HSBC Holdings Regulatory News (HSBA)

Financial review

47 Financial summary

56 Global businesses and geographical regions

72 Other information

73 Risk

152 Capital

Supporting the transition to a low-carbon economy

We acted as a mandated lead arranger in the refinancing of the £2.5bn Beatrice offshore wind farm off the north-east coast of Scotland, which is jointly owned by UK energy firm SSE, Danish fund manager Copenhagen Infrastructure Partners and Edinburgh-based energy firm Red Rock Power Limited, a subsidiary of Beijing-headquartered SDIC Power.

To encourage low-carbon electricity generation and ensure progress towards carbon neutrality by 2050, the UK government awarded Beatrice a 15-year contract for difference, a mechanism in which public funding underpins power revenues that could otherwise fluctuate with swings in electricity prices.

Beatrice is one of the largest wind farms globally with a capacity of 580MW, which is capable of powering approximately 450,000 homes.

Our reported results are prepared in accordance with IFRSs as detailed in the financial statements starting on page

229

.

To measure our performance, we also use non-GAAP financial measures, including those derived from our reported results that eliminate factors that distort year-on-year comparisons. The 'adjusted performance' measure used throughout this report is described below, and where others are used they are described. All non-GAAP financial measures are reconciled to the closest reported financial measure.

The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments', as detailed in Note 10: Segmental analysis on page 263.

Adjusted performance

Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort year-on-year comparisons.

We consider adjusted performance provides 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 year-on-year performance.

Significant items

'Significant items' refers collectively to the items that management and investors would ordinarily identify and consider separately to improve the understanding of the underlying trends in the business.

The tables on pages 56 to 59 and pages 63 to 68 detail the effects of significant items on each of our global business segments and geographical regions in 2019, 2018 and 2017.

Foreign currency translation differences

Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2019.

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.

IFRS 16 'Leases'

On 1 January 2019, HSBC adopted the requirements of IFRS 16 'Leases' retrospectively, with the cumulative effect of initially applying the standard recognised as an adjustment to the opening balance of retained earnings at that date. Comparatives were not restated. The adoption of the standard increased assets by $5bn and increased financial liabilities by the same amount with no effect on net assets or retained earnings.

Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 'Financial Instruments'

Amendments to IFRS 9 and IAS 39 issued in September 2019 modify specific hedge accounting requirements so that entities apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows of the hedging instrument are based is not altered as a result of interest rate benchmark reform. These amendments apply from 1 January 2020 with early adoption permitted. HSBC has adopted the amendments that apply to IAS 39 from 1 January 2019 and has made the additional disclosures as required by the amendments.

The results of HSBC reflect the choice of accounting policies, assumptions and estimates that underlie the preparation of HSBC's consolidated financial statements. The significant accounting policies, including the policies which include critical accounting estimates and judgements, are described in Note 

1.2

 on the financial statements. The accounting policies listed below are highlighted as they involve a high degree of uncertainty and have a material impact on the financial statements:

• Impairment of amortised cost financial assets and financial assets measured at fair value through other comprehensive income ('FVOCI'): The most significant judgements relate to defining what is considered to be a significant increase in credit risk, determining the lifetime and point of initial recognition of revolving facilities, and making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective and very sensitive to the risk factors. See Note 1.2(i) on page 246.

• Deferred tax assets: The most significant judgements relate to judgements made in respect of expected future profitability. See Note 1.2(l) on page 250.

• Valuation of financial instruments: In determining the fair value of financial instruments a variety of valuation techniques are used, some of which feature significant unobservable inputs and are subject to substantial uncertainty. See Note 1.2(c) on page 244.

• Impairment of interests in associates: Impairment testing involves significant judgement in determining the value in use, and in particular estimating the present values of cash flows expected to arise from continuing to hold the investment, based on a number of management assumptions. The most significant judgements relate to the impairment testing of our investment in Bank of Communications Co., Limited ('BoCom'). See Note 1.2(a) on page 242.

• Goodwill impairment: A high degree of uncertainty is involved in estimating the future cash flows of the cash-generating units ('CGUs') and the rates used to discount these cash flows. See Note 1.2(a) on page 242.

• Provisions: Significant judgement may be required due to the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. See Note 1.2(m) on page 250.

• Post-employment benefit plans: The calculation of the defined benefit pension obligation involves the determination of key assumptions including discount rate, inflation rate, pension payments and deferred pensions, pay and mortality. See Note 1.2(k) on page 249.

Given the inherent uncertainties and the high level of subjectivity involved in the recognition or measurement of the items above, it is possible that the outcomes in the next financial year could differ from the expectations on which management's estimates are based, resulting in the recognition and measurement of materially different amounts from those estimated by management in these financial statements.

For footnotes, see page 55.

Unless stated otherwise, all tables in the Annual Report and Accounts 2019 are presented on a reported basis.

For a summary of our financial performance in 2019, see page 27.

For further financial performance data for each global business and geographical region, see pages 56 to 59 and 61 to 69, respectively. The global business segmental results are presented on an adjusted basis in accordance with IFRS 8 'Operating Segments', in Note 10: Segmental analysis on page 263.

The following commentary compares Group financial performance for the years ended 2019 with 2018.

Net interest income

For footnotes, see page 55.

For footnotes, see page 55.

Net interest income ('NII') of $30.5bn was broadly unchanged compared with 2018. Interest income associated with the increase in average interest-earning assets ('AIEA') of 5% was offset by higher funding costs, reflecting higher average interest rates compared with the previous year.

Excluding the adverse effects of significant items and foreign currency translation differences, NII increased by $1.0bn.

Net interest margin ('NIM') of 1.58% was 8 basis points ('bps') lower than in 2018 as the higher yield on AIEA of 14bps was offset by the rise in funding costs of average interest-bearing liabilities of 27bps.

The decrease in NIM in 2019 included the adverse effects of foreign currency translation differences and significant items. Excluding these, NIM fell by 6bps.

Interest income increased by $5.1bn or 10% compared with 2018, benefiting from growth in AIEA of 5% and higher average interest rates compared with the previous year, with the yield on AIEA increasing by 14bps.

Interest income on loans and advances to customers increased by $2.3bn. This was mainly driven by higher average interest rates compared with the previous year, with yields increasing by 6bps and 5% volume growth in AIEA, notably in term lending in Asia, and growth in mortgages in Asia and Europe.

Interest income on short-term funds and financial investments increased by $1.5bn, reflecting higher average interest rates compared with the previous year.

The increase in interest income included $1.6bn in relation to the adverse effects of significant items and foreign currency translation. Excluding these, interest income increased by $6.7bn.

Interest expense increased by $5.1bn or 27% compared with 2018. This reflects growth in average interest-bearing liabilities of 3% and an increase in funding cost of 27bps, predominantly in customer accounts.

Interest expense on interest-bearing customer accounts was $3.0bn higher, mainly in Asia, reflecting higher average interest rates compared with the previous year together with an increase in customer accounts, primarily towards term deposits.

Interest expense on debt securities in issue was $0.8bn higher. This was mainly as a result of debt issuances by HSBC Holdings to meet regulatory requirements, which contributed $0.5bn towards the increase.

The increase in interest expense included the favourable effects of significant items and foreign currency translation differences of $0.6bn. Excluding these impacts, interest expense was $5.7bn higher.

Net fee income of $12.0bn was $0.6bn lower compared with 2018, including adverse foreign currency translation differences of $0.3bn. The remaining reduction primarily reflected lower net fee income in RBWM and GB&M.

In RBWM, the reduction reflected lower fees from broking and unit trusts in Hong Kong due to lower volumes as investor confidence was weaker compared with a strong 2018. In addition, funds under management fees also reduced, reflecting a change in mix of clients' investments to lower risk and lower margin products.

In GB&M, net fee income was lower, mainly in the UK and the US. This was primarily due to lower corporate finance fees, which reflected reduced client activity. This was partly offset by higher underwriting fees, notably in Asia, France and the US, from higher volumes.

Net income from financial instruments held for trading or managed on a fair value basis increased by $0.7bn and included a favourable fair value movement on non-qualifying hedges of $0.3bn, offset by adverse movements in foreign currency translation differences of $0.5bn.

The increase was mainly in Asia, notably in Hong Kong, reflecting favourable market conditions and increased client activity in our Rates, Credit and Equities businesses, and from gains in Balance Sheet Management ('BSM') on funding swaps due to favourable movements on yield curves. In Latin America, income in BSM increased, primarily from gains on debt securities in Argentina and a favourable impact of hyperinflation, as well as increased client activity in GB&M in Mexico. Income increased in the US from increased client activity on US Treasuries and emerging markets interest rate swaps, partly offset by lower revenue from precious metals trading.

In the UK, income fell as subdued market conditions resulted in lower Global Markets revenue, notably in Rates, Credit and Equities.

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss was $3.5bn, compared with a net expense of $1.5bn in 2018. This increase primarily reflected more favourable equity market performance in Hong Kong and France, resulting in revaluation gains on the equity and unit trust assets supporting insurance and investment contracts.

This positive movement resulted in a corresponding movement in liabilities to policyholders and the present value of in-force long-term insurance business (see 'Other operating income' below), reflecting the extent to which the policyholders and shareholders respectively participate in the investment performance of the associated assets.

Change in fair value of designated debt and related derivatives were $0.1bn favourable in 2019, compared with adverse movements of $0.1bn in 2018. These movements were driven by changes in interest rates between the periods, notably in US dollars and pounds sterling.

The majority of our financial liabilities designated at fair value are fixed-rate, long-term debt issuances, and are managed in conjunction with interest rate swaps as part of our interest rate management strategy. These liabilities are discussed further on page 53.

Gains less losses from financial investments of $0.3bn increased by $0.1bn compared with 2018, reflecting higher gains from the disposal of debt securities.

Net insurance premium income was broadly unchanged compared with 2018, and included adverse effects of foreign currency translation differences. Excluding these, the increase of $0.2bn reflected higher new business volumes, particularly in Hong Kong, Singapore and UK, partly offset by higher reinsurance ceded in Hong Kong.

Other operating income of $2.9bn in 2019 increased by $2.0bn compared with 2018. This was primarily due to a higher favourable change in the present value of in-force long-term insurance business ('PVIF') in 2019 (up $1.1bn), and a $0.8bn dilution gain in 2019 following the merger of The Saudi British Bank with Alawwal bank in Saudi Arabia.

This increase in PVIF reflected a favourable movement in 'assumption changes and experience variances' of $1.1bn. This was primarily in Hong Kong due to the effect of interest rate changes on the valuation of the liabilities under insurance contracts, which has a corresponding increase in 'net insurance claims and benefits paid and movement in liabilities to policyholders'. For further details, see Note 21 on the financial statements.

In 2019, we recognised a gain in Argentina following the sale of a stake in the payment processing company Prisma Medios de Pago S.A., and a gain in Mexico associated with the launch of a merchant acquiring services joint venture with Global Payments Inc. By contrast, 2018 included a loss of $0.1bn on the early redemption of subordinated debt linked to the US run-off portfolio.

Net insurance claims and benefits paid and movement in liabilities to policyholders were $5.1bn higher, primarily due to higher returns on financial assets supporting contracts where the policyholder is subject to part or all of the investment risk, and the impact of higher new business volumes, particularly in Hong Kong and Singapore. These were partly offset by the impact of higher reinsurance ceded in Hong Kong.

Changes in expected credit losses and other credit impairment charges ('ECL') of $2.8bn were $1.0bn higher compared with 2018. This was mainly driven by higher charges in CMB, RBWM and GB&M. ECL in 2019 included a charge to reflect the economic outlook in Hong Kong, as well as a partial release of allowances related to UK economic uncertainty. See page 95 for more information on the impact of alternative/additional scenarios. The effects of foreign currency translation differences between the periods were minimal.

• In CMB, ECL charges of $1.2bn were $0.5bn higher reflecting increases in Europe and Hong Kong, while the previous year benefited from net releases in North America that did not recur. The movements were partly offset by a reduction in ECL charges in MENA.

• In RBWM, ECL charges of $1.4bn were $0.3bn higher, driven by increased ECL related to unsecured lending, notably in the US, Mexico, and Hong Kong. In addition, ECL in 2019 included charges in Argentina related to government bond exposures in our insurance business.

• In GB&M, net ECL charges of $0.2bn compared with a net release of $31m in 2018. Releases in the previous period more than offset ECL charges and primarily related to a small number of clients within the oil and gas sector in the US.

• In Corporate Centre, net ECL charges of $7m compared with a net release of $119m in 2018. The ECL in 2019 included charges related to BSM's exposure to government bonds in Argentina. There were also lower net releases recorded in 2019 related to our legacy portfolios in the UK, compared with 2018.

On a constant currency basis, ECL as a percentage of average gross loans and advances to customers was 0.27%, compared with 0.17% in 2018.

Operating expenses of $42.3bn were $7.7bn or 22% higher than in 2018 and included favourable foreign currency translation differences of $1.1bn, which were more than offset by net adverse movements in significant items of $7.9bn.

Significant items included:

• a $7.3bn impairment of goodwill, which included $4.0bn related to our global GB&M business, resulting from an update in long-term assumptions and the planned reshaping of the business, and $2.5bn in our CMB business in Europe, $0.4bn in GPB in North America, and $0.4bn in CMB in Latin America and MENA reflecting lower long-term economic growth rate assumptions. For further details, see Note 21 on the financial statements;

• customer redress programme costs of $1.3bn in 2019, $1.2bn of which related to the mis-selling of payment protection insurance ('PPI') mainly driven by a higher than expected increase in the volume of complaints prior to the deadline in August 2019. This compared with $0.1bn in 2018. For further details, see Note 10 on the financial statements; and

• restructuring and other related costs of $0.8bn in 2019, which included $753m of severance costs arising from cost efficiency measures across our global businesses and functions. We expect annualised cost savings from these measures to be approximately equal to 2019 severance costs.

These were partly offset by:

• the non-recurrence of settlements and provisions in connection with legal and regulatory matters of $0.8bn in 2018;

• lower costs of structural reform of $0.2bn, which included costs associated with the UK's withdrawal from the European Union; and

• the non-recurrence of a provision in relation to past service costs of guaranteed minimum pension obligations in 2018 of $0.2bn.

Excluding significant items and foreign currency translation differences, operating expenses of $32.8bn were $0.9bn or 2.8% higher than in 2018. The increase primarily reflected investments to grow the business (up $0.4bn), notably in RBWM and CMB, as well as continued investment in digital capabilities across all of our global businesses.

Volume-related growth increased operating expenses by $0.2bn, and the UK bank levy of $988m was $24m higher than in 2018.

The impact of our cost-saving efficiencies broadly offset inflation.

The number of employees expressed in full-time equivalent staff ('FTEs') at 31 December 2019 was 235,351, an increase of 134 from 31 December 2018. This largely reflected an increase in FTEs associated with our investment initiatives, which was broadly offset by reductions following our restructuring programmes. The number of contractors at 31 December 2019 was 7,411, a decrease of 3,443 from 31 December 2018.

The 2020 business update sets a target of reducing adjusted operating expenses to $31bn or lower by 2022. To achieve this reduction, we expect to incur restructuring costs of $6bn during the period to 2022.

Share of profit in associates and joint ventures was $2.4bn, a decrease of $0.2bn or 7% compared with 2018, and included the adverse effects of foreign currency translation differences of $90m.

Excluding the effects of foreign currency translation differences, our share of profit in associates and joint ventures decreased by $92m compared with 2018. This reflected lower income from The Saudi British Bank due to higher ECL charges and other expenses relating to the merger with Alawwal bank, partly offset by higher income from BoCom.

At 31 December 2019, we performed an impairment review of our investment in BoCom and concluded that it was not impaired, based on our value-in-use ('VIU') calculation. For more information on the key assumptions in our VIU calculation, including the sensitivity of the VIU to each key assumption, see Note 18 on the financial statements.

Tax expense of $4.6bn was $0.2bn lower than in 2018.

The effective tax rate for 2019 of 34.8% was higher than the 24.5% for 2018 due to the impairment of goodwill in 2019, which is not deductible for tax purposes.

This impairment charge increased the 2019 effective tax rate by 12.3%.

Further details are provided in Note 7 on the financial statements.

For footnotes, see page 55.

A more detailed consolidated balance sheet is contained in the financial statements on page 231.

For footnotes, see page 55.

Balance sheet commentary compared with 31 December 2018

At 31 December 2019, our total assets were $2.7tn, an increase of $157bn or 6% on a reported basis and $126bn or 5% on a constant currency basis.

Our ratio of customer advances to customer accounts of 72.0% was unchanged from 31 December 2018.

Assets

Loans and advances to customers of $1.0tn increased by $55bn or 6% on a reported basis. This included a favourable effect of foreign currency translation differences of $13bn, resulting in growth of $42bn or 4% on a constant currency basis, which was mainly due to continued growth in Asia and Europe, notably in Hong Kong and the UK.

Customer lending in Asia increased by $25bn, with growth in all global businesses. The increase in RBWM (up $13bn) reflected growth in Hong Kong (up $8bn) and Australia (up $3bn), primarily due to increased mortgage lending. In GPB (up $6bn), the increase was mainly in Hong Kong, driven by growth in marketable securities-backed lending transactions, and in Singapore from increased term lending. Lending growth in GB&M (up $4bn) and CMB (up $3bn) reflected higher corporate term lending from our continued strategic focus on loan growth in the region, as well as from an increase in customer demand.

In Europe, customer lending increased by $12bn, notably in HSBC UK (up $11bn). This primarily reflected growth in mortgage balances in RBWM (up $9bn) due to our continued focus on broker-originated mortgages, and in CMB (up $2bn) where term lending increased.

Cash and balances at central banks decreased by $9bn or 5% and included a favourable effect of foreign currency translation differences of $1bn. Excluding this, cash and balances at central banks decreased by $10bn, mainly in the US, reflecting the redeployment of our commercial surplus.

Trading assets increased by $16bn or 7%, which included a favourable effect of foreign currency translation differences of $3bn. Excluding this, trading assets increased by $13bn due to an increase in equity security holdings, notably in Hong Kong, the US and the UK, in part due an increase in client activity compared with 2018. This was partly offset by a decrease in debt securities held in the US.

Derivative assets increased by $35bn or 17% and included a favourable effect of foreign currency translation differences of $5bn. Excluding this, derivative assets increased by $31bn, primarily from mark-to-market gains in the UK. The increase in derivative assets was consistent with the increase in derivative liabilities as the underlying risk is broadly matched.

Financial investments increased by $36bn or 9%, which included a favourable effect of foreign currency translation differences of $3bn. Excluding this, financial investments increased by $33bn, mainly due to an increase in debt securities, notably in the UK, and to a lesser extent in Singapore and the US. This was partly offset by a decrease in investments in government bonds in Hong Kong.

Liabilities

Customer accounts of $1.4tn increased by $76bn or 6% on a reported basis, including the favourable effect of foreign currency translation differences of $17bn. On a constant currency basis, current accounts increased by $59bn or 4%, with growth across all regions, mainly in Asia, Europe and North America.

In Asia, we grew customer accounts by $30bn or 4%, notably in RBWM (up $20bn) and CMB (up $5bn), primarily from an increase in time deposits, reflecting higher customer inflows due to competitive rates. Growth in GB&M (up $5bn) was mainly in Singapore as we continued to target this market for growth.

Customer accounts increased in Europe by $13bn. This was driven by growth in RBWM (up $11bn), mainly due to higher savings balances, notably in the UK, and in CMB (up $10bn), reflecting growth in Global Liquidity and Cash Management ('GLCM'). These increases were partly offset by a decrease in GB&M balances (down $9bn) mainly in the UK in GLCM.

In North America, customer accounts increased by $11bn, notably in RBWM (up $7bn) reflecting growth in savings and deposits from recent promotions. Growth in CMB (up $7bn), was notably in the US from an increase in demand deposits.

Repurchase agreements - non-trading decreased by $26bn or 15%, primarily in the US from a decreased use of repurchase agreements for funding in our Global Markets business.

Financial liabilities designated at fair value were $16bn or 11% higher. This was mainly due to increased issuances of senior debt during the year by HSBC Holdings and increased issuances of structured notes in the UK and France.

Derivative liabilities increased by $34bn or 16%, including a favourable effect of foreign currency translation differences of $5bn. Excluding this, derivative liabilities increased by $29bn, which is consistent with the increase in derivative assets, since the underlying risk is broadly matched.

Debt securities in issue rose by $19bn or 23%, reflecting an increase in certificates of deposits, primarily in Europe, Asia and North America. This was partly offset by a decrease in commercial paper, notably in the UK, and a decrease in medium term notes in North America.

Equity

Total shareholders' equity of $184bn decreased by $2bn or 1%. The reduction was mainly due to dividends paid to shareholders of $12bn and adverse movements of $2bn related to fair value attributable to changes in own credit risk. These reductions were partly offset by profits generated in the period of $7bn, shares issued in lieu of dividends of $3bn and a $1bn decrease in accumulated foreign exchange losses.

Risk-weighted assets

Risk-weighted assets ('RWAs') totalled $843.4bn at 31 December 2019, a $21.9bn decrease. Excluding foreign currency translation differences, RWAs decreased by $26.9bn in 2019.

A $32.2bn decrease in RWAs as a result of methodology and policy changes was mostly due to management initiatives in CMB and GB&M, including risk parameter refinements, a change to our best estimate of expected loss on corporate exposures, and securitisation transactions. A $7.7bn decrease due to model updates included global corporate model changes in CMB and GB&M, and changes to Private Banking credit risk models in Asia and North America. A $9.0bn increase in RWAs due to asset size movements predominantly reflected RWA increases due to lending growth of $26.2bn, which were partly offset by reductions due to active portfolio management of $17.2bn. Changes in asset quality caused a $3.7bn rise in RWAs.

1 The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.

2 Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit risk provisions, also referred to as revenue.

3 Dividends recorded in the financial statements are dividends per ordinary share declared in a year and are not dividends in respect of, or for, that year.

4 Dividends per ordinary share expressed as a percentage of basic earnings per share.

5 Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA'). Cost of funds is the average annualised interest cost as a percentage on average interest-bearing liabilities.

6 Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds.

7 Net interest margin is net interest income expressed as an annualised percentage of AIEA.

8 Including interest-bearing bank deposits only.

9 Including interest-bearing customer accounts only.

10 'Financial liabilities designated at fair value - own debt issued' and 'Debt securities' lines have been merged into one new line: 'Debt securities in issue - non-trading'. Interest expense on financial liabilities designated at fair value is reported as 'Net income/ (expense) from financial instruments held for trading or managed on a fair value basis' in the consolidated income statement, other than interest on own debt, which is reported in 'Interest expense'.

11 Net of impairment allowances.

12 Capital resources are regulatory capital, the calculation of which is set out on page 152.

13 Including perpetual preferred securities, details of which can be found in Note 28 on the financial statements.

14 The definition of net asset value per ordinary share is total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue, excluding own shares held by the company, including those purchased and held in treasury.

15 'Others' includes items with no currency information available ($9,334m for loans to banks, $62,037m for loans to customers, $15m for deposits by banks and $33m for customer accounts).

The Group Chief Executive and the rest of the Group Management Board ('GMB') review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 'Operating

Segments' and are presented in Note 10: Segmental analysis on page 263.

Geographical information is classified by the location of the principal operations of the subsidiary or, for The Hongkong and Shanghai Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank plc, HSBC Bank Middle East Limited and HSBC Bank USA, by the location of the branch responsible for reporting the results or providing funding.

The expense of the UK bank levy is included in the Europe geographical region as HSBC regards the levy as a cost of being headquartered in the UK. For the purposes of the presentation by global business, the cost of the levy is included in the Corporate Centre.

The results of geographical regions are presented on a reported basis.

Supplementary unaudited analysis of significant items by global business is presented below.

For footnotes, see page 71.