an enhanced focus on returns and weaker
client demand.
In Corporate Centre, there were also
adverse fair value movements on financial instruments in Central
Treasury and structural hedges, a loss related to the recycling of
reserves following the completion of the sale of our business in
Russia and an impairment following the classification of our
operations in Armenia as held for sale.
Reported ECL
Reported ECL of $1.1bn were $0.3bn or
21% lower. ECL benefited from a release of stage 3 allowances in
GBM in HSBC Bank plc related to a single client, while lower
charges in CMB were primarily in HSBC UK due to allowance releases,
and also reflected lower charges in relation to the commercial real
estate sector in mainland China compared with 1H23. ECL charges in
WPB were broadly stable as a release of allowances in HSBC UK was
offset by higher charges in Mexico, reflecting unemployment trends
and growth in our unsecured portfolio.
Reported operating expenses
Reported operating expenses of
$16.3bn were $0.8bn or 5% higher, mainly due to higher technology
costs of $0.3bn, including investment, the impacts of inflation,
and an increase in our performance-related pay accrual of $0.3bn,
which reflects a change in the phasing of the performance-related
pay pool relative to 1H23. Our operating expenses also rose due to
the incremental costs from HSBC Innovation Banking ('IVB') of
$0.1bn, the non-recurrence of a $0.2bn impact from the reversal of
historical asset impairments in 1H23, and higher bank levies in
1H24.
These factors were partly offset by
the impact of disposals in Canada and France, continued cost
discipline, and favourable foreign currency translation differences
between the periods of $0.2bn.
Reported share of profit from associates and
JVs
Reported share of profit from
associates and joint ventures of $1.6bn was $43m or 3% higher. This
included an increase in the share of profit from Saudi Awwal Bank
('SAB').
Tax
expense
Tax in 1H24 was a charge of $3.9bn,
representing an effective tax rate of 18.1%. The effective tax rate
for 1H24 was reduced by the non-taxable gain on the sale of our
banking business in Canada and increased by the non-deductible loss
recorded on the planned sale of our business in Argentina.
Excluding these items, the effective rate for 1H24 was 21.4%. Tax
in 1H23 was a charge of $3.6bn, representing an effective tax rate
of 16.6%. The effective tax rate for 1H23 was reduced by 1.9
percentage points by the non-taxable gain recognised on the
acquisition of SVB UK and by 2.0 percentage points by the release
of provisions for uncertain tax positions.
Reported profit after tax in 1H24
$17.7bn
(1H23: $18.1bn)
Reported net interest income in 1H24
$16.9bn
down 7% compared with
1H23.
Reported performance - 2Q24 vs
2Q23
|
|
Quarter
ended
|
Variance
|
|
Reported results
|
|
|
|
2Q24 vs
2Q23
|
|
30 Jun 2024
|
30 Jun
2023
|
31 Mar
2024
|
|
|
of which strategic
transactions1
|
|
$m
|
$m
|
$m
|
$m
|
%
|
$m
|
|
Net
operating income before change in expected credit losses and other
credit impairment charges ('revenue')
|
16,540
|
16,705
|
20,752
|
(165)
|
(1)
|
(362)
|
|
ECL
|
(346)
|
(913)
|
(720)
|
567
|
62
|
7
|
|
Net
operating income
|
16,194
|
15,792
|
20,032
|
402
|
3
|
(355)
|
|
Total operating expenses
|
(8,145)
|
(7,871)
|
(8,151)
|
(274)
|
(3)
|
335
|
|
Operating profit/(loss)
|
8,049
|
7,921
|
11,881
|
128
|
2
|
(20)
|
|
Share of profit in associates and
joint ventures
|
857
|
850
|
769
|
7
|
1
|
-
|
|
Profit before tax
|
8,906
|
8,771
|
12,650
|
135
|
2
|
(20)
|
|
Tax income/(expense)
|
(2,078)
|
(1,726)
|
(1,813)
|
(352)
|
(20)
|
|
|
Profit/(loss) after tax
|
6,828
|
7,045
|
10,837
|
(217)
|
(3)
|
|
1 For details, see 'Impact of strategic
transactions' on page 42.
|
|
|
|
Quarter
ended
|
|
|
30 Jun 2024
|
30 Jun
2023
|
31 Mar
2024
|
|
Notable items
|
$m
|
$m
|
$m
|
|
Revenue
|
|
|
|
|
Disposals, acquisitions and related
costs
|
(161)
|
(241)
|
3,732
|
|
Currency translation on revenue
notable items
|
-
|
1
|
-
|
|
Operating expenses
|
|
|
|
|
Disposals, acquisitions and related
costs
|
(38)
|
(57)
|
(63)
|
|
Restructuring and other related
costs
|
6
|
47
|
13
|
|
Currency translation on operating
expenses notable items
|
-
|
-
|
-
|
Reported profit before tax of $8.9bn
was $0.1bn, or 2%, higher than in 2Q23, reflecting lower ECL
charges, which more than offset a reduction in revenue and growth
in operating expenses.
Reported profit after tax of $6.8bn
was $0.2bn, or 3%, lower compared with
2Q23.
Reported revenue
Reported revenue fell by $0.2bn or 1%
to $16.5bn and included an adverse impact of foreign currency
translation differences of $0.4bn. In addition, the reduction
reflected lower revenue following the 1Q24 completion of the
disposals of our retail banking business in France and the sale of
our banking business in Canada, as well as a loss related to the
recycling of reserves following the completion of the sale of our
business in Russia.
The reduction in revenue was partly
offset by growth in Markets and Securities Services in GBM, notably
from Securities Financing and Equities, and from Wealth in WPB. In
addition, there was an increase in revenue due to the
non-recurrence of 2Q23 fair value losses on the hedging of the
proceeds from the sale of our banking business in
Canada.
There was also revenue growth in
Markets Treasury, mainly from higher NII due to reinvestments in
our portfolio at higher yields. This revenue is allocated to our
global businesses.
Reported ECL
Reported ECL in 2Q24 of $0.3bn
decreased by $0.6bn reflecting lower charges in 2Q24 in the
commercial real estate sector in mainland China, compared with
2Q23, as well as a reduction in ECL charges in HSBC UK, notably due
to a net release of allowances in WPB and lower charges in CMB. In
addition, the decrease in ECL charges reflected the release of
stage 3 allowances related to a single GBM exposure in HSBC Bank
plc.
Reported operating expenses
Reported operating expenses of $8.1bn
were $0.3bn or 3% higher, driven by growth in technology, including
investment, inflationary impacts and a higher performance-related
pay accrual. It also included the non-recurrence of a $0.2bn impact
from the reversal of historical asset impairments in 2Q23. These
increases were partly offset by continued cost discipline,
reductions following the completion of disposals in Canada and
France and a favourable impact of foreign currency translation
differences of $0.2bn.
Reported profit after tax in 2Q24
$6.8bn
(2Q23: $7.0bn)
Constant currency results
1H24 compared with 1H23 - constant
currency basis
|
Results - on a constant currency basis
|
Half-year
to
|
1H24 vs
1H23
|
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which strategic
transactions1
$m
|
|
|
|
Revenue
|
37,292
|
36,502
|
790
|
2
|
(172)
|
|
|
ECL
|
(1,066)
|
(1,317)
|
251
|
19
|
30
|
|
|
Total operating expenses
|
(16,296)
|
(15,244)
|
(1,052)
|
(7)
|
384
|
|
|
Operating profit
|
19,930
|
19,941
|
(11)
|
-
|
242
|
|
|
Share of profit in associates and
joint ventures
|
1,626
|
1,531
|
95
|
6
|
-
|
|
|
Profit before tax
|
21,556
|
21,472
|
84
|
-
|
242
|
|
1 For
details, see 'Impact of strategic transactions' on page
42.
Profit before tax of $21.6bn was
stable on a constant currency basis as revenue growth and lower ECL
charges broadly offset growth in operating expenses. Constant
currency profit before tax excluding notable items of $18.1bn was
also stable compared with 1H23.
Revenue increased by $0.8bn or 2% on
a constant currency basis and included a $4.8bn gain on the
disposal of our banking business in Canada, inclusive of fair value
gains on the hedging of the sales proceeds and recycling of related
reserves. This gain was broadly offset by the period-on-period
impacts of a $1.2bn impairment recognised in 1H24 following the
classification of our business in Argentina as held for sale, the
non-recurrence of a $2.1bn reversal in 1H23 of an impairment
relating the sale of our retail banking operations in France and a
$1.6bn gain recognised on the acquisition of SVB UK.
The remaining increase in revenue was due to higher customer
activity in our Wealth products in WPB, and in Equities and
Securities Financing in GBM, partly offset by a reduction in
revenue in Global Foreign Exchange in GBM. Constant currency
revenue excluding notable items was $33.7bn, an increase of 2%
compared with 1H23.
ECL were $0.3bn lower on a constant
currency basis. ECL benefited from a release of stage 3 allowances
in GBM in HSBC Bank plc related to a single client, while lower
charges in CMB were primarily in HSBC UK due to allowance releases,
as well as lower charges in relation to the commercial real estate
sector in mainland China compared with 1H23. ECL charges in WPB
were broadly stable as a release of allowances
in HSBC UK was offset by higher
charges in Mexico, reflecting unemployment trends and growth in our
unsecured portfolio.
Operating expenses were $1.1bn higher
on a constant currency basis, mainly driven by higher technology
spend and investment, the impacts of inflation and a higher
performance-related pay accrual. The increase also included a rise
of $0.1bn due to additional costs of IVB, the non-recurrence of a
$0.2bn impact from the reversal of historical asset impairments in
1H23, and higher bank levies in 1H24. These factors were partly
offset by the impact of our continued cost discipline and
reductions following the completion of disposals in Canada and
France.
Balance sheet and capital
Balance sheet strength
Total assets of $3.0tn were $64bn
lower than at 31 December 2023 on a reported basis, and included
the adverse impact of foreign currency translation differences of
$41bn. On a constant currency basis, total assets decreased by
$23bn, reflecting lower assets held for sale following the
completion of the sales of our retail banking operations in France
and our banking business in Canada in 1H24. This was partly offset
by higher trading asset balances and an increase in financial
investments.
Reported loans and advances to
customers of $0.9tn remained stable compared with 31 December
2023, and grew by $12bn on a constant currency basis. This included
an increase in CMB, notably in HSBC Bank plc, mainland China and
India. In addition, mortgage balances increased in HSBC UK in
WPB.
Reported customer accounts of $1.6tn
decreased by $18bn. On a constant currency basis, customer accounts
increased by $3bn, notably in GBM, reflecting growth in time
deposit balances in Asia. The increase in GBM also
included a large short-term deposit from a single corporate
customer.
Loans and advances to customers as a
percentage of customer accounts were 59%, compared with 58% at 31
December 2023.
Distributable reserves
The distributable reserves of HSBC
Holdings at 30 June 2024 were $13.7bn, compared with $30.9bn at 31
December 2023. The decrease was primarily driven by dividends on
ordinary shares and additional tier 1 coupon distributions of
$12.2bn and share buy-back payments of $5bn. The profits generated
in HSBC Holdings of $9.7bn in 1H24 will be reflected in the
distributable reserves as at 31 December 2024.
Capital position
We actively manage the Group's
capital position to support our business strategy and meet our
regulatory requirements at all times, including under stress, while
optimising our capital efficiency. To do this, we monitor our
capital position using a number of measures. These include our
capital ratios and the impact on our capital ratios as a result of
stress.
Our CET1 ratio at 30 June 2024 was
15.0%, up from 14.8% at 31 December 2023, driven by a
reduction in RWAs, partly offset by a reduction in our CET1
Capital.
Liquidity position
We actively manage the Group's
liquidity and funding to support our business strategy and meet
regulatory requirements at all times, including under stress. To do
this, we monitor our position using a wide set of measures,
including the liquidity coverage ratio ('LCR') and the net stable
funding ratio ('NSFR'). During 1H24, we enhanced our liquidity
consolidation process and revised the associated provisions
originally recognised to address historical limitations. As Group
LCR is reported as a 12-month average, the benefit of these changes
will be recognised incrementally over the coming year starting from
30 June 2024. The average high-quality liquid assets ('HQLA') we
held was $646.1bn. This excludes HQLA in legal entities which are
not transferable due to local restrictions. For further details,
see page 103.
Common equity tier 1 ratio
(%)
15.0%
(31 December 2023: 14.8%)
Wealth and Personal
Banking
We serve around 40 million customers
globally, including
over 7 million who are international,
from retail customers
to ultra high net worth individuals
and their families.
Contribution to Group profit before tax
Calculation is based on profit
before tax of our global businesses excluding Corporate
Centre.
To
meet our customers' needs, we offer a full suite of products and
services across transactional banking, lending and wealth.
|
Results - on a constant currency basis
|
Half-year
to
|
1H24 vs
1H23
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which
strategic
transactions2
$m
|
|
Net
operating income
|
14,312
|
16,095
|
(1,783)
|
(11)
|
(2,389)
|
|
ECL
|
(476)
|
(484)
|
8
|
2
|
5
|
|
Operating expenses
|
(7,406)
|
(7,020)
|
(386)
|
(5)
|
363
|
|
Share of profit in associates and
JVs
|
28
|
35
|
(7)
|
(20)
|
-
|
|
Profit before tax
|
6,458
|
8,626
|
(2,168)
|
(25)
|
(2,021)
|
|
RoTE (annualised)1
(%)
|
30.6
|
43.1
|
|
|
|
|
1 RoTE (annualised)
in 1H23 included a 10.5 percentage point favourable impact of the
reversal of the impairment
losses relating to the planned sale
of our retail banking operations in France.
2 Impact of
strategic transactions classified as material notable items. For
details, see 'Impact of strategic transactions'
on page 42.
|
|
|
|
|
|
|
|
WPB continued to invest in our key
strategic priorities of expanding our Wealth franchise in Asia,
developing our transactional banking and lending capabilities, and
addressing our customers' international needs.
Performance in 1H24 reflected strong
growth in Wealth, with double digit growth in Private Banking
non-interest income and Retail investment distribution as well as
growth in asset management and life insurance. We also saw moderate
balance sheet growth, growth in our invested assets and wealth
deposits. The results included a broadly stable ECL charge and
growth in operating expenses.
Divisional highlights
14%
Growth in wealth non-interest income
compared with 1H23.
Constant currency profit before tax ($bn)
$6.5bn
Half-year to
16%
Growth in the contractual service
margin in insurance since 1H23, up to $12.2bn.
Constant currency net operating income
($bn)
$14.3bn
Half-year to
|
Management view of revenue
|
Half-year
to
|
1H24 vs
1H23
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which
strategic
transactions3
$m
|
|
Wealth
|
4,336
|
3,888
|
448
|
12
|
(81)
|
|
- investment
distribution
|
1,436
|
1,273
|
163
|
13
|
(63)
|
|
- Global Private
Banking
|
1,327
|
1,147
|
180
|
16
|
-
|
|
net interest income
|
598
|
585
|
13
|
2
|
-
|
|
non-interest income
|
729
|
562
|
167
|
30
|
-
|
|
- life insurance
|
912
|
851
|
61
|
7
|
-
|
|
- asset management
|
661
|
617
|
44
|
7
|
(18)
|
|
Personal Banking
|
9,689
|
10,160
|
(471)
|
(5)
|
(257)
|
|
- net interest
income
|
9,002
|
9,508
|
(506)
|
(5)
|
(216)
|
|
- non-interest
income
|
687
|
652
|
35
|
5
|
(41)
|
|
Other1
|
287
|
2,047
|
(1,760)
|
(86)
|
(2,051)
|
|
- of which: reversal of
impairment loss relating to the planned sale of our retail banking
operations in France
|
54
|
2,058
|
(2,004)
|
>(100)
|
(2,004)
|
|
Net
operating income2
|
14,312
|
16,095
|
(1,783)
|
(11)
|
(2,389)
|
1 'Other'
includes Markets Treasury, HSBC Holdings interest expense and
hyperinflation. It also includes the distribution and manufacturing
(where applicable) of retail and credit protection insurance,
disposal gains and other non-product-specific
income.
2 'Net operating
income' means net operating income before change in expected credit
losses and other credit impairment charges (also referred to as
'revenue').
3 Impact of
strategic transactions classified as material notable items. For
details, see 'Impact of strategic transactions' on page 42.
|
|
Half-year
to
|
|
|
30 Jun 2024
|
30 Jun
2023
|
|
Notable items
|
$m
|
$m
|
|
Revenue
|
|
|
|
Disposals, acquisitions and related
costs
|
55
|
2,034
|
|
Currency translation on revenue
notable items
|
-
|
24
|
|
Operating expenses
|
|
|
|
Disposals, acquisitions and related
costs
|
-
|
(23)
|
|
Restructuring and other related
costs
|
4
|
-
|
|
Currency translation on operating
expenses notable items
|
-
|
(1)
|
Financial performance
Profit before tax of $6.5bn was
$2.2bn lower than in 1H23 on a constant currency basis. The
reduction was driven by the non-recurrence of a $2.1bn reversal in
1H23 of an impairment relating to the sale of our retail banking
operations in France, although it was subsequently reinstated in
4Q23 and the sale completed on 1 January 2024. In addition,
the decrease included the non-recurrence of $0.1bn of profit
before tax in 1H23 from our banking business in Canada, which we
sold in 1Q24. NII was stable compared with 1H23 and fee income
increased 10%. The results included a broadly stable ECL charge and
a 5% growth in operating expense on a constant currency
basis.
Revenue of $14.3bn was $1.8bn or 11%
lower on a constant currency basis. This included the impact of a
reversal of an impairment relating to the planned sale of our
retail banking operations in France included within
'Other'. Wealth
revenue increased $0.4bn or 12% as we continue to accelerate our
wealth expansion. This included double digit growth in investment
distribution and in Global Private Banking, as well as revenue
growth in asset management and life insurance. This was partly
offset by a reduction in Personal Banking NII of $0.5bn, mainly due
to the impact of the disposals in France and Canada mentioned above
and margin compression, partly offset by balance sheet
growth.
In Wealth, revenue of $4.3bn was
$0.4bn or 12% higher.
- Global Private Banking revenue was $0.2bn or 16% higher due to
a strong performance in brokerage and trading in our entities in
Asia.
- Investment distribution revenue was $0.2bn or 13% higher,
driven by mutual funds, structured products and bonds due to the
combination of the execution of our strategy and improved market
sentiment, notably in our entities in Asia.
- Life insurance revenue was $0.1bn or 7% higher. The growth
reflected an increase in contractual service margin ('CSM') release
of $0.1bn, largely due to growth in the CSM balances. New business
CSM of $1.3bn was 77% higher, mainly in Hong Kong.
- Asset management revenue was $44m or 7% higher, driven by a
12% increase in assets under management and positive market
movements. This was partly offset by a reduction in revenue due to
the sale of our banking business in Canada.
- In Personal Banking, revenue of $9.7bn was down $0.5bn or
5%.
- Net interest income was $0.5bn or 5% lower due to the impact
of the sales in France and Canada and narrower margins. Compared
with 1H23, lending balances fell due to the sale of our retail
banking operations in France partly offset by
-
growth in HSBC UK, and in our
entities in Hong Kong, the US and Mexico. Mortgage lending rose in
HSBC UK and in our entities in Hong Kong and the US. Compared with
1H23, unsecured lending increased, notably in HSBC UK, in our
entities in Asia and in Mexico, partly offset by a reduction due to
the sale of our retail banking operations in France. Deposit
balances fell by $9.2bn,
mainly due to the sale of our retail banking operations in France,
and declines in HSBC UK balances due to competition on savings
products and cost of living pressures. These were partly offset by
growth in our main legal entities in mainland China, Australia,
Taiwan and the Channel Islands.
ECL of $0.5bn were broadly stable
compared with 1H23 on a constant currency basis. The 1H24 ECL
benefited from allowance releases in HSBC UK, as portfolio
performance remained resilient, offset by higher charges in Mexico
driven by unemployment trends and portfolio volume
increases.
Operating expenses of $7.4bn were 5%
higher on a constant currency basis, reflecting continued
investment in Wealth in Asia, higher technology spend and
investment, a higher performance-related pay accrual, and from the
impact of inflation. These were partly offset by continued cost
discipline and the impact of the disposals in France and
Canada.
Commercial Banking
We operate in 50 markets, serving
around 1.21 million
customers, ranging from small
enterprises to large companies
operating globally, including those
in the new innovation economy.
Contribution to Group profit before tax
Calculation
is based on profit before tax of our global businesses excluding
Corporate Centre.
We
partner with businesses around the world, supporting every stage of
their growth, their international ambitions and their
sustainability transitions. We deliver value to our clients through
our international network, financing strength, digital capabilities
and our universal banking capabilities, including our industry
leading global trade and payments solutions.
We have continued to strengthen our
transaction banking capabilities, which are at the heart of our
international proposition. We have been recognised as the World's
Best Bank for Payments and Treasury (Euromoney
Awards for Excellence 2024) and our
multi-year investment in our payments capabilities aims to help
clients operate more efficiently, navigate transformation and
improve risk management.
CMB performance in 1H24 remained
solid, with revenue benefiting from the higher interest rates
environment, growth in transaction banking and higher collaboration
revenue. The growth was offset by the non-recurrence of a gain
recognised in 1H23 on the acquisition of SVB UK. The increase in
operating expenses reflected our committed investment in IVB and
technology.
Divisional highlights
7%
Increase in CMB multi-jurisdictional
client revenue compared with 1H23.
Constant currency profit before tax
($bn)
$6.5bn
Half-year to
c.600
HSBC Innovation Banking has onboarded
almost 600 new to bank customers in 1H24.
Constant currency net operating income
($bn)
$10.9bn
Half-year to
|
Management view of revenue
|
Half-year
to
|
1H24 vs
1H23
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which
strategic
transactions4
$m
|
|
Global Trade Solutions
|
970
|
995
|
(25)
|
(3)
|
(11)
|
|
Credit and Lending
|
2,650
|
2,694
|
(44)
|
(2)
|
(41)
|
|
Global Payments Solutions
|
6,016
|
5,857
|
159
|
3
|
(32)
|
|
GBM products, Insurance and
Investments, and Other1
|
1,260
|
2,540
|
(1,280)
|
(50)
|
(1,537)
|
|
- of
which: share of revenue from Markets and Securities Services and
Banking products
|
676
|
655
|
21
|
3
|
|
|
- of
which: gain on the acquisition of Silicon Valley Bank UK
Limited
|
-
|
1,572
|
(1,572)
|
100
|
(1,572)
|
|
Net
operating income2
|
10,896
|
12,086
|
(1,190)
|
(10)
|
(1,621)
|
|
- of
which: transaction banking3
|
7,468
|
7,342
|
126
|
2
|
|
1 Includes a
gain on the acquisition of SVB UK and CMB's share of revenue from
the sale of Markets and Securities Services and Banking products to
CMB customers. GBM's share of revenue from the sale of these
products to CMB customers is included within the corresponding
lines of the GBM management view of revenue. Also includes
allocated revenue from Markets Treasury, HSBC Holdings interest
expense and hyperinflation.
2 'Net
operating income' means net operating income before change in
expected credit losses and other credit impairment charges (also
referred to as 'revenue').
3
Transaction banking comprises Global Trade Solutions, Global
Payments Solutions and CMB's share of Global Foreign Exchange
(shown within 'share of revenue from Markets and Securities
Services and Banking products').
4 Impact of
strategic transactions classified as material notable items. For
details, see 'Impact of strategic transactions' on page
42.
|
|
Half-year
to
|
|
|
30 Jun 2024
|
30 Jun
2023
|
|
Notable items
|
$m
|
$m
|
|
Revenue
|
|
|
|
Disposals, acquisitions and related
costs
|
-
|
1,507
|
|
Currency translation on revenue
notable items
|
-
|
65
|
|
Operating expenses
|
|
|
|
Disposals, acquisitions and related
costs
|
2
|
(15)
|
|
Restructuring and other related
costs
|
3
|
29
|
|
Currency translation on operating
expenses notable items
|
-
|
-
|
Financial performance
Profit before tax of $6.5bn was
$1.5bn lower than in 1H23 on a constant currency basis. This was
primarily due to the non-recurrence of a $1.6bn gain recognised in
1H23 on the acquisition of SVB UK, partly offset by incremental IVB
revenue following the acquisition of SVB UK, and a $0.1bn increase
in net interest income in Global Payments Solutions ('GPS') and
lower ECL charges. The decrease also reflected growth in operating
expenses.
Revenue of $10.9bn was $1.2bn or 10%
lower on a constant currency basis. This was primarily due to the
non-recurrence of a $1.6bn gain recognised in 1H23 on the
acquisition of SVB UK.
- In GPS, revenue rose by $0.2bn, with growth in most of our
legal entities, due to wider margins from interest rate rises and
repricing actions, while average balances decreased following the
sale of our Canada banking business. There was also a 2% increase
in fee income as business initiatives drove growth in transaction
banking including higher volumes, domestic and international
payments, mainly in our legal entities in Europe and Asia, partly
offset by the sale of our Canada banking business.
- In Global Trade Solutions ('GTS'), revenue was down 3%, driven
by lower average balances reflecting the higher rates environment
and the softer trade cycle, notably in our main legal entity in
Asia.
- In Credit and Lending, revenue decreased by $44m or 2%, due to
the sale of our Canada business, margin compression and lower
balances reflecting softer demand from customers, notably in
Asia.
- In GBM products, Insurance and Investments, and Other, revenue
decreased by $1.3bn, largely due to the non-recurrence of a $1.6bn
gain recognised in 1H23 on the acquisition of SVB UK, and the
adverse impacts of hyperinflationary accounting of $0.2bn. These
increases were partly offset by higher revenues from GBM
collaboration, Markets Treasury income and interest income on own
capital.
ECL of $0.6bn were $0.1bn lower
compared with 1H23 on a constant currency basis. The 1H24 period
included updates to credit assumptions in HSBC UK, and our legal
entities in Asia and the Middle East, partly offset by new stage 3
charges in our entity in the Middle East relating to the
construction sector. In addition, there were lower charges in
relation to the commercial real estate sector in mainland China
compared with 1H23.
Operating expenses of $3.9bn were
$0.4bn higher on a constant currency basis, largely driven by the
adverse impact of hyperinflationary accounting of $0.1bn,
incremental costs in IVB of $0.1bn following the acquisition of SVB
UK, ongoing investment in technology and inflationary impacts.
These increases were partly mitigated by the impact of our
continued cost discipline.
Global Banking and Markets
We support multinational corporates,
financial institutions and institutional
clients, as well as public sector and government bodies.
Contribution to Group profit before tax
Calculation is
based on profit before tax of our global businesses excluding
Corporate Centre.
We
are a leader in facilitating global trade and payments,
particularly into and within Asia and the Middle East, helping to
enable our clients in the East and West to achieve their objectives
by accessing our expertise and geographical reach. Our product
specialists deliver a comprehensive range of transaction banking,
financing, capital markets and advisory, and risk management
services.
GBM delivered a strong performance in
1H24, achieving an annualised RoTE of 14.0%. On a constant currency
basis, we grew revenue by 5%, while costs grew by 3%, even as we
continued to invest in technology and people to improve operating
resilience and support future revenue growth. We remain focused on
areas of strategic priority across Global Banking and Markets. We
also had a reduction in ECL compared with 1H23.
Divisional highlights
14.0%
Return on average tangible equity
(annualised), down 0.2 percentage points compared with
1H23.
Constant currency profit before tax
($bn)
$3.8bn
Half-year to
43%
Increase in Securities Financing
revenue compared with 1H23.
Constant currency net operating income
($bn)
$8.7bn
Half-year to
|
Management view of revenue
|
Half-year
to
|
1H24 vs
1H23
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which
strategic
transactions6
$m
|
|
Markets and Securities Services
|
4,824
|
4,628
|
196
|
4
|
(16)
|
|
- Securities
Services
|
1,136
|
1,143
|
(7)
|
(1)
|
-
|
|
- Global Debt
Markets
|
554
|
592
|
(38)
|
(6)
|
(2)
|
|
- Global Foreign
Exchange
|
1,968
|
2,166
|
(198)
|
(9)
|
(12)
|
|
- Equities
|
446
|
235
|
211
|
90
|
-
|
|
- Securities
Financing
|
731
|
512
|
219
|
43
|
(1)
|
|
- Credit and funding valuation
adjustments
|
(11)
|
(20)
|
9
|
45
|
(1)
|
|
Banking
|
4,300
|
4,230
|
70
|
2
|
(39)
|
|
- Global Trade
Solutions
|
347
|
334
|
13
|
4
|
(4)
|
|
- Global Payments
Solutions
|
2,246
|
2,173
|
73
|
3
|
(23)
|
|
- Credit and Lending
|
888
|
981
|
(93)
|
(9)
|
(6)
|
|
- Investment
Banking1
|
544
|
561
|
(17)
|
(3)
|
(3)
|
|
- Other2
|
275
|
181
|
94
|
52
|
(3)
|
|
GBM
Other
|
(382)
|
(537)
|
155
|
29
|
4
|
|
- Principal
Investments
|
29
|
13
|
16
|
>100
|
-
|
|
- Other3
|
(411)
|
(550)
|
139
|
25
|
4
|
|
Net
operating income4
|
8,742
|
8,321
|
421
|
5
|
(51)
|
|
- of which: transaction
banking5
|
5,697
|
5,816
|
(119)
|
(2)
|
(39)
|
1 From 1
January 2024, we renamed 'Capital Markets and Advisory' as
'Investment Banking' to better reflect our purpose and
offering.
2 Includes
portfolio management, earnings on capital and other capital
allocations on all Banking products.
3 Includes
notional tax credits and Markets Treasury, HSBC Holdings interest
expense and hyperinflation.
4 'Net operating
income' means net operating income before change in expected credit
losses and other credit impairment charges (also referred to as
'revenue').
5 Transaction
banking comprises Securities Services, Global Foreign Exchange (net
of revenue shared with CMB), GTS and GPS.
6 Impact of
strategic transactions classified as material notable items. For
details, see 'Impact of strategic transactions' on page
42.
|
|
Half-year
to
|
|
|
30 Jun 2024
|
30 Jun
2023
|
|
Notable items
|
$m
|
$m
|
|
Revenue
|
|
|
|
Disposals, acquisitions and related
costs
|
(14)
|
-
|
|
Currency translation on revenue
notable items
|
-
|
-
|
|
Operating expenses
|
|
|
|
Disposals, acquisitions and related
costs
|
-
|
3
|
|
Restructuring and other related
costs
|
3
|
-
|
|
Currency translation on operating
expenses notable items
|
-
|
-
|
Financial performance
Profit before tax of $3.8bn was
$0.4bn or 12% higher than in 1H23 on a constant currency basis.
This was driven by an increase in revenue of $0.4bn or 5%, notably
from strong performances in Equities and Securities Financing. In
addition, ECL charges decreased compared with 1H23, while operating
expenses increased by $0.1bn.
Revenue of $8.7bn was $0.4bn or 5%
higher on a constant currency basis.
In Markets and Securities Services,
revenue increased by $0.2bn or 4%.
- In Securities Services, revenue was stable as strong
underlying business performance was offset by an outflow of deposit
balances in Argentina.
- In Global Debt Markets, revenue decreased by $38m or 6% as
client demand for structured financing offset an uncertain trading
environment in rates.
- In Global Foreign Exchange, revenue fell by $0.2bn or 9%
compared with a strong performance in 1H23, driven by low
volatility and margin compression.
-
In Equities, revenue rose by
$0.2bn or 90%, reflecting improved market sentiment and strong
client demand for wealth products. In contrast, 1H23 reflected
considerably weaker performance due to lower volume and
volatility.
- In Securities Financing, revenue grew by $0.2bn or 43%, driven
by US Prime client on-boarding and strong institutional financing
demand.
In Banking, revenue increased by
$0.1bn or 2%.
- In GPS, revenue increased by $0.1bn due to wider spreads and
higher fees, reflecting continued growth in cross-border payments
and pricing actions.
- Investment Banking revenue, which includes Issuer Services,
decreased by $17m or 3%, from a strong 1H23 and amid lower Issuer
Services balances.
- Credit and Lending revenue decreased by $0.1bn or 9%, due to
continued muted client demand.
In GBM, Other revenue increased by
$0.2bn, reflecting higher Markets Treasury revenue, which is
allocated to the global businesses.
ECL were $11m, compared with charges
of $0.1bn in 1H23 on a constant currency basis. The 1H24 period
included a release related to a single client.
Operating expenses of $4.9bn
increased by $0.1bn or 3% on a constant currency basis, due to the
impact of higher inflation and a higher performance-related pay
accrual relative to 1H23, partly offset by continued focus on cost
management.
Corporate Centre
The results of Corporate Centre
primarily comprise the financial impact
of certain acquisitions and disposals and the share of profit from
our interests
in our associates and joint ventures. It also includes Central
Treasury,
stewardship costs and consolidation adjustments.
Corporate Centre performance in 1H24
primarily reflected the financial impact of certain acquisitions
and disposals, including the gain on sale of our banking business
in Canada and an impairment relating to the planned disposal of our
business in Argentina.
Financial performance
Profit before tax of $4.8bn increased
by $3.3bn compared with 1H23, on a constant currency
basis.
Revenue of $3.3bn was $3.3bn higher
on a constant currency basis, primarily due to the impact of
notable items. In 1H24, these included a $4.8bn gain on the sale of
our banking business in Canada, inclusive of fair value gains on
related hedging and recycling of related reserves. These also
included an impairment of $1.2bn recognised upon the classification
of our business in Argentina as held for sale, and a loss of $0.1bn
related to the recycling of reserves following the completion of
the sale of our business in Russia. In 1H23, notable items included
a favourable $0.1bn impact following the reversal of an impairment
related to the sale of our France retail banking operations. The
increase in revenue was partly offset by adverse fair value
movements on financial instruments in Central Treasury and
structural hedges, and an impairment following the classification
of our operations in Armenia as held for sale.
Operating expenses increased by
$0.1bn on a constant currency basis, including a charge in the US
related to the incremental costs of the FDIC special assessment, as
well as an increase in costs associated with disposals.
Share of profit from associates and
joint ventures of $1.6bn rose by $0.1bn or 7% on a constant
currency basis, which included an increase in share of profit from
SAB.
|
Results - on a constant currency basis
|
Half-year
to
|
1H24 vs
1H23
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which
strategic
transactions1
$m
|
|
Net operating income
|
3,342
|
-
|
3,342
|
-
|
3,889
|
|
ECL
|
(6)
|
(3)
|
(3)
|
(100)
|
-
|
|
Operating expenses
|
(111)
|
10
|
(121)
|
>(100)
|
(21)
|
|
Share of profit in associates and
JVs
|
1,597
|
1,497
|
100
|
7
|
-
|
|
Profit before tax
|
4,822
|
1,504
|
3,318
|
>100
|
3,868
|
|
RoTE (annualised) (%)
|
20.7
|
8.0
|
|
|
|
|
1 Impact of
strategic transactions classified as material notable items. For
details, see 'Impact of strategic transactions' on
page 42.
|
|
Management view of revenue
|
Half-year
to
|
1H24 vs
1H23
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
$m
|
%
|
of which
strategic
transactions6
$m
|
|
Central
Treasury1
|
(26)
|
81
|
(107)
|
>(100)
|
-
|
|
Legacy portfolios
|
14
|
(11)
|
25
|
>100
|
-
|
|
Other2,3
|
3,354
|
(70)
|
3,424
|
>100
|
3,889
|
|
-
of which: gain on the sale of our banking business
in Canada and associated hedges4
|
4,795
|
(288)
|
5,083
|
>(100)
|
5,083
|
|
- of
which: impairment loss relating to the planned sale of our business
in Argentina
|
(1,191)
|
-
|
(1,191)
|
100
|
(1,191)
|
|
Net
operating income5
|
3,342
|
-
|
3,342
|
n/a
|
3,889
|
|
1 Central Treasury
comprises valuation differences on issued long-term debt and
associated swaps and fair value
movements on financial
instruments.
2 Other comprises
gains and losses on certain planned business disposals, funding
charges on property and technology
assets, revaluation gains and losses
on investment properties and property disposals, as well as
consolidation
adjustments and other revenue
items not allocated to global businesses.
3 Revenue from
Markets Treasury, HSBC Holdings net interest expense and
hyperinflation are allocated out to the global
businesses, to align them better
with their revenue and expense. The total Markets Treasury revenue
component of
this allocation for 1H24 was
$886m (1H23: $362m).
4 Includes fair
value gains/(losses) on the foreign exchange hedging of the
proceeds of the sale and the recycling of
related reserves.
5 'Net operating
income' means net operating income before change in expected credit
losses and other credit
impairment charges (also
referred to as 'revenue').
6 Impact of
strategic transactions classified as material notable items. For
details, see 'Impact of strategic transactions' on
page 42.
|
|
Notable items
|
Half-year
to
|
|
30 Jun 2024
$m
|
30 Jun
2023
$m
|
|
Revenue
|
|
|
|
Disposals, acquisitions and related
costs
|
3,530
|
(220)
|
|
Fair value movements on financial
instruments
|
-
|
15
|
|
Currency translation on revenue
notable items
|
-
|
2
|
|
Operating expenses
|
|
|
|
Disposals, acquisitions and related
costs
|
(103)
|
(83)
|
|
Restructuring and other related
costs
|
9
|
18
|
|
Currency translation on operating
expenses notable items
|
-
|
2
|
Risk overview
Active risk management helps us to
achieve our strategy, serve
our customers and communities and grow our business
safely.
|
Key
risk appetite metrics
|
|
|
|
|
Component
|
Measure
|
Risk
appetite
|
1H24
|
|
|
Capital
|
CET1 ratio - end point
basis
|
≥13.0%
|
15.0%
|
|
|
Change in expected credit losses and
other credit impairment charges
|
Change in expected credit losses and
other credit impairment charges as a % of advances: Retail
(WPB)
|
≤0.50%
|
0.22%
|
|
|
Change in expected credit losses and
other credit impairment charges as a % of advances: Wholesale (GBM,
CMB)
|
≤0.45%
|
0.38%
|
|
|
|
|
|
|
|
|
|
Managing risk
HSBC's operations are subject to
changes in economic and financial conditions as well as
geopolitical developments that could have a material impact on the
Group's operations and financial risks. We continuously review
these factors in all of our key markets and conduct regular reviews
of economic risks and expectations.
The global economy grew more quickly
than expected in the first half of 2024, with the US, China and
Europe growing faster than forecast in the first quarter.
Activity indicators in the second quarter of 2024 also signalled
continued growth. This broad resilience in economic activity means
that a slowdown in inflation has been uneven. While headline
inflation has trended down, services prices have proved more
persistent. As a consequence, market expectations for central bank
interest rate cuts have been volatile, although the European
Central Bank ('ECB') cut interest rates in June and the US Federal
Reserve and Bank of England are expected to follow in the second
half of 2024.
Geopolitical tensions could impact
the Group's operations and its risk profile and are a source of
significant uncertainty, including the ongoing Russia-Ukraine and
Israel-Hamas wars, as well as the potential for further escalation
within the Middle East region. The attacks on commercial shipping
in the Red Sea continued to contribute to higher shipping costs. It
was recently reported that these attacks have caused Egypt's Suez
Canal a significant loss in revenue due to a lower number of
vessels using the route.
Sanctions and trade restrictions
require close monitoring owing to increased complexity and the
frequency of changes associated with them. The US, the UK and the
EU, as well as other countries, have imposed significant sanctions
and trade restrictions against Russia, with new sanctions added
during 2024. The US and UK also announced additional sanctions
against Iran in the first half of 2024 in response to attacks against Israel, and
further sanctions could be imposed in response to additional
escalation.
As noted in the Annual Report and
Accounts 2023, the new secondary sanctions regime introduced by the
US in December 2023 gives the US broad discretion to impose severe
sanctions on non-US banks that are knowingly, or even unknowingly,
engaged in certain transactions or services involving Russia's
military-industrial base. The US expanded the scope of these
secondary sanctions in June 2024.
The broad scope of the discretionary powers
embedded in the regime creates challenges associated with the
detection or prevention of third-party activities beyond our
control. Additionally, the imposition of such sanctions under the
new regime against any non-US HSBC entity could result in
significant adverse commercial, operational and reputational
consequences for HSBC.
Strategic competition has the
potential to impact the Group's operations and financial risks. The
relationships between China and several other countries, including
the US and the UK, remain complex. The US, the UK, the EU and other
countries have imposed various sanctions and trade restrictions on
Chinese individuals and companies in response to earlier measures,
China has imposed its own sanctions, trade restrictions and law
enforcement measures on persons and entities in other
countries.
Supply chains remain vulnerable to a
deterioration in these bilateral relationships and this has
resulted in efforts to de-risk certain sectors, with the reshoring
of manufacturing activities, but the approach of countries to
strategic competition and engagement with China continues to
develop. Further sanctions or counter-sanctions may adversely
affect the Group, its customers and various
markets.
Fiscal policy, deficits and public
indebtedness also influence our risk profile. Public spending as a
proportion of GDP is likely to remain high for most of our key
economies with elevated spending focused on social welfare, defence
and climate transition initiatives. Against a backdrop of slower
economic growth and expectations for a high interest rate
environment continuing for longer than previously anticipated,
elevated borrowing costs could increase and adversely impact the
fiscal responses of highly-indebted sovereigns.
Political changes may also have
implications for policy and could consequently affect our business
and its risks. 2024 is scheduled to be the biggest election year in
history with more than half the world's population having the
opportunity to go to the polls, including eight of the ten most
populous countries in the world. This may continue to result in
uncertainty in some markets in response to shifting domestic and
foreign policy priorities. The recently concluded UK election has
seen a change in government, whilst the French elections led to a
hung parliament, with a new government to be formed in the second
half of 2024. Any changes in government policies could impact the
Group's business and risks. We continue to closely monitor these
developments.
The real estate sector faces
challenges in many of our major markets with weakness observed in
both residential and commercial real estate investment prices and
sentiment. The Hong Kong commercial real estate market has softened
due to high vacancy rates and the prolonged higher interest rate
environment, leading to a halt in commercial land sales. While
mainland China GDP is tracking close to official targets, its
commercial real estate sector remained subdued, without signs of a
sustained recovery. We continue to closely monitor, and seek to
proactively manage, the potential implications of the real estate
downturn for our customers and commercial real estate
portfolios.
All the above risks could have an
impact on our retail customers and we continue to closely monitor
the impact of inflation and the increased cost of living to offer
the right support to our customers in line with regulatory,
government and wider stakeholder expectations.
We engage closely with regulators to
help ensure that we continue to meet their expectations regarding
financial institutions' activities to support economies during
times of market volatility.
Our approach to macroeconomic
scenarios in relation to IFRS 9 'Financial Instruments' remained
unchanged in the first half of 2024 compared with the corresponding
period in 2023. Adjustments to the design and narrative of the most
severe downside scenario have been made to reflect increased
geopolitical risks.
In addition, management adjustments
to expected credit losses and other impairment charges ('ECL') were
applied to reflect ongoing uncertainty in certain sectors, driven
by inflation, interest rate sensitivity and other macroeconomic
risks, which were not fully captured by our models.
We continue to monitor, and seek to
manage, the potential implications of all the above developments on
our customers and our business. While the financial performance of
our operations varies by geography, our balance sheet and liquidity
remained strong.
For further details of our
Central and other scenarios,
see 'Measurement
uncertainty and sensitivity analysis of ECL estimates' on page
69.
Our
risk appetite
Our risk appetite defines our desired
forward-looking risk profile and informs the strategic and
financial planning process. It provides an objective baseline to
guide strategic decision making, helping to ensure that planned
business activities provide an appropriate balance of return for
the risk assumed, while remaining within acceptable risk levels.
Risk appetite supports senior management in allocating capital,
funding and liquidity optimally to finance growth, while monitoring
exposure to non-financial risks.
At 30 June 2024, our CET1 ratio and
ECL charges were within their defined risk appetite thresholds. Our
CET1 capital ratio at 30 June 2024 was 15.0%, up 0.2
percentage points from 31 December 2023, reflecting a capital
increase from strategic transactions, including the gain on
disposal of our Canada banking business adjusted for the $0.21 per
share special dividend, offset by an increase in RWAs mainly from
asset size movements and model updates, excluding the reduction
from our disposals in France and Canada. For further details of the
key drivers of the overall CET1 ratio, see 'Own funds disclosure'
on page 100. Wholesale ECL charges during the year reflect the
default of several mainland China and Hong Kong commercial real
estate developer clients. Wholesale and Retail ECL charges were
within appetite due to relatively low overall defaults.
Stress tests
We regularly conduct stress tests to
assess the resilience of our balance sheet and our capital
adequacy, as well as to provide actionable insights into how key
elements of our portfolios may behave during a crisis. We use the
outcomes to calibrate our risk appetite and to inform our strategic
and financial plans, helping to improve the quality of management's
decision making. The results from the stress tests also drive
recovery and resolution planning to help enhance the Group's
financial stability under various macroeconomic scenarios. The
selection of stress scenarios is based upon the identification and
assessment of our top risks, emerging risks and our risk
appetite.
The Prudential Regulation Authority
('PRA') cancelled the 2024 Annual Cyclical Stress testing exercise
and instead commenced a Desk Based Stress Test exercise, which will
use PRA models and in-house expertise to test the resilience of the
UK banking system against more than one adverse macroeconomic
scenario. HSBC has provided 2023 year-end data to support this. The
results of this exercise across firms will be published in
aggregate only. The PRA intends to return to a concurrent exercise
in 2025, involving the submission of stressed projections and will
provide further details later this year.
During the first half of 2024, the
Group-wide internal stress test commenced and will be used to gauge
the Group's capital adequacy alongside testing of the Group's
strategy. The concluding results of the Group-wide internal stress
test will provide updates to the Group Risk Committee in support of
its assessment of the adequacy of HSBC Holdings' capital levels.
Additionally, the underlying conclusions drawn from this exercise
will also be included in the Group internal capital adequacy
assessment process ('ICAAP').
Climate risk
Climate risk relates to the financial
and non-financial impacts that may arise as a consequence of
climate change and the move to a net zero economy. Climate risk can
impact us either directly or through our relationships with
clients. These include the potential risks arising as a result of
our net zero ambition, which could lead to reputational concerns,
and potential legal and/or regulatory action if we are perceived to
have misled stakeholders on our business activities or if we fail
to achieve our stated net zero targets.
We seek to manage climate risk across
all our businesses in line with our Group-wide risk management
framework and are incorporating climate considerations within our
traditional risk types.
For further details of our approach to
climate risk management, see 'Climate risk' on page 221 of our
Annual Report and Accounts 2023.
For further details of our TCFD
disclosures, see the 'ESG review' on pages 69 to 74 of our Annual
Report and Accounts 2023.
Climate stress tests
To support the requirements for
assessing the impacts of climate change, we continue to develop a
set of capabilities to execute climate stress testing and scenario
analysis. These are used to help improve our understanding of
climate risks and opportunities in our portfolio for managing risk
and business decision making.
We intend to run further internal
climate scenario analyses, including short-term scenarios in the
second half of 2024. The outcomes will be used to identify
challenges and opportunities with regards to our net zero strategy,
inform capital planning and risk appetite, as well as to respond to
climate stress tests for regulators, including the Hong Kong
Monetary Authority.
For further details of our approach to climate risk stress testing,
see 'Insights from scenario analysis' on page 225 of our Annual
Report and Accounts 2023.
Our
operations
We remain committed to investing in
the reliability and resilience of our IT systems and critical
services, including those provided by third parties, which support
all parts of our business. We do so to help protect our customers,
affiliates and counterparties, and to help ensure that we minimise
any disruption to services. In our approach to defending against
these threats, we invest in business and technical controls to help
us prevent, detect, manage and recover from issues in a timely
manner within our risk appetite.
We are working to ensure that we
balance the opportunity AI presents to accelerate delivery of our
strategy, with the need to ensure appropriate controls are in place
to mitigate the associated risks. HSBC is committed to using AI
ethically and responsibly. HSBC's Principles for the Ethical Use of
Data and AI are available at
www.hsbc.com/who-we-are/businesses-and-customers/hsbc-and-ai. We
continue to refine and embed governance and controls into our risk
management processes to help meet the Group's needs and increasing
regulatory expectations for when AI is both developed internally
and enabled through third parties.
We continue to focus on improving the
quality and timeliness of the data used to inform management
decisions, and are progressing with the implementation of our
strategic and regulatory change initiatives to help deliver the
right outcomes for our customers, people, investors and
communities.
For further details of our risk
management framework and risks associated with
our banking and insurance manufacturing operations, see pages 137
and 145 of our Annual Report and Accounts 2023,
respectively.
Our top and emerging risks report
identifies forward-looking risks so that they can be considered in
determining whether any incremental action is needed to either
prevent them from materialising or to limit their effect. Top risks
are those that have the potential to have a material adverse impact
on the financial results, reputation or business model of the
Group.
We actively manage and take actions
to mitigate our top risks. Emerging risks are those that, while
they could have a material impact on our risk profile were they to
occur, are not considered immediate and are not under active
management. Our suite of top and emerging risks is subject to
regular review by senior governance forums.
We continue to monitor closely the
identified risks and ensure management actions are in place, as
required.
For further details
on our top and emerging risks see pages 140 to 144 of our Annual
Report and Accounts 2023.
|
Risk
|
Trend
|
Description
|
|
Externally driven
|
|
|
|
Geopolitical and macroeconomic
risks
|
}
|
Our operations and portfolios are
subject to risks associated with political instability, civil
unrest and military conflict, which could lead to disruption of our
operations, physical risk to our staff and/or physical damage to
our assets. Conflict in certain regions, wider geopolitical
tensions and electoral uncertainty are creating a more complicated
environment for business and trade. Global economic activity
nevertheless remains broadly resilient at mid-2024, despite
still-high interest rates by historical standards.
|
|
Technology and cybersecurity
risk
|
~
|
There is a risk of service disruption
or loss of data resulting from technology failures or malicious
activities from internal or external threats. We continue to
monitor changes to the threat landscape, including those arising
from ongoing geopolitical and macroeconomic events and the impact
this may have on third-party risk management. We operate a
continuous improvement programme to help support the resilience and
stability of our technology operations and counter a fast-evolving
and heightened cyber threat environment.
|
|
Environmental, social and governance
('ESG') risks
|
~
|
We are subject to ESG risks,
including in relation to climate change, nature and human rights.
These risks have increased owing to the pace and volume of
regulatory developments globally, signs of diverging national
agendas, increasing frequency of severe weather events, and due to
stakeholders placing more emphasis on financial institutions'
actions and investment decisions in respect of ESG matters. Failure
to meet these evolving expectations may result in financial and
non-financial risks, including reputational, legal and regulatory
compliance risks.
|
|
Financial crime risk
|
~
|
We are exposed to financial crime
risk from our customers, staff and third parties engaging in
criminal activity. The financial crime risk environment is
heightened due to increasingly complex geopolitical challenges, the
macroeconomic outlook, the complex and dynamic nature of sanctions
compliance, evolving financial crime regulations, rapid
technological developments, an increasing number of national data
privacy requirements and the increasing sophistication of fraud. As
a result, we will continue to face the possibility of regulatory
enforcement and reputational risk.
|
|
Digitalisation and technological
advances
|
~
|
Developments in technology and
changes in regulations continue to enable new entrants to the
banking industry as well as new products and services offered by
competitors. This challenges us to continue to innovate with new
digital capabilities and evolve our products, to attract, retain
and best serve our customers. Along with opportunities, new
technology, including generative AI, can introduce risks and
disruption. We seek to ensure technology developments are managed
with appropriate controls and oversight.
|
|
Evolving regulatory environment
risk
|
}
|
The regulatory and compliance risk
environment is set against continued geopolitical risk and
regulatory focus on operational resilience (including around cyber
risk), financial resilience, model risk and sound risk and
financial crime management practices. Multiple jurisdictions are
progressing implementation of Basel 3.1 standards, and crypto-asset
and AI-related regulations are developing quickly. Making
cross-border payments cheaper and more efficient is a key objective
for global standard setters, and regulatory focus on ESG matters
continues.
|
|
Internally driven
|
|
|
Data risk
|
}
|
We use data to serve our customers
and run our operations, often in real-time within digital
experiences and processes. If our data is not accurate and timely,
our ability to serve customers, operate with resilience or meet
regulatory requirements could be impacted. We seek to ensure that
non-public data is kept confidential, and that we comply with the
growing number of regulations that govern data privacy and
cross-border movement of data.
|
|
Risks arising from the receipt of
services from third parties
|
}
|
We procure goods and services from a
range of third parties. Due to the current macroeconomic and
geopolitical climate, the risk of service disruption in our supply
chain has heightened. We continue to strengthen our controls,
oversight and risk management policies and processes to select and
manage third parties, including our third parties' own supply
chains, particularly for key activities that could affect our
operational resilience.
|
|
Model risk
|
~
|
Model risk arises whenever business
decision making includes reliance on models. We use models in both
financial and non-financial contexts, as well as in a range of
business applications. Evolving regulatory requirements are driving
material changes to the way model risk is managed across the
banking industry, with a particular focus on capital models. New
technologies, including AI and generative AI, are driving a need
for enhanced model risk controls.
|
|
Change execution risk
|
}
|
Delivering change effectively enables
us to meet rapidly evolving customer and stakeholder needs, and
helps us achieve our strategy. We understand the risks associated
with change execution, and deliver complex change in line with
established risk management processes, and prioritising sustainable
outcomes. We continue to focus on meeting industry and regulatory
expectations and fulfilling our obligations to customers and the
marketplace.
|
|
Risks associated with workforce
capability, capacity and environmental factors with potential
impact on growth
|
Ä
|
Our businesses, functions and
geographies are exposed to risks associated with employee retention
and talent availability, and compliance with employment laws and
regulations. Although attrition across the Group has continued to
decline, failure to manage these risks may impact the delivery of
our strategic objectives or lead to regulatory sanctions or legal
claims.
|
|
~
|
Risk heightened during the first half
of 2024
|
}
|
Risk remained at the same level as
full year 2023
|
Ä
|
Risk decreased during the first half
of 2024
|