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o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Or | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2009 | ||
Or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Or | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
N/A | United Kingdom | |
(Translation of Registrant’s name into English) | (Jurisdiction of incorporation or organisation) |
London E14 5HQ
United Kingdom
(Address of principal executive offices)
8 Canada Square
London E14 5HQ
United Kingdom
Tel +44 (0) 20 7991 8888
Fax +44 (0) 20 7992 4880
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Title of each class | Name of each exchange on which registered | |
Ordinary Shares, nominal value US$0.50 each. | London Stock Exchange | |
Hong Kong Stock Exchange | ||
Euronext Paris | ||
Bermuda Stock Exchange | ||
New York Stock Exchange* | ||
American Depository Shares, each representing 5 Ordinary Shares of nominal value US$0.50 each. | New York Stock Exchange | |
6.20% Non-Cumulative Dollar Preference Shares, Series A | New York Stock Exchange* | |
American Depositary Shares, each representing one- fortieth of a Share of 6.20% Non-Cumulative Dollar Preference Shares, Series A | New York Stock Exchange | |
5.25% Subordinated Notes 2012 | New York Stock Exchange | |
6.5% Subordinated Notes 2036 | New York Stock Exchange | |
6.5% Subordinated Notes 2037 | New York Stock Exchange | |
6.8% Subordinated Notes Due 2038 | New York Stock Exchange | |
8.125% Perpetual Subordinated Capital Securities Exchangeable at the Issuer’s Option into Non- Cumulative Dollar Preference Shares | New York Stock Exchange |
Large accelerated filerþ | Accelerated filero | Non-accelerated filer o (Do not check if a smaller reporting company) |
U.S. GAAPo | International Financial Reporting Standards as issued by the International Accounting Standards Boardþ | Othero |
* Not for trading, but only in connection with the registration of American Depositary Shares. |
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Exhibit 4.3 | ||||||||
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1 | Detailed contents are provided on the referenced pages. |
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Highlights / Ratios |
• | Total operating income down by 11 per cent to US$78,631 million (2008: US$88,571 million). | |
• | Net operating income before loan impairment charges and other credit risk provisions down by 19 per cent to US$66,181 million (2008: US$81,682 million). | |
• | Underlying group pre-tax profit up by US$15,308 million to US$13,286 million. | |
• | Group pre-tax profit down by 24 per cent to US$7,079 million (2008: US$9,307 million). | |
• | Profit attributable to shareholders of the parent company up by 2 per cent to US$5,834 million (2008: US$5,728). | |
• | Return on average shareholders’ equity of 5.1 per cent (2008: 4.7 per cent). | |
• | Earnings per ordinary share down by 17 per cent to US$0.34 (2008: US$0.41). |
• | Total equity up by 35 per cent to US$135,661 million (2008: US$100,229 million). | |
• | Loans and advances to customers down by 4 per cent to US$896,231 million (2008: US$932,868 million). | |
• | Customer accounts up by 4 per cent to US$1,159 billion (2008: US$1,115 billion). | |
• | Ratio of customer advances to customer accounts 77.3 per cent (2008: 83.6 per cent). | |
• | Risk-weighted assets down by 1 per cent to US$1,133 billion (2008: US$1,148 billion). |
• | Total dividends declared in respect of 2009 of US$0.34 per ordinary share, a decrease of 47 per cent on dividends for 2008; fourth interim dividend for 2009 of US$0.10 per ordinary share, no change from 2008. | |
• | Core tier 1 ratio of 9.4 per cent and tier 1 ratio of 10.8 per cent. |
• | In April 2009, HSBC Holdings raised £12.5 billion (US$17.8 billion), net of expenses, by way of a fully underwritten rights issue, offering its shareholders 5 new ordinary shares for every 12 ordinary shares at a price of 254 pence per new ordinary share. |
Dividends per ordinary share1 (US dollars) | Earnings per ordinary share (US dollars) | |
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2009 | 2008 | |||||||
% | % | |||||||
Capital ratios | ||||||||
Core tier 1 ratio | 9.4 | 7.0 | ||||||
Tier 1 ratio | 10.8 | 8.3 | ||||||
Total capital ratio | 13.7 | 11.4 | ||||||
Performance ratios | ||||||||
Return on average invested capital2 | 4.1 | 4.0 | ||||||
Return on average total shareholders’ equity3 | 5.1 | 4.7 | ||||||
Post-tax return on average total assets | 0.27 | 0.26 | ||||||
Post-tax return on average risk-weighted assets | 0.58 | 0.55 | ||||||
Credit coverage ratios | ||||||||
Loan impairment charges as a percentage of total operating income | 31.72 | 27.24 | ||||||
Loan impairment charges as a percentage of average gross customer advances | 2.82 | 2.45 | ||||||
Total impairment allowances outstanding as a percentage of impaired loans at the year-end | 83.2 | 94.3 | ||||||
Efficiency and revenue mix ratios | ||||||||
Cost efficiency ratio4 | 52.0 | 60.1 | ||||||
As a percentage of total operating income: | ||||||||
– net interest income | 51.8 | 48.1 | ||||||
– net fee income | 22.5 | 22.6 | ||||||
– net trading income | 12.5 | 7.4 | ||||||
Financial ratios | ||||||||
Loans and advances to customers as a percentage of customer accounts | 77.3 | 83.6 | ||||||
Average total shareholders’ equity to average total assets | 4.72 | 4.87 |
2009 | 2008 | |||||||
US$0.50 ordinary shares in issue (million) | 17,408 | 12,105 | ||||||
Market capitalisation (billion) | US$199 | US$114 | ||||||
Closing market price per ordinary share:6 | ||||||||
– London | £7.09 | £5.77 | ||||||
– Hong Kong | HK$89.40 | HK$67.81 | ||||||
Closing market price per American Depositary Share7 | US$57.09 | US$44.15 |
Over 1 year | Over 3 years | Over 5 years | ||||||||||
HSBC total shareholder return to 31 December 20098 | 128.3 | 103.6 | 120.6 | |||||||||
Benchmarks: | ||||||||||||
– FTSE 1009 | 127.3 | 98.0 | 135.4 | |||||||||
– MSCI World10 | 116.7 | 103.6 | 134.9 | |||||||||
– MSCI Banks11 | 125.2 | 70.6 | 92.3 |
Return on average invested capital (per cent) | Cost efficiency ratio (per cent) | |
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5-year comparison / Footnotes |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
For the year | ||||||||||||||||||||
Net interest income | 40,730 | 42,563 | 37,795 | 34,486 | 31,334 | |||||||||||||||
Other operating income | 37,901 | 46,008 | 49,806 | 35,584 | 30,370 | |||||||||||||||
Loan impairment charges and other credit risk provisions | (26,488 | ) | (24,937 | ) | (17,242 | ) | (10,573 | ) | (7,801 | ) | ||||||||||
Total operating expenses | (34,395 | ) | (49,099 | ) | (39,042 | ) | (33,553 | ) | (29,514 | ) | ||||||||||
Profit before tax | 7,079 | 9,307 | 24,212 | 22,086 | 20,966 | |||||||||||||||
Profit attributable to shareholders of the parent company | 5,834 | 5,728 | 19,133 | 15,789 | 15,081 | |||||||||||||||
Dividends1 | 5,639 | 11,301 | 10,241 | 8,769 | 7,750 | |||||||||||||||
At the year-end | ||||||||||||||||||||
Called up share capital | 8,705 | 6,053 | 5,915 | 5,786 | 5,667 | |||||||||||||||
Total shareholders’ equity | 128,299 | 93,591 | 128,160 | 108,352 | 92,432 | |||||||||||||||
Capital resources12,13 | 155,729 | 131,460 | 152,640 | 127,074 | 105,449 | |||||||||||||||
Customer accounts | 1,159,034 | 1,115,327 | 1,096,140 | 896,834 | 739,419 | |||||||||||||||
Undated subordinated loan capital | 2,785 | 2,843 | 2,922 | 3,219 | 3,474 | |||||||||||||||
Preferred securities and dated subordinated loan capital14 | 52,126 | 50,307 | 49,472 | 42,642 | 35,856 | |||||||||||||||
Loans and advances to customers15 | 896,231 | 932,868 | 981,548 | 868,133 | 740,002 | |||||||||||||||
Total assets | 2,364,452 | 2,527,465 | 2,354,266 | 1,860,758 | 1,501,970 |
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
Per ordinary share | ||||||||||||||||||||
Basic earnings16 | 0.34 | 0.41 | 1.44 | 1.22 | 1.18 | |||||||||||||||
Diluted earnings16 | 0.34 | 0.41 | 1.42 | 1.21 | 1.17 | |||||||||||||||
Dividends | 0.34 | 0.93 | 0.87 | 0.76 | 0.69 | |||||||||||||||
Net asset value at year-end17 | 7.17 | 7.44 | 10.72 | 9.24 | 8.03 | |||||||||||||||
Share information | ||||||||||||||||||||
US$0.50 ordinary shares in issue (millions) | 17,408 | 12,105 | 11,829 | 11,572 | 11,334 |
% | % | % | % | % | ||||||||||||||||
Financial ratios | ||||||||||||||||||||
Dividend payout ratio18 | 100.0 | 226.8 | 60.4 | 62.3 | 58.5 | |||||||||||||||
Post-tax return on average total assets | 0.27 | 0.26 | 0.97 | 1.00 | 1.06 | |||||||||||||||
Return on average total shareholders’ equity | 5.1 | 4.7 | 15.9 | 15.7 | 16.8 | |||||||||||||||
Loans and advances to customers as a percentage of customer accounts | 77.3 | 83.6 | 89.5 | 96.8 | 100.1 | |||||||||||||||
Average total shareholders’ equity to average total assets | 4.72 | 4.87 | 5.69 | 5.97 | 5.96 | |||||||||||||||
Capital ratios12 | ||||||||||||||||||||
Tier 1 ratio | 10.8 | 8.3 | 9.3 | 9.4 | 9.0 | |||||||||||||||
Total capital ratio | 13.7 | 11.4 | 13.6 | 13.5 | 12.8 | |||||||||||||||
Foreign exchange translation rates to US$ | ||||||||||||||||||||
Closing – £:US$1 | 0.616 | 0.686 | 0.498 | 0.509 | 0.581 | |||||||||||||||
–€:US$1 | 0.694 | 0.717 | 0.679 | 0.759 | 0.847 | |||||||||||||||
Average – £:US$1 | 0.641 | 0.545 | 0.500 | 0.543 | 0.550 | |||||||||||||||
–€:US$1 | 0.719 | 0.684 | 0.731 | 0.797 | 0.805 |
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1 | Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of, or for, that year. The third interim dividend for 2008 of US$0.18 was paid on 14 January 2009. The fourth interim dividend for 2008 of US$0.10 was paid on 6 May 2009. First, second and third interim dividends for 2009, each of US$0.08 per ordinary share, were paid on 8 July 2009, 7 October 2009 and 13 January 2010, respectively. Note 12 on the Financial Statements provides more information on the dividends declared in 2009. On 1 March 2010 the Directors declared a fourth interim dividend for 2009 of US$0.10 per ordinary share in lieu of a final dividend, which will be payable to ordinary shareholders on 5 May 2010 in cash in US dollars, or in pounds sterling or Hong Kong dollars at exchange rates to be determined on 26 April 2010, with a scrip dividend alternative. The reserves available for distribution at 31 December 2009 were US$34,460 million. | |
Quarterly dividends of US$15.50 per 6.20 per cent non-cumulative Series A US dollar preference share, equivalent to a dividend of US$0.3875 per Series A ADS, each of which represents one-fortieth of a Series A dollar preference share, were paid on 16 March 2009, 15 June 2009, 15 September 2009 and 15 December 2009. | ||
Quarterly coupons of 8.125 per cent capital securities of US$0.508 were paid on 15 January 2009, 15 April 2009, 15 July 2009 and 15 October 2009. | ||
2 | The definition of return on average invested capital and a reconciliation to the equivalent GAAP measures are set out on page 19. | |
3 | The return on average total shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by average total shareholders’ equity. | |
4 | The cost efficiency ratio is defined as total operating expenses divided by net operating income before loan impairment charges and other credit risk provisions. | |
5 | This footnote is intentionally left blank. | |
6 | The prices of HSBC Holdings ordinary shares and American Depositary Shares (‘ADS’) have been adjusted for the 5-for-12 rights issue completed in April 2009. | |
7 | Each ADS represents five ordinary shares. | |
8 | Total shareholder return is defined on page 19. | |
9 | The Financial Times Stock Exchange 100 Index. | |
10 | The Morgan Stanley Capital International World Index. | |
11 | The Morgan Stanley Capital International World Bank Index | |
12 | The calculation of capital resources, capital ratios and risk-weighted assets for 2009 and 2008 is on a Basel II basis. 2005 to 2007 comparatives are on a Basel I basis. | |
13 | Capital resources are total regulatory capital, the calculation of which is set out on page 289. | |
14 | Includes perpetual preferred securities, details of which can be found in Note 32 on the Financial Statements. | |
15 | Net of impairment allowances. | |
16 | The effect of the bonus element of the rights issue (Note 13 on the Financial Statements) has been included within the basic and diluted earnings per share. | |
17 | The definition of net asset value per share is total shareholders’ equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue. | |
18 | Dividends per ordinary share expressed as a percentage of earnings per ordinary share. |
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Cautionary statement |
• | changes in general economic conditions in the markets in which HSBC operates, such as: |
– | continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; | ||
– | changes in foreign exchange rates, in both market exchange rates (for example, between the US dollar and pound sterling) and government-established exchange rates (for example, between the Hong Kong dollar and US dollar); | ||
– | the timing of interest rate rises in countries which have reduced policy rates to close to zero and more general volatility in interest rates; | ||
– | volatility in equity markets, including in the smaller and less liquid trading markets in Asia and Latin America; |
– | lack of liquidity in wholesale funding markets; | ||
– | illiquidity and downward price pressure in national real estate markets, particularly consumer-owned real estate markets; | ||
– | the ease with which central banks which have provided liquidity support to financial markets through quantitative easing and extended liquidity schemes are able to withdraw such support and the timing of any withdrawal; | ||
– | heightened market concerns over sovereign creditworthiness in over-indebted countries; | ||
– | the impact of lower than expected investment returns on the funding of private and public sector defined benefit pensions; | ||
– | the effect of unexpected changes in actuarial assumptions on longevity which would influence the funding of private and public sector defined benefit pensions; and | ||
– | consumer perception as to the continuing availability of credit, and price competition in the market segments served by HSBC. |
• | changes in government policy and regulation, including: |
– | the monetary, interest rate and other policies of central banks and other regulatory authorities, including the UK Financial Services Authority, the Bank of England, the Hong Kong Monetary Authority, the US Federal Reserve, the US Securities and Exchange Commission, the US Office of the Comptroller of the Currency, the European Central Bank, the People’s Bank of China and the central banks of other leading economies and markets where HSBC operates; | ||
– | initiatives to change the size, scope of activities and interconnectedness of financial institutions following consideration of the regulatory consultations currently under way; | ||
– | 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; |
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– | the practices, pricing or responsibilities of financial institutions serving their consumer markets; | ||
– | expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; | ||
– | changes in bankruptcy legislation in the principal markets in which HSBC operates and the consequences thereof; | ||
– | general changes in government policy that may significantly influence investor decisions, in particular in markets in which HSBC operates, including financial institutions newly taken into state ownership on a full or partial basis; | ||
– | 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 HSBC’s products and services; |
– | the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; and | ||
– | the effects of competition in the markets where HSBC operates including increased competition from non-bank financial services companies, including securities firms. |
• | factors specific to HSBC: |
– | the success of HSBC in adequately identifying the risks it faces, 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, HSBC’s ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and | ||
– | the success of HSBC in addressing operational, legal and regulatory, and litigation challenges. |
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Group Chairman’s Statement |
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Group Chairman’s Statement |
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S K Green,Group Chairman
1 March 2010
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Principal activities / Strategic direction / Challenges and uncertainties |
• | businesses with international customers for whom connections with developing markets are crucial – Global Banking and Markets, Private Banking, the large business segment of Commercial Banking and the mass affluent segment of Personal Financial Services; | |
• | businesses with local customers where service efficiencies can be enhanced through global scale – the small business segment of Commercial Banking and the mass market segment of Personal Financial Services; and | |
• | products where global scale is possible by applying the Group’s efficiency, expertise and brand – product platforms such as global transaction banking. |
• | the HSBC brand and global networks will be leveraged to reach new customers and offer further services to existing clients; | |
• | efficiency will be enhanced by taking full advantage of local, regional and global economies of scale, in particular by adopting a common systems architecture wherever possible; and | |
• | objectives and incentives will be aligned to motivate and reward staff for being fully engaged in delivering the strategy. |
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• | HSBC’s ability to assess the creditworthiness of its customers or to estimate the values of its assets may be impaired if the models and techniques it uses become less accurate in their predictions of future behaviour, valuations or estimates. The process HSBC uses to estimate losses inherent in its credit exposure or assess the value of certain assets requires difficult, |
subjective and complex judgements. These include forecasts of economic conditions and how predicted economic scenarios may impair the ability of HSBC’s borrowers to repay their loans or affect the value of assets. As a consequence, this process may be less capable of making accurate estimates which, in turn, may undermine the reliability of the process; | ||
• | the demand for borrowing from creditworthy customers may diminish should economic activity slow; | |
• | a prolonged period of low interest rates will constrain net interest income earned by HSBC on its excess deposits; | |
• | HSBC’s ability to borrow from other financial institutions or to engage in funding transactions on favourable terms, or at all, could be adversely affected by any renewed disruption in the capital markets or deteriorating investor sentiment; | |
• | market developments may continue to depress consumer confidence and may cause further declines in credit card usage and adverse changes in payment patterns, leading to increases in delinquencies and default rates, write-offs and loan impairment charges beyond HSBC’s expectations; | |
• | loan impairment allowances and write-offs would be likely to rise in the event of a ‘double dip’ recession as consumer confidence weakened and business failures increased; | |
• | HSBC expects to face increased regulation and supervision of the financial services industry, following new proposed regulatory measures in countries in which it operates; | |
• | trade and capital flows may contract as a result of protectionist measures being introduced in certain markets; and | |
• | increased government ownership and control over financial institutions and further consolidation in the financial industry which could significantly alter the competitive landscape. |
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Challenges and uncertainties |
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Challenges and uncertainties |
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Challenges and uncertainties / KPIs |
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2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
% | % | % | % | % | ||||||||||||||||||||||
Revenue growth1 | (19.0 | ) | 3.4 | 20.8 | 13.4 | 12.2 | ||||||||||||||||||||
Revenue mix2 | ||||||||||||||||||||||||||
Net interest income | 61.5 | 52.1 | 47.8 | 52.8 | 54.4 | |||||||||||||||||||||
Net fee income | 26.7 | 24.5 | 27.9 | 26.3 | 25.1 | |||||||||||||||||||||
Other income3 | 11.8 | 23.4 | 24.3 | 20.9 | 20.5 | |||||||||||||||||||||
Cost efficiency4 | 52.0 | 60.1 | 49.4 | 51.3 | 51.2 | |||||||||||||||||||||
Credit performance as measured by risk adjusted margin5 | 3.5 | 4.8 | 6.0 | 6.3 | 6.3 | |||||||||||||||||||||
Return on average invested capital6 | 4.1 | 4.0 | 15.3 | 14.9 | 15.9 | |||||||||||||||||||||
Return on average total shareholders’ equity7 | 5.1 | 4.7 | 15.9 | 15.7 | 16.8 | |||||||||||||||||||||
Dividends per share growth8 | (46.9 | ) | (28.9 | ) | 11.1 | 11.0 | 10.6 | |||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
Basic earnings per ordinary share9 | 0.34 | 0.41 | 1.44 | 1.22 | 1.18 |
For footnotes, see page 149. |
Over | Over | Over | ||||||||||
1 year | 3 years | 5 years | ||||||||||
Total shareholder return | ||||||||||||
HSBC TSR | 128.3 | 103.6 | 120.6 | |||||||||
Benchmarks: | ||||||||||||
– FTSE 100 | 127.3 | 98.0 | 135.4 | |||||||||
– MSCI World | 116.7 | 103.6 | 134.9 | |||||||||
– MSCI Banks | 125.2 | 70.6 | 92.3 |
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KPIs / Reconciliation of reported and underlying profit before tax |
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profit before tax
• | the income statements for 2008 and 2007 at the average rates of exchange for 2009 and 2008, respectively; and | |
• | the balance sheets at 31 December 2008 and 2007 at the prevailing rates of exchange on 31 December 2009 and 2008, respectively. |
• | the gain on sale of HSBC’s UK merchant acquiring business to a joint venture 49 per cent owned by the Group in June 2008 and the gain on sale of the residual stake in June 2009; | |
• | the disposal of seven French regional banking subsidiaries in July 2008; | |
• | the disposal of the stake in Financiera Independencia S.A.B. de C.VB (‘Financiera Independencia’) in Mexico in November 2008; and | |
• | the acquisition of PT Bank Ekonomi Raharja Tbk (‘Bank Ekonomi’) in May 2009. |
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Reconciliation of profit / Financial summary > Income statement |
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | at 2009 | 2009 | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | adjust- | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | ments | 10 | translation | 11 | rates | 12 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
HSBC | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 42,563 | (65 | ) | (2,062 | ) | 40,436 | 53 | 241 | 40,730 | (4 | ) | 1 | ||||||||||||||||||||||||
Net fee income | 20,024 | (58 | ) | (1,315 | ) | 18,651 | 6 | (993 | ) | 17,664 | (12 | ) | (5 | ) | ||||||||||||||||||||||
Changes in fair value14 | 6,570 | (6,570 | ) | – | – | (6,533 | ) | – | (6,533 | ) | (199 | ) | ||||||||||||||||||||||||
Gains on disposal of French regional banks | 2,445 | (2,445 | ) | – | – | – | – | – | (100 | ) | ||||||||||||||||||||||||||
Other income15 | 10,080 | (680 | ) | (1,597 | ) | 7,803 | 298 | 6,219 | 14,320 | 42 | 80 | |||||||||||||||||||||||||
Net operating income16 | 81,682 | (9,818 | ) | (4,974 | ) | 66,890 | (6,176 | ) | 5,467 | 66,181 | (19 | ) | 8 | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (24,937 | ) | 6 | 709 | (24,222 | ) | – | (2,266 | ) | (26,488 | ) | (6 | ) | (9 | ) | |||||||||||||||||||||
Net operating income | 56,745 | (9,812 | ) | (4,265 | ) | 42,668 | (6,176 | ) | 3,201 | 39,693 | (30 | ) | 8 | |||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (38,535 | ) | 68 | 2,655 | (35,812 | ) | (31 | ) | 1,448 | (34,395 | ) | 11 | 4 | |||||||||||||||||||||||
Goodwill impairment | (10,564 | ) | – | – | (10,564 | ) | – | 10,564 | – | 100 | 100 | |||||||||||||||||||||||||
Operating profit | 7,646 | (9,744 | ) | (1,610 | ) | (3,708 | ) | (6,207 | ) | 15,213 | 5,298 | (31 | ) | 410 | ||||||||||||||||||||||
Income from associates | 1,661 | – | 25 | 1,686 | – | 95 | 1,781 | 7 | 6 | |||||||||||||||||||||||||||
Profit before tax | 9,307 | (9,744 | ) | (1,585 | ) | (2,022 | ) | (6,207 | ) | 15,308 | 7,079 | (24 | ) | 757 | ||||||||||||||||||||||
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | 2007 | |||||||||||||||||||||||||||||||||||
2007 | adjustments | at 2008 | 2008 | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
HSBC | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 37,795 | (389 | ) | (4 | ) | 37,402 | 250 | 4,911 | 42,563 | 13 | 13 | |||||||||||||||||||||||||
Net fee income | 22,002 | (239 | ) | (152 | ) | 21,611 | 18 | (1,605 | ) | 20,024 | (9 | ) | (7 | ) | ||||||||||||||||||||||
Changes in fair value14 | 3,055 | (3,055 | ) | – | – | 6,570 | – | 6,570 | 115 | |||||||||||||||||||||||||||
Gains on disposal of French regional banks | – | – | – | – | 2,445 | – | 2,445 | |||||||||||||||||||||||||||||
Other income15 | 16,141 | (1,232 | ) | (269 | ) | 14,640 | 703 | (5,263 | ) | 10,080 | (38 | ) | (36 | ) | ||||||||||||||||||||||
Net operating income16 | 78,993 | (4,915 | ) | (425 | ) | 73,653 | 9,986 | (1,957 | ) | 81,682 | 3 | (3 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (17,242 | ) | 31 | 113 | (17,098 | ) | (6 | ) | (7,833 | ) | (24,937 | ) | (45 | ) | (46 | ) | ||||||||||||||||||||
Net operating income | 61,751 | (4,884 | ) | (312 | ) | 56,555 | 9,980 | (9,790 | ) | 56,745 | (8 | ) | (17 | ) | ||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (39,042 | ) | 514 | 301 | (38,227 | ) | (198 | ) | (110 | ) | (38,535 | ) | 1 | – | ||||||||||||||||||||||
Goodwill impairment | – | – | – | – | – | (10,564 | ) | (10,564 | ) | |||||||||||||||||||||||||||
Operating profit | 22,709 | (4,370 | ) | (11 | ) | 18,328 | 9,782 | (20,464 | ) | 7,646 | (66 | ) | (112 | ) | ||||||||||||||||||||||
Income from associates | 1,503 | (12 | ) | 107 | 1,598 | – | 63 | 1,661 | 11 | 4 | ||||||||||||||||||||||||||
Profit before tax | 24,212 | (4,382 | ) | 96 | 19,926 | 9,782 | (20,401 | ) | 9,307 | (62 | ) | (102 | ) | |||||||||||||||||||||||
For footnotes, see page 149. |
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Financial summary > Income statement |
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Interest income | 62,096 | 91,301 | 92,359 | |||||||||||||
Interest expense | (21,366 | ) | (48,738 | ) | (54,564 | ) | ||||||||||
Net interest income | 40,730 | 42,563 | 37,795 | |||||||||||||
Fee income | 21,403 | 24,764 | 26,337 | |||||||||||||
Fee expense | (3,739 | ) | (4,740 | ) | (4,335 | ) | ||||||||||
Net fee income | 17,664 | 20,024 | 22,002 | |||||||||||||
Trading income excluding net interest income | 6,236 | 847 | 4,458 | |||||||||||||
Net interest income on trading activities | 3,627 | 5,713 | 5,376 | |||||||||||||
Net trading income | 9,863 | 6,560 | 9,834 | |||||||||||||
Changes in fair value of long-term debt issued and related derivatives18 | (6,247 | ) | 6,679 | 2,812 | ||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 2,716 | (2,827 | ) | 1,271 | ||||||||||||
Net income/(expense) from financial instruments designated at fair value | (3,531 | ) | 3,852 | 4,083 | ||||||||||||
Gains less losses from financial investments | 520 | 197 | 1,956 | |||||||||||||
Gains arising from dilution of interests in associates | – | – | 1,092 | |||||||||||||
Dividend income | 126 | 272 | 324 | |||||||||||||
Net earned insurance premiums | 10,471 | 10,850 | 9,076 | |||||||||||||
Gains on disposal of French regional banks | – | 2,445 | – | |||||||||||||
Other operating income | 2,788 | 1,808 | 1,439 | |||||||||||||
Total operating income | 78,631 | 88,571 | 87,601 | |||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (12,450 | ) | (6,889 | ) | (8,608 | ) | ||||||||||
Net operating income before loan impairment charges and other credit risk provisions | 66,181 | 81,682 | 78,993 | |||||||||||||
Loan impairment charges and other credit risk provisions | (26,488 | ) | (24,937 | ) | (17,242 | ) | ||||||||||
Net operating income | 39,693 | 56,745 | 61,751 | |||||||||||||
Employee compensation and benefits | (18,468 | ) | (20,792 | ) | (21,334 | ) | ||||||||||
General and administrative expenses | (13,392 | ) | (15,260 | ) | (15,294 | ) | ||||||||||
Depreciation and impairment of property, plant and equipment | (1,725 | ) | (1,750 | ) | (1,714 | ) | ||||||||||
Goodwill impairment | – | (10,564 | ) | – | ||||||||||||
Amortisation and impairment of intangible assets | (810 | ) | (733 | ) | (700 | ) | ||||||||||
Total operating expenses | (34,395 | ) | (49,099 | ) | (39,042 | ) | ||||||||||
Operating profit | 5,298 | 7,646 | 22,709 | |||||||||||||
Share of profit in associates and joint ventures | 1,781 | 1,661 | 1,503 | |||||||||||||
Profit before tax | 7,079 | 9,307 | 24,212 | |||||||||||||
Tax expense | (385 | ) | (2,809 | ) | (3,757 | ) | ||||||||||
Profit for the year | 6,694 | 6,498 | 20,455 | |||||||||||||
Profit attributable to shareholders of the parent company | 5,834 | 5,728 | 19,133 | |||||||||||||
Profit attributable to minority interests | 860 | 770 | 1,322 |
For footnote, see page 149. |
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The following items are significant to a comparison of reported results with 2008: |
• | the non-recurrence of the US$10.6 billion goodwill impairment charge in North America recorded in 2008; | |
• | the non-recurrence of a US$2.4 billion gain on the sale of French regional banks in 2008; | |
• | fair value losses relating to own credit spreads of US$6.5 billion in 2009 compared with gains of US$6.6 billion in 2008; | |
• | a US$72 million fraud loss relating to Bernard L Madoff Investment Securities LLC (‘Madoff Securities’) in 2009, which was in addition to the US$984 million charge reported in 2008; | |
• | loss from write-downs in legacy securities and structured credit positions amounting to US$0.3 billion in 2009 compared with US$5.4 billion in 2008; |
• | the acquisition in 2008 of the subsidiary, Project Maple II B.V., which owned the Group’s headquarters at 8 Canada Square, and the subsequent sale of the company and leaseback of the property in 2009, resulting in gains of US$0.6 billion in 2009 and US$0.4 billion in 2008; | |
• | the sale of the card merchant-acquiring business in the UK, resulting in gains of US$0.3 billion in 2009 and US$0.4 billion in 2008; | |
• | the change in the basis of delivering long-term employee benefits in the UK, which generated a one-off accounting gain of US$0.5 billion in 2009; and | |
• | the tax expense of US$0.3 billion in 2009, which was lower than in previous years as a result of the geographic distribution of income. The Group generated profits in low tax rate jurisdictions, principally Asia, and incurred losses in high tax rate jurisdictions, principally the US, which when mixed produced a low overall rate. |
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Financial summary > Group performance > Net interest income / Net fee income |
The following items were significant: | ||
• | the non-recurrence of US$1.1 billion of gains which arose in 2007 on the dilution of the Group’s stakes in various associates; | |
• | a US$3.6 billion increase (from US$3.0 billion in 2007 to US$6.6 billion) in fair value gains from wider credit spreads recorded predominantly on HSBC’s own long-term debt designated at fair value. These gains reported in the ‘Other’ segment, are not allocated to customer groups and are not included within regulatory capital calculations; | |
• | the gain of US$2.4 billion on the sale of the French regional banks; and | |
• | a charge against trading income of US$984 million following the fraud in December 2008 relating to Madoff Securities. |
2009 | 2008 | 2007 | ||||||||||
Net interest income19 (US$m) | 40,730 | 42,563 | 37,795 | |||||||||
Average interest-earning assets (US$m) | 1,384,705 | 1,466,622 | 1,296,701 | |||||||||
Gross interest yield20 (per cent) | 4.48 | 6.23 | 7.12 | |||||||||
Net interest spread21 (per cent) | 2.90 | 2.87 | 2.86 | |||||||||
Net interest margin22 (per cent) | 2.94 | 2.90 | 2.91 |
For footnotes, see page 149. |
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2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Cards | 4,625 | 5,844 | 6,496 | |||||||||
Account services | 3,592 | 4,353 | 4,359 | |||||||||
Funds under management | 2,172 | 2,757 | 2,975 | |||||||||
Broking income | 1,617 | 1,738 | 2,012 | |||||||||
Credit facilities | 1,479 | 1,313 | 1,138 | |||||||||
Insurance | 1,421 | 1,771 | 1,836 | |||||||||
Global custody | 988 | 1,311 | 1,404 | |||||||||
Imports/exports | 897 | 1,014 | 866 | |||||||||
Underwriting | 746 | 325 | 367 | |||||||||
Remittances | 613 | 610 | 556 | |||||||||
Corporate finance | 396 | 381 | 409 | |||||||||
Unit trusts | 363 | 502 | 875 | |||||||||
Trust income | 278 | 325 | 299 | |||||||||
Mortgage servicing | 124 | 120 | 109 | |||||||||
Maintenance income on operating leases | 111 | 130 | 139 | |||||||||
Taxpayer financial services | 87 | 168 | 252 | |||||||||
Other | 1,894 | 2,102 | 2,245 | |||||||||
Total fee income | 21,403 | 24,764 | 26,337 | |||||||||
Less: fee expense | (3,739 | ) | (4,740 | ) | (4,335 | ) | ||||||
Net fee income | 17,664 | 20,024 | 22,002 | |||||||||
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Financial summary > Group performance > Net fee income / Net trading income |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Trading activities | 5,240 | 2,988 | 4,521 | |||||||||
Net interest income on trading activities | 3,627 | 5,713 | 5,376 | |||||||||
Other trading income – hedge ineffectiveness: | ||||||||||||
– on cash flow hedges | 90 | (40 | ) | (77 | ) | |||||||
– on fair value hedges | (45 | ) | 5 | 19 | ||||||||
Non-qualifying hedges | 951 | (1,122 | ) | (5 | ) | |||||||
Losses on Madoff Securities fraud | – | (984 | ) | – | ||||||||
Net trading income23,24 | 9,863 | 6,560 | 9,834 | |||||||||
For footnotes, see page 149. |
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Financial summary > Group performance > Net income from financial instruments at FV / Gains less losses from financial instruments |
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Net income/(expense) arising from: | ||||||||||||||||
– financial assets held to meet liabilities under insurance and investment contracts | 3,793 | (5,064 | ) | 2,056 | ||||||||||||
– liabilities to customers under investment contracts | (1,329 | ) | 1,751 | (940 | ) | |||||||||||
– HSBC’s long-term debt issued and related derivatives | (6,247 | ) | 6,679 | 2,812 | ||||||||||||
Change in own credit spread on long-term debt | (6,533 | ) | 6,570 | 3,055 | ||||||||||||
Other changes in fair value25 | 286 | 109 | (243 | ) | ||||||||||||
– other instruments designated at fair value and related derivatives | 252 | 486 | 155 | |||||||||||||
Net income/(expense) from financial instruments designated at fair value | (3,531 | ) | 3,852 | 4,083 | ||||||||||||
Financial assets designated at fair value at 31 December | 37,181 | 28,533 | 41,564 | |||||||||||||
Financial liabilities designated at fair value at 31 December | 80,092 | 74,587 | 89,939 |
For footnote, see page 149. |
• | for certain fixed-rate long-term debt issues whose rate profile has been changed to floating through interest rate swaps as part of a documented interest rate management strategy. Approximately US$63 billion (2008: US$59 billion) of the Group’s debt issues have been accounted for using the fair value option. | |
The movement in fair value of these debt issues includes the effect of own credit spread changes and any ineffectiveness in the economic relationship between the related swaps and own debt. As credit spreads widen or narrow, accounting profits or losses, respectively, are booked. The size and direction of the accounting consequences of changes in own credit spread and ineffectiveness can be volatile from year to year, but do not alter the cash flows envisaged |
as part of the documented interest rate management strategy. As a consequence, gains and losses arising from changes in own credit spread on long-term debt are not regarded internally as part of managed performance and are excluded from underlying results. Similarly, such gains and losses are ignored in the calculation of regulatory capital; | ||
• | for US$15 billion (2008: US$11 billion) of financial assets held to meet liabilities under insurance contracts, and certain liabilities under investment contracts with discretionary participation features; and | |
• | for US$8 billion (2008: US$7 billion) of financial assets held to meet liabilities under unit-linked and other investment contracts, as well as the associated liabilities. |
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• | To the extent that the investment gains related to assets held to back investment contracts, the expense associated with the corresponding increase in liabilities to customers was also recorded under net income from financial instruments designated at fair value. This expense amounted to US$1.3 billion in 2009 compared with an income of US$1.5 billion in 2008 when liabilities fell in line with declining asset markets. | |
• | To the extent that the investment gains related to assets held to back insurance contracts, they were offset by a corresponding increase in ‘Net insurance claims and movement in liabilities to policyholders’ to reflect the extent to which unit-linked policyholders, in particular, participate in the investment performance experienced in the associated asset portfolios. |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Net gain from disposal of: | ||||||||||||
– debt securities | 463 | 19 | 120 | |||||||||
– equity securities | 407 | 1,216 | 1,864 | |||||||||
– other financial investments | 8 | 4 | 14 | |||||||||
878 | 1,239 | 1,998 | ||||||||||
Impairment of available-for-sale equity securities | (358 | ) | (1,042 | ) | (42 | ) | ||||||
Gains less losses from financial investments | 520 | 197 | 1,956 | |||||||||
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Financial summary > Group performance > Gains less losses from financial investments / Net earned insurance premiums / OOI |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Gross insurance premium income | 10,991 | 12,547 | 11,001 | |||||||||
Reinsurance premiums | (520 | ) | (1,697 | ) | (1,925 | ) | ||||||
Net earned insurance premiums | 10,471 | 10,850 | 9,076 | |||||||||
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2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Rent received | 547 | 606 | 630 | |||||||||
Gains/(losses) recognised on assets held for sale | (115 | ) | (130 | ) | 5 | |||||||
Valuation gains/(losses) on investment properties | (24 | ) | (92 | ) | 152 | |||||||
Gain on disposal of property, plant and equipment, intangible assets and non-financial investments | 1,033 | 881 | 213 | |||||||||
Change in present value of in-force long-term insurance business | 605 | 286 | (145 | ) | ||||||||
Other | 742 | 257 | 584 | |||||||||
Other operating income | 2,788 | 1,808 | 1,439 | |||||||||
33
Table of Contents
Financial summary > Group performance > Net insurance claims / Loan impairment charges |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Insurance claims incurred and movement in liabilities to policyholders: | ||||||||||||
– gross | 12,560 | 9,206 | 9,550 | |||||||||
– reinsurers’ share | (110 | ) | (2,317 | ) | (942 | ) | ||||||
– net26 | 12,450 | 6,889 | 8,608 | |||||||||
For footnote, see page 149. |
34
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Loan impairment charges | ||||||||||||||||
New allowances net of allowance releases | 25,832 | 24,965 | 18,182 | |||||||||||||
Recoveries of amounts previously written off | (890 | ) | (834 | ) | (1,005 | ) | ||||||||||
24,942 | 24,131 | 17,177 | ||||||||||||||
Individually assessed allowances | 4,458 | 2,064 | 796 | |||||||||||||
Collectively assessed allowances | 20,484 | 22,067 | 16,381 | |||||||||||||
Impairment of available-for-sale debt securities | 1,474 | 737 | 44 | |||||||||||||
Other credit risk provisions | 72 | 69 | 21 | |||||||||||||
Loan impairment charges and other credit risk provisions | 26,488 | 24,937 | 17,242 | |||||||||||||
% | % | % | ||||||||||
As a percentage of net operating income excluding the effect of fair value movements in respect of credit spread on own debt and before loan impairment charges and other credit risk provisions | 36.4 | 33.2 | 22.7 | |||||||||
Impairment charges on loans and advances to customers as a percentage of gross average loans and advances to customers | 2.8 | 2.5 | 2.0 | |||||||||
US$m | US$m | US$m | ||||||||||
Customer impaired loans | 30,606 | 25,352 | 19,582 | |||||||||
Customer loan impairment allowances | 25,542 | 23,909 | 19,205 |
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Financial summary > Group performance > Loan impairment charges |
36
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37
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Financial summary > Group performance > Operating expenses |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
By expense category | ||||||||||||
Employee compensation and benefits | 18,468 | 20,792 | 21,334 | |||||||||
Premises and equipment (excluding depreciation and impairment) | 4,099 | 4,305 | 3,966 | |||||||||
General and administrative expenses | 9,293 | 10,955 | 11,328 | |||||||||
Administrative expenses | 31,860 | 36,052 | 36,628 | |||||||||
Depreciation and impairment of property, plant and equipment | 1,725 | 1,750 | 1,714 | |||||||||
Amortisation and impairment of intangible assets | 810 | 733 | 700 | |||||||||
Goodwill impairment | – | 10,564 | – | |||||||||
Total operating expenses | 34,395 | 49,099 | 39,042 | |||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Staff numbers (full-time equivalent) | ||||||||||||
Europe | 76,703 | 82,093 | 82,166 | |||||||||
Hong Kong | 27,614 | 29,330 | 27,655 | |||||||||
Rest of Asia-Pacific27 | 87,141 | 89,706 | 80,523 | |||||||||
Middle East27 | 8,281 | 8,453 | 8,050 | |||||||||
North America | 35,458 | 44,725 | 52,722 | |||||||||
Latin America | 54,288 | 58,559 | 64,404 | |||||||||
Total staff numbers | 289,485 | 312,866 | 315,520 | |||||||||
For footnote, see page 149. |
38
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||
% | % | % | ||||||||||||||
HSBC | 52.0 | 60.1 | 49.4 | |||||||||||||
Personal Financial Services | 51.7 | 76.4 | 50.3 | |||||||||||||
Europe | 68.7 | 62.7 | 64.8 | |||||||||||||
Hong Kong | 34.9 | 32.2 | 27.2 | |||||||||||||
Rest of Asia-Pacific27 | 81.2 | 81.5 | 77.9 | |||||||||||||
Middle East27 | 53.5 | 53.2 | 61.1 | |||||||||||||
North America | 38.1 | 106.8 | 42.3 | |||||||||||||
Latin America | 66.7 | 59.7 | 61.3 | |||||||||||||
Commercial Banking | 46.4 | 43.0 | 44.8 | |||||||||||||
Europe | 47.4 | 44.2 | 49.3 | |||||||||||||
Hong Kong | 33.7 | 26.2 | 24.9 | |||||||||||||
Rest of Asia-Pacific27 | 47.0 | 45.9 | 47.5 | |||||||||||||
Middle East27 | 33.8 | 32.0 | 34.5 | |||||||||||||
North America | 47.7 | 46.1 | 45.1 | |||||||||||||
Latin America | 57.0 | 55.0 | 54.3 |
For footnote, see page 149. |
39
Table of Contents
Financial summary > Group performance > Share of profit in associates and joint ventures / Economic profit |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Associates | ||||||||||||
Bank of Communications Co., Limited | 754 | 741 | 445 | |||||||||
Ping An Insurance (Group) Company of China, Limited | 551 | 324 | 518 | |||||||||
Industrial Bank Co., Limited | 216 | 221 | 128 | |||||||||
The Saudi British Bank | 172 | 251 | 216 | |||||||||
Other | 42 | 63 | 159 | |||||||||
Share of profit in associates | 1,735 | 1,600 | 1,466 | |||||||||
Share of profit in joint ventures | 46 | 61 | 37 | |||||||||
Share of profit in associates and joint ventures | 1,781 | 1,661 | 1,503 | |||||||||
40
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2009 | 2008 | |||||||||||||||
US$m | %28 | US$m | %28 | |||||||||||||
Average total shareholders’ equity | 115,431 | 122,292 | ||||||||||||||
Adjusted by: | ||||||||||||||||
Goodwill previously amortised or written off | 8,123 | 8,152 | ||||||||||||||
Property revaluation reserves | (799 | ) | (828 | ) | ||||||||||||
Reserves representing unrealised losses on effective cash flow hedges | 385 | 997 | ||||||||||||||
Reserves representing unrealised losses on available-for-sale securities | 16,189 | 9,163 | ||||||||||||||
Preference shares and other equity instruments | (3,538 | ) | (2,685 | ) | ||||||||||||
Average invested capital29 | 135,791 | 137,091 | ||||||||||||||
Return on invested capital30 | 5,565 | 4.1 | 5,497 | 4.0 | ||||||||||||
Benchmark cost of capital | (13,579 | ) | (10.0 | ) | (13,709 | ) | (10.0 | ) | ||||||||
Economic loss and spread | (8,014 | ) | (5.9 | ) | (8,212 | ) | (6.0 | ) | ||||||||
For footnotes, see page 149. |
41
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Financial summary > Balance sheet > Movement in 2009 |
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
ASSETS | ||||||||||||
Cash and balances at central banks | 60,655 | 52,396 | 21,765 | |||||||||
Trading assets | 421,381 | 427,329 | 445,968 | |||||||||
Financial assets designated at fair value | 37,181 | 28,533 | 41,564 | |||||||||
Derivatives | 250,886 | 494,876 | 187,854 | |||||||||
Loans and advances to banks | 179,781 | 153,766 | 237,366 | |||||||||
Loans and advances to customers | 896,231 | 932,868 | 981,548 | |||||||||
Financial investments | 369,158 | 300,235 | 283,000 | |||||||||
Other assets | 149,179 | 137,462 | 155,201 | |||||||||
Total assets | 2,364,452 | 2,527,465 | 2,354,266 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||
Liabilities | ||||||||||||
Deposits by banks | 124,872 | 130,084 | 132,181 | |||||||||
Customer accounts | 1,159,034 | 1,115,327 | 1,096,140 | |||||||||
Trading liabilities | 268,130 | 247,652 | 314,580 | |||||||||
Financial liabilities designated at fair value | 80,092 | 74,587 | 89,939 | |||||||||
Derivatives | 247,646 | 487,060 | 183,393 | |||||||||
Debt securities in issue | 146,896 | 179,693 | 246,579 | |||||||||
Liabilities under insurance contracts | 53,707 | 43,683 | 42,606 | |||||||||
Other liabilities | 148,414 | 149,150 | 113,432 | |||||||||
Total liabilities | 2,228,791 | 2,427,236 | 2,218,850 | |||||||||
Equity | ||||||||||||
Total shareholders’ equity | 128,299 | 93,591 | 128,160 | |||||||||
Minority interests | 7,362 | 6,638 | 7,256 | |||||||||
Total equity | 135,661 | 100,229 | 135,416 | |||||||||
Total equity and liabilities | 2,364,452 | 2,527,465 | 2,354,266 | |||||||||
A more detailed consolidated balance sheet is contained in the Financial Statements on page 355. |
42
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43
Table of Contents
Financial summary > Balance sheet > Reconciliation of assets and liabilities / Loans and advances and customer accounts |
31 December 2009 compared with 31 December 2008 | ||||||||||||||||||||||||||||
31 Dec 08 | ||||||||||||||||||||||||||||
31 Dec 08 | at 31 Dec 09 | 31 Dec 09 | Under- | |||||||||||||||||||||||||
as | Currency | exchange | Underlying | as | Reported | lying | ||||||||||||||||||||||
reported | translation | 31 | rates | change | reported | change | change | |||||||||||||||||||||
HSBC | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||
Cash and balances at central banks | 52,396 | 1,550 | 53,946 | 6,709 | 60,655 | 16 | 12 | |||||||||||||||||||||
Trading assets | 427,329 | 21,612 | 448,941 | (27,560 | ) | 421,381 | (1 | ) | (6 | ) | ||||||||||||||||||
Financial assets designated at fair value | 28,533 | 2,636 | 31,169 | 6,012 | 37,181 | 30 | 19 | |||||||||||||||||||||
Derivative assets | 494,876 | 32,379 | 527,255 | (276,369 | ) | 250,886 | (49 | ) | (52 | ) | ||||||||||||||||||
Loans and advances to banks | 153,766 | 7,406 | 161,172 | 18,609 | 179,781 | 17 | 12 | |||||||||||||||||||||
Loans and advances to customers | 932,868 | 57,163 | 990,031 | (93,800 | ) | 896,231 | (4 | ) | (9 | ) | ||||||||||||||||||
Financial investments | 300,235 | 14,748 | 314,983 | 54,175 | 369,158 | 23 | 17 | |||||||||||||||||||||
Other assets | 137,462 | 1,807 | 139,269 | 9,910 | 149,179 | 9 | 7 | |||||||||||||||||||||
Total assets | 2,527,465 | 139,301 | 2,666,766 | (302,314 | ) | 2,364,452 | (6 | ) | (11 | ) | ||||||||||||||||||
Deposits by banks | 130,084 | 8,426 | 138,510 | (13,638 | ) | 124,872 | (4 | ) | (10 | ) | ||||||||||||||||||
Customer accounts | 1,115,327 | 64,478 | 1,179,805 | (20,771 | ) | 1,159,034 | 4 | (2 | ) | |||||||||||||||||||
Trading liabilities | 247,652 | 12,714 | 260,366 | 7,764 | 268,130 | 8 | 3 | |||||||||||||||||||||
Financial liabilities designated at fair value | 74,587 | 2,709 | 77,296 | 2,796 | 80,092 | 7 | 4 | |||||||||||||||||||||
Derivative liabilities | 487,060 | 31,722 | 518,782 | (271,136 | ) | 247,646 | (49 | ) | (52 | ) | ||||||||||||||||||
Debt securities in issue | 179,693 | 8,005 | 187,698 | (40,802 | ) | 146,896 | (18 | ) | (22 | ) | ||||||||||||||||||
Liabilities under insurance contracts | 43,683 | 1,763 | 45,446 | 8,261 | 53,707 | 23 | 18 | |||||||||||||||||||||
Other liabilities | 149,150 | 5,144 | 154,294 | (5,880 | ) | 148,414 | – | (4 | ) | |||||||||||||||||||
Total liabilities | 2,427,236 | 134,961 | 2,562,197 | (333,406 | ) | 2,228,791 | (8 | ) | (13 | ) | ||||||||||||||||||
Total shareholders’ equity | 93,591 | 4,114 | 97,705 | 30,594 | 128,299 | 37 | 31 | |||||||||||||||||||||
Minority interests | 6,638 | 226 | 6,864 | 498 | 7,362 | 11 | 7 | |||||||||||||||||||||
Total equity | 100,229 | 4,340 | 104,569 | 31,092 | 135,661 | 35 | 30 | |||||||||||||||||||||
Total equity and liabilities | 2,527,465 | 139,301 | 2,666,766 | (302,314 | ) | 2,364,452 | (6 | ) | (11 | ) | ||||||||||||||||||
44
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31 December 2009 compared with 31 December 2008 | ||||||||||||||||||||||||||||
31 Dec 08 at | ||||||||||||||||||||||||||||
31 Dec 08 | 31 Dec 09 | 31 Dec 09 | Under- | |||||||||||||||||||||||||
as | Currency | exchange | Underlying | as | Reported | lying | ||||||||||||||||||||||
reported | translation | 31 | rates | change | reported | change | change | |||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | % | % | ||||||||||||||||||||||
Loans and advances to customers (net) | ||||||||||||||||||||||||||||
Europe | 426,191 | 37,773 | 463,964 | (24,483 | ) | 439,481 | 3 | (5 | ) | |||||||||||||||||||
Hong Kong | 100,220 | (54 | ) | 100,166 | (785 | ) | 99,381 | (1 | ) | (1 | ) | |||||||||||||||||
Rest of Asia-Pacific | 80,661 | 5,320 | 85,981 | (5,938 | ) | 80,043 | (1 | ) | (7 | ) | ||||||||||||||||||
Middle East | 27,295 | (69 | ) | 27,226 | (4,382 | ) | 22,844 | (16 | ) | (16 | ) | |||||||||||||||||
North America | 256,214 | 7,379 | 263,593 | (56,740 | ) | 206,853 | (19 | ) | (22 | ) | ||||||||||||||||||
Latin America | 42,287 | 6,814 | 49,101 | (1,472 | ) | 47,629 | 13 | (3 | ) | |||||||||||||||||||
932,868 | 57,163 | 990,031 | (93,800 | ) | 896,231 | (4 | ) | (9 | ) | |||||||||||||||||||
Customer accounts | ||||||||||||||||||||||||||||
Europe | 502,476 | 42,883 | 545,359 | (50,340 | ) | 495,019 | (1 | ) | (9 | ) | ||||||||||||||||||
Hong Kong | 250,517 | (119 | ) | 250,398 | 25,043 | 275,441 | 10 | 10 | ||||||||||||||||||||
Rest of Asia-Pacific | 124,194 | 5,736 | 129,930 | 4,069 | 133,999 | 8 | 3 | |||||||||||||||||||||
Middle East | 35,165 | (76 | ) | 35,089 | (2,560 | ) | 32,529 | (7 | ) | (7 | ) | |||||||||||||||||
North America | 143,532 | 5,577 | 149,109 | 48 | 149,157 | 4 | – | |||||||||||||||||||||
Latin America | 59,443 | 10,477 | 69,920 | 2,969 | 72,889 | 23 | 4 | |||||||||||||||||||||
1,115,327 | 64,478 | 1,179,805 | (20,771 | ) | 1,159,034 | 4 | (2 | ) | ||||||||||||||||||||
31 December 2009 compared with 31 December 2008 | ||||||||||||||||||||||||||||
31 Dec 08 at | ||||||||||||||||||||||||||||
31 Dec 08 | 31 Dec 09 | 31 Dec 09 | Under- | |||||||||||||||||||||||||
as | Currency | exchange | Underlying | as | Reported | lying | ||||||||||||||||||||||
reported | translation | 31 | rates | change | reported | change | change | |||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | % | % | ||||||||||||||||||||||
Loans and advances to customers (net) | ||||||||||||||||||||||||||||
Personal Financial Services | 401,402 | 21,119 | 422,521 | (23,061 | ) | 399,460 | – | (5 | ) | |||||||||||||||||||
Commercial Banking | 203,949 | 14,614 | 218,563 | (18,889 | ) | 199,674 | (2 | ) | (9 | ) | ||||||||||||||||||
Global Banking and Markets | 287,306 | 19,989 | 307,295 | (50,339 | ) | 256,956 | (11 | ) | (16 | ) | ||||||||||||||||||
Private Banking | 37,590 | 1,416 | 39,006 | (1,975 | ) | 37,031 | (1 | ) | (5 | ) | ||||||||||||||||||
Other | 2,621 | 25 | 2,646 | 464 | 3,110 | 19 | 18 | |||||||||||||||||||||
932,868 | 57,163 | 990,031 | (93,800 | ) | 896,231 | (4 | ) | (9 | ) | |||||||||||||||||||
Customer accounts | ||||||||||||||||||||||||||||
Personal Financial Services | 440,338 | 24,029 | 464,367 | 34,742 | 499,109 | 13 | 7 | |||||||||||||||||||||
Commercial Banking | 235,879 | 13,901 | 249,780 | 17,608 | 267,388 | 13 | 7 | |||||||||||||||||||||
Global Banking and Markets | 320,386 | 24,243 | 344,629 | (59,902 | ) | 284,727 | (11 | ) | (17 | ) | ||||||||||||||||||
Private Banking | 116,683 | 2,291 | 118,974 | (12,441 | ) | 106,533 | (9 | ) | (10 | ) | ||||||||||||||||||
Other | 2,041 | 14 | 2,055 | (778 | ) | 1,277 | (37 | ) | (38 | ) | ||||||||||||||||||
1,115,327 | 64,478 | 1,179,805 | (20,771 | ) | 1,159,034 | 4 | (2 | ) | ||||||||||||||||||||
45
Table of Contents
Financial summary > Balance sheet / Average balance sheet |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||
balance | income | Yield | balance | income | Yield | balance | income | Yield | ||||||||||||||||||||||||||||||
US$m | US$m | % | US$m | US$m | % | US$m | US$m | % | ||||||||||||||||||||||||||||||
Summary | ||||||||||||||||||||||||||||||||||||||
Total interest-earning assets (itemised below) | 1,384,705 | 62,096 | 4.48 | 1,466,622 | 91,301 | 6.23 | 1,296,701 | 92,359 | 7.12 | |||||||||||||||||||||||||||||
Trading assets32 | 357,504 | 7,614 | 2.13 | 428,539 | 16,742 | 3.91 | 374,973 | 17,562 | 4.68 | |||||||||||||||||||||||||||||
Financial assets designated at fair value33 | 62,143 | 1,032 | 1.66 | 37,303 | 1,108 | 2.97 | 14,899 | 813 | 5.46 | |||||||||||||||||||||||||||||
Impairment provisions | (26,308 | ) | (20,360 | ) | (15,309 | ) | ||||||||||||||||||||||||||||||||
Non-interest-earning assets | 667,942 | 596,885 | 440,686 | |||||||||||||||||||||||||||||||||||
Total assets and interest income | 2,445,986 | 70,742 | 2.89 | 2,508,989 | 109,151 | 4.35 | 2,111,950 | 110,734 | 5.24 | |||||||||||||||||||||||||||||
Short-term funds and loans and advances to banks | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 38,455 | 1,379 | 3.59 | 46,703 | 2,187 | 4.68 | 49,910 | 2,592 | 5.19 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 4,451 | 43 | 0.97 | 8,040 | 333 | 4.14 | 5,295 | 229 | 4.32 | |||||||||||||||||||||||||||||
HSBC France | 37,239 | 440 | 1.18 | 35,801 | 1,495 | 4.18 | 31,591 | 1,294 | 4.10 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 16,626 | 202 | 1.21 | 17,402 | 587 | 3.37 | 13,054 | 609 | 4.67 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 27,903 | 182 | 0.65 | 47,244 | 1,344 | 2.84 | 50,210 | 2,352 | 4.68 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 23,107 | 326 | 1.41 | 27,907 | 881 | 3.16 | 19,286 | 810 | 4.20 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 3,776 | 81 | 2.15 | 4,659 | 165 | 3.54 | 2,861 | 103 | 3.60 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 4,312 | 52 | 1.21 | 6,028 | 188 | 3.12 | 6,328 | 324 | 5.12 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 2,338 | 94 | 4.02 | 9,595 | 328 | 3.42 | 9,393 | 477 | 5.08 | ||||||||||||||||||||||||||||
HSBC Bank Canada | 2,934 | 10 | 0.34 | 3,354 | 107 | 3.19 | 3,810 | 174 | 4.57 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 3,722 | 149 | 4.00 | 3,682 | 247 | 6.71 | 3,555 | 239 | 6.72 | ||||||||||||||||||||||||||||
Brazilian operations34 | 10,490 | 1,003 | 9.56 | 7,959 | 951 | 11.95 | 5,790 | 645 | 11.14 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 1,187 | 10 | 0.84 | 1,133 | 30 | 2.65 | 897 | 33 | 3.68 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 256 | 29 | 11.33 | 612 | 43 | 7.03 | 304 | 16 | 5.26 | |||||||||||||||||||||||||||||
Other operations | 15,782 | 199 | 1.26 | 19,992 | 760 | 3.80 | 19,087 | 898 | 4.70 | |||||||||||||||||||||||||||||
192,578 | 4,199 | 2.18 | 240,111 | 9,646 | 4.02 | 221,371 | 10,795 | 4.88 | ||||||||||||||||||||||||||||||
46
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||
balance | income | Yield | balance | income | Yield | balance | income | Yield | ||||||||||||||||||||||||||||||
US$m | US$m | % | US$m | US$m | % | US$m | US$m | % | ||||||||||||||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 276,602 | 10,898 | 3.94 | 288,214 | 18,587 | 6.45 | 237,231 | 18,078 | 7.62 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 9,993 | 176 | 1.76 | 12,355 | 494 | 4.00 | 9,805 | 507 | 5.17 | |||||||||||||||||||||||||||||
HSBC France | 71,048 | 1,932 | 2.72 | 73,455 | 3,604 | 4.91 | 68,027 | 3,219 | 4.73 | |||||||||||||||||||||||||||||
HSBC Finance | 3,094 | 319 | 10.31 | 4,808 | 505 | 10.50 | 5,492 | 611 | 11.13 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 42,619 | 1,194 | 2.80 | 42,304 | 1,589 | 3.76 | 37,827 | 2,120 | 5.60 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 55,287 | 1,757 | 3.18 | 54,628 | 2,291 | 4.19 | 48,134 | 2,901 | 6.03 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 66,262 | 3,668 | 5.54 | 77,741 | 5,163 | 6.64 | 59,286 | 4,321 | 7.29 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 8,113 | 455 | 5.61 | 8,407 | 553 | 6.58 | 7,467 | 507 | 6.79 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 22,612 | 1,593 | 7.04 | 23,697 | 1,549 | 6.54 | 15,125 | 1,200 | 7.93 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 98,422 | 5,541 | 5.63 | 93,088 | 5,758 | 6.19 | 90,091 | 6,585 | 7.31 | ||||||||||||||||||||||||||||
HSBC Finance | 101,132 | 9,941 | 9.83 | 140,957 | 15,835 | 11.23 | 153,658 | 18,086 | 11.77 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 43,072 | 1,499 | 3.48 | 48,331 | 2,455 | 5.08 | 43,570 | 2,598 | 5.96 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 12,185 | 1,708 | 14.02 | 17,252 | 2,565 | 14.87 | 16,469 | 2,187 | 13.28 | ||||||||||||||||||||||||||||
Brazilian operations34 | 18,704 | 4,494 | 24.03 | 19,642 | 4,879 | 24.84 | 13,569 | 3,895 | 28.71 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 9,302 | 864 | 9.29 | 8,620 | 810 | 9.40 | 8,113 | 778 | 9.59 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 1,940 | 357 | 18.40 | 2,136 | 378 | 17.70 | 1,667 | 241 | 14.46 | |||||||||||||||||||||||||||||
Other operations | 29,670 | 1,905 | 6.42 | 28,027 | 1,707 | 6.09 | 21,318 | 1,790 | 8.40 | |||||||||||||||||||||||||||||
870,057 | 48,301 | 5.55 | 943,662 | 68,722 | 7.28 | 836,849 | 69,624 | 8.32 | ||||||||||||||||||||||||||||||
Financial investments | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 79,763 | 2,321 | 2.91 | 83,725 | 3,840 | 4.59 | 45,885 | 2,431 | 5.30 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 15,602 | 363 | 2.33 | 12,018 | 553 | 4.60 | 10,372 | 511 | 4.93 | |||||||||||||||||||||||||||||
HSBC France | 5,327 | 141 | 2.65 | 14,862 | 795 | 5.35 | 10,357 | 511 | 4.93 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 24,594 | 630 | 2.56 | 24,031 | 1,063 | 4.42 | 30,791 | 1,550 | 5.03 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 52,965 | 644 | 1.22 | 15,361 | 563 | 3.67 | 20,717 | 1,017 | 4.91 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 34,056 | 1,039 | 3.05 | 31,992 | 1,507 | 4.71 | 23,739 | 1,065 | 4.49 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 1,218 | 37 | 3.04 | 937 | 36 | 3.84 | 1,515 | 56 | 3.70 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 6,996 | 118 | 1.69 | 5,671 | 144 | 2.54 | 3,654 | 174 | 4.76 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 27,253 | 969 | 3.56 | 25,089 | 1,232 | 4.91 | 23,373 | 1,189 | 5.09 | ||||||||||||||||||||||||||||
HSBC Finance | 2,426 | 120 | 4.95 | 2,908 | 143 | 4.92 | 4,072 | 229 | 5.62 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 10,282 | 205 | 1.99 | 7,037 | 197 | 2.80 | 6,068 | 258 | 4.25 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 3,916 | 227 | 5.80 | 3,470 | 244 | 7.03 | 3,327 | 319 | 9.59 | ||||||||||||||||||||||||||||
Brazilian operations34 | 6,930 | 820 | 11.83 | 6,758 | 853 | 12.62 | 5,596 | 672 | 12.01 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 604 | 39 | 6.46 | 618 | 47 | 7.61 | 709 | 58 | 8.18 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 181 | 35 | 19.34 | 287 | 47 | 16.38 | 563 | 68 | 12.08 | |||||||||||||||||||||||||||||
Other operations | 50,767 | 1,717 | 3.38 | 29,632 | 1,354 | 4.57 | 27,252 | 1,407 | 5.16 | |||||||||||||||||||||||||||||
322,880 | 9,425 | 2.92 | 264,396 | 12,618 | 4.77 | 217,990 | 11,515 | 5.28 | ||||||||||||||||||||||||||||||
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Financial summary > Balance sheet > Average balance sheet |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||
balance | income | Yield | balance | income | Yield | balance | income | Yield | ||||||||||||||||||||||||||||||
US$m | US$m | % | US$m | US$m | % | US$m | US$m | % | ||||||||||||||||||||||||||||||
Other interest-earning assets | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 17,406 | 188 | 1.08 | 25,885 | 630 | 2.43 | 11,170 | 652 | 5.84 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 21,450 | 360 | 1.68 | 21,189 | 875 | 4.13 | 16,360 | 882 | 5.39 | |||||||||||||||||||||||||||||
HSBC France | 11,867 | 172 | 1.45 | 23,414 | 630 | 2.69 | 12,158 | 419 | 3.45 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 2,618 | 32 | 1.22 | 1,629 | 48 | 2.95 | 832 | 42 | 5.05 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 26,657 | 214 | 0.80 | 33,571 | 949 | 2.83 | 27,057 | 1,237 | 4.57 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 19,917 | 106 | 0.53 | 24,492 | 352 | 1.44 | 11,137 | 588 | 5.28 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 407 | 6 | 1.47 | 212 | 7 | 3.30 | 231 | 12 | 5.19 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 541 | 46 | 8.50 | 843 | 63 | 7.47 | 758 | 52 | 6.86 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 3,327 | 71 | 2.13 | 3,091 | 188 | 6.08 | 3,731 | 231 | 6.19 | ||||||||||||||||||||||||||||
HSBC Finance | 2,995 | 6 | 0.20 | 2,638 | 63 | 2.39 | 1,724 | 89 | 5.16 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 773 | 9 | 1.16 | 1,025 | 25 | 2.44 | 960 | 31 | 3.23 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 138 | – | – | 193 | 2 | 1.04 | – | – | – | ||||||||||||||||||||||||||||
Brazilian operations34 | 1,074 | 46 | 4.28 | 1,438 | 147 | 10.22 | 840 | 75 | 8.93 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 1,372 | 9 | 0.66 | 1,807 | 23 | 1.27 | 1,351 | 40 | 2.96 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 51 | – | – | 58 | 1 | 1.72 | 39 | 1 | 2.56 | |||||||||||||||||||||||||||||
Other operations | (111,403 | ) | (1,094 | ) | (123,032 | ) | (3,688 | ) | (67,857 | ) | (3,926 | ) | ||||||||||||||||||||||||||
(810 | ) | 171 | (21.11 | ) | 18,453 | 315 | 1.71 | 20,491 | 425 | 2.07 | ||||||||||||||||||||||||||||
Total interest-earning assets | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 412,226 | 14,786 | 3.59 | 444,527 | 25,244 | 5.68 | 344,196 | 23,753 | 6.90 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 51,496 | 942 | 1.83 | 53,602 | 2,255 | 4.21 | 41,832 | 2,129 | 5.09 | |||||||||||||||||||||||||||||
HSBC France | 125,481 | 2,685 | 2.14 | 147,532 | 6,524 | 4.42 | 122,133 | 5,443 | 4.46 | |||||||||||||||||||||||||||||
HSBC Finance | 3,094 | 319 | 10.31 | 4,808 | 505 | 10.50 | 5,492 | 611 | 11.13 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 86,457 | 2,058 | 2.38 | 85,366 | 3,287 | 3.85 | 82,504 | 4,321 | 5.24 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 162,812 | 2,797 | 1.72 | 150,804 | 5,147 | 3.41 | 146,118 | 7,507 | 5.14 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 143,342 | 5,139 | 3.59 | 162,132 | 7,903 | 4.87 | 113,448 | 6,784 | 5.98 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 13,514 | 579 | 4.28 | 14,215 | 761 | 5.35 | 12,074 | 678 | 5.62 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 34,461 | 1,809 | 5.25 | 36,239 | 1,944 | 5.36 | 25,865 | 1,750 | 6.77 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 131,340 | 6,675 | 5.08 | 130,863 | 7,506 | 5.74 | 126,588 | 8,482 | 6.70 | ||||||||||||||||||||||||||||
HSBC Finance | 106,553 | 10,067 | 9.45 | 146,503 | 16,041 | 10.95 | 159,454 | 18,404 | 11.54 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 57,061 | 1,723 | 3.02 | 59,747 | 2,784 | 4.66 | 54,408 | 3,061 | 5.63 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 19,961 | 2,084 | 10.44 | 24,597 | 3,058 | 12.43 | 23,351 | 2,745 | 11.76 | ||||||||||||||||||||||||||||
Brazilian operations34 | 37,198 | 6,363 | 17.11 | 35,797 | 6,830 | 19.08 | 25,795 | 5,287 | 20.50 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 12,465 | 922 | 7.40 | 12,178 | 910 | 7.47 | 11,070 | 909 | 8.21 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 2,428 | 421 | 17.34 | 3,093 | 469 | 15.16 | 2,573 | 326 | 12.67 | |||||||||||||||||||||||||||||
Other operations | (15,184 | ) | 2,727 | (45,381 | ) | 133 | (200 | ) | 169 | |||||||||||||||||||||||||||||
1,384,705 | 62,096 | 4.48 | 1,466,622 | 91,301 | 6.23 | 1,296,701 | 92,359 | 7.12 | ||||||||||||||||||||||||||||||
48
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||
balance | expense | Cost | balance | expense | Cost | balance | expense | Cost | ||||||||||||||||||||||||||||||
US$m | US$m | % | US$m | US$m | % | US$m | US$m | % | ||||||||||||||||||||||||||||||
Summary | ||||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities (itemised below) | 1,353,283 | 21,366 | 1.58 | 1,451,842 | 48,738 | 3.36 | 1,279,460 | 54,564 | 4.26 | |||||||||||||||||||||||||||||
Trading liabilities | 205,670 | 3,987 | 1.94 | 277,940 | 11,029 | 3.97 | 250,572 | 12,186 | 4.86 | |||||||||||||||||||||||||||||
Financial liabilities designated at fair value (excluding own debt issued) | 15,688 | 293 | 1.87 | 21,266 | 345 | 1.62 | 20,827 | 224 | 1.07 | |||||||||||||||||||||||||||||
Non-interest bearing current accounts | 123,271 | 98,193 | 83,958 | |||||||||||||||||||||||||||||||||||
Total equity and other non-interest bearing liabilities | 748,074 | 659,747 | 477,133 | |||||||||||||||||||||||||||||||||||
Total equity and liabilities | 2,445,986 | 25,646 | 1.05 | 2,508,988 | 60,112 | 2.40 | 2,111,950 | 66,974 | 3.17 | |||||||||||||||||||||||||||||
Deposits by banks35 | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 35,207 | 553 | 1.57 | 48,167 | 1,875 | 3.89 | 44,787 | 2,148 | 4.80 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 1,063 | 1 | 0.09 | 4,493 | 105 | 2.34 | 690 | 22 | 3.19 | |||||||||||||||||||||||||||||
HSBC France | 43,682 | 536 | 1.23 | 37,851 | 1,672 | 4.42 | 30,816 | 1,358 | 4.41 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 1,051 | 5 | 0.48 | 1,696 | 55 | 3.24 | 2,993 | 123 | 4.11 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 6,892 | 9 | 0.13 | 3,665 | 70 | 1.91 | 3,634 | 150 | 4.13 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 10,710 | 165 | 1.54 | 16,232 | 450 | 2.77 | 10,247 | 445 | 4.34 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 110 | 2 | 1.82 | 338 | 10 | 2.96 | 375 | 12 | 3.20 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 773 | 9 | 1.16 | 1,680 | 29 | 1.73 | 672 | 32 | 4.76 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 8,381 | 9 | 0.11 | 11,015 | 220 | 2.00 | 6,933 | 414 | 5.97 | ||||||||||||||||||||||||||||
HSBC Bank Canada | 1,405 | 8 | 0.57 | 1,391 | 41 | 2.95 | 1,681 | 93 | 5.53 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 1,462 | 49 | 3.35 | 822 | 32 | 3.89 | 983 | 63 | 6.41 | ||||||||||||||||||||||||||||
Brazilian operations34 | 3,292 | 241 | 7.32 | 2,790 | 190 | 6.81 | 1,549 | 106 | 6.84 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 908 | 26 | 2.86 | 1,016 | 43 | 4.23 | 1,137 | 66 | 5.80 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 12 | 1 | 8.33 | 27 | 1 | 3.70 | 117 | 9 | 7.69 | |||||||||||||||||||||||||||||
Other operations | 2,899 | 45 | 1.55 | 4,564 | 166 | 3.64 | 4,495 | 291 | 6.47 | |||||||||||||||||||||||||||||
117,847 | 1,659 | 1.41 | 135,747 | 4,959 | 3.65 | 111,109 | 5,332 | 4.80 | ||||||||||||||||||||||||||||||
Financial liabilities designated at fair value — own debt issued36 | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Holdings | 17,887 | 369 | 2.06 | 18,675 | 721 | 3.86 | 15,142 | 822 | 5.43 | ||||||||||||||||||||||||||||
HSBC Bank | 7,932 | 196 | 2.47 | 8,805 | 529 | 6.01 | 9,907 | 525 | 5.30 | |||||||||||||||||||||||||||||
HSBC France | 5,108 | 128 | 2.51 | 1,515 | 79 | 5.21 | 143 | 11 | 7.69 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 130 | 2 | 1.54 | 127 | 6 | 4.72 | 126 | 6 | 4.76 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 1,615 | 30 | 1.86 | 1,504 | 67 | 4.45 | 1,620 | 125 | 7.72 | ||||||||||||||||||||||||||||
HSBC Finance | 26,628 | 871 | 3.27 | 32,126 | 1,563 | 4.87 | 31,889 | 2,079 | 6.52 | |||||||||||||||||||||||||||||
Other operations | 921 | (38 | ) | (4.13 | ) | 1,083 | 168 | 15.51 | – | – | – | |||||||||||||||||||||||||||
60,221 | 1,558 | 2.59 | 63,835 | 3,133 | 4.91 | 58,827 | 3,568 | 6.07 | ||||||||||||||||||||||||||||||
49
Table of Contents
Financial summary > Balance sheet > Average balance sheet |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||
balance | expense | Cost | Balance | expense | Cost | balance | expense | Cost | ||||||||||||||||||||||||||||||
US$m | US$m | % | US$m | US$m | % | US$m | US$m | % | ||||||||||||||||||||||||||||||
Customer accounts37 | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 274,949 | 2,407 | 0.88 | 305,702 | 10,092 | 3.30 | 270,965 | 10,576 | 3.90 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 27,250 | 256 | 0.94 | 37,778 | 1,349 | 3.57 | 30,955 | 1,485 | 4.80 | |||||||||||||||||||||||||||||
HSBC France | 61,465 | 645 | 1.05 | 39,428 | 1,583 | 4.01 | 31,845 | 1,226 | 3.85 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 71,140 | 200 | 0.28 | 66,142 | 914 | 1.38 | 61,227 | 1,900 | 3.10 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 150,520 | 211 | 0.14 | 139,169 | 1,365 | 0.98 | 125,478 | 3,499 | 2.79 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 92,305 | 1,494 | 1.62 | 96,476 | 2,869 | 2.97 | 76,052 | 2,645 | 3.48 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 9,658 | 191 | 1.98 | 10,266 | 295 | 2.87 | 8,823 | 260 | 2.95 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 18,726 | 432 | 2.31 | 19,922 | 422 | 2.12 | 15,685 | 578 | 3.69 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 85,007 | 975 | 1.15 | 86,701 | 2,069 | 2.39 | 78,138 | 3,051 | 3.90 | ||||||||||||||||||||||||||||
HSBC Bank Canada | 35,051 | 385 | 1.10 | 34,090 | 967 | 2.84 | 30,060 | 1,090 | 3.63 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 11,636 | 391 | 3.36 | 14,612 | 561 | 3.84 | 14,230 | 548 | 3.85 | ||||||||||||||||||||||||||||
Brazilian operations34 | 28,605 | 2,946 | 10.30 | 26,288 | 3,110 | 11.83 | 19,581 | 2,163 | 11.05 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 8,592 | 353 | 4.11 | 7,761 | 296 | 3.81 | 7,604 | 314 | 4.13 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 2,151 | 99 | 4.60 | 2,266 | 145 | 6.40 | 1,892 | 85 | 4.49 | |||||||||||||||||||||||||||||
Other operations | 63,863 | 361 | 0.57 | 64,253 | 1,952 | 3.04 | 55,351 | 2,297 | 4.15 | |||||||||||||||||||||||||||||
940,918 | 11,346 | 1.21 | 950,854 | 27,989 | 2.94 | 827,886 | 31,717 | 3.83 | ||||||||||||||||||||||||||||||
Debt securities in issue | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 72,955 | 1,305 | 1.79 | 86,216 | 4,001 | 4.64 | 64,168 | 3,753 | 5.85 | ||||||||||||||||||||||||||||
HSBC France | 25,065 | 330 | 1.32 | 30,815 | 1,447 | 4.70 | 28,757 | 1,207 | 4.20 | |||||||||||||||||||||||||||||
HSBC Finance | – | – | – | 215 | 8 | 3.72 | 240 | 18 | 7.50 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 1,220 | 21 | 1.72 | 1,685 | 57 | 3.38 | 1,734 | 80 | 4.61 | ||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 5,409 | 218 | 4.03 | 8,995 | 640 | 7.12 | 8,979 | 559 | 6.23 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 403 | 16 | 3.97 | 475 | 20 | 4.21 | 318 | 13 | 4.09 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 2,988 | 62 | 2.07 | 2,650 | 90 | 3.40 | 2,086 | 119 | 5.70 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 20,968 | 590 | 2.81 | 21,922 | 852 | 3.89 | 25,724 | 1,232 | 4.79 | ||||||||||||||||||||||||||||
HSBC Finance | 63,563 | 2,510 | 3.95 | 98,096 | 3,765 | 3.84 | 115,520 | 5,311 | 4.60 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 12,825 | 322 | 2.51 | 16,957 | 604 | 3.56 | 14,771 | 640 | 4.33 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 1,460 | 67 | 4.59 | 2,693 | 243 | 9.02 | 1,147 | 110 | 9.59 | ||||||||||||||||||||||||||||
Brazilian operations34 | 1,568 | 86 | 5.48 | 1,859 | 156 | 8.39 | 1,417 | 115 | 8.12 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 487 | 34 | 6.98 | 556 | 33 | 5.94 | 607 | 45 | 7.41 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 1 | – | – | 2 | – | – | 12 | – | – | |||||||||||||||||||||||||||||
Other operations | 16,745 | 340 | 2.03 | 13,691 | 66 | 0.48 | 6,446 | (13 | ) | (0.20 | ) | |||||||||||||||||||||||||||
225,657 | 5,901 | 2.62 | 286,827 | 11,982 | 4.18 | 271,926 | 13,189 | 4.85 | ||||||||||||||||||||||||||||||
50
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2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | |||||||||||||||||||||||||||||||||
balance | expense | Cost | balance | expense | Cost | balance | expense | Cost | ||||||||||||||||||||||||||||||
US$m | US$m | % | US$m | US$m | % | US$m | US$m | % | ||||||||||||||||||||||||||||||
Other interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 50,247 | 655 | 1.30 | 38,906 | 1,134 | 2.91 | 22,035 | 1,302 | 5.91 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 3,892 | 18 | 0.46 | 4,203 | 135 | 3.21 | 3,427 | 163 | 4.76 | |||||||||||||||||||||||||||||
HSBC France | 24,699 | 187 | 0.76 | 33,920 | 1,361 | 4.01 | 27,830 | 979 | 3.52 | |||||||||||||||||||||||||||||
HSBC Finance | 2,363 | 59 | 2.50 | 3,712 | 191 | 5.15 | 4,557 | 227 | 4.98 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 789 | 5 | 0.63 | 1,258 | 41 | 3.26 | 2,278 | 114 | 5.00 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 12,815 | 105 | 0.82 | 10,557 | 288 | 2.73 | 9,866 | 535 | 5.42 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 19,447 | 177 | 0.91 | 23,685 | 466 | 1.97 | 12,631 | 580 | 4.59 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 266 | 2 | 0.75 | 338 | 7 | 2.07 | 232 | 6 | 2.59 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 1,748 | 68 | 3.89 | 1,918 | 89 | 4.64 | 1,168 | 81 | 6.93 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 9,754 | 368 | 3.77 | 10,490 | 468 | 4.46 | 13,602 | 587 | 4.32 | ||||||||||||||||||||||||||||
HSBC Finance | 4,051 | 102 | 2.52 | 4,670 | 141 | 3.02 | 1,941 | 113 | 5.82 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 1,149 | 6 | 0.52 | 1,306 | 19 | 1.45 | 1,151 | 27 | 2.35 | |||||||||||||||||||||||||||||
HSBC Markets Inc | 1,716 | 36 | 2.10 | 10,349 | 78 | 0.75 | 8,889 | 255 | 2.87 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 301 | 11 | 3.65 | 187 | 20 | 10.70 | 207 | 16 | 7.73 | ||||||||||||||||||||||||||||
Brazilian operations34 | 1,496 | 130 | 8.69 | 2,340 | 207 | 8.85 | 1,103 | 182 | 16.50 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 192 | 2 | 1.04 | 917 | 3 | 0.33 | 574 | 9 | 1.57 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 36 | 1 | 2.78 | 92 | 6 | 6.52 | 95 | 4 | 4.21 | |||||||||||||||||||||||||||||
Other operations | (126,321 | ) | (1,030 | ) | (134,269 | ) | (3,979 | ) | (101,874 | ) | (4,422 | ) | ||||||||||||||||||||||||||
8,640 | 902 | 10.44 | 14,579 | 675 | 4.63 | 9,712 | 758 | 7.80 | ||||||||||||||||||||||||||||||
Total interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Europe | HSBC Bank | 441,290 | 5,116 | 1.16 | 487,796 | 17,631 | 3.61 | 411,862 | 18,304 | 4.44 | ||||||||||||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 32,205 | 275 | 0.85 | 46,474 | 1,589 | 3.42 | 35,072 | 1,670 | 4.76 | |||||||||||||||||||||||||||||
HSBC France | 160,019 | 1,826 | 1.14 | 143,529 | 6,142 | 4.28 | 119,391 | 4,781 | 4.00 | |||||||||||||||||||||||||||||
HSBC Finance | 2,363 | 59 | 2.50 | 3,927 | 199 | 5.07 | 4,797 | 245 | 5.11 | |||||||||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 74,330 | 233 | 0.31 | 70,908 | 1,073 | 1.51 | 68,358 | 2,223 | 3.25 | ||||||||||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 170,227 | 325 | 0.19 | 153,391 | 1,723 | 1.12 | 138,978 | 4,184 | 3.01 | |||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 127,871 | 2,054 | 1.61 | 145,388 | 4,425 | 3.04 | 107,909 | 4,229 | 3.92 | ||||||||||||||||||||||||||||
HSBC Bank Malaysia | 10,437 | 211 | 2.02 | 11,417 | 332 | 2.91 | 9,748 | 291 | 2.99 | |||||||||||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 24,235 | 571 | 2.36 | 26,170 | 630 | 2.41 | 19,611 | 810 | 4.13 | ||||||||||||||||||||||||||||
North America | HSBC Bank USA | 125,725 | 1,972 | 1.57 | 131,632 | 3,676 | 2.79 | 126,017 | 5,409 | 4.29 | ||||||||||||||||||||||||||||
HSBC Finance | 94,242 | 3,483 | 3.70 | 134,892 | 5,469 | 4.05 | 149,350 | 7,503 | 5.02 | |||||||||||||||||||||||||||||
HSBC Bank Canada | 50,430 | 721 | 1.43 | 53,744 | 1,631 | 3.03 | 47,663 | 1,850 | 3.88 | |||||||||||||||||||||||||||||
HSBC Markets Inc | 1,716 | 36 | 2.10 | 10,349 | 78 | 0.75 | 8,889 | 255 | 2.87 | |||||||||||||||||||||||||||||
Latin America | HSBC Mexico | 14,859 | 518 | 3.49 | 18,314 | 856 | 4.67 | 16,567 | 737 | 4.45 | ||||||||||||||||||||||||||||
Brazilian operations34 | 34,961 | 3,403 | 9.73 | 33,277 | 3,663 | 11.01 | 23,650 | 2,566 | 10.85 | |||||||||||||||||||||||||||||
HSBC Bank Panama | 10,179 | 415 | 4.08 | 10,250 | 375 | 3.66 | 9,922 | 434 | 4.37 | |||||||||||||||||||||||||||||
HSBC Bank Argentina | 2,200 | 101 | 4.59 | 2,387 | 152 | 6.37 | 2,116 | 98 | 4.63 | |||||||||||||||||||||||||||||
Other operations | (24,006 | ) | 47 | (32,003 | ) | (906 | ) | (20,440 | ) | (1,025 | ) | |||||||||||||||||||||||||||
1,353,283 | 21,366 | 1.58 | 1,451,842 | 48,738 | 3.36 | 1,279,460 | 54,564 | 4.26 | ||||||||||||||||||||||||||||||
51
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Financial summary > Balance sheet > Net interest margin / Average asset distribution / Changes in net interest income and expense |
2009 | 2008 | 2007 | ||||||||||||
% | % | % | ||||||||||||
Europe | HSBC Bank | 2.35 | 1.71 | 1.58 | ||||||||||
HSBC Private Banking Holdings (Suisse) | 1.30 | 1.24 | 1.10 | |||||||||||
HSBC France | 0.68 | 0.26 | 0.54 | |||||||||||
HSBC Finance | 8.40 | 6.36 | 6.66 | |||||||||||
Hong Kong | Hang Seng Bank | 2.11 | 2.59 | 2.54 | ||||||||||
The Hongkong and Shanghai Banking Corporation | 1.52 | 2.27 | 2.27 | |||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 2.15 | 2.15 | 2.25 | ||||||||||
HSBC Bank Malaysia | 2.72 | 3.02 | 3.21 | |||||||||||
Middle East27 | HSBC Bank Middle East | 3.59 | 3.63 | 3.63 | ||||||||||
North America | HSBC Bank USA | 3.58 | 2.93 | 2.43 | ||||||||||
HSBC Finance | 6.18 | 7.22 | 6.84 | |||||||||||
HSBC Bank Canada | 1.76 | 1.93 | 2.23 | |||||||||||
Latin America | HSBC Mexico | 7.85 | 8.95 | 8.60 | ||||||||||
Brazilian operations34 | 7.96 | 8.85 | 10.55 | |||||||||||
HSBC Bank Panama | 4.07 | 4.39 | 4.29 | |||||||||||
HSBC Bank Argentina | 13.18 | 10.25 | 8.86 | |||||||||||
2.94 | 2.90 | 2.91 | ||||||||||||
Distribution of average total assets | ||||||||||||||
2009 | 2008 | 2007 | ||||||||||||
% | % | % | ||||||||||||
Europe | HSBC Bank | 36.7 | 36.7 | 34.6 | ||||||||||
HSBC Private Banking Holdings (Suisse) | 2.3 | 2.3 | 2.2 | |||||||||||
HSBC France | 15.0 | 13.8 | 12.0 | |||||||||||
HSBC Finance | 0.0 | 0.2 | 0.3 | |||||||||||
Hong Kong | Hang Seng Bank | 4.2 | 3.9 | 4.4 | ||||||||||
The Hongkong and Shanghai Banking Corporation | 10.5 | 9.5 | 10.1 | |||||||||||
Rest of | The Hongkong and Shanghai Banking | |||||||||||||
Asia-Pacific27 | Corporation | 8.5 | 8.8 | 6.9 | ||||||||||
HSBC Bank Malaysia | 0.6 | 0.6 | 0.7 | |||||||||||
Middle East27 | HSBC Bank Middle East | 1.6 | 1.8 | 1.4 | ||||||||||
North America | HSBC Bank USA | 11.0 | 11.2 | 10.1 | ||||||||||
HSBC Finance | 4.5 | 6.2 | 8.3 | |||||||||||
HSBC Bank Canada | 2.7 | 2.9 | 3.3 | |||||||||||
Latin America | HSBC Mexico | 1.4 | 1.5 | 2.5 | ||||||||||
Brazilian operations34 | 2.1 | 2.1 | 1.6 | |||||||||||
HSBC Bank Panama | 0.6 | 0.6 | 0.7 | |||||||||||
HSBC Bank Argentina | 0.2 | 0.2 | 0.2 | |||||||||||
Other operations (including consolidation adjustments) | (1.9 | ) | (2.3 | ) | 0.7 | |||||||||
100.0 | 100.0 | 100.0 | ||||||||||||
52
Table of Contents
Increase/(decrease) | Increase/(decrease) | |||||||||||||||||||||||||||||
in 2009 compared | in 2008 compared | |||||||||||||||||||||||||||||
with 2008 | with 2007 | |||||||||||||||||||||||||||||
2009 | Volume | Rate | 2008 | Volume | Rate | 2007 | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||
Short-term funds and loans and advances to banks | ||||||||||||||||||||||||||||||
Europe | HSBC Bank | 1,379 | (386 | ) | (422 | ) | 2,187 | (166 | ) | (239 | ) | 2,592 | ||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 43 | (149 | ) | (141 | ) | 333 | 119 | (15 | ) | 229 | ||||||||||||||||||||
HSBC France | 440 | 60 | (1,115 | ) | 1,495 | 173 | 28 | 1,294 | ||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 202 | (26 | ) | (359 | ) | 587 | 203 | (225 | ) | 609 | |||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 182 | (549 | ) | (613 | ) | 1,344 | (139 | ) | (869 | ) | 2,352 | |||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 326 | (152 | ) | (403 | ) | 881 | 362 | (291 | ) | 810 | |||||||||||||||||||
HSBC Bank Malaysia | 81 | (31 | ) | (53 | ) | 165 | 65 | (3 | ) | 103 | ||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 52 | (54 | ) | (82 | ) | 188 | (15 | ) | (121 | ) | 324 | ||||||||||||||||||
North America | HSBC Bank USA | 94 | (248 | ) | 14 | 328 | 10 | (159 | ) | 477 | ||||||||||||||||||||
HSBC Bank Canada | 10 | (13 | ) | (84 | ) | 107 | (21 | ) | (46 | ) | 174 | |||||||||||||||||||
Latin America | HSBC Mexico | 149 | 3 | (101 | ) | 247 | 9 | (1 | ) | 239 | ||||||||||||||||||||
Brazilian operations34 | 1,003 | 302 | (250 | ) | 951 | 242 | 64 | 645 | ||||||||||||||||||||||
HSBC Bank Panama | 10 | 1 | (21 | ) | 30 | 9 | (12 | ) | 33 | |||||||||||||||||||||
HSBC Bank Argentina | 29 | (25 | ) | 11 | 43 | 16 | 11 | 16 | ||||||||||||||||||||||
Other operations | 199 | (160 | ) | (401 | ) | 760 | 43 | (181 | ) | 898 | ||||||||||||||||||||
4,199 | (1,911 | ) | (3,536 | ) | 9,646 | 915 | (2,064 | ) | 10,795 | |||||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||||||||
Europe | HSBC Bank | 10,898 | (749 | ) | (6,940 | ) | 18,587 | 3,885 | (3,376 | ) | 18,078 | |||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 176 | (94 | ) | (224 | ) | 494 | 132 | (145 | ) | 507 | ||||||||||||||||||||
HSBC France | 1,932 | (118 | ) | (1,554 | ) | 3,604 | 257 | 128 | 3,219 | |||||||||||||||||||||
HSBC Finance | 319 | (180 | ) | (6 | ) | 505 | (76 | ) | (30 | ) | 611 | |||||||||||||||||||
Hong Kong | Hang Seng Bank | 1,194 | 12 | (407 | ) | 1,589 | 251 | (782 | ) | 2,120 | ||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 1,757 | 28 | (562 | ) | 2,291 | 392 | (1,002 | ) | 2,901 | |||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 3,668 | (762 | ) | (733 | ) | 5,163 | 1,345 | (503 | ) | 4,321 | |||||||||||||||||||
HSBC Bank Malaysia | 455 | (19 | ) | (79 | ) | 553 | 64 | (18 | ) | 507 | ||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 1,593 | (71 | ) | 115 | 1,549 | 680 | (331 | ) | 1,200 | ||||||||||||||||||||
North America | HSBC Bank USA | 5,541 | 330 | (547 | ) | 5,758 | 219 | (1,046 | ) | 6,585 | ||||||||||||||||||||
HSBC Finance | 9,941 | (4,472 | ) | (1,422 | ) | 15,835 | (1,495 | ) | (756 | ) | 18,086 | |||||||||||||||||||
HSBC Bank Canada | 1,499 | (267 | ) | (689 | ) | 2,455 | 284 | (427 | ) | 2,598 | ||||||||||||||||||||
Latin America | HSBC Mexico | 1,708 | (753 | ) | (104 | ) | 2,565 | 104 | 274 | 2,187 | ||||||||||||||||||||
Brazilian operations34 | 4,494 | (233 | ) | (152 | ) | 4,879 | 1,744 | (760 | ) | 3,895 | ||||||||||||||||||||
HSBC Bank Panama | 864 | 64 | (10 | ) | 810 | 49 | (17 | ) | 778 | |||||||||||||||||||||
HSBC Bank Argentina | 357 | (35 | ) | 14 | 378 | 68 | 69 | 241 | ||||||||||||||||||||||
Other operations | 1,905 | 100 | 98 | 1,707 | 564 | (647 | ) | 1,790 | ||||||||||||||||||||||
48,301 | (5,358 | ) | (15,063 | ) | 68,722 | 8,887 | (9,789 | ) | 69,624 | |||||||||||||||||||||
53
Table of Contents
Financial summary > Balance sheet > Changes in net interest income / net interest expense |
Increase/(decrease) in | Increase/(decrease) | |||||||||||||||||||||||||||||
2009 compared with | in 2008 compared with | |||||||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||||||||
2009 | Volume | Rate | 2008 | Volume | Rate | 2007 | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||
Financial investments | ||||||||||||||||||||||||||||||
Europe | HSBC Bank | 2,321 | (182 | ) | (1,337 | ) | 3,840 | 2,006 | (597 | ) | 2,431 | |||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 363 | 165 | (355 | ) | 553 | 81 | (39 | ) | 511 | |||||||||||||||||||||
HSBC France | 141 | (510 | ) | (144 | ) | 795 | 222 | 62 | 511 | |||||||||||||||||||||
Hong Kong | Hang Seng Bank | 630 | 25 | (458 | ) | 1,063 | (340 | ) | (147 | ) | 1,550 | |||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 644 | 1,380 | (1,299 | ) | 563 | (263 | ) | (191 | ) | 1,017 | ||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 1,039 | 97 | (565 | ) | 1,507 | 371 | 71 | 1,065 | |||||||||||||||||||||
HSBC Bank Malaysia | 37 | 11 | (10 | ) | 36 | (21 | ) | 1 | 56 | |||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 118 | 34 | (60 | ) | 144 | 96 | (126 | ) | 174 | ||||||||||||||||||||
North America | HSBC Bank USA | 969 | 106 | (369 | ) | 1,232 | 87 | (44 | ) | 1,189 | ||||||||||||||||||||
HSBC Finance | 120 | (24 | ) | 1 | 143 | (65 | ) | (21 | ) | 229 | ||||||||||||||||||||
HSBC Bank Canada | 205 | 91 | (83 | ) | 197 | 41 | (102 | ) | 258 | |||||||||||||||||||||
Latin America | HSBC Mexico | 227 | 31 | (48 | ) | 244 | 14 | (89 | ) | 319 | ||||||||||||||||||||
Brazilian operations34 | 820 | 22 | (55 | ) | 853 | 140 | 41 | 672 | ||||||||||||||||||||||
HSBC Bank Panama | 39 | (1 | ) | (7 | ) | 47 | (7 | ) | (4 | ) | 58 | |||||||||||||||||||
HSBC Bank Argentina | 35 | (17 | ) | 5 | 47 | (33 | ) | 12 | 68 | |||||||||||||||||||||
Other operations | 1,717 | 966 | (603 | ) | 1,354 | 123 | (176 | ) | 1,407 | |||||||||||||||||||||
9,425 | 2,790 | (5,983 | ) | 12,618 | 2,450 | (1,347 | ) | 11,515 | ||||||||||||||||||||||
Interest expense | ||||||||||||||||||||||||||||||
Deposits by banks | ||||||||||||||||||||||||||||||
Europe | HSBC Bank | 553 | (504 | ) | (818 | ) | 1,875 | 162 | (435 | ) | 2,148 | |||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 1 | (80 | ) | (24 | ) | 105 | 121 | (38 | ) | 22 | ||||||||||||||||||||
HSBC France | 536 | 258 | (1,394 | ) | 1,672 | 310 | 4 | 1,358 | ||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 5 | (21 | ) | (29 | ) | 55 | (53 | ) | (15 | ) | 123 | ||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 9 | 62 | (123 | ) | 70 | 1 | (81 | ) | 150 | |||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 165 | (153 | ) | (132 | ) | 450 | 260 | (255 | ) | 445 | |||||||||||||||||||
HSBC Bank Malaysia | 2 | (7 | ) | (1 | ) | 10 | (1 | ) | (1 | ) | 12 | |||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 9 | (16 | ) | (4 | ) | 29 | 48 | (51 | ) | 32 | |||||||||||||||||||
North America | HSBC Bank USA | 9 | (53 | ) | (158 | ) | 220 | 244 | (438 | ) | 414 | |||||||||||||||||||
HSBC Bank Canada | 8 | – | (33 | ) | 41 | (16 | ) | (36 | ) | 93 | ||||||||||||||||||||
Latin America | HSBC Mexico | 49 | 25 | (8 | ) | 32 | (10 | ) | (21 | ) | 63 | |||||||||||||||||||
Brazilian operations34 | 241 | 34 | 17 | 190 | 85 | (1 | ) | 106 | ||||||||||||||||||||||
HSBC Bank Panama | 26 | (5 | ) | (12 | ) | 43 | (7 | ) | (16 | ) | 66 | |||||||||||||||||||
HSBC Bank Argentina | 1 | (1 | ) | 1 | 1 | (7 | ) | (1 | ) | 9 | ||||||||||||||||||||
Other operations | 45 | (61 | ) | (60 | ) | 166 | 4 | (129 | ) | 291 | ||||||||||||||||||||
1,659 | (653 | ) | (2,647 | ) | 4,959 | 1,183 | (1,556 | ) | 5,332 | |||||||||||||||||||||
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Increase/(decrease) | Increase/(decrease) | |||||||||||||||||||||||||||||
in 2009 compared | in 2008 compared | |||||||||||||||||||||||||||||
with 2008 | with 2007 | |||||||||||||||||||||||||||||
2009 | Volume | Rate | 2008 | Volume | Rate | 2007 | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||
Customer accounts | ||||||||||||||||||||||||||||||
Europe | HSBC Bank | 2,407 | (1,015 | ) | (6,670 | ) | 10,092 | 1,355 | (1,839 | ) | 10,576 | |||||||||||||||||||
HSBC Private Banking Holdings (Suisse) | 256 | (376 | ) | (717 | ) | 1,349 | 328 | (464 | ) | 1,485 | ||||||||||||||||||||
HSBC France | 645 | 884 | (1,822 | ) | 1,583 | 292 | 65 | 1,226 | ||||||||||||||||||||||
Hong Kong | Hang Seng Bank | 200 | 69 | (783 | ) | 914 | 152 | (1,138 | ) | 1,900 | ||||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | 211 | 111 | (1,265 | ) | 1,365 | 382 | (2,516 | ) | 3,499 | |||||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 1,494 | (124 | ) | (1,251 | ) | 2,869 | 711 | (487 | ) | 2,645 | |||||||||||||||||||
HSBC Bank Malaysia | 191 | (17 | ) | (87 | ) | 295 | 43 | (8 | ) | 260 | ||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 432 | (25 | ) | 35 | 422 | 156 | (312 | ) | 578 | ||||||||||||||||||||
North America | HSBC Bank USA | 975 | (40 | ) | (1,054 | ) | 2,069 | 334 | (1,316 | ) | 3,051 | |||||||||||||||||||
HSBC Bank Canada | 385 | 27 | (609 | ) | 967 | 146 | (269 | ) | 1,090 | |||||||||||||||||||||
Latin America | HSBC Mexico | 391 | (114 | ) | (56 | ) | 561 | 15 | (2 | ) | 548 | |||||||||||||||||||
Brazilian operations34 | 2,946 | 274 | (438 | ) | 3,110 | 741 | 206 | 2,163 | ||||||||||||||||||||||
HSBC Bank Panama | 353 | 32 | 25 | 296 | 6 | (24 | ) | 314 | ||||||||||||||||||||||
HSBC Bank Argentina | 99 | (7 | ) | (39 | ) | 145 | 17 | 43 | 85 | |||||||||||||||||||||
Other operations | 361 | (12 | ) | (1,579 | ) | 1,952 | 369 | (714 | ) | 2,297 | ||||||||||||||||||||
11,346 | (292 | ) | (16,351 | ) | 27,989 | 4,710 | (8,438 | ) | 31,717 | |||||||||||||||||||||
Financial liabilities designated at fair value – own debt issued | 1,558 | (177 | ) | (1,398 | ) | 3,133 | 304 | (739 | ) | 3,568 | ||||||||||||||||||||
Debt securities in issue | ||||||||||||||||||||||||||||||
Europe | HSBC Bank | 1,305 | (615 | ) | (2,081 | ) | 4,001 | 1,290 | (1,042 | ) | 3,753 | |||||||||||||||||||
HSBC France | 330 | (270 | ) | (847 | ) | 1,447 | 86 | 154 | 1,207 | |||||||||||||||||||||
HSBC Finance | – | (8 | ) | – | 8 | (2 | ) | (8 | ) | 18 | ||||||||||||||||||||
Hong Kong | Hang Seng Bank | 21 | (16 | ) | (20 | ) | 57 | (2 | ) | (21 | ) | 80 | ||||||||||||||||||
Rest of Asia-Pacific27 | The Hongkong and Shanghai Banking Corporation | 218 | (255 | ) | (167 | ) | 640 | 1 | 80 | 559 | ||||||||||||||||||||
HSBC Bank Malaysia | 16 | (3 | ) | (1 | ) | 20 | 6 | 1 | 13 | |||||||||||||||||||||
Middle East27 | HSBC Bank Middle East | 62 | 11 | (39 | ) | 90 | 32 | (61 | ) | 119 | ||||||||||||||||||||
North America | HSBC Bank USA | 590 | (37 | ) | (225 | ) | 852 | (182 | ) | (198 | ) | 1,232 | ||||||||||||||||||
HSBC Finance | 2,510 | (1,326 | ) | 71 | 3,765 | (802 | ) | (744 | ) | 5,311 | ||||||||||||||||||||
HSBC Bank Canada | 322 | (147 | ) | (135 | ) | 604 | 95 | (131 | ) | 640 | ||||||||||||||||||||
Latin America | HSBC Mexico | 67 | (111 | ) | (65 | ) | 243 | 148 | (15 | ) | 110 | |||||||||||||||||||
Brazilian operations34 | 86 | (24 | ) | (46 | ) | 156 | 36 | 5 | 115 | |||||||||||||||||||||
HSBC Bank Panama | 34 | (4 | ) | 5 | 33 | (4 | ) | (8 | ) | 45 | ||||||||||||||||||||
Other operations | 340 | 15 | 259 | 66 | (14 | ) | 93 | (13 | ) | |||||||||||||||||||||
5,901 | (2,557 | ) | (3,524 | ) | 11,982 | (723 | ) | (1,930 | ) | 13,189 | ||||||||||||||||||||
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Table of Contents
Financial summary > Balance sheet > Short-term borrowings / Contractual obligations / Ratios / Loan maturities |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Securities sold under agreements to repurchase | ||||||||||||
Outstanding at 31 December | 152,218 | 145,180 | 140,001 | |||||||||
Average amount outstanding during the year | 170,671 | 177,256 | 129,779 | |||||||||
Maximum quarter-end balance outstanding during the year. | 157,778 | 190,651 | 148,601 | |||||||||
Weighted average interest rate during the year | 0.8% | 3.8% | 5.4% | |||||||||
Weighted average interest rate at the year-end | 0.4% | 2.9% | 4.8% | |||||||||
Short-term bonds | ||||||||||||
Outstanding at 31 December | 38,776 | 40,279 | 51,792 | |||||||||
Average amount outstanding during the year | 33,010 | 45,330 | 39,153 | |||||||||
Maximum quarter-end balance outstanding during the year. | 38,776 | 55,842 | 51,792 | |||||||||
Weighted average interest rate during the year | 3.2% | 5.0% | 7.0% | |||||||||
Weighted average interest rate at the year-end | 0.6% | 3.1% | 6.5% |
Payments due by period | ||||||||||||||||
Less than | More than | |||||||||||||||
Total | 1 year | 1 – 5 years | 5 years | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Long-term debt obligations | 234,297 | 71,482 | 93,778 | 69,037 | ||||||||||||
Term deposits and certificates of deposit | 211,434 | 198,081 | 13,353 | – | ||||||||||||
Capital (finance) lease obligations | 971 | 103 | 249 | 619 | ||||||||||||
Operating lease obligations | 5,655 | 857 | 2,264 | 2,534 | ||||||||||||
Purchase obligations | 1,359 | 1,045 | 314 | – | ||||||||||||
Short positions in debt securities and equity shares. | 90,067 | 73,437 | 5,332 | 11,298 | ||||||||||||
Current tax liability | 2,141 | 2,141 | – | – | ||||||||||||
Pension/healthcare obligation | 15,979 | 1,188 | 5,548 | 9,243 | ||||||||||||
561,903 | 348,334 | 120,838 | 92,731 | |||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
% | % | % | % | % | ||||||||||||||||
Ratios of earnings to combined fixed charges and preference share dividends:38 | ||||||||||||||||||||
– excluding interest on deposits | 2.64 | 2.97 | 6.96 | 7.22 | 9.16 | |||||||||||||||
– including interest on deposits | 1.20 | 1.13 | 1.34 | 1.40 | 1.59 | |||||||||||||||
Ratios of earnings to combined fixed charges:38 | ||||||||||||||||||||
– excluding interest on deposits | 2.99 | 3.17 | 7.52 | 7.93 | 9.60 | |||||||||||||||
– including interest on deposits | 1.22 | 1.14 | 1.34 | 1.41 | 1.59 |
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Table of Contents
Rest | ||||||||||||||||||||||||||||
Hong | of Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 27 | East | 27 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Maturity of 1 year or less | ||||||||||||||||||||||||||||
Loans and advances to banks | 62,840 | 35,817 | 35,535 | 8,212 | 15,093 | 15,525 | 173,022 | |||||||||||||||||||||
Commercial loans to customers | ||||||||||||||||||||||||||||
Commercial, industrial and international trade | 80,451 | 12,563 | 22,085 | 7,248 | 4,327 | 9,576 | 136,250 | |||||||||||||||||||||
Real estate and other property related | 18,951 | 5,678 | 4,221 | 1,624 | 8,690 | 1,545 | 40,709 | |||||||||||||||||||||
Non-bank financial institutions | 67,934 | 1,201 | 1,751 | 959 | 9,680 | 1,181 | 82,706 | |||||||||||||||||||||
Governments | 1,155 | 110 | 172 | 1,212 | 161 | 442 | 3,252 | |||||||||||||||||||||
Other commercial | 26,238 | 2,026 | 4,173 | 1,432 | 6,944 | 2,665 | 43,478 | |||||||||||||||||||||
194,729 | 21,578 | 32,402 | 12,475 | 29,802 | 15,409 | 306,395 | ||||||||||||||||||||||
Hong Kong Government Home Ownership Scheme | – | 385 | – | – | – | – | 385 | |||||||||||||||||||||
Residential mortgages and other personal loans | 29,732 | 13,083 | 10,811 | 2,959 | 35,352 | 8,793 | 100,730 | |||||||||||||||||||||
Loans and advances to customers | 224,461 | 35,046 | 43,213 | 15,434 | 65,154 | 24,202 | 407,510 | |||||||||||||||||||||
287,301 | 70,863 | 78,748 | 23,646 | 80,247 | 39,727 | 580,532 | ||||||||||||||||||||||
Maturity after 1 year but within 5 years | ||||||||||||||||||||||||||||
Loans and advances to banks | 2,452 | 380 | 105 | 168 | 221 | 374 | 3,700 | |||||||||||||||||||||
Commercial loans to customers | ||||||||||||||||||||||||||||
Commercial, industrial and international trade | 21,101 | 4,708 | 5,427 | 1,591 | 6,183 | 4,591 | 43,601 | |||||||||||||||||||||
Real estate and other property related | 13,937 | 13,125 | 5,354 | 957 | 8,551 | 988 | 42,912 | |||||||||||||||||||||
Non-bank financial institutions | 4,622 | 535 | 472 | 239 | 1,993 | 519 | 8,380 | |||||||||||||||||||||
Governments | 461 | 263 | 257 | 125 | 46 | 731 | 1,883 | |||||||||||||||||||||
Other commercial | 13,638 | 4,375 | 2,536 | 1,076 | 3,029 | 2,508 | 27,162 | |||||||||||||||||||||
53,759 | 23,006 | 14,046 | 3,988 | 19,802 | 9,337 | 123,938 | ||||||||||||||||||||||
Hong Kong Government Home Ownership Scheme | – | 1,276 | – | – | – | – | 1,276 | |||||||||||||||||||||
Residential mortgages and other personal loans | 35,063 | 9,642 | 6,782 | 2,635 | 47,021 | 6,364 | 107,507 | |||||||||||||||||||||
Loans and advances to customers | 88,822 | 33,924 | 20,828 | 6,623 | 66,823 | 15,701 | 232,721 | |||||||||||||||||||||
91,274 | 34,304 | 20,933 | 6,791 | 67,044 | 16,075 | 236,421 | ||||||||||||||||||||||
Interest rate sensitivity of loans and advances to banks and commercial loans to customers | ||||||||||||||||||||||||||||
Fixed interest rate | 12,159 | 302 | 789 | 925 | 3,831 | 2,684 | 20,690 | |||||||||||||||||||||
Variable interest rate | 44,052 | 23,084 | 13,362 | 3,231 | 16,192 | 7,027 | 106,948 | |||||||||||||||||||||
56,211 | 23,386 | 14,151 | 4,156 | 20,023 | 9,711 | 127,638 | ||||||||||||||||||||||
Maturity after 5 years | ||||||||||||||||||||||||||||
Loans and advances to banks | 322 | – | 8 | 55 | 72 | 2,709 | 3,166 | |||||||||||||||||||||
Commercial loans to customers | ||||||||||||||||||||||||||||
Commercial, industrial and international trade | 10,822 | 457 | 716 | 497 | 1,018 | 2,767 | 16,277 | |||||||||||||||||||||
Real estate and other property related | 7,196 | 5,041 | 763 | 85 | 2,738 | 465 | 16,288 | |||||||||||||||||||||
Non-bank financial institutions | 669 | 726 | 23 | 8 | 2,290 | 435 | 4,151 | |||||||||||||||||||||
Governments | 600 | 68 | 166 | 19 | 1 | 700 | 1,554 | |||||||||||||||||||||
Other commercial | 15,279 | 1,363 | 409 | 745 | 944 | 224 | 18,964 | |||||||||||||||||||||
34,566 | 7,655 | 2,077 | 1,354 | 6,991 | 4,591 | 57,234 | ||||||||||||||||||||||
Hong Kong Government Home Ownership Scheme | – | 1,795 | – | – | – | – | 1,795 | |||||||||||||||||||||
Residential mortgages and other personal loans | 97,767 | 21,765 | 14,921 | 811 | 81,561 | 5,688 | 222,513 | |||||||||||||||||||||
Loans and advances to customers | 132,333 | 31,215 | 16,998 | 2,165 | 88,552 | 10,279 | 281,542 | |||||||||||||||||||||
132,655 | 31,215 | 17,006 | 2,220 | 88,624 | 12,988 | 284,708 | ||||||||||||||||||||||
Interest rate sensitivity of loans and advances to banks and commercial loans to customers | ||||||||||||||||||||||||||||
Fixed interest rate | 7,742 | – | 150 | 749 | 1,436 | 2,337 | 12,414 | |||||||||||||||||||||
Variable interest rate | 27,146 | 7,655 | 1,935 | 660 | 5,627 | 4,963 | 47,986 | |||||||||||||||||||||
34,888 | 7,655 | 2,085 | 1,409 | 7,063 | 7,300 | 60,400 | ||||||||||||||||||||||
57
Table of Contents
Financial summary > Balance sheet > Deposits |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||
balance | rate | balance | rate | balance | rate | |||||||||||||||||||||||||
US$m | % | US$m | % | US$m | % | |||||||||||||||||||||||||
Europe | 87,677 | 99,228 | 84,635 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 6,415 | – | 5,231 | – | 6,359 | – | ||||||||||||||||||||||||
Demand – interest bearing | 14,259 | 1.0 | 19,204 | 3.2 | 11,036 | 3.8 | ||||||||||||||||||||||||
Time | 30,367 | 1.6 | 43,695 | 3.9 | 38,470 | 4.7 | ||||||||||||||||||||||||
Other | 36,636 | 1.3 | 31,098 | 4.4 | 28,770 | 4.8 | ||||||||||||||||||||||||
Hong Kong | 10,725 | 5,916 | 7,269 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 2,975 | – | 1,375 | – | 1,331 | – | ||||||||||||||||||||||||
Demand – interest bearing | 5,526 | 0.1 | 2,780 | 2.0 | 2,420 | 4.3 | ||||||||||||||||||||||||
Time | 1,637 | 0.3 | 1,583 | 2.7 | 3,267 | 4.5 | ||||||||||||||||||||||||
Other | 587 | 0.5 | 178 | 3.4 | 251 | 0.4 | ||||||||||||||||||||||||
Rest of Asia-Pacific27 | 12,467 | 18,203 | 12,748 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 1,605 | – | 1,546 | – | 1,356 | – | ||||||||||||||||||||||||
Demand – interest bearing | 4,097 | 1.2 | 4,317 | 2.3 | 3,164 | 2.4 | ||||||||||||||||||||||||
Time | 4,682 | 1.9 | 9,103 | 3.5 | 5,464 | 5.2 | ||||||||||||||||||||||||
Other | 2,083 | 1.4 | 3,237 | 3.8 | 2,764 | 4.8 | ||||||||||||||||||||||||
Middle East27 | 1,317 | 2,151 | 1,517 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 539 | – | 365 | – | 541 | – | ||||||||||||||||||||||||
Demand – interest bearing | 18 | – | 15 | – | 3 | – | ||||||||||||||||||||||||
Time | 691 | 1.2 | 1,239 | 2.7 | 969 | 4.5 | ||||||||||||||||||||||||
Other | 69 | 1.4 | 532 | 0.2 | 4 | – | ||||||||||||||||||||||||
North America | 13,203 | 14,835 | 11,501 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 1,755 | – | 761 | – | 827 | – | ||||||||||||||||||||||||
Demand – interest bearing | 4,770 | 0.1 | 5,684 | 1.7 | 3,759 | 4.8 | ||||||||||||||||||||||||
Time | 5,422 | 0.2 | 7,941 | 2.3 | 6,746 | 6.0 | ||||||||||||||||||||||||
Other | 1,256 | 0.7 | 449 | 1.6 | 169 | 7.1 | ||||||||||||||||||||||||
Latin America | 5,959 | 5,058 | 4,661 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 212 | – | 366 | – | 808 | – | ||||||||||||||||||||||||
Demand – interest bearing | 219 | 0.9 | 81 | 2.5 | 153 | 5.9 | ||||||||||||||||||||||||
Time | 4,171 | 5.0 | 3,357 | 5.6 | 2,690 | 6.5 | ||||||||||||||||||||||||
Other | 1,357 | 8.1 | 1,254 | 7.8 | 1,010 | 8.0 | ||||||||||||||||||||||||
Total | 131,348 | 145,391 | 122,331 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 13,501 | – | 9,644 | – | 11,222 | – | ||||||||||||||||||||||||
Demand – interest bearing | 28,889 | 0.7 | 32,081 | 2.7 | 20,535 | 3.8 | ||||||||||||||||||||||||
Time | 46,970 | 1.7 | 66,918 | 3.7 | 57,606 | 4.9 | ||||||||||||||||||||||||
Other | 41,988 | 1.6 | 36,748 | 4.5 | 32,968 | 5.0 | ||||||||||||||||||||||||
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2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||
balance | rate | balance | rate | balance | rate | |||||||||||||||||||||||||
US$m | % | US$m | % | US$m | % | |||||||||||||||||||||||||
Europe | 440,450 | 447,982 | 391,496 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 55,751 | – | 39,610 | – | 34,585 | – | ||||||||||||||||||||||||
Demand – interest bearing | 212,178 | 0.4 | 225,034 | 2.9 | 210,692 | 3.5 | ||||||||||||||||||||||||
Savings | 57,344 | 2.2 | 73,479 | 4.3 | 62,002 | 4.6 | ||||||||||||||||||||||||
Time | 67,045 | 1.4 | 83,208 | 3.8 | 69,476 | 4.9 | ||||||||||||||||||||||||
Other | 48,132 | 0.8 | 26,651 | 3.9 | 14,741 | 4.5 | ||||||||||||||||||||||||
Hong Kong | 261,703 | 236,109 | 212,792 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 22,056 | – | 15,620 | – | 14,214 | – | ||||||||||||||||||||||||
Demand – interest bearing | 171,846 | 0.1 | 126,199 | 0.4 | 107,053 | 2.2 | ||||||||||||||||||||||||
Savings | 45,537 | 0.6 | 65,068 | 2.4 | 63,649 | 3.9 | ||||||||||||||||||||||||
Time | 20,901 | 0.6 | 27,659 | 2.3 | 26,712 | 3.9 | ||||||||||||||||||||||||
Other | 1,363 | 0.1 | 1,563 | 1.2 | 1,164 | 4.3 | ||||||||||||||||||||||||
Rest of Asia-Pacific27 | 126,144 | 128,381 | 103,235 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 13,425 | – | 11,872 | – | 10,225 | – | ||||||||||||||||||||||||
Demand – interest bearing | 53,108 | 0.8 | 49,329 | 2.0 | 37,340 | 2.5 | ||||||||||||||||||||||||
Savings | 46,137 | 2.5 | 52,849 | 3.8 | 44,004 | 4.1 | ||||||||||||||||||||||||
Time | 12,542 | 1.2 | 13,342 | 3.3 | 10,114 | 4.7 | ||||||||||||||||||||||||
Other | 932 | 1.8 | 989 | 3.6 | 1,552 | 5.2 | ||||||||||||||||||||||||
Middle East27 | 33,211 | 35,546 | 25,615 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 9,865 | – | 10,849 | – | 6,213 | – | ||||||||||||||||||||||||
Demand – interest bearing | 6,364 | 1.4 | 6,324 | 1.6 | 3,749 | 2.0 | ||||||||||||||||||||||||
Savings | 15,005 | 3.4 | 16,119 | 3.1 | 13,946 | 4.6 | ||||||||||||||||||||||||
Time | 1,424 | 2.7 | 1,884 | 2.9 | 1,424 | 4.1 | ||||||||||||||||||||||||
Other | 553 | 0.2 | 370 | 0.5 | 283 | 1.1 | ||||||||||||||||||||||||
North America | 145,820 | 144,982 | 130,982 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 18,350 | – | 16,759 | – | 15,175 | – | ||||||||||||||||||||||||
Demand – interest bearing | 25,870 | 0.2 | 18,261 | 1.6 | 15,389 | 3.3 | ||||||||||||||||||||||||
Savings | 69,296 | 1.4 | 87,001 | 2.5 | 79,529 | 3.3 | ||||||||||||||||||||||||
Time | 25,164 | 1.3 | 17,838 | 3.2 | 17,655 | 5.9 | ||||||||||||||||||||||||
Other | 7,140 | 0.8 | 5,123 | 2.4 | 3,234 | 3.7 | ||||||||||||||||||||||||
Latin America | 63,635 | 65,071 | 54,708 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 10,598 | – | 12,507 | – | 10,530 | – | ||||||||||||||||||||||||
Demand – interest bearing | 4,734 | 1.1 | 4,994 | 1.9 | 5,662 | 2.1 | ||||||||||||||||||||||||
Savings | 33,091 | 8.5 | 31,442 | 10.3 | 24,861 | 8.8 | ||||||||||||||||||||||||
Time | 14,244 | 4.8 | 15,179 | 5.2 | 12,443 | 5.9 | ||||||||||||||||||||||||
Other | 968 | 6.4 | 949 | 8.2 | 1,212 | 9.5 | ||||||||||||||||||||||||
Total | 1,070,963 | 1,058,071 | 918,828 | |||||||||||||||||||||||||||
Demand and other – non-interest bearing | 130,045 | – | 107,217 | – | 90,942 | – | ||||||||||||||||||||||||
Demand – interest bearing | 474,100 | 0.3 | 430,141 | 1.9 | 379,885 | 3.0 | ||||||||||||||||||||||||
Savings | 266,410 | 2.6 | 325,958 | 3.9 | 287,991 | 4.4 | ||||||||||||||||||||||||
Time | 141,320 | 1.6 | 159,110 | 3.6 | 137,824 | 4.9 | ||||||||||||||||||||||||
Other | 59,088 | 0.9 | 35,645 | 3.6 | 22,186 | 4.7 | ||||||||||||||||||||||||
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Financial summary > Balance sheet > CDs // Critical accounting policies |
2009 | 2008 | 2007 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
balance | rate | balance | rate | balance | rate | |||||||||||||||||||
US$m | % | US$m | % | US$m | % | |||||||||||||||||||
Europe | 65,151 | 0.9 | 74,007 | 4.5 | 66,164 | 5.0 | ||||||||||||||||||
Hong Kong | 278 | 3.6 | 745 | 3.0 | 941 | 3.9 | ||||||||||||||||||
Rest of Asia-Pacific27 | 3,536 | 3.7 | 6,966 | 6.6 | 7,094 | 6.0 | ||||||||||||||||||
Middle East27 | 265 | 6.4 | 648 | 4.6 | 136 | 3.7 | ||||||||||||||||||
North America | 14,218 | 1.1 | 22,278 | 3.3 | 23,735 | 5.4 | ||||||||||||||||||
Latin America | 1,227 | 3.6 | 3,036 | 7.8 | 1,526 | 6.8 | ||||||||||||||||||
84,675 | 1.2 | 107,680 | 4.5 | 99,596 | 5.2 | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||||||||||||||||
After | After | |||||||||||||||||||||||||||||||||||||||||||||
3 months | 6 months | |||||||||||||||||||||||||||||||||||||||||||||
3 months | but within | but within | After | |||||||||||||||||||||||||||||||||||||||||||
or less | 6 months | 12 months | 12 months | Total | ||||||||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||||||||||
Europe | 97,874 | 11,310 | 19,664 | 7,131 | 135,979 | |||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | 18,009 | 3,810 | 3,755 | 1 | 25,575 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 25,194 | 2,048 | 9,455 | 3,965 | 40,662 | |||||||||||||||||||||||||||||||||||||||||
– customers | 54,671 | 5,452 | 6,454 | 3,165 | 69,742 | |||||||||||||||||||||||||||||||||||||||||
Hong Kong | 12,031 | 873 | 484 | 500 | 13,888 | |||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | 75 | 24 | 151 | 265 | 515 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 619 | 1 | – | 89 | 709 | |||||||||||||||||||||||||||||||||||||||||
– customers | 11,337 | 848 | 333 | 146 | 12,664 | |||||||||||||||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | 13,890 | 1,784 | 651 | 1,108 | 17,433 | |||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | 1,498 | 1,001 | 366 | 183 | 3,048 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 2,231 | 252 | 19 | 108 | 2,610 | |||||||||||||||||||||||||||||||||||||||||
– customers | 10,161 | 531 | 266 | 817 | 11,775 | |||||||||||||||||||||||||||||||||||||||||
Middle East27 | 902 | 486 | 43 | 319 | 1,750 | |||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | – | 136 | – | – | 136 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 448 | 186 | – | 24 | 658 | |||||||||||||||||||||||||||||||||||||||||
– customers | 454 | 164 | 43 | 295 | 956 | |||||||||||||||||||||||||||||||||||||||||
North America | 14,235 | 4,221 | 3,314 | 1,293 | 23,063 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 2,798 | – | 7 | 238 | 3,043 | |||||||||||||||||||||||||||||||||||||||||
– customers | 11,437 | 4,221 | 3,307 | 1,055 | 20,020 | |||||||||||||||||||||||||||||||||||||||||
Latin America | 11,980 | 2,626 | 1,713 | 3,002 | 19,321 | |||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | 88 | – | – | 322 | 410 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 1,036 | 1,421 | 747 | 236 | 3,440 | |||||||||||||||||||||||||||||||||||||||||
– customers | 10,856 | 1,205 | 966 | 2,444 | 15,471 | |||||||||||||||||||||||||||||||||||||||||
Total | 150,912 | 21,300 | 25,869 | 13,353 | 211,434 | |||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | 19,670 | 4,971 | 4,272 | 771 | 29,684 | |||||||||||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||
– banks | 32,326 | 3,908 | 10,228 | 4,660 | 51,122 | |||||||||||||||||||||||||||||||||||||||||
– customers | 98,916 | 12,421 | 11,369 | 7,922 | 130,628 | |||||||||||||||||||||||||||||||||||||||||
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• | when appropriate empirical information is available, HSBC utilises roll-rate methodology. This methodology employs statistical analysis of historical data and experience of delinquency and default to estimate the likelihood that loans will progress through the various stages of delinquency and ultimately prove irrecoverable. The estimated loss is the difference between the present value of expected future cash flows, discounted at the original effective interest rate of the portfolio, and the carrying amount of the portfolio; and | |
• | when the portfolio size is small or when information is insufficient or not reliable enough to adopt a roll-rate methodology, HSBC adopts a basic formulaic approach based on historical loss rate experience. |
61
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Critical accounting policies |
• | the future cash flows of the CGUs are sensitive to the cash flows projected for the periods for |
which detailed forecasts are available, and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. Forecasts are compared with actual performance and verifiable economic data in future years; however, the cash flow forecasts necessarily and appropriately reflect management’s view of future business prospects at the time of the assessment; and | ||
• | the rate used to discount the future expected cash flows is based on the cost of capital assigned to an individual CGU, and can have a significant effect on the CGU’s valuation. The cost of capital percentage is generally derived from a Capital Asset Pricing Model, which incorporates inputs reflecting a number of financial and economic variables, including the risk-free interest rate in the country concerned and a premium to reflect the inherent risk of the business being evaluated. These variables are subject to fluctuations in external market rates and economic conditions outside management’s control and are therefore established on the basis of significant management judgement and are subject to uncertainty. |
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• | the likelihood and expected timing of future cash flows on the instrument. These cash flows are usually governed by the terms of the instrument, although management judgement may be required when the ability of the counterparty to service the instrument in accordance with the contractual terms is in doubt. Future cash flows may be sensitive to changes in market rates; |
• | selecting an appropriate discount rate for the instrument. Management bases the determination of this rate on its assessment of what a market participant would regard as the appropriate spread of the rate for the instrument over the appropriate risk-free rate; and |
• | judgement to determine what model to use to calculate fair value in areas where the choice of valuation model is particularly subjective, for example, when valuing complex derivative products. |
63
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Critical accounting policies |
64
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65
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Disclosure controls / Management’s assessment of internal controls |
65a
Table of Contents
Customer groups > Personal Financial Services |
Page | ||||
Summary | 66 | |||
Personal Financial Services | 67 | |||
Commercial Banking | 70 | |||
Global Banking and Markets | 73 | |||
Private Banking | 77 | |||
Other | 80 | |||
Analysis by customer group and global business | 82 |
2009 | 2008 | 2007 | ||||||||||||||||||||||
US$m | % | US$m | % | US$m | % | |||||||||||||||||||
Personal Financial Services. | (2,065 | ) | (29.2 | ) | (10,974 | ) | (117.9 | ) | 5,900 | 24.4 | ||||||||||||||
Commercial Banking | 4,275 | 60.4 | 7,194 | 77.3 | 7,145 | 29.5 | ||||||||||||||||||
Global Banking and Markets | 10,481 | 148.1 | 3,483 | 37.4 | 6,121 | 25.3 | ||||||||||||||||||
Private Banking | 1,108 | 15.6 | 1,447 | 15.6 | 1,511 | 6.2 | ||||||||||||||||||
Other40 | (6,720 | ) | (94.9 | ) | 8,157 | 87.6 | 3,535 | 14.6 | ||||||||||||||||
7,079 | 100.0 | 9,307 | 100.0 | 24,212 | 100.0 | |||||||||||||||||||
At 31 December | ||||||||||||||||
2009 | 2008 | |||||||||||||||
US$m | % | US$m | % | |||||||||||||
Personal Financial Services. | 554,074 | 23.4 | 527,901 | 20.9 | ||||||||||||
Commercial Banking | 251,143 | 10.6 | 249,218 | 9.9 | ||||||||||||
Global Banking and Markets | 1,683,672 | 71.2 | 1,991,852 | 78.8 | ||||||||||||
Private Banking | 116,148 | 4.9 | 133,216 | 5.2 | ||||||||||||
Other | 150,983 | 6.4 | 145,581 | 5.8 | ||||||||||||
Intra-HSBC items | (391,568 | ) | (16.5 | ) | (520,303 | ) | (20.6 | ) | ||||||||
2,364,452 | 100.0 | 2,527,465 | 100.0 | |||||||||||||
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2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||
Net interest income | 25,107 | 29,419 | 29,069 | |||||||||||||||||||||||||||||||||
Net fee income | 8,238 | 10,107 | 11,742 | |||||||||||||||||||||||||||||||||
Trading income excluding net interest income | 637 | 175 | 38 | |||||||||||||||||||||||||||||||||
Net interest income on trading activities | 65 | 79 | 140 | |||||||||||||||||||||||||||||||||
Net trading income42 | 702 | 254 | 178 | |||||||||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value. | 2,339 | (2,912 | ) | 1,333 | ||||||||||||||||||||||||||||||||
Gains less losses from financial investments | 224 | 663 | 351 | |||||||||||||||||||||||||||||||||
Dividend income | 33 | 90 | 55 | |||||||||||||||||||||||||||||||||
Net earned insurance premiums | 9,534 | 10,083 | 8,271 | |||||||||||||||||||||||||||||||||
Other operating income | 809 | 259 | 387 | |||||||||||||||||||||||||||||||||
Total operating income | 46,986 | 47,963 | 51,386 | |||||||||||||||||||||||||||||||||
Net insurance claims43 | (11,571 | ) | (6,474 | ) | (8,147 | ) | ||||||||||||||||||||||||||||||
Net operating income16 | 35,415 | 41,489 | 43,239 | |||||||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (19,902 | ) | (21,220 | ) | (16,172 | ) | ||||||||||||||||||||||||||||||
Net operating income | 15,513 | 20,269 | 27,067 | |||||||||||||||||||||||||||||||||
Employee expenses | (7,323 | ) | (9,243 | ) | (9,401 | ) | ||||||||||||||||||||||||||||||
Goodwill impairment | – | (10,564 | ) | – | ||||||||||||||||||||||||||||||||
Other operating expenses | (10,969 | ) | (11,897 | ) | (12,356 | ) | ||||||||||||||||||||||||||||||
Total operating expenses | (18,292 | ) | (31,704 | ) | (21,757 | ) | ||||||||||||||||||||||||||||||
Operating profit/(loss) | (2,779 | ) | (11,435 | ) | 5,310 | |||||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 714 | 461 | 590 | |||||||||||||||||||||||||||||||||
Profit/(loss) before tax | (2,065 | ) | (10,974 | ) | 5,900 | |||||||||||||||||||||||||||||||
By geographical region | ||||||||||||||||||||||||||||||||||||
Europe | 312 | 1,658 | 1,581 | |||||||||||||||||||||||||||||||||
Hong Kong | 2,728 | 3,428 | 4,212 | |||||||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | 463 | 211 | 515 | |||||||||||||||||||||||||||||||||
Middle East27 | (126 | ) | 289 | 245 | ||||||||||||||||||||||||||||||||
North America | (5,226 | ) | (17,228 | ) | (1,546 | ) | ||||||||||||||||||||||||||||||
Latin America | (216 | ) | 668 | 893 | ||||||||||||||||||||||||||||||||
�� | (2,065 | ) | (10,974 | ) | 5,900 | |||||||||||||||||||||||||||||||
% | % | % | ||||||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | (29.2 | ) | (117.9 | ) | 24.4 | |||||||||||||||||||||||||||||||
Cost efficiency ratio | 51.7 | 76.4 | 50.3 | |||||||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 399,460 | 401,402 | 464,726 | |||||||||||||||||||||||||||||||||
Total assets | 554,074 | 527,901 | 636,185 | |||||||||||||||||||||||||||||||||
Customer accounts | 499,109 | 440,338 | 450,071 | |||||||||||||||||||||||||||||||||
For footnotes, see page 149. |
• | The reported loss before tax of US$2.1 billion compared with a loss before tax of US$11.0 billion in 2008. On an underlying basis and excluding the impairment charge of US$10.6 billion in 2008 to fully write off goodwill in respect of North America Personal Financial Services, the pre-tax loss grew by US$1.1 billion. This was driven by a decline in profits due to a significant fall in deposit spreads, reflecting the very low levels of major currency interest rates throughout 2009, and a rise in loan impairment charges outside North America as global economic conditions deteroriated. Within North America, loan impairment charges and operating expenses fell, reflecting the continuing run-off of the exit portfolios, some stabilisation in the credit environment and the closure of the US Consumer Lending branch network at the beginning of 2009. | |
• | Net interest income decreased by 10 per cent. This was due to significant deposit spread compression experienced in the Group’s major deposit-taking entities as a result of lower base rates and lower asset balances as customer loans |
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Customer groups > Personal Financial Services |
in the US declined and consumer finance and unsecured lending activities in other countries were scaled back. These factors were partially mitigated by the benefit of lower funding costs on lending spreads and growth in average liability balances as customers responded to the strength of HSBC’s brand following the market turmoil in 2008. | ||
• | Net fee income was 13 per cent lower, reflecting lower card fees from reduced volumes of new lending and changes in customer behaviour, particularly in North America. Weak equity market sentiment in the first half of 2009 further affected revenues from retail securities and investments, notably in Hong Kong, although relatively more buoyant markets led to some recovery in the second half of the year. | |
• | A net gain of US$2.3 billion was recorded on financial instruments designated at fair value, compared with an expense of US$2.9 billion in 2008. This was largely due to an increase in the value of assets held to meet liabilities under insurance and investment contracts. | |
• | Loan impairment charges fell by 3 per cent, with the significant decline in North America driven by the continuing reduction in balances and some stabilisation of loss experience in certain segments of the consumer finance portfolios. This was partly offset by credit deterioration elsewhere, primarily in the unsecured portfolios of various lending products in the Middle East, the UK and Brazil. The Group further strengthened collection systems and practices, reduced credit lines and tightened lending criteria in 2009. | |
• | Costs declined by US$1.4 billion excluding the goodwill impairment charge in North America in 2008. This reduction resulted primarily from the decision to discontinue originations and close the branch network in the Consumer Lending business in the US, and from the exercise of tight control of discretionary expenditure in most regions, notably in Asia. Costs also benefited from a US$0.2 billion accounting gain on staff benefits in 2009 in the UK. | |
• | Income from associates and joint ventures rose by 51 per cent, largely driven by the Group’s share of profits from Ping An Insurance which increased in 2009 following the non-recurrence of an impairment on its investment in Fortis in 2008. |
• | Customer accounts increased by 7 per cent, largely on the back of strong deposit growth in Asia. Loans and advances to customers were 5 per cent lower as the US consumer finance portfolio continued to decline and, globally, customers reduced their use of credit. At 31 December 2009, the aggregate ratio of customer advances to deposits in Personal Financial Services was 80 per cent, compared with 91 per cent at the end of 2008. |
• | Premier, the Group’s flagship global customer proposition, grew to 3.4 million customers in 2009, attracting 724,000 net new customers of which nearly 50 per cent were new to the Group. Premier was launched in Russia and Colombia during the year, extending the total number of markets where the service is offered to 43. | |
• | Premier was expanded in 2009 with the launch of HSBC Amanah Premier, the world’s first Islamic premium banking service, in six markets (UAE, Saudi Arabia, Malaysia, Indonesia, Qatar and Bahrain), offering customers a suite of shariah compliant products and Islamic wealth management services. | |
• | A second globally consistent proposition, Advance, was developed in 2009 for launch in early 2010. Building on the success of Premier, Advance will target emerging mass affluent customers who are not yet Premier but have the potential to be so. Advance is currently available in seven markets, including Hong Kong and the UK, and will be offered in over 30 markets by the end of 2010. | |
• | As part of its wealth management strategy, HSBC successfully launched the World Selection global investment offering in seven markets. This fund, which will be available in over 20 markets by the end of 2010, is designed to meet the different needs and risk appetites of HSBC customers by offering a range of globally diversified and multi-asset portfolios. The fund had assets of US$2.7 billion at the end of the year. | |
• | HSBC’s growth in personal lending in 2009 was largely in mortgage products in the UK and Hong Kong. In the UK, HSBC launched various marketing campaigns including a new Rate Matcher mortgage promotion. As a result of market share gains in 2009, the UK bank more than met its commitment to make £15 billion (US$24.7 billion) of new mortgage lending |
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available to borrowers. In Hong Kong, HSBC maintained its market leading position with gross mortgage balance growth of 7 per cent during the year. | ||
• | As part of its strategy to deliver a globally consistent customer experience, Personal Financial Services commenced a global retail store update and refresh programme including |
the introduction of a set of minimum service standards across customer touch points. The standardised range of design principles helps address the diverse needs of customers and enables them to recognise and be confident in their dealings with HSBC wherever they are. The customer recommendation score for Personal Financial Services increased in 2009 (see page 20). |
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
2008 | acquisitions | at 2009 | acquisitions | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | and | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | disposals | 10 | translation | 11 | rates | 12 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Personal Financial Services | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 29,419 | (36 | ) | (1,534 | ) | 27,849 | 3 | (2,745 | ) | 25,107 | (15 | ) | (10 | ) | ||||||||||||||||||||||
Net fee income | 10,107 | (32 | ) | (645 | ) | 9,430 | – | (1,192 | ) | 8,238 | (18 | ) | (13 | ) | ||||||||||||||||||||||
Other income15 | 1,963 | (121 | ) | (258 | ) | 1,584 | 1 | 485 | 2,070 | 5 | 31 | |||||||||||||||||||||||||
Net operating income16 | 41,489 | (189 | ) | (2,437 | ) | 38,863 | 4 | (3,452 | ) | 35,415 | (15 | ) | (9 | ) | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (21,220 | ) | 3 | 595 | (20,622 | ) | – | 720 | (19,902 | ) | 6 | 3 | ||||||||||||||||||||||||
Net operating income | 20,269 | (186 | ) | (1,842 | ) | 18,241 | 4 | (2,732 | ) | 15,513 | (23 | ) | (15 | ) | ||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (21,140 | ) | 38 | 1,372 | (19,730 | ) | (1 | ) | 1,439 | (18,292 | ) | 13 | 7 | |||||||||||||||||||||||
Goodwill impairment | (10,564 | ) | – | – | (10,564 | ) | – | 10,564 | – | 100 | 100 | |||||||||||||||||||||||||
Operating loss | (11,435 | ) | (148 | ) | (470 | ) | (12,053 | ) | 3 | 9,271 | (2,779 | ) | 76 | 77 | ||||||||||||||||||||||
Income from associates | 461 | – | 13 | 474 | – | 240 | 714 | 55 | 51 | |||||||||||||||||||||||||||
Loss before tax | (10,974 | ) | (148 | ) | (457 | ) | (11,579 | ) | 3 | 9,511 | (2,065 | ) | 81 | 82 | ||||||||||||||||||||||
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||
acquisitions, | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
2007 | disposals | at 2008 | acquisitions | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Personal Financial Services | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 29,069 | (224 | ) | (126 | ) | 28,719 | 215 | 485 | 29,419 | 1 | 2 | |||||||||||||||||||||||||
Net fee income | 11,742 | (21 | ) | (105 | ) | 11,616 | (9 | ) | (1,500 | ) | 10,107 | (14 | ) | (13 | ) | |||||||||||||||||||||
Other income15 | 2,428 | (91 | ) | (10 | ) | 2,327 | 83 | (447 | ) | 1,963 | (19 | ) | (19 | ) | ||||||||||||||||||||||
Net operating income16 | 43,239 | (336 | ) | (241 | ) | 42,662 | 289 | (1,462 | ) | 41,489 | (4 | ) | (3 | ) | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (16,172 | ) | 4 | 75 | (16,093 | ) | (3 | ) | (5,124 | ) | (21,220 | ) | (31 | ) | (32 | ) | ||||||||||||||||||||
Net operating income | 27,067 | (332 | ) | (166 | ) | 26,569 | 286 | (6,586 | ) | 20,269 | (25 | ) | (25 | ) | ||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (21,757 | ) | 236 | 117 | (21,404 | ) | (98 | ) | 362 | (21,140 | ) | 3 | 2 | |||||||||||||||||||||||
Goodwill impairment | – | – | – | – | – | (10,564 | ) | (10,564 | ) | |||||||||||||||||||||||||||
Operating profit/(loss) | 5,310 | (96 | ) | (49 | ) | 5,165 | 188 | (16,788 | ) | (11,435 | ) | (315 | ) | (325 | ) | |||||||||||||||||||||
Income from associates | 590 | – | 52 | 642 | – | (181 | ) | 461 | (22 | ) | (28 | ) | ||||||||||||||||||||||||
Profit/(loss) before tax | 5,900 | (96 | ) | 3 | 5,807 | 188 | (16,969 | ) | (10,974 | ) | (286 | ) | (292 | ) | ||||||||||||||||||||||
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Customer groups > Commercial Banking |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Net interest income | 7,883 | 9,494 | 9,055 | |||||||||
Net fee income | 3,702 | 4,097 | 3,972 | |||||||||
Trading income excluding net interest income | 332 | 369 | 265 | |||||||||
Net interest income on trading activities | 22 | 17 | 31 | |||||||||
Net trading income42 | 354 | 386 | 296 | |||||||||
Net income/(expense) from financial instruments designated at fair value. | 100 | (224 | ) | 22 | ||||||||
Gains less losses from financial investments | 23 | 193 | 90 | |||||||||
Dividend income | 8 | 88 | 8 | |||||||||
Net earned insurance premiums | 886 | 679 | 733 | |||||||||
Other operating income | 739 | 939 | 165 | |||||||||
Total operating income | 13,695 | 15,652 | 14,341 | |||||||||
Net insurance claims43 | (842 | ) | (335 | ) | (391 | ) | ||||||
Net operating income16 | 12,853 | 15,317 | 13,950 | |||||||||
Loan impairment charges and other credit risk provisions | (3,282 | ) | (2,173 | ) | (1,007 | ) | ||||||
Net operating income | 9,571 | 13,144 | 12,943 | |||||||||
Employee expenses | (2,606 | ) | (3,056 | ) | (3,094 | ) | ||||||
Other operating expenses | (3,357 | ) | (3,525 | ) | (3,158 | ) | ||||||
Total operating expenses | (5,963 | ) | (6,581 | ) | (6,252 | ) | ||||||
Operating profit | 3,608 | 6,563 | 6,691 | |||||||||
Share of profit in associates and joint ventures | 667 | 631 | 454 | |||||||||
Profit before tax | 4,275 | 7,194 | 7,145 | |||||||||
By geographical region | ||||||||||||
Europe | 1,292 | 2,722 | 2,516 | |||||||||
Hong Kong | 956 | 1,315 | 1,619 | |||||||||
Rest of Asia-Pacific27 | 1,064 | 1,235 | 868 | |||||||||
Middle East27 | 21 | 558 | 482 | |||||||||
North America | 543 | 658 | 920 | |||||||||
Latin America | 399 | 706 | 740 | |||||||||
4,275 | 7,194 | 7,145 | ||||||||||
% | % | % | ||||||||||
Share of HSBC’s profit before tax | 60.4 | 77.3 | 29.5 | |||||||||
Cost efficiency ratio | 46.4 | 43.0 | 44.8 | |||||||||
Balance sheet data41 | ||||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 199,674 | 203,949 | 220,068 | |||||||||
Total assets | 251,143 | 249,218 | 307,944 | |||||||||
Customer accounts | 267,388 | 235,879 | 237,987 |
- | to be the leading international business bank, using HSBC’s extensive geographical network together with product expertise in payments, trade, receivables finance and foreign exchange to actively support customers who are trading and investing across borders; and | |
- | to be the best bank for small and medium-sized enterprises (‘SME’s) in target markets, building global scale and creating efficiencies by sharing systems and best practice, including customer experience, training and product offerings, and selectively rolling out the direct banking model. |
• | Commercial Banking remained profitable in all regions in 2009, although profit before tax of US$4.3 billion was 41 per cent lower than in 2008. The results included a US$280 million gain from the disposal of the remaining stake in HSBC’s UK card merchant acquiring business, compared with a US$425 million gain in 2008 from the sale of the first tranche. On an underlying basis, pre-tax profit declined by 35 per cent, driven by the effects of lower interest rates on deposit margins and higher loan impairment charges resulting from deterioration in the global economy. | |
• | Deposit balances increased by 7 per cent to US$267 billion, largely in Hong Kong and the UK, as HSBC’s brand strength continued to attract new customers. Loans and advances were 9 per cent lower, largely as customer demand for new lending declined. This decline was partly offset by targeted growth in key markets such as mainland China. The relative movement in deposits and loans strengthened HSBC’s liquidity position, with an aggregate customer advances to deposits ratio in Commercial Banking of 75 per cent compared with 86 per cent reported at 31 December 2008. | |
• | Net interest income fell by 11 per cent despite higher deposit balances, driven by deposit spread compression and reduced lending balances. This was partly offset by wider spreads on lending due to improved pricing. | |
• | Net fee income was broadly unchanged, as repricing initiatives drove higher fee income from credit facilities in North America which was offset by a reduction in fee income |
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following the part disposal of the card merchant acquiring business to a joint venture in 2008. | ||
• | Loan impairment charges and other credit risk provisions increased by 56 per cent to US$3.3 billion, representing less than 2 per cent of average reported assets. Loan impairment charges in 2009 remained at broadly the same rate as experienced in the second half of 2008, with the charge concentrated in manufacturing, general trading and real estate. The increase in loan impairment charges was mainly in the Middle East, the UK, Brazil, and India, partly offset by an improving credit environment in Hong Kong. | |
• | Operating expenses remained broadly unchanged, including the benefit in the UK of an accounting gain on staff benefits; however, the cost efficiency ratio deteriorated slightly driven by the effect of deposit spread compression on revenues. | |
• | Income from associates and joint ventures rose by 5 per cent. |
• | Product revenues from foreign exchange were unchanged at US$0.5 billion, and revenues from trade and supply chain also remained flat at US$1.4 billion despite the overall decline in global trade levels. While volumes of trade activity were depressed in line with world trade volumes, signs of recovery were apparent towards the end of the year. | |
• | Foreign exchange services were enhanced with the launch of GetRate on Business Internet Banking in Malaysia, India and the UK. | |
• | The number of cross-border intra-Group referrals increased by 48 per cent, notably in Asia which accounted for over half of all successful referrals. The aggregate transaction value of successful referrals was US$9.0 billion. | |
• | HSBC further strengthened its international offerings for customers, with particular focus on business flows to and from mainland China. In conjunction with Bank of Communications, HSBC launched a renminbi trade settlement service in seven ASEAN countries and a same-day credit pledge service on outward remittances into mainland China from Hong Kong. |
• | Services for mainland China companies looking to expand overseas were also a focus of attention, with innovative solutions including a video conference account opening service for SMEs. Investment flows into mainland China were targeted by increasing the number of foreign national relationship managers in HSBC’s international business teams there. |
• | Business banking customer numbers increased by 12 per cent to 3 million with over 61 per cent of new customers in emerging markets. | |
• | Deposit balances in business banking were US$146 billion, providing a significant surplus of funds for deployment. Total revenue from Business Banking of US$5.8 billion, despite the effects of deposit spread compression, represented 45 per cent of total revenue, highlighting the importance of this segment to the Commercial Banking business. | |
• | Customer loans and advances in business banking were US$53 billion, and HSBC continued to support businesses in the global downturn. The US$5 billion International SME Fund was launched in December 2008 in five key markets. The fund was fully allocated by the end of 2009 and 80 per cent of it was utilised. | |
• | In 2009, the global roll-out of internationally consistent offerings continued. Business Direct, the direct channel proposition, was launched in a further three countries and is now live in ten, while the roll-out of a credit scoring platform and deployment of globally consistent training programmes illustrated HSBC’s ability to leverage best practice and drive efficiencies across its worldwide network. |
• | The number of customers using HSBCnet continued to grow strongly, and full regional connectivity was rolled out in Latin America. The receivables finance capability was extended to deliver supplier funding programmes for large buyers, and new pan-European deals were written. |
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Customer groups > Commercial Banking / Global Banking and Markets |
• | Total revenue in the corporate segment was US$6.3 billion. Deposits from corporate customers were US$121 billion, while loans and advances were US$147 billion. Signs of returning confidence in the second half of 2009 were accompanied by higher levels of new lending, particularly in Asia and other emerging markets. |
• | A new global referral programme between Commercial Banking and Personal Financial Services was launched, resulting in over 15,000 successful referrals to HSBC Premier. | |
• | The number of referrals to Private Banking was 1,057, generating over US$2.5 billion in assets under management. |
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
2008 | acquisitions | at 2009 | acquisitions | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | and | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | disposals | 10 | translation | 11 | rates | 12 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Commercial Banking | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 9,494 | (29 | ) | (697 | ) | 8,768 | 45 | (930 | ) | 7,883 | (17 | ) | (11 | ) | ||||||||||||||||||||||
Net fee income | 4,097 | (26 | ) | (367 | ) | 3,704 | 5 | (7 | ) | 3,702 | (10 | ) | – | |||||||||||||||||||||||
Other income15 | 1,726 | (464 | ) | (213 | ) | 1,049 | 295 | (76 | ) | 1,268 | (27 | ) | (7 | ) | ||||||||||||||||||||||
Net operating income16 | 15,317 | (519 | ) | (1,277 | ) | 13,521 | 345 | (1,013 | ) | 12,853 | (16 | ) | (7 | ) | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (2,173 | ) | 3 | 68 | (2,102 | ) | – | (1,180 | ) | (3,282 | ) | (51 | ) | (56 | ) | |||||||||||||||||||||
Net operating income | 13,144 | (516 | ) | (1,209 | ) | 11,419 | 345 | (2,193 | ) | 9,571 | (27 | ) | (19 | ) | ||||||||||||||||||||||
Operating expenses | (6,581 | ) | 30 | 537 | (6,014 | ) | (27 | ) | 78 | (5,963 | ) | 9 | 1 | |||||||||||||||||||||||
Operating profit | 6,563 | (486 | ) | (672 | ) | 5,405 | 318 | (2,115 | ) | 3,608 | (45 | ) | (39 | ) | ||||||||||||||||||||||
Income from associates | 631 | – | 7 | 638 | – | 29 | 667 | 6 | 5 | |||||||||||||||||||||||||||
Profit before tax | 7,194 | (486 | ) | (665 | ) | 6,043 | 318 | (2,086 | ) | 4,275 | (41 | ) | (35 | ) | ||||||||||||||||||||||
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||
acquisitions, | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
2007 | disposals | at 2008 | acquisitions | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Commercial Banking | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 9,055 | (166 | ) | (77 | ) | 8,812 | 41 | 641 | 9,494 | 5 | 7 | |||||||||||||||||||||||||
Net fee income | 3,972 | (113 | ) | (76 | ) | 3,783 | 27 | 287 | 4,097 | 3 | 8 | |||||||||||||||||||||||||
Other income15 | 923 | (7 | ) | (28 | ) | 888 | 525 | 313 | 1,726 | 87 | 35 | |||||||||||||||||||||||||
Net operating income16 | 13,950 | (286 | ) | (181 | ) | 13,483 | 593 | 1,241 | 15,317 | 10 | 9 | |||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (1,007 | ) | 3 | 36 | (968 | ) | (3 | ) | (1,202 | ) | (2,173 | ) | (116 | ) | (124 | ) | ||||||||||||||||||||
Net operating income | 12,943 | (283 | ) | (145 | ) | 12,515 | 590 | 39 | 13,144 | 2 | – | |||||||||||||||||||||||||
Operating expenses | (6,252 | ) | 180 | 47 | (6,025 | ) | (106 | ) | (450 | ) | (6,581 | ) | (5 | ) | (7 | ) | ||||||||||||||||||||
Operating profit | 6,691 | (103 | ) | (98 | ) | 6,490 | 484 | (411 | ) | 6,563 | (2 | ) | (6 | ) | ||||||||||||||||||||||
Income from associates | 454 | – | 26 | 480 | – | 151 | 631 | 39 | 31 | |||||||||||||||||||||||||||
Profit before tax | 7,145 | (103 | ) | (72 | ) | 6,970 | 484 | (260 | ) | 7,194 | 1 | (4 | ) | |||||||||||||||||||||||
For footnotes, see page 149. |
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2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||
Net interest income | 8,610 | 8,541 | 4,430 | |||||||||||||||||||||||||||||||||
Net fee income | 4,363 | 4,291 | 4,901 | |||||||||||||||||||||||||||||||||
Trading income excluding net interest income | 4,701 | 157 | 3,503 | |||||||||||||||||||||||||||||||||
Net interest income/ (expense) on trading activities | 2,174 | 324 | (236 | ) | ||||||||||||||||||||||||||||||||
Net trading income42 | 6,875 | 481 | 3,267 | |||||||||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 473 | (438 | ) | (164 | ) | |||||||||||||||||||||||||||||||
Gains less losses from financial investments | 265 | (327 | ) | 1,313 | ||||||||||||||||||||||||||||||||
Dividend income | 68 | 76 | 222 | |||||||||||||||||||||||||||||||||
Net earned insurance premiums | 54 | 105 | 93 | |||||||||||||||||||||||||||||||||
Other operating income | 1,146 | 868 | 1,218 | |||||||||||||||||||||||||||||||||
Total operating income | 21,854 | 13,597 | 15,280 | |||||||||||||||||||||||||||||||||
Net insurance claims43 | (34 | ) | (79 | ) | (70 | ) | ||||||||||||||||||||||||||||||
Net operating income16 | 21,820 | 13,518 | 15,210 | |||||||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions. | (3,168 | ) | (1,471 | ) | (38 | ) | ||||||||||||||||||||||||||||||
Net operating income | 18,652 | 12,047 | 15,172 | |||||||||||||||||||||||||||||||||
Employee expenses | (4,703 | ) | (4,928 | ) | (5,572 | ) | ||||||||||||||||||||||||||||||
Other operating expenses | (3,834 | ) | (4,164 | ) | (3,786 | ) | ||||||||||||||||||||||||||||||
Total operating expenses | (8,537 | ) | (9,092 | ) | (9,358 | ) | ||||||||||||||||||||||||||||||
Operating profit | 10,115 | 2,955 | 5,814 | |||||||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 366 | 528 | 307 | |||||||||||||||||||||||||||||||||
Profit before tax | 10,481 | 3,483 | 6,121 | |||||||||||||||||||||||||||||||||
By geographical region | ||||||||||||||||||||||||||||||||||||
Europe | 4,545 | 195 | 2,527 | |||||||||||||||||||||||||||||||||
Hong Kong | 1,507 | 1,436 | 1,578 | |||||||||||||||||||||||||||||||||
Rest of Asia-Pacific27 | 2,319 | 2,970 | 1,969 | |||||||||||||||||||||||||||||||||
Middle East27 | 467 | 816 | 495 | |||||||||||||||||||||||||||||||||
North America | 712 | (2,575 | ) | (965 | ) | |||||||||||||||||||||||||||||||
Latin America | 931 | 641 | 517 | |||||||||||||||||||||||||||||||||
10,481 | 3,483 | 6,121 | ||||||||||||||||||||||||||||||||||
% | % | % | ||||||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 148.1 | 37.4 | 25.3 | |||||||||||||||||||||||||||||||||
Cost efficiency ratio | 39.1 | 67.3 | 61.5 |
For footnotes, see page 149. |
– | utilising the Group’s extensive distribution network; | |
– | developing Global Banking and Markets’ hub-and-spoke business model; and | |
– | continuing to build capabilities in major hubs to support the delivery of an advanced suite of services to corporate, institutional and government clients across the HSBC network. |
• | Global Banking and Markets delivered a considerably improved performance with reported pre-tax profits of US$10.5 billion, an increase of US$7.0 billion or 201 per cent compared with 2008. On an underlying basis, profit before tax increased by 249 per cent with strong performances in both developed and emerging markets. Robust revenues across core businesses were driven by higher margins and an increase in market share, with particularly strong performances in Rates and Balance Sheet Management. Revenues grew faster than operating expenses with continued emphasis on active cost management limiting the latter to a relatively modest rise. The cost efficiency ratio improved by 29.1 percentage points to 39.1 per cent. | |
• | Write-downs on legacy positions in credit trading, leveraged and acquisition financing and monoline credit exposures, which totalled US$331 million, were significantly lower than those recorded in 2008, primarily driven by the stabilisation of asset prices. This was partly offset by a fair value loss of US$444 million resulting from tightening credit spreads on structured liabilities; a gain of US$529 million was reported in 2008. | |
• | Loan impairment charges and other credit risk provisions increased by US$1.7 billion. Loan impairment charges were US$1.7 billion compared with US$0.8 billion in 2008, reflecting a deterioration in the credit position of |
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Customer groups > Global Banking and Markets |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||
Global Markets44 | 10,364 | 2,676 | 5,720 | |||||||||||||||||||||||||||||||||
Credit | 2,330 | (5,502 | ) | (1,319 | ) | |||||||||||||||||||||||||||||||
Rates | 2,648 | 2,033 | 1,291 | |||||||||||||||||||||||||||||||||
Foreign exchange | 2,979 | 3,842 | 2,178 | |||||||||||||||||||||||||||||||||
Equities | 641 | (64 | ) | 1,177 | ||||||||||||||||||||||||||||||||
Securities services45 | 1,420 | 2,116 | 1,926 | |||||||||||||||||||||||||||||||||
Asset and structured finance | 346 | 251 | 467 | |||||||||||||||||||||||||||||||||
Global Banking | 4,630 | 5,718 | 4,190 | |||||||||||||||||||||||||||||||||
Financing and equity capital markets | 3,070 | 3,572 | 2,186 | |||||||||||||||||||||||||||||||||
Payments and cash management46 | 1,053 | 1,665 | 1,632 | |||||||||||||||||||||||||||||||||
Other transaction services47 | 507 | 481 | 372 | |||||||||||||||||||||||||||||||||
Balance Sheet Management | 5,390 | 3,618 | 1,226 | |||||||||||||||||||||||||||||||||
Global Asset Management | 939 | 934 | 1,336 | |||||||||||||||||||||||||||||||||
Principal Investments | 42 | (415 | ) | 1,253 | ||||||||||||||||||||||||||||||||
Other48 | 489 | 1,066 | 1,555 | |||||||||||||||||||||||||||||||||
Total operating income | 21,854 | 13,597 | 15,280 | |||||||||||||||||||||||||||||||||
Comparative information has been adjusted to reflect the current management view. | ||
For footnotes, see page 149. |
a small number of clients. This was in line with market trends of a rise in the number and severity of defaults on loans, despite a return of liquidity to the market. Impairment charges on the available-for-sale portfolio at US$1.4 billion were US$0.8 billion higher than in 2008; however, they remained within the range of the stress tests described on page 156 of theAnnual Report and Accounts 2008. | ||
• | Within the Group’s available-for-sale portfolio, the negative reserves in respect of asset-backed securities (‘ABS’s) reduced significantly from US$18.7 billion to US$12.2 billion, reflecting the impact of amortisation and recent increases in ABS prices. Impairment charges of US$1.4 billion were identified on ABSs with a nominal value of US$2.6 billion and were taken to the income statement in 2009. However, due to the underlying credit quality and seniority of the tranches held by HSBC,the expected cash flow impairment on these securities was a more modest US$378 million. A further US$666 million of impairments was absorbed by income noteholders who take the first loss on positions within the securities investment conduits (‘SIC’s) now consolidated in HSBC’s accounts. Further details on the SICs are provided on page 182. |
• | HSBC was recognised for the continuing success of its ‘emerging markets-led and financing-focused’ strategy with numerous key industry awards, includingEuromoney’s Best Debt House in the following emerging market countries and regions: Mexico, Turkey, Asia, Latin America and the Middle East, along with ‘Best Global Bank’, and ‘Best Global Debt House’. Other awards included ‘European DCM House of the Year’, ‘European Corporate Bond House of the Year’ and ‘European Financial Institutions Bond House of the Year’ inFinancial News. | |
• | Global Markets revenues grew significantly as volatile markets and increased customer activity gave impetus to client-facing businesses. Exceptional revenues in Rates and improved revenues in Credit were boosted by greater market share in both primary and secondary client business. Credit revenues were also assisted by a general tightening of credit spreads and an increase in asset prices following a return of liquidity in financial markets. Foreign exchange revenues normalised following unprecedented levels of market volatility in 2008, as the business established deeper institutional client relationships. Equities took advantage of a changed competitive landscape to capture a greater share of business in strategic markets from key institutional clients, particularly in Europe, the Middle East and Asia. | |
• | Securities Services revenues declined as lower interest rates drove down overall margins, although this was partially offset by recent improvements in Asian equity markets which stimulated increases in volumes and assets under custody in the second half of 2009. | |
• | In Global Banking, certain credit default swap transactions which hedge risk within the portfolio, recorded fair value losses of US$429 million as credit spreads tightened, compared with gains of US$912 million reported in 2008. Excluding this, higher spreads drove an increase in credit and lending revenues, reflecting the strength of HSBC’s franchise and the quality of the client portfolio. Revenues in the equity capital markets business doubled following increased market share in key strategic regions. Payments and cash management activities continued to be adversely affected by the low interest rate environment, partly countered by an increase in liability balances. |
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• | Balance Sheet Management continued to benefit from early positioning against the backdrop of a low interest rate environment although, as expected, revenues slowed in the second half of 2009 as certain higher yield positions matured. | |
• | In Global Asset Management, positive fee income growth was recorded in each consecutive quarter, with an improving contribution from emerging markets. Funds under management at 31 December 2009 were US$423 billion, 14 per cent higher than at the start of the year, assisted by positive net inflows of US$11 billion and strengthening market |
performance. Fund launches during the year included ‘HSBC World Selection’ in conjunction with Personal Financial Services, which had assets of US$2.7 billion at year end. In August 2009, Global Asset Management entered the European Exchange Traded Funds (‘ETF’) market, working closely with Global Markets and HSBC Securities Services, and launched three ETF funds. | ||
• | In Principal Investments, opportunities for private equity realisations were limited and impairment charges were made against a small number of equity investments. |
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
2008 | acquisitions | at 2009 | acquisitions | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | and | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | disposals | 10 | translation | 11 | rates | 12 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Global Banking and Markets | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 8,541 | – | (451 | ) | 8,090 | 5 | 515 | 8,610 | 1 | 6 | ||||||||||||||||||||||||||
Net fee income | 4,291 | – | (267 | ) | 4,024 | 1 | 338 | 4,363 | 2 | 8 | ||||||||||||||||||||||||||
Other income15 | 686 | – | (555 | ) | 131 | 2 | 8,714 | 8,847 | 1,190 | 6,652 | ||||||||||||||||||||||||||
Net operating income16 | 13,518 | – | (1,273 | ) | 12,245 | 8 | 9,567 | 21,820 | 61 | 78 | ||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (1,471 | ) | – | 45 | (1,426 | ) | – | (1,742 | ) | (3,168 | ) | (115 | ) | (122 | ) | |||||||||||||||||||||
Net operating income | 12,047 | – | (1,228 | ) | 10,819 | 8 | 7,825 | 18,652 | 55 | 72 | ||||||||||||||||||||||||||
Operating expenses | (9,092 | ) | – | 743 | (8,349 | ) | (3 | ) | (185 | ) | (8,537 | ) | 6 | (2 | ) | |||||||||||||||||||||
Operating profit | 2,955 | – | (485 | ) | 2,470 | 5 | 7,640 | 10,115 | 242 | 309 | ||||||||||||||||||||||||||
Income from associates | 528 | – | 6 | 534 | – | (168 | ) | 366 | (31 | ) | (31 | ) | ||||||||||||||||||||||||
Profit before tax | 3,483 | – | (479 | ) | 3,004 | 5 | 7,472 | 10,481 | 201 | 249 | ||||||||||||||||||||||||||
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||
acquisitions, | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
2007 | disposals | at 2008 | acquisitions | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Global Banking and Markets | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 4,430 | – | (32 | ) | 4,398 | – | 4,143 | 8,541 | 93 | 94 | ||||||||||||||||||||||||||
Net fee income | 4,901 | – | (46 | ) | 4,855 | – | (564 | ) | 4,291 | (12 | ) | (12 | ) | |||||||||||||||||||||||
Other income15 | 5,879 | – | (57 | ) | 5,822 | – | (5,136 | ) | 686 | (88 | ) | (88 | ) | |||||||||||||||||||||||
Net operating income16 | 15,210 | – | (135 | ) | 15,075 | – | (1,557 | ) | 13,518 | (11 | ) | (10 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (38 | ) | – | 1 | (37 | ) | – | (1,434 | ) | (1,471 | ) | (3,771 | ) | (3,876 | ) | |||||||||||||||||||||
Net operating income | 15,172 | – | (134 | ) | 15,038 | – | (2,991 | ) | 12,047 | (21 | ) | (20 | ) | |||||||||||||||||||||||
Operating expenses | (9,358 | ) | – | 175 | (9,183 | ) | – | 91 | (9,092 | ) | 3 | 1 | ||||||||||||||||||||||||
Operating profit | 5,814 | – | 41 | 5,855 | – | (2,900 | ) | 2,955 | (49 | ) | (50 | ) | ||||||||||||||||||||||||
Income from associates | 307 | – | 18 | 325 | – | 203 | 528 | 72 | 62 | |||||||||||||||||||||||||||
Profit before tax | 6,121 | – | 59 | 6,180 | – | (2,697 | ) | 3,483 | (43 | ) | (44 | ) | ||||||||||||||||||||||||
For footnotes, see page 149. |
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Customer groups > Global Banking and Markets / Private Banking |
Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 27 | East | 27 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||
Trading assets49 | 294,951 | 25,742 | 15,960 | 511 | 67,466 | 6,283 | 410,913 | |||||||||||||||||||||
Derivative assets | 190,900 | 16,937 | 15,660 | 668 | 61,192 | 2,820 | 288,177 | |||||||||||||||||||||
Loans and advances to: | ||||||||||||||||||||||||||||
– customers (net) | 176,123 | 21,991 | 23,989 | 6,554 | 18,654 | 9,645 | 256,956 | |||||||||||||||||||||
– banks (net) | 59,171 | �� | 27,789 | 29,388 | 6,385 | 14,403 | 16,638 | 153,774 | ||||||||||||||||||||
Financial investments49 | 83,715 | 92,181 | 36,355 | 9,688 | 49,386 | 14,659 | 285,984 | |||||||||||||||||||||
Total assets41 | 981,831 | 217,146 | 138,884 | 28,189 | 260,131 | 57,491 | 1,683,672 | |||||||||||||||||||||
Deposits by banks | 88,043 | 5,824 | 7,874 | 1,357 | 13,229 | 3,948 | 120,275 | |||||||||||||||||||||
Customer accounts | 169,390 | 26,650 | 43,698 | 5,752 | 19,095 | 20,142 | 284,727 | |||||||||||||||||||||
Trading liabilities | 169,814 | 10,720 | 3,040 | 13 | 69,302 | 2,875 | 255,764 | |||||||||||||||||||||
Derivative liabilities | 191,480 | 16,619 | 15,500 | 651 | 60,178 | 3,270 | 287,698 | |||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||
Trading assets49 | 281,089 | 45,398 | 19,192 | 414 | 74,498 | 5,004 | 425,595 | |||||||||||||||||||||
Derivative assets | 303,265 | 26,989 | 25,492 | 1,014 | 125,848 | 5,145 | 487,753 | |||||||||||||||||||||
Loans and advances to: | ||||||||||||||||||||||||||||
– customers (net) | 185,818 | 23,042 | 27,941 | 6,649 | 35,583 | 8,273 | 287,306 | |||||||||||||||||||||
– banks (net) | 49,508 | 20,970 | 21,309 | 5,401 | 9,238 | 12,574 | 119,000 | |||||||||||||||||||||
Financial investments49 | 105,546 | 46,964 | 29,772 | 7,574 | 39,841 | 8,179 | 237,876 | |||||||||||||||||||||
Total assets41 | 1,180,759 | 233,187 | 147,714 | 27,975 | 348,347 | 53,870 | 1,991,852 | |||||||||||||||||||||
Deposits by banks | 79,509 | 11,509 | 12,261 | 944 | 16,244 | 3,871 | 124,338 | |||||||||||||||||||||
Customer accounts | 199,687 | 30,866 | 42,977 | 7,628 | 23,844 | 15,384 | 320,386 | |||||||||||||||||||||
Trading liabilities | 144,759 | 13,056 | 3,633 | 54 | 72,325 | 2,546 | 236,373 | |||||||||||||||||||||
Derivative liabilities | 300,200 | 28,536 | 25,465 | 1,016 | 122,699 | 4,615 | 482,531 | |||||||||||||||||||||
At 31 December 2007 | ||||||||||||||||||||||||||||
Trading assets49 | 294,078 | 26,877 | 18,119 | 1,613 | 93,395 | 8,570 | 442,652 | |||||||||||||||||||||
Derivative assets | 102,409 | 11,492 | 9,795 | 439 | 56,531 | 1,814 | 182,480 | |||||||||||||||||||||
Loans and advances to: | ||||||||||||||||||||||||||||
– customers (net) | 163,066 | 19,171 | 26,476 | 5,630 | 26,186 | 9,935 | 250,464 | |||||||||||||||||||||
– banks (net) | 89,651 | 53,725 | 24,733 | 6,120 | 14,938 | 10,339 | 199,506 | |||||||||||||||||||||
Financial investments49 | 94,416 | 46,765 | 31,301 | 8,147 | 33,273 | 10,155 | 224,057 | |||||||||||||||||||||
Total assets41 | 912,299 | 218,293 | 130,096 | 26,548 | 263,008 | 46,606 | 1,596,850 | |||||||||||||||||||||
Deposits by banks | 85,315 | 6,251 | 14,737 | 2,437 | 14,825 | 2,830 | 126,395 | |||||||||||||||||||||
Customer accounts | 163,713 | 37,364 | 45,773 | 8,347 | 30,732 | 13,950 | 299,879 | |||||||||||||||||||||
Trading liabilities | 201,010 | 15,939 | 8,517 | 84 | 73,081 | 4,998 | 303,629 | |||||||||||||||||||||
Derivative liabilities | 104,687 | 10,865 | 9,204 | 452 | 53,058 | 1,986 | 180,252 |
For footnotes, see page 149. |
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2009 | 2008 | 2007 | |||||||||||||
US$m | US$m | US$m | |||||||||||||
Net interest income | 1,474 | 1,612 | 1,216 | ||||||||||||
Net fee income | 1,236 | 1,476 | 1,615 | ||||||||||||
Trading income excluding net interest income | 322 | 408 | 525 | ||||||||||||
Net interest income on trading activities | 22 | 14 | 9 | ||||||||||||
Net trading income42 | 344 | 422 | 534 | ||||||||||||
Net expense from financial instruments designated at fair value | – | – | (1 | ) | |||||||||||
Gains less losses from financial investments | 5 | 64 | 119 | ||||||||||||
Dividend income | 5 | 8 | 7 | ||||||||||||
Other operating income | 48 | 49 | 58 | ||||||||||||
Total operating income | 3,112 | 3,631 | 3,548 | ||||||||||||
Net insurance claims43 | – | – | – | ||||||||||||
Net operating income16 | 3,112 | 3,631 | 3,548 | ||||||||||||
Loan impairment charges and other credit risk provisions | (128 | ) | (68 | ) | (14 | ) | |||||||||
Net operating income | 2,984 | 3,563 | 3,534 | ||||||||||||
Employee expenses | (1,234 | ) | (1,367 | ) | (1,250 | ) | |||||||||
Other operating expenses | (650 | ) | (749 | ) | (775 | ) | |||||||||
Total operating expenses | (1,884 | ) | (2,116 | ) | (2,025 | ) | |||||||||
Operating profit | 1,100 | 1,447 | 1,509 | ||||||||||||
Share of profit in associates and joint ventures | 8 | – | 2 | ||||||||||||
Profit before tax | 1,108 | 1,447 | 1,511 | ||||||||||||
By geographical region | |||||||||||||||
Europe | 854 | 998 | 915 | ||||||||||||
Hong Kong | 197 | 237 | 305 | ||||||||||||
Rest of Asia-Pacific27 | 90 | 109 | 89 | ||||||||||||
Middle East27 | 6 | 4 | 3 | ||||||||||||
North America | (50 | ) | 83 | 174 | |||||||||||
Latin America | 11 | 16 | 25 | ||||||||||||
1,108 | 1,447 | 1,511 | |||||||||||||
% | % | % | |||||||||||||
Share of HSBC’s profit before tax | 15.6 | 15.6 | 6.2 | ||||||||||||
Cost efficiency ratio | 60.5 | 58.3 | 57.1 | ||||||||||||
Balance sheet data41 | |||||||||||||||
US$m | US$m | US$m | |||||||||||||
Loans and advances to customers (net) | 37,031 | 37,590 | 43,612 | ||||||||||||
Total assets | 116,148 | 133,216 | 130,893 | ||||||||||||
Customer accounts | 106,533 | 116,683 | 106,197 |
• | Reported pre-tax profit was 23 per cent lower at US$1.1 billion, a fall of 21 per cent on an underlying basis, primarily from a decline in fee income. This was due to a change in the risk tolerance of private banking customers and consequent reduction in client activity, lower fiduciary fees and the effect of weak markets on the value of funds under management. Strong cost control including reduced performance-related costs partially offset the lower revenues. | |
• | Net interest income fell by 6 per cent as lower interest rates in the major economies, combined with aggressive competition for deposits from weaker competitors, particularly in Europe and North America, led to tighter spreads and a decline in balances. Lending volumes declined due to client deleveraging and a lower appetite for credit, although this was partly mitigated by re-pricing historically low margin business to reflect the changed conditions. Favourable interest rate and yield curve movements at the beginning of 2009 generated higher treasury income in Asia and Europe, benefiting net interest income. | |
• | Net fee income decreased by 14 per cent, affected by the fall in the value of equity markets in the second half of 2008 and the first quarter of 2009. This resulted in a lower average value of funds under management and the redemption of investments, particularly hedge funds, in early 2009. Commission income on fiduciary deposits decreased as low interest rates resulted in a decline in volumes, and annual fund performance fees earned in January 2008 were not repeated in 2009. |
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Customer groups > Private Banking |
• | Trading income fell by 18 per cent, also reflecting lower client trading activity, mainly in foreign exchange and structured products. | |
• | Gains less losses from financial investments decreased by 90 per cent due to gains made on the disposal of HSBC’s residual interest in the Hermitage Fund in the first half of 2008 which did not recur in 2009. | |
• | Other operating income was in line with 2008, and included gains on the sale of two office buildings in Switzerland and Luxembourg. | |
• | Loan impairment charges and other credit risk provisions increased by US$62 million, largely due to a single specific charge in the US in 2009. | |
• | Operating expenses decreased by 9 per cent as performance-related costs were cut, staff numbers were reduced and discretionary costs such as travel and marketing were tightly managed. These steps were taken in response to the lower revenues earned in the weaker economic environment. Costs included US$19 million of integration costs relating to the merger of HSBC’s two Swiss private banks, US$17 million of redundancy costs worldwide and the up-front cost of establishing Private Banking in new developing markets, including investments in mainland China, India and Russia. | |
• | The cost efficiency ratio increased by 2.1 percentage points to 60.5 per cent. |
Client assets | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
At 1 January | 352 | 421 | ||||||
Net new money | (7 | ) | 24 | |||||
Value change | 27 | (71 | ) | |||||
Exchange and other | (5 | ) | (22 | ) | ||||
At 31 December | 367 | 352 | ||||||
Client assets by investment class | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Equities | 73 | 53 | ||||||
Bonds | 69 | 57 | ||||||
Structured products | 10 | 7 | ||||||
Funds | 82 | 87 | ||||||
Cash, fiduciary deposits and other | 133 | 148 | ||||||
367 | 352 | |||||||
• | Reported client assets increased by 4 per cent to US$367 billion due to portfolio appreciation and foreign exchange movements, partly offset by a net outflow of funds due to hedge fund redemptions, client deleveraging and the decision not to match aggressive deposit prices offered by weaker competitors, particularly in Europe and North America. Private Banking continued to experience net client inflows in emerging markets, namely Asia, the Middle East and Latin America, with net new money of US$6.6 billion generated in these markets in the year. | |
• | Reported total client assets increased by 6 per cent to US$460 billion, largely due to an increase in the market value of assets. ‘Total client assets’ is a measure equivalent to many industry definitions of assets under management which include some non-financial assets held in client trusts. |
• | Intragroup referrals continued to result in good inflows with US$5.8 billion raised during 2009. | |
• | The legal merger of HSBC’s two Swiss private banks was achieved as planned in April 2009 and technical integration was completed in early January 2010. The combined bank is expected to achieve significant operational and cost efficiencies. | |
• | HSBC Alternative Investments Limited continued to achieve strong returns on hedge fund products in the second half of 2009, including its flagship fund of hedge funds, the GH fund, which achieved a return of 12.3 per cent during the year. A series of new products were launched including one of the first UCITS III hedge funds of hedge funds and as a result, the business saw net inflows in the second half of 2009. | |
• | Major awards included ‘Outstanding Global Private Bank’ byPrivate Banker International, and ‘Best Global Private Bank’, ‘Best Private Bank in Asia’ and ‘Best Private Bank in the Middle East’ byThe BankerandThe Financial Times. TheEuromoney2010 Private Banking Survey placed HSBC second in the Global Private Banking category for the second consecutive year. | |
• | Investment in emerging markets and domestic businesses continued, including the launch of Private Banking in Russia and further investments in Private Banking operations in Asia, Latin America and the Middle East. |
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2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
2008 | acquisitions | at 2009 | acquisitions | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | and | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | disposals | 10 | translation | 11 | rates | 12 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Private Banking | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 1,612 | – | (52 | ) | 1,560 | – | (86 | ) | 1,474 | (9 | ) | (6 | ) | |||||||||||||||||||||||
Net fee income | 1,476 | – | (33 | ) | 1,443 | – | (207 | ) | 1,236 | (16 | ) | (14 | ) | |||||||||||||||||||||||
Other income15 | 543 | – | (19 | ) | 524 | – | (122 | ) | 402 | (26 | ) | (23 | ) | |||||||||||||||||||||||
Net operating income16 | 3,631 | – | (104 | ) | 3,527 | – | (415 | ) | 3,112 | (14 | ) | (12 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (68 | ) | – | 2 | (66 | ) | – | (62 | ) | (128 | ) | (88 | ) | (94 | ) | |||||||||||||||||||||
Net operating income | 3,563 | – | (102 | ) | 3,461 | – | (477 | ) | 2,984 | (16 | ) | (14 | ) | |||||||||||||||||||||||
Operating expenses | (2,116 | ) | – | 54 | (2,062 | ) | – | 178 | (1,884 | ) | 11 | 9 | ||||||||||||||||||||||||
Operating profit | 1,447 | – | (48 | ) | 1,399 | – | (299 | ) | 1,100 | (24 | ) | (21 | ) | |||||||||||||||||||||||
Income from associates | – | – | – | – | – | 8 | 8 | |||||||||||||||||||||||||||||
Profit before tax | 1,447 | – | (48 | ) | 1,399 | – | (291 | ) | 1,108 | (23 | ) | (21 | ) | |||||||||||||||||||||||
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||
acquisitions, | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
2007 | disposals | at 2008 | acquisitions | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Private Banking | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 1,216 | 1 | (12 | ) | 1,205 | – | 407 | 1,612 | 33 | 34 | ||||||||||||||||||||||||||
Net fee income | 1,615 | (105 | ) | 26 | 1,536 | – | (60 | ) | 1,476 | (9 | ) | (4 | ) | |||||||||||||||||||||||
Other income15 | 717 | (18 | ) | 5 | 704 | – | (161 | ) | 543 | (24 | ) | (23 | ) | |||||||||||||||||||||||
Net operating income16 | 3,548 | (122 | ) | 19 | 3,445 | – | 186 | 3,631 | 2 | 5 | ||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (14 | ) | – | – | (14 | ) | – | (54 | ) | (68 | ) | (386 | ) | (386 | ) | |||||||||||||||||||||
Net operating income | 3,534 | (122 | ) | 19 | 3,431 | – | 132 | 3,563 | 1 | 4 | ||||||||||||||||||||||||||
Operating expenses | (2,025 | ) | 98 | (17 | ) | (1,944 | ) | – | (172 | ) | (2,116 | ) | (4 | ) | (9 | ) | ||||||||||||||||||||
Operating profit | 1,509 | (24 | ) | 2 | 1,487 | – | (40 | ) | 1,447 | (4 | ) | (3 | ) | |||||||||||||||||||||||
Income from associates | 2 | – | – | 2 | – | (2 | ) | – | (100 | ) | (100 | ) | ||||||||||||||||||||||||
Profit before tax | 1,511 | (24 | ) | 2 | 1,489 | – | (42 | ) | 1,447 | (4 | ) | (3 | ) | |||||||||||||||||||||||
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Customer groups > Other |
Profit/(loss) before tax | ||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Net interest expense | (1,035 | ) | (956 | ) | (542 | ) | ||||||||||
Net fee income/(expense) | 125 | 53 | (228 | ) | ||||||||||||
Trading income/(expense) excluding net interest income | 244 | (262 | ) | 127 | ||||||||||||
Net interest income/(expense) on trading activities | 35 | (268 | ) | (1 | ) | |||||||||||
Net trading income/(expense)42 | 279 | (530 | ) | 126 | ||||||||||||
Changes in fair value of long-term debt issued and related derivatives | (6,247 | ) | 6,679 | 2,812 | ||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (196 | ) | 747 | 81 | ||||||||||||
Net income/(expense) from financial instruments designated at fair value | (6,443 | ) | 7,426 | 2,893 | ||||||||||||
Gains less losses from financial investments | 3 | (396 | ) | 83 | ||||||||||||
Gains arising from dilution of interests in associates | – | – | 1,092 | |||||||||||||
Dividend income | 12 | 10 | 32 | |||||||||||||
Net earned insurance premiums | (3 | ) | (17 | ) | (21 | ) | ||||||||||
Gains on disposal of French regional banks | – | 2,445 | – | |||||||||||||
Other operating income | 5,042 | 4,261 | 3,523 | |||||||||||||
Total operating income/(expense) | (2,020 | ) | 12,296 | 6,958 | ||||||||||||
Net insurance claims43 | (3 | ) | (1 | ) | – | |||||||||||
Net operating income/(expense)16 | (2,023 | ) | 12,295 | 6,958 | ||||||||||||
Loan impairment charges and other credit risk provisions | (8 | ) | (5 | ) | (11 | ) | ||||||||||
Net operating income/(expense) | (2,031 | ) | 12,290 | 6,947 | ||||||||||||
Employee expenses | (2,602 | ) | (2,198 | ) | (2,017 | ) | ||||||||||
Other operating expenses | (2,113 | ) | (1,976 | ) | (1,545 | ) | ||||||||||
Total operating expenses | (4,715 | ) | (4,174 | ) | (3,562 | ) | ||||||||||
Operating profit/(loss) | (6,746 | ) | 8,116 | 3,385 | ||||||||||||
Share of profit in joint ventures and associates | 26 | 41 | 150 | |||||||||||||
Profit/(loss) before tax | (6,720 | ) | 8,157 | 3,535 | ||||||||||||
By geographical region | ||||||||||||||||
Europe | (2,994 | ) | 5,296 | 1,056 | ||||||||||||
Hong Kong | (359 | ) | (955 | ) | (375 | ) | ||||||||||
Rest of Asia-Pacific27 | 264 | 197 | 1,261 | |||||||||||||
Middle East27 | 87 | 79 | 82 | |||||||||||||
North America | (3,717 | ) | 3,534 | 1,508 | ||||||||||||
Latin America | (1 | ) | 6 | 3 | ||||||||||||
(6,720 | ) | 8,157 | 3,535 | |||||||||||||
% | % | % | ||||||||||||||
Share of HSBC’s profit before tax | (94.9 | ) | 87.6 | 14.6 | ||||||||||||
Cost efficiency ratio | (233.1 | ) | 33.9 | 51.2 |
Balance sheet data41 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 3,110 | 2,621 | 2,678 | |||||||||
Total assets | 150,983 | 145,581 | 164,806 | |||||||||
Customer accounts | 1,277 | 2,041 | 2,006 |
• | Reported loss before tax in Other was US$6.7 billion, compared with a profit of US$8.2 billion in 2008. For a description of the main items reported under ‘Other’, see footnote 40 on page 150. | |
• | Net interest expense substantially comprises the interest paid on third-party debt issues at the holding company level. | |
• | Net trading income was US$279 million, compared with a net trading expense in 2008; this reflected fair value gains on certain non-qualifying hedges, compared with fair value losses in 2008. This caption also included a one-off hedging loss of US$344 million relating to forward foreign exchange contracts entered into to hedge the proceeds of the Group’s rights issue, and a US$121 million loss arising from the mark-to-market of the implied contingent forward contract entered into with the underwriters of the Group’s rights issue. Both of these items were part of the net proceeds of the rights issue but for technical accounting reasons were reflected through the income statement. | |
• | Net expense from financial instruments designated at fair value declined by 90 per cent to US$90 million due to reduced income from non-qualifying interest and exchange rate hedges related to long-term debt issued by HSBC Holdings and its North American and European subsidiaries. | |
• | HSBC recognised a gain of US$576 million in respect of the sale and leaseback of 8 Canada Square, its global headquarters in London, which was effected through the disposal of its entire shareholding in PMII. In 2008, a gain of US$416 million was reported in respect of the purchase of PMII from Metrovacesa. See Note 23 on the Financial Statements. | |
• | Operating expenses increased by 15 per cent to US$4.7 billion, mainly due to further centralisation of certain operational functions in the US to HSBC Technology Services USA |
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resulting in cost savings across the other customer groups in North America. These expenses were previously incurred directly by customer groups, and are now substantially recovered from them through a recharge |
mechanism with the revenue reported in other operating income. Costs at HSBC’s Group Service Centres rose by 10 per cent as the number of migrated activities increased in line with the Group’s Global Resourcing model. |
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | at 2009 | 2009 | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | adjust- | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | ments | 10 | translation | 11 | rates | 12 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Other | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest expense | (956 | ) | – | 12 | (944 | ) | – | (91 | ) | (1,035 | ) | (8 | ) | (10 | ) | |||||||||||||||||||||
Net fee income | 53 | – | (3 | ) | 50 | – | 75 | 125 | 136 | 150 | ||||||||||||||||||||||||||
Changes in fair value | 6,570 | (6,570 | ) | – | – | (6,533 | ) | – | (6,533 | ) | (199 | ) | ||||||||||||||||||||||||
Gains on disposal of French regional banks | 2,445 | (2,445 | ) | – | – | – | – | – | (100 | ) | ||||||||||||||||||||||||||
Other income15 | 4,183 | (95 | ) | (13 | ) | 4,075 | – | 1,345 | 5,420 | 30 | 33 | |||||||||||||||||||||||||
Net operating income/ (expense)16 | 12,295 | (9,110 | ) | (4 | ) | 3,181 | (6,533 | ) | 1,329 | (2,023 | ) | (116 | ) | 42 | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (5 | ) | – | (1 | ) | (6 | ) | – | (2 | ) | (8 | ) | (60 | ) | (33 | ) | ||||||||||||||||||||
Net operating income/ (expense) | 12,290 | (9,110 | ) | (5 | ) | 3,175 | (6,533 | ) | 1,327 | (2,031 | ) | (117 | ) | 42 | ||||||||||||||||||||||
Operating expenses | (4,174 | ) | – | 70 | (4,104 | ) | – | (611 | ) | (4,715 | ) | (13 | ) | (15 | ) | |||||||||||||||||||||
Operating profit/(loss) | 8,116 | (9,110 | ) | 65 | (929 | ) | (6,533 | ) | 716 | (6,746 | ) | (183 | ) | 77 | ||||||||||||||||||||||
Income from associates | 41 | – | (1 | ) | 40 | – | (14 | ) | 26 | (37 | ) | (35 | ) | |||||||||||||||||||||||
Profit/(loss) before tax | 8,157 | (9,110 | ) | 64 | (889 | ) | (6,533 | ) | 702 | (6,720 | ) | (182 | ) | 79 | ||||||||||||||||||||||
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | 2007 | |||||||||||||||||||||||||||||||||||
2007 | adjustments | at 2008 | Under- | 2008 | Re- | Under- | ||||||||||||||||||||||||||||||
as | and dilution | Currency | at 2008 exchange | 2008 | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | adjustments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Other | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest expense | (542 | ) | – | (38 | ) | (580 | ) | (6 | ) | (370 | ) | (956 | ) | (76 | ) | (64 | ) | |||||||||||||||||||
Net fee income/ (expense) | (228 | ) | – | 49 | (179 | ) | – | 232 | 53 | 123 | 130 | |||||||||||||||||||||||||
Changes in fair value | 3,055 | (3,055 | ) | – | – | 6,570 | – | 6,570 | 115 | |||||||||||||||||||||||||||
Gains on disposal of French regional banks | – | – | – | – | 2,445 | – | 2,445 | |||||||||||||||||||||||||||||
Other income15 | 4,673 | (1,116 | ) | 36 | 3,593 | 95 | 495 | 4,183 | (10 | ) | 14 | |||||||||||||||||||||||||
Net operating income16 | 6,958 | (4,171 | ) | 47 | 2,834 | 9,104 | 357 | 12,295 | 77 | 13 | ||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (11 | ) | 24 | 1 | 14 | – | (19 | ) | (5 | ) | 55 | (136 | ) | |||||||||||||||||||||||
Net operating income | 6,947 | (4,147 | ) | 48 | 2,848 | 9,104 | 338 | 12,290 | 77 | 12 | ||||||||||||||||||||||||||
Operating expenses | (3,562 | ) | – | (15 | ) | (3,577 | ) | 6 | (603 | ) | (4,174 | ) | (17 | ) | (17 | ) | ||||||||||||||||||||
Operating profit | 3,385 | (4,147 | ) | 33 | (729 | ) | 9,110 | (265 | ) | 8,116 | 140 | (36 | ) | |||||||||||||||||||||||
Income from associates | 150 | (12 | ) | 11 | 149 | – | (108 | ) | 41 | (73 | ) | (72 | ) | |||||||||||||||||||||||
Profit before tax | 3,535 | (4,159 | ) | 44 | (580 | ) | 9,110 | (373 | ) | 8,157 | 131 | (64 | ) | |||||||||||||||||||||||
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Customer groups > Profit/(loss) before tax |
2009 | |||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | |||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | |||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | 40 | elimination | 50 | Total | |||||||||||||||||||||||||||
Total | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
Net interest income/(expense) | 25,107 | 7,883 | 8,610 | 1,474 | (1,035 | ) | (1,309 | ) | 40,730 | ||||||||||||||||||||||||||
Net fee income | 8,238 | 3,702 | 4,363 | 1,236 | 125 | – | 17,664 | ||||||||||||||||||||||||||||
Trading income excluding net interest income | 637 | 332 | 4,701 | 322 | 244 | – | 6,236 | ||||||||||||||||||||||||||||
Net interest income on trading activities | 65 | 22 | 2,174 | 22 | 35 | 1,309 | 3,627 | ||||||||||||||||||||||||||||
Net trading income42 | 702 | 354 | 6,875 | 344 | 279 | 1,309 | 9,863 | ||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | (6,247 | ) | – | (6,247 | ) | ||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 2,339 | 100 | 473 | – | (196 | ) | – | 2,716 | |||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 2,339 | 100 | 473 | – | (6,443 | ) | – | (3,531 | ) | ||||||||||||||||||||||||||
Gains less losses from financial investments | 224 | 23 | 265 | 5 | 3 | – | 520 | ||||||||||||||||||||||||||||
Dividend income | 33 | 8 | 68 | 5 | 12 | – | 126 | ||||||||||||||||||||||||||||
Net earned insurance premiums | 9,534 | 886 | 54 | – | (3 | ) | – | 10,471 | |||||||||||||||||||||||||||
Other operating income | 809 | 739 | 1,146 | 48 | 5,042 | (4,996 | ) | 2,788 | |||||||||||||||||||||||||||
Total operating income/ (expense) | 46,986 | 13,695 | 21,854 | 3,112 | (2,020 | ) | (4,996 | ) | 78,631 | ||||||||||||||||||||||||||
Net insurance claims43 | (11,571 | ) | (842 | ) | (34 | ) | – | (3 | ) | – | (12,450 | ) | |||||||||||||||||||||||
Net operating income/ (expense)16 | 35,415 | 12,853 | 21,820 | 3,112 | (2,023 | ) | (4,996 | ) | 66,181 | ||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (19,902 | ) | (3,282 | ) | (3,168 | ) | (128 | ) | (8 | ) | – | (26,488 | ) | ||||||||||||||||||||||
Net operating income/ (expense) | 15,513 | 9,571 | 18,652 | 2,984 | (2,031 | ) | (4,996 | ) | 39,693 | ||||||||||||||||||||||||||
Operating expenses | (18,292 | ) | (5,963 | ) | (8,537 | ) | (1,884 | ) | (4,715 | ) | 4,996 | (34,395 | ) | ||||||||||||||||||||||
Operating profit/(loss) | (2,779 | ) | 3,608 | 10,115 | 1,100 | (6,746 | ) | – | 5,298 | ||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 714 | 667 | 366 | 8 | 26 | – | 1,781 | ||||||||||||||||||||||||||||
Profit/(loss) before tax | (2,065 | ) | 4,275 | 10,481 | 1,108 | (6,720 | ) | – | 7,079 | ||||||||||||||||||||||||||
% | % | % | % | % | % | ||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | (29.2 | ) | 60.4 | 148.1 | 15.6 | (94.9 | ) | 100.0 | |||||||||||||||||||||||||||
Cost efficiency ratio | 51.7 | 46.4 | 39.1 | 60.5 | (233.1 | ) | 52.0 | ||||||||||||||||||||||||||||
Balance sheet data41 | |||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 399,460 | 199,674 | 256,956 | 37,031 | 3,110 | 896,231 | |||||||||||||||||||||||||||||
Total assets | 554,074 | 251,143 | 1,683,672 | 116,148 | 150,983 | (391,568 | ) | 2,364,452 | |||||||||||||||||||||||||||
Customer accounts | 499,109 | 267,388 | 284,727 | 106,533 | 1,277 | 1,159,034 |
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2008 | |||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | |||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | |||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | 40 | elimination | 50 | Total | |||||||||||||||||||||||||||
Total | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
Net interest income/(expense) | 29,419 | 9,494 | 8,541 | 1,612 | (956 | ) | (5,547 | ) | 42,563 | ||||||||||||||||||||||||||
Net fee income | 10,107 | 4,097 | 4,291 | 1,476 | 53 | – | 20,024 | ||||||||||||||||||||||||||||
Trading income/(expense) excluding net interest income | 175 | 369 | 157 | 408 | (262 | ) | – | 847 | |||||||||||||||||||||||||||
Net interest income/(expense) on trading activities | 79 | 17 | 324 | 14 | (268 | ) | 5,547 | 5,713 | |||||||||||||||||||||||||||
Net trading income/(expense)42 | 254 | 386 | 481 | 422 | (530 | ) | 5,547 | 6,560 | |||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 6,679 | – | 6,679 | ||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (2,912 | ) | (224 | ) | (438 | ) | – | 747 | – | (2,827 | ) | ||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | (2,912 | ) | (224 | ) | (438 | ) | – | 7,426 | – | 3,852 | |||||||||||||||||||||||||
Gains less losses from financial investments | 663 | 193 | (327 | ) | 64 | (396 | ) | – | 197 | ||||||||||||||||||||||||||
Dividend income | 90 | 88 | 76 | 8 | 10 | – | 272 | ||||||||||||||||||||||||||||
Net earned insurance premiums | 10,083 | 679 | 105 | – | (17 | ) | – | 10,850 | |||||||||||||||||||||||||||
Gains on disposal of French regional banks | – | – | – | – | 2,445 | – | 2,445 | ||||||||||||||||||||||||||||
Other operating income | 259 | 939 | 868 | 49 | 4,261 | (4,568 | ) | 1,808 | |||||||||||||||||||||||||||
Total operating income | 47,963 | 15,652 | 13,597 | 3,631 | 12,296 | (4,568 | ) | 88,571 | |||||||||||||||||||||||||||
Net insurance claims43 | (6,474 | ) | (335 | ) | (79 | ) | – | (1 | ) | – | (6,889 | ) | |||||||||||||||||||||||
Net operating income16 | 41,489 | 15,317 | 13,518 | 3,631 | 12,295 | (4,568 | ) | 81,682 | |||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (21,220 | ) | (2,173 | ) | (1,471 | ) | (68 | ) | (5 | ) | – | (24,937 | ) | ||||||||||||||||||||||
Net operating income | 20,269 | 13,144 | 12,047 | 3,563 | 12,290 | (4,568 | ) | 56,745 | |||||||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (21,140 | ) | (6,581 | ) | (9,092 | ) | (2,116 | ) | (4,174 | ) | 4,568 | (38,535 | ) | ||||||||||||||||||||||
Goodwill impairment | (10,564 | ) | – | – | – | – | – | (10,564 | ) | ||||||||||||||||||||||||||
Operating profit/(loss) | (11,435 | ) | 6,563 | 2,955 | 1,447 | 8,116 | – | 7,646 | |||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 461 | 631 | 528 | – | 41 | – | 1,661 | ||||||||||||||||||||||||||||
Profit/(loss) before tax | (10,974 | ) | 7,194 | 3,483 | 1,447 | 8,157 | – | 9,307 | |||||||||||||||||||||||||||
% | % | % | % | % | % | ||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | (117.9 | ) | 77.3 | 37.4 | 15.6 | 87.6 | 100.0 | ||||||||||||||||||||||||||||
Cost efficiency ratio | 76.4 | 43.0 | 67.3 | 58.3 | 33.9 | 60.1 | |||||||||||||||||||||||||||||
Balance sheet data41 | |||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 401,402 | 203,949 | 287,306 | 37,590 | 2,621 | 932,868 | |||||||||||||||||||||||||||||
Total assets | 527,901 | 249,218 | 1,991,852 | 133,216 | 145,581 | (520,303 | ) | 2,527,465 | |||||||||||||||||||||||||||
Customer accounts | 440,338 | 235,879 | 320,386 | 116,683 | 2,041 | 1,115,327 |
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Customer groups > Profit/(loss) before tax // Geographical regions > Summary |
2007 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | 40 | elimination | 50 | Total | ||||||||||||||||||||||||||||
Total | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income/(expense) | 29,069 | 9,055 | 4,430 | 1,216 | (542 | ) | (5,433 | ) | 37,795 | |||||||||||||||||||||||||||
Net fee income/(expense) | 11,742 | 3,972 | 4,901 | 1,615 | (228 | ) | – | 22,002 | ||||||||||||||||||||||||||||
Trading income excluding net interest income | 38 | 265 | 3,503 | 525 | 127 | – | 4,458 | |||||||||||||||||||||||||||||
Net interest income/(expense) on trading activities | 140 | 31 | (236 | ) | 9 | (1 | ) | 5,433 | 5,376 | |||||||||||||||||||||||||||
Net trading income42 | 178 | 296 | 3,267 | 534 | 126 | 5,433 | 9,834 | |||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 2,812 | – | 2,812 | |||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 1,333 | 22 | (164 | ) | (1 | ) | 81 | – | 1,271 | |||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 1,333 | 22 | (164 | ) | (1 | ) | 2,893 | – | 4,083 | |||||||||||||||||||||||||||
Gains less losses from financial investments | 351 | 90 | 1,313 | 119 | 83 | – | 1,956 | |||||||||||||||||||||||||||||
Gains arising from dilution of interests in associates | – | – | – | – | 1,092 | – | 1,092 | |||||||||||||||||||||||||||||
Dividend income | 55 | 8 | 222 | 7 | 32 | – | 324 | |||||||||||||||||||||||||||||
Net earned insurance premiums | 8,271 | 733 | 93 | – | (21 | ) | – | 9,076 | ||||||||||||||||||||||||||||
Other operating income | 387 | 165 | 1,218 | 58 | 3,523 | (3,912 | ) | 1,439 | ||||||||||||||||||||||||||||
Total operating income | 51,386 | 14,341 | 15,280 | 3,548 | 6,958 | (3,912 | ) | 87,601 | ||||||||||||||||||||||||||||
Net insurance claims43 | (8,147 | ) | (391 | ) | (70 | ) | – | – | – | (8,608 | ) | |||||||||||||||||||||||||
Net operating income16 | 43,239 | 13,950 | 15,210 | 3,548 | 6,958 | (3,912 | ) | 78,993 | ||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (16,172 | ) | (1,007 | ) | (38 | ) | (14 | ) | (11 | ) | – | (17,242 | ) | |||||||||||||||||||||||
Net operating income | 27,067 | 12,943 | 15,172 | 3,534 | 6,947 | (3,912 | ) | 61,751 | ||||||||||||||||||||||||||||
Total operating expenses | (21,757 | ) | (6,252 | ) | (9,358 | ) | (2,025 | ) | (3,562 | ) | 3,912 | (39,042 | ) | |||||||||||||||||||||||
Operating profit | 5,310 | 6,691 | 5,814 | 1,509 | 3,385 | – | 22,709 | |||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 590 | 454 | 307 | 2 | 150 | – | 1,503 | |||||||||||||||||||||||||||||
Profit before tax | 5,900 | 7,145 | 6,121 | 1,511 | 3,535 | – | 24,212 | |||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 24.4 | 29.5 | 25.3 | 6.2 | 14.6 | 100.0 | ||||||||||||||||||||||||||||||
Cost efficiency ratio | 50.3 | 44.8 | 61.5 | 57.1 | 51.2 | 49.4 | ||||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 464,726 | 220,068 | 250,464 | 43,612 | 2,678 | 981,548 | ||||||||||||||||||||||||||||||
Total assets | 636,185 | 307,944 | 1,596,850 | 130,893 | 164,806 | (482,412 | ) | 2,354,266 | ||||||||||||||||||||||||||||
Customer accounts | 450,071 | 237,987 | 299,879 | 106,197 | 2,006 | 1,096,140 |
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Page | |||
Summary | 85 | ||
Europe | 87 | ||
Hong Kong | 98 | ||
Rest of Asia-Pacific | 106 | ||
Middle East | 117 | ||
North America | 125 | ||
Latin America | 136 |
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Geographical regions > Summary / Europe |
2009 | 2008 | 2007 | ||||||||||||||||||||||
US$m | % | US$m | % | US$m | % | |||||||||||||||||||
Europe | 4,009 | 56.7 | 10,869 | 116.7 | 8,595 | 35.5 | ||||||||||||||||||
Hong Kong | 5,029 | 71.0 | 5,461 | 58.7 | 7,339 | 30.3 | ||||||||||||||||||
Rest of Asia-Pacific27 | 4,200 | 59.3 | 4,722 | 50.7 | 4,702 | 19.4 | ||||||||||||||||||
Middle East27 | 455 | 6.4 | 1,746 | 18.8 | 1,307 | 5.4 | ||||||||||||||||||
North America | (7,738 | ) | (109.3 | ) | (15,528 | ) | (166.8 | ) | 91 | 0.4 | ||||||||||||||
Latin America | 1,124 | 15.9 | 2,037 | 21.9 | 2,178 | 9.0 | ||||||||||||||||||
7,079 | 100.0 | 9,307 | 100.0 | 24,212 | 100.0 | |||||||||||||||||||
At 31 December | ||||||||||||||||
2009 | 2008 | |||||||||||||||
US$m | % | US$m | % | |||||||||||||
Europe | 1,268,600 | 53.7 | 1,392,049 | 55.1 | ||||||||||||
Hong Kong | 399,243 | 16.9 | 414,484 | 16.4 | ||||||||||||
Rest of Asia-Pacific27 | 222,139 | 9.4 | 225,573 | 8.9 | ||||||||||||
Middle East27 | 48,107 | 2.0 | 50,952 | 2.0 | ||||||||||||
North America | 475,014 | 20.1 | 596,302 | 23.6 | ||||||||||||
Latin America | 115,967 | 4.9 | 102,946 | 4.1 | ||||||||||||
Intra-HSBC items | (164,618 | ) | (7.0 | ) | (254,841 | ) | (10.1 | ) | ||||||||
2,364,452 | 100.0 | 2,527,465 | 100.0 | |||||||||||||
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Personal | Global | |||||||||||||||||||||||
Financial | Commercial | Banking & | Private | |||||||||||||||||||||
Services | Banking | Markets | Banking | Other | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
UK | 364 | 1,026 | 3,045 | 252 | (2,561 | ) | 2,126 | |||||||||||||||||
France51 | 54 | 102 | 894 | 3 | (429 | ) | 624 | |||||||||||||||||
Germany | – | 21 | 255 | 32 | (18 | ) | 290 | |||||||||||||||||
Malta | 33 | 58 | 9 | – | – | 100 | ||||||||||||||||||
Switzerland | – | – | 5 | 448 | (3 | ) | 450 | |||||||||||||||||
Turkey | 43 | 97 | 119 | 2 | – | 261 | ||||||||||||||||||
Other | (182 | ) | (12 | ) | 218 | 117 | 17 | 158 | ||||||||||||||||
312 | 1,292 | 4,545 | 854 | (2,994 | ) | 4,009 | ||||||||||||||||||
2008 | ||||||||||||||||||||||||
UK | 1,546 | 2,361 | (469 | ) | 250 | 2,997 | 6,685 | |||||||||||||||||
France51 | 139 | 176 | 273 | 10 | 2,242 | 2,840 | ||||||||||||||||||
Germany | – | 31 | 184 | 32 | (22 | ) | 225 | |||||||||||||||||
Malta | 59 | 67 | 16 | – | – | 142 | ||||||||||||||||||
Switzerland | – | – | – | 553 | – | 553 | ||||||||||||||||||
Turkey | 3 | 91 | 130 | – | – | 224 | ||||||||||||||||||
Other | (89 | ) | (4 | ) | 61 | 153 | 79 | 200 | ||||||||||||||||
1,658 | 2,722 | 195 | 998 | 5,296 | 10,869 | |||||||||||||||||||
2007 | ||||||||||||||||||||||||
UK | 1,221 | 2,064 | 1,214 | 317 | 976 | 5,792 | ||||||||||||||||||
France51 | 173 | 192 | 692 | 25 | (49 | ) | 1,033 | |||||||||||||||||
Germany | – | 36 | 195 | 45 | 19 | 295 | ||||||||||||||||||
Malta | 45 | 67 | 45 | – | – | 157 | ||||||||||||||||||
Switzerland | – | – | – | 475 | – | 475 | ||||||||||||||||||
Turkey | 144 | 75 | 118 | (1 | ) | – | 336 | |||||||||||||||||
Other | (2 | ) | 82 | 263 | 54 | 110 | 507 | |||||||||||||||||
1,581 | 2,516 | 2,527 | 915 | 1,056 | 8,595 | |||||||||||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
UK | 329,182 | 313,065 | 326,927 | |||||||||
France51 | 71,567 | 70,896 | 81,473 | |||||||||
Germany | 4,131 | 5,756 | 6,411 | |||||||||
Malta | 4,649 | 4,343 | 4,157 | |||||||||
Switzerland | 12,072 | 12,708 | 13,789 | |||||||||
Turkey | 5,758 | 6,125 | 7,974 | |||||||||
Other | 12,122 | 13,298 | 11,544 | |||||||||
439,481 | 426,191 | 452,275 | ||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
UK | 349,162 | 351,253 | 367,363 | |||||||||
France51 | 70,899 | 74,826 | 64,905 | |||||||||
Germany | 8,134 | 11,611 | 10,282 | |||||||||
Malta | 5,888 | 5,604 | 5,947 | |||||||||
Switzerland | 45,148 | 44,643 | 41,015 | |||||||||
Turkey | 5,830 | 5,845 | 6,473 | |||||||||
Other | 9,958 | 8,694 | 8,969 | |||||||||
495,019 | 502,476 | 504,954 | ||||||||||
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Geographical regions > Europe > 2009 |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Europe | US$m | US$m | US$m | |||||||||||||||||||||||||||||||||
Net interest income | 12,268 | 9,696 | 7,746 | |||||||||||||||||||||||||||||||||
Net fee income | 6,267 | 7,492 | 8,431 | |||||||||||||||||||||||||||||||||
Net trading income | 5,459 | 5,357 | 6,943 | |||||||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | (2,746 | ) | 2,939 | 1,059 | ||||||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 1,321 | (1,826 | ) | 167 | ||||||||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | (1,425 | ) | 1,113 | 1,226 | ||||||||||||||||||||||||||||||||
Gains less losses from financial investments | 50 | 418 | 1,326 | |||||||||||||||||||||||||||||||||
Dividend income | 29 | 130 | 171 | |||||||||||||||||||||||||||||||||
Net earned insurance premiums | 4,223 | 5,299 | 4,010 | |||||||||||||||||||||||||||||||||
Gains on disposal of French regional banks | – | 2,445 | – | |||||||||||||||||||||||||||||||||
Other operating income | 2,262 | 2,096 | 1,193 | |||||||||||||||||||||||||||||||||
Total operating income | 29,133 | 34,046 | 31,046 | |||||||||||||||||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (5,589 | ) | (3,367 | ) | (3,479 | ) | ||||||||||||||||||||||||||||||
Net operating income before loan impairment charges and other credit risk provisions | 23,544 | 30,679 | 27,567 | |||||||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (5,568 | ) | (3,754 | ) | (2,542 | ) | ||||||||||||||||||||||||||||||
Net operating income | 17,976 | 26,925 | 25,025 | |||||||||||||||||||||||||||||||||
Total operating expenses | (13,988 | ) | (16,072 | ) | (16,525 | ) | ||||||||||||||||||||||||||||||
Operating profit | 3,988 | 10,853 | 8,500 | |||||||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 21 | 16 | 95 | |||||||||||||||||||||||||||||||||
Profit before tax | 4,009 | 10,869 | 8,595 | |||||||||||||||||||||||||||||||||
% | % | % | ||||||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 56.7 | 116.7 | 35.5 | |||||||||||||||||||||||||||||||||
Cost efficiency ratio | 59.4 | 52.4 | 59.9 | |||||||||||||||||||||||||||||||||
Year-end staff numbers (full-time equivalent) | 76,703 | 82,093 | 82,166 |
Balance sheet data41 | ||||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 439,481 | 426,191 | 452,275 | |||||||||
Loans and advances to banks (net) | 65,521 | 61,949 | 104,527 | |||||||||
Trading assets, financial assets designated at fair value and financial investments49 | 450,727 | 433,885 | 445,258 | |||||||||
Total assets | 1,268,600 | 1,392,049 | 1,256,220 | |||||||||
Deposits by banks | 89,893 | 80,847 | 87,491 | |||||||||
Customer accounts | 495,019 | 502,476 | 504,954 |
All commentaries on Europe are on an underlying basis unless stated otherwise.
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2009 compared with 2008 | |||||||||||||||||||||||||||||||||||||
2008 | |||||||||||||||||||||||||||||||||||||
2008 | 2008 | at 2009 | 2009 | Under- | 2009 | Re- | Under- | ||||||||||||||||||||||||||||||
as | adjust- | Currency | exchange | adjust- | lying | as | ported | lying | |||||||||||||||||||||||||||||
reported | ments | 10 | translation | 11 | rates | 12 | ments | 10 | change | reported | change | 13 | change | 13 | |||||||||||||||||||||||
Europe | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | ||||||||||||||||||||||||||||
Net interest income | 9,696 | (65 | ) | (1,049 | ) | 8,582 | – | 3,686 | 12,268 | 27 | 43 | ||||||||||||||||||||||||||
Net fee income | 7,492 | (58 | ) | (917 | ) | 6,517 | – | (250 | ) | 6,267 | (16 | ) | (4 | ) | |||||||||||||||||||||||
Changes in fair value14 | 3,118 | (3,118 | ) | – | – | (2,841 | ) | – | (2,841 | ) | (191 | ) | |||||||||||||||||||||||||
Gains on disposal of French regional banks | 2,445 | (2,445 | ) | – | – | – | – | – | (100 | ) | |||||||||||||||||||||||||||
Other income15 | 7,928 | (609 | ) | (1,206 | ) | 6,113 | 280 | 1,457 | 7,850 | (1 | ) | 24 | |||||||||||||||||||||||||
Net operating income16 | 30,679 | (6,295 | ) | (3,172 | ) | 21,212 | (2,561 | ) | 4,893 | 23,544 | (23 | ) | 23 | ||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (3,754 | ) | 6 | 395 | (3,353 | ) | – | (2,215 | ) | (5,568 | ) | (48 | ) | (66 | ) | ||||||||||||||||||||||
Net operating income | 26,925 | (6,289 | ) | (2,777 | ) | 17,859 | (2,561 | ) | 2,678 | 17,976 | (33 | ) | 15 | ||||||||||||||||||||||||
Operating expenses | (16,072 | ) | 68 | 1,723 | (14,281 | ) | – | 293 | (13,988 | ) | 13 | 2 | |||||||||||||||||||||||||
Operating profit | 10,853 | (6,221 | ) | (1,054 | ) | 3,578 | (2,561 | ) | 2,971 | 3,988 | (63 | ) | 83 | ||||||||||||||||||||||||
Income from associates | 16 | – | – | 16 | – | 5 | 21 | 31 | 31 | ||||||||||||||||||||||||||||
Profit before tax | 10,869 | (6,221 | ) | (1,054 | ) | 3,594 | (2,561 | ) | 2,976 | 4,009 | (63 | ) | 83 | ||||||||||||||||||||||||
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Geographical regions > Europe > 2009 |
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91
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Geographical regions > Europe > 2009 / 2008 |
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | 2007 | |||||||||||||||||||||||||||||||||||
2007 | adjustments | at 2008 | 2008 | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Europe | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 7,746 | (390 | ) | (224 | ) | 7,132 | 219 | 2,345 | 9,696 | 25 | 33 | |||||||||||||||||||||||||
Net fee income | 8,431 | (134 | ) | (244 | ) | 8,053 | 15 | (576 | ) | 7,492 | (11 | ) | (7 | ) | ||||||||||||||||||||||
Changes in fair value14 | 1,294 | (1,294 | ) | – | – | 3,118 | – | 3,118 | 141 | |||||||||||||||||||||||||||
Gains on disposal of French regional banks | – | – | – | – | 2,445 | – | 2,445 | |||||||||||||||||||||||||||||
Other income15 | 10,096 | (121 | ) | (321 | ) | 9,654 | 562 | (2,288 | ) | 7,928 | (21 | ) | (24 | ) | ||||||||||||||||||||||
Net operating income16 | 27,567 | (1,939 | ) | (789 | ) | 24,839 | 6,359 | (519 | ) | 30,679 | 11 | (2 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (2,542 | ) | 30 | 152 | (2,360 | ) | (6 | ) | (1,388 | ) | (3,754 | ) | (48 | ) | (59 | ) | ||||||||||||||||||||
Net operating income | 25,025 | (1,909 | ) | (637 | ) | 22,479 | 6,353 | (1,907 | ) | 26,925 | 8 | (8 | ) | |||||||||||||||||||||||
Operating expenses | (16,525 | ) | 416 | 531 | (15,578 | ) | (88 | ) | (406 | ) | (16,072 | ) | 3 | (3 | ) | |||||||||||||||||||||
Operating profit | 8,500 | (1,493 | ) | (106 | ) | 6,901 | 6,265 | (2,313 | ) | 10,853 | 28 | (34 | ) | |||||||||||||||||||||||
Income from associates | 95 | (12 | ) | 14 | 97 | – | (81 | ) | 16 | (83 | ) | (84 | ) | |||||||||||||||||||||||
Profit before tax | 8,595 | (1,505 | ) | (92 | ) | 6,998 | 6,265 | (2,394 | ) | 10,869 | 26 | (34 | ) | |||||||||||||||||||||||
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Geographical regions > Europe > 2008 / Profit/(loss) before tax by customer group |
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2009 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||||||||||
Europe | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income/(expense) | 5,413 | 2,739 | 4,367 | 949 | (525 | ) | (675 | ) | 12,268 | |||||||||||||||||||||||||||
Net fee income | 1,949 | 1,679 | 1,670 | 883 | 86 | – | 6,267 | |||||||||||||||||||||||||||||
Trading income excluding net interest income | 34 | 3 | 2,267 | 175 | 382 | – | 2,861 | |||||||||||||||||||||||||||||
Net interest income/(expense) on trading activities | (1 | ) | 17 | 1,869 | 23 | 15 | 675 | 2,598 | ||||||||||||||||||||||||||||
Net trading income42 | 33 | 20 | 4,136 | 198 | 397 | 675 | 5,459 | |||||||||||||||||||||||||||||
Changes in fair value of long- term debt issued and related derivatives | – | – | – | – | (2,746 | ) | – | (2,746 | ) | |||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 1,012 | 133 | 375 | – | (199 | ) | – | 1,321 | ||||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 1,012 | 133 | 375 | – | (2,945 | ) | – | (1,425 | ) | |||||||||||||||||||||||||||
Gains less losses from financial investments | 20 | 2 | 25 | 5 | (2 | ) | – | 50 | ||||||||||||||||||||||||||||
Dividend income | 2 | 1 | 26 | 3 | (3 | ) | – | 29 | ||||||||||||||||||||||||||||
Net earned insurance premiums | 3,975 | 253 | (2 | ) | – | (3 | ) | – | 4,223 | |||||||||||||||||||||||||||
Other operating income | 182 | 373 | 670 | 28 | 914 | 95 | 2,262 | |||||||||||||||||||||||||||||
Total operating income/ (expense) | 12,586 | 5,200 | 11,267 | 2,066 | (2,081 | ) | 95 | 29,133 | ||||||||||||||||||||||||||||
Net insurance claims43 | (5,221 | ) | (365 | ) | – | – | (3 | ) | – | (5,589 | ) | |||||||||||||||||||||||||
Net operating income/ (expense)16 | 7,365 | 4,835 | 11,267 | 2,066 | (2,084 | ) | 95 | 23,544 | ||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (1,992 | ) | (1,267 | ) | (2,277 | ) | (29 | ) | (3 | ) | – | (5,568 | ) | |||||||||||||||||||||||
Net operating income/ (expense) | 5,373 | 3,568 | 8,990 | 2,037 | (2,087 | ) | 95 | 17,976 | ||||||||||||||||||||||||||||
Total operating expenses | (5,062 | ) | (2,294 | ) | (4,447 | ) | (1,183 | ) | (907 | ) | (95 | ) | (13,988 | ) | ||||||||||||||||||||||
Operating profit/(loss) | 311 | 1,274 | 4,543 | 854 | (2,994 | ) | – | 3,988 | ||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 1 | 18 | 2 | – | – | – | 21 | |||||||||||||||||||||||||||||
Profit/(loss) before tax | 312 | 1,292 | 4,545 | 854 | (2,994 | ) | – | 4,009 | ||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 4.4 | 18.3 | 64.2 | 12.1 | (42.3 | ) | 56.7 | |||||||||||||||||||||||||||||
Cost efficiency ratio | 68.7 | 47.4 | 39.5 | 57.3 | (43.5 | ) | 59.4 | |||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 147,760 | 89,084 | 176,123 | 25,541 | 973 | 439,481 | ||||||||||||||||||||||||||||||
Total assets | 208,669 | 111,874 | 981,831 | 76,871 | 84,010 | (194,655 | ) | 1,268,600 | ||||||||||||||||||||||||||||
Customer accounts | 165,161 | 102,249 | 169,390 | 58,213 | 6 | 495,019 |
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2008 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||||||||||
Europe | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income/(expense) | 6,464 | 3,435 | 3,488 | 1,046 | (459 | ) | (4,278 | ) | 9,696 | |||||||||||||||||||||||||||
Net fee income | 2,612 | 2,025 | 1,763 | 1,020 | 72 | – | 7,492 | |||||||||||||||||||||||||||||
Trading income/(expense) excluding net interest income | 47 | 71 | 1,513 | 198 | (138 | ) | – | 1,691 | ||||||||||||||||||||||||||||
Net interest income/(expense) on trading activities | – | 12 | (655 | ) | 14 | 17 | 4,278 | 3,666 | ||||||||||||||||||||||||||||
Net trading income/(expense)42 | 47 | 83 | 858 | 212 | (121 | ) | 4,278 | 5,357 | ||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 2,939 | – | 2,939 | |||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (1,634 | ) | (214 | ) | (611 | ) | – | 633 | – | (1,826 | ) | |||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | (1,634 | ) | (214 | ) | (611 | ) | – | 3,572 | – | 1,113 | ||||||||||||||||||||||||||
Gains less losses from financial investments | 281 | 132 | (30 | ) | 62 | (27 | ) | – | 418 | |||||||||||||||||||||||||||
Dividend income | 35 | 74 | 25 | 5 | (9 | ) | – | 130 | ||||||||||||||||||||||||||||
Net earned insurance premiums | 4,927 | 391 | – | – | (19 | ) | – | 5,299 | ||||||||||||||||||||||||||||
Gains on disposal of French regional banks | – | – | – | – | 2,445 | – | 2,445 | |||||||||||||||||||||||||||||
Other operating income | 230 | 620 | 398 | 16 | 832 | – | 2,096 | |||||||||||||||||||||||||||||
Total operating income | 12,962 | 6,546 | 5,891 | 2,361 | 6,286 | – | 34,046 | |||||||||||||||||||||||||||||
Net insurance claims43 | (3,224 | ) | (143 | ) | – | – | – | – | (3,367 | ) | ||||||||||||||||||||||||||
Net operating income16 | 9,738 | 6,403 | 5,891 | 2,361 | 6,286 | – | 30,679 | |||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (1,971 | ) | (867 | ) | (875 | ) | (38 | ) | (3 | ) | – | (3,754 | ) | |||||||||||||||||||||||
Net operating income | 7,767 | 5,536 | 5,016 | 2,323 | 6,283 | – | 26,925 | |||||||||||||||||||||||||||||
Total operating expenses | (6,107 | ) | (2,830 | ) | (4,823 | ) | (1,325 | ) | (987 | ) | – | (16,072 | ) | |||||||||||||||||||||||
Operating profit | 1,660 | 2,706 | 193 | 998 | 5,296 | – | 10,853 | |||||||||||||||||||||||||||||
Share of profit/(loss) in associates and joint ventures | (2 | ) | 16 | 2 | – | – | – | 16 | ||||||||||||||||||||||||||||
Profit before tax | 1,658 | 2,722 | 195 | 998 | 5,296 | – | 10,869 | |||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 17.8 | 29.2 | 2.1 | 10.7 | 56.9 | 116.7 | ||||||||||||||||||||||||||||||
Cost efficiency ratio | 62.7 | 44.2 | 81.9 | 56.1 | 15.7 | 52.4 | ||||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 126,909 | 87,245 | 185,818 | 25,722 | 497 | 426,191 | ||||||||||||||||||||||||||||||
Total assets | 171,962 | 107,495 | 1,180,759 | 84,485 | 64,423 | (217,075 | ) | 1,392,049 | ||||||||||||||||||||||||||||
Customer accounts | 145,411 | 91,188 | 199,687 | 66,007 | 183 | 502,476 |
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2007 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||||||||||
Europe | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income | 6,604 | 3,419 | 1,361 | 793 | 86 | (4,517 | ) | 7,746 | ||||||||||||||||||||||||||||
Net fee income/(expense) | 3,060 | 2,194 | 2,316 | 1,032 | (171 | ) | – | 8,431 | ||||||||||||||||||||||||||||
Trading income excluding net interest income | 60 | 36 | 2,657 | 161 | 89 | – | 3,003 | |||||||||||||||||||||||||||||
Net interest income/(expense) on trading activities | (7 | ) | 30 | (610 | ) | 9 | 1 | 4,517 | 3,940 | |||||||||||||||||||||||||||
Net trading income42 | 53 | 66 | 2,047 | 170 | 90 | 4,517 | 6,943 | |||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 1,059 | – | 1,059 | |||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 126 | 31 | (185 | ) | – | 195 | – | 167 | ||||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 126 | 31 | (185 | ) | – | 1,254 | – | 1,226 | ||||||||||||||||||||||||||||
Gains less losses from financial investments | 50 | 36 | 1,100 | 115 | 25 | – | 1,326 | |||||||||||||||||||||||||||||
Dividend income | 1 | 4 | 155 | 7 | 4 | – | 171 | |||||||||||||||||||||||||||||
Net earned insurance premiums | 3,511 | 521 | – | – | (22 | ) | – | 4,010 | ||||||||||||||||||||||||||||
Other operating income/(expense) | 54 | (35 | ) | 853 | 8 | 301 | 12 | 1,193 | ||||||||||||||||||||||||||||
Total operating income | 13,459 | 6,236 | 7,647 | 2,125 | 1,567 | 12 | 31,046 | |||||||||||||||||||||||||||||
Net insurance claims43 | (3,214 | ) | (265 | ) | – | – | – | – | (3,479 | ) | ||||||||||||||||||||||||||
Net operating income16 | 10,245 | 5,971 | 7,647 | 2,125 | 1,567 | 12 | 27,567 | |||||||||||||||||||||||||||||
Loan impairment (charges)/recoveries and other credit risk provisions | (2,044 | ) | (515 | ) | 26 | (4 | ) | (5 | ) | – | (2,542 | ) | ||||||||||||||||||||||||
Net operating income | 8,201 | 5,456 | 7,673 | 2,121 | 1,562 | 12 | 25,025 | |||||||||||||||||||||||||||||
Total operating expenses | (6,635 | ) | (2,941 | ) | (5,150 | ) | (1,208 | ) | (579 | ) | (12 | ) | (16,525 | ) | ||||||||||||||||||||||
Operating profit | 1,566 | 2,515 | 2,523 | 913 | 983 | – | 8,500 | |||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 15 | 1 | 4 | 2 | 73 | – | 95 | |||||||||||||||||||||||||||||
Profit before tax | 1,581 | �� | 2,516 | 2,527 | 915 | 1,056 | – | 8,595 | ||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 6.5 | 10.4 | 10.4 | 3.8 | 4.4 | 35.5 | ||||||||||||||||||||||||||||||
Cost efficiency ratio | 64.8 | 49.3 | 67.3 | 56.8 | 36.9 | 59.9 | ||||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 151,687 | 106,846 | 163,066 | 30,195 | 481 | 452,275 | ||||||||||||||||||||||||||||||
Total assets | 240,361 | 168,846 | 912,299 | 83,740 | 96,346 | (245,372 | ) | 1,256,220 | ||||||||||||||||||||||||||||
Customer accounts | 178,757 | 99,704 | 163,713 | 62,055 | 725 | 504,954 |
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Geographical regions > Hong Kong > 2009 |
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Personal Financial Services | 2,728 | 3,428 | 4,212 | |||||||||||||
Commercial Banking | 956 | 1,315 | 1,619 | |||||||||||||
Global Banking and Markets | 1,507 | 1,436 | 1,578 | |||||||||||||
Private Banking | 197 | 237 | 305 | |||||||||||||
Other | (359 | ) | (955 | ) | (375 | ) | ||||||||||
5,029 | 5,461 | 7,339 | ||||||||||||||
Profit before tax | ||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Net interest income | 4,195 | 5,698 | 5,483 | |||||||||||||
Net fee income | 2,669 | 2,580 | 3,362 | |||||||||||||
Net trading income | 1,225 | 1,193 | 1,242 | |||||||||||||
Changes in fair value of long-term debt issued and related derivatives | (3 | ) | 3 | 2 | ||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 788 | (1,194 | ) | 674 | ||||||||||||
Net income/(expense) from financial instruments designated at fair value | 785 | (1,191 | ) | 676 | ||||||||||||
Gains less losses from financial investments | 9 | (309 | ) | 94 | ||||||||||||
Dividend income | 28 | 41 | 31 | |||||||||||||
Net earned insurance premiums | 3,674 | 3,247 | 2,797 | |||||||||||||
Other operating income | 1,274 | 817 | 845 | |||||||||||||
Total operating income | 13,859 | 12,076 | 14,530 | |||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (4,392 | ) | (1,922 | ) | (3,208 | ) | ||||||||||
Net operating income before loan impairment charges and other credit risk provisions | 9,467 | 10,154 | 11,322 | |||||||||||||
Loan impairment charges and other credit risk provisions | (500 | ) | (765 | ) | (231 | ) | ||||||||||
Net operating income | 8,967 | 9,389 | 11,091 | |||||||||||||
Total operating expenses | (3,946 | ) | (3,943 | ) | (3,780 | ) | ||||||||||
Operating profit | 5,021 | 5,446 | 7,311 | |||||||||||||
Share of profit in associates and joint ventures | 8 | 15 | 28 | |||||||||||||
Profit before tax | 5,029 | 5,461 | 7,339 | |||||||||||||
% | % | % | ||||||||||||||
Share of HSBC’s profit before tax | 71.0 | 58.7 | 30.3 | |||||||||||||
Cost efficiency ratio | 41.7 | 38.8 | 33.4 | |||||||||||||
Year-end staff numbers (full-time equivalent) | 27,614 | 29,330 | 27,655 | |||||||||||||
Balance sheet data41 | ||||||||||||||||
At 31 December | ||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||
US$m | US$m | US$m | ||||||||||||||
Loans and advances to customers (net) | 99,381 | 100,220 | 89,638 | |||||||||||||
Loans and advances to banks (net) | 36,197 | 29,646 | 63,737 | |||||||||||||
Trading assets, financial assets designated at fair value, and financial investments | 154,418 | 122,602 | 102,180 | |||||||||||||
Total assets | 399,243 | 414,484 | 359,386 | |||||||||||||
Deposits by banks | 6,023 | 11,769 | 6,420 | |||||||||||||
Customer accounts | 275,441 | 250,517 | 234,488 |
98
HSBC Holdings plc | ||||
By: | ||||
Name: | Douglas J Flint | |||
Title: | Chief Financial Officer, Executive Director, Risk and Regulation | |||
Table of Contents
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | at 2009 | 2009 | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | adjust- | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | ments | 10 | translation | 11 | rates | 12 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Hong Kong | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 5,698 | – | 21 | 5,719 | – | (1,524 | ) | 4,195 | (26 | ) | (27 | ) | ||||||||||||||||||||||||
Net fee income | 2,580 | – | 10 | 2,590 | – | 79 | 2,669 | 3 | 3 | |||||||||||||||||||||||||||
Changes in fair value14 | 5 | (5 | ) | – | – | (1 | ) | – | (1 | ) | (120 | ) | ||||||||||||||||||||||||
Other income15 | 1,871 | – | 7 | 1,878 | – | 726 | 2,604 | 39 | 39 | |||||||||||||||||||||||||||
Net operating income16 | 10,154 | (5 | ) | 38 | 10,187 | (1 | ) | (719 | ) | 9,467 | (7 | ) | (7 | ) | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (765 | ) | – | (2 | ) | (767 | ) | – | 267 | (500 | ) | 35 | 35 | |||||||||||||||||||||||
Net operating income | 9,389 | (5 | ) | 36 | 9,420 | (1 | ) | (452 | ) | 8,967 | (4 | ) | (5 | ) | ||||||||||||||||||||||
Operating expenses | (3,943 | ) | – | (16 | ) | (3,959 | ) | – | 13 | (3,946 | ) | – | – | |||||||||||||||||||||||
Operating profit | 5,446 | (5 | ) | 20 | 5,461 | (1 | ) | (439 | ) | 5,021 | (8 | ) | (8 | ) | ||||||||||||||||||||||
Income from associates | 15 | – | – | 15 | – | (7 | ) | 8 | (47 | ) | (47 | ) | ||||||||||||||||||||||||
Profit before tax | 5,461 | (5 | ) | 20 | 5,476 | (1 | ) | (446 | ) | 5,029 | (8 | ) | (8 | ) | ||||||||||||||||||||||
99
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Geographical regions > Hong Kong > 2009 / 2008 |
100
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101
Table of Contents
Geographical regions > Hong Kong > 2008 / Profit(loss) before tax by customer group |
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | 2007 | |||||||||||||||||||||||||||||||||||
2007 | adjustments | at 2008 | 2008 | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | and dilution | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Hong Kong | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 5,483 | – | 15 | 5,498 | – | 200 | 5,698 | 4 | 4 | |||||||||||||||||||||||||||
Net fee income | 3,362 | – | 9 | 3,371 | – | (791 | ) | 2,580 | (23 | ) | (23 | ) | ||||||||||||||||||||||||
Changes in fair value14 | 1 | (1 | ) | – | – | 5 | – | 5 | 400 | |||||||||||||||||||||||||||
Other income15 | 2,476 | (1 | ) | 3 | 2,478 | – | (607 | ) | 1,871 | (24 | ) | (24 | ) | |||||||||||||||||||||||
Net operating income16 | 11,322 | (2 | ) | 27 | 11,347 | 5 | (1,198 | ) | 10,154 | (10 | ) | (11 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (231 | ) | 1 | (1 | ) | (231 | ) | – | (534 | ) | (765 | ) | (231 | ) | (231 | ) | ||||||||||||||||||||
Net operating income | 11,091 | (1 | ) | 26 | 11,116 | 5 | (1,732 | ) | 9,389 | (15 | ) | (16 | ) | |||||||||||||||||||||||
Operating expenses | (3,780 | ) | – | (9 | ) | (3,789 | ) | – | (154 | ) | (3,943 | ) | (4 | ) | (4 | ) | ||||||||||||||||||||
Operating profit | 7,311 | (1 | ) | 17 | 7,327 | 5 | (1,886 | ) | 5,446 | (26 | ) | (26 | ) | |||||||||||||||||||||||
Income from associates | 28 | – | – | 28 | – | (13 | ) | 15 | (46 | ) | (46 | ) | ||||||||||||||||||||||||
Profit before tax | 7,339 | (1 | ) | 17 | 7,355 | 5 | (1,899 | ) | 5,461 | (26 | ) | (26 | ) | |||||||||||||||||||||||
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2009 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||||||||||
Hong Kong | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income/(expense) | 2,577 | 938 | 1,150 | 212 | (558 | ) | (124 | ) | 4,195 | |||||||||||||||||||||||||||
Net fee income | 1,410 | 530 | 563 | 125 | 41 | – | 2,669 | |||||||||||||||||||||||||||||
Trading income/(expense) excluding net interest income | 186 | 92 | 792 | 91 | (93 | ) | – | 1,068 | ||||||||||||||||||||||||||||
Net interest income on trading activities | 3 | – | 16 | – | 14 | 124 | 157 | |||||||||||||||||||||||||||||
Net trading income/(expense)42 | 189 | 92 | 808 | 91 | (79 | ) | 124 | 1,225 | ||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | (3 | ) | – | (3 | ) | |||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 707 | (46 | ) | 138 | – | (11 | ) | – | 788 | |||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 707 | (46 | ) | 138 | – | (14 | ) | – | 785 | |||||||||||||||||||||||||||
Gains less losses from financial investments | 80 | 18 | (108 | ) | – | 19 | – | 9 | ||||||||||||||||||||||||||||
Dividend income | 1 | 1 | 10 | – | 16 | – | 28 | |||||||||||||||||||||||||||||
Net earned insurance premiums | 3,161 | 500 | 13 | – | – | – | 3,674 | |||||||||||||||||||||||||||||
Other operating income | 346 | 64 | 59 | 10 | 1,062 | (267 | ) | 1,274 | ||||||||||||||||||||||||||||
Total operating income | 8,471 | 2,097 | 2,633 | 438 | 487 | (267 | ) | 13,859 | ||||||||||||||||||||||||||||
Net insurance claims43 | (3,979 | ) | (404 | ) | (9 | ) | – | – | – | (4,392 | ) | |||||||||||||||||||||||||
Net operating income16 | 4,492 | 1,693 | 2,624 | 438 | 487 | (267 | ) | 9,467 | ||||||||||||||||||||||||||||
Loan impairment (charges)/ recoveries and other credit risk provisions | (203 | ) | (168 | ) | (131 | ) | 1 | 1 | – | (500 | ) | |||||||||||||||||||||||||
Net operating income | 4,289 | 1,525 | 2,493 | 439 | 488 | (267 | ) | 8,967 | ||||||||||||||||||||||||||||
Total operating expenses | (1,566 | ) | (570 | ) | (987 | ) | (242 | ) | (848 | ) | 267 | (3,946 | ) | |||||||||||||||||||||||
Operating profit/(loss) | 2,723 | 955 | 1,506 | 197 | (360 | ) | – | 5,021 | ||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 5 | 1 | 1 | – | 1 | – | 8 | |||||||||||||||||||||||||||||
Profit/(loss) before tax | 2,728 | 956 | 1,507 | 197 | (359 | ) | – | 5,029 | ||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 38.5 | 13.5 | 21.3 | 2.8 | (5.1 | ) | 71.0 | |||||||||||||||||||||||||||||
Cost efficiency ratio | 34.9 | 33.7 | 37.6 | 55.3 | 174.1 | 41.7 | ||||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 43,869 | 28,217 | 21,991 | 3,361 | 1,943 | 99,381 | ||||||||||||||||||||||||||||||
Total assets | 83,497 | 34,743 | 217,146 | 20,353 | 52,508 | (9,004 | ) | 399,243 | ||||||||||||||||||||||||||||
Customer accounts | 166,445 | 62,146 | 26,650 | 19,474 | 726 | 275,441 |
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Hong Kong > Profit/(loss) before tax by customer group |
2008 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||||||||||
Hong Kong | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income/(expense) | 3,381 | 1,498 | 1,524 | 214 | (669 | ) | (250 | ) | 5,698 | |||||||||||||||||||||||||||
Net fee income | 1,441 | 548 | 414 | 163 | 14 | – | 2,580 | |||||||||||||||||||||||||||||
Trading income excluding net interest income | 143 | 79 | 483 | 120 | 30 | – | 855 | |||||||||||||||||||||||||||||
Net interest income/(expense) on trading activities | 11 | 1 | 244 | – | (168 | ) | 250 | 338 | ||||||||||||||||||||||||||||
Net trading income/(expense)42 | 154 | 80 | 727 | 120 | (138 | ) | 250 | 1,193 | ||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 3 | – | 3 | |||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (1,291 | ) | (10 | ) | 39 | – | 68 | – | (1,194 | ) | ||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | (1,291 | ) | (10 | ) | 39 | – | 71 | – | (1,191 | ) | ||||||||||||||||||||||||||
Gains less losses from financial investments | 156 | 32 | (109 | ) | – | (388 | ) | – | (309 | ) | ||||||||||||||||||||||||||
Dividend income | 3 | 2 | 17 | – | 19 | – | 41 | |||||||||||||||||||||||||||||
Net earned insurance premiums | 3,047 | 181 | 17 | – | 2 | – | 3,247 | |||||||||||||||||||||||||||||
Other operating income | 132 | 38 | 101 | 8 | 906 | (368 | ) | 817 | ||||||||||||||||||||||||||||
Total operating income | 7,023 | 2,369 | 2,730 | 505 | (183 | ) | (368 | ) | 12,076 | |||||||||||||||||||||||||||
Net insurance claims43 | (1,773 | ) | (136 | ) | (11 | ) | – | (2 | ) | – | (1,922 | ) | ||||||||||||||||||||||||
Net operating income16 | 5,250 | 2,233 | 2,719 | 505 | (185 | ) | (368 | ) | 10,154 | |||||||||||||||||||||||||||
Loan impairment (charges)/ recoveries and other credit risk provisions | (134 | ) | (335 | ) | (284 | ) | (13 | ) | 1 | – | (765 | ) | ||||||||||||||||||||||||
Net operating income/(expense) | 5,116 | 1,898 | 2,435 | 492 | (184 | ) | (368 | ) | 9,389 | |||||||||||||||||||||||||||
Total operating expenses | (1,691 | ) | (584 | ) | (1,000 | ) | (255 | ) | (781 | ) | 368 | (3,943 | ) | |||||||||||||||||||||||
Operating profit/(loss) | 3,425 | 1,314 | 1,435 | 237 | (965 | ) | – | 5,446 | ||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 3 | 1 | 1 | – | 10 | – | 15 | |||||||||||||||||||||||||||||
Profit/(loss) before tax | 3,428 | 1,315 | 1,436 | 237 | (955 | ) | – | 5,461 | ||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 36.9 | 14.1 | 15.4 | 2.6 | (10.3 | ) | 58.7 | |||||||||||||||||||||||||||||
Cost efficiency ratio | 32.2 | 26.2 | 36.8 | 50.5 | (422.2 | ) | 38.8 | |||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 41,447 | 30,331 | 23,042 | 3,605 | 1,795 | 100,220 | ||||||||||||||||||||||||||||||
Total assets | 75,419 | 36,428 | 233,187 | 28,800 | 66,192 | (25,542 | ) | 414,484 | ||||||||||||||||||||||||||||
Customer accounts | 145,002 | 54,869 | 30,866 | 19,416 | 364 | 250,517 |
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2007 | ||||||||||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||||||||||
Hong Kong | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||
Net interest income/(expense) | 3,342 | 1,540 | 986 | 70 | (767 | ) | 312 | 5,483 | ||||||||||||||||||||||||||||
Net fee income | 1,973 | 526 | 682 | 179 | 2 | – | 3,362 | |||||||||||||||||||||||||||||
Trading income excluding net interest income | 188 | 63 | 553 | 280 | 186 | – | 1,270 | |||||||||||||||||||||||||||||
Net interest income on trading activities | 5 | – | 241 | – | 38 | (312 | ) | (28 | ) | |||||||||||||||||||||||||||
Net trading income42 | 193 | 63 | 794 | 280 | 224 | (312 | ) | 1,242 | ||||||||||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 2 | – | 2 | |||||||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 820 | (13 | ) | 7 | – | (140 | ) | – | 674 | |||||||||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 820 | (13 | ) | 7 | – | (138 | ) | – | 676 | |||||||||||||||||||||||||||
Gains less losses from financial investments | – | – | 38 | 1 | 55 | – | 94 | |||||||||||||||||||||||||||||
Dividend income | 2 | 1 | 6 | – | 22 | – | 31 | |||||||||||||||||||||||||||||
Net earned insurance premiums | 2,654 | 130 | 13 | – | – | – | 2,797 | |||||||||||||||||||||||||||||
Other operating income | 153 | 28 | 114 | 6 | 881 | (337 | ) | 845 | ||||||||||||||||||||||||||||
Total operating income | 9,137 | 2,275 | 2,640 | 536 | 279 | (337 | ) | 14,530 | ||||||||||||||||||||||||||||
Net insurance claims43 | (3,116 | ) | (82 | ) | (10 | ) | – | – | – | (3,208 | ) | |||||||||||||||||||||||||
Net operating income16 | 6,021 | 2,193 | 2,630 | 536 | 279 | (337 | ) | 11,322 | ||||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (175 | ) | (28 | ) | (28 | ) | – | – | – | (231 | ) | |||||||||||||||||||||||||
Net operating income | 5,846 | 2,165 | 2,602 | 536 | 279 | (337 | ) | 11,091 | ||||||||||||||||||||||||||||
Total operating expenses | (1,639 | ) | (547 | ) | (1,025 | ) | (231 | ) | (675 | ) | 337 | (3,780 | ) | |||||||||||||||||||||||
Operating profit/(loss) | 4,207 | 1,618 | 1,577 | 305 | (396 | ) | – | 7,311 | ||||||||||||||||||||||||||||
Share of profit in associates and joint ventures | 5 | 1 | 1 | – | 21 | – | 28 | |||||||||||||||||||||||||||||
Profit/(loss) before tax | 4,212 | 1,619 | 1,578 | 305 | (375 | ) | – | 7,339 | ||||||||||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 17.4 | 6.7 | 6.5 | 1.3 | (1.6 | ) | 30.3 | |||||||||||||||||||||||||||||
Cost efficiency ratio | 27.2 | 24.9 | 39.0 | 43.1 | 241.9 | 33.4 | ||||||||||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 38,197 | 25,890 | 19,171 | 4,329 | 2,051 | 89,638 | ||||||||||||||||||||||||||||||
Total assets | 66,002 | 32,059 | 218,293 | 17,484 | 53,227 | (27,679 | ) | 359,386 | ||||||||||||||||||||||||||||
Customer accounts | 129,159 | 51,562 | 37,364 | 15,649 | 754 | 234,488 |
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Personal | Global | |||||||||||||||||||||||
Financial | Commercial | Banking & | Private | |||||||||||||||||||||
Services | Banking | Markets | Banking | Other | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
Australia | 30 | 32 | 140 | – | (4 | ) | 198 | |||||||||||||||||
India | (219 | ) | (41 | ) | 393 | 1 | 240 | 374 | ||||||||||||||||
Indonesia | (24 | ) | 60 | 129 | – | (11 | ) | 154 | ||||||||||||||||
Japan | (79 | ) | – | 65 | (4 | ) | 1 | (17 | ) | |||||||||||||||
Mainland China | 494 | 616 | 479 | (7 | ) | 50 | 1,632 | |||||||||||||||||
Associates | 678 | 558 | 285 | – | – | 1,521 | ||||||||||||||||||
Other mainland China | (184) | 58 | 194 | (7) | 50 | 111 | ||||||||||||||||||
Malaysia | 88 | 53 | 140 | – | 5 | 286 | ||||||||||||||||||
Singapore | 129 | 77 | 247 | 98 | (9 | ) | 542 | |||||||||||||||||
South Korea | (3 | ) | (5 | ) | 342 | – | 25 | 359 | ||||||||||||||||
Taiwan | (3 | ) | 65 | 96 | – | 2 | 160 | |||||||||||||||||
Other | 50 | 207 | 288 | 2 | (35 | ) | 512 | |||||||||||||||||
463 | 1,064 | 2,319 | 90 | 264 | 4,200 | |||||||||||||||||||
2008 | ||||||||||||||||||||||||
Australia | 19 | 68 | 102 | – | (13 | ) | 176 | |||||||||||||||||
India | (155 | ) | 118 | 578 | 2 | 123 | 666 | |||||||||||||||||
Indonesia | (22 | ) | 17 | 126 | – | – | 121 | |||||||||||||||||
Japan | (88 | ) | (1 | ) | 88 | 1 | 4 | 4 | ||||||||||||||||
Mainland China | 284 | 622 | 688 | (5 | ) | 16 | 1,605 | |||||||||||||||||
Associates | 393 | 558 | 335 | – | – | 1,286 | ||||||||||||||||||
Other mainland China | (109 | ) | 64 | 353 | (5 | ) | 16 | 319 | ||||||||||||||||
Malaysia | 94 | 96 | 171 | – | 8 | 369 | ||||||||||||||||||
Singapore | 104 | 83 | 337 | 110 | (37 | ) | 597 | |||||||||||||||||
South Korea | (16 | ) | (13 | ) | 304 | – | 38 | 313 | ||||||||||||||||
Taiwan | (41 | ) | 45 | 179 | – | (8 | ) | 175 | ||||||||||||||||
Other | 32 | 200 | 397 | 1 | 66 | 696 | ||||||||||||||||||
211 | 1,235 | 2,970 | 109 | 197 | 4,722 | |||||||||||||||||||
2007 | ||||||||||||||||||||||||
Australia | 41 | 37 | 42 | – | 4 | 124 | ||||||||||||||||||
India | (70 | ) | 88 | 429 | (1 | ) | 83 | 529 | ||||||||||||||||
Indonesia | (7 | ) | 29 | 86 | – | (4 | ) | 104 | ||||||||||||||||
Japan | (34 | ) | (3 | ) | 75 | – | 5 | 43 | ||||||||||||||||
Mainland China | 494 | 397 | 369 | – | 1,101 | 2,361 | ||||||||||||||||||
Associates | 516 | 351 | 220 | – | 1,093 | 2,180 | ||||||||||||||||||
Other mainland China | (22 | ) | 46 | 149 | – | 8 | 181 | |||||||||||||||||
Malaysia | 81 | 90 | 146 | – | 13 | 330 | ||||||||||||||||||
Singapore | 101 | 112 | 240 | 90 | 7 | 550 | ||||||||||||||||||
South Korea | (44 | ) | (20 | ) | 159 | – | 28 | 123 | ||||||||||||||||
Taiwan | (52 | ) | 27 | 144 | – | 4 | 123 | |||||||||||||||||
Other | 5 | 111 | 279 | – | 20 | 415 | ||||||||||||||||||
515 | 868 | 1,969 | 89 | 1,261 | 4,702 | |||||||||||||||||||
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At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Australia | 12,112 | 9,321 | 11,339 | |||||||||
India | 4,893 | 6,244 | 7,220 | |||||||||
Indonesia | 2,721 | 1,904 | 1,642 | |||||||||
Japan | 2,496 | 5,839 | 4,258 | |||||||||
Mainland China | 13,294 | 11,440 | 11,647 | |||||||||
Malaysia | 9,132 | 9,404 | 8,856 | |||||||||
Singapore | 14,817 | 13,441 | 11,505 | |||||||||
South Korea | 4,438 | 5,336 | 7,124 | |||||||||
Taiwan | 4,280 | 4,329 | 3,658 | |||||||||
Other | 11,860 | 13,403 | 12,996 | |||||||||
80,043 | 80,661 | 80,245 | ||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Australia | 12,093 | 9,201 | 11,418 | |||||||||
India | 11,676 | 9,767 | 12,021 | |||||||||
Indonesia | 5,014 | 2,896 | 2,574 | |||||||||
Japan | 4,914 | 6,204 | 4,657 | |||||||||
Mainland China | 21,867 | 19,171 | 14,537 | |||||||||
Malaysia | 12,809 | 11,963 | 11,701 | |||||||||
Singapore | 33,211 | 32,748 | 28,962 | |||||||||
South Korea | 4,162 | 4,383 | 5,760 | |||||||||
Taiwan | 9,891 | 9,689 | 9,426 | |||||||||
Other | 18,362 | 18,172 | 18,240 | |||||||||
133,999 | 124,194 | 119,296 | ||||||||||
emerge following an extremely weak start to the year. First quarter GDP fell by 3.2 per cent on a quarter-on-quarter basis, before gains of 1.3 per cent, zero and 1.1 per cent were recorded in the next three quarters, respectively. The unemployment rate rose from 4.3 per cent in December 2008 to a record high of 5.7 per cent in July 2009, before declining to finish the year at 5.1 per cent. The Bank of Japan introduced a range of initiatives in January 2009 with the intention of improving financing conditions across the corporate sector, while fiscal stimulus packages were also implemented.
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Geographical regions > Rest of Asia-Pacific > 2009 |
2009 | 2008 | 2007 | ||||||||||
Rest of Asia-Pacific27 | US$m | US$m | US$m | |||||||||
Net interest income | 3,539 | 3,937 | 3,049 | |||||||||
Net fee income | 1,557 | 1,867 | 1,775 | |||||||||
Net trading income | 1,606 | 2,042 | 1,346 | |||||||||
Changes in fair value of long-term debt issued and related derivatives | (1) | 1 | 1 | |||||||||
Net income/(expense) from other financial instruments designated at fair value | 111 | (172 | ) | 110 | ||||||||
Net income/(expense) from financial instruments designated at fair value | 110 | (171 | ) | 111 | ||||||||
Gains less losses from financial investments | (19 | ) | 24 | 36 | ||||||||
Gains arising from dilution of interests in associates | – | – | 1,081 | |||||||||
Dividend income | 2 | 2 | 6 | |||||||||
Net earned insurance premiums | 365 | 197 | 226 | |||||||||
Other operating income | 1,238 | 1,055 | 781 | |||||||||
Total operating income | 8,398 | 8,953 | 8,411 | |||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (395 | ) | 28 | (253 | ) | |||||||
Net operating income before loan impairment charges and other credit risk provisions | 8,003 | 8,981 | 8,158 | |||||||||
Loan impairment charges and other credit risk provisions | (896 | ) | (852 | ) | (561 | ) | ||||||
Net operating income | 7,107 | 8,129 | 7,597 | |||||||||
Total operating expenses | (4,450 | ) | (4,704 | ) | (3,991 | ) | ||||||
Operating profit | 2,657 | 3,425 | 3,606 | |||||||||
Share of profit in associates and joint ventures | 1,543 | 1,297 | 1,096 | |||||||||
Profit before tax | 4,200 | 4,722 | 4,702 | |||||||||
% | % | % | ||||||||||
Share of HSBC’s profit before tax | 59.3 | 50.7 | 19.4 | |||||||||
Cost efficiency ratio | 55.6 | 52.4 | 48.9 | |||||||||
Year-end staff numbers (full-time equivalent) | 87,141 | 89,706 | 80,523 |
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 80,043 | 80,661 | 80,245 | |||||||||
Loans and advances to banks (net) | 35,648 | 28,665 | 32,373 | |||||||||
Trading assets, financial assets designated at fair value, and financial investments | 58,941 | 53,167 | 54,541 | |||||||||
Total assets | 222,139 | 225,573 | 208,195 | |||||||||
Deposits by banks | 8,075 | 12,688 | 15,100 | |||||||||
Customer accounts | 133,999 | 124,194 | 119,296 |
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2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | at 2009 | 2009 | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | adjust- | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | ments | 10 | translation | 11 | rates | 12 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Rest of Asia-Pacific27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 3,937 | – | (165 | ) | 3,772 | 53 | (286 | ) | 3,539 | (10 | ) | (8 | ) | |||||||||||||||||||||||
Net fee income | 1,867 | – | (80 | ) | 1,787 | 6 | (236 | ) | 1,557 | (17 | ) | (13 | ) | |||||||||||||||||||||||
Changes in fair value14 | 3 | (3 | ) | – | – | (3 | ) | – | (3 | ) | (200 | ) | ||||||||||||||||||||||||
Other income15 | 3,174 | – | (205 | ) | 2,969 | 18 | (77 | ) | 2,910 | (8 | ) | (3 | ) | |||||||||||||||||||||||
Net operating income16 | 8,981 | (3 | ) | (450 | ) | 8,528 | 74 | (599 | ) | 8,003 | (11 | ) | (7 | ) | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (852 | ) | – | 31 | (821 | ) | – | (75 | ) | (896 | ) | (5 | ) | (9 | ) | |||||||||||||||||||||
Net operating income | 8,129 | (3 | ) | (419 | ) | 7,707 | 74 | (674 | ) | 7,107 | (13 | ) | (9 | ) | ||||||||||||||||||||||
Operating expenses | (4,704 | ) | – | 208 | (4,496 | ) | (31 | ) | 77 | (4,450 | ) | 5 | 2 | |||||||||||||||||||||||
Operating profit | 3,425 | (3 | ) | (211 | ) | 3,211 | 43 | (597 | ) | 2,657 | (22 | ) | (19 | ) | ||||||||||||||||||||||
Income from associates | 1,297 | – | 27 | 1,324 | – | 219 | 1,543 | 19 | 17 | |||||||||||||||||||||||||||
Profit before tax | 4,722 | (3 | ) | (184 | ) | 4,535 | 43 | (378 | ) | 4,200 | (11 | ) | (8 | ) | ||||||||||||||||||||||
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Geographical regions > Rest of Asia-Pacific > 2009 / 2008 |
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Geographical regions > Rest of Asia-Pacific > 2008 |
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | 2007 at | |||||||||||||||||||||||||||||||||||
2007 | adjustments | 2008 | 2008 | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | and dilution | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Rest of Asia-Pacific27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 3,049 | – | 38 | 3,087 | 31 | 819 | 3,937 | 29 | 27 | |||||||||||||||||||||||||||
Net fee income | 1,775 | – | 22 | 1,797 | 3 | 67 | 1,867 | 5 | 4 | |||||||||||||||||||||||||||
Changes in fair value14 | – | – | – | – | 3 | – | 3 | |||||||||||||||||||||||||||||
Other income15 | 3,334 | (1,081 | ) | 15 | 2,268 | 70 | 836 | 3,174 | (5 | ) | 37 | |||||||||||||||||||||||||
Net operating income16 | 8,158 | (1,081 | ) | 75 | 7,152 | 107 | 1,722 | 8,981 | 10 | 24 | ||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (561 | ) | – | 15 | (546 | ) | – | (306 | ) | (852 | ) | (52 | ) | (56 | ) | |||||||||||||||||||||
Net operating income | 7,597 | (1,081 | ) | 90 | 6,606 | 107 | 1,416 | 8,129 | 7 | 21 | ||||||||||||||||||||||||||
Operating expenses | (3,991 | ) | – | (12 | ) | (4,003 | ) | (110 | ) | (591 | ) | (4,704 | ) | (18 | ) | (15 | ) | |||||||||||||||||||
Operating profit | 3,606 | (1,081 | ) | 78 | 2,603 | (3 | ) | 825 | 3,425 | (5 | ) | 32 | ||||||||||||||||||||||||
Income from associates | 1,096 | – | 93 | 1,189 | – | 108 | 1,297 | 18 | 9 | |||||||||||||||||||||||||||
Profit before tax | 4,702 | (1,081 | ) | 171 | 3,792 | (3 | ) | 933 | 4,722 | – | 25 | |||||||||||||||||||||||||
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Geographical regions > Rest of Asia-Pacific > Profit before tax by customer groups |
2009 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Rest of Asia-Pacific27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 1,493 | 807 | 1,174 | 115 | 91 | (141 | ) | 3,539 | ||||||||||||||||||||
Net fee income/(expense) | 554 | 331 | 636 | 55 | (19 | ) | – | 1,557 | ||||||||||||||||||||
Trading income/(expense) excluding net interest income | 80 | 134 | 1,013 | 55 | (18) | – | 1,264 | |||||||||||||||||||||
Net interest income/(expense) on trading activities | (1) | – | 202 | – | – | 141 | 342 | |||||||||||||||||||||
Net trading income/(expense)42 | 79 | 134 | 1,215 | 55 | (18 | ) | 141 | 1,606 | ||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | (1) | – | (1) | |||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 110 | 1 | (2) | – | 2 | – | 111 | |||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 110 | 1 | (2 | ) | – | 1 | – | 110 | ||||||||||||||||||||
Gains less losses from financial investments | 5 | 2 | (7 | ) | – | (19 | ) | – | (19 | ) | ||||||||||||||||||
Dividend income | – | – | 1 | – | 1 | – | 2 | |||||||||||||||||||||
Net earned insurance premiums | 337 | 28 | – | – | – | – | 365 | |||||||||||||||||||||
Other operating income | 67 | 66 | 41 | (2 | ) | 1,200 | (134 | ) | 1,238 | |||||||||||||||||||
Total operating income | 2,645 | 1,369 | 3,058 | 223 | 1,237 | (134 | ) | 8,398 | ||||||||||||||||||||
Net insurance claims43 | (380 | ) | (15 | ) | – | – | – | – | (395 | ) | ||||||||||||||||||
Net operating income16 | 2,265 | 1,354 | 3,058 | 223 | 1,237 | (134 | ) | 8,003 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (649 | ) | (221 | ) | (23 | ) | (2 | ) | (1 | ) | – | (896 | ) | |||||||||||||||
Net operating income | 1,616 | 1,133 | 3,035 | 221 | 1,236 | (134 | ) | 7,107 | ||||||||||||||||||||
Total operating expenses | (1,839 | ) | (636 | ) | (1,006 | ) | (131 | ) | (972 | ) | 134 | (4,450 | ) | |||||||||||||||
Operating profit/(loss) | (223 | ) | 497 | 2,029 | 90 | 264 | – | 2,657 | ||||||||||||||||||||
Share of profit in associates and joint ventures | 686 | 567 | 290 | – | – | – | 1,543 | |||||||||||||||||||||
Profit before tax | 463 | 1,064 | 2,319 | 90 | 264 | – | 4,200 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 6.5 | 15.0 | 32.8 | 1.3 | 3.7 | 59.3 | ||||||||||||||||||||||
Cost efficiency ratio | 81.2 | 47.0 | 32.9 | 58.7 | 78.6 | 55.6 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 30,433 | 22,595 | 23,989 | 2,834 | 192 | 80,043 | ||||||||||||||||||||||
Total assets | 40,266 | 31,221 | 138,884 | 11,928 | 7,160 | (7,320 | ) | 222,139 | ||||||||||||||||||||
Customer accounts | 47,573 | 30,196 | 43,698 | 12,496 | 36 | 133,999 |
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2008 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Rest of Asia-Pacific27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 1,708 | 934 | 1,524 | 103 | 139 | (471 | ) | 3,937 | ||||||||||||||||||||
Net fee income | 592 | 356 | 831 | 71 | 17 | – | 1,867 | |||||||||||||||||||||
Trading income/(expense) excluding net interest income | 65 | 122 | 1,233 | 77 | (54 | ) | – | 1,443 | ||||||||||||||||||||
Net interest income/(expense) on trading activities | (5 | ) | – | 123 | – | 10 | 471 | 599 | ||||||||||||||||||||
Net trading income/(expense)42 | 60 | 122 | 1,356 | 77 | (44 | ) | 471 | 2,042 | ||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 1 | – | 1 | |||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (172 | ) | – | (4 | ) | – | 4 | – | (172 | ) | ||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | (172 | ) | – | (4 | ) | – | 5 | – | (171 | ) | ||||||||||||||||||
Gains less losses from financial investments | 15 | 3 | 6 | – | – | – | 24 | |||||||||||||||||||||
Dividend income | – | – | 2 | – | – | – | 2 | |||||||||||||||||||||
Net earned insurance premiums | 172 | 25 | – | – | – | – | 197 | |||||||||||||||||||||
Other operating income/(expense) | 58 | 76 | 79 | (1 | ) | 1,070 | (227 | ) | 1,055 | |||||||||||||||||||
Total operating income | 2,433 | 1,516 | 3,794 | 250 | 1,187 | (227 | ) | 8,953 | ||||||||||||||||||||
Net insurance claims43 | 42 | (14 | ) | – | – | – | – | 28 | ||||||||||||||||||||
Net operating income16 | 2,475 | 1,502 | 3,794 | 250 | 1,187 | (227 | ) | 8,981 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (640 | ) | (137 | ) | (73 | ) | (1 | ) | (1 | ) | – | (852 | ) | |||||||||||||||
Net operating income | 1,835 | 1,365 | 3,721 | 249 | 1,186 | (227 | ) | 8,129 | ||||||||||||||||||||
Total operating expenses | (2,016 | ) | (689 | ) | (1,086 | ) | (140 | ) | (1,000 | ) | 227 | (4,704 | ) | |||||||||||||||
Operating profit/(loss) | (181 | ) | 676 | 2,635 | 109 | 186 | – | 3,425 | ||||||||||||||||||||
Share of profit in associates and joint ventures | 392 | 559 | 335 | – | 11 | – | 1,297 | |||||||||||||||||||||
Profit before tax | 211 | 1,235 | 2,970 | 109 | 197 | – | 4,722 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 2.3 | 13.3 | 31.9 | 1.2 | 2.0 | 50.7 | ||||||||||||||||||||||
Cost efficiency ratio | 81.5 | 45.9 | 28.6 | 56.0 | 84.2 | 52.4 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 27,634 | 21,967 | 27,941 | 2,960 | 159 | 80,661 | ||||||||||||||||||||||
Total assets | 36,310 | 29,030 | 147,714 | 12,440 | 5,528 | (5,449 | ) | 225,573 | ||||||||||||||||||||
Customer accounts | 42,778 | 25,372 | 42,977 | 12,713 | 354 | 124,194 |
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Geographical regions > Rest of Asia-Pacific > Profit before tax by customer group // Middle East |
2007 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Rest of Asia-Pacific27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 1,507 | 750 | 1,035 | 59 | 135 | (437 | ) | 3,049 | ||||||||||||||||||||
Net fee income | 594 | 265 | 820 | 82 | 14 | – | 1,775 | |||||||||||||||||||||
Trading income/(expense) excluding net interest income | 42 | 86 | 817 | 71 | (70 | ) | – | 946 | ||||||||||||||||||||
Net interest income/(expense) on trading activities | (2 | ) | – | (21 | ) | – | (14 | ) | 437 | 400 | ||||||||||||||||||
Net trading income/(expense)42 | 40 | 86 | 796 | 71 | (84 | ) | 437 | 1,346 | ||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 1 | – | 1 | |||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 73 | 4 | (3 | ) | (1 | ) | 37 | – | 110 | |||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 73 | 4 | (3 | ) | �� | (1 | ) | 38 | – | 111 | ||||||||||||||||||
Gains less losses from financial investments | 3 | 4 | 28 | – | 1 | – | 36 | |||||||||||||||||||||
Gains arising from dilution of interests in associates | – | – | – | – | 1,081 | – | 1,081 | |||||||||||||||||||||
Dividend income | – | – | – | – | 6 | – | 6 | |||||||||||||||||||||
Net earned insurance premiums | 209 | 16 | – | – | 1 | – | 226 | |||||||||||||||||||||
Other operating income | 18 | 3 | 44 | 1 | 848 | (133 | ) | 781 | ||||||||||||||||||||
Total operating income | 2,444 | 1,128 | 2,720 | 212 | 2,040 | (133 | ) | 8,411 | ||||||||||||||||||||
Net insurance claims43 | (246 | ) | (7 | ) | – | – | – | – | (253 | ) | ||||||||||||||||||
Net operating income16 | 2,198 | 1,121 | 2,720 | 212 | 2,040 | (133 | ) | 8,158 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (486 | ) | (72 | ) | (3 | ) | – | – | – | (561 | ) | |||||||||||||||||
Net operating income | 1,712 | 1,049 | 2,717 | 212 | 2,040 | (133 | ) | 7,597 | ||||||||||||||||||||
Total operating expenses | (1,713 | ) | (532 | ) | (969 | ) | (123 | ) | (787 | ) | 133 | (3,991 | ) | |||||||||||||||
Operating profit | (1 | ) | 517 | 1,748 | 89 | 1,253 | – | 3,606 | ||||||||||||||||||||
Share of profit in associates and joint ventures | 516 | 351 | 221 | – | 8 | – | 1,096 | |||||||||||||||||||||
Profit before tax | 515 | 868 | 1,969 | 89 | 1,261 | – | 4,702 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 2.1 | 3.6 | 8.1 | 0.4 | 5.2 | 19.4 | ||||||||||||||||||||||
Cost efficiency ratio | 77.9 | 47.5 | 35.6 | 58.0 | 38.6 | 48.9 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 29,313 | 21,397 | 26,476 | 2,913 | 146 | 80,245 | ||||||||||||||||||||||
Total assets | 36,292 | 27,524 | 130,096 | 9,245 | 9,487 | (4,449 | ) | 208,195 | ||||||||||||||||||||
Customer accounts | 38,625 | 25,306 | 45,773 | 9,491 | 101 | 119,296 |
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Personal | Global | |||||||||||||||||||||||
Financial | Commercial | Banking & | Private | |||||||||||||||||||||
Services | Banking | Markets | Banking | Other | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
Egypt | 18 | 51 | 97 | – | 58 | 224 | ||||||||||||||||||
United Arab Emirates | (177 | ) | (136 | ) | 307 | (2 | ) | 5 | (3 | ) | ||||||||||||||
Other | 13 | 45 | (14 | ) | – | (3 | ) | 41 | ||||||||||||||||
Middle East (excluding Saudi Arabia) | (146 | ) | (40 | ) | 390 | (2 | ) | 60 | 262 | |||||||||||||||
Saudi Arabia | 20 | 61 | 77 | 8 | 27 | 193 | ||||||||||||||||||
(126 | ) | 21 | 467 | 6 | 87 | 455 | ||||||||||||||||||
2008 | ||||||||||||||||||||||||
Egypt | 16 | 68 | 90 | – | 49 | 223 | ||||||||||||||||||
United Arab Emirates | 133 | 330 | 388 | 4 | 6 | 861 | ||||||||||||||||||
Other | 80 | 125 | 161 | – | 1 | 367 | ||||||||||||||||||
Middle East (excluding Saudi Arabia) | 229 | 523 | 639 | 4 | 56 | 1,451 | ||||||||||||||||||
Saudi Arabia | 60 | 35 | 177 | – | 23 | 295 | ||||||||||||||||||
289 | 558 | 816 | 4 | 79 | 1,746 | |||||||||||||||||||
2007 | ||||||||||||||||||||||||
Egypt | 10 | 46 | 65 | – | 32 | 153 | ||||||||||||||||||
United Arab Emirates | 108 | 262 | 242 | 3 | 2 | 617 | ||||||||||||||||||
Other | 83 | 101 | 116 | – | – | 300 | ||||||||||||||||||
Middle East (excluding Saudi Arabia) | 201 | 409 | 423 | 3 | 34 | 1,070 | ||||||||||||||||||
Saudi Arabia | 44 | 73 | 72 | – | 48 | 237 | ||||||||||||||||||
245 | 482 | 495 | 3 | 82 | 1,307 | |||||||||||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Egypt | 2,553 | 2,473 | 1,853 | |||||||||
United Arab Emirates | 13,883 | 17,537 | 14,103 | |||||||||
Other | 6,408 | 7,285 | 5,651 | |||||||||
22,844 | 27,295 | 21,607 | ||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Egypt | 5,743 | 5,363 | 4,056 | |||||||||
United Arab Emirates | 17,498 | 19,808 | 18,455 | |||||||||
Other | 9,288 | 9,994 | 8,426 | |||||||||
32,529 | 35,165 | 30,937 | ||||||||||
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Geographical regions > Middle East > 2009 |
2009 | 2008 | 2007 | ||||||||||
Middle East27 | US$m | US$m | US$m | |||||||||
Net interest income | 1,485 | 1,556 | 1,094 | |||||||||
Net fee income | 625 | 691 | 471 | |||||||||
Net trading income | 394 | 402 | 297 | |||||||||
Gains less losses from financial investments | 16 | 8 | 2 | |||||||||
Dividend income | 3 | 2 | 2 | |||||||||
Other operating income | 71 | 9 | 17 | |||||||||
Total operating income | 2,594 | 2,668 | 1,883 | |||||||||
Net insurance claims incurred and movement in liabilities to policyholders | – | – | – | |||||||||
Net operating income before loan impairment charges and other credit risk provisions | 2,594 | 2,668 | 1,883 | |||||||||
Loan impairment charges and other credit risk provisions | (1,334 | ) | (279 | ) | (55 | ) | ||||||
Net operating income | 1,260 | 2,389 | 1,828 | |||||||||
Total operating expenses | (1,001 | ) | (959 | ) | (773 | ) | ||||||
Operating profit | 259 | 1,430 | 1,055 | |||||||||
Share of profit in associates and joint ventures | 196 | 316 | 252 | |||||||||
Profit before tax | 455 | 1,746 | 1,307 | |||||||||
% | % | % | ||||||||||
Share of HSBC’s profit before tax | 6.4 | 18.8 | 5.4 | |||||||||
Cost efficiency ratio | 38.6 | 35.9 | 41.1 | |||||||||
Year-end staff numbers (full-time equivalent) | 8,281 | 8,453 | 8,050 |
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 22,844 | 27,295 | 21,607 | |||||||||
Loans and advances to banks (net) | 8,420 | 7,476 | 7,488 | |||||||||
Trading assets, financial assets designated at fair value, and financial investments | 10,230 | 8,056 | 9,840 | |||||||||
Total assets | 48,107 | 50,952 | 45,669 | |||||||||
Deposits by banks | 1,491 | 1,001 | 2,460 | |||||||||
Customer accounts | 32,529 | 35,165 | 30,937 |
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2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
2008 | acquisitions | at 2009 | acquisitions | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | and | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | disposals | 10 | translation | 11 | rates | 12 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Middle East27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 1,556 | – | (7 | ) | 1,549 | – | (64 | ) | 1,485 | (5 | ) | (4 | ) | |||||||||||||||||||||||
Net fee income | 691 | – | (4 | ) | 687 | – | (62 | ) | 625 | (10 | ) | (9 | ) | |||||||||||||||||||||||
Other income15 | 421 | – | (7 | ) | 414 | – | 70 | 484 | 15 | 17 | ||||||||||||||||||||||||||
Net operating income16 | 2,668 | – | (18 | ) | 2,650 | – | (56 | ) | 2,594 | (3 | ) | (2 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (279 | ) | – | (1 | ) | (280 | ) | – | (1,054 | ) | (1,334 | ) | (378 | ) | (376 | ) | ||||||||||||||||||||
Net operating income | 2,389 | – | (19 | ) | 2,370 | – | (1,110 | ) | 1,260 | (47 | ) | (47 | ) | |||||||||||||||||||||||
Operating expenses | (959 | ) | – | 11 | (948 | ) | – | (53 | ) | (1,001 | ) | (4 | ) | (6 | ) | |||||||||||||||||||||
Operating profit | 1,430 | – | (8 | ) | 1,422 | – | (1,163 | ) | 259 | (82 | ) | (82 | ) | |||||||||||||||||||||||
Income from associates | 316 | – | 1 | 317 | – | (121 | ) | 196 | (38 | ) | (38 | ) | ||||||||||||||||||||||||
Profit before tax | 1,746 | – | (7 | ) | 1,739 | – | (1,284 | ) | 455 | (74 | ) | (74 | ) | |||||||||||||||||||||||
For footnotes, see page 149. |
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Geographical regions > Middle East > 2009 / 2008 |
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||
acquisitions, | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
2007 | disposals | at 2008 | acquisitions | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Middle East27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 1,094 | – | 5 | 1,099 | – | 457 | 1,556 | 42 | 42 | |||||||||||||||||||||||||||
Net fee income | 471 | – | 2 | 473 | – | 218 | 691 | 47 | 46 | |||||||||||||||||||||||||||
Other income15 | 318 | – | 3 | 321 | – | 100 | 421 | 32 | 31 | |||||||||||||||||||||||||||
Net operating income16 | 1,883 | – | 10 | 1,893 | – | 775 | 2,668 | 42 | 41 | |||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (55 | ) | – | (1 | ) | (56 | ) | – | (223 | ) | (279 | ) | (407 | ) | (398 | ) | ||||||||||||||||||||
Net operating income | 1,828 | – | 9 | 1,837 | – | 552 | 2,389 | 31 | 30 | |||||||||||||||||||||||||||
Operating expenses | (773 | ) | – | (5 | ) | (778 | ) | – | (181 | ) | (959 | ) | (24 | ) | (23 | ) | ||||||||||||||||||||
Operating profit | 1,055 | – | 4 | 1,059 | – | 371 | 1,430 | 36 | 35 | |||||||||||||||||||||||||||
Income from associates | 252 | – | – | 252 | – | 64 | 316 | 25 | 25 | |||||||||||||||||||||||||||
Profit before tax | 1,307 | – | 4 | 1,311 | – | 435 | 1,746 | 34 | 33 | |||||||||||||||||||||||||||
For footnotes, see page 149. |
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121
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Geographical regions > Middle East > Profit/(loss) before tax |
2009 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Middle East27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 644 | 464 | 330 | 1 | 46 | – | 1,485 | |||||||||||||||||||||
Net fee income | 203 | 219 | 198 | 3 | 2 | – | 625 | |||||||||||||||||||||
Trading income excluding net interest income | 55 | 75 | 235 | 1 | 3 | – | 369 | |||||||||||||||||||||
Net interest income on trading activities | – | – | 20 | – | 5 | – | 25 | |||||||||||||||||||||
Net trading income42 | 55 | 75 | 255 | 1 | 8 | – | 394 | |||||||||||||||||||||
Gains less losses from financial investments | 12 | (2 | ) | 1 | – | 5 | – | 16 | ||||||||||||||||||||
Dividend income | – | – | 3 | – | – | – | 3 | |||||||||||||||||||||
Other operating income/(expense) | 35 | 39 | 35 | (1 | ) | 39 | (76 | ) | 71 | |||||||||||||||||||
Total operating income | 949 | 795 | 822 | 4 | 100 | (76 | ) | 2,594 | ||||||||||||||||||||
Net insurance claims43 | – | – | – | – | – | – | – | |||||||||||||||||||||
Net operating income16 | 949 | 795 | 822 | 4 | 100 | (76 | ) | 2,594 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (588 | ) | (573 | ) | (173 | ) | – | – | – | (1,334 | ) | |||||||||||||||||
Net operating income | 361 | 222 | 649 | 4 | 100 | (76 | ) | 1,260 | ||||||||||||||||||||
Total operating expenses | (508 | ) | (269 | ) | (255 | ) | (6 | ) | (39 | ) | 76 | (1,001 | ) | |||||||||||||||
Operating profit/(loss) | (147 | ) | (47 | ) | 394 | (2 | ) | 61 | – | 259 | ||||||||||||||||||
Share of profit in associates and joint ventures | 21 | 68 | 73 | 8 | 26 | – | 196 | |||||||||||||||||||||
Profit/(loss) before tax | (126 | ) | 21 | 467 | 6 | 87 | – | 455 | ||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | (1.8 | ) | 0.3 | 6.6 | 0.1 | 1.2 | 6.4 | |||||||||||||||||||||
Cost efficiency ratio | 53.5 | 33.8 | 31.0 | 150.0 | 39.0 | 38.6 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 5,979 | 10,281 | 6,554 | 28 | 2 | 22,844 | ||||||||||||||||||||||
Total assets | 6,810 | 11,861 | 28,189 | 96 | 4,952 | (3,801 | ) | 48,107 | ||||||||||||||||||||
Customer accounts | 15,074 | 10,122 | 5,752 | 1,172 | 409 | 32,529 |
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2008 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Middle East27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 652 | 510 | 362 | 3 | 46 | (17 | ) | 1,556 | ||||||||||||||||||||
Net fee income | 227 | 241 | 217 | 6 | – | – | 691 | |||||||||||||||||||||
Trading income excluding net interest income | 47 | 65 | 244 | – | 24 | – | 380 | |||||||||||||||||||||
Net interest income/(expense) on trading activities | – | – | 20 | – | (15 | ) | 17 | 22 | ||||||||||||||||||||
Net trading income42 | 47 | 65 | 264 | – | 9 | 17 | 402 | |||||||||||||||||||||
Gains less losses from financial investments | 14 | – | (6 | ) | – | – | – | 8 | ||||||||||||||||||||
Dividend income | – | – | 2 | – | – | – | 2 | |||||||||||||||||||||
Other operating income | 21 | 8 | 11 | 3 | 26 | (60 | ) | 9 | ||||||||||||||||||||
Total operating income | 961 | 824 | 850 | 12 | 81 | (60 | ) | 2,668 | ||||||||||||||||||||
Net insurance claims43 | – | – | – | – | – | – | – | |||||||||||||||||||||
Net operating income16 | 961 | 824 | 850 | 12 | 81 | (60 | ) | 2,668 | ||||||||||||||||||||
Loan impairment (charges)/ recoveries and other credit risk provisions | (223 | ) | (45 | ) | (12 | ) | – | 1 | – | (279 | ) | |||||||||||||||||
Net operating income | 738 | 779 | 838 | 12 | 82 | (60 | ) | 2,389 | ||||||||||||||||||||
Total operating expenses | (511 | ) | (264 | ) | (212 | ) | (8 | ) | (24 | ) | 60 | (959 | ) | |||||||||||||||
Operating profit | 227 | 515 | 626 | 4 | 58 | – | 1,430 | |||||||||||||||||||||
Share of profit in associates and joint ventures | 62 | 43 | 190 | – | 21 | – | 316 | |||||||||||||||||||||
Profit before tax | 289 | 558 | 816 | 4 | 79 | – | 1,746 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 3.1 | 6.0 | 8.9 | – | 0.8 | 18.8 | ||||||||||||||||||||||
Cost efficiency ratio | 53.2 | 32.0 | 24.9 | 66.7 | 29.6 | 35.9 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 7,226 | 13,221 | 6,649 | 29 | 170 | 27,295 | ||||||||||||||||||||||
Total assets | 8,168 | 14,672 | 27,975 | 46 | 5,754 | (5,663 | ) | 50,952 | ||||||||||||||||||||
Customer accounts | 13,753 | 10,978 | 7,628 | 1,762 | 1,044 | 35,165 |
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Geographical regions > Middle East > Profit/(loss) before tax // North America > 2009 |
2007 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Middle East27 | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 458 | 381 | 260 | 1 | 18 | (24 | ) | 1,094 | ||||||||||||||||||||
Net fee income | 172 | 164 | 132 | 3 | – | – | 471 | |||||||||||||||||||||
Trading income/(expense) excluding net interest income | 30 | 43 | 183 | – | – | – | 256 | |||||||||||||||||||||
Net interest income/(expense) on trading activities | – | – | (1 | ) | – | 18 | 24 | 41 | ||||||||||||||||||||
Net trading income/(expense)42 | 30 | 43 | 182 | – | 18 | 24 | 297 | |||||||||||||||||||||
Gains less losses from financial investments | 2 | – | – | – | – | – | 2 | |||||||||||||||||||||
Dividend income | – | – | 2 | – | – | – | 2 | |||||||||||||||||||||
Other operating income | 22 | 12 | 9 | 1 | 1 | (28 | ) | 17 | ||||||||||||||||||||
Total operating income | 684 | 600 | 585 | 5 | 37 | (28 | ) | 1,883 | ||||||||||||||||||||
Net insurance claims43 | – | – | – | – | – | – | – | |||||||||||||||||||||
Net operating income16 | 684 | 600 | 585 | 5 | 37 | (28 | ) | 1,883 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (66 | ) | 11 | – | – | – | – | (55 | ) | |||||||||||||||||||
Net operating income | 618 | 611 | 585 | 5 | 37 | (28 | ) | 1,828 | ||||||||||||||||||||
Total operating expenses | (418 | ) | (207 | ) | (171 | ) | (2 | ) | (3 | ) | 28 | (773 | ) | |||||||||||||||
Operating profit | 200 | 404 | 414 | 3 | 34 | – | 1,055 | |||||||||||||||||||||
Share of profit in associates and joint ventures | 45 | 78 | 81 | – | 48 | – | 252 | |||||||||||||||||||||
Profit before tax | 245 | 482 | 495 | 3 | 82 | – | 1,307 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 1.0 | 2.0 | 2.1 | – | 0.3 | 5.4 | ||||||||||||||||||||||
Cost efficiency ratio | 61.1 | 34.5 | 29.2 | 40.0 | 8.1 | 41.1 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 5,173 | 10,762 | 5,630 | 42 | – | 21,607 | ||||||||||||||||||||||
Total assets | 6,045 | 12,219 | 26,548 | 49 | 4,390 | (3,582 | ) | 45,669 | ||||||||||||||||||||
Customer accounts | 11,078 | 9,585 | 8,347 | 1,625 | 302 | 30,937 |
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Personal | Global | |||||||||||||||||||||||
Financial | Commercial | Banking & | Private | |||||||||||||||||||||
Services | Banking | Markets | Banking | Other | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
US | (5,292 | ) | 158 | 505 | (49 | ) | (3,626 | ) | (8,304 | ) | ||||||||||||||
Canada | 17 | 347 | 159 | – | (100 | ) | 423 | |||||||||||||||||
Bermuda | 49 | 37 | 47 | (2 | ) | 10 | 141 | |||||||||||||||||
Other | – | 1 | 1 | 1 | (1 | ) | 2 | |||||||||||||||||
(5,226 | ) | 543 | 712 | (50 | ) | (3,717 | ) | (7,738 | ) | |||||||||||||||
2008 | ||||||||||||||||||||||||
US52 | (17,364 | ) | 226 | (2,899 | ) | 67 | 3,427 | (16,543 | ) | |||||||||||||||
Canada | 106 | 380 | 252 | 5 | 96 | 839 | ||||||||||||||||||
Bermuda | 31 | 51 | 72 | 11 | 9 | 174 | ||||||||||||||||||
Other | (1 | ) | 1 | – | – | 2 | 2 | |||||||||||||||||
(17,228 | ) | 658 | (2,575 | ) | 83 | 3,534 | (15,528 | ) | ||||||||||||||||
2007 | ||||||||||||||||||||||||
US | (1,824 | ) | 377 | (1,243 | ) | 156 | 1,468 | (1,066 | ) | |||||||||||||||
Canada | 265 | 466 | 239 | 8 | 5 | 983 | ||||||||||||||||||
Bermuda | 13 | 77 | 39 | 10 | 34 | 173 | ||||||||||||||||||
Other | – | – | – | – | 1 | 1 | ||||||||||||||||||
(1,546 | ) | 920 | (965 | ) | 174 | 1,508 | 91 | |||||||||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
US | 156,638 | 208,834 | 233,706 | |||||||||
Canada | 47,158 | 44,866 | 53,891 | |||||||||
Bermuda | 3,057 | 2,514 | 2,263 | |||||||||
206,853 | 256,214 | 289,860 | ||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
US | 99,371 | 101,963 | 100,034 | |||||||||
Canada | 41,565 | 33,905 | 37,061 | |||||||||
Bermuda | 8,221 | 7,664 | 8,078 | |||||||||
149,157 | 143,532 | 145,173 | ||||||||||
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Geographical regions > North America > 2009 |
2009 | 2008 | 2007 | ||||||||||||
North America | US$m | US$m | US$m | |||||||||||
Net interest income | 13,670 | 15,218 | 14,847 | |||||||||||
Net fee income | 4,817 | 5,227 | 5,810 | |||||||||||
Net trading income/(expense) | 331 | (3,135 | ) | (542 | ) | |||||||||
Changes in fair value of long-term debt issued and related derivatives | (3,497 | ) | 3,736 | 1,750 | ||||||||||
Net income from other financial instruments designated at fair value | 1 | 1 | – | |||||||||||
Net income/(expense) from financial instruments designated at fair value | (3,496 | ) | 3,737 | 1,750 | ||||||||||
Gains less losses from financial investments | 296 | (120 | ) | 245 | ||||||||||
Dividend income | 53 | 77 | 105 | |||||||||||
Net earned insurance premiums | 309 | 390 | 449 | |||||||||||
Other operating income | 566 | 23 | 360 | |||||||||||
Total operating income | 16,546 | 21,417 | 23,024 | |||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (241 | ) | (238 | ) | (241 | ) | ||||||||
Net operating income before loan impairment charges and other credit risk provisions | 16,305 | 21,179 | 22,783 | |||||||||||
Loan impairment charges and other credit risk provisions | (15,664 | ) | (16,795 | ) | (12,156 | ) | ||||||||
Net operating income | 641 | 4,384 | 10,627 | |||||||||||
Operating expenses (excluding goodwill impairment) | (8,391 | ) | (9,359 | ) | (10,556 | ) | ||||||||
Goodwill impairment | – | (10,564 | ) | – | ||||||||||
Operating profit/(loss) | (7,750 | ) | (15,539 | ) | 71 | |||||||||
Share of profit in associates and joint ventures | 12 | 11 | 20 | |||||||||||
Profit/(loss) before tax | (7,738 | ) | (15,528 | ) | 91 | |||||||||
% | % | % | ||||||||||||
Share of HSBC’s profit before tax | (109.3 | ) | (166.8 | ) | 0.4 | |||||||||
Cost efficiency ratio | 51.5 | 94.1 | 46.3 | |||||||||||
Year-end staff numbers (full-time equivalent) | 35,458 | 44,725 | 52,722 |
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 206,853 | 256,214 | 289,860 | |||||||||
Loans and advances to banks (net) | 15,386 | 11,458 | 16,566 | |||||||||
Trading assets, financial assets designated at fair value, and financial investments49 | 123,288 | 119,634 | 133,998 | |||||||||
Total assets | 475,014 | 596,302 | 574,318 | |||||||||
Deposits by banks | 13,970 | 18,181 | 16,618 | |||||||||
Customer accounts | 149,157 | 143,532 | 145,173 |
All commentaries on North America are on an underlying basis unless stated otherwise.
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2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | at 2009 | 2009 | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | adjust- | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | ments | 10 | translation | 11 | rates | 12 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
North America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 15,218 | – | (79 | ) | 15,139 | – | (1,469 | ) | 13,670 | (10 | ) | (10 | ) | |||||||||||||||||||||||
Net fee income | 5,227 | – | (33 | ) | 5,194 | – | (377 | ) | 4,817 | (8 | ) | (7 | ) | |||||||||||||||||||||||
Changes in fair value14 | 3,444 | (3,444 | ) | – | – | (3,688 | ) | – | (3,688 | ) | (207 | ) | ||||||||||||||||||||||||
Other income/(expense)15 | (2,710 | ) | – | (4 | ) | (2,714 | ) | – | 4,220 | 1,506 | 156 | 155 | ||||||||||||||||||||||||
Net operating income16 | 21,179 | (3,444 | ) | (116 | ) | 17,619 | (3,688 | ) | 2,374 | 16,305 | (23 | ) | 13 | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (16,795 | ) | – | (8 | ) | (16,803 | ) | – | 1,139 | (15,664 | ) | 7 | 7 | |||||||||||||||||||||||
Net operating income | 4,384 | (3,444 | ) | (124 | ) | 816 | (3,688 | ) | 3,513 | 641 | (85 | ) | 431 | |||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (9,359 | ) | – | 58 | (9,301 | ) | – | 910 | (8,391 | ) | 10 | 10 | ||||||||||||||||||||||||
Goodwill impairment | (10,564 | ) | – | – | (10,564 | ) | – | 10,564 | – | 100 | 100 | |||||||||||||||||||||||||
Operating loss | (15,539 | ) | (3,444 | ) | (66 | ) | (19,049 | ) | (3,688 | ) | 14,987 | (7,750 | ) | 50 | 79 | |||||||||||||||||||||
Income from associates | 11 | – | (1 | ) | 10 | – | 2 | 12 | 9 | 20 | ||||||||||||||||||||||||||
Loss before tax | (15,528 | ) | (3,444 | ) | (67 | ) | (19,039 | ) | (3,688 | ) | 14,989 | (7,738 | ) | 50 | 79 | |||||||||||||||||||||
Net interest incomein 2009 declined by 10 per cent, mainly reflecting reduced asset balances in the legacy consumer finance portfolios, increases in average delinquencies and modified loans (which generate lower yields), the compression of deposit spreads and lower revenue from Balance Sheet Management activities. These effects were partly offset by lower funding costs from the decline in interest rates and higher credit card yields which were driven by the effects of re-pricing initiatives, interest rate floors and lower levels of promotional balances. |
Loans and advances to customers declined, mainly in HSBC Finance, following decisions taken to cease new originations and run off the residual balances in Mortgage Services, Consumer Lending and vehicle finance. HSBC Bank USA sold US$4.5 billion of prime mortgages in 2009 in addition to normal sale activity. In Card and Retail |
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Geographical regions > North America > 2009 |
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Geographical regions > North America > 2009 |
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | 2007 | |||||||||||||||||||||||||||||||||||
2007 | adjustments | at 2008 | 2008 | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | and dilution | Currency | exchange | adjust- | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | ments | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
North America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 14,847 | 1 | 7 | 14,855 | – | 363 | 15,218 | 2 | 2 | |||||||||||||||||||||||||||
Net fee income | 5,810 | (105 | ) | 1 | 5,706 | – | (479 | ) | 5,227 | (10 | ) | (8 | ) | |||||||||||||||||||||||
Changes in fair value14 | 1,760 | (1,760 | ) | – | – | 3,444 | – | 3,444 | 96 | |||||||||||||||||||||||||||
Other income/(expense)15 | 366 | (18 | ) | – | 348 | – | (3,058 | ) | (2,710 | ) | (840 | ) | (879 | ) | ||||||||||||||||||||||
Net operating income16 | 22,783 | (1,882 | ) | 8 | 20,909 | 3,444 | (3,174 | ) | 21,179 | (7 | ) | (15 | ) | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (12,156 | ) | – | 12 | (12,144 | ) | – | (4,651 | ) | (16,795 | ) | (38 | ) | (38 | ) | |||||||||||||||||||||
Net operating income | 10,627 | (1,882 | ) | 20 | 8,765 | 3,444 | (7,825 | ) | 4,384 | (59 | ) | (89 | ) | |||||||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (10,556 | ) | 98 | (6 | ) | (10,464 | ) | – | 1,105 | (9,359 | ) | 11 | 11 | |||||||||||||||||||||||
Goodwill impairment | – | �� | – | – | – | – | (10,564 | ) | (10,564 | ) | ||||||||||||||||||||||||||
Operating profit/(loss) | 71 | (1,784 | ) | 14 | (1,699 | ) | 3,444 | (17,284 | ) | (15,539 | ) | (21,986 | ) | (1,017 | ) | |||||||||||||||||||||
Income from associates | 20 | – | – | 20 | – | (9 | ) | 11 | (45 | ) | (45 | ) | ||||||||||||||||||||||||
Profit/(loss) before tax | 91 | (1,784 | ) | 14 | (1,679 | ) | 3,444 | (17,293 | ) | (15,528 | ) | (17,164 | ) | (1,030 | ) | |||||||||||||||||||||
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Geographical regions > North America > 2008 / Profit/(loss) before tax by customer group |
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Analysis by customer group and global business |
2009 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
North America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income/(expense) | 11,244 | 1,391 | 999 | 178 | (84 | ) | (58 | ) | 13,670 | |||||||||||||||||||
Net fee income | 3,174 | 453 | 1,045 | 142 | 3 | – | 4,817 | |||||||||||||||||||||
Trading income/(expense) excluding net interest income | 257 | (10 | ) | (179 | ) | (3 | ) | (30 | ) | – | 35 | |||||||||||||||||
Net interest income/(expense) on trading activities | 60 | 3 | 175 | (1 | ) | 1 | 58 | 296 | ||||||||||||||||||||
Net trading income/(expense)42 | 317 | (7 | ) | (4 | ) | (4 | ) | (29 | ) | 58 | 331 | |||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | (3,497 | ) | – | (3,497 | ) | |||||||||||||||||||
Net income from other financial instruments designated at fair value | – | – | – | – | 1 | – | 1 | |||||||||||||||||||||
Net expense from financial instruments designated at fair value | – | – | – | – | (3,496 | ) | – | (3,496 | ) | |||||||||||||||||||
Gains less losses from financial investments | 16 | 3 | 277 | – | – | – | 296 | |||||||||||||||||||||
Dividend income | 21 | 5 | 27 | 2 | (2 | ) | – | 53 | ||||||||||||||||||||
Net earned insurance premiums | 309 | – | – | – | – | – | 309 | |||||||||||||||||||||
Other operating income | 9 | 162 | 317 | 11 | 1,828 | (1,761 | ) | 566 | ||||||||||||||||||||
Total operating income/(expense) | 15,090 | 2,007 | 2,661 | 329 | (1,780 | ) | (1,761 | ) | 16,546 | |||||||||||||||||||
Net insurance claims43 | (241 | ) | – | – | – | – | – | (241 | ) | |||||||||||||||||||
Net operating income/(expense)16 | 14,849 | 2,007 | 2,661 | 329 | (1,780 | ) | (1,761 | ) | 16,305 | |||||||||||||||||||
Loan impairment charges and other credit risk provisions | (14,424 | ) | (519 | ) | (621 | ) | (98 | ) | (2 | ) | – | (15,664 | ) | |||||||||||||||
Net operating income/(expense) | 425 | 1,488 | 2,040 | 231 | (1,782 | ) | (1,761 | ) | 641 | |||||||||||||||||||
Operating expenses | (5,651 | ) | (958 | ) | (1,328 | ) | (281 | ) | (1,934 | ) | 1,761 | (8,391 | ) | |||||||||||||||
Operating profit/(loss) | (5,226 | ) | 530 | 712 | (50 | ) | (3,716 | ) | – | (7,750 | ) | |||||||||||||||||
Share of profit/(loss) in associates and joint ventures | – | 13 | – | – | (1 | ) | – | 12 | ||||||||||||||||||||
Profit/(loss) before tax | (5,226 | ) | 543 | 712 | (50 | ) | (3,717 | ) | – | (7,738 | ) | |||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | (73.8 | ) | 7.7 | 10.1 | (0.7 | ) | (52.6 | ) | (109.3 | ) | ||||||||||||||||||
Cost efficiency ratio | 38.1 | 47.7 | 49.9 | 85.4 | (108.7 | ) | 51.5 | |||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 151,671 | 31,292 | 18,654 | 5,236 | – | 206,853 | ||||||||||||||||||||||
Total assets | 179,597 | 38,232 | 260,131 | 6,572 | 2,071 | (11,589 | ) | 475,014 | ||||||||||||||||||||
Customer accounts | 74,228 | 42,900 | 19,095 | 12,834 | 100 | 149,157 |
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Geographical regions > North America > Profit/(loss) before tax by customer group |
2008 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
North America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 12,632 | 1,480 | 1,064 | 224 | 22 | (204 | ) | 15,218 | ||||||||||||||||||||
Net fee income/(expense) | 3,896 | 391 | 818 | 181 | (59 | ) | – | 5,227 | ||||||||||||||||||||
Trading income/(expense) excluding net interest income | (250 | ) | 5 | (3,516 | ) | 10 | (128 | ) | – | (3,879 | ) | |||||||||||||||||
Net interest income/(expense) on trading activities | 66 | – | 584 | – | (110 | ) | 204 | 744 | ||||||||||||||||||||
Net trading income/(expense)42 | (184 | ) | 5 | (2,932 | ) | 10 | (238 | ) | 204 | (3,135 | ) | |||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 3,736 | – | 3,736 | |||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (2 | ) | – | (1 | ) | – | 4 | – | 1 | |||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | (2 | ) | – | (1 | ) | – | 3,740 | – | 3,737 | |||||||||||||||||||
Gains less losses from financial investments | 65 | 5 | (209 | ) | – | 19 | – | (120 | ) | |||||||||||||||||||
Dividend income | 36 | 11 | 27 | 3 | – | – | 77 | |||||||||||||||||||||
Net earned insurance premiums | 390 | – | – | – | – | – | 390 | |||||||||||||||||||||
Other operating income/(expense) | (426 | ) | 140 | 240 | 20 | 1,419 | (1,370 | ) | 23 | |||||||||||||||||||
Total operating income/(expense) | 16,407 | 2,032 | (993 | ) | 438 | 4,903 | (1,370 | ) | 21,417 | |||||||||||||||||||
Net insurance claims43 | (238 | ) | – | – | – | – | – | (238 | ) | |||||||||||||||||||
Net operating income/(expense)16 | 16,169 | 2,032 | (993 | ) | 438 | 4,903 | (1,370 | ) | 21,179 | |||||||||||||||||||
Loan impairment charges and other credit risk provisions | (16,132 | ) | (449 | ) | (198 | ) | (16 | ) | – | – | (16,795 | ) | ||||||||||||||||
Net operating income/(expense) | 37 | 1,583 | (1,191 | ) | 422 | 4,903 | (1,370 | ) | 4,384 | |||||||||||||||||||
Operating expenses (excluding goodwill impairment) | (6,701 | ) | (937 | ) | (1,384 | ) | (339 | ) | (1,368 | ) | 1,370 | (9,359 | ) | |||||||||||||||
Goodwill impairment | (10,564 | ) | – | – | – | – | – | (10,564 | ) | |||||||||||||||||||
Operating profit/(loss) | (17,228 | ) | 646 | (2,575 | ) | 83 | 3,535 | – | (15,539 | ) | ||||||||||||||||||
Share of profit/(loss) in associates and joint ventures | – | 12 | – | – | (1 | ) | – | 11 | ||||||||||||||||||||
Profit/(loss) before tax | (17,228 | ) | 658 | (2,575 | ) | 83 | 3,534 | – | (15,528 | ) | ||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | (185.1 | ) | 7.1 | (27.7 | ) | 0.9 | 38.0 | (166.8 | ) | |||||||||||||||||||
Cost efficiency ratio | 106.8 | 46.1 | (139.4 | ) | 77.4 | 27.9 | 94.1 | |||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 179,663 | 35,725 | 35,583 | 5,243 | – | 256,214 | ||||||||||||||||||||||
Total assets | 205,722 | 42,211 | 348,347 | 7,054 | 3,323 | (10,355 | ) | 596,302 | ||||||||||||||||||||
Customer accounts | 65,830 | 39,105 | 23,844 | 14,657 | 96 | 143,532 |
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2007 | ||||||||||||||||||||||||||||
�� | Personal | Global | Inter- | |||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
North America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income/(expense) | 13,175 | 1,558 | 378 | 273 | (17 | ) | (520 | ) | 14,847 | |||||||||||||||||||
Net fee income/(expense) | 4,571 | 338 | 701 | 279 | (79 | ) | – | 5,810 | ||||||||||||||||||||
Trading income/(expense) excluding net interest income | (349 | ) | (2 | ) | (871 | ) | 11 | (78 | ) | – | (1,289 | ) | ||||||||||||||||
Net interest income/(expense) on trading activities | 134 | – | 137 | – | (44 | ) | 520 | 747 | ||||||||||||||||||||
Net trading income/(expense)42 | (215 | ) | (2 | ) | (734 | ) | 11 | (122 | ) | 520 | (542 | ) | ||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | 1,750 | – | 1,750 | |||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | – | – | 11 | – | (11 | ) | – | – | ||||||||||||||||||||
Net income from financial instruments designated at fair value | – | – | 11 | – | 1,739 | – | 1,750 | |||||||||||||||||||||
Gains less losses from financial investments | 176 | (1 | ) | 65 | 2 | 3 | – | 245 | ||||||||||||||||||||
Dividend income | 47 | 1 | 57 | – | – | – | 105 | |||||||||||||||||||||
Net earned insurance premiums | 449 | – | – | – | – | – | 449 | |||||||||||||||||||||
Other operating income/(expense) | (5 | ) | 88 | 167 | 34 | 1,480 | (1,404 | ) | 360 | |||||||||||||||||||
Total operating income | 18,198 | 1,982 | 645 | 599 | 3,004 | (1,404 | ) | 23,024 | ||||||||||||||||||||
Net insurance claims43 | (241 | ) | – | – | – | – | – | (241 | ) | |||||||||||||||||||
Net operating income16 | 17,957 | 1,982 | 645 | 599 | 3,004 | (1,404 | ) | 22,783 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (11,909 | ) | (191 | ) | (46 | ) | (10 | ) | – | – | (12,156 | ) | ||||||||||||||||
Net operating income | 6,048 | 1,791 | 599 | 589 | 3,004 | (1,404 | ) | 10,627 | ||||||||||||||||||||
Total operating expenses | (7,594 | ) | (893 | ) | (1,562 | ) | (415 | ) | (1,496 | ) | 1,404 | (10,556 | ) | |||||||||||||||
Operating profit/(loss) | (1,546 | ) | 898 | (963 | ) | 174 | 1,508 | – | 71 | |||||||||||||||||||
Share of profit/(loss) in associates and joint ventures | – | 22 | (2 | ) | – | – | – | 20 | ||||||||||||||||||||
Profit/(loss) before tax | (1,546 | ) | 920 | (965 | ) | 174 | 1,508 | – | 91 | |||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | (6.4 | ) | 3.8 | (4.0 | ) | 0.7 | 6.3 | 0.4 | ||||||||||||||||||||
Cost efficiency ratio | 42.3 | 45.1 | 242.2 | 69.3 | 49.8 | 46.3 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 218,676 | 38,930 | 26,186 | 6,068 | – | 289,860 | ||||||||||||||||||||||
Total assets | 252,304 | 46,247 | 263,008 | 20,073 | 1,095 | (8,409 | ) | 574,318 | ||||||||||||||||||||
Customer accounts | 61,824 | 36,306 | 30,732 | 16,187 | 124 | 145,173 |
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Geographical regions > Latin America > 2009 |
Personal | Global | |||||||||||||||||||||||
Financial | Commercial | Banking & | Private | |||||||||||||||||||||
Services | Banking | Markets | Banking | Other | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
Argentina | 24 | 86 | 122 | – | – | 232 | ||||||||||||||||||
Brazil | (224 | ) | 211 | 515 | 5 | 3 | 510 | |||||||||||||||||
Mexico | (31 | ) | 66 | 230 | 7 | – | 272 | |||||||||||||||||
Panama | 69 | 55 | 24 | – | – | 148 | ||||||||||||||||||
Other | (54 | ) | (19 | ) | 40 | (1 | ) | (4 | ) | (38 | ) | |||||||||||||
(216 | ) | 399 | 931 | 11 | (1 | ) | 1,124 | |||||||||||||||||
2008 | ||||||||||||||||||||||||
Argentina | – | 111 | 113 | – | – | 224 | ||||||||||||||||||
Brazil | 250 | 348 | 298 | 8 | 6 | 910 | ||||||||||||||||||
Mexico | 360 | 157 | 190 | 7 | – | 714 | ||||||||||||||||||
Panama | 51 | 37 | 33 | – | – | 121 | ||||||||||||||||||
Other | 7 | 53 | 7 | 1 | – | 68 | ||||||||||||||||||
668 | 706 | 641 | 16 | 6 | 2,037 | |||||||||||||||||||
2007 | ||||||||||||||||||||||||
Argentina | 36 | 75 | 90 | – | – | 201 | ||||||||||||||||||
Brazil | 293 | 286 | 297 | 9 | (6 | ) | 879 | |||||||||||||||||
Mexico | 514 | 333 | 113 | 11 | 9 | 980 | ||||||||||||||||||
Panama | 45 | 18 | 16 | 7 | – | 86 | ||||||||||||||||||
Other | 5 | 28 | 1 | (2 | ) | – | 32 | |||||||||||||||||
893 | 740 | 517 | 25 | 3 | 2,178 | |||||||||||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Argentina | 2,319 | 2,356 | 2,485 | |||||||||
Brazil | 22,765 | 18,255 | 18,491 | |||||||||
Mexico | 12,114 | 12,211 | 18,059 | |||||||||
Panama | 5,989 | 4,538 | 4,158 | |||||||||
Other | 4,442 | 4,927 | 4,730 | |||||||||
47,629 | 42,287 | 47,923 | ||||||||||
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Argentina | 3,083 | 2,988 | 2,779 | |||||||||
Brazil | 39,022 | 27,857 | 26,231 | |||||||||
Mexico | 18,195 | 17,652 | 22,307 | |||||||||
Panama | 6,996 | 5,185 | 5,062 | |||||||||
Other | 5,593 | 5,761 | 4,913 | |||||||||
72,889 | 59,443 | 61,292 | ||||||||||
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2009 | 2008 | 2007 | ||||||||||
Latin America | US$m | US$m | US$m | |||||||||
Net interest income | 5,573 | 6,458 | 5,576 | |||||||||
Net fee income | 1,729 | 2,167 | 2,153 | |||||||||
Net trading income | 848 | 701 | 548 | |||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | |||||||||
Net income from other financial instruments designated at fair value | 495 | 364 | 320 | |||||||||
Net income from financial instruments designated at fair value | 495 | 364 | 320 | |||||||||
Gains less losses from financial investments | 168 | 176 | 253 | |||||||||
Gains arising from dilution of interests in associates | – | – | 11 | |||||||||
Dividend income | 11 | 20 | 9 | |||||||||
Net earned insurance premiums | 1,900 | 1,717 | 1,594 | |||||||||
Other operating income | 133 | 300 | 228 | |||||||||
Total operating income | 10,857 | 11,903 | 10,692 | |||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (1,833 | ) | (1,390 | ) | (1,427 | ) | ||||||
Net operating income before loan impairment charges and other credit risk provisions | 9,024 | 10,513 | 9,265 | |||||||||
Loan impairment charges and other credit risk provisions | (2,526 | ) | (2,492 | ) | (1,697 | ) | ||||||
Net operating income | 6,498 | 8,021 | 7,568 | |||||||||
Total operating expenses | (5,375 | ) | (5,990 | ) | (5,402 | ) | ||||||
Operating profit | 1,123 | 2,031 | 2,166 | |||||||||
Share of profit in associates and joint ventures | 1 | 6 | 12 | |||||||||
Profit before tax | 1,124 | 2,037 | 2,178 | |||||||||
% | % | % | ||||||||||
Share of HSBC’s profit before tax | 15.9 | 21.9 | 9.0 | |||||||||
Cost efficiency ratio | 59.6 | 57.0 | 58.3 | |||||||||
Year-end staff numbers (full-time equivalent) | 54,288 | 58,559 | 64,404 |
At 31 December | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Loans and advances to customers (net) | 47,629 | 42,287 | 47,923 | |||||||||
Loans and advances to banks (net) | 18,608 | 14,572 | 12,675 | |||||||||
Trading assets, financial assets designated at fair value, and financial investments | 28,779 | 18,753 | 24,715 | |||||||||
Total assets | 115,967 | 102,946 | 102,649 | |||||||||
Deposits by banks | 5,421 | 5,598 | 4,092 | |||||||||
Customer accounts | 72,889 | 59,443 | 61,292 |
All commentaries on Latin America are on an underlying basis unless stated otherwise.
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Geographical regions > Latin America > 2009 |
2009 compared with 2008 | ||||||||||||||||||||||||||||||||||||
2008 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
2008 | acquisitions | at 2009 | acquisitions | Under- | 2009 | Re- | Under- | |||||||||||||||||||||||||||||
as | and | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | disposals | 10 | translation | 11 | rates | 12 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Latin America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 6,458 | – | (783 | ) | 5,675 | – | (102 | ) | 5,573 | (14 | ) | (2 | ) | |||||||||||||||||||||||
Net fee income | 2,167 | – | (291 | ) | 1,876 | – | (147 | ) | 1,729 | (20 | ) | (8 | ) | |||||||||||||||||||||||
Other income15 | 1,888 | (71 | ) | (220 | ) | 1,597 | – | 125 | 1,722 | (9 | ) | 8 | ||||||||||||||||||||||||
Net operating income16 | 10,513 | (71 | ) | (1,294 | ) | 9,148 | – | (124 | ) | 9,024 | (14 | ) | (1 | ) | ||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (2,492 | ) | – | 294 | (2,198 | ) | – | (328 | ) | (2,526 | ) | (1 | ) | (15 | ) | |||||||||||||||||||||
Net operating income | 8,021 | (71 | ) | (1,000 | ) | 6,950 | – | (452 | ) | 6,498 | (19 | ) | (7 | ) | ||||||||||||||||||||||
Operating expenses | (5,990 | ) | – | 709 | (5,281 | ) | – | (94 | ) | (5,375 | ) | 10 | (2 | ) | ||||||||||||||||||||||
Operating profit | 2,031 | (71 | ) | (291 | ) | 1,669 | – | (546 | ) | 1,123 | (45 | ) | (33 | ) | ||||||||||||||||||||||
Income from associates | 6 | – | (2 | ) | 4 | – | (3 | ) | 1 | (83 | ) | (75 | ) | |||||||||||||||||||||||
Profit before tax | 2,037 | (71 | ) | (293 | ) | 1,673 | – | (549 | ) | 1,124 | (45 | ) | (33 | ) | ||||||||||||||||||||||
Net interest incomeremained broadly in line with 2008 excluding the one-off interest income which arose on recovery of transactional taxes on insurance transactions in Brazil in 2008. Net interest income decreased in Personal Financial Services as average customer lending volumes declined, primarily driven by actions taken to tighten credit criteria and manage down existing higher risk portfolios including credit cards, personal loans and vehicle finance. The effect was partly offset by higher income on increased lending to commercial customers, primarily in Brazil. Repricing initiatives taken during 2008 and early 2009 drove increased spreads on lending products. |
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Geographical regions > Latin America > 2008 |
2008 compared with 2007 | ||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||
acquisitions, | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
2007 | disposals | at 2008 | acquisitions | Under- | 2008 | Re- | Under- | |||||||||||||||||||||||||||||
as | & dilution | Currency | exchange | and | lying | as | ported | lying | ||||||||||||||||||||||||||||
reported | gains | 10 | translation | 11 | rates | 17 | disposals | 10 | change | reported | change | 13 | change | 13 | ||||||||||||||||||||||
Latin America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | % | |||||||||||||||||||||||||||
Net interest income | 5,576 | – | 155 | 5,731 | – | 727 | 6,458 | 16 | 13 | |||||||||||||||||||||||||||
Net fee income | 2,153 | – | 58 | 2,211 | – | (44 | ) | 2,167 | 1 | (2 | ) | |||||||||||||||||||||||||
Other income15 | 1,536 | (11 | ) | 23 | 1,548 | 71 | 269 | 1,888 | 23 | 17 | ||||||||||||||||||||||||||
Net operating income16 | 9,265 | (11 | ) | 236 | 9,490 | 71 | 952 | 10,513 | 13 | 10 | ||||||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (1,697 | ) | – | (64 | ) | (1,761 | ) | – | (731 | ) | (2,492 | ) | (47 | ) | (42 | ) | ||||||||||||||||||||
Net operating income | 7,568 | (11 | ) | 172 | 7,729 | 71 | 221 | 8,021 | 6 | 3 | ||||||||||||||||||||||||||
Operating expenses | (5,402 | ) | – | (190 | ) | (5,592 | ) | – | (398 | ) | (5,990 | ) | (11 | ) | (7 | ) | ||||||||||||||||||||
Operating profit | 2,166 | (11 | ) | (18 | ) | 2,137 | 71 | (177 | ) | 2,031 | (6 | ) | (8 | ) | ||||||||||||||||||||||
Income from associates | 12 | – | – | 12 | – | (6 | ) | 6 | (50 | ) | (50 | ) | ||||||||||||||||||||||||
Profit before tax | 2,178 | �� | (11 | ) | (18 | ) | 2,149 | 71 | (183 | ) | 2,037 | (6 | ) | (9 | ) | |||||||||||||||||||||
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Geographical regions > Latin America > Profit/(loss) before tax by customer group |
2009 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Latin America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income/(expense) | 3,736 | 1,544 | 590 | 19 | (5 | ) | (311 | ) | 5,573 | |||||||||||||||||||
Net fee income | 948 | 490 | 251 | 28 | 12 | – | 1,729 | |||||||||||||||||||||
Trading income excluding net interest income | 25 | 38 | 573 | 3 | – | – | 639 | |||||||||||||||||||||
Net interest income/(expense) on trading activities | 4 | 2 | (108 | ) | – | – | 311 | 209 | ||||||||||||||||||||
Net trading income42 | 29 | 40 | 465 | 3 | – | 311 | 848 | |||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | – | – | – | |||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 510 | 12 | (38 | ) | – | 11 | – | 495 | ||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 510 | 12 | (38 | ) | – | 11 | – | 495 | ||||||||||||||||||||
Gains less losses from financial investments | 91 | – | 77 | – | – | – | 168 | |||||||||||||||||||||
Dividend income | 9 | 1 | 1 | – | – | – | 11 | |||||||||||||||||||||
Net earned insurance premiums | 1,752 | 105 | 43 | – | – | – | 1,900 | |||||||||||||||||||||
Other operating income/(expense) | 170 | 35 | 24 | 2 | (1 | ) | (97 | ) | 133 | |||||||||||||||||||
Total operating income | 7,245 | 2,227 | 1,413 | 52 | 17 | (97 | ) | 10,857 | ||||||||||||||||||||
Net insurance claims43 | (1,750 | ) | (58 | ) | (25 | ) | – | – | – | (1,833 | ) | |||||||||||||||||
Net operating income16 | 5,495 | 2,169 | 1,388 | 52 | 17 | (97 | ) | 9,024 | ||||||||||||||||||||
Loan impairment (charges)/ recoveries and other credit risk provisions | (2,046 | ) | (534 | ) | 57 | – | (3 | ) | – | (2,526 | ) | |||||||||||||||||
Net operating income | 3,449 | 1,635 | 1,445 | 52 | 14 | (97 | ) | 6,498 | ||||||||||||||||||||
Total operating expenses | (3,666 | ) | (1,236 | ) | (514 | ) | (41 | ) | (15 | ) | 97 | (5,375 | ) | |||||||||||||||
Operating profit/(loss) | (217 | ) | 399 | 931 | 11 | (1 | ) | – | 1,123 | |||||||||||||||||||
Share of profit in associates and joint ventures | 1 | – | – | – | – | – | 1 | |||||||||||||||||||||
Profit/(loss) before tax | (216 | ) | 399 | 931 | 11 | (1 | ) | – | 1,124 | |||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | (3.1 | ) | 5.6 | 13.2 | 0.2 | – | 15.9 | |||||||||||||||||||||
Cost efficiency ratio | 66.7 | 57.0 | 37.0 | 78.8 | 88.2 | 59.6 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 19,748 | 18,205 | 9,645 | 31 | – | 47,629 | ||||||||||||||||||||||
Total assets | 35,236 | 23,212 | 57,491 | 328 | 281 | (581 | ) | 115,967 | ||||||||||||||||||||
Customer accounts | 30,628 | 19,775 | 20,142 | 2,344 | – | 72,889 |
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2008 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Latin America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income/(expense) | 4,582 | 1,637 | 579 | 22 | (35 | ) | (327 | ) | 6,458 | |||||||||||||||||||
Net fee income | 1,339 | 536 | 248 | 35 | 9 | – | 2,167 | |||||||||||||||||||||
Trading income excluding net interest income | 123 | 27 | 200 | 3 | 4 | – | 356 | |||||||||||||||||||||
Net interest income/(expense) on trading activities | 7 | 4 | 8 | – | (2 | ) | 327 | 345 | ||||||||||||||||||||
Net trading income42 | 130 | 31 | 208 | 3 | 2 | 327 | 701 | |||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | – | – | – | |||||||||||||||||||||
Net income from other financial instruments designated at fair value | 187 | – | 139 | – | 38 | – | 364 | |||||||||||||||||||||
Net income from financial instruments designated at fair value | 187 | – | 139 | – | 38 | – | 364 | |||||||||||||||||||||
Gains less losses from financial investments | 132 | 21 | 21 | 2 | – | – | 176 | |||||||||||||||||||||
Dividend income | 16 | 1 | 3 | – | – | – | 20 | |||||||||||||||||||||
Net earned insurance premiums | 1,547 | 82 | 88 | – | – | – | 1,717 | |||||||||||||||||||||
Other operating income | 244 | 57 | 39 | 3 | 8 | (51 | ) | 300 | ||||||||||||||||||||
Total operating income | 8,177 | 2,365 | 1,325 | 65 | 22 | (51 | ) | 11,903 | ||||||||||||||||||||
Net insurance claims43 | (1,281 | ) | (42 | ) | (68 | ) | – | 1 | – | (1,390 | ) | |||||||||||||||||
Net operating income16 | 6,896 | 2,323 | 1,257 | 65 | 23 | (51 | ) | 10,513 | ||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (2,120 | ) | (340 | ) | (29 | ) | – | (3 | ) | – | (2,492 | ) | ||||||||||||||||
Net operating income | 4,776 | 1,983 | 1,228 | 65 | 20 | (51 | ) | 8,021 | ||||||||||||||||||||
Total operating expenses | (4,114 | ) | (1,277 | ) | (587 | ) | (49 | ) | (14 | ) | 51 | (5,990 | ) | |||||||||||||||
Operating profit | 662 | 706 | 641 | 16 | 6 | – | 2,031 | |||||||||||||||||||||
Share of profit in associates and joint ventures | 6 | – | – | – | – | – | 6 | |||||||||||||||||||||
Profit before tax | 668 | 706 | 641 | 16 | 6 | – | 2,037 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 7.2 | 7.6 | 6.9 | 0.2 | – | 21.9 | ||||||||||||||||||||||
Cost efficiency ratio | 59.7 | 55.0 | 46.7 | 75.4 | 60.9 | 57.0 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 18,523 | 15,460 | 8,273 | 31 | – | 42,287 | ||||||||||||||||||||||
Total assets | 30,320 | 19,382 | 53,870 | 391 | 361 | (1,378 | ) | 102,946 | ||||||||||||||||||||
Customer accounts | 27,564 | 14,367 | 15,384 | 2,128 | – | 59,443 |
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Geographical regions > Latin America > Profit/(loss) before tax by customer group // Products and services |
2007 | ||||||||||||||||||||||||||||
Personal | Global | Inter- | ||||||||||||||||||||||||||
Financial | Commercial | Banking & | Private | segment | ||||||||||||||||||||||||
Services | Banking | Markets | Banking | Other | elimination | 50 | Total | |||||||||||||||||||||
Latin America | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||
Net interest income | 3,983 | 1,407 | 410 | 20 | 3 | (247 | ) | 5,576 | ||||||||||||||||||||
Net fee income | 1,372 | 485 | 250 | 40 | 6 | – | 2,153 | |||||||||||||||||||||
Trading income excluding net interest income | 67 | 39 | 164 | 2 | – | – | 272 | |||||||||||||||||||||
Net interest income on trading activities | 10 | 1 | 18 | – | – | 247 | 276 | |||||||||||||||||||||
Net trading income42 | 77 | 40 | 182 | 2 | – | 247 | 548 | |||||||||||||||||||||
Changes in fair value of long-term debt issued and related derivatives | – | – | – | – | – | – | – | |||||||||||||||||||||
Net income from other financial instruments designated at fair value | 314 | – | 6 | – | – | – | 320 | |||||||||||||||||||||
Net income from financial instruments designated at fair value | 314 | – | 6 | – | – | – | 320 | |||||||||||||||||||||
Gains less losses from financial investments | 120 | 51 | 82 | 1 | (1 | ) | – | 253 | ||||||||||||||||||||
Gains arising from dilution of interests in associates | – | – | – | – | 11 | – | 11 | |||||||||||||||||||||
Dividend income | 5 | 2 | 2 | – | – | – | 9 | |||||||||||||||||||||
Net earned insurance premiums | 1,448 | 66 | 80 | – | – | – | 1,594 | |||||||||||||||||||||
Other operating income | 145 | 69 | 31 | 8 | 12 | (37 | ) | 228 | ||||||||||||||||||||
Total operating income | 7,464 | 2,120 | 1,043 | 71 | 31 | (37 | ) | 10,692 | ||||||||||||||||||||
Net insurance claims43 | (1,330 | ) | (37 | ) | (60 | ) | – | – | – | (1,427 | ) | |||||||||||||||||
Net operating income16 | 6,134 | 2,083 | 983 | 71 | 31 | (37 | ) | 9,265 | ||||||||||||||||||||
Loan impairment (charges)/ recoveries and other credit risk provisions | (1,492 | ) | (212 | ) | 13 | – | (6 | ) | – | (1,697 | ) | |||||||||||||||||
Net operating income | 4,642 | 1,871 | 996 | 71 | 25 | (37 | ) | 7,568 | ||||||||||||||||||||
Total operating expenses | (3,758 | ) | (1,132 | ) | (481 | ) | (46 | ) | (22 | ) | 37 | (5,402 | ) | |||||||||||||||
Operating profit | 884 | 739 | 515 | 25 | 3 | – | 2,166 | |||||||||||||||||||||
Share of profit in associates and joint ventures | 9 | 1 | 2 | – | – | – | 12 | |||||||||||||||||||||
Profit before tax | 893 | 740 | 517 | 25 | 3 | – | 2,178 | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
Share of HSBC’s profit before tax | 3.7 | 3.1 | 2.1 | 0.1 | – | 9.0 | ||||||||||||||||||||||
Cost efficiency ratio | 61.3 | 54.3 | 48.9 | 64.8 | 71.0 | 58.3 | ||||||||||||||||||||||
Balance sheet data41 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||
Loans and advances to customers (net) | 21,680 | 16,243 | 9,935 | 65 | – | 47,923 | ||||||||||||||||||||||
Total assets | 35,181 | 21,049 | 46,606 | 302 | 261 | (750 | ) | 102,649 | ||||||||||||||||||||
Customer accounts | 30,628 | 15,524 | 13,950 | 1,190 | – | 61,292 |
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Products and services / Other information > Funds under management |
• | foreign exchange; | |
• | currency, interest rate, bond, credit, equity and other derivatives; | |
• | government and non-government fixed income and money market instruments; | |
• | precious metals and exchange traded futures; | |
• | equity services, including research, sales and trading for institutional, corporate and private clients and asset management services; | |
• | distribution of capital markets instruments, including debt, equity and structured products, utilising HSBC’s global network; and | |
• | securities services, where HSBC is one of the world’s leading custodians providing custody |
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and clearing services and funds administration to both domestic and cross-border investors. |
• | financing and capital markets, which comprises capital raising, including debt and equity capital, corporate finance and advisory services, bilateral and syndicated lending, leveraged and acquisition finance, structured and project finance, lease finance, and non-retail deposit-taking; | |
• | international, regional and domestic payments and cash management services; and | |
• | other transaction services, including trade services, factoring and banknotes. |
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Funds under management | ||||||||
At 1 January | 735 | 844 | ||||||
Net new money | 36 | (1 | ) | |||||
Value change | 76 | (159 | ) | |||||
Exchange and other | 10 | 51 | ||||||
At 31 December | 857 | 735 | ||||||
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Funds under management by business | ||||||||
Global Asset Management | 423 | 370 | ||||||
Private Banking | 251 | 219 | ||||||
Affiliates | 3 | 2 | ||||||
Other | 180 | 144 | ||||||
857 | 735 | |||||||
Funds under management at 31 December 2009 were US$857 billion, an increase of 17 per cent when compared with 2008. Both Global Asset Management and Private Banking fund holdings |
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Other information > Assets held in custody / Property / Legal proceedings / Data security / Footnotes |
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1 | The percentage increase in net operating income before loan impairment and other credit risk charges since the previous year. | |
2 | As a percentage of net operating income before loan impairment charges and other credit risk provisions. | |
3 | Other income comprises net operating income before loan impairment charges and other credit risk provisions less net interest income and net fee income. | |
4 | Total operating expenses divided by net operating income before loan impairment and other credit risk charges. | |
5 | Net operating income divided by average risk-weighted assets. | |
6 | Profit attributable to ordinary shareholders divided by average invested capital. | |
7 | The return on average total shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by the average total shareholders’ equity. | |
8 | The percentage increase in dividends per share since the previous year, based on the dividends paid in respect of the year to which the dividend relates. | |
9 | Basic earnings per ordinary share is defined in Note 13 on the Financial Statements. |
10 | These columns comprise the net increments or decrements in profits in the current year compared with the previous year which are attributable to acquisitions or disposals of subsidiaries and/or movements in fair value of own debt attributable to credit spread (together referred to as ‘adjustments’ in the tables for HSBC, the ‘Other’ customer group and certain geographical regions). Comparatives for 2007 include gains arising on the dilution of interests in associates, where relevant. The inclusion of acquisitions and disposals is determined in the light of events each year. | |
11 | ‘Currency translation’ is the effect of translating the results of subsidiaries and associates for the previous year at the average rates of exchange applicable in the current year. | |
12 | Excluding adjustments in 2008. | |
13 | Positive numbers are favourable: negative numbers are unfavourable. | |
14 | Changes in fair value of long-term debt issued. | |
15 | ‘Other income’ in this context comprises net trading income, net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, gains arising from dilution of interests in associates, dividend income, net earned insurance premiums and other operating income less net insurance claims incurred and movement in liabilities to policyholders. | |
16 | Net operating income before loan impairment charges and other credit risk provisions. | |
17 | Excluding adjustments in 2007. |
18 | The change in fair value related to movements in the Group’s credit spread on long-term debt resulted in an expense of US$6.5 billion in 2009 (2008: income of US$6.6 billion; 2007: income of US$3.1 billion). | |
19 | Net interest income includes the cost of funding trading assets, while the related external revenues are reported in trading income. In HSBC’s customer group results, the cost of funding trading assets is included with Global Banking and Markets’ net trading income as an interest expense. | |
20 | Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). | |
21 | Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate paid on average interest-bearing funds. | |
22 | Net interest margin is net interest income expressed as an annualised percentage of AIEA. | |
23 | The cost of internal funding of trading assets was US$1,309 million (2008: US$5,547 million; 2007: US$5,433 million) and is excluded from the reported ‘Net trading income’ line and included in ‘Net interest income’. However, this cost is reinstated in ‘Net trading income’ in HSBC’s customer group and global business reporting. | |
24 | Net trading income includes an expense of US$444 million (2008: income of US$529 million; 2007: income of US$34 million), associated with changes in the fair value of issued structured notes and other hybrid instrument liabilities derived from movements in HSBC issuance spreads. | |
25 | Other changes in fair value include gains and losses arising from changes in the fair value of derivatives that are managed in conjunction with HSBC’s long-term debt issued. | |
26 | Net insurance claims incurred and movement in liabilities to policyholders arise from both life and non-life insurance business. For non-life business, amounts reported represent the cost of claims paid during the year and the estimated cost of notified claims. For life |
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Footnotes // Impact of Market Turmoil > Background and disclosure policy |
business, the main element of claims is the liability to policyholders created on the initial underwriting of the policy and any subsequent movement in the liability that arises, primarily from the attribution of investment performance to savings-related policies. Consequently, claims rise in line with increases in sales of savings-related business and with investment market growth. | ||
27 | The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been restated accordingly. | |
28 | Expressed as a percentage of average invested capital. | |
29 | Average invested capital is measured as average total shareholders’ equity after: |
– | adding back the average balance of goodwill amortised pre-transition to IFRSs or subsequently written-off, directly to reserves (less goodwill previously amortised in respect of the French regional banks sold in 2008); | |
– | deducting the average balance of HSBC’s revaluation surplus relating to property held for own use. This reserve was generated when determining the deemed carrying cost of such properties on transition to IFRSs and will run down over time as the properties are sold; | |
– | deducting average preference shares and other equity instruments issued by HSBC Holdings; and | |
– | deducting average reserves for unrealised gains/(losses) on effective cash flow hedges and available-for-sale securities. |
30 | Return on invested capital is based on the profit attributable to ordinary shareholders of the parent company less goodwill previously amortised in respect of the French regional banks sold in 2008. | |
31 | ‘Currency translation’ is the effect of translating the assets and liabilities of subsidiaries and associates for the previous year-end at the rates of exchange applicable at the current year-end. | |
32 | Interest income on trading assets is reported as ‘Net trading income’ in the consolidated income statement. | |
33 | Interest income on financial assets designated at fair value is reported as ‘Net income from financial instruments designated at fair value’ in the consolidated income statement. | |
34 | Brazilian operations comprise HSBC Bank Brasil S.A.-Banco Múltiplo and subsidiaries, plus HSBC Serviços e Participações Limitada. | |
35 | This table analyses interest-bearing bank deposits only. See page 58 for an analysis of all bank deposits. | |
36 | Interest expense on financial liabilities designated at fair value is reported as ‘Net income on financial instruments designated at fair value’ in the consolidated income statement, other than interest on own debt. | |
37 | This table analyses interest-bearing customer accounts only. See page 59 for an analysis of all customer accounts. | |
38 | For the purpose of calculating the ratios, earnings consist of income from continuing operations before taxation and minority interests, plus fixed charges, and after deduction of the unremitted pre-tax income of associated undertakings. Fixed charges consist of total interest expense, including or excluding interest on deposits, as appropriate, dividends on preference shares and other equity instruments, as applicable, and the proportion of rental expense deemed representative of the interest factor. | |
39 | Net interest margin is calculated as net interest income divided by average interest earning assets. | |
40 | The main items reported under ‘Other’ are certain property activities, unallocated investment activities, centrally held investment companies, gains arising from the dilution of interests in associates, movements in the fair value of own debt designated at fair value (the remainder of the Group’s gain on own debt is included in Global Banking and Markets), and HSBC’s holding company and financing operations. The results also 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, and costs incurred by the Group Service Centres and Shared Service Organisations and associated recoveries. At 31 December 2009, there were no gains arising from the dilution of interests in associates (2008: nil; 2007: US$1.1 billion) and fair value gains on HSBC’s own debt designated at fair value were US$6.2 billion (2008: US$6.7 billion income; 2007: US$2.8 billion expense). | |
41 | Assets by geographical region and customer group include intra-HSBC items. These items are eliminated, where appropriate, under the heading ‘Intra-HSBC items’. | |
42 | In the analyses of customer groups and global businesses, net trading income comprises all gains and losses from changes in the fair value of financial assets and financial liabilities classified as held for trading, together with related external and internal interest income and interest expense, and dividends received; in the statutory presentation internal interest income and expense are eliminated. | |
43 | Net insurance claims incurred and movement in liabilities to policyholders. | |
44 | In 2009, Global Markets included a US$444 million expense on the widening of credit spreads on structured liabilities (2008: income of US$529 million; 2007: income of US$34 million). | |
45 | Total income earned on securities services products in the Group amounted to US$1.4 billion (2008: US$2.2 billion; 2007: US$2.0 billion), of which US$1.4 billion was in Global Banking and Markets (2008: US$2.1 billion; 2007: US$1.9 billion) and US$19 million was in Commercial Banking (2008: US$45 million; 2007: US$33 million). | |
46 | Total income earned on payments and cash management products in the Group amounted to US$3.8 billion (2008: US$5.2 billion; 2007: US$5.2 billion), of which US$2.8 billion was in Commercial Banking (2008: US$3.5 billion; 2007: US$3.5 billion) and US$1.1 billion was in Global Banking and Markets (2008: US$1.7 billion; 2007: US$1.6 billion). | |
47 | Total income earned on other transaction services in the Group amounted to US$1.8 billion (2008: US$1.8 billion; 2007: US$1.4 billion), of which US$1.3 billion was in Commercial Banking relating to trade and supply chain (2008: US$1.3 billion; 2007: US$1.0 billion) and US$507 million was in Global Banking and Markets of which US$382 million related to trade and supply chain (2008: US$355 million; 2007: US$270 million) and US$125 million related to banknotes and other (2008: US$126 million; 2007: US$102 million) | |
48 | ‘Other’ in Global Banking and Markets includes net interest earned on free capital held in the global business not assigned to products. | |
49 | Trading assets and financial investments held in Europe, and by Global Banking and Markets in North America, include financial assets which may be repledged or resold by counterparties. | |
50 | Inter-segment elimination comprises (i) the costs of shared services and Group Service Centres included within ‘Other’ which are recovered from customer groups, and (ii) the intra-segment funding costs of trading activities undertaken within Global Banking and Markets. HSBC’s Balance Sheet Management business, reported within Global Banking and Markets, provides funding to the trading businesses. To report Global Banking and Markets’ ‘Net trading income’ on a fully funded basis, ‘Net interest income’ and ‘Net interest income/(expense) on trading activities’ are grossed up to reflect internal funding transactions prior to their elimination in the inter-segment column. | |
51 | France primarily comprises the domestic operations of HSBC France, HSBC Assurances and the Paris branch of HSBC Bank. | |
52 | US includes the impairment of goodwill in respect of Personal Financial Services – North America as described in Note 22 on the Financial Statements. |
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• | provide high quality and meaningful disclosures useful to decision-making; | |
• | review and enhance their financial instrument disclosures for key areas of interest; | |
• | assess the applicability and relevance of good practice recommendations to their disclosures, acknowledging the importance of such guidance; | |
• | seek to enhance the comparability of financial statement disclosures across the UK banking sector; and | |
• | clearly differentiate in their annual reports between information that is audited and information that is unaudited. |
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Overview of exposure > Reclassification of financial assets |
• | the Financial Stability Forum: ‘Enhancing market and institutional resilience’; | |
• | the Committee of European Banking Supervisors: ‘Banks’ transparency on activities and products affected by the recent market turmoil’ and ‘Consultation Paper 30: Disclosure guidelines: Lessons learnt from the financial crisis’; and | |
• | the IASB Expert Advisory Panel: ‘Measuring and disclosing the fair value of financial instruments in markets that are no longer active’. |
• | overview of exposure; | |
• | business model; | |
• | risk management; | |
• | accounting policies; | |
• | nature and extent of HSBC’s exposures; | |
• | fair values of financial instruments; and | |
• | special purpose entities. |
At 31 December 2009 | At 31 December 2008 | |||||||||||||||||||
Including | Including | |||||||||||||||||||
Carrying | sub-prime | Carrying | sub-prime | |||||||||||||||||
amount | and Alt-A | amount | and Alt-A | |||||||||||||||||
US$bn | US$bn | US$bn | US$bn | |||||||||||||||||
ABSs | 71 | 11 | 81 | 12 | ||||||||||||||||
– fair value through profit or loss | 12 | 1 | 14 | 1 | ||||||||||||||||
– available for sale1 | 48 | 8 | 56 | 9 | ||||||||||||||||
– held to maturity1 | 3 | – | 3 | – | ||||||||||||||||
– loans and receivables | 8 | 2 | 8 | 2 | ||||||||||||||||
Loans at fair value through profit or loss | 2 | 2 | 4 | 3 | ||||||||||||||||
Leveraged finance loans | 6 | – | 6 | – | ||||||||||||||||
– loans and receivables | 6 | – | 6 | – | ||||||||||||||||
79 | 13 | 91 | 15 | |||||||||||||||||
2009 | ||||
US$bn | ||||
Balance at 1 January 2009 | 81.0 | |||
Net ABS sales (principally of US Government agency and sponsored enterprises) | (5.4 | ) | ||
Principal amortisation of available-for-sale ABSs (repayment at par) | (6.1 | ) | ||
Movement on fair values of available-for-sale ABSs | 4.1 | |||
Net sales, principal amortisation and write-downs of ABSs classified as trading | (2.1 | ) | ||
Exchange differences and other movements | (0.9 | ) | ||
Balance at 31 December 2009 | 70.6 | |||
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At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Reclassification to loans and receivables | ||||||||||||||||
ABSs | 7,827 | 6,177 | 7,991 | 6,139 | ||||||||||||
Trading loans – commercial mortgage loans | 553 | 506 | 587 | 557 | ||||||||||||
Leveraged finance and syndicated loans | 5,824 | 5,434 | 5,670 | 4,239 | ||||||||||||
14,204 | 12,117 | 14,248 | 10,935 | |||||||||||||
Reclassification to available for sale | ||||||||||||||||
Corporate debt and other securities | 1,408 | 1,408 | 2,401 | 2,401 | ||||||||||||
15,612 | 13,525 | 16,649 | 13,336 | |||||||||||||
Effect on income statement for 2009 | Effect on income statement for 2008 | |||||||||||||||||||||||
Recorded | Assuming | Net effect | Recorded in the | Assuming | Net effect | |||||||||||||||||||
in the income | no reclass- | of reclass- | income | no reclass- | of reclass- | |||||||||||||||||||
statement | 2 | ification | 3 | ification | statement | 2 | ification | 3 | ification | |||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Financial assets reclassified to loans and receivables | ||||||||||||||||||||||||
ABSs | 511 | 767 | (256 | ) | 303 | (1,549 | ) | 1,852 | ||||||||||||||||
Trading loans – commercial | 32 | 15 | 17 | 17 | (13 | ) | 30 | |||||||||||||||||
mortgage loans | ||||||||||||||||||||||||
Leveraged finance and syndicated loans | 434 | 1,494 | (1,060 | ) | 192 | (1,239 | ) | 1,431 | ||||||||||||||||
977 | 2,276 | (1,299 | ) | 512 | (2,801 | ) | 3,313 | |||||||||||||||||
Financial assets reclassified to available for sale | ||||||||||||||||||||||||
Corporate debt and other securities | 101 | 301 | (200 | ) | 22 | (202 | ) | 224 | ||||||||||||||||
1,078 | 2,577 | (1,499 | ) | 534 | (3,003 | ) | 3,537 | |||||||||||||||||
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Overview of exposure > Financial effect / ABSs classified as available for sale |
Half-year to | ||||||||||||||||
31 Dec | 30 Jun | 31 Dec | 30 Jun | |||||||||||||
2009 | 2009 | 2008 | 2008 | |||||||||||||
US$bn | US$bn | US$bn | US$bn | |||||||||||||
Write-downs taken to income statement | (0.6 | ) | (1.3 | ) | (2.3 | ) | (4.0 | ) | ||||||||
Net movement on available-for-sale reserve on ABSs in the period | 5.3 | 1.2 | (10.4 | ) | (6.1 | ) | ||||||||||
Closing balance of available-for-sale reserve relating to ABSs | (12.2 | ) | (17.5 | ) | (18.7 | ) | (8.3 | ) |
Write-downs/(write-backs) during half-year to | Carrying amount at | |||||||||||||||||||||||||||||||
31 Dec | 30 Jun | 31 Dec | 30 Jun | 31 Dec | 30 Jun | 31 Dec | 30 Jun | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 2008 | 2009 | 2009 | 2008 | 2008 | |||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Sub-prime mortgage-related assets | ||||||||||||||||||||||||||||||||
– loan securitisation | 80 | 156 | 292 | 301 | 758 | 943 | 1,213 | 1,565 | ||||||||||||||||||||||||
– credit trading | 17 | 83 | 150 | 665 | 282 | 303 | 428 | 1,377 | ||||||||||||||||||||||||
Other ABSs | (196 | ) | 103 | 486 | 1,327 | 990 | 1,376 | 2,201 | 8,923 | |||||||||||||||||||||||
Impairments on reclassified assets4 | 3 | 160 | 26 | – | 15,612 | 16,308 | 16,649 | – | ||||||||||||||||||||||||
Derivative exposure to monolines | �� | |||||||||||||||||||||||||||||||
– investment grade counterparts | (78 | ) | 25 | 130 | 598 | 897 | 1,593 | 2,089 | 1,206 | |||||||||||||||||||||||
– non-investment grade counterparts | 45 | 241 | 370 | 608 | 408 | 510 | 352 | 78 | ||||||||||||||||||||||||
Leveraged finance loans5 | (120 | ) | (11 | ) | – | 278 | 196 | 285 | 271 | 7,375 | ||||||||||||||||||||||
Other credit related items | (19 | ) | 5 | 95 | 99 | 61 | 116 | 186 | 321 | |||||||||||||||||||||||
Available-for-sale impairments and | 833 | 564 | 655 | 55 | ||||||||||||||||||||||||||||
other non-trading related items | ||||||||||||||||||||||||||||||||
565 | 1,326 | 2,204 | 3,931 | |||||||||||||||||||||||||||||
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At 31 December 2009 | At 31 December 2008 | |||||||||||||||||||||||
Directly | Directly | |||||||||||||||||||||||
held/ | held/ | |||||||||||||||||||||||
Solitaire | 6 | SPEs | Total | Solitaire | 6 | SPEs | Total | |||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Total carrying amount of net principal exposure | 34,040 | 14,021 | 48,061 | 41,601 | 14,610 | 56,211 | ||||||||||||||||||
Total available-for-sale reserves | (7,349 | ) | (4,864 | ) | (12,213 | ) | (11,528 | ) | (7,204 | ) | (18,732 | ) |
Half year to 31 December | Half year to 30 June | |||||||||||||||||||||||
Directly | Directly | |||||||||||||||||||||||
held/ | held/ | |||||||||||||||||||||||
Solitaire | 6 | SPEs | Total | Solitaire | 6 | SPEs | Total | |||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
Impairment charge: | ||||||||||||||||||||||||
– borne by HSBC | 883 | – | 883 | 539 | – | 539 | ||||||||||||||||||
– allocated to capital note holders7 | – | 20 | 20 | – | 646 | 646 | ||||||||||||||||||
Total impairment charge | 883 | 20 | 903 | 539 | 646 | 1,185 | ||||||||||||||||||
2008 | ||||||||||||||||||||||||
Impairment charge: | ||||||||||||||||||||||||
– borne by HSBC | 224 | – | 224 | 55 | – | 55 | ||||||||||||||||||
– allocated to capital note holders7 | – | 159 | 159 | – | 134 | 134 | ||||||||||||||||||
Total impairment charge | 224 | 159 | 383 | 55 | 134 | 189 | ||||||||||||||||||
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Overview of exposure > AFS ABSs impairment // Business model / Risk management / Accounting policies / Nature and extent of exposures |
• | purchasing US mortgage loans with the intention of structuring and placing securitisations into the market; | |
• | trading in ABSs, including MBSs, in secondary markets; | |
• | holding MBSs and other ABSs in balance sheet management activities, with the intention of earning net interest income over the life of the securities; | |
• | holding MBSs and other ABSs as part of investment portfolios, including the structured investment vehicles (‘SIV’s), SICs and money market funds described under ‘Special purpose entities’ below, with the intention of earning net interest income and management fees; |
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• | holding MBSs or other ABSs in the trading portfolio hedged through credit derivative protection, typically purchased from monolines, with the intention of earning the spread differential over the life of the instruments; and | |
• | originating leveraged finance loans for the purposes of syndicating or selling them down in order to generate a trading profit and holding them in order to earn interest margin over their lives. |
• | Credit risk – ‘Credit exposure’ (see page 206); | |
• | Liquidity risk – ‘The impact of market turmoil on the Group’s liquidity risk position’ (see page 248); and | |
• | Market risk – ‘The impact of market turmoil on market risk’ (see page 252). |
• | direct lending held at fair value through profit or loss; | |
• | ABSs including MBSs and CDOs; | |
• | monolines; | |
• | credit derivative product companies (‘CDPC’s); and | |
• | leveraged finance transactions. |
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Overview of exposure > Nature and extent of exposures |
• | sub-prime: loans to customers who have limited credit histories, modest incomes, high debt-to-income ratios or have experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy or other credit-related actions. For US mortgages, standard US credit scores are primarily used to determine whether a loan is sub-prime. US Home Equity Lines of Credit (‘HELoC’s) are classified as sub-prime. For non-US mortgages, management judgement is used to identify loans with similar risk characteristics to sub-prime, for example, UK non-conforming mortgages (see below); | |
• | US Home Equity Lines of Credit: a form of revolving credit facility provided to customers, which is supported by a first or second lien charge over residential property. Global Banking and Markets’ holdings of HELoCs are classified as US sub-prime residential mortgage assets; | |
• | US Alt-A: loans classified as Alt-A are regarded as lower risk than sub-prime, but they share higher risk characteristics than lending under fully conforming standard criteria. US credit scores, as well as the level and completeness of mortgage documentation held (such as whether there is proof of income), are considered when determining whether an Alt-A classification is appropriate. Mortgages in the US which are not eligible to be sold to the major government sponsored mortgage agencies, Ginnie Mae (Government National Mortgage Association), Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation), are classified as Alt-A if they do not meet the criteria for classification as sub-prime; | |
• | US Government agency and US Government sponsored enterprises mortgage-related assets: securities that are guaranteed by US Government agencies, such as Ginnie Mae, or are guaranteed by US Government sponsored entities, including Fannie Mae and Freddie Mac; | |
• | UK non-conforming mortgage-related assets: UK mortgages that do not meet normal lending criteria. This includes instances where the normal level of documentation has not been provided (for example, in the case of self-certification of income), or where increased risk factors, such as poor credit history, result in lending at a rate that is higher than the normal lending rate. UK non-conforming mortgages are treated as sub-prime exposures; and |
• | other mortgage-related assets: residential mortgage-related assets that do not meet any of the classifications described above. Prime residential mortgage-related assets are included in this category. |
• | commercial property mortgage-related assets: MBSs with collateral other than residential mortgage-related assets; | |
• | leveraged finance-related assets: securities with collateral relating to leveraged finance loans; | |
• | student loan-related assets: securities with collateral relating to student loans; and | |
• | other assets: securities with other receivable-related collateral. |
• | residential MBSs with a carrying amount of US$1.0 billion (2008: US$0.9 billion); | |
• | residential MBS CDOs with a carrying amount of US$15 million (2008: US$39 million); and | |
• | ABSs other than residential MBSs and MBS CDOs with a carrying amount of US$9.2 billion (2008: US$9.8 billion). |
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Designated | Of which | |||||||||||||||||||||||||||
at fair value | held through | |||||||||||||||||||||||||||
Available | Held to | through | Loans and | consolidated | ||||||||||||||||||||||||
Trading | for sale | maturity | profit or loss | receivables | Total | SPEs | ||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||
Sub-prime residential mortgage-related assets | 2,063 | 2,782 | – | – | 837 | 5,682 | 3,213 | |||||||||||||||||||||
Direct lending | 1,439 | – | – | – | – | 1,439 | 913 | |||||||||||||||||||||
MBSs and MBS CDOs8 | 624 | 2,782 | – | – | 837 | 4,243 | 2,300 | |||||||||||||||||||||
US Alt-A residential mortgage-related assets | 191 | 5,403 | 192 | – | 882 | 6,668 | 3,672 | |||||||||||||||||||||
Direct lending | 113 | – | – | – | – | 113 | – | |||||||||||||||||||||
MBSs8 | 78 | 5,403 | 192 | – | 882 | 6,555 | 3,672 | |||||||||||||||||||||
US Government agency and sponsored enterprises mortgage-related assets | ||||||||||||||||||||||||||||
MBSs8 | 375 | 13,332 | 2,333 | – | – | 16,040 | 322 | |||||||||||||||||||||
Other residential mortgage- | 1,646 | 4,582 | – | 335 | 1,401 | 7,964 | 3,160 | |||||||||||||||||||||
related assets | ||||||||||||||||||||||||||||
Direct lending | 452 | – | – | – | – | 452 | – | |||||||||||||||||||||
MBSs8 | 1,194 | 4,582 | – | 335 | 1,401 | 7,512 | 3,160 | |||||||||||||||||||||
Commercial property mortgage-related assets | ||||||||||||||||||||||||||||
MBSs and MBS CDOs8 | 414 | 7,535 | – | 103 | 2,143 | 10,195 | 5,730 | |||||||||||||||||||||
Leveraged finance-related assets | ||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | 555 | 5,150 | – | – | 484 | 6,189 | 4,144 | |||||||||||||||||||||
Student loan-related assets | ||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | 141 | 4,948 | – | – | 145 | 5,234 | 4,127 | |||||||||||||||||||||
Other assets | ||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | 2,302 | 4,329 | – | 6,025 | 1,987 | 14,643 | 2,696 | |||||||||||||||||||||
7,687 | 48,061 | 2,525 | 6,463 | 7,879 | 72,615 | 27,064 | ||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||
Sub-prime residential mortgage-related assets | 3,372 | 3,741 | – | 1 | 453 | 7,567 | 4,230 | |||||||||||||||||||||
Direct lending | 2,789 | – | – | – | – | 2,789 | 1,300 | |||||||||||||||||||||
MBSs and MBS CDOs8 | 583 | 3,741 | – | 1 | 453 | 4,778 | 2,930 | |||||||||||||||||||||
US Alt-A residential mortgage-related assets | 618 | 5,829 | 185 | – | 1,056 | 7,688 | 3,831 | |||||||||||||||||||||
Direct lending | 246 | – | – | – | – | 246 | – | |||||||||||||||||||||
MBSs8 | 372 | 5,829 | 185 | – | 1,056 | 7,442 | 3,831 | |||||||||||||||||||||
US Government agency and sponsored enterprises mortgage-related assets | ||||||||||||||||||||||||||||
MBSs8 | 1,127 | 20,312 | 2,412 | 51 | – | 23,902 | 441 | |||||||||||||||||||||
Other residential mortgage- | 1,633 | 4,272 | – | 31 | 1,413 | 7,349 | 2,822 | |||||||||||||||||||||
related assets9 | ||||||||||||||||||||||||||||
Direct lending | 677 | – | – | – | – | 677 | – | |||||||||||||||||||||
MBSs8 | 956 | 4,272 | – | 31 | 1,413 | 6,672 | 2,822 | |||||||||||||||||||||
Commercial property mortgage-related assets9 | ||||||||||||||||||||||||||||
MBSs and MBS CDOs8 | 589 | 6,802 | – | 86 | 2,124 | 9,601 | 4,985 | |||||||||||||||||||||
Leveraged finance-related assets | ||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | 784 | 4,489 | – | – | 204 | 5,477 | 3,667 | |||||||||||||||||||||
Student loan-related assets | ||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | 214 | 4,809 | – | 3 | 81 | 5,107 | 4,028 | |||||||||||||||||||||
Other assets | ||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | 3,068 | 5,957 | – | 6,371 | 2,660 | 18,056 | 3,941 | |||||||||||||||||||||
11,405 | 56,211 | 2,597 | 6,543 | 7,991 | 84,747 | 27,945 | ||||||||||||||||||||||
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Overview of exposure > Nature and extent of exposures |
2009 | At 31 December 2009 | |||||||||||||||||||||||||||||||
Gross fair value | ||||||||||||||||||||||||||||||||
Movements | Realised | Credit | ||||||||||||||||||||||||||||||
Other | gains/ | default | ||||||||||||||||||||||||||||||
compre- | (losses) in | swap | Net | |||||||||||||||||||||||||||||
Income | hensive | the income | Reclassi- | Gross | gross | principal | Carrying | |||||||||||||||||||||||||
statement | 11 | income | 12 | statement | 13 | fied | 14 | principal | 15 | protection | 16 | exposure | 17 | amount | 18 | |||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Mortgage-related assets | ||||||||||||||||||||||||||||||||
Sub-prime residential | ||||||||||||||||||||||||||||||||
Direct lending | (227 | ) | – | (40 | ) | – | 1,703 | – | 1,703 | 1,439 | ||||||||||||||||||||||
MBSs8 | (44 | ) | 187 | (130 | ) | 795 | 7,483 | 1,248 | 6,235 | 3,419 | ||||||||||||||||||||||
– high grade10 | (16) | 177 | 1 | 134 | 2,762 | 603 | 2,159 | 1,719 | ||||||||||||||||||||||||
– rated C to A | (25) | 10 | (131) | 661 | 4,616 | 645 | 3,971 | 1,700 | ||||||||||||||||||||||||
– not publicly rated | (3) | – | – | – | 105 | – | 105 | – | ||||||||||||||||||||||||
MBS CDOs8 | (2 | ) | (9 | ) | – | 2 | 138 | 15 | 123 | 29 | ||||||||||||||||||||||
– high grade10 | – | (1) | – | – | 36 | 15 | 21 | 17 | ||||||||||||||||||||||||
– rated C to A | (1) | (8) | – | 2 | 89 | – | 89 | 10 | ||||||||||||||||||||||||
– not publicly rated | (1) | – | – | – | 13 | – | 13 | 2 | ||||||||||||||||||||||||
(273 | ) | 178 | (170 | ) | 797 | 9,324 | 1,263 | 8,061 | 4,887 | |||||||||||||||||||||||
US Alt-A residential | ||||||||||||||||||||||||||||||||
Direct lending | – | – | – | – | 129 | – | 129 | 113 | ||||||||||||||||||||||||
MBSs8 | 95 | 661 | (143 | ) | 1,693 | 13,546 | 491 | 13,055 | 6,427 | |||||||||||||||||||||||
– high grade10 | (9) | 361 | 1 | 317 | 1,625 | 428 | 1,197 | 1,237 | ||||||||||||||||||||||||
– rated C to A | 103 | 300 | (144) | 1,376 | 11,885 | 63 | 11,822 | 5,176 | ||||||||||||||||||||||||
– not publicly rated | 1 | – | – | – | 36 | – | 36 | 14 | ||||||||||||||||||||||||
95 | 661 | (143 | ) | 1,693 | 13,675 | 491 | 13,184 | 6,540 | ||||||||||||||||||||||||
US Government agency and sponsored enterprises | ||||||||||||||||||||||||||||||||
MBSs8 | ||||||||||||||||||||||||||||||||
– high grade10 | 116 | 252 | (2 | ) | (123 | ) | 15,827 | – | 15,827 | 16,040 | ||||||||||||||||||||||
Other residential | ||||||||||||||||||||||||||||||||
Direct lending | 79 | – | 70 | – | 463 | – | 463 | 452 | ||||||||||||||||||||||||
MBSs8,9 | 71 | 625 | 37 | 50 | 8,741 | 91 | 8,650 | 7,443 | ||||||||||||||||||||||||
– high grade10 | 76 | 617 | 37 | 75 | 7,884 | 91 | 7,793 | 6,440 | ||||||||||||||||||||||||
– rated C to A | (5) | 10 | – | (34) | 773 | – | 773 | 941 | ||||||||||||||||||||||||
– not publicly rated | – | (2) | – | 9 | 84 | – | 84 | 62 | ||||||||||||||||||||||||
150 | 625 | 107 | 50 | 9,204 | 91 | 9,113 | 7,895 | |||||||||||||||||||||||||
Commercial property | ||||||||||||||||||||||||||||||||
MBS and MBS CDOs8,9 | 35 | 702 | (8 | ) | (104 | ) | 13,734 | 395 | 13,339 | 9,954 | ||||||||||||||||||||||
– high grade10 | 72 | 683 | (8) | (90) | 9,805 | 264 | 9,541 | 7,537 | ||||||||||||||||||||||||
– rated C to A | (37) | 17 | – | (12) | 3,860 | 131 | 3,729 | 2,365 | ||||||||||||||||||||||||
– not publicly rated | – | 2 | – | (2) | 69 | – | 69 | 52 | ||||||||||||||||||||||||
Leveraged finance-related assets | �� | |||||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | (1 | ) | 721 | – | (40 | ) | 7,516 | 895 | 6,621 | 5,612 | ||||||||||||||||||||||
– high grade10 | 14 | 758 | – | (41) | 6,620 | 414 | 6,206 | 5,301 | ||||||||||||||||||||||||
– rated C to A | (15) | (37) | – | 1 | 881 | 481 | 400 | 295 | ||||||||||||||||||||||||
– not publicly rated | – | – | – | – | 15 | – | 15 | 16 | ||||||||||||||||||||||||
Student loan-related assets | ||||||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | (6 | ) | 569 | 2 | 32 | 7,192 | 224 | 6,968 | 5,122 | |||||||||||||||||||||||
– high grade10 | 2 | 630 | – | 32 | 6,690 | 30 | 6,660 | 5,019 | ||||||||||||||||||||||||
– rated C to A | (8) | (61) | 2 | – | 477 | 194 | 283 | 76 | ||||||||||||||||||||||||
– not publicly rated | – | – | – | – | 25 | – | 25 | 27 | ||||||||||||||||||||||||
Other assets | ||||||||||||||||||||||||||||||||
ABS and ABS CDOs8 | 74 | 415 | (17 | ) | 91 | 17,608 | 8,797 | 8,811 | 6,327 | |||||||||||||||||||||||
– high grade10 | 18 | 288 | 10 | 31 | 12,846 | 8,607 | 4,239 | 3,564 | ||||||||||||||||||||||||
– rated C to A | 40 | 152 | (29) | 85 | 4,126 | 190 | 3,936 | 2,245 | ||||||||||||||||||||||||
– not publicly rated | 16 | (25) | 2 | (25) | 636 | – | 636 | 518 | ||||||||||||||||||||||||
Total | 190 | 4,123 | (231 | ) | 2,396 | 94,080 | 12,156 | 81,924 | 62,377 | |||||||||||||||||||||||
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2008 | At 31 December 2008 | |||||||||||||||||||||||||||||||
Gross fair value | ||||||||||||||||||||||||||||||||
Movements | Realised | Credit | ||||||||||||||||||||||||||||||
Other | gains/ | Default | ||||||||||||||||||||||||||||||
compre- | (losses) in | swap | Net | |||||||||||||||||||||||||||||
Income | hensive | the income | Reclassi- | Gross | gross | principal | Carrying | |||||||||||||||||||||||||
statement | 11 | income | 12 | statement | 13 | fied | 14 | principal | 15 | protection | 16 | exposure | 17 | amount | 18 | |||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Mortgage-related assets | ||||||||||||||||||||||||||||||||
Sub-prime residential | ||||||||||||||||||||||||||||||||
Direct lending | (494 | ) | – | 7 | – | 3,653 | – | 3,653 | 2,789 | |||||||||||||||||||||||
MBSs8 | (787 | ) | (1,872 | ) | 1 | (8 | ) | 8,317 | 794 | 7,523 | 4,183 | |||||||||||||||||||||
– high grade10 | (244 | ) | (558 | ) | 6 | (8 | ) | 4,298 | 507 | 3,791 | 2,723 | |||||||||||||||||||||
– rated C to A | (446 | ) | (1,314 | ) | (4 | ) | – | 3,990 | 287 | 3,703 | 1,449 | |||||||||||||||||||||
– not publicly rated | (97 | ) | – | (1 | ) | – | 29 | – | 29 | 11 | ||||||||||||||||||||||
MBS CDOs8 | (125 | ) | (58 | ) | – | (50 | ) | 1,095 | 234 | 861 | 87 | |||||||||||||||||||||
– high grade10 | (14 | ) | (81 | ) | – | – | 212 | 27 | 185 | 68 | ||||||||||||||||||||||
– rated C to A | (111 | ) | 23 | – | (50 | ) | 881 | 207 | 674 | 17 | ||||||||||||||||||||||
– not publicly rated | – | – | – | – | 2 | – | 2 | 2 | ||||||||||||||||||||||||
(1,406 | ) | (1,930 | ) | 8 | (58 | ) | 13,065 | 1,028 | 12,037 | 7,059 | ||||||||||||||||||||||
US Alt-A residential | ||||||||||||||||||||||||||||||||
Direct lending | (11 | ) | – | – | – | 264 | – | 264 | 246 | |||||||||||||||||||||||
MBSs8 | (737 | ) | (6,416 | ) | 9 | (240 | ) | 16,860 | 436 | 16,424 | 7,174 | |||||||||||||||||||||
– high grade10 | (446 | ) | (3,012 | ) | 17 | (82 | ) | 9,804 | 317 | 9,487 | 4,869 | |||||||||||||||||||||
– rated C to A | (292 | ) | (3,404 | ) | (7 | ) | (158 | ) | 7,041 | 119 | 6,922 | 2,293 | ||||||||||||||||||||
– not publicly rated | 1 | – | (1 | ) | – | 15 | – | 15 | 12 | |||||||||||||||||||||||
(748 | ) | (6,416 | ) | 9 | (240 | ) | 17,124 | 436 | 16,688 | 7,420 | ||||||||||||||||||||||
US Government agency and sponsored enterprises | ||||||||||||||||||||||||||||||||
MBSs8 | ||||||||||||||||||||||||||||||||
– high grade10 | (51 | ) | 392 | 40 | – | 23,470 | – | 23,470 | 23,902 | |||||||||||||||||||||||
Other residential | ||||||||||||||||||||||||||||||||
Direct lending | 23 | – | (9 | ) | – | 691 | – | 691 | 677 | |||||||||||||||||||||||
MBSs8,9 | (178 | ) | (738 | ) | (72 | ) | – | 8,391 | 284 | 8,107 | 6,511 | |||||||||||||||||||||
– high grade10 | (149 | ) | (723 | ) | (75 | ) | – | 7,592 | 262 | 7,330 | 5,915 | |||||||||||||||||||||
– rated C to A | (28 | ) | (15 | ) | 2 | – | 717 | 22 | 695 | 549 | ||||||||||||||||||||||
– not publicly rated | (1 | ) | – | 1 | – | 82 | – | 82 | 47 | |||||||||||||||||||||||
(155 | ) | (738 | ) | (81 | ) | – | 9,082 | 284 | 8,798 | 7,188 | ||||||||||||||||||||||
Commercial property | ||||||||||||||||||||||||||||||||
MBS and MBS CDOs8,9 | (292 | ) | (2,743 | ) | (27 | ) | – | 13,524 | 553 | 12,971 | 9,232 | |||||||||||||||||||||
– high grade10 | (231 | ) | (2,709 | ) | (38 | ) | – | 13,091 | 553 | 12,538 | 8,925 | |||||||||||||||||||||
– rated C to A | (61 | ) | (31 | ) | 11 | – | 376 | – | 376 | 264 | ||||||||||||||||||||||
– not publicly rated | – | (3 | ) | – | – | 57 | – | 57 | 43 | |||||||||||||||||||||||
Leveraged finance-related assets | ||||||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | (19 | ) | (1,306 | ) | 1 | – | 7,392 | 936 | 6,456 | 4,781 | ||||||||||||||||||||||
– high grade10 | (19 | ) | (1,302 | ) | 1 | – | 7,373 | 936 | 6,437 | 4,766 | ||||||||||||||||||||||
– rated C to A | – | (4 | ) | – | – | 19 | – | 19 | 15 | |||||||||||||||||||||||
Student loan-related assets | ||||||||||||||||||||||||||||||||
ABSs and ABS CDOs8 | (63 | ) | (1,959 | ) | (4 | ) | – | 7,708 | 279 | 7,429 | 4,963 | |||||||||||||||||||||
– high grade10 | (47 | ) | (1,649 | ) | (4 | ) | – | 6,986 | 279 | 6,707 | 4,578 | |||||||||||||||||||||
– rated C to A | (16 | ) | (310 | ) | – | – | 722 | – | 722 | 385 | ||||||||||||||||||||||
Other assets | ||||||||||||||||||||||||||||||||
ABS and ABS CDOs8 | (466 | ) | (1,461 | ) | (107 | ) | (84 | ) | 21,112 | 8,494 | 12,618 | 9,462 | ||||||||||||||||||||
– high grade10 | (329 | ) | (733 | ) | (81 | ) | – | 11,346 | 3,049 | 8,297 | 6,531 | |||||||||||||||||||||
– rated C to A | (137 | ) | (728 | ) | (26 | ) | (13 | ) | 3,592 | 343 | 3,249 | 1,902 | ||||||||||||||||||||
– not publicly rated | – | – | – | (71 | ) | 6,174 | 5,102 | 1,072 | 1,029 | |||||||||||||||||||||||
Total | (3,200 | ) | (16,161 | ) | (161 | ) | (382 | ) | 112,477 | 12,010 | 100,467 | 74,007 | ||||||||||||||||||||
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Overview of exposures > Significant movements / Monolines |
Gross principal15of US sub-prime | Gross principal15 of US Alt-A | |||||||||||||||
mortgage-backed securities | mortgage-backed securities | |||||||||||||||
at 31 December | at 31 December | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Mortgage vintage | ||||||||||||||||
Pre-2006 | 1,748 | 2,012 | 2,108 | 2,695 | ||||||||||||
2006 | 2,827 | 4,287 | 6,225 | 7,712 | ||||||||||||
2007 | 1,187 | 1,588 | 5,213 | 6,453 | ||||||||||||
5,762 | 7,887 | 13,546 | 16,860 | |||||||||||||
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HSBC’s principal exposure to monolines is through a number of over-the-counter (‘OTC’) derivative |
Net exposure | Net exposure | |||||||||||||||
Notional | before credit | Credit risk | after credit | |||||||||||||
amount | risk adjustment | 19 | adjustment | 20 | risk adjustment | |||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Derivative transactions with monoline counterparties | ||||||||||||||||
Monoline – investment grade (BBB– or above) | 5,623 | 997 | (100 | ) | 897 | |||||||||||
Monoline – sub-investment grade (below BBB–) | 4,400 | 1,317 | (909 | ) | 408 | |||||||||||
10,023 | 2,314 | (1,009 | ) | 1,305 | ||||||||||||
At 31 December 2008 | ||||||||||||||||
Derivative transactions with monoline counterparties | ||||||||||||||||
Monoline – investment grade (BBB– or above) | 9,627 | 2,829 | (740 | ) | 2,089 | |||||||||||
Monoline – sub-investment grade (below BBB–) | 2,731 | 1,104 | (752 | ) | 352 | |||||||||||
12,358 | 3,933 | (1,492 | ) | 2,441 | ||||||||||||
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Overview of exposure > Monolines / Leveraged finance transactions |
• | For highly-rated monolines, the standard credit risk adjustment methodology (as described on page 170) applies, with the exception that the future exposure profile is deemed to be constant (equal to the current market value) over the weighted average life of the referenced security, and the credit risk adjustment cannot fall below 10 per cent of the mark-to-market exposure. | |
• | In respect of monolines, where default has either occurred or there is a strong possibility of default in the near term, the adjustment is determined based on the estimated probabilities of various potential scenarios, and the estimated recovery in each case. | |
• | For other monoline exposures, the credit risk adjustment follows the methodology for highly-rated monolines. However, this methodology is adjusted to include the probability of a claim arising in respect of the referenced security, and applies implied probabilities of default where the likelihood of a claim is believed to be high. |
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At 31 December | ||||||||||||
Funded | Unfunded | Total | ||||||||||
exposures | 21 | exposures | 22 | exposures | ||||||||
US$m | US$m | US$m | ||||||||||
2009 | ||||||||||||
Europe | 3,790 | 368 | 4,158 | |||||||||
Rest of Asia-Pacific | 70 | 22 | 92 | |||||||||
North America | 1,713 | 188 | 1,901 | |||||||||
5,573 | 578 | 6,151 | ||||||||||
Held within: | ||||||||||||
– loans and receivables | 5,569 | 386 | 5,955 | |||||||||
– fair value through profit or loss | 4 | 192 | 196 | |||||||||
2008 | ||||||||||||
Europe | 3,554 | 480 | 4,034 | |||||||||
Rest of Asia-Pacific | 25 | 12 | 37 | |||||||||
North America | 1,825 | 258 | 2,083 | |||||||||
5,404 | 750 | 6,154 | ||||||||||
Held within: | ||||||||||||
– loans and receivables | 5,401 | 482 | 5,883 | |||||||||
– fair value through profit or loss. | 3 | 268 | 271 |
Funded | Unfunded | Total | ||||||||||
exposures21 | exposures22 | exposures | ||||||||||
US$m | US$m | US$m | ||||||||||
At 1 January 2009 | 5,404 | 750 | 6,154 | |||||||||
Additions | – | 50 | 50 | |||||||||
Fundings | 99 | (99 | ) | – | ||||||||
Sales, repayments and other movements | (34 | ) | (150 | ) | (184 | ) | ||||||
Write-backs | 104 | 27 | 131 | |||||||||
At 31 December 2009 | 5,573 | 578 | 6,151 | |||||||||
As described on page 153, certain leveraged finance loans were reclassified from held-for-trading to loans and receivables. As a result, these loans are |
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Table of Contents
Fair values of financial instruments > Carried at fair value |
• | the extent to which prices may be expected to represent genuine traded or tradeable prices; | |
• | the degree of similarity between financial instruments; | |
• | the degree of consistency between different sources; | |
• | the process followed by the pricing provider to derive the data; | |
• | the elapsed time between the date to which the market data relates and the balance sheet date; and | |
• | the manner in which the data was sourced. |
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• | Level 1 – quoted market price:financial instruments with quoted prices for identical instruments in active markets. | |
• | Level 2 – valuation technique using observable inputs:financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable. | |
• | Level 3 — valuation technique with significant unobservable inputs:financial instruments valued using valuation techniques where one or more significant inputs are unobservable. |
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Fair values of financial instruments > Carried at fair value |
At 31 December | |||||||||||
2009 | 2008 | ||||||||||
US$m | US$m | ||||||||||
Type: | |||||||||||
Risk-related | 2,955 | 3,796 | |||||||||
Bid-offer | 528 | 811 | |||||||||
Uncertainty | 223 | 319 | |||||||||
Credit risk adjustment | 2,172 | 2,658 | |||||||||
Other | 32 | 8 | |||||||||
Model-related | 457 | 487 | |||||||||
Model limitation | 391 | 381 | |||||||||
Other | 66 | 106 | |||||||||
Inception profit (Day 1 P&L reserves) | 260 | 204 | |||||||||
Total | 3,672 | 4,487 | |||||||||
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169
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Fair values of financial instruments > Carried at fair value |
170
Table of Contents
• | the probability of default may be calculated from historical market data, or implied from current market levels for certain transaction types such as credit default swaps, either with or without an adjusting factor; | |
• | some entities derive their own probability of default from a non-zero spread, which has the effect of reducing the overall adjustment; | |
• | differing loss assumptions in setting the level of loss given defaults, which may utilise levels set by regulators for capital calculation purposes; and | |
• | counterparty exclusions, whereby certain counterparty types (for example collateralised counterparties) are excluded from the calculation. |
• | adapting HSBC’s existing methodology to utilise probabilities of default implied from credit default swaps with no adjustment factor applied and also implying HSBC’s own probability of default from credit default swaps, results in an additional adjustment of US$170 million; and | |
• | adapting HSBC’s existing methodology to include HSBC’s own probability of default from a non-zero spread based on historical data, excluding collateralised counterparties, and applying loss given default assumptions consistent with those used in regulatory capital calculations, results in a reduction of the credit risk adjustment of US$300 million. |
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Fair values of financial instruments > Carried at fair value |
Valuation techniques | ||||||||||||||||
Quoted | Using | With significant | ||||||||||||||
market | observable | unobservable | ||||||||||||||
price | inputs | inputs | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Assets | ||||||||||||||||
Trading assets | 272,509 | 142,452 | 6,420 | 421,381 | ||||||||||||
Financial assets designated at fair value | 24,184 | 11,773 | 1,224 | 37,181 | ||||||||||||
Derivatives | 1,961 | 244,472 | 4,453 | 250,886 | ||||||||||||
Financial investments: available for sale | 163,149 | 178,168 | 10,214 | 351,531 | ||||||||||||
Liabilities | ||||||||||||||||
Trading liabilities | 119,544 | 139,812 | 8,774 | 268,130 | ||||||||||||
Financial liabilities designated at fair value | 27,553 | 52,032 | 507 | 80,092 | ||||||||||||
Derivatives | 1,843 | 240,611 | 5,192 | 247,646 | ||||||||||||
At 31 December 2008 | ||||||||||||||||
Assets | ||||||||||||||||
Trading assets | 234,399 | 185,369 | 7,561 | 427,329 | ||||||||||||
Financial assets designated at fair value | 14,590 | 13,483 | 460 | 28,533 | ||||||||||||
Derivatives | 8,495 | 476,498 | 9,883 | 494,876 | ||||||||||||
Financial investments: available for sale | 103,949 | 173,157 | 9,116 | 286,222 | ||||||||||||
Liabilities | ||||||||||||||||
Trading liabilities | 105,584 | 135,559 | 6,509 | 247,652 | ||||||||||||
Financial liabilities designated at fair value | 23,311 | 51,276 | – | 74,587 | ||||||||||||
Derivatives | 9,896 | 473,359 | 3,805 | 487,060 |
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Assets | Liabilities | |||||||||||||||||||||||||||
Designated | Designated | |||||||||||||||||||||||||||
at fair value | at fair value | |||||||||||||||||||||||||||
Available | Held for | through | Held for | through | ||||||||||||||||||||||||
for sale | trading | profit or loss | Derivatives | trading | profit or loss | Derivatives | ||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||
Private equity investments | 2,949 | 197 | 345 | – | – | – | – | |||||||||||||||||||||
Asset-backed securities | 4,270 | 944 | – | – | – | – | – | |||||||||||||||||||||
Leveraged finance | – | 73 | – | – | – | – | 25 | |||||||||||||||||||||
Loans held for securitisation | – | 1,395 | – | – | – | – | – | |||||||||||||||||||||
Structured notes | – | 196 | – | – | 5,055 | – | – | |||||||||||||||||||||
Derivatives with monolines | – | – | – | 1,305 | – | – | – | |||||||||||||||||||||
Other derivatives | – | – | – | 3,148 | – | – | 5,167 | |||||||||||||||||||||
Other portfolios | 2,995 | 3,615 | 879 | – | 3,719 | 507 | – | |||||||||||||||||||||
10,214 | 6,420 | 1,224 | 4,453 | 8,774 | 507 | 5,192 | ||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||
Private equity investments | 2,689 | 54 | 225 | – | – | – | – | |||||||||||||||||||||
Asset-backed securities | 4,264 | 882 | – | 95 | – | – | 565 | |||||||||||||||||||||
Leveraged finance | – | 266 | – | – | – | – | 33 | |||||||||||||||||||||
Loans held for securitisation | – | 2,133 | – | – | – | – | – | |||||||||||||||||||||
Structured notes | – | 87 | – | – | 5,294 | – | – | |||||||||||||||||||||
Derivatives with monolines | – | – | – | 2,441 | – | – | – | |||||||||||||||||||||
Other derivatives | – | – | – | 7,347 | – | – | 3,207 | |||||||||||||||||||||
Other portfolios | 2,163 | 4,139 | 235 | – | 1,215 | – | – | |||||||||||||||||||||
9,116 | 7,561 | 460 | 9,883 | 6,509 | – | 3,805 | ||||||||||||||||||||||
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Fair values of financial instruments > Carried at fair value |
Assets | Liabilities | |||||||||||||||||||||||||||
Designated | Designated | |||||||||||||||||||||||||||
at fair value | at fair value | |||||||||||||||||||||||||||
Available | Held for | through | Held for | through | ||||||||||||||||||||||||
for sale | trading | profit or loss | Derivatives | trading | profit or loss | Derivatives | ||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 1 January 2009 | 9,116 | 7,561 | 460 | 9,883 | 6,509 | – | 3,805 | |||||||||||||||||||||
Total gains/(losses) recognised in profit or loss | (260 | ) | (730 | ) | 97 | (5,275 | ) | (107 | ) | (3 | ) | (1,372 | ) | |||||||||||||||
Total gains recognised in other comprehensive income | 617 | 85 | – | 119 | 301 | 10 | 94 | |||||||||||||||||||||
Purchases | 1,785 | 1,598 | 260 | – | 22 | – | – | |||||||||||||||||||||
New issuances | – | – | – | – | 2,522 | 500 | – | |||||||||||||||||||||
Sales | (806 | ) | (2,166 | ) | (13 | ) | – | – | – | – | ||||||||||||||||||
Settlements | (1,059 | ) | (295 | ) | (6 | ) | (104 | ) | (1,266 | ) | – | (206 | ) | |||||||||||||||
Transfers out | (3,043 | ) | (1,077 | ) | – | (1,057 | ) | (537 | ) | – | (620 | ) | ||||||||||||||||
Transfers in | 3,864 | 1,444 | 426 | 887 | 1,330 | – | 3,491 | |||||||||||||||||||||
At 31 December 2009 | 10,214 | 6,420 | 1,224 | 4,453 | 8,774 | 507 | 5,192 | |||||||||||||||||||||
Total gains/(losses) recognised in profit or loss relating to those assets and liabilities held on 31 December 2009 | (371 | ) | (596 | ) | 98 | (3,753 | ) | (136 | ) | (3 | ) | (135 | ) | |||||||||||||||
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Reflected in profit or loss | Reflected in equity | |||||||||||||||
Favourable | Unfavourable | Favourable | Unfavourable | |||||||||||||
changes | changes | changes | changes | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Derivatives, trading assets and trading liabilities23 | 984 | (577 | ) | – | – | |||||||||||
Financial assets and liabilities designated at fair value | 102 | (98 | ) | – | – | |||||||||||
Financial investments: available for sale | – | – | 1,161 | (1,157 | ) | |||||||||||
At 31 December 2008 | ||||||||||||||||
Derivatives, trading assets and trading liabilities23 | 1,266 | (703 | ) | – | – | |||||||||||
Financial assets and liabilities designated at fair value | 30 | (30 | ) | – | – | |||||||||||
Financial investments: available for sale | – | – | 984 | (1,005 | ) |
For footnote, see page 195. |
Reflected in profit or loss | Reflected in equity | |||||||||||||||
Favourable | Unfavourable | Favourable | Unfavourable | |||||||||||||
changes | changes | changes | changes | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Private equity investments | 54 | (54 | ) | 302 | (299 | ) | ||||||||||
Asset-backed securities | 41 | (41 | ) | 734 | (735 | ) | ||||||||||
Leveraged finance | 1 | (1 | ) | – | – | |||||||||||
Loans held for securitisation | 16 | (16 | ) | – | – | |||||||||||
Structured notes | 3 | (3 | ) | – | – | |||||||||||
Derivatives with monolines | 333 | (25 | ) | – | – | |||||||||||
Other derivatives | 309 | (332 | ) | – | – | |||||||||||
Other portfolios | 329 | (203 | ) | 125 | (123 | ) |
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Fair values of financial instruments > Carried at fair value |
Reflected in profit or loss | Reflected in equity | |||||||||||||||
Favourable | Unfavourable | Favourable | Unfavourable | |||||||||||||
changes | changes | changes | changes | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2008 | ||||||||||||||||
Private equity investments | 28 | (28 | ) | 234 | (261 | ) | ||||||||||
Asset-backed securities | 90 | (91 | ) | 667 | (660 | ) | ||||||||||
Leveraged finance | 2 | (2 | ) | – | – | |||||||||||
Loans held for securitisation | 41 | (41 | ) | – | – | |||||||||||
Structured notes | 8 | (8 | ) | – | – | |||||||||||
Derivatives with monolines | 341 | (250 | ) | – | – | |||||||||||
Other derivatives | 652 | (224 | ) | – | – | |||||||||||
Other portfolios | 134 | (89 | ) | 83 | (84 | ) |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Recorded profit/(loss) on: | ||||||||
Derivatives, trading assets and trading liabilities | (4,620 | ) | 779 | |||||
Financial assets and liabilities designated at fair value | 95 | 109 |
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Table of Contents
Valuation techniques | ||||||||||||||||
Quoted | Using | With significant | ||||||||||||||
market | observable | unobservable | ||||||||||||||
price | inputs | inputs | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Assets | ||||||||||||||||
Derivatives | – | 2,981 | – | 2,981 | ||||||||||||
Financial investments: available for sale | – | – | 2,455 | 2,455 | ||||||||||||
Liabilities | ||||||||||||||||
Financial liabilities designated at fair value | 12,549 | 4,360 | – | 16,909 | ||||||||||||
Derivatives | – | 362 | – | 362 | ||||||||||||
At 31 December 2008 | ||||||||||||||||
Assets | ||||||||||||||||
Derivatives | – | 3,682 | – | 3,682 | ||||||||||||
Financial investments: available for sale | – | – | 2,629 | 2,629 | ||||||||||||
Liabilities | ||||||||||||||||
Financial liabilities designated at fair valuex | 13,321 | 3,068 | – | 16,389 | ||||||||||||
Derivatives | – | 1,324 | – | 1,324 |
Assets | ||||
available | ||||
for sale | ||||
US$m | ||||
At 1 January 2009 | 2,629 | |||
Total gains or losses: | ||||
– recognised in profit or loss | (2 | ) | ||
– recognised in other comprehensive income | 103 | |||
Settlements | (275 | ) | ||
At 31 December 2009 | 2,455 | |||
Total gains or losses recognised in profit or loss relating to those assets and liabilities held on 31 December 2009 | (2 | ) |
Reflected in equity | ||||||||
Favourable | Unfavourable | |||||||
changes | changes | |||||||
US$m | US$m | |||||||
Financial investments available for sale | ||||||||
At 31 December 2009 | 115 | (107 | ) | |||||
At 31 December 2008 | 113 | (97 | ) |
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Fair values of financial instruments > Carried at fair value / Not carried at fair value |
178
Table of Contents
• | Loans and advances to banks and customers | |
The fair value of loans and advances is based on observable market transactions, where available. In the absence of observable market transactions, fair value is estimated using discounted cash flow models. Performing loans are grouped, as far as possible, into homogeneous pools segregated by maturity and coupon rates. In general, contractual cash flows are discounted using HSBC’s estimate of the discount rate that a market participant would use in valuing instruments with similar maturity, re-pricing and credit risk characteristics. | ||
The fair value of a loan portfolio reflects both loan impairments at the balance sheet date and estimates of market participants’ expectations of credit losses over the life of the loans. For impaired loans, fair value is estimated by discounting the future cash flows over the time period they are expected to be recovered. | ||
• | Financial investments | |
The fair values of listed financial investments are determined using bid market prices. The fair values of unlisted financial investments are determined using valuation techniques that take into consideration the prices and future earnings streams of equivalent quoted securities. | ||
• | Deposits by banks and customer accounts | |
For the purpose of estimating fair value, deposits by banks and customer accounts are grouped by remaining contractual maturity. Fair values are estimated using discounted cash flows, applying current rates offered for deposits of similar remaining maturities. The fair value |
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Fair values of financial instruments > Not carried at fair value // SPEs > HSBC-sponsored SPEs |
of a deposit repayable on demand is assumed to be the amount payable on demand at the balance sheet date. | ||
• | Debt securities in issue and subordinated liabilities | |
Fair values are determined using quoted market prices at the balance sheet date where available, or by reference to quoted market prices for similar instruments. |
Cash and balances at central banks
Items in the course of collection from other banks
Hong Kong Government certificates of indebtedness
Endorsements and acceptances
Short-term receivables within ‘Other assets’
Accrued income
Hong Kong currency notes in circulation
Items in the course of transmission to other banks
Investment contracts with discretionary participation features within ‘Liabilities under insurance contracts’
Endorsements and acceptances
Short-term payables within ‘Other liabilities’
Accruals
At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Assets | ||||||||||||||||
Loans and advances to banks | 179,781 | 179,658 | 153,766 | 153,363 | ||||||||||||
Loans and advances to customers | 896,231 | 855,780 | 932,868 | 876,239 | ||||||||||||
Financial investments: debt securities | 17,526 | 18,097 | 14,013 | 15,057 | ||||||||||||
Financial investments: treasury and other eligible bills | 101 | 101 | – | – | ||||||||||||
Liabilities | ||||||||||||||||
Deposits by banks | 124,872 | 124,856 | 130,084 | 130,129 | ||||||||||||
Customer accounts | 1,159,034 | 1,160,036 | 1,115,327 | 1,115,291 | ||||||||||||
Debt securities in issue | 146,896 | 145,888 | 179,693 | 170,599 | ||||||||||||
Subordinated liabilities | 30,478 | 30,307 | 29,433 | 28,381 |
At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | Amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Assets classified as held for sale | ||||||||||||||||
Loans and advances to banks and customers | 1,356 | 1,316 | 11 | 11 | ||||||||||||
Financial investments: debt securities | – | – | 37 | 37 |
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At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | Value | amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Loans and advances to customers | ||||||||||||||||
Europe | 439,481 | 431,158 | 426,191 | 417,256 | ||||||||||||
Hong Kong | 99,381 | 99,694 | 100,220 | 100,490 | ||||||||||||
Rest of Asia-Pacific24 | 80,043 | 79,972 | 80,661 | 77,391 | ||||||||||||
Middle East24 | 22,844 | 22,538 | 27,295 | 27,296 | ||||||||||||
North America25 | 206,853 | 174,957 | 256,214 | 211,346 | ||||||||||||
Latin America | 47,629 | 47,461 | 42,287 | 42,460 | ||||||||||||
896,231 | 855,780 | 932,868 | 876,239 | |||||||||||||
For footnotes, see page 195. |
2009 | 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Assets | ||||||||||||||||
Loans and advances to HSBC undertakings | 23,212 | 23,871 | 11,804 | 12,670 | ||||||||||||
Liabilities | ||||||||||||||||
Amounts owed to HSBC undertakings | 3,711 | 3,827 | 4,042 | 4,218 | ||||||||||||
Debt securities in issue | 2,839 | 3,141 | – | – | ||||||||||||
Subordinated liabilities | 14,406 | 15,666 | 14,017 | 13,940 |
• | the activities of the SPE are being conducted on behalf of HSBC according to HSBC’s specific business needs so that it obtains benefit from the SPE’s operation. This might be evidenced, for example, by HSBC providing a significant level of support to the SPE; and | |
• | HSBC has the decision-making powers to obtain the majority of the benefits of the activities of the SPE. |
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SPEs > SIVs and conduits |
• | HSBC has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incidental to the activities of the SPE; and | |
• | HSBC retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits from its activities. |
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Total | ||||||||||||||||||||
Other | Total | multi-seller | Total | |||||||||||||||||
Solitaire | SICs | SICs | conduits | SIVs | ||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | ||||||||||||||||
S&P ratings at 31 December 2009 | ||||||||||||||||||||
AAA | 5.2 | 6.7 | 11.9 | 6.2 | – | |||||||||||||||
AA | 3.0 | 4.1 | 7.1 | 1.3 | – | |||||||||||||||
A | 0.8 | 6.0 | 6.8 | 1.8 | – | |||||||||||||||
BBB | 0.7 | 0.8 | 1.5 | 0.5 | – | |||||||||||||||
BB | 0.2 | 0.3 | 0.5 | 0.5 | – | |||||||||||||||
B | 0.4 | 0.3 | 0.7 | – | – | |||||||||||||||
CCC | 1.0 | 1.0 | 2.0 | – | – | |||||||||||||||
CC | 0.3 | 0.4 | 0.7 | – | – | |||||||||||||||
D | 0.1 | 0.1 | 0.2 | – | – | |||||||||||||||
Total investments | 11.7 | 19.7 | 31.4 | 10.3 | – | |||||||||||||||
Cash and other investments | 1.1 | 0.3 | 1.4 | 0.6 | – | |||||||||||||||
12.8 | 20.0 | 32.8 | 10.9 | – | ||||||||||||||||
S&P ratings at 31 December 2008 | ||||||||||||||||||||
AAA | 8.1 | 12.0 | 20.1 | 6.1 | 0.3 | |||||||||||||||
AA | 0.7 | 1.4 | 2.1 | 1.8 | – | |||||||||||||||
A | 1.0 | 4.7 | 5.7 | 1.6 | – | |||||||||||||||
BBB | 0.8 | 1.0 | 1.8 | 1.2 | – | |||||||||||||||
BB | 0.3 | 0.4 | 0.7 | 0.2 | – | |||||||||||||||
B | 0.1 | 0.2 | 0.3 | 0.5 | – | |||||||||||||||
CCC | 0.2 | 0.2 | 0.4 | 1.8 | – | |||||||||||||||
D | – | – | – | 0.3 | – | |||||||||||||||
Total investments | 11.2 | 19.9 | 31.1 | 13.5 | 0.3 | |||||||||||||||
Cash and other investments | 0.9 | 0.3 | 1.2 | 0.4 | 0.1 | |||||||||||||||
12.1 | 20.2 | 32.3 | 13.9 | 0.4 | ||||||||||||||||
Total | ||||||||||||||||||||
Other | Total | multi-seller | Total | |||||||||||||||||
Solitaire | SICs | SICs | conduits | SIVs | ||||||||||||||||
Weighted average life (years) | ||||||||||||||||||||
At 31 December 2009 | 6.3 | 4.1 | 4.9 | 2.4 | – | |||||||||||||||
At 31 December 2008 | 5.8 | 3.9 | 4.6 | 1.6 | – |
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SPEs > SIVs and conduits |
Total | ||||||||||||||||||||
Other | Total | multi-seller | Total | |||||||||||||||||
Solitaire | SICs | SICs | conduits | 26 | SIVs | |||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | ||||||||||||||||
Asset class at 31 December 2009 | ||||||||||||||||||||
Structured finance | ||||||||||||||||||||
Vehicle loans and equipment leases | – | – | – | 3.0 | – | |||||||||||||||
Consumer receivables | – | – | – | 0.8 | – | |||||||||||||||
Credit card receivables | 0.2 | – | 0.2 | 1.3 | – | |||||||||||||||
Residential MBSs | 3.8 | 4.6 | 8.4 | 0.3 | – | |||||||||||||||
Commercial MBSs | 2.4 | 3.3 | 5.7 | 0.2 | – | |||||||||||||||
Auto floor plan | – | – | – | 0.5 | – | |||||||||||||||
Trade receivables | – | – | – | 2.8 | – | |||||||||||||||
Student loan securities | 2.3 | 1.8 | 4.1 | – | – | |||||||||||||||
Vehicle finance loan securities | 0.1 | 0.2 | 0.3 | – | – | |||||||||||||||
Leverage loan securities | 1.9 | 2.3 | 4.2 | – | – | |||||||||||||||
Other ABSs | 1.0 | 1.8 | 2.8 | 1.2 | – | |||||||||||||||
11.7 | 14.0 | 25.7 | 10.1 | – | ||||||||||||||||
Finance | ||||||||||||||||||||
Commercial bank securities and deposits | 0.1 | 4.8 | 4.9 | 0.6 | – | |||||||||||||||
Investment bank debt securities | – | 0.8 | 0.8 | – | – | |||||||||||||||
Finance company debt securities | – | 0.2 | 0.2 | 0.2 | – | |||||||||||||||
Other assets | 1.0 | 0.2 | 1.2 | – | – | |||||||||||||||
1.1 | 6.0 | 7.1 | 0.8 | – | ||||||||||||||||
12.8 | 20.0 | 32.8 | 10.9 | – | ||||||||||||||||
Sub-prime mortgages | 0.7 | 1.5 | 2.2 | – | – | |||||||||||||||
US Alt-A | 1.9 | 1.8 | 3.7 | – | – | |||||||||||||||
2.6 | 3.3 | 5.9 | – | – | ||||||||||||||||
Asset class at 31 December 2008 | ||||||||||||||||||||
Structured finance | ||||||||||||||||||||
Vehicle loans and equipment leases | – | – | – | 3.9 | – | |||||||||||||||
Consumer receivables | – | – | – | 0.7 | – | |||||||||||||||
Credit card receivables | 0.2 | – | 0.2 | 1.4 | – | |||||||||||||||
Residential MBSs | 4.4 | 5.7 | 10.1 | 0.6 | – | |||||||||||||||
Commercial MBSs | 2.1 | 3.1 | 5.2 | 0.2 | – | |||||||||||||||
Auto floor plan | – | – | – | 2.2 | – | |||||||||||||||
Trade receivables | – | – | – | 2.7 | – | |||||||||||||||
Student loan securities | 2.2 | 2.0 | 4.2 | – | – | |||||||||||||||
Vehicle finance loan securities | – | 0.3 | 0.3 | – | – | |||||||||||||||
Leverage loan securities | 1.5 | 2.2 | 3.7 | – | – | |||||||||||||||
Other ABSs | 0.8 | 1.3 | 2.1 | 1.7 | – | |||||||||||||||
11.2 | 14.6 | 25.8 | 13.4 | – | ||||||||||||||||
Finance | ||||||||||||||||||||
Commercial bank securities and deposits | – | 4.4 | 4.4 | 0.4 | – | |||||||||||||||
Investment bank debt securities | – | 0.5 | 0.5 | – | – | |||||||||||||||
Finance company debt securities | – | 0.4 | 0.4 | – | 0.3 | |||||||||||||||
Other assets | 0.9 | 0.3 | 1.2 | 0.1 | 0.1 | |||||||||||||||
0.9 | 5.6 | 6.5 | 0.5 | 0.4 | ||||||||||||||||
12.1 | 20.2 | 32.3 | 13.9 | 0.4 | ||||||||||||||||
Sub-prime mortgages | 0.9 | 1.3 | 2.2 | – | – | |||||||||||||||
US Alt-A | 2.3 | 2.2 | 4.5 | – | – | |||||||||||||||
3.2 | 3.5 | 6.7 | – | – | ||||||||||||||||
For footnote, see page 195. |
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Table of Contents
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Europe | 6.1 | 7.5 | ||||||
Rest of Asia-Pacific | 0.6 | 0.9 | ||||||
North America | 4.2 | 5.5 | ||||||
10.9 | 13.9 | |||||||
Total | ||||||||||||||||||||
Other | Total | multi-seller | Total | |||||||||||||||||
Solitaire | SICs | SICs | conduits | SIVs | ||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
Financial instruments designated at fair value | 0.1 | – | 0.1 | – | – | |||||||||||||||
Loans and advances to banks | – | – | – | 0.3 | – | |||||||||||||||
Loans and advances to customers | – | – | – | 10.3 | – | |||||||||||||||
Financial investments | 11.6 | 19.8 | 31.4 | – | – | |||||||||||||||
Other assets | 1.1 | 0.2 | 1.3 | 0.3 | – | |||||||||||||||
12.8 | 20.0 | 32.8 | 10.9 | – | ||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
Financial instruments designated at fair value | 0.1 | – | 0.1 | – | – | |||||||||||||||
Derivative assets | – | 0.2 | 0.2 | 0.1 | – | |||||||||||||||
Loans and advances to banks | – | 0.1 | 0.1 | – | 0.1 | |||||||||||||||
Loans and advances to customers | – | – | – | 13.4 | – | |||||||||||||||
Financial investments | 11.1 | 19.9 | 31.0 | – | 0.3 | |||||||||||||||
Other assets | 0.9 | – | 0.9 | 0.4 | – | |||||||||||||||
12.1 | 20.2 | 32.3 | 13.9 | 0.4 | ||||||||||||||||
Total multi-seller | ||||||||||||||||||||||||||||||||||||||||
Solitaire | Other SICs | Total SICs | conduits | Total SIVs | ||||||||||||||||||||||||||||||||||||
Provided | Provided | Provided | Provided | Provided | ||||||||||||||||||||||||||||||||||||
Total | by HSBC | Total | by HSBC | Total | by HSBC | Total | by HSBC | Total | by HSBC | |||||||||||||||||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | |||||||||||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||||||||||
Capital notes | – | – | 0.7 | – | 0.7 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Drawn liquidity facility | 7.6 | 7.6 | – | – | 7.6 | 7.6 | – | – | – | – | ||||||||||||||||||||||||||||||
Commercial paper | 10.8 | 0.7 | 10.1 | 10.1 | 20.9 | 10.8 | 10.3 | – | – | – | ||||||||||||||||||||||||||||||
Medium-term notes | – | – | 3.8 | 3.8 | 3.8 | 3.8 | – | – | – | – | ||||||||||||||||||||||||||||||
Term repos executed | – | – | 10.2 | 10.2 | 10.2 | 10.2 | – | – | – | – | ||||||||||||||||||||||||||||||
18.4 | 8.3 | 24.8 | 24.1 | 43.2 | 32.4 | 10.3 | – | – | – | |||||||||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||||||||||
Capital notes | – | – | 0.9 | – | 0.9 | – | – | – | – | – | ||||||||||||||||||||||||||||||
Drawn liquidity facility | 2.4 | 2.4 | – | – | 2.4 | 2.4 | – | – | – | – | ||||||||||||||||||||||||||||||
Commercial paper | 17.2 | 8.3 | 10.5 | 10.4 | 27.7 | 18.7 | 12.9 | 2.1 | – | – | ||||||||||||||||||||||||||||||
Medium-term notes | – | – | 3.4 | 3.4 | 3.4 | 3.4 | – | – | 0.1 | – | ||||||||||||||||||||||||||||||
Term repos executed | 0.8 | 0.8 | 13.3 | 13.3 | 14.1 | 14.1 | – | – | – | – | ||||||||||||||||||||||||||||||
20.4 | 11.5 | 28.1 | 27.1 | 48.5 | 38.6 | 12.9 | 2.1 | 0.1 | – | |||||||||||||||||||||||||||||||
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SPEs > SIVs and conduits / Money market funds / CNAV funds |
Total | ||||||||||||||||||||
Other | Total | multi-seller | Total | |||||||||||||||||
Solitaire | SICs | SICs | conduits | SIVs | ||||||||||||||||
Years | Years | Years | Years | Years | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
CP funding | 0.2 | 0.1 | 0.1 | 0.1 | n/a | |||||||||||||||
MTN funding | – | 10.3 | 10.3 | – | n/a | |||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
CP funding | 0.1 | 0.2 | 0.1 | 0.1 | n/a | |||||||||||||||
MTN funding | n/a | 7.3 | 7.3 | n/a | 0.1 |
• | HSBC is exposed to the par value of Mazarin’s assets through the provision of a liquidity facility equal to the lesser of the amortised cost of issued senior debt and the amortised cost of non-defaulted assets. At 31 December 2009, HSBC’s exposure amounted to US$13.6 billion (2008: US$15.5 billion). First loss protection is provided through the capital notes issued by Mazarin, which are substantially all held by third parties. | |
• | In addition, at 31 December 2009, HSBC held 1.3 per cent of Mazarin’s capital notes (2008: 1.3 per cent), which have a par value of US$17 million (2008: US$17 million), and a carrying amount of US$0.6 million (2008: US$0.6 million). |
• | These SICs are term funded by HSBC, consequently HSBC’s primary exposure to them is represented by the amortised cost of the debt required to support the non-cash assets of the vehicles. At 31 December 2009 this amounted to US$10.5 billion (2008: US$11.7 billion). | |
• | First loss protection is provided through the capital notes issued by these vehicles, which are substantially all held by third parties. | |
• | In addition, at 31 December 2009, HSBC held 3.76 per cent (2008: 3.53 per cent) of the capital notes issued by these vehicles which have a par value of US$37 million (2008: US$35 million), and a carrying amount of US$2.0 million (2008: US$1.3 million). |
• | CP issued by Solitaire benefits from a 100 per cent liquidity facility provided by HSBC. First loss credit protection against CP-funded securities, after any transaction-specific credit enhancement (as described on page 155) and retained reserves, is provided by HSBC in the form of letters of credit with a combined notional value of US$1.2 billion at 31 December 2009 (2008: US$1.2 billion). | |
• | At 31 December 2009, US$7.6 billion of Solitaire’s assets were funded by the draw-down of the liquidity facility (2008: US$2.4 billion). HSBC is exposed to credit losses on the drawn amounts. | |
• | HSBC’s maximum exposure to Solitaire is limited to the amortised cost of non-cash equivalent assets, which represents the risk that HSBC may be required to fund the vehicle in the event the debt is redeemed without reinvestment from third parties. | |
• | HSBC’s maximum exposure at 31 December 2009 amounted to US$18.4 billion (2008: US$20.4 billion). |
• | HSBC provides transaction-specific liquidity facilities to each of its multi-seller conduits, designed to be drawn in order to ensure the repayment of the CP issued. At 31 December 2009, the committed liquidity facilities amounted to US$14.4 billion (2008: US$17.1 billion). | |
• | First loss protection is provided through transaction-specific credit enhancements, for example, over-collateralisation and excess spread. These credit enhancements are provided by the originator of the assets and not by HSBC. In addition, a layer of secondary loss protection is provided by HSBC in the form of programme-wide enhancement facilities, |
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and at 31 December 2009 this amounted to US$0.6 billion (2008: US$0.6 billion). HSBC’s maximum exposure is equal to the transaction-specific liquidity facilities offered to the multi-seller conduits, as described above. | ||
• | The liquidity facilities are set to support total commitments and therefore exceed the funded assets at both 31 December 2009 and 31 December 2008. | |
• | In consideration of the significant first loss protection afforded by the structure, the credit enhancements and a range of indemnities provided by the various obligors, HSBC carries only a minimal risk of loss from the programme. |
• | Cullinan and Asscher’s only assets are cash equivalents with liabilities to the extent of the liquidation costs and cash balances due to Mazarin, Barion and Malachite. These remain HSBC’s only residual exposure in respect of the SIVs (2008: Cullinan held Mazarin CP amounting to US$0.3 billion). |
• | US$73.6 billion (2008: US$72.0 billion) in Constant Net Asset Value (‘CNAV’) funds, which invest in shorter-dated and highly-rated |
money market securities with the objective of providing investors with a highly liquid and secure investment; | ||
• | US$0.7 billion (2008: US$2.7 billion) in French domicileddynamique(‘dynamic’) funds and Irish ‘enhanced’ funds, together Enhanced Variable Net Asset Value (‘Enhanced VNAV’) funds, which invest in longer-dated money market securities to provide investors with a higher return than traditional money market funds; and | |
• | US$24.7 billion (2008: US$28.0 billion) in various other money market Variable Net Asset Value (‘VNAV’) funds, including funds domiciled in Brazil, France, India and Mexico. |
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
ABSs | 0.3 | 0.8 | ||||||
Certificates of deposit | 16.6 | 13.0 | ||||||
CP | 12.0 | 13.5 | ||||||
Asset-backed CP | 4.6 | 4.6 | ||||||
Floating rate notes | – | 5.2 | ||||||
Government agency bonds | 6.6 | 1.9 | ||||||
Other assets | 2.3 | 4.8 | ||||||
Total | 42.4 | 43.8 | ||||||
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SPEs > Enhanced VNAV funds / Non-money market investment funds / Securitisations / Other |
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Cash | – | 0.3 | ||||||
Trading assets | 42.8 | 43.3 | ||||||
Other assets | 0.3 | 2.3 | ||||||
43.1 | 45.9 | |||||||
• | US$115.6 billion (2008: US$83.1 billion) in specialist funds, comprising fundamental active specialists and active quantitative specialists; | |
• | US$121.7 billion (2008: US$96.2 billion) in local investment management funds which invest in domestic products, primarily for retail and private clients; and | |
• | US$18.1 billion (2008: US$21.0 billion) in multi-manager funds which offer fund of funds and manager of manager products across a diversified portfolio of assets. |
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Cash | 0.2 | 0.4 | ||||||
Trading assets | 0.2 | 0.2 | ||||||
Financial instruments designated at fair value | 5.3 | 2.3 | ||||||
Financial investments | – | 0.8 | ||||||
5.7 | 3.7 | |||||||
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At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Trading assets | 0.9 | 1.3 | ||||||
Loans and advances to customers | 35.4 | 50.8 | ||||||
Other assets | 1.4 | 1.1 | ||||||
Derivatives | 1.2 | 1.4 | ||||||
38.9 | 54.6 | |||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
HSBC originated assets | 0.6 | 0.6 | ||||||
Non-HSBC originated assets: | ||||||||
– term securitisation programmes | 10.5 | 13.5 | ||||||
11.1 | 14.1 | |||||||
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SPEs > Others / Maximum exposures to SPEs |
190
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Securities | Enhanced | Non-money market funds | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment | Multi-seller | CNAV | VNAV | VNAV | Specialist | Local | Securit- | |||||||||||||||||||||||||||||||||||||||||||||||||
SIVs | conduits28 | conduits | funds | funds | funds | funds | funds29 | isations30 | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | ||||||||||||||||||||||||||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | – | 32.8 | 10.9 | 42.4 | 0.7 | – | 0.4 | 5.3 | 38.9 | – | 131.4 | |||||||||||||||||||||||||||||||||||||||||||||
Direct lending31 | – | – | – | – | – | – | – | – | 0.9 | – | 0.9 | |||||||||||||||||||||||||||||||||||||||||||||
ABSs31 | – | 25.7 | – | 0.3 | 0.2 | – | – | – | – | – | 26.2 | |||||||||||||||||||||||||||||||||||||||||||||
ABCP | – | – | – | 4.6 | – | – | – | – | – | – | 4.6 | |||||||||||||||||||||||||||||||||||||||||||||
Other | – | 7.1 | 10.9 | 37.5 | 0.5 | – | 0.4 | 5.3 | 38.0 | – | 99.7 | |||||||||||||||||||||||||||||||||||||||||||||
Funding provided by HSBC | – | 32.4 | – | 0.9 | 0.6 | – | 0.1 | 5.3 | 2.9 | – | 42.2 | |||||||||||||||||||||||||||||||||||||||||||||
CP | – | 10.8 | – | – | – | – | – | – | – | – | 10.8 | |||||||||||||||||||||||||||||||||||||||||||||
MTNs | – | 3.8 | – | – | – | – | – | – | 2.8 | – | 6.6 | |||||||||||||||||||||||||||||||||||||||||||||
Junior notes | – | – | – | – | – | – | – | – | 0.1 | – | 0.1 | |||||||||||||||||||||||||||||||||||||||||||||
Term repos executed | – | 10.2 | – | – | – | – | – | – | – | – | 10.2 | |||||||||||||||||||||||||||||||||||||||||||||
Investments in funds | – | – | – | 0.9 | 0.6 | – | 0.1 | 5.3 | – | – | 6.9 | |||||||||||||||||||||||||||||||||||||||||||||
Drawn liquidity facility | – | 7.6 | – | – | – | – | – | – | – | – | 7.6 | |||||||||||||||||||||||||||||||||||||||||||||
Capital notes32 | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||
Total maximum exposure to consolidated SPEs | – | 42.5 | 14.4 | 0.9 | 0.6 | – | 0.1 | 5.3 | 7.9 | – | 71.7 | |||||||||||||||||||||||||||||||||||||||||||||
Liquidity and credit enhancements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deal-specific liquidity facilities | – | – | 14.4 | – | – | – | – | – | – | – | 14.4 | |||||||||||||||||||||||||||||||||||||||||||||
Indemnities34 | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||
Programme-wide liquidity facilities | – | 29.1 | – | – | – | – | – | – | – | – | 29.1 | |||||||||||||||||||||||||||||||||||||||||||||
Programme-wide limited credit enhancements | – | 1.2 | 0.6 | – | – | – | – | – | – | – | 1.8 | |||||||||||||||||||||||||||||||||||||||||||||
Other liquidity and credit enhancements | – | – | – | – | – | – | – | – | 0.1 | – | 0.1 |
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SPEs > Maximum exposure to SPEs |
Securities | Enhanced | Non-money market funds | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment | Multi-seller | CNAV | VNAV | VNAV | Specialist | Local | Securit- | |||||||||||||||||||||||||||||||||||||||||||||||||
SIVs | conduits | 28 | conduits | funds | funds | funds | funds | funds29 | isations | 30 | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | ||||||||||||||||||||||||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 0.4 | 32.3 | 13.9 | 43.8 | 0.7 | 1.4 | 0.6 | 3.1 | 54.6 | 0.3 | 151.1 | |||||||||||||||||||||||||||||||||||||||||||||
Direct lending31 | – | – | – | – | – | – | – | – | 1.3 | – | 1.3 | |||||||||||||||||||||||||||||||||||||||||||||
ABSs31 | – | 25.8 | – | 0.8 | – | – | – | – | – | – | 26.6 | |||||||||||||||||||||||||||||||||||||||||||||
ABCP | – | – | – | 4.6 | – | – | – | – | – | – | 4.6 | |||||||||||||||||||||||||||||||||||||||||||||
Other | 0.4 | 6.5 | 13.9 | 38.4 | 0.7 | 1.4 | 0.6 | 3.1 | 53.3 | 0.3 | 118.6 | |||||||||||||||||||||||||||||||||||||||||||||
Funding provided by HSBC | – | 38.6 | 2.1 | 0.7 | 0.6 | 1.3 | 0.2 | 3.2 | 0.7 | 0.2 | 47.6 | |||||||||||||||||||||||||||||||||||||||||||||
CP | – | 18.7 | 2.1 | – | – | – | – | – | – | – | 20.8 | |||||||||||||||||||||||||||||||||||||||||||||
MTNs | – | 3.4 | – | – | – | – | – | – | 0.4 | 0.2 | 4.0 | |||||||||||||||||||||||||||||||||||||||||||||
Junior notes | – | – | – | – | – | – | – | – | 0.3 | – | 0.3 | |||||||||||||||||||||||||||||||||||||||||||||
Term repos executed | – | 14.1 | – | – | – | – | – | – | – | – | 14.1 | |||||||||||||||||||||||||||||||||||||||||||||
Investments in funds | – | – | – | 0.7 | 0.6 | 1.3 | 0.2 | 3.2 | – | – | 6.0 | |||||||||||||||||||||||||||||||||||||||||||||
Drawn liquidity facility | – | 2.4 | – | – | – | – | – | – | – | – | 2.4 | |||||||||||||||||||||||||||||||||||||||||||||
Capital notes32 | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||||||||
Total maximum exposure to consolidated SPEs33 | – | 47.6 | 17.1 | 0.8 | 0.6 | 1.3 | 0.2 | 3.2 | 7.8 | 0.2 | 78.8 | |||||||||||||||||||||||||||||||||||||||||||||
Liquidity and credit enhancements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deal-specific liquidity facilities | – | – | 17.1 | – | – | – | – | – | – | – | 17.1 | |||||||||||||||||||||||||||||||||||||||||||||
Indemnities34 | – | – | – | 0.1 | – | – | – | – | – | – | 0.1 | |||||||||||||||||||||||||||||||||||||||||||||
Programme-wide liquidity facilities | – | 34.8 | – | – | – | – | – | – | – | – | 34.8 | |||||||||||||||||||||||||||||||||||||||||||||
Programme-wide limited credit enhancements | – | 1.2 | 0.6 | – | – | – | – | – | – | – | 1.8 | |||||||||||||||||||||||||||||||||||||||||||||
Other liquidity and credit enhancements | – | – | – | – | – | – | – | – | 0.1 | – | 0.1 |
For footnotes, see page 195. |
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Securitisations35 | Money market funds35 | Non-money market funds35 | |||||||||||||||||||||||||||||||||||||||||||||||||
HSBC | Non-HSBC | Enhanced | Multi- | ||||||||||||||||||||||||||||||||||||||||||||||||
originated | originated | CNAV | VNAV | VNAV | Specialist | Local | manager | ||||||||||||||||||||||||||||||||||||||||||||
assets | assets | 36 | funds | funds | funds | funds | funds | 37 | funds | Other | Total | ||||||||||||||||||||||||||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | ||||||||||||||||||||||||||||||||||||||||||
At 31 December 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 0.6 | 10.5 | 31.2 | – | 24.7 | 115.2 | 116.4 | 18.1 | 20.6 | 337.3 | |||||||||||||||||||||||||||||||||||||||||
Funding provided by HSBC | – | 0.1 | 0.1 | – | 0.2 | 1.1 | 0.2 | 0.1 | 8.8 | 10.6 | |||||||||||||||||||||||||||||||||||||||||
MTNs | – | 0.1 | – | – | – | – | – | – | 8.8 | 8.9 | |||||||||||||||||||||||||||||||||||||||||
Investments in funds | – | – | 0.1 | – | 0.2 | 1.1 | 0.2 | 0.1 | – | 1.7 | |||||||||||||||||||||||||||||||||||||||||
Total maximum exposure to unconsolidated SPEs | – | 0.1 | 0.1 | – | 0.2 | 1.1 | 0.2 | 0.1 | 3.2 | 5.0 | |||||||||||||||||||||||||||||||||||||||||
At 31 December 2008 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 0.6 | 13.5 | 28.2 | 2.0 | 26.6 | 82.5 | 93.1 | 21.0 | 20.9 | 288.4 | |||||||||||||||||||||||||||||||||||||||||
Funding provided by HSBC | – | 0.2 | – | – | 0.3 | – | 1.0 | – | 8.3 | 9.8 | |||||||||||||||||||||||||||||||||||||||||
MTNs | – | 0.2 | – | – | – | – | – | – | 8.3 | 8.5 | |||||||||||||||||||||||||||||||||||||||||
Investments in funds | – | – | – | – | 0.3 | – | 1.0 | – | – | 1.3 | |||||||||||||||||||||||||||||||||||||||||
Total maximum exposure to unconsolidated SPEs | – | 0.2 | – | – | 0.3 | – | 1.0 | – | 4.1 | 5.6 |
For footnotes, see page 195. |
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SPEs > Third-party sponsored SPEs // Other off-balance sheet / Footnotes |
Commit- | ||||||||
ments | Drawn | |||||||
US$bn | US$bn | |||||||
At 31 December 2009 | ||||||||
Third-party conduits | 1.3 | 0.3 | ||||||
Third-party securitisations | 0.7 | 0.1 | ||||||
2.0 | 0.4 | |||||||
At 31 December 2008 | ||||||||
Third-party conduits | 1.1 | 0.1 | ||||||
Third-party securitisations | 0.6 | 0.1 | ||||||
1.7 | 0.2 | |||||||
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Derivative assets | 0.1 | – | ||||||
arrangements and commitments
similar undertakings
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1 | Total includes holdings of ABSs issued by Freddie Mac and Fannie Mae. | |
2 | ‘Income and expense’ recorded in the income statement represents the accrual of the effective interest rate and, for 2009, also includes US$163 million in respect of impairment (2008: US$26 million). The effect on the income statement for 2008 shows the income and expense post-reclassification. In 2008 pre-reclassification, the assets were held at fair value and a loss of US$1,371 million was recorded in the period up to reclassification. | |
3 | Effect on the income statement during the period had the reclassification not occurred. | |
4 | Included in the write-downs during the half year to 31 December 2008 were US$26 million relating to reclassified leveraged finance exposures, which had previously been presented under leveraged finance loans. | |
5 | The carrying amount includes funded loans plus the net exposure to unfunded leveraged finance commitments, held within fair value through the profit or loss. | |
6 | ‘Directly held’ includes assets held by Solitaire where HSBC provides first loss protection and assets held directly by the Group. | |
7 | Impairment charges allocated to capital note holders represent impairments where losses would be borne by external third-party investors in the structures. | |
8 | Mortgage-backed securities (‘MBS’s), asset-backed securities (‘ABS’s) and collateralised debt obligations (‘CDO’s). | |
9 | During 2009, for disclosure purposes, certain other residential MBSs were reclassified to commercial property mortgage-related assets. Comparatives have been restated accordingly. | |
10 | High grade assets rated AA or AAA. | |
11 | Gains or losses on the net principal exposure (footnote 17) recognised in the income statement as a result of changes in the fair value of the asset. | |
12 | Fair value gains and losses on the net principal exposure (footnote 17) recognised in other comprehensive income as a result of the changes in the fair value of available-for-sale assets. | |
13 | Realised fair value gains and losses on the net principal exposure (footnote 17) recognised in the income statement as a result of the disposal of assets or the receipt of cash flows from assets. | |
14 | Reclassified from equity on impairment, disposal or payment. This includes impairment losses recognised in the income statement in respect of the net principal exposure (footnote 17) of available-for-sale assets. Payments are the contractual cash flows received on the assets. | |
15 | The gross principal is the redemption amount on maturity or, in the case of an amortising instrument, the sum of the future redemption amounts through the residual life of the security. | |
16 | A credit default swap (‘CDS’) gross protection is the gross principal of the underlying instrument that is protected by CDSs. | |
17 | Net principal exposure is the gross principal amount of assets that are not protected by CDSs. It includes assets that benefit from monoline protection, except where this protection is purchased with a CDS. | |
18 | Carrying amount of the net principal exposure. | |
19 | Net exposure after legal netting and any other relevant credit mitigation prior to deduction of the credit risk adjustment. | |
20 | Cumulative fair value adjustment recorded against OTC derivative counterparty exposures to reflect the creditworthiness of the counterparty. | |
21 | Funded exposure represents the loan amount advanced to the customer, less any fair value write-downs, net of fees held on deposit. | |
22 | Unfunded exposures represent the contractually committed loan facility amount not yet drawn down by the customer, less any fair value write-downs, net of fees held on deposit. | |
23 | Derivatives, trading assets and trading liabilities are presented as one category to reflect the manner in which these financial instruments are risk-managed. | |
24 | The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been restated accordingly. | |
25 | The reasons for the significant difference between carrying amount and fair value of loans and advances to customers in North America are discussed on page 179. | |
26 | Assets within multi-seller conduits are classified as collateralised loans. Under IFRSs, the conduits cannot recognise the underlying assets. | |
27 | For details of the geographical origin of the mortgage loans held at fair value and ABSs, including those represented by MBSs and CDOs held in consolidated SIVs and securities investment conduits, see ‘Nature and extent of HSBC’s exposures’ on page 157. | |
28 | The securities investment conduits include Mazarin, Barion, Malachite and Solitaire. | |
29 | Local investment management funds. | |
30 | Also includes consolidated SPEs that hold mortgage loans held at fair value. | |
31 | These assets only include those measured at fair value. For details on the geographical origin of the mortgage loans held at fair value and ABSs, including those represented by MBSs and CDOs held in consolidated SIVs and securities investment conduits, see ‘Nature and extent of HSBC’s exposures’ on page 157. The geographical origin of the loans and receivables held by the multi-seller conduits is disclosed on page 185. | |
32 | The carrying amount of HSBC’s holding of capital notes in the securities investment conduits amounted to US$2.6 million (2008: US$1.9 million) with a par value of US$54 million (2008: US$52 million). | |
33 | Total maximum exposure to consolidated SPEs as at 31 December 2008 has been restated to reflect more accurately the Group’s exposure to certain securitisation vehicles in which a proportion of the maximum exposure to risk of loss is borne by third-party noteholders. | |
34 | Two limited letters of indemnity which were in place in respect of CNAV funds at 31 December 2008 expired in April 2009. | |
35 | HSBC’s financial investments in off-balance sheet money market funds and non-money market funds have been classified as available-for-sale securities, and measured at fair value. HSBC’s financial investments in off-balance sheet securitisations have been classified as trading assets and available-for-sale securities, and measured at fair value. | |
36 | In the US, HSBC has established securitisation programmes where term-funded SPEs are used to securitise third-party originated mortgages, mainly sub-prime and Alt-A residential mortgages. The majority of these SPEs are not consolidated by HSBC as it is not exposed to the majority of the risk and rewards of ownership in the SPEs. No liquidity facility has been provided by HSBC. | |
37 | Local investment management funds. |
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Regulation and supervision > UK / Hong Kong |
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1 Unaudited. | ||
2 Audited. | ||
3 Audited where indicated. |
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Regulation and supervision > US // Risk management > Introduction / Risk governance |
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Risk management > Risk appetite / Scenario stress testing / Control culture // Credit risk > Management |
• | underlying business activity may be guided and controlled, so that it continues to be aligned to the risk appetite framework; | |
• | key assumptions underpinning risk appetite can be monitored and, as necessary, adjusted through subsequent business planning cycles; and | |
• | business decisions anticipated to be necessary to mitigate risk are flagged and acted upon promptly. |
• | the framework itself defines the governance bodies, processes, metrics and other features of how HSBC addresses risk appetite as part of its ongoing business; and | |
• | periodic risk appetite statements define, at various levels in the business, the desired level of risk commensurate with return and growth targets and in line with the corporate strategy and stakeholder objectives. |
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• | formulating Group credit policy. Compliance, subject to approved dispensations, is mandatory for all HSBC’s operating companies, which must develop and record in local instruction |
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Credit risk > Management |
manuals their detailed credit policies and procedures, consistent with Group policy; | ||
• | guiding HSBC’s operating companies on the Group’s appetite for credit risk exposure to specified market sectors, activities and banking products. GMO Risk controls exposures to certain higher-risk sectors and closely monitors exposure to others, including real estate, the automotive sector, certain non-bank financial institutions, structured products and leveraged finance transactions. When necessary, restrictions are imposed on new business or exposures, which may be capped at Group and/or entity level; | |
• | undertaking independent review and objective assessment of risk. GMO Risk assesses all commercial non-bank credit facilities and exposures — including those embedded in derivatives — that are originated or renewed by HSBC’s operating companies over designated limits, prior to the facilities being committed to customers or transactions being undertaken. Operating companies may not confirm credit approval without this concurrence; | |
• | monitoring the performance and management of portfolios across the Group. GMO Risk tracks emerging trends and conducts in-depth portfolio reviews, overseeing the effective management of any adverse characteristics; | |
• | controlling centrally exposures to sovereign entities, banks and other financial institutions. HSBC’s credit and settlement risk limits to counterparties in these sectors are approved and managed by GMO Risk to optimise the use of credit availability and avoid excessive risk concentration; | |
• | controlling exposure for all debt securities held; where a security is not held solely for the purpose of trading, a formal issuer risk limit is established; | |
• | establishing and maintaining HSBC’s policy on large credit exposures, ensuring that concentrations of exposure by counterparty, sector or geography do not become excessive in relation to the Group’s capital base and remain within internal and regulatory limits. GMO Risk also monitors HSBC’s intra-Group exposures to ensure they are maintained within regulatory limits and ensures that policy and practice are fully aligned to evolving regulatory requirements; | |
• | controlling cross-border exposures, through the imposition of country limits with sub-limits by |
maturity and type of business. Country limits are determined by taking into account economic and political factors, and applying local business knowledge. Transactions with countries deemed to be higher risk are considered on a case by case basis; | ||
• | maintaining and developing HSBC’s risk rating framework and systems, to classify exposures meaningfully and enable focused management of the risks involved. The GCRO chairs the Credit Risk Analytics Oversight Committee, which reports to the RMM and oversees risk rating model governance for both wholesale and retail business. Rating methodologies, based upon a wide range of analytics and market data-based tools, are core inputs to the assessment of customer risk. For larger facilities, while full use is made of automated risk-rating processes, the ultimate responsibility for setting risk ratings rests with the final approving executive; | |
• | assisting the Risk Strategy unit in the development of stress-testing scenarios, economic capital measurement and the refinement of key risk indicators and their reporting, embedded within the Group’s business planning processes; | |
• | reporting on aspects of the HSBC credit risk portfolio to the RMM, the Group Audit Committee and the Board of Directors of HSBC Holdings by way of a variety of regular and ad hoc reports covering: |
– | risk concentrations; | ||
– | retail portfolio performance at Group entity, regional and overall Group levels; | ||
– | specific higher-risk portfolio segments; | ||
– | a risk map of the status of key risk topics, with associated preventive and mitigating actions; | ||
– | individual large impaired accounts, and impairment allowances/charges for all customer segments; | ||
– | country limits, cross-border exposures and related impairment allowances; | ||
– | portfolio and analytical model performance data; and | ||
– | stress-testing results and recommendations; |
• | managing and directing credit risk management systems initiatives. A centralised database covers substantially all the Group’s direct lending exposures, to deliver an increasingly |
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granular level of management reporting. A uniform credit application process for banks is operational throughout the Group and a similar corporate credit application system covers almost all Group corporate business by value; | ||
• | providing advice and guidance to HSBC’s operating companies, to promote best practice throughout the Group on credit-related matters such as sustainability risk, new products and training; and | |
• | acting on behalf of HSBC Holdings as the primary interface, for credit-related issues, with external parties including the Bank of England, the FSA, local regulators, rating agencies, corporate analysts, trade associations and counterparts in the world’s major banks and non-bank financial institutions. |
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Credit risk > Management |
• | known cash flow difficulties experienced by the borrower; | |
• | past due contractual payments of either principal or interest; | |
• | breach of loan covenants or conditions; | |
• | the probability that the borrower will enter bankruptcy or other financial realisation; and | |
• | a significant downgrading in credit rating by an external credit rating agency. |
• | HSBC’s aggregate exposure to the customer; | |
• | the viability of the customer’s business model and their capacity to trade successfully out of financial difficulties, generating sufficient cash flow to service debt obligations; | |
• | the ability of the borrower to obtain, and make payments in, the currency of the loan if not denominated in local currency; |
• | the amount and timing of expected receipts and recoveries; | |
• | the extent of other creditors’ commitments ranking ahead of, orpari passuwith, HSBC and the likelihood of other creditors continuing to support the company; | |
• | the complexity of determining the aggregate amount and ranking of all creditor claims and the extent to which legal and insurance uncertainties are evident; | |
• | the value of security and likelihood of successfully realising it; | |
• | the existence of other credit mitigants and the ability of the providers of such credit mitigants to deliver as contractually committed; and | |
• | when available, the secondary market price of the debt. |
• | to cover losses that have been incurred but have not yet been identified on loans subject to individual assessment; and | |
• | for homogeneous groups of loans that are not considered individually significant. |
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• | historical loss experience in portfolios of similar credit risk characteristics (for example, by industry sector, risk rating or product segment); | |
• | the estimated period between impairment occurring and the loss being identified and evidenced by the establishment of an appropriate allowance against the individual loan; and | |
• | management’s experienced judgement as to whether current economic and credit conditions are such that the actual level of inherent losses is likely to be greater or less than that suggested by historical experience. |
• | low-value, homogeneous small business accounts in certain countries or territories; | |
• | residential mortgages that have not been individually assessed; | |
• | credit cards and other unsecured consumer lending products; and | |
• | motor vehicle financing. |
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Credit risk > Management / Credit exposure > Maximum exposure / Collateral |
• | performing, trade-related and of less than one year’s maturity; | |
• | mitigated by acceptable security cover which is, other than in exceptional cases, held outside the country concerned; | |
• | in the form of securities held for trading purposes for which a liquid and active market exists, and which are measured at fair value daily; | |
• | performing facilities with a principal (excluding security) of US$1 million or below; or | |
• | performing facilities with maturity dates shorter than three months. |
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At 31 December 2009 | At 31 December 2008 | |||||||||||||||||||||||||||||||
Exposure | Exposure | |||||||||||||||||||||||||||||||
Maximum | to credit | Maximum | to credit | |||||||||||||||||||||||||||||
exposure | Offset | risk (net) | exposure | Offset | risk (net) | |||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||
Cash and balances at central banks | 60,655 | – | 60,655 | 52,396 | – | 52,396 | ||||||||||||||||||||||||||
Items in the course of collection from other banks | 6,395 | – | 6,395 | 6,003 | – | 6,003 | ||||||||||||||||||||||||||
Hong Kong Government certificates of indebtedness | 17,463 | – | 17,463 | 15,358 | – | 15,358 | ||||||||||||||||||||||||||
Trading assets | 386,070 | (8,496 | ) | 377,574 | 405,451 | (13,227 | ) | 392,224 | ||||||||||||||||||||||||
Treasury and other eligible bills | 22,346 | – | 22,346 | 32,458 | – | 32,458 | ||||||||||||||||||||||||||
Debt securities | 201,598 | – | 201,598 | 199,619 | – | 199,619 | ||||||||||||||||||||||||||
Loans and advances to banks | 78,126 | – | 78,126 | 73,055 | – | 73,055 | ||||||||||||||||||||||||||
Loans and advances to customers | 84,000 | (8,496 | ) | 75,504 | 100,319 | (13,227 | ) | 87,092 | ||||||||||||||||||||||||
Financial assets designated at fair value | 22,198 | – | 22,198 | 17,540 | – | 17,540 | ||||||||||||||||||||||||||
Treasury and other eligible bills | 223 | – | 223 | 235 | – | 235 | ||||||||||||||||||||||||||
Debt securities | 20,718 | – | 20,718 | 16,349 | – | 16,349 | ||||||||||||||||||||||||||
Loans and advances to banks | 354 | – | 354 | 230 | – | 230 | ||||||||||||||||||||||||||
Loans and advances to customers | 903 | – | 903 | 726 | – | 726 | ||||||||||||||||||||||||||
Derivatives | 250,886 | (189,606 | ) | 61,280 | 494,876 | (383,308 | ) | 111,568 | ||||||||||||||||||||||||
Loans and advances held at amortised cost: | 1,076,012 | (91,127 | ) | 984,885 | 1,086,634 | (83,398 | ) | 1,003,236 | ||||||||||||||||||||||||
– to banks | 179,781 | (116 | ) | 179,665 | 153,766 | (126 | ) | 153,640 | ||||||||||||||||||||||||
– to customers | 896,231 | (91,011 | ) | 805,220 | 932,868 | (83,272 | ) | 849,596 | ||||||||||||||||||||||||
Financial investments | 360,034 | – | 360,034 | 292,984 | – | 292,984 | ||||||||||||||||||||||||||
Treasury and other similar bills | 58,434 | – | 58,434 | 41,027 | – | 41,027 | ||||||||||||||||||||||||||
Debt securities | 301,600 | – | 301,600 | 251,957 | – | 251,957 | ||||||||||||||||||||||||||
Other assets | 36,373 | (4 | ) | 36,369 | 40,859 | (5 | ) | 40,854 | ||||||||||||||||||||||||
Endorsements and acceptances | 9,311 | (4 | ) | 9,307 | 10,482 | (5 | ) | 10,477 | ||||||||||||||||||||||||
Other | 27,062 | – | 27,062 | 30,377 | – | 30,377 | ||||||||||||||||||||||||||
Financial guarantees and similar contracts | 53,251 | – | 53,251 | 52,318 | – | 52,318 | ||||||||||||||||||||||||||
Loan and other credit-related commitments1 | 558,050 | – | 558,050 | 604,022 | – | 604,022 | ||||||||||||||||||||||||||
2,827,387 | (289,233 | ) | 2,538,154 | 3,068,441 | (479,938 | ) | 2,588,503 | |||||||||||||||||||||||||
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Credit risk > Credit exposure > Maximum exposure / Concentration of exposure |
• | in the personal sector, mortgages over residential properties; | |
• | in the commercial and industrial sector, charges over business assets such as premises, stock and debtors; | |
• | in the commercial real estate sector, charges over the properties being financed; and | |
• | in the financial sector, charges over financial instruments such as cash, debt securities and equities in support of trading facilities. |
• | when the counterparty is resident and/or incorporated in an emerging market and seeks to sell a non-domestic currency in exchange for its home currency; | |
• | when the trade involves the purchase of an equity put option from a counterparty whose shares are the subject of the option; | |
• | the purchase of credit protection from a counterparty who is closely associated with the reference entity of the credit default swap or total return swap; and | |
• | the purchase of credit protection on an asset type which is highly concentrated in the exposure of the counterparty selling the credit protection. |
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Credit risk > Credit exposure > Concentration of exposure |
(Unaudited)
At | Constant | Movement on a | At | |||||||||||||||||||||
31 December | currency | constant | 31 December | |||||||||||||||||||||
2008 | effect | currency basis | 2009 | |||||||||||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||||||||||
Gross loans and advances to customers | ||||||||||||||||||||||||
Personal2 | 440,227 | 22,169 | (28,190 | ) | 434,206 | |||||||||||||||||||
Residential mortgages2,3 | 243,337 | 13,567 | 3,765 | 260,669 | ||||||||||||||||||||
Other personal2,4 | 196,890 | 8,602 | (31,955 | ) | 173,537 | |||||||||||||||||||
Corporate and commercial | 407,474 | 30,384 | (54,768 | ) | 383,090 | |||||||||||||||||||
Commercial, industrial and international trade | 209,840 | 16,125 | (29,837 | ) | 196,128 | |||||||||||||||||||
Commercial real estate | 70,969 | 4,668 | (6,248 | ) | 69,389 | |||||||||||||||||||
Other property-related | 30,739 | 1,783 | (2,002 | ) | 30,520 | |||||||||||||||||||
Government | 6,544 | 185 | (40 | ) | 6,689 | |||||||||||||||||||
Other commercial5 | 89,382 | 7,623 | (16,641 | ) | 80,364 | |||||||||||||||||||
Financial | 101,085 | 5,419 | (9,854 | ) | 96,650 | |||||||||||||||||||
Non-bank financial institutions | 99,536 | 5,248 | (9,547 | ) | 95,237 | |||||||||||||||||||
Settlement accounts | 1,549 | 171 | (307 | ) | 1,413 | |||||||||||||||||||
Asset-backed securities reclassified | 7,991 | – | (164 | ) | 7,827 | |||||||||||||||||||
Total gross loans and advances to customers6 | 956,777 | 57,972 | (92,976 | ) | 921,773 | |||||||||||||||||||
Gross loans and advances to banks | 153,829 | 7,413 | 18,646 | 179,888 | ||||||||||||||||||||
Total gross loans and advances | 1,110,606 | 65,385 | (74,330 | ) | 1,101,661 | �� | ||||||||||||||||||
(Audited)
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||
Personal2 | 434,206 | 440,227 | 500,834 | 476,146 | 420,476 | |||||||||||||||||||||||||
Residential mortgages2,3 | 260,669 | 243,337 | 269,068 | 265,337 | 238,546 | |||||||||||||||||||||||||
Other personal2,4 | 173,537 | 196,890 | 231,766 | 210,809 | 181,930 | |||||||||||||||||||||||||
Corporate and commercial | 383,090 | 407,474 | 400,771 | 343,107 | 278,709 | |||||||||||||||||||||||||
Commercial, industrial and international trade | 196,128 | 209,840 | 202,038 | 162,109 | 130,802 | |||||||||||||||||||||||||
Commercial real estate | 69,389 | 70,969 | 72,345 | 60,366 | 51,815 | |||||||||||||||||||||||||
Other property-related | 30,520 | 30,739 | 33,907 | 27,165 | 22,196 | |||||||||||||||||||||||||
Government | 6,689 | 6,544 | 5,708 | 8,990 | 8,218 | |||||||||||||||||||||||||
Other commercial5 | 80,364 | 89,382 | 86,773 | 84,477 | 65,678 | |||||||||||||||||||||||||
Financial | 96,650 | 101,085 | 99,148 | 62,458 | 52,174 | |||||||||||||||||||||||||
Non-bank financial institutions | 95,237 | 99,536 | 96,781 | 59,204 | 50,032 | |||||||||||||||||||||||||
Settlement accounts | 1,413 | 1,549 | 2,367 | 3,254 | 2,142 | |||||||||||||||||||||||||
Asset-backed securities reclassified | 7,827 | 7,991 | – | – | – | |||||||||||||||||||||||||
Total gross loans and advances to customers6 | 921,773 | 956,777 | 1,000,753 | 881,711 | 751,359 | |||||||||||||||||||||||||
Impaired loans | 30,606 | 25,352 | 19,582 | 15,071 | 12,338 | |||||||||||||||||||||||||
– as a percentage of gross loans and advances to customers | 3.3% | 2.6% | 2.0% | 1.7% | 1.6% | |||||||||||||||||||||||||
Total impairment allowances | 25,542 | 23,909 | 19,205 | 13,578 | 11,357 | |||||||||||||||||||||||||
– as a percentage of total gross loans and advances | 2.8% | 2.5% | 1.9% | 1.5% | 1.5% |
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(Audited)
Gross | Gross loans | |||||||||||||||||||||||||||||||||||||||||||||||
loans and | by industry | |||||||||||||||||||||||||||||||||||||||||||||||
Rest of | advances | sector as a | ||||||||||||||||||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | to | % of total | ||||||||||||||||||||||||||||||||||||||||||
Europe | Kong | Pacific7 | East7 | America | America | customers | gross loans | |||||||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | % | |||||||||||||||||||||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal2 | 162,562 | 47,946 | 32,514 | 6,405 | 163,934 | 20,845 | 434,206 | 47.2 | ||||||||||||||||||||||||||||||||||||||||
Residential mortgages2,3 | 109,872 | 35,292 | 21,983 | 1,898 | 86,591 | 5,033 | 260,669 | 28.3 | ||||||||||||||||||||||||||||||||||||||||
Other personal2,4 | 52,690 | 12,654 | 10,531 | 4,507 | 77,343 | 15,812 | 173,537 | 18.9 | ||||||||||||||||||||||||||||||||||||||||
Corporate and commercial | 202,919 | 49,340 | 46,175 | 16,604 | 40,902 | 27,150 | 383,090 | 41.5 | ||||||||||||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial, industrial and international trade | 112,374 | 17,728 | 28,228 | 9,336 | 11,528 | 16,934 | 196,128 | 21.3 | ||||||||||||||||||||||||||||||||||||||||
Commercial real estate | 33,853 | 13,782 | 6,475 | 1,309 | 11,527 | 2,443 | 69,389 | 7.5 | ||||||||||||||||||||||||||||||||||||||||
Other property-related | 6,231 | 10,062 | 3,863 | 1,357 | 8,452 | 555 | 30,520 | 3.3 | ||||||||||||||||||||||||||||||||||||||||
Government | 2,216 | 441 | 595 | 1,356 | 208 | 1,873 | 6,689 | 0.7 | ||||||||||||||||||||||||||||||||||||||||
Other commercial5 | 48,245 | 7,327 | 7,014 | 3,246 | 9,187 | 5,345 | 80,364 | 8.7 | ||||||||||||||||||||||||||||||||||||||||
Financial | 73,851 | 2,899 | 2,350 | 1,213 | 14,150 | 2,187 | 96,650 | 10.5 | ||||||||||||||||||||||||||||||||||||||||
Non-bank financial institutions | 73,225 | 2,462 | 2,246 | 1,206 | 13,963 | 2,135 | 95,237 | 10.3 | ||||||||||||||||||||||||||||||||||||||||
Settlement accounts | 626 | 437 | 104 | 7 | 187 | 52 | 1,413 | 0.2 | ||||||||||||||||||||||||||||||||||||||||
Asset-backed securities reclassified | 6,284 | – | – | – | 1,543 | – | 7,827 | 0.8 | ||||||||||||||||||||||||||||||||||||||||
Total gross loans and advances to customers (‘TGLAC’)6,8 | 445,616 | 100,185 | 81,039 | 24,222 | 220,529 | 50,182 | 921,773 | 100.0 | ||||||||||||||||||||||||||||||||||||||||
Percentage of TGLAC by geographical region | 48.3% | 10.9% | 8.8% | 2.6% | 23.9% | 5.5% | 100.0% | |||||||||||||||||||||||||||||||||||||||||
Impaired loans8 | 10,722 | 841 | 1,200 | 1,646 | 13,246 | 2,951 | 30,606 | |||||||||||||||||||||||||||||||||||||||||
– as a percentage of TGLAC | 2.4% | 0.8% | 1.5% | 6.8% | 6.0% | 5.9% | 3.3% | |||||||||||||||||||||||||||||||||||||||||
Total impairment allowances8 | 6,135 | 804 | 996 | 1,378 | 13,676 | 2,553 | 25,542 | |||||||||||||||||||||||||||||||||||||||||
– as a percentage of TGLAC | 1.4% | 0.8% | 1.2% | 5.7% | 6.2% | 5.1% | 2.8% | |||||||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Personal | 141,532 | 46,087 | 29,887 | 7,524 | 195,534 | 19,663 | 440,227 | 46.0 | ||||||||||||||||||||||||||||||||||||||||
Residential mortgages3 | 87,267 | 33,014 | 18,244 | 1,941 | 98,383 | 4,488 | 243,337 | 25.4 | ||||||||||||||||||||||||||||||||||||||||
Other personal4 | 54,265 | 13,073 | 11,643 | 5,583 | 97,151 | 15,175 | 196,890 | 20.6 | ||||||||||||||||||||||||||||||||||||||||
Corporate and commercial | 219,640 | 52,186 | 47,394 | 18,732 | 47,291 | 22,231 | 407,474 | 42.5 | ||||||||||||||||||||||||||||||||||||||||
Commercial, industrial and international trade | 121,047 | 20,186 | 29,294 | 10,853 | 15,178 | 13,282 | 209,840 | 21.9 | ||||||||||||||||||||||||||||||||||||||||
Commercial real estate | 32,704 | 14,233 | 6,713 | 1,431 | 13,504 | 2,384 | 70,969 | 7.4 | ||||||||||||||||||||||||||||||||||||||||
Other property-related | 7,666 | 10,296 | 3,541 | 1,587 | 7,234 | 415 | 30,739 | 3.2 | ||||||||||||||||||||||||||||||||||||||||
Government | 1,864 | 951 | 579 | 1,181 | 352 | 1,617 | 6,544 | 0.7 | ||||||||||||||||||||||||||||||||||||||||
Other commercial5 | 56,359 | 6,520 | 7,267 | 3,680 | 11,023 | 4,533 | 89,382 | 9.3 | ||||||||||||||||||||||||||||||||||||||||
Financial | 62,620 | 2,680 | 4,193 | 1,453 | 27,746 | 2,393 | 101,085 | 10.6 | ||||||||||||||||||||||||||||||||||||||||
Non-bank financial institutions | 61,823 | 2,402 | 3,940 | 1,447 | 27,560 | 2,364 | 99,536 | 10.4 | ||||||||||||||||||||||||||||||||||||||||
Settlement accounts | 797 | 278 | 253 | 6 | 186 | 29 | 1,549 | 0.2 | ||||||||||||||||||||||||||||||||||||||||
Asset-backed securities reclassified | 6,258 | – | – | – | 1,733 | – | 7,991 | 0.9 | ||||||||||||||||||||||||||||||||||||||||
TGLAC6 | 430,050 | 100,953 | 81,474 | 27,709 | 272,304 | 44,287 | 956,777 | 100.0 | ||||||||||||||||||||||||||||||||||||||||
Percentage of TGLAC by geographical region | 44.9% | 10.6% | 8.5% | 2.9% | 28.5% | 4.6% | 100.0% | |||||||||||||||||||||||||||||||||||||||||
Impaired loans | 6,774 | 852 | 835 | 279 | 14,285 | 2,327 | 25,352 | |||||||||||||||||||||||||||||||||||||||||
– as a percentage of TGLAC | 1.6% | 0.8% | 1.0% | 1.0% | 5.2% | 5.3% | 2.6% | |||||||||||||||||||||||||||||||||||||||||
Total impairment allowances | 3,859 | 733 | 813 | 414 | 16,090 | 2,000 | 23,909 | |||||||||||||||||||||||||||||||||||||||||
– as a percentage of TGLAC | 0.9% | 0.7% | 1.0% | 1.5% | 5.9% | 4.5% | 2.5% |
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Credit risk > Credit exposure > Concentration of exposure |
(Audited)
Commercial, | ||||||||||||||||||||
international | ||||||||||||||||||||
Residential | Other | Property- | trade and | |||||||||||||||||
mortgages | personal | related | other | Total | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
Rest of Asia-Pacific7 | ||||||||||||||||||||
Australia | 5,919 | 993 | 1,785 | 3,496 | 12,193 | |||||||||||||||
India | 883 | 864 | 458 | 3,002 | 5,207 | |||||||||||||||
Indonesia | 59 | 571 | 71 | 2,114 | 2,815 | |||||||||||||||
Japan | 109 | 149 | 796 | 1,444 | 2,498 | |||||||||||||||
Mainland China | 1,503 | 319 | 2,633 | 8,915 | 13,370 | |||||||||||||||
Malaysia | 2,925 | 1,717 | 1,085 | 3,548 | 9,275 | |||||||||||||||
Singapore | 5,149 | 3,041 | 2,407 | 4,251 | 14,848 | |||||||||||||||
South Korea | 2,093 | 407 | 30 | 1,932 | 4,462 | |||||||||||||||
Taiwan | 2,205 | 503 | 53 | 1,578 | 4,339 | |||||||||||||||
Other | 1,138 | 1,967 | 1,020 | 7,907 | 12,032 | |||||||||||||||
21,983 | 10,531 | 10,338 | 38,187 | 81,039 | ||||||||||||||||
Middle East7 (excluding Saudi Arabia) | ||||||||||||||||||||
Egypt | 4 | 326 | 126 | 2,132 | 2,588 | |||||||||||||||
United Arab Emirates | 1,650 | 2,881 | 1,395 | 8,848 | 14,774 | |||||||||||||||
Other | 244 | 1,300 | 1,145 | 4,171 | 6,860 | |||||||||||||||
1,898 | 4,507 | 2,666 | 15,151 | 24,222 | ||||||||||||||||
Latin America | ||||||||||||||||||||
Argentina | 31 | 628 | 49 | 1,689 | 2,397 | |||||||||||||||
Brazil | 717 | 10,494 | 1,076 | 12,111 | 24,398 | |||||||||||||||
Mexico | 2,259 | 2,702 | 995 | 6,762 | 12,718 | |||||||||||||||
Panama | 1,151 | 973 | 475 | 3,464 | 6,063 | |||||||||||||||
Other | 875 | 1,015 | 403 | 2,313 | 4,606 | |||||||||||||||
5,033 | 15,812 | 2,998 | 26,339 | 50,182 | ||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
Rest of Asia-Pacific7 | ||||||||||||||||||||
Australia | 3,598 | 783 | 1,621 | 3,350 | 9,352 | |||||||||||||||
India | 1,112 | 1,482 | 493 | 3,332 | 6,419 | |||||||||||||||
Indonesia | 27 | 527 | 26 | 1,410 | 1,990 | |||||||||||||||
Japan | 57 | 160 | 808 | 4,818 | 5,843 | |||||||||||||||
Mainland China | 1,303 | 12 | 2,784 | 7,423 | 11,522 | |||||||||||||||
Malaysia | 2,699 | 1,624 | 941 | 4,263 | 9,527 | |||||||||||||||
Singapore | 4,209 | 3,301 | 2,448 | 3,521 | 13,479 | |||||||||||||||
South Korea | 2,153 | 682 | 34 | 2,497 | 5,366 | |||||||||||||||
Taiwan | 2,217 | 705 | 14 | 1,497 | 4,433 | |||||||||||||||
Other | 869 | 2,367 | 1,085 | 9,222 | 13,543 | |||||||||||||||
18,244 | 11,643 | 10,254 | 41,333 | 81,474 | ||||||||||||||||
Middle East7 (excluding Saudi Arabia) | ||||||||||||||||||||
Egypt | – | 275 | 125 | 2,106 | 2,506 | |||||||||||||||
United Arab Emirates | 1,693 | 3,748 | 2,118 | 10,214 | 17,773 | |||||||||||||||
Other | 248 | 1,560 | 775 | 4,847 | 7,430 | |||||||||||||||
1,941 | 5,583 | 3,018 | 17,167 | 27,709 | ||||||||||||||||
Latin America | ||||||||||||||||||||
Argentina | 41 | 707 | 60 | 1,648 | 2,456 | |||||||||||||||
Brazil | 376 | 8,585 | 694 | 9,578 | 19,233 | |||||||||||||||
Mexico | 2,150 | 3,665 | 1,024 | 6,094 | 12,933 | |||||||||||||||
Panama | 1,105 | 1,076 | 569 | 1,877 | 4,627 | |||||||||||||||
Other | 816 | 1,142 | 452 | 2,628 | 5,038 | |||||||||||||||
4,488 | 15,175 | 2,799 | 21,825 | 44,287 | ||||||||||||||||
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Gross | ||||||||||||||||||||||||||||||||
Rest of | loans and | Impair- | ||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | advances | ment | ||||||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | to banks | allowances | |||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
At 31 December 2009 | 65,614 | 36,197 | 35,648 | 8,435 | 15,386 | 18,608 | 179,888 | (107 | ) | |||||||||||||||||||||||
At 31 December 2008 | 62,012 | 29,646 | 28,665 | 7,476 | 11,458 | 14,572 | 153,829 | (63 | ) | |||||||||||||||||||||||
At 31 December 2007 | 104,534 | 63,737 | 32,373 | 7,488 | 16,566 | 12,675 | 237,373 | (7 | ) | |||||||||||||||||||||||
At 31 December 2006 | 76,837 | 50,359 | 19,716 | 7,801 | 17,865 | 12,634 | 185,212 | (7 | ) | |||||||||||||||||||||||
At 31 December 2005 | 44,369 | 42,751 | 14,514 | 5,045 | 10,331 | 8,964 | 125,974 | (9 | ) |
(Unaudited)
(Unaudited)
Government | ||||||||||||||||
and official | ||||||||||||||||
Banks | institutions | Other | Total | |||||||||||||
US$bn | US$bn | US$bn | US$bn | |||||||||||||
At 31 December 2009 | ||||||||||||||||
UK | 37.5 | 7.0 | 38.0 | 82.5 | ||||||||||||
US | 10.7 | 29.3 | 25.7 | 65.7 | ||||||||||||
France | 27.0 | 10.7 | 7.7 | 45.4 | ||||||||||||
Germany | 21.9 | 15.0 | 4.5 | 41.4 | ||||||||||||
At 31 December 2008 | ||||||||||||||||
UK | 38.4 | 7.1 | 33.8 | 79.3 | ||||||||||||
US | 13.6 | 26.4 | 34.1 | 74.1 | ||||||||||||
France | 19.9 | 12.1 | 7.9 | 39.9 | ||||||||||||
Germany | 18.9 | 8.0 | 6.7 | 33.6 | ||||||||||||
The Netherlands | 14.1 | 1.9 | 10.3 | 26.3 | ||||||||||||
At 31 December 2007 | ||||||||||||||||
UK | 32.3 | 2.2 | 47.5 | 82.0 | ||||||||||||
US | 14.0 | 11.4 | 29.5 | 54.9 | ||||||||||||
France | 38.8 | 1.7 | 1.9 | 42.4 | ||||||||||||
Germany | 30.3 | 5.9 | 5.6 | 41.8 | ||||||||||||
The Netherlands | 21.4 | 0.2 | 4.2 | 25.8 |
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Credit risk > Areas of special interest > Wholesale lending / Personal lending |
(Unaudited)
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Credit risk > Areas of special interest > Personal lending |
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(Unaudited)
Rest of | ||||||||||||||||||||||||||||||||||||
Rest of | North | Other | ||||||||||||||||||||||||||||||||||
UK | Europe | US | 9 | America | regions | 10 | Total | |||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||||||
Residential mortgages2 | 100,667 | 9,205 | 65,784 | 20,807 | 64,206 | 260,669 | ||||||||||||||||||||||||||||||
Other personal lending2 | 29,018 | 23,672 | 69,275 | 8,068 | 43,504 | 173,537 | ||||||||||||||||||||||||||||||
– motor vehicle finance | – | 65 | 5,771 | 99 | 6,378 | 12,313 | ||||||||||||||||||||||||||||||
– credit cards | 12,427 | 1,820 | 39,374 | 1,118 | 13,319 | 68,058 | ||||||||||||||||||||||||||||||
– second lien mortgages | 1,068 | 2 | 11,786 | 695 | 472 | 14,023 | ||||||||||||||||||||||||||||||
– other | 15,523 | 21,785 | 12,344 | 6,156 | 23,335 | 79,143 | ||||||||||||||||||||||||||||||
Total personal lending2 | 129,685 | 32,877 | 135,059 | 28,875 | 107,710 | 434,206 | ||||||||||||||||||||||||||||||
Impairment allowances | ||||||||||||||||||||||||||||||||||||
Residential mortgages2 | (151 | ) | (41 | ) | (4,416 | ) | (7 | ) | (233 | ) | (4,848 | ) | ||||||||||||||||||||||||
Other personal lending2 | (1,443 | ) | (552 | ) | (7,691 | ) | (206 | ) | (2,349 | ) | (12,241 | ) | ||||||||||||||||||||||||
– motor vehicle finance | – | (7 | ) | (211 | ) | (1 | ) | (351 | ) | (570 | ) | |||||||||||||||||||||||||
– credit cards | (524 | ) | (233 | ) | (3,895 | ) | (42 | ) | (854 | ) | (5,548 | ) | ||||||||||||||||||||||||
– second lien mortgages | (79 | ) | – | (1,608 | ) | (56 | ) | – | (1,743 | ) | ||||||||||||||||||||||||||
– other | (840 | ) | (312 | ) | (1,977 | ) | (107 | ) | (1,144 | ) | (4,380 | ) | ||||||||||||||||||||||||
Total impairment allowances on personal lending2 | (1,594 | ) | (593 | ) | (12,107 | ) | (213 | ) | (2,582 | ) | (17,089 | ) | ||||||||||||||||||||||||
– as a percentage of total personal lending | 1.2% | 1.8% | 9.0% | 0.7% | 2.4% | 3.9% | ||||||||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||||||
Residential mortgages | 78,346 | 8,921 | 80,946 | 17,437 | 57,687 | 243,337 | ||||||||||||||||||||||||||||||
Other personal lending | 29,274 | 24,991 | 89,562 | 7,589 | 45,474 | 196,890 | ||||||||||||||||||||||||||||||
– motor vehicle finance | – | 99 | 10,864 | 137 | 6,201 | 17,301 | ||||||||||||||||||||||||||||||
– credit cards | 11,215 | 1,695 | 46,972 | 1,469 | 13,426 | 74,777 | ||||||||||||||||||||||||||||||
– second lien mortgages | 1,160 | 2 | 14,614 | 803 | 503 | 17,082 | ||||||||||||||||||||||||||||||
– other | 16,899 | 23,195 | 17,112 | 5,180 | 25,344 | 87,730 | ||||||||||||||||||||||||||||||
Total personal lending | 107,620 | 33,912 | 170,508 | 25,026 | 103,161 | 440,227 | ||||||||||||||||||||||||||||||
Impairment allowances | ||||||||||||||||||||||||||||||||||||
Residential mortgages | (10 | ) | (22 | ) | (5,109 | ) | (4 | ) | (174 | ) | (5,319 | ) | ||||||||||||||||||||||||
Other personal lending | (1,197 | ) | (441 | ) | (9,911 | ) | (192 | ) | (1,909 | ) | (13,650 | ) | ||||||||||||||||||||||||
– motor vehicle finance | – | (5 | ) | (426 | ) | (1 | ) | (175 | ) | (607 | ) | |||||||||||||||||||||||||
– credit cards | (385 | ) | (165 | ) | (4,255 | ) | (51 | ) | (805 | ) | (5,661 | ) | ||||||||||||||||||||||||
– second lien mortgages | (50 | ) | – | (2,397 | ) | (41 | ) | – | (2,488 | ) | ||||||||||||||||||||||||||
– other | (762 | ) | (271 | ) | (2,833 | ) | (99 | ) | (929 | ) | (4,894 | ) | ||||||||||||||||||||||||
Total impairment allowances on personal lending | (1,207 | ) | (463 | ) | (15,020 | ) | (196 | ) | (2,083 | ) | (18,969 | ) | ||||||||||||||||||||||||
– as a percentage of total personal lending | 1.1% | 1.4% | 8.8% | 0.8% | 2.0% | 4.3% |
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Credit risk > Areas of special interest > Personal lending / Mortgage lending |
218
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219
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Credit risk > Areas of special interest > Personal lending / Mortgage lending // US personal lending – credit quality |
(Unaudited)
Rest of | ||||||||||||||||||||||||
Rest of | North | Other | ||||||||||||||||||||||
UK | Europe | US | 9 | America | regions | 10 | Total | |||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Residential mortgages11 | 100,667 | 9,205 | 65,784 | 20,807 | 64,206 | 260,669 | ||||||||||||||||||
Second lien mortgages11 | 1,068 | 2 | 11,786 | 695 | 472 | 14,023 | ||||||||||||||||||
Total mortgage lending11 | 101,735 | 9,207 | 77,570 | 21,502 | 64,678 | 274,692 | ||||||||||||||||||
Second lien as a percentage of total mortgage lending | 1.0% | – | 15.2% | 3.2% | 0.7% | 5.1% | ||||||||||||||||||
Impairment allowances | ||||||||||||||||||||||||
Residential mortgages11 | (151 | ) | (41 | ) | (4,416 | ) | (7 | ) | (233 | ) | (4,848 | ) | ||||||||||||
Second lien mortgages11 | (79 | ) | – | (1,608 | ) | (56 | ) | – | (1,743 | ) | ||||||||||||||
Total impairment allowances on mortgage lending | (230 | ) | (41 | ) | (6,024 | ) | (63 | ) | (233 | ) | (6,591 | ) | ||||||||||||
Interest-only (including endowment) mortgages | 45,471 | – | – | 1,154 | 1,127 | 47,752 | ||||||||||||||||||
Affordability mortgages, including ARMs | 2,681 | 1,084 | 21,024 | 232 | 5,921 | 30,942 | ||||||||||||||||||
Other | 144 | – | – | – | 147 | 291 | ||||||||||||||||||
Total interest-only and affordability mortgages | 48,296 | 1,084 | 21,024 | 1,386 | 7,195 | 78,985 | ||||||||||||||||||
– as a percentage of total mortgage lending | 47.5% | 11.8% | 27.1% | 6.4% | 11.1% | 28.8% | ||||||||||||||||||
Negative equity mortgages12 | 6,412 | – | 20,229 | 163 | 488 | 27,292 | ||||||||||||||||||
Other loan-to-value ratios greater than 90 per cent13 | 10,522 | – | 13,695 | 1,887 | 1,451 | 27,555 | ||||||||||||||||||
Total negative equity and other mortgages | 16,934 | – | 33,924 | 2,050 | 1,939 | 54,847 | ||||||||||||||||||
– as a percentage of total mortgage lending | 16.6% | – | 43.7% | 9.5% | 3.0% | 20.0% | ||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Residential mortgages | 78,346 | 8,921 | 80,946 | 17,437 | 57,687 | 243,337 | ||||||||||||||||||
Second lien mortgages | 1,160 | 2 | 14,614 | 803 | 503 | 17,082 | ||||||||||||||||||
Total mortgage lending | 79,506 | 8,923 | 95,560 | 18,240 | 58,190 | 260,419 | ||||||||||||||||||
Second lien as a percentage of total mortgage lending | 1.5% | – | 15.3% | 4.4% | 0.9% | 6.6% | ||||||||||||||||||
Impairment allowances | ||||||||||||||||||||||||
Residential mortgages | (10 | ) | (22 | ) | (5,109 | ) | (4 | ) | (174 | ) | (5,319 | ) | ||||||||||||
Second lien mortgages | (50 | ) | – | (2,397 | ) | (41 | ) | – | (2,488 | ) | ||||||||||||||
Total impairment allowances on mortgage lending | (60 | ) | (22 | ) | (7,506 | ) | (45 | ) | (174 | ) | (7,807 | ) | ||||||||||||
Interest-only (including endowment) mortgages | 33,782 | 553 | – | 1,427 | 993 | 36,755 | ||||||||||||||||||
Affordability mortgages, including ARMs | 4,740 | 824 | 28,571 | 311 | 4,166 | 38,612 | ||||||||||||||||||
Other | 153 | – | – | – | 82 | 235 | ||||||||||||||||||
Total interest-only and affordability mortgages | 38,675 | 1,377 | 28,571 | 1,738 | 5,241 | 75,602 | ||||||||||||||||||
– as a percentage of total mortgage lending | 48.6% | 15.4% | 29.9% | 9.5% | 9.0% | 29.0% | ||||||||||||||||||
Negative equity mortgages12 | 3,268 | – | 21,904 | 86 | 1,635 | 26,893 | ||||||||||||||||||
Other loan-to-value ratios greater than 90 per cent13 | 8,978 | 107 | 19,009 | 1,737 | 2,122 | 31,953 | ||||||||||||||||||
Total negative equity and other mortgages | 12,246 | 107 | 40,913 | 1,823 | 3,757 | 58,846 | ||||||||||||||||||
– as a percentage of total mortgage lending | 15.4% | 1.2% | 42.8% | 10.0% | 6.5% | 22.6% |
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At 31 December 2009 | At 31 December 2008 | ||||||||||||||||||||||||||||||||||||||||
Other | Other | ||||||||||||||||||||||||||||||||||||||||
Mortgage | Consumer | mortgage | Mortgage | Consumer | mortgage | ||||||||||||||||||||||||||||||||||||
Services | Lending | lending | Total | Services | Lending | lending | Total | ||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||
Fixed-rate15 | 13,596 | 37,639 | 98 | 51,333 | 16,288 | 43,873 | 91 | 60,252 | |||||||||||||||||||||||||||||||||
Other15 | 8,168 | 1,867 | 6 | 10,041 | 11,339 | 2,324 | 35 | 13,698 | |||||||||||||||||||||||||||||||||
Adjustable-rate | 7,070 | 1,867 | – | 8,937 | 9,530 | 2,324 | 33 | 11,887 | |||||||||||||||||||||||||||||||||
Interest-only | 1,098 | – | 6 | 1,104 | 1,809 | – | 2 | 1,811 | |||||||||||||||||||||||||||||||||
21,764 | 39,506 | 104 | 61,374 | 27,627 | 46,197 | 126 | 73,950 | ||||||||||||||||||||||||||||||||||
First lien15 | 18,710 | 34,913 | 77 | 53,700 | 23,188 | 40,334 | 93 | 63,615 | |||||||||||||||||||||||||||||||||
Second lien15 | 3,054 | 4,593 | 27 | 7,674 | 4,439 | 5,863 | 33 | 10,335 | |||||||||||||||||||||||||||||||||
21,764 | 39,506 | 104 | 61,374 | 27,627 | 46,197 | 126 | 73,950 | ||||||||||||||||||||||||||||||||||
Stated income16 | 3,905 | – | – | 3,905 | 5,667 | – | – | 5,667 | |||||||||||||||||||||||||||||||||
Impairment allowances | 2,419 | 3,167 | 1 | 5,587 | 3,819 | 3,403 | 1 | 7,223 | |||||||||||||||||||||||||||||||||
– as a percentage of total mortgage lending | 11.1% | 8.0% | 1.0% | 9.1% | 13.8% | 7.4% | 0.8% | 9.8% |
Mortgage lending | Other personal lending | |||||||||||||||||||
as a percentage of: | as a percentage of: | |||||||||||||||||||
total | total other | percentage | ||||||||||||||||||
total | mortgage | total | personal | of total | ||||||||||||||||
lending | lending | lending | lending | lending | ||||||||||||||||
% | % | % | % | % | ||||||||||||||||
California | 6 | 11 | 5 | 11 | 11 | |||||||||||||||
New York | 3 | 7 | 3 | 7 | 7 | |||||||||||||||
Florida | 3 | 7 | 3 | 6 | 6 | |||||||||||||||
Texas | 2 | 4 | 4 | 8 | 6 | |||||||||||||||
Pennsylvania | 3 | 6 | 2 | 5 | 5 | |||||||||||||||
Ohio | 3 | 5 | 2 | 5 | 5 |
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Credit risk > Areas of special interest > US personal lending – credit quality |
• | delinquency in the Consumer Lending business increased, primarily in the 2006, 2007 and 2008 vintages of the first lien real estate secured portfolio. Two months or more delinquent balances rose from US$5.6 billion in 2008 to US$7.4 billion at 31 December 2009, and two months or more delinquency rates grew from 12.1 per cent to 18.2 per cent; | |
• | two months or more delinquent balances in the Mortgage Services portfolio declined from US$4.7 billion in 2008 to US$4.5 billion at 31 December 2009 as the portfolio continued to season, and two months or more delinquency rates increased from 17 per cent in 2008 to 19.6 per cent at 31 December 2009 as balances declined at a faster pace than delinquencies. |
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Quarter ended | ||||||||||||||||||||||||||||||||||||
As | Ex. period | |||||||||||||||||||||||||||||||||||
reported | change | |||||||||||||||||||||||||||||||||||
31 Dec | 31 Dec | 30 Sep | 30 Jun | 31 Mar | 31 Dec | 30 Sep | 30 Jun | 31 Mar | ||||||||||||||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
In Personal Financial Services in the US | ||||||||||||||||||||||||||||||||||||
Residential mortgages | 9,551 | 11,519 | 10,834 | 10,070 | 9,892 | 9,236 | 7,061 | 5,984 | 5,757 | |||||||||||||||||||||||||||
Second lien mortgage lending | 1,194 | 1,628 | 1,631 | 1,676 | 1,772 | 1,790 | 1,616 | 1,585 | 1,638 | |||||||||||||||||||||||||||
Vehicle finance | 267 | 267 | 295 | 310 | 269 | 541 | 512 | 445 | 370 | |||||||||||||||||||||||||||
Credit card | 1,798 | 1,798 | 1,834 | 1,864 | 1,992 | 2,029 | 1,871 | 1,700 | 1,782 | |||||||||||||||||||||||||||
Private label | 622 | 622 | 639 | 636 | 659 | 679 | 606 | 590 | 591 | |||||||||||||||||||||||||||
Personal non-credit card | 1,548 | 2,619 | 2,680 | 2,709 | 2,855 | 3,020 | 2,763 | 2,606 | 2,650 | |||||||||||||||||||||||||||
Total | 14,980 | 18,453 | 17,913 | 17,265 | 17,439 | 17,295 | 14,429 | 12,910 | 12,788 | |||||||||||||||||||||||||||
% | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | |||||||||||||||||||
Residential mortgages | 14.54 | 17.03 | 15.39 | 13.89 | 12.82 | 11.42 | 8.23 | 6.65 | 5.96 | |||||||||||||||||||||||||||
Second lien mortgage lending | 10.14 | 13.35 | 12.71 | 12.35 | 12.59 | 12.26 | 10.59 | 9.83 | 9.76 | |||||||||||||||||||||||||||
Vehicle finance | 4.63 | 4.63 | 4.61 | 3.97 | 2.79 | 4.98 | 4.27 | 3.48 | 2.83 | |||||||||||||||||||||||||||
Credit card | 7.38 | 7.38 | 7.28 | 7.25 | 7.14 | 6.76 | 6.18 | 5.57 | 5.81 | |||||||||||||||||||||||||||
Private label | 4.12 | 4.12 | 4.38 | 4.08 | 4.28 | 3.99 | 3.72 | 3.65 | 3.66 | |||||||||||||||||||||||||||
Personal non-credit card | 12.55 | 19.77 | 18.73 | 18.02 | 18.30 | 17.83 | 15.41 | 14.00 | 13.71 | |||||||||||||||||||||||||||
Total | 11.09 | 13.34 | 12.47 | 11.49 | 10.92 | 10.16 | 8.13 | 7.01 | 6.64 |
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Credit risk > Areas of special interest > Renegotiated loans // Credit quality |
Quarter ended | ||||||||||||||||||||||||||||||||||||||||||||||
As | Ex. period | |||||||||||||||||||||||||||||||||||||||||||||
reported | change | |||||||||||||||||||||||||||||||||||||||||||||
31 Dec | 31 Dec | 30 Sep | 30 Jun | 31 Mar | 31 Dec | 30 Sep | 30 Jun | 31 Mar | ||||||||||||||||||||||||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||||||
In Mortgage Services and Consumer Lending | ||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Services: | 3,477 | 4,456 | 4,250 | 4,257 | 4,535 | 4,699 | 4,227 | 4,260 | 4,484 | |||||||||||||||||||||||||||||||||||||
– first lien | 3,093 | 3,900 | 3,688 | 3,642 | 3,824 | 3,912 | 3,420 | 3,363 | 3,456 | |||||||||||||||||||||||||||||||||||||
– second lien | 384 | 556 | 562 | 615 | 711 | 787 | 807 | 897 | 1,028 | |||||||||||||||||||||||||||||||||||||
Consumer Lending: | 6,022 | 7,445 | 7,131 | 6,514 | 6,203 | 5,577 | 3,866 | 2,777 | 2,484 | |||||||||||||||||||||||||||||||||||||
– first lien | 5,380 | 6,541 | 6,241 | 5,640 | 5,322 | 4,724 | 3,176 | 2,194 | 1,954 | |||||||||||||||||||||||||||||||||||||
– second lien | 642 | 904 | 890 | 874 | 881 | 853 | 690 | 583 | 530 | |||||||||||||||||||||||||||||||||||||
% | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | % | 18 | |||||||||||||||||||||||||||||
Mortgage Services: | ||||||||||||||||||||||||||||||||||||||||||||||
– first lien | 16.53 | 20.00 | 18.09 | 17.13 | 17.24 | 16.87 | 14.16 | 12.91 | 12.41 | |||||||||||||||||||||||||||||||||||||
– second lien | 12.57 | 17.25 | 16.36 | 16.35 | 17.44 | 17.72 | 16.62 | 16.63 | 16.99 | |||||||||||||||||||||||||||||||||||||
– total | 15.98 | 19.61 | 17.84 | 17.01 | 17.27 | 17.01 | 14.57 | 13.55 | 13.22 | |||||||||||||||||||||||||||||||||||||
Consumer Lending: | ||||||||||||||||||||||||||||||||||||||||||||||
– first lien | 15.41 | 18.15 | 16.75 | 14.72 | 13.52 | 11.71 | 7.72 | 5.15 | 4.52 | |||||||||||||||||||||||||||||||||||||
– second lien | 13.98 | 18.64 | 17.49 | 16.17 | 15.43 | 14.54 | 11.27 | 9.04 | 7.96 | |||||||||||||||||||||||||||||||||||||
– total | 15.24 | 18.21 | 16.84 | 14.90 | 13.76 | 12.07 | 8.18 | 5.66 | 4.98 |
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Quarter ended | ||||||||||||||||||||||||
31 Dec | 30 Sep | 30 Jun | 31 Mar | |||||||||||||||||||||
2009 | 2008 | 2009 | 2009 | 2009 | 2009 | |||||||||||||||||||
Number of foreclosed properties at end of period | 6,188 | 9,589 | 6,188 | 6,428 | 7,286 | 8,866 | ||||||||||||||||||
Number of properties added to foreclosed inventory in the year/quarter | 14,845 | 20,051 | 3,496 | 3,546 | 3,550 | 4,253 | ||||||||||||||||||
Average loss on sale of foreclosed properties (US$000)19 | 12 | 14 | 5 | 8 | 13 | 18 | ||||||||||||||||||
Average total loss on foreclosed properties20 | 51% | 42% | 50% | 52% | 53% | 52% | ||||||||||||||||||
Average time to sell foreclosed properties (days) | 193 | 177 | 172 | 184 | 194 | 201 |
External | ||||
credit rating | ||||
Quality classification | ||||
Strong | A– and above | |||
Medium-good | BBB+ to BBB– | |||
Medium-satisfactory | BB+ to B+ and unrated | |||
Sub-standard | B and below | |||
Impaired | Impaired |
Internal | Probability of | |||||||
credit rating | default % | |||||||
Quality classification | ||||||||
Strong | CRR1 to CRR2 | 0 – 0.169 | ||||||
Medium-good | CRR3 | 0.170 – 0.740 | ||||||
Medium-satisfactory | CRR4 to CRR5 | 0.741 – 4.914 | ||||||
Sub-standard | CRR6 to CRR8 | 4.915 – 99.999 | ||||||
Impaired | CRR9 to CRR10 | 100 | ||||||
Credit quality of HSBC’s retail lending | ||||||||
Internal | Expected | |||||||
credit rating | 21 | loss % | ||||||
Quality classification | ||||||||
Strong | EL1 to EL2 | 0 – 0.999 | ||||||
Medium-good | EL3 | 1.000 – 4.999 | ||||||
Medium-satisfactory | EL4 to EL5 | 5.000- 19.999 | ||||||
Sub-standard | EL6 to EL8 | 20.000 – 99.999 | ||||||
Impaired | EL9 to EL10 | 100+ or defaulted | 22 |
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Credit risk > Credit quality > Risk ratings / Financial instruments by credit quality |
• | ‘Strong’: exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default and/or low levels of expected loss. Retail accounts operate within product parameters and only exceptionally show any period of delinquency. | |
• | ‘Medium-good’: exposures require closer monitoring and demonstrate a good capacity to meet financial commitments, with low default risk. Retail accounts typically show only short periods of delinquency, with any losses expected to be minimal following the adoption of recovery processes. | |
• | ‘Medium-satisfactory’: exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk. Retail accounts typically show only short periods of delinquency, with any losses expected to be minor following the adoption of recovery processes. | |
• | ‘Sub-standard’: exposures require varying degrees of special attention and default risk is of greater concern. Retail portfolio segments show longer delinquency periods of generally up to 90 days past due and/or expected losses are higher due to a reduced ability to mitigate these through security realisation or other recovery processes. | |
• | ‘Impaired’: exposures have been assessed, individually or collectively, as impaired. |
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Neither past due nor impaired | Past due | Impair- | ||||||||||||||||||||||||||||||
Medium | Sub | but not | ment | |||||||||||||||||||||||||||||
Strong | Good | Satisfactory | standard | impaired | Impaired | allowances | 23 | Total | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||
Cash and balances at central banks | 55,355 | 3,414 | 1,589 | 297 | – | – | 60,655 | |||||||||||||||||||||||||
Items in the course of collection from other banks | 5,922 | 20 | 453 | – | – | – | 6,395 | |||||||||||||||||||||||||
Hong Kong Government certificates of deposit | 17,463 | – | – | – | – | – | 17,463 | |||||||||||||||||||||||||
Trading assets24 | 306,481 | 37,911 | 39,457 | 2,221 | 386,070 | |||||||||||||||||||||||||||
– treasury and other eligible bills | 21,747 | 315 | 169 | 115 | 22,346 | |||||||||||||||||||||||||||
– debt securities | 180,876 | 7,499 | 12,360 | 863 | 201,598 | |||||||||||||||||||||||||||
– loans and advances to banks | 59,152 | 14,213 | 4,572 | 189 | 78,126 | |||||||||||||||||||||||||||
– loans and advances to customers | 44,706 | 15,884 | 22,356 | 1,054 | 84,000 | |||||||||||||||||||||||||||
Financial assets designated at fair value24 | 11,163 | 3,834 | 7,122 | 79 | 22,198 | |||||||||||||||||||||||||||
– treasury and other eligible bills | 223 | – | – | – | 223 | |||||||||||||||||||||||||||
– debt securities | 9,701 | 3,834 | 7,104 | 79 | 20,718 | |||||||||||||||||||||||||||
– loans and advances to banks | 336 | – | 18 | – | 354 | |||||||||||||||||||||||||||
– loans and advances to customers | 903 | – | – | – | 903 | |||||||||||||||||||||||||||
Derivatives24 | 169,430 | 60,759 | 15,688 | 5,009 | 250,886 | |||||||||||||||||||||||||||
Loans and advances held at amortised cost | 570,357 | 231,394 | 185,167 | 43,820 | 40,078 | 30,845 | (25,649 | ) | 1,076,012 | |||||||||||||||||||||||
– loans and advances to banks | 130,403 | 34,646 | 13,154 | 1,434 | 12 | 239 | (107) | 179,781 | ||||||||||||||||||||||||
– loans and advances to customers8,25 | 439,954 | 196,748 | 172,013 | 42,386 | 40,066 | 30,606 | (25,542) | 896,231 | ||||||||||||||||||||||||
Financial investments | 316,604 | 20,080 | 15,359 | 5,602 | – | 2,389 | 360,034 | |||||||||||||||||||||||||
– treasury and other similar bills | 54,158 | 1,458 | 2,315 | 498 | – | 5 | 58,434 | |||||||||||||||||||||||||
– debt securities | 262,446 | 18,622 | 13,044 | 5,104 | – | 2,384 | 301,600 | |||||||||||||||||||||||||
Other assets | 13,454 | 6,968 | 12,477 | 1,718 | 908 | 848 | 36,373 | |||||||||||||||||||||||||
– endorsements and acceptances | 1,349 | 3,200 | 4,161 | 512 | 12 | 77 | 9,311 | |||||||||||||||||||||||||
– accrued income and other | 12,105 | 3,768 | 8,316 | 1,206 | 896 | 771 | 27,062 | |||||||||||||||||||||||||
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Credit risk > Credit quality > Risk ratings / 2009 / Past due but not impaired |
Neither past due nor impaired | Past due | Impair- | ||||||||||||||||||||||||||||||
Medium | Sub | but not | ment | |||||||||||||||||||||||||||||
Strong | Good | Satisfactory | standard | impaired | Impaired | allowances | 23 | Total | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||
Cash and balances at central banks | 50,070 | 206 | 1,831 | 289 | – | – | 52,396 | |||||||||||||||||||||||||
Items in the course of collection from other banks | 4,541 | 4 | 1,392 | – | 66 | – | 6,003 | |||||||||||||||||||||||||
Hong Kong Government certificates of indebtedness | 15,358 | – | – | – | – | – | 15,358 | |||||||||||||||||||||||||
Trading assets24 | 303,307 | 37,349 | 61,628 | 3,167 | 405,451 | |||||||||||||||||||||||||||
– treasury and other eligible bills | 32,314 | 75 | 17 | 52 | 32,458 | |||||||||||||||||||||||||||
– debt securities | 175,681 | 5,294 | 17,547 | 1,097 | 199,619 | |||||||||||||||||||||||||||
– loans and advances to banks | 60,400 | 7,501 | 5,013 | 141 | 73,055 | |||||||||||||||||||||||||||
– loans and advances to customers | 34,912 | 24,479 | 39,051 | 1,877 | 100,319 | |||||||||||||||||||||||||||
Financial assets designated at fair value24 | 5,288 | 4,141 | 7,293 | 818 | 17,540 | |||||||||||||||||||||||||||
– treasury and other eligible bills | 204 | – | 31 | – | 235 | |||||||||||||||||||||||||||
– debt securities | 4,129 | 4,140 | 7,262 | 818 | 16,349 | |||||||||||||||||||||||||||
– loans and advances to banks | 230 | – | – | – | 230 | |||||||||||||||||||||||||||
– loans and advances to customers | 725 | 1 | – | – | 726 | |||||||||||||||||||||||||||
Derivatives24 | 383,393 | 79,243 | 27,105 | 5,135 | 494,876 | |||||||||||||||||||||||||||
Loans and advances held at amortised cost | 565,542 | 231,966 | 195,822 | 43,432 | 48,422 | 25,422 | (23,972 | ) | 1,086,634 | |||||||||||||||||||||||
– loans and advances to banks | 118,684 | 23,753 | 10,013 | 1,268 | 41 | 70 | (63 | ) | 153,766 | |||||||||||||||||||||||
– loans and advances to customers25 | 446,858 | 208,213 | 185,809 | 42,164 | 48,381 | 25,352 | (23,909 | ) | 932,868 | |||||||||||||||||||||||
Financial investments | 257,435 | 16,170 | 16,719 | 1,382 | 32 | 1,246 | 292,984 | |||||||||||||||||||||||||
– treasury and other similar bills | 37,932 | 1,904 | 1,023 | 168 | – | – | 41,027 | |||||||||||||||||||||||||
– debt securities | 219,503 | 14,266 | 15,696 | 1,214 | 32 | 1,246 | 251,957 | |||||||||||||||||||||||||
Other assets | 11,959 | 9,491 | 17,026 | 1,747 | 219 | 417 | 40,859 | |||||||||||||||||||||||||
– endorsements and acceptances | 1,851 | 4,333 | 3,460 | 805 | 30 | 3 | 10,482 | |||||||||||||||||||||||||
– accrued income and other | 10,108 | 5,158 | 13,566 | 942 | 189 | 414 | 30,377 | |||||||||||||||||||||||||
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Gross | ||||||||||||||||||||||||||||
loans and | ||||||||||||||||||||||||||||
Rest of | advances | |||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | past due not | |||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | impaired | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2009 | 3,759 | 1,165 | 1,996 | 1,661 | 27,989 | 3,508 | 40,078 | |||||||||||||||||||||
At 31 December 2008 | 3,800 | 1,805 | 1,863 | 2,457 | 35,247 | 3,250 | 48,422 |
For footnote, see page 291. |
At 31 December | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Banks | 12 | 41 | ||||||
Customers | 40,066 | 48,381 | ||||||
Personal | 34,306 | 39,592 | ||||||
Corporate and commercial | 5,522 | 8,603 | ||||||
Financial | 238 | 186 | ||||||
40,078 | 48,422 | |||||||
Up to 29 | 30-59 | 60-89 | 90-179 | 180 days | ||||||||||||||||||||
days | days | days | days | and over | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Loans and advances held at amortised cost | 24,330 | 9,920 | 5,259 | 355 | 214 | 40,078 | ||||||||||||||||||
– loans and advances to banks | 12 | – | – | – | – | 12 | ||||||||||||||||||
– loans and advances to customers | 24,318 | 9,920 | 5,259 | 355 | 214 | 40,066 | ||||||||||||||||||
Other assets | 609 | 130 | 63 | 24 | 82 | 908 | ||||||||||||||||||
– endorsements and acceptances | 9 | 1 | – | 1 | 1 | 12 | ||||||||||||||||||
– other | 600 | 129 | 63 | 23 | 81 | 896 | ||||||||||||||||||
24,939 | 10,050 | 5,322 | 379 | 296 | 40,986 | |||||||||||||||||||
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Table of Contents
Credit risk > Credit quality > Past due but not impaired // Impaired loans and advances / Impairment allowances |
Up to 29 | 30-59 | 60-89 | 90-179 | 180 days | ||||||||||||||||||||
days | days | days | days | and over | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Items in the course of collection from other banks | 66 | – | – | – | – | 66 | ||||||||||||||||||
Loans and advances held at amortised cost | 31,034 | 10,814 | 5,493 | 621 | 460 | 48,422 | ||||||||||||||||||
– loans and advances to banks | 41 | – | – | – | – | 41 | ||||||||||||||||||
– loans and advances to customers | 30,993 | 10,814 | 5,493 | 621 | 460 | 48,381 | ||||||||||||||||||
Financial investments | ||||||||||||||||||||||||
– debt securities | 32 | – | – | – | – | 32 | ||||||||||||||||||
Other assets | 45 | 22 | 118 | 7 | 27 | 219 | ||||||||||||||||||
– endorsements and acceptances | 21 | 6 | 1 | 2 | – | 30 | ||||||||||||||||||
– other | 24 | 16 | 117 | 5 | 27 | 189 | ||||||||||||||||||
31,177 | 10,836 | 5,611 | 628 | 487 | 48,739 | |||||||||||||||||||
Impaired loans and advances at | Impaired loans and advances at | |||||||||||||||||||||||
31 December 2009 | 31 December 2008 | |||||||||||||||||||||||
Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
assessed | assessed | Total | assessed | 26 | assessed | 26 | Total | |||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Banks | 239 | – | 239 | 70 | – | 70 | ||||||||||||||||||
Customers | 14,767 | 15,839 | 30,606 | 7,922 | 17,430 | 25,352 | ||||||||||||||||||
Personal8 | 1,977 | 15,451 | 17,428 | 1,538 | 17,071 | 18,609 | ||||||||||||||||||
Corporate and commercial | 11,839 | 387 | 12,226 | 6,086 | 357 | 6,443 | ||||||||||||||||||
Financial | 951 | 1 | 952 | 298 | 2 | 300 | ||||||||||||||||||
15,006 | 15,839 | 30,845 | 7,992 | 17,430 | 25,422 | |||||||||||||||||||
For footnote, see page 291. |
Carrying amount | ||||||||
obtained in: | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Nature of assets | ||||||||
Residential property | 1,587 | 2,562 | ||||||
Commercial and industrial property | 93 | 21 | ||||||
Other | 355 | 382 | ||||||
2,035 | 2,965 | |||||||
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Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||
Gross loans and advances | ||||||||||||||||||||||||||||
Individually assessed impaired loans27 | 8,800 | 823 | 1,006 | 1,310 | 1,990 | 838 | 14,767 | |||||||||||||||||||||
Collectively assessed28 | 436,816 | 99,362 | 80,033 | 22,912 | 218,539 | 49,344 | 907,006 | |||||||||||||||||||||
Impaired loans8,27 | 1,922 | 18 | 194 | 336 | 11,256 | 2,113 | 15,839 | |||||||||||||||||||||
Non-impaired loans29 | 434,894 | 99,344 | 79,839 | 22,576 | 207,283 | 47,231 | 891,167 | |||||||||||||||||||||
Total gross loans and advances8 | 445,616 | 100,185 | 81,039 | 24,222 | 220,529 | 50,182 | 921,773 | |||||||||||||||||||||
Impairment allowances | ||||||||||||||||||||||||||||
Individually assessed | 3,742 | 490 | 508 | 688 | 650 | 416 | 6,494 | |||||||||||||||||||||
Collectively assessed8 | 2,393 | 314 | 488 | 690 | 13,026 | 2,137 | 19,048 | |||||||||||||||||||||
Total impairment allowances8 | 6,135 | 804 | 996 | 1,378 | 13,676 | 2,553 | 25,542 | |||||||||||||||||||||
Net loans and advances | 439,481 | 99,381 | 80,043 | 22,844 | 206,853 | 47,629 | 896,231 | |||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
Individually assessed allowances as a percentage of individually assessed loans and advances | 42.5 | 59.5 | 50.5 | 52.5 | 32.7 | 49.7 | 44.0 | |||||||||||||||||||||
Collectively assessed allowances as a percentage of collectively assessed loans and advances | 0.5 | 0.3 | 0.6 | 3.0 | 6.0 | 4.3 | 2.1 | |||||||||||||||||||||
Total allowances as a percentage of total gross loans and advances | 1.4 | 0.8 | 1.2 | 5.7 | 6.2 | 5.1 | 2.8 | |||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||
Gross loans and advances | ||||||||||||||||||||||||||||
Individually assessed impaired loans26,27 | 4,817 | 813 | 705 | 160 | 832 | 595 | 7,922 | |||||||||||||||||||||
Collectively assessed28 | 425,233 | 100,140 | 80,769 | 27,549 | 271,472 | 43,692 | 948,855 | |||||||||||||||||||||
Impaired loans26,27 | 1,957 | 39 | 130 | 119 | 13,453 | 1,732 | 17,430 | |||||||||||||||||||||
Non-impaired loans29 | 423,276 | 100,101 | 80,639 | 27,430 | 258,019 | 41,960 | 931,425 | |||||||||||||||||||||
Total gross loans and advances | 430,050 | 100,953 | 81,474 | 27,709 | 272,304 | 44,287 | 956,777 | |||||||||||||||||||||
Impairment allowances | ||||||||||||||||||||||||||||
Individually assessed | 2,005 | 411 | 316 | 132 | 192 | 228 | 3,284 | |||||||||||||||||||||
Collectively assessed | 1,854 | 322 | 497 | 282 | 15,898 | 1,772 | 20,625 | |||||||||||||||||||||
Total impairment allowances | 3,859 | 733 | 813 | 414 | 16,090 | 2,000 | 23,909 | |||||||||||||||||||||
Net loans and advances | 426,191 | 100,220 | 80,661 | 27,295 | 256,214 | 42,287 | 932,868 | |||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
Individually assessed allowances as a percentage of individually assessed loans and advances | 41.6 | 50.6 | 44.8 | 82.5 | 23.1 | 38.3 | 41.5 | |||||||||||||||||||||
Collectively assessed allowances as a percentage of collectively assessed loans and advances | 0.4 | 0.3 | 0.6 | 1.0 | 5.9 | 4.1 | 2.2 | |||||||||||||||||||||
Total allowances as a percentage of total gross loans and advances | 0.9 | 0.7 | 1.0 | 1.5 | 5.9 | 4.5 | 2.5 |
For footnotes, see page 291. |
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Credit risk > Impairment allowances > Movements |
At 31 December 2009 | At 31 December 2008 | |||||||||||||||||||||||
Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
assessed | assessed | Total | assessed | assessed | Total | |||||||||||||||||||
allowances | allowances | allowances | allowances | allowances | allowances | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Banks30 | 107 | – | 107 | 63 | – | 63 | ||||||||||||||||||
Customers | 6,494 | 19,048 | 25,542 | 3,284 | 20,625 | 23,909 | ||||||||||||||||||
Personal8 | 572 | 16,517 | 17,089 | 312 | 18,657 | 18,969 | ||||||||||||||||||
Corporate and commercial | 5,528 | 2,354 | 7,882 | 2,845 | 1,795 | 4,640 | ||||||||||||||||||
Financial | 394 | 177 | 571 | 127 | 173 | 300 | ||||||||||||||||||
6,601 | 19,048 | 25,649 | 3,347 | 20,625 | 23,972 | |||||||||||||||||||
For footnotes, see page 291. |
At 31 December | ||||||||
2009 | 2008 | |||||||
% | % | |||||||
Banks | ||||||||
Individually assessed impairment allowances32 | 0.09 | 0.06 | ||||||
Customers32 | 2.96 | 2.63 | ||||||
Individually assessed impairment allowances32 | 0.75 | 0.36 | ||||||
Collectively assessed impairment allowances32 | 2.21 | 2.27 | ||||||
For footnotes, see page 291. |
Banks | Customers | |||||||||||||||
individually | Individually | Collectively | ||||||||||||||
assessed | assessed | assessed | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 1 January 2009 | 63 | 3,284 | 20,625 | 23,972 | ||||||||||||
Amounts written off8 | (35 | ) | (1,563 | ) | (23,242 | ) | (24,840 | ) | ||||||||
Recoveries of loans and advances written off in previous years | 6 | 128 | 756 | 890 | ||||||||||||
Charge to income statement | 70 | 4,388 | 20,484 | 24,942 | ||||||||||||
Exchange and other movements | 3 | 257 | 425 | 685 | ||||||||||||
At 31 December 2009 | 107 | 6,494 | 19,048 | 25,649 | ||||||||||||
At 1 January 2008 | 7 | 2,699 | 16,506 | 19,212 | ||||||||||||
Amounts written off | – | (824 | ) | (17,131 | ) | (17,955 | ) | |||||||||
Recoveries of loans and advances written off in previous years | – | 113 | 721 | 834 | ||||||||||||
Charge to income statement | 54 | 2,010 | 22,067 | 24,131 | ||||||||||||
Exchange and other movements | 2 | (714 | ) | (1,538 | ) | (2,250 | ) | |||||||||
At 31 December 2008 | 63 | 3,284 | 20,625 | 23,972 | ||||||||||||
For footnote, see page 291. |
232
Table of Contents
(Audited)
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Impairment allowances at 1 January | 23,972 | 19,212 | 13,585 | 11,366 | 12,559 | |||||||||||||||
Amounts written off | (24,840 | ) | (17,955 | ) | (12,844 | ) | (9,473 | ) | (9,043 | ) | ||||||||||
Personal2 | (22,703 | ) | (16,625 | ) | (11,670 | ) | (8,281 | ) | (8,046 | ) | ||||||||||
– residential mortgages2 | (4,704) | (2,110 | ) | (930 | ) | (628 | ) | (508 | ) | |||||||||||
– other personal2 | (17,999) | (14,515 | ) | (10,740 | ) | (7,653 | ) | (7,538 | ) | |||||||||||
Corporate and commercial | (1,984 | ) | (1,294 | ) | (1,163 | ) | (1,153 | ) | (984 | ) | ||||||||||
– commercial, industrial and international trade | (1,093) | (789 | ) | (897 | ) | (782 | ) | (673 | ) | |||||||||||
– commercial real estate and other property-related | (327) | (115 | ) | (98 | ) | (111 | ) | (117 | ) | |||||||||||
– other commercial | (564) | (390 | ) | (168 | ) | (260 | ) | (194 | ) | |||||||||||
Financial33 | (153 | ) | (36 | ) | (11 | ) | (39 | ) | (13 | ) | ||||||||||
Recoveries of amounts written off in previous years | 890 | 834 | 1,005 | 779 | 494 | |||||||||||||||
Personal | 712 | 686 | 837 | 605 | 320 | |||||||||||||||
– residential mortgages | 61 | 19 | 19 | 19 | 18 | |||||||||||||||
– other personal | 651 | 667 | 818 | 586 | 302 | |||||||||||||||
Corporate and commercial | 170 | 142 | 157 | 163 | 174 | |||||||||||||||
– commercial, industrial and international trade | 123 | 76 | 74 | 88 | 76 | |||||||||||||||
– commercial real estate and other property-related | 9 | 6 | 29 | 21 | 9 | |||||||||||||||
– other commercial | 38 | 60 | 54 | 54 | 89 | |||||||||||||||
Financial33 | 8 | 6 | 11 | 11 | – | |||||||||||||||
Charge to income statement34 | 24,942 | 24,131 | 17,177 | 10,547 | 7,860 | |||||||||||||||
Personal | 19,781 | 20,950 | 15,968 | 9,929 | 7,249 | |||||||||||||||
– residential mortgages | 4,185 | 5,000 | 1,840 | 1,096 | 605 | |||||||||||||||
– other personal | 15,596 | 15,950 | 14,128 | 8,833 | 6,644 | |||||||||||||||
Corporate and commercial | 4,711 | 2,879 | 1,176 | 664 | 618 | |||||||||||||||
– commercial, industrial and international trade | 2,392 | 1,573 | 897 | 503 | 588 | |||||||||||||||
– commercial real estate and other property-related | 1,492 | 755 | 152 | 75 | 56 | |||||||||||||||
– other commercial | 827 | 551 | 127 | 86 | (26 | ) | ||||||||||||||
Financial33 | 450 | 302 | 36 | (9 | ) | (13 | ) | |||||||||||||
Governments | – | – | (3 | ) | (37 | ) | 6 | |||||||||||||
Exchange and other movements | 685 | (2,250 | ) | 289 | 366 | (504 | ) | |||||||||||||
Impairment allowances at 31 December8 | 25,649 | 23,972 | 19,212 | 13,585 | 11,366 | |||||||||||||||
Impairment allowances against banks: | ||||||||||||||||||||
– individually assessed | 107 | 63 | 7 | 7 | 9 | |||||||||||||||
Impairment allowances against customers: | ||||||||||||||||||||
– individually assessed | 6,494 | 3,284 | 2,699 | 2,565 | 2,683 | |||||||||||||||
– collectively assessed8 | 19,048 | 20,625 | 16,506 | 11,013 | 8,674 | |||||||||||||||
Impairment allowances at 31 December8 | 25,649 | 23,972 | 19,212 | 13,585 | 11,366 | |||||||||||||||
% | % | % | % | % | ||||||||||||||||
Impairment allowances against customers as a percentage of loans and advances to customers: | ||||||||||||||||||||
– individually assessed | 0.70 | 0.34 | 0.27 | 0.29 | 0.36 | |||||||||||||||
– collectively assessed | 2.07 | 2.16 | 1.65 | 1.25 | 1.16 | |||||||||||||||
At 31 December | 2.77 | 2.50 | 1.92 | 1.54 | 1.52 | |||||||||||||||
For footnotes, see page 291. |
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Table of Contents
Credit risk > Impairment allowances > Movements |
(Audited)
2009 | ||||||||||||||||||||||||||||
Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Impairment allowances at 1 January | 3,922 | 733 | 813 | 414 | 16,090 | 2,000 | 23,972 | |||||||||||||||||||||
Amounts written off | (2,781 | ) | (357 | ) | (850 | ) | (384 | ) | (17,792 | ) | (2,676 | ) | (24,840 | ) | ||||||||||||||
Personal2 | (1,876 | ) | (240 | ) | (787 | ) | (376 | ) | (17,204 | ) | (2,220 | ) | (22,703 | ) | ||||||||||||||
– residential mortgages2 | (41) | (1) | (9) | – | (4,610) | (43) | (4,704) | |||||||||||||||||||||
– other personal2 | (1,835) | (239) | (778) | (376) | (12,594) | (2,177) | (17,999) | |||||||||||||||||||||
Corporate and commercial | (810 | ) | (117 | ) | (63 | ) | (8 | ) | (534 | ) | (452 | ) | (1,984 | ) | ||||||||||||||
– commercial, industrial and international trade | (438) | (114) | (50) | (8) | (228) | (255) | (1,093) | |||||||||||||||||||||
– commercial real estate and other property-related | (148) | (1) | (3) | – | (163) | (12) | (327) | |||||||||||||||||||||
– other commercial | (224) | (2) | (10) | – | (143) | (185) | (564) | |||||||||||||||||||||
Financial33 | (95 | ) | – | – | – | (54 | ) | (4 | ) | (153 | ) | |||||||||||||||||
Recoveries of amounts written off in previous years | 265 | 34 | 132 | 27 | 93 | 339 | 890 | |||||||||||||||||||||
Personal | 200 | 32 | 123 | 25 | 60 | 272 | 712 | |||||||||||||||||||||
– residential mortgages | 28 | 6 | 1 | – | 7 | 19 | 61 | |||||||||||||||||||||
– other personal | 172 | 26 | 122 | 25 | 53 | 253 | 651 | |||||||||||||||||||||
Corporate and commercial | 57 | 2 | 9 | 2 | 33 | 67 | 170 | |||||||||||||||||||||
– commercial, industrial and international trade | 52 | 2 | 7 | 2 | 16 | 44 | 123 | |||||||||||||||||||||
– commercial real estate and other property-related | 5 | – | 1 | – | 2 | 1 | 9 | |||||||||||||||||||||
– other commercial | – | – | 1 | – | 15 | 22 | 38 | |||||||||||||||||||||
Financial33 | 8 | – | – | – | – | – | 8 | |||||||||||||||||||||
Charge to income statement34 | 4,409 | 450 | 874 | 1,333 | 15,372 | 2,504 | 24,942 | |||||||||||||||||||||
Personal | 1,995 | 206 | 654 | 593 | 14,390 | 1,943 | 19,781 | |||||||||||||||||||||
– residential mortgages | 158 | (16) | 14 | 20 | 3,955 | 54 | 4,185 | |||||||||||||||||||||
– other personal | 1,837 | 222 | 640 | 573 | 10,435 | 1,889 | 15,596 | |||||||||||||||||||||
Corporate and commercial | 2,163 | 244 | 220 | 706 | 818 | 560 | 4,711 | |||||||||||||||||||||
– commercial, industrial and international trade | 963 | 164 | 154 | 413 | 309 | 389 | 2,392 | |||||||||||||||||||||
– commercial real estate and other property-related | 958 | 70 | 29 | 106 | 288 | 41 | 1,492 | |||||||||||||||||||||
– other commercial | 242 | 10 | 37 | 187 | 221 | 130 | 827 | |||||||||||||||||||||
Financial33 | 251 | – | – | 34 | 164 | 1 | 450 | |||||||||||||||||||||
Exchange and other movements | 412 | (56 | ) | 27 | 3 | (87 | ) | 386 | 685 | |||||||||||||||||||
Impairment allowances at 31 December8 | 6,227 | 804 | 996 | 1,393 | 13,676 | 2,553 | 25,649 | |||||||||||||||||||||
Impairment allowances against banks: | ||||||||||||||||||||||||||||
– individually assessed | 92 | – | – | 15 | – | – | 107 | |||||||||||||||||||||
Impairment allowances against customers: | ||||||||||||||||||||||||||||
– individually assessed | 3,742 | 490 | 508 | 688 | 650 | 416 | 6,494 | |||||||||||||||||||||
– collectively assessed8,35 | 2,393 | 314 | 488 | 690 | 13,026 | 2,137 | 19,048 | |||||||||||||||||||||
Impairment allowances at 31 December8 | 6,227 | 804 | 996 | 1,393 | 13,676 | 2,553 | 25,649 | |||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
Impairment allowances against customers as a percentage of loans and advances to customers: | ||||||||||||||||||||||||||||
– individually assessed | 0.84 | 0.49 | 0.63 | 2.84 | 0.29 | 0.83 | 0.70 | |||||||||||||||||||||
– collectively assessed35 | 0.54 | 0.31 | 0.60 | 2.85 | 5.91 | 4.26 | 2.07 | |||||||||||||||||||||
At 31 December | 1.38 | 0.80 | 1.23 | 5.69 | 6.20 | 5.09 | 2.77 | |||||||||||||||||||||
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2008 | ||||||||||||||||||||||||||||
Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Impairment allowances at 1 January | 3,938 | 376 | 650 | 276 | 11,980 | 1,992 | 19,212 | |||||||||||||||||||||
Amounts written off | (2,483 | ) | (219 | ) | (674 | ) | (164 | ) | (12,215 | ) | (2,200 | ) | (17,955 | ) | ||||||||||||||
Personal | (1,947 | ) | (179 | ) | (646 | ) | (153 | ) | (11,989 | ) | (1,711 | ) | (16,625 | ) | ||||||||||||||
– residential mortgages | (3 | ) | (1 | ) | (6 | ) | – | (2,030 | ) | (70 | ) | (2,110 | ) | |||||||||||||||
– other personal | (1,944 | ) | (178 | ) | (640 | ) | (153 | ) | (9,959 | ) | (1,641 | ) | (14,515 | ) | ||||||||||||||
Corporate and commercial | (515 | ) | (38 | ) | (28 | ) | (11 | ) | (214 | ) | (488 | ) | (1,294 | ) | ||||||||||||||
– commercial, industrial and international trade | (367 | ) | (33 | ) | (16 | ) | (6 | ) | (153 | ) | (214 | ) | (789 | ) | ||||||||||||||
– commercial real estate and other property-related | (77 | ) | (2 | ) | (1 | ) | (3 | ) | (12 | ) | (20 | ) | (115 | ) | ||||||||||||||
– other commercial | (71 | ) | (3 | ) | (11 | ) | (2 | ) | (49 | ) | (254 | ) | (390 | ) | ||||||||||||||
Financial33 | (21 | ) | (2 | ) | – | – | (12 | ) | (1 | ) | (36 | ) | ||||||||||||||||
Recoveries of amounts written off in previous years | 294 | 39 | 107 | 30 | 100 | 264 | 834 | |||||||||||||||||||||
Personal | 275 | 36 | 97 | 27 | 54 | 197 | 686 | |||||||||||||||||||||
– residential mortgages | – | 7 | 1 | – | – | 11 | 19 | |||||||||||||||||||||
– other personal | 275 | 29 | 96 | 27 | 54 | 186 | 667 | |||||||||||||||||||||
Corporate and commercial | 19 | 3 | 6 | 2 | 45 | 67 | 142 | |||||||||||||||||||||
– commercial, industrial and international trade | 19 | 1 | 5 | 1 | 27 | 23 | 76 | |||||||||||||||||||||
– commercial real estate and other property-related | – | – | 1 | – | 5 | – | 6 | |||||||||||||||||||||
– other commercial | – | 2 | – | 1 | 13 | 44 | 60 | |||||||||||||||||||||
Financial33 | – | – | 4 | 1 | 1 | – | 6 | |||||||||||||||||||||
Charge to income statement34 | 3,411 | 556 | 815 | 274 | 16,589 | 2,486 | 24,131 | |||||||||||||||||||||
Personal | 1,961 | 160 | 641 | 219 | 16,006 | 1,963 | 20,950 | |||||||||||||||||||||
– residential mortgages | 18 | – | 9 | 20 | 4,943 | 10 | 5,000 | |||||||||||||||||||||
– other personal | 1,943 | 160 | 632 | 199 | 11,063 | 1,953 | 15,950 | |||||||||||||||||||||
Corporate and commercial | 1,304 | 363 | 173 | 47 | 472 | 520 | 2,879 | |||||||||||||||||||||
– commercial, industrial and international trade | 537 | 316 | 132 | 39 | 213 | 336 | 1,573 | |||||||||||||||||||||
– commercial real estate and other property-related | 540 | 28 | 17 | 4 | 132 | 34 | 755 | |||||||||||||||||||||
– other commercial | 227 | 19 | 24 | 4 | 127 | 150 | 551 | |||||||||||||||||||||
Financial33 | 146 | 33 | 1 | 8 | 111 | 3 | 302 | |||||||||||||||||||||
Exchange and other movements | (1,238 | ) | (19 | ) | (80 | ) | (7 | ) | (364 | ) | (542 | ) | (2,250 | ) | ||||||||||||||
Impairment allowances at 31 December | 3,922 | 733 | 813 | 414 | 16,090 | 2,000 | 23,972 | |||||||||||||||||||||
Impairment allowances against banks: | ||||||||||||||||||||||||||||
– individually assessed | 63 | – | – | – | – | – | 63 | |||||||||||||||||||||
Impairment allowances against customers: | ||||||||||||||||||||||||||||
– individually assessed | 2,005 | 411 | 316 | 132 | 192 | 228 | 3,284 | |||||||||||||||||||||
– collectively assessed35 | 1,854 | 322 | 497 | 282 | 15,898 | 1,772 | 20,625 | |||||||||||||||||||||
Impairment allowances at 31 December | 3,922 | 733 | 813 | 414 | 16,090 | 2,000 | 23,972 | |||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
Impairment allowances against customers as a percentage of loans and advances to customers: | ||||||||||||||||||||||||||||
– individually assessed | 0.47 | 0.41 | 0.39 | 0.48 | 0.07 | 0.51 | 0.34 | |||||||||||||||||||||
– collectively assessed35 | 0.43 | 0.32 | 0.61 | 1.02 | 5.84 | 4.00 | 2.16 | |||||||||||||||||||||
At 31 December | 0.90 | 0.73 | 1.00 | 1.50 | 5.91 | 4.51 | 2.50 | |||||||||||||||||||||
For footnotes, see page 291. |
235
Table of Contents
Credit risk > Impairment allowances > Net loan impairment charge |
(Unaudited)
2009 | 2008 | |||||||||||||||||||||||
Individually | Collectively | Individually | Collectively | |||||||||||||||||||||
assessed | assessed | Total | assessed | assessed | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Banks | 70 | – | 70 | 54 | – | 54 | ||||||||||||||||||
Personal | 316 | 19,465 | 19,781 | 110 | 20,840 | 20,950 | ||||||||||||||||||
Residential mortgages | 171 | 4,014 | 4,185 | 26 | 4,974 | 5,000 | ||||||||||||||||||
Other personal | 145 | 15,451 | 15,596 | 84 | 15,866 | 15,950 | ||||||||||||||||||
Corporate and commercial | 3,699 | 1,012 | 4,711 | 1,782 | 1,097 | 2,879 | ||||||||||||||||||
Commercial, industrial and international trade | 1,681 | 711 | 2,392 | 912 | 661 | 1,573 | ||||||||||||||||||
Commercial real estate and other property-related | 1,330 | 162 | 1,492 | 613 | 142 | 755 | ||||||||||||||||||
Other commercial | 688 | 139 | 827 | 257 | 294 | 551 | ||||||||||||||||||
Financial | 373 | 7 | 380 | 118 | 130 | 248 | ||||||||||||||||||
Total charge to income statement | 4,458 | 20,484 | 24,942 | 2,064 | 22,067 | 24,131 | ||||||||||||||||||
(Unaudited)
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Individually assessed impairment allowances | ||||||||||||||||||||
New allowances | 5,173 | 2,742 | 1,533 | 1,297 | 1,715 | |||||||||||||||
Release of allowances no longer required | (581 | ) | (565 | ) | (608 | ) | (711 | ) | (998 | ) | ||||||||||
Recoveries of amounts previously written off | (134 | ) | (113 | ) | (129 | ) | (128 | ) | (199 | ) | ||||||||||
4,458 | 2,064 | 796 | 458 | 518 | ||||||||||||||||
Collectively assessed impairment allowances | ||||||||||||||||||||
New allowances net of allowance releases | 21,240 | 22,788 | 17,257 | 10,740 | 8,425 | |||||||||||||||
Release of allowances no longer required | – | – | – | – | (788 | ) | ||||||||||||||
Recoveries of amounts previously written off | (756 | ) | (721 | ) | (876 | ) | (651 | ) | (295 | ) | ||||||||||
20,484 | 22,067 | 16,381 | 10,089 | 7,342 | ||||||||||||||||
Total charge for impairment losses | 24,942 | 24,131 | 17,177 | 10,547 | 7,860 | |||||||||||||||
Banks | 70 | 54 | – | (3 | ) | (7 | ) | |||||||||||||
Customers | 24,872 | 24,077 | 17,177 | 10,550 | 7,867 | |||||||||||||||
% | % | % | % | % | ||||||||||||||||
Charge for impairment losses as a percentage of closing gross loans and advances | 2.26 | 2.17 | 1.39 | 0.99 | 0.90 | |||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
At 31 December | ||||||||||||||||||||
Impaired loans8 | 30,845 | 25,422 | 19,594 | 15,086 | 12,360 | |||||||||||||||
Impairment allowances8 | 25,649 | 23,972 | 19,212 | 13,585 | 11,366 |
For footnote, see page 291. |
236
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(Unaudited)
Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
Individually assessed impairment allowances | ||||||||||||||||||||||||||||
New allowances | 2,573 | 315 | 341 | 598 | 1,052 | 294 | 5,173 | |||||||||||||||||||||
Release of allowances no longer required | (255 | ) | (64 | ) | (82 | ) | (16 | ) | (112 | ) | (52 | ) | (581 | ) | ||||||||||||||
Recoveries of amounts previously written off | (70 | ) | (9 | ) | (15 | ) | (2 | ) | (24 | ) | (14 | ) | (134 | ) | ||||||||||||||
2,248 | 242 | 244 | 580 | 916 | 228 | 4,458 | ||||||||||||||||||||||
Collectively assessed impairment allowances | ||||||||||||||||||||||||||||
New allowances net of allowance releases | 2,356 | 233 | 747 | 778 | 14,525 | 2,601 | 21,240 | |||||||||||||||||||||
Recoveries of amounts previously written off | (195 | ) | (25 | ) | (117 | ) | (25 | ) | (69 | ) | (325 | ) | (756 | ) | ||||||||||||||
2,161 | 208 | 630 | 753 | 14,456 | 2,276 | 20,484 | ||||||||||||||||||||||
Total charge for impairment losses | 4,409 | 450 | 874 | 1,333 | 15,372 | 2,504 | 24,942 | |||||||||||||||||||||
Banks | 55 | – | – | 15 | – | – | 70 | |||||||||||||||||||||
Customers | 4,354 | 450 | 874 | 1,318 | 15,372 | 2,504 | 24,872 | |||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
Charge for impairment losses as a percentage of closing gross loans and advances | 0.86 | 0.33 | 0.75 | 4.08 | 6.52 | 3.64 | 2.26 | |||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||
Impaired loans8 | 10,873 | 846 | 1,201 | 1,666 | 13,308 | 2,951 | 30,845 | |||||||||||||||||||||
Impairment allowances8 | 6,227 | 804 | 996 | 1,393 | 13,676 | 2,553 | 25,649 | |||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||
Individually assessed impairment allowances | ||||||||||||||||||||||||||||
New allowances | 1,567 | 365 | 223 | 30 | 397 | 160 | 2,742 | |||||||||||||||||||||
Release of allowances no longer required | (340 | ) | (25 | ) | (53 | ) | (36 | ) | (80 | ) | (31 | ) | (565 | ) | ||||||||||||||
Recoveries of amounts previously written off | (38 | ) | (10 | ) | (17 | ) | (3 | ) | (40 | ) | (5 | ) | (113 | ) | ||||||||||||||
1,189 | 330 | 153 | (9 | ) | 277 | 124 | 2,064 | |||||||||||||||||||||
Collectively assessed impairment allowances | ||||||||||||||||||||||||||||
New allowances net of allowance releases | 2,478 | 255 | 752 | 310 | 16,372 | 2,621 | 22,788 | |||||||||||||||||||||
Recoveries of amounts previously written off | (256 | ) | (29 | ) | (90 | ) | (27 | ) | (60 | ) | (259 | ) | (721 | ) | ||||||||||||||
2,222 | 226 | 662 | 283 | 16,312 | 2,362 | 22,067 | ||||||||||||||||||||||
Total charge for impairment losses | 3,411 | 556 | 815 | 274 | 16,589 | 2,486 | 24,131 | |||||||||||||||||||||
Banks | 54 | – | – | – | – | – | 54 | |||||||||||||||||||||
Customers | 3,357 | 556 | 815 | 274 | 16,589 | 2,486 | 24,077 | |||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
Charge for impairment losses as a percentage of closing gross loans and advances | 0.68 | 0.43 | 0.74 | 0.78 | 5.85 | 4.22 | 2.17 | |||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||
Impaired loans | 6,844 | 852 | 835 | 279 | 14,285 | 2,327 | 25,422 | |||||||||||||||||||||
Impairment allowances | 3,922 | 733 | 813 | 414 | 16,090 | 2,000 | 23,972 |
For footnotes, see page 291. |
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Credit risk > Impairment allowances > Charge // Impaired loans > 2009 |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
% | % | % | % | % | ||||||||||||||||
New allowances net of allowance releases | 2.92 | 2.54 | 2.09 | 1.49 | 1.25 | |||||||||||||||
Recoveries | (0.10 | ) | (0.09 | ) | (0.12 | ) | (0.10 | ) | (0.09 | ) | ||||||||||
Total charge for impairment losses | 2.82 | 2.45 | 1.97 | 1.39 | 1.16 | |||||||||||||||
Amount written off net of recoveries | 2.71 | 1.75 | 1.36 | 1.15 | 1.26 |
Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 7 | East | 7 | America | America | Total | ||||||||||||||||||||
% | % | % | % | % | % | % | ||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
New allowances net of allowance releases | 1.19 | 0.49 | 1.31 | 5.25 | 6.24 | 6.11 | 2.92 | |||||||||||||||||||||
Recoveries | (0.07 | ) | (0.03 | ) | (0.17 | ) | (0.11 | ) | (0.04 | ) | (0.73 | ) | (0.10 | ) | ||||||||||||||
Total charge for impairment losses | 1.12 | 0.46 | 1.14 | 5.14 | 6.20 | 5.38 | 2.82 | |||||||||||||||||||||
Amount written off net of recoveries | 0.63 | 0.33 | 0.94 | 1.40 | 7.14 | 5.03 | 2.71 | |||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||
New allowances net of allowance releases | 0.86 | 0.63 | 1.04 | 1.12 | 5.73 | 5.32 | 2.54 | |||||||||||||||||||||
Recoveries | (0.07 | ) | (0.04 | ) | (0.12 | ) | (0.11 | ) | (0.03 | ) | (0.51 | ) | (0.09 | ) | ||||||||||||||
Total charge for impairment losses | 0.79 | 0.59 | 0.92 | 1.01 | 5.70 | 4.81 | 2.45 | |||||||||||||||||||||
Amount written off net of recoveries | 0.52 | 0.19 | 0.64 | 0.50 | 4.16 | 3.73 | 1.75 |
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• | new loan impairment allowances in the Mortgage Services business decreased in 2009 as the portfolio continued to run off. While loss severities increased compared with 2008, a higher percentage of impairment was in respect of first lien loans which have less severity than second lien loans; |
• | new loan impairment allowances in the vehicle finance loan portfolio decreased as a result of |
lower loan levels reflecting the discontinuance of vehicle finance originations in July 2008. In addition, loss severities decreased as prices on repossessed vehicles improved; and |
• | new loan impairment allowances in the branch-based Consumer Lending business increased in 2009, primarily in the unsecured portfolio due to the deterioration in the 2006 and 2007 vintages which were more pronounced in certain geographic regions and, to a lesser extent, first lien real estate secured loans. These increases were partially offset by lower new loan impairment allowances for second lien real estate secured loans. |
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Credit risk > Impaired loans > 2008 // HSBC Holdings / Risk elements |
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Maximum exposure | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Derivatives | 2,981 | 3,682 | ||||||
Loans and advances to HSBC undertakings | 23,212 | 11,804 | ||||||
Financial investments | 2,455 | 2,629 | ||||||
Financial guarantees and similar contracts | 35,073 | 47,341 | ||||||
Loan and other credit-related commitments | 3,240 | 3,241 | ||||||
66,961 | 68,697 | |||||||
• | impaired loans; | |
• | unimpaired loans contractually past due 90 days or more as to interest or principal; and | |
• | troubled debt restructurings not included in the above. |
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Credit risk > Risk elements |
242
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At 31 December | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Impaired loans | ||||||||||||||||||||
Europe | 10,873 | 6,844 | 6,266 | 5,858 | 5,081 | |||||||||||||||
Hong Kong | 846 | 852 | 433 | 454 | 506 | |||||||||||||||
Rest of Asia-Pacific7 | 1,201 | 835 | 779 | 807 | 596 | |||||||||||||||
Middle East7 | 1,666 | 279 | 309 | 381 | 349 | |||||||||||||||
North America8 | 13,308 | 14,285 | 9,662 | 6,108 | 4,602 | |||||||||||||||
Latin America | 2,951 | 2,327 | 2,145 | 1,478 | 1,226 | |||||||||||||||
30,845 | 25,422 | 19,594 | 15,086 | 12,360 | ||||||||||||||||
Unimpaired loans contractually past due 90 days or more as to principal or interest | ||||||||||||||||||||
Europe | 57 | 635 | 202 | 237 | 592 | |||||||||||||||
Hong Kong | 4 | 43 | 49 | 79 | 74 | |||||||||||||||
Rest of Asia-Pacific7 | 36 | 84 | 94 | 75 | 40 | |||||||||||||||
Middle East7 | 215 | 190 | 62 | 3 | – | |||||||||||||||
North America | 217 | 108 | 24 | 78 | 32 | |||||||||||||||
Latin America | 40 | 21 | 421 | 165 | 4 | |||||||||||||||
569 | 1,081 | 852 | 637 | 742 | ||||||||||||||||
Troubled debt restructurings (not included in the classifications above) | ||||||||||||||||||||
Europe | 436 | 366 | 648 | 360 | 239 | |||||||||||||||
Hong Kong | 236 | 165 | 146 | 189 | 198 | |||||||||||||||
Rest of Asia-Pacific7 | 135 | 90 | 23 | 56 | 96 | |||||||||||||||
Middle East7 | 103 | 29 | 11 | 17 | 25 | |||||||||||||||
North America | 9,613 | 5,618 | 3,322 | 1,712 | 1,417 | |||||||||||||||
Latin America | 1,518 | 1,067 | 848 | 915 | 878 | |||||||||||||||
12,041 | 7,335 | 4,998 | 3,249 | 2,853 | ||||||||||||||||
Trading loans classified as in default | ||||||||||||||||||||
North America | 798 | 561 | 675 | 127 | 11 | |||||||||||||||
Risk elements on loans | ||||||||||||||||||||
Europe | 11,366 | 7,845 | 7,116 | 6,455 | 5,912 | |||||||||||||||
Hong Kong | 1,086 | 1,060 | 628 | 722 | 778 | |||||||||||||||
Rest of Asia-Pacific7 | 1,372 | 1,009 | 896 | 938 | 732 | |||||||||||||||
Middle East7 | 1,984 | 498 | 382 | 401 | 374 | |||||||||||||||
North America | 23,936 | 20,572 | 13,683 | 8,025 | 6,062 | |||||||||||||||
Latin America | 4,509 | 3,415 | 3,414 | 2,558 | 2,108 | |||||||||||||||
44,253 | 34,399 | 26,119 | 19,099 | 15,966 | ||||||||||||||||
Assets held for resale | ||||||||||||||||||||
Europe | 52 | 81 | 59 | 30 | 205 | |||||||||||||||
Hong Kong | 10 | 26 | 29 | 42 | 49 | |||||||||||||||
Rest of Asia-Pacific7 | 8 | 11 | 5 | 15 | 29 | |||||||||||||||
Middle East7 | 2 | 2 | 2 | 2 | 2 | |||||||||||||||
North America | 707 | 1,758 | 1,172 | 999 | 582 | |||||||||||||||
Latin America | 153 | 113 | 101 | 91 | 103 | |||||||||||||||
932 | 1,991 | 1,368 | 1,179 | 970 | ||||||||||||||||
Total risk elements | ||||||||||||||||||||
Europe | 11,418 | 7,926 | 7,175 | 6,485 | 6,117 | |||||||||||||||
Hong Kong | 1,096 | 1,086 | 657 | 764 | 827 | |||||||||||||||
Rest of Asia-Pacific7 | 1,380 | 1,020 | 901 | 953 | 761 | |||||||||||||||
Middle East7 | 1,986 | 500 | 384 | 403 | 376 | |||||||||||||||
North America | 24,643 | 22,330 | 14,855 | 9,024 | 6,644 | |||||||||||||||
Latin America | 4,662 | 3,528 | 3,515 | 2,649 | 2,211 | |||||||||||||||
45,185 | 36,390 | 27,487 | 20,278 | 16,936 | ||||||||||||||||
% | % | % | % | % | ||||||||||||||||
Loan impairment allowances as a percentage of risk elements on loans36 | 58.8 | 70.8 | 75.5 | 71.6 | 71.2 | |||||||||||||||
For footnotes, see page 291. |
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Liquidity and funding > Policies and procedures / Primary sources of funding / Liquidity risk management |
• | projecting cash flows by major currency under various stress scenarios and considering the level of liquid assets necessary in relation thereto; | ||
• | monitoring balance sheet liquidity and advances to deposits ratios against internal and regulatory requirements; | ||
• | maintaining a diverse range of funding sources with back-up facilities; | ||
• | managing the concentration and profile of debt maturities; | ||
• | managing contingent liquidity commitment exposures within pre-determined caps; | ||
• | maintaining debt financing plans; | ||
• | monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory overall funding mix; and | ||
• | maintaining liquidity and funding contingency plans. These plans identify early indicators of stress conditions and describe actions to be taken in the event of difficulties arising from systemic or other crises, while minimising adverse long-term implications for the business. |
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Due | Due | |||||||||||||||||||
Due | between | between | Due | |||||||||||||||||
On | within 3 | 3 and 12 | 1 and 5 | after 5 | ||||||||||||||||
demand | months | months | years | years | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
Deposits by banks | 39,484 | 85,922 | 18,925 | 6,180 | 1,359 | |||||||||||||||
Customer accounts | 800,199 | 277,071 | 71,243 | 45,561 | 7,911 | |||||||||||||||
Trading liabilities | 268,130 | – | – | – | – | |||||||||||||||
Financial liabilities designated at fair value | 6,628 | 1,050 | 5,976 | 36,185 | 67,209 | |||||||||||||||
Derivatives | 245,027 | 300 | 1,002 | 467 | 320 | |||||||||||||||
Debt securities in issue | 124 | 49,493 | 38,445 | 66,661 | 22,663 | |||||||||||||||
Subordinated liabilities | 43 | 481 | 3,020 | 8,660 | 52,304 | |||||||||||||||
Other financial liabilities | 22,500 | 25,123 | 5,732 | 2,354 | 1,103 | |||||||||||||||
1,382,135 | 439,440 | 144,343 | 166,068 | 152,869 | ||||||||||||||||
Loan and other credit-related commitments | 221,191 | 87,044 | 101,289 | 107,379 | 41,147 | |||||||||||||||
Financial guarantees and similar contracts | 6,111 | 15,288 | 17,072 | 10,749 | 4,031 | |||||||||||||||
1,609,437 | 541,772 | 262,704 | 284,196 | 198,047 | ||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
Deposits by banks | 45,884 | 82,514 | 8,734 | 4,875 | 2,356 | |||||||||||||||
Customer accounts | 698,187 | 332,207 | 69,721 | 34,537 | 5,798 | |||||||||||||||
Trading liabilities | 247,652 | – | – | – | – | |||||||||||||||
Financial liabilities designated at fair value | 5,365 | 2,713 | 6,969 | 34,855 | 64,853 | |||||||||||||||
Derivatives | 482,039 | 373 | 1,479 | 2,634 | 1,003 | |||||||||||||||
Debt securities in issue | 481 | 56,590 | 53,174 | 68,169 | 22,920 | |||||||||||||||
Subordinated liabilities | 92 | 686 | 1,646 | 9,718 | 41,701 | |||||||||||||||
Other financial liabilities | 19,474 | 26,180 | 5,473 | 1,472 | 1,022 | |||||||||||||||
1,499,174 | 501,263 | 147,196 | 156,260 | 139,653 | ||||||||||||||||
Loan and other credit-related commitments | 239,753 | 105,952 | 153,774 | 72,111 | 32,432 | |||||||||||||||
Financial guarantees and similar contracts | 5,749 | 13,429 | 17,756 | 9,807 | 5,577 | |||||||||||||||
1,744,676 | 620,644 | 318,726 | 238,178 | 177,662 | ||||||||||||||||
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Liquidity and funding > Liquidity risk management / Contingent liquidity risk |
Ratio of net liquid assets | ||||||||||||||||||||||||
Advances to deposits ratios | to customer liabilities | Net liquid assets | ||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
% | % | % | % | US$bn | US$bn | |||||||||||||||||||
HSBC Bank (UK operations) | ||||||||||||||||||||||||
Year-end | 102.3 | 106.0 | 8.8 | 7.1 | 29.2 | 21.3 | ||||||||||||||||||
Maximum | 107.7 | 106.7 | 13.6 | 14.1 | 46.2 | 52.5 | ||||||||||||||||||
Minimum | 101.7 | 97.5 | 6.5 | 6.9 | 19.5 | 21.3 | ||||||||||||||||||
Average | 105.1 | 101.5 | 10.2 | 10.0 | 32.6 | 35.8 | ||||||||||||||||||
The Hongkong and Shanghai Banking Corporation | ||||||||||||||||||||||||
Year-end | 70.9 | 77.4 | 30.0 | 25.0 | 84.9 | 64.6 | ||||||||||||||||||
Maximum | 77.4 | 82.9 | 35.0 | 25.0 | 97.8 | 64.6 | ||||||||||||||||||
Minimum | 68.6 | 76.7 | 25.0 | 19.9 | 64.6 | 51.1 | ||||||||||||||||||
Average | 71.5 | 80.6 | 30.7 | 21.9 | 85.1 | 56.5 | ||||||||||||||||||
HSBC Bank USA | ||||||||||||||||||||||||
Year-end | 98.1 | 103.7 | 17.8 | 31.5 | 14.1 | 27.4 | ||||||||||||||||||
Maximum | 110.6 | 117.3 | 31.5 | 31.5 | 27.4 | 27.4 | ||||||||||||||||||
Minimum | 98.1 | 103.7 | 16.7 | 15.8 | 13.2 | 17.1 | ||||||||||||||||||
Average | 105.4 | 111.8 | 22.2 | 22.6 | 18.9 | 21.5 |
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Ratio of net liquid assets | ||||||||||||||||||||||||
Advances to deposits ratios | to customer liabilities | Net liquid assets | ||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
% | % | % | % | US$bn | US$bn | |||||||||||||||||||
Total of HSBC’s other principal banking entities37 | ||||||||||||||||||||||||
Year-end | 80.8 | 85.2 | 29.4 | 26.5 | 94.7 | 83.5 | ||||||||||||||||||
Maximum | 85.2 | 92.3 | 29.4 | 26.5 | 94.7 | 83.5 | ||||||||||||||||||
Minimum | 80.8 | 82.7 | 24.7 | 19.4 | 73.2 | 66.1 | ||||||||||||||||||
Average | 82.2 | 88.1 | 27.3 | 22.5 | 84.8 | 73.9 |
For footnote, see page 291. |
At 31 December | ||||||||
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Maximum amounts of unsecured term funding maturing in any rolling: | ||||||||
3 month period | 5.2 | 6.0 | ||||||
12 month period | 12.3 | 17.4 | ||||||
Unused committed sources of secured funding38 | 0.4 | 2.4 | ||||||
Committed backstop lines from non-Group entities in support of CP programmes | 5.3 | 7.3 |
For footnote, see page 291. |
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Liquidity and funding > Contingent liquidity risk / Impact of market turmoil / HSBC Holdings |
The Hongkong and | ||||||||||||||||||||||||||||||||
Shanghai Banking | ||||||||||||||||||||||||||||||||
HSBC Bank | HSBC Bank USA | HSBC Bank Canada | Corporation | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | US$bn | |||||||||||||||||||||||||
Conduits | ||||||||||||||||||||||||||||||||
Client-originated assets39 | ||||||||||||||||||||||||||||||||
– total lines | 7.4 | 5.6 | 6.4 | 11.2 | 0.3 | 0.3 | 0.3 | – | ||||||||||||||||||||||||
– largest individual lines | 0.8 | 1.0 | 0.4 | 0.4 | 0.1 | 0.2 | 0.3 | – | ||||||||||||||||||||||||
HSBC-managed assets40 | 29.1 | 34.8 | – | – | – | – | – | – | ||||||||||||||||||||||||
Other conduits41 | – | – | 1.3 | 1.1 | – | – | – | – | ||||||||||||||||||||||||
Single-issuer liquidity facilities | ||||||||||||||||||||||||||||||||
– five largest42 | 4.3 | 6.0 | 6.1 | 5.0 | 2.0 | 1.5 | 1.2 | 1.0 | ||||||||||||||||||||||||
– largest market sector43 | 7.9 | 7.3 | 4.7 | 3.5 | 2.9 | 2.4 | 1.5 | 1.7 |
For footnotes, see page 291. |
• | interbank funding costs remained above pre-market turmoil levels, although they declined significantly from the peaks observed in the latter part of 2008; | |
• | many asset classes continued to suffer from reduced liquidity; | |
• | the ability of many market participants to issue either unsecured or secured debt continued to be restricted, although the effect was mitigated in part by the support provided by some central bank and government programmes; and | |
• | many special purpose entities with investments linked to US sub-prime mortgages, or to ABSs where the underlying credit exposures were not fully transparent, continued to experience difficulties in raising wholesale funding. |
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249
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Liquidity and funding > HSBC Holdings // Market risk > Sensitivity analysis |
Due | Due | |||||||||||||||||||
Due | between | between | Due | |||||||||||||||||
On | within 3 | 3 and 12 | 1 and 5 | after 5 | ||||||||||||||||
demand | months | months | years | years | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
Amounts owed to HSBC undertakings | – | 292 | 25 | 3,477 | – | |||||||||||||||
Financial liabilities designated at fair value | – | 229 | 687 | 6,205 | 26,152 | |||||||||||||||
Derivatives | 362 | – | – | – | – | |||||||||||||||
Debt securities in issue | – | 37 | 112 | 2,346 | 1,698 | |||||||||||||||
Subordinated liabilities | – | 243 | 728 | 3,881 | 32,232 | |||||||||||||||
Other financial liabilities | – | 1,239 | – | – | – | |||||||||||||||
362 | 2,040 | 1,552 | 15,909 | 60,082 | ||||||||||||||||
Loan commitments | 3,240 | – | – | – | – | |||||||||||||||
Financial guarantees and similar contracts | 35,073 | – | – | – | – | |||||||||||||||
38,675 | 2,040 | 1,552 | 15,909 | 60,082 | ||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
Amounts owed to HSBC undertakings | – | 133 | 539 | 3,590 | – | |||||||||||||||
Financial liabilities designated at fair value | – | 587 | 1,762 | 5,977 | 25,571 | |||||||||||||||
Derivatives | 1,324 | – | – | – | – | |||||||||||||||
Subordinated liabilities | – | 235 | 706 | 3,764 | 32,214 | |||||||||||||||
Other financial liabilities | – | 1,805 | – | – | – | |||||||||||||||
1,324 | 2,760 | 3,007 | 13,331 | 57,785 | ||||||||||||||||
Loan commitments | 3,241 | – | – | – | – | |||||||||||||||
Financial guarantees and similar contracts | 47,341 | – | – | – | – | |||||||||||||||
51,906 | 2,760 | 3,007 | 13,331 | 57,785 | ||||||||||||||||
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• | potential market movements are calculated with reference to data from the past two years; | ||
• | historical market rates and prices are calculated with reference to foreign exchange rates and commodity prices, interest rates, equity prices and the associated volatilities; and | ||
• | VAR is calculated to a 99 per cent confidence level and for a one-day holding period. |
• | the use of historical data as a proxy for estimating future events may not encompass all potential events, particularly those which are extreme in nature; | ||
• | the use of a one-day holding period assumes that all positions can be liquidated or the risk offset in one day. This may not fully reflect the market risk arising at times of severe illiquidity, when a one-day holding period may be insufficient to liquidate or hedge all positions fully; | ||
• | the use of a 99 per cent confidence level, by definition, does not take into account losses that might occur beyond this level of confidence; | ||
• | VAR is calculated on the basis of exposures outstanding at the close of business and therefore does not necessarily reflect intra-day exposures; and | ||
• | VAR is unlikely to reflect loss potential on exposures that only arise under significant market moves. |
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Market risk > Impact of market turmoil / Trading portfolios |
• | sensitivity scenarios, which consider the impact of any single risk factor or set of factors that are unlikely to be captured within the VAR models, such as the break of a currency peg; | ||
• | technical scenarios, which consider the largest move in each risk factor, without consideration of any underlying market correlation; | ||
• | hypothetical scenarios, which consider potential macro economic events, for example, a global flu pandemic; and | ||
• | historical scenarios, which incorporate historical observations of market movements during previous periods of stress which would not be captured within VAR. |
Portfolio | ||||||||
Trading | Non-trading | |||||||
Risk type | ||||||||
Foreign exchange and commodity | VAR | VAR | 44 | |||||
Interest rate | VAR | VAR | 45 | |||||
Equity | VAR | Sensitivity | ||||||
Credit spread | VAR | VAR | 46 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
At 31 December | 204.5 | 191.2 | ||||||
Average | 156.1 | 158.9 | ||||||
Minimum | 105.7 | 59.8 | ||||||
Maximum | 204.5 | 287.1 |
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253
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Market risk > Trading portfolios / Non-trading portfolios |
Foreign | ||||||||||||||||
exchange and | Interest | |||||||||||||||
commodity | rate | Equity | Total48 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | 19.5 | 42.6 | 17.5 | 45.3 | ||||||||||||
At 31 December 2008 | 29.8 | 63.4 | 13.9 | 72.5 | ||||||||||||
Average | ||||||||||||||||
2009 | 20.6 | 51.3 | 11.3 | 53.8 | ||||||||||||
2008 | 19.0 | 50.7 | 15.2 | 53.1 | ||||||||||||
Minimum | ||||||||||||||||
2009 | 11.1 | 35.6 | 4.9 | 35.6 | ||||||||||||
2008 | 8.7 | 21.4 | 8.2 | 22.6 | ||||||||||||
Maximum | ||||||||||||||||
2009 | 46.7 | 78.0 | 21.2 | 86.6 | ||||||||||||
2008 | 54.9 | 147.4 | 39.0 | 104.4 |
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Market risk > Sensitivity of NII / Structural FX exposure |
Rest of | Hong Kong | Rest of | ||||||||||||||||||||||||||
US dollar | Americas | dollar | Asia | Sterling | Euro | |||||||||||||||||||||||
bloc | bloc | bloc | bloc | bloc | bloc | Total | ||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Change in 2010 projected net interest income arising from a shift in yield curves of: | ||||||||||||||||||||||||||||
+25 basis points at the beginning of each quarter | 13 | 92 | 416 | 112 | 363 | (301 | ) | 695 | ||||||||||||||||||||
– 25 basis points at the beginning of each quarter | (382 | ) | (46 | ) | (507 | ) | (133 | ) | (689 | ) | 194 | (1,563 | ) | |||||||||||||||
Change in 2009 projected net interest income arising from a shift in yield curves of: | ||||||||||||||||||||||||||||
+25 basis points at the beginning of each quarter | (243 | ) | 42 | (45 | ) | 100 | 28 | (345 | ) | (463 | ) | |||||||||||||||||
–25 basis points at the beginning of each quarter | 41 | (42 | ) | (285 | ) | (114 | ) | (235 | ) | 351 | (284 | ) |
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• | core deposit franchises: these are exposed to changes in the cost of deposits raised and spreads on wholesale funds. The net interest income benefit of core deposits increases as interest rates rise and decreases as interest rates fall. This risk is asymmetrical in a very low interest rate environment, however, as there is limited room to lower deposit pricing in the event of interest rate reductions; and | ||
• | residual interest rate risk is managed within Global Markets, under the Group’s policy of transferring interest rate risk to Global Markets to be managed within defined limits and with flexibility as to the instruments used. |
• | decreases in interest rates, particularly in US dollar, Hong Kong dollar and sterling which have restricted the Group’s ability to pass on to depositors further rate reductions, thereby increasing exposures to further rate falls; and | ||
• | Global Markets’ decreased net trading asset positions, particularly in euros and US dollars. The funding of net trading assets is recorded in ‘Net interest income’ whereas the income from such assets is recorded in ‘Net trading income’. |
Maximum | Minimum | |||||||||||
impact | impact | |||||||||||
US$m | US$m | US$m | ||||||||||
At 31 December 2009 | ||||||||||||
+ 100 basis point parallel move in all yield curves | (3,096) | (3,438) | (2,715) | |||||||||
As a percentage of total shareholders’ equity | (2.4%) | (2.7%) | (2.1%) | |||||||||
– 100 basis point parallel move in all yield curves | 3,108 | 3,380 | 2,477 | |||||||||
As a percentage of total shareholders’ equity | 2.4% | 2.6% | 1.9% | |||||||||
At 31 December 2008 | ||||||||||||
+ 100 basis point parallel move in all yield curves | (2,740) | (2,740) | (1,737) | |||||||||
As a percentage of total shareholders’ equity | (2.9%) | (2.9%) | (1.9%) | |||||||||
– 100 basis point parallel move in all yield curves | 2,477 | 2,609 | 1,944 | |||||||||
As a percentage of total shareholders’ equity | 2.6% | 2.8% | 2.1% |
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Market risk > Defined benefit schemes / HSBC Holdings |
2009 | 2008 | |||||||
US$bn | US$bn | |||||||
Liabilities (present value) | 30.6 | 24.0 | ||||||
% | % | |||||||
Assets: | ||||||||
Equity investments | 21 | 20 | ||||||
Debt securities | 67 | 68 | ||||||
Other (including property) | 12 | 12 | ||||||
100 | 100 | |||||||
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US dollar | Sterling | Euro | ||||||||||||||
bloc | bloc | bloc | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Change in projected net interest income as at 31 December 2009 arising from a shift in yield curves of: | ||||||||||||||||
+ 25 basis points at the beginning of each quarter | ||||||||||||||||
0-1 year | (13 | ) | 18 | 11 | 16 | |||||||||||
2-3 years | (172 | ) | 75 | 19 | (78 | ) | ||||||||||
4-5 years | (165 | ) | 105 | 6 | (54 | ) | ||||||||||
– 25 basis points at the beginning of each quarter | ||||||||||||||||
0-1 year | 12 | (18 | ) | (11 | ) | (17 | ) | |||||||||
2-3 years | 172 | (75 | ) | (19 | ) | 78 | ||||||||||
4-5 years | 165 | (105 | ) | (6 | ) | 54 | ||||||||||
Change in projected net interest income as at 31 December 2008 arising from a shift in yield curves of: | ||||||||||||||||
+ 25 basis points at the beginning of each quarter | ||||||||||||||||
0-1 year | (81 | ) | 10 | 11 | (60 | ) | ||||||||||
2-3 years | (351 | ) | 20 | 77 | (254 | ) | ||||||||||
4-5 years | (358 | ) | 54 | 64 | (240 | ) | ||||||||||
– 25 basis points at the beginning of each quarter | ||||||||||||||||
0-1 year | 81 | (10 | ) | (11 | ) | 60 | ||||||||||
2-3 years | 351 | (20 | ) | (77 | ) | 254 | ||||||||||
4-5 years | 358 | (54 | ) | (64 | ) | 240 |
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Market risk > HSBC Holdings // Residual value risk |
Non- | ||||||||||||||||||||||||
Up to | More than | interest | ||||||||||||||||||||||
Total | 1 year | 1-5 years | 5-10 years | 10 years | bearing | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Cash at bank and in hand: | ||||||||||||||||||||||||
– balances with HSBC undertakings | 224 | 224 | – | – | – | – | ||||||||||||||||||
Derivatives | 2,981 | – | – | – | – | 2,981 | ||||||||||||||||||
Loans and advances to HSBC undertakings | 23,212 | 16,980 | 3,084 | – | 1,896 | 1,252 | ||||||||||||||||||
Financial investments | 2,455 | – | – | 300 | 1,610 | 545 | ||||||||||||||||||
Investments in subsidiaries | 86,247 | 1,866 | 1,217 | – | 875 | 82,289 | ||||||||||||||||||
Other assets | 674 | – | – | – | – | 674 | ||||||||||||||||||
Total assets | 115,793 | 19,070 | 4,301 | 300 | 4,381 | 87,741 | ||||||||||||||||||
Amounts owed to HSBC undertakings | (3,711 | ) | (2,898 | ) | – | – | – | (813 | ) | |||||||||||||||
Financial liabilities designated at fair values | (16,909 | ) | – | (6,108 | ) | (5,017 | ) | (5,015 | ) | (769 | ) | |||||||||||||
Derivatives | (362 | ) | – | – | – | – | (362 | ) | ||||||||||||||||
Debt securities in issue | (2,839 | ) | – | (1,784 | ) | – | (1,055 | ) | – | |||||||||||||||
Other liabilities | (1,257 | ) | – | – | – | – | (1,257 | ) | ||||||||||||||||
Subordinated liabilities | (14,406 | ) | (2,850 | ) | (865 | ) | (3,117 | ) | (7,382 | ) | (192 | ) | ||||||||||||
Total equity | (75,876 | ) | – | – | – | (3,650 | ) | (72,226 | ) | |||||||||||||||
Other non-interest bearing liabilities | (433 | ) | – | – | – | – | (433 | ) | ||||||||||||||||
Total liabilities and equity | (115,793 | ) | (5,748 | ) | (8,757 | ) | (8,134 | ) | (17,102 | ) | (76,052 | ) | ||||||||||||
Off-balance sheet items attracting interest rate sensitivity | – | (15,302 | ) | 6,275 | 6,306 | 4,051 | (1,330 | ) | ||||||||||||||||
Net interest rate risk gap | – | (1,980 | ) | 1,819 | (1,528 | ) | (8,670 | ) | 10,359 | |||||||||||||||
Cumulative interest rate gap | – | (1,980 | ) | (161 | ) | (1,689 | ) | (10,359 | ) | – | ||||||||||||||
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Non- | ||||||||||||||||||||||||
Up to | More than | interest | ||||||||||||||||||||||
Total | 1 year | 1-5 years | 5-10 years | 10 years | bearing | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Cash at bank and in hand: | ||||||||||||||||||||||||
– balances with HSBC undertakings | 443 | 443 | – | – | – | – | ||||||||||||||||||
Derivatives | 3,682 | – | – | – | – | 3,682 | ||||||||||||||||||
Loans and advances to HSBC undertakings | 11,804 | 8,995 | 511 | – | 1,222 | 1,076 | ||||||||||||||||||
Financial investments | 2,629 | – | – | 300 | 1,885 | 444 | ||||||||||||||||||
Investments in subsidiaries | 81,993 | 1,459 | 1,094 | – | 875 | 78,565 | ||||||||||||||||||
Other assets | 131 | – | – | – | – | 131 | ||||||||||||||||||
Total assets | 100,682 | 10,897 | 1,605 | 300 | 3,982 | 83,898 | ||||||||||||||||||
Amounts owed to HSBC undertakings | (4,042 | ) | (3,389 | ) | – | – | – | (653 | ) | |||||||||||||||
Financial liabilities designated at fair values | (16,389 | ) | (4,210 | ) | (4,410 | ) | (5,290 | ) | (3,448 | ) | 969 | |||||||||||||
Derivatives | (1,324 | ) | – | – | – | – | (1,324 | ) | ||||||||||||||||
Other liabilities | (1,816 | ) | – | – | – | – | (1,816 | ) | ||||||||||||||||
Subordinated liabilities | (14,017 | ) | (1,500 | ) | (2,187 | ) | (2,962 | ) | (7,152 | ) | (216 | ) | ||||||||||||
Total equity | (62,587 | ) | – | – | – | (3,650 | ) | (58,937 | ) | |||||||||||||||
Other non-interest bearing liabilities | (507 | ) | – | – | – | – | (507 | ) | ||||||||||||||||
Total liabilities and equity | (100,682 | ) | (9,099 | ) | (6,597 | ) | (8,252 | ) | (14,250 | ) | (62,484 | ) | ||||||||||||
Off-balance sheet items attracting interest rate sensitivity | – | (12,353 | ) | 4,410 | 5,046 | 3,760 | (863 | ) | ||||||||||||||||
Net interest rate risk gap | – | (10,555 | ) | (582 | ) | (2,906 | ) | (6,508 | ) | 20,551 | ||||||||||||||
Cumulative interest rate gap | – | (10,555 | ) | (11,137 | ) | (14,043 | ) | (20,551 | ) | – | ||||||||||||||
Foreign exchange | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
At 31 December | 83.2 | 55.2 | ||||||
Average | 76.6 | 40.3 | ||||||
Minimum | 55.2 | 29.2 | ||||||
Maximum | 190.8 | 56.1 |
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Operational risk > Legal risk / Group security // Pension risk / Reputational risk |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Within 1 year | 21 | 108 | ||||||
Between 1-2 years | 233 | 59 | ||||||
Between 2-5 years | 1,347 | 530 | ||||||
More than 5 years | 792 | 1,549 | ||||||
Total exposure | 2,393 | 2,246 | ||||||
• | Contractual risk is the risk that the rights and/or obligations of an HSBC company within a contractual relationship are defective. | ||
• | Dispute risk is made up of the risks that an HSBC company is subject to when it is involved in or managing a potential or actual dispute. | ||
• | Legislative risk is the risk that an HSBC company fails to adhere to the laws of the jurisdictions in which it operates. | ||
• | Non-contractual rights risk is the risk that an HSBC company’s assets are not properly owned or are infringed by others, or an HSBC company infringes another party’s rights. |
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• | investments delivering a return below that required to provide the projected plan benefits. This could arise, for example, when there is a fall in the market value of equities, or when increases in long-term interest rates cause a fall in the value of fixed income securities held; |
• | the prevailing economic environment leading to corporate failures, thus triggering write-downs in asset values (both equity and debt); |
• | a change in either interest rates or inflation which causes an increase in the value of the scheme liabilities; and |
• | scheme members living longer than expected (known as longevity risk). |
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Sustainability risk // Insurance operations > Life insurance business |
• | formulating sustainability risk policies. This includes oversight of HSBC’s sustainability risk standards, management of the Equator Principles for project finance lending, and sector-based sustainability policies covering those sectors with high environmental or social impacts (forestry, freshwater infrastructure, chemicals, energy, mining and metals, and defence-related lending); undertaking an independent review of transactions where sustainability risks are assessed to be high, and supporting HSBC’s operating companies to assess similar risks of a lower magnitude; |
• | building and implementing systems-based processes to ensure consistent application of policies, reduce the costs of sustainability risk reviews and capture management information to measure and report on the effect of HSBC’s lending and investment activities on sustainable development; and |
• | providing training and capacity building within HSBC’s operating companies to ensure sustainability risks are identified and mitigated consistently to either HSBC’s own standards, international standards or local regulations, whichever is the higher. |
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• | Life insurance contracts with discretionary participation features (‘DPF’) allow policyholders to participate in the profits generated from such business, which may take the form of annual bonuses and a final bonus, in addition to providing cover on death. Certain minimum return levels are also guaranteed. The largest portfolio is in Hong Kong. |
• | Credit life insurance business is written to underpin banking and finance products. The policy pays a claim if the holder of the loan is unable to make repayments due to early death or unemployment. |
• | Annuities are contracts providing regular payments of income from capital investment for either a fixed period or during the annuitant’s lifetime. Payments to the annuitant either begin on inception of the policy (immediate annuities) or at a designated future date (deferred annuities). |
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Table of Contents
Insurance operations > Non-life business / Insurance risk |
• | Term assurance and critical illness policies provide cover in the event of death (term assurance) and serious illness. |
• | Linked life insurance contracts pay benefits to policyholders which are typically determined by reference to the value of the investments supporting the policies. |
• | Investment contracts with DPF allow policyholders to participate in the profits generated by such business. The largest portfolio is written in France. Policyholders are guaranteed to receive a return on their investment plus any discretionary bonuses. In addition, certain minimum return levels are guaranteed. |
• | Unit-linked investment contracts are those where the principal benefit payable is the value of assigned assets. Any benefits payable to policyholders related to insurance risk are not significant on these contracts. |
• | Other investment contracts include pension contracts written in Hong Kong. |
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• | Accident and health insurance.Potential exposure to concentrations of claims arising from isolated events such as earthquakes are mitigated by the purchase of catastrophe reinsurance. | ||
• | Motor insurance.Reinsurance protection is arranged to avoid excessive exposure to larger losses, particularly from personal injury claims. |
• | Fire and other damage to property.Portfolios at risk from catastrophic losses are protected by reinsurance in accordance with information obtained from professional risk-modelling organisations. |
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Insurance operations > Insurance risk |
(Audited)
Rest of | ||||||||||||||||||||||||
Hong | Asia- | North | Latin | |||||||||||||||||||||
Europe | Kong | Pacific | America | America | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Life (non-linked) | 2,998 | 14,456 | 526 | 1,026 | 1,973 | 20,979 | ||||||||||||||||||
Insurance contracts with DPF50 | 1,128 | 14,095 | 227 | – | – | 15,450 | ||||||||||||||||||
Credit life | 953 | – | 20 | 50 | – | 1,023 | ||||||||||||||||||
Annuities | 452 | – | 28 | 777 | 1,554 | 2,811 | ||||||||||||||||||
Term assurance and other long-term contracts | 465 | 361 | 251 | 199 | 419 | 1,695 | ||||||||||||||||||
Life (linked) | 2,125 | 2,896 | 437 | – | 3,528 | 8,986 | ||||||||||||||||||
Investment contracts with DPF50,51 | 20,979 | – | 35 | – | – | 21,014 | ||||||||||||||||||
Insurance liabilities to policyholders | 26,102 | 17,352 | 998 | 1,026 | 5,501 | 50,979 | ||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Life (non-linked) | 2,962 | 11,320 | 343 | 1,006 | 1,739 | 17,370 | ||||||||||||||||||
Insurance contracts with DPF50 | 1,015 | 11,213 | 216 | – | – | 12,444 | ||||||||||||||||||
Credit life | 252 | – | – | 65 | – | 317 | ||||||||||||||||||
Annuities | 379 | – | 28 | 805 | 1,363 | 2,575 | ||||||||||||||||||
Term assurance and other long-term contracts | 1,316 | 107 | 99 | 136 | 376 | 2,034 | ||||||||||||||||||
Life (linked) | 1,548 | 2,276 | 310 | – | 1,933 | 6,067 | ||||||||||||||||||
Investment contracts with DPF50,51 | 17,732 | – | 34 | – | – | 17,766 | ||||||||||||||||||
Insurance liabilities to policyholders | 22,242 | 13,596 | 687 | 1,006 | 3,672 | 41,203 | ||||||||||||||||||
For footnotes, see page 291. |
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(Audited)
Rest of | ||||||||||||||||||||||||
Hong | Asia- | North | Latin | |||||||||||||||||||||
Europe | Kong | Pacific | America | America | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
Accident and health | 94 | 160 | 7 | 3 | 23 | 287 | ||||||||||||||||||
Motor | 123 | 14 | 20 | – | 234 | 391 | ||||||||||||||||||
Fire and other damage | 72 | 22 | 8 | 16 | 22 | 140 | ||||||||||||||||||
Liability | – | 15 | 4 | – | 2 | 21 | ||||||||||||||||||
Credit (non-life) | 35 | – | – | 86 | – | 121 | ||||||||||||||||||
Marine, aviation and transport | 7 | 9 | 4 | – | 17 | 37 | ||||||||||||||||||
Other non-life insurance contracts | 24 | 32 | 1 | 12 | 58 | 127 | ||||||||||||||||||
Total net written insurance premiums | 355 | 252 | 44 | 117 | 356 | 1,124 | ||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (748 | ) | (107 | ) | (17 | ) | (96 | ) | (155 | ) | (1,123 | ) | ||||||||||||
2008 | ||||||||||||||||||||||||
Accident and health | 14 | 155 | 5 | 3 | 27 | 204 | ||||||||||||||||||
Motor | 350 | 15 | 14 | – | 273 | 652 | ||||||||||||||||||
Fire and other damage | 150 | 26 | 3 | 4 | 22 | 205 | ||||||||||||||||||
Liability | – | 14 | 4 | – | 34 | 52 | ||||||||||||||||||
Credit (non-life) | 99 | – | – | 144 | – | 243 | ||||||||||||||||||
Marine, aviation and transport | – | 11 | 4 | – | 24 | 39 | ||||||||||||||||||
Other non-life insurance contracts | 49 | 28 | – | 15 | 29 | 121 | ||||||||||||||||||
Total net written insurance premiums | 662 | 249 | 30 | 166 | 409 | 1,516 | ||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (553 | ) | (121 | ) | (13 | ) | (98 | ) | (176 | ) | (961 | ) | ||||||||||||
2007 | ||||||||||||||||||||||||
Accident and health | 27 | 132 | 5 | – | 25 | 189 | ||||||||||||||||||
Motor | 369 | 15 | 10 | – | 224 | 618 | ||||||||||||||||||
Fire and other damage | 178 | 23 | 7 | 2 | 19 | 229 | ||||||||||||||||||
Liability | – | 12 | 3 | 8 | 34 | 57 | ||||||||||||||||||
Credit (non-life) | 76 | – | – | 157 | – | 233 | ||||||||||||||||||
Marine, aviation and transport | – | 12 | 4 | – | 18 | 34 | ||||||||||||||||||
Other non-life insurance contracts | 30 | 24 | – | 30 | 24 | 108 | ||||||||||||||||||
Total net written insurance premiums | 680 | 218 | 29 | 197 | 344 | 1,468 | ||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (598 | ) | (90 | ) | (10 | ) | (79 | ) | (151 | ) | (928 | ) | ||||||||||||
For footnotes, see page 291. |
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Insurance operations > Insurance risk |
(Audited)
Insurance contracts | Investment contracts | ||||||||||||||||||||||||||||||||||||||||
Term | |||||||||||||||||||||||||||||||||||||||||
With | Unit- | Annu- | assur- | With | Unit- | Other | |||||||||||||||||||||||||||||||||||
DPF | linked | ities | ance | 53 | Non-life | DPF | 51 | linked | Other | assets | 52 | Total | |||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||||
At 31 December 2009 | |||||||||||||||||||||||||||||||||||||||||
Financial assets | 15,322 | 8,204 | 2,567 | 2,053 | 2,290 | 20,501 | 7,366 | 4,008 | 7,252 | 69,563 | |||||||||||||||||||||||||||||||
– trading assets | – | – | – | – | 10 | – | – | – | – | 10 | |||||||||||||||||||||||||||||||
– financial assets designated at fair value | 599 | 7,837 | 446 | 482 | 63 | 5,498 | 6,572 | 1,582 | 2,085 | 25,164 | |||||||||||||||||||||||||||||||
– derivatives | 16 | 1 | – | 3 | – | 144 | 299 | 2 | 3 | 468 | |||||||||||||||||||||||||||||||
– financial investments | 13,013 | – | 1,511 | 1,033 | 742 | 13,948 | – | 1,701 | 3,901 | 35,849 | |||||||||||||||||||||||||||||||
– other financial assets | 1,694 | 366 | 610 | 535 | 1,475 | 911 | 495 | 723 | 1,263 | 8,072 | |||||||||||||||||||||||||||||||
Reinsurance assets | 6 | 831 | 376 | 389 | 467 | – | – | – | 60 | 2,129 | |||||||||||||||||||||||||||||||
PVIF55 | – | – | – | – | – | – | – | – | 2,780 | 2,780 | |||||||||||||||||||||||||||||||
Other assets and investment properties | 165 | 5 | 25 | 634 | 242 | 516 | 13 | 56 | 601 | 2,257 | |||||||||||||||||||||||||||||||
Total assets | 15,493 | 9,040 | 2,968 | 3,076 | 2,999 | 21,017 | 7,379 | 4,064 | 10,693 | 76,729 | |||||||||||||||||||||||||||||||
Liabilities under investment contracts: | |||||||||||||||||||||||||||||||||||||||||
– designated at fair value | – | – | – | – | – | – | 7,347 | 3,518 | – | 10,865 | |||||||||||||||||||||||||||||||
– carried at amortised cost | – | – | – | – | – | – | – | 417 | – | 417 | |||||||||||||||||||||||||||||||
Liabilities under insurance contracts | 15,450 | 8,986 | 2,811 | 2,718 | 2,728 | 21,014 | – | – | – | 53,707 | |||||||||||||||||||||||||||||||
Deferred tax | 6 | – | 22 | 1 | 7 | 1 | – | 2 | 750 | 789 | |||||||||||||||||||||||||||||||
Other liabilities | – | – | – | – | – | – | – | – | 2,371 | 2,371 | |||||||||||||||||||||||||||||||
Total liabilities | 15,456 | 8,986 | 2,833 | 2,719 | 2,735 | 21,015 | 7,347 | 3,937 | 3,121 | 68,149 | |||||||||||||||||||||||||||||||
Total equity | – | – | – | – | – | – | – | – | 8,580 | 8,580 | |||||||||||||||||||||||||||||||
Total equity and liabilities53 | 15,456 | 8,986 | 2,833 | 2,719 | 2,735 | 21,015 | 7,347 | 3,937 | 11,701 | 76,729 | |||||||||||||||||||||||||||||||
For footnotes, see page 291. |
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Insurance contracts | Investment contracts | |||||||||||||||||||||||||||||||||||||||
Term | ||||||||||||||||||||||||||||||||||||||||
With | Unit- | Annu- | assur- | With | Unit- | Other | ||||||||||||||||||||||||||||||||||
DPF | linked | ities | ance | 53 | Non-life | DPF | 51 | linked | Other | assets | 52 | Total | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||||||||||
Financial assets | 12,336 | 5,141 | 2,378 | 2,209 | 2,053 | 17,312 | 6,138 | 3,739 | 6,684 | 57,990 | ||||||||||||||||||||||||||||||
– trading assets | – | – | – | – | 35 | – | – | – | 4 | 39 | ||||||||||||||||||||||||||||||
– financial assets designated at fair value | 959 | 4,738 | 457 | 496 | 52 | 4,597 | 5,525 | 1,481 | 1,970 | 20,275 | ||||||||||||||||||||||||||||||
– derivatives | 27 | 3 | – | 26 | – | 60 | 170 | 91 | 24 | 401 | ||||||||||||||||||||||||||||||
– financial investments | 9,383 | – | 1,282 | 399 | 860 | 12,482 | – | 1,482 | 2,576 | 28,464 | ||||||||||||||||||||||||||||||
– other financial assets | 1,967 | 400 | 639 | 1,288 | 1,106 | 173 | 443 | 685 | 2,110 | 8,811 | ||||||||||||||||||||||||||||||
Reinsurance assets | 6 | 956 | 311 | 320 | 430 | – | – | – | 60 | 2,083 | ||||||||||||||||||||||||||||||
PVIF55 | – | – | – | – | – | – | – | – | 2,033 | 2,033 | ||||||||||||||||||||||||||||||
Other assets and investment properties | 121 | 3 | 32 | 71 | 257 | 459 | 55 | 54 | 935 | 1,987 | ||||||||||||||||||||||||||||||
Total assets | 12,463 | 6,100 | 2,721 | 2,600 | 2,740 | 17,771 | 6,193 | 3,793 | 9,712 | 64,093 | ||||||||||||||||||||||||||||||
Liabilities under investment contracts: | ||||||||||||||||||||||||||||||||||||||||
– designated at fair value | – | – | – | – | – | – | 6,012 | 3,271 | – | 9,283 | ||||||||||||||||||||||||||||||
– carried at amortised cost | – | – | – | – | – | – | – | 284 | – | 284 | ||||||||||||||||||||||||||||||
Liabilities under insurance contracts | 12,444 | 6,067 | 2,575 | 2,351 | 2,480 | 17,766 | – | – | – | 43,683 | ||||||||||||||||||||||||||||||
Deferred tax | 8 | 7 | 22 | 30 | 1 | 1 | – | 3 | 515 | 587 | ||||||||||||||||||||||||||||||
Other liabilities | – | – | – | – | – | – | – | – | 2,679 | 2,679 | ||||||||||||||||||||||||||||||
Total liabilities | 12,452 | 6,074 | 2,597 | 2,381 | 2,481 | 17,767 | 6,012 | 3,558 | 3,194 | 56,516 | ||||||||||||||||||||||||||||||
Total equity | – | – | – | – | – | – | – | – | 7,577 | 7,577 | ||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||
Total equity and liabilities56 | 12,452 | 6,074 | 2,597 | 2,381 | 2,481 | 17,767 | 6,012 | 3,558 | 10,771 | 64,093 | ||||||||||||||||||||||||||||||
For footnotes, see page 291. |
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Insurance operations > Financial risks |
Rest of | ||||||||||||||||||||||||
Hong | Asia- | North | Latin | |||||||||||||||||||||
Europe | Kong | Pacific | America | America | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Financial assets | 35,704 | 22,337 | 1,330 | 2,582 | 7,610 | 69,563 | ||||||||||||||||||
– trading assets | – | – | – | – | 10 | 10 | ||||||||||||||||||
– financial assets designated at fair value | 14,756 | 4,758 | 877 | – | 4,773 | 25,164 | ||||||||||||||||||
– derivatives | 446 | 18 | 3 | – | 1 | 468 | ||||||||||||||||||
– financial investments | 16,940 | 14,771 | 133 | 2,037 | 1,968 | 35,849 | ||||||||||||||||||
– other financial assets | 3,562 | 2,790 | 317 | 545 | 858 | 8,072 | ||||||||||||||||||
Reinsurance assets | 1,100 | 849 | 25 | 19 | 136 | 2,129 | ||||||||||||||||||
PVIF55 | 1,022 | 1,248 | 113 | 138 | 259 | 2,780 | ||||||||||||||||||
Other assets and investment properties | 1,380 | 498 | 23 | 40 | 316 | 2,257 | ||||||||||||||||||
Total assets | 39,206 | 24,932 | 1,491 | 2,779 | 8,321 | 76,729 | ||||||||||||||||||
Liabilities under investment contracts: | ||||||||||||||||||||||||
– designated at fair value | 6,500 | 4,299 | 66 | – | – | 10,865 | ||||||||||||||||||
– carried at amortised cost | – | – | – | – | 417 | 417 | ||||||||||||||||||
Liabilities under insurance contracts | 27,845 | 17,618 | 1,072 | 1,268 | 5,904 | 53,707 | ||||||||||||||||||
Deferred tax | 334 | 220 | 27 | 82 | 126 | 789 | ||||||||||||||||||
Other liabilities | 1,744 | 284 | 54 | 3 | 286 | 2,371 | ||||||||||||||||||
Total liabilities | 36,423 | 22,421 | 1,219 | 1,353 | 6,733 | 68,149 | ||||||||||||||||||
Total equity | 2,783 | 2,511 | 272 | 1,426 | 1,588 | 8,580 | ||||||||||||||||||
Total equity and liabilities56 | 39,206 | 24,932 | 1,491 | 2,779 | 8,321 | 76,729 | ||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Financial assets | 31,246 | 17,865 | 961 | 2,625 | 5,293 | 57,990 | ||||||||||||||||||
– trading assets | – | – | – | – | 39 | 39 | ||||||||||||||||||
– financial assets designated at fair value | 12,605 | 4,153 | 581 | – | 2,936 | 20,275 | ||||||||||||||||||
– derivatives | 258 | 117 | – | – | 26 | 401 | ||||||||||||||||||
– financial investments | 14,240 | 10,689 | 91 | 2,040 | 1,404 | 28,464 | ||||||||||||||||||
– other financial assets | 4,143 | 2,906 | 289 | 585 | 888 | 8,811 | ||||||||||||||||||
Reinsurance assets | 920 | 1,004 | 20 | 13 | 126 | 2,083 | ||||||||||||||||||
PVIF55 | 845 | 905 | 81 | – | 202 | 2,033 | ||||||||||||||||||
Other assets and investment properties | 933 | 400 | 9 | 354 | 291 | 1,987 | ||||||||||||||||||
Total assets | 33,944 | 20,174 | 1,071 | 2,992 | 5,912 | 64,093 | ||||||||||||||||||
Liabilities under investment contracts: | ||||||||||||||||||||||||
– designated at fair value | 5,310 | 3,895 | 78 | – | – | 9,283 | ||||||||||||||||||
– carried at amortised cost | – | – | – | – | 284 | 284 | ||||||||||||||||||
Liabilities under insurance contracts | 23,752 | 13,873 | 745 | 1,237 | 4,076 | 43,683 | ||||||||||||||||||
Deferred tax | 304 | 161 | 19 | – | 103 | 587 | ||||||||||||||||||
Other liabilities | 2,184 | 190 | 42 | 11 | 252 | 2,679 | ||||||||||||||||||
Total liabilities | 31,550 | 18,119 | 884 | 1,248 | 4,715 | 56,516 | ||||||||||||||||||
Total equity | 2,394 | 2,055 | 187 | 1,744 | 1,197 | 7,577 | ||||||||||||||||||
Total equity and liabilities56 | 33,944 | 20,174 | 1,071 | 2,992 | 5,912 | 64,093 | ||||||||||||||||||
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Life linked | Life non-linked | Non-life | Other | |||||||||||||||||
contracts | 57 | contracts | 58 | insurance | 59 | assets | 54 | Total | 60 | |||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
Trading assets | ||||||||||||||||||||
Debt securities | – | – | 10 | – | 10 | |||||||||||||||
Financial assets designated at fair value | 14,409 | 8,607 | 63 | 2,085 | 25,164 | |||||||||||||||
Treasury bills | 46 | 174 | – | 3 | 223 | |||||||||||||||
Debt securities | 5,086 | 3,428 | 63 | 1,220 | 9,797 | |||||||||||||||
Equity securities | 9,277 | 5,005 | – | 862 | 15,144 | |||||||||||||||
Financial investments | ||||||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||
– debt securities | – | 13,995 | 186 | 670 | 14,851 | |||||||||||||||
Available-for-sale | – | 17,211 | 556 | 3,231 | 20,998 | |||||||||||||||
– Treasury bills | – | – | 211 | 86 | 297 | |||||||||||||||
– other eligible bills | – | 26 | 127 | 126 | 279 | |||||||||||||||
– debt securities | – | 17,169 | 199 | 2,787 | 20,155 | |||||||||||||||
– equity securities | – | 16 | 19 | 232 | 267 | |||||||||||||||
Derivatives | 300 | 165 | – | 3 | 468 | |||||||||||||||
Other financial assets61 | 861 | 4,473 | 1,475 | 1,263 | 8,072 | |||||||||||||||
15,570 | 44,451 | 2,290 | 7,252 | 69,563 | ||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
Trading assets | ||||||||||||||||||||
Debt securities | – | – | 35 | 4 | 39 | |||||||||||||||
Financial assets designated at fair value | 10,263 | 7,990 | 52 | 1,970 | 20,275 | |||||||||||||||
Treasury bills | 31 | 197 | – | 8 | 236 | |||||||||||||||
Debt securities | 4,091 | 3,109 | 52 | 1,625 | 8,877 | |||||||||||||||
Equity securities | 6,141 | 4,684 | – | 337 | 11,162 | |||||||||||||||
Financial investments | ||||||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||
– debt securities | – | 10,411 | 170 | 510 | 11,091 | |||||||||||||||
Available-for-sale | – | 14,617 | 690 | 2,066 | 17,373 | |||||||||||||||
– Treasury bills | – | 4 | 130 | 128 | 262 | |||||||||||||||
– other eligible bills | – | – | 272 | 126 | 398 | |||||||||||||||
– debt securities | – | 14,602 | 254 | 1,596 | 16,452 | |||||||||||||||
– equity securities | – | 11 | 34 | 216 | 261 | |||||||||||||||
Derivatives | 173 | 204 | – | 24 | 401 | |||||||||||||||
Other financial assets61 | 843 | 4,752 | 1,106 | 2,110 | 8,811 | |||||||||||||||
11,279 | 37,974 | 2,053 | 6,684 | 57,990 | ||||||||||||||||
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Insurance operations > Financial risks > Market risk |
• | annuities in payment; | |
• | deferred annuities: these consist of two phases – the savings and investing phase and the retirement income phase; | |
• | annual return: the annual return is guaranteed to be no lower than a specified rate. This may be the return credited to the policyholder every year, or the average annual return credited to the policyholder over the life of the policy, which may occur on the maturity date or the surrender date of the contract; | |
• | capital: policyholders are guaranteed to receive no less than the premiums paid plus declared bonuses less expenses; and | |
• | market performance: policyholders receive an investment return which is guaranteed to be within a prescribed range of average investment returns earned by predetermined market participants on the specified product. |
2009 | 2008 | |||||||||||||||||||||||
Investment | Investment | |||||||||||||||||||||||
returns | returns | |||||||||||||||||||||||
Amount of | implied by | Current | Amount of | implied by | Current | |||||||||||||||||||
reserve | guarantee | 63 | yields | reserve | guarantee | 63 | yields | |||||||||||||||||
US$m | % | % | US$m | % | % | |||||||||||||||||||
Annuities in payment | 925 | 0.0 – 7.5 | 1.3 – 16.7 | 744 | 0.0 – 11.5 | 6.5 – 28.0 | ||||||||||||||||||
Deferred annuities | 943 | 0.0 – 6.0 | 0.9 – 15.1 | 120 | 0.0 – 6.0 | 3.9 – 7.4 | ||||||||||||||||||
Immediate annuities | 553 | 6.0 – 9.0 | 5.4 – 5.4 | 576 | 6.0 – 9.0 | 5.4 – 5.4 | ||||||||||||||||||
Annual return | 17,147 | 0.0 – 4.5 | 0.8 – 6.2 | 13,717 | 0.0 – 4.5 | 2.2 – 4.9 | ||||||||||||||||||
Annual return | 497 | 4.5 – 6.0 | 5.1 – 6.5 | 302 | 4.5 – 6.0 | 3.4 – 7.3 | ||||||||||||||||||
Capital | 15,866 | – | 2.4 – 4.3 | 13,346 | – | 2.0 – 4.3 |
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• | for products with DPF, adjusting bonus rates to manage the liabilities to policyholders. Bonus rates are managed by regularly evaluating their sustainability. The effect is that a significant portion of the market risk is borne by the policyholder; |
• | as far as possible, matching assets to liabilities. For example, for products with annual return or capital guarantees, HSBC seeks to invest in bonds which produce returns at least equal to the investment returns implied by the guarantees while remaining attentive to the overall portfolio credit quality; |
• | using derivatives in a limited number of instances; |
• | when designing new products with investment guarantees, evaluating the cost of the guarantee and considering this cost when determining the level of premiums or the price structure; |
• | periodically reviewing products identified as higher risk, which contain guarantees and embedded optionality features linked to savings and investment products. The scope of the review would include pricing, risk management and profitability (a control introduced during 2008). Guaranteed products which expose the Group to risk beyond the levels deemed acceptable in any of these categories are either altered or are no longer offered to customers; |
• | including features designed to mitigate market risk in new products, such as charging surrender penalties to recoup losses incurred when policyholders surrender their policies; and |
• | exiting, to the extent possible, investment portfolios whose risk is considered unacceptable – for example, by implementing asset reallocation strategies in order to manage risk exposures. |
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Insurance operations > Financial risks > Market risk / Credit risk |
• | for interest rate risk, the sensitivities of the net present values of asset and expected liability |
cash flows, in total and by currency, to a one basis point parallel shift in the discount curves used to calculate the net present values; | ||
• | for equity price risk, the total market value of equity holdings and the market value of equity holdings by region and country; and | |
• | for foreign exchange risk, the total net short foreign exchange position and the net foreign exchange positions by currency. |
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2009 | 2008 | |||||||||||||||
Effect on | Effect on | Effect on | Effect on | |||||||||||||
profit for | total | profit for | total | |||||||||||||
the year | equity | the year | equity | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
+ 100 basis points parallel shift in yield curves | 68 | (82 | ) | 94 | (13 | ) | ||||||||||
– 100 basis points parallel shift in yield curves | (69 | ) | 92 | (82 | ) | 24 | ||||||||||
10 per cent increase in equity prices | 19 | 19 | 10 | 10 | ||||||||||||
10 per cent decrease in equity prices | (20 | ) | (20 | ) | (12 | ) | (12 | ) | ||||||||
10 per cent increase in US dollar exchange rate compared to all currencies | 20 | 20 | 28 | 29 | ||||||||||||
10 per cent decrease in US dollar exchange rate compared to all currencies | (20 | ) | (20 | ) | (28 | ) | (29 | ) | ||||||||
Sensitivity to credit spread increases | (36 | ) | (91 | ) | (73 | ) | (134 | ) |
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Insurance operations > Financial risks > Credit risk |
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Neither past due nor impaired | |||||||||||||||||||||||||
Medium- | Medium- | Sub- | |||||||||||||||||||||||
Strong | good | Satisfactory | standard | Impaired | 64 | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||
At 31 December 2009 | |||||||||||||||||||||||||
Supporting liabilities under non-linked insurance and investment contracts | |||||||||||||||||||||||||
Trading assets – debt securities | 8 | – | 2 | – | 10 | ||||||||||||||||||||
Financial assets designated at fair value | 2,812 | 80 | 704 | 69 | 3,665 | ||||||||||||||||||||
– treasury and other eligible bills | 174 | – | – | – | 174 | ||||||||||||||||||||
– debt securities | 2,638 | 80 | 704 | 69 | 3,491 | ||||||||||||||||||||
Financial investments | 30,126 | 1,509 | 130 | 148 | – | 31,913 | |||||||||||||||||||
– treasury and other similar bills | 211 | – | – | – | – | 211 | |||||||||||||||||||
– other eligible bills | 153 | – | – | – | – | 153 | |||||||||||||||||||
– debt securities | 29,762 | 1,509 | 130 | 148 | – | 31,549 | |||||||||||||||||||
32,946 | 1,589 | 836 | 217 | – | 35,588 | ||||||||||||||||||||
Supporting shareholders’ funds65 | |||||||||||||||||||||||||
Financial assets designated at fair value | 527 | 506 | 180 | 10 | 1,223 | ||||||||||||||||||||
– treasury and other eligible bills | 3 | – | – | – | 3 | ||||||||||||||||||||
– debt securities | 524 | 506 | 180 | 10 | 1,220 | ||||||||||||||||||||
Financial investments | 3,335 | 312 | 16 | 6 | – | 3,669 | |||||||||||||||||||
– treasury and other similar bills | 82 | – | 4 | – | – | 86 | |||||||||||||||||||
– other eligible bills | 126 | – | – | – | – | 126 | |||||||||||||||||||
– debt securities | 3,127 | 312 | 12 | 6 | – | 3,457 | |||||||||||||||||||
3,862 | 818 | 196 | 16 | – | 4,892 | ||||||||||||||||||||
Total66 | |||||||||||||||||||||||||
Trading assets – debt securities | 8 | – | 2 | – | 10 | ||||||||||||||||||||
Financial assets designated at fair value | 3,339 | 586 | 884 | 79 | 4,888 | ||||||||||||||||||||
– treasury and other eligible bills | 177 | – | – | – | 177 | ||||||||||||||||||||
– debt securities | 3,162 | 586 | 884 | 79 | 4,711 | ||||||||||||||||||||
Financial investments | 33,461 | 1,821 | 146 | 154 | – | 35,582 | |||||||||||||||||||
– treasury and other similar bills | 293 | – | 4 | – | – | 297 | |||||||||||||||||||
– other eligible bills | 279 | – | – | – | – | 279 | |||||||||||||||||||
– debt securities | 32,889 | 1,821 | 142 | 154 | – | 35,006 | |||||||||||||||||||
36,808 | 2,407 | 1,032 | 233 | – | 40,480 | ||||||||||||||||||||
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Insurance operations > Financial risks > Credit risk / Liquidity risk |
Neither past due nor impaired | ||||||||||||||||||||||||
Medium- | Medium- | Sub- | ||||||||||||||||||||||
Strong | good | satisfactory | standard | Impaired | 64 | Total | ||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Supporting liabilities under non-linked insurance and investment contracts | ||||||||||||||||||||||||
Trading assets – debt securities | 27 | 8 | – | – | 35 | |||||||||||||||||||
Financial assets designated at fair value | 2,704 | 335 | 319 | – | 3,358 | |||||||||||||||||||
– treasury and other eligible bills | 197 | – | – | – | 197 | |||||||||||||||||||
– debt securities | 2,507 | 335 | 319 | – | 3,161 | |||||||||||||||||||
Financial investments | 24,881 | 718 | 195 | 45 | 4 | 25,843 | ||||||||||||||||||
– treasury and other similar bills | 404 | – | 2 | – | – | 406 | ||||||||||||||||||
– debt securities | 24,477 | 718 | 193 | 45 | 4 | 25,437 | ||||||||||||||||||
27,612 | 1,061 | 514 | 45 | 4 | 29,236 | |||||||||||||||||||
Supporting shareholders’ funds65 | ||||||||||||||||||||||||
Trading assets – debt securities | 4 | – | – | – | 4 | |||||||||||||||||||
Financial assets designated at fair value | 1,502 | 110 | 21 | – | 1,633 | |||||||||||||||||||
– treasury and other eligible bills | 8 | – | – | – | 8 | |||||||||||||||||||
– debt securities | 1,494 | 110 | 21 | – | 1,625 | |||||||||||||||||||
Financial investments | 2,033 | 174 | 54 | 99 | – | 2,360 | ||||||||||||||||||
– treasury and other similar bills | 245 | – | 7 | 2 | – | 254 | ||||||||||||||||||
– debt securities | 1,788 | 174 | 47 | 97 | – | 2,106 | ||||||||||||||||||
3,539 | 284 | 75 | 99 | – | 3,997 | |||||||||||||||||||
Total66 | ||||||||||||||||||||||||
Trading assets – debt securities | 31 | 8 | – | – | 39 | |||||||||||||||||||
Financial assets designated at fair value | 4,206 | 445 | 340 | – | 4,991 | |||||||||||||||||||
– treasury and other eligible bills | 205 | – | – | – | 205 | |||||||||||||||||||
– debt securities | 4,001 | 445 | 340 | – | 4,786 | |||||||||||||||||||
Financial investments | 26,914 | 892 | 249 | 144 | 4 | 28,203 | ||||||||||||||||||
– treasury and other similar bills | 649 | – | 9 | 2 | – | 660 | ||||||||||||||||||
– debt securities | 26,265 | 892 | 240 | 142 | 4 | 27,543 | ||||||||||||||||||
31,151 | 1,345 | 589 | 144 | 4 | 33,233 | |||||||||||||||||||
For footnotes, see page 291. |
Treasury | Other eligible | Debt | ||||||||||||||
bills | bills | securities | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Governments | 342 | 6 | 8,548 | 8,896 | ||||||||||||
Local authorities | – | – | 886 | 886 | ||||||||||||
Asset-backed securities | – | – | 54 | 54 | ||||||||||||
Corporates and other | 132 | 273 | 30,239 | 30,644 | ||||||||||||
474 | 279 | 39,727 | 40,480 | |||||||||||||
At 31 December 2008 | ||||||||||||||||
Governments | 467 | 24 | 6,109 | 6,600 | ||||||||||||
Local authorities | – | – | 525 | 525 | ||||||||||||
Asset-backed securities | – | – | 14 | 14 | ||||||||||||
Corporates and other | – | 374 | 25,720 | 26,094 | ||||||||||||
467 | 398 | 32,368 | 33,233 | |||||||||||||
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Neither past due nor impaired | Past due | |||||||||||||||||||||||
Medium- | Medium- | Sub- | but not | |||||||||||||||||||||
Strong | good | satisfactory | standard | impaired | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Linked insurance contracts67 | 27 | 804 | – | – | – | 831 | ||||||||||||||||||
Non-linked insurance contracts67 | 1,133 | 10 | 90 | 5 | – | 1,238 | ||||||||||||||||||
1,160 | 814 | 90 | 5 | – | 2,069 | |||||||||||||||||||
Reinsurance debtors | 24 | 2 | 11 | 6 | 17 | 60 | ||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Linked insurance contracts67 | 9 | 947 | – | – | – | 956 | ||||||||||||||||||
Non-linked insurance contracts67 | 1,001 | 12 | 50 | – | 4 | 1,067 | ||||||||||||||||||
1,010 | 959 | 50 | – | 4 | 2,023 | |||||||||||||||||||
Reinsurance debtors | 30 | – | 20 | – | 10 | 60 |
• | cash inflows arising from premiums from new business, policy renewals and recurring premium products; | ||
• | cash inflows arising from interest and dividends on investments and principal repayments of maturing debt investments; |
• | cash resources; and | ||
• | cash inflows from the sale of investments. |
• | matching cash inflows with expected cash outflows using specific cash flow projections or more general asset and liability matching techniques such as duration matching; | ||
• | maintaining sufficient cash resources; | ||
• | investing in good credit-quality investments with deep and liquid markets to the degree to which they exist; | ||
• | monitoring investment concentrations and restricting them where appropriate, for example, by debt issues or issuers; and | ||
• | establishing committed contingency borrowing facilities. |
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Insurance operations > Financial risks > Liquidity risk // PVIF |
Expected cash flows (undiscounted)68 | ||||||||||||||||||||
Within 1 year | 1-5 years | 5-15 years | Over 15 years | Total | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||
Non-life insurance | 1,318 | 1,277 | 123 | 10 | 2,728 | |||||||||||||||
Life insurance (non-linked) | 2,393 | 10,098 | 17,253 | 18,231 | 47,975 | |||||||||||||||
Life insurance (linked) | 522 | 2,290 | 4,483 | 6,899 | 14,194 | |||||||||||||||
4,233 | 13,665 | 21,859 | 25,140 | 64,897 | ||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||
Non-life insurance | 1,178 | 1,186 | 115 | 1 | 2,480 | |||||||||||||||
Life insurance (non-linked) | 2,527 | 7,789 | 16,695 | 14,432 | 41,443 | |||||||||||||||
Life insurance (linked) | 1,295 | 1,251 | 3,269 | 5,390 | 11,205 | |||||||||||||||
5,000 | 10,226 | 20,079 | 19,823 | 55,128 | ||||||||||||||||
For footnote, see page 291. |
Liabilities under investment contracts by | ||||||||||||||||
insurance manufacturing subsidiaries69 | ||||||||||||||||
Linked | Other | Investment | ||||||||||||||
investment | investment | contracts | ||||||||||||||
contracts | contracts | with DPF | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Remaining contractual maturity: | ||||||||||||||||
– due within 1 year | 477 | 443 | 14 | 934 | ||||||||||||
– due between 1 and 5 years | 904 | – | 20 | 924 | ||||||||||||
– due between 5 and 10 years | 693 | – | – | 693 | ||||||||||||
– due after 10 years | 2,093 | – | – | 2,093 | ||||||||||||
– undated70 | 3,180 | 3,492 | 20,980 | 27,652 | ||||||||||||
7,347 | 3,935 | 21,014 | 32,296 | |||||||||||||
At 31 December 2008 | ||||||||||||||||
Remaining contractual maturity: | ||||||||||||||||
– due within 1 year | 178 | 314 | – | 492 | ||||||||||||
– due between 1 and 5 years | 610 | 21 | 34 | 665 | ||||||||||||
– due between 5 and 10 years | 482 | 31 | – | 513 | ||||||||||||
– due after 10 years | 1,649 | 42 | – | 1,691 | ||||||||||||
– undated70 | 3,093 | 3,147 | 17,732 | 23,972 | ||||||||||||
6,012 | 3,555 | 17,766 | 27,333 | |||||||||||||
For footnotes, see page 291. |
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PVIF at 31 December | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
+ 100 basis point shift in risk-free rate | 212 | 179 | ||||||
– 100 basis point shift in risk-free rate | (145 | ) | (100 | ) | ||||
+ 100 basis point shift in risk discount rate | (140 | ) | (109 | ) | ||||
– 100 basis point shift in risk discount rate | 162 | 122 |
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Insurance operations > PVIF > Non-economic assumptions // Capital management and allocation |
2009 | 2008 | |||||||||||||||
PVIF | PVIF | |||||||||||||||
Total | included in | Total | included in | |||||||||||||
equity | total equity | equity | total equity | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 1 January | 7,577 | 2,033 | 8,430 | 1,965 | ||||||||||||
Value of new business written during the year71 | 600 | 600 | 452 | 452 | ||||||||||||
Movements arising from in-force business: | ||||||||||||||||
– expected return | (123 | ) | (123 | ) | (186 | ) | (186 | ) | ||||||||
– experience variances72 | (44 | ) | (44 | ) | (36 | ) | (36 | ) | ||||||||
– change in operating assumptions | 48 | 48 | (7 | ) | (7 | ) | ||||||||||
Investment return variances | 16 | 16 | (94 | ) | (94 | ) | ||||||||||
Changes in investment assumptions | 19 | 19 | 12 | 12 | ||||||||||||
Return on net assets | 522 | – | (310 | ) | – | |||||||||||
Exchange differences and other | (83 | ) | 231 | (93 | ) | (73 | ) | |||||||||
Capital transactions | 48 | – | (591 | ) | – | |||||||||||
At 31 December | 8,580 | 2,780 | 7,577 | 2,033 | ||||||||||||
For footnotes, see page 291. |
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Effect on profit for the year | Effect on total equity | |||||||||||||||||||||||
to 31 December | at 31 December | |||||||||||||||||||||||
Life | Non-life | Total | Life | Non-life | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
2009 | ||||||||||||||||||||||||
20% increase in claims costs | – | (191 | ) | (191 | ) | – | (191 | ) | (191 | ) | ||||||||||||||
20% decrease in claims costs | – | 190 | 190 | – | 190 | 190 | ||||||||||||||||||
10% increase in mortality and/or morbidity rates | (51 | ) | – | (51 | ) | (51 | ) | – | (51 | ) | ||||||||||||||
10% decrease in mortality and/or morbidity rates | 62 | – | 62 | 62 | – | 62 | ||||||||||||||||||
50% increase in lapse rates | (162 | ) | – | (162 | ) | (162 | ) | – | (162 | ) | ||||||||||||||
50% decrease in lapse rates | 408 | – | 408 | 408 | – | 408 | ||||||||||||||||||
10% increase in expense rates | (52 | ) | (11 | ) | (63 | ) | (52 | ) | (11 | ) | (63 | ) | ||||||||||||
10% decrease in expense rates | 52 | 11 | 63 | 52 | 11 | 63 | ||||||||||||||||||
2008 | ||||||||||||||||||||||||
20% increase in claims costs | – | (122 | ) | (122 | ) | – | (122 | ) | (122 | ) | ||||||||||||||
20% decrease in claims costs | – | 121 | 121 | – | 121 | 121 | ||||||||||||||||||
10% increase in mortality and/or morbidity rates | (28 | ) | – | (28 | ) | (28 | ) | – | (28 | ) | ||||||||||||||
10% decrease in mortality and/or morbidity rates | 30 | – | 30 | 30 | – | 30 | ||||||||||||||||||
50% increase in lapse rates | (96 | ) | – | (96 | ) | (96 | ) | – | (96 | ) | ||||||||||||||
50% decrease in lapse rates | 194 | – | 194 | 194 | – | 194 | ||||||||||||||||||
10% increase in expense rates | (42 | ) | (9 | ) | (51 | ) | (42 | ) | (9 | ) | (51 | ) | ||||||||||||
10% decrease in expense rates | 41 | 9 | 50 | 41 | 9 | 50 |
• | market capitalisation is the stock market value of the company; | |
• | invested capital is the equity capital invested in HSBC by its shareholders; |
• | economic capital is the internally calculated capital requirement which is deemed necessary by HSBC to support the risks to which it is exposed at a confidence level consistent with a target credit rating of AA; and | |
• | regulatory capital is the capital which HSBC is required to hold in accordance with the rules established by the FSA for the consolidated Group and by HSBC’s local regulators for individual Group companies. |
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Capital management and allocation > Capital measurement and allocation |
• | tier 1 capital is divided into core tier 1 and other tier 1 capital. Core tier 1 capital comprises shareholders’ equity and related minority interests. The book values of goodwill and intangible assets are deducted from core tier 1 capital and other regulatory adjustments are made for items reflected in shareholders’ equity which are treated differently for the purposes of capital adequacy. Qualifying hybrid capital instruments such as non-cumulative perpetual preference shares and innovative tier 1 securities are included in other tier 1 capital; | |
• | tier 2 capital comprises qualifying subordinated loan capital, related minority interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties. |
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Capital management and allocation > Capital measurement and allocation |
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2009 | 2008 | |||||||
US$m | US$m | |||||||
Composition of regulatory capital (Audited) | ||||||||
Tier 1 capital | ||||||||
Shareholders’ equity | 135,252 | 106,301 | ||||||
Shareholders’ equity per balance sheet73 | 128,299 | 93,591 | ||||||
Preference share premium | (1,405 | ) | (1,405 | ) | ||||
Other equity instruments | (2,133 | ) | (2,133 | ) | ||||
Deconsolidation of special purpose entities74 | 10,491 | 16,248 | ||||||
Minority interests | 3,932 | 3,616 | ||||||
Minority interests per balance sheet | 7,362 | 6,638 | ||||||
Preference share minority interests | (2,395 | ) | (2,110 | ) | ||||
Minority interest transferred to tier 2 capital | (678 | ) | (626 | ) | ||||
Minority interest in deconsolidated subsidiaries | (357 | ) | (286 | ) | ||||
Regulatory adjustments to the accounting basis | 164 | 349 | ||||||
Unrealised losses on available-for-sale debt securities75 | 906 | 5,191 | ||||||
Own credit spread | (1,050 | ) | (5,744 | ) | ||||
Defined benefit pension fund adjustment76 | 2,508 | 1,822 | ||||||
Reserves arising from revaluation of property and unrealised gains on available-for-sale equities | (2,226 | ) | (1,726 | ) | ||||
Cash flow hedging reserve | 26 | 806 | ||||||
Deductions | (33,088 | ) | (29,994 | ) | ||||
Goodwill capitalised and intangible assets | (28,680 | ) | (26,861 | ) | ||||
50% of securitisation positions | (1,579 | ) | (989 | ) | ||||
50% of tax credit adjustment for expected losses | 546 | 516 | ||||||
50% of excess of expected losses over impairment allowances | (3,375 | ) | (2,660 | ) | ||||
Core tier 1 capital | 106,260 | 80,272 | ||||||
Other tier 1 capital before deductions | 15,798 | 14,926 | ||||||
Preference share premium | 1,405 | 1,405 | ||||||
Preference share minority interests | 2,395 | 2,110 | ||||||
Innovative tier 1 securities | 11,998 | 11,411 | ||||||
Deductions | 99 | 138 | ||||||
Unconsolidated investments77 | (447 | ) | (378 | ) | ||||
50% of tax credit adjustment for expected losses | 546 | 516 | ||||||
Tier 1 capital | 122,157 | 95,336 | ||||||
Tier 2 capital | ||||||||
Total qualifying tier 2 capital before deductions | 50,075 | 49,394 | ||||||
Reserves arising from revaluation of property and unrealised gains on available-for-sale equities | 2,226 | 1,726 | ||||||
Collective impairment allowances78 | 4,120 | 3,168 | ||||||
Perpetual subordinated debt | 2,987 | 2,996 | ||||||
Term subordinated debt | 40,442 | 41,204 | ||||||
Minority interest in tier 2 capital | 300 | 300 | ||||||
Total deductions other than from tier 1 capital | (16,503 | ) | (13,270 | ) | ||||
Unconsolidated investments77 | (11,547 | ) | (9,613 | ) | ||||
50% of securitisation positions | (1,579 | ) | (989 | ) | ||||
50% of excess of expected losses over impairment allowances | (3,375 | ) | (2,660 | ) | ||||
Other deductions | (2 | ) | (8 | ) | ||||
Total regulatory capital | 155,729 | 131,460 | ||||||
Risk-weighted assets | ||||||||
(Unaudited) | ||||||||
Credit risk | 903,518 | 882,597 | ||||||
Counterparty credit risk | 51,892 | 73,999 | ||||||
Market risk | 51,860 | 70,264 | ||||||
Operational risk | 125,898 | 121,114 | ||||||
Total | 1,133,168 | 1,147,974 | ||||||
For footnotes, see page 291. |
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Capital management and allocation > Capital structure / Movement in tier 1 capital and RWAs // Subsidiaries’ RWAs > Footnotes |
2009 | 2008 | |||||||
% | % | |||||||
Capital ratios (Unaudited) | ||||||||
Core tier 1 ratio | 9.4 | 7.0 | ||||||
Tier 1 ratio | 10.8 | 8.3 | ||||||
Total capital ratio | 13.7 | 11.4 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Movement in tier 1 capital (Audited) | ||||||||
Opening tier 1 capital79 | 95,336 | 101,685 | ||||||
Contribution to tier 1 capital from profit for the year | 10,247 | 11,682 | ||||||
Consolidated profits attributable to shareholders of the parent company | 5,834 | 5,728 | ||||||
Removal of own credit spread net of tax | 4,413 | (4,610 | ) | |||||
Goodwill write-offs | – | 10,564 | ||||||
Net dividends | (3,969 | ) | (7,708 | ) | ||||
Dividends | (5,639) | (11,301 | ) | |||||
Add back: shares issued in lieu of dividends | 1,670 | 3,593 | ||||||
Decrease/(increase) in goodwill and intangible assets deducted | (1,819 | ) | 1,430 | |||||
Ordinary shares issued | 18,399 | 470 | ||||||
Rights issue (net of expenses)80 | 18,326 | – | ||||||
Other | 73 | 470 | ||||||
Innovative tier 1 securities issued | – | 2,133 | ||||||
Foreign currency translation differences | 4,837 | (11,980 | ) | |||||
Other79 | (874 | ) | (2,376 | ) | ||||
Closing tier 1 capital | 122,157 | 95,336 | ||||||
Movement in risk-weighted assets (Unaudited) | ||||||||
At 1 January79 | 1,147,974 | 1,164,649 | ||||||
Movements | (14,806 | ) | (16,675 | ) | ||||
At 31 December | 1,133,168 | 1,147,974 | ||||||
For footnotes, see page 291. |
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2009 | 2008 | |||||||
US$m | US$m | |||||||
The Hongkong and Shanghai Banking Corporation | 288,225 | 247,626 | ||||||
Hang Seng Bank | 60,991 | 44,211 | ||||||
HSBC Bank Malaysia81 | 8,606 | – | ||||||
The Hongkong and Shanghai Banking Corporation and other subsidiaries | 218,628 | 203,415 | ||||||
HSBC Bank | 318,570 | 379,695 | ||||||
HSBC Private Banking Holdings (Suisse) | 20,200 | 20,422 | ||||||
HSBC France | 50,462 | 65,557 | ||||||
HSBC Bank and other subsidiaries | 247,908 | 293,716 | ||||||
HSBC North America | 363,622 | 373,955 | ||||||
HSBC Finance | 174,595 | 187,660 | ||||||
HSBC Bank Canada | 34,831 | 35,336 | ||||||
HSBC Bank USA and other subsidiaries | 154,196 | 150,959 | ||||||
HSBC Mexico | 22,624 | 21,037 | ||||||
HSBC Bank Middle East | 33,773 | 35,217 | ||||||
HSBC Bank Malaysia | – | 11,182 | ||||||
HSBC Brazil | 41,782 | 30,851 | ||||||
HSBC Bank Panama | 9,142 | 9,498 | ||||||
Bank of Bermuda | 4,663 | 4,759 | ||||||
Other | 50,767 | 34,154 | ||||||
1,133,168 | 1,147,974 | |||||||
For footnote, see below. |
1 | The amount of the loan commitments reflects, where relevant, the expected level of take-up of pre-approved loan offers made by mailshots to personal customers. In addition to those amounts, there is a further maximum possible exposure to credit risk of US$62,286 million (2008: US$35,849 million), reflecting the full take-up of such irrevocable loan commitments. The take-up of such offers is generally at modest levels. | |
2 | As discussed further under ‘Write-off of loans and advances’, there was a change in the write-off period in North America during 2009. The effect of this change was an acceleration of write-offs which reduced residential mortgages by US$1,924 million, other personal loans by US$1,340 million and total personal lending by US$3,264 million, with a corresponding reduction in impairment allowances. There was no significant effect on net loans and advances or loan impairment charges. | |
3 | Residential mortgages include Hong Kong Government Home Ownership Scheme loans of US$3,456 million at 31 December 2009 (2008: US$3,882 million). Where disclosed, earlier comparatives were 2007: US$3,942 million; 2006: US$4,078 million; 2005: US$4,680 million. | |
4 | Other personal loans and advances include second lien mortgages and other property-related lending. | |
5 | Other commercial loans and advances include advances in respect of agriculture, transport, energy and utilities. | |
6 | Included within Gross loans and advances to customers is credit card lending of US$68,289 million (2008: US$75,266 million). Where disclosed, earlier comparatives were 2007: US$82,854 million; 2006: US$74,518 million; 2005: US$66,020 million. | |
7 | The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been restated accordingly. | |
8 | As discussed further under ‘Write-off of loans and advances’, there was a change in the write-off period in North America during 2009. The effect of this change was an acceleration of write-offs which reduced gross loans and advances to customers and loans classified as impaired by US$3,264 million, with a corresponding reduction in impairment allowances. There was no significant effect on net customer loans and advances or loan impairment charges. | |
9 | Includes residential mortgages of HSBC Bank USA and HSBC Finance. | |
10 | Comprising Hong Kong, Rest of Asia-Pacific, Middle East and Latin America. | |
11 | As discussed further under ‘Write-off of loans and advances’, there was a change in the write-off period in North America during 2009. The effect of this change was an acceleration of write-offs which reduced residential mortgages by US$1,924 million, second lien mortgages by US$425 million and total mortgage lending by US$2,349 million, with a corresponding reduction in impairment allowances. There was no significant effect on net loans and advances or loan impairment charges. | |
12 | Negative equity arises when the value of the loan exceeds the value of available equity, generally based on values at origination date. | |
13 | Loan-to-value ratios are generally based on values at the balance sheet date. The comparative data for the UK and the US are restated accordingly (previously these ratios were presented based on origination date). |
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Footnotes |
14 | HSBC Finance lending is shown on a management basis and includes loans transferred to HSBC USA Inc. which are managed by HSBC Finance. | |
15 | As discussed further under ‘Write-off of loans and advances’ on page 205, there was a change in the write-off policy in North America during 2009. The effect of this change was a one-off acceleration of write-offs. Excluding this, HSBC Finance mortgage lending at 31 December 2009 totalled US$63,724 million, of which US$52,914 million was fixed rate, US$9,537 million was adjustable rate and US$1,274 million was interest only. Of the total, US$55,625 million was first lien and US$8,098 million was second lien. | |
16 | Stated income lending forms a subset of total mortgage services lending across all categories. | |
17 | By states which individually account for 5 per cent or more of HSBC Finance’s US customer loan portfolio. | |
18 | Percentages are expressed as a function of the relevant loans and receivables balance. | |
19 | The average loss on sale of foreclosed properties is calculated as cash proceeds after deducting selling costs and commissions, minus the book value of the property when it was moved to ‘Real estate owned’, divided by the book value of the property when it was moved to ‘Real estate owned’. | |
20 | The average total loss on foreclosed properties sold during each quarter includes both the loss on sale and the cumulative write-downs recognised on the loans up to and upon classification as ‘Real estate owned’. This average total loss on foreclosed properties is expressed as a percentage of the book value of the property prior to its transfer to ‘Real estate owners’. | |
21 | HSBC observes the disclosure convention that, in addition to those classified as EL9 to EL10, retail accounts classified EL1 to EL8 that are delinquent by 90 days or more are considered impaired, unless individually they have been assessed as not impaired (see page 229, ‘Past due but not impaired financial instruments’). | |
22 | The EL percentage is derived through a combination of PD and LGD, and may exceed 100 per cent in circumstances where the LGD is above 100 per cent reflecting the cost of recoveries. | |
23 | Impairment allowances are not reported for financial instruments whereby the carrying amount is reduced directly for impairment and not through the use of an allowance account. | |
24 | Impairment is not measured for assets held in trading portfolios or designated at fair value as assets in such portfolios are managed according to movements in fair value, and the fair value movement is taken directly to the income statement. Consequently, all such balances are reported under ‘Neither past due nor impaired’. | |
25 | Includes asset-backed securities that have been externally rated as strong (2009: US$5,707 million; 2008: US$7,991 million), medium-good (2009: US$881 million; 2008: nil), medium-satisfactory (2009: US$311 million; 2008: nil), sub-standard (2009: US$468 million; 2008: nil) and impaired (2009: US$460 million; 2008: nil). | |
26 | The balances reported at 31 December 2008 for individually and collectively assessed impaired loans and advances to customers have been restated by US$1.0 billion as a result of a reclassification, for disclosure purposes, of an element of a mortgage portfolio. There has been no change to total impaired loans or total impairment allowances. | |
27 | Impaired loans and advances are those classified as CRR 9, CRR 10, EL 9 or EL 10 and all retail loans 90 days or more past due, unless individually they have been assessed as not impaired (see page 229, ‘Past due but not impaired financial instruments’). | |
28 | Collectively assessed loans and advances comprise homogeneous groups of loans that are not considered individually significant, and loans subject to individual assessment where no impairment has been identified on an individual basis, but on which a collective impairment allowance has been calculated to reflect losses which have been incurred but not yet identified. | |
29 | Collectively assessed loans and advances not impaired are those classified as CRR1 to CRR8 and EL1 to EL8 but excluding retail loans 90 days past due. | |
30 | The impairment allowances on loans and advances to banks relate to the geographical regions, Europe and Middle East. | |
31 | Net of reverse repo transactions, settlement accounts and stock borrowings. | |
32 | As a percentage of loans and advances to banks and loans and advances to customers, as applicable. | |
33 | Includes movement in impairment allowances against banks. | |
34 | See table below ‘Net loan impairment charge to the income statement by geographical region’. | |
35 | Collectively assessed impairment allowances are allocated to geographical segments based on the location of the office booking the allowances or provisions. Consequently, the collectively assessed impairment allowances booked in Hong Kong may cover assets booked in branches located outside Hong Kong, principally in Rest of Asia-Pacific, as well as those booked in Hong Kong. | |
36 | Ratio excludes trading loans classified as in default. |
37 | This comprises the Group’s other main banking subsidiaries and, as such, includes businesses spread across a range of locations, in many of which HSBC may require a higher ratio of net liquid assets to customer liabilities to reflect local market conditions. | |
38 | Unused committed sources of secured funding for which eligible assets were held. | |
39 | Client-originated asset exposures relate to consolidated multi-seller conduits (see page 191). These vehicles provide funding to Group customers by issuing debt secured by a diversified pool of customer-originated assets. | |
40 | HSBC-managed asset exposures relate to consolidated securities investment conduits, primarily Solitaire and Mazarin (see page 191). These vehicles issue debt secured by ABSs which are managed by HSBC. Of the total contingent liquidity risk under this category, US$18.7 billion was already funded on-balance sheet at 31 December 2009 (2008: US$25.3 billion) leaving a net contingent exposure of US$10.4 billion (2008: US$9.5 billion). | |
41 | Other conduit exposures relate to third-party sponsored conduits (see page 194). | |
42 | The five largest committed liquidity facilities provided to customers other than those facilities to conduits. | |
43 | The total of all committed liquidity facilities provided to the largest market sector, other than those facilities to conduits. |
44 | The structural foreign exchange risk is monitored using sensitivity analysis (see page 455). The reporting of commodity risk is consolidated with foreign exchange risk and is not applicable to non-trading portfolios. | |
45 | The interest rate risk on the fixed-rate securities issued by HSBC Holdings is not included in the Group VAR. The management of this risk is described on page 258. | |
46 | Credit spread sensitivity is reported separately for insurance operations (see page 277). | |
47 | The effect of any month-end adjustments, not attributable to a specific daily market move, is spread evenly over the days in the month in question. | |
48 | The total VAR is non-additive across risk types due to diversification effects. |
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49 | HSBC has no insurance manufacturing subsidiaries in the Middle East. | |
50 | Insurance contracts and investment contracts with discretionary participation features (‘DPF’) can give policyholders the contractual right to receive, as a supplement to their guaranteed benefits, additional benefits that may be a significant portion of the total contractual benefits, but whose amount and timing is determined by HSBC. These additional benefits are contractually based on the performance of a specified pool of contracts or assets, or the profit of the company issuing the contracts. | |
51 | Although investment contracts with DPF are financial investments, HSBC continues to account for them as insurance contracts as permitted by IFRS 4. | |
52 | Net written insurance premiums represent gross written premiums less gross written premiums ceded to reinsurers. | |
53 | Term assurance includes credit life insurance. | |
54 | Other assets comprise shareholder assets. | |
55 | Present value of in-force long-term insurance contracts and investment contracts with DPF. | |
56 | Does not include assets, liabilities and shareholders’ funds of associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. | |
57 | Comprise life linked insurance contracts and linked long-term investment contracts. | |
58 | Comprise life non-linked insurance contracts and non-linked long-term investment contracts. | |
59 | Comprises non-life insurance contracts. | |
60 | Does not include financial assets of associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank if Commerce Life Insurance Company Limited. | |
61 | Comprise mainly loans and advances to banks, cash and intercompany balances with other non-insurance legal entities. | |
62 | The table excludes contracts where the market risk is 100 per cent reinsured. | |
63 | Excluding guarantees from associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. | |
64 | Impairment is not measured for debt securities held in trading portfolios or designated at fair value, as assets in such portfolios are managed according to movements in fair value, and the fair value movement is taken directly through the income statement. Consequently, all such balances are reported under ‘neither past due nor impaired’. | |
65 | Shareholders’ funds comprise solvency and unencumbered assets. | |
66 | Does not include treasury bills, other eligible bills and debt securities held by associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. | |
67 | Does not include reinsurers’ share of liabilities under insurance contracts and reinsurance debtors of associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. | |
68 | Do not include insurance contracts issued by associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. | |
69 | Do not include investment contracts issued by associated insurance company, Ping An Insurance, or joint venture insurance companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. | |
70 | In most cases, policyholders have the option to terminate their contracts at any time and receive the surrender values of their policies. These may be significantly lower than the amounts shown above. | |
71 | Value of net new business during the year is the present value of the projected stream of profits from the business. | |
72 | Experience variances include the effect of the difference between demographic, expense and persistency assumptions used in the previous PVIF calculation and actual experience observed during the year. |
73 | Includes externally verified profits for the year to 31 December 2009. | |
74 | Mainly comprises unrealised losses on available-for-sale debt securities within special purpose entities which are excluded from the regulatory consolidation. | |
75 | Under FSA rules, unrealised gains/losses on debt securities net of tax must be excluded from capital resources. | |
76 | Under FSA rules, the defined benefit liability may be substituted with the additional funding that will be paid into the relevant schemes over the following five year period. | |
77 | Mainly comprise investments in insurance entities. | |
78 | Under FSA rules, collective impairment allowances on loan portfolios on the standardised approach are included in tier 2 capital. | |
79 | Opening capital items as at 1 January 2008 are pro forma and unaudited. | |
80 | Rights issue excludes US$493 million of losses arising on derivative contracts and certain fees, which are recognised in the income statement. | |
81 | HSBC Bank Malaysia was transferred within the Group to the ownership of The Hongkong and Shanghai Banking Corporation with effect from 2 January 2009. |
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† | S A Catz | |
Age 48. President of Oracle Corporation. A non-executive Director since May 2008. Managing Director of Donaldson, Lufkin & Jenrette from 1997 to 1999. Joined Oracle in 1999 and appointed to the Board of Directors in 2001. | ||
Ms Catz brings to the Board a background in international business leadership, having helped transform Oracle into the second biggest producer of management software and the world’s leading supplier of software for information management. | ||
V H C Cheng, GBS, OBE | ||
Age 61. Chairman of HSBC Bank (China) Company Limited and, since 21 January 2010, of HSBC Bank (Taiwan) Limited. An executive Director since February 2008. Joined HSBC in 1978. Appointed a Group General Manager in 1995 and a Group Managing Director in 2005. A director of HSBC Bank (Vietnam) Limited. An independent non-executive director of Great Eagle Holdings Limited and, since 10 July 2009, of MTR Corporation Limited. Vice chairman of the China Banking Association. A member of the National Committee of the 11th Chinese People’s Political Consultative Conference (‘CPPCC’) and a senior adviser to the 11th Beijing Municipal Committee of the CPPCC. Chairman and a director of The Hongkong and Shanghai Banking Corporation Limited until 1 February 2010 and of HSBC Global Asset Management (Hong Kong) Limited until 4 February 2010. A director of HSBC Bank Australia Limited and a member of the Exchange Fund Advisory Committee of the Hong Kong Monetary Authority until 1 February 2010. A non-executive director of Swire Pacific Limited from 2005 to 2008. Awarded the Gold Bauhinia Star by the Hong Kong Government in 2005. | ||
Mr Cheng is a career banker with extensive international business experience particularly in Asia. Mr Cheng is Vice President of the Hong Kong Institute of Bankers and was chairman of the Process Review Panel for the Securities and Futures Commission and of the Standing Committee on Directorate Salaries and Conditions of Service of the Hong Kong Government. Chairman of the Council of the Chinese University of Hong Kong since 24 October 2009. Seconded to the Hong Kong Government’s Central Policy Unit from 1989 to 1991 serving as an adviser to the Governor of Hong Kong. |
† | M K T Cheung, GBS, OBE | |
Age 62. Non-executive chairman of the Airport Authority Hong Kong. A non-executive Director since 1 February 2009 and a member of the Group Audit Committee since 1 March 2010. A non-executive director of Hang Seng Bank Limited, HKR International Limited and Hong Kong Exchanges and Clearing Limited. A non-official member of the Executive Council of the Hong Kong Special Administrative Region. Non-executive chairman of the Council of the Hong Kong University of Science and Technology. A director of The Association of Former Council Members of The Stock Exchange of Hong Kong Limited and The Hong Kong International Film Festival Society Limited. Ceased to be a non-executive director of Sun Hung Kai Properties Limited on 9 December 2009. Chairman and Chief Executive Officer of KPMG Hong Kong from 1996 to 2003. A Council Member of the Open University of Hong Kong until 19 June 2009. Awarded the Gold Bauhinia Star by the Hong Kong Government in 2008. | ||
Dr Cheung brings to the Board a background in international business and financial accounting, particularly in Greater China and the wider Asian economy. He retired from KPMG Hong Kong in 2003 after more than 30 years’ distinguished service with the firm. He is a Fellow of the Institute of Chartered Accountants in England and Wales. | ||
† | J D Coombe | |
Age 64. Non-executive chairman of Hogg Robinson Group plc. A non-executive Director since 2005. A member of the Group Audit Committee, the Remuneration Committee and, since 26 February 2010, the Group Risk Committee. A non-executive director of Home Retail Group plc. A trustee of the Royal Academy Trust. Former appointments include: executive director and Chief Financial Officer of GlaxoSmithKline plc; a non-executive director of GUS plc; a member of the Supervisory Board of Siemens AG; chairman of The Hundred Group of Finance Directors and a member of the Accounting Standards Board. | ||
Mr Coombe brings to the Board a background in international business, financial accounting and the pharmaceutical industry. As Chief Financial Officer of GlaxoSmithKline he had responsibility for the Group’s financial operations globally. He is a Fellow of the Institute of Chartered Accountants in England and Wales. |
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† | J L Durán | |
Age 45. Chief Executive Officer of Devanlay SA since 1 July 2009. A non-executive Director since January 2008. A non-executive director of France Telecom. Senior adviser for the Boston Consulting Group during the first half of 2009. Chief Executive of Carrefour SA until December 2008. Former appointments at Carrefour SA include: chairman of its Management Board of Directors; Chief Financial Officer and Managing Director, Organisation and Systems. | ||
Mr Durán brings to the Board a background in international finance, retail and consulting in developed and emerging markets. He joined Carrefour SA in 1991 and held a number of positions within Carrefour’s businesses in Spain, southern Europe and the Americas. | ||
† | R A Fairhead | |
Age 48. Chairman, Chief Executive Officer and a director of Financial Times Group Limited. A non-executive Director since 2004. Chairman of the Group Audit Committee and, since 26 February 2010, the Group Risk Committee. A member of the Nomination Committee. A director of Pearson plc and chairman of Interactive Data Corporation. A non-executive director of The Economist Newspaper Limited. Former appointments include: Executive Vice President, Strategy and Group Control of Imperial Chemical Industries plc; and Finance Director of Pearson plc. | ||
Mrs Fairhead brings to the Board a background in international industry, publishing, finance and general management. As the former Finance Director of Pearson plc she oversaw the day to day running of the finance function and was directly responsible for global financial reporting and control, tax and treasury. She has a Masters in Business Administration from the Harvard Business School. | ||
D J Flint, CBE, Chief Financial Officer, Executive Director, Risk and Regulation | ||
Age 54. Joined HSBC as an executive Director in 1995. A non-executive director of BP p.l.c. and a member of the Consultative Committee of the Large Business Advisory Board of HM Revenue & Customs and the Business Government Forum on Tax and Globalisation. Chairman of HSBC Finance Corporation and a director of HSBC North America Holdings Inc. until 7 May 2009. Co-chairman of the Counterparty Risk Management Policy Group III in 2008. Chaired the Financial Reporting Council’s review of the Turnbull Guidance on Internal Control |
in 2004. Served on the Accounting Standards Board and the Standards Advisory Council of the International Accounting Standards Board from 2001 to 2004. A former partner in KPMG. | ||
Mr Flint has extensive financial experience particularly in banking, multinational financial reporting, treasury and securities trading operations. In 2006 he was honoured with a CBE in recognition of his services to the finance industry. He is a member of the Institute of Chartered Accountants of Scotland and the Association of Corporate Treasurers and he is a Fellow of The Chartered Institute of Management Accountants. | ||
A A Flockhart, CBE | ||
Age 58. Chairman, Personal and Commercial Banking and Insurance. An executive Director since May 2008. Joined HSBC in 1974. Appointed a Group General Manager in 2002 and a Group Managing Director in 2006. Chairman of HSBC Latin America Holdings (UK) Limited since 4 December 2009. Vice chairman and a director of HSBC Bank (Vietnam) Limited. A director of Hang Seng Bank Limited and HSBC Bank Australia Limited. A member of the Visa Asia Pacific Senior Advisory Council, Visa Inc. Chairman of HSBC Bank Malaysia Berhad from 2007 to 5 February 2010. Chief Executive Officer of The Hongkong and Shanghai Banking Corporation Limited from 2007 to 1 February 2010. Ceased to be a director of HSBC Bank (China) Company Limited on 28 February 2010. President and Group Managing Director Latin America and the Caribbean from 2006 to 2007. Chief Executive Officer, Mexico from 2002 to 2006. Senior Executive Vice-President, Commercial Banking, HSBC Bank USA, N.A. from 1999 to 2002. Managing Director of The Saudi British Bank from 1997 to 1999. | ||
Mr Flockhart is a career banker, being an emerging markets specialist with over 30 years’ experience with HSBC across Latin America, the Middle East and Asia. In 2007 he was honoured with a CBE in recognition of his services to British business and charitable services and institutions in Mexico. | ||
* | W K L Fung, SBS, OBE | |
Age 61. Group Managing Director of Li & Fung Limited. A non-executive Director since 1998. Chairman of the Corporate Sustainability Committee. Non-executive deputy chairman of The Hongkong and Shanghai Banking Corporation Limited. A non-executive director of Integrated Distribution Services Group Limited, Convenience |
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Retail Asia Limited and of Trinity Limited which was listed on The Stock Exchange of Hong Kong Limited on 3 November 2009. An independent non-executive director of Shui On Land Limited, VTech Holdings Limited, Singapore Airlines Limited (since 1 December 2009) and Sun Hung Kai Properties Limited (since 1 February 2010). Former appointments include: non-executive director of Bank of Communications; chairman of the Hong Kong General Chamber of Commerce; the Hong Kong Exporters’ Association; and the Hong Kong Committee for the Pacific Economic Cooperation Council. Awarded the Silver Bauhinia Star by the Hong Kong Government in 2008. | ||
Mr Fung brings to the Board over 30 years’ experience in running a major international conglomerate specialising in supply chain management through the borderless manufacturing of global consumer products. During his leadership the family business of Li & Fung has become one of the largest trading companies in Hong Kong with over 80 offices worldwide. | ||
S T Gulliver | ||
Age 50. Chairman, Europe, Middle East and Global Businesses. An executive Director since May 2008. Joined HSBC in 1980. Appointed a Group General Manager in 2000 and a Group Managing Director in 2004. Chairman of HSBC Private Banking Holdings (Suisse) SA since 25 February 2010, of HSBC Bank Middle East Limited since 15 February 2010 and of HSBC France since 1 January 2009. A director of The Hongkong and Shanghai Banking Corporation Limited and HSBC Bank plc. Deputy chairman and member of the Supervisory Board of HSBC Trinkaus & Burkhardt AG. Chief Executive of Global Banking and Markets. A director of HSBC North America Holdings Inc. until 7 May 2009 and of HSBC Latin America Holdings (UK) Limited until 4 December 2009. Co-Head of Global Banking and Markets from 2003 to 2006. Head of Global Markets from 2002 to 2003. Head of Treasury and Capital Markets in Asia-Pacific from 1996 to 2002. | ||
Mr Gulliver is a career banker with over 28 years’ international experience with HSBC. He has held a number of key roles in the Group’s operations worldwide, including in London, Hong Kong, Tokyo, Kuala Lumpur and the United Arab Emirates. Global Banking and Markets is the wholesale banking division of the Group with operations in more than 60 countries and territories. |
† | J W J Hughes-Hallett, SBS | |
Age 60. Chairman of John Swire & Sons Limited. A non-executive Director since 2005. A member of the Nomination Committee and, since 26 February 2010, of the Group Risk Committee. A member of the Group Audit Committee until 1 March 2010. A non-executive director and former chairman of Cathay Pacific Airways Limited and Swire Pacific Limited. A non-executive director of The Hongkong and Shanghai Banking Corporation Limited from 1999 to 2004. A trustee of the Dulwich Picture Gallery and the Esmée Fairbairn Foundation. A member of The Hong Kong Association and of the Governing Board of the Courtauld Institute of Art. Awarded the Silver Bauhinia Star by the Hong Kong Government in 2004. | ||
Mr Hughes-Hallett brings to the Board a background in financial accounting and the management of a broad range of businesses in a number of international industries, including aviation, property, shipping, manufacturing and trading, in the Far East, UK, US and Australia. He is a Fellow of the Institute of Chartered Accountants in England and Wales. | ||
† | W S H Laidlaw | |
Age 54. Chief Executive Officer of Centrica plc. A non-executive Director since January 2008. A member of the Remuneration Committee. Former appointments include: Executive Vice President of Chevron Corporation; non-executive director of Hanson PLC; Chief Executive Officer of Enterprise Oil plc; and President and Chief Operating Officer of Amerada Hess Corporation. | ||
Mr Laidlaw brings to the Board significant international experience, particularly in the energy sector, having had responsibility for businesses in four continents. He has a Masters in Business Administration from INSEAD. | ||
† | J R Lomax | |
Age 64. Former Deputy Governor, Monetary Stability, at the Bank of England and member of the Monetary Policy Committee. A non-executive Director since December 2008. A member of the Group Audit Committee since 1 March 2009 and of the Group Risk Committee since 26 February 2010. A non-executive director of The Scottish American Investment Company PLC and, since 31 July 2009, of Reinsurance Group of America Inc. A director of the Council of Imperial College, London since 1 June 2009 and a member of the Board of the Royal National Theatre. Former appointments include: Deputy Governor of the Bank of England from 2003 |
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Biographies > Directors / Senior management |
to 2008; Permanent Secretary at the UK Government Departments for Transport and Work and Pensions and at the Welsh Office from 1996 to 2003; and Vice President and Chief of Staff to the President of the World Bank from 1995 to 1996. | ||
Ms Lomax brings to the Board business experience in both the public and private sectors and a deep knowledge of the operation of the UK government and the financial system. | ||
† | Sir Mark Moody-Stuart, KCMG | |
Age 69. Chairman of Hermes Equity Ownership Services Limited since 21 July 2009. A non-executive Director since 2001. Chairman of the Remuneration Committee and a member of the Corporate Sustainability Committee. A non-executive director of Accenture Limited and Saudi Aramco. Chairman of the Global Business Coalition on HIV/AIDS and the Global Compact Foundation and a member of the board of the UN Global Compact. Retired as a director and chairman of Anglo American plc on 31 July 2009. Former appointments include: director and chairman of The ‘Shell’ Transport and Trading Company, plc; chairman of the Committee of Managing Directors of the Royal Dutch/Shell Group of Companies; and a Governor of Nuffield Hospitals. | ||
Sir Mark brings to the Board many years’ experience of leading global organisations, having worked during his career in nine countries. He works with many non-governmental organisations to improve companies’ commitment to socially responsible activities. | ||
† | G Morgan | |
Age 64. Non-executive chairman of SNC-Lavalin Group Inc. A non-executive Director since 2006. A member of the Remuneration Committee. A member of the Board of Trustees of The Fraser Institute and the Manning Centre for Building Democracy. A non-executive director of HSBC Bank Canada from 1996 to 2006. Former appointments include: Founding President, Chief Executive Officer and Vice chairman of EnCana Corporation; a director of Alcan Inc. and Lafarge North America, Inc. | ||
Mr Morgan brings to the Board a background in technical, operational, financial and management positions and has led large international companies in the energy and engineering sectors. He has been recognised as Canada’s most respected Chief Executive Officer in a national poll of Chief Executives. He is currently a business columnist for Canada’s largest national newspaper. |
† | N R N Murthy, CBE | |
Age 63. Chairman and Chief Mentor and former Chief Executive Officer of Infosys Technologies Limited. A non-executive Director since May 2008. A member of the Corporate Sustainability Committee and, from the conclusion of the Annual General Meeting in 2010, chairman of the Committee. A non-executive director of Unilever plc and a director of the United Nations Foundation. A non-executive director of New Delhi Television Limited until 22 July 2009. A former non-executive director of DBS Group Holdings Limited and DBS Bank Limited. | ||
Mr Murthy brings to the Board experience in information technology, corporate governance and education, particularly in India. He founded Infosys Technologies Limited in India in 1981 and was its Chief Executive Officer for 21 years. Under his leadership, Infosys established a global footprint and was listed on NASDAQ in 1999. During his career he has worked in France and India. | ||
† | S M Robertson, senior independent non-executive Director | |
Age 68. Non-executive chairman of Rolls-Royce Group plc and the founder member of Simon Robertson Associates LLP. A non-executive Director since 2006 and senior independent non-executive Director since 2007. A member of the Nomination Committee. A non-executive director of Berry Bros. & Rudd Limited, The Economist Newspaper Limited and Royal Opera House Covent Garden Limited. A trustee of the Eden Project Trust and of the Royal Opera House Endowment Fund. Former appointments include: Managing Director of Goldman Sachs International; and chairman of Dresdner Kleinwort Benson. | ||
Mr Robertson brings to the Board a background in international corporate advisory with a wealth of experience in mergers and acquisitions, merchant banking, investment banking and financial markets. During his career he has worked in France, Germany, the UK and the USA. | ||
† | J L Thornton | |
Age 56. A non-executive Director since December 2008. A member of the Remuneration Committee since 24 April 2009 and, from the conclusion of the Annual General Meeting in 2010, chairman of the Committee. Non-executive chairman and a director of HSBC North America Holdings Inc. since December 2008. Professor and director of the Global Leadership Programme at the Tsinghua University School of Economics and Management. Chairman of |
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the Brookings Institution Board of Trustees. A non-executive director of Ford Motor Company, Intel Corporation, Inc., News Corporation, Inc. and China Unicom (Hong Kong) Limited. A director of the National Committee on United States-China Relations and a Trustee of Asia Society, China Institute, The China Foreign Affairs University, the Palm Beach Civic Association and the United World College of East Africa Trust. A member of the Council on Foreign Relations, the China Securities Regulatory Commission International Advisory Committee and China Reform Forum International Advisory Committee. Former appointments include: a non-executive director of Industrial and Commercial Bank of China Limited from 2005 until 2008; and President of the Goldman Sachs Group, Inc. from 1999 until 2003. | ||
Mr Thornton brings to the Board experience that bridges developed and developing economies and the public and private sectors. He has a deep knowledge of financial services and education systems, particularly in Asia. During his 23 year career with Goldman Sachs, he played a key role in the firm’s global development and was chairman of Goldman Sachs Asia. | ||
† | Sir Brian Williamson, CBE | |
Age 65. Chairman of Electra Private Equity plc. A non-executive Director since 2002. A member of the Nomination Committee, having served as chairman of the Committee until 26 February 2010. A director of NYSE Euronext and Climate Exchange plc. Former appointments include: chairman of London International Financial Futures and Options Exchange and Gerrard Group plc; and a non-executive director of Resolution plc, the Financial Services Authority and the Court of The Bank of Ireland. | ||
Sir Brian brings to the Board extensive experience in money and bond markets, private equity, futures, options and commodities trading internationally. He established the London International Financial Futures and Options Exchange in the 1980s and led the Exchange’s development of its electronic trading platform in the mid-1990s. He is a member of the Guild of International Bankers. |
* Non-executive Director | |
† Independent non-executive Director |
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Biographies > Senior management // Board of Directors > The Board |
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Board of Directors > The Board |
Meetings attended in 2009 of: | ||||||||||||||||||||
Corporate | ||||||||||||||||||||
Group Audit | Nomination | Remuneration | Sustainability | |||||||||||||||||
Board | Committee | Committee | Committee | Committee | ||||||||||||||||
Number of meetings held | 8 | 8 | 3 | 7 | 5 | |||||||||||||||
S A Catz | 7 | – | – | – | – | |||||||||||||||
V H C Cheng | 8 | – | – | – | ||||||||||||||||
M K T Cheung1 | 7 | – | – | – | – | |||||||||||||||
J D Coombe | 8 | 8 | – | 7 | – | |||||||||||||||
J L Durán | 7 | – | – | – | – | |||||||||||||||
R A Fairhead | 7 | 8 | 3 | – | – | |||||||||||||||
D J Flint | 8 | – | – | – | – | |||||||||||||||
A A Flockhart | 8 | – | – | – | – | |||||||||||||||
W K L Fung | 8 | – | – | – | 5 | |||||||||||||||
M F Geoghegan | 8 | – | – | – | – | |||||||||||||||
S K Green | 8 | – | – | – | – | |||||||||||||||
S T Gulliver | 8 | – | – | – | – | |||||||||||||||
J W J Hughes-Hallett | 8 | 6 | 3 | – | – | |||||||||||||||
W S H Laidlaw | 8 | – | – | 7 | – | |||||||||||||||
J R Lomax | 8 | 6 | 2 | – | – | – | ||||||||||||||
Sir Mark Moody-Stuart | 8 | – | – | 7 | 5 | |||||||||||||||
G Morgan | 7 | – | – | 6 | – | |||||||||||||||
N R N Murthy | 6 | – | – | – | 4 | |||||||||||||||
S M Robertson | 8 | – | 2 | – | – | |||||||||||||||
J L Thornton | 8 | – | – | 3 | 3 | – | ||||||||||||||
Sir Brian Williamson | 8 | – | 3 | – | – |
1 | Appointed 1 February 2009 – eligible to attend 7 Board Meetings. | |
2 | Appointed as a member on 1 March 2009 – eligible to attend 6 Committee Meetings. Attended a further 2 meetings by invitation. | |
3 | Appointed as a member on 24 April 2009 – eligible to attend 3 Committee Meetings. |
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Board of Directors > The Board |
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Board of Directors > The Board / Corporate governance codes |
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Board of Directors > Board committees |
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Board of Directors > Board committees / Internal control |
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• | Authority to operate the various subsidiaries and responsibilities for financial performance against plans and for capital expenditure are delegated to their respective chief executive officers within limits set by the Board of Directors of HSBC Holdings. Delegation of authority from the Board to individuals requires those individuals to maintain a clear and appropriate apportionment of significant responsibilities and to oversee the establishment and maintenance of systems of control appropriate to the business. The appointment of executives to the most senior positions within |
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Board of Directors > Internal control |
HSBC requires the approval of the Board of Directors of HSBC Holdings. | ||
• | Functional, operating, financial reporting and certain management reporting standards are established by Group Management Office management committees for application across the whole of HSBC. These are supplemented by operating standards set by functional and local management as required for the type of business and geographical location of each subsidiary. | |
• | Systems and procedures are in place in HSBC to identify, control and report on the major risks including credit, market, liquidity and operational risk, (including accounting, tax, legal, compliance, information, physical security and fraud risk). Exposure to these risks is monitored by risk management committees, asset and liability committees and executive committees in subsidiaries and, for HSBC as a whole, by the Group Management Board. A Risk Management Meeting of the Group Management Board, chaired by the Chief Financial Officer, Executive Director, Risk and Regulation, is held monthly to address asset, liability and risk management issues. The minutes of this meeting are submitted to the Group Audit Committee and to the Board of Directors. The Global Operational Risk and Control Committee (‘GORCC’), which reports to the Risk Management Meeting of the Group Management Board, meets at least quarterly to monitor HSBC’s operational risk profile and review the effective implementation of the Group’s operational risk management framework. The GORCC receives quarterly reports on the Group’s operational risk profile, including top risks, control issues, internal and external operational loss events and key risk indicators. The GORCC communicates the lessons learned from operational events both within HSBC and in the wider industry. | |
• | A Disclosure Committee has been established to review public disclosures made by HSBC Holdings for any material errors, misstatements or omissions. The membership of the Disclosure Committee, which is chaired by the Group Company Secretary, includes the heads of the Finance, Legal, Risk, Compliance, Group Communications, Investor Relations and Internal Audit functions and representatives from the principal regions, customer groups and global businesses. The integrity of disclosures is underpinned by structures and processes within the Finance and Risk function that support expert and rigorous analytical review of |
financial reporting. | ||
• | The group financial reporting process for preparing the consolidatedAnnual Report and Accounts 2009is controlled using documented accounting policies and reporting formats, supported by a chart of accounts with detailed instructions and guidance on reporting requirements, issued by Group Finance to all reporting entities within the Group in advance of each reporting period end. The submission of financial information from each reporting entity to Group Finance is subject to certification by the responsible financial officer, and analytical review procedures at reporting entity and Group levels. | |
• | Processes are in place to identify new risks from changes in market conditions and practices or customer behaviours which could expose HSBC to heightened risk of loss or reputational damage. During 2009, attention was focused on evolving best practice in liquidity management and stress testing; aggregating more efficiently counterparty risk data and improving the counterparty crisis management framework; rolling out successfully piloted anti-fraud systems; revised guidance on the approval/review of new products and business initiatives, with greater oversight by the Risk function; the identification of market pricing anomalies; changes in consumer protection standards within personal financial services markets and, more generally, changes in regulation and public policy towards the financial services industry, including the impact of government interventions to address the under-capitalisation and funding difficulties of certain systemically important financial institutions. | |
• | Periodic strategic plans are prepared for key customer groups, global product groups, support functions and certain geographies within the framework of the Group Strategic Roadmap. Rolling operating plans, informed by detailed analysis of risk appetite, are prepared and adopted by all major HSBC operating companies and set out the key business initiatives and the likely financial effects of those initiatives. | |
• | Governance and oversight arrangements are in place to ensure that risk analytical models are fit for purpose, used accordingly and complemented by a variety of model-specific and enterprise-wide stress tests that evaluate the impact of severe yet plausible events and other |
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unusual circumstances not fully captured by quantitative models. | ||
• | Centralised functional control is exercised over all IT developments and operations. Common systems are employed for similar business processes wherever practicable. Credit, market and operational risks are measured and reported on in subsidiaries and aggregated for review of risk concentrations on a Group-wide basis. | |
• | Functional management in Group Management Office is responsible for setting policies, procedures and standards in the following areas of risk: credit; market; liquidity; operational; IT; fraud; business continuity; security; information; insurance; accounting; tax; legal and regulatory compliance; fiduciary; human resources; reputational; sustainability and purchasing. Authorities to enter into credit and market risk exposures are delegated with limits to line management of Group companies. The concurrence of Group Management Office is required, however, to credit proposals with specified higher risk characteristics. | |
• | Policies to guide subsidiary companies and management at all levels in the conduct of business to safeguard the Group’s reputation are established by the Board of HSBC Holdings and the Group Management Board, subsidiary company boards, board committees and senior management. Reputational risks can arise from environmental, social or governance issues, or as a consequence of operational risk events. As a banking group, HSBC’s good reputation depends upon the way in which it conducts its business but it can also be affected by the way in which clients, to which it provides financial services, conduct their business or use financial products and services. | |
• | The establishment and maintenance of appropriate systems of internal control is primarily the responsibility of business management. The internal audit function, which is centrally controlled, monitors the effectiveness of internal control structures across the whole of HSBC focusing on the areas of greatest risk to HSBC as determined using a risk-based grading approach. The head of this function reports to the Group Chairman and the Group Audit Committee. | |
• | Executive management is responsible for ensuring that recommendations made by the internal audit function are implemented within an appropriate and agreed timetable. Confirmation to this effect must be provided to |
internal audit. Executive management must also confirm annually as part of the internal audit process that offices under their control have taken or are in the process of taking the appropriate actions to deal with all significant recommendations made by external auditors in management letters or by regulators following regulatory inspections. |
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Board of Directors > Going concern / Directors’ interests |
HSBC Holdings ordinary shares of US$0.50
At 31 December 2009 | ||||||||||||||||||||||||||||
Jointly | ||||||||||||||||||||||||||||
At | Child | with | ||||||||||||||||||||||||||
1 January | Beneficial | under 18 | Controlled | another | Total | |||||||||||||||||||||||
2009 | owner | or spouse | corporation | person | Trustee | interests | 1 | |||||||||||||||||||||
V H C Cheng | 300,790 | 283,273 | 182,892 | – | – | – | 466,165 | |||||||||||||||||||||
J D Coombe | 13,250 | 19,676 | – | – | – | – | 19,676 | |||||||||||||||||||||
R A Fairhead | – | – | – | – | 21,300 | – | 21,300 | |||||||||||||||||||||
D J Flint | 119,456 | 144,439 | – | – | – | 32,662 | 2 | 177,101 | ||||||||||||||||||||
A A Flockhart | 172,583 | 269,008 | – | – | – | – | 269,008 | |||||||||||||||||||||
W K L Fung | 328,000 | 294,666 | – | 170,000 | – | – | 464,666 | |||||||||||||||||||||
M F Geoghegan | 477,434 | 724,757 | – | – | – | – | 724,757 | |||||||||||||||||||||
S K Green | 667,421 | 836,959 | – | – | 64,252 | 100,000 | 3 | 1,001,211 | ||||||||||||||||||||
S T Gulliver | 2,279,861 | 2,553,592 | 177,465 | – | – | – | 2,731,057 | |||||||||||||||||||||
J W J Hughes-Hallett | 381,049 | – | – | – | – | 67,755 | 3 | 67,755 | ||||||||||||||||||||
W S H Laidlaw | 21,693 | 29,532 | – | – | – | 1,416 | 3 | 30,948 | ||||||||||||||||||||
Sir Mark Moody-Stuart | 10,840 | 7,083 | 1,190 | – | – | 7,083 | 3 | 15,356 | ||||||||||||||||||||
G Morgan | 52,873 | 78,515 | – | – | – | – | 78,515 | |||||||||||||||||||||
S M Robertson | 98,620 | 8,343 | – | – | – | 131,750 | 3 | 140,093 | ||||||||||||||||||||
Sir Brian Williamson | 24,496 | 36,378 | – | – | – | – | 36,378 |
1 | Includes HSBC Holdings ordinary shares of US$0.50 taken up under the rights issue (as described on page 466). The Directors entitled to acquire new ordinary shares under the rights issue took up their rights in full, other than the rights arising in connection with any ordinary shares held by the executive Directors through the HSBC Holdings UK Share Ownership Plan. Details of executive Directors’ other interests in HSBC Holdings ordinary shares of US$0.50 arising from the HSBC Holdings savings-related share option plans and the HSBC Share Plan are set out in the Directors’ Remuneration Report on pages 334 to 348. At 31 December 2009, the aggregate interests under the Securities and Futures Ordinance of Hong Kong of V H C Cheng, D J Flint, A A Flockhart, M F Geoghegan, S K Green and S T Gulliver in HSBC Holdings ordinary shares of US$0.50, including interests arising through employee share plans were: V H C Cheng – 1,439,533; D J Flint – 961,587; A A Flockhart – 1,151,811; M F Geoghegan – 2,536,837; S K Green – 2,809,790 and S T Gulliver – 3,540,006. Each Director’s total interests represents less than 0.02 per cent of the shares in issue. | |
2 | Non-beneficial interest in 21,775 shares. | |
3 | Non-beneficial. |
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HSBC Holdings ordinary shares of US$0.50
Beneficial | Child under | Controlled | Beneficiary | |||||||||||||||||
owner | 18 or spouse | corporation | Trustee | of a trust | 1 | |||||||||||||||
V H C Cheng | 5,088 | 2 | 1,198 | 2 | – | – | 3,143 | |||||||||||||
J D Coombe | 129 | 2 | – | – | – | – | ||||||||||||||
D J Flint | 69 | 3 | – | – | 214 | 4 | 5,122 | |||||||||||||
A A Flockhart | 3,477 | 2 | – | – | – | 2,491 | ||||||||||||||
M F Geoghegan | 2,327 | 2 | – | – | – | 11,871 | ||||||||||||||
S K Green | 33 | 5 | – | – | – | 11,849 | ||||||||||||||
S T Gulliver | – | 4 | 2 | – | – | 5,300 | ||||||||||||||
G Morgan | 514 | 2 | – | – | – | – | ||||||||||||||
S M Robertson | 54 | 2 | – | – | – | – | ||||||||||||||
Sir Brian Williamson | 238 | 2 | – | – | – | – |
1 | Scrip dividend on Performance Share and Restricted Share awards granted in 2007 and 2008 under the HSBC Share Plan. | |
2 | Scrip dividend. | |
3 | Comprises the automatic reinvestment of dividend income by an Individual Savings Account manager (36 shares), the acquisition of shares in the HSBC Holdings UK Share Ownership Plan through regular monthly contributions (19 shares) and the automatic reinvestment of dividend income on shares held in the plan (14 shares). | |
4 | Scrip dividend. Non-beneficial interest in 142 HSBC Holdings ordinary shares of US$0.50. | |
5 | Comprises the acquisition of shares in the HSBC Holdings UK Share Ownership Plan through regular monthly contributions (19 shares) and the automatic reinvestment of dividend income on shares held in the plan (14 shares). |
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Employees > Involvement / Disabled / Remuneration policy / Share plans |
• | employees’ salaries are reviewed annually in the context of business performance, market practice and internal relativities. Allowances and benefits are largely determined by local market practice; | ||
• | employees participate in various variable pay arrangements. Discretionary variable pay is |
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dependent on the achievement of objectives which derive from those determined at Group level. Since 2008, these objectives have typically been categorised in four segments – financial, customer, process and people. Financial and non-financial metrics are used to measure performance against the objectives, which include profitability, expense control, customer recommendation, employee engagement, adherence to HSBC’s ethical standards, lending guidelines and internal controls and procedures. Effective risk management is emphasised to maintain a strong and secure operating platform, and that influences employee remuneration. Actual levels of variable pay depend on the performance of the Group, its constituent businesses and the individual, taking into account competitive market practice and relevant regulator requirements; | ||
• | to ensure that the interests of HSBC and its employees are aligned with those of its shareholders, that HSBC’s approach to risk management supports the interests of all stakeholders and that remuneration is consistent with effective risk management, the Group requires a proportion of variable pay awards above certain thresholds to be deferred into awards of Restricted Shares. In addition, employees are encouraged to participate in HSBC Holdings savings-related share option plans and local share ownership arrangements. |
319
Table of Contents
Employees / Share plans |
HSBC Holdings ordinary shares of US$0.50
Exercise price (£) | ||||||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Awarded | Exercised | Lapsed | At | |||||||||||||||||||||||||||||||||
Date of | 1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | during | during | 31 Dec | |||||||||||||||||||||||||||||||
award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | year | 2 | year | 2009 | ||||||||||||||||||||||||||||
23 Apr 2003 | 5.3496 | 4.6618 | 1 Aug 2008 | 31 Jan 2009 | 371,318 | 5,203 | – | 153,737 | 222,784 | – | ||||||||||||||||||||||||||||||
21 Apr 2004 | 6.4720 | 5.6399 | 1 Aug 2009 | 31 Jan 2010 | 4,647,894 | 610,947 | – | 2,713,037 | 846,201 | 1,699,603 | ||||||||||||||||||||||||||||||
24 May 2005 | 6.6792 | 5.8205 | 1 Aug 2008 | 31 Jan 2009 | 200,358 | 4,384 | – | 13,355 | 191,387 | – | ||||||||||||||||||||||||||||||
24 May 2005 | 6.6792 | 5.8205 | 1 Aug 2010 | 31 Jan 2011 | 4,550,403 | 550,913 | – | 21,802 | 2,781,386 | 2,298,128 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 7.6736 | 6.6870 | 1 Aug 2009 | 31 Jan 2010 | 3,159,428 | 395,653 | – | 533,470 | 804,188 | 2,217,423 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 7.6736 | 6.6870 | 1 Aug 2011 | 31 Jan 2012 | 2,636,893 | 319,896 | – | 2,782 | 1,791,103 | 1,162,904 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 7.0872 | 6.1760 | 1 Aug 2010 | 31 Jan 2011 | 4,705,656 | 529,574 | – | 11,212 | 3,598,098 | 1,625,920 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 7.0872 | 6.1760 | 1 Aug 2012 | 31 Jan 2013 | 3,554,943 | 418,019 | – | 3,608 | 2,619,335 | 1,350,019 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 6.8160 | 5.9397 | 1 Aug 2011 | 31 Jan 2012 | 6,733,293 | 756,995 | – | 6,097 | 5,449,347 | 2,034,844 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 6.8160 | 5.9397 | 1 Aug 2013 | 31 Jan 2014 | 5,947,860 | 694,867 | – | 2,221 | 4,855,816 | 1,784,690 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.3116 | 1 Aug 2012 | 31 Jan 2013 | – | – | 32,960,627 | 3,273 | 1,028,614 | 31,928,740 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.3116 | 1 Aug 2014 | 31 Jan 2015 | – | – | 31,053,247 | 1,141 | 588,049 | 30,464,057 |
1 | The exercise price of awards granted prior to 2009 adjusted for rights issue. | |
2 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £6.78. |
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Table of Contents
HSBC Holdings ordinary shares of US$0.50
Exercise price | ||||||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Awarded | Exercised | Lapsed | At | |||||||||||||||||||||||||||||||||
Date of | 1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | during | during | 31 Dec | |||||||||||||||||||||||||||||||
award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | year | 2 | year | 2009 | ||||||||||||||||||||||||||||
(£) | (£) | |||||||||||||||||||||||||||||||||||||||
08 May 2003 | 5.3496 | – | 1 Aug 2008 | 31 Jan 2009 | 380,020 | – | – | 91,562 | 288,458 | – | ||||||||||||||||||||||||||||||
21 Apr 2004 | 6.4720 | 5.6399 | 1 Aug 2009 | 31 Jan 2010 | 7,456 | 1,098 | – | – | – | 8,554 | ||||||||||||||||||||||||||||||
10 May 2004 | 6.4720 | 5.6399 | 1 Aug 2009 | 31 Jan 2010 | 2,281,863 | 239,792 | – | 695,492 | 1,446,976 | 379,187 | ||||||||||||||||||||||||||||||
24 May 2005 | 6.6792 | – | 1 Aug 2008 | 31 Jan 2009 | 621,324 | – | – | 61,252 | 560,072 | – | ||||||||||||||||||||||||||||||
24 May 2005 | 6.6792 | 5.8205 | 1 Aug 2010 | 31 Jan 2011 | 2,804,273 | 254,169 | – | 9,089 | 2,119,303 | 930,050 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 7.6736 | 6.6870 | 1 Aug 2009 | 31 Jan 2010 | 1,525,575 | 191,701 | – | 151,609 | 1,170,491 | 395,176 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 7.6736 | 6.6870 | 1 Aug 2011 | 31 Jan 2012 | 323,674 | 40,882 | – | – | 227,824 | 136,732 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 7.0872 | – | 1 Aug 2008 | 31 Oct 2008 | 264 | – | – | 264 | – | – | ||||||||||||||||||||||||||||||
25 Apr 2007 | 7.0872 | 6.1760 | 1 Aug 2010 | 31 Jan 2011 | 2,816,884 | 340,681 | – | 1,589 | 1,985,219 | 1,170,757 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 7.0872 | 6.1760 | 1 Aug 2012 | 31 Jan 2013 | 773,845 | 89,634 | – | – | 559,998 | 303,481 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 6.8160 | 5.9397 | 1 Aug 2009 | 31 Oct 2009 | 1,839,871 | 204,574 | – | 371,870 | 1,672,575 | – | ||||||||||||||||||||||||||||||
30 Apr 2008 | 6.8160 | 5.9397 | 1 Aug 2011 | 31 Jan 2012 | 3,291,771 | 387,480 | – | 2,332 | 2,533,167 | 1,143,752 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 6.8160 | 5.9397 | 1 Aug 2013 | 31 Jan 2014 | 1,195,576 | 146,309 | – | – | 973,112 | 368,773 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.3116 | 1 Aug 2010 | 31 Oct 2010 | – | – | 4,625,837 | 1,781 | 160,903 | 4,463,153 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.3116 | 1 Aug 2012 | 31 Jan 2013 | – | – | 12,639,343 | 2,638 | 204,074 | 12,432,631 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.3116 | 1 Aug 2014 | 31 Jan 2015 | – | – | 8,014,194 | 272 | 81,886 | 7,932,036 | ||||||||||||||||||||||||||||||
(US$) | (US$) | |||||||||||||||||||||||||||||||||||||||
26 Apr 2006 | 13.3290 | 11.6154 | 1 Aug 2009 | 31 Jan 2010 | 1,148,429 | 151,349 | – | 48,570 | 1,013,721 | 237,487 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 13.3290 | 11.6154 | 1 Aug 2011 | 31 Jan 2012 | 305,353 | 40,157 | – | 64 | 167,450 | 177,996 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 13.8803 | 12.0958 | 1 Aug 2010 | 31 Jan 2011 | 2,044,643 | 268,319 | – | 1,217 | 1,220,072 | 1,091,673 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 13.8803 | 12.0958 | 1 Aug 2012 | 31 Jan 2013 | 590,169 | 78,253 | – | 87 | 353,595 | 314,740 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 14.4876 | 3 | 12.6250 | 1 Aug 2009 | 31 Oct 2009 | 549,534 | 71,547 | – | – | 621,081 | – | |||||||||||||||||||||||||||||
30 Apr 2008 | 13.6354 | 11.8824 | 1 Aug 2009 | 31 Oct 2009 | 399,466 | 50,322 | – | 34,889 | 414,899 | – | ||||||||||||||||||||||||||||||
30 Apr 2008 | 13.6354 | 11.8824 | 1 Aug 2011 | 31 Jan 2012 | 1,837,345 | 246,992 | – | 275 | 1,160,590 | 923,472 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 13.6354 | 11.8824 | 1 Aug 2013 | 31 Jan 2014 | 507,206 | 69,969 | – | – | 319,324 | 257,851 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 5.1931 | 3 | 1 Aug 2010 | 31 Oct 2010 | – | – | 1,082,798 | – | 54,207 | 1,028,591 | |||||||||||||||||||||||||||||
29 Apr 2009 | – | 4.8876 | 1 Aug 2010 | 31 Oct 2010 | – | – | 604,897 | 279 | 25,496 | 579,122 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 4.8876 | 1 Aug 2012 | 31 Jan 2013 | – | – | 5,084,031 | 769 | 160,306 | 4,922,956 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 4.8876 | 1 Aug 2014 | 31 Jan 2015 | – | – | 2,599,092 | – | 59,764 | 2,539,328 | ||||||||||||||||||||||||||||||
(€) | (€) | |||||||||||||||||||||||||||||||||||||||
26 Apr 2006 | 11.0062 | 9.5912 | 1 Aug 2009 | 31 Jan 2010 | 124,371 | 16,114 | – | 1,083 | 86,382 | 53,020 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 11.0062 | 9.5912 | 1 Aug 2011 | 31 Jan 2012 | 21,831 | 3,084 | – | – | 14,177 | 10,738 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 10.4217 | 9.0818 | 1 Aug 2010 | 31 Jan 2011 | 254,482 | 34,383 | – | – | 148,699 | 140,166 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 10.4217 | 9.0818 | 1 Aug 2012 | 31 Jan 2013 | 74,809 | 10,211 | – | – | 47,547 | 37,473 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 8.6720 | 7.5571 | 1 Aug 2009 | 31 Oct 2009 | 149,323 | 16,379 | – | 8,786 | 156,916 | – | ||||||||||||||||||||||||||||||
30 Apr 2008 | 8.6720 | 7.5571 | 1 Aug 2011 | 31 Jan 2012 | 482,470 | 60,300 | – | – | 378,332 | 164,438 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 8.6720 | 7.5571 | 1 Aug 2013 | 31 Jan 2014 | 196,833 | 23,563 | – | – | 182,523 | 37,873 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.6361 | 1 Aug 2010 | 31 Oct 2010 | – | – | 369,886 | – | 8,150 | 361,736 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.6361 | 1 Aug 2012 | 31 Jan 2013 | – | – | 1,466,146 | – | 25,483 | 1,440,663 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 3.6361 | 1 Aug 2014 | 31 Jan 2015 | – | – | 1,058,095 | – | 20,492 | 1,037,603 | ||||||||||||||||||||||||||||||
(HK$) | (HK$) | |||||||||||||||||||||||||||||||||||||||
26 Apr 2006 | 103.4401 | 90.1414 | 1 Aug 2009 | 31 Jan 2010 | 2,311,113 | 179,064 | – | 40,639 | 2,295,061 | 154,477 | ||||||||||||||||||||||||||||||
26 Apr 2006 | 103.4401 | 90.1414 | 1 Aug 2011 | 31 Jan 2012 | 574,365 | 28,637 | – | – | 552,108 | 50,894 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 108.4483 | 94.5057 | 1 Aug 2010 | 31 Jan 2011 | 2,367,952 | 122,567 | – | – | 2,325,423 | 165,096 | ||||||||||||||||||||||||||||||
25 Apr 2007 | 108.4483 | 94.5057 | 1 Aug 2012 | 31 Jan 2013 | 676,123 | 38,246 | – | – | 657,164 | 57,205 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 106.2478 | 92.5881 | 1 Aug 2009 | 31 Oct 2009 | 1,698,625 | 101,377 | – | 5,208 | 1,794,794 | – | ||||||||||||||||||||||||||||||
30 Apr 2008 | 106.2478 | 92.5881 | 1 Aug 2011 | 31 Jan 2012 | 2,756,295 | 121,655 | – | – | 2,780,939 | 97,011 | ||||||||||||||||||||||||||||||
30 Apr 2008 | 106.2478 | 92.5881 | 1 Aug 2013 | 31 Jan 2014 | 959,694 | 54,445 | – | – | 956,585 | 57,554 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 37.8797 | 1 Aug 2010 | 31 Oct 2010 | – | – | 5,783,397 | 5,528 | 240,016 | 5,537,853 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 37.8797 | 1 Aug 2012 | 31 Jan 2013 | – | – | 23,940,771 | 3,806 | 406,542 | 23,530,423 | ||||||||||||||||||||||||||||||
29 Apr 2009 | – | 37.8797 | 1 Aug 2014 | 31 Jan 2015 | – | – | 21,513,401 | 4,060 | 221,612 | 21,287,729 |
1 | The exercise price of awards granted prior to 2009 adjusted for rights issue. | |
2 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £6.52. | |
3 | Exercisable at a 15 per cent discount to the average market value of the ordinary shares on the five business days immediately preceding the invitation date. |
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Employees > Share plans / Subsidiary company share plans |
322
Table of Contents
Exercise price (£) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | During | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 2 | from | until | 2009 | issue | year | 3 | year | 2009 | |||||||||||||||||||||||||
29 Mar 1999 | 6.3754 | 5.5557 | 3 Apr 2002 | 29 Mar 2009 | 6,858,013 | 1,005,752 | 6,300 | 7,857,465 | – | |||||||||||||||||||||||||||
10 Aug 1999 | 7.4210 | 6.4669 | 10 Aug 2002 | 10 Aug 2009 | 71,100 | 10,490 | – | 81,590 | – | |||||||||||||||||||||||||||
31 Aug 1999 | 7.8710 | 6.8591 | 31 Aug 2002 | 31 Aug 2009 | 4,000 | 590 | – | 4,590 | – | |||||||||||||||||||||||||||
3 Apr 2000 | 7.4600 | 6.5009 | 3 Apr 2003 | 3 Apr 2010 | 7,030,893 | 1,028,887 | 912,232 | 440,700 | 6,706,848 |
1 | The HSBC Holdings Executive Share Option Scheme expired on 26 May 2000. No options have been granted under the Scheme since that date. | |
2 | Adjusted for rights issue. | |
3 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.20. |
Exercise price (£) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | During | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 2 | from | until | 2009 | issue | year | 3 | year | 2009 | |||||||||||||||||||||||||
4 Oct 2000 | 9.6420 | 8.4024 | 4 Oct 2003 | 4 Oct 2010 | 299,016 | 43,745 | – | 3,034 | 339,727 | |||||||||||||||||||||||||||
23 Apr 2001 | 8.7120 | 7.5919 | 23 Apr 2004 | 23 Apr 2011 | 26,148,186 | 3,900,975 | 574 | 797,516 | 29,251,071 | |||||||||||||||||||||||||||
30 Aug 2001 | 8.2280 | 7.1702 | 30 Aug 2004 | 30 Aug 2011 | 147,768 | 21,766 | – | 15,053 | 154,481 | |||||||||||||||||||||||||||
7 May 2002 | 8.4050 | 7.3244 | 7 May 2005 | 7 May 2012 | 28,369,933 | 4,203,127 | 39,355 | 1,329,471 | 31,204,234 | |||||||||||||||||||||||||||
30 Aug 2002 | 7.4550 | 6.4966 | 30 Aug 2005 | 30 Aug 2012 | 337,142 | 50,554 | – | – | 387,696 | |||||||||||||||||||||||||||
2 May 2003 | 6.9100 | 6.0216 | 2 May 2006 | 2 May 2013 | 25,860,244 | 3,866,806 | 1,230,221 | 578,851 | 27,917,978 | |||||||||||||||||||||||||||
29 Aug 2003 | 8.1300 | 7.0848 | 29 Aug 2006 | 29 Aug 2013 | 367,644 | 52,884 | – | 48,746 | 371,782 | |||||||||||||||||||||||||||
3 Nov 2003 | 9.1350 | 7.9606 | 3 Nov 2006 | 3 Nov 2013 | 4,019,800 | 593,054 | – | – | 4,612,854 | |||||||||||||||||||||||||||
30 Apr 2004 | 8.2830 | 7.2181 | 30 Apr 2007 | 30 Apr 2014 | 50,891,202 | 7,544,767 | 277,525 | 1,888,126 | 56,270,318 | |||||||||||||||||||||||||||
27 Aug 2004 | 8.6500 | 7.5379 | 27 Aug 2007 | 27 Aug 2014 | 299,200 | 44,142 | – | 18,395 | 324,947 | |||||||||||||||||||||||||||
20 Apr 2005 | 8.3620 | 7.2869 | 20 Apr 2008 | 20 Apr 2015 | 6,660,770 | 1,011,194 | – | 787,567 | 6,884,397 |
1 | The HSBC Holdings Group Share Option Plan expired on 26 May 2005. No options have been granted under the Plan since that date. | |
2 | Adjusted for rights issue. | |
3 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.17. |
Exercise price (£) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | During | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | year | 2009 | ||||||||||||||||||||||||||
21 Jun 2005 | 8.794 | 7.6634 | 21 Jun 2008 | 21 Jun 2009 | 224,727 | 33,155 | – | 257,882 | – | |||||||||||||||||||||||||||
30 Sep 2005 | 9.170 | 7.9911 | 30 Sep 2008 | 30 Sep 2015 | 74,985 | 11,061 | – | – | 86,046 |
1 | Adjusted for rights issue. |
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Employees > Subsidiary company share plans |
Options at | Options | Options | Options at | |||||||||||||||||||||||||
Date of | Exercise | Exercisable | 1 January | exercised | lapsed | 31 December | ||||||||||||||||||||||
award | price (€) | from | until | 2009 | during year | 1 | during year | 2009 | 1 | |||||||||||||||||||
7 Apr 1999 | 81.71 | 7 Jun 2000 | 7 Apr 2009 | 183,627 | – | 183,627 | – | |||||||||||||||||||||
12 Apr 2000 | 142.50 | 1 Jan 2002 | 12 Apr 2010 | 604,250 | – | – | 604,250 |
1 | Following exercise of the options, the HSBC France shares will be exchanged for HSBC Holdings ordinary shares in the ratio of 14.917916 HSBC Holdings ordinary shares for each HSBC France share. At 31 December 2009, The HSBC Holdings Employee Benefit Trust 2001 (No. 1) held 9,963,718 HSBC Holdings ordinary shares which may be exchanged for HSBC France shares arising from the exercise of these options. |
Options at | Options | Options | Options at | |||||||||||||||||||||||||
Date of | Exercise | Exercisable | 1 January | exercised | lapsed | 31 December | ||||||||||||||||||||||
award | price (€) | from | until | 2009 | during year | 1 | during year | 2009 | 1 | |||||||||||||||||||
21 Dec 1999 | 10.84 | 21 Dec 2000 | 21 Dec 2009 | 26,250 | 17,250 | 9,000 | – | |||||||||||||||||||||
10 Mar 2000 | 12.44 | 27 Jun 2004 | 31 Dec 2010 | 20,626 | 16,206 | – | 4,420 | |||||||||||||||||||||
15 May 2001 | 20.80 | 15 May 2002 | 15 May 2011 | 141,525 | – | – | 141,525 | |||||||||||||||||||||
1 Oct 2002 | 22.22 | 2 Oct 2005 | 1 Oct 2012 | 145,575 | – | – | 145,575 |
1 | Following exercise of the options, the HSBC Private Bank France shares will be exchanged for HSBC Holdings ordinary shares in the ratio of 2.099984 HSBC Holdings ordinary shares for each HSBC Private Bank France share. At 31 December 2009, The CCF Employee Benefit Trust 2001 held 998,783 HSBC Holdings ordinary shares which may be exchanged for HSBC Private Bank France shares arising from the exercise of these options. |
Exercise price (US$) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | during | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | 2 | year | 2009 | |||||||||||||||||||||||||
17 May 1999 | 16.99 | 14.81 | 17 May 2000 | 17 May 2009 | 334,375 | 49,331 | – | 383,706 | – | |||||||||||||||||||||||||||
31 Aug 1999 | 13.96 | 12.17 | 31 Aug 2000 | 31 Aug 2009 | 300,938 | 44,397 | – | 345,335 | – | |||||||||||||||||||||||||||
8 Nov 1999 | 16.96 | 14.78 | 8 Nov 2000 | 8 Nov 2009 | 4,250,577 | 627,096 | – | 4,877,673 | – | |||||||||||||||||||||||||||
8 Feb 2000 | 13.26 | 11.56 | 8 Feb 2001 | 8 Feb 2010 | 66,875 | 9,866 | – | – | 76,741 | |||||||||||||||||||||||||||
30 Jun 2000 | 15.70 | 13.68 | 30 Jun 2001 | 30 Jun 2010 | 26,846 | 3,959 | – | – | 30,805 | |||||||||||||||||||||||||||
13 Nov 2000 | 18.40 | 16.03 | 13 Nov 2001 | 13 Nov 2010 | 5,728,514 | 845,109 | – | – | 6,573,623 | |||||||||||||||||||||||||||
12 Nov 2001 | 21.37 | 18.62 | 12 Nov 2002 | 12 Nov 2011 | 7,571,322 | 1,116,966 | – | – | 8,688,288 | |||||||||||||||||||||||||||
20 Nov 2002 | 10.66 | 9.29 | 20 Nov 2003 | 20 Nov 2012 | 2,402,135 | 354,367 | 20,000 | – | 2,736,502 |
1 | Adjusted for rights issue. | |
2 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.172. |
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Exercise price (US$) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | during | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | 2 | year | 2009 | |||||||||||||||||||||||||
23 Feb 1999 | 7.40 | 6.45 | 23 Feb 2000 | 23 Feb 2009 | 4,904 | 723 | – | 5,627 | – | |||||||||||||||||||||||||||
3 Aug 1999 | 7.10 | 6.19 | 3 Aug 2000 | 3 Aug 2009 | 7,634 | 1,125 | 5,841 | 2,918 | – | |||||||||||||||||||||||||||
4 Feb 2000 | 7.21 | 6.28 | 4 Feb 2001 | 4 Feb 2010 | 31,678 | 4,674 | 10,613 | – | 25,739 | |||||||||||||||||||||||||||
1 Jun 2000 | 7.04 | 6.13 | 1 Jun 2001 | 1 Jun 2010 | 61,649 | 9,095 | – | – | 70,744 | |||||||||||||||||||||||||||
31 Jul 2000 | 10.11 | 8.81 | 31 Jul 2001 | 31 Jul 2010 | 27,744 | 4,093 | – | – | 31,837 | |||||||||||||||||||||||||||
11 Jan 2001 | 14.27 | 12.44 | 11 Jan 2002 | 11 Jan 2011 | 53,943 | 7,958 | – | – | 61,901 |
1 | Adjusted for rights issue. | |
2 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £6.58. |
Exercise price (US$) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | during | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | 2 | year | 2009 | |||||||||||||||||||||||||
11 Jan 2001 | 14.27 | 12.44 | 11 Jan 2002 | 11 Jan 2011 | 134,857 | 19,896 | – | – | 154,753 | |||||||||||||||||||||||||||
6 Feb 2001 | 16.41 | 14.30 | 6 Feb 2002 | 6 Feb 2011 | 556,353 | 81,148 | – | – | 637,501 | |||||||||||||||||||||||||||
29 Mar 2001 | 15.39 | 13.41 | 29 Mar 2002 | 29 Mar 2011 | 270 | 40 | – | – | 310 | |||||||||||||||||||||||||||
16 Apr 2001 | 15.57 | 13.57 | 16 Apr 2002 | 16 Apr 2011 | 539 | 80 | – | – | 619 | |||||||||||||||||||||||||||
6 Jun 2001 | 18.35 | 15.99 | 6 Jun 2002 | 6 Jun 2011 | 8,091 | 1,194 | – | – | 9,285 | |||||||||||||||||||||||||||
16 Jul 2001 | 16.87 | 14.70 | 16 Jul 2002 | 16 Jul 2011 | 14,930 | 2,203 | – | – | 17,133 | |||||||||||||||||||||||||||
28 Aug 2001 | 15.39 | 13.41 | 28 Aug 2002 | 28 Aug 2011 | 13,486 | 1,990 | – | – | 15,476 | |||||||||||||||||||||||||||
26 Sep 2001 | 12.79 | 11.15 | 26 Sep 2002 | 26 Sep 2011 | 350,196 | 51,667 | – | – | 401,863 | |||||||||||||||||||||||||||
30 Jan 2002 | 15.60 | 13.59 | 30 Jan 2003 | 30 Jan 2012 | 1,226 | 181 | – | – | 1,407 | |||||||||||||||||||||||||||
5 Feb 2002 | 16.09 | 14.02 | 5 Feb 2003 | 5 Feb 2012 | 740,461 | 108,165 | – | – | 848,626 | |||||||||||||||||||||||||||
10 Jul 2002 | 15.84 | 13.80 | 10 Jul 2003 | 10 Jul 2012 | 12,260 | 1,809 | – | – | 14,069 | |||||||||||||||||||||||||||
4 Feb 2003 | 10.69 | 9.32 | 4 Feb 2004 | 4 Feb 2013 | 128,904 | 14,877 | 1,699 | – | 142,082 | |||||||||||||||||||||||||||
21 Apr 2003 | 11.85 | 10.33 | 21 Apr 2004 | 21 Apr 2013 | 6,833 | 1,009 | – | – | 7,842 |
1 | Adjusted for rights issue. | |
2 | The weighted average closing price of the shares immediately before the dates on which options were exercised was £7.33. |
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Employees > Compensation / Bank payroll tax // Sustainability |
Exercise price (US$) | ||||||||||||||||||||||||||||||||||||
At | At | At | Adjustment | Exercised | Lapsed | At | ||||||||||||||||||||||||||||||
1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during | during | 31 Dec | |||||||||||||||||||||||||||||
Date of award | 2009 | 2009 | 1 | from | until | 2009 | issue | year | year | 2009 | ||||||||||||||||||||||||||
22 Sep 1999 | 8.02 | 6.99 | 22 Sep 2000 | 22 Sep 2009 | 3,082 | 455 | – | 3,537 | – | |||||||||||||||||||||||||||
20 Sep 2000 | 11.31 | 9.86 | 20 Sep 2001 | 20 Sep 2010 | 4,046 | 597 | – | 4,643 | – | |||||||||||||||||||||||||||
28 Mar 2001 | 15.76 | 13.73 | 28 Mar 2002 | 28 Mar 2011 | 12,811 | 1,890 | – | 2,321 | 12,380 | |||||||||||||||||||||||||||
3 Apr 2002 | 16.01 | 13.95 | 3 Apr 2003 | 3 Apr 2012 | 24,520 | 3,615 | – | 5,627 | 22,508 | |||||||||||||||||||||||||||
30 Apr 2003 | 12.23 | 10.66 | 30 Apr 2004 | 30 Apr 2013 | 4,904 | 723 | – | – | 5,627 |
1 | Adjusted for rights issue. |
£000 | ||||
Basic salaries, allowances and benefits in kind | 3,190 | |||
Pension contributions | 324 | |||
Bonuses paid or receivable | 35,017 | |||
Inducements to join paid or receivable | – | |||
Total | 38,531 | |||
Total (US$000) | 60,103 | |||
Number of | ||||
employees | ||||
£4,300,001 – £4,400,000 | 1 | |||
£5,600,001 – £5,700,000 | 1 | |||
£9,000,001 – £9,100,000 | 1 | |||
£9,300,001 – £9,400,000 | 1 | |||
£10,000,001 – £10,100,000 | 1 |
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• | Business sustainability | |
• | Environmental issues | |
• | Community investment | |
• | Employee engagement |
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Sustainability / Share capital > Issued / Rights and obligations |
328
Table of Contents
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Share capital > Rights and obligations / 2009 // Dividends, shareholders and meetings > 2009 |
1. | 38,963,783 ordinary shares were issued at par in January 2009 to shareholders who elected to receive new shares in lieu of the third interim dividend for 2008. The market value per share used to calculate shareholders’ entitlements to new shares was US$9.7631, being the US dollar equivalent of £6.4785. | |
2. | 109,826,747 ordinary shares were issued at par in May 2009 to shareholders who elected to receive new shares in lieu of the fourth interim dividend for 2008. The market value per share used to calculate shareholders’ entitlements to |
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new shares was US$5.6847, being the US dollar equivalent of £3.907. | ||
3. | 21,713,706 ordinary shares were issued at par in July 2009 to shareholders who elected to receive new shares in lieu of the first interim dividend for 2009. The market value per share used to calculate shareholders’ entitlements to new shares was US$8.7461, being the US dollar equivalent of £5.4595. | |
4. | 64,721,433 ordinary shares were issued at par in October 2009 to shareholders who elected to receive new shares in lieu of the second interim dividend for 2009. The market value per share used to calculate shareholders’ entitlements to new shares was US$10.7597, being the US dollar equivalent of £6.566. |
5. | 5,060,239,065 new ordinary shares were issued at 254 pence per new ordinary share in April 2009 in connection with a rights issue announced on 2 March 2009. |
6. | In connection with the exercise of options under the HSBC Holdings savings-related share option plans: 4,855,485 ordinary shares were issued at prices ranging from £3.3116 to £7.6736 per share; 59,241 ordinary shares were issued at prices ranging from HK$37.8797 to HK$92.5881 per share; 86,150 ordinary shares were issued at prices ranging from US$4.8876 to US$13.8803 per share; and 9,869 ordinary shares were issued at prices ranging from€7.5571 to€9.5912 per share. Options over 57,629,816 ordinary shares lapsed. | |
7. | Options over 152,795,762 ordinary shares were granted at nil consideration under the HSBC Holdings savings-related share option plans on 29 April 2009 as a result of more than 90,000 applications received from HSBC employees resident in over 70 countries and territories. |
8. | 918,532 ordinary shares were issued at prices ranging from £5.5557 to £6.5009 per share in connection with the exercise of options under the HSBC Holdings Executive Share Option Scheme. Options over 8,384,345 ordinary shares lapsed. | |
9. | 1,547,675 ordinary shares were issued at prices ranging from £6.0216 to £8.4050 per share in connection with the exercise of options under |
the HSBC Holdings Group Share Option Plan. Options over 5,466,759 ordinary shares lapsed. | ||
10. | No options were exercised under and no ordinary shares were issued in connection with the HSBC Share Plan. Options over 257,882 ordinary shares lapsed. |
11. | At the Annual General Meeting in 2009, shareholders renewed the authority for the Company to make market purchases of ordinary shares. The authority is to make market purchases of up to 1,720,481,200 ordinary shares. The Directors have not exercised this authority. In accordance with the terms of a waiver granted by the Hong Kong Stock Exchange on 19 December 2005, HSBC Holdings will comply with the applicable law and regulation in the UK in relation to the holding of any shares in treasury and with the conditions of the waiver, in connection with any shares it may hold in treasury. |
12. | At the Annual General Meeting in 2009, shareholders renewed the general authority for the Directors to allot new shares. The general authority is to allot up to 3,440,962,400 ordinary shares, 10,000,000 non-cumulative preference shares of £0.01 each, 8,550,000 non-cumulative preference shares of US$0.01 each and 10,000,000 non-cumulative preference shares of€0.01 each. Within this, the Directors have authority to allot up to a maximum of 860,240,600 ordinary shares wholly for cash to persons other than existing shareholders. |
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Dividends, shareholders and meetings > 2010 / Communications / Notifiable interests / Dealings / AGM |
• | Barclays PLC gave notice on 17 April 2007 that it had an indirect interest on 16 April 2007 in |
518,233,657 HSBC Holdings ordinary shares, representing 4.47 per cent of the ordinary shares in issue at that date. | ||
• | Legal & General Group Plc gave notice on 18 April 2008 that it had a direct interest on 16 April 2008 in 593,425,216 HSBC Holdings ordinary shares, representing 5.00 per cent of the ordinary shares in issue at that date and gave notice on 21 April 2008 that on 18 April 2008 its holding of HSBC ordinary shares fell below 5.00 per cent of the ordinary shares in issue at that date. |
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On behalf of the Board | ||
S K Green,Group Chairman | 1 March 2010 | |
HSBC Holdings plc | ||
Registered number 617987 |
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Remuneration committee / Principles / Application to executive Directors / HSBC performance and context |
Page | ||||
Remuneration policy | ||||
334 | ||||
335 | ||||
335 | ||||
335 | ||||
336 | ||||
336 | ||||
337 | ||||
337 | ||||
338 | ||||
339 | ||||
342 | ||||
342 | ||||
342 | ||||
342 | ||||
343 | ||||
343 | ||||
343 | ||||
344 | ||||
Remuneration review | ||||
345 | ||||
346 | ||||
347 |
• | an assessment of reward with reference to clear and relevant objectives set within a balanced scorecard framework. This framework facilitates a rounded approach to objective setting. Under this framework, objectives are set under four categories –financial, process (including risk mitigation), customer and people. Significant importance is given to the achievement of efficiency and risk objectives as well as financial objectives. Objectives relating to customer development and the productivity of the Group’s human capital are also key to financial performance and the development and sustainability of the Group over the short and medium term; | |
• | a focus on total compensation (salary, bonus and the value of long-term incentives) with variable pay (namely bonus and the value of long-term incentives) differentiated by performance; | |
• | the use of considered discretion to assess the extent to which performance has been achieved rather than applying a formulaic approach which, by its nature, may encourage inappropriate risk taking and cannot cover all scenarios; | |
• | a significant proportion of variable pay being deferred into, predominantly, awards of HSBC Holdings Restricted Shares to tie recipients to |
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the future performance of the Group and to retain key talent. All Restricted Share awards made from 2010 are subject to claw back; and | ||
• | a total remuneration package (salary, bonus, long-term incentive awards and other benefits) which is competitive in relation to comparable organisations in each of the markets in which HSBC operates. |
The Committee also takes into account environmental, social and governance aspects when determining executive Directors’ remuneration and oversees senior management incentive structures to ensure that such structures take account of possible inadvertent consequences from these aspects. |
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HSBC performance and context > Key achievements / Risk management // Executive Director remuneration / Salary |
• | the strengthening of the Group’s tier 1 ratio by 250 basis points to 10.8 per cent, exceeding the target range; | |
• | the maintenance of a highly liquid balance sheet with the ratio of advances to deposits ending below 80 per cent, notwithstanding the impact on profit of the low interest rate environment; | |
• | the reduction in loan impairment charges in the US consumer finance business and the contribution to that reduction made by management’s decisions to curtail origination activity progressively from 2007 then finally close the Consumer Lending branch network in 2009; | |
• | the broad base of strong performances within the Global Banking and Markets business, consistent with its continuing strategy; | |
• | the successful and accelerated wind-down of the legacy exit portfolios of asset-backed and structured credit exposures in the Global Banking and Markets business; | |
• | recovery in shareholders’ equity in line with expectations, as the available-for-sale portfolio in the Global Banking and Markets business recovered value; | |
• | the resilient performance of HSBC in Hong Kong, notwithstanding it is a market significantly affected by the low interest rate environment; | |
• | effective cost control reflected in the underlying cost reduction of 4 per cent excluding the goodwill impairment charge in 2008; |
• | the significant reduction in the Group’s own credit spread; and | |
• | decisive management initiatives taken to address the causes of the disappointing performances in certain personal and commercial portfolios in Latin America and the Middle East. |
• | process objectives focused on efficiency and qualitative measures which, in turn, affect financial performance and mitigate risk. The Group met the target it set for operational losses as a percentage of revenue and embedded the HSBC Risk Appetite Framework, establishing the nature and quantum of risks which the Group is prepared to accept in undertaking its activities. The overall management of risk mitigation was judged to be strong; | |
• | progress in meeting customer recommendation and brand health targets was mixed in a challenging environment for retail and commercial banking. The Group met its brand health target for Personal Financial Services and customer penetration targets for wealth insurance, but narrowly missed the brand health target for Commercial Banking. Customer recommendation targets were not met; and | |
• | regarding the Group’s human capital, HSBC exceeded its 2009 employee engagement target as measured in its Global People Survey, improved on the 2008 score, and exceeded the global financial sector and global norms scores for employee engagement in 2009. The target for the ratio of revenue to staff costs was also met. |
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Executive Director remuneration > Salary / Annual bonus / Performance Shares |
Salary | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£000 | £000 | £000 | ||||||||||
D J Flint | 800 | 700 | 700 | |||||||||
M F Geoghegan | – | 1,070 | 1,070 | |||||||||
S K Green | 1,250 | 1,250 | 1,250 | |||||||||
S T Gulliver1 | 800 | 800 | 800 | |||||||||
HK$000 | HK$000 | HK$000 | ||||||||||
V H C Cheng1 | 9,300 | 9,300 | 9,300 | |||||||||
A A Flockhart1 | 10,000 | 8,000 | 8,000 | |||||||||
M F Geoghegan2 | 13,495 | – | – | |||||||||
1 | V H C Cheng joined the Board on 1 February 2008 and A A Flockhart and S T Gulliver on 1 May 2008. The salaries shown above for 2008 represent the full year equivalent salary for these individuals. | |
2 | Currency change reflects the change in location of the principal office of the Group Chief Executive. 2010 salary is equivalent to 2009 salary. With effect from 26 January 2010, in recognition of the relocation to Hong Kong and the associated additional costs of living that will be incurred, a fixed allowance of HK$3,767,256 (equivalent to £300,000) per annum, is payable together with housing and other benefits in kind that are normal within this location. The fixed allowance is not pensionable and is not considered as part of salary in determining the maximum annual bonus and Performance Share awards. |
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2009 performance1 | 2008 performance | 2007 performance | ||||||||||||||||||||||
Cash | Restricted | Cash | Restricted | Cash | Restricted | |||||||||||||||||||
Shares | Shares | Shares | ||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||
D J Flint2 | – | 2,100 | – | – | 800 | – | ||||||||||||||||||
M F Geoghegan2 | – | 4,000 | – | – | 2,140 | – | ||||||||||||||||||
S K Green3 | – | – | – | – | 1,750 | – | ||||||||||||||||||
S T Gulliver2 | – | 9,000 | – | – | 5,592 | 3,600 | ||||||||||||||||||
HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | HK$000 | |||||||||||||||||||
V H C Cheng | – | 15,600 | – | 18,533 | 23,864 | 9,832 | ||||||||||||||||||
A A Flockhart4 | – | 24,000 | – | 18,705 | – | – | ||||||||||||||||||
US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | |||||||||||||||||||
A A Flockhart4 | – | – | – | – | 2,598 | 1,184 |
1 | The awards made in respect of 2009 performance will be fully deferred into awards of Restricted Shares, issued under the HSBC Share Plan. With the exception of the award for V H C Cheng, 33 per cent of the executive Directors’ awards will vest on each of the first and second anniversaries of the date of the award, with the balance vesting on the third anniversary of the date of the award. The award for V H C Cheng has a vesting date three years from the date of the award. | |
2 | M F Geoghegan, D J Flint and S T Gulliver requested that they not be considered for a bonus in respect of 2008. | |
3 | At the Chairman’s request, he is not considered for an annual bonus award. | |
4 | The change in currency for A A Flockhart reflects a change of expatriate terms. The 2008 figure is on a gross equivalent basis. |
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Executive Director remuneration > Performance Shares |
Banco Bradesco | Fortis | |
Banco Itau | ICBC | |
Banco Santander | JP Morgan Chase | |
Bank of America | Lloyds Banking Group | |
Bank of China | National Australia Bank | |
Barclays | Royal Bank of Canada | |
BBVA | Royal Bank of Scotland | |
BNP Paribas | Société Générale | |
Citigroup | Standard Chartered | |
Credit Suisse Group | UBS | |
DBS Group | UniCredito Italiano | |
Deutsche Bank | Wells Fargo |
If HSBC's TSR outperforms | Proportion of TSR Award | |
companiescomprising | vesting1 | |
75 per cent of the total FFMC | 100% | |
50 per cent of the total FFMC | 20% | |
< 50 per cent of the total FFMC | nil |
1 | Vesting will occur in a straight line between 20 per cent and 100 per cent where HSBC’s performance falls between these incremental steps. |
Average annual EP over | Proportion of EP Award | |
three years | vesting1 | |
8 per cent or above | 100% | |
< 3 per cent | nil |
1 | Vesting will occur in a straight line between 0 per cent and 100 per cent where HSBC’s performance falls between these incremental steps. |
EPS growth in Year 3 over | Proportion of EPS | |
the base EPS | award vesting1 | |
28 per cent or above | 100% | |
16 per cent | 20% | |
< 16 per cent | nil |
1 | Vesting will occur in a straight line between 20% and 100% where HSBC’s performance falls between these incremental steps. |
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ABN AMRO1 | Mitsubishi UFJ Financial Group2 | |
Banco Santander | Mizuho Financial Group | |
Bank of America | Morgan Stanley | |
Bank of New York | National Australia Bank | |
Barclays | Royal Bank of Canada | |
BBVA | Royal Bank of Scotland | |
BNP Paribas | Société Générale | |
Citigroup | Standard Chartered | |
Crédit Agricole | UBS | |
Credit Suisse Group | UniCredito Italiano | |
Deutsche Bank | US Bancorp | |
HBOS1 | Wachovia1 | |
JP Morgan Chase | Wells Fargo | |
Lloyds Banking Group | Westpac Banking Corporation |
1 | ABN AMRO, HBOS and Wachovia have delisted since the start of the performance period for the 2006 and 2007 awards. These comparators have been replaced from the point of delisting by Fortis, Commonwealth Bank of Australia and Toronto Dominion Bank respectively. In 2009 the remainder of the banking activities of Fortis were acquired by BNP Paribas. The treatment of Fortis in the comparator group will be considered in line with the plan rules. | |
2 | Mitsubishi UFJ Financial Group Inc was previously known as Mitsubishi Tokyo Financial Group prior to the acquisition of UFJ Holdings on 1 October 2005. |
If HSBC's performance | Proportion of TSR Award | |
matches | vesting1 | |
Banks ranking 1st to 7th | 100% | |
Bank ranking 8th | 90% | |
Bank ranking 9th | 80% | |
Bank ranking 10th | 70% | |
Bank ranking 11th | 60% | |
Bank ranking 12th | 50% | |
Bank ranking 13th | 40% | |
Bank ranking 14th | 30% | |
Banks ranking below 14th | nil |
1 | Vesting will occur in a straight line where HSBC’s performance falls between these incremental steps. |
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Executive Directors > Funding / TSR / Pensions / Share ownership / Service contracts / Other directorships // Non-executive Directors |
Percentage difference between: | Total | |||||
incremental | ||||||
Year 1 EPS and Base | Year 2 EPS and Base | Year 3 EPS and Base | EPS for the | |||
Year | Year | year | performance | |||
EPS | + | EPS | + | EPS | = | period |
8% | 17% | 26% | 51% |
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Number of shares1 | ||||||||
held at 31 | ||||||||
December | ||||||||
to be held | 2009 | |||||||
V H C Cheng | 200,000 | 1,063,646 | ||||||
D J Flint | 200,000 | 155,326 | ||||||
A A Flockhart | 200,000 | 846,817 | ||||||
M F Geoghegan | 600,000 | 724,757 | ||||||
S K Green | 600,000 | 901,211 | ||||||
S T Gulliver | 200,000 | 3,311,056 | ||||||
Group Managing Directors | 125,000 | – | 2 |
1 | For the purposes of the guidelines, unvested awards of Restricted Shares are included. Unvested Performance Share awards are excluded. | |
2 | All of the Group Managing Directors exceed the expected holdings. |
Contract date | ||
V H C Cheng | 29 August 2008 | |
D J Flint | 14 October 2008 | |
A A Flockhart | 2 December 2008 | |
M F Geoghegan | 26 February 2010 | |
S K Green | 28 February 2008 | |
S T Gulliver | 5 September 2008 |
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Non-executive Directors > Fees // Directors’ 2009 remuneration |
• | in 2011, S A Catz, J D Coombe, J W J Hughes-Hallett, W S H Laidlaw and N R N Murthy; | |
• | in 2012, M K T Cheung, J R Lomax, S M Robertson, J L Thornton and Sir Brian Williamson; and | |
• | in 2013, R A Fairhead and G Morgan. |
J L Durán, W K L Fung and Sir Mark Moody-Stuart will retire at the Annual General Meeting in 2010. |
Chairman, Group Audit Committee | £ | 50,000 | p.a. | |
Member, Group Audit Committee | £ | 20,000 | p.a. |
Chairman, Remuneration Committee | £ | 40,000 | p.a. | |
Member, Remuneration Committee | £ | 20,000 | p.a. |
Chairman, Nomination Committee | £ | 30,000 | p.a. | |
Member, Nomination Committee | £ | 20,000 | p.a. |
Chairman, Corporate Sustainability Committee | £30,000 p.a. | |
Member, Corporate Sustainability Committee | £20,000 p.a. |
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The remuneration of the Group Chairman and executive Directors of HSBC Holdings for 2009 was as follows: |
V H C Cheng | D J Flint | A A Flockhart | M F Geoghegan | S K Green | S T Gulliver | |||||||||||||||||||||||||||||||||||||||||||
2009 | 2008 | 1 | 2009 | 2008 | 2009 | 2008 | 1 | 2009 | 2008 | 2009 | 2008 | 2009 | 20081 | |||||||||||||||||||||||||||||||||||
£000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Salary | 769 | 534 | 700 | 700 | 662 | 229 | 1,070 | 1,070 | 1,250 | 1,250 | 800 | 533 | ||||||||||||||||||||||||||||||||||||
Allowances2 | 191 | 67 | 394 | 394 | – | – | 548 | 544 | 8 | 8 | 8 | 5 | ||||||||||||||||||||||||||||||||||||
Benefits in kind2,3 | 663 | 545 | 8 | 13 | 437 | 355 | 57 | 53 | 4 | 7 | 18 | 9 | ||||||||||||||||||||||||||||||||||||
Bonus (deferred)4 | 1,240 | 1,639 | 2,100 | – | 1,908 | 1,655 | 4,000 | – | – | – | 9,000 | – | ||||||||||||||||||||||||||||||||||||
Total remuneration5 | 2,863 | 2,785 | 3,202 | 1,107 | 3,007 | 2,239 | 5,675 | 1,667 | 1,262 | 1,265 | 9,826 | 547 | ||||||||||||||||||||||||||||||||||||
Total emoluments6 | 1,623 | 1,146 | 1,102 | 1,107 | 1,099 | 584 | 1,675 | 1,667 | 1,262 | 1,265 | 826 | 547 | ||||||||||||||||||||||||||||||||||||
US$000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total remuneration5 | 4,466 | 5,108 | 4,995 | 2,030 | 4,691 | 4,106 | 8,852 | 3,057 | 1,969 | 2,320 | 15,327 | 1,003 | ||||||||||||||||||||||||||||||||||||
Total emoluments6 | 2,532 | 2,102 | 1,719 | 2,030 | 1,714 | 1,071 | 2,613 | 3,057 | 1,969 | 2,320 | 1,288 | 1,003 |
1 | The comparative emoluments figures in respect of 2008 are for the period from the date of appointment of the Director (V H C Cheng, 1 February 2008; and A A Flockhart and S T Gulliver, 1 May 2008). | |
2 | Allowances include an executive allowance paid to fund personal pension arrangements and a company car allowance. Following the categorisation of the company car benefit in 2009 as an allowance and not a benefit in kind, the comparative figures for 2008 for D J Flint, M F Geoghegan, S K Green and S T Gulliver have been adjusted accordingly. | |
3 | Benefits in kind include provision of medical insurance, other insurance cover, accountancy advice and travel assistance. V H C Cheng and A A Flockhart receive housing and other benefits in kind that are normal within the location in which they are employed. | |
4 | These deferred bonuses represent 100 per cent of the annual bonus in respect of 2009, all of which will be deferred into awards of HSBC Holdings Restricted Shares. See page 338 for further details of the deferral and vesting arrangements. | |
5 | Total remuneration, pursuant to the UK Listing Rules, includes deferred bonuses. | |
6 | Total emoluments, pursuant to the UK Companies Act 2006, exclude the annual bonus that has been deferred and is not receivable for at least a further 12 months. |
2009 | 2008 | |||||||
£000 | £000 | |||||||
S A Catz | 65 | 43 | ||||||
M K T Cheung1 | 89 | – | ||||||
J D Coombe | 105 | 105 | ||||||
J L Durán | 65 | 65 | ||||||
R A Fairhead | 135 | 127 | ||||||
W K L Fung2 | 132 | 122 | ||||||
J W J Hughes-Hallett | 105 | 105 | ||||||
W S H Laidlaw | 85 | 77 | ||||||
J R Lomax3 | 82 | 5 | ||||||
Sir Mark Moody-Stuart | 125 | 125 | ||||||
G Morgan | 85 | 85 | ||||||
N R N Murthy | 85 | 45 | ||||||
S M Robertson | 115 | 115 | ||||||
J L Thornton4 | 1,040 | 89 | ||||||
Sir Brian Williamson | 95 | 95 | ||||||
Total | 2,408 | 1,203 | ||||||
Total (US$000) | 3,756 | 2,206 | ||||||
1 | Appointed a Director of HSBC Holdings on 1 February 2009. Includes fees as a non-executive Director and member of the Audit Committee of Hang Seng Bank Limited. | |
2 | Includes fees as non-executive Deputy Chairman of The Hongkong and Shanghai Banking Corporation Limited. | |
3 | Appointed a Director of HSBC Holdings on 1 December 2008. The comparative figure in respect of 2008 is for the period from the date of appointment. | |
4 | Appointed a Director of HSBC Holdings on 1 December 2008. The comparative figure in respect of 2008 is for the period from the date of appointment as a Director. Includes fees as non-executive Chairman of HSBC North America Holdings Inc. |
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Pensions / Share plans |
Transfer value | ||||||||||||||||||||||||||||
(less personal | ||||||||||||||||||||||||||||
Increase in | Increase of | contributions) at | ||||||||||||||||||||||||||
accrued | Transfer | Transfer | transfer value | 31 December 2009 | ||||||||||||||||||||||||
Accrued | Increase in | pension | value | value | of accrued | relating to increase | ||||||||||||||||||||||
annual | Accrued | during 2009, | of accrued | of accrued | pension (less | in accrued pensions | ||||||||||||||||||||||
pension at | pension | excluding | pension at | pension at | personal | during 2009, | ||||||||||||||||||||||
31 December | during | any increase | 31 December | 31 December | contributions) | excluding any | ||||||||||||||||||||||
2009 | 2009 | for inflation | 2008 | 1 | 2009 | 1 | in 2009 | 1 | increase for inflation | 1 | ||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | ||||||||||||||||||||||
A A Flockhart2 | 270 | 16 | 3 | 6 | 4,644 | 4,863 | 219 | 100 | ||||||||||||||||||||
S K Green | 711 | 42 | 4 | 42 | 17,716 | 19,119 | 1,403 | 1,121 | ||||||||||||||||||||
S T Gulliver5 | – | 8 | 3 | 2 | 2,749 | – | 125 | – |
1 | The transfer value represents a liability of HSBC’s pension funds and not a sum paid or due to the individual; it cannot therefore meaningfully be added to annual remuneration. | |
2 | A A Flockhart ceased accrual of pension benefits in the International Staff Retirement Benefits Scheme (‘ISRBS’) on 30 November 2008 and he has deferred commencement of his pension. The ISRBS retains a liability for a contingent spouse’s pension of £131,655 per annum as at 31 December 2009. | |
3 | A A Flockhart and S T Gulliver received increases for inflation to their accrued pensions on 1 January 2009 of 4.2 per cent, based on the increase in the UK Retail Prices Index over the year to 31 October 2008. | |
4 | S K Green’s total accrued pension received no increase in respect of inflation in 2009. The part of S K Green’s pension payable from the HSBC Bank (UK) Pension Scheme receives an annual increase in line with the UK Government’s statutory revaluation order for 2009, which is based on the increase in the UK Retail Prices Index over the last year to 30 September 2009. As this was negative, no increase was applied. The additional accrual of benefits is provided by the Employer Funded Retirement Benefits Scheme. | |
5 | S T Gulliver ceased accrual of pension benefits in the ISRBS on 31 March 2006 and at that time deferred commencement of his pension. S T Gulliver commuted all his benefits out of the ISRBS on 31 May 2009 except for a contingent spouse’s pension. A commutation lump sum of £2,743,437 was paid to S T Gulliver in lieu of his entire pension. The ISRBS retains a contingent spouse’s liability pension of £63,563 per annum as at 31 December 2009. After 31 May 2009, S T Gulliver stopped accruing pension benefits, and as such he is no longer eligible to take transfers from the Scheme in respect of any spouse’s liability. |
The following table shows unfunded pension payments, in respect of which provision has been made, during 2009 to five former Directors of HSBC Holdings plc. |
2009 | 2008 | |||||||
£ | £ | |||||||
B H Asher | 101,858 | 97,752 | ||||||
C F W de Croisset | 247,115 | 221,100 | ||||||
R Delbridge | 146,507 | 140,601 | ||||||
Sir Brian Pearse | 61,095 | 58,632 | ||||||
Sir William Purves | 107,827 | 103,481 | ||||||
664,402 | 621,566 | |||||||
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Exercise price (£) | Adjust- | |||||||||||||||||||||||||||||||||||
At | At | At | ment | Awarded | At | |||||||||||||||||||||||||||||||
Date of | 1 Jan | 31 Dec | Exercisable | 1 Jan | for rights | during the | 31 Dec | |||||||||||||||||||||||||||||
award | 2009 | 2009 | from | 1 | until | 2009 | issue | year | 2009 | |||||||||||||||||||||||||||
D J Flint | 25 Apr 2007 | 7.0872 | 6.1760 | 2 | 1 Aug 2012 | 31 Jan 2013 | 2,310 | 340 | – | 2,650 | ||||||||||||||||||||||||||
A A Flockhart | 25 Apr 2007 | 7.0872 | 6.1760 | 2 | 1 Aug 2010 | 31 Jan 2011 | 1,332 | 196 | – | – | 3 | |||||||||||||||||||||||||
A A Flockhart | 29 Apr 2009 | – | 3.3116 | 1 Aug 2014 | 31 Jan 2015 | – | – | 4,529 | 4,529 |
The HSBC Holdings savings-related share option plans are all-employee share plans under which eligible HSBC employees may be granted options to acquire HSBC Holdings ordinary shares. Employees may make contributions of up to £250 (or equivalent) each month over a period of one, three or five years which may be used on the first, third or fifth anniversary of the commencement of the relevant savings contract, at the employee’s election, to exercise the options. The plans help align the interests of employees with the creation of shareholder value and, as such, exercise of the options is not subject to any performance conditions. The options were awarded for nil consideration and are exercisable at a 20 per cent discount to the average market value of the ordinary shares on the five business days immediately preceding the invitation date. No options lapsed during the year. There are no performance criteria conditional upon which the outstanding options are exercisable and there have been no variations to the terms and conditions since the awards were made. The market value per ordinary share at 31 December 2009 was £7.088. The highest and lowest market values per ordinary share during the year were £7.612 and £3.0413. Market value is the mid-market price derived from the London Stock Exchange Daily Official List on the relevant date. Under the Securities and Futures Ordinance of Hong Kong, the options are categorised as unlisted physically settled equity derivatives. | ||
1 | May be advanced to an earlier date in certain circumstances, e.g. retirement. | |
2 | Adjusted for rights issue. | |
3 | Options lapsed on 29 April 2009 following closure of the associated savings-related account by the Director. |
HSBC Share Plan
Year in | Awards | Awards vested during | Awards | |||||||||||||||||||||||||
which | held at | year1,2,3 | Adjustment | held at | ||||||||||||||||||||||||
Date of | awards | 1 Jan | Monetary | for rights | 31 Dec | |||||||||||||||||||||||
award | may vest | 2009 | Number | value | issue | 2009 | 2 | |||||||||||||||||||||
£000 | ||||||||||||||||||||||||||||
V H C Cheng | 6 Mar 2006 | 2009 | 92,689 | 21,722 | 95 | 13,927 | – | 3 | ||||||||||||||||||||
5 Mar 2007 | 2010 | 180,739 | – | – | 27,156 | 218,035 | ||||||||||||||||||||||
3 Jun 2008 | 2011 | 130,852 | – | – | 19,661 | 157,852 | ||||||||||||||||||||||
D J Flint | 6 Mar 2006 | 2009 | 185,378 | 43,444 | 191 | 27,854 | – | 3 | ||||||||||||||||||||
5 Mar 2007 | 2010 | 270,755 | – | – | 40,682 | 326,626 | ||||||||||||||||||||||
3 Jun 2008 | 2011 | 377,343 | – | – | 56,696 | 455,210 | ||||||||||||||||||||||
A A Flockhart | 6 Mar 2006 | 2009 | 69,518 | 16,291 | 71 | 10,445 | – | 3 | ||||||||||||||||||||
5 Mar 2007 | 2010 | 120,395 | – | – | 18,089 | 145,238 | ||||||||||||||||||||||
3 Jun 2008 | 2011 | 128,675 | – | – | 19,333 | 155,227 | ||||||||||||||||||||||
M F Geoghegan | 6 Mar 2006 | 2009 | 231,724 | 54,305 | 238 | 34,817 | – | 3 | ||||||||||||||||||||
5 Mar 2007 | 2010 | 615,351 | – | – | 92,458 | 742,334 | ||||||||||||||||||||||
3 Jun 2008 | 2011 | 886,755 | – | – | 133,237 | 1,069,746 | ||||||||||||||||||||||
S K Green | 6 Mar 2006 | 2009 | 289,653 | 67,881 | 298 | 43,521 | – | 3 | ||||||||||||||||||||
5 Mar 2007 | 2010 | 461,513 | – | – | 69,344 | 556,750 | ||||||||||||||||||||||
3 Jun 2008 | 2011 | 1,037,692 | – | – | 155,915 | 1,251,829 | ||||||||||||||||||||||
S T Gulliver | 6 Mar 2006 | 2009 | 115,861 | 27,152 | 119 | 17,409 | – | 3 | ||||||||||||||||||||
5 Mar 2007 | 2010 | 133,725 | – | – | 20,092 | 161,319 | ||||||||||||||||||||||
3 Jun 2008 | 2011 | 56,063 | – | – | 8,423 | 67,631 |
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Share plans // Statement of Directors’ Responsibilities |
Vesting of these awards of Performance Shares is subject to the achievement of the corporate performance conditions set out on pages 339 to 342. Interests in awards of Performance Shares are categorised under the Securities and Futures Ordinance of Hong Kong as the interests of a beneficiary of a trust. No awards of Performance Shares were made in 2009. | ||
1 | A part of the total shareholder return element of the performance conditions was met and the related part of the award vested on 8 April 2009, when the market value per share was £4.37, as follows: V H C Cheng, 21,394 shares; D J Flint, 42,788 shares; A A Flockhart, 16,045 shares; M F Geoghegan, 53,485 shares; S K Green, 66,856 shares; and S T Gulliver, 26,742 shares. Awards representing the fourth interim dividend for 2008 vested on 6 May 2009, when the market value per share was £5.39, as follows: V H C Cheng, 328 shares; D J Flint, 656 shares; A A Flockhart, 246 shares; M F Geoghegan, 820 shares; S K Green, 1,025 shares; and S T Gulliver, 410 shares. The market value per share on the date of the award, 6 March 2006, was £9.89. | |
2 | Includes additional shares arising from scrip dividends. | |
3 | The earnings per share element and part of the total shareholder return element of the performance conditions were not met and, under the terms of the Plan, the following awards were forfeited on 8 April 2009: V H C Cheng, 86,931 shares; D J Flint, 173,862 shares; A A Flockhart, 65,199 shares; M F Geoghegan, 217,328 shares; S K Green, 271,659; and S T Gulliver, 108,664 shares. As a consequence, the fourth interim dividend for 2008 did not accrue on the forfeited shares. |
HSBC Share Plan
Year in | Awards | Awards made during | Awards vested during | Awards | ||||||||||||||||||||||||||||||||
which | held on | year1 | year2 | Adjustment | held at | |||||||||||||||||||||||||||||||
Date of | awards | 1 Jan | Monetary | Monetary | for rights | 31 Dec | ||||||||||||||||||||||||||||||
award | may vest | 2009 | Number | value | Number | value | issue | 2009 | 2 | |||||||||||||||||||||||||||
£000 | £000 | |||||||||||||||||||||||||||||||||||
V H C Cheng | 3 Mar 2008 | 2011 | 86,158 | – | – | – | – | 12,945 | 103,936 | |||||||||||||||||||||||||||
2 Mar 2009 | 2012 | – | 416,662 | 1,662 | – | – | 61,471 | 493,545 | ||||||||||||||||||||||||||||
A A Flockhart | 31 Oct 2007 | 2010 | 53,568 | – | – | – | – | 8,048 | 64,621 | |||||||||||||||||||||||||||
3 Mar 2008 | 2011 | 12,488 | – | – | – | – | 1,877 | 15,064 | ||||||||||||||||||||||||||||
2 Mar 2009 | 2012 | – | 420,528 | 1,678 | – | – | 62,041 | 498,124 | ||||||||||||||||||||||||||||
S T Gulliver | 6 Mar 2006 | 2009 | 3 | 150,421 | – | – | 153,193 | 4 | 611 | 4 | – | – | ||||||||||||||||||||||||
5 Mar 2007 | 2009-2010 | 3 | 319,934 | – | – | 163,874 | 4 | 654 | 4 | 23,894 | 191,842 | |||||||||||||||||||||||||
3 Mar 2008 | 2009-2011 | 3 | 480,237 | – | – | 161,399 | 4 | 644 | 4 | 48,345 | 388,157 |
Vesting of Restricted Share awards is normally subject to the Director remaining an employee on the vesting date. The vesting date may be advanced to an earlier date in certain circumstances, e.g. death or retirement. Interests in Restricted Share awards granted in 2007 and 2008 are categorised under the Securities and Futures Ordinance of Hong Kong as the interests of a beneficiary of a trust and interests in Restricted Share awards granted in 2009 are categorised under the Securities and Futures Ordinance of Hong Kong as the interests of a beneficial owner. | ||
1 | At the date of the award, 2 March 2009, the market value per share was £3.99. | |
2 | Includes additional shares arising from scrip dividends. | |
3 | 33 per cent of the award vests on each of the first and second anniversaries of the date of the award, with the balance vesting on the third anniversary of the date of the award. | |
4 | At the date of vesting, 2 March 2009, the market value per share was £3.99. The market value per share on the dates of the awards, 6 March 2006, 5 March 2007 and 3 March 2008, was £9.89, £8.96 and £7.90 respectively. |
On behalf of the Board | 1 March 2010 | |
Sir Mark Moody-Stuart,Chairman of Remuneration Committee |
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London, England
351
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Contents / Consolidated income statement |
Page | ||||||
Financial Statements | ||||||
Consolidated income statement | 353 | |||||
Consolidated statement of comprehensive income | 354 | |||||
Consolidated balance sheet | 355 | |||||
Consolidated statement of cash flows | 356 | |||||
Consolidated statement of changes in equity | 357 | |||||
HSBC Holdings balance sheet | 360 | |||||
HSBC Holdings statement of cash flows | 361 | |||||
HSBC Holdings statement of changes in equity | 362 | |||||
Footnotes to Financial Statements | 364 | |||||
Notes on the Financial Statements | ||||||
1 | 365 | |||||
2 | 369 | |||||
3 | 385 | |||||
4 | 386 | |||||
5 | 386 | |||||
6 | 387 | |||||
7 | 388 | |||||
8 | 388 | |||||
9 | 400 | |||||
10 | 401 | |||||
11 | 407 | |||||
12 | 410 | |||||
13 | 411 | |||||
14 | 412 | |||||
15 | 418 | |||||
16 | 422 |
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2009 | 2008 | 2007 | ||||||||||||||
Notes | US$m | US$m | US$m | |||||||||||||
Interest income | 62,096 | 91,301 | 92,359 | |||||||||||||
Interest expense | (21,366 | ) | (48,738 | ) | (54,564 | ) | ||||||||||
Net interest income | 40,730 | 42,563 | 37,795 | |||||||||||||
Fee income | 21,403 | 24,764 | 26,337 | |||||||||||||
Fee expense | (3,739 | ) | (4,740 | ) | (4,335 | ) | ||||||||||
Net fee income | 17,664 | 20,024 | 22,002 | |||||||||||||
Trading income excluding net interest income | 6,236 | 847 | 4,458 | |||||||||||||
Net interest income on trading activities | 3,627 | 5,713 | 5,376 | |||||||||||||
Net trading income | 9,863 | 6,560 | 9,834 | |||||||||||||
Changes in fair value of long-term debt issued and related derivatives | (6,247 | ) | 6,679 | 2,812 | ||||||||||||
Net income/(expense) from other financial instruments designated at fair value | 2,716 | (2,827 | ) | 1,271 | ||||||||||||
Net income/(expense) from financial instruments designated at fair value | 3 | (3,531 | ) | 3,852 | 4,083 | |||||||||||
Gains less losses from financial investments | 520 | 197 | 1,956 | |||||||||||||
Gains arising from dilution of interests in associates | 4 | – | – | 1,092 | ||||||||||||
Dividend income | 126 | 272 | 324 | |||||||||||||
Net earned insurance premiums | 5 | 10,471 | 10,850 | 9,076 | ||||||||||||
Gains on disposal of French regional banks | – | 2,445 | – | |||||||||||||
Other operating income | 2,788 | 1,808 | 1,439 | |||||||||||||
Total operating income | 78,631 | 88,571 | 87,601 | |||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | 6 | (12,450 | ) | (6,889 | ) | (8,608 | ) | |||||||||
Net operating income before loan impairment charges and other credit risk provisions | 66,181 | 81,682 | 78,993 | |||||||||||||
Loan impairment charges and other credit risk provisions | 7 | (26,488 | ) | (24,937 | ) | (17,242 | ) | |||||||||
Net operating income | 7 | 39,693 | 56,745 | 61,751 | ||||||||||||
Employee compensation and benefits | 8 | (18,468 | ) | (20,792 | ) | (21,334 | ) | |||||||||
General and administrative expenses | (13,392 | ) | (15,260 | ) | (15,294 | ) | ||||||||||
Depreciation and impairment of property, plant and equipment | 23 | (1,725 | ) | (1,750 | ) | (1,714 | ) | |||||||||
Goodwill impairment | 22 | – | (10,564 | ) | – | |||||||||||
Amortisation and impairment of intangible assets | 22 | (810 | ) | (733 | ) | (700 | ) | |||||||||
Total operating expenses | (34,395 | ) | (49,099 | ) | (39,042 | ) | ||||||||||
Operating profit | 5,298 | 7,646 | 22,709 | |||||||||||||
Share of profit in associates and joint ventures | 21 | 1,781 | 1,661 | 1,503 | ||||||||||||
Profit before tax | 7,079 | 9,307 | 24,212 | |||||||||||||
Tax expense | 11 | (385 | ) | (2,809 | ) | (3,757 | ) | |||||||||
Profit for the year | 6,694 | 6,498 | 20,455 | |||||||||||||
Profit attributable to shareholders of the parent company | 5,834 | 5,728 | 19,133 | |||||||||||||
Profit attributable to minority interests | 860 | 770 | 1,322 | |||||||||||||
US$ | US$ | US$ | ||||||||||||||
Basic earnings per ordinary share1 | 13 | 0.34 | 0.41 | 1.44 | ||||||||||||
Diluted earnings per ordinary share1 | 13 | 0.34 | 0.41 | 1.42 |
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Consolidated statement of comprehensive income / Consolidated balance sheet |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Profit for the year | 6,694 | 6,498 | 20,455 | |||||||||
Other comprehensive income/(expense) | ||||||||||||
Available-for-sale investments | 10,817 | (21,904 | ) | (973 | ) | |||||||
– fair value gains/(losses) | 9,821 | (23,722 | ) | 756 | ||||||||
– fair value gains transferred to income statement on disposal | (648 | ) | (1,316 | ) | (1,826 | ) | ||||||
– amounts transferred to the income statement in respect of impairment losses | 2,391 | 1,779 | 86 | |||||||||
– income taxes | (747 | ) | 1,355 | 11 | ||||||||
Cash flow hedges | 772 | 124 | (791 | ) | ||||||||
– fair value gains/(losses) | 481 | (1,720 | ) | 625 | ||||||||
– fair value (gains)/losses transferred to income statement | 808 | 1,754 | (1,886 | ) | ||||||||
– income taxes | (517 | ) | 90 | 470 | ||||||||
Actuarial gains/(losses) on defined benefit plans | (2,608 | ) | (1,175 | ) | 1,525 | |||||||
– before income taxes | (3,586 | ) | (1,609 | ) | 2,167 | |||||||
– income taxes | 978 | 434 | (642 | ) | ||||||||
Share of other comprehensive income/(expense) of associates and joint ventures | 149 | (559 | ) | 372 | ||||||||
Exchange differences | 4,975 | (12,123 | ) | 5,946 | ||||||||
Other comprehensive income/(expense) for the year, net of tax | 14,105 | (35,637 | ) | 6,079 | ||||||||
Total comprehensive income/(expense) for the year | 20,799 | (29,139 | ) | 26,534 | ||||||||
Total comprehensive income/(expense) for the year attributable to: | ||||||||||||
– shareholders of the parent company | 19,529 | (29,143 | ) | 24,866 | ||||||||
– minority interests | 1,270 | 4 | 1,668 | |||||||||
20,799 | (29,139 | ) | 26,534 | |||||||||
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2009 | 2008 | |||||||||||
Notes | US$m | US$m | ||||||||||
ASSETS | ||||||||||||
Cash and balances at central banks | 60,655 | 52,396 | ||||||||||
Items in the course of collection from other banks | 6,395 | 6,003 | ||||||||||
Hong Kong Government certificates of indebtedness | 17,463 | 15,358 | ||||||||||
Trading assets | 16 | 421,381 | 427,329 | |||||||||
Financial assets designated at fair value | 17 | 37,181 | 28,533 | |||||||||
Derivatives | 18 | 250,886 | 494,876 | |||||||||
Loans and advances to banks | 179,781 | 153,766 | ||||||||||
Loans and advances to customers | 896,231 | 932,868 | ||||||||||
Financial investments | 19 | 369,158 | 300,235 | |||||||||
Other assets | 25 | 44,534 | 37,822 | |||||||||
Current tax assets | 2,937 | 2,552 | ||||||||||
Prepayments and accrued income | 12,423 | 15,797 | ||||||||||
Interests in associates and joint ventures | 21 | 13,011 | 11,537 | |||||||||
Goodwill and intangible assets | 22 | 29,994 | 27,357 | |||||||||
Property, plant and equipment | 23 | 13,802 | 14,025 | |||||||||
Deferred tax assets | 11 | 8,620 | 7,011 | |||||||||
Total assets | 2,364,452 | 2,527,465 | ||||||||||
LIABILITIES AND EQUITY | ||||||||||||
Liabilities | ||||||||||||
Hong Kong currency notes in circulation | 17,463 | 15,358 | ||||||||||
Deposits by banks | 124,872 | 130,084 | ||||||||||
Customer accounts | 1,159,034 | 1,115,327 | ||||||||||
Items in the course of transmission to other banks | 5,734 | 7,232 | ||||||||||
Trading liabilities | 26 | 268,130 | 247,652 | |||||||||
Financial liabilities designated at fair value | 27 | 80,092 | 74,587 | |||||||||
Derivatives | 18 | 247,646 | 487,060 | |||||||||
Debt securities in issue | 28 | 146,896 | 179,693 | |||||||||
Other liabilities | 29 | 68,640 | 72,384 | |||||||||
Current tax liabilities | 2,140 | 1,822 | ||||||||||
Liabilities under insurance contracts | 30 | 53,707 | 43,683 | |||||||||
Accruals and deferred income | 13,190 | 15,448 | ||||||||||
Provisions | 31 | 1,965 | 1,730 | |||||||||
Deferred tax liabilities | 11 | 1,837 | 1,855 | |||||||||
Retirement benefit liabilities | 8 | 6,967 | 3,888 | |||||||||
Subordinated liabilities | 32 | 30,478 | 29,433 | |||||||||
Total liabilities | 2,228,791 | 2,427,236 | ||||||||||
Equity | ||||||||||||
Called up share capital | 37 | 8,705 | 6,053 | |||||||||
Share premium account | 8,413 | 8,463 | ||||||||||
Other equity instruments | 2,133 | 2,133 | ||||||||||
Other reserves | 22,236 | (3,747 | ) | |||||||||
Retained earnings | 86,812 | 80,689 | ||||||||||
Total shareholders’ equity | 128,299 | 93,591 | ||||||||||
Minority interests | 36 | 7,362 | 6,638 | |||||||||
Total equity | 135,661 | 100,229 | ||||||||||
Total equity and liabilities | 2,364,452 | 2,527,465 | ||||||||||
S K Green,Group Chairman | ||||
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Consolidated statement of cash flows / Consolidated statement of changes in equity |
2009 | 2008 | 2007 | ||||||||||||||
Notes | US$m | US$m | US$m | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Profit before tax | 7,079 | 9,307 | 24,212 | |||||||||||||
Adjustments for: | ||||||||||||||||
– non-cash items included in profit before tax | 38 | 31,384 | 41,305 | 21,701 | ||||||||||||
– change in operating assets | 38 | (20,803 | ) | 18,123 | (176,538 | ) | ||||||||||
– change in operating liabilities | 38 | 14,645 | (63,413 | ) | 250,095 | |||||||||||
– elimination of exchange differences2 | (19,024 | ) | 36,132 | (18,602 | ) | |||||||||||
– net gain from investing activities | (1,910 | ) | (4,195 | ) | (2,209 | ) | ||||||||||
– share of profits in associates and joint ventures | (1,781 | ) | (1,661 | ) | (1,503 | ) | ||||||||||
– dividends received from associates | 414 | 655 | 363 | |||||||||||||
– contributions paid to defined benefit plans | (974 | ) | (719 | ) | (1,393 | ) | ||||||||||
– tax paid | (2,132 | ) | (5,114 | ) | (5,088 | ) | ||||||||||
Net cash generated from operating activities | 6,898 | 30,420 | 91,038 | |||||||||||||
Cash flows from investing activities | ||||||||||||||||
Purchase of financial investments | (304,629 | ) | (277,023 | ) | (260,980 | ) | ||||||||||
Proceeds from the sale and maturity of financial investments | 241,341 | 223,138 | �� | 238,647 | ||||||||||||
Purchase of property, plant and equipment | (2,000 | ) | (2,985 | ) | (2,720 | ) | ||||||||||
Proceeds from the sale of property, plant and equipment | 4,701 | 2,467 | 3,178 | |||||||||||||
Proceeds from the sale of loan portfolios | 4,852 | 9,941 | 1,665 | |||||||||||||
Net purchase of intangible assets | (956 | ) | (1,169 | ) | (950 | ) | ||||||||||
Net cash inflow/(outflow) from acquisition of or increase in stake of subsidiaries | (677 | ) | 1,313 | (623 | ) | |||||||||||
Net cash inflow from disposal of subsidiaries | 45 | 2,979 | 187 | |||||||||||||
Net cash outflow from acquisition of or increase in stake of associates | (62 | ) | (355 | ) | (351 | ) | ||||||||||
Net cash inflow from the consolidation of funds | – | 16,500 | 1,600 | |||||||||||||
Proceeds from disposal of associates and joint ventures | 308 | 101 | 69 | |||||||||||||
Net cash used in investing activities | (57,077 | ) | (25,093 | ) | (20,278 | ) | ||||||||||
Cash flows from financing activities | ||||||||||||||||
Issue of ordinary share capital | 18,398 | 467 | 474 | |||||||||||||
– rights issue | 18,326 | – | – | |||||||||||||
– other | 72 | 467 | 474 | |||||||||||||
Issue of other equity instruments | – | 2,133 | – | |||||||||||||
Net (purchases)/sales of own shares for market-making and investment purposes | (176 | ) | (194 | ) | 126 | |||||||||||
Purchases of own shares to meet share awards and share option awards | (51 | ) | (808 | ) | (636 | ) | ||||||||||
On exercise of share options | 12 | 27 | 104 | |||||||||||||
Subordinated loan capital issued | 2,959 | 7,094 | 5,705 | |||||||||||||
Subordinated loan capital repaid | (4,637 | ) | (350 | ) | (689 | ) | ||||||||||
Dividends paid to shareholders of the parent company | (4,264 | ) | (7,211 | ) | (6,003 | ) | ||||||||||
Dividends paid to minority interests | (702 | ) | (714 | ) | (718 | ) | ||||||||||
Dividends paid to holders of other equity instruments | (269 | ) | (92 | ) | – | |||||||||||
Net cash generated from/(used in) financing activities | 11,270 | 352 | (1,637 | ) | ||||||||||||
Net increase/(decrease) in cash and cash equivalents | (38,909 | ) | 5,679 | 69,123 | ||||||||||||
Cash and cash equivalents at 1 January | 278,872 | 297,009 | 215,486 | |||||||||||||
Exchange differences in respect of cash and cash equivalents | 10,803 | (23,816 | ) | 12,400 | ||||||||||||
Cash and cash equivalents at 31 December | 38 | 250,766 | 278,872 | 297,009 | ||||||||||||
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2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other reserves | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | Available- | Share- | Total | |||||||||||||||||||||||||||||||||||||||||||||
Called up | equity | for-sale | Cash flow | Foreign | based | share- | ||||||||||||||||||||||||||||||||||||||||||
share | Share | instru- | Retained | fair value | hedging | exchange | payment | Merger | holders’ | Minority | Total | |||||||||||||||||||||||||||||||||||||
capital | premium | 4 | ments | earnings | 3,5 | reserve | reserve | 6 | reserve | reserve | reserve | 3,7 | equity | interests | equity | |||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||||||||
At 1 January | 6,053 | 8,463 | 2,133 | 80,689 | (20,550 | ) | (806 | ) | (1,843 | ) | 1,995 | 17,457 | 93,591 | 6,638 | 100,229 | |||||||||||||||||||||||||||||||||
Profit for the year | – | – | – | 5,834 | – | – | – | – | – | 5,834 | 860 | 6,694 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (net of tax) | – | – | – | (2,536 | ) | 10,603 | 791 | 4,837 | – | – | 13,695 | 410 | 14,105 | |||||||||||||||||||||||||||||||||||
Available-for-sale investments | – | – | – | – | 10,603 | – | – | – | – | 10,603 | 214 | 10,817 | ||||||||||||||||||||||||||||||||||||
Cash flow hedges | – | – | – | – | – | 791 | – | – | – | 791 | (19 | ) | 772 | |||||||||||||||||||||||||||||||||||
Actuarial gains/(losses) on defined benefit plans | – | – | – | (2,685 | ) | – | – | – | – | – | (2,685 | ) | 77 | (2,608 | ) | |||||||||||||||||||||||||||||||||
Share of other comprehensive income of associates and joint ventures | – | – | – | 149 | – | – | – | – | – | 149 | – | 149 | ||||||||||||||||||||||||||||||||||||
Exchange differences | – | – | – | – | – | – | 4,837 | – | – | 4,837 | 138 | 4,975 | ||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year | – | – | – | 3,298 | 10,603 | 791 | 4,837 | – | – | 19,529 | 1,270 | 20,799 | ||||||||||||||||||||||||||||||||||||
Shares issued under employee share plans | 4 | 69 | – | – | – | – | – | – | – | 73 | – | 73 | ||||||||||||||||||||||||||||||||||||
Shares issued in lieu of dividends and amounts arising thereon4 | 118 | (119 | ) | – | 1,670 | – | – | – | – | – | 1,669 | – | 1,669 | |||||||||||||||||||||||||||||||||||
Shares issued in respect of rights issue | 2,530 | – | – | – | – | – | – | – | 15,796 | 18,326 | – | 18,326 | ||||||||||||||||||||||||||||||||||||
Dividends to shareholders | – | – | – | (5,639 | ) | – | – | – | – | – | (5,639 | ) | (832 | ) | (6,471 | ) | ||||||||||||||||||||||||||||||||
Tax credit on dividends | – | – | – | 50 | – | – | – | – | – | 50 | – | 50 | ||||||||||||||||||||||||||||||||||||
Own shares adjustment | – | – | – | (227 | ) | – | – | – | – | – | (227 | ) | – | (227 | ) | |||||||||||||||||||||||||||||||||
Exercise and lapse of share options and vesting of share awards | – | – | – | 807 | – | – | – | (769 | ) | – | 38 | – | 38 | |||||||||||||||||||||||||||||||||||
Cost of share-based payment arrangements | – | – | – | – | – | – | – | 683 | – | 683 | – | 683 | ||||||||||||||||||||||||||||||||||||
Income taxes on share-based payments | – | – | – | 9 | – | – | – | – | – | 9 | – | 9 | ||||||||||||||||||||||||||||||||||||
Other movements | – | – | – | 210 | (18 | ) | (11 | ) | – | 16 | – | 197 | 77 | 274 | ||||||||||||||||||||||||||||||||||
Transfers7 | – | – | – | 5,945 | – | – | – | – | (5,945 | ) | – | – | – | |||||||||||||||||||||||||||||||||||
Net increase in minority interest arising on acquisitions, disposals and capital issuance | – | – | – | – | – | – | – | – | – | – | 209 | 209 | ||||||||||||||||||||||||||||||||||||
At 31 December | 8,705 | 8,413 | 2,133 | 86,812 | (9,965 | ) | (26 | ) | 2,994 | 1,925 | 27,308 | 128,299 | 7,362 | 135,661 | ||||||||||||||||||||||||||||||||||
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Consolidated statement of changes in equity |
�� | 2008 | |||||||||||||||||||||||||||||||||||||||||||||||
Other reserves | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | Available- | Share- | Total | |||||||||||||||||||||||||||||||||||||||||||||
Called up | equity | for-sale | Cash flow | Foreign | based | share- | ||||||||||||||||||||||||||||||||||||||||||
share | Share | instru- | Retained | fair value | hedging | exchange | payment | Merger | holders’ | Minority | Total | |||||||||||||||||||||||||||||||||||||
capital | premium | 4 | ments | 8 | earnings | 3,5 | reserve | reserve | 6 | reserve | reserve | reserve | 3,7 | equity | interests | equity | ||||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||||||||||||||
At 1 January | 5,915 | 8,134 | – | 81,097 | 850 | (917 | ) | 10,055 | 1,968 | 21,058 | 128,160 | 7,256 | 135,416 | |||||||||||||||||||||||||||||||||||
Profit for the year | – | – | – | 5,728 | – | – | – | – | – | 5,728 | 770 | 6,498 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (net of tax) | – | – | – | (1,605 | ) | (21,474 | ) | 106 | (11,898 | ) | – | – | (34,871 | ) | (766 | ) | (35,637 | ) | ||||||||||||||||||||||||||||||
Available-for-sale investments | – | – | – | – | (21,474 | ) | – | – | – | – | (21,474 | ) | (430 | ) | (21,904 | ) | ||||||||||||||||||||||||||||||||
Cash flow hedges | – | – | – | – | – | 106 | – | – | – | 106 | 18 | 124 | ||||||||||||||||||||||||||||||||||||
Actuarial gains/(losses) on defined benefit plans | – | – | – | (1,046 | ) | – | – | – | – | – | (1,046 | ) | (129 | ) | (1,175 | ) | ||||||||||||||||||||||||||||||||
Share of other comprehensive income of associates and joint ventures | – | – | – | (559 | ) | – | – | – | – | – | (559 | ) | – | (559 | ) | |||||||||||||||||||||||||||||||||
Exchange differences | – | – | – | – | – | – | (11,898 | ) | – | – | (11,898 | ) | (225 | ) | (12,123 | ) | ||||||||||||||||||||||||||||||||
Total comprehensive income for the year | – | – | – | 4,123 | (21,474 | ) | 106 | (11,898 | ) | – | – | (29,143 | ) | 4 | (29,139 | ) | ||||||||||||||||||||||||||||||||
Shares issued under employee share plans | 20 | 450 | – | – | – | – | – | – | – | 470 | – | 470 | ||||||||||||||||||||||||||||||||||||
Shares issued in lieu of dividends and amounts arising thereon4 | 118 | (121 | ) | – | 3,596 | – | – | – | – | – | 3,593 | – | 3,593 | |||||||||||||||||||||||||||||||||||
Capital securities issued8 | – | – | 2,133 | – | – | – | – | – | – | 2,133 | – | 2,133 | ||||||||||||||||||||||||||||||||||||
Dividends to shareholders | – | – | – | (11,301 | ) | – | – | – | – | – | (11,301 | ) | (813 | ) | (12,114 | ) | ||||||||||||||||||||||||||||||||
Own shares adjustment | – | – | – | (1,002 | ) | – | – | – | – | – | (1,002 | ) | – | (1,002 | ) | |||||||||||||||||||||||||||||||||
Exercise and lapse of share options and vesting of share awards | – | – | – | 827 | – | – | – | (848 | ) | – | (21 | ) | – | (21 | ) | |||||||||||||||||||||||||||||||||
Cost of share-based payment arrangements | – | – | – | – | – | – | – | 819 | – | 819 | – | 819 | ||||||||||||||||||||||||||||||||||||
Other movements | – | – | – | (252 | ) | 74 | 5 | – | 56 | – | (117 | ) | 73 | (44 | ) | |||||||||||||||||||||||||||||||||
Transfers7 | – | – | – | 3,601 | – | – | – | – | (3,601 | ) | – | – | – | |||||||||||||||||||||||||||||||||||
Net increase in minority interest arising on acquisitions, disposals and capital issuance | – | – | – | – | – | – | – | – | – | – | 118 | 118 | ||||||||||||||||||||||||||||||||||||
At 31 December | 6,053 | 8,463 | 2,133 | 80,689 | (20,550 | ) | (806 | ) | (1,843 | ) | 1,995 | 17,457 | 93,591 | 6,638 | 100,229 | |||||||||||||||||||||||||||||||||
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2007 | ||||||||||||||||||||||||||||||||||||||||||||
Other reserves | ||||||||||||||||||||||||||||||||||||||||||||
Available- | Share- | Total | ||||||||||||||||||||||||||||||||||||||||||
Called up | for-sale | Cash flow | Foreign | based | share- | |||||||||||||||||||||||||||||||||||||||
share | Share | Retained | fair value | hedging | exchange | payment | Merger | holders’ | Minority | Total | ||||||||||||||||||||||||||||||||||
capital | premium | 4 | earnings | 3,5 | reserve | reserve | 6 | reserve | reserve | reserve | 3,7 | equity | interests | equity | ||||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||||||||
At 1 January | 5,786 | 7,789 | 65,397 | 2,005 | (101 | ) | 4,307 | 2,111 | 21,058 | 108,352 | 6,576 | 114,928 | ||||||||||||||||||||||||||||||||
Profit for the year | – | – | 19,133 | – | – | – | – | – | 19,133 | 1,322 | 20,455 | |||||||||||||||||||||||||||||||||
Other comprehensive income (net of tax) | – | – | 1,951 | (1,156 | ) | (810 | ) | 5,748 | – | – | 5,733 | 346 | 6,079 | |||||||||||||||||||||||||||||||
Available-for-sale investments | – | – | – | (1,156 | ) | – | – | – | – | (1,156 | ) | 183 | (973 | ) | ||||||||||||||||||||||||||||||
Cash flow hedges | – | – | – | – | (810 | ) | – | – | – | (810 | ) | 19 | (791 | ) | ||||||||||||||||||||||||||||||
Actuarial gains/(losses) on defined benefit plans | – | – | 1,579 | – | – | – | – | – | 1,579 | (54 | ) | 1,525 | ||||||||||||||||||||||||||||||||
Share of other comprehensive income of associates and joint ventures | – | – | 372 | – | – | – | – | – | 372 | – | 372 | |||||||||||||||||||||||||||||||||
Exchange differences | – | – | – | – | – | 5,748 | – | – | 5,748 | 198 | 5,946 | |||||||||||||||||||||||||||||||||
Total comprehensive income for year | – | – | 21,084 | (1,156 | ) | (810 | ) | 5,748 | – | – | 24,866 | 1,668 | 26,534 | |||||||||||||||||||||||||||||||
Shares issued under employee share plans | 17 | 460 | – | – | – | – | – | – | 477 | – | 477 | |||||||||||||||||||||||||||||||||
Shares issued in lieu of dividends and amounts arising thereon4 | 112 | (115 | ) | 4,354 | – | – | – | – | – | 4,351 | – | 4,351 | ||||||||||||||||||||||||||||||||
Dividends to shareholders | – | – | (10,241 | ) | – | – | – | – | – | (10,241 | ) | (788 | ) | (11,029 | ) | |||||||||||||||||||||||||||||
Own shares adjustment | – | – | (510 | ) | – | – | – | – | – | (510 | ) | – | (510 | ) | ||||||||||||||||||||||||||||||
Exercise and lapse of share options and vesting of share awards | – | – | 758 | – | – | – | (751 | ) | – | 7 | – | 7 | ||||||||||||||||||||||||||||||||
Cost of share-based payment arrangements | – | – | – | – | – | – | 870 | – | 870 | – | 870 | |||||||||||||||||||||||||||||||||
Income taxes on share-based payments | – | – | (65 | ) | – | – | – | – | – | (65 | ) | – | (65 | ) | ||||||||||||||||||||||||||||||
Other movements | – | – | 320 | 1 | (6 | ) | – | (262 | ) | – | 53 | (91 | ) | (38 | ) | |||||||||||||||||||||||||||||
Net increase in minority interest arising on acquisitions, disposals and capital issuance | – | – | – | – | – | – | – | – | – | (109 | ) | (109 | ) | |||||||||||||||||||||||||||||||
At 31 December | 5,915 | 8,134 | 81,097 | 850 | (917 | ) | 10,055 | 1,968 | 21,058 | 128,160 | 7,256 | 135,416 | ||||||||||||||||||||||||||||||||
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HSBC Holdings balance sheet / HSBC Holdings statement of cash flows |
2009 | 2008 | |||||||||||
Notes | US$m | US$m | ||||||||||
ASSETS | ||||||||||||
Cash at bank and in hand: | ||||||||||||
– balances with HSBC undertakings | 224 | 443 | ||||||||||
Derivatives | 18 | 2,981 | 3,682 | |||||||||
Loans and advances to HSBC undertakings | 23,212 | 11,804 | ||||||||||
Financial investments | 2,455 | 2,629 | ||||||||||
Other assets | 4 | 25 | ||||||||||
Current tax assets | 562 | – | ||||||||||
Prepayments and accrued income | 102 | 58 | ||||||||||
Investments in subsidiaries | 24 | 86,247 | 81,993 | |||||||||
Property, plant and equipment | 6 | 6 | ||||||||||
Deferred tax assets | 11 | – | 42 | |||||||||
Total assets | 115,793 | 100,682 | ||||||||||
LIABILITIES AND EQUITY | ||||||||||||
Liabilities | ||||||||||||
Amounts owed to HSBC undertakings | 3,711 | 4,042 | ||||||||||
Financial liabilities designated at fair value | 27 | 16,909 | 16,389 | |||||||||
Derivatives | 18 | 362 | 1,324 | |||||||||
Debt securities in issue | 28 | 2,839 | – | |||||||||
Other liabilities | 29 | 1,257 | 1,816 | |||||||||
Current tax liabilities | – | 219 | ||||||||||
Accruals and deferred income | 419 | 288 | ||||||||||
Deferred tax liabilities | 11 | 14 | – | |||||||||
Subordinated liabilities | 32 | 14,406 | 14,017 | |||||||||
Total liabilities | 39,917 | 38,095 | ||||||||||
Equity | ||||||||||||
Called up share capital | 37 | 8,705 | 6,053 | |||||||||
Share premium account | 8,413 | 8,463 | ||||||||||
Other equity instruments | 37 | 2,133 | 2,133 | |||||||||
Merger reserve and other reserves | 35,127 | 25,341 | ||||||||||
Other reserves | 3,642 | 3,503 | ||||||||||
Retained earnings | 17,856 | 17,094 | ||||||||||
Total equity | 75,876 | 62,587 | ||||||||||
Total equity and liabilities | 115,793 | 100,682 | ||||||||||
S K Green,Group Chairman | ||||
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2009 | 2008 | |||||||||||
Notes | US$m | US$m | ||||||||||
Cash flows from operating activities | ||||||||||||
Profit before tax | (2,058 | ) | 7,931 | |||||||||
Adjustments for: | ||||||||||||
– non-cash items included in profit before tax | 38 | 5,974 | 3,619 | |||||||||
– change in operating assets | 38 | (11,077 | ) | 3,263 | ||||||||
– change in operating liabilities | 38 | 2,040 | (2,035 | ) | ||||||||
– elimination of exchange differences2 | 1 | – | ||||||||||
– tax (paid)/received | 266 | (370 | ) | |||||||||
Net cash (used in)/generated from operating activities | (4,854 | ) | 12,408 | |||||||||
Cash flows from investing activities | ||||||||||||
Purchase of financial investments | – | (300 | ) | |||||||||
Proceeds from sale of financial investments | 275 | 349 | ||||||||||
Purchase of property, plant and equipment | (2 | ) | (5 | ) | ||||||||
Net cash outflow from acquisition of or increase in stake of subsidiaries | (10,344 | ) | (14,320 | ) | ||||||||
Net cash used in investing activities | (10,071 | ) | (14,276 | ) | ||||||||
Cash flows from financing activities | ||||||||||||
Issue of ordinary share capital | 18,333 | 467 | ||||||||||
– rights issue | 18,261 | – | ||||||||||
– other | 72 | 467 | ||||||||||
Issue of other equity instruments | – | 2,133 | ||||||||||
Purchases of own shares to meet share awards and share option awards | – | (54 | ) | |||||||||
On exercise of share options | 12 | 3 | ||||||||||
Subordinated loan capital issued | 2,456 | 6,705 | ||||||||||
Subordinated loan capital repaid | (4,380 | ) | – | |||||||||
Debt securities issued | 2,818 | – | ||||||||||
Dividends paid | (4,264 | ) | (7,211 | ) | ||||||||
Dividends paid to holders of other equity instruments | (269 | ) | (92 | ) | ||||||||
Net cash generated from financing activities | 14,706 | 1,951 | ||||||||||
Net increase/(decrease) in cash and cash equivalents | (219 | ) | 83 | |||||||||
Cash and cash equivalents at 1 January | 443 | 360 | ||||||||||
Cash and cash equivalents at 31 December | 38 | 224 | 443 | |||||||||
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HSBC Holdings statement of changes in equity |
2009 | ||||||||||||||||||||||||||||||||||||
Other reserves | ||||||||||||||||||||||||||||||||||||
Other | Available- | Share- | Total | |||||||||||||||||||||||||||||||||
Called up | equity | for-sale | Other | based | Merger | share- | ||||||||||||||||||||||||||||||
share | Share | instru- | Retained | fair value | paid-in | payment | and other | holders’ | ||||||||||||||||||||||||||||
capital | premium | 4 | ments | earnings | 9 | reserve | capital | reserve | reserves | 7 | equity | |||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
At 1 January | 6,053 | 8,463 | 2,133 | 17,094 | 190 | 1,318 | 1,995 | 25,341 | 62,587 | |||||||||||||||||||||||||||
Profit for the year | – | – | – | (1,096 | ) | – | – | – | – | (1,096 | ) | |||||||||||||||||||||||||
Other comprehensive income (net of tax) | – | – | – | – | 63 | – | – | – | 63 | |||||||||||||||||||||||||||
Available-for-sale investments | – | – | – | – | 103 | – | – | – | 103 | |||||||||||||||||||||||||||
Income tax | – | – | – | – | (40 | ) | – | – | – | (40 | ) | |||||||||||||||||||||||||
Total comprehensive income for the year | – | – | – | (1,096 | ) | 63 | – | – | – | (1,033 | ) | |||||||||||||||||||||||||
Shares issued under employee share plans | 4 | 69 | – | – | – | – | – | – | 73 | |||||||||||||||||||||||||||
Shares issued in lieu of dividends and amounts arising thereon4 | 118 | (119 | ) | – | 1,670 | – | – | – | – | 1,669 | ||||||||||||||||||||||||||
Shares issued in respect of rights issue | 2,530 | – | – | – | – | – | – | 15,731 | 18,261 | |||||||||||||||||||||||||||
Dividends to shareholders | – | – | – | (5,639 | ) | – | – | – | – | (5,639 | ) | |||||||||||||||||||||||||
Own shares adjustment | – | – | – | (188 | ) | – | – | – | – | (188 | ) | |||||||||||||||||||||||||
Exercise and lapse of share options and vesting of share awards | – | – | – | – | – | 146 | (146 | ) | – | – | ||||||||||||||||||||||||||
Cost of share-based payment arrangements | – | – | – | – | – | – | 163 | – | 163 | |||||||||||||||||||||||||||
Income taxes on share- based payments | – | – | – | 19 | – | – | – | – | 19 | |||||||||||||||||||||||||||
Equity investments granted to employees of subsidiaries under employee share plans | – | – | – | – | – | – | (99 | ) | – | (99 | ) | |||||||||||||||||||||||||
Other movements | – | – | – | 51 | – | – | 12 | – | 63 | |||||||||||||||||||||||||||
Transfers7 | – | – | – | 5,945 | – | – | – | (5,945 | ) | – | ||||||||||||||||||||||||||
At 31 December | 8,705 | 8,413 | 2,133 | 17,856 | 253 | 1,464 | 1,925 | 35,127 | 75,876 | |||||||||||||||||||||||||||
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2008 | ||||||||||||||||||||||||||||||||||||
Other reserves | ||||||||||||||||||||||||||||||||||||
Other | Available- | Share- | Total | |||||||||||||||||||||||||||||||||
Called up | equity | for-sale | Other | based | Merger | share- | ||||||||||||||||||||||||||||||
share | Share | instru- | Retained | fair value | paid-in | payment | and other | holders’ | ||||||||||||||||||||||||||||
capital | premium | 4 | ments | 8 | earnings | 9 | reserve | capital | reserve | reserves | 7 | equity | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
At 1 January | 5,915 | 8,134 | – | 14,209 | 482 | 1,181 | 1,968 | 28,942 | 60,831 | |||||||||||||||||||||||||||
Profit for the year | – | – | – | 7,644 | – | – | – | – | 7,644 | |||||||||||||||||||||||||||
Other comprehensive income (net of tax) | – | – | – | – | (292 | ) | – | – | – | (292 | ) | |||||||||||||||||||||||||
Available-for-sale investments | – | – | – | – | (356 | ) | – | – | – | (356 | ) | |||||||||||||||||||||||||
Income tax | – | – | – | – | 64 | – | – | – | 64 | |||||||||||||||||||||||||||
Total comprehensive income for the year | – | – | – | 7,644 | (292 | ) | – | – | – | 7,352 | ||||||||||||||||||||||||||
Shares issued under employee share plans | 20 | 450 | – | – | – | – | – | – | 470 | |||||||||||||||||||||||||||
Shares issued in lieu of dividends and amounts arising thereon4 | 118 | (121 | ) | – | 3,596 | – | – | – | – | 3,593 | ||||||||||||||||||||||||||
Capital securities issued8 | – | – | 2,133 | – | – | – | – | 2,133 | ||||||||||||||||||||||||||||
Dividends to shareholders | – | – | – | (11,301 | ) | – | – | – | – | (11,301 | ) | |||||||||||||||||||||||||
Own shares adjustment | – | – | – | (647 | ) | – | – | – | – | (647 | ) | |||||||||||||||||||||||||
Exercise and lapse of share options and vesting of share awards | – | – | – | – | – | 137 | (75 | ) | – | 62 | ||||||||||||||||||||||||||
Cost of share-based payment arrangements | – | – | – | – | – | – | 14 | – | 14 | |||||||||||||||||||||||||||
Income taxes on share-based payments | – | – | – | (2 | ) | – | – | – | – | (2 | ) | |||||||||||||||||||||||||
Equity investments granted to employees of subsidiaries under employee share plans | – | – | – | – | – | – | 87 | – | 87 | |||||||||||||||||||||||||||
Other movements | – | – | – | (6 | ) | – | – | 1 | – | (5 | ) | |||||||||||||||||||||||||
Transfers7 | – | – | – | 3,601 | – | – | – | (3,601 | ) | – | ||||||||||||||||||||||||||
At 31 December | 6,053 | 8,463 | 2,133 | 17,094 | 190 | 1,318 | 1,995 | 25,341 | 62,587 | |||||||||||||||||||||||||||
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Footnotes |
1 | The effect of the bonus element within the rights issue has been included within the calculation of basic and diluted earnings per share for the period, through an adjustment to the weighted average number of ordinary and dilutive potential ordinary shares outstanding. Comparative data has been restated on this basis. | |
2 | Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense. | |
3 | Cumulative goodwill amounting to US$5,138 million has been charged against reserves in respect of acquisitions of subsidiaries prior to 1 January 1998, including US$3,469 million charged against the merger reserve arising on the acquisition of HSBC Bank plc. The balance of US$1,669 million has been charged against retained earnings. | |
4 | Share premium includes the deduction of US$1 million in respect of issuance costs incurred during the year (2008: US$3 million; 2007: US$3 million). | |
5 | Retained earnings include 179,964,968 (US$2,572 million) of own shares held within HSBC’s insurance business, retirement funds for the benefit of policyholders or beneficiaries within employee trusts for the settlement of shares expected to be delivered under employee share schemes or bonus plans, and the market-making activities in Global Markets (2008: 194,751,829 (US$3,094 million); 2007: 158,706,463 (US$2,649 million). | |
6 | Amounts transferred to the income statement in respect of cash flow hedges include US$502 million (2008: US$152 million; 2007: US$57 million) taken to ‘Net interest income’ and US$306 million (2008: US$1,602 million; 2007: US$1,829 million) taken to ‘Net trading income’. | |
7 | Statutory share premium relief under Section 131 of the Companies Act 1985 (the ‘Act’) was taken in respect of the acquisition of HSBC Bank plc in 1992, HSBC France in 2000 and HSBC Finance Corporation in 2003 and the shares issued were recorded at their nominal value only. In HSBC’s consolidated financial statements the fair value differences of US$8,290 million in respect of HSBC France and US$12,768 million in respect of HSBC Finance Corporation were recognised in the merger reserve. The merger reserve created on the acquisition of HSBC Finance Corporation subsequently became attached to HSBC Overseas Holdings (UK) Limited (‘HOHU’), following a number of inter-group reorganisations. At 31 December 2009, an amount of US$5,945 million (2008: US$3,601 million) was transferred from this reserve to retained earnings as a result of impairment in HSBC Holdings’ investment in HOHU. During 2009, pursuant to section 131 of the Companies Act 1985, statutory share premium relief was taken in respect of the rights issue and US$15,796 million was recognised in the merger reserve. The merger reserve includes the deduction of US$614 million in respect of costs relating to the rights issue, of which US$149 million was subsequently transferred to the income statement. Of this US$149 million, US$121 million was a loss arising from accounting for the agreement with the underwriters as a contingent forward contract. The merger reserve excludes the loss of US$344 million on a forward foreign exchange contract associated with hedging the proceeds of the rights issue. For further details see Note 41 on the Financial Statements. | |
8 | In April 2008, HSBC Holdings issued US$2,200 million of Perpetual Subordinated Capital Securities, including US$67 million of issuance costs, which are classified as equity under IFRSs. | |
9 | Retained earnings include 38,446,053 (US$562 million) of own shares held to fund employee share plans (2008: 36,995,330 (US$562 million)). |
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Note 1 |
1 | Basis of preparation |
(a) | Compliance with International Financial Reporting Standards | |
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 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 2009, there were no unendorsed standards effective for the year ended 31 December 2009 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 2009 are prepared in accordance with IFRSs as issued by the IASB. | ||
IFRSs comprise accounting standards issued by the IASB and its predecessor body as well as interpretations issued by the International Financial Reporting Interpretations Committee (‘IFRIC’) and its predecessor body. | ||
During 2009, HSBC adopted the following significant standards and amendments to standards: |
• | ‘Classification of Rights Issues – Amendment to IAS 32’, (‘the amendment’) which is effective for annual periods beginning on or after 1 February 2010, with early adoption permitted. HSBC has elected to adopt the amendment in advance of the effective date and, as required by IAS 8, has applied the amendment retrospectively. The amendment requires that rights issues, options or warrants to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights issues, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. The offer of rights by HSBC Holdings plc to its shareholders on 20 March 2009 was accounted for as an equity instrument, as required by the amendment, in the consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings. | ||
• | IFRS 8 ‘Operating Segments’ (‘IFRS 8’), which replaced IAS 14 ‘Segment Reporting’ requires an entity to disclose information about its segments which enables users to evaluate the nature and financial effects of its business activities and the economic environments in which it operates. HSBC’s operating segments are organised into six geographical regions; Europe, Hong Kong, Rest of Asia-Pacific, Middle East, North America and Latin America. Due to the nature of the Group, HSBC’s chief operating decision-maker regularly reviews operating activity on a number of bases, including by geographical region, customer group and global business, and retail businesses by geographical region. HSBC’s IFRS 8 operating segments were determined to be geographical regions because the chief operating decision-maker primarily uses information on geographical regions in order to make decisions about allocating resources and assessing performance. | ||
IFRS 8 requires segment financial information to be reported using the same measures reported to the chief operating decision-maker for the purpose of making decisions about allocating resources to the operating segments and assessing their performance. Information provided to the chief operating decision-maker of HSBC to make decisions about allocating resources and assessing performance of operating segments is measured in accordance with IFRSs. | |||
• | IAS 1 ‘Presentation of Financial Statements’ (‘IAS 1’) (Revised 2007) aims to improve users’ ability to analyse and compare information given in financial statements. The adoption of the revised standard had no effect on the results reported in HSBC’s consolidated financial statements or the separate financial statements of HSBC Holdings. It did, however, result in certain presentational changes in HSBC’s consolidated financial statements, including: |
– | the presentation of all items of income and expenditure in two financial statements, the ‘Consolidated income statement’ and the ‘Consolidated statement of comprehensive income’; and | ||
– | the presentation of the ‘Consolidated statement of changes in equity’ as a financial statement replaces the previous ‘Equity’ note on the financial statements. |
• | An amendment to IFRS 7 ‘Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments’. The most significant additional disclosures required by this amendment in the consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings include tables of fair |
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Note 1 |
value measurements disclosing the source of inputs using a three level fair value hierarchy, and reconciliations of the movements between opening and closing balances of Level 3 financial instruments, being those measured at fair value using a valuation technique with significant unobservable inputs. | |||
During 2009, in addition to the above, HSBC adopted a number of standards, interpretations and amendments thereto which had an insignificant effect on the consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings. | |||
(b) | Differences between IFRSs and Hong Kong Financial Reporting Standards | ||
There are no significant differences between IFRSs and Hong Kong Financial Reporting Standards in terms of their application to HSBC and consequently there would be no significant differences had the financial statements been prepared in accordance with Hong Kong Financial Reporting Standards. The Notes on the Financial Statements, taken together with the Report of the Directors, include the aggregate of all disclosures necessary to satisfy IFRSs and Hong Kong reporting requirements. | |||
(c) | Presentation of information | ||
Disclosures under IFRS 4 ‘Insurance Contracts’ (‘IFRS 4’) and IFRS 7 concerning the nature and extent of risks relating to insurance contracts and financial instruments have been included in the audited sections of the ‘Report of the Directors: Risk’ on pages 196 to 293. | |||
Capital disclosures under IAS 1 have been included in the audited sections of ‘Capital management and allocation’ on pages 285 to 291. | |||
Disclosures relating to the effect of the recent market turmoil on HSBC’s securitisation activities and structured products, and disclosures under IFRS 7 relating to the fair value of financial instruments, have been included in the audited section of ‘Report of the Directors: Impact of Market Turmoil’ on pages 151 to 195. | |||
In publishing the parent company financial statements here together with the Group financial statements, HSBC Holdings has taken advantage of the exemption in section 408(3) of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these financial statements. | |||
HSBC’s consolidated financial statements are presented in US dollars which is also HSBC Holdings’ functional currency. HSBC Holdings’ functional currency is the US dollar because the US dollar and currencies linked to it are the most significant currencies relevant to the underlying transactions, events and conditions of its subsidiaries, as well as representing a significant proportion of its funds generated from financing activities. HSBC uses the US dollar as its presentation currency in its consolidated financial statements because the US dollar and currencies linked to it form the major currency bloc in which HSBC transacts and funds its business. | |||
(d) | Comparative information | ||
As required by US public company reporting requirements, these consolidated financial statements include two years of comparative information for the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity and related notes on the financial statements. | |||
(e) | Use of estimates and assumptions | ||
The preparation of financial information requires the use of estimates and assumptions about future conditions. The use of available information and the application of judgement are inherent in the formation of estimates; actual results in the future may differ from estimates upon which financial information is prepared. Management believes that HSBC’s critical accounting policies where judgement is necessarily applied are those which relate to impairment of loans and advances, goodwill impairment, the valuation of financial instruments, the impairment of available-for-sale financial assets and deferred tax assets (see ‘Critical Accounting Policies’ on pages 61 to 65, which form an integral part of these financial statements). | |||
Further information about key assumptions concerning the future, and other key sources of estimation uncertainty, are set out in the notes on the financial statements. |
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(f) | Consolidation | ||
The consolidated financial statements of HSBC comprise the financial statements of HSBC Holdings and its subsidiaries made up to 31 December, with the exception of the banking and insurance subsidiaries of HSBC Bank Argentina, whose financial statements are made up to 30 June annually to comply with local regulations. Accordingly, HSBC uses their audited interim financial statements, drawn up to 31 December annually. | |||
Subsidiaries are consolidated from the date that HSBC gains control. The purchase method of accounting is used to account for the acquisition of subsidiaries by HSBC. The cost of an acquisition is measured at the fair value of the consideration given at the date of exchange, together with costs directly attributable to that acquisition. The acquired identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair value of HSBC’s share of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of HSBC’s share of the identifiable assets, liabilities and contingent liabilities of the business acquired, the difference is recognised immediately in the income statement. | |||
Entities that are controlled by HSBC are consolidated until the date that control ceases. | |||
In the context of Special Purpose Entities (‘SPE’s), the following circumstances may indicate a relationship in which, in substance, HSBC controls and consequently consolidates an SPE: |
– | the activities of the SPE are being conducted on behalf of HSBC according to its specific business needs so that HSBC obtains benefits from the SPE’s operation; | ||
– | HSBC has the decision-making powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an ‘autopilot’ mechanism, HSBC has delegated these decision-making powers; | ||
– | HSBC has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incident to the activities of the SPE; or | ||
– | HSBC retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits from its activities. |
HSBC performs a re-assessment of consolidation whenever there is a change in the substance of the relationship between HSBC and an SPE. | |||
All intra-HSBC transactions are eliminated on consolidation. | |||
The consolidated financial statements of HSBC also include the attributable share of the results and reserves of joint ventures and associates. These are based on financial statements made up to 31 December, with the exception of the Bank of Communications, Ping An Insurance and Industrial Bank which are included on the basis of financial statements made up for the twelve months to 30 September. These are equity accounted three months in arrears in order to meet the requirements of the Group’s reporting timetable. HSBC has taken into account the effect of significant transactions or events that occur between the period from 1 October to 31 December that would have a material affect on its results. | |||
(g) | Future accounting developments | ||
At 31 December 2009, a number of standards and interpretations, and amendments thereto, had been issued by the IASB, which are not effective for HSBC’s consolidated financial statements or the separate financial statements of HSBC Holdings as at 31 December 2009. Those which are expected to have a significant effect on HSBC’s consolidated financial statements and the separate financial statements of HSBC Holdings are discussed below. | |||
Standards and Interpretations issued by the IASB and endorsed by the EU | |||
A revised IFRS 3 ‘Business Combinations’ and amendments to IAS 27 ‘Consolidated and Separate Financial Statements’ were issued on 10 January 2008. The revisions and amendments to the standards apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual financial reporting period beginning on or after 1 July 2009. The main changes under the standards are that: |
– | acquisition-related costs are recognised as an expense in the income statement in the period in which they are incurred; |
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Notes 1 and 2 |
– | all consideration transferred, including contingent consideration, is recognised and measured at fair value at the acquisition date; | ||
– | equity interests held prior to control being obtained are remeasured to fair value at the date of obtaining control, and any gain or loss is recognised in the income statement; | ||
– | changes in a parent’s ownership interest in a subsidiary that do not result in a change of control are treated as transactions between equity holders and are reported in equity; and | ||
– | an option is available, on a transaction-by-transaction basis, to measure any non-controlling (previously referred to as minority) interests in the entity acquired either at fair value, or at the non-controlling interests’ proportionate share of the net identifiable assets of the entity acquired. |
The effect that the changes will have on HSBC’s consolidated financial statements and the separate financial statements of HSBC Holdings will depend on the incidence and timing of business combinations occurring after 31 December 2009. | |||
Standards and Interpretations issued by the IASB but not endorsed by the EU | |||
IFRS 9 ‘Financial Instruments’ introduces new requirements for the classification and measurement of financial assets. The standard is effective for annual periods beginning on or after 1 January 2013 with early adoption permitted. IFRS 9 is required to be applied retrospectively. If the standard is adopted prior to 1 January 2012, an entity will be exempt from the requirement to restate prior period comparative information. IFRS 9 is subject to EU endorsement, the timing of which is uncertain. Accordingly, HSBC is unable to provide a date by which it plans to apply IFRS 9. | |||
The main changes to the requirements of IAS 39 are summarised below. |
– | All financial assets that are currently in the scope of IAS 39 will be classified as either amortised cost or fair value. The available-for-sale and held-to-maturity categories will no longer exist. | ||
– | Classification is based on an entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Reclassifications between the two categories are prohibited unless there is a change in the entity’s business model. | ||
– | A financial asset is measured at amortised cost if two criteria are met: i) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows; and ii) the contractual cash flows of the instrument are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. Movements in the fair value of financial assets classified at fair value are recognised in profit or loss, except for equity investments where an entity takes the option to designate an equity instrument that is not held for trading at fair value through other comprehensive income. If this option is taken, all subsequent changes in fair value are recognised in other comprehensive income with no recycling of gains or losses to the income statement. Dividend income would continue to be recognised in the income statement. | ||
– | An entity is only permitted to designate a financial asset otherwise meeting the amortised cost criteria at fair value through profit or loss if doing so significantly reduces or eliminates an accounting mismatch. This designation is made on initial recognition and is irrevocable. | ||
– | Financial instruments which contain embedded derivatives are to be classified in their entirety either at fair value or amortised cost depending on whether the contracts as a whole meet the relevant criteria under IFRS 9. |
IFRS 9 is the first instalment in the IASB’s planned phased replacement of IAS 39 with a less complex and improved standard for financial instruments. The next steps in the IASB’s project will address the classification and measurement requirements for financial liabilities, the impairment of financial assets measured at amortised cost and hedge accounting. The IASB has indicated that it aims to finalise the replacement of IAS 39 by the end of 2010. In addition, the IASB is working with the US Financial Accounting Standards Board to reduce inconsistencies between US GAAP and IFRS in accounting for financial instruments. The impact of IFRS 9 may change as a consequence of further developments resulting from the IASB’s financial instruments project. As a result, it is impracticable to quantify the impact of IFRS 9 as at the date of publication of these financial statements. |
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2 | Summary of significant accounting policies |
(a) | Interest income and expense | ||
Interest income and expense for all financial instruments except for those classified as held for trading or designated at fair value (other than debt securities issued by HSBC and derivatives managed in conjunction with such debt securities issued) are recognised in ‘Interest income’ and ‘Interest expense’ in the income statement using the effective interest method. The effective interest method is a way of calculating the amortised cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. | |||
The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, HSBC estimates cash flows considering all contractual terms of the financial instrument but excluding future credit losses. The calculation includes all amounts paid or received by HSBC that are an integral part of the effective interest rate of a financial instrument, including transaction costs and all other premiums or discounts. | |||
Interest on impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. | |||
(b) | Non-interest income | ||
Fee incomeis earned from a diverse range of services provided by HSBC to its customers. Fee income is accounted for as follows: |
– | income earned on the execution of a significant act is recognised as revenue when the act is completed (for example, fees arising from negotiating, or participating in the negotiation of, a transaction for a third-party, such as an arrangement for the acquisition of shares or other securities); | ||
– | income earned from the provision of services is recognised as revenue as the services are provided (for example, asset management, portfolio and other management advisory and service fees); and | ||
– | income which forms an integral part of the effective interest rate of a financial instrument is recognised as an adjustment to the effective interest rate (for example, certain loan commitment fees) and recorded in ‘Interest income’ (Note 2a). |
Net trading incomecomprises all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading, together with the related interest income, expense and dividends. | |||
Net income from financial instruments designated at fair valueincludes all gains and losses from changes in the fair value of financial assets and financial liabilities designated at fair value through profit or loss. Interest income and expense and dividend income arising on these financial instruments are also included in ‘Net income from financial instruments designated at fair value’, except for interest arising from debt securities issued, and derivatives managed in conjunction with those debt securities, which is recognised in ‘Interest expense’ (Note 2a). | |||
Dividend incomeis recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities, and usually the date when shareholders have approved the dividend for unlisted equity securities. | |||
(c) | Operating segments | ||
HSBC’s operating segments are organised into six geographical regions; Europe, Hong Kong, Rest of Asia-Pacific, Middle East, North America and Latin America. Due to the nature of the Group, HSBC’s chief operating decision-maker regularly reviews operating activity on a number of bases, including by geographical region, customer group and global business, and retail businesses by geographical region. HSBC’s operating segments were determined to be geographical regions because the chief operating decision-maker primarily uses information on geographical regions in order to make decisions about allocating resources and assessing performance. | |||
Measurement of segmental assets, liabilities, income and expenses is in accordance with the Group’s accounting policies. Segmental income and expenses include transfers between segments and these transfers are conducted |
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on arm’s length terms and conditions. Shared costs are included in segments on the basis of the actual recharges made. | |||
(d) | Determination of fair value | ||
All financial instruments are recognised initially at fair value. In the normal course of business, the fair value of a financial instrument on initial recognition is the transaction price (that is, the fair value of the consideration given or received). In certain circumstances, however, the fair value will be based on other observable current market transactions in the same instrument, without modification or repackaging, or on a valuation technique whose variables include only data from observable markets, such as interest rate yield curves, option volatilities and currency rates. When such evidence exists, HSBC recognises a trading gain or loss on inception of the financial instrument, being the difference between the transaction price and the fair value. When unobservable market data have a significant impact on the valuation of financial instruments, the entire initial difference in fair value indicated by the valuation model from the transaction price is not recognised immediately in the income statement but is recognised over the life of the transaction on an appropriate basis, or when the inputs become observable, or the transaction matures or is closed out, or when HSBC enters into an offsetting transaction. | |||
Subsequent to initial recognition, the fair values of financial instruments measured at fair value that are quoted in active markets are based on bid prices for assets held and offer prices for liabilities issued. When independent prices are not available, fair values are determined by using valuation techniques which refer to observable market data. These include comparison with similar instruments where market observable prices exist, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Fair values of financial instruments may be determined in whole or in part using valuation techniques based on assumptions that are not supported by prices from current market transactions or observable market data, where current prices or observable market data are not available. | |||
Valuation techniques incorporate assumptions about factors that other market participants would use in their valuations, including interest rate yield curves, exchange rates, volatilities, and prepayment and default rates. If there are additional factors that are not incorporated within the valuation model but would be considered by market participants, further fair value adjustments are applied to model calculated fair values. These fair value adjustments include adjustments for bid-offer spread, model uncertainty, credit risk and model limitation. Where a financial instrument has a quoted price in an active market and it is part of a portfolio, the fair value of the portfolio is calculated as the product of the number of units and quoted price and no block discounts are made. | |||
If the fair value of a financial asset measured at fair value becomes negative, the financial instrument is recorded as a financial liability until the fair value becomes positive, at which time the financial instrument is recorded as a financial asset. | |||
The fair values of financial liabilities are measured using quoted market prices where available, or using valuation techniques. These fair values include market participants’ assessments of the appropriate credit spread to apply to HSBC’s liabilities. The amount of change during the period, and cumulatively, in the fair value of designated financial liabilities and loans and advances that is attributable to changes in their credit spread is determined as the amount of change in the fair value that is not attributable to changes in market conditions that give rise to market risk. | |||
(e) | Reclassification of financial assets | ||
Non-derivative financial assets (other than those designated at fair value through profit or loss upon initial recognition) may be reclassified out of the fair value through profit or loss category in the following circumstances: |
– | financial assets that would have met the definition of loans and receivables at initial recognition (if the financial asset had not been required to be classified as held for trading) may be reclassified out of the fair value through profit or loss category if there is the intention and ability to hold the financial asset for the foreseeable future or until maturity; and | ||
– | financial assets (except financial assets that would have met the definition of loans and receivables at initial recognition) may be reclassified out of the fair value through profit or loss category and into another category in rare circumstances. |
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When a financial asset is reclassified as described in the above circumstances, the financial asset is reclassified at its fair value on the date of reclassification. Any gain or loss already recognised in the income statement is not reversed. The fair value of the financial asset on the date of reclassification becomes its new cost or amortised cost, as applicable. | |||
(f) | Loans and advances to banks and customers | ||
Loans and advances to banks and customers include loans and advances originated by HSBC which are not classified either as held for trading or designated at fair value. Loans and advances are recognised when cash is advanced to a borrower. They are derecognised when either the borrower repays its obligations, or the loans are sold or written off, or substantially all the risks and rewards of ownership are transferred. They are initially recorded at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Where exposures are hedged by derivatives designated and qualifying as fair value hedges, the carrying value of the loans and advances so hedged includes a fair value adjustment for the hedged risk only. | |||
HSBC may commit to underwrite loans on fixed contractual terms for specified periods of time, where the drawdown of the loan is contingent upon certain future events outside the control of HSBC. Where the loan arising from the lending commitment is expected to be held for trading, the commitment to lend is recorded as a derivative and measured at fair value through profit or loss. On drawdown, the loan is classified as held for trading and measured at fair value through profit or loss. Where it is not HSBC’s intention to trade but hold the loan, a provision on the loan commitment is only recorded where it is probable that HSBC will incur a loss. This may occur, for example, where a loss of principal is probable or the interest rate charged on the loan is lower than the cost of funding. On inception of the loan, the loan to be held is recorded at its fair value and subsequently measured at amortised cost using the effective interest method. However, where the initial fair value is lower than the cash amount advanced (for example, due to the rate of interest charged on the loan being below the market rate of interest), the write-down is charged to the income statement. The write-down will be recovered over the life of the loan, through the recognition of interest income using the effective interest method, unless the loan becomes impaired. The write-down is recorded as a reduction to other operating income. | |||
Financial assets which have been reclassified out of the fair value through profit or loss category into the loans and receivables category are initially recorded at the fair value at the date of reclassification. The reclassified assets are subsequently measured at amortised cost, using the effective interest rate determined at the date of reclassification. | |||
(g) | Impairment of loans and advances | ||
Losses for impaired loans are recognised promptly when there is objective evidence that impairment of a loan or portfolio of loans has occurred. Impairment allowances are calculated on individual loans and on groups of loans assessed collectively. Impairment losses are recorded as charges to the income statement. The carrying amount of impaired loans on the balance sheet is reduced through the use of impairment allowance accounts. Losses expected from future events are not recognised. | |||
Individually assessed loans and advances | |||
For all loans that are considered individually significant, HSBC assesses on a case-by-case basis at each balance sheet date whether there is any objective evidence that a loan is impaired. For those loans where objective evidence of impairment exists, impairment losses are determined considering the following factors: |
– | HSBC’s aggregate exposure to the customer; | ||
– | the viability of the customer’s business model and their capacity to trade successfully out of financial difficulties and generate sufficient cash flow to service debt obligations; | ||
– | the amount and timing of expected receipts and recoveries; — the likely dividend available on liquidation or bankruptcy; | ||
– | the extent of other creditors’ commitments ranking ahead of, orpari passu with, HSBC and the likelihood of other creditors continuing to support the company; |
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– | the complexity of determining the aggregate amount and ranking of all creditor claims and the extent to which legal and insurance uncertainties are evident; | ||
– | the realisable value of security (or other credit mitigants) and likelihood of successful repossession; | ||
– | the likely deduction of any costs involved in recovery of amounts outstanding; | ||
– | the ability of the borrower to obtain, and make payments in, the currency of the loan if not denominated in local currency; and | ||
– | when available, the secondary market price of the debt. |
Impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate, and comparing the resultant present value with the loan’s current carrying amount. | |||
Collectively assessed loans and advances | |||
Impairment is assessed on a collective basis in two circumstances: |
– | to cover losses which have been incurred but have not yet been identified on loans subject to individual assessment; and | ||
– | for homogeneous groups of loans that are not considered individually significant. |
Incurred but not yet identified impairment | |||
Individually assessed loans for which no evidence of loss has been specifically identified on an individual basis are grouped together according to their credit risk characteristics for the purpose of calculating an estimated collective loss. This reflects impairment losses that HSBC has incurred as a result of events occurring before the balance sheet date, which HSBC is not able to identify on an individual loan basis, and that can be reliably estimated. These losses will only be individually identified in the future. As soon as information becomes available which identifies losses on individual loans within the group, those loans are removed from the group and assessed on an individual basis for impairment. | |||
The collective impairment allowance is determined after taking into account: |
– | historical loss experience in portfolios of similar credit risk characteristics (for example, by industry sector, loan grade or product); | ||
– | the estimated period between impairment occurring and the loss being identified and evidenced by the establishment of an appropriate allowance against the individual loan; and | ||
– | management’s experienced judgement as to whether current economic and credit conditions are such that the actual level of inherent losses at the balance sheet date is likely to be greater or less than that suggested by historical experience. |
The period between a loss occurring and its identification is estimated by local management for each identified portfolio. | |||
Homogeneous groups of loans and advances | |||
Statistical methods are used to determine impairment losses on a collective basis for homogeneous groups of loans that are not considered individually significant, because individual loan assessment is impracticable. Losses in these groups of loans are recorded on an individual basis when individual loans are written off, at which point they are removed from the group. Two alternative methods are used to calculate allowances on a collective basis: |
– | When appropriate empirical information is available, HSBC utilises roll rate methodology. This methodology employs statistical analyses of historical data and experience of delinquency and default to estimate the amount of loans that will eventually be written off as a result of the events occurring before the balance sheet date which HSBC is not able to identify on an individual loan basis, and that can be reliably estimated. Under this methodology, loans are grouped into ranges according to the number of days past due, and statistical analysis is used to estimate the likelihood that loans in each range will progress through the various stages of delinquency and ultimately prove irrecoverable. Current economic conditions are also evaluated when calculating the appropriate level of allowance required to cover inherent loss. The estimated |
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loss is the difference between the present value of expected future cash flows, discounted at the original effective interest rate of the portfolio, and the carrying amount of the portfolio. In certain highly developed markets, sophisticated models also take into account behavioural and account management trends as revealed in, for example, bankruptcy and rescheduling statistics. | |||
– | When the portfolio size is small or when information is insufficient or not reliable enough to adopt a roll rate methodology, HSBC adopts a basic formulaic approach based on historical loss rate experience. |
In normal circumstances, historical experience provides the most objective and relevant information from which to assess inherent loss within each portfolio. In certain circumstances, historical loss experience provides less relevant information about the inherent loss in a given portfolio at the balance sheet date, for example, where there have been changes in economic, regulatory or behavioural conditions, such that the most recent trends in the portfolio risk factors are not fully reflected in the statistical models. | |||
These additional portfolio risk factors may include recent loan portfolio growth and product mix, unemployment rates, bankruptcy trends, geographic concentrations, loan product features (such as the ability of borrowers to repay adjustable-rate loans where reset interest rates give rise to increases in interest charges), economic conditions such as national and local trends in housing markets and interest rates, portfolio seasoning, account management policies and practices, current levels of write-offs, changes in laws and regulations and other items which can affect customer payment patterns on outstanding loans, such as natural disasters. These risk factors, where relevant, are taken into account when calculating the appropriate level of impairment allowances by adjusting the impairment allowances derived solely from historical loss experience. | |||
Roll rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure they remain appropriate. | |||
Write-off of loans and advances | |||
Loans (and the related impairment allowance accounts) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write off may be earlier. | |||
Reversals of impairment | |||
If the amount of an impairment loss decreases in a subsequent period, and the decrease can be related objectively to an event occurring after the impairment was recognised, the excess is written back by reducing the loan impairment allowance account accordingly. The write-back is recognised in the income statement. | |||
Reclassified loans and advances | |||
Where financial assets have been reclassified out of the fair value through profit or loss category to the loans and receivables category, the effective interest rate determined at the date of reclassification is used to calculate any impairment losses. | |||
Following reclassification, where there is a subsequent increase in the estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the effective interest rate from the date of change in the estimate rather than as an adjustment to the carrying amount of the asset at the date of change in the estimate. | |||
Assets acquired in exchange for loans | |||
Non-financial assets acquired in exchange for loans as part of an orderly realisation are recorded as assets held for sale and reported in ‘Other assets’. The asset acquired is recorded at the lower of its fair value (less costs to sell) and the carrying amount of the loan (net of impairment allowance) at the date of exchange. No depreciation is charged in respect of assets held for sale. Any subsequent write-down of the acquired asset to fair value less costs to sell is recognised in the income statement, in ‘Other operating income’. Any subsequent increase in the fair value less costs to sell, to the extent this does not exceed the cumulative write-down, is also recognised in ‘Other operating income’, together with any realised gains or losses on disposal. |
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Note 2 |
Renegotiated loans | |||
Loans subject to collective impairment assessment whose terms have been renegotiated are no longer considered past due, but are treated as up to date loans for measurement purposes once the minimum number of payments required under the new arrangements have been received. These renegotiated loans are segregated from other parts of the loan portfolio for the purposes of collective impairment assessment, to reflect their risk profile. Loans subject to individual impairment assessment, whose terms have been renegotiated, are subject to ongoing review to determine whether they remain impaired or should be considered past due. The carrying amount of loans that have been classified as renegotiated retain this classification until maturity or derecognition. | |||
(h) | Trading assets and trading liabilities | ||
Treasury bills, debt securities, equity securities, loans, deposits, debt securities in issue, and short positions in securities are classified as held for trading if they have been acquired or incurred principally for the purpose of selling or repurchasing in the near term, or they form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking. These financial assets or financial liabilities are recognised on trade date, when HSBC enters into contractual arrangements with counterparties to purchase or sell the financial instruments, and are normally derecognised when either sold (assets) or extinguished (liabilities). Measurement is initially at fair value, with transaction costs taken to the income statement. Subsequently, the fair values are remeasured, and gains and losses from changes therein are recognised in the income statement in ‘Net trading income’. | |||
(i) | Financial instruments designated at fair value | ||
Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below, and are so designated by management. HSBC may designate financial instruments at fair value when the designation: |
– | eliminates or significantly reduces measurement or recognition inconsistencies that would otherwise arise from measuring financial assets or financial liabilities, or recognising gains and losses on them, on different bases. Under this criterion, the main classes of financial instruments designated by HSBC are: | ||
Long-term debt issues. The interest payable on certain fixed rate long-term debt securities issued has been matched with the interest on ‘receive fixed/pay variable’ interest rate swaps as part of a documented interest rate risk management strategy. An accounting mismatch would arise if the debt securities issued were accounted for at amortised cost, because the related derivatives are measured at fair value with changes in the fair value recognised in the income statement. By designating the long-term debt at fair value, the movement in the fair value of the long-term debt will also be recognised in the income statement. | |||
Financial assets and financial liabilities under investment contracts. Liabilities to customers under linked contracts are determined based on the fair value of the assets held in the linked funds, with changes recognised in the income statement. If no designation was made for the assets relating to the customer liabilities they would be classified as available-for-sale and the changes in fair value would be recorded in other comprehensive income. These financial instruments are managed on a fair value basis and management information is also prepared on this basis. Designation at fair value of the financial assets and liabilities under investment contracts allows the changes in fair values to be recorded in the income statement and presented in the same line. | |||
– | applies to groups of financial assets, financial liabilities or combinations thereof that are managed, and their performance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy, and where information about the groups of financial instruments is reported to management on that basis. Under this criterion, certain financial assets held to meet liabilities under insurance contracts are the main class of financial instrument so designated. HSBC has documented risk management and investment strategies designed to manage such assets at fair value, taking into consideration the relationship of assets to liabilities in a way that mitigates market risks. Reports are provided to management on the fair value of the assets. Fair value measurement is also consistent with the regulatory reporting requirements under the appropriate regulations for these insurance operations. | ||
– | relates to financial instruments containing one or more embedded derivatives that significantly modify the cash flows resulting from those financial instruments, including certain debt issues and debt securities held. |
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The fair value designation, once made, is irrevocable. Designated financial assets and financial liabilities are recognised when HSBC enters into the contractual provisions of the arrangements with counterparties, which is generally on trade date, and are normally derecognised when either sold (assets) or extinguished (liabilities). Measurement is initially at fair value, with transaction costs taken to the income statement. Subsequently, the fair values are remeasured, and gains and losses from changes therein are recognised in the income statement in ‘Net income from financial instruments designated at fair value’. | |||
(j) | Financial investments | ||
Treasury bills, debt securities and equity securities intended to be held on a continuing basis, other than those designated at fair value, are classified as available-for-sale or held-to-maturity. Financial investments are recognised on trade date when HSBC enters into contractual arrangements with counterparties to purchase securities, and are normally derecognised when either the securities are sold or the borrowers repay their obligations. |
(i) | Available-for-sale financial assets are initially measured at fair value plus direct and incremental transaction costs. They are subsequently remeasured at fair value, and changes therein are recognised in other comprehensive income in ‘Available-for-sale investments – fair value gains/(losses)’ until the financial assets are either sold or become impaired. When available-for-sale financial assets are sold, cumulative gains or losses previously recognised in other comprehensive income are recognised in the income statement as ‘Gains less losses from financial investments’. | ||
Interest income is recognised on available-for-sale debt securities using the effective interest rate, calculated over the asset’s expected life. Premiums and/or discounts arising on the purchase of dated investment securities are included in the calculation of their effective interest rates. Dividends are recognised in the income statement when the right to receive payment has been established. | |||
At each balance sheet date an assessment is made of whether there is any objective evidence of impairment in the value of a financial asset. Impairment losses are recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the financial asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. | |||
If the available-for-sale financial asset is impaired, the difference between the financial asset’s acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any previous impairment loss recognised in the income statement, is removed from other comprehensive income and recognised in the income statement. | |||
Impairment losses for available-for-sale debt securities are recognised within ‘Loan impairment charges and other credit risk provisions’ in the income statement and impairment losses for available-for-sale equity securities are recognised within ‘Gains less losses from financial investments’ in the income statement. | |||
Once an impairment loss has been recognised on an available-for-sale financial asset, the subsequent accounting treatment for changes in the fair value of that asset differs depending on the nature of the available-for-sale financial asset concerned: |
– | For an available-for-sale debt security, a subsequent decline in the fair value of the instrument is recognised in the income statement when there is further objective evidence of impairment as a result of further decreases in the estimated future cash flows of the financial asset. Where there is no further objective evidence of impairment, the decline in the fair value of the financial asset is recognised in other comprehensive income. If the fair value of a debt security increases in a subsequent period, and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement to the extent of the increase in fair value; | ||
– | For an available-for-sale equity security, all subsequent increases in the fair value of the instrument are treated as a revaluation and are recognised in other comprehensive income. Impairment losses recognised on the equity security are not reversed through the income statement. Subsequent decreases in the fair value of the available-for-sale equity security are recognised in the income statement, to the extent that further cumulative impairment losses have been incurred in relation to the acquisition cost of the equity security. |
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Note 2 |
(ii) | Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that HSBC positively intends, and is able, to hold to maturity. Held-to-maturity investments are initially recorded at fair value plus any directly attributable transaction costs, and are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. |
(k) | Sale and repurchase agreements (including stock lending and borrowing) | ||
When securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the balance sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to sell (‘reverse repos’) are not recognised on the balance sheet and the consideration paid is recorded in ‘Loans and advances to banks’ or ‘Loans and advances to customers’ as appropriate. The difference between the sale and repurchase price is treated as interest and recognised over the life of the agreement. | |||
Securities lending and borrowing transactions are generally secured, with collateral taking the form of securities or cash advanced or received. The transfer of securities to counterparties under these agreements is not normally reflected on the balance sheet. Cash collateral advanced or received is recorded as an asset or a liability respectively. | |||
Securities borrowed are not recognised on the balance sheet. If they are sold on to third parties, an obligation to return the securities is recorded as a trading liability and measured at fair value, and any gains or losses are included in ‘Net trading income’. | |||
(l) | Derivatives and hedge accounting | ||
Derivatives are recognised initially, and are subsequently remeasured, at fair value. Fair values of exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are obtained using valuation techniques, including discounted cash flow models and option pricing models. | |||
Derivatives may be embedded in other financial instruments, for example, a convertible bond with an embedded conversion option. Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not clearly and closely related to those of the host contract; the terms of the embedded derivative would meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is not held for trading or designated at fair value. These embedded derivatives are measured at fair value with changes therein recognised in the income statement. | |||
Derivatives are classified as assets when their fair value is positive, or as liabilities when their fair value is negative. Derivative assets and liabilities arising from different transactions are only offset if the transactions are with the same counterparty, a legal right of offset exists, and the parties intend to settle the cash flows on a net basis. | |||
The method of recognising fair value gains and losses depends on whether derivatives are held for trading or are designated as hedging instruments, and if the latter, the nature of the risks being hedged. All gains and losses from changes in the fair value of derivatives held for trading are recognised in the income statement. When derivatives are designated as hedges, HSBC classifies them as either: (i) hedges of the change in fair value of recognised assets or liabilities or firm commitments (‘fair value hedges’); (ii) hedges of the variability in highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (‘cash flow hedges’); or (iii) a hedge of a net investment in a foreign operation (‘net investment hedges’). Hedge accounting is applied to derivatives designated as hedging instruments in a fair value, cash flow or net investment hedge provided certain criteria are met. | |||
Hedge accounting | |||
At the inception of a hedging relationship, HSBC documents the relationship between the hedging instruments and the hedged items, its risk management objective and its strategy for undertaking the hedge. HSBC also requires a documented assessment, both at hedge inception and on an ongoing basis, of whether or not the hedging instruments, primarily derivatives, that are used in hedging transactions are highly effective in offsetting the changes attributable to the hedged risks in the fair values or cash flows of the hedged items. Interest on designated qualifying hedges is included in ‘Net interest income’. |
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Fair value hedge | |||
Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments are recorded in the income statement, along with changes in the fair value of the hedged assets, liabilities or group thereof that are attributable to the hedged risk. | |||
If a hedging relationship no longer meets the criteria for hedge accounting, the cumulative adjustment to the carrying amount of the hedged item is amortised to the income statement based on a recalculated effective interest rate over the residual period to maturity, unless the hedged item has been derecognised, in which case, it is released to the income statement immediately. | |||
Cash flow hedge | |||
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income within the ‘Cash flow hedges – fair value gains/(losses)’. Any gain or loss in fair value relating to an ineffective portion is recognised immediately in the income statement. | |||
The accumulated gains and losses recognised in other comprehensive income are reclassified to the income statement in the periods in which the hedged item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income are removed from equity and included in the initial measurement of the cost of the asset or liability. | |||
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss recognised in other comprehensive income at that time remains in equity until the forecast transaction is eventually recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in other comprehensive income is immediately reclassified to the income statement. | |||
Net investment hedge | |||
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. A gain or loss on the effective portion of the hedging instrument is recognised in other comprehensive income; a gain or loss on the ineffective portion is recognised immediately in the income statement. Gains and losses previously recognised in other comprehensive income are reclassified to the income statement on the disposal of the foreign operation. | |||
Hedge effectiveness testing | |||
To qualify for hedge accounting, HSBC requires that at the inception of the hedge and throughout its life, each hedge must be expected to be highly effective (prospective effectiveness), and demonstrate actual effectiveness (retrospective effectiveness) on an ongoing basis. | |||
The documentation of each hedging relationship sets out how the effectiveness of the hedge is assessed. The method adopted by an entity to assess hedge effectiveness will depend on its risk management strategy. | |||
For prospective effectiveness, the hedging instrument must be expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated. For actual effectiveness to be achieved, the changes in fair value or cash flows must offset each other in the range of 80 per cent to 125 per cent. | |||
Hedge ineffectiveness is recognised in the income statement in ‘Net trading income’. | |||
Derivatives that do not qualify for hedge accounting | |||
All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognised immediately in the income statement. These gains and losses are reported in ‘Net trading income’, except where derivatives are managed in conjunction with financial instruments designated at fair value (other than derivatives managed in conjunction with debt securities issued by the Group), in which case gains and losses are reported in ‘Net income from financial instruments designated at fair value’. The interest on derivatives managed in conjunction with debt securities issued by the Group which are designated at fair value is |
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Note 2 |
recognised in ‘Interest expense’. All other gains and losses on these derivatives are reported in ‘Net income from financial instruments designated at fair value’. | |||
(m) | Derecognition of financial assets and liabilities | ||
Financial assets are derecognised when the contractual right to receive cash flows from the assets has expired; or when HSBC has transferred its contractual right to receive the cash flows of the financial assets, and either: |
– | substantially all the risks and rewards of ownership have been transferred; or | ||
– | HSBC has neither retained nor transferred substantially all the risks and rewards, but has not retained control. |
Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, is cancelled, or expires. | |||
(n) | Offsetting financial assets and financial liabilities | ||
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. | |||
(o) | Subsidiaries, associates and joint ventures | ||
HSBC classifies investments in entities which it controls as subsidiaries. Where HSBC is a party to a contractual arrangement whereby, together with one or more parties, it undertakes an economic activity that is subject to joint control, HSBC classifies its interest in the venture as a joint venture. HSBC classifies investments in entities over which it has significant influence, and that are neither subsidiaries nor joint ventures, as associates. For the purpose of determining this classification, control is considered to be the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. | |||
HSBC Holdings’ investments in subsidiaries are stated at cost less any impairment losses. An impairment loss recognised in prior periods shall be reversed through the income statement if, and only if, there has been a change in the estimates used to determine the investment in subsidiary’s recoverable amount since the last impairment loss was recognised. | |||
Investments in associates and interests in joint ventures are recognised using the equity method. Under this method, such investments are initially stated at cost, including attributable goodwill, and are adjusted thereafter for the post-acquisition change in HSBC’s share of net assets. | |||
Profits on transactions between HSBC and its associates and joint ventures are eliminated to the extent of HSBC’s interest in the respective associates or joint ventures. Losses are also eliminated to the extent of HSBC’s interest in the associates or joint ventures unless the transaction provides evidence of an impairment of the asset transferred. | |||
(p) | Goodwill and intangible assets |
(i) | Goodwill arises on business combinations, including the acquisition of subsidiaries, and on the acquisition of interests in joint ventures and associates, when the cost of acquisition exceeds the fair value of HSBC’s share of the identifiable assets, liabilities and contingent liabilities acquired. If HSBC’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of an acquired business is greater than the cost of acquisition, the excess is recognised immediately in the income statement. | ||
Intangible assets are recognised separately from goodwill when they are separable or arise from contractual or other legal rights, and their fair value can be measured reliably. | |||
Goodwill is allocated to cash-generating units for the purpose of impairment testing, which is undertaken at the lowest level at which goodwill is monitored for internal management purposes. Impairment testing is performed at least annually, and whenever there is an indication that the cash-generating unit may be impaired, by comparing the recoverable amount from a cash-generating unit with the carrying amount of its net assets, including attributable goodwill. The recoverable amount of an asset is the higher of its fair value less cost to sell, and its value in use. Value in use is the present value of the expected future cash flows from |
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a cash-generating unit. If the recoverable amount is less than the carrying value, an impairment loss is charged to the income statement. Goodwill is stated at cost less accumulated impairment losses. | |||
Goodwill on acquisitions of interests in joint ventures and associates is included in ‘Interests in associates and joint ventures’ and is not tested separately for impairment. | |||
At the date of disposal of a business, attributable goodwill is included in HSBC’s share of net assets in the calculation of the gain or loss on disposal. | |||
(ii) | Intangible assets include the present value of in-force long-term insurance business, computer software, trade names, mortgage servicing rights, customer lists, core deposit relationships, credit card customer relationships and merchant or other loan relationships. Intangible assets are subject to impairment review if there are events or changes in circumstances that indicate that the carrying amount may not be recoverable. Where: |
– | intangible assets have an indefinite useful life, or are not yet ready for use, they are tested for impairment annually. This impairment test may be performed at any time during the year, provided it is performed at the same time every year. An intangible asset recognised during the current period is tested before the end of the current year; and | ||
– | intangible assets have a finite useful life, except for the present value of in-force long-term insurance business, they are stated at cost less amortisation and accumulated impairment losses and are amortised over their estimated useful lives. Estimated useful life is the lower of legal duration and expected useful life. The amortisation of mortgage servicing rights is included within ‘Net fee income’. |
For the accounting policy governing the present value of in-force long-term insurance business (see Note 2y). | |||
(iii) | Intangible assets with finite useful lives are amortised, generally on a straight-line basis, over their useful lives as follows: |
Trade names | 10 years | |
Mortgage servicing rights | generally between 5 and 12 years | |
Internally generated software | between 3 and 5 years | |
Purchased software | between 3 and 5 years | |
Customer/merchant relationships | between 3 and 10 years | |
Other | generally 10 years |
(q) | Property, plant and equipment | ||
Land and buildings are stated at historical cost, or fair value at the date of transition to IFRSs (‘deemed cost’), less any impairment losses and depreciation calculated to write-off the assets over their estimated useful lives as follows: |
– | freehold land is not depreciated; | ||
– | freehold buildings are depreciated at the greater of two per cent per annum on a straight-line basis or over their remaining useful lives; and | ||
– | leasehold buildings are depreciated over the unexpired terms of the leases, or over their remaining useful lives. |
Equipment, fixtures and fittings (including equipment on operating leases where HSBC is the lessor) are stated at cost less any impairment losses and depreciation calculated on a straight-line basis to write-off the assets over their useful lives, which run to a maximum of 35 years but are generally between 5 years and 20 years. | |||
Property, plant and equipment is subject to an impairment review if there are events or changes in circumstances which indicate that the carrying amount may not be recoverable. | |||
HSBC holds certain properties as investments to earn rentals or for capital appreciation, or both. Investment properties are included in the balance sheet at fair value with changes therein recognised in the income statement in the period of change. Fair values are determined by independent professional valuers who apply recognised valuation techniques. |
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Note 2 |
(r) | Finance and operating leases | ||
Agreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of assets, but not necessarily legal title, are classified as finance leases. When HSBC is a lessor under finance leases the amounts due under the leases, after deduction of unearned charges, are included in ‘Loans and advances to banks’ or ‘Loans and advances to customers’ as appropriate. The finance income receivable is recognised in ‘Net interest income’ over the periods of the leases so as to give a constant rate of return on the net investment in the leases. | |||
When HSBC is a lessee under finance leases, the leased assets are capitalised and included in ‘Property, plant and equipment’ and the corresponding liability to the lessor is included in ‘Other liabilities’. A finance lease and its corresponding liability are recognised initially at the fair value of the asset or, if lower, the present value of the minimum lease payments. Finance charges payable are recognised in ‘Net interest income’ over the period of the lease based on the interest rate implicit in the lease so as to give a constant rate of interest on the remaining balance of the liability. | |||
All other leases are classified as operating leases. When acting as lessor, HSBC includes the assets subject to operating leases in ‘Property, plant and equipment’ and accounts for them accordingly. Impairment losses are recognised to the extent that residual values are not fully recoverable and the carrying value of the assets is thereby impaired. When HSBC is the lessee, leased assets are not recognised on the balance sheet. Rentals payable and receivable under operating leases are accounted for on a straight-line basis over the periods of the leases and are included in ‘General and administrative expenses’ and ‘Other operating income’, respectively. | |||
(s) | Income tax | ||
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in the same statement in which the related item appears. | |||
Current tax is the tax expected to be payable on the taxable profit for the year, calculated using tax rates enacted or substantively enacted by the balance sheet date, and any adjustment to tax payable in respect of previous years. Current tax assets and liabilities are offset when HSBC intends to settle on a net basis and the legal right to offset exists. | |||
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. | |||
Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realised or the liabilities settled, based on tax rates and laws enacted, or substantively enacted, by the balance sheet date. Deferred tax assets and liabilities are offset when they arise in the same tax reporting group and relate to income taxes levied by the same taxation authority, and when HSBC has a legal right to offset. | |||
Deferred tax relating to actuarial gains and losses on post-employment benefits is recognised in other comprehensive income. Deferred tax relating to share-based payment transactions is recognised directly in equity to the extent that the amount of the estimated future tax deduction exceeds the amount of the related cumulative remuneration expense. Deferred tax relating to fair value re-measurements of available-for-sale investments and cash flow hedging instruments which are charged or credited directly to other comprehensive income, is also charged or credited to other comprehensive income and is subsequently recognised in the income statement when the deferred fair value gain or loss is recognised in the income statement. | |||
(t) | Pension and other post-employment benefits | ||
HSBC operates a number of pension and other post-employment benefit plans throughout the world. These plans include both defined benefit and defined contribution plans and various other post-employment benefits such as post-employment healthcare. | |||
Payments to defined contribution plans and state-managed retirement benefit plans, where HSBC’s obligations under the plans are equivalent to a defined contribution plan, are charged as an expense as they fall due. |
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The defined benefit pension costs and the present value of defined benefit obligations are calculated at the reporting date by the schemes’ actuaries using the Projected Unit Credit Method. The net charge to the income statement mainly comprises the current service cost, plus the unwinding of the discount rate on plan liabilities, less the expected return on plan assets, and is presented in operating expenses. Past service costs are charged immediately to the income statement to the extent that the benefits have vested, and are otherwise recognised on a straight-line basis over the average period until the benefits vest. Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions. Actuarial gains and losses are recognised in other comprehensive income in the period in which they arise. | |||
The defined benefit liability recognised in the balance sheet represents the present value of defined benefit obligations adjusted for unrecognised past service costs and reduced by the fair value of plan assets. Any net defined benefit surplus is limited to unrecognised past service costs plus the present value of available refunds and reductions in future contributions to the plan. | |||
The cost of obligations arising from other post-employment defined benefit plans, such as defined benefit health-care plans, are accounted for on the same basis as defined benefit pension plans. | |||
(u) | Share-based payments | ||
The cost of share-based payment arrangements with employees is measured by reference to the fair value of equity instruments on the date they are granted, and recognised as an expense on a straight-line basis over the vesting period, with a corresponding credit to the ‘Share-based payment reserve’. The vesting period is the period during which all the specified vesting conditions of a share-based payment arrangement are to be satisfied. The fair value of equity instruments that are made available immediately, with no vesting period attached to the award, are expensed immediately. | |||
Fair value is determined by using appropriate valuation models, taking into account the terms and conditions upon which the equity instruments were granted. Vesting conditions include service conditions and performance conditions; any other features of a share-based payment arrangement are non-vesting conditions. Market performance conditions and non-vesting conditions are taken into account when estimating the fair value of equity instruments at the date of grant, so that an award is treated as vesting irrespective of whether the market performance condition or non-vesting condition is satisfied, provided all other vesting conditions are satisfied. | |||
Vesting conditions, other than market performance conditions, are not taken into account in the initial estimate of the fair value at the grant date. They are taken into account by adjusting the number of equity instruments included in the measurement of the transaction, so that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. On a cumulative basis, no expense is recognised for equity instruments that do not vest because of a failure to satisfy non-market performance or service conditions. | |||
Where an award has been modified, as a minimum, the expense of the original award continues to be recognised as if it had not been modified. Where the effect of a modification is to increase the fair value of an award or increase the number of equity instruments, the incremental fair value of the award or incremental fair value of the extra equity instruments is recognised in addition to the expense of the original grant, measured at the date of modification, over the modified vesting period. | |||
A cancellation that occurs during the vesting period is treated as an acceleration of vesting, and recognised immediately for the amount that would otherwise have been recognised for services over the vesting period. | |||
Where HSBC Holdings enters into share-based payment arrangements involving employees of subsidiaries, the cost is recognised in ‘Investment in subsidiaries’ and credited to the ‘Share-based payment reserve’ over the vesting period. Where a subsidiary funds the share-based payment arrangement, ‘Investment in subsidiaries’ is reduced by the fair value of equity instruments. | |||
(v) | Foreign currencies | ||
Items included in the financial statements of each of HSBC’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). HSBC’s consolidated financial statements are presented in US dollars which is also HSBC Holdings’ functional currency. |
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Note 2 |
Transactions in foreign currencies are recorded in the functional currency at the rate of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange ruling at the balance sheet date. Any resulting exchange differences are included in the income statement. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated into the functional currency using the rate of exchange at the date of the initial transaction. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated into the functional currency using the rate of exchange at the date the fair value was determined. Any exchange component of a gain or loss on a non-monetary item is recognised in other comprehensive income if the gain or loss on the non-monetary item is recognised in other comprehensive income. Any exchange component of a gain or loss on a non-monetary item is recognised in the income statement if the gain or loss on the non-monetary item is recognised in the income statement. | |||
In the consolidated financial statements, the assets, including related goodwill where applicable, and liabilities of branches, subsidiaries, joint ventures and associates whose functional currency is not US dollars, are translated into the Group’s presentation currency at the rate of exchange ruling at the balance sheet date. The results of branches, subsidiaries, joint ventures and associates whose functional currency is not US dollars are translated into US dollars at the average rates of exchange for the reporting period. Exchange differences arising from the retranslation of opening foreign currency net assets, and exchange differences arising from retranslation of the result for the reporting period from the average rate to the exchange rate prevailing at the period end, are recognised in other comprehensive income. Exchange differences on a monetary item that is part of a net investment in a foreign operation are recognised in the income statement of the separate financial statements. In consolidated financial statements these exchange differences are recognised in other comprehensive income. On disposal of a foreign operation, exchange differences relating thereto and previously recognised in other comprehensive income are recognised in the income statement. | |||
(w) | Provisions | ||
Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a current legal or constructive obligation, which has arisen as a result of past events, and for which a reliable estimate can be made of the amount of the obligation. | |||
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, are possible obligations that arise from past events whose existence will be confirmed only by the occurrence, or non-occurrence, of one or more uncertain future events not wholly within the control of HSBC; or are present obligations that have arisen from past events but are not recognised because it is not probable that settlement will require the outflow of economic benefits, or because the amount of the obligations cannot be reliably measured. Contingent liabilities are not recognised in the financial statements but are disclosed unless the probability of settlement is remote. | |||
(x) | Financial guarantee contracts | ||
Liabilities under financial guarantee contracts which are not classified as insurance contracts are recorded initially at their fair value, which is generally the fee received or receivable. Subsequently, financial guarantee liabilities are measured at the higher of the initial fair value, less cumulative amortisation, and the best estimate of the expenditure required to settle the obligations. | |||
HSBC Holdings has issued financial guarantees and similar contracts to other Group entities. Where it has previously asserted explicitly that it regards such contracts as insurance contracts and has used accounting applicable to insurance contracts, HSBC may elect to account for guarantees as an insurance contract. This election is made on a contract by contract basis, but the election for each contract is irrevocable. Where these guarantees have been classified as insurance contracts, they are measured and recognised as insurance liabilities. | |||
(y) | Insurance contracts | ||
Through its insurance subsidiaries, HSBC issues contracts to customers that contain insurance risk, financial risk or a combination thereof. A contract under which HSBC accepts significant insurance risk from another party by agreeing to compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract. An insurance contract may also transfer financial risk, but is accounted for as an insurance contract if the insurance risk is significant. |
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While investment contracts with discretionary participation features are financial instruments, they continue to be treated as insurance contracts as permitted by IFRS 4. | |||
Insurance contracts are accounted for as follows: | |||
Premiums | |||
Gross insurance premiums for non-life insurance business are reported as income over the term of the insurance contracts based on the proportion of risks borne during the accounting period. The unearned premium (the proportion of the business underwritten in the accounting year relating to the period of risk after the balance sheet date) is calculated on a daily or monthly pro rata basis. | |||
Premiums for life insurance contracts are accounted for when receivable, except in unit-linked insurance contracts where premiums are accounted for when liabilities are established. | |||
Reinsurance premiums are accounted for in the same accounting period as the premiums for the direct insurance contracts to which they relate. | |||
Claims and reinsurance recoveries | |||
Gross insurance claims for non-life insurance contracts include paid claims and movements in outstanding claims liabilities. | |||
Gross insurance claims for life insurance contracts reflect the total cost of claims arising during the year, including claim handling costs and any policyholder bonuses allocated in anticipation of a bonus declaration. Claims arising during the year include maturities, surrenders and death claims. | |||
Maturity claims are recognised when due for payment. Surrenders are recognised when paid or at an earlier date on which, following notification, the policy ceases to be included within the calculation of the related insurance liabilities. Death claims are recognised when notified. | |||
Reinsurance recoveries are accounted for in the same period as the related claim. | |||
Liabilities under insurance contracts | |||
Outstanding claims liabilities for non-life insurance contracts are based on the estimated ultimate cost of all claims incurred but not settled at the balance sheet date, whether reported or not, together with related claim-handling costs and a reduction for the expected value of salvage and other recoveries. Liabilities for claims incurred but not reported are made on an estimated basis, using appropriate statistical techniques. | |||
Liabilities under non-linked life insurance contracts are calculated by each life insurance operation based on local actuarial principles. | |||
Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value which is calculated by reference to the value of the relevant underlying funds or indices. | |||
A liability adequacy test is carried out on insurance liabilities to ensure that the carrying amount of the liabilities is sufficient in the light of current estimates of future cash flows. When performing the liability adequacy test, all contractual cash flows are discounted and compared with the carrying value of the liability. When a shortfall is identified it is charged immediately to the income statement. | |||
Present value of in-force long-term insurance business | |||
The value placed on insurance contracts that are classified as long-term insurance business or long-term investment contracts with discretionary participating features (‘DPF’) and are in force at the balance sheet date is recognised as an asset. The asset represents the present value of the shareholders’ interest in the profits expected to emerge from these contracts written at the balance sheet date. | |||
The present value of in-force long-term insurance business and long-term investment contracts with DPF, referred to as ‘PVIF’, is determined by discounting the shareholders’ interest in future profits expected to emerge from business currently in force using appropriate assumptions in assessing factors such as future mortality, lapse rates and levels of expenses and a risk discount rate that reflects the risk premium attributable to the respective contracts. The PVIF incorporates allowances for both non-market risk and the value of financial |
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Notes 2 and 3 |
options and guarantees. The PVIF asset is presented gross of attributable tax in the balance sheet and movements in the PVIF asset are included in ‘Other operating income’ on a gross of tax basis. | |||
Future profit participation | |||
Where contracts provide discretionary profit participation benefits to policyholders, liabilities for these contracts include provisions for the future discretionary benefits to policyholders. These provisions reflect actual performance of the investment portfolio to date and management expectation on the future performance in connection with the assets backing the contracts, as well as other experience factors such as mortality, lapses and operational efficiency, where appropriate. This benefit may arise from the contractual terms, regulation, or past distribution policy. | |||
In the case of net unrealised investment gains on contracts whose discretionary benefits principally reflect the actual performance of the investment portfolio, the corresponding increase in the liabilities is recognised in either the income statement or other comprehensive income, following the treatment of the unrealised gains on the relevant assets. In the case of net unrealised losses, a deferred participating asset is recognised only to the extent that its recoverability is highly probable. Movements in the liabilities arising from realised gains and losses on relevant assets are recognised in the income statement. | |||
Investment contracts | |||
Customer liabilities under linked and certain non-linked investment contracts and the corresponding financial assets are designated at fair value. Movements in fair value are recognised in ‘Net income from financial investments designated at fair value’. Premiums receivable and amounts withdrawn are accounted for as increases or decreases in the liability recorded in respect of investment contracts. | |||
Liabilities under linked investment contracts are at least equivalent to the surrender or transfer value which is calculated by reference to the value of the relevant underlying funds or indices. | |||
Investment management fees receivable are recognised in the income statement over the period of the provision of the investment management services, in ‘Net fee income’. | |||
The incremental costs directly related to the acquisition of new investment contracts or renewing existing investment contracts are deferred and amortised over the period during which the investment management services are provided. | |||
(z) | Debt securities issued and deposits by customers and banks | ||
Financial liabilities are recognised when HSBC enters into the contractual provisions of the arrangements with counterparties, which is generally on trade date, and initially measured at fair value, which is normally the consideration received net of directly attributable transaction costs incurred. Subsequent measurement of financial liabilities, other than those measured at fair value through profit or loss and financial guarantees, is at amortised cost, using the effective interest method to amortise the difference between proceeds received, net of directly attributable transaction costs incurred, and the redemption amount over the expected life of the instrument. | |||
(aa) | Share capital | ||
Shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax. | |||
HSBC Holdings plc shares held by HSBC are recognised in equity as a deduction from retained earnings until they are cancelled. When such shares are subsequently sold, reissued or otherwise disposed of, any consideration received is included in equity, net of any directly attributable incremental transaction costs and related income tax effects. | |||
(ab) | Cash and cash equivalents | ||
For the purpose of the statement of cash flows, cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in |
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value. Such investments are normally those with less than three months’ maturity from the date of acquisition, and include cash and balances at central banks, treasury bills and other eligible bills, loans and advances to banks, items in the course of collection from or in transmission to other banks, and certificates of deposit. |
Rights issues to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights issues pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. On initial recognition, these rights are recognised in shareholders’ equity and are not subsequently re-measured during the offer period. Following the exercise of the rights and the allotment of new shares, the cash proceeds of the rights issue are recognised in shareholders’ equity. Incremental costs directly attributable to the rights issue are shown as a deduction from the proceeds, net of tax. |
3 | Net income/(expense) from financial instruments designated at fair value |
Net income/(expense) from financial instruments designated at fair value includes: |
• | all gains and losses from changes in the fair value of financial assets and liabilities designated at fair value, including liabilities under investment contracts; | |
• | all gains and losses from changes in the fair value of derivatives that are managed in conjunction with financial assets and liabilities designated at fair value; and | |
• | interest income, interest expense and dividend income in respect of: |
– | financial assets and liabilities designated at fair value; and | ||
– | derivatives managed in conjunction with the above, |
except for interest arising from HSBC’s issued debt securities and derivatives managed in conjunction with those debt securities, which is recognised in ‘Interest expense’. |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Net income/(expense) arising on: | ||||||||||||
– financial assets held to meet liabilities under insurance and investment contracts | 3,793 | (5,064 | ) | 2,056 | ||||||||
– other financial assets designated at fair value | 2 | 1,738 | 581 | |||||||||
– derivatives managed in conjunction with financial assets designated at fair value | (249 | ) | 77 | (18 | ) | |||||||
3,546 | (3,249 | ) | 2,619 | |||||||||
– liabilities to customers under investment contracts | (1,329 | ) | 1,751 | (940 | ) | |||||||
– HSBC’s long-term debt issued and related derivatives | (6,247 | ) | 6,679 | 2,812 | ||||||||
– changes in own credit spread on long-term debt | (6,533 | ) | 6,570 | 3,055 | ||||||||
– derivatives managed in conjunction with HSBC’s issued debt securities | (1,726 | ) | 4,413 | 2,476 | ||||||||
– other changes in fair value | 2,012 | (4,304 | ) | (2,719 | ) | |||||||
– other financial liabilities designated at fair value | 492 | (1,368 | ) | (395 | ) | |||||||
– derivatives managed in conjunction with other financial liabilities designated at fair value | 7 | 39 | (13 | ) | ||||||||
(7,077 | ) | 7,101 | 1,464 | |||||||||
Net income/(expense) from financial instruments designated at fair value | (3,531 | ) | 3,852 | 4,083 | ||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Net income/(expense) arising on: | ||||||||||||
– HSBC’s long-term debt issued and related derivatives | ||||||||||||
– changes in own credit spread on long-term debt | (2,612 | ) | 2,262 | 876 | ||||||||
– derivatives managed in conjunction with HSBC’s issued debt securities | (352 | ) | 688 | 1,094 | ||||||||
– other changes in fair value | 201 | 37 | (1,054 | ) | ||||||||
Net income/(expense) from financial instruments designated at fair value | (2,763 | ) | 2,987 | 916 | ||||||||
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Notes 4, 5 and 6 |
4 | Gains arising from dilution of interests in associates |
Gains arising | HSBC’s | HSBC’s | ||||||||||
from dilution | interests after | interests before | ||||||||||
of HSBC’s | issue of | issue of | ||||||||||
interests | new shares | new shares | ||||||||||
US$m | % | % | ||||||||||
2007 | ||||||||||||
Industrial Bank1 | 187 | 12.78 | 15.98 | |||||||||
Ping An Insurance | 485 | 16.78 | 19.90 | |||||||||
Bank of Communications2 | 404 | 18.60 | 19.90 | |||||||||
Financiera Independencia S.A. de C.V. | 11 | 18.68 | 19.90 | |||||||||
Vietnam Technological and Commercial Joint Stock Bank | 5 | 14.44 | 15.00 | |||||||||
Gains arising from dilution of interests in associates | 1,092 | |||||||||||
1 | Investment held through Hang Seng Bank, a 62.14 per cent owned subsidiary of HSBC. The dilution gains therefore include a minority interest of US$71 million. | |
2 | Subsequent to the dilution of its interests in Bank of Communications, HSBC increased its holding from 18.60 per cent to 19.01 per cent at 31 December 2007 (Note 21). |
5 | Net earned insurance premiums |
Life | Life | Investment | ||||||||||||||||||
Non-life | insurance | insurance | contracts | |||||||||||||||||
insurance | (non-linked) | (linked) | with DPF | 1 | Total | |||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
2009 | ||||||||||||||||||||
Gross earned premiums | 1,572 | 5,218 | 1,427 | 2,774 | 10,991 | |||||||||||||||
– gross written premiums | 1,339 | 5,285 | 1,427 | 2,774 | 10,825 | |||||||||||||||
– movement in unearned premiums | 233 | (67 | ) | – | – | 166 | ||||||||||||||
Reinsurers’ share of gross earned premiums | (225 | ) | (278 | ) | (17 | ) | – | (520 | ) | |||||||||||
– gross written premiums ceded to reinsurers | (215 | ) | (280 | ) | (11 | ) | – | (506 | ) | |||||||||||
– reinsurers’ share of movement in unearned premiums | (10 | ) | 2 | (6 | ) | – | (14 | ) | ||||||||||||
1,347 | 4,940 | 1,410 | 2,774 | 10,471 | ||||||||||||||||
2008 | ||||||||||||||||||||
Gross earned premiums | 1,834 | 6,086 | 1,825 | 2,802 | 12,547 | |||||||||||||||
– gross written premiums | 1,776 | 6,257 | 1,825 | 2,802 | 12,660 | |||||||||||||||
– movement in unearned premiums | 58 | (171 | ) | – | – | (113 | ) | |||||||||||||
Reinsurers’ share of gross earned premiums | (263 | ) | (851 | ) | (583 | ) | – | (1,697 | ) | |||||||||||
– gross written premiums ceded to reinsurers | (260 | ) | (878 | ) | (564 | ) | – | (1,702 | ) | |||||||||||
– reinsurers’ share of movement in unearned premiums | (3 | ) | 27 | (19 | ) | – | 5 | |||||||||||||
1,571 | 5,235 | 1,242 | 2,802 | 10,850 | ||||||||||||||||
2007 | ||||||||||||||||||||
Gross earned premiums | 1,855 | 4,906 | 2,350 | 1,890 | 11,001 | |||||||||||||||
– gross written premiums | 1,853 | 4,892 | 2,350 | 1,890 | 10,985 | |||||||||||||||
– movement in unearned premiums | 2 | 14 | – | – | 16 | |||||||||||||||
Reinsurers’ share of gross earned premiums | (407 | ) | (357 | ) | (1,161 | ) | – | (1,925 | ) | |||||||||||
– gross written premiums ceded to reinsurers | (385 | ) | (357 | ) | (1,166 | ) | – | (1,908 | ) | |||||||||||
– reinsurers’ share of movement in unearned premiums | (22 | ) | – | 5 | – | (17 | ) | |||||||||||||
1,448 | 4,549 | 1,189 | 1,890 | 9,076 | ||||||||||||||||
1 | Discretionary participation features. |
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6 | Net insurance claims incurred and movement in liabilities to policyholders |
Life | Life | Investment | ||||||||||||||||||
Non-life | insurance | insurance | contracts | |||||||||||||||||
insurance | (non-linked) | (linked) | with DPF | 1 | Total | |||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
2009 | ||||||||||||||||||||
Gross claims incurred and movement in liabilities | 1,281 | 4,669 | 2,676 | 3,934 | 12,560 | |||||||||||||||
– claims, benefits and surrenders paid | 987 | 2,098 | 325 | 1,818 | 5,228 | |||||||||||||||
– movement in liabilities | 294 | 2,571 | 2,351 | 2,116 | 7,332 | |||||||||||||||
Reinsurers’ share of claims incurred and movement in liabilities | (158 | ) | (98 | ) | 146 | – | (110 | ) | ||||||||||||
– claims, benefits and surrenders paid | (156 | ) | (159 | ) | (21 | ) | – | (336 | ) | |||||||||||
– movement in liabilities | (2 | ) | 61 | 167 | – | 226 | ||||||||||||||
1,123 | 4,571 | 2,822 | 3,934 | 12,450 | ||||||||||||||||
2008 | ||||||||||||||||||||
Gross claims incurred and movement in liabilities | 1,044 | 5,480 | 939 | 1,743 | 9,206 | |||||||||||||||
– claims, benefits and surrenders paid | 1,044 | 1,491 | 481 | 1,911 | 4,927 | |||||||||||||||
– movement in liabilities | – | 3,989 | 458 | (168 | ) | 4,279 | ||||||||||||||
Reinsurers’ share of claims incurred and movement in liabilities | (83 | ) | (792 | ) | (1,442 | ) | – | (2,317 | ) | |||||||||||
– claims, benefits and surrenders paid | (158 | ) | (172 | ) | (44 | ) | – | (374 | ) | |||||||||||
– movement in liabilities | 75 | (620 | ) | (1,398 | ) | – | (1,943 | ) | ||||||||||||
961 | 4,688 | (503 | ) | 1,743 | 6,889 | |||||||||||||||
2007 | ||||||||||||||||||||
Gross claims incurred and movement in liabilities | 1,099 | 3,377 | 2,886 | 2,188 | 9,550 | |||||||||||||||
– claims, benefits and surrenders paid | 1,017 | 940 | 790 | 1,080 | 3,827 | |||||||||||||||
– movement in liabilities | 82 | 2,437 | 2,096 | 1,108 | 5,723 | |||||||||||||||
Reinsurers’ share of claims incurred and movement in liabilities | (171 | ) | 349 | (1,120 | ) | – | (942 | ) | ||||||||||||
– claims, benefits and surrenders paid | (207 | ) | (169 | ) | (45 | ) | – | (421 | ) | |||||||||||
– movement in liabilities | 36 | 518 | (1,075 | ) | – | (521 | ) | |||||||||||||
928 | 3,726 | 1,766 | 2,188 | 8,608 | ||||||||||||||||
1 | Discretionary participation features. |
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Notes 7 and 8 |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Income | ||||||||||||
Interest recognised on impaired financial assets | 941 | 1,040 | 404 | |||||||||
Fees earned on financial assets or liabilities not held for trading nor designated at fair value, other than fees included in effective interest rate calculations on these types of assets and liabilities | 12,310 | 14,511 | 15,140 | |||||||||
Fees earned on trust and other fiduciary activities where HSBC holds or invests assets on behalf of its customers | 2,735 | 3,314 | 3,695 | |||||||||
Income from listed investments | 9,201 | 11,425 | 10,944 | |||||||||
Income from unlisted investments | 7,085 | 11,359 | 10,429 | |||||||||
Losses from the fraud at Bernard L Madoff Investment Securities LLC | (72 | ) | (984 | ) | – | |||||||
Expense | ||||||||||||
Interest on financial instruments, excluding interest on financial liabilities held for trading or designated at fair value | (19,737 | ) | (45,525 | ) | (50,876 | ) | ||||||
Fees payable on financial assets or liabilities not held for trading nor designated at fair value, other than fees included in effective interest rate calculations on these types of assets and liabilities | (1,580 | ) | (1,866 | ) | (1,923 | ) | ||||||
Fees payable relating to trust and other fiduciary activities where HSBC holds or invests assets on behalf of its customers | (116 | ) | (159 | ) | (163 | ) | ||||||
Gains/(losses) | ||||||||||||
Gain on disposal or settlement of loans and advances | 244 | 94 | 64 | |||||||||
Impairment of available-for-sale equity securities | (358 | ) | (1,042 | ) | (42 | ) | ||||||
Gains on disposal of property, plant and equipment, intangible assets and non-financial investments | 457 | 465 | 213 | |||||||||
Gain on sale/repurchase of 8 Canada Square1 | 576 | 416 | – | |||||||||
Loan impairment charges and other credit risk provisions | (26,488 | ) | (24,937 | ) | (17,242 | ) | ||||||
Net impairment charge on loans and advances | (24,942 | ) | (24,131 | ) | (17,177 | ) | ||||||
Impairment of available-for-sale debt securities | (1,474 | ) | (737 | ) | (44 | ) | ||||||
Impairment in respect of other credit risk provisions | (72 | ) | (69 | ) | (21 | ) | ||||||
1 | The repurchase of 8 Canada Square occurred in 2008. See Note 23 for further details. |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Wages and salaries | 16,268 | 18,169 | 18,535 | |||||||||
Social security costs | 1,512 | 1,625 | 1,587 | |||||||||
Post-employment benefits | 688 | 998 | 1,212 | |||||||||
18,468 | 20,792 | 21,334 | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Europe | 84,056 | 87,864 | 86,918 | |||||||||
Hong Kong | 28,894 | 30,030 | 27,702 | |||||||||
Rest of Asia-Pacific1 | 88,122 | 87,954 | 75,095 | |||||||||
Middle East1 | 8,468 | 8,201 | 8,008 | |||||||||
North America | 42,202 | 53,090 | 58,117 | |||||||||
Latin America | 57,774 | 64,319 | 66,442 | |||||||||
Total | 309,516 | 331,458 | 322,282 | |||||||||
1 | The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been adjusted accordingly. |
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2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Defined benefit pension plans | 161 | 477 | 694 | |||||||||
– HSBC Bank (UK) Pension Scheme | (179 | ) | 255 | 490 | ||||||||
– Other plans | 340 | 222 | 204 | |||||||||
Defined contribution pension plans | 492 | 498 | 484 | |||||||||
653 | 975 | 1,178 | ||||||||||
Defined benefit healthcare plans | 31 | 13 | 33 | |||||||||
Defined contribution healthcare plans | 4 | 10 | 1 | |||||||||
688 | 998 | 1,212 | ||||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Defined benefit pension plans | 6,147 | 3,154 | ||||||
– HSBC Bank (UK) Pension Scheme | 3,822 | 392 | ||||||
– Other plans | 2,325 | 2,762 | ||||||
Defined benefit healthcare plans | 820 | 734 | ||||||
6,967 | 3,888 | |||||||
• | to limit the risk of the assets failing to meet the liabilities of the plans over the long-term; and | |
• | to maximise returns consistent with an acceptable level of risk so as to control the long-term costs of the defined benefit plans. |
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Note 8 |
% | ||||
Equities | 15.0 | |||
Bonds | 50.0 | |||
Alternative assets1 | 10.0 | |||
Property | 10.0 | |||
Cash | 15.0 | |||
100.0 | ||||
1 | Alternative assets include emerging market bonds, loans, and infrastructure assets. |
US$m | 1 | £m | ||||||
2009 | nil | nil | ||||||
2010 | nil | nil | ||||||
2011 | nil | nil | ||||||
2012 | 754 | 465 | ||||||
2013 | 754 | 465 | ||||||
2014 | 754 | 465 | ||||||
2015 | 1,022 | 630 | ||||||
2016 | 1,022 | 630 | ||||||
2017 | 1,022 | 630 | ||||||
2018 | 1,022 | 630 |
1 | The payment schedule was agreed with the Trustee in pounds sterling and the equivalent US dollar amounts are shown at the exchange rate effective as at 31 December 2009. |
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Note 8 |
Healthcare cost trend | ||||||||||||||||||||||||||||
Rate of | Rate | Year of | ||||||||||||||||||||||||||
Discount | Inflation | increase for | of pay | Initial | Ultimate | ultimate | ||||||||||||||||||||||
rate | rate | pensions | 1 | increase | rate | rate | rate | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
UK2 | 5.70 | 3.70 | 3.50 | 4.20 | 7.70 | 7.70 | n/a | |||||||||||||||||||||
Hong Kong | 2.58 | n/a | n/a | 5.00 | n/a | n/a | n/a | |||||||||||||||||||||
US | 5.92 | 2.50 | n/a | 3.50 | 7.40 | 4.50 | 2027 | |||||||||||||||||||||
Jersey | 5.70 | 3.70 | 3.70 | 5.45 | n/a | n/a | n/a | |||||||||||||||||||||
Mexico | 8.50 | 3.50 | 3.50 | 4.50 | 6.75 | 6.75 | n/a | |||||||||||||||||||||
Brazil | 11.25 | 4.50 | 4.50 | 5.50 | 10.00 | 5.50 | 2019 | |||||||||||||||||||||
France | 5.50 | 2.00 | 2.00 | 3.00 | n/a | n/a | n/a | |||||||||||||||||||||
Canada | 6.25 | 2.50 | n/a | 3.72 | 8.00 | 5.00 | 2015 | |||||||||||||||||||||
Switzerland | 3.25 | 1.50 | n/a | 2.50 | n/a | n/a | n/a | |||||||||||||||||||||
Germany | 5.50 | 2.00 | 2.00 | 3.00 | n/a | n/a | n/a |
1 | Rate of increase for pensions in payment and deferred pension (except for the UK). | |
2 | Rate of increase for pensions in the UK is for pensions in payment only. |
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Healthcare cost trend | ||||||||||||||||||||||||||||
Rate of | Rate | Year of | ||||||||||||||||||||||||||
Discount | Inflation | increase for | of pay | Initial | Ultimate | ultimate | ||||||||||||||||||||||
rate | rate | pensions | 1 | increase | rate | rate | rate | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
UK2 | 6.50 | 2.90 | 3.00 | 3.40 | 6.90 | 6.90 | n/a | |||||||||||||||||||||
Hong Kong | 1.19 | n/a | n/a | 5.00 | n/a | n/a | n/a | |||||||||||||||||||||
US | 6.05 | 2.50 | n/a | 3.50 | 8.90 | 5.00 | 2018 | |||||||||||||||||||||
Jersey | 6.50 | 2.90 | 2.90 | 4.65 | n/a | n/a | n/a | |||||||||||||||||||||
Mexico | 8.10 | 3.50 | 2.00 | 4.50 | 6.75 | 6.75 | n/a | |||||||||||||||||||||
Brazil | 10.75 | 4.50 | 4.50 | 5.50 | 10.00 | 5.50 | 2018 | |||||||||||||||||||||
France | 5.75 | 2.00 | 2.00 | 3.00 | n/a | n/a | n/a | |||||||||||||||||||||
Canada | 7.19 | 2.50 | n/a | 3.85 | 8.20 | 4.90 | 2012 | |||||||||||||||||||||
Switzerland | 2.60 | 1.50 | n/a | 2.39 | n/a | n/a | n/a | |||||||||||||||||||||
Germany | 5.75 | 2.00 | 2.00 | 3.00 | n/a | n/a | n/a |
1 | Rate of increase for pensions in payment and deferred pension (except for the UK). | |
2 | Rate of increase for pensions in the UK is for pensions in payment only. |
Healthcare cost trend | ||||||||||||||||||||||||||||
Rate of | Rate | Year of | ||||||||||||||||||||||||||
Discount | Inflation | increase for | of pay | Initial | Ultimate | ultimate | ||||||||||||||||||||||
rate | rate | pensions | 1 | increase | rate | rate | rate | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||
UK | 5.80 | 3.30 | 3.30 | 4.30 | 7.30 | 7.30 | n/a | |||||||||||||||||||||
Hong Kong | 3.45 | n/a | n/a | 5.02 | n/a | n/a | n/a | |||||||||||||||||||||
US | 6.55 | 2.50 | n/a | 3.75 | 9.60 | 5.00 | 2014 | |||||||||||||||||||||
Jersey | 5.80 | 3.30 | 3.30 | 5.05 | n/a | n/a | n/a | |||||||||||||||||||||
Mexico | 7.88 | 3.50 | 2.00 | 4.50 | 6.00 | 6.00 | n/a | |||||||||||||||||||||
Brazil | 10.75 | 4.50 | 4.50 | 4.50 | 10.50 | 5.50 | 2017 | |||||||||||||||||||||
France | 5.50 | 2.00 | 2.00 | 3.00 | 6.00 | 6.00 | n/a | |||||||||||||||||||||
Canada | 5.43 | 2.50 | n/a | 3.86 | 9.00 | 4.90 | 2012 | |||||||||||||||||||||
Switzerland | 3.30 | 1.50 | n/a | 2.38 | n/a | n/a | n/a | |||||||||||||||||||||
Germany | 5.50 | 2.00 | 2.00 | 3.00 | n/a | n/a | n/a |
1 | Rate of increase for pensions in payment and deferred pension. |
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Note 8 |
Life expectancy at | Life expectancy at | |||||||||||||||||
age 65 for a male | age 65 for a female | |||||||||||||||||
Mortality table | member currently: | member currently: | ||||||||||||||||
Aged 65 | Aged 45 | Aged 65 | Aged 45 | |||||||||||||||
UK | SAPS MC1 | 22.3 | 24.2 | 23.3 | 25.2 | |||||||||||||
Hong Kong | n/a | n/a | n/a | n/a | n/a | |||||||||||||
US | RP 2000 fully generational | 19.2 | 20.7 | 21.2 | 22.1 | |||||||||||||
Jersey | 80% of PNA002 | 24.1 | 26.1 | 26.5 | 28.4 | |||||||||||||
Mexico | EMSSA-97, AA generational scale from | |||||||||||||||||
RP 2000 series | 18.5 | 20.1 | 21.1 | 22.0 | ||||||||||||||
Brazil | RP 2000 fully generational | 19.2 | 20.7 | 21.2 | 22.1 | |||||||||||||
France | TG 05 | 23.2 | 26.0 | 26.7 | 29.6 | |||||||||||||
Canada | UP94 generational | 19.5 | 21.1 | 22.0 | 22.8 | |||||||||||||
Switzerland | BVG 20053 | 17.9 | 17.9 | 21.0 | 21.0 | |||||||||||||
Germany | Heubeck 2005 G | 18.3 | 21.0 | 22.4 | 25.0 |
1 | SAPS MC projections with 1 per cent minimum improvement beyond 2002. Light table with 1.08 rating for male and standard table with 1.06 rating for female. | |
2 | PNA00 year of birth and medium cohort with 1 per cent minimum improvement thereafter. | |
3 | Additional 8.5 per cent liability loading for future mortality improvements. |
Life expectancy at | Life expectancy at | |||||||||||||||||
age 65 for a male | age 65 for a female | |||||||||||||||||
Mortality table | member currently: | member currently: | ||||||||||||||||
Aged 65 | Aged 45 | Aged 65 | Aged 45 | |||||||||||||||
UK | PA921 | 20.8 | 22.8 | 24.1 | 26.2 | |||||||||||||
Hong Kong | n/a | n/a | n/a | n/a | n/a | |||||||||||||
US | RP 2000 fully generational | 19.1 | 20.6 | 21.1 | 22.0 | |||||||||||||
Jersey | 90% of PNA002 | 23.0 | 25.0 | 25.4 | 27.3 | |||||||||||||
Mexico | EMSSA-97, AA generational scale | |||||||||||||||||
from RP 2000 series | 18.3 | 19.8 | 21.0 | 21.9 | ||||||||||||||
Brazil | RP 2000 fully generational | 19.1 | 20.6 | 21.1 | 22.0 | |||||||||||||
France | TG 05 | 23.1 | 25.9 | 26.6 | 29.4 | |||||||||||||
Canada pension plans | Between UP94 C2015 and | 18.5 | 18.5 | 21.1 | 21.1 | |||||||||||||
UP94 C2027 | and 19.4 | and 19.4 | and 21.6 | and 21.6 | ||||||||||||||
Canada healthcare plan | UP94 C2025 | 19.3 | 19.3 | 21.5 | 21.5 | |||||||||||||
Switzerland | BVG 20053 | 17.9 | 17.9 | 21.0 | 21.0 | |||||||||||||
Germany | Heubeck 2005 G | 18.0 | 20.7 | 22.1 | 24.7 |
1 | PA92 with standard improvements to 2005 and medium cohort with 1 per cent minimum improvement thereafter. | |
2 | PNA00 year of birth and medium cohort with 1 per cent minimum improvement thereafter. | |
3 | Additional 8.5 per cent liability loading for future mortality improvements. |
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HSBC Bank (UK) Pension Scheme | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Discount rate | ||||||||
Change in pension obligation at year end from a 25bps increase | (879 | ) | (559 | ) | ||||
Change in pension obligation at year end from a 25bps decrease | 946 | 595 | ||||||
Change in 2010 pension cost from a 25bps increase | (13 | ) | (9 | ) | ||||
Change in 2010 pension cost from a 25bps decrease | 13 | 10 | ||||||
Rate of inflation | ||||||||
Change in pension obligation at year end from a 25bps increase | 964 | 525 | ||||||
Change in pension obligation at year end from a 25bps decrease | (907 | ) | (493 | ) | ||||
Change in 2010 pension cost from a 25bps increase | 65 | 45 | ||||||
Change in 2010 pension cost from a 25bps decrease | (63 | ) | (41 | ) | ||||
Rate of increase for pensions in payment and deferred pensions | ||||||||
Change in pension obligation at year end from a 25bps increase | 800 | 349 | ||||||
Change in pension obligation at year end from a 25bps decrease | (766 | ) | (328 | ) | ||||
Change in 2010 pension cost from a 25bps increase | 50 | 29 | ||||||
Change in 2010 pension cost from a 25bps decrease | (49 | ) | (23 | ) | ||||
Rate of pay increase | ||||||||
Change in pension obligation at year end from a 25bps increase | 195 | 172 | ||||||
Change in pension obligation at year end from a 25bps decrease | (174 | ) | (168 | ) | ||||
Change in 2010 pension cost from a 25bps increase | 18 | 16 | ||||||
Change in 2010 pension cost from a 25bps decrease | (16 | ) | (15 | ) | ||||
Investment return | ||||||||
Change in 2010 pension cost from a 25bps increase | (44 | ) | (36 | ) | ||||
Change in 2010 pension cost from a 25bps decrease | 44 | 36 | ||||||
Mortality | ||||||||
Change in pension obligation from each additional year of longevity assumed | 487 | 365 |
Other plans | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Change in defined benefit obligation at year end from a 25bps increase in discount rate | (269 | ) | (255 | ) | ||||
Change in 2010 defined benefit charge from a 25bps increase in discount rate | (3 | ) | (4 | ) | ||||
Increase in defined benefit obligation from each additional year of longevity assumed | 120 | 91 |
HSBC Bank (UK) Pension Scheme | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Expected | Expected | |||||||||||||||
rates of return | Value | rates of return | Value | |||||||||||||
% | US$m | % | US$m | |||||||||||||
Fair value of plan assets | 17,701 | 14,865 | ||||||||||||||
Equities | 8.4 | 2,770 | 8.1 | 2,242 | ||||||||||||
Bonds | 5.3 | 12,597 | 5.7 | 10,999 | ||||||||||||
Property | 7.7 | 1,502 | 6.9 | 1,184 | ||||||||||||
Other | 5.3 | 832 | 4.2 | 440 | ||||||||||||
Defined benefit obligation | (21,523 | ) | (15,257 | ) | ||||||||||||
Present value of funded obligations | (21,523 | ) | (15,257 | ) | ||||||||||||
Net liability | (3,822 | ) | (392 | ) | ||||||||||||
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Note 8 |
Other plans | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Expected | Expected | |||||||||||||||
rates of return | 1 | Value | rates of return | 1 | Value | |||||||||||
% | US$m | % | US$m | |||||||||||||
Fair value of plan assets | 6,822 | 6,024 | ||||||||||||||
Equities | 8.2 | 2,302 | 8.3 | 1,856 | ||||||||||||
Bonds | 5.0 | 3,809 | 5.0 | 3,261 | ||||||||||||
Property | 6.4 | 55 | 6.3 | 87 | ||||||||||||
Other | 3.5 | 656 | 3.8 | 820 | ||||||||||||
Defined benefit obligation | (9,109 | ) | (8,787 | ) | ||||||||||||
Present value of funded obligations | (8,588 | ) | (8,271 | ) | ||||||||||||
Present value of unfunded obligations | (521 | ) | (516 | ) | ||||||||||||
Effect of limit on plan surpluses | (47 | ) | (9 | ) | ||||||||||||
Unrecognised past service cost | 9 | 10 | ||||||||||||||
Net liability | (2,325 | ) | (2,762 | ) | ||||||||||||
1 | The expected rates of return are weighted on the basis of the fair value of the plan assets. |
HSBC Bank (UK) Pension Scheme | Other plans | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 1 January | 15,257 | 23,512 | 8,787 | 8,873 | ||||||||||||
Current service cost | 260 | 387 | 334 | 357 | ||||||||||||
Interest cost | 1,019 | 1,227 | 397 | 466 | ||||||||||||
Contributions by employees | 5 | 2 | 17 | 40 | ||||||||||||
Actuarial (gains)/losses | 4,563 | (3,032 | ) | (114 | ) | 358 | ||||||||||
Benefits paid | (884 | ) | (873 | ) | (608 | ) | (596 | ) | ||||||||
Past service cost – vested immediately | – | – | 20 | 9 | ||||||||||||
Past service cost – unvested benefits | – | – | – | 10 | ||||||||||||
Disposals | – | – | – | (44 | ) | |||||||||||
Business combinations | – | – | 4 | – | ||||||||||||
Reduction in liabilities resulting from curtailments | – | – | (41 | ) | (20 | ) | ||||||||||
Liabilities extinguished on settlements | (499 | ) | – | (1 | ) | (81 | ) | |||||||||
Exchange differences | 1,802 | (5,966 | ) | 314 | (585 | ) | ||||||||||
At 31 December | 21,523 | 15,257 | 9,109 | 8,787 | ||||||||||||
HSBC Bank (UK) Pension Scheme | Other plans | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 1 January | 14,865 | 22,704 | 6,024 | 7,768 | ||||||||||||
Expected return on plan assets | 959 | 1,359 | 381 | 549 | ||||||||||||
Contributions by HSBC | 367 | 462 | 596 | 238 | ||||||||||||
– normal | 367 | 462 | 178 | 223 | ||||||||||||
– special | – | – | 418 | 15 | ||||||||||||
Contributions by employees | 5 | 2 | 17 | 40 | ||||||||||||
Experience gains/(losses) | 871 | (2,861 | ) | 65 | (1,452 | ) | ||||||||||
Benefits paid | (884 | ) | (873 | ) | (522 | ) | (576 | ) | ||||||||
Assets distributed on curtailments | – | – | (5 | ) | – | |||||||||||
Assets distributed on settlements | – | – | (6 | ) | (40 | ) | ||||||||||
Exchange differences | 1,518 | (5,928 | ) | 272 | (503 | ) | ||||||||||
At 31 December | 17,701 | 14,865 | 6,822 | 6,024 | ||||||||||||
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2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
HSBC Bank (UK) Pension Scheme | 683 | 725 | 756 | 801 | 847 | 5,359 | ||||||||||||||||||
Other significant plans | 453 | 512 | 534 | 560 | 592 | 3,561 |
HSBC Bank (UK) Pension Scheme | Other plans | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Current service cost | 260 | 387 | 454 | 334 | 357 | 347 | ||||||||||||||||||
Interest cost | 1,019 | 1,227 | 1,247 | 397 | 466 | 398 | ||||||||||||||||||
Expected return on plan assets | (959 | ) | (1,359 | ) | (1,211 | ) | (381 | ) | (549 | ) | (486 | ) | ||||||||||||
Past service cost | – | – | – | 21 | 9 | 7 | ||||||||||||||||||
Gains on curtailments | – | – | – | (36 | ) | (20 | ) | (63 | ) | |||||||||||||||
(Gains)/losses on settlements | (499 | ) | – | – | 5 | (41 | ) | 1 | ||||||||||||||||
Total (income)/expense | (179 | ) | 255 | 490 | 340 | 222 | 204 | |||||||||||||||||
HSBC Bank (UK) Pension Scheme | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Defined benefit obligation | (21,523 | ) | (15,257 | ) | (23,512 | ) | (24,332 | ) | (20,587 | ) | ||||||||||
Fair value of plan assets | 17,701 | 14,865 | 22,704 | 20,587 | 17,396 | |||||||||||||||
Net deficit | (3,822 | ) | (392 | ) | (808 | ) | (3,745 | ) | (3,191 | ) | ||||||||||
Experience gains/(losses) on plan liabilities | (234 | ) | (49 | ) | (64 | ) | 540 | 70 | ||||||||||||
Experience gains/(losses) on plan assets | 871 | (2,861 | ) | 29 | – | 1,623 | ||||||||||||||
Gains/(losses) from changes in actuarial assumptions | (4,329 | ) | 3,081 | 2,459 | (570 | ) | (2,038 | ) | ||||||||||||
Total net actuarial gains/(losses) | (3,692 | ) | 171 | 2,424 | (30 | ) | (345 | ) | ||||||||||||
Other plans | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Defined benefit obligation | (9,109 | ) | (8,787 | ) | (8,873 | ) | (7,916 | ) | (7,102 | ) | ||||||||||
Fair value of plan assets | 6,822 | 6,024 | 7,768 | 7,116 | 6,356 | |||||||||||||||
Net deficit | (2,287 | ) | (2,763 | ) | (1,105 | ) | (800 | ) | (746 | ) | ||||||||||
Experience gains/(losses) on plan liabilities | 20 | (52 | ) | (354 | ) | (167 | ) | (113 | ) | |||||||||||
Experience gains/(losses) on plan assets | 65 | (1,452 | ) | 157 | 203 | 78 | ||||||||||||||
Gains/(losses) from changes in actuarial assumptions | 94 | (306 | ) | (121 | ) | (44 | ) | (393 | ) | |||||||||||
Total net actuarial gains/(losses) | 179 | (1,810 | ) | (318 | ) | (8 | ) | (428 | ) | |||||||||||
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Table of Contents
Note 8 |
2009 | 2008 | ||||||||||||||||
Expected | Expected | ||||||||||||||||
rates of return | 1 | Value | rates of return | 1 | Value | ||||||||||||
% | US$m | % | US$m | ||||||||||||||
Fair value of plan assets | 142 | 128 | |||||||||||||||
Equities | 12.2 | 43 | 11.6 | 39 | |||||||||||||
Bonds | 8.7 | 72 | 8.0 | 89 | |||||||||||||
Other | 4.6 | 27 | – | – | |||||||||||||
Defined benefit obligation | (937 | ) | (839 | ) | |||||||||||||
Present value of funded obligations | (148 | ) | (172 | ) | |||||||||||||
Present value of unfunded obligations | (789 | ) | (667 | ) | |||||||||||||
�� | |||||||||||||||||
Unrecognised negative past service cost | (25 | ) | (23 | ) | |||||||||||||
Net liability | (820 | ) | (734 | ) | |||||||||||||
1 The expected rates of return are weighted on the basis of the fair value of the plan assets. | |||||||||||||||||
Changes in the present value of defined benefit obligations | |||||||||||||||||
2009 | 2008 | ||||||||||||||||
US$m | US$m | ||||||||||||||||
At 1 January | 839 | 1,038 | |||||||||||||||
Current service cost | 11 | 19 | |||||||||||||||
Interest cost | 55 | 65 | |||||||||||||||
Contributions by employees | 2 | 2 | |||||||||||||||
Actuarial (gains)/losses | 44 | 2 | |||||||||||||||
Benefits paid | (43 | ) | (76 | ) | |||||||||||||
Reduction in liabilities resulting from curtailments | (22 | ) | (31 | ) | |||||||||||||
Liabilities extinguished on settlements | (4 | ) | (38 | ) | |||||||||||||
Exchange differences | 55 | (142 | ) | ||||||||||||||
At 31 December | 937 | 839 | |||||||||||||||
Changes in the fair value of plan assets | |||||||||||||||||
2009 | 2008 | ||||||||||||||||
US$m | US$m | ||||||||||||||||
At 1 January | 128 | 146 | |||||||||||||||
Expected return on plan assets | 11 | 12 | |||||||||||||||
Contributions by HSBC | 11 | 19 | |||||||||||||||
Experience gains/(losses) | 8 | (14 | ) | ||||||||||||||
Benefits paid | (4 | ) | (9 | ) | |||||||||||||
Assets distributed on settlements. | (4 | ) | (12 | ) | |||||||||||||
Exchange differences | (8 | ) | (14 | ) | |||||||||||||
At 31 December | 142 | 128 | |||||||||||||||
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Table of Contents
2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Significant plans | 52 | 53 | 54 | 56 | 58 | 323 |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Current service cost | 11 | 19 | 25 | |||||||||
Interest cost | 55 | 65 | 67 | |||||||||
Expected return on plan assets | (11 | ) | (12 | ) | (13 | ) | ||||||
Past service cost | (2 | ) | (2 | ) | (4 | ) | ||||||
Gains on curtailments | (22 | ) | (31 | ) | (42 | ) | ||||||
Gains on settlements | – | (26 | ) | – | ||||||||
�� | ||||||||||||
Total expense | 31 | 13 | 33 | |||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Defined benefit obligation | (937 | ) | (839 | ) | (1,038 | ) | (1,106 | ) | (1,004 | ) | ||||||||||
Fair value of plan assets | 142 | 128 | 146 | 133 | 107 | |||||||||||||||
Net deficit | (795 | ) | (711 | ) | (892 | ) | (973 | ) | (897 | ) | ||||||||||
Experience gains/(losses) on plan liabilities | 13 | (34 | ) | 15 | (12 | ) | 19 | |||||||||||||
Experience gains/(losses) on plan assets | 8 | (14 | ) | (6 | ) | (1 | ) | 1 | ||||||||||||
Gains/(losses) from changes in actuarial assumptions | (57 | ) | 32 | 94 | (25 | ) | (63 | ) | ||||||||||||
Total net actuarial gains/(losses) | (36 | ) | (16 | ) | 103 | (38 | ) | (43 | ) | |||||||||||
2009 | 2008 | |||||||||||||||
1% increase | 1% decrease | 1% increase | 1% decrease | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Increase/(decrease) of the aggregate of the current service cost and interest cost | 8 | (7 | ) | 9 | (7 | ) | ||||||||||
Increase/(decrease) of defined benefit obligation | 86 | (75 | ) | 77 | (62 | ) |
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Table of Contents
Notes 8, 9 and 10 |
2009 | 2008 | 2007 | ||||||||||
US$000 | US$000 | US$000 | ||||||||||
Fees | 3,756 | 2,529 | 2,626 | |||||||||
Salaries and other emoluments | 11,835 | 11,584 | 7,929 | |||||||||
Bonuses | – | – | 8,938 | |||||||||
15,591 | 14,113 | 19,493 | ||||||||||
Gains on the exercise of share options. | – | 23 | 13 | |||||||||
Vesting of Long-Term Incentive awards | 1,579 | 7,147 | 4,563 |
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Audit fees for HSBC Holdings’ statutory audit1 | 2.3 | 2.1 | 3.0 | |||||||||
– fees relating to current year | 2.1 | 2.5 | 3.0 | |||||||||
– fees relating to prior year | 0.2 | (0.4 | ) | – | ||||||||
Fees payable to KPMG for other services provided to HSBC | 77.1 | 88.3 | 79.1 | |||||||||
Audit-related services: | ||||||||||||
– audit of HSBC’s subsidiaries, pursuant to legislation2 | 45.9 | 48.6 | 45.2 | |||||||||
– other services pursuant to legislation3 | 24.2 | 26.5 | 19.4 | |||||||||
Tax services4 | 2.6 | 3.1 | 2.9 | |||||||||
Other services: | ||||||||||||
– services relating to information technology5 | 0.3 | 0.6 | 0.4 | |||||||||
– services related to corporate finance transactions6 | 0.1 | 1.4 | 1.8 | |||||||||
– all other services7 | 4.0 | 8.1 | 9.4 | |||||||||
Total fees payable | 79.4 | 90.4 | 82.1 | |||||||||
1 | Fees payable to KPMG Audit Plc for the statutory audit of the consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings. They exclude amounts payable for the statutory audit of HSBC Holdings’ subsidiaries which have been included in ‘Fees payable to KPMG for other services provided to HSBC’. | |
2 | Including fees payable to KPMG for the statutory audit of HSBC’s subsidiaries. | |
3 | Including services for assurance and other services that relate to statutory and regulatory filings, including comfort letters and interim reviews. Other services pursuant to legislation included no fees paid to KPMG in respect of work relating to preparation for reporting under section 404 of the Sarbanes-Oxley Act (2008: nil; 2007: US$1.6 million). No other accounting firms were paid for work on this project in 2009 (2008: US$1.2 million; 2007: US$2.5 million). | |
4 | Including tax compliance services and tax advisory services. | |
5 | Including advice on IT security and business continuity and performing agreed-upon IT testing procedures. | |
6 | Including fees payable to KPMG for transaction-related work, including US debt issuances. | |
7 | Including other assurance and advisory services such as translation services, ad-hoc accounting advice and review of financial models. |
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2009 | 2008 | 2007 | ||||||||||
US$000 | US$000 | US$000 | ||||||||||
Audit fees | 670 | 720 | 612 | |||||||||
Tax services | – | 73 | 14 | |||||||||
All other services | 260 | – | 36 | |||||||||
Total fees payable | 930 | 793 | 662 | |||||||||
1-year savings- | 3-year savings- | 5-year savings- | ||||||||||
related share | related share | related share | ||||||||||
option plan | option plans | option plans | ||||||||||
2009 | ||||||||||||
Risk-free interest rate1 (%) | 0.7 | 2.1 | 2.4 | |||||||||
Expected life2 (years) | 1 | 3 | 5 | |||||||||
Expected volatility3 (%) | 50 | 35 | 30 | |||||||||
Share price at grant date (£) | 4.65 | 4.65 | 4.65 | |||||||||
2008 | ||||||||||||
Risk-free interest rate1 (%) | 4.5 | 4.5 | 4.5 | |||||||||
Expected life2 (years) | 1 | 3 | 5 | |||||||||
Expected volatility3 (%) | 25 | 25 | 25 | |||||||||
Share price at grant date (£) | 8.80 | 8.80 | 8.80 | |||||||||
2007 | ||||||||||||
Risk-free interest rate1 (%) | 5.6 | 5.5 | 5.4 | |||||||||
Expected life2 (years) | 1 | 3 | 5 | |||||||||
Expected volatility3 (%) | 17 | 17 | 17 | |||||||||
Share price at grant date (£) | 9.24 | 9.24 | 9.24 |
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Note 10 |
1 | The risk-free rate was determined from the UK gilts yield curve for the UK Savings-Related Share Option Plans. A similar yield curve was used for the International Savings-Related Share Option Plans. | |
2 | Expected life is not a single input parameter but a function of various behavioural assumptions. | |
3 | Expected volatility is estimated by considering both historic average share price volatility and implied volatility derived from traded options over HSBC shares of similar maturity to those of the employee options. |
2009 | 2008 | |||||||
Number | Number | |||||||
(000s) | (000s) | |||||||
Outstanding at 1 January | 11,619 | 12,318 | ||||||
Additions during the year1 | 333 | 5,664 | ||||||
Adjustment for rights issue | 1,712 | – | ||||||
Released in the year | (1,076 | ) | (2,246 | ) | ||||
Forfeited in the year | (5,228 | ) | (4,117 | ) | ||||
Outstanding at 31 December | 7,360 | 11,619 | ||||||
1 | Additions in 2009 comprised reinvested dividend equivalents |
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2009 | 2008 | |||||||
Number | Number | |||||||
(000s) | (000s) | |||||||
Outstanding at 1 January | 122,206 | 79,256 | ||||||
Additions during the year | 108,439 | 72,120 | ||||||
Adjustment for rights issue | 26,119 | – | ||||||
Released in the year | (49,718 | ) | (17,092 | ) | ||||
Forfeited in the year | (22,728 | ) | (12,078 | ) | ||||
Outstanding at 31 December | 184,318 | 122,206 | ||||||
2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
exercise | exercise | |||||||||||||||
Number | price | Number | price | |||||||||||||
(000s) | £ | (000s) | £ | |||||||||||||
Outstanding at 1 January | 300 | 8.89 | 524 | 8.85 | ||||||||||||
Adjustment for rights issue | 44 | 7.75 | – | – | ||||||||||||
Forfeited and expired in the year | (258 | ) | 7.66 | (224 | ) | 8.79 | ||||||||||
Outstanding and exercisable at 31 December | 86 | 7.99 | 300 | 8.89 | ||||||||||||
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Note 10 |
2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
exercise | exercise | |||||||||||||||
Number | price | Number | price | |||||||||||||
(000s) | £ | (000s) | £ | |||||||||||||
Outstanding at 1 January | 74,401 | 6.97 | 89,739 | 6.83 | ||||||||||||
Granted in the year | 152,796 | 3.32 | 32,951 | 6.82 | ||||||||||||
Adjustment for rights issue | 7,970 | 6.08 | – | – | ||||||||||||
Exercised in the year | (5,011 | ) | 5.72 | (30,126 | ) | 6.10 | ||||||||||
Forfeited, cancelled and expired in the year | (57,630 | ) | 5.96 | (18,163 | ) | 7.04 | ||||||||||
Outstanding at 31 December | 172,526 | 3.69 | 74,401 | 6.97 | ||||||||||||
2009 | 2008 | |||||||
Exercise price range (£) | 3.31 – 6.69 | 5.35 – 7.67 | ||||||
Weighted average remaining contractual life (years) | 3.47 | 1.87 | ||||||
Of which exercisable: | ||||||||
Number (000s) | 5,145 | 1,751 | ||||||
Weighted average exercise price (£) | 6.26 | 6.03 |
2009 | 2008 | |||||||
Number | Number | |||||||
(000s) | (000s) | |||||||
Outstanding at 1 January | – | 4,811 | ||||||
Additions during the year1 | – | 159 | ||||||
Released in the year | – | (11 | ) | |||||
Forfeited in the year | – | (4,959 | ) | |||||
Outstanding at 31 December | – | – | ||||||
1 | Additions during the year comprised reinvested dividend equivalents. |
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2009 | 2008 | |||||||
Number | Number | |||||||
(000s) | (000s) | |||||||
Outstanding at 1 January | 2,717 | 19,299 | ||||||
Additions during the year1 | 30 | 934 | ||||||
Adjustment for rights issue | 376 | – | ||||||
Released in the year | (2,916 | ) | (16,405 | ) | ||||
Forfeited in the year | (34 | ) | (1,111 | ) | ||||
Outstanding at 31 December | 173 | 2,717 | ||||||
1 | Additions during the year principally comprised reinvested dividend equivalents. |
2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
exercise | exercise | |||||||||||||||
Number | price | Number | price | |||||||||||||
(000s) | £ | (000s) | £ | |||||||||||||
Outstanding at 1 January | 142,593 | 8.16 | 152,216 | 8.15 | ||||||||||||
Adjustment for rights issue | 21,333 | 7.12 | – | – | ||||||||||||
Exercised in the year | (1,548 | ) | 6.28 | (3,734 | ) | 7.38 | ||||||||||
Forfeited and expired in the year | (4,659 | ) | 7.15 | (5,889 | ) | 8.28 | ||||||||||
Outstanding at 31 December | 157,719 | 7.12 | 142,593 | 8.16 | ||||||||||||
2009 | 2008 | |||||||||||||||
Exercise price range (£) | 6.00-7.00 | 7.01-8.50 | 6.00-8.00 | 8.01-10.00 | ||||||||||||
Number (000s) | 28,406 | 129,313 | 25,947 | 116,646 | ||||||||||||
Weighted average exercise price (£) | 6.03 | 7.36 | 6.91 | 8.44 | ||||||||||||
Weighted average remaining contractual life (years) | 3.33 | 3.34 | 4.33 | 4.34 | ||||||||||||
Of which exercisable: | ||||||||||||||||
Number (000s) | 28,406 | 129,313 | 25,947 | 116,646 | ||||||||||||
Weighted average exercise price (£) | 6.03 | 7.36 | 6.91 | 8.44 |
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Notes 10 and 11 |
2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
exercise | exercise | |||||||||||||||
Number | price | Number | price | |||||||||||||
(000s) | £ | (000s) | £ | |||||||||||||
Outstanding at 1 January | 13,964 | 6.92 | 18,239 | 6.85 | ||||||||||||
Adjustment for rights issue | 2,046 | 6.04 | – | – | ||||||||||||
Exercised in the year | (920 | ) | 6.39 | (4,051 | ) | 6.58 | ||||||||||
Expired in the year | (8,383 | ) | 5.61 | (224 | ) | 7.70 | ||||||||||
Outstanding at 31 December | 6,707 | 6.50 | 13,964 | 6.92 | ||||||||||||
2009 | 2008 | |||||||
Exercise price range (£) | 5.50 – 7.00 | 6.01 – 7.87 | ||||||
Number (000s) | 6,707 | 13,964 | ||||||
Weighted average exercise price (£) | 6.50 | 6.92 | ||||||
Weighted average remaining contractual life (years) | 0.26 | 0.75 | ||||||
Of which exercisable: | ||||||||
Number (000s) | 6,707 | 13,964 | ||||||
Weighted average exercise price (£) | 6.50 | 6.92 |
2009 | 2008 | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Number | price | Number | price | |||||||||||||
(000s) | € | (000s) | € | |||||||||||||
Outstanding and exercisable at 1 January and 31 December. | 604 | 142.5 | 604 | 142.5 | ||||||||||||
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2009 | 2008 | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Number | price | Number | price | |||||||||||||
(000s) | US$ | (000s) | US$ | |||||||||||||
Outstanding at 1 January | 2,402 | 10.66 | 2,455 | 10.66 | ||||||||||||
Adjustment for rights issue | 354 | 9.29 | – | – | ||||||||||||
Exercised in the year | (20 | ) | 9.29 | (12 | ) | 10.66 | ||||||||||
Expired in the year | – | 9.29 | (41 | ) | 10.66 | |||||||||||
Outstanding and exercisable at 31 December | 2,736 | 9.29 | 2,402 | 10.66 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Current tax | ||||||||||||
UK Corporation tax | 206 | 1,671 | 1,326 | |||||||||
– on current year profit | 280 | 1,738 | 1,372 | |||||||||
– adjustments in respect of prior years | (74 | ) | (67 | ) | (46 | ) | ||||||
Overseas tax | 1,847 | 1,703 | 3,879 | |||||||||
– on current year profit | 1,826 | 1,732 | 3,976 | |||||||||
– adjustments in respect of prior years | 21 | (29 | ) | (97 | ) | |||||||
2,053 | 3,374 | 5,205 | ||||||||||
Deferred tax | ||||||||||||
Origination and reversal of temporary differences | (1,672 | ) | (504 | ) | (1,247 | ) | ||||||
Effect of changes in tax rates | (10 | ) | (89 | ) | (35 | ) | ||||||
Adjustments in respect of prior years | 14 | 28 | (166 | ) | ||||||||
(1,668 | ) | (565 | ) | (1,448 | ) | |||||||
Tax expense | 385 | 2,809 | 3,757 | |||||||||
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Note 11 |
2009 | 2008 | 2007 | ||||||||||||||||||||||
US$m | % | US$m | % | US$m | % | |||||||||||||||||||
Analysis of tax expense | ||||||||||||||||||||||||
Taxation at UK corporation tax rate of 28% (2008: 28.5%; 2007: 30%)1 | 1,982 | 28.0 | 2,652 | 28.5 | 7,264 | 30.0 | ||||||||||||||||||
Goodwill impairment | – | – | 3,010 | 32.3 | – | – | ||||||||||||||||||
Non-deductible loss on foreign exchange swaps on rights issue proceeds2 | 96 | 1.4 | – | – | – | – | ||||||||||||||||||
Effect of taxing overseas profits in principal locations at different rates | (1,345 | ) | (19.0 | ) | (1,339 | ) | (14.4 | ) | (1,460 | ) | (6.0 | ) | ||||||||||||
Gains not subject to tax | (238 | ) | (3.4 | ) | (1,016 | ) | (10.9 | ) | (296 | ) | (1.2 | ) | ||||||||||||
Adjustments in respect of prior period liabilities | (39 | ) | (0.6 | ) | (67 | ) | (0.7 | ) | (309 | ) | (1.3 | ) | ||||||||||||
Low income housing tax credits3 | (98 | ) | (1.4 | ) | (103 | ) | (1.1 | ) | (107 | ) | (0.4 | ) | ||||||||||||
Effect of profit in associates and joint ventures | (499 | ) | (7.1 | ) | (473 | ) | (5.1 | ) | (450 | ) | (1.9 | ) | ||||||||||||
Release of deferred tax consequent on restructuring of Group interests | – | – | – | – | (359 | ) | (1.5 | ) | ||||||||||||||||
Impact of gains arising from dilution of interests in associates5 | – | – | – | – | (253 | ) | (1.0 | ) | ||||||||||||||||
Deferred tax temporary differences not provided4 | 360 | 5.1 | 157 | 1.7 | (432 | ) | (1.8 | ) | ||||||||||||||||
Non taxable income | (365 | ) | (5.2 | ) | (519 | ) | (5.6 | ) | (404 | ) | (1.7 | ) | ||||||||||||
Permanent disallowables | 223 | 3.2 | 217 | 2.3 | 202 | 0.8 | ||||||||||||||||||
Additional provision for tax on overseas dividends | 341 | 4.8 | 294 | 3.2 | 335 | 1.4 | ||||||||||||||||||
Other items | (33 | ) | (0.4 | ) | (4 | ) | – | 26 | 0.1 | |||||||||||||||
Overall tax expense1 | 385 | 5.4 | 2,809 | 30.2 | 3,757 | 15.5 | ||||||||||||||||||
1 | The change in the UK corporation tax rate from 30 per cent to 28 per cent with effect from 1 April 2008 gave rise to a blended tax rate for 2008 of 28.5 per cent. | |
2 | In August 2009, the UK Government enacted legislation that gains or losses on transactions designated to hedge foreign exchange exposures connected to rights issues should be disregarded for tax purposes. | |
3 | Low income housing tax credits arise in the US and are designed to encourage the provision of rental housing for low income households. | |
4 | 2008 includes the effect of previously unrecognised temporary differences principally related to the recognition of trading losses (2007: capital losses). | |
5 | The gains arising from the dilution of HSBC’s interests in associates were not subject to tax and, as such, there is a reconciling item which reduces the effective tax rate for 2007 (see Note 4). |
2009 | 2008 | |||||||
US$m | US$m | |||||||
At 1 January | 5,156 | 3,425 | ||||||
Income statement credit | 1,668 | 565 | ||||||
Equity: | ||||||||
– available-for-sale investments | (587 | ) | 582 | |||||
cash flow hedges | (517 | ) | 90 | |||||
– actuarial losses | 978 | 434 | ||||||
– share-based payments | 9 | – | ||||||
Foreign exchange and other adjustments. | 76 | 60 | ||||||
At 31 December | 6,783 | 5,156 | ||||||
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2009 | 2008 | |||||||
US$m | US$m | |||||||
Deferred tax assets | ||||||||
Retirement benefits | 1,772 | 927 | ||||||
Loan impairment allowances | 6,363 | 5,891 | ||||||
Unused tax losses | 164 | 282 | ||||||
Accelerated capital allowances | 215 | 99 | ||||||
Available-for-sale investments | 68 | 518 | ||||||
Cash flow hedges | 229 | 1,145 | ||||||
Share-based payments | 196 | 245 | ||||||
Other short-term temporary differences | 1,778 | 457 | ||||||
10,785 | 9,564 | |||||||
Deferred tax liabilities | ||||||||
Assets leased to customers | 1,121 | 916 | ||||||
Revaluation of property | 399 | 374 | ||||||
Accelerated capital allowances | 129 | 167 | ||||||
Other short-term temporary differences | 564 | 419 | ||||||
Provision for tax on profit remitted from overseas | – | 78 | ||||||
Available-for-sale investments | 340 | 121 | ||||||
Cash flow hedges | 91 | 280 | ||||||
Fee income | 1,080 | 930 | ||||||
Other temporary differences | 278 | 1,123 | ||||||
4,002 | 4,408 | |||||||
Net deferred tax assets before offsetting balances within countries | 6,783 | 5,156 | ||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Deferred tax assets | 8,620 | 7,011 | ||||||
Deferred tax liabilities | (1,837 | ) | (1,855 | ) | ||||
6,783 | 5,156 | |||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
US | 5,110 | 5,073 | ||||||
Brazil | 1,289 | 850 | ||||||
Mexico | 620 | 456 | ||||||
UK | 395 | – | ||||||
Other | 1,206 | 632 | ||||||
8,620 | 7,011 | |||||||
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Table of Contents
Notes 11, 12 and 13 |
Deferred tax asset/(liability) | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Temporary differences: | ||||||||
– short-term timing differences | 1 | 1 | ||||||
– fair valued assets and liabilities | (23 | ) | 30 | |||||
– share-based payments | 8 | 11 | ||||||
(14 | ) | 42 | ||||||
Dividends to shareholders of the parent company were as follows: |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Per | Settled | Per | Settled | Per | Settled | |||||||||||||||||||||||||||||||
share | Total | in scrip | share | Total | in scrip | share | Total | in scrip | ||||||||||||||||||||||||||||
US$ | US$m | US$m | US$ | US$m | US$m | US$ | US$m | US$m | ||||||||||||||||||||||||||||
Dividends declared on ordinary shares | ||||||||||||||||||||||||||||||||||||
In respect of previous year: | ||||||||||||||||||||||||||||||||||||
– fourth interim dividend | 0.10 | 1,210 | 624 | 0.39 | 4,620 | 2,233 | 0.36 | 4,161 | 2,116 | |||||||||||||||||||||||||||
In respect of current year: | ||||||||||||||||||||||||||||||||||||
– first interim dividend | 0.08 | 1,384 | 190 | 0.18 | 2,158 | 256 | 0.17 | 1,986 | 712 | |||||||||||||||||||||||||||
– second interim dividend | 0.08 | 1,385 | 696 | 0.18 | 2,166 | 727 | 0.17 | 1,997 | 912 | |||||||||||||||||||||||||||
– third interim dividend | 0.08 | 1,391 | 160 | 0.18 | 2,175 | 380 | 0.17 | 2,007 | 614 | |||||||||||||||||||||||||||
0.34 | 5,370 | 1,670 | 0.93 | 11,119 | 3,596 | 0.87 | 10,151 | 4,354 | ||||||||||||||||||||||||||||
Quarterly dividends on preference shares classified as equity | ||||||||||||||||||||||||||||||||||||
March dividend | 15.50 | 22 | 15.50 | 22 | 15.50 | 22 | ||||||||||||||||||||||||||||||
June dividend | 15.50 | 23 | 15.50 | 23 | 15.50 | 23 | ||||||||||||||||||||||||||||||
September dividend | 15.50 | 22 | 15.50 | 22 | 15.50 | 22 | ||||||||||||||||||||||||||||||
December dividend | 15.50 | 23 | 15.50 | 23 | 15.50 | 23 | ||||||||||||||||||||||||||||||
62.00 | 90 | 62.00 | 90 | 62.00 | 90 | |||||||||||||||||||||||||||||||
Quarterly coupons on capital securities classified as equity1 | ||||||||||||||||||||||||||||||||||||
January coupon | 0.508 | 44 | – | – | – | – | ||||||||||||||||||||||||||||||
April coupon | 0.508 | 45 | – | – | – | – | ||||||||||||||||||||||||||||||
July coupon | 0.508 | 45 | 0.541 | 47 | – | – | ||||||||||||||||||||||||||||||
October coupon | 0.508 | 45 | 0.508 | 45 | – | – | ||||||||||||||||||||||||||||||
2.032 | 179 | 1.049 | 92 | – | – | |||||||||||||||||||||||||||||||
1 | During April 2008, HSBC Holdings issued US$2,200 million of Perpetual Subordinated Capital Securities, which are classified as equity under IFRSs. |
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2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Profit attributable to shareholders of the parent company | 5,834 | 5,728 | 19,133 | |||||||||
Dividend payable on preference shares classified as equity | (90 | ) | (90 | ) | (90 | ) | ||||||
Coupon payable on capital securities classified as equity | (179 | ) | (92 | ) | – | |||||||
Profit attributable to the ordinary shareholders of the parent company | 5,565 | 5,546 | 19,043 | |||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Number | Per | Number | Per | Number | Per | |||||||||||||||||||||||||||||||
Profit | of shares | share | Profit | of shares | share | Profit | of shares | share | ||||||||||||||||||||||||||||
US$m | (millions) | US$ | US$m | (millions) | US$ | US$m | (millions) | US$ | ||||||||||||||||||||||||||||
Basic | 5,565 | 16,277 | 0.34 | 5,546 | 13,555 | 0.41 | 19,043 | 13,248 | 1.44 | |||||||||||||||||||||||||||
Effect of dilutive potential ordinary shares | 143 | 118 | 133 | |||||||||||||||||||||||||||||||||
Diluted | 5,565 | 16,420 | 0.34 | 5,546 | 13,673 | 0.41 | 19,043 | 13,381 | 1.42 | |||||||||||||||||||||||||||
Number of shares (millions) | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Weighted average number of ordinary shares outstanding | 16,277 | 13,555 | 13,248 | |||||||||
Weighted average number of dilutive potential ordinary shares | 143 | 118 | 133 | |||||||||
– Savings-related Share Option Plan | 26 | 13 | 23 | |||||||||
– Executive Share Option Scheme | – | 3 | 6 | |||||||||
– Group Share Option Plan | – | 5 | 18 | |||||||||
– Restricted and performance share awards | 117 | 95 | 77 | |||||||||
– HSBC France share options | – | 1 | 6 | |||||||||
– HSBC Finance share options | – | 1 | 3 | |||||||||
Weighted average number of ordinary shares outstanding assuming dilution. | 16,420 | 13,673 | 13,381 | |||||||||
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Note 14 |
• | Personal Financial Services offers a broad range of products and services to meet the personal banking, consumer finance and wealth management needs of individual customers. Personal banking products typically include current and savings accounts, mortgages and personal loans, credit cards, insurance, wealth management and local and international payment services. | |
• | Commercial Banking product offerings include the provision of financing services, payments and cash management, international trade finance, treasury and capital markets, commercial cards, insurance, wealth management and investment banking services. | |
• | Global Banking and Markets provides tailored financial solutions to major government, corporate and institutional clients worldwide. The client-focused business lines deliver a full range of banking capabilities including investment banking and financing solutions; a markets business that provides services in credit, rates, foreign exchange, money markets and securities services; global asset management services and principal investment activities. | |
• | Private Banking provides a range of services to meet the banking, investment and wealth advisory needs of high net worth individuals. |
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Year ended 31 December 2009 | ||||||||||||||||||||||||||||||||
Rest of | Intra- | |||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | HSBC | |||||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | Items | Total | |||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Interest income | 20,283 | 5,327 | 5,877 | 2,260 | 19,526 | 10,091 | (1,268 | ) | 62,096 | |||||||||||||||||||||||
Interest expense | (8,015 | ) | (1,132 | ) | (2,338 | ) | (775 | ) | (5,856 | ) | (4,518 | ) | 1,268 | (21,366 | ) | |||||||||||||||||
Net interest income | 12,268 | 4,195 | 3,539 | 1,485 | 13,670 | 5,573 | – | 40,730 | ||||||||||||||||||||||||
Fee income | 8,576 | 3,099 | 1,972 | 682 | 5,496 | 2,230 | (652 | ) | 21,403 | |||||||||||||||||||||||
Fee expense | (2,309 | ) | (430 | ) | (415 | ) | (57 | ) | (679 | ) | (501 | ) | 652 | (3,739 | ) | |||||||||||||||||
Net fee income | 6,267 | 2,669 | 1,557 | 625 | 4,817 | 1,729 | – | 17,664 | ||||||||||||||||||||||||
Trading income excluding net interest income | 2,861 | 1,068 | 1,264 | 369 | 35 | 639 | – | 6,236 | ||||||||||||||||||||||||
Net interest income on trading activities | 2,598 | 157 | 342 | 25 | 296 | 209 | – | 3,627 | ||||||||||||||||||||||||
Net trading income | 5,459 | 1,225 | 1,606 | 394 | 331 | 848 | – | 9,863 | ||||||||||||||||||||||||
Changes in fair value of long- term debt issued and related derivatives | (2,746 | ) | (3 | ) | (1 | ) | – | (3,497 | ) | – | – | (6,247 | ) | |||||||||||||||||||
Net income from other financial instruments designated at fair value | 1,321 | 788 | 111 | – | 1 | 495 | – | 2,716 | ||||||||||||||||||||||||
Net income from financial instruments designated at fair value | (1,425 | ) | 785 | 110 | – | (3,496 | ) | 495 | – | (3,531 | ) | |||||||||||||||||||||
Gains less losses from financial investments | 50 | 9 | (19 | ) | 16 | 296 | 168 | – | 520 | |||||||||||||||||||||||
Dividend income | 29 | 28 | 2 | 3 | 53 | 11 | – | 126 | ||||||||||||||||||||||||
Net earned insurance premiums | 4,223 | 3,674 | 365 | – | 309 | 1,900 | – | 10,471 | ||||||||||||||||||||||||
Other operating income | 2,262 | 1,274 | 1,238 | 71 | 566 | 133 | (2,756 | ) | 2,788 | |||||||||||||||||||||||
Total operating income | 29,133 | 13,859 | 8,398 | 2,594 | 16,546 | 10,857 | (2,756 | ) | 78,631 | |||||||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (5,589 | ) | (4,392 | ) | (395 | ) | – | (241 | ) | (1,833 | ) | – | (12,450 | ) | ||||||||||||||||||
Net operating income before loan impairment charges and other credit risk provisions | 23,544 | 9,467 | 8,003 | 2,594 | 16,305 | 9,024 | (2,756 | ) | 66,181 | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (5,568 | ) | (500 | ) | (896 | ) | (1,334 | ) | (15,664 | ) | (2,526 | ) | – | (26,488 | ) | |||||||||||||||||
Net operating income | 17,976 | 8,967 | 7,107 | 1,260 | 641 | 6,498 | (2,756 | ) | 39,693 | |||||||||||||||||||||||
Employee compensation and benefits | (7,174 | ) | (2,102 | ) | (2,363 | ) | (545 | ) | (4,085 | ) | (2,199 | ) | – | (18,468 | ) | |||||||||||||||||
General and administrative expenses | (5,775 | ) | (1,502 | ) | (1,872 | ) | (419 | ) | (3,794 | ) | (2,786 | ) | 2,756 | (13,392 | ) | |||||||||||||||||
Depreciation and impairment of property, plant and equipment | (762 | ) | (224 | ) | (172 | ) | (31 | ) | (329 | ) | (207 | ) | – | (1,725 | ) | |||||||||||||||||
Amortisation and impairment of intangible assets | (277 | ) | (118 | ) | (43 | ) | (6 | ) | (183 | ) | (183 | ) | – | (810 | ) | |||||||||||||||||
Total operating expenses | (13,988 | ) | (3,946 | ) | (4,450 | ) | (1,001 | ) | (8,391 | ) | (5,375 | ) | 2,756 | (34,395 | ) | |||||||||||||||||
Operating profit/(loss) | 3,988 | 5,021 | 2,657 | 259 | (7,750 | ) | 1,123 | – | 5,298 | |||||||||||||||||||||||
Share of profit in associates and joint ventures | 21 | 8 | 1,543 | 196 | 12 | 1 | – | 1,781 | ||||||||||||||||||||||||
Profit/(loss) before tax | 4,009 | 5,029 | 4,200 | 455 | (7,738 | ) | 1,124 | – | 7,079 | |||||||||||||||||||||||
Tax income/(expense) | (776 | ) | (869 | ) | (753 | ) | (94 | ) | 2,285 | (178 | ) | – | (385 | ) | ||||||||||||||||||
Profit/(loss) for the year | 3,233 | 4,160 | 3,447 | 361 | (5,453 | ) | 946 | – | 6,694 | |||||||||||||||||||||||
413
Table of Contents
Note 14 |
Profit/(loss) for the year (continued) |
Year ended 31 December 2008 | ||||||||||||||||||||||||||||||||
Rest of | Intra- | |||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | HSBC | |||||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | items | Total | |||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Interest income | 35,117 | 9,530 | 9,066 | 2,451 | 25,897 | 11,632 | (2,392 | ) | 91,301 | |||||||||||||||||||||||
Interest expense | (25,421 | ) | (3,832 | ) | (5,129 | ) | (895 | ) | (10,679 | ) | (5,174 | ) | 2,392 | (48,738 | ) | |||||||||||||||||
Net interest income | 9,696 | 5,698 | 3,937 | 1,556 | 15,218 | 6,458 | – | 42,563 | ||||||||||||||||||||||||
Fee income | 10,225 | 3,062 | 2,414 | 740 | 6,292 | 2,716 | (685 | ) | 24,764 | |||||||||||||||||||||||
Fee expense | (2,733 | ) | (482 | ) | (547 | ) | (49 | ) | (1,065 | ) | (549 | ) | 685 | (4,740 | ) | |||||||||||||||||
Net fee income | 7,492 | 2,580 | 1,867 | 691 | 5,227 | 2,167 | – | 20,024 | ||||||||||||||||||||||||
Trading income/(expense) excluding net interest income | 1,691 | 856 | 1,443 | 380 | (3,879 | ) | 356 | – | 847 | |||||||||||||||||||||||
Net interest income on trading activities | 3,666 | 337 | 599 | 22 | 744 | 345 | – | 5,713 | ||||||||||||||||||||||||
Net trading income/(expense) | 5,357 | 1,193 | 2,042 | 402 | (3,135 | ) | 701 | – | 6,560 | |||||||||||||||||||||||
Changes in fair value of long- term debt issued and related derivatives | 2,939 | 3 | 1 | – | 3,736 | – | – | 6,679 | ||||||||||||||||||||||||
Net income/(expense) from other financial instruments designated at fair value | (1,826 | ) | (1,194 | ) | (172 | ) | – | 1 | 364 | – | (2,827 | ) | ||||||||||||||||||||
Net income/(expense) from financial instruments designated at fair value | 1,113 | (1,191 | ) | (171 | ) | – | 3,737 | 364 | – | 3,852 | ||||||||||||||||||||||
Gains less losses from financial investments | 418 | (309 | ) | 24 | 8 | (120 | ) | 176 | – | 197 | ||||||||||||||||||||||
Dividend income | 130 | 41 | 2 | 2 | 77 | 20 | – | 272 | ||||||||||||||||||||||||
Net earned insurance premiums | 5,299 | 3,247 | 197 | – | 390 | 1,717 | – | 10,850 | ||||||||||||||||||||||||
Gains on disposal of French regional banks | 2,445 | – | – | – | – | – | – | 2,445 | ||||||||||||||||||||||||
Other operating income | 2,096 | 817 | 1,055 | 9 | 23 | 300 | (2,492 | ) | 1,808 | |||||||||||||||||||||||
Total operating income | 34,046 | 12,076 | 8,953 | 2,668 | 21,417 | 11,903 | (2,492 | ) | 88,571 | |||||||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (3,367 | ) | (1,922 | ) | 28 | – | (238 | ) | (1,390 | ) | – | (6,889 | ) | |||||||||||||||||||
Net operating income before loan impairment charges and other credit risk provisions | 30,679 | 10,154 | 8,981 | 2,668 | 21,179 | 10,513 | (2,492 | ) | 81,682 | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (3,754 | ) | (765 | ) | (852 | ) | (279 | ) | (16,795 | ) | (2,492 | ) | – | (24,937 | ) | |||||||||||||||||
Net operating income | 26,925 | 9,389 | 8,129 | 2,389 | 4,384 | 8,021 | (2,492 | ) | 56,745 | |||||||||||||||||||||||
Employee compensation and benefits | (8,551 | ) | (2,069 | ) | (2,475 | ) | (544 | ) | (4,609 | ) | (2,544 | ) | – | (20,792 | ) | |||||||||||||||||
General and administrative expenses | (6,428 | ) | (1,562 | ) | (2,037 | ) | (384 | ) | (4,282 | ) | (3,059 | ) | 2,492 | (15,260 | ) | |||||||||||||||||
Depreciation and impairment of property, plant and equipment | (865 | ) | (209 | ) | (163 | ) | (25 | ) | (265 | ) | (223 | ) | – | (1,750 | ) | |||||||||||||||||
Amortisation and impairment of intangible assets | (228 | ) | (103 | ) | (29 | ) | (6 | ) | (203 | ) | (164 | ) | – | (733 | ) | |||||||||||||||||
Goodwill impairment | – | – | – | – | (10,564 | ) | – | – | (10,564 | ) | ||||||||||||||||||||||
Total operating expenses | (16,072 | ) | (3,943 | ) | (4,704 | ) | (959 | ) | (19,923 | ) | (5,990 | ) | 2,492 | (49,099 | ) | |||||||||||||||||
Operating profit/(loss) | 10,853 | 5,446 | 3,425 | 1,430 | (15,539 | ) | 2,031 | – | 7,646 | |||||||||||||||||||||||
Share of profit in associates and joint ventures | 16 | 15 | 1,297 | 316 | 11 | 6 | – | 1,661 | ||||||||||||||||||||||||
Profit/(loss) before tax | 10,869 | 5,461 | 4,722 | 1,746 | (15,528 | ) | 2,037 | – | 9,307 | |||||||||||||||||||||||
Tax income/(expense) | (2,199 | ) | (899 | ) | (928 | ) | (245 | ) | 1,715 | (253 | ) | – | (2,809 | ) | ||||||||||||||||||
Profit/(loss) for the year | 8,670 | 4,562 | 3,794 | 1,501 | (13,813 | ) | 1,784 | – | 6,498 | |||||||||||||||||||||||
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Year ended 31 December 2007 | ||||||||||||||||||||||||||||||||
Rest of | Intra- | |||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | HSBC | |||||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | items | Total | |||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Interest income | 33,144 | 12,580 | 8,002 | 2,156 | 30,183 | 9,471 | (3,177 | ) | 92,359 | |||||||||||||||||||||||
Interest expense | (25,398 | ) | (7,097 | ) | (4,953 | ) | (1,062 | ) | (15,336 | ) | (3,895 | ) | 3,177 | (54,564 | ) | |||||||||||||||||
Net interest income | 7,746 | 5,483 | 3,049 | 1,094 | 14,847 | 5,576 | – | 37,795 | ||||||||||||||||||||||||
Fee income | 10,973 | 3,860 | 2,201 | 508 | 6,733 | 2,647 | (585 | ) | 26,337 | |||||||||||||||||||||||
Fee expense | (2,542 | ) | (498 | ) | (426 | ) | (37 | ) | (923 | ) | (494 | ) | 585 | (4,335 | ) | |||||||||||||||||
Net fee income | 8,431 | 3,362 | 1,775 | 471 | 5,810 | 2,153 | – | 22,002 | ||||||||||||||||||||||||
Trading income/(expense) excluding net interest income | 3,003 | 1,270 | 946 | 256 | (1,289 | ) | 272 | – | 4,458 | |||||||||||||||||||||||
Net interest income/(expense) on trading activities | 3,940 | (28 | ) | 400 | 41 | 747 | 276 | – | 5,376 | |||||||||||||||||||||||
Net trading income/(expense) | 6,943 | 1,242 | 1,346 | 297 | (542 | ) | 548 | – | 9,834 | |||||||||||||||||||||||
Changes in fair value of long- term debt issued and related derivatives | 1,059 | 2 | 1 | – | 1,750 | – | – | 2,812 | ||||||||||||||||||||||||
Net income from other financial instruments designated at fair value | 167 | 674 | 110 | – | – | 320 | – | 1,271 | ||||||||||||||||||||||||
Net income from financial instruments designated at fair value | 1,226 | 676 | 111 | – | 1,750 | 320 | – | 4,083 | ||||||||||||||||||||||||
Gains less losses from financial investments | 1,326 | 94 | 36 | 2 | 245 | 253 | – | 1,956 | ||||||||||||||||||||||||
Gains arising from dilution of interests in associates | – | – | 1,081 | – | – | 11 | – | 1,092 | ||||||||||||||||||||||||
Dividend income | 171 | 31 | 6 | 2 | 105 | 9 | – | 324 | ||||||||||||||||||||||||
Net earned insurance premiums | 4,010 | 2,797 | 226 | – | 449 | 1,594 | – | 9,076 | ||||||||||||||||||||||||
Other operating income | 1,193 | 845 | 781 | 17 | 360 | 228 | (1,985 | ) | 1,439 | |||||||||||||||||||||||
Total operating income | 31,046 | 14,530 | 8,411 | 1,883 | 23,024 | 10,692 | (1,985 | ) | 87,601 | |||||||||||||||||||||||
Net insurance claims incurred and movement in liabilities to policyholders | (3,479 | ) | (3,208 | ) | (253 | ) | – | (241 | ) | (1,427 | ) | – | (8,608 | ) | ||||||||||||||||||
Net operating income before loan impairment charges and other credit risk provisions | 27,567 | 11,322 | 8,158 | 1,883 | 22,783 | 9,265 | (1,985 | ) | 78,993 | |||||||||||||||||||||||
Loan impairment charges and other credit risk provisions | (2,542 | ) | (231 | ) | (561 | ) | (55 | ) | (12,156 | ) | (1,697 | ) | – | (17,242 | ) | |||||||||||||||||
Net operating income | 25,025 | 11,091 | 7,597 | 1,828 | 10,627 | 7,568 | (1,985 | ) | 61,751 | |||||||||||||||||||||||
Employee compensation and benefits | (9,022 | ) | (2,124 | ) | (2,084 | ) | (447 | ) | (5,384 | ) | (2,273 | ) | – | (21,334 | ) | |||||||||||||||||
General and administrative expenses | (6,429 | ) | (1,386 | ) | (1,741 | ) | (300 | ) | (4,653 | ) | (2,770 | ) | 1,985 | (15,294 | ) | |||||||||||||||||
Depreciation and impairment of property, plant and equipment | (848 | ) | (180 | ) | (139 | ) | (20 | ) | (317 | ) | (210 | ) | – | (1,714 | ) | |||||||||||||||||
Amortisation and impairment of intangible assets | (226 | ) | (90 | ) | (27 | ) | (6 | ) | (202 | ) | (149 | ) | – | (700 | ) | |||||||||||||||||
Total operating expenses | (16,525 | ) | (3,780 | ) | (3,991 | ) | (773 | ) | (10,556 | ) | (5,402 | ) | 1,985 | (39,042 | ) | |||||||||||||||||
Operating profit | 8,500 | 7,311 | 3,606 | 1,055 | 71 | 2,166 | – | 22,709 | ||||||||||||||||||||||||
Share of profit in associates and joint ventures | 95 | 28 | 1,096 | 252 | 20 | 12 | – | 1,503 | ||||||||||||||||||||||||
Profit before tax | 8,595 | 7,339 | 4,702 | 1,307 | 91 | 2,178 | – | 24,212 | ||||||||||||||||||||||||
Tax income/(expense) | (1,505 | ) | (1,206 | ) | (721 | ) | (178 | ) | 332 | (479 | ) | – | (3,757 | ) | ||||||||||||||||||
Profit for the year | 7,090 | 6,133 | 3,981 | 1,129 | 423 | 1,699 | – | 20,455 | ||||||||||||||||||||||||
415
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Note 14 |
Rest of | Intra- | |||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | HSBC | |||||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | items | Total | |||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
Year ended 31 December 2009 | ||||||||||||||||||||||||||||||||
Net operating income | 17,976 | 8,967 | 7,107 | 1,260 | 641 | 6,498 | (2,756 | ) | 39,693 | |||||||||||||||||||||||
External | 16,734 | 8,352 | 6,056 | 1,283 | 767 | 6,501 | – | 39,693 | ||||||||||||||||||||||||
Inter-segment | 1,242 | 615 | 1,051 | (23) | (126) | (3) | (2,756) | – | ||||||||||||||||||||||||
Profit/(loss) for the year includes the following significant non-cash items: | ||||||||||||||||||||||||||||||||
Depreciation, amortisation and impairment | 1,039 | 342 | 215 | 37 | 515 | 390 | – | 2,538 | ||||||||||||||||||||||||
Loan impairment losses gross of recoveries and other credit risk provisions | 5,833 | 534 | 1,028 | 1,361 | 15,757 | 2,865 | – | 27,378 | ||||||||||||||||||||||||
Impairment of financial investments | 137 | 129 | 50 | 4 | 38 | – | – | 358 | ||||||||||||||||||||||||
Year ended 31 December 2008 | ||||||||||||||||||||||||||||||||
Net operating income | 26,925 | 9,389 | 8,129 | 2,389 | 4,384 | 8,021 | (2,492 | ) | 56,745 | |||||||||||||||||||||||
External | 25,887 | 8,205 | 7,010 | 2,386 | 5,236 | 8,021 | – | 56,745 | ||||||||||||||||||||||||
Inter-segment | 1,038 | 1,184 | 1,119 | 3 | (852 | ) | – | (2,492 | ) | – | ||||||||||||||||||||||
Profit/(loss) for the year includes the following significant non-cash items: | ||||||||||||||||||||||||||||||||
Depreciation, amortisation and impairment | 1,093 | 312 | 192 | 31 | 11,352 | 387 | – | 13,367 | ||||||||||||||||||||||||
Loan impairment losses gross of recoveries and other credit risk provisions | 4,050 | 803 | 960 | 309 | 16,892 | 2,757 | – | 25,771 | ||||||||||||||||||||||||
Impairment of financial investments | 278 | 535 | – | – | 229 | – | – | 1,042 | ||||||||||||||||||||||||
Year ended 31 December 2007 | ||||||||||||||||||||||||||||||||
Net operating income | 25,025 | 11,091 | 7,599 | 1,826 | 10,627 | 7,568 | (1,985 | ) | 61,751 | |||||||||||||||||||||||
External | 23,772 | 10,168 | 6,620 | 1,836 | 11,784 | 7,571 | – | 61,751 | ||||||||||||||||||||||||
Inter-segment | 1,253 | 923 | 979 | (10 | ) | (1,157 | ) | (3 | ) | (1,985 | ) | – | ||||||||||||||||||||
Profit for the year includes the following significant non-cash items: | ||||||||||||||||||||||||||||||||
Depreciation, amortisation and impairment | 1,074 | 270 | 166 | 26 | 627 | 359 | – | 2,522 | ||||||||||||||||||||||||
Loan impairment losses gross of recoveries and other credit risk provisions | 3,085 | 273 | 656 | 83 | 12,218 | 1,932 | – | 18,247 | ||||||||||||||||||||||||
Impairment of financial investments | 42 | – | – | �� | – | – | – | 42 |
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Rest of | ||||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | Total | ||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||
Year ended 31 December 2009 | ||||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 56.7 | 71.0 | 59.3 | 6.4 | (109.3 | ) | 15.9 | 100.0 | ||||||||||||||||||||||||
Cost efficiency ratio | 59.4 | 41.7 | 55.6 | 38.6 | 51.5 | 59.6 | 52.0 | |||||||||||||||||||||||||
Year ended 31 December 2008 | ||||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 116.7 | 58.7 | 50.7 | 18.8 | (166.8 | ) | 21.9 | 100.0 | ||||||||||||||||||||||||
Cost efficiency ratio | 52.4 | 38.8 | 52.4 | 35.9 | 94.1 | 57.0 | 60.1 | |||||||||||||||||||||||||
Year ended 31 December 2007 | ||||||||||||||||||||||||||||||||
Share of HSBC’s profit before tax | 35.5 | 30.3 | 19.4 | 5.4 | 0.4 | 9.0 | 100.0 | |||||||||||||||||||||||||
Cost efficiency ratio | 59.9 | 33.4 | 48.9 | 41.1 | 46.3 | 58.3 | 49.4 |
Rest of | Intra- | |||||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | HSBC | |||||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | items | Total | |||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 439,481 | 99,381 | 80,043 | 22,844 | 206,853 | 47,629 | – | 896,231 | ||||||||||||||||||||||||
Interests in associates and joint ventures | 147 | 157 | 11,083 | 1,573 | 42 | 9 | – | 13,011 | ||||||||||||||||||||||||
Total assets | 1,268,600 | 399,243 | 222,139 | 48,107 | 475,014 | 115,967 | (164,618 | ) | 2,364,452 | |||||||||||||||||||||||
Customer accounts | 495,019 | 275,441 | 133,999 | 32,529 | 149,157 | 72,889 | – | 1,159,034 | ||||||||||||||||||||||||
Total liabilities | 1,213,907 | 384,912 | 203,243 | 42,325 | 447,530 | 101,492 | (164,618 | ) | 2,228,791 | |||||||||||||||||||||||
Capital expenditure incurred2 | 983 | 290 | 159 | 102 | 658 | 540 | – | 2,732 | ||||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 426,191 | 100,220 | 80,661 | 27,295 | 256,214 | 42,287 | – | 932,868 | ||||||||||||||||||||||||
Interests in associates and joint ventures | 137 | 153 | 9,728 | 1,383 | 128 | 8 | – | 11,537 | ||||||||||||||||||||||||
Total assets | 1,392,049 | 414,484 | 225,573 | 50,952 | 596,302 | 102,946 | (254,841 | ) | 2,527,465 | |||||||||||||||||||||||
Customer accounts | 502,476 | 250,517 | 124,194 | 35,165 | 143,532 | 59,443 | – | 1,115,327 | ||||||||||||||||||||||||
Total liabilities | 1,361,960 | 400,637 | 210,478 | 45,416 | 571,657 | 91,929 | (254,841 | ) | 2,427,236 | |||||||||||||||||||||||
Capital expenditure incurred2 | 2,078 | 440 | 426 | 85 | 726 | 617 | – | 4,372 | ||||||||||||||||||||||||
At 31 December 2007 | ||||||||||||||||||||||||||||||||
Loans and advances to customers (net) | 452,275 | 89,638 | 80,245 | 21,607 | 289,860 | 47,923 | – | 981,548 | ||||||||||||||||||||||||
Interests in associates and joint ventures | 158 | 155 | 8,602 | 1,265 | 127 | 77 | – | 10,384 | ||||||||||||||||||||||||
Total assets | 1,256,220 | 359,386 | 208,195 | 45,669 | 574,318 | 102,649 | (192,171 | ) | 2,354,266 | |||||||||||||||||||||||
Customer accounts | 504,954 | 234,488 | 119,296 | 30,937 | 145,173 | 61,292 | – | 1,096,140 | ||||||||||||||||||||||||
Total liabilities | 1,198,413 | 344,011 | 194,675 | 41,576 | 542,549 | 89,797 | (192,171 | ) | 2,218,850 | |||||||||||||||||||||||
Capital expenditure incurred2 | 1,722 | 441 | 239 | 38 | 833 | 599 | – | 3,872 |
1 | The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been restated accordingly. | |
2 | Expenditure incurred on property, plant and equipment and other intangible assets. Excludes assets acquired as part of business combinations and goodwill. |
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Notes 14 and 15 |
Personal | Global | Intra- | ||||||||||||||||||||||||||
Financial | Commercial | Banking | Private | HSBC | ||||||||||||||||||||||||
Services | Banking | & Markets | Banking | Other | 1 | items | Total | |||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Year ended 31 December 2009 | ||||||||||||||||||||||||||||
Net operating income | 15,513 | 9,571 | 18,652 | 2,984 | (2,031 | ) | (4,996 | ) | 39,693 | |||||||||||||||||||
External | 13,804 | 9,285 | 21,383 | 2,275 | (7,054) | – | 39,693 | |||||||||||||||||||||
Inter-segment | 1,709 | 286 | (2,731) | 709 | 5,023 | (4,996) | – | |||||||||||||||||||||
Year ended 31 December 2008 | ||||||||||||||||||||||||||||
Net operating income | 20,269 | 13,144 | 12,047 | 3,563 | 12,290 | (4,568 | ) | 56,745 | ||||||||||||||||||||
External | 15,023 | 13,080 | 17,739 | 2,231 | 8,672 | – | 56,745 | |||||||||||||||||||||
Inter-segment | 5,246 | 64 | (5,692 | ) | 1,332 | 3,618 | (4,568 | ) | – | |||||||||||||||||||
Year ended 31 December 2007 | ||||||||||||||||||||||||||||
Net operating income | 27,067 | 12,943 | 15,172 | 3,534 | 6,947 | (3,912 | ) | 61,751 | ||||||||||||||||||||
External | 21,059 | 11,442 | 23,595 | 2,144 | 3,511 | – | 61,751 | |||||||||||||||||||||
Inter-segment | 6,008 | 1,501 | (8,423 | ) | 1,390 | 3,436 | (3,912 | ) | – | |||||||||||||||||||
1 | The main items reported in the ‘Other’ segment are certain property activities, unallocated investment activities, centrally held investment companies and HSBC’s holding company and financing operations. The ‘Other’ segment also includes gains and losses on the disposal of certain significant subsidiaries or business units. |
2009 | 2008 | 2007 | ||||||||||||||||||||||
External net | Non- | External net | Non- | External net | Non- | |||||||||||||||||||
operating | current | operating | current | operating | current | |||||||||||||||||||
income | 1 | assets | 2 | income | 1 | assets | 2 | income | 1 | assets | 2 | |||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
UK | 9,958 | 19,704 | 15,789 | 12,491 | 15,955 | 12,394 | ||||||||||||||||||
Hong Kong | 8,352 | 3,374 | 8,205 | 3,527 | 10,168 | 3,226 | ||||||||||||||||||
USA | (1,042 | ) | 5,499 | 2,862 | 4,660 | 9,304 | 20,403 | |||||||||||||||||
France | 3,322 | 11,782 | 6,457 | 11,862 | 4,597 | 12,868 | ||||||||||||||||||
Brazil | 3,368 | 1,868 | 3,886 | 1,421 | 3,659 | 1,735 | ||||||||||||||||||
Other countries | 15,735 | 25,557 | 19,546 | 23,020 | 18,068 | 22,420 | ||||||||||||||||||
39,693 | 67,784 | 56,745 | 56,981 | 61,751 | 73,046 | |||||||||||||||||||
1 | External net operating income is attributed to countries on the basis of the location of the branch responsible for reporting the results or advancing the funds. | |
2 | Non-current assets consist of property, plant and equipment, goodwill, other intangible assets, interests in associates and joint ventures and certain other assets expected to be recovered more than twelve months after the reporting period. |
Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The summary of significant accounting policies in Note 2 describes how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial assets and liabilities by category as defined in IAS 39 and by balance sheet heading. |
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At 31 December 2009 | ||||||||||||||||||||||||||||||||||||
Financial | Derivatives | Derivatives | ||||||||||||||||||||||||||||||||||
assets and | designated | designated | ||||||||||||||||||||||||||||||||||
Held-to- | Available- | liabilities at | as fair value | as cash flow | ||||||||||||||||||||||||||||||||
Held for | Designated | maturity | Loans and | for-sale | amortised | hedging | hedging | |||||||||||||||||||||||||||||
trading | at fair value | securities | receivables | securities | cost | instruments | instruments | Total | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||||||
Cash and balances at central banks | – | – | – | – | – | 60,655 | – | – | 60,655 | |||||||||||||||||||||||||||
Items in the course of collection from other banks | – | – | – | – | – | 6,395 | – | – | 6,395 | |||||||||||||||||||||||||||
Hong Kong Government certificates of indebtedness | – | – | 17,463 | – | – | – | – | 17,463 | ||||||||||||||||||||||||||||
Trading assets | 421,381 | – | – | – | – | – | – | – | 421,381 | |||||||||||||||||||||||||||
Financial assets designated at fair value | – | 37,181 | – | – | – | – | – | – | 37,181 | |||||||||||||||||||||||||||
Derivatives | 245,685 | – | – | – | – | – | 584 | 4,617 | 250,886 | |||||||||||||||||||||||||||
Loans and advances to banks | – | – | – | 179,781 | – | – | – | – | 179,781 | |||||||||||||||||||||||||||
Loans and advances to customers | – | – | – | 896,231 | – | – | – | – | 896,231 | |||||||||||||||||||||||||||
Financial investments | – | – | 17,626 | – | 351,532 | – | – | – | 369,158 | |||||||||||||||||||||||||||
Other assets | – | – | – | 1,356 | 3 | 24,758 | – | – | 26,117 | |||||||||||||||||||||||||||
Accrued income | – | – | – | – | – | 10,256 | – | – | 10,256 | |||||||||||||||||||||||||||
Total financial assets | 667,066 | 37,181 | 17,626 | 1,094,831 | 351,535 | 102,064 | 584 | 4,617 | 2,275,504 | |||||||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||||||||||
Hong Kong currency notes in circulation | – | – | – | 17,463 | – | – | – | – | 17,463 | |||||||||||||||||||||||||||
Deposits by banks | – | – | – | – | – | 124,872 | – | – | 124,872 | |||||||||||||||||||||||||||
Customer accounts | – | – | – | – | – | 1,159,034 | – | – | 1,159,034 | |||||||||||||||||||||||||||
Items in the course of transmission to other banks | – | – | – | – | – | 5,734 | – | – | 5,734 | |||||||||||||||||||||||||||
Trading liabilities | 268,130 | – | – | – | – | – | – | – | 268,130 | |||||||||||||||||||||||||||
Financial liabilities designated at fair value | – | 80,092 | – | – | – | – | – | – | 80,092 | |||||||||||||||||||||||||||
Derivatives | 244,072 | – | – | – | – | – | 1,085 | 2,489 | 247,646 | |||||||||||||||||||||||||||
Debt securities in issue | – | – | – | – | – | 146,896 | – | – | 146,896 | |||||||||||||||||||||||||||
Other liabilities | – | – | – | – | – | 66,169 | – | – | 66,169 | |||||||||||||||||||||||||||
Accruals | – | – | – | – | – | 11,644 | – | – | 11,644 | |||||||||||||||||||||||||||
Subordinated liabilities | – | – | – | – | – | 30,478 | – | – | 30,478 | |||||||||||||||||||||||||||
Total financial liabilities | 512,202 | 80,092 | – | 17,463 | – | 1,544,827 | 1,085 | 2,489 | 2,158,158 | |||||||||||||||||||||||||||
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Note 15 |
At 31 December 2008 | ||||||||||||||||||||||||||||||||||||
Financial | Derivatives | Derivatives | ||||||||||||||||||||||||||||||||||
assets and | designated | designated | ||||||||||||||||||||||||||||||||||
Held-to- | Available- | liabilities at | as fair value | as cash flow | ||||||||||||||||||||||||||||||||
Held for | Designated | maturity | Loans and | for-sale | amortised | hedging | hedging | |||||||||||||||||||||||||||||
trading | at fair value | securities | receivables | securities | cost | instruments | instruments | Total | ||||||||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||||||
Cash and balances at central banks | – | – | – | – | – | 52,396 | – | – | 52,396 | |||||||||||||||||||||||||||
Items in the course of collection from other banks | – | – | – | – | – | 6,003 | – | – | 6,003 | |||||||||||||||||||||||||||
Hong Kong Government certificates of indebtedness | – | – | – | 15,358 | – | – | – | – | 15,358 | |||||||||||||||||||||||||||
Trading assets | 427,329 | – | – | – | – | – | – | – | 427,329 | |||||||||||||||||||||||||||
Financial assets designated at fair value | – | 28,533 | – | – | – | – | – | – | 28,533 | |||||||||||||||||||||||||||
Derivatives | 488,385 | – | – | – | – | – | 839 | 5,652 | 494,876 | |||||||||||||||||||||||||||
Loans and advances to banks | – | – | – | 153,766 | – | – | – | – | 153,766 | |||||||||||||||||||||||||||
Loans and advances to customers | – | – | – | 932,868 | – | – | – | – | 932,868 | |||||||||||||||||||||||||||
Financial investments | – | – | 14,013 | – | 286,222 | – | – | – | 300,235 | |||||||||||||||||||||||||||
Other assets | – | – | – | 11 | 1 | 27,093 | – | – | 27,105 | |||||||||||||||||||||||||||
Accrued income | – | – | – | – | – | 13,754 | – | – | 13,754 | |||||||||||||||||||||||||||
Total financial assets | 915,714 | 28,533 | 14,013 | 1,102,003 | 286,223 | 99,246 | 839 | 5,652 | 2,452,223 | |||||||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||||||||||
Hong Kong currency notes in circulation | – | – | – | 15,358 | – | – | – | – | 15,358 | |||||||||||||||||||||||||||
Deposits by banks | – | – | – | – | – | 130,084 | – | – | 130,084 | |||||||||||||||||||||||||||
Customer accounts | – | – | – | – | – | 1,115,327 | – | – | 1,115,327 | |||||||||||||||||||||||||||
Items in the course of transmission to other banks | – | – | – | – | – | 7,232 | – | – | 7,232 | |||||||||||||||||||||||||||
Trading liabilities | 247,652 | – | – | – | – | – | – | – | 247,652 | |||||||||||||||||||||||||||
Financial liabilities designated at fair value | – | 74,587 | – | – | – | – | – | – | 74,587 | |||||||||||||||||||||||||||
Derivatives | 481,799 | – | – | – | – | – | 1,267 | 3,994 | 487,060 | |||||||||||||||||||||||||||
Debt securities in issue | – | – | – | – | – | 179,693 | – | – | 179,693 | |||||||||||||||||||||||||||
Other liabilities | – | – | – | – | – | 70,003 | – | – | 70,003 | |||||||||||||||||||||||||||
Accruals | – | – | – | – | – | 14,072 | – | – | 14,072 | |||||||||||||||||||||||||||
Subordinated liabilities | – | – | – | – | – | 29,433 | – | – | 29,433 | |||||||||||||||||||||||||||
Total financial liabilities | 729,451 | 74,587 | – | 15,358 | – | 1,545,844 | 1,267 | 3,994 | 2,370,501 | |||||||||||||||||||||||||||
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At 31 December 2009 | ||||||||||||||||||||||||
Financial | ||||||||||||||||||||||||
assets and | ||||||||||||||||||||||||
Available- | liabilities at | |||||||||||||||||||||||
Held for | Designated | Loans and | for-sale | amortised | ||||||||||||||||||||
Trading | at fair value | receivables | securities | cost | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash at bank and in hand | – | – | – | – | 224 | 224 | ||||||||||||||||||
Derivatives | 2,981 | – | – | – | – | 2,981 | ||||||||||||||||||
Loans and advances to HSBC undertakings | – | – | 23,212 | – | – | 23,212 | ||||||||||||||||||
Financial investments | – | – | – | 2,455 | – | 2,455 | ||||||||||||||||||
Other assets | – | – | – | – | 4 | 4 | ||||||||||||||||||
Total financial assets | 2,981 | – | 23,212 | 2,455 | 228 | 28,876 | ||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||
Amounts owed to HSBC undertakings | – | – | – | – | 3,711 | 3,711 | ||||||||||||||||||
Financial liabilities designated at fair value | – | 16,909 | – | – | – | 16,909 | ||||||||||||||||||
Derivatives | 362 | – | – | – | – | 362 | ||||||||||||||||||
Debt securities in issue | – | – | – | – | 2,839 | 2,839 | ||||||||||||||||||
Other liabilities | – | – | – | – | 8 | 8 | ||||||||||||||||||
Accruals | – | – | – | – | 419 | 419 | ||||||||||||||||||
Subordinated liabilities | – | – | – | – | 14,406 | 14,406 | ||||||||||||||||||
Total financial liabilities | 362 | 16,909 | – | – | 21,383 | 38,654 | ||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Financial | ||||||||||||||||||||||||
assets and | ||||||||||||||||||||||||
Available- | liabilities at | |||||||||||||||||||||||
Held for | Designated | Loans and | for-sale | amortised | ||||||||||||||||||||
trading | at fair value | receivables | securities | cost | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash at bank and in hand | – | – | – | – | 443 | 443 | ||||||||||||||||||
Derivatives | 3,682 | – | – | – | – | 3,682 | ||||||||||||||||||
Loans and advances to HSBC undertakings | – | – | 11,804 | – | – | 11,804 | ||||||||||||||||||
Financial investments | – | – | – | 2,629 | – | 2,629 | ||||||||||||||||||
Other assets | – | – | – | – | 25 | 25 | ||||||||||||||||||
Total financial assets | 3,682 | – | 11,804 | 2,629 | 468 | 18,583 | ||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||
Amounts owed to HSBC undertakings | – | – | – | – | 4,042 | 4,042 | ||||||||||||||||||
Financial liabilities designated at fair value | – | 16,389 | – | – | – | 16,389 | ||||||||||||||||||
Derivatives | 1,324 | – | – | – | – | 1,324 | ||||||||||||||||||
Other liabilities | – | – | – | – | 10 | 10 | ||||||||||||||||||
Accruals | – | – | – | – | 288 | 288 | ||||||||||||||||||
Subordinated liabilities | – | – | – | – | 14,017 | 14,017 | ||||||||||||||||||
Total financial liabilities | 1,324 | 16,389 | – | – | 18,357 | 36,070 | ||||||||||||||||||
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Notes 16 and 17 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Trading assets: | ||||||||
– not subject to repledge or resale by counterparties | 320,155 | 340,675 | ||||||
– which may be repledged or resold by counterparties | 101,226 | 86,654 | ||||||
421,381 | 427,329 | |||||||
Treasury and other eligible bills | 22,346 | 32,458 | ||||||
Debt securities | 201,598 | 199,619 | ||||||
Equity securities | 35,311 | 21,878 | ||||||
Trading securities at fair value | 259,255 | 253,955 | ||||||
Loans and advances to banks | 78,126 | 73,055 | ||||||
Loans and advances to customers | 84,000 | 100,319 | ||||||
421,381 | 427,329 | |||||||
Fair value1 | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
US Treasury and US Government agencies2 | 17,620 | 26,621 | ||||||
UK Government | 12,113 | 10,586 | ||||||
Hong Kong Government | 10,649 | 6,648 | ||||||
Other government | 94,264 | 98,983 | ||||||
Asset-backed securities3 | 5,308 | 6,566 | ||||||
Corporate debt and other securities | 83,990 | 82,673 | ||||||
Equity securities | 35,311 | 21,878 | ||||||
259,255 | 253,955 | |||||||
1 | Included within these figures are debt securities issued by banks and other financial institutions of US$41,466 million (2008: US$49,997 million), of which US$7,280 million (2008: US$3,449 million) are guaranteed by various governments. | |
2 | Includes securities that are supported by an explicit guarantee issued by the US Government. | |
3 | Excludes asset-backed securities included under US Treasury and US Government agencies. |
Treasury | ||||||||||||||||
and other | Debt | Equity | ||||||||||||||
eligible bills | securities | securities | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Fair value at 31 December 2009 | ||||||||||||||||
Listed on a recognised exchange1 | 3,107 | 159,030 | 33,428 | 195,565 | ||||||||||||
Unlisted | 19,239 | 42,568 | 1,883 | 63,690 | ||||||||||||
22,346 | 201,598 | 35,311 | 259,255 | |||||||||||||
Fair value at 31 December 2008 | ||||||||||||||||
Listed on a recognised exchange1 | 1 | 145,370 | 20,871 | 166,242 | ||||||||||||
Unlisted | 32,457 | 54,249 | 1,007 | 87,713 | ||||||||||||
32,458 | 199,619 | 21,878 | 253,955 | |||||||||||||
1 | Included within listed investments are US$3,229 million (2008: US$3,870 million) of investments listed in Hong Kong. |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Reverse repos | 50,357 | 48,188 | ||||||
Settlement accounts | 10,128 | 4,337 | ||||||
Stock borrowing | 4,711 | 1,888 | ||||||
Other | 12,930 | 18,642 | ||||||
78,126 | 73,055 | |||||||
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2009 | 2008 | |||||||
US$m | US$m | |||||||
Reverse repos | 42,172 | 58,285 | ||||||
Stock borrowing | 18,042 | 13,740 | ||||||
Settlement accounts | 12,134 | 10,116 | ||||||
Other | 11,652 | 18,178 | ||||||
84,000 | 100,319 | |||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Financial assets designated at fair value: | ||||||||
– not subject to repledge or resale by counterparties | 37,166 | 28,522 | ||||||
– which may be repledged or resold by counterparties | 15 | 11 | ||||||
37,181 | 28,533 | |||||||
Treasury and other eligible bills | 223 | 235 | ||||||
Debt securities | 20,718 | 16,349 | ||||||
Equity securities | 14,983 | 10,993 | ||||||
Securities designated at fair value | 35,924 | 27,577 | ||||||
Loans and advances to banks | 354 | 230 | ||||||
Loans and advances to customers | 903 | 726 | ||||||
37,181 | 28,533 | |||||||
Fair value1 | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
US Treasury and US Government agencies2 | 78 | 93 | ||||||
UK Government | 4,799 | 992 | ||||||
Hong Kong Government | 177 | 284 | ||||||
Other government | 3,491 | 3,624 | ||||||
Asset-backed securities3 | 6,463 | 6,492 | ||||||
Corporate debt and other securities | 5,933 | 5,099 | ||||||
Equities | 14,983 | 10,993 | ||||||
35,924 | 27,577 | |||||||
1 | Included within these figures are debt securities issued by banks and other financial institutions of US$13,745 million (2008: US$10,351 million), of which US$49 million (2008: US$14 million) are guaranteed by various governments. | |
2 | Includes securities that are supported by an explicit guarantee issued by the US Government. | |
3 | Excludes asset-backed securities included under US Treasury and US Government agencies. |
Treasury | ||||||||||||||||
and other | Debt | Equity | ||||||||||||||
eligible bills | securities | securities | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Fair value at 31 December 2009 | ||||||||||||||||
Listed on a recognised exchange1 | 78 | 7,168 | 10,549 | 17,795 | ||||||||||||
Unlisted | 145 | 13,550 | 4,434 | 18,129 | ||||||||||||
223 | 20,718 | 14,983 | 35,924 | |||||||||||||
Fair value at 31 December 2008 | ||||||||||||||||
Listed on a recognised exchange1 | 80 | 3,490 | 8,140 | 11,710 | ||||||||||||
Unlisted | 155 | 12,859 | 2,853 | 15,867 | ||||||||||||
235 | 16,349 | 10,993 | 27,577 | |||||||||||||
1 | Included within listed investments are US$506 million of investments listed in Hong Kong (2008: US$576 million). |
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Note 18 |
Assets | Liabilities | |||||||||||||||||||||||
Trading | Hedging | Total | Trading | Hedging | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
At 31 December 2009 | ||||||||||||||||||||||||
Foreign exchange | 55,036 | 1,695 | 56,731 | 54,502 | 300 | 54,802 | ||||||||||||||||||
Interest rate | 212,102 | 3,506 | 215,608 | 209,351 | 3,274 | 212,625 | ||||||||||||||||||
Equity | 15,729 | – | 15,729 | 19,013 | – | 19,013 | ||||||||||||||||||
Credit | 28,479 | – | 28,479 | 27,042 | – | 27,042 | ||||||||||||||||||
Commodity and other | 1,135 | – | 1,135 | 960 | – | 960 | ||||||||||||||||||
Gross total fair values | 312,481 | 5,201 | 317,682 | 310,868 | 3,574 | 314,442 | ||||||||||||||||||
Netting | (66,796 | ) | (66,796 | ) | ||||||||||||||||||||
Total | 250,886 | 247,646 | ||||||||||||||||||||||
At 31 December 2008 | ||||||||||||||||||||||||
Foreign exchange | 115,803 | 2,010 | 117,813 | 115,311 | 826 | 116,137 | ||||||||||||||||||
Interest rate | 317,796 | 4,481 | 322,277 | 310,255 | 4,435 | 314,690 | ||||||||||||||||||
Equity | 18,660 | – | 18,660 | 21,913 | – | 21,913 | ||||||||||||||||||
Credit | 91,271 | – | 91,271 | 89,715 | – | 89,715 | ||||||||||||||||||
Commodity and other | 2,979 | – | 2,979 | 2,729 | – | 2,729 | ||||||||||||||||||
Gross total fair values | 546,509 | 6,491 | 553,000 | 539,923 | 5,261 | 545,184 | ||||||||||||||||||
Netting | (58,124 | ) | (58,124 | ) | ||||||||||||||||||||
Total | 494,876 | 487,060 | ||||||||||||||||||||||
2009 | 2008 | |||||||||||||||
Trading | Trading | Trading | Trading | |||||||||||||
assets | liabilities | assets | liabilities | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Foreign exchange | 2,250 | 362 | 1,772 | 1,324 | ||||||||||||
Interest rate | 731 | – | 1,910 | – | ||||||||||||
Total fair values | 2,981 | 362 | 3,682 | 1,324 | ||||||||||||
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HSBC | HSBC Holdings | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Foreign exchange | 2,883,201 | 3,045,017 | 17,150 | 14,312 | ||||||||||||
Interest rate | 13,874,355 | 12,435,965 | 6,804 | 7,804 | ||||||||||||
Equity | 217,828 | 221,053 | – | – | ||||||||||||
Credit | 1,237,055 | 1,583,337 | – | – | ||||||||||||
Commodity and other | 53,720 | 63,103 | – | – | ||||||||||||
18,266,159 | 17,348,475 | 23,954 | 22,116 | |||||||||||||
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Note 18 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Unamortised balance at 1 January | 204 | 306 | ||||||
Deferral on new transactions | 192 | 326 | ||||||
Recognised in the income statement during the period: | ||||||||
– amortisation | (86 | ) | (168 | ) | ||||
– subsequent to unobservable inputs becoming observable | (19 | ) | (118 | ) | ||||
– maturity, termination or offsetting derivative | (42 | ) | (99 | ) | ||||
Exchange differences | 11 | (38 | ) | |||||
Risk hedged | – | (5 | ) | |||||
Unamortised balance at 31 December1 | 260 | 204 | ||||||
1 | This amount is yet to be recognised in the consolidated income statement. |
At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Fair value | Cash flow | Fair value | ||||||||||||||
Cash flow hedge | hedge | hedge | hedge | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Foreign exchange | 12,359 | 2,469 | 14,931 | 2,602 | ||||||||||||
Interest rate | 236,388 | 42,224 | 229,785 | 27,305 | ||||||||||||
248,747 | 44,693 | 244,716 | 29,907 | |||||||||||||
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At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Fair value | Fair value | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Foreign exchange | 342 | – | 265 | 10 | ||||||||||||
Interest rate | 242 | 1,085 | 574 | 1,257 | ||||||||||||
584 | 1,085 | 839 | 1,267 | |||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | US$m | ||||||||||
Gains/(losses): | ||||||||||||
– on hedging instruments | 114 | (296 | ) | (186 | ) | |||||||
– on the hedged items attributable to the hedged risk | (159 | ) | 301 | 205 | ||||||||
(45 | ) | 5 | 19 | |||||||||
At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Fair value | Fair value | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Foreign exchange | 1,353 | 300 | 1,745 | 816 | ||||||||||||
Interest rate | 3,264 | 2,189 | 3,907 | 3,178 | ||||||||||||
4,617 | 2,489 | 5,652 | 3,994 | |||||||||||||
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Notes 18 and 19 |
More than 3 | 5 years or less | |||||||||||||||
3 months | months but less | but more than | More than | |||||||||||||
or less | than 1 year | 1 year | 5 years | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 31 December 2009 | ||||||||||||||||
Assets | 120,915 | 111,456 | 53,184 | 476 | ||||||||||||
Liabilities | (71,143 | ) | (78,841 | ) | (39,377 | ) | (6,559 | ) | ||||||||
Net cash inflows/(outflows) exposure | 49,772 | 32,615 | 13,807 | (6,083 | ) | |||||||||||
At 31 December 2008 | ||||||||||||||||
Assets | 99,426 | 71,491 | 52,988 | 2,081 | ||||||||||||
Liabilities | (83,019 | ) | (77,656 | ) | (62,633 | ) | (7,817 | ) | ||||||||
Net cash inflows/(outflows) exposure | 16,407 | (6,165 | ) | (9,645 | ) | (5,736 | ) | |||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Financial investments: | ||||||||
– not subject to repledge or resale by counterparties | 356,864 | 287,479 | ||||||
– which may be repledged or resold by counterparties | 12,294 | 12,756 | ||||||
369,158 | 300,235 | |||||||
2009 | 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Treasury and other eligible bills | 58,434 | 58,434 | 41,027 | 41,027 | ||||||||||||
– available for sale | 58,333 | 58,333 | 41,027 | 41,027 | ||||||||||||
– held to maturity | 101 | 101 | – | – | ||||||||||||
Debt securities | 301,600 | 302,171 | 251,957 | 253,001 | ||||||||||||
– available for sale | 284,074 | 284,074 | 237,944 | 237,944 | ||||||||||||
– held to maturity | 17,526 | 18,097 | 14,013 | 15,057 | ||||||||||||
Equity securities | 9,124 | 9,124 | 7,251 | 7,251 | ||||||||||||
– available for sale | 9,124 | 9,124 | 7,251 | 7,251 | ||||||||||||
Total financial investments | 369,158 | 369,729 | 300,235 | 301,279 | ||||||||||||
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Amortised | Fair | |||||||
cost | value | 1 | ||||||
US$m | US$m | |||||||
At 31 December 2009 | ||||||||
US Treasury | 17,650 | 17,635 | ||||||
US Government agencies2 | 12,539 | 12,804 | ||||||
US Government sponsored entities2 | 4,885 | 4,924 | ||||||
UK Government | 9,653 | 9,782 | ||||||
Hong Kong Government | 37,747 | 37,763 | ||||||
Other government | 87,122 | 87,881 | ||||||
Asset-backed securities3 | 48,500 | 34,914 | ||||||
Corporate debt and other securities | 153,639 | 154,902 | ||||||
Equities | 7,051 | 9,124 | ||||||
�� | 378,786 | 369,729 | ||||||
At 31 December 2008 | ||||||||
US Treasury | 11,528 | 11,755 | ||||||
US Government agencies2 | 8,131 | 8,307 | ||||||
US Government sponsored entities2 | 15,109 | 15,240 | ||||||
UK Government | 16,077 | 16,217 | ||||||
Hong Kong Government | 966 | 989 | ||||||
Other government | 60,755 | 61,528 | ||||||
Asset-backed securities3 | 55,685 | 36,052 | ||||||
Corporate debt and other securities | 145,269 | 143,940 | ||||||
Equities | 5,901 | 7,251 | ||||||
319,421 | 301,279 | |||||||
At 31 December 2007 | ||||||||
US Treasury | 6,799 | 6,831 | ||||||
US Government agencies2 | 5,709 | 5,732 | ||||||
US Government sponsored entities2 | 14,732 | 14,533 | ||||||
UK Government | 757 | 749 | ||||||
Hong Kong Government | 3,941 | 3,942 | ||||||
Other government | 60,109 | 60,320 | ||||||
Asset-backed securities3 | 64,186 | 63,976 | ||||||
Corporate debt and other securities | 114,955 | 114,709 | ||||||
Equities | 8,405 | 12,594 | ||||||
279,593 | 283,386 | |||||||
1 | Included within the above figures are debt securities issued by banks and other financial institutions of US$133,256 million (2008: US$140,878 million; 2007: US$142,863 million), of which US$55,324 million (2008: US$39,213 million; 2007: US$2,490 million) are guaranteed by various governments. The fair value of the debt securities issued by banks and other financial institutions was US$133,461 million (2008: US$141,526 million; 2007: US$143,023 million). | |
2 | Includes securities that are supported by an explicit guarantee issued by the US Government. | |
3 | Excludes asset-backed securities included under US Government agencies and sponsored entities. |
Treasury | Treasury | |||||||||||||||||||||||
and other | and other | Debt | Debt | Equity | ||||||||||||||||||||
eligible bills | eligible bills | securities | securities | securities | ||||||||||||||||||||
available | held to | available | held to | available | ||||||||||||||||||||
for sale | maturity | for sale | maturity | for sale | Total | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Carrying amount at 31 December 2009 | ||||||||||||||||||||||||
Listed on a recognised exchange1 | 2,334 | – | 135,653 | 2,743 | 911 | 141,641 | ||||||||||||||||||
Unlisted | 55,999 | 101 | 148,421 | 14,783 | 8,213 | 227,517 | ||||||||||||||||||
58,333 | 101 | 284,074 | 17,526 | 9,124 | 369,158 | |||||||||||||||||||
Carrying amount at 31 December 2008 | ||||||||||||||||||||||||
Listed on a recognised exchange1 | 3,539 | – | 108,972 | 2,332 | 471 | 115,314 | ||||||||||||||||||
Unlisted | 37,488 | – | 128,972 | 11,681 | 6,780 | 184,921 | ||||||||||||||||||
41,027 | – | 237,944 | 14,013 | 7,251 | 300,235 | |||||||||||||||||||
1 | The fair value of listed held-to-maturity debt securities as at 31 December 2009 was US$2,769 million (2008: US$2,345 million). |
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Notes 19 and 20 |
At 31 December | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Remaining contractual maturity of total debt securities: | ||||||||
1 year or less | 75,782 | 72,551 | ||||||
5 years or less but over 1 year | 141,683 | 93,824 | ||||||
10 years or less but over 5 years | 31,934 | 28,141 | ||||||
Over 10 years | 52,201 | 57,441 | ||||||
301,600 | 251,957 | |||||||
Remaining contractual maturity of debt securities available for sale: | ||||||||
1 year or less | 75,160 | 71,967 | ||||||
5 years or less but over 1 year | 135,187 | 89,931 | ||||||
10 years or less but over 5 years | 26,105 | 22,402 | ||||||
Over 10 years | 47,622 | 53,644 | ||||||
284,074 | 237,944 | |||||||
Remaining contractual maturity of debt securities held to maturity: | ||||||||
1 year or less | 622 | 584 | ||||||
5 years or less but over 1 year | 6,496 | 3,893 | ||||||
10 years or less but over 5 years | 5,829 | 5,739 | ||||||
Over 10 years | 4,579 | 3,797 | ||||||
17,526 | 14,013 | |||||||
After one year but within | After five years but | |||||||||||||||||||||||||||||||
Within one year | five years | within ten years | After ten years | |||||||||||||||||||||||||||||
Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | |||||||||||||||||||||||||
US$m | % | US$m | % | US$m | % | US$m | % | |||||||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||||||||||||||
US Treasury | 13,816 | 1.72 | 2,450 | 1.02 | 170 | 1.37 | 700 | 4.47 | ||||||||||||||||||||||||
US Government agencies | 4 | 4.44 | 6 | 2.76 | 297 | 4.71 | 11,777 | 3.56 | ||||||||||||||||||||||||
US Government-sponsored agencies | 521 | 1.15 | 176 | 2.59 | 1,567 | 3.84 | 743 | 3.99 | ||||||||||||||||||||||||
UK Government | 33 | 0.79 | 6,532 | 1.95 | – | – | 1,683 | 3.15 | ||||||||||||||||||||||||
Hong Kong Government | 99 | 0.37 | 573 | 2.24 | – | – | – | – | ||||||||||||||||||||||||
Other governments | 25,772 | 3.08 | 33,895 | 4.24 | 5,482 | 4.19 | 2,384 | 3.97 | ||||||||||||||||||||||||
Asset-backed securities | 616 | 0.61 | 3,004 | 0.69 | 6,471 | 0.39 | 38,217 | 0.91 | ||||||||||||||||||||||||
Corporate debt and other securities | 34,239 | 2.18 | 89,120 | 2.16 | 11,816 | 2.64 | 3,603 | 3.46 | ||||||||||||||||||||||||
Total amortised cost | 75,100 | 135,756 | 25,803 | 59,107 | ||||||||||||||||||||||||||||
Total carrying value | 75,160 | 135,187 | 26,105 | 47,622 | ||||||||||||||||||||||||||||
Held-to-maturity | ||||||||||||||||||||||||||||||||
US Treasury | – | – | 31 | 4.71 | 57 | 7.56 | 56 | 9.64 | ||||||||||||||||||||||||
US Government agencies | – | – | – | – | 6 | 7.59 | 447 | 6.58 | ||||||||||||||||||||||||
US Government-sponsored agencies | 1 | 4.56 | 56 | 6.70 | 5 | 7.12 | 1,817 | 6.14 | ||||||||||||||||||||||||
Hong Kong Government | – | – | 2 | 3.30 | 8 | 5.03 | – | – | ||||||||||||||||||||||||
Other governments | 36 | 3.36 | 389 | 3.56 | 330 | 4.28 | 582 | 6.88 | ||||||||||||||||||||||||
Asset-backed securities | – | – | – | – | – | – | 192 | 6.13 | ||||||||||||||||||||||||
Corporate debt and other securities | 585 | 3.91 | 6,018 | 4.29 | 5,423 | 4.67 | 1,485 | 5.93 | ||||||||||||||||||||||||
Total amortised cost | 622 | 6,496 | 5,829 | 4,579 | ||||||||||||||||||||||||||||
Total carrying value | 622 | 6,496 | 5,829 | 4,579 | ||||||||||||||||||||||||||||
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– | Full derecognition occurs when HSBC transfers its contractual right to receive cash flows from the financial assets, or retains the right but assumes an obligation to pass on the cash flows from the asset, and transfers substantially all the risks and rewards of ownership. The risks include credit, interest rate, currency, prepayment and other price risks. | |
– | Partial derecognition occurs when HSBC sells or otherwise transfers financial assets in such a way that some but not substantially all of the risks and rewards of ownership are transferred but control is retained. These financial assets are recognised on the balance sheet to the extent of HSBC’s continuing involvement. |
2009 | 2008 | |||||||||||||||
Carrying | Carrying | Carrying | Carrying | |||||||||||||
amount of | amount of | amount of | amount of | |||||||||||||
transferred | associated | transferred | associated | |||||||||||||
assets | liabilities | assets | liabilities | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Nature of transaction | ||||||||||||||||
Repurchase agreements | 108,518 | 107,525 | 94,154 | 91,139 | ||||||||||||
Securities lending agreements | 7,363 | 7,264 | 4,497 | 4,096 | ||||||||||||
115,881 | 114,789 | 98,651 | 95,235 | |||||||||||||
Securitisations at 31 December | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Carrying amount of assets (original) | 17,427 | 17,427 | ||||||
Carrying amount of assets (currently recognised) | 139 | 299 | ||||||
Carrying amount of associated liabilities (currently recognised) | 69 | 149 |
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Note 21 |
At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | amount | value | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Listed | ||||||||||||||||
Bank of Communications Co., Limited | 5,110 | 10,820 | 4,612 | 6,717 | ||||||||||||
Industrial Bank Co., Limited | 1,084 | 3,774 | 913 | 1,368 | ||||||||||||
Ping An Insurance (Group) Company of China, Limited | 4,391 | 10,803 | 3,727 | 5,965 | ||||||||||||
SABB Takaful Company | 29 | 99 | 4 | 29 | ||||||||||||
The Saudi British Bank | 1,376 | 3,472 | 1,214 | 3,453 | ||||||||||||
11,990 | 28,968 | 10,470 | 17,532 | |||||||||||||
At 31 December 2009 | ||||||||
HSBC's | Issued | |||||||
Country of | interest in | equity | ||||||
incorporation | equity capital | capital | ||||||
Listed | ||||||||
Bank of Communications Co., Limited | PRC | 1 | 19.01% | RMB48,994m | ||||
Industrial Bank Co., Limited2 | PRC | 1 | 12.78% | RMB5,000m | ||||
Ping An Insurance (Group) Company of China, Limited | PRC | 1 | 16.78% | RMB7,345m | ||||
SABB Takaful Company | Saudi Arabia | 32.50% | SR340m | |||||
The Saudi British Bank | Saudi Arabia | 40.00% | SR7,500m | |||||
Unlisted | ||||||||
Barrowgate Limited2,3 | Hong Kong | 24.64% | – | |||||
British Arab Commercial Public Limited Company | England | 48.92% | US$77m fully paid | |||||
£30m fully paid | ||||||||
£5m nil paid | ||||||||
Vietnam Technological and Commercial Joint Stock Bank | Vietnam | 19.91% | VND5,400,417m | |||||
Yantai City Commercial Bank2 | PRC | 20.00% | RMB2,000m | |||||
Wells Fargo HSBC Trade Bank, N.A.4 | United States | 20.00% | – |
1 | People’s Republic of China. | |
2 | Investment held through Hang Seng Bank Limited, a 62.14 per cent owned subsidiary of HSBC. | |
3 | Issued equity capital is less than HK$1 million. | |
4 | Issued equity capital is less than US$1 million. HSBC disposed of its equity interest on 12 February 2010. |
2009 | 2008 | |||||||
US$m | US$m | |||||||
HSBC’s share of: | ||||||||
– assets | 157,366 | 123,283 | ||||||
– liabilities | 147,501 | 114,578 | ||||||
– revenues | 7,514 | 5,939 | ||||||
– profit after tax | 1,722 | 1,600 |
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Table of Contents
At 31 December 2009 | ||||||||||
HSBC’s interest | Issued | |||||||||
Country of | Principal | in equity | equity | |||||||
incorporation | activity | capital | capital | |||||||
HSBC Saudi Arabia Limited | Saudi Arabia | Investment banking | 60.00% | SR50m | ||||||
Vaultex UK Limited | England | Cash management | 50.00% | £10m | ||||||
Hana HSBC Life Insurance Co., Ltd | South Korea | Insurance manufacturing | 49.99% | KRW60,201m | ||||||
Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited | India | Insurance manufacturing | 26.00% | INR5,000m |
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Notes 21 and 22 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
HSBC’s share of: | ||||||||
– current assets | 700 | 594 | ||||||
– non-current assets | 513 | 281 | ||||||
– current liabilities | 621 | 260 | ||||||
– non-current liabilities | 416 | 449 | ||||||
– income | 370 | 301 | ||||||
– expenses | 324 | 240 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Gross amount | ||||||||
At 1 January | 1,453 | 1,308 | ||||||
Additions | 5 | 88 | ||||||
Disposals | – | (46 | ) | |||||
Exchange differences | (12 | ) | 86 | |||||
Other changes | – | 17 | ||||||
At 31 December1 | 1,446 | 1,453 | ||||||
1 | Includes the carrying amount of goodwill arising from joint ventures of US$32 million (2008: US$39 million). |
Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Gross amount | ||||||||||||||||||||||||||||
At 1 January 2009 | 15,511 | 122 | 364 | 69 | 12,487 | 3,866 | 32,419 | |||||||||||||||||||||
Additions | – | – | 570 | – | – | 10 | 580 | |||||||||||||||||||||
Disposals | (3 | ) | – | – | – | – | – | (3 | ) | |||||||||||||||||||
Exchange differences | 460 | 1 | 119 | – | – | 294 | 874 | |||||||||||||||||||||
Other changes | (53 | ) | – | – | – | (4 | ) | (8 | ) | (65 | ) | |||||||||||||||||
At 31 December 2009 | 15,915 | 123 | 1,053 | 69 | 12,483 | 4,162 | 33,805 | |||||||||||||||||||||
Accumulated impairment losses | ||||||||||||||||||||||||||||
At 1 January 2009 | – | – | – | – | (10,564 | ) | – | (10,564 | ) | |||||||||||||||||||
Impairment losses | – | – | – | – | – | – | – | |||||||||||||||||||||
At 31 December 2009 | – | – | – | – | (10,564 | ) | – | (10,564 | ) | |||||||||||||||||||
Net carrying amount at 31 December 2009 | 15,915 | 123 | 1,053 | 69 | 1,919 | 4,162 | 23,241 | |||||||||||||||||||||
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Rest of | ||||||||||||||||||||||||||||
Hong | Asia- | Middle | North | Latin | ||||||||||||||||||||||||
Europe | Kong | Pacific | 1 | East | 1 | America | America | Total | ||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Gross amount | ||||||||||||||||||||||||||||
At 1 January 2008 | 16,744 | 124 | 281 | 69 | 12,561 | 4,474 | 34,253 | |||||||||||||||||||||
Additions | 12 | – | 142 | – | – | 1 | 155 | |||||||||||||||||||||
Disposals | (415 | ) | – | – | – | (13 | ) | – | (428 | ) | ||||||||||||||||||
Exchange differences | (775 | ) | (2 | ) | (59 | ) | – | (61 | ) | (609 | ) | (1,506 | ) | |||||||||||||||
Other changes | (55 | ) | – | – | – | – | – | (55 | ) | |||||||||||||||||||
At 31 December 2008 | 15,511 | 122 | 364 | 69 | 12,487 | 3,866 | 32,419 | |||||||||||||||||||||
Accumulated impairment losses | ||||||||||||||||||||||||||||
At 1 January 2008 | – | – | – | – | – | – | – | |||||||||||||||||||||
Impairment losses | – | – | – | – | (10,564 | ) | – | (10,564 | ) | |||||||||||||||||||
At 31 December 2008 | – | – | – | – | (10,564 | ) | – | (10,564 | ) | |||||||||||||||||||
Net carrying amount at 31 December 2008 | 15,511 | 122 | 364 | 69 | 1,923 | 3,866 | 21,855 | |||||||||||||||||||||
1 | The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been restated accordingly. |
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Note 22 |
2009 | 2008 | |||||||||||||||||||||||
Nominal | Nominal | |||||||||||||||||||||||
growth rate | growth rate | |||||||||||||||||||||||
beyond | beyond | |||||||||||||||||||||||
Goodwill at | initial | Goodwill at | initial | |||||||||||||||||||||
1 July | Discount | cash flow | 31 December | Discount | cash flow | |||||||||||||||||||
Cash-generating unit | 2009 | rate | projections | 2008 | rate | projections | ||||||||||||||||||
US$m | % | % | US$m | % | % | |||||||||||||||||||
Personal Financial Services – Europe | 4,507 | 11.0 | 3.1 | 4,422 | 10.0 | 3.5 | ||||||||||||||||||
Commercial Banking – Europe | 3,480 | 11.0 | 3.1 | 3,427 | 10.0 | 3.5 | ||||||||||||||||||
Private Banking – Europe | 4,483 | 11.0 | 3.1 | 4,470 | 9.0 | 3.5 | ||||||||||||||||||
Global Banking and Markets – Europe | 3,489 | 11.0 | 3.1 | 3,451 | 11.0 | 3.5 | ||||||||||||||||||
Personal Financial Services – North America | – | – | – | – | 13.6 | 3.9 | ||||||||||||||||||
Personal Financial Services – Latin America | 2,350 | 15.0 | 8.0 | 2,189 | 16.8 | 8.8 | ||||||||||||||||||
Total goodwill in the CGUs listed above | 18,309 | 17,959 | ||||||||||||||||||||||
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2009 | 2008 | |||||||
US$m | US$m | |||||||
At 1 January | 2,033 | 1,965 | ||||||
Value of new business written during the year | 600 | 452 | ||||||
Movement from in-force business (including investment return variances and changes in investment assumptions) | (84 | ) | (311 | ) | ||||
Exchange differences and other movements | 231 | (73 | ) | |||||
At 31 December | 2,780 | 2,033 | ||||||
2009 | 2008 | |||||||||||||||||||||||
UK | Hong Kong | France | UK | Hong Kong | France | |||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||
Risk free rate | 3.50 | 2.58 | 3.46 | 4.30 | 1.14 | 4.03 | ||||||||||||||||||
Risk discount rate | 7.00 | 11.00 | 8.00 | 8.00 | 11.00 | 8.00 | ||||||||||||||||||
Expenses inflation | 3.50 | 3.00 | 2.00 | 3.50 | 3.00 | 2.00 |
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Notes 22 and 23 |
Customer/ | ||||||||||||||||||||||||||||
Mortgage | Internally | merchant | ||||||||||||||||||||||||||
Trade | servicing | generated | Purchased | relation- | ||||||||||||||||||||||||
names | rights | software | software | ships | Other | Total | ||||||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | US$m | ||||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||
At 1 January 2009 | 67 | 1,360 | 3,429 | 867 | 1,749 | 421 | 7,893 | |||||||||||||||||||||
Additions1 | – | 116 | 763 | 65 | 20 | 10 | 974 | |||||||||||||||||||||
Acquisition of subsidiaries | – | – | – | – | 58 | – | 58 | |||||||||||||||||||||
Disposals | – | (29 | ) | (14 | ) | (18 | ) | (25 | ) | – | (86 | ) | ||||||||||||||||
Amount written off | – | (757 | ) | (45 | ) | (1 | ) | (15 | ) | – | (818 | ) | ||||||||||||||||
Exchange differences | 1 | – | 247 | 53 | 201 | 9 | 511 | |||||||||||||||||||||
Other changes | – | (1 | ) | 20 | (12 | ) | – | 62 | 69 | |||||||||||||||||||
At 31 December 2009 | 68 | 689 | 4,400 | 954 | 1,988 | 502 | 8,601 | |||||||||||||||||||||
Accumulated amortisation | ||||||||||||||||||||||||||||
At 1 January 2009 | (45 | ) | (1,023 | ) | (1,992 | ) | (631 | ) | (681 | ) | (52 | ) | (4,424 | ) | ||||||||||||||
Charge for the year2 | (4 | ) | (3 | ) | (433 | ) | (98 | ) | (228 | ) | (30 | ) | (796 | ) | ||||||||||||||
Impairment | – | – | (6 | ) | (5 | ) | (6 | ) | – | (17 | ) | |||||||||||||||||
Disposals | – | 29 | 6 | 18 | 15 | – | 68 | |||||||||||||||||||||
Amount written off | – | 757 | 45 | 1 | 15 | – | 818 | |||||||||||||||||||||
Exchange differences | (1 | ) | – | (131 | ) | (32 | ) | (72 | ) | (1 | ) | (237 | ) | |||||||||||||||
Other changes | – | – | – | – | 2 | (42 | ) | (40 | ) | |||||||||||||||||||
At 31 December 2009 | (50 | ) | (240 | ) | (2,511 | ) | (747 | ) | (955 | ) | (125 | ) | (4,628 | ) | ||||||||||||||
Net carrying amount at 31 December 2009 | 18 | 449 | 1,889 | 207 | 1,033 | 377 | 3,973 | |||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||
At 1 January 2008 | 63 | 1,202 | 3,473 | 760 | 1,866 | 165 | 7,529 | |||||||||||||||||||||
Additions1 | – | 158 | 764 | 118 | 169 | 23 | 1,232 | |||||||||||||||||||||
Acquisition of subsidiaries | 10 | – | – | 68 | 4 | 267 | 349 | |||||||||||||||||||||
Disposals | – | – | (43 | ) | (26 | ) | (25 | ) | (3 | ) | (97 | ) | ||||||||||||||||
Exchange differences | (8 | ) | – | (561 | ) | (59 | ) | (264 | ) | (24 | ) | (916 | ) | |||||||||||||||
Other changes | 2 | – | (204 | ) | 6 | (1 | ) | (7 | ) | (204 | ) | |||||||||||||||||
At 31 December 2008 | 67 | 1,360 | 3,429 | 867 | 1,749 | 421 | 7,893 | |||||||||||||||||||||
Accumulated amortisation | ||||||||||||||||||||||||||||
At 1 January 2008 | (44 | ) | (724 | ) | (2,167 | ) | (549 | ) | (541 | ) | (33 | ) | (4,058 | ) | ||||||||||||||
Charge for the year2 | (6 | ) | (299 | ) | (365 | ) | (114 | ) | (227 | ) | (20 | ) | (1,031 | ) | ||||||||||||||
Impairment | – | – | – | (1 | ) | – | – | (1 | ) | |||||||||||||||||||
Disposals | – | – | 18 | 6 | 10 | – | 34 | |||||||||||||||||||||
Exchange differences | 5 | – | 311 | 36 | 80 | 1 | 433 | |||||||||||||||||||||
Other changes | – | – | 211 | (9 | ) | (3 | ) | – | 199 | |||||||||||||||||||
At 31 December 2008 | (45 | ) | (1,023 | ) | (1,992 | ) | (631 | ) | (681 | ) | (52 | ) | (4,424 | ) | ||||||||||||||
Net carrying amount at 31 December 2008 | 22 | 337 | 1,437 | 236 | 1,068 | 369 | 3,469 | |||||||||||||||||||||
1 | At 31 December 2009, HSBC had US$0.2 million (2008: US$2 million) of contractual commitments to acquire intangible assets. | |
2 | The amortisation charge for the year is recognised within the income statement under ‘Amortisation and impairment of intangible assets’, with the exception of the amortisation of mortgage servicing rights that is charged to net fee income. |
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Long | Short | Equipment, | Equipment | |||||||||||||||||||||
Freehold | leasehold | leasehold | fixtures | on | ||||||||||||||||||||
land and | land and | land and | and | operating | ||||||||||||||||||||
buildings | buildings | buildings | 1 | fittings | 2 | leases | Total | 3 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Cost or fair value | ||||||||||||||||||||||||
At 1 January 2009 | 4,126 | 1,736 | 2,924 | 10,320 | 4,547 | 23,653 | ||||||||||||||||||
Additions at cost4 | 344 | 35 | 179 | 1,253 | 299 | 2,110 | ||||||||||||||||||
Acquisition of subsidiaries | – | – | 15 | 7 | – | 22 | ||||||||||||||||||
Fair value adjustments | (58 | ) | 16 | 18 | – | – | (24 | ) | ||||||||||||||||
Disposals | (201 | ) | (510 | ) | (98 | ) | (640 | ) | (117 | ) | (1,566 | ) | ||||||||||||
Reclassified to held for sale | (697 | ) | – | (20 | ) | (63 | ) | – | (780 | ) | ||||||||||||||
Transfers | – | (2 | ) | 2 | – | – | – | |||||||||||||||||
Exchange differences | 342 | 62 | 90 | 737 | 507 | 1,738 | ||||||||||||||||||
Other changes | 59 | (10 | ) | 25 | (62 | ) | – | 12 | ||||||||||||||||
At 31 December 2009 | 3,915 | 1,327 | 3,135 | 11,552 | 5,236 | 25,165 | ||||||||||||||||||
Accumulated depreciation and impairment | ||||||||||||||||||||||||
At 1 January 2009 | (368 | ) | (228 | ) | (886 | ) | (6,614 | ) | (1,532 | ) | (9,628 | ) | ||||||||||||
Depreciation charge for the year | (82 | ) | (44 | ) | (193 | ) | (1,160 | ) | (169 | ) | (1,648 | ) | ||||||||||||
Disposals | 39 | 46 | 90 | 495 | (4 | ) | 666 | |||||||||||||||||
Reclassified to held for sale | 46 | – | 3 | 30 | – | 79 | ||||||||||||||||||
Impairment losses recognised | (30 | ) | (1 | ) | (26 | ) | (20 | ) | – | (77 | ) | |||||||||||||
Exchange differences | (25 | ) | (7 | ) | (42 | ) | (496 | ) | (173 | ) | (743 | ) | ||||||||||||
Other changes | (30 | ) | 5 | (11 | ) | 22 | 2 | (12 | ) | |||||||||||||||
At 31 December 2009 | (450 | ) | (229 | ) | (1,065 | ) | (7,743 | ) | (1,876 | ) | (11,363 | ) | ||||||||||||
Net carrying amount at 31 December 2009 | 3,465 | 1,098 | 2,070 | 3,809 | 3,360 | 13,802 | ||||||||||||||||||
Cost or fair value | ||||||||||||||||||||||||
At 1 January 2008 | 4,701 | 1,438 | 2,856 | 10,957 | 6,054 | 26,006 | ||||||||||||||||||
Additions at cost4 | 466 | 26 | 327 | 1,813 | 353 | 2,985 | ||||||||||||||||||
Acquisition of subsidiaries | 29 | – | – | 16 | – | 45 | ||||||||||||||||||
Fair value adjustments | (93 | ) | 4 | (3 | ) | – | – | (92 | ) | |||||||||||||||
Disposals | (138 | ) | (102 | ) | (41 | ) | (803 | ) | (175 | ) | (1,259 | ) | ||||||||||||
Reclassified from/(to) held for sale | 16 | 469 | (2 | ) | 98 | – | 581 | |||||||||||||||||
Transfers | – | 3 | (3 | ) | – | – | – | |||||||||||||||||
Exchange differences | (611 | ) | (62 | ) | (214 | ) | (1,876 | ) | (1,685 | ) | (4,448 | ) | ||||||||||||
Other changes | (244 | ) | (40 | ) | 4 | 115 | – | (165 | ) | |||||||||||||||
At 31 December 2008 | 4,126 | 1,736 | 2,924 | 10,320 | 4,547 | 23,653 | ||||||||||||||||||
Accumulated depreciation and impairment | ||||||||||||||||||||||||
At 1 January 2008 | (344 | ) | (175 | ) | (826 | ) | (7,003 | ) | (1,964 | ) | (10,312 | ) | ||||||||||||
Depreciation charge for the year | (82 | ) | (53 | ) | (184 | ) | (1,201 | ) | (187 | ) | (1,707 | ) | ||||||||||||
Disposals | 7 | 2 | 14 | 537 | 57 | 617 | ||||||||||||||||||
Reclassified (from)/to held for sale | 1 | (18 | ) | – | (30 | ) | – | (47 | ) | |||||||||||||||
Transfers | – | (3 | ) | 3 | – | – | – | |||||||||||||||||
Impairment losses recognised | (30 | ) | (2 | ) | – | (11 | ) | – | (43 | ) | ||||||||||||||
Exchange differences | 73 | 9 | 107 | 1,257 | 561 | 2,007 | ||||||||||||||||||
Other changes | 7 | 12 | – | (163 | ) | 1 | (143 | ) | ||||||||||||||||
At 31 December 2008 | (368 | ) | (228 | ) | (886 | ) | (6,614 | ) | (1,532 | ) | (9,628 | ) | ||||||||||||
Net carrying amount at 31 December 2008 | 3,758 | 1,508 | 2,038 | 3,706 | 3,015 | 14,025 | ||||||||||||||||||
Net carrying amount at 1 January 2008 | 4,357 | 1,263 | 2,030 | 3,954 | 4,090 | 15,694 |
1 | Including assets held on finance leases with a net book value of US$18 million (2008: US$13 million). | |
2 | Including assets held on finance leases with a net book value of US$513 million (2008: US$315 million). | |
3 | Including assets with a net book value of US$36 million (2008: US$28 million) pledged as security for liabilities. | |
4 | At 31 December 2009, HSBC had US$878 million (2008: US$1,498 million) of contractual commitments to acquire property, plant and equipment. |
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Note 23 |
2009 | 2008 | |||||||||||||||
Accumulated | Accumulated | |||||||||||||||
Cost | depreciation | Cost | depreciation | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
At 1 January | 1,621 | (675 | ) | 1,490 | (671 | ) | ||||||||||
Additions | 175 | – | 314 | – | ||||||||||||
Disposals | (89 | ) | 71 | (40 | ) | 12 | ||||||||||
Depreciation charge for the year | – | (133 | ) | – | (116 | ) | ||||||||||
Impairment loss recognised | – | (24 | ) | – | – | |||||||||||
Exchange differences | 86 | (40 | ) | (141 | ) | 100 | ||||||||||
Other changes | 31 | (30 | ) | (2 | ) | – | ||||||||||
At 31 December | 1,824 | (831 | ) | 1,621 | (675 | ) | ||||||||||
Net carrying amount at 31 December | 993 | 946 | ||||||||||||||
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Long | Short | |||||||||||||||
Freehold | leasehold | leasehold | ||||||||||||||
land and | land and | land and | ||||||||||||||
buildings | buildings | buildings | Total | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Fair value | ||||||||||||||||
At 1 January 2009 | 566 | 188 | 217 | 971 | ||||||||||||
Additions at cost | 36 | – | – | 36 | ||||||||||||
Fair value adjustments | (58 | ) | 16 | 18 | (24 | ) | ||||||||||
Disposals | – | (25 | ) | – | (25 | ) | ||||||||||
Exchange differences | 57 | 5 | – | 62 | ||||||||||||
Other changes | 39 | – | 2 | 41 | ||||||||||||
At 31 December 2009 | 640 | 184 | 237 | 1,061 | ||||||||||||
Fair value | ||||||||||||||||
At 1 January 2008 | 925 | 205 | 216 | 1,346 | ||||||||||||
Additions at cost | 78 | – | – | 78 | ||||||||||||
Fair value adjustments | (93 | ) | 4 | (3 | ) | (92 | ) | |||||||||
Disposals | (2 | ) | – | – | (2 | ) | ||||||||||
Transfers | – | – | (1 | ) | (1 | ) | ||||||||||
Exchange differences | (196 | ) | (15 | ) | 5 | (206 | ) | |||||||||
Other changes | (146 | ) | (6 | ) | – | (152 | ) | |||||||||
At 31 December 2008 | 566 | 188 | 217 | 971 | ||||||||||||
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Note 24 |
At 31 December 2009 | |||||||||||||||
HSBC’s | |||||||||||||||
Country of | interest in | Issued | |||||||||||||
incorporation | equity capital | equity | Share | ||||||||||||
or registration | % | capital | class | ||||||||||||
Europe | |||||||||||||||
HSBC Asset Finance (UK) Limited | England | 100 | £265m | Ordinary £1 | |||||||||||
HSBC Bank A.S. | Turkey | 100 | TRL652m | A-Common TRL1 B-Common TRL1 | |||||||||||
HSBC Bank Malta p.l.c. | Malta | 70.03 | €88m | Ordinary€0.30 | |||||||||||
HSBC Bank plc | England | 100 | £797m | Ordinary £1 Preferred Ordinary £1 Series 2 Third Dollar Preference US$0.01 Third Dollar Preference US$0.01 | |||||||||||
HSBC France | France | 99.99 | €337m | Shares€5.00 | |||||||||||
HSBC Bank International Limited | Jersey | 100 | £1m | Ordinary £1 | |||||||||||
HSBC Life (UK) Limited | England | 100 | £94m | Ordinary £1 | |||||||||||
HSBC Private Banking Holdings (Suisse) S.A. | Switzerland | 100 | CHF1,363m | Ordinary CHF1,000 | |||||||||||
HSBC Trinkaus & Burkhardt AG | Germany | 78.60 | €26m | Shares of no par value value | |||||||||||
Marks and Spencer Retail Financial Services Holdings Limited | England | 100 | £67m | Ordinary £1 | |||||||||||
Hong Kong | |||||||||||||||
Hang Seng Bank Limited7 | Hong Kong | 62.14 | HK$9,559m | Ordinary HK$5.00 | |||||||||||
HSBC Insurance (Asia) Limited | Hong Kong | 100 | HK$125m | Ordinary HK$1,000 | |||||||||||
HSBC Life (International) Limited | Bermuda | 100 | HK$327m | Ordinary HK$1.00 | |||||||||||
The Hongkong and Shanghai Banking Corporation Limited | Hong Kong | 100 | HK$22,494m | Ordinary HK$2.50 CIP1 US$1.00 CRP2 US$1.00 NIP3 US$1.00 | |||||||||||
Rest of Asia-Pacific | |||||||||||||||
HSBC Bank Australia Limited | Australia | 100 | A$657m | Ordinary A$1.00 Pref A$10,000 | |||||||||||
HSBC Bank (China) Company Limited | PRC4 | 100 | RMB8,000m | Ordinary CNY1.00 | |||||||||||
HSBC Bank Malaysia Berhad | Malaysia | 100 | RM114m | Ordinary RM0.50 | |||||||||||
Middle East | |||||||||||||||
HSBC Bank Middle East Limited | Jersey | 100 | US$931m | CRP2 US$1.00 Ordinary US$1.00 | |||||||||||
HSBC Bank Egypt S.A.E. | Egypt | 94.53 | EGP1,509m | Ordinary EGP84.00 | |||||||||||
North America | |||||||||||||||
The Bank of Bermuda Limited | Bermuda | 100 | US$30m | Common BMD1.00 | |||||||||||
HSBC Bank Canada | Canada | 100 | C$1,225m | Class 1 Pref of NPV5 Class 2 Pref of NPV5 Common of NPV | |||||||||||
HSBC Bank USA, N.A. | United States | 100 | US$2m | Common US$100 | |||||||||||
HSBC Finance Corporation | United States | 100 | US$3,038m | Common US$0.01 | |||||||||||
HSBC Securities (USA) Inc. | United States | 100 | – | 6 | Common US$0.05 | ||||||||||
Latin America | |||||||||||||||
HSBC Bank Argentina S.A. | Argentina | 99.99 | ARS1,244m | Ordinary-A ARS1.00 Ordinary-B ARS1.00 | |||||||||||
HSBC Bank Brasil S.A. – Banco Múltiplo | Brazil | 100 | BRL3,483m | Ordinary BRL1.14 Ordinary BRL1.89 Ordinary BRL1.17 | |||||||||||
HSBC Mexico, S.A., Institucion de Banca Multiple, Grupo Financiero HSBC | Mexico | 99.99 | MXN4,334m | Ordinary MXN2.00 | |||||||||||
HSBC Bank (Panama) S.A. | Panama | 100 | US$10m | Ordinary PAB 1.00 |
1 | Cumulative Irredeemable Preference shares. | |
2 | Cumulative Redeemable Preference shares. | |
3 | Non-cumulative Irredeemable Preference shares. | |
4 | People’s Republic of China. | |
5 | Preference shares of nil par value. | |
6 | Issued equity capital is less than US$1 million. | |
7 | Listed in Hong Kong. |
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HSBC’s | ||||||
interest in | ||||||
Subsidiary | equity capital | Description of relationship that gives HSBC control | ||||
% | ||||||
2009 | ||||||
HSBC Private Equity Fund 3 | 38.8 | HSBC has control under IAS 27 because it is the investment adviser/manager of the fund and has a significant equity interest. | ||||
2008 | ||||||
HSBC Private Equity Fund 3 | 38.8 | HSBC has control under IAS 27 because it is the investment adviser/manager of the fund and has a significant equity interest. |
Carrying value of total | ||||||
consolidated assets | Nature of SPE | |||||
US$bn | ||||||
2009 | ||||||
Barion Funding Limited | 4.4 | Structured investment conduit | ||||
Bryant Park Funding LLC | 3.8 | Conduit | ||||
HSBC Affinity Corporation I | 4.9 | Securitisation | ||||
HSBC Auto Receivables Corporation | 1.3 | Securitisation | ||||
HSBC Corporate Money Fund (Euro) | 0.8 | Money market fund | ||||
HSBC Funding Inc V | 5.3 | Securitisation | ||||
HSBC Home Equity Loan Corporation I | 3.1 | Securitisation | ||||
HSBC Home Equity Loan Corporation II | 3.3 | Securitisation | ||||
HSBC Investor Prime Money Market Fund | 10.7 | Money market fund | ||||
HSBC Receivables Funding, Inc I | 5.4 | Securitisation | ||||
HSBC Receivables Inc Funding II | 1.8 | Securitisation | ||||
HSBC Sterling Liquidity Fund | 7.5 | Money market fund | ||||
HSBC US Dollar Liquidity Fund | 23.4 | Money market fund | ||||
Malachite Funding Limited | 4.3 | Structured investment conduit | ||||
Mazarin Funding Limited | 11.3 | Structured investment conduit | ||||
Metrix Funding Ltd. | 3.7 | Securitisation | ||||
Metrix Securities plc | 4.2 | Securitisation | ||||
Regency Assets Limited | 6.8 | Conduit | ||||
Solitaire Funding Ltd. | 12.8 | Conduit | ||||
Turquoise Receivable Trustee Ltd. | 0.5 | Securitisation |
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Table of Contents
Notes 24, 25, 26 and 27 |
Carrying value of total | ||||||
consolidated assets | Nature of SPE | |||||
US$bn | ||||||
2008 | ||||||
Barion Funding Limited | 4.5 | Structured investment conduit | ||||
Bryant Park Funding LLC | 5.5 | Conduit | ||||
Cullinan Funding Ltd. | 0.4 | Structured investment vehicle | ||||
HSBC Affinity Corporation I | 6.0 | Securitisation | ||||
HSBC Auto Receivables Corporation | 3.5 | Securitisation | ||||
HSBC Corporate Money Fund (Euro) | 0.6 | Money market fund | ||||
HSBC Home Equity Loan Corporation I | 3.5 | Securitisation | ||||
HSBC Investor Prime Money Market Fund | 10.5 | Money market fund | ||||
HSBC Receivables Funding, Inc I | 5.7 | Securitisation | ||||
HSBC Sterling Liquidity Fund | 7.7 | Money market fund | ||||
HSBC US Dollar Liquidity Fund | 25.0 | Money market fund | ||||
Malachite Funding Limited | 4.2 | Structured investment conduit | ||||
Mazarin Funding Limited | 11.5 | Structured investment conduit | ||||
Metris Receivables Inc. | 3.6 | Securitisation | ||||
Metrix Funding Ltd. | 3.6 | Securitisation | ||||
Metrix Securities plc | 4.2 | Securitisation | ||||
Regency Assets Limited | 8.1 | Conduit | ||||
Solitaire Funding Ltd. | 12.1 | Conduit | ||||
Turquoise Receivable Trustee Ltd. | 2.3 | Securitisation |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Bullion | 13,757 | 6,095 | ||||||
Assets held for sale | 3,118 | 2,075 | ||||||
Reinsurers’ share of liabilities under insurance contracts (Note 30) | 2,069 | 2,023 | ||||||
Endorsements and acceptances | 9,311 | 10,482 | ||||||
Other accounts | 16,279 | 17,147 | ||||||
44,534 | 37,822 | |||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Non-current assets held for sale | ||||||||
Interests in associates | 105 | 2 | ||||||
Property, plant and equipment | 1,639 | 2,007 | ||||||
Investment properties | 1 | 2 | ||||||
Financial assets | 1,359 | 62 | ||||||
Other | 14 | 2 | ||||||
Total assets classified as held for sale | 3,118 | 2,075 | ||||||
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Table of Contents
2009 | 2008 | |||||||
US$m | US$m | |||||||
Deposits by banks | 41,165 | 36,537 | ||||||
Customer accounts | 99,306 | 113,053 | ||||||
Other debt securities in issue | 37,592 | 31,288 | ||||||
Other liabilities – net short positions in securities | 90,067 | 66,774 | ||||||
268,130 | 247,652 | |||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Deposits by banks and customer accounts | 6,586 | 6,618 | ||||||
Liabilities to customers under investment contracts | 10,865 | 9,283 | ||||||
Debt securities in issue (Note 28) | 38,208 | 34,969 | ||||||
Subordinated liabilities (Note 32) | 20,180 | 20,316 | ||||||
Preference shares (Note 32) | 4,253 | 3,401 | ||||||
80,092 | 74,587 | |||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Subordinated liabilities (Note 32): | ||||||||
– owed to third parties | 12,549 | 13,321 | ||||||
– owed to HSBC undertakings | 4,360 | 3,068 | ||||||
16,909 | 16,389 | |||||||
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Notes 28, 29 and 30 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Bonds and medium-term notes | 160,295 | 160,927 | ||||||
Other debt securities in issue | 62,401 | 85,023 | ||||||
222,696 | 245,950 | |||||||
Of which debt securities in issue reported as: | ||||||||
– trading liabilities (Note 26) | (37,592 | ) | (31,288 | ) | ||||
– financial liabilities designated at fair value (Note 27) | (38,208 | ) | (34,969 | ) | ||||
146,896 | 179,693 | |||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Fixed rate | ||||||||
Secured financing: | ||||||||
0.01% to 3.99%: due 2010 to 2019 | 5,929 | 767 | ||||||
4.00% to 4.99%: due 2010 to 2015 | 1,948 | 1,590 | ||||||
5.00% to 5.99%: due 2010 to 2021 | 1,315 | 2,754 | ||||||
7.00% to 7.99%: due 2010 to 2011 | 9 | 14 | ||||||
8.00% to 9.99%: due 2010 to 2028 | 417 | 462 | ||||||
10.00% or higher: due 2010 | 43 | – | ||||||
Other fixed rate senior debt: | ||||||||
0.01% to 3.99%: due 2010 to 2051 | 22,554 | 21,790 | ||||||
4.00% to 4.99%: due 2010 to 2046 | 15,754 | 13,088 | ||||||
5.00% to 5.99%: due 2010 to 2036 | 25,619 | 22,357 | ||||||
6.00% to 6.99%: due 2010 to 2033 | 11,066 | 11,176 | ||||||
7.00% to 7.99%: due 2010 to 2039 | 3,900 | 4,995 | ||||||
8.00% to 9.99%: due 2010 to 2037 | 1,737 | 1,822 | ||||||
10.00% or higher: due 2010 to 2017 | 280 | 884 | ||||||
90,571 | 81,699 | |||||||
Variable interest rate | ||||||||
Secured financings – 0.01% to 13.99%: due 2010 to 2021 | 13,971 | 27,741 | ||||||
FHLB advances – 0.01% to 0.99%: due 2010 to 2036 | 1,000 | 3,156 | ||||||
Other variable interest rate senior debt – 0.01% to 12.99%: due 2010 to 2057 | 50,258 | 43,849 | ||||||
65,229 | 74,746 | |||||||
Structured notes | ||||||||
Interest rate linked | 5 | 348 | ||||||
Equity, equity index or credit-linked | 4,490 | 4,134 | ||||||
4,495 | 4,482 | |||||||
Total bonds and medium-term notes | 160,295 | 160,927 | ||||||
HSBC Holdings |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Bonds and medium-term notes | ||||||||
Fixed rate senior debt, unsecured: | ||||||||
4.00% to 4.99%: due 2010 to 2014 | 1,791 | – | ||||||
6.00% to 6.99%: due 2010 to 2024 | 1,048 | – | ||||||
2,839 | – | |||||||
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HSBC | HSBC Holdings | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Amounts due to investors in funds consolidated by HSBC | 48,193 | 44,539 | – | – | ||||||||||||
Obligations under finance leases (Note 40) | 644 | 563 | – | – | ||||||||||||
Dividend declared and payable by HSBC Holdings | 1,231 | 1,795 | 1,231 | 1,795 | ||||||||||||
Endorsements and acceptances | 9,313 | 10,482 | – | – | ||||||||||||
Other liabilities | 9,259 | 15,005 | 26 | 21 | ||||||||||||
68,640 | 72,384 | 1,257 | 1,816 | |||||||||||||
Reinsurers’ | ||||||||||||
Gross | share | Net | ||||||||||
US$m | US$m | US$m | ||||||||||
At 31 December 2009 Non-life insurance liabilities Unearned premium provision | 833 | (135 | ) | 698 | ||||||||
Notified claims | 1,032 | (245 | ) | 787 | ||||||||
Claims incurred but not reported | 685 | (82 | ) | 603 | ||||||||
Other | 178 | (5 | ) | 173 | ||||||||
2,728 | (467 | ) | 2,261 | |||||||||
Life insurance liabilities to policyholders | ||||||||||||
Life (non-linked) | 20,979 | (771 | ) | 20,208 | ||||||||
Investment contracts with discretionary participation features1 | 21,014 | – | 21,014 | |||||||||
Life (linked) | 8,986 | (831 | ) | 8,155 | ||||||||
50,979 | (1,602 | ) | 49,377 | |||||||||
Total liabilities under insurance contracts | 53,707 | (2,069 | ) | 51,638 | ||||||||
At 31 December 2008 | ||||||||||||
Non-life insurance liabilities | ||||||||||||
Unearned premium provision | 1,136 | (159 | ) | 977 | ||||||||
Notified claims | 908 | (230 | ) | 678 | ||||||||
Claims incurred but not reported | 368 | (41 | ) | 327 | ||||||||
Other | 68 | – | 68 | |||||||||
2,480 | (430 | ) | 2,050 | |||||||||
Life insurance liabilities to policyholders | ||||||||||||
Life (non-linked) | 17,370 | (637 | ) | 16,733 | ||||||||
Investment contracts with discretionary participation features1 | 17,766 | – | 17,766 | |||||||||
Life (linked) | 6,067 | (956 | ) | 5,111 | ||||||||
41,203 | (1,593 | ) | 39,610 | |||||||||
Total liabilities under insurance contracts | 43,683 | (2,023 | ) | 41,660 | ||||||||
1 | Though investment contracts with discretionary participation features are financial instruments, HSBC continues to treat them as insurance contracts as permitted by IFRS 4. |
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Note 30 |
Reinsurers’ | ||||||||||||
Gross | share | Net | ||||||||||
US$m | US$m | US$m | ||||||||||
2009 | ||||||||||||
Unearned premium reserve (‘UPR’) | ||||||||||||
At 1 January | 1,136 | (159 | ) | 977 | ||||||||
Changes in UPR recognised as (income)/expense | (233 | ) | 10 | (223 | ) | |||||||
Gross written premiums | 1,339 | (215 | ) | 1,124 | ||||||||
Gross earned premiums | (1,572 | ) | 225 | (1,347 | ) | |||||||
Exchange differences and other movements | (70 | ) | 14 | (56 | ) | |||||||
At 31 December | 833 | (135 | ) | 698 | ||||||||
Notified and incurred but not reported claims | ||||||||||||
At 1 January | 1,276 | (271 | ) | 1,005 | ||||||||
Notified claims | 908 | (230 | ) | 678 | ||||||||
Claims incurred but not reported | 368 | (41 | ) | 327 | ||||||||
Claims paid in current year | (987 | ) | 156 | (831 | ) | |||||||
Claims incurred in respect of current year | 939 | (156 | ) | 783 | ||||||||
Claims incurred in respect of prior years | 342 | (2 | ) | 340 | ||||||||
Exchange differences and other movements | 147 | (54 | ) | 93 | ||||||||
At 31 December | 1,717 | (327 | ) | 1,390 | ||||||||
Notified claims | 1,032 | (245 | ) | 787 | ||||||||
Claims incurred but not reported | 685 | (82 | ) | 603 | ||||||||
Other | 178 | (5 | ) | 173 | ||||||||
Total non-life insurance liabilities | 2,728 | (467 | ) | 2,261 | ||||||||
2008 | ||||||||||||
Unearned premium reserve (‘UPR’) | ||||||||||||
At 1 January | 1,279 | (181 | ) | 1,098 | ||||||||
Changes in UPR recognised as (income)/expense. | (58 | ) | 3 | (55 | ) | |||||||
Gross written premiums | 1,776 | (260 | ) | 1,516 | ||||||||
Gross earned premiums | (1,834 | ) | 263 | (1,571 | ) | |||||||
Exchange differences and other movements | (85 | ) | 19 | (66 | ) | |||||||
At 31 December | 1,136 | (159 | ) | 977 | ||||||||
Notified and incurred but not reported claims | ||||||||||||
At 1 January | 1,483 | (429 | ) | 1,054 | ||||||||
Notified claims | 1,063 | (380 | ) | 683 | ||||||||
Claims incurred but not reported | 420 | (49 | ) | 371 | ||||||||
Claims paid in current year | (1,044 | ) | 158 | (886 | ) | |||||||
Claims incurred in respect of current year | 975 | (68 | ) | 907 | ||||||||
Claims incurred in respect of prior years | 69 | (15 | ) | 54 | ||||||||
Exchange differences and other movements | (207 | ) | 83 | (124 | ) | |||||||
At 31 December | 1,276 | (271 | ) | 1,005 | ||||||||
Notified claims | 908 | (230 | ) | 678 | ||||||||
Claims incurred but not reported | 368 | (41 | ) | 327 | ||||||||
Other | 68 | – | 68 | |||||||||
Total non-life insurance liabilities | 2,480 | (430 | ) | 2,050 | ||||||||
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Life insurance liabilities to policyholders |
Reinsurers’ | ||||||||||||
Gross | share | Net | ||||||||||
US$m | US$m | US$m | ||||||||||
2009 | ||||||||||||
Life (non-linked) | ||||||||||||
At 1 January | 17,370 | (637 | ) | 16,733 | ||||||||
Benefits paid | (2,098 | ) | 159 | (1,939 | ) | |||||||
Increase in liabilities to policyholders | 4,669 | (98 | ) | 4,571 | ||||||||
Exchange differences and other movements | 1,038 | (195 | ) | 843 | ||||||||
At 31 December | 20,979 | (771 | ) | 20,208 | ||||||||
Investment contracts with discretionary participation features | ||||||||||||
At 1 January | 17,766 | – | 17,766 | |||||||||
Benefits paid | (1,818 | ) | – | (1,818 | ) | |||||||
Increase in liabilities to policyholders | 3,934 | – | 3,934 | |||||||||
Exchange differences and other movements1 | 1,132 | – | 1,132 | |||||||||
At 31 December | 21,014 | – | 21,014 | |||||||||
Life (linked) | ||||||||||||
At 1 January | 6,067 | (956 | ) | 5,111 | ||||||||
Benefits paid | (325 | ) | 21 | (304 | ) | |||||||
Increase in liabilities to policyholders | 2,676 | 146 | 2,822 | |||||||||
Exchange differences and other movements2 | 568 | (42 | ) | 526 | ||||||||
At 31 December | 8,986 | (831 | ) | 8,155 | ||||||||
Total liabilities to policyholders | 50,979 | (1,602 | ) | 49,377 | ||||||||
2008 | ||||||||||||
Life (non-linked) | ||||||||||||
At 1 January | 14,370 | (605 | ) | 13,765 | ||||||||
Benefits paid | (1,491 | ) | 172 | (1,319 | ) | |||||||
Increase in liabilities to policyholders | 5,480 | (792 | ) | 4,688 | ||||||||
Exchange differences and other movements | (989 | ) | 588 | (401 | ) | |||||||
At 31 December | 17,370 | (637 | ) | 16,733 | ||||||||
Investment contracts with discretionary participation features | ||||||||||||
At 1 January | 18,983 | – | 18,983 | |||||||||
Benefits paid | (1,911 | ) | – | (1,911 | ) | |||||||
Increase in liabilities to policyholders | 1,743 | – | 1,743 | |||||||||
Exchange differences and other movements1 | (1,049 | ) | – | (1,049 | ) | |||||||
At 31 December | 17,766 | – | 17,766 | |||||||||
Life (linked) | ||||||||||||
At 1 January | 6,399 | (57 | ) | 6,342 | ||||||||
Benefits paid | (481 | ) | 44 | (437 | ) | |||||||
Increase in liabilities to policyholders | 939 | (1,442 | ) | (503 | ) | |||||||
Exchange differences and other movements2 | (790 | ) | 499 | (291 | ) | |||||||
At 31 December | 6,067 | (956 | ) | 5,111 | ||||||||
Total liabilities to policyholders | 41,203 | (1,593 | ) | 39,610 | ||||||||
1 | Includes movement in liabilities relating to discretionary profit participation benefits due to policyholders arising from net unrealised investment gains recognised in other comprehensive income. | |
2 | Includes amounts arising under reinsurance agreements. |
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Notes 31 and 32 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
At 1 January | 1,730 | 1,958 | ||||||
Additional provisions/increase in provisions1 | 894 | 738 | ||||||
Provisions utilised | (684 | ) | (624 | ) | ||||
Amounts reversed | (225 | ) | (147 | ) | ||||
Exchange differences and other movements | 250 | (195 | ) | |||||
At 31 December | 1,965 | 1,730 | ||||||
1 | The increase in provisions includes the unwinding of discounts of US$3 million (2008: US$3 million) in relation to vacant space provisions and US$32 million (2008: US$21 million) in relation to Brazilian provisions for civil and fiscal labour claims. |
(i) | Provisions for onerous property contracts of US$158 million (2008: US$85 million), of which US$32 million (2008: US$20 million) relates to discounted future costs associated with leasehold properties that became vacant as a consequence of HSBC’s move to Canary Wharf in 2002. The provisions cover rent voids while finding new tenants, shortfalls in expected rent receivable compared with rent payable and the cost of refurbishing the buildings to attract tenants. Uncertainties arise from movements in market rents, delays in finding new tenants and the timing of rental reviews. | |
(ii) | Labour, civil and fiscal litigation provisions in HSBC’s Brazil operations of US$538 million (2008: US$334 million). These relate to labour and overtime litigation claims brought by employees after leaving the bank. The provisions are based on the expected number of departing employees, their individual salaries and historical trends. The timing of the settlement of these claims is uncertain. | |
(iii) | Provisions of US$449 million (2008: US$439 million) have been made in respect of costs arising from contingent liabilities and contractual commitments (Note 39), including guarantees of US$56 million (2008: US$35 million) and commitments of US$172 million (2008: US$192 million). |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Subordinated liabilities | ||||||||
At amortised cost | 30,478 | 29,433 | ||||||
– subordinated liabilities | 23,893 | 24,618 | ||||||
– preferred securities | 6,585 | 4,815 | ||||||
Designated at fair value (Note 27) | 24,433 | 23,717 | ||||||
– subordinated liabilities | 20,180 | 20,316 | ||||||
– preferred securities | 4,253 | 3,401 | ||||||
54,911 | 53,150 | |||||||
Subordinated liabilities | ||||||||
HSBC Holdings | 23,048 | 23,544 | ||||||
Other HSBC | 31,863 | 29,606 | ||||||
54,911 | 53,150 | |||||||
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2009 | 2008 | |||||||||
US$m | US$m | |||||||||
Amounts owed to third parties by HSBC Holdings(see below) | 23,048 | 23,544 | ||||||||
Other HSBC subordinated liabilities | ||||||||||
€1,400m | 5.3687% non-cumulative step-up perpetual preferred securities1 | 1,804 | 1,532 | |||||||
US$1,350m | 9.547% non-cumulative step-up perpetual preferred securities, series 11 | 1,339 | 1,337 | |||||||
€800m | Callable subordinated floating rate notes 20162 | 1,152 | 1,116 | |||||||
£700m | 5.844% non-cumulative step-up perpetual preferred securities3 | 1,136 | 1,021 | |||||||
US$1,250m | 4.61% non-cumulative step-up perpetual preferred securities1 | 1,077 | 745 | |||||||
US$1,000m | 4.625% subordinated notes 2014 | 1,002 | 1,001 | |||||||
US$1,000m | 5.911% trust preferred securities 20354 | 993 | 992 | |||||||
£600m | 4.75% subordinated notes 2046 | 961 | 863 | |||||||
€750m | 5.13% non-cumulative step-up perpetual preferred securities1 | 960 | 790 | |||||||
US$1,000m | 5.875% subordinated notes 2034 | 950 | 953 | |||||||
€600m | 4.25% callable subordinated notes 20165 | 904 | 831 | |||||||
US$900m | 10.176% non-cumulative step-up perpetual preferred securities, series 21 | 900 | 900 | |||||||
€600m | 8.03% non-cumulative step-up perpetual preferred securities1 | 862 | 834 | |||||||
£500m | 8.208% non-cumulative step-up perpetual preferred securities1 | 806 | 724 | |||||||
£500m | 4.75% callable subordinated notes 20206 | 785 | 675 | |||||||
£500m | 5.375% subordinated notes 2033 | 776 | 659 | |||||||
US$750m | Undated floating rate primary capital notes | 750 | 750 | |||||||
US$750m | 5.625% subordinated notes 2035 | 712 | 715 | |||||||
US$700m | 7.00% subordinated notes 2039 | 688 | 694 | |||||||
€500m | Callable subordinated floating rate notes 20207 | 639 | 567 | |||||||
£350m | Callable subordinated variable coupon notes 20178 | 608 | 518 | |||||||
£350m | 5% callable subordinated notes 20239 | 550 | 481 | |||||||
£350m | 5.375% callable subordinated step-up notes 203010 | 531 | 461 | |||||||
US$500m | 6.00% subordinated notes 2017 | 521 | 498 | |||||||
US$500m | Undated floating rate primary capital notes | 500 | 500 | |||||||
£300m | 6.5% subordinated notes 2023 | 483 | 436 | |||||||
US$450m | Callable subordinated floating rate notes 20162 | 449 | 449 | |||||||
£300m | 5.862% non-cumulative step-up perpetual preferred securities3 | 412 | 333 | |||||||
US$400m | Primary capital undated floating rate notes | 407 | 410 | |||||||
US$400m | Primary capital undated floating rate notes (second series) | 404 | 404 | |||||||
US$400m | Primary capital undated floating rate notes (third series) | 400 | 400 | |||||||
CAD400m | 4.80% subordinated notes 2022 | 382 | 277 | |||||||
£225m | 6.25% subordinated notes 2041 | 363 | 325 | |||||||
US$300m | 6.95% subordinated notes 2011 | 321 | 324 | |||||||
US$300m | 7.65% subordinated notes 2025 | 312 | 384 | |||||||
US$300m | Undated floating rate primary capital notes, series 3 | 300 | 300 | |||||||
US$300m | Callable subordinated floating rate notes 201711 | 299 | 299 | |||||||
BRL500m | Subordinated certificates of deposit 2016 | 287 | 215 | |||||||
US$250m | Non-convertible subordinated obligations 2019 | 247 | – | |||||||
BRL383m | Subordinated certificates of deposit 2015 | 220 | – | |||||||
US$250m | 7.20% subordinated debentures 2097 | 213 | 218 | |||||||
US$200m | 7.808% capital securities 2026 | 200 | 200 | |||||||
US$200m | 8.38% capital securities 2027 | 200 | 200 | |||||||
CAD200m | 4.94% subordinated debentures 2021 | 190 | 163 | |||||||
US$200m | 7.75% subordinated notes 2009 | – | 203 | |||||||
US$200m | 6.625% subordinated notes 2009 | – | 198 | |||||||
Other subordinated liabilities each less than US$200m | 3,868 | 3,711 | ||||||||
31,863 | 29,606 | |||||||||
54,911 | 53,150 | |||||||||
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Note 32 |
1 | See ‘Step-up perpetual preferred securities’ below, note (a) ‘Guaranteed by HSBC Holdings’. | |
2 | The interest margin on the€800 million and US$450 million callable subordinated floating rate notes 2016 increases by 0.5 per cent from March 2011 and July 2011, respectively. | |
3 | See ‘Step-up perpetual preferred securities’ below, note (b) ‘Guaranteed by HSBC Bank’. | |
4 | The distributions on the trust preferred securities change in November 2015 to three-month dollar LIBOR plus 1.926 per cent. | |
5 | The interest rate on the 4.25 per cent callable subordinated notes changes in March 2011 to three-month EURIBOR plus 1.05 per cent. | |
6 | The interest rate on the 4.75 per cent callable subordinated notes 2020 changes in September 2015 to three-month sterling LIBOR plus 0.82 per cent. | |
7 | The interest margin on the callable subordinated floating rate notes 2020 increases by 0.5 per cent from September 2015. | |
8 | The interest rate on the callable subordinated variable coupon notes 2017 is fixed at 5.75 per cent until June 2012. Thereafter, the rate per annum is the sum of the gross redemption yield of the then prevailing five-year UK gilt plus 1.70 per cent. | |
9 | The interest rate on the 5 per cent callable subordinated notes 2023 changes in March 2018 to become the rate per annum which is the sum of the gross redemption yield of the then prevailing five-year UK gilt plus 1.80 per cent. | |
10 | The interest rate on the 5.375 per cent callable subordinated step-up notes 2030 changes in November 2025 to three-month sterling LIBOR plus 1.50 per cent. | |
11 | The interest margin on the callable subordinated floating rate notes 2017 increases by 0.5 per cent from July 2012. |
(a) | Guaranteed by HSBC Holdings | |
The seven issues of non-cumulative step-up perpetual preferred securities (footnote 1) were made by Jersey limited partnerships and are guaranteed, on a subordinated basis, by HSBC Holdings. The proceeds of the issues were on-lent to HSBC Holdings by the limited partnerships by issue of subordinated notes. The preferred securities qualify as innovative tier 1 capital for HSBC. The preferred securities, together with the guarantee, are intended to provide investors with rights to income and capital distributions and distributions upon liquidation of HSBC Holdings that are equivalent to the rights that they would have had if they had purchased non-cumulative perpetual preference shares of HSBC Holdings. | ||
The preferred securities are perpetual, but redeemable in 2014, 2010, 2013, 2016, 2030, 2012 and 2015, respectively, at the option of the general partner of the limited partnerships. If not redeemed, the distributions payable step-up and become floating rate or, for the sterling issue, for each successive five-year period the sum of the then five-year benchmark UK gilt plus a margin. There are limitations on the payment of distributions if prohibited under UK banking regulations or other requirements, if a payment would cause a breach of HSBC’s capital adequacy requirements, or if HSBC Holdings has insufficient distributable reserves (as defined). | ||
HSBC Holdings has covenanted that if it is prevented under certain circumstances from paying distributions on the preferred securities in full, it will not pay dividends or other distributions in respect of its ordinary shares, or effect repurchase or redemption of its ordinary shares, until after a distribution has been paid in full. | ||
If (i) HSBC’s total capital ratio falls below the regulatory minimum ratio required, or (ii) the Directors expect that, in view of the deteriorating financial condition of HSBC Holdings, the former will occur in the near term, then the preferred securities will be substituted by preference shares of HSBC Holdings having economic terms which are in all material respects equivalent to those of the preferred securities and the guarantee taken together. | ||
(b) | Guaranteed by HSBC Bank | |
The two issues of non-cumulative step-up perpetual preferred securities (footnote 3) were made by Jersey limited partnerships and are guaranteed, on a subordinated basis, by HSBC Bank. The proceeds of the issues were on-lent to HSBC Bank by the limited partnerships by issue of subordinated notes. The preferred securities qualify as innovative tier 1 capital for HSBC and for HSBC Bank on a solo and consolidated basis and, together with the guarantee, are intended to provide investors with rights to income and capital distributions and distributions upon liquidation of HSBC Bank that are equivalent to the rights they would have had if they had purchased non-cumulative perpetual preference shares of HSBC Bank. | ||
The two issues of preferred securities are perpetual, but redeemable in 2031 and 2020, respectively, at the option of the general partner of the limited partnerships. If not redeemed, the distributions payable step-up and become floating rate. The same limitations on the payment of distributions apply to HSBC Bank as to HSBC Holdings, as described above. HSBC Bank has provided a similar covenant to that provided by HSBC Holdings, also as described above. |
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If (i) any of the two issues of preferred securities are outstanding in November 2048 or April 2049, respectively, or (ii) the total capital ratio of HSBC Bank on a solo and consolidated basis falls below the regulatory minimum ratio required, or (iii) in view of the deteriorating financial condition of HSBC Bank, the Directors expect (ii) to occur in the near term, then the preferred securities will be substituted by preference shares of HSBC Bank having economic terms which are in all material respects equivalent to those of the preferred securities and the guarantee taken together. |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Subordinated liabilities: | ||||||||
– at amortised cost | 14,406 | 14,017 | ||||||
– designated at fair value (Note 27) | 16,909 | 16,389 | ||||||
31,315 | 30,406 | |||||||
2009 | 2008 | |||||||||
US$m | US$m | |||||||||
Amounts owed to third parties | ||||||||||
€1,750m | 6.0% subordinated notes 2019 | 2,835 | – | |||||||
US$2,500m | 6.5% subordinated notes 2037 | 2,659 | 2,669 | |||||||
€1,600m | 6.25% subordinated notes 2018 | 2,306 | 2,231 | |||||||
US$2,000m | 6.5% subordinated notes 2036 | 2,052 | 2,052 | |||||||
€1,000m | 5.375% subordinated notes 2012 | 1,549 | 1,403 | |||||||
£900m | 6.375% callable subordinated notes 20221 | 1,517 | 1,330 | |||||||
US$1,400m | 5.25% subordinated notes 2012 | 1,488 | 1,455 | |||||||
US$1,500m | 6.8% subordinated notes 2038 | 1,484 | 1,484 | |||||||
£750m | 7.0% subordinated notes 2038 | 1,267 | 1,140 | |||||||
£650m | 6.75% subordinated notes 2028 | 1,043 | 938 | |||||||
€700m | 3.625% callable subordinated notes 20202 | 1,005 | 840 | |||||||
£650m | 5.75% subordinated notes 2027 | 1,000 | 878 | |||||||
US$750m | Callable subordinated floating rate notes 20163 | 750 | 750 | |||||||
US$750m | Callable subordinated floating rate notes 20154 | 750 | 750 | |||||||
US$488m | 7.625% subordinated notes 2032 | 587 | 609 | |||||||
£250m | 9.875% subordinated bonds 20185 | 496 | 441 | |||||||
US$222m | 7.35% subordinated notes 2032 | 260 | 269 | |||||||
€2,000m | Callable subordinated floating rate notes 20146 | – | 2,805 | |||||||
US$1,000m | 7.5% subordinated notes 2009 | – | 1,068 | |||||||
€300m | 5.5% subordinated notes 2009 | – | 432 | |||||||
23,048 | 23,544 | |||||||||
Amounts owed to HSBC undertakings | ||||||||||
€1,400m | 5.3687% fixed/floating subordinated notes 2043 – | |||||||||
HSBC Capital Funding (Euro 2) LP | 2,042 | 1,532 | ||||||||
US$1,350m | 9.547% subordinated step-up cumulative notes 2040 – | |||||||||
HSBC Capital Funding (Dollar 1) LP | 1,339 | 1,337 | ||||||||
US$1,250m | 4.61% fixed/floating subordinated notes 2043 – | |||||||||
HSBC Capital Funding (Dollar 2) LP | 1,223 | 745 | ||||||||
€750m | 5.13% fixed/floating subordinated notes 2044 – | |||||||||
HSBC Capital Funding (Euro 3) LP | 1,095 | 790 | ||||||||
US$900m | 10.176% subordinated step-up cumulative notes 2040 – | |||||||||
HSBC Capital Funding (Dollar 1) LP | 900 | 900 | ||||||||
€600m | 8.03% subordinated step-up cumulative notes 2040 – | |||||||||
HSBC Capital Funding (Euro 1) LP | 862 | 834 | ||||||||
£500m | 8.208% subordinated step-up cumulative notes 2040 – | |||||||||
HSBC Capital Funding (Sterling 1) LP | 806 | 724 | ||||||||
8,267 | 6,862 | |||||||||
31,315 | 30,406 | |||||||||
1 | The interest rate on the 6.375 per cent callable subordinated notes 2022 changes in October 2017 to become three-month sterling LIBOR plus 1.3 per cent. The notes may be redeemed at par from October 2017 at the option of the borrower, subject to the prior notification of the FSA. |
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Notes 33 and 34 |
2 | The interest rate on the 3.625 per cent callable subordinated notes 2020 changes in June 2015 to become three-month EURIBOR plus 0.93 per cent. The notes may be redeemed at par from June 2015 at the option of the borrower, subject to the prior notification of the FSA. | |
3 | The interest margin on the callable subordinated floating rate notes 2016 increases by 0.5 per cent from October 2011. The notes are repayable from their step up date at the option of the borrower, subject to the prior notification of the FSA. | |
4 | On 11 February 2010, HSBC Holdings gave notice to holders of its US$750 million callable subordinated floating rate notes due 2015 that it will call and redeem the notes at par on 16 March 2010. | |
5 | The interest rate on the 9.875 per cent subordinated bonds 2018 changes in April 2013 to become the higher of (i) 9.875 per cent or (ii) the sum of the yield on the relevant benchmark treasury stock plus 2.5 per cent. The bonds may be redeemed in April 2013 at par and redemption has also been allowed from April 1998, subject to the prior notification of the FSA, for an amount based on the redemption yields of the relevant benchmark treasury stocks. | |
6 | In September 2009, HSBC Holdings redeemed its€2,000 million callable subordinated floating rate notes due 2014 at par. |
At 31 December 2009 | ||||||||||||
Due after | ||||||||||||
Due within | more than | |||||||||||
one year | one year | Total | ||||||||||
US$m | US$m | US$m | ||||||||||
Assets | ||||||||||||
Financial assets designated at fair value | 3,786 | 33,395 | 37,181 | |||||||||
Loans and advances to banks | 172,916 | 6,865 | 179,781 | |||||||||
Loans and advances to customers | 381,967 | 514,264 | 896,231 | |||||||||
Financial investments | 134,824 | 234,334 | 369,158 | |||||||||
Other financial assets | 26,189 | 7,383 | 33,572 | |||||||||
719,682 | 796,241 | 1,515,923 | ||||||||||
Liabilities | ||||||||||||
Deposits by banks | 118,308 | 6,564 | 124,872 | |||||||||
Customer accounts | 1,114,149 | 44,885 | 1,159,034 | |||||||||
Financial liabilities designated at fair value | 4,666 | 75,426 | 80,092 | |||||||||
Debt securities in issue | 83,590 | 63,306 | 146,896 | |||||||||
Other financial liabilities | 67,061 | 3,606 | 70,667 | |||||||||
Subordinated liabilities | 369 | 30,109 | 30,478 | |||||||||
1,388,143 | 223,896 | 1,612,039 | ||||||||||
At 31 December 2008 | ||||||||||||
Due after | ||||||||||||
Due within | more than | |||||||||||
one year | one year | Total | ||||||||||
US$m | US$m | US$m | ||||||||||
Assets | ||||||||||||
Financial assets designated at fair value | 4,735 | 23,798 | 28,533 | |||||||||
Loans and advances to banks | 146,268 | 7,498 | 153,766 | |||||||||
Loans and advances to customers | 407,582 | 525,286 | 932,868 | |||||||||
Financial investments | 111,027 | 189,208 | 300,235 | |||||||||
Other financial assets | 27,642 | 6,308 | 33,950 | |||||||||
697,254 | 752,098 | 1,449,352 | ||||||||||
Liabilities | ||||||||||||
Deposits by banks | 123,835 | 6,249 | 130,084 | |||||||||
Customer accounts | 1,083,426 | 31,901 | 1,115,327 | |||||||||
Financial liabilities designated at fair value | 7,368 | 67,219 | 74,587 | |||||||||
Debt securities in issue | 107,094 | 72,599 | 179,693 | |||||||||
Other financial liabilities | 70,898 | 4,860 | 75,758 | |||||||||
Subordinated liabilities | 745 | 28,688 | 29,433 | |||||||||
1,393,366 | 211,516 | 1,604,882 | ||||||||||
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HSBC Holdings |
At 31 December 2009 | ||||||||||||
Due after | ||||||||||||
Due within | more than | |||||||||||
one year | one year | Total | ||||||||||
US$m | US$m | US$m | ||||||||||
Assets | ||||||||||||
Loans and advances to HSBC undertakings | 18,067 | 5,145 | 23,212 | |||||||||
Financial investments | – | 2,455 | 2,455 | |||||||||
Other financial assets | 4 | – | 4 | |||||||||
18,071 | 7,600 | 25,671 | ||||||||||
Liabilities | ||||||||||||
Amounts owed to HSBC undertakings | 277 | 3,434 | 3,711 | |||||||||
Financial liabilities designated at fair value | – | 16,909 | 16,909 | |||||||||
Debt securities in issue | – | 2,839 | 2,839 | |||||||||
Other financial liabilities | 1,240 | 17 | 1,257 | |||||||||
Subordinated liabilities | – | 14,406 | 14,406 | |||||||||
1,517 | 37,605 | 39,122 | ||||||||||
At 31 December 2008 | ||||||||||||
Due after | ||||||||||||
Due within | more than | |||||||||||
one year | one year | Total | ||||||||||
US$m | US$m | US$m | ||||||||||
Assets | ||||||||||||
Loans and advances to HSBC undertakings | 4,842 | 6,962 | 11,804 | |||||||||
Financial investments | – | 2,629 | 2,629 | |||||||||
Other financial assets | 25 | – | 25 | |||||||||
4,867 | 9,591 | 14,458 | ||||||||||
Liabilities | ||||||||||||
Amounts owed to HSBC undertakings | 176 | 3,866 | 4,042 | |||||||||
Financial liabilities designated at fair value | 1,500 | 14,889 | 16,389 | |||||||||
Other financial liabilities | 1,805 | 11 | 1,816 | |||||||||
Subordinated liabilities | – | 14,017 | 14,017 | |||||||||
3,481 | 32,783 | 36,264 | ||||||||||
455
Table of Contents
Note 34, 35, 36 and 37 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
Currency of structural exposure | ||||||||
Euro | 25,284 | 23,137 | ||||||
Pound sterling | 21,369 | 15,319 | ||||||
Chinese renminbi | 13,398 | 11,927 | ||||||
Mexican pesos | 5,393 | 4,127 | ||||||
Brazilian reais | 5,234 | 3,381 | ||||||
Hong Kong dollars | 3,842 | 3,929 | ||||||
Indian rupees | 3,836 | 3,252 | ||||||
Canadian dollars | 3,620 | 3,423 | ||||||
Swiss francs | 2,910 | 2,192 | ||||||
UAE dirhams | 2,209 | 3,472 | ||||||
Turkish lira | 1,741 | 1,505 | ||||||
Korean won | 1,412 | 1,243 | ||||||
Malaysian ringgit | 1,300 | 1,148 | ||||||
Indonesian rupiah | 1,057 | 221 | ||||||
Australian dollars | 1,017 | 690 | ||||||
Argentine pesos | 675 | 510 | ||||||
Saudi riyals | 657 | 530 | ||||||
Egyptian pounds | 561 | 517 | ||||||
Singapore dollars | 556 | 534 | ||||||
Taiwanese dollars | 547 | 485 | ||||||
Vietnamese dong | 505 | 483 | ||||||
Philippine pesos | 473 | 445 | ||||||
Qatari rial | 384 | 272 | ||||||
Costa Rican colon | 375 | 378 | ||||||
Thai baht | 357 | 404 | ||||||
Russian rouble | 295 | 268 | ||||||
Honduran lempira | 282 | 341 | ||||||
Chilean pesos | 230 | 176 | ||||||
Japanese yen | 228 | 263 | ||||||
Colombian pesos | 220 | 185 | ||||||
Omani rial | 210 | 210 | ||||||
South African rand | 201 | 151 | ||||||
New Zealand dollars | 161 | 124 | ||||||
Jordanian dinar | 159 | 147 | ||||||
Algerian dinar | 146 | 27 | ||||||
Sri Lankan rupee | 141 | 96 | ||||||
Brunei dollars | 132 | 91 | ||||||
Bahraini dinar | 85 | 114 | ||||||
Others, each less than US$100 million. | 587 | 518 | ||||||
Total | 101,789 | 86,235 | ||||||
Assets pledged at 31 December | ||||||||
2009 | 2008 | |||||||
US$m | US$m | |||||||
Treasury bills and other eligible securities | 3,970 | 3,434 | ||||||
Loans and advances to banks | 6,767 | 6,949 | ||||||
Loans and advances to customers | 77,699 | 70,209 | ||||||
Debt securities | 203,766 | 185,224 | ||||||
Equity shares | 7,305 | 4,326 | ||||||
Other | 646 | 439 | ||||||
300,153 | 270,581 | |||||||
456
Table of Contents
2009 | 2008 | |||||||
US$m | US$m | |||||||
Minority interests attributable to holders of ordinary shares in subsidiaries | 4,665 | 4,227 | ||||||
Preference shares issued by subsidiaries | 2,697 | 2,411 | ||||||
7,362 | 6,638 | |||||||
2009 | 2008 | |||||||||||
US$m | US$m | |||||||||||
US$575m | 6.36% non-cumulative preferred stock, Series B1 | 559 | 559 | |||||||||
US$518m | Floating rate non-cumulative preferred stock, Series F2 | 518 | 518 | |||||||||
US$374m | Floating rate non-cumulative preferred stock, Series G3 | 374 | 374 | |||||||||
US$374m | 6.50% non-cumulative preferred stock, Series H3 | 374 | 374 | |||||||||
CAD250m | Non-cumulative 5 year rate reset class 1 preferred shares, Series E4 | 238 | – | |||||||||
CAD175m | Non-cumulative redeemable class 1 preferred shares, Series C5 | 167 | 143 | |||||||||
CAD175m | Non-cumulative class 1 preferred shares, Series D5 | 167 | 143 | |||||||||
US$150m | Depositary shares each representing 25% interest in a share of adjustable-rate cumulative preferred stock, Series D6 | 150 | 150 | |||||||||
US$150m | Cumulative preferred stock7 | 150 | 150 | |||||||||
2,697 | 2,411 | |||||||||||
1 | The Series B preferred stock is redeemable at the option of HSBC Finance Corporation, in whole or in part, from 24 June 2010 at par. | |
2 | The Series F preferred stock is redeemable at par at the option of HSBC USA Inc., in whole or in part, on any dividend payment date on or after 7 April 2010. | |
3 | The Series G and Series H preferred stock are redeemable at par at the option of HSBC USA Inc., in whole or in part, at any time from 1 January 2011 and 1 July 2011, respectively. | |
4 | The Series E preferred shares are redeemable at par at the option of HSBC Bank Canada, in whole or in part from 30 June 2014. | |
5 | The Series C and Series D preferred shares are redeemable at a declining premium above par at the option of HSBC Bank Canada, in whole or in part, from 30 June 2010 and 31 December 2010, respectively. | |
6 | The preferred stock has been redeemable at the option of HSBC USA Inc., in whole or in part, from 1 July 1999 at par. | |
7 | The preferred stock has been redeemable at the option of HSBC USA Inc., in whole or in part, from 1 October 2007 at par. |
457
Table of Contents
Note 37 |
2009 | 2008 | |||||||
US$m | US$m | |||||||
HSBC Holdings ordinary shares1 | 8,705 | 6,053 | ||||||
Number | US$m | |||||||
HSBC Holdings ordinary shares1 | ||||||||
At 1 January 2009 | 12,105,265,082 | 6,053 | ||||||
Shares issued under HSBC employee share plans | 7,476,952 | 4 | ||||||
Shares issued in lieu of dividends | 235,225,669 | 118 | ||||||
Shares issued in respect of rights issue2 | 5,060,239,065 | 2,530 | ||||||
At 31 December 2009 | 17,408,206,768 | 8,705 | ||||||
At 1 January 2008 | 11,829,052,317 | 5,915 | ||||||
Shares issued under HSBC Finance share plans | 65,198 | – | ||||||
Shares issued under HSBC employee share plans | 40,578,468 | 20 | ||||||
Shares issued in lieu of dividends | 235,569,099 | 118 | ||||||
At 31 December 2008 | 12,105,265,082 | 6,053 | ||||||
1 All ordinary shares in issue confer identical rights in respect of capital, dividends, voting and otherwise. | ||||||||
2 See Note 41 for details of the rights issue. | ||||||||
Number | US$m | |||||||
HSBC Holdings non-cumulative preference shares of US$0.01 each | ||||||||
At 1 January 2009 and 31 December 2009 | 1,450,000 | – | ||||||
At 1 January 2008 and 31 December 2008 | 1,450,000 | – | ||||||
458
Table of Contents
Number of | ||||||||||||
HSBC Holdings | ||||||||||||
ordinary shares | Period of exercise | Exercise price | ||||||||||
31 December 20091 | 270,742,989 | 2010 to 2015 | £3.3116 – 8.4024 | |||||||||
50,938,242 | 2010 to 2015 | HK$37.8797 – 94.5057 | ||||||||||
3,283,710 | 2010 to 2015 | €3.6361 – 9.5912 | ||||||||||
12,073,216 | 2010 to 2015 | US$4.8876 – 12.0958 | ||||||||||
31 December 2008 | 211,226,573 | 2009 to 2015 | £5.3496 – 9.642 | |||||||||
11,344,167 | 2009 to 2014 | HK$103.4401 – 108.4483 | ||||||||||
1,304,119 | 2009 to 2014 | €8.6720 – 11.0062 | ||||||||||
7,382,145 | 2009 to 2014 | US$13.3290 – 14.7478 | ||||||||||
31 December 2007 | 240,726,775 | 2008 to 2015 | £5.3496 – 9.642 | |||||||||
12,839,412 | 2008 to 2013 | HK$103.4401 – 108.4483 | ||||||||||
823,472 | 2008 to 2013 | €10.4217 – 11.0062 | ||||||||||
6,324,920 | 2008 to 2013 | US$13.3290 – 14.7478 |
1 | During 2009, the number and prices of unexercised share options were adjusted for the rights issue. |
459
Table of Contents
Notes 37 and 38 |
Number of | ||||||||||||
HSBC France | ||||||||||||
shares exchangeable | ||||||||||||
for HSBC Holdings | ||||||||||||
ordinary shares | Period of exercise | Exercise price | ||||||||||
31 December 2009 | 604,250 | 2010 | €142.50 | |||||||||
31 December 2008 | 787,877 | 2009 to 2010 | €81.71 – 142.50 | |||||||||
31 December 2007 | 1,009,031 | 2008 to 2010 | €73.48 – 142.50 |
Number of HSBC | ||||||||||||
Private Bank France | ||||||||||||
shares exchangeable | ||||||||||||
for HSBC Holdings | ||||||||||||
ordinary shares | Period of exercise | Exercise price | ||||||||||
31 December 2009 | 291,520 | 2010 to 2012 | €12.44 – 22.22 | |||||||||
31 December 2008 | 333,976 | 2009 to 2012 | €10.84 – 22.22 | |||||||||
31 December 2007 | 340,976 | 2008 to 2012 | €10.84 – 22.22 |
Number of | ||||||||||||
HSBC Holdings | ||||||||||||
ordinary shares | Period of exercise | Exercise price | ||||||||||
31 December 20091 | 18,105,959 | 2010 to 2012 | US$ | 9.29 – 18.62 | ||||||||
31 December 2008 | 20,681,582 | 2009 to 2012 | US$ | 10.66 – 21.37 | ||||||||
31 December 2007 | 21,728,010 | 2008 to 2012 | nil – US$21.37 |
1 | During 2009, the number and prices of unexercised share options were adjusted for the rights issue. |
460
Table of Contents
Number of HSBC | ||||||||||||
Holdings | ||||||||||||
ordinary shares | Period of exercise | Exercise price | ||||||||||
31 December 20091 | 2,481,702 | 2010 to 2013 | US$ | 6.13 – 15.99 | ||||||||
31 December 2008 | 2,205,321 | 2009 to 2013 | US$ | 7.04 – 18.35 | ||||||||
31 December 2007 | 2,314,083 | 2008 to 2013 | US$ | 7.04 – 18.35 |
1 | During 2009, the number and prices of unexercised share options were adjusted for the rights issue. |
HSBC | HSBC Holdings | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Depreciation, amortisation and impairment | 2,538 | 13,367 | 2,522 | 5,947 | 3,601 | |||||||||||||||
Gains arising from dilution of interests in associates | – | – | (1,092 | ) | – | – | ||||||||||||||
Revaluations on investment property | 24 | 92 | (152 | ) | – | – | ||||||||||||||
Share-based payment expense | 683 | 819 | 870 | 21 | 14 | |||||||||||||||
Loan impairment losses gross of recoveries and other credit risk provisions | 27,378 | 25,771 | 18,247 | – | – | |||||||||||||||
Provisions | 669 | 591 | 989 | – | – | |||||||||||||||
Impairment of financial investments | 358 | 1,042 | 42 | – | – | |||||||||||||||
Charge for defined benefit plans | 192 | 490 | 727 | – | – | |||||||||||||||
Accretion of discounts and amortisation of premiums | (458 | ) | (867 | ) | (452 | ) | 6 | 4 | ||||||||||||
31,384 | 41,305 | 21,701 | 5,974 | 3,619 | ||||||||||||||||
461
Table of Contents
Notes 38 and 39 |
HSBC | HSBC Holdings | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Change in loans to HSBC undertakings | – | – | – | (11,408 | ) | 3,129 | ||||||||||||||
Change in prepayments and accrued income | 3,198 | 4,178 | (5,069 | ) | (44 | ) | 166 | |||||||||||||
Change in net trading securities and net derivatives | 15,388 | (23,293 | ) | (4,972 | ) | 352 | (16 | ) | ||||||||||||
Change in loans and advances to banks | (30,354 | ) | 22,596 | (8,922 | ) | – | – | |||||||||||||
Change in loans and advances to customers | 6,149 | 7,279 | (131,886 | ) | – | – | ||||||||||||||
Change in financial assets designated at fair value | (8,911 | ) | 12,757 | (13,360 | ) | 2 | (12 | ) | ||||||||||||
Change in other assets | (6,273 | ) | (5,394 | ) | (12,329 | ) | 21 | (4 | ) | |||||||||||
(20,803 | ) | 18,123 | (176,538 | ) | (11,077 | ) | 3,263 | |||||||||||||
HSBC | HSBC Holdings | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Change in accruals and deferred income | (2,258 | ) | (6,169 | ) | 5,119 | 131 | 138 | |||||||||||||
Change in deposits by banks | (5,216 | ) | (3,038 | ) | 32,594 | – | – | |||||||||||||
Change in customer accounts | 41,983 | 32,372 | 199,806 | – | – | |||||||||||||||
Change in debt securities in issue | (32,797 | ) | (67,152 | ) | (12,489 | ) | 21 | – | ||||||||||||
Change in financial liabilities designated at fair value | 7,430 | (15,352 | ) | 12,304 | 2,411 | (2,299 | ) | |||||||||||||
Change in other liabilities | 5,503 | (4,074 | ) | 12,761 | (523 | ) | 126 | |||||||||||||
14,645 | (63,413 | ) | 250,095 | 2,040 | (2,035 | ) | ||||||||||||||
HSBC | HSBC Holdings | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Cash at bank with HSBC undertakings | – | – | – | 224 | 443 | |||||||||||||||
Cash and balances at central banks | 60,655 | 52,396 | 21,765 | – | – | |||||||||||||||
Items in the course of collection from other banks | 6,395 | 6,003 | 9,777 | – | – | |||||||||||||||
Loans and advances to banks of one month or less | 160,673 | 165,066 | 232,320 | – | – | |||||||||||||||
Treasury bills, other bills and certificates of deposit less than three months | 28,777 | 62,639 | 41,819 | – | – | |||||||||||||||
Less: items in the course of transmission to other banks | (5,734 | ) | (7,232 | ) | (8,672 | ) | – | – | ||||||||||||
Total cash and cash equivalents | 250,766 | 278,872 | 297,009 | 224 | 443 | |||||||||||||||
HSBC | HSBC Holdings | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
US$m | US$m | US$m | US$m | US$m | ||||||||||||||||
Interest paid | (29,030 | ) | (60,342 | ) | (63,626 | ) | (2,513 | ) | (2,525 | ) | ||||||||||
Interest received | 74,062 | 107,019 | 103,393 | 1,560 | 1,619 | |||||||||||||||
Dividends received | 1,023 | 1,876 | 1,833 | 7,488 | 10,779 |
462
Table of Contents
HSBC | HSBC Holdings | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Guarantees and contingent liabilities | ||||||||||||||||
Guarantees and irrevocable letters of credit pledged as collateral security | 73,385 | 72,895 | 35,073 | 47,341 | ||||||||||||
Other contingent liabilities | 174 | 259 | – | – | ||||||||||||
73,559 | 73,154 | 35,073 | 47,341 | |||||||||||||
Commitments | ||||||||||||||||
Documentary credits and short-term trade-related transactions | 9,066 | 9,789 | – | – | ||||||||||||
Forward asset purchases and forward forward deposits placed | 192 | 197 | – | – | ||||||||||||
Undrawn formal standby facilities, credit lines and other commitments to lend | 548,792 | 594,036 | 3,240 | 3,241 | ||||||||||||
558,050 | 604,022 | 3,240 | 3,241 | |||||||||||||
At 31 December 2009 | At 31 December 2008 | |||||||||||||||
Guarantees | Guarantees | |||||||||||||||
by HSBC | by HSBC | |||||||||||||||
Holdings | Holdings | |||||||||||||||
Guarantees in | in favour of | Guarantees | in favour of | |||||||||||||
favour of | other HSBC | in favour of | other HSBC | |||||||||||||
third parties | Group entities | third parties | Group entities | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Guarantee type | ||||||||||||||||
Financial guarantees and similar contracts1 | 23,558 | 35,073 | 20,879 | 47,341 | ||||||||||||
Standby letters of credit that are financial guarantee contracts2 | 10,712 | – | 11,171 | – | ||||||||||||
Other direct credit substitutes3 | 4,676 | – | 4,613 | – | ||||||||||||
Performance bonds4 | 14,468 | – | 15,304 | – | ||||||||||||
Bid bonds4 | 728 | – | 627 | – | ||||||||||||
Standby letters of credit related to particular transactions4 | 4,944 | – | 4,791 | – | ||||||||||||
Other transaction-related guarantees4 | 13,577 | – | 15,028 | – | ||||||||||||
Other items | 722 | – | 482 | – | ||||||||||||
73,385 | 35,073 | 72,895 | 47,341 | |||||||||||||
1 | Financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Similar contracts are contracts that provide protection against credit risk on a specified exposure but do not meet the definition of financial guarantees. The amounts in the above table are nominal principal amounts. | |
2 | Standby letters of credit which are financial guarantee contracts are irrevocable obligations on the part of HSBC to pay third parties when customers fail to make payments when due. | |
3 | Other direct credit substitutes include re-insurance letters of credit and trade-related letters of credit issued without provision for the issuing entity to retain title to the underlying shipment. | |
4 | Performance bonds, bid bonds, standby letters of credit and other transaction-related guarantees are undertakings by which the obligation on HSBC to make payment depends on the outcome of a future event. |
463
Table of Contents
Notes 39 and 40 |
464
Table of Contents
2009 | 2008 | |||||||||||||||||||||||
Present value | Present value | |||||||||||||||||||||||
Total future | Future | of finance | Total future | Future | of finance | |||||||||||||||||||
minimum | interest | lease | minimum | interest | lease | |||||||||||||||||||
payments | charges | commitments | payments | charges | commitments | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Lease commitments: | ||||||||||||||||||||||||
– no later than one year | 103 | (29 | ) | 74 | 55 | (28 | ) | 27 | ||||||||||||||||
– later than one year and no later than five years | 249 | (116 | ) | 133 | 188 | (130 | ) | 58 | ||||||||||||||||
– later than five years | 619 | (182 | ) | 437 | 736 | (258 | ) | 478 | ||||||||||||||||
971 | (327 | ) | 644 | 979 | (416 | ) | 563 | |||||||||||||||||
2009 | 2008 | |||||||||||||||
Land and | Land and | |||||||||||||||
buildings | Equipment | buildings | Equipment | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Future minimum lease payments under non-cancellable operating leases: | ||||||||||||||||
– no later than one year | 846 | 11 | 757 | 9 | ||||||||||||
– later than one year and no later than five years | 2,253 | 11 | 1,791 | 9 | ||||||||||||
– later than five years | 2,534 | – | 1,573 | – | ||||||||||||
5,633 | 22 | 4,121 | 18 | |||||||||||||
465
Table of Contents
Notes 40, 41 and 42 |
2009 | 2008 | |||||||||||||||||||||||
Total future | Unearned | Total future | Unearned | |||||||||||||||||||||
minimum | finance | Present | minimum | finance | Present | |||||||||||||||||||
payments | income | value | payments | income | value | |||||||||||||||||||
US$m | US$m | US$m | US$m | US$m | US$m | |||||||||||||||||||
Lease receivables: | ||||||||||||||||||||||||
– no later than one year | 2,874 | (328 | ) | 2,546 | 3,013 | (389 | ) | 2,624 | ||||||||||||||||
– later than one year and no later than five years | 9,525 | (1,061 | ) | 8,464 | 8,783 | (1,186 | ) | 7,597 | ||||||||||||||||
– later than five years | 6,902 | (1,737 | ) | 5,165 | 8,114 | (2,334 | ) | 5,780 | ||||||||||||||||
19,301 | (3,126 | ) | 16,175 | 19,910 | (3,909 | ) | 16,001 | |||||||||||||||||
2009 | 2008 | |||||||||||||||
Land and | Land and | |||||||||||||||
buildings | Equipment | buildings | Equipment | |||||||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Future minimum lease payments under non-cancellable operating leases: | ||||||||||||||||
– no later than one year | 37 | 857 | 37 | 678 | ||||||||||||
– later than one year and no later than five years | 21 | 917 | 31 | 625 | ||||||||||||
– later than five years | 23 | 447 | 21 | 110 | ||||||||||||
81 | 2,221 | 89 | 1,413 | |||||||||||||
466
Table of Contents
467
Table of Contents
Notes 42 and 43 |
HSBC | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
US$m | US$m | U$m | ||||||||||
Short-term employee benefits | 22 | 31 | 62 | |||||||||
Post-employment benefits | 3 | 5 | 4 | |||||||||
Termination benefits | – | – | 9 | |||||||||
Share-based payments | 27 | 16 | 40 | |||||||||
�� | 52 | 52 | 115 | |||||||||
468
Table of Contents
At 31 December | ||||||||
2009 | 20081 | |||||||
US$000 | US$000 | |||||||
Advances and credits | 5,352 | 2,051 | ||||||
Guarantees | – | – |
2009 | 2008 | |||||||||||||||
Highest | Highest | |||||||||||||||
amounts | amounts | |||||||||||||||
Balance at | outstanding | Balance at | outstanding | |||||||||||||
31 December | during year | 31 December | during year | |||||||||||||
US$000 | US$000 | US$000 | US$000 | |||||||||||||
Key Management Personnel1 | ||||||||||||||||
Advances and credits | 736,112 | 1,406,877 | 217,383 | 475,048 | ||||||||||||
Guarantees | 31,785 | 34,048 | 25,249 | 42,178 |
1 | Includes Key Management Personnel, close family members of Key Management Personnel and entities which are controlled, jointly controlled or significantly influenced, or for which significant voting power is held, by Key Management Personnel or their close family members. |
At 31 December | ||||||||
2009 | 2008 | |||||||
(000s | ) | (000s | ) | |||||
Number of options held over HSBC Holdings ordinary shares under employee share plans | 1,033 | 943 | ||||||
Number of HSBC Holdings ordinary shares held beneficially and non-beneficially | 19,567 | 16,733 | ||||||
Number of HSBC Holdings preference shares held beneficially and non-beneficially | 8 | 8 | ||||||
Number of HSBC Holdings 8.125% Perpetual Subordinated Capital Securities held beneficially and non-beneficially | 25 | 21 | ||||||
20,633 | 17,705 | |||||||
469
Table of Contents
Notes 43 and 44 |
2009 | 2008 | |||||||||||||||
Highest | Highest | |||||||||||||||
balance during | Balance at | balance during | Balance at | |||||||||||||
the year | 1 | 31 December | 1 | the year | 1 | 31 December | 1 | |||||||||
US$m | US$m | US$m | US$m | |||||||||||||
Amounts due from joint ventures: | ||||||||||||||||
– unsubordinated | 423 | 378 | 424 | 343 | ||||||||||||
Amounts due from associates: | ||||||||||||||||
– subordinated | 17 | 17 | 59 | 59 | ||||||||||||
– unsubordinated | 1,343 | 1,239 | 1,060 | 280 | ||||||||||||
1,783 | 1,634 | 1,543 | 682 | |||||||||||||
Amounts due to joint ventures | 130 | 129 | 66 | 64 | ||||||||||||
Amounts due to associates | 1,494 | 136 | 735 | 293 | ||||||||||||
1,624 | 265 | 801 | 357 | |||||||||||||
1 | The disclosure of the year-end balance and the highest balance during the year is considered the most meaningful information to represent transactions during the year. |
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2009 | 2008 | |||||||||||||||
Highest balance | Highest balance | |||||||||||||||
during | Balance at | during | Balance at | |||||||||||||
the year | 1 | 31 December | 1 | the year | 1 | 31 December | 1 | |||||||||
Subsidiaries | US$m | US$m | US$m | US$m | ||||||||||||
Assets | ||||||||||||||||
Cash at bank | 443 | 224 | 443 | 443 | ||||||||||||
Derivatives | 3,682 | 2,981 | 3,682 | 3,682 | ||||||||||||
Loans and advances | 26,156 | 23,212 | 17,242 | 11,804 | ||||||||||||
Financial investments | 2,629 | 2,455 | 2,844 | 2,629 | ||||||||||||
Investments in subsidiaries | 90,914 | 86,247 | 86,233 | 81,993 | ||||||||||||
Total related party assets | 123,824 | 115,119 | 110,444 | 100,551 | ||||||||||||
Liabilities | ||||||||||||||||
Amounts owed to HSBC undertakings | 5,669 | 3,711 | 4,042 | 4,042 | ||||||||||||
Derivatives | 1,324 | 362 | 1,324 | 1,324 | ||||||||||||
Subordinated liabilities: | ||||||||||||||||
– at amortised cost | 3,907 | 3,907 | 4,168 | 3,795 | ||||||||||||
– designated at fair value | 4,360 | 4,360 | 4,186 | 3,067 | ||||||||||||
Total related party liabilities | 15,260 | 12,340 | 13,720 | 12,228 | ||||||||||||
Guarantees | 47,341 | 35,073 | 56,733 | 47,341 | ||||||||||||
Commitments | 3,241 | 3,240 | 3,638 | 3,241 |
1 | The disclosure of the year-end balance and the highest balance during the year is considered the most meaningful information to represent transactions during the year. The above outstanding balances arose in the ordinary course of business and are on substantially the same terms, including interest rates and security, as for comparable transactions with third-party counterparties, with the exception of US$529 million (2008: US$476 million) in respect of loans from HSBC subsidiaries to HSBC Holdings made at an agreed zero per cent interest rate. |
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Note 45 |
471a
Table of Contents
Enforceability of judgements / Exchange controls / Dividends |
Page | ||||
472 | ||||
472 | ||||
472 | ||||
472 | ||||
473 | ||||
473 | ||||
474 | ||||
475 | ||||
476 | ||||
476 | ||||
477 | ||||
478 | ||||
478 | ||||
479 | ||||
480 | ||||
480 | ||||
482 | ||||
484 |
• | certain civil liabilities under US securities laws in original actions; or | |
• | judgements of US courts based upon these civil liability provisions. |
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Announcement | 1 March 2010 | |||
Shares quoted ex-dividend in London, Hong Kong, Paris and Bermuda | 17 March 2010 | |||
ADSs quoted ex-dividend in New York | 17 March 2010 | |||
Record date in Hong Kong | 18 March 2010 | |||
Record date in London, New York, Paris and Bermuda1 | 19 March 2010 | |||
Mailing ofAnnual Report and Accounts 2009and/orAnnual Review 2009, Notice of Annual General Meeting and dividend documentation | 30 March 2010 | |||
Final date for receipt by registrars of forms of election, Investor Centre electronic instructions and revocations of standing instructions for scrip dividends | 22 April 2010 | |||
Exchange rate determined for payment of dividends in sterling and Hong Kong dollars | 26 April 2010 | |||
Payment date: dividend warrants, new share certificates or transaction advices and notional tax vouchers mailed and shares credited to stock accounts in CREST | 5 May 2010 |
1 | Removals to and from the Overseas Branch register of shareholders in Hong Kong will not be permitted on this date. |
Interim dividends for 2010 | |||||||||
First | Second | Third | Fourth | ||||||
Announcement | 4 May 2010 | 2 August 2010 | 1 November 2010 | 28 February 2011 | |||||
Shares quoted ex-dividend in London, Hong Kong, Paris and Bermuda | 19 May 2010 | 18 August 2010 | 17 November 2010 | 16 March 2011 | |||||
ADSs quoted ex-dividend in New York | 19 May 2010 | 18 August 2010 | 17 November 2010 | 16 March 2011 | |||||
Record date in Hong Kong | 20 May 2010 | 19 August 2010 | 18 November 2010 | 17 March 2011 | |||||
Record date in London, New York, Paris and Bermuda1 | 21 May 2010 | 20 August 2010 | 19 November 2010 | 18 March 2011 | |||||
Payment date | 7 July 2010 | 6 October 2010 | 12 January 2011 | 5 May 2011 |
1 | Removals to and from the Overseas Branch Register of shareholders in Hong Kong will not be permitted on these dates. |
First | Second | Third | Fourth | |||||||||||||||||||
interim | interim | interim | interim | 1 | Total | 2 | ||||||||||||||||
2009 | US$ | 0.080 | 0.080 | 0.080 | 0.100 | 0.340 | ||||||||||||||||
£ | 0.048 | 0.050 | 0.048 | 0.062 | 0.208 | |||||||||||||||||
HK$ | 0.620 | 0.620 | 0.620 | 0.775 | 2.635 | |||||||||||||||||
2008 | US$ | 0.180 | 0.180 | 0.180 | 0.100 | 0.640 | ||||||||||||||||
£ | 0.090 | 0.100 | 0.124 | 0.069 | 0.383 | |||||||||||||||||
HK$ | 1.403 | 1.398 | 1.395 | 0.775 | 4.971 | |||||||||||||||||
2007 | US$ | 0.170 | 0.170 | 0.170 | 0.390 | 0.900 | ||||||||||||||||
£ | 0.085 | 0.084 | 0.086 | 0.194 | 0.449 | |||||||||||||||||
HK$ | 1.328 | 1.322 | 1.325 | 3.041 | 7.016 | |||||||||||||||||
2006 | US$ | 0.150 | 0.150 | 0.150 | 0.360 | 0.810 | ||||||||||||||||
£ | 0.082 | 0.079 | 0.078 | 0.183 | 0.422 | |||||||||||||||||
HK$ | 1.164 | 1.167 | 1.168 | 2.799 | 6.298 | |||||||||||||||||
2005 | US$ | 0.140 | 0.140 | 0.140 | 0.310 | 0.730 | ||||||||||||||||
£ | 0.077 | 0.079 | 0.079 | 0.169 | 0.404 | |||||||||||||||||
HK$ | 1.088 | 1.086 | 1.085 | 2.403 | 5.662 |
1 | The fourth interim dividend for 2009 of US$0.10 per share has been translated into pounds sterling and Hong Kong dollars at the closing rate on 31 December 2009. The dividend will be paid on 5 May 2010. | |
2 | The above dividends declared are accounted for as disclosed in Note 12 on the Financial Statements. |
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American Depositary Shares / Nature of trading market |
For: | HSBC ADS holders must pay: | |
Each issuance of HSBC ADSs, including as a result of a distribution of shares (through stock dividend or stock split or rights or other property) | US$5.00 (or less) per 100 HSBC ADSs or portion thereof | |
Each cancellation of HSBC ADSs, including if the deposit agreement terminates | US$5.00 (or less) per 100 HSBC ADSs or portion thereof | |
Transfer and registration of shares on HSBC’s share register from the holder’s name to the name of The Bank of New York Mellon or its agent when the holder deposits or withdraws shares | Registration or transfer fees (of which there currently are none) | |
Conversion of non-US currency to US dollars | Charges and expenses incurred by The Bank of New York Mellon with respect to the conversion | |
Each cash distribution to HSBC ADS holders | US$0.02 or less per ADS | |
Cable, telex and facsimile transmission expenses | As provided in the Deposit Agreement | |
Transfers or issues of HSBC ordinary shares to the depositary in exchange for HSBC ADSs | Subject to the exceptions described in the ‘Stamp duty and stamp duty reserve tax’ paragraphs in the Shareholder Information section on page 481, stamp duty or stamp duty reserve tax equal to 1.5 per cent (rounded up, in the case of stamp duty, to the nearest £5) of the amount of the consideration given for the transfer, or the value of the shares if there is no such consideration, or their issue price | |
Distribution of securities to holders of deposited securities which are distributed by the depositary to ADS holders | A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs | |
Any charges incurred by the depositary or its agents for servicing the deposited securities | As applicable |
2009 | ||||
Category of expense | US$ | |||
Stock exchange listing fees | 104,906 | |||
Fulfilment costs | 196,312 | |||
– shareholder meeting costs (printing and distribution of materials and vote tabulation) | 21,785 | |||
– beneficial holder searches | 167,300 | |||
– sundry costs including: postage and envelopes for mailing annual and interim financial reports, dividend warrants, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile and telephone calls | 7,227 | |||
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London | Hong Kong | New York | Paris | Bermuda | ||||||||||||||||||||||||||||||||||||
US$0.50 shares | US$0.50 shares | ADSs1 | US$0.50 shares | US$0.50 shares | ||||||||||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||||||||
pence | pence | HK$ | HK$ | US$ | US$ | euro | euro | US$ | US$ | |||||||||||||||||||||||||||||||
2009 | 761 | 304 | 98.0 | 30.6 | 64.0 | 22.0 | 8.6 | 3.3 | 12.5 | 4.6 | ||||||||||||||||||||||||||||||
2008 | 809 | 534 | 125.4 | 67.4 | 79.5 | 41.3 | 10.3 | 5.5 | 15.9 | 8.0 | ||||||||||||||||||||||||||||||
2007 | 840 | 700 | 140.6 | 119.2 | 90.3 | 74.8 | 12.4 | 9.7 | 17.6 | 14.8 | ||||||||||||||||||||||||||||||
2006 | 896 | 796 | 139.1 | 114.5 | 89.3 | 73.0 | 13.2 | 11.5 | 17.6 | 14.7 | ||||||||||||||||||||||||||||||
2005 | 828 | 719 | 122.8 | 110.5 | 77.8 | 70.3 | 12.0 | 10.3 | 15.4 | 14.1 | ||||||||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||||||||||
4th Quarter | 761 | 668 | 98.0 | 85.3 | 64.0 | 54.9 | 8.6 | 7.5 | 12.5 | 11.0 | ||||||||||||||||||||||||||||||
3rd Quarter | 730 | 493 | 91.8 | 61.4 | 59.5 | 39.9 | 8.1 | 5.7 | 11.6 | 8.2 | ||||||||||||||||||||||||||||||
2nd Quarter | 578 | 411 | 70.8 | 42.9 | 45.5 | 29.5 | 6.6 | 4.4 | 9.2 | 6.9 | ||||||||||||||||||||||||||||||
1st Quarter | 594 | 304 | 71.8 | 30.6 | 45.0 | 22.0 | 6.3 | 3.3 | 8.6 | 4.6 | ||||||||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||||||||||
4th Quarter | 809 | 534 | 113.7 | 67.4 | 74.9 | 41.3 | 10.3 | 5.5 | 14.4 | 8.0 | ||||||||||||||||||||||||||||||
3rd Quarter | 801 | 624 | 119.2 | 103.8 | 76.2 | 65.2 | 10.2 | 7.7 | 14.9 | 12.8 | ||||||||||||||||||||||||||||||
2nd Quarter | 782 | 676 | 125.4 | 111.2 | 79.5 | 69.4 | 9.9 | 8.4 | 15.9 | 14.1 | ||||||||||||||||||||||||||||||
1st Quarter | 734 | 621 | 121.2 | 96.1 | 75.9 | 63.4 | 9.8 | 8.2 | 15.0 | 12.6 | ||||||||||||||||||||||||||||||
London | Hong Kong | New York | Paris | Bermuda | ||||||||||||||||||||||||||||||||||||
US$0.50 shares | US$0.50 shares | ADSs1 | US$0.50 shares | US$0.50 shares | ||||||||||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||||||||
pence | pence | HK$ | HK$ | US$ | US$ | euro | euro | US$ | US$ | |||||||||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||||||||||||||||
January | 740 | 660 | 92.4 | 83.6 | 59.3 | 53.5 | 8.3 | 7.6 | 11.6 | 10.7 | ||||||||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||||||||||
December | 726 | 680 | 93.8 | 86.5 | 60.2 | 55.3 | 8.1 | 7.7 | 12.0 | 11.2 | ||||||||||||||||||||||||||||||
November | 761 | 668 | 98.0 | 85.3 | 64.0 | 55.3 | 8.6 | 7.5 | 12.5 | 11.0 | ||||||||||||||||||||||||||||||
October | 723 | 671 | 90.4 | 85.7 | 58.3 | 54.9 | 7.8 | 7.5 | 11.7 | 11.0 | ||||||||||||||||||||||||||||||
September | 730 | 640 | 91.8 | 80.7 | 59.5 | 52.0 | 8.1 | 7.4 | 11.6 | 11.4 | ||||||||||||||||||||||||||||||
August | 672 | 627 | 86.4 | 77.7 | 55.8 | 52.5 | 7.9 | 7.4 | 11.2 | 10.5 | ||||||||||||||||||||||||||||||
July | 606 | 493 | 77.1 | 61.4 | 50.7 | 39.9 | 7.1 | 5.7 | 9.6 | 8.2 |
1 | In New York each ADS represents 5 underlying ordinary shares. |
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Table of Contents
Shareholder profile / Memorandum and Articles of Association / Annual General Meeting |
London Stock Exchange | HSBA | |||
Hong Kong Stock Exchange | 5 | |||
New York Stock Exchange (ADS) | HBC | |||
Euronext Paris | HSB | |||
Bermuda Stock Exchange | HSBC |
Number of | Total | |||||||
Ordinary shares held | shareholders | shares held | ||||||
1-100 | 33,140 | 1,041,849 | ||||||
101-400 | 31,295 | 7,610,861 | ||||||
401-500 | 8,047 | 3,620,690 | ||||||
501-1,000 | 32,745 | 23,569,774 | ||||||
1,001-5,000 | 73,547 | 171,133,596 | ||||||
5,001-10,000 | 18,792 | 131,845,068 | ||||||
10,001-20,000 | 10,858 | 151,471,115 | ||||||
20,001-50,000 | 6,541 | 201,655,152 | ||||||
50,001-200,000 | 3,210 | 296,820,337 | ||||||
200,001-500,000 | 757 | 238,071,012 | ||||||
500,001 and above | 1,157 | 16,181,367,314 | ||||||
Total | 220,089 | 17,408,206,768 | ||||||
• | may enter into or otherwise be interested in any contract, arrangement, transaction or proposal with HSBC Holdings or in which HSBC Holdings is otherwise interested; | |
• | may hold any other office or place of profit under HSBC Holdings (except that of auditor or auditor of a subsidiary of HSBC Holdings) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity for HSBC Holdings, and in any such case on such terms as to remuneration and otherwise as the Board may arrange; | |
• | may be a director or other officer, or employed by, or a party to any transaction or arrangement with or otherwise interested in, any company promoted by HSBC Holdings or in which HSBC Holdings is otherwise interested or as regards which HSBC Holdings has any powers of appointment; and | |
• | shall not be liable to account to HSBC Holdings for any profit, remuneration or other benefit realised by any such office, employment, contract, arrangement, transaction or proposal or from any interest in any body corporate and no such contract, arrangement, transaction, proposal or interest shall be avoided on the grounds of any such interest or benefit nor shall the receipt of any such profit, remuneration or any other benefit constitute a breach of his or her duty under the Companies Act 2006 not to accept benefits from third parties. |
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• | any requirement as to quorum at the meeting at which the matter is considered is met without counting the Director in question or any other interested Director; and | |
• | the matter was agreed to without their voting or would have been agreed to if their votes had not been counted. |
Total votes | ||||||||||||||
Resolution | For | 1 | Against | Vote withheld | 2 | |||||||||
1 | To receive the Report and Accounts for 2008 | 7,901,287,647 | 40,358,760 | 35,340,460 | ||||||||||
2 | To approve the Directors’ Remuneration Report for 2008 | 7,060,582,014 | 681,527,638 | 233,742,167 | ||||||||||
3 | To re-elect the following as Directors: | |||||||||||||
(a) S A Catz | 7,929,542,903 | 22,920,267 | 31,655,980 | |||||||||||
(b) V H C Cheng | 7,941,676,475 | 11,270,381 | 31,134,247 | |||||||||||
(c) M K T Cheung | 7,939,025,380 | 11,377,699 | 33,777,308 | |||||||||||
(d) J D Coombe | 7,935,388,445 | 13,017,095 | 35,791,573 | |||||||||||
(e) J L Durán | 7,940,220,049 | 12,282,606 | 31,706,996 | |||||||||||
(f) R A Fairhead | 7,937,758,292 | 14,728,893 | 31,726,248 | |||||||||||
(g) D J Flint | 7,912,074,791 | 37,587,208 | 34,389,735 | |||||||||||
(h) A A Flockhart | 7,929,977,258 | 17,696,949 | 36,519,295 | |||||||||||
(i) W K L Fung | 7,827,043,012 | 66,722,011 | 90,363,781 | |||||||||||
(j) M F Geoghegan | 7,908,649,043 | 38,351,123 | 37,448,198 | |||||||||||
(k) S K Green | 7,791,903,013 | 56,527,889 | 135,700,002 | |||||||||||
(l) S T Gulliver | 7,907,643,866 | 35,501,686 | 39,631,531 | |||||||||||
(m) J W J Hughes-Hallett | 7,935,557,101 | 16,848,745 | 31,718,789 | |||||||||||
(n) W S H Laidlaw | 7,936,661,889 | 13,720,447 | 33,737,012 | |||||||||||
(o) J R Lomax | 7,925,965,357 | 26,348,115 | 31,806,338 | |||||||||||
(p) Sir Mark Moody-Stuart | 7,936,652,035 | 15,533,759 | 31,931,899 | |||||||||||
(q) G Morgan | 7,937,695,742 | 12,657,251 | 33,729,241 | |||||||||||
(r) N R N Murthy | 7,939,721,249 | 12,600,587 | 31,798,598 | |||||||||||
(s) S M Robertson | 7,939,561,457 | 12,763,612 | 31,776,474 | |||||||||||
(t) J L Thornton | 7,939,757,360 | 12,291,883 | 31,909,754 | |||||||||||
(u) Sir Brian Williamson | 7,939,497,300 | 12,796,977 | 31,784,282 | |||||||||||
4 | To reappoint the Auditor at remuneration to be determined by the Group Audit Committee | 7,885,940,600 | 38,605,986 | 52,015,387 | ||||||||||
5 | To authorise the Directors to allot shares | 7,865,611,572 | 80,639,173 | 32,860,563 | ||||||||||
6 | To disapply pre-emption rights (Special Resolution) | 7,898,555,932 | 52,061,875 | 29,723,057 | ||||||||||
7 | To authorise the Company to purchase its own Ordinary Shares | 7,866,095,619 | 20,259,041 | 92,366,735 | ||||||||||
8 | To alter the Articles of Association with effect from 1 October 2009 (Special Resolution) | 7,950,959,375 | 5,013,812 | 24,681,152 | ||||||||||
9 | To approve general meetings (other than annual general meetings) being called on 14 clear days’ notice (Special Resolution) | 7,769,003,251 | 178,874,096 | 32,468,298 |
1 | Includes discretionary votes. | |
2 | A ‘Vote withheld’ is not a ‘vote’ in law and is not counted in the calculation of the votes ‘For’ and ‘Against’ the resolution. |
477
Table of Contents
Interim Management Statements / Enquiries / Investor relations |
Principal Register: | Hong Kong Overseas Branch Register: | Bermuda Overseas Branch Register: | ||
Computershare Investor Services PLC | Computershare Hong Kong Investor | Corporate Shareholder Services | ||
The Pavilions | Services Limited | The Bank of Bermuda Limited | ||
Bridgwater Road | Hopewell Centre | 6 Front Street | ||
Bristol BS99 6ZZ | Rooms 1712-1716, 17thFloor | Hamilton HM 11 | ||
United Kingdom | 183 Queen’s Road East | Bermuda | ||
Telephone: 44 (0) 870 702 0137 | Hong Kong | Telephone: 1 441 299 6737 | ||
Email via website: | Telephone: 852 2862 8555 | Email: | ||
www.investorcentre.co.uk/contactus | Email: hsbc.ecom@computershare.com.hk | bob.bda.shareholder.services@ bob.hsbc.com | ||
Investor Centre: | Investor Centre: | Investor Centre: | ||
www.investorcentre.co.uk | www.computershare.com/hk/investors | www.computershare.com/investor/bm |
PO Box 358516
Pittsburgh, PA 15252-8516
USA
Telephone (US): 1 877 283 5786
Telephone (International): 1 201 680 6825
Email: shrrelations@bnymellon.com
Website: www.bnymellon.com/shareowner
103, avenue des Champs Elysées
75419 Paris Cedex 08
France
Telephone: 33 1 40 70 22 56
Email: ost-agence-des-titres-hsbc-reims.hbfr-do@hsbc.fr
Website: www.hsbc.fr
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Table of Contents
For those in Europe, the Middle East and | For those in Asia-Pacific: | For those in the Americas: | ||
Africa: | ||||
Group Communications | Group Communications (Asia) | Internal Communications | ||
HSBC Holdings plc | The Hongkong and Shanghai | HSBC – North America | ||
8 Canada Square | Banking Corporation | 26525 N Riverwoods Boulevard | ||
London E14 5HQ | Limited | Mettawa | ||
UK | 1 Queen’s Road Central | Illinois 60045 | ||
Hong Kong | USA |
Computershare Hong Kong Investor Services Limited | Computershare Investor Services PLC | |
Hopewell Centre, Rooms 1712-1716, 17th Floor | The Pavilions | |
183 Queen’s Road East | Bridgwater Road | |
Hong Kong | Bristol BS99 6ZZ | |
UK |
Manager Investor Relations | SVP Investor Relations | Head of Investor Relations, Asia-Pacific | ||
HSBC Holdings plc | HSBC North America Holdings Inc. | The Hongkong and Shanghai Banking | ||
8 Canada Square | 26525 N. Riverwoods Boulevard | Corporation Limited | ||
London E14 5HQ | Mettawa, Illinois 60045 | 1 Queen���s Road Central | ||
UK | USA | Hong Kong | ||
Telephone: 44 (0)20 7991 8041 | 1 224 544 4400 | 852 2822 4908 | ||
Facsimile: 44 (0)845 587 0225 | 1 224 552 4400 | 852 2537 5109 | ||
Email: investorrelations@hsbc.com | investor.relations.usa@us.hsbc.com | investorrelations@hsbc.com.hk |
479
Table of Contents
Where more information is available / Taxation of shares and dividends |
480
Table of Contents
481
Table of Contents
Taxation of shares and dividends / History of HSBC |
1865 | The founding member of the HSBC Group, The Hongkong and Shanghai Banking Corporation, is established in both Hong Kong and Shanghai. | |
1959 | The Mercantile Bank of India Limited and The British Bank of the Middle East, now HSBC Bank Middle East Limited, are purchased. | |
1965 | A 51 per cent interest (subsequently increased to 62.14 per cent) is acquired in Hang Seng Bank Limited. Hang Seng Bank is the fourth-largest listed bank in Hong Kong by market capitalisation. | |
1980 | A 51 per cent interest in Marine Midland Banks, Inc., now HSBC USA, Inc, is acquired (with the remaining interest acquired in 1987). | |
1981 | The Hongkong and Shanghai Banking Corporation incorporates its then existing Canadian operations. HSBC Bank Canada subsequently makes numerous acquisitions, expanding rapidly to become the largest foreign-owned bank in Canada. |
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Table of Contents
1987 | A 14.9 per cent interest in Midland Bank plc, now HSBC Bank plc, one of the UK’s principal clearing banks, is purchased. | |
1991 | HSBC Holdings plc is established as the parent company of the HSBC Group. | |
1992 | HSBC purchases the remaining interest in Midland Bank plc. | |
1993 | As a consequence of the Midland acquisition, HSBC’s Head Office is transferred from Hong Kong to London in January. | |
1997 | HSBC assumes selected assets, liabilities and subsidiaries of Banco Bamerindus do Brasil S.A., now HSBC Bank Brazil, following the intervention of the Central Bank of Brazil, and in Argentina completes the acquisition of Grupo Roberts, now part of HSBC Bank Argentina S.A. | |
1999 | HSBC acquires Republic New York Corporation, subsequently merged with HSBC USA, Inc., and Safra Republic Holdings S.A. | |
2000 | HSBC completes its acquisition of 99.99 per cent of the issued share capital of Crédit Commercial de France S.A., now HSBC France. | |
2002 | HSBC acquires 99.59 per cent of Grupo Financiero Bital, S.A. de C.V., the holding company of what is now HSBC Mexico. | |
2003 | HSBC acquires Household International, Inc., now HSBC Finance Corporation. | |
2003 | HSBC acquires Banco Lloyds TSB S.A.–Banco Múltiplo in Brazil and the country’s leading consumer finance company, Losango Promotora de Vendas Limitada. | |
2004 | HSBC Bank USA, Inc. merges with HSBC Bank & Trust (Delaware) N.A. to form HSBC Bank USA, N.A. | |
2004 | The acquisition of The Bank of Bermuda Limited is completed. |
2004 | HSBC acquires Marks and Spencer Retail Financial Services Holdings Limited, which trades as Marks and Spencer Money (‘M&S Money’) in the UK. | |
2004 | HSBC acquires 19.9 per cent of Bank of Communications, and Hang Seng Bank acquires 15.98 per cent of Industrial Bank. | |
2005 | HSBC increases its holding in Ping An Insurance to 19.9 per cent, having made its initial investment in 2002. Ping An Insurance is the second-largest life insurer and the third-largest property and casualty insurer in mainland China. | |
2005 | HSBC Finance completes the acquisition of Metris Companies Inc., making HSBC the fifth-largest issuer of MasterCard and Visa cards in the USA. | |
2006 | HSBC acquires Grupo Banistmo S.A. (‘Banistmo’), the leading banking group in Central America, through a tender offer to acquire 99.98 per cent of the outstanding shares of Banistmo. | |
2007 | HSBC’s three associates in mainland China, Industrial Bank, Ping An Insurance and Bank of Communications, issue new shares. HSBC does not subscribe and, as a result, its interests in the associates’ equity decrease from 15.98 per cent to 12.78 per cent, from 19.90 per cent to 16.78 per cent and from 19.90 per cent to 18.60 per cent, respectively. Subsequently, HSBC increases its holding in Bank of Communications from 18.60 per cent to 19.01 per cent. | |
2007 | HSBC is named the successful bidder in a government auction to acquire the assets, liabilities and operations of The Chinese Bank in Taiwan. | |
2008 | HSBC completes the sale of its seven French regional banks. | |
2009 | In May, HSBC completes the acquisition of 88.89 per cent of PT Bank Ekonomi Raharja Tbk in Indonesia for US$608 million in cash and, in August, increases its holding to 98.96 per cent at a total cost of US$ 680 million. |
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Table of Contents
Form 20-F Item Number and Caption | Location | Page | ||||
PART I | ||||||
1. Identity of Directors, Senior Management and Advisers | Not required for Annual Report | — | ||||
2. Offer Statistics and Expected Timetable | Not required for Annual Report | — | ||||
3. Key Information | ||||||
A. Selected Financial Data | Five-Year Comparison | 4-5, 473 | ||||
B. Capitalisation and Indebtedness | Not required for Annual Report | — | ||||
C. Reasons for the Offer and use of Proceeds | Not required for Annual Report | — | ||||
D. Risk Factors | Challenges and Uncertainties | 12-18 | ||||
4. Information on the Company | ||||||
A. History and Development of the Company | Operating and Financial Review Shareholder Information | 18-150, 482-483, 500 | ||||
Shareholder Information | 472-484 | |||||
Impact of Market Turmoil | 151-195 | |||||
B. Business Overview | Operating and Financial Review | 18-150 | ||||
Regulation and Supervision | 196-199 | |||||
Impact of Market Turmoil | 151-195 | |||||
C. Organisational Structure | Principal Activities | 12 | ||||
Organisational Structure Chart | 484 | |||||
Note 24 – Notes on the Financial Statements | 442-444 | |||||
D. Property, Plants and Equipment | Property | 148 | ||||
Note 23 – Notes on the Financial Statements | 439-441 | |||||
4 A. Unresolved Staff Comments | Not Applicable | — | ||||
5. Operating and Financial Review and Prospects | ||||||
A. Operating Results | Operating and Financial Review | 18-150 | ||||
Impact of Market Turmoil | 151-195 | |||||
B. Liquidity and Capital Resources | Risk | 244-249, 281-283, | ||||
285-290` | ||||||
C. Research and Development, Patents and Licences, etc. | Not Applicable | — | ||||
D. Trend Information | Operating and Financial Review | 18-150 | ||||
E. Off-Balance Sheet Arrangements | Special Purpose Entities | 181-194 |
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Table of Contents
Form 20-F Item Number and Caption | Location | Page | ||||
Other off-balance sheet arrangements and commitments | 194 | |||||
F. Contractual Obligations | Operating and Financial Review | 56 | ||||
6. Directors, Senior Management and Employees | ||||||
A. Directors and Senior Management | Governance | 294-302 | ||||
B. Compensation | Directors’ Remuneration Report | 334-348 | ||||
C. Board Practices | Report of the Directors | 302-304 | ||||
Directors’ Remuneration Report | 334, 337- 338 | |||||
Directors’ Remuneration Report | 342-344 | |||||
D. Employees | Governance | 318-319 | ||||
E. Share Ownership | Governance | 316-317 | ||||
Directors’ Remuneration Report | 347-348 | |||||
7. Major Shareholders and Related Party Transactions | ||||||
A. Major Shareholders | Governance | 332 | ||||
B. Related Party Transactions | Note 43 - Notes on the Financial Statements | 468-471 | ||||
C. Interests of Experts and Counsel | Not required for Annual Report | — | ||||
8. Financial Information | ||||||
A. Consolidated Statements and Other Financial Information | Financial Statements | 352-471a | ||||
Legal Proceedings | 148-149 | |||||
Note 42 – Notes on the Financial Statements | 467-468 | |||||
Shareholder Information | 472-473 | |||||
B. Significant Changes | Not Applicable | — | ||||
9. The Offer and Listing | ||||||
A. Offer and Listing Details | Shareholder Information | 475-476 | ||||
B. Plan of Distribution | Not required for Annual Report | — | ||||
C. Markets | Shareholder Information | 475-476 | ||||
D. Selling Shareholders | Not required for Annual Report | — | ||||
E. Dilution | Not required for Annual Report | — | ||||
F. Expenses of the Issue | Not required for Annual Report | — |
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Table of Contents
Form 20-F Item Number and Caption | Location | Page | ||||
10. Additional Information | ||||||
A. Share Capital | Not required for Annual Report | — | ||||
B. Memorandum and Articles of Association | Shareholder Information | 476-477 | ||||
C. Material Contracts | Not Applicable | — | ||||
D. Exchange Controls | Exchange controls and other limitations affecting security holders | 472 | ||||
E. Taxation | Shareholder Information | 480-482 | ||||
F. Dividends and Paying Agents | Not required for Annual Report | — | ||||
G. Statements by Experts | Not required for Annual Report | — | ||||
H. Documents on Display | Shareholder Information | 480 | ||||
I. Subsidiary Information | Not Applicable | — | ||||
11. Quantitative and Qualitative Disclosures About Market Risk | Management of Risk | 250-261 | ||||
Note 18 and 34 – Notes on the Financial Statements | 424-428, 455-456 | |||||
12. Description of Securities Other than Equity Securities | ||||||
A. Debt Securities | Not required for Annual Report | — | ||||
B. Warrants and Rights | Not required for Annual Report | — | ||||
C. Other Securities | Not required for Annual Report | — | ||||
D. American Depositary Shares | Shareholder Information | 474 | ||||
PART II | ||||||
13. Defaults, Dividends Arrearages and Delinquencies | Not Applicable | — | ||||
14. Material Modifications to the Rights of Securities Holders and Use of Proceeds | Not Applicable | — | ||||
15. Controls and Procedures | ||||||
Report of Independent Registered Public | 350-351 | |||||
Accounting Firm to the Board of Directors and shareholders of HSBC Holdings plc Disclosure Controls | 65a | |||||
16. [Reserved] |
484c
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Form 20-F Item Number and Caption | Location | Page | ||||
A. Audit Committee Financial Expert | Report of the Directors | 310 | ||||
B. Code of Ethics | Report of the Directors | 308-310 | ||||
C. Principal Accountant Fees and Services | Report of the Directors | 310-312 | ||||
Note 9 – Notes on the Financial Statements | 400-401 | |||||
D. Exemptions from the Listing Standards for Audit Committees | Not Applicable | — | ||||
E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers | Report of the Directors | 332 | ||||
F. Changes in Registrant’s Certifying Accountant | Not Applicable | — | ||||
G. Corporate Governance | Report of the Directors | 308-310 | ||||
PART III | ||||||
17. Financial Statements | Not Applicable | — | ||||
18. Financial Statements | Financial Statements | 350-471a | ||||
19. Exhibits (including Certifications) | * |
484d
Table of Contents
Accounting term | US equivalent or brief description | |
Accounts | Financial Statements | |
Articles of Association | Bylaws | |
Associates | Long-term equity investments accounted for using the equity method | |
Attributable profit | Net income | |
Balance sheet | Statement of financial position | |
Bills | Notes | |
Called up share capital | Ordinary shares, issued and fully paid | |
Capital allowances | Tax depreciation allowances | |
Creditors | Payables | |
Debtors | Receivables | |
Deferred tax | Deferred income tax | |
Depreciation | Amortisation | |
Finance lease | Capital lease | |
Freehold | Ownership with absolute rights in perpetuity | |
Interests in associates and joint ventures | Long-term equity investments accounted for using the equity method | |
Loans and advances | Lendings | |
Loan capital | Long-term debt | |
Nominal value | Par value | |
One-off | Non-recurring | |
Ordinary shares | Common stock | |
Overdraft | A line of credit, contractually repayable on demand unless a fixed-term has been agreed, established through a customer’s current account | |
Preference shares | Preferred stock | |
Premises | Real estate | |
Provisions | Liabilities | |
Share capital | Ordinary shares or common stock issued and fully paid | |
Shareholders’ equity | Stockholders’ equity | |
Share premium account | Additional paid-in capital | |
Shares in issue | Shares outstanding | |
Write-offs | Charge-offs |
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Abbreviation | Brief description | |
ABS1 | Asset-backed security | |
ADR | American Depositary Receipt | |
ADS | American Depositary Share | |
AIEA | Average interest-earning assets | |
ALCO | Asset and Liability Management Committee | |
ARM | Adjustable-rate mortgage | |
ASEAN | Association of Southeast Asian Nations | |
ASF | Asset and Structured Finance | |
Asscher | Asscher Finance Ltd, a structured investment vehicle managed by HSBC | |
ATM | Automated teller machine | |
Bank of Bermuda | The Bank of Bermuda Limited | |
Bank of Communications | Bank of Communications Co., Limited, mainland China’s fourth largest bank by market capitalisation, in which HSBC currently has 19.01 per cent interest | |
Bao Viet | BaoViet Holdings | |
Barion | Barion Funding Limited, a term funding vehicle | |
Basel Committee | Basel Committee on Banking Supervision | |
Basel I | 1988 Basel Capital Accord | |
Basel II1 | 2006 Basel Capital Accord | |
BBA | British Bankers’ Association | |
Bps | Basis points. One basis point is equal to one hundredth of a percentage point | |
Brazilian operations | HSBC Bank Brasil S.A.–Banco Múltiplo and subsidiaries, plus HSBC Serviços e Participações Limitada | |
CD | Certificate of deposit | |
CDS1 | Credit default swap | |
CDO1 | Collateralised debt obligation | |
CGU | Cash-generating unit | |
CNAV1 | Constant Net Asset Value | |
Combined Code | Combined Code on Corporate Governance issued by the Financial Reporting Council | |
CP1 | Commercial paper | |
CPI | Consumer price index | |
CRR1 | Customer risk rating | |
Cullinan | Cullinan Finance Ltd, a structured investment vehicle managed by HSBC | |
Decision One | Decision One Mortgage Company, HSBC Finance’s subsidiary which originates loans referred by mortgage brokers | |
DPF | Discretionary participation feature of insurance and investment contracts | |
Enhanced VNAV1 | Enhanced Variable Net Asset Value | |
EPS | Earnings per share | |
EU | European Union | |
Fannie Mae | Federal National Mortgage Association, US | |
FDIC | Federal Deposit Insurance Corporation (US) | |
Financiera Independencia | Financiera Independencia S.A.B. de C.V. | |
Freddie Mac | Federal Home Loan Mortgage Corporation, US | |
FSA | Financial Services Authority (UK) | |
FTSE | Financial Times - Stock Exchange index | |
GAAP | Generally Accepted Accounting Principles | |
GCRO | Group Chief Risk Officer | |
GDP | Gross domestic product | |
Ginnie Mae | Government National Mortgage Association, US | |
Global Markets | HSBC’s treasury and capital markets services in Global Banking and Markets | |
GMB | Group Management Board | |
GMO | Group Management Office | |
Group | HSBC Holdings together with its subsidiary undertakings | |
H1N1 | Influenza ‘A’ (H1N1) virus, commonly referred to as swine flu | |
Hang Seng Bank | Hang Seng Bank Limited, the third largest bank listed in Hong Kong by market capitalisation |
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Table of Contents
Abbreviation | Brief description | |
HELoC | Home equity lines of credit | |
HFC | HFC Bank Limited, the UK-based consumer finance business acquired through the acquisition by HSBC of HSBC Finance | |
HIBOR | Hong Kong Interbank Offer Rate | |
HKMA | Hong Kong Monetary Authority | |
HKSE | The Stock Exchange of Hong Kong Limited | |
Hong Kong | The Hong Kong Special Administrative Region of the People’s Republic of China | |
HSBC | HSBC Holdings together with its subsidiary undertakings | |
HSBC Assurances | HSBC Assurances, comprising Erisa S.A., the French life insurer, and Erisa I.A.R.D., the property and casualty insurer (together, formerly Erisa) | |
HSBC Bank | HSBC Bank plc, formerly Midland Bank plc | |
HSBC Bank Argentina | HSBC Bank Argentina S.A. | |
HSBC Bank Brazil | HSBC Bank Brasil S.A.–Banco Múltiplo | |
HSBC Bank China | HSBC Bank (China) Company Limited, HSBC’s banking subsidiary in mainland China which was incorporated in March 2007 | |
HSBC Bank Malaysia | HSBC Bank Malaysia Berhad | |
HSBC Bank Middle East | HSBC Bank Middle East Limited, formerly The British Bank of the Middle East | |
HSBC Bank Panama | HSBC Bank (Panama) S.A., formerly Grupo Banistmo S.A. | |
HSBC Bank USA | HSBC’s retail bank in the US. From 1 July 2004, HSBC Bank USA, N.A. (formerly HSBC Bank USA, Inc.) | |
HSBC Direct | HSBC’s online banking and savings proposition | |
HSBC Finance | HSBC Finance Corporation, the US consumer finance company (formerly Household International, Inc.) | |
HSBC France | HSBC’s French banking subsidiary, formerly CCF S.A. | |
HSBC Holdings | HSBC Holdings plc, the parent company of HSBC | |
HSBC Mexico | HSBC México S.A., the commercial banking subsidiary of Grupo Financiero HSBC, S.A. de C.V. | |
HSBC Premier | HSBC’s premium global banking service | |
HSBC Private Bank (Suisse) | HSBC Private Bank (Suisse) S.A., HSBC’s private bank in Switzerland (merged with HSBC Guyerzeller Bank in 2009) | |
IAS | International Accounting Standard | |
IASB | International Accounting Standards Board | |
IFRSs | International Financial Reporting Standards | |
IFRIC | International Financial Reporting Interpretations Committee | |
Industrial Bank | Industrial Bank Co. Limited, a national joint-stock bank in mainland China in which Hang Seng Bank currently has a 12.78 per cent interest | |
IPO | Initial public offering | |
IRB1 | Internal ratings-based | |
KPI | Key performance indicator | |
KPMG | KPMG Audit Plc and its affiliates | |
LIBOR | London Interbank Offer Rate | |
Madoff Securities | Bernard L Madoff Investment Securities LLC | |
Mainland China | People’s Republic of China excluding Hong Kong | |
Malachite | Malachite Funding Limited, a term funding vehicle | |
MasterCard | MasterCard Inc. | |
Mazarin | Mazarin Funding Limited, an asset-backed CP conduit | |
MBS1 | US mortgage-backed security | |
Metrovacesa | Metrovacesa, S.A. | |
Monoline1 | Monoline insurance company | |
M&S Money | Marks and Spencer Retail Financial Services Holdings Limited | |
MSCI | Morgan Stanley Capital International index | |
MTN1 | Medium-term note | |
NA | Nationally Chartered, a designation for certain categories of banks in the US | |
NYSE | New York Stock Exchange |
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Table of Contents
Abbreviation | Brief description | |
OFT | Office of Fair Trading (UK) | |
OTC1 | Over-the-counter | |
Performance Shares | Awards of HSBC Holdings ordinary shares under employee share plans that are subject to corporate performance conditions | |
Ping An Insurance | Ping An Insurance (Group) Company of China, Limited, the second-largest life insurer in the PRC, in which HSBC currently has 16.78 per cent interest | |
PPI | Payment protection insurance product | |
Premier | See HSBC Premier | |
PVIF | Present value of in-force long-term insurance business | |
Repo | Sale and repurchase transaction | |
Restricted Shares | Awards of Restricted Shares define the number of HSBC Holdings ordinary shares to which the employee will become entitled, generally between one and three years from the date of the award, and normally subject to the individual remaining in employment | |
Reverse repo | Security purchased under commitments to sell | |
RMM | Risk Management Meeting of the Group Management Board | |
RPI | Retail price index (UK) | |
RWA1 | Risk weighted asset | |
S&P | Standard and Poor’s rating agency | |
SEC | Securities and Exchange Commission (US) | |
SIC | Securities investment conduit | |
SIP | Statement of investment principles produced by trustees of defined pension plans | |
SIV1 | Structured investment vehicle | |
SME | Small and medium-sized enterprise | |
Solitaire | Solitaire Funding Limited, a special purpose entity managed by HSBC | |
SPE1 | Special purpose entity | |
STIP | Short-term income protection insurance product | |
Techcombank | Vietnam Technological and Commercial Joint Stock Bank | |
The Chinese Bank | The Chinese Bank Co., Ltd., the business in Taiwan | |
The Hongkong and Shanghai Banking Corporation | The Hongkong and Shanghai Banking Corporation Limited, the founding member of the HSBC Group | |
TSR | Total shareholder return | |
UAE | United Arab Emirates | |
UK | United Kingdom | |
US | United States | |
VAR1 | Value at risk | |
Visa | Visa Inc. | |
VNAV | Variable Net Asset Value | |
WWF | World Wide Fund for Nature |
1 | Full definition included in Glossary of Terms on page 489. |
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Table of Contents
Term | Definition | |
Alt-A | A US description for loans regarded as lower risk than sub-prime, but with higher risk characteristics than lending under normal criteria. | |
Arrears | Customers are said to be in arrears (or in a state of delinquency) when they are behind in fulfilling their obligations, with the result that an outstanding loan is unpaid or overdue. When a customer is in arrears, the total outstanding loans on which payments are overdue are described as delinquent. | |
Asset-backed securities (‘ABS’s) | Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages. | |
Back-testing | A statistical technique used to monitor and assess the accuracy of a model, and how that model would have performed had it been applied in the past. | |
Basel II | The capital adequacy framework issued by the Basel Committee on Banking Supervision in June 2006 in the form of the ‘International Convergence of Capital Measurement and Capital Standards’. | |
Collectively assessed impairment | Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant. | |
Collateralised debt obligation (‘CDO’) | A security issued by a third-party which references ABSs and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets. | |
Commercial paper (‘CP’) | An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. The debt is usually issued at a discount, reflecting prevailing market interest rates. | |
Commercial real estate | Any real estate investment, comprising buildings or land, intended to generate a profit, either from capital gain or rental income. | |
Conduits | A vehicle that holds asset-backed securities such as mortgages, vehicle finance loans and credit card loans which is financed by short-term debt normally issued in the form of commercial paper which is collateralised by the asset-backed debt. | |
Constant net asset value fund (‘CNAV’) | A fund that prices its assets on an amortised cost basis, subject to the amortised book value of the portfolio remaining within 50 basis points of its market value. | |
Contractual maturities | The date on which the final payment (principal or interest) of any financial instrument is due to be paid, at which point all the remaining outstanding principal and interest have been repaid. | |
Core tier 1 capital | The highest quality form of regulatory capital that comprises total shareholders’ equity and related minority interests, less goodwill and intangible assets and certain other regulatory adjustments. | |
Credit default swap | A derivative contract whereby a buyer pays a fee to a seller in return for receiving a payment in the event of a defined credit event (e.g. bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency) on an underlying obligation (which may or may not be held by the buyer). | |
Credit derivative product companies (‘CDPC’s) | Independent companies that specialise in selling credit default protection on corporate exposures in the form of credit derivatives. | |
Credit enhancements | Facilities used to enhance the creditworthiness of financial obligations and cover losses due to asset default. | |
Credit risk | Risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises mainly from direct lending, trade finance and leasing business, but also from products such as guarantees, derivatives and debt securities. | |
Credit risk adjustment | An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties. |
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Table of Contents
Term | Definition | |
Credit risk mitigation | A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as collateral, guarantee and credit protection. | |
Credit risk spread | The premium over the benchmark or risk-free rate required by the market to accept a lower credit quality. The yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks. The yield spread rises as the credit rating worsens. | |
Customer deposits | Money deposited by account holders. Such funds are recorded as liabilities. | |
Customer risk rating (‘CRR’) | A scale of 22 grades measuring internal obligor probability of default. | |
Debt restructuring | A restructuring by which the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as debt or interest charge reduction. | |
Debt securities | Assets on the Group’s balance sheet representing certificates of indebtedness of credit institutions, public bodies or other undertakings, excluding those issued by Central Banks. | |
Debt securities in issue | Transferable certificates of indebtedness of the Group to the bearer of the certificates. These are liabilities of the Group and include certificates of deposits. | |
Delinquency | See ‘Arrears’. | |
Economic capital | The internally calculated capital requirement which is deemed necessary by HSBC to support the risks to which it is exposed at a confidence level consistent with a target credit rating of AA. | |
Economic profit | The difference between the return on financial capital invested by shareholders (‘return on invested capital’) and the cost of that capital. Economic profit may be expressed as a whole number or as a percentage. | |
Enhanced variable net asset value funds (‘ENAV’) | Funds that price their assets on a fair value basis. Consequently, prices may change from one day to the next. | |
Equity risk | The risk arising from positions, either long or short, in equities or equity-based instruments, which create exposure to a change in the market price of the equities or equity instruments. | |
Expected loss (‘EL’) | A regulatory calculation of the amount expected to be lost on an exposure using a 12 month time horizon and downturn loss estimates. EL is calculated by multiplying the Probability of Default (a percentage) by the Exposure at Default (an amount) and Loss Given Default (a percentage). | |
Exposure | A claim, contingent claim or position which carries a risk of financial loss. | |
Exposure at default (‘EAD’) | The amount expected to be outstanding after any credit risk mitigation, if and when the counterparty defaults. EAD reflects drawn balances as well as allowance for undrawn amounts of commitments and contingent exposures. | |
Fair value adjustment | An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model. | |
First lien | A security interest granted over an item of property to secure the repayment of a debt that places its holder first in line to collect repayment from the sale of the underlying collateral in the event of a default on the debt. | |
Funded exposures | A funded exposure is one where the notional amount of a contract is or has been exchanged. | |
Funding risk | A form of liquidity risk arising when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required. |
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Table of Contents
Term | Definition | |
Historic rating transition matrices (‘HRTM’) | HRTMs show the probability of a counterparty with a particular rating moving to a different rating over a defined time horizon. | |
Impaired loans | Loans where the Group does not expect to collect all the contractual cash flows or expects to collect them later than they are contractually due. | |
Impairment allowances | Management’s best estimate of losses incurred in the loan portfolios at the balance sheet date. | |
Individually assessed impairment | Exposure to loss is assessed on all individually significant accounts and all other accounts that do not qualify for collective assessment. | |
Insurance risk | A risk, other than a financial risk, transferred from the holder of a contract to the insurance provider. The principal insurance risk is that, over time, the combined cost of claims, administration and acquisition of the contract may exceed the aggregate amount of premiums received and investment income. | |
Internal Capital Adequacy Assessment Process (‘ICAAP’) | The Group’s own assessment of the levels of capital that it needs to hold through an examination of its risk profile from regulatory and economic capital viewpoints. | |
Internal Model Method (‘IMM’) | One of three approaches defined by Basel II to determine exposure values for counterparty credit risk. | |
Internal ratings-based approach (‘IRB’) | A method of calculating credit risk capital requirements using internal, rather than supervisory, estimates of risk parameters. | |
Invested capital | Equity capital invested in HSBC by its shareholders. | |
IRB advanced approach | A method of calculating credit risk capital requirements using internal PD, LGD and EAD models. | |
IRB foundation approach | A method of calculating credit risk capital requirements using internal PD models but with supervisory estimates of LGD and conversion factors for the calculation of EAD. | |
ISDA | International Swaps and Derivatives Association. | |
ISDA Master agreement | Standardised contract developed by ISDA used as an umbrella under which bilateral derivatives contracts are entered into. | |
Key management personnel | Directors and Group Managing Directors of HSBC Holdings. | |
Level 1 – quoted market price | Financial instruments with quoted prices for identical instruments in active markets. | |
Level 2 – valuation technique using observable inputs | Financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable. | |
Level 3 – valuation technique with significant unobservable inputs | Financial instruments valued using valuation techniques where one or more significant inputs are unobservable. | |
Leveraged finance | Funding provided for entities with higher than average indebtedness, which typically arises from sub-investment grade acquisitions or event-driven financing. | |
Liquidity enhancement | Liquidity enhancement makes funds available if required, for reasons other than asset default, e.g. to ensure timely repayment of maturing commercial paper. | |
Liquidity risk | The risk that HSBC does not have sufficient financial resources to meet its obligations as they fall due, or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows. | |
Loan modification | A process by which the terms of a loan are modified either temporarily or permanently, including changes to the rate and/or the payment. Modification may also lead to a re-ageing of the account. |
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Term | Definition | |
Loan-to-value ratio (‘LTV’) | A mathematical calculation that expresses the amount of the loan as a percentage of the value of security. A high LTV indicates that there is less cushion to protect the lender against house price falls or increases in the loan if repayments are not made and interest is added to the outstanding loan balance. | |
Loans past due | Loans on which repayments are overdue. | |
Loss given default (‘LGD’) | The estimated ratio (percentage) of the loss on an exposure to the amount outstanding at default (EAD) upon default of a counterparty. | |
Market risk | The risk that movements in market risk factors, including foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices will reduce income or portfolio values. | |
Monoline insurers (‘monolines’) | Entities which specialise in providing credit protection to the holders of debt instruments in the event of default by the debt security counterparty. This protection is typically held in the form of derivatives such as CDS’s referencing the underlying exposures held. | |
Mortgage-backed securities (‘MBS’s) | Securities that represent interests in groups of mortgages, which may be on residential or commercial properties. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). When the MBS references mortgages with different risk profiles, the MBS is classified according to the highest risk class. | |
Mortgage-related assets | Assets which are referenced to underlying mortgages. | |
Mortgage vintage | The year a mortgage was originated. | |
Medium term notes (‘MTN’s) | Notes issued by corporates across a range of maturities. MTNs are frequently issued by corporates under MTN Programmes whereby notes are offered on a regular and continuous basis to investors. | |
Net asset value per share | Total shareholders’ equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue. | |
Negative equity mortgages | Negative equity is the value of the asset less the outstanding balance on the loan. It arises when the value of the property purchased is below the balance outstanding on the loan. | |
Net interest income | The amount of interest received or receivable on assets net of interest paid or payable on liabilities. | |
Net principal exposure | The gross principal amount of assets that are not protected by CDSs. It includes assets that benefit from monoline protection, except where this protection is purchased with a CDS. | |
Non-conforming mortgages | Mortgages that do not meet normal lending criteria, e.g. where the normal level of documentation has not been provided or where increased risk factors are present, such as poor credit history, result in lending at a rate that is higher than the normal lending rate. | |
Operational risk | The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events, including legal risk. | |
Over-the-counter (‘OTC’) | A bilateral transaction (e.g. derivatives) that is not exchange traded and valued using valuation models. | |
Performance Shares | Awards of HSBC Holdings ordinary shares under employee share plans that are subject to the achievement of corporate performance conditions. | |
Prime | A US description for mortgages granted to the most creditworthy category of borrowers. | |
Private equity investments | Equity securities in operating companies not quoted on a public exchange, often involving the investment of capital in private companies or the acquisition of a public company that results in the delisting of public equity. |
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Table of Contents
Term | Definition | |
Probability of default (‘PD’) | The probability that an obligor will default within a one-year time horizon. | |
Regulatory capital | The capital which HSBC holds, determined in accordance with rules established by the FSA for the consolidated Group and by local regulators for individual Group companies. | |
Renegotiated loans | Loans whose terms have been renegotiated and are treated as up to date loans for measurement purposes once the minimum number of payments required under the new arrangements have been received. | |
Restricted Shares | Awards of HSBC Holdings ordinary shares to which employees will normally become entitled, generally between one and three years, subject to remaining an employee. | |
Retail loans | Money loaned to individuals rather than institutions. This includes both secured and unsecured loans such as mortgages and credit card balances. | |
Return on equity | Profit attributable to ordinary shareholders divided by average invested capital. | |
Risk appetite | An assessment of the types and quantum of risks to which HSBC wishes to be exposed. | |
Risk-weighted assets (‘RWA’s) | Calculated by assigning a degree of risk expressed as a percentage (risk weight) to an exposure in accordance with the applicable Standardised or IRB approach rules. | |
Seasoning | The emergence of credit loss patterns in portfolios over time. | |
Second lien | A security interest granted over an item of property to secure the repayment of a debt that is issued against the same collateral as a first lien but that is subordinate to it. In the case of default, repayment for this debt will only be received after the first lien has been repaid. | |
Securitisation | A transaction or scheme whereby the credit risk associated with an exposure, or pool of exposures, is tranched and where payments to investors in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures. A traditional securitisation involves the transfer of the exposures being securitised to an SPE which issues securities. In a synthetic securitisation, the tranching is achieved by the use of credit derivatives and the exposures are not removed from the balance sheet of the originator. | |
Single-issuer liquidity facility | A liquidity or stand-by line provided to a corporate customer which is different from a similar line provided to a conduit funding vehicle. | |
Structured Investment Vehicles (‘SIV’s) | Special purpose entities which invest in diversified portfolios of interest-earning assets, generally funded through issues of commercial paper, medium-term notes and other senior debt to take advantage of the spread differentials between the assets in the SIV and the funding cost. | |
Special purpose entities (‘SPE’s) | A corporation, trust or other non-bank entity, established for a narrowly defined purpose, including for carrying on securitisation activities. The structure of the entity and activities are intended to isolate the obligations of the SPE from those of the originator and the holders of the beneficial interests in the securitisation. | |
Standardised approach | In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutions (‘ECAI’) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to the gross income of eight specified business lines. | |
Structured finance / notes | An instrument whose return is linked to the level of a specified index or the level of a specified asset. The return on a structured note can be linked to equities, interest rates, foreign exchange, commodities or credit. Structured notes may or may not offer full or partial capital protection in the event of a decline in the underlying index or asset. |
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Term | Definition | |
Student loan related assets | Securities with collateral relating to student loans. | |
Subordinated liabilities | Liabilities which rank after the claims of other creditors of the issuer in the event of insolvency or liquidation. | |
Sub-prime | A US description for customers with high credit risk, for example those who have limited credit histories, modest incomes, high debt-to-income ratios, high loan-to-value ratios (for real estate secured products) or have experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy or other credit-related problems. | |
Tier 1 capital | A component of regulatory capital, comprising core tier 1 and other tier 1 capital. Other tier 1 capital includes qualifying hybrid capital instruments such as non-cumulative perpetual preference shares and innovative tier 1 securities. | |
Tier 2 capital | A component of regulatory capital, comprising qualifying subordinated loan capital, related minority interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties. | |
Troubled debt restructuring | A US description for restructuring a debt whereby the creditor for economic or legal reasons related to a debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. | |
Unfunded exposures | An exposure where the notional amount of a contract has not been exchanged. | |
Value-at-risk (‘VAR’) | A technique that measures the loss that could occur on risk positions as a result of adverse movements in market risk factors (e.g. rates, prices, volatilities) over a specified time horizon and to a given level of confidence. | |
Wholesale loans | Money loaned to sovereign borrowers, banks, non-bank financial institutions and corporate entities. | |
Write-down | Reduction in the carrying value of an asset due to impairment or fair value movements. | |
Wrong-way risk | An adverse correlation between the counterparty’s probability of default and the mark-to-market value of the underlying transaction. |
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Accounting 365 | ||||
developments (future) 367 | ||||
policies (critical) 61 | ||||
policies (significant) 157, 369 | ||||
Accounts | ||||
approval 471 | ||||
basis of preparation 66, 365 | ||||
Acquisitions and disposals 444 | ||||
Actuarial assumptions 394 | ||||
American Depositary Shares 474 | ||||
Annual General Meeting 333, 477 | ||||
Areas of special interest 214 | ||||
Asset-backed securities 154, 156 | ||||
Assets | ||||
average balance sheet 46 | ||||
by customer group 66 | ||||
by geographical region 86, 417 | ||||
charged as security 456 | ||||
held in custody and under administration 148 | ||||
intangible 438 | ||||
other 444 | ||||
trading 422 | ||||
underlying/reported reconciliation 44 | ||||
Associates and joint ventures | ||||
dilution gains 41, 386 | ||||
interests in 432 | ||||
share of profit in 40 | ||||
Audit committee (Group) 310 | ||||
Auditors’ remuneration 400 | ||||
Auditors’ Report 350 | ||||
Balance sheet | ||||
average 46 | ||||
consolidated 42, 354 | ||||
data 4, 67, 70, 76, 77, 80, 82, 88, 95, 98, 103, | ||||
108, 114, 118, 122, 126, 133, 137, 142, | ||||
417 | ||||
HSBC Holdings 360 | ||||
insurance manufacturing subsidiaries 270 | ||||
underlying/reported reconciliation 44 | ||||
Bank payroll tax 326 | ||||
Borrowings (short-term) 56 | ||||
Brand perception 20 | ||||
Business highlights 68, 71, 74, 78 | ||||
Business model 156 | ||||
Business performance review | ||||
Europe 89, 93 | ||||
Hong Kong 99, 101 | ||||
Latin America 138, 140 | ||||
Middle East 119, 121 | ||||
North America 127, 131 | ||||
Rest of Asia-Pacific 109, 112 | ||||
Calendar (dividends) 473 | ||||
Capital | ||||
management and allocation 285 | ||||
return on invested capital 2 | ||||
structure 289 | ||||
Capital and performance ratios 3, 4 | ||||
Cash flow | ||||
accounting policy 384 | ||||
consolidated statement 356 | ||||
HSBC Holdings 361 | ||||
notes 461 |
payable under financial liabilities 249 | ||||
projected scenario analysis 247 | ||||
Cautionary statement regarding forward-looking statements 6 | ||||
Certificates of deposit and other time deposits (maturity analysis) 60 | ||||
Challenges and uncertainties 12 | ||||
Client assets 78 | ||||
Collateral and credit enhancements 207 | ||||
Commercial Banking | ||||
business highlights 71 | ||||
financial performance 70 | ||||
products and services 145 | ||||
strategic direction 70 | ||||
underlying/reported profit 72 | ||||
Committees (board) 310, 334 | ||||
Communication with shareholders 332, 478 | ||||
Concentration of exposure 208 | ||||
Conduits 182 | ||||
Constant currency 21 | ||||
Constant Net Asset Value funds 187 | ||||
Contents 1, 66, 85, 196, 294, 334, 472 | ||||
Contingent liabilities and contractual commitments 463 | ||||
Contractual obligations 56 | ||||
Corporate governance | ||||
codes 308 | ||||
report 294 | ||||
Corporate sustainability 326 | ||||
committee 313 | ||||
governance 328 | ||||
risk 264 | ||||
Cost efficiency ratio 3, 39 | ||||
Credit coverage ratios 3 | ||||
Credit exposure 206 | ||||
Credit quality 203 | ||||
classifications 226 | ||||
Credit risk | ||||
challenges and uncertainties 17 | ||||
management thereof 201 | ||||
insurance 277 | ||||
Critical accounting policies 61 | ||||
Cross-border exposures 206, 213 | ||||
Customer accounts 87, 98, 107, 117, 125, 136 | ||||
recommendation 20 | ||||
underlying/reported reconciliation 45 | ||||
Customer groups and global businesses 66 | ||||
Daily distribution of revenues 253 | ||||
Data security 149 | ||||
Dealings in HSBC Holdings plc shares 332 | ||||
Debt securities in issue 209, 446 | ||||
accounting policy 384 | ||||
Defined termsinside front cover, 489 | ||||
Deposits | ||||
average balances and average rates 58 | ||||
time 60 | ||||
Derivatives 208, 209, 424 | ||||
accounting policy 376 | ||||
Dilution gains 41, 386 | ||||
Directors 294 | ||||
appointments and re-election 307 | ||||
biographies 294 |
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board of directors 302 | ||||
bonus 338 | ||||
emoluments 400 | ||||
fees 344 | ||||
interests 316 | ||||
non-executive 343 | ||||
other directorships 343 | ||||
pensions 342, 346 | ||||
remuneration (executive) 337, 345 | ||||
remuneration (principles) 334 | ||||
responsibilities (statement of) 349 | ||||
service contracts 343 | ||||
share plans 347 | ||||
Disclosure policy (market turmoil) 151 | ||||
Dividends 2, 331, 332, 410, 472, 473 | ||||
Donations 327 | ||||
Earnings per share 2, 19, 340, 341, 411 | ||||
Economic briefing | ||||
Europe 88, 92 | ||||
Hong Kong 99, 101 | ||||
Latin America 137, 140 | ||||
Middle East 118, 121 | ||||
North America 125, 130 | ||||
Rest of Asia-Pacific 107, 111 | ||||
Economic profit 41, 340 | ||||
Efficiency and revenue mix ratios 3 | ||||
Employees 318 | ||||
compensation and benefits 326, 388 | ||||
disabled 318 | ||||
engagement 20, 327 | ||||
involvement 318 | ||||
remuneration policy 318 | ||||
Enforceability of judgements made in the US 472 | ||||
Enhanced Variable Net Asset Value funds 188 | ||||
Enquiries (from shareholders) 478 | ||||
Equity 43 | ||||
Equity securities 178, 255 | ||||
Europe | ||||
balance sheet data 88, 95, 417 | ||||
business performance 89, 93 | ||||
challenges and uncertainties 14 | ||||
customer accounts by country 87 | ||||
economic briefing 88, 92 | ||||
lending 211 | ||||
loan impairment charges/allowances 231, 234, 237, 238 | ||||
loans and advances to customers 87 | ||||
principal operations 85 | ||||
profit/(loss) 87, 88, 95, 413 | ||||
regulation and supervision (UK) 197 | ||||
underlying/reported profit 89, 92 | ||||
Events after the balance sheet date 471 | ||||
Exchange controls and other limitations affecting | ||||
equity security holders 472 | ||||
Exposures 152, 157, 162, 186, 188, 189, 206 | ||||
Fee income (net) 27 | ||||
Fair value | ||||
accounting policy 370 | ||||
Financial assets | ||||
critical accounting policy (valuation) 64 | ||||
designated at fair value 423 | ||||
not qualifying for de-recognition 431 |
reclassification 153 | ||||
Financial assets and liabilities | ||||
accounting policy 370, 378 | ||||
by measurement basis 418 | ||||
critical accounting policy (valuation) 63 | ||||
Financial guarantee contracts | ||||
accounting policy 382 | ||||
Financial highlights 2 | ||||
Financial instruments | ||||
accounting policy (fair value) 374 | ||||
credit quality 225 | ||||
fair values, 166 | ||||
net income from 30, 385 | ||||
not at fair value 179 | ||||
critical accounting policy (valuation) 63 | ||||
Financial investments 428 | ||||
accounting policy 375 | ||||
gains less losses from 31 | ||||
Financial liabilities designated at fair value 445 | ||||
Financial risks (insurance) 272 | ||||
Financial statements 5, 352 | ||||
Five-year comparison 4 | ||||
Footnotes 5, 149, 195, 291, 364 | ||||
Foreign exchange | ||||
accounting policy 381 | ||||
exposures 257, 455 | ||||
rates 4 | ||||
Funds under management 147 | ||||
Geographical regions 85 | ||||
Global Banking and Markets | ||||
asset-backed securities 154 | ||||
balance sheet data 76 | ||||
business highlights 74 | ||||
financial performance 73 | ||||
products and services 146 | ||||
strategic direction 73 | ||||
underlying/reported profit 75 | ||||
Glossary 485 | ||||
Going concern 316 | ||||
Goodwill | ||||
accounting policy 378 | ||||
and intangible assets 434 | ||||
critical accounting policy 62 | ||||
Governance codes 294 | ||||
HSBC Holdings/New York Stock Exchange | ||||
corporate governance differences 308 | ||||
Group Chairman’s Statement 8 | ||||
Group Management Board 310 | ||||
Health and safety 328 | ||||
History and development of HSBC 482 | ||||
Hong Kong | ||||
balance sheet data 98, 103, 417 | ||||
business performance 99, 101 | ||||
challenges and uncertainties 14 | ||||
economic briefing 99, 101 | ||||
lending 211 | ||||
loan impairment charges/allowances 231, 234, | ||||
237, 238 | ||||
principal operations 85 | ||||
profit/(loss) 98, 103, 413 | ||||
regulation and supervision 197 | ||||
underlying/reported profit 99, 102 |
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HSBC Holdings plc | ||||
balance sheet 360 | ||||
cash flow 361 | ||||
credit risk 241 | ||||
deferred tax 410 | ||||
dividends 473 | ||||
employee emoluments 399 | ||||
financial assets and liabilities 177, 421 | ||||
liquidity and funding management 249 | ||||
market risk 258 | ||||
maturity analysis of assets and liabilities 455 | ||||
net income from financial instruments 385 | ||||
related party transactions 471 | ||||
share plans 405, 347 | ||||
statement of changes in equity 362 | ||||
structural foreign exchange exposures 258 | ||||
subordinated liabilities 453 | ||||
Impairment | ||||
accounting policy 371 | ||||
allowances and charges 35, 230 | ||||
assessment 203 | ||||
available-for-sale assets 178 | ||||
critical accounting policy 61 | ||||
impaired loans and advances 230 | ||||
losses as percentage of loans and advances 232 | ||||
movement by industry and geographical region 232, 233, 234 | ||||
Income statement (consolidated) 23, 353 | ||||
Information on HSBC (availability thereof) 480 | ||||
Insurance | ||||
accounting policy 382 | ||||
claims incurred (net) and movements in liabilities to policyholders 34, 387 | ||||
liabilities under contracts issued 447 | ||||
net earned premiums 32, 386 | ||||
PVIF business 283 | ||||
risk management 265 | ||||
Interest income/expense (net) 26 | ||||
accounting policy 369 | ||||
analysis of changes in 53 | ||||
average balance sheet 46 | ||||
sensitivity 57, 256 | ||||
Interim management statements 478 | ||||
Internal control 313 | ||||
IFRS and Hong Kong Financial Reporting Standards comparison 366 | ||||
Investor relations 479 | ||||
IT performance 20 | ||||
Key performance indicators | ||||
financial 18 | ||||
non-financial 20 | ||||
Latin America | ||||
balance sheet data 137, 142 | ||||
business performance 138, 140 | ||||
challenges and uncertainties 15 | ||||
customer accounts by country 136 | ||||
economic briefing 137, 140 | ||||
lending 211 | ||||
loan impairment charges/allowances 231, 234, 237, 238 | ||||
loans and advances to customers 136, 212 | ||||
principal operations 85 |
profit/(loss) 137, 142, 413 | ||||
underlying/reported profit 138, 140 | ||||
Lease commitments 465 | ||||
accounting policy 380 | ||||
Legal | ||||
challenges and uncertainties 17 | ||||
proceedings 148 | ||||
litigation 467 | ||||
Leveraged finance transactions 165, 194 | ||||
Liabilities | ||||
average balance sheet 49 | ||||
other 447 | ||||
subordinated 450 | ||||
trading 445 | ||||
underlying/reported reconciliation 44 | ||||
Life insurance business 265 | ||||
Liquidity and funding 244 | ||||
challenges and uncertainties 15 | ||||
management of risk 245 | ||||
impact of market turmoil 248 | ||||
insurance 281 | ||||
policies and procedures 244 | ||||
primary sources of funding 244 | ||||
Loans and advances | ||||
accounting policy 371 | ||||
collateral 207 | ||||
concentration of exposure 209 | ||||
credit quality of 203 | ||||
delinquency in the US 224 | ||||
impairment 230, 238, 241 | ||||
maturity and interest sensitivity 57 | ||||
modifications and re-aging 224 | ||||
past due 229 | ||||
renegotiated 224 | ||||
to banks by geographical region 213 | ||||
to customers by industry sector and geographical region 45, 181, 211 | ||||
underlying/reported reconciliation 45 | ||||
Market risk 250 | ||||
impact of market turmoil 252 | ||||
insurance 274 | ||||
sensitivity analysis 251 | ||||
Market turmoil 151, 248, 252 | ||||
Maturity analysis of assets and liabilities 454 | ||||
Maximum exposure to credit risk 206 | ||||
Memorandum and Articles of Association 476 | ||||
Middle East | ||||
balance sheet data 118, 122, 417 | ||||
business performance 119, 121 | ||||
challenges and uncertainties 14 | ||||
customer accounts by country 117 | ||||
economic briefing 118, 121 | ||||
lending 211 | ||||
loan impairment charges/allowances 231, 234, 237, 238 | ||||
loans and advances to customers 117, 212 | ||||
principal operations 85 | ||||
profit/(loss) 117, 122, 413 | ||||
underlying/reported profit 119, 120 | ||||
wholesale lending 214 | ||||
Minority interests 457 | ||||
Money market funds 187 |
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Monoline insurers 163 | ||||
Mortgage lending 218, 222 | ||||
Nomination committee 312 | ||||
Non-interest income | ||||
accounting policy 369 | ||||
Non-life insurance business 266 | ||||
Non-money market investment funds 188 | ||||
Non-trading portfolios 255 | ||||
North America | ||||
balance sheet data 126, 133 | ||||
business performance 127, 131 | ||||
challenges and uncertainties 15 | ||||
customer accounts by country 125 | ||||
economic briefing 125, 130 | ||||
lending 211 | ||||
loan delinquency in the US 223 | ||||
loan impairment charges/allowances 231, 234, 237, 238 | ||||
loans and advances to customers 125 | ||||
mortgage lending 218 | ||||
principal operations 85 | ||||
profit/(loss) 126, 133, 413 | ||||
regulation and supervision (US) 198 | ||||
underlying/reported profit 127, 130 | ||||
Off-balance sheet arrangements 194 | ||||
Operating expenses 38 | ||||
Operating income 33, 388 | ||||
Operational risk | ||||
challenges and uncertainties 18 | ||||
Organisational structure chart 484 | ||||
Other (notes) 80 | ||||
Pensions | ||||
accounting policy 380 | ||||
defined benefit plans 258, 395, 398 | ||||
for directors 346 | ||||
risk 263 | ||||
Performance and context 335 | ||||
Personal Financial Services | ||||
business highlights 68 | ||||
financial performance 67 | ||||
products and services 145 | ||||
strategic direction 67 | ||||
underlying/reported profit 69 | ||||
Personal lending 215 | ||||
Pillar 2 and 3 288 | ||||
Principal activities 12 | ||||
Private Banking | ||||
business highlights 78 | ||||
financial performance 78 | ||||
products and services 147 | ||||
strategic direction 77 | ||||
underlying/reported profit 79 | ||||
Products and services 145 | ||||
Profit before tax | ||||
by country 87, 106, 117, 125 | ||||
by customer group 66, 67, 70 73, 77 80, 82 | ||||
by geographical region 86, 88, 95, 98, 103, | ||||
108, 114, 118, 122, 126, 133, 137, 142, | ||||
413 | ||||
consolidated 353 | ||||
data 4 |
underlying/reported reconciliations 22, 69, 72, | ||||
75, 79, 81, 89, 92, 99, 102, 109, 112, 127, | ||||
130 | ||||
Property, plant and equipment 148, 439 | ||||
accounting policy 379 | ||||
Provisions 450 | ||||
accounting policy 382 | ||||
PVIF 283 | ||||
Ratios | ||||
advances to deposits 246 | ||||
capital and performance 3 | ||||
credit coverage 3 | ||||
cost efficiency 3, 39 | ||||
earnings to combined fixed charges 56 | ||||
financial 4 | ||||
key performance indicators 19 | ||||
net liquid assets to customer liabilities 246 | ||||
Regulation and supervision 196 | ||||
challenges and uncertainties 16 | ||||
Related party transactions 468 | ||||
Remuneration committee 312, 334 | ||||
Renegotiated loans 224 | ||||
Repricing gap 254 | ||||
Reputational risk 263 | ||||
Residual value risk management 261 | ||||
Rest of Asia-Pacific | ||||
balance sheet data 108, 114 | ||||
business performance 109, 112 | ||||
challenges and uncertainties 14 | ||||
customer accounts by country 107 | ||||
economic briefing 107, 111 | ||||
lending 211 | ||||
loan impairment charges/allowances 231, 234, | ||||
237, 238 | ||||
loans and advances to customers 107, 212 | ||||
principal operations 85 | ||||
profit/(loss) 106, 114, 413 | ||||
underlying/reported profit 109, 112 | ||||
Rights issue 2, 466 | ||||
accounting policy 385 | ||||
Risk elements in loan portfolio 241 | ||||
Risk management 157, 199, 336 | ||||
appetite 200 | ||||
capital management and allocation 285 | ||||
contingent liquidity 247 | ||||
control culture 201 | ||||
credit 201 | ||||
credit spread 255 | ||||
gap risk 254, 260 | ||||
governance and ownership 199 | ||||
insurance operations 265 | ||||
legal 262 | ||||
liquidity and funding management 245 | ||||
market 250 | ||||
operational 262 | ||||
pension 263 | ||||
rating scales 226 | ||||
reputational 263 | ||||
residual value 261 | ||||
scenario stress testing 200 | ||||
security and fraud 263 | ||||
sustainability 264 |
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Risk-weighted assets 290 | ||||
by principal subsidiary 291 | ||||
Sale and repurchase agreements | ||||
accounting policy 376 | ||||
Securities held for trading 208 | ||||
Securitisations 189 | ||||
Segmental analysis 412 | ||||
accounting policy 369 | ||||
Senior management | ||||
biographies 299 | ||||
Share-based payments 401 | ||||
accounting policy 381 | ||||
Share capital 328, 457 | ||||
accounting policy 384 | ||||
notifiable interests in 332 | ||||
ownership guidelines 342 | ||||
rights and obligations 329 | ||||
Share information 3 | ||||
Share plans | ||||
Bank of Bermuda plans 325, 461 | ||||
discretionary plans 322 | ||||
for directors 347, 402 | ||||
for employees 319, 402 | ||||
HSBC Finance plans 324, 406, 460 | ||||
HSBC France plans 323, 406, 459 | ||||
Performance Shares and Restricted Share awards 347, 402, 403 | ||||
Shareholder (communications with) 332, 478 | ||||
profile 476 | ||||
Special purpose entities 181, 190, 194 | ||||
Staff numbers 38, 388 | ||||
Statement of changes in equity 357 | ||||
Statement of comprehensive income 354 | ||||
Stock symbols 476 | ||||
Strategic direction 12 | ||||
Structural foreign exchange exposure 257 | ||||
Structured investment vehicles (SIVs) 182 | ||||
Subsidiaries 442 | ||||
accounting policy 378 | ||||
Supplier payment policy 328 | ||||
Taxation | ||||
accounting policy 380 | ||||
challenges and uncertainties 18 | ||||
deferred tax – critical accounting policy 65 | ||||
expense 407 | ||||
UK residents 480 | ||||
US residents 481 | ||||
Tier 1 capital 289, 290 | ||||
Total shareholder return 3, 19, 340, 341, 342 | ||||
Trading assets 422 | ||||
accounting policy 374 | ||||
Trading income (net) 28 | ||||
Trading liabilities | ||||
accounting policy 374 | ||||
Trading market (nature of) 475 | ||||
Trading portfolios 253 | ||||
Troubled debt restructurings 242 | ||||
Underlying performance 21 | ||||
Value at risk 251 | ||||
Wholesale lending 214 |
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Incorporated in England on 1 January 1959 with limited liability under the UK Companies Act
Registered in England: number 617987
REGISTERED OFFICE AND
GROUP MANAGEMENT OFFICE
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 (0) 20 7991 8888
Facsimile: 44 (0) 20 7992 4880
Web: www.hsbc.com
REGISTRARS
Principal Register
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Telephone: 44 (0) 870 702 0137
Hong Kong Overseas Branch Register
Computershare Hong Kong Investor Services
Limited
Hopewell Centre
Rooms 1712-1716, 17th floor
183 Queen’s Road East
Hong Kong
Telephone: 852 2862 8555
Corporate Shareholder Services
The Bank of Bermuda Limited
6 Front Street
Hamilton HM11
Bermuda
Telephone: 1 441 299 6737
BNY Mellon Shareowner Services
PO Box 358516
Pittsburgh
PA15252 – 8516
USA
Telephone: 1 877 283 5786
Email: shrrelations@bnymellon.com
Paying Agent (France)
HSBC France
103 avenue des Champs Elysées
75419 Paris Cedex 08
France
Telephone: 33 1 40 70 22 56
Goldman Sachs International
Peterborough Court
133 Fleet Street
London EC4A 2BB
United Kingdom
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
500
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All rights reserved
The FSC logo identifies products which contain wood from well-managed forests certified in accordance with the rules of the Forest Stewardship Council.
Mixed Sources SGS-COC-006116 © 1996 Forest Stewardship Council A.C. |
HSBC’s new China headquarters building (front cover, centre) on the River Huangpu in Pudong, Shanghai, is due to open in mid-2010. Photography: Mike Abrahams
Group Chairman
Photography: Eddie Chan Wai Hing
Table of Contents
Exhibit | ||
Number | Description | |
1.1 | Memorandum and Articles of Association of HSBC Holdings plc. + | |
2.1 | The total amount of long-term debt securities of HSBC Holdings plc authorized under any instrument does not exceed 10 percent of the total assets of the Group on a consolidated basis. HSBC Holdings plc hereby agrees to furnish to the Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of HSBC Holdings plc or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. | |
4.1 | Service Agreement dated October 14, 2008 between HSBC Holdings plc and Douglas Jardine Flint.* | |
4.2 | Service Agreement dated May 24, 2007 between HSBC Holdings plc and Stephen Keith Green, as amended February 28, 2008. ** | |
4.3 | Service Agreement dated May 24, 2007 between HSBC Asia Holdings BV and Michael F Geoghegan, as amended February 1, 2010. | |
4.4 | Service Agreement dated August 29, 2008 between The Hong Kong and Shanghai Banking Corporation Limited and Vincent Cheng Hoi Chuen.* | |
4.5 | Service Agreement dated December 2, 2008 between HSBC Asia Holdings B.V. and Alexander Flockhart.* | |
4.6 | Service Agreement dated September 5, 2008 between HSBC Asia Holdings B.V. and Stuart Gulliver.* | |
7.1 | Computation of ratios of earnings to combined fixed charges (and preference share dividends). | |
8.1 | Subsidiaries of HSBC Holdings plc (set forth in Note 24 to the consolidated financial statements included in this Form 20-F). | |
12.1 | Certificate of HSBC Holdings plc’s Group Chief Executive pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
12.2 | Certificate of HSBC Holdings plc’s Group Finance Director pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
13.1 | Annual Certification of HSBC Holdings plc’s Group Chief Executive and Group Finance Director pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
14.1 | Consent of KPMG Audit plc. |
Table of Contents
Exhibit | ||
Number | Description | |
14.2 | Pages of HSBC Holdings plc’s 2000 Form 20-F/A dated February 26, 2001 relating to the Memorandum and Articles of Association of HSBC Holdings plc that are incorporated by reference into this Form 20-F. *** | |
14.3 | Pages of HSBC Holdings plc’s 2001 Form 20-F dated March 13, 2002 relating to the Memorandum and Articles of Association of HSBC Holdings plc that are incorporated by reference into this Form 20-F. ** | |
23.1 | Consent of Estella Chiu. | |
23.2 | Consent of Mercer. | |
23.3 | Consent of Towers Watson. |
+ | As previously filed with the Securities and Exchange Commission as Exhibit 4.3 to HSBC Holdings plc’s Registration Statement on Form S-8 (333-162565) dated October 19, 2009. | |
* | As previously filed with the Securities and Exchange Commission as an exhibit to HSBC Holdings plc’s Form 20-F dated March 10, 2009. | |
** | As previously filed with the Securities and Exchange Commission as an exhibit to HSBC Holdings plc’s Form 20-F dated March 20, 2008. | |
*** | As previously filed with the Securities and Exchange Commission as an exhibit to HSBC Holdings plc’s Form 20-F dated March 20, 2006. |
Table of Contents
HSBC Holdings plc | ||||
By: | /s/ Douglas J Flint | |||
Name: | Douglas J Flint | |||
Title: | Chief Financial Officer, Executive Director, Risk and Regulation | |||