HSBC Holdings Regulatory News (HSBA)

Consolidated balance sheet

Five-year summary consolidated balance sheet

Five-year selected financial information

For footnotes, see page 99.

A more detailed consolidated balance sheet is contained in the Financial Statements on page 339.

Combined view of customer lending and customer deposits

For footnote, see page 99.

Movement in 2015

Total reported assets of $2.4 trillion were 9% lower than at 31 December 2014 on a reported basis and 4% lower on a constant currency basis. One of the main drivers for this reduction was a fall in trading assets which reflects our ongoing focus on the efficient use of the balance sheet in the context of new prudential regulations. 

Our ratio of customer advances to customer accounts was 71.7%. Both customer loans and customer accounts fell on a reported basis with these movements including:

· adverse currency translation movements of $52bn and $65bn, respectively;

· the transfer to 'Assets held for sale' and 'Liabilities of disposal groups held for sale' of balances relating to the planned disposal of our operations in Brazil of $17bn and $15bn, respectively; and

· a $13bn reduction in corporate overdraft and current account balances relating to a small number of clients in our PCM business in the UK who settled their overdraft and deposit balances on a net basis, with customers increasing the frequency with which they settled their positions.

Excluding these movements, customer lending grew by $32bn (or 4%) driven by Europe, and customer accounts grew by $32bn (or 3%), notably in Asia.

Assets

Cash and balances at central banks fell by $31bn, primarily in North America as we managed the balance of our liquid asset portfolio to maximise investment returns.

Trading assets decreased by $79bn, of which $16bn was driven by adverse currency translation, as we continued our reduction in trading inventory in the context of the prudential regulation. This resulted in reductions in holdings of debt securities by the Rates business, notably in Europe and North America. In addition, lower settlement balances also reflected our actions to improve efficiency of balance sheet usage.

Derivative assets decreased by $57bn or 16%, driven by valuation movements in interest rate contracts, reflecting shifts in major yield curves, notably in France and the UK.

Loans and advances to customers decreased by $50bn on a reported basis, driven by Latin America and Europe. This included the following items:

· adverse currency translation movements of $52bn;

· reclassification of $17bn to 'Assets held for sale' relating to our operations in Brazil; and

· a $13bn reduction in corporate overdraft balances in Europe, with a corresponding fall in corporate customer accounts.

Excluding these factors, customer lending balances grew by $32bn, largely from growth in Europe of $20bn, North America of $5bn and Asia of $4bn.

In Europe, the growth was from increased term lending to CMB customers, notably in the UK and Germany and higher balances in GB&M. In North America, the growth in balances was driven by increased term lending to corporate and commercial customers in CMB and GB&M, partly offset by a decline in RBWM from the continued reduction in the US run-off portfolio and the transfer to 'Assets held for sale' of US first lien mortgage balances. In Asia, balances rose largely from residential mortgage lending in Hong Kong and mainland China. CMB lending balances also rose, although GB&M lending fell. Both of these businesses were affected by weakening demand for trade lending, while GB&M's reduction also reflected our active management of overall client returns.

Liabilities

Repurchase agreements decreased by $27bn or 25%, driven by falls in Europe, notably in the UK, and in North America. We continued to closely manage these balances, as we reassessed the overall returns on these activities in light of the evolving regulatory landscape and overall client returns.

Customer accounts decreased by $61bn and included the following items:

· adverse currency translation movements of $65bn;

· reclassification of over $15bn to 'Liabilities of disposal groups held for sale' relating to our operations in Brazil; and

· a $13bn reduction in corporate current account balances, in line with the fall in corporate overdraft positions.

Excluding these factors, customer accounts grew by $32bn, notably in Asia in the first half of the year, reflecting growth in RBWM from increased savings balances by new and existing Premier customers, together with a rise in our PCM business in CMB.

Balances in Europe were broadly unchanged. Growth in our PCM business in CMB and a rise in RBWM balances reflecting customers' continued preference for holding balances in current and savings accounts were broadly offset by a fall in GB&M.

Trading liabilities fell by $49bn, mainly in North America and Europe reflecting the reduction in trading assets and our focus on optimising the funding of trading assets.

The decrease in derivative liabilities was in line with that of derivative assets as the underlying risk was broadly matched.

Equity

Total shareholders' equity fell by $2.0bn or 1%. The effects of profits generated in the year and the issue of new contingent convertible securities were more than offset by the combined effect of dividends paid and an increase in accumulated foreign exchange losses, which reflected the marked appreciation in the US dollar against a number of currencies, notably sterling and the euro. We recorded fair value gains in our available-for-sale reserve relating to our equity interest in Visa Europe of $432m. These were more than offset by fair value gains transferred to the income statement and fair value losses on debt securities during the year. The gains on Visa Europe were assessed against the expected consideration to be received from the proposed sale to Visa Inc. This transaction is expected to complete in 2016, at which point we will transfer the fair value gains to the income statement.

Risk-weighted assets

Risk-weighted assets ('RWA's) totalled $1,103bn at 31 December 2015, a decrease of $117bn during 2015. After foreign currency translation differences, RWAs reduced by $65bn in 2015, driven by targeted RWA initiatives of $124bn, partly offset by business growth of $35bn, and from growth in our associates of $14bn. The RWA initiatives included:

· the accelerated sell-down of our consumer mortgage portfolio in the US and the GB&M legacy book, together contributing $30bn to the reduction; and

· exposure reductions, process improvements and refined calculations, which reduced RWAs by $93bn, 61% of which were in GB&M.

The business growth of $35bn was from higher term lending to corporate customers in CMB and from higher general lending to corporates in GB&M. There was an increase of $14bn in our associates, BoCom and The Saudi British Bank.

Customer accounts by country

For footnotes, see page 99.