Blueprint
 
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 October
 
HSBC Holdings plc
 
42nd Floor, 8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F X Form 40-F  
 
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).
 
Yes  No X
 
(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-   ).
 
 
 
HSBC HOLDINGS PLC
 
3Q17 EARNINGS RELEASE - HIGHLIGHTS
 
 
Strategic execution
 
 
●
Completed 71% of the buy-back announced in July 2017, at 26 October
 
 
 
●
Further $13bn of RWA reductions in 3Q17, bringing the total reduction since the start of 2015 to $309bn
 
 
 
●
Achieved annualised run-rate savings of $5.2bn since our investor update, and remain committed to delivering positive adjusted jaws for 2017
 
 
 
●
Continue to make good progress with actions to deploy capital and invest:
 
 
 
-
Delivered growth from our international network with a 7% increase in transaction banking product revenue and a 14% rise in revenue synergies between global businesses compared with 9M16
 
 
 
-
Pivot to Asia generating returns and driving over 70% of Group adjusted profit in 9M17; 17% lending growth vs. 3Q16
 
 
 
-
Lending growth in Guangdong of $1.1bn vs. 3Q16
 
 
 
-
Maintained momentum in Asian Insurance and Asset Management, with annualised new business premiums and AuM up 13% and 17%, respectively, compared with 9M16
 
Stuart Gulliver, Group Chief Executive, said:
"We maintained good momentum in the third quarter, with higher revenue in our three main global businesses. We also continued to make good progress with the strategic actions we set out in 2015. Our international network continued to deliver strong growth in the third quarter, and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong."
 
Financial performance
 
 
●
Reported profit before tax for 9M17 of $14.9bn was $4.3bn or 41% higher than for 9M16, in part reflecting favourable movements in significant items, which included a loss on sale and trading results of the operations in Brazil that we sold on 1 July 2016; adjusted profit before tax of $17.4bn was $1.2bn or 8% higher than in 9M16, reflecting revenue growth, notably in RBWM and GB&M, and lower LICs, which were partly offset by an increase in operating expenses.
 
 
 
●
Reported revenue for 9M17 of $39.1bn was $0.2bn higher, as growth was partly offset by an adverse impact of foreign currency translation; adjusted revenue of $39.1bn increased by $1.1bn or 3%, reflecting higher revenue in RBWM and CMB due to higher average deposit balances and wider spreads in Asia, and higher revenue in GB&M across all of our businesses, which were partly offset by lower revenue in Corporate Centre and GPB.
 
 
 
●
Reported operating expenses for 9M17 of $25.0bn were $2.4bn or 9% lower due to a decrease in significant items; adjusted operating expenses of $22.4bn were $0.9bn or 4% higher, reflecting an increase in performance-related pay and investments in business growth programmes. The impact of our cost-saving initiatives broadly offset inflation and continuing investment in regulatory and compliance programmes.
 
 
 
●
Adjusted jaws for 9M17 was negative 1.3%.
 
 
 
●
Reported profit before tax for 3Q17 of $4.6bn was up $3.8bn compared with 3Q16, reflecting the net favourable effects of significant items; adjusted profit before tax of $5.4bn fell by $0.1bn. Compared with 2Q17, reported and adjusted profit before tax both fell by $0.7bn. Lower reported profit before tax reflected higher operating expenses, while the reduction in adjusted profit before tax reflected lower revenue in Corporate Centre and GB&M, as well as an increase in operating expenses.
 
 
 
●
Our capital base remained strong, with a common equity tier 1 ('CET1') ratio of 14.6% and a leverage ratio of 5.7%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial highlights and key ratios
Nine months ended 30 Sep
Quarter ended 30 Sep
 
2017
 
2016
 
Change
2017
 
2016
 
Change
 
 
$m
 
$m
 
%
$m
 
$m
 
%
 
Reported PBT
14,863
 
10,557
 
41
4,620
 
843
 
448
 
Adjusted PBT
17,410
 
16,167
 
8
5,443
 
5,521
 
(1
)
Return on average ordinary shareholders' equity (annualised)
8.2%
 
4.4%
 
86.4
7.1%
 
(1.4)%
 
 
 
Adjusted jaws
(1.3)%
 
 
 
(4.9)%
 
 
 
 
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, as explained in 'Adjusted performance'.
 
 
 
 
 
 
 
 
 
Capital and balance sheet
At
 
30 Sep 2017
 
30 Jun 2017
 
31 Dec 2016
 
 
%
 
%
 
%
 
Common equity tier 1 ratio1
14.6
 
14.7
 
13.6
 
Leverage ratio
5.7
 
5.7
 
5.4
 
 
$m
 
$m
 
$m
 
Loans and advances to customers
945,168
 
919,838
 
861,504
 
Customer accounts
1,337,121
 
1,311,958
 
1,272,386
 
Risk-weighted assets1
888,628
 
876,118
 
857,181
 
 
 
 
1
Unless otherwise stated, risk-weighted assets and capital are calculated and presented on a transitional CRD IV basis as implemented in the UK by the Prudential Regulation Authority.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
1
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
Table of contents
 
Page
 
 
 
Page
 
Highlights
1
 
 
Summary information - global businesses
21
 
Group Chief Executive's review
3
 
 
Summary information - geographical regions
24
 
Adjusted performance
4
 
 
Appendix - selected information
26
 
Financial performance commentary
6
 
 
- Reconciliation of reported and adjusted results - global businesses
26
 
Cautionary statement regarding forward-looking statements
14
 
 
- Reconciliation of reported and adjusted risk-weighted assets
31
 
Summary consolidated income statement
15
 
 
 
- Reconciliation of reported and adjusted results - geographical regions
32
 
Summary consolidated balance sheet
16
 
 
Capital
17
 
 
Gross loans and advances by industry sector and geographical region
37
 
Risk-weighted assets
17
 
 
Terms and abbreviations
38
 
Leverage
20
 
 
 
 
 
 
 
HSBC Holdings plc - Earnings Release
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 GMT. Details of how to participate in the call and the live audio webcast can be found at www.hsbc.com/investor-relations.
 
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from approximately 3,900 offices in 67 countries and territories in our geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of $2,526bn at 30 September 2017, HSBC is one of the world's largest banking and financial services organisations.
 
 
 
 
2
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
Review by Stuart Gulliver, Group Chief Executive
Business performance
Our businesses carried good momentum from the first half of the year into the third quarter. Reported profits were significantly higher than last year's third quarter, in part reflecting the non-recurrence of a number of significant items. Growth in loans and advances translated into higher adjusted revenue in all three main global businesses compared with 3Q16, and our strong year-to-date revenue performance enabled us to accelerate investment in business growth. This contributed to an increase in operating expenses, which kept adjusted profits broadly stable relative to the same period last year.
Retail Banking and Wealth Management had a good quarter, with strong revenue growth from current accounts, savings and deposits, and further growth in loans and deposits in Hong Kong, the UK and Mexico. Commercial Banking benefited from another strong revenue performance from Global Liquidity and Cash Management, particularly in Asia. Global Banking and Markets continued to grow revenue despite a challenging quarter for the industry, demonstrating again the benefit of its differentiated business model. It achieved this largely through growth in Global Liquidity and Cash Management, Equities and Securities Services, which exceeded the impact of subdued market activity on our banking and fixed income businesses.
Our third-quarter costs rose relative to the same period last year as we accelerated investment to grow the business. This aims to reinforce the positive impact of targeted investment in previous quarters, particularly in Retail Banking and Wealth Management. Performance-related compensation also grew in line with profit before tax for the year to date. We remain committed to achieving positive jaws for the full year.
We had completed 71% of our most recent $2bn equity buy-back as at 26 October, and we expect to finish by the end of 2017.
Strategy execution
With fewer than three months remaining to implement the strategic actions we started in 2015, we continue to make good progress.
We generated a further $13bn of RWA savings in the quarter, taking us further beyond our initial target. Our RWA reduction programmes have extracted a total of $309bn of RWAs from the business since the start of 2015.
We remain on track to achieve around $6bn of annualised cost savings by the end of the year, and removed a further $0.6bn of costs in the third quarter.
Our international network continued to deliver strong growth in the third quarter, with all of our transaction banking products benefiting from higher balances and interest rate rises.
Our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong and the Pearl River Delta. Our Insurance and Asset Management businesses in Asia generated higher annualised new business premiums and assets under management, up 13% and 17% respectively for the first nine months of the year.
HSBC was named Best Overall International Bank for the Belt and Road Initiative at the Asiamoney New Silk Road Finance Awards in September.
Last week, HSBC became the first foreign bank to be approved as a joint-lead underwriter for Panda bond issuance by offshore non-financial corporates in the mainland China interbank bond market. This enables us to extend our coverage of debt-market products, and reinforces our position as the leading non-Chinese bank in mainland China.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
3
 
Earnings Release - 3Q17
 
 
 
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 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
● the income statement for 9M16 at the average rates of exchange for 9M17;
● the income statement for quarterly periods at the average rates of exchange for 3Q17; and
● the closing prior period balance sheets at the prevailing rates of exchange on 30 September 2017.
No adjustment has been made to the exchange rates used to translate foreign currency denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC's operations have been translated at the appropriate exchange rates applied in the current 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 26 to 36 detail the effects of significant items on each of our global business segments and geographical regions during 9M17, 3Q17 and the respective comparatives in 2016, as well as 2Q17.
Change to presentation from 1 January 2017
Own credit spread
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statement, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
 
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.
In 2016, we changed our reportable segments from geographical regions to global businesses. This reflected a shift in emphasis of our internal reporting towards the global business basis.
Comparative data has been re-presented accordingly.
Reconciliations of the adjusted global business results to the Group reported results are presented on page 5. Supplementary reconciliations from reported to adjusted results by global business are presented on pages 26 to 31 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables which provide breakdowns of revenue by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed. Adjusted return on average risk-weighted assets ('RoRWA') is used to measure the performance of RBWM, CMB, GB&M and GPB, and is also presented. For GPB, a further measure of business performance is client assets, which is presented on page 23.
 
 
 
 
 
4
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results
 
Nine months ended 
Quarter ended
 
30 Sep
 
30 Sep
 
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
Reported
39,144
 
38,982
 
12,978
 
13,173
 
9,512
 
Currency translation
 
(1,072
)
 
199
 
(78
)
Significant items
(60
)
36
 
53
 
39
 
3,277
 
- DVA on derivative contracts
340
 
(96
)
65
 
178
 
55
 
- fair value movements on non-qualifying hedges1
(50
)
385
 
(20
)
61
 
(12
)
- gain on disposal of our investment in Vietnam Technological and Commercial Joint
    Stock Bank
(126
)
-
 
(126
)
-
 
-
 
- gain on disposal of our membership interest in Visa - Europe
-
 
(584
)
-
 
-
 
-
 
- gain on disposal of our membership interest in Visa - US
(312
)
-
 
-
 
(166
)
-
 
-  own credit spread2
-
 
144
 
-
 
-
 
1,370
 
- portfolio disposals
163
 
51
 
131
 
42
 
119
 
- provisions/(releases) arising from the ongoing review of compliance with the
    UK Consumer Credit Act
3
 
(2
)
3
 
-
 
-
 
- other acquisitions, disposals and dilutions
(78
)
-
 
-
 
(78
)
-
 
- loss and trading results from disposed-of operations in Brazil
-
 
273
 
-
 
-
 
1,743
 
- currency translation on significant items
 
(135
)
 
2
 
2
 
Adjusted
39,084
 
37,946
 
13,031
 
13,411
 
12,711
 
Loan impairment charge and other credit risk provisions ('LICs')
 
 
 
 
 
Reported
(1,111
)
(2,932
)
(448
)
(427
)
(566
)
Currency translation
 
(59
)
 
1
 
(1
)
Significant items
-
 
867
 
-
 
-
 
-
 
- trading results from disposed-of operations in Brazil
-
 
748
 
-
 
-
 
-
 
- currency translation on significant items
 
119
 
 
-
 
-
 
Adjusted
(1,111
)
(2,124
)
(448
)
(426
)
(567
)
Operating expenses
 
 
 
 
 
Reported
(24,989
)
(27,349
)
(8,546
)
(8,115
)
(8,721
)
Currency translation
 
583
 
 
(138
)
7
 
Significant items
2,607
 
5,301
 
770
 
719
 
1,472
 
- costs associated with portfolio disposals
14
 
-
 
4
 
10
 
-
 
- costs associated with the UK's exit from the EU
12
 
-
 
8
 
4
 
-
 
- costs to achieve
2,347
 
2,032
 
677
 
837
 
1,014
 
- costs to establish UK ring-fenced bank
277
 
147
 
101
 
93
 
53
 
- impairment of GPB - Europe goodwill
-
 
800
 
-
 
-
 
-
 
- regulatory provisions/(releases) in GPB
-
 
(46
)
-
 
-
 
(50
)
- provisions/(releases) in connection with legal matters
(426
)
723
 
(104
)
(322
)
-
 
- UK customer redress programmes
383
 
489
 
84
 
89
 
456
 
- trading results from disposed-of operations in Brazil
-
 
1,059
 
-
 
-
 
-
 
- currency translation on significant items
 
97
 
 
8
 
(1
)
Adjusted
(22,382
)
(21,465
)
(7,776
)
(7,534
)
(7,242
)
Share of profit in associates and joint ventures
 
 
 
 
 
Reported
1,819
 
1,856
 
636
 
651
 
618
 
Currency translation
 
(47
)
 
17
 
1
 
Significant items
-
 
1
 
-
 
-
 
-
 
- trading results from disposed-of operations in Brazil
-
 
1
 
-
 
-
 
-
 
- currency translation on significant items
 
-
 
 
 
 
-
 
Adjusted
1,819
 
1,810
 
636
 
668
 
619
 
Profit before tax
 
 
 
 
 
Reported
14,863
 
10,557
 
4,620
 
5,282
 
843
 
Currency translation
 
 
(595
)
 
79
 
(71
)
Significant items
2,547
 
6,205
 
823
 
758
 
4,749
 
- revenue
(60
)
36
 
53
 
39
 
3,277
 
-  LICs
-
 
867
 
-
 
-
 
-
 
- operating expenses
2,607
 
5,301
 
770
 
719
 
1,472
 
-  share in profit of associates and joint ventures
-
 
1
 
-
 
-
 
-
 
Adjusted
17,410
 
16,167
 
5,443
 
6,119
 
5,521
 
 
 
 
1
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
2
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
5
Earnings Release - 3Q17
 
 
 
Financial performance commentary
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution of results by global business
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
Adjusted profit before tax
 
 
 
 
 
Retail Banking and Wealth Management
5,058
 
4,076
 
1,703
 
1,578
 
1,533
 
Commercial Banking
5,086
 
4,472
 
1,643
 
1,675
 
1,527
 
Global Banking and Markets
4,938
 
4,134
 
1,535
 
1,729
 
1,582
 
Global Private Banking
198
 
254
 
55
 
73
 
72
 
Corporate Centre
2,130
 
3,231
 
507
 
1,064
 
807
 
Total
17,410
 
16,167
 
5,443
 
6,119
 
5,521
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution of results by geographical region
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
Reported profit/(loss) before tax
 
 
 
 
 
Europe
522
 
(32
)
(50
)
778
 
(1,617
)
Asia
11,659
 
10,815
 
4,029
 
3,536
 
3,660
 
Middle East and North Africa
1,168
 
1,308
 
364
 
417
 
329
 
North America
1,080
 
116
 
127
 
381
 
66
 
Latin America
434
 
(1,650
)
150
 
170
 
(1,595
)
Total
14,863
 
10,557
 
4,620
 
5,282
 
843
 
Adjusted profit before tax
 
 
 
 
 
Europe
2,341
 
2,509
 
540
 
1,254
 
865
 
Asia
12,115
 
10,948
 
4,009
 
3,825
 
3,791
 
Middle East and North Africa
1,190
 
1,182
 
370
 
427
 
320
 
North America
1,287
 
1,071
 
361
 
427
 
388
 
Latin America
477
 
457
 
163
 
186
 
157
 
Total
17,410
 
16,167
 
5,443
 
6,119
 
5,521
 
 
Adjusted profit before tax by global business and region is presented to support the commentary on adjusted performance on the following pages.
The tables on pages 26 to 36 reconcile reported to adjusted results for each of our global business segments and geographical regions.
 
Group
3Q17 compared with 3Q16 - reported results
 
 
 
 
 
 
 
 
 
Movement in reported profit before tax compared with 3Q16
 
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
 
2017
 
2016
 
3Q17 vs. 3Q16
 
$m
 
$m
 
$m
 
%
Revenue
12,978
 
9,512
 
3,466
 
36
LICs
(448
)
(566
)
118
 
21
Operating expenses
(8,546
)
(8,721
)
175
 
2
Share of profit from associates and JVs
636
 
618
 
18
 
3
Profit before tax
4,620
 
843
 
3,777
 
448
Reported profit before tax
Reported profit before tax of $4.6bn in 3Q17 was $3.8bn higher than in 3Q16. This reflected higher reported revenue (up $3.5bn), lower reported LICs (down $0.1bn) and a decrease in reported operating expenses (down $0.2bn).
Excluding the net favourable effects of significant items of $3.9bn and net adverse foreign currency translation of $0.1bn, profit before tax was $0.1bn or 1% lower.
 
Reported revenue
Reported revenue of $13.0bn in 3Q17 was $3.5bn or 36% higher. This largely reflected a net favourable movement in significant items of $3.2bn, notably:
 
 
●
the non-recurrence of a $1.7bn loss recognised in 3Q16 on our sale of operations in Brazil to Banco Bradesco S.A., which we completed on 1 July 2016; and
 
 
 
●
in 3Q16, $1.4bn of adverse fair value movements on our own debt designated at fair value, reflecting changes in our own credit spread, which are now reported in the statement of other comprehensive income, following our partial early adoption of IFRS 9 'Financial Instruments' on 1 January 2017.
 
Excluding significant items and an adverse effect of foreign currency translation of $0.1bn, revenue increased by $0.3bn or 3%.
Reported LICs
Reported LICs of $0.4bn were $0.1bn or 21% lower, reflecting reductions in RBWM and CMB.
Excluding significant items and foreign currency translation, LICs reduced by $0.1bn or 21%.
Reported operating expenses
Reported operating expenses of $8.5bn were $0.2bn or 2% lower and included a decrease in significant items of $0.7bn. Significant items included:
 
 
●
costs to achieve of $0.7bn, compared with $1.0bn in 3Q16; and
 
 
 
 
6
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
●
a provision of $0.5bn in 3Q16 relating to UK customer redress programmes, compared with $0.1bn in 3Q17.
 
Excluding significant items and favourable currency translation differences, operating expenses increased by $0.5bn or 7%.
Reported income from associates
Reported income from associates of $0.6bn increased by $18m or 3%.
 
Group
3Q17 compared with 3Q16 - adjusted results
 
 
 
 
 
 
 
 
 
 
Movement in adjusted profit before tax compared with 3Q16
 
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
 
2017
 
2016
 
3Q17 vs. 3Q16
 
$m
 
$m
 
$m
 
%
 
Revenue
13,031
 
12,711
 
320
 
3
 
LICs
(448
)
(567
)
119
 
21
 
Operating expenses
(7,776
)
(7,242
)
(534
)
(7
)
Share of profit from associates and JVs
636
 
619
 
17
 
3
 
Profit before tax
5,443
 
5,521
 
(78
)
(1
)
 
Adjusted profit before tax
On an adjusted basis, profit before tax of $5.4bn fell $0.1bn, as revenue growth and a reduction in LICs was offset by higher operating expenses.
Adjusted revenue
Adjusted revenue of $13.0bn was $0.3bn or 3% higher. The increase notably reflected higher deposit income across our three main global business:
 
 
●
In RBWM, revenue increased by $0.3bn. This was primarily in Retail Banking in current accounts, savings and deposits, particularly in Hong Kong, the US and Mexico, as we benefited from increased balances and wider spreads.
 
 
 
●
In CMB, revenue increased by $0.2bn, driven by Global Liquidity and Cash Management ('GLCM'), notably in Asia, as we benefited from wider deposit spreads and grew balances. In the UK, deposit balances grew, but this was more than offset by spread compression, following the base rate reduction in 2016. Revenue also increased to a lesser extent in Credit and Lending ('C&L'), as balance growth in the UK more than offset narrower spreads in Asia.
 
 
 
●
In GB&M, revenue increased by $0.1bn. There was continued momentum in revenue from transaction banking products, notably in GLCM, where we grew balances and benefited from wider spreads, particularly in Asia. In Global Markets, revenue increased in Equities, partly offset by lower revenue in Foreign Exchange and Credit, as a result of lower volatility and narrower spreads. In Global Banking, revenue fell primarily reflecting narrower spreads, notably in Asia.
 
These increases were partly offset:
 
 
●
In Corporate Centre, revenue decreased by $0.2bn, notably reflecting continuing disposals in the US run-off portfolio, reducing revenue by $0.2bn, and net unfavourable movements in credit and funding valuation adjustments in legacy credit (down $0.1bn).
 
Adjusted LICs
Adjusted LICs of $0.4bn were $0.1bn or 21% lower. This reflected a reduction in RBWM of $0.1bn, mainly in Turkey and the US as credit quality improved.
Adjusted operating expenses
Adjusted operating expenses of $7.8bn increased by $0.5bn or 7%, primarily reflecting investments in business growth programmes, notably in RBWM, and an increase in performance-related pay. The impact of our cost-saving initiatives broadly offset inflation and investment in our regulatory programmes and compliance.
Adjusted income from associates
Adjusted income from associates of $0.6bn increased by $17m or 3%.
Third interim dividend for 2017
On 3 October 2017, the Board announced a third interim dividend for 2017 of $0.10 per ordinary share.
 
Group
9M17 compared with 9M16 - reported results
 
 
 
 
 
 
 
 
 
 
Movement in reported profit before tax compared with 9M16
 
Nine months ended
 
30 Sep
 
30 Sep
 
Variance
 
2017
 
2016
 
9M17 vs. 9M16
 
$m
 
$m
 
$m
 
%
 
Revenue
39,144
 
38,982
 
162
 
-
 
LICs
(1,111
)
(2,932
)
1,821
 
62
 
Operating expenses
(24,989
)
(27,349
)
2,360
 
9
 
Share of profit from associates and JVs
1,819
 
1,856
 
(37
)
(2
)
Profit before tax
14,863
 
10,557
 
4,306
 
41
 
 
Reported profit before tax
Reported profit before tax of $14.9bn in 9M17 was $4.3bn or 41% higher than in 9M16, including net favourable movement in significant items of $3.7bn, partly offset by the adverse impact of foreign currency translation of $0.6bn. Excluding these, profit before tax increased by $1.2bn to $17.4bn.
Reported revenue
Reported revenue of $39.1bn was $0.2bn higher, and included a net favourable movement in significant items of $0.1bn. Significant items included a loss of $1.7bn recognised in 9M16 on the sale of our Brazil business to Banco Bradesco S.A., which completed on 1 July 2016. This loss was substantially offset by the reported revenue earned by the Brazil business in 9M16 of $1.5bn.
Excluding significant items and foreign currency translation, revenue increased by $1.1bn or 3%.
Reported LICs
Reported LICs of $1.1bn were $1.8bn or 62% lower, notably due to reductions in CMB, RBWM and GB&M, as well as the effect of our sale of operations in Brazil ($0.7bn).
Excluding significant items and a favourable effect of foreign currency translation, LICs were $1.0bn or 48% lower.
Reported operating expenses
Reported operating expenses of $25.0bn were $2.4bn or 9% lower. This reflected a decrease in significant items of $2.7bn, which reflected:
 
 
●
in 9M16, a $0.8bn write-off of goodwill in our GPB business in Europe;
 
 
 
●
a net release of $0.4bn in 9M17 related to settlements and provisions in connection with legal matters compared with charges of $0.7bn in 9M16; and
 
 
 
●
operating expenses of $1.1bn incurred by our Brazil business prior to its sale.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
7
 
 
Earnings Release - 3Q17
 
These were partly offset by:
 
 
●
costs to achieve of $2.3bn, compared with $2.0bn in 9M16.
 
Excluding significant items and the favourable effect of foreign currency translation of $0.6bn, operating expenses increased by $0.9bn or 4%, mainly reflecting higher performance-related pay and increased investment in growth programmes, primarily in RBWM where investments were partly funded by the proceeds from our sale of Visa shares. The increase also included a $0.1bn credit in 9M16 related to the 2015 UK bank levy.
Reported income from associates
Reported income from associates of $1.8bn was $37m or 2% lower.
Tax expense
The effective tax rate for 9M17 of 22.3% was lower than the 29.3% in 9M16, principally as 9M16 included the non-deductible loss on our sale of operations in Brazil, a non-deductible goodwill impairment and a higher level of charges in respect of prior periods.
 
Group
9M17 compared with 9M16 - adjusted results
 
 
 
 
 
 
 
 
 
 
Movement in adjusted profit before tax compared with 9M16
 
Nine months ended
 
30 Sep
 
30 Sep
 
Variance
 
2017
 
2016
 
9M17 vs. 9M16
 
$m
 
$m
 
$m
 
%
 
Revenue
39,084
 
37,946
 
1,138
 
3
 
LICs
(1,111
)
(2,124
)
1,013
 
48
 
Operating expenses
(22,382
)
(21,465
)
(917
)
(4
)
Share of profit from associates and JVs
1,819
 
1,810
 
9
 
-
 
Profit before tax
17,410
 
16,167
 
1,243
 
8
 
Adjusted profit before tax
On an adjusted basis, profit before tax of $17.4bn was $1.2bn higher than in 9M16, reflecting higher revenue and lower LICs, partly offset by an increase in operating expenses. Adjusted jaws was negative 1.3%, although we achieved positive adjusted jaws in our three main global businesses.
Adjusted revenue
Adjusted revenue of $39.1bn was $1.1bn or 3% higher, reflecting increased revenue in RBWM, GB&M and CMB, partly offset by decreases in Corporate Centre and GPB.
 
 
●
In RBWM, revenue increased by $1.4bn or 10%, with growth in Wealth Management and Retail Banking. The increase in Wealth Management was mainly in insurance manufacturing (up $0.5bn) as favourable market impacts compared with adverse market impacts in 9M16, notably in Asia. In addition, investment distribution income increased. Retail Banking revenue also increased, notably from current accounts, savings and deposits, reflecting balance growth and wider spreads in Hong Kong, Mexico and the US. This was partly offset by lower personal lending revenue compared with 9M16.
 
 
 
●
In GB&M revenue increased by $0.7bn or 6%. In Global Markets revenue was higher, notably in Equities reflecting Prime Financing growing its market share. Revenue also increased in GLCM, Securities Services ('HSS') and Global Banking. These increases were partly offset by lower revenue in Foreign Exchange and a net adverse movement on credit and funding valuations adjustments ($136m).
 
 
 
●
In CMB, revenue increased by $0.3bn or 3%, driven by growth in GLCM. This reflected wider spreads and increased deposit balances in Asia. In the UK, narrower spreads more than offset balance growth.
 
These increases were partly offset:
 
 
●
In Corporate Centre, revenue decreased by $1.1bn, with reductions in the US run-off portfolio (down $0.5bn), as a result of continuing disposals, and Central Treasury (down $0.6bn). In Central Treasury, a fall in revenue reflected lower favourable fair value movements ($0.2bn in 9M17, compared with $0.5bn in 9M16) relating to the hedging of our long-term debt, higher interest expense on our debt and a fall in Balance Sheet Management ('BSM') revenue.
 
 
 
●
In GPB, revenue was $0.1bn or 4% lower, primarily due to the impact of client repositioning actions. However, in the markets that we have targeted for growth, revenue increased, notably in Hong Kong due to higher investment revenue reflecting increased client activity, and growth in deposit revenue as spreads widened.
 
Adjusted LICs
Adjusted LICs of $1.1bn were $1.0bn or 48% lower, reflecting reductions in:
 
 
●
CMB ($0.5bn lower), notably due to lower LICs in North America and the UK, primarily as 9M16 included charges against exposures in the oil and gas sector, and in Spain as 9M16 included charges related to an exposure in the construction sector. In addition, 9M17 included a release of allowances related to the construction sector in the UK. These reductions were partly offset by higher LICs in Hong Kong across various sectors.
 
 
 
●
GB&M ($0.4bn lower) due to a reduction in individually assessed charges, particularly as 9M16 included LICs on exposures in the oil and gas, and mining sectors in the US.
 
Adjusted operating expenses
Adjusted operating expenses of $22.4bn were $0.9bn or 4% higher than in 9M16. This reflected an increase in performance-related pay ($0.4bn), as well as increased investments in business growth programmes ($0.2bn), primarily in RBWM where investments were partly funded by the proceeds from our sale of Visa shares. The increase also included a credit of $0.1bn related to the 2015 UK bank levy recorded in 9M16. The impact of our cost-saving initiatives broadly offset inflation and continued investment in our regulatory programmes and compliance.
Our total investment in regulatory programmes and compliance was $2.1bn, up $0.2bn or 9%. This reflected the continued implementation of our Global Standards programme to enhance financial crime risk controls and capabilities, and to meet external commitments.
The number of employees expressed in full time equivalent staff ('FTEs') at 30 September 2017 was 232,346, a decrease of 2,829 from 31 December 2016. This reflected reductions resulting from our transformation programmes, partly offset by investment in Global Standards and our business growth programmes.
Adjusted income from associates
Adjusted income from associates of $1.8bn was broadly unchanged.
 
 
 
 
 
8
HSBC Holdings plc  Earnings Release 3Q17
 
Retail Banking and Wealth Management
9M17 compared with 9M16 - adjusted results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management view of adjusted revenue
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
9M17 vs. 9M16
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
%
 
$m
 
$m
 
$m
 
Net operating income1
 
 
 
 
 
 
 
Retail Banking
9,984
 
9,443
 
541
 
6
 
3,434
 
3,404
 
3,191
 
- current accounts, savings and deposits
4,624
 
3,865
 
759
 
20
 
1,612
 
1,582
 
1,300
 
- personal lending
5,360
 
5,578
 
(218
)
(4
)
1,822
 
1,822
 
1,891
 
mortgages
1,750
 
1,914
 
(164
)
(9
)
599
 
578
 
646
 
credit cards
2,220
 
2,288
 
(68
)
(3
)
742
 
771
 
771
 
other personal lending2
1,390
 
1,376
 
14
 
1
 
481
 
473
 
474
 
Wealth Management
4,803
 
3,979
 
824
 
21
 
1,583
 
1,590
 
1,542
 
- investment distribution3
2,491
 
2,218
 
273
 
12
 
894
 
810
 
808
 
- life insurance manufacturing
1,538
 
1,025
 
513
 
50
 
425
 
509
 
466
 
- asset management
774
 
736
 
38
 
5
 
264
 
271
 
268
 
Other4
439
 
427
 
12
 
3
 
166
 
100
 
158
 
Total
15,226
 
13,849
 
1,377
 
10
 
5,183
 
5,094
 
4,891
 
Adjusted RoRWA (%)5
5.8
 
4.8
 
 
 
 
 
5.7
 
5.5
 
5.3
 
 
For footnotes see page 13
Adjusted profit before tax of $5.1bn was $1.0bn or 24% higher, reflecting strong revenue growth from deposits and Wealth Management. We achieved positive adjusted jaws of 4.7% as revenue growth (up 9.9%) exceeded growth in operating expenses (up 5.2%), which included investments in technology and business growth programmes.
Adjusted revenue of $15.2bn was $1.4bn or 10% higher, reflecting growth in both Retail Banking, and Wealth Management.
The revenue increase in Retail Banking resulted from:
 
 
●
growth in current accounts, savings and deposits (up $0.8bn) due to wider spreads and higher balances in Hong Kong, Mexico and the US.
This was partly offset by:
 
 
●
lower personal lending revenue (down $0.2bn) reflecting mortgage spread compression, notably in Hong Kong, the UK and mainland China, which was partly offset by balance growth.
The revenue increase in Wealth Management resulted from:
 
 
●
growth in insurance manufacturing revenue (up $0.5bn) including favourable market impacts of $257m due to
 
interest rate and equity market movements, notably in Asia and France, compared with adverse market impacts in 9M16 of $320m, and higher insurance sales in Asia; and
 
 
●
higher investment distribution revenue (up $0.3bn), primarily driven by higher sales of mutual funds in Hong Kong, reflecting increased investor confidence.
 
Adjusted LICs of $0.8bn were $0.1bn or 10% lower as a result of decreases in Turkey of $63m and the US of $39m, reflecting improved credit quality. This was partly offset in Mexico where higher LICs ($43m) reflected targeted growth in unsecured lending and associated higher delinquency rates. In the UK, LICs also rose by $34m as we increased allowances against our mortgages and cards exposures. LICs in the UK remain at historically low levels (c.12bps of the overall portfolio).
Adjusted operating expenses of $9.4bn were $0.5bn or 5% higher, mainly from investment in growth initiatives, notably in retail business banking, in our international proposition through the introduction of new products and services, and in mainland China. Operating expense growth also reflected higher staff costs and inflation, however, these factors were substantially offset by transformational and other cost savings.
 
 
Commercial Banking
9M17 compared with 9M16 - adjusted results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management view of adjusted revenue
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
9M17 vs. 9M16
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
%
 
$m
 
$m
 
$m
 
Net operating income1
 
 
 
 
 
 
 
 
 
 
 
 
Global Trade and Receivables Finance
1,363
 
1,385
 
(22
)
(2
)
464
 
456
 
459
 
Credit and Lending
3,738
 
3,750
 
(12
)
-
 
1,297
 
1,259
 
1,279
 
Global Liquidity and Cash Management
3,500
 
3,138
 
362
 
12
 
1,231
 
1,179
 
1,061
 
Markets products, Insurance and Investments, and Other6
1,153
 
1,225
 
(72
)
(6
)
355
 
372
 
384
 
Total
9,754
 
9,498
 
256
 
3
 
3,347
 
3,266
 
3,183
 
Adjusted RoRWA (%)5
2.4
 
2.2
 
 
 
2.2
 
2.3
 
2.2
 
For footnotes see page 13
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
9
 
Earnings Release - 3Q17
 
Adjusted profit before tax of $5.1bn was $0.6bn or 14% higher, reflecting lower LICs and higher revenue. We achieved positive adjusted jaws of 0.3%, as 2.7% revenue growth exceeded a 2.4% increase in operating expenses.
Adjusted revenue was $0.3bn or 3% higher, as strong growth in GLCM was partly offset by a small reduction in Global Trade and Receivables Finance ('GTRF') and as C&L remained broadly unchanged.
 
 
●
In GLCM, revenue increased by $362m or 12%, notably in Asia, reflecting wider spreads and balance growth, partly achieved through customer deposit retention initiatives. In the UK, average balances increased by 14%, but this was more than offset by narrower spreads following the base rate reduction in 2016.
 
 
 
●
In GTRF, revenue was $22m or 2% lower. While revenue has stabilised in 2017 following a period of decline, mainly from lending growth in Asia and Europe, this was more than offset by a reduction in Middle East and North Africa ('MENA') reflecting the effect of managed customer exits in the UAE.
 
 
 
●
In C&L revenue was broadly unchanged. In Asia revenue was lower, as balance growth was more than offset by spread compression, although in the UK revenue increased as lending growth more than offset narrower spreads.
 
Adjusted LICs of $0.3bn were $0.5bn lower, notably due to lower LICs in North America and the UK, primarily as 9M16 included charges against exposures in the oil and gas sector, and in Spain as 9M16 included charges related to an exposure in the construction sector. In addition, 9M17 included a release of allowances related to the construction sector in the UK. These reductions were partly offset by higher LICs in Hong Kong, notably as 9M17 included a small number of individually assessed LICs across various sectors.
Adjusted operating expenses were $0.1bn or 2% higher as we continued to invest in Global Standards. Salary inflation was offset by our cost-saving initiatives.
 
Global Banking and Markets
9M17 compared with 9M16 - adjusted results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management view of adjusted revenue
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
9M17 vs. 9M16
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
%
 
$m
 
$m
 
$m
 
Net operating income1
 
 
 
 
 
 
 
 
 
 
Global Markets
5,401
 
5,069
 
332
 
7
 
1,679
 
1,815
 
1,689
 
- FICC
4,410
 
4,312
 
98
 
2
 
1,348
 
1,484
 
1,425
 
Foreign Exchange
1,955
 
2,006
 
(51
)
(3
)
605
 
733
 
655
 
Rates
1,698
 
1,599
 
99
 
6
 
551
 
509
 
544
 
Credit
757
 
707
 
50
 
7
 
192
 
242
 
226
 
- Equities
991
 
757
 
234
 
31
 
331
 
331
 
264
 
Global Banking
2,893
 
2,778
 
115
 
4
 
943
 
1,077
 
995
 
Global Liquidity and Cash Management
1,609
 
1,387
 
222
 
16
 
567
 
530
 
475
 
Securities Services
1,281
 
1,155
 
126
 
11
 
442
 
441
 
408
 
Global Trade and Receivables Finance
532
 
515
 
17
 
3
 
174
 
180
 
175
 
Principal Investments
255
 
172
 
83
 
48
 
178
 
50
 
174
 
Credit and funding valuation adjustments7
(161
)
(25
)
(136
)
>100
 
(66
)
(92
)
(77
)
Other8
(109
)
(49
)
(60
)
>100
 
(39
)
7
 
(50
)
Total
11,701
 
11,002
 
699
 
6
 
3,878
 
4,008
 
3,789
 
Adjusted RoRWA (%)5
2.2
 
1.7
 
 
 
 
 
2.0
 
2.3
 
2.0
 
 
For footnotes see page 13
 
Adjusted profit before tax of $4.9bn was $0.8bn or 19% higher, reflecting a strong revenue performance and a reduction in LICs of $0.4bn. We achieved positive adjusted jaws of 2.3%, as our revenue growth (up 6.4%) exceeded an increase in our operating expenses (up 4.1%).
 
Adjusted revenue increased by $0.7bn or 6% including a net adverse movement of $136m on credit and funding valuation adjustments. Excluding these movements, adjusted revenue increased by $0.8bn or 8%, with growth in all of our businesses:
 
 
●
Revenue increased from our transaction banking products, notably GLCM (up $0.2bn) and HSS (up $0.1bn). In GLCM, balances grew as we won client mandates and deposit spreads widened, notably in Asia and the US.
 
 
 
●
Global Markets revenue increased by $0.3bn, notably in Equities (up $0.2bn), as we continued to capture market share with Prime Financing products. In Fixed Income, Currencies and Commodities ('FICC'), revenue increased by $0.1bn as we captured increased client flows and grew market share in Europe in Rates and Credit.
 
 
 
●
Global Banking revenue increased by $0.1bn or 4%, reflecting growth in lending balances and continued momentum in investment banking products, which offset the effects of tightening spreads on lending in Asia. The increase in revenue also included recoveries on restructured facilities in 9M17, compared with write-downs in 9M16.
 
Adjusted LICs of $0.1bn decreased by $0.4bn. This reflected a reduction in individually assessed charges, particularly as the prior year included LICs on exposures in the oil and gas, and mining sectors in the US.
 
Adjusted operating expenses increased by $0.3bn or 4%, reflecting higher performance-related pay, and pension and severance costs, as well as strategic investments in GLCM, HSS and Foreign Exchange. Our continued cost management, efficiency improvements and FTE reductions were broadly offset by the effects of inflation.
 
 
 
 
10
HSBC Holdings plc  Earnings Release 3Q17
 
 
Global Private Banking
9M17 compared with 9M16 - adjusted results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management view of adjusted revenue
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
9M17 vs. 9M16
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
%
 
$m
 
$m
 
$m
 
Net operating income1
 
 
 
 
 
 
 
 
 
 
Investment revenue
528
 
571
 
(43
)
(8
)
174
 
180
 
191
 
Lending
284
 
316
 
(32
)
(10
)
98
 
97
 
105
 
Deposit
294
 
258
 
36
 
14
 
103
 
103
 
82
 
Other
177
 
190
 
(13
)
(7
)
62
 
58
 
64
 
Total
1,283
 
1,335
 
(52
)
(4
)
437
 
438
 
442
 
Adjusted RoRWA (%)5
1.7
 
2.0
 
 
 
1.3
 
1.8
 
1.7
 
 
For footnotes see page 13
 
Adjusted profit before tax of $0.2bn was $56m or 22% lower as revenue decreased, partly offset by a reduction in costs.
 
Adjusted revenue of $1.3bn was $52m or 4% lower, reflecting the impact of client repositioning actions. These actions are largely complete. However, revenue from markets targeted for growth increased by 9%, particularly in Hong Kong as higher investment revenue reflected increased client activity, and deposit revenue benefited from wider spreads.
 
Adjusted LICs of $17m compared with net releases of $10m in 9M16. The figure in 9M17 primarily reflects a charge related to a single client in the UK.
 
Adjusted operating expenses of $1.1bn were $23m or 2% lower, mainly as a result of the managed reduction in FTEs and the impact of our cost-saving initiatives.
 
Net new money of $4bn reflected positive inflows of $13bn in key markets targeted for growth, particularly in Hong Kong. This was partly offset by outflows resulting from the repositioning of the business.
 
 
Corporate Centre
9M17 compared with 9M16 - adjusted results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management view of adjusted revenue
 
Nine months ended
Quarter ended
 
30 Sep
 
30 Sep
 
Variance
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2016
 
9M17 vs. 9M16
2017
 
2017
 
2016
 
 
$m
 
$m
 
$m
 
%
 
$m
 
$m
 
$m
 
Net operating income1
 
 
 
 
 
 
 
 
 
 
Central Treasury9
1,076
 
1,719
 
(643
)
(37
)
311
 
431
 
366
 
Legacy portfolios
88
 
606
 
(518
)
(85
)
(46
)
106
 
275
 
- US run-off portfolio
47
 
570
 
(523
)
(92
)
(28
)
47
 
150
 
- legacy credit
41
 
36
 
5
 
14
 
(18
)
59
 
125
 
Other10
(44
)
(63
)
19
 
(30
)
(79
)
68
 
(235
)
Total
1,120
 
2,262
 
(1,142
)
(50
)
186
 
605
 
406
 
 
For footnotes see page 13
 
Adjusted profit before tax of $2.1bn was $1.1bn or 34% lower, due to a reduction in revenue and higher operating expenses. This was partly offset by a reduction in LICs.
 
Adjusted revenue fell by $1.1bn or 50%, reflecting a decrease in Central Treasury ($0.6bn) and continuing disposals in the US run-off portfolio ($0.5bn). In Central Treasury revenue decreased as a result of:
 
 
●
lower favourable fair value movements relating to the economic hedging of interest and exchange rate risk on our long-term debt with long-term derivatives of $0.2bn compared with $0.5bn in 9M16;
 
 
 
●
higher interest on our debt (up $0.3bn), mainly reflecting the higher costs of debt issued to meet regulatory requirements; and
 
 
 
●
a reduction in revenue in BSM reflecting lower reinvestment yields.
 
Net loan impairment releases of $92m compared with adjusted LICs of $34m in 9M16. This reflected lower LICs in the US run-off portfolio together with higher net releases of impairment allowances in our legacy credit portfolio as collateral values improved.
 
Adjusted operating expenses were $0.1bn or 14% higher, in part due to a credit booked in 1Q16 relating to the 2015 UK bank levy $0.1bn. The remainder of the increase related to investment in regulatory programmes and compliance, partly offset by lower costs associated with our US run-off portfolio.
 
Adjusted income from associates rose by $26m or 1%.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
11
 
Earnings Release - 3Q17
 
Balance sheet commentary compared with 30 June 2017
 
Total assets grew by $33.8bn or 1.4% on a reported basis. On a constant currency basis, total assets were broadly unchanged.
 
Loans and advances to customers
 
Reported loans and advances to customers grew by $25.3bn or 3%, driven by growth in Asia. This included the following:
 
 
●
favourable currency translation differences of $13.3bn; and
 
 
 
●
a $3.8bn increase in corporate overdraft balances in the UK relating to a small number of customers that settled their overdraft and deposit balances on a net basis.
 
Excluding these factors, loans and advances to customers grew by $8.2bn or 1%. We continued to grow lending in Asia (up $8.6bn) across all our global businesses, notably in Hong Kong, where CMB term lending increased, and we grew mortgage balances in RBWM. This reflected our continuing strategic focus on growth in the region.
 
Lending in Europe increased by $1.2bn, notably in the UK, as higher balances in RBWM were driven by UK mortgage growth of $2.8bn. CMB term lending in the UK increased, but this was offset by reductions in GB&M, which reflected a reduction in short-term assets, including overdrafts.
 
These lending increases were partly offset by a $1.4bn reduction in GB&M balances in North America, reflecting our active management of overall client returns.
 
Customer accounts
 
Customer accounts increased by $25.2bn or 2% on a reported basis. This included:
 
 
●
a favourable currency translation effect of $16.4bn; and
 
 
 
●
a $3.8bn increase in corporate current account balances, in line with the increase in corporate overdrafts.
 
Excluding these factors, customer accounts increased by $4.9bn. This reflected increases in Asia in CMB, RBWM and GB&M ($10.1bn combined), notably in Hong Kong, Singapore and Australia.
 
By contrast, Europe balances decreased by $6.8bn, primarily in GB&M and CMB, reflecting outflows of short-term deposits placed by a small number of customers in the UK and France.
 
 
Net interest margin
 
 
 
 
 
 
 
 
Net interest margin
 
Nine months ended
Year ended
 
30 Sep
 
30 Sep
 
31 Dec
 
 
2017
 
2016
 
2016
 
 
$m
 
$m
 
$m
 
Net interest income
20,904
 
22,945
 
29,813
 
Average interest earning assets
1,711,493
 
1,723,736
 
1,723,702
 
 
%
 
%
 
%
 
Gross yield
2.36
 
2.55
 
2.46
 
Less: cost of funds
(0.87
)
(0.93
)
(0.87
)
Net interest spread
1.49
 
1.62
 
1.59
 
Net interest margin
1.63
 
1.78
 
1.73
 
 
In 2016, we earned net interest income of $0.9bn from the operations in Brazil that we sold in that year (9M16: $0.9bn) from average interest-earning assets of $25.8bn (9M16: $25.2bn). Excluding these operations in Brazil, our net interest margin for 2016 was 1.70% (9M16: 1.73%) with a gross yield of 2.34% (9M16: 2.37%) and a cost of funds of 0.76% (9M16: 0.77%).
 
9M17 vs FY16
 
Net interest margin ('NIM') of 1.63% fell by 10bps, compared with NIM of 1.73% for 2016. Excluding the effects of the sale of our operations in Brazil (completed on 1 July 2016) and foreign currency translation, NIM fell by 5bps.
 
The fall in NIM reflected:
 
 
●
The continuing run-off of our higher-yielding US CML portfolio;
 
 
 
●
Pressure on asset yields, notably in Europe, reflecting negative interest rates in continental Europe, market competition and decreased yields on mortgages in the UK, due to a change in portfolio mix towards lower-yielding fixed-rate products, partly offset by the benefits of lending volume growth in Asia and central bank rate rises in Mexico; and
 
 
 
●
Higher Group debt costs, affected by the longer maturities and the structural subordination of our new issuance. The cost of debt was also affected by the US dollar rate rises.
 
These decreases were partly offset by:
 
 
●
The benefits of US dollar rate rises, notably from increased yields on our surplus liquidity; and
 
 
 
●
A lower cost of customer accounts in Europe, reflecting base rate reductions in the UK and negative interest rates in continental Europe, and in Asia reflecting a change in mix towards lower-cost accounts.
 
9M17 NIM remained broadly unchanged from 1H17.
 
 
 
 
12
HSBC Holdings plc  Earnings Release 3Q17
 
Notes
 
 
●
Income statement comparisons, unless stated otherwise, are between the quarter ended 30 September 2017 and the quarter ended 30 September 2016. Balance sheet comparisons, unless otherwise stated, are between balances at 30 September 2017 and the corresponding balances at 30 June 2017.
 
 
 
●
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 194 to 203 of our Annual Report and Accounts 2016.
 
 
 
●
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
Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.
2
'Other personal lending' includes personal non-residential closed-end loans and personal overdrafts.
3
'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.
4
'Other' mainly includes the distribution and manufacturing (where applicable) of retail and credit protection insurance.
5
Adjusted return on average risk-weighted assets ('RoRWA') is used to measure the performance of RBWM, CMB, GB&M and GPB. Adjusted RoRWA is calculated using annualised profit before tax and reported average risk-weighted assets at constant currency adjusted for the effects of significant items.
6
'Markets products, Insurance and Investments and Other' includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and Global Banking products.
7
In 3Q17, credit and funding valuation adjustments included an adverse fair value movement of $126m on the widening of credit spreads on structured liabilities (3Q16: adverse fair value movement of $160m; 2Q17: adverse fair value movement of $216m).
8
'Other' in GB&M includes net interest earned on free capital held in the global business not assigned to products, 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'.
9
Central Treasury includes revenue relating to BSM of $584m (2Q17: $643m; 3Q16: $744m), interest expense of $331m (2Q17: $296m; 3Q16: $293m) and favourable valuation differences on issued long-term debt and associated swaps of $80m (2Q17: favourable movements of $125m; 3Q16: favourable movements of $108m). Revenue relating to BSM includes other internal allocations, including notional tax credits to reflect the economic benefit generated by certain activities that is not reflected within operating income, for example 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' in Corporate Centre includes internal allocations relating to legacy credit.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
13
 
Earnings Release - 3Q17
 
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 and expectations, are forward-looking statements. Words such as 'expects', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC's Directors, officers or employees to third parties, including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
 
 
●
changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks' policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; and consumer perception as to the
 
continuing availability of credit and price competition in the market segments we serve;
 
 
●
changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the conduct of business of financial institutions in serving their retail customers, corporate clients and counterparties; the standards of market conduct; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for our products and services; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and
 
 
 
●
factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models we use; our success in addressing operational, legal and regulatory, and litigation challenges, notably compliance with the Deferred Prosecution Agreement with US authorities; and other risks and uncertainties we identify in the 'top and emerging risks' on pages 64 to 67 of the Annual Report and Accounts 2016.
 
For further information contact:
 
 
 
Investor Relations
Media Relations
UK - Richard O'Connor
UK - Heidi Ashley
Tel: +44 (0) 20 7991 6590
Tel: +44 (0) 20 7992 2045
 
 
Email: investorrelations@hsbc.com
 
 
 
Hong Kong - Hugh Pye
Hong Kong - Gareth Hewett
Tel: +852 2822 4908
Tel: +852 2822 4929
 
 
 
US - Rob Sherman
 
Tel: +1 (1) 212 525 6901
 
 
 
 
 
 
14
HSBC Holdings plc  Earnings Release 3Q17
 
 
Summary consolidated income statement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended
Quarter ended
 
 
30 Sep
 
30 Sep
 
30 Sep
 
30 Jun
 
30 Sep
 
 
 
2017
 
2016
 
2017
 
2017
 
2016
 
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
 
Net interest income
20,904
 
22,945
 
7,127
 
6,990
 
7,185
 
 
Net fee income
9,746
 
9,848
 
3,255
 
3,267
 
3,262
 
 
Net trading income
5,758
 
7,555
 
1,830
 
1,682
 
2,231
 
 
Net income/(expense) from financial instruments designated at fair value
3,048
 
(252
)
1,041
 
1,078
 
(813
)
 
- changes in fair value of long-term debt issued and related derivatives
752
 
(1,402
)
272
 
540
 
(1,672
)
 
- net income from other financial instruments designated at fair value
2,296
 
1,150
 
769
 
538
 
859
 
 
Gains less losses from financial investments
1,079
 
1,271
 
388
 
353
 
306
 
 
Dividend income
89
 
78
 
40
 
36
 
14
 
 
Net insurance premium income
7,462
 
7,891
 
2,651
 
2,018
 
2,535
 
 
Other operating income/(expense)
416
 
(847
)
(110
)
324
 
(1,491
)
 
Total operating income
48,502
 
48,489
 
16,222
 
15,748
 
13,229
 
 
Net insurance claims and benefits paid and movement in liabilities to policyholders
(9,358
)
(9,507
)
(3,244
)
(2,575
)
(3,717
)
 
Net operating income before loan impairment charges and other credit risk provisions
39,144
 
38,982
 
12,978
 
13,173
 
9,512
 
 
Loan impairment charges and other credit risk provisions
(1,111
)
(2,932
)
(448
)
(427
)
(566
)
 
Net operating income
38,033
 
36,050
 
12,530
 
12,746
 
8,946
 
 
Total operating expenses
(24,989
)
(27,349
)
(8,546
)
(8,115
)
(8,721
)
 
Operating profit
13,044
 
8,701
 
3,984
 
4,631
 
225
 
 
Share of profit in associates and joint ventures
1,819
 
1,856
 
636
 
651
 
618
 
 
Profit before tax
14,863
 
10,557
 
4,620
 
5,282
 
843
 
 
Tax expense
(3,310
)
(3,094
)
(1,115
)
(994
)
(803
)
 
Profit after tax
11,553
 
7,463
 
3,505
 
4,288
 
40
 
 
Attributable to:
 
 
 
 
 
 
 
- ordinary shareholders of the parent company
9,957
 
5,739
 
2,958
 
3,869
 
(617
)
 
- preference shareholders of the parent company
67
 
67
 
22
 
23
 
22
 
 
- other equity holders
722
 
902
 
256
 
153
 
391
 
 
- non-controlling interests
807
 
755
 
269
 
243
 
244
 
 
Profit after tax
11,553
 
7,463
 
3,505
 
4,288
 
40
 
 
 
$
 
$
 
$
 
$
 
$
 
 
Basic earnings per share
0.50
 
0.29
 
0.15
 
0.19
 
(0.03
)
 
Diluted earnings per share
0.50
 
0.29
 
0.15
 
0.19
 
(0.03
)
 
Dividend per ordinary share (in respect of the period)
0.30
 
0.30
 
0.10
 
0.10
 
0.10
 
 
 
%
 
%
 
%
 
%
 
%
 
 
Return on average ordinary shareholders' equity (annualised)
8.2
 
4.4
 
7.1
 
9.5
 
(1.4
)
 
Return on average risk-weighted assets1
2.3
 
1.3
 
2.1
 
2.4
 
0.3
 
 
Cost efficiency ratio
63.8
 
70.2
 
65.8
 
61.6
 
91.7
 
 
 
 
 
1
Return on average risk-weighted assets is calculated using annualised profit before tax and reported average risk-weighted assets.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
15
 
 
 
Earnings Release - 3Q17
 
 
Summary consolidated balance sheet
 
 
 
 
 
 
 
 
 
 
 
 
At
 
 
30 Sep
 
30 Jun
 
31 Dec
 
 
 
2017
 
2017
 
2016
 
 
 
$m
 
$m
 
$m
 
 
Assets
 
 
 
 
Cash and balances at central banks
162,555
 
163,353
 
128,009
 
 
Trading assets
334,283
 
320,037
 
235,125
 
 
Financial assets designated at fair value
28,952
 
27,937
 
24,756
 
 
Derivatives
221,936
 
229,719
 
290,872
 
 
Loans and advances to banks
89,710
 
86,633
 
88,126
 
 
Loans and advances to customers
945,168
 
919,838
 
861,504
 
 
Reverse repurchase agreements - non-trading
184,920
 
196,834
 
160,974
 
 
Financial investments
383,898
 
385,378
 
436,797
 
 
Assets held for sale
669
 
2,301
 
4,389
 
 
Other assets
174,123
 
160,413
 
144,434
 
 
Total assets
2,526,214
 
2,492,443
 
2,374,986
 
 
Liabilities and equity
 
 
 
 
Liabilities
 
 
 
 
Deposits by banks
69,653
 
64,230
 
59,939
 
 
Customer accounts
1,337,121
 
1,311,958
 
1,272,386
 
 
Repurchase agreements - non-trading
122,196
 
145,306
 
88,958
 
 
Trading liabilities
227,961
 
202,401
 
153,691
 
 
Financial liabilities designated at fair value
95,205
 
93,163
 
86,832
 
 
Derivatives
213,269
 
223,413
 
279,819
 
 
Debt securities in issue
59,740
 
63,289
 
65,915
 
 
Liabilities of disposal groups held for sale
1,093
 
620
 
2,790
 
 
Liabilities under insurance contracts
83,770
 
81,147
 
75,273
 
 
Other liabilities
117,462
 
111,130
 
106,805
 
 
Total liabilities
2,327,470
 
2,296,657
 
2,192,408
 
 
Equity
 
 
 
 
Total shareholders' equity
191,013
 
188,396
 
175,386
 
 
Non-controlling interests
7,731
 
7,390
 
7,192
 
 
Total equity
198,744
 
195,786
 
182,578
 
 
Total liabilities and equity
2,526,214
 
2,492,443
 
2,374,986
 
 
 
%
 
%
 
%
 
 
Loans and advances to customers as a percentage of customer accounts
70.7
 
70.1
 
67.7
 
 
 
 
 
 
16
HSBC Holdings plc  Earnings Release 3Q17
 
 
Capital
 
 
 
 
 
 
 
Transitional own funds disclosure
 
 
At
 
 
30 Sep
 
30 Jun
 
 
 
2017
 
2017
 
Ref*
 
$m
 
$m
 
6
Common equity tier 1 capital before regulatory adjustments
160,966
 
160,026
 
28
Total regulatory adjustments to common equity tier 1
(31,186
)
(31,117
)
29
Common equity tier 1 capital
129,780
 
128,909
 
36
Additional tier 1 capital before regulatory adjustments
25,189
 
23,695
 
43
Total regulatory adjustments to additional tier 1 capital
(111
)
(110
)
44
Additional tier 1 capital
25,078
 
23,585
 
45
Tier 1 capital
154,858
 
152,494
 
51
Tier 2 capital before regulatory adjustments
32,003
 
31,885
 
57
Total regulatory adjustments to tier 2 capital
(498
)
(487
)
58
Tier 2 capital
31,505
 
31,398
 
59
Total capital (TC = T1 + T2)
186,363
 
183,892
 
60
Total risk-weighted assets
888,628
 
876,118
 
 
Capital ratios
%
 
%
 
61
Common equity tier 1 ratio
14.6
 
14.7
 
62
Tier 1 ratio
17.4
 
17.4
 
63
Total capital ratio
21.0
 
21.0
 
 
 
 
*
The references identify the lines prescribed in the European Banking Authority ('EBA') template that are applicable and where there is a value.
 
Capital
 
Our CET1 capital ratio decreased to14.6%, mainly as a result of a $12.5bn rise in RWAs.
 
CET1 capital increased in the quarter by $0.9bn, due to:
 
 
 
●
$0.9bn of capital generation through profits, net of dividends and scrip; and
 
 
 
●
favourable foreign currency translation differences of $1.8bn.
 
These increases were partly offset by the share buy-back of $2.0bn.
 
Our 2017 Pillar 2A requirement, as per the PRA's Individual Capital Guidance based on a point in time assessment, is 3.5% of RWAs, of which 2.0% is met by CET1.
 
 
 
Risk-weighted assets
 
RWAs
 
RWAs increased by $12.5bn during the third quarter of the year, including an increase of $7.6bn due to foreign currency translation differences. The remaining increase of $4.9bn was mainly due to an increase in asset size of $16.1bn and changes to methodology and policy of $2.2bn, less reductions of $13.0bn due to RWA initiatives.
 
Asset size
 
Asset size movements principally derive from:
 
 
●
corporate lending growth in CMB and GB&M businesses which increased RWAs by $10.5bn, mainly in Asia and Europe;
 
 
 
●
retail lending growth in RBWM, primarily in Asia, which increased RWAs by $1.5bn; and
 
 
 
●
new transactions and changes in parameters which increased counterparty credit risk and market risk RWAs by $3.3bn, mainly in Europe.
 
Methodology and policy
 
Methodology and policy movements arise mainly from changes of $1.1bn to the treatment of non-performing retail exposures and an increase in the risk weight floors applied by the Hong Kong Monetary Authority to local mortgages of $0.6bn.
RWA initiatives
 
Reduced exposures, refined calculations and process improvements reduced RWAs by $11.8bn, and continued reduction in legacy credit and US run-off portfolios reduced them by a further $1.2bn.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
17
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
Overview of RWAs
 
 
30 Sep
 
30 Jun
 
30 Sep
 
 
 
2017
 
2017
 
2017
 
 
 
RWA
 
RWA
 
Capital
requirement1
 
 
 
$bn
 
$bn
 
$bn
 
1
Credit risk (excluding Counterparty credit risk)
615.9
 
601.9
 
49.3
 
2
Standardised approach
129.8
 
130.2
 
10.4
 
3
Foundation IRB (FIRB) approach2
27.7
 
26.9
 
2.2
 
4
Advanced IRB (AIRB) approach2
458.4
 
444.8
 
36.7
 
6
Counterparty credit risk
59.8
 
61.5
 
4.8
 
7
Mark to market
37.2
 
36.7
 
3.0
 
10
Internal model method (IMM)
10.0
 
10.0
 
0.8
 
11
Risk exposure amount for contributions to the default fund of a CCP
0.7
 
0.7
 
0.1
 
12
CVA
11.9
 
14.1
 
0.9
 
13
Settlement risk
0.7
 
0.3
 
0.1
 
14
Securitisation exposures in the banking book (after the cap)
22.8
 
22.7
 
1.8
 
15
IRB approach
20.0
 
19.7
 
1.6
 
16
IRB supervisory formula approach (SFA)
0.2
 
0.2
 
-
 
17
Internal assessment approach (IAA)
1.5
 
1.6
 
0.1
 
18
Standardised approach
1.1
 
1.2
 
0.1
 
19
Market risk
42.6
 
43.6
 
3.4
 
20
Standardised approach
4.4
 
3.8
 
0.3
 
21
Internal models approach (IMA)
38.2
 
39.8
 
3.1
 
23
Operational risk
98.0
 
98.0
 
7.8
 
25
Standardised approach
98.0
 
98.0
 
7.8
 
27
Amounts below the thresholds for deduction (subject to 250% risk weight)
48.8
 
48.1
 
3.9
 
29
Total
888.6
 
876.1
 
71.1
 
 
 
 
1
'Capital requirement' here, and in all tables where the term is used, represents the Pillar 1 capital charge at 8% of the RWAs.
 
 
 
2
Internal ratings based.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWAs by global business
 
RBWM
 
CMB
 
GB&M
 
GPB
 
Corporate
Centre
 
Total
 
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
Credit risk
93.8
 
274.2
 
175.7
 
13.4
 
130.4
 
687.5
 
Counterparty credit risk
-
 
-
 
57.8
 
0.2
 
2.5
 
60.5
 
Market risk
-
 
-
 
40.6
 
-
 
2.0
 
42.6
 
Operational risk
27.4
 
24.2
 
30.9
 
2.8
 
12.7
 
98.0
 
At 30 Sep 2017
121.2
 
298.4
 
305.0
 
16.4
 
147.6
 
888.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWAs by geographical region
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
Credit risk
231.8
 
278.0
 
47.6
 
104.0
 
26.1
 
687.5
 
Counterparty credit risk
30.7
 
15.1
 
1.1
 
12.3
 
1.3
 
60.5
 
Market risk1
28.9
 
22.9
 
2.7
 
7.3
 
0.9
 
42.6
 
Operational risk
30.9
 
36.6
 
7.5
 
12.8
 
10.2
 
98.0
 
At 30 Sep 2017
322.3
 
352.6
 
58.9
 
136.4
 
38.5
 
888.6
 
 
 
 
1
RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.
 
 
 
 
18
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWA movement by global businesses 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 Jul 2017
116.6
 
289.2
 
265.0
 
16.4
 
145.3
 
43.6
 
876.1
 
RWA initiatives
-
 
(3.1
)
(7.9
)
-
 
(1.0
)
(1.0
)
(13.0
)
Asset size
2.2
 
7.2
 
6.7
 
-
 
(0.5
)
0.5
 
16.1
 
Asset quality
-
 
0.2
 
(1.1
)
-
 
0.6
 
-
 
(0.3
)
Model updates
-
 
-
 
-
 
(0.1
)
-
 
-
 
(0.1
)
- portfolios moving onto IRB approach
-
 
-
 
-
 
(0.1
)
-
 
-
 
(0.1
)
- new/updated models
-
 
-
 
-
 
-
 
-
 
-
 
-
 
Methodology and policy
1.5
 
1.3
 
(0.4
)
-
 
0.3
 
(0.5
)
2.2
 
- internal updates
0.9
 
1.3
 
(0.4
)
-
 
0.3
 
(0.5
)
1.6
 
- external updates - regulatory
0.6
 
-
 
-
 
-
 
-
 
-
 
0.6
 
Foreign exchange movements
0.9
 
3.6
 
2.1
 
0.1
 
0.9
 
-
 
7.6
 
Total RWA movement
4.6
 
9.2
 
(0.6
)
-
 
0.3
 
(1.0
)
12.5
 
RWAs at 30 Sep 2017
121.2
 
298.4
 
264.4
 
16.4
 
145.6
 
42.6
 
888.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWA movement by geographical region by key driver
 
Credit risk, counterparty credit risk and operational risk
 
 
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Market risk
 
Total RWAs
 
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
RWAs at 1 Jul 2017
282.3
 
325.5
 
56.4
 
130.6
 
37.7
 
43.6
 
876.1
 
RWA initiatives
(4.4
)
(3.3
)
(0.6
)
(3.7
)
-
 
(1.0
)
(13.0
)
Asset size
8.4
 
6.3
 
(0.1
)
0.9
 
0.1
 
0.5
 
16.1
 
Asset quality
0.8
 
(1.5
)
0.5
 
(0.3
)
0.2
 
-
 
(0.3
)
Model updates
(0.1
)
-
 
-
 
-
 
-
 
-
 
(0.1
)
- portfolios moving onto IRB approach
(0.1
)
-
 
-
 
-
 
-
 
-
 
(0.1
)
- new/updated models
-
 
-
 
-
 
-
 
-
 
-
 
-
 
Methodology and policy
0.7
 
1.4
 
-
 
0.6
 
-
 
(0.5
)
2.2
 
- internal updates
0.7
 
0.8
 
-
 
0.6
 
-
 
(0.5
)
1.6
 
- external updates - regulatory
-
 
0.6
 
-
 
-
 
-
 
-
 
0.6
 
Foreign exchange movements
5.7
 
1.3
 
-
 
1.0
 
(0.4
)
-
 
7.6
 
Total RWA movement
11.1
 
4.2
 
(0.2
)
(1.5
)
(0.1
)
(1.0
)
12.5
 
RWAs at 30 Sep 2017
293.4
 
329.7
 
56.2
 
129.1
 
37.6
 
42.6
 
888.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWA flow statements of credit risk exposures under IRB approach1
 
 
 
Three months to
 
 
 
30 Sep
 
30 Jun
 
30 Sep
 
 
 
 
2017
 
2017
 
2017
 
 
 
 
RWAs
 
RWAs
 
Capital requirement
 
 
 
 
$bn
 
$bn
 
$bn
 
 
1
RWAs at the beginning of the period
471.7
 
470.3
 
37.7
 
 
2
Asset size
6.9
 
0.7
 
0.6
 
 
3
Asset quality
(0.2
)
(4.1
)
-
 
 
4
Model updates
-
 
0.7
 
-
 
 
5
Methodology and policy
1.4
 
(2.5
)
0.1
 
 
6
Acquisitions and disposals
-
 
(1.5
)
-
 
 
7
Foreign exchange movements
6.3
 
8.1
 
0.5
 
 
9
RWAs at the end of the period
486.1
 
471.7
 
38.9
 
 
 
 
1
This table includes RWA initiatives of $5.7bn allocated across the RWA flow layers to which they relate.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
19
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWA flow statements of counterparty credit risk exposures under the IMM1
 
 
 
Three months to
 
 
 
30 Sep
 
30 Jun
 
30 Sep
 
 
 
 
2017
 
2017
 
2017
 
 
 
 
RWAs
 
RWAs
 
Capital requirement
 
 
 
 
$bn
 
$bn
 
$bn
 
 
1
RWAs at the beginning of the period
14.1
 
14.3
 
1.1
 
 
2
Asset size
(0.3
)
0.7
 
-
 
 
3
Asset quality
(0.1
)
(0.2
)
-
 
 
4
Model updates
-
 
-
 
-
 
 
5
Methodology and policy
(0.4
)
(0.7
)
-
 
 
9
RWAs at the end of the period
13.3
 
14.1
 
1.1
 
 
 
 
1
This table includes RWA initiatives of $0.6bn allocated across the RWA flow layers to which they relate.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWA flow statements of market risk exposures under the IMA1
 
 
 
VaR
 
StressedVaR
 
IRC
 
Other
 
Total RWA
 
Capital requirement
 
 
 
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
 
1
RWAs at 1 Jul 2017
8.8
 
14.5
 
11.8
 
4.7
 
39.8
 
3.2
 
 
2
Movement in risk levels
1.3
 
1.7
 
1.3
 
(2.5
)
1.8
 
0.1
 
 
3
Model updates/changes
(0.9
)
(0.7
)
-
 
-
 
(1.6
)
(0.1
)
 
4
Methodology and policy
(1.2
)
(0.3
)
(0.3
)
-
 
(1.8
)
(0.1
)
 
8
RWAs at 30 Sep 2017
8.0
 
15.2
 
12.8
 
2.2
 
38.2
 
3.1
 
 
 
 
 
 
 
 
 
 
 
1
RWAs at 1 Apr 2017
9.5
 
12.3
 
10.1
 
2.2
 
34.1
 
2.7
 
 
2
Movement in risk levels
0.4
 
1.9
 
1.7
 
2.5
 
6.5
 
0.5
 
 
3
Model updates/changes
(1.6
)
(0.2
)
-
 
-
 
(1.8
)
(0.1
)
 
4
Methodology and policy
0.5
 
0.5
 
-
 
-
 
1.0
 
0.1
 
 
8
RWAs at 30 Jun 2017
8.8
 
14.5
 
11.8
 
4.7
 
39.8
 
3.2
 
 
 
 
1
This table includes RWA initiatives of $1.0bn allocated across the RWA flow layers to which they relate.
 
 
 
 
 
Leverage
 
 
 
 
 
 
 
 
 
 
Leverage ratio
 
 
At
 
 
30 Sep
 
30 Jun
 
 
 
2017
 
2017
 
Ref*
 
$bn
 
$bn
 
20
Tier 1 capital
146.2
 
144.0
 
21
Total leverage ratio exposure
2,566.5
 
2,533.0
 
 
 
%
 
%
 
22
Leverage ratio
5.7
 
5.7
 
EU-23
Choice on transitional arrangements for the definition of the capital measure
Fully phased in
 
Fully phased in
 
 
UK leverage ratio exposure - quarterly average
2,378.0
 
2,343.2
 
 
 
%
 
%
 
 
UK leverage ratio - quarterly average
6.1
 
6.0
 
 
UK leverage ratio - quarter end
6.1
 
6.1
 
 
 
*
The references identify the lines prescribed in the EBA template.
 
Our leverage ratio calculated in accordance with CRD IV was 5.7% at 30 September 2017, unchanged from 30 June 2017.
 
At 30 September 2017, our UK minimum leverage ratio requirement of 3% was supplemented by an additional leverage ratio buffer of 0.4% and a countercyclical leverage ratio buffer of 0.1%. These additional buffers translate into capital values
 
of $10.5bn and $3.5bn, respectively. We comfortably exceeded these leverage requirements.
 
In October 2017, following the FPC recommendation, the PRA increased the minimum requirement for the UK leverage ratio from 3% to 3.25%. The increase will apply to the Group's reporting and disclosure requirements from 31 December 2017 onwards.
 
 
 
 
20
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
Summary information - global businesses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HSBC adjusted profit before tax
 
Nine months ended 30 Sep 2017
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
GlobalBanking andMarkets
 
GlobalPrivateBanking
 
Corporate Centre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net interest income/(expense)
10,328
 
6,640
 
3,434
 
603
 
(98
)
20,907
 
Net fee income/(expense)
3,878
 
2,640
 
2,730
 
528
 
(30
)
9,746
 
Net trading income1
331
 
383
 
4,925
 
140
 
270
 
6,049
 
Other income2
689
 
91
 
612
 
12
 
978
 
2,382
 
Net operating income before loan impairment charges and other credit risk provisions
15,226
 
9,754
 
11,701
 
1,283
 
1,120
 
39,084
 
Loan impairment (charges)/recoveries and other credit risk provisions
(794
)
(306
)
(86
)
(17
)
92
 
(1,111
)
Net operating income
14,432
 
9,448
 
11,615
 
1,266
 
1,212
 
37,973
 
Total operating expenses
(9,376
)
(4,362
)
(6,677
)
(1,068
)
(899
)
(22,382
)
Operating profit
5,056
 
5,086
 
4,938
 
198
 
313
 
15,591
 
Share of profit in associates and joint ventures
2
 
-
 
-
 
-
 
1,817
 
1,819
 
Adjusted profit before tax
5,058
 
5,086
 
4,938
 
198
 
2,130
 
17,410
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
29.1
 
29.2
 
28.4
 
1.1
 
12.2
 
100.0
 
Adjusted cost efficiency ratio
61.6
 
44.7
 
57.1
 
83.2
 
80.3
 
57.3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended 30 Sep 2016
Net interest income
9,599
 
6,331
 
3,648
 
601
 
996
 
21,175
 
Net fee income/(expense)
3,576
 
2,687
 
2,646
 
574
 
(91
)
9,392
 
Net trading income1
303
 
364
 
4,559
 
144
 
1,959
 
7,329
 
Other income/(expense)2
371
 
116
 
149
 
16
 
(602
)
50
 
Net operating income before loan impairment charges and other credit risk provisions
13,849
 
9,498
 
11,002
 
1,335
 
2,262
 
37,946
 
Loan impairment (charges)/recoveries and other credit risk provisions
(880
)
(767
)
(453
)
10
 
(34
)
(2,124
)
Net operating income
12,969
 
8,731
 
10,549
 
1,345
 
2,228
 
35,822
 
Total operating expenses
(8,912
)
(4,259
)
(6,415
)
(1,091
)
(788
)
(21,465
)
Operating profit
4,057
 
4,472
 
4,134
 
254
 
1,440
 
14,357
 
Share of profit in associates and joint ventures
19
 
-
 
-
 
-
 
1,791
 
1,810
 
Adjusted profit before tax
4,076
 
4,472
 
4,134
 
254
 
3,231
 
16,167
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
25.2
 
27.6
 
25.6
 
1.6
 
20.0
 
100.0
 
Adjusted cost efficiency ratio
64.4
 
44.8
 
58.3
 
81.7
 
34.8
 
56.6
 
 
 
 
1
Net trading income includes the revenues of internally funding trading assets, while the related costs are reported in net interest income. In our global business results, the total cost of funding trading assets is included within Corporate Centre net trading income as an interest expense. In the statutory presentation, internal interest income and expense are eliminated.
 
 
 
2
Other income in this context comprises where applicable net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income/(expense) and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
21
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HSBC adjusted profit before tax (continued)
 
Quarter ended 30 Sep 2017
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
GlobalBanking andMarkets
 
GlobalPrivateBanking
 
Corporate Centre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net interest income/(expense)
3,583
 
2,352
 
1,182
 
209
 
(196
)
7,130
 
Net fee income/(expense)
1,362
 
866
 
855
 
173
 
(1
)
3,255
 
Net trading income1
34
 
113
 
1,540
 
45
 
143
 
1,875
 
Other income2
204
 
16
 
301
 
10
 
240
 
771
 
Net operating income before loan impairment charges and other credit risk provisions
5,183
 
3,347
 
3,878
 
437
 
186
 
13,031
 
Loan impairment (charges)/recoveries and other credit risk provisions
(238
)
(188
)
(45
)
(16
)
39
 
(448
)
Net operating income
4,945
 
3,159
 
3,833
 
421
 
225
 
12,583
 
Total operating expenses
(3,255
)
(1,516
)
(2,298
)
(366
)
(341
)
(7,776
)
Operating profit/(loss)
1,690
 
1,643
 
1,535
 
55
 
(116
)
4,807
 
Share of profit in associates and joint ventures
13
 
-
 
-
 
-
 
623
 
636
 
Adjusted profit before tax
1,703
 
1,643
 
1,535
 
55
 
507
 
5,443
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
31.3
 
30.2
 
28.2
 
1.0
 
9.3
 
100.0
 
Adjusted cost efficiency ratio
62.8
 
45.3
 
59.3
 
83.8
 
183.3
 
59.7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended 30 Jun 2017
Net interest income
3,454
 
2,203
 
1,204
 
207
 
19
 
7,087
 
Net fee income/(expense)
1,309
 
882
 
983
 
182
 
(33
)
3,323
 
Net trading income1
156
 
146
 
1,543
 
48
 
48
 
1,941
 
Other income2
175
 
35
 
278
 
1
 
571
 
1,060
 
Net operating income before loan impairment charges and other credit risk provisions
5,094
 
3,266
 
4,008
 
438
 
605
 
13,411
 
Loan impairment (charges)/recoveries and other credit risk provisions
(266
)
(117
)
(58
)
-
 
15
 
(426
)
Net operating income
4,828
 
3,149
 
3,950
 
438
 
620
 
12,985
 
Total operating expenses
(3,229
)
(1,474
)
(2,221
)
(365
)
(245
)
(7,534
)
Operating profit
1,599
 
1,675
 
1,729
 
73
 
375
 
5,451
 
Share of profit/(loss) in associates and joint ventures
(21
)
-
 
-
 
-
 
689
 
668
 
Adjusted profit before tax
1,578
 
1,675
 
1,729
 
73
 
1,064
 
6,119
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
25.8
 
27.4
 
28.2
 
1.2
 
17.4
 
100.0
 
Adjusted cost efficiency ratio
63.4
 
45.1
 
55.4
 
83.3
 
40.5
 
56.2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended 30 Sep 2016
Net interest income
3,269
 
2,144
 
1,297
 
198
 
195
 
7,103
 
Net fee income/(expense)
1,288
 
904
 
944
 
196
 
(70
)
3,262
 
Net trading income1
120
 
125
 
1,457
 
47
 
519
 
2,268
 
Other income/(expense)2
214
 
10
 
91
 
1
 
(238
)
78
 
Net operating income before loan impairment charges and other credit risk provisions
4,891
 
3,183
 
3,789
 
442
 
406
 
12,711
 
Loan impairment (charges)/recoveries and other credit risk provisions
(349
)
(242
)
(22
)
(2
)
48
 
(567
)
Net operating income
4,542
 
2,941
 
3,767
 
440
 
454
 
12,144
 
Total operating expenses
(3,013
)
(1,414
)
(2,185
)
(368
)
(262
)
(7,242
)
Operating profit
1,529
 
1,527
 
1,582
 
72
 
192
 
4,902
 
Share of profit in associates and joint ventures
4
 
-
 
-
 
-
 
615
 
619
 
Adjusted profit before tax
1,533
 
1,527
 
1,582
 
72
 
807
 
5,521
 
 
%
 
%
 
%
 
%
 
%
 
%
 
Share of HSBC's adjusted profit before tax
27.8
 
27.7
 
28.6
 
1.3
 
14.6
 
100.0
 
Adjusted cost efficiency ratio
61.6
 
44.4
 
57.7
 
83.3
 
64.5
 
57.0
 
 
 
 
1
Net trading income includes the revenues of internally funding trading assets, while the related costs are reported in net interest income. In our global business results, the total cost of funding trading assets is included within Corporate Centre net trading income as an interest expense. In the statutory presentation, internal interest income and expense are eliminated.
 
 
 
2
Other income in this context comprises where applicable net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income/(expense) and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.
 
 
 
 
22
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
Global Private Banking - reported client assets1
 
Quarter ended
 
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2017
 
2016
 
 
$bn
 
$bn
 
$bn
 
Opening balance
315
 
306
 
317
 
Net new money
3
 
-
 
(4
)
- of which: areas targeted for growth
6
 
3
 
-
 
Value change
5
 
5
 
6
 
Disposals
(1
)
(2
)
-
 
Exchange and other
5
 
6
 
(4
)
Closing balance
327
 
315
 
315
 
 
 
 
 
 
 
 
 
 
 
Quarter ended
 
30 Sep
 
30 Jun
 
30 Sep
 
 
2017
 
2017
 
2016
 
 
$bn
 
$bn
 
$bn
 
Europe
157
 
154
 
158
 
Asia
129
 
119
 
113
 
North America
41
 
42
 
41
 
Latin America
-
 
-
 
3
 
Middle East2
-
 
-
 
-
 
Closing balance
327
 
315
 
315
 
 
 
 
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.
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
23
 
Earnings Release - 3Q17
 
 
 
Summary information - geographical regions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HSBC reported profit/(loss) before tax
 
Nine months ended 30 Sep 2017
 
Europe
 
Asia
 
MENA
 
North America
 
LatinAmerica
 
Intra-HSBCitems
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net interest income
5,286
 
10,331
 
1,312
 
2,593
 
1,547
 
(165
)
20,904
 
Net fee income
3,204
 
4,267
 
470
 
1,418
 
387
 
-
 
9,746
 
Net trading income1
2,506
 
2,274
 
154
 
374
 
285
 
165
 
5,758
 
Other income2
2,441
 
2,565
 
86
 
530
 
163
 
(3,049
)
2,736
 
Net operating income before loan impairment charges and other credit risk provisions
13,437
 
19,437
 
2,022
 
4,915
 
2,382
 
(3,049
)
39,144
 
Loan impairment (charges)/recoveries and other credit risk provisions
(152
)
(544
)
(175
)
158
 
(398
)
-
 
(1,111
)
Net operating income
13,285
 
18,893
 
1,847
 
5,073
 
1,984
 
(3,049
)
38,033
 
Total operating expenses
(12,791
)
(8,663
)
(1,037
)
(3,997
)
(1,550
)
3,049
 
(24,989
)
Operating profit
494
 
10,230
 
810
 
1,076
 
434
 
-
 
13,044
 
Share of profit in associates and joint ventures
28
 
1,429
 
358
 
4
 
-
 
-
 
1,819
 
Profit before tax
522
 
11,659
 
1,168
 
1,080
 
434
 
-
 
14,863
 
 
%
 
%
 
%
 
%
 
%
 
 
%
 
Share of HSBC's profit before tax
3.5
 
78.4
 
7.9
 
7.3
 
2.9
 
 
100.0
 
Cost efficiency ratio
95.2
 
44.6
 
51.3
 
81.3
 
65.1
 
 
63.8
 
 
 
 
 
 
 
 
 
 
Nine months ended 30 Sep 2016
Net interest income
6,549
 
9,294
 
1,405
 
3,255
 
2,499
 
(57
)
22,945
 
Net fee income
3,285
 
3,960
 
548
 
1,448
 
607
 
-
 
9,848
 
Net trading income1
4,020
 
2,477
 
304
 
330
 
367
 
57
 
7,555
 
Other income/(expense)2
27
 
2,020
 
80
 
499
 
(1,513
)
(2,479
)
(1,366
)
Net operating income before loan impairment charges and other credit risk provisions
13,881
 
17,751
 
2,337
 
5,532
 
1,960
 
(2,479
)
38,982
 
Loan impairment charges and other credit risk provisions
(386
)
(552
)
(184
)
(705
)
(1,105
)
-
 
(2,932
)
Net operating income
13,495
 
17,199
 
2,153
 
4,827
 
855
 
(2,479
)
36,050
 
Total operating expenses
(13,524
)
(7,887
)
(1,206
)
(4,707
)
(2,504
)
2,479
 
(27,349
)
Operating profit/(loss)
(29
)
9,312
 
947
 
120
 
(1,649
)
-
 
8,701
 
Share of profit/(loss) in associates and joint ventures
(3
)
1,503
 
361
 
(4
)
(1
)
-
 
1,856
 
Profit/(loss) before tax
(32
)
10,815
 
1,308
 
116
 
(1,650
)
-
 
10,557
 
 
%
 
%
 
%
 
%
 
%
 
 
%
 
Share of HSBC's profit before tax
(0.3
)
102.4
 
12.4
 
1.1
 
(15.6
)
 
100.0
 
Cost efficiency ratio
97.4
 
44.4
 
51.6
 
85.1
 
127.8
 
 
70.2
 
 
 
 
1
Net trading income includes the revenues of internally funding trading assets, while the related costs are reported in net interest income.
 
 
 
2
Other income in this context comprises where applicable net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income/(expense) and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.
 
 
 
 
 
24
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HSBC reported profit/(loss) before tax
 
Quarter ended 30 Sep 2017
 
Europe
 
Asia
 
MENA
 
North America
 
LatinAmerica
 
Intra-HSBCitems
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Net interest income
1,816
 
3,566
 
454
 
823
 
537
 
(69
)
7,127
 
Net fee income
1,029
 
1,448
 
154
 
489
 
135
 
-
 
3,255
 
Net trading income1
816
 
700
 
36
 
100
 
109
 
69
 
1,830
 
Other income2
873
 
937
 
16
 
7
 
52
 
(1,119
)
766
 
Net operating income before loan impairment charges and other credit risk provisions
4,534
 
6,651
 
660
 
1,419
 
833
 
(1,119
)
12,978
 
Loan impairment (charges)/recoveries and other credit risk provisions
(171
)
(96
)
(53
)
21
 
(149
)
-
 
(448
)
Net operating income
4,363
 
6,555
 
607
 
1,440
 
684
 
(1,119
)
12,530
 
Total operating expenses
(4,430
)
(3,023
)
(364
)
(1,314
)
(534
)
1,119
 
(8,546
)
Operating profit/(loss)
(67
)
3,532
 
243
 
126
 
150
 
-
 
3,984
 
Share of profit in associates and joint ventures
17
 
497
 
121
 
1
 
-
 
-
 
636
 
Profit/(loss) before tax
(50
)
4,029
 
364
 
127
 
150
 
-
 
4,620
 
 
%
 
%
 
%
 
%
 
%
 
 
%
 
Share of HSBC's profit before tax
(1.1
)
87.3
 
7.9
 
2.7
 
3.2
 
 
100.0
 
Cost efficiency ratio
97.7
 
45.5
 
55.2
 
92.6
 
64.1
 
 
65.8
 
 
 
 
 
 
 
 
 
 
Quarter ended 30 Jun 2017
Net interest income
1,766
 
3,433
 
451
 
876
 
522
 
(58
)
6,990
 
Net fee income
1,132
 
1,413
 
158
 
435
 
129
 
-
 
3,267
 
Net trading income1
646
 
670
 
35
 
160
 
113
 
58
 
1,682
 
Other income2
1,146
 
730
 
65
 
249
 
50
 
(1,006
)
1,234
 
Net operating income before loan impairment charges and other credit risk provisions
4,690
 
6,246
 
709
 
1,720
 
814
 
(1,006
)
13,173
 
Loan impairment (charges)/recoveries and other credit risk provisions
14
 
(281
)
(65
)
31
 
(126
)
-
 
(427
)
Net operating income
4,704
 
5,965
 
644
 
1,751
 
688
 
(1,006
)
12,746
 
Total operating expenses
(3,933
)
(2,946
)
(351
)
(1,373
)
(518
)
1,006
 
(8,115
)
Operating profit
771
 
3,019
 
293
 
378
 
170
 
-
 
4,631
 
Share of profit in associates and joint ventures
7
 
517
 
124
 
3
 
-
 
-
 
651
 
Profit before tax
778
 
3,536
 
417
 
381
 
170
 
-
 
5,282
 
 
%
 
%
 
%
 
%
 
%
 
 
%
 
Share of HSBC's profit before tax
14.8
 
66.9
 
7.9
 
7.2
 
3.2
 
 
100.0
 
Cost efficiency ratio
83.9
 
47.2
 
49.5
 
79.8
 
63.6
 
 
61.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended 30 Sep 2016
Net interest income
2,033
 
3,153
 
482
 
1,019
 
523
 
(25
)
7,185
 
Net fee income
1,109
 
1,389
 
163
 
478
 
123
 
-
 
3,262
 
Net trading income1
1,180
 
774
 
73
 
109
 
70
 
25
 
2,231
 
Other income/(expense)2
(1,299
)
683
 
7
 
(26
)
(1,681
)
(850
)
(3,166
)
Net operating income/(expense) before loan impairment charges and other credit risk provisions
3,023
 
5,999
 
725
 
1,580
 
(965
)
(850
)
9,512
 
Loan impairment charges and other credit risk provisions
(44
)
(208
)
(88
)
(88
)
(138
)
-
 
(566
)
Net operating income/(expense)
2,979
 
5,791
 
637
 
1,492
 
(1,103
)
(850
)
8,946
 
Total operating expenses
(4,594
)
(2,642
)
(419
)
(1,424
)
(492
)
850
 
(8,721
)
Operating profit/(loss)
(1,615
)
3,149
 
218
 
68
 
(1,595
)
-
 
225
 
Share of profit/(loss) in associates and joint ventures
(2
)
511
 
111
 
(2
)
-
 
-
 
618
 
Profit/(loss) before tax
(1,617
)
3,660
 
329
 
66
 
(1,595
)
-
 
843
 
 
%
 
%
 
%
 
%
 
%
 
 
%
 
Share of HSBC's profit before tax
(191.8
)
434.2
 
39.0
 
7.8
 
(189.2
)
 
100.0
 
Cost efficiency ratio
152.0
 
44.0
 
57.8
 
90.1
 
(51.0
)
 
91.7
 
 
 
 
1
Net trading income includes the revenues of internally funding trading assets, while the related costs are reported in net interest income.
 
 
 
2
Other income in this context comprises where applicable net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net insurance premium income/(expense) and other operating income less net insurance claims and benefits paid and movement in liabilities to policyholders.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
25
 
Earnings Release - 3Q17
 
 
 
Appendix - selected information
 
Supplementary analysis of significant items by global business is presented below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - global businesses
 
Nine months ended 30 Sep 2017
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
Global Bankingand Markets
 
Global PrivateBanking
 
Corporate Centre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Reported
15,462
 
9,754
 
11,361
 
1,303
 
1,264
 
39,144
 
Significant items
(236
)
-
 
340
 
(20
)
(144
)
(60
)
- DVA on derivative contracts
-
 
-
 
340
 
-
 
-
 
340
 
- fair value movements on non-qualifying hedges1
-
 
-
 
-
 
-
 
(50
)
(50
)
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank
-
 
-
 
-
 
-
 
(126
)
(126
)
- gain on disposal of our membership interest in Visa - US
(312
)
-
 
-
 
-
 
-
 
(312
)
- portfolio disposals
73
 
-
 
-
 
(20
)
110
 
163
 
- provisions arising from the ongoing review of compliance with the UK Consumer Credit Act
3
 
-
 
-
 
-
 
-
 
3
 
- other acquisitions, disposals and dilutions
-
 
-
 
-
 
-
 
(78
)
(78
)
Adjusted
15,226
 
9,754
 
11,701
 
1,283
 
1,120
 
39,084
 
Loan impairment charge and other credit risk provisions ('LICs')
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(794
)
(306
)
(86
)
(17
)
92
 
(1,111
)
Adjusted
(794
)
(306
)
(86
)
(17
)
92
 
(1,111
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(9,983
)
(4,382
)
(6,398
)
(1,074
)
(3,152
)
(24,989
)
Significant items
607
 
20
 
(279
)
6
 
2,253
 
2,607
 
- costs associated with portfolio disposals
-
 
-
 
-
 
1
 
13
 
14
 
- costs associated with the UK's exit from the EU
-
 
-
 
4
 
-
 
8
 
12
 
- costs to achieve
224
 
20
 
143
 
5
 
1,955
 
2,347
 
- costs to establish UK ring-fenced bank
-
 
-
 
-
 
-
 
277
 
277
 
- provisions/(releases) in connection with legalmatters
-
 
-
 
(426
)
-
 
-
 
(426
)
- UK customer redress programmes
383
 
-
 
-
 
-
 
-
 
383
 
Adjusted
(9,376
)
(4,362
)
(6,677
)
(1,068
)
(899
)
(22,382
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Reported
2
 
-
 
-
 
-
 
1,817
 
1,819
 
Adjusted
2
 
-
 
-
 
-
 
1,817
 
1,819
 
Profit before tax
 
 
 
 
 
 
 
 
 
 
 
 
Reported
4,687
 
5,066
 
4,877
 
212
 
21
 
14,863
 
Significant items
371
 
20
 
61
 
(14
)
2,109
 
2,547
 
- revenue
(236
)
-
 
340
 
(20
)
(144
)
(60
)
- operating expenses
607
 
20
 
(279
)
6
 
2,253
 
2,607
 
Adjusted
5,058
 
5,086
 
4,938
 
198
 
2,130
 
17,410
 
 
 
 
1
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
 
 
26
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - global businesses (continued)
 
Nine months ended 30 Sep 2016
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
Global Bankingand Markets
 
Global PrivateBanking
 
CorporateCentre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Reported
15,674
 
10,364
 
11,692
 
1,372
 
(120
)
38,982
 
Currency translation
(359
)
(322
)
(300
)
(21
)
(70
)
(1,072
)
Significant items
(1,466
)
(544
)
(390
)
(16
)
2,452
 
36
 
- DVA on derivative contracts
-
 
-
 
(96
)
-
 
-
 
(96
)
- fair value movements on non-qualifying hedges1
2
 
-
 
-
 
-
 
383
 
385
 
- gain on the disposal of our membership interest in Visa - Europe
(354
)
(230
)
-
 
-
 
-
 
(584
)
- own credit spread2
-
 
-
 
-
 
-
 
144
 
144
 
- portfolio disposals
-
 
-
 
-
 
-
 
51
 
51
 
- releases arising from the ongoing review of compliance with the UK Consumer Credit Act
-
 
-
 
-
 
(2
)
-
 
(2
)
- loss and trading results from disposed-of operations in Brazil
(987
)
(288
)
(268
)
(12
)
1,828
 
273
 
- currency translation on significant items
(127
)
(26
)
(26
)
(2
)
46
 
(135
)
Adjusted
13,849
 
9,498
 
11,002
 
1,335
 
2,262
 
37,946
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(1,374
)
(1,071
)
(459
)
9
 
(37
)
(2,932
)
Currency translation
(42
)
(11
)
(10
)
1
 
3
 
(59
)
Significant items
536
 
315
 
16
 
-
 
-
 
867
 
- trading results from disposed-of operations in Brazil
462
 
272
 
14
 
-
 
-
 
748
 
- currency translation on significant items
74
 
43
 
2
 
-
 
-
 
119
 
Adjusted
(880
)
(767
)
(453
)
10
 
(34
)
(2,124
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(10,721
)
(4,615
)
(7,002
)
(1,870
)
(3,141
)
(27,349
)
Currency translation
219
 
109
 
205
 
13
 
37
 
583
 
Significant items
1,590
 
247
 
382
 
766
 
2,316
 
5,301
 
- costs to achieve
229
 
48
 
142
 
6
 
1,607
 
2,032
 
- costs to establish UK ring-fenced bank
1
 
1
 
-
 
-
 
145
 
147
 
- impairment of GPB - Europe goodwill
-
 
-
 
-
 
800
 
-
 
800
 
- regulatory provisions/(releases) in GPB
-
 
-
 
-
 
(48
)
2
 
(46
)
- provisions/(releases) in connection withlegal matters
-
 
-
 
136
 
-
 
587
 
723
 
- UK customer redress programmes
438
 
23
 
28
 
-
 
-
 
489
 
- trading results from disposed-of operations in Brazil
805
 
155
 
82
 
8
 
9
 
1,059
 
- currency translation on significant items
117
 
20
 
(6
)
-
 
(34
)
97
 
Adjusted
(8,912
)
(4,259
)
(6,415
)
(1,091
)
(788
)
(21,465
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Reported
18
 
-
 
-
 
-
 
1,838
 
1,856
 
Currency translation
1
 
-
 
-
 
-
 
(48
)
(47
)
Significant items
-
 
-
 
-
 
-
 
1
 
1
 
- trading results from disposed-of operations in Brazil
-
 
-
 
-
 
-
 
1
 
1
 
- currency translation on significant items
-
 
-
 
-
 
-
 
-
 
-
 
Adjusted
19
 
-
 
-
 
-
 
1,791
 
1,810
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
Reported
3,597
 
4,678
 
4,231
 
(489
)
(1,460
)
10,557
 
Currency translation
(181
)
(224
)
(105
)
(7
)
(78
)
(595
)
Significant items
660
 
18
 
8
 
750
 
4,769
 
6,205
 
- revenue
(1,466
)
(544
)
(390
)
(16
)
2,452
 
36
 
- LICs
536
 
315
 
16
 
-
 
-
 
867
 
- operating expenses
1,590
 
247
 
382
 
766
 
2,316
 
5,301
 
- share of profit in associates and joint ventures
-
 
-
 
-
 
-
 
1
 
1
 
Adjusted
4,076
 
4,472
 
4,134
 
254
 
3,231
 
16,167
 
 
 
 
1
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
2
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
27
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - global businesses (continued)
 
Quarter ended 30 Sep 2017
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
Global Bankingand Markets
 
Global PrivateBanking
 
CorporateCentre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Reported
5,180
 
3,347
 
3,813
 
445
 
193
 
12,978
 
Significant items
3
 
-
 
65
 
(8
)
(7
)
53
 
- DVA on derivative contracts
-
 
-
 
65
 
-
 
-
 
65
 
- fair value movements on non-qualifying hedges1
-
 
-
 
-
 
-
 
(20
)
(20
)
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank
-
 
-
 
-
 
-
 
(126
)
(126
)
- portfolio disposals
-
 
-
 
-
 
(8
)
139
 
131
 
- provisions arising from the ongoing review ofcompliance with the UK Consumer Credit Act
3
 
-
 
-
 
-
 
-
 
3
 
Adjusted
5,183
 
3,347
 
3,878
 
437
 
186
 
13,031
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(238
)
(188
)
(45
)
(16
)
39
 
(448
)
Adjusted
(238
)
(188
)
(45
)
(16
)
39
 
(448
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(3,366
)
(1,524
)
(2,243
)
(370
)
(1,043
)
(8,546
)
Significant items
111
 
8
 
(55
)
4
 
702
 
770
 
- costs associated with portfolio disposals
-
 
-
 
-
 
1
 
3
 
4
 
- costs associated with the UK's exit from the EU
-
 
-
 
3
 
-
 
5
 
8
 
- costs to achieve
27
 
8
 
46
 
3
 
593
 
677
 
- costs to establish UK ring-fenced bank
-
 
-
 
-
 
-
 
101
 
101
 
- provisions/(releases) in connection with legal
    matters
-
 
-
 
(104
)
-
 
-
 
(104
)
- UK customer redress programmes
84
 
-
 
-
 
-
 
-
 
84
 
Adjusted
(3,255
)
(1,516
)
(2,298
)
(366
)
(341
)
(7,776
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Reported
13
 
-
 
-
 
-
 
623
 
636
 
Adjusted
13
 
-
 
-
 
-
 
623
 
636
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
Reported
1,589
 
1,635
 
1,525
 
59
 
(188
)
4,620
 
Significant items
114
 
8
 
10
 
(4
)
695
 
823
 
- revenue
3
 
-
 
65
 
(8
)
(7
)
53
 
- operating expenses
111
 
8
 
(55
)
4
 
702
 
770
 
Adjusted
1,703
 
1,643
 
1,535
 
55
 
507
 
5,443
 
 
 
 
1
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
 
28
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - global businesses (continued)
 
Quarter ended 30 Jun 2017
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
Global Bankingand Markets
 
Global PrivateBanking
 
CorporateCentre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Reported
5,200
 
3,216
 
3,759
 
439
 
559
 
13,173
 
Currency translation
60
 
50
 
67
 
7
 
15
 
199
 
Significant items
(166
)
-
 
182
 
(8
)
31
 
39
 
- DVA on derivative contracts
-
 
-
 
178
 
-
 
-
 
178
 
- fair value movements on non-qualifying hedges1
-
 
-
 
-
 
-
 
61
 
61
 
- gain on disposal of our membership interest inVisa - US
(166
)
-
 
-
 
-
 
-
 
(166
)
- portfolio disposals
-
 
-
 
-
 
(8
)
50
 
42
 
- other acquisitions, disposals and dilutions
-
 
-
 
-
 
-
 
(78
)
(78
)
- currency translation on significant items
-
 
-
 
4
 
-
 
(2
)
2
 
Adjusted
5,094
 
3,266
 
4,008
 
438
 
605
 
13,411
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(260
)
(121
)
(61
)
-
 
15
 
(427
)
Currency translation
(6
)
4
 
3
 
-
 
-
 
1
 
Adjusted
(266
)
(117
)
(58
)
-
 
15
 
(426
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(3,341
)
(1,460
)
(1,910
)
(360
)
(1,044
)
(8,115
)
Currency translation
(52
)
(27
)
(32
)
(7
)
(20
)
(138
)
Significant items
164
 
13
 
(279
)
2
 
819
 
719
 
- costs associated with portfolio disposals
-
 
-
 
-
 
-
 
10
 
10
 
- costs associated with the UK's exit from the EU
-
 
-
 
1
 
-
 
3
 
4
 
- costs to achieve
72
 
13
 
49
 
2
 
701
 
837
 
- costs to establish UK ring-fenced bank
-
 
-
 
-
 
-
 
93
 
93
 
- provisions/(releases) in connection withlegal matters
-
 
-
 
(322
)
-
 
-
 
(322
)
- UK customer redress programmes
89
 
-
 
-
 
-
 
-
 
89
 
- currency translation on significant items
3
 
-
 
(7
)
-
 
12
 
8
 
Adjusted
(3,229
)
(1,474
)
(2,221
)
(365
)
(245
)
(7,534
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(20
)
-
 
-
 
-
 
671
 
651
 
Currency translation
(1
)
-
 
-
 
-
 
18
 
17
 
Adjusted
(21
)
-
 
-
 
-
 
689
 
668
 
Profit before tax
 
 
 
 
 
 
 
 
 
 
 
 
Reported
1,579
 
1,635
 
1,788
 
79
 
201
 
5,282
 
Currency translation
1
 
27
 
38
 
-
 
13
 
79
 
Significant items
(2
)
13
 
(97
)
(6
)
850
 
758
 
- revenue
(166
)
-
 
182
 
(8
)
31
 
39
 
- operating expenses
164
 
13
 
(279
)
2
 
819
 
719
 
Adjusted
1,578
 
1,675
 
1,729
 
73
 
1,064
 
6,119
 
 
 
 
1
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
29
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - global businesses (continued)
 
Quarter ended 30 Sep 2016
 
Retail Bankingand WealthManagement
 
CommercialBanking
 
Global Bankingand Markets
 
Global PrivateBanking
 
CorporateCentre
 
Total
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Reported
4,918
 
3,201
 
3,762
 
440
 
(2,809
)
9,512
 
Currency translation
(27
)
(18
)
(29
)
2
 
(6
)
(78
)
Significant items
-
 
-
 
56
 
-
 
3,221
 
3,277
 
- DVA on derivative contracts
-
 
-
 
55
 
-
 
-
 
55
 
- fair value movements on non-qualifying hedges1
2
 
-
 
-
 
-
 
(14
)
(12
)
- own credit spread2
-
 
-
 
-
 
-
 
1,370
 
1,370
 
- portfolio disposals
-
 
-
 
-
 
-
 
119
 
119
 
- loss on disposal of operations in Brazil
-
 
-
 
-
 
-
 
1,743
 
1,743
 
- currency translation on significant items
(2
)
-
 
1
 
-
 
3
 
2
 
Adjusted
4,891
 
3,183
 
3,789
 
442
 
406
 
12,711
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(351
)
(241
)
(20
)
(2
)
48
 
(566
)
Currency translation
2
 
(1
)
(2
)
-
 
-
 
(1
)
Adjusted
(349
)
(242
)
(22
)
(2
)
48
 
(567
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(3,592
)
(1,436
)
(2,243
)
(318
)
(1,132
)
(8,721
)
Currency translation
20
 
3
 
(3
)
(3
)
(10
)
7
 
Significant items
559
 
19
 
61
 
(47
)
880
 
1,472
 
- costs to achieve
124
 
11
 
51
 
1
 
827
 
1,014
 
- costs to establish UK ring-fenced bank
1
 
1
 
-
 
-
 
51
 
53
 
- regulatory provisions/(releases) in GPB
-
 
-
 
-
 
(48
)
(2
)
(50
)
- UK customer redress programmes
438
 
8
 
10
 
-
 
-
 
456
 
- currency translation on significant items
(4
)
(1
)
-
 
-
 
4
 
(1
)
Adjusted
(3,013
)
(1,414
)
(2,185
)
(368
)
(262
)
(7,242
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Reported
4
 
-
 
-
 
-
 
614
 
618
 
Currency translation
-
 
-
 
-
 
-
 
1
 
1
 
Adjusted
4
 
-
 
-
 
-
 
615
 
619
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
Reported
979
 
1,524
 
1,499
 
120
 
(3,279
)
843
 
Currency translation
(5
)
(16
)
(34
)
(1
)
(15
)
(71
)
Significant items
559
 
19
 
117
 
(47
)
4,101
 
4,749
 
- revenue
-
 
-
 
56
 
-
 
3,221
 
3,277
 
- operating expenses
559
 
19
 
61
 
(47
)
880
 
1,472
 
Adjusted
1,533
 
1,527
 
1,582
 
72
 
807
 
5,521
 
 
 
 
1
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
2
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
 
 
 
 
 
30
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted risk-weighted assets
 
At 30 Sep 2017
 
 
Retail
Banking and
WealthManagement
 
CommercialBanking
 
GlobalBanking andMarkets
 
Global PrivateBanking
 
Corporate Centre
 
Total
 
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
$bn
 
Risk-weighted assets
 
 
 
 
 
 
Reported
121.2
 
298.4
 
305.0
 
16.4
 
147.6
 
888.6
 
Disposals
-
 
(0.1
)
-
 
-
 
(5.2
)
(5.3
)
- Brazil operations
-
 
-
 
-
 
-
 
(5.2
)
(5.2
)
- Lebanon operations
-
 
(0.1
)
-
 
-
 
-
 
(0.1
)
Adjusted
121.2
 
298.3
 
305.0
 
16.4
 
142.4
 
883.3
 
 
 
 
 
 
 
 
 
At 30 Jun 2017
 
Risk-weighted assets
 
 
 
 
 
 
Reported
116.6
 
289.2
 
306.1
 
16.4
 
147.8
 
876.1
 
Currency translation
0.9
 
3.6
 
2.1
 
0.1
 
0.9
 
7.6
 
Disposals
-
 
(0.1
)
-
 
-
 
(5.2
)
(5.3
)
- Brazil operations
-
 
-
 
-
 
-
 
(5.2
)
(5.2
)
- Lebanon operations
-
 
(0.1
)
-
 
-
 
-
 
(0.1
)
Adjusted
117.5
 
292.7
 
308.2
 
16.5
 
143.5
 
878.4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At 30 Sep 2016
 
Risk-weighted assets
 
 
 
 
 
 
Reported
120.2
 
282.3
 
307.2
 
16.8
 
177.6
 
904.1
 
Currency translation
0.5
 
2.5
 
1.0
 
0.2
 
(2.3
)
1.9
 
Disposals
(4.9
)
(1.9
)
(0.9
)
(0.1
)
(0.7
)
(8.5
)
- Brazil operations
(4.7
)
(1.5
)
(0.9
)
(0.1
)
(0.2
)
(7.4
)
- Lebanon operations
(0.2
)
(0.4
)
-
 
-
 
(0.5
)
(1.1
)
Adjusted
115.8
 
282.9
 
307.3
 
16.9
 
174.6
 
897.5
 
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
31
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - geographical regions
 
Nine months ended 30 Sep 2017
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
UK
 
HongKong
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
13,437
 
19,437
 
2,022
 
4,915
 
2,382
 
39,144
 
10,027
 
12,119
 
Significant items
30
 
-
 
1
 
(96
)
5
 
(60
)
26
 
(63
)
- DVA on derivative contracts
193
 
110
 
1
 
31
 
5
 
340
 
164
 
38
 
- fair value movements on non-qualifying hedges2
(68
)
16
 
-
 
2
 
-
 
(50
)
(63
)
25
 
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank
-
 
(126
)
-
 
-
 
-
 
(126
)
-
 
(126
)
- gain on disposal of our membership interest inVisa - US
-
 
-
 
-
 
(312
)
-
 
(312
)
-
 
-
 
- portfolio disposals
(20
)
-
 
-
 
183
 
-
 
163
 
-
 
-
 
- provisions arising from the ongoing reviewof compliance with the UK Consumer Credit Act
3
 
-
 
-
 
-
 
-
 
3
 
3
 
-
 
- other acquisitions, disposals and dilutions
(78
)
-
 
-
 
-
 
-
 
(78
)
(78
)
-
 
Adjusted1
13,467
 
19,437
 
2,023
 
4,819
 
2,387
 
39,084
 
10,053
 
12,056
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(152
)
(544
)
(175
)
158
 
(398
)
(1,111
)
(112
)
(415
)
Adjusted
(152
)
(544
)
(175
)
158
 
(398
)
(1,111
)
(112
)
(415
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
(12,791
)
(8,663
)
(1,037
)
(3,997
)
(1,550
)
(24,989
)
(10,201
)
(4,534
)
Significant items
1,789
 
456
 
21
 
303
 
38
 
2,607
 
1,664
 
217
 
- costs associated with portfolio disposals
4
 
-
 
-
 
10
 
-
 
14
 
-
 
-
 
- costs associated with the UK's exit from the EU
12
 
-
 
-
 
-
 
-
 
12
 
9
 
-
 
- costs to achieve
1,539
 
456
 
21
 
293
 
38
 
2,347
 
1,421
 
217
 
- costs to establish UK ring-fenced bank
277
 
-
 
-
 
-
 
-
 
277
 
277
 
-
 
- provisions/(releases) in connection with legal matters
(426
)
-
 
-
 
-
 
-
 
(426
)
(426
)
-
 
- UK customer redress programmes
383
 
-
 
-
 
-
 
-
 
383
 
383
 
-
 
Adjusted1
(11,002
)
(8,207
)
(1,016
)
(3,694
)
(1,512
)
(22,382
)
(8,537
)
(4,317
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
28
 
1,429
 
358
 
4
 
-
 
1,819
 
27
 
-
 
Adjusted
28
 
1,429
 
358
 
4
 
-
 
1,819
 
27
 
-
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
522
 
11,659
 
1,168
 
1,080
 
434
 
14,863
 
(259
)
7,170
 
Significant items
1,819
 
456
 
22
 
207
 
43
 
2,547
 
1,690
 
154
 
- revenue
30
 
-
 
1
 
(96
)
5
 
(60
)
26
 
(63
)
- operating expenses
1,789
 
456
 
21
 
303
 
38
 
2,607
 
1,664
 
217
 
Adjusted
2,341
 
12,115
 
1,190
 
1,287
 
477
 
17,410
 
1,431
 
7,324
 
 
 
 
1
Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
2
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
 
32
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - geographical regions (continued)
 
Nine months ended 30 Sep 2016
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
UK
 
HongKong
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
13,881
 
17,751
 
2,337
 
5,532
 
1,960
 
38,982
 
10,369
 
10,700
 
Currency translation1
(861
)
(52
)
(326
)
13
 
132
 
(1,072
)
(875
)
(33
)
Significant items
(67
)
(23
)
(10
)
64
 
72
 
36
 
(5
)
(11
)
- DVA on derivative contracts
(106
)
(29
)
-
 
2
 
37
 
(96
)
(108
)
(29
)
- fair value movements on non-qualifying hedges2
260
 
18
 
-
 
109
 
(2
)
385
 
221
 
25
 
- gain on disposal of our membership interest inVisa - Europe
(573
)
-
 
(11
)
-
 
-
 
(584
)
(441
)
-
 
- own credit spread3
256
 
(12
)
(2
)
(98
)
-
 
144
 
230
 
(7
)
- portfolio disposals
-
 
-
 
-
 
51
 
-
 
51
 
-
 
-
 
- releases arising from the ongoing review of compliance with the UK Consumer Credit Act
(2
)
-
 
-
 
-
 
-
 
(2
)
(2
)
-
 
- loss and trading results from disposed-of operationsin Brazil
-
 
-
 
-
 
-
 
273
 
273
 
-
 
-
 
- currency translation on significant items
98
 
-
 
3
 
-
 
(236
)
(135
)
95
 
-
 
Adjusted1
12,953
 
17,676
 
2,001
 
5,609
 
2,164
 
37,946
 
9,489
 
10,656
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(386
)
(552
)
(184
)
(705
)
(1,105
)
(2,932
)
(240
)
(231
)
Currency translation
32
 
-
 
20
 
(2
)
(109
)
(59
)
32
 
1
 
Significant items
-
 
-
 
-
 
-
 
867
 
867
 
-
 
-
 
- trading results from disposed-of operations in Brazil
-
 
-
 
-
 
-
 
748
 
748
 
-
 
-
 
- currency translation on significant items
-
 
-
 
-
 
-
 
119
 
119
 
-
 
-
 
Adjusted
(354
)
(552
)
(164
)
(707
)
(347
)
(2,124
)
(208
)
(230
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
(13,524
)
(7,887
)
(1,206
)
(4,707
)
(2,504
)
(27,349
)
(9,902
)
(4,122
)
Currency translation1
551
 
39
 
125
 
(8
)
(102
)
583
 
549
 
13
 
Significant items
2,885
 
217
 
65
 
888
 
1,246
 
5,301
 
1,830
 
85
 
- costs to achieve
1,377
 
262
 
75
 
300
 
18
 
2,032
 
1,187
 
132
 
- costs to establish UK ring-fenced bank
147
 
-
 
-
 
-
 
-
 
147
 
147
 
-
 
- impairment of GPB - Europe goodwill
800
 
-
 
-
 
-
 
-
 
800
 
-
 
-
 
- regulatory provisions/(releases) in GPB
1
 
(47
)
-
 
-
 
-
 
(46
)
-
 
(47
)
- provisions/(releases) in connection with legalmatters
136
 
-
 
-
 
587
 
-
 
723
 
72
 
-
 
- UK customer redress programmes
489
 
-
 
-
 
-
 
-
 
489
 
489
 
-
 
- trading results from disposed-of operations in Brazil
-
 
-
 
-
 
-
 
1,059
 
1,059
 
-
 
-
 
- currency translation on significant items
(65
)
2
 
(10
)
1
 
169
 
97
 
(65
)
-
 
Adjusted1
(10,088
)
(7,631
)
(1,016
)
(3,827
)
(1,360
)
(21,465
)
(7,523
)
(4,024
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(3
)
1,503
 
361
 
(4
)
(1
)
1,856
 
(4
)
19
 
Currency translation
1
 
(48
)
-
 
-
 
-
 
(47
)
1
 
-
 
Significant items
-
 
-
 
-
 
-
 
1
 
1
 
-
 
-
 
- trading results from disposed-of operations in Brazil
-
 
-
 
-
 
-
 
1
 
1
 
-
 
-
 
- currency translation on significant items
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
Adjusted
(2
)
1,455
 
361
 
(4
)
-
 
1,810
 
(3
)
19
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(32
)
10,815
 
1,308
 
116
 
(1,650
)
10,557
 
223
 
6,366
 
Currency translation
(277
)
(61
)
(181
)
3
 
(79
)
(595
)
(293
)
(19
)
Significant items
2,818
 
194
 
55
 
952
 
2,186
 
6,205
 
1,825
 
74
 
- revenue
(67
)
(23
)
(10
)
64
 
72
 
36
 
(5
)
(11
)
- LICs
-
 
-
 
-
 
-
 
867
 
867
 
-
 
-
 
- operating expenses
2,885
 
217
 
65
 
888
 
1,246
 
5,301
 
1,830
 
85
 
- share of profit in associates and joint ventures
-
 
-
 
-
 
-
 
1
 
1
 
-
 
-
 
Adjusted
2,509
 
10,948
 
1,182
 
1,071
 
457
 
16,167
 
1,755
 
6,421
 
 
 
 
1
Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
2
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
3
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
33
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - geographical regions (continued)
 
Quarter ended 30 Sep 2017
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
UK
 
HongKong
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
4,534
 
6,651
 
660
 
1,419
 
833
 
12,978
 
3,468
 
4,160
 
Significant items
32
 
(121
)
-
 
142
 
-
 
53
 
33
 
(119
)
- DVA on derivative contracts
57
 
5
 
-
 
3
 
-
 
65
 
50
 
2
 
- fair value movements on non-qualifying hedges2
(20
)
-
 
-
 
-
 
-
 
(20
)
(20
)
5
 
- gain on disposal of our investment in Vietnam Technological and Commercial Joint Stock Bank
-
 
(126
)
-
 
-
 
-
 
(126
)
-
 
(126
)
- portfolio disposals
(8
)
-
 
-
 
139
 
-
 
131
 
-
 
-
 
- provisions arising from the ongoing reviewof compliance with the UK Consumer Credit Act
3
 
-
 
-
 
-
 
-
 
3
 
3
 
-
 
Adjusted1
4,566
 
6,530
 
660
 
1,561
 
833
 
13,031
 
3,501
 
4,041
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(171
)
(96
)
(53
)
21
 
(149
)
(448
)
(144
)
(27
)
Adjusted
(171
)
(96
)
(53
)
21
 
(149
)
(448
)
(144
)
(27
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
(4,430
)
(3,023
)
(364
)
(1,314
)
(534
)
(8,546
)
(3,542
)
(1,584
)
Significant items
558
 
101
 
6
 
92
 
13
 
770
 
521
 
49
 
- costs associated with portfolio disposals
2
 
-
 
-
 
2
 
-
 
4
 
-
 
-
 
- costs associated with the UK's exit from the EU
8
 
-
 
-
 
-
 
-
 
8
 
5
 
-
 
- costs to achieve
467
 
101
 
6
 
90
 
13
 
677
 
435
 
49
 
- costs to establish UK ring-fenced bank
101
 
-
 
-
 
-
 
-
 
101
 
101
 
-
 
- provisions/(releases) in connection with legal matters
(104
)
-
 
-
 
-
 
-
 
(104
)
(104
)
-
 
- UK customer redress programmes
84
 
-
 
-
 
-
 
-
 
84
 
84
 
-
 
Adjusted1
(3,872
)
(2,922
)
(358
)
(1,222
)
(521
)
(7,776
)
(3,021
)
(1,535
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
17
 
497
 
121
 
1
 
-
 
636
 
16
 
12
 
Adjusted
17
 
497
 
121
 
1
 
-
 
636
 
16
 
12
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(50
)
4,029
 
364
 
127
 
150
 
4,620
 
(202
)
2,561
 
Significant items
590
 
(20
)
6
 
234
 
13
 
823
 
554
 
(70
)
- revenue
32
 
(121
)
-
 
142
 
-
 
53
 
33
 
(119
)
- operating expenses
558
 
101
 
6
 
92
 
13
 
770
 
521
 
49
 
Adjusted
540
 
4,009
 
370
 
361
 
163
 
5,443
 
352
 
2,491
 
 
 
 
1
Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
2
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
 
 
34
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - geographical regions (continued)
 
Quarter ended 30 Jun 2017
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
UK
 
HongKong
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
Reported1
4,690
 
6,246
 
709
 
1,720
 
814
 
13,173
 
3,541
 
3,852
 
Currency translation1
152
 
24
 
3
 
25
 
-
 
199
 
87
 
(14
)
Significant items
53
 
77
 
1
 
(96
)
4
 
39
 
53
 
34
 
- DVA on derivative contracts
85
 
69
 
1
 
19
 
4
 
178
 
71
 
26
 
- fair value movements on non-qualifying hedges2
54
 
6
 
-
 
1
 
-
 
61
 
60
 
8
 
- gain on disposal of our membership interest inVisa - US
-
 
-
 
-
 
(166
)
-
 
(166
)
-
 
-
 
- portfolio disposals
(8
)
-
 
-
 
50
 
-
 
42
 
-
 
-
 
- other acquisitions, disposals and dilutions
(78
)
-
 
-
 
-
 
-
 
(78
)
(78
)
-
 
- currency translation on significant items
-
 
2
 
-
 
-
 
-
 
2
 
-
 
-
 
Adjusted1
4,895
 
6,347
 
713
 
1,649
 
818
 
13,411
 
3,681
 
3,872
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
14
 
(281
)
(65
)
31
 
(126
)
(427
)
16
 
(233
)
Currency translation
2
 
(1
)
-
 
3
 
(3
)
1
 
2
 
1
 
Adjusted
16
 
(282
)
(65
)
34
 
(129
)
(426
)
18
 
(232
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
(3,933
)
(2,946
)
(351
)
(1,373
)
(518
)
(8,115
)
(3,113
)
(1,557
)
Currency translation1
(111
)
(16
)
(1
)
(17
)
2
 
(138
)
(65
)
6
 
Significant items
379
 
189
 
7
 
131
 
13
 
719
 
321
 
93
 
- costs associated with portfolio disposals
2
 
-
 
-
 
8
 
-
 
10
 
-
 
-
 
- costs associated with the UK's exit from the EU
4
 
-
 
-
 
-
 
-
 
4
 
4
 
-
 
- costs to achieve
509
 
188
 
7
 
121
 
12
 
837
 
455
 
93
 
- costs to establish UK ring-fenced bank
93
 
-
 
-
 
-
 
-
 
93
 
93
 
-
 
- provisions/(releases) in connection with legal matters
(322
)
-
 
-
 
-
 
-
 
(322
)
(322
)
-
 
- UK customer redress programmes
89
 
-
 
-
 
-
 
-
 
89
 
89
 
-
 
- currency translation on significant items
4
 
1
 
-
 
2
 
1
 
8
 
2
 
-
 
Adjusted1
(3,665
)
(2,773
)
(345
)
(1,259
)
(503
)
(7,534
)
(2,857
)
(1,458
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
7
 
517
 
124
 
3
 
-
 
651
 
6
 
(19
)
Currency translation
1
 
16
 
-
 
-
 
-
 
17
 
1
 
-
 
Adjusted
8
 
533
 
124
 
3
 
-
 
668
 
7
 
(19
)
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
778
 
3,536
 
417
 
381
 
170
 
5,282
 
450
 
2,043
 
Currency translation
44
 
23
 
2
 
11
 
(1
)
79
 
25
 
(7
)
Significant items
432
 
266
 
8
 
35
 
17
 
758
 
374
 
127
 
- revenue
53
 
77
 
1
 
(96
)
4
 
39
 
53
 
34
 
- operating expenses
379
 
189
 
7
 
131
 
13
 
719
 
321
 
93
 
Adjusted
1,254
 
3,825
 
427
 
427
 
186
 
6,119
 
849
 
2,163
 
 
 
 
1
Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
2
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
35
 
 
 
Earnings Release - 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of reported and adjusted results - geographical regions (continued)
 
Quarter ended 30 Sep 2016
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
UK
 
HongKong
 
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
3,023
 
5,999
 
725
 
1,580
 
(965
)
9,512
 
1,919
 
3,639
 
Currency translation1
29
 
(20
)
(106
)
15
 
(2
)
(78
)
(24
)
(27
)
Significant items
1,346
 
43
 
4
 
138
 
1,746
 
3,277
 
1,291
 
11
 
- DVA on derivative contracts
4
 
34
 
-
 
15
 
2
 
55
 
(8
)
(4
)
- fair value movements on non-qualifying hedges2
(17
)
5
 
-
 
-
 
-
 
(12
)
(18
)
9
 
- own credit spread3
1,359
 
4
 
3
 
4
 
-
 
1,370
 
1,317
 
6
 
- portfolio disposals
-
 
-
 
-
 
119
 
-
 
119
 
-
 
-
 
- loss on disposal of operations in Brazil
-
 
-
 
-
 
-
 
1,743
 
1,743
 
-
 
-
 
- currency translation on significant items
-
 
-
 
1
 
-
 
1
 
2
 
-
 
-
 
Adjusted1
4,398
 
6,022
 
623
 
1,733
 
779
 
12,711
 
3,186
 
3,623
 
LICs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(44
)
(208
)
(88
)
(88
)
(138
)
(566
)
21
 
(88
)
Currency translation
(2
)
-
 
7
 
(1
)
(5
)
(1
)
-
 
1
 
Adjusted
(46
)
(208
)
(81
)
(89
)
(143
)
(567
)
21
 
(87
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported1
(4,594
)
(2,642
)
(419
)
(1,424
)
(492
)
(8,721
)
(3,692
)
(1,362
)
Currency translation1
(28
)
6
 
44
 
(10
)
1
 
7
 
10
 
11
 
Significant items
1,136
 
102
 
42
 
180
 
12
 
1,472
 
1,020
 
23
 
- costs to achieve
628
 
148
 
47
 
179
 
12
 
1,014
 
513
 
70
 
- costs to establish UK ring-fenced bank
53
 
-
 
-
 
-
 
-
 
53
 
53
 
-
 
- regulatory provisions/(releases) in GPB
(3
)
(47
)
-
 
-
 
-
 
(50
)
-
 
(47
)
- UK customer redress programmes
456
 
-
 
-
 
-
 
-
 
456
 
456
 
-
 
- currency translation on significant items
2
 
1
 
(5
)
1
 
-
 
(1
)
(2
)
-
 
Adjusted1
(3,486
)
(2,534
)
(333
)
(1,254
)
(479
)
(7,242
)
(2,662
)
(1,328
)
Share of profit in associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(2
)
511
 
111
 
(2
)
-
 
618
 
(2
)
7
 
Currency translation
1
 
-
 
-
 
-
 
-
 
1
 
1
 
(1
)
Adjusted
(1
)
511
 
111
 
(2
)
-
 
619
 
(1
)
6
 
Profit/(loss) before tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported
(1,617
)
3,660
 
329
 
66
 
(1,595
)
843
 
(1,754
)
2,196
 
Currency translation
-
 
(14
)
(55
)
4
 
(6
)
(71
)
(13
)
(16
)
Significant items
2,482
 
145
 
46
 
318
 
1,758
 
4,749
 
2,311
 
34
 
- revenue
1,346
 
43
 
4
 
138
 
1,746
 
3,277
 
1,291
 
11
 
- operating expenses
1,136
 
102
 
42
 
180
 
12
 
1,472
 
1,020
 
23
 
Adjusted
865
 
3,791
 
320
 
388
 
157
 
5,521
 
544
 
2,214
 
 
 
 
1
Amounts are non-additive across geographical regions due to intra-Group transactions.
 
 
 
2
Excludes items where there are substantial offsets in the income statement for the same period.
 
 
 
3
'Own credit spread' includes the fair value movements on our long-term debt attributable to credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities. From 1 January 2017, HSBC adopted, in its consolidated financial statements, the requirements of IFRS 9 'Financial Instruments' relating to the presentation of gains and losses on financial liabilities designated at fair value. As a result, changes in fair value attributable to changes in own credit risk are presented in other comprehensive income with the remainder of the effect presented in profit and loss.
 
 
 
 
 
36
HSBC Holdings plc  Earnings Release 3Q17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross loans and advances by industry sector and by geographical region
 
Europe
 
Asia
 
MENA
 
NorthAmerica
 
LatinAmerica
 
Total
 
As a %of totalgross loans
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
At 30 Sep 2017
 
 
 
 
 
 
 
Personal
165,134
 
146,008
 
7,114
 
41,936
 
6,984
 
367,176
 
35.2
- first lien residential mortgages
123,002
 
106,956
 
2,452
 
36,629
 
2,346
 
271,385
 
26.0
- other personal
42,132
 
39,052
 
4,662
 
5,307
 
4,638
 
95,791
 
9.2
Wholesale
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and commercial
179,873
 
241,223
 
21,063
 
55,208
 
12,457
 
509,824
 
48.9
- manufacturing
29,321
 
33,190
 
2,804
 
14,220
 
3,088
 
82,623
 
7.9
- international trade and services
64,206
 
82,899
 
8,746
 
10,259
 
2,989
 
169,099
 
16.2
- commercial real estate
24,926
 
36,560
 
726
 
8,789
 
1,685
 
72,686
 
7.0
- other property-related
7,764
 
43,002
 
1,988
 
8,049
 
456
 
61,259
 
5.9
- government
3,731
 
5,310
 
1,307
 
379
 
515
 
11,242
 
1.1
- other commercial
49,925
 
40,262
 
5,492
 
13,512
 
3,724
 
112,915
 
10.8
Financial
56,177
 
81,749
 
8,325
 
14,943
 
4,168
 
165,362
 
15.9
- non-bank financial institutions
38,455
 
25,050
 
1,204
 
10,332
 
609
 
75,650
 
7.3
- banks
17,722
 
56,699
 
7,121
 
4,611
 
3,559
 
89,712
 
8.6
Total wholesale
236,050
 
322,972
 
29,388
 
70,151
 
16,625
 
675,186
 
64.8
Total gross loans and advances at 30 Sep 2017
401,184
 
468,980
 
36,502
 
112,087
 
23,609
 
1,042,362
 
100.0
 
%
 
%
 
%
 
%
 
%
 
%
 
 
Percentage of total gross loans and advances
38.5
 
44.9
 
3.5
 
10.8
 
2.3
 
100.0
 
 
 
 
 
 
 
 
 
 
At 30 Jun 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Personal
157,466
 
142,566
 
7,333
 
40,693
 
6,862
 
354,920
 
35.0
- first lien residential mortgages
116,741
 
104,115
 
2,473
 
35,317
 
2,296
 
260,942
 
25.7
- other personal
40,725
 
38,451
 
4,860
 
5,376
 
4,566
 
93,978
 
9.3
Wholesale
 
 
 
 
 
 
 
Corporate and commercial
172,228
 
234,098
 
21,642
 
55,677
 
12,825
 
496,470
 
49.0
- manufacturing
28,945
 
33,343
 
3,107
 
14,392
 
3,083
 
82,870
 
8.2
- international trade and services
61,038
 
79,206
 
9,013
 
10,929
 
3,369
 
163,555
 
16.2
- commercial real estate
24,014
 
34,849
 
800
 
8,601
 
1,638
 
69,902
 
6.9
- other property-related
7,928
 
41,805
 
1,659
 
7,883
 
470
 
59,745
 
5.9
- government
3,404
 
4,997
 
1,220
 
373
 
480
 
10,474
 
1.0
- other commercial
46,899
 
39,898
 
5,843
 
13,499
 
3,785
 
109,924
 
10.8
Financial
53,243
 
81,265
 
8,738
 
15,288
 
4,112
 
162,646
 
16.0
- non-bank financial institutions
37,802
 
25,706
 
1,185
 
10,529
 
789
 
76,011
 
7.5
- banks
15,441
 
55,559
 
7,553
 
4,759
 
3,323
 
86,635
 
8.5
Total wholesale
225,471
 
315,363
 
30,380
 
70,965
 
16,937
 
659,116
 
65.0
Total gross loans and advances at 30 Jun 2017
382,937
 
457,929
 
37,713
 
111,658
 
23,799
 
1,014,036
 
100.0
 
%
 
%
 
%
 
%
 
%
 
%
 
 
Percentage of total gross loans and advances
37.8
 
45.2
 
3.7
 
11.0
 
2.3
 
100.0
 
 
 
 
 
 
 
 
 
 
At 31 Dec 2016
 
 
 
 
 
 
 
Personal
146,499
 
134,700
 
7,744
 
44,956
 
5,899
 
339,798
 
35.5
- first lien residential mortgages
108,008
 
98,072
 
2,535
 
39,239
 
1,924
 
249,778
 
26.1
- other personal
38,491
 
36,628
 
5,209
 
5,717
 
3,975
 
90,020
 
9.4
Wholesale
 
 
 
 
 
 
 
Corporate and commercial
161,653
 
212,848
 
22,078
 
58,276
 
10,972
 
465,827
 
48.6
- manufacturing
27,005
 
32,564
 
2,941
 
15,348
 
2,785
 
80,643
 
8.4
- international trade and services
55,875
 
72,166
 
8,448
 
11,035
 
2,518
 
150,042
 
15.6
- commercial real estate
21,460
 
32,798
 
724
 
7,849
 
1,340
 
64,171
 
6.7
- other property-related
7,025
 
37,628
 
1,856
 
8,823
 
306
 
55,638
 
5.8
- government
3,009
 
2,919
 
1,619
 
354
 
541
 
8,442
 
0.9
- other commercial
47,279
 
34,773
 
6,490
 
14,867
 
3,482
 
106,891
 
11.2
Financial
43,666
 
79,254
 
10,370
 
14,823
 
3,742
 
151,855
 
15.9
- non-bank financial institutions
31,307
 
19,517
 
2,599
 
9,750
 
556
 
63,729
 
6.7
- banks
12,359
 
59,737
 
7,771
 
5,073
 
3,186
 
88,126
 
9.2
Total wholesale
205,319
 
292,102
 
32,448
 
73,099
 
14,714
 
617,682
 
64.5
Total gross loans and advances at 31 Dec 2016
351,818
 
426,802
 
40,192
 
118,055
 
20,613
 
957,480
 
100.0
 
%
 
%
 
%
 
%
 
%
 
%
 
 
Percentage of total gross loans and advances
36.7
 
44.6
 
4.2
 
12.3
 
2.2
 
100.0
 
 
 
 
 
 
HSBC Holdings plc  Earnings Release 3Q17
37
 
Earnings Release - 3Q17
 
 
 
Terms and abbreviations
 
 
 
3Q17
Third quarter of 2017
2Q17
Second quarter of 2017
3Q16
 
Third quarter of 2016
 
9M17
Nine months to 30 September 2017
9M16
Nine months to 30 September 2016
BoCom
Bank of Communications Co., Limited, one of China's largest banks
Bps
 
Basis points. One basis point is equal to one-hundredth of a percentage point
 
C&L
Credit and Lending
CET1
Common equity tier 1
CMB
Commercial Banking, a global business
CML
Consumer and Mortgage Lending (US)
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
Costs to achieve
Transformation costs to deliver the cost reduction and productivity outcomes outlined in the Investor Update in June 2015
CRD IV
Capital Requirements Directive IV
CRR
Capital Requirements Regulation
DVA
Debit valuation adjustment
EBA
European Banking Authority
FICC
Fixed Income, Currencies and Commodities
FTEs
Full-time equivalent staff
FX
Foreign exchange
GB&M
Global Banking and Markets, a global business
GLCM
 
Global Liquidity and Cash Management
 
GPB
Global Private Banking, a global business
Group
HSBC Holdings together with its subsidiary undertakings
GTRF
 
Global Trade and Receivables Finance
IFRSs
International Financial Reporting Standards
IMA
Internal Models Approach
IRB
Internal ratings based
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
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
LICs
Loan impairment charges and other credit risk provisions
MENA
Middle East and North Africa
MREL
Minimum requirement for own funds and eligible liabilities
NIM
Net interest margin
Own credit spread
Fair value movements on our long-term debt designated at fair value resulting from changes in credit spread
Panda bond
Renminbi-denominated bond issued in mainland China by a non-Chinese issuer
PBT
Profit before tax
PRA
Prudential Regulation Authority (UK)
Revenue
Net operating income before LICs
RBWM
Retail Banking and Wealth Management, a global business
RoRWA
Return on average risk-weighted assets
RWAs
Risk-weighted assets
$m/$bn
United States dollar millions/billions
VaR
Value at risk
 
 
 
 
38
 
HSBC Holdings plc  Earnings Release 3Q17
Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/9011U_-2017-10-29.pdf
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
HSBC Holdings plc
 
 
 
 
By:
 
 
Name: Ben J S Mathews
 
 
Title: Group Company Secretary
 
 
 
 
Date: 30 October 2017