20th Mar 2015 16:19
Financial sumarry | |
Use of non-GAAP financial measures | 40 |
Consolidated income statement | 45 |
Group performance by income and expense item | 46 |
Net interest income | 46 |
Net fee income | 48 |
Net trading income | 49 |
Net income/(expense) from financial instruments designated at fair value | 50 |
Gains less losses from financial investments | 51 |
Net insurance premium income | 51 |
Other operating income | 52 |
Net insurance claims and benefits paid and movementin liabilities to policyholders | 53 |
Loan impairment charges and other credit risk provisions | 53 |
Operating expenses | 54 |
Share of profit in associates and joint ventures | 55 |
Tax expense | 56 |
Consolidated balance sheet | 57 |
Movement in 2014 | 58 |
Reconciliation of RoRWA measures | 62 |
Critical accounting estimates and judgements | 62 |
The management commentary included in the Report of the Directors: 'Financial Review', together with the 'Employees' and 'Corporate sustainability' sections of 'Corporate Governance' and the 'Directors' Remuneration Report' is presented in compliance with the IFRSs Practice Statement 'Management Commentary' issued by the IASB.
Use of non-GAAP financial measures
Our reported results are prepared in accordance with IFRSs as detailed in the Financial Statements on page 334. In measuring our performance, the financial measures that we use include those which have been derived from our reported results in order to eliminate factors which distort year-on-year comparisons. These are considered non-GAAP financial measures. The primary non-GAAP financial measure we use is 'adjusted performance'. Other non-GAAP financial measures are described and reconciled to the most relevant reported financial measure when used.
Adjusted performance
Adjusted performance is computed by adjusting reported results for the year-on-year effects of foreign currency translation differences and significant items which distort year-on-year comparisons.
Previously we used the non-GAAP financial measure of 'underlying performance', which was calculated by adjusting reported results for the year-on-year effects of currency translation differences, own credit spread and acquisitions, disposals and dilutions. In 2014, we modified our approach to better align it with the way we view our performance internally and with feedback received from investors. Adjusted performance builds on underlying performance by maintaining the adjustment for currency translation differences and incorporating the adjustments for own credit spread and acquisitions, disposals and dilutions into the definition of significant items. We use the term 'significant items' to collectively describe the group of individual adjustments which are excluded from reported results when arriving at adjusted performance. Significant items, which are detailed below, are those items which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the underlying trends in the business.
We believe adjusted performance provides useful information for investors by aligning internal and external reporting, identifying and quantifying items management believe to be significant and providing insight into how management assesses year-on-year performance.
We arrive at adjusted performance by excluding from our reported results:
· the year-on-year effects of foreign currency translation differences. This is done by comparing reported results for 2014 with reported results for 2013 retranslated at 2014 exchange rates. The foreign currency translation differences reflect the movements of the US dollar against most major currencies; and
· significant items which distort the year-on-year comparison of reported results by obscuring the underlying factors and trends which affect operations. Significant items include adjustments for own credit spread and acquisitions, disposals and dilutions which were previously part of our underlying measure. The following pages provide further details, including a reconciliation from reported to adjusted results.
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 year incurred, and remove the operating profit or loss of the acquired, disposed of or diluted subsidiaries, associates,joint ventures and businesses from all the years presented so we can view results on a like-for-like basis. Disposal of strategic investments other than those included in the above definition would be included in other significant items if material.
The following acquisitions, disposals and changes to ownership levels affected adjusted performance:
Disposal gains/(losses) affecting adjusted performance
Date | Disposal gain/(loss) | ||
US$m | |||
| |||
Reclassification gain in respect of our holding in Industrial Bank Co., Limited following the issue of additional share capital to third parties1 | Jan 2013 | 1,089 | |
HSBC Insurance (Asia-Pacific) Holdings Limited's disposal of its shareholding in Bao Viet Holdings1 | Mar 2013 | 104 | |
Household Insurance Group Holding company's disposal of its insurance manufacturing business1 | Mar 2013 | (99) | |
HSBC Seguros, S.A. de C.V., Grupo Financiero HSBC's disposal of its property and Casualty Insurance business in Mexico1 | Apr 2013 | 20 | |
HSBC Bank plc's disposal of its shareholding in HSBC (Hellas) Mutual Funds Management SA2 | Apr 2013 | (7) | |
HSBC Insurance (Asia-Pacific) Holdings Limited disposal of its shareholding in Hana HSBC Life Insurance Company Limited1 | May 2013 | 28 | |
HSBC Bank plc's disposal of HSBC Assurances IARD2 | May 2013 | (4) | |
The Hongkong and Shanghai Banking Corporation Limited's disposal of HSBC Life (International) Limited's Taiwan branch operations2 | June 2013 | (36) | |
HSBC Markets (USA) Inc.'s disposal of its subsidiary, Rutland Plastic Technologies2 | Aug 2013 | 17 | |
HSBC Insurance (Singapore) Pte Ltd's disposal of its Employee Benefits Insurance business in Singapore2 | Aug 2013 | (8) | |
HSBC Investment Bank Holdings plc's disposal of its investment in associate FIP Colorado2 | Aug 2013 | (5) | |
HSBC Investment Bank Holdings plc group's disposal of its investment in subsidiary, Viking Sea Tech1 | Aug 2013 | 54 | |
HSBC Latin America Holdings UK Limited's disposal of HSBC Bank (Panama) S.A.2 | Oct 2013 | 1,107 | |
HSBC Latin America Holdings UK Limited's disposal of HSBC Bank (Peru) S.A.2 | Nov 2013 | (18) | |
HSBC Latin America Holdings UK Limited's disposal of HSBC Bank (Paraguay) S.A.2 | Nov 2013 | (21) | |
Reclassification loss in respect of our holding in Yantai Bank Co., Limited following an increase in its registered share capital1 | Dec 2013 | (38) | |
HSBC Latin America Holdings UK Limited's disposal of HSBC Bank (Colombia) S.A.1 | Feb 2014 | 18 | |
Reclassification loss in respect of our holding in Vietnam Technological & Commercial Joint Stock Bank following the loss of significant influence1 | Jun 2014 | (32) | |
HSBC Bank Middle East Limited's disposal of its operations in Pakistan1 | Oct 2014 | (27) |
For footnotes, see page 109.
Foreign currency translation differences ('constant currency')
Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2014. We exclude the translation differences when using constant currency because it allows us to assess balance sheet and income statement performance on a like-for-like basis to better understand the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 2013 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
· the income statements for 2013 at the average rates of exchange for 2014; and
· the balance sheet at 31 December 2013 at the prevailing rates of exchange on 31 December 2014.
No adjustment has been made to the exchange rates used to translate foreign currency denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current year on the basis described above.
Other significant items
The following tables detail the effect of other significant items in 2014 and 2013 on each of our geographical segments and global businesses.
Other significant items affecting adjusted performance - (gains)/losses
Europe | Asia | MENA |
| North America | Latin America | Total | ||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Revenue | ||||||||||||
Debit valuation adjustment on derivative contracts | 234 | 69 | 5 | 16 | 8 | 332 | ||||||
Fair value movements on non-qualifying hedges3 | 235 | 4 | − | 302 | − | 541 | ||||||
Gain on sale of several tranches of real estate secured accountsin the US | − | − | − | (168) | − | (168) | ||||||
Gain on sale of shareholding in Bank of Shanghai | − | (428) | − | − | − | (428) | ||||||
Impairment of our investment in Industrial Bank | − | 271 | − | − | − | 271 | ||||||
Provisions arising from the ongoing review of compliance with the Consumer Credit Act in the UK | 632 | − | − | − | − | 632 | ||||||
Year ended 31 December 2014 | 1,101 | (84) | 5 | 150 | 8 | 1,180 | ||||||
Operating expenses | ||||||||||||
Charge in relation to the settlement agreement with the Federal Housing Finance Authority | − | − | − | 550 | − | 550 | ||||||
Settlements and provisions in connection with foreign exchange investigations | 1,187 | − | − | − | − | 1,187 | ||||||
Restructuring and other related costs | 123 | 9 | 2 | 28 | 116 | 278 | ||||||
Regulatory provisions in GPB | 16 | 49 | − | − | − | 65 | ||||||
UK customer redress programmes | 1,275 | − | − | − | − | 1,275 | ||||||
Year ended 31 December 2014 | 2,601 | 58 | 2 | 578 | 116 | 3,355 | ||||||
RBWM | CMB | GB&M | GPB | Other | Total | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Revenue | ||||||||||||
Debit valuation adjustment on derivative contracts | − | − | 332 | − | − | 332 | ||||||
Fair value movements on non-qualifying hedges3 | 493 | (1) | 8 | 1 | 40 | 541 | ||||||
Gain on sale of several tranches of real estate secured accountsin the US | (168) | − | − | − | − | (168) | ||||||
Gain on sale of shareholding in Bank of Shanghai | − | − | − | − | (428) | (428) | ||||||
Impairment of our investment in Industrial Bank | − | − | − | − | 271 | 271 | ||||||
Provisions arising from the ongoing review of compliance with the Consumer Credit Act in the UK | 568 | 24 | − | 40 | − | 632 | ||||||
Year ended 31 December 2014 | 893 | 23 | 340 | 41 | (117) | 1,180 | ||||||
Operating expenses | ||||||||||||
Charge in relation to the settlement agreement with the Federal Housing Finance Authority | 17 | − | 533 | − | − | 550 | ||||||
Settlements and provisions in connection with foreign exchange investigations | − | − | 1,187 | − | − | 1,187 | ||||||
Restructuring and other related costs | 88 | 37 | 27 | 6 | 120 | 278 | ||||||
Regulatory provisions in GPB | − | − | − | 65 | − | 65 | ||||||
UK customer redress programmes | 992 | 138 | 145 | − | − | 1,275 | ||||||
Year ended 31 December 2014 | 1,097 | 175 | 1,892 | 71 | 120 | 3,355 | ||||||
Europe | Asia | MENA | North America | Latin America | Total | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Revenue | ||||||||||||
Net gain on completion of Ping An disposal | − | (553) | − | − | − | (553) | ||||||
Debit valuation adjustment on derivative contracts | (65) | (40) | (2) | 14 | (13) | (106) | ||||||
Fair value movements on non-qualifying hedges3 | (297) | 32 | − | (246) | − | (511) | ||||||
FX gains relating to sterling debt issued by HSBC Holdings | (442) | − | − | − | − | (442) | ||||||
Write-off of allocated goodwill relating to the GPB Monaco business | 279 | − | − | − | − | 279 | ||||||
Loss on sale of several tranches of real estate secured accounts in the US | − | − | − | 123 | − | 123 | ||||||
Loss on sale of non-real estate secured accounts in the US | − | − | − | 271 | − | 271 | ||||||
Loss on early termination of cash flow hedges in the US run-off portfolio | − | − | − | 199 | − | 199 | ||||||
Loss on sale of an HFC Bank UK secured loan portfolio | 146 | − | − | − | − | 146 | ||||||
Year ended 31 December 2013 | (379) | (561) | (2) | 361 | (13) | (594) | ||||||
Operating expenses | ||||||||||||
Restructuring and other related costs | 217 | 86 | 4 | 101 | 75 | 483 | ||||||
UK customer redress programmes | 1,235 | − | − | − | − | 1,235 | ||||||
Madoff-related litigation costs | 298 | − | − | − | − | 298 | ||||||
Regulatory provisions in GPB | 317 | 35 | − | − | − | 352 | ||||||
US customer remediation provisions relating to CRS | − | − | − | 100 | − | 100 | ||||||
Accounting gain arising from change in basis of delivering ill-health benefits in the UK | (430) | − | − | − | − | (430) | ||||||
Year ended 31 December 2013 | 1,637 | 121 | 4 | 201 | 75 | 2,038 | ||||||
RBWM | CMB | GB&M | GPB | Other | Total | |||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||
Revenue | ||||||||||||
Net gain on completion of Ping An disposal | − | − | − | − | (553) | (553) | ||||||
Debit valuation adjustment on derivative contracts | − | − | (106) | − | − | (106) | ||||||
Fair value movements on non-qualifying hedges3 | (262) | − | 18 | − | (267) | (511) | ||||||
FX gains relating to sterling debt issued by HSBC Holdings | − | − | − | − | (442) | (442) | ||||||
Write-off of allocated goodwill relating to the GPB Monaco business | − | − | − | 279 | − | 279 | ||||||
Loss on sale of several tranches of real estate secured accounts in the US | 123 | − | − | − | − | 123 | ||||||
Loss on sale of non-real estate secured accounts in the US | 271 | − | − | − | − | 271 | ||||||
Loss on early termination of cash flow hedges in the US run-off portfolio | 199 | − | − | − | − | 199 | ||||||
Loss on sale of an HFC Bank UK secured loan portfolio | 146 | − | − | − | − | 146 | ||||||
Year ended 31 December 2013 | 477 | − | (88) | 279 | (1,262) | (594) | ||||||
Operating expenses | ||||||||||||
Restructuring and other related costs | 167 | 31 | 13 | 73 | 199 | 483 | ||||||
UK customer redress programmes | 953 | 148 | 134 | − | − | 1,235 | ||||||
Madoff-related litigation costs | − | − | 298 | − | − | 298 | ||||||
Regulatory provisions in GPB | − | − | − | 352 | − | 352 | ||||||
US customer remediation provisions relating to CRS | 100 | − | − | − | − | 100 | ||||||
Accounting gain arising from change in basis of delivering ill-health benefits in the UK | (189) | (160) | (81) | − | − | (430) | ||||||
Year ended 31 December 2013 | 1,031 | 19 | 364 | 425 | 199 | 2,038 | ||||||
For footnote, see page 109.
The following table reconciles selected reported items for 2014 and 2013 to adjusted items. Equivalent tablesare provided for each of our global businesses and geographical segments on www.hsbc.com.
Reconciliation of reported and adjusted items
2014 | 2013 | Change5 | ||||
US$m | US$m | % | ||||
Revenue4 | ||||||
Reported | 61,248 | 64,645 | (5) | |||
Currency translation adjustment6 | (686) | |||||
Own credit spread7 | (417) | 1,246 | ||||
Acquisitions, disposals and dilutions | (9) | (2,757) | ||||
Other significant items | 1,180 | (594) | ||||
Adjusted | 62,002 | 61,854 | − | |||
Loan impairment charges and other credit risk provisions | ||||||
Reported | (3,851) | (5,849) | 34 | |||
Currency translation adjustment6 | 168 | |||||
Acquisitions, disposals and dilutions | − | 67 | ||||
Other significant items | − | − | ||||
Adjusted | (3,851) | (5,614) | 31 | |||
Total operating expenses | ||||||
Reported | (41,249) | (38,556) | (7) | |||
Currency translation adjustment6 | 348 | |||||
Acquisitions, disposals and dilutions | 40 | 488 | ||||
Other significant items | 3,355 | 2,038 | ||||
Adjusted | (37,854) | (35,682) | (6) | |||
Adjusted cost efficiency ratio | 61.1% | 57.7% | ||||
Share of profit in associates and joint ventures | ||||||
Reported | 2,532 | 2,325 | 9 | |||
Currency translation adjustment6 | 11 | |||||
Acquisitions, disposals and dilutions | − | 87 | ||||
Other significant items | − | − | ||||
Adjusted | 2,532 | 2,423 | 4 | |||
Profit before tax | ||||||
Reported | 18,680 | 22,565 | (17) | |||
Currency translation adjustment6 | (159) | |||||
Own credit spread7 | (417) | 1,246 | ||||
Acquisitions, disposals and dilutions | 31 | (2,115) | ||||
Other significant items | 4,535 | 1,444 | ||||
Adjusted | 22,829 | 22,981 | (1) |
For footnotes, see page 109.
Adjusted profit before tax
2014 | 2013 | Change5 | ||||
US$m | US$m | % | ||||
By global business | ||||||
Retail Banking and Wealth Management | 7,648 | 7,959 | (4) | |||
Commercial Banking | 8,940 | 7,910 | 13 | |||
Global Banking and Markets | 8,114 | 9,208 | (12) | |||
Global Private Banking | 738 | 900 | (18) | |||
Other | (2,611) | (2,996) | 13 | |||
Year ended 31 December | 22,829 | 22,981 | (1) | |||
By geographical region | ||||||
Europe | 3,905 | 4,301 | (9) | |||
Asia8 | 14,635 | 14,309 | 2 | |||
Middle East and North Africa | 1,854 | 1,673 | 11 | |||
North America | 2,111 | 2,048 | 3 | |||
Latin America | 324 | 650 | (50) | |||
Year ended 31 December | 22,829 | 22,981 | (1) |
For footnotes, see page 109.
Related Shares:
HSBC Holdings