Document

FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549

 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
For the month of May 2019

Commission File Number: 001-14930

HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F   X             Form 40-F ......
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ______


(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes.......             No    X
 
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ..............).
 
 
 
This Report on Form 6-K with respect to our quarterly results for the three-month period ended March 31, 2019 is hereby incorporated by reference in the following HSBC Holdings plc registration statements: Registration Statements on Form F-3 (Nos. 333-92024, 333-135007, 333-158065, 333-180288, 333-202420, 333-223191) and Registration Statement on Form F-4 (No. 333-126531).

                                                                                       
Neither our website referred to herein, nor any of the information contained on our website, is incorporated by reference in the Form 6-K



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3 MAY 2019
HSBC HOLDINGS PLC
1Q19 EARNINGS RELEASE – HIGHLIGHTS
John Flint, Group Chief Executive, said:
“These are an encouraging set of results, particularly in the context of heightened economic uncertainty globally. We remain focused on executing the strategy we outlined last June, while also being alert to risks in the global economy.”
Financial performance (vs. 1Q18)
•
Reported profit after tax up 31% to $4.9bn.
•
Reported revenue up 5%. Adjusted revenue up 9%, supported by positive market impacts and disposal gains.
•
Reported operating expenses down 12%. Adjusted operating expenses up 3.2% in 1Q19, which has slowed from 5.6% at FY18 (compared with FY17). Returned to positive adjusted jaws of 6.0%, supported by favourable markets-related movements and disposal gains in Latin America.
•
Earnings per share of 21 cents, up 40%. Return on tangible equity (annualised) up 220bps to 10.6%.
•
Common equity tier 1 (‘CET1’) ratio up 30bps from 31 December 2018 to 14.3%, including a 7bps adverse impact of IFRS 16. We are committed to the discipline of scrip neutralisation and will announce our decision on 2019 share buybacks at the half-year.
Strategic progress
•
Continued growth momentum in RBWM and CMB. Adjusted revenue up 10% in RBWM and 11% in CMB, compared with 1Q18. Strong adjusted revenue performances in Retail Banking (up 11%) and Global Liquidity and Cash Management (up 17%).
•
Strong growth in Asia, despite a softer rate and growth environment. Reported revenue up 7% compared with 1Q18; reported lending growth of $11bn or 2% compared with 4Q18.
•
Investments of $1.0bn in 1Q19, up 15% compared with 1Q18, on near- and medium-term initiatives to grow the business and enhance our digital capabilities.
•
Revenue growth from our international network, with transaction banking revenue up 9% compared with 1Q18.
•
US turnaround progressing, but this remains our most challenging strategic priority. In 1Q19, we increased retail customer numbers and continued to capitalise on our international network, despite the softening rate environment.
Financial highlights and key ratios
 
Quarter ended 31 Mar
 
2019
2018
Change

 
$m
$m
%

Reported profit before tax
6,213
4,755
30.7

Adjusted profit before tax
6,350
5,800
9.5

Reported profit after tax
4,910
3,738
31.4

 
$
$
%

Basic earnings per share
0.21
0.15
40.0

Diluted earnings per share
0.21
0.15
40.0

Net asset value per ordinary share
8.20
8.40
(2.4
)
Tangible net asset value per ordinary share
7.05
7.29
(3.3
)
Tangible net asset value per fully diluted ordinary share
7.02
7.25
(3.2
)
 
Millions
Millions
 
Basic number of ordinary shares outstanding
20,082
20,013
 
Basic number of ordinary shares outstanding and dilutive potential ordinary shares
20,177
20,118
 
 
%
%
 
Net interest margin
1.59
1.67
 
Return on average ordinary shareholders’ equity (annualised)
10.2
7.5


Return on average tangible equity (annualised)
10.6
8.4


Adjusted jaws
6.0
 
 
We use adjusted performance to understand the underlying trends in the business. The main differences between reported and adjusted figures are foreign currency translation and significant items, which include litigation and regulatory items.
Capital and balance sheet
 
 
At
 
 
31 Mar
31 Dec
 
 
2019
2018
 
Footnotes
%
%
Common equity tier 1 ratio
1
14.3
14.0
Leverage ratio
1
5.4
5.5
 
 
$m
$m
Loans and advances to customers
 
1,005,279
981,696
Customer accounts
 
1,356,511
1,362,643
Loans and advances to customers as a percentage of customer accounts

 
74.1%
72.0%
Risk-weighted assets
1
879,485
865,318
1
The Group has adopted the EU’s regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’. These apply to reported and adjusted RWAs, regulatory capital and related ratios throughout this 1Q19 Earnings Release, unless otherwise stated.

HSBC Holdings plc Earnings Release 1Q19
1

Earnings Release – 1Q19

Contents
 
Page
 
 
Page
Highlights
 
Risk-weighted assets
Group Chief Executive’s review
 
Summary information – global businesses
Adjusted performance
 
Summary information – geographical regions

Financial performance commentary
 
Appendix – selected information



Cautionary statement regarding forward-looking statements
 
– Reconciliation of reported and adjusted results – global businesses





Summary consolidated income statement
 
– Reconciliation of reported and adjusted risk-weighted assets




Summary consolidated balance sheet
 
– Reconciliation of reported and adjusted results – geographical regions

Credit risk
 
– Reconciliation of capital with and without IFRS 9 transitional arrangements
Capital
 
First interim dividend for 2019
Leverage
 
Terms and abbreviations
HSBC Holdings plc will be conducting a trading update conference call with analysts and investors today to coincide with the publication of its Earnings Release. The call will take place at 07.30am BST. Details of how to participate in the call and the live audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in
66 countries and territories in our geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of $2,659bn at 31 March 2019, HSBC is one of the world’s largest banking and financial services organisations.

2
HSBC Holdings plc Earnings Release 1Q19

Review by John Flint, Group Chief Executive
We have made a good start to 2019. Reported profit after tax was up significantly on 1Q18, thanks largely to strong revenue growth in our Retail Banking and Wealth Management and Commercial Banking businesses, and favourable movements in significant items. Return on tangible equity – our headline measure – was up considerably on the same period last year, and we delivered positive adjusted jaws over the quarter.
Our three main global businesses performed well. Retail Banking and Wealth Management generated a significant increase in adjusted revenue on the back of higher lending and deposit balances, notably in the UK and Hong Kong, and from positive market impacts in insurance manufacturing. Commercial Banking delivered a double-digit increase in adjusted revenue, owing mainly to our continued strength in transaction banking, with growth across all regions. Global Banking and Markets adjusted revenue was up relative to a strong first quarter last year, with favourable movements on credit and funding valuation adjustments and growth in transaction banking more than offsetting the impact of economic uncertainty on our Global Banking, equities and fixed income businesses.
These are an encouraging set of results, and we remain focused on executing the strategy we outlined last June. At the same time, we remain alert to risks in the global economy. We are proactively managing costs and investment in line with this more uncertain outlook, and will continue to do so.
Adjusted performance
Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort period-on-period comparisons.
We consider adjusted performance to provide useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US dollar against most major currencies. We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and better understand the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 1Q19 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
•
the income statements for 4Q18 and 1Q18 at the average rates of exchange for 1Q19; and
•
the closing prior period balance sheets at the prevailing rates of exchange on 31 March 2019.
No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC’s Argentinian subsidiaries has not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC’s operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.
Significant items
‘Significant items’ refers collectively to the items that management and investors would ordinarily identify and consider separately to understand better the underlying trends in the business.
The tables on pages 34 to 42 detail the effects of significant items on each of our global business segments and geographical regions during 1Q19, 4Q18 and 1Q18.
Adjusted performance – foreign currency translation of significant items
The foreign currency translation differences related to significant items are presented as a separate component of significant items. This is considered a more meaningful presentation as it allows better comparison of period-on-period movements in performance.
Global business performance
The Group Chief Executive, supported by the rest of the Group Management Board (‘GMB’), is considered to be the Chief Operating Decision Maker (‘CODM’) for the purposes of identifying the Group‘s reportable segments.
The Group Chief Executive and the rest of the GMB review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 ‘Operating Segments’. Global business results are assessed by the CODM on the basis of adjusted performance, which removes the effects of significant items and currency translation from reported results. We therefore present these results on an adjusted basis as required by IFRSs.
A reconciliation of the Group’s adjusted results to the Group’s reported results is presented on page 4. Supplementary reconciliations of adjusted to reported results by global business are presented on pages 34 to 36 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that provide breakdowns of adjusted revenue by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed.

HSBC Holdings plc Earnings Release 1Q19
3

Earnings Release – 1Q19

Reconciliation of reported and adjusted results
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

 
 
2019

2018

2018

 
Footnotes
$m

$m

$m

Revenue
 
 
 
 
Reported
 
14,428

12,695

13,710

Currency translation
 


75

(656
)
Significant items
 
(22
)
(129
)
142

– customer redress programmes
 
—

(7
)
—

– disposals, acquisitions and investment in new businesses
 
—

(29
)
112

– fair value movement on financial instruments
1
(22
)
(95
)
28

– currency translation of significant items
 
 
2

2

Adjusted
 
14,406

12,641

13,196

Change in expected credit losses and other credit impairment charges
 






Reported
 
(585
)
(853
)
(170
)
Currency translation
 
 
(10
)
18

Adjusted
 
(585
)
(863
)
(152
)
Operating expenses
 
 
 
 
Reported
 
(8,222
)
(9,144
)
(9,383
)
Currency translation
 


(55
)
446

Significant items
 
159

265

1,123

– cost of structural reform
2
53

61

126

– customer redress programmes
 
56

(16
)
93

– disposals, acquisitions and investment in new businesses
 
—

(2
)
2

– past service costs of guaranteed minimum pension benefits equalisation
 
—

228

—

– restructuring and other related costs
 
50

15

20

– settlements and provisions in connection with legal and regulatory matters
 
—

(24
)
897

– currency translation of significant items
 
 
3

(15
)
Adjusted
 
(8,063
)
(8,934
)
(7,814
)
Share of profit in associates and joint ventures
 






Reported
 
592

558

598

Currency translation
 


13

(28
)
Adjusted
 
592

571

570

Profit before tax
 






Reported
 
6,213

3,256

4,755

Currency translation
 


23

(220
)
Significant items
 
137

136

1,265

– revenue
 
(22
)
(129
)
142

– operating expenses
 
159

265

1,123

Adjusted
 
6,350

3,415

5,800

Loans and advances to customers (net)
 
 
 
 
Reported
 
1,005,279

981,696

981,165

Currency translation
 
 
5,923

(43,391
)
Adjusted
 
1,005,279

987,619

937,774

Customer accounts
 
 
 
 
Reported
 
1,356,511

1,362,643

1,379,679

Currency translation
 
 
7,573

(55,166
)
Adjusted
 
1,356,511

1,370,216

1,324,513

1
Includes fair value movements on non-qualifying hedges and debit value adjustments (‘DVA’) on derivative contracts.
2
Comprises costs associated with preparations for the UK’s exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.


4
HSBC Holdings plc Earnings Release 1Q19

Financial performance commentary
Distribution of results by global business
 
 
Quarter ended
 
31 Mar

31 Dec

31 Mar

 
2019

2018

2018

 
$m

$m

$m

Adjusted profit/(loss) before tax
 
 
 
Retail Banking and Wealth Management
2,231

1,354

1,876

Commercial Banking
2,016

1,676

2,030

Global Banking and Markets
1,639

704

1,640

Global Private Banking
98

60

111

Corporate Centre
366

(379
)
143

Total
6,350

3,415

5,800

Distribution of results by geographical region
 
Quarter ended
 
31 Mar

31 Dec

31 Mar

 
2019

2018

2018

 
$m

$m

$m

Reported profit/(loss) before tax
 
 
 
Europe
(14
)
(1,559
)
(18
)
Asia
5,006

3,951

4,768

Middle East and North Africa
465

399

437

North America
379

290

(596
)
Latin America
377

175

164

Total
6,213

3,256

4,755

Adjusted profit/(loss) before tax
 
 
 
Europe
69

(1,402
)
134

Asia
5,040

3,974

4,662

Middle East and North Africa
466

401

431

North America
388

294

426

Latin America
387

148

147

Total
6,350

3,415

5,800

Tables showing adjusted profit before tax by global business and region are presented to support the commentary on adjusted performance on the following pages.
The tables on pages 34 to 42 reconcile reported to adjusted results for each of our global business segments and geographical regions.
Group
1Q19 compared with 1Q18 – reported results
Movement in reported profit before tax compared with 1Q18
 
Quarter ended
 
31 Mar

31 Mar

Variance
 
2019

2018

1Q19 vs. 1Q18
 
$m

$m

$m

%

Revenue
14,428

13,710

718

5

ECL
(585
)
(170
)
(415
)
>(100)

Operating expenses
(8,222
)
(9,383
)
1,161

12

Share of profit from associates and JVs
592

598

(6
)
(1
)
Profit before tax
6,213

4,755

1,458

31

Reported profit before tax
Reported profit before tax of $6.2bn in 1Q19 was $1.5bn or 31% higher than in 1Q18. This increase reflected higher revenue in RBWM due to balance sheet growth and wider margins in Retail Banking, and in CMB due to growth in Global Liquidity and Cash Management (‘GLCM’) and Credit and Lending (‘C&L’). Revenue growth included the favourable effects of market impacts in insurance manufacturing, credit and funding valuation adjustments in GB&M and the non-recurrence of a 1Q18 adverse swap mark-to-market loss on a bond reclassification in Corporate Centre. Growth also included 1Q19 disposal gains in RBWM and CMB of $157m.
Operating expenses were $1.2bn lower, reflecting net favourable movements in significant items, notably as 1Q18 included a charge of $0.9bn for settlements and provisions in connection with legal and regulatory matters. This was partly offset by an increase in expenditure on investments to grow the business, including enhancements of digital capabilities. In addition, expected credit losses and other credit impairment charges (‘ECL’) increased, notably in CMB in the UK and Asia.
Excluding net favourable movements in significant items of $1.1bn and adverse foreign currency translation differences of $0.2bn, profit before tax increased by $0.6bn or 9%.
Reported revenue
Reported revenue of $14.4bn was $0.7bn or 5% higher than in 1Q18.

HSBC Holdings plc Earnings Release 1Q19
5

Earnings Release – 1Q19

The increase in reported revenue included adverse foreign currency translation differences of $0.7bn, partly offset by a net favourable movement in significant items of $0.2bn.
Excluding foreign currency translation differences and significant items, revenue increased by $1.2bn or 9%.
Reported ECL
Reported ECL of $0.6bn were $0.4bn higher than in 1Q18, notably in CMB, reflecting charges in 1Q19, compared with net releases in 1Q18. In addition, there were lower net ECL releases in Corporate Centre in 1Q19.
The effect of foreign currency translation differences between the periods was minimal.
Reported operating expenses
Reported operating expenses of $8.2bn were $1.2bn or 12% lower than in 1Q18. This primarily reflected a favourable effect of foreign currency translation differences of $0.4bn and net favourable movements in significant items of $1.0bn, which included the non-recurrence of settlements and provisions in connection with legal and regulatory matters of $0.9bn in 1Q18. These favourable movements were partly offset by an increase in operating expenses from near- and medium-term investments to grow the business, together with higher performance-related pay.
Excluding significant items and foreign currency translation differences, operating expenses increased by $0.2bn or 3%.
Reported share of profit from associates and JVs
Reported income from associates of $0.6bn was broadly unchanged.
Group
1Q19 compared with 1Q18 – adjusted results
Movement in adjusted profit before tax compared with 1Q18
 
Quarter ended
 
31 Mar

31 Mar

Variance
 
2019

2018

1Q19 vs. 1Q18
 
$m

$m

$m

%

Revenue
14,406

13,196

1,210

9

ECL
(585
)
(152
)
(433
)
>(100)

Operating expenses
(8,063
)
(7,814
)
(249
)
(3
)
Share of profit from associates and JVs
592

570

22

4

Profit before tax
6,350

5,800

550

9

Adjusted profit before tax
On an adjusted basis, profit before tax of $6.4bn was $0.6bn or 9% higher than in 1Q18.
From 1 July 2018, Argentina was deemed a hyperinflationary economy for accounting purposes. The impact of applying IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ from 1 July 2018 and presenting in accordance with IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ resulted in a $50m decrease in profit before tax in 1Q19. The effects of hyperinflation accounting in Argentina have not been deemed a significant item and are therefore included within adjusted results.
Adjusted revenue
Adjusted revenue of $14.4bn was $1.2bn or 9% higher than in 1Q18, reflecting continued growth momentum in RBWM and CMB, notably in Asia. Revenue increased in GB&M, while in GPB revenue fell. We also recorded a net favourable movement in revenue in Corporate Centre.
•
In RBWM, revenue increased by $0.5bn or 10%, mainly in Retail Banking, reflecting growth in lending and deposit balances, primarily in the UK and Hong Kong, and wider margins resulting from interest rate rises. In Wealth Management, revenue growth was mainly due to favourable market impacts in 1Q19 of $181m in insurance manufacturing (1Q18: $40m adverse), partly offset by lower investment distribution revenue compared with a strong 1Q18.
•
In CMB, revenue increased by $0.4bn or 11%, primarily in GLCM as we benefited from wider deposit margins, notably in Hong Kong and the UK, as well as growth in average balances in the UK. In addition, revenue increased in C&L due to balance sheet growth, partly offset by the effects of margin compression. Revenue growth in Global Trade and Receivables Finance (‘GTRF’) was due to improved margins and higher fees.
•
In GB&M, revenue increased by $0.1bn or 3% and included a net favourable movement on credit and funding valuation adjustments. Revenue increases in GLCM and Securities Services were driven by the impact of higher interest rates and average balance growth. Revenue also increased in GTRF, primarily in MENA and Asia, as we grew average lending balances. In Global Banking, revenue fell as 1Q18 included gains on corporate lending restructuring, while in Global Markets, revenue was down due to reduced client activity, driven by market uncertainty, partly offset by a provision release of $106m in Equities.
•
In GPB, revenue decreased by $17m or 4%, primarily in the US, reflecting the impact of our repositioning actions and lower investment revenue in Switzerland. This was partly offset by an increase in Asia from growth in deposit revenue and annuity fees, partly offset by lower brokerage and trading revenue.
•
In Corporate Centre, we recorded a net favourable movement in revenue of $0.2bn. This primarily reflected higher revenue in Central Treasury, mainly as 1Q18 included a $177m loss arising from swap mark-to-market movements following a bond reclassification under IFRS 9 ‘Financial Instruments’. This was partly offset by the adverse effects of hyperinflation accounting in Argentina of $56m.
Adjusted ECL
Adjusted ECL of $0.6bn were $0.4bn higher, driven by a small number of individual corporate exposures, mainly in the UK. There was no material change in the quarter to allowances relating to economic uncertainty in the UK.
The ECL variance was driven by:

6
HSBC Holdings plc Earnings Release 1Q19

•
CMB (up $0.3bn), mainly in HSBC UK, our UK ring-fenced bank, from charges related to a small number of customers, and an allowance to reflect current economic uncertainty in the UK. ECL were also higher in Asia, reflecting higher specific charges in various sectors in 1Q19 compared with net releases in 1Q18; and
•
Corporate Centre (up $0.1bn) from lower net releases related to our legacy credit portfolio.
Adjusted ECL in RBWM, GB&M and GPB were broadly in line with charges in 1Q18.
In 1Q19, adjusted ECL as a percentage of average gross loans and advances to customers was 0.24%, compared with 0.07% at 1Q18.
Adjusted operating expenses
Adjusted operating expenses of $8.1bn were $0.2bn or 3% higher than in 1Q18. This included an increase in investments (up $0.1bn), notably from near- and medium-term investments to grow the business, mainly in RBWM and CMB, and continued investment in digital across all global businesses. In addition, performance-related pay increased by $0.1bn.
Adjusted share of profit from associates and JVs
Adjusted income from associates of $0.6bn was $22m or 4% higher than in 1Q18, mainly reflecting an increase in share of income from Bank of Communications Co., Limited (‘BoCom’).
Tax expense
The effective tax rate for 1Q19 of 21.0% was lower than 21.4% in 1Q18, as 1Q18 contained a non-deductible regulatory settlement. The impact of this was partly offset by the effect of changes in profit mix and adjustments in respect of prior periods.
First interim dividend for 2019
On 3 May 2019, the Board announced a first interim dividend for 2019 of $0.10 per ordinary share. Further details are set out at the end of this release.
Retail Banking and Wealth Management
1Q19 compared with 1Q18 – adjusted results
Management view of adjusted revenue
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

Variance
 
 
2019

2018

2018

1Q19 vs. 1Q18
 
Footnotes
$m

$m

$m

$m

%

Retail Banking
 
3,870

3,944

3,494

376

11

– current accounts, savings and deposits
 
2,197

2,328

1,786

411

23

– personal lending
 
1,673

1,616

1,708

(35
)
(2
)
    mortgages
 
433

418

551

(118
)
(21
)
    credit cards
 
789

723

694

95

14

    other personal lending
1
451

475

463

(12
)
(3
)
Wealth Management
 
1,907

1,129

1,768

139

8

– investment distribution
2
855

673

1,019

(164
)
(16
)
– life insurance manufacturing
 
793

207

479

314

66

– asset management
 
259

249

270

(11
)
(4
)
Other
3
194

62

181

13

7

Net operating income
4
5,971

5,135

5,443

528

10

RoTE excluding significant items and UK bank levy (annualised) (%)

 
22.1

–

23.1

 
 
For footnotes, see page 14.
Adjusted profit before tax of $2.2bn was $0.4bn or 19% higher than in 1Q18. This increase reflected a strong revenue performance in Retail Banking due to balance sheet growth and the impact of interest rates on margins. The increase also included favourable market impacts in life insurance manufacturing, as well as disposal gains in Argentina and Mexico. This was partly offset by higher operating expenses.
Adjusted revenue of $6.0bn was $0.5bn or 10% higher.
In Retail Banking, revenue of $3.9bn was up $0.4bn or 11%. The increase reflected deposit balance growth of $20bn or 3%, particularly in the UK and Hong Kong, and lending balance growth of $30bn or 9% compared with 1Q18, notably in mortgages in the UK and Hong Kong, together with improved deposit margins from higher interest rates.
In Wealth Management, revenue of $1.9bn was up $0.1bn or 8%, reflecting:
•
higher life insurance manufacturing revenue (up $0.3bn or 66%), mostly from net favourable market impacts of $0.2bn (favourable movement of $181m in 1Q19, compared with an adverse movement of $40m in 1Q18), and the growth in value of new business written (up 23% to $366m).
This was partly offset by:
•
lower investment distribution revenue (down $0.2bn or 16%), as exceptional market conditions in Asia in 1Q18 did not recur in 1Q19.
Revenue in 1Q19 also included disposal gains in Argentina and Mexico of $133m.
Adjusted ECL were $0.3bn, up 4% from 1Q18, driven by growth in unsecured lending, although credit quality remained stable across the loan portfolio at 33 basis points of average gross loans and advances to customers.
Adjusted operating expenses of $3.5bn were $0.2bn or 5% higher. These were mainly driven by increased staff costs and inflation, particularly in Asia, and the impact of strategic investment in growth initiatives. During 1Q19, we added additional staff to support business growth initiatives, and continued to enhance our technology and digital capabilities. We also continued to invest in regulatory and compliance programmes.

HSBC Holdings plc Earnings Release 1Q19
7

Earnings Release – 1Q19

Commercial Banking
1Q19 compared with 1Q18 – adjusted results
Management view of adjusted revenue
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

Variance
 
 
2019

2018

2018

1Q19 vs. 1Q18
 
Footnotes
$m

$m

$m

$m

%
Global Trade and Receivables Finance
 
473

457

448

25

6
Credit and Lending
 
1,360

1,339

1,262

98

8
Global Liquidity and Cash Management
 
1,508

1,534

1,292

216

17
Markets products, Insurance and Investments, and Other
5
580

385

533

47

9
Net operating income

4
3,921

3,715

3,535

386

11
RoTE excluding significant items and UK bank levy (annualised) (%)

 
13.9

–

15.5

 
 
For footnotes, see page 14.
Adjusted profit before tax of $2.0bn was $14m or 1% lower than in 1Q18. Broad-based revenue growth reflected favourable performance in GLCM, C&L and GTRF. This increase was more than offset by an ECL charge in 1Q19 compared with a net release in 1Q18, notably in the UK, and higher operating expenses from increased investment.
Adjusted revenue of $3.9bn was $0.4bn or 11% higher, with growth in all major products and in all regions.
•
In GLCM, revenue was $0.2bn or 17% higher, with growth in all regions. The increase was mainly in Hong Kong from wider margins, and in the UK reflecting wider margins and average balance sheet growth. In C&L, revenue growth of $0.1bn or 8% reflected balance sheet growth in most countries, partly offset by the effects of margin compression. In addition, revenue increased in GTRF by $25m or 6%, reflecting higher margins in Asia, higher balances in the UK and fee growth in MENA. Revenue was also higher in Other products, notably from a disposal gain of $24m in Latin America.
•
CMB revenue growth continued to be broadly based, with increases in our largest markets – Hong Kong (8%) and the UK (6%), and also in the rest of Asia and Europe, MENA, Latin America and North America.
Adjusted ECL were $0.2bn compared with net releases of $0.1bn in 1Q18. The increase was driven by higher ECL in HSBC UK relating to a small number of clients and an increase in allowances reflecting current economic uncertainty in the UK. ECL were also higher in Asia from higher specific charges in Hong Kong and mainland China across various sectors.
Adjusted operating expenses of $1.7bn were $0.1bn or 5% higher, reflecting increased investment-related spend and higher staff costs. This includes a continued increase in investment in our digital capabilities (up $0.1bn), enabling us to provide simpler and faster customer experience.
Global Banking and Markets
1Q19 compared with 1Q18 – adjusted results
Management view of adjusted revenue
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

Variance
 
 
2019

2018

2018

1Q19 vs. 1Q18
 
Footnotes
$m

$m

$m

$m

%

Global Markets
 
1,741

1,108

1,833

(92
)
(5
)
– FICC
 
1,364

891

1,422

(58
)
(4
)
Foreign Exchange
 
698

607

718

(20
)
(3
)
Rates
 
490

210

455

35

8

Credit
 
176

74

249

(73
)
(29
)
– Equities
 
377

217

411

(34
)
(8
)
Securities Services
 
478

488

463

15

3

Global Banking
 
935

943

1,026

(91
)
(9
)
Global Liquidity and Cash Management
 
687

684

610

77

13

Global Trade and Receivables Finance
 
211

199

189

22

12

Principal Investments
 
84

(61
)
70

14

20

Credit and funding valuation adjustments
6
47

(179
)
(61
)
108

>100

Other
7
(115
)
(99
)
(176
)
61

35

Net operating income
4
4,068

3,083

3,954

114

3

RoTE excluding significant items and UK bank levy (annualised) (%)
 
11.3

–

11.9

 
 
For footnotes, see page 14.
Adjusted profit before tax of $1.6bn was broadly unchanged from 1Q18 as increased revenue was offset by continued investment in the business. The strength of our diversified product offering delivered a stable performance, despite economic uncertainty that resulted in lower primary issuance and market activity.
Adjusted revenue of $4.1bn was $0.1bn or 3% higher, and included a net favourable movement of $0.1bn on credit and funding valuation adjustments. 1Q19 also included a provision release in Equities, which was broadly equal to 1Q18 restructuring gains in Global Banking.
•
We grew revenue across our transaction banking products. GLCM rose by $0.1bn or 13% and Securities Services by $15m or 3%, driven by the impact of higher interest rates and increased average balances. GTRF revenue (up $22m or 12%) was higher, primarily in MENA and Asia, as we grew average lending balances while reducing risk-weighted assets.

8
HSBC Holdings plc Earnings Release 1Q19

•
Global Banking revenue fell $0.1bn or 9%, reflecting 1Q18 gains on corporate lending restructuring, the impact of tightening credit spreads on portfolio hedges and lower event-driven activity.
•
Global Markets revenue decreased by $0.1bn or 5%, due to reduced client activity, particularly in Credit and Equities, partly offset by a provision release of $106m in Equities.
Adjusted ECL were $40m, up $23m. The charge in 1Q19 largely related to a single corporate exposure in the UK.
Adjusted operating expenses of $2.4bn were $0.1bn or 4% higher, driven by investment in people to support growth across our businesses, and in our Chinese securities joint venture HSBC Qianhai, as well as higher performance-related pay.
Global Private Banking
1Q19 compared with 1Q18 – adjusted results
Management view of adjusted revenue
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

Variance
 
 
2019

2018

2018

1Q19 vs. 1Q18
 
Footnotes
$m

$m

$m

$m

%

Investment revenue
 
184

162

204

(20
)
(10
)
Lending
 
97

93

100

(3
)
(3
)
Deposit
 
121

126

120

1

1

Other
 
48

44

43

5

12

Net operating income
4
450

425

467

(17
)
(4
)
RoTE excluding significant items and UK bank levy (annualised) (%)
 
10.9

–

12.3

 
 
For footnotes, see page 14.
Adjusted profit before tax of $98m fell $13m or 12% compared with 1Q18, largely due to the impact of our repositioning actions in the US, partly offset by lower operating expenses, despite continued investment in growth.
Adjusted revenue of $450m decreased by $17m or 4%, mainly in the US following repositioning actions, and lower revenue in Switzerland. This was partly offset by revenue growth in Asia.
Investment revenue was $20m or 10% lower, mainly in Switzerland and Asia from lower client activity, partly offset by higher annuity fees in Asia. Deposit revenue was broadly unchanged from 1Q18 as growth in Asia from wider margins and balance growth was offset by lower revenue in the US following the client exits mentioned above, together with margin compression.
In 1Q19, we attracted $10bn of net new money inflows, mainly in Asia and Europe.
Adjusted ECL were $2m, mainly in the UK. This compared with a net release of $3m in 1Q18, mainly in the US.
Adjusted operating expenses of $350m were $9m or 3% lower. This was mainly due to the partial release of a provision associated with the wind-down of our operations in Monaco. This reduction was partly offset by an increase in Asia, driven by investments to support business growth.
Corporate Centre8 
1Q19 compared with 1Q18 – adjusted results
Management view of adjusted revenue
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

Variance
 
 
2019

2018

2018

1Q19 vs. 1Q18
 
Footnotes
$m

$m

$m

$m

%

Central Treasury
9
326

304

(21
)
347

>100

Legacy portfolios
 
(71
)
(12
)
4

(75
)
>(100)

Other
10
(259
)
(9
)
(186
)
(73
)
(39
)
Net operating income
4
(4
)
283

(203
)
199

98

RoTE excluding significant items and UK bank levy (annualised) (%)
 
(6.7
)
–

(2.5
)
 
 
For footnotes, see page 14.
Adjusted profit before tax of $0.4bn was $0.2bn higher than in 1Q18.
Adjusted negative revenue of $4m compared with adjusted negative revenue of $0.2bn in 1Q18. This reflected higher revenue in
Central Treasury, partly offset by a revenue reduction in legacy portfolios and Other.
In Central Treasury, revenue of $326m compared with negative revenue of $21m in 1Q18 and included:
•
the non-recurrence of a $177m loss arising from adverse swap mark-to-market movements following a bond reclassification under IFRS 9 ‘Financial Instruments’ in 1Q18;
•
favourable fair value movements of $50m in 1Q19, compared with adverse movements of $64m in 1Q18, relating to the economic hedging of interest rate and exchange rate risk on our long-term debt with long-term derivatives; and
•
higher revenue in Balance Sheet Management (‘BSM’) (up $53m), primarily driven by the non-recurrence of portfolio restructuring losses in 1Q18 related to the establishment of HSBC UK.
Lower revenue from legacy portfolios (down $0.1bn) reflected losses on portfolio disposals and funding fair value adjustments.
Other income decreased by $0.1bn, mainly due to the adverse effects of hyperinflation accounting in Argentina, and also due to a change in the allocation of liquidity costs in anticipation of a change in the regulatory environment relating to the net stable funding ratio.

HSBC Holdings plc Earnings Release 1Q19
9

Earnings Release – 1Q19

A net release of adjusted ECL of $6m primarily related to our legacy portfolios. This compared with a net release of $84m in 1Q18.
Adjusted operating expenses of $0.2bn decreased by $0.1bn or 30%, mainly as 1Q18 included a $41m charge in relation to the 2017 UK bank levy. In addition, costs relating to our legacy portfolios reduced compared with 1Q18.
Adjusted income from associates of $0.6bn increased by $12m or 2%, driven by higher income from BoCom.
Group
1Q19 compared with 4Q18 – reported results
Movement in reported profit before tax compared with 4Q18
 
Quarter ended
 
31 Mar

31 Dec

Variance
 
2019

2018

1Q19 vs. 4Q18
 
$m

$m

$m

%
Revenue
14,428

12,695

1,733

14
ECL
(585
)
(853
)
268

31
Operating expenses
(8,222
)
(9,144
)
922

10
Share of profit from associates and JVs
592

558

34

6
Profit before tax
6,213

3,256

2,957

91
Reported profit before tax
Reported profit before tax of $6.2bn in 1Q19 was $3.0bn or 91% higher than in 4Q18, reflecting higher revenue and lower operating expenses, primarily as 4Q18 included the UK bank levy charge. ECL were also lower, as 4Q18 included allowances relating to the economic uncertainty in the UK.
The effect of foreign currency translation differences and net movements in significant items between the periods was minimal.
Reported revenue
Reported revenue of $14.4bn was $1.7bn or 14% higher, which primarily reflected revenue increases in Global Markets in GB&M, and Wealth Management in RBWM.
The increase in reported revenue included favourable foreign currency translation differences of $0.1bn, broadly offset by a net adverse movement in significant items of $0.1bn.
Excluding significant items and currency translation differences, revenue increased by $1.8bn or 14%.
Reported ECL
Reported ECL of $0.6bn were $0.3bn lower than in 4Q18, primarily driven by reductions in CMB, and to a lesser extent in RBWM.
The effect of foreign currency translation differences between the periods was minimal.
Reported operating expenses
Reported operating expenses of $8.2bn were $0.9bn or 10% lower than in 4Q18, primarily due to the UK bank levy charge of $0.9bn recorded in 4Q18. Net favourable movements in significant items of $0.1bn were broadly offset by an adverse effect of foreign currency translation differences of $0.1bn.
Significant items included:
•
the non-recurrence of a provision in relation to past service costs of guaranteed minimum pension benefits equalisation of $0.2bn in 4Q18.
This was partly offset by:
•
customer redress programme costs of $56m, compared with a net release of $16m in 4Q18.
Excluding significant items and foreign currency translation differences, operating expenses decreased by $0.9bn or 10%.
Reported share of profit from associates and JVs
Reported income from associates of $0.6bn was $34m or 6% higher than in 4Q18, primarily reflecting an increase in income from the Saudi British Bank (‘SABB’).
Excluding favourable foreign currency translation differences of $13m, income from associates increased by $21m.

10
HSBC Holdings plc Earnings Release 1Q19

Group
1Q19 compared with 4Q18 – adjusted results
Movement in adjusted profit before tax compared with 4Q18
 
Quarter ended
 
31 Mar

31 Dec

Variance
 
2019

2018

1Q19 vs. 4Q18
 
$m

$m

$m

%
Revenue
14,406

12,641

1,765

14
ECL
(585
)
(863
)
278

32
Operating expenses
(8,063
)
(8,934
)
871

10
Share of profit from associates and JVs
592

571

21

4
Profit before tax
6,350

3,415

2,935

86
Adjusted profit before tax
On an adjusted basis, profit before tax of $6.4bn was $2.9bn or 86% higher than in 4Q18, reflecting revenue increases mainly in GB&M and RBWM. Operating expenses reduced, primarily as 4Q18 included the UK bank levy charge, and ECL were also lower.
The effect of hyperinflation accounting in Argentina reduced adjusted profit before tax by $35m.
Adjusted revenue
Adjusted revenue of $14.4bn increased by $1.8bn or 14% compared with 4Q18.
•
In GB&M, revenue was $1.0bn or 32% higher, mainly in Global Markets due to a seasonal increase in client activity at the start of the calendar year compared with subdued markets activity in 4Q18. The increase also included a net favourable movement on credit and funding valuation adjustments.
•
In RBWM, revenue increased by $0.8bn or 16%, driven by growth in Wealth Management, notably in insurance manufacturing revenue following a net favourable movement in market impacts. Investment distribution revenue also rose, largely due to a seasonal increase in market activity. In Retail Banking, growth in deposit and loan balances was more than offset by margin compression.
•
In CMB, revenue increased by $0.2bn or 6%, driven by higher insurance income and Global Markets product revenue in Asia. In addition, higher revenue reflected favourable revaluation movements on an equity investment in the UK and a disposal gain in
Latin America. Revenue growth in GTRF and C&L was broadly offset by lower revenue in GLCM.
These increases were partly offset:
•
In Corporate Centre, revenue fell by $0.3bn. This included the adverse effects of hyperinflation accounting in Argentina of $129m and the adverse effect of a change in accounting treatment following the implementation of IFRS 16 ‘Leases’ on 1 January 2019. Revenue from our legacy portfolios also decreased, mainly driven by losses on portfolio disposals.
Adjusted ECL
Adjusted ECL of $0.6bn were $0.3bn lower, as 4Q18 included higher allowances relating to economic uncertainty in the UK, as well as charges relating to a small number of CMB customers in Asia.
Adjusted operating expenses
Adjusted operating expenses of $8.1bn were $0.9bn or 10% lower, primarily due to the UK bank levy charge of $0.9bn recorded in 4Q18. Excluding this charge, adjusted operating expenses increased by $0.1bn or 1%, mainly reflecting higher performance-related pay
(up $0.2bn) and growth in transaction volumes. These increases were partly offset by a reduction in investments of $0.2bn.
The number of employees expressed in full-time equivalent staff (‘FTEs’) at 31 March 2019 was 238,359, an increase of 3,141 from
31 December 2018. This was primarily driven by investments in business growth programmes across RBWM and CMB. The number of contractors as at 31 March 2019 was 10,278, a decrease of 576 from 31 December 2018.
The effect of hyperinflation accounting in Argentina reduced adjusted operating expenses by $81m.
Adjusted share of profit from associates and JVs
Adjusted share of income from associates of $0.6bn was $21m or 4% higher than in 4Q18, reflecting an increase in share of income from SABB.
Balance sheet – 31 March 2019 compared with 31 December 2018
At 31 March 2019, our total assets of $2.7tn were $100.9bn higher on a reported basis. On a constant currency basis, our total assets were $86.6bn higher, reflecting targeted lending growth, notably in Asia.
Loans and advances to customers as a percentage of customer accounts were 74%, up from 72%.
Loans and advances to customers
Reported loans and advances to customers grew by $23.6bn or 2%. This included favourable effects of foreign currency translation differences of $5.9bn. On a constant currency basis, customer lending increased by $17.7bn or 2%.
Customer lending growth was primarily in Asia (up $10.1bn). This increase was notably in GPB (up $3.2bn), mainly in Hong Kong
(up $2.5bn) driven by a small number of marketable securities-backed lending transactions. Customer lending also increased in CMB
(up $2.9bn) and GB&M (up $1.3bn), reflecting higher term lending from our continued strategic focus on growth throughout Asia.
In RBWM, customer lending increased by $2.7bn, primarily in Hong Kong (up $1.7bn), maintaining a leading position in mortgages and personal lending, and in Australia (up $0.8bn), as we continued to increase mortgage lending.
In Europe, customer lending increased by $6.7bn, notably in HSBC UK (up $3.5bn) from growth in mortgage balances (up $1.6bn), due to our focus on broker-originated mortgages. We increased lending to our corporate clients within HSBC UK mainly through term lending, primarily to large corporates and commercial real estate clients. The remaining increase in Europe primarily reflected growth in France in GB&M.

HSBC Holdings plc Earnings Release 1Q19
11

Earnings Release – 1Q19

Customer accounts
Customer accounts fell by $6.1bn on a reported basis, including favourable foreign currency translation differences of $7.6bn. On a constant currency basis, customer accounts fell by $13.7bn or 1%.
In Asia, customer accounts fell by $8.8bn, primarily in CMB (down $9.3bn) and GB&M (down $4.3bn). These reductions were notably in Hong Kong and mainland China, primarily in term deposits and savings accounts from ongoing remediation, seasonal outflows and as customers redeployed their surplus funds. This was partly offset by growth in RBWM (up $4.7bn), notably in Hong Kong and Australia, mainly in savings accounts, from higher customer inflows due to competitive rates.
Customer accounts also fell in North America (down $4.2bn), primarily in GB&M (down $3.6bn) and in CMB (down $1.9bn), reflecting a decrease in non-interest bearing demand deposits and savings accounts, notably due to seasonal reductions. These reductions were partly offset by customer accounts growth in RBWM (up $2.0bn), reflecting higher savings inflows arising from promotional rates and growth initiatives.
Risk-weighted assets
Risk-weighted assets (‘RWAs’) totalled $879.5bn at 31 March 2019, a $14.2bn increase during 1Q19 that included an increase of $3.2bn due to foreign currency translation differences. The $11.0bn increase (excluding foreign currency translation differences) was primarily due to:
•
lending and transactional growth across CMB, GB&M and RBWM, which increased RWAs by $10.6bn;
•
the implementation of IFRS 16 ‘Leases’, which resulted in the recognition of right of use assets totalling $4.5bn and a corresponding rise in RWAs; and
•
a $1.7bn increase in RWAs as a result of an increase in the value of significant holdings in Corporate Centre.
These movements were partly offset by decreases due to management initiatives of $4.5bn, market risk reductions of $0.7bn,
model updates of $0.3bn and improved asset quality of $0.2bn.
Net interest margin

Quarter ended
Year ended


31 Mar

31 Mar

31 Dec


2019

2018

2018


$m

$m

$m

Net interest income
7,468

7,456

30,489

Average interest-earning assets
1,902,912

1,812,194

1,839,346


%

%

%

Gross interest yield
2.89

2.55

2.70

Less: cost of funds
(1.53
)
(1.02
)
(1.21
)
Net interest spread
1.36

1.53

1.49

Net interest margin
1.59

1.67

1.66

The Group’s net interest margin (’NIM’) in 1Q19 was 1.59%, which was 7 basis points (‘bps’) lower compared with the year ended 2018. This was driven by a 32bps increase in the cost of funds, notably from the increased cost of customer accounts in Asia, partly offset by a 19bps increase in gross yields, driven mainly by higher yields on surplus liquidity in most regions and rising lending yields. Hyperinflation accounting in Argentina had a 1bp adverse impact in 2018, with a corresponding favourable impact in 1Q19.
The cost of funds rose by 32bps from the increased cost of customer accounts. This was driven by Asia and reflected the repricing of deposits in Hong Kong as well as a change in funding mix, with a 4bps adverse impact on Group NIM. The cost of Group debt also rose, primarily relating to the higher cost of issuances of senior debt by HSBC Holdings plc, with a 3bps adverse impact on Group NIM.
Gross yields benefited from loan book growth, in particular term lending and mortgages in Asia. Gross yields on surplus liquidity also increased in most regions, mainly on Treasury bills and debt securities. These benefits were partly offset by the adverse effect of the implementation of IFRS 16 in 1Q19 of 1bp.
Compared with 1Q18, NIM dropped by 8bps, reflecting higher cost of funds, notably from the increased cost of customer accounts in Asia. This was partly offset by higher gross yields, driven mainly by rising lending yields and increased yields on surplus liquidity.
Return on Equity and Return on Tangible Equity
We provide Return on Tangible Equity (‘RoTE’) in addition to Return on Equity (‘RoE’) as a way of assessing our performance which is closely aligned to our capital position.
RoTE is computed by adjusting reported ‘profit attributable to the ordinary shareholders of the parent company’ for the post-tax movements in the present value of in-force long-term insurance business (‘PVIF’) and adjusting the reported equity for goodwill, intangibles and PVIF, net of deferred tax. The adjustment to
reported results and reported equity excludes amounts attributable to other equity instrument holders and non-controlling interests.
For our global businesses, we provide RoTE excluding significant items and the UK bank levy which is more closely aligned to the basis on which the global business performance is assessed by the Chief Operating Decision Maker (further information on the basis of preparation for our global businesses is provided on page 47 of the Annual Report and Accounts 2018).
RoTE excluding significant items and UK bank levy is computed by adjusting ‘profit attributable to the ordinary shareholders, excluding PVIF’ for significant items (net of tax) and the bank levy, and adjusting the ‘average tangible equity’ for the change in fair value on our long-term debt attributable to credit spread through other comprehensive income (‘fair value of own debt’), and debit valuation adjustments (‘DVA’).
The following table details the adjustments made to the reported results and equity:

12
HSBC Holdings plc Earnings Release 1Q19

Return on Equity and Return on Tangible Equity
 
Quarter ended
 
31 Mar

31 Dec

31 Mar

 
2019

2018

2018

 
$m

$m

$m

Profit
 
 
 
Profit attributable to the ordinary shareholders of the parent company
4,134

1,537

3,086

Increase in PVIF (net of tax)
(446
)
(189
)
(79
)
Profit attributable to the ordinary shareholders, excluding PVIF
3,688

1,348

3,007

Significant items (net of tax) and bank levy
105

 
1,215

Profit attributable to the ordinary shareholders, excluding PVIF, significant items and UK bank levy
3,793

 
4,222

Equity
 
 
 
Average ordinary shareholders’ equity
163,769

161,060

166,834

Effect of goodwill, PVIF and other intangibles (net of deferred tax)
(22,683
)
(22,299
)
(21,983
)
Average tangible equity
141,086

138,761

144,851

Fair value of own debt, DVA and other adjustments
423

 
2,974

Average tangible equity excluding fair value of own debt, DVA and other adjustments
141,509

 
147,825

 
%

%

%

Ratio
 
 
 
Return on equity
10.2

3.8

7.5

Return on tangible equity (annualised)
10.6

3.9

8.4

Return on tangible equity excluding significant items and UK bank levy (annualised)
10.9



11.6

Return on tangible equity by global business
 
Quarter ended 31 Mar 2019
 
Retail Banking and Wealth Management

Commercial Banking

Global Banking and Markets

Global Private Banking

Corporate Centre

Total

 
$m

$m

$m

$m

$m

$m

Profit before tax
2,174

2,012

1,535

96

396

6,213

Tax expense
(410
)
(430
)
(307
)
(18
)
(138
)
(1,303
)
Profit after tax
1,764

1,582

1,228

78

258

4,910

Less attributable to: preference shareholders, other equity holders, non-controlling interests
(230
)
(241
)
(164
)
(5
)
(136
)
(776
)
Profit attributable to ordinary shareholders of the parent company
1,534

1,341

1,064

73

122

4,134

Increase in PVIF (net of tax)
(424
)
(22
)
—

—

—

(446
)
Significant items (net of tax) and UK bank levy
41

3

79

2

(20
)
105

Balance Sheet Management allocation and other adjustments
147

147

184

14

(492
)
—

Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy
1,298

1,469

1,327

89

(390
)
3,793

Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments
23,800

42,916

47,743

3,330

23,720

141,509

RoTE excluding significant items and UK bank levy (annualised) (%)
22.1%

13.9%

11.3%

10.9%

-6.7%

10.9%

 
 
Quarter ended 31 Mar 2018
Profit before tax
1,796

2,110

1,769

70

(990
)
4,755

Tax expense
(310
)
(458
)
(377
)
(9
)
137

(1,017
)
Profit after tax
1,486

1,652

1,392

61

(853
)
3,738

Less attributable to: preference shareholders, other equity holders, non-controlling interests
(216
)
(223
)
(149
)
(6
)
(58
)
(652
)
Profit attributable to ordinary shareholders of the parent company
1,270

1,429

1,243

55

(911
)
3,086

Increase in PVIF (net of tax)
(66
)
(14
)
—

—

1

(79
)
Significant items (net of tax) and UK bank levy
81

3

(31
)
33

1,129

1,215

Balance Sheet Management allocation and other adjustments
126

122

149

20

(417
)
—

Profit attributable to ordinary shareholders, excluding PVIF, significant items and bank levy
1,411

1,540

1,361

108

(198
)
4,222

Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments
24,737

40,258

46,488

3,574

32,768

147,825

RoTE excluding significant items and UK bank levy (annualised) (%)
23.1%

15.5%

11.9%

12.3%

(2.5)%

11.6%



Notes
•
Income statement comparisons, unless stated otherwise, are between the quarter ended 31 March 2019 and the quarter ended
31 March 2018. Balance sheet comparisons, unless otherwise stated, are between balances at 31 March 2019 and the corresponding balances at 31 December 2018.

HSBC Holdings plc Earnings Release 1Q19
13

Earnings Release – 1Q19

•
The financial information on which this Earnings Release is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with HSBC’s significant accounting policies as described on pages 224 to 237 of our Annual Report and Accounts 2018.
•
The Board has adopted a policy of paying quarterly interim dividends on ordinary shares. Under this policy, it is intended to have a pattern of three equal interim dividends with a variable fourth interim dividend. Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, sterling and Hong Kong dollars or, subject to the Board’s determination that a scrip dividend is to be offered in respect of that dividend, may be satisfied in whole or in part by the issue of new shares in lieu of a cash dividend.
Footnotes to financial performance commentary
1
‘Other personal lending’ includes personal non-residential closed-end loans and personal overdrafts.
2
‘Investment distribution’ includes Investments, which comprises mutual funds (HSBC manufactured and third party), structured products and securities trading, and Wealth Insurance distribution, consisting of HSBC manufactured and third-party life, pension and investment insurance products.
3
‘Other’ mainly includes the distribution and manufacturing (where applicable) of retail and credit protection insurance.
4
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
5
‘Markets products, Insurance and Investments and Other’ includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and Global Banking products.
6
From 1 January 2018, the qualifying components according to IFRS 7 ‘Financial Instruments: Disclosures’ of fair value movements relating to changes in credit spreads on structured liabilities were recorded through other comprehensive income. The residual movements remain in credit and funding valuation adjustments, and comparatives have not been restated.

7
‘Other’ in GB&M includes allocated funding costs and gains resulting from business disposals. Within the management view of total operating income, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities that is not reflected within operating income, such as notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included within ‘Other’.
8
Corporate Centre comprises Central Treasury, including Balance Sheet Management (‘BSM’), our legacy businesses, interests in our associates and joint ventures, central stewardship costs and the UK bank levy.
9
Central Treasury includes revenue relating to BSM of $623m (4Q18: $637m; 1Q18: $570m), interest expense of $317m (4Q18: $340m; 1Q18: $299m) and favourable valuation differences on issued long-term debt and associated swaps of $50m (4Q18: favourable movements of $67m; 1Q18: adverse movements of $241m). Revenue relating to BSM includes other internal allocations to reflect the economic benefit generated by certain activities, which is not reflected within operating income, such as notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included in other Central Treasury.
10
Other miscellaneous items in Corporate Centre include internal allocations relating to legacy credit.

14
HSBC Holdings plc Earnings Release 1Q19

Cautionary statement regarding forward-looking statements
This Earnings Release contains certain forward-looking statements with respect to HSBC’s financial condition, results of operations, capital position and business.
Statements that are not historical facts, including statements about HSBC’s beliefs, targets and expectations, are forward-looking statements. Words such as ‘expects’, ‘anticipates’, ‘intends’, ‘targets’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC’s Directors, officers or employees to third parties, including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
•
changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks’ policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; consumer perception as to the continuing availability of credit and price competition in the market segments we serve; and deviations from the market and economic assumptions that form the basis for our ECL measurements;
•
changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the conduct of business of financial institutions in serving their retail customers, corporate clients and counterparties; the standards of market conduct; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for our products and services; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and
•
factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models we use; our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in the ‘top and emerging risks’ on pages 69 to 73 of the Annual Report and Accounts 2018.
For further information contact:
Investor Relations
Media Relations
UK – Richard O’Connor
UK – Gillian James
Tel: +44 (0) 20 7991 6590
Tel: +44 (0) 20 7992 0516
 
 
Hong Kong – Hugh Pye
Hong Kong – Patrick Humphris
Tel: +852 2822 4908
Tel: +852 2822 2052


HSBC Holdings plc Earnings Release 1Q19
15

Earnings Release – 1Q19

Summary consolidated income statement
 
Quarter ended
 
31 Mar

31 Dec

31 Mar

 
2019

2018

2018

 
$m

$m

$m

Net interest income
7,468

7,709

7,456

Net fee income
3,026

2,827

3,507

Net income from financial instruments held for trading or managed on a fair value basis
2,881

2,046

2,384

Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
1,710

(1,444
)
(155
)
Changes in fair value of long-term debt and related derivatives
11

32

10

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
270

154

117

Gains less losses from financial investments
99

57

101

Dividend income
8

19

9

Net insurance premium income
3,296

2,171

3,078

Other operating income
850

372

41

Total operating income
19,619

13,943

16,548

Net insurance claims and benefits paid and movement in liabilities to policyholders
(5,191
)
(1,248
)
(2,838
)
Net operating income before change in expected credit losses and other credit impairment charges
14,428

12,695

13,710

Change in expected credit losses and other credit impairment charges
(585
)
(853
)
(170
)
Net operating income
13,843

11,842

13,540

Total operating expenses
(8,222
)
(9,144
)
(9,383
)
Operating profit
5,621

2,698

4,157

Share of profit in associates and joint ventures
592

558

598

Profit before tax
6,213

3,256

4,755

Tax expense
(1,303
)
(1,163
)
(1,017
)
Profit after tax
4,910

2,093

3,738

Attributable to:
 


 
– ordinary shareholders of the parent company
4,134

1,537

3,086

– preference shareholders of the parent company
22

23

22

– other equity holders
410

234

288

– non-controlling interests
344

299

342

Profit after tax
4,910

2,093

3,738

 
$

$

$

Basic earnings per share
0.21

0.07

0.15

Diluted earnings per share
0.21

0.07

0.15

Dividend per ordinary share (in respect of the period)
0.10

0.21

0.10

 
%

%

%

Return on average ordinary shareholders’ equity (annualised)
10.2

3.8

7.5

Return on average tangible equity (annualised)
10.6

3.9

8.4

Cost efficiency ratio
57.0

72.0

68.4



16
HSBC Holdings plc Earnings Release 1Q19

Summary consolidated balance sheet
 
At
 
31 Mar

31 Dec

 
2019

2018

 
$m

$m

Assets
 
 
Cash and balances at central banks
172,731

162,843

Trading assets
264,414

238,130

Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
39,324

41,111

Derivatives
213,093

207,825

Loans and advances to banks
71,581

72,167

Loans and advances to customers
1,005,279

981,696

Reverse repurchase agreements – non-trading
227,029

242,804

Financial investments
409,780

407,433

Other assets
255,765

204,115

Total assets
2,658,996

2,558,124

Liabilities and Equity




Liabilities




Deposits by banks
65,844

56,331

Customer accounts
1,356,511

1,362,643

Repurchase agreements – non-trading
166,224

165,884

Trading liabilities
92,290

84,431

Financial liabilities designated at fair value
159,726

148,505

Derivatives
210,978

205,835

Debt securities in issue
99,038

85,342

Liabilities under insurance contracts
90,860

87,330

Other liabilities
221,197

167,574

Total liabilities
2,462,668

2,363,875

Equity


 
Total shareholders’ equity
188,362

186,253

Non-controlling interests
7,966

7,996

Total equity
196,328

194,249

Total liabilities and equity
2,658,996

2,558,124



HSBC Holdings plc Earnings Release 1Q19
17

Earnings Release – 1Q19

Credit risk
A summary of our current policies and practices for the management of credit risk is set out in ‘Credit risk management’ on page 79 of the Annual Report and Accounts 2018.
Summary of credit risk
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
 
 
At 31 Mar 2019
 At 31 Dec 2018
 
 
Gross carrying/nominal amount

Allowance for ECL1

Gross carrying/nominal amount

Allowance for
ECL1

 
Footnotes
$m

$m

$m

$m

Loans and advances to customers at amortised cost
 
1,013,829

(8,550
)
990,321

(8,625
)
– personal
 
404,797

(3,025
)
394,337

(2,947
)
– corporate and commercial
 
542,898

(5,372
)
534,577

(5,552
)
– non-bank financial institutions
 
66,134

(153
)
61,407

(126
)
Loans and advances to banks at amortised cost
 
71,594

(13
)
72,180

(13
)
Other financial assets measured at amortised cost
 
619,969

(85
)
582,917

(55
)
– cash and balances at central banks
 
172,734

(3
)
162,845

(2
)
– items in the course of collection from other banks
 
5,808

—

5,787

—

– Hong Kong Government certificates of indebtedness
 
36,672

—

35,859

—

– reverse repurchase agreements – non-trading
 
227,029

—

242,804

—

– financial investments
 
63,628

(21
)
62,684

(18
)
– prepayments, accrued income and other assets
2
114,098

(61
)
72,938

(35
)
Total gross carrying amount on-balance sheet
 
1,705,392

(8,648
)
1,645,418

(8,693
)
Loans and other credit-related commitments
 
617,164

(341
)
592,008

(325
)
– personal
 
213,322

(12
)
207,351

(13
)
– corporate and commercial
 
268,763

(321
)
271,022

(305
)
– financial
 
135,079

(8
)
113,635

(7
)
Financial guarantees
 
22,577

(56
)
23,518

(93
)
– personal
 
920

(1
)
927

(1
)
– corporate and commercial
 
16,391

(50
)
17,355

(85
)
– financial
 
5,266

(5
)
5,236

(7
)
Total nominal amount off-balance sheet
3
639,741

(397
)
615,526

(418
)
 
 
2,345,133

(9,045
)
2,260,944

(9,111
)
 
 
 
 
 
 
 
 
Fair value

Memorandum allowance for ECL4

Fair value

Memorandum allowance for ECL4

 
 
$m

$m

$m

$m

Debt instruments measured at fair value through other comprehensive income (‘FVOCI’)
 
344,244

(80
)
343,110

(84
)
1
The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.
2
Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’ as presented within the summary consolidated balance sheet on page 17 includes both financial and non-financial assets.
3
Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
4
Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.


18
HSBC Holdings plc Earnings Release 1Q19

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 March 2019
 
Gross carrying/nominal amount1
 
Allowance for ECL
 
ECL coverage %
 
 
Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1
Stage 2
Stage 3
POCI2
Total
 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

%
%
%
%
%
Loans and advances to customers at amortised cost
934,547

65,931

13,016

335

1,013,829

(1,253
)
(2,231
)
(4,861
)
(205
)
(8,550
)
0.1
3.4
37.3
61.2
0.8
– personal
384,886

15,252

4,659

—

404,797

(540
)
(1,320
)
(1,165
)
—

(3,025
)
0.1
8.7
25.0
—
0.7
– corporate and commercial
485,914

48,496

8,154

334

542,898

(660
)
(867
)
(3,641
)
(204
)
(5,372
)
0.1
1.8
44.7
61.1
1.0
– non-bank financial institutions
63,747

2,183

203

1

66,134

(53
)
(44
)
(55
)
(1
)
(153
)
0.1
2.0
27.1
100.0
0.2
Loans and advances to banks at amortised cost
71,015

579

—

—

71,594

(11
)
(2
)
—

—

(13
)
—
0.3
—
—
—
Other financial assets measured at amortised cost
617,857

2,014

97

1

619,969

(39
)
(8
)
(38
)
—

(85
)
—
0.4
39.2
—
—
Loan and other credit-related commitments
593,485

22,843

832

4

617,164

(144
)
(126
)
(71
)
—

(341
)
—
0.6
8.5
—
0.1
– personal
210,765

2,096

461

—

213,322

(11
)
(1
)
—

—

(12
)
—
—
—
—
—
– corporate and commercial
248,743

19,663

353

4

268,763

(126
)
(124
)
(71
)
—

(321
)
0.1
0.6
20.1
—
0.1
– financial
133,977

1,084

18

—

135,079

(7
)
(1
)
—

—

(8
)
—
0.1
—
—
—
Financial guarantees
19,919

2,448

207

3

22,577

(19
)
(26
)
(11
)
—

(56
)
0.1
1.1
5.3
—
0.2
– personal
917

2

1

—

920

(1
)
—

—

—

(1
)
0.1
—
—
—
0.1
– corporate and commercial
14,136

2,050

202

3

16,391

(17
)
(23
)
(10
)
—

(50
)
0.1
1.1
5.0
—
0.3
– financial
4,866

396

4

—

5,266

(1
)
(3
)
(1
)
—

(5
)
—
0.8
25.0
—
0.1
At 31 Mar 2019
2,236,823

93,815

14,152

343

2,345,133

(1,466
)
(2,393
)
(4,981
)
(205
)
(9,045
)
0.1
2.6
35.2
59.8
0.4
Stage 2 days past due analysis at 31 March 2019
 
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
 
 
Of which:

Of which:

 
Of which:

Of which:

 
Of which:
Of which:
 
Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2
1 to 29
 DPD3
30 and > DPD3
 
$m

$m

$m

$m

$m

$m

%
%
%
Loans and advances to customers at amortised cost
65,931

2,475

1,582

(2,231
)
(213
)
(230
)
3.4
8.6
14.5
– personal
15,252

1,836

1,336

(1,320
)
(191
)
(208
)
8.7
10.4
15.6
– corporate and commercial
48,496

634

246

(867
)
(22
)
(22
)
1.8
3.5
8.9
– non-bank financial institutions
2,183

5

—

(44
)
—

—

2.0
—
—
Loans and advances to banks at amortised cost
579

—

—

(2
)
—

—

0.3
—
—
Other financial assets measured at amortised cost
2,014

16

38

(8
)
—

—

0.4
—
—
For footnotes, see page 20.

HSBC Holdings plc Earnings Release 1Q19
19

Earnings Release – 1Q19

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2018
 
Gross carrying/nominal amount1
 
Allowance for ECL
 
ECL coverage %
 
 
Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1

Stage 2

Stage 3

POCI2

Total

Stage 1
Stage 2
Stage 3
POCI2
Total
 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

%
%
%
%
%
Loans and advances to customers at amortised cost
915,188

61,786

13,023

324

990,321

(1,276
)
(2,108
)
(5,047
)
(194
)
(8,625
)
0.1
3.4
38.8
59.9
0.9
– personal
374,681

15,075

4,581

—

394,337

(534
)
(1,265
)
(1,148
)
—

(2,947
)
0.1
8.4
25.1
—
0.7
– corporate and commercial
481,262

44,779

8,212

324

534,577

(698
)
(812
)
(3,848
)
(194
)
(5,552
)
0.1
1.8
46.9
59.9
1.0
– non-bank financial institutions
59,245

1,932

230

—

61,407

(44
)
(31
)
(51
)
—

(126
)
0.1
1.6
22.2
—
0.2
Loans and advances to banks at amortised cost
71,873

307

—

—

72,180

(11
)
(2
)
—

—

(13
)
—
0.7
—
—
—
Other financial assets measured at amortised cost
581,118

1,673

126

—

582,917

(27
)
(6
)
(22
)
—

(55
)
—
0.4
17.5
—
—
Loan and other credit-related commitments
569,250

21,839

912

7

592,008

(143
)
(139
)
(43
)
—

(325
)
—
0.6
4.7
—
0.1
– personal
205,183

1,760

408

—

207,351

(12
)
(1
)
—

—

(13
)
—
0.1
—
—
—
– corporate and commercial
251,478

19,034

503

7

271,022

(126
)
(136
)
(43
)
—

(305
)
0.1
0.7
8.5
—
0.1
– financial
112,589

1,045

1

—

113,635

(5
)
(2
)
—

—

(7
)
—
0.2
—
—
—
Financial guarantees
20,884

2,334

297

3

23,518

(19
)
(29
)
(45
)
—

(93
)
0.1
1.2
15.2
—
0.4
– personal
920

3

4

—

927

(1
)
—

—

—

(1
)
0.1
—
—
—
0.1
– corporate and commercial
15,011

2,053

288

3

17,355

(16
)
(25
)
(44
)
—

(85
)
0.1
1.2
15.3
—
0.5
– financial
4,953

278

5

—

5,236

(2
)
(4
)
(1
)
—

(7
)
—
1.4
20.0
—
0.1
At 31 Dec 2018
2,158,313

87,939

14,358

334

2,260,944

(1,476
)
(2,284
)
(5,157
)
(194
)
(9,111
)
0.1
2.6
35.9
58.1
0.4
Stage 2 days past due analysis at 31 December 2018
 
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
 
 
Of which:

Of which:

 
Of which:

Of which:

 
Of which:
Of which:
 
Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2

1 to 29
 DPD3

30 and > DPD3

Stage 2
1 to 29
 DPD3
30 and > DPD3
 
$m

$m

$m

$m

$m

$m

%
%
%
Loans and advances to customers at amortised cost
61,786

2,554

1,914

(2,108
)
(204
)
(254
)
3.4
8.0
13.3
– personal
15,075

1,807

1,383

(1,265
)
(165
)
(220
)
8.4
9.1
15.9
– corporate and commercial
44,779

737

485

(812
)
(39
)
(34
)
1.8
5.3
7.0
– non-bank financial institutions
1,932

10

46

(31
)
—

—

1.6
—
—
Loans and advances to banks at amortised cost
307

—

—

(2
)
—

—

0.7
—
—
Other financial assets measured at amortised cost
1,673

10

26

(6
)
—

—

0.4
—
—
1
Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2
Purchased or originated credit-impaired ('POCI').
3
Days past due ('DPD'). Up-to-date accounts in Stage 2 are not shown in amounts presented above.

20
HSBC Holdings plc Earnings Release 1Q19

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
The following disclosure provides a reconciliation by stage of the Group’s gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. The transfers of financial instruments represents the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL. The net remeasurement of ECL arising from stage transfers represents the increase or decrease due to these transfers, for example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net remeasurement excludes the underlying customer risk rating (‘CRR’)/probability of default (‘PD’) movements of the financial instruments transferring stage. This is captured, along with other credit quality movements in the ‘changes in risk parameters – credit quality’ line item. The ‘Net new and further lending/repayments’ represent the gross carrying/nominal amount and associated allowance ECL impact from volume movements within the Group’s lending portfolio.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees

 
Non-credit impaired
Credit impaired
 
 
Stage 1
Stage 2
Stage 3
POCI
Total
 
Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

Gross carrying/ nominal amount

Allowance for ECL

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

At 1 Jan 2019
1,511,839

(1,449
)
86,241

(2,278
)
14,232

(5,135
)
334

(194
)
1,612,646

(9,056
)
Transfers of financial instruments:
(14,411
)
(90
)
13,330

227

1,081

(137
)
—

—

—

—

– transfers from stage 1 to stage 2
(24,962
)
93

24,962

(93
)
—

—

—

—

—

—

– transfers from stage 2 to stage 1
10,686

(186
)
(10,686
)
186

—

—

—

—

—

—

– transfers to stage 3
(225
)
10

(1,065
)
156

1,290

(166
)
—

—

—

—

– transfers from stage 3
90

(7
)
119

(22
)
(209
)
29

—

—

—

—

Net remeasurement of ECL arising from transfer of stage
—

128

—

(197
)
—

(5
)
—

—

—

(74
)
Net new and further lending/repayments
23,497

(46
)
(8,947
)
155

(555
)
266

9

(9
)
14,004

366

Changes in risk parameters – credit quality
—

37

—

(268
)
—

(694
)
—

(3
)
—

(928
)
Changes to model used for ECL calculation
—

—

—

—

—

—

—

—

—

—

Assets written off
—

—

—

—

(700
)
693

—

—

(700
)
693

Foreign exchange
7,911

(11
)
530

(20
)
68

(6
)
(2
)
2

8,507

(35
)
Others
1,505

3

647

(4
)
(71
)
76

1

(1
)
2,082

74

At 31 Mar 2019
1,530,341

(1,428
)
91,801

(2,385
)
14,055

(4,942
)
342

(205
)
1,636,539

(8,960
)
ECL release/(charge) for the period


119



(310
)


(433
)


(12
)


(636
)
Recoveries


















89

Others


















(39
)
Total ECL charge for the period


















(586
)
 
At 31 Mar 2019
3 months ended 31 Mar 2019

 
Gross carrying/nominal amount

Allowance for ECL

ECL charge

 
$m

$m

$m

As above
1,636,539

(8,960
)
(586
)
Other financial assets measured at amortised cost
619,969

(85
)
(1
)
Non-trading reverse purchase agreement commitments
88,625

—

—

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary consolidated income statement
2,345,133

(9,045
)
(587
)
Debt instruments measured at FVOCI
344,244

(80
)
2

Total allowance for ECL/total income statement ECL charge for the period
n/a

(9,125
)
(585
)
As shown in the above table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees decreased $96m during the period from $9,056m at 31 December 2018 to $8,960m at 31 March 2019.
This decrease was primarily driven by:
•
$366m relating to underlying net book volume movements, which included the ECL allowance associated with new originations, assets derecognised, and net further lending; and
•
$693m of assets written off.
These decreases were partly offset by increases of:
•
$928m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages;
•
$74m relating to the net remeasurement impact of stage transfers; and
•
foreign exchange and other movements of $39m.
The ECL charge for the period of $636m presented in the previous table comprises $928m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stage, $74m relating to the net remeasurement impact of stage transfers, partly offset by $366m relating to underlying net book volume movements.

HSBC Holdings plc Earnings Release 1Q19
21

Earnings Release – 1Q19

Personal lending
Total personal lending for loans and advances to customers by stage distribution

Gross carrying amount
Allowance for ECL
 
Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

 
$m

$m

$m

$m

$m

$m

$m

$m

By portfolio
 
 
 
 
 
 
 
 
First lien residential mortgages
291,520

6,472

2,990

300,982

(40
)
(67
)
(430
)
(537
)
– of which: interest only (including offset)
32,053

1,423

341

33,817

(4
)
(13
)
(92
)
(109
)
affordability (including US adjustable rate mortgages)
15,662

1,168

534

17,364

(3
)
(4
)
(5
)
(12
)
Other personal lending
93,366

8,780

1,669

103,815

(500
)
(1,253
)
(735
)
(2,488
)
– other
70,968

4,472

1,139

76,579

(222
)
(463
)
(466
)
(1,151
)
– credit cards
20,018

4,146

452

24,616

(272
)
(775
)
(249
)
(1,296
)
– second lien residential mortgages
926

132

73

1,131

(1
)
(11
)
(16
)
(28
)
– motor vehicle finance
1,454

30

5

1,489

(5
)
(4
)
(4
)
(13
)
At 31 Mar 2019
384,886

15,252

4,659

404,797

(540
)
(1,320
)
(1,165
)
(3,025
)
By geography
 
 
 
 
 
 
 
 
Europe
173,530

5,981

2,069

181,580

(105
)
(479
)
(457
)
(1,041
)
– of which: UK

143,376

4,614

1,375

149,365

(95
)
(449
)
(237
)
(781
)
Asia
161,540

5,472

711

167,723

(202
)
(366
)
(184
)
(752
)
– of which: Hong Kong

108,830

2,694

169

111,693

(70
)
(231
)
(37
)
(338
)
MENA
5,454

321

401

6,176

(59
)
(69
)
(263
)
(391
)
North America
38,076

2,567

1,239

41,882

(29
)
(95
)
(139
)
(263
)
Latin America
6,286

911

239

7,436

(145
)
(311
)
(122
)
(578
)
At 31 Mar 2019
384,886

15,252

4,659

404,797

(540
)
(1,320
)
(1,165
)
(3,025
)
By portfolio
 
 
 
 
 
 
 
 
First lien residential mortgages
284,103

6,286

2,944

293,333

(41
)
(62
)
(432
)
(535
)
– of which: interest only (including offset)
31,874

1,324

338

33,536

(3
)
(13
)
(92
)
(108
)
affordability (including US adjustable rate mortgages)
16,110

1,065

507

17,682

(3
)
(4
)
(5
)
(12
)
Other personal lending
90,578

8,789

1,637

101,004

(493
)
(1,203
)
(716
)
(2,412
)
– other
67,196

4,400

1,121

72,717

(214
)
(435
)
(465
)
(1,114
)
– credit cards
20,932

4,259

453

25,644

(272
)
(756
)
(233
)
(1,261
)
– second lien residential mortgages
1,022

100

57

1,179

(2
)
(9
)
(13
)
(24
)
– motor vehicle finance
1,428

30

6

1,464

(5
)
(3
)
(5
)
(13
)
At 31 Dec 2018
374,681

15,075

4,581

394,337

(534
)
(1,265
)
(1,148
)
(2,947
)
By geography
















Europe
169,782

5,731

2,051

177,564

(105
)
(453
)
(450
)
(1,008
)
– of which: UK

139,237

4,308

1,315

144,860

(93
)
(421
)
(219
)
(733
)
Asia
155,661

5,413

693

161,767

(207
)
(353
)
(180
)
(740
)
– of which: Hong Kong

104,909

2,715

169

107,793

(71
)
(220
)
(39
)
(330
)
MENA
5,565

350

411

6,326

(61
)
(70
)
(263
)
(394
)
North America
38,283

2,552

1,186

42,021

(29
)
(90
)
(142
)
(261
)
Latin America
5,390

1,029

240

6,659

(132
)
(299
)
(113
)
(544
)
At 31 Dec 2018
374,681

15,075

4,581

394,337

(534
)
(1,265
)
(1,148
)
(2,947
)



22
HSBC Holdings plc Earnings Release 1Q19

Wholesale lending
Total wholesale lending for loans and advances to banks and customers at amortised cost
 
Gross carrying amount
Allowance for ECL
 
Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial
485,914

48,496

8,154

334

542,898

(660
)
(867
)
(3,641
)
(204
)
(5,372
)
– agriculture, forestry and fishing

5,718

1,049

228

2

6,997

(14
)
(40
)
(119
)
(1
)
(174
)
– mining and quarrying

11,392

2,178

307

2

13,879

(32
)
(42
)
(107
)
(2
)
(183
)
– manufacture
94,570

11,680

1,445

128

107,823

(121
)
(175
)
(686
)
(85
)
(1,067
)
– electricity, gas, steam and air-conditioning supply

12,856

1,973

89

62

14,980

(12
)
(66
)
(20
)
(52
)
(150
)
– water supply, sewerage, waste management and remediation

3,390

196

24

—

3,610

(6
)
(2
)
(17
)
—

(25
)
– construction
11,851

2,608

924

60

15,443

(19
)
(39
)
(424
)
(55
)
(537
)
– wholesale and retail trade, repair of motor vehicles and motorcycles

84,191

12,004

1,686

35

97,916

(99
)
(133
)
(918
)
(7
)
(1,157
)
– transportation and storage

23,846

1,792

356

37

26,031

(35
)
(51
)
(104
)
—

(190
)
– accommodation and food

19,552

1,850

314

2

21,718

(46
)
(37
)
(145
)
(1
)
(229
)
– publishing, audiovisual and broadcasting

22,323

1,374

211

—

23,908

(48
)
(21
)
(72
)
—

(141
)
– real estate
116,975

7,423

1,300

1

125,699

(107
)
(103
)
(535
)
—

(745
)
– professional, scientific and technical activities

21,312

1,104

350

—

22,766

(29
)
(34
)
(117
)
—

(180
)
– administrative and support services

22,154

1,761

430

4

24,349

(36
)
(54
)
(160
)
(1
)
(251
)
– public administration and defence, compulsory social security

1,338

36

—

—

1,374

(1
)
(3
)
—

—

(4
)
– education
1,663

61

33

—

1,757

(11
)
(4
)
(6
)
—

(21
)
– health and care
4,229

430

140

—

4,799

(12
)
(17
)
(35
)
—

(64
)
– arts, entertainment and recreation

4,973

303

49

1

5,326

(10
)
(10
)
(24
)
—

(44
)
– other services
12,399

337

254

—

12,990

(16
)
(22
)
(146
)
—

(184
)
– activities of households

713

66

—

—

779

—

—

—

—

—

– extra-territorial organisations and bodies activities

1,291

1

6

—

1,298

(1
)
—

(1
)
—

(2
)
– government
8,348

256

8

—

8,612

(5
)
(1
)
(5
)
—

(11
)
– asset-backed securities
830

14

—

—

844

—

(13
)
—

—

(13
)
Non-bank financial institutions
63,747

2,183

203

1

66,134

(53
)
(44
)
(55
)
(1
)
(153
)
Loans and advances to banks
71,015

579

—

—

71,594

(11
)
(2
)
—

—

(13
)
At 31 Mar 2019
620,676

51,258

8,357

335

680,626

(724
)
(913
)
(3,696
)
(205
)
(5,538
)
By geography
 
 
 
 
 
 
 
 
 
 
Europe
198,535

18,349

4,357

178

221,419

(393
)
(571
)
(1,500
)
(118
)
(2,582
)
– of which: UK
139,481

14,540

3,129

35

157,185

(331
)
(515
)
(988
)
(20
)
(1,854
)
Asia
316,818

20,548

1,665

89

339,120

(190
)
(144
)
(979
)
(36
)
(1,349
)
– of which: Hong Kong

192,826

9,605

777

66

203,274

(103
)
(66
)
(429
)
(34
)
(632
)
MENA
24,545

3,274

1,703

53

29,575

(47
)
(92
)
(939
)
(46
)
(1,124
)
North America
62,339

8,023

296

—

70,658

(33
)
(83
)
(99
)
—

(215
)
Latin America
18,439

1,064

336

15

19,854

(61
)
(23
)
(179
)
(5
)
(268
)
At 31 Mar 2019
620,676

51,258

8,357

335

680,626

(724
)
(913
)
(3,696
)
(205
)
(5,538
)

HSBC Holdings plc Earnings Release 1Q19
23

Earnings Release – 1Q19

Total wholesale lending for loans and advances to banks and customers at amortised cost (continued)
 
Gross carrying amount
Allowance for ECL
 
Stage 1

Stage 2

Stage 3

POCI

Total

Stage 1

Stage 2

Stage 3

POCI

Total

 
$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

Corporate and commercial
481,262

44,779

8,212

324

534,577

(698
)
(812
)
(3,848
)
(194
)
(5,552
)
– agriculture, forestry and fishing

5,361

1,102

236

2

6,701

(15
)
(34
)
(117
)
(1
)
(167
)
– mining and quarrying

12,094

1,717

359

2

14,172

(29
)
(51
)
(94
)
(2
)
(176
)
– manufacture
92,606

11,404

1,569

125

105,704

(132
)
(156
)
(791
)
(83
)
(1,162
)
– electricity, gas, steam and air-conditioning supply

14,522

1,422

40

60

16,044

(18
)
(60
)
(15
)
(54
)
(147
)
– water supply, sewerage, waste management and remediation

3,335

164

24

—

3,523

(5
)
(2
)
(17
)
—

(24
)
– construction
12,919

1,116

1,168

51

15,254

(27
)
(41
)
(524
)
(44
)
(636
)
– wholesale and retail trade, repair of motor vehicles and motorcycles

83,751

12,225

1,652

37

97,665

(115
)
(128
)
(968
)
(7
)
(1,218
)
– transportation and storage

23,327

1,825

351

38

25,541

(37
)
(46
)
(82
)
(1
)
(166
)
– accommodation and food

19,385

1,889

270

3

21,547

(43
)
(41
)
(83
)
(1
)
(168
)
– publishing, audiovisual and broadcasting

19,758

1,224

189

1

21,172

(42
)
(16
)
(84
)
—

(142
)
– real estate
116,132

5,985

1,115

1

123,233

(97
)
(80
)
(594
)
—

(771
)
– professional, scientific and technical activities

21,282

941

350

—

22,573

(29
)
(29
)
(113
)
—

(171
)
– administrative and support services

22,820

1,843

437

3

25,103

(41
)
(48
)
(166
)
(1
)
(256
)
– public administration and defence, compulsory social security

1,425

30

8

—

1,463

(1
)
(3
)
(5
)
—

(9
)
– education
1,713

102

14

—

1,829

(11
)
(7
)
(6
)
—

(24
)
– health and care
3,710

457

141

—

4,308

(10
)
(16
)
(33
)
—

(59
)
– arts, entertainment and recreation

4,326

676

39

—

5,041

(9
)
(9
)
(15
)
—

(33
)
– other services
13,259

411

242

1

13,913

(31
)
(31
)
(140
)
—

(202
)
– activities of households

770

59

1

—

830

—

—

—

—

—

– extra-territorial organisations and bodies activities

49

3

7

—

59

—

—

(1
)
—

(1
)
– government
7,905

168

—

—

8,073

(6
)
(1
)
—

—

(7
)
– asset-backed securities
813

16

—

—

829

—

(13
)
—

—

(13
)
Non-bank financial institutions
59,245

1,932

230

—

61,407

(44
)
(31
)
(51
)
—

(126
)
Loans and advances to banks
71,873

307

—

—

72,180

(11
)
(2
)
—

—

(13
)
At 31 Dec 2018
612,380

47,018

8,442

324

668,164

(753
)
(845
)
(3,899
)
(194
)
(5,691
)
By geography




















Europe
190,387

19,073

4,233

150

213,843

(366
)
(529
)
(1,598
)
(102
)
(2,595
)
– of which: UK
133,004

15,370

2,928

8

151,310

(313
)
(471
)
(998
)
—

(1,782
)
Asia
314,591

17,729

1,736

92

334,148

(179
)
(121
)
(1,040
)
(36
)
(1,376
)
– of which: Hong Kong

194,186

8,425

729

69

203,409

(99
)
(54
)
(413
)
(35
)
(601
)
MENA
25,684

2,974

1,769

53

30,480

(73
)
(77
)
(974
)
(46
)
(1,170
)
North America
62,631

6,928

314

—

69,873

(37
)
(107
)
(101
)
—

(245
)
Latin America
19,087

314

390

29

19,820

(98
)
(11
)
(186
)
(10
)
(305
)
At 31 Dec 2018
612,380

47,018

8,442

324

668,164

(753
)
(845
)
(3,899
)
(194
)
(5,691
)


24
HSBC Holdings plc Earnings Release 1Q19

Capital
Key metrics (KM1/IFRS9-FL)
 
 
 
At
 
 
 
31 Mar

31 Dec

30 Sep

30 Jun

31 Mar

Ref*
 
Footnotes
2019

2018

2018

2018

2018

 
Available capital ($bn)
1
 
 
 
 
 
1
Common equity tier 1 (‘CET1’) capital
 
125.8

121.0

123.1

122.8

129.6

2
CET1 capital as if IFRS 9 transitional arrangements had not been applied
 
124.9

120.0

122.1

121.8

128.6

3
Tier 1 capital
 
151.8

147.1

149.3

147.1

157.1

4
Tier 1 capital as if IFRS 9 transitional arrangements had not been applied
 
150.9

146.1

148.3

146.1

156.1

5
Total capital
 
177.8

173.2

178.1

176.6

185.2

6
Total capital as if IFRS 9 transitional arrangements had not been applied
 
176.9

172.2

177.1

175.6

184.2

 
Risk-weighted assets (‘RWAs’) ($bn)
 
 
 
 
 
 
7
Total RWAs
 
879.5

865.3

862.7

865.5

894.4

8
Total RWAs as if IFRS 9 transitional arrangements had not been applied
 
878.9

864.7

862.1

864.9

893.8

 
Capital ratios (%)
1
 
 
 
 
 
9
CET1
 
14.3

14.0

14.3

14.2

14.5

10
CET1 as if IFRS 9 transitional arrangements had not been applied
 
14.2

13.9

14.2

14.1

14.4

11
Tier 1
 
17.3

17.0

17.3

17.0

17.6

12
Tier 1 as if IFRS 9 transitional arrangements had not been applied
 
17.2

16.9

17.2

16.9

17.5

13
Total capital
 
20.2

20.0

20.7

20.4

20.7

14
Total capital as if IFRS 9 transitional arrangements had not been applied
 
20.1

19.9

20.6

20.3

20.6

 
Additional CET1 buffer requirements as a percentage of RWA (%)
 
 
 
 
 
 
 
Capital conservation buffer requirement
 
2.50

1.88

1.88

1.88

1.88

 
Countercyclical buffer requirement
 
0.67

0.56

0.45

0.46

0.34

 
Bank G-SIB and/or D-SIB additional requirements
 
2.00

1.50

1.50

1.50

1.50

 
Total of bank CET1 specific buffer requirements
 
5.17

3.94

3.83

3.84

3.72

 
Total capital requirement (%)
 
 
 
 
 
 
 
Total capital requirement
2
11.0

10.9

11.5

11.5

11.5

 
CET1 available after meeting the bank’s minimum capital requirements
3
8.1

7.9

7.8

7.7

8.0

 
Leverage ratio
4
 
 
 
 
 
15
Total leverage ratio exposure measure ($bn)
 
2,735.2

2,614.9

2,676.4

2,664.1

2,707.9

16
Leverage ratio (%)
 
5.4

5.5

5.4

5.4

5.6

17
Leverage ratio as if IFRS 9 transitional arrangements had not been applied (%)
 
5.4

5.5

5.4

5.3

5.5

 
Liquidity coverage ratio (‘LCR’)
5

 
 
 
 
 
Total high-quality liquid assets ($bn)
 
535.4

567.2

533.2

540.2

533.1

 
Total net cash outflow ($bn)
 
374.8

368.7

334.1

341.7

338.5

 
LCR ratio (%)
6
142.9

153.8

159.6

158.1

157.5

*
The references in this table identify the lines prescribed in the relevant European Banking Authority (‘EBA’) template where applicable and where there is a value.
For footnotes, see page 29.
Own funds disclosure
 
 
At
 
 
31 Mar

31 Dec

 
 
2019

2018

Ref*
 
$m

$m

6
Common equity tier 1 capital before regulatory adjustments
159,001

155,483

28
Total regulatory adjustments to common equity tier 1
(33,199
)
(34,461
)
29
Common equity tier 1 capital
125,802

121,022

36
Additional tier 1 capital before regulatory adjustments
26,106

26,180

43
Total regulatory adjustments to additional tier 1 capital
(60
)
(60
)
44
Additional tier 1 capital
26,046

26,120

45
Tier 1 capital
151,848

147,142

51
Tier 2 capital before regulatory adjustments
27,112

26,729

57
Total regulatory adjustments to tier 2 capital
(1,160
)
(633
)
58
Tier 2 capital
25,952

26,096

59
Total capital
177,800

173,238

60
Total risk-weighted assets
879,485

865,318

 
Capital ratios
%

%

61
Common equity tier 1 ratio
14.3

14.0

62
Tier 1 ratio
17.3

17.0

63
Total capital ratio 
20.2

20.0

*
The references in this table identify the lines prescribed in the relevant EBA template.


HSBC Holdings plc Earnings Release 1Q19
25

Earnings Release – 1Q19

Capital
At 31 March 2019, our common equity tier 1 (‘CET1’) capital ratio increased to 14.3% from 14.0% at 31 December 2018. This was primarily due to CET1 capital growth during the quarter and was partly offset by the $14.2bn rise in RWAs.
CET1 capital increased by $4.8bn during the quarter, mainly as a result of:
•
capital generation of $2.0bn through profits, net of cash and scrip dividends;
•
favourable foreign currency translation differences of $0.9bn;
•
a $0.8bn increase in FVOCI reserve; and
•
higher than expected scrip take-up in the final dividend, which added $0.3bn.
Leverage
Leverage ratio
 
 
At
 
 
31 Mar

31 Dec

 
 
2019

2018

Ref*
 
$bn

$bn

20
Tier 1 capital
148.3

143.5

21
Total leverage ratio exposure
2,735.2

2,614.9

 
 
%

%

22
Leverage ratio
5.4

5.5

EU-23
Choice of transitional arrangements for the definition of the capital measure
Fully phased-in

Fully phased-in

 
UK leverage ratio exposure – quarterly average
2,521.9

2,464.4

 
 
%

%

 
UK leverage ratio – quarterly average
5.9

5.8

 
UK leverage ratio – quarter end
5.9

6.0

*
The references identify the lines prescribed in the EBA template.
Our leverage ratio calculated in accordance with the Capital Requirements Directive and Regulation (‘CRD IV’) was 5.4% at
31 March 2019, down from 5.5% at 31 December 2018. The increase in exposure was primarily due to growth in customer lending, trading and other assets.
The Group’s UK leverage ratio at 31 March 2019 was 5.9%. This measure excludes qualifying central bank balances from the calculation of exposure.
At 31 March 2019, our UK minimum leverage ratio requirement of 3.25% was supplemented by an additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of 0.2%. These additional buffers translated into capital values of $17.7bn and $5.9bn respectively. We exceeded these leverage requirements.

26
HSBC Holdings plc Earnings Release 1Q19

Risk-weighted assets
Overview of RWAs (OV1)
 
 
 
31 Mar

31 Dec

31 Mar

 
 
 
2019

2018

2019

 
 
 
RWAs

RWAs

Capital
requirement7

Ref*
 
Footnotes
$bn

$bn

$bn

1
Credit risk (excluding counterparty credit risk)
 
649.8

638.1

52.0

2
– standardised approach
 
130.1

128.6

10.4

3
– foundation internal ratings based (‘IRB’) approach
 
30.8

30.5

2.5

4
– advanced IRB approach
 
488.9

479.0

39.1

6
Counterparty credit risk
 
50.0

47.2

4.0

7
– mark-to-market
 
27.0

24.7

2.2

10
– internal model method (‘IMM’)
 
16.3

16.2

1.3

11
– risk exposure amount for contributions to the default fund of a central counterparty
 
0.4

0.4

—

12
– credit valuation adjustment
 
6.3

5.9

0.5

13
Settlement risk
 
0.1

0.1

—

14
Securitisation exposures in the non-trading book
 
8.5

8.4

0.7

15
– IRB method
 
3.7

4.6

0.3

17
– IRB internal assessment approach
 
1.4

1.7

0.1

18
– standardised approach
 
2.2

2.1

0.2

14a
– exposures subject to the new securitisation framework
8
1.2

N/A

0.1

19
Market risk
 
35.1

35.8

2.8

20
– standardised approach
 
5.4

5.7

0.4

21
– internal models approach (‘IMA’)
 
29.7

30.1

2.4

23
Operational risk
 
91.1

91.1

7.3

25
– standardised approach
 
91.1

91.1

7.3

27
Amounts below the thresholds for deduction (subject to 250% risk weight)
 
44.9

44.6

3.6

29
Total
 
879.5

865.3

70.4

*
The references in this table identify the lines prescribed in the relevant EBA template where applicable and where there is a value.
For footnotes, see page 29.
RWAs by global business

RBWM

CMB

GB&M

GPB

Corporate
Centre

Total


$bn

$bn

$bn

$bn

$bn

$bn

Credit risk
99.2

301.1

173.2

13.8

115.9

703.2

Counterparty credit risk
—

—

48.3

0.2

1.6

50.1

Market risk
—

—

32.5

—

2.6

35.1

Operational risk
27.3

24.3

31.5

2.8

5.2

91.1

At 31 Mar 2019
126.5

325.4

285.5

16.8

125.3

879.5

RWAs by geographical region


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$bn

$bn

$bn

$bn

$bn

$bn

Credit risk

225.7

296.1

46.7

104.0

30.7

703.2

Counterparty credit risk

29.5

9.6

1.1

8.6

1.3

50.1

Market risk
9
23.8

21.6

1.7

9.5

1.7

35.1

Operational risk

27.3

39.5

6.8

11.7

5.8

91.1

At 31 Mar 2019

306.3

366.8

56.3

133.8

39.5

879.5

For footnotes, see page 29.
RWA movement by global business by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
RBWM

CMB

GB&M

GPB

Corporate
Centre

Market risk

Total RWAs

 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

RWAs at 1 Jan 2019
126.9

321.2

248.6

16.8

116.0

35.8

865.3

Asset size
1.4

4.2

5.0

0.1

1.5

(0.7
)
11.5

Asset quality
(0.3
)
0.5

(1.3
)
—

0.9

—

(0.2
)
Model updates
(0.1
)
—

(0.1
)
—

(0.1
)
—

(0.3
)
Methodology and policy
(1.8
)
(2.5
)
0.2

(0.1
)
4.2

—

—

Foreign exchange movements
0.4

2.0

0.6

—

0.2

—

3.2

Total RWA movement
(0.4
)
4.2

4.4

—

6.7

(0.7
)
14.2

RWAs at 31 Mar 2019
126.5

325.4

253.0

16.8

122.7

35.1

879.5


HSBC Holdings plc Earnings Release 1Q19
27

Earnings Release – 1Q19

RWA movement by geographical region by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
Europe

Asia

MENA

North
America

Latin
America

Market risk

Total RWAs

 
$bn

$bn

$bn

$bn

$bn

$bn

$bn

RWAs at 1 Jan 2019
274.1

340.6

54.8

123.1

36.9

35.8

865.3

Asset size
5.0

5.4

0.3

0.3

1.2

(0.7
)
11.5

Asset quality
0.7

—

(0.3
)
(0.3
)
(0.3
)
—

(0.2
)
Model updates
(0.1
)
—

—

(0.2
)
—

—

(0.3
)
Methodology and policy
0.8

(1.8
)
(0.1
)
0.9

0.2

—

—

Foreign exchange movements
2.0

1.0

(0.1
)
0.5

(0.2
)
—

3.2

Total RWA movement
8.4

4.6

(0.2
)
1.2

0.9

(0.7
)
14.2

RWAs at 31 Mar 2019
282.5

345.2

54.6

124.3

37.8

35.1

879.5

RWAs
Risk-weighted assets (‘RWAs’) increased by $14.2bn during 1Q19, including an increase of $3.2bn due to foreign currency translation differences. The $11.0bn increase (excluding foreign currency translation differences) was primarily due to $11.5bn asset size growth during the quarter, which was offset by reductions of $0.3bn from model updates and a $0.2bn decrease due to improved asset quality.
Asset size
The $11.5bn growth during 1Q19 was mainly due to:
•
lending growth of $4.2bn in CMB and $1.5bn in GB&M, mainly in Asia and Europe, and $1.4bn in RBWM, mainly in Asian mortgage lending;
•
growth of $3.5bn in GB&M counterparty credit risks in Europe, largely in the form of securities financing transactions, new derivative trades, and mark-to-market movements; and
•
a $1.7bn increase in RWAs as a result of an increase in the value of significant holdings in Corporate Centre.
This was partly offset by:
•
a $0.7bn fall in market risk mainly due to a reduction in equity risk and exposures in Europe and Asia.
Model updates
The $0.3bn reduction in RWAs mainly resulted from the application of IRB models to receivables finance in North America.
Methodology and policy
Movements largely comprised a $4.5bn increase in tangible fixed assets within Corporate Centre as a result of implementing IFRS 16 ‘Leases’ with effect from 1 January 2019, reflecting the recognition of right of use assets for assets formerly under operating leases, offset by a $4.5bn reduction in RWAs due to management initiatives, most notably in CMB and GB&M.
RWA flow statements of credit risk exposures under IRB approach10 (CR8)
 
 
RWAs

Capital
requirement7

Ref*
 
$bn

$bn

1
RWAs at 1 Jan 2019
509.5

40.7

2
Asset size
5.7

0.6

3
Asset quality
(0.1
)
—

4
Model updates
(0.1
)
—

5
Methodology and policy
1.6

0.1

7
Foreign exchange movements
3.1

0.2

9
RWAs at 31 Mar 2019
519.7

41.6

*
The references in this table identify the lines prescribed in the relevant EBA template where applicable and where there is a value.
For footnotes, see page 29.
RWAs under the IRB approach increased by $10.2bn in the quarter, including an increase of $3.1bn due to foreign currency translation differences. The $7.1bn increase (excluding foreign currency translation differences) was primarily due to asset size growth of $5.7bn and methodology and policy driven increases of $1.6bn during the quarter.
Asset size
The $5.7bn growth in RWAs during 1Q19 was mainly driven by lending growth in CMB, GB&M and RBWM, mostly in Asia and Europe.
Methodology and policy
The $1.6bn increase primarily comprised:
•
the $3.9bn impact of recognising right of use assets under operating leases upon implementation of IFRS 16 ‘Leases’; and
•
a $0.8bn increase due to internal policy updates.
This was partly offset by:
•
a $3.1bn reduction in RWAs due to management initiatives, most notably in CMB.

28
HSBC Holdings plc Earnings Release 1Q19

RWA flow statements of counterparty credit risk exposures under the IMM (CCR7)
 
 
RWAs

Capital
requirement7

Ref*
 
$bn

$bn

1
RWAs at 1 Jan 2019
21.1

1.8

2
Asset size
0.5

—

5
Methodology and policy
(0.6
)
(0.1
)
9
RWAs at 31 Mar 2019
21.0

1.7

*
The references in this table identify the lines prescribed in the relevant EBA template where applicable and where there is a value.
For footnotes, see page 29.
RWAs under the IMM decreased by $0.1bn. Methodology and policy changes, which included increased recognition of hedging, reduced RWAs by $0.6bn, offsetting asset size growth of $0.5bn due to increased exposures.
RWA flow statements of market risk exposures under the IMA (MR2-B)
 
 
VaR

Stressed
VaR

IRC

Other

Total RWAs

Capital
requirement7

Ref*
 
$bn

$bn

$bn

$bn

$bn

$bn

1
RWAs at 1 Jan 2019
7.1

12.1

6.4

4.5

30.1

2.4

2
Movement in risk levels
(0.4
)
(1.4
)
2.5

(1.1
)
(0.4
)
—

8
RWAs at 31 Mar 2019
6.7

10.7

8.9

3.4

29.7

2.4

*
The references in this table identify the lines prescribed in the relevant EBA template where applicable and where there is a value.
For footnotes, see page 29.
RWAs under the IMA decreased by $0.4bn due to:
•
VaR/Stressed VaR reductions of $1.8bn as a result of lower equity correlation and reduced exposure in principal Asian and European indices; and
•
reductions in positions under Other, which reduced RWAs by $1.1bn.
These movements were partly offset by a $2.5bn increase in IRC RWAs as a result of increased sovereign exposure.
Footnotes to capital, leverage and risk-weighted assets
1
Capital figures and ratios are reported on the CRD IV transitional basis for additional tier 1 and tier 2 capital in accordance with articles 484-92 of the Capital Requirements Regulation.
2
Total capital requirement is defined as the sum of Pillar 1 and Pillar 2A capital requirements set by the PRA.

3
The minimum requirements represent the total capital requirement to be met by CET1.

4
Leverage ratio is calculated using the CRD IV end-point basis for additional tier 1 capital.
5
The EU's regulatory transitional arrangements for IFRS 9 in article 473a of the Capital Requirements Regulation do not apply to liquidity coverage measures.
6
LCR is calculated as at the end of each period rather than using average values.
7
‘Capital requirement’ represents the minimum capital charge set at 8% of RWAs by article 92 of the Capital Requirements Regulation.
8
On 1 January 2019, a new securitisation framework came into force in the EU for new transactions entered into on or after that date. Existing positions are subject to ‘grandfathering’ provisions and will transfer to the new framework on 1 January 2020. Our exposures subject to the approaches under the new framework at 31 March 2019 include $293m under the external ratings-based approach, $651m under the internal assessment approach, and $293m under the standardised approach.
9
RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.
10
Securitisation positions are not included in this table.

HSBC Holdings plc Earnings Release 1Q19
29

Earnings Release – 1Q19

Summary information – global businesses
HSBC adjusted profit before tax
 
Quarter ended 31 Mar 2019
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 
$m

$m

$m

$m

$m

$m

Net operating income/(expense) before change in expected credit losses and other credit impairment charges
5,971

3,921

4,068

450

(4
)
14,406

of which: net interest income/(expense)
3,965

2,800

1,422

216

(935
)
7,468

Change in expected credit losses and other credit impairment (charges)/recoveries
(302
)
(247
)
(40
)
(2
)
6

(585
)
Net operating income
5,669

3,674

4,028

448

2

13,821

Total operating expenses
(3,451
)
(1,658
)
(2,389
)
(350
)
(215
)
(8,063
)
Operating profit/(loss)
2,218

2,016

1,639

98

(213
)
5,758

Share of profit in associates and joint ventures
13

—

—

—

579

592

Adjusted profit before tax
2,231

2,016

1,639

98

366

6,350

 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
35.2

31.7

25.8

1.5

5.8

100.0

Adjusted cost efficiency ratio
57.8

42.3

58.7

77.8

(5,375.0
)
56.0

 
Quarter ended 31 Dec 2018
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 
$m

$m

$m

$m

$m

$m

Net operating income before change in expected credit losses and other credit impairment charges
5,135

3,715

3,083

425

283

12,641

of which: net interest income/(expense)
4,077

2,788

1,445

220

(788
)
7,742

Change in expected credit losses and other credit impairment (charges)/recoveries
(344
)
(448
)
(65
)
(9
)
3

(863
)
Net operating income
4,791

3,267

3,018

416

286

11,778

Total operating expenses
(3,450
)
(1,591
)
(2,314
)
(356
)
(1,223
)
(8,934
)
Operating profit/(loss)
1,341

1,676

704

60

(937
)
2,844

Share of profit in associates and joint ventures
13

—

—

—

558

571

Adjusted profit before tax
1,354

1,676

704

60

(379
)
3,415

 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
39.6

49.1

20.6

1.8

(11.1
)
100.0

Adjusted cost efficiency ratio
67.2

42.8

75.1

83.8

432.2

70.7

 
Quarter ended 31 Mar 2018
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global
Banking and
Markets

Global
Private
Banking

Corporate Centre

Total

 
$m

$m

$m

$m

$m

$m

Net operating income/(expense) before change in expected credit losses and other credit impairment charges
5,443

3,535

3,954

467

(203
)
13,196

of which: net interest income/(expense)
3,640

2,407

1,125

217

(273
)
7,116

Change in expected credit losses and other credit impairment (charges)/recoveries
(289
)
67

(17
)
3

84

(152
)
Net operating income/(expense)
5,154

3,602

3,937

470

(119
)
13,044

Total operating expenses
(3,281
)
(1,572
)
(2,297
)
(359
)
(305
)
(7,814
)
Operating profit/(loss)
1,873

2,030

1,640

111

(424
)
5,230

Share of profit in associates and joint ventures
3

—

—

—

567

570

Adjusted profit before tax
1,876

2,030

1,640

111

143

5,800

 
%

%

%

%

%

%

Share of HSBC’s adjusted profit before tax
32.3

35.0

28.3

1.9

2.5

100.0

Adjusted cost efficiency ratio
60.3

44.5

58.1

76.9

(150.2
)
59.2



30
HSBC Holdings plc Earnings Release 1Q19

Global Private Banking – reported client assets1
 
Quarter ended
 
31 Mar

31 Dec

31 Mar

 
2019

2018

2018

 
$bn

$bn

$bn

Opening balance
309

326

330

Net new money
10

1

3

Value change
14

(11
)
(2
)
Disposals
—

—

—

Exchange and other
2

(7
)
—

Closing balance
335

309

331

For footnotes, see page 33.
Global Private Banking – reported client assets by geography1
 
 
Quarter ended
 
 
31 Mar

31 Dec

31 Mar

 
 
2019

2018

2018

 
Footnotes
$bn

$bn

$bn

Europe
 
158

149

162

Asia
 
139

124

131

North America
 
38

36

38

Latin America
 
—

—

—

Middle East
2
—

—

—

Closing balance
 
335

309

331

For footnotes, see page 33.

HSBC Holdings plc Earnings Release 1Q19
31

Earnings Release – 1Q19

Summary information – geographical regions
HSBC reported profit/(loss) before tax
 
Quarter ended 31 Mar 2019
 
Europe

Asia

MENA

North America

Latin
 America

Intra-HSBC
items

Total

 
$m

$m

$m

$m

$m

$m

$m

Net interest income
1,524

3,996

437

853

508

150

7,468

Net fee income
911

1,409

159

424

123

—

3,026

Net income from financial instruments held for trading or managed on a fair value basis
1,207

1,209

104

218

215

(72
)
2,881

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
747

948

—

—

15

—

1,710

Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
291

8

(1
)
2

47

(77
)
270

Other income/(expense)3
(75
)
249

3

179

63

(1,346
)
(927
)
Net operating income before change in expected credit losses and other credit impairment charges
4,605

7,819

702

1,676

971

(1,345
)
14,428

Change in expected credit losses and other credit impairment charges
(303
)
(158
)
(6
)
(3
)
(115
)
—

(585
)
Net operating income
4,302

7,661

696

1,673

856

(1,345
)
13,843

Total operating expenses
(4,318
)
(3,131
)
(345
)
(1,294
)
(479
)
1,345

(8,222
)
Operating profit
(16
)
4,530

351

379

377

—

5,621

Share of profit in associates and joint ventures
2

476

114

—

—

—

592

Profit before tax
(14
)
5,006

465

379

377

—

6,213

 
%

%

%

%

%

 
%

Share of HSBC’s profit before tax
(0.2
)
80.5

7.5

6.1

6.1

 
100.0

Cost efficiency ratio
93.8

40.0

49.1

77.2

49.3

 
57.0

 
 
 
 
 
 
 
 
 
Quarter ended 31 Dec 2018
Net interest income
1,629

4,132

431

889

570

58

7,709

Net fee income
910

1,199

144

457

128

(11
)
2,827

Net income from financial instruments held for trading or managed on a fair value basis
894

1,064

88

77

213

(290
)
2,046

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
(753
)
(703
)
—

—

12

—

(1,444
)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
(95
)
—

(3
)
6

10

236

154

Other income3
1,411

1,191

8

144

10

(1,361
)
1,403

Net operating income before loan impairment charges and other credit risk provisions
3,996

6,883

668

1,573

943

(1,368
)
12,695

Change in expected credit losses and other credit impairment charges
(422
)
(197
)
(6
)
(41
)
(187
)
—

(853
)
Net operating income
3,574

6,686

662

1,532

756

(1,368
)
11,842

Total operating expenses
(5,136
)
(3,203
)
(348
)
(1,242
)
(583
)
1,368

(9,144
)
Operating profit
(1,562
)
3,483

314

290

173

—

2,698

Share of profit in associates and joint ventures
3

468

85

—

2

—

558

Profit before tax
(1,559
)
3,951

399

290

175

—

3,256

 
%

%

%

%

%

 
%

Share of HSBC’s profit before tax
(47.9
)
121.3

12.3

8.9

5.4



100.0

Cost efficiency ratio
128.5

46.5

52.1

79.0

61.8

 
72.0


32
HSBC Holdings plc Earnings Release 1Q19

HSBC reported profit/(loss) before tax (continued)

 
Quarter ended 31 Mar 2018
 
Europe

Asia

MENA

North America

Latin
 America

Intra-HSBC
items

Total

 
$m

$m

$m

$m

$m

$m

$m

Net interest income
1,739

3,831

461

870

528

27

7,456

Net fee income
1,087

1,678

157

444

141

—

3,507

Net income from financial instruments held for trading or managed on a fair value basis
1,155

956

42

212

121

(102
)
2,384

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss
(227
)
70

—

—

2

—

(155
)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss
155

(34
)
5

10

8

(27
)
117

Other income/(expense)3
561

806

11

89

(3
)
(1,063
)
401

Net operating income before loan impairment charges and other credit risk provisions
4,470

7,307

676

1,625

797

(1,165
)
13,710

Change in expected credit losses and other credit impairment (charges)/recoveries
(62
)
(32
)
(4
)
47

(119
)
—

(170
)
Net operating income
4,408

7,275

672

1,672

678

(1,165
)
13,540

Total operating expenses
(4,437
)
(2,986
)
(343
)
(2,268
)
(514
)
1,165

(9,383
)
Operating profit/(loss)
(29
)
4,289

329

(596
)
164

—

4,157

Share of profit in associates and joint ventures
11

479

108

—

—

—

598

Profit/(loss) before tax
(18
)
4,768

437

(596
)
164

—

4,755

 
%

%

%

%

%



%

Share of HSBC’s profit before tax
(0.4
)
100.3

9.2

(12.5
)
3.4



100.0

Cost efficiency ratio
99.3

40.9

50.7

139.6

64.5



68.4

Footnotes to summary information – global businesses and geographical regions
1
Client assets are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately. The main components of client assets are funds under management, which are not reported on the Group’s balance sheet, and customer deposits, which are reported on the Group’s balance sheet.
2
‘Middle East’ is an offshore business, therefore client assets are booked across to various regions, primarily in Europe.
3
Other income in this context comprises where applicable changes in fair value of long-term debt and related derivatives, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.


HSBC Holdings plc Earnings Release 1Q19
33

Earnings Release – 1Q19

Appendix – selected information
Analysis of significant items by global business, geographical regions and countries/territories are presented below.
Reconciliation of reported and adjusted results – global businesses


Quarter ended 31 Mar 2019


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate Centre

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported
 
5,971

3,921

4,015

450

71

14,428

Significant items

—

—

53

—

(75
)
(22
)
– fair value movement on financial instruments
2
—

—

53

—

(75
)
(22
)
Adjusted

5,971

3,921

4,068

450

(4
)
14,406

Change in expected credit losses and other credit impairment (charges)/recoveries













Reported

(302
)
(247
)
(40
)
(2
)
6

(585
)
Adjusted

(302
)
(247
)
(40
)
(2
)
6

(585
)
Operating expenses













Reported

(3,508
)
(1,662
)
(2,440
)
(352
)
(260
)
(8,222
)
Significant items

57

4

51

2

45

159

– costs of structural reform
3
—

2

13

—

38

53

– customer redress programmes

56

—

—

—

—

56

– restructuring and other related costs

1

2

38

2

7

50

Adjusted

(3,451
)
(1,658
)
(2,389
)
(350
)
(215
)
(8,063
)
Share of profit in associates and joint ventures













Reported

13

—

—

—

579

592

Adjusted

13

—

—

—

579

592

Profit before tax













Reported

2,174

2,012

1,535

96

396

6,213

Significant items

57

4

104

2

(30
)
137

– revenue

—

—

53

—

(75
)
(22
)
– operating expenses

57

4

51

2

45

159

Adjusted

2,231

2,016

1,639

98

366

6,350

Loans and advances to customers (net)













Reported

369,178

339,729

252,180

42,497

1,695

1,005,279

Adjusted

369,178

339,729

252,180

42,497

1,695

1,005,279

Customer accounts













Reported

653,969

349,352

281,462

64,489

7,239

1,356,511

Adjusted

653,969

349,352

281,462

64,489

7,239

1,356,511

For footnotes, see page 42.

34
HSBC Holdings plc Earnings Release 1Q19

Reconciliation of reported and adjusted results – global businesses (continued)


Quarter ended 31 Dec 2018


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported

5,110

3,703

3,112

429

341

12,695

Currency translation

25

19

21

1

9

75

Significant items

—

(7
)
(50
)
(5
)
(67
)
(129
)
– customer redress programmes

—

(7
)
—

—

—

(7
)
– disposals, acquisitions and investment in new businesses

—

—

—

(5
)
(24
)
(29
)
– fair value movement on financial instruments
2
—

—

(49
)
—

(46
)
(95
)
– currency translation on significant items

—

—

(1
)
—

3

2

Adjusted

5,135

3,715

3,083

425

283

12,641

Change in expected credit losses and other credit impairment (charges)/recoveries













Reported

(339
)
(444
)
(64
)
(8
)
2

(853
)
Currency translation

(5
)
(4
)
(1
)
(1
)
1

(10
)
Adjusted

(344
)
(448
)
(65
)
(9
)
3

(863
)
Operating expenses













Reported

(3,445
)
(1,574
)
(2,271
)
(355
)
(1,499
)
(9,144
)
Currency translation

(20
)
(8
)
(15
)
(1
)
(11
)
(55
)
Significant items

15

(9
)
(28
)
—

287

265

– costs of structural reform
3
(1
)
3

14

—

45

61

– customer redress programmes

17

(11
)
(22
)
—

—

(16
)
– disposals, acquisitions and investment in new businesses

—

—

—

(2
)
—

(2
)
– past service costs of guaranteed minimum pension benefits equalisation

—

—

—

—

228

228

– restructuring and other related costs

—

—

—

—

15

15

– settlements and provisions in connection with legal and regulatory matters

—

—

(21
)
—

(3
)
(24
)
– currency translation on significant items

(1
)
(1
)
1

2

2

3

Adjusted

(3,450
)
(1,591
)
(2,314
)
(356
)
(1,223
)
(8,934
)
Share of profit in associates and joint ventures













Reported

12

—

—

—

546

558

Currency translation

1

—

—

—

12

13

Adjusted

13

—

—

—

558

571

Profit before tax













Reported

1,338

1,685

777

66

(610
)
3,256

Currency translation

1

7

5

(1
)
11

23

Significant items

15

(16
)
(78
)
(5
)
220

136

– revenue

—

(7
)
(50
)
(5
)
(67
)
(129
)
– operating expenses

15

(9
)
(28
)
—

287

265

Adjusted

1,354

1,676

704

60

(379
)
3,415

Loans and advances to customers (net)













Reported

361,872

333,162

244,978

39,217

2,467

981,696

Currency translation

2,978

1,950

1,010

(51
)
36

5,923

Adjusted

364,850

335,112

245,988

39,166

2,503

987,619

Customer accounts













Reported

640,924

357,596

290,914

64,658

8,551

1,362,643

Currency translation

3,285

2,159

2,253

(126
)
2

7,573

Adjusted

644,209

359,755

293,167

64,532

8,553

1,370,216

For footnotes, see page 42.


HSBC Holdings plc Earnings Release 1Q19
35

Earnings Release – 1Q19

Reconciliation of reported and adjusted results – global businesses (continued)


Quarter ended 31 Mar 2018


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported

5,669

3,699

4,178

482

(318
)
13,710

Currency translation

(226
)
(164
)
(195
)
(15
)
(56
)
(656
)
Significant items

—

—

(29
)
—

171

142

– disposals, acquisitions and investment in new businesses

—

—

—

—

112

112

– fair value movement on financial instruments
2
—

—

(30
)
—

58

28

– currency translation on significant items

—

—

1

—

1

2

Adjusted

5,443

3,535

3,954

467

(203
)
13,196

Change in expected credit losses and other credit impairment (charges)/recoveries













Reported

(303
)
64

(22
)
3

88

(170
)
Currency translation

14

3

5

—

(4
)
18

Adjusted

(289
)
67

(17
)
3

84

(152
)
Operating expenses













Reported

(3,573
)
(1,653
)
(2,387
)
(415
)
(1,355
)
(9,383
)
Currency translation

189

80

113

15

49

446

Significant items

103

1

(23
)
41

1,001

1,123

– costs of structural reform
3
1

1

7

—

117

126

– customer redress programmes

93

—

—

—

—

93

– disposals, acquisitions and investment in new businesses

—

—

—

2

—

2

– restructuring and other related costs

—

—

—

—

20

20

– settlements and provisions in connection with legal and regulatory matters

16

—

(33
)
41

873

897

– currency translation on significant items

(7
)
—

3

(2
)
(9
)
(15
)
Adjusted

(3,281
)
(1,572
)
(2,297
)
(359
)
(305
)
(7,814
)
Share of profit in associates and joint ventures













Reported

3

—

—

—

595

598

Currency translation

—

—

—

—

(28
)
(28
)
Adjusted

3

—

—

—

567

570

Profit/(loss) before tax













Reported

1,796

2,110

1,769

70

(990
)
4,755

Currency translation

(23
)
(81
)
(77
)
—

(39
)
(220
)
Significant items

103

1

(52
)
41

1,172

1,265

– revenue

—

—

(29
)
—

171

142

– operating expenses

103

1

(23
)
41

1,001

1,123

Adjusted

1,876

2,030

1,640

111

143

5,800

Loans and advances to customers (net)













Reported

356,733

329,801

248,432

41,071

5,128

981,165

Currency translation

(17,354
)
(14,096
)
(10,215
)
(1,345
)
(381
)
(43,391
)
Adjusted

339,379

315,705

238,217

39,726

4,747

937,774

Customer accounts













Reported

656,759

359,146

290,233

63,069

10,472

1,379,679

Currency translation

(22,823
)
(14,159
)
(14,987
)
(2,534
)
(663
)
(55,166
)
Adjusted

633,936

344,987

275,246

60,535

9,809

1,324,513

For footnotes, see page 42.


36
HSBC Holdings plc Earnings Release 1Q19

Reconciliation of reported and adjusted risk-weighted assets
 
At 31 Mar 2019
 
Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total

 
$bn

$bn

$bn

$bn

$bn

$bn

Risk-weighted assets
 
 
 
 
 
 
Reported
126.5

325.4

285.5

16.8

125.3

879.5

Disposals
—

—

—

—

(0.8
)
(0.8
)
– operations in Brazil
—

—

—

—

(0.8
)
(0.8
)
Adjusted
126.5

325.4

285.5

16.8

124.5

878.7

 
 
 
 
 
 
 
 
At 31 Dec 2018
Risk-weighted assets
 
 
 
 
 
 
Reported
126.9

321.2

281.0

16.8

119.4

865.3

Currency translation
0.4

2.0

0.6

—

0.2

3.2

Disposals
—

—

—

—

(0.8
)
(0.8
)
– operations in Brazil
—

—

—

—

(0.8
)
(0.8
)
Adjusted
127.3

323.2

281.6

16.8

118.8

867.7

 
 
 
 
 
 
 
 
At 31 Mar 2018
Risk-weighted assets
 
 
 
 
 
 
Reported
125.8

314.0

304.3

16.9

133.4

894.4

Currency translation
(4.2
)
(13.9
)
(7.7
)
(0.4
)
(2.6
)
(28.8
)
Disposals
—

—

—

—

(2.6
)
(2.6
)
– operations in Brazil
—

—

—

—

(2.6
)
(2.6
)
Adjusted
121.6

300.1

296.6

16.5

128.2

863.0

Reconciliation of reported and adjusted results – geographical regions


Quarter ended 31 Mar 2019


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1












Reported
4
4,605

7,819

702

1,676

971

14,428

Significant items
 
(60
)
27

—

4

7

(22
)
– fair value movement on financial instruments
2
(60
)
27

—

4

7

(22
)
Adjusted
4
4,545

7,846

702

1,680

978

14,406

ECL
 






Reported
 
(303
)
(158
)
(6
)
(3
)
(115
)
(585
)
Adjusted
 
(303
)
(158
)
(6
)
(3
)
(115
)
(585
)
Operating expenses
 






Reported
4
(4,318
)
(3,131
)
(345
)
(1,294
)
(479
)
(8,222
)
Significant items
 
143

7

1

5

3

159

– costs of structural reform
3
52

1

—

—

—

53

– customer redress programmes
 
56

—

—

—

—

56

– restructuring and other related costs
 
35

6

1

5

3

50

Adjusted
4
(4,175
)
(3,124
)
(344
)
(1,289
)
(476
)
(8,063
)
Share of profit in associates and joint ventures
 






Reported
 
2

476

114

—

—

592

Adjusted
 
2

476

114

—

—

592

Profit/(loss) before tax
 






Reported
 
(14
)
5,006

465

379

377

6,213

Significant items
 
83

34

1

9

10

137

– revenue
 
(60
)
27

—

4

7

(22
)
– operating expenses
 
143

7

1

5

3

159

Adjusted
 
69

5,040

466

388

387

6,350

Loans and advances to customers (net)
 












Reported
 
384,129

461,508

27,823

109,923

21,896

1,005,279

Adjusted
 
384,129

461,508

27,823

109,923

21,896

1,005,279

Customer accounts
 












Reported
 
507,459

656,566

35,941

129,934

26,611

1,356,511

Adjusted
 
507,459

656,566

35,941

129,934

26,611

1,356,511

For footnotes, see page 42.

HSBC Holdings plc Earnings Release 1Q19
37

Earnings Release – 1Q19

Reconciliation of reported and adjusted results – geographical regions (continued)
 


Quarter ended 31 Mar 2019


UK

Hong
Kong

Mainland China

US

Mexico


Footnotes
$m

$m

$m

$m

$m

Revenue
1










Reported
 
3,501

5,020

806

1,192

657

Significant items
 
(64
)
22

1

3

5

– fair value movement on financial instruments
2
(64
)
22

1

3

5

Adjusted
 
3,437

5,042

807

1,195

662

ECL
 










Reported
 
(290
)
(100
)
(40
)
(10
)
(98
)
Adjusted
 
(290
)
(100
)
(40
)
(10
)
(98
)
Operating expenses
 










Reported
 
(3,451
)
(1,672
)
(499
)
(1,011
)
(334
)
Significant items
 
113

7

—

3

2

– costs of structural reform
3
33

1

—

—

—

– customer redress programmes
 
56

—

—

—

—

– restructuring and other related costs
 
24

6

—

3

2

Adjusted
 
(3,338
)
(1,665
)
(499
)
(1,008
)
(332
)
Share of profit in associates and joint ventures
 










Reported
 
3

6

461

—

—

Adjusted
 
3

6

461

—

—

Profit/(loss) before tax
 










Reported
 
(237
)
3,254

728

171

225

Significant items
 
49

29

1

6

7

– revenue
 
(64
)
22

1

3

5

– operating expenses
 
113

7

—

3

2

Adjusted
 
(188
)
3,283

729

177

232

Loans and advances to customers (net)
 










Reported
 
296,111

295,322

41,643

65,916

18,832

Adjusted
 
296,111

295,322

41,643

65,916

18,832

Customer accounts
 










Reported
 
403,149

475,763

41,808

78,950

20,831

Adjusted
 
403,149

475,763

41,808

78,950

20,831

For footnotes, see page 42.


38
HSBC Holdings plc Earnings Release 1Q19

Reconciliation of reported and adjusted results – geographical regions (continued)


Quarter ended 31 Dec 2018


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1






Reported
4
3,996

6,883

668

1,573

943

12,695

Currency translation
4
39

35

4

(3
)
7

75

Significant items

(100
)
(1
)
—

1

(29
)
(129
)
– customer redress programmes

(7
)
—

—

—

—

(7
)
– disposals, acquisitions and investment in new businesses

(5
)
—

—

—

(24
)
(29
)
– fair value movement on financial instruments
2
(90
)
(1
)
—

(1
)
(3
)
(95
)
– currency translation on significant items

2

—

—

2

(2
)
2

Adjusted
4
3,935

6,917

672

1,571

921

12,641

ECL













Reported

(422
)
(197
)
(6
)
(41
)
(187
)
(853
)
Currency translation

(6
)
(3
)
1

—

(2
)
(10
)
Adjusted

(428
)
(200
)
(5
)
(41
)
(189
)
(863
)
Operating expenses













Reported
4
(5,136
)
(3,203
)
(348
)
(1,242
)
(583
)
(9,144
)
Currency translation
4
(31
)
(27
)
(3
)
2

(3
)
(55
)
Significant items

254

7

—

4

—

265

– costs of structural reform
3
57

4

—

—

—

61

– customer redress programmes

(16
)
—

—

—

—

(16
)
– disposals, acquisitions and investment in new businesses

(2
)
—

—

—

—

(2
)
– past service costs of guaranteed minimum pension benefits equalisation

228

—

—

—

—

228

– restructuring and other related costs

6

4

—

5

—

15

– settlements and provisions in connection with legal and regulatory matters

(24
)
—

—

—

—

(24
)
– currency translation on significant items

5

(1
)
—

(1
)
—

3

Adjusted
4
(4,913
)
(3,223
)
(351
)
(1,236
)
(586
)
(8,934
)
Share of profit in associates and joint ventures













Reported

3

468

85

—

2

558

Currency translation

1

12

—

—

—

13

Adjusted

4

480

85

—

2

571

Profit/(loss) before tax













Reported

(1,559
)
3,951

399

290

175

3,256

Currency translation

3

17

2

(1
)
2

23

Significant items

154

6

—

5

(29
)
136

– revenue

(100
)
(1
)
—

1

(29
)
(129
)
– operating expenses

254

7

—

4

—

265

Adjusted

(1,402
)
3,974

401

294

148

3,415

Loans and advances to customers (net)













Reported

373,073

450,545

28,824

108,146

21,108

981,696

Currency translation

4,335

853

(107
)
827

15

5,923

Adjusted

377,408

451,398

28,717

108,973

21,123

987,619

Customer accounts













Reported

503,154

664,824

35,408

133,291

25,966

1,362,643

Currency translation

6,453

581

(105
)
865

(221
)
7,573

Adjusted

509,607

665,405

35,303

134,156

25,745

1,370,216

For footnotes, see page 42.


HSBC Holdings plc Earnings Release 1Q19
39

Earnings Release – 1Q19

Reconciliation of reported and adjusted results – geographical regions (continued)


Quarter ended 31 Dec 2018


UK

Hong
Kong

Mainland China

US

Mexico


Footnotes
$m

$m

$m

$m

$m

Revenue
1





Reported

2,871

4,361

660

1,087

596

Currency translation

39

(8
)
17

1

19

Significant items

(93
)
(6
)
(1
)
2

(4
)
– customer redress programmes

(7
)
—

—

—

—

– fair value movement on financial instruments
2
(86
)
(6
)
1

—

(3
)
– currency translation on significant items

—

—

(2
)
2

(1
)
Adjusted

2,817

4,347

676

1,090

611

ECL











Reported

(404
)
(102
)
(57
)
(21
)
(134
)
Currency translation

(4
)
(1
)
(1
)
(1
)
(4
)
Adjusted

(408
)
(103
)
(58
)
(22
)
(138
)
Operating expenses











Reported

(4,372
)
(1,708
)
(493
)
(968
)
(344
)
Currency translation

(34
)
4

(12
)
(1
)
(11
)
Significant items

251

7

—

4

—

– costs of structural reform
3
41

4

—

—

—

– customer redress programmes

(16
)
—

—

—

—

– past service costs of guaranteed minimum pension benefits equalisation

228

—

—

—

—

– restructuring and other related costs

7

4

—

4

—

– settlements and provisions in connection with legal and regulatory matters

(10
)
—

—

—

—

– currency translation on significant items

1

(1
)
—

—

—

Adjusted

(4,155
)
(1,697
)
(505
)
(965
)
(355
)
Share of profit in associates and joint ventures











Reported

4

10

455

—

—

Currency translation

—

—

12

—

—

Adjusted

4

10

467

—

—

Profit/(loss) before tax











Reported

(1,901
)
2,561

565

98

118

Currency translation

1

(5
)
16

(1
)
4

Significant items

158

1

(1
)
6

(4
)
– revenue

(93
)
(6
)
(1
)
2

(4
)
– operating expenses

251

7

—

4

—

Adjusted

(1,742
)
2,557

580

103

118

Loans and advances to customers (net)











Reported

287,144

290,547

38,979

64,009

17,890

Currency translation

5,940

(657
)
969

—

335

Adjusted

293,084

289,890

39,948

64,009

18,225

Customer accounts











Reported

399,487

484,897

45,712

82,523

19,936

Currency translation

8,260

(1,097
)
1,137

—

374

Adjusted

407,747

483,800

46,849

82,523

20,310

For footnotes, see page 42.


40
HSBC Holdings plc Earnings Release 1Q19

Reconciliation of reported and adjusted results – geographical regions (continued)


Quarter ended 31 Mar 2018


Europe

Asia

MENA

North
America

Latin
America

Total


Footnotes
$m

$m

$m

$m

$m

$m

Revenue
1






Reported
4
4,470

7,307

676

1,625

797

13,710

Currency translation
4
(343
)
(161
)
(25
)
(21
)
(126
)
(656
)
Significant items
 
47

(11
)
—

91

15

142

– disposals, acquisitions and investment in new businesses
 
—

—

—

95

17

112

– fair value movement on financial instruments
2
46

(12
)
—

(5
)
(1
)
28

– currency translation on significant items
 
1

1

—

1

(1
)
2

Adjusted
4
4,174

7,135

651

1,695

686

13,196

ECL
 






Reported
 
(62
)
(32
)
(4
)
47

(119
)
(170
)
Currency translation
 
6

2

2

(1
)
9

18

Adjusted
 
(56
)
(30
)
(2
)
46

(110
)
(152
)
Operating expenses
 






Reported
4
(4,437
)
(2,986
)
(343
)
(2,268
)
(514
)
(9,383
)
Currency translation
4
263

92

17

9

85

446

Significant items
 
179

—

—

944

—

1,123

– costs of structural reform
3
125

1

—

—

—

126

– customer redress programmes
 
93

—

—

—

—

93

– disposals, acquisitions and investment in new business
 
2

—

—

—

—

2

– restructuring and other related costs
 
20

—

—

—

—

20

– settlements and provisions in connection with legal and regulatory matters
 
(46
)
(1
)
—

944

—

897

– currency translation on significant items
 
(15
)
—

—

—

—

(15
)
Adjusted
4
(3,995
)
(2,894
)
(326
)
(1,315
)
(429
)
(7,814
)
Share of profit in associates and joint ventures
 






Reported
 
11

479

108

—

—

598

Currency translation
 
—

(28
)
—

—

—

(28
)
Adjusted
 
11

451

108

—

—

570

Profit/(loss) before tax
 






Reported
 
(18
)
4,768

437

(596
)
164

4,755

Currency translation
 
(74
)
(95
)
(6
)
(13
)
(32
)
(220
)
Significant items
 
226

(11
)
—

1,035

15

1,265

– revenue
 
47

(11
)
—

91

15

142

– operating expenses
 
179

—

—

944

—

1,123

Adjusted
 
134

4,662

431

426

147

5,800

Loans and advances to customers (net)
 












Reported
 
389,792

435,935

29,820

104,296

21,322

981,165

Currency translation
 
(29,449
)
(8,607
)
(1,129
)
(1,292
)
(2,914
)
(43,391
)
Adjusted
 
360,343

427,328

28,691

103,004

18,408

937,774

Customer accounts
 












Reported
 
531,025

652,770

35,471

136,637

23,776

1,379,679

Currency translation
 
(40,139
)
(9,150
)
(1,045
)
(1,421
)
(3,411
)
(55,166
)
Adjusted
 
490,886

643,620

34,426

135,216

20,365

1,324,513

For footnotes, see page 42.

HSBC Holdings plc Earnings Release 1Q19
41

Earnings Release – 1Q19

Reconciliation of reported and adjusted results – geographical regions (continued)


Quarter ended 31 Mar 2018


UK

Hong
Kong

Mainland China

US

Mexico


Footnotes
$m

$m

$m

$m

$m

Revenue
1





Reported
 
3,481

4,667

645

1,136

558

Currency translation
 
(259
)
(11
)
(38
)
2

(13
)
Significant items
 
49

1

(1
)
91

(1
)
– disposals, acquisitions and investment in new businesses
 
—

—

—

95

—

– fair value movement on financial instruments
2
48

1

(1
)
(5
)
(1
)
– currency translation on significant items
 
1

—

—

1

—

Adjusted
 
3,271

4,657

606

1,229

544

ECL
 










Reported
 
(57
)
(14
)
(8
)
22

(107
)
Currency translation
 
4

—

—

(1
)
2

Adjusted
 
(53
)
(14
)
(8
)
21

(105
)
Operating expenses
 










Reported
 
(3,446
)
(1,510
)
(454
)
(1,938
)
(324
)
Currency translation
 
189

6

26

(1
)
7

Significant items
 
126

—

—

889

—

– costs of structural reform
3
112

(1
)
—

—

—

– customer redress programmes
 
93

—

—

—

—

– restructuring and other related costs
 
20

—

—

—

—

– settlements and provisions in connection with legal and regulatory matters
 
(89
)
(1
)
—

889

—

– currency translation on significant items
 
(10
)
2

—

—

—

Adjusted
 
(3,131
)
(1,504
)
(428
)
(1,050
)
(317
)
Share of profit in associates and joint ventures
 










Reported
 
11

6

473

—

—

Currency translation
 
—

—

(27
)
—

—

Adjusted
 
11

6

446

—

—

Profit/(loss) before tax
 










Reported
 
(11
)
3,149

656

(780
)
127

Currency translation
 
(66
)
(5
)
(39
)
—

(4
)
Significant items
 
175

1

(1
)
980

(1
)
– revenue
 
49

1

(1
)
91

(1
)
– operating expenses
 
126

—

—

889

—

Adjusted
 
98

3,145

616

200

122

Loans and advances to customers (net)
 










Reported
 
302,090

272,621

44,022

62,655

16,595

Currency translation
 
(21,948
)
(47
)
(2,783
)
—

(900
)
Adjusted
 
280,142

272,574

41,239

62,655

15,695

Customer accounts
 










Reported
 
421,892

471,587

42,572

86,043

17,890

Currency translation
 
(30,652
)
(81
)
(2,690
)
—

(971
)
Adjusted
 
391,240

471,506

39,882

86,043

16,919

Reconciliation of capital with and without IFRS 9 transitional arrangements
 
At 31 Mar 2019
 
CET1

Tier 1

Total own funds

 
$bn

$bn

$bn

Reported balance using IFRS 9 transitional arrangements
125.8

151.8

177.8

Expected credit losses reversed under transitional arrangements for IFRS 9
(1.0
)
(1.0
)
(1.0
)
 – standardised approach
(1.0
)
(1.0
)
(1.0
)
 – internal ratings based approach
—

—

—

Tax impacts
0.2

0.2

0.2

Changes in amounts deducted from CET1 for deferred tax assets and significant investments
(0.1
)
(0.1
)
(0.1
)
 – amounts deducted from CET1 for deferred tax assets
—

—

—

 – amounts deducted from CET1 for significant investments
(0.1
)
(0.1
)
(0.1
)
Reported balance excluding IFRS 9 transitional arrangements
124.9

150.9

176.9

Footnotes to Appendix – selected information

1
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as ‘revenue’.

2
Includes fair value movements on non-qualifying hedges and DVA on derivative contracts.

3
Comprises costs associated with preparations for the UK’s exit from the European Union, costs to establish the UK ring-fenced bank (including the UK ServCo group) and costs associated with establishing an intermediate holding company in Hong Kong.

4
Amounts are non-additive across geographical regions due to intra-Group transactions.


42
HSBC Holdings plc Earnings Release 1Q19

First interim dividend for 2019
On 3 May 2019, the Directors declared a first interim dividend in respect of 2019 of $0.10 per ordinary share. The ordinary shares in London, Hong Kong, Paris and Bermuda, and the American Depositary Shares (‘ADSs’) in New York, will be quoted ex-dividend on
16 May 2019. The dividend will be payable on 5 July 2019 to holders of record on 17 May 2019.
The dividend will be payable in US dollars, sterling or Hong Kong dollars, or a combination of these currencies, at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 24 June 2019. A scrip dividend will also be offered. Particulars of these arrangements will be sent to shareholders on or about 30 May 2019 and elections must be received by 20 June 2019.
The dividend will be payable on ordinary shares held through Euroclear France, the settlement and central depositary system for Euronext Paris, on 5 July 2019 to the holders of record on 17 May 2019. The dividend will be payable in US dollars or as a scrip dividend. Particulars of these arrangements will be announced through Euronext Paris on 6 May, 24 May and 8 July 2019.
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 5 July 2019 to holders of record on 17 May 2019. The dividend of $0.50 per ADS will be payable by the depositary in US dollars or as a scrip dividend of new ADSs. Particulars of these arrangements will be sent to holders on or about 30 May 2019 and elections will be required to be made by 13 June 2019. Alternatively, the cash dividend may be invested in additional ADSs by participants in the dividend reinvestment plan operated by the depositary.
To receive the dividend, any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register must lodge the share transfer with the Principal Registrar,
the Hong Kong or Bermuda Branch Registrar by 4.00pm local time on 17 May 2019.
Transfers of ADSs must be lodged with the depositary by 11.00am local time on 17 May 2019 in order to receive the dividend.
Dividend on preference shares
A quarterly dividend of $15.50 per 6.20% non-cumulative US dollar preference share, Series A (‘Series A dollar preference share’), (equivalent to a dividend of $0.3875 per Series A American Depositary Share (‘ADS’), each of which represents one-fortieth of a Series A dollar preference share), and £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and
15 December 2019 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has declared a quarterly dividend be payable on 17 June 2019 to holders of record on 31 May 2019.

For and on behalf of
HSBC Holdings plc


Richard Gray
Group Company Secretary


The Board of Directors of HSBC Holdings plc as at the date of this announcement are: Mark Tucker*, John Flint, Kathleen Casey†, Laura Cha†, Henri de Castries†, Irene Lee†, Ewen Stevenson, José Meade†, Heidi Miller†, Marc Moses, David Nish†, Jonathan Symonds†, Jackson Tai† and Pauline van der Meer Mohr†.
*
Non-executive Group Chairman
†
Independent non-executive Director


43
HSBC Holdings plc Earnings Release 1Q19

Earnings Release – 1Q19

Terms and abbreviations
1Q19
First quarter of 2019
1Q18
First quarter of 2018
4Q18
Fourth quarter of 2018
AFS
Available for sale
BoCom
Bank of Communications Co., Limited

Bps

Basis points. One basis point is equal to one-hundredth of a percentage point

BSM
Balance Sheet Management
C&L
Credit and Lending
CET1
Common equity tier 1
CMB
Commercial Banking, a global business
CML
Consumer and Mortgage Lending (US)
CODM
Chief Operating Decision Maker
Corporate Centre
In December 2016, certain functions were combined to create a Corporate Centre. These include Balance Sheet Management, legacy businesses and interests in associates and joint ventures. The Corporate Centre also includes the results of our financing operations, central support costs with associated recoveries and the UK bank levy
CRD IV
Capital Requirements Directive IV
CRR
Customer risk rating
D-SIB
Domestic systemically important bank
DPD
Days past due
DVA
Debit value adjustments
EBA
European Banking Authority
ECL
Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied
FTEs
Full-time equivalent staff
FVOCI
Fair value through other comprehensive income
GB&M
Global Banking and Markets, a global business
GLCM

Global Liquidity and Cash Management

GMB
Group Management Board
GPB
Global Private Banking, a global business
Group
HSBC Holdings together with its subsidiary undertakings
G-SIB
Global systemically important bank
GTRF

Global Trade and Receivables Finance
Hong Kong
Hong Kong Special Administrative Region of the People’s Republic of China

HSBC
HSBC Holdings together with its subsidiary undertakings

HSBC Bank

HSBC Bank plc

HSBC Holdings
HSBC Holdings plc, the parent company of HSBC
HSBC UK
HSBC UK Bank plc
IAS
International Accounting Standards
IFRSs
International Financial Reporting Standards
IMA
Internal models approach
IMM
Internal model method
IRB
Internal ratings based
IRC
Incremental risk charge
Jaws
The difference between the rate of growth of revenue and the rate of growth of costs. Positive jaws is where the revenue growth rate exceeds the cost growth rate. We calculate this on an adjusted basis
JV
Joint venture
LCR
Liquidity coverage ratio
Legacy credit
A portfolio of assets comprising Solitaire Funding Limited, securities investment conduits, asset-backed securities trading portfolios, credit correlation portfolios and derivative transactions entered into directly with monoline insurers
Mainland China
People’s Republic of China excluding Hong Kong

MENA
Middle East and North Africa
NIM
Net interest margin
PBT
Profit before tax
PD
Probability of default
POCI
Purchased or originated credit-impaired
PRA
Prudential Regulation Authority (UK)
RBWM
Retail Banking and Wealth Management, a global business
Revenue
Net operating income before ECL
RMBS
Residential mortgage-backed securities
RoE
Return on average ordinary shareholders’ equity
RoTE
Return on average tangible equity
RWAs
Risk-weighted assets
SABB
The Saudi British Bank
ServCo group
Separately incorporated group of service companies set up in response to UK ring-fencing proposals

$m/$bn/$tn
United States dollar millions/billions/trillions. We report in US dollars
VaR
Value at risk



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HSBC Holdings plc Earnings Release 1Q19

Paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/9606X_1-2019-5-2.pdf


HSBC Holdings plc Earnings Release 1Q19
45

Earnings Release – 1Q19

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                
                                    
HSBC Holdings plc

 
By:
/s/ Ewen Stevenson
 
Name: Ewen Stevenson
 
Title: Group Chief Financial Officer

Date: 3 May 2019                                                    


46
HSBC Holdings plc Earnings Release 1Q19