Blueprint
 
FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
 
 
For the month of May 2018
 
Commission File Number: 001-14930
 
HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F X Form 40-F  
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ______
 
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes  No X
 
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-   ).
 
This Report on Form 6-K with respect to our quarterly results for the three-month period ended March 31, 2018 is hereby incorporated by reference in the following HSBC Holdings plc registration statements: Registration Statements on Form F-3 (Nos. 333-92024, 333-135007, 333-158065, 333-180288, 333-202420, 333-223191) and Registration Statement on Form F-4 (No. 333-126531).
 
Neither our website referred to herein, nor any of the information contained on our website, is incorporated by reference in the Form 6-K.
 
 
 
HSBC HOLDINGS PLC
 
 
 
1Q18 EARNINGS RELEASE - HIGHLIGHTS
 
 
 
Financial performance
 
●     Reported revenue of $13.7bn was 6% higher, driven by higher deposit margins and balance growth in RBWM, and GLCM growth within CMB, notably in Asia. These increases were partly offset by lower revenue in Corporate Centre. Adjusted revenue of $13.9bn was 3% higher, excluding the effects of currency translation and movements in significant items.
 
●     Reported operating expenses of $9.4bn were 13% higher, primarily reflecting investments to grow the business and enhance our digital capabilities, and the effects of currency translation. Adjusted operating expenses of $8.2bn were 8% higher, excluding the effects of currency translation and movements in significant items.
 
●     Reported profit before tax of $4.8bn was 4% lower, as higher revenue was more than offset by higher operating expenses. Adjusted profit before tax of $6.0bn was 3% lower, excluding the effects of currency translation and movements in significant items.
 
●     Lending growth of $17bn in 1Q18, increasing net loans and advances to customers by 2% in the quarter.
 
●     Strong capital base with a common equity tier 1 ('CET1') ratio of 14.5% and a CRD IV leverage ratio of 5.6%.
 
●     We intend to initiate a share buy-back of up to $2bn, which we expect to commence shortly. In light of the growth opportunities that we currently see, we expect this to be the only share buy-back that we announce in 2018.
 
●     We intend to call two Tier 1 securities, with a nominal amount outstanding of $6bn.
 
 
 
John Flint, Group Chief Executive, said:
 
"Our global businesses performed well in the first quarter, maintaining momentum from the end of 2017. We continue to benefit from interest rate rises and economic growth, particularly in Asia. Our primary focus is to grow the businesses safely, and we have increased investment to deliver that aim. We intend to deliver positive jaws for 2018."
 
 
 
 
 
 
 
Financial highlights and key ratios
 
Quarter ended 31 Mar
 
2018
2017
Change
 
$m
$m
%
Reported PBT
4,755
4,961
(4)
Adjusted PBT
6,033
6,210
(3)
 
%
%
%
Return on average ordinary shareholders' equity (annualised)
7.5
8.0
(6.3)
Return on average tangible equity (annualised)
 
8.4
9.1
(7.7)
Adjusted jaws
(5.7)
 
 
We use adjusted performance to understand the underlying trends in the business. The main differences between reported and adjusted figures are foreign currency translation and significant items, which include litigation and regulatory items, offset by the non-recurrence of costs-to-achieve in 1Q18.
 
 
 
 
 
Capital and balance sheet
 
At
 
31 Mar
31 Dec
 
2018
2017
 
%
%
Common equity tier 1 ratio1
14.5
14.5
Leverage ratio1
5.6
5.6
 
$m
$m
Loans and advances to customers
981,165
962,964
Customer accounts
1,379,679
1,364,462
Risk-weighted assets1
894,400
871,337
1      Calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation. Figures at 31 December 2017 are reported under IAS 39.
 
 
 
 
 
 
 
 
 
Table of contents
 
Page
 
 
Page
Highlights
1
 
Risk-weighted assets
24
Group Chief Executive's review
3
 
Summary information - global businesses
27
Adoption of IFRS 9 'Financial Instruments'
4
 
Summary information - geographical regions
 
29
Adjusted performance
4
 
Appendix - selected information
 
 
31
Financial performance commentary
6
 
-  Reconciliation of reported and adjusted results - global businesses
 
31
Cautionary statement regarding forward-looking statements
14
 
-  Reconciliation of reported and adjusted risk-weighted assets
34
Summary consolidated income statement
15
 
-  Reconciliation of reported and adjusted results - geographical regions
34
Summary consolidated balance sheet
16
 
First interim dividend for 2018
37
Credit risk
17
 
Dividend on Series A dollar preference shares
37
Capital
22
 
Terms and abbreviations
38
Leverage
23
 
 
 
 
 
 
 
 
 
HSBC Holdings plc - Earnings Release
HSBC Holdings plc will be conducting a trading update conference call with analysts and investors today to coincide with the publication of its Earnings Release. The call will take place at 07.30am BST. Details of how to participate in the call and the live audio webcast can be found at www.hsbc.com/investor-relations.
 
 
 
Note to editors
 
HSBC Holdings plc
 
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from approximately 3,900 offices in 67 countries and territories in our geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of $2,652bn at 31 March 2018, HSBC is one of the world's largest banking and financial services organisations.
 
 
 
 
 
Review by John Flint, Group Chief Executive
Our global businesses performed well in the first quarter. Retail Banking and Wealth Management and Commercial Banking both benefited from wider deposit spreads and increased balances to deliver significant increases in adjusted revenue on last year's first quarter. Both businesses also grew lending, with Commercial Banking making notable progress in Hong Kong and the UK, and Retail Banking and Wealth Management making further headway in the UK mortgage market. Global Banking and Markets adjusted revenue was stable relative to a strong first quarter last year, as growth in transaction banking and Equities revenue balanced the impact of lower client activity on our fixed income businesses. Global Private Banking grew adjusted revenue and continued to attract net new money in its target markets.
 
A stronger revenue environment enabled us to invest in growing the business. In 1Q18, we increased investment in Retail Banking and Wealth Management to further grow our market share in the UK and mainland China. We also made strategic hires in our securities joint venture in mainland China, and invested to enhance our digital capabilities in all our global businesses. This targeted spending contributed to a rise in adjusted costs in the first three months of the year. We intend to deliver positive adjusted jaws for 2018.
 
Having received the appropriate regulatory clearances, we now plan to execute a share buy-back of up to $2bn. We expect this to commence shortly.
 
Adoption of IFRS 9 'Financial Instruments'
HSBC adopted the requirements of IFRS 9 'Financial Instruments' on 1 January 2018, with the exception of the provisions relating to the presentation of gains and losses on financial liabilities designated at fair value, which were adopted on 1 January 2017.
 
The classification and measurement and impairment requirements of IFRS 9 were applied retrospectively by adjusting the opening balance sheet at the date of initial application. As permitted by IFRS 9, HSBC has not restated comparative periods. Adoption is expected to reduce net assets at 1 January 2018 by $1.6bn, with the classification and measurement changes increasing net assets by $1.1bn, impairment reducing net assets by $2.2bn, impacts on our associates reducing net assets by $0.9bn, and deferred tax increasing net assets by $0.4bn. The effect of IFRS 9 on the carrying value of investments in associates has been updated from the effect disclosed in our Annual Report and Accounts 2017 and in our Report on Transition to IFRS 9 'Financial Instruments' 1 January 2018 as a result of those entities publicly reporting their expected transition impacts. The effect of adoption of IFRS 9 remains subject to change until the Group finalises its financial statements for the year ending 31 December 2018.
 
Under IFRS 9, the recognition and measurement of expected credit losses differs from under IAS 39. The change in expected credit losses relating to financial assets under IFRS 9 is recorded in the income statement under 'change in expected credit losses and other credit impairment charges' ('ECL'). As prior periods have not been restated, changes in impairment of financial assets in the comparative periods remain in accordance with IAS 39 and are recorded in the income statement under 'loan impairment charges and other credit risk provisions' ('LICs') and are therefore not necessarily comparable to ECL recorded for the current period. Further information is provided in our Report on Transition to IFRS 9 'Financial Instruments' 1 January 2018.
 
 
Adjusted performance
Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort period-on-period comparisons.
 
We consider adjusted performance to provide useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses period-on-period performance.
 
Foreign currency translation differences
 
Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 1Q18. We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and better understand the underlying trends in the business.
 
Foreign currency translation differences
Foreign currency translation differences for 1Q18 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
●    the income statements for 4Q17 and 1Q17 at the average rates of exchange for 1Q18; and
●    the closing prior period balance sheets at the prevailing rates of exchange on 31 March 2018.
No adjustment has been made to the exchange rates used to translate foreign currency denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.
Significant items
 
'Significant items' refers collectively to the items that management and investors would ordinarily identify and consider separately to understand better the underlying trends in the business.
 
The tables on pages 27 to 30 detail the effects of significant items on each of our global business segments and geographical regions in 1Q18, 4Q17 and 1Q17.
 
Adjusted performance - foreign currency translation of significant items
 
The foreign currency translation differences related to significant items are presented as a separate component of significant items. This is considered a more meaningful presentation as it allows better comparison of period-on-period movements in performance.
 
Global business performance
 
The Group Chief Executive, supported by the rest of the Group Management Board ('GMB'), is considered to be the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments.
 
The Group Chief Executive and the rest of the GMB review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating segments'. Global business results are assessed by CODM on the basis of adjusted performance, that removes the effects of significant items and currency translation from reported results. We therefore present these results on an adjusted basis as required by IFRSs.
 
A reconciliation of the Group's adjusted results to the Group's reported results is presented on page 5. Supplementary reconciliations of  adjusted to reported results by global business are presented on pages 31 to 33 for information purposes.
 
Management view of adjusted revenue
 
Our global business segment commentary includes tables which provide breakdowns of revenue by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed.
 
Reconciliation of reported and adjusted results
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
 
2018
2017
2017
 
$m
$m
$m
Revenue
 
 
 
Reported
13,710
 
12,301
 
12,993
 
Currency translation
 
236
 
660
 
Significant items
140
 
145
 
(142
)
-  customer redress programmes
-
 
105
 
-
 
-  disposals, acquisitions and investment in new businesses
112
 
79
 
(156
)
-  fair value movement on financial instruments
28
 
(45
)
6
 
-  currency translation of significant items
 
6
 
8
 
Adjusted
13,850
 
12,682
 
13,511
 
ECL/LICs
 
 
 
Reported
(170
)
(658
)
(236
)
Currency translation
 
(24
)
(4
)
Adjusted
(170
)
(682
)
(240
)
Operating expenses
 
 
 
Reported
(9,383
)
(9,895
)
(8,328
)
Currency translation
 
(219
)
(513
)
Significant items
1,138
 
1,173
 
1,220
 
-  costs to achieve
-
 
655
 
833
 
-  cost of structural reform†
126
 
131
 
83
 
-  customer redress programmes
93
 
272
 
210
 
-  disposals, acquisitions and investment in new businesses
2
 
39
 
-
 
-  gain on partial settlement of pension obligation
-
 
(188
)
-
 
-  restructuring and other related costs
20
 
-
 
-
 
-  settlements and provisions in connection with legal and regulatory matters*
897
 
228
 
-
 
-  currency translation of significant items
 
36
 
94
 
Adjusted
(8,245
)
(8,941
)
(7,621
)
Share of profit in associates and joint ventures
 
 
 
Reported
598
 
556
 
532
 
Currency translation
 
18
 
28
 
Adjusted
598
 
574
 
560
 
Profit before tax
 
 
 
Reported
4,755
 
2,304
 
4,961
 
Currency translation
 
11
 
171
 
Significant items
1,278
 
1,318
 
1,078
 
-  revenue
140
 
145
 
(142
)
-  operating expenses
1,138
 
1,173
 
1,220
 
Adjusted
6,033
 
3,633
 
6,210
 
 
 
†Comprises costs associated with the UK's exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.
 
*As previously disclosed, we are engaged in active discussions with the US Department of Justice ('DoJ') with a view toward potential resolution of civil claims based on the DoJ's investigation of HSBC's legacy RMBS securitisation activities. As discussions developed during Q1 2018, we recognised a provision with respect to this matter. There can be no assurances, however, as to how or when this matter will be resolved, or whether this matter will be resolved prior to the commencement of formal legal proceedings by the DoJ or whether the ultimate loss will exceed the provision. Also in relation to securitisation matters, HSBC Mortgage Corporation (USA) Inc. and Decision One Mortgage Company LLC engaged in court-ordered mediation discussions with Residential Funding Company LLC ('RFC') and a provision has been recognised in this regard.
 
 
 
 
 
 
 
Financial performance commentary
 
 
Distribution of results by global business
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
 
2018
2017
2017
 
$m
$m
$m
Adjusted profit/(loss) before tax
 
 
 
Retail Banking and Wealth Management
1,906
1,430
 
1,815
 
Commercial Banking
2,111
1,721
 
1,888
 
Global Banking and Markets
1,713
834
 
1,806
 
Global Private Banking
113
93
 
74
 
Corporate Centre
190
(445)

627
 
Total
6,033
3,633
 
6,210
 
 
 
Distribution of results by geographical region
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
 
2018
2017
2017
 
$m
$m
$m
Reported profit/(loss) before tax
 
 
 
Europe
(18)
(2,386
)
(206
)
Asia
4,768
3,670
 
4,094
 
Middle East and North Africa
437
333
 
387
 
North America
(596)
521
 
572
 
Latin America
164
166
 
114
 
Total
4,755
2,304
 
4,961
 
Adjusted profit/(loss) before tax
 
 
 
Europe
222
(1,314
)
786
 
Asia
4,756
4,009
 
4,384
 
Middle East and North Africa
437
347
 
395
 
North America
438
422
 
521
 
Latin America
180
169
 
124
 
Total
6,033
3,633
 
6,210
 
 
 
Adjusted PBT by global business and region is presented to support the commentary on adjusted performance on the following pages.
 
The tables on pages 27 to 30 reconcile reported to adjusted results for each of our global business segments and geographical regions.
 
 
 
Group
 
1Q18 compared with 1Q17 - reported results
 
Movement in reported profit before tax compared with 1Q17
 
Quarter ended
 
31 Mar
31 Mar
Variance
 
2018
2017
 
1Q18 vs. 1Q17
 
$m
$m
$m
%
Revenue
13,710
12,993
 
717
6
ECL/LICs
(170)
(236
)
66
28
Operating expenses
(9,383)
(8,328
)
(1,055)
(13)
Share of profit from associates and JVs
598
532
 
66
12
Profit before tax
4,755
4,961
 
(206)
(4)
 
 
Reported profit before tax
 
Reported profit before tax of $4.8bn in 1Q18 was $0.2bn or 4% lower than in 1Q17. This included a net adverse movement in significant items of $0.2bn, partly offset by the favourable effects of foreign currency translation of $0.2bn.
 
Excluding the effects of significant items and foreign currency translation, profit before tax decreased by $0.2bn or 3%, as revenue growth was more than offset by a rise in operating expenses.
 
Reported revenue
 
Reported revenue of $13.7bn in 1Q18 was $0.7bn or 6% higher than 1Q17. This reflected a favourable effect of foreign currency translation of $0.7bn, partly offset by a net adverse movement in significant items of $0.3bn, which included a loss on disposals, acquisitions and investment in new businesses of $0.1bn in 1Q18 related to the early redemption of subordinated debt in the US. This compared with a gain of $0.2bn in 1Q17, largely related to the disposal of our membership interest in Visa Inc.
 
Excluding significant items and currency translation, revenue increased by $0.3bn or 3%.
 
 
 
Reported ECL/LICs
 
The reported change in expected credit losses and other credit impairment charges ('ECL') was $0.2bn in 1Q18. This mainly related to charges of $0.3bn in RBWM, partly offset by net releases of ECL in Corporate Centre and CMB.
 
In 1Q17, reported LICs of $0.2bn mainly related to RBWM ($0.3bn), partly offset by net releases, notably in GB&M and Corporate Centre. The effect of currency translation differences between the periods was minimal.
 
Reported operating expenses
 
Reported operating expenses of $9.4bn were $1.1bn or 13% higher than in 1Q17 and included an adverse impact of foreign currency translation of $0.5bn, partly offset by a favourable movement in significant items of $0.1bn.
 
The favourable movement in significant items was driven by:
 
●     the non-recurrence of costs to achieve, which were $0.8bn in 1Q17; and
 
●     customer redress programme costs of $0.1bn in 1Q18, compared with $0.2bn in 1Q17.
 
These were partly offset by:
 
●     settlements and provisions in connection with legal and regulatory matters of $0.9bn.
 
Excluding significant items and currency translation, operating expenses increased by $0.6bn or 8%.
 
Reported income from associates
 
Reported income from associates of $0.6bn increased by $66m or 12%.
 
Group
 
1Q18 compared with 1Q17 - adjusted results
 
Movement in adjusted profit before tax compared with 1Q17
 
Quarter ended
 
31 Mar
31 Mar
Variance
 
2018
2017
1Q18 vs. 1Q17
 
$m
$m
$m
%
Revenue
13,850
13,511
 
339
3
 
ECL/LICs
(170)
(240
)
70
29
 
Operating expenses
(8,245)
(7,621
)
(624)
(8
)
Share of profit from associates and JVs
598
560
 
38
7
 
Profit before tax
6,033
6,210
 
(177)
(3
)
 
 
Adjusted profit before tax
 
Adjusted profit before tax of $6.0bn was $0.2bn or 3% lower compared with 1Q17, as revenue growth was more than offset by a rise in operating expenses.
 
Adjusted revenue
 
Adjusted revenue of $13.9bn was $0.3bn or 3% higher than 1Q17, notably driven by RBWM and CMB, partly offset by lower revenue in Corporate Centre. Revenue in GB&M was broadly unchanged.
 
●     In RBWM, revenue increased by $0.5bn or 9%, driven by growth in Retail Banking, reflecting wider spreads and balance growth in current accounts, savings and deposits, and in Wealth Management from investment distribution due to growth in sales of retail securities and mutual funds in Asia.
 
●     In CMB, revenue increased by $0.3bn or 10%, notably in GLCM, as we benefited from wider deposit spreads in Hong Kong and mainland China. In addition, revenue also increased in Credit and Lending ('C&L'), notably in the UK and Hong Kong as we grew balances.
 
●     In GB&M, revenue was broadly unchanged from 1Q17. Strong growth in GLCM and Securities Services reflected interest rate rises and deposit balance growth, primarily in Asia and the US. Revenue also increased in Global Banking from growth in lending balances, and from recoveries on restructured facilities in 1Q18. By contrast, revenue fell in Rates and Credit, partly offset in Equities and Foreign Exchange.
 
●     In GPB, revenue increased by $45m or 10%, mainly in Hong Kong, as higher investment revenue reflected increased client activity, and deposit revenue increased as we benefited from wider spreads.
 
●     In Corporate Centre, we recorded a net loss of $0.1bn in 1Q18, compared with revenue of $0.4bn in 1Q17. This was primarily in Central Treasury, reflecting lower revenue in Balance Sheet Management (down $0.3bn) and a loss arising from swap mark-to-market movements following a bond reclassification under IFRS 9 'Financial Instruments' of $0.2bn.
 
Adjusted ECL/LICs
 
Adjusted ECL of $0.2bn in 1Q18 mainly related to charges in RBWM ($0.3bn), notably in Mexico and the UK against our unsecured lending balances, and to a lesser extent in Hong Kong, also against unsecured lending. These charges were partly offset by net releases in Corporate Centre related to our Legacy Credit portfolio, as well as in CMB.
 
In 1Q17, adjusted LICs of $0.2bn related to charges in RBWM mainly in Mexico reflecting growth in unsecured lending together with an associated rise in delinquency.
 
 
 
 
 
Adjusted operating expenses
 
Adjusted operating expenses of $8.2bn were $0.6bn or 8% higher than 1Q17. This reflected investments to grow the business mainly in RBWM and GB&M, and continued investment in digital across all global businesses.
 
Our total investment in regulatory programmes and compliance was $0.7bn, up $39m or 6%. This reflected the continued focus on our Global Standards programme to ensure that changes we have made are effective and sustainable.
 
The number of employees expressed in full-time equivalent staff ('FTEs') at 31 March 2018 was 228,899, an increase of 212 from 31 December 2017. This was primarily driven by investments in business growth programmes.
 
We expect adjusted operating expenses excluding the UK bank levy for the full year to be broadly in line with 1Q18, subject to achieving full year positive jaws.
 
Adjusted share of income from associates
 
Adjusted income from associates of $0.6bn increased by $38m or 7%.
 
Tax expense
 
The effective tax rate for 1Q18 of 21.4% was lower than the 24.2% in 1Q17, principally due to a change in profit mix and a favourable adjustment in respect of prior years in comparison to 1Q17.
 
First interim dividend for 2018
 
The Board announces a first interim dividend for 2018 of $0.10 per ordinary share, further details of which are set out at the end of this release.
 
 
 
Retail Banking and Wealth Management
 
1Q18 compared with 1Q17 - adjusted results
 
Management view of adjusted revenue
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
Variance
 
2018
2017
2017
1Q18 vs. 1Q17
 
$m
$m
$m
$m
%
Net operating income1
 
 
 
 
 
Retail Banking
3,653
3,531
 
3,380
 
273
 
8
 
-  current accounts, savings and deposits
1,857
1,740
 
1,510
 
347
 
23
 
-  personal lending
1,796
1,791
 
1,870
 
(74
)
(4
)
    mortgages
579
603
 
630
 
(51
)
(8
)
    credit cards
725
689
 
753
 
(28
)
(4
)
    other personal lending2
492
499
 
487
 
5
 
1
 
Wealth Management
1,829
1,433
 
1,698
 
131
 
8
 
-  investment distribution3
1,044
793
 
821
 
223
 
27
 
-  life insurance manufacturing
503
353
 
614
 
(111
)
(18
)
-  asset management
282
287
 
263
 
19
 
7
 
Other4
187
165
 
135
 
52
 
39
 
Total
5,669
5,129
 
5,213
 
456
 
9
 
Adjusted RoRWA (%)5
6.2
4.6
 
6.3
 
 
 
RoTE excluding significant items and UK bank levy (%)11
 
23.1
-
25.0
 
 
 
 
 
For footnotes see page 13.
 
 
 
Adjusted profit before tax of $1.9bn was $0.1bn or 5% higher than 1Q17. This primarily reflected increased revenue from deposits and investment distribution, partly offset by higher operating expenses.
 
Adjusted revenue of $5.7bn was $0.5bn or 9% higher than 1Q17, as we grew revenue in both Retail Banking and Wealth Management.
 
●     In Retail Banking (up $0.3bn), the increase was driven by wider spreads and balance growth in current accounts, savings and deposits, notably in Hong Kong, and to a lesser extent in the US and Mexico. This was partly offset by lower personal lending revenue, mainly in the US, mainland China and Hong Kong, reflecting continuing mortgage spread compression from competitive pressures, although we grew our total lending balances by $25bn, or 8% compared with 1Q17.
 
●     In Wealth Management (up $0.1bn), the increase was primarily in investment distribution, reflecting higher sales of retail securities and mutual funds in Asia, following increased investor confidence. This increase was partly offset by lower life insurance manufacturing revenue, largely from a net adverse movement in market updates of $0.2bn, notably in Asia and France.
 
Adjusted ECL were $0.3bn in 1Q18, mainly related to charges in Mexico, the UK and Hong Kong, primarily against unsecured lending balances.
 
In 1Q17, adjusted LICs of $0.3bn were notably related to charges in Mexico, as well as in the UK, Hong Kong and the UAE, against unsecured lending balances.
 
Adjusted operating expenses of $3.5bn increased by $0.4bn or 12% driven by investments to grow the business, particularly in cards in the Pearl River Delta and in the US, as well as continued investment in digital capabilities in our core markets. We have invested in the UK to expand our intermediary channel to exceed 30 brokers. Additionally, inflation contributed to higher operating expenses.
 
 
 
 
 
Commercial Banking
 
1Q18 compared with 1Q17 - adjusted results
 
Management view of adjusted revenue
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
Variance
 
2018
2017
2017
1Q18 vs. 1Q17
 
$m
$m
$m
$m
%
Net operating income1
 
 
 
 
 
Global Trade and Receivables Finance
466
462
 
467
 
(1
)
-
 
Credit and Lending
1,325
1,351
 
1,280
 
45
 
4
 
Global Liquidity and Cash Management
1,351
1,303
 
1,158
 
193
 
17
 
Markets products, Insurance and Investments, and Other6
557
416
 
447
 
110
 
25
 
Total
3,699
3,532
 
3,352
 
347
 
10
 
Adjusted RoRWA (%)5
2.8
2.2
 
2.6
 
 
 
RoTE excluding significant items and UK bank levy (%)11
 
15.5
-
15.7
 
 
 
 
 
For footnotes see page 13.
 
Adjusted profit before tax of $2.1bn was $0.2bn or 12% higher, as strong revenue growth was partly offset by higher operating expenses.
 
Adjusted revenue was $0.3bn or 10% higher, driven by an increase in GLCM and C&L. Revenue also increased from Markets products and Insurance and Investments, notably in Asia. In GTRF, revenue remained broadly unchanged.
 
●     In GLCM, revenue increased by $0.2bn or 17%, reflecting wider spreads in Hong Kong and mainland China as we benefited from interest rate rises. We also grew average balances compared with 1Q17.
 
●     In C&L, revenue increased by $45m or 4%, as we grew balances, notably in the UK and Hong Kong. This was partly offset by the effects of spread compression.
 
●     In GTRF, revenue was unchanged as balance sheet growth in the UK and Asia was offset by lower balances in MENA reflecting the effect of repositioning.
 
A net release in adjusted ECL of $0.1bn reflected continuing stable credit conditions. In 1Q17, there was a net release of adjusted LICs of $10m.
 
Adjusted operating expenses of $1.7bn were $0.2bn or 12% higher, reflecting continued investment in Global Standards and digital capabilities, as well as higher performance-related pay.
 
 
 
Global Banking and Markets
 
1Q18 compared with 1Q17 - adjusted results
 
Management view of adjusted revenue
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
Variance
 
2018
2017
2017
1Q18 vs. 1Q17
 
$m
$m
$m
$m
%
Net operating income1
 
 
 
 
 
Global Markets
1,864
1,323
 
2,066
 
(202
)
(10)
-  Foreign exchange
741
625
 
658
 
83
 
13
-  Rates
445
282
 
696
 
(251
)
(36)
-  Credit
252
146
 
351
 
(99
)
(28)
-  FICC
1,438
1,053
 
1,705
 
(267
)
(16)
-  Equities
426
270
 
361
 
65
 
18
Global Banking
1,010
933
 
949
 
61
 
6
Global Liquidity and Cash Management
635
599
 
543
 
92
 
17
Securities Services
482
477
 
431
 
51
 
12
Global Trade and Receivables Finance
180
171
 
189
 
(9
)
(5)
Principal Investments
69
64
 
32
 
37
 
116
Credit and funding valuation adjustments7
(65)
(109
)
-
 
(65
)
n/a
Other8
(27)
5
 
(68
)
41
 
60
Total
4,148
3,463
 
4,142
 
6
 
-
Adjusted RoRWA (%)5
2.3
1.1
 
2.4
 
 
 
RoTE excluding significant items and UK bank levy (%)11
11.9
-
12.8
 
 
 
 
 
For footnotes see page 13.
 
 
 
Adjusted profit before tax of $1.7bn was $0.1bn or 5% lower, reflecting an increase in operating expenses, and a small charge in ECL in contrast to a net release of LICs in 1Q17.
 
Adjusted revenue of $4.1bn was broadly unchanged and included a net adverse movement of $65m on credit and funding valuation adjustments. Excluding these movements, revenue increased by $71m or 2%. The increase in adjusted revenue primarily reflected:
 
●     an increase in our transaction banking products, with double digit growth in GLCM (up $0.1bn, or 17%), and in Securities Services (up $0.1bn, or 12%), driven by the impact of higher interest rates and growth of operating balances as we continued to win new client mandates in GLCM, notably in Asia and the US;
 
●     an increase in Global Banking (up $0.1bn, or 6%), as we continued to grow lending balances, and from recoveries on restructured facilities, partly offset by muted investment banking activity compared with 1Q17.
 
This was partly offset by:
 
●     a decrease in Global Markets (down $0.2bn), primarily in fixed income revenue (Rates and Credit) reflecting reduced client flows, although this was partly offset by higher revenue in Equities and Foreign Exchange.
 
Adjusted ECL were $22m in 1Q18. In 1Q17, there was a net release of adjusted LICs of $21m.
 
Adjusted operating expenses increased by $0.1bn or 2%, reflecting increased litigation expenses, and a rise in investment costs to grow the business.
 
 
 
 
 
Global Private Banking
 
1Q18 compared with 1Q17 - adjusted results
 
Management view of adjusted revenue
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
Variance
 
2018
2017
2017
1Q18 vs. 1Q17
 
$m
$m
$m
$m
%
Net operating income1
 
 
 
 
 
Investment revenue
210
168
 
185
 
25
14
 
Lending
103
104
 
97
 
6
6
 
Deposit
122
109
 
92
 
30
33
 
Other
47
49
 
63
 
(16)
(25
)
Total
482
430
 
437
 
45
10
 
Adjusted RoRWA (%)5
2.8
2.2
 
1.9
 
 
 
RoTE excluding significant items and UK bank levy (%)11
12.3
-
7.4
 
 
 
 
 
       For footnotes see page 13.
 
Adjusted profit before tax of $113m was $39m or 53% higher, due to revenue growth, partly offset by a marginal increase in operating expenses.
 
Adjusted revenue of $0.5bn increased by $45m or 10%, mainly in Hong Kong from higher investment revenue due to increased client activity and higher deposit revenue as spreads widened following interest rate rises.
 
In 1Q18, we attracted net new money of $5.3bn in key markets targeted for growth.
 
Adjusted operating expenses of $0.4bn increased by 3% primarily reflecting higher performance-related pay.
 
 
 
 
 
Corporate Centre
 
1Q18 compared with 1Q17 - adjusted results
 
Management view of adjusted revenue
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
Variance
 
2018
2017
2017
1Q18 vs. 1Q17
 
$m
$m
$m
$m
%
Net operating income1
 
 
 
 
 
Central Treasury9
(75)
269
 
364
 
(439
)
(121)
Legacy portfolios
19
(84
)
28
 
(9
)
(32)
-  US run-off portfolio
12
(7
)
28
 
(16
)
(57)
-  legacy credit
7
(77
)
-
 
7
 
n/a
Other10
(92)
(57
)
(25
)
(67
)
>(200)
Total
(148)
128
 
367
 
(515
)
(140)
                                 
 
For footnotes see page 13.
 
 
 
Adjusted profit before tax of $0.2bn was $0.4bn or 70% lower, driven by a decrease in revenue, while operating expenses were broadly unchanged.
 
We recorded a net loss of adjusted revenue of $0.1bn in 1Q18, compared with revenue of $0.4bn in 1Q17. This reduction mainly reflected decreases in Central Treasury primarily due to:
 
●     lower revenue in Balance Sheet Management (down $0.3bn) reflecting repositioning carried out in 2017 in anticipation of higher policy rates, lower reinvestment yields and lower gains from AFS disposals; and
 
●     a loss arising from adverse swap mark-to-market movements following a bond reclassification under IFRS 9 'Financial Instruments' ($0.2bn).
 
A net release of adjusted ECL of $0.1bn in 1Q18 primarily related to our Legacy Credit portfolio.
 
In 1Q17, we recorded a net release of LICs of $41m which included releases related to Legacy Credit, as well as our US run-off portfolio.
 
Adjusted operating expenses of $0.3bn were broadly unchanged from 1Q17.
 
 
 
Adjusted income from associates increased by $44m or 8%.
 
Group
 
1Q18 compared with 4Q17 - reported results
 
Movement in reported profit before tax compared with 4Q17
 
Quarter ended
 
31 Mar
31 Dec
Variance
 
2018
2017
1Q18 vs. 4Q17
 
$m
$m
$m
%
Revenue
13,710
12,301
 
1,409
11
 
ECL/LICs
(170)
(658
)
488
74
 
Operating expenses
(9,383)
(9,895
)
512
5
 
Share of profit from associates and JVs
598
556
 
42
8
 
Profit before tax
4,755
2,304
 
2,451
106
 
 
 
Reported profit before tax
 
Reported profit before tax of $4.8bn in 1Q18 was $2.5bn higher than in 4Q17. This included a net favourable movement in significant items of $40m.
 
Excluding significant items, profit before tax increased by $2.4bn to $6.0bn, reflecting higher revenue and lower operating expenses.
 
Reported revenue
 
Reported revenue of $13.7bn in 1Q18 was $1.4bn or 11% higher than in 4Q17, and reflected a favourable effect of foreign currency translation of $0.2bn. Significant items of $0.1bn were broadly in line with 4Q17.
 
Excluding significant items and currency translation differences, revenue increased by $1.2bn or 9% reflecting revenue growth in all global businesses, partly offset by lower revenue in Corporate Centre.
 
Reported ECL/LICs
 
ECL were $0.2bn in 1Q18. This mainly related to charges of $0.3bn in RBWM, partly offset by a net release of ECL in Corporate Centre and CMB.
 
LICs in 4Q17 were $0.7bn and were mainly incurred in GB&M $0.4bn. In addition we incurred charges of $0.2bn in RBWM and $0.2bn in CMB. These charges were partly offset by a net release of $0.1bn in Corporate Centre.
 
Reported operating expenses
 
Reported operating expenses of $9.4bn were $0.5bn or 5% lower. This reduction included a $35m favourable movement in significant items which included:
 
●     the non-recurrence of costs to achieve, which were $0.7bn in 4Q17;
 
●     customer redress programme costs of $0.1bn in 1Q18, compared with $0.3bn in 4Q17.
 
These were partly offset by:
 
●     settlements and provisions in connection with legal matters of $0.9bn in 1Q18. This compared with settlements and provisions in connection with legal matters of $0.2bn in 4Q17.
 
 
 
Excluding significant items and an adverse effect of foreign currency translation of $0.2bn, operating expenses decreased by $0.7bn or 8%.
 
Reported income from associates
 
Reported income from associates of $0.6bn was $42m or 8% higher than in 4Q17.
 
Group
 
1Q18 compared with 4Q17 - adjusted results
 
Movement in adjusted profit before tax compared with 4Q17
 
Quarter ended
 
31 Mar
31 Dec
Variance
 
2018
2017
1Q18 vs. 4Q17
 
$m
$m
$m
%
Revenue
13,850
12,682
 
1,168
 
9
 
ECL/LICs
(170)
(682
)
512
 
75
 
Operating expenses
(8,245)
(8,941
)
696
 
8
 
Share of profit from associates and JVs
598
574
 
24
 
4
 
Profit before tax
6,033
3,633
 
2,400
 
66
 
Adjusted profit before tax
 
On an adjusted basis, profit before tax of $6.0bn was $2.4bn or 66% higher, reflecting higher revenue and lower operating expenses.
 
Adjusted revenue
 
Adjusted revenue of $13.9bn increased by $1.2bn or 9% compared with 4Q17, mainly reflecting higher revenue in all our global businesses, partly offset by lower revenue in Corporate Centre.
 
●     In GB&M revenue increased by $0.7bn, with growth in all businesses, notably in Global Markets reflecting a seasonal increase in client activity in 1Q18, as well as continued momentum in GLCM and Securities Services.
 
 
 
●     In RBWM, revenue increased by $0.5bn, driven by Wealth Management, notably in investment distribution and insurance manufacturing in Asia from higher sales in 1Q18 compared with 4Q17, due to seasonality.
 
●     In CMB, revenue increased by $0.2bn, notably in GLCM as spreads widened, primarily in Asia. Revenue also increased from Insurance and Investments and Markets products, notably in Asia.
 
These increases were partly offset:
 
●     In Corporate Centre, revenue decreased by $0.3bn, notably as a result of a loss arising from adverse swap mark-to-market movements following a bond reclassification under IFRS 9 'Financial Instruments' ($0.2bn).
 
Adjusted ECL/LICs
 
 
 
Adjusted ECL of $0.2bn, mainly related to charges in RBWM ($0.3bn), notably in Mexico against our unsecured lending balances, as well as in the UK and Hong Kong, also against unsecured lending. These charges were partly offset by a net release in Corporate Centre.
 
 
 
In 4Q17, adjusted LICs were $0.7bn and included individually assessed LICs relating to two large corporate exposures in GB&M in Europe. In addition, 4Q17 included LICs of $0.2bn in CMB, primarily related to individually assessed exposures in the UK, and in RBWM LICs of $0.2bn related mainly to our unsecured lending portfolio in Mexico.
 
Adjusted operating expenses
 
Adjusted operating expenses of $8.2bn were $0.7bn or 8% lower, primarily due to a UK bank levy charge of $0.9bn recorded in 4Q17. Excluding this charge, adjusted operating expenses increased by $0.2bn or 2%, mainly reflecting investments to grow the business and enhance our digital capabilities, and also an increase in performance-related pay.
 
Adjusted share of income from associates
 
Adjusted income from associates of $0.6bn was $24m or 4% higher than in 4Q17.
 
Balance sheet commentary compared with 1 January 2018
 
The impact of transitioning to IFRS 9 'Financial Instruments' on 1 January 2018 was a reduction in our total assets of $3.3bn from 31 December 2017, as well as the reclassification of certain items within the balance sheet. The commentary that follows compares our balance sheet as at 31 March 2018 with that as at 1 January 2018.
 
At 31 March 2018 our total assets were $2.7tn, an increase of $134bn or 5% on a reported basis and $95bn or 4% on a constant currency basis. The reported growth reflected an increase in short-term settlement accounts relating to Global Markets activity of $33bn, as activity increased after the seasonal reduction in December 2017, as well as an increase in loans and advances to customers (up $31bn), and trading assets (up $23bn).
 
Loans and advances to customers
 
Reported loans and advances to customers grew by $31.4bn or 3%, and included a favourable effect of currency translation of $14.6bn.
 
Excluding currency translation, and a small reduction in corporate overdraft balances relating to customers that settled their overdraft and deposit balances on a net basis, loans and advances to customers grew by $17.0bn, reflecting continued lending growth in Asia (up $14.2bn), primarily in Hong Kong as we increased term lending in CMB and GB&M.
 
We also grew lending in the Middle East and North Africa by $2.1bn, notably in term lending in GB&M.
 
Lending in Europe fell by $0.4bn, as growth in term lending in CMB in the UK was more than offset by a reduction in GB&M in the UK reflecting a reclassification of short-term lending by Global Markets into other assets during 1Q18. In RBWM we continued to grow our mortgage lending, notably in the UK (up $1.8bn).
 
Customer accounts
 
Reported customer accounts grew by $19.5bn, but were broadly unchanged on a constant currency basis, despite robust growth in RBWM, notably in Hong Kong and the UK.
 
We grew balances in Europe by $8.0bn, reflecting growth in GB&M in the UK, partly offset in CMB, as well as in GPB as we actively redeployed clients' deposits to assets under management to maximise their returns.
 
In Asia customer accounts fell by $3.5bn, primarily in GB&M and CMB in Hong Kong and mainland China, as seasonal customer outflows were higher than new deposit growth. The remaining reduction in customer accounts was driven by North America, notably in GB&M and CMB.
 
Net interest margin
 
 
Quarter ended
Year ended
 
31 Mar
31 Mar
31 Dec
 
2018
2017
2017
 
$m
$m
$m
Net interest income
7,456
6,787
28,176
 
Average interest earning assets
1,812,194
1,683,136
1,726,120
 
 
%
%
%
Gross yield
2.55
2.33
2.37
 
Less: cost of funds
(1.02)
(0.83
(0.88
)
Net interest spread
1.53
1.50
1.49
 
Net interest margin
1.67
1.64
1.63
 
 
 
The 1Q18 net interest margin of 1.67% was 4bps higher than that for 2017. This was driven by an increase of 18bps in gross yields, partly offset by an increase of 14bps in the cost of funds.
 
Gross yields benefited from a rate rise in Hong Kong, notably from increased lending yields on term lending in Asia. Gross yields on surplus liquidity increased in all regions, mainly on AFS securities. These benefits were partly offset by the completion of the run-off of our higher-yielding US CML portfolio in 2017 and continuing competitive pressures on lending yields in Europe, notably in mortgages and overdrafts, despite balance growth.
 
The cost of funds rose by 14bps from the increased cost of customer accounts, mainly deposit accounts in Asia reflecting the rate rise in Hong Kong. The cost of Group debt also rose, primarily relating to the higher cost of issuances of senior debt by HSBC Holdings.
 
Compared with the fourth quarter of 2017, net interest margin increased, reflecting an increase in our gross yields, driven by increased lending yields and increased yields on surplus liquidity in most regions. This was partly offset by an increase in our cost of funds, notably from increased cost of customer accounts in Asia.
 
 
 
 
 
Notes
 
●     Income statement comparisons, unless stated otherwise, are between the quarter ended 31 March 2018 and the quarter ended 31 March 2017. Balance sheet comparisons, unless otherwise stated, are between balances at 31 March 2018 and the corresponding balances at 1 January 2018.
 
●     The financial information on which this Earnings Release is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with HSBC's significant accounting policies as described on pages 188 to 194 of our Annual Report and Accounts 2017 and the new policies for financial instruments as described on pages 16 to 20 of our Report on Transition to IFRS 9 'Financial Instruments' 1 January 2018. Comparative periods have not been restated. IFRS 9 does not require restatement and the impact of other new policies are not material.
 
●     The Board has adopted a policy of paying quarterly interim dividends on ordinary shares. Under this policy, it is intended to have a pattern of three equal interim dividends with a variable fourth interim dividend. Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, sterling and Hong Kong dollars or, subject to the Board's determination that a scrip dividend is to be offered in respect of that dividend, may be satisfied in whole or in part by the issue of new shares in lieu of a cash dividend. Details of the first interim dividend for 2018 and the series A dollar preference share dividend are set out at the end of this release.
 
Footnotes to financial performance commentary
1
Net operating income before changes in expected credit losses and other credit impairment charges, also referred to as revenue.
2
'Other personal lending' includes personal non-residential closed-end loans and personal overdrafts.
3
'Investment distribution' includes Investments, which comprises mutual funds (HSBC manufactured and third party), structured products and securities trading, and Wealth Insurance distribution, consisting of HSBC manufactured and third-party life, pension and investment insurance products.
4
'Other' mainly includes the distribution and manufacturing (where applicable) of retail and credit protection insurance.
5
Adjusted return on average risk-weighted assets ('Adjusted RoRWA') is used to measure the performance of RBWM, CMB, GB&M and GPB. Adjusted RoRWA is calculated using annualised profit before tax and reported average risk-weighted assets at constant currency adjusted for the effects of significant items.
6
'Markets products, Insurance and Investments and Other' includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and Global Banking products.
7
From 1 January 2018, the qualifying components according to IFRS 7 'Financial Instruments: Disclosures' of fair value movements relating to changes in credit spreads on structured liabilities, were recorded through OCI. The residual movements remain in credit and funding valuation adjustments, and comparatives have not been restated.
 
8
'Other' in GB&M includes net interest earned on free capital held in the global business not assigned to products, allocated funding costs and gains resulting from business disposals. Within the management view of total operating income, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities that is not reflected within operating income, such as notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included within 'Other'.
9
Central Treasury includes revenue relating to Balance Sheet Management ('BSM') of $592m (4Q17: $660m; 1Q17: $854m), interest expense of $377m (4Q17: $278m; 1Q17: $343m) and adverse valuation differences on issued long-term debt and associated swaps of $241m (4Q17: adverse movements of $56m; 1Q17: adverse movements of $65m). Revenue relating to BSM includes other internal allocations, including notional tax credits to reflect the economic benefit generated by certain activities which is not reflected within operating income, for example notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included in other Central Treasury.
10
Other miscellaneous items in Corporate Centre include internal allocations relating to legacy credit.
11
Return on average tangible equity ('RoTE') is calculated as Profit Attributable to Ordinary Shareholders (based on annualised Reported PBT, as adjusted for tax, insurance balances, certain capital securities and associates) divided by allocated Average Tangible Shareholders' Equity. In 1Q18, Group RoTE on this basis was 8.4%.
RoTE excluding significant items and the UK bank levy adjusts RoTE for the effects of significant items, the UK bank levy, tax and other items. This is the RoTE measure used at the global business level. In 1Q18, Group RoTE excluding significant items and the UK bank levy was 11.6%.
The reconciling items between Group RoTE and Group RoTE excluding significant items and the UK bank levy in 1Q18 were significant items (+3.5% points), the UK bank levy (+0.1% points), tax (-0.2% points) and other items (-0.2% points).                                                                     
 
 
Cautionary statement regarding forward-looking statements
This Earnings Release contains certain forward-looking statements with respect to HSBC's financial condition, results of operations, capital position and business.
 
Statements that are not historical facts, including statements about HSBC's beliefs and expectations, are forward-looking statements. Words such as 'expects', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
 
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC's Directors, officers or employees to third parties, including financial analysts.
 
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.
 
These include, but are not limited to:
 
●     changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks' policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; and consumer perception as to the continuing availability of credit and price competition in the market segments we serve;
 
●     changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the conduct of business of financial institutions in serving their retail customers, corporate clients and counterparties; the standards of market conduct; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for our products and services; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and
 
●     factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models we use; our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in the 'top and emerging risks' on pages 63 to 66 of the Annual Report and Accounts 2017.
 
 
 
 
 
For further information contact:
 
Investor Relations
Media Relations
UK - Richard O'Connor
UK - Heidi Ashley
Tel: +44 (0) 20 7991 6590
Tel: +44 (0) 20 7992 2045
 
 
 
 
Hong Kong - Hugh Pye
 
Tel: +852 2822 4908
 
 
 
Summary consolidated income statement
 
 
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
 
2018
2017
2017
 
$m
$m
$m
Net interest income
7,456
7,272
6,787
 
Net fee income
3,507
3,065
3,224
 
Net income from financial instruments held for trading or managed on a fair value basis2,3
2,384
1,997
2,187
 
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
(155)
627
964
 
Changes in fair value of long-term debt and related derivatives3
10
(13)
24
 
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
117
N/A
N/A
Gains less losses from financial investments
101
71
338
 
Dividend income
9
17
13
 
Net insurance premium income
3,078
2,317
2,793
 
Other operating income/(expense)
41
(79)
202
 
Total operating income
16,548
15,274
16,532
 
Net insurance claims and benefits paid and movement in liabilities to policyholders
(2,838)
(2,973)
(3,539
)
Net operating income before change in expected credit losses and other credit impairment charges
13,710
12,301
12,993
 
Change in expected credit losses and other credit impairment charges
(170)
N/A
N/A
Loan impairment charges and other credit risk provisions
N/A
(658)
(236
)
Net operating income
13,540
11,643
12,757
 
Total operating expenses
(9,383
(9,895)
(8,328
)
Operating profit/(loss)
4,157
1,748
4,429
 
Share of profit in associates and joint ventures
598
556
532
 
Profit/(loss) before tax
4,755
2,304
4,961
 
Tax expense
(1,017)
(1,978)
(1,201
)
Profit/(loss) after tax
3,738
326
3,760
 
Attributable to:
 
 
 
-  ordinary shareholders of the parent company
3,086
(274)
3,130
 
-  preference shareholders of the parent company
22
23
22
 
-  other equity holders
288
303
313
 
-  non-controlling interests
342
274
295
 
Profit/(loss) after tax
3,738
326
3,760
 
 
$
$
$
Basic earnings per share
0.15
(0.01)
0.16
Diluted earnings per share
0.15
(0.01)
0.16
Dividend per ordinary share (in respect of the period)
0.10
0.21
0.10
 
%
%
%
Return on average ordinary shareholders' equity (annualised)
7.5
(0.7)
8.0
 
Return on average tangible equity (annualised)
 
8.4
(0.5)
9.1
 
Return on average risk-weighted assets1
2.2
1.0
2.3
 
Cost efficiency ratio
68.4
80.4
64.1
 
 
 
1      Return on average risk-weighted assets is calculated using annualised profit before tax and reported average risk-weighted assets.
 
 2      The classification and measurement requirements under IFRS 9, which was adopted from 1 January 2018, are based on an entity's assessment of both the business model for managing the assets and the contractual cash flow characteristics of the assets. The standard contains a classification for items measured mandatorily at fair value through profit or  loss as a residual category. Given its residual nature, the presentation of the income statement has been updated to separately present items in this category which are of a dissimilar nature or function, in line with IAS 1 'Presentation of Financial Statements' requirements. Comparative data have been re-presented. There is no net impact on Total operating income. 
 
3      Prior to 2018 foreign exchange exposure on some financial instruments designated at fair value was presented in the same line in the income statement as the underlying fair value movement on these instruments. In 2018 we have grouped the presentation of the entire effect of foreign exchange exposure in profit or loss and presented it within 'Net income from financial instruments held for trading or managed on a fair value basis'. Comparative data have been re-presented. There is no net impact on Total operating income and the impact on 'Changes in fair value of long-term debt and related derivatives' is $563m in 4Q17 and $84m in 1Q17.
 
 
 
Summary consolidated balance sheet
 
 
 
At
 
31 Mar
1 Jan
31 Dec
 
2018
20181
2017
 
$m
$m
$m
Assets
 
 
 
Cash and balances at central banks
184,445
180,621
180,624
 
Trading assets
277,116
254,410
287,995
 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
40,964
39,746
N/A
Financial assets designated at fair value
N/A
N/A
29,464
 
Derivatives
221,038
219,818
219,818
 
Loans and advances to banks
78,727
82,559
90,393
 
Loans and advances to customers
981,165
949,737
962,964
 
Reverse repurchase agreements - non-trading
213,107
201,553
201,553
 
Financial investments
392,878
383,499
389,076
 
Other assets
262,683
206,487
159,884
 
Total assets
2,652,123
2,518,430
2,521,771
 
Liabilities and Equity
 
 
 
Liabilities
 
 
 
Deposits by banks
63,999
64,492
69,922
 
Customer accounts
1,379,679
1,360,227
1,364,462
 
Repurchase agreements - non-trading
168,614
130,002
130,002
 
Trading liabilities
83,364
80,864
184,361
 
Financial liabilities designated at fair value
150,008
144,006
94,429
 
Derivatives
216,902
216,821
216,821
 
Debt securities in issue
71,482
66,536
64,546
 
Liabilities under insurance contracts
87,611
85,598
85,667
 
Other liabilities
226,902
173,660
113,690
 
Total liabilities
2,448,561
2,322,206
2,323,900
 
Equity
 
 
 
Total shareholders' equity
195,924
188,644
190,250
 
Non-controlling interests
7,638
7,580
7,621
 
Total equity
203,562
196,224
197,871
 
Total liabilities and equity
2,652,123
2,518,430
2,521,771
 
 
%
%
%
Ratio of customer advances to customer accounts
71.1
69.8
70.6
 
1      Balances at 1 January 2018 have been prepared in accordance with accounting policies referred to on page 13. 31 December 2017 balances have not been represented.
 
 
 
Credit risk
Refer to pages 16 to 20 of our Report on Transition to IFRS 9 'Financial Instruments' 1 January 2018 for the new policies for financial instruments.
 
 
 
 
 
Summary of credit risk
 
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
 
At 31 Mar 2018
 At 1 Jan 2018
 
Gross carrying/nominal amount
Allowance for ECL1
Gross carrying/nominal amount
Allowance for ECL1
 
$m
$m
$m
$m
Loans and advances to customers at amortised cost
990,523
(9,358)
959,080
 
(9,343)
-  personal
388,278
(3,068)
375,069
 
(3,047)
-  corporate and commercial
542,061
(6,023)
520,137
 
(6,053)
-  non-bank financial institutions
60,184
(267)
63,874
 
(243)
Loans and advances to banks at amortised cost
78,750
(23)
82,582
 
(23)
Other financial assets measured at amortised cost
615,008
(75)
557,864
 
(114)
-  cash and balances at central banks
184,448
(3)
180,624
 
(3)
-  items in the course of collection from other banks
5,527
-
6,628
 
-
-  Hong Kong Government certificates of indebtedness
36,334
-
34,186
 
-
-  reverse repurchase agreements - non-trading
213,107
-
201,553
 
-
-  financial investments
60,568
(18)
59,539
 
(16)
-  prepayments, accrued income and other assets2
115,024
(54)
75,334
 
(95)
Total gross carrying amount on balance sheet
1,684,281
(9,456)
1,599,526
 
(9,480)
Loans and other credit related commitments
517,769
(375)
501,361
 
(376)
-  personal
205,638
(44)
196,093
 
(14)
-  corporate and commercial
263,335
(324)
262,391
 
(355)
-  financial
48,796
(7)
42,877
 
(7)
Financial guarantee and similar contracts
89,096
(184)
89,382
 
(161)
-  personal
1,408
(3)
791
 
(4)
-  corporate and commercial
76,352
(176)
78,102
 
(153)
-  financial
11,336
(5)
10,489
 
(4)
Total nominal amount off-balance sheet3
606,865
(559)
590,743
 
(537)
 
2,291,146
(10,015)
2,190,269
 
(10,017)
 
 
 
 
 
 
Fair value
Memorandum allowance for ECL4
Fair value
Memorandum allowance for ECL4
 
$m
$m
$m
$m
Debt instruments measured at fair value through other comprehensive income
330,420
(122
322,163
 
(184
 
 
 
 
1      The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.
 
2      Includes only those financial instruments which are subject to the impairment requirements of IFRS 9. 'Prepayments, accrued income and other assets' as presented within the summary consolidated balance sheet on page 16 includes both financial and non-financial assets.
 
3      Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
 
4      Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in 'Change in expected credit losses and other credit impairment charges' in the income statement.
 
 
 
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 March 2018
 
Gross carrying/nominal amount1
 
 
Allowance for ECL
 
 
ECL coverage %
 
 
Stage 1
Stage 2
Of which:
Of which:
Stage 3
POCI3
Total
 
Stage 1
Stage 2
Of which:
Of which:
Stage 3
POCI3
Total
 
Stage 1
Stage 2
Of which:
Of which:
Stage 3
POCI3
Total
 
 
 
1 to 29
 DPD2
30 and > DPD2
 
 
 
 
 
 
1 to 29
 DPD2
30 and > DPD2
 
 
 
 
 
 
1 to 29
 DPD2
30 and > DPD2
 
 
 
 
$m
$m
$m
$m
$m
$m
$m
 
$m
$m
$m
$m
$m
$m
$m
 
%
%
%
%
%
%
%
 
 
Loans and advances to customers at amortised cost
906,278
 
68,078
 
3,069
 
2,136
 
15,367
 
800
 
990,523
 
 
(1,273
)
(2,230
)
(246
)
(251
)
(5,665
)
(190
)
(9,358
)
 
0.1
 
3.3
 
8.0
 
11.8
 
36.9
 
23.8
 
0.9
 
-  personal
365,886
 
17,580
 
2,183
 
1,317
 
4,812
 
-
 
388,278
 
 
(559
)
(1,184
)
(191
)
(224
)
(1,325
)
-
 
(3,068
)
 
0.2
 
6.7
 
8.7
 
17.0
 
27.5
 
-
 
0.8
 
-  corporate and commercial
483,882
 
47,415
 
870
 
806
 
9,964
 
800
 
542,061
 
 
(675
)
(1,020
)
(55
)
(27
)
(4,138
)
(190
)
(6,023
)
 
0.1
 
2.2
 
6.3
 
3.3
 
41.5
 
23.8
 
1.1
 
-  non-bank financial institutions
56,510
 
3,083
 
16
 
13
 
591
 
-
 
60,184
 
 
(39
)
(26
)
-
 
-
 
(202
)
-
 
(267
)
 
0.1
 
0.8
 
-
 
-
 
34.2
 
-
 
0.4
 
Loans and advances to banks at amortised cost
78,137
 
594
 
2
 
30
 
19
 
-
 
78,750
 
 
(18
)
(3
)
(1
)
-
 
(2
)
-
 
(23
)
 
-
 
0.5
 
50.0
 
-
 
10.5
 
-
 
-
 
Other financial assets measured at amortised cost
613,843
 
1,084
 
22
 
45
 
79
 
2
 
615,008
 
 
(40
)
(3
)
-
 
-
 
(32
)
-
 
(75
)
 
-
 
0.3
 
-
 
-
 
40.5
 
-
 
-
 
Loan and other credit-related commitments
487,707
 
29,359
 
 
 
696
 
7
 
517,769
 
 
(109
)
(172
)
 
 
(94
)
-
 
(375
)
 
-
 
0.6
 
 
 
13.5
 
-
 
0.1
 
-  personal
202,538
 
2,912
 
 
 
188
 
-
 
205,638
 
 
(11
)
(1
)
 
 
(32
)
-
 
(44
)
 
-
 
-
 
 
 
17.0
 
-
 
-
 
-  corporate and commercial
237,562
 
25,304
 
 
 
462
 
7
 
263,335
 
 
(91
)
(171
)
 
 
(62
)
-
 
(324
)
 
-
 
0.7
 
 
 
13.4
 
-
 
0.1
 
-  financial
47,607
 
1,143
 
 
 
46
 
-
 
48,796
 
 
(7
)
-
 
 
 
-
 
-
 
(7
)
 
-
 
-
 
 
 
-
 
-
 
-
 
Financial guarantee and similar contracts
79,251
 
9,014
 
 
 
814
 
17
 
89,096
 
 
(43
)
(57
)
 
 
(84
)
-
 
(184
)
 
0.1
 
0.6
 
 
 
10.3
 
-
 
0.2
 
-  personal
1,404
 
1
 
 
 
3
 
-
 
1,408
 
 
(1
)
-
 
 
 
(2
)
-
 
(3
)
 
0.1
 
-
 
 
 
66.7
 
-
 
0.2
 
-  corporate and commercial
66,892
 
8,632
 
 
 
811
 
17
 
76,352
 
 
(38
)
(56
)
 
 
(82
)
-
 
(176
)
 
0.1
 
0.6
 
 
 
10.1
 
-
 
0.2
 
-  financial
10,955
 
381
 
 
 
-
 
-
 
11,336
 
 
(4
)
(1
)
 
 
-
 
-
 
(5
)
 
-
 
0.3
 
 
 
-
 
-
 
-
 
At 31 Mar 2018
2,165,216
 
108,129
 
 
 
16,975
 
826
 
2,291,146
 
 
(1,483
)
(2,465
)
 
 
(5,877
)
(190
)
(10,015
)
 
0.1
 
2.3
 
 
 
34.6
 
23.0
 
0.4
 
For footnotes, see page 19.
 
 
 
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 1 January 2018
 
Gross carrying/nominal amount1
 
 
Allowance for ECL
 
 
ECL coverage %
 
 
Stage 1
Stage 2
Of which:
Of which:
Stage 3
POCI3
Total
 
Stage 1
Stage 2
Of which:
Of which:
Stage 3
POCI3
Total
 
Stage 1
Stage 2
Of which:
Of which:
Stage 3
POCI3
Total
 
 
 
1 to 29
 DPD2
30 and > DPD2
 
 
 
 
 
 
1 to 29
 DPD2
30 and > DPD2
 
 
 
 
 
 
1 to 29
 DPD2
30 and > DPD2
 
 
 
 
$m
$m
$m
$m
$m
$m
$m
 
$m
$m
$m
$m
$m
$m
$m
 
%
%
%
%
%
%
%
 
 
Loans and advances to customers at amortised cost
871,566
 
72,658
 
2,393
 
2,447
 
13,882
 
974
 
959,080
 
 
(1,309
)
(2,201
)
(261
)
(261
)
(5,591
)
(242
)
(9,343
)
 
0.2
 
3.0
 
10.9
 
10.7
 
40.3
 
24.8
 
1.0
 
-  personal
354,305
 
16,354
 
1,683
 
1,428
 
4,410
 
-
 
375,069
 
 
(581
)
(1,156
)
(218
)
(230
)
(1,310
)
-
 
(3,047
)
 
0.2
 
7.1
 
13.0
 
16.1
 
29.7
 
-
 
0.8
 
-  corporate and commercial
456,837
 
53,262
 
684
 
977
 
9,064
 
974
 
520,137
 
 
(701
)
(1,037
)
(42
)
(31
)
(4,073
)
(242
)
(6,053
)
 
0.2
 
1.9
 
6.1
 
3.2
 
44.9
 
24.8
 
1.2
 
-  non-bank financial institutions
60,424
 
3,042
 
26
 
42
 
408
 
-
 
63,874
 
 
(27
)
(8
)
(1
)
-
 
(208
)
-
 
(243
)
 
-
 
0.3
 
3.8
 
-
 
51.0
 
-
 
0.4
 
Loans and advances to banks at amortised cost
81,027
 
1,540
 
7
 
66
 
15
 
-
 
82,582
 
 
(17
)
(4
)
(2
)
-
 
(2
)
-
 
(23
)
 
-
 
0.3
 
28.6
 
-
 
13.3
 
-
 
-
 
Other financial assets measured at amortised cost
556,185
 
1,517
 
133
 
46
 
155
 
7
 
557,864
 
 
(28
)
(4
)
-
 
(1
)
(82
)
-
 
(114
)
 
-
 
0.3
 
-
 
2.2
 
52.9
 
-
 
-
 
Loan and other credit-related commitments
475,986
 
24,330
 
 
 
999
 
46
 
501,361
 
 
(126
)
(183
)
 
 
(67
)
-
 
(376
)
 
-
 
0.8
 
 
 
6.7
 
-
 
0.1
 
-  personal
194,320
 
1,314
 
 
 
459
 
-
 
196,093
 
 
(13
)
(1
)
 
 
-
 
-
 
(14
)
 
-
 
0.1
 
 
 
-
 
-
 
-
 
-  corporate and commercial
240,854
 
20,951
 
 
 
540
 
46
 
262,391
 
 
(108
)
(180
)
 
 
(67
)
-
 
(355
)
 
-
 
0.9
 
 
 
12.4
 
-
 
0.1
 
-  financial
40,812
 
2,065
 
 
 
-
 
-
 
42,877
 
 
(5
)
(2
)
 
 
-
 
-
 
(7
)
 
-
 
0.1
 
 
 
-
 
-
 
-
 
Financial guarantee and similar contracts
77,921
 
11,014
 
 
 
413
 
34
 
89,382
 
 
(36
)
(47
)
 
 
(78
)
-
 
(161
)
 
-
 
0.4
 
 
 
18.9
 
-
 
0.2
 
-  personal
768
 
18
 
 
 
5
 
-
 
791
 
 
-
 
(2
)
 
 
(2
)
-
 
(4
)
 
-
 
11.1
 
 
 
40.0
 
-
 
0.5
 
-  corporate and commercial
67,596
 
10,064
 
 
 
408
 
34
 
78,102
 
 
(35
)
(44
)
 
 
(74
)
-
 
(153
)
 
0.1
 
0.4
 
 
 
18.1
 
-
 
0.2
 
-  financial
9,557
 
932
 
 
 
-
 
-
 
10,489
 
 
(1
)
(1
)
 
 
(2
)
-
 
(4
)
 
-
 
0.1
 
 
 
-
 
-
 
-
 
At 1 Jan 2018
2,062,685
 
111,059
 
 
 
15,464
 
1,061
 
2,190,269
 
 
(1,516
)
(2,439
)
 
 
(5,820
)
(242
)
(10,017
)
 
0.1
 
2.2
 
 
 
37.6
 
22.8
 
0.5
 
1      Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
 
2      Days past due ('DPD'). Up to date accounts in Stage 2 are not shown in amounts presented above.
 
3      Purchased or originated credit-impaired ('POCI').
 
 
 
Personal lending
 
Total personal lending for loans and advances to customers by stage distribution
 
Gross carrying amount
Allowance for ECL
 
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
 
$m
$m
$m
$m
$m
$m
$m
$m
By portfolio
 
 
 
 
 
 
 
 
First lien residential mortgages
275,794
 
8,376
 
3,160
 
287,330
 
(41
)
(73
)
(491
)
(605
)
-  of which:
 
 
 
 
 
 
 
 
interest only (including offset)
31,482
 
1,231
 
237
 
32,950
 
(3
)
(17
)
(67
)
(87
)
affordability including ARMs
13,380
 
2,409
 
569
 
16,358
 
(2
)
(4
)
(5
)
(11
)
Other personal lending
90,092
 
9,204
 
1,652
 
100,948
 
(518
)
(1,111
)
(834
)
(2,463
)
-  other
66,961
 
5,163
 
1,087
 
73,211
 
(233
)
(349
)
(484
)
(1,066
)
-  credit cards
20,681
 
3,855
 
492
 
25,028
 
(279
)
(744
)
(333
)
(1,356
)
-  second lien residential mortgages
1,080
 
142
 
69
 
1,291
 
(2
)
(14
)
(14
)
(30
)
-  motor vehicle finance
1,370
 
44
 
4
 
1,418
 
(4
)
(4
)
(3
)
(11
)
At 31 Mar 2018
365,886
 
17,580
 
4,812
 
388,278
 
(559
)
(1,184
)
(1,325
)
(3,068
)
By geography
 
 
 
 
 
 
 
 
Europe
171,904
 
5,594
 
2,108
 
179,606
 
(177
)
(282
)
(518
)
(977
)
-  of which: UK
 
141,821
 
4,165
 
1,429
 
147,415
 
(168
)
(259
)
(316
)
(743
)
Asia
146,034
 
5,822
 
694
 
152,550
 
(176
)
(381
)
(197
)
(754
)
-  of which: HK
 
95,662
 
2,861
 
171
 
98,694
 
(70
)
(249
)
(39
)
(358
)
MENA
5,710
 
552
 
476
 
6,738
 
(62
)
(123
)
(294
)
(479
)
North America
36,575
 
4,512
 
1,215
 
42,302
 
(23
)
(97
)
(142
)
(262
)
Latin America
5,663
 
1,100
 
319
 
7,082
 
(121
)
(301
)
(174
)
(596
)
At 31 Mar 2018
365,886
 
17,580
 
4,812
 
388,278
 
(559
)
(1,184
)
(1,325
)
(3,068
)
 
 
 
 
Wholesale lending
 
Total wholesale lending for loans and advances to banks and customers at amortised cost
 
Gross carrying amount
Allowance for ECL
 
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
 
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
483,882
 
47,415
 
9,964
 
800
 
542,061
 
(675
)
(1,020
)
(4,138
)
(190
)
(6,023
)
-  agriculture, forestry and fishing
 
7,964
 
1,317
 
317
 
3
 
9,601
 
(28
)
(37
)
(127
)
(2
)
(194
)
-  mining and quarrying
 
9,282
 
3,094
 
704
 
1
 
13,081
 
(17
)
(193
)
(221
)
(1
)
(432
)
-  manufacture
90,635
 
10,555
 
1,849
 
501
 
103,540
 
(139
)
(162
)
(922
)
(66
)
(1,289
)
-  electricity, gas, steam and  air-conditioning supply
 
14,998
 
1,330
 
84
 
55
 
16,467
 
(15
)
(37
)
(23
)
(40
)
(115
)
-  water supply, sewerage, waste management and remediation
 
3,043
 
112
 
20
 
-
 
3,175
 
(5
)
(3
)
(8
)
-
 
(16
)
-  construction
14,901
 
1,449
 
876
 
43
 
17,269
 
(38
)
(35
)
(456
)
(42
)
(571
)
-  wholesale and retail trade, repair of motor vehicles and motorcycles
 
85,380
 
11,130
 
3,062
 
117
 
99,689
 
(81
)
(126
)
(1,002
)
(14
)
(1,223
)
-  transportation and storage
 
23,254
 
1,439
 
150
 
59
 
24,902
 
(23
)
(62
)
(84
)
(17
)
(186
)
-  accommodation and food
 
18,021
 
1,995
 
242
 
-
 
20,258
 
(42
)
(53
)
(68
)
-
 
(163
)
-  publishing, audiovisual and broadcasting
 
18,729
 
1,324
 
142
 
-
 
20,195
 
(30
)
(24
)
(85
)
-
 
(139
)
-  real estate
113,512
 
7,029
 
1,208
 
1
 
121,750
 
(90
)
(94
)
(636
)
-
 
(820
)
-  professional, scientific and technical activities
 
20,484
 
1,769
 
289
 
-
 
22,542
 
(28
)
(25
)
(65
)
-
 
(118
)
-  administrative and support services
 
22,024
 
1,498
 
345
 
20
 
23,887
 
(33
)
(38
)
(181
)
(8
)
(260
)
-  public administration and defence, compulsory social security
 
1,411
 
222
 
-
 
-
 
1,633
 
(1
)
(2
)
-
 
-
 
(3
)
-  education
1,963
 
101
 
18
 
-
 
2,082
 
(11
)
(5
)
(9
)
-
 
(25
)
-  health and care
5,753
 
539
 
132
 
-
 
6,424
 
(12
)
(16
)
(53
)
-
 
(81
)
-  arts, entertainment and recreation
 
4,559
 
397
 
51
 
-
 
5,007
 
(21
)
(30
)
(8
)
-
 
(59
)
-  other services
15,890
 
1,119
 
462
 
-
 
17,471
 
(59
)
(52
)
(190
)
-
 
(301
)
-  activities of households
 
123
 
721
 
-
 
-
 
844
 
-
 
-
 
-
 
-
 
-
 
-  extra-territorial organisations and bodies activities
 
1,460
 
11
 
4
 
-
 
1,475
 
-
 
-
 
-
 
-
 
-
 
-  government
9,332
 
176
 
9
 
-
 
9,517
 
(2
)
(1
)
-
 
-
 
(3
)
-  asset-backed securities
1,164
 
88
 
-
 
-
 
1,252
 
-
 
(25
)
-
 
-
 
(25
)
Non-bank financial institutions
56,510
 
3,083
 
591
 
-
 
60,184
 
(39
)
(26
)
(202
)
-
 
(267
)
Loans and advances
to banks
78,137
 
594
 
19
 
-
 
78,750
 
(18
)
(3
)
(2
)
-
 
(23
)
At 31 Mar 2018
618,529
 
51,092
 
10,574
 
800
 
680,995
 
(732
)
(1,049
)
(4,342
)
(190
)
(6,313
)
By geography
 
 
 
 
 
 
 
 
 
 
Europe
208,110
 
15,051
 
5,911
 
626
 
229,698
 
(379
)
(578
)
(2,030
)
(98
)
(3,085
)
-  of which: UK
147,238
 
11,724
 
4,190
 
424
 
163,576
 
(276
)
(515
)
(1,332
)
(22
)
(2,145
)
Asia
314,431
 
19,490
 
1,713
 
116
 
335,750
 
(178
)
(115
)
(963
)
(41
)
(1,297
)
-  of which: HK
 
182,941
 
12,225
 
825
 
72
 
196,063
 
(81
)
(65
)
(419
)
(26
)
(591
)
MENA
24,598
 
5,117
 
1,803
 
47
 
31,565
 
(51
)
(96
)
(983
)
(47
)
(1,177
)
North America
54,405
 
10,531
 
851
 
-
 
65,787
 
(36
)
(227
)
(221
)
-
 
(484
)
Latin America
16,985
 
903
 
296
 
11
 
18,195
 
(88
)
(33
)
(145
)
(4
)
(270
)
At 31 Mar 2018
618,529
 
51,092
 
10,574
 
800
 
680,995
 
(732
)
(1,049
)
(4,342
)
(190
)
(6,313
)
 
 
 
 
 
 
Capital
 
 
Key metrics
 
 
 
At
 
 
 
31 Mar1
1 Jan1
31 Dec2
Ref*
 
Footnotes
2018
2018
2017
 
Available capital ($bn)
3
 
 
 
1
Common equity tier 1 ('CET1') capital
 
129.6
127.3
126.1
2
CET1 capital as if IFRS 9 transitional arrangements had not been applied
 
128.6
126.3
N/A
3
Tier 1 capital
 
157.1
152.1
151.0
4
Tier 1 capital as if IFRS 9 transitional arrangements had not been applied
 
156.1
151.1
N/A
5
Total capital
 
185.2
183.1
182.4
6
Total capital as if IFRS 9 transitional arrangements had not been applied
 
184.2
182.1
N/A
 
Risk-weighted assets ('RWAs') ($bn)
 
 
 
 
7
Total RWAs
 
894.4
872.1
871.3
8
Total RWAs as if IFRS 9 transitional arrangements had not been applied
 
893.8
871.6
N/A
 
Capital ratios (%)
3
 
 
 
9
CET1
 
14.5
14.6
14.5
10
CET1 as if IFRS 9 transitional arrangements had not been applied
 
14.4
14.5
N/A
11
Tier 1
 
17.6
17.4
17.3
12
Tier 1 as if IFRS 9 transitional arrangements had not been applied
 
17.5
17.3
N/A
13
Total capital
 
20.7
21.0
20.9
14
Total capital as if IFRS 9 transitional arrangements had not been applied
 
20.6
20.9
N/A
 
Additional CET1 buffer requirements as a percentage of RWA (%)
 
 
 
 
 
Capital conservation buffer requirement
 
1.88
N/A
1.25
 
Countercyclical buffer requirement
 
0.34
N/A
0.22
 
Bank G-SIB and/or D-SIB additional requirements
 
1.50
N/A
1.25
 
Total of bank CET1 specific buffer requirements
 
3.72
N/A
2.72
 
CET1 available after meeting the bank's minimum capital requirements
4
8.0
N/A
8.0
 
Total Capital Requirement (%)
 
 
 
 
 
Total Capital Requirement
 
11.5
N/A
N/A
 
Leverage ratio
 
 
 
 
15
Total leverage ratio exposure measure ($bn)
 
2,707.9
2,556.4
2,557.1
16
Leverage ratio (%)
5
5.6
5.6
5.6
17
Leverage ratio as if IFRS 9 transitional arrangements had not been applied (%)
5
5.5
5.6
N/A
 
Liquidity Coverage Ratio ('LCR')
6
 
 
 
 
Total high-quality liquid assets ($bn)
 
533.1
N/A
512.6
 
Total net cash outflow ($bn)
 
338.5
N/A
359.9
 
LCR ratio (%)
7
157.5
N/A
142.2
 
 
*      The references identify the lines prescribed in the EBA template.
 
For footnotes, see page 26.
 
 
 
Own funds disclosure
 
 
At
 
 
31 Mar1
1 Jan1
31 Dec2
 
 
2018
2018
2017
Ref*
 
$m
$m
$m
6
Common equity tier 1 capital before regulatory adjustments
163,401
158,923
158,557
28
Total regulatory adjustments to common equity tier 1
(33,755)
(31,613)
(32,413)
29
Common equity tier 1 capital
129,646
127,310
126,144
36
Additional tier 1 capital before regulatory adjustments
27,489
24,922
24,922
43
Total regulatory adjustments to additional tier 1 capital
(60)
(112)
(112)
44
Additional tier 1 capital
27,429
24,810
24,810
45
Tier 1 capital
157,075
152,120
150,954
51
Tier 2 capital before regulatory adjustments
28,661
31,517
31,932
57
Total regulatory adjustments to tier 2 capital
(545)
(503)
(503)
58
Tier 2 capital
28,116
31,014
31,429
59
Total capital
185,191
183,134
182,383
60
Total risk-weighted assets
894,400
872,089
871,337
 
Capital ratios
%
%
%
61
Common equity tier 1 ratio
14.5
14.6
14.5
62
Tier 1 ratio
17.6
17.4
17.3
63
Total capital ratio
20.7
21.0
20.9
*      The references identify the lines prescribed in the EBA template.
 
For footnotes, see page 26.
 
 
 
Capital
 
Our CET1 capital ratio remained unchanged at 14.5%.
 
CET1 capital increased in the quarter by $3.5bn, mainly as a result of:
 
●     a $1.2bn IFRS 9 day one transitional impact, mainly due to classification and measurement changes;
 
●     $0.7bn of capital generation through profits, net of cash and scrip dividends; and
 
●     $1.9bn of favourable foreign currency translation differences.
 
 
 
In 2Q 2018, HSBC will change the way in which some of its capital securities are recognised in regulatory capital. The securities were previously recognised as grandfathered Tier 2 capital and will now be treated as fully eligible Tier 2 instruments. This change is expected to increase the Group's total capital ratio by an estimated 40bps to 21.1% based on figures as at 31 March 2018.
 
 
 
 
 
Leverage
 
 
Leverage ratio
 
 
At
 
 
31 Mar1
1 Jan1
31 Dec2
 
 
2018
2018
2017
Ref*
 
$bn
$bn
$bn
20
Tier 1 capital
150.3
143.8
 
142.7
21
Total leverage ratio exposure
2,707.9
2,556.4
 
2,557.1
 
 
%
%
%
22
Leverage ratio
5.6
5.6
 
5.6
EU-23
Choice on transitional arrangements for the definition of the capital measure
Fully phased-in
Fully phased-in
Fully phased-in
 
UK leverage ratio exposure - quarterly average
2,444.9
2,351.2
 
2,351.4
 
 
%
%
%
 
UK leverage ratio - quarterly average
6.1
6.2
 
6.1
 
UK leverage ratio - quarter end
6.0
6.1
 
6.1
*      The references identify the lines prescribed in the EBA template.
 
For footnotes, see page 26.
 
 
 
 
 
Our leverage ratio calculated in accordance with CRD IV was 5.6% at 31 March 2018, unchanged from 5.6% at 31 December 2017. Growth in tier 1 capital was offset by a rise in the leverage exposure measure.
 
The Group's UK leverage ratio at 31 March 2018 on a modified basis, excluding qualifying central bank balances, was 6.0%.
 
At 31 March 2018, our UK minimum leverage ratio requirement of 3.25% was supplemented by an additional leverage ratio buffer of 0.5% and a countercyclical leverage ratio buffer of 0.1%. These additional buffers translate into capital values of $13.1bn and $2.9bn respectively. We comfortably exceeded these leverage requirements.
 
 
 
Risk-weighted assets
 
 
Overview of RWAs
 
 
31 Mar1
1 Jan1
31 Dec2
31 Mar
 
 
2018
2018
2017
2018
 
 
RWA
RWA
RWA
Capital
requirement8
Ref*
 
$bn
$bn
$bn
$bn
1
Credit risk (excluding counterparty credit risk)
638.1
 
624.0
 
623.9
 
51.1
 
2
-  standardised approach
129.4
 
127.0
 
126.9
 
10.4
 
3
-  foundation Internal Ratings Based ('IRB') approach
30.4
 
28.4
 
28.4
 
2.4
 
4
-  advanced IRB approach
478.3
 
468.6
 
468.6
 
38.3
 
6
Counterparty credit risk
57.9
 
54.1
 
54.1
 
4.5
 
7
-  mark-to-market
37.7
 
34.2
 
34.2
 
3.0
 
10
-  internal model method
10.4
 
9.7
 
9.7
 
0.8
 
11
-  risk exposure amount for contributions to the default fund of a central counterparty
0.6
 
0.7
 
0.7
 
-
 
12
-  credit valuation adjustment
9.2
 
9.5
 
9.5
 
0.7
 
13
Settlement risk
0.1
 
0.4
 
0.4
 
-
 
14
Securitisation exposures in the non-trading book
14.8
 
15.2
 
15.3
 
1.1
 
15
-  IRB ratings based method
11.3
 
11.9
 
12.0
 
0.9
 
16
-  IRB supervisory formula method
-
 
0.2
 
0.2
 
-
 
17
-  IRB internal assessment approach
1.7
 
1.5
 
1.5
 
0.1
 
18
-  standardised approach
1.8
 
1.6
 
1.6
 
0.1
 
19
Market risk
43.2
 
38.9
 
38.9
 
3.5
 
20
-  standardised approach
4.8
 
4.4
 
4.4
 
0.4
 
21
-  internal models approach
38.4
 
34.5
 
34.5
 
3.1
 
23
Operational risk
92.7
 
92.7
 
92.7
 
7.4
 
25
-  standardised approach
92.7
 
92.7
 
92.7
 
7.4
 
27
Amounts below the thresholds for deduction (subject to 250% risk weight)
47.6
 
46.8
 
46.0
 
3.8
 
29
Total
894.4
 
872.1
 
871.3
 
71.4
 
*      The references identify the lines prescribed in the EBA template.
 
For footnotes, see page 26.
 
 
 
RWAs by global business
 
RBWM
CMB
GB&M
GPB
CorporateCentre
Total
 
$bn
$bn
$bn
$bn
$bn
$bn
Credit risk
98.5
 
290.3
 
177.3
 
13.9
 
120.5
 
700.5
 
Counterparty credit risk
-
 
-
 
56.1
 
0.2
 
1.7
 
58.0
 
Market risk
-
 
-
 
40.1
 
-
 
3.1
 
43.2
 
Operational risk
27.3
 
23.7
 
30.8
 
2.8
 
8.1
 
92.7
 
At 31 Mar 2018
125.8
 
314.0
 
304.3
 
16.9
 
133.4
 
894.4
 
 
 
RWAs by geographical region
 
 
Europe
Asia
MENA
NorthAmerica
LatinAmerica
Total
 
Footnote
$bn
$bn
$bn
$bn
$bn
$bn
Credit risk
 
231.6
 
292.7
 
47.9
 
100.0
 
28.3
 
700.5
 
Counterparty credit risk
 
29.2
 
14.2
 
1.0
 
12.1
 
1.5
 
58.0
 
Market risk
9
29.1
 
23.7
 
3.8
 
9.1
 
1.3
 
43.2
 
Operational risk
 
28.9
 
37.1
 
7.1
 
12.1
 
7.5
 
92.7
 
At 31 Mar 2018
 
318.8
 
367.7
 
59.8
 
133.3
 
38.6
 
894.4
 
For footnote, see page 26.
 
 
 
RWA movement by global businesses by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
RBWM
CMB
GB&M
GPB
Corporate
Centre
Market risk
Total
RWAs
 
$bn
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 31 Dec 2017
121.5
 
301.0
 
263.4
 
16.0
 
130.5
 
38.9
 
871.3
 
Asset size
2.0
 
5.1
 
2.6
 
0.4
 
(3.8
)
4.5
 
10.8
 
Asset quality
0.4
 
1.3
 
(0.6
)
0.3
 
1.6
 
-
 
3.0
 
Model updates
0.1
 
0.6
 
-
 
-
 
-
 
-
 
0.7
 
-  new/updated models
0.1
 
0.6
 
-
 
-
 
-
 
-
 
0.7
 
Methodology and policy
0.5
 
1.9
 
(3.9
)
-
 
0.3
 
(0.2
)
(1.4
)
-  internal updates
0.7
 
1.7
 
(3.9
)
-
 
(0.5
)
(0.2
)
(2.2
)
-  external updates
(0.2
)
0.2
 
-
 
-
 
0.8
 
-
 
0.8
 
Foreign exchange movements
1.3
 
4.1
 
2.7
 
0.2
 
1.7
 
-
 
10.0
 
Total RWA movement
4.3
 
13.0
 
0.8
 
0.9
 
(0.2
)
4.3
 
23.1
 
RWAs at 31 Mar 2018
125.8
 
314.0
 
264.2
 
16.9
 
130.3
 
43.2
 
894.4
 
 
 
RWA movement by geographical region by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
Europe
Asia
MENA
NorthAmerica
LatinAmerica
Market risk
Total RWAs
 
$bn
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 31 Dec 2017
282.6
 
334.3
 
55.9
 
124.2
 
35.4
 
38.9
 
871.3
 
Asset size
(2.8
)
6.6
 
0.1
 
1.9
 
0.5
 
4.5
 
10.8
 
Asset quality
2.4
 
1.6
 
(0.1
)
(1.1
)
0.2
 
-
 
3.0
 
Model updates
0.7
 
-
 
-
 
-
 
-
 
-
 
0.7
 
-  new/updated models
0.7
 
-
 
-
 
-
 
-
 
-
 
0.7
 
Methodology and policy
(0.8
)
(0.6
)
0.3
 
-
 
(0.1
)
(0.2
)
(1.4
)
-  internal updates
(0.8
)
(1.0
)
(0.1
)
(0.1
)
-
 
(0.2
)
(2.2
)
-  external updates
-
 
0.4
 
0.4
 
0.1
 
(0.1
)
-
 
0.8
 
Foreign exchange movements
7.6
 
2.1
 
(0.2
)
(0.8
)
1.3
 
-
 
10.0
 
Total RWA movement
7.1
 
9.7
 
0.1
 
-
 
1.9
 
4.3
 
23.1
 
RWAs at 31 Mar 2018
289.7
 
344.0
 
56.0
 
124.2
 
37.3
 
43.2
 
894.4
 
 
RWAs
 
RWAs increased by $23.1bn, including an increase of $10.0bn due to foreign currency translation differences.
 
The resulting increase of $13.1bn (excluding foreign currency translation differences) was primarily due to asset size growth of $10.8bn  and asset quality changes of $3.0bn.
 
The following comments describe RWA movements for the three month period to 31 March 2018, excluding foreign currency translation differences.
 
Asset size
 
Asset size movements were principally driven by exposure growth and movements in market parameters which increased counterparty credit risk and market risk RWAs by $8.2bn.
 
Lending growth of $2.6bn was driven by CMB ($5.2bn) and RBWM ($2.0bn) and mainly concentrated in Asia, North America and Europe. This was partly offset by reductions in Corporate Centre ($3.7bn) and GB&M ($1.3bn).
 
Asset quality changes
 
Asset quality movements increased RWAs by $4.1bn, mainly reflecting changes in portfolio mix in Europe ($2.4bn) and Asia ($1.6bn).  These changes were partly offset by changes in the North American portfolio which reduced RWAs by $1.1bn.
 
Methodology and policy
 
The $2.2bn decrease reported in internal updates derives from management initiatives, mainly taking the form of process improvements and refined calculations ($1.4bn) and trade actions ($0.4bn). The partly offsetting $0.8bn increase in external updates arises from the Group's adoption of IFRS 9 'Financial Instruments' and the EU's related regulatory transitional arrangements.
 
 
 
 
 
RWA flow statements of credit risk exposures under IRB approach10
 
 
RWA
Capital requirement8
 
 
$bn
$bn
1
RWAs at 31 Dec 2017
497.0
 
39.8
 
2
Asset size
2.8
 
0.2
 
3
Asset quality
2.0
 
0.2
 
4
Model updates
0.7
 
0.1
 
5
Methodology and policy
(0.7
)
(0.1
)
7
Foreign exchange movements
6.9
 
0.5
 
9
RWAs at 31 Mar 2018
508.7
 
40.7
 
  For footnotes, see page 26.
 
 
 
RWAs under the IRB approach increased by $11.7bn including an increase of $6.9bn due to foreign currency translation differences. The remaining increase of $4.8bn was principally due to organic book growth of $2.8bn in Asia and a movement in asset quality of $2.0bn reflecting the changes in portfolio mix in Europe and Asia.
 
 
 
RWA flow statements of counterparty credit risk exposures under the IMM
 
 
RWA
Capital requirement8
 
 
$bn
$bn
1
RWAs at 31 Dec 2017
12.5
 
1.0
 
2
Asset size
0.3
 
-
 
5
Methodology and policy
(0.1
)
-
 
9
RWAs at 31 Mar 2018
12.7
 
1.0
 
   For footnote, see page 26.
 
    RWAs under the IMM increased by $0.2bn, mainly as a result of increases in asset size driven by mark-to-market movements.
 
 
 
RWA flow statements of market risk exposures under the IMA
 
 
VaR
StressedVaR
IRC
Other
Total RWA
Capital requirement8
 
 
$bn
$bn
$bn
$bn
$bn
$bn
1
RWAs at 31 Dec 2017
8.3
 
14.3
 
10.0
 
1.9
 
34.5
 
2.8
 
2
Movement in risk levels
1.2
 
-
 
1.4
 
1.5
 
4.1
 
0.3
 
4
Methodology and policy
-
 
-
 
(0.2
)
-
 
(0.2
)
-
 
8
RWAs at 31 Mar 2018
9.5
 
14.3
 
11.2
 
3.4
 
38.4
 
3.1
 
For footnote, see page 26.
 
RWAs under the IMA increased by $3.9bn mainly due to increased risk levels in Europe and Asia as a result of:
 
●     higher volatility and exposure that added $1.2bn to VaR;
 
●     high grade sovereign exposure that added $1.4bn to the incremental risk charge; and
 
●     increased exposure and currency depreciation that added $1.5bn to other market risk measures.
 
 
 
Footnotes to capital, leverage and risk-weighted assets
1
Unless otherwise stated, all figures are calculated using the EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation.
2
All figures presented as reported under IAS 39 at 31 December 2017.
3
Capital figures and ratios are reported on the CRD IV transitional basis for additional tier 1 and tier 2 capital in accordance with articles 484-92 of the Capital Requirements Regulation.
4
The minimum requirements include the total capital requirement to be met by CET1, comprised of the Pillar 1 and Pillar 2A requirements set by the Prudential Regulation Authority.
 
5
Leverage ratio is calculated using the CRD IV end-point basis for additional tier 1 capital.
6
The EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation do not apply to liquidity coverage measures.
7
LCR is calculated as at the end of each period rather than using average values.
8
'Capital requirement' represents the minimum total capital charge set at 8% of RWAs by article 92 of the Capital Requirements Regulation.
9
RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.
10
Securitisation positions are not included in this table.
 
 
Summary information - global businesses
 
 
HSBC adjusted profit before tax
 
Quarter ended 31 Mar 2018
 
Retail Bankingand WealthManagement
CommercialBanking
GlobalBanking andMarkets
GlobalPrivateBanking
Corporate Centre
Total
 
$m
$m
$m
$m
$m
$m
Net interest income
3,799
2,517
1,181
223
(264)
7,456
Net fee income
1,497
952
863
207
(12)
3,507
Net income from financial instruments held for trading or managed on a fair value basis2,3
116
148
2,077
48
23
2,412
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
(143)
(12)
-
-
-
(155)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
(59)
4
112
-
60
117
Other income1,3
459
90
(85)
4
45
513
Net operating income before change in expected credit losses and other credit impairment charges
5,669
3,699
4,148
482
(148)
13,850
Change in expected credit losses and other credit impairment charges/(recoveries)
(303)
64
(22)
3
88
(170)
Net operating income
5,366
3,763
4,126
485
(60)
13,680
Total operating expenses
(3,463)
(1,652)
(2,413)
(372)
(345)
(8,245)
Operating profit
1,903
2,111
1,713
113
(405)
5,435
Share of profit in associates and joint ventures
3
-
-
-
595
598
Adjusted profit before tax
1,906
2,111
1,713
113
190
6,033
 
%
%
%
%
%
%
Share of HSBC's adjusted profit before tax
31.6
35.0
28.4
1.9
3.1
100.0
Adjusted cost efficiency ratio
61.1
44.7
58.2
77.2
(233.1)
59.5
 
 
 
Quarter ended 31 Dec 2017
Net interest income
3,684
 
2,462
1,482
216
(356)
7,488
Net fee income
1,295
 
898
771
179
(27)
3,116
Net income from financial instruments held for trading or managed on a fair value basis2,3
122
 
159
1,087
32
638
2,038
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
630
 
(6)
-
10
-
634
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
N/A
N/A
N/A
N/A
N/A
N/A
Other income/(expense)1,3
(602
)
19
123
(7)
(127)
(594)
Net operating income/(expense) before loan impairment charges and other credit risk provisions
5,129
 
3,532
3,463
430
128
12,682
Loan impairment (charges)/recoveries and other credit risk provisions
(188
)
(198)
(392)
1
95
(682)
Net operating income/(expense)
4,941
 
3,334
3,071
431
223
12,000
Total operating expenses
(3,527
)
(1,613)
(2,237)
(338)
(1,226)
(8,941)
Operating profit/(loss)
1,414
 
1,721
834
93
(1,003)
3,059
Share of profit in associates and joint ventures
16
 
-
-
-
558
574
Adjusted profit/(loss) before tax
1,430
 
1,721
834
93
(445)
3,633
 
%
%
%
%
%
%
Share of HSBC's adjusted profit before tax
39.4
 
47.4
23.0
2.6
(12.4)
100.0
Adjusted cost efficiency ratio
68.8
 
45.7
64.6
78.6
957.8
70.5
  For footnotes, see page 30.
 
 
 
HSBC adjusted profit before tax (continued)
 
Quarter ended 31 Mar 2017
 
Retail Bankingand WealthManagement
CommercialBanking
GlobalBanking andMarkets
GlobalPrivateBanking
Corporate Centre
Total
 
$m
$m
$m
$m
$m
$m
Net interest income
3,484
2,220
1,100
197
86
7,087
Net fee income/(expense)
1,272
959
959
184
4
3,378
Net income from financial instruments held for trading or managed on a fair value basis2,3
139
128
1,932
53
73
2,325
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
1,007
(13)
-
12
-
1,006
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
N/A
N/A
N/A
N/A
N/A
N/A
Other income/(expense)1,3
(689)
58
151
(9)
204
(285)
Net operating income before loan impairment charges and other credit risk provisions
5,213
3,352
4,142
437
367
13,511
Loan impairment charges and other credit risk provisions
(311)
10
21
(1)
41
(240)
Net operating income
4,902
3,362
4,163
436
408
13,271
Total operating expenses
(3,096)
(1,474)
(2,357)
(362)
(332)
(7,621)
Operating profit
1,806
1,888
1,806
74
76
5,650
Share of profit in associates and joint ventures
9
-
-
-
551
560
Adjusted profit before tax
1,815
1,888
1,806
74
627
6,210
 
%
%
%
%
%
%
Share of HSBC's adjusted profit before tax
29.2
30.4
29.1
1.2
10.1
100.0
Adjusted cost efficiency ratio
59.4
44.0
56.9
82.8
90.5
56.4
For footnotes, see page 30.
 
 
 
Global Private Banking - reported client assets4
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
 
2018
2017
2017
 
$bn
$bn
$bn
Opening balance
330
 
327
 
298
 
Net new money
3
 
(4
)
1
 
-  of which: areas targeted for growth
5
 
2
 
5
 
Value change
(2
)
4
 
7
 
Disposals
-
 
(1
)
(7
)
Exchange and other
-
 
4
 
7
 
Closing balance
331
 
330
 
306
 
For footnotes, see page 30.
 
 
 
Global Private Banking - reported client assets by geography4
 
Quarter ended
 
31 Mar
31 Dec
31 Mar
 
2018
2017
2017
 
$bn
$bn
$bn
Europe
162
 
161
 
153
 
Asia
131
 
130
 
111
 
North America
38
 
39
 
42
 
Latin America
-
 
-
 
-
 
Middle East5
-
 
-
 
-
 
Closing balance
331
 
330
 
306
 
For footnotes, see page 30.
 
 
 
Summary information - geographical regions
 
 
HSBC reported profit/(loss) before tax
 
Quarter ended 31 Mar 2018
 
Europe
Asia
MENA
North America
Latin
 America
Intra-HSBC
items
Total
 
$m
$m
$m
$m
$m
$m
$m
Net interest income
1,739
3,831
461
870
528
27
7,456
Net fee income
1,087
1,678
157
444
141
-
3,507
Net income from financial instruments held for trading or managed on a fair value basis2,3
1,155
956
42
212
121
(102)
2,384
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
(227)
70
-
-
2
-
(155)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
155
(34)
5
10
8
(27)
117
Other income1,3
561
806
11
89
(3)
(1,063)
401
Net operating income before change in expected credit losses and other credit impairment charges
4,470
7,307
676
1,625
797
(1,165)
13,710
Change in expected credit losses and other credit impairment charges/(recoveries)
(62)
(32)
(4)
47
(119)
-
(170)
Net operating income
4,408
7,275
672
1,672
678
(1,165)
13,540
Total operating expenses
(4,437)
(2,986)
(343)
(2,268)
(514)
1,165
(9,383)
Operating profit/(loss)
(29)
4,289
329
(596)
164
-
4,157
Share of profit in associates and joint ventures
11
479
108
-
-
-
598
Profit/(loss) before tax
(18)
4,768
437
(596)
164
-
4,755
 
%
%
%
%
%
 
%
Share of HSBC's profit before tax
(0.4)
100.3
9.2
(12.5)
3.4
 
100.0
Cost efficiency ratio
99.3
40.9
50.7
139.6
64.5
 
68.4
 
 
 
 
 
 
 
 
 
Quarter ended 31 Dec 2017
Net interest income
1,684
3,822
440
848
551
(73)
7,272
Net fee income
957
1,364
149
462
133
-
3,065
Net income from financial instruments held for trading or managed on a fair value basis2,3
897
709
26
153
139
73
1,997
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
183
428
-
-
16
-
627
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Other income/(expense)1,3
262
46
23
335
4
(1,330)
(660)
Net operating income before loan impairment charges and other credit risk provisions
3,983
6,369
638
1,798
843
(1,330)
12,301
Loan impairment charges and other credit risk provisions
(506)
(26)
(32)
31
(125)
-
(658)
Net operating income
3,477
6,343
606
1,829
718
(1,330)
11,643
Total operating expenses
(5,874)
(3,127)
(357)
(1,308)
(559)
1,330
(9,895)
Operating profit/(loss)
(2,397)
3,216
249
521
159
-
1,748
Share of profit in associates and joint ventures
11
454
84
-
7
-
556
Profit/(loss) before tax
(2,386)
3,670
333
521
166
-
2,304
 
%
%
%
%
%
 
%
Share of HSBC's profit before tax
(103.6)
159.3
14.5
22.6
7.2
 
100.0
Cost efficiency ratio
147.5
49.1
56.0
72.7
66.3
 
80.4
                                 For footnotes, see page 30.
 
 
 
HSBC reported profit/(loss) before tax (continued)
 
 
Quarter ended 31 Mar 2017
 
Europe
Asia
MENA
North America
Latin
 America
Intra-HSBC
items
Total
 
$m
$m
$m
$m
$m
$m
$m
Net interest income
1,704
 
3,332
407
894
488
(38)
6,787
Net fee income
1,043
 
1,406
158
494
123
-
3,224
Net income from financial instruments held for trading or managed on a fair value basis2,3
962
 
906
83
114
84
38
2,187
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss2
298
 
651
-
-
15
-
964
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Other income1,3
206
 
245
5
274
25
(924)
(169)
Net operating income before loan impairment charges and other credit risk provisions
4,213
 
6,540
653
1,776
735
(924)
12,993
Loan impairment charges and other credit risk provisions
5
 
(167)
(57)
106
(123)
-
(236)
Net operating income
4,218
 
6,373
596
1,882
612
(924)
12,757
Total operating expenses
(4,428
)
(2,694)
(322)
(1,310)
(498)
924
(8,328)
Operating profit
(210
)
3,679
274
572
114
-
4,429
Share of profit/(loss) in associates and joint ventures
4
 
415
113
-
-
-
532
Profit before tax
(206
)
4,094
387
572
114
-
4,961
 
%
%
%
%
%
 
%
Share of HSBC's profit before tax
(4.2
)
82.6
7.8
11.5
2.3
 
100.0
Cost efficiency ratio
105.1
 
41.2
49.3
73.8
67.8
 
64.1
 
 
 
 
 
 
 
 
 
 
 
Footnotes to summary information - global businesses and geographical regions
1
Other income in this context comprises where applicable changes in fair value of long-term debt and related derivatives, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.
2
The classification and measurement requirements under IFRS 9, which was adopted from 1 January 2018, are based on an entity's assessment of both the business model for managing the assets and the contractual cash flow characteristics of the assets. The standard contains a classification for items measured mandatorily at fair value through profit or  loss as a residual category. Given its residual nature, the presentation of the income statement has been updated to separately present items in this category which are of a dissimilar nature or function, in line with IAS 1 'Presentation of Financial Statements' requirements. Comparative data have been re-presented. There is no net impact on Total operating income.
3
Prior to 2018 foreign exchange exposure on some financial instruments designated at fair value was presented in the same line in the income statement as the underlying fair value movement on these instruments. In 2018 we have grouped the presentation of the entire effect of foreign exchange exposure in profit or loss and presented it within 'Net income from financial instruments held for trading or managed on a fair value basis'. Comparative data have been re-presented. There is no net impact on Total operating income and the impact on 'Changes in fair value of long-term debt and related derivatives' is $563m in 4Q17 and $84m in 1Q17.
4
Client assets are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately. The main components of client assets are funds under management, which are not reported on the Group's balance sheet, and customer deposits, which are reported on the Group's balance sheet.
5
'Middle East' is an offshore business, therefore client assets are booked across to various regions, primarily in Europe.
 
 
 
 
Appendix - selected information
Supplementary analysis of significant items by global business is presented below.
 
Reconciliation of reported and adjusted results - global businesses
 
Quarter ended 31 Mar 2018
 
Retail Banking and WealthManagement
CommercialBanking
Global Bankingand Markets
Global PrivateBanking
Corporate Centre
Total
 
$m
$m
$m
$m
$m
$m
Revenue
 
 
 
 
 
 
Reported
5,669
 
3,699
 
4,178
 
482
 
(318
)
13,710
 
Significant items
-
 
-
 
(30
)
-
 
170
 
140
 
-  disposals, acquisitions and investment in new businesses
-
 
-
 
-
 
-
 
112
 
112
 
-  fair value movement on financial instruments
-
 
-
 
(30
)
-
 
58
 
28
 
Adjusted
5,669
 
3,699
 
4,148
 
482
 
(148
)
13,850
 
Change in expected credit losses and other credit impairment charges/(recoveries)
 
 
 
 
 
 
Reported
(303
)
64
 
(22
)
3
 
88
 
(170
)
Adjusted
(303
)
64
 
(22
)
3
 
88
 
(170
)
Operating expenses
 
 
 
 
 
 
Reported
(3,573
)
(1,653
)
(2,387
)
(415
)
(1,355
)
(9,383
)
Significant items
110
 
1
 
(26
)
43
 
1,010
 
1,138
 
-  costs of structural reform
 
1
 
1
 
7
 
-
 
117
 
126
 
-  customer redress programmes
93
 
-
 
-
 
-
 
-
 
93
 
-  disposals, acquisitions and investment in new businesses
-
 
-
 
-
 
2
 
-
 
2
 
-  restructuring and other related costs
-
 
-
 
-
 
-
 
20
 
20
 
-  settlements and provisions in connection with legal and regulatory matters
16
 
-
 
(33
)
41
 
873
 
897
 
Adjusted
(3,463
)
(1,652
)
(2,413
)
(372
)
(345
)
(8,245
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
Reported
3
 
-
 
-
 
-
 
595
 
598
 
Adjusted
3
 
-
 
-
 
-
 
595
 
598
 
Profit/(loss) before tax
 
 
 
 
 
 
Reported
1,796
 
2,110
 
1,769
 
70
 
(990
)
4,755
 
Significant items
110
 
1
 
(56
)
43
 
1,180
 
1,278
 
-  revenue
-
 
-
 
(30
)
-
 
170
 
140
 
-  operating expenses
110
 
1
 
(26
)
43
 
1,010
 
1,138
 
Adjusted
1,906
 
2,111
 
1,713
 
113
 
190
 
6,033
 
 
 
 
 
Reconciliation of reported and adjusted results - global businesses (continued)
 
Quarter ended 31 Dec 2017
 
Retail Bankingand WealthManagement
CommercialBanking
Global Bankingand Markets
Global PrivateBanking
CorporateCentre
Total
 
$m
$m
$m
$m
$m
$m
Revenue
 
 
 
 
 
 
Reported
5,057
 
3,366
 
3,256
 
420
 
202
 
12,301
 
Currency translation
68
 
58
 
72
 
10
 
28
 
236
 
Significant items
4
 
108
 
135
 
-
 
(102
)
145
 
-  customer redress programmes
-
 
103
 
2
 
-
 
-
 
105
 
-  disposals, acquisitions and investment in new businesses
4
 
-
 
99
 
-
 
(24
)
79
 
-  fair value movement on financial instruments
-
 
-
 
33
 
-
 
(78
)
(45
)
-  currency translation on significant items
-
 
5
 
1
 
-
 
-
 
6
 
Adjusted
5,129
 
3,532
 
3,463
 
430
 
128
 
12,682
 
LICs
 
 
 
 
 
 
Reported
(186
)
(190
)
(373
)
1
 
90
 
(658
)
Currency translation
(2
)
(8
)
(19
)
-
 
5
 
(24
)
Adjusted
(188
)
(198
)
(392
)
1
 
95
 
(682
)
Operating expenses
 
 
 
 
 
 
Reported
(3,751
)
(1,619
)
(2,325
)
(512
)
(1,688
)
(9,895
)
Currency translation
(68
)
(29
)
(63
)
(15
)
(44
)
(219
)
Significant items
292
 
35
 
151
 
189
 
506
 
1,173
 
-  costs to achieve
46
 
24
 
97
 
(2
)
490
 
655
 
-  costs of structural reform
 
6
 
3
 
4
 
-
 
118
 
131
 
-  customer redress programmes
254
 
16
 
2
 
-
 
-
 
272
 
-  disposals, acquisitions and investment in new businesses
-
 
-
 
-
 
30
 
9
 
39
 
-  gain on partial settlement of pension obligation
(26
)
(9
)
(9
)
(3
)
(141
)
(188
)
-  settlements and provisions in connection with legal and regulatory matters
-
 
-
 
50
 
164
 
14
 
228
 
-  currency translation on significant items
12
 
1
 
7
 
-
 
16
 
36
 
Adjusted
(3,527
)
(1,613
)
(2,237
)
(338
)
(1,226
)
(8,941
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
Reported
16
 
-
 
-
 
-
 
540
 
556
 
Currency translation
-
 
-
 
-
 
-
 
18
 
18
 
Adjusted
16
 
-
 
-
 
-
 
558
 
574
 
Profit/(loss) before tax
 
 
 
 
 
 
Reported
1,136
 
1,557
 
558
 
(91
)
(856
)
2,304
 
Currency translation
(2
)
21
 
(10
)
(5
)
7
 
11
 
Significant items
296
 
143
 
286
 
189
 
404
 
1,318
 
-  revenue
4
 
108
 
135
 
-
 
(102
)
145
 
-  operating expenses
292
 
35
 
151
 
189
 
506
 
1,173
 
Adjusted
1,430
 
1,721
 
834
 
93
 
(445
)
3,633
 
 
 
Reconciliation of reported and adjusted results - global businesses (continued)
 
Quarter ended 31 Mar 2017
 
Retail Bankingand WealthManagement
CommercialBanking
Global Bankingand Markets
Global PrivateBanking
CorporateCentre
Total
 
$m
$m
$m
$m
$m
$m
Revenue
 
 
 
 
 
 
Reported
5,082
 
3,191
 
3,789
 
419
 
512
 
12,993
 
Currency translation
204
 
161
 
248
 
22
 
25
 
660
 
Significant items
(73
)
-
 
105
 
(4
)
(170
)
(142
)
-  disposals, acquisitions and investment in new businesses
(73
)
-
 
-
 
(4
)
(79
)
(156
)
-  fair value movement on financial instruments
-
 
-
 
97
 
-
 
(91
)
6
 
-  currency translation on significant items
-
 
-
 
8
 
-
 
-
 
8
 
Adjusted
5,213
 
3,352
 
4,142
 
437
 
367
 
13,511
 
LICs
 
 
 
 
 
 
Reported
(296
)
3
 
20
 
(1
)
38
 
(236
)
Currency translation
(15
)
7
 
1
 
-
 
3
 
(4
)
Adjusted
(311
)
10
 
21
 
(1
)
41
 
(240
)
Operating expenses
 
 
 
 
 
 
Reported
(3,276
)
(1,398
)
(2,245
)
(344
)
(1,065
)
(8,328
)
Currency translation
(187
)
(75
)
(165
)
(18
)
(68
)
(513
)
Significant items
367
 
(1
)
53
 
-
 
801
 
1,220
 
-  costs to achieve
125
 
(1
)
48
 
-
 
661
 
833
 
-  costs of structural reform
 
-
 
-
 
-
 
-
 
83
 
83
 
-  customer redress programmes
210
 
-
 
-
 
-
 
-
 
210
 
-  currency translation on significant items
32
 
-
 
5
 
-
 
57
 
94
 
Adjusted
(3,096
)
(1,474
)
(2,357
)
(362
)
(332
)
(7,621
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
Reported
9
 
-
 
-
 
-
 
523
 
532
 
Currency translation
-
 
-
 
-
 
-
 
28
 
28
 
Adjusted
9
 
-
 
-
 
-
 
551
 
560
 
Profit/(loss) before tax
 
 
 
 
 
 
Reported
1,519
 
1,796
 
1,564
 
74
 
8
 
4,961
 
Currency translation
2
 
93
 
84
 
4
 
(12
)
171
 
Significant items
294
 
(1
)
158
 
(4
)
631
 
1,078
 
-  revenue
(73
)
-
 
105
 
(4
)
(170
)
(142
)
-  operating expenses
367
 
(1
)
53
 
-
 
801
 
1,220
 
Adjusted
1,815
 
1,888
 
1,806
 
74
 
627
 
6,210
 
 
 
Reconciliation of reported and adjusted risk-weighted assets
 
At 31 Mar 2018
 
 
Retail Bankingand WealthManagement
CommercialBanking
Global Banking
and Markets
Global PrivateBanking
Corporate
Centre
Total
 
$bn
$bn
$bn
$bn
$bn
$bn
Risk-weighted assets
 
 
 
 
 
 
Reported
125.8
 
314.0
 
304.3
 
16.9
 
133.4
 
894.4
 
Disposals
-
 
-
 
-
 
-
 
(2.7
)
(2.7
)
-  Brazil operations
-
 
-
 
-
 
-
 
(2.6
)
(2.6
)
-  Lebanon operations
-
 
-
 
-
 
-
 
(0.1
)
(0.1
)
Adjusted
125.8
 
314.0
 
304.3
 
16.9
 
130.7
 
891.7
 
 
 
 
 
 
 
 
 
At 31 Dec 2017
 
Risk-weighted assets
 
 
 
 
 
 
Reported
121.5
 
301.0
 
299.3
 
16.0
 
133.5
 
871.3
 
Currency translation
1.3
 
4.1
 
2.7
 
0.2
 
1.7
 
10.0
 
Disposals
-
 
-
 
-
 
-
 
(2.7
)
(2.7
)
-  Brazil operations
-
 
-
 
-
 
-
 
(2.6
)
(2.6
)
-  Lebanon operations
-
 
-
 
-
 
-
 
(0.1
)
(0.1
)
Adjusted
122.8
 
305.1
 
302.0
 
16.2
 
132.5
 
878.6
 
 
 
 
 
 
 
 
 
At 31 Mar 2017
 
Risk-weighted assets
 
 
 
 
 
 
Reported
113.5
 
280.6
 
296.0
 
15.4
 
152.4
 
857.9
 
Currency translation
3.2
 
14.1
 
8.8
 
0.5
 
4.2
 
30.8
 
Disposals
(0.2
)
(0.4
)
-
 
-
 
(5.7
)
(6.3
)
-  Brazil operations
-
 
-
 
-
 
-
 
(5.2
)
(5.2
)
-  Lebanon operations
(0.2
)
(0.4
)
-
 
-
 
(0.5
)
(1.1
)
Adjusted
116.5
 
294.3
 
304.8
 
15.9
 
150.9
 
882.4
 
 
 
Reconciliation of reported and adjusted results - geographical regions
 
Quarter ended 31 Mar 2018
 
Europe
Asia
MENA
NorthAmerica
LatinAmerica
Total
UK
HongKong
 
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
 
 
 
 
 
 
 
 
Reported1
4,470
 
7,307
 
676
 
1,625
 
797
 
13,710
 
3,481
 
4,667
 
Significant items
46
 
(12
)
-
 
90
 
16
 
140
 
48
 
1
 
-  disposals, acquisitions and investment in new businesses
-
 
-
 
-
 
95
 
17
 
112
 
-
 
-
 
-  fair value movement on financial instruments
46
 
(12
)
-
 
(5
)
(1
)
28
 
48
 
1
 
Adjusted1
4,516
 
7,295
 
676
 
1,715
 
813
 
13,850
 
3,529
 
4,668
 
ECL
 
 
 
 
 
 
 
 
Reported
(62
)
(32
)
(4
)
47
 
(119
)
(170
)
(57
)
(14
)
Adjusted
(62
)
(32
)
(4
)
47
 
(119
)
(170
)
(57
)
(14
)
Operating expenses
 
 
 
 
 
 
 
 
Reported1
(4,437
)
(2,986
)
(343
)
(2,268
)
(514
)
(9,383
)
(3,446
)
(1,510
)
Significant items
194
 
-
 
-
 
944
 
-
 
1,138
 
136
 
-
 
-  costs of structural reform
125
 
1
 
-
 
-
 
-
 
126
 
112
 
1
 
-  customer redress programmes
93
 
-
 
-
 
-
 
-
 
93
 
93
 
-
 
-  disposals, acquisitions and investment in new
    businesses
2
 
-
 
-
 
-
 
-
 
2
 
-
 
-
 
-  restructuring and other related costs
20
 
-
 
-
 
-
 
-
 
20
 
20
 
-
 
-  settlements and provisions in connection with legal and regulatory matters
(46
)
(1
)
-
 
944
 
-
 
897
 
(89
)
(1
)
Adjusted1
(4,243
)
(2,986
)
(343
)
(1,324
)
(514
)
(8,245
)
(3,310
)
(1,510
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
Reported
11
 
479
 
108
 
-
 
-
 
598
 
11
 
6
 
Adjusted
11
 
479
 
108
 
-
 
-
 
598
 
11
 
6
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
Reported
(18
)
4,768
 
437
 
(596
)
164
 
4,755
 
(11
)
3,149
 
Significant items
240
 
(12
)
-
 
1,034
 
16
 
1,278
 
184
 
1
 
-  revenue
46
 
(12
)
-
 
90
 
16
 
140
 
48
 
1
 
-  operating expenses
194
 
-
 
-
 
944
 
-
 
1,138
 
136
 
-
 
Adjusted
222
 
4,756
 
437
 
438
 
180
 
6,033
 
173
 
3,150
 
1      Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
 
 
Reconciliation of reported and adjusted results - geographical regions (continued)
 
Quarter ended 31 Dec 2017
 
Europe
Asia
MENA
NorthAmerica
LatinAmerica
Total
UK
HongKong
 
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
 
 
 
 
 
 
 
 
Reported1
3,983
 
6,369
 
638
 
1,798
 
843
 
12,301
 
2,895
 
3,998
 
Currency translation1
216
 
48
 
1
 
2
 
(21
)
236
 
164
 
(9
)
Significant items
40
 
121
 
-
 
3
 
(19
)
145
 
34
 
12
 
-  customer redress programmes
105
 
-
 
-
 
-
 
-
 
105
 
105
 
-
 
-  disposals, acquisitions and investment in new businesses
 
-
 
99
 
-
 
(1
)
(19
)
79
 
-
 
-
 
-  fair value movement on financial instruments
(71
)
22
 
-
 
4
 
-
 
(45
)
(77
)
12
 
-  currency translation on significant items
6
 
-
 
-
 
-
 
-
 
6
 
6
 
-
 
Adjusted1
4,239
 
6,538
 
639
 
1,803
 
803
 
12,682
 
3,093
 
4,001
 
LICs
 
 
 
 
 
 
 
 
Reported
(506
)
(26
)
(32
)
31
 
(125
)
(658
)
(380
)
19
 
Currency translation
(24
)
(1
)
-
 
-
 
1
 
(24
)
(18
)
-
 
Adjusted
(530
)
(27
)
(32
)
31
 
(124
)
(682
)
(398
)
19
 
Operating expenses
 
 
 
 
 
 
 
 
Reported1
(5,874
)
(3,127
)
(357
)
(1,308
)
(559
)
(9,895
)
(4,886
)
(1,598
)
Currency translation1
(211
)
(33
)
-
 
(1
)
16
 
(219
)
(167
)
4
 
Significant items
1,051
 
186
 
13
 
(103
)
26
 
1,173
 
840
 
91
 
-  costs to achieve
369
 
167
 
13
 
78
 
28
 
655
 
345
 
74
 
-  costs of structural reform
 
131
 
-
 
-
 
-
 
-
 
131
 
124
 
-
 
-  customer redress programmes
272
 
-
 
-
 
-
 
-
 
272
 
272
 
-
 
-  disposals, acquisitions and investment in new businesses
 
32
 
-
 
-
 
7
 
-
 
39
 
-
 
-
 
-  gain on partial settlement of pension obligation
-
 
-
 
-
 
(188
)
-
 
(188
)
-
 
-
 
-  settlements and provisions in connection with legal and regulatory matters
211
 
17
 
-
 
-
 
-
 
228
 
64
 
17
 
-  currency translation on significant items
36
 
2
 
-
 
-
 
(2
)
36
 
35
 
-
 
Adjusted1
(5,034
)
(2,974
)
(344
)
(1,412
)
(517
)
(8,941
)
(4,213
)
(1,503
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
Reported
11
 
454
 
84
 
-
 
7
 
556
 
11
 
9
 
Currency translation
-
 
18
 
-
 
-
 
-
 
18
 
-
 
-
 
Adjusted
11
 
472
 
84
 
-
 
7
 
574
 
11
 
9
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
Reported
(2,386
)
3,670
 
333
 
521
 
166
 
2,304
 
(2,360
)
2,428
 
Currency translation
(19
)
32
 
1
 
1
 
(4
)
11
 
(21
)
(5
)
Significant items
1,091
 
307
 
13
 
(100
)
7
 
1,318
 
874
 
103
 
-  revenue
40
 
121
 
-
 
3
 
(19
)
145
 
34
 
12
 
-  operating expenses
1,051
 
186
 
13
 
(103
)
26
 
1,173
 
840
 
91
 
Adjusted
(1,314
)
4,009
 
347
 
422
 
169
 
3,633
 
(1,507
)
2,526
 
1      Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
Reconciliation of reported and adjusted results - geographical regions (continued)
 
Quarter ended 31 Mar 2017
 
Europe
Asia
MENA
NorthAmerica
LatinAmerica
Total
UK
HongKong
 
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
 
 
 
 
 
 
 
 
Reported1
4,213
 
6,540
 
653
 
1,776
 
735
 
12,993
 
3,018
 
4,107
 
Currency translation1
579
 
100
 
(2
)
17
 
(6
)
660
 
406
 
(34
)
Significant items
(48
)
47
 
-
 
(142
)
1
 
(142
)
(55
)
22
 
-  disposals, acquisitions and investment in new businesses
 
(4
)
-
 
-
 
(152
)
-
 
(156
)
-
 
-
 
-  fair value movement on financial instruments
(51
)
46
 
-
 
10
 
1
 
6
 
(60
)
22
 
-  currency translation on significant items
7
 
1
 
-
 
-
 
-
 
8
 
5
 
-
 
Adjusted1
4,744
 
6,687
 
651
 
1,651
 
730
 
13,511
 
3,369
 
4,095
 
LICs
 
 
 
 
 
 
 
 
Reported
5
 
(167
)
(57
)
106
 
(123
)
(236
)
16
 
(155
)
Currency translation
-
 
1
 
-
 
2
 
(7
)
(4
)
1
 
1
 
Adjusted
5
 
(166
)
(57
)
108
 
(130
)
(240
)
17
 
(154
)
Operating expenses
 
 
 
 
 
 
 
 
Reported1
(4,428
)
(2,694
)
(322
)
(1,310
)
(498
)
(8,328
)
(3,546
)
(1,393
)
Currency translation1
(477
)
(63
)
2
 
(11
)
8
 
(513
)
(350
)
12
 
Significant items
944
 
171
 
8
 
83
 
14
 
1,220
 
907
 
74
 
-  costs to achieve
563
 
167
 
8
 
82
 
13
 
833
 
531
 
75
 
-  costs of structural reform
 
83
 
-
 
-
 
-
 
-
 
83
 
83
 
-
 
-  customer redress programmes
210
 
-
 
-
 
-
 
-
 
210
 
210
 
-
 
-  currency translation on significant items
88
 
4
 
-
 
1
 
1
 
94
 
83
 
(1
)
Adjusted1
(3,961
)
(2,586
)
(312
)
(1,238
)
(476
)
(7,621
)
(2,989
)
(1,307
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
Reported
4
 
415
 
113
 
-
 
-
 
532
 
5
 
7
 
Currency translation
(6
)
34
 
-
 
-
 
-
 
28
 
(6
)
-
 
Adjusted
(2
)
449
 
113
 
-
 
-
 
560
 
(1
)
7
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
Reported
(206
)
4,094
 
387
 
572
 
114
 
4,961
 
(507
)
2,566
 
Currency translation
96
 
72
 
-
 
8
 
(5
)
171
 
51
 
(21
)
Significant items
896
 
218
 
8
 
(59
)
15
 
1,078
 
852
 
96
 
-  revenue
(48
)
47
 
-
 
(142
)
1
 
(142
)
(55
)
22
 
-  operating expenses
944
 
171
 
8
 
83
 
14
 
1,220
 
907
 
74
 
Adjusted
786
 
4,384
 
395
 
521
 
124
 
6,210
 
396
 
2,641
 
1      Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
First interim dividend for 2018
The Directors of HSBC Holdings plc have declared a first interim dividend of $0.10 per ordinary share in respect of the financial year ending 31 December 2018 in accordance with their intention, as set out in the
 
Annual Report and Accounts 2017
 
, to pay quarterly dividends on the ordinary shares in a pattern of three equal dividends with a variable fourth interim dividend. The ordinary shares in London, Hong Kong, Paris and Bermuda and the American Depositary Shares ('ADSs') in New York will be quoted ex-dividend on 17 May 2018. The dividend will be payable on 5 July 2018 to holders of record on 18 May 2018.
 
The dividend will be payable in US dollars, sterling or Hong Kong dollars, or a combination of these currencies, at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 25 June 2018. A scrip dividend will also be offered. Particulars of these arrangements will be sent to shareholders on or about 31 May 2018 and elections must be received by 21 June 2018.
 
The dividend will be payable on ordinary shares held through Euroclear France, the settlement and central depositary system for Euronext Paris, on 5 July 2018 to the holders of record on 18 May 2018. The dividend will be payable in US dollars or as a scrip dividend. Particulars of these arrangements will be announced through Euronext Paris on 7 May, 25 May and 6 July 2018.
 
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 5 July 2018 to holders of record on 18 May 2018. The dividend of $0.50 per ADS will be payable by the depositary in US dollars or as a scrip dividend of new ADSs. Particulars of these arrangements will be sent to holders on or about 31 May 2018 and elections will be required to be made by 15 June 2018. Alternatively, the cash dividend may be invested in additional ADSs for participants in the dividend reinvestment plan operated by the depositary.
 
Any person who has acquired ordinary shares registered on the Principal register in the United Kingdom, the Hong Kong Overseas Branch register or the Bermuda Overseas Branch register but who has not lodged the share transfer with the Principal Registrar, Hong Kong or Bermuda Overseas Branch Registrar should do so before 4.00pm local time on 18 May 2018 in order to receive the dividend.
 
Ordinary shares may not be removed from or transferred to the Principal register in the United Kingdom, the Hong Kong Overseas Branch register or the Bermuda Overseas Branch register on 18 May 2018. Any person wishing to remove or transfer ordinary shares to or from each register must do so before 4.00pm local time on 17 May 2018.
 
Transfer of ADSs must be lodged with the depositary by 11.00am local time on 18 May 2018 to receive the dividend.
 
Dividend on 6.20% non-cumulative US dollar preference shares, series A ('Series A Dollar Preference Shares')
 
In 2005, 1,450,000 Series A Dollar Preference Shares were issued for a consideration of $1,000 each, and Series A American Depositary Shares, each of which represents one-fortieth of a Series A Dollar Preference Share, were listed on the New York Stock Exchange.
 
A non-cumulative fixed-rate dividend of 6.20% per annum is payable on the Series A Dollar Preference Shares on 15 March, 15 June, 
 
15 September and 15 December 2018 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has declared a dividend of $0.3875 per Series A American Depositary Share for the quarter ending 15 June 2018.
 
The dividend will be payable on 15 June 2018 to holders of record on 31 May 2018.
 
Any person who has acquired Series A American Depositary Shares but who has not lodged the transfer documentation with the depositary should do so before 12.00pm local time on 31 May 2018 in order to receive the dividend.
 
 
 
 
 
For and on behalf of
 
HSBC Holdings plc
 
 
 
 
 
Ben J S Mathews
 
Group Company Secretary
 
 
 
 
 
The Board of Directors of HSBC Holdings plc as at the date of this announcement are: Mark Tucker*, John Flint,  Kathleen Casey†, Laura Cha†, Henri de Castries†, Lord Evans of Weardale†, Irene Lee†, Iain Mackay, Heidi Miller†, Marc Moses, David Nish†, Jonathan Symonds†, Jackson Tai† and Pauline van der Meer Mohr†.
 
*      Non-executive Group Chairman.
 
†    Independent non-executive Director.
 
 
 
 
 
 
 
Terms and abbreviations
 
 
1Q18
First quarter of 2018
1Q17
First quarter of 2017
4Q17
Fourth quarter of 2017
Adjusted RoRWA
Adjusted return on average risk-weighted assets
AFS
Available for sale
Bps
 
Basis points. One basis point is equal to one-hundredth of a percentage point
 
C&L
Credit and Lending
CET1
Common equity tier 1
CMB
Commercial Banking, a global business
CML
Consumer and Mortgage Lending (US)
Corporate Centre
In December 2016, certain functions were combined to create a Corporate Centre. These include Balance Sheet Management, legacy businesses and interests in associates and joint ventures. The Corporate Centre also includes the results of our financing operations, central support costs with associated recoveries and the UK bank levy
Costs to achieve
Transformation costs to deliver the cost reduction and productivity outcomes outlined in the Investor Update in June 2015
CRD IV
Capital Requirements Directive IV
D-SIB
Domestic systemically important bank
EBA
European Banking Authority
ECL
Expected credit losses and other credit impairment charges
FTEs
Full-time equivalent staff
FVOCI
Fair value through other comprehensive income
GB&M
Global Banking and Markets, a global business
GLCM
 
Global Liquidity and Cash Management
 
GPB
Global Private Banking, a global business
Group
HSBC Holdings together with its subsidiary undertakings
G-SIB
Global systemically important bank
GTRF
 
Global Trade and Receivables Finance
IAS
International Accounting Standards
IFRSs
International Financial Reporting Standards
IMA
Internal Models Approach
IMM
Internal Model Method
IRB
Internal ratings based
Jaws
The difference between the rate of growth of revenue and the rate of growth of costs. Positive jaws is where the revenue growth rate exceeds the cost growth rate. We calculate this on an adjusted basis
JV
Joint venture
LCR
Liquidity coverage ratio
Legacy credit
A portfolio of assets comprising Solitaire Funding Limited, securities investment conduits, asset-backed securities trading portfolios, credit correlation portfolios and derivative transactions entered into directly with monoline insurers
LICs
Loan impairment charges and other credit risk provisions
MENA
Middle East and North Africa
PBT
Profit before tax
POCI
Purchased or originated credit-impaired
RBWM
Retail Banking and Wealth Management, a global business
Revenue
Net operating income before ECL/LICs
RMBS
Residential mortgage-backed securities
RWAs
Risk-weighted assets
$m/$bn
United States dollar millions/billions
VaR
Value at risk
 
 
Click on, or paste the following link into your web browser, to view the associated PDF document.
 
http://www.rns-pdf.londonstockexchange.com/rns/1046N_1-2018-5-3.pdf
 
 
 
 
 
 
 
 
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
HSBC Holdings plc
 
 
 
By: /s/ Ben J S Mathews
 
Name: Ben J S Mathews
 
Title: Group Company Secretary
 
 
 
Date: 04 May 2018