hsba201411036k.htm
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 November
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 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- ..............).
 
 
 

HSBC Holdings plc - Interim Management Statement
 
HSBC Holdings plc ('HSBC') will be conducting a trading update conference call with analysts and investors today to coincide with the release of its Interim Management Statement. The trading update call will take place at 10.00am GMT, and details of how to participate in the call and the live audio webcast can be found below and at Investor Relations on www.hsbc.com.
 
 
 
 
Conference call details
 
 
Date: Monday, 3 November 2014
 
 
Time: 10.00am GMT
            18.00pm HKT
 
 
Audio webcast: Please follow this link for the webcast: http://www.hsbc.com/1/2/investor-relations/financial-info
 
 
Speakers: Stuart Gulliver, Group Chief Executive
                    Ian Mackay, Group  Finance Director
 
 
Conference details for investors and analysts: Passcode: HSBC
 
Toll
    
Toll free
  
UK and International
+44 (0) 203 140 8139
  
UK
0800 051 1155
USA
+1 408 352 9351
  
USA
1855 636 5482
Hong Kong
+852 3017 5001
      
 
Replay conference call details (available until 4 December 2014): Passcode: 16720826
 
Toll
    
Toll free
  
International
+61 2 8199 0299
  
UK
0808 234 0072
USA
+1 646 254 3697
  
USA
1855 452 5696
Hong Kong
+852 305 12780
  
Hong Kong
800 963 117
 
Investor Relations
  
Media Relations
Guy Lewis
Rebecca Self
Heidi Ashley
Tel: +44 (0) 20 7992 1938
Tel: +44 (0) 20 7991 3643
Tel: +44 (0) 20 7992 2045
Hugh Pye
Camila Sugimura
Gareth Hewett
Tel: +852 2822 4908
Tel: +44 (0) 20 7991 8041
Tel: +852 2822 4929
             
 
 
Table of contents
 
Highlights
3
  
Summary consolidated income statement
12
Group Chief Executive's comments
5
  
Summary consolidated balance sheet
13
Fourth interim dividend
6
  
Capital
14
Geographical regions
6
  
Risk-weighted assets
15
Implementation of CRD IV
6
  
Leverage ratio
19
Underlying performance
6
  
Profit before tax by global business and
  
Financial performance commentary
7
  
geographical region
20
Capital and risk-weighted assets commentary
10
  
Summary information - global businesses
21
Trading conditions since 30 September 2014
    
Summary information - geographical regions
27
and outlook
10
  
Appendix - selected information
32
Notes
11
  
Loans and advances to customers by industry sector
  
Cautionary statement regarding forward-looking
    
and by geographical region
32
statements
11
      



Terms and Abbreviations
 
1Q13/4Q13
First/fourth quarter of 2013
2Q14
Second quarter of 2014
3Q13/3Q14
Third quarter of 2013/2014
9M13/9M14
Nine months to 30 September 2013/2014
BoCom
Bank of Communications Co., Limited
CCR
Counterparty credit risk
CET1
Common equity tier 1
CMB
Commercial Banking
CML
Consumer and Mortgage Lending in the US
CRD IV
Capital Requirements Directive IV
CRS
Card and Retail Services
CVA
Credit valuation adjustment
DVA
Debit valuation adjustment
FCA
Financial Conduct Authority
FTEs
Full-time equivalent staff
FX
Foreign exchange
GB&M
Global Banking and Markets
GMB
Group Management Board
GPB
Global Private Banking
Industrial Bank
Industrial Bank Co., Limited
IRB
Internal ratings based
Legacy Credit
A portfolio of assets comprising Solitaire Funding Limited, securities investment conduits, asset-backed securities trading and correlation portfolios and
derivative transactions entered into with monoline insurers
LGD
Loss given default
LICs
Loan impairment and other credit risk provisions
NCOA
Non-credit obligation assets
Own credit spread
Fair value movements on our long-term debt designated at fair value resulting from changes in credit spread
PBT
Profit before tax
Ping An
Ping An Insurance (Group) Company of China, Ltd
PPI
Payment Protection Insurance
ppts
Percentage points
PRA
Prudential Regulation Authority
Principal RBWM
RBWM excluding the effects of the US run-off portfolio and the disposal of the CRS business in the US
RBWM
Retail Banking and Wealth Management
RoRWA
Pre-tax Return on Risk Weighted Assets is calculated using an average of RWAs at quarter-ends on a Basel 2.5 basis for all periods up to and including
 31 December 2013 and a CRD IV end point basis from 1 January 2014
RWAs
Risk-weighted assets
STD
Standardised approach
US$m/US$bn
United States dollar millions/billions
VaR
Value at risk
 
Note to editors
 
HSBC Holdings plc
 
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from over 6,200 offices in 74 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,729bn at 30 September 2014, HSBC is one of the world's largest banking and financial services organisations.
 
Highlights
 
 
· Reported PBT up 2% in 3Q14 at US$4,609m compared with US$4,530m in 3Q13.
 
 
· Underlying PBT was down US$595m or 12% in 3Q14 at US$4,409m compared with US$5,004m in 3Q13, principally reflecting net movements in significant items (US$1,468m net reduction in PBT).
 
 
· Higher 3Q14 revenue in CMB and GB&M - CMB continued to grow, notably in our home markets of Hong Kong and the UK. Strong performance in GB&M was driven by Markets as Foreign Exchange and Equities both    benefitted from higher client activity.
 
 
· Higher 3Q14 operating expenses - 3Q14 underlying operating expenses were US$11,091m, 15% higher than US$9,608m in 3Q13. Excluding significant items operating expenses increased by 6%, in part reflecting inflation and    increases in risk, compliance and related costs.
 
 
· Further loan growth - on a constant currency basis we grew loans and advances to customers in 3Q14, notably in CMB in our home markets of the UK and Hong Kong.
 
 
· Reported PBT down 9% for 9M14 at US$16,949m compared with US$18,601m for 9M13.
 
 
· Underlying PBT down 6% for 9M14 at US$16,969m compared with US$18,014m for 9M13, primarily due to the effect of net movements in significant items (US$2,275m net reduction in PBT).
 
 
· Earnings per ordinary share and dividends per ordinary share (in respect of the period) for 9M14 were US$0.67 and US$0.30, respectively, compared with US$0.71 and US$0.30 for 9M13. The third interim dividend was US$0.10 per    ordinary share.
 
 
· Return on average ordinary shareholders' equity 9M14 annualised return was 0.9ppts lower at 9.5%, compared with 10.4% for the equivalent period in 2013.
 
 
· Strong capital position - at 3Q14, the CRD IV transitional basis CET1 capital ratio remained at 11.2%, consistent with 30 June 2014. The end point CET1 capital ratio was 11.4%, up from 11.3% at 30 June 2014. This largely reflected    internal capital generation that was adversely affected by foreign exchange movements.
 
   
Nine months ended 30 September
   
2014
  
2013
  
Change
   
US$m
  
US$m
  
%
Income statement and performance measures1
            
Reported profit before tax
  
16,949
  
18,601
  
(9)
Underlying profit before tax
  
16,969
  
18,014
  
(6)
Profit attributable to ordinary shareholders of the parent company
  
12,748
  
13,055
  
(2)
Cost efficiency ratio
  
62.5%
  
56.6%
    
Reported pre-tax RoRWA (annualised)
  
1.9%
  
2.2%
    

 
   
At
30 Sep
2014
  
At
30 Jun
2014
  
At
31 Dec
2013
  
Change from
30 Jun 2014
to 30 Sep 2014
   
%
  
%
  
%
    
Capital and balance sheet2
                
CRD IV
                
Common equity tier 1 ratio (Year 1 transition)
  
11.2
  
11.2
  
10.8
    
Common equity tier 1 ratio (end point)
  
11.4
  
11.3
  
10.9
    
Basel 2.5
                
Core tier 1 ratio
          
13.6
    
                 
   
US$m
  
US$m
  
US$m
  
US$m
                 
Loans and advances to customers
  
1,028,880
  
1,047,241
  
992,089
  
(18,361)
Customer accounts
  
1,395,116
  
1,415,705
  
1,361,297
  
(20,589)
Risk-weighted assets - CRD IV basis
  
1,227,548
  
1,248,572
  
1,214,939
    
Risk-weighted assets - Basel 2.5 basis
          
1,092,653
    
 
 
1 All on a reported basis, unless otherwise stated. Underlying basis eliminates effects of foreign currency translation differences, acquisitions, disposals and changes in ownership levels of subsidiaries, associates, joint ventures and businesses, and changes in fair value due to movements in credit spread on own long-term debt issued by the Group and designated at fair value. A reconciliation of reported results to underlying results is shown on page 6.
 
2 For details of the implementation of CRD IV, see page 6.
 
Reported and underlying items
 
   
9 months ended
30 September
  
Quarter ended
30 September
  
   
2014
  
2013
  
2014
  
2013
  
   
US$m
  
US$m
  
US$m
  
US$m
  
                   
Reported
                  
Revenue1
  
46,942
  
49,450
  
15,775
  
15,078
  
Loan impairment charges and other credit risk provisions
  
(2,601)
  
(4,709)
  
(760)
  
(1,593)
  
Operating expenses
  
(29,357)
  
(27,983)
  
(11,091)
  
(9,584)
  
Profit before tax
  
16,949
  
18,601
  
4,609
  
4,530
  
                   
Underlying adjustments to reported profit before tax
                  
Reported profit before tax
  
16,949
  
18,601
  
4,609
  
4,530
  
Currency translation
  
-
  
(36)
  
-
  
(18)
  
Fair value movements on own debt
  
15
  
594
  
(200)
  
575
  
Gain on de-recognition of Industrial Bank as an associate
  
-
  
(1,089)
  
-
  
-
  
Gain on disposal of Colombia operations
  
(18)
  
-
  
-
  
-
  
Gain on sale of associate shareholdings in Bao Viet Holdings
  
-
  
(104)
  
-
  
-
  
Loss on sale of Household Insurance Group's insurance manufacturing business
  
-
  
99
  
-
  
-
  
Operating results of disposals, acquisitions and dilutions
  
(9)
  
8
  
-
  
(25)
  
Other (gains)/losses on disposals
  
32
  
(59)
  
-
  
(58)
  
                   
Underlying profit before tax
  
16,969
  
18,014
  
4,409
  
5,004
  
                   
Underlying
                  
Revenue1
  
46,934
  
48,295
  
15,575
  
15,583
  
Loan impairment charges and other credit risk provisions
  
(2,599)
  
(4,562)
  
(760)
  
(1,602)
  
Operating expenses
  
(29,331)
  
(27,564)
  
(11,091)
  
(9,608)
  
Profit before tax
  
16,969
  
18,014
  
4,409
  
5,004
  
                   
Included in underlying profit before tax are the following significant items
(on a reported basis)
                
                 
Revenue1
                  
Debit valuation adjustment on derivative contracts
  
(278)
  
300
  
(123)
  
(151)
  
Fair value movement on non-qualifying hedges
  
(341)
  
461
  
(19)
  
168
  
FX gains relating to the sterling debt issued by HSBC Holdings
  
-
  
442
  
-
  
-
  
Gain on sale of several tranches of real estate secured accounts in the US
  
76
  
2
  
91
  
3
  
Gain on sale of shareholding in Bank of Shanghai
  
428
  
-
  
-
  
-
  
Impairment on our investment in Industrial Bank
  
(271)
  
-
  
(271)
  
-
Loss on early termination of cash flow hedges in the US run-off portfolio
  
-
  
(199)
  
-
  
-
Loss on sale of an HFC Bank UK secured loan portfolio
  
-
  
(138)
  
-
  
-
Loss on sale of the non-real estate portfolio in the US
  
-
  
(271)
  
-
  
-
  
Net gain on completion of Ping An disposal2
  
-
  
553
  
-
  
-
  
Provisions arising from the ongoing review of compliance with the Consumer Credit Act in the UK
  
(580)
  
-
  
(213)
  
-
  
Write-off of allocated goodwill relating to the GPB Monaco business3
  
-
  
(279)
  
-
  
-
  
                   
Total
  
(966)
  
871
  
(535)
  
20
  
                 
Operating costs
                
Accounting gain arising from change in basis of delivering ill-health benefits in the UK
  
-
  
430
  
-
  
-
  
Charge in relation to settlement agreement with Federal Housing Finance Authority
  
(550)
  
-
  
(550)
  
-
  
Madoff-related litigation costs
  
-
  
(298)
  
-
  
-
  
Provision for FCA investigation into foreign exchange
  
(378)
  
-
  
(378)
  
-
  
Regulatory investigation provisions in GPB
  
-
  
(317)
  
-
  
(198)
  
Restructuring and other related costs
  
(150)
  
(396)
  
(68)
  
(158)
  
UK bank levy
  
45
  
(9)
  
-
  
-
  
UK customer redress programmes
  
(935)
  
(840)
  
(701)
  
(428)
  
US customer remediation provision relating to CRS
  
-
  
(100)
  
-
  
-
  
                   
Total
  
(1,968)
  
(1,530)
  
(1,697)
  
(784)
  
 
 
1 Net operating income before loan impairment charges, also referred to as 'revenue'.
 
2 The gain of US$553m represents the net impact of the disposal of available-for-sale investments in Ping An offset by adverse changes in fair value of the contingent forward sale contract to the point of delivery of the shares.
 
3 In 1Q13, the private banking operations of HSBC Private Bank Holdings (Suisse) SA in Monaco were classified as held for sale. At this time a loss on reclassification to held for sale was recognised following a write down in the value of goodwill allocated to the operation. Following a strategic review we decided to retain the operation and the assets and liabilities of the business were reclassified to the relevant balance sheet categories; however, the loss on classification was not reversed.
 
Group Chief Executive, Stuart Gulliver, commented:
 
"The third quarter was a period of continued progress. Excluding significant items, we increased underlying profit before tax in all of our global businesses and maintained a strong balance sheet and a robust capital position.
 
"Revenue continued to grow in Commercial Banking, dominated by growth in our home markets of Hong Kong and the United Kingdom. Global Banking and Markets contributed a strong revenue performance with its differentiated business model. Global Private Banking has attracted net new money of US$10 billion in areas targeted for growth since the start of the year. The remodelling of Retail Banking and Wealth Management and Global Private Banking remains ongoing.
 
"Loan impairment charges are lower reflecting the current economic environment and the beneficial changes to our portfolio since 2011.
 
"We continued to build essential infrastructure to deliver against our risk and compliance commitments and fulfil our regulatory obligations in the third quarter. Cost inflation in a number of our markets and a number of significant items also contributed additional costs. As a consequence, operating expenses are now higher than before. We are committed to achieving additional sustainable savings by further streamlining our processes and procedures.
 
"Despite the rising regulatory expectations, I am confident that our business model remains sustainable and that we can deliver further value for our shareholders while meeting our obligations and protecting the future of HSBC."
 
Fourth interim dividend
 
The proposed timetable for the fourth interim dividend has been revised since the release of the 2014 interim results. The revised timetable is as follows:
 
Annual Report and Accounts 2014 announcement date
  
23 February 2015
ADSs quoted ex-dividend in New York
  
4 March 2015
Shares quoted ex-dividend in London, Hong Kong, Paris and Bermuda
  
5 March 2015
Dividend record date in London, Hong Kong, New York, Paris and Bermuda
  
6 March 2015
Dividend payment date
  
30 April 2015
 
 
Geographical regions
 
Hong Kong and Rest of Asia-Pacific are no longer regarded as separate reportable operating segments, in light of the geographical financial information presented to the GMB. From 1 January 2014, they have been replaced by a new operating segment, 'Asia', which better aligns with internal management information used for evaluating business decisions and resource allocations. Comparative data have been re-presented to reflect this change.
 
Implementation of CRD IV
 
On 1 January 2014, CRD IV came into force and capital and RWAs at 30 September 2014 are calculated and presented on this basis. Prior to 1 January 2014, capital and RWAs were calculated and presented on a Basel 2.5 basis, and capital and RWAs at 31 December 2013 were also estimated based on the Group's interpretation of final CRD IV legislation and final rules issued by the PRA, details of which can be found in the basis of preparation on page 324 of the Annual Report and Accounts 2013.
 
Underlying performance
Underlying performance:
 
 
· adjusts for the period-on-period effects of foreign currency translation;
 
 
· eliminates the fair value movements on our long-term debt attributable to credit spread ('own credit spread') where the net result of such movements will be zero upon maturity of the debt; and
 
 
· adjusts for acquisitions, disposals and changes of ownership levels of subsidiaries, associates, joint ventures and businesses.
 
For acquisitions, disposals and changes of ownership levels of subsidiaries, associates, joint ventures and businesses, we eliminate the gain or loss on disposal or dilution and any associated gain or loss on reclassification or impairment recognised in the period incurred, and remove the operating profit or loss of the acquired, disposed of or diluted subsidiaries, associates, joint ventures and businesses from all the periods presented so we can view results on a like-for-like basis. Disposal of investments other than those included in the above definition do not lead to underlying adjustments.
 
 
 
Reconciliation of reported and underlying items
 
   
Nine months ended
30 September
  
Quarter ended
30 September
  
   
2014
  
2013
  
Change
  
2014
  
2013
  
Change
  
   
US$m
  
US$m
  
%
  
US$m
  
US$m
  
%
  
                           
Reported revenue
  
46,942
  
49,450
  
(5)
  
15,775
  
15,078
  
5
  
Currency translation adjustment1
      
(146)
          
127
      
Own credit spread
  
15
  
594
      
(200)
  
575
      
Acquisitions, disposals and dilutions
  
(23)
  
(1,603)
      
-
  
(197)
      
                           
Underlying revenue
  
46,934
  
48,295
  
(3)
  
15,575
  
15,583
  
-
  
                           
Reported LICs
  
(2,601)
  
(4,709)
  
45
  
(760)
  
(1,593)
  
52
  
Currency translation adjustment1
      
91
          
(21)
      
Acquisitions, disposals and dilutions
  
2
  
56
      
-
  
12
      
                           
Underlying LICs
  
(2,599)
  
(4,562)
  
43
  
(760)
  
(1,602)
  
53
  
                         
Reported operating expenses
  
(29,357)
  
(27,983)
  
(5)
  
(11,091)
  
(9,584)
  
(16)
  
Currency translation adjustment1
      
4
          
(124)
      
Acquisitions, disposals and dilutions
  
26
  
415
      
-
  
100
      
                           
Underlying operating expenses
  
(29,331)
  
(27,564)
  
(6)
  
(11,091)
  
(9,608)
  
(15)
  
                           
Underlying cost efficiency ratio
  
62.5%
  
57.1%
      
71.2%
  
61.7%
      
                           
Reported profit before tax
  
16,949
  
18,601
  
(9)
  
4,609
  
4,530
  
2
  
Currency translation adjustment1
      
(36)
          
(18)
      
Own credit spread
  
15
  
594
      
(200)
  
575
      
Acquisitions, disposals and dilutions
  
5
  
(1,145)
      
-
  
(83)
      
                           
Underlying profit before tax
  
16,969
  
18,014
  
(6)
  
4,409
  
5,004
  
(12)
  
 
 
1 'Currency translation adjustment' is the effect of translating the results of branches, subsidiaries, joint ventures and associates for the previous period at the average rates of exchange applicable in the current period.
 
Financial performance commentary
 
3Q14 compared with 3Q13
 
 
· Reported PBT of US$4.6bn for 3Q14 was US$0.1bn or 2% higher than for 3Q13, primarily due to favourable fair value movements of US$0.2bn on our own debt designated at fair value resulting from changes in credit spreads, compared with adverse movements of US$0.6bn in 3Q13 and lower LICs. These factors were partly offset by increased operating expenses, primarily due to the effect of significant items.
 
 
· Reported revenue was US$15.8bn in the quarter, US$0.7bn or 5% higher than in 3Q13. On an underlying basis, revenue was broadly unchanged and included the effect of a number of significant items recorded in 3Q14:
 
 
− an impairment of US$271m on our investment in Industrial Bank;
 
 
− provisions of US$213m arising from the ongoing review of compliance with the Consumer Credit Act in the UK; and
 
 
− adverse fair value movements on non-qualifying hedges of US$19m (compared with favourable movements of US$168m in 3Q13).
 
 
These were partly offset by:
 
 
− a less adverse DVA of US$123m (compared with US$151m in 3Q13) on derivative contracts; and
 
 
− a gain of US$91m on the sale of US real estate accounts in the US run-off portfolio in RBWM (compared with a US$3m gain in 3Q13).
 
 
· Excluding the effect of significant items, revenue increased by US$0.5bn, primarily in GB&M and CMB. In GB&M, higher revenue was driven by an 18% increase in Markets as Foreign Exchange and Equities both benefitted from increased client activity. In CMB and the other global businesses, revenue trends in the quarter continued those seen in the first half of the year, with the increase in CMB driven by our home markets of Hong Kong and the UK. Revenue was lower in RBWM from the continued run-off of the CML portfolio and in GPB due to the repositioning of the business.
 
 
· LICs of US$0.8bn were US$0.8bn favourable compared with 3Q13 on both a reported and an underlying basis, notably in Europe (US$0.4bn) and North America (US$0.3bn). In Europe, this reflected the trends we saw in the first half of 2014, principally driven by CMB and GB&M in the UK. In North America, we recorded a net release in 3Q14 compared with a net charge in 3Q13, primarily in the CML portfolio.
 
 
· Reported operating expenses of US$11.1bn were 16% higher than in the same period in 2013. On an underlying basis, operating expenses rose by US$1.5bn, primarily reflecting a number of significant items recorded in 3Q14. These included:
 
 
− a provision for UK customer redress of US$701m (compared with US$428m in 3Q13). This included additional estimated redress for possible mis-selling in previous years of PPI policies of US$589m, which reflected an increase in the level of overall claims driven by claims management companies;
 
 
− a charge of US$550m in the US relating to a settlement agreement with the Federal Housing Finance Agency; and
 
 
− provision of US$378m relating to the estimated liability in connection with the ongoing foreign exchange investigation by the UK FCA. See 'Trading conditions since 30 September 2014 and outlook'.
 
These factors were partly offset by:
 
 
− lower restructuring and other related costs of US$68m (compared with US$158m in 3Q13); and
 
 
− regulatory investigation provisions in GPB of US$198m recorded in 3Q13.
 
Excluding significant items, operating expenses increased by US$0.6bn, in part reflecting inflation and increases in risk, compliance and related costs.
 
 
· The reported cost efficiency ratio increased from 63.6% in 3Q13 to 70.3% in 3Q14 and, on an underlying basis, it rose from 61.7% to 71.2%.
 
 
· The effective tax rate for the three months was 21.4%, similar to the UK corporation tax rate of 21.5%.
 
9M14 compared with 9M13
 
 
· Reported PBT of US$16.9bn for the first nine months of 2014 was US$1.7bn or 9% lower than in the same period in 2013. Our results reflected lower gains (net of losses) from disposals and reclassifications; notably, the first nine months of 2013 included a US$1.1bn accounting gain arising from the reclassification of Industrial Bank as a financial investment. This was partly offset by minimal fair value movements on our own debt compared with adverse movements of US$0.6bn in 9M13.
 
 
· On an underlying basis, PBT fell by US$1.0bn to US$17.0bn, primarily due to the effect of significant items (a US$2.3bn net reduction in PBT). Excluding significant items, underlying PBT increased by US$1.2bn, driven by lower LICs and higher revenue partly offset by an increase in operating expenses.
 
 
· Reported revenue was US$46.9bn in 9M14, 5% lower than in 9M13, in part reflecting lower gains (net of losses) from disposals and reclassifications. On an underlying basis, revenue of US$46.9bn was US$1.4bn or 3% lower, reflecting the effect of the significant items tabulated below:
 
 
Significant items included in revenue (on a reported basis)
 
   
9 months ended 30 September
  
   
2014
  
2013
   
US$m
  
US$m
         
Debit valuation adjustment on derivative contracts
  
(278)
  
300
Fair value movement on non-qualifying hedges
  
(341)
  
461
FX gains relating to the sterling debt issued by HSBC Holdings
  
-
  
442
Gain on sale of several tranches of real estate secured accounts in the US
  
76
  
2
Gain on sale of shareholding in Bank of Shanghai
  
428
  
-
Impairment on our investment in Industrial Bank
  
(271)
  
-
Loss on early termination of cash flow hedges in the US run-off portfolio
  
-
  
(199)
Loss on sale of an HFC Bank UK secured loan portfolio
  
-
  
(138)
Loss on sale of the non-real estate portfolio in the US
  
-
  
(271)
Net gain on completion of Ping An disposal
  
-
  
553
Provisions arising from the ongoing review of compliance with the Consumer Credit Act in the UK
  
(580)
  
-
Write-off of allocated goodwill relating to the GPB Monaco business
  
-
  
(279)
         
Total
  
(966)
  
871
           
 

 
 
 
 
 
· Excluding significant items, revenue was US$0.5bn higher. The main drivers of revenue movements in our global businesses were as follows:
 
 
− in CMB, revenue rose by US$0.7bn. This was due to higher net interest income driven by average lending and deposit growth in Hong Kong, and rising average deposit balances and wider lending spreads in the UK. In addition, revenue grew from higher term lending fees in the UK. Despite lending spread compression compared with 9M13, spreads in 9M14 were broadly unchanged from the end of 2013; and
 
 
− in GB&M, revenue rose by US$0.2bn. Revenue rose in Equities as we successfully positioned the business to capture increased client activity, and in Payments and Cash Management, reflecting growth in deposit balances. In addition, there were increases in Principal Investments and Credit, the latter driven by disposal gains in our Legacy Credit portfolio. In Capital Financing, revenue was broadly unchanged as the effects of increased volumes and market share gains across our products were offset by spread and fee compression. By contrast, Foreign Exchange revenue decreased, affected by lower market volatility and reduced client flows during the period, although volumes improved in the third quarter. In addition, Balance Sheet Management revenue fell, in line with our expectations.
 
These factors were partially offset in:
 
 
− RBWM, where revenue fell by US$0.5bn reflecting reduced net interest income due to lower average balances, which included the impact of portfolio sales in the US run-off portfolio. In our Principal RBWM business, revenue was broadly unchanged with a reduction in personal lending revenue mostly offset by higher net interest income from current accounts, savings and deposits, mainly in Europe and Asia; and
 
 
− GPB, where revenue was US$0.3bn lower, reflecting a managed reduction in client assets as we continued to reposition the business, and a reduction in broking and trading income reflecting lower market volatility. Despite a reduction in client assets, we attracted net new money of US$10bn in areas that we have targeted for growth, including our home and priority markets and the high net worth client segment.
 
 
· Reported LICs of US$2.6bn were US$2.1bn lower on a reported basis and US$2.0bn lower on an underlying basis than in 9M13, primarily from reductions in Europe, North America and Latin America:
 
 
− in Europe, the decrease of US$1.0bn was mainly driven by lower individually assessed impairments in CMB in the UK, reflecting the improved quality of the portfolio and the economic environment, together with lower individually assessed impairments and higher net releases of credit risk provisions on available-for-sale asset-backed securities, both in GB&M;
 
 
− in North America, the decrease of US$0.6bn reflected reduced levels of new impaired loans and delinquency in the CML portfolio, as well as lower lending balances from the continued run-off and loan sales. These factors were partly offset by lower reserve releases relating to lower favourable market valuation changes of the underlying properties as improvements in housing market conditions were less pronounced in 9M14; and
 
 
− in Latin America, the decrease of US$0.4bn was mainly in Brazil and Mexico. In Brazil, the decrease primarily reflected changes to the impairment model and revisions to the assumptions for restructured loan account portfolios made in 2013 in both RBWM and CMB, partly offset by an individual impairment in GB&M in 9M14. In Mexico, LICs improved due to reduced individually assessed impairments in CMB, in particular relating to homebuilders following a change in public housing policy in 2013.
 
 
· Reported operating expenses for 9M14 of US$29.4bn were 5% higher than in the same period in 2013. On an underlying basis, operating expenses rose by US$1.8bn and included the following significant items:

 
Significant items included in operating expenses (on a reported basis)
 
   
Nine months ended 30 September
   
2014
  
2013
   
US$m
  
US$m
         
Accounting gain arising from change in basis of delivering ill-health benefits in the UK
  
-
  
430
Charge in relation to settlement agreement with Federal Housing Finance Authority
  
(550)
  
-
Madoff-related litigation costs
  
-
  
(298)
Provision for FCA investigation into foreign exchange
  
(378)
  
-
Regulatory investigation provisions in GPB
  
-
  
(317)
Restructuring and other related costs
  
(150)
  
(396)
UK bank levy
  
45
  
(9)
UK customer redress programmes
  
(935)
  
(840)
US customer remediation provision relating to CRS
  
-
  
(100)
         
Total
  
(1,968)
  
(1,530)
 

 
 
· Excluding significant items, operating expenses were US$1.3bn or 5% higher reflecting in part increases in risk, compliance and related costs. This included Global Standards and the broader risk and regulatory reform programme being undertaken across the industry to build the necessary infrastructure to meet today's enhanced compliance standards, as well as meeting obligations such as multiple stress tests across different jurisdictions and structural reform. Global Standards remains one of our key strategic priorities, aiming to deliver a consistent approach to financial crime risk management.
 
The Global Standards programme has transitioned from design to implementation, and during 9M14 we began deploying it across the Group. Our global businesses are currently embedding operating procedures to deliver the global anti-money laundering and sanctions policies which were approved and issued earlier in the year. Investment has also been made in developing our financial crime compliance expertise and building strategic infrastructure solutions for customer due diligence, transaction monitoring and sanctions screening.
 
The increase in costs also reflected inflationary pressures, including wage inflation, primarily in Asia and Latin America.
 
We continued to invest in strategic initiatives in support of organically growing our business, primarily in CMB in Asia, by increasing the number of Relationship Managers and FTEs to support business growth in Business Banking and Global Trade and Receivables Finance.
 
During 9M14, we generated further sustainable savings of US$0.9bn, primarily by re-engineering certain of our back office processes, which in part offset the cost increases noted above.
 
 
· The reported cost efficiency ratio increased by 5.9 ppts from 56.6% for 9M13 to 62.5% in 2014 while, on an underlying basis, it increased from 57.1% to 62.5%.
 
 
· FTEs at the end of the quarter were 257,945, an increase of 1,856 compared with 30 June 2014, reflecting continued investment in Compliance and Global Standards, and investment to support business growth.
 
 
· The effective tax rate for 9M14 of 17.8% was lower than the UK corporation tax rate of 21.5%. This reflected the recurring benefits from tax exempt income from government bonds and equities held across a number of Group entities and recognition of the Group's share of post-tax profits of associates and joint ventures within our pre-tax income, together with a current tax credit for prior periods. The tax expense decreased by US$0.8bn to US$3.0bn for 9M14, primarily due to a reduction in accounting profits and the benefit of the current tax credit for prior years.
 
 
· On 6 October 2014, the Board announced a third interim dividend for 2014 of US$0.10 per ordinary share.
 
Balance sheet commentary compared with 30 June 2014
 
 
· Reported loans and advances to customers decreased by US$18bn during 3Q14 driven by adverse foreign exchange movements of US$34bn. Excluding these movements, loans and advances to customers increased by US$16bn, primarily in CMB and, to a lesser extent, in GB&M. In CMB we experienced growth in the majority of our regions from term lending following growth campaigns, most notably in our home markets of the UK and Hong Kong. The growth in GB&M was mainly in Europe from higher corporate overdraft balances that did not meet the criteria for netting, with a corresponding rise in customer accounts.
 
 
· Reported customer accounts decreased by US$21bn during 3Q14 driven by adverse foreign exchange movements of US$43bn. Excluding these movements, customer accounts increased by US$22bn, with growth in RBWM and GB&M and, to a lesser extent, in CMB in our Payments and Cash Management business in Asia and in the UK. RBWM balances increased, mainly in Hong Kong reflecting growth in our customer portfolio, in particular for the Premier segment, and in the UK reflecting customers' continued preference for holding balances in current and savings accounts. Also in the UK, corporate current account balances rose, mainly in GB&M, in line with the increase in corporate overdraft balances as noted above.
 
 
· Other significant balance sheet movements in the quarter included an increase in derivative assets and liabilities, notably in Europe and Asia, reflecting continued shifts in major yield curves.
 
Net interest margin
 
 
· Net interest margin has remained broadly stable since 2Q14, although it decreased in 9M14 compared with the same period in 2013 as a result of significantly lower gross yields on customer lending, including balances within 'Assets held for sale', primarily in North America and Latin America. In North America, this was driven by the effect of the disposals of the CML non-real estate portfolio and select tranches of CML first lien mortgages in the US in 2013. Both North America and Latin America, notably Brazil, were also affected by a change in the composition of their lending portfolios as secured, lower yielding balances made up a greater proportion of the portfolio. In Brazil, the effect of this more than offset the effect of increasing interest rates. In addition in Latin America, yields on customer lending also decreased in Mexico due to falls in central bank interest rates. Yields on customer lending also fell in Asia and Europe, although to a lesser extent. In Europe this was due to the impact of the provisions arising from the ongoing review of compliance with the Consumer Credit Act in the UK. However, yields on our surplus liquidity increased (notably in Asia and Latin America) in line with interest rate rises in mainland China and Brazil, and as a result of active management of our portfolios.
 
 
· Our overall cost of funds for 9M14 decreased compared with the same period in 2013, but this had a marginal effect on the net interest margin. The cost of funds decreased across most of our regions, although this was partly offset by a rise in Latin America, reflecting increasing interest rates in Brazil.
 
 
· In addition, the net interest margin for 9M14 reduced compared with the same period in 2013 due to the significant increase in reverse repurchase agreements and repurchase agreements arising from the change in 4Q13 in the way that GB&M manage these activities. This had the effect of increasing average interest-earning assets without a correspondingly large increase in net interest income, as these agreements are typically lower-yielding and have a lower cost of funds than the rest of the portfolio.
 
 
Capital and risk-weighted assets commentary
 
Internal capital generation contributed US$1.7bn to CET1 capital, being profits attributable to shareholders of the parent company after regulatory adjustment for own credit spread and net of the third interim dividend and planned scrip. This was adversely affected by foreign currency translation differences of US$5.2bn, partly offset by a reduction in goodwill of US$1.4bn predominantly due to FX movements.
 
At 3Q14, RWAs decreased by US$21.1bn, mainly as a result of movements in foreign exchange driven by the strengthening of the US dollar against other currencies reducing RWAs by US$19.5bn.
 
US retail run-off portfolio RWAs decreased by US$5.8bn as a result of the continued reduction of the legacy portfolio and book quality movements. The latter were the result of a combination of credit quality improvements and exposures moving to default taking the form of capital deductions rather than RWAs. Additionally, the reclassification of part of the mortgage portfolio led to an RWA decrease of US$4.1bn, reported in internal updates.
 
Business growth in CMB and GB&M from higher term lending and commercial loans to corporate customers increased RWAs by US$16.9bn, of which BoCom accounted for US$3.5bn. This was offset by an improvement in corporate credit quality in Europe reducing RWAs by US$0.8bn.
 
In GB&M, the sale of certain structured investment conduit positions in North America resulted in a reduction in RWAs of US$0.9bn. In addition, increased offsetting of available-for-sale reserves against related RWAs, reported in internal updates, and the continued managed run-off of the securitisation portfolio reduced RWAs by US$3.0bn.
 
In GB&M, market risk RWAs increased by US$3.8bn. Methodology changes increased RWAs by US$6.7bn, driven by the introduction, for collateralised transactions, of the basis between the currency of the trade and the currency of collateral into the VaR calculation and removal of the diversification benefit from the Risks not in VaR calculations. These were partially offset by the sale of our correlation trading portfolio, reducing Comprehensive Risk Measure RWAs by US$2.0bn and the recalibration of the Incremental Risk Charge model for US$1.0bn, reported in movements in risk levels.
 
Counterparty credit RWAs declined by US$4.4bn during the quarter. In Europe, updates to the Internal Model Method and a more efficient allocation of collateral both in IRB, reported in internal updates, and standardised approach resulted in a decrease in RWAs of US$6.9bn. This was partially offset by a book size increase in North America of US$3.1bn arising due to normal business movements and hedges used to facilitate the sale of our correlation trading portfolio.
 
Trading conditions since 30 September 2014 and outlook
 
Our performance in October was in line with the trends we experienced during the first nine months of the year.
 
Discussions are ongoing with the UK FCA regarding a proposed resolution of their foreign exchange investigation with respect to HSBC Bank plc's systems and controls relating to one part of its spot FX trading business in London. Although there can be no certainty that a resolution will be agreed, if one is reached, the resolution is likely to involve the payment of a significant financial penalty. We continue to cooperate fully with regulatory and law enforcement authorities in the UK and other jurisdictions.
 
 
In addition, in connection with the inquiry by French magistrates regarding whether HSBC Private Bank (Suisse) SA acted appropriately in relation to certain customers who had French tax reporting requirements, HSBC Private Bank (Suisse) SA has been summoned to appear before the French magistrates for possible commencement of a criminal investigation. Although the outcome of the hearing, and any such investigation, is at this time uncertain, as matters progress it is possible that any fines, penalties or other terms imposed could be significant.
 
 

Notes
 
 
· Income statement comparisons, unless stated otherwise, are between the quarter ended 30 September 2014 and the quarter ended 30 September 2013, or between the nine months ended 30 September 2014 and the corresponding nine months in 2013. Balance sheet comparisons, unless otherwise stated, are between balances at 30 September 2014 and the corresponding balances at 30 June 2014.
 
 
· The financial information on which this Interim Management Statement 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 432 to 450 of the Annual Report and Accounts 2013.
 
 
· The Board has adopted a policy of paying quarterly interim dividends on the 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.
 
Cautionary statement regarding forward-looking statements
 
The Interim Management Statement 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; and our success in addressing operational, legal and regulatory, and litigation challenges, notably compliance with the Deferred Prosecution Agreements with US authorities.
 
Summary consolidated income statement
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net interest income
  
26,158
  
26,533
  
8,753
  
8,684
  
8,714
Net fee income
  
12,239
  
12,441
  
4,062
  
4,131
  
4,037
Net trading income
  
5,570
  
7,645
  
2,295
  
995
  
1,283
                     
Changes in fair value of long-term debt issued and related derivatives
  
476
  
(953)
  
38
  
235
  
466
Net income from other financial instruments designated at fair value
  
1,440
  
1,203
  
218
  
917
  
981
                     
Net income from financial instruments designated at fair value
  
1,916
  
250
  
256
  
1,152
  
1,447
Gains less losses from financial investments
  
915
  
1,876
  
(31)
  
762
  
20
Dividend income
  
289
  
278
  
201
  
64
  
171
Net insurance premium income
  
9,316
  
9,275
  
3,179
  
3,001
  
3,049
Other operating income
  
861
  
1,419
  
323
  
210
  
473
                     
Total operating income
  
57,264
  
59,717
  
19,038
  
18,999
  
19,194
                     
Net insurance claims and benefits paid and movement in liabilities to policyholders
  
(10,322)
  
(10,267)
  
(3,263)
  
(3,716)
  
(4,116)
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
46,942
  
49,450
  
15,775
  
15,283
  
15,078
                     
Loan impairment charges and other credit risk provisions
  
(2,601)
  
(4,709)
  
(760)
  
(1,043)
  
(1,593)
                     
Net operating income
  
44,341
  
44,741
  
15,015
  
14,240
  
13,485
                     
Total operating expenses
  
(29,357)
  
(27,983)
  
(11,091)
  
(9,414)
  
(9,584)
                     
Operating profit
  
14,984
  
16,758
  
3,924
  
4,826
  
3,901
                     
Share of profit in associates and joint ventures
  
1,965
  
1,843
  
685
  
729
  
629
                     
Profit before tax
  
16,949
  
18,601
  
4,609
  
5,555
  
4,530
                     
Tax expense
  
(3,009)
  
(3,770)
  
(987)
  
(747)
  
(1,045)
                     
Profit after tax
  
13,940
  
14,831
  
3,622
  
4,808
  
3,485
                     
Profit attributable to shareholders of the parent company
  
13,177
  
13,484
  
3,431
  
4,535
  
3,200
Profit attributable to non-controlling interests
  
763
  
1,347
  
191
  
273
  
285
                     
   
US$
  
US$
  
US$
  
US$
  
US$
                     
Basic earnings per ordinary share
  
0.67
  
0.71
  
0.17
  
0.23
  
0.16
Diluted earnings per ordinary share
  
0.67
  
0.70
  
0.17
  
0.23
  
0.16
Dividend per ordinary share (in respect of the period)
  
0.30
  
0.30
  
0.10
  
0.10
  
0.10
                     
   
%
  
%
  
%
  
%
  
%
                     
Return on average ordinary shareholders' equity (annualised)
  
9.5
  
10.4
  
7.2
  
9.8
  
7.2
Pre-tax return on average risk-weighted assets (annualised)
  
1.9
  
2.2
  
1.5
  
1.8
  
1.6
Cost efficiency ratio
  
62.5
  
56.6
  
70.3
  
61.6
  
63.6


Summary consolidated balance sheet
 
   
At
30 Sep
2014
  
At
30 Jun
2014
  
At
31 Dec
2013
   
US$m
  
US$m
  
US$m
ASSETS
            
Cash and balances at central banks
  
133,424
  
132,137
  
166,599
Trading assets
  
331,642
  
347,106
  
303,192
Financial assets designated at fair value
  
29,729
  
31,823
  
38,430
Derivatives
  
308,611
  
269,839
  
282,265
Loans and advances to banks
  
124,756
  
127,387
  
120,046
Loans and advances to customers
  
1,028,880
  
1,047,241
  
992,089
Reverse repurchase agreements - non-trading
  
190,848
  
198,301
  
179,690
Financial investments
  
411,604
  
423,710
  
425,925
Other assets
  
169,151
  
176,049
  
163,082
             
Total assets
  
2,728,645
  
2,753,593
  
2,671,318
             
LIABILITIES AND EQUITY
            
Liabilities
            
Deposits by banks
  
89,421
  
92,764
  
86,507
Customer accounts
  
1,395,116
  
1,415,705
  
1,361,297
Repurchase agreements - non-trading
  
150,814
  
165,506
  
164,220
Trading liabilities
  
215,395
  
228,135
  
207,025
Financial liabilities designated at fair value
  
77,590
  
82,968
  
89,084
Derivatives
  
300,415
  
263,494
  
274,284
Debt securities in issue
  
90,234
  
96,397
  
104,080
Liabilities under insurance contracts
  
73,742
  
75,223
  
74,181
Other liabilities
  
133,753
  
134,679
  
120,181
             
Total liabilities
  
2,526,480
  
2,554,871
  
2,480,859
             
Equity
            
Total shareholders' equity
  
193,597
  
190,281
  
181,871
Non-controlling interests
  
8,568
  
8,441
  
8,588
             
Total equity
  
202,165
  
198,722
  
190,459
             
Total equity and liabilities
  
2,728,645
  
2,753,593
  
2,671,318
             
Ratio of customer advances to customer accounts
  
73.7%
  
74.0%
  
72.9%




Capital
Capital structure
 
   
CRD IV year 1 transition
  
Basel 2.5
   
At
30 Sep
2014
  
At
30 Jun
2014
  
Estimated at
31 Dec
2013
  
At
31 Dec
2013
   
US$m
  
US$m
  
US$m
  
US$m
Composition of regulatory capital
                
Shareholders' equity per balance sheet1
  
193,597
  
190,281
  
181,871
  
181,871
Non-controlling interests
  
3,818
  
3,792
  
3,644
  
4,955
Regulatory adjustments to the accounting basis
  
(26,068)
  
(19,387)
  
(20,044)
  
(7,942)
Deductions
  
(33,271)
  
(34,616)
  
(34,238)
  
(29,833)
                 
Common equity/core tier 1 capital
  
138,076
  
140,070
  
131,233
  
149,051
                 
Other tier 1 capital before deductions
  
19,607
  
13,977
  
14,573
  
16,110
Deductions
  
(152)
  
(164)
  
(165)
  
(7,006)
                 
Tier 1 capital
  
157,531
  
153,883
  
145,641
  
158,155
                 
Total qualifying tier 2 capital before deductions
  
38,473
  
39,197
  
35,786
  
47,812
Total deductions other than from tier 1 capital
  
(229)
  
(246)
  
(248)
  
(11,958)
                 
Total regulatory capital
  
195,775
  
192,834
  
181,179
  
194,009
                 
Total risk-weighted assets
  
1,227,548
  
1,248,572
  
1,214,939
  
1,092,653
                 
   
%
  
%
  
%
  
%
Capital ratios
                
Common equity tier 1 ratio
  
11.2
  
11.2
  
10.8
    
Core tier 1 ratio
              
13.6
Tier 1 ratio
  
12.8
  
12.3
  
12.0
  
14.5
Total capital ratio
  
15.9
  
15.4
  
14.9
  
17.8
 
 
1 Includes externally verified profits for the period ended 30 September 2014.
 
Reconciliation of regulatory capital from Year 1 transitional basis to an estimated CRD IV end point basis
 
   
At
  
At
  
Estimated at
   
30 Sep
2014
  
30 Jun
2014
  
31 Dec
2013
   
US$m
  
US$m
  
US$m
             
Common equity tier 1 capital on a year 1 transitional basis
  
138,076
  
140,070
  
131,233
Unrealised gains arising from revaluation of property
  
1,343
  
1,346
  
1,281
Unrealised gains in available for sale reserves
  
512
  
141
  
-
             
Common equity tier 1 capital end point basis
  
139,931
  
141,557
  
132,514
             
Additional tier 1 capital on a year 1 transitional basis
  
19,455
  
13,813
  
14,408
Grandfathered instruments:
            
- preference share premium
  
(1,160)
  
(1,160)
  
(1,160)
- preference share non-controlling interests
  
(1,955)
  
(1,955)
  
(1,955)
- hybrid capital securities
  
(10,097)
  
(10,227)
  
(10,727)
Transitional provisions:
            
- allowable non-controlling interest in AT1
  
(324)
  
(231)
  
(366)
- unconsolidated investments
  
152
  
164
  
165
             
Additional tier 1 capital end point basis
  
6,071
  
404
  
365
             
Tier 1 capital end point basis
  
146,002
  
141,961
  
132,879
             
Tier 2 capital on a year 1 transitional basis
  
38,244
  
38,951
  
35,538
Grandfathered instruments:
            
- perpetual subordinated debt
  
(2,218)
  
(2,218)
  
(2,218)
- term subordinated debt
  
(21,513)
  
(21,513)
  
(21,513)
Transitional provisions:
            
- non-controlling interest in tier 2 capital
  
(240)
  
(240)
  
(240)
- allowable non-controlling interest in tier 2
  
277
  
190
  
345
- unconsolidated investments
  
(152)
  
(164)
  
(165)
             
Tier 2 capital end point basis
  
14,398
  
15,006
  
11,747
             
Total regulatory capital end point basis
  
160,400
  
156,967
  
144,626
             
Total risk-weighted assets
  
1,227,548
  
1,248,572
  
1,214,939
 
 
Capital and RWA movements by major driver - CRD IV end point basis
 
   
Common equity
    
   
tier 1 capital
  
RWAs
   
US$bn
  
US$bn
         
CRD IV end point basis at 1 July 2014
  
141.6
  
1,248.6
Contribution to CET1 capital from profit
  
3.4
    
Net dividends including foreseeable net dividends1
  
(1.7)
    
- foreseeable third interim dividend
  
(2.1)
    
- add back: planned scrip take-up
  
0.4
    
         
Exchange differences and other
  
(3.4)
  
(19.4)
Legacy portfolio
      
(14.3)
Corporate growth
      
16.9
CCR model update and calculation change
      
(4.3)
         
CRD IV end point basis at 30 September 2014
  
139.9
  
1,227.5
 
 
1 This includes dividends on ordinary shares, quarterly dividends on preference shares and coupons on capital securities, classified as equity.
 
Risk-weighted assets
RWAs by risk type
 
   
CRD IV transition and end point
  
Basel 2.5
   
At
  
At
  
Estimated at
  
At
   
30 Sep
2014
  
30 Jun
2014
  
31 Dec
2013
  
31 Dec
2013
   
US$bn
  
US$bn
  
US$bn
  
US$bn
                 
Credit risk
  
945.5
  
966.0
  
936.5
  
864.3
Counterparty credit risk
  
97.0
  
101.4
  
95.8
  
45.8
Market risk
  
66.9
  
63.1
  
63.4
  
63.4
Operational risk
  
118.1
  
118.1
  
119.2
  
119.2
                 
   
1,227.5
  
1,248.6
  
1,214.9
  
1,092.7
 
RWAs by global businesses
 
   
At
  
At
  
At
   
30 Sep
2014
  
30 Jun
2014
  
31 Dec
2013
   
US$bn
  
US$bn
  
US$bn
             
Total
  
1,227.5
  
1,248.6
  
1,092.7
             
Retail Banking and Wealth Management
  
209.2
  
223.0
  
233.5
Commercial Banking
  
429.0
  
424.9
  
391.7
Global Banking and Markets
  
527.0
  
537.3
  
422.3
Global Private Banking
  
21.3
  
22.1
  
21.7
Other
  
41.0
  
41.3
  
23.5
 
RWAs by geographical regions1
 
   
At
  
At
  
At
   
30 Sep
2014
  
30 Jun
2014
  
31 Dec
2013
   
US$bn
  
US$bn
  
US$bn
             
Total
  
1,227.5
  
1,248.6
  
1,092.7
             
Europe
  
382.3
  
393.6
  
300.1
Asia
  
490.9
  
481.1
  
430.7
Middle East and North Africa
  
61.8
  
62.7
  
62.5
North America
  
227.6
  
236.9
  
223.8
Latin America
  
93.1
  
96.8
  
89.5
 
 
1 RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.
 
 
Credit risk exposure - RWAs by geographical region
 
   
Europe
  
Asia
  
MENA
  
North
America
  
Latin
America
  
Total
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
CRD IV basis
                        
RWAs
                        
IRB advanced approach
  
201.3
  
213.1
  
11.4
  
146.6
  
11.4
  
583.8
IRB foundation approach
  
11.4
  
-
  
3.7
  
-
  
-
  
15.1
Standardised approach
  
45.4
  
178.3
  
38.6
  
28.1
  
56.2
  
346.6
                   
67.6
    
At 30 September 2014
  
258.1
  
391.4
  
53.7
  
174.7
  
67.6
  
945.5
                         
CRD IV basis
                        
RWAs
                        
IRB advanced approach
  
211.2
  
209.9
  
11.2
  
155.3
  
12.0
  
599.6
IRB foundation approach
  
11.4
  
-
  
4.1
  
-
  
-
  
15.5
Standardised approach
  
46.9
  
174.3
  
39.0
  
30.7
  
60.0
  
350.9
                         
At 30 June 2014
  
269.5
  
384.2
  
54.3
  
186.0
  
72.0
  
966.0
                         
Basel 2.5 basis
                        
RWAs
                        
IRB advanced approach
  
157.1
  
182.9
  
11.2
  
161.5
  
8.5
  
521.2
IRB foundation approach
  
9.8
  
-
  
3.8
  
-
  
-
  
13.6
Standardised approach
  
44.5
  
165.9
  
40.0
  
22.7
  
56.4
  
329.5
                         
At 31 December 2013
  
211.4
  
348.8
  
55.0
  
184.2
  
64.9
  
864.3
 
Credit risk exposure - RWAs by global businesses
 
   
Principal RBWM
  
RBWM
(Run-off)
CMB
  
GB&M
  
GPB
  
Other
  
Total
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
                             
CRD IV basis
                            
RWAs
                            
IRB advanced approach
  
57.9
  
50.7
  
208.5
  
245.2
  
10.4
  
11.1
  
583.8
IRB foundation approach
  
-
  
-
  
7.6
  
6.2
  
0.1
  
1.2
  
15.1
Standardised approach
  
57.6
  
5.5
  
180.0
  
69.0
  
6.5
  
28.0
  
346.6
                             
At 30 September 2014
  
115.5
  
56.2
  
396.1
  
320.4
  
17.0
  
40.3
  
945.5
                             
CRD IV basis
                            
RWAs
                            
IRB advanced approach
  
60.3
  
60.6
  
206.2
  
249.5
  
11.1
  
11.9
  
599.6
IRB foundation approach
  
-
  
-
  
7.2
  
6.9
  
0.1
  
1.3
  
15.5
Standardised approach
  
59.0
  
5.5
  
178.5
  
73.6
  
6.5
  
27.8
  
350.9
                             
At 30 June 2014
  
119.3
  
66.1
  
391.9
  
330.0
  
17.7
  
41.0
  
966.0
                             
Basel 2.5 basis
                            
RWAs
                            
IRB advanced approach
  
58.4
  
72.6
  
183.2
  
192.8
  
10.4
  
3.8
  
521.2
IRB foundation approach
  
 
-
  
-
  
6.3
  
5.8
  
0.1
  
1.4
  
13.6
Standardised approach
  
60.6
  
3.1
  
169.3
  
71.6
  
6.9
  
18.0
  
329.5
                             
At 31 December 2013
  
119.0
  
75.7
  
358.8
  
270.2
  
17.4
  
23.2
  
864.3

 
 
RWA movement by geographical regions by key driver - credit risk - IRB only
 
   
Europe
  
Asia
  
MENA
  
North
America
  
Latin
America
  
Total
  
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
RWAs at 1 January 2014
on Basel 2.5 basis
  
166.9
  
182.9
  
15.0
  
161.5
  
8.5
  
534.8
  
                           
Foreign exchange movement
  
(4.6)
  
(1.3)
  
(0.2)
  
(1.4)
  
(1.2)
  
(8.7)
  
Acquisitions and disposals
  
(2.3)
  
-
  
(0.5)
  
(3.5)
  
(0.1)
  
(6.4)
  
Book size
  
5.6
  
18.3
  
(0.1)
  
1.6
  
1.8
  
27.2
  
Book quality
  
(3.0)
  
0.7
  
0.4
  
(5.4)
  
0.7
  
(6.6)
  
Model updates
  
14.9
  
0.3
  
-
  
(6.4)
  
-
  
8.8
  
- portfolios moving onto
IRB approach
  
-
  
-
  
-
  
-
  
-
  
-
  
- new/updated models
  
14.9
  
0.3
  
-
  
(6.4)
  
-
  
8.8
  
                           
Methodology and policy
  
35.2
  
12.2
  
0.5
  
0.2
  
1.7
  
49.8
  
- internal updates
  
(11.5)
  
(5.6)
  
(0.2)
  
(6.8)
  
(0.1)
  
(24.2)
  
- external updates - regulatory
  
2.2
  
6.7
  
(0.2)
  
0.7
  
0.1
  
9.5
  
- CRD IV impact
  
37.0
  
5.7
  
0.4
  
4.9
  
0.2
  
48.2
  
- NCOA moving from STD to IRB
  
7.5
  
5.4
  
0.5
  
1.4
  
1.5
  
16.3
  
                           
                           
Total RWA movement
  
45.8
  
30.2
  
0.1
  
(14.9)
  
2.9
  
64.1
  
                           
RWAs at 30 September 2014 on
CRD IV basis
  
212.7
  
213.1
  
15.1
  
146.6
  
11.4
  
598.9
  
                           
RWAs at 1 July 2014
on CRD IV basis
  
222.6
  
209.9
  
15.3
  
155.3
  
12.0
  
615.1
  
                           
Foreign exchange movement
  
(9.5)
  
(2.1)
  
-
  
(1.3)
  
(0.8)
  
(13.7)
  
Acquisitions and disposals
  
-
  
-
  
-
  
(0.9)
  
-
  
(0.9)
  
Book size
  
2.6
  
5.3
  
0.1
  
2.1
  
(0.1)
  
10.0
  
Book quality
  
(1.3)
  
-
  
(0.3)
  
(3.1)
  
0.3
  
(4.4)
  
Model updates
  
-
  
-
  
-
  
(1.3)
  
-
  
(1.3)
  
- portfolios moving onto
IRB approach
  
-
  
-
  
-
  
-
  
-
  
-
  
- new/updated models
  
-
  
-
  
-
  
(1.3)
  
-
  
(1.3)
  
                           
Methodology and policy
  
(1.7)
  
-
  
-
  
(4.2)
  
-
  
(5.9)
  
- internal updates
  
(1.7)
  
-
  
-
  
(4.2)
  
-
  
(5.9)
  
- external updates - regulatory
  
-
  
-
  
-
  
-
  
-
  
-
  
- CRD IV impact
  
-
  
-
  
-
  
-
  
-
  
-
  
- NCOA moving from STD to IRB
  
-
  
-
  
-
  
-
  
-
  
-
  
                           
                           
Total RWA movement
  
(9.9)
  
3.2
  
(0.2)
  
(8.7)
  
(0.6)
  
(16.2)
  
                           
RWAs at 30 September 2014 on
CRD IV basis
  
212.7
  
213.1
  
15.1
  
146.6
  
11.4
  
598.9
  
                         
RWAs at 1 January 2013
on Basel 2.5 basis
  
150.7
  
162.3
  
12.6
  
187.1
  
11.2
  
523.9
                         
Foreign exchange movement
  
0.4
  
(3.7)
  
(0.4)
  
(1.0)
  
(0.7)
  
(5.4)
Acquisitions and disposals
  
(1.5)
  
-
  
-
  
(8.6)
  
-
  
(10.1)
Book size
  
4.7
  
15.4
  
0.8
  
(7.8)
  
(0.9)
  
12.2
Book quality
  
(1.3)
  
5.7
  
1.2
  
(11.3)
  
0.2
  
(5.5)
Model updates
  
(1.8)
  
-
  
0.1
  
(0.2)
  
-
  
(1.9)
- portfolios moving onto
IRB approach
  
-
  
-
  
-
  
-
  
-
  
-
- new/updated models
  
(1.8)
  
-
  
0.1
  
(0.2)
  
-
  
(1.9)
                         
Methodology and policy
  
1.7
  
0.4
  
-
  
9.2
  
0.1
  
11.4
- internal updates
  
(0.8)
  
(6.0)
  
-
  
(1.0)
  
0.1
  
(7.7)
- external updates - regulatory
  
2.5
  
6.4
  
-
  
10.2
  
-
  
19.1
                         
                         
Total RWA movement
  
2.2
  
17.8
  
1.7
  
(19.7)
  
(1.3)
  
0.7
                         
RWAs at 30 September 2013
  
152.9
  
180.1
  
14.3
  
167.4
  
9.9
  
524.6
                                         


 
   
Europe
  
Asia
  
MENA
  
North
America
  
Latin
America
  
Total
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
                         
RWAs at 1 July 2013
on Basel 2.5 basis
  
148.4
  
173.6
  
13.9
  
174.5
  
10.5
  
520.9
                         
Foreign exchange movement
  
6.4
  
(0.6)
  
0.1
  
0.6
  
(0.1)
  
6.4
Acquisitions and disposals
  
-
  
-
  
-
  
(0.4)
  
-
  
(0.4)
Book size
  
2.7
  
5.1
  
0.7
  
(2.4)
  
(0.4)
  
5.7
Book quality
  
(3.7)
  
2.1
  
(0.4)
  
(4.1)
  
(0.1)
  
(6.2)
Model updates
  
-
  
-
  
-
  
-
  
-
  
-
- portfolios moving onto
IRB approach
  
-
  
-
  
-
  
-
  
-
  
-
- new/updated models
  
-
  
-
  
-
  
-
  
-
  
-
                         
Methodology and policy
  
(0.9)
  
(0.1)
  
-
  
(0.8)
  
-
  
(1.8)
- internal updates
  
(0.9)
  
(0.1)
  
-
  
(0.8)
  
-
  
(1.8)
- external updates - regulatory
  
-
  
-
  
-
  
-
  
-
  
-
                         
                         
Total RWA movement
  
4.5
  
6.5
  
0.4
  
(7.1)
  
(0.6)
  
3.7
                         
RWAs at 30 September 2013
  
152.9
  
180.1
  
14.3
  
167.4
  
9.9
  
524.6
 
 
 
RWA movement by global businesses by key driver - credit risk - IRB only
 
   
Principal
RBWM
  
US
run-off
portfolio
  
Total
RBWM
  
CMB
  
GB&M
  
GPB
  
Other
  
Total
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
RWAs at 1 January 2014
on Basel 2.5 basis
  
58.4
  
72.6
  
131.0
  
189.5
  
198.5
  
10.6
  
5.2
  
534.8
Foreign exchange movement
  
(1.3)
  
-
  
(1.3)
  
(4.0)
  
(3.1)
  
-
  
(0.3)
  
(8.7)
Acquisitions and disposals
  
-
  
-
  
-
  
-
  
(6.4)
  
-
  
-
  
(6.4)
Book size
  
1.3
  
(5.2)
  
(3.9)
  
20.4
  
12.4
  
(0.6)
  
(1.1)
  
27.2
Book quality
  
(2.3)
  
(6.7)
  
(9.0)
  
3.0
  
(0.6)
  
(0.6)
  
0.6
  
(6.6)
Model updates
  
0.1
  
(6.2)
  
(6.1)
  
9.3
  
5.3
  
0.3
  
-
  
8.8
- portfolios moving onto
IRB approach
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
- new/updated models
  
0.1
  
(6.2)
  
(6.1)
  
9.3
  
5.3
  
0.3
  
-
  
8.8
                                 
Methodology and policy
  
1.7
  
(3.8)
  
(2.1)
  
(2.1)
  
45.3
  
0.8
  
7.9
  
49.8
- internal updates
  
(2.9)
  
(4.1)
  
(7.0)
  
(5.5)
  
(11.4)
  
(0.3)
  
-
  
(24.2)
- external updates - regulatory
  
-
  
-
  
-
  
2.5
  
6.3
  
0.5
  
0.2
  
9.5
- CRD IV impact
  
-
  
-
  
-
  
(0.7)
  
48.6
  
0.2
  
0.1
  
48.2
- NCOA moving from STD
to IRB
  
4.6
  
0.3
  
4.9
  
1.6
  
1.8
  
0.4
  
7.6
  
16.3
                                 
Total RWA movement
  
(0.5)
  
(21.9)
  
(22.4)
  
26.6
  
52.9
  
(0.1)
  
7.1
  
64.1
                                 
RWAs at 30 September 2014
on CRD IV basis
  
57.9
  
50.7
  
108.6
  
216.1
  
251.4
  
10.5
  
12.3
  
598.9
                                 
RWAs at 1 July 2014
on CRD IV basis
  
60.3
  
60.6
  
120.9
  
213.4
  
256.4
  
11.2
  
13.2
  
615.1
Foreign exchange movement
  
(1.8)
  
-
  
(1.8)
  
(6.2)
  
(5.2)
  
(0.2)
  
(0.3)
  
(13.7)
Acquisitions and disposals
  
-
  
-
  
-
  
-
  
(0.9)
  
-
  
-
  
(0.9)
Book size
  
0.2
  
(1.8)
  
(1.6)
  
8.7
  
3.9
  
(0.2)
  
(0.8)
  
10.0
Book quality
  
(0.5)
  
(2.7)
  
(3.2)
  
0.2
  
(1.3)
  
(0.3)
  
0.2
  
(4.4)
Model updates
  
-
  
(1.3)
  
(1.3)
  
-
  
-
  
-
  
-
  
(1.3)
- portfolios moving onto
IRB approach
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
- new/updated models
  
-
  
(1.3)
  
(1.3)
  
-
  
-
  
-
  
-
  
(1.3)
                                 
Methodology and policy
  
(0.3)
  
(4.1)
  
(4.4)
  
-
  
(1.5)
  
-
  
-
  
(5.9)
- internal updates
  
(0.3)
  
(4.1)
  
(4.4)
  
-
  
(1.5)
  
-
  
-
  
(5.9)
- external updates - regulatory
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
- CRD IV impact
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
- NCOA moving from STD
to IRB
  
-
  
-
  
-
  
-
  
-
  
-
  
-
  
-
                                 
Total RWA movement
  
(2.4)
  
(9.9)
  
(12.3)
  
2.7
  
(5.0)
  
(0.7)
  
(0.9)
  
(16.2)
                                 
RWAs at 30 September 2014 on CRD IV basis
  
57.9
  
50.7
  
108.6
  
216.1
  
251.4
  
10.5
  
12.3
  
598.9
 
RWA movement by key driver - counterparty credit risk - advanced approach
 
   
On CRD IV basis
  
On Basel 2.5 basis
   
9 months to
  
3 months to
  
9 months to
  
3 months to
   
30 Sep 2014
  
30 Sep 2014
  
30 Sep 2013
  
30 Sep 2013
   
US$bn
  
US$bn
  
US$bn
  
US$bn
                 
RWAs at beginning of period
  
42.2
  
70.8
  
45.7
  
45.1
                 
Book size
  
7.4
  
4.2
  
(0.3)
  
(1.3)
Book quality
  
(0.3)
  
-
  
(1.5)
  
(0.5)
Model updates
  
0.1
  
(2.1)
  
-
  
-
Methodology and policy
  
21.2
  
(2.3)
  
(2.7)
  
(2.1)
- internal updates
  
(3.3)
  
(2.3)
  
(2.7)
  
(2.1)
- external regulatory updates
  
7.5
  
-
  
-
  
-
- CRD IV impact
  
17.0
  
-
  
-
  
-
                 
                 
Total RWA movement
  
28.4
  
(0.2)
  
(4.5)
  
(3.9)
                 
RWAs at end of period
  
70.6
  
70.6
  
41.2
  
41.2
 
RWA movement by key driver - market risk - internal model based
 
   
On CRD IV basis
  
On Basel 2.5 basis
   
9 months to
  
3 months to
  
9 months to
  
3 months to
  
   
30 Sep 2014
  
30 Sep 2014
  
30 Sep 2013
  
30 Sep 2013
  
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
                   
RWAs at beginning of period
  
52.2
  
49.5
  
44.5
  
59.5
  
                   
Acquisitions and disposals
  
(2.0)
  
(2.0)
  
-
  
-
  
Movement in risk levels
  
(0.1)
  
(1.0)
  
(13.3)
  
(8.7)
  
Model updates
  
-
  
-
  
17.6
  
-
  
Methodology and policy
  
3.1
  
6.7
  
2.0
  
-
  
- internal updates
  
0.5
  
-
  
2.0
  
-
  
- external regulatory updates
  
2.6
  
6.7
  
-
  
-
  
                   
                   
Total RWA movement
  
1.0
  
3.7
  
6.3
  
(8.7)
  
                   
RWAs at end of period
  
53.2
  
53.2
  
50.8
  
50.8
  
                         
 
Leverage ratio
 
The table below presents our estimated leverage ratio, based on the approach prescribed by the PRA. The numerator is calculated using the final CRD IV end point tier 1 capital definition and the exposure measure is calculated based on the January 2014 Basel III text.
 
A detailed basis of preparation is outlined on page 198 of the Interim Report 2014.
 
Estimated leverage ratio
 
   
PRA-prescribed basis at
   
30 Sep
2014
  
30 Jun
2014
   
US$bn
  
US$bn
         
Total assets per regulatory balance sheet
  
2,822
  
2,833
Adjustment to reverse netting of loans and deposits allowable under IFRS
  
67
  
98
         
Reversal of accounting values:
  
(525)
  
(498)
- derivatives
  
(309)
  
(270)
- repurchase agreement and securities finance
  
(216)
  
(228)
         
Replaced with regulatory values:
  
400
  
436
- derivatives
  
176
  
199
- repurchase agreement and securities finance
  
224
  
237
         
Addition of off balance sheet commitments and guarantees
  
421
  
445
         
Exclusion of items already deducted from the capital measure
  
(36)
  
(37)
         
Exposure measure after regulatory adjustments
  
3,149
  
3,277
         
Tier 1 capital under CRD IV (end point)
  
146
  
142
         
Estimated leverage ratio (end point)
  
4.6%
  
4.3%


Profit before tax by global business and geographical region
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
By global business
                    
Retail Banking and Wealth Management
  
4,352
  
4,852
  
1,307
  
1,333
  
1,585
Commercial Banking
  
7,062
  
6,016
  
2,291
  
2,351
  
1,882
Global Banking and Markets
  
5,974
  
7,575
  
941
  
2,162
  
1,852
Global Private Banking
  
554
  
92
  
190
  
163
  
(16)
Other
  
(993)
  
66
  
(120)
  
(454)
  
(773)
                     
   
16,949
  
18,601
  
4,609
  
5,555
  
4,530
                     
By geographical region
                    
Europe
  
2,751
  
2,723
  
493
  
498
  
(45)
Asia
  
11,369
  
12,862
  
3,475
  
4,130
  
3,600
Middle East and North Africa
  
1,476
  
1,288
  
487
  
487
  
379
North America
  
883
  
1,042
  
58
  
376
  
376
Latin America
  
470
  
686
  
96
  
64
  
220
                     
   
16,949
  
18,601
  
4,609
  
5,555
  
4,530

Summary information - global businesses
 
Retail Banking and Wealth Management
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
18,700
  
19,930
  
6,377
  
6,079
  
6,641
                     
Loan impairment charges and other credit risk provisions
  
(1,472)
  
(2,541)
  
(247)
  
(621)
  
(773)
                     
Net operating income
  
17,228
  
17,389
  
6,130
  
5,458
  
5,868
                     
Total operating expenses
  
(13,198)
  
(12,827)
  
(4,929)
  
(4,253)
  
(4,376)
                     
Operating profit
  
4,030
  
4,562
  
1,201
  
1,205
  
1,492
                     
Share of profit in associates and joint ventures
  
322
  
290
  
106
  
128
  
93
                     
Profit before tax
  
4,352
  
4,852
  
1,307
  
1,333
  
1,585
                     
Profit before tax relates to:
                    
Principal RBWM
  
3,925
  
4,984
  
939
  
1,224
  
1,483
US run-off portfolio
  
427
  
(132)
  
368
  
109
  
102
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
4,352
  
4,852
  
1,307
  
1,333
  
1,585
Currency translation adjustment
      
52
      
2
  
8
Acquisitions, disposals and dilutions
  
(6)
  
67
  
-
  
-
  
(5)
                     
Underlying profit before tax
  
4,346
  
4,971
  
1,307
  
1,335
  
1,588
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
70.6
  
64.4
  
77.3
  
70.0
  
65.9
Reported pre-tax RoRWA (annualised)
  
2.6
  
2.5
  
2.4
  
2.4
  
2.6



Reconciliation of reported and underlying Principal RBWM profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
3,925
  
4,984
  
939
  
1,224
  
1,483
Currency translation adjustment
      
52
      
2
  
8
Acquisitions, disposals and dilutions
  
(6)
  
(53)
  
-
  
-
  
(5)
                     
Underlying profit before tax
  
3,919
  
4,983
  
939
  
1,226
  
1,486
 
Principal RBWM: management view of revenue
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Current accounts, savings and deposits
  
4,395
  
4,262
  
1,482
  
1,485
  
1,478
Wealth products
  
4,863
  
4,767
  
1,667
  
1,629
  
1,579
Investment distribution1
  
2,654
  
2,735
  
933
  
849
  
882
Life insurance manufacturing
  
1,348
  
1,201
  
440
  
478
  
441
Asset Management
  
861
  
831
  
294
  
302
  
256
                     
Personal lending
  
8,591
  
8,918
  
2,879
  
2,872
  
2,884
Mortgages
  
2,397
  
2,389
  
793
  
787
  
779
Credit cards
  
3,269
  
3,341
  
1,101
  
1,111
  
1,098
Other personal lending2
  
2,925
  
3,188
  
985
  
974
  
1,007
                     
Other3
  
(197)
  
696
  
(98)
  
(216)
  
206
                     
Net operating income4
  
17,652
  
18,643
  
5,930
  
5,770
  
6,147
 
 
1 '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.
 
2 'Other personal lending' includes personal non-residential closed-end loans and personal overdrafts.
 
3 'Other' includes the distribution and manufacturing (where applicable) of retail and credit protection insurance, any gains or losses on business disposals, movements in non-qualifying hedges, losses arising from a review of compliance with the Consumer Credit Act in the UK in 2014 and loss on disposal of HFC UK Bank secured lending portfolio in 2013.
 
4 Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.
 
Commercial Banking
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
12,318
  
11,848
  
4,202
  
4,106
  
3,985
                     
Loan impairment charges and other credit risk provisions
  
(970)
  
(1,841)
  
(408)
  
(365)
  
(681)
                     
Net operating income
  
11,348
  
10,007
  
3,794
  
3,741
  
3,304
                     
Total operating expenses
  
(5,531)
  
(5,170)
  
(1,943)
  
(1,849)
  
(1,834)
                     
Operating profit
  
5,817
  
4,837
  
1,851
  
1,892
  
1,470
                     
Share of profit in associates and joint ventures
  
1,245
  
1,179
  
440
  
459
  
412
                     
Profit before tax
  
7,062
  
6,016
  
2,291
  
2,351
  
1,882
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
7,062
  
6,016
  
2,291
  
2,351
  
1,882
Currency translation adjustment
      
14
      
(12)
  
-
Acquisitions, disposals and dilutions
  
(13)
  
(70)
  
-
  
(1)
  
(19)
                     
Underlying profit before tax
  
7,049
  
5,960
  
2,291
  
2,338
  
1,863
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
44.9
  
43.6
  
46.2
  
45.0
  
46.0
Reported pre-tax RoRWA (annualised)
  
2.3
  
2.1
  
2.1
  
2.2
  
1.9
 
Management view of revenue
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Global Trade and Receivables Finance1
  
2,190
  
2,216
  
761
  
743
  
757
Credit and lending
  
4,734
  
4,562
  
1,626
  
1,614
  
1,554
Payments and Cash Management1, current accounts and savings deposits
  
4,170
  
3,924
  
1,432
  
1,416
  
1,345
Other
  
1,224
  
1,146
  
383
  
333
  
329
                     
Net operating income2
  
12,318
  
11,848
  
4,202
  
4,106
  
3,985
 
 
1 'Global Trade and Receivables Finance' and 'Payments and Cash Management' include revenue attributable to foreign exchange products.
 
 
Global Banking and Markets
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
Net operating income before loan impairment charges
and other credit risk provisions
  
14,470
  
14,881
  
4,679
  
4,631
  
4,220
                     
Loan impairment charges and other credit risk provisions
  
(185)
  
(292)
  
(136)
  
(46)
  
(118)
                     
Net operating income
  
14,285
  
14,589
  
4,543
  
4,585
  
4,102
                     
Total operating expenses
  
(8,687)
  
(7,374)
  
(3,729)
  
(2,561)
  
(2,368)
                     
Operating profit
  
5,598
  
7,215
  
814
  
2,024
  
1,734
                     
Share of profit in associates and joint ventures
  
376
  
360
  
127
  
138
  
118
                     
Profit before tax
  
5,974
  
7,575
  
941
  
2,162
  
1,852
 
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
5,974
  
7,575
  
941
  
2,162
  
1,852
Currency translation adjustment
      
(71)
      
(15)
  
(24)
Acquisitions, disposals and dilutions
  
(9)
  
(88)
  
-
  
(2)
  
(72)
                     
Underlying profit before tax
  
5,965
  
7,416
  
941
  
2,145
  
1,756
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
60.0
  
49.6
  
79.7
  
55.3
  
56.1
Reported pre-tax RoRWA (annualised)
  
1.6
  
2.4
  
0.7
  
1.6
  
1.7
 
 
Management view of revenue
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Markets
  
5,718
  
5,646
  
1,873
  
1,620
  
1,575
Credit
  
775
  
642
  
182
  
246
  
154
Rates
  
1,642
  
1,613
  
515
  
496
  
507
Foreign Exchange
  
2,286
  
2,494
  
852
  
631
  
660
Equities
  
1,015
  
897
  
324
  
247
  
254
                     
Capital Financing
  
3,064
  
3,017
  
989
  
1,078
  
975
Payments and Cash Management
  
1,367
  
1,298
  
463
  
460
  
436
Securities Services
  
1,275
  
1,255
  
429
  
433
  
408
Global Trade and Receivables Finance
  
588
  
560
  
199
  
202
  
189
Balance Sheet Management
  
2,241
  
2,391
  
739
  
752
  
711
Principal Investments
  
464
  
347
  
122
  
248
  
142
Debit valuation adjustment
  
(278)
  
300
  
(123)
  
(186)
  
(151)
Other
  
31
  
67
  
(12)
  
24
  
(65)
                     
Net operating income1
  
14,470
  
14,881
  
4,679
  
4,631
  
4,220
                     
By geographical region
                    
Europe
  
5,805
  
5,722
  
1,897
  
1,916
  
1,432
Asia
  
5,368
  
5,348
  
1,783
  
1,702
  
1,640
Middle East and North Africa
  
723
  
625
  
254
  
218
  
216
North America
  
1,629
  
2,126
  
462
  
489
  
606
Latin America
  
1,057
  
1,160
  
323
  
336
  
369
Intra-HSBC items
  
(112)
  
(100)
  
(40)
  
(30)
  
(43)
                     
Net operating income1
  
14,470
  
14,881
  
4,679
  
4,631
  
4,220
 
 
1 Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.


Global Private Banking
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
1,820
  
1,809
  
590
  
597
  
658
                     
Loan impairment (charges)/recoveries and other credit risk provisions
  
25
  
(35)
  
31
  
(11)
  
(21)
                     
Net operating income
  
1,845
  
1,774
  
621
  
586
  
637
                     
Total operating expenses
  
(1,304)
  
(1,692)
  
(436)
  
(427)
  
(657)
                     
Operating profit/(loss)
  
541
  
82
  
185
  
159
  
(20)
                     
Share of profit in associates and joint ventures
  
13
  
10
  
5
  
4
  
4
                     
Profit/(loss) before tax
  
554
  
92
  
190
  
163
  
(16)
 
Reconciliation of reported and underlying profit/(loss) before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit/(loss) before tax
  
554
  
92
  
190
  
163
  
(16)
Currency translation adjustment
      
8
      
-
  
(7)
Acquisition, disposals and dilution
  
-
  
-
  
-
  
-
  
-
                     
Underlying profit/(loss) before tax
  
554
  
100
  
190
  
163
  
(23)
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
71.6
  
93.5
  
73.9
  
71.5
  
99.8
Reported pre-tax RoRWA (annualised)
  
3.4
  
0.6
  
3.5
  
2.9
  
(0.3)
 
Client assets1by geography
 
   
Quarter ended
   
30 Sep
2014
  
30 Jun
2014
  
31 Mar
2014
  
31 Dec
2013
  
30 Sep
2013
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
                     
Europe
  
210
  
196
  
195
  
197
  
205
Asia
  
112
  
112
  
109
  
108
  
106
North America
  
45
  
63
  
65
  
65
  
65
Latin America
  
13
  
13
  
12
  
12
  
14
                     
Total
  
380
  
384
  
381
  
382
  
390
 
Client assets1
 
   
Quarter ended
   
30 Sep
2014
  
30 Jun
2014
  
31 Mar
2014
  
31 Dec
2013
  
30 Sep
2013
   
US$bn
  
US$bn
  
US$bn
  
US$bn
  
US$bn
                     
Opening balance
  
384
  
381
  
382
  
390
  
386
Net new money
  
-
  
(1)
  
(2)
  
(11)
  
(5)
Of which: areas targeted for growth
  
5
  
3
  
2
  
(4)
  
1
Value change
  
(1)
  
3
  
3
  
5
  
7
Exchange and other
  
(3)
  
1
  
(2)
  
(2)
  
2
                     
Closing balance
  
380
  
384
  
381
  
382
  
390
 
 
1 '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.


Other1
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges and other credit risk provisions
  
4,170
  
5,159
  
1,513
  
1,440
  
1,009
- of which effect of changes in own credit spread on the
fair value of long-term debt issued
  
(15)
  
(594)
  
200
  
(429)
  
(575)
                     
Loan impairment recoveries and other credit risk provisions
  
1
  
-
  
-
  
-
  
-
                     
Net operating income
  
4,171
  
5,159
  
1,513
  
1,440
  
1,009
                     
Total operating expenses
  
(5,173)
  
(5,097)
  
(1,640)
  
(1,894)
  
(1,784)
                     
Operating profit/(loss)
  
(1,002)
  
62
  
(127)
  
(454)
  
(775)
           
7
        
Share of profit in associates and joint ventures
  
9
  
4
  
7
  
-
  
2
                     
Profit/(loss) before tax
  
(993)
  
66
  
(120)
  
(454)
  
(773)
 
Reconciliation of reported and underlying profit/(loss) before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit/(loss) before tax
  
(993)
  
66
  
(120)
  
(454)
  
(773)
Currency translation adjustment
      
(39)
      
1
  
5
Own credit spread
  
15
  
594
  
(200)
  
363
  
575
Acquisitions, disposals and dilutions
  
33
  
(1,054)
  
-
  
32
  
13
                     
Underlying loss before tax
  
(945)
  
(433)
  
(320)
  
(58)
  
(180)
 
 
1 The main items reported under 'Other' are the results of HSBC's holding company and financing operations, which include net interest earned on free capital held centrally, operating costs incurred by the head office operations in providing stewardship and central management services to HSBC, along with the costs incurred by the Group Service Centres and Shared Service Organisations and associated recoveries. The results also include fines and penalties as part of the settlement of investigations into past inadequate compliance with anti-money laundering and sanctions laws, the UK bank levy together with unallocated investment activities, centrally held investment companies, gains arising from the dilutions of interests in associates and joint ventures and certain property transactions. In addition, 'Other' also includes part of the movement in the fair value of long-term debt designated at fair value (the remainder of the Group's movement on own debt is included in GB&M).


Summary information - geographical regions
Europe
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
16,774
  
16,339
  
5,901
  
5,021
  
4,865
                     
Loan impairment charges and other credit risk provisions
  
(404)
  
(1,364)
  
(138)
  
(150)
  
(518)
                     
Net operating income
  
16,370
  
14,975
  
5,763
  
4,871
  
4,347
                     
Total operating expenses
  
(13,624)
  
(12,252)
  
(5,272)
  
(4,374)
  
(4,390)
                     
Operating profit/(loss)
  
2,746
  
2,723
  
491
  
497
  
(43)
                     
Share of profit/(loss) in associates and joint ventures
  
5
  
−
  
2
  
1
  
(2)
                     
Profit/(loss) before tax
  
2,751
  
2,723
  
493
  
498
  
(45)
 
Reconciliation of reported and underlying profit/(loss) before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit/(loss) before tax
  
2,751
  
2,723
  
493
  
498
  
(45)
Currency translation adjustment
      
248
      
(19)
  
34
Own credit spread
  
(12)
  
479
  
(171)
  
308
  
482
Acquisitions, disposals and dilutions
  
-
  
(17)
  
-
  
-
  
(39)
                     
Underlying profit before tax
  
2,739
  
3,433
  
322
  
787
  
432
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
81.2
  
75.0
  
89.3
  
87.1
  
90.2
Reported pre-tax RoRWA (annualised)
  
1.0
  
1.2
  
0.5
  
0.5
  
(0.1)
 
Profit/(loss) before tax by global business
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Retail Banking and Wealth Management
  
235
  
1,311
  
(245)
  
(35)
  
355
Commercial Banking
  
2,145
  
1,448
  
594
  
805
  
362
Global Banking and Markets
  
1,534
  
1,764
  
109
  
601
  
196
Global Private Banking
  
262
  
(220)
  
86
  
78
  
(106)
Other
  
(1,425)
  
(1,580)
  
(51)
  
(951)
  
(852)
                     
Profit/(loss) before tax
  
2,751
  
2,723
  
493
  
498
  
(45)
 
Reconciliation of reported and underlying UK profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
1,930
  
2,426
  
234
  
338
  
206
Currency translation adjustment
      
246
      
(13)
  
43
Own credit spread
  
(81)
  
465
  
(206)
  
545
  
464
Acquisitions, disposals and dilutions
  
-
  
(18)
  
-
  
-
  
(40)
                     
Underlying profit before tax
  
1,849
  
3,119
  
28
  
870
  
673

Asia
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
17,884
  
19,015
  
5,777
  
6,234
  
5,724
                     
Loan impairment charges and other credit risk provisions
  
(387)
  
(341)
  
(171)
  
(112)
  
(142)
                     
Net operating income
  
17,497
  
18,674
  
5,606
  
6,122
  
5,582
                     
Total operating expenses
  
(7,690)
  
(7,318)
  
(2,681)
  
(2,581)
  
(2,507)
                     
Operating profit
  
9,807
  
11,356
  
2,925
  
3,541
  
3,075
                     
Share of profit in associates and joint ventures
  
1,562
  
1,506
  
550
  
589
  
525
                     
Profit before tax
  
11,369
  
12,862
  
3,475
  
4,130
  
3,600
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
11,369
  
12,862
  
3,475
  
4,130
  
3,600
Currency translation adjustment
      
(96)
      
(3)
  
1
Own credit spread
  
3
  
1
  
(2)
  
5
  
2
Acquisitions, disposals and dilutions
  
32
  
(1,124)
  
-
  
32
  
4
                     
Underlying profit before tax
  
11,404
  
11,643
  
3,473
  
4,164
  
3,607
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
43.0
  
38.5
  
46.4
  
41.4
  
43.8
Reported pre-tax RoRWA (annualised)
  
3.2
  
4.2
  
2.8
  
3.5
  
3.4
 
Profit/(loss) before tax by global business
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Retail Banking and Wealth Management
  
3,462
  
3,377
  
1,123
  
1,183
  
1,079
Commercial Banking
  
3,597
  
3,479
  
1,225
  
1,218
  
1,169
Global Banking and Markets
  
3,538
  
3,674
  
1,123
  
1,120
  
1,069
Global Private Banking
  
209
  
252
  
76
  
63
  
74
Other
  
563
  
2,080
  
(72)
  
546
  
209
                     
Profit before tax
  
11,369
  
12,862
  
3,475
  
4,130
  
3,600
 
Reconciliation of reported and underlying Hong Kong profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
6,414
  
6,277
  
1,866
  
2,441
  
2,072
Currency translation adjustment
      
4
      
1
  
1
                     
Underlying profit before tax
  
6,414
  
6,281
  
1,866
  
2,442
  
2,073



Middle East and North Africa
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
1,978
  
1,896
  
684
  
642
  
643
                     
Loan impairment (charges)/recoveries and other credit risk provisions
  
30
  
(6)
  
(20)
  
28
  
(53)
                     
Net operating income
  
2,008
  
1,890
  
664
  
670
  
590
                     
Total operating expenses
  
(918)
  
(924)
  
(304)
  
(319)
  
(308)
                     
Operating profit
  
1,090
  
966
  
360
  
351
  
282
                     
Share of profit in associates and joint ventures
  
386
  
322
  
127
  
136
  
97
                     
Profit before tax
  
1,476
  
1,288
  
487
  
487
  
379
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
1,476
  
1,288
  
487
  
487
  
379
Currency translation adjustment
      
(3)
      
(1)
  
(3)
Own credit spread
  
7
  
3
  
1
  
1
  
2
Acquisitions, disposals and dilutions
  
(11)
  
(27)
  
-
  
(3)
  
(11)
                     
Underlying profit before tax
  
1,472
  
1,261
  
488
  
484
  
367
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
46.4
  
48.7
  
44.4
  
49.7
  
47.9
Reported pre-tax RoRWA (annualised)
  
3.1
  
2.7
  
3.1
  
3.1
  
2.3
 
Profit/(loss) before tax by global business
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Retail Banking and Wealth Management
  
273
  
239
  
91
  
100
  
59
Commercial Banking
  
506
  
481
  
150
  
175
  
130
Global Banking and Markets
  
723
  
630
  
246
  
233
  
219
Global Private Banking
  
13
  
11
  
4
  
5
  
4
Other
  
(39)
  
(73)
  
(4)
  
(26)
  
(33)
                     
Profit before tax
  
1,476
  
1,288
  
487
  
487
  
379

North America
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
6,145
  
6,824
  
2,078
  
2,006
  
2,192
                     
Loan impairment (charges)/recoveries and other credit risk provisions
  
(356)
  
(959)
  
55
  
(238)
  
(263)
                     
Net operating income
  
5,789
  
5,865
  
2,133
  
1,768
  
1,929
                     
Total operating expenses
  
(4,918)
  
(4,838)
  
(2,081)
  
(1,395)
  
(1,562)
                     
Operating profit
  
871
  
1,027
  
52
  
373
  
367
                     
Share of profit in associates and joint ventures
  
12
  
15
  
6
  
3
  
9
                     
Profit before tax
  
883
  
1,042
  
58
  
376
  
376
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
883
  
1,042
  
58
  
376
  
376
Currency translation adjustment
      
(46)
      
1
  
(10)
Own credit spread
  
17
  
111
  
(28)
  
49
  
89
Acquisitions, disposals and dilutions
  
-
  
103
  
-
  
-
  
(17)
                     
Underlying profit before tax
  
900
  
1,210
  
30
  
426
  
438
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
80.0
  
70.9
  
100.1
  
69.5
  
71.3
Reported pre-tax RoRWA (annualised)
  
0.5
  
0.6
  
0.1
  
0.6
  
0.6
 
Profit/(loss) before tax by global business
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Retail Banking and Wealth Management
  
455
  
(112)
  
325
  
144
  
58
Principal RBWM
  
28
  
20
  
(43)
  
35
  
(44)
Run-off portfolio
  
427
  
(132)
  
368
  
109
  
102
Commercial Banking
  
642
  
542
  
256
  
153
  
225
Global Banking and Markets
  
(229)
  
844
  
(543)
  
52
  
150
Global Private Banking
  
76
  
46
  
25
  
23
  
14
Other
  
(61)
  
(278)
  
(5)
  
4
  
(71)
                     
Profit before tax
  
883
  
1,042
  
58
  
376
  
376


Latin America
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Net operating income before loan impairment charges
and other credit risk provisions
  
6,373
  
7,254
  
2,108
  
2,135
  
2,296
                     
Loan impairment charges and other credit risk provisions
  
(1,484)
  
(2,039)
  
(486)
  
(571)
  
(616)
                     
Net operating income
  
4,889
  
5,215
  
1,622
  
1,564
  
1,680
                     
Total operating expenses
  
(4,419)
  
(4,529)
  
(1,526)
  
(1,500)
  
(1,460)
                     
Operating profit
  
470
  
686
  
96
  
64
  
220
                     
Share of profit in associates and joint ventures
  
-
  
-
  
-
  
-
  
-
                     
Profit before tax
  
470
  
686
  
96
  
64
  
220
 
Reconciliation of reported and underlying profit before tax
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Reported profit before tax
  
470
  
686
  
96
  
64
  
220
Currency translation adjustment
      
(139)
      
(2)
  
(40)
Acquisitions, disposals and dilutions
  
(16)
  
(80)
  
-
  
-
  
(20)
                     
Underlying profit/(loss) before tax
  
454
  
467
  
96
  
62
  
160
                     
   
%
  
%
  
%
  
%
  
%
                     
Cost efficiency ratio
  
69.3
  
62.4
  
72.4
  
70.3
  
63.6
Reported pre-tax RoRWA (annualised)
  
0.7
  
0.9
  
0.4
  
0.3
  
0.9
 
Profit/(loss) before tax by global business
 
 
   
Nine months ended
  
Quarter ended
   
30 Sep
2014
  
30 Sep
2013
  
30 Sep
2014
  
30 Jun
2014
  
30 Sep
2013
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
                     
Retail Banking and Wealth Management
  
(73)
  
37
  
13
  
(59)
  
34
Commercial Banking
  
172
  
66
  
66
  
-
  
(4)
Global Banking and Markets
  
408
  
663
  
6
  
156
  
218
Global Private Banking
  
(6)
  
3
  
(1)
  
(6)
  
(2)
Other
  
(31)
  
(83)
  
12
  
(27)
  
(26)
                     
Profit before tax
  
470
  
686
  
96
  
64
  
220

 
Appendix – selected information
 
Loans and advances to customers by industry sector and by geographical region
 
   
Europe
  
Asia
  
Middle
East and
North
Africa
  
North
America
  
Latin
America
  
Gross loans and advances
to customers
  
Gross loans
by industry
sector as a
% of total
gross loans
   
US$m
  
US$m
  
US$m
  
US$m
  
US$m
  
US$m
  
%
At 30 September 2014
                            
Personal
  
185,866
  
129,162
  
6,564
  
67,006
  
14,305
  
402,903
  
38.7
First lien residential mortgages
  
136,596
  
95,273
  
2,539
  
56,697
  
4,355
  
295,460
  
28.4
Other personal
  
49,270
  
33,889
  
4,025
  
10,309
  
9,950
  
107,443
  
10.3
                             
Corporate and commercial
  
253,627
  
222,579
  
20,513
  
55,796
  
31,363
  
583,878
  
56.0
Manufacturing
  
64,828
  
36,977
  
2,325
  
14,439
  
13,177
  
131,746
  
12.6
International trade and services
  
76,576
  
77,734
  
9,753
  
13,322
  
7,949
  
185,334
  
17.8
Commercial real estate
  
28,708
  
34,898
  
398
  
6,320
  
2,416
  
72,740
  
7.0
Other property-related
  
7,722
  
33,473
  
1,678
  
8,612
  
284
  
51,769
  
5.0
Government
  
2,646
  
1,045
  
1,498
  
169
  
964
  
6,322
  
0.6
Other commercial
  
73,147
  
38,452
  
4,861
  
12,934
  
6,573
  
135,967
  
13.0
                             
Financial
  
28,013
  
12,201
  
3,462
  
7,594
  
1,537
  
52,807
  
5.1
Non-bank financial institutions
  
25,679
  
11,599
  
3,441
  
7,591
  
1,360
  
49,670
  
4.8
Settlement accounts
  
2,334
  
602
  
21
  
3
  
177
  
3,137
  
0.3
                             
Asset-backed securities reclassified
  
2,127
  
-
  
-
  
137
  
-
  
2,264
  
0.2
                             
Total gross loans and advances to customers
  
469,633
  
363,942
  
30,539
  
130,533
  
47,205
  
1,041,852
  
100.0
                             
At 30 June 2014
                            
Personal
  
194,898
  
129,680
  
6,553
  
69,573
  
15,048
  
415,752
  
39.2
First lien residential mortgages
  
144,225
  
95,489
  
2,543
  
58,677
  
4,501
  
305,435
  
28.8
Other personal
  
50,673
  
34,191
  
4,010
  
10,896
  
10,547
  
110,317
  
10.4
                             
Corporate and commercial
  
257,715
  
221,852
  
20,983
  
55,916
  
32,965
  
589,431
  
55.5
Manufacturing
  
65,374
  
35,210
  
2,445
  
12,941
  
14,196
  
130,166
  
12.3
International trade and services
  
79,981
  
80,574
  
10,072
  
13,087
  
8,534
  
192,248
  
18.1
Commercial real estate
  
30,935
  
34,727
  
434
  
6,677
  
2,492
  
75,265
  
7.1
Other property-related
  
7,444
  
32,730
  
1,593
  
8,644
  
348
  
50,759
  
4.8
Government
  
2,404
  
1,082
  
1,696
  
568
  
1,007
  
6,757
  
0.6
Other commercial
  
71,577
  
37,529
  
4,743
  
13,999
  
6,388
  
134,236
  
12.6
                             
Financial
  
29,603
  
12,091
  
2,838
  
7,579
  
1,397
  
53,508
  
5.0
Non-bank financial institutions
  
26,990
  
11,686
  
2,837
  
7,579
  
1,230
  
50,322
  
4.7
Settlement accounts
  
2,613
  
405
  
1
  
-
  
167
  
3,186
  
0.3
                             
Asset-backed securities reclassified
  
2,382
  
-
  
-
  
138
  
-
  
2,520
  
0.3
                             
Total gross loans and advances to customers
  
484,598
  
363,623
  
30,374
  
133,206
  
49,410
  
1,061,211
  
100.0
                             
At 31 December 2013
                            
Personal
  
192,107
  
124,529
  
6,484
  
72,690
  
14,918
  
410,728
  
40.8
First lien residential mortgages
  
140,474
  
92,047
  
2,451
  
60,955
  
3,948
  
299,875
  
29.8
Other personal
  
51,633
  
32,482
  
4,033
  
11,735
  
10,970
  
110,853
  
11.0
                             
Corporate and commercial
  
239,116
  
203,894
  
19,760
  
50,307
  
30,188
  
543,265
  
53.9
Manufacturing
  
55,920
  
30,758
  
3,180
  
11,778
  
12,214
  
113,850
  
11.3
International trade and services
  
76,700
  
79,368
  
8,629
  
11,676
  
8,295
  
184,668
  
18.3
Commercial real estate
  
31,326
  
34,560
  
639
  
5,900
  
2,421
  
74,846
  
7.4
Other property-related
  
7,308
  
27,147
  
1,333
  
8,716
  
328
  
44,832
  
4.5
Government
  
3,340
  
1,021
  
1,443
  
499
  
974
  
7,277
  
0.7
Other commercial
  
64,522
  
31,040
  
4,536
  
11,738
  
5,956
  
117,792
  
11.7
                             
Financial
  
27,872
  
9,688
  
2,532
  
9,055
  
1,376
  
50,523
  
5.0
Non-bank financial institutions
  
26,314
  
9,359
  
2,532
  
9,055
  
1,277
  
48,537
  
4.8
Settlement accounts
  
1,558
  
329
  
-
  
-
  
99
  
1,986
  
0.2
                             
Asset-backed securities reclassified
  
2,578
  
-
  
-
  
138
  
-
  
2,716
  
0.3
                             
Total gross loans and advances to customers
  
461,673
  
338,111
  
28,776
  
132,190
  
46,482
  
1,007,232
  
100.0
 
Please click on the following link to view the HSBC Holdings plc Data Pack for 3Q 2014:
 
 
http://www.rns-pdf.londonstockexchange.com/rns/9132V_-2014-11-2.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:
 
                                                                                       Name: Ben J S Mathews
 
                                                                                                 Title: Group Company Secretary
                     
                                                                                    Date: 03 November 2014