HSBC : Annual Report and Accounts 2018

HSBC Holdings plc

Annual Report and Accounts 2018

Connecting customers to opportunities

HSBC aims to be where the growth is, enabling businesses to thrive and economies to prosper, and ultimately helping people to fulfil their hopes and realise their ambitions.

Cover image

Our global marketing campaign explores how HSBC helps people prosper. The Group's iconic hexagon becomes a lens through which to look at the world, showing how we help individuals, businesses and communities to grow and flourish. This includes our commitment to the development of renewable energy sources that can support the global transition to a low-carbon economy. We have pledged to provide $100 billion in sustainable financing and investments by 2025.

Inside front cover image

We are investing in digital technology to improve the service we provide to our customers. Our award-winning mobile apps are one of the ways we help them manage their money more quickly, conveniently and safely. This picture was taken by Terry Tam, who works for HSBC as an IT developer.

Employee photos

All the photos on the inside pages of this report, with the exception of Board and executive profiles, were taken by people working for HSBC in locations including the UK, China, India, Malta and Bangladesh. Many more employees across the Group's international network have contributed to HSBC Now Photo, an ongoing project that allows them to demonstrate their talent as photographers and show the diversity of the world around them.

Contents

This Strategic Report was approved by the Board on 19 February 2019. Mark E Tucker

Group Chairman

Strategic Report

An overview of how we are structured, what we do and where, our strategic priorities, the principal risks we face, and high-level performance information.

The section is introduced by both the Group Chairman and the Group Chief Executive, and also explains the role of the Board.

• 2 Highlights

• 4 Group Chairman's statement

• 7 Group Chief Executive's review

• 10 Our strategy

• 12 Strategic priorities

• 14 Financial overview

• 18 Global businesses

• 22 How we do business

• 30 Risk overview

• 32 Remuneration

StrategicReport

None of the websites referred to in this Annual Report and Accounts (including where a link is provided), and none of the information contained on such websites, are incorporated by reference in this report.

Our values

Our values define who we are as an organisation and make us distinctive.

Dependable

We are dependable, standing firm for what is right and delivering on commitments.

Open

We are open to different ideas and cultures, and value diverse perspectives.

Connected

We are connected to our customers, communities, regulators and each other, caring about individuals and their progress.

As a reminder

Reporting currency

We use US dollars.

Adjusted measures

We supplement our IFRS figures with alternative performance measures used by management internally. These measures are highlighted with the following symbol:

Further explanation may be found on page 34.

Financial Review

Detailed reporting of our financial performance, at Group level as well as within our matrix structure. It also includes our full risk report and reporting on how we manage capital.

• 34 Financial summary

• 47 Global businesses and geographical regions

• 65 Other information

• 69 Risk

• 148 Capital

Corporate Governance

Details of our Board of Directors and senior management, and our approach to corporate governance and remuneration.

• 152 Corporate governance report

• 153 Biographies of Directors and senior management

• 157 Board of Directors

• 158 Board committees

• 164 Internal control

• 165 Going concern and viability

• 166 Share capital and other disclosures

• 169 Employees

• 172 Directors' remuneration report

206

Financial Statements

Our financial statements and related notes and reports.

• 207 Report of the independent auditors

• 214 Financial statements

• 224 Notes on the financial statements

Additional Information

Important information for our shareholders, including contact information. Like any industry and company, we have our set of abbreviations and terminology. Accordingly, we provide an explanation of the abbreviations used. A glossary of key terms is available online atwww.hsbc.com/investors.

Directors' responsibility statement

• 310 Shareholder information

• 314 Forward-looking statements / Certain defined terms

• 316 Abbreviations

Financial ReviewCorporate GovernanceFinancial StatementsAdditional Information

HSBC Holdings plc Annual Report and Accounts 2018

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Strategic Report

Highlights

Our international network, access to high-growth markets and balance sheet strength help us deliver long-term value for our stakeholders.

Group

For year ended 31 Dec 2018

$19.9bn

$21.7bn

$53.8bn

(2017: $17.2bn)

(2017: $21.1bn)

(2017: $51.4bn)

At 31 Dec 2018

Reported risk-weighted assets ($bn)

2018 14.0 2018 2,558

871 857

2017 14.5 2017 2,522

2016 13.6 2016 2,375

$865bn

14.0%

$2,558bn

(2017: $871bn)

(2017: 14.5%)

(2017: $2,522bn)

Reported risk-weighted assets ($bn)1 2018 865
2017	871
2016	857

About HSBC

With assets of $2.6tn at

31 December 2018, HSBC is one of the world's largest banking and financial services organisations.

More than

39 million

customers bank with us

We employ around

235,000

people around the world2

We have around

200,000

shareholders in 130 countries and territories

For footnotes, see page 67.

Strategy highlights

In June 2018, we set out eight strategic priorities against which we committed to tracking our performance until the end of 2020. Below is a selection of highlights from our progress in 2018.

11% 14%

adjusted revenue growth in Asiarevenue growth in transaction bankingpercentage point improvement in employee engagement to 66%

6of

HSBC 'scale markets' improved by two ranks or maintained a top-three rank in customer satisfaction for RBWM

Awards

Selected awards and recognitions Euromoney Trade Finance Survey 2019

Top Global Trade Finance Bank

Euromoney Cash Management Survey 2018

Best Global Cash Manager for Corporates Best Global Cash Manager for Financial Institutions

Euromoney Awards for Excellence 2018

World's Best Bank for Transaction Services World's Best Bank for Corporates

North America's Best Bank for Transaction Services

Asia's Best Bank for Sustainable Finance Middle East's Best Bank for Financing

Insurance Asset Management Awards 2018

Best Emerging Markets Manager of the Year

The Banker Investment Banking

Awards 2018

Most Innovative Investment Bank of the Year

PWM/The Banker Global Private Banking Awards 2018

Best Private Bank in Hong Kong Best Private Bank in the UK

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HSBC Holdings plc Annual Report and Accounts 2018

Highlights

Our global businesses

Our operating model consists of four global businesses and a Corporate Centre, supported by HSBC Operations, Services and Technology, and 11 global functions, including risk, finance, compliance, legal, marketing and human resources.

Retail Banking and Wealth Management ('RBWM')Commercial Banking ('CMB')

Global Banking and Markets ('GB&M')Global Private Banking ('GPB')

We help 38 million customers across the world to manage their finances, buy their homes, and save and invest for the future.

Our HSBC Premier and Advance propositions are aimed at mass affluent and emerging affluent customers who value international connectivity. For customers with simpler banking needs, we offer a full range of products and services reflecting local requirements.

We support approximately 1.5 million business customers in 53 countries and territories, ranging from small enterprises focused primarily on their domestic markets, through to large companies operating globally.

We serve approximately 4,100 clients in more than 50 countries and territories. We support major government, corporate and institutional clients worldwide.

We serve high net worth and ultra high net worth individuals and families, including those with international banking needs.

Our services include working capital, term loans, payment services and international trade facilitation, as well as expertise in mergers and acquisitions, and access to financial markets.

Our product specialists continue to deliver a comprehensive range of transaction banking, financing, advisory, capital markets and risk management services.

Services provided include Investment Management, which includes advisory and brokerage services, and Private Wealth Solutions, which comprises trusts and estate planning, to protect and preserve wealth for future generations.

Adjusted profit before tax

$7.1bn

$7.7bn

$6.1bn

$0.3bn

(2017: $6.5bn)

(2017: $6.8bn)

(2017: $5.8bn)

(2017: $0.3bn)

Adjusted risk-weighted assets

$126.9bn

$321.2bn

$281.0bn

$16.8bn

(31 Dec 2017: $118.1bn)

(31 Dec 2017: $289.8bn)

(31 Dec 2017: $293.2bn)

(31 Dec 2017: $15.8bn)

Our global businesses are presented on an adjusted basis, which is consistent with the way in which we assess the performance of our global businesses.

Delivery against Group financial targets

Return on tangible equity

Adjusted jawsDividends per ordinary share in respect of 2018

8.6%

(1.2)%

$0.51

Target: >11% by 2020 (2017: 6.8%)

Target: positive

Target: sustain

For further details, see page 17.

StrategicReport

Financial ReviewCorporate GovernanceFinancial StatementsAdditional Information

HSBC Holdings plc Annual Report and Accounts 2018

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