HSBC Holdings plc
Reconciliations of Non-GAAP Financial Measures 30 September 2020
Use of non-GAAP financial measures
Use of non-GAAP financial measures
Our reported results are prepared in accordance with IFRSs
as detailed in the Financial Statements starting on page 229 of the Annual Report and Accounts 2019. In measuring our performance, the financial measures that we use include those which have been derived from our reported results in order to eliminate factors which distort year-on-year comparisons. These are considered non-GAAP financial measures.
Return on Equity and Return on Tangible Equity
We provide Return on Tangible Equity ('RoTE') in addition to Return on Equity ('RoE') as a way of assessing our performance which is closely aligned to our capital position.
RoTE is computed by adjusting reported 'profit attributable to the ordinary shareholders of the parent company' for the post-tax movements in the present value of in-forcelong-term insurance business ('PVIF') and adjusting the reported equity for goodwill, intangibles and PVIF, net of deferred tax. The adjustment to
reported results and reported equity excludes amounts attributable to other equity instrument holders and non-controlling interests.
For our global businesses, we provide RoTE excluding significant items and the UK bank levy which is more closely aligned to the basis on which the global business performance is assessed by the Chief Operating Decision Maker (further information on the basis of preparation for our global businesses is provided on page 263 of the Annual Report and Accounts 2019).
RoTE excluding significant items and UK bank levy is computed by adjusting 'profit attributable to the ordinary shareholders, excluding PVIF' for significant items (net of tax) and the bank levy, and adjusting the 'average tangible equity' for the change in fair value on our long-term debt attributable to credit spread through other comprehensive income ('fair value of own debt'), and debt valuation adjustments ('DVA').
The following table details the adjustments made to the reported results and equity:
Return on Equity and Return on Tangible Equity
Nine months ended | Quarter ended | ||||
30 Sep | 30 Sep | 30 Sep | 30 Jun | 30 Sep | |
2020 | 2019 | 2020 | 2020 | 2019 | |
$m | $m | $m | $m | $m | |
Profit | |||||
Profit attributable to the ordinary shareholders of the parent company | 3,336 | 11,478 | 1,359 | 192 | 2,971 |
Impairment of goodwill and other intangible assets (net of tax) | 1,156 | - | 2 | 1,154 | - |
Increase in PVIF (net of tax) | (562) | (1,290) | (252) | (56) | (652) |
Profit attributable to the ordinary shareholders, excluding goodwill, other | |||||
intangible assets impairment and PVIF | 3,930 | 10,188 | 1,109 | 1,290 | 2,319 |
Significant items (net of tax) and bank levy | 1,505 | 608 | |||
Profit attributable to the ordinary shareholders, excluding goodwill | |||||
impairment, PVIF, significant items and UK bank levy | 5,435 | 10,796 | |||
Equity | |||||
Average ordinary shareholders' equity | 165,934 | 165,954 | 167,151 | 166,084 | 167,347 |
Effect of goodwill, PVIF and other intangibles (net of deferred tax) | (17,234) | (23,191) | (17,081) | (17,136) | (23,688) |
Average tangible equity | 148,700 | 142,763 | 150,070 | 148,948 | 143,659 |
Fair value of own debt, DVA and other adjustments | (260) | 529 | |||
Average tangible equity excluding fair value of own debt, DVA and other | |||||
adjustments | 148,440 | 143,292 | |||
% | % | % | % | % | |
Ratio | |||||
Return on average ordinary shareholder's equity (annualised) | 2.7 | 9.2 | 3.2 | 0.5 | 7.0 |
Return on tangible equity (annualised) | 3.5 | 9.5 | 2.9 | 3.5 | 6.4 |
Return on tangible equity excluding significant items and UK bank levy (annualised) | 4.9 | 10.1 |
- HSBC Holdings plc Reconciliations of Non-GAAP Financial Measures 3Q20
Return on Tangible Equity by global business
Nine months ended 30 Sep 2020 | |||||
Wealth | Global | ||||
and Personal | Commercial | Banking and | Corporate | ||
Banking | Banking | Markets | Centre | Total | |
$m | $m | $m | $m | $m | |
Profit before tax | 2,696 | 1,284 | 2,912 | 500 | 7,392 |
Tax expense | (492) | (527) | (1,093) | (116) | (2,228) |
Profit after tax | 2,204 | 757 | 1,819 | 384 | 5,164 |
Less attributable to: preference shareholders, other equity holders, non-controlling | (543) | (492) | (498) | (295) | (1,828) |
interests | |||||
Profit attributable to ordinary shareholders of the parent company | 1,661 | 265 | 1,321 | 89 | 3,336 |
Increase in PVIF (net of tax) | (544) | (16) | - | (2) | (562) |
Significant items (net of tax) and UK bank levy | 346 | 64 | 818 | 1,040 | 2,268 |
Balance Sheet Management allocation and other adjustments | 15 | (8) | (12) | 398 | 393 |
Profit attributable to ordinary shareholders, excluding PVIF, significant | |||||
items and UK bank levy | 1,478 | 305 | 2,127 | 1,525 | 5,435 |
Average tangible shareholders' equity excluding fair value of own debt, DVA and | 25,998 | 37,519 | 41,114 | 43,809 | 148,440 |
other adjustments | |||||
RoTE excluding significant items and UK bank levy (annualised) (%) | 7.6 | 1.1 | 6.9 | 4.6 | 4.9 |
Nine months ended 30 Sep 2019 | |||||
Profit before tax | 5,607 | 5,531 | 3,832 | 2,274 | 17,244 |
Tax expense | (766) | (1,030) | (392) | (1,324) | (3,512) |
Profit after tax | 4,841 | 4,501 | 3,440 | 950 | 13,732 |
Less attributable to: preference shareholders, other equity holders, non-controlling | |||||
interests | (885) | (660) | (592) | (117) | (2,254) |
Profit attributable to ordinary shareholders of the parent company | 3,956 | 3,841 | 2,848 | 833 | 11,478 |
Increase in PVIF (net of tax) | (1,236) | (46) | - | (8) | (1,290) |
Significant items (net of tax) and UK bank levy | 858 | 45 | 158 | (613) | 448 |
Balance Sheet Management allocation and other adjustments | (3) | 2 | - | 161 | 160 |
Profit attributable to ordinary shareholders, excluding PVIF, significant items and | |||||
bank levy | 3,575 | 3,842 | 3,006 | 373 | 10,796 |
Average tangible shareholders' equity excluding fair value of own debt, DVA and | |||||
other adjustments | 26,714 | 36,691 | 40,226 | 39,661 | 143,292 |
RoTE excluding significant items and UK bank levy (annualised) (%) | 17.9 | 14.0 | 10.0 | 1.3 | 10.1 |
HSBC Holdings plc Reconciliations of Non-GAAP Financial Measures 3Q20 | 2 |
Use of non-GAAP financial measures
Reconciliation of reported and adjusted risk-weighted assets
The following table reconciles reported and adjusted risk-weighted assets ('RWAs').
Reconciliation of reported and adjusted risk-weighted assets
At 30 September 2020 | |||||||
Wealth | Global | ||||||
and Private | Commercial | Banking and | Corporate | ||||
Banking | Banking | Markets | Centre | Total | |||
Footnotes | $bn | $bn | $bn | $bn | $bn | ||
Risk-weighted assets | |||||||
Reported | 173.2 | 332.4 | 267.1 | 84.3 | 857.0 | ||
Adjusted | 1 | 173.2 | 332.4 | 267.1 | 84.3 | 857.0 | |
At 30 June 2020 | |||||||
Risk-weighted assets | |||||||
Reported | 161.8 | 330.9 | 277.6 | 84.3 | 854.6 | ||
Currency translation | 2.6 | 7.1 | 4.0 | 0.5 | 14.2 | ||
Adjusted | 1 | 164.4 | 338.0 | 281.6 | 84.8 | 868.8 | |
At 30 September 2019 | |||||||
Risk-weighted assets | |||||||
Reported | 161.6 | 328.0 | 294.6 | 81.0 | 865.2 | ||
Currency translation | 1.1 | 5.5 | 1.8 | 0.5 | 8.9 | ||
Disposals | |||||||
- operations in Brazil | (0.8) | (0.8) | |||||
Adjusted | 1 | 162.7 | 333.5 | 296.4 | 80.7 | 873.3 | |
- Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and significant items.
- HSBC Holdings plc Reconciliations of Non-GAAP Financial Measures 3Q20
HSBC Holdings plc
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 020 7991 8888 www.hsbc.com
Incorporated in England with limited liability Registered number 617987
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HSBC Holdings plc published this content on 27 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 October 2020 08:29:04 UTC