27th Mar 2012 16:15
This document comprises the Annual Report and Accounts 2011 for HSBC Holdings plc and its subsidiaries. It contains the Report of the Directors and Financial Statements, together with the Independent Auditor's Report thereon, as required by the UK Companies Act 2006. The Annual Review 2011 of HSBC Holdings plc is published as a separate document. The Report of the Directors on pages 2 to 255 and the Directors' Remuneration Report on pages 256 to 274 have each been drawn up in accordance with the requirements of English law, and liability in respect thereof is also governed by English law. In particular, the liability of the Directors for these reports is solely to HSBC Holdings plc. Additional information, including commentary on 2010 compared with 2009, may be found in the Form 20‑F filed with the US Securities and Exchange Commission and available on www.hsbc.com and www.sec.gov. Certain defined terms Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our' refers to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People's Republic of China is referred to as 'Hong Kong'. When used in the terms 'shareholders' equity' and 'total shareholders' equity', 'shareholders' means holders of HSBC Holdings ordinary shares and those preference shares classified as equity. The abbreviations 'US$m' and 'US$bn' represent millions and billions (thousands of millions) of US dollars, respectively. Financial statements The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board ('IASB') and as endorsed by the European Union ('EU'). EU‑endorsed IFRSs may differ from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the EU. At 31 December 2011, there were no unendorsed standards effective for the year ended 31 December 2011 affecting these consolidated and separate financial statements, and there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC's financial statements for the year ended 31 December 2011 are prepared in accordance with IFRSs as issued by the IASB. We use the US dollar as our presentation currency because the US dollar and currencies linked to it form the major currency bloc in which we transact and fund our business. Unless otherwise stated, the information presented in this document has been prepared in accordance with IFRSs. When reference to 'underlying' or 'underlying basis' is made in tables or commentaries, comparative information has been expressed at constant currency (see page 16), eliminating the impact of fair value movements in respect of credit spread changes on HSBC's own debt and adjusting for the effects of acquisitions and disposals of subsidiaries and businesses. A reconciliation of reported and underlying profit before tax is presented on page 17. | Contents | ||
Report of the Directors | |||
Overview | |||
Financial highlights ...................................................... | 2 | ||
Group Chairman's Statement ....................................... | 4 | ||
Group Chief Executive's Business Review .................... | 7 | ||
Principal activities ....................................................... | 10 | ||
Business and operating models ..................................... | 10 | ||
Strategic direction ........................................................ | 11 | ||
Risk ............................................................................. | 12 | ||
HSBC Values ................................................................ | 13 | ||
Key performance indicators ......................................... | 13 | ||
Operating and Financial Review | |||
Financial summary1 ..................................................... | 16 | ||
Global businesses1 ......................................................... | 43 | ||
Products and services ................................................... | 44 | ||
Geographical regions1 .................................................. | 59 | ||
Other information ....................................................... | 94 | ||
Risk1 ............................................................................ | 98 | ||
Capital ......................................................................... | 211 | ||
Corporate Governance1 | |||
Corporate Governance Report ..................................... | 218 | ||
Biographies of Directors and senior management ......... | 218 | ||
Board of Directors ....................................................... | 225 | ||
Board committees ........................................................ | 230 | ||
Internal control............................................................ | 240 | ||
Going concern basis...................................................... | 243 | ||
Employees ................................................................... | 243 | ||
Directors' Remuneration Report1 .............................. | 256 | ||
Financial Statements and Other Information | |||
Statement of Directors' Responsibilities ...................... | 275 | ||
Independent Auditor's Report ...................................... | 276 | ||
Financial Statements1 | |||
Financial statements .................................................... | 278 | ||
Notes on the financial statements ................................ | 291 | ||
Shareholder Information1 | |||
Shareholder information .............................................. | 414 | ||
Cautionary statement regarding forward-looking statements ................................................................... | 422 | ||
Glossary ....................................................................... | 423 | ||
Index ........................................................................... | 432 | ||
1. Detailed contents are provided on the referenced pages. | |||
Who we are and what we do
HSBC is one of the world's largest banking and financial services organisations. With around 7,200 offices in both established and faster-growing markets, we aim to be where the growth is, connecting customers to opportunities, enabling businesses to thrive and economies to prosper, and ultimately helping people to fulfil their hopes and realise their ambitions.
We serve around 89 million customers through our four global businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. Our network covers 85 countries and territories in six geographical regions: Europe, Hong Kong, Rest of Asia-Pacific, Middle East and North Africa, North America and Latin America. Our aim is to be acknowledged as the world's leading international bank.
Listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by over 220,000 shareholders in 132 countries and territories.
Highlights
·; Profit before tax up 15% to US$21.9bn on a reported basis.
·; Underlying pre-tax profit down 6% to US$17.7bn.
·; Launched strategy to reshape the Group, improve returns and position for growth.
·; Strong performance in faster-growing regions, with revenue up 12% in Hong Kong, Rest of Asia-Pacific, Latin America and the Middle East and North Africa.
·; Record year in Commercial Banking with profit before tax of US$7.9bn, up 31%.
·; Achieved sustainable cost savings of US$0.9bn with a strong pipeline of further savings.
·; Dividends declared in respect of 2011 US$7.3bn or US$0.41 per ordinary share, up 14% on 2010.
·; Core tier 1 capital ratio 10.1%, down from 10.5% in 2010, largely reflecting the introduction of Basel 2.5.
Cover image
A Chinese ship in Brazil's largest port, Santos, illustrates the growing trade links between the two countries.China is today Brazil's largest trading partner, with HSBC financing an increasing share of that trade.
Financial highlights
Earnings per share US$0.92 - up 26% 2010: US$0.73 2009: US$0.34 | Dividends per ordinary share1 US$0.39 2010: US$0.34 2009: US$0.34 | Net assets per share US$8.48 - up 7% 2010: US$7.94 2009: US$7.17 | ||
For the year
Profit before taxation US$21,872m - up 15% 2010: US$19,037m 2009: US$7,079m | Underlying profit before taxation US$17,696m - down 6% 2010: US$18,925m
| Total operating income US$83,461m - up 4% 2010: US$80,014m 2009: US$78,631m | ||
Net operating income before loan impairment charges and other credit risk provisions US$72,280m - up 6% 2010: US$68,247m 2009: US$66,181m | Profit attributable to the ordinary shareholders of the parent company US$16,224m - up 27% 2010: US$12,746m 2009: US$5,565m | |||
At the year-end
Loans and advances tocustomers US$940bn - down 2% 2010: US$958bn 2009: US$896bn | Customer accounts US$1,254bn - up 2% 2010: US$1,228bn 2009: US$1,159bn | Ratio of customer advances to customer accounts 75.0% 2010: 78.1% 2009: 77.3% | ||
Total equity US$166bn - up 7% 2010: US$155bn 2009: US$136bn | Average total shareholders' equityto average total assets 5.6% 2010: 5.5% 2009: 4.7% | Risk-weighted assets US$1,210bn - up 10% 2010: US$1,103bn 2009: US$1,133bn | ||
Capital ratios
Core tier 1 ratio 10.1% 2010: 10.5% 2009: 9.4% | Tier 1 ratio 11.5% 2010: 12.1% 2009: 10.8% | Total capital ratio 14.1% 2010: 15.2% 2009: 13.7% | ||
Performance ratios
Credit coverage ratios
Loan impairment charges tototal operating income 13.8% 2010: 16.9% 2009: 31.7% | Loan impairment charges toaverage gross customer advances 1.2% 2010: 1.5% 2009: 2.8% | Total impairment allowances toimpaired loans at year-end 42.3% 2010: 43.0% (restated for change in disclosure policy - see page 105) | ||
Return ratios
Return on averageinvested capital2 10.2% 2010: 8.7% 2009: 4.1% | Return on average ordinary shareholders' equity3 10.9% 2010: 9.5% 2009: 5.1% | Post-tax return onaverage total assets 0.6% 2010: 0.6% 2009: 0.3% | Pre-tax return on average risk-weighted assets 1.9% 2010: 1.7% 2009: 0.6% | |||
Efficiency and revenue mix ratios
Cost efficiency ratio4 57.5% 2010: 55.2% 2009: 52.0% | Net interest income tototal operating income 48.7% 2010: 49.3% 2009: 51.8% | Net fee income tototal operating income 20.6% 2010: 21.7% 2009: 22.5% | Net trading income tototal operating income 7.8% 2010: 9.0% 2009: 12.5% | |||
Share information at the year-end
Closing market price | ||||||||
US$0.50 ordinary shares in issue 17,868m 2010: 17,686m 2009: 17,408m | Marketcapitalisation US$136bn 2010: US$180bn 2009: US$199bn | London £4.91 2010: £6.512009: £7.09 | Hong Kong HK$59.00 2010: HK$79.702009: HK$89.40 | AmericanDepositary Share5 US$38.10 2010: US$51.042009: US$57.09 | ||||
Total shareholder return6 | ||||||||
Over 1 year | Over 3 years | Over 5 years | ||||||
To 31 December 2011 ..................................... | 79.1 | 96.8 | 78.2 | |||||
Benchmarks: |
|
|
|
|
|
| ||
- FTSE 1007 ...................................................... |
| 97.8 |
| 140.3 |
| 107.9 | ||
- MSCI World7 .................................................. |
| 95.7 |
| 129.4 |
| 114.9 | ||
- MSCI Banks7 .................................................. |
| 82.7 |
| 107.5 |
| 60.5 | ||
For footnotes, see page 95.
Related Shares:
HSBC Holdings