HSBC Holdings plc
Annual Report and
Accounts 2024
Opening up a world of opportunity
Our ambition is to be the preferred international
financial partner for our clients.
Our purpose, ambition and values reflect our
strategy and support our focus on execution.
Read more on our values and strategy on pages 5 and 11.
Contents
Strategic report
1
Performance in 2024
2
Highlights
4
Who we are
6
Group Chairman’s shareholder letter
8
Group CEO’s shareholder letter
11
Our strategy
15
ESG overview
20
Board decision making and
engagement with stakeholders
(Section 172(1) statement)
24
Remuneration
25
Financial overview
30
Global businesses
37
Risk overview
40
Long-term viability and going
concern statement
Environmental, social and
governance (‘ESG’) review
42
Environmental
63
Social
73
Governance
Financial review
86
Financial summary
98
Global businesses and legal
entities
120 Reconciliation of alternative
performance measures
Risk review
127 Our approach to risk
131 Top and emerging risks
137 Our material banking risks
Corporate governance report
237 Biographies of Directors and
senior management
259 Board committees
279 Directors’ remuneration report
Financial statements
330 Independent auditors’ report
341 Financial statements
353 Notes on the financial statements
Additional information
439 Shareholder information
454 Abbreviations
This Strategic Report was approved by the
Board on 19 February 2025.
Sir Mark E Tucker
Group Chairman
A reminder
The currency we report in is US dollars.
Our approach to ESG reporting
We embed our ESG reporting and Task Force on
Climate-related Financial Disclosures (‘TCFD’) within
our Annual Report and Accounts. Our TCFD
disclosures are highlighted with the following
symbol:
Use of alternative performance
measures
We supplement our IFRS Accounting Standards
figures with non-IFRS Accounting Standards
measures used by management internally that
constitute alternative performance measures under
European Securities and Markets Authority guidance
and non-GAAP financial measures defined in and
presented in accordance with US Securities and
Exchange Commission rules and regulations.
These measures are highlighted with the following
symbol:
Further explanation may be found on page 29.
Targets and forward guidance
We do not reconcile our forward guidance on RoTE
excluding the impact of notable items, target basis
operating expenses, dividend payout ratio target
basis or banking net interest income (‘banking NII’)
to their equivalent reported measures.
For our financial targets, medium-term is defined as
between three to five years, and long term as five to
six years, from 1 January 2025.
See page 2 for details on our forward guidance
and outlook.
None of the websites referred to in this Annual Report
and Accounts 2024 for the year ended 31 December
2024 (including where a link is provided), and none of
the information contained on such websites, are
incorporated by reference in this report.
HSBC Holdings plc Annual Report and Accounts 2024
linkedin.com/company/hsbc
Cover image: Opening up a world of opportunity
This year’s annual report marks 160 years since our founding and
celebrates our rich history of shaping finance around the world. To
mark this occasion, our special anniversary cover encapsulates the
depth and the breadth of our services, and our commitment to
connecting people and businesses through our global network –
creating opportunities, driving progress and pioneering new ideas.
TCFD
Performance in 2024
HSBC is one of the largest banking and financial services
organisations in the world.
We have a clear strategy to deliver revenue and profit growth,
enhance customer service and create long-term shareholder value.
Financial performance
indicators
Our financial performance indicators
demonstrate our continued focus on the
delivery of sustainable returns for our
shareholders. They also provide insight into
the performance that has driven the
outcomes of our financial targets.
Read more on our financial performance in 2024
on pages 2 and 27.
For an explanation of performance against our
key Group financial targets, see page 25.
For a reconciliation of alternative performance
measures to their reported equivalents, see
page 124.
Return on average tangible equity
14.6%
(2023: 14.6%)
Return on average tangible equity excluding
notable items of 16.0% (2023: 16.2%)
Profit before tax
$32.3bn
(2023: $30.3bn)
Net interest income
$32.7bn
(2023: $35.8bn)
Banking net interest income of $43.7bn
(2023: $44.1bn)
Operating expenses
$33.0bn
(2023: $32.1bn)
Target basis operating expenses up 5% to
$32.6bn
Common equity tier 1 capital ratio
14.9%
(2023: 14.8%)
Dividend per share in respect of 2024
$0.87
Inclusive of a special dividend of $0.21 per
share.
(2023 dividend per share: $0.61)
Strategic performance
indicators
Our strategy supports our ambition of being
the preferred international financial partner for
our clients.
We are committed to building a business for
the long term, developing relationships that
last.
Read more on our strategy on pages 11 to 13.
Read more on multi-jurisdictional client revenue
on page 125.
Read more on how we set and define our ESG
metrics on page 17.
Read more on our definition of sustainable
finance and investment on page 45.
Grow our Wealth business
$64bn
Net new invested assets generated in 2024,
of which $47bn were in Asia.
(2023: $84bn generated, of which $47bn
were in Asia)
Serve our clients internationally
62%
Wholesale multi-jurisdictional client revenue
is generated by clients banking with us across
multiple markets.
(2023: 61%)
Gender representation
34.6%
Senior leadership roles held by women.
(2023: 34.1%)
Sustainable finance and investment
$393.6bn
Cumulative total provided and facilitated since
1 January 2020.
(2023: $294.4bn)
HSBC Holdings plc Annual Report and Accounts 2024
1
Highlights
Financial performance reflected business growth, particularly in Wealth.
We continued to make progress in reshaping the Group and we have announced
a simplification of our organisation structure to accelerate strategic delivery.
Financial performance (vs 2023)
– Profit before tax rose by $2.0bn to $32.3bn,
including a $1.0bn net favourable impact from
notable items. In 2024, these included a gain of
$4.8bn on the disposal of our banking business
in Canada, the impacts of the disposal of our
business in Argentina, comprising a $1.0bn loss
on disposal, and the recycling of foreign
currency reserve losses and other reserves of
$5.2bn. In 2023, notable items included an
impairment of $3.0bn on our associate, Bank of
Communications Co., Limited (‘BoCom’),
disposal losses of $1.0bn on Treasury
repositioning and risk management and a
$1.6bn gain recognised on the acquisition of
Silicon Valley Bank UK Limited (‘SVB UK’).
Profit after tax increased by $0.4bn to
$25.0bn.
– Constant currency profit before tax
excluding notable items increased by
$1.4bn to $34.1bn, primarily reflecting
revenue growth in Wealth and Personal
Banking (‘WPB’) and Global Banking and
Markets (‘GBM’), partly offset by a rise in
operating expenses, in line with our cost
growth targets.
– Revenue of $65.9bn was stable. There was
growth in revenue from higher customer
activity in Wealth in WPB, and in Equities and
Securities Financing in GBM. In addition, 2023
included disposal losses of $1.0bn related to
Treasury repositioning and risk management.
This was offset by the net adverse impact of
certain strategic transactions described above,
as well as a $0.2bn loss on the early
redemption of legacy securities.
– Constant currency revenue excluding
notable items rose by $2.9bn to $67.4bn.
– Net interest income (‘NII’) decreased by
$3.1bn, reflecting the impact of business
disposals and higher funding costs associated
with the redeployment of our commercial
surplus to the trading book, where the related
revenue is recognised in ‘net income from
financial instruments held for trading or
managed on a fair value basis‘, partly offset by
higher NII in HSBC UK, reflecting the benefit
of our structural hedge. Banking NII of
$43.7bn fell by $0.4bn or 1% compared
with 2023, as increased deployment of our
commercial surplus to the trading book only
partly mitigated the reductions in NII.
– Net interest margin (‘NIM’) of 1.56%
decreased by 10 basis points (‘bps’), mainly
due to increased deployment of our
commercial surplus to the trading book.
– Expected credit losses and other credit
impairment charges (‘ECL’) of $3.4bn were
stable. ECL were $1.8bn in Commercial
Banking (‘CMB’) and $0.2bn in GBM. This
included stage 3 charges relating to the
commercial real estate sector in mainland
China ($0.4bn), the onshore Hong Kong real
estate sector ($0.1bn), and a charge related to
a single CMB customer in the UK. ECL in
WPB were $1.3bn and primarily related to our
legal entities in Mexico, Hong Kong and the
UK. ECL were 36bps of average gross
loans, including loans and advances
classified as held for sale (2023: 32bps).
– Operating expenses grew by $1.0bn or 3%
to $33.0bn, mainly due to higher spend and
investment in technology and the impacts of
inflation, partly offset by reductions related to
our business disposals in Canada and
– France, and from lower levies in the UK and
the US.
– Target basis operating expenses rose by
5%, in line with our cost growth target.
This increase primarily reflected higher spend
and investment in technology, and the impact
of inflation. This is measured on a constant
currency basis, excluding notable items, the
impact of retranslating the prior year results of
hyperinflationary economies at constant
currency, and the direct costs from the sales
of our French retail banking operations and our
banking business in Canada.
– Customer lending balances fell by $8bn on
a reported basis but rose by $14bn on a
constant currency basis. Growth included
lending balance growth in CMB and higher
mortgage balances in WPB.
– Customer accounts rose by $43bn on a
reported basis, and $75bn on a constant
currency basis, with growth across all of our
global businesses, primarily in Asia.
– Common equity tier 1 (‘CET1’) capital
ratio of 14.9% rose by 0.1 of a percentage
point, mainly due to capital generation and a
reduction in RWAs through strategic
transactions, offset by dividends, share buy-
backs and organic balance sheet growth.
– The Board has approved a fourth interim
dividend of $0.36 per share, resulting in a
total of $0.87 per share in respect of 2024,
inclusive of a special dividend of $0.21 per
share. We also intend to initiate a share buy-
back of up to $2bn, which we expect to
complete by our first quarter 2025 results
announcement.
Outlook
– We have announced measures to simplify the
Group and we are focused on opportunities
that build on our strong platform for growth.
– We are now targeting a mid-teens return on
average tangible equity (‘RoTE’) in each of
the three years from 2025 to 2027 excluding
notable items, while acknowledging the
outlook for interest rates remains volatile and
uncertain, particularly in the medium term.
– We expect banking NII of around $42bn in
2025. Our current expectation reflects
modelling of a number of market-dependent
factors. If changes in these factors impact the
output of our modelling, we would update our
expectation for 2025 Banking NII in future
quarterly results announcements.
– We retain a Group-wide focus on cost
discipline. We are targeting growth in target
basis operating expenses of approximately
3% in 2025 compared with 2024.
– Our target basis operating expenses for 2025
excludes the direct cost impact of the business
disposals in Canada and Argentina, notable
items and the impact of retranslating the prior
year results of hyperinflationary economies at
constant currency.
– Our cost target includes the impact of
simplification-related saves associated with our
announced reorganisation, which aims to
generate approximately $0.3bn of cost
reductions in 2025, with a commitment to an
– annualised reduction of $1.5bn in our cost
base expected by the end of 2026. To deliver
these reductions, we plan to incur severance
and other up-front costs of $1.8bn over 2025
and 2026, which will be classified as notable
items. We are focused on opportunities where
we have a clear competitive advantage and
accretive returns, and we aim to redeploy
around $1.5bn of additional costs from non-
strategic activities into these areas, over the
medium term.
– We expect ECL charges as a percentage of
average gross loans to continue to be
within our medium-term planning range of
30bps to 40bps in 2025 (including lending held
for sale balances).
Strategic Report
2
HSBC Holdings plc Annual Report and Accounts 2024
– Over the medium to long term, we continue to
expect mid-single digit percentage growth
for year-on-year customer lending balances.
– We expect double-digit percentage average
annual growth in fee and other income in
Wealth over the medium-term.
– We intend to continue to manage the CET1
capital ratio within our medium-term target
range of 14% to 14.5%, with a dividend
payout ratio target basis of 50% for 2025,
excluding material notable items and related
impacts.
Our targets and expectations reflect our current
outlook for the global macroeconomic
environment and market-dependent factors, such
as market-implied interest rates (as of mid-January
2025) and rates of foreign exchange, as well as
customer behaviour and activity levels.
We do not reconcile our forward guidance on RoTE
excluding the impact of notable items, target basis
operating expenses, dividend payout ratio target
basis or banking NII to their equivalent reported
measures.
Reshaping the Group for growth
– We continue to make progress on
reshaping the Group. In 2024, we
completed the sales of our retail banking
operations in France, and exited our
businesses in Canada and Argentina. We have
also enhanced the efficiency of the Group
through smaller inorganic actions.
– In 2024, we served our customers through
three global businesses, Wealth and
Personal Banking, Commercial Banking
and Global Banking and Markets. In
October 2024, we announced that we are
simplifying our organisational structure to
accelerate delivery against our strategic
priorities. Effective 1 January 2025, the Group
operates through four new businesses: Hong
Kong, UK, Corporate and Institutional Banking,
and International Wealth and Premier Banking.
– In January 2024, we completed the sale of
our retail banking operations in France. In
accordance with the terms of the sale, we
retained a €7.1bn ($7.4bn) portfolio of home
and other loans. During the fourth quarter of
2024 we began to actively market this retained
portfolio for sale. On 1 January 2025 we
reclassified this portfolio as hold-to-collect-and-
sell and expect to recognise an estimated $1bn
fair value pre-tax loss in ‘other comprehensive
income’ in equity on the remeasurement of the
financial instruments in 1Q25.
– In March 2024, we completed the sale of
HSBC Bank Canada. The completion of the
transaction resulted in a $4.8bn gain on sale,
inclusive of the recycling of foreign currency
translation and other reserves losses.
Following completion of the sale, the Board
approved a special dividend of $0.21 per
share, which was paid on 21 June 2024.
– In December 2024, we completed the sale
of our business in Argentina. The
completion of the transaction resulted in a pre-
tax loss on sale of $1.0bn during 2024 and a
$5.2bn recycling of foreign currency
translation reserve losses and other reserves
to the income statement in 4Q24.
– During 2024, we completed the sale of our
business in Russia and recognised foreign
currency translation reserve losses of
approximately $0.1bn. We also completed the
sale of our operations in Armenia and exited
our retail banking operations in Mauritius.
– We also announced divestments in our
private banking business in Germany and
our business in South Africa, and we signed
a memorandum of understanding in relation to
the planned sale of our France life
insurance business. In addition, we have
launched a strategic review of our business in
Malta. The review is at an early stage and no
decisions have been made.
– In January 2025, as part of our efforts to
simplify HSBC and increase leadership in our
areas of strength, we announced that we
will begin to wind down our mergers and
acquisitions (‘M&A’) and equity capital
markets activities in the UK, Europe, and
the US, subject to local legal requirements.
We will retain more focused M&A and equity
capital markets capabilities in Asia and the
Middle East.
– In June 2024, we completed the
acquisition of Citi’s retail wealth
management portfolio in mainland China.
This portfolio complements our growing set of
wealth businesses and our ambition to be the
leading international wealth manager for mass
affluent and high net worth individuals in
mainland China.
– In January 2024, we acquired SilkRoad
Property Partners Group – expanding our
real estate investment capabilities in Asia-
Pacific, aligning with our ambition of becoming
a top direct real estate investment manager in
the region.
Acquisitions and disposals that are classified as
material notable items form part of ‘strategic
transactions’ and their impacts are separately
presented in our financial reporting. Read more
on the financial impact of our strategic
transactions on page 102.
Read more on our organisational update on
page 5.
ESG update
Transition to net zero
– Supporting the transition to net zero is a key
priority for HSBC. In our net zero transition plan
published in January 2024, we committed to
continually calibrate our approach to take into
consideration the latest scientific
methodologies, climate-related policy
measures and developments in the real world.
As we near the mid-point towards our 2030
targets, we have begun a review of our
interim 2030 financed emission targets and
associated policies. This forms part of our
annual net zero transition plan review as
referenced in our 3Q24 earnings release in
October.
– In 2020, we set an ambition to achieve net zero
in our own operations and supply chain by
2030. We have made good progress in
reducing our scope 1 and 2 emissions and are
currently on track to deliver reductions of more
than 90% by 2030 compared to our 2019
baseline. However, progress in reducing
emissions in the scope 3 supply chain
component is proving slower than we
anticipated. We currently expect a 40%
emissions reduction across our operations,
travel and supply chain by 2030 which would
mean that we would need to rely heavily on
carbon offsets to achieve net zero in our supply
chain by 2030. As such, we have revisited our
ambition, taking into account latest best
practice on carbon offsets. We are now
focused on achieving net zero in our
operations, travel and supply chain by 2050.
– Since 2020, we have provided and facilitated
$393.6bn of sustainable finance and
investment, which was an increase of $99.2bn
in the past year. This consisted of green and
social financing, alongside other forms of
sustainable financing and investment.
– We have continued to focus on financing
our clients’ transition needs. In 2024, we
launched HSBC Infrastructure Finance to help
realise the financing and advisory
opportunities in creating the infrastructure
for a low carbon economy. We have also
continued to focus on emerging climate
technologies and supply chain
decarbonisation.
– We have continued to participate in cross
sector efforts to support customers’
transitions.
Build inclusion and resilience
– In 2024, 34.6% of senior leadership roles
were held by women, and we are on track
to achieve our ambition of 35% by 2025.
We also continued to work towards meeting
our ethnicity ambitions.
– Digital accessibility is important to us. We are
using the power of technology to help provide
a great digital experience for our customers and
employees, including people with disabilities
and those who are neurodivergent. We also
expanded our efforts to support customers
with disabilities in our branch spaces.
Act responsibly
– We have strengthened our AI governance
processes to help ensure the responsible
development and use of AI and launched
www.hsbc.com/ai to increase the transparency
of our AI strategy with clients and investors.
– We continued to develop our understanding
of our salient human rights issues. In 2024,
we focused on our approach to human rights
risk management relating to the goods and
services we buy from third parties and in
respect of our business customers.
HSBC Holdings plc Annual Report and Accounts 2024
3
Strategic report
Who we are
HSBC is one of the largest banking and financial services organisations in the world.
Guided by our purpose of opening up a world of opportunity, our ambition is to be the preferred
international financial partner for our clients.
Our global
reach
Our global
businesses
in 2024
Wealth and Personal
Banking (’WPB’)
WPB helped millions of our
customers look after their day-to-
day finances and manage, protect
and grow their wealth.
For further details, see page 30.
Commercial Banking
(‘CMB’)
Our global reach and expertise
helped domestic and international
businesses around the world
unlock their potential.
For further details, see page 32.
Global Banking and
Markets (’GBM’)
GBM provided a comprehensive
range of financial services and
products to corporates,
governments and institutions.
For further details, see page 34.
For further details on our
organisational update, see page 5.
Revenue in 2024 by global business
1
Strategic Report
4
HSBC Holdings plc Annual Report and Accounts 2024
In 2024, we served around 41 million customers worldwide through a network
covering 58 countries and territories.
Approximately
41m
Customers bank with us
We employ approximately
211,000
Full-time equivalent staff
Assets of
$3.0tn
Operations in
58
Countries and territories
Our customers range from individual savers
and investors to some of the world’s
biggest companies, governments and
international organisations. We aim to
connect them to opportunities and help
them to achieve their ambitions.
For further details of our customers and
approach to geographical information, see
page 96.
In 2024, we served our customers through three global businesses, which focused on
delivering growth in areas where we have distinctive capabilities and have significant
opportunities. Our 2024 operating segment results are presented on this basis.
Effective 1 January 2025, the Group will operate through four new businesses which
are detailed on page 5.
WPB
CMB
GBM
32%
26%
42%
1 Calculation is based on revenue of our global businesses excluding Corporate Centre. Corporate Centre had negative
revenue of $1,929m in 2024. See page 36 for details of Corporate Centre results in 2024.
Our new
organisational
structure
Hong Kong
Being the market leader in our home market of Hong
Kong is one of our clear strengths and remains a
strategic priority.
UK
Our UK ring-fenced bank has a leading market
position in our home market of the UK and will
continue to be a critical pillar of our strategy.
Corporate and Institutional
Banking
Our new Corporate and Institutional Banking
business is a market leader in cross-border
transaction banking and capital markets and
integrates our Commercial Banking business
(outside the UK and Hong Kong) with our Global
Banking and Markets business.
International Wealth
and Premier Banking
This business brings together Premier focused
banking (outside Hong Kong and the UK), our Global
Private Bank, and our wealth manufacturing
businesses of Asset Management and Insurance.
Group Operating Committee
To align with the new structure, a new Group Operating Committee comprised of 12 members now serves as
the leading decision-making committee of the Group, replacing the Group Executive Committee of 18
members. The Group’s functions are also being realigned to support the new business structure.
* Both our Hong Kong and UK businesses will serve our personal banking customers and commercial clients residing in these
home markets.
For further details on our senior management team, see page 242.
Our values
Our stakeholders
Our stakeholders are the people who
work for us, bank with us, own us,
regulate us, and live in the societies
we serve and the planet we all
inhabit. These human connections
are complex and overlap.
Many of our employees are
customers and shareholders, while
our business customers are often
suppliers. Guided by our purpose,
we aim to create value for our
customers and shareholders.
Our size and global reach mean our
actions can have a significant
impact. We are committed to doing
business responsibly, and thinking
for the long term. This is key to
delivering our strategy.
HSBC Holdings plc Annual Report and Accounts 2024
5
Effective from 1 January 2025, we have implemented a new organisational business
structure that aims to unleash our full potential by building on our strong progress in
recent years and driving our success into the future.
Our values help define who we are as an organisation, and are key to our long-term success.
We value
difference
We succeed
together
We take
responsibility
We get
it done
Building strong relationships with our stakeholders helps enable us to deliver our strategy in
line with our long-term values, and operate the business in a sustainable way.
For further details of how we are engaging with our stakeholders, see page 16.
Strategic report
Group Chairman’s shareholder letter
In 2024, global economic growth was mixed.
In the West, the US remained an
outperformer, while growth across Europe
was disappointing. In Asia and the Middle
East, there was broadly steady growth. With
inflation falling and with signs of the labour
market softening, the US Federal Reserve
was able to start cutting rates, as did most
advanced economies.
This was against a backdrop of significant
geopolitical uncertainty, heightened by
numerous and consequential elections across
the world. The war in Ukraine, now entering
its fourth year, and the conflicts and
continuing tensions in the Middle East, have
had a tragic human impact. Our thoughts are
with all those who have suffered and
continue to experience the devastating
consequences.
In this context, our focus is on our
customers, leveraging our global network to
help them navigate the challenges and
capture the opportunities that emerge. That
approach, combined with the disciplined
execution of our strategy, delivered another
strong financial performance and increased
returns in 2024.
And we are very well positioned for the
future.
HSBC’s 160
th Anniversary
2025 will mark HSBC’s 160th anniversary.
In 1865, HSBC’s founders started out with a
clear and simple objective: to establish a bank
in Hong Kong and Shanghai that would
facilitate local and international trade,
connecting East and West, and the many
places in-between.
That objective is as relevant and significant
today as it was then.
2024 progress and performance
In 2024, we delivered profit before tax of
$32.3bn - an increase of $2.0bn compared
with 2023. Our return on average tangible
equity was 14.6%, or 16% excluding the
impact of notable items.
We delivered increased returns for our
shareholders. The Board approved a fourth
quarterly dividend of $0.36 per share, bringing
the total dividend announced for 2024 to
$0.87 per share. This includes the special
dividend of $0.21 per share that was paid in
June following the completion of the sale of
HSBC Bank Canada. In addition, we
announced three share buy-backs in respect
of 2024 worth a total of $9bn. And today, we
announced a further share buy-back of up to
$2bn.
Since the start of 2023, we have repurchased
11% of the issued share count. Combined
with our sustained levels of profitability, this
led to greater earnings and dividends per
share for our shareholders.
Dividends paid in 2024, together with a more
than 20% increase in the share price,
delivered a total shareholder return for the
year of more than 30%.
Our performance demonstrates that our
strategy is working. To maintain, and indeed
accelerate, the momentum, we are being
very deliberate in creating investment
capacity for priority areas, focusing on long-
term strategic growth.
Optimising cost and capital allocation, we
completed the sale of our businesses in
Canada, Russia, Argentina, and Armenia, as
well as our retail banking operations in France
and Mauritius. We announced the planned
sale of our business in South Africa and of
our private banking business in Germany, as
well as the planned sale of our life insurance
business in France.
In parallel, our strategic investments are
yielding significant results. In Wealth, for
instance, revenue grew by 18% in 2024,
including a 21% increase in fee and other
income. The continued inflow of Net New
Invested Assets and growth in total
customers point to the material upside
opportunity. In Hong Kong, for instance, we
added approximately 800k new-to-bank
customers.
Strategic Report
6
HSBC Holdings plc Annual Report and Accounts 2024
Sir Mark E Tucker
Group Chairman
2024 was a year of strong performance. We continued to help
our customers navigate challenges and capture meaningful
opportunities, whilst providing increased returns for our
shareholders. Looking ahead, we have the right people and
structure to drive accelerated growth in 2025 and beyond.
"Our performance
demonstrates that our
strategy is working. To
maintain, and indeed
accelerate, the
momentum, we are
being very deliberate in
creating investment
capacity for priority
areas, focusing on long-
term strategic growth."
At the same time, we secured multiple
additional licences to expand our operations
in mainland China. In India, we received an
approval earlier this year to open bank
branches in 20 new cities that are at the
centre of the expanding wealth and
international opportunity.
We will continue to focus on and invest in
growth opportunities where we have a clear
competitive advantage.
Leadership and Board Changes
Following Noel Quinn’s decision to retire as
Group Chief Executive, the Board ran a
rigorous and robust process to appoint his
successor.
I would like to once again pay tribute to
Noel’s exceptional leadership and thank him
for his unwavering commitment and
dedication to HSBC during his 37 years of
service. We wish him the very best in all of
his future endeavours.
In September, Georges Elhedery became our
Group Chief Executive. He brings a wealth of
experience and an outstanding track record of
delivery, achieved over a career spent
working in Asia, the Middle East and Europe.
In a little over five months, he has already
made his mark.
From 1 January 2025, we began operating
through four businesses: Hong Kong, the UK,
Corporate and Institutional Banking, and
International Wealth and Premier Banking.
The objective is to create a simpler and more
dynamic organisation - with faster decision-
making and clear lines of accountability.
Georges was succeeded as Group Chief
Financial Officer by Pam Kaur, who joined the
Board as an Executive Director, having
previously served as Group Chief Risk and
Compliance Officer.
At the 2024 Annual General Meeting (‘AGM’),
David Nish retired from the Board. David
made invaluable contributions over eight
years, particularly as Chair of the Group Audit
Committee and as Senior Independent
Director. Ann Godbehere took over as Senior
Independent Director. Ann’s extensive
financial services experience, over a 30-year
career spanning insurance, retail and private
banking, and wealth management, positions
her very well for this role. Brendan Nelson
took over as Chair of the Group Audit
Committee. His UK and international financial
and auditing expertise and experience are
enormously valuable.
In 2024, the Board held meetings in mainland
China, Dubai, Singapore, New York, and
London. On each occasion, we had the
privilege and pleasure to meet with valued
clients, government officials, regulators, and
colleagues.
Our AGM in London and the Informal
Meeting of our Hong Kong Shareholders
provided substantive opportunities to engage
with our shareholders, on important issues
related to the Group.
Global outlook
The economic outlook remains uncertain with
potential downside risks to global growth
from trade frictions and supply chain
disruptions. Inflation has declined but is
proving stubborn and could be impacted by
oil and gas prices, as well as any trade tariffs.
Global growth is expected to remain fairly
stable in 2025, with the US still likely to
remain the major engine of growth. However,
policy priorities are adding to uncertainties
regarding growth prospects around the world.
Already, it appears that the improvement in
world trade growth may be starting to falter.
In China, the package of fiscal and monetary
measures announced in the final quarter of
2024 was welcome and helped it reach its
annual target of ‘around 5%’ GDP growth.
Aided by its transformation to a consumption-
led and innovation-focused economic model,
we expect it to deliver a comparable
performance in 2025. Hong Kong should also
continue to expand, with its growth directly
linked to mainland China.
Elsewhere in Asia, changing supply chains
and resilient local demand helped to drive
growth in a number of markets, including
India. Over the longer term, the demographic
dividend will benefit countries like India and
markets across South and Southeast Asia.
As this happens, we also continue to see
great potential in the fast-growing corridor
between Asia and the Middle East, where
strong demographics combine with large
scale capital spending on infrastructure and
further diversification, which are set to
continue.
In Europe, with inflation pressures easing and
interest rates on a downward trajectory,
consumer spending should rise. As a result,
we expect the Eurozone to expand this year.
Meanwhile, the new UK government is
pursuing a pro-growth agenda, which we fully
support.
Our people
I want to end by expressing the Board’s
immense appreciation and gratitude to all our
colleagues for driving our Group forward.
All that we delivered in 2024 was only made
possible by their sustained efforts, energies,
and execution focus. They are the lifeblood of
the HSBC Group, serving our customers and
creating value for shareholders.
Sir Mark E Tucker
Group Chairman
19 February 2025
HSBC Holdings plc Annual Report and Accounts 2024
7
Strategic report
Group CEO’s shareholder letter
RoTE
14.6%
(2023: 14.6%)
RoTE excluding notable items
16.0%
(2023: 16.2%)
Profit before tax
$32.3bn
(2023: $30.3bn)
Dear fellow shareholders,
The opportunity to lead HSBC is a privilege.
Even more so as we celebrate our 160th
anniversary. Like each of my predecessors, I
see my responsibility as delivering
sustainable strategic growth for our
shareholders. This begins by putting our
customers at the centre of everything we do.
Our financial strength, international network,
heritage, and brand mean we build upon firm
foundations.
We look to the future with confidence.
We begin from a position of strength, which
is reinforced by our 2024 performance.
During the year, we delivered a return on
average tangible equity (‘RoTE’) of 14.6%.
This includes several notable items, in
particular related to strategic disposals.
Excluding these, our RoTE was 16.0%,
achieving our ‘mid-teens’ target. Our
common equity tier 1 (‘CET1’) capital ratio
was 14.9%, reflecting our long-standing
financial strength. With our continued focus
on cost discipline, we managed cost growth
on our target basis of around 5%, which was
in line with our targeted cost growth. This
strong performance enabled us to announce
$26.9 billion in returns to our shareholders
through dividends and share buy-backs,
which we expect to remain central to our
strategy.
Simple, more agile, focused
The world in which we operate is changing
quickly. We are adapting to help our
customers navigate new complexities. By
doing so, we will open up a world of
opportunity as we serve their needs,
delivering on our strategy.
Since assuming the role in September, I have
focused on injecting energy and intent into
the way we deliver our strategy. We are
being more agile in the way we allocate our
resources and invest to prepare for the
future. That includes retiring non-strategic
assets and embracing the productive power
of new technologies and tools to modernise
HSBC and enhance the way we serve our
customers.
We have renewed vigour in finding the
efficiencies that will optimise our resource
allocation, be that geographical, business line
or balance sheet. This will enhance the way
we actively and dynamically manage costs
and capital, and target investments.
We will be guided by three overarching
priorities:
– Focus on our customers, delivering high
levels of satisfaction;
– Drive long-term growth by focusing on our
strengths, increasing our leadership and
market share in the areas where we can
generate attractive returns;
– Simplify our structure and operating model.
Reshape and rationalise our portfolio, to
meet the needs of a fast-changing world.
To achieve this, I have put in place a smaller,
core team of exceptionally talented leaders.
They are each committed to fostering a culture
of excellence for our colleagues, driven by a
growth-orientated mindset. HSBC’s many
talented colleagues around the world are key to
delivering the exceptional customer experience
that will drive our future growth.
We have also simplified the organisation in
two important ways.
First, by moving away from a complex matrix
governance structure built around three
business lines and five geographical regions
to create four new businesses. Each firmly
rooted in our core strengths:
– Corporate and Institutional Banking, which
combines our two wholesale businesses;
– International Wealth and Premier Banking,
to focus on accelerating the build out of our
global wealth proposition;
Strategic Report
8
HSBC Holdings plc Annual Report and Accounts 2024
Georges Elhedery
Group CEO
A simple, more agile, focused organisation built on our core
strengths, delivering sustainable strategic growth for our
customers and shareholders.
"Our ambition is to
unlock HSBC’s full
potential for the benefit
of all our stakeholders,
provide excellent
customer outcomes that
enhance our franchise
and brand, generating
the strategic growth that
will deliver attractive
returns for you, our
shareholders."
– Our two home markets of Hong Kong and
the UK, where we have scale and market-
leading positions.
HSBC’s supporting infrastructure is being
simplified and realigned to enable these four
businesses to grow.
Simply put, we are aligning our structure to
our strategy.
Second, we are significantly improving our
operating model, led by a tighter team at the
Group Operating Committee, that will:
– Provide clarity of accountability, empower
colleagues to make faster decisions and
accelerate the pace at which we generate
greater productivity;
– Make HSBC simple, with fewer
management lines and layers, and less
committees, designed to reduce
bureaucracy, create closer collaboration,
emphasise teamwork, and facilitate the
flow of ideas and innovation;
– Adapt quickly to the factors that are
shaping the economies and industries in
which our customers operate;
– Sharpen and strengthen our focus on
capital efficiency and firm-wide risk
management.
This will create a step change in the way we
work, the way we serve customers and the
way we generate sustainable strategic
growth, driving higher returns for our
shareholders.
In short, unlocking HSBC’s full potential.
Designed to deliver strong, sustainable
strategic growth
For 160 years, HSBC has been defined by its
financial strength and international network.
Both remain enablers of everything we do.
What is changing is the clarity, speed and
intensity with which we are repositioning
HSBC around our four complementary, clearly
differentiated businesses.
Corporate and Institutional Banking (‘CIB’) is
an international wholesale bank with
significant competitive advantages. It has a
powerful deposit franchise with financing
capabilities supported by the strength of our
balance sheet and our network. It has the
products and skills required to serve the
global banking needs of international
corporate clients, particularly in transaction
banking where we continue to invest. This
positions us to better capture global and intra-
regional flows as supply chains reconfigure,
new trade routes emerge, economies grow,
and customers’ expectations of financial
services evolve.
The future economy will require financing and
investment in sectors such as advanced
technologies, specifically digitalisation,
computing and generative AI, as well as clean
energy and healthcare. CIB is well positioned
to facilitate this by helping entrepreneurs to
secure the capital they need to build the
businesses of the future and by supporting
our customers as they look to decarbonise.
International Wealth and Premier Banking
(‘IWPB’) is ideally placed to capture the
increasing number of affluent and high-net-
worth customers. Especially those with
international banking needs who seek new
investment opportunities to help them to
protect and grow their wealth. Our
recognised brand, financial strength and
complementary footprints across Asia and
the Middle East serve to reinforce HSBC‘s
position in the world’s fastest-growing wealth
markets. We also have an asset management
business with distinct specialism in both
regions offering customers access to
investment opportunities across asset
classes.
The Hong Kong and UK businesses give us
strong platforms in our home markets. We
serve personal banking customers and small
and medium enterprises in these businesses.
In Hong Kong specifically, where HSBC was
founded, Hang Seng Bank, a customer-
centric community bank, is a strategically
important investment of the HSBC Group,
which enhances the strength of our franchise
and market-leading position. We also have a
fast-growing insurance manufacturing
business in Hong Kong, leveraging the
inflows that are propelling Hong Kong to
become the leading international wealth hub.
In the UK, we have a leading retail,
commercial and innovation-focused bank
which continues to build market share.
Customers in Hong Kong and the UK with
global banking needs will be able to access
the power of our international network
through our CIB and IWPB businesses, that
are anchored in these two leading
international financial centres.
HSBC Holdings plc Annual Report and Accounts 2024
9
Strategic report
Financial strength
CET1 ratio
14.9%
(2023: 14.8%)
In 2024, our strong financial performance
enabled us to announce
$26.9bn
in returns to our shareholders through
dividends and share buy-backs.
Cost discipline
Operating expenses
$33.0bn
(2023: $32.1bn)
Target basis operating expenses up 5% to
$32.6bn
Delivering on our priorities to customers
and shareholders
HSBC is a highly connected, global
organisation. Our international network is a
significant differentiator.
By refocusing on our core strengths, we are
creating a simple, more agile, focused
organisation structured to better serve our
customers and deliver for our shareholders.
We have taken the first deliberate and
decisive steps. We continue to move at pace
and with a relentless focus on actively
managing our costs. Not as a one off, but as
an embedded mindset.
How we deliver on our three priorities is
equally important. We are instilling a culture
of excellence, leadership and accountability
throughout the firm. We are also undergoing
a comprehensive transformation of our
operations, modernising our infrastructure,
and investing in technology such as AI,
generative AI, data and analytics. This will
enhance customer experience as well as
drive operational excellence.
The aim being to create a refocused,
reinvigorated HSBC, firmly rooted in four
complementary businesses with the ambition
to generate high levels of total shareholder
returns.
Today’s actions define a confident
future
I am confident about our future and what we
can achieve.
As we celebrate our 160th anniversary, our
history and heritage stand us in good stead.
In so many ways, adapting to new economic
realities and technologies is what we have
always done. It brings out the best in our
people and culture, especially when acting as
a trusted advisor to our customers as they
navigate the world’s economic uncertainties
and look towards new opportunities.
As we look to the future, our strategic
priorities are clear, our leadership team is
now in place, supported by a simplified
structure that enables action.
We have clarity on who we are and what we
seek to achieve. We are driven by a precision
of purpose that guides the way we do
business, the values we uphold and the way
we serve our customers, colleagues and
communities.
We are prioritising a high-performance culture
where employees are passionate about what
they can achieve and rewarded for their
strong customer focus, skills, ambition and
initiative. We will invest in our people, one of
our most valuable assets, providing them
with expansive career opportunities and
supporting them in developing future-focused
skills, establishing HSBC as an employer of
choice and a great place to work.
A strong culture and effective leadership will
be key to our long-term success.
I would like to thank all of my colleagues for
their valuable contributions to our results. It is
a privilege to work with such talented people.
Their dedication, commitment, and desire to
deliver for our customers differentiates HSBC
and is key to delivering long-term growth.
The actions we are taking will have clear and
tangible impact. Our ambition is to unlock
HSBC’s full potential for the benefit of all our
stakeholders, provide excellent customer
outcomes that enhance our franchise and
brand, generating the strategic growth that
will deliver attractive returns for you, our
shareholders.
Georges Elhedery
Group CEO
19 February 2025
Strategic Report
10
HSBC Holdings plc Annual Report and Accounts 2024
Our strategy
During 2024, we continued to implement our strategy
aligned to our purpose, values and ambition.
On 22 October 2024, we announced that we
would simplify our organisational structure to
help accelerate delivery against our strategic
priorities. Effective 1 January 2025, we are
operating through four new businesses:
Hong Kong, UK, Corporate and Institutional
Banking, and International Wealth and
Premier Banking. The Group’s functions are
being realigned to support the four
businesses. For 2024, the bank operated
under, and our reporting remained aligned to,
our prior global business structure, Wealth
and Personal Banking, Commercial Banking
and Global Banking and Markets.
Building leadership where we are strong
Our strategic priorities remain clear. We aim
to maintain and build on our leadership in
Hong Kong and the UK. International
connectivity distinguishes HSBC – indeed,
international trade has always been at the
heart of our business. We were founded in
Hong Kong in 1865 and by 1875 had
expanded into seven countries across Asia,
Europe and North America.
We are committed to building on our strong
platform for growth. HSBC is a highly
connected, global business and the plans we
set out in October 2024 aim to increase our
leadership and market share in areas where
we have competitive advantage, deliver
best-in-class products and service excellence
to our customers, and create a simple,
more agile, focused organisation with
clearer lines of accountability and faster
decision making.
2024 results
We delivered a good set of results again in
2024. Our reported profit before tax was
$32.3bn. During 2024, we reported several
notable items, in particular related to the
disposal of our businesses in Canada and
Argentina. To facilitate comparison across
periods, we also consider profit before tax
excluding notable items and the impact of
foreign currency translation. On this basis,
profit before tax was $34.1bn, compared with
$32.7bn in 2023. Our reported revenue of
$65.9bn was broadly stable compared with
2023. Excluding notable items and in
constant currency, we grew revenue by 5%
compared with 2023.
In 2024, we achieved a RoTE of 14.6%.
During 2024, we reported several notable
items, in particular related to strategic
disposals. To facilitate comparison across
periods, we also consider our RoTE excluding
the impact of notable items. In 2024, RoTE
excluding notable items was 16.0%,
achieving our target of ‘mid-teens’. We
delivered a 16.2% RoTE excluding notable
items in 2023.
14.6%
Return on average tangible equity
(2023: 14.6%)
Reported profit before tax
Progress in our affluent and wealth businesses
In WPB, revenue increased by 7% compared
with 2023 on a constant currency basis.
We continued to demonstrate strategic
progress during 2024, building our affluent
and wealth propositions, taking advantage of
the growth of wealth assets, specifically in
Asia. At 31 December 2024, wealth balances
in WPB were $1.8tn, an increase of 7%
compared with 2023. Within this we
attracted net new invested assets of $64bn
in 2024, with $47bn booked in Asia. Wealth
deposits, including Premier and Global
Private Banking deposits, grew to $555bn.
Revenue in Wealth was up $1.3bn or 18%
on a constant currency basis, with an
increase in Asia of 32%. This supports our
medium term target to grow Wealth fees
and other income at a double-digit
percentage compound annual growth rate
over the medium term. Our total invested
assets were $1.3tn, up from $1.2tn in 2023.
There was a strong performance in our WPB
insurance business, which delivered revenue
growth of 32% to $1.8bn. Our insurance
manufacturing new business contractual
service margin (‘CSM’) of $2.5bn increased
by 49% compared with $1.7bn in 2023. The
growth in CSM underpins our potential future
revenue from this business.
$1.8tn
Wealth balances
Increased by 7% compared with 2023
HSBC Holdings plc Annual Report and Accounts 2024
11
$32.3bn
(2023: $30.3bn)
Corporate Centre
$1.2bn
WPB
$12.2bn
CMB
$11.9bn
GBM
$7.1bn
Strategic report
Progress in our wholesale businesses
In CMB, revenue declined by 4% compared
with 2023 on a constant currency basis. This
was primarily due to the non-recurrence of a
gain in 2023 on the acquisition of SVB UK. In
GBM, constant currency revenue grew by
11% compared with 2023.
Our strength in international connectivity is a
key differentiator. We partner with our clients
as they expand internationally. The
reconfiguration of global supply chains plays
to our strength in network business: in our 58
markets, we are well placed to help clients
manage increased complexity.
Transaction banking is a leading HSBC
proposition. We ranked second by Global
Payments Solutions (‘GPS’) revenue in the
first three quarters of 20241. We also
facilitated over $850bn in trade2 and have
been ranked first in revenue for the last
seven consecutive years3. We generated
revenue of $26.3bn from transaction banking
during 2024, which was broadly stable
compared with 2023. We were ranked joint
second in Global Foreign Exchange (‘GFX’)
revenue4 and second in APAC securities
services in the first three quarters of 20245.
$850bn
Trade volume facilitated
1 Source: Coalition Greenwich Competitor Analytics
– 9M24.
2 HSBC internal management information,
excluding Hang Seng, Malaysia and Germany.
3 Source: Coalition Greenwich Competitor Analytics
– 9M24.
4 Source: Coalition Greenwich Competitor
Analytics – 9M24.
5 Source: Coalition Greenwich Competitor
Analytics – 9M24.
Performance across geographies
Hong Kong
We have the leading banking franchise in Hong
Kong, with $575bn in customer deposits and
market leadership in a number of product
areas6. In 2024, reported revenue was
$21.2bn, an increase of 6%. We welcomed
799,000 new-to-bank customers in WPB, with
the rate of growth accelerating from 345,000 in
the first half of 2024, to 454,000 in the second
half. Our 2024 full year new-to-bank customers
numbers grew by 66% compared with 2023.
We also continued to solidify our leadership
position and grow our WPB business. In our
wholesale businesses, we focused on
maintaining our leading position across multiple
products. In trade finance, our market share
was 29.2%, an increase of 3.5 percentage
points from 20237.
UK
HSBC UK has a top 3 franchise8 with $340bn
in customer deposits. Reported revenue was
$12.8bn in 2024, a decrease of 5%, although it
represented an increase of 5% excluding the
$1.6bn gain on acquisition of Silicon Valley
Bank UK – a notable item in 2023. We
continued to grow our CMB business and we
are ‘Share Leader’ in UK corporate banking
with 75% market penetration, according to
Coalition Greenwich. In our WPB business, we
grew mortgage lending balances by $4.6bn
since 31 December 2023 on a constant
currency basis, taking our UK mortgage
market share from 8.0% to 8.1%9. In the UK,
we see the opportunity to continue building
our mortgage franchise and build share in
small and medium-sized enterprise (‘SME’)
banking.
Other markets
In addition to Hong Kong and the UK, we
have an established presence in a number of
markets, including mainland China, India,
Singapore and the UAE. These markets are
well connected to international trade, wealth
and investment flow and are key to our
international connectivity.
In 2024, we reported profit before tax of
$3.2bn in our mainland China business,
including a $2.2bn share of profit from our
associate, BoCom. We have a strong client
franchise in mainland China, helping to
support clients’ international needs. We were
the Best Trade/Supply Chain Finance Bank in
202410. We also completed the acquisition of
Citi’s retail wealth management portfolio, and
supported by our expanded onshore Global
Private Banking business, grew our wealth
invested assets by 61% compared with 2023.
In India, we reported a profit before tax of
$1.7bn. We aim to continue growing our
wholesale franchise by taking advantage of
corporate supply chains. In 2024, we were
recognised by Euromoney as the number one
International Bank in India. We are also
tapping into the wealth pools of the Indian
diaspora through Global Private Banking. In
2024, we remained the top foreign bank for
non-resident Indians in wealth11. In January
2025, we received permission to open 20
further branches, the largest such approval
for a foreign bank in over a decade.
In Singapore, we generated profit before tax
of $1.4bn. Singapore is our primary wholesale
offshore booking centre and wealth hub
within the ASEAN region and is a centre for
our transaction banking operations. In 2024,
we were recognised by Euromoney as the
Best International Bank and the Best Cash
Management Bank in Singapore. We
continued to grow our Premier and Wealth
balances in Singapore in 2024.
In the UAE, we generated $0.9bn in profit
before tax. We continue to be the largest
foreign bank in the UAE12 and aim to continue
growing our institutional and international
wholesale banking business, leveraging the
vital role the UAE and the Middle East play in
global trade. In 2024, we were ranked
number one in equity and debt capital
markets in MENAT for the 4th consecutive
year13 and Euromoney recognised us as the
UAE’s Best International Bank. We
established onshore Global Private Banking in
2022 and have continued to invest in our
wealth platforms including our global online
trading platform WorldTrader, launched in
2024. Our Wealth invested assets grew by
25% compared with 2023, and we saw an
increase of 8% in our international new-to-
bank customers during the same period.
As noted above, from 1 January 2025, we are
operating through four businesses, while
during 2024, we operated through three
global businesses: WPB, CMB and GBM.
799,000
Hong Kong WPB new-to-bank customers
75%
UK corporate banking market penetration
6
HSBC internal analysis based on loans and
advances to customers and customer accounts in
our Hong Kong legal entity as of 30 June 2024,
and the financial data presented in the 2Q24
results announcements of 13 selected peer banks.
7 Source: HKMA.
8 HSBC internal analysis based on the 9M24 PBT
of HSBC UK and the financial data presented in
the 3Q24 results announcements of four
selected peer banks.
9 Source: Bank of England.
10 Source: Corporate Treasurer Awards 2024.
11 Source: Indian Mutual Fund Industry.
12 HSBC internal analysis based on 9M24 revenue,
deposits and advances, using peers' published
results.
13 Source: Bloomberg league table.
Strategic Report
12
HSBC Holdings plc Annual Report and Accounts 2024
Reshaping and focusing the Group
We have continued to make progress in
reshaping the Group. In 2024, we completed
the sales of our businesses in Canada,
Russia, Armenia and Argentina. Furthermore,
we disposed of our retail banking operations
in France and Mauritius.
We also announced planned disposals in our
private banking business in Germany and our
business in South Africa. We signed a
memorandum of understanding in relation to
the planned sale of our France life insurance
business and have launched a strategic
review of our business in Malta. The review
is at an early stage and no decisions have
been made.
We completed the acquisition of Citi’s retail
wealth management portfolio in mainland
China and SilkRoad Property Partners Group
in Singapore.
We expect further reshaping actions as we
align the Group with our four businesses.
Deposit strength core to our strategy
We are proud of our deposit strength across
all of our franchises, which has built steadily
since our founding. We have a total deposit
base of $1.65tn, comprised primarily of
current and savings accounts. Our balance
sheet is also highly liquid with customer
loans of $0.93tn, representing 56% of
customer deposits. We operate with a
customer deposits surplus of $724bn relative
to customer loans. We hold a surplus of
deposits in each of our major functional
currencies, including US dollars, Hong Kong
dollars, sterling, renminbi and the euro. We
also operate a surplus of customer deposits
relative to customer loans in our major
operating entities, including The Hongkong
and Shanghai Banking Corporation Limited,
HSBC UK and HSBC Bank plc.
The long 2009-2021 period of close-to-zero
central bank interest rates and very low
government bond yields in many of our
operational currencies constrained our
earnings in prior years. One contributor to
our rise in profits in recent years has been a
return of central bank interest rates and
government bond yields to levels more
typical of prior decades.
Over the period from 2022 to 2024, we
increased both the size and duration of our
structural hedge, further stabilising our
banking NII. The sensitivity of our banking NII
to a 100bps parallel downward shift in
interest rates has reduced from c.$(7)bn at
30 June 2022, to $(2.9)bn at 31 December
2024. This was primarily due to hedging
actions, although higher prevailing interest
rates also contributed to a reduction in
sensitivity. The Group expects to further
increase the size and duration of the
structural hedge, subject to market
conditions.
$1.65tn
Customer deposit balances
(2023: $1.61tn)
$0.93tn
Customer loans
(2023: $0.94tn)
Improving operational excellence through artificial intelligence
We are transforming our operations to
enhance customer experiences through the
use of artificial intelligence (‘AI’) and
automation to help deliver faster,
personalised and more seamless services.
Through the reduction of inefficiencies and
streamlining processes we will help provide
quicker responses and better journeys for
our customers. The investments we are
making in Technology will contribute to a
simpler, safer organisation with operational
resilience and stability at its core, helping to
create lasting value for both our customers
and stakeholders.
By harnessing AI capabilities, HSBC aims to
improve customer service through AI
supported mobile apps and strengthened
contact centre capabilities, as well as
improving process efficiency in onboarding,
know-your-customer, and credit applications.
We are supporting our engineers through the
scaled roll out of coding assistants to
improve technology productivity, and we are
using AI to help protect the bank and our
customers more effectively against fraud and
cyber crime.
We are committed to the responsible use of
AI, ensuring that our initiatives align with
industry and regulatory standards and best
practices. Our governance frameworks aim
to enable robust prioritisation of use cases
whilst mitigating potential risk associated
with AI deployment.
HSBC Holdings plc Annual Report and Accounts 2024
13
Strategic report
Our ambitions
Mid-teens RoTE extended
During 2024, we announced our intention to
target a mid-teens RoTE1, excluding the
impact of notable items, for 2025. Alongside
our 2024 annual results, we have extended
this target to each of 2025, 2026 and 2027.
We will consider our cost and investment
plans within this framework.
Simplification
With our 2024 results, we have announced
that we aim to generate approximately
$0.3bn of cost reductions in 2025, with a
commitment to an annualised reduction of
$1.5bn in our cost base expected by the end
of 2026. These savings are primarily people-
related organisational design reductions, have
negligible impact on revenues and are aligned
to the strategic reorganisation of the Group.
We have simplified our businesses in our
domestic markets, Hong Kong and the UK.
Our scale retail and commercial banking
platforms here will benefit from shorter lines
of decision making, empowering our
colleagues to get things done.
We plan to intensify successful partnerships
between our domestic markets and our
international franchises, CIB and IWPB, for
those clients with more complex and
networked needs. Ensuring we continue to
provide the services and products our global
scale enables us to create is key to our
growth. We will continue to service Wealth
clients; and internationally active commercial
and corporate clients in Hong Kong and the
UK on an integrated basis.
Growth
We are focused on growth opportunities
within our strategy that play to our strengths,
while maintaining tight cost discipline and
continuing to invest in growth and efficiency.
We see growth opportunities in each of our
four franchises. In CIB, these include further
expanding our international network
businesses, notably transaction banking. In
IWPB, we intend to particularly focus on
building our successful wealth business,
especially in Asia. In Hong Kong, we intend to
support continued growth in non-resident
customer numbers and will seek to build on
our strong SME proposition. In the UK, we
see the opportunity to continue building our
mortgage franchise and build share in SME
banking.
We will consider using cost savings
generated through business disposals for
incremental re-investment into our core
franchises. This would be in addition to our
ongoing investments.
Capital generation
Our business model is designed to be highly
capital generative. In 2024, our common
equity tier 1 (‘CET1’) capital ratio grew from
14.8% to 14.9% as at 31 December 2024.
During the calendar year, we paid $5.5bn
ordinary dividends with respect to 2024, we
expect to pay a further $6.4bn through the
fourth interim dividend and we expect to
repurchase $11bn of our shares for
cancellation with respect to 2024. The capital
generated on the disposal of our Canadian
banking operations supported the $0.21 per
share special dividend paid in 2Q24,
representing a further $3.9bn distribution.
We aim to maintain a CET1 capital ratio in the
range of 14 to 14.5% over the medium term.
Our primary use of capital generation is to
pay an ordinary dividend of 50% of profit
attributable to ordinary shareholders,
excluding material notable items and related
impacts (our dividend payout ratio target
basis1). Our preferred use of capital after
paying the dividend is to support the growth
of our four businesses.
In recent years, much of our income growth
has come from capital-light income streams,
such as deposit revenue from higher interest
rates; and from fee income, notably in
Wealth. Our RWAs of $838.3bn at 31
December 2024 remained broadly stable
compared with 31 December 2022.
Combined with strategic actions, this enabled
the Group to buy back 11% of its outstanding
shares in two years, while reporting a CET1
ratio rising from 14.2% to 14.9% over the
two years.
Should organic growth in any given year
require less incremental capital than the
Group has retained after paying ordinary
dividends to our shareholders, we plan to
consider further share buy-backs.
c.$1.5bn
Annualised reduction in our cost base by the
end of 2026
14-14.5%
CET1 capital ratio over the medium term
50%
Dividend payout ratio target basis1
1 We do not reconcile our forward guidance on
RoTE excluding the impact of notable items,
target basis operating expenses, dividend payout
ratio target basis or banking NII to their
equivalent reported measures.
Strategic Report
14
HSBC Holdings plc Annual Report and Accounts 2024
ESG overview
Our approach to environmental, social and governance is rooted in
creating long-term value for our customers and the economies that we serve.
Our approach
Our approach to ESG is focused on creating
long-term value for our customers and wider
stakeholders. We focus our efforts on three
areas: the transition to net zero, building
inclusion and resilience, and acting
responsibly.
Our approach to the transition
Supporting the transition to net zero is a key
priority for HSBC. We believe the transition to
net zero will help make the global economy
stronger and more resilient against mounting
climate impacts. In October 2020, we
announced our ambition to become a net zero
bank by 2050. We believe supporting our
customers’ transition both benefits their
business and helps generate long-term
financial returns for our shareholders.
Since we set our net zero ambition, collective
global efforts have driven progress in some
vital areas of the decarbonisation challenge.
Billions of dollars have been allocated to clean
energy. Falling costs of renewables and
advancements in clean technologies have
accelerated their adoption. And while it is
taking time for more nascent industries such
as hydrogen, carbon capture and storage and
sustainable aviation fuel to scale, with
supportive government policies and industrial
strategies their adoption can be accelerated,
and their costs reduced.
We have always recognised that the
transition would not be linear. Yet while the
transition has progressed, the global pace of
change remains insufficient. As the UN’s
latest Emission Gap report recently warned,
current government policies, conventional
energy demand, clean technology adoption,
and wider consumption patterns are not yet
aligned with the Paris Agreement goal of
holding the temperature increase to well
below 2°C above pre-industrial levels and
pursuing efforts to limit the temperature
increase to 1.5°C above pre-industrial levels.
As a bank, our ability to finance our
customers’ transition and, in turn, progress
toward and meet our targets, relies on
decarbonisation solutions scaling across
sectors, alongside growing demand from our
customers for capital to transition their
business models. Ambitious and credible
governmental policy measures also remain
fundamental prerequisites for decarbonising
the real economy at sufficient pace. We are
limited by, and cannot on our own overcome,
the present lag in policy measures and the
overall slower pace of the transition. These
factors put our customers’, and our own, net
zero ambitions at risk.
In our net zero transition plan published in
January 2024, we committed to continually
calibrate our approach to take into consideration
the latest scientific methodologies, climate-
related policy measures and developments in
the real world given that our sector portfolios
reflect progress in the real economy in the
regions where we operate. As we near the mid-
point towards our 2030 targets, it is important
to take stock of our own progress so far. We
have made good progress in reducing the
emissions from our own operations but more
uneven progress towards our ambitions for our
financed emissions footprint.
Net zero in our own operations,
business travel and supply chain
In 2020, we set an ambition to reach net zero
in our operations and supply chain by 2030
and we continue to make good progress in
driving down our direct emissions, which are
largely derived from energy consumption. We
are currently on track to achieve a reduction
in our scope 1 and 2 emissions of more than
90% by 2030 compared with our 2019
baseline, through a programme of energy
efficiency initiatives and significant
investment in renewable power. However,
progress in reducing emissions in the scope 3
supply chain component is proving slower
than we anticipated, driven mainly by the
slower pace of the transition across the real
economy.
It has become clear that we would need to
rely heavily on carbon offsets to achieve net
zero in our supply chain by 2030. This
approach would not be aligned with recently
updated guidance from the Science Based
Targets Initiative on the role of offsets in
meeting corporate net zero claims.
As such, we have revisited this ambition to
take into account latest best practice
guidance. We are now focused on cutting
emissions across our operations, travel and
supply chain to achieve net zero by 2050. We
expect to continue to report on our progress
up to 2030 and beyond. Presently, across our
operations, business travel and supply chain,
we expect to achieve a reduction of around
40% in emissions by 2030.
Interim financed emissions targets
Our strategy is to support emission
reductions in the wider economy by working
with our portfolio of customers to facilitate
the emission reductions they are seeking to
make. That is what we consider when setting
financed emissions targets. To the extent our
customers are facing challenges, especially in
light of the slower pace of the transition,
there is no real benefit to society in simply
sending those customers to another
organisation that may be less committed to
supporting their transition.
As such, we are supporting both new and
existing customers that are making positive
steps to transition to a net zero economy. We
continue to focus on engaging with our
customers on their transition plans,
considering our strategic business lines and
markets, managing the products and services
we offer, and adapting the financing choices
we make to help move the world towards a
resilient, net zero economy.
However, as we have set out in our net zero
transition plan, we must acknowledge that our
influence on the decarbonisation of individual
companies and the industries and economies in
which our customers operate has limits. There
are fundamental prerequisites, outside of our
control, which impact our ability to meet our
2030 interim financed emissions targets and
ultimately reach our net zero ambition. These
include technological advancements,
diversification of the energy mix, market
demand for climate solutions, evolving
customer preferences, and government
leadership and effective policy.
At the current pace of decarbonisation, a
combination of the above factors has led to
the transition being slower than envisaged by
recent Paris-aligned net zero scenarios.
Moreover, certain high emitting sectors are
not yet currently on a 1.5°C pathway. Until
the real economy makes significant progress
in decarbonising, our own progress towards
our 2030 targets and 2050 net zero ambition
will be constrained.
Against this background, we have begun a
review of our interim financed emissions
targets and associated policies as part of the
annual review of our net zero transition plan
that we referenced in our 3Q24 earnings
release in October. This analysis is complex:
it presents considerable data and
methodology challenges and it is going to
take time to complete.
As we calibrate our approach for the latest
context, we will seek to balance being
ambitious on net zero while recognising
present near-term global challenges, and the
associated impact of the transition playing out
differently across the regions and sectors we
serve. In doing so we plan to draw on the
latest scientific evidence and credible
industry-specific pathways while, at the same
time, maintaining our commitment under our
2021 Climate Resolution.
HSBC Holdings plc Annual Report and Accounts 2024
15
Strategic report
We have been clear on our commitment to
being transparent on the risks, challenges and
opportunities arising from our ambition to be
net zero by 2050. As such, we intend to
provide the results of our review in our net
zero transition plan update, which we expect
to be released in the second half of 2025.
We remain committed to net zero,
recognising it is a priority for our customers
to support their growth and prosperity over
the long term. While no single actor can drive
the transition alone, we will continue to
actively look for opportunities to support our
customers’ transition and engage in the
ongoing efforts to achieve the goals of the
Paris Agreement.
Build inclusion and resilience
To help create long-term value for all
stakeholders, we focus on fostering inclusion
and building resilience for our colleagues, our
customers and the communities we operate
within.
For colleagues, we focus on creating an
inclusive, healthy and rewarding environment
as this helps us to attract, develop and retain
the best talent, and we support their
resilience through access to well-being and
learning resources.
We strive to provide an inclusive and
accessible banking experience for our
customers. We do this by providing
resources that help them manage their
finances, and services that help them protect
what they value.
In 2024 we updated our global philanthropy
strategy to align with our ESG areas of focus:
‘transition to net zero’; and ‘building inclusion
and resilience’, allowing us to work alongside
the communities we operate within to help
create change.
Act responsibly
We are focused on operating a strong and
sustainable business that puts the customer
first, values good governance, and gives our
stakeholders confidence in how we do what
we do. Our conduct approach guides us to do
the right thing and to focus on the impact we
have on our customers and the financial
markets in which we operate. Customer
experience is at the heart of how we operate.
We aim to act responsibly and with integrity
across the value chain.
Engaging with our stakeholders and our material ESG topics
We know that engaging with our stakeholders is core to being a responsible business. To determine material topics that our stakeholders are
interested in, we conduct a number of activities throughout the year, including engagements outlined in the table below. Disclosure standards
such as the TCFD, World Economic Forum (‘WEF’) Stakeholder Capitalism Metrics and Sustainability Accounting Standards Board (‘SASB’), as
well as the ESG Guide under the Hong Kong Stock Exchange Listing Rules and other applicable rules and regulations, are considered as part of
the identification of material issues and disclosures.
Our stakeholders How we engage
Customers
Our customers’ voices are heard through our everyday interactions
with them, customer surveys, listening to their complaints, and
online feedback through social media and third-party financial
websites and forums.
Material topics highlighted through our
engagement
1
– Customer advocacy
– Cybersecurity
– Employee training
– Inclusion
– Employee engagement
– Supporting our customers – financed
emissions
– Embedding net zero into the way we operate
– Sustainability risk policies, including thermal
coal phase-out policy and energy policy
– Net zero transition plan
– Financial inclusion and community investment
– Climate risk
– Anti-bribery and corruption
– Conduct and product responsibility
– Supply chain management
– Human rights
Employees
Our colleagues’ voices are heard through our annual Snapshot
survey, exchange sessions, town hall meetings, leadership summits,
and our ‘speak-up’ channels, including our global whistleblowing
platform, HSBC Confidential.
Investors
We engage with our investors through our AGMs, virtual and in-
person meetings, investor roadshows, conferences and investor
surveys, seeking to respond to questions they raise and to convey
their views to senior management.
Communities
We regularly engage with non-governmental organisations (‘NGOs’),
charities and civil society groups both directly and through cross-
industry forums, as well as through partnerships. Our Climate
Advisory Panel, comprising representatives from NGOs and industry
experts, provides independent advice and challenge.
Regulators and
governments
We proactively engage with regulators, governments and
international leaders to build strong relationships, responding to
consultations via industry bodies to help shape our approach to
financed emissions methodologies, scenario analysis and portfolio
alignment to support the transition to net zero in the global
economy.
Suppliers
Our code of conduct sets out our expectations and the minimum
standards we expect from our suppliers on the environment,
diversity, and human rights. We have begun direct engagement with
our highest-emitting suppliers to understand their carbon reduction
targets and disclosure plans.
1 These form part of our ESG disclosures suite together with other requirements, and are not exhaustive or exclusive to one stakeholder group. For further details of
our disclosures, see our ESG review and ESG Data Pack, as well as our ESG reporting centre at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-
reporting-centre.
Strategic Report
16
HSBC Holdings plc Annual Report and Accounts 2024
Our ESG ambitions, metrics and targets TCFD
We have established ambitions and targets
that guide how we do business, including
how we operate and how we serve our
customers. These include targets designed
to help track our progress against our
environmental and social sustainability goals.
They also help us to improve employee
advocacy and the representation of senior
leadership, as well as strengthen our market
conduct. The targets for these measures are
linked to the pillars of our ESG strategy:
transition to net zero, building inclusion and
resilience, and acting responsibly.
To help us achieve our ESG ambitions, a
number of measures are included in the
annual incentive and long-term incentive
scorecards of the Group CEO, Group CFO
and Group Executives that underpin the ESG
metrics in the table below.
For a summary of how all financial and non-
financial metrics link to executive
remuneration, see pages 296 to 308 of the
Directors’ remuneration report.
In our previous disclosures and in our net
zero transition plan we have highlighted the
risks, dependencies and uncertainties
associated with our approach and progress
towards our ESG ambitions. For further
details on our climate reporting, see the ESG
review page 43.
The table below sets out some of the key
ESG metrics we use to measure progress
against our ambitions. For further details of
how we are doing, see the ESG review on
page 41.
Environmental:
Transition to net
zero
1
Sustainable finance and
investment
2
Net zero in our own operations
3
Financed emissions
4
$393.6bn
66.1%
7 sectors
Cumulative total provided and
facilitated since 1 January 2020.
(2023: $294.4bn)
Ambition: Provide and facilitate
$750bn to $1tn of sustainable
finance and investment by 2030.
Reduction in absolute operational
greenhouse gas emissions from
2019 baseline.
(2023: 57.3%)
Updated ambition: Become a net
zero bank by 2050.
Number of sectors where we have set
interim financed emissions targets,
comprising five on-balance sheet and
two combined financed emissions
targets. Ambition: Align our financed
emissions to achieve net zero by 2050.
Social:
Build inclusion
and resilience
Gender representation
5
Black heritage
5
Inclusion Index
7
34.6%
3.0%
78%
Senior leadership roles held by
women. (2023: 34.1%)
Ambition: Achieve 35% senior
leadership roles held by women
by 20256.
Senior leadership roles held by Black
heritage colleagues in the UK and US
combined. (2023: 3.0%)
Ambition: 3.4% of senior leadership
roles held by Black heritage
colleagues in the UK and US
combined by 20256.
Inclusion index score. (2023: 78%)
Ambition: Maintain 75% in the
Snapshot Inclusion index.
Governance:
Acting
responsibly
Conduct training
8
Customer satisfaction
9
99%
4 out of 6
3 out of 6
Employees who completed
conduct training in 2024.
(2023: 98%)
Target: At least 98% of employees
complete conduct and financial
crime training each year.
WPB markets that sustained top-
three rank and/or improved in
customer satisfaction.
(2023: 3 out of 6)
Target: To be ranked top three and/or
improve customer satisfaction rank.
CMB markets that sustained top-
three rank and/or improved in
customer satisfaction.
(2023: 5 out of 6)
Target: To be ranked top three and/or
improve customer satisfaction rank.
1 For further details of our approach to transition to net zero, methodology and third-party limited assurance reports on financed emissions, sustainable finance and
investment progress, and our own operations’ scope 1, 2 and 3 (business travel and supply chain) greenhouse gas emissions data, see www.hsbc.com/who-we-
are/esg-and-responsible-business/esg-reporting-centre.
2 In October 2020, we announced our ambition to provide and facilitate between $750bn to $1tn of sustainable finance and investment by 2030. For further details
and breakdown, see the ESG review on page 45. For details of how this ambition links with the scorecards, see page 297.
3 This absolute greenhouse gas emission figure covers scope 1, scope 2 and scope 3 (business travel) emissions. For further details of how this ambition links with
the scorecards, see page 297.
4 See page 48 for further details of our interim targets, which include combined on-balance sheet financed emissions and facilitated emission targets for two
emissions intensive sectors: oil and gas, and power and utilities. The remaining five sectors for which we have set on-balance sheet financed emissions targets are:
cement; iron, steel and aluminium; aviation; automotive; and thermal coal mining.
5 Senior leadership is classified as those at band 3 and above in our global career band structure. For further details, see the ESG review on page 65. For further
details of how this ambition links with the scorecards, see page 297.
6 These numerical ambitions do not form part of any US-based senior leader performance or other objectives, or in other jurisdictions where application of such
should not apply under local law.
7 For further details, see the ESG review on page 67. For details of how this ambition links with the scorecards, see page 297.
8 The completion rate shown relates to the ‘Conduct Matters’ training module that was launched in December 2023 and concluded in 2024, and covers permanent
and non-permanent employees (where legally permissible to assign training). For completion rates related to financial crime training, see the ESG review on page 80.
9 The markets where we report rank positions for WPB and CMB – the UK, Hong Kong, mainland China, India, Mexico and Singapore – are in line with the annual
executive scorecards. For further details of customer satisfaction, see the ESG review on page 77. For further details of how this target links with the scorecards, see
page 297.
HSBC Holdings plc Annual Report and Accounts 2024
17
Strategic report
Task Force on Climate-related Financial Disclosures (‘TCFD’) TCFD
The Financial Stability Board’s Task Force on
Climate-related Financial Disclosures (‘TCFD’)
recommendations set an important
framework for understanding and analysing
climate-related risks, and we are committed
to regular and transparent reporting to help
communicate and track our progress. We
also seek to advocate for the same from our
customers, suppliers and the industry.
We have set out our key climate-related
financial disclosures throughout the Annual
Report and Accounts 2024 and related
disclosures. We recognise that further work
lies ahead as we continue to develop our
management and reporting capabilities. In
2024, we enhanced our disclosures, such as
the portfolio breakdown for Energy
Performance Certificate (‘EPC’) ratings into
owner-occupied and buy-to-let properties.
We have considered our ‘comply or explain’
obligation under both the UK Financial
Conduct Authority’s Listing Rules and
Sections 414CA and 414CB of the UK
Companies Act 2006, and confirm that we
have made disclosures consistent with the
TCFD Recommendations and Recommended
Disclosures, including its annexes and
supplemental guidance, save for certain
items, which we summarise below.
– We set interim 2030 financed emissions
targets. However, we use different time
horizons for climate risk management. For
climate risk, we define short term as time
periods up to 2026; medium term between
2027 and 2035; and long term between
2036 and 2050. For financed emissions we
do not plan to set 2026 targets. In 2024, we
disclosed interim 2030 targets for financed
emissions for seven sectors as outlined on
page 52. Following this, we have set
combined on-balance sheet financed
emissions and facilitated emissions targets
for two emissions intensive sectors: oil and
gas, and power and utilities. We have also
set targets for on-balance sheet financed
emissions for the following five sectors:
cement; iron, steel and aluminium; aviation;
automotive; and thermal coal mining.
– The methodology and data used for
financed emissions is evolving. We expect
industry guidance, market practice, data
availability, scenarios and regulatory
disclosure requirements to continue to
change, along with the shape of our own
business. We have begun a review of our
2030 financed emissions targets and
associated policies, as part of the annual
review of our NZTP that we referenced in
our 3Q24 earnings release in October.
– We do not fully disclose impacts from
climate-related opportunities on financial
planning and performance, including on
revenue, costs and the balance sheet,
quantitative scenario analysis, detailed
climate risk exposures for all sectors and
geographies or physical risk metrics. This is
due to transitional challenges in relation to
data limitations, although nascent work is
ongoing in these areas. We expect these
data limitations to be addressed in the
medium term as more reliable data
becomes available and technology solutions
are implemented.
– We currently focus on disclosing only four
out of 15 categories of scope 3 greenhouse
gas emissions including business travel,
supply chain and financed emissions,
following our internal materiality
assessment. In relation to financed
emissions, we publish on-balance sheet
financed emissions for a number of sectors,
covering 2.7% of our loans and advances to
customers at 31 December 2023, as
detailed on page 56. We also publish
facilitated emissions for the oil and gas, and
power and utilities sectors. Data quality of
future disclosures on financed emissions
and related risks are reliant on our
customers publicly disclosing their
greenhouse gas emissions, targets and
plans, and related risks. We recognise the
need to provide early transparency on
climate disclosures but balance this with the
recognition that existing data and reporting
processes continue to require significant
enhancements.
For a full summary of our TCFD disclosures,
including detailed disclosure locations for
additional information, see pages 444 to 450.
ESG disclosure map and directory
The table below sets out the key non-financial information, including risks and policies on environmental, social and governance matters, and
where it can be found:
Transition to
net zero
At a glance
Read more on our approach to the transition and
understanding our climate reporting
Page 42
Supporting our customers
Read more on our progress made against our $750bn to
$1tn sustainable finance and investment ambition
Page 45
Partnering for systemic change
Read more on how we partner externally in support of
systemic change, including an update on our Climate
Solutions Partnership
Page 47
Embedding net zero
Read more on our progress made against our ambition to
achieve net zero in our financed emissions by 2050
Page 48
Read more on our progress in decarbonising our own
operations and supply chain
Page 58
Read more on our sustainability risk policies and our
thermal coal exposures
Page 61
Detailed Task Force on Climate-related
Financial Disclosures (‘TCFD’)
We make disclosures consistent with Task Force on Climate-
related Financial Disclosures (‘TCFD’) recommendations,
Page 444
highlighted with the symbol: TCFD
Build
inclusion and
resilience
Inclusion disclosures
Read more on how we are building an inclusive
environment that reflects our customers and communities,
and our latest pay gap statistics
Page 63
Pay gap disclosures
Page 65
Act
responsibly
How we govern ESG
Read more on our approach to ESG governance and
human rights
Page 74
Page 75
Human rights disclosures
How our ESG ambitions link to
executive remuneration
Read more on our ESG ambitions embedded in executive
remuneration
Page 17
Pages 284 to 300
ESG Data
Pack
Detailed ESG information
Our ESG Data Pack provides more granular ESG
information, including the breakdown of our sustainable
finance and investment progress, and complaints volumes
www.hsbc.com/esg
Strategic Report
18
HSBC Holdings plc Annual Report and Accounts 2024
Responsible business culture
We have a responsibility to help protect our
customers, our communities and the integrity
of the financial system.
Employee matters
We are building a responsible business culture
that values difference, takes responsibility,
seeks different perspectives and upholds good
standards of conduct.
There may be times when our colleagues need
to speak up about behaviours in the workplace
and in the first instance we encourage
colleagues to speak to their line manager. Our
annual employee survey showed that 85% of
colleagues have trust in their direct manager.
HSBC Confidential is our whistleblowing
channel, which allows colleagues past and
present to raise concerns confidentially and, if
preferred, anonymously (subject to local laws).
Our Snapshot survey showed that 80% of
colleagues feel able to speak up when they see
behaviours they consider to be wrong.
Our inclusion index measures our colleagues’
sense of belonging and psychological safety
within the organisation, and in 2024 this
remained unchanged at 78%.
To help address under-representation across
our colleague base, we have an ambition to
achieve a 35% representation of women in
senior leadership roles (classified as those at
band 3 and above in our global career band
structure) by 20251. We remain on track,
having achieved 34.6% in 2024.
We have an ambition to increase our Black
heritage senior leader representation in both the
UK and US combined to 3.4% by 20251. In 2024
we maintained our position at 3.0%.
Our hiring practices are merit-based, and we
seek to ensure that every candidate, regardless
of their identity and background, has an equal
opportunity to demonstrate their skill and
potential. We have identified specific Group-
wide priorities, which we track and monitor
progress against. We adapt implementation of
our strategy across international operations to
ensure it remains relevant locally. We have
enabled 93% of our colleagues to disclose their
ethnicity, with 67% currently choosing to do so,
where this is legally permissible.
1
These numerical ambitions do not form part of
any US-based senior leader performance or other
objectives, or in other jurisdictions where
application of such should not apply under local
law.
The table below outlines high-level
representation metrics.
All employees
48.8%
51.2%
Senior leadership
1
65.4%
34.6%
Holdings Board
46.2%
53.8%
1 Senior leadership is classified as those at band 3
and above in our global career band structure.
For further details of how we look after our
people, including our inclusion ambitions, how
we encourage our employees to speak up, and
our approach to employee conduct, see the
Social section of the ESG review on page 63.
Listening to our customers
We continue to listen, learn and act on our
customers’ feedback. We use the net
promoter system to share customer feedback
with our front-line teams, allowing them to
respond directly to customers. We also have
dedicated global forums to promote ongoing
improvement of our customers’ experience.
Social matters
We aim to help provide people and
communities with the skills and knowledge
needed to thrive through the transition to a
sustainable future. For this reason, we focus
our support on programmes that help build
inclusion and resilience. We also support
climate solutions and innovation, and
contribute to disaster relief. For examples of
our programmes, see the ‘Engaging with our
communities’ section of the ESG review on
page 72.
Human rights
As set out in our Human Rights Statement, we
recognise the role of business in respecting
human rights. Our approach is guided by the
UN Guiding Principles on Business and Human
Rights (‘UNGPs’) and the OECD Guidelines for
Multinational Enterprises on Responsible
Business Conduct. Our Human Rights
Statement and annual statements under the
UK Modern Slavery Act, are available on
www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre. For
further details of our approach, see the
‘Human rights’ section of the ESG review on
page 75.
Anti-corruption and anti-bribery
We are required to comply with all applicable
anti-bribery and corruption laws in every
market and jurisdiction in which we operate.
We seek to focus on the spirit of relevant laws
and regulations to demonstrate our
commitment to ethical behaviours and
conduct as part of our environmental, social
and corporate governance.
Environmental matters
For details of our climate ambition and carbon
emission metrics, see the ESG review on
page 42.
Group non-financial and sustainability
information statement
This section primarily covers Group non-
financial and sustainability information as
required by applicable regulations. Other
related information can be found as follows:
For further details of our key performance
indicators, see page 1.
For further details of our business model, see
page 4.
For further details of our principal risks and
how they are managed, see pages 37 to 39.
For further details of our TCFD disclosures,
including alignment with sections 414CA and
414CB of the Companies Act 2006, see pages
444 to 450.
Helping to boost reforestation in the Amazon basin
We acted as sole bookrunner and structuring bank for the World Bank’s $225m, 9-year
principal-protected Amazon reforestation-linked outcome bond, their largest outcome bond
issued to date. Under this bond, up to $36m of capital will be mobilised to support
reforestation activities undertaken by Mombak, the Brazilian project sponsor. Mombak intends
to use these funds to reforest degraded land with native tree species, and in doing so seek to
generate carbon removal credits.
This transaction is the first ever carbon removal credit-backed financing in international debt
capital markets. It represents a new, blended finance solution to help lower the cost of capital
for highly capital-intensive, nature-based solutions.
HSBC Holdings plc Annual Report and Accounts 2024
19
Male
Female
Male
Female
Male
Female
Strategic report
Board decision making and
engagement with stakeholders
The Board is committed to effective engagement with our
stakeholders and seeks to understand their interests and the
impacts on them when making decisions.
Section 172(1) statement
The Board recognises the importance of
engaging with stakeholders effectively to
ensure their interests and priorities are
understood and given due consideration in
Board discussions and decision-making. In
2024, the Directors took part in a
comprehensive stakeholder engagement
programme, meeting with stakeholders
directly where practicable and ensuring the
outcomes of engagement activities were
reported to the Board. Further details of the
Board’s engagement with stakeholders are
set out below. Our section 172(1) statement
is set out on pages 20 to 23 and describes
how the Directors have had regard to the
matters set out in section 172(1) (a) to (f) of
the Companies Act 2006 when discharging
their duty to promote the success of the
company. It includes examples of principal
decisions taken by the Board and how
relevant stakeholder impacts were
considered as part of the Board’s decision-
making.
Directors’ engagements with key stakeholders in 2024
Stakeholders
Engagement
Impact and outcomes
Customers
We recognise that the
greater our understanding of
our customers’ needs, the
better we can help support
them to achieve their
financial aims and succeed in
our purpose and strategy.
– Meetings with key customers in various regions
and engagement events with business customers
to discuss challenges and opportunities in their
relevant markets.
– Introductory meetings between the new Group
CEO and key clients across global markets.
– Regular reports to the Board on customer
matters, including operational resilience,
customer experiences across the Group and
results of retail customer surveys, including
changes to net promoter scores.
– Continued engagement with customers around the world helped
to further the Board’s understanding of their respective needs,
including how the Group can support customers to achieve their
varied goals, including during their transition to net zero.
– Customer surveys provided insights into how the Group can drive
meaningful improvements in outcomes for customers.
– Reports from management highlight where there are
opportunities for innovation and collaboration with our customers
and support the Board’s oversight of Group activities to ensure
such innovations are aligned with Group risk appetite and strategic
objectives.
Employees
We want to continue to be a
positive place to work and
build careers, with the
success of the Group’s
strategy dependent upon
having motivated people
with the expertise and skills
required to deliver it.
– Regular internal communications and
presentations from the Group CEO and Group
CFO to keep the workforce informed of business
performance, and leadership and other
organisational changes.
– Employee events, including leadership forums,
webcasts, town halls, off-sites and employee
exchange sessions, as well as events that form
part of the workforce engagement programme led
by the dedicated workforce engagement non-
executive Director, including visits to several
Global Service Centres.
– Participation in sessions with senior leaders in
multiple jurisdictions to discuss Group
performance and strategy, including a global town
hall co-hosted by the Group CEO for global
sustainability colleagues to discuss sustainability
matters.
– Interaction with leads of employee resource
groups and participation at multiple events in
many jurisdictions.
– Meeting with colleagues across jurisdictions allowed Directors to
hear first-hand views on important issues, including inclusion
matters, talent development and the employee experience.
– Workforce engagements and interactions helped to ensure
continued connectivity between the Board and the workforce,
inform Board discussions and decision making and enhance
understanding of the Group culture across different geographies.
Such engagements also help enable the Board to put into
perspective employee Snapshot survey results and monitor
activity in response to matters raised.
– Directors taking part in the Bank Director Programme shared their
experiences and knowledge with the employees enrolled to
qualify as Group subsidiary directors. Such sessions provided
participants with the opportunity to ask questions and
demonstrate how good governance practices are embedded
throughout the Group. Following the success of this programme,
a second Director-sponsored development programme launched
in November 2024, aimed at prospective and existing employee
subsidiary chairs.
– Internal communications by executive Directors helped increase
awareness among the workforce of Group performance and
significant developments during the year, including changes to
executive leadership and the organisational structure. This
engagement aims to promote better understanding of and
engagement with the Group’s strategic aims across the
workforce. Employee engagement with Group strategy is
monitored through annual Snapshot surveys, the results of which
are presented to the Board.
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20
HSBC Holdings plc Annual Report and Accounts 2024
Stakeholders
Engagement
Impact and outcomes
Investors
We seek to understand
investor needs and
sentiment through ongoing
dialogue and a variety of
engagements with both
retail and institutional
investors.
– The Group Chairman and the Group CEO held a
Q&A session with retail shareholders at the annual
Informal Shareholders’ Meeting in Hong Kong.
– As part of the hybrid 2024 AGM, shareholders were
able to ask questions of the Board during the
meeting, either virtually or in person.
– Directors attended the inaugural HSBC Global
Investment Summit held in Hong Kong in April
2024, at which the Group Chairman and Group CEO
also presented.
– The Group Chairman and the Senior Independent
Director met with a number of large institutional
investors.
– The Group CEO and the Group CFO, together and
separately, attended meetings with investors.
– In addition to routine meetings with top investors
and proxy advisors, the Group Remuneration
Committee Chair led a consultation with
shareholders on proposed updates to the Directors’
Remuneration Policy, which will be put to
shareholder vote at the 2025 AGM.
– The Group Chairman and the Group CEO and Group
CFO presented the interim and year-end results to
analysts and investors and engaged in Q&A
sessions.
– Regular interactions with institutional and retail investors
throughout the year helped the Board to understand investor
sentiment regarding material matters such as strategy delivery
and outlook, transition to net zero, and to gauge investors’
continued support for the Group.
– Q&A sessions at analyst and investor briefings and meetings with
Directors and senior management provide investors with the
opportunity to learn more about the Group’s strategic direction
and offered the Board insight into investor priorities and areas of
interest.
– The outcomes of targeted engagement at management level on
key topics of investor interest were reported to the Board to help
enable its continued monitoring of responses to key matters of
strategic importance, which during the year has included our first
net zero transition plan and financial targets.
– For details of the Group Remuneration Committee Chair’s
engagements with key investors and proxy advisory firms, and
how they were taken into account by the Group Remuneration
Committee in its decision making and in the development of the
Directors’ Remuneration Policy, see the Directors’ remuneration
report on pages 279 to 317.
– Building on the success of the inaugural HSBC Global Investment
Summit, a second summit has been scheduled to take place in
2025. The summit provides a forum for open and frank exchange
of thoughts and ideas between world-class experts, political
leaders, institutional investors and top decision-makers.
Communities
We seek to play an
important role in supporting
the communities in which
we operate through our
corporate social
responsibility and broader
engagement activities.
– Directors met with an environmental non-profit
organisation affiliated with WWF to discuss the
Group’s ongoing partnership arrangements.
– Director attendance at summits to facilitate
engagement with philanthropic partners and civil
society on issues relevant to our communities,
such as the World Economic Forum, Abu Dhabi
Sustainability Week and New York Climate Week.
– Meetings with members of the Sustainable
Markets Initiative Council to discuss priorities and
opportunities.
– Meetings with charitable partners enabled the Directors to better
understand the Group’s impact within local communities as an
employer, sponsor, collaborator and supporter.
– These engagements provided opportunities for Directors to learn
from and engage in an exchange of knowledge and ideas with
subject-matter experts in areas including nature conservation,
sustainable aviation fuel and carbon reduction solutions. These in
turn, give context for Board decision-making on sustainability
matters and inform discussions about the Group’s own net zero
ambitions.
Regulators and
governments
Maintaining constructive
dialogue and relations with
the relevant authorities in
the markets in which we
operate helps support the
achievement of our strategic
aims.
– Various meetings across our key markets with
heads of state, international leaders and
government officials.
– Regular meetings with and presentations from our
regulators, including the PRA and FCA, as well as
introductory meetings with the newly appointed
Group CEO.
– Presentations made by the Group Chairman and
Group CEO at regulatory forums.
– Targeted outreach to key international regulatory
bodies and government officials on key topics of
regulatory and community interest, including our
net zero transition, changes to executive leadership
and geopolitical matters.
– Regular reports and updates to the Board from
management regarding regulatory and political
developments relevant to the Group.
– Frequent and varied engagements between the Board and heads
of state, international leaders, government officials and regulators
provided an opportunity for open dialogue on matters of regulatory
interest and strategic importance.
– Through meetings with international officials, and at presentations
given by the Group Chairman, Group CEO and other senior leaders
at regulatory forums, Directors were able to communicate the
Group’s strategy, perspectives and insights while helping to
ensure that they remained abreast of political and regulatory
developments. It also allowed the Board opportunities to share
perspectives on industry best practices.
– Regular reports from management enabled the Board to monitor
the Group’s responses to geopolitical and regulatory changes and
ensure that appropriate resources and controls are in place. Such
reports are critical to ensuring that the Board continues to
understand and meet its regulatory obligations, and also provide
valuable context to the Board’s strategic discussions.
Suppliers
We engage with suppliers,
which helps us operate our
business effectively and
execute our strategy.
– Regular reports were provided to the Board from
the Group Chief Operating Officer which included
outcomes of engagement with suppliers and
updates on supplier risks and priorities across the
Group.
– Meetings with key suppliers to discuss how
technology solutions may be enhanced through AI
and data and opportunities for innovation,
particularly in the areas of improving customer
experience, risk management and operational
resilience, and regulatory compliance.
– Meeting with our suppliers helped the Directors understand our
suppliers’ challenges, where there are opportunities for
collaboration and innovation and where there are opportunities
within our own operations.
– Management reports enabled the Board, supported by the Group
Risk Committee, to monitor management of third-party risk, the
delivery of the Group data programme, and to ensure that
sustainable capabilities are in place for delivery of the Group’s
strategic objectives.
– It is important for the Board to understand the Group’s supply
chain and how suppliers’ operations align to our values and codes
of conduct. Board reports on such matters, and on the outcomes
of supplier engagements, provide context and support the Board’s
understanding when reviewing and approving the annual
statement under the UK Modern Slavery Act.
HSBC Holdings plc Annual Report and Accounts 2024
21
Strategic report
Principal strategic decisions
The Board is responsible for setting and
monitoring execution against the Group
strategy. When taking principal decisions in
2024, the Directors considered the likely
short- and long-term consequences of the
decision, how it aligned with our strategic
priorities, and any other relevant matters,
including those arising under section 172(1)
of the Companies Act 2006, in accordance
with their duties.
To enable the Board to operate effectively in
this regard, good governance practices have
been adopted and are implemented in the
course of Board meetings administration.
Governance features as an agenda item at all
scheduled Board meetings. Papers presented
to the Board for its consideration are
expected to follow a template to help ensure
that Directors have the appropriate
information to take informed decisions. The
template requires authors to, among other
things, describe any steps taken or to be
taken, to engage with relevant stakeholders,
explain the extent to which stakeholders are,
or will be impacted by the matter under
consideration, and how this has influenced
the recommendation to the Board. The
following pages describe some examples of
how the Board operated during the year with
regard to the matters under sections 172(1)
(a) – (f) of the Companies Act 2006 in the
course of taking principal strategic decisions.
Executive Director Changes
In April 2024, the Group announced that Sir
Noel Quinn would be retiring from his role as
Group CEO and the Board began a formal
process to appoint a successor. As Group
CEO, Sir Noel Quinn drove a transformative
phase for the bank, leading the execution of
its revenue repositioning and overall
simplification through disposal of non-core
assets. In making the decision to appoint a
new Group CEO, the Board had in mind the
overall strategic direction and desired culture
of the Group and the skills and experience
required to navigate the next phase of growth
and development.
The Board takes a long-term view to
succession planning and keeps this under
continual review, supported by the dedicated
work of the Nomination & Corporate
Governance Committee. Upon confirmation
of Sir Noel Quinn’s retirement, a formal
executive search process was undertaken,
supported by an external executive search
agency and led by the Nomination &
Corporate Governance Committee. The
search process considered internal and
external candidates with the depth of
knowledge and understanding required to
lead an organisation with the global scale and
complex nature of HSBC.
In July 2024, the Board announced its
decision to appoint Georges Elhedery, then
Group CFO, as Group CEO. In determining
that Georges Elhedery was the right
candidate for the role, the Board took into
account his exceptional leadership and
proven track record of leading through
change, driving growth, delivering
simplification, prudent risk management and
cost discipline. Georges has extensive
international experience and during his time
at HSBC has developed strong and
productive relationships with various
stakeholders, evidenced through positive
feedback received from analysts, investors
and colleagues.
The Board’s decision to appoint Georges in
the role of Group CEO was further influenced
by his clear and ambitious vision of HSBC’s
ability to deliver for its customers, investors,
employees and communities with a strong
focus on execution. Since his appointment,
Georges has prioritised meetings with
customers, employees and other
stakeholders in HSBC’s home markets as
well as key growth areas to continue to
develop these relationships in his new role.
The Board, together with the Nomination &
Corporate Governance Committee, undertook a
further executive search process to appoint a
successor to the role of Group CFO. Following
Board approval, it was announced in July 2024
that Jonathan Bingham would be appointed as
interim Group CFO, with effect from 2
September 2024, to provide strategic leadership
and continuity during the search for a permanent
candidate. In October 2024, the company
announced that Pam Kaur, then Group Chief
Risk and Compliance Officer, would be
appointed as Group CFO with effect from 1
January 2025. In taking this appointment
decision, the Board took into consideration
Pam’s strong technical expertise and
appreciation of the global challenges facing the
Group, and the banking industry more broadly,
together with her reputation within HSBC.
Throughout the executive Director
appointment processes, both the Board and
the Nomination & Corporate Governance
Committee oversaw engagement with
regulators and the necessary regulatory
approval processes. See the Nomination &
Corporate Governance Committee Report on
page 259 for further information about the
appointment and induction process of the
Group CEO and the Group CFO respectively,
and the Board’s succession planning activities.
Group Strategy
Over the last five years, the Group has
repositioned its portfolio away from non-core
markets and directed revenue into higher
growth areas. Through meetings with, and
regular updates from senior management
across the Group, the Board continues to
monitor strategic execution and alignment
over geographical and business areas,
including in the context of changing
geopolitical and macroeconomic factors, with
due regard to the impacts of its operations on
stakeholders. The Board took time during the
year to consider strategic key performance
indicators and the Group CEO provided
regular updates and progress reports on
these.
The Board receives regional strategic updates
from management to inform its
understanding of business performance and
alignment with long-term Group strategy.
During the year, and following conclusion of
the sale of HSBC Bank Canada, the Board
endorsed a number of transactions to further
the Group’s core ambitions. One such
transaction was the sale of the Group’s
business in Argentina. A strategic review of
the business was undertaken which
considered whether it supported our strategy
for international expansion and growth.
The review concluded that HSBC Argentina,
as a largely domestically-focused business,
had limited connectivity with the Group’s
international network, and further contributed
to earnings volatility when its results were
converted to USD. Consideration was given
to regulatory matters, the impacts of a sale
on our employees and customers, particularly
the impacts of migration and continuity of
services, and it was concluded that the
prospective buyer was well positioned to take
the business forward. The Board also took
the decision to explore the sale of the
Group’s private banking business in Germany,
in alignment with the Group’s strategic
direction. Following a review, it was noted
that the German business was primarily
focused on domestic clients and had not
been integrated into the Global Private
Banking business more widely. It was
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22
HSBC Holdings plc Annual Report and Accounts 2024
Group Strategy continued
determined that, to maintain focus on Global
Private Banking’s strategic objectives and
prioritise focus on our international
connectivity to scale growth in alignment
with our strategy, it would be favourable for
the business to enter into an arrangement
with an organisation better placed to grow
and invest in the business. The Board
supported a sale of the private banking
business to a suitable buyer.
Following Georges Elhedery’s appointment
as Group CEO, he has been focused on
driving a more streamlined and dynamic
organisational structure to enable the Board
and management to execute at pace. During
the year, the Board provided oversight and
challenge to management on plans to
accelerate the delivery of this strategy. In
October 2024, the Board approved a
simplification of the Group’s organisational
structure, to take effect from 1 January 2025,
in order to create a more agile business that
makes it easier for colleagues to achieve best
in class service for our customers, and drive
the future success of the Group for the
benefit of all our stakeholders over the long
term.
As part of its meetings, the Board monitors
the results of the annual employee Snapshot
survey and receives regular updates on
customer initiatives and priorities from across
the Group. Annual Snapshot survey results
have indicated that employees want to be
empowered to get things done, which is one
of our core values. This feedback, together
with the Board’s ongoing monitoring of
customer needs, helped inform the Board’s
consideration of the new structure, with its
key aims: to simplify and improve internal
decision-making processes and
accountability; and enable colleagues to be
better positioned to serve our customers
quickly and effectively.
The Board further considered the impacts of
organisational changes on employees and our
relationships with customers, investors and
regulators. The new structure will help foster
clearer communication, empower teams, and
reduce the complexity of reporting lines, with
a focus on improving the employee
experience at the Group and ultimately
providing better outcomes for our customers
and communities. The Board will oversee and
monitor the implementation of the new
organisational structure and its impacts over
the course of 2025.
As HSBC accelerates delivery of its strategy,
the Board has also given considerable
thought to how to optimise the Group’s
governance and leadership structure, while
continuing to generate sustainable returns
and maintain a reputation for high standards
of business conduct.
During the year, the Board looked closely at
formulating the right organisational structure
to create a transparent and accountable
leadership team and has overseen significant
changes to the Group Executive Committee
(‘GEC’) and approved several key
appointments. In conjunction with the wider
business simplification, from 1 January 2025,
the Board endorsed that the 18 member GEC
would be replaced by a new Group Operating
Committee comprised of 12 members, which
will serve as the leading executive decision-
making committee for the Group. In taking
the decision to approve this change, the
Board had regard to the governance and
oversight requirements of the Group, and the
likely impacts on employees and customers
and our ongoing commitments to our
regulators.
The Board has further reviewed the
Committee structure and identified areas of
improvement, leading to the creation of a
new Board Sustainability Working Group
(‘SWG’) (see page 249), changes to the
Group’s Technology and Operations
Committee (see page 276) and combining of
the ESG Committee and Sustainability
Execution Committee (see page 249) as
explained in further detail below.
Sustainability
The Board is responsible for setting the
Group’s ESG strategy and takes a direct and
active role in monitoring the Group’s progress
towards its ESG ambitions. ESG remains an
important area of focus for the Board, and
ESG matters were considered at most of its
meetings during the course of the year. An
ESG dashboard is presented to the Board
regularly, which contains key metrics to help
the Board monitor progress against the
Group’s ESG ambitions and drive informed
discussions and decision making.
In January 2024, the Group published its first
net zero transition plan which outlines the
proposed steps for delivering the Group’s
ambition to align its financing portfolio to net
zero by 2050. Since its publication, the Board
has been informed of feedback from
customers, investors and shareholder groups,
and government officials, all of which have
provided valuable context to Board
discussions on the progress and
development of its sustainability agenda.
In recognition of the complexity of the
sustainability landscape and real-world
transition challenges, the Board established
the SWG, comprised of five non-executive
Directors and supported by members of
executive management, including the Group
CEO and Group CFO. This working group has
an initial remit to provide oversight and
guidance in relation to the Group’s
sustainability activities, including the targets
and timelines set out in the net zero transition
plan, key sustainability risk policies and
communication with key stakeholder groups.
The SWG provides strategic input and
guidance as appropriate and its areas of focus
and priority are kept under review as needed.
The SWG is actively involved in the
consideration of our approach to net zero
transition, covered in more detail within our
ESG update on page 3 and our ESG overview
on page 15.
As part of the Board’s aim to simplify and
optimise the Group’s governance and
leadership frameworks, the Board also
reviewed the effectiveness of the executive
level ESG governance structure and
associated reporting to the Board. Following
this review, in 2024 the Board endorsed the
rationalisation of the ESG Committee and
Sustainability Execution Committee into a
single governance body, the ‘ESG
Committee’. The newly constituted ESG
Committee continues to report to the new
Group Operating Committee, with escalation
of matters to the SWG or the Board, as
appropriate. This consolidation allows for
greater Board oversight of significant ESG
and sustainability matters, and more
streamlined reporting of key matters up to
Board level.
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23
Strategic report
Remuneration
Our remuneration policy supports the achievement of our strategic objectives
by aligning reward with our long-term sustainable performance.
Remuneration for our executive Directors
At the 2025 Annual General Meeting (‘AGM’),
we will be seeking shareholder approval for a
new executive Director remuneration policy.
Over several years, the Group Remuneration
Committee has expressed concerns around
the competitiveness of the executive Director
remuneration opportunity and indicated a
preference to operate a policy with a higher
proportion of the package based on variable
pay linked to performance, aligned to practice
among our international peers.
The removal of the limits on the ratio between
fixed and variable pay by the UK regulators
provides an opportunity to revisit our current
Directors’ remuneration policy and the
Committee feels that now is the right time to
set a policy that better reflects the Group’s
focus on long-term sustainable performance.
After careful consideration, the Committee
concluded that the current variable pay
framework of an annual incentive and single
performance-based long-term incentive is most
appropriate. The Committee considered the
right approach is to unwind the changes made
in 2014, when the 2:1 pay ratio was introduced
and to reset the maximum opportunity.
The Committee reflected on the appropriate
maximum opportunity for the Group CEO and
Group CFO considering (i) the maximum
opportunity in 2014; (ii) market data for our
international banking peers and the largest
FTSE 30 companies, reflecting that HSBC is
one of the world’s leading international banks;
and (iii) compression challenges within the
senior HSBC team.
We will continue to set a scorecard of
stretching and quantitative financial and
strategic performance targets aligned to our
strategy and stakeholder interests. Maximum
pay outcomes will be delivered only for
exceptional performance as required by these
targets.
The Committee engaged with major investors
on the new remuneration policy and the Chair
of the Committee met with many shareholders
directly. Shareholders we spoke to were
generally supportive of our proposal and their
feedback has directly influenced the final
policy. We would like to thank our shareholders
for the time taken to engage with us during the
year.
For details of our proposed executive Director
remuneration policy, see page 284.
2024 remuneration decisions
The Committee considered carefully the
wider context in which performance was
delivered in 2024 and judged that the overall
scorecard outcome for both Sir Noel Quinn
and Georges Elhedery was appropriate
against the targets set at the start of the year
for financial, strategic and personal measures.
The Committee also carefully considered the
executive Directors’ pay outcomes in the
context of pay decisions made for the wider
workforce and determined that these were
an appropriate reflection of Group, business
and individual performance delivered in 2024.
Executive Directors’ scorecard outcomes
(% of maximum opportunity)
2024 annual incentive
Sir Noel Quinn
77.81%
Georges Elhedery
78.79%
2022–2024 long-term incentive
Sir Noel Quinn
75.00%
Georges Elhedery
75.00%
For details of Directors’ pay and performance for
2024, see the Directors’ remuneration report on
page 296.
Remuneration for our colleagues
Our focus remains on taking actions that
improve our ability to attract, retain and
energise colleagues to deliver high
performance and growth.
Rewarding colleagues responsibly
Fixed pay increases for 2025 were
determined based on consistent principles to
help address wage inflation in the markets
where we operate.
We will award an average global fixed pay
increase of 3.6% in 2025, compared with
4.4% for the previous year, reflecting that
projected wage inflation is lower in many of
our markets.
We continue to review all wages globally
against local Living Wage benchmarks to help
ensure we pay responsibly and provide
financial security to colleagues. We are proud
to have been certified by the Fair Wage
Network as a global Living Wage employer
for 2025.
Recognising colleagues’ success
We introduced new performance routines
and changes to performance assessment for
over 200,000 colleagues in 58 markets.
We also introduced a new variable pay
structure for over 150,000 colleagues,
providing more clarity around variable pay
levels for on-target performance, and how
this is impacted by Group, business and
individual performance.
The Group Remuneration Committee
determined overall variable pay of $3,800m
(2023: $3,774m). This followed a review of
our performance against financial and non-
financial metrics set out in the Group risk
framework. Our highest performers received
the largest increases in variable pay
compared with the previous year.
Variable pay pool
($m)
3,800
3,774
For details of how the Group Remuneration
Committee sets the pool, see page 283.
Supporting colleagues to grow
In our employee Snapshot survey, 78% of
respondents said they believe HSBC
genuinely cares about their well-being, a
record high. We have been ranked number
one for workplace mental health for the third
year running in the Global CCLA Corporate
Mental Health Benchmark 2024. We have
prioritised supporting colleagues to work
flexibly, balancing customer needs, social
connection and individual flexibility.
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HSBC Holdings plc Annual Report and Accounts 2024
2024
2023
Financial overview
In assessing the Group’s financial performance, management uses a range
of financial measures that focus on the delivery of sustainable returns for
our shareholders and maintaining our financial strength.
Executive summary
We delivered a strong performance in 2024
with reported profit before tax of $32.3bn, up
$2.0bn or 6% compared with 2023. Our
financial performance demonstrates the
progress against our strategic priorities.
In 2024, we achieved a return on average
tangible equity (‘RoTE’) of 14.6% and a RoTE
excluding notable items of 16.0%. We have
now further extended our mid-teens RoTE
target in each of the three years from 2025 to
2027, excluding notable items.
This section sets out our key Group financial
targets and the progress we made towards
these in 2024, and our expectations for 2025
and beyond. We also include a more detailed
table covering further key financial metrics that
we consider insightful for understanding the
Group’s performance.
The Group financial results that follow provide
more detailed insight into the performance
that has driven the outcomes of our financial
targets. It covers income statement
performance on both a reported and constant
currency basis, and the main factors impacting
the strength of our balance sheet, capital and
liquidity position.
Group financial targets
Return on average tangible equity
excluding notable items
16.0%
(2023: 16.2%)
In 2024, RoTE was 14.6%, in line with 2023.
For the purposes of measuring performance
against our Group target, we adjust RoTE to
exclude notable items. From 1 January 2024,
we revised the adjustments made to RoTE
from excluding only the impact of strategic
transactions and the impairment of BoCom, to
exclude all notable items. This was intended to
improve alignment with the treatment of
notable items in our other income statement
disclosures. RoTE excluding notable items has
been re-presented for 2023 on the revised
basis and we no longer disclose RoTE
excluding strategic transactions and the
impairment of BoCom.
RoTE excluding notable items was 16.0%, a
decrease of 0.2 percentage points compared
with 2023.
We are now targeting a mid-teens RoTE in
each of the three years from 2025 to 2027
excluding notable items.
Our targets and expectations reflect our
current outlook for the global macroeconomic
environment and market-dependent factors,
such as market-implied interest rates as of mid-
January 2025 and rates of foreign exchange, as
well as customer behaviour and activity levels.
Target basis operating expenses
$32.6bn
(2023: $31.1bn)
In 2024, reported operating expenses
increased by 3.0% compared with 2023.
Target basis operating expense growth was
5.1% compared with 2023, in line with our
target of approximately 5%. Growth primarily
reflected higher investment spend, including in
technology and from inflationary pressures.
Our target basis operating expenses for 2024
excluded the direct cost impact of the disposals
in France and Canada from the 2023 baseline. It
is measured on a constant currency basis and
excludes notable items and the impact of
retranslating the prior year results of
hyperinflationary economies at constant currency.
We retain a Group-wide focus on cost
discipline. We are targeting growth in target
basis operating expenses of approximately
3% in 2025 compared with 2024. Our target
basis operating expenses for 2025 excludes
the direct cost impact of the business
disposals in Canada and Argentina, notable
items and the impact of retranslating the prior
year results of hyperinflationary economies at
constant currency.
Our cost target includes the impact of
simplification-related savings associated with
our announced reorganisation, which aims to
generate approximately $0.3bn of cost
reductions in 2025, with a commitment to an
annualised reduction of $1.5bn in our cost
base expected by the end of 2026. To deliver
these reductions, we plan to incur severance
and other up-front costs of $1.8bn over 2025
and 2026, which will be classified as notable
items.
Capital and dividend policy
CET1 ratio
14.9%
Dividend payout ratio in respect of 2024
50%
on a dividend payout ratio target basis.
At 31 December 2024, our CET1 capital ratio
was 14.9% which was higher than our
medium-term target range of 14% to 14.5%.
We intend to continue to manage the CET1
ratio to within this range.
The total dividend per share in 2024 of $0.87
included a special dividend of $0.21 per share
that was paid in June following the completion
of the sale of HSBC Bank Canada. On a
dividend payout ratio target basis, this resulted
in a payout ratio of 50% of earnings per share.
For the purposes of computing our target basis
dividend payout ratio, we exclude from
dividends per share the special dividend of
$0.21 per share, and we exclude from earnings
per share material notable items and related
impacts. See page 121 for our calculation of
earnings per share.
The Board has established a target basis
dividend payout ratio of 50% for 2025,
subject to meeting capital requirements. This
policy is designed to provide sustainable cash
dividends, while retaining the flexibility to
invest and grow the business, supplemented
by additional shareholder distributions, if
appropriate.
HSBC Holdings plc Annual Report and Accounts 2024
25
Strategic report
Key financial metrics
For the year ended 31 Dec
Reported results
2024
2023
2022
Profit before tax ($m)
32,309
30,348
17,058
Profit after tax ($m)
24,999
24,559
16,249
Revenue ($m)
65,854
66,058
50,620
Cost efficiency ratio (%)
50.2
48.5
64.6
Net interest margin (%)
1.56
1.66
1.42
Basic earnings per share ($)
1.25
1.15
0.72
Diluted earnings per share ($)
1.24
1.14
0.72
Dividend per ordinary share (in respect of the period) ($)
1
0.87
0.61
0.32
Dividend payout ratio (%)
2
50
50
44
Alternative performance measures
Constant currency profit before tax ($m)
32,309
29,903
16,302
Constant currency revenue ($m)
65,854
64,912
49,587
Constant currency cost efficiency ratio (%)
50.2
48.5
65.0
Constant currency profit before tax excluding notable items ($m)
34,122
32,680
23,057
Constant currency revenue excluding notable items ($m)
67,434
64,489
53,383
Constant currency profit before tax excluding notable items and strategic transactions ($m)
34,037
32,217
N/A
Constant currency revenue excluding notable items and strategic transactions ($m)
67,256
63,043
N/A
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances
to customers (%)
0.36
0.34
0.36
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances
to customers, including held for sale (%)
0.36
0.32
0.36
Basic earnings per share excluding material notable items and related impacts ($)
1.31
1.22
N/A
Return on average ordinary shareholders’ equity (%)
13.6
13.6
9.0
Return on average tangible equity (%)
14.6
14.6
10.0
Return on average tangible equity excluding notable items (%)
16.0
16.2
11.8
Target basis operating expenses ($m)
32,648
31,074
N/A
At 31 Dec
Balance sheet
2024
2023
2022
Total assets ($m)
3,017,048
3,038,677
2,949,286
Net loans and advances to customers ($m)
930,658
938,535
923,561
Customer accounts ($m)
1,654,955
1,611,647
1,570,303
Average interest-earning assets ($m)
2,099,285
2,161,746
2,143,758
Loans and advances to customers as % of customer accounts (%)
56.2
58.2
58.8
Total shareholders’ equity ($m)
184,973
185,329
177,833
Tangible ordinary shareholders’ equity ($m)
154,295
155,710
146,927
Net asset value per ordinary share at period end ($)
9.26
8.82
8.01
Tangible net asset value per ordinary share at period end ($)
8.61
8.19
7.44
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)
3,4
14.9
14.8
14.2
Risk-weighted assets ($m)
3,4
838,254
854,114
839,720
Total capital ratio (%)
3,4
20.6
20.0
19.3
Leverage ratio (%)
3,4
5.6
5.6
5.8
High-quality liquid assets (liquidity value) ($m)
4,5
649,210
647,505
647,046
Liquidity coverage ratio (%)
4,5,6
138
136
132
Net stable funding ratio (%)
4,5,6,7
143
138
141
Share count
Period end basic number of $0.50 ordinary shares outstanding, after deducting own shares held (millions)
17,918
19,006
19,739
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares, after
deducting own shares held (millions)
18,062
19,135
19,876
Average basic number of $0.50 ordinary shares outstanding, after deducting own shares held (millions)
18,357
19,478
19,849
For reconciliation and analysis of our reported results on a constant currency basis, including lists of notable items, see page 99. Definitions and calculations of other
alternative performance measures are included in ‘Reconciliation of alternative performance measures’ on page 120.
1
In 2024, dividend per share includes the special dividend of $0.21 per ordinary share arising from the proceeds of the sale of our banking business in Canada to Royal
Bank of Canada.
2 In 2024 and 2023, our dividend payout ratio was adjusted for material notable items and related impacts, including all associated income statement impacts relating to
those items. In 2022, our dividend payout ratio was adjusted for the loss on classification to held for sale of our retail banking business in France, items relating to the
sale of our banking business in Canada, and the recognition of certain deferred tax assets.
3
Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation in force at the
time. References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the UK‘s version of such regulation or
directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently amended under UK law.
4
Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those submitted in regulatory
filings. Where differences are significant, we may restate in subsequent periods.
5
The liquidity coverage ratio is based on the average value of the preceding 12 months. The net stable funding ratio is based on the average value of four preceding quarters.
6 We enhanced our liquidity consolidation process in 2Q24 by revising provisions that addressed historical limitations. As our Group LCR and NSFR are reported on an
average basis, the benefit of these changes incrementally increased our LCR and NSFR by circa 3% and 11% during the year, respectively. Compared to year ended 31
December 2023, the increase in LCR was mainly driven by these enhancements. The associated NSFR increase driven by these changes was partly offset by higher
required stable funding primarily due to a rise in financial investments and derivatives activities.
7 We enhanced our calculation processes during 1Q24 and our NSFR comparatives have been restated.
Strategic Report
26
HSBC Holdings plc Annual Report and Accounts 2024
Basis of presentation
Impact of strategic transactions
To aid the understanding of our results, we
separately disclose the impact of strategic
transactions classified as material notable
items on the results of the Group and our
global businesses. Material notable items are
a subset of notable items and categorisation
is dependent on the nature of each item in
conjunction with the financial impact on the
Group’s income statement. Strategic
transactions classified as material notable
items comprise the disposal of our retail
banking operations in France, our banking
business in Canada, the sale of our business
in Argentina and the acquisition of SVB UK.
The impacts quoted include the gains or
losses on classification to held for sale or on
acquisition and all other related notable items.
They also include the distorting impact
between the periods of the operating income
statement results related to acquisitions and
disposals that affect period-on-period
comparisons. It is computed by including the
operating income statement results of each
business in any period for which there are no
results in the comparative period. We
consider the monthly impacts of distorting
income statement results when calculating
the impact of strategic transactions. See page
102 for supplementary analysis of the impact
of strategic transactions.
Constant currency performance
Constant currency performance is computed
by adjusting reported results of comparative
periods for the effects of foreign currency
translation differences, which distort period-
on-period comparisons.
We consider constant currency performance
to provide useful information for investors by
aligning internal and external reporting, and
reflecting how management assesses period-
on-period performance.
Notable items
We separately disclose ‘notable items‘, which
are components of our income statement
that management would consider as outside
the normal course of business and generally
non-recurring in nature. We now disclose
‘profit before tax excluding notable items’ and
‘revenue excluding notable items’. We have
introduced these new measures due to the
significant impact of notable items on the
Group’s results. We consider profit before tax
excluding notable items and revenue
excluding notable items as useful information
in understanding period-on-period
performance.
Certain notable items are classified as
‘material notable items’, which are a subset
of notable items. Categorisation as a material
notable item is dependent on the nature of
each item in conjunction with the financial
impact on the Group’s income statement.
The tables on pages 99 to 101 and pages 113
to 118 detail the effects of notable items on
each of our global business segments and
legal entities during 2024, 2023 and 2022.
Management view of revenue on a
constant currency basis
Our global business segment commentary
includes tables that provide breakdowns of
revenue on a constant currency basis by
major product. These reflect the basis on
which revenue performance of the
businesses is assessed and managed.
Global Trade Solutions
During 2024, we renamed our Global Trade
and Receivables Finance business as Global
Trade Solutions (‘GTS’), to better reflect our
broad suite of products and the focus we
place on serving our clients globally.
Comparative periods
Unless otherwise stated, all performance
commentary that follows compares our
results in 2024 with those in 2023.
Reported results (vs 2023)
Reported profit
Reported profit before tax of $32.3bn was
$2.0bn or 6% higher. This included a net
$1.0bn favourable impact from notable items.
In 2024, notable items included a gain of
$4.8bn following the disposal of our banking
business in Canada, and losses associated
with the sale of our business in Argentina,
comprising a $1.0bn loss on disposal, as well
as the recycling of foreign currency reserve
losses and other reserves of $5.2bn. In 2023,
notable items included an impairment of
$3.0bn on our associate, Bank of
Communications Co., Limited (‘BoCom’),
which followed the reassessment of our
accounting value-in-use. They also included
disposal losses of $1.0bn on Treasury
repositioning and risk management and a
$1.6bn gain recognised on the acquisition of
Silicon Valley Bank UK Limited (‘SVB UK’).
For further details on our value-in-use
assessment for associates, see page 88.
The increase in reported profit before tax also
included revenue growth from Wealth
products in WPB and in Equities and
Securities Financing in GBM.
Reported operating expenses increased by
$1.0bn, mainly due to higher spend and
investment in technology and the impacts of
inflation, partly offset by reductions related to
our business disposals in Canada and France,
and from a reduction in levies in the UK and
the US. Target basis operating expenses rose
by 5% compared with 2023, in line with our
cost growth target.
Reported profit after tax of $25.0bn was
$0.4bn higher than in 2023. This included the
impact of an increase in the Group’s effective
tax rate, notably due to the impact of our
business disposals in Canada and Argentina.
Reported revenue
Reported revenue of $65.9bn was broadly
stable. There was growth in revenue from
higher customer activity in Wealth in WPB,
and in Equities and Securities Financing in
GBM. In addition, reported revenue in 2023
included disposal losses of $1.0bn related to
Treasury repositioning and risk management.
These items were broadly offset by the net
adverse impact of certain strategic
transactions described above, as well as a
$0.2bn loss on the early redemption of legacy
securities, and a reduction from the results of
the businesses that have now been disposed.
NII of $32.7bn fell by $3.1bn, and included
the adverse impact of foreign currency
translation differences of $1.6bn and the
impact from the early redemption of legacy
securities of $0.2bn. The reduction included
the effect of the disposal of our banking
business in Canada. The fall in NII also
reflected an increase of $2.7bn in funding
costs associated with the redeployment of
our commercial surplus into the trading book,
where the related revenue is recognised in
’net income on financial instruments held for
trading or managed on a fair value basis’.
These reductions were in part mitigated by
higher NII in HSBC UK, including the benefit
of our structural hedge. In Markets Treasury
NII increased due to reinvestments in our
portfolio at higher yields. Banking NII of
$43.7bn fell by $0.4bn or 1%, as increased
deployment of our commercial surplus to the
trading book partly mitigated the reductions in
NII.
Revenue in 2024 was adversely affected by a
$0.8bn impact of hyperinflationary accounting
in Argentina, including the devaluation of the
Argentinian peso, compared with a $1.4bn
adverse impact in 2023.
Reported ECL
Reported ECL charges of $3.4bn were stable
compared with 2023. This reflected
reductions in CMB and GBM, offset by an
increase in WPB.
HSBC Holdings plc Annual Report and Accounts 2024
27
Strategic report
Reported results continued
2024
2023
2022
2024 vs 2023
of which strategic
transactions
1
Reported results
$m
$m
$m
$m
%
$m
Net operating income before change in expected credit
losses and other credit impairment charges (‘revenue’)
65,854
66,058
50,620
(204)
—
(3,947)
ECL
(3,414)
(3,447)
(3,584)
33
1
72
Net operating income
62,440
62,611
47,036
(171)
—
(3,875)
Total operating expenses
(33,043)
(32,070)
(32,701)
(973)
(3)
1,100
Operating profit
29,397
30,541
14,335
(1,144)
(4)
(2,775)
Share of profit in associates and joint ventures less
impairment
2,912
(193)
2,723
3,105
>100
—
Profit before tax
32,309
30,348
17,058
1,961
6
(2,775)
Tax expense
(7,310)
(5,789)
(809)
(1,521)
(26)
Profit after tax
24,999
24,559
16,249
440
2
Revenue excluding notable items
67,434
65,723
54,222
1,711
3
Profit before tax excluding notable items
34,122
33,198
23,560
924
3
1 For details, see ‘Impact of strategic transactions‘ on page 102.
2024
2023
2022
Notable items
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
1
(1,343)
1,298
(2,737)
Fair value movements on financial instruments
2
—
14
(618)
Restructuring and other related costs
—
—
(247)
Disposal losses on Markets Treasury repositioning
—
(977)
—
Early redemption of legacy securities
(237)
—
—
Currency translation on revenue notable items
—
88
(174)
Operating expenses
Disposals, acquisitions and related costs
(199)
(321)
(18)
Impairment of non-financial items
—
—
—
Restructuring and other related costs
(34)
136
(2,882)
Currency translation on operating expenses notable items
—
—
(62)
Share of profit in associates and joint ventures less impairment
Impairment of interest in associate
—
(3,000)
—
1 The amount in 2024 includes a $1.0bn loss on disposal and a $5.2bn loss on the recycling in foreign currency translation reserve losses and other reserves arising
on sale of our business in Argentina. This was partly offset by a gain of $4.8bn on the sale of our banking business in Canada, inclusive of fair value gains on
related hedging and recycling of related reserves. The amount in 2023 included a gain recognised in respect of the acquisition of SVB UK of $1.6bn. The amount in
2022 included losses from classifying businesses as held for sale as part of a broader restructuring of our European business of which $2.4bn related to the sale of
our retail banking operations in France.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
ECL charges in CMB were $1.8bn in 2024, and
in GBM charges were $0.2bn. This included
charges of $0.4bn in respect of commercial real
estate in mainland China and of $0.1bn in the
Hong Kong real estate sector. This compared
with charges of $1.0bn and $0.1bn respectively
in these sectors in 2023. In addition, ECL in
2024 in CMB included a charge related to a
single exposure in the UK, while charges in
HSBC Bank UK reduced compared with 2023. In
GBM, charges in 2024 also benefited from a
release of stage 3 allowances in HSBC Bank plc
related to a single exposure.
In WPB, ECL charges were $1.3bn. These
primarily related to our legal entity in Mexico,
reflecting growth in our unsecured lending
portfolio and unemployment trends, and also in
Hong Kong and the UK.
For further details of the calculation of ECL, see
pages 147 to 160.
Reported operating expenses
Reported operating expenses of $33.0bn were
$1.0bn or 3% higher, including favourable
foreign currency translation differences between
the periods of $0.6bn. The increase reflected
higher spend and investment in technology and
inflationary impacts, while performance-related
pay remained stable. Operating expenses were
also adversely impacted by the non-recurrence
of a $0.2bn reversal of historical asset
impairments in 2023.
These increases were partly offset by a
favourable impact from the UK bank levy of
$0.1bn, as 2023 included adjustments relating to
prior years, and from the non-recurrence of a
$0.2bn charge incurred in the US relating to the
FDIC special assessment.
The number of employees expressed in full-time
equivalent staff (‘FTE’) at 31 December 2024
was 211,304, a decrease of 9,557 compared
with 31 December 2023, primarily reflecting the
completion of the sales of our banking business
in Canada, our retail banking operations in
France and our business in Argentina. The
number of contractors at 31 December 2024
was 4,226, a decrease of 450.
Reported share of profit in associates
and joint ventures less impairment
Reported share of profit in associates and joint
ventures less impairment of $2.9bn was $3.1bn
higher than in 2023. This primarily reflected the
non-recurrence of an impairment charge in 2023
of $3.0bn relating to our investment in BoCom
due to a reduction to the accounting value-in-use
of the investment. In addition, there was an
increase in the share of profit from Saudi Awwal
Bank (‘SAB’).
Tax expense
Tax in 2024 was a charge of $7.3bn,
representing an effective tax rate of 22.6%,
compared with 19.1% in 2023. The effective tax
rate for 2024 was increased by 4.8 percentage
points by the non-deductible loss on disposal of
our business in Argentina and by 0.7 percentage
points by the tax charge arising under the Global
Minimum Tax rules, and reduced by 3.6
percentage points by the non-taxable gain on
disposal of our banking business in Canada. The
effective tax rate for 2023 was increased by 2.3
percentage points by the non-deductible
impairment of investments in associates, and
reduced by 1.6 percentage points by the release
of provisions for uncertain tax positions and by
1.5 percentage points by the non-taxable
accounting gain arising on the acquisition of
SVB UK.
Reported profit after tax in 2024
$25.0bn
(2023: $24.6bn)
Strategic Report
28
HSBC Holdings plc Annual Report and Accounts 2024
Constant currency results
2024
2023
2022
2024 vs 2023
of which strategic
transactions
1
Results – on a constant currency basis
$m
$m
$m
$m
%
$m
Revenue
65,854
64,912
49,587
942
1
(3,890)
ECL
(3,414)
(3,259)
(3,615)
(155)
(5)
36
Total operating expenses
(33,043)
(31,494)
(32,229)
(1,549)
(5)
992
Operating profit
29,397
30,159
13,743
(762)
(3)
Share of profit in associates and joint ventures less impairment
2,912
(256)
2,559
3,168
>100
—
Profit before tax
32,309
29,903
16,302
2,406
8
(2,862)
Revenue excluding notable items
67,434
64,489
53,383
2,945
5
Profit before tax excluding notable items
34,122
32,680
23,057
1,442
4
1 For details, see ‘Impact of strategic transactions‘ on page 102.
Profit before tax of $32.3bn was $2.4bn
higher than in 2023 on a constant currency
basis. Constant currency profit before tax
excluding notable items of $34.1bn was
$1.4bn or 4% higher.
Revenue increased by $0.9bn or 1% on a
constant currency basis, and included a
$3.9bn net adverse impact from strategic
transactions. The growth in revenue reflected
the impact of higher customer activity in our
Wealth products in WPB, and in Equities and
Securities Financing in GBM. NII fell due to
business disposals and a loss on the early
redemption of legacy securities in 2024.
The reduction also included higher funding
costs associated with the redeployment of
our commercial surplus into the trading book,
where the related revenue is recognised in
’net income on financial instruments held for
trading or managed on a fair value basis’,
partly offset by higher NII in HSBC UK,
including the benefit of our structural hedge.
On a constant currency basis, banking NII of
$43.7bn increased by $1.5bn or 4%.
ECL were $0.2bn or 5% higher on a constant
currency basis. This included an increase in
WPB, mainly in our legal entity in Mexico,
from higher unsecured lending and
unemployment trends, and from higher
charges in our main legal entities in Hong
Kong and the UK. This was partly offset by
reductions in CMB and GBM including lower
stage 3 charges, including charges relating to
the commercial real estate sector in mainland
China, and in CMB, lower charges in HSBC
UK. The reduction in CMB was partly offset
by a charge in 2024 related to a specific
exposure in the UK.
Operating expenses were $1.5bn or 5%
higher on a constant currency basis, primarily
reflecting higher spend and investment in
technology and inflationary impacts, partly
offset by continued cost discipline. The
favourable impacts from the completion of
disposals in Canada and France were largely
offset by the adverse impact of re-translating
the results of hyperinflationary economies at
constant currency. Target basis operating
expenses rose by $1.6bn or 5% compared
with 2023.
Share of profit in associates and joint
ventures less impairment of $2.9bn was
$3.2bn higher on a constant currency basis,
and included the non-recurrence of a $3.0bn
impairment of our investment in BoCom due
to a revision to the accounting value-in-use of
the investment. The increase also included a
higher share of profit from SAB.
Balance sheet and capital
Balance sheet strength
Total assets of $3.0tn were $22bn lower than
at 31 December 2023 on a reported basis,
and included adverse effects of foreign
currency translation differences of $66bn.
On a constant currency basis, total assets
rose by $45bn, mainly from an increase in
financial investments, and higher derivative
and trading asset balances. This was partly
offset by a reduction in assets held for sale,
notably following the completion of our
disposals in France, Canada and Argentina.
Reported loans and advances to customers
fell by $8bn. On a constant currency basis,
loans and advances increased by $14bn. The
increase included lending balance growth in
CMB, together with mortgage lending
growth in WPB.
Reported customer accounts of $1.7tn
increased by $43bn. On a constant currency
basis, they grew by $75bn, with growth
across all of our global businesses, mainly in
Asia.
Loans and advances to customers as a
percentage of customer accounts was 56.2%,
compared with 58.2% at 31 December 2023.
Distributable reserves
The distributable reserves of HSBC Holdings at
31 December 2024 were $28.3bn, a $2.6bn
decrease since 31 December 2023, primarily
driven by $27.4bn of dividends on ordinary
shares, additional tier 1 coupon and share buy-
back payments, offset by $24.8bn in profits
and other reserves movements generated in
2024. Distributable reserves are sensitive to
impairments of investments in subsidiaries to
the extent they are not offset by the realisation
of related reserves. Further details on HSBC
Holdings’ intentions to increase distributable
reserves in 2025 are provided in the Corporate
Governance report on page 318.
Capital position
We actively manage the Group’s capital
position to support our business strategy and
meet our regulatory requirements at all
times, including under stress, while
optimising our capital efficiency. To do this,
we monitor our capital position using a
number of measures. These include our
capital ratios and the impact on our capital
ratios as a result of stress.
Our CET1 capital ratio at 31 December 2024
was 14.9%, up marginally compared with the
prior year as capital generation and a reduction
in RWAs through strategic transactions were
offset by dividends, share buy-backs and
organic balance sheet growth. In January 2025,
the PRA announced the delay of Basel 3.1
implementation to 1 January 2027 pending US
developments. We expect that the impact on
our CET1 ratio will be a modest benefit.
Liquidity position
We actively manage the Group’s liquidity and
funding to support the business strategy and
meet regulatory requirements at all times,
including under stress. To do this, we monitor
our position using a number of risk appetite
measures, including the liquidity coverage
ratio and the net stable funding ratio. During
2024, the average high-quality liquid assets we
held was $649.2bn. This excludes high-quality
liquid assets in legal entities which are not
transferable due to local restrictions.
For further details, see page 204.
Common equity tier 1 ratio (%)
14.9%
(2023: 14.8%)
HSBC Holdings plc Annual Report and Accounts 2024
29
Strategic report
Global businesses
During the year we served our customers through three global businesses.
The following pages set out how each global business has performed.
From 1 January 2025, we have simplified our structure as explained on page 5.
Wealth and Personal Banking
Our WPB business served 40 million customers globally, including 7.7 million who are international, from retail
customers to ultra high net worth individuals and their families.
Contribution to Group profit before tax
Calculation is based on profit before tax of our global
businesses excluding Corporate Centre.
To meet our customers’ needs, WPB
offered a full suite of products and
services across transactional banking,
lending and wealth.
WPB continued to invest in our key strategic
priorities of expanding our Wealth franchise in
Asia, developing our transactional banking
and lending capabilities, and addressing our
customers’ international needs.
Divisional highlights
21%
Growth in wealth non-interest income
compared with 2023.
Performance in 2024 reflected strong growth
in Wealth, with double digit growth across
Retail investment distribution, Private
Banking and life insurance as well as growth
in asset management. We also saw
moderate balance sheet growth, and
increases in our invested assets and wealth
deposits. The results included growth in
operating expenses, reflecting investment
and inflationary impacts.
12%
Growth in contractual service margin in
insurance since 2023, up to $12.1bn.
Results – on a constant currency basis
2024
2023
2022
2024 vs 2023
of which strategic
transactions
2
$m
$m
$m
$m
%
$m
Net operating income
28,674
26,848
20,772
1,826
7
(636)
ECL
(1,335)
(935)
(1,160)
(400)
(43)
(22)
Operating expenses
(15,204)
(14,352)
(14,141)
(852)
(6)
651
Share of profit in associates and JVs
47
64
29
(17)
(27)
—
Profit before tax
12,182
11,625
5,500
557
5
(7)
RoTE
1 (%)
29.0
28.5
13.8
1 RoTE (annualised) in 2023 and 2022 included a 0.3 and 4.7 percentage point adverse impact from the impairment losses relating to the sale of our retail banking
operations in France respectively.
2 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
International customers are those who bank in more than one market, those whose address is different from the market we bank them in and customers whose
nationality, or country of birth for non-resident Indians and overseas Chinese, is different to the market we bank them in. Customers may be counted more than
once when banked in multiple countries.
Our new Premier proposition
Kicking off in three markets – Hong Kong, Singapore and the UK – the new HSBC Premier
proposition focuses on our strengths in wealth, health, travel and international services,
combining the expertise of our Premier Relationship Managers with digital financial planning
solutions to help affluent customers navigate important investment decisions. We partnered
with top brands to provide an exclusive set of travel, dining, international property and health
and well-being services via the HSBC Premier Mastercard credit card. Building on our core
international capabilities, such as international credit history transfer and round the clock 24/7
account servicing, the updated HSBC Premier enables us to support a new generation of
customers, while also deepening relationships with millions of our existing clients.
Strategic Report
30
HSBC Holdings plc Annual Report and Accounts 2024
$12.2bn
39%
Management view of revenue
2024
2023
2022
2024 vs 2023
of which strategic
transactions
4
$m
$m
$m
$m
%
$m
Wealth
8,758
7,446
6,973
1,312
18
(235)
– investment distribution
2,925
2,517
2,469
408
16
(167)
– Global Private Banking
2,612
2,268
2,039
344
15
—
net interest income
1,193
1,167
975
26
2
—
non-interest income
1,419
1,101
1,064
318
29
—
– life insurance
1,840
1,396
1,337
444
32
(10)
– asset management
1,381
1,265
1,128
116
9
(58)
Personal Banking
19,352
20,240
15,884
(888)
(4)
(669)
– net interest income
17,980
18,940
14,597
(960)
(5)
(578)
– non-interest income
1,372
1,300
1,287
72
6
(91)
Other
1
564
(838)
(2,085)
1,402
>100
268
– of which: impairment (loss)/reversal relating to the sale of
our retail banking operations in France
2
28
4
(2,374)
24
>100
24
Net operating income
3
28,674
26,848
20,772
1,826
7
(636)
1 ‘Other’ includes Markets Treasury, HSBC Holdings interest expense and hyperinflation. It also includes the distribution and manufacturing (where applicable) of
retail and credit protection insurance, disposal gains and other non-product-specific income.
2 The amounts associated with the sale of our retail banking operations in France include all related impacts disclosed in notable items, which are presented across
various lines in our consolidated income statement.
3 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
4 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions’ on page 102.
2024
2023
2022
Notable items – on a reported basis
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
28
4
(2,212)
Restructuring and other related costs
—
—
98
Disposal losses on Markets Treasury repositioning
—
(391)
—
Currency translation on revenue notable items
—
34
(158)
Operating expenses
Disposals, acquisitions and related costs
(3)
(53)
(7)
Restructuring and other related costs
(10)
20
(357)
Currency translation on operating expenses notable items
—
—
(3)
Financial performance
Profit before tax of $12.2bn was $0.6bn higher
than in 2023 on a constant currency basis. The
growth reflected higher Wealth revenue, as
we continued to execute on our strategy. This
was partly offset by a $0.2bn reduction from
the sale of our banking business in Canada,
which completed in 1Q24. Net interest income
(‘NII’) grew by 2% compared with 2023, while
fee income increased by 12%. Operating
expenses grew by $0.9bn and there was an
increase in ECL of $0.4bn, both on a constant
currency basis.
Revenue of $28.7bn was $1.8bn or 7% higher
on a constant currency basis. Wealth
performed strongly, up $1.3bn. This included
double-digit percentage growth in life
insurance, Global Private Banking and
investment distribution, as well as growth in
asset management. This was partly offset by a
reduction in Personal Banking NII of $1.0bn,
due to the impact of the disposals in France
and Canada and margin compression, partly
offset by balance sheet and non-NII growth.
In Wealth, revenue of $8.8bn was up $1.3bn
or 18%.
– Investment distribution revenue grew by
$0.4bn, or 16%, driven by higher sales of
mutual funds, structured products and
bonds due to our continued investment in
Wealth and improved market sentiment,
including in our entities in Asia.
– Global Private Banking revenue was $0.3bn
or 15% higher, primarily driven by a strong
performance in brokerage and trading in our
entities in Asia.
– Life insurance revenue was $0.4bn or 32%
higher. The growth included an increase in
earnings from contractual service margin
(‘CSM’) release, largely due to continued
growth in the CSM balance. The year-on-
year increase in revenue also included the
impact of corrections to historical valuation
estimates recognised in 2023. Insurance
manufacturing new business CSM of $2.5bn
was 49% higher than in 2023, mainly in our
legal entities in Hong Kong.
– Asset management revenue was $0.1bn or
9% higher, driven by a 7% increase in
assets under management due to inflows
and positive market movements. This was
partly offset by a reduction in revenue due to
the sale of our banking business in Canada.
In Personal Banking, revenue of $19.4bn was
down $0.9bn or 4%.
– Net interest income was $1.0bn or 5%
lower due to the impact of the sales of our
banking businesses in France and Canada
and narrower margins. Compared with 2023,
lending balances were broadly stable with
growth mainly in mortgages in HSBC UK and
our legal entity in the US. This was offset by
the reclassification of the France retained
loans to Corporate Centre. Unsecured lending
balances increased, including in HSBC UK and
our legal entities in Asia and Mexico. Deposit
balances grew by $24bn, including in our legal
entities in Asia and the UK.
Other revenue increased by $1.4bn, mainly
due to a $1.1bn increase in revenue allocated
from Markets Treasury, including from the
non-recurrence of 2023 disposal losses on
repositioning and risk management, the non-
recurrence of a loss on sale of our business in
New Zealand in 2023 of $0.1bn and higher
interest income earned on own capital.
ECL were $1.3bn, an increase of $0.4bn
compared with 2023 on a constant currency
basis, reflecting higher charges in our legal
entity in Mexico, mainly in our unsecured
portfolio, due to portfolio growth and
unemployment trends. In addition, we had
higher charges in our legal entities in Hong
Kong and the UK as a result of portfolio
growth.
Operating expenses of $15.2bn were 6%
higher on a constant currency basis, reflecting
continued investments in Wealth in Asia,
higher spend and investment in technology,
higher performance-related pay and from the
impact of higher inflation. These were partly
offset by continued cost discipline and the
impact of the disposals in France and Canada.
HSBC Holdings plc Annual Report and Accounts 2024
31
Strategic report
Commercial Banking
Our CMB business served around 1.2
1 million customers across 48 countries and territories, ranging from small
enterprises to large companies operating globally.
Contribution to Group profit before tax
Calculation is based on profit before tax of our global
businesses excluding Corporate Centre.
CMB partnered with businesses around
the world, supporting every stage of
their growth, international ambitions
and sustainability transitions. CMB
delivered value to clients through our
international network, financing
strength, digital capabilities and our
universal banking offering, including our
global trade and payments solutions.
HSBC has been recognised as the World’s best
Trade Finance Bank and the World’s best
Payments and Treasury Bank (Euromoney
Awards) and we continue to invest in
capabilities to assist clients in fulfilling their
business needs more efficiently.
We have completed our first full year of
HSBC Innovation Banking with global revenue
now standing at $0.7bn, and over 1,200 new
customers onboarded in 2024.
Divisional highlights
10%
Increase in loans and advances to customers
in Global Trade Solutions, compared with
2023, on a constant currency basis.
CMB profit before tax compared with 2023
was impacted by the non-recurrence of the
gain on acquisition of SVB UK recognised in
2023. Excluding this, there was a good 2024
performance, with growth in revenue due to
balance sheet growth, continued momentum
in growing our multi-jurisdictional client base,
and investment in our core transaction
banking capabilities leading to higher fee
income. Revenue also benefited from the
growth in GBM collaboration income. The
increase in operating expenses reflected the
impact of hyperinflation in Argentina,
increased technology spend and investment,
incremental costs associated with HSBC
Innovation Banking and inflationary pressures.
1 The number of customers reduced due to the
sale of our banking business in Canada.
$25bn
CMB grew deposits by $25bn or 5%
compared with 2023.
Results – on a constant currency basis
2024
2023
2022
2024 vs 2023
of which strategic
transactions
2
$m
$m
$m
$m
%
$m
Net operating income
21,580
22,396
16,207
(816)
(4)
(2,228)
ECL
(1,815)
(2,006)
(1,868)
191
10
69
Operating expenses
(7,906)
(7,234)
(6,810)
(672)
(9)
255
Share of profit/(loss) in associates and JVs
1
(1)
1
2
>100
—
Profit before tax
11,860
13,155
7,530
(1,295)
(10)
(1,904)
RoTE
1 (%)
20.0
23.4
13.7
1 RoTE in 2023 included a 3.1 percentage point favourable impact from the gain recognised on the acquisition of SVB UK.
2 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
An international partner for a global travel retailer
Our 15-year partnership with Swiss-based Avolta reflects a deep collaboration that has
supported Avolta’s international expansion. During the pandemic, we worked closely with
Avolta to help them navigate the travel retail sector's challenges. This year, beyond
transaction banking and credit solutions, we served as lead global coordinator and physical
bookrunner on a €500m bond, reaffirming our commitment to Avolta’s strategic goals. As an
innovative and rapidly-evolving company, Avolta needs a banking partner that matches their
pace. Utilising our international network and expertise in key markets across the US, Europe
and Asia, we have helped unlock global opportunities for Avolta and their customers, fostering
a robust partnership centred on growth and innovation.
Strategic Report
32
HSBC Holdings plc Annual Report and Accounts 2024
$11.9bn
38%
Management view of revenue
2024
2023
2022
2024 vs 2023
of which strategic
transactions
4
$m
$m
$m
$m
%
$m
Global Trade Solutions
1,992
1,969
2,045
23
1
(39)
Credit and Lending
5,183
5,239
5,728
(56)
(1)
(281)
Global Payments Solutions
11,880
12,125
6,911
(245)
(2)
(225)
Markets products, Insurance and Investments and Other
1
2,525
3,063
1,523
(538)
(18)
(1,683)
– of which: share of revenue for Markets and Securities Services
and Banking products
1,382
1,295
1,181
87
7
– of which: gain on the acquisition of Silicon Valley Bank UK Limited
—
1,659
—
(1,659)
(100)
(1,659)
Net operating income
2
21,580
22,396
16,207
(816)
(4)
(2,228)
– of which: transaction banking
3
14,867
15,077
9,853
1 Includes a gain on the acquisition of SVB UK and CMB‘s share of revenue from the sale of Markets and Securities Services and Banking products to CMB
customers. GBM‘s share of revenue from the sale of these products to CMB customers is included within the corresponding lines of the GBM management view
of revenue. Also includes allocated revenue from Markets Treasury, HSBC Holdings interest expense and hyperinflation.
2 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
3 Transaction banking comprises Global Trade Solutions, Global Payments Solutions and CMB’s share of Global Foreign Exchange (shown within ‘share of revenue
for Markets and Securities Services and Banking products’).
4 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
2024
2023
2022
Notable items – on a reported basis
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
—
1,591
—
Restructuring and other related costs
—
—
(16)
Disposal losses on Markets Treasury repositioning
—
(316)
—
Currency translation on revenue notable items
—
65
6
Operating expenses
Disposals, acquisitions and related costs
(2)
(55)
—
Restructuring and other related costs
2
32
(266)
Currency translation on operating expenses notable items
—
—
(7)
Financial performance
Profit before tax of $11.9bn was $1.3bn
lower than in 2023 on a constant currency
basis. This was mainly due to a reduction in
revenue following the non-recurrence of a
$1.7bn gain recognised in 2023 on the
acquisition of SVB UK, the impact of the
disposal of our banking business in Canada in
2024, as well as higher operating expenses.
The reduction in profit before tax was partly
offset by balance-sheet-driven revenue
growth, excluding the disposal of our banking
business in Canada, higher revenue allocated
from Markets Treasury, transaction banking
fee growth and lower ECLs.
Revenue of $21.6bn was $0.8bn or 4% lower
on a constant currency basis. This was
primarily due to the non-recurrence of the
gain on the acquisition of SVB UK in 2023, as
mentioned above. It also included an adverse
impact of $0.6bn from strategic transactions,
notably in relation to the disposal of our
banking business in Canada. These were
partly offset by an increase in NII due to the
hyperinflationary impacts in Argentina and
higher allocated revenue from Markets
Treasury.
– In GTS, revenue was up $23m or 1%,
mainly due to growth in fee income from
guarantees, higher balances and improved
margins. This was partly offset by the
impact of the disposal of our banking
business in Canada.
– In Credit and Lending, revenue decreased
by $0.1bn or 1% due to the impact of the
disposal of our banking business in Canada,
partly offset by higher income in IVB.
– In GPS, revenue was down $0.2bn or 2%,
reflecting the impact of the disposal of our
banking business in Canada, and a
decrease in our main legal entities in Asia
and Europe from lower margins, reflecting
a change in the product mix. This was
partly offset by growth in fee income
reflecting business initiatives and
transaction volumes. There was also higher
revenue in HSBC UK due to higher margins
and in our legal entity in Argentina due to
hyperinflationary impacts.
– In GBM products, Insurance and
Investments, and Other, revenue
decreased by $0.5bn, largely due to the
non-recurrence of the $1.7bn gain
recognised in 2023 on the acquisition of
SVB UK. This adverse impact was partly
offset by higher allocated revenue from
Markets Treasury, including from the non-
recurrence of 2023 disposal losses on
repositioning and risk management and
interest income on own capital. There was
also higher GBM collaboration revenue,
reflecting growth in Global Markets and
Capital Financing products, notably in our
key entities in Hong Kong, the UK and in
Europe.
ECL charges of $1.8bn were $0.2bn lower on
a constant currency basis. ECLs in 2024
reflected lower charges in our main legal
entity in Asia, reflecting a reduction in ECL in
the commercial real estate sector in mainland
China, and in HSBC UK. These reductions
were partly offset by new stage 3 charges
related to a single customer in the UK, and in
our main legal entity in the Middle East.
Operating expenses of $7.9bn were $0.7bn
or 9% higher on a constant currency basis.
The increase reflected hyperinflationary
impacts in Argentina, incremental costs in
IVB following the acquisition of SVB UK,
higher spend and investment in technology,
and inflationary impacts. These increases
were in part mitigated by continued cost
discipline and lower costs following the
disposal of our banking business in Canada.
HSBC Holdings plc Annual Report and Accounts 2024
33
Strategic report
Global Banking and Markets
Our GBM business supported multinational corporates, financial institutions and institutional clients, as well as
public sector and government bodies.
Contribution to Group profit before tax
Calculation is based on profit before tax of our global
businesses excluding Corporate Centre.
GBM is a leading provider of transaction
banking, financing and risk
management solutions to our clients.
Our global network with expertise,
particularly in Asia and the Middle East,
provides a differentiated service to our
clients’ international financial
requirements.
Divisional highlights
13.0%
Return on average tangible equity, up 1.6
percentage points compared with 2023.
GBM delivered a strong performance in 2024,
achieving a RoTE of 13.0%. On a constant
currency basis, we grew revenue by 11%,
while costs grew by 4% as we continued to
invest in technology to support future
revenue growth, and from the impact of
inflation. We also had a reduction in ECL
compared with 2023.
36%
Increase in Securities Financing revenue
compared with 2023, primarily from new
client onboarding in prime finance.
Results – on a constant currency basis
2024
2023
2022
2024 vs 2023
of which strategic
transactions
1
$m
$m
$m
$m
%
$m
Net operating income
17,529
15,771
14,542
1,758
11
(49)
ECL
(235)
(317)
(578)
82
26
(11)
Operating expenses
(10,231)
(9,872)
(9,403)
(359)
(4)
59
Share of profit/(loss) in associates and JVs
—
—
(2)
—
—
—
Profit before tax
7,063
5,582
4,559
1,481
27
(1)
RoTE (%)
13.0
11.4
9.8
1 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
India‘s biggest-ever IPO listing
In October 2024, we led the $3.3bn initial public offering (‘IPO’) of Hyundai Motor India
Limited, India’s largest ever IPO and the second largest globally in 2024 at the time of the
transaction.
Acting as joint book-running lead manager, we supported the company throughout the
transaction. The strength of our international network in connecting clients to investors across
markets, helped the company to attract significant demand from both domestic and global
investors. The transaction, also the largest auto IPO since 2022, represented Hyundai’s largest
stock market listing outside of South Korea, demonstrating the depth and evolution of India’s
capital markets-raising potential from the perspective of global corporates and investors.
Strategic Report
34
HSBC Holdings plc Annual Report and Accounts 2024
$7.1bn
23%
Management view of revenue
2024
2023
2022
2024 vs 2023
of which strategic
transactions
6
$m
$m
$m
$m
%
$m
Markets and Securities Services
9,652
8,806
8,815
846
10
(63)
– Securities Services
2,280
2,305
1,994
(25)
(1)
(3)
– Global Debt Markets
968
827
698
141
17
(8)
– Global Foreign Exchange
3,972
4,030
4,088
(58)
(1)
(49)
– Equities
891
552
1,015
339
61
(1)
– Securities Financing
1,523
1,120
924
403
36
(5)
– Credit and funding valuation adjustments
18
(28)
96
46
>100
3
Banking
8,656
8,460
6,690
196
2
(125)
– Global Trade Solutions
690
658
670
32
5
(13)
– Global Payments Solutions
4,497
4,427
2,861
70
2
(72)
– Credit and Lending
1,820
1,967
2,229
(147)
(7)
(15)
– Investment Banking
1
1,084
1,040
737
44
4
(9)
– Other
2
565
368
193
197
54
(16)
GBM Other
(779)
(1,495)
(963)
716
48
139
– Principal Investments
24
(5)
57
29
>100
—
– Other
3
(803)
(1,490)
(1,020)
687
46
139
Net operating income
4
17,529
15,771
14,542
1,758
11
(49)
– of which: transaction banking
5
11,439
11,420
9,613
19
—
1 From 1 January 2024, we renamed ‘Capital Markets and Advisory‘ as ‘Investment Banking‘ to better reflect our purpose and offering.
2 Includes portfolio management, earnings on capital and other capital allocations on all Banking products.
3 Includes notional tax credits and Markets Treasury, HSBC Holdings interest expense and hyperinflation.
4 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
5 Transaction banking comprises Securities Services, Global Foreign Exchange (net of revenue shared with CMB), GTS and GPS.
6 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
2024
2023
2022
Notable items – on a reported basis
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
(14)
—
—
Restructuring and other related costs
—
—
(184)
Disposal losses on Markets Treasury repositioning
—
(270)
—
Currency translation on revenue notable items
—
(2)
4
Operating expenses
Disposals, acquisitions and related costs
(2)
3
—
Restructuring and other related costs
(1)
21
(252)
Currency translation on operating expenses notable items
—
—
(8)
Financial performance
Profit before tax of $7.1bn was $1.5bn or
27% higher than in 2023 on a constant
currency basis. This was driven by an
increase in revenue of $1.8bn or 11%on a
constant currency basis, including from strong
performances in Securities Financing,
Equities and Global Debt Markets. In addition,
ECL charges decreased compared with 2023,
while operating expenses increased by
$0.4bn on a constant currency basis.
Revenue of $17.5bn was $1.8bn or 11%
higher on a constant currency basis.
In Markets and Securities Services (‘MSS‘),
revenue increased by $0.8bn or 10% driven
by prime finance, fixed income and equity
derivatives.
– In Securities Services, revenue decreased
by $25m or 1% from divestments within
our fund administration business and from
lower NII due to reduced rates impacting
margins.
– In Global Debt Markets, revenue rose by
$0.1bn or 17%, from higher client demand
for financing products and increased volumes
primarily from emerging markets credit.
– In Global Foreign Exchange, revenue fell by
$0.1bn or 1%, as client activity remained
resilient given the market environment.
– In Equities, revenue increased by $0.3bn or
61% amid improved market sentiment,
which drove strong client demand for
wealth products, as well as higher levels of
volatility in 2H24.
– In Securities Financing, revenue rose by
$0.4bn or 36%, primarily driven by new
client onboarding in prime finance and
robust institutional financing demand.
In Banking, revenue increased by $0.2bn or
2%.
– In GPS, revenue increased by $0.1bn or
2%, driven by higher average balances and
fee performance resulting from business
initiatives, repricing and transaction growth.
– In Investment Banking, which includes
Issuer Services, revenue increased by
$44m or 4%, due to higher advisory and
financing activity, supported by the
recovery in global capital markets.
– In Credit and Lending, revenue decreased
by $0.1bn or 7% reflecting ongoing muted
client demand.
– In Banking Other, revenue increased by
$0.2bn or 54% due to hedging activities
and higher allocated earnings on capital
held in the business.
In GBM Other, revenue increased by $0.7bn
or 48%, driven by higher allocated revenue
from Markets Treasury, including from the non-
recurrence of 2023 disposal losses on
repositioning and risk management, and lower
HSBC Holdings interest expense.
ECL of $0.2bn decreased by $0.1bn on a
constant currency basis, mainly as the 2024
period included a release related to a single
exposure.
Operating expenses of $10.2bn increased by
$0.4bn or 4% on a constant currency basis,
due to the impact of inflation and higher
spend and investment in technology, partly
mitigated by continued cost discipline.
HSBC Holdings plc Annual Report and Accounts 2024
35
Strategic report
Corporate Centre
The results of Corporate Centre primarily comprise the financial impact of certain acquisitions and disposals and
the share of profit from our interests in our associates and joint ventures and related impairments. It also includes
Central Treasury, stewardship costs and consolidation adjustments.
Corporate Centre performance in 2024 primarily
reflected the financial impact of certain
acquisitions and disposals, including the gain on
the sale of our banking business in Canada and
losses on the disposal of our business in
Argentina, including foreign currency and other
reserve losses. In 2023, performance included
the recognition of an impairment in our
investment in our associate BoCom.
Financial performance
Profit before tax of $1.2bn was $1.7bn higher
than in 2023 on a constant currency basis. The
increase included the impact of the non-
recurrence of an impairment charge of $3.0bn
in 2023 relating to our investment in BoCom.
Revenue of $1.9bn was $1.8bn lower on a
constant currency basis, primarily due to the
impact of notable items.
In 2024, these included a loss on disposal of
$1.0bn, as well as foreign currency and other
reserve losses of $5.2bn, following the
disposal of our business in Argentina. They also
included a loss of $0.1bn related to the
recycling of reserves following the completion
of the sale of our business in Russia, and a
$0.2bn loss on the early redemption of legacy
securities. These were partly offset by a
$4.8bn gain on the sale of our banking
business in Canada, inclusive of fair value gains
on related hedging and recycling of related
reserves.
In 2023, notable items included fair value losses
of $0.3bn relating to the hedging of the
proceeds of the sale of our business in Canada.
The reduction in revenue also included adverse
fair value movements on financial instruments
in Central Treasury and structural hedges, a
reduction following the transfer of the retained
French retail lending portfolio from WPB, and
fair valuation losses on legacy portfolios. This
was partly offset by fair value gains on hedging
related to our retained French retail lending
portfolio.
Operating expenses decreased by $0.3bn on a
constant currency basis. This included a lower
impact from levies, including in relation to the
FDIC special assessment and the UK bank levy.
Share of profit from associates and joint
ventures of $2.9bn increased by $3.2bn on a
constant currency basis, primarily reflecting the
non-recurrence of an impairment charge of
$3.0bn in 2023 relating to our investment in
BoCom and an increase in share of profit from
SAB.
Results – on a constant currency basis
2024
2023
2022
2024 vs 2023
of which strategic
transactions
1
$m
$m
$m
$m
%
$m
Net operating income
(1,929)
(103)
(1,934)
(1,826)
>(100)
(977)
ECL
(29)
(1)
(9)
(28)
>(100)
—
Operating expenses
298
(36)
(1,875)
334
>100
27
Share of profit in associates and joint ventures less impairment
2,864
(319)
2,531
3,183
>100
—
– of which: impairment loss relating to our investment in BoCom
—
(3,017)
—
3,017
>100
—
Profit/(loss) before tax
1,204
(459)
(1,287)
1,663
>100
(950)
RoTE (annualised) (%)
0.7
(1.0)
2.8
1 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
Management view of revenue
2024
2023
2022
2024 vs 2023
of which strategic
transactions
6
$m
$m
$m
$m
%
$m
Central Treasury
1
(49)
99
(743)
(148)
>(100)
—
Legacy portfolios
(50)
3
(181)
(53)
>(100)
—
Other
2,3
(1,830)
(205)
(1,010)
(1,625)
>(100)
(977)
– of which: gain on the sale of banking business in Canada
and associated hedges
4
4,795
(275)
—
5,070
>100
5,070
– of which: loss on the sale of business in Argentina
(1,011)
—
—
(1,011)
>(100)
(1,011)
– of which: recycling of foreign currency translation reserve
losses and other reserves on sale of business in Argentina
(5,166)
—
—
(5,166)
>(100)
(5,166)
Net operating income
5
(1,929)
(103)
(1,934)
(1,826)
>(100)
(977)
1
Central Treasury comprises valuation differences on issued long-term debt and associated swaps and fair value movements on financial instruments.
2 Other comprises gains and losses on certain transactions, funding charges on property and technology assets, the results of the retained France retail loan portfolio,
revaluation gains and losses on investment properties and property disposals, consolidation adjustments and other revenue items not allocated to global businesses.
3 Revenue from Markets Treasury, HSBC Holdings net interest expense and hyperinflation are allocated out to the global businesses, to align them better with their
revenue and expense. The total Markets Treasury revenue component of this allocation for 2024 was $1,569m (2023: $(339)m; 2022: $1,377m).
4 Includes fair value gains/(losses) on the foreign exchange hedging of the proceeds of the sale and the recycling of related reserves.
5 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
6 Impact of strategic transactions classified as material notable items. For details, see ‘Impact of strategic transactions‘ on page 102.
2024
2023
2022
Notable items – on a reported basis
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
(1,357)
(297)
(525)
Fair value movements on financial instruments
—
14
(618)
Restructuring and other related costs
—
—
(145)
Early redemption of legacy securities
(237)
—
—
Currency translation on revenue notable items
—
(9)
(26)
Operating expenses
Disposals, acquisitions and related costs
(192)
(216)
(11)
Restructuring and other related costs
(25)
63
(2,007)
Currency translation on operating expenses notable items
—
—
(46)
Impairment of interest in associate
—
(3,000)
—
Currency translation on associate notable items
(17)
Strategic Report
36
HSBC Holdings plc Annual Report and Accounts 2024
Risk overview
Active risk management helps us to achieve our strategy,
serve our customers and communities and grow our
business safely.
Managing risk
HSBC’s operations are subject to changes in
the economy, financial conditions and
geopolitical developments that could have a
material impact on the Group’s operations and
financial risks. These factors are a significant
source of uncertainty that we monitor and
review continuously.
Despite political and economic uncertainties,
global economic growth was resilient in 2024.
This was led by strong growth in the US and a
mild recovery in the EU, while key emerging
markets were supported by monetary policy
easing. In the US, performance was supported
by household consumption and government
spending. In mainland China activity by sector
has been uneven, but fiscal and monetary
support ensured that the official economic
growth target was still met. UK growth
remained low despite a fall in inflation and
lower interest rates, as consumers continued to
prioritise saving.
Continued moderate growth is expected in
2025, but the trajectory of US economic and
trade policies in the aftermath of the US
election, and geopolitical risks such as the
ongoing Russia-Ukraine war and conflict in
the Middle East, remain key sources of
forecast uncertainty.
Inflation and high interest rates remain key
considerations for policymakers. In the US and
Europe, headline inflation rates trended
downwards towards central bank target ranges,
despite high and persistent services price
increases. Disinflation enabled the US Federal
Reserve and the ECB to cut their policy rates by
100bps and 75bps respectively, and the Bank of
England by 50bps in 2024.
Further cuts in interest rates are expected in
the US, although the resilience of the
economy and the perceived supply chain and
inflation risks attached to new and
prospective US tariff policies, have led
markets to pare back their expectations for
rate cuts in 2025. In the Eurozone, interest
rates are expected to be cut in order to
support growth. Markets also expect the
Bank of England to continue to reduce the
bank rate throughout 2025. In mainland
China, authorities have reduced benchmark
policy interest rates to support private sector
borrowing as demand for loans has
weakened. Further fiscal and monetary
easing is expected to support local
consumption and offset some of the impact
of US tariffs.
Fiscal policy, public deficits and indebtedness
influence our risk profile. Public spending as a
proportion of GDP is likely to remain high for
most key economies. Against the backdrop of
higher global interest rates, a high level of
public debt issuance, and a strong US dollar,
borrowing costs for certain countries could
increase further. This could adversely impact
the fiscal capacity and debt sustainability of
highly-indebted sovereign issuers.
Additional sanctions on Iran were imposed in
2024 in response to Iran’s activities and the
increase in tensions between Israel and Iran.
The sanctions and trade restrictions imposed
by the US, the UK, and the EU, as well as
other countries, as a result of the Russia-
Ukraine war, remain complex, far-reaching
and evolving. The US has expanded the reach
of its secondary sanctions regime, which
includes broad discretion to impose severe
sanctions on non-US banks. The imposition of
such sanctions against any non-US HSBC
entity could result in significant adverse
commercial, operational and reputational
consequences for HSBC. In response to such
sanctions and trade restrictions, as well as
asset flight, Russia has implemented certain
countermeasures, including the expropriation
of certain foreign assets.
Strategic competition with China has the
potential to impact global supply chains which
may in turn impact the Group’s operations.
The US, the UK, the EU and other countries
have imposed various sanctions and trade
restrictions on Chinese individuals and
companies. China has also imposed its own
sanctions, trade restrictions and other
measures against certain countries,
businesses and individuals. This has resulted
in efforts to de-risk certain sectors with the
reshoring of manufacturing activities.
Further sanctions or counter-sanctions may
adversely affect the Group, its customers and
various markets.
Political changes may also have implications
for policy and regulations. Newly elected
governments in several key markets have
committed to a shift in domestic and foreign
policy priorities. The US administration
supports sweeping economic, foreign and
trade policy changes that, if enacted, are
expected to have geopolitical and
macroeconomic implications, including an
uncertain impact on growth and inflation.
HSBC continues to monitor these policy
changes and assess their implications for
economic conditions in our key markets.
Challenging conditions persist in the real
estate sector in several of our major markets.
The Hong Kong commercial real estate
market has seen prices fall amid low
transaction volumes and a high interest rate
environment. Despite an improvement in
sentiment associated with supportive policy
measures and recent US interest rate cuts,
commercial real estate market demand has
remained weak. Prices also fell in the Hong
Kong residential market during 2024 but
sentiment and transaction volumes started to
improve in the fourth quarter, supported by
more favourable government measures and
improved affordability as prices and interest
rates fell. Stabilisation of the real estate market
could be dependent on a further lowering of
interest rates to revive demand for property
both in the domestic market and from
mainland China. Higher interest rates, a
stronger US dollar and weak sentiment in
mainland China remain the key risks to
recovery.
HSBC Holdings plc Annual Report and Accounts 2024
37
Key risk appetite metrics
Component
Measure
Risk
appetite
2024
Capital
CET1 ratio – end point basis
≥13.5%
14.9%
Change in expected
credit losses and
other credit
impairment charges
Change in expected credit losses and other credit
impairment charges as a % of advances: Retail (WPB)
≤0.50%
0.27%
Change in expected credit losses and other credit
impairment charges as a % of advances: Wholesale
(GBM, CMB)
≤0.45%
0.37%
Strategic report
Managing risk continued
In mainland China an excess of inventory and
low confidence have resulted in the fall in
both commercial and residential real estate
prices. A recovery remains contingent on
reform and broader economy-wide stimulus
measures. We continue to closely monitor
market conditions and take steps to
proactively manage our commercial real
estate portfolios.
In the fourth quarter of 2024 management
adjustments to ECL were applied to reflect
sector or portfolio risks that are not fully
captured by our models.
We continue to assess the impact of Basel
3.1 standards on our capital, including the
release of more beneficial PRA near-final
rules, developments in the US and the
associated implementation challenges.
We monitor, and seek to manage, the
potential implications of all the above
developments on our customers and our
business. While the financial performance of
our operations varied by geography, our
balance sheet and liquidity remained strong.
For further details of our Central and other
scenarios, see ‘Measurement uncertainty and
sensitivity analysis of ECL estimates’ on page
147.
Our risk appetite
Our risk appetite sets our approach to
monitoring and managing our risk exposure. It
defines our desired forward-looking risk
profile and informs the strategic and financial
planning process. It provides a baseline to
guide strategic decision making by helping
planned business activities to deliver an
appropriate balance of return for the risk
assumed, while remaining within acceptable
risk levels. Risk appetite supports senior
management in allocating financial resources
optimally to finance sustainable growth and
manage risk exposures.
At 31 December 2024 our CET1 ratio and
ECL charges were within their defined risk
appetite thresholds. Our CET1 capital ratio at
31 December 2024 was 14.9%, up marginally
compared with the prior year as capital
generation and a reduction in RWAs through
strategic transactions were offset by
dividends, share buy-backs and organic
balance sheet growth. For further details of
the key drivers of the overall CET1 ratio, see
‘Own funds’ on page 205. Wholesale ECL
charges during the year continued to reflect
stress in the mainland China and Hong Kong
commercial real estate sectors however,
Wholesale and Retail ECL charges remained
within appetite.
Stress tests
We regularly conduct stress tests to assess
the resilience of our balance sheet and our
capital adequacy, as well as to provide
actionable insights into how key elements of
our portfolios may behave during a crisis. We
use the outcomes to calibrate our risk
appetite to inform our strategic and financial
plans, helping to improve the quality of
management’s decision making. The results
from the stress tests also drive recovery and
resolution planning to help enhance the
Group’s financial stability under various
severe macroeconomic or idiosyncratic
scenarios. The selection of stress scenarios is
based upon the identification and assessment
of our top and emerging risks and our risk
appetite.
The Prudential Regulation Authority (‘PRA’)
cancelled the 2024 Annual Cyclical Scenario
stress testing exercise and instead
commenced a Desk Based Stress Test
exercise, which used PRA models and their
in-house expertise to test the resilience of
the UK banking system against more than
one adverse macroeconomic scenario. HSBC
provided 2023 year-end data to support this.
The results of this exercise across firms were
published in aggregate only, within the
Financial Stability Report issued in the fourth
quarter of 2024. The PRA announced an
updated Stress Testing Framework and
intends to return to a concurrent exercise in
2025, involving the submission of stressed
projections. Further details will be provided
by the PRA during 2025.
During 2024, the Group-wide internal stress
test was completed and assessed the impact
of two contrasting scenarios envisioning
severe macroeconomic conditions over a five-
year period. These scenarios reflected the
uncertain inflation and interest rate
environment, heightened geopolitical
tensions, banking sector challenges, and
global economic stress. The outcomes
demonstrated that the Group has sufficient
capital to withstand severe but plausible
stress conditions. Additionally, the
conclusions drawn from this exercise will also
be included in the Group Internal Capital
Adequacy Assessment Process.
Climate risk
Climate risk relates to the financial and non-
financial impacts that may arise as a
consequence of climate change and the
move to a net zero economy. Climate risk can
impact us either directly or through our
relationships with our clients. These include
the potential risks arising as a result of our
net zero ambition, which could lead to
reputational concerns, and potential legal and/
or regulatory enforcement action if we are
perceived to mislead stakeholders on our
business activities or if we fail to achieve our
stated net zero ambition.
We seek to manage climate risk across all our
businesses in line with our Group-wide risk
management framework and continue to
incorporate climate considerations within our
traditional risk types.
For further details of our approach to climate risk
management, see ‘Climate risk‘ on page 219.
For further details of our TCFD disclosures, see
the ‘ESG review‘ on page 444.
Climate stress tests
Scenario analysis supports our strategy by
assessing our potential exposures to climate
risks and vulnerabilities under a range of
climate scenarios. Scenario analysis helps to
build our awareness of climate change,
understand plausible impacts to our strategy,
plan for the future and meet our growing
regulatory requirements.
In 2024, we enhanced our internal climate
scenario analysis exercise by focusing our
efforts on generating more granular insights
for key sectors and regions to support core
decision-making processes. We also
continued to embed climate considerations
into core processes across the Group and to
respond to our regulatory requirements.
Additionally, we produced several climate
stress tests for regulators around the world,
including the Hong Kong Monetary Authority.
For further details of our approach to climate risk
stress testing, see ‘Insights from scenario
analysis’ on page 223.
Our operations
We remain committed to investing in the
reliability and resilience of our technology
systems and critical services. We assess our
third parties to help ensure they deliver the
standard of services we require to provide
resilient services to our customers. We do so
to help protect our customers, affiliates and
counterparties, and minimise any disruption
to our services. In our approach to defending
against these threats, we invest in business
and technical controls to help us prevent,
detect, manage and recover from issues in a
timely manner within our risk appetite.
We are working to balance the opportunity
artificial intelligence (‘AI’) presents to
accelerate delivery of our strategy with the
need for appropriate controls to be in place to
mitigate the associated risks. HSBC is
committed to using AI responsibly. HSBC’s
Principles for the Ethical Use of Data and AI
are available at www.hsbc.com/ai. We
continue to refine and embed governance
and controls into our risk management
processes to help meet the Group’s needs
and increasing regulatory expectations for
when AI is both developed internally and
enabled through third parties.
We continue to focus on improving the
quality and timeliness of the data used to
inform management decisions, and are
progressing with the implementation of our
strategic and regulatory change initiatives to
help deliver the right outcomes for our
customers, people, investors and
communities.
For further details of our risk management
framework and risks associated with our banking
and insurance manufacturing operations, see
pages 136 and 231, respectively.
Strategic Report
38
HSBC Holdings plc Annual Report and Accounts 2024
Top and emerging risks
Our top and emerging risks report identifies
forward-looking risks so that they can be
considered in determining whether any
incremental action is needed to either
prevent them from materialising or to limit
their effect. Top risks are those that have the
potential to have a material adverse impact
on the financial results, reputation or
business model of the Group. We actively
manage and take actions to mitigate our top
risks. Emerging risks are those that, while
they could have a material impact on our risk
profile were they to occur, are not considered
immediate and are not under active
management. Our suite of top and emerging
risks is subject to regular review by senior
governance forums. We continue to monitor
closely the identified risks and agree
management actions to remediate and/or
reduce them to acceptable levels, as
required.
Risk
Trend Description
Externally driven
Geopolitical and
macroeconomic risks ~
Our operations and portfolios are subject to risks arising from political instability, civil unrest and military conflict, which could
lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. We are also subject to
cyclical and idiosyncratic macroeconomic risks. Among the key risks to the economic outlook is the prospective recalibration
of economic and trade policies following elections in the US and other markets in 2024. This could prove disruptive to the
global economy.
Technology and
cybersecurity risk
~
There is an increased risk of service disruption or loss of data resulting from technology failures or malicious activities from
internal or external threats. We continue to monitor changes to the technology and threat landscape, including those arising
from ongoing geopolitical and macroeconomic events and the impact this may have on third-party risk management. We
operate a continuous improvement programme to help support the resilience and stability of our technology operations and
counter a fast-evolving and heightened cyber threat environment.
Environmental, social
and governance
(‘ESG’) risks
~
We are subject to ESG risks, including in relation to climate change, nature and human rights. These risks have increased
owing to the pace and volume of regulatory developments globally, signs of diverging national agendas, increasing frequency
of severe weather events, which require careful monitoring, and may impact financial and non-financial risks due to
stakeholders placing more emphasis on financial institutions’ actions and investment decisions in respect of ESG matters.
Failure to meet these evolving expectations may result in financial and non-financial risks, including reputational, legal and
regulatory compliance risks.
Financial crime risk
~
We are exposed to financial crime risk from our customers, staff and third parties engaging in criminal activity. The financial
crime risk environment is heightened due to increasingly complex geopolitical challenges, the macroeconomic outlook, the
complex and dynamic nature of sanctions and export control compliance, evolving financial crime regulations, rapid
technological developments, an increasing number of national data privacy requirements and the increasing sophistication of
fraud. As a result, we will continue to face the possibility of regulatory enforcement and reputational risk.
Digitalisation and
technological
advances
~
Developments in technology and changes in regulations continue to enable new entrants to the banking industry as well as
new products and services offered by competitors. This challenges us to continue to innovate with new digital capabilities and
evolve our products, to attract, retain and best serve our customers. Along with opportunities, new technology, including
generative AI, can introduce risks and disruption. We seek to manage technology developments with appropriate controls and
oversight.
Evolving regulatory
environment risk
}
The regulatory and compliance risk environment is set against continued geopolitical risk and regulatory focus on operational
resilience, financial resilience, model risk, ESG, financial crime and risk management practices. Multiple jurisdictions are
progressing the implementation of Basel 3.1 standards to various timescales, some of which are being delayed. The
governmental and regulatory focus on improving pro-business growth is also driving legislative and regulatory change.
Internally driven
Data risk
}
We use data to serve our customers and run our operations, often in real-time within digital experiences and processes. If our
data is not accurate and timely, our ability to serve customers, operate with resilience or meet regulatory requirements could
be impacted. We seek to ensure that non-public data is kept confidential, and that we comply with the growing number of
regulations that govern data privacy and cross-border movement of data.
Risks arising from the
receipt of services
from third parties
}
We procure goods and services from a range of third parties. Due to the current macroeconomic and geopolitical climate, the
risk of service disruption in our supply chain remains heightened. We continue to strengthen our controls, oversight and risk
management policies and processes to select and manage third parties, including our third parties’ own supply chains,
particularly for key activities that could affect our operational resilience.
Model risk
~
Model risk arises whenever business decision making includes reliance on models. We use models in both financial and non-
financial contexts, as well as in a range of business applications. Evolving regulatory requirements are driving material
changes to the way model risk is managed across the banking industry, with a particular focus on capital models. New
technologies, including AI and generative AI, are driving a need for enhanced model risk controls.
Change execution risk
}
Delivering change effectively is critical to achieving our strategy and enables us to meet rapidly-evolving customer and
stakeholder needs. We seek to deliver complex change in line with established risk management processes, prioritising
sustainable outcomes and understanding the associated risks. We focus on meeting industry and regulatory expectations and
fulfilling our obligations to customers and clients.
Risks associated with
workforce capability,
capacity and
environmental factors
with potential impact
on growth
~
Our businesses, functions and geographies are exposed to risks associated with employee retention and talent availability,
changing skills requirements of our workforce, and compliance with employment laws and regulations. Attrition across the
Group remains stable, but failure to manage these risks may impact the delivery of our strategic objectives or lead to
regulatory sanctions or legal claims, and the risks are heightened during the current period of fundamental organisational
change.
~ Risk heightened during 2024 } Risk remained at the same level as 2023
HSBC Holdings plc Annual Report and Accounts 2024
39
Strategic report
Long-term viability and going
concern statement
Under the UK Corporate Governance Code,
the Directors are required to provide a viability
statement that must state whether the Group
will be able to continue in operation and meet
its liabilities, taking into account its current
position and the principal risks it faces. They
must also specify the period covered by, and
the appropriateness of, this statement.
The Directors have specified a period of three
years to 31 December 2027. They are satisfied
that a forward-looking assessment of the
Group for this period is sufficient to enable a
reasonable statement of viability. In addition,
this period is covered by the Group’s stress
testing programmes, and its internal
projections for profitability, key capital ratios
and leverage ratios. Notwithstanding this, our
stress testing programmes also cover
scenarios out to five years and our
assessments of risks are beyond three years
where appropriate (see page 131):
– This period is representative of the time
horizon to consider the impact of ongoing
regulatory changes in the financial services
industry.
– Our updated business plan covers 2025 –
2029.
The Board, having made appropriate enquiries,
is satisfied that the Group as a whole has
adequate resources to continue operations for
a period of at least 12 months from the date of
this report, and it therefore continues to adopt
the going concern basis in preparing the
financial statements.
Based upon their assessment, the Directors
have a reasonable expectation that the Group
will be able to continue in operation and meet
liabilities as they fall due over the next three
years.
In making their going concern and viability
assessments, the Directors have considered a
wide range of detailed information relating to
present and potential conditions, including
projections for profitability, liquidity, capital
requirements and capital resources.
The Directors carried out a robust
assessment of the emerging and principal
risks facing the Group to determine its long-
term viability, including those that would
threaten its solvency and liquidity. They
determined that the principal risks are the
Group’s top and emerging risks as set out on
page 39. These include geopolitical and
macroeconomic risks (including geopolitical
tensions and their impact on sanctions, trade
restrictions and tariff increases, and
continued distressed Chinese economic
activity), digitalisation and technological
advances, financial crime risk and ESG risks,
all of which have remained at heightened
levels during 2024.
The Directors assessed that all of the top and
emerging risks identified are considered to be
material and, therefore, appropriate to be
classified as the principal risks to be
considered in the assessment of viability. They
also appraised the impact that these principal
risks could have on the Group’s risk profile,
taking account of mitigating actions planned or
taken for each, and compared this with the
Group’s risk appetite as approved by the
Board.
In carrying out their assessment of the
principal risks, the Directors considered a wide
range of information including:
– details of the Group’s business and
operating models, and strategy (see page
11);
– details of the Group’s approach to managing
risk and allocating capital;
– a summary of the Group’s financial position
considering performance, its ability to
maintain minimum levels of regulatory
capital, liquidity funding and the minimum
requirements for own funds and eligible
liabilities over the period of the assessment.
Notable are the risks which the Directors
believe could adversely impact the Group’s
future results or operations;
– enterprise risk reports, including the
Group’s risk appetite profile (see page 127)
and top and emerging risks (see page 131);
– the impact on the Group due to the Russia-
Ukraine war and conflict in the Middle East;
uncertainty around Hong Kong and mainland
China’s commercial real estate sector,
potential trade restrictions and tariff
increases and strained economic and
diplomatic relations between China and the
US, the UK, the EU and other countries;
– reports and updates regarding regulatory and
internal stress testing. In 2024 the Bank of
England completed their Desk Based Stress
Test exercise to assess the resilience of the
UK banking system. The stress scenario
explored the potential impacts of a number
of adverse macroeconomic conditions,
including global aggregate demand and
supply shock, global commodity prices and
supply-chain disruptions from increased
geopolitical tensions, uncertain inflation
across advanced economies and rapidly
changing interest rates. Additionally, HSBC
completed the 2024 Group-wide internal
stress test, which explored the impact of
two contrasting scenarios depicting severe
macroeconomic conditions over a five-year
period, reflecting banking sector strains and
global economic stress. The results of both
these exercises indicated the Group is
sufficiently capitalised to withstand severe
but plausible adverse stress;
– the results of our 2024 internal climate
scenario analysis exercise further
demonstrate the Group is sufficiently
capitalised to withstand severe stress.
Further details of the insights from the 2024
climate scenario analysis are explained from
page 223;
– reports and updates from management on
risk-related issues selected for in-depth
consideration;
– reports and updates on regulatory
developments;
– legal proceedings and regulatory matters set
out in Note 35 on the financial statements;
and
– reports and updates from management on
the operational resilience of the Group.
Aileen Taylor
Group Chief People & Governance Officer
19 February 2025
Strategic Report
40
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings plc Annual Report and Accounts 2024
41
Environmental,
social and
governance
review
Our ESG review sets out our approach to our
environment, customers, employees and
governance. It explains how we aim to achieve
our purpose, deliver our strategy in a way that is
sustainable, and build strong relationships with all
of our stakeholders.
How we present our TCFD disclosures
Our overall approach to TCFD can be found on page 18 and
additional information is included on pages 444 to 450. Further
details have been embedded in this section and the Risk review
section on pages 219 to 228. Our TCFD disclosures are highlighted
with the following symbol:
42 Environmental
63 Social
73 Governance
Shanghai, China, 1870s. Waterfront View.
TCFD
ESG review
Environmental TCFD
Transition to net zero
We aim to support the transition to net zero and a sustainable future
in partnership with our customers and other stakeholders
At a glance
Supporting the transition to net zero is a key
priority for HSBC. In 2020, we set an ambition to
become a net zero bank by 2050. We continue
to develop our capabilities, products and services
to support our customers’ transition, reduce
emissions in our own operations and partner for
systemic change.
We believe supporting our customers’ transition
both benefits their business and helps generate
long-term financial returns for our shareholders.
Since we set our net zero ambition, we have
seen promising progress in some vital areas of
the decarbonisation challenge. Yet while the
transition has progressed, the global pace of
change remains insufficient. We are limited by,
and cannot on our own overcome, the present
lag in policy measures and the overall slower
pace of the transition.
In our net zero transition plan published in
January 2024 we committed to continually
calibrate our approach to take into consideration
the latest scientific methodologies, climate-
related policies, and developments in the real
world, given that our sector portfolios reflect
progress in the regional economies where we
operate. As we near the mid-point towards our
own 2030 targets, it is important to take stock of
our own progress so far. We have made good
progress in reducing the emissions from our
own operations but more uneven progress
towards our ambitions for our financed
emissions footprint.
Financed emissions
Our strategy is to support emissions reductions
in the wider economy by working with our
portfolio of customers to facilitate the emissions
reductions they are seeking to make. We
continue to focus on engaging with our
customers on their transition plans, managing
the products and services that we offer, and
adapting the financing choices we make to help
move the world towards a resilient, net zero
economy.
We have set 2030 targets that combine financed
and facilitated emissions for the oil and gas
sector on an absolute emissions reduction basis,
and for the power and utilities sector using an
emissions intensity metric. We have also set a
target for on-balance sheet financed emissions
for thermal coal mining.
For demand-side sectors, we have set 2030
emissions intensity targets to reflect the need to
scale up low-emissions technologies while
transitioning away from existing high-emitting
technologies in transport and industry. As part of
our financial reporting, we present the progress
for these sectors against our published financed
emissions baselines and targets.
As we have set out in our net zero transition
plan, we must acknowledge that there are
fundamental prerequisites, outside of our
control, which impact our ability to meet our
2030 interim financed emissions targets. These
include technological advancements,
diversification of the energy mix, market demand
for climate solutions, evolving customer
preferences, and government leadership and
effective policy.
At the current pace of decarbonisation, a
combination of the above factors has led to the
transition being slower than envisaged by recent
Paris-aligned net zero scenarios. Against this
background, we have begun a review of our
interim 2030 financed emission targets and
associated policies as part of the annual net zero
transition plan review referenced in our 3Q24
earnings release in October.
As we calibrate our approach for the latest
context, we will seek to balance being ambitious
on net zero while recognising the present near-
term global challenges and the associated
impact of the transition playing out differently
across the regions and sectors we serve. In
doing so we plan to draw on the latest scientific
evidence and credible industry-specific
pathways, while, at the same time, maintaining
our commitment under our 2021 Climate
Resolution.
Own operations and supply chain
In 2020, we set an ambition to reach net zero in
our operations and supply chain by 2030. Our
approach is to reduce emissions from
consumption, replace consumption with low-
emissions alternatives, and remove remaining
emissions with high-quality carbon credits, in line
with external guidance.
We continue to make good progress in driving
down our direct emissions. However, progress
in reducing scope 3 emissions in our supply
chain is proving slower than we anticipated,
driven mainly by the slower pace of the transition
across the real economy.
While we remain committed to our approach, it
has become clear that we would need to rely
heavily on carbon offsets to achieve net zero in
our supply chain by 2030. As such, we have
revisited our ambition to take into account latest
best practice guidance on carbon offsets. We are
now focused on achieving net zero across our
operations, travel and supply chain by 2050.
In this section
Understanding
our climate
reporting
We continue to evolve our disclosures taking into consideration data
limitations and other challenges, and provide an overview of key changes for
2024.
Page 43
Supporting our
customers
Sustainable finance and
investment
We seek to support our customers’ transition to net zero, including through
the provision and facilitation of sustainable finance and investment solutions.
Page 45
Partnering for
systemic change
Supporting systemic change
to help deliver net zero
We focus on building partnerships that help support an enabling environment for
scaling net zero solutions in the geographies most impacted by climate change.
Page 47
Embedding net
zero
Financed emissions
We aim to align our financed emissions to achieve net zero by 2050.
Page 48
Net zero in our own
operations
We aim to achieve net zero in our own operations, travel and supply chain by
2050, in line with our overarching net zero ambition.
Page 58
Managing climate risk
We manage climate risk across our businesses in line with our Group-wide risk
management framework and continue to enhance our stress testing and
scenario analysis capability to identify and understand climate-related risks.
Page 60
Sustainability risk policies
Our sustainability risk policies help to set out our appetite for financing and
advisory activities in certain sectors.
Page 61
ESG review | Environment
42
HSBC Holdings plc Annual Report and Accounts 2024
Understanding our climate reporting
Continuing to evolve our climate
disclosures
We engage with standard setters to support
the development of transparent and consistent
climate-related industry standards in areas such
as product labelling, sustainability disclosures,
sustainable finance taxonomy and emissions
accounting. In 2025, we will continue to review
and enhance our approach to disclosures.
Internal and external data challenges
The effective measurement, governance and
reporting of progress against our climate
ambitions relies heavily on the availability and
quality of both internal and external data.
Newer data sources and topics may be difficult
to assure using traditional verification
techniques. This, coupled with diverse external
data sources and complex structures, further
complicates data consolidation. Our internal
data on customer groups that was used to
source financial exposure and emissions data,
is based on credit and relationship
management factors and is not always aligned
with the need to analyse emissions across
sector value chains. This can result in
inconsistencies in our financed emissions
calculations.
We continue to invest in the development of
data and analytics capabilities to support our
transition. This includes sourcing more reliable
data from external providers. We are also
developing our processes, systems, controls
and governance to meet the demands of future
ESG reporting.
Given our dependency on collecting emissions
data from our clients and the manual nature of
the process, enhanced verification and
assurance procedures are performed on a
sample basis over this data, including the first
and second lines of defence. Our climate
models undergo independent review by an
internal model review group, and we obtain
limited assurance on our financed emissions
and sustainable finance disclosures from
external parties, including our external auditors.
Policies and implementation
We continue to review and enhance
implementation of sustainability risk policies as
we apply them in practice. They are reviewed
and, where appropriate, updated based on
factors including risk materiality,
implementation experience, evolving scientific
guidance, updated climate scenarios, policy
and regulatory requirements and evolving
industry practices.
Lack of consistency across sustainable
finance taxonomies
Sustainable finance metrics, taxonomies and
practices currently lack global consistency. As
standards develop and regulatory guidance
evolves across jurisdictions, our targets,
methodologies and disclosures may also
need to adapt. Recognising these challenges,
we have developed and disclosed our
Sustainable Finance and Investment Data
Dictionary to accompany reporting against our
sustainable financing and investment
ambition. For further details, see page 45.
The evolution of the dictionary could lead to
differences in year-on-year reporting. We
continue to engage with standard setters in
different regions to support the development
of transparent and consistent taxonomies to
encourage science-based decarbonisation,
particularly in high transition risk sectors.
Impact on our reporting and financial
statements
We have assessed the impact of climate risk
on our balance sheet and have concluded that
no incremental adjustments were needed to
capture climate impacts in our financial
statements for the year ended 31 December
2024. The effects of climate change are a
source of uncertainty. We capture known and
observable potential impacts of climate-
related risks in our asset valuations and
balance sheet calculations. These are
considered in relevant areas of our balance
sheet, including expected credit losses,
classification and measurement of financial
instruments, goodwill and other intangible
assets; and in making the long-term viability
and going concern assessment. As part of
assessing the impact on our financial
statements we conducted scenario analysis
to understand the impact of climate risk on
our business (see pages 60 and 223). For
further details of how management
considered the impact of climate-related risks
on its financial position and performance, see
‘Critical estimates and judgements’ on page
354.
Progress on our net zero transition plan
We continue to take actions across our
organisation to support the implementation of
our net zero transition plan. This report
provides key updates on our progress in 2024
and our annual TCFD reporting.
For further details of our climate risk exposures,
see page 219.
Key changes to our 2024 disclosures
We are committed to timely and
transparent reporting. However, we
recognise that challenges may result in us
having to change certain disclosures. In
2024, there was an impact on certain
climate disclosures, including:
– Financed emissions for the automotive,
thermal coal mining and aviation sectors:
In 2024, we made a methodological
change to the way we calculate
financed emissions for our automotive
clients. In addition, we identified errors
in both the thermal coal mining and
aviation sectors, including errors in
lending product codes. These changes
have resulted in a 25% decrease in
emissions reported for automotive and a
30% increase in emissions reported for
aviation in 2022 figures, and a 18%
increase in emissions reported for
thermal coal mining in the 2020 baseline
figure on an absolute financed
emissions basis. For further details, see
page 51.
– Thermal coal exposure: we continue to
refine our basis of preparation and have
made further enhancements in 2024.
For further details, see page 62.
– Supply chain emissions: we have
restated our supply chain emissions due
to revisions in our methodology and an
error in the mapping of industry averages.
This has resulted in a 25% increase to
our 2019 baseline emissions and a 2%
increase to our 2023 reported emissions.
For further details, see page 59.
– Asset management financed emissions
2019 baseline: we have re-baselined our
2019 intensity figure due to an error in
the issuer mapping and is now 124
tCO2e/M$ invested versus 131 tCO2e/
M$ invested reported in the Annual
Report and Accounts 2022. For further
details, see page 57.
– Energy consumption: We have restated
our 2019 metric for total energy
consumption due to an error. For further
details, see page 59
HSBC Holdings plc Annual Report and Accounts 2024
43
ESG review
Explaining scope 1, 2 and 3 emissions
To measure and manage our greenhouse gas
emissions, we follow the Greenhouse Gas Protocol
global framework, which identifies three scopes
of emissions. Scope 1 represents the direct
emissions we create. Scope 2 represents the
indirect emissions resulting from the use of
electricity and energy to run a business. Scope 3
represents indirect emissions attributed to upstream
and downstream activities. Our upstream activities
include business travel and emissions from our
supply chain including transport, distribution and
waste. Our downstream activities include those
related to investments and including financed
emissions.
Under the protocol, scope 3 emissions are also
broken down into 15 categories, of which we
provide reporting emissions data for three related
to upstream activities. These are: purchased goods
and services (category 1); capital goods (category 2);
and business travel (category 6). We also report
data on downstream activities for financed
emissions (category 15).
For further breakdown of our scope 1, 2 and 3 emissions, see our ESG Data Pack at www.hsbc.com/esg.
1 Our analysis of financed emissions comprises ‘on-balance sheet financed emissions’ and ‘facilitated emissions’.
Assurance relating to ESG metrics TCFD
HSBC Holdings plc is responsible for
preparation of the ESG information and all
supporting records, including selecting
appropriate measurement and reporting
criteria, in this Annual Report and Accounts
2024, ESG Data Pack and the additional reports
published on our website.
We recognise the importance of ESG
disclosures and the quality of data underpinning
them. We also acknowledge that our internal
processes to support ESG disclosures continue
to be developed and that currently they partly
rely on manual sourcing and categorisation of
data. Certain aspects of our ESG disclosures are
subject to enhanced verification and assurance
procedures including the first, second and third
lines of defence. Assurance assists with
reducing the risk of misstatement, although it
cannot be fully eliminated given the challenges
in data, evolving methodologies and emerging
standards. We aim to continue to enhance our
approach in line with external regulations and
expectations.
For 2024, ESG metrics are subject to stand-
alone independent limited third-party assurance
in accordance with the International Standard
on Assurance Engagements 3000 (Revised)
‘Assurance Engagements other than Audits or
Reviews of Historical Financial Information’
and, in respect of the greenhouse gas
emissions, in accordance with the International
Standard on Assurance Engagements 3410
‘Assurance Engagements on Greenhouse Gas
Statements’, issued by the International
Auditing and Assurance Standards Board, on
the following specific ESG metrics:
– our use of proceeds from Green Bond
issuances 2024 (published in December
2024);
– our cumulative sustainable finance and
investment provided and facilitated from
1 January 2020 to 31 December 2024 (see
page 45);
– our on-balance sheet financed emissions for
2023 for six sectors, our on-balance sheet
financed emissions for 2021 and 2022 for
thermal coal mining, and our facilitated
emissions for two sectors for 2023 (see
page 56);
– our thermal coal financing drawn balance
exposures for 2021 and 2022 (see page 62);
– our own operations’ scope 1, 2 and 3
(business travel) greenhouse gas emissions
data (see page 59), as well as supply chain
emissions (purchased good and services, and
capital goods) data; and
– our re-baselined 2019 intensity metric and the
scope 1 and 2 financed emission intensity
achieved by 31 December 2023 for our HSBC
asset management business (see page 57).
The work performed for independent limited
assurance is substantially less than the work
performed for a reasonable assurance opinion,
such as that provided for financial statements.
Our data dictionaries and methodologies for
preparing the above ESG-related metrics and
independent third-party limited assurance reports
can be found at www.hsbc.com/who-we-are/esg-
and-responsible-business/esg-reporting-centre.
ESG review | Environment
44
HSBC Holdings plc Annual Report and Accounts 2024
Our own
operations and
supply chain
See page 58
Scope 2
Indirect
Scope 3
Indirect
Scope 1
Direct
Scope 31
Indirect
Our financed
emissions See
page 48
Electricity,
steam
heating
and
cooling
Purchased
goods and
services
(Category 1)
Company
facilities
Company
vehicles
Business travel
(Category 6)
Capital goods
(Category 2)
Investments and
financed emissions
(category 15)
Upstream activities
Downstream activities
HSBC Holdings
Supporting our customers
Sustainable finance and investment TCFD
We aim to help our customers transition to
net zero and a sustainable future by providing
and facilitating between $750bn and $1tn of
sustainable finance and investment by 2030.
Our sustainable finance and investment
ambition aims to help promote green,
sustainable and socially-focused business and
sustainable investment products and
solutions.
Since 1 January 2020, we have provided and
facilitated a cumulative $352.5bn of
sustainable finance and $41.1bn of ESG and
sustainable investing, as defined in our
Sustainable Finance and Investment Data
Dictionary 2024. This included 39% where
the use of proceeds was dedicated to green
financing, 12% to social financing, and 15%
to other sustainable financing. It also included
24% of sustainability-linked financing and
10% of net new investment flows managed
and distributed on behalf of investors.
In 2024, our underwriting of green, social,
sustainability and sustainability-linked bonds
for clients increased over the year, measured
on a proportional share basis, in line with the
wider bond market environment, although it
remained at 15% of our total bond
underwriting.
On-balance sheet sustainable lending
transactions increased by 11% compared
with 2023. In 2024, transactions totalling
$0.5bn were identified as no longer fulfilling
our eligibility criteria. These were declassified
and removed from the cumulative progress
total, and reported as a negative entry in
2024. Since 1 January 2020, the cumulative
amount declassified from the total is $1.2bn.
Continued progress towards achieving our
sustainable finance and investment ambition
is dependent on market demand for the
products and services set out in our
Sustainable Finance and Investment Data
Dictionary 2024.
Sustainable finance and investment summary
1
2024
($bn)
2023
($bn)
2022
($bn)
2021
($bn)
2020
($bn)
Cumulative
progress
since 2020
($bn)
Balance sheet-related transactions provided
2
47.4
42.7
42.2
26.0
10.4
168.7
Capital markets/advisory (facilitated)
37.3
33.3
34.5
48.7
30.0
183.8
ESG and sustainable investing (net new flows)
14.5
7.7
7.5
7.7
3.7
41.1
Total contribution
6
99.2
83.7
84.2
82.4
44.1
393.6
Sustainable finance and investment classification by theme
1
Green use of proceeds
5
42.2
37.1
29.0
27.1
18.9
154.3
Social use of proceeds
9.6
8.4
6.7
11.3
9.7
45.7
Other sustainable use of proceeds
3
13.9
10.7
12.6
11.7
8.3
57.2
Sustainability-linked
4
19.0
19.8
28.4
24.6
3.5
95.3
ESG and sustainable investing
14.5
7.7
7.5
7.7
3.7
41.1
Total contribution
6
99.2
83.7
84.2
82.4
44.1
393.6
1 The 2024 data in this table has been prepared in accordance with our Sustainable Finance and Investment Data Dictionary 2024, which includes green, social and
sustainability activities. The amounts provided and facilitated include: the limits agreed for balance sheet-related transactions provided (including drawn and
undrawn amounts), the proportional share of facilitated capital markets/advisory activities and ESG and sustainable investing net new flows of both HSBC-owned
(Asset Management) sustainable investment funds and Wealth and Global Private Banking investments.
2 In 2024 only 9 months of WPB green/energy efficient mortgages were included for the first time within Other Qualified Green Lending, future years’ reporting will
include 12 months of transactions.
3 Sustainable use of proceeds can be used for green, social or a combination of green and social purposes, assessed by HSBC against internal standards and
relevant industry guidelines.
4 Sustainability-linked products, where the coupon or interest rate is dependent on whether the borrower achieves certain pre-defined sustainability performance
target(s), are assessed by HSBC against internal standards and relevant industry guidelines and can be used for general purposes, which may be sustainable or
non-sustainable.
5 Included within the total cumulative contribution towards our ambition are transactions to customers within the six high transition risk sectors (i.e. automotive,
chemicals, construction and building materials, metal and mining, oil and gas, and power and utilities) as described on page 221, of which approximately $56bn is
defined as green use of proceeds in line with the Sustainable Finance and Investment Data Dictionary 2024.
6 The $393.6bn cumulative progress since 1 January 2020 is subject to independent third-party limited assurance in accordance with International Standard on
Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’. Our Sustainable Finance and
Investment Data Dictionary 2024 and independent third-party limited assurance report is available at: www.hsbc.com/who-we-are/esg-and-responsible-business/
esg-reporting-centre.
Our sustainable finance and investment data dictionary
We define sustainable finance and investment
as any form of financial service that integrates
ESG criteria into business or investment
decisions. This includes financing, investing
and related activities that support the
achievement of the UN SDGs, including but
not limited to the aims of the Paris Agreement
on climate change.
Our Sustainable Finance and Investment Data
Dictionary sets out our approach for classifying
financing and investment as sustainable for the
purpose of tracking and disclosing our
performance against our sustainable finance
and investment ambition.
We update our data dictionary annually,
including reviewing our product definitions,
adding new qualifying products and removing
products that no longer qualify, making
enhancements to our internal standards, and
developing our reporting and governance. This
year, we also indicate for the first time the
types of eligible environmental and social
activities we intend to consider going forward
when qualifying certain use of proceeds
financing for inclusion towards our sustainable
finance and investment ambition including:
climate solutions; nature; adaptation and social-
related activities.
We engage in industry initiatives to develop our
understanding and approach to ‘transition
finance’. However, we do not currently plan to
include transition finance as a product label or
stand-alone category in our data dictionary and
reporting. We will continue to monitor industry
guidance as it develops.
For our 2024 ESG Data Pack and Sustainable
Finance and Investment Data Dictionary, see
www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
HSBC Holdings plc Annual Report and Accounts 2024
45
ESG review
Sustainable finance and investment continued TCFD
Leveraging our strengths
We are focused on three key areas that play to
our strengths as an organisation and can help
deliver an impact on decarbonisation in the
global economy, particularly in Asia-Pacific and
the Middle East where the need for financing at
scale is most critical. In 2024, we were named
the world’s best bank for sustainable finance in
the Euromoney Awards for Excellence.
Transitioning industry
We support our clients in emissions-intensive
industries with their transition goals by engaging
with them on their transition plans and by
providing financing solutions.
In 2024, we refreshed transition plan
assessments for major clients in the oil and gas,
power and utilities and coal mining sectors, and
we began assessing major clients in the
automotive, aviation, cement, steel and
aluminium sectors, to better understand their
objectives and identify opportunities to enable
their decarbonisation strategies.
Development of clean power generation is
critical to achieving net zero. We supported Abu
Dhabi Future Energy Company (Masdar) towards
its equity commitments on new greenfield
projects in renewable energy and energy
efficiency, by acting as joint lead manager and
bookrunner in raising $1bn through its second
green bond issuance.
Scaling infrastructure finance plays an important
role in meeting global decarbonisation
objectives. In 2024, we launched HSBC
Infrastructure Finance (‘HIF’), which brings
together our infrastructure finance, export
finance, and debt/project finance capabilities to
increase our capacity to realise opportunities in
the transition to a low carbon economy.
Pentagreen Capital, our joint venture with
Singapore investment firm Temasek targets
marginally bankable clean energy and adaptation
projects in Southeast Asia to support them to
commercial scale, with the aim of accelerating the
transition to a low carbon economy. Pentagreen
Capital completed its second deal in 2024: a green
loan for BE C&I Solutions to catalyse the
construction of distributed sustainable bioenergy
projects across Southeast Asia and India.
To support our WPB customers, HSBC UK
launched Energy Efficient Home Cashback
Mortgages, to offer cashback incentives to
customers taking out our mortgage loans to
finance their purchases of residential properties
with an A or B EPC rating.
Catalysing the new economy
We aim to support clean industrial development
and the scaling of entrepreneurial new economy
companies at all stages of financing across the
markets we operate in. We do this through
direct financing and investment as well as
through catalytic partnerships.
We continue to work closely with Breakthrough
Energy in developing and deploying critical
climate solutions. We are an anchor partner in
the Breakthrough Energy Catalyst platform,
which provides expertise, resources and capital
into first-of-a-kind or first commercial scale
projects. Additionally, in 2024 we directly
supported a number of Breakthrough Energy
Ventures portfolio companies with venture debt
and other banking services. We acted as a lead
arranger in a $100m credit facility for US-based
Electric Hydrogen to support the manufacturing
and deployment of the company’s electrolyser
plants in producing green hydrogen.
In 2024, we launched a partnership with Google
Cloud to offer banking support for climate tech
companies in the Google Cloud Ready
Sustainability programme, and support them to
scale up. These companies can now access
HSBC products and services that are tailored to
their specific growth ambitions, including
venture debt financing options and support from
our specialist climate tech finance team.
Decarbonising trade and supply chains
We continue to focus on helping to decarbonise
trade flows and supply chains through our green
trade finance and sustainable trade instruments,
sustainable supply chain financing and
sustainability-linked lending for trade.
We supported PDS Limited, a global fashion
infrastructure platform, on a trade facility to
enable deployment of working capital linked to
the successful delivery of environmental and
social targets across their operations, aligned to
their ESG approach.
Mid-market and smaller businesses make up a
large proportion of global supply chains. In 2024,
we expanded our sustainable finance
capabilities with the launch of a sustainability
improvement loan (‘SIL’) for businesses of this
size in Hong Kong and Singapore, broadening
the sustainable finance options available in the
region. We recently completed our first SIL
transaction in Asia-Pacific with Opal Cosmetics,
a manufacturer and seller of personal care and
beauty products headquartered in Hong Kong
and with a global supply chain. The proceeds
from the facility will support the company’s
general working capital needs and ongoing
research and development activities. We now
offer sustainability improvement loans to clients
in 11 markets.
For more examples of how we are supporting
our customers, see additional case studies on
pages 19, 48, 49, 50, 51, and 57.
ESG and sustainable investing
We offer a broad suite of ESG and sustainable
investing solutions across asset management,
wealth, private banking, and insurance, to help
institutional and individual investors generate
financial returns, manage risk and pursue ESG-
related objectives in line with their preferences.
As at 31 December 2024, HSBC Asset
Management managed $179.8bn in ESG and
sustainable investing portfolios for internal and
external investors. This includes those that are
distributed by HSBC Wealth and Private Banking
and those HSBC Asset Management manages
on behalf of HSBC Life.
HSBC Asset Management recognises that its
clients’ investment objectives are evolving, and
sustainability preferences vary, and offers a
broad range of sustainable investing solutions, in
both traditional and alternative areas of
investment. Our ESG and sustainable investing
approach includes impact funds with a clear
ESG or sustainable objective, thematic funds
that seek to invest in ESG or sustainable trends,
and strategies that seek to mitigate ESG risks by
investing assets with higher ESG performance
and exclusions of those that are lower ESG
performing. Considerations across our approach
can include, but are not limited to, climate or
net-zero transition plans and controversies
identified related to UN SDGs.
For the avoidance of doubt, products or assets
invested pursuant to our ESG and sustainable
investing approach do not necessarily qualify as
‘sustainable investments’ as defined by the EU
Sustainable Finance Disclosure Regulation and/or
other relevant regulations, and may not qualify as
‘sustainable’ products for the purposes of the UK
Sustainability Disclosure Requirements and
European Securities and Markets Authority fund
naming guidance and/or any other regulatory
standards. The HSBC ESG and sustainable
investing approach is an internal classification
used to establish our own ESG and sustainable
investing standards and to promote consistency
across asset classes and HSBC business lines
where relevant. Our ESG and sustainable
investing approach should not be relied on
externally to assess the sustainability
characteristics of any given product.
For our private banking and wealth customers,
we offer a range of ESG and sustainable investing
products across different asset classes, including
mutual funds, ETFs, equities, fixed income,
discretionary and alternatives. In 2024, we
continued to expand our investment offering with
the launch of eight ESG and sustainable investing
mutual funds and ETFs. We regularly publish
insights to help our clients better understand the
ESG implications of their investments.
In 2024, we made updates to integrate ESG into
our client wealth advisory journey in both
Switzerland and Luxembourg, including building
capabilities to understand private banking
clients’ sustainability preferences, rebalance
their investment portfolios and monitor
portfolios in line with their preferences. We also
integrated client sustainability preferences into
the investment product filtering process for
retail wealth clients in Hong Kong.
In 2024, HSBC Life increased ESG and
sustainable investing assets across its insurance
manufacturing entities in Asia, Europe, and Latin
America. The majority of these newly-deployed
assets were green and sustainability-linked
bonds, followed by placements into sustainable
private credit funds.
For further details of our asset management
policies, see page 62.
ESG review | Environment
46
HSBC Holdings plc Annual Report and Accounts 2024
Partnering for systemic change
Supporting systemic change to help deliver net zero
We focus on building strategic partnerships that
can help to create an enabling environment for
mobilising finance, and support development
and scaling-up of solutions for the net zero
transition. For example, in 2024 we made a
strategic investment in sustainable aviation fuel
(‘SAF’) through a one-time purchase agreement
for approximately 1.2m US gallons of SAF
produced by EcoCeres, which will be used to
refuel Cathay Pacific aircraft at Hong Kong
International Airport.
We continue to participate in several
sustainability-related cross-industry alliances and
initiatives to help stimulate industry engagement
on climate and nature-related issues, encourage
the flow of finance for the net zero transition,
and improve global financial standards,
guidance, and frameworks to mobilise finance
and accelerate action.
Through our philanthropy, we partner with a
range of non-governmental organisations to
develop thought leadership, spur innovation,
build capacity and test and scale climate
solutions.
Highlights from our net zero and
sustainability-aligned partnerships
In 2024 we donated approximately $9m in grant
funding to help establish a portfolio of
partnerships aligned to the strategic focus areas
set out in our net zero transition plan:
transitioning industry, catalysing the new
economy, and decarbonising trade and supply
chains. We are also supporting initiatives
focused on driving progress on cross-cutting
issues, such as nature and the just transition.
Our collaboration with the Mission Possible
Partnership seeks to support decarbonisation of
some of the world’s hard-to-abate heavy
industry and transport sectors. We are funding a
joint initiative focused on demand creation for
green building materials in the Middle East,
fostering collaboration among industry leaders,
policymakers, and innovators to unlock projects.
We launched a new partnership with Third
Derivative and Founders Factory to support
climate tech innovation focused on hard-to-abate
sectors, particularly in Asia where there is a
significant need and growing market for such
technologies. The partnership seeks to provide
capacity building and facilitate connections with
the investment community to support the
development and scaling of key climate
technologies.
Our partnership with the Venture Climate
Alliance (‘VCA’) supports venture capital firms to
shape and share best practices that help to
prepare them for the climate transition at the
earliest stages of business creation. Work is
underway on developing a climate solutions
framework to support portfolio-level climate
impact disclosure and expand VCA membership
across emerging markets.
We are supporting Apparel Impact Institute’s
(‘Aii’) Fashion Climate Fund, which aims to
mobilise $2bn in blended finance to halve
carbon emissions from the sector by 2030. We
have leveraged our trade finance expertise to
provide insights and help inform Aii’s ‘Brand
Playbook for Financing Decarbonisation’ and the
‘Landscape and Opportunities to Finance the
Decarbonisation of India’s Apparel
Manufacturing Sector’.
Climate Solutions Partnership
Our five-year Climate Solutions Partnership with
the World Resources Institute, WWF and over
50 local partners, continues to support nature-
based solutions and energy transition in Asia.
Since 2020, $105m in funding has been
deployed to our NGO partners. The energy
programmes have engaged companies across
Asia to help set new standards in climate
commitments for their industries and mobilised
finance to support the uptake of renewables.
The nature programmes supported the Asia
Sustainable Palm Oil Links programme, focused
on promoting sustainable palm oil production,
consumption and trade across Asia, and the
Nature-based Solutions Accelerator, which
supported projects to reach investment
readiness.
Through this partnership, we also launched an
open-access Environmental Crimes Financial
Toolkit to help financial institutions detect and
monitor activities related to environmental and
financial crimes. The first set of tools focuses on
commodity-driven deforestation and land
conversion.
Our just transition approach
The transition to net zero is expected to
drive social changes on a global scale,
presenting risks and opportunities for our
clients and our stakeholders. Our net
zero transition plan sets out our initial
approach to incorporating just transition
considerations. We are taking steps to
embed just transition principles into our
client engagement activities, our own
operations, and our financing decisions.
HSBC Asset Management, in line with
relevant stewardship activities,
encourages companies to identify and
address the impacts of their climate
strategy on stakeholders, including
workers, suppliers, and the communities
in which they operate. This may include
specific metrics or objectives in relation,
but not limited to, employee training and
development, green job creation,
safeguarding workers’ rights and support
for affected communities.
We are a founding funder of the Just
Transition Finance Lab, hosted at the
LSE’s Grantham Research Institute,
which aims to accelerate solutions to
achieve progress on climate and wider
environmental goals through a people-
centred approach. Since its launch in
early 2024, the Lab has produced a range
of outputs including: mapping just
transition policies to a set of metrics,
exploration of the role investors can play
in facilitating a just transition in India, a
case study of the coal-to-clean shift in
Chile, and a detailed examination of the
financial path to a just transition in the
critical minerals sector.
Our approach to nature
Around one third of the emissions reductions
required to limit global warming in line with
the Paris Agreement are linked to the land
use system and nature.
We have been further developing our
approach to nature, which builds on the
outline that was set out in our net zero
transition plan. This includes considering how
to: understand our exposure to nature;
manage nature-related risks and impacts;
support our customers, including financing
and investing in nature-related solutions; and
build nature-related skills, data capacities and
partnerships.
We are taking steps to embed our approach
to nature alongside delivery of our net zero
implementation plans. We continue to test
and scale approaches to financing and
investing in biodiversity and nature, which
has included acting as sole bookrunner and
structuring bank for an Amazon reforestation-
linked outcome bond, the World Bank’s
largest outcome bond issued to date (see
page 19). In 2024, starting with our European
clients, we began including nature-related
questions in our client transition engagement
questionnaire.
Climate Asset Management, HSBC Asset
Management’s joint venture with climate
investment and advisory firm Pollination, has
now raised commitments of more than $1bn
for natural capital projects around the world,
and announced the final close of its Natural
Capital and Nature Based Carbon Funds.
HSBC Holdings plc Annual Report and Accounts 2024
47
ESG review
Embedding net zero
Financed emissions
TCFD
As part of our ambition to become a net zero
bank by 2050, we published initial financed
emissions targets for 2030. As we near the
mid-point towards our 2030 targets, we have
begun a review of our interim 2030 financed
emissions targets and associated policies as
described on page 15. This forms part of our
annual net zero transition plan review
referenced in our 3Q24 earnings release.
Our analysis of financed emissions comprises
‘on-balance sheet financed emissions’ and
‘facilitated emissions’, which we distinguish
where necessary in our reporting.
Our on-balance sheet financed emissions
include emissions related to on-balance sheet
lending, such as project finance and direct
lending. Our facilitated emissions include
emissions related to financing we help clients
to raise through capital markets activities. Our
analysis covers financing from Global Banking
and Markets, and Commercial Banking.
Financed emissions link the financing we
provide to our customers and their activities
in the real economy, and provide an indication
of the associated greenhouse gas emissions.
They form part of our scope 3 emissions,
which include emissions associated with the
use of a company’s products and services.
We have set combined on-balance sheet
financed and facilitated emissions targets for
two emissions-intensive sectors: oil and gas,
and power and utilities. We have also set
targets for on-balance sheet financed
emissions for the following sectors: cement;
iron, steel and aluminium; aviation;
automotive; and thermal coal mining.
As part of our financial reporting, we present
the progress for these sectors against our
published financed emissions baselines and
targets.
We have set absolute emissions reduction
targets for the oil and gas, and thermal coal
mining sectors. For the power and utilities;
cement; iron, steel and aluminium; aviation;
and automotive sectors, we have set
emissions intensity targets that allow us to
deploy capital towards decarbonisation
solutions.
Supporting India’s
transition to a greener
economy
We acted as sole Export Credit Agency
(‘ECA’) coordinator and sole green
structurer for an inaugural $1bn green push
export finance facility for Reliance
Industries (‘RIL’), guaranteed by the Italian
ECA, known as SACE. This was RIL’s first
ever green loan and will be used to
primarily finance eligible green projects
being developed by RIL’s new energy
business.
As India’s largest private sector company,
RIL is seeking to address India’s energy
challenges – affordability, sustainability and
security – with the aim of bridging the
green energy divide and supporting clean
energy infrastructure demand globally.
RIL’s new energy proposition is aimed at
creating a manufacturing ecosystem
including solar photovoltaics, advanced
energy storage and green chemical value
chains.
Our approach to financed emissions
In our approach to assessing our financed
emissions, our key methodological decisions
were shaped in line with industry practices
and standards. We recognise these are still
developing.
Coverage of our analysis
Our analysis focuses on the most carbon-
emissive sectors and the parts of the value
chain where we believe the majority of
emissions are produced, to help reduce double
counting of emissions. This is different to the
scope of sectors within the wholesale
corporate lending portfolio that we use to
manage climate risk. These sectors are set out
on page 221.
By estimating emissions and setting targets
for customers that directly account for, or
indirectly influence, the majority of emissions
in each of the most carbon-emissive sectors,
we can focus our engagement and resources
where we believe the potential for change is
highest. For each sector, our reported
emissions now typically include all the major
greenhouse gases, including carbon dioxide,
methane and nitrous oxide, among others.
These are reported as tonnes of CO2
equivalent (‘tCO2e’).
To calculate annual on-balance sheet financed
emissions, we follow guidance from the
Partnership for Carbon Accounting Financials
(‘PCAF’) standard. We use drawn balances as
at 31 December in the year of analysis related
to wholesale credit and lending, including
business loans and project finance, as the
value of finance provided to customers. We
excluded products that were short term by
design and typically less than 12 months in
duration to reduce volatility, having considered
the PCAF guidance and subject matter expert
opinions from the business. For facilitated
emissions we considered all capital market
transactions in scope for the year of analysis.
These included debt and equity capital
markets, and syndicated loans.
For further details of our financed emissions
methodology, exclusions, and limitations, see
our Financed Emissions and Thermal Coal
Exposures Methodology at www.hsbc.com/who-
we-are/esg-and-responsible-business/esg-
reporting-centre.
ESG review | Environment
48
HSBC Holdings plc Annual Report and Accounts 2024
Financed emissions continued
The chart below shows the scope of our
financed emissions analysis of the seven
sectors, including upstream, midstream, and
downstream activities within each sector.
The allocation of companies to different parts
of the value chain is highly dependent on
expert judgement and data available on
company revenue streams. As data quality
improves, this will be further refined.
Sector
Scope of
emissions
Value chain in scope
Coverage of
greenhouse
gases (‘GHGs’)
Oil and gas
1, 2 and 3
Upstream
(e.g. extraction)
Midstream
(e.g. transport)
Downstream
(e.g. fuel use)
Integrated/
diversified
All GHGs
Power and utilities
1
1 and 2
Upstream (e.g.
generation)
Midstream
(e.g. transmission and distribution)
Downstream
(e.g. retail)
Diversified utilities -
Power generation
All GHGs
Cement
1 and 2
Upstream (e.g. raw
materials, extraction)
Midstream
(e.g. clinker and cement manufacturing)
Downstream
(e.g. construction)
All GHGs
Iron, steel and
aluminium
1 and 2
Upstream (e.g. raw
materials, extraction)
Midstream
(e.g. ore to steel)
Downstream
(e.g. construction)
All GHGs
Aviation
1 for airlines
3 for aircraft
lessors
Upstream (e.g. parts
manufacturers)
Midstream
(e.g. aircraft manufacturing)
Downstream
(e.g. airlines and air lessors)
All GHGs
Automotive
1, 2 and 3
Upstream
(e.g. suppliers)
Midstream
(e.g. motor vehicle manufacture)
Downstream
(e.g. retail)
All GHGs
Thermal coal mining
1, 2 and 3
Upstream
(e.g. extraction)
Midstream
(e.g. processing)
Downstream
(e.g. retail)
All GHGs
Key:
1 The power and utilities value chain has been updated to show diversified utilities power generation as a separate part of the value chain. This has always been
included in-scope of the power and utilities target.
Setting our targets
Our target-setting approach to date for on-
balance sheet financed emissions and
facilitated emissions, has been to utilise a single
reference scenario – IEA’s NZE 2021 – to
underpin both energy supply-related sectors (oil
and gas; power and utilities; and thermal coal
mining), and our published targets for demand-
side sectors in transport (aviation and
automotive) and heavy industry (cement; and
iron, steel and aluminium).
Facilitated emissions included in our combined
metrics are weighted at 33%, in accordance
with the PCAF standard. To further reduce the
inherent volatility in facilitated emissions, we
apply a three-year moving average across
transactions (i.e. average of 2021, 2022 and
2023 for the 2023 progress numbers) to track
progress to our combined target. This means
that transactions facilitated in 2028 and 2029
will still have an impact on the 2030 progress
number and will need to be taken into
consideration as we manage progress towards
our target.
Our approach for financed emissions
accounting does not rely on purchasing credits
to achieve any financed emissions targets we
set.
An evolving approach
In the upcoming review of our financed
emissions targets, we will seek to balance being
ambitious on net zero while recognising present
near-term global challenges and the associated
impact of the transition playing out differently
across the regions and sectors we serve. In
doing so, we plan to draw on the latest
scientific evidence and credible industry-specific
pathways while, at the same time, maintaining
our commitment under our 2021 Climate
Resolution.
Other sector updates
For the agricultural sector, due to ongoing
data challenges, we are not in a position to
report our financed emissions or set a target at
this time. For commercial real estate, we
continue to work towards outlining our financed
emissions ambition. For residential real estate,
we continue to expect to measure and report
our financed emissions in future disclosures.
Supermarket group serves up sustainability incentives
across value chain
HSBC UK has collaborated with Asda on its supply chain finance programme for over ten years. In
September 2024, as part of this ongoing partnership, we acted as the lead arranger for a new
facility, which offers $190m of financing to Asda’s suppliers on enhanced pricing terms based on a
supplier’s ESG performance.
From January 2025, the initiative will extend incentives to over 250 of Asda’s suppliers based on
their sustainability practices, as assessed by EcoVadis. This initiative showcases how major
retailers can engage their supply chains to encourage greater transparency and progress towards
wider sustainability goals.
HSBC Holdings plc Annual Report and Accounts 2024
49
Included in analysis
ESG review
Financed emissions continued
Data and methodology limitations
Our financed emissions estimates and
methodological choices are shaped by the
availability of data for the sectors we analyse.
We are members of the PCAF, which defines
and develops greenhouse gas accounting
standards for financial institutions. Its Global
GHG Accounting and Reporting Standards for
Financed Emissions and for Facilitated
Emissions provide detailed methodological
guidance to measure and disclose financed
and facilitated emissions.
– We have found that data quality scores vary
across the different sectors and years of
our analysis. While we expect our data
quality scores to improve over time, as
companies continue to expand their
disclosures to meet growing regulatory and
stakeholder expectations, there may be
fluctuations within sectors year-on-year,
and/or differences in the data quality scores
between sectors due to changes in data
availability.
– The majority of our clients do not yet report
the full scope of greenhouse gas emissions
included in our analysis, in particular scope
3 emissions at a subsidiary level. In the
absence of client-reported emissions, we
estimated emissions using proxies based
on company production and revenue
figures. Although we sought to minimise
the use of non-company-specific data, we
applied industry averages in our analysis
where company-specific data was
unavailable through our third-party datasets.
As data improves, estimates will be
replaced with reported figures.
– Third-party datasets that feed into our
analysis may have up to a two-year lag in
reported emissions figures, and we are
working with data providers to help reduce
this. Mapping external datasets to our
internal client entities is challenging due to
complex company ownership structures.
– The methodology and data used to assess
financed emissions and set targets are new
and evolving, and we expect industry
guidance, market practice, and regulations
to continue to change. As we undertake the
review of our 2030 financed emissions
targets, we will use appropriate data
sources and current methodologies
available.
– We remain conscious that the attribution
factor used in the financed emissions
calculation is sensitive to changes in drawn
amounts or market fluctuations, and we
plan to be transparent around drivers for
change to portfolio financed emissions
where possible.
– We calculate sector-level emissions
intensity metrics using a portfolio-weighted
approach. Due to data limitations, we are
unable to obtain production data for all of
our clients. We therefore calculate an
emissions intensity figure using the 75th
percentile of available data points to meet
this data gap.
– The classification of our clients into sectors
is performed with inputs from subject
matter experts, and will also continue to
evolve with improvements to data and our
sector classification approach. Our internal
data on customer groups used to source
financial exposure and emissions data is
based on credit and relationship
management attributes, and is not always
aligned to the data needed to analyse
emissions across sector value chains. As
the sub-sector, and therefore the value
chain classification, is based on judgement,
this may be revised as better data becomes
available. As a consequence, classification
changes can result in sectoral movement
year-on-year. Emissions are calculated at a
counterparty group level, rather than at
subsidiary level, mainly due to the
availability of emissions data, but this may
lead to over-or under-estimation of
emissions compared with calculation at the
counterparty level. Companies with multiple
activities, such as conglomerates with near
to equal business activity split across
multiple sectors, are excluded as these can
have different activities covered by multiple
sector targets.
– The operating environment for climate
analysis and portfolio alignment is maturing.
We continue to work to improve our data
management processes.
For further details of our financed emissions
methodology, exclusions, and limitations, see
our Financed Emissions and Thermal Coal
Exposures Methodology at www.hsbc.com/who-
we-are/esg-and-responsible-business/esg-
reporting-centre.
Helping to tackle food waste emissions via innovation
Food waste is a growing issue globally with an estimated one-third of all food produced going
to waste, creating significant methane emissions. Mill, a US-based technology company,
produces a food recycler for your kitchen that turns food waste into nutrient-rich food
grounds. These food grounds can be used in composting processes or picked up and
distributed to farm partners as food for soil or animals. These pathways help to keep food out
of landfill, reuse resources and reduce emissions.
In August 2024, HSBC Innovation Banking supported Mill by providing $25m of venture debt
funding following their successful Series C fundraising. The financing supports Mill to continue
to scale its food-recycler business to consumers across the US.
ESG review | Environment
50
HSBC Holdings plc Annual Report and Accounts 2024
Financed emissions continued
Our approach to emissions re-baselines and restatements
The PCAF recommends that financial
institutions should, in line with the
Greenhouse Gas Protocol Corporate Value
Chain (scope 3) Accounting and Reporting
Standard requirement, establish a
recalculation policy to ensure consistency,
comparability and relevance of the reported
greenhouse gas emissions data over time.
Our emissions re-baseline and restatement
policy defines the circumstances for a
restatement of previously reported emissions
data and targets, including a re-baseline.
In 2024, we reviewed and enhanced our
policy by extending the scope to cover
additional emissions categories, including
scope 1 and 2 emissions in our own
operations. We also now include scope or
boundary changes as a key driver of change.
HSBC Asset Management is covered by a
different emissions re-baseline and
restatement framework as per page 57.
Emissions data and related processes are
continually evolving. Therefore, we do not
consider data and process enhancements to
be a key driver of change. This may change
over time as data and processes mature.
When key drivers, in aggregate, breach our
defined significance thresholds, a
restatement of previously reported emissions
data and targets, including where necessary a
re-baseline, is required.
We expect our policy to evolve with further
industry guidance.
The table below outlines the key drivers of
change and what we expect to disclose when
thresholds are breached.
For further details of our emissions re-baseline
and restatement policy, see our Financed
Emissions and Thermal Coal Exposures
Methodology at www.hsbc.com/who-we-are/
esg-and-responsible-business/esg-reporting-
centre.
Key drivers of change
What we expect to disclose
Changes to the emissions methodology including those driven by
changes in industry guidance/regulations
– A revised comparative amount for the restatement period that
reflects the new information
– The difference between the amount disclosed in the previous
period and the revised comparative amount
– The reasons for revising the comparative amount and why the new
information provides reliable and more relevant information
– The actions being taken to remediate same or similar errors in the
future
Errors, such as those in the internal application or interpretation of
methodology, or errors in internal data
Scope or boundary changes, such as acquisitions or divestments,
and inventory boundary and coverage changes
In 2024, we made the decision to amend the
approach for prioritising data sources for
automotive clients to utilise production data
as opposed to reported third-party data,
representing a methodological change. This
change was implemented to include tailpipe
emissions instead of all scope 3 categories, in
order to be consistent with the target
scenario reference pathway and industry
practice.
For the aviation sector, we restated the 2022
metrics as a lending product code was
previously excluded in error; it is now
included in our analysis.
For the thermal coal mining sector, we re-
baselined the 2020 metric due to three
errors: an incorrect product code exclusion,
an error in the hierarchy construct of a client,
and the incorrect inclusion of a non-thermal
coal project. Methodological changes were
also applied to align with the refinements to
our basis of preparation in our reporting.
We are conducting a review of our controls
for population and product codes, and aim to
enhance them accordingly.
We have set out in the table below the
restated metrics for the automotive and
aviation sectors, and the re-baselined metric
for the thermal coal mining sector, for
applicable years where the significance
threshold was breached. The significance
threshold was not breached for all other
sectors, or for scope or boundary changes.
Re-baselines and restatements
Previously Reported
Restated Metrics
Percentage Change
Sector
Reporting metrics
2020
2022
2020
2022
2020
2022
Automotive
On-balance sheet financed - tCO2e/million vkm
-
216.6
-
170.1
-
(21) %
On-balance sheet financed - Mt CO2e
-
5.5
-
4.1
-
(25) %
Aviation
On-balance sheet financed - tCO2e/million rpk
-
86.5
-
90.2
-
4 %
On-balance sheet financed - Mt CO2e
-
2.7
-
3.5
-
30 %
Thermal coal mining
On-balance sheet financed - Mt CO2e
4.0
-
4.7
-
18 %
-
IFC and HSBC Asset Management partner to improve
sustainability in emerging markets
In 2024, International Finance Corporation (‘IFC’), a member of the World Bank Group, and
HSBC Asset Management (‘HSBC AM’) announced their intention to establish a specialised
fund vehicle targeting corporate bond issuers in emerging markets, with the aim of increasing
access to finance and supporting sustainable growth. The fund will be classified as Article 9
under the EU Sustainable Finance Disclosure Regulation.
This announcement furthers collaboration between IFC and HSBC AM, helping to mobilise
institutional investment in key areas, such as sustainable technologies and social impact in
emerging markets. IFC has committed to invest up to $100m in the fund, which will support
an existing HSBC AM global emerging market corporate sustainable bond strategy.
HSBC Holdings plc Annual Report and Accounts 2024
51
ESG review
Financed emissions continued
Targets and progress
We have set out in the table below our
combined on-balance sheet financed and
facilitated emissions targets for the oil and
gas, and power and utilities sectors.
In 2023, applying three-year average values
weighted at 33%, facilitated emissions for
the oil and gas sector total 6.5 Mt CO2e, and
for the power and utilities sector, they total
346.6 tCO2e/GWh. These values are then
combined with the on-balance sheet numbers
for the relevant year to track progress to
target. We set out the annual figures before
the application of the three-year average in
the facilitated emissions table on page 56.
We also set out our defined targets for the
on-balance sheet financed emissions of the
following sectors: cement; iron, steel and
aluminium; aviation; automotive; and thermal
coal mining. We disclose emissions in 2022
and 2023 and progress achieved in 2023
versus baseline for each sector, except for
the thermal coal mining sector, for which we
disclose financed emissions figures for 2021
and 2022. We are continuing to work on our
2023 and 2024 figures and expect to report
on these in future disclosures. In 2021,
thermal coal mining financed emissions
totalled 1.38 Mt CO2e. In 2022, they were
down by 69% against the re-baselined 2020
figure of 4.7 Mt CO2e.
When assessing the changes from 2019 to
2023, it is important to emphasise how
changes to exposure and market fluctuations
impact yearly updates as we make progress
towards our interim targets. Movement from
one year to the next may not reflect future
trends for the financed emissions of our
portfolio.
Sector
1
Baseline
2022
2023
2023 % change
vs. baseline
2030 target
Unit
2
Target scenario
Combined on-balance sheet financed and facilitated emissions at 33%, with three-year moving average
Oil and gas
42.6 in 2019
31.9
23.2
(46) %
(34) %
Mt CO2e
IEA NZE 2021
Power and utilities
513.4 in 2019
396.8
349.0
(32) %
138.0
tCO2e/GWh
IEA NZE 2021
On-balance sheet financed emissions
Cement
0.64 in 2019
0.71
0.59
(8) %
0.46
tCO2e/t cement
IEA NZE 2021
Iron, steel and aluminium
1.8 in 2019
2.5
2.1
17 %
1.05 (1.43)
3
tCO2e/t metal
IEA NZE 2021
Aviation
84.0 in 2019
90.2
79.6
(5) %
63.0
4
tCO2e/million rpk
IEA NZE 2021
Automotive
191.5 in 2019
170.1
152.4
(20) %
66.0
tCO2e/million vkm
IEA NZE 2021
Thermal coal mining
4.7 in 2020
1.44
N/A
N/A
(70)%
5
Mt CO2e
IEA NZE 2021
1 Our absolute and intensity emissions metrics and targets are measured based on the drawn exposures of the counterparties in scope for each sector. Emissions
intensity is a weighted average according to the portfolio weight of each investment, as a proportion of the total portfolio value. For oil and gas; and power and
utilities, the baseline, progress and target figures represent combined on-balance sheet financed and facilitated emissions. For cement; iron, steel and aluminium;
aviation; automotive; and thermal coal mining, the baseline, progress and target figures represent on-balance sheet financed emissions. For the aviation and
automotive sectors, the target figure is unchanged while the 2022 figure represents restated on-balance sheet financed emissions. For thermal coal mining, the
target is unchanged while the 2020 baseline figure has been re-baselined.
2 For the oil and gas sector, absolute emissions are measured in million tonnes of carbon dioxide equivalent (‘Mt CO2e’); for the power and utilities sector, intensity
is measured in tonnes of carbon dioxide equivalent per gigawatt hour (‘tCO2e/GWh’); for the cement sector, intensity is measured in tonnes of carbon dioxide
equivalent per tonne of cement (‘tCO2e/t cement’); for the iron, steel and aluminium sector, intensity is measured in tonnes of carbon dioxide equivalent per tonne
of metal (‘tCO2e/t metal’); for the aviation sector, intensity is measured in tonnes of carbon dioxide equivalent per million revenue passenger kilometres (‘tCO2e/
million rpk’); for the automotive sector, intensity is measured in tonnes of carbon dioxide equivalent per million vehicle kilometres ('tCO2e/million vkm’); and for the
thermal coal mining sector, absolute emissions are measured in million tonnes of carbon dioxide equivalent (‘Mt CO2e’).
3 While the iron, steel and aluminium 2030 target is aligned with the IEA NZE 2021 scenario, we also reference the Mission Possible Partnership Technology
Moratorium scenario, whose 2030 reference range is shown in parentheses.
4 Our aviation unit includes passenger and cargo tonnes, converted into revenue passenger kilometre (‘rpk‘), to align with our target pathway. This is comparable to
revenue tonne kilometre ('rtk') using a 100kg per passenger conversion factor as we already include belly and dedicated cargo in our production figures. The
conversion factor changed from 95kg per passenger used in the baseline disclosure to align with industry practice.
5 The thermal coal mining scope differs from the other sectors. We include solely emissions from thermal coal production and coal power generation, rather than
the total emissions of a counterparty within a sector, to reflect the thermal coal mining absolute financed emissions reduction target.
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HSBC Holdings plc Annual Report and Accounts 2024
Financed emissions continued
We plan to report financed emissions and
progress against our targets annually, and to
be transparent in our disclosures about the
methodologies applied and any challenges or
dependencies. However, financed emissions
figures may not be reconcilable or
comparable year-on-year in future, and
baselines and targets may require updates or
revisions as data, methodologies and
reference scenarios develop.
Consistent with the PCAF guidance on
financed emissions accounting, we only
consider the outstanding drawn financing
amount given this has a direct link to real
economy emissions.
A number of clients have material undrawn
balances that, if drawn, could significantly
increase the financed emissions related to
those clients. We expect to assess how to
manage these exposures on a forward-
looking basis as we progress towards our
2030 targets. In addition, for the intensity-
based sectors, the emissions intensity is
sensitive to material clients and changes to
drawn balances year-on-year can therefore
influence the trend.
We continue to engage with and support our
clients in their decarbonisation journey by
providing financing and advisory services.
Oil and gas
For the oil and gas sector, our analysis
included scope 1, 2 and 3 emissions,
including carbon dioxide and methane, for
upstream and integrated companies. Our
baseline and progress figures reflect
combined on-balance sheet financed and
facilitated emissions.
We have set a target to reduce absolute
combined on-balance sheet financed and
facilitated emissions for our oil and gas
portfolio by 34% by 2030 relative to our 2019
baseline. This is consistent with a global
1.5°C-aligned pathway, as defined by the IEA
NZE 2021 scenario.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure derived from the updated IEA
NZE 2024 scenario, which suggests a 30%
reduction relative to the 2019 baseline.
In 2023, absolute combined on-balance sheet
financed and facilitated emissions in our
portfolio decreased by 46% to 23.2 million
tonnes of carbon dioxide equivalent (‘Mt
CO2e’) relative to the 2019 baseline, and by
27% from 2022 to 2023. The reduction was
due to divestments and other strategic
decisions, and temporary factors such as low
loan drawdown levels, and subdued capital
markets activity.
A return to market conditions with clients
increasing capital markets activity, or other
factors that could lead to clients drawing
down existing loans, will lead to increased
financed emissions in our portfolio. Based on
Dealogic data, capital markets activity for the
sector increased by more than 15% in 2024
compared with 2023.
Oil and gas
Mt CO2e
2023 progress
from baseline
(46) %
MtCO2e
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
2019 2020 2021 2022 2023
2030
0
5
10
15
20
25
30
35
40
45
50
Power and utilities
For the power and utilities sector, our
analysis included scope 1 and 2 emissions for
upstream power generation, and diversified
utilities power generation companies. We
focused on power generation companies
because they control sector output, which
has the most material emissions impact in
the real economy. Our baseline and progress
figures reflect combined on-balance sheet
financed and facilitated emissions.
We target a combined on-balance sheet
financed and facilitated emissions intensity of
138 tonnes of carbon dioxide equivalent per
gigawatt hour (‘tCO2e/GWh’) by 2030. We
have chosen an intensity-based target as
electricity demand is expected to more than
double by 2050, due to both population
growth and electrification required to
decarbonise mobility, buildings and industry.
Our target is consistent with a global 1.5°C-
aligned pathway, as defined by the IEA NZE
2021 scenario.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure of 194.6 tCO2e/GWh derived
from the updated IEA NZE 2024 scenario.
In 2023, the combined on-balance sheet
financed and facilitated emissions intensity in
our portfolio decreased by 32% to 349.0
tCO2e/GWh relative to the 2019 baseline, and
by 12% from 2022 to 2023. This reduction
was driven by an increase in the financing of
renewable energy projects and companies,
and a decrease in the financing of high
emissions intensity clients.
Power and utilities
tCO2e/GWh
2023 progress
from baseline
(32) %
tCO2e/GWh
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
2019 2020 2021 2022 2023
2030
0
100
200
300
400
500
600
700
HSBC Holdings plc Annual Report and Accounts 2024
53
ESG review
Financed emissions continued
Cement
For the cement sector, our analysis included
scope 1 and 2 emissions for midstream
companies with clinker and cement
manufacturing facilities.
We target an on-balance sheet financed
emissions intensity of 0.46 tonnes of carbon
dioxide equivalent per tonne of cement
(‘tCO2e/t cement’) by 2030, using 2019 as our
baseline. Our target is consistent with a
global 1.5°C-aligned pathway, as defined by
the IEA NZE 2021 scenario.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure of 0.47 tCO2e/t cement derived
from the updated IEA NZE 2024 scenario.
While some emissions reductions can be
achieved through energy efficiency, we
believe that to significantly reduce fuel and
process emissions from cement
manufacturing, and to meet our targets,
large-scale investments are required in new
production processes and technologies,
including clinker substitution, alternative fuel
use such as bioenergy, and carbon capture
use and storage. Carbon capture use and
storage is a nascent technology and is
currently applied at around 45 facilities
worldwide with a capture capacity of roughly
50 MtCO2 per year. This is short of IEA NZE
scenarios, which lay out a pathway of around
1 Gt CO2 per year captured and stored by
2030. Several cement sector customers are
making progress in carbon capture use and
storage and are launching their first carbon
capture use and storage pilot projects.
The 2023 emissions intensity of our portfolio,
at 0.59 tCO2e/t cement, was 8% lower than
the 2019 baseline. It was also down by 17%
in 2023 from 2022. The decline in 2023 was
mainly attributable to improvements in the
availability of emissions and production data
across a number of emissions-intensive
clients. Emissions intensity trends are highly
sensitive to material client exposures and
changes to drawn balances year-on-year.
Cement
tCO2e/t cement
2023 progress
from baseline
(8) %
tCO2e/t cement
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
2019 2020 2021 2022 2023
2030
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Iron, steel and aluminium
For the iron, steel and aluminium sector, we
covered scope 1 and 2 for midstream iron,
steel and aluminium production in our
analysis. We intend to address our coverage
of aluminium in future disclosures due to the
low materiality in our portfolio, as well as
volatility caused by the greater emissions
intensity of aluminium production, compared
to iron and steel.
We target an on-balance sheet financed
emissions intensity of 1.05 tonnes of carbon
dioxide equivalent per tonne of metal (‘tCO2e/
t metal’) by 2030, using 2019 as our baseline.
Our target is consistent with a global 1.5°C-
aligned pathway for iron and steel, as defined
by the IEA NZE 2021 scenario. Meeting the
2030 target will be technologically challenging
as this is a particularly hard-to-abate sector.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure of 1.29 tCO2e/t metal derived
from the updated IEA NZE 2024 scenario, and
of 1.43 tCO2e/t metal from the MPP Tech
Moratorium scenario. The MPP Tech
Moratorium scenario confines investments to
near zero emissions technologies from 2030
onwards, and assumes no assets are
prematurely retired. It projects a slower
transition than IEA NZE scenarios in the near
term due to the use of different assumptions
for steel production, steelmaking technology
mix, steel emissions intensity, and use of
hydrogen in steelmaking.
The emissions intensity of our portfolio in
2023 rose by 17% to 2.1 tCO2e/t metal
against our 2019 baseline, due to aluminium
sector exposures impacting the overall
sector’s emissions intensity in 2023, and a
low baseline figure resulting from a higher
mix of low emissions-intensive steel clients.
Emissions intensity dropped by 16% in 2023
versus 2022 due to the reduced exposure to
aluminium clients, and a larger mix of low
emissions-intensive clients.
Iron, steel and aluminium
tCO2e/t metal
2023 progress
from baseline
17 %
tCO2e/t metal
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
Mission Possible Partnership (‘MPP’) Tech Moratorium
2019 2020 2021 2022 2023
2030
0
0.5
1
1.5
2
2.5
3
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54
HSBC Holdings plc Annual Report and Accounts 2024
Financed emissions continued
Aviation
For the aviation sector, we included
passenger airlines’ scope 1 and aircraft
lessors‘ scope 3 downstream emissions. We
excluded military and dedicated cargo flights
as the emissions intensity of such cargo
flights is different to that of passenger
airlines. This approach is in line with industry
practice to ensure consistency of financed
emissions measurement and target setting.
We target an on-balance sheet financed
emissions intensity of 63 tonnes of carbon
dioxide equivalent per million revenue
passenger kilometres (‘tCO2e/million rpk’) by
2030, using 2019 as our baseline. Our target
is consistent with a global 1.5°C-aligned
pathway, as defined by the IEA NZE 2021
scenario.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure of 70.3 tCO2e/million rpk derived
from the updated IEA NZE 2024 scenario.
To meet our target, we believe the sector
needs significant policy support, investments
in alternative fuels, such as sustainable
aviation fuel, and new efficient aircraft to
reduce emissions. The adoption of
sustainable aviation fuel is in its infancy,
currently accounting for an estimated 0.3% of
global jet fuel production. Sustainable aviation
fuel use needs to increase to 15% by 2030 to
be in line with the IEA NZE 2021. This
requires a significant ramp-up of investment
in production capacity and supportive policies,
such as fuel taxes and low carbon fuel
standards.
The industry is also adopting the unit of
revenue tonne kilometre (‘rtk’) to take into
account the transport of cargo for airlines in-
scope of the target. We plan to consider this
unit change to rtk in future disclosures to
better reflect the industry standard. We
already include passenger and cargo tonnes
in our production figures.
In 2023, the emissions intensity of our
portfolio fell by 5% to 79.6 tCO2e/million rpk
relative to the 2019 baseline and was down
by 12% from the 2022 restated emissions
intensity. This decline was largely driven by
improved data quality, higher exposure to
lower emissions-intensive airlines compared
with the sector average, and improved
operational efficiency with the return to pre-
Covid air traffic activity levels.
Aviation
tCO2e/million rpk
2023 progress
from baseline
(5) %
tCO2e/million rpk
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
2019 2020 2021 2022 2023
2030
0
20
40
60
80
100
120
140
Automotive
For the automotive sector, we looked at
scopes 1 and 2 for midstream manufacturing
of vehicles, and scope 3 for tank-to-wheel
exhaust pipe emissions for light-duty
vehicles. We excluded heavy-duty vehicles
from our analysis as the target pathway
derived from the IEA excludes them, as they
have a different decarbonisation pathway
relative to light-duty vehicles. This approach
reflects a change from previous disclosures
to only include tailpipe emissions instead of
all scope 3 categories, in order to be
consistent with the target scenario reference
pathway and industry practice. We will
consider including heavy-duty vehicle
manufacturers as well as heavy-duty vehicle
production at a later stage of our analysis, as
data and methodologies develop.
We target an on-balance sheet financed
emissions intensity of 66 tonnes of carbon
dioxide equivalent per million vehicle
kilometres (‘tCO2e/million vkm’) by 2030
using 2019 as our baseline. This is in line with
a global 1.5°C-aligned pathway, as defined by
the IEA NZE 2021 scenario, modified to
match the share of new in-year vehicle sales
for light-duty vehicles.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure of 66.2 tCO2e/million vkm derived
from the updated IEA NZE 2024 scenario,
which remains close to the 2030 target figure
of 66.0 under the 2021 scenario.
Meeting our target is heavily dependent on
the share of new electric vehicle sales our
clients will achieve in 2030, including battery
and plug-in electric vehicles. BloombergNEF
estimates that the electric vehicle share of
sales in 2024 exceeded 20%, however this is
below the 27% implied by the IEA NZE 2021
scenario based on HSBC analysis.
Achieving our 2030 financed emissions target
will be challenging unless there is a strong
acceleration in the share of electric vehicle
sales. This will require large-scale
investments in new electric vehicle and
battery manufacturing plants, alongside
widespread charging infrastructure, and
government policies to support electric
vehicles.
The 2023 emissions intensity of our portfolio
dropped by 20% to 152.4 tCO2e/million vkm
against our 2019 baseline, and by 10%
versus the restated emissions intensity of our
portfolio for 2022, which excludes non-
tailpipe scope 3 emissions. The decline
against baseline was driven by changes in our
loan book resulting primarily from credit-led
business decisions. From 2022 to 2023, the
reduction was driven by a portfolio mix with
lower emissions intensity clients, and lower
exposures to carbon-intensive clients.
Automotive
tCO2e/million vkm
2023 progress
from baseline
(20) %
tCO2e/million vkm
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
2019 2020 2021 2022 2023
2030
0
50
100
150
200
250
300
HSBC Holdings plc Annual Report and Accounts 2024
55
ESG review
Financed emissions continued
Thermal coal mining
For the thermal coal mining sector, our
analysis focused on scope 1, 2 and 3
emissions in upstream companies, including
those involved in extraction. When calculating
our financed emissions from thermal coal
mining, we focused on thermal coal
extraction and processing companies, and
diversified mining companies. The majority of
our reported financed emissions relate to
scope 3 emissions associated with coal
mining, representing financing provided to
large conglomerates that own diversified
business interests including coal.
We have set a target to reduce our absolute on-
balance sheet financed emissions by 70% by
2030, relative to the re-baselined 2020 figure of
4.7 million tonnes of carbon dioxide equivalent
(‘Mt CO2e’). We used 2020 as a baseline to align
with the baseline used for our drawn balance
exposure targets in our thermal coal phase-out
policy. Our target is consistent with a global
1.5°C-aligned pathway, as defined by the IEA
NZE 2021 scenario.
We show in the chart our progress to date
against our 2030 target. We also indicate the
2030 figure of 2.7 Mt CO2e derived from the
updated IEA NZE 2024 scenario, which
suggests a 42% reduction relative to the re-
baselined 2020 figure.
In 2021, absolute on-balance sheet financed
emissions decreased by 71% to 1.38 Mt
CO2e relative to the re-baselined 2020 figure.
In 2022, the absolute on-balance sheet
financed emissions of our portfolio decreased
by 69% to 1.44 Mt CO2e relative to the re-
baselined 2020 figure, and they rose by 4%
from 2021 to 2022. The reduction from the
2020 re-baselined figure was due to strategic
decisions and temporary factors, such as low
loan drawdown levels.
A return to normal market conditions with
clients drawing down existing loans will lead
to increased financed emissions in our
portfolio.
Thermal coal mining
Mt CO2e
2022 progress
from baseline
(69) %
Mt CO2e
HSBC sector portfolio emissions
Existing HSBC sector target based on IEA NZE 2021
IEA NZE 2024
2019 2020 2021 2022
2030
0
1
2
3
4
5
6
7
8
9
10
On-balance sheet financed emissions
The table below summarises the results of our assessment of on-balance sheet financed emissions using 2022 and 2023 data. For thermal coal
mining, we disclosed in 2023 our 2020 baseline, which has been re-baselined as described on page 51, and we now present figures for 2021
and 2022. The PCAF data quality scores across most sectors improved in 2023 due to better data availability.
On-balance sheet financed emissions – wholesale credit lending and project finance
1,2
Sector
Year
Scope 1–2
(Mt CO2e)
Scope 3
(Mt CO2e)
Emissions
intensity
PCAF data quality score
3
Scope 1 and 2
Scope 3
Oil and gas
2022
1.3
16.2
N/A
3.2
3.2
2023†
1.6
15.2
N/A
2.4
2.7
Power and utilities
2022
7.6
N/A
401.7
3.3
N/A
2023†
7.3
N/A
349.6
3.1
N/A
Cement
2022
4.5
N/A
0.71
2.9
N/A
2023†
6.3
N/A
0.59
2.3
N/A
Iron, steel and aluminium
2022
2.7
N/A
2.5
3.0
N/A
2023†
1.8
N/A
2.1
2.9
N/A
Aviation
2022
3.3
0.15
90.2
3.2
2.4
2023†
2.6
0.21
79.6
3.1
2.6
Automotive
2022
0.11
4.0
170.1
2.7
3.4
2023†
0.12
6.0
152.4
2.2
3.2
Thermal coal mining
2021†
0.05
1.33
N/A
3.1
3.1
2022†
0.07
1.37
N/A
3.1
3.1
Facilitated emissions
The table below summarises the results of our assessment of facilitated emissions using 2022 and 2023 data for the oil and gas, and the power
and utilities sectors.
Applying a 100% weighting, the oil and gas values for scope 1 to 3 emissions decreased from 15.2 Mt CO2e in 2022 to 9.0 Mt CO2e in 2023.
For the power and utilities sector, the values for scope 1 and 2 emissions rose from 3.8 Mt CO2e in 2022 to 4.6 Mt CO2e in 2023. For all 100%-
weighted facilitated values, please refer to the ESG Data Pack4.
Facilitated emissions – ECM, DCM and syndicated loans (33% weighting)
Sector
Year
4
Scope 1-2
(Mt CO2e)
Scope 3
(Mt CO2e)
Emissions
intensity
PCAF Data quality score
3
Scope 1 and 2
Scope 3
Oil and gas
2022
0.36
4.7
N/A
3.3
3.3
2023†
0.27
2.7
N/A
2.1
2.5
Power and utilities
2022
1.2
N/A
358.7
2.9
N/A
2023†
1.5
N/A
322.2
2.6
N/A
1 The total amount of short-term finance excluded for the thermal coal mining sector was 0.04% and 0.1% of total loans and advances to customers at 31 December 2021
and 31 December 2022 respectively; in 2023, for all other sectors, it was 0.7% of total loans and advances to customers at 31 December 2023.
2 The total loans and advances analysed for the thermal coal mining sector were 0.1% of total loans and advances to customers at 31 December 2021 and 31 December
2022, respectively. For all other sectors in 2023, the total loans and advances analysed were 2.7% of total loans and advances to customers at 31 December 2023. The
total loans and advances analysed for the purpose of the financed emissions calculation and reporting have not been adjusted for assets held for sale.
3 PCAF scores where 1 is high and 5 is low. This is a weighted average score based on financing for on-balance sheet financed emissions.
4 The total capital markets activity analysed applying a 100% weighting in 2023 was $10.4.bn, representing 3.3% of capital markets activity at 31 December 2023.
† Data is subject to independent third-party limited assurance in accordance with ISAE 3000 / ISAE 3410. For further details, see our Financed Emissions and Thermal
Coal Exposures Methodology and the independent third-party limited assurance report, which are available at www.hsbc.com/who-we-are/esg-and-responsible-
business/esg-reporting-centre.
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56
HSBC Holdings plc Annual Report and Accounts 2024
Financed emissions continued
Reducing emissions in our assets under management
HSBC Asset Management continues to work
towards its interim target1 of reducing scope 1
and 2 financed emissions intensity by 58%
between 2019 and 2030 for its in scope assets
under management (AUM), consisting of listed
equities and corporate fixed income managed
within its major investment hubs. As of 31
December 2019, in scope assets amounted to
$193.9bn, equating to 38% of global AUM.
2019 re-baselined metrics
In 2024, we improved our methodology for
calculating financed emissions intensity,
including a revised mapping logic for issuers’
carbon intensity and EVIC (enterprise value
including cash) data. We have re-baselined our
2019 intensity figure due to an error in the data
mapping and it is now 124 tCO2e/M$ invested
versus 131 tCO2e/M$ invested reported in the
Annual Report and Accounts 2022,
representing a decrease of 5.6%.
The Partnership for Carbon Accounting
Financials (PCAF)2 recommends that financial
institutions should, in line with the
Greenhouse Gas Protocol Corporate Value
Chain (Scope 3) Accounting and Reporting
Standard requirement, establish a restatement
policy to ensure consistency, comparability
and relevance of the reported greenhouse gas
emissions data over time. HSBC Asset
Management has defined an internal financed
emissions re-baseline and restatement
framework which adapts HSBC Group’s
approach and defines relevant circumstances
for HSBC Asset Management.
Our financed emissions metrics
As at 31 December 2023, the scope 1 and 2
financed emissions intensity of HSBC Asset
Management’s in scope assets stood at 69.8
tCO2e/M$ invested. The PCAF data quality
score for our 31 December 2023 financed
emissions intensity was 2.63.
Reported metrics
3
2019
2023
Unit
Scope 1 and 2 financed emissions intensity
124.0*
69.8 tCO2e/M$ invested
AUM in scope
193.9
223.0
Billions $
PCAF Data Quality Score
2.63
2.63
*indicates that this metric has been re-baselined
1 Our targets remain subject to consultation with stakeholders including investors and fund boards on whose behalf we manage the assets. The 58% target is based
on assumptions for financial markets and other data, including the IEA Net Zero emissions by 2050 scenario and its underlying activity growth assumptions.
Carbon emissions intensity is measured as tonnes of carbon dioxide equivalent per million USD invested (tCO2e/M$ invested), where emissions are scaled by
enterprise values including cash.
2 PCAF defines and develops greenhouse gas accounting standards for financial institutions. Its Global GHG Accounting and Reporting Standard for Financed
Emissions provides detailed methodological guidance to measure and disclose financed emissions. PCAF Standards are available at: https://
carbonaccountingfinancials.com/standard.
3 The re-baselined 2019 financed emissions intensity metric, and 2023 metrics were subject to independent third-party limited assurance in accordance with the
International Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’, and
with respect to the greenhouse emissions, in accordance with the International Standard on Assurance Engagements 3410 ‘Assurance Engagements on
Greenhouse Gas Statements’, issued by the International Auditing and Assurance Standards Board. For the independent third-party’s limited assurance report, see
http://www.assetmanagement.hsbc.com/net-zero. The methodology used is available at: http://www.assetmanagement.hsbc.co.uk/-/media/files/attachments/
common/creating-a-new-climate-for-change/financed-emissions-disclosures-reporting-criteria.pdf.
Boosting the offshore wind industry in the UK
SeAH Wind Ltd is developing a new offshore wind technology manufacturing facility in
Teesside, North-East England. The factory is seeking to make a significant contribution to the
offshore wind industry and play an important role in addressing the growing global demand for
renewable energy.
Building on previous financing in 2023, we acted as mandated lead arranger and lender for a
$282m loan to SeAH Wind Ltd, with guarantees provided by UK Export Finance and the Korea
Trade Insurance Corporation, bringing total financing arranged by HSBC for the project to
$740m.
The proceeds will be used to support the ongoing construction and expansion of the new UK
manufacturing facility, helping the company grow through its extended product range for
offshore wind.
HSBC Holdings plc Annual Report and Accounts 2024
57
ESG review
Net zero in our own operations TCFD
As described on page 15, we have revisited
our ambition to achieve net zero in our own
operations and supply chain by 2030 and are
now focused on actions to cut emissions
across these areas as part of our overall
ambition to become net zero by 2050.
Reduce, replace and remove
Our guiding approach is, and will continue to
be to reduce, replace and remove emissions
from our own operations and supply chain.
We plan to first focus on reducing carbon
emissions from consumption, and then
replace remaining emissions with low-carbon
alternatives in line with the Paris Agreement.
We will reduce emissions through the
purchase of 100% renewables and plan to
add investments in sustainable aviation fuel
to replace traditional fuel and reduce
emissions from our travel over time.
Altogether, across our operations, business
travel and supply chain, we expect to achieve
a reduction of around 40% in emissions by
2030. In line with current guidance, we
expect to only use carbon credits to remove
emissions when it is not possible to directly
reduce or replace. However, recognising the
importance of high quality carbon removals in
limiting global temperature rises, we have
started to explore some high integrity carbon
removal projects.
Our energy consumption
In 2024 we achieved a 30.5% reduction in
our energy consumption compared with 2019
(2023: 26.3%).This has been achieved
through optimising the use of our real estate
portfolio and carrying out a reduction in our
office space and data centres. We continue
to optimise our assets to ensure greater
efficiency and capitalise on new energy
technologies. In 2024 we increased our
purchase of electricity from renewable
sources to 75.4% from 58.4% in 2023. This
included increasing our coverage of green
tariffs in India and mainland China.
Renewable electricity can help unlock our
emissions reduction potential, and we aim to
achieve 100% renewable electricity across
our own operations by 2030.
Our biggest challenge continues to be the
limited availability of power purchase
agreements and green tariffs in some of our
markets due to regulations. We continue to
expand our network of experts in the
renewables space to help us identify
opportunities globally.
Business travel
We have analysed our travel patterns to
identify areas where we can continue to
reduce emissions. For example, we have
introduced internal regional reduction targets
and emission information at the point of
booking to encourage ownership and
flexibility in decision making.
Engaging with our supply chain
Our supply chain contributes c.81% of our
operational emissions and is the area in
which we face the most significant
decarbonisation challenge. When we set our
ambition in 2020, we did so without detailed
supply chain data.
It has become clear that progress in reducing
emissions in our supply chain is proving
slower than we anticipated, mainly driven by
the slower pace of the transition across the
real economy. Many suppliers are still in the
early phase of their decarbonisation journey,
do not have sufficient insight into their own
emissions footprint, and have not set
decarbonisation targets. We have stepped up
targeted efforts to support decarbonisation
across our supply chain.
We aim to deepen collaboration with
suppliers and increase our focus on those
without public disclosures or emissions
reduction plans, supporting them through
education and incentivisation. We will build
partnerships with larger suppliers to drive
change in shared supply chains through
scaled solutions, including through industry
initiatives.
In 2024 we incorporated an additional supply
chain data source to complement data from
CDP (formerly the Carbon Disclosure Project).
We continue to improve the measurement,
quality and reporting of our supply chain
emissions data to generate insights to drive
targeted reduction activities. We have
engaged with our 300 highest-emitting
suppliers to collaborate and identify
emissions reduction opportunities based on
supplier maturity levels.
In October 2024 we convened our first
Supply Chain Decarbonisation Day to facilitate
in-depth discussion and the development of
joint action plans with some of our largest
suppliers in the technology, professional
services and real estate sectors, to help drive
emissions reduction. In 2025, we will hold a
similar event with different suppliers.
Focus on natural resources
We aim to be a responsible consumer of
natural resources across our operations and
supply chain. Wherever possible, through our
procurement choices, design and
construction, or operations, we aim to protect
the environment and mitigate our impact on
the depletion of natural resources. Our main
focus areas are waste, paper and sustainable
diets.
Our presence in environmentally sensitive
areas
Our global portfolio of buildings supports
customers and communities in areas that
may be of high or very high water stress, and/
or protected areas of biodiversity.
About 50% of our global offices, branches
and data centres are located mainly in urban
or city centre locations with large,
concentrated populations. These areas have
been identified as being subject to high and
very high water stress, accounting for 49% of
our annual water consumption and about
0.8% are in protected areas of biodiversity.
We have implemented consumption
reduction measures, including installation of
water efficient taps, flow restrictors, auto-
taps and low or zero flush sanitary fittings.
Our environmental and sustainability management policies
Our buildings policy recognises that regulatory and environmental requirements vary across
geographies and may include environmental certification. The policy is supported by Corporate
Services procedures on environmental and sustainability management, seeking to ensure that
HSBC’s properties continually reduce their overall direct impact on the environment.
Detailed design considerations documented in our global engineering standards aim to reduce or
avoid depletion of critical resources, such as energy, water, land and raw materials. Suppliers are
required to comply with our Supplier Code of Conduct and have in place environmental policies
appropriate to the size and nature of their operations to reduce environmental impacts.
ESG review | Environment
58
HSBC Holdings plc Annual Report and Accounts 2024
Net zero in our own operations continued
2024 Emissions performance
We are making progress towards our updated
2050 net zero ambition. In 2024 we achieved a
reduction in absolute operational greenhouse
gas emissions (energy and business travel) of
66.1% from our 2019 baseline. Overall,
including supply chain emissions, we achieved a
30.7% reduction against 2019 and 5.5%
compared with 2023.
Emissions from our energy
We are currently on track to reduce our scope 1
and 2 emissions by more than 90% by 2030
compared with our 2019 baseline. In 2024, we
reduced these emissions (including energy and
road fleet) to 98,785 tonnes CO2e, representing
a 76.2% reduction from our 2019 baseline and a
46.3% reduction from 2023, helped by further
efficiency measures and portfolio reductions, and
an increase in renewable electricity procurement
to 75.4%, up from 58.4% in 2023.
Emissions from travel
We reduced our emissions from scope 3
business travel by 50.8% compared with
2019 with travel volumes remaining well
below pre-pandemic levels, although
emissions increased by 22.6% compared
with 2023 as travel behaviours normalise
gradually across the bank.
Emissions from our supply chain
In 2024, we reduced our supply chain emissions
by 8.4% against the restated 2019 baseline
emissions, while compared with 2023, they
remained relatively stable, with a small reduction
of 1.0%. This was mainly driven by suppliers
providing real estate-related services and financial
services, while emissions from suppliers of
technology-related goods and services have
increased, due to an increase in their investments
(e.g. data centres), growth of new services (e.g.
cloud and AI) and increase in our spend.
In 2024 we also expanded the calculation scope
by including two additional markets with third
party spend. We continue to widen our
reporting as more emissions and spend data are
added to the procurement scope.
Emissions calculations approach
Our emissions report adheres to the
Greenhouse Gas (‘GHG’) Protocol, which
incorporates the scope 2 market-based
emissions methodology. We report GHG
emissions associated with the energy used in
our premises and employees’ business travel
and our supply chain in tonnes of CO2
equivalent. As a financial services organisation,
carbon dioxide is the main type of GHG
applicable to our operations, however, our
current reporting also incorporates methane and
nitrous oxide for completeness, although
deemed immaterial.
Based on our operational control boundary, in
2024 we collected data on energy use and
business travel for our operations in 34 countries
and territories out of the 58 markets we operate
in, which accounted for approximately 97.7% of
our full-time equivalent staff (‘FTEs’). To estimate
the emissions of our operations in entities where
we have operational control and a small
presence, we scale up the emissions to 100%.
We apply reviewed and updated emission uplift
rates to reflect uncertainty concerning the
quality and coverage of emission measurement
and estimation. This approach is consistent with
both the Intergovernmental Panel on Climate
Change’s Good Practice Guidance and
Uncertainty Management in National
Greenhouse Gas Inventories and our internal
analysis.
Our calculation methodology for supply chain
emissions follows the spend-based method
under the GHG protocol; a combination of
supplier emissions data and industry averages.
We source actual data via CDP, or direct
engagement with suppliers, and in the absence
of this we use estimations from a new data
provider and then industry average carbon
intensities from CDP to estimate supply chain
emissions.
As more of our suppliers report their emissions,
we should be able to include more accurate data
and fewer industry averages in the calculation.
We have applied a data quality score to the
sources of data we used to determine
counterparty emissions. For further details, see
our GHG Reporting Guidance at
www.hsbc.com/esg
In 2024 we conducted a materiality
assessment on upstream scope 3 categories,
and we have identified categories 1
(purchased goods and services), 2 (capital
goods), and 6 (business travel) as material.
Our approach to re-baselines and
restatements
We re-baselined our 2019 and restated our 2023
supply chain metrics in line with our emissions
re-baseline and restatement policy (see page
51). As referenced above, in 2024, we made the
decision to amend the methodology. We also
identified an error in the mapping of industry
averages. In addition, we have identified an
error in our 2019 metric disclosed in our ARA
2023 for total energy consumption, which we
have now restated.
We are conducting a review of our controls
related to these items and aim to enhance
them accordingly.
HSBC Holdings plc Annual Report and Accounts 2024
59
Energy and travel greenhouse gas emissions in tonnes CO2e
3
2024
2023 2019 baseline
Scope 1
1
Ä
15,025
16,918
22,066
Scope 2 (market-based)
1
Ä
83,760
167,174
392,270
Scope 3
~
1,127,909
1,113,498
1,356,631
Category 1: Purchased goods and services
1,2
Ä
866,873
880,494
1,033,972
Category 2: Capital goods
1,2
~
127,158
123,763
50,651
Category 6: Business travel
1
~
133,878
109,241
272,008
Total
Ä
1,226,693
1,297,590
1,770,967
Included Scope 1 and 2 of UK
Ä
5,887
5,909
10,432
1 Data in 2024 is subject to an independent third-party limited assurance in accordance with the
International Standard on Assurance engagements 3410 (Assurance Engagements on Greenhouse
Gas Statements). For further details, see GHG Reporting Guidance 2024 and third-party limited
assurance report at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre. In
respect of data in 2019 and 2023, see our relevant Annual Report and Accounts.
2 Supply chain emissions are calculated using a combination of supplier emissions data and industry
average emissions factors. A data quality score is applied to this calculation where 1 is high and 4 is
low, based on the quality of emissions data. This is a weighted average score based on HSBC
supplier spend. Data quality scores can be found in the ESG Data Pack.
3 Data is based on the 12-month period to 30 September.
For further details of our methodologies, our independent third-party limited assurance reports and
relevant environment key facts, see our ESG Data Pack at www.hsbc.com/esg.
Greenhouse gas emissions in tonnes CO2e
per FTE
Energy consumption in kWh in 000s
2024
2023
2019
2024
2023
2019
Scope 1, 2 and
3 (Category 6) Ä
1.1
1.3
2.9
Total Ä 728,890
772,736 1,049,072
Scope 1, 2 and
3 (Category 1, 2
and 6)
Ä
5.7
5.9
7.8
UK only Ä 206,028
209,939 281,271
Revisions
Reporting
metrics
Previously
reported
Restated metrics
Percentage
change
2019
2023
2019
2023
2019 2023
Category 1:
Purchased Goods and
Services
tonnes CO2e
829,635 859,256 1,033,972
880,494
25 %
2 %
Category 2: Capital
Goods
tonnes CO2e
37,617 121,783
50,651
123,763
35 %
2 %
Total Supply chain
tonnes CO2e
867,252 981,039 1,084,623 1,004,257
25 %
2 %
Energy consumption
kWh in 000s
913,556
n/a 1,049,072
n/a
15 %
n/a
ESG review
Managing climate risk TCFD
Climate risk relates to the financial and non-
financial impacts that may arise as a result of
climate change and the move to a net zero
economy. We manage climate risk across all
our businesses and are incorporating climate
considerations within our traditional risk types
in line with our Group-wide risk management
framework.
Our material exposure to climate risk relates
to wholesale and retail client financing activity
within our banking portfolio. We are also
exposed to climate risk in relation to asset
ownership by our insurance business and
employee pension plans. Our clients are
exposed to climate-related investment risk in
our asset management business.
In the table below, we set out our duties to
our stakeholders in our four most material
roles.
For further details of our approach to climate
risk, see ‘ESG risk’ on page 133 and ‘Climate
risk’ on page 219.
Banking
We manage the climate risk in our
banking portfolios through our risk
appetite and policies for financial
and non-financial risks.
Employee pensions
Our pension plans have fiduciaries
to manage climate risk in line with
their duties towards members
under local regulatory
requirements.
Asset management
Climate risk management is a key
feature of our investment decision
making and portfolio management
approach.
Insurance
We consider climate risk in the
management of our shareholder
and policyholder portfolio of
assets.
Climate risk
This enables us to identify
opportunities to support our
customers, while continuing to
meet stakeholder expectations.
We monitor climate risk exposure
internally for our largest plans
based on asset sector allocation
and carbon emissions data where
available.
We also engage with companies
on topics related to climate
change.
ESG factors are incorporated into
investment analysis to evaluate
climate risk impacts, as well as
the ongoing monitoring during the
investment cycle.
Banking
Our banking business is well positioned to
support our customers managing their own
climate risk through financing. For our most
material wholesale customers, we use our
transition engagement questionnaire to
understand clients’ climate strategies and
risks. We have set out a suite of policies to
guide our management of climate risk. We
continue to develop our climate risk appetite
and metrics to help manage climate
exposures in our wholesale and retail
portfolios. We use climate scenario analysis
to gain insights into the long-term effects of
transition and physical risks across our
wholesale and retail portfolios (for further
details, see page 223).
Asset management
HSBC Asset Management recognises that
climate-related risks may impact the
operational and financial performance of
investee companies. The impact of these
risks will vary depending on characteristics
such as asset class, sector, business model
and geography. HSBC Asset Management
continues to integrate climate analysis into its
actively managed product offerings and seeks
to assess climate-related risks that could
impact investment performance, where
applicable and relevant.
As part of its stewardship activities, HSBC
Asset Management engages on climate
change issues with investee companies on a
priority list, as defined in its Stewardship
Plan. HSBC Asset Management makes
independent engagement decisions in the
interests of its clients.
Employee pensions
The Trustee of the HSBC Bank (UK) Pension
Scheme (‘the Scheme’), our largest plan with
$34bn of assets under management, aims to
achieve net zero greenhouse gas emissions
across its defined benefit and defined
contribution assets by 2050. To help achieve
this, it is targeting an interim emissions
reduction of 50% by 2030, from 2019 levels,
for its equity and corporate bond mandates.
This commitment was made in the context of
wider efforts to manage the impact of climate
change on the Scheme’s investments and
the consequent impact on the financial
interests of members.
The Scheme reports its carbon emissions for
its equity and corporate bond mandates in its
annual TCFD Report and will seek to widen
the coverage of its assessment and reporting
over time. In line with the Trustee’s
commitment to good stewardship, the
Trustee engages its asset managers to
ensure that financially material ESG risks are
explicitly considered in the investment
process.
Insurance
In 2024, our Insurance business enhanced
our stress testing modelling capability to
assess the solvency resilience of our
Insurance entities under prescribed climate
scenarios.
For further details of the HSBC Asset
Management’s Stewardship Plan, see:
www.assetmanagement.hsbc.co.uk/en/
institutional-investor/about-us/responsible-
investing/-/media/files/attachments/uk/policies/
stewardship-plan-uk.pdf
For further details of the HSBC Bank (UK)
Pension Scheme’s annual TCFD statements and
UK Stewardship Code submission, see https://
futurefocus.staff.hsbc.co.uk/active-dc/
information-centre/search-documents
ESG review | Environment
60
HSBC Holdings plc Annual Report and Accounts 2024
Sustainability risk policies TCFD
Our sustainability risk policies form part of our
broader risk management framework and are
important mechanisms for managing risks,
including delivering our net zero ambition.
These policies focus on mitigating
reputational, credit, legal and other risks
related to our customers’ environmental and
social impacts.
Our policies
Our sustainability risk policies comprise our
core net zero-aligned policies – thermal coal
phase-out and energy – and our broader
sustainability risk policies covering:
agricultural commodities, forestry, mining and
metals, and World Heritage Sites and
Ramsar-designated wetlands. We also apply
the Equator Principles when financing
relevant projects.
These policies aim to provide clear signals to
our customers on our risk appetite for certain
activities.
We continue to review policy implementation
as we apply our sustainability risk policies in
practice, and our operationalisation of such
policies continues to be enhanced. We take a
risk-based approach when identifying
transactions and clients to which our
sustainability risk policies apply and, where
relevant, when reporting on relevant
exposures, adopting approaches
proportionate to risk and materiality. This
helps to focus our efforts on areas where we
believe we can help drive meaningful change,
while taking into account experience from
policy implementation over time.
We regularly review our policies,
incorporating feedback and building on
experience from policy implementation over
time. We have begun a review of our interim
financed emissions targets and associated
policies as part of the annual review of our
net zero transition plan that we referenced in
our 3Q24 earnings release in October.
For clients in scope of our sustainability risk
policies, where we identify activities that
could cause material negative impacts, we
expect clients to demonstrate that they are
identifying and mitigating risks responsibly
and will look to take required actions as
outlined in our policies. This may, as
appropriate, include conducting enhanced
due diligence or applying financing
restrictions. Such instances may require
additional review and approval by our
sustainability risk specialists and risk
committees.
For further details of how we manage
sustainability risk, as well as our full policies, see
www.hsbc.com/who-we-are/esg-and-
responsible-business/managing-risk/
sustainability-risk
Governance and implementation
Our Group Risk and Compliance function has
specialists who review and support
implementation of our sustainability risk
policies. Our relationship managers are
primarily responsible for assessing relevant
considerations under our risk management
framework, including whether our clients may
be in scope of applicable sustainability risk
policies. They are supported by sustainability
risk managers for management of risks as
outlined in the policies. Where considered
appropriate, policy matters are escalated to
relevant governance committees.
Oversight of the development and
implementation of policies is the
responsibility of relevant governance
committees comprising senior members of
the Group Risk and Compliance function and
global businesses.
Biodiversity and natural capital-related
policies
Our sustainability risk policies impose
restrictions on certain financing activities that
may have material negative impacts on
nature. Our forestry and agricultural
commodities policies focus specifically on the
upstream impacts of key agricultural
commodities including palm oil, timber, soy
and cattle. We also require palm oil
customers to obtain certification under the
Roundtable on Sustainable Palm Oil.
Our energy policy
Our energy policy covers the broader energy
system, including upstream oil and gas, fossil
fuel power generation, hydrogen, renewables
and hydropower, nuclear, biomass and
waste-to-energy sectors.
The policy seeks to balance three objectives:
driving down global greenhouse gas
emissions; enabling an orderly transition that
builds resilience in the long term; and
supporting a just and affordable transition,
recognising the local realities in all the
communities we serve.
The energy policy was first published in
December 2022, and is reviewed annually,
with the most recent update in February
2025.
For further details of our oil and gas, and power
and utilities financed emissions targets, see the
'Targets and progress’ section in ‘Financed
emissions on page 52.
For further details of our energy policy, see
www.hsbc.com/who-we-are/esg-and-
responsible-business/managing-risk/
sustainability-risk.
HSBC Holdings plc Annual Report and Accounts 2024
61
ESG review
Sustainability risk policies continued
Our thermal coal phase-out policy
As set out in the thermal coal phase-out
policy, we are committed to phasing out the
financing of thermal coal-fired power and
thermal coal mining in EU and OECD markets
by 2030, and globally by 2040.
Our policy aims to support thermal coal
phase-out aligned to science-based
timeframes, recognising the different pace
between advanced and emerging economies.
In turn, our policy supports progress towards
our financed emissions targets for the power
and utilities and thermal coal mining sectors.
The policy was first published in December
2021 and is reviewed annually, with the most
recent update in February 2025.
For further details of our oil and gas, power and
utilities financed emissions target, see the
‘Targets and progress’ section in ‘Financed
emissions’ on page 52.
For our thermal coal phase-out policy, see
www.hsbc.com/-/files/hsbc/our-approach/risk-
and-responsibility/pdfs/240125-hsbc-thermal-
coal-phase-out-policy.pdf.
Thermal coal financing exposures
We aim to reduce thermal coal financing
drawn balance exposure from a 2020
baseline by at least 25% by 2025, and aim to
reduce it by 50% by 2030.
Our basis of preparation for reporting on
thermal coal financing drawn balance
exposures is aligned with our thermal coal
phase-out policy and applies a risk-based
approach to reporting on relevant exposures.
This includes the use of globally recognised
third-party data sources to screen clients and
applies materiality considerations to product
type, customer type and exposure type,
which informs inclusion and exclusion
requirements.
Specifically, for product types, short-term
lending exposures are excluded from our
thermal coal financing exposures reporting, in
line with our financed emissions
methodology. For customer types, exclusions
are applied for certain customer types such
as sovereigns and individuals. For exposure
types, a threshold of $15m for drawn
balances is applied for thermal coal financing
exposures reporting.
We recognise that we provide financing to
groups of connected companies where the
wider group has thermal coal exposures, and
this introduces additional complexities when
estimating thermal coal exposure. In such
cases, we consider the nature and the extent
of the connections and any restrictions on
use of financing proceeds to fund the thermal
coal activities.
We continue to refine our basis of preparation
and have made further enhancements in
2024 while taking into account experience
from policy implementation over time.
Applying our refined basis of preparation did
not have a material impact on the thermal
coal financing drawn balance exposure as of
31 December 2020.
For further details of our Financed Emissions and
Thermal Coal Exposures Methodology, see
www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
The chart below sets out our thermal coal
financing drawn balance exposure for the
2020 baseline as well as the exposure figures
for 2021† and 2022†, which were $1bn
(rounded).
We continue to work on our 2023 and 2024
numbers and expect to report on these in
future disclosures.
Thermal Coal Financing drawn balance
exposure
1
$bn
2020
2021
2022
0
0.5
1
1.5
2
1 The reduction is based on estimated underlying
numbers aligned to our refined basis of
preparation.
† Data is subject to independent third-party limited
assurance, in accordance with ISAE 3000/ISAE
3410. For further details, see our Financed
Emissions and Thermal Coal Exposures
Methodology and independent third-party limited
assurance report, which are available at
www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
For further details of our approach to financed
emissions, see ’Our Approach to financed
emissions’ on page 48.
Asset Management policy
HSBC Asset Management’s Energy and
Thermal Coal Policies have been developed in
support of HSBC Group’s net zero ambition.
In its capacity as a discretionary investment
manager and under its Energy Policy, HSBC
Asset Management engages and assesses
the transition plans of oil and gas, and power
and utilities issuers responsible for around 70
per cent of relevant emissions based upon all
listed equity and corporate fixed income
managed within its major investment hubs.
Its Thermal Coal Policy is developed in
support of the transition from thermal coal-
fired power and thermal coal mining
(collectively ‘thermal coal’) within the 2030/40
timelines set out in the HSBC Thermal Coal
Phase-Out Policy, and is intended to help
meet the dual objectives of phasing out
thermal coal within science-based
timeframes and of energy transition in more
coal-reliant economies.
The Energy Policy and Thermal Coal Policy
complement one another and are reviewed at
least annually.
For further details of the energy policy, see
www.assetmanagement.hsbc.co.uk/-/media/
files/attachments/common/energy-policy-en.pdf.
For further details of the thermal coal policy, see
www.assetmanagement.hsbc.co.uk/-/media/
files/attachments/common/coal-policy-en.pdf.
ESG review | Environment
62
HSBC Holdings plc Annual Report and Accounts 2024
Social
Building inclusion and resilience
We play an active role in opening up a world of opportunity for our customers,
colleagues and communities by connecting across our international networks
to help build a more inclusive and resilient society.
At a glance
Inclusion is key to opening up a world of
opportunity. It involves a commitment to
identifying and addressing barriers that may
stop people from accessing opportunities
because of who they are or where they are
from.
Inclusion goes hand in hand with resilience.
We aim to help people build the capabilities
they need to achieve their goals and to deal
with the challenges they face, so we are
focused on delivering products, services and
education that support our colleagues,
customers and communities.
Colleagues
We believe that an inclusive, healthy and
rewarding workplace helps the whole Group
succeed. We are focused on inclusive hiring so
we can help ensure our colleagues – and
particularly our leadership – are representative
of the communities we serve.
Employee well-being is essential. We offer all
colleagues a wide range of resources that help
support their mental, physical and financial
well-being so they can thrive in and out of
work. We are working to ensure that our
offices, branches and digital spaces are
accessible.
Customers
We are committed to helping our customers
access the financial services they need. They
should not find it more difficult to access
finance because of their gender, ethnicity,
sexual orientation, neurodiversity or disability.
Our ambition is to create a welcoming,
inclusive and accessible banking experience
for all our customers.
We build resilience by creating products and
services that simplify the banking experience,
so customers can manage their wealth more
easily. We also provide financial education for
our customers.
Communities
In 2024, we updated our global philanthropy
strategy to align with our ESG areas of focus –
‘transition to net zero’ and ‘building inclusion
and resilience’, allowing us to work alongside
the communities we operate within to help
create change.
We believe that fostering inclusion and
building resilience helps us to create long-term
value and growth. By removing unnecessary
barriers and striving to be a fair and equitable
organisation, we can attract and retain the best
talent, support a wider customer base to
achieve their goals and stimulate growth in our
communities.
In this section
Our commitment
to inclusion
Our approach to inclusion
We value diversity of thought and we are building an inclusive
environment that reflects our customers and communities.
Page 64
Fostering a diverse
environment
Page 65
Fostering an inclusive
culture
Page 66
Building a healthy
workplace
Listening to our colleagues We run a Snapshot survey and report insights to our Group Operating
Committee and the Board.
Page 67
Being a great place to
work
We aim to create a great workplace that will help in attracting, retaining and
motivating our colleagues so they can deliver for our customers across
countries and territories.
Page 68
Developing skills,
careers and
opportunities
Learning and skills
development
We energise our colleagues for growth and build resilience by equipping
them with skills that they need today and preparing them to meet future
challenges.
Page 70
Building customer
inclusion and
resilience
Our approach to customer
inclusion and resilience
We aim to support financial well-being and remove barriers customers can
face in accessing financial services.
Page 71
Engaging with our
communities
Helping to build a more
inclusive and resilient
society
We focus on a number of priorities where we can make a difference to the
community and support sustainable growth.
Page 72
HSBC Holdings plc Annual Report and Accounts 2024
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ESG review
Our commitment to inclusion
Our approach to inclusion
Our purpose, ‘Opening up a world of
opportunity’, explains why we exist as an
organisation and is the foundation of our
global inclusion strategy.
We have identified specific Group-wide
priorities, which we track and monitor
progress against. Embracing our unique
international footprint, we adapt
implementation of our global inclusion
strategy to help ensure it remains locally
relevant and compliant with local laws.
How we hold ourselves to account
We set strategic priorities
Our strategic priorities are aligned to three
public aspirational ambitions, which have
been created to increase representation of
under-represented groups. In 2024, we
continued to make progress against our
priorities by:
– achieving a 34.6% representation of
women in senior leadership roles, with
an ambition of achieving 35% by 20251;
– attaining a 3.0% representation of Black
heritage colleagues in senior leadership
in the UK and US combined, against an
ambition to achieve 3.4% by 20251; and
– increasing our Inclusion index as
measured in our Snapshot survey, to
78% against a 2024 target of 75%.
1 These numerical ambitions do not form part
of any US-based senior leader performance or
other objectives, or in other jurisdictions where
application of such should not apply under
local law.
We monitor progress
We consistently track and measure
performance against our priorities, utilising
our data capabilities to accurately monitor
progress through:
– an inclusion dashboard, which monitors
progress against ambitions and is
reported to the Group Operating
Committee on a quarterly basis; and
– review meetings between our Head of
Inclusion and each Group Operating
Committee member to discuss progress
against aspirational ambitions and to
support further progress.
We are transparent
We are transparent in sharing our data
through external disclosures and we
participate in benchmarking to measure
our progress across the industry. In 2024,
we:
– ranked as a Top 75 employer in the UK
Social Mobility Index, improving 30
places to number 37;
– ranked number 3 in the Stonewall
Workplace Equality Index in the UK and
maintained our Stonewall Gold standard;
and
– were awarded an Ambassador Status by
Carers UK.
We are evidence-led
Our priorities are informed by data, and we continue to enable our colleagues to self-identify across a range of data points that reflect their
personal identity, including ethnicity, sexual orientation, gender identity and ability.
We have enabled our colleagues to self-identify through our systems and our Snapshot survey, helping us to understand the diverse
composition of our global workforce.
Data availability enables us to embrace our international footprint, set locally-relevant priorities, support under-represented groups and
improve outcomes for our colleagues. In countries and territories where we are able to do so, we invite colleagues to share their data with
us. In 2024, we enabled 93% of our colleagues to disclose their ethnic background, with 67% of colleagues currently choosing to do so,
where this is legally permissible. In certain markets we invite colleagues to share additional characteristics with us, for example, disability or
socio-economic background.
For further details of our representation data, pay gap data, and actions, see www.hsbc.com/who-we-are/our-people/inclusion-at-hsbc and
the ESG Data Pack at www.hsbc.com/esg.
Parker Review UK disclosures
The history of our organisation is rooted in multiculturalism, and we remain focused on
embracing the different cultures and perspectives in the communities we serve while
enabling our customers to realise their global ambitions.
HSBC has supported the aims and objectives of the Parker Review and participated in annual
reporting since its formation in 2016.
We are committed to building a diverse workforce that reflects the communities we serve.
98.5% of our UK-based senior leadership population (including our Executive Committee and
their direct reports) have made self-disclosures regarding their ethnic heritage. A total of
17.1% of our senior leadership identify as coming from an ethnic minority background, broadly
aligned to the UK Census representation of 18%.
Our ambition is to ensure we remain reflective of UK Census data.
ESG review | Social
64
HSBC Holdings plc Annual Report and Accounts 2024
Holdings Board
Group
Executives
Combined
Group
Executives and
reports
1
Subsidiary
directors
2
Senior
leadership
3
Middle
management
3
Junior
management
3
All employees
Fostering a diverse environment
Women in senior leadership
Increasing female representation in our senior
leadership roles is one of our longest-
standing strategic priorities. Since achieving
our ambition of having 30% of senior
leadership positions held by women in 2020,
we set a new ambition to reach 35% by
20251. We are on track to meet our 2025
ambition, with 34.6% of senior leadership
roles held by women at the end of 2024. Our
hiring practices are merit-based, and we seek
to ensure that every candidate, regardless of
their identity and background, has an equal
opportunity to demonstrate their skill and
potential. A total of 36.8% of all external
appointments into senior positions were
female, compared with 37.7% in 2023.
Women represented 38.0% of all promotions
into senior leadership roles in 2024.
In 2024, we relaunched our Accelerating
Women’s Leadership programme, developed
in partnership with Cranfield Business School.
The programme aims to strengthen our talent
pipeline by improving the representation of
women in senior leadership roles. It is
designed to increase the visibility, career
advocacy and network of our high-performing
senior women, ultimately driving engagement
and enhancing leadership capability. In 2024,
we ran two pilot sessions held in the UK and
Hong Kong. We also launched a modified
version of the programme in a US pilot called
Accelerating Enterprise Leaders, which also
welcomes our male colleagues.
Our Coaching Circles programme, which
matches senior leaders with a small group of
colleagues to provide advice and support on
the development of leadership skills and
network building, welcomed 4,052 women
and 4,103 men in 2024.
Black colleagues in senior leadership
Having a workforce that better reflects the
communities we serve remains one of our
strategic priorities. We have an ambition to
increase our Black heritage senior leader
representation in both the UK and US
combined to 3.4% by 20251. In 2024 we
maintained our position at 3.0%.
Previously in 2020, we set our initial ethnicity
ambition to double the number of Black
colleagues in senior leadership roles globally
by 20251. While this ambition was not tracked
through our senior leadership performance
scorecards, it remained a strategic priority.
Since 2020, we have increased the
representation of our Black colleagues in
senior leadership by 60%. We have seen a
number of changes to the global footprint of
our business since setting this ambition, and
despite our efforts so far, we are not making
the progress towards our ambition as quickly
as we would like and we are unlikely to
achieve our 2020 ambition by 2025.
We remain committed to focusing on the
development of our Black heritage
colleagues. To address this, we use the
Solaris programme as a development
initiative for our UK-based Black heritage
women. To date, 41 women have completed
the programme, with 20% of participants
securing a promotion.
Our immersive development programme, ‘In
Their Shoes’ was designed to bring to life the
lived experiences of minority ethnic
colleagues, including the challenges they
face. In 2024, the programme was
recognised as an Outstanding Innovation at
the Learning Excellence Awards and was
highly commended in the Global Diversity
Initiative of the Year category at the British
Diversity Awards. Since its launch,12,707
colleagues have completed the programme.
1 These numerical ambitions do not form part of
any US-based senior leader performance or
other objectives, or in other jurisdictions where
application of such should not apply under local
law.
Gender representation
46.2%
78.9%
68.0%
67.2%
65.4%
62.3%
50.9%
48.8%
53.8%
21.1%
32.0%
32.8%
34.6%
37.7%
49.1%
51.2%
Male
Female
1 Combined Group Executives and direct reports
includes HSBC Group Executives and their direct
reports (excluding administrative staff) as of 31
December 2024.
2 Directors (or equivalent) of subsidiary companies
that are included in the Group’s consolidated
financial statements, excluding corporate directors.
3 In our leadership structure, we classify senior
leadership as those at global career band 3 and
above; middle management as those at global
career band 4; and junior management as those
at global career bands 5 and 6.
Representation and pay gaps
We publish this data annually to ensure both
transparency and a maintained focus on
addressing representation gaps within the
organisation. Our gender and ethnicity pay gap
reporting shows the difference in average pay
between these two groups of people and the
wider workforce, regardless of role or seniority.
We have reported our UK gender
representation and pay gap data since 2017 in
line with reporting regulations, and have
voluntarily extended this to include the US,
mainland China, Hong Kong, India, Mexico,
Singapore, Malaysia, and the UAE, alongside
ethnicity data for the UK and US. In 2024, we
have also extended this to include our
colleagues with a disability in the UK. This now
covers approximately 81% of our workforce. In
2024, our mean aggregate UK-wide gender pay
gap was 40.6% compared with 43.2% in 2023,
and the ethnicity pay gap was 7.7% compared
with 4.5% in 2023. Our UK gender pay gap is
driven by several factors, including the shape of
our workforce, where there are more men than
women in senior higher-paid roles and more
women than men in junior roles. While we are
confident in our approach to pay equity, until
women and ethnic minority colleagues are
proportionately represented across all areas
and levels of the organisation we will continue
to see gaps in average pay.
We are committed to paying colleagues fairly
regardless of their gender or ethnicity and have
processes to review that remuneration is free
from bias. We also review our pay practices
and undertake a pay equity review annually. If
pay differences are identified that are not due
to objective, tangible reasons such as
performance, skills or experience, we make
adjustments.
For further details of our representation data, pay
gap data, and actions, see www.hsbc.com/who-
we-are/our-people/inclusion-at-hsbc and the ESG
Data Pack at www.hsbc.com/esg.
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ESG review
Fostering an inclusive culture
Looking to the future and beyond our public
commitments, we refreshed our global
inclusion strategy to refocus our ambitions
against our strategic priorities, and set out our
approach to inclusion over the next three to
five years. We have established key
principles that enable us to pivot towards
building a more inclusive culture for all of our
colleagues.
Our colleagues’ personal sense of belonging
and psychological safety are two key
measures captured as part of our Inclusion
Index in the annual Snapshot survey, which
we monitor and review by various identities
that comprise our global workforce. In 2024
we achieved a score of 78%, which is three
percentage points ahead of our annual
aspirational goal, and on par with the financial
services industry benchmark.
Analysis of our Inclusion index allows us to
measure engagement levels of specific
colleague groups in greater detail, in particular
different personal identities, to better
understand the experiences of our colleagues
globally. We found that scores from
colleagues who identify as male and female
were comparable, at 79% and 77%
respectively, remaining unchanged from
2023. From an ethnicity perspective, our
Black heritage colleagues were two
percentage points below the Group-wide
average, while our Asian heritage colleagues’
results were on a par with the overall score,
at 78%. From a sexual orientation
perspective, colleagues who identified as
LGB+ were one percentage point above the
Group-wide result.
Our employee resource groups
Bringing together the shared identities,
values and interests of our colleagues allows
us to build an inclusive culture across the
organisation and our volunteer-led employee
resource groups (’ERGs’) enable this. Our
ERGs provide insight on key societal issues.
Through sponsorship by our non-executive
directors and our Group Operating
Committee, we bring together our senior
leaders and colleagues, bringing to life our
values of ‘valuing difference’ and ‘succeeding
together’.
In 2024, our ERGs led numerous initiatives
and events including our Pride ERG for
LGBTQ+ colleagues, who worked with our
Group Benefits team to expand Gender
Dysphoria healthcare benefits in India.
Our Ability ERG, for our colleagues with a
disability, created a framework called ‘Know
me Better’, as a tool to help facilitate
conversations between colleagues and line
managers regarding a colleague’s disability.
Our focus on disability
We are dedicated to creating an inclusive
culture where all employees, including those
with disabilities can thrive. Our progress is
guided by our Global Disability Council,
sponsored by our HSBC UK Chief Executive
Officer, with senior leaders across the
business meeting every two months.
We have launched the second cohort of our
Career Development Programme for our
colleagues in middle and junior management
with a disability, in partnership with an
external coaching provider. In 2024, we
launched an international pilot of the
programme in Hong Kong.
In 2024, stories from our colleagues were
showcased globally as part of our Disability
Confidence series. The series leveraged the
power of our colleagues sharing their
experiences, the support they receive, and
how this has helped them empower others to
do the same.
We have also expanded our workplace
adjustments programme through our provider
Microlink, with services now available to over
44,000 colleagues in India, a 17 percentage
point increase compared with 2023.
Socio-economic diversity
To better support our colleagues from lower
socio-economic backgrounds, we have
partnered with the London School of
Economics and Progress Together to produce
a comprehensive framework targeting socio-
economic mobility in 2024.
The ‘VOICE’ is designed to support
individuals, people managers, and
organisations in retaining and advancing
colleagues from lower socio-economic
backgrounds within the UK financial services
sector. The blueprint was developed through
extensive input from professionals across the
industry who come from a lower socio-
economic background, and they shared their
experiences as part of our qualitative
research. It highlights the biases that can
impact retention and progression and offers
actionable, evidence-based strategies rooted
in behavioural science to drive meaningful
change.
Through our Strive ERG for colleagues who
come from a lower socio-economic
background we have developed internal
mentoring programmes pairing junior and
senior colleagues for coaching and
development sessions.
We have enabled our colleagues in Singapore
to share their socio-economic background.
In 2023, we entered the Social Mobility Index
for the first time and gained recognition as a
top 75 employer. We continue to be
recognised as a top 75 employer, improving
our rank by 30 places to number 37 in 2024.
Supporting our colleagues with caring responsibilities
We have found that many of our colleagues are often involved in both their careers and
significant caring responsibilities outside work, and are finding managing both responsibilities
increasingly challenging. In our Snapshot survey nearly 16% of colleagues self-identified as
having caring responsibilities.
In 2024 we launched the Global Carers Charter, which comprises a series of tools, policies
and support available for colleagues with caring responsibilities. Following its launch in the UK,
HSBC’s Global Carers Charter was awarded Ambassador Status by Carers UK.
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HSBC Holdings plc Annual Report and Accounts 2024
Building a healthy workplace
Listening to our colleagues
We value difference at HSBC, and we do this
by seeking out different perspectives and
listening. Our colleagues succeed together by
being connected across the organisation, and
they take responsibility by speaking up.
These activities are core to our values and we
capture regular feedback from our colleagues
to help improve HSBC and the employee
experience.
How we listen
Our annual employee engagement survey is
called ‘Snapshot’ and runs every September.
It is an opportunity for all employees to share
feedback on what it is like to work at HSBC.
Our 2024 survey achieved a response rate of
88%, up from 85% in 2023, with more than
182,000 colleagues choosing to share their
views. This high level of participation enables
us to share results confidentially across all
levels of the organisation. Insights from our
Snapshot survey are shared with the Group
Operating Committee and the Board, and are
provided directly to more than 11,000 people
managers with 10 or more responses from
their teams. We support teams to have good
conversations about their feedback through
the provision of interactive dashboards, action
planning tools and discussion guides.
Our Employee Engagement Index, our key
measure of how people feel about HSBC, has
increased to 80%, up three percentage points
compared with 2023. This was the largest
increase seen across the Snapshot indices,
and puts us six points ahead of the global
financial services benchmark that we
measure against.
Key driver analysis shows engagement is
most influenced by a clear understanding of
HSBC’s strategic objectives, confidence in
the future and our strategy, positivity towards
career and development, and trust and
confidence in leadership.
Following significant increases last year, the
career index remained stable at 71% and is
six points ahead of the global financial
services benchmark. The proportion of
colleagues stating a preference to remain
with HSBC for five or more years increased
to 70%, up three percentage points from
2023. Our inclusion index, a key measure of
building an inclusive culture at HSBC,
remained unchanged at 78%, against an
ambition of maintaining 75%.
We have found that 75% of colleagues have
said that working conditions enable them to
be productive, which is up two percentage
points compared with 2023. Despite this,
62% of colleagues report that work
processes allow them to work efficiently,
which is down three percentage points
compared with 2023. This remains one of the
lowest scoring items across the Snapshot
survey, particularly across our senior
leadership population. There are a number of
initiatives underway to make it easier for
colleagues to work efficiently.
We also run an annual Pay and Benefits
survey, which in 2024 helped to evaluate
changes to our performance approach, as
well as capturing ongoing feedback about
colleague expectations on compensation and
development in support of our employer
value proposition. We complement these
large surveys with continuous lifecycle
feedback from new joiners, internal movers
and voluntary leavers.
We are committed to building on our high
levels of engagement and feedback
throughout 2025.
For further details of our Snapshot data, see the
ESG Data Pack at www.hsbc.com/esg.
Employee conduct and harassment
We expect all our employees to treat each
other with respect and dignity, and we do not
tolerate or condone discrimination,
harassment or bullying in any form, as
outlined in our Global Anti-Bullying and
Harassment Code. This is supported by our
Global Code of Conduct, which helps us to
maintain high standards across the Group.
We encourage our colleagues to speak up
about poor behaviour or things that do not
seem right. At times, we know it can be
difficult to raise concerns, so regular
communication and tracking is important to
us. We measure confidence to speak up via
our Snapshot Speak Up Index, which is at
77% in 2024, up by one percentage point
from 2023. We recognise that our speak up
culture requires continued focus to ensure
we create the right environment for our
people. Our Snapshot survey revealed an
increase in colleagues able to state their
opinion without fear of negative
consequences, with 73% of colleagues
feeling able to do so, up by one percentage
point from 2023.
We strive to improve awareness and
education around poor behaviours and
strengthen our understanding and response
to these issues across all levels of the
organisation. In 2024, to ensure continued
high-quality investigations into conduct
concerns, we introduced six new investigator
training modules aimed at the Human
Resources investigator community.
Our colleagues continue to receive training on
bullying, harassment, discrimination and
retaliation at least every other year in our
Global Mandatory Training curriculum and as
part of other learning resources, including in
People Manager training.
We have mandatory procedures for handling
and investigating employee concerns, which
include those for bullying and harassment.
Cases are continually monitored from our
speak-up channels, and data is reported to
management committees to ensure there is
visibility at leadership level.
In 2024 the bank received a total of 624
concerns raised relating to bullying and
harassment. Where the concerns were
substantiated following an investigation,
appropriate action was taken, which included
termination of services where appropriate. In
2024, 26% of concerns raised were either
partly or fully substantiated and 34 colleagues
were dismissed in relation to bullying,
harassment, discrimination or retaliation.
We are committed to addressing this type of
behaviour and will continue to take action
where we find that an employee has
breached our values and high standards of
conduct.
Delivering accessible learning
We are committed to fostering an inclusive workplace for all colleagues, regardless of
technology or ability.
In 2024, our Global Mandatory Training received Gold at the Brandon Hall Awards for Best
Training Program for Global Accessibility Standards.
To uphold these standards we collaborate closely with our accessibility experts, ensuring our
digital learning aligns with the high benchmarks set for our customer-facing websites. Our
Global Mandatory Training assigned to all colleagues undergoes an external audit to identify
any gaps affecting the experience of colleagues, such as those with visual impairments or
those who are neurodiverse. We also conduct inclusive user testing to incorporate learner
feedback into the design, helping to ensure a seamless experience for everyone.
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Being a great place to work
To fulfil our purpose and drive our strategy,
we need the best people, performing at their
best. Focusing on opportunities for
colleagues, making them a part of something
bigger and being clear on what they can
expect when they deliver on our strategy, is
fundamental to delivering for our customers.
Our workforce proposition strengthens our
ability to attract, retain and energise our
colleagues and is driven by three key reward
principles of rewarding colleagues’
responsibly, recognising colleagues’ success
and supporting our colleagues to grow.
Rewarding colleagues responsibly
Our pay and benefits proposition aims to
reward colleagues responsibly, helping to
ensure financial security for all. We remain
committed to providing a competitive total
compensation package with an appropriate
mix of fixed pay and variable pay. In our
Snapshot survey, 52% of colleagues feel they
are paid fairly for what they do, the sentiment
remaining unchanged from 2023.
Following our accreditation as a global living
wage employer in 2024 we have continued to
work with the Fair Wage Network, which
provides an independent source of wage
levels. HSBC has achieved accreditation as a
global living wage employer in 2025 in
respect of the next two years. A living wage
should be sufficient to cover an adequate
standard of living given the cost of goods and
services in each country in which we operate.
We will continue to review all wages globally
against local living wage benchmarks.
For our UK suppliers that have staff working
within the UK, we seek to encourage them to
pay at least the living wage.
For further details of our approach to workforce
reward, see page 301.
Recognising colleagues’ success
We believe in recognising our colleagues’
success and have a number of mechanisms
to help enable colleagues to be rewarded for
their work.
In 2024, we introduced performance routines,
to encourage our colleagues to talk about
their ambitious goals throughout the year.
This is complemented with improving the
exchange of feedback, so colleagues know
how they are doing and how they can
improve. These activities are brought
together through performance check-in
conversations at the year-end, with a
simplified approach to performance
assessments.
These changes were communicated to over
215,000 colleagues in 59 markets at the
beginning of the year. Our Pay and Benefits
survey measures several factors, including
our colleagues’ understanding of
performance routines, with 76% reporting a
‘good understanding’ of how to practice
them. In our Snapshot survey, 87% of
colleagues reported that they had a clear
understanding of what is expected of them
and 94% of colleagues said they have had at
least one performance check-in conversation
with their manager.
Variable pay allows us to recognise the
performance and behaviours of our
colleagues. In 2024 we introduced ‘Target
Variable Pay’ to 150,000 colleagues in 47
markets.
We have supported managers in their
understanding of the changes, with nearly
18,000 people managers attending training.
Changes to our pay structure provide more
clarity and transparency on how we make pay
decisions and how performance impacts
variable pay, helping colleagues understand
how they contribute to the performance of
the organisation.
Our ‘At Our Best’ recognition platform offers
employees the opportunity to recognise their
peers for role model behaviours linked to our
values. In 2024, our colleagues recognised
one another over 1.5 million times, up three
percentage points from 2023. Managers are
also encouraged to recognise colleagues’
service anniversaries every five years up to
30 years of service, and at 40 years. In 2024
over 28,000 anniversaries were celebrated.
Share plans are another way to empower
colleagues to participate in the Group’s
success. In 2024, we invited 194,000
colleagues to participate in our share plans
and 93% of colleagues globally now have
access to a share plan.
Supporting our colleagues to grow
To help our colleagues to grow personally and
professionally, we are committed to
supporting their mental, physical and financial
well-being, offering flexibility and helping
colleagues develop new skills.
We use colleague feedback, benchmarking
from industry experts and we work with
external partners across business, civil
society and academia. As a founding member
of the World Wellbeing Movement, we are
working with the associated Wellbeing
Research Centre at the University of Oxford
to shape our approach to well-being. In
Snapshot, a record 78% of our colleagues
said, ‘my organisation cares about my well-
being’, up nine percentage points from 2023.
We further detail our approach to supporting
our colleagues to grow on the following page.
We further detail our approach to skills and
career development on page 70.
Our first ever global activity challenge
We launched our first ever global activity challenge designed to help colleagues increase their
activity levels and well-being over a four-week period. With over 70 activities to choose from,
we supported colleagues with a new global internal community group on our intranet, two
expert speaker events, tailored content given on the Virgin Pulse app and motivational videos
filmed by colleagues. During the challenge, colleagues collectively logged physical activity
equivalent to 478,000 miles, which is equivalent to 19 times around the equator. After the
challenge, two thirds of the participants surveyed responded positively to joining the next
challenge.
One in four global colleagues with the Virgin Pulse app joined the challenge, with Asia-Pacific
accounting for 77% of all participation.
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HSBC Holdings plc Annual Report and Accounts 2024
Being a great place to work continued
Flexible working
Flexible working remains one of the top
reasons colleagues say they would
recommend HSBC to someone else, with
74% of colleagues saying flexible working is
the aspect of our well-being programme they
value the most. In 2024, 85% of our
colleagues practised some form of flexible
working arrangement, with 75% of
colleagues working in a hybrid way.
We acknowledged that not all our colleagues
had the right balance between working at
home or in the office. In 2024, we have found
that a better balance has been achieved, with
colleagues attending the office between 2-3
days per week on average. This was achieved
by our senior leadership reinforcing their
expectations on office attendance.
To further support flexibility and work-life
balance we have improved family leave
policies. We now offer 94% of employees at
least 18 weeks of parental leave on full pay
for primary caregivers, and 74% of
employees have at least two weeks of paid
leave for secondary caregivers. We also
provide five fully paid days of carers leave and
of compassionate leave, to 67% and 79% of
colleagues, respectively.
Mental well-being
In 2024 we continued to retain number one
status in the CCLA Corporate Mental Health
Benchmark for the third year running. While
we are pleased with the progress made in
2024, mental health did decline with 79% of
colleagues saying they have positive mental
health, compared with 83% in 2023. This
decline aligns with broader societal trends,
with younger generations in particular
experiencing lower levels of mental health.
We have continued to make the meditation
app Headspace available to our colleagues
globally, with over 35,000 enrolled, and we
have extended access to family and friends.
In 2024, we upgraded our Employee
Assistance Programme in over 30 countries
to support the mental health of colleagues
and their families. We have lowered the age
threshold on paediatric counselling support,
and in some countries this is now available
from age five years. More countries will aim
to enhance support for children in 2025.
We have sought third-party assurances and
benchmarking to ensure our approach
remains relevant and effective. In 2024, we
used the 2023 MindForward Alliance’s
Thriving at Work Benchmark, for which we
received a global score of 91 points, 14 points
ahead of the global average.
In 2024, mental health awareness training
was completed by more than 227,000
colleagues as part of Global Mandatory
Training. Our voluntary mental health
education modules have been completed
over 37,000 times, with 74% being
managers. We have also expanded the global
reach of mental health champions in our
Mindfulness Network by nearly 27%.
Physical well-being
The Snapshot survey also revealed that 72%
of colleagues rate their physical health as
positive, compared with 74% in 2023. In
2024, we continued to make the Virgin Pulse
app available to colleagues, supporting them
to increase their physical activity. Over
21,000 colleagues have now downloaded the
app, up 260% from 2023. More than 1,000
personal and team activity challenges were
run and nearly 5,000 health checks were
completed.
We have continued to provide access to
private medical insurance for 99% of
permanent employees and telemedicine
healthcare services in the majority of our
countries and territories. In certain countries
and territories, we also provide on-site
medical centres that the majority of
colleagues can access. We have also
increased the number of colleagues who
have access to company paid health
assessments. In 2024, eligibility for a
personalised health assessment was
extended to all UK employees. Health
assessments are provided in 43 countries and
we are working to extend availability in 2025.
Financial well-being
Financial challenges remain a concern for
many colleagues, caused by increases in the
cost of living globally. In 2024, 62% of
colleagues said they felt positive about their
financial health and 57% of colleagues said
they have at least three months of essential
outgoings saved, both up one percentage
point from 2023.
We launched a five-part financial well-being
series covering key career milestones. The
series had over 4,000 attendees during the
live events, with 93% of participants saying
the events were useful or very useful.
Recordings of the events have since been
watched more than 15,000 times across 37
countries. Since the launch of the series,
65% of colleagues said they know where to
find financial well-being support at HSBC, up
five percentage points from 2023.
In our Pay and Benefits survey one in three
colleagues said that they want more support
with financial well-being. In 2025 we aim to
trial a new financial well-being platform with
5,000 colleagues in the UK and Asia to help
our colleagues improve their financial literacy,
money skills and planning.
For further details of our Snapshot well-being
data see the ESG Data Pack at www.hsbc.com/
esg.
Awards
CCLA Global 100 Mental Health
Benchmark
– Ranked number 1 global
employer for the third
consecutive year
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69
Supporting our
colleagues in the Middle
East
In the wake of regional conflicts we
made promotion and support of mental
health a priority. We held regular on-site
Critical Incident Support across our
MENAT region, covering Egypt, UAE,
Kuwait, Türkiye and Qatar.
Across the region, belief that HSBC
genuinely cares about its colleagues was
at 66%, up 12 percentage points from
2023. We also found that awareness of
mental health support at HSBC was at
74%, up six percentage points from
2023.
To support broader well-being across the
region we increased paid maternity leave
to a consistent 18 weeks. Family friendly
enhancements were also made to the
medical plan with the introduction of
fertility treatment coverage and new
coverage for Applied Behaviour Analysis
in Bahrain, Kuwait, Oman, Qatar and the
UAE.
We also held on-site breast screening
and flu immunisation appointments in
the UAE. Following increased demand
for these services, more appointments
and longer hours have been made
available.
ESG review
Developing skills, careers and opportunities
Learning and skills development
Employee development energises our
colleagues for growth and helps equip them
with the skills they need today while also
preparing them to meet future challenges.
Enabling future skills
We have adapted our skills development
platforms and learning resources, to help
prepare our workforce for future challenges
and enable skills building at scale. In 2024,
we:
– increased the number of active users and
participation in learning programmes via our
learning experience Degreed. This aims to
address skills gaps through internal and
external learning content and courses,
enabling colleagues to share, collaborate
and learn individually or in groups through
structured learning pathways;
– unlocked over 250,000 hours of skills
development through our Talent
Marketplace. To date more than 46,000
colleagues have created a profile helping
them match their interest in developing
specific skills or career goals with on-the-
job projects and networking;
– accelerated the use of digital badging to
acknowledge skill-building achievements.
We have launched over 150 badges and
issued over 12,000 badging credentials
associated with priority skills such as
sustainability, AI and data analytics; and
– enabled our colleagues to learn via a range
of channels, reflected in an increase of total
training hours by our colleagues to 6.2
million hours.
Maintaining our risk management culture
Our Risk Academy delivers and deploys
comprehensive learning opportunities for all
employees, including foundational training in
traditional areas of risk management, such as
financial crime risk, and specialised
development for senior leaders and those in
high-risk roles. The Academy also addresses
issues like ESG risk, AI and cybersecurity.
For senior leaders, we have introduced new
programmes centred on Enterprise
Leadership through a risk lens. These
programmes are designed to support HSBC’s
strategic priority of sustainable growth by
equipping leaders with the skills needed to
navigate an evolving risk environment. We
launched and concluded a new Financial
Crime masterclass series for our senior
leader population, focusing on the importance
of risk management and protecting the bank
from financial crime.
Building responsible AI expertise
As we continue to enhance our AI capabilities
across the organisation, our new AI Academy
helps to support advanced skills development
aligned with HSBC’s AI strategy. This was
launched in response to the growing global
interest in AI and focuses on fostering AI
literacy and promoting responsible AI use
throughout the bank.
Our Global Mandatory Training covers key
principles and foundational concepts of AI
usage and we have developed foundational
and intermediate pathways to raise
awareness of AI principles, ethics, risks and
governance. We have also developed specific
courses tailored for our senior leadership
population that focus on understanding AI
and exploring its use cases for business and
decision making.
Skilling the transition to net zero
Our Sustainability Academy continues to
support our net zero ambitions and strategy.
As the Academy has evolved, we have
increased our focus on building capabilities
beyond foundational skills, specifically
targeting priority groups that support both our
customers and our operations in the
transition to net zero. In 2024, our key focus
has been on:
– providing on-demand learning tailored to
the specific roles, regions, and client bases
of colleagues involved in supporting
customers through the transition;
– facilitating external certifications and
qualifications, as needed, to deepen
colleagues’ expertise in areas such as
Sustainability Climate Risk through
providers like GARP and Fitch;
– delivering a three-month Sustainability
Leadership Programme in collaboration
with Imperial College London and our own
Sustainability Centre of Excellence experts
for over 200 colleagues; and
– offering net zero learning opportunities to
the Board and 100 of our most senior
leaders.
We have leveraged our internal experts from
the Sustainability Centre of Excellence to
provide advanced skills training in key
transition areas, such as power systems and
storage, carbon removal, transition in Asia-
Pacific, steel and cement industries, road
transport systems, hydrogen and agriculture.
Training at HSBC
6.2 million
Training hours by our colleagues in 2024.
(2023: 5.3 million)
29.6 hours
Training hours per FTE in 2024.
(2023: 23.9 hours)
Energising our
colleagues for growth
We aim to provide our colleagues with
the opportunity to develop critical skills
while creating a pipeline of talent to
support our strategic ambitions. It is
essential that we promote effective
leadership and foster an environment
that inspires our colleagues to grow. In
2024, our focus has been on:
– Our Digital Acceleration Programme,
which aims to create dynamic working
methods and simplify our technology
landscape. This will enable us to work
faster and smarter, enhancing our
ability to develop better products and
services for our customers while
embracing innovative technologies;
– Our ‘CARE’ programme, which
embodies the principles of being
connected, accountable, responsive
and empathic. It outlines the
behaviours that reflect these values,
guiding our colleagues in delivering
exceptional service to our customers.
The programme has also been
integrated into our customer
experience objectives, with progress
tracked through our Customer
Centricity Index, which is included in
our 2024 Snapshot survey.
– The Managing Director Leadership
Programme, which was expanded in
2024. It combines immersive in-
person sessions on leadership with
virtual deep dives on key issues and
all-hands strategy sessions, alongside
an enterprise risk leaders programme
and a series focused on doing
business in key locations. To support
our leadership pipeline we have
refreshed our development offering
for the next layer of leaders to be
delivered in 2025; and
– Our Emerging Talent proposition,
supporting HSBC in a future-focused
way, supplying the organisation with
diverse and capable talent pools to
anticipate and address existing future
skill shortages.
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HSBC Holdings plc Annual Report and Accounts 2024
The reduction in no-cost accounts between 2023
and 2024 is due to bulk closure of inactive accounts
in the UK.
Building customer inclusion and resilience
Our approach to customer inclusion and resilience
We believe that financial services, when
accessible and fair, can reduce inequality and
help more people access opportunities. We
play an active role in opening up a world of
opportunity for customers and communities,
by supporting their financial well-being, and
removing barriers to accessing financial
services.
Access to products and services
We provide innovative solutions to help
improve customer access to products and
services. For those in need of additional
support due to social or financial
vulnerabilities or for those customers who do
not qualify for a standard account, the UK and
Hong Kong offer a No-cost Account with no
minimum balance and no account opening
fees, to help with basic banking needs.
In the UK, we continue to offer our
groundbreaking ‘No Fixed Address’ service,
working in partnership with housing and
homelessness charity Shelter UK, providing
access to financial services to help rebuild lives
and increase financial resilience. Since its launch
in November 2019, this service has supported
over 7,000 individuals, with over 1,400 of these
in 2024 alone.
Making banking accessible
Number of no-cost accounts held for
customers, in the UK and Hong Kong, who do
not qualify for a standard account or who
might need additional support due to social or
financial vulnerability.
674,439
718,306
716,957
Supporting financial knowledge and
education
We continue to invest in financial education
content and tools across different channels to
help customers, colleagues and communities
be confident users of financial services, for
example by offering programmes focused on
improving resilience and basic money
management skills.
Customers
Since 2020, we received over 8.8 million
unique visitors to our global digital financial
education content, which helps customers
expand their financial capabilities through our
personal financial management tools.
HSBC UK further enhanced capabilities that
help customers to establish healthy savings
habits through the launch of ‘Savings Goals’.
Customers have used this mobile banking
feature, since launch in April 2024, to set up
over 125,000 goals, with ‘Rainy Day’ as one of
the most popular categories. We have also
seen that over 10% of goals have already been
achieved showing how this capability is helping
support customers to build financial resilience.
Well+, our flagship health and wellness-based
reward programme on our HSBC HK mobile
banking app had another successful year with
over 267,000 new customers in this year alone.
More than 400,000 customers are now
engaged, earning points by taking part in
activities aimed at improving their holistic
health covering physical, mental and financial
well-being.
Communities
In the UK we continued to support the
development of children and young people's
financial capability, including those with special
education needs, through our Money Heroes
Programme – winner of the 2024 Third Sector
Business Charity Partnership Award (supported
by Young Enterprise). In addition, we launched
a new partnership with Girlguiding UK in
November 2024, introducing the Money Skills
– ‘I’m Money Confident’ badge.
For schools, colleges and youth groups we
offer the ‘Smart Money’ programme, where
training is delivered by HSBC colleagues to
help improve financial capability and
employability. In 2024, we trained over 1,000
colleagues, and working with our dedicated
Financial Education Team, over 280,000
children and young people were engaged in
the programme across the UK.
In Hong Kong we launched a face-to-face
training programme for teenagers with special
education needs on how to make healthy
financial choices and build essential financial
skills for day-to-day living.
Creating an inclusive banking experience
We endeavour to ensure that our banking
products and services are designed to be
accessible for customers experiencing either
temporary or permanent challenges, such as
disability, impairment or a major life event. In
Hong Kong we introduced a simplified mobile
banking app designed to improve digital
inclusion for seniors, offering a more
accessible and intuitive user experience. The
app features an enhanced interface with easy-
to-understand buttons, increased use of
visuals, and streamlined access to essential
banking services. As the first initiative of its
kind among Hong Kong banks, the app has
been successful in engaging over 663,000
unique users since its launch in October 2022.
We are committed to improving accessibility
across our digital channels and continuously
review our browser-based websites and
mobile banking services against the Web
Content Accessibility Guidelines 2.1 AA
standards. We promote digital accessibility by
offering educational resource. In 2024 we
launched the Accessibility Hub, a multi-award
winning accessibility awareness e-learning
content, promoting digital accessibility to the
general public, attracting circa 150,000 views
as of September 2024. Also since launch,
more than 1,000 individuals across 140
companies globally have participated in our
specialised digital accessibility Training 1000
Programme.
Supporting customers extends beyond our
digital channels and we recognise that not all
disabilities are visible. We rolled out our
Hidden Disabilities Sunflower Lanyard Scheme
to two additional markets this year – Singapore
and the UAE – expanding it beyond the UK,
Hong Kong, the Channel Islands and Australia.
The lanyard indicates that an individual may
need a little more help, support or time.
In 2024 two UK branches, Loughborough and
Sheffield, received awards for their accessible
and inclusive branch design. We are proud to
be recognised by the Financial Times Diversity
in Finance Awards, the Construction Industry
Council and the Business Disability Forum for
our work to improve accessibility, equity and
inclusion in UK financial services.
We continue to introduce accessibility features
and designs (e.g. a curved notch and braille
dots) to our card products across the globe to
support people with visual impairments,
learning difficulties, and colour blindness. In
2024, we introduced accessibility features in
India, Philippines and Indonesia resulting in a
total of 20 markets where those features are
now available.
For the second year HSBC sponsored and
hosted the annual AbilityNet’s Techshare Pro
Conference, Europe's largest event for the
accessibility and disability inclusion
community, at our Group Head Office in
London. Over 1,600 individuals attended the
event (in person or online) globally.
Supporting women
UK CMB launched a Women’s Business
Growth Initiative Programme to support
women in scaling their businesses and
provide access to funding, making £250m
available for lending, education and
networking opportunities. The aim of the
support is to help narrow the credit gap for
women-led businesses, which is estimated to
be valued at $1.7tn globally.
In Mexico and Uruguay, our Mujeres Al
Mundo programme helps to address gender
gaps by providing businesswomen access to
funding, education and networking. In 2024
we provided over $190m in sustainable
financing to support women-owned
enterprises in both countries. We also won
the 2024 Financial Alliance for Women’s
‘Outstanding Contributor’ award for enabling
full financial access for women and unlocking
huge value in the Female Economy.
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71
2024
2023
2022
ESG review
Engaging with our communities
Helping to build a more inclusive and resilient society
We have a long-standing commitment to
support the communities in which we
operate. We aim to empower people and
communities to develop the skills and
knowledge needed to thrive in the future.
Through the global reach of our charitable
partnerships we bring together diverse
people, ideas and perspectives that help us
open up opportunities and build a more
inclusive world.
Building community and future skills
We work with charity partners to initiate
programmes that help people and
communities respond to opportunities and
challenges as global economies transition
towards a low-carbon future. In 2024, these
included:
– Continuing a partnership with the British
Council in Brazil, Mexico, India, Indonesia
and Vietnam, and in Australia, India and
Malaysia with The King’s Trust Group, to
empower young, marginalised people with
the skills needed to excel in the green
economy.
– In India, HSBC collaborated with two
charities to help enhance sustainability in
the handloom and apparel sectors,
benefiting 10,000 weavers. Our initiatives
focused on adopting energy-efficient
practices, reducing water pollution,
promoting natural fibre products, and
increasing the use of natural dyes.
– HSBC Continental Europe collaborated with
Junior Achievement Europe to launch the
Climate Resilience Programme, which aims
to provide educational opportunities related
to innovations in climate resilience for
young people in France, Italy and Malta.
We also work with our charity partners to
help strengthen the resilience of
communities where we operate. Initiatives
launched in 2024 included:
– ‘Saving for Good’, in partnership with INJAZ
Al Arab, which teaches financial literacy
fundamentals to 2,386 low-income workers
and the large migrant worker population in
the MENA region.
– A new financial literacy curriculum in Hong
Kong that aims to strengthen the financial
management knowledge of elderly learners
and provide a better understanding of
fintech applications and awareness of
online fraud.
– We responded to disaster relief appeals to
support efforts in Bangladesh, Central
Europe, Mexico, the Middle East, Spain,
Taiwan, Thailand, the USA and Vietnam.
Community engagement and
volunteering
We offer paid volunteering days, and
encourage our people to offer their time,
skills and knowledge to causes within their
communities. In 2024, our colleagues gave
over 254,000 hours to community activities
during work hours. Examples of volunteering
efforts in 2024 included:
– around 260 employees supported
Waterkeeper, a US-based environmental
non-profit, with 700 hours volunteered
across 16 events in the country; and
– more than 200 employees acted as
mentors for marginalised youth in support
of the Strive and Rise Programme in Hong
Kong.
Charitable giving in 2024 (%)
Social, including Future Skills: 29%
Environment, including the Climate
Solutions Partnership: 40%
Local Priorities: 21%
Disaster relief and other giving: 10%
Total cash giving towards charitable
programmes
$94.7m
Hours volunteered during work time
>254,000
People projected to be reached through
our social and future skills programme
>928,000
Resilient Community Environment Initiative helps to
build bio-diverse Beijing Palace Museum
Established in October 2023, the HSBC Philanthropy Foundation Beijing aims to build
inclusive and resilient communities by focusing on the development of children, support for
disabled elderly people, promoting employability and livelihoods, and building a resilient eco-
environment in communities.
In 2024, the Foundation’s ‘HSBC Resilient Community Environment Initiative’ was extended
to include the Palace Museum in Beijing’s Forbidden City. Altogether 2,243 square metres of
green space and a 118-square-metre pond in the Museum’s Cining Garden were renovated
and populated with diverse local species to form a healthy and resilient ecosystem. Visitors
to the Forbidden City have benefited from the enhanced scenery since the second half of
2024.
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HSBC Holdings plc Annual Report and Accounts 2024
Governance
Acting responsibly
We remain committed to high standards of governance. We work
alongside our regulators and recognise our contribution to building
healthy and sustainable societies.
At a glance
Our relationship
We act on our responsibility to run our
business in a way that upholds high
standards of corporate governance.
Customer experience is at the heart of how
we operate. It is imperative that we treat our
customers well, that we listen, and that we
act to resolve complaints quickly and fairly.
We measure customer satisfaction through
net promoter scores across each of our global
businesses, listen carefully to customer
feedback so we know where we need to
improve, and take steps to do this. Our
customer satisfaction performance improved
in many markets in which we operate,
although we still have work to do to improve
our rank position against competitors.
We are committed to working with our
regulators to manage the safety of the
financial system, adhering to the spirit and
the letter of the rules and regulations
governing our industry.
We strive to meet our responsibilities to
society, including through being transparent
in our approach to paying taxes. We also seek
to ensure we respect human rights in our
workplace and our supply chains, and
continually work to improve our compliance
management capabilities.
For further details of our corporate governance,
see our corporate governance report on page
236.
In this section
Setting high
standards of
governance
How ESG is governed
We expect that our approach to ESG governance is likely to continue to
develop, in line with our evolving approach to ESG matters and
stakeholder expectations.
Page 74
Human rights
Our respect for human rights
We have continued to develop our understanding of our salient human
rights issues and associated risk management.
Page 75
Customer
experience
Customer satisfaction
While we are positioned among the top three banks in 58% of our key
markets within WPB and CMB, we recognise the need to improve our
customer experience further to enhance our competitive ranking.
Page 77
How we listen
We aim to be open and transparent in how we track, record and manage
complaints.
Page 78
Integrity, conduct
and fairness
Safeguarding the
financial system
We have continued our efforts to combat financial crime and reduce its
impact on our organisation, customers and the communities that we
serve.
Page 80
Whistleblowing
Our global whistleblowing channel, HSBC Confidential, allows our
colleagues and other stakeholders to raise concerns confidentially.
Page 80
A responsible approach to
tax
We seek to pay our fair share of tax in all jurisdictions in which we
operate.
Page 81
Conduct: Our product
responsibilities
Our conduct approach guides us to do the right thing and to focus on the
impact we have on our customers and the financial markets in which we
operate.
Page 82
Our approach with
our suppliers
We require suppliers to meet our third-party risk compliance standards
and assess them to identify any financial stability concerns.
Page 82
Safeguarding data
Data privacy
We are committed to protecting the data we process, in accordance with
the laws and regulations of the markets in which we operate.
Page 83
Cybersecurity
We invest in our business and technical controls to help prevent, detect
and mitigate cyber-threats.
Page 84
HSBC Holdings plc Annual Report and Accounts 2024
73
ESG review
Setting high standards of governance TCFD
How ESG is governed
The Board takes overall responsibility for ESG
strategy, overseeing executive management
in developing the approach, execution and
associated reporting. Progress against our
ESG ambitions is reviewed through Board
discussion and review of key topics, such as
updates on sustainability infrastructure
finance and employee sentiment. The Board
is regularly provided with specific updates on
ESG matters, including the sustainability
execution programme, human rights and
workforce engagement. Board members
receive ESG-related training as part of their
induction and ongoing development, and
seek out further opportunities to build their
skills and experience in this area. For further
details of Board members’ ESG skills and
experience, see page 237. For further details
of their induction and training in 2024, see
page 250.
In October 2024, we enhanced our ESG
governance with the establishment of a new
Sustainability Working Group (‘SWG’) of the
HSBC Holdings Board, with an initial duration
of 12 months. The SWG is comprised of five
non-executive Directors, along with
attendance by other executives. At the
executive level, the governance activity was
streamlined with the removal of the
Sustainability Execution Committee, with its
activity managed within the project team. We
expect that our approach to ESG governance
is likely to continue to develop, in line with
our evolving approach to ESG matters and
stakeholder expectations.
The diagram on the right provides an
illustration of our ESG governance process,
including how the Board’s strategy on climate
is cascaded and implemented throughout the
organisation. It identifies examples of forums
that manage both climate-related
opportunities and risks, along with their
responsibilities and the responsible chair. The
structure of the process is similar for the
escalation of problems, with issues either
resolved in a given forum or raised to the
appropriate level of governance with
appropriate scope and authority.
Given the wide-ranging remit of ESG matters,
the governance activities are managed
through a combination of specialist
governance infrastructure and regular
meetings and committees, where
appropriate. These include the Group
Disclosure and Controls Committee and
Group Audit Committee, which provide
oversight for the scope and content of ESG
disclosures, and the Group People
Committee, which provides oversight support
for the Group’s approach to performance
management.
For some areas, such as climate where our
approach is more advanced, dedicated
governance activities exist to support the
wide range of activities.
The Group Chief Risk and Compliance Officer
and the chief risk officers of our PRA-
regulated businesses are the senior
managers responsible for climate financial
risks under the UK Senior Managers Regime.
Climate risks are considered in the Group
Risk Management Meeting and the Group
Risk Committee, with scheduled updates
provided, as well as detailed reviews of
material matters, such as climate-related
stress-testing exercises.
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HSBC Holdings plc Annual Report and Accounts 2024
How HSBC’s climate
strategy is cascaded
Opportunities
Risks
Board level governance
Group Board
Group Audit Committee
Group Risk Committee
Specialist Board governance
Sustainability Working Group
Provides guidance on the Group-wide medium- and longer-term sustainability strategy,
including our progress towards our net zero ambitions, taking into account key factors such
as risk appetite, commerciality, capability and data. The group will also oversee progress
against the strategy, including financing and supporting clients’ transitions. The group will
provide guidance on target setting, policy review, financing and investing.
Chair: Independent non-executive Director - Geraldine Buckingham
Management level governance
ESG Committee
Has oversight of ESG strategy, policy,
material commitments and external
disclosure. Oversees and monitors
progress against ESG strategy,
policies, plans, targets, commitments
and execution processes. Reports to
the SWG and Board on progress on
the commitments, deliverables and
targets under the sustainability
execution programme.
Co-Chairs: Group CEO and Group
Chief Sustainability Officer
Group Risk Management Meeting
Oversees the enterprise-wide
management of all risks, including
updates relating to the Group’s
climate risk profile and risk appetite,
top and emerging climate risks, and
key climate initiatives.
Chair: Group Chief Risk and
Compliance Officer
Regional, global business and group infrastructure
Examples of ESG-related management governance
The following governance bodies support management in its delivery of ESG activities.
Sustainable Execution
Programme
Oversees the global
delivery of climate
strategy through 10
modules.
Chair: Global Head of
Sustainability
Transformation
Group Reputational Risk
Committee
Provides recommendations
and advice on significant
reputational risk matters
with impact across the
Group.
Chair: Group Chief Risk
and Compliance Officer
Human Rights
Steering Committee
Oversees the Group’s
evolving approach to
human rights and
provides enhanced
governance.
Chair: Group Chief Risk
and Compliance Officer
Human rights
Our respect for human rights
As set out in our Human Rights Statement,
we recognise the role of business in
respecting human rights. Our approach is
guided by the UN Guiding Principles on
Business and Human Rights (‘UNGPs’) and
the OECD Guidelines for Multinational
Enterprises on Responsible Business
Conduct.
Our salient human rights issues
We continue to develop our understanding of
our salient human rights issues. These are
the human rights at risk of the most severe
negative impact through our business
activities and relationships.
An extensive review of our salient human
rights issues conducted in 2022 identified five
human rights risks inherent to HSBC’s
business globally, and five types of activity
through which such risks might arise. These
are represented in the adjacent table.
In 2023, building on this assessment, we
provided practical guidance and training,
where relevant, to our colleagues across the
Group on how to identify and manage human
rights risk.
In 2024, we focused on our approach to
human rights risk management relating to the
goods and services we buy from third parties
and in respect of our business customers.
We issued human rights due diligence good
practice guidance tailored to procurement and
corresponding high-level guidance for staff
who manage our relationships with our
business customers.
Managing risks to human rights
In 2024, we continued the process of
adapting our risk management procedures to
reflect what we learned from the work on
salient human rights issues and began
embedding the related guidance documents
described above.
We developed a human rights due diligence
operating procedure for procurement globally.
The procedure describes the due diligence
process undertaken to identify suppliers
where the risk of adverse human rights
impact is considered higher and the process
to be followed to review and mitigate the
risk. We built on the human rights supplier
audit pilots undertaken in 2023 in our Asia-
Pacific and Latin America regions with an
expanded programme of human rights audits
in 11 countries across Asia-Pacific, Latin
America, the Middle East and North Africa.
We continued to develop our in-house
capability on human rights with the launch of
further online resources for all staff and
bespoke human rights training for key
colleagues, including those managing
relationships with suppliers and business
customers, and those with responsibility for
overseeing risk management processes.
For further details of the actions taken to respect
the right to decent work, see our 2024 Annual
Statement under the UK Modern Slavery Act at
www.hsbc.com/who-we-are/esg-and-
responsible-business/modern-slavery-act.
For further details of the actions taken to respect
the right to equality and freedom from
discrimination, see ’Our approach to inclusion’
on page 64.
Sustainability risk policies
Some of our business customers operate in
sectors in which the risk of adverse human
rights impact is considered greater. Our
sustainability risk policies consider human
rights issues such as forced labour, harmful
or exploitative child labour, workers’ rights
and land rights.
Through our membership of international
certification schemes, such as the Forestry
Stewardship Council, the Roundtable on
Sustainable Palm Oil and the Equator
Principles, we recognise standards aimed at
respecting human rights.
We regularly review our sustainability risk
policies and policy implementation as we
apply our policies in practice.
For further details, see our sustainability risk
policies at www.hsbc.com/who-we-are/esg-and-
responsible-business/managing-risk/
sustainability-risk.
Financial crime controls
Our financial crime risk framework also helps
to mitigate the risk of being associated with
adverse human rights impacts, by helping to
identify and assess the financial crime risk
associated with our customers, employees
and third parties.
For further details of how we fight financial
crime, see www.hsbc.com/who-we-are/esg-and-
responsible-business/fighting-financial-crime.
Other principles
HSBC’s Principles for the Ethical Use of Data
and Artificial Intelligence include how we
seek to respect the right to privacy while
making use of these technologies.
For further details see www.hsbc.com/-/files/
hsbc/our-approach/risk-and-responsibility/
pdfs/240715-hsbc-principles-for-the-ethical-use-
of-data-and-ai.pdf?download=1.
HSBC Holdings plc Annual Report and Accounts 2024
75
Our salient human rights issues
Illustration of HSBC Group’s inherent human rights risks mapped to business activities.
Inherent human rights risks
HSBC activities
Employer
Buyer
Provider of products
and services
Investor
Personal
customers
Business
customers
Right to
decent
work
Freedom from forced labour
u
u
u
Just and favourable conditions of work
u
u
u
u
Right to health and safety at work
u
u
u
u
Right to equality and freedom from discrimination
u
u
u
u
u
Right to privacy
u
u
u
Cultural and land rights
u
u
u
Right to dignity and justice
u
u
u
u
u
ESG review
Our respect for human rights continued
Supporting change
We continued to participate in industry
forums, including the Thun Group of Banks,
which is an informal group that seeks to
promote understanding of the UNGPs within
the sector, and the UN Global Compact
Human Rights Working Group.
HSBC has been a member of the Mekong
Club since 2016. We are a participant in their
financial services working group, and we use
their informative typological toolkits,
infographics, and other multimedia resources
covering current and emerging issues. Our
compliance teams regularly collaborate and
engage with the Mekong Club in designing
Group-wide knowledge sharing and training
sessions.
Investments
HSBC Asset Management acknowledges the
important role that business plays in
respecting human rights. If mismanaged or
left unaddressed, human rights violations
may materialise as business risks, negatively
impacting investee companies’ operations,
supply chain or brand. These may in turn
present risk both to client investments and
reputation.
HSBC Asset Management engages with
companies prioritised for purposeful
engagement under its Stewardship Plan on
core themes material to investee companies,
including human rights. Engagements may be
on a one-on-one basis, or collaboratively with
other investors. In 2024, it has developed
engagement guidelines, highlighting its
expectations of good practice for companies,
where human rights may be a material issue.
Further details can be found in its
Stewardship Plan. The Global Voting
Guidelines provide an overview of its
approach to exercising its shareholder rights
in respect of ESG issues, including human
rights.
In 2024, HSBC Asset Management joined the
Investor Initiative on Human Rights Data
(‘II-HRD’), a collaborative engagement
initiative that aims to improve the depth and
breadth of corporate human rights data
available to investors and the transparency of
human rights assessment criteria. This
initiative seeks to address the industry-wide
challenges commonly cited, including lack of
transparent ESG ratings methodologies by
commercial data providers and insufficient
inclusion of human rights data.
For HSBC Asset Management’s Stewardship
Plan, see: www.assetmanagement.hsbc.co.uk/
en/institutional-investor/about-us/responsible-
investing/-/media/files/attachments/uk/policies/
stewardship-plan-uk.pdf.
Measuring effectiveness
Metric
2024
2023
Contracted suppliers who either confirmed adherence to the code of
conduct or provided their own alternative that was accepted by our
Global Procurement function
96.7%
95%
Employees who have received training on one or more aspects of human
rights
11,884
8,176
For further inclusion metrics, see page 64 in this ESG review.
Supporting those impacted and those
potentially at risk
We continued to expand our Survivor Bank
programme, which has now supported over
3,500 (a more than 15% increase since last
year) survivors of modern slavery and human
trafficking in the UK.
Our Wealth and Personal Banking team
continues to deliver training to raise
awareness of modern slavery, enabling
employees to spot signs of abuse and
escalate their concerns through established
channels. In addition, our customer-facing
employees globally are trained to identify and
support vulnerable customers as part of their
induction training.
For further details of our work to support
vulnerable communities, see page 71.
Effectiveness
The table below includes some indicative
metrics we use to measure year-on-year
improvement to our human rights processes.
ESG review | Governance
76
HSBC Holdings plc Annual Report and Accounts 2024
Customer experience
We remain committed to improving
customers’ experiences. In 2024, we
gathered feedback from over one million
customers across our three global businesses
to help us understand our strengths and the
areas we need to focus on. We were ranked
among the top three banks or improved our
ranking against our competitors in 58% of our
six key markets across WPB and CMB1 in line
with 2023.
Customer satisfaction
Listening to drive improvement
We have continued to embed our feedback
system so we can better listen, learn and act
on customer feedback. We use the net
promoter score (‘NPS’) and customer
satisfaction to provide a consistent measure
of our performance. NPS is measured by
subtracting the percentage of ‘detractors’
from the percentage of ‘promoters’.
‘Detractors’ are customers who provide a
score of 0 to 6, and ‘promoters’ are
customers who provide a score of 9 to 10 to
the question: ‘On a scale on 0 to 10, how
likely is it that you would recommend HSBC
to a friend or colleague’.
We run studies that allow us to benchmark
ourselves against other banks. We try to
make it as easy as possible for customers to
give us feedback, leveraging our use of digital
real-time surveys to capture insight. By
sharing this and other feedback with our
front-line teams, and allowing them to
respond directly to customers, we are
improving how we address issues and realise
opportunities.
We continue to run dedicated global forums
to provide oversight of our retail and business
customers’ experiences and promote
continuous improvement. This helps ensure
we use feedback in all aspects of how we run
our business, and prioritise initiatives that
matter most to our customers.
How we fared
In WPB, we were ranked among the top
three banks against our competitors in Hong
Kong and mainland China. In Hong Kong, we
remained first overall against our competitors,
and improved our NPS score. This was driven
by improved scores across all customer
segments.
Our NPS rank improved in the UK and
Singapore. This was largely driven by
improved scores among our affluent
customers. In Mexico our rank remained
stable, and in India our rank declined, largely
driven by our personal banking customers.
In our private bank, our global NPS increased
to 48 points, compared with 42 points in
2023. All the existing markets included in the
programme increased their scores from 2023
and we have included India and UAE for the
first time this year.
In CMB, we were ranked among the top
three banks against our competitors in three
of our six key markets. We ranked first in
Hong Kong and as a top three bank in
Singapore and India. In mainland China, we
ranked outside the top three but ranked first
among international banks. In Mexico, we
have dropped from 3rd to 4th position due to
improved competitor performance in
business banking.
After an improved rank position in 2023, our
overall performance in the UK has stabilised
in 2024. Even though we sit outside of the
top 3 in business banking, we are still ranked
in the top 3 among mid-market enterprise and
large corporates in the UK. We remain
committed to improving our NPS
performance across markets, with action
plans developed centrally and locally.
In GBM, we have one of the highest
satisfaction scores against our international
competitors. We were ranked in the top three
banks globally, with high satisfaction scores
based on our digital capabilities.
Number of markets in top three or
improving rank
1,2
2024
WPB
4 out of 6
CMB
3 out of 6
1 The six markets comprise: the UK, Hong Kong,
Mexico, mainland China, India and Singapore.
Rank positions are provided using data gathered
through third-party research agencies.
2 We benchmark our NPS against our key
competitors to create a rank position in each
market. This table is based on the number of
markets where we are in the top three or have an
improved rank from the previous year.
Acting on feedback
In 2024, we have continued to focus on
developing our products and services, and
enhancing our digital capabilities to improve
customer experience.
Wealth and Personal Banking
We continue to redesign our international
products and services to make it quicker and
easier to bank internationally. This year we
have improved the way our customers make
international payments. Customers can send
funds directly to mobile wallets from their
banking app, with customers now able to
send international payments with just the
recipients’ name alongside their phone
number or email address.
Commercial Banking
Global Payments Solutions (‘GPS’)
implemented a new globally aligned client
service model focused on delivering an
enhanced front-to-back client experience. We
leverage data to improve our engagements
with customers and are investing in
technology to drive process efficiencies,
reduce query volumes and drive automation.
Our new Trade Solutions platform (‘HTS’) lets
us quickly deploy new capabilities (like
TradePay) across multiple markets. It helps
provide a consistent user experience and
enables easy connectivity to other platform
ecosystems.
In sustainability we continue to build an end-
to-end customer journey through launching
new propositions that incentivise and reward
customers for improving their ESG
performance, such as the HSBC Buildings
Sustainability Assessment Tool in the UK and
Sustainability Improvement Loan. In our
Customer Channels division, we have
deployed AI and personalisation solutions to
improve proactive engagement and the
speed of query resolution. We have increased
adoption of customer digital capabilities to
improve fulfilment turnaround times. We
have also increased the resilience of our
digital channels and further reduced customer
fraud risk. These actions are helping to build
greater digital trust with our customers and
thereby improving customer experience.
Global Banking and Markets
We continued our efforts to support our
clients in their sustainability and transition
journey by maintaining our Top 5 book-runner
position globally in green, sustainable and
social bonds, and by extending the
sustainability-focused product and solutions
range beyond the labelled products suite. We
have refined our priority and core coverage
model, including piloting a range of priority
client squads to drive specific client goals.
We continue to invest in our coverage
enablement strategy, including thought
leadership and transaction banking solutions.
HSBC Holdings plc Annual Report and Accounts 2024
77
ESG review
How we listen
To improve how we serve our customers, we
must be open to feedback and acknowledge
when things go wrong. We continue to adapt
at pace to provide support for customers
facing new challenges, new ways of working
and those that require enhanced care needs.
We aim to be open and consistent in how we
track, record and manage complaints,
although as we serve a wide range of
customers – from personal banking and
wealth customers to large corporates,
institutions and governments – we tailor our
approach in each of our global businesses. As
the table on the right demonstrates, we have
a consistent set of principles that enable us
to remain customer-focused throughout the
complaints process.
For further details of complaints volumes by
geography, see our ESG Data Pack at
www.hsbc.com/esg.
How we handle complaints
Our principles
Our actions
Making it easy
for customers
to complain
Customers can complain through the channel that best suits them. We provide a
point of contact along with clear information on next steps and timescales.
Acknowledging
complaints
All colleagues welcome complaints as opportunities and exercise empathy to
acknowledge our customers’ issues. Complaints are escalated if they cannot be
resolved at first point of contact.
Keeping the
customer up to
date
We set clear expectations and keep customers informed throughout the complaint
resolution process through their preferred channel.
Ensuring fair
resolution
We thoroughly investigate all complaints to address concerns and ensure the right
outcome for our customers.
Providing
available rights
We provide customers with information on their rights and the appeal process if
they are not satisfied with the outcome of the complaint.
Undertaking
root cause
analysis
Complaint causes are analysed on a regular basis to identify and address any
systemic issues and to inform process improvements.
Wealth and Personal Banking
In 2024, we received approximately 887,000
complaints from customers in eight priority
markets, and the ratio of complaints per 1,000
customers per month in these markets
decreased from 2.2 to 2.0. We had a reduction
in complaints in our top three markets (the UK,
Hong Kong and Mexico), which comprise 86%
of complaints globally.
In the UK, complaints fell 9%. During 2024,
our two key priorities continued to be
complaints prevention, and improving the
quality of resolution of the complaints we
received. We made good progress in both
areas, driven by targeted intervention in
priority areas and ongoing regular oversight.
This has included identifying prominent
complaint themes – such as telephony
customer experience, transaction disputes and
international payment processing – and
allocating them to individual executives as
accountable ‘owners’ to remedy the root
cause.
The decrease in complaints in Hong Kong was
primarily driven by improvements in
capabilities that make banking with HSBC
easier for customers. A deeper customer-
centric culture, regular reviews, root cause
analysis of customer feedback and greater
collaboration across business lines to address
emerging customer pain points, also
contributed to the fall in complaints.
In Mexico, there was a 5.3% fall in the
volume of total complaints in 2024 compared
with 2023, with unrecognised debit card
charges down by 9% despite an increase in
transaction volumes. This was achieved
through targeted actions, including improving
fraud processes and the introduction of
enhancements to the way customers receive
purchase authorisations.
In our private bank, we received 647
complaints, an increase of 140 compared
with 2023. This was largely due to the
inclusion of complaint data for the private
banking operation in India, which received
128 complaints in 2024. Complaint data for
this business was reported in WPB figures in
2023. Banking products and service issues
represented the largest volume of complaints
overall, a high proportion of which were
attributable to issues with payment
processing and credit cards. Overall, the
private bank resolved 646 complaints.
WPB complaint volumes
1
(per 1,000 customers per month)
2024
2023
Total
2
2.0
2.2
UK
3
q
1.0
1.1
Hong Kong
3
q
0.7
0.9
Mexico
3
q
5.0
5.2
1 A complaint is any expression of dissatisfaction
about WPB’s activities, products or services
where a response or resolution is explicitly, or
implicitly, expected.
2
Priority markets in 2024 included: the UK, Hong
Kong (excluding Hang Seng), Mexico, mainland
China, India, UAE, Singapore and Australia,
selected based on complaints volume, customer
base and strategic importance among other
factors. The 2023 total has been revised from 2.3
to 2.2 due to a change in the composition of these
eight priority markets.
3 The UK, Hong Kong and Mexico make up 86%
of total complaints.
Acting on feedback
In 2024, we continued to improve our capabilities and tools across the business to enhance the customer experience globally. By consistently
measuring customer experience, we actively listen, learn and take action based on what our customers share with us. Additionally, we introduced
a customer experience behavioural framework across the bank, aligned with HSBC’s core values. This framework supports our colleagues in
meeting minimum service standards and prioritising customer experience in their daily routines. These efforts enable us to identify opportunities
to continue to improve our customer experience and systematically track and measure our progress.
ESG review | Governance
78
HSBC Holdings plc Annual Report and Accounts 2024
How we listen continued
Commercial Banking
In 2024 we received 46,276 customer and
client complaints, an increase of 0.8% from
2023. Of the overall volume, 32,748 came
from HSBC UK, 8,779 from Asia-Pacific and
the remainder from the rest of our global
markets.
The most common complaint related to
servicing and transactions, with the largest
volume of complaints globally coming from
business banking customers, representing
68.2% of our total complaints.
Although we have seen a minor increase in
complaint volumes, this reflects
improvements in the quality of our logging
process and we have increased our
understanding of the root cause of many
complaints. In 2024, we enhanced training for
our front-line colleagues to ensure they can
accurately identify the differences between a
complaint, query and feedback and upgraded
our complaint reporting tools. For 2025, our
focus will be on addressing the root cause of
complaint trends, as well as improvements to
our systems, processes and customer advice.
CMB complaint volumes
(000s)
2024
2023
Total
46.2
45.9
UK
1
q
32.7
33.8
Hong Kong
1
p
7.7
6.5
1 The UK and Hong Kong (excluding Hang Seng)
account for 87% of total complaints.
Acting on feedback
In 2024, we have further invested in comprehensive training programmes for our staff to ensure they are equipped with the skills and
knowledge needed to manage complaints effectively. This includes training on active listening, empathy, identification and treatment of
customers in financial difficulty and conflict resolution. All of our front-line teams globally went through this training to ensure that conduct and
the customer are at the heart of our management of client feedback. We have implemented advanced complaint reporting tools that enable us
to capture customer feedback more accurately and efficiently. These tools allow us to identify and address issues promptly. Within our Business
Banking segment, we continue to work with front-line teams to identify and manage complaints better.
Global Banking and Markets
In 2024, we received 1,838 customer
complaints in Global Banking, an increase of
18.4% from 2023. Of the overall complaint
volumes, 37.6% came from Europe and
28.9% came from Asia-Pacific. The most
common complaint, at 34.2% of total
complaints, related to transactions.
In Markets and Securities Services (‘MSS’)
complaints decreased by 13.6% to 306. The
majority of complaints were operational in
nature and resolved in a timely manner. Of
the overall MSS complaints, 49% came from
Europe and 33.9% from Asia-Pacific, our two
largest markets.
GBM complaint volumes
1
2024
2023
Total
2,144
1,906
Global
Banking
2
p
1,838
1,552
Global Markets
and Securities
Services
3
q
306
354
1 Globally, a complaint is any expression of
dissatisfaction, whether justified or not, relating to
the provision of, or failure to provide, a specific
product or service or service activity. Within the
UK, a complaint is any expression of
dissatisfaction – whether justified or not – about
our products, services or activities, which suggests
we have caused (or might cause) financial loss,
material distress or a material inconvenience.
2 Global Banking also includes Global Payments
Solutions (previously known as Global Liquidity
and Cash Management) and complaints relating
to payment operations.
3 Contains Global Research complaint volumes.
Acting on feedback
In 2024, our focus has been to increase the capture and quality of complaints received within GBM. Our focus has been on doing deep dives
into the quality of complaints received and delivering bespoke training on the complaint themes that we see. We have defined robust
feedback loops allowing us to learn continuously from customer experiences and embed these into our processes. We regularly review and
analyse complaint data to identify trends and implement improvements in our services. Although we have seen growth in complaint
volumes, we are seeing higher levels of compliant quality and better decisions to address them in the first instance.
HSBC Holdings plc Annual Report and Accounts 2024
79
ESG review
Integrity, conduct and fairness
Safeguarding the financial system
We have continued our efforts to combat
financial crime and reduce its impact on our
organisation, customers and the communities
that we serve. Financial crime includes fraud,
bribery and corruption, tax evasion, sanctions
and export control violations and evasion,
money laundering, terrorist financing and
proliferation financing.
We manage financial crime risk because it is
the right thing to do to protect our customers,
shareholders, staff, the communities in which
we operate, as well as the integrity of the
financial system on which we all rely. We have
a financial crime risk management framework
that is applicable across all global businesses
and functions, and in all countries and territories
in which we operate. The financial crime risk
framework, which is overseen by the Board, is
supported by our financial crime policy that is
designed to enable adherence to applicable
laws and regulations globally. Annual global
mandatory training is provided to all colleagues,
with additional targeted training tailored to
certain individuals. We carry out regular risk
assessments to identify where we need to
respond to evolving financial crime threats, as
well as to monitor and test our financial crime
risk management programme.
We continue to invest in new technology; we
are enhancing our fraud monitoring capability
and our trade screening controls, and
investing in the application of machine
learning to improve the accuracy and
timeliness of our detection capabilities.
These new technologies should enhance our
ability to respond effectively to unusual
activity and be more granular in our risk
assessments.
Our anti-bribery and corruption policy
Our global financial crime policy requires that
all activity must be: conducted without intent
to bribe or corrupt; reasonable and
transparent; considered to be neither lavish
nor disproportionate to the professional
relationship; appropriately documented with
business rationale; and authorised at an
appropriate level of seniority. Our global
financial crime policy requires that we identify
and mitigate the risk of our employees,
customers and third parties committing
bribery or corruption. Among other controls,
we use risk assessments, due diligence and
ongoing monitoring following a risk-based
approach, to identify and help mitigate the
risk that our customers are involved in, or use
HSBC’s products or services, to commit
bribery or corruption. In 2024, two former
employees of an HSBC subsidiary in China
were convicted of bribery-related offences
and each received a fine and suspended
sentence. The HSBC subsidiary in China self-
reported this matter to the police and was not
a subject of the police investigation or
charges.
99%
Total percentage of permanent and non-
permanent employees who received financial
crime training, including on anti-bribery and
corruption.
Whistleblowing
We want colleagues and stakeholders to
have confidence in speaking up when they
observe unlawful or unethical behaviour. We
offer a range of speak-up channels to listen to
the concerns of individuals and have a zero
tolerance policy for acts of retaliation.
Listening through whistleblowing
channels
Our global whistleblowing channel, HSBC
Confidential, is one of our speak-up channels,
which allows colleagues and other
stakeholders to raise concerns confidentially
and, if preferred, anonymously (subject to
local laws). In most of our markets, HSBC
Confidential concerns are raised through an
independent third party, offering 24/7 hotlines
and a web portal in multiple languages. We
also provide and monitor an external email
address for concerns about accounting,
internal financial controls or auditing matters
(accountingdisclosures@hsbc.com). Concerns
are investigated proportionately and
independently, with action taken where
appropriate. This can include disciplinary
action, such as dismissal and adjustments to
variable pay and performance ratings, or
operational actions including changes to
policies and procedures.
We continue to actively promote our full
range of speak-up channels to colleagues to
help ensure their concerns are handled
through the most effective route. In 2024,
13% fewer concerns were raised through
HSBC Confidential compared with 2023. Of
the concerns investigated through the HSBC
Confidential channel in 2024, 66% related to
individual behaviour and personal conduct,
21% to security and fraud risks, 12% to
compliance risks and less than 1% to other
categories.
The Group Audit Committee has oversight of
the Group’s whistleblowing arrangements, and
the Chair of the Group Audit Committee acts
as HSBC’s Whistleblowers’ Champion with
responsibility for ensuring and overseeing the
integrity, independence and effectiveness of
the Group’s policies and procedures.
Regulatory Compliance sets the
whistleblowing policy and procedures, and
provides the Group Audit Committee with
periodic updates on their effectiveness.
Specialist teams and investigation functions
own whistleblowing controls, with monitoring
in place to determine control effectiveness.
For further details of the role of the Group Audit
Committee in relation to whistleblowing,
including updates received in 2024 on
operational effectiveness, see page 267.
HSBC Confidential concerns raised in
2024:
1,527
(2023: 1,746)
Substantiation rate of concerns
investigated through HSBC Confidential
in 2024:
35%
(2023: 41%)
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80
HSBC Holdings plc Annual Report and Accounts 2024
The scale of our work
Each month in 2024 we monitored
approximately 900 million transactions
for signs of financial crime. We
performed daily screening of
approximately 121 million customer
records for sanctions exposure. In 2024,
we filed over 113,000 suspicious activity
reports to law enforcement and
regulatory authorities where we
identified potential financial crime.
A responsible approach to tax
We seek to pay our fair share of tax in all
jurisdictions in which we operate, and to
minimise the likelihood of customers using
our products and services to evade or
inappropriately avoid tax. We also abide by
international protocols that affect our
organisation. Our approach to tax and
governance processes is designed to achieve
these goals.
Through adoption of the Group’s risk
management framework, we seek to ensure
that we do not adopt inappropriately tax-
motivated transactions or products, and that
tax planning is scrutinised and supported by
genuine commercial activity. HSBC has no
appetite for using aggressive tax structures.
With respect to our own taxes, we are guided
by the following principles:
– We are committed to applying both the
letter and spirit of the law. This includes
adherence to a variety of measures arising
from the OECD Base Erosion and Profit
Shifting initiative including the ‘Pillar Two’
global minimum tax rules that apply to the
Group from 2024. These rules seek to
ensure that the Group pays tax at a
minimum rate of 15% in each jurisdiction in
which it operates. We have identified 14
jurisdictions that may have an effective tax
rate below 15% in 2024. We continually
monitor the number of active subsidiaries
within each jurisdiction as part of our
ongoing entity rationalisation programme.
– We seek to ensure that our entities active
in nil or low tax jurisdictions have clear
business rationale for why they are based
in these locations and appropriate
transparency over their activities.
– We seek to have open and transparent
relationships with all tax authorities. Given
the size and complexity of our organisation,
which operates across 58 jurisdictions, a
number of areas of differing interpretation
or disputes with tax authorities exist at any
point in time. We cooperate with the
relevant local tax authorities to mutually
agree and resolve these in a timely manner.
With respect to our customers’ taxes, we are
guided by the following principles:
– We have made considerable investments
to support external tax transparency
initiatives and reduce the risk of banking
services being used to facilitate customer
tax evasion. Initiatives include the US
Foreign Account Tax Compliance Act, the
OECD Standard for Automatic Exchange of
Financial Account Information (‘Common
Reporting Standard’), and the UK legislation
on the corporate criminal offence of failing
to prevent the facilitation of tax evasion.
– We implement processes that aim to
ensure that inappropriately tax-motivated
products and services are not provided to
our customers.
Our tax contributions
The Group effective tax rate for the year of
22.6% was higher than in the previous year
(2023: 19.1%). The effective tax rate for the
year increased by 4.8% due to the non-
deductible loss in respect of the sale of our
business in Argentina, and decreased by
3.6% due to the non-taxable gain on the
disposal of HSBC Canada. Further details are
provided on page 380.
Tax paid in 2024 is higher than in 2023 mainly
because the Hong Kong Inland Revenue
Department did not issue HSBC’s corporation
tax assessments for 2023 until January 2024,
at which time they were paid. The equivalent
assessments for 2024 were received and
paid in December 2024.
The UK bank levy charge for 2024 of $249m
was lower than the charge of $339m in 2023,
as the charge for 2023 was increased by
adjustments arising upon filing prior year
returns.
As highlighted below, in addition to paying
$9.2bn (2023: $6.8bn) of our own tax
liabilities during 2024, we collected taxes of
$10.1bn (2023: $10.8bn) on behalf of
governments around the world. A more
detailed geographical breakdown of the taxes
paid in 2024 is provided in the ESG Data
Pack.
Taxes paid – by type of tax
Tax on profits $6,080m (2023: $3,685m)
Withholding taxes $667m (2023: $432m)
Employer taxes $1,003m (2023: $1,052m)
Bank levy $135m (2023: $57m)
Irrecoverable VAT $1,098m (2023: $1,298m)
Other duties and levies $229m1 (2023: $249m)
Taxes paid – by region
Europe $2,780m (2023: $2,945m)
Asia-Pacific $5,020m (2023: $2,488m)
Middle East, North Africa
and Türkiye $421m (2023: $296m)
North America $291m (2023: $389m)
Latin America $700m (2023: $655m)
Taxes collected – by region
Europe $4,214m (2023: $4,714m)
Asia-Pacific $3,223m (2023: $3,226m)
Middle East, North Africa
and Türkiye $118m (2023: $77m)
North America $1,025m (2023: $1,119m)
Latin America $1,483m (2023: $1,680m)
1 Other duties and levies includes property taxes of $76m (2023: $91m).
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ESG review
Conduct: Our product responsibilities
Our conduct approach guides us to do the
right thing and to focus on the impact we
have for our customers and the financial
markets in which we operate. It is embedded
into the way we design, approve, market and
manage products and services, with a focus
on five clear outcomes:
– We understand our customers’ needs.
– We provide products and services that offer
a fair exchange of value.
– We service customers’ ongoing needs and
put it right if we make a mistake.
– We act with integrity in the financial
markets we operate in.
– We operate resiliently and securely to avoid
harm to customers and markets.
We train all our colleagues on our approach to
customer and market conduct, helping to
ensure our conduct outcomes are part of
everything we do.
Designing products and services
Our approach to product development is set
out in our policies and provides a clear basis
on which informed decisions can be made.
Our policies require that products must be fit-
for-purpose throughout their existence,
meeting regulatory requirements and
associated conduct outcomes.
Our approach includes:
– designing products to meet identified
customer needs;
– managing products through governance
processes, helping to ensure they meet
customers’ needs and deliver a fair
exchange of value;
– periodically reviewing products to help
ensure they remain relevant and perform in
line with expectations we have set; and
– improving, or withdrawing from sale, products
which do not meet our customers’ needs or
no longer meet our high standards.
Meeting our customers’ needs
Our policies and procedures set standards to
help ensure that we consider and meet
customer needs. These include:
– enabling customers to understand the key
features of products and services;
– enabling customers to make informed
decisions before purchasing a product or
service; and
– ensuring processes are in place for the
provision of advice to customers.
They help us provide the right outcomes for
customers, including those with enhanced
care needs. This enables us to support
customers who are more vulnerable to
external impacts.
Financial promotion
Our policies help to ensure that in the sale of
products and services, we use marketing and
product materials that support customer
understanding and fair customer outcomes.
This includes providing information on
products and services that is fair, clear and
not misleading. We also have controls in
place to help ensure our cross-border
marketing complies with relevant regulatory
requirements.
Product governance
Our product management policy covers
the entire lifecycle of the product. This
helps ensure that our products meet our
requirements before we sell them and
allows continued risk-based oversight of
product performance against the
intended customer outcomes.
When we decide to withdraw a product
from sale, we aim to consider the
implications for our existing customers
and agree actions to help them achieve a
fair outcome where appropriate.
Our approach with our suppliers
We maintain global standards and procedures
for the onboarding and use of third-party
suppliers. We require suppliers to meet our
third-party risk compliance standards and
assess them to identify any financial stability
concerns.
Sustainable procurement
Supporting and engaging with our supply
chain is vital to the development of our
sustainable procurement processes. In 2024:
– We continued gathering carbon emission
data from our suppliers through CDP
(formerly the Carbon Disclosure Project) and
introduced a new data collection method to
simplify and improve our supplier outreach
for scope 3 data collection.
– We began implementing decarbonisation
plans for our three highest emitting
procurement categories: technology; real
estate; and professional services. We
engaged suppliers on their emissions
disclosure plans and carbon reduction
targets. We outlined what we expect of our
suppliers on these aspects and explored
joint opportunities.
– We hosted a Supply Chain Decarbonisation
Day with senior managers at HSBC and
suppliers to facilitate collaboration and
discuss innovative decarbonisation solutions
with some of our largest suppliers.
– We have started developing a biodiversity
strategy that aims to integrate biodiversity
considerations into our procurement
practices and define a clear set of
requirements for our suppliers.
– Since its launch in 2023, the Supplier
Diversity Portal is now live in a number of
jurisdictions. Further expansion is planned
for 2025 to reach a wider demographic of
diverse-owned suppliers (at least 51%
owned, managed or controlled by a
historically and locally under-represented
group). For further details, see
www.hsbc.com/who-we-are/esg-and-
responsible-business/working-with-suppliers.
– To increase engagement with diverse-
owned suppliers, we introduced a
development programme. The programme
is designed to empower diverse-owned
suppliers to effectively engage with large
corporations, including HSBC, and supports
our ambition to further diversify our supply
chain, to represent the communities that we
operate in.
Supplier code of conduct
Our supplier code of conduct (‘the code’) was
refreshed in 2024, setting out our ambitions
and areas of focus on the environment,
diversity and human rights, and outlines the
minimum standards we expect of our
suppliers on these issues. We continue to
formalise adherence to the code with clauses
in our supplier contracts, which support the
right to audit and act if a breach is discovered.
At the end of 2024, 96.7% of approximately
10,200 contracted suppliers had either
confirmed adherence to the code or provided
their own alternative that was accepted by
our Global Procurement function.
For further details of the number of suppliers in
each geographical region, see the ESG Data
Pack at www.hsbc.com/esg.
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HSBC Holdings plc Annual Report and Accounts 2024
Safeguarding data
Data privacy
We are committed to protecting the data we
process, in accordance with the laws and
regulations of the markets in which we
operate.
Our approach rests on having the right talent,
technology, systems, controls, policies and
processes to ensure appropriate
management of privacy risk. Our Group-wide
data risk policy and principles provide a
consistent global approach to managing data
privacy risk, and must be applied by all our
global businesses and functions. Our privacy
principles are available at www.hsbc.com/
who-we-are/esg-and-responsible-business/
managing-risk/operational-risk.
We conduct regular employee training and
awareness sessions on data privacy and
security issues throughout the year. This
includes mandatory training that is updated
regularly for all our global colleagues, with
additional training sessions where needed to
keep up to speed with new developments.
Where relevant, we encourage our data
privacy employees to obtain external
accreditation.
We provide transparency to our customers
and stakeholders on how we collect, use and
manage their personal data, and their
associated rights. Where relevant, we work
with third parties to help ensure adequate
protections are provided, in line with our data
risk policy and as required under applicable
data privacy laws. We offer a broad range of
channels in the markets where we operate,
through which customers and stakeholders
can raise concerns about the privacy of their
data.
Our dedicated privacy teams report to senior
management on data privacy risks and
issues, and provide oversight for global data
privacy programmes. We review data privacy
regularly at multiple governance forums,
including at Board level, to help ensure there
is appropriate oversight by senior executives.
Data privacy laws and regulations continue to
evolve globally. We continually monitor the
regulatory environment to ensure we respond
appropriately to any changes.
As part of our three lines of defence model,
our Global Internal Audit function provides
independent assurance as to whether our
data privacy risk management approaches
and processes are designed and operating
effectively. In addition, we have established
data privacy governance structures and
continue to embed accountability across all
businesses and functions.
We continue to implement industry practices
for data privacy and security. Our privacy
teams work closely with our data protection
officers, industry bodies and research
institutions to drive the design,
implementation and monitoring of privacy
solutions. We conduct regular reviews and
privacy risk assessments and continue to
develop solutions to strengthen our data
privacy controls.
We have procedures to articulate the actions
needed to deal with data privacy
considerations. These include notifying
regulators, customers or other data subjects,
as required under applicable privacy laws and
regulations, in the event of a reportable
incident occurring.
Intellectual property rights practices
We have a Group intellectual property risk
policy, supported by controls and guidance, to
manage risk relating to intellectual property.
This is to help ensure that commercially and
strategically valuable intellectual property is
identified and protected appropriately,
including by applying to register trademarks
and patents and enforcing our intellectual
property rights against unauthorised use by
third parties. Our intellectual property
framework also helps us avoid infringement
of third-party intellectual property rights,
supporting our consistent and effective
management of intellectual property risk in
line with our risk appetite.
Responsible AI
Artificial intelligence (‘AI’) and other emerging technologies provide the opportunity to process
and analyse data at a depth and breadth not previously possible. While these technologies
offer significant potential benefits for our customers, they also pose potential ethical risks for
the financial services industry and society as a whole. We have a set of principles to help
ensure we consider and address the ethical issues that could arise. HSBC’s Principles for the
Ethical Use of Data and Artificial Intelligence are available at www.hsbc.com/ai.
We continue to develop and enhance our approach to, and oversight of, AI, taking into
consideration the fast-evolving regulatory landscape, market developments and best practice.
HSBC Holdings plc Annual Report and Accounts 2024
83
Data Privacy Day
In February 2024, we held a global online
event for our colleagues to mark
International Data Privacy Day. The event
was hosted by our Global Head of Data
Legal, in collaboration with the
International Association of Privacy
Professionals.
The discussion focused on key
developments in the data privacy
landscape for 2024 and beyond, including
the impact of digital entropy and rapidly
evolving AI-related advancements. This
was followed by a Q&A with the
audience to encourage further dialogue.
ESG review
Cybersecurity
The threat of a cyber incident remains a
concern for our organisation, as it does across
the financial sector and other industries. As
cyber-threats continue to evolve, failure to
protect our operations may result in disruption
for our customers and our business, cause
financial loss or loss of sensitive data, and can
have a negative impact on our customers’ and
our own reputation, among other risks.
We continue to monitor ongoing geopolitical
events and changes to the cyber-threat
landscape and take proactive measures with
the aim of reducing any impact on our
customers.
Prevent, detect and mitigate
We invest in business and technical controls to
help prevent, detect and mitigate cyber
threats. Our cybersecurity controls follow a
’defence in depth’ approach, leveraging
multiple security layers, and recognising the
complexity of our environment. Our ability to
detect and respond to attacks through round-
the-clock security operations centre
capabilities is intended to help reduce the
impact of attacks.
Our cyber intelligence and threat analysis team
proactively collects and analyses internal and
external cyber information to continuously
evaluate threat levels for the most prevalent
attack types and their potential outcomes. We
actively participate in the broader cyber
intelligence community, including by sharing
technical expertise in investigations, alongside
others in the financial services industry and
government agencies around the world.
In 2024, we continued our programme of
continual improvement to further strengthen
our cyber defences and enhance our
cybersecurity capabilities to help reduce the
likelihood and impact of unauthorised access,
security vulnerabilities being exploited, data
leakage, third-party security exposure and
advanced malware. One key area of focus is
the increasing use of AI, which could be used
to facilitate sophisticated cyber-attacks. We
are enhancing governance processes to
manage potential cybersecurity risks, along
with accelerating the potential this
technology brings.
We work with third parties, including suppliers,
financial infrastructure bodies and other non-
traditional third parties, in an effort to help
reduce the threat of cyber-attacks impacting
our business services.
We have a third-party security risk
management process in place to assess,
identify and manage the risks associated with
cybersecurity threats with supplier and other
third-party relationships. The process includes
risk-based cybersecurity due diligence reviews
that assess third parties’ cybersecurity
programmes against our standards and
requirements.
Policy and governance
We have a robust suite of cybersecurity
policies, procedures, and key controls to help
with the effective oversight and management
of the organisation. This includes but is not
limited to defined information security
responsibilities for employees, contractors
and third parties, as well as standard
procedures for cyber incident identification,
investigation, mitigation and reporting. We
operate a three lines of defence model,
aligned to the enterprise risk management
framework, to help oversight and challenge of
our cybersecurity capabilities and priorities.
Within the first line of defence, risk owners
within global business and functions are
accountable for identifying and managing
cyber risk. They work with cybersecurity
control owners to apply risk treatment in line
with our risk appetite. Our controls are
designed to be executed in line with our
policies and are reviewed and challenged by
our risk stewards representing the second
line of defence. They are independently
assured by the Global Internal Audit function,
the third line of defence.
The assessment and management of our
cybersecurity risk is led and coordinated by a
Global Chief Information Security Officer
(‘CISO’). Our Global CISO has extensive
experience in financial services, security and
resilience as well as strategy, governance,
risk management and regulatory compliance.
The Global CISO is supported by regional and
business-level CISOs. In the event of
incidents, the Global CISO and relevant
supporting CISOs are informed and are
engaged in alignment with our cybersecurity
incident response protocols.
Key performance indicators, control
effectiveness and other matters related to
cybersecurity, including significant cyber
incidents, are presented on a regular basis to
various management risk and control
committees including to Board committees,
the Group Risk Management Meeting and
across global businesses, functions and
regions. This is done to help ensure ongoing
awareness and management of our
cybersecurity position.
Our cybersecurity capabilities are periodically
assessed against standards issued by the
National Institute of Standards and Technology
and by independent third parties, and we
proactively collaborate with regulators to
participate in regular testing activities. In
addition, HSBC engages external independent
third parties to support our penetration and
threat-led penetration testing.
Cyber training and awareness
We understand the important role our people
play in protecting against cybersecurity
threats. Our aim is to equip every colleague
with the appropriate tools and behaviours they
need to keep our organisation and customers’
data safe. We provide cybersecurity training
and awareness to all our people, ranging from
our top executives to IT developers to front-
line branch staff around the world, and we
deliver targeted training to staff that are
identified as having elevated cyber risk
exposure.
Boosting gender
representation in
cybersecurity
To help address barriers to opportunity,
HSBC Cybersecurity has been working to
increase the representation of women in
emerging talent via a variety of initiatives
across 2024. These include:
– Sponsoring the CyberFirst Girls
Competition for the second
consecutive year, aimed at inspiring
girls interested in technology to pursue
a career in cybersecurity.
– Providing cybersecurity work-
shadowing opportunities to
undergraduates who are part of the
UK-based Women in Technology
programme.
– Cybersecurity colleagues have hosted
a range of events with university
students in Poland, Mexico, mainland
China, India and the UK.
We host an annual Cyber Awareness Month
for all colleagues, covering topics such as
online safety at home, social media safety,
safe hybrid working, and cyber incidents and
response. Our dedicated cybersecurity
training and awareness team also provides a
wide range of education and guidance to both
customers and our colleagues about how to
spot and prevent online fraud.
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HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings plc Annual Report and Accounts 2024
85
Financial
review
The financial review gives detailed reporting of our
financial performance at Group level as well as
across the global businesses we reported on in
2024 and legal entities.
86
Financial summary
98
Global businesses and legal entities
120
Reconciliation of alternative performance
measures
Hong Kong, 1980s. Serving Our Customers.
Financial review
Financial summary
Contents
86
Key financial measures: basis of preparation
86
Use of alternative performance measures
88
Critical estimates and judgements
88
Impact of hyperinflationary accounting
89
Consolidated income statement
90
Income statement commentary
94
Consolidated balance sheet
Key financial measures: basis of
preparation
Return on average tangible equity
excluding notable items
From 1 January 2024, we revised the adjustments made to our
adjusted RoTE measure. Prior to this, we adjusted RoTE for the
impact of strategic transactions and the impairment of our investment
in Bank of Communications Co., Limited (‘BoCom‘), whereas from
1 January 2024 we have excluded all notable items. This was
intended to improve alignment with the treatment of notable items in
our other income statement disclosures. The calculation for RoTE
excluding notable items, adjusts the ‘profit attributable to the ordinary
shareholders, excluding goodwill and other intangible assets
impairment‘ for the post-tax impact of notable items. It also adjusts
the ‘average tangible equity‘ for the post-tax impact of notable items
in each period, which remain as adjusting items for all relevant
periods within that calendar year. For a reconciliation from return on
equity (‘RoE’) to RoTE excluding notable items, see page 122.
We do not reconcile our forward RoTE guidance to the equivalent
reported measure.
Banking net interest income
Banking net interest income (‘banking NII’) adjusts our NII, primarily
for the impact of funding trading and fair value activities reported in
interest expense. It represents the Group’s banking revenue that is
directly impacted by changes in interest rates.
We use this measure to determine the deployment of our surplus
funding, and to help optimise our structural hedging and risk
management actions. For more information on banking NII, see
page 91.
Target basis operating expenses
Target basis operating expenses is computed by excluding the direct
cost impact of our France retail banking operations and Canada
banking business disposals from the 2023 baseline. It is measured on
a constant currency basis and excludes notable items and the impact
of retranslating the prior year results of hyperinflationary economies at
constant currency, which we consider to be outside of our control.
We consider target basis operating expenses to provide useful
information to investors by quantifying and excluding the notable
items that management considered when setting and assessing cost-
related targets. For a reconciliation from reported operating expenses
to target basis operating expenses, see page 124.
In 2024, we targeted operating expenses growth on a target basis of
approximately 5% compared with 2023. This target reflected our
business plan for 2024, which included an increase in staff
compensation, higher spend and investment in technology for growth
and efficiency, in part mitigated by cost savings from actions taken
during 2023.
We are targeting growth in target basis operating expenses of
approximately 3% in 2025 compared with 2024. Our target basis
operating expenses for 2025 excludes the direct cost impact of the
business disposals in Canada and Argentina, notable items and the
impact of retranslating the prior year results of hyperinflationary
economies at constant currency.
Our cost target includes the impact of simplification-related saves
associated with our announced reorganisation, see page 98, which
aims to generate approximately $0.3bn of cost reductions in 2025. To
deliver these reductions, we plan to incur severance and other up-
front costs of $1.8bn over 2025 and 2026, which will be classified as
notable items.
We do not reconcile our forward target basis operating expenses
guidance to the reported operating expenses.
Dividend payout ratio target basis
We established a dividend payout ratio target basis of 50% for 2023
and 2024, and we continue to target a payout ratio target basis of
50% for 2025. For the purposes of computing our dividend payout
ratio target basis, we exclude from earnings per share material
notable items and related impacts. Material notable items are
components of our income statement that management would
consider as outside the normal course of business and generally non-
recurring in nature, which are excluded from our dividend payout ratio
calculation and our earnings per share measure, along with related
impacts.
Material notable items are a subset of notable items for which
categorisation is dependent on the nature of each item in conjunction
with the financial impact on the Group’s income statement. They
comprise the impacts of the sales of our banking business in Canada
and our retail banking operations in France, the gain following the
acquisition of SVB UK, the impacts of the sale of our business in
Argentina and the impairment of BoCom. We also exclude HSBC
Bank Canada‘s financial results from the 30 June 2022 net asset
reference date until completion, as the gain on sale was recognised
through a combination of the consolidation of HSBC Bank Canada‘s
results in the Group‘s results since this date, and the remaining gain
on sale recognised at completion, inclusive of the recycling of related
reserves and fair value gains on related hedges. Following the
completion of the sale of our banking business in Canada, the Board
approved a special dividend of $0.21 per share, which was paid in
June 2024, alongside the first interim dividend.
For a reconciliation of basic earnings per share to basic earnings per
share excluding material notable items and related impacts, see
page 125. We do not reconcile our forward dividend payout ratio
target basis guidance to the reported dividend payout ratio.
Use of alternative performance
measures
Our reported results are prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board (‘IFRS Accounting Standards’), as detailed in the
financial statements starting on page 341.
To measure our performance, we supplement our IFRS Accounting
Standards figures with non-IFRS Accounting Standards measures,
which constitute alternative performance measures under European
Securities and Markets Authority guidance and non-GAAP financial
measures defined in and presented in accordance with US Securities
and Exchange Commission rules and regulations. These measures
include those derived from our reported results that eliminate factors
distorting year-on-year comparisons. The ‘constant currency
performance’ measure used throughout this report is described below.
Definitions and calculations of other alternative performance measures
Financial summary
86
HSBC Holdings plc Annual Report and Accounts 2024
are included in our ‘Reconciliation of alternative performance measures’
on page 120. Also, the insurance-specific non-GAAP measure ‘Insurance
equity plus CSM net of tax‘, is provided on page 106, along with its
definition and reconciliation to the GAAP measure. All alternative
performance measures are reconciled to the closest reported
performance measure.
The global business segmental results are presented on a constant
currency basis in accordance with IFRS 8 ‘Operating Segments’ as
detailed in Note 10 ‘Segmental analysis’ on page 383.
Constant currency performance
Constant currency performance is computed by adjusting reported
results for the effects of foreign currency translation differences, which
distort year-on-year comparisons.
We consider constant currency performance to provide useful
information for investors by aligning internal and external reporting, and
reflecting how management assesses year-on-year performance.
Notable items and material notable
items
We separately disclose ‘notable items’, which are components of our
income statement that management would consider as outside the
normal course of business and generally non-recurring in nature.
Certain notable items are classified as ‘material notable items’, which
are a subset of notable items. Categorisation as a material notable item
is dependent on the nature of each item in conjunction with the financial
impact on the Group’s income statement. We exclude material notable
items when computing our dividend payout ratio target basis. Material
notable items currently comprise the sale of our retail operations in
France and our banking business in Canada, the sale of our business in
Argentina, the acquisition of SVB UK and the impairment of our
investment in BoCom.
The tables on pages 99 to 101 and pages 113 to 118 detail the effects of
notable items on each of our global business segments, legal entities and
selected countries/territories in 2024, 2023 and 2022.
Impact of strategic transactions
To aid the understanding of our results, we separately disclose the
impact of strategic transactions classified as material notable items on
the results of the Group and our global businesses. At 31 December
2024, strategic transactions classified as material notable items in
current and comparative periods comprise the disposal of our retail
banking operations in France, the disposal of our banking business in
Canada, the sale of our business in Argentina and the acquisition of SVB
UK.
The impacts of strategic transactions include the gains or losses on
classification to held for sale or on acquisition and all other related
notable items. They also include the distorting impact between the
periods of the operating income statement results related to acquisitions
and disposals that affect period-on-period comparisons. This is
computed by including the operating income statement results of each
business in any period for which there are no results in the comparative
period. We consider the monthly impacts of distorting income
statement results when calculating the impact of strategic transactions.
See page 102 for supplementary analysis of the impact of strategic
transactions.
Constant currency revenue and profit
before tax excluding notable items
We separately report ‘constant currency revenue excluding notable
items’ and ‘constant currency profit before tax excluding notable items’,
which exclude the impact of notable items and the impact of foreign
exchange translation. We consider this measure to provide useful
information to investors as it removes items which distort period-on-
period comparisons.
For a reconciliation of ‘constant currency revenue excluding notable items’
and ‘constant currency profit before tax excluding notable items’ to reported
revenue and reported profit respectively, see page 122.
Constant currency revenue and profit
before tax excluding notable items
and the impact of strategic
transactions
To aid the understanding of our results, we separately disclose ‘constant
currency revenue excluding notable items and the impact of strategic
transactions’ and ‘constant currency profit before tax excluding notable
items and the impact of strategic transactions’. This measure excludes
the impact of strategic transactions classified as material notable items
from constant currency revenue and profit before tax excluding notable
items. At 31 December 2024, strategic transactions classified as
material notable items comprise the disposal of our retail banking
operations in France, our banking business in Canada, the sale of our
business in Argentina and the acquisition of SVB UK.
The impacts quoted include the gains or losses on classification to held
for sale or acquisition and all other related notable items. They also
include the distorting impact between the periods of the operating
income statement results related to acquisitions and disposals that
affect period-on-period comparisons. It is computed by including the
operating income statement results of each business in any period for
which there are no results in the comparative period. We consider the
monthly impacts of distorting income statement results when
calculating the impact of strategic transactions.
For a reconciliation of ‘constant currency revenue excluding notable items
and the impact of strategic transactions’ and ‘constant currency profit
before tax excluding notable items and the impact of strategic transactions’
to reported revenue and reported profit respectively, see page 122.
Foreign currency translation
differences
Foreign currency translation differences reflect the movements of the
US dollar against most major currencies during 2024.
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 to better understand the underlying trends in the business.
Foreign currency translation differences for 2024 are computed by
retranslating into US dollars for non-US dollar branches, subsidiaries,
joint ventures and associates:
–
the income statements for 2023 and 2022 at the average rates of
exchange for 2024; and
–
the balance sheets at 31 December 2023 and 31 December 2022 at
the prevailing rates of exchange on 31 December 2024.
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. The constant currency data of our operations
in Argentina and Türkiye has not been adjusted further for the impacts
of hyperinflation.
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.
Insurance metrics no longer reported
Insurance manufacturing value of new business and Insurance
manufacturing proxy embedded value were previously presented as
non-GAAP performance measures. The Group continues to review its
use of non-GAAP performance measures following implementation of
IFRS 17 and has now discontinued the reporting of these measures.
Instead ‘New business CSM’ is now management’s key new-
business performance measure, and ‘Equity plus CSM net of tax’ is
considered a measure of entity value more closely aligned with
IFRS 17.
HSBC Holdings plc Annual Report and Accounts 2024
87
Financial review
Impact of hyperinflationary
accounting
During 2024, we continued to treat Argentina and Türkiye as
hyperinflationary economies for accounting purposes. The impact of
applying IAS 29 ‘Financial Reporting in Hyperinflationary Economies’
and the hyperinflation provisions of IAS 21 ’The Effects of Changes in
Foreign Exchange Rates’ for our operations in both Argentina and
Türkiye was a decrease in the Group’s profit before tax of $917m
(2023: $1,297m), comprising a decrease in revenue, including loss on
net monetary position, of $840m (2023: $1,586m) and an increase in
ECL and operating expenses of $77m (2023: decrease of $289m).
These numbers reflect an increase in the consumer price index (‘CPI’)
of 3,915.03 (2023: 2,429.13 increase) for Argentina and 825.55 (2023:
730.89 increase) for Türkiye. We have now completed the sale of our
business in Argentina, so there will be no impact in 2025 of hyperinflation
in this market, although comparative data will include the impact of
hyperinflation.
Critical estimates and judgements
The results of HSBC reflect the choice of accounting policies,
assumptions and estimates that underlie the preparation of HSBC’s
consolidated financial statements. The material accounting policies,
including the policies which include critical 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, selecting and calibrating
the probability of default (‘PD’), the loss given default (‘LGD’) and the
exposure at default (‘EAD’) models, as well as selecting model inputs
and economic forecasts, making assumptions and estimates to
incorporate relevant information about late-breaking and past events,
current conditions and forecasts of economic conditions, and selecting
applicable recovery strategies for certain wholesale credit-impaired
loans. 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 359.
–
Deferred tax assets: The most significant judgements relate to those
made in respect of recoverability, which are based on expected
future profitability. See Note 1.2(l) on page 364.
–
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 357.
–
Impairment of investment in subsidiaries: Impairment testing,
including testing for reversal of impairment, 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. See Note 1.2(a) on page 354.
–
Impairment of interests in associates: Impairment testing,
including testing for reversal of impairment, 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 354.
–
Impairment of goodwill and non-financial assets: 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 354 and Note 1.2(n) on
page 365.
–
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 364.
–
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 363.
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.
Financial summary
88
HSBC Holdings plc Annual Report and Accounts 2024
Consolidated income statement
Summary consolidated income statement
2024
2023
20221
2021
2020
$m
$m
$m
$m
$m
Net interest income
32,733
35,796
30,377
26,489
27,578
Net fee income
12,301
11,845
11,770
13,097
11,874
Net income from financial instruments held for trading or managed on a fair value basis2
21,116
16,661
10,278
7,744
9,582
Net income/(expense) from assets and liabilities of insurance businesses, including related
derivatives, measured at fair value through profit or loss
5,901
7,887
(13,831)
4,053
2,081
Net insurance premium income
—
—
—
10,870
10,093
Insurance finance (expense)/income
(5,978)
(7,809)
13,799
—
—
Insurance service result
1,310
1,078
809
—
—
Gain on acquisition3
—
1,591
—
—
—
Gains/(losses) recognised on sale of business operations4
(1,752)
(61)
(2,678)
—
—
Other operating income/(expense)5
223
(930)
96
1,687
1,866
Total operating income
65,854
66,058
50,620
63,940
63,074
Net insurance claims and benefits paid and movement in liabilities to policyholders
—
—
—
(14,388)
(12,645)
Net operating income before change in expected credit losses and other
credit impairment charges6
65,854
66,058
50,620
49,552
50,429
Change in expected credit losses and other credit impairment charges
(3,414)
(3,447)
(3,584)
928
(8,817)
Net operating income
62,440
62,611
47,036
50,480
41,612
Total operating expenses excluding impairment of goodwill and other intangible assets
(32,966)
(32,355)
(32,554)
(33,887)
(33,044)
(Impairment)/reversal of impairment of goodwill and other intangible assets
(77)
285
(147)
(733)
(1,388)
Operating profit
29,397
30,541
14,335
15,860
7,180
Share of profit in associates and joint ventures
2,912
2,807
2,723
3,046
1,597
Impairment of interest in associate
—
(3,000)
—
—
—
Profit before tax
32,309
30,348
17,058
18,906
8,777
Tax expense
(7,310)
(5,789)
(809)
(4,213)
(2,678)
Profit for the year
24,999
24,559
16,249
14,693
6,099
Attributable to:
– ordinary shareholders of the parent company
22,917
22,432
14,346
12,607
3,898
– preference shareholders of the parent company
—
—
—
7
90
– other equity holders
1,062
1,101
1,213
1,303
1,241
– non-controlling interests
1,020
1,026
690
776
870
Profit for the year
24,999
24,559
16,249
14,693
6,099
Five-year financial information
2024
2023
20221
2021
2020
$
$
$
$
$
Basic earnings per share
1.25
1.15
0.72
0.62
0.19
Diluted earnings per share
1.24
1.14
0.72
0.62
0.19
Dividends per ordinary share (paid in the period)7
0.82
0.53
0.27
0.22
—
%
%
%
%
%
Dividend payout ratio8
50
50
44
40
79
Post-tax return on average total assets
0.8
0.8
0.5
0.5
0.2
Return on average ordinary shareholders’ equity
13.6
13.6
9.0
7.1
2.3
Return on average tangible equity
14.6
14.6
10.0
8.3
3.1
Effective tax rate
22.6
19.1
4.7
22.3
30.5
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year ended
31 December 2022 have been restated accordingly. Comparative data for the years ended 31 December 2021 and 2020 are prepared on an IFRS 4 basis.
2 Includes a $255m gain (2023: $315m loss) on the foreign exchange hedging of the proceeds from the sale of our banking business in Canada and a $114m mark-
to-market gain (2023:nil) on interest rate hedging of the portfolio of retained loans post sale of our retail banking business in France.
3 Gain recognised in respect of the acquisition of SVB UK.
4 This line item has been updated to include amounts from Other operating income relating to all sales of business operations; in the 2023 Annual Report and Accounts,
this line item only reflected the disposal of our France retail banking business. The amount in 2024 includes a $1.0bn loss on disposal and a $5.2bn loss on the recycling
in foreign currency translation reserve losses and other reserves arising on sale of our business in Argentina. This was partly offset by a gain of $4.6bn, inclusive of the
recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn of other reserves losses but excluding the $255m gain on the foreign exchange hedging
(see footnote 2 above) on the sale of our banking business in Canada. The amount in 2023 primarily reflected losses due to restrictions impacting the recoverability of
assets in Russia, partly offset by a gain on sale of our retail banking operations in France. The amount in 2022 included losses from classifying businesses as held for
sale as part of a broader restructuring of our European business.
5 Other operating (expense)/income includes a loss on net monetary positions of $1,187m (2023: $1,667m; 2022: $678m) as a result of applying IAS 29 ‘Financial
Reporting in Hyperinflationary Economies’.
6 Net operating income before change in expected credit losses and other credit impairment charges also referred to as revenue.
7 Includes dividend paid during the period, which consisted of a fourth interim dividend of $0.31 per ordinary share in respect of the financial year ended
31 December 2023 paid in April 2024 and the first, second and third interim dividends of $0.30 per ordinary share in respect of the financial year ending
31 December 2024. In addition, a special dividend of $0.21 per ordinary share from the Canada sale proceeds was paid in June 2024 along with the first interim
dividend.
8 In 2024 and 2023, our dividend payout ratio was adjusted for material notable items and related impacts. In 2022, our dividend payout ratio was adjusted for the
loss on classification to held for sale of our retail banking business in France, items relating to the sale of our banking business in Canada, and the recognition of
certain deferred tax assets. No items were adjusted for in 2021 and 2020.
Unless stated otherwise, all tables are presented on a reported basis.
For a summary of our financial performance in 2024, see page 27.
For further financial performance data for each global business and legal entity, see pages 98 to 102 and 110 to 120 respectively. The global business segmental
results are presented on a constant currency basis in accordance with IFRS 8 ‘Operating Segments’ as set out in Note 10: Segmental analysis on page 383.
HSBC Holdings plc Annual Report and Accounts 2024
89
Financial review
Income statement commentary
The following commentary compares Group financial performance for the year ended 2024 with 2023, unless otherwise stated.
Net interest income
Year ended
Quarter ended
31 Dec 2024
31 Dec 2023
31 Dec 2022
31 Dec 2024
30 Sep 2024
31 Dec 2023
$m
$m
$m
$m
$m
$m
Interest income
108,631
100,868
52,826
26,004
27,255
26,714
Interest expense
(75,898)
(65,072)
(22,449)
(17,819)
(19,618)
(18,430)
Net interest income
32,733
35,796
30,377
8,185
7,637
8,284
Average interest-earning assets
2,099,285
2,161,746
2,143,758
2,113,276
2,088,100
2,164,324
%
%
%
%
%
%
Gross interest yield1
5.17
4.67
2.46
4.90
5.19
4.90
Less: gross interest payable1
(3.95)
(3.47)
(1.24)
(3.60)
(4.07)
(3.83)
Net interest spread2
1.22
1.20
1.22
1.30
1.12
1.07
Net interest margin3
1.56
1.66
1.42
1.54
1.46
1.52
1 Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Gross interest payable is the average annualised
interest cost as a percentage of average interest-bearing liabilities.
2 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.
3 Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Summary of interest income by type of asset
2024
2023
2022
Average
balance
Interest
income
Yield
Average
balance
Interest
income
Yield
Average
balance
Interest
income
Yield
$m
$m
%
$m
$m
%
$m
$m
%
Short-term funds and loans and advances to banks
349,517
14,727
4.21
403,674 14,770
3.66
445,659
5,577
1.25
Loans and advances to customers
949,825
49,879
5.25
957,717 47,673
4.98
1,022,320
32,543
3.18
Reverse repurchase agreements – non-trading1
238,694
17,721
7.42
240,263 14,391
5.99
231,058
4,886
2.11
Financial investments
470,182
20,587
4.38
407,363 16,858
4.14
372,702
7,704
2.07
Other interest-earning assets
91,067
5,717
6.28
152,729
7,176
4.70
72,019
2,116
2.94
Total interest-earning assets
2,099,285 108,631
5.17
2,161,746 100,868
4.67
2,143,758
52,826
2.46
Summary of interest expense by type of liability
2024
2023
2022
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
Average
balance
Interest
expense
Cost
$m
$m
%
$m
$m
%
$m
$m
%
Deposits by banks2
66,405
2,930
4.41
60,392
2,401
3.98
75,739
770
1.02
Customer accounts3
1,385,840
40,173
2.90
1,334,803 34,162
2.56
1,342,342
10,903
0.81
Repurchase agreements – non-trading1
187,337
15,617
8.34
146,605 10,858
7.41
118,308
3,085
2.61
Debt securities in issue – non-trading
196,440
12,806
6.52
184,867 11,223
6.07
179,775
5,607
3.12
Other interest-bearing liabilities
84,773
4,372
5.16
146,216
6,428
4.40
87,965
2,084
2.37
Total interest-bearing liabilities
1,920,795
75,898
3.95
1,872,883 65,072
3.47
1,804,129
22,449
1.24
1 The average balances for repurchase and reverse repurchase agreements include net amounts where the criteria for offsetting are met, resulting in a lower net
balance reported for repurchase agreements and thus higher cost.
2 Including interest-bearing bank deposits only.
3 Including interest-bearing customer accounts only.
Net interest income (‘NII’) for 2024 was $32.7bn, a decrease of
$3.1bn or 9% compared with 2023. The decrease included a $2.7bn
reduction mainly due to the redeployment of our commercial surplus
to net trading and fair value assets, for which the associated revenue
is reported in ‘net income on financial instruments held for trading or
managed on a fair value basis‘. The fall also reflected a $1.0bn loss
due to the disposal of our business in Canada and a $0.2bn loss in
2024 related to the early redemption of legacy securities. NII in HSBC
UK grew by $0.6bn, including the benefit of our structural hedge and
balance sheet growth, partly offset by mortgage pricing pressures.
There was also higher NII in Markets Treasury due to reinvestments
in our portfolio at higher yields. Excluding the unfavourable impact of
foreign currency translation differences, net interest income
decreased by $1.4bn or 4%. NII for the fourth quarter of 2024 was
$8.2bn, up 7% compared with the previous quarter, and down 1%
compared with the fourth quarter of 2023. The increase compared
with 3Q24 was predominantly driven by the non-recurrence of the
adverse impact in 3Q24 from the early redemption of legacy
securities. The decline in NII compared with 4Q23 was predominantly
driven by the impact of lower AIEA.
Net interest margin (‘NIM’) for 2024 of 1.56% was 10bps lower
compared with 2023, reflecting redeployment of our commercial
surplus to net trading and fair value assets, and higher interest
expense due to higher market rates and an adverse impact of $0.2bn
from the early redemption of legacy securities. The decrease in NIM
in 2024 included the unfavourable impact of foreign currency
translation differences. Excluding this, NIM decreased by 6bps. NIM
for the fourth quarter of 2024 was 1.54%, up 8bps compared with the
previous quarter, and up 2bps compared with the fourth quarter of
2023. The increase against the previous quarter was primarily due to
the non-recurrence of the adverse impact from the early redemption
of legacy securities. The year-on-year increase was predominantly
driven by HSBC UK.
Interest income for 2024 of $108.6bn increased by $7.8bn compared
with 2023, primarily due to an increase in market interest rates.
Interest income of $26bn in the fourth quarter of 2024 was down
$1.3bn compared with the previous quarter, and down $0.7bn
compared with the fourth quarter of 2023. Both the declines were
primarily due to lower market interest rates.
Financial summary
90
HSBC Holdings plc Annual Report and Accounts 2024
The change in interest income in 2024 compared with 2023 included
an adverse impact of foreign currency translation differences of
$2.7bn. After excluding foreign currency translation differences,
interest income increased by $10.5bn.
Interest expense for 2024 of $75.9bn increased by $10.8bn
compared with 2023, primarily due to an increase in market interest
rates, growth in customer accounts with higher proportion for term
deposits and the impact of the early redemption of legacy securities.
The rise in interest expense included the favourable effects of foreign
currency translation differences of $1.1bn. Excluding this, interest
expense increased by $11.9bn.
Interest expense of $17.8bn in the fourth quarter of 2024 was $1.8bn
and $0.6bn lower compared with the third quarter of 2024 and the
fourth quarter of 2023 respectively. The decrease against the previous
quarter was due to the non-recurrence of an adverse impact from the
early redemption of legacy securities. The year-on-year decline was
primarily due to lower market interest rates.
Banking net interest income
Year ended
Quarter ended
31 Dec 2024 31 Dec 2023 31 Dec 2024 30 Sep 2024 31 Dec 2023
$m
$m
$m
$m
$m
Net interest income
32,733
35,796
8,185
7,637
8,284
Banking book funding costs used to generate ‘net income from financial instruments
held for trading or managed on a fair value basis’
11,434
8,744
2,874
3,051
2,542
Third-party net interest income from insurance
(429)
(445)
(109)
(104)
(109)
Banking net interest income
43,738
44,095
10,950
10,584
10,717
– of which:
The Hongkong and Shanghai Banking Corporation Limited
21,691
22,024
5,464
5,475
5,566
HSBC UK Bank plc
10,368
9,684
2,663
2,643
2,455
HSBC Bank plc
4,630
4,596
1,182
1,152
1,205
Banking net interest income is an alternative performance measure,
and is defined as Group reported net interest income after deducting:
–
the internal cost to fund trading and fair value net assets for which
associated revenue is reported in ‘Net income from financial
instruments held for trading or managed on a fair value basis’, also
referred to as ‘trading and fair value income’. These funding costs
reflect proxy overnight or term interest rates as applied by internal
funds transfer pricing;
–
the funding costs of foreign exchange swaps in Markets Treasury,
where an offsetting income or loss is recorded in trading and fair
value income. These instruments are used to manage foreign
currency deployment and funding in our entities; and
–
third-party net interest income in our insurance business.
In our segmental disclosures, the funding costs of trading and fair
value net assets are predominantly recorded in GBM in ‘net income
from financial instruments held for trading or managed on a fair value
basis’. On consolidation, this funding is eliminated in Corporate
Centre, resulting in an increase in the funding costs reported in NII
with an equivalent offsetting increase in ‘net income from financial
instruments held for trading or managed on a fair value basis’ in this
segment. In the consolidated Group results, the cost to fund these
trading and fair value net assets is reported in NII.
Banking NII was $43.7bn in 2024. The funding costs associated with
generating trading and fair value income were $11.4bn, an increase of
$2.7bn compared with 2023, primarily reflecting redeployment of our
commercial surplus to net trading and fair value assets. Banking NII
also deducts third-party NII related to our insurance business, which
was $0.4bn, stable compared with 2023. The movement in banking
NII also included a reduction from the disposal of our business in
Canada of $1.0bn, a $0.2bn loss in 2024 related to the early
redemption of legacy securities and from higher interest expense on
deposits in part due to balance growth. Banking NII in HSBC UK grew
by $0.7bn, including the benefit of our structural hedge and balance
sheet growth, partly offset by mortgage pricing pressures. There was
higher NII in Markets Treasury due to reinvestments in our portfolio at
higher yields.
The internally allocated funding to generate trading and fair value
income was approximately $200bn at 31 December 2024, a rise of
approximately $37bn since 31 December 2023, although it decreased
by approximately $9bn during 4Q24. This relates to trading, fair value
and associated net asset balances predominantly in GBM. The
increase reflected management decisions on the deployment of our
commercial surplus.
Net fee income of $12.3bn was $0.5bn or 4% higher than in 2023,
and included an adverse impact from foreign currency translation
differences of $0.2bn, as well as a reduction of $0.4bn due to the
impact of the disposal of our banking business in Canada. On a
constant currency basis, net fee income was $0.6bn higher, driven by
an increase in WPB, while a smaller rise in GBM was offset by a
reduction in CMB.
In WPB, net fee income increased by $0.6bn. The rise was mainly
due to higher income from unit trusts, broking income and funds
under management, including in Hong Kong. This reflected stronger
equity markets and improved customer sentiment. Cards income
grew, including in our main entity in Mexico, as customer spending
increased, as well as in our legal entities in Asia, which mitigated the
reduction from the disposal of our banking business in Canada. The
growth in cards activity resulted in a corresponding rise in fee
expense.
In GBM, net fee income was stable, including an adverse impact of
foreign currency translation of $42m. There was higher broking and
underwriting income in our main entity in Europe, although this was
partly offset by a rise in associated fee expense. In addition, there
was higher fee expense relating to broking and custody, as well as
intercompany fee expenses incurred on behalf of other global
businesses.
In CMB, net fee income decreased by $0.1bn driven by lower fees
from credit facilities, notably due to the disposal of our banking
operations in Canada. This reduction was partly offset by an increase
in fee income from GBM products sold to CMB customers.
Net income from financial instruments held for trading or
managed on a fair value basis of $21.1bn was $4.5bn higher
compared with 2023. This included favourable fair value movements
of $0.6bn on the foreign exchange hedging of the proceeds of the
sale of our banking business in Canada until completion of the sale.
The increase also reflected higher client activity and elevated volatility
in Markets and Securities Services in GBM. A component of funding
costs incurred to generate this income are reported in NII, and these
increased by $2.7bn, compared with 2023.
In WPB, income rose by $0.2bn due to a favourable movement
related to derivatives in our insurance business and from higher
customer trading activity in Wealth, including in our main legal entity
in Asia.
HSBC Holdings plc Annual Report and Accounts 2024
91
Financial review
Net income from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through
profit or loss of $5.9bn fell by $2.0bn compared with 2023. This
decrease reflected adverse fair value movements on debt securities,
due to movements in interest rates, including in our portfolios in Hong
Kong and France, partly offset by improved equity returns.
This unfavourable movement resulted in a corresponding reduction in
insurance finance expense, which has an offsetting impact for the
related liabilities to policyholders.
Insurance finance expense of $6.0bn was $1.8bn lower than in
2023, reflecting the impact of investment returns on underlying
assets on the value of liabilities to policyholders, which moves
inversely with ‘net income from assets and liabilities of insurance
businesses, including related derivatives, measured at fair value
through profit or loss’.
Insurance service result of $1.3bn increased by $0.2bn compared
with 2023, primarily due to an increase in the release of the
contractual service margin (‘CSM’).
Gain on acquisition fell by $1.6bn, reflecting the non-recurrence of a
gain recognised in respect of the acquisition of SVB UK in 1Q23.
Losses recognised on sale of business operations were $1.8bn in
2024. This compared with a gain of $61m in 2023. In 2024, there
were losses from completion of the disposal of our business in
Argentina, comprising the recycling of $5.2bn of foreign currency
translation reserve losses and other reserves to the income
statement and a $1.0bn loss on disposal. This was partly offset by a
gain of $4.6bn on the sale of our banking business in Canada,
inclusive of recycling of foreign currency translation reserve and other
reserve losses to the income statement.
Other operating income of $0.2bn was $1.3bn higher than in 2023.
The increase primarily related to the non-recurrence of losses in 2023
of $1.0bn relating to Treasury repositioning and risk management.
The increase also included the non-recurrence of a loss of $0.3bn in
2023 relating to corrections to historical valuation estimates in our life
insurance business, and losses related to the disposal of our New
Zealand retail mortgage loan portfolio and the merger of HSBC Bank
Oman in 2023 with Sohar International.
Change in expected credit losses and other credit impairment
charges (‘ECL’) were a charge of $3.4bn, stable compared with 2023.
ECL charges in CMB were $1.8bn in 2024 and in GBM charges were
$0.2bn. This included charges of $0.4bn in respect of commercial real
estate in mainland China and of $0.1bn in the Hong Kong real estate
sector. This compared with charges of $1.0bn and $0.1bn
respectively in these sectors in 2023. In addition, ECL in CMB in 2024
included a charge related to a single exposure in the UK, while
charges in HSBC UK reduced compared with 2023. In GBM, charges
in 2024 also benefited from a release of stage 3 allowances in HSBC
Bank plc related to a single exposure.
In WPB, ECL charges were $1.3bn. These primarily related to our
legal entity in Mexico, reflecting growth in our unsecured lending
portfolio and unemployment trends, and also in Hong Kong.
For further details on the calculation of ECL, including the
measurement uncertainties and significant judgements applied to
such calculations, the impact of the economic scenarios and
management judgemental adjustments, see pages 147 to 160.
Operating expenses
Year ended
2024
2023
2022
$m
$m
$m
Gross employee compensation and benefits
20,153
19,623
19,288
Capitalised wages and salaries
(1,688)
(1,403)
(1,285)
Property and equipment
4,786
4,285
4,949
Amortisation and impairment of intangibles
2,235
1,827
1,701
UK bank levy
249
339
13
Legal proceedings and regulatory matters
145
188
246
Other operating expenses1
7,163
7,211
7,789
Reported operating expenses
33,043
32,070
32,701
Currency translation
(576)
(472)
Constant currency operating expenses
33,043
31,494
32,229
1 Other operating expenses includes professional fees, contractor costs, transaction taxes, marketing and travel.
Staff numbers (full-time equivalents)1
2024
2023
2022
Global businesses
Wealth and Personal Banking
119,791
128,399
128,764
Commercial Banking
45,190
45,884
43,640
Global Banking and Markets
45,983
46,241
46,435
Corporate Centre
340
337
360
At 31 Dec
211,304
220,861
219,199
1 Represents the number of full-time equivalent people with contracts of service with the Group who are being paid at the reporting date.
Financial summary
92
HSBC Holdings plc Annual Report and Accounts 2024
Operating expenses of $33.0bn were $1.0bn or 3% higher than in
2023, including a favourable impact of $0.6bn from foreign currency
translation differences. The increase reflected higher spend and
investment in technology and inflationary impacts, while performance-
related pay remained stable. Operating expenses were adversely
impacted by the non-recurrence of a $0.2bn reversal of historical
asset impairments in 2023.
These increases were partly offset by the favourable impacts from
the completion of business disposals in Canada and France, and a
lower UK bank levy of $0.1bn, as 2023 included adjustments relating
to prior years. Operating expenses in 2024 benefited from the non-
recurrence of a $0.2bn charge in 2023 incurred in the US relating to
the FDIC special assessment.
Target basis operating expense growth was 5% compared with 2023,
in line with our cost growth target. This primarily reflected higher
investment spend, including in technology and from inflationary
pressures, while our performance-related pay accrual was broadly in
line with 2023. Our target basis operating expenses are measured on
a constant currency basis, excluding notable items, the impact of
retranslating the prior year results of hyperinflationary economies at
constant currency, and the direct costs from the sales of our French
retail banking operations and our banking business in Canada.
For a reconciliation of target basis operating expense to reported operating
expenses see page 124.
The number of employees expressed in full-time equivalent staff
(‘FTE’) at 31 December 2024 was 211,304, a decrease of 9,557
compared with 31 December 2023, primarily reflecting the
completion of the sales of our banking business in Canada, our retail
banking operations in France and our business in Argentina. The
number of contractors at 31 December 2024 was 4,226, a decrease
of 450.
Share of profit in associates and joint ventures of $2.9bn was
$3.1bn higher than in 2023, including an increase in the share of profit
from SAB.
Impairment of interest in associate. In relation to our investment in
BoCom, at 31 December 2024 we concluded that there was no
indication of further significant impairment (or indication that an
impairment may no longer exist or may have decreased significantly)
since 31 December 2023.
At 31 December 2023, the Group performed an impairment test on
the carrying value of our investment in BoCom which resulted in an
impairment of $3.0bn.
For further details of our impairment review process, see Note 18: Interests
in associates and joint ventures on page 401.
Tax expense
2024
2023
$m
$m
Tax (charge)/credit
Reported
(7,310)
(5,789)
Currency translation
—
222
Constant currency tax (charge)/credit
(7,310)
(5,567)
Notable items
2024
2023
$m
$m
Tax
Tax (charge)/credit on notable items
108
207
Uncertain tax positions
—
427
Tax expense
The effective tax rate for 2024 of 22.6% was higher than the 19.1%
in 2023. The effective tax rate for 2024 was increased by 4.8
percentage points by the non-deductible loss on disposal of our
business in Argentina and by 0.7 percentage points by the tax charge
arising under the Global Minimum Tax rules, and reduced by 3.6
percentage points by the non-taxable gain on disposal of our banking
business in Canada. The effective tax rate for 2023 was increased by
2.3 percentage points by the non-deductible impairment of
investments in associates, and reduced by 1.6 percentage points by
the release of provisions for uncertain tax positions and by 1.5
percentage points by the non-taxable accounting gain arising on the
acquisition of SVB UK.
Return on average tangible equity
In 2024, RoTE was 14.6%, compared with 14.6% in 2023. RoTE
excluding notables was 16.0% in 2024, compared with 16.2% in
2023.
HSBC Holdings plc Annual Report and Accounts 2024
93
Financial review
Consolidated balance sheet
Five-year summary consolidated balance sheet
2024
2023
20221
2021
2020
$m
$m
$m
$m
$m
Assets
Cash and balances at central banks
267,674
285,868
327,002
403,018
304,481
Trading assets
314,842
289,159
218,093
248,842
231,990
Financial assets designated and otherwise mandatorily measured at fair value
through profit or loss
115,769
110,643
100,101
49,804
45,553
Derivatives
268,637
229,714
284,159
196,882
307,726
Loans and advances to banks
102,039
112,902
104,475
83,136
81,616
Loans and advances to customers
930,658
938,535
923,561
1,045,814
1,037,987
Reverse repurchase agreements – non-trading
252,549
252,217
253,754
241,648
230,628
Financial investments
493,166
442,763
364,726
446,274
490,693
Assets held for sale
27,234
114,134
115,919
3,411
299
Other assets
244,480
262,742
257,496
239,110
253,191
Total assets at 31 Dec
3,017,048
3,038,677
2,949,286
2,957,939
2,984,164
Liabilities
Deposits by banks
73,997
73,163
66,722
101,152
82,080
Customer accounts
1,654,955
1,611,647
1,570,303
1,710,574
1,642,780
Repurchase agreements – non-trading
180,880
172,100
127,747
126,670
111,901
Trading liabilities
65,982
73,150
72,353
84,904
75,266
Financial liabilities designated at fair value
138,727
141,426
127,321
145,502
157,439
Derivatives
264,448
234,772
285,762
191,064
303,001
Debt securities in issue
105,785
93,917
78,149
78,557
95,492
Insurance contract liabilities
107,629
120,851
108,816
112,745
107,191
Liabilities of disposal groups held for sale
29,011
108,406
114,597
9,005
—
Other liabilities
203,361
216,635
212,319
190,989
204,019
Total liabilities at 31 Dec
2,824,775
2,846,067
2,764,089
2,751,162
2,779,169
Equity
Total shareholders’ equity
184,973
185,329
177,833
198,250
196,443
Non-controlling interests
7,300
7,281
7,364
8,527
8,552
Total equity at 31 Dec
192,273
192,610
185,197
206,777
204,995
Total liabilities and equity at 31 Dec
3,017,048
3,038,677
2,949,286
2,957,939
2,984,164
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year ended
31 December 2022 have been restated accordingly. Comparative data for the years ended 31 December 2021 and 2020 are prepared on an IFRS 4 basis.
A more detailed consolidated balance sheet is contained in the financial statements on page 343.
Five-year selected financial information
2024
2023
20221
2021
2020
$m
$m
$m
$m
$m
Called up share capital
8,973
9,631
10,147
10,316
10,347
Capital resources2
172,386
171,204
162,423
177,786
184,423
Undated subordinated loan capital
17
18
1,967
1,968
1,970
Preferred securities and dated subordinated loan capital3
35,258
36,413
29,921
28,568
30,721
Risk-weighted assets
838,254
854,114
839,720
838,263
857,520
Total shareholders’ equity
184,973
185,329
177,833
198,250
196,443
Less: preference shares and other equity instruments
(19,070)
(17,719)
(19,746)
(22,414)
(22,414)
Total ordinary shareholders’ equity
165,903
167,610
158,087
175,836
174,029
Less: goodwill and intangible assets (net of tax)
(11,608)
(11,900)
(11,160)
(17,643)
(17,606)
Tangible ordinary shareholders’ equity
154,295
155,710
146,927
158,193
156,423
Financial statistics
Loans and advances to customers as a percentage of customer accounts
56.2%
58.2%
58.8%
61.1%
63.2%
Average total shareholders’ equity to average total assets
6.12%
6.01%
5.97%
6.62%
6.46%
Net asset value per ordinary share at year-end ($)4
9.26
8.82
8.01
8.76
8.62
Tangible net asset value per ordinary share at year-end ($)4
8.61
8.19
7.44
7.88
7.75
Tangible net asset value per fully diluted share at year-end ($)
8.54
8.14
7.39
7.84
7.72
Number of $0.50 ordinary shares in issue (millions)
17,947
19,263
20,294
20,632
20,694
Basic number of $0.50 ordinary shares outstanding, after deducting own shares
held (millions)
17,918
19,006
19,739
20,073
20,184
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary
shares, after deducting own shares held (millions)
18,062
19,135
19,876
20,189
20,272
Closing foreign exchange translation rates to $:
$1: £
0.797
0.784
0.830
0.739
0.732
$1: €
0.964
0.903
0.937
0.880
0.816
1 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the financial year ended
31 December 2022 have been restated accordingly. Comparative data for the years ended 31 December 2021 and 2020 are prepared on an IFRS 4 basis.
2 Capital resources are regulatory total capital, the calculation of which is set out on page 204.
3 Including perpetual preferred securities, details of which can be found in Note 29: Subordinated liabilities on page 416.
4 For the definition, see page 121.
Financial summary
94
HSBC Holdings plc Annual Report and Accounts 2024
Combined view of customer lending and customer deposits1
2024
2023
$m
$m
Loans and advances to customers
930,658
938,535
Loans and advances to customers of disposal groups reported in ‘Assets held for sale’
965
73,285
– banking business in Canada
—
56,129
– retail banking operations in France
—
16,902
– private banking business in Germany
309
—
– business in South Africa
656
—
– other
—
254
Non-current assets held for sale
12
92
Combined customer lending
931,635
1,011,912
Currency translation
—
(27,137)
Combined customer lending at constant currency
931,635
984,775
Customer accounts
1,654,955
1,611,647
Customer accounts reported in ‘Liabilities of disposal groups held for sale’
5,399
85,950
– banking business in Canada
—
63,001
– retail banking operations in France
—
22,307
– private banking business in Germany
2,085
—
– business in South Africa
3,294
—
– other
20
642
Combined customer deposits
1,660,354
1,697,597
Currency translation
—
(38,656)
Combined customer deposits at constant currency
1,660,354
1,658,941
1 On 9 April 2024, HSBC Latin America B.V. entered into a binding agreement to sell its business in Argentina to Grupo Financiero Galicia (‘Galicia‘). The sale was
completed on 6 December 2024, so is not included in the table above.
Balance sheet commentary compared with 31 December 2023
At 31 December 2024, total assets of $3.0tn were $22bn or 1% lower
on a reported basis and increased by $45bn or 1% on a constant
currency basis.
Reported loans and advances to customers as a percentage of
customer accounts was 56.2% compared with 58.2% at
31 December 2023. The movement in this ratio reflected a higher
growth in customer accounts than in lending.
Assets
Cash and balances at central banks decreased by $18bn or 6%,
which included an $11bn adverse impact of foreign currency
translation differences. The decrease was mainly in HSBC UK,
reflecting a reduction in repurchase agreements, as well as an
increase in the deployment of our cash surplus into financial
investments. Cash also decreased in our legal entities in the US to a
partial redeployment of surplus liquidity to reverse repurchase
agreements, and in Hong Kong due to lower balances maintained for
faster payment system flow. This was partly offset by increases in
HSBC Bank plc from an increase in deposit bank balances and
issuances of new commercial paper and certificates of deposit.
Trading assets increased by $26bn or 9%, mainly as we captured
increased client activity in equity and debt securities, particularly in
our legal entity in Hong Kong and in HSBC Bank plc. The increase in
trading assets also reflected the use of surplus liquidity to fund
trading activities given the subdued demand for customer lending.
Derivative assets increased by $39bn or 17%, reflecting an increase
in foreign exchange contracts, mainly in HSBC Bank plc and our legal
entities in Asia, as a result of foreign exchange rate movements. The
increase in derivative assets was consistent with the increase in
derivative liabilities, as the underlying risk is broadly matched.
Loans and advances to customers of $931bn decreased by $8bn or
1% on a reported basis. This included an adverse impact of foreign
currency translation differences of $21bn. Loans and advances to
customers are net of allowances for ECL.
On a constant currency basis, loans and advances to customers
increased by $14bn, reflecting the following movements.
In WPB, customer lending increased by $2bn, reflecting growth in
mortgage balances, including in our main legal entities in the UK (up
$5bn) and the US (up $3bn). There was also growth in lending in
Private Banking (up $3bn) and in unsecured lending (up $1bn).
These increases were partly offset by a $7.4bn (€7.1bn) transfer to
Corporate Centre of a portfolio of home and certain other loans
retained following the sale of our retail banking operations in France.
In CMB, customer lending was $6bn higher, reflecting increases in
our legal entities in mainland China (up $2bn), India (up $2bn), and
Mexico (up $1bn). There were also increases in HSBC UK (up $2bn)
and HSBC Bank plc (up $1bn) from higher revolving credit facility
balances and term lending. These increases were partly offset by a
reduction in lending balances in our main legal entity in Hong Kong
(down $3bn) due to lower market wide loan demand and competitive
pricing.
In GBM, customer lending balances were broadly stable. There was a
decrease in lending balances in our main legal entity in Hong Kong
(down $6bn) due to muted client demand. The reduction was broadly
offset by growth in our legal entity in Singapore (up $3bn) reflecting
higher overdraft balances, and in our main legal entity in Australia (up
$2bn) from higher term lending balances.
In Corporate Centre, the increase in customer balances of $7bn
reflected the transfer of balances from WPB, mentioned above.
Financial investments increased by $50bn or 11%, mainly in our
main legal entities in Hong Kong and Singapore as well as in HSBC
UK and HSBC Bank plc from the purchase of debt securities, treasury
and other eligible bills, as we redeployed our commercial surplus to
benefit from higher yield curves and enhance our hedging activities on
net interest income. The increase was across both debt instruments
held at fair value through other comprehensive income and
instruments held at amortised cost.
Assets held for sale decreased by $87bn or 76% following the
completion of the sales of our retail banking operations in France and
our banking operations in Canada in 2024.
Other assets decreased by $18bn or 7% primarily reflecting a
reduction in settlement accounts balances, including in HSBC Bank
plc as well as in our legal entities in the US and Hong Kong.
HSBC Holdings plc Annual Report and Accounts 2024
95
Financial review
Liabilities
Customer accounts of $1.7tn increased by $43bn or 3% on a
reported basis. This included an adverse impact of foreign currency
translation differences of $32bn.
On a constant currency basis, customer accounts increased by $75bn,
reflecting the following movements.
In WPB, customer accounts grew by $31bn, reflecting higher interest-
bearing savings and time deposit balances due to strong deposit
inflow as interest rates remained high. The increase in customer
accounts included growth in our main legal entities in Asia (up $30bn)
and in HSBC UK (up $6bn).
In CMB, customer accounts increased by $25bn, primarily in our legal
entities in Asia (up $12bn), including in Hong Kong (up $8bn) due to an
increase in term deposits and in mainland China (up $3bn) due to an
increase in current and savings accounts. Balances also increased in
HSBC Bank plc (up $9bn) driven by organic growth from existing
customers as well as new to bank customers, and in our main legal
entity in Mexico (up $3bn).
In GBM, customer accounts increased by $20bn, due to higher
balances in our legal entities in Asia (up $9bn) supported by term
deposit campaigns, and in HSBC Bank plc (up $8bn) driven by an
increase in short-term money market account balances. Balances also
rose in our main legal entity in the Middle East (up $3bn), including in
term deposits and current accounts.
Debt securities in issue increased by $12bn or 13%, primarily in
HSBC Bank plc mainly driven by new commercial paper and
certificates of deposit issued to meet liquidity and funding
requirements.
Derivative liabilities increased by $30bn or 13%, which is consistent
with the increase in derivative assets, since the underlying risk is
broadly matched.
Liabilities of disposal groups held for sale decreased by $79bn or
73% following the completion of the sales of our retail banking
operations in France and our banking operations in Canada during
2024.
Other liabilities decreased by $13bn or 6%, including from a $9bn
reduction in settlement account balances in our main legal entity in
the US.
Equity
Total shareholders’ equity, including non-controlling interests, of
$192bn was stable compared with 31 December 2023.
Shareholders’ equity was increased by profits generated of $24bn and
net gains through other comprehensive income (‘OCI’) of $2bn. These
increases were broadly offset by the impact of dividends paid of
$16bn, and the impact of our $11bn share buy-back activities in 2024.
The net gains through OCI of $2bn included a favourable movement
of $6bn due to the recycling of foreign exchange and other reserves
to the income statement, primarily relating to the completion of
disposals in Argentina and Canada, as well as a favourable movement
of $1bn from the effects of hyperinflation. These impacts were partly
offset by $5bn of exchange differences.
Financial investments
As part of our interest rate hedging strategy, we hold a portfolio of
debt instruments, reported within financial investments, which are
classified as hold-to-collect-and-sell. As a result, the change in value of
these instruments is recognised through ‘debt instruments at fair
value through other comprehensive income’ in equity.
At 31 December 2024, we had recognised a pre-tax cumulative
unrealised loss reserve through other comprehensive income of
$3.8bn related to these hold-to-collect-and-sell positions, excluding
investments held in our insurance business. This reflected a $0.1bn
pre-tax gain in 2024, inclusive of movements on related fair value
hedges. In 2023, we recognised a loss of $1.0bn in the income
statement in relation to Treasury repositioning and risk management
actions in this portfolio, compared with minimal disposal losses in
2024. Overall, the Group is positively exposed to rising interest rates
through NII, although there is an adverse impact on our capital base in
the early stages of a rising interest rate environment due to the fair
value of hold-to-collect-and-sell instruments. Over time, these adverse
movements will unwind as the instruments reach maturity, although
not all will necessarily be held to maturity, or as interest rates begin to
fall.
We also hold a portfolio of financial investments measured at
amortised cost, which are classified as hold-to-collect. At
31 December 2024, there was a cumulative unrecognised loss of
$2.9bn. This included an unrealised loss of $2.2bn that related to debt
instruments held to manage our interest rate exposure, representing
a deterioration of $1.2bn during 2024.
Customer accounts by country/territory
2024
2023
$m
$m
Hong Kong
575,141
543,504
UK
524,251
508,181
US
99,278
99,607
Singapore
76,737
73,547
Mainland China
63,169
56,006
France
40,384
42,666
Australia
31,951
32,071
Germany1
23,564
30,641
Mexico
27,525
29,423
UAE
28,008
24,882
India
27,199
24,377
Taiwan
17,067
16,949
Malaysia
17,038
15,983
Egypt
4,137
5,858
Indonesia
5,558
5,599
Türkiye
3,489
3,510
Other1
90,459
98,843
At 31 Dec
1,654,955
1,611,647
1 At 31 December 2024, customer accounts of $5bn met the criteria to be classified as held for sale and are reported within ‘Liabilities of disposal groups held for
sale’ on the balance sheet, of which $3bn and $2bn belongs to the planned sale of our South Africa business and planned sale of our private banking business in
Germany, respectively. Refer to Note 23 on page 411 for further details.
Financial summary
96
HSBC Holdings plc Annual Report and Accounts 2024
Loans and advances, deposits by currency
At
31 Dec 2024
$m
USD
GBP
HKD
EUR
CNY
Others1
Total
Loans and advances to banks
33,727
15,267
5,340
4,137
8,129
35,439
102,039
Loans and advances to customers
171,530
286,797
203,586
68,437
51,966
148,342
930,658
Total loans and advances
205,257
302,064
208,926
72,574
60,095
183,781
1,032,697
Deposits by banks
31,415
18,771
3,973
8,788
4,114
6,936
73,997
Customer accounts
476,210
426,747
316,997
124,452
67,405
243,144
1,654,955
Total deposits
507,625
445,518
320,970
133,240
71,519
250,080
1,728,952
31 Dec 2023
Loans and advances to banks
33,231
15,632
7,106
4,688
8,772
43,473
112,902
Loans and advances to customers
170,274
284,261
213,079
68,655
49,594
152,672
938,535
Total loans and advances
203,505
299,893
220,185
73,343
58,366
196,145
1,051,437
Deposits by banks
28,744
18,231
2,597
6,997
4,517
12,077
73,163
Customer accounts
441,967
423,725
305,520
128,444
63,535
248,456
1,611,647
Total deposits
470,711
441,956
308,117
135,441
68,052
260,533
1,684,810
1 ‘Others’ includes items with no currency information available of $878m for loans to banks (2023: $1,592m), $941m for loans to customers (2023: $1,904m), nil
for deposits by banks (2023: $11m) and $6m for customer accounts (2023: $8m).
Risk-weighted assets
Risk-weighted assets (‘RWAs‘) decreased by $15.8bn during the year,
primarily due to strategic disposals of $47.8bn, a decrease of $22.2bn
from foreign currency translation differences and a $8.9bn reduction
from methodology and policy changes, mainly driven by a $7.5bn fall
due to regulatory changes related to the risk-weighting of residential
mortgages in Hong Kong. These were offset by the increase of
$63.1bn RWAs, reflected in the following movements:
–
a $49.4bn increase in asset size, which was in part attributed to a
$14.6bn rise in operational risk, driven by an increase in average
income. Further increases were due to corporate lending growth,
largely in HSBC UK Bank plc and in SAB, higher sovereign
exposures in Other trading entities and Asia, and retail mortgage
growth in the US and HSBC UK Bank plc; and
–
a $7.4bn increase mainly following a revision to the definition of
default in our probability of default (‘PD‘) models for exposures to
financial institutions and post-model adjustments in Hong Kong,
and a $6.3bn increase from credit risk migrations in Asia, including
in the Hong Kong commercial real estate sector.
In January 2025, the PRA announced the delay of Basel 3.1
implementation to 1 January 2027 pending US developments. The
near-final rules released in September 2024 are now subject to a
three-year transitional provision, ensuring that the date for full
implementation remains 1 January 2030. We expect that the impact
on our CET1 ratio will be a modest benefit.
RWAs by currency
At
31 Dec 2024
$m
USD
GBP
HKD
EUR
CNY
Others
Total
RWAs1
205,645
165,684
136,001
67,440
56,561
206,923
838,254
31 Dec 2023
RWAs1
202,697
155,231
135,701
69,996
57,907
232,582
854,114
1 RWAs include credit risk, market risk and operational risk RWAs.
HSBC Holdings plc Annual Report and Accounts 2024
97
Financial review
Global businesses and legal
entities
Contents
98
Summary
99
Supplementary analysis of constant currency results and notable
items by global business
103
Reconciliation of reported and constant currency risk-weighted assets
104
Supplementary tables for WPB and GBM
110
Analysis of reported results by legal entities
113
Summary information – legal entities and selected countries/territories
118
Analysis by country/territory
Summary
The Group CEO, supported in 2024 by the Group Executive
Committee (‘GEC‘), reviewed operating activity on a number of bases,
including by global business and legal entities. Up to 31 December
2024, our global businesses – Wealth and Personal Banking,
Commercial Banking, and Global Banking and Markets – along with
Corporate Centre were our reportable segments under IFRS 8
‘Operating Segments’ and are presented below and in Note 10:
Segmental analysis on page 383. Following our organisational
announcement in October 2024, effective from 1 January 2025 the
Group’s operating segments will comprise four new businesses –
Hong Kong, UK, Corporate and Institutional Banking, and International
Wealth and Premier Banking – along with Corporate Centre. These
will replace our previously reported operating segments up to
31 December 2024.
For further details of our new operating segments effective from 1 January
2025, see page 103.
Basis of preparation
The Group CEO, supported in 2024 by the rest of the GEC, is
considered the Chief Operating Decision Maker (‘CODM’) for the
purposes of identifying the Group’s reportable segments. Global
business results are assessed by the CODM on the basis of
constant currency performance. We separately disclose ‘notable
items’, which are components of our income statement that
management would consider as outside the normal course of
business and generally non-recurring in nature. Constant currency
performance information for 2023 and 2022 are presented as
described on page 87. As required by IFRS 8, reconciliations of the
total constant currency global business results to the Group’s
reported results are presented on page 384.
Supplementary reconciliations from reported to constant currency
results by global business are presented on pages 99 to 101 for
information purposes.
Global business performance is also assessed using return on
tangible equity (‘RoTE’). A reconciliation of global business RoTE to
the Group’s RoTE is provided on page 123.
Our operations are closely integrated and, accordingly, the
presentation of data includes internal allocations of certain items of
income and expense. These allocations include the costs of certain
support services and global functions to the extent that they can be
meaningfully attributed to global businesses and legal entities. While
such allocations have been made on a systematic and consistent
basis, they necessarily involve a degree of subjectivity. Costs that
are not allocated to global businesses are included in Corporate
Centre.
Where relevant, income and expense amounts presented include
the results of inter-segment funding along with inter-company and
inter-business line transactions. All such transactions are undertaken
on arm’s length terms. The intra-Group elimination items for the
global businesses are presented in Corporate Centre.
HSBC Holdings incurs the liability of the UK bank levy, with the cost
being recharged to its UK operating subsidiaries. The current year
expense will be reflected in the fourth quarter as it is assessed on
our balance sheet position as at 31 December.
The results of main legal entities are presented on a reported and
constant currency basis, including HSBC UK Bank plc, HSBC Bank
plc, The Hongkong and Shanghai Banking Corporation Limited,
HSBC Bank Middle East Limited, HSBC North America Holdings
Inc., HSBC Bank Canada and Grupo Financiero HSBC, S.A. de C.V.
The results of legal entities are presented on a reported basis on
page 110 and a constant currency basis on page 113.
Global businesses
98
HSBC Holdings plc Annual Report and Accounts 2024
Supplementary analysis of constant currency results and notable items by
global business
$m
$m
$m
$m
$m
Revenue3
28,674
21,580
17,529
(1,929)
65,854
ECL
(1,335)
(1,815)
(235)
(29)
(3,414)
Operating expenses
(15,204)
(7,906)
(10,231)
298
(33,043)
Share of profit in associates and joint ventures
47
1
—
2,864
2,912
Profit/(loss) before tax
12,182
11,860
7,063
1,204
32,309
Loans and advances to customers (net)
447,085
306,926
169,516
7,131
930,658
Customer accounts
823,267
490,475
340,898
315
1,654,955
Constant currency results1
2024
Wealth and
Personal
Banking2
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
1 In the current period constant currency results are equal to reported as there is no currency translation.
2 On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking operations in France to CCF, a subsidiary of Promontoria MMB SAS (‘My
Money Group’). With effect from this date, we have prospectively reclassified the portfolio of retained loans, profit participation interest and licence agreement of
the CCF brand from WPB to Corporate Centre.
3 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Notable items
2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Notable items
Revenue
Disposals, acquisitions and related costs1
28
—
(14)
(1,357)
(1,343)
– of which:
Argentina1
—
—
—
(6,138)
(6,138)
Canada2
—
—
—
4,924
4,924
France
55
—
—
5
60
Early redemption of legacy securities
—
—
—
(237)
(237)
Operating expenses
Disposals, acquisitions and related costs
(3)
(2)
(2)
(192)
(199)
– of which:
Argentina
—
(9)
—
(34)
(43)
Canada
(1)
(1)
—
(151)
(153)
France
1
—
—
(6)
(5)
Restructuring and other related costs3
(10)
2
(1)
(25)
(34)
1 Includes $1.0bn loss on disposal and a $5.2bn loss on the recycling in foreign currency translation reserve losses and other reserves arising on sale of our
business in Argentina.
2 Includes $4.8bn gain on disposal of our banking business in Canada, inclusive of a $0.3bn gain on the foreign exchange hedging of the sales proceeds, the
recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn of other reserves losses.
3 Amounts relate to restructuring provisions recognised in 2024 and reversals of restructuring provisions recognised during 2022.
HSBC Holdings plc Annual Report and Accounts 2024
99
Financial review
Reconciliation of reported results to constant currency results – global businesses (continued)
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Revenue1
Reported
27,275
22,867
16,115
(199)
66,058
Currency translation
(427)
(471)
(344)
96
(1,146)
Constant currency
26,848
22,396
15,771
(103)
64,912
ECL
Reported
(1,058)
(2,062)
(326)
(1)
(3,447)
Currency translation
123
56
9
—
188
Constant currency
(935)
(2,006)
(317)
(1)
(3,259)
Operating expenses
Reported
(14,738)
(7,524)
(9,865)
57
(32,070)
Currency translation
386
290
(7)
(93)
576
Constant currency
(14,352)
(7,234)
(9,872)
(36)
(31,494)
Share of profit/(loss) in associates and joint ventures
Reported
65
(1)
—
(257)
(193)
Currency translation
(1)
—
—
(62)
(63)
Constant currency
64
(1)
—
(319)
(256)
Profit/(loss) before tax
Reported
11,544
13,280
5,924
(400)
30,348
Currency translation
81
(125)
(342)
(59)
(445)
Constant currency
11,625
13,155
5,582
(459)
29,903
Loans and advances to customers (net)
Reported
454,878
309,422
173,966
269
938,535
Currency translation
(10,022)
(8,319)
(3,098)
(7)
(21,446)
Constant currency
444,856
301,103
170,868
262
917,089
Customer accounts
Reported
804,863
475,666
330,522
596
1,611,647
Currency translation
(12,153)
(10,571)
(9,296)
(14)
(32,034)
Constant currency
792,710
465,095
321,226
582
1,579,613
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Notable items (continued)
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Notable items
Revenue
Disposals, acquisitions and related costs1,2,3
4
1,591
—
(297)
1,298
Fair value movements on financial instruments4
—
—
—
14
14
Disposal losses on Markets Treasury repositioning
(391)
(316)
(270)
—
(977)
Operating expenses
Disposals, acquisitions and related costs
(53)
(55)
3
(216)
(321)
Restructuring and other related costs5
20
32
21
63
136
Impairment of interest in associate6
—
—
—
(3,000)
(3,000)
1 Includes the impact of the sale of our retail banking operations in France.
2 Includes the gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3 Includes fair value movements on the foreign exchange hedging of the proceeds from the sale of our banking business in Canada.
4 Fair value movements on non-qualifying hedges in HSBC Holdings.
5 Amounts relate to reversals of restructuring provisions recognised during 2022.
6 Relates to an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom. See Note 18 on page 401 to 402.
Global businesses
100
HSBC Holdings plc Annual Report and Accounts 2024
Reconciliation of reported results to constant currency results – global businesses (continued)
2022
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Revenue1
Reported
21,103
16,494
14,899
(1,876)
50,620
Currency translation
(331)
(287)
(357)
(58)
(1,033)
Constant currency
20,772
16,207
14,542
(1,934)
49,587
ECL
Reported
(1,130)
(1,849)
(595)
(10)
(3,584)
Currency translation
(30)
(19)
17
1
(31)
Constant currency
(1,160)
(1,868)
(578)
(9)
(3,615)
Operating expenses
Reported
(14,415)
(7,052)
(9,383)
(1,851)
(32,701)
Currency translation
274
242
(20)
(24)
472
Constant currency
(14,141)
(6,810)
(9,403)
(1,875)
(32,229)
Share of profit/(loss) in associates and joint ventures
Reported
30
—
(2)
2,695
2,723
Currency translation
(1)
1
—
(164)
(164)
Constant currency
29
1
(2)
2,531
2,559
Profit/(loss) before tax
Reported
5,588
7,593
4,919
(1,042)
17,058
Currency translation
(88)
(63)
(360)
(245)
(756)
Constant currency
5,500
7,530
4,559
(1,287)
16,302
Loans and advances to customers (net)
Reported
422,309
311,957
188,940
355
923,561
Currency translation
2,763
(2,733)
(2,287)
(5)
(2,262)
Constant currency
425,072
309,224
186,653
350
921,299
Customer accounts
Reported
779,310
463,928
326,630
435
1,570,303
Currency translation
2,571
(1,122)
(3,210)
8
(1,753)
Constant currency
781,881
462,806
323,420
443
1,568,550
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Notable items (continued)
2022
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Notable items
Revenue
Disposals, acquisitions and related costs1
(2,212)
—
—
(525)
(2,737)
Fair value movements on financial instruments2
—
—
—
(618)
(618)
Restructuring and other related costs3
98
(16)
(184)
(145)
(247)
Operating expenses
Disposals, acquisitions and related costs
(7)
—
—
(11)
(18)
Restructuring and other related costs
(357)
(266)
(252)
(2,007)
(2,882)
1 Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business, of which $2.3bn (inclusive of $0.4bn in
goodwill impairments) related to the sale of the retail banking operations in France. Held-for-sale classification for the sale of the retail banking operations in
France was reversed in 1Q23 ($2.1bn loss reversed) and reinstated in 4Q23 ($2.0bn loss reinstated).
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
HSBC Holdings plc Annual Report and Accounts 2024
101
Financial review
Strategic transactions supplementary analysis
The following table presents the selected impacts of strategic
transactions to the Group and our global business segments. These
comprise the strategic transactions where the financial impacts of the
acquisition or disposal have qualified for material notable item
treatment in our results. Material notable items are a subset of
notable items and categorisation is dependent on the financial impact
on the Group’s income statement. At 2024, strategic transactions
classified as material notable items in current and comparative
periods comprise the disposal of our retail banking operations in
France, our banking business in Canada, the sale of our business in
Argentina and the acquisition of SVB UK.
The impacts quoted include the gains or losses on classification to
held for sale or acquisition and all other related notable items. They
also include the distorting impact between the periods of the
operating income statement results related to acquisitions and
disposals that affect period-on-period comparisons. It is computed by
including the operating income statement results of each business in
any period for which there are no results in the comparative period.
We consider the monthly impacts of distorting income statement
results when calculating the impact of strategic transactions.
Constant currency results
2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Revenue
54
179
—
(1,209)
(976)
ECL
—
(3)
—
—
(3)
Operating expenses
(7)
(76)
—
(191)
(274)
Share of profit in associates and joint ventures
—
—
—
—
—
Profit before tax
47
100
—
(1,400)
(1,253)
– HSBC Innovation Banking1
100
—
100
– Retail banking operations in France
47
(1)
46
– Banking business in Canada
4,773
4,773
– Business in Argentina
(6,172)
(6,172)
of which: notable items
Revenue
55
—
—
(1,209)
(1,154)
Profit before tax
55
7
—
(1,400)
(1,338)
of which: distorting impact of operating results between periods
Revenue
(1)
179
—
—
178
Profit/(loss) before tax
(8)
93
—
—
85
2023
Revenue
690
2,407
49
(231)
2,915
ECL
22
(72)
11
—
(39)
Operating expenses
(658)
(331)
(59)
(218)
(1,266)
Share of profit in associates and joint ventures
—
—
—
—
—
Profit/(loss) before tax
54
2,004
1
(449)
1,610
– HSBC Innovation Banking1
1,583
—
1,583
– Retail banking operations in France
(141)
(26)
(167)
– Banking business in Canada
211
400
82
(424)
269
– Business in Argentina
(16)
21
(81)
—
(76)
of which: notable items
Revenue
41
1,659
—
(231)
1,469
Profit before tax
(11)
1,607
—
(449)
1,147
of which: distorting impact of operating results between periods
Revenue
649
748
49
—
1,446
Profit before tax
65
397
1
—
463
1 Includes the impact of our acquisition of SVB UK, which in June 2023 changed its legal entity name to HSBC Innovation Bank Limited.
Global businesses
102
HSBC Holdings plc Annual Report and Accounts 2024
Reconciliation of reported and constant currency risk-weighted assets
At 31 Dec 2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$bn
$bn
$bn
$bn
$bn
Risk-weighted assets
Reported
181.1
337.9
231.9
87.4
838.3
Constant currency
181.1
337.9
231.9
87.4
838.3
At 31 Dec 2023
Risk-weighted assets
Reported
192.9
354.5
218.5
88.2
854.1
Currency translation
(6.8)
(12.6)
(4.8)
(1.1)
(25.3)
Constant currency
186.1
341.9
213.7
87.1
828.8
At 31 Dec 2022
Risk-weighted assets
Reported
182.9
342.4
225.9
88.5
839.7
Currency translation
(4.1)
(9.3)
(4.2)
(0.5)
(18.1)
Constant currency
178.8
333.1
221.7
88.0
821.6
New operating segments effective 1 January 2025 - summary results
Effective from 1 January 2025, the Group’s reporting segments under
IFRS 8 ‘Operating Segments’ will comprise four new businesses –
Hong Kong, UK, Corporate and Institutional Banking, and International
Wealth and Premier Banking – along with Corporate Centre. These
will replace our previously reported operating segments up to
31 December 2024.
The Hong Kong business comprises Personal Banking and
Commercial Banking of HSBC Hong Kong and Hang Seng Bank. The
UK business comprises UK Personal Banking (including first direct and
M&S Bank) and UK Commercial Banking including HSBC Innovation
Bank. Corporate and Institutional Banking integrates the Commercial
Banking business outside of the UK and Hong Kong together with the
Global Banking and Markets business, the UK non-ringfenced bank
(HSBC Bank plc), Europe, and the Americas. International Wealth and
Premier Banking comprises Premier banking outside of Hong Kong
and the UK, our Global Private Bank, and our wealth manufacturing
businesses of Asset Management and Insurance.
Selected 2024 financial information have been re-presented, for
illustrative purposes only, to align with the Group’s operating
segments effective from 1 January 2025 and are presented in the
following table. No additional adjustments have been made to this
information other than to reflect the presentation of the Group’s new
operating segments, and there are no changes to the Group’s total
figures as disclosed in this Annual Report and Accounts 2024. All data
presented in the following table is unaudited.
$m
$m
$m
$m
$m
$m
Revenue
15,034
11,954
26,819
13,976
(1,929)
65,854
ECL
(1,076)
(402)
(869)
(1,038)
(29)
(3,414)
Operating expenses
(4,837)
(4,947)
(14,544)
(9,013)
298
(33,043)
Share of profit in associates and joint ventures less
impairment
—
—
1
47
2,864
2,912
Profit before tax
9,121
6,605
11,407
3,972
1,204
32,309
RoTE (%)
c.38%
c.25%
c.14%
c.16%
c.1%
14.6%
At 31 Dec 2024
Loans and advances to customers (net)
235,208
267,293
284,701
136,325
7,131
930,658
Customer accounts
507,389
330,012
557,796
259,443
315
1,654,955
RWAs
143,668
133,495
388,047
85,673
87,371
838,254
2024
Hong Kong
UK
Corporate
and
Institutional
Banking
International
Wealth and
Premier
Banking
Corporate
Centre
Total
For further details of our organisational update, see page 5.
HSBC Holdings plc Annual Report and Accounts 2024
103
Financial review
Supplementary tables for WPB and GBM
WPB constant currency performance by business unit
A breakdown of WPB by business unit is presented below to reflect the basis of how the revenue performance of the business units is
assessed and managed.
WPB – summary (constant currency basis)
Consists of1
Total
WPB
Banking
operations
Life
insurance
Global
Private
Banking
Asset
management
$m
$m
$m
$m
$m
2024
Net operating income before change in expected credit losses and other credit
impairment charges2
28,674
22,842
1,840
2,611
1,381
– net interest income
20,352
18,819
326
1,193
14
– net fee income/(expense)
5,930
3,452
177
1,015
1,286
– other income
2,392
571
1,337
403
81
ECL
(1,335)
(1,334)
—
(1)
—
Net operating income
27,339
21,508
1,840
2,610
1,381
Total operating expenses
(15,204)
(11,728)
(716)
(1,752)
(1,008)
Operating profit
12,135
9,780
1,124
858
373
Share of profit in associates and joint ventures
47
14
33
—
—
Profit before tax
12,182
9,794
1,157
858
373
2023
Net operating income before change in expected credit losses and other credit
impairment charges2
26,848
21,920
1,396
2,268
1,264
– net interest income
19,902
18,455
282
1,167
(2)
– net fee income/(expense)
5,283
3,148
147
800
1,188
– other income
1,663
317
967
301
78
ECL
(935)
(933)
4
(6)
—
Net operating income
25,913
20,987
1,400
2,262
1,264
Total operating expenses
(14,352)
(11,075)
(683)
(1,639)
(955)
Operating profit
11,561
9,912
717
623
309
Share of profit in associates and joint ventures
64
14
50
—
—
Profit before tax
11,625
9,926
767
623
309
2022
Net operating income before change in expected credit losses and other
credit impairment charges2
20,772
16,267
1,337
2,039
1,129
– net interest income
15,887
14,576
342
975
(6)
– net fee income/(expense)
5,290
3,241
150
795
1,104
– other income
(405)
(1,550)
845
269
31
ECL
(1,160)
(1,146)
(8)
(5)
(1)
Net operating income
19,612
15,121
1,329
2,034
1,128
Total operating expenses
(14,141)
(11,001)
(787)
(1,495)
(858)
Operating profit
5,471
4,120
542
539
270
Share of profit in associates and joint ventures
29
12
17
—
—
Profit before tax
5,500
4,132
559
539
270
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data for the year ended
31 December 2022 have been restated accordingly.
Global businesses
104
HSBC Holdings plc Annual Report and Accounts 2024
Life insurance business performance
The following table provides an analysis of the performance of our life insurance business for the period. It comprises income earned by our
insurance manufacturing operations within our WPB business, as well as income earned and costs incurred within our Wealth insurance
distribution channels, consolidation and inter-company elimination entries.
Results of WPB’s life insurance business unit (constant currency basis)
2024
2023
2022
Insurance
manufac-
turing
operations
Wealth
insurance
and other1
Life
insurance
Insurance
manufac-
turing
operations
Wealth
insurance
and other1
Life
insurance
Insurance
manufac-
turing
operations
Wealth
insurance
and other1
Life
insurance
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
326
—
326
282
—
282
345
(3)
342
Net fee income/(expense)
10
167
177
(25)
172
147
(31)
181
150
Other income
1,331
6
1,337
975
(8)
967
832
13
845
– insurance service result
1,356
(15)
1,341
1,120
(31)
1,089
868
(19)
849
– net investment returns (excluding net
interest income)
(162)
(15)
(177)
(198)
55
(143)
(196)
(24)
(220)
– other operating income
137
36
173
53
(32)
21
160
56
216
Net operating income before change in
expected credit losses and other credit
impairment charges2
1,667
173
1,840
1,232
164
1,396
1,146
191
1,337
ECL
—
—
—
4
—
4
(9)
1
(8)
Net operating income
1,667
173
1,840
1,236
164
1,400
1,137
192
1,329
Total operating expenses
(601)
(115)
(716)
(570)
(113)
(683)
(593)
(194)
(787)
Operating profit
1,066
58
1,124
666
51
717
544
(2)
542
Share of profit/(loss) in associates and joint
ventures
33
—
33
50
—
50
17
—
17
Profit before tax
1,099
58
1,157
716
51
767
561
(2)
559
1 ‘Wealth insurance and other’ includes fee income earned and operating expenses incurred within our Wealth distribution channels. It also includes the IFRS 17
consolidation entries arising from transactions between our insurance manufacturing operations and Wealth distribution channels and with the wider Group, as
well as allocations of central costs benefiting life insurance.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc Annual Report and Accounts 2024
105
Financial review
WPB insurance manufacturing (constant currency basis)
The following table shows the results of our insurance manufacturing operations for our WPB business and for all global business segments in
aggregate.
Results of insurance manufacturing operations1,2
2024
2023
2022
WPB
All global
businesses
WPB
All global
businesses
WPB
All global
businesses
$m
$m
$m
$m
$m
$m
Net interest income
326
363
282
321
345
370
Net fee expense
10
21
(25)
(13)
(31)
(16)
Other income
1,331
1,326
975
965
832
842
Insurance service result
1,356
1,356
1,120
1,119
868
872
– release of contractual service margin
1,290
1,290
1,087
1,087
900
900
– risk adjustment release
74
74
44
44
47
47
– experience variance and other
36
36
31
30
50
54
– loss from onerous contracts
(44)
(44)
(42)
(42)
(129)
(129)
Net investment returns (excluding net interest income)3
(162)
(165)
(198)
(205)
(196)
(208)
– insurance finance income/(expense)
(5,985)
(5,985)
(7,718)
(7,718)
13,882
13,885
– other investment income
5,823
5,820
7,520
7,513
(14,078)
(14,093)
Other operating income
137
135
53
51
160
178
Net operating income before change in expected credit losses and other
credit impairment charges4,5
1,667
1,710
1,232
1,273
1,146
1,196
Change in expected credit losses and other credit impairment charges
—
—
4
4
(9)
(9)
Net operating income
1,667
1,710
1,236
1,277
1,137
1,187
Total operating expenses
(601)
(602)
(570)
(580)
(593)
(589)
Operating profit
1,066
1,108
666
697
544
598
Share of profit in associates and joint ventures
33
33
50
50
17
17
Profit before tax of insurance business operations5
1,099
1,141
716
747
561
615
Additional information
Insurance manufacturing new business contractual service margin (reported basis)
2,515
2,515
1,686
1,686
1,111
1,111
Consolidated Group new business contractual service margin (reported basis)
2,729
2,729
1,812
1,812
1,229
1,229
Annualised new business premiums of insurance manufacturing operations
4,912
4,912
3,797
3,797
2,354
2,354
Net dividends of insurance manufacturing operations (reported basis)6
1,522
1,522
813
813
(152)
(152)
1 Constant currency results are derived by adjusting for period-on-period effects of foreign currency translation differences. The impact of foreign currency
translation differences on ‘All global businesses’ profit before tax was a $13m decrease for 2023 and a $60m decrease for 2022.
2 The results presented for insurance manufacturing are shown before elimination of inter-company transactions with HSBC non-insurance operations. The ‘All
global businesses‘ result consists primarily of WPB business, as well as a small proportion of CMB business.
3 Net investment return under IFRS 17 for all global businesses for 2024 was $198m (2023: $116m; 2022: $162m), which consisted of net interest income, net
income/(expenses) on assets held at fair value through profit or loss, and insurance finance income/(expense).
4 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
5
The effect of applying hyperinflation accounting in Argentina on insurance manufacturing operations in all global business resulted in a decrease of $53m in revenue in
2024 (2023: decrease of $35m, 2022: decrease of $7m) and a decrease of $53m in profit before tax in 2024 (2023: decrease of $35m, 2022: decrease of $6m).
6 Net dividends of insurance manufacturing operations include dividends paid to immediate parent companies of $1,612m (2023: $993m; 2022: $606m) net of
CET1 qualifying injections to fund business growth of $90m (2023: $180m; 2022: $758m including a $528m capital injection to fund the acquisition of AXA
Singapore).
Insurance manufacturing
The following commentary, unless otherwise specified, relates to the
‘All global businesses’ results.
Profit before tax of $1.1bn increased by $0.4bn compared with 2023.
This primarily reflected the following:
–
Insurance service result of $1.4bn increased by $0.2bn compared
with 2023 primarily due to an increase in the release of CSM.
–
Net investment return (excluding net interest income) remained
broadly unchanged, with negative impacts in China from reducing
interest rates partly offset by gains in other markets.
–
Other operating income increased by $0.1bn compared with 2023,
with the increase driven by the non-repeat of losses of $0.3bn in
2023 from corrections to historical valuation estimates, partly
offset by current period losses on reinsurance contracts in Hong
Kong.
Profit before tax of $0.7bn in 2023 increased by $0.1bn compared
with 2022. This primarily reflected the following:
–
Insurance service result of $1.1bn increased by $0.3bn compared
with 2022. This was driven by an increase in the release of CSM of
$0.2bn as a result of a higher closing CSM balance. The improved
insurance service result also reflected a reduction to losses from
onerous contracts of $0.1bn, mainly in Hong Kong and Singapore,
in part due to improved market conditions in 2023.
–
Other operating income decreased by $0.1bn compared with
2022, and included a $0.3bn loss from corrections to historical
valuation estimates, partly offset by gains of $0.2bn from
reinsurance contracts in Hong Kong.
Insurance manufacturing new business contractual service margin
increased by $0.8bn or 49% primarily in Hong Kong, from new
business volumes increasing and a $0.2bn benefit from recognising a
new reinsurance contract.
Annualised new business premiums (‘ANP’) is used to assess new
insurance premiums generated by the business. It is calculated as
100% of annualised first year regular premiums and 10% of single
premiums, before reinsurance ceded. ANP in 2024 increased by 29%
compared with 2023, primarily from strong new business sales in
Hong Kong.
Insurance equity plus CSM net of tax
Insurance equity plus CSM net of tax is a non-GAAP alternative
performance measure that provides information about our insurance
manufacturing operations’ net asset value plus the future earnings
from in-force business. At 31 December 2024, insurance equity plus
CSM net of tax was $17,025m (31 December 2023: $16,583m;
31 December 2022: $14,646m).
At 31 December 2024, insurance equity plus CSM net of tax was
calculated as insurance manufacturing operations equity of $7,015m
plus CSM of $12,063m less tax of $2,053m. At 31 December 2023, it
was calculated as insurance manufacturing operations equity of
Global businesses
106
HSBC Holdings plc Annual Report and Accounts 2024
$7,731m plus CSM of $10,786m less tax of $1,934m. At
31 December 2022, it was calculated as insurance manufacturing
operations equity of $7,236m plus CSM of $9,058m less tax of
$1,648m.
The increase of $0.4bn in 2024 insurance manufacturing equity plus
CSM net of tax compared to the prior year includes an increase in
CSM net of tax of $1.2bn and a reduction in equity of $0.7bn. CSM
net of tax benefited from strong new business written in the period,
partially offset by a reduction of $0.6bn from reclassification of our
French insurance business to held for sale. The reduction in insurance
manufacturing equity of $0.7bn primarily reflected the benefit of profit
after tax in the year of $0.9bn offset by net dividends paid of $1.5bn.
Net dividends of $1.5bn in 2024 have increased by $0.7bn primarily
due to releases of surplus regulatory capital in Hong Kong.
Insurance metrics no longer reported
Insurance manufacturing value of new business and Insurance
manufacturing proxy embedded value were previously presented as
non-GAAP performance measures. The Group continues to review its
use of non-GAAP performance measures following implementation of
IFRS 17 and has now discontinued the reporting of these measures.
Instead ‘New business CSM’ is now management’s key new
business performance measure, and ‘Equity plus CSM net of tax’ is
considered a measure of entity value more closely aligned with
IFRS 17.
WPB: Wealth balances
The following table shows the wealth balances, which include invested assets and wealth deposits. Invested assets comprise customer assets
either managed by our Asset Management business or by external third-party investment managers, as well as self-directed investments by our
customers.
WPB – reported wealth balances1
2024
2023
$bn
$bn
Global Private Banking invested assets
395
363
– managed by Global Asset Management
68
61
– external managers, direct securities and other
327
302
Retail invested assets
409
383
– managed by Global Asset Management
175
178
– external managers, direct securities and other
234
205
Asset Management third-party distribution
489
445
Reported invested assets1
1,293
1,191
Wealth deposits (Premier and Global Private Banking)2
555
536
Total reported wealth balances
1,848
1,727
1 Invested assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as
investment manager. At 31 December 2024, $54bn of invested assets were classified as held for sale and are not included in the table above (2023: $32bn).
2 Premier and Global Private Banking deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts balance of
$823bn (2023: $805bn) on page 99. At 31 December 2024, $3bn of wealth deposits were classified as held for sale and are not included in the table above (2023:
$42bn).
Asset Management: funds under management
The following table shows the funds under management of our Asset Management business. Funds under management represents assets
managed, either actively or passively, on behalf of our customers. Funds under management are not reported on the Group’s balance sheet,
except where it is deemed that we are acting as principal rather than agent in our role as investment manager.
Asset Management – reported funds under management1
2024
2023
$bn
$bn
Opening balance
684
595
Net new invested assets
30
54
Net market movements
47
23
Foreign exchange and others
(18)
12
Transfer to Markets Treasury
(12)
—
Closing balance
731
684
Asset Management – reported funds under management by legal entities
2024
2023
$bn
$bn
HSBC Bank plc
165
162
The Hongkong and Shanghai Banking Corporation Limited
223
198
HSBC North America Holdings Inc.
67
71
Grupo Financiero HSBC, S.A. de C.V.
15
15
Other trading entities2
261
238
Closing balance
731
684
1 Funds under management are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role
as investment manager.
2 Funds under management of $194bn in 2024 and $177bn in 2023 relating to our Asset Management entity in the UK are reported under ‘other trading entities’ in
the table above.
HSBC Holdings plc Annual Report and Accounts 2024
107
Financial review
At 31 December 2024, Asset Management funds under management amounted to $731bn, an increase of $47bn or 7%. The increase reflected
net new invested assets of $30bn and a positive impact from market performance. These increases were partly offset by an adverse impact of
foreign exchange translation of $18bn and from a reduction of $12bn due to a transfer of a portfolio forming part of the Group’s Holdings Capital
Buffer from Asset Management to our Markets Treasury function. Net new invested assets were mainly in long-term products, primarily passive
investment, alternative investment, and multi-asset investment products. These inflows were partly offset by redemptions from money market
instruments in the US.
Global Private Banking: client balances
Global Private Banking client balances comprises invested assets and deposits, which are translated at the rates of exchange applicable for their
respective year-ends, with the effects of currency translation reported separately.
Global Private Banking – reported client balances1
2024
2023
$bn
$bn
Opening balance
447
383
Net new invested assets
23
17
Increase/(decrease) in deposits
1
9
Net market movements
37
19
Foreign exchange and others
(24)
19
Closing balance
484
447
Global Private Banking – reported client balances by legal entities
2024
2023
$bn
$bn
HSBC UK Bank plc
36
32
HSBC Bank plc
115
54
The Hongkong and Shanghai Banking Corporation Limited
251
209
HSBC North America Holdings Inc.
77
64
HSBC Bank Middle East Limited
3
—
Grupo Financiero HSBC, S.A. de C.V.
2
3
Other trading entities
—
85
Closing balance
484
447
1 Client balances are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as
investment manager. Customer deposits included in these client balances are on balance sheet.
Retail invested assets
The following table shows the invested assets of our retail customers. These comprise customer assets either managed by our Asset
Management business or by external third-party investment managers as well as self-directed investments by our customers.
Retail invested assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than
agent in our role as investment manager.
Retail invested assets
2024
2023
$bn
$bn
Opening balance
383
363
Net new invested assets1
28
26
Net market movements
23
7
Foreign exchange and others
(25)
(13)
Closing balance
409
383
Retail invested assets by legal entities
2024
2023
$bn
$bn
HSBC UK Bank plc
31
29
HSBC Bank plc
8
31
The Hongkong and Shanghai Banking Corporation Limited
336
292
HSBC Bank Middle East Limited
3
3
HSBC North America Holdings Inc.
16
14
Grupo Financiero HSBC, S.A. de C.V.
10
9
Other trading entities
5
5
Closing balance
409
383
1 ‘Retail net new invested assets’ covers nine markets, comprising Hong Kong including Hang Seng Bank (Hong Kong), mainland China, Malaysia, Singapore,
HSBC UK, UAE, US, Canada and Mexico. The net new invested assets relating to all other geographies is reported in ‘foreign exchange and others’.
Global businesses
108
HSBC Holdings plc Annual Report and Accounts 2024
WPB invested assets
Net new invested assets represents the net customer inflows from retail invested assets, Asset Management third-party distribution and Global
Private Banking invested assets. It excludes all customer deposits. The net new invested assets in the table below is non-additive from the
tables above, as net new invested assets managed by Asset Management that are generated by retail clients or Global Private Banking will be
recorded in both businesses.
WPB: Invested assets
2024
2023
$bn
$bn
Opening balance
1,191
1,015
Net new invested assets
64
84
Net market movements
97
43
Foreign exchange and others
(59)
49
Closing balance
1,293
1,191
WPB: Net new invested assets by legal entities
2024
2023
$bn
$bn
HSBC UK Bank plc
3
1
HSBC Bank plc
9
3
The Hongkong and Shanghai Banking Corporation Limited
47
47
HSBC Bank Middle East Limited
1
1
HSBC North America Holdings Inc.
(10)
7
Grupo Financiero HSBC, S.A. de C.V.
2
5
Other trading entities
12
20
Total
64
84
GBM: Securities Services and Issuer Services
Assets held in custody
Custody is the safekeeping and servicing of securities and other
financial assets on behalf of clients. Assets held in custody are not
reported on the Group’s balance sheet, except where it is deemed
that we are acting as principal rather than agent in our role as
investment manager. At 31 December 2024, we held $10.6tn of
assets as custodian, an increase of 9% compared with 31 December
2023. The balance comprised $9.7tn of assets in Securities Services,
which were recorded at market value, and $0.9tn of assets in Issuer
Services, recorded at book value.
The increase was mainly in Securities Services balances. This was
driven by net asset inflows in Asia and Europe and favourable market
movements in Asia, North America and Latin America, partly offset by
adverse impacts of currency translations in Asia and Europe.
Assets under administration
Our assets under administration business includes the provision of
bond and loan administration services, transfer agency services and
the valuation of portfolios of securities and other financial assets on
behalf of clients and complements the custody business. At
31 December 2024, the value of assets held under administration by
the Group amounted to $5.2tn, which was 6% higher than at
31 December 2023. The balance comprised $3.1tn of assets in
Securities Services, which were recorded at market value, and $2.1tn
of assets in Issuer Services, recorded at book value.
The increase was mainly driven by Securities Services balances due
to net asset inflows in Europe and Asia together with favourable
market movement, partly offset by adverse impact of currency
translations notably in Europe and Asia. Issuer Services balances also
rose driven by new issuances, including in the UK and the US, as well
as new assets, including in our legal entity in Hong Kong.
HSBC Holdings plc Annual Report and Accounts 2024
109
Financial review
Analysis of reported results by legal entities
HSBC reported profit/(loss) before tax and balance sheet data
2024
HSBC
UK Bank
plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A. de
C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
10,331
1,254
15,077
1,590
1,613
300
2,292
2,774
(2,498)
32,733
Net fee income
1,672
1,629
5,449
508
1,372
129
630
1,076
(164)
12,301
Net income from financial
instruments held for trading or
managed on a fair value basis
580
6,042
11,781
331
914
33
504
411
520
21,116
Net income from assets and
liabilities of insurance businesses,
including related derivatives,
measured at fair value through profit
and loss
—
1,100
4,608
—
—
—
22
183
(12)
5,901
Insurance finance income/(expense)
—
(1,261)
(4,562)
—
—
—
(26)
(150)
21
(5,978)
Insurance service result
—
217
1,042
—
—
—
76
(7)
(18)
1,310
Other income/(expense)1
169
576
658
75
365
—
75
(984)
(2,463)
(1,529)
Net operating income before
change in expected credit losses
and other credit impairment
charges2
12,752
9,557
34,053
2,504
4,264
462
3,573
3,303
(4,614)
65,854
Change in expected credit losses
and other credit impairment charges
(405)
(211)
(1,532)
(198)
(81)
(40)
(864)
(93)
10
(3,414)
Net operating income
12,347
9,346
32,521
2,306
4,183
422
2,709
3,210
(4,604)
62,440
Total operating expenses excluding
impairment of goodwill and other
intangible assets
(5,124)
(6,718)
(14,296) (1,191)
(3,349)
(236)
(1,992) (1,959)
1,899
(32,966)
Impairment of goodwill and other
intangible assets
(11)
(5)
(33)
(1)
(2)
—
(2)
(22)
(1)
(77)
Operating profit/(loss)
7,212
2,623
18,192
1,114
832
186
715
1,229
(2,706)
29,397
Share of profit in associates and
joint ventures less impairment3
1
22
2,278
—
—
—
15
600
(4)
2,912
Profit/(loss) before tax
7,213
2,645
20,470
1,114
832
186
730
1,829
(2,710)
32,309
%
%
%
%
%
%
%
%
%
%
Share of HSBC’s profit before tax
22.2
8.2
63.4
3.4
2.6
0.6
2.3
5.7
(8.4)
100.0
Cost efficiency ratio
40.3
70.3
42.1
47.6
78.6
51.1
55.8
60.0
41.1
50.2
Balance sheet data
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
(net)
272,973 103,464
449,940 20,440
55,786
—
23,439
4,617
(1)
930,658
Total assets
426,165 914,506
1,400,456 57,215 253,251
—
46,007 26,623
(107,175) 3,017,048
Customer accounts
340,233 297,785
845,284 34,808
99,278
—
27,525
9,999
43 1,654,955
Risk-weighted assets4,5,6
138,332 137,609
402,847 26,624
74,416
—
29,671 50,731
(648)
838,254
Legal entities
110
HSBC Holdings plc Annual Report and Accounts 2024
HSBC reported profit/(loss) before tax and balance sheet data (continued)
2023
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A. de
C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
9,684
2,674
16,705
1,551
1,712
1,275
2,148
3,765
(3,718)
35,796
Net fee income
1,597
1,527
4,859
475
1,237
559
581
1,225
(215)
11,845
Net income from financial
instruments held for trading or
managed on a fair value basis
516
4,220
9,507
397
729
110
437
1,054
(309)
16,661
Net income from assets and
liabilities of insurance businesses,
including related derivatives,
measured at fair value through profit
and loss
—
1,438
6,258
—
—
—
39
323
(171)
7,887
Insurance finance income/(expense)
—
(1,460)
(6,237)
—
—
—
(44)
(166)
98
(7,809)
Insurance service result
—
154
838
—
—
—
87
9
(10)
1,078
Other income/(expense)1
1,608
736
(31)
2
185
22
65 (1,481)
(506)
600
Net operating income before change
in expected credit losses and other
credit impairment charges2
13,405
9,289
31,899
2,425
3,863
1,966
3,313
4,729
(4,831)
66,058
Change in expected credit losses
and other credit
impairment charges
(523)
(212)
(1,641)
(90)
(94)
(46)
(696)
(279)
134
(3,447)
Net operating income
12,882
9,077
30,258
2,335
3,769
1,920
2,617
4,450
(4,697)
62,611
Total operating expenses excluding
impairment of goodwill and other
intangible assets
(4,602)
(6,483)
(13,379)
(1,095)
(3,473) (1,049)
(1,823) (2,631)
2,180
(32,355)
Impairment of goodwill and other
intangible assets
(10)
97
(16)
(1)
222
—
(3)
(4)
—
285
Operating profit/(loss)
8,270
2,691
16,863
1,239
518
871
791
1,815
(2,517)
30,541
Share of profit in associates and
joint ventures less impairment3
—
(52)
(696)
—
—
—
14
544
(3)
(193)
Profit/(loss) before tax
8,270
2,639
16,167
1,239
518
871
805
2,359
(2,520)
30,348
%
%
%
%
%
%
%
%
%
%
Share of HSBC’s profit before tax
27.2
8.7
53.3
4.1
1.7
2.9
2.6
7.8
(8.3)
100.0
Cost efficiency ratio
34.4
68.7
42.0
45.2
84.2
53.4
55.1
55.7
45.1
48.5
Balance sheet data
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
(net)
270,208
95,750
455,315 20,072
54,829
—
26,410 15,951
—
938,535
Total assets
423,029 896,682
1,333,911 50,612 252,339 90,731
47,309 59,051
(114,987) 3,038,677
Customer accounts
339,611 274,733
801,430 31,341
99,607
—
29,423 35,326
176 1,611,647
Risk-weighted assets4,5
129,211 131,468
396,677 24,294
72,248 31,890
32,639 59,574
6,704
854,114
HSBC Holdings plc Annual Report and Accounts 2024
111
Financial review
HSBC reported profit/(loss) before tax and balance sheet data (continued)
2022
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A. de
C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Net interest income
7,615
2,357
14,031
903
1,922
1,251
1,796
2,244
(1,742)
30,377
Net fee income
1,536
1,601
4,924
458
1,223
598
455
1,127
(152)
11,770
Net income from financial
instruments held for trading or
managed on a fair value basis
472
3,564
5,270
360
485
76
351
639
(939)
10,278
Net income/(expense) from assets
and liabilities of insurance
businesses, including related
derivatives, measured at fair value
through profit and loss
—
(1,761)
(12,117)
—
—
—
(9)
66
(10)
(13,831)
Insurance finance income/(expense)
—
1,431
12,407
—
—
—
3
(32)
(10)
13,799
Insurance service result
—
149
636
—
—
—
50
(20)
(6)
809
Other income/(expense)1
148
(1,920)
491
22
533
29
67
(521)
(1,431)
(2,582)
Net operating income before loan
impairment (charges)/recoveries and
other credit risk provisions2
9,771
5,421
25,642
1,743
4,163
1,954
2,713
3,503
(4,290)
50,620
Change in expected credit losses
and other credit impairment
(charges)/recoveries
(563)
(292)
(2,090)
21
(20)
(84)
(507)
(61)
12
(3,584)
Net operating income
9,208
5,129
23,552
1,764
4,143
1,870
2,206
3,442
(4,278)
47,036
Total operating expenses excluding
impairment of goodwill and other
intangible assets
(4,667)
(6,497)
(13,011)
(1,033)
(3,429) (1,017)
(1,631) (2,359)
1,090
(32,554)
Impairment of goodwill and other
intangible assets
(54)
11
(42)
(3)
(9)
(21)
(5)
(2)
(22)
(147)
Operating profit/(loss)
4,487
(1,357)
10,499
728
705
832
570
1,081
(3,210)
14,335
Share of profit in associates and
joint ventures less impairment
—
(38)
2,400
—
—
—
13
351
(3)
2,723
Profit/(loss) before tax
4,487
(1,395)
12,899
728
705
832
583
1,432
(3,213)
17,058
%
%
%
%
%
%
%
%
%
%
Share of HSBC’s profit before tax
26.3
(8.2)
75.6
4.3
4.1
4.9
3.4
8.4
(18.8)
100.0
Cost efficiency ratio
48.3
119.6
50.9
59.4
82.6
53.1
60.3
67.4
24.9
64.6
Balance sheet data
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
(net)
245,921
86,964
473,985 19,762
54,159
—
20,446 22,325
(1)
923,561
Total assets
412,522 863,308
1,297,806 48,086 239,117 94,604
39,939 67,345
(113,441) 2,949,286
Customer accounts
336,086 253,075
784,236 29,893 100,404
—
25,531 41,078
— 1,570,303
Risk-weighted assets4,5
110,919 127,017
406,985 22,490
72,446 31,876
26,744 60,289
8,144
839,720
1 Other income/(expense) in this context includes gain on acquisitions, impairment gain/(loss) relating to the sale of our retail banking operations in France, and
other operating income/(expense).
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3 Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
4 Risk-weighted assets are non-additive across the legal entities due to market risk diversification effects within the Group.
5 Balances are on a third-party Group consolidated basis.
6 Other trading entities’ RWAs balance at 31 December 2024 includes HSBC Argentina operational risk RWAs, due to the averaging calculation and will roll off over
future reporting cycles.
Legal entities
112
HSBC Holdings plc Annual Report and Accounts 2024
Summary information – legal entities and selected countries/territories
Legal entity reported and constant currency results¹
2024
HSBC
UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities2
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue3
12,752
9,557
34,053
2,504
4,264
462
3,573
3,303
(4,614)
65,854
ECL
(405)
(211)
(1,532)
(198)
(81)
(40)
(864)
(93)
10
(3,414)
Operating expenses
(5,135)
(6,723)
(14,329) (1,192)
(3,351)
(236)
(1,994)
(1,981)
1,898
(33,043)
Share of profit in associates and joint
ventures
1
22
2,278
—
—
—
15
600
(4)
2,912
Profit/(loss) before tax
7,213
2,645
20,470
1,114
832
186
730
1,829
(2,710)
32,309
Loans and advances to customers (net) 272,973 103,464
449,940 20,440
55,786
—
23,439
4,617
(1) 930,658
Customer accounts
340,233 297,785
845,284 34,808
99,278
—
27,525
9,999
43 1,654,955
1 In the current period, constant currency results are equal to reported, as there is no currency translation.
2 Other trading entities includes the results of entities located in Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi Awwal Bank) which do
not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit before tax of $1,429m.
Supplementary analysis is provided on page 120 to provide a fuller picture of the MENAT regional performance.
3 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entity results: notable items
2024
HSBC
UK Bank
plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related
costs1
—
(148)
—
—
—
—
—
(23)
(1,172) (1,343)
Early redemption of legacy securities
—
—
—
—
—
—
—
—
(237)
(237)
Operating expenses
Disposals, acquisitions and related
costs
8
(9)
—
—
(29)
(36)
—
(61)
(72)
(199)
Restructuring and other related costs2
3
15
(5)
(2)
(4)
—
—
(9)
(32)
(34)
1 Includes a $1.0bn loss on disposal and a $5.2bn loss on the recycling in foreign currency translation reserve losses and other reserves arising on sale of our
business in Argentina. This is partly offset by a $4.8bn gain on disposal of our banking business in Canada, inclusive of a $0.3bn gain on the foreign exchange
hedging of the sales proceeds, the recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn of other reserves losses.
2 Amounts relate to restructuring provisions recognised in 2024 and reversals of restructuring provisions recognised during 2022.
Selected countries/territories results1
2024
UK2
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue3
21,017
22,038
4,078
4,216
3,573
ECL
(526)
(1,273)
(121)
(81)
(864)
Operating expenses
(13,725)
(8,886)
(2,971)
(3,350)
(1,994)
Share of profit/(loss) in associates and joint ventures
24
8
2,241
—
15
Profit before tax
6,790
11,887
3,227
785
730
Loans and advances to customers (net)
313,925
272,152
44,551
55,786
23,439
Customer accounts
524,251
575,141
63,169
99,278
27,525
1 In the current period, constant currency results are equal to reported, as there is no currency translation.
2 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
3 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc Annual Report and Accounts 2024
113
Financial review
Selected countries/territories results: notable items
2024
UK1
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related costs1,2
285
—
—
—
—
Early redemption of legacy securities
(237)
—
—
—
—
Operating expenses
Disposals, acquisitions and related costs
(50)
(2)
(7)
(28)
—
Restructuring and other related costs3
(42)
(4)
—
(4)
—
1 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
2 Includes fair value movements on the foreign exchange hedging of the sale of our banking business in Canada which is booked in HSBC Overseas Holdings (UK)
Limited.
3 Amounts relate to restructuring provisions recognised in 2024 and reversals of restructuring provisions recognised during 2022.
Legal entity reported and constant currency results (continued)
2023
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities1
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue2
Reported
13,405
9,289
31,899
2,425
3,863
1,966
3,313
4,729
(4,831)
66,058
Currency translation
391
150
(93)
1
—
(28)
(103)
(1,567)
103
(1,146)
Constant currency
13,796
9,439
31,806
2,426
3,863
1,938
3,210
3,162
(4,728)
64,912
ECL
Reported
(523)
(212)
(1,641)
(90)
(94)
(46)
(696)
(279)
134
(3,447)
Currency translation
(11)
(1)
—
—
—
1
34
166
(1)
188
Constant currency
(534)
(213)
(1,641)
(90)
(94)
(45)
(662)
(113)
133
(3,259)
Operating expenses
Reported
(4,612)
(6,386)
(13,395)
(1,096)
(3,251)
(1,049)
(1,826)
(2,635)
2,180
(32,070)
Currency translation
(126)
(99)
31
—
—
16
55
796
(97)
576
Constant currency
(4,738)
(6,485)
(13,364)
(1,096)
(3,251)
(1,033)
(1,771)
(1,839)
2,083
(31,494)
Share of profit/(loss) in
associates and joint ventures
Reported
—
(52)
(696)
—
—
—
14
544
(3)
(193)
Currency translation
—
(1)
(61)
—
—
—
(1)
—
—
(63)
Constant currency
—
(53)
(757)
—
—
—
13
544
(3)
(256)
Profit/(loss) before tax
Reported
8,270
2,639
16,167
1,239
518
871
805
2,359
(2,520)
30,348
Currency translation
254
49
(123)
1
—
(11)
(15)
(605)
5
(445)
Constant currency
8,524
2,688
16,044
1,240
518
860
790
1,754
(2,515)
29,903
Loans and advances to
customers (net)
Reported
270,208
95,750
455,315
20,072
54,829
—
26,410
15,951
—
938,535
Currency translation
(4,407)
(4,136)
(6,200)
(4)
—
—
(4,904)
(1,794)
(1)
(21,446)
Constant currency
265,801
91,614
449,115
20,068
54,829
—
21,506
14,157
(1)
917,089
Customer accounts
Reported
339,611
274,733
801,430
31,341
99,607
—
29,423
35,326
176 1,611,647
Currency translation
(5,539)
(9,425)
(7,068)
(12)
—
—
(5,464)
(4,527)
1
(32,034)
Constant currency
334,072
265,308
794,362
31,329
99,607
—
23,959
30,799
177 1,579,613
1 Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi Awwal Bank)
which do not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit before tax of $1,286m,
and constant currency profit before tax of $1,090m. Supplementary analysis is provided on page 120 to provide a fuller picture of the MENAT regional
performance.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entities
114
HSBC Holdings plc Annual Report and Accounts 2024
Legal entity results: notable items (continued)
2023
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and
related costs1,2,3
1,591
(14)
—
—
—
—
—
—
(279)
1,298
Fair value movements on
financial instruments4
—
—
—
—
—
—
—
—
14
14
Restructuring and other
related costs
—
361
—
—
—
—
—
—
(361)
—
Disposal losses on Markets
Treasury repositioning
(145)
(94)
(473)
(20)
(246)
—
—
—
1
(977)
Operating expenses
Disposals, acquisitions and
related costs
(45)
(111)
—
—
(11)
(115)
—
—
(39)
(321)
Restructuring and other
related costs5
20
30
10
2
10
—
6
2
56
136
Impairment of interest in
associate6
—
—
(3,000)
—
—
—
—
—
—
(3,000)
1 Includes the impacts of the sale of our retail banking operations in France.
2 Includes the gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3 Includes fair value movements on the foreign exchange hedging of the proceeds from the sale of our banking business in Canada.
4 Fair value movements on non-qualifying hedges in HSBC Holdings.
5 Balances relate to reversals of restructuring provisions recognised during 2022.
6 Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
Selected countries/territories results (continued)
2023
UK1
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue2
Reported
19,092
20,611
3,923
3,796
3,313
Currency translation
637
67
(64)
—
(103)
Constant currency
19,729
20,678
3,859
3,796
3,210
ECL
Reported
(594)
(1,529)
(93)
(94)
(696)
Currency translation
(14)
(5)
(2)
—
34
Constant currency
(608)
(1,534)
(95)
(94)
(662)
Operating expenses
Reported
(12,485)
(8,244)
(2,713)
(3,251)
(1,826)
Currency translation
(328)
(27)
41
—
55
Constant currency
(12,813)
(8,271)
(2,672)
(3,251)
(1,771)
Share of profit/(loss) in associates and joint ventures
Reported
(53)
30
(746)
—
14
Currency translation
—
—
(61)
—
(1)
Constant currency
(53)
30
(807)
—
13
Profit before tax
Reported
5,960
10,868
371
451
805
Currency translation
295
35
(86)
—
(15)
Constant currency
6,255
10,903
285
451
790
Loans and advances to customers (net)
Reported
309,262
279,551
44,275
54,829
26,410
Currency translation
(5,044)
1,663
(1,207)
—
(4,904)
Constant currency
304,218
281,214
43,068
54,829
21,506
Customer accounts
Reported
508,181
543,504
56,006
99,607
29,423
Currency translation
(8,289)
3,233
(1,525)
—
(5,464)
Constant currency
499,892
546,737
54,481
99,607
23,959
1 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc Annual Report and Accounts 2024
115
Financial review
Selected countries/territories results: notable items (continued)
2023
UK1
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related costs2,3,4
1,272
—
—
—
—
Fair value movements on financial instruments5
14
—
—
—
—
Disposal losses on Markets Treasury repositioning
(239)
(473)
—
(246)
—
Operating expenses
Disposals, acquisitions and related costs
(71)
(1)
(5)
(11)
—
Restructuring and other related costs6
75
9
4
10
6
Impairment of interest in associate7
—
—
(3,000)
—
—
1 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
2 Includes the gain of $1.6bn recognised in respect of the acquisition of SVB UK.
3 Includes the impairment gain relating to the sale of our retail banking operations in France.
4 Includes fair value movements on the foreign exchange hedging of the proceeds from the sale of our banking business in Canada.
5 Fair value movements on non-qualifying hedges in HSBC Holdings.
6 Balances relates to reversals of restructuring provisions recognised during 2022.
7 Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom.
Legal entity reported and constant currency results
2022
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corpo-
ration
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities1
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue2
Reported
9,771
5,421
25,642
1,743
4,163
1,954
2,713
3,503
(4,290)
50,620
Currency translation
399
(30)
(338)
3
—
(96)
265
(1,235)
(1)
(1,033)
Constant currency
10,170
5,391
25,304
1,746
4,163
1,858
2,978
2,268
(4,291)
49,587
ECL
Reported
(563)
(292)
(2,090)
21
(20)
(84)
(507)
(61)
12
(3,584)
Currency translation
(57)
8
2
—
—
5
(46)
59
(2)
(31)
Constant currency
(620)
(284)
(2,088)
21
(20)
(79)
(553)
(2)
10
(3,615)
Operating expenses
Reported
(4,721)
(6,486)
(13,053)
(1,036)
(3,438)
(1,038)
(1,636)
(2,361)
1,068
(32,701)
Currency translation
(178)
(177)
165
(1)
—
51
(163)
792
(17)
472
Constant currency
(4,899)
(6,663)
(12,888)
(1,037)
(3,438)
(987)
(1,799)
(1,569)
1,051
(32,229)
Share of profit/(loss) in
associates and joint ventures
Reported
—
(38)
2,400
—
—
—
13
351
(3)
2,723
Currency translation
—
—
(164)
—
—
—
—
—
—
(164)
Constant currency
—
(38)
2,236
—
—
—
13
351
(3)
2,559
Profit/(loss) before tax
Reported
4,487
(1,395)
12,899
728
705
832
583
1,432
(3,213)
17,058
Currency translation
164
(199)
(335)
2
—
(40)
56
(384)
(20)
(756)
Constant currency
4,651
(1,594)
12,564
730
705
792
639
1,048
(3,233)
16,302
Loans and advances to
customers (net)
Reported
245,921
86,964
473,985
19,762
54,159
—
20,446
22,325
(1)
923,561
Currency translation
10,166
331
(8,248)
16
—
—
(1,318)
(3,210)
1
(2,262)
Constant currency
256,087
87,295
465,737
19,778
54,159
—
19,128
19,115
—
921,299
Customer accounts
Reported
336,086
253,075
784,236
29,893
100,404
—
25,531
41,078
— 1,570,303
Currency translation
13,894
3,640
(9,033)
24
—
—
(1,645)
(8,633)
—
(1,753)
Constant currency
349,980
256,715
775,203
29,917
100,404
—
23,886
32,445
— 1,568,550
1 Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi Awwal Bank)
which do not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit before tax of $997m and
constant currency profit before tax of $756m.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entities
116
HSBC Holdings plc Annual Report and Accounts 2024
Legal entity results: notable items (continued)
2022
HSBC UK
Bank plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
HSBC
Bank
Canada
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and
related costs1
—
(2,242)
—
—
—
—
—
—
(495)
(2,737)
Fair value movements on
financial instruments2
—
—
—
—
—
—
—
—
(618)
(618)
Restructuring and other
related costs3
1
(278)
46
(13)
98
1
(17)
—
(85)
(247)
Operating expenses
Disposals, acquisitions and
related costs
—
(18)
—
—
—
—
—
—
—
(18)
Restructuring and other
related costs
(521)
(656)
(741)
(64)
(421)
(87)
(115)
(150)
(127)
(2,882)
1 Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business, of which $2.3bn (inclusive of $0.4bn in
goodwill impairments) relates to the sale of the retail banking operations in France. Held-for-sale classification for the sale of the retail banking operations in
France was reversed in 1Q23 ($2.1bn loss reversed) and reinstated in 4Q23 ($2.0bn loss reinstated).
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Selected countries/territories results (continued)
2022
UK1
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue2
Reported
17,268
15,712
4,104
4,107
2,713
Currency translation
746
60
(272)
—
265
Constant currency
18,014
15,772
3,832
4,107
2,978
ECL
Reported
(712)
(1,683)
(326)
(20)
(507)
Currency translation
(54)
(8)
21
—
(46)
Constant currency
(766)
(1,691)
(305)
(20)
(553)
Operating expenses
Reported
(13,232)
(7,935)
(2,757)
(3,438)
(1,636)
Currency translation
(504)
(26)
178
—
(163)
Constant currency
(13,736)
(7,961)
(2,579)
(3,438)
(1,799)
Share of profit/(loss) in associates and joint ventures
Reported
(41)
5
2,386
—
12
Currency translation
—
—
(163)
—
1
Constant currency
(41)
5
2,223
—
13
Profit before tax
Reported
3,283
6,099
3,407
649
582
Currency translation
188
26
(236)
—
57
Constant currency
3,471
6,125
3,171
649
639
Loans and advances to customers (net)
Reported
286,032
294,580
50,481
54,159
20,446
Currency translation
11,825
1,122
(2,811)
—
(1,318)
Constant currency
297,857
295,702
47,670
54,159
19,128
Customer accounts
Reported
493,028
542,543
56,948
100,404
25,531
Currency translation
20,382
2,068
(3,169)
—
(1,645)
Constant currency
513,410
544,611
53,779
100,404
23,886
1 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc Annual Report and Accounts 2024
117
Financial review
Selected countries/territories results: notable items (continued)
2022
UK1
Hong
Kong
Mainland
China
US
Mexico
$m
$m
$m
$m
$m
Revenue
Disposals, acquisitions and related costs
(60)
—
—
—
—
Fair value movements on financial instruments2
(617)
—
—
—
—
Restructuring and other related costs3
407
(124)
71
99
(17)
Operating expenses
Restructuring and other related costs
(1,741)
(393)
(70)
(424)
(115)
1 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in February 2022, including losses associated with RWA reduction commitments.
Analysis by country/territory
Profit/(loss) before tax by country/territory within global businesses
2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
UK1
2,487
3,446
12
845
6,790
– of which: HSBC UK Bank plc (ring-fenced bank)
2,628
4,367
146
72
7,213
– of which: HSBC Bank plc (non-ring-fenced bank)
534
97
657
(359)
929
– of which: Holdings and other
(675)
(1,018)
(791)
1,132
(1,352)
France
60
196
127
(153)
230
Germany
27
45
137
5
214
Hong Kong
7,453
3,212
1,704
(482)
11,887
Australia
141
378
99
(9)
609
India
96
448
875
269
1,688
Indonesia
7
156
63
(5)
221
Mainland China2
(167)
235
678
2,481
3,227
Malaysia
143
155
219
(3)
514
Singapore
572
376
448
(21)
1,375
Taiwan
113
70
223
(8)
398
Egypt
123
145
355
(16)
607
UAE
371
228
355
(83)
871
Saudi Arabia3
—
—
112
596
708
US
74
578
331
(198)
785
Canada4
71
126
26
4,503
4,726
Mexico
185
529
13
3
730
Other5
426
1,537
1,286
(6,520)
(3,271)
Year ended 31 Dec 2024
12,182
11,860
7,063
1,204
32,309
1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo Group’).
2 Includes our share of the profits of our associate, Bank of Communications Co., Limited.
3 Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, Saudi Awwal Bank.
4 Corporate Centre includes a gain of $4.5bn on the sale of our banking business in Canada excluding the fair value movements on the foreign exchange hedging
of the sale which is booked in HSBC Overseas Holdings (UK) Limited.
5 Corporate Centre includes the profit and loss impact of inter-company debt eliminations of $(269)m and a loss of $6.2bn relating to the sale of our business in
Argentina.
Legal entities
118
HSBC Holdings plc Annual Report and Accounts 2024
Profit/(loss) before tax by country/territory within global businesses (continued)
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking
and Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
UK1
2,415
4,437
(692)
(200)
5,960
– of which: HSBC UK Bank plc (ring-fenced bank)
2,754
5,282
144
90
8,270
– of which: HSBC Bank plc (non-ring-fenced bank)
396
295
121
177
989
– of which: Holdings and other
(735)
(1,140)
(957)
(467)
(3,299)
France
(35)
235
128
10
338
Germany
44
144
128
4
320
Hong Kong
6,808
2,970
1,394
(304)
10,868
Australia
177
319
85
(15)
566
India
56
398
774
289
1,517
Indonesia
23
124
68
(7)
208
Mainland China2
(90)
339
662
(540)
371
Malaysia
111
158
219
(21)
467
Singapore
233
436
444
(31)
1,082
Taiwan
99
72
198
(7)
362
Egypt
141
98
303
(11)
531
UAE
387
212
377
(83)
893
Saudi Arabia3
—
—
118
539
657
US
225
513
111
(398)
451
Canada
293
561
120
(96)
878
Mexico
317
504
15
(31)
805
Other4
340
1,760
1,472
502
4,074
Year ended 31 Dec 2023
11,544
13,280
5,924
(400)
30,348
1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo Group’).
2 Includes our share of the profits of our associate, Bank of Communications Co., Limited.
3 Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, Saudi Awwal Bank.
4 Corporate Centre includes the profit and loss impact of inter-company debt eliminations of $571m.
2022
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking
and Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
UK1
1,764
2,094
(534)
(41)
3,283
– of which: HSBC UK Bank plc (ring-fenced bank)
2,112
2,662
143
(430)
4,487
– of which: HSBC Bank plc (non-ring fenced bank)
294
315
141
(473)
277
– of which: Holdings and other
(642)
(883)
(818)
862
(1,481)
France2
(2,248)
210
81
(231)
(2,188)
Germany
17
8
133
(147)
11
Hong Kong
4,435
1,278
955
(568)
6,100
Australia
147
180
157
(36)
448
India
45
304
622
306
1,277
Indonesia
4
71
100
(8)
167
Mainland China3
(100)
303
526
2,678
3,407
Malaysia
110
89
219
(36)
382
Singapore
218
255
351
(77)
747
Taiwan
36
43
137
(17)
199
Egypt
101
76
194
(4)
367
UAE
128
107
320
(86)
469
Saudi Arabia4
30
—
94
345
469
US
209
557
270
(387)
649
Canada
243
548
140
(89)
842
Mexico
241
414
39
(112)
582
Other5
208
1,056
1,115
(2,532)
(153)
Year ended 31 Dec 2022
5,588
7,593
4,919
(1,042)
17,058
1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo Group’).
2 Includes the impact of goodwill impairment of $425m as a result of the reclassification of our retail banking operations in France to held for sale. At 31 December
2022, HSBC’s cash-generating units were based on geographical regions, sub-divided by global businesses.
3 Includes our share of the profits of our associate, Bank of Communications Co., Limited.
4 Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, Saudi Awwal Bank.
5 Corporate Centre includes the profit and loss impact of inter-company debt eliminations of $1,850m.
HSBC Holdings plc Annual Report and Accounts 2024
119
Financial review
Middle East, North Africa and Türkiye supplementary information
The following tables show the results of our Middle East, North Africa and Türkiye business operations on a regional basis (including results of
all the legal entities operating in the region and our share of the results of Saudi Awwal Bank). They also show the profit before tax of each of
the global businesses.
Middle East, North Africa and Türkiye regional performance
2024
2023
$m
$m
Revenue1
3,852
3,688
Change in expected credit losses and other credit impairment charges
(222)
(133)
Operating expenses
(1,695)
(1,592)
Share of profit in associates and joint ventures
596
538
Profit before tax
2,531
2,501
Loans and advances to customers (net)
22,975
22,766
Customer accounts
42,434
40,708
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Profit before tax by global business
2024
2023
$m
$m
Wealth and Personal Banking
585
612
Commercial Banking
368
400
Global Banking and Markets
1,091
1,104
Corporate Centre
487
385
Total
2,531
2,501
Reconciliation of alternative
performance measures
Contents
120
Use of alternative performance measures
121
Alternative performance measure definitions
122
Constant currency revenue and profit before tax excluding notable
items and strategic transactions
122
Return on average ordinary shareholders’ equity and return on average
tangible equity
123
Net asset value and tangible net asset value per ordinary share
123
Post-tax return and average total shareholders’ equity on average total
assets
124
Expected credit losses and other credit impairment charges as % of
average gross loans and advances to customers
124
Target basis operating expenses
125
Basic earnings per share excluding material notable items and related
impacts
125
Multi-jurisdictional client revenue
Use of alternative performance
measures
Our reported results are prepared in accordance with IFRS Accounting
Standards as detailed in our financial statements starting on page 341.
As described on page 86, we use a combination of reported and
alternative performance measures, including those derived from our
reported results that eliminate factors that distort year-on-year
comparisons. These are considered alternative performance
measures (non-GAAP financial measures).
The following information details the adjustments made to the
reported results and the calculation of other alternative performance
measures. All alternative performance measures are reconciled to the
closest reported performance measure.
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As
required by the standard, the Group applied the requirements
retrospectively with comparative data previously published under
IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022
transition date.
In addition to the alternative performance measures set out in this
section, another alternative performance measure in relation to the
Group’s insurance manufacturing operations is set out on pages 105
to 107.
Reconciliation of alternative performance measures
120
HSBC Holdings plc Annual Report and Accounts 2024
Alternative performance measure definitions
Alternative performance measure
Definition
Reported revenue excluding notable items
Reported revenue after excluding notable items reported under revenue
Reported profit before tax excluding notable items
Reported profit before tax after excluding notable items reported under revenue
less notable items reported under operating expenses
Constant currency revenue excluding notable items1
Reported revenue excluding notable items and the impact of foreign exchange
translation2
Constant currency profit before tax excluding notable
items1
Reported profit before tax excluding notable items and the impact of foreign
exchange translation2
Constant currency revenue excluding notable items
and strategic transactions1
Reported revenue excluding notable items, strategic transactions and the impact
of foreign exchange translation3
Constant currency profit before tax excluding notable
items and strategic transactions1
Reported profit before tax excluding notable items, strategic transactions and the
impact of foreign exchange translation3
Return on average ordinary shareholders’ equity (‘RoE’)
Profit attributable to the ordinary shareholders
Average ordinary shareholders’ equity
Return on average tangible equity (‘RoTE‘)
Profit attributable to the ordinary shareholders, excluding impairment
of goodwill and other intangible assets
Average ordinary shareholders’ equity adjusted for goodwill and intangibles
Return on average tangible equity (‘RoTE‘) excluding
notable items
Profit attributable to the ordinary shareholders, excluding impairment of goodwill
and other intangible assets and notable items2
Average ordinary shareholders’ equity adjusted for goodwill
and intangibles and notable items2
Net asset value per ordinary share
Total ordinary shareholders’ equity4
Basic number of ordinary shares in issue after deducting own shares held
Tangible net asset value per ordinary share
Tangible ordinary shareholders’ equity5
Basic number of ordinary shares in issue after deducting own shares held
Post-tax return on average total assets
Profit after tax
Average total assets
Average total shareholders’ equity on average total
assets
Average total shareholders’ equity
Average total assets
Expected credit losses and other credit impairment
charges (‘ECL’) as % of average gross loans and
advances to customers
Annualised constant currency ECL6
Constant currency average gross loans and advances to customers6
Expected credit losses and other credit impairment
charges (‘ECL’) as % of average gross loans and
advances to customers, including held for sale
Annualised constant currency ECL6
Constant currency average gross loans and advances to customers,
including held for sale6
Target basis operating expenses
Reported operating expenses excluding notable items, foreign exchange
translation and other excluded items7
Basic earnings per share excluding material notable
items and related impacts
Profit attributable to ordinary shareholders excluding material notable
items and related impacts8
Weighted average number of ordinary shares outstanding after deducting own
shares held
Multi-jurisdictional client revenue
Total client revenue we generate from clients that hold a relationship with
us that generates revenue in more than one market
1 Constant currency performance is computed by adjusting reported results for the effects of foreign currency translation differences, which distort period-on-
period comparisons.
2 For details of notable items, see ‘Supplementary financial information‘ on page 99.
3 For details of strategic transactions, see ‘Strategic transactions supplementary analysis‘ on page 102.
4 Total ordinary shareholders’ equity is total shareholders‘ equity less non-cumulative preference shares and capital securities.
5 Tangible ordinary shareholders’ equity is total ordinary shareholders’ equity excluding goodwill and other intangible assets (net of deferred tax).
6 The constant currency numbers are derived by adjusting reported ECL and average loans and advances to customers for the effects of foreign currency
translation differences.
7 Other excluded items includes the impact of re-translating comparative period financial information at the latest rates of foreign exchange in hyperinflationary
economies, which we consider to be outside of our control, and the impact of the sale of our retail banking operations in France and banking business in Canada.
8 For details of material notable items and related impacts, that are included in the calculation of Profit attributable to ordinary shareholders excluding material
notable items and related impacts, see page 125.
HSBC Holdings plc Annual Report and Accounts 2024
121
Financial review
Constant currency revenue and profit before tax excluding notable items and strategic transactions
Year ended
2024
2023
2022
$m
$m
$m
Revenue
Reported
65,854
66,058
50,620
Notable items
1,580
(335)
3,602
Reported revenue excluding notable items
67,434
65,723
54,222
Currency translation1
(1,234)
(839)
Constant currency revenue excluding notable items
67,434
64,489
53,383
Constant currency impact of strategic transactions (distorting impact of operating results between periods)2
(178)
(1,446)
N/A
Constant currency revenue excluding notable items and strategic transactions
67,256
63,043
N/A
Profit before tax
Reported
32,309
30,348
17,058
Notable items
1,813
2,850
6,502
Reported profit before tax excluding notable items
34,122
33,198
23,560
Currency translation1
(518)
(503)
Constant currency profit before tax excluding notable items
34,122
32,680
23,057
Constant currency impact of strategic transactions (distorting impact of operating results between periods)2
(85)
(463)
N/A
Constant currency profit before tax excluding notable items and strategic transactions
34,037
32,217
N/A
1 Currency translation on the reported balance excluding currency translation on notable items.
2 For more details of strategic transactions, please refer to page 102.
Return on average ordinary shareholders’ equity, return on average tangible equity and return on average tangible equity excluding notable
items
2024
2023
2022
$m
$m
$m
Profit after tax
Profit attributable to the ordinary shareholders of the parent company
22,917
22,432
14,346
Impairment of goodwill and other intangible assets (net of tax)
118
43
535
Profit attributable to the ordinary shareholders, excluding goodwill and other
intangible assets impairment
23,035
22,475
14,881
Impact of notable items1
1,588
2,173
2,750
Profit attributable to the ordinary shareholders, excluding goodwill, other intangible assets impairment
and notable items
24,623
24,648
17,631
Equity
Average total shareholders’ equity
187,507
184,029
180,263
Effect of average preference shares and other equity instruments
(18,480)
(18,794)
(21,202)
Average ordinary shareholders’ equity
169,027
165,235
159,061
Effect of goodwill and other intangibles (net of deferred tax)
(11,626)
(11,480)
(10,786)
Average tangible equity
157,401
153,755
148,275
Average impact of notable items
(3,322)
(1,162)
1,565
Average tangible equity excluding notable items
154,079
152,593
149,840
%
%
%
Ratio
Return on average ordinary shareholders’ equity
13.6
13.6
9.0
Return on average tangible equity
14.6
14.6
10.0
Return on average tangible equity excluding notable items
16.0
16.2
11.8
1 For details of notable items please refer to Supplementary financial information on page 99.
From 1 January 2024, we have revised the adjustments made to
return on average tangible equity (‘RoTE’). Prior to this, we adjusted
RoTE for the impact of strategic transactions and the impairment of
our investment in Bank of Communications Co., Limited (‘BoCom’),
whereas from 1 January 2024 we have excluded all notable items.
This was intended to improve alignment with the treatment of notable
items in our other income statement disclosures. Comparatives have
been re-presented on the revised basis and we no longer disclose
RoTE excluding strategic transactions and the impairment of BoCom.
We will now target a RoTE in the mid-teens in each of the three years
from 2025 to 2027 excluding the impact of notable items.
Reconciliation of alternative performance measures
122
HSBC Holdings plc Annual Report and Accounts 2024
The following table details the adjustments made to reported results by global business:
Return on average tangible equity by global business
Year ended 31 Dec 2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Profit before tax
12,182
11,860
7,063
1,204
32,309
Tax expense
(2,173)
(2,834)
(1,573)
(730)
(7,310)
Profit after tax
10,009
9,026
5,490
474
24,999
Less attributable to: preference shareholders, other equity holders, non-controlling
interests
(824)
(471)
(520)
(267)
(2,082)
Profit attributable to ordinary shareholders of the parent company
9,185
8,555
4,970
207
22,917
Other adjustments
(110)
314
(202)
116
118
Profit attributable to ordinary shareholders
9,075
8,869
4,768
323
23,035
Average tangible shareholders’ equity
31,267
44,357
36,622
45,155
157,401
Return on average tangible equity (%)
29.0
20.0
13.0
0.7
14.6
Year ended 31 Dec 2023
Profit before tax
11,544
13,280
5,924
(400)
30,348
Tax expense
(2,141)
(2,945)
(1,165)
462
(5,789)
Profit after tax
9,403
10,335
4,759
62
24,559
Less attributable to: preference shareholders, other equity holders, non-controlling
interests
(828)
(485)
(588)
(226)
(2,127)
Profit attributable to ordinary shareholders of the parent company
8,575
9,850
4,171
(164)
22,432
Other adjustments
(221)
364
168
(268)
43
Profit attributable to ordinary shareholders
8,354
10,214
4,339
(432)
22,475
Average tangible shareholders’ equity
29,352
43,687
38,036
42,680
153,755
Return on average tangible equity (%)
28.5
23.4
11.4
(1.0)
14.6
Net asset value and tangible net asset value per ordinary share
2024
2023
2022
$m
$m
$m
Total shareholders’ equity
184,973
185,329
177,833
Preference shares and other equity instruments
(19,070)
(17,719)
(19,746)
Total ordinary shareholders’ equity
165,903
167,610
158,087
Goodwill, PVIF and intangible assets (net of deferred tax)
(11,608)
(11,900)
(11,160)
Tangible ordinary shareholders’ equity
154,295
155,710
146,927
Basic number of $0.50 ordinary shares outstanding after deducting own shares held
17,918
19,006
19,739
Value per share
$
$
$
Net asset value per ordinary share
9.26
8.82
8.01
Tangible net asset value per ordinary share
8.61
8.19
7.44
Post-tax return and average total shareholders’ equity on average total assets
2024
2023
2022
$m
$m
$m
Profit after tax
24,999
24,559
16,249
Average total shareholders’ equity
187,507
184,029
180,263
Average total assets
3,062,474
3,059,887
3,017,495
Ratio
%
%
%
Post-tax return on average total assets
0.8
0.8
0.5
Average total shareholders’ equity to average total assets
6.12
6.01
5.97
HSBC Holdings plc Annual Report and Accounts 2024
123
Financial review
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers and expected credit
losses and other credit impairment charges as % of average gross loans and advances to customers, including held for sale
2024
2023
2022
$m
$m
$m
Expected credit losses and other credit impairment charges (‘ECL’)
(3,414)
(3,447)
(3,584)
Currency translation
—
188
(31)
Constant currency
(3,414)
(3,259)
(3,615)
Average gross loans and advances to customers
952,484
955,585
1,014,148
Currency translation
(16,140)
(10,586)
(17,751)
Constant currency
936,344
944,999
996,397
Average gross loans and advances to customers, including held for sale
968,785
1,020,992
1,035,678
Currency translation
(17,394)
(14,752)
(18,233)
Constant currency
951,391
1,006,240
1,017,445
Ratio
%
%
%
Expected credit losses and other credit impairment charges as % of average gross loans and advances to
customers
0.36
0.34
0.36
Expected credit losses and other credit impairment charges as % of average gross loans and advances to
customers, including held for sale
0.36
0.32
0.36
Target basis operating expenses
Target basis operating expenses for 2024 was computed by excluding
the direct cost impact of our retail banking operations in France and
Canada banking business disposals from the 2023 baseline. It is
measured on a constant currency basis and excludes notable items
and the impact of retranslating the prior year results of
hyperinflationary economies at constant currency, which we consider
to be outside of our control. We consider target basis operating
expenses to provide useful information to investors by quantifying
and excluding the notable items that management considered when
setting and assessing cost-related targets. In 2024, we targeted
operating expenses growth of approximately 5% compared with
2023. This target reflected our business plan for 2024, which included
an increase in staff compensation, higher spend and investment in
technology for growth and efficiency, in part mitigated by cost savings
from actions taken during 2023. We are targeting growth in target
basis operating expenses of approximately 3% in 2025 compared
with 2024.
Our target basis operating expenses for 2025 excludes the direct cost
impact of the business disposals in Canada and Argentina, notable
items and the impact of retranslating the prior year results of
hyperinflationary economies at constant currency.
Our cost target includes the impact of simplification-related saves
associated with our announced reorganisation, see page 103, which
aims to generate approximately $0.3bn of cost reductions in 2025,
with a commitment to an annualised reduction of $1.5bn in our cost
base expected by the end of 2026. To deliver these reductions, we
plan to incur severance and other up-front costs of $1.8bn over 2025
and 2026, which will be classified as notable items.
We do not reconcile our forward target basis operating expenses
guidance to the reported operating expenses.
Target basis operating expenses
2024
2023
$m
$m
Reported operating expenses
33,043
32,070
Notable items
(233)
(185)
– disposals, acquisitions and related costs
(199)
(321)
– restructuring and other related costs1
(34)
136
Currency translation2
(577)
Excluding the constant currency impact of the sale of our retail banking operations
in France and banking business in Canada3
(162)
(976)
Excluding the impact of retranslating prior year costs of hyperinflationary economies at a constant currency foreign exchange rate
742
Target basis operating expenses
32,648
31,074
1 Amounts relate to restructuring provisions recognised in 2024 and reversals of restructuring provisions recognised during 2022.
2 Currency translation on reported operating expenses, excluding currency translation on notable items.
3 This represents the business as usual costs which are not classified as notable items relating to our retail banking operations in France and banking business in
Canada, on a constant currency basis. This does not include the disposal costs which relate to these transactions.
Reconciliation of alternative performance measures
124
HSBC Holdings plc Annual Report and Accounts 2024
Basic earnings per share excluding material notable items and related impacts
Basic earnings per share excluding material notable items and related impacts
2024
2023
$m
$m
Profit attributable to shareholders of company
23,979 23,533
Coupon payable on capital securities classified as equity
(1,062) (1,101)
Profit attributable to ordinary shareholders of company
22,917 22,432
Impairment of interest in associate1
— 3,000
Gain on acquisition of SVB UK
(5) (1,549)
Impact of the sale of our retail banking operations in France
(56) 108
Impact of the sale of our banking business in Canada2
(4,963) (311)
Impact of the sale of our business in Argentina
6,161 —
Profit attributable to ordinary shareholders of company excluding material notable items and related impacts
24,054 23,680
Number of shares
Weighted average basic number of ordinary shares (millions) after deducting own shares held
18,357 19,478
Basic earnings per share ($)
1.25 1.15
Basic earnings per share excluding material notable items and related impacts ($)
1.31 1.22
Dividend per ordinary share (in respect of the period) ($)3
0.87 0.61
Dividend payout ratio (%) (dividend per ordinary share divided by basic earnings per share excluding material notable items and
related impacts)
50% 50%
1 Represents an impairment loss of $3bn recognised in respect of the Group’s investment in BoCom in 2023. See Note 18 on page 402.
2 Represents gain on sale of business in Canada recognised on completion, inclusive of the earnings recognised by the banking business from 30 June 2022, the
recycling of losses in foreign currency translation reserves and other reserves, and gain on the foreign exchange hedging of the sale proceeds.
3 In 2024, dividend per share includes the special dividend of $0.21 per ordinary share arising from the proceeds of the sale of our banking business in Canada to
Royal Bank of Canada.
Material notable items are a subset of notable items. Material notable
items are components of our income statement that management
would consider as outside the normal course of business and
generally non-recurring in nature, which are excluded from our
dividend payout ratio calculation and our earnings per share measure,
along with related impacts. Categorisation as a material notable item
is dependent on the nature of each item in conjunction with the
financial impact on the Group’s income statement.
Related impacts include those items that do not qualify for
designation as notable items but whose adjustment is considered by
management to be appropriate for the purposes of determining the
basis for our dividend payout ratio calculation.
Material notable items in 2024 and comparative periods included the
sale of our business in Argentina, the sale of our retail banking
operations in France, the sale of our banking business in Canada, the
gain following the acquisition of SVB UK and the impairment of our
investment in BoCom. In determining this measure, we also excluded
HSBC Bank Canada‘s financial results from the 30 June 2022 net
asset reference date until completion of the sale, as the gain on sale
was recognised through a combination of the consolidation of HSBC
Bank Canada‘s results in the Group‘s results since this date, and the
remaining gain on sale recognised at completion. For the sale of our
business in Argentina, between signing and closing, the loss on sale
varied by changes in the net asset value of the disposed business and
associated hyperinflation and foreign currency translation, and in the
fair value of consideration including price adjustments and migration
costs. There were no additional related impacts identified, and the
ongoing profits from HSBC Argentina were not excluded from our
basic earnings per share excluding material notable items and related
impacts.
Multi-jurisdictional client revenue
Multi-jurisdictional client revenue is a financial metric we use to
assess our ability to drive value from our international network.
In our wholesale businesses, we identify a client as multi-jurisdictional
if they hold a relationship with us that generates revenue in any
market outside of where the primary relationship is managed. A client
is defined as a mastergroup (HSBC’s own client groupings) that
includes both the parent and, where relevant, any subsidiaries.
Multi-jurisdictional client revenue is a component of wholesale client
revenue and represents the total client revenue we generate from
multi-jurisdictional clients. Wholesale client revenue is derived by
excluding from CMB and GBM reported revenue the revenue we
generate from client facilitation in Fixed Income and Equities, as well
as other non-client revenue. In 2023, we also excluded the gain on
the acquisition of SVB UK.
Wholesale multi-jurisdictional client revenue
2024
2023
$bn
$bn
CMB and GBM revenue
39.1
39.0
Allocated revenue and other1
(1.3)
0.9
Client facilitation in Fixed Income and Equities
(5.6)
(4.8)
Gain on acquisition of SVB UK
—
(1.6)
Wholesale client revenue
32.3
33.5
– clients banked in multiple jurisdictions (‘multi-jurisdictional’)
20.0
20.4
– domestic only clients
12.3
13.1
1 Including allocations of Market Treasury revenue, HSBC Holdings interest expense and hyperinflationary accounting adjustments, and interest earned on capital
held in the global businesses.
HSBC Holdings plc Annual Report and Accounts 2024
125
Financial review
126
HSBC Holdings plc Annual Report and Accounts 2024
Risk
review
Our risk review outlines our approach to risk
management, how we identify and monitor top
and emerging risks, and the actions we take to
mitigate them. In addition, it explains our
material banking risks, including how we
manage capital.
127
Our approach to risk
131
Top and emerging risks
137
Our material banking risks
139
Credit risk
200
Treasury risk
216
Market risk
219
Climate risk
228
Resilience risk
229
Regulatory compliance risk
229
Financial crime risk
230
Model risk
231
Insurance manufacturing operations risk
Bangkok, Thailand, 1990s. Customer Service Desk.
Our approach to risk
Our risk appetite
Our risk appetite defines the level and types of risk that we are willing
to take, while informing the financial planning process and guiding
strategic decision making. Our risk appetite is defined as the
aggregate level of risk that we are comfortable to take to achieve our
strategic objectives. Risk appetite also provides a mechanism for non-
executive directors and executive directors to collectively establish
the Group’s willingness to engage in certain activities and assess
these activities.
Enterprise-wide application
Our risk appetite is expressed holistically through various risk
management mechanisms and activities, in both quantitative and
qualitative terms. The Group Risk and Compliance function carried out
a review in 2024, which led to enhancements to our Global Risk
Appetite Framework to help ensure it remains aligned to industry best
practices, regulatory expectations and our strategic goals. Our Global
Risk Appetite Framework continues to evolve and expand its scope as
part of our periodic review process.
The Board reviews and approves the Group’s risk appetite regularly to
make sure it remains fit for purpose. The Group’s risk appetite is
considered, developed, and enhanced through the following
principles:
–
alignment with our strategy, purpose, values, external risk
environment, reputational and customer needs;
–
compliance with applicable laws, regulations and regulatory
priorities;
–
forward-looking insights into future risk exposure;
–
sufficiency of available capital, liquidity and balance sheet leverage
to absorb the risks;
–
capacity and capabilities of people to manage the risk landscape;
–
functionality, capacity and resilience of available systems to
manage the risk landscape;
–
effectiveness of the applicable control environment to mitigate
risk; and
–
internally and externally disclosed commitments.
We formally articulate our risk appetite through our Risk Appetite
Statement (‘RAS’). Setting out our risk appetite helps ensure that we
agree a suitable level of risk for our strategy. In this way, risk appetite
informs our financial planning process and helps senior management
to allocate capital to business activities, services and products.
At a Group level, performance against the RAS is reported to the
Group Risk Management Meeting alongside key risk indicators to
support targeted insight and discussion of breaches of risk appetite
and any associated mitigating actions. This reporting allows risks to
be promptly identified and mitigated, and informs risk-adjusted
remuneration to drive a strong risk culture.
Coverage of each principal subsidiary and material operating entity is
monitored through a RAS, which helps ensure they remain aligned
with the Group’s RAS. Each RAS and business activity is guided and
underpinned by qualitative principles and/or quantitative metrics.
Risk management
We recognise that the primary role of risk management is to help
protect our customers, business, colleagues, shareholders and the
communities that we serve, while ensuring we are able to support
our strategy and provide sustainable growth. This is supported
through our three lines of defence model described on page 128.
In addition, we recognise the importance of a strong culture, which
refers to our shared attitudes, beliefs, values and standards that
shape behaviours including those related to risk awareness, risk
taking and risk management. All our people are responsible for the
management of risk, with ultimate supervisory oversight residing with
the Board.
The implementation of our business strategy remains a key focus. As
we implement change initiatives, we actively manage the execution
risks. We also perform periodic risk assessments, including against
strategies, to help ensure retention of key personnel for our continued
safe operation.
We aim to use a comprehensive risk management approach across
the organisation and across all risk types, underpinned by our culture
and values. This is outlined in our risk management framework,
including the key principles and practices that we employ in managing
material risks, both financial and non-financial. The framework fosters
continuous monitoring and promotes risk awareness and a positive
risk culture. It encourages a sound operational and strategic decision-
making and escalation process. It also supports a consistent approach
to identifying, assessing, managing and reporting the risks we accept
and incur in our activities, with clear accountabilities. We actively
review and enhance our risk management framework and our
approach to managing risk.
Group Risk and Compliance is independent from the global
businesses, including our sales and trading functions. It provides
challenge, oversight and appropriate balance in risk/return decisions.
HSBC Holdings plc Annual Report and Accounts 2024
127
Risk review
Our risk management framework
The following diagram and descriptions summarise key aspects of the risk management framework, including governance, structure, risk
management tools and our culture, which together help align employee behaviour with risk appetite.
Key components of our risk management framework
HSBC values and risk culture
Risk governance
Non-executive risk governance
The Board approves the Group’s risk appetite, plans and performance
targets. It sets the ‘tone from the top’ and is advised by the Group Risk
Committee (see page 251).
Executive risk governance
Our executive risk governance structure is responsible for the enterprise-
wide management of all risks, including key policies and frameworks for the
management of risk within the Group (see pages 128 and 137).
Roles and
responsibilities
Three lines of defence model
Our ‘three lines of defence’ model defines roles and responsibilities for risk
management. An independent Group Risk and Compliance function helps
ensure the necessary balance in risk/return decisions (see page 128).
Processes and tools
Risk appetite
The Group has processes in place to identify, assess, monitor, manage and
report risks to help ensure we remain within our risk appetite and to
anticipate, prevent, respond to, and recover from, significant operational
disruptions.
Enterprise-wide risk management tools
Active risk management: identification/assessment,
monitoring, management and reporting
Operational resilience
Internal controls
Policies and procedures
Policies and procedures define the minimum requirements for the controls
required to manage our risks.
Control activities
Operational and resilience risk management defines minimum standards
and processes for managing operational risks and internal controls.
Systems and infrastructure
The Group has systems and processes that support the identification,
capture and exchange of information to support risk management activities.
Risk governance
The Board has ultimate supervisory responsibility for the effective
management of risk and approves our risk appetite.
The Group Chief Risk and Compliance Officer, supported by members
of the Group Risk Management Meeting, holds executive
accountability for the ongoing monitoring, assessment and
management of the risk environment and the effectiveness of the risk
management framework.
The Group Chief Risk and Compliance Officer is also responsible for
the oversight of reputational risk, with the support of the Group
Reputational Risk Committee. The Group Reputational Risk
Committee considers matters arising from customers, transactions
and third parties that either present a serious potential reputational
risk to the Group or merit a Group-led decision to help enable a
consistent risk management approach across the regions, global
businesses and global functions. Further details can be found under
the ‘Reputational risk’ section of www.hsbc.com/who-we-are/esg-
and-responsible-business/managing-risk.
Day-to-day responsibility for risk management is delegated to senior
managers with individual accountability for decision making. All our
people have a role to play in risk management. These roles are
defined using the three lines of defence model, which takes into
account our business and functional structures, including regulatory
compliance and financial crime, as described in the following
commentary, ‘Our responsibilities’.
We use a defined executive risk governance structure to help enable
appropriate oversight and accountability of risk, which facilitates
reporting and escalation to the Group Risk Management Meeting.
This structure is summarised in the following table.
Authority
Membership
Responsibilities include:
Group Risk Management
Meeting
Group Chief Risk and Compliance Officer
Group Chief Legal Officer
Group CEO
Group CFO
Group Head of Financial Crime and Group
Money Laundering Reporting Officer
All other Group Executive Committee
members
– Supporting the Group Chief Risk and Compliance Officer in exercising Board-delegated
risk management authority
– Overseeing the implementation of risk appetite and the risk management framework
– Forward-looking assessment of the risk environment, analysing possible risk impacts
and taking appropriate action
– Monitoring all categories of risk and determining appropriate mitigating action
– Promoting a supportive Group culture in relation to risk management and conduct
Group Risk and Compliance
Executive Committee
Group Chief Risk and Compliance Officer
Chief risk and compliance officers of
HSBC’s global businesses
Regional chief risk and compliance
officers and chief risk officers
Heads of Global Risk and Compliance
sub-functions
– Supporting the Group Chief Risk and Compliance Officer in providing strategic
direction for the Group Risk and Compliance function, setting priorities and providing
oversight
– Overseeing a consistent approach to accountability for, and mitigation of, risk and
compliance across the Group
Governance structure for the management of risk and compliance
Risk review
128
HSBC Holdings plc Annual Report and Accounts 2024
Authority
Membership
Responsibilities include:
Global business/regional risk
management meetings
Global business/regional chief risk and
compliance officers and chief risk officers
Global business/regional chief executive
officers
Global business/regional chief financial
officers
Global business/regional heads of global
functions
– Supporting the Group Chief Risk and Compliance Officer in exercising Board-delegated
risk management authority
– Forward-looking assessment of the risk environment
– Implementation of risk appetite and the risk management framework
– Monitoring all categories of risk and overseeing appropriate mitigating actions
– Embedding a supportive culture in relation to risk management and controls
Governance structure for the management of risk and compliance (continued)
The Board committees with responsibility for oversight of risk-related matters are set out on page 249.
Treasury risks are the responsibility of the Group Executive Committee and the Group Risk Committee. Global Treasury actively manages these risks, supported
by the Holdings Asset and Liability Management Committee (‘ALCO’) and local ALCOs, overseen by Treasury Risk Management and the Group Risk
Management Meeting. Further details on treasury risk management are set out on page 200.
Our responsibilities
All our people are responsible for identifying and managing risk within
the scope of their roles. Roles are defined using the three lines of
defence model, which takes into account our business and functional
structures as described below.
Three lines of defence
To create a robust control environment to manage risks, we use an
activity-based three lines of defence model. This model delineates
management accountabilities and responsibilities for risk
management and the control environment.
The model underpins our approach to risk management by clarifying
responsibility and encouraging collaboration, as well as enabling
effective coordination of risk and control activities. The three lines of
defence are summarised below:
–
The first line of defence owns the risks and is responsible
for identifying, recording, reporting and managing these risks in
line with risk appetite, including that the right controls and
assessments are in place to mitigate them.
–
The second line of defence challenges the first line of defence on
effective risk management, and provides advice, guidance and
assurance of the first line of defence to help ensure it is managing
risk effectively.
–
The third line of defence is our Global Internal Audit function,
which provides independent assurance as to whether our risk
management approach and processes are designed and operating
effectively.
Group Risk and Compliance function
Our Group Risk and Compliance function is responsible for the
Group’s risk management framework. This responsibility includes
establishing global policy, monitoring risk profiles, and identifying and
managing forward-looking risk. Group Risk and Compliance is made
up of sub-functions covering all risks to our business. Forming part of
the second line of defence, the Group Risk and Compliance function
is independent from the global businesses, including sales and trading
functions. It provides challenge, appropriate oversight and balance in
risk/return decisions.
Responsibility for minimising both financial and non-financial risk,
including regulatory compliance and financial crime, lies with our
people. They are required to manage the risks of the business and
operational activities for which they are responsible. We maintain
adequate oversight of our risks through our various specialist risk
stewards and the collective accountability held by our chief risk and
compliance officers.
We have continued to strengthen the control environment and our
approach to the management of risk, as set out in our risk
management framework. Our ongoing focus is on helping to enable
more effective oversight and better end-to-end identification and
management of financial and non-financial risks. This is overseen by
the Enterprise Risk Management function, headed by the Global Head
of Enterprise Risk Management.
Stress testing and recovery planning
Our stress testing programme assesses our capital and liquidity
strength through an examination of our resilience to external shocks,
and forms part of our risk management and capital and liquidity
planning. As well as undertaking regulatory-driven stress tests, we
conduct our own internal stress tests to understand the nature and
level of material risks, quantify the impact of such risks and develop
plausible mitigating actions. The outcome of a stress test provides
management with key insights into the impact of severely adverse
events on the Group and provides an indication to regulators of the
Group’s resilience to shocks and financial stability.
Internal stress tests
Our internal capital assessment uses a range of stress scenarios that
explore risks identified by management. They include potential
adverse macroeconomic, geopolitical, climate and operational risk
events, as well as other potential events that are specific to HSBC.
The selection of stress scenarios is based upon the output of our
identified top and emerging risks and our risk appetite processes.
Stress testing analysis helps management understand the nature and
extent of vulnerabilities to which the Group is exposed. Using this
information, management decides whether risks can or should be
mitigated through management actions or, if they were to crystallise,
be absorbed through capital and liquidity. This in turn informs
decisions about preferred capital and liquidity levels and allocations.
During 2024, we completed a Group-wide internal stress test
alongside testing of the Group’s strategy, otherwise known as the
corporate plan, to test and inform our strategy and assumptions. The
stress scenario assessed the impact of two contrasting scenarios
envisioning severe macroeconomic conditions over a five-year period.
These scenarios reflected the uncertain inflation and interest rate
environment, heightened geopolitical tensions, banking sector
challenges and global economic stress.
In addition to the Group-wide stress testing scenarios, each major
subsidiary conducts regular macroeconomic and event-driven scenario
analysis specific to its region. They also participate, as required, in the
regulatory stress testing programmes of the jurisdictions in which
they operate, such as stress tests required by the Bank of England
(‘BoE’) in the UK, the Federal Reserve Board (‘FRB’) in the US, and
the Hong Kong Monetary Authority (‘HKMA’) in Hong Kong.
We also conduct reverse stress tests each year at Group level and,
where required, at subsidiary entity level to understand potential
extreme conditions that would make our business model non-viable.
Reverse stress testing identifies potential stresses and vulnerabilities
we might face, and helps inform early warning triggers, management
actions and contingency plans designed to mitigate risks.
HSBC Holdings plc Annual Report and Accounts 2024
129
Risk review
Recovery and resolution plans
Recovery and resolution plans form part of the integral framework
safeguarding the Group’s financial stability under severe stress. The
Group recovery plan, together with stress testing, helps us identify
credible recovery options that can be implemented under a range of
idiosyncratic and market-wide stress scenarios. The aim is to mitigate
the potential shortfall in capital and liquidity pressures. The Group
continues to develop its recovery and resolution capabilities, including
in relation to the Resolvability Assessment Framework.
Key developments in 2024
In 2024, we continued to manage risks related to macroeconomic and
geopolitical uncertainties and develop risk management capabilities
through the continued enhancement of our risk management
framework. We also retained our focus on risk transformation and
financial crime and continued to assess the Group’s operational
resilience capability while prioritising the most significant enterprise
risks. We made progress with, and continue to develop capabilities to
address key risks. More specifically, we sought to enhance our risk
management in the following areas:
–
We are advancing on our comprehensive initiative aimed at
strengthening our global regulatory reporting processes and
making them more sustainable. This multifaceted programme
includes enhancing data, consistency and controls.
–
We are further strengthening our control environment through the
delivery of a new Global Control Oversight function which aims to
help drive a centralised and consistent approach to controls
oversight across the first line of defence business and process
owners.
–
We continue to maintain a focus on our technology and
cybersecurity controls to improve the resilience and security of our
technology services in response to the heightened external threat
environment.
–
We have improved the quality of our strategic change investment
processes and associated control monitoring and are seeking to
transition to a more agile approach to delivery of complex
transformation portfolios and initiatives.
–
We continue to enhance our model risk framework in response to
changes in regulation and external factors. AI and machine learning
models remain a key focus. Progress has been made in enhancing
governance activity in this area with particular focus on generative
AI due to the pace of technological change and regulatory and
wider interest in adoption and usage.
–
We enhanced our processes, framework and controls to improve
the oversight of our material third parties. We have strengthened
our due diligence and monitoring capabilities, with respect to the
financial stability of our third parties to better manage our supply
chain and operational resilience. We will continue to assess and
manage our operational resilience.
–
Through our climate risk programme, we made progress on
embedding climate considerations throughout our organisation,
including through risk policy updates. We also developed risk
metrics to monitor and manage exposures, and further enhanced
our internal climate scenario analysis. We continue to implement
our climate risk programme to complete our annual materiality
assessment and make changes to our policies, processes and
capabilities to better embed climate considerations throughout our
organisation.
–
We deployed industry-leading technology and advanced analytics
capabilities into new markets to improve our ability to identify
suspicious activities and prevent financial crime. We will continue
to evaluate technological solutions to improve our capabilities in
the detection and prevention of financial crime.
–
We continued to embed our regulatory management systems
focusing on forward-looking analysis, regulatory mapping, and
regulatory content for our inventory.
–
We continued to enhance our frameworks, policies and
governance processes to embed regulatory requirements.
f
Risk review
130
HSBC Holdings plc Annual Report and Accounts 2024
Top and emerging risks
We use a top and emerging risks process to provide a forward-looking
view of issues with the potential to threaten the execution of our
strategy or operations over the medium to long term.
We proactively assess the internal and external risk environment, as
well as review the themes identified across our regions and global
businesses, for any risks that may require global escalation. We
update our top and emerging risks as necessary.
Our current top and emerging risks are as follows.
Externally driven
Geopolitical and macroeconomic risks
Elections and subsequent changes of government during 2024 have
created uncertainty as domestic and foreign policy priorities have
shifted. The US in particular is expected to continue to bring about
changes to economic and foreign policy that will have broad economic
and geopolitical implications.
Key economic and financial risks are monitored closely. Major
markets, including the US and UK, continued to grow during the
second half of 2024, due to expansionary fiscal policies and the
positive impact of monetary easing on domestic demand and
investment. Similarly, Hong Kong and mainland China also continued
to grow, despite ongoing declines in house prices and weakness in
consumer spending.
The outlook for 2025 remains uncertain as the new US administration
intends to enact a significant change in economic and foreign policies
that could have an uncertain impact on global growth, inflation and
interest rates. In particular, the prospect of additional US tariffs and
retaliatory actions on trade has started to weigh on economic growth
forecasts and has raised future inflation expectations. Consequently,
markets now expect that major central banks will adopt a more
cautious approach to lowering policy interest rates during the course
of 2025.
The prospective impact on individual economies from the imposition
of higher US tariffs will depend on the breadth and level of the
increases and the dependence of the relevant countries’ exports on
US import demand. Emerging markets with higher levels of US dollar-
denominated debt and weaker public finances could be further
impacted by higher US interest rates and US dollar strength which
could result in higher repayment costs and refinancing risks and the
associated possibility of sovereign rating downgrades.
The country and sector implications of changing global trade policies
remains an area that is closely monitored. The implications for export
demand from mainland China and Hong Kong is a key area of
concern.
Markets continue to finance high public deficits, but debt
sustainability remains a risk when set against a backdrop of more
uncertain global growth prospects and a higher interest rate
environment. Debt levels continue to rise in major markets as
demands grow on government budgets from rising social welfare
costs, defence and climate transition. We are monitoring the fiscal
and market implications of recent government changes, including in
the UK and the US, where election pledges are ambitious relative to
already stretched fiscal positions. As global yields have increased,
government bond prices have become increasingly sensitive to
differences in growth and inflation expectations between markets, as
well as the perception of fiscal and funding risks. A loss of investor
confidence could drive a rise in yields, raise funding costs for
governments and lead to tax increases and expenditure cuts that are
negative for growth. For HSBC, the risks of a sharp rise in funding
costs in our key markets relate both to the credit and refunding risks
of our customers, market pricing risks of assets held for sale, and
risks to net interest margins.
We continue to monitor real estate conditions in mainland China and
Hong Kong, where activity remains mixed. Various central
government policies have been introduced to support the property
market and wider economy, but meaningful signs of recovery are yet
to be observed, with the exception of the residential real estate
market in Hong Kong, which has seen some improvement in
sentiment and transaction volumes in the fourth quarter of 2024.
In Hong Kong, the high vacancy rate in the commercial real estate
sector and the elevated interest rate environment have added
downward pressure to the commercial real estate market.
Commercial land sales resumed during the latter part of 2024 after a
halt earlier in the year, and the recent reduction in interest rates has
provided some liquidity relief to borrowers operating in this sector.
Nevertheless, a sustainable recovery in underlying demand is yet to
materialise, so the pressure on property prices may persist. We
continue to closely monitor the risk of further credit deterioration and
defaults in the portfolio.
The Israel-Hamas conflict may resurge. While a 42-day ceasefire was
agreed in January 2025, the durability of the ceasefire remains
uncertain. The regional economic impact of this conflict was relatively
limited throughout 2024. The US and UK imposed additional sanctions
on Iran in 2024 in response to Iran’s activities and the increase in
tensions between Israel and Iran. Further sanctions may be imposed
and could increase the risk within our operations. While supply chains
have largely adapted to the Russia-Ukraine war and the conflict in the
Middle East, the disruption of key supply routes, particularly through
the Red Sea, continues to impact global supply costs. Escalation,
resurgence or other changes in the Russia-Ukraine war and the
conflict in the Middle East could impact economic activity regionally or
globally for a prolonged period, which in turn could have a material
adverse effect on the Group’s business, financial condition, results of
operations, prospects, liquidity, capital position and credit ratings.
HSBC actively monitors and responds to financial sanctions and trade
restrictions that have been adopted in response to the conflicts.
The sanctions and trade restrictions imposed by the US, the UK, and
the EU, as well as other countries, as a result of the Russia-Ukraine
war, remain complex, far-reaching and evolving. The US has
expanded the reach of its secondary sanctions regime, which includes
broad discretion to impose severe sanctions on non-US banks that are
knowingly or even unknowingly engaged in certain transactions or
services directly or indirectly involving Russia’s military-industrial
base, including certain third-party activities that are difficult to detect
or beyond HSBC’s control. The imposition of such sanctions against
any non-US HSBC entity could result in significant adverse
commercial, operational and reputational consequences for HSBC. In
response to such sanctions and trade restrictions, as well as asset
flight, Russia has implemented certain countermeasures, including
the expropriation of foreign assets.
Following a strategic review in 2022, HSBC Europe BV (a wholly-
owned subsidiary of HSBC Bank plc) entered into an agreement to
sell its wholly-owned subsidiary HSBC Bank Russia (RR) (Limited
Liability Company), which was completed in May 2024.
Global tensions over trade and technology are resulting in divergent
regulatory standards and compliance regimes, presenting long-term
strategic challenges for multinational businesses. The relationships
between China and several other countries, including the US and the
UK, remain complex.
To date, the US, the UK, the EU and other countries have imposed
various sanctions and trade restrictions on Chinese persons and
companies, and there is a continued risk of additional sanctions and
trade restrictions or tariffs being imposed by the US and other
governments in relation to, among other things, alleged human rights
abuses, advances in certain sensitive technologies, territorial conflicts,
and the illicit trade of fentanyl and other synthetic opioids. Strategic
competition with China has the potential to impact the Group's
operations and global supply chains remain vulnerable to a
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Risk review
deterioration in the relationship between China and other countries.
For example, the US recently imposed a new programme restricting
certain US outbound investments in Chinese companies engaged in
sensitive technology sectors and the EU is considering a similar
programme. In addition, during 2024 both the US and the EU raised
the rate at which they levy tariffs on a range of Chinese imports,
including electric vehicles. These have been imposed on the basis of
unfair competition, where the Chinese government is accused of
providing unfair subsidies to industry.
China, in turn, imposed a number of its own sanctions and trade
restrictions that target, or provide authority to target, foreign
individuals or companies as well as certain goods such as rare earth
minerals and metals, and technology and services. These, as well as
certain other retaliatory measures, have been and may continue to be
imposed against certain countries, businesses and individuals.
Existing and additional sanctions, trade restrictions, counter-sanctions
and other retaliatory measures relating to the foregoing or other
geopolitical tensions may adversely affect the Group, its customers
and the markets in which the Group operates by creating regulatory,
reputational and market risks, including additional inflationary
pressures, and a more complex operating environment.
As the geopolitical landscape evolves, compliance by multinational
corporations with their legal or regulatory obligations in one
jurisdiction may be seen as supporting the law or policy objectives of
that jurisdiction over another, creating additional legal, regulatory,
reputational and political risks for the Group. We maintain dialogue
with our regulators in various jurisdictions on the impact of legal and
regulatory obligations on our business and customers.
The financial impact on the Group of geopolitical risks in Asia is
heightened due to the region’s relatively high contribution to the
Group’s profitability, particularly in Hong Kong.
While it is the Group‘s policy to comply with all applicable laws and
regulations of all jurisdictions in which it operates, geopolitical
tensions and potential ambiguities in the Group’s compliance
obligations continue to present challenges and risks for the Group,
and could have a material adverse impact on the Group’s strategy,
business, customers, operations, financial results and reputation.
More stringent data privacy, national security and cybersecurity laws
in a number of markets could pose potential challenges to intra-Group
data sharing. These developments may affect our ability to manage
financial crime risks across markets due to limitations on cross-border
transfers of personal information.
Provisioning against credit loss is conducted under the IFRS 9
‘Financial Instruments’ (’IFRS 9’) calculations of ECL, which use
forward-looking scenarios that incorporate the economic and financial
risks detailed above.
Key considerations in our calculation of ECLs included inflationary
pressures, interest rates and changes to economic and financial
policies. In the fourth quarter of 2024, to address heightened policy
uncertainty following the US election and to overcome any lags in
consensus forecasts, an adjustment factor based on more recent
views of expected tariffs and other policy changes was modelled and
then applied to each of the economic scenarios. The effect was to
lower growth expectations in our major markets, while the impact on
inflation and interest rates was varied.
Following the adjustment the Central scenario continues to be
assigned the highest probability weighting across all of our major
markets. Outer scenarios have incorporated more adverse tariff
escalations and the escalation of key geopolitical risks.
There remains uncertainty regarding the adequacy of our models to
reflect credit losses under emerging risks which are not captured
under the historical loss experience of our models, or to adequately
distinguish risks for specific sectors or portfolios.
The above risks could also have an impact on our customers and we
continue to closely monitor the potential impacts and offer support to
our customers in line with regulatory, government and wider
stakeholder expectations.
For further details of our Central and other scenarios, see ‘Measurement
uncertainty and sensitivity analysis of ECL estimates’ on page 148.
Mitigating actions
–
We closely monitor geopolitical and economic developments in
key markets and sectors and undertake scenario analysis where
appropriate. This helps us to take actions to manage our portfolios
where necessary, including through enhanced monitoring,
amending our risk appetite and/or reducing limits and exposures.
–
We stress test portfolios of particular concern to identify
sensitivity to loss under a range of scenarios, with management
actions being taken to rebalance exposures and manage risk
appetite where necessary.
–
We apply management judgemental adjustments where modelled
ECL does not fully reflect the identified risks and related
uncertainty, or to capture significant late-breaking events.
–
We regularly review key portfolios – including our commercial real
estate portfolio – to help ensure that individual customer or
portfolio risks are understood and that our ability to manage the
level of facilities offered through any downturn is appropriate.
–
We continue to seek to manage sanctions and trade restrictions
through the use of reasonably-designed policies, procedures and
controls, which are subject to ongoing testing and enhancements.
–
We have taken steps, where necessary, to enhance physical
security in geographical areas deemed to be at high risk from
terrorism and military conflicts.
Technology and cybersecurity risk
Like other organisations, we operate in an extensive and complex
technology landscape. We need to remain resilient in order to support
customers, our colleagues and financial markets globally. Risks arise
where, for example, technology is not understood, maintained or
developed appropriately. We also continue to operate in an
increasingly complex cyber threat environment globally. These threats
include potential unauthorised access to systems including access to
customer data, whether ours or that of our third-party suppliers’.
These threats require ongoing investment in business and technical
controls to defend against them.
Mitigating actions
–
We continue to upgrade many of our technology systems and are
transforming how software solutions are developed, delivered,
maintained and tested as part of our investment in the Group’s
operational resilience capabilities to seek to meet the expectations
of our customers and regulators, and to help prevent disruptions to
our services.
–
Our cyber intelligence and threat analysis team continually
evaluate threat levels for the most prevalent cyber-attack types
and their potential outcomes (see page 84), and we continue to
seek to strengthen our controls to help reduce the likelihood and
impact of attacks including advanced malware, data leakage,
exposure through third parties and security vulnerabilities.
–
We continue to seek to enhance our cybersecurity capabilities,
including Cloud security, identity and access management, metrics
and data analytics, and third-party security reviews and to invest in
mitigating the potential threats of emerging technologies.
–
We regularly report and review cyber risk and control
effectiveness at executive level across global businesses,
functions and regions, as well as at non-executive Board level to
help enable appropriate visibility and governance of the risk and its
mitigating actions.
–
We participate globally in industry bodies and working groups,
working together to seek to prevent, detect and defend against
cyber-attacks on financial organisations globally.
–
We respond to attempts to compromise our cybersecurity in
accordance with our cybersecurity framework. To date, none of
these attacks have had a material impact on our business or
operations.
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HSBC Holdings plc Annual Report and Accounts 2024
Environmental, social and governance (’ESG’) risk
We are subject to financial and non-financial risks associated with
ESG-related matters, such as climate change, nature-related and
human rights issues. These matters can impact us both directly and
indirectly through our business activities and relationships. For details
of how we govern ESG, see page 74.
We may face credit losses if climate-related regulatory, legislative or
technological developments impact customers’ business models or if
extreme weather events disrupt or interrupt customers’ operations,
resulting in financial difficulty for customers and/or stranded assets,
and impacting their ability to repay their debts. Our customers may
find that their business models fail to align to a net zero economy or
face disruption to their operations or deterioration to their assets as a
result of extreme weather.
Trading losses may arise if climate change results in changes to
macroeconomic and financial variables that negatively impact our
trading book exposures.
We may also be exposed to liquidity impacts in the form of deposit
outflows due to changes in customer behaviours driven by impacts to
profitability/wealth, or from reputational concerns relating to the
progress we make towards our climate-related ambitions and targets.
We may face impacts to our real estate portfolios due to changes to
the climate, an increase in the frequency and severity of extreme
weather events and chronic shifts in weather patterns, which could
impact both property values and the ability of borrowers to afford their
mortgage payments. This may lead to the reduced availability or
increased cost of insurance, including insurance that protects property
pledged as collateral of HSBC mortgages.
Operational risk may increase if extreme weather events impact
critical operations and premises.
We may face regulatory compliance risk resulting from the increasing
pace, breadth and depth of climate-related regulatory expectations,
including on the management of climate risk, and variations in
climate-related reporting standards, requiring implementation in short
timeframes across multiple jurisdictions.
Conduct risk may arise in association with the increasing demand for
‘green’ or ‘sustainable’ products where there are differing and
developing standards or taxonomies.
We may face reputational risk arising from how we decide to support
our customers in high-emitting sectors in their transition to net zero,
the preferences of different stakeholders in relation to our approach
to the transition to net zero, and if we make insufficient progress in
achieving our climate-related ambitions and targets.
We may also be exposed to model risk, as the uncertain and evolving
impacts of climate change as well as data and methodology
limitations, present challenges to creating reliable and accurate model
outputs.
Reputational, regulatory compliance and legal risks may increase as
we make progress towards our ESG-related ambitions and targets,
with stakeholders likely to place greater focus on our actions, such as
the development of ESG-related policies, our disclosures and
financing and investment decisions relating to our ESG-related
ambitions and targets.
We may be exposed to additional risks if we fail to:
–
make sufficient progress towards our ESG-related ambitions and
targets;
–
set adequate plans to execute those plans or adapt those plans to
changes in the external environment;
–
manage the risks associated both with meeting and not meeting
our ESG-related ambitions and targets; and
–
meet evolving regulatory expectations and requirements on the
management of ESG risks.
We may face additional risks if we knowingly or unknowingly make
inaccurate, unclear, misleading, or unsubstantiated claims regarding
sustainability to our stakeholders.
We may face climate and ESG-related litigation and regulatory
enforcement risks, either directly if stakeholders think that we are not
adequately managing climate and ESG-related risks, or indirectly, if
our clients and customers are themselves the subject of litigation,
potentially resulting in the revaluation of their assets.
Requirements, policy objectives, expectations, views or market and
public perceptions and preferences in connection with the transition to a
net zero economy and ESG-related matters may vary by jurisdiction and
stakeholder, particularly in light of the differing perspectives of
stakeholders in different markets, including the UK, the US, the EU and
other markets regarding climate impacts and the nature of the
appropriate responses to climate change. We may be subject to
potentially conflicting approaches to ESG matters in certain jurisdictions,
which may impact our ability to conduct certain business within those
jurisdictions or result in additional regulatory compliance, reputational,
political or litigation risks. For example, our reputation and client
relationships may be damaged as a result of our decision to participate,
or not to participate, in certain projects perceived to be associated with
causing or exacerbating climate change, as well as any decisions we
make to continue to conduct or change our activities in response to
considerations relating to climate change, including the transition to net
zero. These risks may also arise from divergence in the implementation
of ESG, climate policy and financial regulation in the many regions in
which we operate, including initiatives to apply and enforce policy and
regulation with extraterritorial effect.
We may face financial reporting risk in relation to our climate and ESG
disclosures, as data remains of limited quality and consistency, exposing
us to the risk of using incomplete and inaccurate data and models that
could result in sub-optimal decision making. Methodologies, data,
scenarios and industry standards that we have used may evolve over
time in line with market practice, regulation or developments in science,
where applicable. Any such developments in methodologies and
scenarios, and changes in the availability, accuracy and verifiability of
data over time and our ability to collect and process such data, exposes
us to financial reporting risk in relation to our climate and ESG
disclosures. This could result in revisions to our internal measurement
frameworks as well as reported data going forward, including on
financed emissions, meaning that such data may not be reconcilable or
comparable year on year. We may also have to re-evaluate our progress
towards our ESG-related ambitions and targets in the future.
We may also be exposed to nature-related risks beyond climate change.
These risks may arise when the provision of ecosystem services, such
as water availability, air quality and soil quality, is compromised, primarily
by the five key drivers of nature loss: changes in land/freshwater/sea-
use; climate change; pollution of air, water and soil; over-exploitation of
natural resources; and invasive alien species. They can manifest
themselves in a variety of ways for both HSBC and its customers,
including through macroeconomic, market, credit, reputational,
regulatory compliance and legal risks.
Regulation and disclosure requirements in relation to human rights
are increasing. Businesses are expected to be transparent about their
efforts to identify and respond to the risk of adverse human rights
impacts arising from their business activities and relationships. Failure
to manage this risk may negatively impact people and communities,
which in turn may result in reputational, regulatory compliance and
legal risks for HSBC.
Mitigating actions
–
The Environmental Risk Steering Meeting provides oversight of
environmental risk and the risk of greenwashing. For further
details of the Group’s ESG governance structure, see page 74.
–
Our climate risk programme continues to support the development
of our climate risk management capabilities across four key pillars:
governance and risk appetite, risk management, stress testing and
scenario analysis, and disclosures.
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133
Risk review
–
We continue to enhance our approach to managing and mitigating
the risk of greenwashing.
–
Our sustainability risk policies form part of our broader risk
management framework and are important mechanisms for
managing risks. Our sustainability risk policies focus on mitigating
reputational, credit, legal and other risks related to our customers’
environmental and social impacts. For further details of our
sustainability risk policies, see page 62.
–
We are developing our understanding of nature-related risks in line
with European regulatory expectations.
–
In 2024, we focused on our approach to human rights risk
management relating to the goods and services we buy from third
parties and in respect of our business customers. For further
details of our approach to human rights risk management, see
page 75.
–
The scope of our financial reporting risk framework includes
oversight of the accuracy and completeness of climate and ESG
disclosures. Our risk appetite statement references our climate
and ESG disclosures. Our internal controls incorporate
requirements for addressing the risk of misstatement in climate
and ESG disclosures. To support this, we have developed a
framework to guide control implementation over climate and ESG
disclosures, which includes areas such as process and data
governance, and risk assessment.
–
We continue to engage with our customers, investors and
regulators proactively on the management of climate and ESG
risks. We also engage with initiatives, including the Climate
Financial Risk Forum, Task Force on Climate-related Financial
Disclosures and CDP (formerly the Carbon Disclosure Project) to
help drive best practice for climate risk management.
For further details of our approach to climate risk management, see ‘Climate
risk’ on page 219.
Our ESG review can be found on page 41.
Financial crime risk
Financial institutions remain under considerable regulatory scrutiny
regarding their ability to detect and prevent financial crime. In 2024,
these risks continued to be exacerbated by rising geopolitical tensions
and ongoing macroeconomic factors. These challenges require
managing conflicting laws and approaches to legal and regulatory
regimes, and implementing increasingly complex and less predictable
sanctions and trade restrictions.
Amid increasing cost of living pressures, we continue to face
increasing regulatory expectations with respect to managing internal
and external fraud and protecting customers. The accessibility and
increasing sophistication of generative AI brings additional financial
crime risks. While there is potential for the technology to support
financial crime detection, there is also a risk that criminals use
generative AI to perpetrate fraud, particularly scams.
The digitisation of financial services continues to have an impact on
the payments ecosystem, with an increasing number of new market
entrants and payment mechanisms, not all of which are subject to the
same level of regulatory scrutiny or regulations as banks.
Developments around digital assets and currencies have continued at
pace, with an increasing regulatory and enforcement focus on the
financial crimes linked to these types of assets.
The intersection of ESG issues and financial crime continues to pose
risks related to potential ‘greenwashing’, human rights issues and
environmental crime, as our organisation, customers and suppliers
transition to net zero. In addition, climate change itself could heighten
risks linked to vulnerable migrant populations in countries where
financial crime is already more prevalent.
We also continue to face increasing challenges presented by national
data privacy requirements, which may affect our ability to manage
financial crime risks across markets.
Mitigating actions
–
We continue to seek to manage sanctions and trade restrictions
through the use of reasonably designed policies, procedures and
controls, which are subject to ongoing testing and enhancements.
–
We continue to develop our fraud controls and invest in
capabilities to fight financial crime through the application of
advanced analytics and AI, while monitoring technological
developments and engaging with third parties.
–
We continue to assess the impact of a rapidly changing payments
ecosystem, as well as risks associated with direct and indirect
exposure to digital assets and currencies, in an effort to maintain
appropriate financial crime controls.
–
We regularly review our existing policies and control framework so
that developments relating to ESG are considered and the related
financial crime risks are mitigated to the extent possible.
–
We engage with regulators, policymakers and relevant
international bodies, seeking to address data privacy challenges
through international standards, guidance and legislation.
Digitalisation and technological
advances risk
Developments in technology and changes to regulations are enabling
new entrants to the industry, particularly with respect to payments.
This challenges us to continue innovating to address evolving
customer requirements, drive efficiency and adapt our products to
attract and retain customers. As a result, we may need to increase
investment in our business to adapt or develop products and services
to respond to our customers’ evolving needs. We aim to ensure that
new digital capabilities do not weaken our resilience or wider risk
management capabilities.
New technologies such as generative AI, large language models,
blockchain, and quantum computing offer both business opportunities
and potential risks for HSBC. As with the use of all technologies, we
aim to maximise their potential while seeking to ensure a robust
control environment is in place to help manage the inherent risks.
Mitigating actions
–
We continue to monitor this emerging risk and advances in
technology, as well as changes in customer behaviours, to
understand how these may impact our business.
–
We assess new technologies to help develop appropriate controls
and maintain resilience.
–
We closely monitor and assess financial crime risk and the impact
on payment transparency and wider payment infrastructure.
–
We conduct risk assessments and have governance in place (for
example on AI and digital assets and currencies) to help enable
Group-wide cross-risk focus on areas of emerging technology.
–
We make public commitments as to how we engage with new
technology innovation, for example publishing HSBC’s Principles
for the Ethical Use of Data and AI.
–
We continue to make improvements to our related policies and to
our control framework in order to enhance the end-to-end
management of risks from new technology innovations.
Evolving regulatory environment risk
We aim to keep abreast of the emerging regulatory compliance and
conduct risk agenda. Current focus areas include but are not limited
to: ESG developments, particularly managing the risk of
‘greenwashing’; ensuring good customer outcomes and addressing
customer vulnerabilities; enhancements to regulatory reporting
controls; employee compliance including the use of e-communication
channels; and developments in legal principles or conduct
requirements (including in relation to the risk of such developments in
one part of the financial industry being construed as applying to other
parts of the financial industry, which could lead to legal or regulatory
proceedings).
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HSBC Holdings plc Annual Report and Accounts 2024
The competitive landscape in which the Group operates may be
impacted by future regulatory changes and government intervention
including changes driven by governments adopting a pro-business
growth agenda.
Mitigating actions
–
We monitor regulatory developments to understand the evolving
regulatory landscape, and seek to respond with changes in a
timely manner.
–
We engage with governments and regulators, and respond to
consultations with a view to help shape regulations that can be
implemented effectively.
–
We hold regular meetings with relevant authorities to discuss
strategic contingency plans, including those arising from
geopolitical issues.
–
Our purpose-led conduct approach aligns to our purpose and
values, in particular the value ‘we take responsibility’.
Internally driven
Data risk
We use multiple systems and growing quantities of data to support
our customers. Risk arises if data is incorrect, unavailable, misused or
unprotected. Along with other banks and financial institutions, we
need to meet external regulatory obligations and laws that cover data,
such as the Basel Committee on Banking Supervision’s 239
guidelines and the General Data Protection Regulation.
Mitigating actions
–
Through our global data management framework, we monitor the
quality, availability and security of data that supports our
customers and internal processes. We work towards resolving any
identified data issues in a timely manner.
–
We continue to make improvements to our data policies and to our
control framework – which includes trusted sources, data flows
and data quality – in order to enhance the end-to-end management
of data risk.
–
We have established a global data management utility and
continue to simplify and unify data management activities across
the Group.
–
We seek to protect customer data through our data privacy
framework, which establishes practices, design principles and
guidelines that enable us to demonstrate compliance with data
privacy laws and regulations.
–
We continue to modernise our data and analytics infrastructure
through investments in cloud technology, data visualisation,
machine learning and AI.
–
We continue to educate our employees on data risk and data
management. We have delivered regular mandatory training
globally on how to protect and manage data appropriately.
Risks arising from the receipt of
services from third parties
We use third parties to provide a range of goods and services. It is
critical that we seek to have appropriate risk management policies,
processes and practices over the selection, governance and oversight
of third parties and their supply chain, particularly for key activities
that could affect our operational resilience. Any deficiency in the
management of risks associated with our third parties could affect our
ability to support our customers and meet regulatory expectations.
Mitigating actions
–
We continue to monitor the effectiveness of the controls operated
by our third-party providers and request third-party control reports,
where required.
–
We continued to develop the management of our intra-group
arrangements using the same control standards as we apply to
external third party arrangements.
–
We have strengthened our due diligence and monitoring
capabilities in respect of the financial stability of our third parties.
–
We have strengthened the way third-party risk is overseen and
managed across all non-financial risks, and have enhanced our
processes, framework and reporting capabilities to help improve
the visibility of risk and enable more robust management of our
material third parties by our global businesses, functions and
regions.
–
We are implementing the changes required by new regulations as
set by our regulators.
Model risk
Model risk arises whenever business decision making includes
reliance on models. We use models in both financial and non-financial
contexts, as well as in a range of business applications such as
customer selection, product pricing, financial crime transaction
monitoring, creditworthiness evaluation and financial reporting.
Assessing model performance is a continuous undertaking including
both regular monitoring of the model’s performance and more
fundamental reviews of the model construct and data.
Model risk remains a key area of focus given the regulatory scrutiny in
this area, with local regulatory exams taking place in many
jurisdictions and the PRA’s supervisory statement 1/23 (SS1/23)
coming into effect, This provided detailed principles-based guidance
on how model risk should be managed, and further developments in
policy are also expected from other regulators.
We continued to prioritise the redevelopment of internal ratings-based
(‘IRB’) and internal model methods (‘IMM’) models, in relation to
counterparty credit, as part of the IRB repair and Basel 3.1 and
Fundamental Review of the Trading Book programmes. We have a
key focus on enhancing the quality of data used as model inputs and
ensuring that models adhere to both the letter and spirit of the
regulation. Some models have been approved and a number are
pending approval decisions from the UK’s Prudential Regulation
Authority (‘PRA’) and other key regulators. We also launched a major
project to develop 32 Wholesale IRB models which are expected to
be submitted for regulatory approval over the next two and a half
years.
Focus remains on AI and machine learning models where the pace of
technological advances, including the development of generative AI,
is driving significant changes in modelling techniques, and regulators
across the globe are beginning to publish regulations and guidance.
Mitigating actions
–
We are investing in the redevelopment of our IRB models used in
our wholesale businesses to enhance our modelling capability and
help ensure we meet regulatory expectations for the adoption of
Basel 3.1 requirements.
–
We updated our Model Risk Management (‘MRM’) framework to
meet the requirements of the PRA’s SS1/23 with a programme of
work in progress to implement these changes across our model
landscape.
–
We completed a review of model tiering across the organisation
assessing the materiality and complexity of all models and
assigning a new tier which will drive the level of oversight required
at model level.
–
We introduced a new framework to govern and manage the risks
associated with Deterministic Quantitative Methods. These are
complex and material calculators, which although not technically
models, still present similar risks.
–
Model Risk Governance committees at the Group, business and
functional levels continue to provide oversight of model risk.
–
Model Risk Management works closely with businesses to help
develop IRB/IMM/IMA/IFRS 9/stress testing models to meet risk
HSBC Holdings plc Annual Report and Accounts 2024
135
Risk review
management, pricing, capital management, and credit risk
measurement needs.
–
Additional assurance work is performed by the model risk
governance teams, which act as second lines of defence. The
teams test whether controls implemented by model users comply
with model risk policy and if model risk procedures are adequate.
–
Models using AI or generative AI techniques are reviewed by the
relevant risk teams and monitored by the business to help ensure
that identified risks have adequate oversight and review. A
framework to manage the range of risks that are generated by
these advanced techniques and to recognise the multidisciplinary
nature of these risks has been developed.
Change execution risk
The needs of our customers are evolving faster than ever, and the
complexity and pace of strategic, regulatory and technological change
require us to improve the way we prioritise resources and deliver
strategic outcomes safely and sustainably. The embedding of
structural changes throughout the Group, arising as part of the
reorganisation of our businesses announced in October 2024, is
expected to enable the strategy to be executed more efficiently but
may elevate the level of change execution risk in the near to medium
term.
Mitigating actions
–
We have strengthened our investment case and prioritisation
processes, while improving the monitoring and oversight of our
change portfolio and overall operating control environment.
–
The Change Prioritisation and Oversight Committee continues to
oversee the prioritisation, strategic alignment, and management of
execution risk for strategic change portfolios and initiatives.
Additionally, the HSBC Holdings Board provides enhanced
oversight over the simplification programme, directly supervising
its mobilisation and delivery.
–
Change benefits and funding will be aligned to the new Group
organisational structure. Consideration of integrated business and
technology architecture design will be a critical input to our
prioritisation of future change investment.
Risks associated with workforce
capability, capacity and
environmental factors with potential
impact on growth
Our global businesses and functions in all of our markets are exposed
to risks associated with workforce capacity challenges, including
challenges to retain, develop and attract high-performing employees
in key labour markets, the changing skills requirements of our
workforce and compliance with employment laws and regulations.
Failure to manage these risks may have an impact on the delivery of
our strategic objectives. It could also result in poor customer
outcomes or a breach of employment laws and regulations, which
may lead to regulatory sanctions or legal claims.
Mitigating actions
–
We seek to promote an inclusive workforce and provide health and
wellbeing support. We continue to build our speak-up culture
through active campaigns.
–
We monitor hiring activities and levels of employee attrition, with
each business and function putting in place plans to help ensure
they have effective workforce forecasting to meet business
demands.
–
We monitor people risks that could arise due to organisational
restructuring, seeking to ensure that we manage redundancies
sensitively and support impacted employees. We encourage our
people leaders to focus on talent retention at all levels, with an
empathetic mindset and approach, while ensuring the whole
proposition of working at HSBC is well understood.
–
Our Future Skills curriculum aims to provide skills that enable
employees and HSBC to be successful in the future.
–
We develop succession plans for key management roles, with
oversight from the Group Executive Committee.
Risk review
136
HSBC Holdings plc Annual Report and Accounts 2024
Our material banking risks
The material risk types associated with our banking and insurance manufacturing operations are described in the following tables:
Credit risk See page 139
Credit risk is the risk of financial loss
if a customer or counterparty fails to
meet an obligation under a contract.
Credit risk arises principally from direct
lending, trade finance and leasing
business, but also from other products
such as guarantees and derivatives.
Credit risk is:
– measured as the amount that could be lost if a customer or counterparty
fails to make repayments;
– monitored using various internal risk management measures and within
limits approved by individuals within a framework of delegated authorities;
and
– managed through a risk control framework, which outlines clear
and consistent policies, principles and guidance for risk managers; and by
setting limits and appetite across geographical markets, portfolios or
sectors.
Treasury risk See page 200
Treasury risk is the risk of having
insufficient capital, liquidity or funding
resources to meet financial
obligations and satisfy regulatory
requirements, including the risk of an
adverse impact on earnings or capital
due to structural and transactional
foreign exchange exposures and
changes in market interest rates,
together with pension and insurance
risk.
Treasury risk arises from changes to the
respective resources and risk profiles
driven by customer behaviour,
management decisions or the external
environment.
Treasury risk is:
– measured through risk appetite and more granular limits, set to provide an
early warning of increasing risk, minimum ratios of relevant regulatory
metrics, and metrics to monitor the key risk drivers impacting treasury
resources;
– monitored and projected against appetites and by using operating plans
based on strategic objectives together with stress and scenario testing; and
– managed through control of resources in conjunction with risk profiles,
strategic objectives and cash flows.
Market risk See page 216
Market risk is the risk of an adverse
financial impact on trading activities
arising from changes in market
parameters such as interest rates,
foreign exchange rates, asset prices,
volatilities, correlations and credit
spreads.
Market risk arises from both trading
portfolios and non-trading portfolios.
Market risk for non-trading portfolios is
discussed in the Treasury risk section on
page 212. Market risk exposures arising
from our insurance operations are
discussed on page 234.
Market risk is:
– measured using sensitivities, value at risk and stress testing, giving a
detailed picture of potential gains and losses for a range of market
movements and scenarios, as well as tail risks over specified time horizons;
– monitored using value at risk, stress testing and other measures; and
– managed using risk limits approved by the Group Risk Management
Meeting and the risk management meetings in various global businesses.
Climate risk See page 219
Climate risk relates to the financial
and non-financial impacts that may
arise as a result of climate change
and the move to a net zero economy.
Climate risk can materialise through:
–
physical risk, which arises from the
increased frequency and severity of
weather events;
–
transition risk, which arises from the
process of moving to a net zero
economy;
–
net zero alignment risk, which arises
from failing to meet our net zero
ambition or to meet external
expectations related to net zero; and
–
the risk of greenwashing, which arises
from the act of knowingly or
unknowingly making inaccurate,
unclear, misleading or unsubstantiated
claims regarding sustainability to
stakeholders.
Climate risk is:
–
measured using risk metrics and stress testing;
–
monitored against risk appetite statements; and
–
managed through adherence to risk appetite thresholds, through specific
policies, and through enhancements to processes and development of
tools including the development of product market controls to manage the
risk of greenwashing and the development of portfolio steering capabilities
to manage our net zero ambitions.
Resilience risk See page 228
Resilience risk is the risk of sustained
and significant business disruption
from execution, delivery, physical
security or safety events, causing the
inability to provide critical services to
our customers, affiliates, and
counterparties.
Resilience risk arises from failures or
inadequacies in processes, people,
systems or external events.
Resilience risk is:
–
measured using a range of metrics and against our agreed risk appetite;
–
monitored through oversight of enterprise processes, risks, controls and
strategic change programmes; and
–
managed by continual monitoring and thematic reviews.
Description of risks – banking operations
Risks
Arising from
Measurement, monitoring and management of risk
HSBC Holdings plc Annual Report and Accounts 2024
137
Risk review
Regulatory compliance risk
Regulatory compliance risk is the risk
associated with breaching our duty to
clients and other counterparties,
inappropriate market conduct
(including unauthorised trading) and
breaching related financial services
regulatory standards.
See page 229
Regulatory compliance risk arises from the
failure to observe relevant laws, codes,
rules and regulations and can manifest
itself in poor market or customer outcomes
and lead to fines, penalties and reputational
damage to our business.
Regulatory compliance risk is:
–
measured by reference to risk appetite, identified metrics, incident
assessments, regulatory feedback and the judgement and assessment of
our regulatory compliance teams;
–
monitored against the first line of defence risk and control assessments,
and the results of the monitoring and control assurance activities of the
second line of defence functions; and
–
managed by establishing and communicating appropriate policies and
procedures, training employees in them and monitoring activity to help
embed their observance. Proactive risk control and/or remediation work is
undertaken where required.
Financial crime risk
See page 229
Financial crime risk is the risk that
HSBC’s products and services will be
exploited for criminal activity. This
includes fraud, bribery and
corruption, tax evasion, sanctions
and export control violations and
evasion, money laundering, terrorist
financing and proliferation financing.
Financial crime risk arises from day-to-day
banking operations involving customers,
third parties and employees.
Financial crime risk is:
–
measured by reference to risk appetite, identified metrics, incident
assessments, regulatory feedback and the judgement of, and assessment
by, our financial crime teams;
–
monitored against the first line of defence risk and control assessments,
and the results of the monitoring and control assurance activities of the
second line of defence functions; and
–
managed by establishing and communicating appropriate policies and
procedures, training employees and monitoring activity to help embed
their observance. Proactive risk control and/or remediation work is
undertaken where required.
Model risk
See page 230
Model risk is the risk of the potential
for adverse consequences from
model errors or the inappropriate use
of modelled outputs to inform
business decisions.
Model risk arises in both financial and non-
financial contexts whenever business
decision making includes reliance on
models.
Model risk is:
– measured by reference to model performance tracking and the output of
detailed technical reviews and regulatory feedback, with key metrics
including model review statuses and findings;
– monitored against model risk appetite statements, insight from the
independent validations completed by the model risk management team;
and
– managed by creating and communicating appropriate policies, procedures
and guidance, training colleagues in their application, and supervising their
adoption to help ensure operational effectiveness.
Description of risks – banking operations (continued)
Risks
Arising from
Measurement, monitoring and management of risk
Our insurance manufacturing subsidiaries are regulated separately from our banking operations. Risks in our insurance entities are managed
using methodologies and processes that are subject to Group oversight. Our insurance operations are also subject to many of the same risks as
our banking operations, and these are covered by the Group’s risk management processes. However, there are specific risks inherent to the
insurance operations as noted below.
Financial risk See page 231
For insurance entities, financial risk
includes the risk of not being able to
effectively match liabilities arising
under insurance contracts with
appropriate investments and that the
expected sharing of financial
performance with policyholders
under certain contracts is not
possible.
Exposure to financial risk arises from:
– market risk affecting the fair values of
financial assets or their future cash
flows;
– credit risk; and
– liquidity risk of entities being unable to
make payments to policyholders as they
fall due.
Financial risk is:
– measured for credit risk, in terms of economic capital and the amount that
could be lost if a counterparty fails to make repayments; for market risk, in
terms of economic capital, internal metrics and fluctuations in key financial
variables; and for liquidity risk, in terms of internal metrics including
stressed operational cash flow projections;
– monitored through a framework of approved limits and delegated
authorities; and
– managed through a risk control framework, which outlines clear and
consistent policies, principles and guidance. This includes using product
design, asset liability matching and bonus rates.
Insurance risk See page 235
Insurance risk is the risk that, over
time, the cost of insurance policies
written, including claims and
benefits, may exceed the total
amount of premiums and investment
income received.
The cost of claims and benefits can be
influenced by many factors, including
mortality and morbidity experience, as well
as lapse and surrender rates.
Insurance risk is:
– measured in terms of life insurance liabilities and economic capital allocated
to insurance underwriting risk;
– monitored through a framework of approved limits and delegated
authorities; and
– managed through a risk control framework, which outlines clear and
consistent policies, principles and guidance. This includes using product
design, underwriting, reinsurance and claims-handling procedures.
Description of risks – insurance manufacturing operations
Risks
Arising from
Measurement, monitoring and management of risk
Risk review
138
HSBC Holdings plc Annual Report and Accounts 2024
Credit risk
Contents
139
Overview
139
Credit risk management
141
Credit risk in 2024
142
Summary of credit risk
145
Stage 2 decomposition
146
Assets held for sale
147
Credit exposure
148
Measurement uncertainty and sensitivity analysis of ECL estimates
161
Reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
166
Credit quality
170
Wholesale lending
184
Personal lending
195
Supplementary information
199
HSBC Holdings
Overview
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet an obligation under a contract. Credit risk arises
principally from direct lending, trade finance and leasing business, but
also from other products such as guarantees and derivatives.
Credit risk management
Key developments in 2024
There were no material changes to the policies and practices for the
management of credit risk in 2024. We continued to apply the
requirements of IFRS 9 ‘Financial Instruments’ within the Credit Risk
sub-function.
We actively managed the risks related to macroeconomic
uncertainties, including interest rates, inflation, fiscal and monetary
policy, broader geopolitical uncertainties and conflicts.
For further details, see ‘Top and emerging risks’ on page 131.
Governance and structure
We have established Group-wide credit risk management and related
IFRS 9 processes. We continue to assess the impact of economic
developments in key markets on specific customers, customer
segments or portfolios. As credit conditions change, we take
mitigating actions, including the revision of risk appetites or limits and
tenors, as appropriate. In addition, we continue to evaluate the terms
under which we provide credit facilities within the context of
individual customer requirements, the quality of the relationship, local
regulatory requirements, market practices and our local market
position.
Credit Risk sub-function
(Audited)
Credit approval authorities are delegated by the Board to the Group
CEO together with the authority to sub-delegate them. The Credit
Risk sub-function in Group Risk and Compliance is responsible for the
key policies and processes for managing credit risk, which include
formulating Group credit policies and risk rating frameworks, guiding
the Group’s appetite for credit risk exposures, undertaking
independent reviews and objective assessment of credit risk, and
monitoring performance and management of portfolios.
The principal objectives of our credit risk management are:
–
to maintain across HSBC a strong culture of responsible lending,
and robust risk policies and control frameworks;
–
to both partner and challenge our businesses in defining,
implementing and continually re-evaluating our risk appetite under
actual and scenario conditions; and
–
to ensure there is independent, expert scrutiny of credit risks, their
costs and their mitigation.
Key risk management processes
IFRS 9 ‘Financial Instruments’ process
The IFRS 9 process comprises three main areas: modelling, data and
forward economic guidance; implementation; and governance.
Modelling, data and forward economic guidance
We have established IFRS 9 modelling and data processes in various
geographies, which are subject to internal model risk governance
including independent review of significant model developments.
We have a centralised process for generating unbiased and
independent global economic scenarios. Scenarios are subject to a
process of review and challenge by a dedicated central team and
individually for each region. Each quarter, the scenarios and probability
weights are reviewed and checked for consistency with the economic
conjuncture and current economic and financial risks. These are
subject to final review and approval by senior management in a
forward economic guidance global business impairment committee.
Implementation
A centralised impairment engine performs the expected credit losses
calculation using data, which is subject to a number of validation
checks and enhancements, from a variety of client, finance and risk
systems. Where possible, these checks and processes are performed
in a globally consistent and centralised manner.
Governance
Regional management review forums are established in key sites and
regions in order to review and approve the impairment results.
Regional management review forums have representatives from
Credit Risk and Finance. The key site and regional approvals are
reported up to the relevant global business impairment committee for
final approval of the Group’s ECL for the period. Required members of
the committee are the Wholesale Global Chief Corporate Credit
Officer and Chief Risk and Compliance Officer for Wealth and
Personal Banking Risk, as well as the relevant global business’s Chief
Financial Officer and the Global Financial Controller.
Concentration of exposure
(Audited)
Concentrations of credit risk arise when a number of counterparties or
exposures have comparable economic characteristics, or such
counterparties are engaged in similar activities or operate in the same
geographical areas or industry sectors so that their collective ability to
meet contractual obligations is similarly affected by changes in
economic, political or other conditions. We use a number of controls
and measures to minimise undue concentration of exposure in our
portfolios across industries, countries and global businesses. These
include portfolio and counterparty limits, approval and review controls,
and stress testing.
Credit quality of financial instruments
(Audited)
Our risk rating system facilitates the internal ratings-based approach
under the Basel framework adopted by the Group to support the
calculation of our minimum credit regulatory capital requirement. The
five credit quality classifications encompass a range of granular
internal credit rating grades assigned to wholesale and retail
HSBC Holdings plc Annual Report and Accounts 2024
139
Risk review
customers, and the external ratings attributed by external agencies to
debt securities.
For debt securities and certain other financial instruments, external
ratings have been aligned to the five quality classifications based upon
the mapping of related customer risk rating (‘CRR’) to external credit
rating.
Wholesale lending
The CRR 10-grade scale summarises a more granular underlying
23-grade scale of obligor probability of default (‘PD’). All corporate
customers are rated using the 10- or 23-grade scale, depending on
the degree of sophistication of the Basel approach adopted for the
exposure.
Each CRR band is associated with an external rating grade by reference
to long-run default rates for that grade, represented by the average of
issuer-weighted historical default rates. This mapping between internal
and external ratings is indicative and may vary over time.
Retail lending
Retail lending credit quality is based on a 12-month point-in-time
probability-weighted PD.
Credit quality classification
Sovereign
debt securities
and bills
Other
debt securities
and bills
Wholesale lending
and derivatives
Retail lending
External
credit rating
External
credit rating
Internal
credit rating
12-month Basel
probability of
default %
Internal
credit rating
12 month
probability-
weighted PD %
Quality classification1,2
Strong
BBB and above
A- and above
CRR 1 to CRR 2
0–0.169
Band 1 and 2
0.000–0.500
Good
BBB- to BB
BBB+ to BBB-
CRR 3
0.170–0.740
Band 3
0.501–1.500
Satisfactory
BB- to B and unrated
BB+ to B and unrated
CRR 4 to CRR 5
0.741–4.914
Band 4 and 5
1.501–20.000
Sub-standard
B- to C
B- to C
CRR 6 to CRR 8
4.915–99.999
Band 6
20.001–99.999
Credit impaired
Default
Default
CRR 9 to CRR 10
100
Band 7
100
1 Customer risk rating (‘CRR’).
2 12-month point-in-time probability-weighted probability of default (‘PD’).
Quality classification definitions
– ‘Strong’ exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default and/or low levels of
expected loss.
– ‘Good’ exposures require closer monitoring and demonstrate a good capacity to meet financial commitments, with low default risk.
– ‘Satisfactory’ exposures require closer monitoring and demonstrate an average-to-fair capacity to meet financial commitments, with moderate default risk.
– ‘Sub-standard’ exposures require varying degrees of special attention and default risk is of greater concern.
– ‘Credit-impaired’ exposures have been assessed as described in Note 1.2(i) to the financial statements.
Forborne loans and advances
(Audited)
Forbearance measures consist of concessions towards an obligor that
is experiencing or about to experience difficulties in meeting its
financial commitments.
We continue to class loans as forborne when we modify the
contractual payment terms due to having concerns about the
borrowers’ ability to meet contractual payments when they were due.
Our definition of forborne captures non-payment-related concessions,
such as covenant waivers.
For details of our policy on forbearance, see Note 1.2(i) in the financial
statements.
Credit quality of forborne loans
For wholesale lending, where payment-related forbearance measures
result in a diminished financial obligation, or if there are other
indicators of impairment, the loan will be classified as credit impaired
if it is not already so classified. All facilities with a customer, including
loans that have not been modified, are considered credit impaired
following the identification of a payment-related forborne loan. For
retail lending, where a material payment-related concession has been
granted, the loan will be classified as credit impaired. In isolation, non-
payment related forbearance measures may not result in the loan
being classified as credit impaired unless combined with other
indicators of credit impairment. These are classed as performing
forborne loans for both wholesale and retail lending.
Wholesale and retail lending forborne loans are classified as credit
impaired until there is sufficient evidence to demonstrate a significant
reduction in the risk of non-payment of future cash flows, observed
over a minimum one-year period, and there are no other indicators of
impairment. Any forborne loans not considered credit impaired will
remain forborne for a minimum of two years from the date that credit
impairment no longer applies. For wholesale and retail lending, any
forbearance measures granted on a loan already classed as forborne
results in the customer being classed as credit impaired.
Forborne loans and recognition of expected
credit losses
(Audited)
Forborne loans expected credit loss assessments reflect the higher
rates of losses typically experienced with these types of loans such
that they are in stage 2 and stage 3. The higher rates are more
pronounced in unsecured retail lending requiring further
segmentation. For wholesale lending, forborne loans are typically
assessed individually. Credit risk ratings are intrinsic to the
impairment assessments. The individual impairment assessment
takes into account the higher risk of the future non-payment inherent
in forborne loans.
Impairment assessment
(Audited)
For details of our impairment policies on loans and advances and
financial investments, see Note 1.2(i) on the financial statements.
Risk review
140
HSBC Holdings plc Annual Report and Accounts 2024
Write-off of loans and advances
(Audited)
Under IFRS 9, write-off should occur when there is no reasonable
expectation of recovering further cash flows from the financial asset.
This principle does not prohibit early write-off, which is defined in
local policies to ensure effectiveness in the management of
customers in the collections process.
Unsecured personal facilities, including credit cards, are generally
written off at between 150 and 210 days past due. The standard
period runs until the end of the month in which the account becomes
180 days contractually delinquent. However, in exceptional
circumstances, to avoid unfair customer outcomes, deliver customer
duty or meet regulatory expectations, the period may be extended
further.
For secured facilities, write-off should occur upon repossession of
collateral, receipt of proceeds via settlement, or determination that
recovery of the collateral will not be pursued. Where these assets are
maintained on the balance sheet beyond 60 months of consecutive
delinquency-driven default, the prospect of recovery is reassessed.
Recovery activity, on both secured and unsecured assets, may
continue after write-off.
Any unsecured exposures that are not written off at 180 days past
due, and any secured exposures that are in ‘default’ status for 60
months or greater but are not written off, are subject to additional
monitoring via the appropriate governance forums.
Credit risk in 2024
At 31 December 2024, gross loans and advances to banks and
customers of $1,042bn decreased by $20.1bn on a reported basis
compared with 31 December 2023. Gross loans and advances to
customers decreased by $9.2bn while gross loans and advances to
banks decreased by $10.9bn. This included total adverse foreign
exchange movements of $26.2bn.
On a constant currency basis, the increase of $6.1bn was driven by a
$9.6bn rise in personal loans and advances to customers and a $3.0bn
rise in wholesale loans and advances to customers. These were partly
offset by a $6.5bn decrease in loans and advances to banks.
The rise in personal loans and advances to customers was driven by
mortgage growth (up $7.5bn), mainly in HSBC UK (up $4.5bn), in our
legal entities in the US (up $2.7bn) and in Mexico (up $0.3bn). There
was a further increase in other personal lending (up $2.1bn), mainly in
our entities in Europe (up $1.1bn) and in Asia (up $1.0bn).
The rise in wholesale loans and advances to customers was driven by
an increase in balances with non-bank financial institutions (up
$9.6bn), mainly in HSBC Bank plc (up $4.2bn) and in our legal entities
in Asia (up $2.2bn), in the US (up $1.2bn), in HSBC UK (up $1.0bn)
and in the Middle East (up $0.8bn). This was partly offset by a $6.6bn
reduction in corporate and commercial balances, observed mainly in
our legal entities in the US (down $2.9bn) and in Asia (down $2.4bn).
The decrease in loans and advances to banks was driven by lower
central bank balances and money market lending balances in our legal
entities in Asia (down $9.1bn), partly offset by higher balances in our
legal entities in the Middle East (up $3.6bn).
The movement in gross loans and advances to banks and customers
included a $3.1bn decrease on a constant currency basis due to the
reclassification of businesses into 'assets held for sale' during the
period.
At 31 December 2024, the allowance for ECL of $10.3bn decreased
by $1.7bn compared with 31 December 2023, including favourable
foreign exchange movements of $0.5bn. The $10.3bn allowance
comprised $9.8bn in respect of assets held at amortised cost, $0.4bn
in respect of loan commitments and financial guarantees, and $0.1bn
in respect of debt instruments measured at fair value through other
comprehensive income (‘FVOCI’).
On a constant currency basis, stage 3 gross loans and advances to
customers at 31 December 2024 increased by $3.9bn. The increase in
stage 3 exposures was driven by defaults in the commercial real
estate portfolio in Hong Kong, which are generally well collateralised.
There was a decrease in the associated allowance for ECL due to
write-offs of heavily-impaired exposures.
On a constant currency basis, the allowance for ECL in relation to
loans and advances to customers decreased by $0.9bn from
31 December 2023. This was attributable to:
–
a $0.8bn decrease in wholesale loans and advances to customers,
which included a $0.7bn decrease in stage 3 and a $0.1bn
decrease in stages 1 and 2; and
–
a $0.1bn decrease in personal loans and advances to customers
driven by stages 1 and 2.
The ECL charge for 2024 was $3.4bn, inclusive of recoveries. The
ECL charge comprised: $2.1bn in respect of wholesale lending, of
which the stage 3 charge was $1.6bn; $1.2bn in respect of personal
lending, of which $0.9bn were in stage 3; and $0.1bn in respect of
other assets and debt instruments measured at FVOCI.
Wholesale lending charges were recognised mainly in our legal
entities in Hong Kong ($1.0bn). While the mainland China commercial
real estate sector remained subdued, there were limited new defaults
and lower total ECL charges of $0.4bn during the period ($1.0bn
during 2023). ECL charges in the Hong Kong commercial real estate
sector excluding exposure to mainland China borrowers of $0.1bn
during the period were also low due to the limited impact from
defaults, driven by the high level of collateralisation in the portfolio.
Personal lending charges reflected higher charges in our legal entity in
Mexico, mainly in our unsecured portfolio, due to portfolio growth and
unemployment trends. In addition, there were higher charges in our
legal entities in the UK and Hong Kong as a result of portfolio growth.
At 31 December 2024, gross other financial assets measured at
amortised cost of $828.6bn decreased by $131.7bn on a reported
basis compared with 31 December 2023. This included total adverse
foreign exchange movements of $30.7bn.
On a constant currency basis, the decrease of $101.0bn was mainly
driven by a $91.9bn decrease in assets held for sale, due to the
completion of the disposals of our banking business in Canada and
our retail banking operations in France.
Income statement movements are analysed further on page 90.
While credit risk arises across most of our balance sheet, ECL have
typically been recognised on loans and advances to customers and
banks, in addition to securitisation exposures and other structured
products. As a result, our disclosures focus primarily on these two
areas. For further details of:
–
maximum exposure to credit risk, see page 148;
–
measurement uncertainty and sensitivity analysis of ECL
estimates, see page 148;
–
reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers including
loan commitments and financial guarantees, see page 161;
–
credit quality, see page 166;
–
total wholesale lending for loans and advances to banks and
customers by stage distribution, see page 171;
–
wholesale lending collateral, see page 181;
–
total personal lending for loans and advances to customers at
amortised cost by stage distribution, see page 185; and
–
personal lending collateral, see page 194.
HSBC Holdings plc Annual Report and Accounts 2024
141
Risk review
Summary of credit risk
The following disclosure presents the gross carrying/nominal amount of financial instruments to which the impairment requirements in IFRS 9
are applied and the associated allowance for ECL.
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited)
31 Dec 2024
At 31 Dec 2023
Gross carrying/
nominal amount
Allowance for
ECL1
Gross carrying/
nominal amount
Allowance for
ECL1
$m
$m
$m
$m
Loans and advances to customers at amortised cost
940,373
(9,715)
949,609
(11,074)
Loans and advances to banks at amortised cost
102,052
(13)
112,917
(15)
Other financial assets measured at amortised cost
828,580
(92)
960,271
(422)
– cash and balances at central banks
267,674
—
285,868
—
– Hong Kong Government certificates of indebtedness
42,293
—
42,024
—
– reverse repurchase agreements – non-trading
252,549
—
252,217
—
– financial investments
153,982
(9)
148,346
(20)
– assets held for sale2
3,273
(4)
103,186
(324)
– prepayments, accrued income and other assets3
108,809
(79)
128,630
(78)
Total gross carrying amount on-balance sheet
1,871,005
(9,820)
2,022,797
(11,511)
Loans and other credit-related commitments
619,367
(348)
661,015
(367)
Financial guarantees
16,998
(29)
17,009
(39)
Total nominal amount off-balance sheet4
636,365
(377)
678,024
(406)
2,507,370
(10,197)
2,700,821
(11,917)
Fair value
Memorandum
allowance for
ECL5
Fair value
Memorandum
allowance for
ECL5
$m
$m
$m
$m
Debt instruments measured at fair value through other comprehensive income
(‘FVOCI’)
346,124
(54)
302,348
(97)
1 The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which
case the ECL is recognised as a provision.
2 For further details on gross carrying amounts and allowances for ECL related to assets held for sale, see ‘Assets held for sale’ on page 146. At 31 December
2024, the gross carrying amount comprised $1,113m of loans and advances to customers and banks (2023: $84,075m) and $2,160m of other financial assets at
amortised cost (2023: $19,111m). The corresponding allowance for ECL comprised $4m of loans and advances to customers and banks (2023: $303m) and
$0.3m of other financial assets at amortised cost (2023: $21m).
3 Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’ as
presented within the consolidated balance sheet on page 343 comprises both financial and non-financial assets, including cash collateral and settlement
accounts. It also includes ‘Items in the course of collection from other banks’ which was presented separately in 2023.
4 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in
‘Change in expected credit losses and other credit impairment charges’ in the income statement.
The following table provides an overview of the Group’s credit risk by stage and industry, and the associated ECL coverage. The financial assets
recorded in each stage have the following characteristics:
–
Stage 1: These financial assets are unimpaired and without significant increase in credit risk on which a 12-month allowance for ECL is
recognised.
–
Stage 2: A significant increase in credit risk has been experienced on these financial assets since initial recognition for which a lifetime ECL is
recognised.
–
Stage 3: There is objective evidence of impairment and the financial assets are therefore considered to be in default or otherwise credit
impaired on which a lifetime ECL is recognised.
–
POCI: Financial assets that are purchased or originated at a deep discount are seen to reflect the incurred credit losses on which a lifetime
ECL is recognised.
Risk review
142
HSBC Holdings plc Annual Report and Accounts 2024
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2024
(Audited)
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
Stage
1
Stage
2
Stage
3 POCI2
Total
Stage
1
Stage
2
Stage
3
POCI2
Total
Stage
1
Stage
2
Stage
3
POCI2
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
%
Loans and
advances to
customers at
amortised cost
824,420
93,248 22,615
90 940,373 (1,078) (2,546) (6,040)
(51) (9,715)
0.1
2.7
26.7
56.7
1.0
– personal
403,746
39,919
3,560
— 447,225
(570) (1,158)
(796)
— (2,524)
0.1
2.9
22.4
—
0.6
– corporate and
commercial
340,987
51,231 18,376
90 410,684
(463) (1,358) (4,883)
(51) (6,755)
0.1
2.7
26.6
56.7
1.6
– non-bank
financial
institutions
79,687
2,098
679
—
82,464
(45)
(30)
(361)
—
(436)
0.1
1.4
53.2
—
0.5
Loans and
advances to
banks at
amortised cost
101,852
198
2
— 102,052
(9)
(2)
(2)
—
(13)
—
1.0
100.0
—
—
Other financial
assets
measured at
amortised cost
826,621
1,806
153
— 828,580
(64)
(5)
(23)
—
(92)
—
0.3
15.0
—
—
Loan and other
credit-related
commitments
597,231
21,175
958
3 619,367
(137)
(121)
(90)
—
(348)
—
0.6
9.4
—
0.1
– personal
251,489
1,680
86
— 253,255
(17)
—
(5)
—
(22)
—
—
5.8
—
—
– corporate and
commercial
231,201
17,453
838
3 249,495
(111)
(116)
(83)
—
(310)
—
0.7
9.9
—
0.1
– financial
114,541
2,042
34
— 116,617
(9)
(5)
(2)
—
(16)
—
0.2
5.9
—
—
Financial
guarantees
15,353
1,397
248
—
16,998
(8)
(5)
(16)
—
(29)
0.1
0.4
6.5
—
0.2
– personal
1,416
11
—
—
1,427
—
—
—
—
—
—
—
—
—
—
– corporate and
commercial
10,048
1,232
195
—
11,475
(7)
(5)
(15)
—
(27)
0.1
0.4
7.7
—
0.2
– financial
3,889
154
53
—
4,096
(1)
—
(1)
—
(2)
—
—
1.9
—
—
At 31 Dec
2024
2,365,477 117,824 23,976
93 2,507,370 (1,296) (2,679) (6,171)
(51) (10,197)
0.1
2.3
25.7
54.8
0.4
1 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2 Purchased or originated credit-impaired (‘POCI’).
Unless identified at an earlier stage, all financial assets are deemed to
have suffered a significant increase in credit risk when they are 30
days past due (‘DPD’) and are transferred from stage 1 to stage 2.
The following disclosure presents the ageing of stage 2 financial
assets by those less than 30 DPD and greater than 30 DPD and
therefore presents those financial assets classified as stage 2 due to
ageing (30 DPD) and those identified at an earlier stage (less than 30
DPD).
Stage 2 days past due analysis at 31 December 2024
(Audited)
Gross carrying amount
Allowance for ECL
ECL coverage %
Stage 2
Up-to-
date
1 to 29
DPD1
30 and
> DPD1
Stage 2
Up-to-
date
1 to 29
DPD1
30 and
> DPD1
Stage 2
Up-to-
date
1 to 29
DPD1
30 and
> DPD1
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
Loans and advances to
customers at amortised
cost
93,248
90,157
1,888
1,203
(2,546)
(2,147)
(192)
(207)
2.7
2.4
10.2
17.2
– personal
39,919
37,676
1,361
882
(1,158)
(799)
(169)
(190)
2.9
2.1
12.4
21.5
– corporate and
commercial
51,231
50,486
506
239
(1,358)
(1,326)
(21)
(11)
2.7
2.6
4.2
4.6
– non-bank financial
institutions
2,098
1,995
21
82
(30)
(22)
(2)
(6)
1.4
1.1
9.5
7.3
Loans and advances to
banks at amortised cost
198
198
—
—
(2)
(2)
—
—
1.0
1.0
—
—
Other financial assets
measured at amortised
cost
1,806
1,794
3
9
(5)
(5)
—
—
0.3
0.3
—
—
1 The days past due amounts presented above are on a contractual basis.
HSBC Holdings plc Annual Report and Accounts 2024
143
Risk review
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2023
(Audited)
Gross carrying/nominal amount1
Allowance for ECL
ECL coverage %
Stage 1
Stage 2
Stage 3
POCI2
Total
Stage 1
Stage 2
Stage 3
POCI2
Total
Stage 1
Stage 2
Stage 3
POCI2
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
%
Loans and
advances to
customers at
amortised
cost
809,384 120,871 19,273
81 949,609 (1,130) (2,964) (6,950)
(30) (11,074)
0.1
2.5
36.1
37.0
1.2
– personal
396,534 47,483
3,505
— 447,522
(579) (1,434)
(854)
— (2,867)
0.1
3.0
24.4
—
0.6
– corporate
and
commercial
342,878 69,738 14,958
81 427,655
(499) (1,500) (5,774)
(30) (7,803)
0.1
2.2
38.6
37.0
1.8
– non-bank
financial
institutions
69,972
3,650
810
—
74,432
(52)
(30)
(322)
—
(404)
0.1
0.8
39.8
—
0.5
Loans and
advances to
banks at
amortised
cost
111,479
1,436
2
— 112,917
(10)
(3)
(2)
—
(15)
—
0.2
100.0
—
—
Other
financial
assets
measured at
amortised
cost
946,873 12,734
664
— 960,271
(109)
(132)
(181)
—
(422)
—
1.0
27.3
—
—
Loan and
other credit-
related
commitments
630,949 28,922
1,140
4 661,015
(153)
(128)
(86)
—
(367)
—
0.4
7.5
—
0.1
– personal
253,183
3,459
355
— 256,997
(23)
—
(2)
—
(25)
—
—
0.6
—
—
– corporate
and
commercial
246,210 20,928
736
4 267,878
(120)
(119)
(83)
—
(322)
—
0.6
11.3
—
0.1
– financial
131,556
4,535
49
— 136,140
(10)
(9)
(1)
—
(20)
—
0.2
2.0
—
—
Financial
guarantees
14,746
1,879
384
—
17,009
(7)
(7)
(25)
—
(39)
—
0.4
6.5
—
0.2
– personal
1,106
13
—
—
1,119
—
—
—
—
—
—
—
—
—
—
– corporate
and
commercial
10,157
1,290
330
—
11,777
(6)
(6)
(24)
—
(36)
0.1
0.5
7.3
—
0.3
– financial
3,483
576
54
—
4,113
(1)
(1)
(1)
—
(3)
—
0.2
1.9
—
0.1
At 31 Dec
2023
2,513,431 165,842 21,463
85 2,700,821 (1,409) (3,234) (7,244)
(30) (11,917)
0.1
2.0
33.8
35.3
0.4
1 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2 Purchased or originated credit-impaired (‘POCI’).
Stage 2 days past due analysis at 31 December 2023
(Audited)
Gross carrying amount
Allowance for ECL
ECL coverage %
Stage 2
Up-to-
date
1 to 29
DPD1 30 and >
DPD1
Stage
2
Up-to-
date
1 to 29
DPD1 30 and >
DPD1
Stage
2
Up-to-
date
1 to 29
DPD1 30 and >
DPD1
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
Loans and advances to
customers at amortised cost
120,871 116,320
2,571
1,980 (2,964)
(2,458)
(245)
(261)
2.5
2.1
9.5
13.2
– personal
47,483
44,634
1,785
1,064 (1,434)
(974)
(214)
(246)
3.0
2.2
12.0
23.1
– corporate and commercial
69,738
68,446
697
595 (1,500)
(1,454)
(31)
(15)
2.2
2.1
4.4
2.5
– non-bank financial
institutions
3,650
3,240
89
321
(30)
(30)
—
—
0.8
0.9
—
—
Loans and advances to banks
at amortised cost
1,436
1,424
—
12
(3)
(3)
—
—
0.2
0.2
—
—
Other financial assets
measured at amortised cost
12,734
12,417
171
146
(132)
(113)
(9)
(10)
1.0
0.9
5.3
6.8
1 The days past due amounts presented above are on a contractual basis.
Risk review
144
HSBC Holdings plc Annual Report and Accounts 2024
Stage 2 decomposition
The following table presents the stage 2 decomposition of gross
carrying amount and allowances for ECL for loans and advances to
customers and banks. It also sets out the reasons why an exposure is
classified as stage 2 and therefore presented as a significant increase
in credit risk at 31 December 2024.
The quantitative classification shows gross carrying amount and
allowances for ECL for which the applicable reporting date probability
of default (‘PD’) measure exceeds defined quantitative thresholds for
retail and wholesale exposures, as set out in Note 1.2 ‘Summary of
material accounting policies’, on page 359.
The qualitative classification primarily accounts for customer risk
rating (‘CRR’) deterioration, watch-and-worry and retail management
judgemental adjustments.
A summary of our current policies and practices for the significant increase
in credit risk is set out in ‘Summary of material accounting policies’ on
page 359.
Loans and advances to customers and banks1
At 31 Dec 2024
Loans and advances to customers
Loans and
advances
to banks at
amortised
cost Total stage 2
Personal
of which:
Corporate
and
commercial
Non-bank
financial
institutions
first lien
mortgages credit cards
other
personal
lending
$m
$m
$m
$m
$m
$m
$m
$m
Quantitative
36,356
30,992
2,904
2,460
37,787
1,658
176
75,977
Qualitative
3,452
3,107
85
260
13,327
438
22
17,239
of which: forbearance
175
70
40
65
1,086
3
—
1,264
30 DPD backstop2
111
78
2
31
117
2
—
230
Total gross carrying amount
39,919
34,177
2,991
2,751
51,231
2,098
198
93,446
Quantitative
(1,118)
(121)
(651)
(346)
(1,124)
(28)
—
(2,270)
Qualitative
(35)
(8)
(9)
(18)
(229)
(2)
(2)
(268)
of which: forbearance
(5)
—
(1)
(4)
(12)
—
—
(17)
30 DPD backstop2
(5)
(1)
—
(4)
(5)
—
—
(10)
Total allowance for ECL
(1,158)
(130)
(660)
(368)
(1,358)
(30)
(2)
(2,548)
ECL coverage %
2.9
0.4
22.1
13.4
2.7
1.4
1.0
2.7
Residual average life3 (in years)
17.0
19.5
<1.0
3.6
2.7
1.9
<1.0
At 31 Dec 2023
Quantitative
35,742
31,178
1,940
2,624
53,034
2,955
781
92,512
Qualitative
11,678
7,077
2,477
2,124
16,241
653
642
29,214
of which: forbearance
171
69
34
68
982
2
—
1,155
30 DPD backstop2
63
32
2
29
463
42
13
581
Total gross carrying amount
47,483
38,287
4,419
4,777
69,738
3,650
1,436
122,307
Quantitative
(1,103)
(149)
(554)
(400)
(1,225)
(24)
(1)
(2,353)
Qualitative
(324)
(50)
(142)
(132)
(270)
(6)
(2)
(602)
of which: forbearance
(4)
—
(1)
(3)
(11)
—
—
(15)
30 DPD backstop2
(7)
(1)
(1)
(5)
(5)
—
—
(12)
Total allowance for ECL
(1,434)
(200)
(697)
(537)
(1,500)
(30)
(3)
(2,967)
ECL coverage %
3.0
0.5
15.8
11.2
2.2
0.8
0.2
2.4
Residual average life3 (in years)
16.0
19.3
<1.0
4.1
2.5
1.2
<1.0
1 Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross carrying amount
and allowance for ECL have been assigned in order of categories presented.
2 Days past due (‘DPD’).
3 Calculated as the difference between final contractual maturities and the reporting date, weighted based on the contribution of the instrument to the stage 2
total gross carrying amount of the corresponding product or sector.
HSBC Holdings plc Annual Report and Accounts 2024
145
Risk review
Assets held for sale
(Audited)
At 31 December 2024, the most material balances held for sale arose
from our business in South Africa and our private banking business in
Germany.
Disclosures relating to assets held for sale are provided in the
following credit risk tables, primarily where the disclosure is relevant
to the measurement of these financial assets:
–
‘Maximum exposure to credit risk’ (page 148); and
–
‘Distribution of financial instruments by credit quality at
31 December’ (page 166);
Although there was a reclassification on the balance sheet, there was
no separate income statement reclassification. As a result, charges
for changes in expected credit losses and other credit impairment
charges shown in the credit risk disclosures include charges relating
to financial assets classified as ‘assets held for sale’.
‘Loans and other credit-related commitments’, ‘financial guarantees’
and ‘Debt instruments measured at fair value through other
comprehensive income’ as reported in credit disclosures, also include
exposures and allowances relating to financial assets classified as
‘assets held for sale’.
Loans and advances to customers and banks measured at amortised cost
(Audited)
2024
2023
Total gross loans
and advances
Allowance
for ECL
Total gross loans
and advances
Allowance
for ECL
$m
$m
$m
$m
As reported
1,042,425
(9,728)
1,062,526
(11,089)
Reported in ‘Assets held for sale’
1,113
(4)
84,075
(303)
At 31 December
1,043,538
(9,732)
1,146,601
(11,392)
At 31 December 2024, gross loans and advances of our business in
South Africa were $660m and the related allowance for ECL was
$4m. Gross loans and advances of our private banking business in
Germany were $309m and of our French life insurance business were
$144m, both with negligible allowance for ECL.
Lending balances held for sale continue to be measured at amortised
cost less allowances for impairment and, therefore, such carrying
amounts may differ from fair value.
These lending balances are part of associated disposal groups that are
measured in their entirety at the lower of carrying amount and fair
value less costs to sell. Any difference between the carrying amount
of these assets and their sales price is part of the overall gain or loss
on the associated disposal group as a whole.
For further details of the carrying amount and the fair value at 31 December
2024 of loans and advances to banks and customers classified as held for
sale, see Note 23 on the financial statements.
Gross loans and allowance for ECL on loans and advances to customers and banks reported in ‘Assets held for sale’
(Audited)
South Africa
German Private Banking
Business
Other
Total
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
at amortised cost
660
(4)
309
—
—
—
969
(4)
– personal
—
—
130
—
—
—
130
—
– corporate and commercial
586
(4)
19
—
—
—
605
(4)
– non-bank financial institutions
74
—
160
—
—
—
234
—
Loans and advances to banks at
amortised cost
—
—
—
—
144
—
144
—
At 31 Dec 20241
660
(4)
309
—
144
—
1,113
(4)
Banking business in
Canada
Retail banking operations in
France
Other
Total
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers
at amortised cost
56,349
(220)
16,984
(82)
255
(1)
73,588
(303)
– personal
27,071
(95)
13,920
(79)
140
(1)
41,131
(175)
– corporate and commercial
27,789
(120)
3,012
(3)
—
—
30,801
(123)
– non-bank financial institutions
1,489
(5)
52
—
115
—
1,656
(5)
Loans and advances to banks at
amortised cost
154
—
10,333
—
—
—
10,487
—
At 31 Dec 2023
56,503
(220)
27,317
(82)
255
(1)
84,075
(303)
1 The table above does not include disposals completed during 2024 including the sale of our retail banking operations in France completed on 1 January 2024 and
our banking business in Canada completed on 28 March 2024. The sale of our business in Argentina was announced in the first quarter of 2024 and completed
on 6 December 2024. The gross loans and advances to customers and banks in Argentina were $1,760m and the associated allowance for ECL was $34m at
31 March 2024. For more details, please refer to business disposals as disclosed in Note 23 on page 411.
Risk review
146
HSBC Holdings plc Annual Report and Accounts 2024
The table below analyses the amount of ECL (charges)/releases arising from assets held for sale. The charges during the period relate to our
businesses in Canada ($41m) and in Argentina ($40m).
Changes in expected credit losses and other credit impairment
(Audited)
2024
2023
$m
$m
ECL (charges)/releases arising from:
– assets held for sale
(81)
(49)
– assets not held for sale
(3,333)
(3,398)
Year ended 31 Dec
(3,414)
(3,447)
Credit exposure
Maximum exposure to credit risk
(Audited)
This section provides information on balance sheet items and their offsets as well as loan and other credit-related commitments. Commentary
on consolidated balance sheet movements in 2024 is provided on page 95.
‘Maximum exposure to credit risk’ table
The following table presents our maximum exposure before taking
account of any collateral held or other credit enhancements (unless
such enhancements meet accounting offsetting requirements).
The table excludes trading assets, financial assets designated and
otherwise mandatorily measured at fair value through profit or loss,
and financial investments measured at fair value through other
comprehensive income as their carrying amount best represents the
net exposure to credit risk. Equity securities are also excluded as
they are not subject to credit risk.
For the financial assets recognised on the balance sheet, the
maximum exposure to credit risk equals their carrying amount and is
net of the allowance for ECL. For financial guarantees and other
guarantees granted, it is the maximum amount that we would have
to pay if the guarantees were called upon. For loan commitments
and other credit-related commitments, it is generally the full amount
of the committed facilities.
The offset in the table relates to amounts where there is a legally
enforceable right of offset in the event of counterparty default and
where, as a result, there is a net exposure for credit risk purposes.
However, as there is no intention to settle these balances on a net
basis under normal circumstances, they do not qualify for net
presentation for accounting purposes. No offset has been applied to
off-balance sheet collateral. In the case of derivatives, the offset
column also includes collateral received in cash and other financial
assets.
Other credit risk mitigants
While not disclosed as an offset in the following ‘Maximum exposure
to credit risk’ table, other arrangements are in place that reduce our
maximum exposure to credit risk. These include a charge over
collateral on borrowers’ specific assets, such as residential properties,
collateral held in the form of financial instruments that are not held on
the balance sheet and short positions in securities. In addition, for
financial assets held as part of linked insurance/investment contracts
the credit risk is predominantly borne by the policyholder. See page
358 and Note 31 on the financial statements for further details of
collateral in respect of certain loans and advances and derivatives.
Collateral available to mitigate credit risk is disclosed in the ‘Collateral’
section on page 181.
HSBC Holdings plc Annual Report and Accounts 2024
147
Risk review
Maximum exposure to credit risk
(Audited)
2024
2023
Maximum exposure
Offset
Net
Maximum exposure
Offset
Net
$m
$m
$m
$m
$m
$m
Loans and advances to customers held at amortised cost
930,658
(22,822)
907,836
938,535
(22,607)
915,928
– personal
444,701
(2,256)
442,445
444,655
(2,470)
442,185
– corporate and commercial
403,929
(18,897)
385,032
419,852
(18,771)
401,081
– non-bank financial institutions
82,028
(1,669)
80,359
74,028
(1,366)
72,662
Loans and advances to banks at amortised cost
102,039
—
102,039
112,902
—
112,902
Other financial assets held at amortised cost
854,427
(4,383)
850,044
973,316
(13,919)
959,397
– cash and balances at central banks
267,674
—
267,674
285,868
—
285,868
– Hong Kong Government certificates of indebtedness
42,293
—
42,293
42,024
—
42,024
– reverse repurchase agreements – non-trading
252,549
(4,383)
248,166
252,217
(13,919)
238,298
– financial investments
153,973
—
153,973
148,326
—
148,326
– assets held for sale
27,234
—
27,234
114,134
—
114,134
– prepayments, accrued income and other assets
110,704
—
110,704
130,747
—
130,747
Derivatives
268,637
(254,257)
14,380
229,714
(222,059)
7,655
Total on-balance sheet exposure to credit risk
2,155,761
(281,462) 1,874,299
2,254,467
(258,585) 1,995,882
Total off-balance sheet
970,610
—
970,610
1,007,885
— 1,007,885
– financial and other guarantees
109,380
—
109,380
111,102
—
111,102
– loan and other credit-related commitments
861,230
—
861,230
896,783
—
896,783
At 31 Dec
3,126,371
(281,462) 2,844,909
3,262,352
(258,585) 3,003,767
Concentration of exposure
We have a number of global businesses with a broad range of
products. We operate in a number of geographical markets with the
majority of our exposures in Asia and Europe.
For an analysis of:
–
financial investments, see Note 16 on the financial statements;
–
trading assets, see Note 11 on the financial statements;
–
derivatives, see page 184 and Note 15 on the financial statements;
and
–
loans and advances by industry sector and by the location of the
principal operations of the lending subsidiary (or, in the case of the
operations of The Hongkong and Shanghai Banking Corporation
Limited, HSBC Bank plc, HSBC Bank Middle East Limited and
HSBC Bank USA, by the location of the lending branch), see page
170 for wholesale lending and page 184 for personal lending.
Credit deterioration of financial
instruments
(Audited)
A summary of our current policies and practices regarding the identification,
treatment and measurement of stage 1, stage 2, stage 3 (credit impaired)
and POCI financial instruments can be found in Note 1.2 on the financial
statements.
Measurement uncertainty and sensitivity analysis of ECL estimates
(Audited)
The recognition and measurement of ECL involves the use of
judgement and estimation. We form multiple economic scenarios,
apply these forecasts to credit risk models to estimate future credit
losses, and probability weight the results to determine an unbiased
ECL estimate.
Management assessed the current economic environment, reviewed
the latest forecasts and discussed key risks before selecting the
appropriate economic scenarios and their weightings.
The Central scenario is constructed to reflect the latest
macroeconomic expectations. Outer scenarios incorporate the
crystallisation of economic and geopolitical risks.
In the fourth quarter of 2024, the four economic scenarios were
modified to reflect heightened policy uncertainty following the US
election and to overcome any lags in consensus forecasts. An
adjustment factor based on more recent views of expected tariffs and
other policy changes was modelled and then applied to each of the
economic scenarios. The effect was to lower growth expectations in
our major markets, while the impact on inflation and interest rates
was varied.
Management judgemental adjustments are used where modelled
ECL does not fully reflect the identified risks and related uncertainty,
or to capture significant late-breaking events.
At 31 December 2024, there was an overall reduction in management
judgemental adjustments compared with 31 December 2023, as
modelled outcomes better reflected the key risks at 31 December 2024.
Methodology
At 31 December 2024, four scenarios were used to capture the latest
economic expectations and to articulate management’s view of the
range of risks and potential outcomes. Each scenario is updated with
the latest economic forecasts and distributional estimates every
quarter.
Three scenarios, the Upside, Central and Downside, are drawn from
consensus forecasts, market data and distributional estimates of the
entire range of economic outcomes. The fourth scenario, the
Downside 2, represents management’s view of severe downside
risks. Consensus estimates are deployed as conditioning variables in a
proprietary expansion of the scenario variables.
The Central scenario is deemed the ‘most likely’ scenario, and usually
attracts the largest probability weighting. It is created using consensus
forecasts, which is the average of a panel of external forecasts.
The outer scenarios represent the tails of the distribution and are less
likely to occur. The consensus Upside and Downside scenarios are
created with reference to forecast probability distributions for select
markets that capture economists’ views of the entire range of
economic outcomes. In the later years of these scenarios, projections
revert to long-term consensus trend expectations. Reversion to trend
expectations is done with reference to historically observed quarterly
changes in the values of macroeconomic variables.
Risk review
148
HSBC Holdings plc Annual Report and Accounts 2024
The fourth scenario, the Downside 2, represents management’s view of
severe downside risks. It is a globally consistent, narrative-driven
scenario that explores a more extreme economic outcome than those
captured by the consensus scenarios. In this scenario, variables do not,
by design, revert to long-term trend expectations and may instead
explore alternative states of equilibrium, where economic variables move
permanently away from past trends.
The consensus Downside and the consensus Upside scenarios are each
constructed to be consistent with a 10% probability. The Downside 2 is
calibrated to a 5% probability. The Central scenario is assigned the
remaining 75%. This weighting scheme is deemed appropriate for the
unbiased estimation of ECL in most circumstances. However,
management may depart from this probability-based scenario weighting
approach when the economic outlook and forecasts are determined to
be particularly uncertain and risks are elevated.
For the fourth quarter of 2024, we assessed that consensus forecasts
and distributional estimates did not adequately reflect the
consequences of the US election on the global economic outlook.
Due to the lag in forecasts there was increased uncertainty as to how
tariffs would be implemented and economic policy would change. As
such, scenarios have been constructed using the described standard
methodology and an adjustment – to account for policy changes –
applied. The adjustment was based on a modelled update to the
Central scenario and incorporated a detailed narrative of US economic
policy proposals, including specific tariff rates. The modelled results
were then layered onto the Central scenario, which resulted in
changes to most variables. To quantify the impact, the adjustment
reduces GDP growth in our key markets by an average of 30bps and
50bps respectively, in the first two years of the Central scenario
forecast. Outer scenarios were adjusted in parallel.
The scenario adjustment entailed no change in scenario probability
weights, which remained in line with our Forward Economic Guidance
(’FEG’) framework. Uncertainties relating to the policy outlook have been
addressed in the scenarios directly. Measures of dispersion and
uncertainty have remained low but may reflect lags in the consensus
economic forecasting process.
Scenarios produced to calculate ECL are aligned to HSBC’s top and
emerging risks.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC with reference to external forecasts and estimates,
specifically for the purpose of calculating ECL.
Forecasts may change and remain subject to uncertainty. Outer
scenarios are designed to capture the potential crystallisation of key
economic and financial risks and alternative paths for economic
variables.
In our key markets, the Central scenario incorporates potential
impacts from anticipated changes to US economic and trade policy,
including higher tariffs. The overall effect of the adjustment in our key
markets is to lower GDP and raise inflation and unemployment
estimates, relative to the consensus. Consequently, GDP growth and
unemployment forecasts have deteriorated in the fourth quarter of
2024, compared with the fourth quarter of 2023. With regards to
monetary policy, the expected path for interest rates in many of our
markets is based on market futures. Interest rate expectations have
increased relative to the fourth quarter of 2023, with fewer rate cuts
forecast. The exception is mainland China, where the headwinds to
growth ensure that forecast interest rates are lower.
At the end of 2024, risks to the economic outlook included a number
of significant geopolitical issues. Within our Downside scenarios, the
economic consequences from the crystallisation of those risks were
captured by higher commodity and goods prices, the re-acceleration
of inflation, a further rise in interest rates and a global recession.
The scenarios used to calculate ECL are described below.
The consensus Central scenario
HSBC’s Central scenario reflects expectations for slower growth and
higher inflation and unemployment across many of our key markets.
Expectations of lower GDP growth during 2025 are driven by the
assumed effects of higher tariffs, which impede trade flows, weaken
consumption and deter investment. In the scenario, the US applies tariffs
on key trading partners, focusing on mainland China and Mexico at the
outset of the new administration’s term, before moving attention to
other trading partners. Countries are expected to respond in kind. As a
direct consequence of tariffs, trade growth is expected to be lower,
which in turn weighs on GDP growth.
Mainland China, Hong Kong and Mexico experience the greatest
negative consequences given their deeper trade and financial
interlinkages, with the US economy. Indirect consequences from tariffs
dampen growth elsewhere. Tariffs, or the threat of them, increases
uncertainty, leading to lower confidence and reduced investment.
Tighter restrictions on immigration into the US are also expected to
reduce the size of the labour force, putting upward pressure on wage
growth. At the same time, higher tariff rates drive US inflation. Higher
inflation is assumed to erode purchasing power and reduces GDP
growth. In other markets, including in Mexico, higher inflation is also
expected due to currency depreciation. The higher projected rates of
inflation ensure that central banks are expected to slow the pace of
interest rate reductions. The exception is in mainland China, where
the PBoC cuts interest rates as the excess of domestic supply is
expected to become more acute and drives prices lower.
Global GDP is expected to grow by 2.5% in 2025 in the Central
scenario, and the average rate of global GDP growth is forecast to be
2.6% over the five-year forecast period. This is below the average
growth rate over the five-year period prior to the onset of the pandemic
of 2.9%.
The key features of our Central scenario are:
–
GDP growth rates across the majority of our main markets are
expected to slow in 2025 and 2026, due to the implementation of
higher tariffs as well as underlying structural weaknesses in some
economies. The most significant slowdowns in activity are expected
to occur in the markets with the highest trade dependence with the
US. Elevated interest rates and higher price levels are also expected
to continue to weigh on some consumer and corporate segments.
–
In most markets, unemployment is forecast to rise moderately in
2025 as economic activity slows, although it will remain low by
historical standards.
–
Inflation is forecast to increase in several of our main markets, as a
result of tariffs, even as services price inflation is expected to ease as
wage growth moderates. However, inflation largely remains within
central banks’ target ranges from 2025. The main exceptions are
Hong Kong and mainland China, where inflation is expected to remain
subdued, despite higher tariffs, due to weak domestic demand.
–
Housing market conditions remain mixed, with price weakness
expected to persist in Hong Kong and mainland China, stronger
growth in the UAE and Mexico, and more muted price growth in the
UK, US and France. High inventory levels remain the biggest drag on
Hong Kong and mainland China residential property and this is
expected to lead to another year of price declines in 2025, before a
gradual recovery from 2026.
–
Challenging conditions are also forecast to continue in certain
segments of the commercial property sector in a number of our key
markets. Structural changes to demand in the office segment in
particular have driven lower valuations.
–
Policy interest rates in key markets are forecast to gradually decline
further in 2025. In the longer term, they are expected to remain at a
higher level than in recent years.
–
The Brent crude oil price is forecast to average around $69 per barrel
over the projection period.
HSBC Holdings plc Annual Report and Accounts 2024
149
Risk review
The Central scenario was created with forecasts available in late November, and reviewed continually until the end of December 2024. In accordance
with HSBC’s scenario framework, a probability weight of 75% has been assigned to the Central scenario across all major markets.
The following tables describe key macroeconomic variables in the consensus Central scenario.
GDP (annual average growth rate, %)
2025
1.2
2.0
1.7
4.0
0.9
4.4
0.9
2026
1.3
1.6
1.8
3.7
0.9
4.2
1.2
2027
1.8
1.6
3.5
4.3
1.4
3.9
1.7
2028
1.6
1.8
3.1
3.9
1.5
3.6
1.9
2029
1.6
2.0
2.7
3.7
1.4
3.6
2.0
5-year average1
1.5
1.8
2.6
3.9
1.2
3.9
1.5
Unemployment rate (%)
2025
4.9
4.4
3.3
5.2
7.5
2.7
3.5
2026
4.7
4.3
3.7
5.4
7.3
2.6
3.5
2027
4.5
4.3
3.3
5.2
7.2
2.6
3.5
2028
4.3
4.2
3.0
5.0
7.0
2.5
3.5
2029
4.3
4.1
2.9
5.0
7.0
2.5
3.5
5-year average1
4.5
4.2
3.2
5.2
7.2
2.6
3.5
House prices (annual average growth rate, %)
2025
1.4
4.4
(0.5)
(5.9)
2.1
9.3
7.6
2026
3.8
3.2
2.4
(0.7)
4.4
5.1
4.5
2027
4.6
2.4
3.0
3.2
4.4
3.6
4.2
2028
3.5
2.5
2.7
4.1
3.8
1.8
4.0
2029
2.7
2.6
2.7
2.9
3.1
1.3
4.0
5-year average1
3.2
3.0
2.1
0.7
3.6
4.2
4.9
Inflation (annual average growth rate, %)
2025
2.4
2.4
1.4
0.3
1.2
2.1
5.0
2026
2.1
2.8
1.9
1.0
1.6
1.9
3.9
2027
2.1
2.5
2.2
1.5
2.0
1.8
3.4
2028
2.0
2.2
2.2
1.7
2.3
1.9
3.4
2029
2.0
2.1
2.3
1.6
2.2
1.8
3.4
5-year average
2.1
2.4
2.0
1.2
1.9
1.9
3.8
Central bank policy rate (annual average, %)
2025
4.2
4.1
4.5
2.9
2.1
4.1
9.4
2026
3.9
3.7
4.1
2.9
1.8
3.8
8.8
2027
3.8
3.7
4.0
3.0
2.0
3.7
8.8
2028
3.7
3.6
4.0
3.2
2.0
3.6
8.9
2029
3.7
3.6
4.0
3.3
2.1
3.6
8.9
5-year average1
3.9
3.7
4.1
3.1
2.0
3.8
8.9
Consensus Central scenario 2025–2029 (as at 4Q24)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
1 The five-year average is calculated over a projected period of 20 quarters from 1Q25 to 4Q29.
2 For mainland China, the rate shown is the Loan Prime Rate.
Risk review
150
HSBC Holdings plc Annual Report and Accounts 2024
GDP (annual average growth rate, %)
2024
0.3
1.0
2.6
4.5
0.8
3.7
1.9
2025
1.2
1.8
2.7
4.4
1.5
4.0
2.2
2026
1.7
2.1
2.6
4.3
1.6
3.8
2.3
2027
1.6
2.0
2.6
3.8
1.5
3.4
2.4
2028
1.6
2.0
2.6
3.9
1.5
3.4
2.4
5-year average1
1.3
1.8
2.6
4.2
1.4
3.6
2.2
Unemployment rate (%)
2024
4.7
4.3
3.0
5.2
7.5
2.6
2.9
2025
4.6
4.2
3.0
5.1
7.3
2.6
2.9
2026
4.3
4.0
3.2
5.1
7.0
2.6
2.9
2027
4.2
4.0
3.2
5.1
6.8
2.6
2.9
2028
4.2
4.0
3.2
5.1
6.8
2.6
2.9
5-year average1
4.4
4.1
3.1
5.1
7.1
2.6
2.9
House prices (annual average growth rate, %)
2024
(5.5)
2.9
(6.6)
(0.6)
(1.0)
12.6
6.5
2025
0.1
2.7
(0.7)
1.1
2.4
7.7
4.2
2026
3.5
3.1
2.6
2.6
4.0
4.4
4.2
2027
3.0
2.7
2.8
4.0
4.4
2.6
4.0
2028
3.0
2.1
3.0
4.5
4.0
2.3
4.0
5-year average1
0.8
2.7
0.2
2.3
2.8
5.9
4.6
Inflation (annual average growth rate,%)
2024
3.2
2.7
2.1
1.8
2.7
2.3
4.2
2025
2.2
2.2
2.1
2.0
1.8
2.2
3.6
2026
2.2
2.3
2.2
2.1
1.7
2.1
3.5
2027
2.3
2.2
2.4
2.0
1.9
2.1
3.5
2028
2.3
2.2
2.4
2.0
2.1
2.1
3.5
5-year average1
2.4
2.3
2.2
2.0
2.0
2.1
3.7
Central bank policy rate (annual average, %)
2024
5.0
5.0
5.4
3.2
3.6
5.1
10.4
2025
4.3
4.0
4.4
3.3
2.8
4.1
8.6
2026
3.9
3.7
4.1
3.5
2.6
3.7
7.9
2027
3.8
3.7
4.1
3.7
2.6
3.7
7.9
2028
3.7
3.8
4.1
3.9
2.7
3.8
8.1
5-year average1
4.1
4.1
4.4
3.5
2.9
4.1
8.6
Consensus Central scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
1 The five-year average is calculated over a projected period of 20 quarters from 1Q24 to 4Q28.
2 For mainland China, the rate shown is the Loan Prime Rate. In prior periods, including the 4Q23 disclosure, the reference rate shown for mainland China was the
Lending Rate.
The graphs compare the Central scenario at the year end 2023 with economic expectations at the end of 2024.
GDP growth: Comparison of Central scenarios
Hong Kong
4Q23 Central
4Q24 Central
2024
2025
2026
2027
2028
2029
-1
0
1
2
3
4
5
6
7
8
Note: Real GDP shown as year-on-year percentage change.
Mainland China
4Q23 Central
4Q24 Central
2024
2025
2026
2027
2028
2029
-1
0
1
2
3
4
5
6
7
8
Note: Real GDP shown as year-on-year percentage change.
HSBC Holdings plc Annual Report and Accounts 2024
151
4Q23 Central 5Y Average: 2.6%
4Q24 Central 5Y Average: 2.6%
4Q23 Central 5Y Average: 4.2%
4Q24 Central 5Y Average: 3.9%
Risk review
UK
4Q23 Central
4Q24 Central
2024
2025
2026
2027
2028
2029
-1
0
1
2
3
4
5
Note: Real GDP shown as year-on-year percentage change.
US
4Q23 Central
4Q24 Central
2024
2025
2026
2027
2028
2029
-1
0
1
2
3
4
5
Note: Real GDP shown as year-on-year percentage change.
The consensus Upside scenario
Compared with the Central scenario, the consensus Upside scenario
features stronger economic activity in the near term, before
converging to long-run trend expectations. It also incorporates a faster
fall in the rate of inflation than in the Central scenario.
The scenario is consistent with a number of key upside risk themes.
These include only limited increases in tariffs and a faster fall in the
rate of inflation that allows central banks to reduce interest rates
more quickly. The Upside scenario would also be consistent with a
de-escalation in geopolitical tensions, where the Russia-Ukraine war
moves quickly towards a conclusion, tensions in the Middle East
subside and US-China relations become more cordial.
The following tables describe key macroeconomic variables in the
consensus Upside scenario.
Consensus Upside scenario 2025–2029 (as at 4Q24)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
GDP level (%, start-to-peak)1
11.3 (4Q29)
13.6 (4Q29)
21.4 (4Q29)
27.5
(4Q29)
8.9 (4Q29)
28.9 (4Q29)
13.6 (4Q29)
Unemployment rate (%, min)2
3.5 (3Q26)
3.6 (1Q26)
2.9 (4Q29)
4.9
(4Q26)
6.4 (4Q26)
2.2 (4Q26)
3.0 (1Q25)
House price index (%, start-to-peak)1
24.2 (4Q29)
23.6 (4Q29)
25.3 (4Q29)
9.8
(4Q29)
22.8 (4Q29)
26.1 (4Q29)
31.7 (4Q29)
Inflation rate (YoY % change, min)3
1.4 (1Q26)
1.6 (2Q26)
(0.1) (4Q25)
(1.0) (4Q25)
0.1 (4Q25)
0.6 (4Q25)
3.1 (2Q26)
Central bank policy rate (%, min)2
3.6 (4Q25)
3.6 (1Q29)
4.0 (1Q29)
2.7
(1Q26)
1.4 (3Q25)
3.6 (1Q29)
7.6 (1Q26)
1 Cumulative change to the highest level of the series during the 20-quarter projection.
2 Lowest projected unemployment or policy interest rate in the scenario. For mainland China, rate shown is the Loan Prime Rate.
3 Lowest projected year-on-year percentage change in inflation in the scenario.
Consensus Upside scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
GDP level (%, start-to-peak)1
10.8
(4Q28)
14.3
(4Q28)
21.8
(4Q28)
30.4
(4Q28)
10.4
(4Q28)
30.7
(4Q28)
17.8
(4Q28)
Unemployment rate (%, min)2
3.1
(4Q24)
3.1
(2Q25)
2.4
(3Q24)
4.8
(4Q25)
6.2
(4Q25)
2.0
(4Q25)
2.4
(3Q24)
House price index (%, start-to-peak)1
13.0
(4Q28)
21.9
(4Q28)
17.9
(4Q28)
19.7
(4Q28)
19.6
(4Q28)
34.2
(4Q28)
30.6
(4Q28)
Inflation rate (YoY % change, min)3
1.3
(2Q25)
1.4
(1Q25)
0.3
(4Q24)
0.6
(3Q24)
1.5
(3Q24)
1.4
(1Q25)
2.7
(1Q25)
Central bank policy rate (%, min)2
3.7
(3Q28)
3.7
(2Q27)
4.1
(1Q27)
3.1
(3Q24)
2.6
(2Q26)
3.7
(1Q27)
7.8
(2Q25)
1 Cumulative change to the highest level of the series during the 20-quarter projection.
2 Lowest projected unemployment or policy interest rate in the scenario. For mainland China, the rate shown is the Loan Prime Rate. In prior periods, including the
4Q23 disclosure, the reference rate shown for mainland China was the Lending Rate.
3 Lowest projected year-on-year percentage change in inflation in the scenario.
Downside scenarios
Downside scenarios explore the intensification and crystallisation of a
number of key economic and financial risks. These include a more
material escalation of tariff policies and geopolitical tensions, which
disrupt key commodity and goods markets, causing inflation and
interest rates to rise, and creating a global recession.
As the geopolitical environment remains volatile and complex, risks
include:
–
an increase in protectionist policies, as countries that impose
tariffs are met with retaliatory actions. This lowers investment,
complicates international supply chains, and impedes trade flows;
–
broader and more prolonged conflicts in the Middle East and
between Russia and Ukraine, which further disrupt energy and
food supplies; and
–
continued differences between the US and China, which could
affect economic confidence, and the global goods trade and supply
chains for critical technologies.
High inflation and higher interest rates also remain key risks. Should
tariffs increase significantly and geopolitical tensions escalate, energy
and food prices could rise and increase pressure on household
budgets and firms’ costs. Higher inflation and labour supply shortages
could also trigger a wage-price spiral and put sustained pressure on
household incomes and corporate margins. In turn, it raises the risk
that central banks react by raising interest rates, leading to higher
defaults and an economic recession.
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HSBC Holdings plc Annual Report and Accounts 2024
4Q23 Central 5Y Average: 1.3%
4Q24 Central 5Y Average: 1.5%
4Q23 Central 5Y Average: 1.8%
4Q24 Central 5Y Average: 1.8%
The consensus Downside scenario
In the consensus Downside scenario, economic activity is weaker
compared with the Central scenario. In this scenario, GDP declines,
unemployment rates rise, and asset prices fall. The scenario features
an increase in tariffs over and above those assumed in the Central
scenario and an escalation of geopolitical tensions, which causes a
rise in inflation, as supply chain constraints intensify and energy prices
rise. The scenario also features a temporary increase in interest rates
above the Central scenario, before the effects of weaker consumption
demand begin to dominate and commodity prices and inflation fall
again.
The following tables describe key macroeconomic variables in the
consensus Downside scenario.
Consensus Downside scenario 2025–2029 (as at 4Q24)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
GDP level (%, start-to-trough)1
(1.0) (4Q26)
(0.6) (3Q25)
(4.5) (4Q25)
(2.5)
(3Q25)
(0.6) (1Q26)
0.3 (1Q25)
(2.1) (4Q26)
Unemployment rate (%, max)2
6.1 (4Q25)
5.3 (3Q25)
5.1 (2Q26)
6.9
(4Q26)
8.3 (3Q25)
3.4 (1Q26)
4.1 (4Q25)
House price index (%, start-to-
trough)1
(4.5) (1Q26)
(0.2) (1Q25)
(1.9) (2Q26)
(12.8)
(3Q26)
(0.3) (1Q25)
(0.4) (1Q25)
2.1 (1Q25)
Inflation rate (YoY % change, max)3
3.4 (4Q25)
4.5 (1Q26)
3.1 (1Q26)
2.0
(1Q26)
2.6 (3Q25)
2.8 (1Q26)
7.4 (4Q25)
Central bank policy rate (%, max)2
5.0 (1Q25)
4.8 (1Q25)
5.2 (1Q25)
3.0
(1Q25)
3.2 (1Q25)
4.8 (1Q25)
11.5 (3Q25)
1 Cumulative change to the lowest level of the series during the 20-quarter projection.
2 The highest projected unemployment or policy interest rate in the scenario. For mainland China, the rate shown is the Loan Prime Rate.
3 The highest projected year-on-year percentage change in inflation in the scenario.
Consensus Downside scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
GDP level (%, start-to-trough)1
(1.0) (2Q25)
(1.4) (3Q24)
(1.6) (3Q25)
(1.5)
(1Q24)
(0.3) (2Q24)
1.4 (1Q24)
(0.3) (4Q24)
Unemployment rate (%, max)2
6.4 (1Q25)
5.6 (4Q24)
4.7 (4Q25)
6.9
(4Q25)
8.5 (4Q24)
3.7 (4Q25)
3.5 (4Q25)
House price index (%, start-to-
trough)1
(12.0) (2Q25)
(1.3) (3Q24)
(9.6) (4Q24)
(7.1)
(3Q25)
(1.2) (3Q24)
0.3 (1Q24)
1.2 (1Q24)
Inflation rate (YoY % change, max)3
4.1 (1Q24)
3.5 (4Q24)
3.8 (3Q24)
3.5
(4Q24)
3.8 (2Q24)
3.0 (1Q24)
6.5 (4Q24)
Central bank policy rate (%, max)2
5.7 (1Q24)
5.6 (1Q24)
6.0 (1Q24)
3.2
(3Q24)
4.2 (1Q24)
5.7 (1Q24)
12.0 (3Q24)
1 Cumulative change to the lowest level of the series during the 20-quarter projection.
2 The highest projected unemployment or policy interest rate in the scenario. For mainland China, the rate shown is the Loan Prime Rate. In prior periods, including
the 4Q23 disclosure, the reference rate shown for mainland China was the Lending Rate.
3 The highest projected year-on-year percentage change in inflation in the scenario.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and
reflects management’s view of the tail of the economic distribution. It
incorporates the crystallisation of a number of risks simultaneously,
including significant increases in tariffs globally, where the US
imposes particularly high and punitive tariffs on imports from
mainland China and Mexico. A further escalation of geopolitical crises
is also assumed, which creates severe supply disruptions to goods
and energy markets.
In the scenario, as inflation surges and central banks tighten monetary
policy further, consumer and business confidence falls. However, this
impulse is assumed to be short-lived, as recession takes hold, causing
a fall in demand, leading commodity prices to correct sharply and
global price inflation to fall.
The following tables describe key macroeconomic variables in the
Downside 2 scenario.
Downside 2 scenario 2025–2029 (as at 4Q24)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
GDP level (%, start-to-trough)1
(9.1) (2Q26)
(4.1) (2Q26)
(10.1) (4Q25)
(8.7)
(4Q25)
(7.9) (2Q26)
(6.8) (2Q26)
(10.5) (3Q26)
Unemployment rate (%, max)2
8.4 (2Q26)
9.3 (2Q26)
7.1 (1Q26)
7.1
(4Q26)
10.4 (1Q27)
5.0 (3Q25)
5.6 (1Q26)
House price index (%, start-to-
trough)1
(27.2) (4Q26)
(15.8) (4Q25)
(34.4) (3Q27)
(30.5)
(4Q26)
(14.0) (2Q27)
(13.2) (2Q27)
2.0 (1Q25)
Inflation rate (YoY % change, max)3
10.1 (2Q25)
4.9 (4Q25)
3.6 (1Q26)
3.8
(4Q25)
7.6 (2Q25)
3.7 (2Q25)
7.9 (4Q25)
Central bank policy rate (%, max)2
5.5 (1Q25)
5.5 (1Q25)
5.9 (1Q25)
3.5
(3Q25)
4.2 (1Q25)
5.6 (1Q25)
12.1 (3Q25)
1 Cumulative change to the lowest level of the series during the 20-quarter projection.
2 The highest projected unemployment or policy interest rate in the scenario. For mainland China, the rate shown is the Loan Prime Rate.
3 The highest projected year-on-year percentage change in inflation in the scenario.
Downside 2 scenario 2024–2028 (as at 4Q23)
UK
US
Hong Kong
Mainland China
France
UAE
Mexico
GDP level (%, start-to-trough)1
(8.8) (2Q25)
(4.6) (1Q25)
(8.2) (1Q25)
(6.4)
(1Q25)
(6.6) (1Q25)
(4.9) (2Q25)
(8.1) (2Q25)
Unemployment rate (%, max)2
8.4 (2Q25)
9.3 (2Q25)
6.4 (4Q24)
7.0
(4Q25)
10.2 (4Q25)
4.3 (3Q24)
4.9 (2Q25)
House price index (%, start-to-
trough)1
(30.2) (4Q25)
(14.7) (4Q24)
(32.8) (3Q26)
(25.5)
(4Q25)
(14.5) (2Q26)
(2.9) (4Q25)
1.2 (1Q24)
Inflation rate (YoY % change, max)3
10.1 (2Q24)
4.8 (2Q24)
4.1 (3Q24)
4.1
(4Q24)
8.6 (2Q24)
3.5 (2Q24)
7.0 (4Q24)
Central bank policy rate (%, max)2
6.0 (1Q24)
6.1 (1Q24)
6.4 (1Q24)
4.1
(3Q24)
5.2 (1Q24)
6.1 (1Q24)
12.7 (3Q24)
1 Cumulative change to the lowest level of the series during the 20-quarter projection.
2 The highest projected unemployment or policy interest rate in the scenario. For mainland China, rate shown is the Loan Prime Rate. In prior periods, including the
4Q23 disclosure, the reference rate shown for mainland China was the Lending Rate.
3 The highest projected year-on-year percentage change in inflation in the scenario.
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Risk review
The following graphs show the historical and forecasted GDP growth rate for the various economic scenarios in our four largest markets.
Hong Kong
Central
Upside
Downside
Downside 2
2024
2025
2026
2027
2028
2029
-12
-8
-4
0
4
8
12
Mainland China
Central
Upside
Downside
Downside 2
2024
2025
2026
2027
2028
2029
-12
-8
-4
0
4
8
12
UK
Central
Upside
Downside
Downside 2
2024
2025
2026
2027
2028
2029
-10
-8
-6
-4
-2
0
2
4
6
US
Central
Upside
Downside
Downside 2
2024
2025
2026
2027
2028
2029
-10
-8
-6
-4
-2
0
2
4
6
Scenario weighting
Scenario weightings are calibrated to probabilities that are determined
with reference to consensus forecast probability distributions.
Management may then choose to vary weights if they assess that the
calibration lags more recent events, or does not reflect their view of
the distribution of economic and geopolitical risk. Management’s view
of the scenarios and the probability distribution takes into
consideration the relationship of the consensus scenario to both
internal and external assessments of risk.
In assessing the economic environment and the level of risk and
uncertainty, management has considered both global and country-
specific factors.
In the fourth quarter of 2024, key considerations around uncertainty
focused on:
–
US import tariffs and bilateral tariff escalations globally, and the
impact on trade and manufacturing supply chains;
–
the extent and success of mainland China in deploying fiscal and
monetary support to secure economic growth and underpin a
recovery in the real estate market;
–
prospects for recovery in the Hong Kong residential property
market;
–
the implications of changes to monetary policy expectations on
growth and employment;
–
estimation and forecast uncertainty for UK unemployment given
ongoing methodology updates at the Office for National Statistics;
and
–
risks of an asset price correction given elevated valuations across
different asset classes.
Although these factors are significant, management assessed that
following the tariff-based adjustment, the Central scenario reflected
the most likely future economic outcome and that outer scenarios
were sufficiently well calibrated to address the crystallisation of more
severe risks.
This led management to assign scenario probabilities that are aligned
to the standard scenario probability calibration framework in all major
markets. The Central scenario was assigned a 75% probability
weighting in our major markets. The consensus Upside scenario was
assigned a 10% weighting, and the consensus Downside scenario
was given 10%. The Downside 2 was assigned a 5% weighting.
In support of the decision, it was noted that the effect of higher tariffs
would be most negative in mainland China and Hong Kong, as it
would limit trade growth (a significant growth driver in 2024)
substantially and lead to weaker domestic demand. The adjustment to
the Central scenario reflected this assumption.
In the UK, tariffs have a small direct impact on GDP growth forecasts
in the Central scenario, but indirect effects would be larger through
weaker trade and lower global growth. The outlook also remains weak
given the only partially offsetting impacts from measures announced
in the 2024-25 Budget and higher US interest rates.
For the US, the Central scenario reflects expectations that economic
growth will slow in 2025 as households and businesses adjust to
higher inflation, lower labour supply and elevated interest rates.
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HSBC Holdings plc Annual Report and Accounts 2024
The impact from tariffs is minimal for the UAE, as trade with the US is
small, but it is assumed to be affected through secondary channels,
including a stronger US dollar and higher interest rates. It was also
observed that geopolitical risks have remained high since the
outbreak of conflict in the Middle East, but economic and market
impacts have been limited and oil production remains unaffected.
Escalation risks were assessed to be consistent with the probabilities
assigned to the Downside scenario.
Management concluded that Mexico is likely to be one of the most
heavily affected countries from US tariff policies and that the impacts
are reflected in the scenarios. GDP growth forecasts in the Central
scenario are lower than in previous periods, and inflation and interest
rates are higher, in part due to an expected deprecation of the
Mexican peso.
In France, recent domestic political uncertainty is the main factor
weighing on reduced growth prospects, and as with other European
markets, there are also assumed to be negative impacts stemming
from higher US tariffs.
The following tables describe the probabilities assigned in each
scenario.
Standard
weights
UK
US
Hong
Kong
Mainland
China
Canada
France
UAE
Mexico
4Q24
Upside scenario
10
10
10
10
10
10
10
10
10
Central scenario
75
75
75
75
75
75
75
75
75
Downside scenario
10
10
10
10
10
10
10
10
10
Downside 2 scenario
5
5
5
5
5
5
5
5
5
4Q23
Upside scenario
10
10
10
10
10
10
10
10
10
Central scenario
75
75
75
75
75
75
75
75
75
Downside scenario
10
10
10
10
10
10
10
10
10
Downside 2 scenario
5
5
5
5
5
5
5
5
5
Scenario weightings, %
At 31 December 2024, the consensus Upside and Central scenarios for all markets had a combined weighting of 85%, unchanged as at
31 December 2023. Weightings assigned to downside scenarios also remained unchanged.
Critical estimates and judgements
The calculation of ECL under IFRS 9 involved significant judgements,
assumptions and estimates at 31 December 2024. These included:
–
the selection and configuration of economic scenarios, given the
constant change in economic conditions and distribution of
economic risks; and
–
estimating the economic effects of those scenarios on ECL, where
similar observable historical conditions cannot be captured by the
credit risk models.
How economic scenarios are
reflected in ECL calculations
Models are used to reflect economic scenarios in ECL estimates. As
described above, modelled assumptions and linkages based on historical
information could not alone produce relevant information under the
conditions experienced in 2024, and management judgemental
adjustments were still required to support modelled outcomes.
We have developed globally consistent methodologies for the
application of forward economic guidance into the calculation of ECL
for wholesale and retail credit risk. These standard approaches are
described below, followed by the management judgemental
adjustments made, including those to reflect the circumstances
experienced in 2024.
For our wholesale portfolios, a global methodology is used for the
estimation of the term structure of probability of default (‘PD’) and
loss given default (‘LGD’). For PDs, we consider the correlation of
forward economic guidance to default rates for a particular industry in
a country. For LGD calculations, we consider the correlation of
forward economic guidance to collateral values and realisation rates
for a particular country and industry. PDs and LGDs are estimated for
the entire term structure of each instrument.
For impaired loans, allowance for ECL estimates are derived based on
discounted cash flow (‘DCF’) calculations for internal forward-looking
scenarios specific to individual borrower circumstances (see page
359). Probability-weighted outcomes are applied, and depending on
materiality and status of the borrower, the number of scenarios
considered will change. Where relevant for the case being assessed,
forward economic guidance is incorporated as part of these scenarios.
LGD-driven proxy and modelled estimates are used for certain less
material cases.
For our retail portfolios, the models are predominantly based on
historical observations and correlations with default rates and
collateral values.
For PD, the impact of economic scenarios is modelled for each
portfolio, using historical relationships between default rates and
macroeconomic variables. These are included within IFRS 9 ECL
estimates using either economic response models or models that
contain internal, external and macroeconomic variables. The
macroeconomic impact on PD is modelled over the period equal to
the remaining maturity of the assets.
For LGD, the impact is modelled for mortgage portfolios by
forecasting future loan-to-value profiles for the remaining maturity of
the asset, using national level house price index forecasts and
applying the corresponding LGD expectation relative to the updated
forecast collateral values.
For unsecured retail portfolios historically observed recovery rates are
leveraged to measure loss. For both mortgages and unsecured, a
limited number of portfolios utilise a macroeconomic dependent
stressed LGD applied to the Downside 2 scenario.
Management judgemental
adjustments
In the context of IFRS 9, management judgemental adjustments are
typically short-term increases or decreases to the modelled allowance
for ECL at either a customer, segment or portfolio level where
management believes allowances do not sufficiently reflect the credit
risk/expected credit losses at the reporting date. These can relate to
risks or uncertainties that are not reflected in the models and/or to
any late-breaking events with significant uncertainty, subject to
management review and challenge.
This includes refining model inputs and outputs and using
adjustments to ECL based on management judgement and
quantitative analysis for impacts that are difficult to model.
The effects of management judgemental adjustments are considered for both
balances and allowance for ECL when determining whether or not a significant
increase in credit risk has occurred and is allocated to a stage where
appropriate. This is in accordance with the internal adjustments framework.
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155
Risk review
Management judgemental adjustments are reviewed under the
governance process for IFRS 9 (as detailed in the section ‘Credit risk
management’ on page 139). Review and challenge focuses on the
rationale and quantum of the adjustments with a further review
carried out by the second line of defence where significant. For some
management judgemental adjustments, internal frameworks establish
the conditions under which these adjustments should no longer be
required and as such are considered as part of the governance
process. This internal governance process allows management
judgemental adjustments to be reviewed regularly and, where
possible, to reduce the reliance on these through model recalibration
or redevelopment, as appropriate.
The drivers of management judgemental adjustments continue to
evolve with the economic environment and as new risks emerge.
In addition to management judgemental adjustments there are also
‘Other adjustments’, which are made to address process limitations
and data/model deficiencies and can also include, where appropriate,
the impact of new models where governance has sufficiently
progressed to allow an accurate estimate of ECL allowance to be
incorporated into the total reported ECL.
‘Management judgemental adjustments’ and ‘Other adjustments’
constitute the total value of adjustments to modelled allowance for
ECL. For the wholesale portfolio, defaulted exposures are assessed
individually and management judgemental adjustments are made only
to the performing portfolio.
At 31 December 2024, there was a $0.6bn reduction in management
judgemental adjustments compared with 31 December 2023. This
was driven by retail due to reductions in economic uncertainty,
primarily in the UK and Asia, and model redevelopments which
captured macro-economic risks more effectively.
Management judgemental adjustments made in estimating the
scenario-weighted reported allowance for ECL at 31 December 2024
are set out in the following table.
Management judgemental adjustments to ECL at 31 December 20241
Retail
Wholesale2
Total
$bn
$bn
$bn
Modelled ECL (A)3
2.6
2.0
4.6
Banks, sovereigns, government entities and low-risk counterparties
0.0
0.0
Corporate lending adjustments
0.1
0.1
Inflation related adjustments
0.0
0.0
Other credit judgements
0.0
0.0
Total management judgemental adjustments (B)4
0.0
0.1
0.1
Other adjustments (C)5
(0.0)
0.1
0.1
Final ECL (A + B + C)6
2.6
2.2
4.8
Management judgemental adjustments to ECL at 31 December 20231,7
Retail
Wholesale2
Total
$bn
$bn
$bn
Modelled ECL (A)3
2.6
2.4
5.0
Banks, sovereigns, government entities and low-risk counterparties
0.0
0.0
Corporate lending adjustments
0.1
0.1
Inflation-related adjustments
0.1
0.1
Other credit judgements
0.5
0.5
Total management judgemental adjustments (B)4
0.6
0.1
0.7
Other adjustments (C)5
(0.0)
0.0
0.0
Final ECL (A + B + C)6
3.2
2.5
5.7
1 Management judgemental adjustments presented in the table reflect increases or (decreases) to allowance for ECL, respectively.
2 The wholesale portfolio corresponds to adjustments to the performing portfolio (stage 1 and stage 2).
3 (A) refers to probability-weighted allowance for ECL before any adjustments are applied.
4 (B) refers to adjustments that are applied where management believes allowance for ECL does not sufficiently reflect the credit risk/expected credit losses of
any given portfolio at the reporting date. These can relate to risks or uncertainties that are not reflected in the model and/or to any late-breaking events.
5 (C) refers to adjustments to allowance for ECL made to address process limitations and data/model deficiencies and can also include where appropriate, the
impact of new models where governance has sufficiently progressed to allow an accurate estimate of ECL allowance to be incorporated into the total reported
ECL.
6 As presented within our internal credit risk governance (see page 139).
7 31 December 2023 includes the Canada, Argentina, Armenia and Oman businesses and retail banking operations in France.
Management judgemental adjustments at 31 December 2024 were
an increase to allowance for ECL of $0.1bn for the wholesale portfolio
and $0.0bn for the retail portfolio.
At 31 December 2024, wholesale management judgemental
adjustments were an increase to allowance for ECL of $0.1bn
(31 December 2023: $0.1bn increase). These were mainly to
corporate exposures to reflect heightened uncertainty in specific
sectors and geographies, including offsetting adjustments to the real
estate sector in mainland China, Hong Kong and the US, and
adjustments to exposures to the automotive and industrial sectors in
Germany.
At 31 December 2024, retail management judgemental adjustments
to allowance for ECL were $0.0bn (31 December 2023 $0.6bn). The
reduction in adjustments compared with 31 December 2023 for
inflation-related adjustments was primarily due to the reduction of
inflation related risk in the UK and the sale of the Canadian banking
business. Other credit judgements decreased due to reductions in
economic uncertainty, primarily in the UK and Asia, and model
redevelopments which captured macro-economic risks more
effectively.
Economic scenarios sensitivity
analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against
the economic forecasts as part of the ECL governance process by
recalculating the allowance for ECL under each scenario described
above for selected portfolios, applying a 100% weighting to each
scenario in turn. The weighting is reflected in both the determination
of a significant increase in credit risk and the measurement of the
resulting allowances.
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HSBC Holdings plc Annual Report and Accounts 2024
The allowance for ECL calculated for the Upside and Downside
scenarios should not be taken to represent the upper and lower limits
of possible ECL outcomes. The impact of defaults that might occur in
the future under different economic scenarios is captured by
recalculating allowances for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in
numbers representing tail risk scenarios when assigned a 100%
weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes
allowance for ECL and financial instruments related to defaulted
(stage 3) obligors. The measurement of stage 3 ECL is relatively more
sensitive to credit factors specific to the obligor than future economic
scenarios, and therefore the effects of macroeconomic factors are not
necessarily the key consideration when performing individual
assessments of allowances for obligors in default. Loans to defaulted
obligors are a small portion of the overall wholesale lending exposure,
even if representing the majority of the allowance for ECL. Due to the
range and specificity of the credit factors to which the ECL is
sensitive, it is not possible to provide a meaningful alternative
sensitivity analysis for a consistent set of risks across all defaulted
obligors.
For retail mortgage exposures the sensitivity analysis includes
allowance for ECL for defaulted obligors of loans and advances. This
is because the retail ECL for secured mortgage portfolios, including
loans in all stages, is sensitive to macroeconomic variables.
Wholesale and retail sensitivity
The wholesale and retail sensitivity tables present the 100%
weighted results. These exclude portfolios held by the insurance
business and small portfolios, and as such cannot be directly
compared with personal and wholesale lending presented in other
credit risk tables. In both the wholesale and retail analysis, the
comparative period results for Downside 2 scenarios are also not
directly comparable with the current period, because they reflect
different risks relative to the consensus scenarios for the period end.
The wholesale and retail sensitivity analysis is stated inclusive of
management judgemental adjustments, as appropriate to each
scenario.
For both retail and wholesale portfolios, the gross carrying amount of
financial instruments are the same under each scenario. For
exposures with similar risk profile and product characteristics, the
sensitivity impact is therefore largely the result of changes in
macroeconomic assumptions.
Wholesale analysis
Reported
Gross carrying
amount4
Reported
allowance for
ECL
Consensus
Central
scenario
allowance for
ECL
Consensus
Upside
scenario
allowance for
ECL
Consensus
Downside
scenario
allowance for
ECL
Downside 2
scenario
allowance for
ECL
By geography at 31 Dec 2024
$m
$m
$m
$m
$m
$m
UK
432,160
717
667
526
850
2,389
US
202,888
216
201
205
247
461
Hong Kong
450,966
659
616
465
906
1,496
Mainland China
137,960
178
141
84
329
886
Mexico
34,713
69
61
46
86
302
UAE
58,909
51
49
40
58
120
France
184,591
82
80
69
97
125
Other geographies5
455,823
234
216
176
304
774
Total
1,958,010
2,205
2,031
1,612
2,877
6,555
of which:
Stage 1
1,830,264
689
632
494
797
803
Stage 2
127,746
1,516
1,399
1,118
2,080
5,751
IFRS 9 ECL sensitivity to future economic conditions1,2,3
By geography at 31 Dec 2023
UK
426,427
820
754
599
1,041
2,487
US
191,104
215
199
189
268
441
Hong Kong
447,480
609
566
433
807
1,393
Mainland China
129,945
258
217
142
414
945
Canada5
84,092
89
75
56
107
487
Mexico
30,159
60
56
46
73
226
UAE
52,074
32
32
30
34
40
France
178,827
98
102
90
124
141
Other geographies5,7
450,271
325
298
245
410
882
Total
1,990,378
2,507
2,301
1,829
3,278
7,043
of which:
Stage 1
1,820,843
754
702
553
860
854
Stage 2
169,535
1,753
1,599
1,276
2,418
6,189
1 Allowance for ECL sensitivity includes off-balance sheet financial instruments. These are subject to significant measurement uncertainty.
2 Includes low credit-risk financial instruments such as debt instruments at FVOCI, which have high carrying amounts but low ECL under all the above scenarios.
3 Excludes defaulted obligors. For a detailed breakdown of performing and non-performing wholesale portfolio exposures, see page 170.
4 Staging refers only to probability-weighted/reported gross carrying amount. Stage allocation of gross exposures varies by scenario, with higher allocation to stage
2 under the Downside 2 scenario.
5
Includes small portfolios that use less complex modelling approaches and are not sensitive to macroeconomic changes.
6 Classified as held for sale at 31 December 2023.
7 Includes the Argentina and Armenia businesses, which were sold in 2024.
HSBC Holdings plc Annual Report and Accounts 2024
157
Risk review
At 31 December 2024, the highest level of 100% scenario-weighted
allowance for ECL was observed in the UK and Hong Kong under the
Downside 2 scenario, driven primarily by a larger exposure to those
geographies, namely in the real estate sector. In relation to the
underlying exposure, mainland China and Mexico have the higher
Downside 2 ECL coverage, mostly due to the relatively larger
proportion of higher risk exposures in those geographies.
Compared with 31 December 2023, the Downside 2 ECL impact
reduced by $0.5bn mostly due to the sale of the Canada business
while observing offsetting impacts driven by updates to our forward
economic scenarios.
In the wholesale portfolio, off-balance sheet financial instruments
have a lower likelihood to be fully converted to a funded exposure at
the point of default, and consequently the sensitivity of the allowance
for ECL is lower in relation to its nominal amount, when compared
with an on-balance sheet exposure with a similar risk profile.
Retail analysis
IFRS 9 ECL sensitivity to future economic conditions1
Reported gross
carrying
amount
Reported
allowance for
ECL
Consensus
Central
scenario
allowance for
ECL
Consensus
Upside
scenario
allowance for
ECL
Consensus
Downside
scenario
allowance for
ECL
Downside 2
scenario
allowance for
ECL
By geography at 31 Dec 2024
$m
$m
$m
$m
$m
$m
UK
Mortgages
163,541
126
117
107
132
288
Credit cards
7,415
280
275
265
276
447
Other
8,249
241
233
217
243
351
Mexico
Mortgages
7,482
165
162
155
168
215
Credit cards
2,227
337
333
330
338
423
Other
3,722
419
416
413
422
593
Hong Kong
Mortgages
106,866
5
5
4
5
10
Credit cards
9,419
293
275
268
300
770
Other
6,210
106
102
101
105
249
UAE
Mortgages
1,993
8
8
8
8
8
Credit cards
536
31
31
31
31
35
Other
688
17
17
17
17
19
US
Mortgages
16,965
6
6
6
6
8
Credit cards
193
15
14
14
15
17
Other geographies
Mortgages
51,064
131
127
124
136
180
Credit cards
3,500
162
159
156
164
223
Other
2,292
72
72
69
73
93
Total
392,361
2,413
2,351
2,285
2,440
3,928
of which: mortgages
347,910
440
425
405
456
708
Stage 1
311,875
51
47
43
58
129
Stage 2
33,761
126
117
107
129
275
Stage 3
2,274
263
261
255
269
304
of which: credit cards
23,290
1,116
1,086
1,064
1,124
1,915
Stage 1
19,915
276
267
258
284
701
Stage 2
3,107
655
634
621
656
1,027
Stage 3
267
185
185
185
185
188
of which: others
21,161
856
839
816
860
1,305
Stage 1
18,574
216
204
193
217
532
Stage 2
2,005
360
355
343
363
483
Stage 3
583
279
279
279
279
290
Risk review
158
HSBC Holdings plc Annual Report and Accounts 2024
IFRS 9 ECL sensitivity to future economic conditions1,2
Reported gross
carrying amount
Reported
allowance for
ECL
Consensus
Central scenario
allowance for
ECL
Consensus
Upside scenario
allowance for
ECL
Consensus
Downside
scenario
allowance for
ECL
Downside 2
scenario
allowance for
ECL
By geography at 31 Dec 2023
$m
$m
$m
$m
$m
$m
UK
Mortgages
161,127
189
180
172
201
334
Credit cards
7,582
344
340
302
353
486
Other
8,183
341
333
273
383
515
Mexico
Mortgages
8,666
188
180
150
235
363
Credit cards
2,445
295
286
206
376
489
Other
4,529
513
503
426
600
731
Hong Kong
Mortgages
106,136
2
2
1
3
5
Credit cards
9,128
287
239
214
395
887
Other
6,269
109
100
88
124
256
UAE
Mortgages
2,001
25
25
25
25
25
Credit cards
471
24
24
22
25
32
Other
721
20
20
19
21
28
France
Mortgages
20,589
50
50
50
51
51
Other
1,328
44
44
43
45
48
US
Mortgages
14,385
8
4
3
4
10
Credit cards
204
15
15
10
15
16
Canada
Mortgages
25,464
67
65
64
70
99
Credit cards
338
13
13
12
16
15
Other
1,368
13
13
12
14
33
Other geographies
Mortgages
55,368
152
149
144
158
198
Credit cards
3,655
173
166
151
202
291
Other
2,416
91
86
83
95
137
Total
442,373
2,962
2,835
2,471
3,411
5,049
of which: mortgages
393,736
681
655
609
747
1,085
Stage 1
347,874
101
92
77
145
303
Stage 2
43,451
264
249
225
280
429
Stage 3
2,412
316
314
307
322
352
of which: credit cards
23,822
1,150
1,082
918
1,381
2,217
Stage 1
18,557
249
232
180
329
604
Stage 2
4,953
707
657
546
859
1,415
Stage 3
312
193
193
192
194
197
of which: others
24,815
1,131
1,098
944
1,283
1,748
Stage 1
19,551
218
205
151
272
501
Stage 2
4,542
540
519
423
636
868
Stage 3
722
373
373
370
375
379
1 Allowance for ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2 Included balances and allowance for ECL which had been reclassified from ‘loans and advances to customers’ to ‘assets held for sale’ in the balance sheet at
31 December 2023. This also included any balances and allowance for ECL which continued to be reported as personal lending in ‘loans and advances to
customers’ that are in accordance with the basis of inclusion for retail sensitivity analysis. This includes the Canada, Argentina businesses and retail banking
operations in France.
At 31 December 2024, the most significant level of allowance for ECL
sensitivity was observed in the UK, Mexico and Hong Kong. Mortgages
reflected the lowest level of allowance for ECL sensitivity across most
markets given the significant levels of collateral relative to the exposure
values. Credit cards and other unsecured lending across stages 1 and 2
are more sensitive to economic forecasts and therefore reflected the
highest level of allowance for ECL sensitivity during 2024.
There was a reduction in the total sensitivity for ECL allowance in all
scenarios compared with 31 December 2023, due to banking portfolio
sales, reduction of management judgemental adjustments, model
redevelopments and scenario evolution.
There is limited sensitivity in credit cards and other unsecured lending
in stage 3 as levels of loss on defaulted exposures remain consistent
through various economic conditions. The Downside 2 scenario is
from the tail of the economic distribution where allowance for ECL is
more sensitive based on historical experience and includes a
macroeconomic-dependent stressed LGD for a limited number of
portfolios.
The reported gross carrying amount by stage is representative of the
weighted scenario allowance for ECL. The allowance for ECL
sensitivity to the other scenarios includes changes in allowance for
ECL due to the levels of loss and the migration of additional lending
balances in or out of stage 2.
HSBC Holdings plc Annual Report and Accounts 2024
159
Risk review
Group ECL sensitivity results
The allowance for ECL of the scenarios and management judgemental
adjustments is highly sensitive to movements in economic forecasts.
Based upon the sensitivity tables presented above, if the Group allowance
for ECL balance was estimated solely on the basis of the Central scenario,
Downside scenario or the Downside 2 scenario at 31 December 2024, it
would increase/(decrease) as presented in the below table.
Total Group ECL at 31 December 2024
Retail1
Wholesale1
$bn
$bn
Reported allowance for ECL
2.4
2.2
Scenarios
100% Consensus Central scenario
(0.1)
(0.2)
100% Consensus Upside scenario
(0.1)
(0.6)
100% Consensus Downside scenario
0.0
0.7
100% Downside 2 scenario
1.5
4.3
Total Group ECL at 31 December 2023
Reported allowance for ECL
3.0
2.5
Scenarios
100% Consensus Central scenario
(0.1)
(0.2)
100% Consensus Upside scenario
(0.5)
(0.7)
100% Consensus Downside scenario
0.4
0.8
100% Downside 2 scenario
2.1
4.5
1 On the same basis as retail and wholesale sensitivity analysis.
At 31 December 2024, the Group allowance for ECL decreased in the
retail portfolio by $0.6bn and decreased by $0.3bn in the wholesale
portfolio, compared with 31 December 2023.
There was also a reduction in allowance for ECL sensitivity across all
scenarios within the retail and wholesale portfolios since
31 December 2023, primarily as a result of the sale of our Canada
banking business, the sale of our retail banking operations in France,
and various other business sales during the first half of 2024.
For the wholesale portfolio this was the main driver of the decrease in
Downside 2 ECL sensitivity.
For the retail portfolios the ECL sensitivity decrease across all
scenarios including the Downside 2 was also primarily due to the
reduction of management judgemental adjustments, model
redevelopments and scenario evolution.
Reconciliation from reported exposure and ECL to sensitised exposure and weighted ECL
Wholesale
Retail
Total
Gross carrying/
nominal amount
Allowance
for ECL
Gross carrying/
nominal amount
Allowance
for ECL
Gross carrying/
nominal amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
Included in sensitivity analysis
1,958,010
(2,205)
392,361
(2,413)
2,350,371
(4,618)
– Exclusions from sensitivity as described in the
section above1
20,409
(5,419)
309,178
(124)
329,587
(5,543)
– Debt instruments measured at fair value through
other comprehensive income2
(346,124)
54
—
—
(346,124)
54
– Performance guarantees2
(92,722)
311
—
—
(92,722)
311
– Other financial assets at amortised cost not
presented as wholesale or personal lending, including
held for sale2
(568,668)
141
(130)
—
(568,798)
141
– Other3
5,978
(441)
498
(9)
6,476
(450)
As reported in the Summary of credit risk
(excluding debt instruments measured at FVOCI) by
stage distribution and ECL coverage by industry
sector at 31 Dec 2024
976,883
(7,559)
701,907
(2,546)
1,678,790
(10,105)
Other financial assets at amortised cost
828,580
(92)
Total reported in the Summary of credit risk
(excluding debt instruments measured at FVOCI) by
stage distribution and ECL coverage by industry
sector at 31 Dec 2024
2,507,370
(10,197)
Risk review
160
HSBC Holdings plc Annual Report and Accounts 2024
Reconciliation from reported exposure and ECL to sensitised exposure and weighted ECL (continued)
Wholesale
Retail
Total
Gross carrying/
nominal amount
Allowance
for ECL
Gross carrying/
nominal amount
Allowance
for ECL
Gross carrying/
nominal amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
Included in sensitivity analysis
1,990,378
(2,507)
442,373
(2,962)
2,432,751
(5,469)
– Exclusions from sensitivity as described in the
section above1
17,024
(6,237)
308,569
(93)
325,593
(6,330)
– Debt instruments measured at fair value through
other comprehensive income2
(302,348)
97
—
—
(302,348)
97
– Performance guarantees2
(93,312)
35
—
—
(93,312)
35
– Other financial assets at amortised cost not
presented as wholesale or personal lending, including
held for sale2
(579,534)
93
(41,129)
174
(620,663)
267
– Other3
2,704
(84)
(4,175)
(11)
(1,471)
(95)
As reported in the Summary of credit risk (excluding
debt instruments measured at FVOCI) by stage
distribution and ECL coverage by industry sector at 31
Dec 2023
1,034,912
(8,603)
705,638
(2,892)
1,740,550
(11,495)
Other financial assets at amortised cost
960,271
(422)
Total reported in the Summary of credit risk (excluding
debt instruments measured at FVOCI) by stage
distribution and ECL coverage by industry sector at 31
Dec 2023
2,700,821
(11,917)
1 Comprises wholesale defaulted obligors, retail portfolios utilising less complex modelling approaches, private banking and insurance.
2 The sensitivity analysis includes certain items reported in Other assets at amortised cost, which are not allocated to an industry in the credit tables. It also
includes FVOCI and performance guarantees, which are presented separately in the credit tables.
3 Includes FX and other operational variances.
Reconciliations of changes in gross carrying/nominal amount and allowances
for loans and advances to banks and customers including loan commitments
and financial guarantees
The following disclosure provides a reconciliation by stage of the
Group’s gross carrying/nominal amount and allowances for loans and
advances to banks and customers, including loan commitments and
financial guarantees.
In addition, a reconciliation by stage of the Group’s gross carrying
amount and allowances for loans and advances to banks and
customers and a reconciliation by stage of the Group’s nominal
amount and allowances for loan commitments and financial
guarantees, were included in this section following adoption of the
recommendations of the third report from The Taskforce on
Disclosures about Expected Credit Losses (‘DECL’).
Movements are calculated on a quarterly basis and therefore fully
capture stage movements between quarters. If movements were
calculated on a year-to-date basis they would only reflect the opening
and closing position of the financial instrument.
The transfers of financial instruments represents the impact of stage
transfers upon the gross carrying/nominal amount and associated
allowance for ECL.
The net remeasurement of ECL arising from transfer of stage
represents the increase or decrease due to these transfers, for
example, moving from a 12-month (stage 1) to a lifetime (stage 2)
ECL measurement basis. Net remeasurement excludes the
underlying customer risk rating (‘CRR’)/probability of default (‘PD’)
movements of the financial instruments transferring stage. This is
captured, along with other credit quality movements in the ‘changes
to risk parameters – credit quality’ line item.
Changes in ‘Net new and further lending/repayments’ represents the
impact from volume movements within the Group’s lending portfolio
and includes ‘New financial assets originated or purchased’, ‘assets
derecognised (including final repayments)’ and ‘changes to risk
parameters – further lending/repayment’.
HSBC Holdings plc Annual Report and Accounts 2024
161
Risk review
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
1,496,805
(1,300)
153,084
(3,102)
20,799
(7,063)
85
(30) 1,670,773
(11,495)
Transfers of financial
instruments:
(19,629)
(1,259)
6,652
2,302
12,977
(1,043)
—
—
—
—
– transfers from stage 1 to
stage 2
(116,211)
419
116,211
(419)
—
—
—
—
—
—
– transfers from stage 2 to
stage 1
98,731
(1,627)
(98,731)
1,627
—
—
—
—
—
—
– transfers to stage 3
(2,799)
16
(12,230)
1,321
15,029
(1,337)
—
—
—
—
– transfers from stage 3
650
(67)
1,402
(227)
(2,052)
294
—
—
—
—
Net remeasurement of ECL
arising from transfer of
stage
—
959
—
(831)
—
(144)
—
—
—
(16)
Changes due to
modifications not
derecognised
—
—
—
—
(25)
—
—
—
(25)
—
Net new and further
lending/repayments
87,833
(168)
(37,731)
589
(5,246)
1,689
7
(7)
44,863
2,103
Changes to risk parameters
– credit quality
—
363
—
(1,773)
—
(3,945)
—
(11)
—
(5,366)
Changes to models used
for ECL calculation
—
68
—
(4)
—
(20)
—
—
—
44
Assets written off
—
—
—
—
(4,459)
4,459
—
—
(4,459)
4,459
Credit-related modifications
that resulted in
derecognition
—
—
—
—
—
—
—
—
—
—
Foreign exchange and
others1, 2, 3
(75,322)
105
(6,107)
145
(223)
(81)
1
(3)
(81,651)
166
At 31 Dec 2024
1,489,687
(1,232)
115,898
(2,674)
23,823
(6,148)
93
(51) 1,629,501
(10,105)
ECL income statement
change for the period
1,222
(2,019)
(2,420)
(18)
(3,235)
Recoveries
260
Others
(158)
Total ECL income
statement change for the
period
(3,133)
1 Total includes $3.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a corresponding allowance
for ECL of $46m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
2 Total includes $35.3bn of nominal amount and $21m of corresponding allowance for ECL related to derecognition of loan commitments and financial guarantees
following the sale of our banking business in Canada during 2024.
3 Total includes $2.7bn of nominal amount related to derecognition of loan commitments and financial guarantees following the sale of our banking business in
Argentina during 2024.
At 31 Dec 2024
12 months ended
31 Dec 2024
Gross carrying/
nominal amount
Allowance for ECL
ECL charge
$m
$m
$m
As above
1,629,501
(10,105)
(3,133)
Other financial assets measured at amortised cost
828,580
(92)
(114)
Non-trading reverse purchase agreement commitments
49,289
—
—
Performance and other guarantees not considered for IFRS 9
—
—
(173)
Summary of financial instruments to which the impairment requirements in IFRS 9 are
applied/Summary consolidated income statement
2,507,370
(10,197)
(3,420)
Debt instruments measured at FVOCI
346,124
(54)
6
Total allowance for ECL/total income statement ECL change for the period
n/a
(10,251)
(3,414)
As shown in the previous table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments
and financial guarantees decreased $1,390m during the period from
$11,495m at 31 December 2023 to $10,105m at 31 December 2024.
This decrease was driven by:
–
$4,459m of assets written off;
–
$2,103m relating to volume movements, which included the
allowance for ECL associated with new originations, assets
derecognised and further lending/repayment;
–
foreign exchange and other movements of $166m; and
–
$44m of changes to models used for ECL calculation.
Risk review
162
HSBC Holdings plc Annual Report and Accounts 2024
These were partly offset by:
–
$5,366m relating to credit quality changes, including the credit
quality impact of financial instruments transferring between
stages; and
–
$16m relating to the net remeasurement impact of stage
transfers.
The ECL charge for the period of $3,235m presented in the previous
table consisted of $5,366m relating to credit quality changes,
including the credit quality impact of financial instruments transferring
between stages and $16m relating to the net remeasurement impact
of stage transfers.
This was partly offset by $2,103m relating to underlying net book
volume movement and $44m in changes to models used for ECL
calculation.
Summary views of the movement in wholesale and personal lending
are presented on pages 173 and 185.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
Gross
exposure
Allowance/
provision
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
1,433,643
(1,257) 177,223
(3,710)
21,207
(6,949)
129
(38) 1,632,202
(11,954)
Transfers of financial instruments:
(18,948)
(1,048)
10,286
2,228
8,662
(1,180)
—
—
—
—
– transfers from stage 1 to
stage 2
(150,728)
442 150,728
(442)
—
—
—
—
—
—
– transfers from stage 2 to
stage 1
133,079
(1,467) (133,079)
1,467
—
—
—
—
—
—
– transfers to stage 3
(1,986)
23
(8,600)
1,379
10,586
(1,402)
—
—
—
—
– transfers from stage 3
687
(46)
1,237
(176)
(1,924)
222
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
917
—
(973)
—
(124)
—
—
—
(180)
Net new and further lending/
repayments
77,693
(185)
(36,795)
661
(4,956)
1,117
(36)
3
35,906
1,596
Changes to risk parameters –
credit quality
—
307
—
(1,262)
—
(3,896)
—
21
—
(4,830)
Changes to models used for ECL
calculation
—
(22)
—
46
—
7
—
—
—
31
Assets written off
—
—
—
—
(3,922)
3,922
—
—
(3,922)
3,922
Credit-related modifications that
resulted in derecognition
—
—
—
—
(119)
95
—
—
(119)
95
Foreign exchange and others1
4,417
(12)
2,370
(92)
(73)
(55)
(8)
(16)
6,706
(175)
At 31 Dec 2023
1,496,805
(1,300) 153,084
(3,102)
20,799
(7,063)
85
(30) 1,670,773
(11,495)
ECL income statement change for
the period
1,017
(1,528)
(2,896)
24
(3,383)
Recoveries
268
Others
—
—
—
—
—
—
—
—
—
(195)
Total ECL income statement
change for the period
(3,310)
1 Total includes $7.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a corresponding allowance
for ECL of $70m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
(Audited)
At 31 Dec 2023
12 months ended
31 Dec 2023
Gross carrying/
nominal amount
Allowance for
ECL
ECL charge
$m
$m
$m
As above
1,670,773
(11,495)
(3,310)
Other financial assets measured at amortised cost
960,271
(422)
(35)
Non-trading reverse purchase agreement commitments
69,777
—
—
Performance and other guarantees not considered for IFRS 9
—
—
(44)
Summary of financial instruments to which the impairment requirements in IFRS 9 are
applied/Summary consolidated income statement
2,700,821
(11,917)
(3,389)
Debt instruments measured at FVOCI
302,348
(97)
(58)
Total allowance for ECL/total income statement ECL change for the period
n/a
(12,014)
(3,447)
HSBC Holdings plc Annual Report and Accounts 2024
163
Risk review
Reconciliation of changes in gross carrying amount and allowances for loans and advances to banks and customers
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
920,863
(1,140) 122,307
(2,967)
19,275
(6,952)
81
(30) 1,062,526
(11,089)
Transfers of financial instruments:
(19,794)
(1,227)
7,344
2,259
12,450
(1,032)
—
—
—
—
– transfers from stage 1 to stage 2
(90,611)
404
90,611
(404)
—
—
—
—
—
—
– transfers from stage 2 to stage 1
72,935
(1,580) (72,935)
1,580
—
—
—
—
—
—
– transfers to stage 3
(2,559)
16 (11,512)
1,310
14,071
(1,326)
—
—
—
—
– transfers from stage 3
441
(67)
1,180
(227)
(1,621)
294
—
—
—
—
Net remeasurement of ECL arising
from transfer of stage
—
932
—
(801)
—
(144)
—
—
—
(13)
Changes due to modifications not
derecognised
—
—
—
—
(25)
—
—
—
(25)
—
Net new and further lending/
repayments
52,439
(161) (33,154)
570
(4,535)
1,606
7
(7)
14,757
2,008
Changes to risk parameters – credit
quality
—
361
—
(1,724)
—
(3,873)
—
(11)
—
(5,247)
Changes to models used for ECL
calculation
—
66
—
(18)
—
(20)
—
—
—
28
Assets written off
—
—
—
—
(4,459)
4,459
—
—
(4,459)
4,459
Credit-related modifications that
resulted in derecognition
—
—
—
—
—
—
—
—
—
—
Foreign exchange and others1
(27,236)
82
(3,051)
133
(89)
(86)
2
(3) (30,374)
126
At 31 Dec 2024
926,272
(1,087)
93,446
(2,548)
22,617
(6,042)
90
(51) 1,042,425
(9,728)
ECL income statement change for
the period
1,198
(1,973)
(2,431)
(18)
(3,224)
Recoveries
260
Others
(161)
Total ECL income statement
change for the period
(3,125)
1 Total includes $3.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a corresponding allowance
for ECL of $46m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
Reconciliation of changes in gross carrying amount and allowances for loans and advances to banks and customers (continued)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
Gross
carrying
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
879,023
(1,109) 140,816
(3,518) 19,586
(6,851)
129
(38) 1,039,554
(11,516)
Transfers of financial instruments:
(19,276)
(980) 11,250
2,154
8,026
(1,174)
—
—
—
—
– transfers from stage 1 to stage 2
(108,758)
423 108,758
(423)
—
—
—
—
—
—
– transfers from stage 2 to stage 1
90,655
(1,382) (90,655)
1,382
—
—
—
—
—
—
– transfers to stage 3
(1,692)
22 (7,975)
1,367
9,667
(1,389)
—
—
—
—
– transfers from stage 3
519
(43)
1,122
(172) (1,641)
215
—
—
—
—
Net remeasurement of ECL arising
from transfer of stage
—
859
—
(934)
—
(118)
—
—
—
(193)
Net new and further lending/
repayments
55,024
(210) (32,069)
685 (4,233)
1,026
(40)
3
18,682
1,504
Changes to risk parameters – credit
quality
—
311
—
(1,292)
—
(3,804)
—
21
—
(4,764)
Changes to models used for ECL
calculation
—
(17)
—
28
—
7
—
—
—
18
Assets written off
—
—
—
— (3,922)
3,922
—
—
(3,922)
3,922
Credit-related modifications that
resulted in derecognition
—
—
—
—
(119)
95
—
—
(119)
95
Foreign exchange and others1
6,092
6
2,310
(90)
(63)
(55)
(8)
(16)
8,331
(155)
At 31 Dec 2023
920,863
(1,140) 122,307
(2,967) 19,275
(6,952)
81
(30) 1,062,526
(11,089)
ECL income statement change for
the period
943
(1,513)
(2,889)
24
(3,435)
Recoveries
268
Others
(203)
Total ECL income statement
change for the period
(3,370)
1 Total includes $7.7bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and a corresponding allowance
for ECL of $70m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
Risk review
164
HSBC Holdings plc Annual Report and Accounts 2024
Reconciliation of changes in nominal amount and allowances for loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
575,942
(160)
30,777
(135)
1,524
(111)
4
—
608,247
(406)
Transfers of financial instruments:
165
(32)
(692)
43
527
(11)
—
—
—
—
– transfers from stage 1 to
stage 2
(25,600)
15
25,600
(15)
—
—
—
—
—
—
– transfers from stage 2 to
stage 1
25,796
(47) (25,796)
47
—
—
—
—
—
—
– transfers to stage 3
(240)
—
(718)
11
958
(11)
—
—
—
—
– transfers from stage 3
209
—
222
—
(431)
—
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
27
—
(30)
—
—
—
—
—
(3)
Net new and further lending/
repayments
35,394
(7)
(4,577)
19
(711)
83
—
—
30,106
95
Changes to risk parameters –
credit quality
—
2
—
(49)
—
(72)
—
—
—
(119)
Changes to models used for ECL
calculation
—
2
—
14
—
—
—
—
—
16
Foreign exchange and others1,2
(48,086)
23
(3,056)
12
(134)
5
(1)
—
(51,277)
40
At 31 Dec 2024
563,415
(145)
22,452
(126)
1,206
(106)
3
—
587,076
(377)
ECL income statement change
for the period
24
(46)
11
—
(11)
Recoveries
—
Others
3
Total ECL income statement
change for the period
(8)
1 Total includes $35.3bn of nominal amount and $21m of corresponding allowance for ECL related to derecognition of loan commitments and financial guarantees
following the sale of our banking business in Canada during 2024.
2 Total includes $2.7bn of nominal amount related to derecognition of loan commitments and financial guarantees following the sale of our banking business in
Argentina during 2024.
Reconciliation of changes in nominal amount and allowances for loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
Nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
554,620
(148)
36,407
(192)
1,621
(98)
—
— 592,648
(438)
Transfers of financial instruments:
328
(68)
(964)
74
636
(6)
—
—
—
—
– transfers from stage 1 to
stage 2
(41,970)
19
41,970
(19)
—
—
—
—
—
—
– transfers from stage 2 to
stage 1
42,424
(85) (42,424)
85
—
—
—
—
—
—
– transfers to stage 3
(294)
1
(625)
12
919
(13)
—
—
—
—
– transfers from stage 3
168
(3)
115
(4)
(283)
7
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
58
—
(39)
—
(6)
—
—
—
13
Net new and further lending/
repayments
22,669
25
(4,726)
(24)
(723)
91
4
—
17,224
92
Changes to risk parameters –
credit quality
—
(4)
—
30
—
(92)
—
—
—
(66)
Changes to models used for ECL
calculation
—
(5)
—
18
—
—
—
—
—
13
Foreign exchange and others
(1,675)
(18)
60
(2)
(10)
—
—
—
(1,625)
(20)
At 31 Dec 2023
575,942
(160)
30,777
(135)
1,524
(111)
4
— 608,247
(406)
ECL income statement change
for the period
74
(15)
(7)
—
52
Recoveries
—
Others
8
Total ECL income statement
change for the period
60
HSBC Holdings plc Annual Report and Accounts 2024
165
Risk review
Credit quality
Credit quality of financial instruments
(Audited)
We assess the credit quality of all financial instruments that are
subject to credit risk. The credit quality of financial instruments is a
point-in-time assessment of PD, whereas stages 1 and 2 are
determined based on relative deterioration of credit quality since initial
recognition for the majority of portfolios. Accordingly, for non-credit-
impaired financial instruments, there is no direct relationship between
the credit quality assessment and stages 1 and 2, although typically
the lower credit quality bands exhibit a higher proportion in stage 2.
The five credit quality classifications provided below each encompass
a range of granular internal credit rating grades assigned to wholesale
and personal lending businesses and the external ratings attributed by
external agencies to debt securities, as shown in the table on
page 139.
Distribution of financial instruments by credit quality at 31 December 2024
(Audited)
Gross carrying/notional amount
Allowance
for ECL/
other credit
provisions
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
In-scope for IFRS 9 ECL
Loans and advances to customers held at
amortised cost
515,266 193,080
186,416
22,906
22,705 940,373
(9,715) 930,658
– personal
360,317
53,595
27,774
1,979
3,560 447,225
(2,524) 444,701
– corporate and commercial
114,504 118,785
138,705
20,224
18,466 410,684
(6,755) 403,929
– non-bank financial institutions
40,445
20,700
19,937
703
679
82,464
(436)
82,028
Loans and advances to banks held at amortised
cost
92,621
4,255
5,040
134
2 102,052
(13) 102,039
Cash and balances at central banks
266,713
949
12
—
— 267,674
— 267,674
Hong Kong Government certificates of
indebtedness
42,293
—
—
—
—
42,293
—
42,293
Reverse repurchase agreements – non-trading
155,831
70,877
25,799
42
— 252,549
— 252,549
Financial investments
146,970
3,681
3,331
—
— 153,982
(9) 153,973
Assets held for sale
2,425
458
367
1
22
3,273
(4)
3,269
Other assets
88,338
9,735
10,151
454
131 108,809
(79) 108,730
– endorsements and acceptances
2,101
2,663
3,090
243
10
8,107
(14)
8,093
– accrued income and other
86,237
7,072
7,061
211
121 100,702
(65) 100,637
Debt instruments measured at fair value
through other comprehensive income1
336,313
9,448
7,768
380
— 353,909
(54) 353,855
Out-of-scope for IFRS 9 ECL
Trading assets
119,546
21,951
15,804
2,300
47 159,648
— 159,648
Other financial assets designated and otherwise
mandatorily measured at fair value through profit
or loss
53,282
11,862
4,390
231
11
69,776
—
69,776
Derivatives
224,870
34,124
9,373
258
12 268,637
— 268,637
Assets held for sale
3,019
—
—
—
—
3,019
—
3,019
Total gross carrying amount on balance sheet 2,047,487 360,420
268,451
26,706
22,930 2,725,994
(9,874) 2,716,120
Percentage of total credit quality (%)
75.1
13.2
9.9
1.0
0.8
100
Loan and other credit-related commitments
400,120 131,396
77,220
9,670
961 619,367
(348) 619,019
Financial guarantees
7,365
4,263
4,399
723
248
16,998
(29)
16,969
In-scope: Irrevocable loan commitments and
financial guarantees
407,485 135,659
81,619
10,393
1,209 636,365
(377) 635,988
Loan and other credit-related commitments
96,952
76,340
65,619
2,847
453 242,211
— 242,211
Performance and other guarantees
39,940
32,956
17,339
1,671
817
92,723
(312)
92,411
Out-of-scope: Revocable loan commitments
and non-financial guarantees
136,892 109,296
82,958
4,518
1,270 334,934
(312) 334,622
1 For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such,
the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.
Risk review
166
HSBC Holdings plc Annual Report and Accounts 2024
Distribution of financial instruments by credit quality at 31 December 2023
(Audited)
Gross carrying/notional amount
Allowance
for ECL/
other credit
provisions
Net
Strong
Good Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
In-scope for IFRS 9 ECL
Loans and advances to customers held at
amortised cost
497,665
206,476
197,582
28,532
19,354
949,609
(11,074)
938,535
– personal
346,562
62,656
32,314
2,485
3,505
447,522
(2,867)
444,655
– corporate and commercial
118,123
123,713
145,249
25,531
15,039
427,655
(7,803)
419,852
– non-bank financial institutions
32,980
20,107
20,019
516
810
74,432
(404)
74,028
Loans and advances to banks held at amortised
cost
101,057
4,640
6,363
855
2
112,917
(15)
112,902
Cash and balances at central banks
284,723
1,068
77
—
—
285,868
—
285,868
Hong Kong Government certificates of
indebtedness
42,024
—
—
—
—
42,024
—
42,024
Reverse repurchase agreements – non-trading
170,494
46,884
34,206
633
—
252,217
—
252,217
Financial investments
143,333
3,814
1,137
62
—
148,346
(20)
148,326
Assets held for sale
68,501
16,403
14,812
2,939
531
103,186
(324)
102,862
Other assets
106,184
11,982
9,965
366
133
128,630
(78)
128,552
– endorsements and acceptances
2,405
2,666
2,707
161
18
7,957
(18)
7,939
– accrued income and other
103,779
9,316
7,258
205
115
120,673
(60)
120,613
Debt instruments measured at fair value through
other comprehensive income1
288,959
12,037
7,897
805
5
309,703
(97)
309,606
Out-of-scope for IFRS 9 ECL
Trading assets
122,695
20,595
20,746
1,326
135
165,497
—
165,497
Other financial assets designated and otherwise
mandatorily measured at fair value through profit
or loss
52,649
11,517
4,733
84
6
68,989
—
68,989
Derivatives
196,098
27,377
6,041
187
11
229,714
—
229,714
Assets held for sale
12,495
—
—
—
—
12,495
—
12,495
Total gross carrying amount on balance sheet
2,086,877
362,793
303,559
35,789
20,177 2,809,195
(11,608) 2,797,587
Percentage of total credit quality (%)
74.3
12.9
10.8
1.3
0.7
100
Loan and other credit-related commitments
436,359
142,500
73,230
7,782
1,144
661,015
(367)
660,648
Financial guarantees
7,700
4,146
4,080
699
384
17,009
(39)
16,970
In-scope: Irrevocable loan commitments and
financial guarantees
444,059
146,646
77,310
8,481
1,528
678,024
(406)
677,618
Loan and other credit-related commitments
92,509
77,891
61,462
3,896
377
236,135
—
236,135
Performance and other guarantees
39,784
32,231
19,445
1,853
964
94,277
(145)
94,132
Out-of-scope: Revocable loan commitments and
non-financial guarantees
132,293
110,122
80,907
5,749
1,341
330,412
(145)
330,267
1 For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such,
the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.
HSBC Holdings plc Annual Report and Accounts 2024
167
Risk review
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(Audited)
Gross carrying/notional amount
Allowance
for ECL
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers at amortised cost
515,266
193,080
186,416
22,906
22,705
940,373
(9,715)
930,658
– stage 1
498,415
170,420
150,818
4,767
—
824,420
(1,078)
823,342
– stage 2
16,851
22,660
35,598
18,139
—
93,248
(2,546)
90,702
– stage 3
—
—
—
—
22,615
22,615
(6,040)
16,575
– POCI
—
—
—
—
90
90
(51)
39
Loans and advances to banks at amortised cost
92,621
4,255
5,040
134
2
102,052
(13)
102,039
– stage 1
92,528
4,226
4,981
117
—
101,852
(9)
101,843
– stage 2
93
29
59
17
—
198
(2)
196
– stage 3
—
—
—
—
2
2
(2)
—
– POCI
—
—
—
—
—
—
—
—
Other financial assets measured at amortised cost
702,570
85,700
39,660
497
153
828,580
(92)
828,488
– stage 1
702,373
85,032
38,977
239
—
826,621
(64)
826,557
– stage 2
197
668
683
258
—
1,806
(5)
1,801
– stage 3
—
—
—
—
153
153
(23)
130
– POCI
—
—
—
—
—
—
—
—
Loan and other credit-related commitments
400,120
131,396
77,220
9,670
961
619,367
(348)
619,019
– stage 1
398,779
125,956
67,949
4,547
—
597,231
(137)
597,094
– stage 2
1,341
5,440
9,271
5,123
—
21,175
(121)
21,054
– stage 3
—
—
—
—
958
958
(90)
868
– POCI
—
—
—
—
3
3
—
3
Financial guarantees
7,365
4,263
4,399
723
248
16,998
(29)
16,969
– stage 1
7,352
4,192
3,625
184
—
15,353
(8)
15,345
– stage 2
13
71
774
539
—
1,397
(5)
1,392
– stage 3
—
—
—
—
248
248
(16)
232
– POCI
—
—
—
—
—
—
—
—
At 31 Dec 2024
1,717,942
418,694
312,735
33,930
24,069 2,507,370
(10,197)
2,497,173
Debt instruments at FVOCI1
– stage 1
336,264
9,448
7,290
—
—
353,002
(31)
352,971
– stage 2
49
—
478
380
—
907
(23)
884
– stage 3
—
—
—
—
—
—
—
—
– POCI
—
—
—
—
—
—
—
—
At 31 Dec 2024
336,313
9,448
7,768
380
—
353,909
(54)
353,855
Loans and advances to customers at amortised cost
497,665
206,476
197,582
28,532
19,354
949,609
(11,074)
938,535
– stage 1
478,422
177,410
147,940
5,612
—
809,384
(1,130)
808,254
– stage 2
19,243
29,066
49,642
22,920
—
120,871
(2,964)
117,907
– stage 3
—
—
—
—
19,273
19,273
(6,950)
12,323
– POCI
—
—
—
—
81
81
(30)
51
Loans and advances to banks at amortised cost
101,057
4,640
6,363
855
2
112,917
(15)
112,902
– stage 1
101,011
4,631
5,550
287
—
111,479
(10)
111,469
– stage 2
46
9
813
568
—
1,436
(3)
1,433
– stage 3
—
—
—
—
2
2
(2)
—
– POCI
—
—
—
—
—
—
—
—
Other financial assets measured at amortised cost
815,259
80,151
60,197
4,000
664
960,271
(422)
959,849
– stage 1
814,776
78,486
53,095
516
—
946,873
(109)
946,764
– stage 2
483
1,665
7,102
3,484
—
12,734
(132)
12,602
– stage 3
—
—
—
—
664
664
(181)
483
– POCI
—
—
—
—
—
—
—
—
Loan and other credit-related commitments
436,359
142,500
73,230
7,782
1,144
661,015
(367)
660,648
– stage 1
432,017
135,192
61,213
2,527
—
630,949
(153)
630,796
– stage 2
4,342
7,308
12,017
5,255
—
28,922
(128)
28,794
– stage 3
—
—
—
—
1,140
1,140
(86)
1,054
– POCI
—
—
—
—
4
4
—
4
Financial guarantees
7,700
4,146
4,080
699
384
17,009
(39)
16,970
– stage 1
7,497
3,943
3,204
102
—
14,746
(7)
14,739
– stage 2
203
203
876
597
—
1,879
(7)
1,872
– stage 3
—
—
—
—
384
384
(25)
359
– POCI
—
—
—
—
—
—
—
—
At 31 Dec 2023
1,858,040
437,913
341,452
41,868
21,548 2,700,821
(11,917)
2,688,904
Debt instruments at FVOCI1
– stage 1
288,909
12,037
7,579
—
—
308,525
(37)
308,488
– stage 2
50
—
318
805
—
1,173
(59)
1,114
– stage 3
—
—
—
—
5
5
(1)
4
– POCI
—
—
—
—
—
—
—
—
At 31 Dec 2023
288,959
12,037
7,897
805
5
309,703
(97)
309,606
1 For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such,
the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.
Risk review
168
HSBC Holdings plc Annual Report and Accounts 2024
Credit-impaired loans
(Audited)
We determine that a financial instrument is credit impaired and in
stage 3 by considering relevant objective evidence, primarily whether:
–
contractual payments of either principal or interest are past due for
more than 90 days;
–
there are other indications that the borrower is unlikely to pay,
such as when a concession has been granted to the borrower for
economic or legal reasons relating to the borrower’s financial
condition; and
–
the loan is otherwise considered to be in default. If such
unlikeliness to pay is not identified at an earlier stage, it is deemed
to occur when an exposure is 90 days past due. Therefore, the
definitions of credit impaired and default are aligned as far as
possible so that stage 3 represents all loans that are considered
defaulted or otherwise credit impaired.
Forbearance
The following table shows the gross carrying amount and allowance
for ECL of the Group’s holdings of forborne loans and advances to
customers by industry sector and by stages.
A summary of our current policies and practices for forbearance is set out in
‘Credit risk management’ on page 139.
Forborne loans and advances to customers at amortised cost by stage allocation
Performing forborne
Non-performing forborne
Total forborne
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
Gross carrying amount
Personal
545
1,424
—
1,969
– first lien residential mortgages
266
1,040
—
1,306
– second lien residential mortgages
1
3
—
4
– guaranteed loans in respect of residential property
32
7
—
39
– other personal lending which is secured
—
7
—
7
– credit cards
86
87
—
173
– other personal lending which is unsecured
147
280
—
427
– motor vehicle finance
13
—
—
13
Wholesale
4,325
7,542
85
11,952
– corporate and commercial
4,247
7,351
85
11,683
– non-bank financial institutions
78
191
—
269
At 31 Dec 2024
4,870
8,966
85
13,921
Allowance for ECL
Personal
(73)
(305)
—
(378)
– first lien residential mortgages
(12)
(148)
—
(160)
– second lien residential mortgages
—
—
—
—
– guaranteed loans in respect of residential property
(1)
(1)
—
(2)
– other personal lending which is secured
—
(2)
—
(2)
– credit cards
(17)
(45)
—
(62)
– other personal lending which is unsecured
(38)
(109)
—
(147)
– motor vehicle finance
(5)
—
—
(5)
Wholesale
(461)
(2,008)
(51)
(2,520)
– corporate and commercial
(460)
(1,972)
(51)
(2,483)
– non-bank financial institutions
(1)
(36)
—
(37)
At 31 Dec 2024
(534)
(2,313)
(51)
(2,898)
Gross carrying amount
Personal
816
1,282
—
2,098
– first lien residential mortgages
530
815
—
1,345
– second lien residential mortgages
1
8
—
9
– guaranteed loans in respect of residential property
24
20
—
44
– other personal lending which is secured
1
6
—
7
– credit cards
96
83
—
179
– other personal lending which is unsecured
155
349
—
504
– motor vehicle finance
9
1
—
10
Wholesale
5,848
5,505
68
11,421
– corporate and commercial
5,778
5,459
68
11,305
– non-bank financial institutions
70
46
—
116
At 31 Dec 2023
6,664
6,787
68
13,519
Allowance for ECL
Personal
(113)
(307)
—
(420)
– first lien residential mortgages
(50)
(113)
—
(163)
– second lien residential mortgages
—
(3)
—
(3)
– guaranteed loans in respect of residential property
—
(2)
—
(2)
– other personal lending which is secured
—
(1)
—
(1)
– credit cards
(17)
(46)
—
(63)
– other personal lending which is unsecured
(43)
(142)
—
(185)
– motor vehicle finance
(3)
—
—
(3)
Wholesale
(259)
(1,932)
(28)
(2,219)
– corporate and commercial
(257)
(1,920)
(28)
(2,205)
– non-bank financial institutions
(2)
(12)
—
(14)
At 31 Dec 2023
(372)
(2,239)
(28)
(2,639)
HSBC Holdings plc Annual Report and Accounts 2024
169
Risk review
Forborne loans and advances to customers by legal entities
HSBC UK
Bank plc
HSBC Bank
plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
$m
$m
$m
$m
$m
$m
$m
$m
Gross carrying amount
Performing forborne
1,251
1,506
1,073
10
787
201
42
4,870
Non-performing forborne
2,231
1,578
3,698
460
464
355
265
9,051
At 31 Dec 2024
3,482
3,084
4,771
470
1,251
556
307
13,921
Allowance for ECL
Performing forborne
(101)
(36)
(296)
(1)
(52)
(48)
—
(534)
Non-performing forborne
(393)
(464)
(943)
(196)
(71)
(127)
(170)
(2,364)
At 31 Dec 2024
(494)
(500)
(1,239)
(197)
(123)
(175)
(170)
(2,898)
Gross carrying amount
Performing forborne
1,478
2,081
1,574
31
954
503
43
6,664
Non-performing forborne
1,936
1,199
2,250
471
430
233
336
6,855
At 31 Dec 2023
3,414
3,280
3,824
502
1,384
736
379
13,519
Allowance for ECL
Performing forborne
(75)
(25)
(142)
(1)
(43)
(84)
(2)
(372)
Non-performing forborne
(289)
(400)
(986)
(225)
(74)
(126)
(167)
(2,267)
At 31 Dec 2023
(364)
(425)
(1,128)
(226)
(117)
(210)
(169)
(2,639)
Wholesale lending
This section presents further disclosures related to wholesale lending.
It provides details of the main legal entities, countries and customer
classification that are driving the change observed in wholesale loans
and advances to banks and customers, with the impact of foreign
exchange separately identified.
This section also provides reconciliations of the opening 1 January
2024 to 31 December 2024 closing gross carrying/nominal amounts
and the associated allowance for ECL. Further granularity is also
provided by stage, with data for our main legal entities presented for
gross loans and advances to banks and customers, loan and other
credit-related commitments and financial guarantees.
At 31 December 2024, wholesale lending for gross loans and
advances to banks and customers of $595.2bn decreased by $19.8bn
on a reported basis, compared with 31 December 2023. Excluding
adverse foreign exchange movements of $16.3bn, total wholesale
lending decreased by $3.5bn.
On a constant currency basis, the wholesale loans and advances to
customers grew by $3.0bn, mainly driven by an increase in non-bank
financial institutions (up $9.6bn), partly offset by a decrease in
corporate and commercial lending (down $6.6bn).
The increase in non-bank financial institutions of $9.6bn was largely
driven by growth in balances in HSBC Bank plc (up $4.2bn), in our
legal entities in Asia (up $2.2bn), in the US (up $1.2bn), in HSBC UK
(up $1.0bn) and in the Middle East (up $0.8bn).
The decrease in corporate and commercial balances of $6.6bn, mainly
in our legal entities in the US (down $2.9bn) and in Asia (down
$2.4bn), was driven by repayments, including in ‘real estate and
construction’ and in HSBC Bank plc (down $0.7bn). Additionally, there
was a decrease of $0.5bn from the sale of our business in Argentina.
On a constant currency basis, gross loans and advances to banks
decreased by $6.5bn, mainly driven by lower central bank balances
and money market lending balances in our legal entities in Asia (down
$9.1bn) and a decrease of $0.6bn from the sale of our business in
Argentina. This was partly offset by higher balances in our legal
entities in the Middle East (up $3.6bn).
The decrease in stage 2 exposures on a constant currency basis
(down $19.5bn) was mainly driven by maturities, repayments and
new downgrades to stage 3 exposures, primarily in Asia.
On a constant currency basis, stage 3 gross loans and advances to
customers increased by $3.7bn, primarily driven by corporate and
commercial exposure (up $3.8bn) driven by defaults in commercial
real estate lending in Hong Kong, which are generally well
collateralised. There was a decrease in the associated allowance for
ECL due to write-offs of heavily-impaired exposures.
At 31 December 2024, the write-offs attributable to wholesale lending
increased by $0.3bn to $2.9bn, compared with 31 December 2023.
The allowance for ECL attributable to loans and advances to banks
and customers of $7.2bn at 31 December 2024 decreased by $1.0bn
from $8.2bn at 31 December 2023. This included adverse foreign
exchange movements of $0.2bn.
On a constant currency basis, the allowance for ECL attributable to
corporate and commercial loans and advances decreased by $0.8bn,
largely due to the write-offs of heavily-impaired exposures in ‘real
estate and construction’, mainly in Hong Kong. The allowance for ECL
attributable to loans and advances to non-bank financial institutions
remained broadly stable.
On a reported basis, loan commitments and financial guarantees of
$381.7bn decreased by $38.2bn compared with 31 December 2023.
Excluding adverse foreign exchange movements of $14.0bn, financial
nominal amounts decreased by $14.8bn, and corporate and
commercial nominal amounts decreased by $9.4bn.
The allowance for ECL attributable to loan commitments and financial
guarantees at 31 December 2024 remained unchanged at $0.4bn.
The table below provides a breakdown by industry sector and stage of
the Group’s gross carrying amount and allowances for ECL for
wholesale loans and advances to banks and customers.
Counterparties or exposures are classified when presenting
comparable economic characteristics, or engaged in similar activities
so that their collective ability to meet contractual obligations is
uniformly affected by changes in economic, political or other
conditions. Therefore, the industry classification does not adhere to
Nomenclature des Activités Économiques dans la Communauté
Européenne (‘NACE’), which is applicable to other financial regulatory
reporting.
Risk review
170
HSBC Holdings plc Annual Report and Accounts 2024
Total wholesale lending for loans and advances to banks and customers by stage distribution
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
340,987
51,231
18,376
90 410,684
(463)
(1,358)
(4,883)
(51)
(6,755)
– agriculture, forestry and fishing
5,437
1,314
282
—
7,033
(14)
(34)
(46)
—
(94)
– mining and quarrying
6,811
463
318
—
7,592
(6)
(7)
(32)
—
(45)
– manufacturing
70,987
10,250
1,466
21
82,724
(83)
(172)
(618)
(20)
(893)
– electricity, gas, steam and air-
conditioning supply
15,277
971
209
—
16,457
(14)
(23)
(85)
—
(122)
– water supply, sewerage, waste
management and remediation
2,530
388
43
—
2,961
(4)
(4)
(16)
—
(24)
– real estate and construction
63,794
17,320
8,887
62
90,063
(90)
(666)
(1,811)
(31)
(2,598)
– of which: commercial real estate
49,994
14,720
7,558
61
72,333
(67)
(604)
(1,355)
(29)
(2,055)
– wholesale and retail trade, repair of
motor vehicles and motorcycles
66,977
8,125
2,725
3
77,830
(67)
(117)
(1,188)
—
(1,372)
– transportation and storage
18,589
3,637
417
—
22,643
(15)
(74)
(232)
—
(321)
– accommodation and food
11,406
1,718
1,610
—
14,734
(30)
(55)
(214)
—
(299)
– publishing, audiovisual and
broadcasting
18,181
1,416
229
—
19,826
(42)
(55)
(61)
—
(158)
– professional, scientific and technical
activities
23,044
2,436
644
4
26,128
(29)
(49)
(188)
—
(266)
– administrative and support services
17,671
1,707
739
—
20,117
(26)
(40)
(254)
—
(320)
– public administration and defence,
compulsory social security
64
—
—
—
64
—
—
—
—
—
– education
1,361
192
43
—
1,596
(4)
(7)
(16)
—
(27)
– health and care
3,357
489
184
—
4,030
(8)
(18)
(25)
—
(51)
– arts, entertainment and recreation
1,817
171
78
—
2,066
(5)
(4)
(26)
—
(35)
– other services
6,470
491
327
—
7,288
(24)
(20)
(66)
—
(110)
– activities of households
582
7
—
—
589
—
—
—
—
—
– extra-territorial organisations and
bodies activities
118
—
—
—
118
—
—
—
—
—
– government
6,495
123
175
—
6,793
(2)
—
(5)
—
(7)
– asset-backed securities
19
13
—
—
32
—
(13)
—
—
(13)
Non-bank financial institutions
79,687
2,098
679
—
82,464
(45)
(30)
(361)
—
(436)
Loans and advances to banks
101,852
198
2
— 102,052
(9)
(2)
(2)
—
(13)
At 31 Dec 2024
522,526
53,527
19,057
90 595,200
(517)
(1,390)
(5,246)
(51)
(7,204)
By legal entity
HSBC UK Bank plc
81,630
12,772
3,356
—
97,758
(197)
(403)
(603)
—
(1,203)
HSBC Bank plc1
85,022
5,843
2,305
47
93,217
(54)
(111)
(752)
(22)
(939)
The Hongkong and Shanghai Banking
Corporation Limited
279,535
27,078
11,483
39 318,135
(170)
(677)
(2,999)
(28)
(3,874)
HSBC Bank Middle East Limited
26,359
951
848
4
28,162
(20)
(6)
(463)
(1)
(490)
HSBC North America Holdings Inc.
30,107
4,665
503
—
35,275
(31)
(141)
(121)
—
(293)
Grupo Financiero HSBC, S.A. de C.V.
11,957
1,703
230
—
13,890
(35)
(48)
(128)
—
(211)
Other trading entities1
7,840
515
332
—
8,687
(10)
(4)
(180)
—
(194)
Holding companies, shared service
centres and intra-Group eliminations
76
—
—
—
76
—
—
—
—
—
At 31 Dec 2024
522,526
53,527
19,057
90 595,200
(517)
(1,390)
(5,246)
(51)
(7,204)
1 At 31 December 2023, Other trading entities included gross carrying amount of $1,792m related to Private Banking entities that were reclassified to HSBC Bank
plc to continue the process of simplifying our structure in 2024 and gross carrying amount of $1,169m related to our business in Argentina which was sold on
6 December 2024.
Total wholesale lending for loans and other credit-related commitments and financial guarantees to banks and customers by stage distribution1
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
241,249
18,685
1,033
3 260,970
(118)
(121)
(98)
—
(337)
Financial
118,430
2,196
87
— 120,713
(10)
(5)
(3)
—
(18)
At 31 Dec 2024
359,679
20,881
1,120
3 381,683
(128)
(126)
(101)
—
(355)
By legal entity
HSBC UK Bank plc
37,848
4,540
445
—
42,833
(27)
(36)
(57)
—
(120)
HSBC Bank plc
144,941
6,118
256
3 151,318
(21)
(30)
(21)
—
(72)
The Hongkong and Shanghai Banking
Corporation Limited
72,860
3,973
99
—
76,932
(54)
(32)
(6)
—
(92)
HSBC Bank Middle East Limited
8,879
329
35
—
9,243
(5)
(1)
(10)
—
(16)
HSBC North America Holdings Inc.
91,314
5,723
226
—
97,263
(20)
(26)
(5)
—
(51)
HSBC Bank Canada
—
—
—
—
—
—
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V.
2,334
53
—
—
2,387
(1)
(1)
—
—
(2)
Other trading entities
1,503
145
59
—
1,707
—
—
(2)
—
(2)
At 31 Dec 2024
359,679
20,881
1,120
3 381,683
(128)
(126)
(101)
—
(355)
1 Included in loans and other credit-related commitments and financial guarantees is $49bn relating to unsettled reverse repurchase agreements, which once
drawn are classified as ‘Reverse repurchase agreements – non-trading’.
HSBC Holdings plc Annual Report and Accounts 2024
171
Risk review
Total wholesale lending for loans and advances to banks and customers by stage distribution (continued)
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
342,878
69,738
14,958
81
427,655
(499)
(1,500)
(5,774)
(30)
(7,803)
– agriculture, forestry and fishing
5,207
1,662
312
—
7,181
(13)
(53)
(64)
—
(130)
– mining and quarrying
6,260
638
325
—
7,223
(7)
(11)
(83)
—
(101)
– manufacturing
69,690
13,744
1,877
22
85,333
(89)
(194)
(839)
(21)
(1,143)
– electricity, gas, steam and air-
conditioning supply
12,817
1,283
255
—
14,355
(14)
(17)
(88)
—
(119)
– water supply, sewerage, waste
management and remediation
2,753
407
102
—
3,262
(5)
(7)
(51)
—
(63)
– real estate and construction
73,701
21,871
5,835
48
101,455
(96)
(629)
(2,554)
(7)
(3,286)
– of which: commercial real estate
59,883
19,107
4,552
47
83,589
(73)
(603)
(2,091)
(7)
(2,774)
– wholesale and retail trade, repair of
motor vehicles and motorcycles
66,083
10,676
2,358
4
79,121
(80)
(127)
(1,132)
(2)
(1,341)
– transportation and storage
17,117
3,894
445
—
21,456
(18)
(52)
(160)
—
(230)
– accommodation and food
9,681
5,135
1,058
—
15,874
(27)
(118)
(112)
—
(257)
– publishing, audiovisual and
broadcasting
17,455
2,066
210
—
19,731
(42)
(81)
(50)
—
(173)
– professional, scientific and technical
activities
22,686
3,327
733
7
26,753
(32)
(63)
(306)
—
(401)
– administrative and support services
19,055
2,551
597
—
22,203
(31)
(63)
(174)
—
(268)
– public administration and defence,
compulsory social security
1,037
5
—
—
1,042
—
—
—
—
—
– education
1,137
277
46
—
1,460
(3)
(8)
(4)
—
(15)
– health and care
3,245
808
183
—
4,236
(9)
(21)
(26)
—
(56)
– arts, entertainment and recreation
1,666
196
99
—
1,961
(5)
(6)
(31)
—
(42)
– other services
7,065
972
318
—
8,355
(26)
(37)
(90)
—
(153)
– activities of households
684
10
—
—
694
—
—
—
—
—
– extra-territorial organisations and
bodies activities
100
1
—
—
101
—
—
—
—
—
– government
5,420
202
205
—
5,827
(2)
—
(10)
—
(12)
– asset-backed securities
19
13
—
—
32
—
(13)
—
—
(13)
Non-bank financial institutions
69,972
3,650
810
—
74,432
(52)
(30)
(322)
—
(404)
Loans and advances to banks
111,479
1,436
2
—
112,917
(10)
(3)
(2)
—
(15)
At 31 Dec 2023
524,329
74,824
15,770
81
615,004
(561)
(1,533)
(6,098)
(30)
(8,222)
By legal entity
HSBC UK Bank plc
76,793
18,735
3,769
—
99,297
(213)
(474)
(593)
—
(1,280)
HSBC Bank plc
82,025
8,452
2,673
40
93,190
(69)
(138)
(1,035)
(7)
(1,249)
The Hongkong and Shanghai Banking
Corporation Limited
287,876
37,402
7,077
38
332,393
(185)
(696)
(3,349)
(21)
(4,251)
HSBC Bank Middle East Limited
21,927
1,598
894
3
24,422
(17)
(11)
(571)
(2)
(601)
HSBC North America Holdings Inc.
30,797
5,712
583
—
37,092
(24)
(145)
(127)
—
(296)
Grupo Financiero HSBC, S.A. de C.V.
13,714
1,186
382
—
15,282
(39)
(56)
(231)
—
(326)
Other trading entities
11,164
1,739
392
—
13,295
(14)
(13)
(192)
—
(219)
Holding companies, shared service
centres and intra-Group eliminations
33
—
—
—
33
—
—
—
—
—
At 31 Dec 2023
524,329
74,824
15,770
81
615,004
(561)
(1,533)
(6,098)
(30)
(8,222)
Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1 (continued)
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Corporate and commercial
256,367
22,218
1,066
4
279,655
(126)
(125)
(107)
—
(358)
Financial
135,039
5,111
103
—
140,253
(11)
(10)
(2)
—
(23)
At 31 Dec 2023
391,406
27,329
1,169
4
419,908
(137)
(135)
(109)
—
(381)
By legal entity
HSBC UK Bank plc
31,982
5,760
350
—
38,092
(31)
(32)
(56)
—
(119)
HSBC Bank plc
148,980
9,466
310
4
158,760
(20)
(27)
(27)
—
(74)
The Hongkong and Shanghai Banking
Corporation Limited
70,436
3,975
79
—
74,490
(59)
(39)
(16)
—
(114)
HSBC Bank Middle East Limited
6,944
323
56
—
7,323
(4)
(1)
(3)
—
(8)
HSBC North America Holdings Inc.
101,067
5,103
248
—
106,418
(14)
(27)
(1)
—
(42)
HSBC Bank Canada
28,156
2,461
66
—
30,683
(8)
(8)
(3)
—
(19)
Grupo Financiero HSBC, S.A. de C.V.
2,092
34
—
—
2,126
(1)
—
—
—
(1)
Other trading entities
1,749
207
60
—
2,016
—
(1)
(3)
—
(4)
At 31 Dec 2023
391,406
27,329
1,169
4
419,908
(137)
(135)
(109)
—
(381)
1 Included in loans and other credit-related commitments and financial guarantees is $70bn relating to unsettled reverse repurchase agreements, which once
drawn are classified as ‘Reverse repurchase agreements – non-trading’.
Risk review
172
HSBC Holdings plc Annual Report and Accounts 2024
Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and
customers including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying/
nominal
amount
Allowanc
e for ECL
Gross
carrying/
nominal
amount
Allowanc
e for ECL
Gross
carrying/
nominal
amount
Allowanc
e for ECL
Gross
carrying/
nominal
amount
Allowanc
e for ECL
Gross
carrying/
nominal
amount
Allowanc
e for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
845,982
(698)
102,129
(1,668)
16,939
(6,207)
85
(30)
965,135
(8,603)
Transfers of financial
instruments:
(17,606)
(214)
6,997
825
10,609
(611)
—
—
—
—
– transfers from stage 1 to
stage 2
(70,991)
173
70,991
(173)
—
—
—
—
—
—
– transfers from stage 2 to
stage 1
55,182
(380)
(55,182)
380
—
—
—
—
—
—
– transfers to stage 3
(2,056)
7
(9,515)
636
11,571
(643)
—
—
—
—
– transfers from stage 3
259
(14)
703
(18)
(962)
32
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
214
—
(226)
—
(12)
—
—
—
(24)
Net new and further lending/
repayments
58,044
(151)
(29,842)
311
(4,450)
1,219
7
(7)
23,759
1,372
Change to risk parameters –
credit quality
—
112
—
(899)
—
(2,508)
—
(11)
—
(3,306)
Changes to models used for
ECL calculation
—
39
—
105
—
—
—
—
—
144
Assets written off
—
—
—
—
(2,925)
2,925
—
—
(2,925)
2,925
Credit-related modifications
that resulted in derecognition
—
—
—
—
—
—
—
—
—
—
Foreign exchange and
others1 2 3
(53,384)
53
(4,996)
36
4
(153)
1
(3)
(58,375)
(67)
At 31 Dec 2024
833,036
(645)
74,288
(1,516)
20,177
(5,347)
93
(51)
927,594
(7,559)
ECL income statement
change for the period
214
(709)
(1,301)
(18)
(1,814)
Recoveries
40
Others
(126)
Total ECL income statement
change for the period
(1,900)
1
Total includes $2.9bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale during the year, and a
corresponding allowance for ECL of $23m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for
sale’ on page 411.
2 Total includes $28.9bn of nominal amount and $20m of corresponding allowance for ECL related to derecognition of loan commitments and financial guarantees
following the sale of our banking business in Canada during 2024.
3 Total includes $0.3bn of nominal amount related to derecognition of loan commitments and financial guarantees following the sale of our banking business in
Argentina during 2024.
As shown in the above table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments
and financial guarantees decreased by $1,044m during the period
from $8,603m at 31 December 2023 to $7,559m at 31 December
2024.
This decrease was driven by:
–
$2,925m of assets written off;
–
$1,372m relating to volume movements, which included the
allowance for ECL associated with new originations, assets
derecognised and further lending/repayments; and
–
$144m relating to changes to models used for ECL calculation.
These were partly offset by:
–
$3,306m relating to credit quality changes, including the credit
quality impact of financial instruments transferring between
stages;
–
foreign exchange and other movements of $67m; and
–
$24m relating to the net remeasurement impact of stage
transfers.
The ECL charge for the period of $1,814m presented in the previous
table consisted of $3,306m relating to credit quality changes,
including the credit quality impact of financial instruments transferring
between stages and $24m relating to the net remeasurement impact
of stage transfers. This was partly offset by $1,372m relating to
underlying net book volume movement and $144m in changes to
models used for ECL calculation.
During the period, there was a net transfer between stage 1 and
stage 2 of $15,809m gross carrying/nominal amounts. It was primarily
driven by our entities in Asia ($12,878m), mainly due to deterioration
in the real estate and construction sectors, and in our main entity in
the US ($1,986m) and Mexico ($1,805m), partly offset by
improvements in the economic outlook that led to upgrades to stage
1 exposures, primarily in our legal entities in the UK($3,077m).
A summary of basis of preparation is available on page 161.
HSBC Holdings plc Annual Report and Accounts 2024
173
Risk review
Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and
customers including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
POCI
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
830,322
(670) 124,660
(2,205)
17,068
(6,144)
129
(38)
972,179
(9,057)
Transfers of financial instruments:
(16,804)
(429)
10,247
1,141
6,557
(712)
—
—
—
—
– transfers from stage 1 to
stage 2
(93,511)
172
93,511
(172)
—
—
—
—
—
—
– transfers from stage 2 to
stage 1
77,772
(605) (77,772)
605
—
—
—
—
—
—
– transfers to stage 3
(1,444)
20
(6,255)
765
7,699
(785)
—
—
—
—
– transfers from stage 3
379
(16)
763
(57)
(1,142)
73
—
—
—
—
Net remeasurement of ECL
arising from transfer of stage
—
354
—
(294)
—
(45)
—
—
—
15
Net new and further lending/
repayments
43,282
(138) (32,082)
311
(3,787)
973
(36)
3
7,377
1,149
Changes to risk parameters –
credit quality
—
203
—
(621)
—
(2,941)
—
21
—
(3,338)
Changes to models used for ECL
calculation
—
(9)
—
25
—
—
—
—
—
16
Assets written off
—
—
—
—
(2,596)
2,596
(2,596)
2,596
Credit-related modifications that
resulted in derecognition
—
—
—
—
(119)
95
—
—
(119)
95
Foreign exchange and others1
(10,818)
(9)
(696)
(25)
(184)
(29)
(8)
(16)
(11,706)
(79)
At 31 Dec 2023
845,982
(698) 102,129
(1,668)
16,939
(6,207)
85
(30)
965,135
(8,603)
ECL income statement change
for the period
410
(579)
(2,013)
24
(2,158)
Recoveries
42
Others
—
—
—
—
—
—
—
—
—
(203)
Total ECL income statement
change for the period
(2,319)
1 Total includes $13.5bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale during the year, and a
corresponding allowance for ECL of $61m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for
sale’ on page 411.
Wholesale lending – distribution of financial instruments to which the impairment requirements of IFRS 9 are applied by credit quality
Gross carrying amount
Allowance
for ECL
Net
Strong
Good
Satisfactory
Sub-
standard
Credit
impaired
Total
$m
$m
$m
$m
$m
$m
$m
$m
By legal entity
HSBC UK Bank plc
21,548
30,317
36,450
6,087
3,356
97,758
(1,203)
96,555
HSBC Bank plc
42,189
21,755
24,150
2,771
2,352
93,217
(939)
92,278
The Hongkong and Shanghai Banking
Corporation Limited
157,900
69,084
71,651
7,978
11,522
318,135
(3,874)
314,261
HSBC Bank Middle East Limited
15,854
4,263
6,927
266
852
28,162
(490)
27,672
HSBC North America Holdings Inc.
6,095
11,726
13,967
2,984
503
35,275
(293)
34,982
Grupo Financiero HSBC, S.A. de C.V.
1,476
5,523
5,974
687
230
13,890
(211)
13,679
Other trading entities
2,432
1,072
4,563
288
332
8,687
(194)
8,493
Holding companies, shared service centres and
intra-Group eliminations
76
—
—
— —
76
—
76
At 31 Dec 2024
247,570 143,740 163,682 21,061 19,147 595,200
(7,204) 587,996
Percentage of total credit quality (%)
41.6
24.2
27.5
3.5
3.2
100.0
By legal entity
HSBC UK Bank plc
20,777
30,245
36,206
8,300
3,769
99,297
(1,280)
98,017
HSBC Bank plc
41,149
20,962
24,164
4,202
2,713
93,190
(1,249)
91,941
The Hongkong and Shanghai Banking
Corporation Limited
165,255
72,683
78,566
8,774
7,115
332,393
(4,251)
328,142
HSBC Bank Middle East Limited
13,660
3,082
6,270
513
897
24,422
(601)
23,821
HSBC North America Holdings Inc.
6,244
13,668
13,094
3,503
583
37,092
(296)
36,796
Grupo Financiero HSBC, S.A. de C.V.
1,853
6,543
5,882
622
382
15,282
(326)
14,956
Other trading entities
3,189
1,277
7,449
988
392
13,295
(219)
13,076
Holding companies, shared service centres and
intra-Group eliminations
33
—
—
—
—
33
—
33
At 31 Dec 2023
252,160
148,460
171,631
26,902
15,851
615,004
(8,222)
606,782
Percentage of total credit quality (%)
41.0
24.1
27.9
4.4
2.6
100.0
Risk review
174
HSBC Holdings plc Annual Report and Accounts 2024
Our risk rating system facilitates the internal ratings-based approach under the Basel framework adopted by the Group to support calculation of
our minimum credit regulatory capital requirement. The credit quality classifications can be found on page 139.
Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost
Gross carrying amount
Allowance for ECL
Basel one-year
PD range Stage 1 Stage 2 Stage 3 POCI
Total Stage 1 Stage 2 Stage 3 POCI
Total
ECL
coverage
Mapped
external rating
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Corporate
and
commercial
340,987 51,231 18,376
90 410,684
(463) (1,358) (4,883) (51) (6,755)
1.6
– CRR 1
0.000 to 0.053 32,564
121
—
— 32,685
(3)
(5)
—
—
(8)
—
AA- and above
– CRR 2
0.054 to 0.169 79,350
2,469
—
— 81,819
(25)
(15)
—
—
(40)
—
A+ to A-
– CRR 3
0.170 to 0.740 111,229
7,556
—
— 118,785
(103)
(72)
—
—
(175)
0.1
BBB+ to BBB-
– CRR 4
0.741 to 1.927 73,050 12,591
—
— 85,641
(144)
(99)
—
—
(243)
0.3
BB+ to BB-
– CRR 5
1.928 to 4.914 40,391 12,673
—
— 53,064
(158)
(159)
—
—
(317)
0.6
BB- to B
– CRR 6
4.915 to 8.860
2,491
7,436
—
—
9,927
(16)
(190)
—
—
(206)
2.1
B-
– CRR 7
8.861 to 15.000
1,370
3,735
—
—
5,105
(7)
(172)
—
—
(179)
3.5
CCC+
– CRR 8
15.001 to 99.999
542
4,650
—
—
5,192
(7)
(646)
—
—
(653)
12.6
CCC to C
– CRR 9/10
100.000
—
— 18,376
90 18,466
—
— (4,883) (51) (4,934)
26.7
D
Non-bank
financial
institutions
79,687
2,098
679
— 82,464
(45)
(30)
(361)
—
(436)
0.5
– CRR 1
0.000 to 0.053 19,516
191
—
— 19,707
(1)
(1)
—
—
(2)
—
AA- and above
– CRR 2
0.054 to 0.169 20,572
166
—
— 20,738
(5)
—
—
—
(5)
—
A+ to A-
– CRR 3
0.170 to 0.740 20,370
330
—
— 20,700
(12)
(3)
—
—
(15)
0.1
BBB+ to BBB-
– CRR 4
0.741 to 1.927 12,987
502
—
— 13,489
(16)
(2)
—
—
(18)
0.1
BB+ to BB-
– CRR 5
1.928 to 4.914
6,058
390
—
—
6,448
(11)
(6)
—
—
(17)
0.3
BB- to B
– CRR 6
4.915 to 8.860
48
319
—
—
367
—
(8)
—
—
(8)
2.2
B-
– CRR 7
8.861 to 15.000
63
79
—
—
142
—
(1)
—
—
(1)
0.7
CCC+
– CRR 8
15.001 to 99.999
73
121
—
—
194
—
(9)
—
—
(9)
4.6
CCC to C
– CRR 9/10
100.000
—
—
679
—
679
—
—
(361)
—
(361)
53.2
D
Banks
101,852
198
2
— 102,052
(9)
(2)
(2)
—
(13)
—
– CRR 1
0.000 to 0.053 79,213
53
—
— 79,266
(3)
—
—
—
(3)
—
AA- and above
– CRR 2
0.054 to 0.169 13,315
40
—
— 13,355
(2)
—
—
—
(2)
—
A+ to A-
– CRR 3
0.170 to 0.740
4,226
29
—
—
4,255
(2)
—
—
—
(2)
—
BBB+ to BBB-
– CRR 4
0.741 to 1.927
3,275
12
—
—
3,287
(1)
—
—
—
(1)
—
BB+ to BB-
– CRR 5
1.928 to 4.914
1,706
47
—
—
1,753
(1)
(1)
—
—
(2)
0.1
BB- to B
– CRR 6
4.915 to 8.860
10
1
—
—
11
—
—
—
—
—
—
B-
– CRR 7
8.861 to 15.000
107
13
—
—
120
—
—
—
—
—
—
CCC+
– CRR 8
15.001 to 99.999
—
3
—
—
3
—
(1)
—
—
(1)
33.3
CCC to C
– CRR 9/10
100.000
—
—
2
—
2
—
—
(2)
—
(2)
100.0
D
At 31 Dec
2024
522,526 53,527 19,057
90 595,200
(517) (1,390) (5,246) (51) (7,204)
1.2
HSBC Holdings plc Annual Report and Accounts 2024
175
Risk review
Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost (continued)
Basel one-year
PD range
Gross carrying amount
Allowance for ECL
ECL
coverage
Mapped
external rating
Stage 1 Stage 2 Stage 3
POCI
Total Stage 1 Stage 2 Stage 3 POCI
Total
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Corporate and
commercial
342,878 69,738 14,958
81 427,655
(499) (1,500) (5,774)
(30) (7,803)
1.8
– CRR 1
0.000 to 0.053 34,097
715
—
— 34,812
(4)
(3)
—
—
(7)
—
AA- and above
– CRR 2
0.054 to 0.169 81,131
2,180
—
— 83,311
(23)
(14)
—
—
(37)
—
A+ to A-
– CRR 3
0.170 to 0.740 112,322 11,391
—
— 123,713
(106)
(87)
—
—
(193)
0.2
BBB+ to BBB-
– CRR 4
0.741 to 1.927 72,654 16,904
—
— 89,558
(156)
(130)
—
—
(286)
0.3
BB+ to BB-
– CRR 5
1.928 to 4.914 37,631 18,060
—
— 55,691
(169)
(240)
—
—
(409)
0.7
BB- to B
– CRR 6
4.915 to 8.860
2,675
7,341
—
— 10,016
(24)
(176)
—
—
(200)
2.0
B-
– CRR 7
8.861 to 15.000
1,031
6,319
—
—
7,350
(10)
(246)
—
—
(256)
3.5
CCC+
– CRR 81
15.001 to 99.999
1,337
6,828
—
—
8,165
(7)
(604)
—
—
(611)
7.5
CCC to C
– CRR 9/10
100.000
—
— 14,958
81 15,039
—
— (5,774)
(30) (5,804)
38.6
D
Non-bank financial
institutions
69,972
3,650
810
— 74,432
(52)
(30)
(322)
—
(404)
0.5
– CRR 1
0.000 to 0.053 15,475
211
—
— 15,686
(2)
—
—
—
(2)
—
AA- and above
– CRR 2
0.054 to 0.169 16,920
374
—
— 17,294
(6)
(2)
—
—
(8)
—
A+ to A-
– CRR 3
0.170 to 0.740 19,195
912
—
— 20,107
(10)
(4)
—
—
(14)
0.1
BBB+ to BBB-
– CRR 4
0.741 to 1.927 11,480
1,032
—
— 12,512
(19)
(5)
—
—
(24)
0.2
BB+ to BB-
– CRR 5
1.928 to 4.914
6,635
872
—
—
7,507
(9)
(15)
—
—
(24)
0.3
BB- to B
– CRR 6
4.915 to 8.860
232
116
—
—
348
(6)
(1)
—
—
(7)
2.0
B-
– CRR 7
8.861 to 15.000
25
93
—
—
118
—
(2)
—
—
(2)
1.7
CCC+
– CRR 8
15.001 to 99.999
10
40
—
—
50
—
(1)
—
—
(1)
2.0
CCC to C
– CRR 9/10
100.000
—
—
810
—
810
—
—
(322)
—
(322)
39.8
D
Banks
111,479
1,436
2
— 112,917
(10)
(3)
(2)
—
(15)
—
– CRR 1
0.000 to 0.053 89,112
10
—
— 89,122
(4)
—
—
—
(4)
—
AA- and above
– CRR 2
0.054 to 0.169 11,899
36
—
— 11,935
(2)
—
—
—
(2)
—
A+ to A-
– CRR 3
0.170 to 0.740
4,631
9
—
—
4,640
(1)
—
—
—
(1)
—
BBB+ to BBB-
– CRR 4
0.741 to 1.927
2,488
58
—
—
2,546
(1)
—
—
—
(1)
—
BB+ to BB-
– CRR 5
1.928 to 4.914
3,062
755
—
—
3,817
(2)
(1)
—
—
(3)
0.1
BB- to B
– CRR 6
4.915 to 8.860
22
20
—
—
42
—
—
—
—
—
—
B-
– CRR 7
8.861 to 15.000
1
—
—
—
1
—
—
—
—
—
—
CCC+
– CRR 8
15.001 to 99.999
264
548
—
—
812
—
(2)
—
—
(2)
0.2
CCC to C
– CRR 9/10
100.000
—
—
2
—
2
—
—
(2)
—
(2)
100.0
D
At 31 Dec 2023
524,329 74,824 15,770
81 615,004
(561) (1,533) (6,098)
(30) (8,222)
1.3
1 Corporate and commercial lending reported in CRR 8 for stage 1 includes $782m related to the UK Bounce Back Loan Scheme with immaterial allowances for
ECL.
Wholesale lending – credit risk profile by obligor grade for loan and other credit-related commitments and financial guarantees
Nominal amount
Allowance for ECL
Basel one-year
PD range Stage 1 Stage 2 Stage 3 POCI
Total Stage 1 Stage 2 Stage 3 POCI
Total
ECL
coverage
Mapped
external
rating
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Loan and
other credit-
related
commitments
345,742 19,495
872
3 366,112
(120)
(121)
(85)
—
(326)
0.1
– CRR 1
0.000 to 0.053 92,090
89
—
— 92,179
(3)
—
—
—
(3)
— AA- and above
– CRR 2
0.054 to 0.169 92,967
1,009
—
— 93,976
(12)
(2)
—
—
(14)
—
A+ to A-
– CRR 3
0.170 to 0.740 97,876
5,051
—
— 102,927
(38)
(15)
—
—
(53)
0.1
BBB+ to BBB-
– CRR 4
0.741 to 1.927 40,135
4,349
—
— 44,484
(28)
(22)
—
—
(50)
0.1
BB+ to BB-
– CRR 5
1.928 to 4.914 18,581
3,976
—
— 22,557
(26)
(22)
—
—
(48)
0.2
BB- to B
– CRR 6
4.915 to 8.860
1,828
2,297
—
— 4,125
(4)
(22)
—
—
(26)
0.6
B-
– CRR 7
8.861 to 15.000
1,378
678
—
— 2,056
(1)
(12)
—
—
(13)
0.6
CCC+
– CRR 8
15.001 to 99.999
887
2,046
—
— 2,933
(8)
(26)
—
—
(34)
1.2
CCC to C
– CRR 9/10
100.000
—
—
872
3
875
—
—
(85)
—
(85)
9.7
D
Financial
guarantees
13,937
1,386
248
— 15,571
(8)
(5)
(16)
—
(29)
0.2
– CRR 1
0.000 to 0.053
1,895
1
—
— 1,896
—
—
—
—
—
— AA- and above
– CRR 2
0.054 to 0.169
4,326
12
—
— 4,338
(1)
—
—
—
(1)
—
A+ to A-
– CRR 3
0.170 to 0.740
4,137
71
—
— 4,208
(2)
—
—
—
(2)
—
BBB+ to BBB-
– CRR 4
0.741 to 1.927
2,106
286
—
— 2,392
(3)
—
—
—
(3)
0.1
BB+ to BB-
– CRR 5
1.928 to 4.914
1,295
478
—
— 1,773
(2)
(1)
—
—
(3)
0.2
BB- to B
– CRR 6
4.915 to 8.860
162
232
—
—
394
—
(1)
—
—
(1)
0.3
B-
– CRR 7
8.861 to 15.000
5
128
—
—
133
—
(2)
—
—
(2)
1.5
CCC+
– CRR 8
15.001 to 99.999
11
178
—
—
189
—
(1)
—
—
(1)
0.5
CCC to C
– CRR 9/10
100.000
—
—
248
—
248
—
—
(16)
—
(16)
6.5
D
At 31 Dec 2024
359,679 20,881
1,120
3 381,683
(128)
(126)
(101)
—
(355)
0.1
Risk review
176
HSBC Holdings plc Annual Report and Accounts 2024
Wholesale lending – credit risk profile by obligor grade for loan and other credit-related commitments and financial guarantees (continued)
Nominal amount
Allowance for ECL
Basel one-year
PD range
Stage 1
Stage 2
Stage 3 POCI
Total
Stage 1
Stage 2
Stage 3 POCI
Total
ECL
coverage
Mapped
external rating
%
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
Loan and other
credit-related
commitments
377,766 25,463
785
4 404,018
(130)
(128)
(84)
—
(342)
0.1
– CRR 1
0.000 to 0.053 65,730
1,676
—
— 67,406
(5)
(1)
—
—
(6)
—
AA- and above
– CRR 2
0.054 to 0.169 152,224
2,490
—
— 154,714
(13)
(6)
—
—
(19)
—
A+ to A-
– CRR 3
0.170 to 0.740 105,569
6,044
—
— 111,613
(46)
(24)
—
—
(70)
0.1
BBB+ to BBB-
– CRR 4
0.741 to 1.927 38,102
4,751
—
— 42,853
(33)
(20)
—
—
(53)
0.1
BB+ to BB-
– CRR 5
1.928 to 4.914 14,054
5,367
—
— 19,421
(28)
(31)
—
—
(59)
0.3
BB- to B
– CRR 6
4.915 to 8.860
1,170
2,453
—
—
3,623
(4)
(15)
—
—
(19)
0.5
B-
– CRR 7
8.861 to 15.000
780
848
—
—
1,628
(1)
(10)
—
—
(11)
0.7
CCC+
– CRR 8
15.001 to 99.999
137
1,834
—
—
1,971
—
(21)
—
—
(21)
1.1
CCC to C
– CRR 9/10
100.000
—
—
785
4
789
—
—
(84)
—
(84)
10.6
D
Financial
guarantees
13,640
1,866
384
— 15,890
(7)
(7)
(25)
—
(39)
0.2
– CRR 1
0.000 to 0.053
2,553
1
—
—
2,554
—
—
—
—
—
—
AA- and above
– CRR 2
0.054 to 0.169
4,212
202
—
—
4,414
(1)
—
—
—
(1)
—
A+ to A-
– CRR 3
0.170 to 0.740
3,584
202
—
—
3,786
(2)
—
—
—
(2)
0.1
BBB+ to BBB-
– CRR 4
0.741 to 1.927
1,932
407
—
—
2,339
(2)
(1)
—
—
(3)
0.1
BB+ to BB-
– CRR 5
1.928 to 4.914
1,266
455
—
—
1,721
(2)
(2)
—
—
(4)
0.2
BB- to B
– CRR 6
4.915 to 8.860
91
387
—
—
478
—
(1)
—
—
(1)
0.2
B-
– CRR 7
8.861 to 15.000
1
76
—
—
77
—
—
—
—
—
—
CCC+
– CRR 8
15.001 to 99.999
1
136
—
—
137
—
(3)
—
—
(3)
2.2
CCC to C
– CRR 9/10
100.000
—
—
384
—
384
—
—
(25)
—
(25)
6.5
D
At 31 Dec 2023
391,406 27,329
1,169
4 419,908
(137)
(135)
(109)
—
(381)
0.1
Commercial real estate
Commercial real estate (‘CRE’) lending includes the financing of
corporate, institutional and high net worth customers who are
investing primarily in income-producing assets and, to a lesser extent,
in their construction and development. The portfolio has larger
concentrations in Hong Kong, the UK and mainland China.
Our global exposure is centred largely on cities with economic,
political or cultural significance. In more developed markets, our
exposure mainly comprises the financing of investment assets, the
redevelopment of existing stock and the augmentation of both
commercial and residential markets to support economic and
population growth. In less developed commercial real estate markets,
our exposures comprise lending for development assets on relatively
short tenors with a particular focus on supporting larger, better-
capitalised developers involved in residential construction or assets
supporting economic expansion.
Excluding favourable foreign exchange movements of $1.1bn,
commercial real estate lending decreased by $10.1bn, mainly from
$6.4bn in our entities in Hong Kong due to loan repayments and write-
offs.
Commercial real estate lending to customers
of which:
HSBC
UK
Bank
plc
HSBC
Bank
plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
of which:
Hong Kong
excluding
exposure to
mainland
China
borrowers
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Gross loans
and advances
Stage 1
9,394
3,285
34,337
1,136
1,420
380
42 49,994 9,758
22,643
22,132
Stage 2
4,052
313
9,103
—
1,184
67
1 14,720 4,112
7,619
6,515
Stage 3
492
213
6,451
117
240
22
23 7,558
492
5,967
4,554
POCI
—
43
18
—
—
—
—
61
43
18
—
At 31 Dec 2024
13,938
3,854
49,909
1,253
2,844
469
66 72,333 14,405
36,247
33,201
– of which:
forborne loans
502
54
3,087
116
273
19
23 4,074
545
2,729
Allowance for
ECL
(203)
(72)
(1,627)
(23)
(103)
(8)
(19) (2,055)
(227)
(1,418)
(405)
HSBC Holdings plc Annual Report and Accounts 2024
177
Risk review
Commercial real estate lending to customers (continued)
of which:
HSBC
UK
Bank
plc
HSBC
Bank
plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle East
Limited
HSBC
North
America
Holdings
Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong Kong
of which:
Hong Kong
excluding
exposure to
mainland China
borrowers
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Gross loans and
advances
Stage 1
10,304 4,218
41,307
1,126
1,803
685
440 59,883 10,790
28,846
27,560
Stage 2
3,262
400
13,229
189
1,956
70
1 19,107 3,294
10,375
8,681
Stage 3
444
184
3,570
145
166
25
18
4,552
470
3,226
576
POCI
—
32
15
—
—
—
—
47
32
15
—
At 31 Dec 2023
14,010 4,834
58,121
1,460
3,925
780
459 83,589 14,586
42,462
36,817
– of which:
forborne loans
461
69
2,454
126
433
52
—
3,595
519
2,227
Allowance for
ECL
(148)
(49)
(2,399)
(55)
(98)
(15)
(10) (2,774)
(172)
(2,149)
(296)
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle
East
Limited
HSBC North
America
Holdings Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Wealth and
Personal
Banking1
325
273
37
—
2
—
—
637
469
37
Commercial
Banking
13,613
2,757
33,551
695
2,842
469
66
53,993 13,640
24,473
Global Banking
and Markets
—
824
16,183
558
—
—
—
17,565
296
11,599
Corporate
Centre
—
—
138
—
—
—
—
138
—
138
At 31 Dec 2024
13,938
3,854
49,909
1,253
2,844
469
66
72,333 14,405
36,247
Wealth and
Personal
Banking1
409
377
66
—
2
—
423
1,277
409
66
Commercial
Banking
13,601
3,322
37,826
733
3,923
780
36
60,221 13,686
27,811
Global Banking
and Markets
—
1,135
20,066
727
—
—
—
21,928
491
14,444
Corporate
Centre
—
—
163
—
—
—
—
163
—
141
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589 14,586
42,462
Commercial real estate gross loans and advances to customers by global business
1 Comprised exclusively by exposures in Global Private Banking.
Risk review
178
HSBC Holdings plc Annual Report and Accounts 2024
Commercial real estate gross loans and advances to customers by credit quality
of which:
HSBC
UK
Bank
plc
HSBC
Bank
plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
of which:
Hong Kong
excluding
exposure to
mainland
China
borrowers
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Strong
4,663
739
9,106
137
—
18
42
14,705
4,875
4,522
4,484
Good
2,098
1,430
16,113
407
566
111
—
20,725
2,107
10,421
9,754
Satisfactory
5,770
1,312
13,556
592
1,423
283
—
22,936
5,948
10,850
10,716
Sub-standard
915
117
4,665
—
615
35
1
6,348
940
4,469
3,693
Credit impaired
492
256
6,469
117
240
22
23
7,619
535
5,985
4,554
At 31 Dec 2024
13,938
3,854
49,909
1,253
2,844
469
66
72,333 14,405
36,247
33,201
Strong
3,940
740
12,394
255
25
65
16
17,435
4,191
6,527
6,118
Good
2,555
2,054
17,777
246
781
130
18
23,561
2,592
12,004
11,262
Satisfactory
6,370
1,642
19,509
634
1,691
500
407
30,753
6,575
16,290
15,759
Sub-standard
701
182
4,856
180
1,262
60
—
7,241
726
4,400
3,102
Credit impaired
444
216
3,585
145
166
25
18
4,599
502
3,241
576
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589 14,586
42,462
36,817
The Hong Kong CRE portfolio (excluding exposure to mainland China
borrowers) saw negative credit migration in 2024 as a result of higher
interest rates, high inventory levels and weak demand. This was
predominantly driven by a deterioration in the secured portfolio as
borrowers sought payment deferrals to accommodate debt
serviceability challenges.
Secured exposures account for 54% of the total portfolio
(31 December 2023: 54%), with collateral values regularly updated in
line with our existing practice. The trend of loan right-sizing and
borrower deleveraging within the secured portfolio has supported
good collateral coverage levels that continue to provide headroom in
the event of a further softening of property valuations. As at
31 December 2024, the weighted average LTV:
–
of performing exposures rated ‘sub-standard’ was 46%
(31 December 2023: 54%);
–
of ‘credit impaired’ exposures was 58% (31 December 2023:
71%). This has driven relatively low levels of stage 3 allowance for
ECL. The reduction in LTV reflects the significantly smaller 'credit
impaired' portfolio at 31 December 2023.
The unsecured portfolio remained stable in size and quality, with
limited levels of default and close to 90% rated Strong or Good.
Unsecured exposures are typically granted to strong, listed Hong
Kong CRE developers, which commonly are members of
conglomerate groups with diverse cashflows. We continue to closely
assess and manage the risk in the portfolio, including through
portfolio reviews and stress testing. Vulnerable borrowers, including
those with debt serviceability challenges and higher LTV levels, are
subject to heightened monitoring and management.
Market conditions remain challenging, particularly for commercial
property as a result of continued weakness in demand. The
performance of the residential market remains mixed, with some
initial improvement in sentiment and transaction levels observed in
the fourth quarter of 2024, driven by a further easing of real estate
regulatory policies in October and improved end-user affordability as
prices and interest rates fell. Nevertheless, property price pressure is
likely to persist in the near term and until economic conditions and
sentiment improve. Given the more uncertain interest rate outlook,
we expect broader market fundamentals to remain subdued and
challenges in this sector to continue.
Refinance risk in commercial real estate
Commercial real estate lending tends to require the repayment of a
significant proportion of the principal at maturity. Typically, a customer
will arrange repayment through the acquisition of a new loan to settle
the existing debt. Refinance risk is the risk that a customer, being
unable to repay the debt on maturity, fails to refinance it at
commercial terms. We monitor our commercial real estate portfolio
closely, assessing indicators for signs of potential issues with
refinancing.
Maturity analysis commercial real estate gross loans and advances to customers
of which:
HSBC UK
Bank plc
HSBC
Bank plc
The Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC Bank
Middle East
Limited
HSBC North
America
Holdings Inc.
Grupo
Financiero
HSBC, S.A.
de C.V.
Other
trading
entities
Total
UK
Hong
Kong
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
< 1 year
3,488
846
22,244
455
1,084
111
20
28,248
3,826
18,204
1–2 years
3,303
876
11,213
162
603
142
6
16,305
3,373
7,196
2–5 years
6,634
1,600
14,079
447
1,145
143
40
24,088
6,685
9,254
> 5 years
513
532
2,373
189
12
73
—
3,692
521
1,593
At 31 Dec 2024
13,938
3,854
49,909
1,253
2,844
469
66
72,333
14,405
36,247
< 1 year
3,553
1,496
25,427
396
1,472
619
437
33,400
3,950
19,887
1–2 years
4,514
474
14,144
175
623
60
2
19,992
4,571
10,923
2–5 years
5,411
2,149
16,052
441
1,814
71
3
25,941
5,520
9,885
> 5 years
532
715
2,498
448
16
30
17
4,256
545
1,767
At 31 Dec 2023
14,010
4,834
58,121
1,460
3,925
780
459
83,589
14,586
42,462
HSBC Holdings plc Annual Report and Accounts 2024
179
Risk review
The following table presents the Group’s exposure to borrowers
classified in the commercial real estate sector where the ultimate
parent is based in mainland China, as well as all commercial real
estate exposures booked on mainland China balance sheets. In
addition to CRE as defined in our primary CRE disclosure above, this
table includes financing provided to a corporate or financial entity for
the purchase or financing of a property which supports the overall
operations of the business. This provides a more comprehensive view
of our mainland China CRE exposures. The exposures at
31 December 2024 are split by country/territory and credit quality
including allowances for ECL by stage.
Mainland China commercial real estate
(Audited)
Hong Kong
Mainland China
Rest of the Group
Total
$m
$m
$m
$m
Loans and advances to customers1
3,161
3,694
303
7,158
Guarantees issued and others2
80
16
5
101
Total mainland China commercial real estate exposure at 31 Dec 2024
3,241
3,710
308
7,259
Distribution of mainland China commercial real estate exposure by
credit quality
Strong
118
1,817
109
2,044
Good
578
595
1
1,174
Satisfactory
196
899
49
1,144
Sub-standard
777
136
149
1,062
Credit impaired
1,572
263
—
1,835
At 31 Dec 2024
3,241
3,710
308
7,259
Allowance for ECL by credit quality
Strong
—
(4)
—
(4)
Good
—
(3)
—
(3)
Satisfactory
—
(13)
—
(13)
Sub-standard
(261)
(30)
(17)
(308)
Credit impaired
(749)
(81)
—
(830)
At 31 Dec 2024
(1,010)
(131)
(17)
(1,158)
Allowance for ECL by stage distribution
Stage 1
—
(9)
—
(9)
Stage 2
(261)
(41)
(17)
(319)
Stage 3
(743)
(81)
—
(824)
POCI
(6)
—
—
(6)
At 31 Dec 2024
(1,010)
(131)
(17)
(1,158)
ECL coverage %
31.2
3.5
5.5
16.0
Loans and advances to customers1
6,033
4,917
839
11,789
Guarantees issued and others2
255
66
37
358
Total mainland China commercial real estate exposure at 31 Dec 2023
6,288
4,983
876
12,147
Distribution of mainland China commercial real estate exposure by
credit quality
Strong
781
1,723
6
2,510
Good
604
953
421
1,978
Satisfactory
679
1,704
261
2,644
Sub-standard
1,298
327
188
1,813
Credit impaired
2,926
276
—
3,202
At 31 Dec 2023
6,288
4,983
876
12,147
Allowance for ECL by credit quality
Strong
—
(3)
—
(3)
Good
—
(5)
(1)
(6)
Satisfactory
(3)
(27)
—
(30)
Sub-standard
(66)
(87)
(16)
(169)
Credit impaired
(1,726)
(125)
—
(1,851)
At 31 Dec 2023
(1,795)
(247)
(17)
(2,059)
Allowance for ECL by stage distribution
Stage 1
—
(10)
—
(10)
Stage 2
(69)
(112)
(17)
(198)
Stage 3
(1,726)
(125)
—
(1,851)
At 31 Dec 2023
(1,795)
(247)
(17)
(2,059)
ECL coverage %
28.5
5.0
1.9
17.0
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent liabilities.
Risk review
180
HSBC Holdings plc Annual Report and Accounts 2024
(Unaudited)
The mainland China commercial real estate portfolio continues to face
challenges as market fundamentals remain weak and refinancing risks
continue. The portfolio remains closely managed, with reductions in
exposures driven by a combination of de-risking measures,
repayments by performing customers and write-offs in the ‘credit
impaired’ category.
The portfolio of mainland China CRE loans booked in Hong Kong
remains relatively higher risk, with allowances for ECL substantially
against unsecured exposures. For secured exposures, allowances for
ECL are minimal, reflecting the nature and value of the security held.
Approximately half of the performing exposure in the mainland China
CRE portfolio booked in Hong Kong is lending to state-owned
enterprises and relatively strong privately-owned enterprises. This is
reflected in the relatively low allowances for ECL in this part of the
portfolio.
Mainland China real estate market activity remains depressed with
continued weakness in underlying buyer demand for housing. Various
government stimulus measures were introduced in 2024 to underpin
market confidence. Despite some early signs of price stabilisation in
certain cities, these measures have not yet triggered a meaningful
recovery in transaction levels. Financing conditions and liquidity for
borrowers operating in the real estate sector therefore remains
constrained, particularly for privately-owned enterprises. A market
recovery is likely to be protracted and contingent on further
government support.
The Group has additional exposures to mainland China commercial
real estate as a result of lending to multinational corporates booked
outside of mainland China, which is not incorporated in the table
above.
Collateral and other credit enhancements
(Audited)
Although collateral can be an important mitigant of credit risk, it is the
Group’s practice to lend on the basis of the customer’s ability to meet
their obligations out of cash flow resources rather than placing
primary reliance on collateral and other credit risk enhancements.
Depending on the customer’s standing and the type of product,
facilities may be provided without any collateral or other credit
enhancements. For other lending, a charge over collateral is obtained
and considered in determining the credit decision and pricing. In the
event of default, the Group may utilise the collateral as a source of
repayment.
Depending on its form, collateral can have a significant financial effect
in mitigating our exposure to credit risk. Where there is sufficient
collateral, an expected credit loss is not recognised. This is the case
for reverse repurchase agreements and for certain loans and
advances to customers where the loan to value (‘LTV’) is very low.
Mitigants may include a charge on borrowers’ specific assets, such as
real estate or financial instruments. Other credit risk mitigants include
short positions in securities and financial assets held as part of linked
insurance/investment contracts where the risk is predominantly borne
by the policyholder. Additionally, risk may be managed by employing
other types of collateral and credit risk enhancements, such as
second charges, other liens and unsupported guarantees. Guarantees
are normally taken from corporates and export credit agencies.
Corporates would normally provide guarantees as part of a parent/
subsidiary relationship and span a number of credit grades. The export
credit agencies will normally be investment grade.
Certain credit mitigants are used strategically in portfolio management
activities. While single name concentrations arise in portfolios
managed by Global Banking and Corporate Banking, it is only in Global
Banking that their size requires the use of portfolio level credit
mitigants. Across Global Banking, risk limits and utilisations, maturity
profiles and risk quality are monitored and managed proactively. This
process is key to the setting of risk appetite for these larger, more
complex, geographically distributed customer groups. While the
principal form of risk management continues to be at the point of
exposure origination, through the lending decision-making process,
Global Banking also utilises loan sales and credit default swap (‘CDS’)
hedges to manage concentrations and reduce risk.
These transactions are the responsibility of a dedicated Global
Banking portfolio management team. Hedging activity is carried out
within agreed credit parameters, and is subject to market risk limits
and a robust governance structure. Where applicable, CDSs are
entered into directly with a central clearing house counterparty.
Otherwise, the Group’s exposure to CDS protection providers is
diversified among mainly banking counterparties with strong credit
ratings.
CDS mitigants are held at portfolio level and are not included in the
expected credit loss calculations. CDS mitigants are not reported in
the following tables.
Collateral on loans and advances
Collateral held is analysed separately for commercial real estate and
for other corporate, commercial and financial (non-bank) lending. The
following tables include off-balance sheet loan commitments,
primarily undrawn credit lines.
The collateral measured in the following tables consists of fixed first
charges on real estate, and charges over cash and marketable
financial instruments. The values in the tables represent the expected
market value on an open market basis, actual values realised are a
function of market conditions. No adjustment has been made to the
collateral for any expected costs of recovery. Marketable securities
are measured at their fair value.
Other types of collateral, such as unsupported guarantees and floating
charges over the assets of a customer’s business, are not measured
in the following tables. While such mitigants have value, often
providing rights in insolvency, their assignable value is not sufficiently
certain and they are therefore assigned no value for disclosure
purposes.
The LTV ratios presented are calculated by directly associating loans
and advances with the collateral that individually and uniquely
supports each facility. When collateral assets are shared by multiple
loans and advances, whether specifically or, more generally, by way
of an all monies charge, the collateral value is pro-rated across the
loans and advances protected by the collateral.
For credit-impaired loans, the collateral values cannot be directly
compared with impairment allowances recognised. The LTV figures
use open market values with no adjustments, actual values realised
are a function of market conditions. Impairment allowances are
calculated on a different basis, by considering other cash flows and
adjusting collateral values for costs of realising collateral as explained
further on page 359.
Commercial real estate loans and advances
The value of commercial real estate collateral is determined by using
a combination of external and internal valuations and physical
inspections. For commercial real estate, where the facility exceeds
regulatory threshold requirements, Group policy requires an
independent review of the valuation at least every three years, or
more frequently as the need arises.
In Hong Kong, market practice is typically for lending to major
property companies to be either secured by guarantees or unsecured.
In Europe, facilities of a working capital nature are generally not
secured by a first fixed charge, and are therefore disclosed as not
collateralised.
HSBC Holdings plc Annual Report and Accounts 2024
181
Risk review
Gross carrying/nominal amount
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
%
%
%
%
%
Not collateralised
36,168
4,709
1,704
—
42,581
0.1
9.0
47.5
—
3.0
Fully collateralised by LTV ratio
37,090
11,909
5,254
—
54,253
0.1
1.7
7.8
—
1.2
– less than 50%
20,522
5,154
2,413
—
28,089
0.1
1.7
5.7
—
0.9
– 51% to 75%
11,392
3,840
1,691
—
16,923
0.1
2.2
7.6
—
1.3
– 76% to 90%
2,554
2,277
767
—
5,598
0.1
0.9
12.5
—
2.1
– 91% to 100%
2,622
638
383
—
3,643
0.2
2.3
12.3
—
1.8
Partially collateralised (A): LTV > 100%
2,119
698
815
64
3,696
0.2
2.8
19.7
45.8
5.8
– collateral value on A
1,255
457
570
29
2,311
Total at 31 Dec 2024
75,377
17,316
7,773
64 100,530
0.1
3.8
17.7
45.8
2.1
of which: UK
Not collateralised
4,487
1,890
127
—
6,504
0.4
3.8
27.8
—
1.9
Fully collateralised by LTV ratio
9,139
3,194
305
—
12,638
0.2
1.1
8.2
—
0.6
– less than 50%
2,903
761
160
—
3,824
0.2
1.5
8.0
—
0.8
– 51% to 75%
4,202
1,693
69
—
5,964
0.2
1.2
12.0
—
0.6
– 76% to 90%
1,173
732
24
—
1,929
0.1
0.4
10.2
—
0.3
– 91% to 100%
861
8
52
—
921
0.1
7.7
2.7
—
0.3
Partially collateralised (B): LTV > 100%
503
565
119
46
1,233
0.2
2.9
21.1
48.6
5.3
– collateral value on B
296
350
69
26
741
Total UK at 31 Dec 2024
14,129
5,649
551
46
20,375
0.2
2.2
15.5
48.6
1.3
of which: Hong Kong
Not collateralised
16,380
2,312
1,404
—
20,096
—
14.3
47.9
—
5.0
Fully collateralised by LTV ratio
17,115
6,045
4,127
—
27,287
0.1
1.4
5.8
—
1.2
– less than 50%
12,935
3,589
2,102
—
18,626
0.1
1.3
3.8
—
0.7
– 51% to 75%
3,534
1,059
1,243
—
5,836
0.1
2.2
6.2
—
1.8
– 76% to 90%
336
1,050
654
—
2,040
0.1
1.1
11.8
—
4.4
– 91% to 100%
310
347
128
—
785
—
0.5
2.4
—
0.6
Partially collateralised (C): LTV > 100%
185
62
562
18
827
—
1.9
17.6
38.1
12.9
– collateral value on C
119
41
397
3
560
Total Hong Kong at 31 Dec 2024
33,680
8,419
6,093
18
48,210
—
4.9
16.6
38.1
3.0
Not collateralised
36,754
5,128
2,543
—
44,425
0.1
3.9
72.4
—
4.7
Fully collateralised by LTV ratio
46,212
15,177
1,963
—
63,352
0.1
2.5
12.0
—
1.0
– less than 50%
24,391
7,413
574
—
32,378
0.1
1.9
13.1
—
0.7
– 51% to 75%
16,086
5,240
657
—
21,983
0.1
3.1
9.3
—
1.1
– 76% to 90%
3,140
1,437
454
—
5,031
0.1
3.5
11.8
—
2.1
– 91% to 100%
2,595
1,087
278
—
3,960
0.2
2.3
16.6
—
1.9
Partially collateralised (A): LTV > 100%
7,075
1,487
156
50
8,768
0.1
1.8
30.2
14.5
1.0
– collateral value on A
4,004
1,061
115
26
5,206
Total at 31 Dec 2023
90,041
21,792
4,662
50 116,545
0.1
2.8
45.6
14.5
2.4
of which: UK
Not collateralised
4,644
1,288
97
—
6,029
0.4
2.0
12.4
—
0.9
Fully collateralised by LTV ratio
9,762
2,512
295
—
12,569
0.1
1.3
13.9
—
0.7
– less than 50%
3,514
507
51
—
4,072
0.1
1.9
21.6
—
0.6
– 51% to 75%
4,826
1,418
103
—
6,347
0.1
1.1
16.4
—
0.6
– 76% to 90%
749
292
80
—
1,121
0.1
1.3
14.9
—
1.5
– 91% to 100%
673
295
61
—
1,029
0.1
1.6
1.9
—
0.6
Partially collateralised (B): LTV > 100%
1,580
239
82
35
1,936
0.1
1.1
34.2
20.7
2.0
– collateral value on B
524
171
62
17
774
Total UK at 31 Dec 2023
15,986
4,039
474
35
20,534
0.2
1.5
17.1
20.7
0.9
of which: Hong Kong
Not collateralised
16,889
2,323
2,215
—
21,427
—
6.5
78.7
—
8.8
Fully collateralised by LTV ratio
20,783
8,447
989
—
30,219
—
2.1
5.0
—
0.8
– less than 50%
15,425
5,604
294
—
21,323
—
1.5
1.4
—
0.5
– 51% to 75%
4,102
2,140
312
—
6,554
0.1
3.8
2.1
—
1.4
– 76% to 90%
657
619
315
—
1,591
0.1
1.8
8.0
—
2.3
– 91% to 100%
599
84
68
—
751
—
0.1
20.5
—
1.9
Partially collateralised (C): LTV > 100%
1,770
616
52
15
2,453
—
0.8
24.5
—
0.7
– collateral value on C
1,569
535
39
8
2,151
Total Hong Kong at 31 Dec 2023
39,442
11,386
3,256
15
54,099
—
2.9
55.5
—
4.0
Wholesale lending – commercial real estate loans and advances to customers including loan commitments by level of collateral for key
countries/territories (by stage)
(Audited)
Risk review
182
HSBC Holdings plc Annual Report and Accounts 2024
Other corporate, commercial and financial (non-bank) loans and advances
Other corporate, commercial and financial (non-bank) loans are
analysed separately in the following table, which focuses on the
countries/territories containing the majority of our loans and advances
balances. For financing activities in other corporate and commercial
lending, collateral value is not strongly correlated to principal
repayment performance.
Collateral values are generally refreshed when an obligor’s general
credit performance deteriorates and we have to assess the likely
performance of secondary sources of repayment should it prove
necessary to rely on them.
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
$m
$m
$m
$m
$m
%
%
%
%
%
Not collateralised
713,028
62,844
6,870
5
782,747
0.1
0.9
41.5
14.2
0.5
Fully collateralised by LTV ratio
87,488
11,992
3,394
21
102,895
0.1
2.0
8.0
98.1
0.6
– less than 50%
39,432
4,360
1,703
—
45,495
0.1
1.6
6.9
—
0.5
– 51% to 75%
20,169
4,643
778
21
25,611
0.1
2.8
12.0
98.1
1.0
– 76% to 90%
9,016
1,515
512
—
11,043
0.1
1.6
7.1
—
0.6
– 91% to 100%
18,871
1,474
401
—
20,746
—
0.8
6.3
—
0.2
Partially collateralised (A): LTV > 100%
51,536
5,772
2,411
3
59,722
0.1
0.8
34.3
7.0
1.5
– collateral value on A
22,800
2,519
1,162
1
26,482
Total at 31 Dec 2024
852,052
80,608
12,675
29
945,364
0.1
1.1
31.2
72.8
0.6
of which: UK
Not collateralised
134,075
10,822
2,661
4
147,562
0.1
2.5
32.4
—
0.9
Fully collateralised by LTV ratio
24,552
3,046
968
—
28,566
0.1
2.4
5.8
—
0.6
– less than 50%
9,183
1,288
473
—
10,944
0.1
2.2
2.8
—
0.5
– 51% to 75%
7,544
1,216
244
—
9,004
0.1
2.7
7.0
—
0.7
– 76% to 90%
2,942
367
129
—
3,438
0.1
2.3
15.3
—
0.9
– 91% to 100%
4,883
175
122
—
5,180
0.1
2.1
5.3
—
0.3
Partially collateralised (B): LTV > 100%
7,016
1,055
395
—
8,466
0.2
1.3
10.8
—
0.8
– collateral value on B
3,832
581
252
—
4,665
Total UK at 31 Dec 2024
165,643
14,923
4,024
4
184,594
0.1
2.4
23.9
—
0.8
of which: Hong Kong
Not collateralised
117,849
6,389
1,313
—
125,551
—
0.6
58.1
—
0.7
Fully collateralised by LTV ratio
28,291
5,866
1,877
21
36,055
0.1
2.1
5.3
98.1
0.7
– less than 50%
14,500
1,774
903
—
17,177
0.1
1.4
5.1
—
0.5
– 51% to 75%
7,331
2,766
449
21
10,567
0.1
3.0
8.3
98.1
1.4
– 76% to 90%
2,896
752
372
—
4,020
0.1
1.9
3.6
—
0.7
– 91% to 100%
3,564
574
153
—
4,291
—
0.3
1.7
—
0.1
Partially collateralised (C): LTV > 100%
17,125
1,535
1,048
—
19,708
—
0.4
46.8
—
2.6
– collateral value on C
6,741
627
639
—
8,007
Total Hong Kong at 31 Dec 2024
163,265
13,790
4,238
21
181,314
—
1.2
31.9
98.1
0.9
Not collateralised
672,142
76,261
7,702
8
756,113
0.1
0.9
40.0
6.8
0.6
Fully collateralised by LTV ratio
113,339
19,747
2,629
23
135,738
0.1
1.4
10.7
89.8
0.5
– less than 50%
42,953
7,069
1,168
—
51,190
0.1
1.5
11.8
—
0.5
– 51% to 75%
24,011
8,222
887
—
33,120
0.1
1.3
6.4
—
0.6
– 76% to 90%
10,194
2,531
421
23
13,169
0.1
1.6
10.3
90.6
0.9
– 91% to 100%
36,181
1,925
153
—
38,259
—
1.1
27.6
—
0.2
Partially collateralised (A): LTV > 100%
53,686
9,019
2,233
3
64,941
0.1
0.7
32.2
38.4
1.3
– collateral value on A
24,505
4,266
993
1
29,765
Total at 31 Dec 2023
839,167
105,027
12,564
34
956,792
0.1
1.0
32.5
67.1
0.6
of which: UK
Not collateralised
117,824
20,401
3,423
—
141,648
0.2
1.9
23.2
—
1.0
Fully collateralised by LTV ratio
22,217
5,912
1,162
—
29,291
0.1
1.7
3.7
—
0.6
– less than 50%
7,385
2,340
601
—
10,326
0.1
1.2
1.3
—
0.5
– 51% to 75%
6,966
2,292
434
—
9,692
0.1
1.7
3.6
—
0.7
– 76% to 90%
2,256
809
106
—
3,171
0.2
2.5
15.8
—
1.3
– 91% to 100%
5,610
471
21
—
6,102
0.1
2.1
14.5
—
0.3
Partially collateralised (B): LTV > 100%
6,335
1,732
299
—
8,366
0.2
1.8
18.4
—
1.2
– collateral value on B
3,508
1,080
175
—
4,763
Total UK at 31 Dec 2023
146,376
28,045
4,884
—
179,305
0.2
1.8
18.3
—
0.9
of which: Hong Kong
Not collateralised
114,025
7,523
906
—
122,454
—
0.4
57.5
—
0.5
Fully collateralised by LTV ratio
32,857
8,918
877
22
42,674
0.1
1.3
6.6
94.7
0.5
– less than 50%
16,175
2,898
230
—
19,303
0.1
1.4
11.8
—
0.4
– 51% to 75%
9,461
4,515
336
—
14,312
0.1
1.2
3.1
—
0.5
– 76% to 90%
4,245
863
253
22
5,383
0.1
1.8
2.0
94.7
0.9
– 91% to 100%
2,976
642
58
—
3,676
—
0.4
27.0
—
0.5
Partially collateralised (C): LTV > 100%
16,152
2,887
704
—
19,743
—
0.6
30.2
—
1.2
– collateral value on C
6,619
1,306
318
—
8,243
Total Hong Kong at 31 Dec 2023
163,034
19,328
2,487
22
184,871
0.1
0.8
31.8
94.7
0.6
Wholesale lending – other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level
of collateral for key countries/territories (by stage)
(Audited)
Gross carrying/nominal amount
ECL coverage
HSBC Holdings plc Annual Report and Accounts 2024
183
Risk review
Other credit risk exposures
In addition to collateralised lending, other credit enhancements are
employed and methods used to mitigate credit risk arising from
financial assets. These are summarised below:
–
Some securities issued by governments, banks and other financial
institutions benefit from additional credit enhancements provided
by government guarantees that cover the assets.
–
Debt securities issued by banks and financial institutions include
asset-backed securities (‘ABSs’) and similar instruments, which
are supported by underlying pools of financial assets. Credit risk
associated with ABSs is reduced through the purchase of credit
default swap (‘CDS’) protection.
–
Trading loans and advances mainly consist of reverse repos and
stock borrowing, which are by their nature collateralised.
–
Cash collateral is posted to satisfy margin requirements. There is
limited credit risk on cash collateral posted since in the event of
default of the counterparty this would be set off against the
related liability.
Collateral accepted as security that the Group is permitted to sell or
repledge under these arrangements is described on page 400 of the
financial statements.
The Group’s maximum exposure to credit risk includes financial
guarantees and similar contracts granted, as well as loan and other
credit-related commitments. Depending on the terms of the
arrangement, we may use additional credit mitigation if a guarantee is
called upon or a loan commitment is drawn and subsequently
defaults.
For further information on these arrangements, see Note 32 on the financial
statements.
Derivatives
We participate in transactions exposing us to counterparty credit risk.
Counterparty credit risk is the risk of financial loss if the counterparty
to a transaction defaults before satisfactorily settling it. It arises
principally from over-the-counter (‘OTC’) derivatives and securities
financing transactions and is calculated in both the trading and non-
trading books. Transactions vary in value by reference to a market
factor such as an interest rate, exchange rate or asset price.
The counterparty risk from derivative transactions is taken into
account when reporting the fair value of derivative positions. The
adjustment to the fair value is known as the credit valuation
adjustment (‘CVA’).
For an analysis of CVAs, see Note 12 on the financial statements.
The following table reflects by risk type the fair values and gross notional contract amounts of derivatives cleared through an exchange, central
counterparty or non-central counterparty.
Notional contract amounts and fair values of derivatives
2024
2023
Notional
amount
Fair value
Notional
amount
Fair value
Assets
Liabilities
Assets
Liabilities
$m
$m
$m
$m
$m
$m
Total OTC derivatives
29,273,397
368,938
367,759 24,551,539
337,066
343,098
– total OTC derivatives cleared by central counterparties
13,484,581
111,974
113,091 11,130,785
116,520
118,796
– total OTC derivatives not cleared by central counterparties
15,788,816
256,964
254,668 13,420,754
220,546
224,302
Total exchange traded derivatives
1,267,685
12,445
9,435
1,111,247
9,134
8,159
Gross
30,541,082
381,383
377,194 25,662,786
346,200
351,258
Offset
(112,746)
(112,746)
(116,486)
(116,486)
At 31 Dec
268,637
264,448
229,714
234,772
The purposes for which HSBC uses derivatives are described in Note 15 on
the financial statements.
The International Swaps and Derivatives Association (‘ISDA’) master
agreement is our preferred agreement for documenting derivatives
activity. It is common, and our preferred practice, for the parties
involved in a derivative transaction to execute a credit support annex
(‘CSA’) in conjunction with the ISDA master agreement. Under a CSA,
collateral is passed between the parties to mitigate the counterparty
risk inherent in outstanding positions. The majority of our CSAs are
with financial institutional clients.
We manage the counterparty exposure on our OTC derivative
contracts by using collateral agreements with counterparties and
netting agreements. Currently, we do not actively manage our general
OTC derivative counterparty exposure in the credit markets, although
we may manage individual exposures in certain circumstances.
We place strict policy restrictions on collateral types and as a
consequence the types of collateral received and pledged are, by
value, highly liquid and of a strong quality, being predominantly cash.
Where a collateral type is required to be approved outside the
collateral policy, approval is required from a committee of senior
representatives from Markets, Legal and Risk.
See Note 31 on the financial statements for details regarding legally
enforceable right of offset in the event of counterparty default and collateral
received in respect of derivatives.
Personal lending
This section presents further disclosures related to personal lending.
It provides details of the main legal entities, countries and products
that are driving the change observed in personal gross loans and
advances to customers, with the impact of foreign exchange
separately identified. Additionally, Hong Kong and UK mortgage book
loan to value (‘LTV’) data is provided.
This section also provides reconciliations of the opening
1 January 2024 to 31 December 2024 closing gross carrying/nominal
amounts and associated allowance for ECL by product. Further
product granularity is also provided by stage, with data for our main
legal entities presented for gross loans and advances to customers,
loan and other credit-related commitments and financial guarantees.
At 31 December 2024, total personal lending for gross loans and
advances to customers of $447.2bn decreased by $0.3bn on a
reported basis, compared with 31 December 2023. This decrease
included adverse foreign exchange movements of $9.9bn. On a
constant currency basis, the increase of $9.6bn was driven by growth
in mortgages (up $7.5bn) and other personal lending (up $2.1bn).
On a constant currency basis, mortgage lending gross balances
increased by $7.5bn to $361.3bn at 31 December 2024. Mortgages
grew in our main legal entities in the UK (up $4.5bn), in the US (up
$2.7bn), Australia (up $1.3bn) and Mexico (up $0.3bn). These
increases were partly offset by a $1.2bn decrease in China, mainly
due to loan repayments.
Risk review
184
HSBC Holdings plc Annual Report and Accounts 2024
On a constant currency basis, other personal lending balances at
31 December 2024 increased by $2.1bn compared with 31 December
2023. This included an increase in our entities in Europe (up $1.1bn),
in our entities in Asia (up $1.0bn) and in Mexico (up $0.3bn). This was
partly offset by the sale of our business in Argentina (down $0.3bn).
Total personal lending gross carrying amounts in stage 2 decreased
by $7.6bn compared with 31 December 2023. Excluding adverse
foreign exchange movements of $1.1bn, the decrease of $6.5bn was
driven by a reduction in credit judgements, primarily in the UK.
At 31 December 2024, the write-offs attributable to personal lending
increased by $0.2bn to $1.5bn, compared with 31 December 2023.
At 31 December 2024, the allowance for ECL attributable to personal
lending, excluding off-balance sheet loan commitments and
guarantees, decreased by $0.3bn to $2.5bn, compared with
31 December 2023. This decrease included favourable foreign
exchange movements of $0.2bn.
On a constant currency basis, the allowance for ECL attributable to
other personal lending of $2.1bn decreased by $0.1bn compared with
31 December 2023. This net release was driven by resilient
performance and a reduction in credit judgements in the UK. The
allowance for ECL attributable to mortgages of $0.5bn remained
unchanged compared with 31 December 2023.
The quality of both our Hong Kong and UK mortgage books remained
strong, with low levels of impairment allowances. The average LTV
ratio on new mortgage lending in Hong Kong was 67%, compared
with an estimated 63% for the overall mortgage portfolio. The
average LTV ratio on new lending in the UK was 69%, compared with
an estimated 53% for the overall mortgage portfolio.
Total personal lending for loans and advances to customers at amortised cost by stage distribution
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
By portfolio
First lien residential mortgages
324,703
34,177
2,450
361,330
(59)
(130)
(284)
(473)
– of which: interest-only (including offset)
21,155
2,457
103
23,715
(3)
(10)
(17)
(30)
– affordability (including US adjustable rate
mortgages)
16,628
386
243
17,257
(2)
(2)
(7)
(11)
Other personal lending
79,043
5,742
1,110
85,895
(511)
(1,028)
(512)
(2,051)
– second lien residential mortgages
366
10
19
395
—
—
(2)
(2)
– guaranteed loans in respect of residential property
6,492
186
20
6,698
(2)
(2)
(5)
(9)
– other personal lending which is secured
30,564
478
138
31,180
(12)
(4)
(15)
(31)
– credit cards
21,611
2,991
313
24,915
(268)
(660)
(199)
(1,127)
– other personal lending which is unsecured
18,198
1,864
598
20,660
(214)
(345)
(279)
(838)
– motor vehicle finance
1,812
213
22
2,047
(15)
(17)
(12)
(44)
At 31 Dec 2024
403,746
39,919
3,560
447,225
(570)
(1,158)
(796)
(2,524)
By legal entity
HSBC UK Bank plc
152,338
31,325
1,075
184,738
(148)
(307)
(211)
(666)
HSBC Bank plc1
23,501
1,198
324
25,023
(17)
(24)
(99)
(140)
The Hongkong and Shanghai Banking Corporation
Limited
191,614
5,519
1,170
198,303
(174)
(385)
(164)
(723)
HSBC Bank Middle East Limited
3,678
158
40
3,876
(14)
(29)
(30)
(73)
HSBC North America Holdings Inc.
20,851
497
327
21,675
(4)
(12)
(11)
(27)
Grupo Financiero HSBC, S.A. de C.V.
11,016
1,172
620
12,808
(207)
(400)
(279)
(886)
Other trading entities1
748
50
4
802
(6)
(1)
(2)
(9)
At 31 Dec 2024
403,746
39,919
3,560
447,225
(570)
(1,158)
(796)
(2,524)
1 At 31 December 2023, ‘Other trading entities’ included gross carrying amount of $9,079m and allowances for ECL of $23m related to Private Banking entities
that were reclassified to HSBC Bank plc to continue the process of simplifying our structure.
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
HSBC UK Bank plc
51,078
442
47
51,567
(6)
—
(3)
(9)
HSBC Bank plc
1,605
7
2
1,614
—
—
—
—
The Hongkong and Shanghai Banking Corporation
Limited
189,737
1,165
35
190,937
(4)
—
(2)
(6)
HSBC Bank Middle East Limited
2,452
7
—
2,459
—
—
—
—
HSBC North America Holdings Inc.
3,707
68
2
3,777
—
—
—
—
HSBC Bank Canada
—
—
—
—
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V.
3,892
—
—
3,892
(7)
—
—
(7)
Other trading entities
434
2
—
436
—
—
—
—
At 31 Dec 2024
252,905
1,691
86
254,682
(17)
—
(5)
(22)
HSBC Holdings plc Annual Report and Accounts 2024
185
Risk review
Total personal lending for loans and advances to customers at amortised cost by stage distribution (continued)
Gross carrying amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
By portfolio
First lien residential mortgages
320,410
38,287
2,212
360,909
(102)
(200)
(269)
(571)
– of which: interest-only (including offset)
21,895
2,923
139
24,957
(4)
(27)
(31)
(62)
– affordability (including US adjustable rate
mortgages)
14,380
381
291
15,052
(3)
(1)
(10)
(14)
Other personal lending
76,124
9,196
1,293
86,613
(477)
(1,234)
(585)
(2,296)
– second lien residential mortgages
317
58
21
396
—
(3)
(5)
(8)
– guaranteed loans in respect of residential property
8,001
502
90
8,593
(1)
(5)
(14)
(20)
– other personal lending which is secured
28,900
424
157
29,481
(13)
(5)
(24)
(42)
– credit cards
19,909
4,419
352
24,680
(236)
(697)
(203)
(1,136)
– other personal lending which is unsecured
17,010
3,582
659
21,251
(212)
(505)
(331)
(1,048)
– motor vehicle finance
1,987
211
14
2,212
(15)
(19)
(8)
(42)
At 31 Dec 2023
396,534
47,483
3,505
447,522
(579)
(1,434)
(854)
(2,867)
By legal entity
HSBC UK Bank plc
146,354
35,190
1,218
182,762
(152)
(490)
(255)
(897)
HSBC Bank plc
14,598
1,747
273
16,618
(24)
(22)
(91)
(137)
The Hongkong and Shanghai Banking Corporation
Limited
191,382
7,741
948
200,071
(165)
(402)
(162)
(729)
HSBC Bank Middle East Limited
3,335
397
47
3,779
(19)
(33)
(36)
(88)
HSBC North America Holdings Inc.
18,096
553
364
19,013
(5)
(14)
(16)
(35)
Grupo Financiero HSBC, S.A. de C.V.
12,717
1,740
536
14,993
(197)
(463)
(273)
(933)
Other trading entities
10,052
115
119
10,286
(17)
(10)
(21)
(48)
At 31 Dec 2023
396,534
47,483
3,505
447,522
(579)
(1,434)
(854)
(2,867)
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution (continued)
Nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
HSBC UK Bank plc
52,093
734
88
52,915
(11)
—
(2)
(13)
HSBC Bank plc
1,630
36
4
1,670
—
—
—
—
The Hongkong and Shanghai Banking Corporation
Limited
181,967
2,479
223
184,669
(3)
—
—
(3)
HSBC Bank Middle East Limited
1,978
7
1
1,986
—
—
—
—
HSBC North America Holdings Inc.
3,695
72
8
3,775
—
—
—
—
HSBC Bank Canada
6,610
113
30
6,753
—
—
—
—
Grupo Financiero HSBC, S.A. de C.V.
4,308
—
—
4,308
(8)
—
—
(8)
Other trading entities
2,008
31
1
2,040
(1)
—
—
(1)
At 31 Dec 2023
254,289
3,472
355
258,116
(23)
—
(2)
(25)
Exposure to UK interest-only mortgage loans
The following information is presented for HSBC branded interest-
only mortgage loans. This excludes offset mortgages in first direct
and private banking mortgages.
At the end of 2024, the average LTV ratio of the interest-only
mortgage loans was 44% (2023: 44%), and 99% (2023: 97%) had an
LTV ratio of 75% or less.
Of the interest-only mortgage loans that expired in 2022, 82% were
repaid within 12 months of expiry with a total of 97% being repaid
within 24 months of expiry. For those expired during 2023, 83% were
repaid within 12 months of expiry.
At 31 December 2024, interest-only mortgage loan exposures were
$15.2bn (2023: $15.2bn) and the maturity profile was as follows:
UK interest-only mortgage loans
$m
Expired interest-only mortgage loans
128
Interest-only mortgage loans by maturity
– 2025
165
– 2026
247
– 2027
366
– 2028
515
– 2029–2033
2,728
– post-2033
11,100
At 31 Dec 2024
15,249
Risk review
186
HSBC Holdings plc Annual Report and Accounts 2024
UK interest-only mortgage loans (continued)
$m
Expired interest-only mortgage loans
141
Interest-only mortgage loans by maturity
– 2024
141
– 2025
242
– 2026
315
– 2027
436
– 2028–2032
2,919
– post-2032
11,010
At 31 Dec 2023
15,204
Exposure to offset mortgage in first direct
The offset mortgage in first direct is no longer on sale and is only available for existing offset mortgage customers. It works by grouping
together the customer’s mortgage, savings and current accounts to offset their credit and debit balances against their mortgage exposure. At
31 December 2024, exposures were worth a total $4.1bn with an average LTV ratio of 28% (2023: $5.0bn exposure and 29% LTV ratio).
Reconciliations of changes in personal lending gross carrying/nominal amount
and allowances for loans and advances to customers including loan
commitments and financial guarantees
The following disclosure provides a reconciliation by stage of the Group’s personal lending gross carrying/nominal amount and allowances for
loans and advances to customers, including loan commitments and financial guarantees.
In addition, three reconciliations by stage of the Group’s gross carrying/nominal amount and allowances for first lien mortgages, credit cards and
other personal lending, including loan commitments and financial guarantees, have been included following the adoption of the
recommendations of the DECL Taskforce’s third report since 2023.
Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers
including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
650,823
(602)
50,955
(1,434)
3,860
(856)
705,638
(2,892)
Transfers of financial instruments:
(2,023)
(1,045)
(345)
1,477
2,368
(432)
—
—
– transfers from stage 1 to stage 2
(45,220)
246
45,220
(246)
—
—
—
—
– transfers from stage 2 to stage 1
43,549
(1,247)
(43,549)
1,247
—
—
—
—
– transfers to stage 3
(743)
9
(2,715)
685
3,458
(694)
—
—
– transfers from stage 3
391
(53)
699
(209)
(1,090)
262
—
—
Net remeasurement of ECL arising from transfer
of stage
—
745
—
(605)
—
(132)
—
8
Changes due to modifications not derecognised
—
—
—
—
(25)
—
(25)
—
Net new and further lending/repayments
29,789
(17)
(7,889)
278
(796)
470
21,104
731
Change to risk parameters – credit quality
—
251
—
(874)
—
(1,437)
—
(2,060)
Changes to models used for ECL calculation
—
29
—
(109)
—
(20)
—
(100)
Assets written off
—
—
—
—
(1,534)
1,534
(1,534)
1,534
Foreign exchange and others1,2,3
(21,938)
52
(1,111)
109
(227)
72
(23,276)
233
At 31 Dec 2024
656,651
(587)
41,610
(1,158)
3,646
(801)
701,907
(2,546)
ECL income statement change for the period
1,008
(1,310)
(1,119)
(1,421)
Recoveries
220
Others
(32)
Total ECL income statement change for the
period
(1,233)
1 Total includes $0.8bn of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding allowance for ECL of
$23m, reflecting business disposals, as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
2 Total includes $6.4bn of nominal amount and $1m of corresponding allowance for ECL related to derecognition of loan commitments and financial guarantees
following the sale of our banking business in Canada during 2024.
3 Total includes $2.4bn of nominal amount related to derecognition of loan commitments and financial guarantees following the sale of our banking business in
Argentina during 2024.
As shown in the above table, the allowance for ECL for loans and advances to customers and relevant loan commitments and financial
guarantees decreased by $346m during the period from $2,892m at 31 December 2023 to $2,546m at 31 December 2024.
HSBC Holdings plc Annual Report and Accounts 2024
187
Risk review
This decrease was driven by:
–
$1,534m of assets written off;
–
$731m relating to volume movements, which included the
allowance for ECL associated with new originations, assets
derecognised and further lending/repayment;
–
foreign exchange and other movements of $233m; and
–
$8m relating to the net remeasurement impact of stage transfers.
These were partly offset by:
–
$2,060m relating to credit quality changes, including the credit
quality impact of financial instruments transferring between
stages; and
–
$100m of changes to models used for ECL calculation.
The ECL charge for the period of $1,421m presented in the above
table consisted of $2,060m relating to credit quality changes,
including the credit quality impact of financial instruments transferring
between stages, and $100m relating to changes to models used for
the calculation of ECL. This was partly offset by $731m relating to
underlying net book volume movements and $8m relating to the net
remeasurement impact of stage transfer.
During the period, there was a net transfer between stage 1 and
stage 2 of $1,671m gross carrying/nominal amounts. This increase
was mainly driven by HSBC UK ($3,410m) due to mortgages portfolio
and Mexico ($860m) due to a slight deterioration in unsecured lending
portfolio, partly offset by Hong Kong ($2,983m) due to improvement
in credit cards and other unsecured lending portfolio.
A summary of basis of preparation is available on page 161.
Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers
including loan commitments and financial guarantees
(Audited)
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
603,321
(587)
52,563
(1,505)
4,139
(805)
660,023
(2,897)
Transfers of financial instruments:
(2,144)
(619)
39
1,087
2,105
(468)
—
—
– transfers from stage 1 to stage 2
(57,217)
270
57,217
(270)
—
—
—
—
– transfers from stage 2 to stage 1
55,307
(862)
(55,307)
862
—
—
—
—
– transfers to stage 3
(542)
3
(2,345)
614
2,887
(617)
—
—
– transfers from stage 3
308
(30)
474
(119)
(782)
149
—
—
Net remeasurement of ECL arising from transfer of
stage
—
563
—
(679)
—
(79)
—
(195)
Net new and further lending/repayments
34,411
(47)
(4,713)
350
(1,169)
144
28,529
447
Change to risk parameters – credit quality
—
104
—
(641)
—
(955)
—
(1,492)
Changes to models used for ECL calculation
—
(13)
—
21
—
7
—
15
Assets written off
—
—
—
—
(1,326)
1,326
(1,326)
1,326
Foreign exchange and others1,2
15,235
(3)
3,066
(67)
111
(26)
18,412
(96)
At 31 Dec 2023
650,823
(602)
50,955
(1,434)
3,860
(856)
705,638
(2,892)
ECL income statement change for the period
607
(949)
(883)
(1,225)
Recoveries
226
Others
8
Total ECL income statement change for the period
(991)
1 Total includes $7.8bn of gross carrying loans and advances and a corresponding allowance for ECL of $11m, due to the retention of certain balances previously
classified as assets held for sale of our retail banking operations in France. For further details, see Note 23 ‘Assets held for sale and liabilities of disposal groups
held for sale’ on page 411.
2 Total includes $2.0bn of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding allowance for ECL of
$20m, reflecting business disposals, as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
Risk review
188
HSBC Holdings plc Annual Report and Accounts 2024
First lien residential mortgages – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to
customers including loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
340,764
(109)
38,513
(202)
2,258
(264)
381,535
(575)
Transfers of financial instruments:
(3,561)
(232)
2,694
232
867
—
—
—
– transfers from stage 1 to stage 2
(33,524)
23
33,524
(23)
—
—
—
—
– transfers from stage 2 to stage 1
30,113
(244)
(30,113)
244
—
—
—
—
– transfers to stage 3
(290)
6
(1,127)
90
1,417
(96)
—
—
– transfers from stage 3
140
(17)
410
(79)
(550)
96
—
—
Net remeasurement of ECL arising from transfer of
stage
—
163
—
(152)
—
(30)
—
(19)
Changes due to modifications not derecognised
—
—
—
—
—
—
—
—
Net new and further lending/repayments
14,008
20
(6,336)
26
(523)
33
7,149
79
Change to risk parameters – credit quality
—
115
—
(73)
—
(103)
—
(61)
Changes to models used for ECL calculation
—
(8)
—
29
—
1
—
22
Assets written off
—
—
—
—
(63)
63
(63)
63
Foreign exchange and others
(6,535)
(7)
(530)
10
(65)
15
(7,130)
18
At 31 Dec 2024
344,676
(58)
34,341
(130)
2,474
(285)
381,491
(473)
ECL income statement change for the period
290
(170)
(99)
21
Recoveries
7
Others
(1)
Total ECL income statement change for the
period
27
At 1 Jan 2023
317,666
(74)
40,048
(231)
2,230
(270)
359,944
(575)
Transfers of financial instruments:
(1,182)
(109)
421
138
761
(29)
—
—
– transfers from stage 1 to stage 2
(41,207)
28
41,207
(28)
—
—
—
—
– transfers from stage 2 to stage 1
40,164
(117)
(40,164)
117
—
—
—
—
– transfers to stage 3
(354)
1
(958)
100
1,312
(101)
—
—
– transfers from stage 3
215
(21)
336
(51)
(551)
72
—
—
Net remeasurement of ECL arising from transfer of
stage
—
72
—
(79)
—
(67)
—
(74)
Net new and further lending/repayments
15,447
(3)
(3,939)
22
(751)
322
10,757
341
Change to risk parameters – credit quality
—
16
—
(67)
—
(269)
—
(320)
Changes to models used for ECL calculation
—
(2)
—
28
—
—
—
26
Assets written off
—
—
—
—
(53)
53
(53)
53
Foreign exchange and others
8,833
(9)
1,983
(13)
71
(4)
10,887
(26)
At 31 Dec 2023
340,764
(109)
38,513
(202)
2,258
(264)
381,535
(575)
ECL income statement change for the period
83
(96)
(14)
(27)
Recoveries
10
Others
13
Total ECL income statement change for the period
(4)
HSBC Holdings plc Annual Report and Accounts 2024
189
Risk review
Credit cards – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan
commitments
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
153,292
(253)
6,547
(698)
450
(144)
160,289
(1,095)
Transfers of financial instruments:
796
(453)
(1,469)
717
673
(264)
—
—
– transfers from stage 1 to stage 2
(6,427)
129
6,427
(129)
—
—
—
—
– transfers from stage 2 to stage 1
7,255
(569)
(7,255)
569
—
—
—
—
– transfers to stage 3
(179)
2
(765)
327
944
(329)
—
—
– transfers from stage 3
147
(15)
124
(50)
(271)
65
—
—
Net remeasurement of ECL arising from transfer of
stage
—
280
—
(256)
—
(45)
—
(21)
Changes due to modifications not derecognised
—
—
—
—
(2)
—
(2)
—
Net new and further lending/repayments
9,604
18
(1,122)
127
(1)
194
8,481
339
Change to risk parameters – credit quality
—
79
—
(476)
—
(694)
—
(1,091)
Changes to models used for ECL calculation
—
22
—
(122)
—
1
—
(99)
Assets written off
—
—
—
—
(736)
736
(736)
736
Foreign exchange and others1
(7,380)
27
(196)
50
(41)
17
(7,617)
94
At 31 Dec 2024
156,312
(280)
3,760
(658)
343
(199)
160,415
(1,137)
ECL income statement change for the period
399
(727)
(544)
(872)
Recoveries
106
Others
(10)
Total ECL income statement change for the
period
(776)
1 Total includes $4.5bn of nominal amount related to derecognition of loan commitments and financial guarantees following the sale of our banking business in
Canada and our business in Argentina during 2024.
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
140,519
(244)
6,747
(777)
353
(160)
147,619
(1,181)
Transfers of financial instruments:
199
(292)
(848)
496
649
(204)
—
—
– transfers from stage 1 to stage 2
(7,855)
102
7,855
(102)
—
—
—
—
– transfers from stage 2 to stage 1
8,124
(391)
(8,124)
391
—
—
—
—
– transfers to stage 3
(82)
1
(621)
227
703
(228)
—
—
– transfers from stage 3
12
(4)
42
(20)
(54)
24
—
—
Net remeasurement of ECL arising from transfer of
stage
—
185
—
(301)
—
(5)
—
(121)
Net new and further lending/repayments
13,206
27
621
169
12
(41)
13,839
155
Change to risk parameters – credit quality
—
82
—
(281)
—
(301)
—
(500)
Changes to models used for ECL calculation
—
(9)
—
15
—
1
—
7
Assets written off
—
—
—
—
(571)
571
(571)
571
Foreign exchange and others
(632)
(2)
27
(19)
7
(5)
(598)
(26)
At 31 Dec 2023
153,292
(253)
6,547
(698)
450
(144)
160,289
(1,095)
ECL income statement change for the period
285
(398)
(346)
(459)
Recoveries
108
Others
(200)
Total ECL income statement change for the period
(551)
Risk review
190
HSBC Holdings plc Annual Report and Accounts 2024
Other personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers
including loan commitments and financial guarantees
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
156,767
(240)
5,895
(534)
1,152
(448)
163,814
(1,222)
Transfers of financial instruments:
742
(360)
(1,570)
528
828
(168)
—
—
– transfers from stage 1 to stage 2
(5,269)
94
5,269
(94)
—
—
—
—
– transfers from stage 2 to stage 1
6,181
(434)
(6,181)
434
—
—
—
—
– transfers to stage 3
(274)
1
(823)
268
1,097
(269)
—
—
– transfers from stage 3
104
(21)
165
(80)
(269)
101
—
—
Net remeasurement of ECL arising from transfer of
stage
—
302
—
(197)
—
(57)
—
48
Changes due to modifications not derecognised
—
—
—
—
(23)
—
(23)
—
Net new and further lending/repayments
6,177
(55)
(431)
125
(272)
243
5,474
313
Change to risk parameters – credit quality
—
57
—
(325)
—
(640)
—
(908)
Changes to models used for ECL calculation
—
15
—
(16)
—
(22)
—
(23)
Assets written off
—
—
—
—
(735)
735
(735)
735
Foreign exchange and others1,2
(8,023)
32
(385)
49
(121)
40
(8,529)
121
At 31 Dec 2024
155,663
(249)
3,509
(370)
829
(317)
160,001
(936)
ECL income statement change for the period
319
(413)
(476)
(570)
Recoveries
107
Others
(21)
Total ECL income statement change for the
period
(484)
1 Total includes $0.3bn of gross carrying loans and advances, which were classified to assets held for sale, and a corresponding allowance for ECL of $10m,
reflecting business disposals, as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’ on page 411.
2 Total includes $4.4bn of nominal amount related to derecognition of loan commitments and financial guarantees following the sale of our banking business in
Canada during 2024.
Non-credit impaired
Credit impaired
Stage 1
Stage 2
Stage 3
Total
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
Gross
carrying/
nominal
amount
Allowance
for ECL
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
145,136
(269)
5,768
(497)
1,556
(375)
152,460
(1,141)
Transfers of financial instruments:
(1,161)
(218)
466
453
695
(235)
—
—
– transfers from stage 1 to stage 2
(8,155)
140
8,155
(140)
—
—
—
—
– transfers from stage 2 to stage 1
7,019
(354)
(7,019)
354
—
—
—
—
– transfers to stage 3
(106)
1
(766)
287
872
(288)
—
—
– transfers from stage 3
81
(5)
96
(48)
(177)
53
—
—
Net remeasurement of ECL arising from transfer of
stage
—
306
—
(299)
—
(7)
—
—
Net new and further lending/repayments
5,758
(71)
(1,395)
159
(430)
(137)
3,933
(49)
Change to risk parameters – credit quality
—
6
—
(293)
—
(385)
—
(672)
Changes to models used for ECL calculation
—
(2)
—
(22)
—
6
—
(18)
Assets written off
—
—
—
—
(702)
702
(702)
702
Foreign exchange and others1
7,034
8
1,056
(35)
33
(17)
8,123
(44)
At 31 Dec 2023
156,767
(240)
5,895
(534)
1,152
(448)
163,814
(1,222)
ECL income statement change for the period
239
(455)
(523)
(739)
Recoveries
108
Others
195
Total ECL income statement change for the period
(436)
1 Total includes $7.2bn of gross carrying loans and advances and a corresponding allowance for ECL of $10m, due to the retention of certain balances previously
classified as assets held for sale of our retail banking operations in France. For further details, see Note 23 ‘Assets held for sale and liabilities of disposal groups
held for sale’ on page 411.
HSBC Holdings plc Annual Report and Accounts 2024
191
Risk review
Personal lending – credit risk profile by internal PD band for loans and advances to customers at amortised cost
Gross carrying amount
Allowance for ECL
PD range1 2
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
ECL
coverage
%
$m
$m
$m
$m
$m
$m
$m
$m
%
First lien residential
mortgages
324,703
34,177
2,450
361,330
(59)
(130)
(284)
(473)
0.1
– Band 1
0.000 to 0.250
234,451
1,820
—
236,271
(15)
(4)
—
(19)
—
– Band 2
0.251 to 0.500
64,340
11,816
—
76,156
(10)
(9)
—
(19)
—
– Band 3
0.501 to 1.500
22,005
14,631
—
36,636
(16)
(25)
—
(41)
0.1
– Band 4
1.501 to 5.000
3,668
3,990
—
7,658
(17)
(27)
—
(44)
0.6
– Band 5
5.001 to 20.000
117
1,178
—
1,295
—
(13)
—
(13)
1.0
– Band 6
20.001 to 99.999
122
742
—
864
(1)
(52)
—
(53)
6.1
– Band 7
100.000
—
—
2,450
2,450
—
—
(284)
(284)
11.6
Credit cards
21,611
2,991
313
24,915
(268)
(660)
(199)
(1,127)
4.5
– Band 1
0.000 to 0.250
10,051
1
—
10,052
(26)
—
—
(26)
0.3
– Band 2
0.251 to 0.500
2,340
4
—
2,344
(15)
(1)
—
(16)
0.7
– Band 3
0.501 to 1.500
5,113
23
—
5,136
(72)
(5)
—
(77)
1.5
– Band 4
1.501 to 5.000
3,847
1,013
—
4,860
(123)
(103)
—
(226)
4.7
– Band 5
5.001 to 20.000
260
1,526
—
1,786
(32)
(263)
—
(295)
16.5
– Band 6
20.001 to 99.999
—
424
—
424
—
(288)
—
(288)
67.9
– Band 7
100.000
—
—
313
313
—
—
(199)
(199)
63.6
Other personal lending
57,432
2,751
797
60,980
(243)
(368)
(313)
(924)
1.5
– Band 1
0.000 to 0.250
29,124
19
—
29,143
(30)
—
—
(30)
0.1
– Band 2
0.251 to 0.500
6,109
242
—
6,351
(9)
(1)
—
(10)
0.2
– Band 3
0.501 to 1.500
11,702
121
—
11,823
(37)
(3)
—
(40)
0.3
– Band 4
1.501 to 5.000
9,006
660
—
9,666
(95)
(25)
—
(120)
1.2
– Band 5
5.001 to 20.000
1,433
1,076
—
2,509
(70)
(111)
—
(181)
7.2
– Band 6
20.001 to 99.999
58
633
—
691
(2)
(228)
—
(230)
33.3
– Band 7
100.000
—
—
797
797
—
—
(313)
(313)
39.3
At 31 Dec 2024
403,746
39,919
3,560
447,225
(570)
(1,158)
(796)
(2,524)
0.6
First lien residential
mortgages
320,410
38,287
2,212
360,909
(102)
(200)
(269)
(571)
0.2
– Band 1
0.000 to 0.250
229,188
3,174
—
232,362
(16)
(14)
—
(30)
—
– Band 2
0.251 to 0.500
54,891
12,266
—
67,157
(11)
(17)
—
(28)
—
– Band 3
0.501 to 1.500
28,159
16,140
—
44,299
(22)
(49)
—
(71)
0.2
– Band 4
1.501 to 5.000
7,451
4,559
—
12,010
(52)
(30)
—
(82)
0.7
– Band 5
5.001 to 20.000
599
1,097
—
1,696
—
(11)
—
(11)
0.6
– Band 6
20.001 to 99.999
122
1,051
—
1,173
(1)
(79)
—
(80)
6.8
– Band 7
100.000
—
—
2,212
2,212
—
—
(269)
(269)
12.2
Credit cards
19,909
4,419
352
24,680
(236)
(697)
(203)
(1,136)
4.6
– Band 1
0.000 to 0.250
9,490
1
—
9,491
(32)
—
—
(32)
0.3
– Band 2
0.251 to 0.500
2,481
6
—
2,487
(21)
(1)
—
(22)
0.9
– Band 3
0.501 to 1.500
4,799
294
—
5,093
(56)
(17)
—
(73)
1.4
– Band 4
1.501 to 5.000
2,787
2,291
—
5,078
(93)
(158)
—
(251)
4.9
– Band 5
5.001 to 20.000
352
1,374
—
1,726
(34)
(258)
—
(292)
16.9
– Band 6
20.001 to 99.999
—
453
—
453
—
(263)
—
(263)
58.1
– Band 7
100
—
—
352
352
—
—
(203)
(203)
57.7
Other personal lending
56,215
4,777
941
61,933
(241)
(537)
(382)
(1,160)
1.9
– Band 1
0.000 to 0.250
28,115
30
—
28,145
(34)
(1)
—
(35)
0.1
– Band 2
0.251 to 0.500
6,634
286
—
6,920
(11)
(1)
—
(12)
0.2
– Band 3
0.501 to 1.500
12,935
329
—
13,264
(61)
(9)
—
(70)
0.5
– Band 4
1.501 to 5.000
7,215
1,447
—
8,662
(79)
(46)
—
(125)
1.4
– Band 5
5.001 to 20.000
1,137
2,005
—
3,142
(55)
(199)
—
(254)
8.1
– Band 6
20.001 to 99.999
179
680
—
859
(1)
(281)
—
(282)
32.8
– Band 7
100.000
—
—
941
941
—
—
(382)
(382)
40.6
At 31 Dec 2023
396,534
47,483
3,505
447,522
(579)
(1,434)
(854)
(2,867)
0.6
1 12-month point in time adjusted for multiple economic scenarios.
2 PD bands do not consider the impact of any management judgemental adjustments on stage or allowances for ECL including the impact of new models not yet
formally implemented. For a list of management judgemental adjustments see page 155.
Risk review
192
HSBC Holdings plc Annual Report and Accounts 2024
Personal lending – credit risk profile by internal PD band for loan and other credit-related commitments and financial guarantees
Nominal amount
Allowance for ECL
PD range1
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
ECL
coverage
%
$m
$m
$m
$m
$m
$m
$m
$m
%
Loan and other credit-
related commitments
251,489
1,680
86
253,255
(17)
—
(5)
(22)
—
– Band 1
0.000 to 0.250
199,314
65
—
199,379
(9)
—
—
(9)
—
– Band 2
0.251 to 0.500
14,409
178
—
14,587
(2)
—
—
(2)
—
– Band 3
0.501 to 1.500
28,081
389
—
28,470
(1)
—
—
(1)
—
– Band 4
1.501 to 5.000
8,431
463
—
8,894
(3)
—
—
(3)
—
– Band 5
5.001 to 20.000
800
484
—
1,284
(2)
—
—
(2)
0.2
– Band 6
20.001 to 99.999
454
101
—
555
—
—
—
—
—
– Band 7
100.000
—
—
86
86
—
—
(5)
(5)
5.8
Financial guarantees
1,416
11
—
1,427
—
—
—
—
—
– Band 1
0.000 to 0.250
743
—
—
743
—
—
—
—
—
– Band 2
0.251 to 0.500
389
—
—
389
—
—
—
—
—
– Band 3
0.501 to 1.500
55
—
—
55
—
—
—
—
—
– Band 4
1.501 to 5.000
220
—
—
220
—
—
—
—
—
– Band 5
5.001 to 20.000
3
11
—
14
—
—
—
—
—
– Band 6
20.001 to 99.999
6
—
—
6
—
—
—
—
—
– Band 7
100.000
—
—
—
—
—
—
—
—
—
At 31 Dec 2024
252,905
1,691
86
254,682
(17)
—
(5)
(22)
—
Loan and other credit-
related commitments
253,183
3,459
355
256,997
(23)
—
(2)
(25)
—
– Band 1
0.000 to 0.250
196,201
114
—
196,315
(15)
—
—
(15)
—
– Band 2
0.251 to 0.500
17,861
63
—
17,924
(1)
—
—
(1)
—
– Band 3
0.501 to 1.500
29,623
1,262
—
30,885
(1)
—
—
(1)
—
– Band 4
1.501 to 5.000
8,550
1,334
—
9,884
(4)
—
—
(4)
—
– Band 5
5.001 to 20.000
508
564
—
1,072
(2)
—
—
(2)
0.2
– Band 6
20.001 to 99.999
440
122
—
562
—
—
—
—
—
– Band 7
100.000
—
—
355
355
—
—
(2)
(2)
0.6
Financial guarantees
1,106
13
—
1,119
—
—
—
—
—
– Band 1
0.000 to 0.250
348
—
—
348
—
—
—
—
—
– Band 2
0.251 to 0.500
386
—
—
386
—
—
—
—
—
– Band 3
0.501 to 1.500
359
1
—
360
—
—
—
—
—
– Band 4
1.501 to 5.000
3
—
—
3
—
—
—
—
—
– Band 5
5.001 to 20.000
2
12
—
14
—
—
—
—
—
– Band 6
20.001 to 99.999
8
—
—
8
—
—
—
—
—
– Band 7
100.000
—
—
—
—
—
—
—
—
—
At 31 Dec 2023
254,289
3,472
355
258,116
(23)
—
(2)
(25)
—
1 12-month point in time adjusted for multiple economic scenarios.
HSBC Holdings plc Annual Report and Accounts 2024
193
Risk review
Collateral on loans and advances
(Audited)
The following table provides a quantification of the value of fixed
charges we hold over specific assets where we have a history
of enforcing, and are able to enforce, collateral in satisfying a debt in
the event of the borrower failing to meet its contractual obligations,
and where the collateral is cash or can be realised by sale in an
established market. The collateral valuation excludes any adjustments
for obtaining and selling the collateral and, in particular, loans shown
as not collateralised or partially collateralised may also benefit from
other forms of credit mitigants.
Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage
(Audited)
Gross carrying/nominal amount
ECL coverage
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$m
$m
$m
$m
%
%
%
%
Fully collateralised by LTV ratio
332,641
34,203
2,371
369,215
—
0.4
10.0
0.1
– less than 50%
141,331
18,076
1,238
160,645
—
0.2
7.6
0.1
– 51% to 70%
111,963
11,507
698
124,168
—
0.4
11.2
0.1
– 71% to 80%
39,374
3,040
242
42,656
—
0.7
13.1
0.1
– 81% to 90%
25,514
1,264
131
26,909
—
0.9
15.0
0.1
– 91% to 100%
14,459
316
62
14,837
—
1.8
22.4
0.1
Partially collateralised (A): LTV > 100%
12,031
139
103
12,273
—
3.2
46.2
0.4
– collateral value on A
11,274
126
70
11,470
Total at 31 Dec 2024
344,672
34,342
2,474
381,488
—
0.4
11.5
0.1
of which: UK
Fully collateralised by LTV ratio
151,264
30,574
747
182,585
—
0.2
8.5
0.1
– less than 50%
62,753
16,689
445
79,887
—
0.1
6.9
0.1
– 51% to 70%
50,374
10,456
206
61,036
—
0.2
9.7
0.1
– 71% to 80%
20,552
2,423
64
23,039
—
0.4
12.1
0.1
– 81% to 90%
15,965
939
23
16,927
—
0.6
13.0
0.1
– 91% to 100%
1,620
67
9
1,696
—
0.7
16.7
0.1
Partially collateralised (B): LTV > 100%
146
15
5
166
—
1.0
27.7
0.9
– collateral value on B
109
12
4
125
Total UK at 31 Dec 2024
151,410
30,589
752
182,751
—
0.2
8.6
0.1
of which: Hong Kong
Fully collateralised
95,751
756
138
96,645
—
—
1.3
—
– less than 50%
38,894
372
79
39,345
—
—
0.4
—
– 51% to 70%
30,088
227
31
30,346
—
—
0.4
—
– 71% to 80%
6,783
47
11
6,841
—
—
5.1
—
– 81% to 90%
7,602
42
9
7,653
—
0.2
1.1
—
– 91% to 100%
12,384
68
8
12,460
—
0.1
8.8
—
Partially collateralised (C): LTV > 100%
11,744
103
14
11,861
—
0.2
19.1
—
– collateral value on C
11,034
96
12
11,142
Total Hong Kong at 31 Dec 2024
107,495
859
152
108,506
—
0.1
2.9
—
Fully collateralised by LTV ratio
331,279
38,378
2,129
371,786
—
0.5
10.1
0.1
– less than 50%
140,992
19,715
1,165
161,872
—
0.3
7.1
0.1
– 51% to 70%
113,043
12,636
568
126,247
—
0.6
10.9
0.1
– 71% to 80%
37,866
4,111
229
42,206
—
0.9
15.2
0.2
– 81% to 90%
23,278
1,499
109
24,886
—
1.2
17.3
0.2
– 91% to 100%
16,100
417
58
16,575
—
1.6
28.9
0.2
Partially collateralised (A): LTV > 100%
9,529
136
129
9,794
—
3.4
42.0
0.6
– collateral value on A
8,968
123
104
9,195
Total at 31 Dec 2023
340,808
38,514
2,258
381,580
—
0.5
11.9
0.1
of which: UK
Fully collateralised by LTV ratio
146,739
33,597
759
181,095
—
0.3
9.7
0.1
– less than 50%
60,403
17,629
458
78,490
—
0.2
7.9
0.1
– 51% to 70%
49,945
11,248
207
61,400
—
0.4
9.4
0.1
– 71% to 80%
20,293
3,275
61
23,629
—
0.6
13.4
0.1
– 81% to 90%
12,946
1,161
18
14,125
—
0.8
17.5
0.1
– 91% to 100%
3,152
284
15
3,451
—
1.0
41.6
0.3
Partially collateralised (B): LTV > 100%
317
19
27
363
0.1
1.7
17.5
1.4
– collateral value on B
244
15
22
281
Total UK at 31 Dec 2023
147,056
33,616
786
181,458
—
0.3
9.9
0.1
of which: Hong Kong
Fully collateralised by LTV ratio
97,414
1,354
93
98,861
—
—
0.3
—
– less than 50%
41,903
831
66
42,800
—
—
0.1
—
– 51% to 70%
29,762
330
15
30,107
—
—
0.5
—
– 71% to 80%
5,260
48
2
5,310
—
0.1
0.4
—
– 81% to 90%
8,161
61
4
8,226
—
0.1
1.9
—
– 91% to 100%
12,328
84
6
12,418
—
0.3
1.8
—
Partially collateralised (C): LTV > 100%
8,973
86
4
9,063
—
0.9
7.8
—
– collateral value on C
8,535
81
4
8,620
Total Hong Kong at 31 Dec 2023
106,387
1,440
97
107,924
—
0.1
0.7
—
Risk review
194
HSBC Holdings plc Annual Report and Accounts 2024
Supplementary information
Wholesale lending – loans and advances to customers at amortised cost by country/territory
Gross carrying amount
Allowance for ECL
Corporate
and
commercial
of which: real
estate and
construction1
Non-bank
financial
institutions
Total
Corporate
and
commercial
of which: real
estate and
construction1
Non-bank
financial
institutions
Total
$m
$m
$m
$m
$m
$m
$m
$m
UK
102,245
17,540
21,771
124,016
(1,412)
(289)
(234)
(1,646)
– of which: HSBC UK Bank
plc (ring-fenced bank)
79,833
16,722
10,268
90,101
(1,146)
(260)
(54)
(1,200)
– of which: HSBC Bank plc
(non-ring-fenced bank)
22,412
818
11,503
33,915
(266)
(29)
(180)
(446)
– of which: Other trading
entities
—
—
—
—
—
—
—
—
France
25,950
3,986
7,222
33,172
(257)
(42)
(9)
(266)
Germany
6,256
264
421
6,677
(153)
—
—
(153)
Hong Kong
118,332
42,042
17,846
136,178
(2,922)
(1,494)
(112)
(3,034)
Australia
12,532
4,509
2,931
15,463
(30)
(3)
—
(30)
India
12,540
2,581
6,425
18,965
(45)
(5)
(6)
(51)
Indonesia
3,132
184
356
3,488
(109)
(44)
—
(109)
Mainland China
29,930
5,326
8,044
37,974
(222)
(117)
(6)
(228)
Malaysia
5,773
1,067
278
6,051
(40)
(10)
—
(40)
Singapore
17,267
3,266
1,830
19,097
(234)
(80)
(1)
(235)
Taiwan
3,848
60
—
3,848
—
—
—
—
Egypt
777
32
51
828
(115)
(20)
—
(115)
UAE
13,278
1,809
1,589
14,867
(408)
(258)
—
(408)
US
24,084
4,028
10,348
34,432
(246)
(106)
(47)
(293)
Mexico
10,318
525
1,407
11,725
(201)
(9)
(11)
(212)
Other
24,422
2,844
1,945
26,367
(361)
(121)
(10)
(371)
At 31 Dec 2024
410,684
90,063
82,464
493,148
(6,755)
(2,598)
(436)
(7,191)
UK
105,536
17,852
18,343
123,879
(1,451)
(246)
(231)
(1,682)
– of which: HSBC UK Bank
plc (ring-fenced bank)
80,248
17,060
9,372
89,620
(1,212)
(212)
(66)
(1,278)
– of which: HSBC Bank plc
(non-ring-fenced bank)
24,791
792
8,971
33,762
(240)
(34)
(165)
(405)
– of which: Other trading
entities
497
—
—
497
1
—
—
1
France
27,017
4,796
5,701
32,718
(636)
(53)
(18)
(654)
Germany
6,667
240
632
7,299
(74)
—
—
(74)
Hong Kong
125,340
48,594
19,319
144,659
(3,099)
(2,147)
(57)
(3,156)
Australia
12,685
4,443
1,564
14,249
(49)
(1)
—
(49)
India
10,856
2,083
5,315
16,171
(47)
(7)
(4)
(51)
Indonesia
3,100
162
411
3,511
(136)
(58)
—
(136)
Mainland China
28,655
6,709
7,775
36,430
(313)
(212)
(11)
(324)
Malaysia
5,797
1,137
258
6,055
(69)
(15)
—
(69)
Singapore
15,845
3,458
948
16,793
(321)
(40)
(1)
(322)
Taiwan
4,512
30
81
4,593
—
—
—
—
Egypt
899
45
86
985
(128)
(10)
(1)
(129)
UAE
13,740
1,979
823
14,563
(543)
(296)
—
(543)
US
26,993
5,143
9,155
36,148
(239)
(101)
(58)
(297)
Mexico
11,326
865
1,349
12,675
(320)
(19)
(5)
(325)
Other
28,687
3,919
2,672
31,359
(378)
(81)
(18)
(396)
At 31 Dec 2023
427,655
101,455
74,432
502,087
(7,803)
(3,286)
(404)
(8,207)
1 Real estate lending within this disclosure corresponds solely to the industry of the borrower. Commercial real estate on page 177 includes borrowers in multiple
industries investing in income-producing assets and, to a lesser extent, their construction and development.
HSBC Holdings plc Annual Report and Accounts 2024
195
Risk review
Personal lending – loans and advances to customers at amortised cost by country/territory
Gross carrying amount
Allowance for ECL
First lien
residential
mortgages
Other
personal
of which:
credit
cards
Total
First lien
residential
mortgages
Other
personal
of which:
credit
cards
Total
$m
$m
$m
$m
$m
$m
$m
$m
UK
170,809
21,426
8,016
192,235
(139)
(540)
(284)
(679)
– of which: HSBC UK Bank plc (ring-fenced bank)
166,709
18,029
7,933
184,738
(132)
(534)
(283)
(666)
– of which: HSBC Bank plc (non-ring-fenced
bank)
4,100
3,397
83
7,497
(7)
(6)
(1)
(13)
– of which: Other trading entities
—
—
—
—
—
—
—
—
France1
377
6,601
1
6,978
(12)
(12)
—
(24)
Germany
—
—
—
—
—
—
—
—
Hong Kong
107,759
31,676
10,165
139,435
(5)
(421)
(291)
(426)
Australia
22,154
407
372
22,561
(7)
(9)
(8)
(16)
India
1,984
865
265
2,849
(3)
(18)
(14)
(21)
Indonesia
46
323
142
369
(3)
(11)
(6)
(14)
Mainland China
6,087
771
227
6,858
(12)
(42)
(33)
(54)
Malaysia
3,252
1,198
938
4,450
(23)
(62)
(36)
(85)
Singapore
5,802
6,653
571
12,455
—
(56)
(28)
(56)
Taiwan
5,788
1,424
340
7,212
—
(15)
(4)
(15)
Egypt
—
321
89
321
—
(1)
—
(1)
UAE
2,082
1,338
543
3,420
(3)
(55)
(31)
(58)
US
21,021
653
195
21,674
(12)
(16)
(14)
(28)
Mexico
7,488
5,320
2,242
12,808
(167)
(719)
(339)
(886)
Other
6,681
6,919
809
13,600
(87)
(74)
(39)
(161)
At 31 Dec 2024
361,330
85,895
24,915
447,225
(473)
(2,051)
(1,127)
(2,524)
UK
168,469
19,503
8,056
187,972
(209)
(697)
(339)
(906)
– of which: HSBC UK Bank plc (ring-fenced bank)
164,878
17,884
7,975
182,762
(205)
(692)
(336)
(897)
– of which: HSBC Bank plc (non-ring-fenced
bank)
3,226
141
81
3,367
(3)
(5)
(2)
(8)
– of which: Other trading entities
365
1,478
—
1,843
(1)
—
(1)
(1)
France1
436
7,476
1
7,912
(13)
(8)
—
(21)
Germany
—
165
—
165
—
—
—
—
Hong Kong
107,182
31,248
9,663
138,430
(2)
(417)
(286)
(419)
Australia
23,001
446
396
23,447
(5)
(19)
(18)
(24)
India
1,537
680
185
2,217
(4)
(16)
(12)
(20)
Indonesia
58
288
137
346
(2)
(11)
(7)
(13)
Mainland China
7,503
754
287
8,257
(3)
(49)
(39)
(52)
Malaysia
2,313
2,115
882
4,428
(23)
(87)
(36)
(110)
Singapore
8,151
5,589
521
13,740
—
(38)
(17)
(38)
Taiwan
5,607
1,370
309
6,977
—
(17)
(4)
(17)
Egypt
—
341
89
341
—
(1)
(1)
(1)
UAE
1,957
1,325
440
3,282
(10)
(62)
(24)
(72)
US
18,340
673
199
19,013
(15)
(19)
(14)
(34)
Mexico
8,778
6,215
2,465
14,993
(176)
(757)
(297)
(933)
Other
7,577
8,425
1,050
16,002
(109)
(98)
(42)
(207)
At 31 Dec 2023
360,909
86,613
24,680
447,522
(571)
(2,296)
(1,136)
(2,867)
1 Included in other personal lending at 31 December 2024 is $6,562m (31 December 2023: $7,424m) guaranteed by Crédit Logement.
Risk review
196
HSBC Holdings plc Annual Report and Accounts 2024
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied – by global business
Gross carrying/nominal amount
Allowance for ECL
Stage 1
Stage 2
Stage 3
POCI
Total Stage 1 Stage 2 Stage 3
POCI
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
WPB1
569,548
39,984
3,717
—
613,249
(596) (1,166)
(811)
—
(2,573)
CMB
436,536
44,223 16,912
48
497,719
(446) (1,020) (4,713)
(29)
(6,208)
GBM
674,730
10,676
2,116
42
687,564
(106)
(331)
(524)
(22)
(983)
Corporate Centre1
72,079
369
25
—
72,473
(3)
(36)
(17)
—
(56)
Total gross carrying amount on-balance sheet at
31 Dec 2024
1,752,893
95,252 22,770
90 1,871,005 (1,151) (2,553) (6,065)
(51)
(9,820)
WPB
252,695
1,674
84
—
254,453
(17)
—
(9)
—
(26)
CMB
132,703
13,879
896
—
147,478
(97)
(92)
(86)
—
(275)
GBM
226,995
7,019
226
3
234,243
(31)
(34)
(11)
—
(76)
Corporate Centre
191
—
—
—
191
—
—
—
—
—
Total nominal amount off-balance sheet at
31 Dec 2024
612,584
22,572
1,206
3
636,365
(145)
(126)
(106)
—
(377)
WPB
142,388
339
—
—
142,727
(14)
(2)
—
—
(16)
CMB
103,406
323
—
—
103,729
(7)
(2)
—
—
(9)
GBM
97,422
149
—
—
97,571
(9)
—
—
—
(9)
Corporate Centre
2,028
69
—
—
2,097
(1)
(19)
—
—
(20)
Debt instruments measured at FVOCI at
31 Dec 2024
345,244
880
—
—
346,124
(31)
(23)
—
—
(54)
WPB
630,661
54,069
4,233
— 688,963
(621)
(1,551)
(977)
— (3,149)
CMB
464,893
66,688 12,698
49 544,328
(508)
(1,336)
(4,995)
(23) (6,862)
GBM
696,377
14,247
3,002
32 713,658
(119)
(199)
(1,161)
(7) (1,486)
Corporate Centre
75,805
37
6
—
75,848
(1)
(13)
—
—
(14)
Total gross carrying amount on-balance sheet at
31 Dec 2023
1,867,736 135,041 19,939
81 2,022,797
(1,249)
(3,099)
(7,133)
(30) (11,511)
WPB
253,333
3,811
333
— 257,477
(22)
—
(2)
—
(24)
CMB
142,206
16,238
877
— 159,321
(100)
(101)
(102)
—
(303)
GBM
250,007
10,752
314
4 261,077
(38)
(34)
(7)
—
(79)
Corporate Centre
149
—
—
—
149
—
—
—
—
—
Total nominal amount off-balance sheet at
31 Dec 2023
645,695
30,801
1,524
4 678,024
(160)
(135)
(111)
—
(406)
WPB
124,747
406
—
— 125,153
(14)
(17)
—
—
(31)
CMB
86,021
405
—
—
86,426
(9)
(18)
—
—
(27)
GBM
88,229
173
1
—
88,403
(13)
(6)
(1)
—
(20)
Corporate Centre
2,201
165
—
—
2,366
(1)
(18)
—
—
(19)
Debt instruments measured at FVOCI at
31 Dec 2023
301,198
1,149
1
— 302,348
(37)
(59)
(1)
—
(97)
1 With effect from 1 January 2024, following the sale of our retail banking business in France, we have prospectively reclassified the $7.4bn portfolio of retained
loans from WPB to Corporate Centre.
HSBC Holdings plc Annual Report and Accounts 2024
197
Risk review
Loans and advances to customers and banks – other supplementary information
Gross
carrying
amount
of which:
stage 3
and POCI
Allowance
for ECL
of which:
stage 3
and POCI
Change in
ECL
Write-offs
Recoveries
$m
$m
$m
$m
$m
$m
$m
First lien residential mortgages
361,330
2,450
(473)
(284)
33
(63)
7
– second lien residential mortgages
395
19
(2)
(2)
6
—
1
– guaranteed loans in respect of residential property
6,698
20
(9)
(5)
3
(7)
—
– other personal lending which is secured
31,180
138
(31)
(15)
5
(3)
—
– credit cards
24,915
313
(1,127)
(199)
(804)
(736)
106
– other personal lending which is unsecured
20,660
598
(838)
(279)
(484)
(699)
103
– motor vehicle finance
2,047
22
(44)
(12)
(38)
(26)
3
Other personal lending
85,895
1,110
(2,051)
(512)
(1,312)
(1,471)
213
Personal lending
447,225
3,560
(2,524)
(796)
(1,279)
(1,534)
220
– agriculture, forestry and fishing
7,033
282
(94)
(46)
4
(10)
1
– mining and quarrying
7,592
318
(45)
(32)
29
(26)
—
– manufacturing
82,724
1,487
(893)
(638)
(170)
(403)
3
– electricity, gas, steam and air-conditioning supply
16,457
209
(122)
(85)
—
—
—
– water supply, sewerage, waste management and
remediation
2,961
43
(24)
(16)
2
(40)
—
– real estate and construction
90,063
8,949
(2,598)
(1,842)
(812)
(1,554)
12
– wholesale and retail trade, repair of motor vehicles and
motorcycles
77,830
2,728
(1,372)
(1,188)
(369)
(337)
8
– transportation and storage
22,643
417
(321)
(232)
(104)
(20)
1
– accommodation and food
14,734
1,610
(299)
(214)
(81)
(27)
—
– publishing, audiovisual and broadcasting
19,826
229
(158)
(61)
(79)
(75)
2
– professional, scientific and technical activities
26,128
648
(266)
(188)
(132)
(174)
1
– administrative and support services
20,117
739
(320)
(254)
(39)
(88)
1
– public administration and defence, compulsory social
security
64
—
—
—
—
—
—
– education
1,596
43
(27)
(16)
(16)
(3)
—
– health and care
4,030
184
(51)
(25)
(3)
(12)
1
– arts, entertainment and recreation
2,066
78
(35)
(26)
(19)
(22)
—
– other services
7,288
327
(110)
(66)
(82)
(115)
10
– activities of households
589
—
—
—
—
—
—
– extra-territorial organisations and bodies activities
118
—
—
—
—
—
—
– government
6,793
175
(7)
(5)
6
—
—
– asset-backed securities
32
—
(13)
—
1
—
—
Corporate and commercial
410,684
18,466
(6,755)
(4,934)
(1,864)
(2,906)
40
Non-bank financial institutions
82,464
679
(436)
(361)
(59)
(19)
—
Wholesale lending
493,148
19,145
(7,191)
(5,295)
(1,923)
(2,925)
40
Loans and advances to customers
940,373
22,705
(9,715)
(6,091)
(3,202)
(4,459)
260
Loans and advances to banks
102,052
2
(13)
(2)
(1)
—
—
At 31 Dec 2024
1,042,425
22,707
(9,728)
(6,093)
(3,203)
(4,459)
260
Risk review
198
HSBC Holdings plc Annual Report and Accounts 2024
Loans and advances to customers and banks – other supplementary information (continued)
Gross
carrying
amount
of which:
stage 3 and
POCI
Allowance
for ECL
of which:
stage 3 and
POCI
Change in
ECL
Write-offs
Recoveries
$m
$m
$m
$m
$m
$m
$m
First lien residential mortgages
360,909
2,212
(571)
(269)
(10)
(53)
10
– second lien residential mortgages
396
21
(8)
(5)
(1)
(1)
2
– guaranteed loans in respect of residential property
8,593
90
(20)
(14)
2
(8)
2
– other personal lending which is secured
29,481
157
(42)
(24)
8
(2)
2
– credit cards
24,680
352
(1,136)
(203)
(577)
(571)
108
– other personal lending which is unsecured
21,251
659
(1,048)
(331)
(380)
(663)
99
– motor vehicle finance
2,212
14
(42)
(8)
(61)
(28)
3
Other personal lending
86,613
1,293
(2,296)
(585)
(1,009)
(1,273)
216
Personal lending
447,522
3,505
(2,867)
(854)
(1,019)
(1,326)
226
– agriculture, forestry and fishing
7,181
312
(130)
(64)
(21)
(9)
—
– mining and quarrying
7,223
325
(101)
(83)
27
(49)
—
– manufacturing
85,333
1,899
(1,143)
(860)
(355)
(273)
11
– electricity, gas, steam and air-conditioning supply
14,355
255
(119)
(88)
(26)
(10)
—
– water supply, sewerage, waste management and
remediation
3,262
102
(63)
(51)
(44)
(2)
—
– real estate and construction
101,455
5,883
(3,286)
(2,561)
(1,358)
(1,191)
6
– wholesale and retail trade, repair of motor vehicles and
motorcycles
79,121
2,362
(1,341)
(1,134)
(124)
(447)
12
– transportation and storage
21,456
445
(230)
(160)
(87)
(42)
—
– accommodation and food
15,874
1,058
(257)
(112)
(33)
(26)
—
– publishing, audiovisual and broadcasting
19,731
210
(173)
(50)
(106)
(73)
—
– professional, scientific and technical activities
26,753
740
(401)
(306)
(262)
(110)
1
– administrative and support services
22,203
597
(268)
(174)
39
(137)
—
– public administration and defence, compulsory social
security
1,042
—
—
—
—
—
—
– education
1,460
46
(15)
(4)
(1)
(22)
—
– health and care
4,236
183
(56)
(26)
40
(7)
—
– arts, entertainment and recreation
1,961
99
(42)
(31)
15
(8)
—
– other services
8,355
318
(153)
(90)
22
(181)
12
– activities of households
694
—
—
—
—
—
—
– extra-territorial organisations and bodies activities
101
—
—
—
—
—
—
– government
5,827
205
(12)
(10)
(15)
—
—
– asset-backed securities
32
—
(13)
—
—
—
—
Corporate and commercial
427,655
15,039
(7,803)
(5,804)
(2,289)
(2,587)
42
Non-bank financial institutions
74,432
810
(404)
(322)
(168)
(9)
—
Wholesale lending
502,087
15,849
(8,207)
(6,126)
(2,457)
(2,596)
42
Loans and advances to customers
949,609
19,354
(11,074)
(6,980)
(3,476)
(3,922)
268
Loans and advances to banks
112,917
2
(15)
(2)
53
—
—
At 31 Dec 2023
1,062,526
19,356
(11,089)
(6,982)
(3,423)
(3,922)
268
HSBC Holdings
(Audited)
Credit risk in HSBC Holdings primarily arises from transactions with
Group subsidiaries.
In HSBC Holdings, the maximum exposure to credit risk arises from
two components:
–
financial assets on the balance sheet, where maximum exposure
equals the carrying amount (see page 350); and
–
financial guarantees and other guarantees, where the maximum
exposure is the maximum that we would have to pay if the
guarantees were called upon (see Note 33).
In the case of our derivative asset balances (see page 350), there is a
legally enforceable right of offset in the event of counterparty default
and where, as a result, there is a net exposure for credit risk
purposes. However, as there is no intention to settle these balances
on a net basis under normal circumstances, they do not qualify for net
presentation for accounting purposes. These offsets also include
collateral received in cash and other financial assets.
The total offset relating to our derivative asset balances was $3.0bn at
31 December 2024 (2023: $3.0bn).
The credit quality of loans and advances and financial investments,
both of which consist of intra-Group lending and US Treasury bills and
bonds, is assessed as ‘strong’, with 100% of the exposure being
neither past due nor impaired (2023: 100%). For further details of
credit quality classification, see page 140.
HSBC Holdings plc Annual Report and Accounts 2024
199
Risk review
Treasury risk
Contents
200
Overview
200
Treasury risk management
202
Other Group risks
204
Capital risk in 2024
207
Liquidity and funding risk in 2024
211
Structural foreign exchange risk in 2024
212
Interest rate risk in the banking book in 2024
Overview
Treasury risk is the risk of having insufficient capital, liquidity or
funding resources to meet financial obligations and satisfy regulatory
requirements, including the risk of adverse impact on earnings or
capital due to structural and transactional foreign exchange
exposures, as well as changes in market interest rates, together with
pension and insurance risk.
Treasury risk arises from changes to the respective resources and risk
profiles driven by customer behaviour, management decisions or the
external environment.
Approach and policy
(Audited)
Our objective in the management of treasury risk is to maintain
appropriate levels of capital, liquidity, funding, foreign exchange and
market risk to support our business strategy, and meet our regulatory
and stress testing-related requirements.
Our approach to treasury management is driven by our strategic and
organisational requirements, and considers the regulatory, economic
and commercial environment. We aim to maintain a strong capital and
liquidity base to support the risks inherent in our business and invest
in accordance with our strategy, meeting both consolidated and local
regulatory requirements at all times.
Our policy is underpinned by our risk management framework. The
risk management framework incorporates a number of measures
aligned to our assessment of risks for both internal and regulatory
purposes. These risks include credit, market, operational, pensions,
structural and transactional foreign exchange risk, and interest rate
risk in the banking book.
For further details, refer to our Pillar 3 Disclosures at 31 December 2024.
Treasury risk management
Key developments in 2024
–
The Group continues to benefit from a healthy capital, liquidity and
funding position.
–
The Board approved a fourth interim dividend for full year 2023,
paid in April 2024. For the full year 2024, the Board approved three
interim dividends, which were paid in June, September and
December 2024. A fourth interim dividend has also been
announced with these results. We announced a total of $11bn of
share buy-backs during 2024.
–
On 1 January 2024, HSBC Continental Europe completed the sale
of its retail banking operations in France.
–
On 28 March 2024, HSBC completed the sale of HSBC Bank
Canada to the Royal Bank of Canada. The associated gain on sale
of $4.8bn, including the recycling of related reserves, added
approximately 0.8 percentage points to our CET1 ratio in 1Q24.
The Board approved a special dividend of $0.21 per share, paid in
June 2024 alongside the first interim dividend.
–
On 6 December 2024, HSBC completed the sale of HSBC
Argentina to Grupo Financiero Galicia recognising a loss on
disposal of $1bn. In addition, $5.2bn of FX and other reserve
losses were recycled to the income statement on completion. The
sale had an immaterial capital impact.
–
The Bank continues its delivery efforts against regulatory
commitments, including enhancements to regulatory reporting and
the implementation of prudential policy changes across the
jurisdictions in which we operate. We continue to assess the
impact of Basel 3.1, following the PRA announcement to delay the
implementation until 1 January 2027, and expect a modest benefit
to our CET1 ratio.
–
We have made significant progress in improving our recovery and
resolution capabilities in line with the Group’s preferred resolution
strategy and regulatory expectations, including the Bank of
England’s (‘BoE’) Resolvability Assessment Framework (‘RAF’).
–
We further stabilised our banking net interest income through
increasing both the size and duration of our structural hedge.
For quantitative disclosures on capital ratios, own funds and risk-weighted
assets (‘RWAs’), see pages 204 to 205. For quantitative disclosures on liquidity
and funding metrics, see pages 208 to 209. For quantitative disclosures on
interest rate risk in the banking book, see pages 212 to 214.
Governance and structure
The Global Head of Traded and Treasury Risk Management and Risk
Analytics is the accountable risk steward for all treasury risks. The
Group Treasurer is the risk owner for all treasury risks, with the
exception of pension risk and insurance risk. The Group Treasurer co-
owns pension risk with the Group Head of Performance and Reward.
Insurance risk is owned by the Chief Executive Officer for Global
Insurance.
Capital risk, liquidity risk, interest rate risk in the banking book,
structural foreign exchange risk and transactional foreign exchange
risk are the responsibility of the Group Operating Committee and the
Group Risk Committee (‘GRC’). Global Treasury actively manages
these risks on an ongoing basis, supported by the Holdings Asset and
Liability Management Committee (‘ALCO’) and local ALCOs, overseen
by Treasury Risk Management and Risk Management Meetings.
Pension risk is overseen by a network of local and regional pension
risk management meetings. The Global Pensions Financial Risk
Management Meeting provides oversight of all pension plans
sponsored by HSBC globally and is chaired by the accountable risk
steward. Insurance risk is overseen by the Global Insurance Risk
Management Meeting, chaired by the Chief Risk and Compliance
Officer for Global Insurance.
Capital, liquidity and funding risk
management processes
Assessment and risk appetite
Our capital management approach is underpinned by a Global Capital
Risk policy and supporting frameworks for recovery and resolution
planning and stress testing. The policy sets out our approach to
determining key capital risk appetites including CET1, total capital,
minimum requirements for own funds and eligible liabilities (‘MREL’),
the leverage ratio and double leverage. Our internal capital adequacy
assessment process (‘ICAAP’) is an assessment of the Group’s
capital position, outlining both regulatory and internal capital resources
and requirements resulting from HSBC’s business model, strategy,
risk profile and management, performance and planning, risks to
capital, and the implications of stress testing. Our assessment of
capital adequacy is driven by an assessment of risks. These risks
include credit, market, operational, pensions, insurance, structural
foreign exchange, interest rate risk in the banking book and group
risk. Climate risk is also considered as part of the ICAAP, and we are
continuing to develop our approach. The Group’s ICAAP supports the
Risk review
200
HSBC Holdings plc Annual Report and Accounts 2024
determination of the consolidated capital risk appetite and target
ratios, as well as enables the assessment and determination of capital
requirements by regulators. Subsidiaries prepare ICAAPs in line with
global guidance, while considering their local regulatory regimes to
determine their own risk appetites and ratios.
HSBC Holdings is the provider of MREL to its subsidiaries, including
equity and non-equity capital. These investments are funded by HSBC
Holdings’ own equity capital and MREL-eligible debt. MREL includes
own funds and liabilities that can be written down or converted into
capital resources in order to absorb losses or recapitalise a bank in the
event of its failure. In line with our existing structure and business
model, HSBC has three resolution groups – the European Resolution
Group, the Asian Resolution Group and the US Resolution Group.
There are some smaller entities that fall outside these resolution
groups.
HSBC Holdings seeks to maintain a prudent balance between the
composition of its capital and its investments in subsidiaries.
As a matter of long-standing policy, the holding company group
retains a substantial holdings capital buffer comprising cash and other
high-quality liquid assets, which at 31 December 2024 was in excess
of $20bn, our target operating level.
We aim to ensure that management has oversight of our liquidity and
funding risks at Group and entity level through governance
arrangements, in line with our risk management framework. We
manage liquidity and funding risk at an operating entity level in
accordance with globally consistent policies, procedures and reporting
standards. This ensures that obligations can be met in a timely
manner, in the jurisdiction where they fall due.
Operating entities are required to meet internal minimum
requirements and any applicable regulatory requirements at all times.
These requirements are assessed through our internal liquidity
adequacy assessment process (‘ILAAP’), which ensures that
operating entities have strategies, policies, processes and systems
for the identification, measurement, management and monitoring of
liquidity risk over an appropriate set of time horizons, including intra-
day. The ILAAP informs the setting of risk appetite. It also assesses
the capability to manage liquidity and funding effectively in each major
entity. These metrics are set and managed locally but are subject to
global review and challenge to ensure consistency of approach and
application of the Group’s policies and controls.
Planning and performance
Capital and RWA plans form part of the annual financial resource plan
that is approved by the Board. Capital and RWA forecasts are
submitted to the Group Executive Committee on a monthly basis, and
capital and RWAs are monitored and managed against the plan. The
responsibility for global capital allocation principles rests with the
Group Chief Financial Officer, supported by the Group Capital
Management Meeting. This is a specialist forum addressing capital
management, reporting into Holdings ALCO.
Through our internal governance processes, we seek to strengthen
discipline over our investment and capital allocation decisions, and to
ensure that returns on investment meet management’s objectives.
The Group allocates financial resources to businesses and entities to
support the execution of our strategy and to meet their regulatory and
economic capital needs. We evaluate and manage business returns
by using a return on average tangible equity measure and a related
economic profit measure.
Funding and liquidity plans also form part of the financial resource
plan that is approved by the Board. The Board-level appetite measures
are the liquidity coverage ratio (‘LCR’) and net stable funding ratio
(‘NSFR’), together with an internal liquidity metric, at entity level. In
addition, we use a wider set of measures to manage an appropriate
funding and liquidity profile, including legal entity depositor
concentration limits, intra-day liquidity, forward-looking funding
assessments and other key measures.
Risks to capital and liquidity
Outside the stress testing framework, other risks may be identified
that have the potential to affect our RWAs, capital and/or liquidity
position. Downside and upside scenarios are assessed against our
management objectives, and mitigating actions are assigned as
necessary. We closely monitor future regulatory developments and
continue to evaluate the impact of these upon our capital and liquidity
requirements, particularly those related to the UK’s implementation of
the outstanding measures to be implemented from the Basel III
reforms (‘Basel 3.1‘).
Regulatory developments
The Prudential Regulation Authority (‘PRA‘) published the second part
of its near-final rules on the UK’s implementation of Basel 3.1 on
12 September 2024. On 17 January 2025, the PRA revised the
implementation date to 1 January 2027 to allow greater clarity
regarding implementation in the United States. The Risk Weighted
Asset (‘RWA‘) output floor is now subject to a three-year transitional
provision, ensuring that the date for full implementation remains
1 January 2030. We continue to assess the impact of Basel 3.1
standards on our capital, including the recent release of more
beneficial PRA near-final rules, developments in the US and
associated implementation challenges (including data provision). We
expect that the impact on our CET1 ratio at 1 January 2027 will be a
modest benefit.
Regulatory reporting processes and controls
We are advancing a comprehensive initiative aimed at strengthening
our global regulatory reporting processes and making them more
sustainable. This multifaceted programme includes enhancing data,
consistency and controls. This remains a key priority for both HSBC
management and regulatory authorities.
While this programme continues, there may be further impacts on
some of our regulatory ratios, such as the CET1, LCR and NSFR, as
we implement recommended changes and continue to enhance our
controls across the process.
Stress testing and recovery and resolution
planning
The Group uses stress testing to inform management of the capital
and liquidity needed to withstand internal and external shocks,
including a global economic downturn or a systems failure. Stress
testing results are also used to inform risk mitigation actions, input
into global business performance through tangible equity allocation,
and recovery and resolution planning, as well as to re-evaluate
business plans where analysis shows capital, liquidity and/or returns
do not meet their target.
In addition to a range of internal stress tests, we are subject to
supervisory stress testing in many jurisdictions. These include the
exercises of the Bank of England (‘BoE’), the US Federal Reserve
Board, the European Banking Authority, the European Central Bank
and the Hong Kong Monetary Authority. The results of regulatory
stress testing and our internal stress tests are used when assessing
our internal capital and liquidity requirements through the ICAAP and
ILAAP. The outcomes of stress testing exercises carried out by the
PRA and other regulators feed into the setting of regulatory minimum
ratios and buffers.
We maintain recovery plans for the Group and material entities, which
set out potential options management could take in a range of stress
scenarios that could result in a breach of capital or liquidity buffers.
The Group recovery plan sets out the framework and governance
arrangements to support restoring HSBC to a stable and viable
position, and so lowering the probability of failure from either
idiosyncratic company-specific stress or systemic market-wide issues.
Our material entities’ recovery plans provide detailed actions that
management would consider taking in a stress scenario should their
positions deteriorate and threaten to breach risk appetite and
regulatory minimum levels. This is to help ensure that HSBC entities
can stabilise their financial position and recover from financial losses
in a stress environment.
HSBC Holdings plc Annual Report and Accounts 2024
201
Risk review
The Group has capabilities, resources and arrangements in place to
address the unlikely event that HSBC might not be recoverable and
would therefore need to be resolved by regulators. In August 2024,
the Group and the Bank of England (‘BoE’) publicly disclosed the
status of HSBC’s progress against the BoE’s Resolvability
Assessment Framework (‘RAF‘). The BoE acknowledged the
significant progress made by HSBC in enhancing its resolvability
capabilities.
Overall, our recovery and resolution planning helps safeguard the
Group’s financial and operational stability. HSBC has a programme of
continuous improvement to maintain and enhance its recovery and
resolution capabilities, designed to meet the BoE’s expectations and
RAF requirements.
Measurement of interest rate risk in
the banking book processes
Assessment and risk appetite
Interest rate risk in the banking book (‘IRRBB’) is the risk of an
adverse impact to earnings or capital due to changes in market
interest rates or changes in expected interest rate repricing of client
products that impact banking book positions. It is generated by our
non-traded assets and liabilities, specifically loans, deposits and
financial instruments that are not held for trading intent or in order to
hedge positions held with trading intent.
Our global IRRBB risk management framework is designed to ensure
that all material sources of IRRBB are identified, measured, managed,
and monitored, with policies and frameworks in place.
Our IRRBB risks are measured and managed using a combination of
earnings-based and economic value measures to ensure that the
balance between stabilising earnings and generating value sensitivity
is managed appropriately. These metrics measure IRRBB risks across
the banking book, to support the overall monitoring against risk
appetite, including:
–
Banking Net Interest Income (‘BNII’) Sensitivity; and
–
Economic Value of Equity (‘EVE’) Sensitivity.
Banking net interest income sensitivity
BNII sensitivity captures the risk to earnings generated from the
Banking Book from changes in market implied interest rates over a
12-month period using static rolling balance sheet assumptions.
The static rolling balance sheet assumptions are in place to ensure
that IRRBB management actions are focused on risks which can be
managed within Treasury. A notable exception to this is related to the
price sensitivity of certain interest bearing non-maturity deposits,
where we apply dynamic assumptions to ensure we capture any
potential margin widening or compression over the corresponding
shock horizon and rate scenario.
Economic value of equity sensitivity
EVE measures the present value of our banking book assets and
liabilities excluding equity, based on a run-off balance sheet. EVE
sensitivity measures the impact to EVE from a movement in interest
rates, including the assumed term profile of non-maturing deposits
having adjusted for stability and price sensitivity. It is measured and
reported as part of our internal risk metrics, regulatory rules (including
the Supervisory Outlier Test) and Pillar 3 disclosures.
Further details of HSBC’s risk management of interest rate risk in the banking
book can be found in the Group’s Pillar 3 Disclosures at 31 December 2024.
Other Group risks
Non-trading book foreign exchange
exposures
Structural foreign exchange exposures
Structural foreign exchange exposures arise from capital invested or
net assets in a foreign operation. A foreign operation is an entity that
is a subsidiary, associate, joint venture or branch of a reporting entity
the activities of which are based or conducted in a country or currency
other than those of the reporting entity. An entity’s functional
reporting currency is normally that of the primary economic
environment in which the entity operates.
Exchange differences on structural exposures are recognised in other
comprehensive income. We use the US dollar as our presentation
currency in our consolidated financial statements because the US
dollar and currencies linked to it form the major currency bloc in which
we transact and fund our business. Therefore, our consolidated
balance sheet is affected by exchange differences between the US
dollar and all the non-US dollar functional currencies of underlying
foreign operations.
Our structural foreign exchange exposures are managed with the
primary objective of ensuring, where practical, that our consolidated
capital ratios and the capital ratios of individual banking subsidiaries
are largely protected from the effect of changes in exchange rates.
We hedge structural foreign exchange positions where it is capital
efficient to do so, and subject to approved limits. This is achieved
through a combination of net investment hedges and economic
hedges. Hedging positions are monitored and rebalanced periodically
to manage RWA or downside risks associated with HSBC’s foreign
currency investments.
For further details of our structural foreign exchange exposures, see page 211.
Transactional foreign exchange exposures
Transactional foreign exchange risk arises primarily from day-to-day
transactions in the banking book generating profit and loss or fair
value through other comprehensive income reserves in a currency
other than the reporting currency of the operating entity. Transactional
foreign exchange exposure generated through profit and loss is
periodically transferred to Markets and Securities Services and
managed within limits, with the exception of limited residual foreign
exchange exposure arising from timing differences or for other
reasons. Transactional foreign exchange exposure generated through
other comprehensive income reserves is managed by Global Treasury
within approved appetite.
HSBC Holdings risk management
As a financial services holding company, HSBC Holdings has limited
market risk activities. Its activities predominantly involve maintaining
sufficient capital resources to support the Group’s diverse activities;
allocating these capital resources across the Group’s businesses;
earning dividend and interest income on its investments in the
businesses; payment of operating expenses; providing dividend
payments to its equity shareholders and interest payments to
providers of debt capital; and maintaining a supply of short-term liquid
assets for deployment under extraordinary circumstances.
The main market risks to which HSBC Holdings is exposed are
banking book interest rate risk and foreign currency risk. Exposure to
these risks arises from short-term cash balances, funding positions
held, loans to subsidiaries, investments in long-term financial assets,
financial liabilities including debt capital issued, and structural foreign
exchange hedges. In addition, the impacts of the American
Depository Receipts in Grupo Financiero Galicia received as part of
the purchase consideration for HSBC Argentina are recognised by
HSBC Holdings. The objective of HSBC Holdings’ market risk
management strategy is to manage volatility in capital resources, cash
flows and distributable reserves that could be caused by movements
in market parameters. Market risk for HSBC Holdings is monitored by
Holdings ALCO in accordance with its risk appetite statement.
Risk review
202
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings uses interest rate swaps and cross-currency interest
rate swaps to manage the interest rate risk and foreign currency risk
arising from its long-term debt issues. It also uses forward foreign
exchange contracts to manage its structural foreign exchange
exposures.
For quantitative disclosures on HSBC Holdings’ interest rate risk in the
banking book see page 215.
Pension risk management processes
Our global pensions strategy is to move from defined benefit to
defined contribution plans, where local law allows and it is considered
competitive to do so. Our most material defined benefit plans have
been closed to new entrants for many years, and the majority
(including the largest plan in the UK) are also closed to future accrual.
In defined contribution pension plans, the contributions that HSBC is
required to make are known, while the ultimate pension benefit will
vary, typically with investment returns achieved by investment
choices made by the employee. While the market risk to HSBC of
defined contribution plans is low, the Group is still exposed to
operational and reputational risk.
In defined benefit pension plans, the level of pension benefit is
known. Therefore, the level of contributions required by HSBC will
vary due to a number of risks, including:
–
investments delivering a return below the level required to provide
the projected plan benefits;
–
the prevailing economic environment leading to corporate failures,
thus triggering write-downs in asset values (both equity and debt);
–
a change in either interest rates or inflation expectations, causing
an increase in the value of plan liabilities; and
–
plan members living longer than expected (known as longevity
risk).
Pension risk is assessed using an economic capital model that takes
into account potential variations in these factors. The impact of these
variations on both pension assets and pension liabilities is assessed
using a one-in-200-year stress test. Scenario analysis and other stress
tests are also used to support pension risk management, including
the review of de-risking opportunities.
To fund the benefits associated with defined benefit plans,
sponsoring Group companies, and in some instances employees,
make regular contributions in accordance with advice from actuaries
and in consultation with the plan’s fiduciaries where relevant. These
contributions are normally set to ensure that there are sufficient funds
to meet the cost of the accruing benefits for the future service of
active members. However, higher contributions are required when
plan assets are considered insufficient to cover the existing pension
liabilities. Contribution rates are typically revised annually or once
every three years, depending on the plan.
The defined benefit plans invest contributions in a range of
investments designed to limit the risk of assets failing to meet a
plan’s liabilities. Any changes in expected returns from the
investments may also change future contribution requirements. In
pursuit of these long-term objectives, an overall target allocation is
established between asset classes of the defined benefit plan. In
addition, each permitted asset class has its own benchmarks, such as
stock-market or property valuation indices or liability characteristics.
The benchmarks are reviewed at least once every three to five years
and more frequently if required by local legislation or circumstances.
The process generally involves an extensive asset and liability review.
In addition, some of the Group’s pension plans hold longevity swap
contracts. These arrangements provide long-term protection to the
relevant plans against costs resulting from pensioners or their
dependants living longer than initially expected. The most sizeable
plan to do this is the HSBC Bank (UK) Pension Scheme, which holds
longevity swaps covering approximately 50% of the plan’s pensioner
liabilities.
HSBC Holdings plc Annual Report and Accounts 2024
203
Risk review
Capital risk in 2024
Capital overview
Capital and liquidity adequacy metrics
At
31 Dec 2024
31 Dec 2023
Risk-weighted assets (‘RWAs’) ($bn)
Credit risk
657.9
683.9
Counterparty credit risk
37.7
35.5
Market risk
36.2
37.5
Operational risk
106.5
97.2
Total RWAs
838.3
854.1
Capital on a transitional basis ($bn)
Common equity tier 1 capital
124.9
126.5
Tier 1 capital
144.1
144.2
Total capital
172.4
171.2
Capital ratios on a transitional basis (%)
Common equity tier 1 ratio
14.9
14.8
Tier 1 ratio
17.2
16.9
Total capital ratio
20.6
20.0
Capital on an end point basis ($bn)
Common equity tier 1 (‘CET1’) capital
124.9
126.5
Tier 1 capital
144.1
144.2
Total capital
168.5
167.1
Capital ratios on an end point basis (%)
Common equity tier 1 ratio
14.9
14.8
Tier 1 ratio
17.2
16.9
Total capital ratio
20.1
19.6
Liquidity coverage ratio (‘LCR’)
Total high-quality liquid assets ($bn)
649.2
647.5
Total net cash outflow ($bn)
470.7
477.1
LCR (%)1
138
136
Net stable funding ratio (‘NSFR’)1,2
Total available stable funding ($bn)
1,523.4
1,601.9
Total required stable funding ($bn)
1,064.5
1,162.3
NSFR (%)
143
138
1 We enhanced our liquidity consolidation process in 2Q24 by revising provisions that addressed historical limitations. As our Group LCR and NSFR are reported on
an average basis, the benefit of these changes incrementally increased our LCR and NSFR by circa 3% and 11% during the year, respectively. Compared to year
ended 31 December 2023, the increase in LCR was mainly driven by these enhancements. The associated NSFR increase driven by these changes was partly
offset by higher required stable funding primarily due to a rise in financial investments and derivatives activities.
2 We enhanced our calculation process during 1Q24 and our NSFR comparatives have been restated.
References to EU regulations and directives (including technical
standards) should, as applicable, be read as references to the UK’s
version of such regulation or directive, as onshored into UK law under
the European Union (Withdrawal) Act 2018, and as may be
subsequently amended under UK law.
Capital figures and ratios in the previous table are calculated in
accordance with the regulatory requirements of the Capital
Requirements Regulation and Directive, the CRR II regulation and the
Prudential Regulation Authority (‘PRA’) Rulebook (‘CRR II’).
The table presents them under the transitional arrangements in CRR II
for capital instruments and after their expiry, known as the end point.
Regulatory numbers and ratios are presented as at the date of
reporting. Small changes may exist between these numbers and
ratios and those submitted in regulatory filings. Where differences are
significant, we may restate in subsequent periods.
Risk review
204
HSBC Holdings plc Annual Report and Accounts 2024
Own funds disclosure
(Audited)
At
31 Dec 2024
31 Dec 2023
Ref*
$m
$m
Common equity tier 1 capital: instruments and reserves
1
Capital instruments and the related share premium accounts
22,378
22,964
– ordinary shares
22,378
22,964
2
Retained earnings1
138,959
135,614
3
Accumulated other comprehensive income (and other reserves)1
(8,410)
(7,195)
5
Minority interests (amount allowed in consolidated CET1)
3,960
3,917
5a
Independently reviewed net profits net of any foreseeable charge or dividend
7,184
10,568
6
Common equity tier 1 capital before regulatory adjustments
164,071
165,868
28
Total regulatory adjustments to common equity tier 1
(39,160)
(39,367)
29
Common equity tier 1 capital
124,911
126,501
36
Additional tier 1 capital before regulatory adjustments
19,286
17,732
43
Total regulatory adjustments to additional tier 1 capital
(70)
(70)
44
Additional tier 1 capital
19,216
17,662
45
Tier 1 capital
144,127
144,163
51
Tier 2 capital before regulatory adjustments
29,334
28,148
57
Total regulatory adjustments to tier 2 capital
(1,075)
(1,107)
58
Tier 2 capital
28,259
27,041
59
Total capital
172,386
171,204
* The references identify lines prescribed in the PRA template, which are applicable and where there is a value.
1 We have updated the classification between components of shareholders’ equity to present ‘Retained Earnings’ in Row 2 and ‘Accumulated other
comprehensive income (and other reserves)’ in Row 3. The comparatives have been aligned.
The CET1 capital ratio increased marginally from 14.8% at
31 December 2023 to 14.9% at 31 December 2024, reflecting a
decrease in RWAs of $15.8bn, partly offset by a decrease in CET1
capital of $1.6bn. The key drivers of the overall rise in our CET1 ratio
during the year were:
–
a 0.9 percentage point increase, excluding foreign exchange
fluctuations, was primarily driven by a reduction in RWAs through
strategic transactions, and the gain on disposal of our Canadian
banking business adjusted for the $0.21 per share special
dividend;
–
a 0.9 percentage point reduction excluding foreign exchange
fluctuations, owing to higher RWAs mainly driven by organic
balance sheet growth and credit migrations excluding strategic
transactions;
–
a 0.4 percentage point increase from capital generation, mainly
through regulatory profits and other reserves less dividends and
share buy-backs; and
–
a 0.3 percentage point decrease from the adverse impact of
regulatory deductions and foreign exchange fluctuations on our
RWAs and capital.
Our Pillar 2A requirement at 31 December 2024, as per the PRA’s
Individual Capital Requirement based on a point-in-time assessment,
was equivalent to 2.6% of RWAs, of which 1.5% was required to be
met by CET1. Throughout 2024 we complied with the PRA’s
regulatory capital adequacy requirements.
Risk-weighted assets
RWAs by global business
WPB
CMB
GBM
Corporate
Centre
Total
RWAs
$bn
$bn
$bn
$bn
$bn
Credit risk
143.3
299.7
132.6
82.3
657.9
Counterparty credit risk
0.7
0.2
35.2
1.6
37.7
Market risk
1.1
0.9
27.1
7.1
36.2
Operational risk1
36.0
37.1
37.0
(3.6)
106.5
At 31 Dec 20242
181.1
337.9
231.9
87.4
838.3
At 31 Dec 2023
192.9
354.5
218.5
88.2
854.1
1 Operational risk RWAs for HSBC Bank Canada are excluded post the PRA waiver permission granted in October 2024.
2 RWAs balance at 31 December 2024 includes HSBC Argentina operational risk RWAs due to the averaging calculation and will roll off over future reporting
cycles.
HSBC Holdings plc Annual Report and Accounts 2024
205
Risk review
RWAs by legal entities1
HSBC
UK
Bank
plc
HSBC
Bank
plc
The
Hongkong
and Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc
HSBC
Bank
Canada3
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities4
Holding
companies,
shared service
centres and
intra-Group
eliminations
Total
RWAs
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
Credit risk
117.2
71.8
314.3
19.3
60.7
—
23.7
40.7
10.2
657.9
Counterparty credit risk
0.3
19.7
10.9
0.6
3.4
—
0.6
2.2
—
37.7
Market risk2
0.2
26.1
23.0
2.1
2.7
—
0.5
1.3
1.5
36.2
Operational risk3
20.6
20.0
54.6
4.6
7.6
—
4.9
6.5
(12.3)
106.5
At 31 Dec 2024
138.3
137.6
402.8
26.6
74.4
—
29.7
50.7
(0.6)
838.3
At 31 Dec 2023
129.2
131.5
396.7
24.3
72.2
31.9
32.6
59.6
6.7
854.1
1 Balances are on a third-party Group consolidated basis.
2 Market risk RWAs are non-additive across the legal entities due to diversification effects within the Group.
3 Operational risk RWAs for HSBC Bank Canada are excluded post the PRA waiver permission granted in October 2024.
4 RWAs balance at 31 December 2024 includes HSBC Argentina operational risk RWAs due to the averaging calculation and will roll off over future reporting
cycles.
RWA movement by global business by key driver
Credit risk, counterparty credit risk and operational
risk
WPB
CMB
GBM
Corporate
Centre
Market
risk
Total
RWAs
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 1 Jan 2024
191.6
353.5
196.3
75.2
37.5
854.1
Asset size
11.1
17.3
13.9
2.6
4.5
49.4
Asset quality
1.7
5.4
(0.9)
0.1
—
6.3
Model updates
3.2
0.7
3.5
—
—
7.4
Methodology and policy
(8.9)
(3.2)
0.2
2.8
0.2
(8.9)
Acquisitions and disposals1
(12.3)
(26.1)
(3.7)
0.3
(6.0)
(47.8)
Foreign exchange movements2
(6.4)
(10.6)
(4.5)
(0.7)
—
(22.2)
Total RWA movement
(11.6)
(16.5)
8.5
5.1
(1.3)
(15.8)
RWAs at 31 Dec 2024³
180.0
337.0
204.8
80.3
36.2
838.3
1 Balance includes operational risk RWAs for HSBC Bank Canada post the PRA waiver permission granted in October 2024.
2 Credit risk foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying transactional
currencies, and other movements in the table are presented on a constant currency basis.
3 RWAs balance at 31 December 2024 includes HSBC Argentina operational risk RWAs due to the averaging calculation and will roll off over future reporting
cycles.
RWA movement by legal entities by key driver1
Credit risk, counterparty credit risk and operational risk
HSBC
UK Bank
plc
HSBC
Bank plc
The
Hongkong
and
Shanghai
Banking
Corporation
Limited
HSBC
Bank
Middle
East
Limited
HSBC
North
America
Holdings
Inc
HSBC
Bank
Canada2
Grupo
Financiero
HSBC,
S.A.
de C.V.
Other
trading
entities4
Holding
companies,
shared
service
centres and
intra-Group
eliminations
Market
risk
Total
RWAs
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 1 Jan 2024
129.0
108.8
369.3
21.5
69.6
31.1
31.9
58.0
(2.6)
37.5
854.1
Asset size
10.2
4.3
15.5
2.5
0.6
—
2.3
11.0
(1.5)
4.5
49.4
Asset quality
1.9
0.5
6.2
(0.8)
0.5
—
—
(2.0)
—
—
6.3
Model updates
0.1
0.8
5.3
0.7
0.4
—
—
0.1
—
—
7.4
Methodology and policy
(0.6)
4.5
(11.5)
0.7
0.7
—
—
(4.6)
1.7
0.2
(8.9)
Acquisitions and
disposals2
—
(3.9)
0.1
—
—
(30.5)
—
(7.8)
0.3
(6.0)
(47.8)
Foreign exchange
movements3
(2.5)
(3.5)
(5.1)
(0.1)
(0.1)
(0.6)
(5.0)
(5.3)
—
—
(22.2)
Total RWA movement
9.1
2.7
10.5
3.0
2.1
(31.1)
(2.7)
(8.6)
0.5
(1.3)
(15.8)
RWAs at 31 Dec 2024
138.1
111.5
379.8
24.5
71.7
—
29.2
49.4
(2.1)
36.2
838.3
1 Balances are on a third-party Group consolidated basis.
2 Balance includes operational risk RWAs for HSBC Bank Canada post the PRA waiver permission granted in October 2024.
3 Credit risk foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying transactional
currencies, and other movements in the table are presented on a constant currency basis.
4 RWAs balance at 31 December 2024 includes HSBC Argentina operational risk RWAs due to the averaging calculation and will roll off over future reporting
cycles.
Risk review
206
HSBC Holdings plc Annual Report and Accounts 2024
RWAs decreased by $15.8bn during the year, mainly due to strategic
disposals of $47.8bn and foreign currency translation differences of
$22.2bn, which were partly offset by asset size movements of
$49.4bn.
Asset size
Asset size RWAs increased by $49.4bn, including a $14.6bn rise in
operational risk RWAs driven by an increase in average income.
CMB RWAs rose by $17.3bn, including a $6.4bn increase in
operational risk RWAs, and additional RWAs contributed by an
increase in corporate lending, mainly in HSBC UK Bank plc and higher
sovereign exposures in Other trading entities and Asia.
GBM RWAs increased by $13.9bn, mainly reflecting an increase in
operational risk RWAs of $5.5bn, higher securities financing
exposures in HSBC Bank plc, and mark-to-market movements and
organic growth in counterparty credit risk, mainly in Asia. Further
RWA increases were due to higher sovereign exposures in Asia and
Other trading entities.
WPB RWAs increased by $11.1bn, including a $4.2bn rise in
operational risk RWAs, and due to retail mortgage growth in the US
and HSBC UK Bank plc, and higher sovereign exposures in Other
trading entities and Asia.
Corporate Centre RWAs increased by $2.6bn, primarily due to lending
growth in SAB, reflected in Other trading entities.
Market risk RWAs increased by $4.5bn, which was mainly attributed
to an increase in stressed value at risk due to higher sensitivities to
interest rate shocks under the stress scenario, and the higher
incremental risk charge due to increased positions, mainly in Asia and
HSBC Bank plc.
Asset quality
The $6.3bn rise in RWAs was mainly due to unfavourable credit
migrations in Asia, including in the Hong Kong commercial real estate
sector, which was partly offset by favourable credit risk migrations in
Sri Lanka and Other trading entities. A further RWA increase in HSBC
UK Bank plc was mainly attributed to changes in the loan-to-value mix
of our mortgages portfolio.
Model updates
The $7.4bn RWAs increase mainly followed a revision to the definition
of default in our PD models for exposures to financial institutions, and
an increase in the post-model adjustments for the Hong Kong models.
Methodology and policy
The $8.9bn decrease in RWAs largely reflected a $7.5bn fall due to
regulatory changes related to the risk-weighting of residential
mortgages in Hong Kong. Credit risk parameter refinements, mainly in
Asia, further contributed to the fall in RWAs.
Acquisitions and disposals
RWAs decreased by $47.8bn, predominantly from the disposal of our
banking business in Canada, including operational risk RWAs post the
PRA waiver permission granted in October 2024, the sale of our
business in Argentina and the sale of our retail banking operations in
France.
Leverage ratio
At
31 Dec 2024
31 Dec 2023
$bn
$bn
Tier 1 capital (leverage)
144.1
144.2
Total leverage ratio exposure
2,571.1
2,574.8
%
%
Leverage ratio
5.6
5.6
Our leverage ratio was 5.6% at 31 December 2024, unchanged from
31 December 2023. Leverage exposures decreased primarily due to
strategic disposals and adverse foreign currency translation
differences, which exceeded the increase in the underlying balance
sheet. This was offset by a fall in the tier 1 capital.
At 31 December 2024, our UK minimum leverage ratio requirement of
3.25% was supplemented by a leverage ratio buffer of 0.9%, which
consists of an additional leverage ratio buffer of 0.7% and a
countercyclical leverage ratio buffer of 0.2%. These buffers translated
into capital values of $18.0bn and $5.1bn respectively.
Regulatory transitional arrangements
for IFRS 9 ‘Financial Instruments’
We have adopted the regulatory transitional arrangements of the
Capital Requirements Regulation for IFRS 9, including paragraph four
of article 473a. These allow banks to add back to their capital base a
proportion of the impact that IFRS 9 has upon their loan loss
allowances. Our capital and ratios are presented under these
arrangements throughout the tables in this section, including the end
point figures.
Pillar 3 disclosure requirements
Pillar 3 of the Basel regulatory framework is related to market
discipline and aims to make financial services firms more transparent
by requiring publication of wide-ranging information on their risks,
capital and management.
For further details, see our Pillar 3 Disclosures at 31 December 2024, which
is expected to be published on or around 19 February 2025 at
www.hsbc.com/investors.
Liquidity and funding risk in 2024
Liquidity metrics
At 31 December 2024, all of the Group’s material operating entities
were above the required regulatory minimum liquidity and funding
levels. Each entity maintains sufficient unencumbered liquid assets to
comply with local and regulatory requirements. Each entity maintains
a sufficient stable funding profile and is assessed using the NSFR or
other appropriate metrics.
In addition to regulatory metrics, we use a wide set of measures to
manage our liquidity and funding profile.
HSBC Holdings plc Annual Report and Accounts 2024
207
Risk review
The Group liquidity and funding position on an average basis is analysed in the following sections.
Operating entities’ liquidity
At 31 Dec 2024
LCR1
HQLA
Net
outflows
NSFR1
%
$bn
$bn
%
HSBC UK Bank plc (ring-fenced bank)2
190
117
61
154
HSBC Bank plc (non-ring-fenced bank)3
148
138
93
115
The Hongkong and Shanghai Banking Corporation – Hong Kong branch4
191
145
76
124
HSBC Singapore5
287
32
11
184
Hang Seng Bank
299
57
19
174
HSBC Bank China
191
27
14
147
HSBC Bank USA
167
80
48
127
HSBC Continental Europe
149
82
55
139
HSBC Bank Middle East Ltd – UAE branch
251
14
6
151
HSBC Canada
—
—
—
—
HSBC Mexico
164
9
6
125
At 31 Dec 2023
HSBC UK Bank plc (ring-fenced bank)2
201
118
59
158
HSBC Bank plc (non-ring-fenced bank)3
148
132
89
116
The Hongkong and Shanghai Banking Corporation – Hong Kong branch4
192
147
77
127
HSBC Singapore5
292
26
9
174
Hang Seng Bank
254
52
21
163
HSBC Bank China
170
24
14
139
HSBC Bank USA
172
82
48
131
HSBC Continental Europe
158
83
52
137
HSBC Bank Middle East Ltd – UAE branch
281
13
5
163
HSBC Canada
164
21
13
129
HSBC Mexico
149
8
5
124
1
The LCR and NSFR ratios presented in the above table are based on average values. The LCR is the average of the preceding 12 months. The NSFR is the
average of the preceding four quarters.
2
HSBC UK Bank plc refers to the HSBC UK liquidity group, which comprises five legal entities: HSBC UK Bank plc, Marks and Spencer Financial Services plc,
HSBC Private Bank (UK) Ltd, HSBC Innovation Bank Limited and HSBC Trust Company (UK) Limited, managed as a single operating entity, in line with the
application of UK liquidity regulation as agreed with the PRA.
3
HSBC Bank plc includes overseas branches and special purpose entities consolidated by HSBC for financial statements purposes.
4
The Hongkong and Shanghai Banking Corporation – Hong Kong branch represents the material activities of The Hongkong and Shanghai Banking Corporation
Limited. It is monitored and controlled for liquidity and funding risk purposes as a stand-alone operating entity.
5
HSBC Singapore includes HSBC Bank Singapore Limited and The Hongkong and Shanghai Banking Corporation – Singapore branch. Liquidity and funding risk is
monitored and controlled at country level in line with the local regulator’s approval.
Consolidated liquidity metrics
Net stable funding ratio
We manage funding risk based on the PRA’s NSFR rules. The Group’s NSFR at 31 December 2024, calculated from the average of the four
preceding quarters, was 143%.
At1,2
31 Dec 2024
30 Jun 2024
31 Dec 2023
$bn
$bn
$bn
Total available stable funding ($bn)
1,523
1,544
1,602
Total required stable funding ($bn)
1,064
1,115
1,162
NSFR ratio (%)
143
138
138
1 We enhanced our liquidity consolidation process in 2Q24 by revising provisions that addressed historical limitations. As our Group NSFR is reported on an
average basis, the benefit of these changes incrementally increased our NSFR by circa 11% during the year by reducing required stable funding. This reduction
was partly offset by a rise in financial investments and derivatives activities, resulting in a net 5% increase of NSFR compared with year ended 31 December
2023.
2 We enhanced our calculation process during 1Q24 and our NSFR comparatives have been restated.
Risk review
208
HSBC Holdings plc Annual Report and Accounts 2024
Liquidity coverage ratio
At 31 December 2024, the average high-quality liquid assets (‘HQLA‘)
held at entity level amounted to $790bn (31 December 2023:
$795bn). The Group consolidation methodology includes a deduction
to reflect the impact of limitations in the transferability of entity
liquidity around the Group. That resulted in an adjustment of $141bn
to LCR HQLA and $6bn to LCR inflows on an average basis.
We enhanced our liquidity consolidation process in 2Q24 by revising
the provisions that addressed historical limitations. As Group LCR is
reported on an average basis, the benefits of these changes have
incrementally increased our LCR by circa 3% during the year by
reducing net outflows. This reduction was partly offset by an organic
increase in outflows, mostly in Asia, resulting in a net 2% increase of
our LCR compared with year ended 31 December 2023.
At1
31 Dec 2024
30 Jun 2024 31 Dec 2023
$bn
$bn
$bn
High-quality liquid assets (in
entities)
790
780
795
Group LCR HQLA
649
646
648
Net outflows
471
472
477
Liquidity coverage ratio (%)
138
137
136
Adjustment for transfer
restrictions2
(147)
(141)
(154)
1 Group LCR numbers above are based on average values. The LCR is the
average of the preceding 12 months.
2 This includes adjustments made to high-quality liquid assets and inflows in
entities to reflect liquidity transfer restrictions.
Liquid assets
After the $141bn deduction, the average Group LCR HQLA of $649bn
(31 December 2023: $648bn) was held in a range of asset classes and
currencies. Of these, 95% were eligible as level 1 (31 December
2023: 97%).
The following tables reflect the composition of the average liquidity
pool by asset type and currency at 31 December 2024.
Liquidity pool by asset type1
Liquidity
pool
Cash
Level 12
Level 22
$bn
$bn
$bn
$bn
Cash and balance at central
bank
266
266
—
—
Central and local government
bonds
352
—
326
26
Regional government public
sector entities
2
—
2
—
International organisation and
multilateral developments
banks
18
—
18
—
Covered bonds
8
—
2
6
Other
3
—
1
2
Total at 31 Dec 2024
649
266
349
34
Total at 31 Dec 2023
648
310
317
21
1 Group liquid assets numbers are based on average values.
2 As defined in EU regulations, level 1 assets means ‘assets of extremely high
liquidity and credit quality’, and level 2 assets means ‘assets of high liquidity
and credit quality’.
Liquidity pool by currency1
$
£
€
HK$
Other
Total
$bn
$bn
$bn
$bn
$bn
$bn
Liquidity pool at 31 Dec
2024
196
170 113
47
123
649
Liquidity pool at 31 Dec
2023
184
173 112
51
128
648
1 Group liquid assets numbers are based on average values.
Sources of funding
Our primary sources of funding are customer current accounts and
savings deposits payable on demand or at short notice. We issue
secured and unsecured wholesale securities to supplement customer
deposits, meet regulatory obligations and to change the currency mix,
maturity profile or location of our liabilities.
The following ‘Funding sources’ and ‘Funding uses’ tables provide a
view of how our consolidated balance sheet is funded. In practice, all
the principal operating entities are required to manage liquidity and
funding risk on a stand-alone basis.
The tables analyse our consolidated balance sheet according to the
assets that primarily arise from operating activities and the sources of
funding primarily supporting these activities. Assets and liabilities that
do not arise from operating activities are presented as a net balancing
source or deployment of funds.
Funding sources
(Audited)
2024
2023
$m
$m
Customer accounts
1,654,955
1,611,647
Deposits by banks
73,997
73,163
Repurchase agreements – non-trading
180,880
172,100
Debt securities in issue
105,785
93,917
Cash collateral, margin, settlement accounts and
items in course of transmission to other banks
82,732
92,550
Liabilities of disposal groups held for sale
29,011
108,406
Subordinated liabilities
25,958
24,954
Financial liabilities designated at fair value
138,727
141,426
Insurance contract liabilities
107,629
120,851
Trading liabilities
65,982
73,150
– repos
14,806
12,198
– stock lending
3,525
3,322
– other trading liabilities
47,651
57,630
Total equity
192,273
192,610
Other balance sheet liabilities
359,119
333,903
At 31 Dec
3,017,048
3,038,677
Funding uses
(Audited)
2024
2023
$m
$m
Loans and advances to customers
930,658
938,535
Loans and advances to banks
102,039
112,902
Reverse repurchase agreements – non-trading
252,549
252,217
Cash collateral, margin, settlement accounts and
items in course of collection from other banks
78,538
96,253
Assets held for sale
27,234
114,134
Trading assets
314,842
289,159
– reverse repos
16,823
16,575
– stock borrowing
8,374
14,609
– other trading assets
289,645
257,975
Financial investments
493,166
442,763
Cash and balances with central banks
267,674
285,868
Other balance sheet assets
550,348
506,846
At 31 Dec
3,017,048
3,038,677
.
HSBC Holdings plc Annual Report and Accounts 2024
209
Risk review
Wholesale term debt maturity profile
The maturity profile of our wholesale term debt obligations is set out in the following table. The balances in the table are not directly
comparable with those in the consolidated balance sheet because the table presents gross cash flows relating to principal payments and not
the balance sheet carrying value, which includes debt securities and subordinated liabilities measured at fair value.
Wholesale funding cash flows payable by HSBC under financial liabilities by remaining contractual maturities1
Due not
more
than
1 month
Due over
1 month
but not
more than
3 months
Due over
3 months
but not
more than
6 months
Due over
6 months
but not
more than
9 months
Due over
9 months
but not
more
than
1 year
Due over
1 year
but not
more than
2 years
Due over
2 years
but not
more than
5 years
Due
over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Debt securities issued
14,260
15,011
13,841
10,235
11,644
29,639
62,434
53,814 210,878
– unsecured CDs and CP
5,346
7,803
10,495
6,623
6,829
662
1,787
1,598
41,143
– unsecured senior MTNs
7,528
3,351
1,014
1,269
2,736
21,593
47,236
42,899 127,626
– unsecured senior structured notes
874
1,826
2,258
1,457
1,526
6,055
9,160
6,520
29,676
– secured covered bonds
—
—
—
—
—
—
1,254
—
1,254
– secured asset-backed commercial paper
488
—
—
—
—
—
—
—
488
– secured ABS
24
47
67
64
61
664
520
864
2,311
– others
—
1,984
7
822
492
665
2,477
1,933
8,380
Subordinated liabilities
—
—
1,737
1,030
—
892
2,694
30,349
36,702
– subordinated debt securities
—
—
1,737
1,030
—
892
2,694
29,471
35,824
– preferred securities
—
—
—
—
—
—
—
878
878
At 31 Dec 2024
14,260
15,011
15,578
11,265
11,644
30,531
65,128
84,163 247,580
Debt securities issued
17,620
9,798
14,284
13,226
12,226
20,882
64,010
50,045 202,091
– unsecured CDs and CP
6,400
6,777
7,601
6,429
6,513
1,179
1,073
925
36,897
– unsecured senior MTNs
8,190
1,160
4,365
3,627
3,267
12,903
54,984
41,007 129,503
– unsecured senior structured notes
2,307
1,491
1,617
2,513
1,978
2,924
2,793
5,910
21,533
– secured covered bonds
—
—
—
—
—
—
1,275
—
1,275
– secured asset-backed commercial paper
426
—
—
—
—
—
—
—
426
– secured ABS
22
44
62
58
55
188
861
539
1,829
– others
275
326
639
599
413
3,688
3,024
1,664
10,628
Subordinated liabilities
—
2,013
—
—
—
3,358
4,282
27,234
36,887
– subordinated debt securities
—
2,000
—
—
—
3,358
4,282
25,441
35,081
– preferred securities
—
13
—
—
—
—
—
1,793
1,806
At 31 Dec 2023
17,620
11,811
14,284
13,226
12,226
24,240
68,292
77,279 238,978
1 Excludes financial liabilities of disposal groups.
Risk review
210
HSBC Holdings plc Annual Report and Accounts 2024
Structural foreign exchange risk in 2024
Structural foreign exchange exposures represent net assets or capital investments in subsidiaries, branches, joint arrangements or associates,
together with any associated hedges, the functional currencies of which are currencies other than the US dollar. Exchange differences on
structural exposures are usually recognised in ‘other comprehensive income’.
Hong Kong dollars
40,106
(5,841)
34,265
(9,861)
—
24,404
Pounds sterling
46,462
(15,024)
31,438
—
(1,254)
30,184
Chinese renminbi
35,032
(4,725)
30,307
(1,080)
—
29,227
Euros
17,391
(2,013)
15,378
—
(1,297)
14,081
Canadian dollars
43
—
43
—
—
43
Indian rupees
7,056
(1,973)
5,083
—
—
5,083
Mexican pesos
3,991
—
3,991
—
—
3,991
Saudi riyals
4,675
—
4,675
—
—
4,675
UAE dirhams
5,264
(893)
4,371
(2,543)
—
1,828
Malaysian ringgit
3,036
—
3,036
—
—
3,036
Singapore dollars
2,405
—
2,405
1,092
(1,089)
2,408
Australian dollars
2,126
—
2,126
—
—
2,126
Taiwanese dollars
2,199
(1,015)
1,184
—
—
1,184
Indonesian rupiah
1,541
(533)
1,008
—
—
1,008
Swiss francs
1,096
(541)
555
—
—
555
Korean won
1,204
(756)
448
—
—
448
Thai baht
976
(460)
516
—
—
516
Egyptian pound
891
—
891
—
—
891
Qatari rial
728
(97)
631
(299)
—
332
Argentinian peso
—
—
—
—
—
—
Vietnamese dong
769
—
769
—
—
769
Others, each less than $700m
4,327
(463)
3,864
—
—
3,864
At 31 Dec
181,318
(34,334)
146,984
(12,691)
(3,640)
130,653
2023
Hong Kong dollars
39,014
(5,792)
33,222
(7,979)
—
25,243
Pounds sterling
46,661
(16,415)
30,246
—
(1,275)
28,971
Chinese renminbi
33,809
(3,299)
30,510
(1,066)
—
29,444
Euros
15,673
(515)
15,158
—
(1,384)
13,774
Canadian dollars
5,418
(1,076)
4,342
—
—
4,342
Indian rupees
6,286
(2,110)
4,176
—
—
4,176
Mexican pesos
4,883
—
4,883
—
—
4,883
Saudi riyals
4,312
—
4,312
—
—
4,312
UAE dirhams
4,995
(613)
4,382
(2,761)
—
1,621
Malaysian ringgit
2,754
—
2,754
—
—
2,754
Singapore dollars
2,345
(224)
2,121
—
—
2,121
Australian dollars
2,362
—
2,362
—
—
2,362
Taiwanese dollars
2,212
(1,127)
1,085
—
—
1,085
Indonesian rupiah
1,535
(512)
1,023
—
—
1,023
Swiss francs
1,191
(526)
665
—
—
665
Korean won
1,354
(864)
490
—
—
490
Thai baht
1,022
—
1,022
—
—
1,022
Egyptian pound
959
—
959
—
—
959
Qatari rial
834
(215)
619
(299)
—
320
Argentinian peso
794
—
794
—
—
794
Vietnamese dong
872
—
872
—
—
872
Others, each less than $700m
4,386
(487)
3,899
—
—
3,899
At 31 Dec
183,671
(33,775)
149,896
(12,105)
(2,659)
135,132
Net structural foreign exchange exposures
2024
Currency of structural exposure
Net investment in
foreign operations
(excl non-
controlling interest)
Net
investment
hedges
Structural foreign
exchange
exposures (pre-
economic hedges)
Economic
hedges –
structural FX
hedges1
Economic
hedges – equity
securities (AT1)2
Net structural
foreign
exchange
exposures
$m
$m
$m
$m
$m
$m
1 Represents hedges that do not qualify as net investment hedges for accounting purposes. The SGD position represents the hedge against our SGD AT1
issuance.
2 Represents foreign currency-denominated preference share and AT1 instruments. These are accounted for at historical cost under IFRS Accounting Standards
and do not qualify as net investment hedges for accounting purposes. The gain or loss arising from changes in the US dollar value of these instruments is
recognised on redemption in retained earnings.
For a definition of structural foreign exchange exposures, see page 202.
HSBC Holdings plc Annual Report and Accounts 2024
211
Risk review
Interest rate risk in the banking book in 2024
Banking net interest income sensitivity
Banking NII Sensitivity analyses the sensitivity of our banking net
interest income to interest rate shocks. This metric, which was
introduced in our Annual Report and Accounts 2023, includes the
sensitivity arising from the use of banking book liabilities to fund
trading assets, as well as the currency impacts of vanilla foreign
exchange swaps to optimise cash management across the Group.
Banking NII Sensitivity is therefore a more comprehensive measure
than NII Sensitivity which was disclosed previously and is aligned
with the presentation of banking net interest income as an alternative
performance measure intended to approximate the Group’s banking
revenue that is directly impacted by changes in interest rates.
The following tables set out the assessed impact to a hypothetical
base case projection of our banking NII under an immediate shock of
100bps to the current market-implied path of interest rates across all
currencies on 31 December 2024 (effects in the first, second and
third years). For example, Year 3 shows the impact of an immediate
rate shock on the banking NII projected for the third year.
The sensitivities shown represent a hypothetical simulation of the
base case banking NII, assuming a static balance sheet (specifically
no assumed migration from current account to term deposits), and no
management actions from Global Treasury. This also incorporates the
effect of interest rate behaviouralisation, hypothetical managed rate
product pricing assumptions, prepayment of mortgages and deposit
stability. The sensitivity calculations exclude pensions, insurance
exposures, and our interest in associates.
The sensitivity analysis performed in the case of a down-shock does
not include floors to market rates, and it does not include floors on
some wholesale assets and liabilities. However, floors have been
maintained for deposits and loans to customers where this is
contractual or where negative rates would not be applied.
As the market and policy rates move, the degree to which these
changes are passed on to customers will vary based on a number of
factors, including the absolute level of market rates, regulatory and
contractual frameworks, and competitive dynamics. To aid
comparability between markets, we have simplified the basis of
preparation for our disclosure and have used a 50% pass-on
assumption for major entities on certain interest-bearing deposits.
Our asset pass-on assumptions are largely in line with our contractual
agreements or established market practice, which typically results in
a significant portion of interest rate changes being passed on.
An immediate interest rate rise of 100bps would increase projected
banking NII by $2.1bn. An immediate interest rate fall of 100bps
would decrease projected banking NII by $2.9bn.
The sensitivity of banking NII for 12 months as at 31 December 2024
decreased by $0.7bn in the plus 100bps parallel shock and by $0.5bn
in the minus 100bps parallel shock, when compared with
31 December 2023. The decline in sensitivities is primarily due to an
increase in stabilisation activities in line with our strategy.
For further details of measurement of interest rate risk in the banking book,
see page 202.
Banking NII sensitivity to an instantaneous change in yield curves (12 months) – Year 1 sensitivity by currency
Currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in Jan 2025 to Dec 2025 (based on balance sheet at 31 Dec 2024)
+100bps parallel
572
220
219
301
821
2,133
-100bps parallel
(862)
(403)
(353)
(314)
(954)
(2,886)
Change in Jan 2024 to Dec 2024 (based on balance sheet at 31 Dec 2023)
+100bps parallel
343
411
496
285
1,297
2,832
-100bps parallel
(494)
(493)
(602)
(304)
(1,460)
(3,353)
Banking NII sensitivity to an instantaneous down 100bps parallel change in yield curves – Year 2 and Year 3 sensitivity by currency
Currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in banking NII (based on balance sheet at 31 Dec 2024)
Year 2 (Jan 2026 to Dec 2026)
(1,226)
(509)
(563)
(444)
(1,333)
(4,075)
Year 3 (Jan 2027 to Dec 2027)
(1,531)
(550)
(1,022)
(504)
(1,449)
(5,056)
Change in banking NII (based on balance sheet at 31 Dec 2023)
Year 2 (Jan 2025 to Dec 2025)
(1,015)
(693)
(938)
(333)
(1,798)
(4,777)
Year 3 (Jan 2026 to Dec 2026)
(1,289)
(761)
(1,439)
(405)
(1,926)
(5,820)
Non-trading portfolios
Value at risk of non-trading portfolios
Non-trading portfolios comprise of positions that primarily arise from
the interest rate management of our retail and wholesale banking
assets and liabilities, financial investments measured at fair value
through other comprehensive income (‘FVOCI’) or at amortised cost,
and certain exposures arising from our insurance operations.
Value at risk (‘VaR’) of non-trading portfolios is a technique for
estimating potential losses on risk positions as a result of movements
in market rates and prices over a specified time horizon and to a
given level of confidence. The use of VaR is integrated into the
market risk management of non-trading portfolios to have a complete
picture of risk, complementing risk sensitivity analysis.
From 1Q24, we adopted a methodology change to measure non-
trading VaR over a 10-day holding period as opposed to 1 day in order
to better reflect longer average time horizons in the management of
non-trading portfolios compared with trading portfolios.
Comparative data at 31 December 2023 has been restated on a 10-
day basis accordingly, using a scalar approach that results in restated
numbers being approximately three times higher than previously
reported 1-day basis numbers.
Risk review
212
HSBC Holdings plc Annual Report and Accounts 2024
Our models are predominantly based on historical simulation that
incorporates the following features:
–
historical market rates and prices, which are calculated with
reference to interest rates, credit spreads and the associated
volatilities;
–
potential market movements that are calculated with reference to
data from the past two years; and
–
calculations to a 99% confidence level and using a 10-day holding
period.
Although a valuable guide to risk, VaR is used for non-trading
portfolios with awareness of its limitations. For example:
–
The use of historical data as a proxy for estimating future market
moves may not encompass all potential market events,
particularly those that are extreme in nature. As the model is
calibrated on the last 500 business days, it does not adjust
instantaneously to a change in market regime.
–
The use of a 10-day holding period for risk management purposes
of non-trading books is only an indication of exposure and not
indicative of the time period required to hedge or liquidate
positions.
–
The use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence.
Non-trading VaR includes non-trading financial instruments held in
portfolios managed by Global Treasury. The management of interest
rate risk in the banking book is described further in ‘Banking net
interest income sensitivity’ on page 212.
The interest rate risk on the fixed-rate securities issued by HSBC
Holdings is not included in the Group non-trading VaR. The
management of this risk is described on page 215. Non-trading VaR
also excludes the equity risk on securities held at fair value and non-
trading book foreign exchange risk.
The daily levels of total non-trading VaR in 2024 are set out in the graph below.
Weekly VaR (non-trading portfolios), 99% 10 day ($m)
Non-trading total
Interest rate
Credit spread
Diversification
Dec-23
Jan-24
Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Nov-24
Dec-24
-600
-400
-200
0
200
400
600
800
1,000
1,200
The Group non-trading VaR for 2024 is shown in the table below.
Interest rate
Credit spread
Portfolio diversification1
Total2
$m
$m
$m
$m
Balance at 31 Dec 2024
528.4
246.1
(220.7)
553.8
Average
603.7
315.1
(222.9)
695.8
Maximum
1,000.6
369.1
1,097.6
Minimum
292.1
242.4
408.7
Balance at 31 Dec 2023
549.6
356.7
(329.5)
576.7
Average
494.0
266.1
(201.6)
558.6
Maximum
638.6
368.0
—
709.4
Minimum
344.0
174.5
—
401.5
Non-trading VaR, 99% 10 day
(Audited)
1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic
market risk that occurs when combining a number of different risk types – such as interest rate and credit spreads – together in one portfolio. It is measured as
the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of portfolio
diversification. As the maximum and minimum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit
for these measures.
2 The total VaR is non-additive across risk types due to diversification effects.
The VaR for non-trading activity decreased by $23m from $577m at
31 December 2023 to $554m at 31 December 2024 due to the 2022
inflation-driven stress period dropping out of our two-year historical
scenario window, decreasing the volatility calibrated by the model
during the second half of the year, largely offset by an increase in the
duration risk of Global Treasury’s portfolios. Prior to this change in
calibration, non-trading VaR peaked at $1,097m during May 2024,
driven by an increase in the duration of Global Treasury’s portfolios,
higher market yields and more volatile historical scenarios from
March 2022. The average portfolio diversification effect between
interest rate and credit spread exposure remained broadly stable.
Non-trading VaR is managed and controlled through a limit approved
by the Group Chief Risk and Compliance Officer for HSBC Holdings.
The limit was rescaled higher to reflect the change in the basis of
preparation detailed above.
HSBC Holdings plc Annual Report and Accounts 2024
213
Risk review
Sensitivity of capital and reserves
Global Treasury maintains a portfolio of high-quality liquid assets for
contingent liquidity and NII stabilisation purposes, which is in part
accounted for under a hold-to-collect-and-sell business model. This
hold-to-collect-and-sell portfolio, together with any associated
derivatives in designated hedge accounting relationships, is
accounted for at fair value through other comprehensive income and
has an impact on CET1. The portfolio represents the vast majority of
our hold-to-collect-and-sell capital risk and is risk managed with a
variety of tools, including risk sensitivities and value at risk measures.
The table below measures the sensitivity of the value of this portfolio
to an instantaneous 100 basis point increase in interest rates, based
on the risk sensitivity of a shift in value for a 1 basis point (‘bps‘)
parallel movement in interest rates.
Sensitivity of hold-to-collect-and-sell reserves to interest rate movements
$m
At 31 Dec 2024
+100 basis point parallel move in all yield curves
(3,433)
As a percentage of total shareholders’ equity
(1.86)%
At 31 Dec 2023
+100 basis point parallel move in all yield curves
(2,264)
As a percentage of total shareholders’ equity
(1.22)%
The increase in the sensitivity of the portfolio during 2024 was mainly
driven by an increase in NII stabilisation hedging in line with our
strategy. While this hedging has increased the capital sensitivity of
the portfolio it has the effect of further dampening the volatility of our
banking NII over time and through the cycle. The figures in the table
above do not take into account the effects of interest rate convexity.
The portfolio mostly comprises vanilla sovereign bonds in a variety of
currencies and the primary risk is interest rate duration risk, although
the portfolio also generates asset swap, credit spread and asset
spread risks that are managed within appetite as part of our risk
management framework. A minus 100bps shock would lead to an
approximately symmetrical gain.
Alongside our monitoring of the hold-to-collect-and-sell reserve
sensitivity, we also monitor the sensitivity of reported cash flow
hedging reserves to interest rate movements on a yearly basis by
assessing the expected reduction in valuation of cash flow hedges
due to parallel movements of plus or minus 100bps in all yield curves.
The following table details the sensitivity of our cash flow hedging
reserves to the stipulated movements in yield curves at the year end.
The sensitivities are indicative and based on simplified scenarios. We
apply flooring on negative rates in the minus 100bps scenario in this
assessment. The effect of this flooring is immaterial at the end of
2024.
The sensitivity of the cash flow hedging reserve increased compared
with 31 December 2023. The increase was mainly driven by our NII
stabilisation activity. Our exposure to fixed rate pound sterling hedges
continued to be the largest in size and in terms of year-on-year
increase. Hong Kong dollar and euro hedges contributed the majority
of the rest of the increase in exposure.
Sensitivity of cash flow hedging reported reserves to interest rate movements
$m
At 31 Dec 2024
+100 basis point parallel move in all yield curves
(4,496)
As a percentage of total shareholders’ equity
(2.43)%
-100 basis point parallel move in all yield curves
4,500
As a percentage of total shareholders’ equity
2.43%
At 31 Dec 2023
+100 basis point parallel move in all yield curves
(3,436)
As a percentage of total shareholders’ equity
(1.85)%
-100 basis point parallel move in all yield curves
3,474
As a percentage of total shareholders’ equity
1.87%
Third-party assets in Markets Treasury
Third-party assets in Markets Treasury increased by 2% compared
with 31 December 2023. The net increase of $19bn is partly
reflective of higher commercial surpluses during the year, with the
increase of $69bn in ‘Financial Investments’ and the decrease of
$17bn in ‘Cash and balances at central banks’ largely driven by NII
stabilisation activity. Additionally, a decrease of $22bn in ‘Other’ is
attributed to the disposal of HSBC Bank Canada assets previously
classified as held for sale.
Third-party assets in Markets Treasury
2024
2023
$m
$m
Cash and balances at central banks
261,284
278,289
Trading assets
163
238
Loans and advances:
– to banks
66,518
78,667
– to customers
743
1,083
Reverse repurchase agreements
47,812
45,419
Financial investments
465,123
396,259
Other
12,232
34,651
At 31 Dec
853,875
834,606
Risk review
214
HSBC Holdings plc Annual Report and Accounts 2024
Defined benefit pension plans
Market risk arises within our defined benefit pension plans to the
extent that the obligations of the plans are not fully matched by
assets with determinable cash flows.
For details of our defined benefit plans, including asset allocation, see Note
5 on the financial statements, and for pension risk management, see page
203.
Additional market risk measures
applicable only to the parent
company
HSBC Holdings monitors and manages foreign exchange risk and interest
rate risk. In order to manage interest rate risk, HSBC Holdings uses the
projected sensitivity of its NII to future changes in yield curves.
Foreign exchange risk
HSBC Holdings’ foreign exchange exposures derive almost entirely
from the execution of structural foreign exchange hedges on behalf
of the Group. At 31 December 2024, HSBC Holdings had forward
foreign exchange contracts of $33.9bn (2023: $33.8bn) to manage
the Group’s structural foreign exchange exposures.
For further details of our structural foreign exchange exposures, see page
211.
Sensitivity of banking net interest income
HSBC Holdings monitors banking NII sensitivity in the first, second
and third years. Banking NII sensitivity includes the impact of AT1
instruments as well as vanilla foreign exchange swaps to optimise
cash management. For 2024, we have changed the HSBC Holdings
disclosure from NII sensitivity to banking NII sensitivity to reflect our
internal management of interest rate sensitivity, aligned to the Group
approach (see page 212). Comparative data for the financial year
ended 31 December 2023 have been re-presented accordingly.
These sensitivities assume that any issuance where HSBC Holdings
has an option to redeem at a future call date is called at that date.
The tables below set out the effect on HSBC Holdings’ future
banking NII of an immediate shock of +/-100bps to the current
market-implied path of interest rates across all currencies on 31
December 2024.
The banking NII sensitivities shown are indicative and based on
simplified scenarios. An immediate interest rate rise of 100bps would
decrease projected banking NII for the 12 months to 31 December
2025 by $156m. Conversely, an immediate fall of 100bps would
increase projected banking NII for the 12 months to 31 December 2025
by $156m.
Overall the banking NII sensitivity is mainly driven by interest rate
sensitive liabilities funding equity (non-interest bearing) investments in
subsidiaries.
Banking NII sensitivity to an instantaneous change in yield curves (12 months) – Year 1 sensitivity by currency
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in Jan 2025 to Dec 2025 (based on balance sheet at 31 Dec 2024)
+100bps parallel
(194)
—
31
7
—
(156)
-100bps parallel
194
—
(31)
(7)
—
156
Change in Jan 2024 to Dec 2024 (based on balance sheet at 31 Dec 2023)
+100bps parallel
(228)
—
34
8
(1)
(187)
-100bps parallel
228
—
(34)
(8)
1
187
$
HK$
£
€
Other
Total
$m
$m
$m
$m
$m
$m
Change in banking NII (based on balance sheet at 31 Dec 2024)
Year 2 (Jan 2026 to Dec 2026)
182
—
(36)
(24)
—
122
Year 3 (Jan 2027 to Dec 2027)
192
—
(28)
(27)
—
137
Change in banking NII (based on balance sheet at 31 Dec 2023)
—
Year 2 (Jan 2025 to Dec 2025)
194
—
(47)
(8)
(1)
138
Year 3 (Jan 2026 to Dec 2026)
194
—
(44)
(29)
(3)
118
Banking NII sensitivity to an instantaneous down 100bps parallel change in yield curves – Year 2 and Year 3 sensitivity by currency
The figures represent hypothetical movements in banking NII based
on projected yield curve scenarios, HSBC Holdings’ current interest
rate risk profile and assumed changes to that profile during the next
three years.
The sensitivities represent our assessment of the change to a
hypothetical base case based on a static balance sheet assumption,
and do not take into account the effect of actions that could be taken
to mitigate this interest rate risk.
HSBC Holdings plc Annual Report and Accounts 2024
215
Risk review
Market risk
Contents
216
Overview
216
Market risk management
217
Market risk in 2024
217
Trading portfolios
218
Market risk balance sheet linkages
Overview
Market risk is the risk of an adverse financial impact on trading
activities arising from changes in market parameters such as interest
rates, foreign exchange rates, asset prices, volatilities, correlations
and credit spreads. Market risk arises from both trading portfolios and
non-trading portfolios.
Trading portfolios comprise positions held for client servicing and
market-making, with the intention of short-term resale and/or to
hedge risks resulting from such positions.
For further details of market risk in non-trading portfolios, see page 212 of
the Annual Report and Accounts 2024.
Market risk management
Key developments in 2024
There were no material changes to our policies and practices for the
management of market risk in 2024.
Governance and structure
The following diagram summarises the main business areas where
trading market risks reside and the market risk measures used to
monitor and limit exposures.
Risk types
Trading risk
– Foreign exchange and commodities
– Interest rates
– Credit spreads
– Equities
Global business
GBM
Risk measure
Value at risk | Sensitivity | Stress testing
The objective of our risk management policies and measurement
techniques is to manage and control market risk exposures to
optimise return on risk while maintaining a market profile consistent
with our established risk appetite.
Market risk is managed and controlled through limits approved by the
Group Chief Risk and Compliance Officer. These limits are allocated
across business lines and to the Group’s legal entities. Each major
operating entity has an independent market risk management and
control sub-function, which is responsible for measuring, monitoring
and reporting market risk exposures against limits on a daily basis.
Each operating entity is required to assess the market risks arising in
its business and to transfer them either to its local Markets and
Securities Services or Markets Treasury unit for management, or to
separate books managed under the supervision of the local ALCO.
The Traded Risk function enforces the controls around trading in
permissible instruments approved for each site as well as changes
that follow the approval of new products. Traded Risk also restricts
trading in the more complex derivative products to only those offices
with appropriate levels of product expertise and control systems.
Key risk management processes
Monitoring and limiting market risk
exposures
Our objective is to manage and control market risk exposures while
maintaining a market profile consistent with our risk appetite.
We use a range of tools to monitor and limit market risk exposures
including sensitivity analysis, VaR and stress testing.
Sensitivity analysis
Sensitivity analysis measures the impact of movements in
individual market factors on specific instruments or portfolios,
including interest rates, foreign exchange rates and equity prices.
We use sensitivity measures to monitor the market risk positions
within each risk type. Granular sensitivity limits are set for trading
desks with consideration of market liquidity, customer demand and
capital constraints, among other factors.
Value at risk
(Audited)
VaR is a technique for estimating potential losses on risk positions as
a result of movements in market rates and prices over a specified
time horizon and to a given level of confidence. The use of VaR is
integrated into market risk management and calculated for all trading
positions regardless of how we capitalise them. Where we do not
calculate VaR explicitly, we use alternative tools as summarised in
the ‘Stress testing’ section below.
Our models are predominantly based on historical simulation that
incorporates the following features:
–
historical market rates and prices, which are calculated with
reference to foreign exchange rates, commodity prices, interest
rates, equity prices and the associated volatilities;
–
potential market movements that are calculated with reference to
data from the past two years; and
–
calculations to a 99% confidence level and using a one-day holding
period.
The models also incorporate the effect of option features on the
underlying exposures. The nature of the VaR models means that an
increase in observed market volatility will lead to an increase in VaR
without any changes in the underlying positions.
VaR model limitations
Although a valuable guide to risk, VaR is used with awareness of its
limitations. For example:
–
The use of historical data as a proxy for estimating future market
moves may not encompass all potential market events, particularly
those that are extreme in nature. As the model is calibrated on the
last 500 business days, it does not adjust instantaneously to a
change in the market regime.
–
The use of a one-day holding period for risk management
purposes of trading books assumes that this short period is
sufficient to hedge or liquidate all positions.
–
The use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence.
–
VaR is calculated on the basis of exposures outstanding at the close of
business and therefore does not reflect intra-day exposures.
Risk review
216
HSBC Holdings plc Annual Report and Accounts 2024
Risk not in VaR framework
The risks not in VaR (‘RNIV’) framework captures and capitalises material
market risks that are not adequately covered in the VaR model.
Risk factors are reviewed on a regular basis and are either incorporated
directly into the VaR models, where possible, or quantified through either
the VaR-based RNIV approach or a stress test approach within the RNIV
framework. While VaR-based RNIVs are calculated by using historical
scenarios, stress-type RNIVs are estimated on the basis of stress
scenarios whose severity is calibrated to be in line with the capital
adequacy requirements. The outcome of the VaR-based RNIV approach
is included in the overall VaR calculation but excluded from the VaR
measure used for regulatory back-testing.
Stress-type RNIVs include a deal contingent derivatives capital charge
to capture risk for these transactions and a de-peg risk measure to
capture risk to pegged and heavily-managed currencies.
Stress testing
Stress testing is an important procedure that is integrated into our
market risk management framework to evaluate the potential impact on
portfolio values of more extreme, although plausible, events or
movements in a set of financial variables. In such scenarios, losses can
be much greater than those predicted by VaR modelling. Stress testing
and reverse stress testing provide senior management with insights
regarding the ‘tail risk’ beyond VaR.
Stress testing is implemented at legal entity, regional and overall Group
levels. A set of scenarios is used consistently across all regions within
the Group. Market risk stress testing incorporates both historical and
hypothetical events. Market risk reverse stress tests are designed to
identify vulnerabilities in our portfolios by looking for scenarios that lead
to loss levels considered severe for the relevant portfolio. These
scenarios may be local or idiosyncratic in nature and complement the
systematic top-down stress testing.
The risk appetite around potential stress losses for the Group is set
and monitored against limits.
Back-testing
We routinely validate the accuracy of our VaR models by back-testing the
VaR metric against both actual and hypothetical profit and loss.
Hypothetical profit and loss excludes non-modelled items such as fees,
commissions and revenue related to intra-day transactions.
The hypothetical profit and loss reflects the profit and loss that would be
realised if positions were held constant from the end of one trading day
to the end of the next. This measure of profit and loss does not align
with how risk is dynamically hedged, and is therefore not necessarily
indicative of the actual performance of the business.
The number of hypothetical loss back-testing exceptions, together with a
number of other indicators, is used to assess model performance and to
consider whether enhanced internal monitoring of a VaR model is
required. We back-test our VaR at set levels of our Group entity hierarchy.
During 2024, the Group experienced one back-testing exception on
losses against actual and hypothetical profit and losses, mainly driven
by volatility in certain equity markets.
Market risk in 2024
The past year had a busy political agenda, with the November US
election being the main event. Geopolitics remained prominent amid
ongoing tensions in the Middle East and the Russia-Ukraine war.
Major central banks began their easing cycles in 2024, with the US
Federal Reserve cutting its policy rate by 1% since September, while
the ECB and some other European central banks implemented rate
cuts starting in June. In contrast, the Bank of Japan raised its
overnight rate in March, ending a prolonged period of negative
interest rates and ceasing yield curve control.
Throughout the year, government bond yields generally trended
upward, except during the third quarter, largely driven by volatile
inflation figures and shifting central bank expectations. In Europe, the
yield spread between France and Germany widened amid
uncertainties surrounding French fiscal policy following local
legislative elections. Global equities reached multiple record highs in
the US and Europe, buoyed by strong corporate earnings and positive
sentiment in the technology sector. Global markets rebounded from a
short period of volatility in August, triggered by the unwinding of carry
trades due to rising Japanese government bond yields, US recession
concerns, and equity market valuations.
In foreign exchange markets, the trend of a strengthening US dollar
continued against most developed and emerging market currencies.
The euro approached parity with the US dollar, while the yen
weakened to multi-decade lows. Credit markets performed positively
throughout the year, with a more pronounced tightening of high-yield
credit spreads compared with investment-grade spreads, despite a
broad widening of spreads in August.
We continued to manage market risk prudently during 2024.
Sensitivity exposures and VaR remained within appetite as the
business pursued its core market-making activity in support of our
customers. Market risk was managed using a complementary set of
risk measures and limits, including stress testing and scenario
analysis.
Trading portfolios
Value at risk of the trading portfolios
Trading VaR predominantly resides within the Markets and Securities
Services business. As of 31 December 2024, Trading VaR stood at
$38.3m, down from $52.8m as of 31 December 2023. At the end of
December 2024, Trading VaR was mainly driven by exposures to
interest rate risk factors from the Global Debt Markets and Global
Foreign Exchange business lines to facilitate client-driven activity.
Trading VaR peaked in March 2024 due to the sensitivity of the
trading book to interest rates movements, coupled with relatively
large interest rate shocks captured in the VaR scenario window. VaR
reduced in the second half of 2024, mainly as a result of some
volatile scenarios rolling off the VaR scenario window.
HSBC Holdings plc Annual Report and Accounts 2024
217
Risk review
The daily levels of total trading VaR during 2024 are set out in the graph below.
Daily VaR (trading portfolios), 99% 1 day ($m)
Trading total
Interest rate (‘IR’) trading
Equity (‘EQ’) trading
Credit spread (‘CS’) trading intent
Foreign exchange (‘FX’) trading
Diversification
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Oct-24
Nov-24
Dec-24
-80
-60
-40
-20
0
20
40
60
80
100
The Group trading VaR for the year is shown in the table below.
Trading VaR, 99% 1 day1
(Audited)
Foreign
exchange and
commodity
Interest
rate
Equity
Credit
spread
Portfolio
diversification2
Total3
$m
$m
$m
$m
$m
$m
Balance at 31 Dec 2024
14.6
34.9
16.3
8.2
(35.7)
38.3
Average
15.2
48.3
14.8
9.9
(35.1)
53.1
Maximum
29.8
78.1
20.5
13.1
83.3
Minimum
6.9
24.8
12.7
6.6
37.0
Balance at 31 Dec 2023
13.4
55.9
15.2
7.2
(38.9)
52.8
Average
16.2
53.9
19.0
11.6
(40.8)
59.8
Maximum
24.6
86.0
27.8
16.5
98.2
Minimum
9.3
25.5
13.4
6.6
34.4
1 Trading portfolios comprise positions arising from the market-making and warehousing of customer-derived positions.
2 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic
market risk that occurs when combining a number of different risk types – such as interest rate, equity and foreign exchange – together in one portfolio. It is
measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of
portfolio diversification. As the maximum and minimum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification
benefit for these measures.
3 The total VaR is non-additive across risk types due to diversification effects.
The table below shows trading VaR at a 99% confidence level compared with trading VaR at a 95% confidence level at 31 December 2024.
This comparison facilitates the benchmarking of the trading VaR, which can be stated at different confidence levels, with financial institution
peers. The 95% VaR is unaudited.
Comparison of trading VaR, 99% 1 day vs trading VaR, 95% 1 day
Trading VaR, 99% 1 day Trading VaR, 95% 1 day
$m
$m
Balance at 31 Dec 2024
38.3
23.4
Average
53.1
33.0
Maximum
83.3
48.9
Minimum
37.0
22.0
Balance at 31 Dec 2023
52.8
35.3
Average
59.8
36.8
Maximum
98.2
53.3
Minimum
34.4
21.0
Market risk balance sheet linkages
The following balance sheet lines in the Group’s consolidated position
are subject to market risk:
Trading assets and liabilities
The Group’s trading assets and liabilities are in almost all cases
originated by GBM. Other than a limited number of exceptions, these
assets and liabilities are treated as traded risk for the purposes of
market risk management. The exceptions primarily arise in Global
Banking where the short-term acquisition and disposal of assets are
linked to other non-trading-related activities such as loan origination.
Risk review
218
HSBC Holdings plc Annual Report and Accounts 2024
Derivative assets and liabilities
We undertake derivative activity for three primary purposes: to create
risk management solutions for clients, to manage the portfolio risks
arising from client business, and to manage and hedge our own risks.
Most of our derivative exposures arise from sales and trading
activities within GBM. The assets and liabilities included in trading
VaR give rise to a large proportion of the income included in net
income from financial instruments held for trading or managed on a
fair value basis. Adjustments to trading income such as valuation
adjustments are not measured by the trading VaR model.
For information on the accounting policies applied to financial instruments
at fair value, see Note 1.2 on the financial statements.
Climate risk TCFD
Contents
219
Overview
220
Climate risk management
221
Embedding our climate risk approach
223
Insights from climate scenario analysis
Overview
Our climate risk approach identifies two primary drivers of climate
risk:
–
physical risk, which arises from the increased frequency and
severity of extreme weather events, such as hurricanes and
floods, or chronic gradual shifts in weather patterns or rises in the
sea level; and
–
transition risk, which arises from the process of moving to a net
zero economy, including changes in government policy and
legislation, technology, market demand, and reputational
implications triggered by a change in stakeholder expectations,
action or inaction.
In addition, we have also identified the following thematic issues
related to climate risk, which are most likely to materialise in the form
of reputational, regulatory compliance and litigation risks:
–
net zero alignment risk, which arises from the risk of HSBC failing
to meet its net zero ambition or failing to meet external
expectations related to net zero; and
–
the risk of greenwashing, which arises from the act of knowingly
or unknowingly making inaccurate, unclear, misleading or
unsubstantiated claims regarding sustainability to our
stakeholders.
Approach
We recognise that the physical impacts of climate change and the
transition to a net zero economy can create significant financial risks
for companies, investors and the financial system. HSBC may be
affected by climate risks either directly or indirectly through our
relationships with customers, which could result in both financial and
non-financial impacts.
Our climate risk approach aims to effectively manage the material
climate risks that could impact our operations, financial performance
and stability, and reputation. It is informed by the evolving
expectations of our regulators.
We continue to develop our approach and climate risk capabilities
across our businesses, by prioritising sectors, portfolios and
counterparties with the highest impacts, and recognise that this is a
long-term iterative process. This includes increasing coverage and
incorporating more mature data, climate analytics, frameworks and
tools, and responding to emerging industry best practice and climate-
related regulations.
This also necessitates reflecting on how climate risk continues to
evolve in the real world, and improving how we embed climate risk
factors into strategic planning, transactions and decision making
across our businesses. For example, our mergers and acquisitions
process considers potential climate and sustainability-related targets,
net zero transition plans and climate strategy, and how this relates to
HSBC.
Our climate risk approach is aligned to our Group-wide risk
management framework and three lines of defence model, which
sets out how we identify, assess and manage our risks. For further
details of the three lines of defence framework, see page 129.
The tables below provide an overview of the climate risk drivers and thematic issues considered within HSBC’s climate risk approach.
Climate risk – risk drivers
Details
Potential impacts
Time horizons
Physical
Acute
Increased frequency and severity of weather events causing
disruption to business operations.
– Decreased real estate
values or stranded assets.
– Decreased household
income and wealth.
– Increased costs of legal
and compliance.
– Increased public scrutiny.
– Decreased profitability.
– Lower asset performance.
Short term
Medium term
Long term
Chronic
Longer-term shifts in climate patterns (e.g. sustained higher
temperatures, sea level rise, shifting monsoons or chronic heat
waves).
Transition
Policy and legal
Mandates on, and regulation of products and services and/or
policy support for low-carbon alternatives. Litigation from parties
who have suffered loss and damage from climate impacts.
Technology
Replacement of existing products with lower emissions options.
End-demand (market) Changing consumer demand from individuals and corporates.
Reputational
Increased scrutiny following a change in stakeholder perceptions
of climate-related action or inaction.
HSBC Holdings plc Annual Report and Accounts 2024
219
Risk review
Climate risk – thematic issues
Net zero
alignment risk
Net zero ambition
risk
Failing to set or adapt our net zero ambition and broader business strategy in alignment with key stakeholder
expectations, latest scientific understanding and commercial objectives.
Net zero
execution risk
Failing to meet our net zero ambition due to taking insufficient or ineffective actions, or due to the actions of clients,
suppliers and other stakeholders or due to other external factors.
Net zero reporting
risk
Failing to report emissions baselines and targets, and performance against these accurately due to data, methodology
and model limitations.
Risk of
greenwashing
Firm
Making inaccurate, unclear, misleading or unsubstantiated claims in relation to our sustainability commitments and
targets, as well as the reporting of our performance towards them.
Product
Making inaccurate, unclear, misleading or unsubstantiated claims in relation to products or services offered to clients
that have stated sustainability objectives, characteristics, impacts or features.
Client
Making inaccurate, unclear, misleading or unsubstantiated claims as a consequence of our relationships with clients or
transactions we undertake with them, where their sustainability commitments or related performance are
misrepresented or are not aligned to our own commitments.
Our annual climate risk materiality assessment helps us to
understand how climate risk may impact HSBC’s risk taxonomy.
The assessment considers short-term (up to 2026), medium-term
(2027-2035) and long-term (2036-2050) periods. The table below
provides a summary of how climate risk may impact a subset of
HSBC’s principal risks.
In addition to this assessment, we also consider climate risk in our
emerging risk reporting and scenario analysis (for further details, see
‘Top and emerging risks’ on page 39).
Climate risk drivers
Credit risk
Traded risk
Reputational risk1
Regulatory
compliance risk1
Resilience risk
Other financial
and non-
financial risk
types
Physical risk
u
u
u
u
Transition risk
u
u
u
u
u
u
1 Our climate risk approach identifies thematic issues such as net zero alignment risk and the risk of greenwashing, which are most likely to materialise in the
form of reputational, regulatory compliance and litigation risks.
Climate risk management
Key developments in 2024
Our climate risk programme continues to support the development of
our climate risk management capabilities. The following outlines key
developments in 2024:
–
We have started to enhance our approach to managing net zero
alignment risk in our wholesale portfolio, through developing
portfolio steering capabilities and revenue assessments.
–
We enhanced our approach to assessing the impact of climate
change on capital, focusing on credit, market and operational risk.
–
We enhanced our internal climate scenario analysis, including
through improvements to input data and models (e.g. for the
power and utilities sector). For further details of scenario analysis,
see page 223.
–
We enhanced our approach to managing and mitigating the risk of
greenwashing.
–
We developed climate risk guidelines for relationship managers to
further embed climate risk considerations into credit risk
assessments.
While we have made progress, further work remains, including the
need to develop additional metrics and tools to measure our
exposure to climate-related risks.
Governance and structure
The Board takes overall supervisory responsibility for our ESG
strategy, overseeing executive management in developing the
approach, execution and associated reporting.
The Group Chief Risk and Compliance Officer is the senior manager
responsible for the management of climate risk under the UK Senior
Managers Regime, holding overall accountability for the Group’s
climate risk programme.
The Sustainability Working Group, established in 4Q24, oversees and
provides guidance on the Group-wide medium and longer-term
sustainability strategy.
The ESG Committee has oversight of ESG strategy, policy, material
commitments and external disclosure. It is co-chaired by the Group
CEO and the Group Chief Sustainability Officer.
The Group Reputational Risk Committee provides recommendations
and advice on significant reputational risk matters with impacts
across the Group.
The Environmental Risk Steering Meeting (formerly the
Environmental Risk Oversight Forum) provides oversight of
environmental risk and the risk of greenwashing. Equivalent forums
have been established at a regional level.
The Group Risk Management Meeting and the Group Risk
Committee receive regular updates on our climate risk profile and the
progress of our climate risk programme.
For further details of the Group’s ESG governance structure, see page 74.
Risk appetite
Our climate risk appetite forms part of the Group’s risk appetite
statement and supports the business in delivering our net zero
ambition effectively and sustainably.
Our climate risk appetite statement is approved and overseen by the
Board. Climate risk indicators are reported on a quarterly basis for
oversight by the Group Risk Management Meeting and the Group Risk
Committee.
Policies, processes and controls
We continue to integrate climate risk into policies, processes and
controls across many areas of our organisation, and we will continue
to update these as our climate risk management capabilities mature
over time.
For further details of how we manage climate risk across our global
businesses, see page 60.
Risk review
220
HSBC Holdings plc Annual Report and Accounts 2024
Embedding our climate risk approach
The table below provides further details of how we have embedded the management of climate risk across key risk types. For further details of
our internal scenario analysis, see ‘Insights from climate scenario analysis’ on page 223.
Wholesale
credit risk
We have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six high transition risk sectors, as shown in the
below table. As at 31 December 2024, the overall exposure to the six high transition risk sectors was 18% of total gross carrying amount of
wholesale loans and advances. These disclosures cover the whole of the value chain of the sector. The sector classifications are based on
internal HSBC definitions and can be judgemental in nature. We use publicly available data as well as internal data to determine the appropriate
sector. The classification of our clients into sectors is performed with inputs from subject matter experts. The sector classifications are subject
to the remediation of ongoing data quality challenges and continuous improvement of our ongoing processes. The data will continue to be
enhanced and refined in future years.
Our relationship managers engage with our key wholesale customers, including those in higher transition risk sectors, through a transition
engagement questionnaire (‘TEQ’). In 2024, the TEQ was expanded to cover all geographies. The TEQ helps to gather information and assess
our wholesale customers’ business model alignment to a net zero transition and their exposure to physical and transition risks. We use the
responses to the questionnaire to risk-assess our key wholesale customers.
Our credit policies require that relationship managers comment on climate risk factors in credit applications for new money requests and annual
credit reviews. Our credit policies also require manual credit risk rating overrides if climate is deemed to have a material impact on credit risk
under 12 months if not already captured under the original credit risk rating.
Key developments to our framework in 2024 included the expansion of the TEQ, as set out above, and additionally the development of climate
risk guidelines for relationship managers to further embed climate risk considerations into credit risk assessments.
Key challenges for further embedding climate risk into credit risk management relate to the availability of adequate physical risk data to assess
impacts on our wholesale customers.
Wholesale loan exposure to high transition risk sectors at 31 December 2024
Units Automotive
Chemicals
Construction,
Contracting &
Building
Materials5
Metals
and
mining
Oil
and
gas
Power
and
utilities
Total
2024
Wholesale loan exposure as a proportion of
total wholesale loans and advances1,2,3,4
%
4
2
3
2
3
4
18
1 Percentages shown in the table also include green and other sustainable finance loans, which support the transition to the net zero economy.
The methodology for quantifying our exposure to high transition risk sectors and the transition risk metrics will evolve over time as more data
becomes available and is incorporated in our risk management systems and processes. We are aiming to develop the appropriate systems,
data and processes to provide enhanced disclosures in future years.
2 Counterparties are allocated to the high transition risk sectors via a two-step approach. Firstly, where the main business of a group of
connected counterparties is in a high transition risk sector, all lending to the group is included in one high transition risk sector irrespective of
the sector of each individual obligor within the group. Secondly, where the main business of a group of connected counterparties is not in a
high transition risk sector, only lending to individual obligors in the high transition risk sectors is included. The main business of a group of
connected counterparties is identified by the industry that generates the majority of revenue within a group. Customer revenue data utilised
during this allocation process is the most recent readily available and will not always align to our own reporting period.
3 The six high transition risk sectors make up 18% of total gross carrying amount of wholesale loans and advances to banks and customers of
$596bn. Amounts include assets held for sale.
4 The sectors used to monitor the wholesale corporate lending portfolio set out in the table are different to the scope of sectors we focus on for
financed emissions targets and reporting. The latter focus on the most carbon-emissive sectors, and the parts of the value chain where we
believe the majority of emissions are produced to help reduce double counting. These sectors are set out within 'Financed emissions' section
on page 48.
5 Construction, Contracting & Building Materials has been renamed from Construction & Building Materials. The name has been revised to
clarify that parties who build assets for end clients, investors and landowners, which should be included in this sector for their associated
construction risks.
Retail credit
risk
Climate risk may impact retail credit risk through an increase in credit losses on our global retail mortgage portfolio, primarily due to the impact of
physical risk. Our current climate assessment, in line with last year’s assessment, indicates that our retail mortgage portfolio remains resilient to
climate risk, with impact severity muted at a portfolio level given that our book has diversified property locations, with insurance coverage being
a key loan covenant. Our retail credit risk mortgage policy requires that every mortgage market conducts an annual review of their climate risk
management framework, to ensure they remain fit for purpose. Within our mortgage portfolios, properties or areas with potentially heightened
physical risk are identified and assessed locally with exposure monitored using risk indicators. A reduction in property value, higher insurance
costs and insurance availability are potential future negative financial impacts for properties with higher physical risk.
UK retail mortgage book
The UK is our largest mortgage market, and as of November 2024, made up 46.7% of our global mortgage portfolio. Our ESG Data Pack
includes our climate risk exposures for this portfolio across regions. The maturity profile of the UK mortgage book shows that the average
remaining contractual term in the UK is 21.8 years. However, with some customers undertaking refinancing options during this term, the
average term of the mortgage can be reduced to between five and eight years. This means our strategic approach to climate risk considers both
present day risk and long-term forward-looking risk, given that customers may choose to remain with us over the lifespan of the loan. Please see
the result of our climate scenario analysis on page 226.
Physical risk
For the UK mortgage book, flood data is sourced from a third-party data provider, and considers the UK only, covering present day risk from tidal,
river and surface water/flash flooding baselined to 2021. A flood risk rating score of 0-100 is provided with 100 being highest risk. Flood risk
scores are based on the average annual loss generated using flood hazard frequency, flood depths and based on the probability of flooding
events occurring. For the UK mortgage book, flood data is available for 93.7% of the mortgage book of which 0.9% is at a very high risk of
flooding, with 2.7% of the book at a high risk of flooding. Geographically, by lending balances, our highest risk exposures are the Greater London
and South-East regions. During 2024 we changed our flood risk classification of very high risk to align to the provider’s flood score bands. The
postcode data used in the regional flood table has also been refined to incorporate a more granular approach. This has helped to aid the regional
allocation and as a result the 2023 data has been restated to reflect this.
Risk type
Our approach
HSBC Holdings plc Annual Report and Accounts 2024
221
Risk review
Retail credit
risk
(continued)
Transition risk
We monitor the energy performance certificate (‘EPC’) ratings of individual properties from A (highest efficiency) through to G (least efficient) as
EPCs are commonly used as an indicator of transition risk in the UK mortgage book. All UK rental properties must have a minimum EPC rating of
E. It is broadly expected that the rental market will need to transition all rented properties to an EPC rating of C by 2030. We track EPC ratings
for both owner occupied (‘OO’) and buy to let (‘BTL’), which are 96.6% of the portfolio and 3.4% of the portfolio by lending value, respectively.
The EPC profile is broadly improving (to higher bands) but is evolving slowly, and the pace is dependent on regulation. Where we do not hold a
current EPC, we have included expired EPCs for 2024. EPCs are a reliable proxy as energy efficiency ratings gradually improve over time.
UK residential mortgages tenor (remaining mortgage term by balance ($m)) as at 31 December 20241
Tenor
Remaining mortgage balance
($m)
<1 year
357
1 to 5 years
3,589
>5 years
159,452
Weighted average of remaining mortgage term (years)
21.8
There has been an increase observed across the market in the number of people seeking new mortgages of up to 35 years or more due to rising house
prices, higher interest rates and cost of living challenges although the average life of an HSBC mortgage loan is approximately between five and eight
years due to refinancing. Despite this, our strategic approach to climate risk considers present day and long-term risk given customers may remain on
our book for the whole loan term.
For further details of flood risk and the EPC breakdown of our UK retail mortgage portfolio, see our ESG Data Pack at www.hsbc.com/esg.
1 The table includes instances where individual properties have multiple associated accounts and mortgage balances. These are aggregated to a
property level and the longest term remaining is taken as the tenor. UK mortgage balances presented here are not directly reconcilable to
other tables in the document due to differences in the basis of preparation.
Treasury
risk
Climate risk may impact Treasury risk through increased regulatory requirements and from changes to customer behaviours, which may result in
increased deposit outflows.
As part of our ICAAP, we assess the impact of climate change on capital, focusing on credit risk, market risk and operational risk and perform
sensitivity analysis on our Internal Capital Planning Buffer.
As part of our ILAAP, we assess how climate risk could impact the Group liquidity position. As part of our Internal Climate Scenario Analysis
(‘ICSA’), we have developed an exploratory scenario to understand the impact of a potential greenwashing event on our deposits. For further
details, please see page 224.
In October 2024 we published our Green Financing Framework, in alignment with the International Capital Market Association Green Bond
Principles. This framework promotes transparency, forming part of our sustainability strategy and helping to further our aim of supporting our
clients in transitioning to a net zero future.
Pension risk
Climate risk could result in additional costs within our defined benefit pension plans, due to changes in the pension plans’ investment
performance or through having to meet evolving regulatory requirements.
Our global policies on the oversight of pension investments explicitly reflect climate considerations. Training has been provided to local
management on how to consider ESG risks in pension investments. We also conduct an annual exercise to estimate the exposure of our largest
pension plans to climate risk.
Insurance risk
Climate risk could result in losses on our insurance assets due to changes in macroeconomic parameters.
We develop an annual plan to support the management of climate risk. This plan includes enhancing our stress test modelling capabilities to
assess the solvency resilience of our insurance entities under prescribed climate scenarios.
Traded risk
Climate risk may result in trading losses due to increases in market volatility and widening spreads from the macro and microeconomic impacts
of transition and physical risk.
We have implemented climate risk limits in global and regional trading mandates to monitor exposure to climate-sensitive sectors and countries
across different asset classes in the Markets and Securities Services (‘MSS‘) business.
Our market risk policies include specific climate risk control requirements, which ensure that our climate risk limits and utilisations are monitored
in the same way as market and traded credit risk exposures.
We conduct monthly stress testing to understand the vulnerabilities of our trading portfolio to various climate scenarios, which are refined on an
annual basis, with the results reported to global and regional senior management.
Reputational
risk
We manage the reputational impact of climate risk through our broader reputational risk framework, supported by our sustainability risk policies
and metrics.
Our sustainability risk policies form part of our broader risk management framework and are important mechanisms for managing risks, including
delivering our net zero ambition. Our thermal coal phase-out and energy policies aim to drive down greenhouse gas emissions while supporting
a just transition.
Our global network of sustainability risk managers provides local policy guidance to relationship managers for the oversight of policy compliance,
and in support of implementation across our wholesale banking activities. For further details of our sustainability risk policies, see page 61.
We have developed risk appetite metrics to monitor our performance against our financed emissions targets. For further details of our targets,
see page 52.
Regulatory
compliance
risk
Regulatory Compliance is responsible for the oversight and management of climate-related risks that could cause breaches of our regulatory
duties to customers and inappropriate market conduct. We have updated our policies to incorporate considerations for ESG and climate risks,
particularly in relation to new and ongoing product management, sales outcomes, and product marketing.
To support our key policies, we have also enhanced the underlying control frameworks and processes. This includes the integration of
greenwashing risk and controls considerations in the design of new products and changes to them, as well as in relation to marketing materials.
From a product sales perspective, we have established key control principles, encompassing the sales journey design, training and competence,
supervision, sales quality, and governance.
We operate an ESG and climate risk working group tasked with tracking and monitoring the integration of ESG and climate risk stewardship
across our operations. This group also monitors regulatory and legislative developments related to the ESG and climate agenda.
Risk type
Our approach
Risk review
222
HSBC Holdings plc Annual Report and Accounts 2024
Resilience
risk
Resilience risks may potentially crystallise through physical climate risk impacts to our buildings supporting service provision, or through physical
and/or transition disruption to our third-party supply chain relationships.
We have developed metrics to assess how physical risk may impact our critical properties and to monitor progress against our own operations’
net zero ambitions.
Our resilience risk policies are subject to continuous improvement to remain relevant to evolving climate risks.
Model risk
Model risk in the ESG context refers to the uncertainties and complexities inherent in the modelling of the financial impact translation of climate-
related changes and scenarios.
Climate risk models are used for climate scenario analysis, risk management, and emissions reporting among other use cases. Climate risk
modelling is at a nascent stage, with challenges – including limitations in data availability, consistency and quality – shared across the industry.
We have developed model risk procedures that set out the minimum control requirements for identifying, measuring and managing model risk
for climate-related models. All the identified climate-related models are subject to HSBC’s model lifecycle controls and policy.
Financial
reporting
risk
Climate risk impacts financial reporting risk through increased reporting requirements.
The scope of financial reporting risk includes oversight of the accuracy and completeness of ESG and climate reporting. Our risk appetite
statement states that HSBC has no appetite for material errors in ESG disclosures in our key markets, balanced with the evolving requirements
and data availability.
In addition, our internal controls incorporate requirements for addressing the risk of misstatement in ESG and climate reporting. To support this,
a framework is used to provide guidance on control implementation over ESG and climate reporting and disclosures, which includes areas such
as process and data governance, and risk assessment.
Risk type
Our approach
Challenges
Key challenges include:
–
the diverse range of internal and external data sources and data
structures needed for climate-related reporting, which introduces
data accuracy and reliability risks;
–
data limitations on customer assets and supply chains, and
methodology gaps, which hinder our ability to assess physical
risks accurately;
–
industry-wide data gaps on customer emissions and transition plan
and methodology gaps, which limit our ability to assess transition
risks accurately; and
–
limitations in our management of net zero alignment risk due to
known and unknown factors, including the limited accuracy and
reliability of data, emerging methodologies, and the need to
develop new tools to better inform decision making.
Insights from climate scenario analysis
Climate scenario analysis supports our strategy by assessing our
potential exposures to risks and vulnerabilities under a range of
climate scenarios. It is one of the key tools used to support the
evaluation of portfolios in line with our net zero ambition.
The scenarios developed for climate scenario analysis are designed to
examine HSBC’s financial performance and capital resilience across a
wide range of potential climate outcomes. They are sufficiently
diverse to enable HSBC’s key physical and transition risk
vulnerabilities to be explored. For further details about these risks,
see ‘Overview under Climate risk’ on page 219.
The analysis supports our approach to supporting our clients in the
transition to net zero through assessing, where available, client level
financial and credit risk metrics, and identifying where further analysis
and climate risk focus is required.
From a risk management perspective, it enhances our understanding
of the various transition and global warming pathways that may
unfold and their plausibility, and informs how we manage implications
to credit risk and revenues.
To meet our global regulatory needs, we produced several climate
stress tests for regulators around the world, including the Hong Kong
Monetary Authority (‘HKMA’). We continue to enhance our climate
scenario analysis exercises so that we can have a more
comprehensive understanding of climate headwinds, risks and
opportunities to support our strategic planning, actions and risk
management.
Use of climate scenario outputs to
support how we assess our climate
resilience
As we navigate the transition to net zero, climate scenario analysis is
used to support core banking processes such as client-facing
activities, finance activities and risk management.
From a financial and capital planning perspective, we use climate
scenario analysis to support the Group’s internal capital adequacy
assessment process (‘ICAAP’) to understand the amount of capital
the Group should hold to meet identified climate risks, including
integration of climate impacts into the Group’s internal stress testing
exercises. In addition, it informs strategic planning by providing
insights on the size and timing of financial impacts, and IFRS 9 loss
provisioning to ensure climate risks are adequately provisioned for in
our balance sheet, such as expected credit losses (‘ECL’).
Climate scenario analysis also supports portfolio steering frameworks
set up to help shape our Global Businesses strategy to meet net zero
ambitions. Portfolio steering has been developed to enable the Group
to manage sector portfolios in line with its net zero by 2050 ambition,
while managing risks and capturing commercial opportunities. This
enables HSBC to manage financed emissions within our appetite at
portfolio level.
Climate scenario analysis supports the Group to assess the impact of
our net zero ambitions on our revenue and profitability to help
strengthen our understanding of business model risk, and supports
building the organisation’s awareness of climate change risk,
informing our climate risk appetite.
Our climate scenarios
Our 2024 scenarios considered the key regions in which we operate
and were designed to assess the impact on our balance sheet across
three distinct periods: short term up to 2026; medium term from
2027 to 2035; and long term from 2036 to 2050.
Building on prior years, the 2024 climate scenario analysis exercise
benefited from new scenarios, including: the introduction of a new
Below 2 Degrees scenario that is aligned with the Paris Agreement
goal of limiting global warming to below 2 degrees by the end of the
century; and a bespoke near-term Severe Climate Stress scenario;
and from updated climate scenario assumptions, which include
increased sector and geographical granularity for all scenarios.
The 2024 climate scenarios range from a combination of highest
physical risk to highest transition risk as follows:
HSBC Holdings plc Annual Report and Accounts 2024
223
Risk review
–
Downside Physical Risk scenario: with significant global warming
and physical risk events, assumes climate action is limited to
currently implemented governmental policies, new
decarbonisation policies fail to get introduced and global warming
continues.
–
Severe Climate Stress scenario: a near term disorderly climate
action, triggered by unprecedented global weather events that
lead to a short, sharp economic recession. In this scenario,
extreme physical events pivot the public view on climate and the
transition to net zero accelerates. This extreme stress scenario is
used to test HSBC’s capital resilience to extreme and very unlikely
events, combining downside climate and macroeconomic risks
with a horizon ending in 2030.
–
Current Commitments scenario: assumes a slower-than-required
transition to a net zero economy, reflective of the current pace of
transition, which assumes that climate action is limited to current
governmental committed policies, including already implemented
actions. This scenario helps us determine the actions we need to
take to reach our net zero ambition while operating in a world that
is not on a net zero by 2050 pathway.
–
Below 2 Degrees scenario: a Paris Agreement-aligned scenario
where net zero is achieved, but beyond the 2050 scenario horizon,
as it assumes an orderly and gradual rise in the stringency of
climate policies over time.
–
Delayed Transition Risk scenario: in which action is delayed until
2030 but is then stringent and rapid enough to meet net zero by
2050, accentuating disorderly transition risks.
We have chosen these scenarios to provide a holistic view that
supplements the Group’s current and future strategic thinking. The
2024 climate scenarios are underpinned by well-established industry
bodies such as the Network for Greening Finance Phase IV, the
Intergovernmental Panel on Climate Change (‘IPCC’) and International
Energy Agency (‘IEA’), which are further enriched for additional
granularity, ensuring consistency with industry-recognised work and
reflecting the latest climate policy and economic outlook.
Characteristics of our scenarios
Scenarios
Downside
Physical Risk
Severe Climate
Stress
Current
Commitments
Below 2 Degrees
Delayed
Transition Risk
Scenario
outcomes
Rise in global
temperatures by 2100 (vs
pre-industrial levels)
4.2°C
N/A
2.4˚c
1.7˚c
1.6˚c
End of horizon
2050
2030
2050
2050
2050
Underlying
assumptions
based on
global
averages
Global climate actions
Implemented
policies only
Rapid & disorderly
transition
All currently pledged
policies
Gradually rising
stringency of policies
Rapid & disorderly
transition
Assumed pace of
technology change and
adoption
Slow change
Accelerated progress
Limited progress
Moderate change
Accelerates from
2030
Assumed socioeconomic
impact
Very high
Very high
Moderate
High
Very high
Assumed carbon price
($/tCO2)
2030
2050
2030
2030
2050
2030
2050
2030
2050
9
8
326
30
78
46
136
30
558
Scenario risk
characteristics
Climate
risk
Physical
p
Higher
p
Higher
u
Moderate
q
Lower
q
Lower
Transition
q
Lower
p
Higher
u
Moderate
p
Higher
p
Higher
Group outputs and our methodology
Climate scenario analysis allows us to model how different potential
climate pathways may impact the resilience of our customers and our
portfolios.
Our models continue to incorporate a range of climate-specific
metrics that could potentially impact our customers, including
expected production volumes, revenue, costs and capital
expenditure.
We assess how these metrics interplay with economic factors, such
as carbon prices, which represent the cost effects of climate-related
policies that aim to discourage carbon-emitting activities and
encourage low-carbon solutions. The expected result of higher carbon
prices is a reduction in emissions as high-emission activities become
uneconomical.
We analyse how climate risks impact principal risk types within our
organisation, including credit and traded risks, non-financial risks and
pension risk. While the following sections focus primarily on credit
risk, we also set out how we continue to enhance and embed
impacts from traded risk, pension risk and non-financial risks.
For our wholesale lending portfolio, the scope of our 2024 analysis
prioritised high-emitting sectors, and we focused on delving deeper
into a selection of high transition risk sectors. We have enhanced our
climate models for the power and utilities and automotive sectors,
while regional deep dives focused on select high risk and material
sectors. The financial metrics used in our models included credit
rating and client cashflow impacts to derive ECLs and risk-weighted
assets (‘RWAs’), emissions and balance sheet impacts.
For our retail mortgage portfolio, our analysis focused on key regions
and physical risk factors, including property locations, perils and
insurance coverage.
The internal climate scenario analysis exercise showed that losses
are influenced by their exposure to a variety of climate risks under
different climate scenarios.
When assessing our long-term scenarios, climate-related losses are
expected to remain minimal in the short term and likely to increase in
the medium and longer time horizon, driven by the transition to a net
zero economy and greater physical risk impacts.
Under the defined climate scenarios, transition risk impacts are
predominantly driven by credit risk losses and are expected to create
a drag on the Group’s profitability across all scenarios. In the Below 2
Degrees scenario, we expect to see an increase in projected credit
losses that materialise in the medium term if early action to transition
to net zero is taken. Credit losses are projected to increase in the
medium to long term if the transition to net zero is delayed, which
was underlined within the Delayed Transition scenario, where climate
action begins later and is therefore expected to be more rapid and
disruptive for our customers who will have less time to restructure
their business models and reduce their carbon emissions.
The risks and opportunities will need to be carefully balanced, and by
building a more climate-resilient balance sheet, we can reduce
impairment risks and improve longer-term stability.
Increased lending opportunities exist during an accelerated transition
period such as those expected in the Below 2 Degrees, Delayed
Risk review
224
HSBC Holdings plc Annual Report and Accounts 2024
+Physical Risk Transition Risk+
Transition Risk and Severe Climate Stress scenarios, noting that
these scenarios also experience the risk of heightened impairments
in the latter stages of their time horizons.
Modelling limitations
We continue to look for ways of enhancing our methodology to
improve the effectiveness of our climate scenario analysis by
incorporating lessons learnt from previous exercises and feedback
from key stakeholders, including regulators. There are industry-wide
limitations, particularly on data availability, although our models are
designed to produce outputs that can support our assessment of the
level of our climate resilience.
Climate scenario analysis requires considerable amounts of data and
we are continuing to enhance coverage of our exposures. Where data
is only available for a subset of our counterparties, we extrapolate the
results observed where available to the wider population or dataset.
We do not capture the second order impacts of climate risk
exposures within our modelling approach, such as impacts on our
counterparties from their supply chains.
For a broad overview of the models that we use for our climate scenario
analysis, as well as graphs that show how global carbon prices and carbon
emissions will differ under our climate scenarios, see our ESG Data Pack at
www.hsbc.com/esg.
How climate change is impacting our
wholesale lending portfolio
The 2024 climate scenario analysis exercise was designed to
examine the climate risks and vulnerabilities of corporate
counterparties across high transition risk sectors under climate
scenarios of varying severity. Specifically, we measured the modelled
effect on our projected ECL change over the short-, medium- and
long-term horizons under each scenario. This was compared to a
counterfactual scenario that excludes climate change impacts to
isolate the climate only changes in ECL.
Counterparty specific analysis was conducted for those corporates
where transition risk is elevated either from an overall sectoral
perspective or in response to specific jurisdictional policies, which
require HSBC to respond to regulatory requirements. This analysis
was conducted to generate more granular counterparty-specific
insights relative to previous exercises.
The impact on our wholesale portfolios is demonstrated by the table
below, which shows the size of exposures by sector in 2024 and the
cumulative change in ECL compared with a counterfactual scenario
(expressed as a multiple). The size of our exposure in each sector is
represented by our exposure at default (‘EAD’) relative to one
another.
Under the Current Commitments scenario, our modelled outputs
predict that ECL will not be more than 25% higher than the
counterfactual scenario for any of the assessed sectors. The highest
impacts are seen in the chemicals, construction and building
materials, power and utilities and agriculture and soft commodities
sectors. Greater climate risks would crystallise in the Below 2
Degrees scenario with its gradually increasing transition to net zero,
driven by pockets of customers in higher-emitting sectors that are
continuously exposed to larger climate-related losses.
The analysis shows credit risk losses continue to be driven by
counterparties in certain high transition risk sectors where the
Group’s largest exposures are concentrated, such as construction
and building materials, chemicals, and power and utilities sectors. In
these sectors we have counterparties, such as steel or cement
manufacturers who have high emissions in their processes and in
their downstream or upstream value chains, who may also
experience cost pressures due to carbon-tax pass-through rates.
Furthermore, harder to abate sectors contain a high proportion of
customers without climate transition plans.
We have continued to incorporate information from our customers’
transition plans to consider how our clients and their sectors will be
impacted. For the oil and gas sector, we see counterparties having
relatively lower projected climate-related losses on a consistent basis,
which is highly dependent on the assumption of continued
government support and commitment to the execution of their
complex transition plans.
In the case of the Severe Climate Stress scenario, we observed that
impacts would be more severe and focused than other climate
scenarios in the short- to medium-term. These impacts were driven
by the underlying severity of the scenario, particularly due to the
sharp increase in stricter climate policies and therefore carbon prices
that adversely affect the debt servicing capabilities of companies, and
acute extreme weather events.
We have the opportunity to ease potential negative impacts as
transition risks increase, by supporting our customers to diversify into
more renewable and greener revenue streams and invest in
emission-reducing technologies.
Impact on wholesale lending portfolios
Wholesale
sectors
Exposure
at default
(EAD)3
2023
ECL increase 1, 2
Climate Scenarios
Current
Commit
ments
Below 2 Degrees
Peak 4
Short
term
Medium
term
Long
term
Conglomerates and
industrials
n
Chemicals
n
Construction,
contracting and
building materials
n
Power and utilities
n
Oil and gas
n
Automotive
n
Land transport and
logistics
n
Agriculture & soft
commodities
n
Metals and mining
n
Aviation
n
Marine
n
1 Increase in cumulative ECL compared with counterfactual over short-,
medium- and long-term time horizons, expressed as a multiple.
2 Values in the key represent the multiplier of increase in ECL, i.e. <1.1
equates to less than 10% increase over the counterfactual (or equivalent
proxy which is most representative of baseline for the sector).
3 The size of the bubbles is a visual representation of the portfolios, in terms
of EAD, relative to one another.
4 The peak multiplier reflects the maximum increase in ECL for the Current
Commitments scenario over the forecasted scenario time horizon.
Lower
Impact
<1.1x
<1.25x
<1.5x
<1.75x
<2.25x <2.75x Higher
Impact
How climate change is impacting our
retail mortgage portfolio
As part of our 2024 climate scenario analysis exercise, we completed
a detailed climate risk assessment for the UK, US, Singapore and
Malaysia. In our 2023 exercise we also assessed Hong Kong,
Australia and mainland China. Our coverage represented 91% of the
balances in our global retail mortgage portfolio, across the two
exercises. For our Hong Kong portfolio, we completed a short- and
long-term scenario analysis exercise during late 2023 and early 2024
at the request of the HKMA.
Our analysis shows that over the longer term, we expect minimal
losses to materialise when considering the Current Commitments
scenario. Although the severity of climate perils is expected to
worsen over time, our overall losses remain low under a severe
Downside Physical Risk scenario.
HSBC Holdings plc Annual Report and Accounts 2024
225
Risk review
In 2024, we continued to develop our approach to assess impacts
from severe acute physical risk events with an exploratory new near-
term Severe Climate Stress scenario.
Within all scenarios, loss impacts are assessed by considering
borrowers’ ability and willingness to service their debts, including
customers’ affordability incorporating increased debt servicing costs
and the impact on property valuation.
When quantifying impacts from climate events, insurance availability
is a key mitigation of loss. Our scenario analysis methodology was
enriched further in 2024 by enhancing insurance availability and
assumptions related to insurance premium costs. This approach has
been benchmarked with the insurance industry, based on a
calculation of average annualised loss.
When assessing impacts from climate risk, we note that there are
several limitations as mentioned previously. Specifically for our retail
mortgage portfolio, these limitations include:
–
Lack of historical experience and limited benchmark data,
especially around loss quantification, there is strong reliance on
external peril models and vulnerability assumptions.
–
Accuracy of peril projection data relies upon the exact coordinates
of a property. The geocoding process can lead to inaccurate
results for some properties where address data is incomplete or in
regions where geocoding services are less accurate.
–
Additionally, a key assumption in quantifying the impacts from
perils is the level of resilience a particular building archetype has,
for example age of construction, material or relevant building
standards. This information is often limited, and assumptions are
made.
Projected peril risk
Perils are assessed that are material to each region and where we
have the external peril data available.
Flooding has the potential to be the peril having the largest impact on
our portfolio. When assessing the risk in the portfolio we assess both
the inherent and residual risks. An inherent view considers property
location, whereas the residual risk incorporates the resilience a
particular building has to the peril impacts. The inherent flood risk is
shown below, and outlines the percentage of properties and their
corresponding flood depths predicted in a 1-in-100 year event.
In 2024, we provided further granularity in our flood risk table by
reporting the proportion of properties that we would expect to be at
no risk of flooding during a 1-in-100 year severity flood event. In the
2024 exercise under the Baseline flood risk 1-in-100 year event for
the UK, 92.1% of properties have no forecasted flood risk (2023:
92.4%), as such c.8% of properties are situated in areas that could be
exposed to varying severities of flooding, however there are often
mitigating factors, such as the floor level of a building, that reduce
risk.
The table below outlines the flood depths that the properties would
be exposed to under different climate scenarios.
Exposure to flooding (%)1
Climate Scenarios
Markets
Flood
depth
(metres)
Baseline flood
risk
1-in-100 year
event2, 3
Current
Commitments
Downside
Physical Risk
2024
2050
2050
UK
0
92.1
91.5
91.6
0-0.5
7.8
8.3
5.2
0.5-1.5
0.1
0.2
2.8
>1.5
0
0
0.4
Hong
Kong4
0
67.9
64.0
64.0
0-0.5
16.9
17.0
15.5
0.5-1.5
15.1
18.9
20.4
>1.5
0.1
0.1
0.1
1 Severe flood events include river and surface flooding and coastal
inundation. The table compares 2050 snapshots under the Current
Commitments and Downside Physical Risk scenarios with a baseline view
in 2024. We do expect to see changes to our flood depth distributions as
climate risk data is refreshed.
2 Baseline flood risk is the flood risk for a 1-in-100 year event, based on
current peril data.
3 2024 relates to the year in which the assessment was conducted. The
baseline data is based on the mortgage portfolio as at 31 December 2023
and 2022, for the UK and Hong Kong respectively.
4 In 2022, 94% of properties in Hong Kong (where HSBC provides
mortgages) are apartments located on the second floor or above. For
properties located in areas exposed to flooding, direct damages would be
mitigated against, with only common ground floor areas potentially
impacted.
Through our climate scenario analysis, we recognise acute impacts
are more severe than long-term chronic impacts. We observed this
when assessing the outputs under the Severe Climate Stress
scenario, which focuses on prescribed physical risk events rather
than recognising the probabilistic nature of these perils, which are
considered very unlikely by 2030. Overall, our retail mortgage
portfolio remains resilient to climate risk and impact severity is muted
at portfolio levels as our book has diversified property locations with
insurance coverage being a key loan covenant.
How climate change is impacting our
commercial real estate portfolios
In our climate scenario analysis exercise, we assess our commercial
real estate (‘CRE’) customers’ vulnerability to various perils, including
flooding and cyclonic wind exposures. Our CRE portfolio is globally
diversified with larger concentrations in Hong Kong, the UK, France
and the US. In our 2024 exercise we carried out a detailed
assessment of our UK portfolio. In addition, we performed a bespoke
assessment of our Hong Kong portfolio via the HKMA climate
scenario analysis exercise.
Geographical location is a key determinant in our exposure to
potential physical risk events, which can lead to higher ECLs due to
the cost of repairing damage as well as the longer-term impacts on
property valuations. These can lead to higher defaults and
consequential losses in areas where physical risk events are gradually
increasing in frequency and severity.
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226
HSBC Holdings plc Annual Report and Accounts 2024
The table below shows the proportion of our CRE portfolio exposed
to specific physical perils in our key markets.
Exposure to peril (%)1
Market
Exposure
at default
(EAD)2
2023
Coastal
inundation
Cyclone
wind3
Surface
water
flooding
Riverine
flooding
Forest
Fires
Hong
Kong
n
1
100
12
10
2
UK
n
17
0
9
8
0
1 Proportion of our CRE portfolio exposed to specific physical perils in the
Downside Physical Risk scenario as at 2050.
2 The size of the bubbles is a visual representation of the portfolios, in terms
of EAD, relative to one another.
3 Assumes all properties are impacted by some damage due to extreme
wind, but the intensity of impact is very insignificant and highly muted in
some regions, represented by (~0%) exposure to this peril.
As assessed through our internal climate scenario analysis exercise,
impacts on our UK portfolio are largely driven by chronic physical risk,
related mainly to coastal and tidal river flooding due to a rise in sea
level. The UK analysis explored acute weather events, such as
extreme rainfall accompanied with storm winds that may lead to
further property damage and business disruption.
We assessed the impacts on transition risk for the UK portfolio,
mainly focused on the impact of retrofitting costs on property
valuations due to meet minimum energy performance certificate
(‘EPC’) requirements for properties having low energy efficiency.
Sensitivity analysis has been conducted on EPC upgrade costs that
would be higher in a faster transition scenario due to the accelerated
pace of upgrades. In the Below 2 Degrees scenario, we assume
actions where non-domestic properties are required to achieve an
EPC rating of B by 2040. To meet these minimum standards,
counterparties in our portfolio would potentially need to retrofit their
properties or risk having stranded assets with a material valuation
haircut.
The table below demonstrates the impact on our CRE portfolio for
specific markets, including the three biggest markets – Hong Kong,
the UK and the US. This shows the increase in cumulative ECL over
different time horizons, under each scenario, compared with a
counterfactual scenario (expressed as a multiple).
Impact on our commercial real estate portfolio
Climate Scenarios
ECL increase 1,2
Short-term
Medium-term
Long-term
Below 2 Degrees
Downside Physical Risk
Lower
Impact
<1.1x
<1.25x
<1.5x
<1.75x
<2.25x <2.75x Higher
Impact
1 Increase in cumulative ECL compared with counterfactual over short,
medium and long-term time horizons, expressed as a multiple.
2 Values in the key represent the multiplier of increase in ECL, i.e. <1.1
equates to less than 10% increase over the counterfactual which excludes
climate change impacts.
Geographically, our most significant exposure is in Hong Kong, which
was assessed in a bespoke exercise. This region has material
physical risk exposure to wind and flooding due to strong tropical
cyclones. However, in the HKMA exercise, a large proportion of CRE
exposures were not materially impacted, with less than 0.5% of
properties suffering from damage greater than 3% of their asset
values per year. The properties are protected from cyclonic winds and
flooding due to high building standards, high elevation, and protection
from coastal defences in this region, such as rainstorm impacts being
muted due to the positive impact of new drainage tunnels and tanks
in the city.
Overall, and in line with our assessment in prior years, our analysis
shows our commercial real estate portfolio remains resilient to
climate risk. Under our Below 2 Degrees scenario, impact severity is
muted at the portfolio level as our counterparties have diversified
property portfolios with insurance coverage being a key loan
covenant. Under the Downside Physical Risk scenario, the impacts
were observed to be heightened due to significant global weather
events. We also observed impacts in the Severe Climate Stress
scenario are more significant, which were driven by coastal
inundation and flooding events.
Our CRE modelling is subject to similar limitations as our retail
mortgage climate models in regard to lack of historical data, reliance
on exact building co-ordinates and information on building resilience.
How we assess climate risk impacts
on other risk types
We use climate scenario analysis to assess the impacts on other
risks including traded risk, sovereign credit risk, pension risk and non-
financial risks.
In 2024 for traded risk, we explored the potential fair value impacts of
climate risks on our trading and banking portfolios across multiple
scenarios, covering physical and transition risk climate drivers, and
capturing short and long-term impacts. The analysis considered all
relevant asset classes including interest rates, exchange rates, credit
and equities, with market shocks capturing the impact of abrupt
increases in carbon prices or physical risk perils resulting in structural
economic impacts that affect the productivity of high-risk sectors at a
country level.
For sovereign credit risk we continued to assess the impacts of
climate risks on sovereign debt under the different climate scenarios.
For pension risk we modelled balance sheet and income statement
projections for the main defined benefit pension plans. This year’s
exercise focused on assessing the impact of a severe physical risk
shock using the Severe Climate Stress scenario.
For non-financial risk we assessed the potential impacts of a
misstatement in our ESG and climate-related reporting and
disclosures. For regulatory compliance risk, we assessed the
potential impacts of greenwashing in the manufacturing and
marketing of ESG funds and in the marketing of sustainability-linked
bonds. For resilience risk, we assessed the potential impacts on our
critical real estate from climate change, including temperature
extremes, drought, water stress, wildfire, tropical cyclones and
flooding.
Understanding the resilience of our
properties
Climate change poses a physical risk to the buildings that we occupy,
potentially impacting our operational resilience. This includes our
offices, retail branches and data centres, both in terms of loss and
damage, and business interruption.
We measure the impacts of climate and weather events on our
buildings on an ongoing basis using historical, current and scenario-
modelled forecast data. In 2024, there were 40 major storms that had
a minor impact on three of our buildings.
We use stress testing to evaluate the potential impact on our owned
or leased premises. Our 2024 scenario stress test analysed how nine
climate change-related hazards – comprising coastal flooding, fluvial
flooding, pluvial flooding, soil movement due to drought, temperature
extremes, water stress, wildfires, landslides and tropical cyclones –
could impact 2,719 of our properties.
The 2024 test modelled climate change with the Intergovernmental
Panel on Climate Change (‘IPCC’) Taking the Highway scenario
(SSP5-8.5), which projects that the rise in global temperatures will
likely exceed 4°C by 2100. It also modelled a less severe IPCC Middle
of the Road scenario (SSP2-4.5), which projects that global warming
will likely be limited to 2°C.
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227
Risk review
Key findings from the Taking the Highway scenario included that by
2050, 15 of our 2,719 properties will have a high potential for impact
due to climate change, with insurance-related losses estimated to be
in excess of 10% of the insured value of the buildings.
A key finding from the Middle of the Road scenario showed that the
total number of buildings at risk reduced from 15 to 9. The
highlighted facilities are still at risk from the same perils of extreme
temperature and water stress by 2050.
This forward-looking data along with historical data helps inform real
estate planning. We will continue to enhance our understanding of
how extreme weather events impact our buildings portfolio as
climate risk assessment tools improve and evolve. We buy insurance
for property damage and business interruption and consider
insurance as a loss-mitigation strategy depending on its availability
and price.
We regularly review and enhance our building selection process and
global engineering standards and will continue to assess historical
claims data to help ensure our building selection and design
standards address the potential impacts of climate change.
Conclusion to insights from climate
scenario analysis
Climate scenario analysis is an evolving process and there are data
and modelling limitations due to the information and expertise
available in the current market. Physical risk modelling is nascent and
currently we are only able to model direct climate peril impacts on
real estate. Limited considerations are made to the pricing
implications of new green products and clients that are likely to
emerge over the time horizon.
We will continue to enhance the use of climate scenario analysis in
our business decision making, supporting our climate resilience. We
have started to explore the impacts on our portfolio from a nature risk
perspective and expect the model and capabilities to evolve over
time.
Resilience risk
Overview
Resilience risk is the risk of sustained and significant business
disruption from execution, delivery, physical security or safety events,
causing the inability to provide critical services to our customers,
affiliates and counterparties. Resilience risk arises from failures or
inadequacies in processes, people, systems or external events.
Resilience risk management
Key developments in 2024
During the year, we conducted several initiatives to keep pace with
geopolitical, regulatory and technology changes, and strengthened
the management of resilience risk.
–
We continued to recognise that our customers were impacted by
service disruptions, responded to these urgently and aimed to
recover with minimum delay. We continued to initiate post-
incident review processes to prevent recurrence. Where we
identify that investment is required to further enhance the Group’s
operational resilience capabilities, findings are fed into the Group’s
financial planning, helping to ensure we continue to meet the
expectations of our customers and our regulators.
–
We continued to monitor markets affected by the Russia-Ukraine
war and the conflict in the Middle East, as well as other
geopolitical events, for any potential impact they may have on our
colleagues and operations.
–
We provided analysis and easy-to-access risk and control
information and metrics to enable management to focus on non-
financial risks in their decision making and appetite setting.
–
We further strengthened our non-financial risk governance and
senior leadership.
We prioritise our efforts on material risks and areas undergoing
strategic growth, aligning our location strategy to this need. We also
remotely provide oversight and stewardship, including support of
chief risk officers, in territories where we have no physical presence.
Governance and structure
The Enterprise Risk Management target operating model provides a
globally consistent view across resilience risks, strengthening our risk
management oversight while operating effectively as part of a
simplified non-financial risk structure.
We view resilience risk across nine sub-risk types related to:
technology and cybersecurity risk; third-party risk; transaction
processing risk; business interruption and incident risk; data risk;
change execution risk; building unavailability risk; protective security
risk and workplace safety.
Risk appetite and key escalations for resilience risk are reported to
the Non-Financial Risk Management Board, chaired by the Group
Chief Risk and Compliance Officer, with an escalation path to the
Group Risk Management Meeting and Group Risk Committee.
Key risk management processes
We operate processes to support our resilience according to our Risk
Management Framework. Our operational resilience is our ability to
anticipate, prevent, adapt, respond to, recover, and learn from internal
or external disruption, continuing to provide Important Business
Services to customers and clients, while minimising impact on the
wider financial system when disruption occurs. This is achieved via
day-to-day oversight and periodic and ongoing assurance, such as
deep dive reviews and controls testing, which may result in
challenges being raised to our businesses and group governance by
our risk stewards. We have invested to improve response and
recovery strategies for our important business services and Important
Group business services to meet regulatory and customer
expectations.
Business operations continuity
We continue to monitor the Russia-Ukraine war and the conflict in the
Middle East, and remain ready to take measures to ensure business
continuity in affected markets should the situations require. There
have been no related significant disruptions to our services, although
businesses and functions in nearby markets continually review their
plans and responses to minimise any potential impacts.
Risk review
228
HSBC Holdings plc Annual Report and Accounts 2024
Regulatory compliance risk
Overview
Regulatory Compliance risk is the risk associated with breaching our
duty to clients and other counterparties, inappropriate market conduct
(including unauthorised trading) and breaching related financial
services regulatory standards. Regulatory Compliance risk arises from
the failure to observe relevant laws, codes, rules and regulations and
can manifest itself in poor market or customer outcomes and lead to
fines, penalties and reputational damage to our business. We aim to
keep abreast of developments in legal principles or conduct
requirements (including in relation to the risk of such developments in
one part of the financial industry being construed as applying to other
parts of the financial industry, which could lead to legal or regulatory
proceedings).
Regulatory compliance risk
management
Key developments in 2024
Regulatory horizon scanning and mapping capabilities continue to
evolve with a focus on enhanced connectivity to Risk management
systems to support better traceability of regulatory obligations.
We have enhanced our processes, framework, and governance
capabilities to improve the controls and oversight of Consumer Duty
outcomes in the UK. Work is underway to transition from event-
driven technology to incorporate Cloud and analytics capability to
enhance our oversight abilities in areas such as surveillance.
Governance and structure
The Group Head of Regulatory Compliance reports to the Group Chief
Risk and Compliance Officer. Regulatory Compliance and Financial
Crime Compliance teams work together and with relevant
stakeholders to achieve good conduct outcomes, and provide
enterprise-wide support on the Compliance risk agenda in close
collaboration with colleagues from the Group Risk and Compliance
function.
Key risk management processes
The Global Regulatory Compliance capability is responsible for setting
global policies, standards and risk appetite to guide the Group’s
management of Regulatory Compliance risk. It also devises the
required frameworks, support processes and tooling to protect
against Regulatory Compliance risks. The Group capability provides
oversight, review and challenge to the global market, regional and
local line of business teams to help them identify, assess and
mitigate Regulatory Compliance risks, where required. The Group’s
Regulatory Compliance risk policies are regularly reviewed. Global
policies and procedures require the identification and escalation of
any actual or potential regulatory breaches.
Relevant events and issues are escalated to the Group’s Non-
Financial Risk Management Board, the Group Risk Management
Meeting and the Group Risk Committee, as appropriate. The Group
Head of Regulatory Compliance attends the Risk and Compliance
Executive Committee, the Group Risk Management Meeting and the
Group Risk Committee.
Financial crime risk
Overview
Financial crime risk is the risk that HSBC’s products and services will
be exploited for criminal activity. This includes fraud, bribery and
corruption, tax evasion, sanctions and export control violations and
evasion, money laundering, terrorist financing and proliferation
financing. Financial crime risk arises from day-to-day banking
operations involving customers, third parties and employees.
Financial crime risk management
Key developments in 2024
We regularly review the effectiveness of our financial crime risk
management framework, which includes continued consideration of
the complex and dynamic nature of sanctions compliance and export
control risk. We continued to respond to the financial sanctions and
trade restrictions that have been imposed on Russia, including
methods used to limit sanctions evasion.
We continued to make progress with several key financial crime risk
management initiatives, including:
–
deployment of our intelligence-led, dynamic risk assessment
capability for customer account monitoring in additional entities
and global businesses;
–
deployment of a next generation capability to increase our
monitoring coverage on correspondent banking activity in
additional markets;
–
enhancing our fraud controls and continuing to invest in, and
monitor, technological developments; and
–
enhancements in response to the rapidly evolving and complex
global payments landscape and refinement of our digital assets
and currencies strategy.
Governance and structure
The structure of the Financial Crime function remained substantively
unchanged in 2024. The Group Head of Financial Crime and Group
Money Laundering Reporting Officer continues to report to the Group
Chief Risk and Compliance Officer, while the Group Risk Committee
retains oversight of matters relating to financial crime.
Key risk management processes
We will not tolerate knowingly conducting business with individuals
or entities believed to be engaged in criminal activity. We require
everybody in HSBC to play their role in maintaining effective systems
and controls to prevent and detect financial crime. Where we believe
we have identified suspected criminal activity or vulnerabilities in our
control framework, we will take appropriate mitigating action.
We manage financial crime risk because it is the right thing to do to
protect our customers, shareholders, staff, the communities in which
we operate, as well as the integrity of the financial system on which
we all rely. We operate in a highly regulated industry in which these
same policy goals are codified in law and regulation.
We are committed to complying with the laws and regulations of all
the markets in which we operate and apply a consistently high
financial crime standard globally.
We continued to invest in enhancing our operational control
capabilities and technology solutions to deter and detect criminal
activity. We further strengthened our financial crime risk taxonomy
and control libraries and our monitoring capabilities through
technology deployments. We developed more targeted metrics, and
continued to seek to enhance our governance and reporting.
HSBC Holdings plc Annual Report and Accounts 2024
229
Risk review
We are committed to working in partnership with the wider industry
and the public sector in managing financial crime risk. In 2024, our
focus remained on measures to improve the overall effectiveness of
the global financial crime framework and promote the risk-based
approach.
Through our work with industry bodies, such as the Wolfsberg Group,
we provided input into legislative and regulatory reform activities and
supported the efforts of the global standard setter, the Financial
Action Task Force. We did this by contributing to the development of
responses to consultation papers focused on how financial crime risk
management frameworks can deliver more effective outcomes in
detecting and deterring criminal activity. In addition, we participated
in a number of public events related to the promotion of risk-based
supervision, payment transparency, fraud risk management and
financial inclusion, as well as tackling forestry crimes, wildlife
trafficking and human trafficking.
Model risk
Overview
Model risk is the risk of the potential for adverse consequences from
model errors or the inappropriate use of modelled outputs to inform
business decisions.
Model risk arises in both financial and non-financial contexts
whenever business decision making includes reliance on models.
Key developments in 2024
In 2024, we continued to make improvements in our Model Risk
Management (‘MRM’) processes amid regulatory changes in MRM
requirements.
Initiatives during the year included:
–
updating our MRM Framework to meet the requirements of the
PRA’s SS1/23 with a programme of work in progress to
implement these changes across the model landscape;
–
completing a review of model tiering across the organisation
assessing the materiality and complexity of all models and
assigning a new tier which will drive the level of oversight required
at model level;
–
introducing a new framework to govern and manage the risks
associated with Deterministic Quantitative Methods, which are
complex and material calculators that although not technically
models still present similar risks;
–
following feedback from the PRA and other regulators on a
number of our model submissions for internal ratings-based (‘IRB’)
models, we are delivering a programme of work to redevelop
several IRB models for wholesale credit;
–
enhancing our framework for the independent validation of models
accounting for new generative AI techniques becoming more
widely used; and
–
working closely with businesses and functions in developing a
governance framework to manage the range of risks these AI and
Machine Learning (‘ML’) techniques can introduce.
Governance and structure
Model risk governance committees at the Group, business and
functional levels provide oversight of model risk. The committees
include senior leaders from the global businesses and the Group Risk
and Compliance function, and focus on model-related concerns and
are supported by key model risk metrics. We also have Model Risk
Committees in our geographical regions focused on local delivery and
requirements. The Group-level Model Risk Committee is chaired by
the Group Chief Risk and Compliance Officer, and the heads of key
businesses participate in these meetings.
Key risk management processes
We use a variety of modelling approaches, including regression,
simulation, sampling, machine learning and judgemental scorecards
for a range of business applications. These activities include
customer selection, product pricing, financial crime transaction
monitoring, creditworthiness evaluation and financial reporting. Global
responsibility for managing model risk is delegated from the Board to
the Group Chief Risk and Compliance Officer, who authorises the
Group Model Risk Committee. This committee regularly reviews our
model risk management policies and procedures, and requires the
first line of defence to demonstrate comprehensive and effective
controls based on a library of model risk controls provided by Model
Risk Management. Model Risk Management also reports on model
risk to senior management and the Group Risk Committee on a
regular basis through the use of the risk map, risk appetite metrics
and top and emerging risks.
We regularly review the effectiveness of these processes, including
the model risk committee structure, to help ensure appropriate
understanding and ownership of model risk is embedded in the
businesses and functions.
Risk review
230
HSBC Holdings plc Annual Report and Accounts 2024
Insurance manufacturing
operations risk
Contents
231
Overview
231
Insurance manufacturing operations risk management
232
Insurance manufacturing operations risk in 2024
232
Measurement
233
Key risk types
233
– Market risk
234
– Credit risk
234
– Liquidity risk
235
– Insurance underwriting risk
Overview
The key risks for our insurance manufacturing operations are market
risk, in particular interest rate and equity, credit risk and insurance
underwriting risk. These have a direct impact on the financial results
and capital positions of the insurance operations.
HSBC’s insurance business
We sell insurance products through a range of channels including our
branches, insurance sales forces, direct channels and third-party
distributors. The majority of sales are through an integrated
bancassurance model that provides insurance products principally for
customers with whom we have a banking relationship, although the
proportion of sales through other sources such as independent
financial advisers, tied agents and digital platforms is increasing.
For the insurance products we manufacture, the majority of sales are
savings, universal life and protection contracts.
We choose to manufacture these insurance products in HSBC
subsidiaries based on an assessment of operational scale and risk
appetite. Manufacturing insurance allows us to retain the risks and
rewards associated with writing insurance contracts by keeping part
of the underwriting profit and investment income within the Group.
Our life insurance manufacturing subsidiaries operate in eight
markets, which are Hong Kong, Macau, Singapore, mainland China,
France, UK, Malta and Mexico. This excludes Argentina where the
sale of the insurance business was completed on 6 December 2024.
In addition, we have: an interest in a life insurance manufacturing
associate in India; a captive insurance entity in Bermuda that insures
the non-financial risks of the wider Group; and a reinsurance entity in
Bermuda.
Where we do not have the risk appetite or operational scale to be an
effective insurance manufacturer, we engage with a small number of
leading external insurance companies in order to provide insurance
products to our customers. These arrangements are generally
structured with our exclusive strategic partners and earn the Group a
combination of commissions, fees and a share of profits. We
distribute insurance products in all of our geographical regions.
This section focuses only on the risks relating to the insurance
products we manufacture.
Insurance manufacturing operations
risk management
Key developments in 2024
The insurance manufacturing subsidiaries follow the Group’s risk
management framework. In addition, there are specific policies and
practices relating to the risk management of insurance contracts,
which did not change materially over 2024. During the year, there
was continued market volatility observed across interest rates, equity
and credit markets and foreign exchange rates. This was
predominantly driven by geopolitical factors and wider inflationary
concerns. Other areas of focus were the ongoing integration of the
insurance business that was acquired through AXA Singapore in 2022
into the Group’s risk management framework, development of
processes and systems within the reinsurance entity established in
Bermuda, and controls supporting IFRS 17.
As mentioned, the insurance business in Argentina was sold during
2024, with the sale completing on 6 December 2024. Following
HSBC’s announcement on 20 December 2024 of the signing of a
memorandum of understanding for the planned sale of its French
insurance business, the balance sheet of the French business has
been reported as held for sale at 31 December 2024. Further details
are provided on page 411.
Governance and structure
(Audited)
Insurance manufacturing risks are managed to a defined risk appetite,
which is aligned to the Group’s risk appetite and risk management
framework, including its three lines of defence model. For details of
the Group’s governance framework, see page 128. The Global
Insurance Risk Management Meeting oversees the control
framework globally and is accountable to the WPB Risk Management
Meeting on risk matters relating to the insurance business.
The monitoring of the risks within our insurance operations is carried
out by Insurance Risk teams. The Group’s risk stewardship functions
support the Insurance Risk teams in their respective areas of
expertise.
Stress and scenario testing
(Audited)
Stress testing forms a key part of the risk management framework
for the insurance business. We participate in local and Group-wide
regulatory stress tests, as well as internally developed stress and
scenario tests, including Group internal stress test exercises.
The results of these stress tests and the adequacy of management
action plans to mitigate these risks are considered in the Group’s
ICAAP and the entities’ regulatory Own Risk and Solvency
Assessments, which are produced by all material entities.
Key risk management processes
Market risk
(Audited)
All our insurance manufacturing subsidiaries have market risk
mandates and limits that specify the investment instruments in which
they are permitted to invest and the maximum quantum of market
risk that they may retain. They manage market risk by using some or
all of the techniques listed below, among others, depending on the
nature of the contracts written.
–
We are able to adjust bonus rates to manage the liabilities to
policyholders for products with participating features. The effect is
that a significant proportion of the market risk is borne by the
policyholder.
–
We use asset and liability matching where asset portfolios are
structured to support projected liability cash flows. The Group
manages its assets using an approach that considers asset quality,
diversification, cash flow matching, liquidity, volatility and target
HSBC Holdings plc Annual Report and Accounts 2024
231
Risk review
investment return. We use models to assess the effect of a range
of future scenarios on the values of financial assets and
associated liabilities, and ALCOs employ the outcomes in
determining how best to structure asset holdings to support
liabilities.
–
We use derivatives and other financial instruments to protect
against adverse market movements.
–
We design new products to mitigate market risk, such as
changing the investment return sharing proportion between
policyholders and the shareholder.
Credit risk
(Audited)
Our insurance manufacturing subsidiaries also have credit risk
mandates and limits within which they are permitted to operate,
which consider the credit risk exposure, quality and performance of
their investment portfolios. Our assessment of the creditworthiness
of issuers and counterparties is based primarily upon internationally
recognised credit ratings and other publicly available information.
Stress testing is performed on investment credit exposures using
credit spread sensitivities and default probabilities.
We use a number of tools to manage and monitor credit risk. These
include a credit report containing a watch-list of investments with
current credit concerns, primarily investments that may be at risk of
future impairment or where high concentrations to counterparties are
present in the investment portfolio. Sensitivities to credit spread risk
are assessed and monitored regularly.
Capital and liquidity risk
(Audited)
Capital risk for our insurance manufacturing subsidiaries is assessed
in the Group’s ICAAP, based on their financial capacity to support the
risks to which they are exposed. Capital adequacy is assessed on
both the Group’s economic capital basis, and the relevant local
insurance regulatory basis.
Risk appetite buffers are set to ensure that the operations are able to
remain solvent, allowing for business-as-usual volatility and extreme
but plausible stress events.
Liquidity risk is less material for the insurance business. It is managed
by cash flow matching and maintaining sufficient cash resources,
investing in high credit-quality investments with deep and liquid
markets, monitoring investment concentrations and restricting them
where appropriate, and establishing committed contingency
borrowing facilities.
Insurance manufacturing subsidiaries complete quarterly liquidity risk
reports and an annual review of the liquidity risks to which they are
exposed.
Insurance underwriting risk
(Audited)
Our insurance manufacturing subsidiaries primarily use the following
frameworks and processes to manage and mitigate insurance
underwriting risks:
–
a formal approval process for launching new products or making
changes to products;
–
a product pricing and profitability framework, which requires initial
and ongoing assessment of the adequacy of premiums charged
on new insurance contracts to meet the risks associated with
them;
–
a framework for customer underwriting;
–
reinsurance, which cedes risks to third-party reinsurers to keep
risks within risk appetite, reduce volatility and improve capital
efficiency; and
–
oversight by financial reporting committees and actuarial review
committees in each of our entities of the methodology and
assumptions that underpin IFRS 17 reporting.
Insurance manufacturing operations risk in 2024
Measurement
The following tables show the composition of the fair value of underlying items of the Group’s participating contracts at the reporting date.
Life direct
participating
and investment
DPF contracts1
Life
other
contracts2
Other
contracts3
Shareholder
assets
and liabilities
Total
At 31 Dec 2024
$m
$m
$m
$m
$m
Financial assets
98,676
4,452
6,227
5,967
115,322
– trading assets
—
—
—
—
—
– financial assets designated and otherwise mandatorily measured
at fair value through profit or loss
94,327
4,233
4,839
690
104,089
– derivatives
207
7
1
—
215
– financial investments – at amortised cost
545
90
1,060
4,335
6,030
– financial assets at fair value through other comprehensive income
—
—
6
73
79
– other financial assets
3,597
122
321
869
4,909
Insurance contract assets
14
104
—
—
118
Reinsurance contract assets
—
5,013
—
—
5,013
Other assets and investment properties4
24,647
64
36
3,337
28,084
Total assets at 31 Dec 2024
123,337
9,633
6,263
9,304
148,537
Liabilities under investment contracts designated at fair value
—
—
5,931
—
5,931
Insurance contract liabilities
102,605
4,427
—
—
107,032
Reinsurance contract liabilities
—
701
—
—
701
Deferred tax
—
—
—
12
12
Other liabilities4
21,772
39
—
6,035
27,846
Total liabilities
124,377
5,167
5,931
6,047
141,522
Total equity
—
—
—
7,015
7,015
Total liabilities and equity at 31 Dec 2024
124,377
5,167
5,931
13,062
148,537
Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
Risk review
232
HSBC Holdings plc Annual Report and Accounts 2024
Life direct
participating and
investment DPF
contracts1
Life
other
contracts2
Other
contracts3
Shareholder
assets
and liabilities
Total
At 31 Dec 2023
$m
$m
$m
$m
$m
Financial assets
113,605
3,753
5,812
7,696
130,866
– trading assets
—
—
—
—
—
– financial assets designated and otherwise mandatorily measured
at fair value through profit or loss
100,427
3,593
4,177
1,166
109,363
– derivatives
258
10
—
6
274
– financial investments – at amortised cost
1,351
67
1,157
4,772
7,347
– financial assets at fair value through other comprehensive income
8,859
—
5
693
9,557
– other financial assets
2,710
83
473
1,059
4,325
Insurance contract assets
13
213
—
—
226
Reinsurance contract assets
—
4,871
—
—
4,871
Other assets and investment properties
2,782
164
35
1,636
4,617
Total assets at 31 Dec 2023
116,400
9,001
5,847
9,332
140,580
Liabilities under investment contracts designated at fair value
—
—
5,103
—
5,103
Insurance contract liabilities
116,389
3,961
—
—
120,350
Reinsurance contract liabilities
—
819
—
—
819
Deferred tax
—
1
—
3
4
Other liabilities
—
—
—
6,573
6,573
Total liabilities
116,389
4,781
5,103
6,576
132,849
Total equity
—
—
—
7,731
7,731
Total liabilities and equity at 31 Dec 2023
116,389
4,781
5,103
14,307
140,580
Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
1 ‘Life direct participating and investment DPF contracts’ are life direct participating contracts and investment contracts with discretionary participating features.
These are substantially measured under the variable fee approach measurement model.
2 ‘Life other contracts’ are measured under the general measurement model and mainly include protection insurance contracts as well as reinsurance contracts.
The reinsurance contracts primarily provide diversification benefits over the life direct participating and investment DPF contracts.
3 ‘Other contracts’ includes investment contracts for which HSBC does not bear significant insurance risk.
4 ’Other assets and investment properties’ includes $24,222m and ’Other liabilities’ includes $23,420m in respect of the classification of the French insurance
business assets and liabilities as held for sale at 31 December 2024. Further details are provided on page 411.
Key risk types
Market risk
(Audited)
Description and exposure
Market risk is the risk of changes in market factors affecting HSBC’s
capital or profit. Market factors include interest rates, equity and growth
assets, credit spreads and foreign exchange rates.
Our exposure varies depending on the type of contract issued. Our most
significant life insurance products are contracts with participating
features. These products typically include some form of capital guarantee
or guaranteed return on the sums invested by the policyholders, to which
bonuses are added if allowed by the overall performance of the funds. For
contracts without participating features, some form of guarantee may still
exist but HSBC’s ability to share risks with policyholders will be reduced.
Funds supporting these savings products are primarily invested in fixed
income, with a proportion in some cases allocated to other asset classes
to provide customers with the potential for enhanced returns.
These products expose HSBC to the risk of variation in asset returns,
which will impact our participation in the investment performance.
In addition, in some scenarios the asset returns can become insufficient
to cover the policyholders’ financial guarantees, and some contracts are
non-participating, in which case the shortfall has to be met by HSBC.
Amounts are held against the cost of such positions, calculated by
stochastic modelling in the larger entities.
The cost of such guarantees are generally not material and are absorbed
by the insurance fulfilment cash flows.
For unit-linked contracts, market risk is substantially borne by the
policyholder, but some market risk exposure typically remains, as fees
earned are related to the market value of the linked assets.
Sensitivities
The following table provides the impacts on the CSM, profit after tax and
equity of our insurance manufacturing subsidiaries from reasonably
possible effects of changes in selected interest rate, credit spread, equity
price, growth assets and foreign exchange rate scenarios for the year.
These sensitivities are prepared in accordance with current IFRS
Accounting Standards and are based on changing one assumption at a
time with other variables being held constant, recognising that in practice
such variables could be correlated.
Due in part to the impact of the cost of guarantees and hedging strategies
which may be in place, the relationship between the CSM, profit after tax
and total equity and the risk factors is non-linear. Therefore, the results
disclosed should not be extrapolated to measure sensitivities to different
levels of stress. For the same reason, the impact of the stress is not
necessarily symmetrical on the upside and downside. The sensitivities
are stated before allowance for management actions, which may mitigate
the effect of changes in the market environment.
The method used for deriving sensitivity information and significant
market risk factors remain unchanged except for updates made to the
foreign exchange rate risk methodology, which now limits the impacts to
within more recent historical ranges. 2023 comparative sensitivities have
been updated to reflect this change.
The sensitivities provided below include the French insurance
business, which was classified as held for sale at 31 December 2024.
Further details are provided on page 411.
HSBC Holdings plc Annual Report and Accounts 2024
233
Risk review
Sensitivity of HSBC’s insurance manufacturing subsidiaries to market risk factors
(Audited)
2024
2023
Effect on
CSM
Effect on profit
after tax1
Effect on
total equity
Effect on
CSM
Effect on
profit after tax1
Effect on
total equity
$m
$m
$m
$m
$m
$m
+100 basis point parallel shift in yield curves
(155)
83
52
(92)
66
32
-100 basis point parallel shift in yield curves
(249)
(217)
(186)
(390)
(137)
(103)
+100 basis point shift in credit spreads
(907)
(84)
(115)
(884)
(11)
(45)
-100 basis point shift in credit spreads
876
60
91
806
104
138
10% increase in growth assets2
467
73
73
436
78
78
10% decrease in growth assets2
(514)
(79)
(79)
(507)
(85)
(85)
10% appreciation in US dollar exchange rate against local
functional currency3
71
17
17
24
(1)
(1)
10% depreciation in US dollar exchange rate against local
functional currency3
(26)
(3)
(3)
(35)
(3)
(3)
1 ‘Effect on profit after tax‘ in respect for the year.
2 ‘Growth assets’ primarily comprise equity securities and investment properties. Variability in growth asset fair value constitutes a market risk to insurance
manufacturing subsidiaries.
3 During the year 10% US dollar exchange rate methodology changed and the 10% sensitivity range applies to all currencies except for the Hong Kong dollar,
where the extent of change is limited by the impact of the HKD to USD peg. The comparatives have been restated accordingly.
Credit risk
(Audited)
Description and exposure
Credit risk is the risk of financial loss if a customer or counterparty
fails to meet their obligation under a contract. It arises in two main
risks for our insurance manufacturers:
–
the risk associated with credit spread volatility and default by debt
security counterparties after investing premiums to generate a
return for policyholders and shareholders; and
–
the risk of default by reinsurance counterparties and non-
reimbursement for claims made after ceding insurance risk.
The amounts outstanding at the balance sheet date in respect
of these items are shown in the table on page 232.
The credit quality of the reinsurers’ share of liabilities under insurance
contracts is assessed as ‘satisfactory’ or higher (as defined on
page 139), with none of the exposure being either past due or
impaired (2023: none).
Credit risk on assets supporting unit-linked liabilities is predominantly
borne by the policyholders. Therefore, our exposure is primarily
related to liabilities under non-linked insurance and investment
contracts and shareholders’ funds. The credit quality of insurance
financial assets is included in the table on page 166.
The risk associated with credit spread volatility is to a large extent
mitigated by holding debt securities to maturity, and sharing a degree
of credit spread experience with policyholders.
Liquidity risk
(Audited)
Description and exposure
Liquidity risk is the risk that an insurance operation, though solvent,
either does not have sufficient financial resources available to meet
its obligations when they fall due, or can secure them only at
excessive cost. Liquidity risk may be able to be shared with
policyholders for products with participating features.
The remaining maturity of insurance contract liabilities is included in
Note 4 on page 373.
The amounts of insurance contract liabilities that are payable on demand are set out by the product grouping below; 2024 balances exclude the
French insurance business that was classified as held for sale at 31 December 2024 (further details are provided on page 411).
Amounts payable on demand
(Audited)
2024
2023
Amounts payable
on demand
Carrying amount
for these
contracts
Amounts payable
on demand
Carrying amount
for these contracts
$m
$m
$m
$m
Life direct participating and investment DPF contracts
98,275
102,605
107,287
116,389
Life other contracts
2,960
4,427
2,765
3,961
At 31 Dec
101,235
107,032
110,052
120,350
Risk review
234
HSBC Holdings plc Annual Report and Accounts 2024
Insurance underwriting risk
Description and exposure
Insurance underwriting risk is the risk of loss through adverse
experience, in either timing or amount, of insurance underwriting
parameters (non-economic assumptions). These parameters include
mortality, morbidity, longevity, lapse and expense rates.
The principal risk we face is that, over time, the cost of the contract,
including claims and benefits, may exceed the total amount of
premiums and investment income received.
The tables on page 232 analyse our life insurance underwriting risk
exposures by composition of the fair value of the underlying items.
The insurance underwriting risk profile and related exposures remain
largely consistent with those observed at 31 December 2023.
Sensitivities
(Audited)
The following table shows the sensitivity of the CSM, profit and total
equity to reasonably foreseeable changes in non-economic
assumptions across all our insurance manufacturing subsidiaries.
These sensitivities are prepared in accordance with current IFRS.
Sensitivity to lapse rates depends on the type of contracts
being written. An increase in lapse rates typically has a negative
effect on CSM (and therefore expected future profits) due to the loss
of future income on the lapsed policies. However, some contract
lapses have a positive effect on profit due to the existence of policy
surrender charges.
Mortality and morbidity risk is typically associated with life insurance
contracts. During the year we have revised the sensitivity to mortality
and morbidity rates from 10% to 5% to align with reasonably
foreseeable changes, and the comparatives have been restated
accordingly. The effect on profit of an increase in mortality or
morbidity depends on the type of business being written.
Expense rate risk is the exposure to a change in the allocated cost
of administering insurance contracts. To the extent that increased
expenses cannot be passed on to policyholders, an increase in
expense rates will have a negative effect on our profits. This risk is
generally greatest for our smaller entities.
The impact of changing insurance underwriting risk factors is primarily
absorbed within the CSM, unless contracts are onerous in which case
the impact is directly to profit. The impact of changes to the CSM is
released to profits over the expected coverage periods of the related
insurance contracts.
The sensitivities provided below include the French insurance
business, which was classified as held for sale at 31 December 2024.
Further details are provided on page 411.
Sensitivity of HSBC’s insurance manufacturing subsidiaries to insurance underwriting risk factors1
(Audited)
Effect on
CSM
Effect on
profit after tax2
Effect on
total equity
At 31 Dec 2024
$m
$m
$m
10% increase in lapse rates
(282)
(21)
(30)
10% decrease in lapse rates
297
23
36
5% increase in mortality and/or morbidity rates
(92)
(16)
(20)
5% decrease in mortality and/or morbidity rates
102
14
23
10% increase in expense rates
(66)
(11)
(15)
10% decrease in expense rates
68
12
15
At 31 Dec 2023
10% increase in lapse rates
(277)
(24)
(24)
10% decrease in lapse rates
290
29
29
5% increase in mortality and/or morbidity rates3
(87)
(11)
(11)
5% decrease in mortality and/or morbidity rates3
87
16
16
10% increase in expense rates
(68)
(6)
(6)
10% decrease in expense rates
67
11
11
1 The sensitivities impacts are provided after considering the impacts of reinsurance contracts held as risk mitigation.
2 ‘Effect on profit after tax‘ in respect for the year.
3 During the year the sensitivity to mortality and morbidity rates have been changed from 10% to 5% and the comparatives have been restated accordingly.
HSBC Holdings plc Annual Report and Accounts 2024
235
Risk review
236
HSBC Holdings plc Annual Report and Accounts 2024
Corporate
governance
report
HSBC continues to enhance its corporate
governance practices and procedures to
support the Board’s commitment to high
standards of corporate governance.
The corporate governance report contains the
Report of the Directors and gives details of our
Board of Directors, senior management, and
Board committees. It outlines key aspects of
our approach to corporate governance,
including internal control.
It also includes the Directors’ remuneration
report, which explains our policies on
remuneration and their application.
We have a comprehensive range of policies and systems
in place designed to help ensure that the Group is well
managed, with effective oversight and control.
237
The Board
242
Senior management
245
How we are governed
251
Board matters considered and workforce
engagement
257
Board and committee effectiveness,
performance and accountability
259
Board committees
279
Directors’ remuneration report
318
Share capital and other related governance
disclosures
323
Internal control
325
Employees
327
Statement of compliance
London, UK, 2019. HSBC Lion, 8 Canada Square.
The Board
The Board, which seeks to promote the Group’s long-term success,
deliver sustainable value to shareholders and promote a culture
of openness and debate, comprises diverse, high-calibre members
who have experience in our global markets.
Chairman and executive Directors
Sir Mark E Tucker (67)
Group Chairman
Appointed to the Board: September 2017
Group Chairman since: October 2017
Skills and experience: With over 40 years of
experience in financial services in Asia, the US, the
UK, and Africa, including 30 years based in Hong
Kong, Mark has a deep understanding of the
industry and the markets in which we operate.
Career: Mark is also non-executive Group Chairman
of the Discovery Group of South Africa. Mark was
previously Group Chief Executive and President of
AIA Group Limited (‘AIA’). Prior to that, he was
Group Chief Executive of Prudential plc. Mark
previously served on the Court of the Bank of
England. He has also served on the Board of the
Goldman Sachs Group.
External appointments:
– Non-executive Group Chairman of Discovery
Group of South Africa
– Supporting Chair of Chapter Zero
– Member of the Asia Business Council
– Member of the Hong Kong Chief Executive’s
Council of Advisers
– Member of the Investment Council of the
Supreme National Investment Committee of the
Kingdom of Saudi Arabia
– Chairman of the Multinational Chairmen’s Group
– Director, Peterson Institute for International
Economics
– Director, Institute of International Finance
– Trustee, Asia Society Global Board of Trustees
– Member of the China National Financial
Regulatory Administration International Advisory
Council (NFRA IAC)
– International Adviser, Hong Kong Academy of
Finance - International Council of Advisers
– Member of the Advisory Board of the Asia Global
Institute
– International Business Leaders’ Advisory Council
to the Mayor of Beijing (IBLAC Beijing) – Advisor
to the Mayor
– International Business Leaders’ Advisory Council
to the Mayor of Shanghai (IBLAC Shanghai) –
Advisor to the Mayor
Georges Elhedery (50)
Group CEO
Appointed to the Board: January 2023
Skills and experience: Georges has over 25 years
of experience in the banking industry across
Europe, the Middle East and Asia, and has held a
number of executive roles at a regional, global
business and functional level.
Career: Georges was appointed Group CEO from
2 September 2024. He most recently served as
Group CFO between January 2023 and September
2024. Georges joined HSBC in 2005 with extensive
trading experience in London, Paris and Tokyo. He
has since held a number of senior leadership roles,
including Head of Global Banking and Markets,
Middle East and North Africa; Chief Executive
Officer for HSBC, Middle East, North Africa and
Türkiye; Global Head of Markets; and co-Chief
Executive Officer, Global Banking and Markets
based in London.
External appointments:
– Member of the Monetary Authority of Singapore,
International Advisory Panel
– Independent non-executive Director of
Sustainable Markets Initiative Limited
– Member of the Financial Services Task Force of
the Sustainable Markets Initiative
– Member of the Advisory Board of The China
Children Development Fund
– Principal Member of The Glasgow Financial
Alliance for Net Zero
Manveen Kaur
(known as Pam Kaur) (61)
Group CFO
Appointed to the Board: January 2025
Skills and experience: Pam has extensive global
banking experience, gained over an almost 40-year
career with a number of global financial institutions.
She has performed many senior roles in audit,
business, compliance, finance and risk
management.
Career: Pam was appointed Group CFO on
1 January 2025. Prior to this, she served as Group
Chief Risk Officer from January 2020 and assumed
responsibility for Compliance in June 2021. She
served as Group Chief Risk and Compliance Officer
until December 2024. Prior to joining HSBC in April
2013 as Group Head of Internal Audit, Pam held
several senior positions including Global Head of
Group Audit for Deutsche Bank; Chief Financial
Officer and Chief Operating Officer of the
Restructuring and Risk Division for Royal Bank of
Scotland Group plc; Group Head of Compliance and
Anti-Money Laundering for Lloyds TSB; and Chief
Compliance Officer for Citigroup International.
External appointments:
– Non-executive Director of The Hongkong and
Shanghai Banking Corporation Limited
– Independent non-executive Director of abrdn plc
.
Board committee membership key
Committee Chair
Group Audit Committee
Group Risk Committee
Group Remuneration Committee
Nomination & Corporate Governance Committee
Group Technology and Operations Committee
For full biographical details of our Board
members, see www.hsbc.com/who-we-are/our-
people/board-of-directors.
HSBC Holdings plc Annual Report and Accounts 2024
237
Corporate governance
Independent non-executive Directors
Geraldine Buckingham (47)
Independent non-executive
Director
Appointed to the Board: May 2022
Skills and experience: Geraldine is
an experienced executive within the
global financial services industry, with
significant leadership experience in
Asia.
Career: Geraldine is the former Chair
and Head of Asia-Pacific at BlackRock,
where she was responsible for all
business activities across Hong Kong,
mainland China, Japan, Australia,
Singapore, India and Korea. After
stepping down from this role, she
acted as senior adviser to the
Chairman and Chief Executive Officer
of BlackRock. She earlier served as
BlackRock’s Global Head of Corporate
Strategy, and previously was a partner
within McKinsey & Company’s
financial services practice.
External appointments:
– Independent non-executive Director
of Brunswick Group Partnership Ltd
– Independent non-executive Director
of H.R.L. Morrison & Co Limited
– Member of the Advisory Board of
ClimateWorks Centre Australia
– Member of the Advisory Board of
the McKinsey Health Institute
Rachel Duan (54)
Independent non-executive
Director
Appointed to the Board: September
2021
Skills and experience: Rachel is an
experienced business leader with
exceptional international experience in
the US, Japan, mainland China and
Hong Kong.
Career: Rachel spent 24 years at
General Electric (‘GE’), where she
held positions including Senior Vice
President of GE, and President and
Chief Executive Officer of GE’s Global
Markets where she was responsible
for driving GE’s growth in Asia-Pacific,
the Middle East, Africa, Latin America,
Russia and the Commonwealth of
Independent States. She also
previously served as President and
Chief Executive Officer of GE
Advanced Materials China and then of
Asia-Pacific; President and CEO of GE
Healthcare China; and President and
CEO of GE China. She has previously
served as a non-executive Director of
AXA S.A.
External appointments:
– Independent non-executive Director
of Sanofi S.A.
– Independent non-executive Director
of the Adecco Group AG
– Independent non-executive Director
of Kering S.A.
Dame Carolyn Fairbairn (64)
Independent non-executive
Director
Appointed to the Board: September
2021
Skills and experience: Carolyn has
significant experience across the
media, government and finance
sectors, and a deep understanding of
the macroeconomic, regulatory and
political environment.
Career: An economist by training,
Carolyn has served as a partner at
McKinsey & Company, a member of
the UK prime minister John Major’s
Number 10 Policy Unit, and as
Director-General of the Confederation
of British Industry, and held senior
executive positions at the BBC and
ITV plc. She has extensive board
experience, having previously served
as non-executive Director of Lloyds
Banking Group plc, The Vitec Group
plc, Capita plc and BAE Systems plc.
She has also served as a non-
executive Director of the UK
Competition and Markets Authority
and the Financial Services Authority.
External appointments:
– Senior Independent non-executive
Director of Tesco plc
– Chair of Royal Mencap Society
Report of the Directors | Corporate governance report
238
HSBC Holdings plc Annual Report and Accounts 2024
James Forese (61)
Independent non-executive
Director
Appointed to the Board: May 2020
Skills and experience: Jamie has
over 30 years of international
business and management
experience in the finance industry
working in areas including global
markets, investment and private
banking.
Career: Jamie formerly served as
President of Citigroup. He began his
career in securities trading with
Salomon Brothers, one of Citigroup’s
predecessor companies, in 1985. In
addition to his most recent role as
Citigroup’s President, he was Chief
Executive Officer of Citigroup’s
Institutional Clients Group. He has
held the positions of Chief Executive
of its Securities and Banking division
and Head of its Global Markets
business.
External appointments:
– Non-executive Chair of HSBC North
America Holdings Inc
– Non-executive Chairman of Global
Bamboo Technologies
Ann Godbehere (69)
Independent non-executive
Director
Appointed to the Board: September
2023
Senior Independent non-executive
Director: May 2024
Skills and experience: Ann brings
deep financial acumen and extensive
financial services experience over a
30-year career spanning insurance,
retail and private banking, and wealth
management. She also provides
global perspectives, drawing upon
experiences and insights gained from
a long career in international business.
Career: After joining Swiss Re in
1996, Ann served as the company’s
Chief Financial Officer from 2003 to
2007. She was also Interim Chief
Financial Officer of Northern Rock
Bank from 2008 to 2009 in the period
immediately after its nationalisation.
Ann also has extensive board
experience, including with FTSE 100
companies, having previously served
as non-executive Director of
Prudential plc, British American
Tobacco plc, UBS AG, UBS Group AG
and as Senior Independent non-
executive Director of Rio Tinto plc and
Rio Tinto Limited.
External appointments:
– Non-executive Director of HSBC
Bank plc
– Non-executive Director and Chair of
the Audit Committee of Stellantis
N.V.
– Non-executive Director and Chair of
the Audit and Risk Committee of
Shell plc
Steven Guggenheimer (59)
Independent non-executive
Director
Appointed to the Board: May 2020
Skills and experience: Steven
brings extensive insight into
technologies ranging from artificial
intelligence to Cloud computing,
through his experience advising
businesses on digital transformation.
Career: Steven has more than 25
years of experience at Microsoft,
including more than a decade as
Corporate Vice President, where he
led teams focused on original
equipment manufacturers, developers
and independent software vendors
and artificial intelligence solutions.
External appointments:
– Independent non-executive Director
of BT Group plc
– Independent non-executive Director
of Leupold & Stevens, Inc
– Independent non-executive Director
of Forrit Holdings Limited
HSBC Holdings plc Annual Report and Accounts 2024
239
Corporate governance
Dr José Antonio Meade
Kuribreña (55)
Independent non-executive
Director
Appointed to the Board: March 2019
Workforce engagement non-executive
Director since: June 2022
Skills and experience: José has
extensive experience in public
administration, banking and financial
policy.
Career: José has held Cabinet-level
positions in the federal government of
Mexico, including as Secretary of
Finance and Public Credit, Secretary
of Social Development, Secretary of
Foreign Affairs and Secretary of
Energy. Prior to his appointment to
the Cabinet, he served as
Undersecretary and as Chief of Staff
in the Ministry of Finance and Public
Credit. José is also a former Director
General of Banking and Savings at the
Ministry of Finance and Public Credit,
and served as Chief Executive Officer
of the National Bank for Rural Credit.
External appointments:
–
Independent non-executive
Director of Alfa S.A.B. de C.V.
–
Independent non-executive
Director of Grupo Comercial
Chedraui, S.A.B. de C.V.
–
Independent Member of the
Technical Committee of Fibra Uno
Administracion SA de CV
–
Board member of the Global
Center on Adaptation
–
Member of the Advisory Board of
the University of California, Centre
for US-Mexican Studies
–
Member of the UNICEF Mexico
Advisory Board
Kalpana Morparia (75)
Independent non-executive
Director
Appointed to the Board: March 2023
Skills and experience: Kalpana is a
skilled business leader with significant
experience gained through a 45-year
career in banking across Asia,
primarily in India.
Career: Kalpana’s most recent
executive role was as Chair of J.P.
Morgan, South and Southeast Asia
and a member of J.P. Morgan’s Asia
executive committee, held until her
retirement in 2021. Before J.P.
Morgan, she was the Joint Managing
Director of ICICI Bank, India’s second-
largest bank, from 2001 to 2007. She
previously served as a non-executive
Director of Hindustan Unilever Limited
and Dr.Reddy’s Laboratories Ltd.
External appointments:
–
Independent non-executive
Director of The Great Eastern
Shipping Company Limited
–
Independent non-executive
Director of Philip Morris
International Inc
–
Independent Director of Meesho
Inc
–
Member of the Mentor Council of
the Institute for Sustainability,
Employment and Growth (ISEG
Foundation)
Eileen Murray (66)
Independent non-executive
Director
Appointed to the Board: July 2020
Skills and experience: Eileen has
extensive knowledge in financial
services, technology and corporate
strategy from a career spanning more
than 40 years.
Career: Eileen previously served as
co-Chief Executive Officer of
Bridgewater Associates, LP. Before
this, she was Chief Executive Officer
for Investment Risk Management
LLC, and President and co-Chief
Executive Officer of Duff Capital
Advisors. Eileen started her
professional career at Morgan
Stanley, where she held positions
including Controller, Treasurer, and
Global Head of Technology and
Operations, as well as Chief
Operating Officer for its Institutional
Securities Group. She was also Head
of Global Technology, Operations and
Product Control at Credit Suisse.
External appointments:
– Independent non-executive Director
of Guardian Life Insurance
Company of America
– Independent non-executive Director
of Broadridge Financial Solutions,
Inc
– Chair of Invisible Urban Charging
– Operating partner of Liberty City
Ventures
Report of the Directors | Corporate governance report
240
HSBC Holdings plc Annual Report and Accounts 2024
Brendan Nelson (75)
Independent non-executive
Director
Appointed to the Board: September
2023
Skills and experience: Brendan
brings UK and international financial
and auditing expertise, and significant
experience in auditing and as audit
committee chair of UK-listed
companies.
Career: Brendan spent over 25 years
as a partner at KPMG LLP, served on
the board from 2000 and as Vice
Chairman from 2006, until his
retirement in 2010. Internationally, he
held various senior positions including
Global Chairman of the financial
services practice. Subsequently,
Brendan joined the boards of bp plc
and NatWest Group plc where he also
served as Chairman of both
companies’ audit committees.
During his career, Brendan was
President of the Institute of Chartered
Accountants of Scotland, a member
of the Financial Reporting Review
Panel and a member of the Financial
Services Authority's Practitioner
Panel. As current Chairman of the
Board of BP Pension Trustees Ltd,
Brendan has received training in ESG
considerations for investment
decisions and helped set an ambition
to be net zero in terms of greenhouse
gas emissions from investments by
2050.
External appointments:
– Non-executive Director of HSBC UK
Bank plc
– Chairman of BP Pension Trustees
Ltd
Swee Lian Teo (65)
Independent non-executive
Director
Appointed to the Board: October 2023
Skills and experience: Swee Lian
brings extensive experience within
the international financial services
industry, having previously spent over
27 years with the Monetary Authority
of Singapore (‘MAS‘).
Career: During Swee Lian’s time at
the MAS, she worked in foreign
reserves management, financial
sector development, strategic
planning and financial supervision,
before she became the Deputy
Managing Director for Financial
Supervision. She retired from the
MAS in 2015 after serving as Special
Advisor, focused on MAS’s role in the
international regulatory framework, in
the Managing Director’s office. Swee
Lian previously served as a non-
executive Director on the boards of
AIA Group Limited, Singapore
Telecommunications Limited and the
Dubai Financial Services Authority.
External appointments:
– Chair of CapitaLand Integrated
Commercial Trust Management
Limited
– Director of Clifford Capital Pte Ltd
– Director of Clifford Capital Holdings
Pte Ltd
Aileen Taylor (52)
Group Chief People &
Governance Officer
Appointed: October 2024
Skills and experience: Aileen is
a solicitor with significant risk,
governance and regulatory
experience across the banking
industry. She is a member of the
European Corporate Governance
Council and the GC100.
Career: Prior to joining HSBC,
Aileen spent 19 years at the
Royal Bank of Scotland Group,
holding various legal, risk and
compliance roles. She was
appointed Group Secretary in
2010 and subsequently Chief
Governance Officer and Board
Counsel. Aileen started her HSBC
career as Group Company
Secretary and Chief Governance
Officer in 2019 and has been
leading connectivity between
Board and Executive for over five
years. Her role was expanded to
Group Chief Human Resources
and Governance Officer in
October 2024 and then became
Group Chief People &
Governance Officer. Aileen has
held various industry positions
such as a member of the
Financial Conduct Authority's
Listing Authority Advisory Panel.
Former Directors who served during the year
David Nish
David Nish retired from the Board on 3 May 2024
Sir Noel Quinn
Sir Noel Quinn retired from the Board on 2 September 2024
For full biographical details of our Board members, see
www.hsbc.com/who-we-are/our-people/board-of-directors.
HSBC Holdings plc Annual Report and Accounts 2024
241
Corporate governance
Senior management
Richard Blackburn (59)
Interim Group Chief Risk and
Compliance Officer
Richard was appointed Interim Group
Chief Risk and Compliance Officer in
January 2025. He also retains his
existing responsibilities as Global
Head of Traded and Treasury Risk
Management & Global Head of Risk
Analytics. Richard has 35 years’
experience in the financial services
sector and has been with HSBC for
over 20 years. In that time, he has
held a number of senior roles
including Regional Chief Risk Officer
for Europe and MENAT, Chief Risk &
Compliance Officer for Global Banking
& Markets, Chief Risk & Compliance
Officer for Global Commercial
Banking, Chief Financial Officer for
Global Markets and Head of Global
Markets Asset & Liability
Management.
Jonathan Calvert-Davies (56)
Group Head of Internal Audit
Jonathan is a standing attendee of the
Group Operating Committee, having
joined HSBC as Group Head of
Internal Audit in October 2019. He has
over 30 years of experience providing
assurance, audit and advisory services
to the banking and securities
industries in the UK, the US and
Europe. Jonathan’s previous roles
included leading KPMG UK’s financial
services internal audit services
practice and PwC’s UK internal audit
services practice. He also previously
served as interim Group Head of
Internal Audit at the Royal Bank of
Scotland Group.
Bob Hoyt (60)
Group Chief Legal Officer
Bob joined HSBC as Group Chief
Legal Officer in January 2021. He was
previously Group General Counsel at
Barclays from 2013 to 2020. Prior to
that, he was General Counsel and
Chief Regulatory Affairs Officer for
PNC Financial Services Group. Bob
has served as General Counsel and
Senior Policy Adviser to the US
Department of the Treasury under
Secretary Henry M. Paulson Jr, and as
Special Assistant and Associate
Counsel to the White House under
President George W. Bush.
David Liao (52)
Co-Chief Executive,
Asia and Middle East
David was appointed Co-Chief
Executive of the Asia-Pacific region in
2021, which was expanded to cover the
Middle East in January 2025. David,
who joined HSBC in 1997, has held
several senior roles during his HSBC
career including: Head of Global
Banking Coverage for Asia-Pacific;
President and Chief Executive of HSBC
China; Head of Global Banking and
Markets, HSBC China; and Treasurer
and Head of Global Markets, HSBC
China. He also serves as the Chair of
HSBC Bank (China) Company Limited,
and as a Director of Bank of
Communications Co., Limited and Hang
Seng Bank Limited.
Report of the Directors | Corporate governance report
242
HSBC Holdings plc Annual Report and Accounts 2024
Senior management, which includes
the Group Operating Committee,
effective from 1 January 2025,
supports the Group CEO in the day-
to-day management of the business
and the implementation
of strategy.
Barry O’Byrne (49)
Chief Executive Officer,
International Wealth & Premier
Banking
Barry was appointed Chief Executive
Officer of Wealth and Premier
Banking in October 2024. He joined
HSBC in 2017 firstly as Chief
Operating Officer for Global
Commercial Banking and became
Chief Executive Officer in 2019.
Before joining HSBC, Barry worked at
GE Capital for 19 years where he held
a number of senior leadership roles,
including Chief Executive Officer and
Chief Operating Officer for GE Capital
International.
Michael Roberts (64)
Chief Executive Officer,
HSBC Bank plc, and Corporate
and Institutional Banking
Michael was appointed Chief
Executive Officer, Corporate and
Institutional Banking and Western
Markets in January 2025. In this role
he also holds the role of CEO, HSBC
Bank plc, the Group’s non-ring-fenced
bank. Michael previously served as
Chief Executive Officer of HSBC US
and Americas until December 2024.
Prior to this he held the role of Chief
Executive Officer of HSBC USA when
he joined HSBC in 2019. Prior to
joining HSBC, Michael spent over 30
years at Citigroup in a number of
senior leadership roles, most recently
as Global Head of Corporate Banking
and Capital Management and Chief
Lending Officer.
Surendra Rosha (56)
Co-Chief Executive,
Asia and Middle East
Surendra was appointed Co-Chief
Executive of the Asia-Pacific region in
2021, which was expanded to cover
the Middle East in January 2025. He
is a Director of The Hongkong and
Shanghai Banking Corporation
Limited, HSBC Global Asset
Management Limited and HSBC Bank
Malaysia Berhad. Surendra joined
HSBC in 1991 and has held several
senior positions within Global Banking
and Markets, including Head of Global
Markets in Indonesia and Head of
Institutional Sales, Asia-Pacific. He
previously held the position of Chief
Executive for HSBC India and Head of
Financial Institutions Group, Asia-
Pacific.
John David Stuart
(known as Ian Stuart) (61)
Chief Executive Officer,
HSBC UK Bank plc
Ian has been Chief Executive Officer
of HSBC UK Bank plc, the Group’s UK
ring-fenced bank, since 2017. He
joined HSBC in 2014 and served as
Head of Commercial Banking, UK and
Europe, until taking up his current
role. Ian has worked over 45 years in
financial services, and previously
worked at Bank of Scotland, NatWest,
RBS and Barclays. Ian holds an
Honorary Masters and Honorary
Doctorate degree for his services to
the banking sector. He is a member of
the UK Finance Board, TheCityUK
Board, the UK Investment Council and
is a business ambassador for
Meningitis Now.
Stuart Riley (50)
Group Chief Information Officer
Stuart was appointed Group Chief
Information Officer in February 2024,
initially overseeing the Technology
function. In October 2024, he
assumed responsibilities for data and
analytics, and emerging technology,
innovation, and ventures. Prior to
joining HSBC, Stuart was Co-Chief
Information Officer of Citi, and
previously held senior technology
roles at Deutsche Bank. He has also
held the role of Partner at TAG
Consulting, a technology consulting
firm.
Suzy White (48)
Group Chief Operating Officer
Suzy was appointed Group Chief
Operating Officer in October 2024.
Suzy has been with HSBC for more
than 25 years and has held a number
of senior leadership roles, most
recently Chief Operating Officer for
Global Banking and Markets. Previous
roles included Regional Chief
Operating Officer for Global Markets
in the Americas, and Chief Risk
Officer for Global Banking and
Markets and Commercial Banking in
the US.
HSBC Holdings plc Annual Report and Accounts 2024
243
Additional members of the Group
Operating Committee
Georges Elhedery
Pam Kaur
Aileen Taylor
Other Senior Management who
served on the Group Executive
Committee during the year:
– Greg Guyett, former Chief
Executive Officer Global Banking
and Markets stepped down as a
Group Executive Committee
member on 31 December 2024. He
assumed the role of Chair, Strategic
Clients Group on 1 January 2025.
– Elaine Arden, former Group Chief
Human Resources Officer stepped
down on 30 September 2024.
– John Hinshaw, former Group Chief
Operating Officer stepped down on
30 September 2024.
– Nuno Matos, former Chief
Executive Officer Wealth and
Personal Banking stepped down on
30 September 2024.
– Colin Bell, former Chief Executive
Officer HSBC Bank plc and HSBC
Europe stepped down on
31 December 2024.
– Dr Celine Herweijer, former Group
Chief Sustainability Officer stepped
down on 31 December 2024.
– Steve John, former Group Chief
Communications and Brand Officer
stepped down on 31 December
2024.
– Stephen Moss, former Regional
Chief Executive Officer – Middle
East, North Africa and Türkiye
stepped down on 31 December
2024.
– Jonathan Bingham, Global Financial
Controller, served on the Group
Executive Committee as interim
Group Chief Financial Officer from
2 September 2024 to 31 December
2024.
– Jo Miyake attended meetings of
the Group Executive Committee as
interim CEO, Global Commercial
Banking from 1 October 2024 to
31 December 2024.
Corporate governance
11
9
9
7
4
4
6
9
Board and senior management diversity
We value difference
We believe that a diverse and inclusive Board, reflective of the communities we serve, is a
critical component of effective decision-making and of developing a sustainable and
successful business for HSBC.
This section outlines the key inclusion metrics for Board members and executive management as at 31 December 2024. The metrics as at 1 January
2025 have also been included to reflect changes to the Board and senior management that took effect from 1 January 2025.
Gender and ethnic representation
In accordance with the requirements of UK Listing Rule 6.6.6 (10) the tables below outline the current gender and ethnic representation of the
HSBC Holdings Board and executive management reflecting data gathered through self-identification.
Gender Identity
As at 31 December 2024
As at 1 January 2025
Board members
Executive
management2
Board members
Executive
management3
Number
%
Number of
senior
positions1
Number
%
Number
%
Number of
senior
positions1
Number
%
Male
6
46
3
15
79
6
43
2
10
77
Female
7
54
1
4
21
8
57
2
3
23
Other
—
—
—
—
—
—
—
—
—
—
Not specified/prefer not to say
—
—
—
—
—
—
—
—
—
—
Ethnic Background
As at 31 December 2024
As at 1 January 2025
Board members
Executive
management2
Board members
Executive
management3
Number
%
Number of
senior
positions1
Number
%
Number
%
Number of
senior
positions1
Number
%
White British or other White (including
minority-White groups)
8
62
3
13
69
8
57
2
9
69
Mixed/multiple ethnic groups
—
—
—
—
—
—
—
—
—
—
Asian/Asian British
3
23
—
4
21
4
29
1
3
23
Black/African/Caribbean/Black British
—
—
—
—
—
—
—
—
—
—
Other ethnic groups
2
15
1
1
5
2
14
1
1
8
Not specified/prefer not to say
—
—
—
1
5
—
—
—
—
—
1
Senior positions on the Board comprise the Group Chairman, Group CEO, Group CFO and Senior Independent non-executive Director.
2 Executive management comprises the Group Executive Committee members and the Group Head of Internal Audit.
3 Executive management comprises the Group Operating Committee members and the Group Head of Internal Audit.
Skills and experience
As it is essential to the effective governance of the Group, and the
Board’s oversight and challenge of management, the Board ensures
that collectively and individually, the Board possess the necessary
skills, knowledge, expertise and experience.
The summary provides an overview of the skills and experiences held
by the non-executive Directors on the Board. This is based on the
current skills matrix, which is reviewed annually by the Nomination &
Corporate Governance Committee to ensure that the Board has the
skills and experience required to effectively discharge its duties and to
support succession planning discussions. The skills and experiences
of the newly appointed non-executive Directors are also included in
the summary.
1 Corporate Social Responsibility ('CSR')
Report of the Directors | Corporate governance report
244
HSBC Holdings plc Annual Report and Accounts 2024
Banking
Finance
Risk
Customer
Digital technology
CSR
1/ESG
Direct Asia market experience
Global business experience
How we are governed
We are committed to high standards of corporate governance. The
Group has in place a comprehensive range of policies and procedures,
which are reviewed on a regular basis, designed to help ensure that
the Group’s end-to-end governance is well managed, with effective
oversight and controls.
Governance highlights 2024
Appointment of new Group
CEO
Read more on pages 22 and 259
to 262
Appointment of new Group CFO
Read more on pages 22, and 259
to 262
Governance simplification
Read more on pages 22 and 249
Oversight of organisational
changes
Read more on pages 22 to 23
Establishment of new Board
Sustainability Working Group
Read more on pages 23, 74 and
249
Establishment of Group
Technology and Operations
Committee
Read more on pages 249 and
276 to 278
Active stakeholder engagement
Read more on pages 20 to 23
Revised Directors’
Remuneration Policy
Read more from page 279
Board and executive governance
The Board, led by the Group Chairman, is responsible for, among
other matters:
–
promoting the Group’s long-term success and delivering
sustainable value to shareholders;
–
establishing and approving the Group’s strategy and objectives,
and monitoring the alignment of the Group’s purpose, strategy and
values with the desired culture and standards;
–
setting the Group’s risk appetite and monitoring the Group’s risk
profile;
–
approving and monitoring capital and financial resource plans for
achieving strategic objectives, including material transactions;
–
considering and approving the Group’s technology and
environmental, social and governance strategies;
–
reviewing the effectiveness of stakeholder engagement
mechanisms, including engagement with the workforce;
–
approving the appointment and remuneration of Directors,
including Board roles;
–
reviewing the Group’s overall corporate governance arrangements;
and
–
providing entrepreneurial leadership of the Group within a
framework of prudent and effective controls, which enable risks to
be assessed and managed.
A schedule of matters reserved to the Board is set out within its
terms of reference, which are available on our website at
www.hsbc.com/who-we-are/our-people/board-of-directors/board-
responsibilities. The Board’s powers are subject to relevant laws,
regulations and HSBC’s articles of association.
The role of the independent non-executive Directors is to support the
development of strategy, oversee risk, hold management to account
and ensure the executive Directors are discharging their
responsibilities properly, while creating the right culture to encourage
constructive challenge. Further details on the independence of the
Board can be found on page 321. Non-executive Directors also review
the performance of management in meeting agreed goals and
objectives. The Group Chairman meets with the non-executive
Directors without the executive Directors in attendance after Board
meetings and otherwise, as necessary.
The roles of Group Chairman and Group CEO are held by two
different individuals. There is a clear division of responsibilities
between the leadership of the Board by the Group Chairman, and the
executive responsibility for day-to-day management of HSBC’s
business undertaken by the Group CEO.
The majority of Board members are independent non-executive
Directors. As at 31 December 2024, the Board comprised the Group
Chairman, 11 non-executive Directors, and one executive Director
who is the Group CEO. From 1 January 2025, the newly appointed
Group CFO will be an executive Director.
For further details of Board members’ career backgrounds, skills, experience
and external appointments, see their biographies on page 237, and for a
breakdown of the diversity and skills of the Board and senior management,
see page 244.
Operation of the Board
The Board is ordinarily scheduled to meet nine times a year. In 2024,
the Board held 10 meetings. For further details on attendance at
those meetings, see page 246. The Board agenda is agreed by the
Group Chairman, working with both the Group CEO and the Group
Company Secretary. For further information, see ’Board matters
considered’ on page 251.
The Group Chief People & Governance Officer (who is also the duly
appointed Group Company Secretary), the Group Chief Risk and
Compliance Officer and the Group Chief Legal Officer were regular
attendees at Board meetings during 2024. The non-executive
Chairman of The Hongkong and Shanghai Banking Corporation
Limited was also a regular attendee at Board meetings. The chief
executive officers of the three global businesses often attended
Board strategy discussions, and other senior executives attended
Board meetings for specific items as and when requested by the
Board.
In addition, as agreed by the Board, the Board Oversight Sub-Group is
called on an ad hoc basis where necessary. Such meetings are an
informal mechanism for a smaller group of Board members and
management to discuss emerging issues and upcoming Board
matters.
HSBC Holdings plc Annual Report and Accounts 2024
245
Corporate governance
Board roles, responsibilities and meeting attendance
The table below sets out the Board members’ respective roles, responsibilities and attendance at Board meetings and the AGM in 2024. For a
full description of key Board members’ responsibilities, see www.hsbc.com/who-we-are/our-people.
Roles
Board
attendance in
20241
Responsibilities
Group Chairman
Sir Mark E Tucker2,4
11/11
– Provides effective leadership of the Board and promotes the highest standards of corporate governance practices.
– Leads the Board in providing strong strategic oversight and setting the Board’s agenda, culture and values.
– Leads the Board in challenging management’s thinking and proposals, and fosters open and constructive debate
among Directors.
– Maintains internal and external relationships with key stakeholders, and communicates investors’ views to the
Board.
– Organises periodic monitoring and evaluation, including externally facilitated evaluation, of the performance of the
Board, its committees and individual Directors.
– Leads on succession planning for the Board and its committees, ensuring appointments reflect diverse cultures,
skills and experiences.
Executive Director
Group CEO
Sir Noel Quinn4,6
Georges Elhedery4,6,7
7/7
4/4
– Leads and directs the fulfilment of the Group’s purpose and strategy, in alignment with the desired culture and
values as set by the Board.
– Leads the senior executive committee with responsibility for the day-to-day leadership and management of the
Group, in accordance with the authority delegated to him from the Board.
– Maintains effective relationships with key internal and external stakeholders including the Group Chairman, the
Board, customers, regulators, governments and investors.
– Maintains accountability for the Group’s compliance with applicable laws, codes, rules and regulations, good
market practice and HSBC’s own standards, value and policies.
Executive Director
Group CFO
Georges Elhedery4,6,7
Jonathan Bingham7
7/7
4/4
– Supports the Group CEO in developing and implementing the Group strategy, and recommends the annual budget
and long-term strategic and financial resource plan.
– Leads the Finance function and is responsible for effective financial and regulatory reporting, including the
effectiveness of the processes and controls, to ensure the financial control framework is robust and fit for
purpose.
– Maintains relationships with key stakeholders including shareholders.
Non-executive Director
Senior Independent
Director
David Nish3,4,,5
Ann Godbehere3,4,5
5/5
11/11
– Supports the Group Chairman, acting as intermediary for non-executive Directors when necessary.
– Leads the non-executive Directors in the oversight of the Group Chairman, supporting the clear division of
responsibility between the Group Chairman and the Group CEO.
– Listens to shareholders’ views if they have concerns that cannot be resolved through the normal channels.
Non-executive Directors
– Develop and approve the Group strategy.
– Challenge and oversee the performance of management in achieving agreed corporate goals and objectives.
– Approve the Group’s risk appetite and review risk profile and performance.
– Contribute to the assessment and monitoring of culture.
– Maintain internal and external relationships with the Group’s key stakeholders.
Geraldine Buckingham3,4
11/11
Rachel Duan3,4,8
10/11
Dame Carolyn Fairbairn3,4
11/11
James Forese3,4
11/11
Steven Guggenheimer3,4
11/11
Dr José Antonio Meade
Kuribreña3,4
11/11
Kalpana Morparia3,4
11/11
Eileen Murray3,4,8
10/11
Brendan Nelson3,4
11/11
Swee Lian Teo3,4
11/11
Group Chief People &
Governance Officer
(duly appointed Group
Company Secretary)
Aileen Taylor
– Maintains strong and consistent governance practices at Board level and throughout the Group.
– Supports the Group Chairman in ensuring effective functioning of the Board and its committees, and transparent
engagement between senior management and non-executive Directors.
– Facilitates induction and professional development of non-executive Directors.
– Advises and supports the Board and management in ensuring effective end-to-end governance and decision
making across the Group.
1 The total number of meetings comprises nine scheduled meetings, one ad hoc meeting and the AGM.
2 The non-executive Group Chairman was considered to be independent on appointment.
3 Independent non-executive Director. All of the non-executive Directors are considered to be independent. There are no relationships or circumstances that are
likely to affect any individual non-executive Director’s objective judgement. All non-executive Directors have confirmed their independence during the year.
4 Attended the AGM on 3 May 2024. Kalpana Morparia attended virtually.
5 David Nish retired from the Board with effect from 3 May 2024 and was succeeded as the Board’s senior independent non-executive Director on that date by
Ann Godbehere.
6 Sir Noel Quinn retired from the Board with effect from 2 September 2024 and was succeeded as Group CEO on that date by Georges Elhedery.
7 Georges Elhedery stepped down from his role as Group CFO with effect from 2 September 2024 and Jonathan Bingham was appointed interim Group CFO on
that date. Jonathan Bingham was not appointed as an executive Director. From 1 January 2025, Pam Kaur was appointed as an executive Director and assumed
the role of Group CFO.
8 Due to prior commitments, Eileen Murray was unable to attend the Board meeting in September 2024 and Rachel Duan was unable to attend the ad hoc Board
meeting held in October 2024.
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HSBC Holdings plc Annual Report and Accounts 2024
Relationship between the Board and
senior management
The Board delegates day-to-day management of the business and
implementation of strategy to the Group CEO. During the year, the
incumbent Group CEO was supported in his management of the
Group by recommendations and advice from the Group Executive
Committee (’GEC’), an executive forum comprising members of
senior management that included chief executive officers of the
global businesses and regions, as well as functional heads. With
effect from 1 January 2025, the Group CEO is supported in his role by
the Group Operating Committee (‘Group OpCo’) in place of the GEC.
The Group CEO reports to the Board on Group OpCo meetings'
outcomes and other executive matters of note relevant for the Board.
For further details of the senior management team, see page 242.
All Directors are encouraged to have contact with management at all
levels and have full access to management information as may be
required. Visits to local business operations and meetings with local
management are arranged for the non-executive Directors, alongside
the executive Directors, when they attend Board meetings in different
locations, and when travelling for other reasons. Senior management
often attend Directors’ engagements and receive updates from the
workforce engagement non-executive Director, José Meade. For
further details, see ’The Board's engagement with the workforce’ on
page 254.
Executive governance
Throughout 2024, the GEC promoted the culture, as led and overseen
by the Board, across the organisation by demonstrating the right tone
from the top. The GEC modelled our values through their everyday
behaviours, fostering a culture that delivered against our purpose of
opening up a world of opportunity. At its meetings, the GEC
dedicated time to reflect on how they had demonstrated our purpose
and values in the day-to-day course of business.
The GEC’s operating rhythm helped to facilitate end-to-end
governance between senior leadership and the Board. The operating
rhythm had the following three pillars:
–
regular check-in meetings to review and discuss current and
emerging trends and issues;
–
a monthly meeting to review the performance of each of the
global businesses in principal geographies and legal entities,
supported by strategic key performance indicators; and
–
a strategy- and governance-focused meeting, held in advance of
each Board meeting.
Separate committees have been established to provide specialist
oversight for matters delegated to the Group CEO and senior
management. For further details of these committees, see page 249.
To further support our senior management, we have dedicated
company secretaries and corporate governance officers who support
and advise legal entities, global businesses and global functions on
our corporate governance practices. These roles serve to strengthen
the consistency and effectiveness of our end-to-end governance
arrangements, and support connectivity and information sharing.
From 1 January 2025 the GEC has been replaced by the Group
Operating Committee (‘Group OpCo’), whose key focus has been
establishing clear lines of accountability and enabling the Group to
execute our strategy at pace.
The Group OpCo serves as the leading executive decision-making
committee and supports the Group CEO in discharging his
responsibilities for the management and delivery of Group strategy.
In support of the ambition to simplify HSBC, the Nomination &
Corporate Governance Committee endorsed a new Group
Governance Framework and Operating Rhythm, which will be
implemented throughout the organisation in 2025.
Subsidiary governance
We are committed to maintaining high standards of corporate
governance throughout the Group. All subsidiary boards and their
respective businesses are required to have in place effective
governance arrangements with regard to the businesses’ nature, size,
location and the sectors in which they operate.
The subsidiary accountability
framework
The subsidiary accountability framework aims to balance appropriate
governance oversight by the Group with each subsidiary’s local legal
and regulatory requirements. The framework supports the Group in
promoting effective governance arrangements across its subsidiaries
by:
–
setting out high-level principles to enhance communications and
connectivity; and
–
ensuring a shared and consistent understanding of the Group’s
strategic objectives, culture and values.
The subsidiary accountability framework also focuses on ensuring that
each subsidiary is led by an effective board with an appropriate
balance of skills, diversity, experience and knowledge, having regard
to the nature of the subsidiary’s business and local legal and
regulatory requirements. Board composition of the Group’s
subsidiaries is kept under review as part of succession planning. The
Nomination & Corporate Governance Committee reviews the
succession plans of principal subsidiaries, and principal subsidiaries
review the succession plans for their own subsidiaries, as appropriate.
The framework is subject to periodic review by the Board and/or the
Nomination & Corporate Governance Committee and updated as
required to ensure it is aligned to regulatory requirements and best
practices. A comprehensive internal review of the framework was
undertaken in 2024 with the outputs reported to the Nomination &
Corporate Governance Committee. A number of improvements were
made to the framework to provide greater clarity and additional
guidance for subsidiaries.
The role of principal subsidiaries
Certain subsidiaries are designated formally by the Board as principal
subsidiaries. In addition to their obligations under their respective local
laws and regulations, principal subsidiaries – supported by regional
company secretaries – perform a critical role in ensuring effective and
high standards of governance across the Group and in overseeing the
implementation of the subsidiary accountability framework in the
regions for which they are responsible.
Representatives from principal subsidiaries attend the Board and its
committee meetings for relevant topics, including when the Board
holds meetings outside of the UK. Chairs of principal subsidiaries’ risk
and audit committees are invited to attend relevant Group Risk
Committee and Group Audit Committee meetings. Attendance and
participation at these meetings enhances subsidiary directors’
understanding of the challenges facing the Group and helps to identify
common challenges and facilitates the sharing of lessons learned.
Such committee participation supplements the regular reports,
certifications and escalations from principal subsidiaries’ boards and
their respective committees to the Board and relevant committee(s)
of the Board.
The Group Chairman interacts regularly with the chairs of the principal
subsidiaries, including through the Chairman’s Forum. The Chairman’s
Forum comprises the chairs of each of the principal subsidiaries, the
Group’s senior independent non-executive Director, the chairs of the
Group’s audit, risk and remuneration committees, and where relevant,
the Group CEO, other non-executive Directors and members of
executive management, advisers and/or external experts.
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247
Corporate governance
In 2024, the Chairman’s Forum covered topics such as strategic
business considerations, geopolitical issues and economic outlook,
shareholder engagements, Group-wide connectivity of non-executive
Directors, key regulatory themes, employee engagement and financial
performance.
The Group Remuneration Committee Chair hosted dedicated forums
with the chairs of principal subsidiaries to share key priorities for 2024
and the future. These sessions provided an opportunity for review and
input on proposed pay outcomes and allocation, before approval by
the Group Remuneration Committee.
The principal subsidiaries are:
Principal subsidiary
Oversight responsibility
The Hongkong and Shanghai Banking
Corporation Limited
Asia-Pacific
HSBC Bank plc
Europe and Bermuda (excluding
UK ring-fenced activities)
HSBC UK Bank plc
UK ring-fenced bank and its
subsidiaries
HSBC Middle East Holdings BV
Middle East, North Africa and
Türkiye
HSBC North America Holdings Inc.
US
HSBC Latin America Holdings (UK)
Limited
Mexico and Latin America
Subsidiary director development
The Group is dedicated to supporting the continuing professional
development of its subsidiary directors. A global non-executive
director update was held in September 2024, which was attended by
subsidiary non-executive directors from across the Group. Updates
were provided by the Group Chairman and Group CEO, along with
presentations on net zero transition, digital acceleration, AI and
geopolitics.
The Bank Director Programme (launched in 2022), is designed to
prepare HSBC executives and senior managers to assume roles as
internal non-executive directors on our subsidiary boards. The
programme covers six modules: governance and the role of a bank
director; finance, capital and liquidity management; risk and
regulation; strategy, leadership and culture; ESG and managing
stakeholders; and technology and operations. The programme was
delivered for a second time in 2024 to a cohort of 26 participants
selected from across the Group. Many of those colleagues who have
completed the programme have already taken up positions as internal
non-executive directors on Group subsidiary boards.
During 2024 we launched our inaugural Bank Chair Programme with a
group of subsidiary board and committee chairs from across our
regions. The programme represents a significant investment in
subsidiary director development and is sponsored by the Group
Chairman together with the Group Chief People & Governance
Officer. It is a unique and forward-looking initiative, focused on
developing our ‘chairs of the future‘ and equipping them to lead ‘best-
in-class’ subsidiary boards and committees at HSBC. Part one of the
programme was delivered in November 2024 and comprised three
modules covering: the challenges faced by board and committee
chairs; the evolving role of the chair; and navigating regulatory
priorities.
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HSBC Holdings plc Annual Report and Accounts 2024
Board and Group executive committees and working groups
The Board delegates oversight of certain audit, risk, remuneration,
nomination, technology and governance matters to its committees,
which are each chaired by a non-executive Director. Only the Group
Chairman and the independent non-executive Directors are members
of Board committees. Members of the senior management team
attend Board committee meetings, as appropriate. Details of the
responsibilities and work carried out by each of the Board committees
can be found in the respective committee reports starting on page
259.
The Chairman’s Committee is an ad hoc committee, which provides
the Board with the opportunity to consider time-critical matters
between scheduled Board meetings. All Board members are invited
to attend Chairman’s Committee meetings.
In addition to the Board committees, bespoke working groups have
been established as an informal mechanism for smaller groups of
Board members and senior management to meet to discuss
emerging issues and upcoming Board matters, as appropriate.
The GEC established a number of committees to support the senior
management during 2024 in their running of the business and provide
specialist oversight for matters delegated to them, including capital
and liquidity, risk management, disclosure and financial reporting,
restructuring and investment considerations, transformation
oversight, ESG matters and talent and development. These
committees also help fulfil their responsibilities under the Senior
Managers and Certification Regime.
The structure below sets out the current committees and working
groups at the Board and Group Executive level as at 31 December
2024. The key changes in the year include:
The Board Sustainability Working Group (‘SWG‘) was established,
with effect from October 2024, to enhance the Board’s oversight of
sustainability matters. For more information on the role and function
of this working group please refer to ‘Board decision-making and
engagement with stakeholders‘ on page 23.
On 25 January 2024, the Board approved that the Technology
Working Group be demised and, in its place, established the creation
of the Group Technology Committee (‘GTC’), effective from March
2024. The GTC was delegated responsibility to oversee the Group’s
technology strategy and its alignment with the wider global strategy
of the Group. In December 2024, the remit of the GTC (renamed the
Group Technology and Operations Committee (‘GTOC‘)) was
extended to cover oversight of global operations.
The Board also approved a proposal from the Group CEO to combine
the Group‘s executive level ESG Committee and Sustainability
Execution Committee, with effect from October 2024. For more
information on this Committee please refer to ‘Board matters
considered on page 251‘.
In addition, the Board approved that the GEC of 18 members be
simplified and replaced by a new Group Operating Committee
comprised of 12 members, with effect from 1 January 2025
(www.hsbc.com/who-we-are/our-people/senior-management).
Board Chair: Sir Mark Tucker
Chairman’s
Committee
Nomination &
Corporate
Governance
Committee
Group Audit
Committee
Group Risk
Committee
Group
Remuneration
Committee
Group Technology
and Operations
Committee
Informal
Governance
Chair: Sir Mark
Tucker
Chair: Sir Mark
Tucker
Chair: Brendan
Nelson
Chair: James
Forese
Chair: Dame
Carolyn Fairbairn
Chair: Eileen Murray
Board Oversight
Sub-Group
Chair: Sir Mark
Tucker
See page 259
See page 263
See page 271
See page 279
See page 276
Sustainability
Working Group
Chair: Geraldine
Buckingham
Group Executive Committee Chair: Georges Elhedery1
Acquisitions and
Disposals
Committee
Group Disclosure
and Controls
Committee
Group People
Committee
Group Risk
Management
Meeting
Holdings Asset
and Liabilities
Committee
Change
Prioritisation and
Oversight
Committee
Environmental,
Social and
Governance
Committee
Chair: Georges
Elhedery
Chair: Jonathan
Bingham2
Chair: Aileen
Taylor
Chair: Pam Kaur3
Chair: Jonathan
Bingham2
Chair: Jonathan
Bingham2
Co-Chairs:
Jonathan Bingham
and Celine
Herweijer4
1 With effect from 2 September 2024, the role of Chair changed from Sir Noel Quinn to Georges Elhedery and with effect from 1 January 2025 the GEC was
replaced by the Group Operating Committee and committees reporting into it are under review.
2 Pam Kaur appointed as Chair with effect from 1 January 2025.
3 Richard Blackburn appointed as Chair with effect from 1 January 2025.
4 With effect from 2 September 2024, Jonathan Bingham succeeded Georges Elhedery as Co-Chair and Pam Kaur appointed as sole Chair with effect from
1 January 2025.
HSBC Holdings plc Annual Report and Accounts 2024
249
Corporate governance
Board induction and training
The Board recognises the importance of induction and training for its
Directors. The Group Chief People & Governance Officer works with
the Group Chairman to ensure that, on appointment, new Directors
are provided with tailored and comprehensive induction programmes
appropriate to their individual experiences and needs, including the
process for managing conflicts. To ensure Directors’ contribution to
the Board remains informed and relevant, all Board members receive
appropriate training, both individually and collectively, throughout their
time served on the Board.
The Group Chief People & Governance Officer also helps to arrange
and deliver the induction programme for new Board members,
through formal briefings and introductory sessions with other Board
members, senior management, legal counsel, auditors, tax advisers
and regulators, as appropriate. Topics covered in the induction
programme include but are not limited to: purpose and values; culture
and leadership; governance and stakeholder management; Directors’
legal and regulatory duties; recovery and resolution planning; anti-
money laundering and anti-bribery; technical and business briefings;
and strategy.
The induction process is often initiated before appointment to allow
each new Board member to contribute meaningfully from
appointment. The structure of the induction supports good
information flows within the Board and its committees, as well as
between senior management and non-executive Directors, providing
a clear understanding of our culture and way of operating.
Prior to his appointment as Group CEO becoming effective, Georges
Elhedery received relevant training and legal advice from a firm of
solicitors on 15 August 2024. Prior to her appointment as Group CFO,
Pam Kaur received relevant training and legal advice from a firm of
solicitors on 11 December 2024.
Following this training, both Georges Elhedery and Pam Kaur
confirmed their understanding of their obligations as directors of a
listed issuer pursuant to Rule 3.09D of the Hong Kong Listing Rules.
The approach to training is agreed annually, with key topics agreed for
2024 including cybersecurity, media interaction and the UK’s Senior
Manager and Certification Regime. Training sessions were facilitated
by both internal subject matter experts and by external presenters.
Directors were also issued with training modules, which mirrored the
mandatory training undertaken by employees. During 2024, this
training covered topics including risk management, sustainability,
health and safety, well-being, cyber-security, financial crime, and
conduct.
Non-executive Directors also discussed individual development areas
with the Group Chairman as part of their ongoing performance
discussions regarding their contributions on the Board. The Group
Chief People & Governance Officer makes appropriate arrangements
for any additional training needs identified using internal resources, or
otherwise, at HSBC’s expense.
Members of Board committees receive relevant training as
appropriate. Further details on any specific training commissioned by
Board committees can be found in the respective committee reports
from page 259 onward. Directors may take independent professional
advice at HSBC’s expense.
Board Directors who serve on principal subsidiary boards receive
training that is pertinent to circumstances and context relevant to
those boards. Opportunities exist for the principal subsidiaries'
committee chairs to share their understanding of specific areas with
the Directors as part of the Chairman’s Forum. For further details, see
’The role of principal subsidiaries’ on page 247.
Directors’ induction and ongoing development in 2024
Director
Induction
Strategy and
business briefings2
Risk and
control3
Corporate
governance, ESG
and other
reporting matters4
Board global
mandatory
training5
Geraldine Buckingham
u
u
u
u
u
Rachel Duan
u
u
u
u
u
Georges Elhedery1
u
u
u
u
u
Dame Carolyn Fairbairn
u
u
u
u
u
James Forese
u
u
u
u
u
Ann Godbehere
u
u
u
u
u
Steven Guggenheimer
u
u
u
u
u
José Antonio Meade Kuribreña
u
u
u
u
u
Kalpana Morparia
u
u
u
u
u
Eileen Murray
u
u
u
u
u
Brendan Nelson
u
u
u
u
u
Swee Lian Teo
u
u
u
u
u
Sir Mark Tucker
u
u
u
u
u
u Matter considered
u Matter not considered
1 As part of the transition from Group CFO to Group CEO, Georges Elhedery completed an induction and development plan.
2 Directors participated in business strategy, market development and business briefings, which are global, regional and/or market-specific. Examples of specific
sessions held in 2024 included: ’Technology and the future of artificial intelligence’, ’WPB customer-centricity improvement plan’, and ’Investor sentiments’.
3 Directors received risk and control training and briefings. Examples of specific sessions held in 2024 included: ’Cybersecurity’ and ’The UK’s Senior Manager
Certification Regime’.
4 Directors received training on the UK’s Senior Managers’ and Certification Regime as well as development updates at Board meetings on: ’Board stakeholder
engagement and management’ and ESG matters including regulatory changes. Directors received additional training through their attendance at forums such as
the Chairman’s Forum, Remuneration Committee Chairs’ Forum and the Global Non-Executive Director Update.
5 Training modules, issued to all Directors, mirrored training undertaken by employees. This included: risk management, sustainability, health and safety, well-
being, cybersecurity, financial crime and conduct and values, personal conflicts of interest, data quality, privacy and security and AI and our changing world.
Report of the Directors | Corporate governance report
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HSBC Holdings plc Annual Report and Accounts 2024
Board matters considered
During 2024, the Board remained focused on HSBC’s strategic direction and delivery, and overseeing Group performance. It considered
performance against financial and other strategic objectives, key business challenges, emerging risks, sustainability and governance, business
development, investor relations and the Group’s relationships with its stakeholders. The end-to-end governance framework facilitated discussion
on strategy and performance by each of the global businesses and across the principal geographical areas, which enabled the Board to support
executive management with its delivery of the Group’s strategy. The Board considers the impacts of its decision making on the Group’s
stakeholders and examples of how the Board has taken principal strategic decisions.
Board matters considered in 2024
Meetings at which topics were discussed1
Main topic
Sub-topic
Jan
Feb
Mar
May
Jun
Jul
Sep
Oct
Nov
Dec
Strategy
Group strategy
u
u
u
u
u
u
u
u
u
u
Regional strategy/global business strategy
u
u
u
u
u
u
u
u
u
u
Environmental, social and governance strategies
u
u
u
u
u
u
u
u
u
u
Business and financial
performance
Region/global business
u
u
u
u
u
u
u
u
u
u
Financial performance
u
u
u
u
u
u
u
u
u
u
Financial
Results and accounts1
u
u
u
u
u
u
u
u
u
u
Dividends
u
u
u
u
u
u
u
u
u
u
Group financial resource planning
u
u
u
u
u
u
u
u
u
u
Risk
Risk update
u
u
u
u
u
u
u
u
u
u
Risk appetite
u
u
u
u
u
u
u
u
u
u
Capital and liquidity adequacy
u
u
u
u
u
u
u
u
u
u
Regulatory
Regulatory and legal matters2
u
u
u
u
u
u
u
u
u
u
Regulatory matters with regulators in attendance3
u
u
u
u
u
u
u
u
u
u
External
External insights4
u
u
u
u
u
u
u
u
u
u
Technology
Strategic and operational
u
u
u
u
u
u
u
u
u
u
People and culture
Purpose, values and engagement
u
u
u
u
u
u
u
u
u
u
Governance
Policies, terms of reference and delegations of
authority
u
u
u
u
u
u
u
u
u
u
Board/committee effectiveness
u
u
u
u
u
u
u
u
u
u
Appointments and conflicts of interest
u
u
u
u
u
u
u
u
u
u
Stakeholder/workforce engagement
u
u
u
u
u
u
u
u
u
u
AGM and resolutions
u
u
u
u
u
u
u
u
u
u
u Matter considered
u Matter not considered
1 No Board meetings were held during April and August 2024. An ad hoc board meeting was held in October 2024.
2 Includes recovery and resolution planning, modern slavery and human trafficking, UK regulatory activities, and listing authority renewals.
3 Meetings attended by members of the Prudential Regulation Authority.
4 Includes presentations and/or talks from external parties, for example government officials or regulators.
Key areas of focus
The Board’s key areas of focus in 2024 are set out by theme below.
Strategy and business performance
The Group remains focused on building a sustainable platform for
growth by increasing returns for investors, enhancing customer
service, and creating capacity for future investment. In 2024, the
Board reviewed progress within the Group’s global businesses and
regions against its agreed strategy. At each Board meeting, the Board
discussed the Group’s strategic performance and opportunities to
track strategic execution and delivery.
There was a continued focus in 2024 to build upon efforts to re-shape
the Group to align with areas of strength in key markets. Disposals
such as those completed in Canada and Argentina, and in progress in
Germany, allow for a renewed focus on businesses that more closely
align with the Group’s strategic aims, and support resource allocation
to provide the strongest competitive advantage to ultimately benefit
the wider Group and its customers.
Upon his appointment, the new Group CEO has been driving a more
dynamic organisational structure, to set the Group up to accelerate
delivery of its strategic objectives and drive the next phase of its
growth and development. Together, the executive team and the
Board work to ensure that strategic decisions taken capitalise on
opportunities that will work to drive profitability for shareholders and
efficiencies with a more streamlined Group structure.
Environmental, social and governance
In October 2020, we announced our ambition to become a net zero
bank by 2050. We believe supporting our customers’ transition
benefits their businesses and helps generate long-term financial
returns for our shareholders.
The Board has overall responsibility for ESG strategy, overseeing
executive management in developing the approach, execution, and
associated reporting. To support senior leadership in the delivery of
the ESG strategy, with effect from October 2024, the Board
established a new sustainability working group, the SWG, comprised
of five non-executive Directors. This working group engages with
executive management on sustainability matters and provides
oversight and guidance in relation to the Group’s sustainability
activities. The SWG was actively involved in the consideration of our
approach to net zero transition, covered in more detail within our ESG
overview on page 15.
During the year, the Board also oversaw the rationalisation of the ESG
Committee and Sustainability Execution Committee into a single
governance body (named the ESG Committee). These Board and
executive level governance forums support senior management in the
operationalisation of the Group’s sustainability strategy, through the
oversight of the sustainability execution programme. For further
details see page 74. In 2024, the Board oversaw the implementation
of ESG strategy through regular dashboard reports and detailed
updates including: review and approval of the net zero transition plan;
deep dives on the sustainability execution programme; and updates
on human rights.
HSBC Holdings plc Annual Report and Accounts 2024
251
Corporate governance
Financial decisions
The Board and its dedicated committees approved key financial
decisions throughout the year, including the Annual Report and
Accounts 2023, the Interim Report 2024 and the first quarter and the
third quarter Earnings Releases. In January 2024, the Board approved
the 2024 financial resource plan. The Board monitored the Group’s
performance against the approved plan, as well as the plans of each
of the global businesses. The Board also approved the renewal of the
various debt issuance programmes.
As previously communicated, we established and achieved a target
dividend payout ratio of 50% of earnings per ordinary share (’EPS’) for
2023 and 2024, excluding the special dividend. EPS for this purpose
excludes material notable items and related impacts. Material notable
items in 2023 and 2024 included the sale of our businesses in Canada
and Argentina, the sale of our retail banking operations in France, the
gain following the acquisition of SVB UK and the impairment of our
investment in BoCom. We also exclude HSBC Bank Canada‘s
financial results from the 30 June 2022 net asset reference date until
completion on 29 March 2024, as the gain on sale was recognised
through a combination of the consolidation of HSBC Bank Canada‘s
results in the Group‘s results since this date, and the remaining gain
on sale recognised at completion, inclusive of the recycling of related
reserves and fair value gains on related hedges. The Board has
adopted a dividend policy designed to provide sustainable cash
dividends, while retaining the flexibility to invest and grow the
business in the future, supplemented by additional shareholder
distributions, if appropriate. The Board has established a target
dividend payout ratio of 50% for 2025, subject to meeting capital
requirements. In addition to dividend payments, HSBC announced a
share buy-back of up to $2bn on 22 February 2024 and further share
buy-backs of up to $3bn on 7 May 2024, 1 August 2024 and
30 October 2024, bringing the total announced during 2024 to $11bn.
On 21 February 2024, an interim dividend of $0.31 per share for the
2023 full-year was announced, followed by a special dividend of $0.21
per share on 30 April 2024 and interim dividends of $0.10 each
announced on 30 April 2024, 31 July 2024 and 29 October 2024. For
further details of dividend payments, see page 439.
Risk, regulatory and legal
considerations
The Board, advised by the Group Risk Committee, promotes a strong
risk governance culture that shapes the Group’s risk appetite and
supports the maintenance of a strong risk management framework,
giving consideration to the measurement, evaluation, acceptance and
management of risks, including emerging risks.
The Board considered the Group’s approach to risk including its
regulatory obligations. A number of key frameworks, control
documents, core processes and legal responsibilities were also
reviewed and approved as required by the Board and/or its relevant
committees. These included:
–
the Group’s risk appetite framework and risk appetite statement;
–
the individual liquidity adequacy assessment process;
–
the individual capital adequacy assessment process;
–
the Group’s obligations under the Modern Slavery Act and
approval of the Modern Slavery and Human Trafficking Statement;
–
the Group Recovery Plan;
–
the efficacy of Model Risk Management (’MRM’) activities within
the Bank;
–
the Group’s risk data aggregation and risk reporting framework
aligned to the Basel Committee on Banking Supervision 239
Principles;
–
the Group’s PRA Operational Resilience self-assessment
regulatory submission;
–
the internal controls framework; and
–
the revised matters reserved to the Board and terms of reference
for the Board committees.
The Board also reviewed and monitored the implications of
geopolitical and macroeconomic developments during the year, both
directly and by way of updates from the Group Risk Committee, and
received regular updates on the Group’s risk profile, including in
relation to financial crime risk.
Technology
Throughout the year, the Board received updates on technology and
innovation from the Group Chief Operating Officer and Group Chief
Information Officer. These included regular updates on the
programme established to simplify the Group’s technology
infrastructure, enhance system resilience, and accelerate digital
transformation across the bank, following recommendations from the
third-party review of technology strategy conducted in 2023.
The Technology Governance Working Group was demised on
1 March 2024, and the Group Technology Committee (‘GTC‘) became
effective from the same date. Since its establishment, the GTC has
supported the Board in overseeing execution of the technology
strategy with a focus on areas where technology is fundamental to
strategic delivery including technology architecture, innovation, data
and cybersecurity. In December 2024, the remit of the GTC (renamed
the Group Technology and Operations Committee (‘GTOC‘)) was
extended to cover oversight of global operations, reflecting changes
to the Group’s organisational structure and in recognition of the
importance of operations to delivery of the Group’s strategy. The
Board received regular updates from the Chair of GTOC during the
year. For further details of matters considered at GTOC, refer to the
Group Technology and Operations Committee Report on page 276.
People and culture
The Board is responsible for setting and monitoring the desired
culture of the Group and dedicates time to people and culture related
matters at Board and Committee meetings and in its engagements
with management and the wider workforce.
Each scheduled Board meeting begins with a ’culture moment’,
which helps to ensure that the right cultural tone is set from the top
and establishes the right cultural context for Board discussion. To help
raise its awareness of employee and other stakeholder perspectives,
Board meetings and dedicated reports feature insights into
behaviours within the Group, which demonstrate alignment to its
purpose and values. Board papers highlight relevant stakeholder
considerations, including in connection with its workforce. The Board
also gains valuable cultural insights through its many personal
interactions with the workforce and other stakeholders. For further
details see ‘Directors’ engagements with key stakeholders in 2024’
on page 20.
Additionally, the Board receives cultural insights from the all-
employee Snapshot survey and broader reporting, which provides key
data indicators, including on peoples' behaviours, sentiment and
business outcomes. Following her appointment as Group Chief
People & Governance Officer, Aileen Taylor has also introduced a new
people and governance report that will be presented to the Board on a
regular basis to help ensure that they have sight over such matters
within the Group.
The governance structure supporting the Board further facilitates
effective oversight of key people and culture matters. Through the
work of the Group Audit Committee, the Board monitors the nature of
risk and control culture across the Group and sees the impact of its
policies and practices and how they are embedded, through reports
on matters such as whistleblowing, code of conduct breaches and
investigations (for further information see the Group Audit Committee
report on page 263).
The Directors also learn about people and culture matters by way of
presentations at the Chairman’s Forum. The principal subsidiary chairs
report on their respective approaches to workforce engagement as
well as what they have learned from such engagements and other
cultural insights.
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HSBC Holdings plc Annual Report and Accounts 2024
Each of the non-executive Directors is aligned to one or more of our
Group Employee Resource Groups (’ERGs’): Ability, Balance,
Embrace, Generations, Nurture and Pride. Attending ERG events
provides Directors with opportunities to hear directly from employees
on matters of cultural importance to the Group. Board engagement
with management and the wider workforce continued to remain a
strong area of attention, particularly with the ongoing activities carried
out by the dedicated workforce engagement non-executive Director
and in respect of the changes to the Group’s leadership. For further
details of the work carried out by the workforce engagement non-
executive Director, see page 254.
Governance
During the year, the Board continued to oversee the overall
governance of the Group. There are processes in place to ensure that
the Board and its Committees receive timely and relevant information
pertaining to Group governance matters and that this information is
duly considered at the appropriate level. The Board allocated time at
its scheduled meetings for Group governance matters and, during the
year, these included regular reports on the activities of its
Committees, reviews of Directors’ conflicts of interest, the review
and approval of delegations of authority for specific Treasury matters
and review of the broader Group Delegated Authority Framework, and
oversight of the Board’s annual effectiveness review.
The Board has due regard to its oversight of Group governance,
including compliance with the UK Corporate Governance Code and
the Hong Kong Corporate Governance Code and the duties of
directors under the Companies Act 2006, when taking decisions. For
examples of Board decision making, see ’Board decision making and
engagement with stakeholders’ on page 20.
The Board and senior management continued to support further
improvements to various governance initiatives to encourage
simplification and promote effective decision making in the business.
Guidance and training for Board and committee paper templates
remained a focus in 2024 for global businesses and functions. In
particular, a training session sponsored by the Group Chairman and
the Group CEO took place to ensure that standards remained
consistent and accurate across the Group. Additionally, the Group-
wide delegations of authority framework was reviewed and approved
by the Board and its relevant subsidiaries in February 2024. This
decision was key to driving efficiencies in the execution of contracts
and documents by directors and senior management.
The Board, supported by the Nomination & Corporate Governance
Committee, reviews the skills and experience of the Directors on an
ongoing basis. This ensures that the composition of the Board and its
Committees comprise the necessary skills, diversity, experience and
competencies to discharge their responsibilities effectively. For
further details of the review and changes to the Board, see the
Nomination & Corporate Governance Committee report on page 259.
For further details of diversity of the Board, see page 244.
HSBC Holdings plc Annual Report and Accounts 2024
253
Corporate governance
The Board’s engagement with the workforce
The Board is committed to engaging with the Group’s workforce,
which takes place in a variety of ways across many forums, including
small-scale exchange sessions and larger town halls. These
interactions allow the Board to have meaningful engagement with
colleagues and gain insights from the workforce which inform Board
discussion and decision-making. These engagements also provide
colleagues with the opportunity to share ideas and feedback on topics
that are important to them with the Board directly.
It is the responsibility of all Directors to engage with colleagues, and
the Board’s dedicated workforce engagement non-executive Director,
José Meade, leads on the delivery of such engagements. The Board
recognises that a dedicated non-executive director, that champions
workforce engagement, presents an inclusive opportunity to help
ensure that the employee voice is being considered and accounted
for in Board decision-making. For further examples of how members
of the Board have engaged with a variety of our stakeholders outside
of the workforce engagement programme please see ‘Board decision
making and engagement with stakeholders’ on page 20.
96
7,000+
Virtual/physical sessions
attended by non-executive
Directors
Number of employees engaged
physically/virtually
9
55
Countries where in-person
engagement took place and
many more virtually
Virtual/physical sessions attended by
workforce engagement non-
executive Director
4,600+
Number of employees engaged virtually/physically by workforce
engagement non-executive Director
The Board’s workforce engagement programme
In early 2024, the Board agreed a workforce engagement programme
designed to ensure that Directors were afforded various opportunities
to interact with colleagues across the Group. A non-exhaustive extract
of the 2024 programme can be seen below. In structuring the
programme, two mechanisms were used through which the Board
engaged with the workforce. First, targeted events for Board
members during Board travel or as individual Director location
allowed, and second, Board members joined pre-existing Group
employee events scheduled throughout the year. This approach
allowed the Board to meet a diverse group of colleagues and
participate in a broad range of different engagements. Engagement
events were held in three broad formats; in-person events, larger-
scale events, including town halls; and virtual events.
Visits to Global Services Centres (‘GSCs’) took on a variety of formats,
mixing exchange sessions with floor walks, networking lunches and
town halls. Engagements across all formats were designed to
promote open dialogue and two-way discussions between the
attending Directors and colleagues.
When designing the programme at the start of 2024, it took into
account the Group’s key strategic areas of focus in place at the time
and thereby worked to complement the Board’s priorities and agenda
for 2024. Structuring the programme in this way meant that when the
Board travelled for Board meetings to different regions, in-person
engagements were arranged as part of the Board timetabling, which
were highly valued by colleagues and Board members alike. A key
component of the 2024 programme was visits to GSCs in locations
that were convenient to scheduled Board travel. Further engagement
events, town halls and meetings with the workforce were scheduled
throughout the year either in person, where individual Director
location allowed, or virtually.
Board’s Workforce Engagement: 2024 Extract
January
February
March
May
June
September
October
December
Colleague
Engagement
Lunch & Floor
Walks
Representation
& Inclusion
exchange
session
Black Leaders
Action and
Advisory
Council
(’BLAAC’)
Strategy &
Performance &
Female Talent
Engagement
GB&M Floor
walk
Tour of Risk &
Compliance
floor and
exchange with
colleagues
Engagement
with respective
Employee
Resource
Groups (’ERG’)
US key talent &
Market
Securities
Services team
exchange
Audience
ERG Members
and talent
across a range
of grades and
businesses
Leaders in the
US market
BLAAC
members
Senior and
female UK-
based talent
GB&M
colleagues
MENAT
colleagues
ERG Global
Leads
US colleagues
Location
Shanghai
New York
Virtual
London
Singapore
Dubai
Virtual
New York
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HSBC Holdings plc Annual Report and Accounts 2024
The outputs and key themes arising from all engagements formed the
bases of José Meade’s regular reports to the Board and facilitated
Board discussions and decision-making. Further to José Meade’s
commitment to attend the Group Executive Committee (’GEC’) and
the Chairman’s Forum, by so doing this year he continued to help
facilitate discussions on key themes, issues, employee sentiment,
and other outcomes from the 2024 workforce engagements. His
participation helped to ensure that good dialogue with senior
executives and other Group subsidiary chairs was maintained and
helped management to respond appropriately and in a timely manner
to colleagues and their feedback. In addition, this allowed for José
Meade to capture feedback from executives on workforce
engagement and take their suggestions into consideration going
forward. In his role, José Meade will continue to engage in these and
other relevant forums during 2025.
Workforce engagement non-executive Director activities during 2024
Key themes arose throughout the year such as, inclusion in the
workplace, engagement with HSBC top talent, and Group Strategy.
The themes guided conversations between colleagues and Board
members and helped to shape the 2024 workforce engagement
programme to ensure that it developed events that were reflective of
these key topics.
Non-executive Director sponsorship of our Global Employee Resource
Groups (’ERGs’) continued during 2024. Each Director is aligned to a
Global ERG and during the course of 2024 has met with their
respective ERGs to discuss the ERGs’ strategy for the year and
upcoming priorities. Directors will also take part in other ERG events
where possible, and every effort is made to facilitate local ERG
members meeting their aligned Director during planned Board travel.
Set out below is a selection of workforce engagement events that
were held in 2024 across multiple regions, attended by José Meade
and other members of the Board where the occasion permitted.
China
–
Directors completed a floor walk to meet with teams from
across the Wealth and Private Banking business line, as well
as the Pinnacle team.
–
Directors learnt about the financial planning journey of an
HSBC customer, the role colleagues play and the digital
capabilities available.
–
Connected with various ERG representatives and colleagues
across functions to informally discuss and share
experiences.
New York
–
Attended the ‘HSBC Latin-Americans in NYC Day’ with key
speakers including macro strategists and featuring external
speakers on the Mexican economic outlook.
–
Met with a small group of leaders in HSBC to discuss
inclusion and culture in the US market and consider any
more progress needed.
London
–
An engagement session was held with colleagues where
views were sought on how colleagues interpreted and
understood Group strategy and its practical application.
–
An event was held to promote female talent in the UK.
Discussions held included the change of Group senior
leadership, what it meant to individuals and teams, and the
opportunities for female promotion.
Hong Kong
–
Participated in several sessions that allowed for Directors to
meet and network with Executive Leadership Programme
colleagues.
Singapore
–
Several sessions were held that were designed to promote
ERG engagement. Directors participated in sessions
including a Pride Panel as well as Ability, Sustainability and
Balance Exchanges, to ensure HSBC is inclusive and
supportive.
Dubai
–
Participated in a varied schedule of workforce engagement
events including a discussion with regional Embrace ERG
members and networking with senior talent.
Representation & Inclusion Exchange session
New York, February
Pride Panel
Singapore, June
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255
Corporate governance
Spotlight on our Global Service Centres (‘GSCs‘)
HSBC currently has GSCs in eight countries that operate in over 50
markets and in 20 languages. The GSCs play a pivotal role in helping
to support the wider HSBC business and are key in driving the
technological capabilities of the Group.
Continuing the focus on the Group’s GSCs in 2023 when José Meade
visited Mexico City and Hyderabad, during 2024 he visited the GSCs
in Krakow, Guangzhou and Cairo. Details of each visit are set out
below. In July 2024, José Meade attended the GEC meeting where
he discussed insights from his various engagements to date,
including with the GSCs. Discussions at the GEC focused on key
themes arising from the GSC visits, and how these could be further
considered and taken forward by the executive team.
“It is impossible to discuss strategy without
considering the role of our GSCs. I have
visited several of our GSCs over the past year,
which have further highlighted to me their
pivotal role in our operations and in
developing our technological capabilities
more broadly for the success of the Group
through strategy execution.”
José Meade, Dedicated Workforce Engagement NED
GSC: Krakow, Poland (May 2024)
4,570
29
13
FTE permanent
employees
countries serviced
languages supported
–
José Meade visited the Krakow GSC during planned Board travel to the UK. Sessions were held by the local team, including a ‘Tech and Ops Roadshow’ and
Cybersecurity ‘Show & Tell’, where José Meade learnt how the Polish GSC looks to leverage technology in servicing their businesses and functions.
–
HSBC Krakow employees have looked to build upon the ‘energise for growth’ strategic pillar. They have partnered with local universities to develop branded
HSBC courses to recruit top talent locally and leverage relationships with fellow businesses to collaborate and problem-solve using technology-forward
solutions.
GSC: Guangzhou, China (June 2024)
8,571
19
7
FTE permanent
employees
countries serviced
languages supported
–
Brendan Nelson and José Meade visited the Guangzhou GSC during planned Board travel to Hong Kong. They participated in several sessions during their
visit, including those on risk capabilities delivered by the GSC and systems developed in collaboration with business and Technology to help enhance data
accuracy. Directors had the opportunity to share and exchange their experiences with local GSC employees on topics such as talent, GSC intelligence,
operations, and the future of HSBC.
–
The local GSC in Guangzhou continues to act as a strategic centre specifically for markets across Hong Kong, Singapore and the UK. The visit underpinned
how the GSC works to identify both issues and opportunities alike and deliver digital solutions in response, to the benefit of global business lines.
GSC: Cairo, Egypt (September 2024)
2,243
23
3
FTE permanent
employees
countries serviced
languages supported
–
Rachel Duan and José Meade visited the Cairo GSC during planned Board travel to the Middle East. A deep dive session with the local HR lead allowed for
insights into how the Cairo GSC supports its employees and seeks to attract and retain top talent through development opportunities to help ensure that
employees are engaged with their own growth within the organisation. Interactions with employees across Group operations, through local office floorwalks
and networking lunches, allowed José Meade to understand how these policies work in practice and obtain first-hand feedback from employees on how the
Group is working to promote their voice and ideas.
–
Group strategy remained a key theme during the GSC visit to Cairo, and Directors learnt more about the legacy and history of HSBC Egypt, as well as how it
looks to progress in the future.
Looking to the Future
“In 2024 we connected with our colleagues across the business and throughout the world. We
focused discussions on our strategy, inclusion and our GSCs. This approach enabled us to
highlight to the Board and senior management the strengths of our inclusive workforce. By
engaging with our talented workforce directly, understanding and valuing their contributions,
we continue to work together to open up a world of opportunity and achieve our strategic
aims. In 2025, I look forward to working with my fellow Directors and senior leadership to
build on this engagement and design a programme aligned to the refreshed strategic priorities,
and help support the Group‘s ambitions, guided by our values, for the benefit of its many
stakeholders.“ José Meade
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HSBC Holdings plc Annual Report and Accounts 2024
Board and committee
effectiveness, performance and
accountability
Actions following the 2023
Performance Review
As disclosed in last year’s report, the 2023 Board review concluded
that the Board was performing well as an engaged, global governance
body. The review highlighted, amongst other things, strong Board
performance in areas including Stakeholder Accountability, Board
Culture, Relationship with Senior Management, and Board Resources
and Support, and identified some minor areas where further
enhancement to the Board’s operating practices may be beneficial.
During 2024, the Board successfully implemented the actions agreed
to address the findings from the 2023 review. This included the
establishment of the Group Technology Committee (‘GTC‘) to provide
oversight of technology-related matters across the Group. The GTC’s
remit was later expanded to include responsibility for Operations, and
as a result was renamed as the Group Technology and Operations
Committee (‘GTOC’). Further details of the work of the GTC/GTOC
can be found on pages 276 to 278.
In addition, the Board approved a revised set of Key Performance
Indicators, ensuring that the Board can effectively oversee the
performance of the business, and receive insights into execution,
trends, and emerging areas of risk. These are kept under regular
review.
Other actions have resulted in changes to the Board’s operating
practices, including through greater training on effective Board
reporting and enhanced stakeholder engagement plans to ensure the
Board has the opportunity for regular engagement with the full
spectrum of key stakeholder groups.
2024 Board and committee
performance review process
Performance reviews are an important part of the effective
governance and operation of the Board and its committees. In 2024,
the Nomination & Corporate Governance Committee invited
Independent Board Evaluation (‘IBE’) to conduct a follow-up review to
the 2023 external performance review. IBE is an independent external
service provider with no other connection with the Group or any
individual Directors.
A comprehensive brief was provided to IBE to ensure focus on
priority areas relevant to the Board and committees, IBE were also
asked to provide an independent view as to whether the actions
taken following the 2023 review had appropriately addressed the
findings of that review.
The review took the form of detailed 1-2-1 interviews with members
of the Board and select members of management and advisers. IBE
also attended and observed the Board and committee meetings in
December 2024, and were provided with relevant meeting materials
for review in advance.
Initial observations were shared with the Board in December 2024,
following which a report was compiled by IBE based on the views
supplied by those interviewed as well as IBE’s observations as part of
the review process. The process and findings set out in this report
were shared and agreed with the Group Chairman, committee chairs
and IBE.
HSBC Holdings plc Annual Report and Accounts 2024
257
Corporate governance
Findings and recommendations
Overall, the review concluded that the Board and its committees
continued to operate effectively, with the 2023 report findings having
been appropriately addressed and a few minor areas identified for
further improvement. Positive feedback and practices were
highlighted in relation to succession planning for the Board and senior
management, with the pace and robustness of the Group CEO
selection process considered to be particularly strong. Key strengths
highlighted included the efficient, inclusive and transparent
communication with the wider Board, and regulators through the
duration of the process. The good practices would be leveraged for
future senior succession practices, with the importance of a sufficient
handover period being noted.
The report from IBE also confirmed that the culture of the Board
continues to be regarded as a key strength. The major organisational
and leadership changes that took place during 2024 further
demonstrated the flexibility of the Board governance and operating
rhythm, and its commitment in response to the needs of the Group
and its stakeholders. It was acknowledged that the refresh of the
senior leadership team and executive governance framework would
require ongoing strong and open communication between the Board
and the new Group Operating Committee. The new committee
structure, in particular the establishment of the Group Technology and
Operations Committee and the launch of the Sustainability Working
Group, have enhanced Board oversight and support to management
in these areas of critical strategic importance. Further, it was
acknowledged that work continues to ensure the quality and insight
of reporting to the Board, with concise reports that focus on the most
material and emerging risks.
IBE presented its report to the December 2024 Board meeting, and
was present for the Board’s discussion, led by the Group Chairman,
on the findings identified through IBE’s review. Actions arising from
the Board and committee review will be monitored by the Board over
the coming months. Further details on the findings specific to each
committee can be found within the respective committee reports
later in this section.
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HSBC Holdings plc Annual Report and Accounts 2024
Nomination & Corporate
Governance Committee
“We have full confidence in Georges and the new senior leadership team. They have the
skills, experience and track record necessary to deliver the next exciting phase of the
Group’s development and growth.“
Sir Mark E Tucker
Chair
Nomination & Corporate Governance Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 20241
The Committee’s key responsibilities include:
–
overseeing succession planning and leading the process for
identifying and nominating candidates for appointment to the
Board and its committees;
–
overseeing succession planning and development of senior
leadership;
–
overseeing and monitoring the corporate governance framework
of the Company and its subsidiaries; and
–
ensuring that the corporate governance framework is consistent
with relevant standards and best practices.
Sir Mark Tucker (Chair)
Oct 2017
9/9
Geraldine Buckingham
May 2022
9/9
Rachel Duan
Sep 2021
9/9
Dame Carolyn Fairbairn
Sep 2021
8/9
James Forese
May 2020
9/9
Ann Godbehere
Sep 2023
9/9
Steven Guggenheimer
May 2020
9/9
José Antonio Meade
Kuribreña
Apr 2019
9/9
Kalpana Morparia
Mar 2023
9/9
Eileen Murray2
Jul 2020
8/9
Brendan Nelson
Sep 2023
9/9
David Nish3
Apr 2018
3/3
Swee Lian Teo
Oct 2023
9/9
1 In addition to the scheduled Committee meetings, various sub-groups of
the Committee were established during the year to oversee the
succession process for the Group CEO and other senior leadership
changes.
2 Due to personal reasons, Eileen Murray was unable to attend the
Committee meeting in September 2024.
3 David Nish retired from the Board on 3 May 2024.
I am pleased to present the Nomination & Corporate Governance
Committee report, which provides an overview of the Committee’s
activities during 2024.
Succession planning was central to the Committee’s agenda during
the year. The main area of focus was the Group CEO succession
planning, which was triggered by Sir Noel Quinn’s decision to retire as
Group CEO. The Committee undertook a formal search process,
which built upon the Committee’s long-term work to develop
potential internal and external succession options for the Group CEO
role. Additional details on this process, which unanimously concluded
that Georges Elhedery was an outstanding candidate and the right
person for the role, are set out later in this report. The rigorous and
detailed work undertaken by the Committee over the prior years on
Group CEO succession enabled us to conduct a thorough, robust and
market-leading process, at pace. The process received positive
feedback from key stakeholders, including from Committee
members, as part of the 2024 Board and Committee performance
review.
The Committee also oversaw and supported the changes made to the
Group’s organisational structure and leadership team. This included
endorsing the establishment of the new Group Operating Committee
(‘Group OpCo’), which serves as the leading decision-making
executive committee of the Group. The Committee was fully
supportive of Georges' recommendations for appointments to the
Group OpCo. We have full confidence in Georges and the new senior
leadership team. They have the skills, experience and track record
necessary to deliver the next exciting phase of the Group’s
development and growth.
We were delighted to welcome Pam Kaur to the Board as an
Executive Director, following her appointment as Group CFO. Pam is
well known to the Board, having served as Group Chief Risk Officer
since 2020, and in the expanded role of Group Chief Risk and
Compliance Officer since 2021, and we look forward to working
closely with her in this new capacity. Georges and Pam formed an
effective partnership in their prior roles, and I am confident that the
Group and its stakeholders will continue to benefit from this
relationship in the years ahead. I would also like to thank Jonathan
Bingham, for his excellent work and valuable contributions during his
tenure as Interim Group CFO.
We have continued to review our governance structure in light of
evolving business needs to ensure that it remains appropriate in
supporting the delivery of Group strategy and aligned with
stakeholder expectations. During 2024, this led to several changes to
our Board and Committee operations, including the establishment of
the Group Technology Committee and of the Sustainability Working
Group. We subsequently agreed to expand the remit of the Group
Technology Committee to include Operations. Going forward, the
HSBC Holdings plc Annual Report and Accounts 2024
259
Corporate governance
Group Technology and Operations Committee will oversee the work
of the new Group CIO and Group COO.
Both forums have strengthened our governance oversight in the key
areas of technology and sustainability, which are two critical elements
of our strategy and risk management activity. Additional details on
these forums can be found on pages 23, and 276.
Separately, following the changes to the organisational structure
announced in October 2024, the Committee considered what further
enhancements to the Group’s governance arrangements were
necessary. This resulted in two principal changes. Firstly, in order to
strengthen the connectivity between the Group and our most
significant subsidiary boards, the Committee recommended that Ann
Godbehere and Brendan Nelson be appointed as directors of HSBC
Bank plc and HSBC UK Bank plc, respectively. Secondly, the
Committee approved changes to the Group’s executive governance
framework and operating rhythm aimed at ensuring enhanced, clearer
lines of accountability and decision-making.
The annual Board and Committee performance review is critically
important for ensuring that our governance practices meet the
highest standards and work effectively. Following the externally
facilitated review in 2023, conducted by IBE, the Committee invited
them again to conduct a follow-up review in 2024. The objective was
to provide assurance that the recommendations made had been
addressed and that the Board and its Committees were working
effectively. The findings and agreed actions from the 2024 review can
be found from page 257.
Finally, there were changes to the UK and Hong Kong Corporate
Governance Codes, which take effect from this year. Whilst our
existing governance practices are aligned with the requirements of
these revised Codes, the Committee continues to assess possible
enhancements, monitoring market practices to ensure that we not
only remain compliant, but also meet our objective of having world
class governance.
Sir Mark E Tucker
Group Chairman
Committee governance
The Group Chief People & Governance Officer, in her capacity as the
Group Company Secretary, attended all Committee meetings during
the year. She supported the Group Chairman in ensuring that the
Committee fulfilled its governance responsibilities. The Group CEO
selectively attended Committee meetings, joining when required.
Russell Reynolds Associates (’RRA’) supported the Committee and
the management team with Board succession planning and
appointments. RRA also provided support to management on senior
management succession, and on development and recruitment.
Representatives from RRA regularly attend meetings during the year
and have no other connection with the Group or members of the
Board.
Board composition and succession
The Committee continued to keep the composition of the Board and
of its Committees under review, with assessments focused on the
skills, knowledge, and experience necessary to oversee, challenge
and support management, in the achievement of the Group’s
strategic and business objectives.
The Committee has a long-standing policy under which non-executive
Directors are expected to serve two three-year terms. Any
appointments that extend beyond this are reviewed on an annual
basis, with consideration given to the future needs of the Board, and
the performance and contributions of the individual.
José (’Pepe’) Meade, Workforce Engagement non-executive Director,
will complete his second three-year term at the 2025 AGM. As a
result, a review was conducted, which took into account the broader
needs of the Board and the Group, to determine whether his term
should be extended. Pepe has played an important and valuable role,
significantly enhancing the Board’s engagements with all colleagues
and its understanding of their views. In order to allow him to build on
this work, as the business embarks on a period of change under new
leadership, the Committee agreed that his appointment should be
extended by a year, leading up to the 2026 AGM, subject to his re-
election by shareholders. It is the Board’s strong belief that this
extension of Pepe’s appointment, given his performance and
contributions to the Board in 2024, is in the best interests of the
Group and all of its stakeholders.
The Committee will continue to monitor the market throughout 2025
for potential candidates for appointment to the Board in both the short
and medium-term. This will ensure that the Board has a pipeline of
credible successors with the relevant skills, knowledge, and
experience.
Committee composition
As communicated in the 2023 Annual Report and Accounts, the
Board-level Group Technology Committee (’GTC’), chaired by Eileen
Murray, was established on 1 March 2024. In December 2024,
reflecting the changes to the Group COO role and its inclusion in the
newly formed Group OpCo, the Committee approved changes to the
remit of the GTC, adding responsibility for Operations, in addition to
Technology. As a result, the GTC was renamed as the Group
Technology and Operations Committee. Additional information on the
work undertaken by the Group Technology and Operations
Committee since its formation, along with its priorities for the year
ahead, can be found from page 276.
As part of the decision to establish the Sustainability Working Group
(’SWG’), it was agreed that Geraldine Buckingham would be
appointed as its Chair. Additional details on the work undertaken by
the SWG can be found on page 23.
The Committee also reviewed the composition of the Board
Committees, to ensure that it remains appropriate, with consideration
given to the Board diversity and inclusion policy, and to ensure
effective use of the skills and expertise of the Directors. Several
changes to the Committees’ composition were agreed during the
year. The Committee will continue to review the Committees’
composition to ensure that it remains appropriate.
Board diversity
The Board recognises the importance of gender, social and ethnic
diversity, and the benefits that diverse identities and backgrounds
bring to Board effectiveness. Representation is a consideration in
succession plans and appointments at both Board and senior
management level, as well as more broadly across the Group. The
Committee also considers representation on Board Committees when
reviewing their composition.
At the end of 2024, the Board had 54% female representation, with
seven female Board members out of a total of 13, which is above the
year-end 2025 target set by the FTSE Women Leaders Review.
Following Pam Kaur’s appointment as an Executive Director on
1 January 2025, female representation increased to 57%. The Board
now also has two female leaders holding one of the four senior
positions. These four senior roles, as defined by the FTSE Women
Leaders Review, are Chair, Chief Executive Officer, Senior
Independent Director and Chief Financial Officer.
Beyond gender, the Committee remains focused on enhancing the
ethnic heritage diversity of the Board, reflecting the international
nature of our business and HSBC’s Asia heritage.
The Board’s diversity and inclusion policy highlights our commitment
to diversity, while providing specifics on the approach taken to
achieving our relevant ambitions. Additional details on activities aimed
at improving representation across senior management and the wider
workforce, together with supporting statistics, can be found on page
64. The Board’s diversity and inclusion policy is available at
www.hsbc.com/who-we-are/our-people/board-of-directors/board-
responsibilities
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260
HSBC Holdings plc Annual Report and Accounts 2024
Group CEO succession
Following the announcement on 30 April 2024 that Sir Noel Quinn
would retire as Group CEO, the Committee oversaw a rigorous formal
search, selection and appointment process to identify the next leader
of the Group. A high-level overview of the process is shown in the
graphic below.
The Committee’s focus on Group CEO succession planning since Sir
Noel Quinn’s appointment in 2020, supported its objective to
complete the search at pace and provide clarity on future leadership
to the organisation and our stakeholders.
The process to select Sir Noel Quinn’s successor was led by the
Group Chairman and the Committee, who were supported by a
leading external search partner.
Key steps in the process included:
–
The establishment of a committee sub-group, comprising the
Group Chairman, Senior Independent non-executive and
Committee Chairs, to oversee the process. Regular updates were
provided to the broader Committee through weekly update notes
from the Group Chairman, who also engaged with the Group’s
principal regulators throughout the process.
–
Agreement on the regulatory role profile and key selection criteria,
which included key technical, experiential and leadership
competencies that were determined to be essential for the
successful candidate.
–
The assessment of all internal and external candidates against this
role profile and selection criteria, with the support of a leading
external search firm. Candidates also provided a written
articulation of their strategic vision for the Group, which was
followed by the shortlisting of the final candidates.
–
Thorough referencing and background checks, which were
conducted on the final candidates, to provide the Committee with
a deeper understanding of their character and motivations.
–
The final candidates were interviewed with all non-executive
Directors. They also presented their strategic vision for the Group
to the Committee and participated in Q&A.
–
Interview feedback, which included non-executive Directors
scoring each candidate against the successful selection profile, as
well as qualitative feedback based on candidate interviews,
presentation and Q&A, which was collated and discussed by the
Committee.
Establishment of a
sub-group of the
Committee
Agreement of the
regulatory role profile
and success criteria
Internal and external
candidate assessment
Candidate interviews
with Group Chairman
and NEDs
Presentations to
Committee on
strategic vision and
Q&A
Announcement of
appointment of
Georges Elhedery as
Group CEO
Board approval
following receipt of
regulatory approval
Regulatory
engagement,
application and
interview
Decision on preferred
candidate
Feedback collated and
discussed by the
Committee
Based on the information gathered on the candidates over the past
four years, as well as the succession process, the Committee
selected Georges Elhedery as the preferred candidate.
Georges then participated in the required regulatory interviews with
the PRA and FCA, after which the Committee received confirmation
of regulatory approval, and announced Georges’ appointment on
Wednesday 17 July 2024.
The Committee also agreed on a comprehensive induction and
development plan to best support Georges’ transition to Group CEO.
The Committee continues to oversee this plan and receives regular
updates on progress.
Senior executive succession and
development
Jonathan Bingham, Global Financial Controller, was appointed as
Interim Group CFO with effect from 2 September 2024. This interim
appointment allowed Georges to focus on his new responsibilities as
Group CEO, whilst the process to identify a permanent successor
was conducted. The process to select the permanent Group CFO was
led by the Group CEO, with the support of the Group Chief People &
Governance Officer and a leading external search firm. Consistent
with the approach taken for the selection of Georges Elhedery as
Group CEO, internal and external candidates were considered and
assessed against the agreed role profile and selection criteria.
Following the completion of interviews with members of the Board,
Pam Kaur was selected to join the Board as an Executive Director and
Group CFO.
Following Pam’s selection for the role of Group CFO, Richard
Blackburn, Global Head of Traded and Treasury Risk Management &
Global Head of Risk Analytics, was appointed as Interim Group Chief
Risk and Compliance Officer with effect from 1 January 2025. An
update on permanent succession for this position will be provided in
due course.
In conjunction with the announcement on the new, simpler
organisational structure, designed to unleash the full potential of
HSBC, the Committee also approved several changes to the senior
leadership team, based on the recommendations of the new Group
CEO. These included the approval of the new Group OpCo terms of
reference, together with its membership. Members of the Committee
were closely involved in the assessment and selection process for
roles on the new Group OpCo, including the roles of CEO of
Corporate and Institutional Banking and Western Markets, and the
split of the previous Group COO’s responsibilities into two new Group
OpCo roles – those of Group CIO and Group COO.
Committee performance review
The 2024 annual review of the effectiveness of the Board and Board
Committees, including the Nomination & Corporate Governance
Committee, was conducted externally by IBE.
It determined that the Committee continued to perform effectively.
There were no specific actions identified for the Committee. The
review acknowledged the Committee’s role in the Group CEO
succession process, which was very well managed, and identified
several good practices that would be applied to future succession
processes for key roles across the Group. Additional details on the
annual review of the Board and Committees’ effectiveness can be
found from page 257.
HSBC Holdings plc Annual Report and Accounts 2024
261
Corporate governance
Subsidiary governance
In line with the subsidiary accountability framework, the Committee
continued to oversee the corporate governance and succession
arrangements across the principal subsidiary portfolio. Additional
details on the subsidiary accountability framework are set out on
page 247.
Given the improvement in quality of the succession planning updates
over the previous years, the Committee agreed that, for 2024, the
material subsidiary plans no longer required direct oversight. Principal
Subsidiaries continued to oversee plans for their respective
subsidiaries, with the Committee retaining the ability to review
material subsidiary succession plans, where necessary.
The Committee continued to support and seek opportunities to
enhance subsidiary connectivity. That included leveraging the
Chairman’s Forum and Remuneration Committee Chairs’ Forum,
which regularly brought together the chairs of the principal
subsidiaries to discuss issues of common interest.
In order to further strengthen connectivity between the Board and the
most significant subsidiary boards, the Committee took relevant steps
with two of the principal UK regulated entities. It recommended that
Ann Godbehere be appointed to the HSBC Bank plc board and
Brendan Nelson be appointed to the HSBC UK Bank plc board. Given
that the Board has benefitted from James Forese’s leadership of the
HSBC North America Holdings Inc. Board, the Committee is confident
that these appointments will enhance governance arrangements and
connectivity.
The committee continues to provide support and look for
opportunities to enhance subsidiary connectivity through non-
executive Director events and other engagement forums. The
Group’s flagship events held in 2024 included the Bank Director
Programme and the Bank Chair Programme. The Group Chairman also
hosted an annual Global NED Update, which was attended by over
200 subsidiary non-executive Directors.
Jan
Feb
Apr
May
Jun
Jul
Sep
Sep
Dec
Board composition and succession
Board composition, including succession planning and skills matrices
u
u
u
u
u
u
u
u
u
Executive talent and development
Senior executive succession and appointments
u
u
u
u
u
u
u
u
u
Governance
Board and corporate governance developments
u
u
u
u
u
u
u
u
u
Board and committee performance review
u
u
u
u
u
u
u
u
u
Subsidiary governance
u
u
u
u
u
u
u
u
u
Subsidiary appointments
u
u
u
u
u
u
u
u
u
u Matter considered
u Matter not considered
Report of the Directors | Corporate governance report | Board committees
262
HSBC Holdings plc Annual Report and Accounts 2024
Group Audit Committee
“Given changes in the external operating environment and as a result of the
reorganisation of the Group, the Group Audit Committee will play an important role in
monitoring the impact on the control environment during this period of change.“
Brendan Nelson
Chair
Group Audit Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 20241
The Committee’s key responsibilities include:
–
monitoring and assessing the integrity of the financial
statements, formal announcements and regulatory information
in relation to the Group’s financial performance, as well as
significant accounting judgements;
– reviewing the effectiveness of internal controls;
– reviewing management’s arrangements for compliance with
prudential regulatory financial reporting;
– reviewing the annual financial resource plan, including annual
budget, capital expenditure and business plans;
– reviewing and monitoring the relationship with the external
auditor and overseeing its appointment, remuneration and
independence;
– overseeing the Group’s policies, procedures and arrangements
for capturing and responding to whistleblower concerns and
ensuring they are operating effectively; and
–
overseeing the work of Global Internal Audit and monitoring and
assessing the effectiveness, performance, resourcing,
independence and standing of the function.
Brendan Nelson (Chair)
Sept 2023
10/10
Geraldine Buckingham2
Oct 2024
2/2
Rachel Duan3
Apr 2022
9/10
James Forese3
May 2020
9/10
Ann Godbehere4
Feb 2024
7/7
Eileen Murray5, 6
June 2022
6/8
David Nish7
May 2016
4/4
Notes:
1 These included one ad hoc meeting held on 31 January 2024 and a joint
meeting with the Group Risk Committee (’GRC’), which took place on 18
June 2024.
2 Geraldine Buckingham was appointed as a member of the GAC on
1 October 2024.
3 Rachel Duan and James Forese were unable to join one ad hoc GAC
meeting, due to prior commitments.
4 Ann Godbehere joined the GAC on 21 February 2024.
5 Eileen Murray stepped down from the GAC on 1 October 2024.
6 Eileen Murray was unable to attend the meeting held on 25 September
2024 due to personal reasons.
7 David Nish stepped down from the GAC on 3 May 2024 upon his
retirement from the Board.
I am pleased to introduce the Group Audit Committee (‘GAC’) report,
my first as GAC Chair. In this report, I have provided an overview of
the key matters and issues considered by the GAC in 2024. I
assumed the role of GAC Chair following the publication of the FY23
results and Annual Report in February 2024, succeeding David Nish. I
would like to acknowledge and thank David for his leadership of the
GAC during his time as Chair.
Internal controls have been a key focus during 2024, and the GAC
assumed responsibility for the oversight of all internal controls - which
was previously limited to those related to financial reporting. We have
overseen management’s proposed enhancement of controls,
including the creation of a new Group Chief Controls Oversight Office
function. This will enhance effective operation and monitoring of the
Group’s control environment. This will include the work to support
preparations for the Board's declaration on the effectiveness of
material controls, which will be required from 2026 under the 2024
UK Corporate Governance Code.
Given changes in the external operating environment and as a result
of the reorganisation of the Group, the GAC will have an important
role in monitoring the impact on the control environment during this
period of change. A key element of this continues to be our progress
in enhancing the control environment regarding the Group’s
regulatory reporting obligations. Remediation of errors in regulatory
reporting and achieving a sustainable controls environment over these
returns, remains a priority for the Committee, management and our
regulators globally. Further details on progress under this programme
can be found later in this report.
The GAC received regular updates from the Group Chief Financial
Officer and Global Financial Controller on key financial reporting
issues and the related management judgements. These included
spending significant time on the appropriateness and clarity of the
Group’s market guidance, including in relation to returns, costs and
expected credit losses (‘ECL’). Given the uncertain global
macroeconomic environment, the GAC carefully considered its
disclosures on ECLs, in particular those relating to the Group’s
exposure to the mainland China and Hong Kong corporate real estate
sectors.
I have spent time with several of the subsidiary audit committee
chairs, building on the important connectivity between the Group and
subsidiaries established over the past few years. Regular engagement
with our subsidiary audit chairs will continue to be an important part
of the GAC’s governance practices through 2025 and beyond.
The GAC also oversaw the External Quality Review of the Global
Internal Audit function during the year, which was conducted by
Deloitte in accordance with the Internal Audit Code. I am pleased to
report that the function is highly valued across the HSBC Group, and
received a ’Generally Confirms’ rating, which is the highest attainable
under the internal audit International Professional Practices
framework.
Finally, I was pleased that the review of the GAC’s performance
concluded that the GAC continued to operate effectively. Further
details on the review, which also considered the performance of the
Board and the other Board committees, can be found as part of the
'How we are governed' section on page 257.
Brendan Nelson
Chair of the Group Audit Committee
HSBC Holdings plc Annual Report and Accounts 2024
263
Corporate governance
Committee governance
The Committee operates under delegated authority from the Board,
and advises the Board on matters concerning the Group’s financial
reporting requirements. The Committee Chair reports on the key
matters and discussions at the subsequent Board meeting, and the
Board also receives copies of the Committee agendas and minutes.
This supports the Board‘s oversight of the work carried out by
management, Global Internal Audit and PricewaterhouseCoopers LLP
(‘PwC‘), as the Group’s statutory auditor.
The Nomination & Corporate Governance Committee has confirmed
that each member of the Committee is independent according to the
criteria of the US Securities and Exchange Commission, and the
Committee and individual members continue to possess competence
relevant to the banking and broader financial services sector in which
the Group operates. The Board has determined that Brendan Nelson
and Ann Godbehere are the audit committee ‘financial experts’ for the
purposes of section 407 of the Sarbanes-Oxley Act and have recent
and relevant financial experience for the purposes of the UK and Hong
Kong Corporate Governance Codes.
The Committee Chair continued to engage with various key
stakeholders, including the UK PRA, to understand their views, key
themes and areas of focus within the broader financial services sector
on matters relevant to the work of the Committee. This included
trilateral meetings involving the Group’s external auditor, PwC, and
the UK PRA.
Members of senior management routinely attended meetings of the
GAC. The external auditor attended all meetings.
The Chair holds regular meetings with management, Global Internal
Audit and PwC, as the external auditor, to discuss relevant items as
they arose during the year outside the formal Committee process.
The Committee also regularly meets with the internal and external
auditors, without management present. Private discussions are also
held with relevant members of senior management, including the
Group Chief Financial Officer and Group Chief Risk and Compliance
Officer.
Matters considered during 2024
Jan
Feb
Apr
Jun
Jul
Sep
Oct
Dec
Reporting
Financial reporting matters including:
– review of financial statements, ensuring that disclosures are fair, balanced and understandable
– significant accounting judgements
– going concern assumptions and viability statement
– supplementary regulatory information
u
u
u
u
u
u
u
u
Review of the Group's annual financial resource plan
u
u
u
u
u
u
u
u
ESG and climate reporting
u
u
u
u
u
u
u
u
Regulatory reporting-related matters including:
– oversight of the Group's engagement with PRA-requested skilled person reviews
– reports from the principal subsidiaries on progress and learnings in relation to their local
remediation efforts
– adequacy of resources across Finance and other SME teams to deliver the Group-wide
remediation programme
u
u
u
u
u
u
u
u
Certificates from principal subsidiary audit committees
u
u
u
u
u
u
u
u
Control environment
Control enhancement programmes
u
u
u
u
u
u
u
u
Group transformation
u
u
u
u
u
u
u
u
Review of deficiencies and effectiveness of internal financial controls
u
u
u
u
u
u
u
u
Internal audit
Reports from Global Internal Audit
u
u
u
u
u
u
u
u
Audit plan updates, independence and effectiveness
u
u
u
u
u
u
u
u
External audit
Reports from external audit, including external audit plan
u
u
u
u
u
u
u
u
Appointment, remuneration, non-audit services and effectiveness
u
u
u
u
u
u
u
u
Compliance
Accounting standards and critical accounting policies
u
u
u
u
u
u
u
u
Corporate governance codes and listing rules
u
u
u
u
u
u
u
u
Whistleblowing
Whistleblowing arrangements and effectiveness
u
u
u
u
u
u
u
u
u Matter considered
u Matter not considered
Report of the Directors | Corporate governance report | Board committees
264
HSBC Holdings plc Annual Report and Accounts 2024
How the Committee discharged its responsibilities
Financial, sustainability and climate reporting
The GAC is responsible for reviewing the Group’s financial reporting
during the year, including the Annual Report and Accounts, Interim
Report, quarterly earnings releases, analyst presentations and Pillar 3
disclosures.
Furthermore, as an area of expanded assurance, the GAC, supported
by the executive-level ESG Committee, provided close oversight of
the disclosure risks in relation to sustainability and climate reporting,
amid rising stakeholder expectations. The work will continue
throughout 2025 in partnership with the Sustainability Working Group.
As part of its review, the GAC:
–
challenged and evaluated management’s application of critical
accounting policies and material areas in which significant
accounting judgements were applied;
–
reviewed and challenged management’s judgements and
disclosures in relation to impairment reviews of HSBC’s
investment in Bank of Communications Co., Limited, performed
using a value-in-use methodology;
–
gave particular regard to the analysis and measurement of IFRS 9
ECL, including the key judgements and management adjustments
made in relation to the forward economic guidance, underlying
economic scenarios and reasonableness of the weightings, as well
as modelling and adjustments;
–
focused on preparation for disclosures to ensure these were
consistent, appropriate and could be validated under the relevant
financial and governance reporting requirements;
–
tracked and monitored delivery against the external audit plan; and
–
provided advice to the Board on the form and basis underlying the
long-term viability statement.
We also received independent third-party limited standalone
assurance on the Group’s climate reporting. Further details can be
found in ’Assurance relating to ESG data’ on page 44.
In conjunction with the GRC, the GAC considered the current position
of the Group, along with the emerging and principal risks, and carried
out a robust assessment of the Group’s prospects. This assessment
informed the GAC’s recommendation to the Board on the Group’s
long-term viability. The GAC also undertook a detailed review before
recommending to the Board that the Group continues to adopt the
going concern basis in preparing the annual and interim financial
statements. Further details can be found on page 40.
Following the October 2024 announcement in relation to the Group's
organisation structure, the GAC oversaw management proposals
regarding the external disclosure requirements following the
reorganisation of the Group around four core business. The GAC
reviewed the financial resource plan, prior to approval by the Board,
which helped to support the revised guidance, including in relation to
the expected benefits from the reorganisation and simplification of
the Group, which were communicated to the market as part of the
FY24 results. In relation to the expected benefits specifically, the GAC
considered the independent validation report provided by a third party,
and which provided additional comfort on the appropriateness of
management's proposed guidance.
The GAC will complete a thorough review of the pro-forma historical
financial performance for 2023 and 2024, based on the new
organisational structure, prior to their communication to the market
next month.
Financial planning
The GAC reviewed and debated the robustness of the financial plan
for the financial years 2025 to 2029. The GAC considered the risks
and challenges, and ensured that the process to develop the financial
resource plan was robust and that the assumptions driving the
financial performance of the Group were appropriate and subject to
appropriate challenge.
Fair, balanced and understandable
Following review and challenge of the disclosures, the Committee
recommended to the Board that the Annual Report and Accounts,
taken as a whole, were fair, balanced and understandable. These
provided the shareholders with the necessary information to assess
the Group’s position and performance, business model, strategy and
risks facing the business.
The Committee reviewed the draft Annual Report and Accounts 2024
and results announcements to provide feedback and challenge to
management. It was supported by the work of the Group Disclosure
and Controls Committee, which also reviewed and assessed the
Annual Report and Accounts 2024 and investor communications.
This work enabled the GAC to discharge its responsibilities and
support the Board in making the statement required under the UK and
Hong Kong Corporate Governance Codes.
Internal controls
During the year, the Board approved changes to the scope of the
GAC’s responsibilities in relation to internal controls. These changes
saw the GAC assume responsibility for oversight of the effectiveness
of all internal controls. This reflected the GAC’s experience in
overseeing internal controls over financial reporting, and the
responsibility that will apply from the 2026 financial year to make a
declaration on the effectiveness of material controls under the 2024
UK Corporate Governance Code.
Regular updates and confirmations are provided to the GAC on the
action management takes to remediate any failings or weaknesses
identified through the operation of the Group’s framework of internal
financial controls. This is supplemented by reviews of these controls
by the second line of defence and internal audit, and the external
auditors, who provided additional comfort to the Committee on the
effectiveness of these controls. These reviews confirmed that there
were no material weaknesses as at the year-end.
These updates included the Group’s work on compliance with section
404 of the US Sarbanes-Oxley Act. Based on this work, the GAC
recommended that the Board support its assessment of the internal
controls over financial reporting.
The GAC continued to focus on controls over the Group's Insurance
business following the implementation of the IFRS 17 ‘Insurance
Contracts‘ accounting standards. The GAC welcomed management's
progress in improving the control environment during 2024. However,
there remains further work to ensure that the Insurance business
embeds the control standards expected on a consistent basis across
all markets.
For further details of how the Board reviewed the effectiveness of key
aspects of internal control, see page 323.
Regulatory reporting
Regulatory reporting has been a key priority for the Committee over
recent years and will continue to be a priority for 2025. The
Committee is focused on monitoring the programme of work to
address the quality and reliability of regulatory reporting to meet
regulatory expectations.
Management provided updates on the status of ongoing HSBC-
specific external reviews, and discussed the issues and themes
identified from the increased assurance work and focus on regulatory
reporting. The GAC also discussed root cause themes, remediation of
known issues and new issues identified through the increased
assurance work. The Committee challenged management on
remediation plans, to assess whether there was a sustainable
reduction in issues and that dependencies with other key
programmes were well understood.
Further details can be found in the ‘Principal activities and significant issues
considered during 2024’ table on page 268.
HSBC Holdings plc Annual Report and Accounts 2024
265
Corporate governance
Adequacy of resources
The Committee is responsible, under the Hong Kong Listing Rules, to
annually assess the adequacy of resources of the accounting, internal
audit, financial reporting and ESG performance and reporting
functions. It also monitored the legal and regulatory environment
relevant to its responsibilities.
The Committee determined that each of the functions provided
thorough information with regards to people capacity and capability
and endorsed the annual update to the Board.
In recognition that the enhancement of the Group’s regulatory reporting
processes and controls was a priority for both the Committee and the
Group’s regulators, the GAC also considered the adequacy of regulatory
reporting resources as part of the year-end activities.
Connectivity with principal subsidiary audit
committees
The Committee recognises the importance of strong connectivity and
alignment with principal subsidiary audit committees. The
mechanisms to support this are well established and continued to
operate effectively during the year.
This included information sharing and targeted collaboration between
audit committee chairs and management to ensure there was
appropriate focus on the local implementation of programmes. During
2024 this included a particular focus on regulatory reporting, with the
subsidiary audit committee chairs, chief executive officers and chief
financial officers of the Europe, Asia-Pacific, Middle East and
Americas regions attending Committee meetings to update on
progress, share local challenges, and areas of focus with the
Committee.
In addition to the Chair‘s regular meetings with the audit chairs of the
Group’s UK, European, US, Middle Eastern and Asian principal
subsidiaries, and their attendance at GAC meetings for relevant items,
they provided quarterly reports on their local audit committee activity.
This included updates on internal control, and financial and regulatory
reporting matters that are significant from a local or enterprise-wide
perspective. In addition, the Committee received escalations from
subsidiary boards for information and action, as appropriate. The
connectivity between the Group and subsidiary audit committees is
supplemented by attendance at committee meetings by the Group
and subsidiary audit committee chairs.
On a half-year basis, principal subsidiary audit committees provided
certifications to the Committee that regarded the preparation of their
financial statements, adherence to Group policies and escalation of
any issues that required the attention of the Committee. These
certifications also included information regarding the governance,
review and assurance activities undertaken by principal subsidiary
audit committees in relation to prudential regulatory reporting.
External auditor
The GAC has the primary responsibility for overseeing the relationship
with the Group’s external auditor, PwC.
PwC completed its tenth audit, providing robust challenge to
management and sound independent advice to the Committee on
specific financial reporting judgements, sustainability reporting and
the overall control environment. The senior audit partner is Matthew
Falconer, who assumed the role as part of the regular rotation of audit
partners in support of the independence of PwC for the 2024 financial
year. The Committee reviewed the external auditor’s approach and
strategy for the annual audit and received regular updates on the
audit, including observations on the control environment.
Key audit matters discussed with PwC are set out in its report on
page 331. The Committee reviewed, and concluded that, all
requirements of the Financial Reporting Council's (‘FRC’) Audit
Committee and the External Audit: Minimum Standard (’the
Standard’), where relevant, were met during 2024.
The GAC reviewed the PwC external audit approach, including the
materiality, risk assessment and scope of the audit. PwC highlighted
the changes being made to its approach to enhance the quality and
effectiveness of the audit. PwC’s plan supports its, and the GAC’s,
focus on audit quality through standardisation, centralisation and the
use of technology.
Following commitments made as part of the audit tender process
conducted in 2022, specifically in relation to plans for greater
utilisation of digital solutions on the HSBC audit, the Committee
received a demonstration of how PwC were leveraging digital audit
tooling as part of the audit of the Group’s accounts. PwC continue to
look for opportunities to further leverage technology to enhance the
efficiency, robustness and quality of the Group statutory audit.
Effectiveness of external audit process
The GAC assessed the effectiveness of PwC as the Group’s external
auditor, using a questionnaire that focused on the overall audit
process, its effectiveness and the quality of output.
In addition, the GAC Chair, certain principal subsidiary audit chairs and
members of the Group Executive Committee met with the Senior
Audit Partner to discuss findings from the questionnaire and provide
in-depth feedback on the interaction with the PwC audit team.
Key strengths identified through the review included strong
independent challenge, the knowledge of the audit team and the
good understanding of the Group‘s businesses and associated risks
that were demonstrated through the course of the audit. The review
also identified some areas for improvement, including with regards to
communication and coordination with management, and planning.
The GAC receives regular updates from PwC and management on
performance across the audit quality indicators, which provides wider
visibility of ongoing and emerging issues.
There were no breaches of the policy on hiring employees or former
employees of the external auditor during the year. The lead audit
partner attends all Committee meetings and the GAC Chair maintains
regular contact with the senior audit partner and his team throughout
the year.
During the year, the Committee considered the impact of the fine and
six-month suspension on PwC’s China Firm upon PwC UK‘s ability to
act as auditor for the Group. The GAC received assurance from PwC’s
Global Leadership Team that the issues leading to the sanctions did
not impact the Group, and that PwC were taking appropriate steps to
prevent reoccurrence. The GAC will continue to monitor until the
completion of the suspension, which is due to expire during March
2025.
Independence and objectivity
The Committee assessed any potential threats to independence that
were self-identified or reported by PwC. Based on the reporting
received, PwC are deemed to be independent and PwC, in
accordance with professional ethical standards and applicable rules
and regulations, provided the GAC with written confirmation of its
independence for the duration of 2024.
The Committee confirms it has complied with the provisions of The
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 for the financial statements.
Following the Committee‘s recommendation to reappoint PwC as the
auditor, shareholders passed the associated resolution at the 2024
AGM. At the same time, shareholders authorised the Committee to
determine PwC‘s audit fee for the financial year ended 31 December
2024, which was approved by the Committee at its July 2024
meeting.
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266
HSBC Holdings plc Annual Report and Accounts 2024
Non-audit services
The Committee is responsible for setting, reviewing and monitoring
the appropriateness of the provision of non-audit services by the
external auditor. It also applies the Group’s policy on the award of
non-audit services to the external auditor. The non-audit services are
carried out in accordance with the external auditor independence
policy to ensure that services do not create a conflict of interest. All
non-audit services are either approved by the GAC Chair, or by Group
Finance when acting within delegated limits and criteria set by the
GAC.
The non-audit services carried out by PwC included 16 engagements
approved during the year where the fees were over $100,000 but less
than $1m. Group Finance, to whom the GAC has delegated authority
for non-audit services below $1m, considered that it was in the best
interests of the Group to use PwC for these services because they
were:
–
audit-related assurance services, with the work closely related to
work performed in the audit and in some instances required by
local regulators to be performed by the external auditor; or
–
other assurance services that involve obtaining appropriate audit
evidence to express a conclusion designed to enhance the degree
of confidence of the intended users other than the responsible
party about the subject matter information, including attestation
reports on internal controls of a service organisation primarily
prepared for and used by third-party end users.
There were no engagements during the year where the fees
exceeded $1m, above which GAC approval would be required.
2024
2023
Auditors‘ remuneration
$m
$m
Total fees payable
146.6
155.9
of which fees for non-audit services
43.8
46.1
Ratio of non-audit fees to audit fees1
43.0%
42.0%
1 The calculation is on a simple ratio and is not based on FRC guidance on non-
audit fees ratio thresholds.
Whistleblowing and speak-up culture
An important part of HSBC’s values is speaking up when something
does not feel right. HSBC remains committed to ensuring colleagues
have confidence to speak up and acting when they do. A wide variety
of channels are provided for colleagues to raise concerns, including
the Group’s whistleblowing channel, HSBC Confidential (see page 80
for further information).
The Board has delegated responsibility to the GAC to oversee the
effectiveness of HSBC’s whistleblowing procedures. The Chair of the
GAC is a Group Senior Manager (’SMF7’), and has a prescribed
responsibility as the Whistleblowers’ Champion to ensure integrity of
HSBC’s policy and procedure on whistleblowing and protecting those
who report concerns. As part of his responsibility, the GAC Chair
reports to the Board on the GAC’s oversight of whistleblowing as part
of his regular reporting updates.
The Group Head of Regulatory Compliance regularly updates the GAC
on whistleblowing effectiveness, including controls assessments and
internal audit findings. In 2024, the GAC has been briefed on actions
to improve the timeliness of HSBC Confidential investigations against
internal standards. The Committee is also briefed on culture and
conduct risks from whistleblowing cases and actions taken. In 2024,
the GAC Chair also met with the Group Head of Regulatory
Compliance for briefings on significant whistleblowing matters.
Global Internal Audit
The primary role of the Global Internal Audit function is to help the
Board and Management to strengthen the organisation’s ability to
create, protect and sustain value. Global Internal Audit does this by
providing independent, risk based and objective assurance on the
design and operating effectiveness of the Group’s governance, risk
management and control framework and processes, prioritising the
greatest areas of risk. The independence of Global Internal Audit from
day-to-day line management responsibility is fundamental to its ability
to deliver objective audit coverage of all parts of the Group. Global
Internal Audit is free from interference by any element in the
organisation, including on matters of audit selection, scope,
procedures, frequency, timing, or internal audit report content. The
Group Head of Internal Audit reports to, and meets frequently with,
the Chair of the GAC.
In addition, in 2024, there was continued heightened interaction
between Global Internal Audit Senior Management and the members
of the GAC, aimed at increasing knowledge and awareness of the
audit universe and existing and emerging risks identified by Global
Internal Audit. Global Internal Audit adheres to The Institute of Internal
Auditors' mandatory guidance.
Consistent with previous years, the 2025 audit planning process
includes assessing the inherent risks and strength of the control
environment across the audit entities representing the Group. Results
of this assessment are combined with a top-down analysis of risk
themes by risk category to ensure that themes identified are
addressed in the annual plan. Audit coverage is achieved using a
combination of business and functional audits of processes and
controls, risk management frameworks and major change initiatives,
as well as regulatory audits, investigations and special reviews. In
addition to the ongoing importance of regulatory-focused work, key
risk theme categories for 2025 audit coverage remain as: strategy,
governance and culture; financial crime, conduct and compliance;
financial resilience; and operational resilience. A quarterly continuous
monitoring assessment of key risk themes will form the basis of
thematic reporting and plan updates and will ultimately drive the 2026
planning process.
Global Internal Audit has made updates to the audit universe and risk
assessment to reflect the Group reorganisation. As a result, audits
have been added to the 2025 Annual Audit Plan, and audits have been
refocused, to reflect the risks arising from the Group reorganisation.
In addition to the Group reorganisation, Global Internal Audit’s new or
heightened areas of coverage for 2025 are: Group strategy; significant
change initiatives including regulatory change; material regulatory
obligations; compliance; anti-money laundering and sanctions;
conduct, internal and external fraud; credit risk management; financial
forecasting; regulatory reporting; enterprise wide risk management,
operational resilience; Financial Reporting Council Corporate
Governance reporting on material controls; model risk management;
data management; technology resilience and cybersecurity; and
incident and escalation management. In addition, Global Internal Audit
will continue its programme of culture audits to assess the extent that
behaviours reflect HSBC’s purpose, ambition, strategy and values.
The annual audit plan and material plan updates made in response to
changes in the Group’s structure and risk profile are approved by the
GAC.
The results of audit work, together with an assessment of the Group’s
overall governance, risk management and control framework and
processes are reported to the GAC, GRC and local audit and risk
committees, as appropriate. This reporting highlights key themes
identified through audit activity, and the output from continuous
monitoring. This includes business and regulatory developments and an
independent view of emerging and horizon risk, together with details of
audit coverage and any required changes to the annual audit plan. Based
on regular internal audit reporting to the GAC, private sessions with the
Group Head of Internal Audit, the Global Professional Practices annual
assessment and quarterly quality assurance updates, the GAC is
satisfied with the effectiveness of the Global Internal Audit function
and the appropriateness of its resources. In December 2024, Global
Internal Audit’s External Quality Assessment Review was reported to
the GAC, which concluded that Global Internal Audit is a well-
respected, independent provider of assurance which is highly valued
across the Group and that Global Internal Audit generally conforms
with the 2017 International Professional Practices framework (’IPPF’),
which includes the IIA Standards and Code of Ethics. ’Generally
Conforms’ is the highest rating attainable and means the function is
compliant with the requirements of the Standards in all material
HSBC Holdings plc Annual Report and Accounts 2024
267
Corporate governance
aspects. Global Internal Audit also generally meets the CIIA’s IA
Financial Services Code of Practice requirements.
Executive management is accountable for addressing the matters raised
by Global Internal Audit, which must be addressed within an appropriate
and agreed timetable. Confirmation to this effect must be provided to
Global Internal Audit, which validates closure on a risk basis.
Global Internal Audit maintains a close working relationship with
HSBC’s external auditor, PwC. The external auditor is kept informed
of Global Internal Audit’s activities and results, and is afforded free
access to all internal audit reports and supporting records.
Areas of focus
Key issues
Conclusions and actions
Significant
accounting
judgements
Expected credit losses
The measurement of expected credit losses involves
significant judgements, particularly under current
economic conditions. There remains uncertainty over
ECL estimation due to sustained high inflation,
interest rate volatility, economic policy changes
following election outcomes globally and weaker
economic growth in the Group’s key operating
markets.
–
The Committee reviewed economic scenarios for the key countries and territories in
which the Group operates and challenged management’s judgements on the
weightings assigned to the scenarios. The Committee also challenged
management’s judgemental adjustments to account for uncertainty in specific
sectors and geographies, including the controls underpinning the adjustments
process and conditions under which the adjustments would be reduced or removed.
–
The Committee continued to monitor management’s updates on areas of particular
focus, including downside risk in mainland China and Hong Kong commercial real
estate sectors.
Valuation of defined benefit pension obligations
The valuation of defined benefit pension obligations
involves highly judgemental inputs and actuarial
assumptions which include interest rate, inflation rate,
mortality rates and other demographic assumptions.
Management considered these assumptions in
consultation with actuarial experts to determine the
valuation of the defined benefit obligations.
–
The GAC has considered the effect of changes in key assumptions on the HSBC UK
Bank plc section of the HSBC Bank (UK) Pensions Scheme, which is the principal
plan of HSBC Group. Details of key assumptions can be found on pages 378 to 379
of the ’Notes on the financial statements’.
Valuation of financial instruments
During 2024, management continuously refined its
methodology and approach to valuing the Group’s
portfolio in relation to investments, trading assets and
liabilities and derivatives.
–
The Committee received periodic updates on the key valuation metrics and
judgements involved in the determination of the fair value of financial instruments,
and agreed with the judgements applied by management, which were validated
through appropriate governance and control forums.
Investment in subsidiaries
Management has reviewed investments in
subsidiaries for indicators of impairment and
conducted impairment reviews where relevant. These
involve exercising significant judgement to assess the
recoverable amounts of subsidiaries, by reference to
projected future cash flows, discount rates and
regulatory capital assumptions.
–
The Committee reviewed the judgements in relation to the impairment review of
HSBC Overseas Holdings (UK) Limited and the key inputs such as projected profits,
underpinning the recoverable amounts of its subsidiaries.
Principal activities and significant issues considered during 2024
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268
HSBC Holdings plc Annual Report and Accounts 2024
Principal activities and significant issues considered during 2024 (continued)
Areas of focus
Key issues
Conclusions and actions
Significant
accounting
judgements
Investment in an associate – Bank of
Communications Co., Limited
During the year, management performed impairment
reviews of HSBC’s investment in Bank of
Communications Co., Ltd (‘BoCom’). This included
assessment as to whether there is indication of
further impairment, or that previously recognised
impairment may no longer exist or may have
decreased. The impairment reviews are complex and
require significant judgements, such as the
appropriateness of projected future cash flows,
discount rate, and regulatory capital assumptions.
–
The GAC reviewed and challenged management’s judgements and disclosures in
relation to impairment reviews of HSBC’s investment in BoCom, performed using a
value-in-use methodology.
–
The Committee reviewed the appropriateness of key assumptions such as projected
future cash flows, with particular focus on the potential impacts of the publicly
announced policies aimed at promoting growth and economic development in China
during the fourth quarter of 2024.
–
The GAC considered the consistency of judgements with prior period impairment
reviews, reflecting available details as at 31 December 2024 as to how these
policies may be enacted.
Interest rate management
During 2024, management proposed a framework for
the disposal of selected hold-to-collect-and-sell
securities to improve risk management of hold-to-
collect-and-sell positions and to stabilise and protect
net interest income over the medium term.
–
The GAC received regular management updates on hedging strategy, including the
repositioning of structural interest rate hedges.
–
The Committee reviewed controls on, and financial outcomes of, disposals of hold-
to-collect-and-sell securities.
Impairment of goodwill and non-financial assets
During the year, management tested for impairment
goodwill and non-financial assets including additional
consideration for the future impacts resulting from the
announced organisational restructure. Key
judgements in this area relate to long-term growth
rates, discount rates and projected future cash flows
to include for each cash-generating unit tested, both
in terms of compliance with the accounting standards
and reasonableness of the forecasts.
–
The Committee reviewed and challenged management’s approach and methodology
used for the impairment testing of goodwill and non-financial assets, with a key
focus on the projected cash flows included in the forecasts and discount rates used.
–
The GAC also challenged management’s key judgements and considered the
reasonableness of the outcomes against business forecasts and strategic objectives
of HSBC.
Legal proceedings and regulatory matters
Management has used judgement in relation to the
recognition and measurement of provisions, as well
as the existence of contingent liabilities for legal and
regulatory matters.
–
The Committee reviewed reports from management on legal proceedings and
regulatory matters, and challenged related accounting judgements and disclosures.
Tax-related judgements
HSBC has recognised deferred tax assets to the
extent that they are recoverable through expected
future taxable profits. Significant judgement continues
to be exercised in assessing the probability and
sufficiency of future taxable profits, future reversals of
existing taxable temporary differences and expected
outcomes relating to uncertain tax treatments.
–
The Committee considered the recoverability of deferred tax assets. The Committee
also considered management’s judgements relating to tax positions in respect of
which the appropriate tax treatment is uncertain, open to interpretation or has been
challenged by the tax authority.
Long-term viability and going concern statement
The GAC has considered a wide range of information
relating to present and future projections of
profitability, cash flows, capital requirements and
capital resources. These considerations include
stressed scenarios and the implications of:
–
geopolitical tensions including the ongoing Russia-
Ukraine and Middle East conflicts, US-China
tensions and the consequential impacts on the
supply chains globally;
–
macroeconomic risks including inflationary risks,
mainland China and Hong Kong real estate sector
risks and economic policy uncertainty following
election outcomes globally; and
–
climate risk, operational resilience, and other top
and emerging risks, and the related impact on
profitability, capital and liquidity.
–
In accordance with the UK and Hong Kong Corporate Governance Codes, the
Directors carried out a robust assessment of the principal and emerging risks of the
Group and parent company. The GAC considered the statement to be made by the
Directors and concluded that the Group and parent company will be able to continue
in operation and meet liabilities as they fall due, and that it is appropriate that the
long-term viability statement covers a period of three years.
Impact of acquisitions and disposals
HSBC engaged in a number of business acquisitions
and disposals, notably in Canada, Germany, South
Africa, Argentina, Armenia and Russia. Judgement
was involved in determining the timing of recognition
of assets held-for-sale, gains or losses, and the
measurement of assets and liabilities on acquisition or
disposal.
–
The Committee reviewed management’s judgements related to the completion of
the sale of the Group's banking business in Canada and of HSBC Argentina, as well
as the planned sales of the German private bank business and the business in South
Africa, such as the timing of classification as held-for-sale and the remeasurement of
assets.
Financial and
regulatory
reporting
Environmental, social and governance (‘ESG’)
reporting
The Committee considered management’s efforts to
enhance ESG disclosures and associated verification
and assurance activities, with a specific focus on the
net zero transition plan and climate-related disclosures
made in the Annual Report and Accounts 2024.
–
The Committee considered ESG disclosures for the Annual Report and Accounts
2024 in detail, to ensure these were fair and balanced, and were also transparent on
the challenges faced and aligned with the Group’s progress in the embedding of
sustainable and climate-related policies across the business. In addition, the
committee reviewed the narrative relating to our net zero ambitions and targets and
the planned annual net zero transition plan review.
HSBC Holdings plc Annual Report and Accounts 2024
269
Corporate governance
Principal activities and significant issues considered during 2024 (continued)
Areas of focus
Key issues
Conclusions and actions
Regulatory reporting
The GAC monitored progress by management in
delivering a sustainable control environment for
regulatory reporting across the Group.
–
The Committee reflected on the continued focus on the quality and reliability of
regulatory reporting by the PRA and other regulators globally.
–
The Committee oversaw management’s execution against the agreed remediation
plans, and challenged management on the approach and timeframes to deliver
accurate reporting submissions to the Group’s global regulators. Discussions
included a focus on shared dependencies across various Group-wide programmes,
for example and in particular, data.
Control
environment
Sustainable control environment
The GAC oversaw the effectiveness of the internal
control environment of the Group, including with
regards to the requirements of US Sarbanes-Oxley
Act.
During the year, the remit of the GAC with regards to
internal control was extended beyond financial
reporting controls to include oversight of all internal
controls.
–
The Committee received regular updates on the control environment, and broader
change framework, to review the impact on financial reporting and tax risk within
the Group, with regular updates provided on IFRS 17 and Basel 3.1.
–
In these updates the Committee monitored the assessment of the financial
reporting risk, tax risk and progress made on remediation of US Sarbanes-Oxley Act
significant deficiencies. This oversight helped the Committee to understand the
progress being made by management to set out strategic actions to remediate
identified issues and uplift the control environment to enable a sustainable reduction
in risk.
–
Management’s updates were supplemented by further focus and assurance work
from Global Internal Audit, including audits of significant programmes of activity
during 2024.
–
The Committee oversaw the work to support the Group’s oversight of internal
controls, including the establishment and scope of responsibilities of the new Group
Controls Oversight Office.
Regulatory
change
Basel 3.1 Reform
The GAC considered the implementation of the Basel
3.1 Reform and the impact on the capital
requirements and RWA assurance. This was
considered in the context of the strategy and
structure of the balance sheet.
–
The Committee received updates on the progress and impact of the Basel 3.1
programme on the Group, including following the publication by the PRA on
12 September 2024 of the second near-final policy statement and rules covering
their implementation.
–
Management discussed the delayed implementation dates, ongoing uncertainty
over the final definition of the rules by regulators, and the work undertaken to
mitigate delivery risks given the concentration of delivery during 2024 & 1H25. The
discussion highlighted the dependencies of the Basel 3.1 programme with data,
models and subject matter resources.
–
The Committee reviewed the ongoing management of risks, issues and
dependencies and challenged management to prioritise deliverables across each
jurisdiction in line with regulatory timelines. The Committee discussions focused on
ensuring, in each case, that the Group complied with the applicable minimum
standards under the regulation.
Committee performance review
In 2024, the annual review of the performance of the Board
committees, including the GAC, was conducted externally by IBE. On
the basis of the review, directors concluded that the GAC continued
to operate effectively.
Positive feedback was noted on the refreshed Committee
composition, in particular the change of Committee leadership and
the new practices and focus introduced, including on the control
environment. The Committee will consider scheduling an extra
meeting in 2025 to provide additional, dedicated time for discussion,
given the range and complexity of topics under the Committee’s
remit. The review highlighted the continued importance of strong
interaction between the GAC, GRC, and GTOC agendas, via the
Committee Chairs, and this will continue to be an area of focus in
2025.
Further details of the annual review of the Board and Committee
effectiveness can be found on page 257.
Report of the Directors | Corporate governance report | Board committees
270
HSBC Holdings plc Annual Report and Accounts 2024
Group Risk Committee
“Managing the impacts of political change and policy volatility has been a key trend this
year, with changes in governments globally, having economic and commercial
implications for both the Group and the industry.“
James Forese
Chair
Group Risk Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 20241
The Group Risk Committee (’GRC’) has overall non-executive
responsibility for the oversight of risk-related matters and the risks
impacting the Group. The GRC’s key responsibilities include:
–
overseeing and advising the Board on all risk-related matters,
including financial and non-financial risks;
–
advising the Board on risk appetite-related matters, and key
regulatory submissions;
–
reviewing the effectiveness of the Group’s risk management
framework and how effectively management is embedding and
maintaining an effective risk management control system;
–
reviewing and challenging the Group’s stress testing exercises;
and
–
overseeing the Group’s approach to conduct, fairness and the
prevention of financial crime.
James Forese (Chair)
Jun 2022
10/10
Geraldine Buckingham2
Jun 2022
8/8
Dame Carolyn Fairbairn
Sep 2021
10/10
Steven Guggenheimer
May 2020
10/10
Kalpana Morparia3
Jul 2020
8/8
Eileen Murray4
Oct 2024
2/2
Brendan Nelson
Sep 2023
10/10
David Nish5
Feb 2020
3/4
Swee Lian Teo
Oct 2023
10/10
1 These included six scheduled meetings, two ad hoc meetings and two
joint meetings, one with the Group Remuneration Committee and one
with the Group Audit Committee.
2 Geraldine Buckingham stepped down from the GRC on 1 October 2024.
3 Kalpana Morparia stepped down from the GRC on 1 October 2024.
4 Eileen Murray was appointed to the GRC on 1 October 2024.
5 David Nish stepped down from the GRC on 3 May 2024. He was unable
to attend one meeting due to a prior commitment.
I am pleased to present the GRC report.
The GRC membership has been refreshed this year to ensure that the
mix of skills and experience remains appropriate for the business of the
Committee and due to the retirement of David Nish, who stepped down
from the Committee in May after completing eight years of service with
the Group. I would like to thank David for his contribution to the GRC as a
valued member. Geraldine Buckingham and Kalpana Morparia stepped
down from the GRC in order to join other Board Committees. Eileen
Murray joined the GRC to complement her chair responsibilities for the
Group Technology and Operations Committee.
From a macroeconomic perspective, the year has been characterised by
a fluctuating interest rate outlook. There have been persistent concerns
over potential ’hard landings’ in major economies, and ’higher for longer’
policy rate predictions gradually shifting to market expectations for more
and rapid rate cuts, though with significant ongoing volatility and
uncertainty. Managing the impacts of political change and policy volatility
has been a key trend this year, with changes in governments having
economic and commercial implications for both the Group and the
industry. While performance in Hong Kong has improved, mainland China
continues to experience a slow economic recovery. The Group’s
wholesale credit risk and retail credit risk portfolios remain resilient
despite these challenges and the GRC has regularly reviewed portfolio
performance throughout the year.
Financial risks have been well managed this year, and the GRC has
continued to focus on treasury, capital and liquidity risk management
activities, including dedicating time to its assessment of the internal
capital adequacy assessment process (‘ICAAP’) and internal liquidity
adequacy assessment process (‘ILAAP’), which the GRC considers to be
one of its primary responsibilities. This is alongside prudential sensitivity
analysis and its recovery and resolution responsibilities. The Group made
its Resolvability Assessment Framework public disclosure in August,
receiving positive feedback from the Bank of England, which recognised
the progress made and our success in remediating previously identified
shortcomings. The Group Recovery Plan was submitted in June and we
await feedback from the PRA.
Non-financial risk has necessitated considerable GRC attention this year.
The fast-paced regulatory landscape has resulted in dynamic, and in
many cases, increasing expectations from regulators around the world.
With the ongoing conflict between Russia and Ukraine, navigating
sanctions obligations has been an ongoing challenge, and the Israel-
Hamas conflict poses a significant risk to security in the region, with
associated potential customer, staff and operational impacts. With the
publication of Supervisory statement 1/23 – ‘Model risk management
principles for banks’ last year, the GRC has undertaken to better
understand its responsibilities under the new regime, by challenging the
revised Group policy and framework, and holding an education session to
increase knowledge. The GRC supported management through an
exercise to enhance the HSBC Risk Management Framework, which has
resulted in several areas of improvement and brings us into line with
industry best practice. The Committee has also considered updates to
the Global Risk Appetite Framework and Group Risk Appetite Statement
to promote more transparency and consistency across the Group. The
Group continues to prepare for the PRA’s regulatory requirements
relating to Operational Resilience by improving its capabilities, identifying
its vulnerabilities and undertaking an extensive programme of testing.
Risk culture and its importance has also featured extensively throughout
committee discussions, including the development and implementation
of the Risk Culture Framework. Other areas of focus and challenge
include the Group’s data strategy and remediation programme, conduct
and financial crime, technology and cyber risk, ESG and ongoing Risk
Transformation programmes. As explained in the Report of the GAC on
page 265, responsibility for oversight of all internal controls transitioned
to the GAC during 2024.
Further details on these and other areas of GRC oversight during the year
are set out below.
HSBC Holdings plc Annual Report and Accounts 2024
271
Corporate governance
I am proud to have led the GRC this year and am pleased at the
effective execution of its duties. I am confident the Committee
remains well placed to discharge its responsibilities and provide
valuable advice to the Board in 2025 and the future.
Committee governance
The Group Chief Risk and Compliance Officer, Group CFO, Group
Chief Operating Officer, Group Chief Information Officer, Group Chief
People & Governance Officer, Group Chief Legal Officer and Group
Head of Internal Audit are standing attendees at GRC meetings. The
Chair and members of the GRC also hold private meetings with the
Group Chief Risk and Compliance Officer, the Group Head of Strategy
and Corporate Development, the Group Head of Internal Audit and the
external auditor, PwC, following scheduled GRC meetings.
The participation of our senior business leaders, including the Group
CEO who attended five scheduled GRC meetings in 2024, and the
chief executive officers of the three global businesses reaffirmed the
ownership of, and accountability for, risks in the first line of defence.
Outside of formal meetings, the Chair meets regularly with the Group
Chief Risk and Compliance Officer, and, where appropriate, members
of senior management, to discuss priorities and track progress on key
actions. The Chair also meets regularly with the GRC Secretary to
ensure the GRC addresses its governance responsibilities. A
summary of coverage is set out in the ’Matters considered during
2024’ table.
Matters considered during 2024
Jan2
Feb
Mar2
May
Jun
Jul
Sep
Dec
Holistic enterprise risk monitoring including
Group risk profile1
u
u
u
u
u
u
u
u
Risk framework and policies
u
u
u
u
u
u
u
u
Treasury and traded risk
u
u
u
u
u
u
u
u
Wholesale/retail credit risk
u
u
u
u
u
u
u
u
Financial reporting risk
u
u
u
u
u
u
u
u
Resilience risk (including IT and operational risk)
u
u
u
u
u
u
u
u
Financial crime risk
u
u
u
u
u
u
u
u
People and conduct risk
u
u
u
u
u
u
u
u
Regulatory compliance risk
u
u
u
u
u
u
u
u
Legal risk
u
u
u
u
u
u
u
u
Model risk
u
u
u
u
u
u
u
u
Climate risk
u
u
u
u
u
u
u
u
Strategic risk
u
u
u
u
u
u
u
u
u Matter considered
u Matter not considered
1 The GRC receives updates on all risk types through the Group risk profile, which is presented to all regular meetings.
2 The January and March meetings are ad hoc meetings with a reduced agenda.
How the Committee discharged its responsibilities
Activities outside formal meetings
The GRC held a number of meetings outside its regular schedule to
facilitate deeper and more effective oversight of the risks impacting
the Group. Areas covered included ICAAP and ILAAP preparations,
interest rate risk in the banking book, operational resilience and model
risk management, as well as briefings on the Resolvability
Assessment Framework and the Group Risk Appetite Framework.
Further details of these sessions are included in the ’Principal
activities and significant issues considered during 2024’ table starting
on page 273.
Connectivity with principal subsidiary risk
committees
During 2024, the GRC continued to actively engage with principal
subsidiary risk committees through the scheduled participation of
principal subsidiary risk committee chairs at relevant GRC meetings, and
through regular connectivity meetings with the principal subsidiary risk
committee chairs. These meetings are also attended by the Group Chief
Risk and Compliance Officer. This participation and connectivity
promoted the sharing of information and best practices between the
GRC and principal subsidiary risk committees, as well as encouraging
director relationships. Principal subsidiary risk committee chairs were
invited to attend a joint meeting between the GRC and the GAC in order
that a consistent message on changes to committee responsibilities
with regards to internal controls was received.
The GRC has also received certifications from the principal subsidiary
risk committees, confirming that management had been challenged on
the quality of the information provided, the committees had reviewed
the actions proposed by management to address any emerging issues
and that risk management and internal control systems had been
operating effectively.
These interactions furthered the GRC’s understanding of the risk profile
of the principal subsidiaries, leading to more comprehensive review and
challenge by the GRC.
Collaborative oversight by the GRC, GAC,
Group Technology and Operations Committee
(’GTOC’) and Group Remuneration Committee
(’RemCo’)
The GRC worked closely with the GAC and the GTOC to address any
areas of significant overlap, and to oversee risk and controls more
comprehensively through inter-committee communications and joint
meetings.
The GRC and the GAC convened on one occasion to consider a range
of issues, including changes being made to how each committee
manages and oversees internal controls.
The GRC and GTOC worked closely to ensure appropriate alignment
in the review, discussion, challenge and conclusions on topics
including risk and control issues relating to digital assets and
currencies, the Group's data strategy, artificial intelligence and
cybersecurity. This ensured that the committees benefited from each
other’s expertise and challenge.
Coordination between the GRC, GAC and the GTOC is supported by
cross-membership. The GRC Chair attends the GAC, the GTOC Chair
attends the GRC, and the GAC Chair attends both the GTOC and
GRC, strengthening connectivity and the flow of information between
the committees.
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272
HSBC Holdings plc Annual Report and Accounts 2024
The GRC and Group RemCo work collaboratively to consider risk adjustment to the variable pay pool as part of the Group reward process, given
the integral nature of risk management to the Group’s performance culture. This year, the committee has also considered improvements to the
Risk and Reward framework.
Holistic
enterprise risk
monitoring,
including Group
risk profile
Macroeconomic, geopolitical and other emerging
risks have the potential to present significant
challenges to revenue growth, operational resilience
and our commitment to serve customers and local
markets.
–
The GRC closely monitored geopolitical and macroeconomic risks that could impact
the Group’s strategy, business performance or operations. These risks were
exacerbated by ongoing conflict between Russia-Ukraine, the Israel-Hamas conflict
and rising political tensions between the US and China. The resulting sanctions risk
from these events has required significant focus and oversight by the Committee.
While market sentiment and economic growth had been more positive than forecast,
the real estate sector continued to experience pressure, particularly in mainland
China and Hong Kong.
–
The GRC continued to track top and emerging risks, our risk appetite and other
management information metrics, as well as other early warning measures to
understand sensitivities and the likelihood of the potential impact to our operations,
customers and stakeholders. The GRC provided oversight and challenge of a robust
book of strategic management actions to respond to potential downside scenarios.
–
The GRC requested reports on the risk profile of key business areas in local
geographies and invited principal subsidiary chairs and relevant management to
attend and participate in discussions.
Risk framework
and policies
Effective risk management policies, frameworks,
appetites and thresholds, and oversight of these, are
essential for HSBC to safely, consistently and
sustainably support customers, manage risk and
deliver strategic aims.
–
The Group has a risk appetite statement to define risk appetite and tolerance
thresholds, which forms the basis of the risk management procedures for the first
and second lines of defence, the Group’s capacity and capabilities to support
customers, and the achievement of strategic goals. The GRC maintained oversight of
the Group’s risk appetite framework, reviewing changes to the Group’s risk appetite
statements and recommending these to the Board for approval. This year's update to
the risk appetite statement was focused on providing essential coverage of the key
risks facing the Group and setting thresholds that reflected its desired risk profile for
these risks. A review of the Group risk appetite framework was also undertaken to
assess the dimensions of the framework and consider principles and approaches to
support effective and consistent appetite setting for the Group’s broader business
strategy. Areas of proposed improvement included: expanding assessments against
appetite to an evaluation-based risk appetite that considers the entire risk profile; and
enhancing Board-level overall statements to explicitly define the Group’s targeted
appetite and the risks outside of appetite or tolerance, as well as qualitative context.
–
The GRC met with the Group Chief Risk and Compliance Officer and the Global Head
of Enterprise Risk Management individually to ensure clarity and understanding of
the changes being proposed, and how the improved design would support better
outcomes for the Group. The framework has been validated by Oliver Wyman and
brings the risk appetite framework into line with industry peers.
–
The GRC also reviewed and approved proposed annual updates to HSBC’s Risk
Management Framework, providing a standardised, Group-wide approach to the
identification, treatment and reporting of risk.
Treasury risk
It is essential that capital and liquidity risk is
monitored effectively, and the Group takes active
steps to maintain its capital and liquidity positions.
Regular stress testing is undertaken to ascertain the
Group’s operation when under stress. Developing
action plans and guardrails to cover scenarios of
recovery or resolution at a subsidiary or Group level
is an essential part of HSBC’s prudential
management.
–
The Group proactively tracks and maintains safeguarding of its capital and liquidity
positions. It performs internal and regulatory stress tests to measure resilience and
performance against a range of stress scenarios, and to challenge the strategic
management actions that could be applied against anticipated stress events and
headwinds.
–
The GRC conducted its annual review and challenge of the Group’s ICAAP and ILAAP,
and provided its recommendation to the Board for approval. The GRC continued to
monitor Interest Rate Risk in the Banking Book (’IRRBB’) sensitivity, structural hedging
strategy and the ongoing activities to develop the Group’s capabilities for internal
reporting and enhanced external disclosures. An education session on IRRBB was held
in April to provide the Committee with the Group’s latest position, context around the
regulatory feedback and an overview of the different components of IRRBB.
–
The GRC reviewed the Group’s ongoing activities to identify, manage and mitigate
treasury, capital and liquidity risks, including early warning indicators, sensitivity
analysis, capital and liquidity reporting and adequacy.
–
In relation to stress testing exercises, the GRC reviewed the Group Recovery Plan
stress scenarios in March and September. The GRC also considered the Group-wide
internal stress test, scenarios and outputs, which contribute to the Group’s
commitment to regularly test the resilience of the balance sheet and profit and loss
under multiple scenarios of varying severity. An internal climate scenario analysis was
undertaken, with results presented in February 2024.
–
As part of its regulatory obligations, the Group is required to show how its recovery
and resolution strategies could be executed effectively and identify any risks to
successful implementation. The GRC continued its oversight of the Group’s progress in
maintaining and developing its capabilities under the Bank of England’s requirements
for resolvability. The GRC has been regularly updated on the Group’s implementation
of the PRA’s Trading Activity Wind Down requirements in preparation for the March
2025 deadline, which will require the Group to have implemented a set of capabilities
that will allow the execution of a full or partial wind down of its trading activities in an
orderly fashion. In March 2024, the GRC reviewed the Resolvability Assessment
Framework public disclosure and made a recommendation to the Board for approval. In
June 2024, management presented the 2024 Group Recovery Plan ahead of its
submission to the PRA in June. The plan was also recommended to the Board for
approval. The Chairs of the GRC and the GAC both received comprehensive briefings
prior to the presentation of both submissions.
Principal activities and significant issues considered during 2024
Risk areas
Key issues
Conclusions and actions
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273
Corporate governance
Principal activities and significant issues considered during 2024 (continued)
Risk areas
Key issues
Conclusions and actions
Model risk
HSBC can face risks from inappropriate or incorrect
business decisions arising from the use of models
that have been inadequately designed, implemented
or used, or do not perform in line with expectations
and predictions.
–
The GRC has had significant engagement on model risk management due to the
release of Supervisory Statement (SS) 1/23 – ‘Model risk management principles for
banks’ in 2023, and the required remediation in order to be in compliance with the
PRA’s new expectations. The GRC has overseen revisions to the model risk policy
and framework, plus the self-assessment exercise required by the statement. In
addition, a separate education session was held in July, providing an in-depth
overview of model risk, how models are used within the business, and with a
specific focus on Wholesale IRB Models and the data challenges.
Resilience /
Operational risk
A failure in resilience could lead to a situation where
HSBC customers might suffer significant disruption
to services or loss of data.
Technology risks (including cybersecurity) could
cause unmanaged disruption to any IT system within
HSBC, as a result of malicious acts, accidental
actions, poor IT practice, or IT system failure.
–
The GRC continued its oversight of the Group’s implementation of operational
resilience capabilities in line with PRA and FCA policies. The GRC reviewed and
challenged the operational resilience self-assessment against regulatory expectations
and was briefed on the methodology used to identify vulnerabilities from the
mapping and testing of Important Group Business Services and Entity Important
Business Services in line with regulatory policy. An additional briefing session on
operational resilience was held in June to prepare the Committee for the self-
assessment in June.
–
The GRC regularly reviewed reports on the Group’s technology risk profile, as well as
receiving updates on cybersecurity risk. Reports have focused on the risk and control
environment, as well as the current threat landscape and emerging risks. The GRC
will continue to work with the Group Technology and Operations Committee to
consider the risks and opportunities in the use of AI (generative and advanced) and
digital assets and currencies in 2025.
–
The GRC continued with its strong focus on understanding the Group’s data risk
landscape, its data strategy and data management programme. This has included the
tracking of progress made against the Group’s data execution programme and
timelines are being monitored closely.
–
Third-party risk management received additional focus this year in light of a number
of external incidents that had largely occurred due to the failure of third-party
vendors. The GRC will continue this focus into 2025, working closely with the GTOC.
Wholesale/
retail credit risk
HSBC faces risk from the possibility of losses
resulting from the failure of a counterparty to meet
its agreed obligations to pay the Group. The
commercial real estate sector has presented unique
challenges for the wholesale credit risk portfolio,
particularly for office properties.
–
The GRC received briefings on the macroeconomic and policy landscape impacting
credit risk, both retail and commercial, and reviewed updates on the strategy and
approach to managing credit risk and credit risk capabilities. The GRC received regular
updates on the Group’s expected credit losses and provisions, and the credit risk
arising from the wholesale portfolio and mortgage books. Throughout the year, the
GRC focused on building even stronger credit capabilities for specialty sectors,
including the continued implementation of the Country and Industry components of the
Credit Risk Appetite Framework.
–
The GRC challenged on changes made to the Commercial Real Estate cap to ensure
adequate control of the business, given commercial real estate is the largest corporate
sector concentration in the wholesale portfolio.
–
The GRC had oversight of the development of stronger portfolio management
capabilities and further improving the Group’s credit risk culture. A key focus area
continued to be maintaining appropriate tools and treatments available to our
customers to support anyone experiencing financial difficulty, having the right people
available to give the right advice and ensuring that conduct and good customer
outcomes are first priorities.
Financial
reporting risk
HSBC is exposed to risks where controls supporting
the reporting of its financial statements are not
effective, resulting in material error or misstatement
–
While the GAC has primary responsibility in relation to internal control systems
(including financial controls), with further detail on page 265, the GRC receives reports
on entity level control assessments to enable the oversight of the effectiveness of
such controls in support of the Group’s financial reporting.
Financial crime
risk
There is a risk that HSBC’s products and services
could be exploited for criminal activity, including
fraud, bribery and corruption, tax evasion, sanctions
and export control violations, money laundering,
terrorist financing and proliferation financing.
Insider threat also presents the risk that an individual
with access to bank data, systems, infrastructure or
finances could use that access to intentionally cause
harm to the bank and its customers.
–
The GRC was updated regularly on the operation and effectiveness of the systems and
controls pertaining to financial crime risk across geographies and businesses. This
included reviewing updates to the Group’s financial crime policy, enhancing the
approach to insider risk, and monitoring the fraud landscape and strategies for
managing fraud risk.
–
Specific updates on Russia sanctions have been necessary with the ongoing conflict
between Russia and Ukraine, in particular due to the increasing severity of US
sanctions and the Group's unique global position in many of the affected markets. The
GRC has been appraised of all management engagement with local governments and
regulators in impacted regions.
–
The GRC increased their focus on Insider Threat, as HSBC’s inherent risk has increased
due to factors including cost-of-living challenges and inflation affecting markets, the
potential impact of restructures on staff morale, and the inherent risks associated with
growth.
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HSBC Holdings plc Annual Report and Accounts 2024
Principal activities and significant issues considered during 2024 (continued)
Risk areas
Key issues
Conclusions and actions
People and
conduct risk
People are central to everything HSBC does
and it is essential to manage the risk of not
having the right people with the right skills,
and to ensure staff always have the
customer’s interest at the forefront.
Monitoring of conduct outcomes is integral to
ensuring the needs of our customers are
adequately met.
–
The GRC considered people risk issues with a focus on capacity, capability, culture and
conduct. It also considered remuneration risks, and strategies to retain talent and acquire new
capabilities in key areas, with a particular focus on approaches to maintain low attrition rates.
–
The GRC now considers an Annual Conduct Update, further to the implementation of the
Purpose Led Conduct Framework in 2023.
–
The GRC and Group RemCo met in September to consider improvements to the Risk and
Reward framework. The proposed changes support better understanding of the risk factors
used to drive performance assessments and how judgements made align to the application
of the Risk Modifier.
–
The GRC met in November to review the Group’s risk and reward alignment framework to
promote sound and effective risk management in meeting PRA and FCA remuneration rules
and expectations.
Regulatory
compliance risk
As a result of operating in multiple
jurisdictions globally, HSBC is exposed to risks
associated with inappropriate market conduct
or breaching related financial services
regulatory standards or expectations.
–
The GRC and its members actively engage with regulators and act on feedback. The
Committee closely monitors the progress of regulatory remediation activities, with support
from the Group Chief Risk and Compliance Officer as well as principal subsidiary risk
committee chairs. Throughout the year, the GRC had oversight over reports providing
feedback from regulators, including a summary of regulatory deliverables to ensure HSBC
remains in line with regulatory standards and expectations.
–
The GRC also considered the 'Statement of Compliance' exercise, which is an assessment of
Significant Regulatory Matters undertaken for principal subsidiary CEOs, providing an opinion
as to how well managed these are and where gaps may exist. Further to a pilot undertaken in
Mexico, this approach is now being rolled out across all principal subsidiaries.
Legal risk
HSBC is exposed to the risk of financial loss,
legal or regulatory action resulting from
contractual risk, dispute management risk,
breach of competition law or intellectual
property risk.
–
The GRC oversees and receives regular updates on key legal developments and material legal
issues from the Group Chief Legal Officer. The updates also cover material litigation and
regulatory enforcement matters and an overview of the legal risk profile of HSBC.
Climate risk
Environmental, social and governance risks
present significant risks to organisations both
in terms of their own operations and how they
engage with stakeholders and communities.
–
The GRC remained focused on climate risk and greenwashing risk. The GRC received reports
on climate risk management and sustainability risk policies, while maintaining oversight of
delivery plans and risk appetite breaches to help ensure that the Group continues to develop
and maintains robust climate risk management capabilities. Reputation risk considerations
have also formed part of these discussions.
–
The GRC approved the 2024 internal climate scenario analysis in February 2024. The
outcomes will be used to respond to multiple regional regulatory climate exercises as well as
meeting regulatory expectations on incorporating climate change within the Group’s strategic
plans and ICAAP.
Committee performance review
2024/2025
In 2024 the annual review of the performance of the Board
Committees, including the GRC, was conducted externally by IBE. On
the basis of the review, Directors concluded that the GRC continued
to operate effectively.
Areas for enhancement were identified, including the need for:
continued focus on paper quality and content to increase focus on the
most significant enterprise and emerging risks; ongoing refinement of
the GRC agenda to streamline and enable greater attention to
strategic risk areas; continued additional educational and ‘deep dive’
sessions outside of the formal schedule of meetings to allow for
greater debate, insights and learnings, coupled with other
mechanisms to guide the scheduled Committee discussions; ongoing
work with Management to ensure effective and timely follow up to
Committee challenge. The collaboration across the GRC, GAC and
GTOC agendas, via the Committee Chairs, will continue in 2025.
The outcomes of the performance review have been reported to the
Board, and the GRC will track the progress in implementing
recommendations during 2025.
Further details of the annual review of the Board and Committee
effectiveness can be found on page 257.
Focus of future activities
The GRC’s focus for 2025 will include the following activities:
–
to continue to monitor the effective delivery of risk transformation
programmes and to seek assurance that the enhanced capabilities
have been fully embedded into the business;
–
to support the continued enhancement of the Group's risk appetite
and risk management frameworks further to the improvements
made in 2024, particularly in light of continued geopolitical and
macroeconomic headwinds;
–
to continue to assess the Group's operational resilience capability
and to track the completion of the programme of work required by
the PRA rules coming into effect in March 2025;
–
to continue to support and challenge the remediation activities
identified to enhance Model Risk Management capabilities in line
with SS 1/23;
–
to continue to oversee treasury risk to strengthen our capital and
liquidity management capabilities;
–
to continue the oversight of recovery and resolution planning
activities to assess our capabilities if such a situation arises, with
particular focus on our Trading Activity Wind Down obligations;
–
to monitor delivery against our climate ambitions and the
development of appropriate data and model management tools
and capabilities; and
–
to continue to oversee financial crime risk and the strengthening of
the financial crime control framework, including proactive
management by the business.
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275
Corporate governance
Group Technology and Operations
Committee
“The Committee oversees all aspects of the Group’s technology and operations
strategies, which enable the efficient provision of resilient, sustainable, and innovative
products and services to our customers.“
Eileen Murray
Chair
Group Technology and Operations Committee
Membership
Key responsibilities
Member since
Meeting attendance
in 20241
The GTOC has overall responsibility for the oversight of HSBC’s
technology and operations strategies and alignment with the overall
HSBC Group strategy, including global business and global function
priorities. The GTOC’s key responsibilities include:
–
reviewing, challenging, and making recommendations to the
Board on technology strategy and related matters;
–
overseeing HSBC’s data strategy and framework;
–
overseeing HSBC’s cybersecurity strategy and framework; and
–
overseeing HSBC’s global operations, including payments,
procurement, corporate real estate and operational resilience.
Eileen Murray (Chair)
Mar 2024
7/7
Steven Guggenheimer
Mar 2024
7/7
Kalpana Morparia2
Mar 2024
6/7
Brendan Nelson
Mar 2024
7/7
Swee Lian Teo
Mar 2024
7/7
1
These included seven scheduled meetings.
2 Kalpana Morparia was unable to attend the November meeting due to a
prior commitment.
I am pleased to present the first report of the Group Technology and
Operations Committee (‘GTOC’), which was established in March
2024 as the Group Technology Committee with the responsibility for
oversight of execution against the Group’s Technology strategy. In
December 2024, the remit of the Committee was extended to also
cover global operations, including payments, procurement, corporate
real estate, and operational resilience, reflecting changes to the Group
organisational structure and the importance of operations to delivery
of the Group’s strategy. I would like to thank Steve Guggenheimer,
Kalpana Morparia, Brendan Nelson and Swee Lian Teo, all of whom
joined the Committee alongside me in March. Each director has
brought their unique skills, experience and perspectives to the
matters we have spent time on.
Since our first meeting in March 2024, a key area of oversight and
focus has been oversight of the enterprise-wide programme
established to simplify the Group’s technology infrastructure, enhance
system resilience, and accelerate digital transformation across the
bank. The GTOC has challenged management on its plans and
prioritisation and has overseen progress in execution of what is a
multi-year deliverable, seeking assurance from Risk and Global
Internal Audit on the robustness of the approach.
The GTOC has worked closely with management since its inception
to reinforce and enhance the guardrails supporting technology
investments and transformation, the tracking of benefits and
outcomes, and to enhance accountability for delivery. It has received
updates on key projects and programmes, and has considered the
technology deliverables within our payments, core banking, and global
private banking and wealth strategies.
The GTOC has also received regular updates on management’s
programme to meet regulatory deliverables and address technology-
related risk and control matters and we have again challenged the
approach to prioritisation and delivery timelines.
Other areas of focus for the GTOC during the year have included the
Group’s data and cybersecurity programmes. We provided input and
challenge to management’s remediation plans and efforts to enhance
technology, cybersecurity, and data metrics and key performance
indicators. We also considered the innovation agenda, including
opportunities in respect of artificial intelligence and digital assets.
To support engagement and connectivity across the Group on key
technology matters, I invited observers from each of the four largest
principal subsidiaries to join the GTOC meetings. We held two
subsidiary-focused meetings during 2024, with a focus on operational
resilience, including data and third-party risks. We discussed
regulatory regimes across the different markets, progress against
agreed timelines, challenges to meet expectations, and dependencies
on Group-level programmes and deliverables.
In October 2024, the GTOC hosted a training session to which all
Board members were invited, to hear external insights and
perspectives on third-party suppliers, including key risks and trends.
Further details on these and other areas of GTOC oversight during the year
are set out below.
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276
HSBC Holdings plc Annual Report and Accounts 2024
Committee governance
The GTOC operates under delegated authority from the Board and
advises the Board on matters concerning the Group’s technology and
operations strategies and related matters. The GTOC Chair reports on
the key matters and discussions at the subsequent Board meeting,
and the Board also has access to the GTOC papers and receives
copies of meeting agendas and minutes.
The Group Chief Information Officer, Group Chief Operating Officer,
Group Chief Risk and Compliance Officer, Global Head of Enterprise
Risk Management, Group CFO, Group Head of Internal Audit, and the
external auditor are standing attendees at GTOC meetings. The Chair
and members of the GTOC also hold private meetings with the Group
Chief Information Officer, Group Chief Operating Officer, Group Chief
Risk and Compliance Officer, and Group Head of Internal Audit, as
required.
The GTOC Chair meets regularly with the Group Chief Information
Officer and Group Chief Operating Officer and other members of
senior management, to discuss priorities and track progress on key
actions. The Chair also meets regularly with the GTOC Secretary to
ensure the GTOC addresses its governance responsibilities. A
summary of coverage is set out in the ’Matters considered during
2024’ table.
Matters considered during 2024
Mar
May
Jun
Jul
Sep
Nov
Dec
Technology
u
u
u
u
u
u
u
Investment and transformation
u
u
u
u
u
u
u
Resilience
u
u
u
u
u
u
u
Innovation
u
u
u
u
u
u
u
Cybersecurity
u
u
u
u
u
u
u
Data
u
u
u
u
u
u
u
Resource and capability
u
u
u
u
u
u
u
u Matter considered
u Matter not considered
How the Committee discharged its responsibilities
Engagement outside formal meetings
The GTOC Chair held several meetings outside its regular schedule to
facilitate deeper and more effective oversight of all key topics under
its remit. The Chair regularly met with key stakeholders, including
executives, programme sponsors, second and third line of defence,
and independent third parties.
On 16 October 2024, KPMG held an education session on Third Party
Management for the HSBC Holdings Board covering industry insights,
trends, and the regulatory landscape. Further details of this and
similar sessions are included in the ’Principal activities and significant
issues considered during 2024’ table starting on page 277.
Connectivity with principal subsidiaries
Board members representing the four principal subsidiaries (UK, Asia,
Europe and the US) are invited to attend the GTOC. As described
above, two additional ‘GTOC - Principal Subsidiaries’ meetings were
held covering Operational Resilience (resiliency challenges, regulatory
requirements and action plans to address resilience issues).
Collaborative oversight by the GTOC, GRC
and GAC
The GTOC worked closely with the GRC and the GAC to address any
areas of significant overlap, and to oversee technology more
comprehensively through inter-committee communications.
The committees worked closely to ensure appropriate alignment in
the review, discussion, challenge, and conclusions on topics including
technology, cybersecurity, data and innovation. This ensured that the
committees benefited from each other’s expertise and challenge.
On 16 September 2024, members of the Group Technology, Group
Risk and Group Remuneration Committees met to consider proposed
changes to HSBC’s risk and reward alignment framework and to
promote accountability for technology deliverables.
Coordination between the GTOC, GRC and the GAC is supported by
cross-membership. The GTOC Chair attends the GRC, the GRC Chair
attends the GAC, and the GAC Chair attends both the GTOC and
GRC, strengthening connectivity and the flow of information between
the committees.
Principal activities and significant issues considered during 2024
Area of focus
Key issues
Conclusions and actions
Technology
strategy
There is Group-wide focus to
implement the technology strategy.
This requires clarity and alignment of
priorities and collaboration across
businesses, functions, and markets to
deliver the most critical initiatives.
–
The GTOC regularly reviewed and challenged updates in relation to the technology strategy and the
programmes in place to deliver. The committee oversaw and requested more granularity on
timelines, the prioritisation approach, key risks, dependencies and challenges.
–
Additionally, the GTOC challenged that focus, funding and resource was being applied to enable the
execution timelines to be met and requested assurances from Risk and Global Internal Audit on the
robustness of the approach and progress being made.
Technology
strategy:
management
information and
KPIs
The Board and Board Committees rely
on quality management information,
KPIs and metrics to effectively
oversee the areas under their remit.
–
The GTOC provided detailed feedback and insights on work to refine Board level metrics to ensure
strong governance and accountability across technology, cybersecurity and data. Discussions
included the calibration of quantifiable triggers and tolerance levels.
Investment and
transformation
A number of significant programmes
with material technology components
have been subject to replanning and/
or did not deliver the benefits
expected.
–
The GTOC challenged management on the quality of business cases and provided inputs to the
enhanced investment case framework, which has been refined to require:
–
articulation of risks and dependencies to ensure that these are well understood by
management, and appropriately considered;
–
detailed insights on the opportunity and peer insights; and
–
accurate and informed cost estimations.
Investment and
transformation:
Global Payments
Solutions
Payments is a significant proposition
for HSBC and is subject to an ongoing
investment programme.
–
The GTOC provided oversight of the Global Payments Solutions strategy, including the risk profile,
effectiveness of the control environment, investment and expected benefits, and alignment of the
current technology stack to the desired target state architecture.
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277
Corporate governance
Principal activities and significant issues considered during 2024 (continued)
Area of focus
Key issues
Conclusions and actions
Investment and
transformation:
Global Private
Banking and
Wealth
GPB and Wealth is a significant
proposition for HSBC and is subject to
an ongoing investment programme.
–
The GTOC provided oversight of the Global Private Banking and Wealth strategy, including the risk
profile, effectiveness of the control environment, investment and expected benefits, and alignment
of the current technology stack to the desired target state architecture.
Resilience
Operational resilience is a key priority
for HSBC
–
The GTOC regularly discussed actions being taken to improve resiliency, including work to simplify the
technology estate and to enhance controls to reduce service interruptions impacting customers.
–
In view of our reliance on services provided by third parties, the GTOC also reviewed the third-party risk
management framework that is in place to monitor associated risks and identify and implement
mitigating actions, and provided oversight of third-party related topics in relation to: regulatory feedback/
trends; technology and cybersecurity resilience; third-party security risk; spend and usage
–
In addition, committee members met with principal subsidiaries to discuss resiliency challenges,
regulatory requirements, and action plans to address resilience issues.
Innovation
strategy
While AI, and particularly generative
AI, is likely to provide much
opportunity for the bank, the risks
need to be understood and managed
appropriately.
–
The GTOC has reviewed strategies to leverage the opportunities presented by innovation and new
technologies, including in relation to digital assets and generative AI. These discussions set clear
expectations with regard to risk, control and governance frameworks, enhancements (where required)
and associated funding needs.
Cybersecurity
Cybersecurity remains one of the
most significant risks faced by the
financial services industry.
–
The GTOC provided oversight of cybersecurity; receiving regular updates from the Group Chief
Information Officer and Group Chief Information Security Officer relating to: key controls; service and
resilience; the external threat environment; enhancements to metrics; and progress updates on key
programmes. The Committee also discussed the impacts of cyber issues experienced by suppliers and
challenged management on what additional actions could be taken to mitigate those risks.
–
The GTOC reviewed and challenged regular updates on the cybersecurity programme, including
specific focus on the results of an industry-wide peer review and the timelines for ongoing
enhancements to the cyber risk and control framework.
Data
Significant work is ongoing to develop
the Group’s data strategy and deliver
the data remediation programme.
–
The GTOC requested several specific updates on the Group’s data remediation programme,
including on progress made, and challenges encountered, to meet regulatory commitments.
Additionally, the Committee challenged to understand the assessment of the control landscape,
residual risk and plans to mitigate, both short and long term. The GTOC challenged management to
articulate a clear data strategy, and this will remain an area of material focus in 2025.
–
The Committee demonstrated oversight of the key priorities to implement improvements to the
integrity of regulatory reporting; enhance data quality measures across priority processes; and meet
regulatory commitments.
Resource and
capability
Having the right skills and resources is
critical to achieving our strategic
ambitions.
–
The GTOC reviewed management's technology people and capability plans. Key resources,
dependencies on subject matter experts, and future skills needs were also considered in respect of
programme updates.
Committee performance review
In 2024 the annual review of the effectiveness of the Board
committees, including the GTOC, was conducted externally by IBE.
On the basis of the review, directors concluded that the GTOC was
operating effectively.
Positive feedback was noted on the leadership of the GTOC Chair, the
quality of information received, and the responsiveness of
management in relation to the topics of focus during 2024. The
review highlighted the importance of continued connectivity between
the Board Committees, in particular the GTOC and GRC given the
overlap of issues within their respective remits.
Further details of the annual review of the Board and Committee
performance can be found on pages 257 to 258.
Focus of future activities
The GTOC’s focus for 2025 will include the following activities:
–
Oversight and review of the Group's global operations strategy,
including payments, procurement, corporate real estate and
operational resilience;
–
continued oversight and review of the Group’s technology
strategy, cybersecurity strategy and related matters;
–
continued oversight of key transformation programmes, with a
particular focus on accountability;
–
continued focus on data remediation activities and management’s
articulation of its data strategy, and the monitoring of progress to
execute;
–
continued focus on the resilience of services; and
–
continued consideration of technology innovation initiatives and
how these might be leveraged in support of the Group strategy.
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278
HSBC Holdings plc Annual Report and Accounts 2024
Directors’ remuneration report
“Our new remuneration policy will support the delivery of our strategy and materially
strengthen the alignment between performance, pay and shareholder interests.“
Dame Carolyn Fairbairn
Chair
Group Remuneration Committee
Membership
1
Key responsibilities
Member
since
Meeting attendance
in 2024
The Committee’s key responsibilities include:
–
making recommendations to the Board, for approval by
shareholders, on the Group’s remuneration policy;
–
setting the overarching principles, parameters and governance
framework of the Group’s remuneration policy;
–
approving the remuneration of executive Directors and other senior
Group employees; and
–
regularly reviewing the effectiveness of the remuneration policy of
the Group and its subsidiaries in the context of strategy, culture,
conduct and effective risk management.
Dame Carolyn Fairbairn (Chair)
Sep 2021
9/9
Geraldine Buckingham
Jun 2022
9/9
Rachel Duan
Sep 2021
9/9
Ann Godbehere
Sep 2023
9/9
José Antonio Meade
Kuribreña
May 2021
9/9
Kalpana Jaisingh Morparia2
Oct 2024
2/2
Eileen Murray
May 2023
9/9
1 All members of the Committee are independent non-executive Directors
of HSBC Holdings plc.
2 Kalpana Jaisingh Morparia joined the Committee on 1 October 2024.
All disclosures in the Directors’ remuneration report are unaudited unless otherwise stated. Disclosures marked as audited should be
considered audited in the context of financial statements taken as a whole.
Dear shareholders,
I am delighted to present our 2024 Directors’ remuneration report on
behalf of the members of the Group Remuneration Committee (the
’Committee’). I would like to thank Geraldine Buckingham for her
valued contribution and to welcome Kalpana Morparia.
I also thank you, our shareholders, for your support of our
remuneration resolutions at the 2024 Annual General Meeting
(’AGM’). Our implementation of the current Directors’ remuneration
policy and our resolution to provide the Committee with discretion to
set an appropriate variable to fixed pay ratio received respectively
over 97% and 99% of votes cast in favour.
The most significant item on the Committee's agenda this year was
the review of the Directors’ remuneration policy. The changes and
supporting rationale are set out over the following pages. We present
the formal policy for shareholder approval before describing the key
remuneration decisions for our executive Directors for 2024, our
approach to wider workforce reward and Committee governance.
Further information and disclosure is provided at the end of the report
to meet our reporting obligations in the UK and Hong Kong.
2025 executive Director remuneration policy
Commencing in 2023, the Committee undertook a detailed review of
the executive Directors’ remuneration policy to ensure it remains
appropriate given the size and complexity of the Group, the talent
market in which we compete and regulatory and best practice
developments.
We extensively engaged with major shareholders, representing 65%
of those who voted at the 2024 AGM, and proxy advisory bodies.
Shareholders were supportive of the proposals and understood the
rationale for change. We received valuable feedback on our
disclosure, which we have covered within this report. Our discussions
focused on the need for stretching performance targets, and some
individual shareholders had feedback on specific performance
measures. The Committee carefully considered all feedback received,
which has directly influenced final proposals.
Context for the review and overall remuneration structure
In 2014, as a result of European legislation (CRD IV), the Prudential
Regulation Authority (’PRA’) and Financial Conduct Authority (’FCA’)
introduced a 2:1 cap on the ratio between variable and fixed pay for
material risk takers (’MRTs’). In response to this change, in line with
other global banks operating in Europe, we introduced Fixed Pay
Allowances (’FPAs’) so that HSBC could balance being competitive on
a total compensation basis and complying with the remuneration
rules.
For our executive Directors, we converted part of their variable pay
opportunity (annual incentive of 300% of salary and long-term
incentive of 600% of salary) into new FPAs at an effective discount of
50% to reflect the greater certainty of fixed pay. The change
materially weakened the link between performance and pay and
reduced the maximum total remuneration opportunity from
£13,125,000 to £10,725,000 for the Group CEO and from £7,350,000
to £6,000,000 for the Group CFO. The total opportunity has remained
largely unchanged over the last decade, despite subsequent changes
to the Directors’ remuneration policy and changes in incumbents and
scope of the Group CFO role.
Over several years, the Committee has expressed concerns that the
2:1 cap was having a material impact on the competitiveness of the
executive Director remuneration opportunity at HSBC versus
international peers.
Now that the 2:1 variable to fixed pay ratio has been removed by UK
regulators, the Committee feels it is the right time to return to a
remuneration structure with a higher proportion of variable pay linked
to performance that is more closely aligned to the experience of our
shareholders. This will also help address compression between the
total compensation of our executive Directors and some of our Group
Operating Committee roles.
We have received strong support from shareholders for our existing
policy over many years, which we discussed in our recent
engagement. In determining the new policy, the Committee
considered several different incentive structures, recognising the
diversity in approach among our global peers. This included more
HSBC Holdings plc Annual Report and Accounts 2024
279
Corporate governance
Group CEO
Pre-2014
2014
Policy
2023
Policy
Current
(2024)
Group CFO
Pre-2014
2014
Policy
2023
Policy
Current
(2024)
complex models such as hybrid structures, the use of restricted stock
and retaining part of the FPA. These were ultimately rejected in the
interests of simplicity and transparency, and a fundamental desire for
pay to be linked to performance and shareholder value creation.
The Committee concluded that the current framework of an annual
incentive and single performance-based long-term incentive is most
appropriate. It is a simple and well understood structure and supports
the delivery of our strategy and alignment with performance through
the cycle.
Evolution of our maximum opportunity over time (£000)
£13,125
£10,725
£10,317
£10,575
£7,350
£6,000
£6,116
£6,264
Salary
FPA
Pension
Annual Incentive
Long-term Incentive
We propose to reverse the changes made in 2014 to increase the
proportion of pay linked to long-term performance. This means
removing FPAs in their entirety and resetting the maximum variable
pay opportunity to 900% of salary, split between 300% in annual
incentive and 600% in long-term incentive (‘LTI’).
At this level, the LTI enables the Committee to target an appropriate
maximum opportunity relative to peers with significantly less reliance
on fixed pay. Specifically, the proposed structure reduces fixed pay by
49% for the Group CEO and 51% for the Group CFO.
The Committee considered a lower maximum LTI opportunity for the
Group CFO but decided against this, reflecting on the relative
complexity of the Group CFO role at HSBC compared to other listed
peers in the FTSE 30, practice at international banks, and internal pay
compression. We tested this with shareholders during our
engagement who were largely supportive of the approach.
In line with current market practice and in direct response to investor
feedback, we propose to increase the shareholding guideline to equal
the LTI opportunity of 600% of salary for both the Group CEO and
Group CFO.
The Committee also intends to implement a post-employment
shareholding guideline in line with Investment Association guidelines,
which will apply for two-years post cessation of employment.
Overall, the structure ensures that a significant portion of pay is tied
to the creation of long-term, sustainable shareholder value.
Shareholders we spoke to were supportive of the principle and
simplicity of returning to our 2014 structure, reducing reliance on
fixed pay and increasing the proportion of variable pay.
2025 total remuneration opportunity
The Committee reflected on the appropriate maximum opportunity for
the Group CEO and Group CFO considering (i) the maximum
opportunity in 2014; (ii) market data for our international banking peers
and the largest FTSE 30 companies; and (iii) internal pay compression
challenges with members of the Group Operating Committee.
After considering these factors, which are described further below,
the Committee determined the appropriate maximum opportunity for
2025 should be £15,150,000 for the Group CEO role and £8,837,500
for the Group CFO.
Returning to the pre-2014 structure increases the proportion of pay
subject to performance to 89%, compared to 69% under the current
policy. This provides less certainty in pay outcomes with higher pay at
maximum performance offset by lower pay for weaker performance.
The Committee felt that a higher maximum opportunity was required
to reflect the additional volatility given the lower fixed pay and reverse
the reduction in total compensation when FPAs were introduced.
Group CEO payout under different performance scenarios (£m)
£10.6
£6.9
£5.1
£3.2
£15.15
£8.4
£5.0
£1.7
Maximum
Target
Minimum
Below
Minimum
Maximum
Target
Minimum
Below
Minimum
Group CEO maximum total compensation opportunity (£000)
Group CFO maximum total compensation opportunity (£000)
International banking peer group
Top 10 by market cap in FTSE 30
International banking peer group
Top 10 by market cap in FTSE 30
(Stock ticker and ranking by market capitalisation)
£15,150
£13,125
£10,575
£0
£40,000
JPM (1)
MS (3)
CITI (5)
BAC (2)
UBS (6)
HSBC (4)
HSBC (4)
HSBC (4)
BARC (9)
DBK (11)
STAN (12)
LLOY (10)
DBS (7)
BNP (8)
£15,150
£13,125
£10,575
£0
£20,000
AZN (1)
HSBC (3)
SHEL (2)
GSK (10)
LSEG (9)
HSBC (3)
BP (7)
BAT (8)
ULVR (4)
RELX (6)
HSBC (3)
RIO (5)
£8,838
£7,350
£6,264
£0
£20,000
JPM (1)
CITI (5)
MS (3)
UBS (6)
BAC (2)
HSBC (4)
DBK (11)
HSBC (4)
HSBC (4)
BARC (9)
STAN (12)
LLOY (10)
£8,838
£7,350
£6,264
£0
£10,000
HSBC (3)
SHEL (2)
AZN (1)
GSK (10)
HSBC (3)
BP (7)
HSBC (3)
RIO (5)
ULVR (4)
LSEG (9)
RELX (6)
BAT (8)
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HSBC Holdings plc Annual Report and Accounts 2024
n HSBC proposed n HSBC current
n HSBC pre-2014
Data source: Deloitte. 2024 total compensation is based on 2023 year-end disclosures. The market capitalisation ranking shown in brackets is based on a 3-month
average as at 31 December 2024.
n Fixed pay n Variable pay
’Target’, ’Minimum’ and ’Below Minimum’ scenarios assume performance outcomes
of 50%, 25% and 0% respectively for both the annual incentive and LTI.
Current
Proposed
Group CEO target total compensation (£000)
Group CFO target total compensation (£000)
International banking peer group
Top 10 by market cap in FTSE 30
International banking peer group
Top 10 by market cap in FTSE 30
(Stock ticker and ranking by market capitalisation)
£8,400
£7,500
£6,894
£0
£27,000
MS (3)
JPM (1)
CITI (5)
BAC (2)
UBS (6)
HSBC (4)
DBK (11)
HSBC (4)
HSBC (4)
BARC (9)
STAN (12)
LLOY (10)
DBS (7)
BNP (8)
£8,400
£7,500
£6,894
£0
£11,000
AZN (1)
HSBC (3)
SHEL (2)
HSBC (3)
LSEG (9)
ULVR (4)
BP (7)
HSBC (3)
BAT (8)
GSK (10)
RELX (6)
RIO (5)
£4,900
£4,200
£4,116
£0
£11,000
JPM (1)
MS (3)
CITI (5)
DBK (11)
BAC (2)
UBS (6)
HSBC (4)
HSBC (4)
HSBC (4)
BARC (9)
STAN (12)
LLOY (10)
£4,900
£4,200
£4,116
£0
£6,000
SHEL (2)
HSBC (3)
AZN (1)
HSBC (3)
HSBC (3)
GSK (10)
ULVR (4)
BP (7)
RELX (6)
RIO (5)
LSEG (9)
BAT (8)
Over several years, the Committee has seen increases to pay
opportunities and changes to pay structures, which have further
widened the gap between HSBC and some of our US and European
banking peers. In determining the new policy, we have not targeted
the quantum or structure of pay in US banks given the differences in
market and business models compared to HSBC. However, we
believe it is appropriate to narrow the gap to these roles as we recruit
from this talent base across various levels of the organisation and this
will help alleviate some of the challenges of pay compression.
HSBC is the third-largest company in the FTSE by market
capitalisation, a proxy for the scale and complexity of the Group.
Operating within 58 countries and territories and employing over
211,000 full-time equivalent employees means that HSBC is also one
of the most geographically diverse companies and one of the largest
employers in the FTSE 30. The Committee believes that the
maximum pay opportunities towards the upper end of the FTSE 30
are reflective of the size and scope of HSBC. These also remain
below the pay levels had the growth in median executive Director
salaries observed amongst FTSE 30 companies over the last 10 years
been applied to our 2014 maximum opportunities.
Compared to our international banking peers, the maximum pay
opportunities place HSBC second amongst our European peers, and
behind all comparable US roles. The Committee believe this is
appropriate given HSBC is one of the largest banking and financial
services organisations in the world, which is listed in the UK, whilst
recognising the different pay environment in the US.
The Committee also reflected on the challenges of pay compression
between the executive Directors and members of the Group
Operating Committee in the context of succession planning, and
considering pay outcomes and market benchmarks for each role.
From 2021 to 2023, the expected total compensation of nearly a third
of Group Executive Committee members was higher by on average
30% than the Group CFO. The proposed maximum opportunity for
the Group CFO helps to restore the pay differential expected by the
market versus other senior roles, albeit a gap still remains.
2025 fixed pay
To achieve the increased maximum pay opportunity, base salary for
Georges Elhedery will increase to £1,500,000, up 9%. Whilst this is
higher than the average 2025 fixed pay increase of 2.9% for UK
employees, overall fixed pay for Georges will reduce by 49%
following removal of his FPA.
Georges’ proposed salary remains behind the level we would expect
had average UK wider workforce salary increases of 4% been applied
since 2014, when the 2:1 cap was introduced. The average annual
HSBC Group CEO salary increase over the same period was 1%.
Evolution of Group CEO salary over time (£000)
£1,250
£1,376
£1,500
Actual salary
If increased in line with UK wider workforce
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
We considered higher base salaries given the significant reduction in
fixed pay but elected to keep the base salary increase lower,
recognising wider cost of living challenges faced by colleagues and
customers. This was a view shared by shareholders and reflects our
disciplined approach to executive pay.
For Pam Kaur, base salary will increase to £875,000, up 9%. This
enables a maximum pay opportunity reflecting the scale and
complexity of the Group CFO role at HSBC and limits pay
compression with comparable roles on our Group Operating
Committee. Similar to Georges, though Pam’s salary increase is
above the average fixed pay increase for UK employees, her overall
fixed pay will reduce by 51% following removal of the FPA.
Subject to shareholder approval of the remuneration policy, salary
increases for both Georges and Pam will be effective from 1 March
2025, in line with the UK workforce.
Performance measures and targets
Our proposal represents a material change in structure and quantum,
but this will only be realised if stretching performance targets are met
and value is delivered for shareholders.
The Committee has undertaken a comprehensive review of the
performance measures used for our incentive arrangements to
ensure alignment to the Group’s priorities and balance delivery of
financial and strategic performance. Performance targets and ranges
have been set with stretch to reflect the increased pay opportunities.
This topic has been a strong focus of policy discussions with
shareholders and their views are reflected in our decisions.
For the 2025 annual incentive scorecard, we will:
–
Retain our core measures of PBT, Group RoTE and costs, each
assessed excluding notable items, and introduce a measure on fee
income growth relative to balance sheet growth to incentivise
growth with less reliance on capital.
HSBC Holdings plc Annual Report and Accounts 2024
281
n HSBC proposed n HSBC current
n HSBC pre-2014
Data source: Deloitte. 2024 total compensation based on 2023 year-end disclosures. 'Target' value of total compensation based on 50% of the maximum value for
the annual incentive, or target value if disclosed; 50% of the maximum value for performance-based LTI; the maximum value of restricted shares; and one third of
face value for share options. Market capitalisation ranking shown in brackets based on 3-month average as at 31 December 2024.
Corporate governance
–
Reduce the weighting for PBT to 10% and remove Asia RoTE to
reduce overlap with Group RoTE and simplify the scorecard. This
change retains financial measures at 60% of the scorecard, which
the Committee believes appropriately balances investor views
with regulatory expectations for a balanced scorecard.
–
Maintain customer Net Promoter Score as a strategic measure to
reflect our ambition to be a top-three bank for customer
satisfaction and/or improve customer satisfaction rank.
–
Include people and culture measures that support us in
strengthening our inclusive culture of high-performance.
For the 2025–2027 LTI, we will:
–
Retain Group RoTE, relative total shareholder return (’TSR’) and
environment measures.
–
Increase the weighting of RoTE to 40%, reflecting that the delivery
of a strong stable return on tangible equity is a core measure of
the sustainable returns expected by our investors.
–
Increase the weighting of relative TSR to 40% as it is a key
measure of shareholder returns, a material relative measure used
by our peers and in line with investor expectations.
–
Reduce the weighting of the environment measure from 25% to
20% following feedback from our shareholders on the metrics and
targets used given the higher LTI opportunity, recognising that
financed emissions targets remain difficult to include at this time.
This ensures a greater proportion of the scorecard is aligned to
value creation while supporting our ESG ambitions.
We will not use financed emission targets for the 2025-2027 LTI
awards given current challenges in methodology and the timeliness
and frequency of reporting, which was generally accepted by the
investors we spoke to. The Committee will keep this under review for
future performance cycles.
Group RoTE is the only measure used in both our annual incentive
and LTI scorecards, reflecting our focus on delivering sustainable
returns and a strong preference for the measure by most
shareholders. This ensures we incentivise capital productivity for the
current year whilst supporting our external commitment to deliver
sustainable returns and mid-teens RoTE over the medium-term.
We will continue to utilise a risk modifier and operate a judgement-
based approach to adjustments for all risk and compliance matters,
aligned to shareholder feedback and the expectations of our
regulators. The Committee considers the application of the risk
modifier each year and has applied it in three instances for our
executive Directors since its introduction in 2021.
When setting performance targets, we consider our internal financial
planning and strategy process, our strategic guidance and analyst
consensus where available such that minimum, target, and maximum
performance levels are set with stretch. This was a key focus of
investors in our consultation, who recognised that our recent LTI
targets have been set to deliver maximum payouts only for
outperformance. The Committee remains committed to ensuring
there is sufficient stretch in our targets in future years, which is
demonstrated in the maximum RoTE target for the 2025-2027 LTI and
illustrated below.
LTI Group RoTE performance range versus external guidance
External guidance
Minimum to Target
Target to Maximum
2025-2027 LTI
2024-2026 LTI
2023-2025 LTI
Changes in non-executive Director fees
The Board, excluding non-executive Directors, has reviewed the fees
payable to non-executive Directors in the context of changes to the
organisational structure. Following this review, it was considered that
the fees payable for chairing or being a member of a Board
Committee (excluding the Nomination & Corporate Governance
Committee) should be increased to recognise the responsibilities and
material additional time commitment associated with such a role.
Giving due consideration to the highly regulated and complex industry
in which HSBC operates, it was agreed to align the additional fee for
chairing a Board Committee at £150,000 per annum (i.e., in line with
the current fee for chairing the Group Risk Committee). The increase
in the fee for chairing a Board Committee will be phased over two
years, with an increase to £125,000 per annum for 2025, and a further
increase to £150,000 per annum with effect from 1 January 2026.
The Board also agreed increases to the additional fee for being a
member of a Board Committee, and for the role of designated non-
executive Director for workforce engagement to £50,000 per annum.
These increases reflect the additional activity being undertaken during
this period of organisational and cultural change. No other changes
are proposed to non-executive Director fees for 2025.
Performance in 2024
Financial performance
Our financial performance in 2024 demonstrates that our strategy is
working and is delivering strong returns for our shareholders.
We delivered a reported profit before tax of $32.3bn, up $2.0bn
compared with 2023. This increase included a $1.0bn net favourable
impact from notable items, which in 2024 included gains and losses
relating to our disposals in Canada and Argentina. Constant currency
profit before tax excluding notable items increased by $1.4bn to
$34.1bn.
Reported revenue of $65.9bn was stable compared to 2023, despite a
net adverse movement in gains and losses on our strategic
transactions. This reflected higher customer activity in our Wealth
products in WPB and in Equities and Securities Financing in GBM.
2024 costs on a target basis grew by around 5% in line with our
targeted growth.
Our RoTE for 2024 was 14.6%, compared with 14.6% in 2023.
Excluding notable items, RoTE was 16.0%.
The Board approved a fourth quarterly dividend of $0.36 per share,
bringing the total dividend announced for 2024 to $0.87 per share.
This includes the special dividend of $0.21 per share that was paid in
June following the completion of the sale of HSBC Bank Canada.
Furthermore, in respect of 2024 we announced three share buy-backs
worth a total of $9bn, and today we have announced a further share
buy-back of up to $2bn.
Strategic performance
We continue to make good progress in reshaping the Group. In 2024,
we completed the sales of our retail banking operations in France, our
banking business in Canada, and our businesses in Argentina, Russia
and Armenia. We acquired SilkRoad Property Partners Group in
Singapore and Citi’s retail wealth management portfolio in mainland
China. We announced divestments in our private banking business in
Germany and our business in South Africa, as well as the planned sale
of our life insurance business in France. In October 2024, we
announced a simplified organisational structure to accelerate delivery
against our strategic priorities.
We continue to strengthen our scale positions in Hong Kong and the
UK and drive strong profit generation in these businesses. We remain
focused on our goal to become a digital-first bank and have continued
to see growth in customer adoption of our digital services across all
our businesses, which is reflected in our Net Promoter Scores.
Over 88% of colleagues participated in our 2024 Snapshot survey
where our employee engagement index rose a further three
percentage points to reach an all-time high of 80%, six percentage
points above the global financial services benchmark.
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HSBC Holdings plc Annual Report and Accounts 2024
15.5%
14.3%
13.0%
17.0%
16.0%
14.0%
14.0%
16.0%
18.0%
Mid-teens
12%+
Key remuneration decisions for executive
Directors
Executive Director changes
Sir Noel Quinn stepped down as Group CEO and as an executive
Director of the Board on 2 September 2024 and was succeeded by
Georges Elhedery. Pam Kaur was appointed Group CFO from 1
January 2025. All remuneration decisions in respect of this change
were made in accordance with our shareholder-approved policy.
Given his retirement from the Group on 30 April 2025, Sir Noel Quinn
will be treated as a good leaver for the purpose of unvested incentive
awards. He remained eligible for a 2024 annual incentive but will not
receive an LTI award for the 2025–2027 performance period, nor will
he be eligible for a 2025 annual incentive.
Annual incentive for 2024 performance
Scorecards were set at the start of the year to align with our reported
financial performance, excluding the impact of strategic transactions
and one-offs on the Group's financial performance in 2024.
Georges Elhedery's formulaic scorecard outcome of 78.79% (2023:
76.75%) results in an annual incentive outcome of £1,677,000 (2023:
£1,287,000). This was calculated by applying respective formulaic
scorecard outcomes to the pro-rated maximum opportunities for the
Group CEO and Group CFO roles, based on the period spent in each
role during 2024.
The formulaic scorecard outcome for Sir Noel Quinn was 77.81%
(2023: 75.93% pre risk adjustment, 70.24% post risk adjustment),
which results in an annual incentive outcome of £1,540,000 (2023:
£2,018,000), after pro-rating for his time as Group CEO during 2024.
Taking into account the Group’s performance against risk metrics, and
inputs from the Group Risk Committee, the Committee used its
judgement and applied no adjustment in respect of risk matters to
executive Director annual incentive outcomes for 2024.
2022–2024 LTI vesting
Georges Elhedery and Sir Noel Quinn participated in the 2022–2024
LTI that will vest in March 2025.
The maximum RoTE and relative TSR targets were exceeded,
reflecting the strong absolute and relative performance of the Group
over the performance period. The capital reallocation to Asia measure
was not met and performance against the environment measures
exceeded the maximum target. 75% of the original award will vest on
a pro-rata basis over the next five years.
2025–2027 LTI awards
The Committee intends to grant both Georges Elhedery and Pam Kaur
the maximum 2025-2027 LTI award of 600% of base salary (Georges
Elhedery: £9,000,000, Pam Kaur: £5,250,000), subject to shareholder
approval of the LTI opportunity under the new policy.
The value realised from the award is subject to performance over the
next three years and the award will vest over a further five years with
a one-year retention period on vesting shares.
For further details, see ‘Long-term incentive (’LTI’) awards‘ on page 298.
Rewarding our colleagues
We are taking actions that improve our ability to attract, retain and
energise colleagues to deliver high performance and growth.
In 2024, we changed our performance approach by simplifying ratings
and focusing on better performance routines. In our Snapshot survey,
87% of colleagues reported a clear understanding of what is expected
of them and 77% confirmed at least two performance check-in
conversations with their manager. We also introduced a new target
variable pay plan, which covers over 150,000 colleagues in 46
markets to increase transparency and differentiation of variable pay.
The Committee is encouraged by increasing pay sentiment year-on-
year in most areas because of actions taken through 2023, which is
expected to improve further following changes introduced in 2024.
For further details, see ‘Our approach to workforce reward‘ on page 301.
Fixed pay
We are pleased to be accredited as a global living wage employer in
2025 and meet or exceed living wage benchmarks in all our markets.
This gives confidence that we provide core financial security to
colleagues through fixed pay, which is the largest part of most
colleagues' reward.
Fixed pay is primarily reviewed through our annual pay cycle. Effective
in 2025, we have awarded an overall fixed pay increase of 3.6%. The
level of increases vary by market, depending on the economic
situation and individual roles. The highest increases were made to
lower paid colleagues relative to relevant market benchmarks.
Variable pay
The Committee determined total variable pay of $3,800m, broadly flat
compared with the $3,774m awarded in 2023. This was determined
based on a review of our performance against financial and non-
financial metrics. We considered the strength of our financial
performance in 2024 and the ratio between variable pay and pre-
variable pay profit before tax, the Group’s performance against key
risk and compliance metrics, and our total compensation position
compared with market and the broader economic outlook.
Total compensation across all our businesses increased relative to
2023, rewarding our colleagues for their contribution to our
performance. Distribution of variable pay by business considered
relative performance against RoTE, reported profit before tax and cost
targets, and performance against risk and compliance metrics. Strong
differentiation has meant our highest performers received the largest
increases in variable pay compared with the previous year.
Ex-post risk adjustments were made to the variable pay of relevant
individuals for material risk events over 2024. This included
adjustments for some individuals following the conclusion of the
investigation into the PRA’s 29 January 2024 Notice for historic
depositor protection failings arising in HSBC Bank plc and HSBC UK
Bank plc and the Committee now considers this matter closed.
Other remuneration matters
HSBC's variable to fixed pay ratio
Following shareholder approval at the 2024 AGM, the Committee
reviewed several options to set new pay ratios and concluded that a
single overall ratio of 10:1 was most appropriate, supported by
internal guidance to manage expectations on its application. The ratio
will apply across the Group, where permitted by regulation.
The ratio will support us to materially strengthen alignment of pay and
performance in our executive Directors’ remuneration policy. The ratio
has limited impact on the wider workforce and is higher than we
intend on using in practice. However, the new cap gives us flexibility
to reward extraordinary individual performance delivered by a small
number of employees in frontline roles.
We will continue to keep our pay principles and approach under
review, monitoring market developments and competitiveness, to
increase the proportion of pay for performance over time.
PRA/FCA consultation on UK remuneration rules
The Committee welcomes the recent consultation announced by the
PRA and FCA to review the UK remuneration rules to improve overall
competitiveness of UK capital markets.
We have introduced a degree of flexibility into our policy to ensure it
remains competitive against peers once the final rules are known.
Any changes made would always be in line with the key principles
used by the Committee when setting the policy. We would engage
with major shareholders ahead of making any material changes, and
provide clear and comprehensive disclosure in our Annual Report and
Accounts.
We remain supportive of the use of deferral mechanisms and will
continue to deliver a substantial portion of variable pay in shares to
ensure alignment between shareholder interests, good risk
management and individual reward. Our policy commits to a weighted
average time horizon of at least five years for the deferral period of
LTI awards, in line with UK Corporate Governance requirements.
HSBC Holdings plc Annual Report and Accounts 2024
283
Corporate governance
Plan limits under Share Plan 2011
The rules of the HSBC Share Plan 2011 currently include an annual
individual limit on awards of 600% of salary, based on the market
value of shares.
LTI awards are not eligible to receive dividend equivalents to comply
with regulatory requirements. Consistent with our disclosed practice
since 2017 when the regulatory change came into force, the number
of shares awarded is calculated using a share price discounted for the
expected dividend yield over the vesting period. The market value of
the proposed LTI award would therefore exceed 600% of base salary.
Amending this limit to reflect the fair value of shares (defined in
accordance with relevant accounting standards) will enable the
Committee to grant up to the maximum award under the new policy.
Shareholder support for this change will be sought at the 2025 AGM.
Conclusion
On behalf of the Committee, I would like to thank our shareholders
for the time taken to engage with us and their valuable feedback as
we developed our new policy. We are committed to regular
engagement and I look forward to further dialogue in the year ahead.
As Chair of the Committee, I hope you will support the 2024
Directors’ remuneration report, our new Directors’ remuneration
policy and the amendment to plan limits under Share Plan 2011 at this
year's AGM.
Dame Carolyn Fairbairn
Chair
Group Remuneration Committee
19 February 2025
2024 executive remuneration at a glance
This section sets out an overview of our performance and 2024 remuneration outcomes for executive Directors.
Our performance
Reported profit before tax
$32.3bn
(2023: $30.3bn)
Operating expenses
$33.0bn
(2023: $32.1bn)
Target basis operating
expenses up 5% to $32.6bn
Return on average tangible
equity
14.6%
(2023: 14.6%)
Return on average tangible equity
excluding notable items of 16.0%
(2023: 16.2%)
HK customer net promoter score
in WPB and CMB relative to peers
1st
(2023: WPB: 3rd; CMB: 1st)
Employee engagement
index
80%
(2023: 77%)
Inclusion index
78%
(2023: 78%)
Percentage of women in senior
leadership roles
34.6%
(2023: 34.1%)
Percentage of colleagues of Asian
heritage in senior leadership roles
39.3%
(2023: 37.8%)
Remuneration outcomes for executive Directors
Summary remuneration outcomes for 2024 are set out below. Further details are set out in our annual report on Directors‘ remuneration on
pages 296 to 298.
Sir Noel Quinn
Georges Elhedery
Annual incentive outcome (£000)
£1,980
£1,540
77.81%
£2,134
£1,677
78.79%
Long-term incentive (LTI) outcome (£000)
£5,298
£4,131
£3,968
£1,330
Vesting long-term incentive
Share price appreciation
on long-term incentive
£1,207
£941
£904
£303
Vesting long-term incentive
Share price appreciation
on long-term incentive
Single total figure of remuneration (£000)
£9,164
£10,641
Base salary and fixed pay allowance
Pension and benefits
Annual incentive
Long-term incentive
Notional returns on deferred cash
awarded in respect of prior role
£5,364
£3,292
Base salary and fixed pay allowance
Pension and benefits
Annual incentive
Long-term incentive
Notional returns on deferred cash
awarded in respect of prior role
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HSBC Holdings plc Annual Report and Accounts 2024
Maximum opportunity
2024 annual incentive
Maximum opportunity
2024 annual incentive1
Maximum opportunity
2022–2024 LTI
2024
2023
Maximum opportunity2
2022–2024 LTI
2024
2023
1
Calculated based on Group CFO and Group CEO scorecard outcomes
applied to the respective salary for each role.
2 Received in prior role as Co-CEO, GBM.
CEO
Current
1
CFO
Current
1
CEO/CFO
Proposed
1
Current
Proposed
CEO
Current
CEO
Proposed
CFO
Current
CFO
Proposed
Current
Proposed
Current
Current
Current
Current
Proposed
Proposed
Proposed
Proposed
Directors’ remuneration policy
This section sets outs the Directors’ remuneration policy proposed for
shareholders' approval at the AGM on 2 May 2025.
The Committee is responsible for reviewing and recommending to
the Board the Directors’ remuneration policy for shareholder approval.
The policy is intended to apply for three years to the end of the AGM
in 2028, although we may seek shareholders’ approval for a new
policy during the period depending on regulatory developments,
changes to our strategy or competitive pressures.
Remuneration policy – key principles
The Committee determined the policy using the following key
principles:
–
The rationale and operation of the policy should be easy to
understand and transparent.
–
There should be a strong alignment between reward and the
interests of our stakeholders, including shareholders, customers
and employees.
–
The policy should maintain a focus on long-term performance.
–
Total remuneration should be competitive to ensure we can retain
and attract talent to deliver our strategic priorities.
–
The structure should meet the expectations of investors and our
regulators.
Setting the policy
The Committee reviewed the Director’s remuneration policy in the
context of significant regulatory change following removal of the 2:1
variable to fixed pay ratio. Input was received from the Group
Chairman and management while ensuring that conflicts of interest
were suitably mitigated. Input was provided by the Committee’s
appointed independent advisers throughout the process.
Key changes to the policy as a result of this review include:
–
removal of Fixed Pay Allowances.
–
an increase in the maximum opportunity of the annual and long-
term incentives.
–
an increase in shareholding guidelines and the introduction of a
post-cessation shareholding guideline.
We extensively engaged with major shareholders, representing 65%
of those who voted at the 2024 AGM, and proxy advisory bodies. The
Committee carefully considered all feedback received, which has
directly influenced the final proposal.
Full detail on the context for the review, the Committee's key
considerations, including how the Committee has responded to
shareholder feedback, is provided in the Chair's letter on pages 279 to
284.
Remuneration policy at a glance
This section sets out the key changes in our Directors’ remuneration policy and our proposed implementation for 2025.
Policy structure
Total remuneration mix
Maximum total remuneration opportunity (£000)
Base salary
Fixed Pay Allowance
Pension
Annual incentive
Long-term incentive
£10,575
£15,150
£6,264
£8,838
Fixed
Variable
Fixed pay - 2025 implementation (£000)
Georges Elhedery
Pam Kaur
£3,214
£1,650
Salary
FPA
Pension
£1,968
£963
Salary
FPA
Pension
Variable pay
Annual incentive opportunity
Long-term incentive opportunity
Shareholding requirement
Group CEO
Group CFO
215%
300%
320%
600%
400%
600%
300%
600%
HSBC Holdings plc Annual Report and Accounts 2024
285
13%
16%
28%
42%
10%
30%
59%
13%
17%
28%
41%
1
Pension accounts for 1% of the total remuneration mix.
Corporate governance
Remuneration policy – executive Directors
Fixed pay
Elements
Details
Base salary
To attract, retain and develop key talent by being market competitive and rewarding ongoing contribution to role.
Operation
– The base salary for an executive Director is designed to reflect the individual’s role, experience and responsibility.
– Base salaries are normally reviewed on an annual basis against relevant comparator groups and may be reviewed more frequently
at the discretion of the Committee.
Maximum opportunity
– No maximum opportunity.
– Increases may be made at the Committee’s discretion, taking into consideration factors such as increases to scope and
responsibilities of the role, development of the individual within the role, salary increases for the wider workforce and
competitiveness against market.
Cash in lieu of pension
To help executive Directors build retirement savings.
Operation
– Directors receive a cash allowance in lieu of a pension entitlement.
Maximum opportunity
– The maximum opportunity will be aligned with the maximum contribution rate that HSBC could make for the majority of employees
in the relevant jurisdiction. This is currently set at 10% of base salary in line with the maximum contribution rate, as a percentage of
salary, that HSBC could make for a majority of employees who are defined contribution members of the HSBC Bank (UK) pension
scheme in the UK.
Benefits and all employee share plans
Elements
Details
Benefits
To provide support for physical, mental and financial health in accordance with local market practice.
Operation
Benefits take account of local market practice and include, but are not restricted to:
– taxable benefits (gross value before payment of tax) including provision of medical insurance, accommodation, car, club
membership, independent legal advice in relation to a matter arising out of the performance of employment duties for HSBC, tax
return assistance or preparation, and travel assistance (including any associated tax due, where applicable); and
– non-taxable benefits including the provision of a health assessment, life assurance and other insurance coverage.
Additional benefits may also be provided when an executive is relocated or spends a substantial proportion of their time in more than
one jurisdiction for business needs, or in such other circumstances as the Committee may determine in its discretion. Such benefits
could include, but are not restricted to, airfare, accommodation, shipment, storage, utilities, and any tax and social security that may
be due in respect of such benefits.
Maximum opportunity
– No maximum opportunity.
– The maximum value is determined by the nature of the benefit provided. The benefit amount will be disclosed in the single total
figure of remuneration table for the relevant year.
All employee share plans
To promote share ownership by all employees.
Operation
– Executive Directors are entitled to participate in all employee share plans, such as HSBC Sharesave, on the same basis as all other
employees in the relevant jurisdiction.
– Under Sharesave, executive Directors can make monthly savings over a period of three or five years towards the grant of an option
over HSBC shares. The option price can be at a discount, currently up to 20%, on the share price at the time the option is granted.
Maximum opportunity
– The maximum number of options is determined by the maximum savings limit set by HM Revenue and Customs. This is currently
£500 per month.
– Executive Directors may also receive additional share options at no extra cost via the Sharesave bonus mechanism, with applicable
rates set by HM Revenue and Customs.
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Variable pay
Adhering to HSBC’s values-aligned behaviours and conduct standards is a prerequisite to be considered for variable pay. Executive Directors
receive an overall performance assessment that considers performance against goals and role expectations, and demonstration of our values-
aligned behaviours. This is considered by the Committee when applying discretion to the formulaic scorecard outcomes.
Elements
Details
Annual incentive
To drive and reward performance against annual financial and non-financial objectives that are consistent with the strategy and align
to shareholder interests.
Operation
Annual incentive awards are discretionary and can be delivered in any combination of cash and shares under the HSBC Share Plan
2011 (‘HSBC Share Plan’). Shares will not normally represent less than 50% of any award and are normally immediately vested.
On vesting, shares equivalent to the net number of shares that vested (after those sold to cover any income tax and social security
payable) must be held for a retention period up to one year, or such other period as may be expected by regulators.
The awards will be subject to clawback (i.e. repayment or recoupment of paid/vested awards) on or after vesting for a period of seven
years from the date of award, or such other period as required by regulators. This may be extended to 10 years, or such other period
as required by regulators in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. Details of the
clawback provision are set out in the bottom section of this table.
Any deferred shares may be entitled to dividend equivalents during the vesting period, which will be paid on vesting. Where awards
do not receive dividend equivalents during the vesting period (to meet regulatory requirements), the number of shares to be awarded
will be determined using a fair value share price (defined in accordance with relevant accounting standards) discounted for the
expected dividend yield.
Any deferred cash award may be entitled to notional returns during the deferral period, or any appropriate adjustment to reflect such
notional returns, as determined by the Committee.
The Committee retains discretion to:
– apply a longer retention period;
– increase the proportion of the award to be delivered in shares; or
– defer the vesting of a portion of the awards, subject to such conditions that the Committee may determine at its discretion (which
may include continued employment). The deferred awards will be subject to malus (i.e. reduction and/or cancellation of unvested
awards) provisions during any applicable deferral period.
The Committee also retains discretion to amend the structure and terms of awards to reflect changes in regulatory requirements
whilst ensuring that any changes will align with the key principles of the Directors' remuneration policy.
The Committee may adjust and amend awards in accordance with the relevant plan rules.
Maximum opportunity
The maximum opportunity for the annual incentive award in respect of a financial year is up to 300% of base salary.
Performance measures
Performance is normally measured against an annual scorecard, based on targets set for financial and non-financial measures,
determined at the beginning of the financial year. The scorecards may vary by individual.
Measures with financial targets will generally have a weighting of 60% for both the Group CEO and the Group CFO. The Committee
will review the scorecard annually and may vary the measures, weighting and targets each year.
The overall payout of the annual incentive could be between 0% (for below minimum performance) and 100% of the maximum
opportunity.
Minimum and maximum performance levels for each measure are defined in the scorecard. 25% of the award opportunity will pay
out for achieving minimum performance and 100% of the award will pay out for achieving maximum performance. Details on payout
between these levels will be disclosed in the respective Directors' Remuneration Report.
The Committee exercises its judgement to determine performance achieved and awards at the end of the performance period, which
in normal circumstances will be one financial year, to ensure that the outcome is fair in the context of overall Group and individual
performance. The Committee can adjust the payout based on the outcome of the performance measures, if it considers that the
payout determined does not appropriately reflect the overall position and performance of the Group for the relevant performance
period.
The scorecard outcome may also be subject to a risk and compliance modifier and/or a capital underpin under which the Committee
will have the discretion to adjust down the overall scorecard outcome, taking into account performance against those factors.
The Committee has the discretion to:
– change the overall weighting of the financial and non-financial measures, whilst ensuring the overall balance remains appropriate;
– vary the measures and their respective weightings within each category. The specific performance measures will be disclosed in
the ‘annual report on remuneration’ for the relevant year; and
– make adjustments to performance targets, measures, weightings and/or outcomes in exceptional circumstances. This may be to
reflect significant one-off items that occur during the measurement period and/or where the Committee determines that original
measures, targets or conditions are no longer appropriate or that amendment is required so that the measures, targets or
conditions achieve their original purpose. Full and clear disclosure of any such adjustments will be made in the 'annual report on
remuneration' for the relevant year, subject to commercial confidentiality.
Malus and clawback
(applicable to both annual
incentive and LTI)
The Committee has the discretion to operate malus and clawback provisions.
Malus can be applied to unvested awards in circumstances including:
– detrimental conduct, including conduct that brings the business into disrepute;
– past performance being materially worse than originally reported;
– restatement, correction or amendment of any financial statements; and
– improper or inadequate risk management.
Clawback may be applied in circumstances including:
– participation in, or responsibility for, conduct that results in significant losses;
– failing to meet appropriate standards and propriety;
– reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a contract
of employment;
– a material failure of risk management suffered by HSBC or a business unit in the context of Group risk management standards,
policies and procedures; and
– any other circumstances required by local regulatory obligations to which any member of the HSBC Group or its subsidiary is
subject.
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Elements
Details
Long-term incentives
(‘LTI’)
To incentivise sustainable long-term performance and alignment with shareholder interests.
Operation
LTI awards are discretionary and are granted if the Committee considers that there has been satisfactory performance over the prior
year. The awards are granted as rights to receive shares under the HSBC Share Plan, normally subject to a forward-looking three-year
performance period from the start of the financial year in which the awards are granted.
At the end of the performance period, the performance outcome will be used to assess the percentage of the awards that will vest.
These shares will then normally vest in five equal instalments, with the first vesting on or around the third anniversary of the grant
date and the last instalment vesting on or around the seventh anniversary of the grant date, in accordance with current UK
remuneration rules.
On each vesting, shares equivalent to the net number of shares that vested (after those sold to cover any income tax and social
security payable) must be held for a retention period up to one year (or such other period as may be permitted by regulators).
Awards are subject to malus provisions prior to vesting. The awards will also be subject to clawback on or after vesting for a period of
seven years from the date of award, or such other period as required by regulators. This may be extended to 10 years, or such other
period as required by regulators, in the event of an ongoing internal/regulatory investigation at the end of the seven-year period.
Details of the malus and clawback provisions are set out in the previous section on annual incentive awards.
Awards may be entitled to dividend equivalents during the vesting period, which will be paid on vesting. Where awards do not receive
dividend equivalents during the vesting period (to meet regulatory requirements), the number of shares to be awarded will be
determined using a fair value share price discounted for the expected dividend yield.
The Committee also retains discretion to amend the structure and terms of awards to reflect changes in regulatory requirements
whilst ensuring that any changes will align with the key principles of the Directors' remuneration policy. In any event, we expect the
weighted average time horizon of the deferral period to be at least five years.
The Committee may adjust or amend awards in accordance with the rules of the HSBC Share Plan.
Maximum opportunity
The maximum opportunity for the LTI award in respect of a financial year is up to 600% of base salary.
Performance measures
The Committee will take into consideration prior performance when assessing the value of the LTI grant. Forward-looking
performance is measured against a long-term scorecard, determined at the start of the financial year in which awards are granted.
Financial measures will generally have a weighting of 60% or more.
For each measure, the Committee will determine the extent of achievement based on actual performance against the target set and
other relevant factors that the Committee considers appropriate to take account of in order to better reflect the Group's underlying
performance. The overall payout level could be between 0% (for below minimum performance) and 100% of the maximum.
Minimum, target and maximum performance levels for each measure are defined in the scorecard. 25% of the award opportunity will
vest for achieving minimum performance, 50% of the award will vest for achieving target performance and 100% of the award will
vest for achieving maximum performance. Where performance achieved is between the minimum, target and maximum level of
performance set in the scorecard, the number of awards that will vest will be determined on a straight-line basis.
The Committee can adjust the LTI payout based on the outcome of the performance measures, if it considers that the payout
determined does not appropriately reflect the overall position and performance of the Group during the performance period.
The scorecard outcome may also be subject to a risk and compliance modifier and/or a capital underpin under which the Committee
will have the discretion to adjust down the overall scorecard outcome, taking into account performance against those factors.
Performance targets will normally be set annually for each three-year cycle. The Committee has the discretion to:
– change the overall weighting of the financial and non-financial measures, whilst ensuring the overall balance remains appropriate;
– vary the measures and their respective weightings within each category. The specific performance measures will be disclosed in
the ‘annual report on remuneration’ for the relevant year;
– vary the risk and compliance and/or any underpin measures; and
– make adjustments to performance targets, measures, weightings and/or outcomes in exceptional circumstances. This may be to
reflect significant one-off items that occur during the measurement period and/or where the Committee determines that original
measures, targets or conditions are no longer appropriate or that an amendment is required so that the measures, targets or
conditions achieve their original purpose. Revised targets/measures will be, in the opinion of the Committee, no less difficult to
satisfy had they been set at the same time as the original targets. Full and clear disclosure of any such adjustments will be made
within the 'annual report on remuneration' for the relevant year, subject to commercial confidentiality.
Other
Elements
Details
Shareholding guidelines
To ensure appropriate alignment with the interest of our shareholders.
Operation
Executive Directors are expected to satisfy the following shareholding requirement as a percentage of base salary within five years
from the date of their appointment:
– Group CEO: 600%
– Group CFO: 600%
On cessation of employment, executive Directors will normally be required to maintain the minimum shareholding requirement for
two years (or, if their actual shareholding is lower at the time of cessation, the actual shareholding upon departure). For this purpose,
unvested shares which are not subject to forward-looking performance conditions (on a net of tax basis) will count towards the
shareholding requirement. HSBC operates an anti-hedging policy under which individuals are not permitted to enter into any personal
hedging strategies in relation to HSBC shares subject to a vesting and/or retention period.
Maximum opportunity
Not applicable.
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Committee discretion
The Committee welcomes the recent consultation announced by the
PRA and FCA to review the UK remuneration rules to improve the
overall competitiveness of UK capital markets. The proposals cover a
wide range of areas, including the application of deferral and retention
periods, which are directly applicable to our policy design.
Aligned to the key principles used by the Committee to set the policy,
the Committee feel it is important that it retains discretion to amend
the structure and terms of awards in the event of regulatory change
to ensure the policy continues to meet the expectations of our
regulators and it remains competitive versus peers.
Where discretion is exercised by the Committee, changes will always
be made in line with the key principles used to determine the policy.
We will engage with major shareholders ahead of making any material
change, and clearly disclose any changes and their rationale in our
Annual Report and Accounts.
One area discussed with shareholders as part of our engagement was
how the Committee would exercise their discretion on the length and
amount of deferral in the event of regulatory change.
The Committee believe that deferral mechanisms and the
requirements to deliver a substantial portion of variable remuneration
in shares are critical policy design elements to ensure ongoing
alignment between reward and the interests of our shareholders.
We have therefore included in the policy a commitment to ensure
that the weighted average time horizon of the deferral period for LTI
awards is at least five years, in line with UK Corporate Governance
requirements.
In addition to the specific areas of discretion expressly set out in the
policy table, the incentive plans include a number of operational areas
of discretion available to the Committee, including:
–
the right to grant awards in the form of conditional share awards or
options (including nil-cost options);
–
the right to amend a performance condition in accordance with its
terms, or if anything happens that causes the Committee to
consider it appropriate to do so;
–
the right to settle the award in cash, based on the relevant share
price, or shares as appropriate; and
–
the right to adjust the award on a variation of share capital or other
corporate event that affects the current or future value of the
award, or alternatively, the right to vest the award early in such
circumstances.
The Committee reserves the right to make any remuneration
payments and payments for loss of office, notwithstanding that they
are not in line with the policy set out above, where the terms of the
payment were agreed:
–
before the policy above or any previous policy came into effect;
–
at a time where a previous policy, approved by shareholders, was
in place provided the payment is in line with the terms of that
policy; or
–
at a time when the relevant individual was not a Director of the
Group and the payment was not in consideration for the individual
becoming a Director of the Group.
For these purposes, payments include the Committee satisfying
awards of variable remuneration. This means making payments in line
with the terms that were agreed at the time the award was granted.
Choice of performance measures and targets
The performance measures selected for the annual incentive and LTI
awards will be set on an annual basis by the Committee, taking into
account the Group’s strategic priorities and any feedback received
from our shareholders. The following table sets out the performance
measures we currently consider for inclusion in our scorecards. The
Committee retains the discretion to choose other measures that are
appropriate for achieving our strategic priorities and meeting any
regulatory expectations, taking into account the views of our
shareholders.
Our objective when setting targets is to balance stretch and
achievability so they act as an effective incentive whilst recognising
outperformance.
Financial targets are set on a reported basis excluding notable items.
This means items occurring outside the normal course of business
and which are generally not expected to repeat, are excluded, and
assessed performance is not impacted by one-offs. Performance
targets are set taking into account a number of factors, including the
targets set in our financial resource plan, our strategic priorities,
shareholder expectations, the economic environment and risk
appetite. Non-financial targets are set based on progress versus prior
year actuals, external commitments and market benchmarks.
Minimum targets are set considering prior year(s) performance and
downside risks to the financial resource plan. Maximum targets
include a stretch above plan, considering upside opportunities.
The overall range is reviewed, taking into account external
commitments and analyst consensus, where available. As a result,
the final target ranges are not formulaically driven or always
symmetrically spread around the plan.
Performance measures
Measures and
modifier/underpin
Example measures for annual incentive scorecard
Example measures for
LTI scorecard
Rationale
Financial measures
– Profit before tax
– RoTE
– Revenue growth
– Volume growth
– Costs
– RoTE
– Total shareholder return
– Underpin to maintain a
minimum CET1 ratio
Measures are selected to
incentivise the achievement
of our financial targets as set
out in our strategic priorities
and financial resource plan.
Strategic measures
– Customer satisfaction
– Employee engagement
– Succession planning and inclusion
– Carbon reduction and sustainable finance
– Reduce carbon
emissions
– Sustainable finance
Measures are selected to
support the delivery of our
strategic priorities.
Risk and compliance
measures, modifier
and/or underpin
– Sustained delivery of global conduct outcomes
– Effective financial crime risk management
– Effective management of material operational risks
– Risk metrics to identify when business activities are outside of tolerance
level for a significant period of time
– Failures in risk management that have resulted in significant customer
detriment, reputational damage and/or regulatory censure
– CET1 level
– Modifier linked to risk
and compliance
performance
Measures are chosen to
ensure a high level of
accountability of risk and
conduct, to promote an
effective risk management
environment and to embed a
robust governance system.
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Approach to recruitment remuneration – executive Directors
On the recruitment or appointment of a new executive Director, the
Committee would adhere to the following principles:
–
Remuneration packages should be in line with the approved policy
for executive Directors.
–
Remuneration packages must meet any applicable local regulatory
requirements.
–
Where necessary, compensation may be provided in respect of
forfeiture of remuneration awards from an existing employer (for
example, buy-out awards).
Outlined in the following table are all components that would be
considered for inclusion in the remuneration package of a new
executive Director appointment and, for each, the approach that
would be adopted.
In the case of an internal appointment, any existing commitments will
be honoured and any variable element awarded in respect of the prior
role will be allowed to be paid out according to its existing terms.
Components of remuneration package of a new executive Director
Component of remuneration
Approach taken
Fixed pay
The base salary will reflect the individual’s role, experience and responsibility, and will be set in the context of market
practice.
The maximum cash in lieu of pension allowance will be no more than the maximum contribution, as a percentage of salary,
that can be made for the majority of employees in the relevant jurisdiction.
Benefits
Benefits to be provided will be dependent on circumstances while in line with Group policy and the remuneration policy
table, including the global mobility policy (where applicable) and local regulations.
Variable pay awards
New appointments will be eligible to be considered for variable pay awards consisting of an annual incentive and/or LTI
award (or any other element which the Committee considers appropriate given the particular circumstances but not
exceeding the maximum level of variable remuneration set out below).
For the year in which the individual commences providing services as an executive Director, the Committee retains the
discretion to determine the proportion of variable pay to be deferred, the deferral and retention period, whether any
performance and/or continued employment conditions should be applied, and the period over which such performance
should be assessed. In exercising this discretion, the Committee will take into account the circumstances in which the
individual is appointed (for example, if it is promotion of an internal candidate or an external appointment), expectations of
shareholders and any regulatory requirements.
Total variable pay awarded for the year in which the individual is newly appointed as an executive Director will be limited to
900% of base salary. This limit excludes buy-out awards and is in line with the aggregate maximum variable pay opportunity
set out in the remuneration policy table.
Guaranteed bonuses are only permitted by exception and in very rare and limited circumstances (for example, where the
individual loses a variable pay opportunity with the previous employer as a result of joining HSBC and such an award is
considered essential to attract and hire the candidate). If such an award is provided, then in line with the PRA remuneration
rules, it will be limited to the first year of service, subject to the Group deferral policy and performance requirements.
Buy-out awards
The Committee may make an award to buy out remuneration terms forfeited on resignation from the previous employer.
The Group buy-out policy is in line with the PRA remuneration rules, which state that both the terms and amount of any
replacement awards will not be more generous than the award forfeited on departure from the former employer.
In considering buy-out levels and conditions, the Committee will take into account the type of award, performance measures
and likelihood of performance conditions being met in setting the quantum of the buy-out. Buy-out awards will match the
terms of forfeited awards with the previous employer as closely as possible, subject to proof of forfeiture and other relevant
documentation. Where the vesting time is fewer than 90 days, cash or deferred cash may be awarded for administrative
purposes.
Where appropriate, the Committee retains the discretion to utilise the provisions provided in the UK Financial Conduct
Authority's Listing Rules for the purpose of making buy-out awards.
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Policy on payments for loss of office – executive Directors
The following table sets out the basis on which payments for loss of office may be made. Other than as set out in the table, there are no further
obligations that could give rise to remuneration payments or payments for loss of office:
Payments for loss of office
Component of remuneration
Approach taken
Fixed pay and benefits
Executive Directors may be entitled to payments in lieu of:
– notice, which may consist of base salary, cash in lieu of pension allowance, and other contractual benefits, or an amount in
lieu of; and/or
– accrued but untaken holiday entitlement.
Payments may be made in instalments or a lump sum, and may be subject to mitigation, and subject to applicable tax and
social security deductions.
Annual incentive and LTI
In exceptional circumstances, as determined by the Committee, an executive Director may be eligible for the grant of annual
incentives and/or LTIs under the HSBC Share Plan, taking into account the time worked in the performance year and based
on the individual’s contribution.
Unvested awards
All unvested awards will be forfeited when an executive Director ceases employment voluntarily and is not deemed a good
leaver. An executive Director may be considered a good leaver, under the HSBC Share Plan, if their employment ceases in
specified circumstances, which include:
– ill health, injury or disability, as established to the satisfaction of the Committee;
– retirement with the agreement and approval of the Committee;
– the employee’s employer ceasing to be a member of the Group;
– redundancy with the agreement and approval of the Committee; or
– any other reason at the discretion of the Committee.
If an executive Director is considered a good leaver, unvested awards will normally continue to vest in line with the applicable
vesting dates, subject to performance conditions, the HSBC share plan rules, and malus and clawback provisions. Unless the
Committee determined otherwise, awards made subject to forward-looking performance conditions, including LTI awards,
will normally be subject to pro-rating for time in employment during the performance period.
In the event of death, unvested awards will vest and be released to the executive Director’s estate as soon as practicable.
In respect of outstanding unvested awards, the Committee may determine that good leaver status is contingent upon the
Committee being satisfied that the executive Director has no current or future intention at the date of leaving HSBC of being
employed by any competitor financial services firm. The Committee determines the list of competitor firms from time to
time, and the length of time for which this restriction applies. If the Committee becomes aware of any evidence to the
contrary before vesting, the award will lapse.
Post-departure benefits
Executive Directors can be provided certain benefits for up to a maximum of seven years from date of departure for those
who depart under good leaver provisions under the HSBC Share Plan, in accordance with the terms of the policy. Benefits
may include, but are not limited to, medical coverage, tax return preparation assistance and legal expenses.
Other
Where an executive Director has been relocated as part of their employment, the Committee retains the discretion to pay the
repatriation costs. This may include, but is not restricted to, airfare, accommodation, shipment, storage, utilities, and any tax
and social security that may be due in respect of such benefits.
Except in the case of gross misconduct or resignation, an executive Director may also receive retirement gifts.
Legal claims
The Committee retains the discretion to make payments (including professional and outplacement fees) in connection with
an executive Director’s cessation of office or employment. This may include payments that are made in good faith in
discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of
any claim arising in connection with the cessation of that executive Director’s office or employment.
Change of control
In the event of a change of control, outstanding awards will be treated in line with the provisions set out in the respective
plan rules.
Other directorships
Executive Directors may accept appointments as non-executive
Directors of companies that are not part of HSBC if so authorised by
either the Board or the Nomination & Corporate Governance
Committee.
When considering a request to accept a non-executive Director
appointment, the Board or the Nomination & Corporate Governance
Committee will take into account, among other things, the expected
time commitment associated with the proposed appointment.
The time commitment for external appointments is also routinely
reviewed to ensure that it will not compromise the executive
Director’s commitment to HSBC.
Service contracts
The service contracts of executive Directors do not have a fixed term.
The notice periods of executive Directors are set at the discretion of
the Committee, taking into account market practice and governance
considerations.
Service agreements for each executive Director are available for
inspection at HSBC Holdings’ registered office. Consistent with the
best interests of the Group, the Committee will seek to minimise
termination payments. Executive Directors may be eligible for a
payment in relation to statutory rights.
Contract date (rolling)
Notice period
(Director and HSBC)
Georges Elhedery
01 January 2023
12 months
Pam Kaur
01 January 2025
12 months
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Corporate governance
Proposed policy
minimum
1
Proposed policy
target
Proposed policy
maximum
Proposed policy
maximum with 50%
share price increase
Proposed policy
minimum
1
Proposed policy
target
Proposed policy
maximum
Proposed policy
maximum with 50%
share price increase
Remuneration scenarios
The following charts show how the total value of remuneration and its
composition would vary under different performance scenarios for
executive Directors under the proposed policy, which is effective
from the date of the 2025 AGM, subject to shareholders’ approval.
The charts have been prepared using 2025 salaries and, therefore, the
cash in lieu of pension, annual incentive and LTI opportunities have
been computed as percentages of 2025 salaries. Benefits is
represented by the value of regular benefits in the 2024 single figure
of total remuneration. For Georges Elhedery, this is the annualised
value of benefits for Sir Noel Quinn, and for Pam Kaur this is the value
of benefits for Georges Elhedery.
The charts set out:
–
the minimum level of remuneration receivable under the policy for
each performance year;
–
the remuneration level for achieving target level of performance
(which assumes 50% of maximum variable pay opportunity is
realised);
–
the maximum level of remuneration (which assumes 100% of the
variable pay opportunity is realised); and
–
the maximum level of remuneration assuming a 50% increase in
share price for LTI awards.
Georges Elhedery (£000)
£1,838
£8,588
£15,338
£19,838
Pam Kaur (£000)
£1,060
£4,997
£8,935
£11,560
Fixed pay (salary and cash in lieu of pension)
Benefits
Annual incentive
LTI
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26%
29%
23%
59%
68%
53%
8%
11%
19%
90%
19%
11%
91%
26%
53%
29%
59%
8%
23%
68%
2%
1%
1%
2%
1%
1%
1
Under the proposed policy minimum, benefits account for 10% of the total remuneration receivable for Georges Elhedery, and 9% of the total remuneration
receivable for Pam Kaur.
Remuneration policy – non-executive Directors
The Nomination & Corporate Governance Committee has considered the time commitments required for all non-executive Directors as the
Board supports HSBC through its ambitious agenda of governance reform, growth and organisational development in an environment of
increasing regulatory, political and organisational complexity. Further information on the time commitment non-executive Directors are expected
to fulfil is set out on page 322.
The following table sets out the framework that will be used to determine the fees for non-executive Directors during the term of this policy.
Elements and link to
strategy
Operation
Maximum opportunity
Fees
To reflect the time
commitment and
responsibilities of a non-
executive Director of HSBC
Holdings.
The policy for non-executive Directors is to pay:
– base fees; and
– further fees for additional Board duties, including but not limited to chairing a
committee, membership of a committee, or acting as the Senior Independent
Director and/or Deputy Chairperson.
Fees are paid in cash. The Board retains the discretion to pay in shares rather than
cash where appropriate.
The non-executive Group Chairperson will be paid a fixed annual fee for all Board
responsibilities based on their experience and the time commitments expected
for the role, together with such other benefits as the Committee may in its
absolute discretion determine.
A newly appointed non-executive Director would be paid in line with the policy on
a time-apportioned basis in the first year as necessary. No sign-on payments are
offered to non-executive Directors.
The Board (excluding the non-executive Directors) has discretion to approve
changes to the fees. The Board may also introduce any new component of fees
for non-executive Directors, subject to the principles, parameters and other
requirements set out in this remuneration policy.
Certain non-executive Directors may be entitled to receive fees for their services
as directors of subsidiary companies of HSBC Holdings. Such additional
remuneration is determined by the Board of Directors of each relevant subsidiary
within a framework set by the Committee.
– The Board will normally review the amount
of each component of fees periodically to
assess whether, individually and in
aggregate, they remain competitive and
appropriate in light of changes in roles,
responsibilities and/or time commitment of
the non-executive Directors, and to ensure
that individuals of the appropriate calibre are
retained or appointed.
– There is no prescribed maximum annual
increase. The Committee is guided by the
general increase for the employee
population but on occasions may need to
recognise other factors including, but not
limited to, change in responsibility and/or
variance to market levels of remuneration.
– Travel allowances are set at an appropriate
level, taking into account the time
requirement for non-executive Directors to
travel to overseas meetings.
Expenses/benefits
Any taxable or other expenses incurred in performing their role are reimbursed, as
well as any related tax cost on such reimbursement.
Non-executive Directors may on occasion receive reimbursement for costs
incurred in relation to the provision of professional advice. These payments, if
made, are taxable benefits to the non-executive Directors and the tax arising is
paid by the Group on the Directors’ behalf.
Not applicable
Shareholding guidelines
To ensure appropriate
alignment with the interests
of our shareholders.
Non-executive Directors, individually or with their connected persons, are
expected to satisfy a shareholding guideline of 15,000 shares within five years
from their appointment.
The Committee reviews compliance with the guidelines annually. The Committee
has full discretion in determining any consequences in cases of non-compliance.
Not applicable
Service contracts
Non-executive Directors are appointed for fixed terms not exceeding
three years, which may be renewed subject to their re-election by
shareholders at AGMs. Non-executive Directors do not have service
contracts, but are bound by letters of appointment issued for and on
behalf of HSBC Holdings, which are available for inspection at HSBC
Holdings’ registered office.
Policy on payments for loss of office –
non-executive Directors
There are no obligations in the non-executive Directors’ letters of
appointment that could give rise to remuneration payments or
payments for loss of office.
Non-executive Directors are entitled to notice under their letter of
appointment. Non-executive Directors’ current terms of appointment
will expire as follows:
2025 AGM
2026 AGM
2027 AGM
José Antonio Meade
Kuribreña
Kalpana Morparia
James Forese
Geraldine Buckingham
Steven Guggenheimer
Rachel Duan
Eileen Murray
Dame Carolyn
Fairbairn
Ann Godbehere
Brendan Nelson
Swee Lian Teo
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Corporate governance
Policy alignment with UK Corporate Governance Code
The table below details how the Group Remuneration Committee addresses the principles set out in the UK Corporate Governance Code with
respect to the Directors’ remuneration policy. This covers both the 2018 UK Corporate Governance Code applicable in 2024, and the revised
2024 UK Corporate Governance Code applicable from 2025 onwards. Information related to malus and clawback can be found on page 287.
Provision
Approach
Clarity
– The Committee regularly engages and consults with major shareholders to take into account shareholder
feedback and to ensure there is transparency on our policy and its implementation.
– Details of our remuneration practices and our remuneration policy for Directors are published and
available to all our employees.
Remuneration arrangements should be transparent
and promote effective engagement with
shareholders and the workforce.
Simplicity
– Our Directors’ remuneration policy has been designed so that it is easy to understand and transparent,
while complying with the provisions set out in the UK Corporate Governance Code and the remuneration
rules of the UK’s PRA and FCA, as well as meeting the expectations of our shareholders. The objective of
each remuneration element is explained and the amount paid in respect of each element is clearly set
out.
Remuneration structures should avoid complexity
and their rationale and operation should be easy to
understand.
Risk
– In line with regulatory requirements, our remuneration practices promote sound and effective risk
management while supporting our business objectives.
– The Group Chief Risk and Compliance Officer attends Committee meetings and updates the Committee
on the overall risk profile of the Group. The Committee also seeks inputs from the Group Risk Committee
when making remuneration decisions.
– Risk and conduct considerations are taken into account in setting the variable pay pool, from which any
executive Director variable pay is funded.
– Executive Directors' annual incentive and LTI scorecards include a mix of financial and non-financial
measures. Financial measures are subject to a CET1 underpin to ensure CET1 remains within risk
tolerance levels while achieving financial targets. In addition, the overall scorecard outcome is subject to
a risk and compliance modifier.
– The deferred portion of any awards granted to executive Directors is subject to a seven-year deferral
period during which our malus policy can be applied. All variable pay awards that have vested are subject
to our clawback policy for a period of up to seven years from the award date (extending to 10 years
where an investigation is ongoing).
Remuneration structures should identify and
mitigate against reputational and other risks from
excessive rewards, as well as behavioural risks that
can arise from target-based incentive plans.
Predictability
–
The charts set out on page 292 show how the total value of remuneration and its composition vary
under different performance scenarios for executive Directors.
The range of possible values of rewards to individual
Directors and any other limits or discretions should
be identified and explained at the time of approving
the policy.
Proportionality
–
The annual incentive and LTI scorecards reward achievement of our financial resource plan targets, as
well as long-term financial and shareholder value creation targets.
–
The Committee retains the discretion to adjust the annual incentive and LTI payout based on the
outcome of the relevant scorecards, if it considers that the payout determined does not appropriately
reflect the overall position and performance of the Group during the performance period.
The link between individual awards, the delivery of
strategy and the long-term performance of the
Group should be clear and outcomes should not
reward poor performance.
Alignment with culture
–
In order for any annual incentive award to be made, each executive Director must achieve a minimum
standard of conduct, which is assessed by reference to HSBC values.
–
Annual incentive and LTI scorecards contain non-financial measures linked to our wider social strategy.
These include measures related to reducing the environmental impact of our operations, improving
customer satisfaction and inclusion.
–
Our Leadership 360 provides one of several ways for senior employees to ask for feedback about how
they lead to help inform their ongoing development.
Incentive schemes should drive behaviours
consistent with the Group’s purpose, values and
strategy.
Remuneration arrangements for colleagues
Our reward principles and commitments guide our approach to
workforce reward and support our focus on being a great place to
work. The Committee reviews these principles and commitments to
support HSBC’s overall ability to attract, retain, develop and energise
the best people, and who are aligned to HSBC’s values. Full details of
our remuneration framework for colleagues is provided on page 295.
Our executive Directors’ remuneration policy aligns with the
framework for colleagues as follows:
–
Externally sourced market data is used to help guide pay decisions
for colleagues, including executive Directors.
–
The base salary increases for executive Directors take into
consideration the base salary increases of colleagues across the
Group, and relevant market conditions.
–
The cash in lieu of pension allowance for executive Directors will not
exceed the maximum contribution (as a percentage of salary) that can
be made for the majority of colleagues in the relevant jurisdiction.
–
All colleagues are eligible to be considered for an annual incentive
award based on their overall performance assessment, which
considers performance against goals and role expectations, and
demonstration of our values-aligned behaviours. The variable pay
for all colleagues, including executive Directors, is funded from a
Group variable pay pool that is determined with reference to Group
performance. Colleagues who receive a variable pay award above
a certain level have a portion of their award deferred over a period
of three to seven years, or other period as required by regulators.
–
LTI awards are considered for senior management, given their
ability to directly influence the Group's long-term performance.
The Board gathers views from our colleagues through a number of
engagement channels. Our management engages with colleagues,
either on a Group-wide basis or in the context of smaller focus
groups, to solicit feedback generally on a wide range of matters,
including pay. Our annual survey on pay seeks the views of all
colleagues on their performance and pay outcomes. The Committee
reviews the outcomes of the survey and determines the key
remuneration priorities for the forthcoming year. Whilst we have not
explicitly sought the views of colleagues on the new policy, many of
our colleagues are also shareholders and therefore have the
opportunity to vote on the policy at the 2025 AGM.
As part of our annual calendar, the Committee Chair also hosts a
forum attended by the chairs of our principal subsidiary boards and
remuneration committees. This allows the Committee to understand
local market factors and feedback gathered from colleagues, within
the regions where we operate, on pay and performance matters. This
also helps both management and the Committee to determine the
prioritisation of pay budgets, and allows the Committee to ensure that
funding is directed to the areas of need in support of the Group’s
strategic ambitions.
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Remuneration structure for colleagues
We set out below the key features of our remuneration framework, which applies on a Group-wide basis, subject to compliance with local laws:
Fixed pay
Attract and retain colleagues
with market competitive pay
for the role, skills and
experience required.
– Fixed pay may include base salary, fixed pay allowances, cash in lieu of pension and other cash
allowances in accordance with local market practice.
– It is based on predetermined criteria, non-discretionary, transparent and not reduced based on
performance.
– It represents a higher proportion of total compensation for more junior colleagues.
– Fixed pay may change to reflect an individual’s position, role or grade, cost of living in the
country, individual skills, capabilities and experience.
– Fixed pay is generally delivered in cash on a monthly basis.
– Consistent with approach for
Group colleagues except that
under our proposed new
policy, executive Directors will
not receive a fixed pay
allowance.
Benefits
Support the physical, mental
and financial health of a
diverse workforce in
accordance with local market
practice.
– Benefits may include, but are not limited to, the provision of a pension, medical insurance, life
insurance and health assessment.
– Provision of medical insurance,
life insurance, car and tax
return assistance.
Variable pay
Incentivise and reward
performance based on
annual financial and non-
financial measures
consistent with the medium-
to long-term strategy,
stakeholder interests and
values-aligned behaviours.
– All colleagues are eligible to be considered for a discretionary variable pay award. Individual
awards are determined against performance goals set at the start of the year.
– Variable pay represents a higher proportion of total compensation for more senior colleagues to
strengthen alignment between total compensation and business performance.
– Variable pay for employees is limited to 10 times fixed pay, except where local regulations
require otherwise.
– Awards are generally paid in cash and shares. For MRTs, at least 50% of the awards are in
shares and/or where required by regulations, in units linked to asset management funds.
– Annual incentive is determined
based on the outcomes of an
annual scorecard of financial
and non-financial measures.
– Executive Directors and
members of the Group
Operating Committee are also
eligible to be considered for a
long-term incentive award,
which is subject to three-year
forward-looking performance
measures.
Buy-out awards
Support recruitment of key
individuals.
– Buy-out awards may be offered if an individual holds any outstanding unvested awards that are
forfeited on resignation from the previous employer.
– The terms of the buy-out awards will not be more generous than the terms attached to the
awards forfeited on cessation of employment with the previous employer.
– For new hires, the approach is
consistent with the approach
taken for employees and the
policy approved by shareholders.
New hire indicative
variable pay
Support recruitment of key
individuals.
– New hire indicative variable pay is awarded in exceptional circumstances, typically involving a
critical senior new hire, and is limited to an individual’s first year of employment only. The award
is subject to a number of factors (such as the respective performance of the Group, business
unit and individual), and the final value paid remains at the full discretion of HSBC.
– For new hires, the approach is
consistent with the approach
taken for employees and the
policy approved by shareholders.
Deferral
Align employee interests
with the medium- to long-
term strategy, stakeholder
interests and values-aligned
behaviours.
– A Group-wide deferral approach is applicable to all employees. A portion of annual incentive
awards above a specified threshold is deferred in shares vesting annually over a three-year
period (33% vesting on the first and second anniversaries of grant and 34% on the third).
– Awards for MRTs are paid in line with the PRA and FCA remuneration rules, and in compliance
with local regulations.
– This means that awards are generally subject to a minimum 40% deferral (60% for awards of
£500,000 or more) over a minimum period of four years up to a maximum of seven years.
– Group standard deferral generally applies to MRTs identified as ’de minimis’. Individuals based
outside the UK and identified as MRTs under local regulations, would be subject to local
requirements where necessary.
– All deferred awards are subject to malus provisions, subject to compliance with local laws.
Awards granted to MRTs on or after 1 January 2015 and awards granted to non-MRTs on or
after 1 January 2022 are subject to clawback.
– HSBC operates an anti-hedging policy for all employees, which prohibits employees from
entering into any personal hedging strategies in respect of HSBC securities.
– For all Group MRTs and the majority of local MRTs, excluding executive Directors, a minimum
50% of the deferred awards is in HSBC shares with the remaining portion in deferred cash.
Local regulatory requirements would also apply where necessary.
– For some employees in our asset management business, where required by the relevant
regulations, at least 50% of the deferred award is linked to fund units reflective of funds
managed by those entities, with the remaining portion in deferred cash awards.
– Variable pay awards made in HSBC shares or linked to relevant fund units granted to MRTs are
generally subject to a one-year retention period post-vesting.
– MRTs who are subject to a five-year deferral period, except senior management or individuals in
PRA- and FCA-designated senior management functions, have a six-month retention period
applied to their awards.
– Where an employee is subject to more than one regulation, the requirement specific to the
sector and/or country in which the individual is working is applied.
– All of the LTI award, or at least
60% of the total variable
award (including LTI), is
deferred. The deferred awards
will vest in five equal annual
instalments, with the first
vesting on or around the third
anniversary of the grant date
and the last instalment vesting
on or around the seventh
anniversary of the grant date.
– All deferred awards are in
HSBC shares and subject to a
post-vesting retention period
of one year.
Severance payments
Adhere to contractual
agreements with involuntary
leavers.
– Where an individual’s employment is terminated involuntarily for gross misconduct then,
subject to compliance with local laws, the Group’s policy is not to make any severance
payment and all outstanding unvested awards are forfeited.
– For other cases of involuntary termination of employment, the determination of any
severance will take into consideration the performance of the individual, contractual notice
period, applicable local laws and circumstances of the case.
– Generally, for good leavers, all outstanding unvested awards will normally continue to vest in
line with the applicable vesting dates. Where relevant, any performance conditions attached to
the awards, and malus and clawback provisions, will remain applicable to those awards.
– Severance amounts awarded to MRTs are not considered as variable pay for the purpose of
application of the deferral and variable pay cap rules under the PRA and FCA remuneration rules
where such amounts include: (i) payments of fixed remuneration that would have been payable
during the notice and/or consultation period; (ii) statutory severance payments; (iii) payments
determined in accordance with any approach applicable in the relevant jurisdictions; and (iv)
payments made to settle a potential or actual dispute.
– Any payments will be in line
with the policy on loss of
office.
Remuneration components
and objectives
Application for Group employees
Approach for executive
Directors
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Corporate governance
Annual report on Directors’ remuneration
This section sets out how our approved Directors’ remuneration policy was implemented during 2024.
Single total figure of remuneration
(Audited)
The following table shows the single total figure of remuneration of each executive Director for 2024, together with comparative figures. Sir
Noel Quinn retired as Group CEO and as an executive Director of the Board on 2 September 2024 and was succeeded by Georges Elhedery.
The figures below reflect the remuneration paid in respect of time spent as executive Director during 2024.
Single total figure of remuneration
Sir Noel Quinn
Georges Elhedery
(£000)
2024
2023
2024
2023
Base salary
914
1,336
989
780
Fixed pay allowance (’FPA’)
1,138
1,700
1,288
1,085
Cash in lieu of pension
91
134
99
78
Taxable benefits1
66
127
39
4
Non-taxable benefits
60
89
58
52
Total fixed
2,270
3,386
2,473
1,999
Annual incentive2,3
1,540
2,018
1,677
1,287
Notional returns4
56
43
8
6
Replacement award
—
—
—
—
Long-term incentive5,6
5,298
4,949
1,207
—
Total variable
6,894
7,010
2,891
1,293
Total fixed and variable
9,164
10,396
5,364
3,292
1 Taxable benefits include the provision of medical insurance, car benefit, accommodation and tax return assistance (including any associated tax due, where applicable).
Non-taxable benefits include the provision of life assurance and other insurance cover.
2 Sir Noel Quinn was not eligible to be considered for a 2025-2027 LTI award. To satisfy regulatory requirements, 40% of the annual incentive award for Sir Noel Quinn
is delivered immediately and 60% is deferred. Both immediate and deferred portions of the award are split evenly between cash and shares. The shares portion of the
award is subject to a retention period of one year and both the shares and the deferred cash portions of the award are subject to clawback provisions.
3 The annual incentive award for Georges Elhedery is awarded 50% in cash and 50% in shares. The shares portion of the award vests immediately at grant and is
subject to a retention period of one year and clawback provisions.
4 Deferred cash awards granted in prior years include a right to receive notional returns for the period between the grant and vesting date. This is determined by
reference to a rate of return specified at the time of grant and paid annually, with the amount disclosed on a paid basis.
5 LTI awards were made in February 2022 (in respect of 2021) at a share price of £5.380 for which the performance period ended on 31 December 2024. The value of
the awards has been computed based on a share price of £7.184, the average share price during the three-month period to 31 December 2024. The value attributable
to share price appreciation for Sir Noel Quinn is £1,330,238 and for Georges Elhedery is £303,006. The vesting LTI granted to Georges Elhedery was in respect of
2021 performance in his role as Co-CEO, GBM. See the following section for details of the performance assessment, which resulted in 75.00% vesting.
6 The value of the 2021-2023 LTI for Sir Noel Quinn has been restated based on a share price of £5.899 to reflect the value of the award on 12 March 2024, when the
first tranche of the award vested. In 2023, the value was based on the average share price during the three-month period to 31 December 2023 of £6.192.
Benefits
The values of the significant benefits in the single total figure table are set out in the following table. The accommodation benefits in Hong Kong
and the car benefits for Georges Elhedery are not included in the table below as they were not deemed significant.
Sir Noel Quinn
Georges Elhedery
(£000)
2024
2023
2024
2023
Group income protection (non-taxable)
57
84
49
49
Accommodation in Hong Kong (taxable)
18
67
—
—
Car and driver in UK and Hong Kong (taxable)
15
47
—
—
Determining executive Directors’ incentive outcomes
(Audited)
Both executive Directors met the minimum standard of conduct and
behaviour for an annual incentive award to be made.
The award is determined by applying the outcome of their annual
scorecard to the maximum opportunity, set at 215% of base salary.
Sir Noel Quinn has been assessed on full-year performance against
the Group CEO annual scorecard with his pay outcome pro-rated for
time in role up to and including 1 September 2024. Georges Elhedery
has been assessed on full-year performance against both the Group
CEO and Group CFO scorecards with his pay outcome pro-rated
based on the time spent and salary received in each role.
The financial measures, weightings and targets were set at the start
of the year to align with our reported financial performance, excluding
notable items, to ensure that out-turns were not impacted by one-
offs. In setting the targets, the Committee considered the 2024
financial plan, 2023 performance, external commitments, scenario
testing of upside and downside risks in the plan, and analyst
consensus where available.
Diversity representation target ranges were set based on a trajectory
to meet our external commitments. Other strategic measures were
set based on maintaining or improving when compared with 2023
performance and/or market benchmarks.
In assessing performance, the Committee considered, and made no
adjustment for, the impact of interest rates, re-confirming that
variations in the macroeconomic environment and their impact on
business outcomes remain for our executives to manage.
The Committee considered carefully the wider context in which
performance was delivered in 2024 and judged that the overall
scorecard outcome for both Sir Noel Quinn and Georges Elhedery
was appropriate against the targets set at the start of the year for
financial, strategic and personal measures.
Taking into account inputs from the Group Risk Committee, the
Committee concluded that the risk and compliance modifier should not
be applied for 2024 based on the Group’s performance against key risk
metrics for either Sir Noel Quinn or Georges Elhedery.
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Annual incentive scorecard assessment
(Audited)
Summary assessment
Minimum
(25% payout)
Maximum
(100% payout)
Performance
Weighting
(%)
Assessment
(%)
Sir Noel Quinn
Outcome (%)
Georges Elhedery
Outcome (%)
Profit before tax ($bn)1
27.1
33.5
34.1
15.0
100.00
15.00
15.00
Target basis operating expenses ($bn)1
32.9
32.3
32.6
15.0
60.09
9.01
9.01
Group RoTE1,2
13.5%
16.5%
16.0%
25.0
87.50
21.88
21.88
Asia RoTE1,2
15.1%
18.1%
18.2%
5.0
100.00
5.00
5.00
Customer satisfaction
See following tables for commentary
15.0
75.00
11.25
11.25
Employee experience
10.0
70.00
7.00
7.00
Wider society
5.0
50.00
2.50
2.50
Personal measures
10.0
6.17
7.15
Total
100.0
77.81
78.79
Scorecard outcome (000)
£1,540
£1,677
Risk adjustment (000)
£—
£—
Annual incentive (000)
£1,540
£1,677
1 Excluding notable items.
2 The CET1 capital ratio of 14.9% exceeded the tolerance level in the risk appetite statement as required by the underpin.
Strategic measures for both executive Directors
Measures
Weighting Performance achievement
Assessment Outcome
Customer
satisfaction
Maintain and improve
NPS in the UK and
Hong Kong, and in
key growth markets
15.0%
– The Committee assessed performance against a scorecard of quantitative
targets set at the start of the year, and using NPS data from external providers.
– In Hong Kong we met our NPS targets, and are ranked in first place in both CMB
and WPB.
– In HSBC UK, WPB saw a modest improvement in rank by two positions to joint
11th. In CMB, as measured by the Savanta MarketVue Business Banking
Survey, our Mid-Market Enterprise (’MME’) segment has improved its rank to
2nd position at FY24 (FY23: 3rd). Our Large Corporate sector was ranked 3rd for
NPS in the 2024 Coalition Greenwich UK Commercial Study.
– For other key growth markets, in WPB we improved rank in Singapore, but saw
a decline in India and rank remained stable in Mexico and China. In CMB,
Singapore and India rankings are in the Top 3.
– GBM has seen an improvement globally rising from 3rd to 2nd place.
– Overall, the Committee assessed that the NPS targets were met.
75.00%
11.25%
Employee
experience
Improve diversity and
inclusion
10.0%
– Senior leadership representation for women increased by 0.5 percentage points
year-on-year to 34.6%, exceeding the target set.
– Senior leadership colleagues with Asian heritage increased by 1.5 percentage
points year-on-year to 39.3%, exceeding target.
– The percentage of Black heritage colleagues in senior leadership roles remained
flat at 3.0%, which was above the minimum set, but behind target.
– The Inclusion index in our employee Snapshot survey remained flat at 78%,
above minimum, but behind target.
70.00%
7.00%
Wider
society
Execution of
sustainability
commitments
5.0%
– Whilst the Sustainability Execution Programme (’SEP’) is on track with mitigating
actions in place for known risks, the Committee assessment considered that the
pace of progress could have been accelerated with greater management focus.
– The absolute financed emissions for oil & gas and thermal coal mining exceeded
the 2024 goal on the trajectory towards our 2030 reduction target.
50.00%
2.50%
Personal measures were set at the start of the year and measured by the Committee against agreed targets and key performance indicators.
Group CEO
Weighting Assessment Performance achievement
Technology
transformation
4.67%
75.00%
– Progress was made on our technology strategy through mobilisation of 83% value streams with clear
accountability across technology and business leads.
– Future State Architecture (’FSA’), which defines the technology roadmap, was agreed for four areas
(Wholesale Credit & Lending, GPB & Wealth, Global FX and Wholesale Client Services Onboarding and Know
Your Customer) with 97% of FSAs approved providing a better end-state view of our strategic application
estate.
Driving data quality
remediation
2.33%
50.00%
– The Committee’s assessment balanced strong progress against the targets set at the start of the year, while
noting that data risk is one of the three principal risk areas to have a material impact on the Group in 2024,
and taking into consideration regulatory feedback.
Simplification of
processes and
organisation
3.0%
50.00%
– In 2024, we completed the sales of our retail banking operations in France, and businesses in Canada,
Argentina, Russia and Armenia. We announced divestments in our private banking business in Germany and
our business in South Africa, and announced the planned sale of our France life insurance business. We
acquired SilkRoad Property Partners Group in Singapore and Citi’s retail wealth management portfolio in
mainland China. In October 2024, we announced a simplified organisational structure.
Total
6.17% out of 10.00%
Personal measures for the Group CEO and the Group CFO
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297
Corporate governance
Group CFO
Weighting Assessment Performance achievement
Deliver activities
relating to
regulatory priorities
5.0%
75.00%
– The Committee’s assessment considered improved regulatory feedback on recovery and resolution planning
activity, and measurement and management of IRRBB risk.
– The Integrity of Regulatory Reporting programme continues to remediate against known gaps to deliver
improvements in the quality of regulatory returns, partially meeting the targets set at the start of the year.
– The regulatory excellence programme achieved efficiencies and outcomes broadly in line with the targets and
milestones set, and the Finance on The Cloud programme successfully closed in April 2024.
Enhanced
disclosures and
controls
2.5%
67.86%
– Implemented enhanced disclosures covering banking NII, structural hedge and multi-jurisdictional revenue.
– Progress against external disclosure commitments for scope 3 emissions of Pillar 3 sections and coal
exposures and delivery of other ESG regulatory deliverables including climate risk stress testing and
regulatory reporting.
Drive liquidity and
capital management
across the Group
2.5%
87.50%
– Strong capital and liquidity positions with no breaches in risk appetite, meeting the targets set.
Total
7.63% out of 10.00%
Personal measures for the Group CEO and the Group CFO (continued)
Long-term incentive (’LTI’) awards
LTI awards over 2022 to 2024 performance period
(Audited)
Sir Noel Quinn, Georges Elhedery and Ewen Stevenson were each
granted a 2022–2024 LTI award in February 2022. In line with the
terms of his departure, Ewen Stevenson is a good leaver and his
award has been pro-rated for time in employment.
The scorecard delivered an outcome of 75.00%, reflecting strong
shareholder returns across the performance period.
Based on the performance outcome, 737,504 shares will vest for Sir
Noel Quinn, 167,991 shares will vest for Georges Elhedery and
191,224 shares will vest for Ewen Stevenson. The awards will vest in
five equal annual instalments commencing in March 2025.
The Committee determined that there were no windfall gains to
consider for this award given the share price at grant (£5.38) was
above the share price at the previous LTI grant (£4.26).
The 2022–2024 LTI award is subject to a risk and compliance
modifier. The Committee received input from the GRC who assessed
that the performance targets were delivered with appropriate risk
management. On this basis, the Committee considered that no
adjustment for risk should be made.
Measures (weighting)1
Minimum
(25% payout)
Target
(50% payout)
Maximum
(100% payout)
Actual Assessment
Outcome
RoTE with CET1 capital ratio underpin2 (25%)
8.0%
9.5%
11.0%
14.6%
100.0%
25.00%
Capital reallocation to Asia with CET1 capital ratio
underpin3 (25%)
46.0%
48.0%
50.0%
43.7%
0.0%
0.00%
Transition to net
zero4 (25%)
Carbon reduction (own
emissions)
52.0%
56.0%
60.0%
66.1%
100.0%
12.50%
Sustainable finance and
investment
$285bn
$340bn
$370bn
$394bn
100.0%
12.50%
Relative TSR5 (25%)
At median of the
peer group
Straight-line vesting
between minimum
and maximum
At upper quartile of
the peer group
Above upper
quartile
100.0%
25.00%
Total
75.00%
Assessment of the 2022–2024 LTI awards
1 Awards vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set out in this table.
2 Assessed based on RoTE in the 2024 financial year. The CET1 capital ratio of 14.9% exceeded the level required by the underpin.
3 Assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2024.
4 Carbon reduction assessed on percentage reduction in total energy and travel emissions achieved by 31 December 2024 using 2019 as the baseline. Sustainable
finance and investment assessed on cumulative financing provided over the performance period.
5 The peer group was: Bank of America, Barclays, BNP Paribas, Citigroup, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group,
Morgan Stanley, Standard Chartered and UBS Group. Credit Suisse Group was removed following its acquisition by UBS Group in June 2023.
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LTI awards over 2025 to 2027 performance period
After taking into account performance for 2024, and subject to
shareholder approval of the new policy, the Committee intends to
grant Georges Elhedery an LTI award of £9,000,000 and Pam Kaur an
LTI award of £5,250,000 (both 600% of base salary). The awards will
have a three-year performance period starting on 1 January 2025.
Alongside reviewing the policy, the Committee has undertaken a
comprehensive review of the performance measures used for our
incentive arrangements to ensure alignment to the Group's priorities
and balance delivery of financial and strategic performance.
For the 2025-2027 LTI, we will retain Group RoTE, relative TSR and
environment measures, reflecting our strategic commitments, and to
assess relative performance compared with peers.
We will increase the weighting of RoTE to 40%, reflecting that the
delivery of a strong stable return on tangible equity is a core measure
of the sustainable returns expected by our investors. Group RoTE will
be assessed excluding notable items in the last year of assessment to
mirror our outlook on RoTE which targets a mid-teens return in each
of the three years from 2025 to 2027 excluding notable items.
The RoTE measure is subject to a CET1 capital ratio underpin. If the
CET1 capital ratio at the end of the performance period is below the
CET1 risk tolerance level set in the risk appetite statement, then the
assessment for this measure will be reduced to nil.
We will increase the weighting of relative TSR to 40% as it is a key
measure of shareholder returns, a material relative measure used by
our peers and in line with investor expectations. No changes have
been made to our relative TSR peer group, which continues to include
more Asian peers to better reflect our growth and investment focus
following a review in 2023.
Following feedback from our shareholders on the metrics used and
recognising the increase in LTI opportunity, we have reduced the
overall weighting of the environment measure from 25% to 20% to
ensure a greater proportion of the LTI is aligned to value creation
while supporting our ESG ambitions.
The Committee completed a comprehensive review of the
environment metrics in the LTI and discussed with major
shareholders. At this stage, financed emission targets remain difficult
to include given challenges in the methodology, timeliness and
frequency of reporting. This was recognised by the investors we
spoke to as part of our policy engagement. We therefore decided to
retain metrics on carbon reduction in our own emissions and
sustainable finance and investment, given we cannot currently use
financed emissions, which is a material metric in supporting our ESG
ambitions.
The Committee will continue to keep the environment measures and
weighting under review for future performance cycles.
Performance targets have been set to balance stretch and
achievability so that awards act as an effective incentive for
management, and incentivise outperformance against our external
strategic commitments. The proposed change in remuneration
structure will be supported by target ranges calibrated to reflect the
increase to the remuneration opportunity.
It was recognised by investors in our engagement that our recent LTI
targets have been set to deliver maximum payouts only for
outperformance compared to consensus and our external strategic
commitments.
For 2025-2027 awards:
–
The maximum target for RoTE reflects stretch above plan and
performance forecasts, taking into account the macroeconomic
environment. The minimum target for RoTE is aligned to our
external commitment of mid-teens RoTE over the medium term.
–
The minimum target for relative TSR is set ‘at the median of our
peer group’, which ensures no payout for below median
performance aligned to investor expectations. The maximum is set
‘at the upper quartile of our peer group’.
–
Our emissions reduction targets have been set based on meeting
our forecasts relating to emissions reduction and purchase of
renewable energy.
–
For the sustainable finance and investment measure, we have set
performance targets to support our ambition announced in 2020 to
provide $750bn to $1tn of financing and investment by 2030. We
reflected on sustainable financing forecasts, market demand, and
regulation, as well as higher LTI opportunity in setting the stretch
in the target range.
The LTI is subject to a risk and compliance modifier, which gives the
Committee the discretion to ensure performance targets are delivered
with appropriate risk management.
Consistent with our approach since 2017, the number of shares to be
awarded will be adjusted to reflect the expected dividend yield of the
shares over the vesting period, as awards are not entitled to dividend
equivalents in accordance with regulatory requirements.
To the extent performance conditions are satisfied at the end of the
three-year performance period, the awards will vest in five equal
annual instalments commencing from around the third anniversary of
the grant date. On vesting, shares equivalent to the net number of
shares that have vested (after those sold to cover any income tax and
social security payable) will be held for a retention period of up to one
year, or such period as required by regulators.
Performance conditions for the 2025–2027 LTI awards
Measures (weighting)1
Minimum
(25% payout)
Target
(50% payout)
Maximum
(100% payout)
RoTE (excluding notable items) with CET1 capital ratio
underpin2 (40%)
14.0%
16.0%
18.0%
Relative TSR3 (40%)
At the median of the
peer group
Straight-line vesting between
minimum and maximum
At the upper quartile of the
peer group
Environment4 (20%)
Carbon reduction (own
emissions)
71.0%
73.0%
78.0%
Sustainable finance and
investment
$648.0bn
$720.0bn
$792.0bn
Subject to risk and compliance modifier
The Group Remuneration Committee retains the discretion to revise down the formulaic outcome taking into account performance against risk and compliance
factors during the performance period.
1
Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2
To be assessed based on RoTE excluding notable items at the end of the performance period, subject to the CET1 capital ratio underpin.
3
The peer group for the 2024 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings, J.P. Morgan
Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.
4
Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2027 using 2019 as the
baseline. The sustainable finance and investment measure will assess the cumulative amount provided and facilitated over the performance period starting from
1 January 2020 and ending 31 December 2027.
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Corporate governance
Annual incentive measures for 2025
The 2025 annual incentive scorecard measures for our executive
Directors have been set to incentivise the delivery of our strategy and
its execution at pace.
Following the Committee’s comprehensive review of the policy and
its implementation, core measures of PBT, Group RoTE and costs
have been retained, with each assessed excluding notable items so
that the outcome reflects performance in the control of management.
We have introduced a measure on fee income growth relative to
balance sheet growth to incentivise growth with less reliance on
capital. To simplify and retain financial measures at 60% of the
scorecard (in order to meet regulatory expectations), we have
reduced the weighting for PBT to 10% and removed the Asia RoTE
measure to reduce overlap with Group RoTE.
The Committee felt it appropriate to have financials weighted at 60%
to balance alignment with shareholder performance and regulatory
expectations, and in line with UK peers.
Customer Net Promoter Score (’NPS’) has been retained to reflect our
ambition to be a top-three bank for customer satisfaction and/or
improve customer satisfaction rank.
We have added a measure focused on delivery of benefits from the
organisational change.
Our people and culture measures support our strategy to have an
inclusive culture of high performance. The Committee intends to
assess this by considering our established inclusion index, the
retention of high performers and other relevant indicators.
We have removed the sustainability measure introduced in 2024 to
reduce duplication with the environment measure in the LTI, which
better reflects the time horizon of our sustainability commitments.
Personal measures have been set to ensure meaningful weighting for
the most critical goals for each executive Director.
The Committee will continue to retain discretion to adjust the
formulaic outcomes of scorecards, taking into account factors such as
Group profits, wider business performance and stakeholder
experience, to ensure executive reward is aligned with underlying
Group performance and the broader stakeholder experience.
The weightings and performance measures for the 2025 annual
incentive scorecard for executive Directors are opposite.
Performance targets have been set to reflect the Group’s 2025 plan,
external commitments, scenario testing of upside and downside risks
in the plan while considering macroeconomic uncertainty, including
the interest rate environment and analyst consensus where available.
The performance targets are commercially sensitive, and it would be
detrimental to the Group’s interests to disclose them at the start of
the financial year. However, as with the 2025-2027 LTI scorecard, the
Committee is mindful that targets must remain suitably stretching to
support the increased remuneration opportunity of the new policy.
Subject to commercial sensitivity, we will disclose the targets in the
2025 Directors’ remuneration report.
2025 annual incentive performance measures
Weighting
Financial measures (all measures subject to CET1 capital
ratio underpin)
60.0%
Group RoTE (excluding notable items)
25.0%
Profit before tax (excluding notable items)
10.0%
Fee income growth relative to balance sheet growth
10.0%
Target basis operating expenses (excluding notable items)
15.0%
Strategic measures
30.0%
Customer satisfaction:
Improvement in NPS scores/rank
15.0%
Deliver benefits of announced organisational changes
8.0%
People and culture:
Inclusion and retention of high performers
7.0%
Personal measures
– Group CEO: Deliver enterprise-wide foundational priorities
including regulatory excellence, wealth acceleration and
strategic investments, and the Group's technology strategy.
– Group CFO: Deliver activities relating to regulatory excellence
priorities, Group Sustainability priorities, and robust liquidity
and capital management.
10.0%
Subject to risk and compliance modifier
The Group Remuneration Committee retains the discretion to
revise down the formulaic outcome taking into account
performance against risk and compliance factors during the
performance period.
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Our approach to workforce reward
Our goal is to deliver a unique and exceptional experience to energise
colleagues to perform at their best. This is critical to strengthening our
ability to attract, retain and motivate the people we need in competitive
markets where employee expectations continue to evolve.
Our workforce reward principles and commitments guide our
approach and support our focus on being a great place to work.
–
We will reward our colleagues responsibly through fixed pay
security and protection through core benefits, a competitive total
compensation opportunity, pay equity, and a more inclusive and
sustainable benefits proposition over time.
–
We will recognise colleagues' success through our performance
routines, including feedback and recognition, pay for performance,
and all employee share ownership opportunities.
–
We will support our colleagues to grow through our proposition
beyond pay, with a focus on future skills and development, support
for well-being, and flexibility.
In 2024, we made several changes to improve colleague experience and
unlock our performance edge:
–
We introduced new performance routines to over 200,000
colleagues in 58 markets, so colleagues know what is expected of
them, how they are doing and how they can improve. This is
achieved by discussing performance more frequently through the
year, regularly exchanging feedback and simplifying year-end
performance assessment to focus less on ratings and more on a
dialogue between managers and colleagues.
–
We introduced 'Target Variable Pay' to over 150,000 colleagues in 46
markets, helping improve clarity and transparency on how we make
pay decisions and the impact of Group, business and individual
performance on variable pay.
–
We continued to improve our wellbeing offering by enhancing
country Employee Assistance Programmes, increasing the number
of mental health champions to expand the network's global reach,
developing new financial wellbeing support and running global
activity challenges to improve employees' physical wellbeing.
The Committee tracks various metrics to assess how we are doing and
prioritise action plans. Our approach overall is working and has positively
contributed to employee engagement, which has risen to a record high
of 80% in our employee Snapshot survey. Additional metrics
highlighting some of our areas of focus in 2024 are outlined below.
Our approach to workforce reward forms part of our broader
employee value proposition and helps us retain and engage the
leaders and people we need to execute our strategy. We will continue
to track and measure progress against key metrics at a Group, global
business and market level and use these insights to inform what
improvements we can make. In 2025, we will continue to embed our
performance and pay changes, protect well-being and flexibility, and
reinvest in colleagues' skills development.
We will reward
you responsibly
Living wage
Fixed pay
Pay fairness
Global living wage
employer
3.6% (2023: 4.4%) 5
percentage
points
p
Following our accreditation as a global
living wage employer in 2024, we have
continued to work with the Fair Wage
Network which provides an independent
source of wage levels. HSBC has
achieved accreditation as a global living
wage employer in 2025 and will
continue to review all wages against
local living wage benchmarks.
increase to fixed pay for 2025, targeted at
colleagues that need it most, such as
those in high inflation markets.
increase in the number of colleagues who
say they are paid fairly for what they do,
compared with the 2021 year-end pay
review.
We will recognise
your success
Feedback
Recognition
81% (2023: 81% )
42% p
1.5m (2023: 1.4m) p
of colleagues say they receive feedback
to help them improve performance.
average monthly increase in colleagues
receiving feedback compared to 2023.
recognitions by employees of their peers
for demonstrating role model behaviours
that are linked to our values, up 7% on
2023.
We will support
you to grow
Mental health
Financial wellbeing
Career
#1 (2023: #1)
65% (2023: 60%) p 71% (2023: 71%)
in the Global CCLA Corporate Mental
Health Benchmark for the third year
running.
of colleagues say they know where to find
financial wellbeing support, an increase of
five percentage points compared to 2023.
Our Career Index is six percentage points
higher than the financial services
benchmark.
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Corporate governance
Committee governance
The Group Chairman, Chair of the Group Risk Committee, Group
CEO, Group Chief Risk and Compliance Officer, Group Chief People
and Governance Officer, Group Chief Legal Officer, Global Head of
Remuneration Governance and Regulatory Accountabilities
(Committee Secretary), and Group Head of Performance and Reward
routinely and selectively attend Committee meetings.
No Director is present at Committee meetings when their own
remuneration is discussed.
The Chair regularly engaged with the Committee’s key stakeholders,
including senior management, independent advisors, investors, proxy
advisors and regulators to listen to numerous perspectives to help
inform the broader decision-making of the Committee.
A copy of the Committee’s terms of reference can be found on our
website at www.hsbc.com/who-we-are/our-people/board-of-directors/
board-committees and further information on stakeholder
engagement for setting the remuneration policy is set out from
page 285.
The Committee Secretary regularly met with the Chair to ensure the
Committee fulfilled its governance responsibilities, to consider input
from stakeholders when finalising meeting agendas and track
progress on actions and priorities. A summary of coverage is set out
in the ’Matters considered during 2024’ table below.
Matters considered during 2024
Feb1
Feb1 Jun2
Jun
Jul
Sep2
Sep
Oct2
Dec
Remuneration framework and governance
Group variable pay, workforce performance and pay matters and insights
u
u
u
u
u
u
u
u
u
Directors’ remuneration policy design
u
u
u
u
u
u
u
u
u
Executive Director remuneration policy implementation, scorecards and pay proposals
u
u
u
u
u
u
u
u
u
Remuneration for other senior executives of the Group
u
u
u
u
u
u
u
u
u
Directors’ remuneration report
u
u
u
u
u
u
u
u
u
Regulatory, risk and governance
Material risk and audit events, and performance and remuneration impacts for individuals involved
u
u
u
u
u
u
u
u
u
Regulatory updates, including identification of Material Risk Takers
u
u
u
u
u
u
u
u
u
Governance matters
u
u
u
u
u
u
u
u
u
Matters from principal subsidiary committees
u
u
u
u
u
u
u
u
u
u Matter considered
u Matter not considered
1 There were two meetings held during February.
2 The June, September and October meetings were ad hoc with reduced agenda.
How the Committee discharged its responsibilities
Activities outside formal meetings
In addition to its regular schedule, the Committee convened three ad
hoc meetings to facilitate oversight of key topics under its remit in
support of strategic priorities and initiatives during 2024.
The Committee keeps abreast of regulatory and investor
developments and periodically undertakes training to explore key
topics in more detail. A comprehensive induction session was held
with Kalpana Morparia in October 2024 to introduce her to the work
of the Committee.
Connectivity with principal subsidiary
remuneration committees
The Chair hosted the biannual Remuneration Committee Chairs
Forum in October and November 2024, bringing together Committee
members and Chairs of the principal subsidiary remuneration
committees. The forum provided the opportunity for members to
discuss key priorities and challenges in relation to people,
performance and pay matters across the Group. The focus in October
was progress on Committee priorities for the year including the
development of a new executive Director policy, progress on
delivering the employee value proposition commitments and to
receive regional feedback on key considerations for the 2024 pay
review. In November, the forum focused on the preliminary Group
variable pay for 2024, and allocation by business, function and region
and the 2025 fixed pay budgets.
The Committee received certifications from the principal subsidiary
remuneration committees, confirming that the relevant committee
had discharged its obligations overseeing the implementation and
operation of HSBC’s Group Remuneration Framework and escalated
all relevant concerns to the Committee. A regular report is presented
to the Committee highlighting significant remuneration matters from
the Group’s subsidiaries.
Collaborative oversight by the GRC, GAC and
GTOC
The Committee worked closely with, and received feedback and input
from, the GRC and GAC on the alignment of remuneration with risk
appetite, conduct and compliance-related matters, including risk
adjustment considerations for Group variable pay and the application
of the risk modifier in respect of senior employees.
The Chair met with the Chair of the GRC, GAC and GTOC to consider
the Group’s risk and reward alignment framework, which is designed
to promote sound and effective risk management in meeting PRA and
FCA remuneration rules and expectations. During the year, the Chair
of the Committee hosted a joint session with the GRC and GTOC to
consider improvements to the risk and reward framework, more
details of which can be found on page 304.
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Advisers
The Committee received input and advice from different advisers on
specific topics during 2024. Deloitte was retained as independent
advisor to the Committee in 2024 having been reappointed in 2022
following a formal tender process. Deloitte also provided tax
compliance and other advisory services to the Group in 2024. Deloitte
is a founding member of the Remuneration Consultants Group and
voluntarily operates under the code of conduct in relation to executive
remuneration consulting in the UK.
The Committee also received advice from Willis Towers Watson on
market data and remuneration trends. Willis Towers Watson also
provides actuarial support to Global Finance, benchmarking data for
the wider workforce and services related to benefits administration
for our Group employees. The Committee was satisfied the advice
provided by Deloitte and Willis Towers Watson was objective and
independent in 2024.
For 2024, total fees of £275,150 and £68,971 were incurred in relation
to remuneration advice provided by Deloitte and Willis Towers
Watson, respectively. This was based on pre-agreed fees and a time-
and-materials basis.
Committee performance review
In 2024, the annual review of the performance of the Board
committees, including the Committee, was conducted externally by
IBE. On the basis of the review, the directors concluded that the
Committee continued to operate effectively.
Positive feedback was noted on the leadership of the Committee
Chair and membership of the Committee, which was considered to
have practical overlap of members with other Board committees, and
an appropriate flow of information between Committee Chairs.
The review highlighted the importance of both continuing to consider
performance and pay for the wider workforce, and taking the
opportunity to take a fresh look at the performance and pay approach
in the context of changes to the employee value proposition.
The outcomes of the evaluation have been reported to the Board, and
the Committee will track the progress in implementing
recommendations during 2025.
Further details of the annual review of the Board and Committee
effectiveness can be found on page 257.
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Corporate governance
Additional remuneration disclosures
This section provides further information in relation to executive Director and wider workforce remuneration as required by the UK, Hong Kong,
and Pillar 3 remuneration disclosure requirements. For the purpose of the Pillar 3 remuneration disclosures, executive Directors and non-
executive Directors are considered to be members of the management body. Members of the Group Executive Committee other than the
executive Directors are considered as senior management.
Link between risk, performance and reward
Our remuneration practices promote sound and effective risk management to support our business objectives and the delivery of our strategy.
We set out below the key features of our framework, which enable us to align between risk, performance and reward, subject to compliance
with local laws and regulations:
Variable pay
–
Group variable pay is expected to reflect Group performance, based on a range of financial and non-financial factors. We use a structured
payout ratio range, that varies the payout ratio with profits before tax, and a countercyclical funding methodology, with both a floor and a
ceiling, with the payout ratio generally reducing as performance increases to avoid pro-cyclicality. The floor recognises that even in challenging
times, remaining competitive is important. The ceiling recognises that at higher levels of performance it is not always necessary to continue to
increase variable pay, thereby limiting the risk of inappropriate behaviour to drive financial performance.
–
The main quantitative and qualitative performance and risk metrics used for assessment of performance include:
–
Group and business unit financial performance, considering contextual factors driving performance, and capital requirements;
–
current and future risks, taking into consideration performance against the risk appetite, financial resourcing plan and global conduct
outcomes; and
–
fines, penalties and provisions for customer redress, which are automatically included in the Committee’s definition of profit for
determining the pool.
–
In the event that the Group was unable to distribute dividends to shareholders for reasons such as capital adequacy, then the Group may
determine that as a year of weak performance. In such a year, the Group may withhold some, or all, variable pay for employees including
unvested share awards, using the metrics outlined above as a basis for that determination.
Individual
performance
–
Assessment of individual performance is made with reference to clear and relevant financial and non-financial goals. Goals for senior
management take into account appropriate measures linked to sustainability risks, such as: reduction in carbon footprint; facilitating financing
to help clients with their transition to net zero; employee inclusion; and risk and compliance measures, subject to local legal requirements.
–
A mandatory global risk and compliance goal is included for all other employees. Subject to any legal/regulatory requirements, all employees
receive an overall performance assessment supported by an assessment against the minimum values-aligned behaviours and conduct
standards expected of all colleagues and performance on their goals. This ensures that performance is assessed not only on what is achieved
but also on how it is achieved.
Control
function staff
–
Group policy is for control functions staff to report into their respective function. Remuneration decisions for senior functional roles are made
by the global function head.
–
The performance and reward of individuals in control functions, including risk and compliance colleagues, are assessed according to a balanced
scorecard of goals specific to the functional role they undertake.
–
Their remuneration is determined independent of the performance of the business areas they oversee.
–
Remuneration is carefully benchmarked with the market and internally to ensure it is set at an appropriate level.
–
The Committee is responsible for approving remuneration for the Group Chief Risk and Compliance Officer and Group Head of Internal Audit.
Variable pay
adjustments
and conduct
recognition
–
Variable pay awards may be adjusted upwards or downwards to reflect positive or negative conduct in adherence with the Code of Conduct.
Downward adjustments can be made in circumstances including:
–
detrimental conduct, including conduct that brings HSBC into disrepute;
–
involvement in events resulting in significant operational losses, or events that have caused or have the potential to cause significant harm
to HSBC; and
–
non-compliance with the values-aligned behaviours and other mandatory requirements or policies.
–
Rewarding positive conduct can be through use of our global recognition platform, At Our Best, or positive adjustments to variable pay awards.
Malus
–
Malus can be applied to unvested deferred awards (up to 100% of awards) granted in prior years in circumstances including:
–
detrimental conduct, including conduct that brings the business into disrepute;
–
past performance being materially worse than originally reported;
–
restatement, correction or amendment of any financial statements; and
–
improper or inadequate risk management.
Clawback
–
Clawback can be applied to vested or paid awards granted to MRTs on or after 1 January 2015 (and awards granted to non-MRTs on or after
1 January 2022) for a period of seven years, extended to 10 years for employees in PRA and FCA designated senior management functions in
the event of ongoing internal/regulatory investigation at the end of the seven-year period. Clawback may be applied in circumstances including:
–
participation in, or responsibility for, conduct that results in significant losses;
–
failing to meet appropriate standards and propriety;
–
reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a contract of
employment; and
–
a material failure of risk management suffered by HSBC or a business unit in the context of Group risk-management standards, policies and
procedures.
–
Clawback can also be applied to vested or paid awards granted to designated Executive Officers as defined by the US Securities and Exchange
Commission (’SEC’) for a period of three years in the event of an accounting restatement due to material non-compliance with any financial
reporting requirement under the US securities laws.
Sales
incentives
–
We generally do not operate commission-based sales plans, unless aligned with local market practice and with appropriate safeguards to avoid
incentivising inappropriate sales behaviours.
Identification
of MRTs
–
We identify individuals as MRTs based on qualitative and quantitative criteria set out in the PRA’s and FCA’s remuneration rules. Our
identification process is underpinned by the following key principles:
–
MRTs are identified at Group, HSBC Bank (consolidated) and HSBC UK Bank level.
–
MRTs are also identified at other solo regulated entity level as required by the regulations.
–
When identifying an MRT, HSBC considers a colleague’s role within its matrix management structure. The global business and function that
an individual works within takes precedence, followed by the geographical location in which they work.
–
We also identify additional MRTs based on our own internal criteria, which include compensation thresholds and individuals in certain roles and
grades who otherwise would not be identified as MRTs under the remuneration rules.
Framework
elements
Application
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Summary of shareholder return and Group CEO remuneration
The graph shows HSBC TSR performance (based on the daily spot
Return Index in sterling) against the FTSE 100 Total Return Index for
the 10-year period ended 31 December 2024.
The FTSE 100 Total Return Index has been chosen as a recognised
broad equity market index of which HSBC Holdings is a member.
The single total figure remuneration for the Group CEO over the past
10 years, together with the outcomes of the respective
annual incentive and LTI awards, are presented in the following table.
HSBC TSR and FTSE 100 Total Return Index
HSBC TSR
FTSE 100 Total Return Index
Dec 2014
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Dec 2021
Dec 2022
Dec 2023
Dec 2024
0%
100%
200%
300%
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Group CEO
Stuart
Gulliver
Stuart
Gulliver
Stuart
Gulliver
Stuart
Gulliver
John
Flint
John
Flint
Sir Noel
Quinn
Sir Noel
Quinn
Sir Noel
Quinn
Sir Noel
Quinn
Sir Noel
Quinn
Sir Noel
Quinn1,2
Georges
Elhedery2,3
Single total figure £0004
7,340
5,675
6,086
2,387
4,582
2,922
1,977
4,154
4,895
5,562 10,396
9,164
1,867
Annual incentive5 (% of
maximum)
45%
64%
80%
76%
76%
61%
66%
32%
57%
75%
70%
78%
78%
Long-term incentive5,6,7 (% of
maximum)
41%
–%
–%
100%
–%
–%
–%
–%
–%
–%
75%
75%
—%
1
Sir Noel Quinn’s 2024 single total figure reflects his single total figure of remuneration and includes his total fixed pay, benefits and annual incentive up to and
including 1 September 2024 when he stepped down as Group CEO, plus his vesting 2022-2024 LTI.
2
The 2024 annual incentive figures for Sir Noel Quinn and Georges Elhedery reflect their assessment against the Group CEO scorecard for their periods as Group
CEO.
3
Georges Elhedery’s total single figure reflects his total fixed pay, annual incentive and benefits in respect of his period as Group CEO (for the period 2 September
2024 to 31 December 2024). Georges Elhedery’s vesting 2022-2024 LTI was granted before his appointment as Group CEO and has been excluded.
4
Sir Noel Quinn’s 2023 single total figure has been restated to reflect the value of the 2021-2023 LTI on 12 March 2024, when the first tranche of the award
vested.
5
The 2012 annual incentive figure for Stuart Gulliver included 60% of the annual incentive disclosed in the 2012 Directors’ remuneration report, which was
deferred for five years and subject to service conditions and satisfactory completion of the five-year deferred prosecution agreement with the US Department of
Justice, entered into in December 2012 (’AML DPA’) as determined by the Committee. The AML DPA performance condition was met and the award vested in
2018. The value of the award at vesting was in the 2018 single total figure of remuneration and included as long-term incentive for 2018.
6
Long-term incentive awards are included in the single total figure of remuneration for the year in which the performance period is deemed to be substantially
completed. For Group Performance Share Plan (’GPSP’) awards, this is the end of the financial year preceding the date of grant. The GPSP award shown in 2015
therefore relates to the award granted in 2016.
7
The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made. LTI awards have a three-year performance period
and the first LTI award was made in February 2017. The value of the LTI awards expected to vest will be included in the total single total figure of remuneration
of the year in which the performance period ends.
Voting results from Annual General Meeting
2024 Annual General Meeting voting results
For
Against
Withheld
Remuneration report (votes cast)
97.36%
2.64%
––
9,581,517,143
259,382,421
7,973,872
Remuneration Committee discretion to set appropriate variable to fixed pay ratio(s) for
Material Risk Takers (votes cast)
99.31%
0.69%
9,760,585,369
67,898,883
20,437,945
Remuneration policy (votes cast from 2022 Annual General Meeting)
95.73%
4.27%
––
7,666,488,029
342,320,697
7,773,468
HSBC Holdings plc Annual Report and Accounts 2024
305
Corporate governance
Total return
to
shareholder
2024
▲ 43%
2023
Employee
pay
2024
▲ 1%
2023
Pay ratio
The following table shows the ratio between the total pay of the
Group CEO and the lower quartile, median and upper quartile pay of
our UK employees.
Total pay and benefits for the Group CEO reflects the total fixed pay,
annual incentive and benefits for Sir Noel Quinn up to and including
1 September 2024 and for Georges Elhedery from 2 September 2024,
plus the value of Sir Noel Quinn’s vesting 2022-2024 long-term incentive
(’LTI’), which was awarded in respect of his performance as Group CEO
in 2021. The median ratio is stable year on year, reflecting that a LTI has
vested in each of the last two years with a similar scorecard outcome.
Total pay ratio
Method
Lower
quartile
Median
Upper
quartile
2024
A
283:1
165:1
87:1
20231
A
285:1
165:1
86:1
2022
A
167:1
95:1
49:1
2021
A
154:1
90:1
46:1
2020
A
139:1
85:1
43:1
2019
A
169:1
105:1
52:1
Total pay and benefits amounts used to calculate the ratio
(£)
Method
Lower quartile
Median
Upper quartile
Total
pay and
benefits
Total
salary
Total
pay and
benefits
Total
salary
Total
pay and
benefits
Total
salary
2024
A
38,995 31,962
66,772 53,945 127,050 91,664
2023
A
36,528 27,680
63,000 45,536 121,223 89,506
2022
A
33,284 24,615
58,257 41,000 113,778 95,000
2021
A
31,727 27,666
54,678 41,500 106,951 84,000
2020
A
29,833 23,264
48,703 36,972
96,386 75,000
2019
A
28,920 24,235
46,593 41,905
93,365 72,840
1
The 2023 pay ratios have been restated to reflect the revised 2023 single
total figure of remuneration for Sir Noel Quinn.
The total pay and benefits for the median employee for 2024 was
£66,772, a 6.0% increase compared with 2023.
Our UK workforce comprises a diverse mix of colleagues across different
businesses and levels of seniority, from junior cashiers in our retail
branches to senior executives managing our global business units. We
aim to deliver market-competitive pay for each role, taking into
consideration the skills and experience required for the business.
Pay structure varies across roles in order to deliver an appropriate mix of
fixed and variable pay. Junior colleagues have a greater portion of their
pay delivered in a fixed component, which does not vary with
performance and allows them to predictably meet their day-to-day needs.
Our senior management, including executive Directors, generally have a
higher portion of their total remuneration opportunity structured as
variable pay and linked to the performance of the Group, given their role
and ability to influence the strategy and performance of the Group.
Executive Directors also have a higher proportion of their variable pay
delivered in shares, which vest over a period of seven years with a post-
vesting retention period of one year. During this deferral and retention
period, the awards are linked to the share price so the value of award
realised by them after the vesting and retention period will be aligned to
the performance of the Group.
We are satisfied that the median pay ratio is consistent with the pay and
progression policies for our UK workforce, taking into account the diverse
mix of our UK employees, the pay mix applicable to each role and our
objective of delivering market competitive pay for each role subject to
Group, business and individual performance.
Our ratios have been calculated using the option ‘A’ methodology
prescribed under the UK Companies (Miscellaneous Reporting)
Regulations 2018. Under this option, the ratios are calculated using full-
time equivalent pay and benefits of all employees providing services in the
UK at 31 December 2024. We believe this approach provides accurate
information and representation of the ratios. The ratio has been computed
taking into account the pay and benefits of over 34,000 UK employees,
other than the Group CEOs. We calculated our pay quartiles and benefits
information for our UK employees using:
–
full-time equivalent annualised fixed pay, which includes base salary
and allowances, at 31 December 2024;
–
variable pay awards for 2024;
–
return on deferred cash awards granted in prior years. The deferred
cash portion of the annual incentive granted in prior years includes a
right to receive notional returns for the period between the grant date
and vesting date, which is determined by reference to a rate of return
specified at the time of grant. A payment of notional return is made
annually and the amount is disclosed on a paid basis in the year in
which the payment is made;
–
gains realised from exercising awards from taxable employee share
plans; and
–
full-time equivalent value of taxable benefits and pension contributions.
Full-time equivalent fixed pay and benefits for each employee have been
calculated by using each employee’s data as at 31 December 2024.
Where an employee works part-time, fixed pay and benefits are grossed
up, where appropriate, to full-time equivalent. One-off benefits have not
been included in calculating the ratios as these are not permanent in
nature and in some cases, depending on individual circumstances, may
not truly reflect a benefit to the employee.
The reported ratios may not be comparable to our international and listed
peers on the FTSE 100, given differences in business mix and size,
employment and compensation practices, methodologies for computing
pay ratios and assumptions used by companies.
Relative importance of spend on pay
The following chart shows the change in:
–
total employee pay between 2023 and 2024; and
–
dividends and share buy-backs in respect of 2023 and 2024.
In 2024, total spend on pay was stable compared with 2023. The total
return to shareholders increased by 43% compared with 2023. This
included the special dividend of $0.21 per share that was paid in June
following the completion of the sale of our banking business in Canada,
as well as $11bn of capital return to shareholders through share buy-
backs, which included the up to $2bn buy-back announced at our 2023
annual results in February 2024. In addition, the Group has announced
the intention to initiate a further buy-back of up to $2bn. Dividends
include an approximation of the amount payable in April 2025 in relation
to the fourth interim dividend of $0.36 per ordinary share.
Relative importance of spend on pay
$26.9bn
$18.8bn
$18.5bn
$18.2bn
Dividends
Share buy-back
Employee Pay
Report of the Directors | Corporate governance report | Directors’ remuneration report
306
HSBC Holdings plc Annual Report and Accounts 2024
$15.9bn
$11.0bn
$11.8bn
$7.0bn
Comparison of Directors’ and employees’ pay
The following table compares the changes in each Director’s base
salary, taxable benefits and annual incentive between 2020 and 2024
with the percentage change in each of those elements of pay for UK-
based employees of HSBC Group Management Services Limited, the
employing entity of the executive Directors.
The non-executive Director fees were increased in 2024. The year-on-
year percentage change in fees noted in the table below is primarily
driven by any pro-rated fees received by the non-executive Director
based on time served by them on the Board and the relevant Board
committees and any additional responsibilities taken on by the non-
executive Director during each year. The value of benefits received by
the non-executive Directors reflect the taxable expense
reimbursements claimed, and the associated gross-up tax, in relation
to attending the Board meetings in each year. Page 313 provides the
underlying single total figure of remuneration for non-executive
Directors used to calculate these figures.
Annual percentage change in remuneration
Base salary/fees
Benefits
Annual incentive
Director/employees
2024
2023
2022
2021
2020
2024
2023
2022
2021
2020
2024
2023
2022
2021
2020
Executive Directors
Sir Noel Quinn1,2,3
(31.6)
0.5
3.2
1.7
151.7
(47.8)
6.7
25.3
(48.9)
353.7
(23.7)
(6.7)
36.1
99.0
20.2
Georges Elhedery4
26.7
—
—
—
—
866.0
—
—
—
—
30.3
—
—
—
—
Non-executive Directors
Geraldine Buckingham5
10.7
57.4
—
—
—
(40.0)
—
—
—
—
—
—
—
—
—
Rachel Duan6,7
4.5
8.4
235.8
—
—
—
(100.0)
—
—
—
—
—
—
—
—
Dame Carolyn Fairbairn7,8
4.7
5.3
231.1
—
—
—
(100.0)
—
—
—
—
—
—
—
—
James Forese9
5.5
10.2
20.5
257.5
—
300.0
—
—
—
—
—
—
—
—
—
Ann Godbehere10
472.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Steven Guggenheimer11
(1.9)
0.8
4.8
86.6
—
300.0
(90.0)
—
—
—
—
—
—
—
—
José Antonio Meade
Kuribreña12
3.7
0.8
8.5
10.4
28.7
75.0
(71.4)
—
(100.0)
100.0
—
—
—
—
—
Kalpana Morparia13
45.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Eileen Murray14,15
14.1
10.7
(1.5)
121.7
— (100.0)
—
—
—
—
—
—
—
—
—
Brendan Nelson16
306.2
—
—
—
—
216.7
—
—
—
—
—
—
—
—
—
David Nish17
(66.8)
0.4
(1.0)
0.4
108.7
57.9
(13.6)
120.0
25.0
(50.0)
—
—
—
—
—
Swee Lian Teo18
402.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Sir Mark Tucker
—
—
—
—
—
184.3
(54.9)
242.4
(36.5)
(77.5)
—
—
—
—
—
Employee group19
3.3
5.0
3.1
1.0
2.0
4.1
5.7
7.0
1.3
2.3
2.4
11.7
3.7
25.2
(20.0)
1
Sir Noel Quinn succeeded John Flint as interim Group CEO with effect from 5 August 2019 and was appointed permanently into the role on 17 March 2020. The
annual percentage change in 2020 for Sir Noel Quinn is based on remuneration reported in his 2019 single total figure of remuneration (for the period 5 August
2019 to 31 December 2019) and his 2020 single total figure of remuneration (for the period 1 January 2020 to 31 December 2020). Based on his annualised 2019
compensation as an executive Director, his percentage change in salary, benefits and annual incentive was 2.1%, 85.2% and -50.9%, respectively for 2020.
2
Sir Noel Quinn voluntarily waived the cash portion of his 2020 annual incentive. The year-on-year percentage change between 2020 and 2021 would be -1%
without this cash waiver.
3
Sir Noel Quinn stepped down as Group CEO and as an executive Director of the Board with effect from 2 September 2024. The annual percentage change in
2024 for Sir Noel Quinn is based on remuneration reported in his 2024 single total figure of remuneration (for the period 1 January 2024 to 1 September 2024).
Based on his annualised 2024 compensation as an executive Director, his percentage change in salary, benefits and annual incentive was 3.0%, -22.4% and
14.1% respectively for 2024.
4
Georges Elhedery succeeded Ewen Stevenson as Group CFO with effect from 1 January 2023, and succeeded Sir Noel Quinn as Group CEO with effect from
2 September 2024. The annual percentage change in 2024 for Georges Elhedery is based on remuneration reported in his 2024 single total figure of
remuneration, which reflects compensation as both Group CFO and Group CEO during 2024.
5
Geraldine Buckingham stepped down as a member of the Group Risk Committee on 1 October 2024 and was appointed as a member of the Group Audit
Committee and Chair of the Sustainability Working Group on 1 October 2024.
6
Rachel Duan was appointed as a member of the Group Audit Committee on 1 June 2022.
7
Rachel Duan and Dame Carolyn Fairbairn did not receive taxable benefits in 2023, resulting in a 100% reduction in benefits from the prior year.
8
Dame Carolyn Fairbairn was appointed as Chair of the Group Remuneration Committee effective 29 April 2022.
9
James Forese was appointed as non-executive Chair of HSBC North America Holdings, Inc in 2021. He was appointed as a member of the Sustainability Working
Group on 1 October 2024.
10 Ann Godbehere was appointed as a member of the Group Audit Committee on 21 February 2024 and as a member of the Sustainability Working Group on 1
October 2024. She was also appointed as Senior Independent Director on 3 May 2024.
11 Steven Guggenheimer joined the Board on 1 May 2020. He stepped down as a Co-Chair of the Technology Governance Working Group on 1 March 2024 and
was appointed as a member of the Group Technology Committee on 1 March 2024.
12 José Antonio Meade Kuribreña did not receive taxable benefits in 2021, resulting in a 100% reduction in benefits from the prior year.
13 Kalpana Morparia joined the Board on 1 March 2023. She was appointed as a member of the Group Technology Committee on 1 March 2024 and Group
Remuneration Committee on 1 October 2024. Kalpana Morparia stepped down as a member of Group Risk Committee on 1 October 2024.
14 Eileen Murray was appointed as a member of the Group Audit Committee on 1 June 2022. She stepped down as the Co-Chair of the Technology Governance
Working Group Committee and was appointed as the Chair of the Group Technology Committee on 1 March 2024. Eileen Murray stepped down as a member of
the Group Audit Committee and was appointed as a member of the Group Risk Committee on 1 October 2024.
15 Eileen Murray did not receive taxable benefits in 2024, resulting in a 100% reduction in benefits from the prior year.
16 Brendan Nelson was appointed as Chair of the Group Audit Committee on 21 February 2024. He was appointed as a member of the Group Technology
Committee on 1 March 2024 and the Sustainability Working Group on 1 October 2024.
17 David Nish retired from the Board effective 3 May 2024.
18 Swee Lian Teo was appointed as a member of the Group Technology Committee on 1 March 2024 and the Sustainability Working Group on 1 October 2024.
19 Employee group consists of individuals employed by HSBC Group Management Services Ltd, the employing entity of the executive Directors, as no individuals
are employed directly by HSBC Holdings.
HSBC Holdings plc Annual Report and Accounts 2024
307
Corporate governance
Scheme interests awarded during 2024
(Audited)
The table below sets out the scheme interests granted to executive Directors during 2024 in respect of the 2023 performance year, as
disclosed in the 2023 Directors’ remuneration report. No non-executive Directors received scheme interests during the financial year. The below
table includes details of immediate shares and fixed pay allowances in compliance with Chapter 17 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited.
Scheme awards in 2024
(Audited)
Type of interest
awarded
Basis on which
award made
Date of award
Face
value
awarded
£000
Percentage
receivable for
minimum
performance
Number of
shares
awarded
End of
performance
period
Sir Noel Quinn
LTI deferred shares1
% of base salary
26 February 2024
5,822
25
974,853
31 December 2026
Immediate shares2
% of base salary
26 February 2024
1,009
N/A
168,955
31 December 2023
Fixed pay allowance3
N/A
8 May 2024
300
N/A
42,146
N/A
15 August 2024
300
N/A
46,219
N/A
5 November 2024
300
N/A
41,846
N/A
Georges Elhedery
LTI deferred shares1
% of base salary
26 February 2024
3,399
25
569,177
31 December 2026
Immediate shares2
% of base salary
26 February 2024
643
N/A
107,752
31 December 2023
Fixed pay allowance3
N/A
8 May 2024
192
N/A
26,899
N/A
15 August 2024
192
N/A
29,498
N/A
5 November 2024
299
N/A
41,720
N/A
1
In accordance with the remuneration policy approved by shareholders at the 2022 AGM, the LTI award was determined at 320% of base salary for Sir Noel
Quinn and 320% of base salary for Georges Elhedery. The number of shares to be granted was determined by taking HSBC’s closing share price of £5.972 taken
on 23 February 2024, and applying a discount based on HSBC’s expected dividend yield of 6.25% per annum for the vesting period (£4.385). The fair value of the
awards was £2.028 based on IFRS 2 accounting standards. LTI awards are conditional share awards subject to a three-year forward-looking performance period
and vest in five equal annual instalments, between the third and seventh anniversary of the award date, subject to performance achieved. Awards are subject to
clawback for a maximum period of 10 years from the date of the award and are not eligible for dividend equivalents.
2
Immediate share awards are granted based on the previous years’ performance as part of the annual incentive and are not subject to forward-looking
performance conditions. On vesting, awards will be subject to a one-year retention period. The face values of the immediate share awards have been computed
using HSBC’s closing share price of £5.972 taken on 23 February 2024. The fair value of the awards was £5.957 based on IFRS 2 accounting standards. Awards
are subject to clawback for a maximum period of 10 years from the date of the award.
3
Fixed pay allowance awards are granted in instalments in accordance with the remuneration policy approved by shareholders at the 2022 AGM, and are not
subject to forward-looking performance conditions. Individual tax liabilities were satisfied in cash, therefore the face value awarded represents the net of tax
value of the shares and the number of shares awarded reflects the net of tax number of shares. The fixed pay allowance awards have been computed using
HSBC’s closing share price of £7.126 taken on 7 May 2024, £6.498 taken on 14 August 2024 and £7.177 taken on 4 November 2024. The fair values of these
awards are based on IFRS 2 accounting standards and are £7.208, £6.558 and £7.224 respectively. These awards vest immediately and are subject to a retention
period and released annually on pro-rata basis over five years, starting in March 2025.
Measures (weighting)1
Minimum
(25% payout)
Target
(50% payout)
Maximum
(100% payout)
RoTE with CET1 capital ratio underpin2 (37.5%)
14.0%
16.0%
17.0%
Environment and sustainability3
(25%)
Carbon reduction
(own emissions)
66.0%
70.0%
74.0%
Sustainable finance and
investment
$539.0bn
$641.0bn
$693.0bn
Relative TSR4 (37.5%)
At median of the
peer group
Straight-line vesting between
minimum and maximum
At upper quartile of
peer group
Subject to risk and compliance modifier
The Group Remuneration Committee retains the discretion to revise down the formulaic outcome taking into account performance against risk and compliance
factors during the performance period.
Performance conditions for the 2024–2026 LTI awards
(Audited)
1
Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2
To be assessed based on RoTE at the end of the performance period, subject to the CET1 capital ratio underpin.
3
Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2026 using 2019 as the
baseline. The sustainable finance and investment measure will assess the cumulative amount provided and facilitated over the period ending 31 December 2026.
4
The peer group for the 2024–2026 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings,
J.P. Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.
Report of the Directors | Corporate governance report | Directors’ remuneration report
308
HSBC Holdings plc Annual Report and Accounts 2024
Other scheme interests held during 2024
The table below details scheme interests held by executive Directors during 2024, in respect of prior performance years. Vesting of deferred
share awards is normally subject to the Director remaining an employee on the vesting date. The awards may vest at an earlier date in some
circumstances. Under the Securities and Futures Ordinance of Hong Kong, interests in conditional share awards are categorised as the interests
of the beneficial owner.
Other scheme interests in 2024
HSBC Holdings ordinary shares
Type of
interest held
Dates of
award
Award
price (£)1
Usually vesting
At 1 Jan
2024
Vested in
period
Lapsed in
period
Cancelled in
period
At 31 Dec
2024
from
to
Sir Noel
Quinn
LTI deferred
shares
1 Mar 2021
4.262
1 Mar 2024
31 Mar 2028 1,118,554
167,7822
279,639
—
671,133
28 Feb 2022
5.380
1 Mar 2025
31 Mar 2029
983,339
—
—
—
983,339
27 Feb 2023
6.357
1 Mar 2026
31 Mar 2030
861,422
—
—
—
861,422
Deferred
shares
27 Feb 20173
6.503
1 Mar 2020
31 Mar 2024
19,886
20,6984
—
—
—
26 Feb 20185
7.234
1 Mar 2021
31 Mar 2025
43,011
21,504
—
—
21,507
25 Feb 20196
6.235
1 Mar 2022
31 Mar 2026
84,351
28,117
—
—
56,234
24 Feb 20207
5.622
1 Mar 2023
31 Mar 2027
161,362
40,340
—
—
121,022
Georges
Elhedery
LTI deferred
shares
28 Feb 2022
5.380
1 Mar 2025
31 Mar 2029
223,989
—
—
—
223,989
27 Feb 2023
6.357
1 Mar 2026
31 Mar 2030
251,474
—
—
—
251,474
Deferred
shares
25 Feb 20198
6.235
1 Mar 2020
31 Mar 2024
17,193
17,193
—
—
—
24 Feb 20207
5.622
1 Mar 2023
31 Mar 2027
118,129
29,532
—
—
88,597
1 Mar 20219
4.262
1 Mar 2024
31 Mar 2028
305,523
61,104
—
—
244,419
28 Feb 202210
5.380
1 Mar 2025
31 Mar 2029
273,163
—
—
—
273,163
1
The award price is the closing price on the day before the grant date. In all cases the purchase price is nil.
2
The performance conditions were assessed and confirmed at 75%. The remaining 25% of the award was forfeited. Shares equivalent in number to those that
vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award vests in five equal tranches commencing in 2024. The
first tranche vested on 12 March 2024 at a market value of £5.8992. The closing price of the shares immediately before the date on which the awards were
vested was £5.758.
3
The award vested in five equal annual tranches. The final tranche vested on 11 March 2024 at a market value of £5.7534. Shares equivalent in number to those
that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The closing price of the shares immediately before the
date on which the awards were vested was £5.799.
4
The quantity vested included 812 dividend equivalents allocated in respect of the Q4 2023 dividend.
5
Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in
five equal annual tranches. The fourth tranche vested on 12 March 2024 at a market value of £5.8992. The closing price of the shares immediately before the
date on which the awards were vested was £5.758.
6
Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in
five equal annual tranches. The third tranche vested on 11 March 2024 at a market value of £5.7534. The closing price of the shares immediately before the date
on which the awards were vested was £5.799.
7
Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in
five equal annual tranches. The second tranche vested on 11 March 2024 at a market value of £5.7534. The closing price of the shares immediately before the
date on which the awards were vested was £5.799.
8
Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The award vested in
five equal annual tranches. The final tranche vested on 11 March 2024 at a market value of £5.7534. The closing price of the shares immediately before the date
on which the awards were vested was £5.799.
9
Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in
five equal annual tranches. The first tranche vested on 12 March 2024 at a market value of £5.8992. The closing price of the shares immediately before the date
on which the awards were vested was £5.758.
10 The award will vest in five equal annual tranches commencing in 2025. Shares equivalent in number to those that vest under the award (net of tax liabilities)
must be retained for one year from the vesting date.
No Directors held any short position (as defined in the Securities and Futures Ordinance of Hong Kong) in the shares or debentures of HSBC
Holdings and its associated corporations. Save as stated in the tables above, none of the Directors had an interest in any shares or debentures
of HSBC Holdings or any associates at the beginning or at the end of the period, and none of the Directors or members of their immediate
families were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the period.
There have been no changes in the shares or debentures of the Directors from 31 December 2024 to the date of this report.
HSBC Holdings plc Annual Report and Accounts 2024
309
Corporate governance
Executive Directors’ interests in shares
(Audited)
The shareholdings of executive Directors in 2024, including the
shareholdings of their connected persons, at 31 December 2024 (or
the date they stepped down from the Board, if earlier) are set out
below. The following table shows the comparison of shareholdings
with the company shareholding guidelines. There have been no
changes in the shareholdings of the executive Directors from
31 December 2024 to the date of this report.
Individuals have five years from their appointment date to build up the
recommended levels of shareholding. In line with investor guidance,
for executive Directors, unvested shares that are not subject to
forward-looking performance conditions (on a net of tax basis) can
count towards their shareholding requirement under the shareholder-
approved policy.
The Committee reviews compliance with the shareholding
requirement, taking into account shareholder expectations and
guidelines. The Committee also has full discretion in determining any
penalties for non-compliance.
With regard to post-employment shareholding arrangements, we
believe that our remuneration structure achieves the objective of
ensuring there is ongoing alignment of executive Directors’ interests
with shareholder experience post-cessation of their employment due
to the following features of the policy:
–
Shares delivered to executive Directors as part of the fixed pay
allowance have a five-year retention period, which continues to
apply following a departure of an executive Director.
–
Shares delivered as part of an annual incentive award are subject
to a one-year retention period, which continues to apply following
a departure of an executive Director.
–
LTI awards have a seven-year vesting period with a one-year post-
vesting retention period, which is not accelerated on departure.
The weighted average holding period of an LTI award within HSBC is
therefore six years, in excess of the five-year holding period typically
implemented by FTSE-listed companies.
HSBC operates a policy under which individuals are not permitted to
enter into any personal hedging strategies in relation to HSBC shares
subject to a vesting and/or retention period.
Shares
(Audited)
Shareholding
guidelines
(% of salary)
Shareholding at
31 Dec 20242 or
date stepped
down
(% of salary)
At 31 Dec 2024, or date stepped down from the Board if earlier
Scheme interests
Share
interests
(number
of shares)
Share
options3
Shares awarded subject to deferral1
without
performance
conditions
with
performance
conditions4
Executive Directors
Sir Noel Quinn5 (stepped down from 2
September 2024)
400%
1,068%
2,046,949
—
869,896
2,819,614
Georges Elhedery5 (appointed as Group
CEO from 2 September 2024)
400%
504%
966,017
—
606,179
1,044,640
1
The gross number of shares is disclosed. A portion will be sold at vesting to cover any income tax and social security that falls due at the time of vesting.
2
The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2024 (£7.184), and does not
include any unvested interests.
3
At 31 December 2024, Sir Noel Quinn and Georges Elhedery did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).
4
LTI awards granted in February 2022, 2023 and 2024 are subject to the performance conditions as set out in the preceding sections.
5
Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment.
Total pension entitlements
(Audited)
No employees who served as executive Directors during the year
have a right to amounts under any HSBC final salary pension scheme
for their services as executive Directors or are entitled to additional
benefits in the event of early retirement. There is no retirement age
set for Directors, but the normal retirement age for colleagues is 65.
Payments to past Directors
(Audited)
In line with the terms of his departure disclosed in our Annual Report
and Accounts 2022, Ewen Stevenson was granted good leaver status.
Ewen Stevenson is eligible to receive vesting of the 2022–2024 LTI
award, pro-rated for time in employment subject to satisfaction of
non-compete provisions under which he cannot undertake a role with
a defined list of competitor financial services firms for 12 months
after his employment ceases with HSBC. Details of the 2022–2024
LTI outcome are outlined on page 298.
No other payments were made to, or in respect of, former Directors
in the year in excess of the minimum threshold of £50,000 set for this
purpose.
External appointments
During 2024, executive Directors did not receive any fees from
external appointments.
Payments for loss of office
(Audited)
Departure terms for Sir Noel Quinn
Sir Noel Quinn is leaving the Group on 30 April 2025. He will continue
to receive his salary, Fixed Pay Allowance (’FPA’), cash in lieu of
pension allowance and other benefits up to (and including) his
retirement date in the normal way. The aggregate value of these
payments from 2 September 2024 to 31 December 2024 was
£1,147,055 and comprised a salary of £454,844, a FPA of £562,019,
cash in lieu of pension allowance of £45,484 and benefits totalling
£84,707, which includes Group Income Protection, a contribution
towards Sir Noel Quinn's legal fees incurred in connection with his
departure arrangements and other benefits in connection with his
retirement. Sir Noel Quinn will also receive cash in lieu of unused
holiday on expiry of his notice period. The fixed pay allowance will be
awarded in immediately vested shares, be subject to a retention
period and released on a pro-rata basis over five years.
Sir Noel Quinn will not be eligible for an LTI award in respect of the
2024 performance year, or any annual incentive award in respect of
the 2025 performance year. In accordance with the contractual terms
Report of the Directors | Corporate governance report | Directors’ remuneration report
310
HSBC Holdings plc Annual Report and Accounts 2024
agreed and our approved Directors’ remuneration policy, Sir Noel
Quinn was granted good leaver status in respect of his outstanding
unvested share awards. Good leaver status is conditional upon him
not taking up a role with a defined list of competitor financial services
firms for a year from his departure date. As a good leaver, his
deferred share awards will continue to vest and be released on their
scheduled vesting dates, subject to the relevant terms (including post-
vesting retention periods, malus and, where applicable, clawback).
Any vesting of his LTI awards will be pro-rated for the period up to the
departure date and will be subject to the relevant terms (including
post-vesting retention periods, malus and clawback) and the
achievement of the required performance conditions. For this
purpose, his 2022 and 2023 LTI awards have been pro-rated for time
with the maximum number of shares, being 669,995 and 433,268
respectively, still subject to performance.
Sir Noel Quinn will be eligible to receive certain post-departure
benefits for a period of up to seven years after the departure date. Sir
Noel Quinn will receive no other compensation or payment for the
termination of his service agreement or his ceasing to be a Director of
the Group.
Directors’ emoluments
The details of compensation paid to executive and non-executive Directors for the year ended 31 December 2024 are set out below:
Emoluments
Sir Noel Quinn
Georges Elhedery
Non-executive Directors1
2024
2023
2024
2023
2024
2023
£000
£000
£000
£000
£000
£000
Directors' base salary, allowances and benefits in kind
2,270
3,386
2,473
1,999
Non-executive Directors' fees and benefits in kind
5,583
4,769
Pension contributions
—
—
—
—
—
—
Performance-related pay paid or receivable2,3
1,540
6,293
10,677
3,783
—
—
Inducements to join paid or receivable
—
—
—
—
—
—
Compensation for loss of office
1,147
—
—
—
—
—
Notional return on deferred cash
56
43
8
6
—
—
Total
5,013
9,722
13,157
5,788
5,583
4,769
Total ($000)
6,406
12,424
16,814
7,397
7,135
6,095
1
Fees and benefits in kind for 2024 reflects the population as per the single total figure table for non-executive Directors, which excludes individuals who have
stepped down from the Board during 2024.
2
Includes the value of the deferred and LTI awards at grant.
3
The 2024 value of performance-related pay paid or receivable for Georges Elhedery includes the proposed 2025-2027 LTI award under the new executive
Director remuneration policy, which is subject to shareholder approval at the 2025 AGM.
The aggregate amount of Directors’ emoluments (including both executive Directors and non-executive Directors) for the year ended
31 December 2024 was $30,355,377. The aggregate value of Director retirement benefits for current Directors is nil.
As per our policy, benefits in kind may include, but are not limited to, the provision of medical insurance, income protection insurance, health
assessment, life assurance, club membership, tax assistance, car benefit, travel assistance, provision of company owned-accommodation and
relocation costs (including any tax due, where applicable).
The details of compensation paid to former executive Directors for the year ended 31 December 2024 are set out below:
Emoluments to former executive Directors
Douglas Flint
Stuart Gulliver
John Flint
Marc Moses
£
$
£
$
£
$
£
$
Post-employment medical insurance benefits
8,018
10,246
8,018
10,246
12,161
15,541
18,950
24,217
Tax return support
—
—
—
—
—
—
2,500
3,195
1
Amounts are converted into US dollars based on the average exchange rates for the year.
The total aggregate value of benefits provided to former executive Directors in 2024 was £49,646 ($63,444). There were payments under
retirement benefit arrangements to four former Directors of £3,225,964.
We note an additional retirement benefit payment made in 2023 to a former Director of £1,038,863. This means payments under retirement
benefit arrangements for 2023 were made to four former Directors, totalling £2,420,537.
The provision at 31 December 2024 in respect of unfunded pension obligations to two former Directors amounted to £352,441. This relates to
unfunded unapproved retirement benefits schemes.
HSBC Holdings plc Annual Report and Accounts 2024
311
Corporate governance
Emoluments of senior management and five highest paid employees
The following tables set out the emoluments paid to senior management, which in this case comprises executive Directors and members of the
Group Executive Committee, for the year ended 31 December 2024, or for the period of appointment in 2024 as a Director or member of the
Group Executive Committee. Details of the remuneration paid and share awards granted to the five highest paid employees, comprising
Georges Elhedery, Pam Kaur and three other members of the Group Executive Committee for the year ended 31 December 2024, are also
presented.
Five highest paid employees – share awards (HSBC Share Plan 2011)
Dates of award
Award
price (£)1
HSBC Holdings ordinary share awards
Usually vesting
At 1 Jan
2024
Granted in
period
Vested in
period2
Lapsed
in period
Cancelled in
period
At 31 Dec 2024
from
to
2017 to 2023
—
1 Mar 2024
30 Mar 2030
4,290,807
—
478,332
—
—
3,812,475
26 Feb 20243
5.972
26 Feb 2024
30 Mar 2031
—
2,064,764
568,482
—
—
1,496,282
18 Mar 20244
5.980
18 Mar 2024
30 Mar 2028
—
313,085
113,864
—
—
199,221
8 May 20245
7.126
8 May 2024
30 Mar 2027
—
1,012,813
332,397
—
—
680,416
15 Aug 20246
6.498
15 Aug 2024
15 Aug 2024
—
29,498
29,498
—
—
—
5 Nov 20247
7.177
5 Nov 2024
5 Nov 2024
—
41,720
41,720
—
—
—
1 Jan to 31 Dec 20248
—
1 Mar 2024
30 Mar 2024
—
5,269
5,269
—
—
—
4,290,807
3,467,149
1,569,562
—
—
6,188,394
1
The award price is the closing price on the day before the grant date. In all cases the purchase price is nil.
2
The weighted average closing price of the shares immediately before the dates on which the awards were vested was £6.2037.
3
The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period,
range between £2.028 and £5.957. These awards include LTI awards and other awards which are subject to satisfaction of performance conditions. LTI awards
are subject to a combination of financial and non-financial metrics that are detailed in the Directors’ remuneration report in this Annual Report and Accounts 2024.
4
The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period,
range between £5.165 and £5.789.
5
The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period,
range between £6.823 and £7.208.
6
The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the award was £6.558.
7
The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the award was £7.224.
8
Relates to the allocation of dividend equivalent shares in relation to eligible awards.
Emoluments
£000s
Five highest paid employees
Senior management
Basic salaries, allowances and benefits in kind
10,688
37,990
Pension contributions
9
656
Performance-related pay paid or receivable1
33,459
58,290
Inducements to join paid or receivable
—
—
Compensation for loss of office2
—
2,221
Total
44,156
99,157
Total ($000)
56,429
126,717
1
Includes the value of deferred share awards at grant.
2
Excludes expected payments in 2025 in connection with loss of office for senior management in 2024.
Emoluments by bands
Hong Kong dollars
US dollars
Number of highest paid employees
Number of senior management
$5,500,001 – $6,000,000
$704,877 – $768,956
—
2
$8,000,001 – $8,500,000
$1,025,275 – $1,089,355
—
1
$20,000,001 – $20,500,000
$2,563,187 – $2,627,267
—
3
$21,000,001 – $21,500,000
$2,691,347 – $2,755,426
—
1
$29,500,001 – $30,000,000
$3,780,701 – $3,844,781
—
1
$33,000,001 – $33,500,000
$4,229,259 – $4,293,339
—
1
$34,500,001 – $35,000,000
$4,421,498 – $4,485,578
—
1
$35,000,001 – $35,500,000
$4,485,578 – $4,549,658
—
1
$37,000,001 – $37,500,000
$4,741,897 – $4,805,976
—
1
$40,000,001 – $40,500,000
$5,126,375 – $5,190,454
—
1
$44,000,001 – $44,500,000
$5,639,012 – $5,703,092
—
1
$47,500,001 – $48,000,000
$6,087,570 – $6,151,650
—
1
$49,000,001 – $49,500,000
$6,279,809 – $6,343,889
—
2
$50,500,001 – $51,000,000
$6,472,048 – $6,536,128
—
1
$57,000,001 – $57,500,000
$7,305,084 – $7,369,164
1
2
$76,500,001 – $77,000,000
$9,804,192 – $9,868,271
1
—
$83,000,001 – $83,500,000
$10,637,228 – $10,701,307
1
1
$107,000,001 – $107,500,000
$13,713,053 – $13,777,132
1
1
$131,000,001 – $131,500,000
$16,788,877 – $16,852,957
1
1
Report of the Directors | Corporate governance report | Directors’ remuneration report
312
HSBC Holdings plc Annual Report and Accounts 2024
Non-executive Directors
(Audited)
The following table shows the total fees and benefits of non-executive Directors for 2024, together with comparative figures for 2023.
Fees and benefits
(Audited)
Fees1
Benefits2
Total
(£000)
2024
2023
2024
2023
2024
2023
Geraldine Buckingham3
270
244
3
5
273
249
Rachel Duan
255
244
3
—
258
244
Dame Carolyn Fairbairn
292
279
5
—
297
279
James Forese4
801
759
4
1
805
760
Ann Godbehere5
389
68
—
—
389
68
Steven Guggenheimer6
259
264
4
1
263
265
José Antonio Meade Kuribreña
253
244
7
4
260
248
Kalpana Morparia7
248
170
1
—
249
170
Eileen Murray8
331
290
—
3
331
293
Brendan Nelson9
329
81
38
12
367
93
David Nish10
159
479
30
19
189
498
Swee Lian Teo11
256
51
—
—
256
51
Sir Mark Tucker
1,500
1,500
145
51
1,645
1,551
Total (£000)
5,343
4,673
240
96
5,583
4,769
Total ($000)
6,828
5,972
307
123
7,135
6,095
1
Fees are in line with the Directors’ remuneration policy. There was a 5% increase in fees for Director fees, Group Risk Committee Member, Group Audit
Committee Chair and Member, Remuneration Committee Chair and Member, Nomination & Corporate Governance Committee Member and Group Technology
Committee Chair and Member).
2
Benefits include taxable expenses such as accommodation, travel and subsistence relating to attendance at Board and other meetings at HSBC Holdings’
registered offices. Amounts disclosed have been grossed up using a tax rate of 45%, where relevant.
3
Stepped down as a member of the Group Risk Committee and joined the Group Audit Committee as member on 1 October 2024. Appointed as Chair of the
Sustainability Working Group on 1 October 2024.
4
Appointed as a member of the Sustainability Working Group on 1 October 2024. Includes fee of £430,000 (2023: £443,000) in relation to his role as Chair of
HSBC North America Holdings, Inc.
5
Appointed as a member of the Group Audit Committee on 21 February 2024 and the Sustainability Working Group on 1 October 2024. Appointed as Senior
Independent Director on 3 May 2024.
6
Stepped down as a member of the Technology Governance Working Group on 1 March 2024. Appointed as a member of the Group Technology Committee on
1 March 2024.
7
Appointed as a member of the Group Technology Committee on 1 March 2024. Stepped down as a member of Group Risk Committee on 1 October 2024 and
joined the Group Remuneration Committee on 1 October 2024.
8
Stepped down as the Co-Chair of the Technology Governance Working Group Committee on 1 March 2024 and as the member of the Group Audit Committee
on 1 October 2024. Appointed as the Chair of the Group Technology Committee on 1 March 2024 and as a member of the Group Risk Committee on 1 October
2024.
9
Appointed as Chair of the Group Audit Committee on 21 February 2024. Appointed as member of the Group Technology Committee on 1 March 2024 and
Sustainability Working Group on 1 October 2024.
10 Retired from the Board at the conclusion of the 2024 AGM on 3 May 2024.
11 Appointed as member of the Group Technology Committee on 1 March 2024 and the Sustainability Working Group on 1 October 2024.
HSBC Holdings plc Annual Report and Accounts 2024
313
Corporate governance
Non-executive Directors’ interests in shares
(Audited)
The shareholdings of persons who were non-executive Directors in
2024, including the shareholdings of their connected persons, at
31 December 2024, or date of cessation as a Director if earlier, are
set out below. There have been no changes in the shareholdings of
the non-executive Directors from 31 December 2024 to the date of
this report.
Non-executive Directors are expected to meet the shareholding
guidelines of 15,000 shares within five years of the date of their
appointment. All non-executive Directors who had been appointed for
five years or more at 31 December 2024 met the guidelines.
Shares
Shareholding
guidelines (number
of shares)
Share interests
(number of shares)
Geraldine Buckingham
15,000
15,000
Rachel Duan
15,000
15,000
Dame Carolyn Fairbairn
15,000
15,000
James Forese
15,000
115,000
Ann Godbehere
15,000
15,000
Steven Guggenheimer
15,000
15,000
José Antonio Meade Kuribreña
15,000
15,000
Kalpana Morparia
15,000
15,000
Eileen Murray
15,000
75,000
Brendan Nelson
15,000
15,000
David Nish (retired on 3 May 2024)
15,000
50,000
Swee Lian Teo
15,000
15,200
Sir Mark Tucker
15,000
307,352
2025 fees for non-executive Directors
The table below sets out the 2025 fees for non-executive Directors. The fees paid to non-executive Directors who are standing for election or
re-election as members of Board Committees are set out in the table below (these Board Committees’ fees and Board fees are pro-rated for
part year service where relevant).
2025 fees
Position
£
Non-executive Group Chairman1
1,500,000
Non-executive Director (base fee)
136,500
Senior Independent Director
200,000
Group Risk Committee
Chair
150,000
Member
50,000
Group Audit Committee, Group Remuneration Committee and Group Technology Committee
Chair
125,000
Member
50,000
Nomination & Corporate Governance Committee
Chair
––
Member
34,650
Sustainability Working Group
Chair
60,000
Member
30,000
Designated workforce engagement non-executive Director
50,000
1
The Group Chairman does not receive a base fee or any other fee in respect of chairing of the Nomination & Corporate Governance Committee.
The Board has reviewed the fees payable to non-executive Directors in the context of changes to the organisational structure. Following this
review, the Board considered that the fees payable for chairing or being a member of a Board Committee (excluding the Nomination &
Corporate Governance Committee) should be increased to recognise the responsibilities and additional time commitment associated with such
a role. Overall, giving due consideration to the highly regulated and complex industry in which HSBC operates, the Board agreed to align the
additional fee payable for chairing a Board Committee at £150,000 per annum (i.e., in line with the current fee for chairing the Group Risk
Committee). The increase in the fee for chairing a Board Committee will be phased over two years, with an increase to £125,000 per annum for
2025, and a further increase to £150,000 per annum with effect from 1 January 2026.
The Board also agreed increases to the additional fee for being a member of a Board Committee, and for the role of designated non-executive
Director for workforce engagement, which were both increased to £50,000 per annum. These increases reflect the additional activity being
undertaken during this period of organisational and cultural change.
No other changes are proposed to non-executive Director fees for 2025.
Report of the Directors | Corporate governance report | Directors’ remuneration report
314
HSBC Holdings plc Annual Report and Accounts 2024
MRT remuneration disclosures
The following tables set out the remuneration disclosures for
individuals identified as MRTs for HSBC Holdings.
Remuneration information for individuals who are only identified as
MRTs at HSBC Bank plc, HSBC UK Bank plc or other solo-regulated
entity levels is included, where relevant, in those entities’ disclosures.
The 2024 variable pay information included in the following tables is
based on the market value of awards. For share awards, the market
value is based on HSBC Holdings’ share price at the date of grant
(unless indicated otherwise). For cash awards, it is the value of
awards expected to be paid to the individual over the deferral period.
Remuneration awarded for the financial year (REM1)
Supervisory
function
Management
function
Other senior
management
Other
identified
staff
Fixed
remuneration
Number of identified staff
13.0
2.0
18.9
1,260.6
Total fixed pay ($m)
7.1
7.4
45.0
703.8
– of which: cash-based ($m)1
7.1
3.6
45.0
703.8
– of which: shares or equivalent ownership interests ($m)2
—
3.8
—
—
– of which: share-linked instruments or equivalent non-cash instruments ($m)
—
—
—
—
– of which: other instruments ($m)
—
—
—
—
– of which: other forms ($m)
—
—
—
—
Variable
remuneration3
Number of identified staff
13.0
2.0
18.9
1,260.6
Total variable remuneration ($m)4
—
20.2
81.1
769.0
– of which: cash-based ($m)
—
2.1
36.8
387.8
– of which: deferred ($m)
—
0.6
16.3
179.7
– of which: shares or equivalent ownership interests ($m)2
—
18.1
44.3
367.6
– of which: deferred ($m)
—
16.7
31.3
209.5
– of which: share-linked instruments or equivalent non-cash instruments ($m)
—
—
—
9.3
– of which: deferred ($m)
—
—
—
5.1
– of which: other instruments ($m)
—
—
—
—
– of which: deferred ($m)
—
—
—
—
– of which: other forms ($m)
—
—
—
4.3
– of which: deferred ($m)
—
—
—
2.7
Total remuneration ($m)
7.1
27.6
126.1
1,472.8
1
Cash-based fixed remuneration is paid immediately.
2
Paid in HSBC shares. Vested shares are subject to a retention period of up to one year.
3
Variable pay awarded in respect of 2024. In accordance with shareholder approval received on 3 May 2024 (99% in favour), and where regulations permit, for
each MRT the variable component of remuneration for any one year is limited to ten times the fixed component of total remuneration, in line with the maximum
pay ratio approved by the Group Remuneration Committee. HSBC Holdings plc continues to provide approval for entities regulated by the European Banking
Authority to operate a maximum variable pay ratio of 200% of the fixed component of total remuneration for each MRT, where permitted to do so.
4
27 identified staff members were exempt from the application of the remuneration structure requirements for MRTs under the PRA and FCA remuneration rules.
Their total remuneration is $7.1m, of which $6.0m is fixed pay and $1.1m is variable remuneration.
Special payments to staff whose professional activities have a material impact on institutions’ risk profile (REM2)
Supervisory
function
Management
function
Other senior
management
Other
identified
staff
Guaranteed variable remuneration awards1
Number of identified staff
—
—
—
—
Total amount ($m)
—
—
—
—
– of which guaranteed variable remuneration awards paid during the financial year, that are not
taken into account in the bonus cap ($m)
—
—
—
—
Severance payments awarded in previous periods, that have been paid out during the financial year2
Number of identified staff
—
—
—
1.0
Total amount ($m)
—
—
—
3.4
Severance payments awarded during the financial year2
Number of identified staff
—
—
6.9
34.0
Total amount ($m)
—
—
7.5
42.6
– of which paid during the financial year ($m)
—
—
—
37.1
– of which deferred ($m)
—
—
—
—
– of which severance payments paid during the financial year, that are not taken into account in
the bonus cap ($m)
—
—
7.5
42.6
– of which highest payment that has been awarded to a single person ($m)
—
—
4.3
9.3
1
No guaranteed variable remuneration was awarded in 2024. HSBC would offer a guaranteed variable remuneration award in exceptional circumstances for new
hires, and for the first year of employment only. It would typically involve a critical new hire, and would also depend on factors such as the seniority of the
individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance year.
2
Includes payments such as payment in lieu of notice, statutory severance, outplacement service, legal fees, ex-gratia payments and settlements (excludes pre-
existing benefit entitlements triggered on terminations).
HSBC Holdings plc Annual Report and Accounts 2024
315
Corporate governance
Deferred remuneration at 31 December1 (REM3)
$m
Total amount
of deferred
remuneration
awarded for
previous
performance
periods
of which:
due to
vest in
the
financial
year
of which:
vesting in
subsequent
financial
years
Amount of
performance
adjustment
made in the
financial year
to deferred
remuneration
that was due
to vest in the
financial year
Amount of
performance
adjustment
made in the
financial year
to deferred
remuneration
that was due
to vest in
future
performance
years
Total
amount of
adjustment
during the
financial
year due to
ex post
implicit
adjustments
Total amount
of deferred
remuneration
awarded
before the
financial year
actually paid
out in the
financial year
Total amount
of deferred
remuneration
awarded for
previous
performance
period that
has vested
but is subject
to retention
periods
Supervisory function
—
—
—
—
—
—
—
—
Cash-based
—
—
—
—
—
—
—
—
Shares
—
—
—
—
—
—
—
—
Share-linked instruments
—
—
—
—
—
—
—
—
Other instruments
—
—
—
—
—
—
—
—
Other forms
—
—
—
—
—
—
—
—
Management function
58.9
4.1
54.8
(3.0)
—
11.5
4.2
2.7
Cash-based
6.5
1.3
5.2
—
—
—
1.3
—
Shares
52.4
2.8
49.6
(3.0)
—
11.5
2.9
2.7
Share-linked instruments
—
—
—
—
—
—
—
—
Other instruments
—
—
—
—
—
—
—
—
Other forms
—
—
—
—
—
—
—
—
Other senior management
195.8
17.9
177.9
(5.4)
—
29.6
18.2
7.5
Cash-based
65.7
8.2
57.5
—
—
—
8.3
—
Shares
130.1
9.7
120.4
(5.4)
—
29.6
9.9
7.5
Share-linked instruments
—
—
—
—
—
—
—
—
Other instruments
—
—
—
—
—
—
—
—
Other forms
—
—
—
—
—
—
—
—
Other identified staff
1,253.5
247.3
1,006.2
—
—
152.6
250.8
63.5
Cash-based
467.3
97.3
370.0
—
—
—
98.2
—
Shares
749.1
142.2
606.9
—
—
145.8
144.7
57.8
Share-linked instruments
31.9
6.4
25.5
—
—
6.3
6.5
4.4
Other instruments
—
—
—
—
—
—
—
—
Other forms
5.2
1.4
3.8
—
—
0.5
1.4
1.3
Total amount
1,508.2
269.3
1,238.9
(8.4)
—
193.7
273.2
73.7
1
This table provides details of balances and movements during performance year 2024. For details of variable pay awards granted for 2024, refer to the
’Remuneration awarded for the financial year’ table. Deferred remuneration is made in cash and/or shares. Share-based awards are made in HSBC shares.
Identified staff - remuneration by band1 (REM4)
Identified staff that are high
earners as set out in Article
450(i) CRR
€1,000,000 – 1,500,000
257
€1,500,000 – 2,000,000
118
€2,000,000 – 2,500,000
48
€2,500,000 – 3,000,000
35
€3,000,000 – 3,500,000
13
€3,500,000 – 4,000,000
8
€4,000,000 – 4,500,000
7
€4,500,000 – 5,000,000
10
€5,000,000 – 6,000,000
7
€6,000,000 – 7,000,000
6
€7,000,000 – 8,000,000
1
€8,000,000 – 9,000,000
1
€9,000,000 – 10,000,000
1
€10,000,000 – 11,000,000
3
€11,000,000 – 12,000,000
—
€12,000,000 – 13,000,000
—
€13,000,000 – 14,000,000
—
€14,000,000 – 15,000,000
—
€15,000,000 – 16,000,000
1
€16,000,000 – 17,000,000
—
€17,000,000 – 18,000,000
—
€18,000,000 – 19,000,000
—
€19,000,000 – 20,000,000
1
1
Table prepared in euros in accordance with Article 450 of the European Union Capital Requirements Regulation, using the exchange rates published by the
European Commission for financial programming and budget for December of the reported year as published on its website.
Report of the Directors | Corporate governance report | Directors’ remuneration report
316
HSBC Holdings plc Annual Report and Accounts 2024
Information on remuneration of staff whose professional activities have a material impact on institutions’ risk profile (REM5)
Management body
Business areas
Total
Supervisory
function
Management
function
Total
Investment
banking
Retail
banking
Asset
management
Corporate
function
Independent
internal
control
function
All
other
Total number of
identified staff
1,294.5
– of which members of
the Board
13.0
2.0
15.0
– of which senior
management
2.0
2.0
—
6.9
2.0
6.0
– of which other
identified staff
532.9
289.6
29.0
165.0
183.5
60.6
Total remuneration of
identified staff ($m)
7.1
27.6 34.7
721.4
329.7
38.8
220.8
149.0 139.2
– of which variable
remuneration ($m)1
—
20.2 20.2
394.6
167.6
20.6
112.9
69.6 84.8
– of which fixed
remuneration ($m)
7.1
7.4 14.5
326.8
162.1
18.2
107.9
79.4 54.4
1
Variable pay awarded in respect of 2024. In accordance with shareholder approval received on 3 May 2024 (99% in favour), and where regulations permit, for
each MRT the variable component of remuneration for any one year is limited to ten times the fixed component of total remuneration, in line with the maximum
pay ratio approved by the Group Remuneration Committee. HSBC Holdings plc continues to provide approval for entities regulated by the European Banking
Authority to operate a maximum variable pay ratio of 200% of the fixed component of total remuneration for each MRT, where permitted to do so.
Share plan matters considered by the Group Remuneration Committee
The Group Remuneration Committee and its delegates considered
various matters relating to the HSBC share plans during the financial
year.
The HSBC International Employee Share Purchase Plan
(‘ShareMatch’) and The HSBC Holdings Savings-Related Share Option
Plan (UK) (‘Sharesave’) were offered in 2024. The HSBC variable pay
deferral approach for the 2024 performance year was approved, for
which certain minor updates were made to comply with legal and
regulatory requirements. The Directors Remuneration Policy was
approved and will be available for shareholders to vote on at the 2025
AGM. Other awards with performance conditions were approved for
certain strategically important projects during 2024.
Certain awards were granted to executive Directors or senior
managers with vesting periods of less than 12 months:
–
Fixed pay allowance awards were granted to executive Directors
in accordance with the approved Directors’ remuneration policy,
which vest immediately and are subject to a retention period.
These awards are not subject to clawback on the basis that they
form part of the executive Directors’ fixed pay. The awards were
granted under the HSBC Share Plan 2011.
–
Immediate share awards were granted to executive Directors and
senior managers in compliance with our regulatory requirements
to deliver a portion of non-deferred variable pay in instruments.
These awards vest immediately, and are subject to a retention
period and clawback provisions.
HSBC Holdings plc Annual Report and Accounts 2024
317
Corporate governance
Share capital and other related
governance disclosures
Share buy-backs
On 1 November 2023, HSBC Holdings commenced a further share
buy-back of its ordinary shares of up to a maximum consideration of
$3.0bn. The share buy-back continued in 2024 and was concluded on
16 February 2024, with 64,733,089 ordinary shares repurchased for
cancellation on UK trading venues and 79,414,800 ordinary shares
repurchased for cancellation on The Stock Exchange of Hong Kong
Limited (’HKEx’) from 1 January 2024 to 16 February 2024.
On 23 February 2024, HSBC Holdings commenced a further share
buy-back of its ordinary shares of up to a maximum consideration of
$2.0bn. This share buy-back concluded on 23 April 2024 with
127,570,463 ordinary shares repurchased for cancellation on UK
trading venues and 127,412,800 ordinary shares repurchased for
cancellation on HKEx.
On 8 May 2024, HSBC Holdings commenced a further share buy-back
of its ordinary shares of up to a maximum consideration of $3.0bn.
This share buy-back concluded on 26 July 2024 with 171,668,799
ordinary shares repurchased for cancellation on UK trading venues
and 171,252,800 ordinary shares repurchased for cancellation on
HKEx.
On 2 August 2024, HSBC Holdings commenced a further share buy-
back of its ordinary shares of up to a maximum consideration of
$3.0bn. This share buy-back concluded on 25 October 2024 with
172,311,192 ordinary shares repurchased for cancellation on UK
trading venues and 173,041,600 ordinary shares repurchased for
cancellation on HKEx.
On 31 October 2024, HSBC Holdings commenced a further share
buy-back of its ordinary shares of up to a maximum consideration of
$3.0bn. As at 31 December 2024, 132,349,029 ordinary shares had
been repurchased for cancellation on UK trading venues and
82,502,400 ordinary shares had been repurchased for cancellation on
HKEx.
The purpose of the share buy-backs was to reduce HSBC’s number of
outstanding ordinary shares.
As at 31 December 2024, the total number of ordinary shares
repurchased during the year was 1,302,256,972, representing a
nominal value of $651,128,486 and an aggregate consideration paid
by HSBC of £4,477,248,660 on UK trading venues and
HK$41,961,808,443 on HKEx. The ordinary shares repurchased
represent 7.256% of the ordinary shares in issue as at 31 December
2024. Of the repurchased ordinary shares, 20,433,459 were awaiting
cancellation as at 31 December 2024.
The table that follows outlines details of the ordinary shares
purchased and cancelled on a monthly basis during 2024.
Share buy-back - UK venues
Number of shares
repurchased
Highest price
paid per share
Lowest price
paid per share
Average price
paid per share
Aggregate
price paid
£
£
£
£
Jan 2024
64,733,089
6.4300
5.8190
6.1356
397,174,665
Feb 2024
17,761,890
6.2050
5.9270
6.0468
107,403,375
Mar 2024
59,048,017
6.2810
5.7290
6.0295
356,031,979
Apr 2024
50,760,556
6.6960
6.1950
6.4603
327,930,581
May 2024
59,069,838
7.2440
6.8240
6.9678
411,587,427
Jun 2024
76,307,014
7.0080
6.7040
6.8620
523,621,847
Jul 2024
36,291,947
6.9330
6.6350
6.7829
246,165,955
Aug 2024
51,180,681
6.6810
6.1090
6.4796
331,631,735
Sep 2024
78,450,902
6.8340
6.4550
6.6528
521,919,215
Oct 2024
46,324,540
7.1490
6.5930
6.8097
315,457,983
Nov 2024
86,259,230
7.3510
6.8880
7.1500
616,752,033
Dec 2024
42,444,868
7.8500
7.3080
7.5762
321,571,865
Total
668,632,572
4,477,248,660
Share buy-back - Hong Kong venues
Number of shares
repurchased
Highest price
paid per share
Lowest price
paid per share
Average price
paid per share
Aggregate
price paid
(HK$)
(HK$)
(HK$)
(HK$)
Jan 2024
57,819,600
63.8000
57.8500
61.0549
3,530,172,280
Feb 2024
33,790,800
62.4500
58.8500
60.8394
2,055,810,581
Mar 2024
63,110,400
61.9500
58.1000
60.1891
3,798,555,480
Apr 2024
52,106,800
64.9500
61.1000
63.0989
3,287,883,380
May 2024
53,104,800
70.6500
67.5000
68.7465
3,650,768,500
Jun 2024
65,043,200
69.7500
67.0500
68.2592
4,439,796,237
Jul 2024
53,104,800
69.2500
65.9000
67.3965
3,579,076,860
Aug 2024
64,395,200
68.9000
61.1500
65.5441
4,220,726,180
Sep 2024
64,664,000
70.9500
65.7500
68.4382
4,425,485,800
Oct 2024
47,667,200
72.3000
67.3500
69.1996
3,298,553,120
Nov 2024
58,186,800
72.5500
68.8500
71.1225
4,138,390,665
Dec 2024
20,630,800
75.9500
72.3500
74.4804
1,536,589,360
Total
633,624,400
41,961,808,443
Report of the Directors | Corporate governance report
318
HSBC Holdings plc Annual Report and Accounts 2024
Dividends
Dividends for 2024
First, second and third interim dividends for 2024, each of $0.10 per
ordinary share, were paid on 21 June 2024, 27 September 2024 and
19 December 2024. A special dividend of $0.21 was paid on 21 June
2024. For further details of the dividends approved in 2024, see Note
8 on the financial statements.
On 19 February 2025, the Directors approved a fourth interim
dividend for 2024 of $0.36 per ordinary share, making a total of $0.87
for the 2024 full-year when including the $0.21 special dividend. The
fourth interim dividend for 2024 will be payable on 25 April 2025 in
cash in US dollars, or in sterling or Hong Kong dollars at exchange
rates to be determined on 14 April 2025. The fourth interim dividend
for 2024 of $1.80 per American Depositary Share, each of which
represents five ordinary shares, will be payable by the depositary in
US dollars. No liability was recorded in the financial statements in
respect of the fourth interim dividend for 2024.
A quarterly dividend of £0.01 per non-cumulative preference share of
£0.01 each was paid on 15 March, 17 June, 16 September and
16 December 2024.
Dividends for 2025
The Group intends to pay quarterly dividends on its ordinary shares
during 2025.
A quarterly dividend of £0.01 per non-cumulative preference share of
£0.01 each is payable on 17 March, 16 June, 15 September and
15 December 2025 for the quarter then ended at the sole and
absolute discretion of the Board of HSBC Holdings plc. Accordingly,
the Board of HSBC Holdings plc has approved a quarterly dividend to
be payable on the non-cumulative preference share on 17 March 2025
to holders of record on 28 February 2025.
Distributable Reserves
As at 31 December 2024, the distributable reserves of HSBC
Holdings were $28.3bn, inclusive of $24.8bn in profits and other
reserves movements generated in 2024. As at the date of this report,
HSBC Holdings intends to increase its distributable reserves subject
to shareholder and court approval. Shareholder approval will be
sought at the 2025 AGM. The process will involve the conversion of
the amount standing to the credit of each of the share premium
account ($14.8bn) and capital redemption reserve ($1.8bn) as at
31 December 2024 into retained earnings, and will have no impact on
regulatory capital. Further information will be included in the Notice of
the 2025 AGM which will be circulated to shareholders on 21 March
2025. The process is expected to complete by the end of July 2025.
Share capital
Issued share capital
The nominal value of HSBC Holdings’ issued share capital paid up at
31 December 2024 was $8,973,475,291 divided into 17,946,950,582
ordinary shares of $0.50 each and one non-cumulative preference
share of £0.01, representing approximately 100.00% and 0.00%
respectively of the nominal value of HSBC Holdings’ total issued
share capital paid up at 31 December 2024.
Rights, obligations and restrictions
attaching to shares
The rights and obligations attaching to each class of ordinary and non-
cumulative preference shares in our share capital are set out in full in
our Articles of Association. The Articles of Association may be
amended by special resolution of the shareholders and can be found
on our website at www.hsbc.com/who-we-are/our-people/board-of-
directors/board-responsibilities.
Ordinary shares
HSBC Holdings has one class of ordinary share, which carries no right
to fixed income. There are no voting restrictions on the issued
ordinary shares, all of which are fully paid. On a show of hands, each
member present has the right to one vote at general meetings. On a
poll, each member present or voting by proxy is entitled to one vote
for every $0.50 nominal value of share capital held.
There are no specific restrictions on transfers of ordinary shares,
which are governed by the general provisions of the Articles of
Association and prevailing legislation.
Information on the policy adopted by the Board for paying interim dividends
on the ordinary shares may be found in the ’Shareholder information’
section on page 439.
Dividend waivers
The Group’s employee benefit trusts, which hold shares in HSBC
Holdings in connection with the operation of its share plans, have
lodged standing instructions to waive dividends on shares held by
them that have not been allocated to employees. Shares held by
custodians in connection with the vesting of employee share awards
also lodged instructions to waive dividends. The total amount of
dividends waived during 2024 was $28.85m.
Preference shares
The preference shares, which have preferential rights to income and
capital, do not, in general, confer a right to attend and vote at general
meetings.
There are three classes of preference shares in the share capital of
HSBC Holdings: non-cumulative US dollar preference shares of $0.01
each (‘dollar preference shares’); non-cumulative preference shares of
£0.01 each (‘sterling preference shares’); and non-cumulative
preference shares of €0.01 (‘euro preference shares’).
The sterling preference share in issue is a Series A sterling preference
share. There are no dollar preference shares or euro preference
shares in issue.
Information on dividends approved for 2023 and 2024 may be found in
Note 8 on the financial statements.
Further details of the rights and obligations attaching to the HSBC Holdings’
issued share capital may be found in Note 32 on the financial statements.
Compliance with Hong Kong Listing
Rule 13.25A(2)
HSBC Holdings has been granted a waiver from strict compliance
with Rule 13.25A(2) of the Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited.
Under this waiver, HSBC’s obligation to file a Next Day Return
following the issue of new shares, pursuant to the vesting of share
awards granted under its share plans to persons who are not
Directors, would only be triggered where it falls within one of the
circumstances set out under Rule 13.25A(3).
Share capital changes in 2024
In addition to the share buy-backs, the following events occurred
during the year in relation to the ordinary share capital of HSBC
Holdings:
Scrip dividends
There were no scrip dividends issued during the year.
Treasury shares
HSBC Holdings does not hold any ordinary shares in treasury.
HSBC Holdings plc Annual Report and Accounts 2024
319
Corporate governance
All-employee share plans1
HSBC Holdings
ordinary shares issued
Aggregate
nominal value
Market value per share
from
to
$
£
£
HSBC International Employee Share Purchase Plan
141,770
70,885
5.957
6.707
1
In respect of the HSBC Holdings Savings Related Share Option Plan (UK), no new shares were issued under this plan. All exercises were satisfied by market
purchased shares. See page 326 for details of options granted, exercised and lapsed.
HSBC share plans
HSBC Holdings
ordinary shares issued
Aggregate
nominal value
Market value per share
from
to
$
£
£
Vesting of awards under the HSBC Share Plan 2011
10,141,660
5,070,830
5.799
7.177
Authorities to allot and to purchase
shares and pre-emption rights
At the AGM in 2024, shareholders renewed the general authority for
the Directors to allot new shares up to 12,700,701,506 ordinary
shares, 15,000,000 non-cumulative preference shares of £0.01 each,
15,000,000 non-cumulative preference shares of $0.01 each,
15,000,000 non-cumulative preference shares of €0.01 each.
Shareholders also renewed the authority for the Directors to make
market/off-market purchases of up to 1,905,105,226 ordinary shares.
The Directors exercised their market/off-market purchase authority
from both the 2023 AGM and the 2024 AGM and repurchased
1,302,256,972 ordinary shares during the year.
In addition, shareholders gave authority for the Directors to grant
rights to subscribe for, or to convert any security into, no more than
3,810,210,452 ordinary shares in relation to any issue by HSBC
Holdings, or any member of the Group, of contingent convertible
securities that automatically convert into or are exchanged for
ordinary shares in HSBC Holdings in prescribed circumstances. For
further details on the issue of contingent convertible securities, see
Note 32 on the financial statements.
Other than as disclosed in the tables above headed ‘Share capital
changes in 2024’, the Directors did not allot any shares during 2024.
Debt securities
In 2024, HSBC Holdings issued the equivalent of $24.0bn of debt
securities in the public capital markets in a range of currencies and
maturities, of which $16.1bn were in the form of senior securities to
ensure it meets the current and proposed regulatory rules, including
those relating to the availability of adequate total loss-absorbing
capacity. For details of capital instruments and subordinated bail-
inable debt, see Notes 29 and 32 on pages 416 and 423.
Treasury shares
HSBC Holdings does not hold any ordinary shares in treasury.
Notifiable interests in share capital
During 2024, HSBC Holdings did not receive any notification of major
holdings of voting rights pursuant to the requirements of Rule 5 of the
Disclosure Guidance and Transparency Rules (’Rule 5 of the DTRs’).
No notifications had been received between 31 December 2024 and
14 February 2025. Previous notifications received are as follows:
–
BlackRock, Inc. gave notice on 3 March 2020 that on 2 March
2020 it had the following: an indirect interest in HSBC Holdings
ordinary shares of 1,235,558,490; qualifying financial instruments
with 7,294,459 voting rights that may be acquired if the
instruments are exercised or converted; and financial instruments
with a similar economic effect to qualifying financial instruments,
which refer to 2,441,397 voting rights, representing 6.07%, 0.03%
and 0.01%, respectively, of the total voting rights at 2 March 2020.
–
Ping An Asset Management Co., Ltd. gave notice on 6 December
2017 that on 4 December 2017 it had an indirect interest in HSBC
Holdings ordinary shares of 1,007,946,172, representing 5.04% of
the total voting rights at that date.
At 31 December 2024, according to the register maintained by HSBC
Holdings pursuant to section 336 of the Securities and Futures
Ordinance of Hong Kong:
–
BlackRock, Inc. gave notice on 24 December 2024 that on
19 December 2024 it had the following interests in HSBC Holdings
ordinary shares: a long position of 1,615,527,141 shares and a
short position of 4,231,678 shares, representing 8.99% and
0.02%, respectively, of the ordinary shares in issue at that date.
–
Ping An Asset Management Co., Ltd. gave notice on 10 May 2024
that on 7 May 2024 it had a long position of 1,502,584,731 in
HSBC Holdings ordinary shares, representing 7.98% of the
ordinary shares in issue at that date.
Between 31 December 2024 and 14 February 2025, the following
notification was received:
–
BlackRock, Inc. gave notice on 31 January 2025 that on 28 January
2025 it had the following interests in HSBC Holdings ordinary
shares: a long position of 1,601,449,305 shares and a short
position of 5,961,010 shares, representing 8.97% and 0.03%,
respectively, of the ordinary shares in issue at that date.
Sufficiency of float
In compliance with the Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited, at least 25% of the total
issued share capital has been held by the public at all times during
2024 and up to the date of this report.
Dealings in HSBC Holdings listed
securities
The Group has policies and procedures that, except where permitted
by statute and regulation, prohibit specified transactions in respect of
its securities listed on The Stock Exchange of Hong Kong Limited.
Except for dealings as intermediaries or as trustees by subsidiaries of
HSBC Holdings, and purchases by HSBC Holdings under the share
buy-backs, neither HSBC Holdings nor any of its subsidiaries has
purchased, sold or redeemed any of its securities listed on The Stock
Exchange of Hong Kong Limited during the year ended 31 December
2024.
Directors’ interests
Pursuant to the requirements of the UK Listing Rules and according to the
register of Directors’ interests maintained by HSBC Holdings pursuant to
section 352 of the Securities and Futures Ordinance of Hong Kong, the
Directors of HSBC Holdings at 31 December 2024 had certain interests,
all beneficial unless otherwise stated, in the shares or debentures of
HSBC Holdings and its associated corporations.
Save as stated in the following table, no further interests were held
by Directors, and no Directors or their connected persons were
awarded or exercised any right to subscribe for any shares or
debentures in any HSBC corporation during the year.
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HSBC Holdings plc Annual Report and Accounts 2024
No Directors held any short position as defined in the Securities and Futures Ordinance of Hong Kong in the shares or debentures of HSBC
Holdings and its associated corporations.
Directors’ interests – shares and debentures
At 31 Dec 2024 or date of cessation, if earlier
At 1 Jan 2024, or
date of
appointment,
if later
Beneficial
owner
Child
under 18
or spouse
Jointly
with
spouse/
other
Trustee
Total
interests
HSBC Holdings ordinary shares
Geraldine Buckingham1
15,000
15,000
15,000
Rachel Duan1
15,000
15,000
15,000
Georges Elhedery2
753,467
966,017
966,017
Dame Carolyn Fairbairn
15,000
15,000
15,000
James Forese1
115,000
115,000
115,000
Ann Godbehere1
15,000
15,000
15,000
Steven Guggenheimer1
15,000
15,000
15,000
José Antonio Meade Kuribreña1
15,000
15,000
15,000
Kalpana Morparia1
15,000
15,000
15,000
Eileen Murray1
75,000
75,000
75,000
Brendan Nelson
—
15,000
15,000
David Nish (retired on 3 May 2024)
50,000
50,000
50,000
Sir Noel Quinn2 (retired on 2 September 2024)
1,721,465
2,046,949
2,046,949
Swee Lian Teo
15,200
15,200
15,200
Sir Mark Tucker
307,352
307,352
307,352
1
Geraldine Buckingham has an interest in 3,000, Rachel Duan in 3,000, James Forese in 23,000, Ann Godbehere in 3,000, Steven Guggenheimer in 3,000, José
Antonio Meade Kuribreña in 3,000, Kalpana Morparia in 3,000 and Eileen Murray in 15,000 listed American Depositary Shares (’ADS’), which are categorised as
equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.
2
Executive Directors’ other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC
Share Plan 2011 are set out in the Scheme interests in the Directors’ remuneration report on page 279. At 31 December 2024, or date of cessation if earlier, the
aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee
share plans and the interests above were: Sir Noel Quinn – 5,736,459; and Georges Elhedery – 2,616,836, representing approximately 0.03% and 0.015% of the
shares in issue respectively.
There have been no changes in the shares or debentures of the current Directors from 31 December 2024 to the date of this report.
UK Listing Rule 6.6.1 and other
disclosures
The disclosures required by UKLR 6.6.1, and other regulations, are set
out on the following pages:
Content
Page references
Long-term incentives
298
Dividends and Dividend waivers
319
Share buy-back
318
Emissions
42
Energy Efficiency
42, 45-46
Principal activities of HSBC
11, 30, 96-97, 405
Business review and future developments
11-40, 41, 128, 136, 430
Risk Review
37-39, 128-235
Engagement with suppliers, customers and
others
20-21
Board governance
Appointment and re-election of
Directors
A rigorous selection process is followed for the appointment of
Directors. Appointments are made on merit and candidates are
considered against objective criteria, and with regard to the benefits
of a diverse Board. Appointments are made in accordance with HSBC
Holdings’ Articles of Association.
The Board may at any time appoint any person as a Director or
secretary, either to fill a vacancy or as an additional officer. The Board
may appoint any Director or secretary to hold any employment or
executive office and may revoke or terminate any such appointment.
Non-executive Directors are appointed for an initial three-year term
and, subject to continued satisfactory performance based upon an
assessment by the Group Chairman and the Nomination & Corporate
Governance Committee, are proposed for re-election by shareholders
at each AGM. They typically serve two three-year terms, with any
individual’s appointment beyond six years to be for a rolling one-year
term and subject to thorough review and challenge with reference to
the needs of the Board. Where non-executive Directors are appointed
beyond six years, an explanation will be provided in the Annual Report
and Accounts.
Shareholders vote at each AGM on whether to elect and re-elect
individual Directors. All Directors that stood for election and re-
election at the 2024 AGM were elected and re-elected by
shareholders.
Joint Company Secretary
Aileen Taylor is the Group Company Secretary and Group Chief
People & Governance Officer.
Hannah Ashdown (48) was appointed as Deputy Group Secretary in
December 2021 and for administrative purposes, in October 2022, was
appointed as Joint Company Secretary. She is a Fellow of the Chartered
Governance Institute UK and Ireland. Hannah has over 20 years’
governance and regulatory experience across multiple sectors including
financial services, asset management, energy, leisure and retail.
Independence
Independence is a critical component of good corporate governance,
and a principle that is applied consistently at both the HSBC Holdings
and subsidiary level. The Group Nomination & Corporate Governance
Committee has delegated authority from the Board in relation to the
assessment of the independence of non-executive Directors. In
accordance with the UK and Hong Kong Corporate Governance
Codes, the Group Nomination & Corporate Governance Committee
has reviewed and confirmed that all non-executive Directors who
have submitted themselves for election and re-election at the AGM
are considered to be independent. This conclusion was reached after
consideration of all relevant circumstances that are likely to impair, or
could appear to impair, independence.
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321
Corporate governance
In line with the requirements of the Hong Kong Corporate
Governance Code, the Group Nomination & Corporate Governance
Committee also reviewed and considered the mechanisms in place to
ensure independent views and inputs are available to the Board.
These mechanisms include:
–
having the appropriate Board and committee structure in place,
including rules on the appointment and tenure of non-executive
Directors;
–
facilitating the option of having brokers and external industry
experts in attendance at Board meetings during 2024, as well as
having representatives from the Group’s key regulators attend
Board meetings in relation to specific regulatory items;
–
ensuring non-executive Directors are entitled to obtain
independent professional advice relating to their personal
responsibilities as a Director at the Group’s expense;
–
having terms of reference for each committee and the Board that
provide authority to engage independent professional advisers;
and
–
holding annual Board and committee performance reviews, with
feedback sought from members on the quality of, and access to,
independent external advice.
Conflicts of interest
The Board has an established policy and set of procedures, which are
reviewed annually, to ensure that the Board’s management of
Directors’ conflicts of interest is effective. The Board has the power
to authorise conflicts where they arise, in accordance with the
Companies Act 2006 and HSBC Holdings’ Articles of Association.
Details of all Directors’ conflicts of interest are recorded in the
register of conflicts. Upon appointment, new Directors are advised of
the policy and procedures for managing conflicts. Directors are
required to notify the Board of any actual or potential conflicts of
interest and to update the Board with any changes to the facts and
circumstances surrounding such conflicts. Directors are requested to
review and confirm their own and their respective closely associated
persons’ outside interests and appointments twice each year. The
Board has considered, and authorised (with or without conditions)
where appropriate, potential conflicts as they have arisen during the
year in accordance with its conflicts policy and procedures. All non-
executive Directors are subject to re-vetting by the Group’s
compliance team on a triennial basis following appointment. As part
of this re-vetting process, all conflict checks are refreshed.
Non-executive Director commitments
The terms and conditions of the appointments of non-executive
Directors are set out in a letter of appointment, which includes the
expectations of them, and the estimated time required to perform
their role. Letters of appointment of each non-executive Director are
available for inspection at the registered office of HSBC Holdings.
Non-executive Directors serving on the Board and as a member of
any committees are expected to serve up to 75 days per annum. The
Senior Independent Director is expected to serve an additional 30
days per annum. Those Directors who also chair a large committee
are expected to commit up to 100 days per annum, with the Group
Risk Committee Chair expected to commit up to 150 days per annum.
Any additional time commitment required of non-executive Directors
in connection with Board and committee activities is confirmed to
them separately.
Board approval is required for any non-executive Director’s external
commitments, with consideration given to their total time
commitments, potential conflicts of interest, and regulatory and
investor expectations.
Directors’ indemnities
The Articles of Association of HSBC Holdings contain a qualifying
third-party indemnity provision, which entitles Directors and other
officers to be indemnified out of the assets of HSBC Holdings against
claims from third parties in respect of certain liabilities.
HSBC Holdings has granted, by way of deed poll, indemnities to the
Directors, including former Directors, against certain liabilities arising
in connection with their position as a Director of HSBC Holdings or of
any Group company. Directors are indemnified to the maximum
extent permitted by law.
The indemnities that constitute a ’qualifying third-party indemnity
provision’, as defined by section 234 of the Companies Act 2006,
remained in force for the whole of the financial year (or, in the case of
Directors appointed during 2024, from the date of their appointment).
The deed poll is available for inspection at the registered office of
HSBC Holdings.
Additionally, Directors and pension trustees have the benefit of both
Directors’ and officers’ liability insurance and pension trustees’ liability
insurance. Qualifying pension scheme indemnities have also been
granted to the trustees of the Group’s pension schemes, which were
in force for the whole of the financial year and remain in force as at
the date of this report.
Contracts of significance
During 2024, none of the Directors had a material interest, directly or
indirectly, in any contract of significance with any HSBC company.
During the year, all Directors were reminded of their obligations in
respect of transacting in HSBC securities and, following specific
enquiry, all Directors have confirmed that they have complied with
their obligations.
Shareholder engagement and
communication
The Board is directly accountable to, and gives high priority to
communicating with, HSBC’s shareholders. Information about HSBC
and its activities is provided to shareholders in its Interim Reports and
the Annual Report and Accounts as well as on www.hsbc.com.
The Board seeks to understand investor needs through ongoing
dialogue between members of the Board and institutional investors
throughout the year. For examples of such engagement, see
’Directors’ engagements with key stakeholders in 2024’ on page 21
and the Group Remuneration Committee Chair’s letter on page 279.
During 2024, approximately 612 meetings were held with institutional
investors and analysts globally.
Our shareholder communications policy summarises how we
communicate with our shareholders, including through financial
reporting, general shareholder meetings, investor and analyst meetings
and our website. The policy is reviewed annually by the Board, and in
2024 the Board confirmed that it was satisfied with its implementation
and effectiveness. The policy can be found at www.hsbc.com/who-we-
are/our-people/board-of-directors/board-responsibilities.
We also publish our current and past financial results, investor
presentations and shareholder information such as dividend payments
and shareholder meeting details. Stock exchange announcements are
also accessible on our website along with information for fixed
income investors. For further details, see www.hsbc.com/investors.
Directors are encouraged to develop an understanding of the views of
shareholders. Enquiries from individuals on matters relating to their
shareholdings and HSBC’s business are welcomed. Any individual or
institutional investor can make an enquiry by contacting the investor
relations team, Group Chairman, Group CEO, Group CFO and Group
Company Secretary and Chief Governance Officer. Our Senior
Independent Director is also available to shareholders if they have
concerns that cannot be resolved or for which the normal channels
would not be appropriate. They can be contacted via the Group
Company Secretary and Chief Governance Officer at 8 Canada
Square, London E14 5HQ.
Annual General Meeting
The AGM in 2025 is planned to be held in London, UK at 10:00am on
Friday, 2 May 2025. Information on how to vote and participate, both
in advance and on the day, can be found in the Notice of the 2025
AGM, which will be sent to shareholders on 21 March 2025 and be
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322
HSBC Holdings plc Annual Report and Accounts 2024
available on www.hsbc.com/agm. A live webcast will be available on
www.hsbc.com/agm. A recording of the proceedings will be available
on www.hsbc.com/agm shortly after the conclusion of the AGM.
Shareholders should monitor our website and announcements for any
changes to these arrangements. Shareholders may send enquiries to
the Board in writing via Company Secretary, HSBC Holdings plc,
8 Canada Square, London E14 5HQ or by sending an email to
shareholderquestions@hsbc.com.
General meetings and resolutions
Shareholders may require the Directors to call a general meeting
other than an AGM, as provided by the UK Companies Act 2006. A
valid request to call a general meeting may be made by members
representing at least 5% of the paid-up capital of HSBC Holdings as
carries the right of voting at its general meetings (excluding any paid-
up capital held as treasury shares). A request must state the general
nature of the business to be dealt with at the meeting and may
include the text of a resolution that may properly be moved and is
intended to be moved at the meeting. At any general meeting
convened on such request, no business may be transacted except
that stated by the requisition or proposed by the Board.
Shareholders may request the Directors to send a resolution to
shareholders for consideration at an AGM, as provided by the UK
Companies Act 2006. A valid request must be made by
(i) members representing at least 5% of the paid-up capital of HSBC
Holdings as carries the right of voting at its general meetings
(excluding any paid-up capital held as treasury shares), or (ii) at least
100 members who have a right to vote on the resolution at the AGM
in question and hold shares in HSBC Holdings on which there has
been paid up an average sum, per member, of at least £100.
The request must be received by HSBC Holdings not later than (i) six
weeks before the AGM in question; or (ii) if later, the time at which
the notice of AGM is published.
A request may be in hard copy form or in electronic form, and must
be authenticated by the person or persons making it. A request may
be made in writing to HSBC Holdings at its UK address, referred to in
the paragraph above or by sending an email to
shareholderquestions@hsbc.com.
Articles of Association
The Articles of Association were last approved at the 2022 AGM. The
Articles of Association can be found at www.hsbc.com/who-we-are/
our-people/board-of-directors/board-responsibilities.
Events after the balance sheet date
For details of events after the balance sheet date, see Note 37 on the
financial statements.
Change of control
The Group is not party to any significant agreements that take effect,
alter or terminate following a change of control of the Group. The
Group does not have agreements with any Director or employee that
would provide compensation for loss of office or employment
resulting from a takeover bid.
Branches
The Group provides a wide range of banking and financial services
through branches and offices in the UK and overseas.
Research and development activities
During the ordinary course of business, the Group develops new
products and services within the global businesses.
Political donations
HSBC does not make any political donations or incur political
expenditure within the ordinary meaning of those words. We have no
intention of altering this policy. However, the definitions of political
donations, political parties, political organisations and political
expenditure used in the UK Companies Act 2006 are very wide. As a
result, they may cover routine activities that form part of the normal
business activities of the Group and are an accepted part of engaging
with stakeholders. To ensure that neither the Group nor any of its
subsidiaries inadvertently breaches the UK Companies Act 2006,
authority is sought from shareholders at the AGM to make political
donations.
HSBC provides administrative support to two political action
committees (’PACs’) in the US funded by voluntary political
contributions by eligible employees. We do not control the PACs, and
all decisions regarding the amounts and recipients of contributions are
directed by a voluntary Board Finance Committee, which consists of
contributing eligible employees. The PACs recorded combined
political donations of $124,450 during 2024 (2023: $110,004).
Charitable contributions
For details of charitable contributions, see page 72.
Internal control
The Board is responsible for monitoring the Group’s risk management
and internal control systems, determining the level and type of risks
the Group is willing to take in achieving its strategic objectives, and
reviewing the effectiveness of these procedures on an annual basis.
To meet this requirement and to discharge its obligations under the
FCA Handbook and the PRA Rulebook, procedures have been
designed to provide reasonable assurance against material
misstatement, errors, losses or fraud. They are designed to provide
effective internal control within the Group and accord with the
Financial Reporting Council‘s guidance for Directors, issued in 2014,
on risk management, internal control and related financial and
business reporting. The procedures have been in place throughout the
year and up to 19 February 2025, the date of publication of the Annual
Report and Accounts 2024.
The Board, the GRC and the GAC monitored the effectiveness of the
Group’s system of risk management and internal control during the
year through regular updates on the operation of the Group's internal
controls, supplemented by reviews of these controls by the second
line of defence and internal audit, and the external auditors. In
particular, this focused on the Group’s regulatory remediation and
change programmes, and involved working closely with management
to better prioritise and understand where there are key
interdependencies. These reviews enabled to the Board to perform an
annual review of effectiveness, identifying no material weaknesses as
at the year-end. To support the work of the Board, the GRC and the
GAC in discharging their responsibilities in this regard, assurance was
also provided by executive management confirming that a risk
assessment had been undertaken and controls were in place to
mitigate the risks arising from the Group’s key activities. Necessary
actions will be taken to remedy any failings or weaknesses identified
from these activities on an ongoing basis.
In 2025, continued focus will be placed on the quality and timeliness
of data used to inform management decisions and support oversight
of emerging risks and potential risks arising from new products and
offerings. In preparation for the Board’s forthcoming responsibility
under the 2024 UK Corporate Governance Code, the Board approved
changes to the scope of the GAC’s responsibilities in relation to
internal controls to extend these to cover all internal controls and,
once defined, all material controls including financial, operational,
reporting and compliance controls.
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323
Corporate governance
The key risk management and internal control procedures include the
following:
The HSBC Book
In 2024, the HSBC Book replaced the Global Principles document and
is situated at the top of the HSBC document hierarchy. It underpins
the key principles, policies and procedures that are fundamental to
the Group’s risk management structure. It informs and connects our
purpose, ambition, strategy and values, guiding us to make
responsible decisions aligned to our risk culture and risk management
approach, to do the right thing, and to treat our customers and our
colleagues fairly at all times.
Risk management framework
The risk management framework supports our HSBC Book. It outlines
the key principles and practices that we employ in managing material
risks. It applies to all categories of risk and supports a consistent
approach in identifying, assessing, managing and reporting the risks
we accept and incur in our activities.
Delegation of authority within limits
set by the Board
Subject to certain matters reserved for the Board, the Group CEO has
been delegated authority limits and powers within which to manage the
day-to-day affairs of the Group. A delegation of authority framework is in
place providing a Group structure within which the Board and its
subsidiaries can manage their delegated powers. These delegated
authorities can be used for the approval, signing and execution of
specific written agreements and documents such as procurement
contracts.
The delegation of authority framework is adopted on a legal entity basis
via a board resolution which is reviewed annually. Matters not covered
by the delegation of authority framework can be set out in a separate
board resolution, powers of attorney or the relevant Group policy with
clear systems of control that are appropriate to the business or function.
Authorities to enter into credit and market risk exposures are delegated
with limits to line management of Group companies in line with Group
policy. Credit and market risks are measured and reported at subsidiary
company level and aggregated for risk concentration analysis on a
Group-wide basis.
Risk identification and monitoring
Systems and procedures are in place to identify, assess, control and
monitor the material risk types facing HSBC as set out in the risk
management framework. The Group‘s risk measurement and
reporting systems are designed to help ensure that material risks are
captured with all the attributes necessary to support well-founded
decisions, that those attributes are accurately assessed and that
information is delivered in a timely manner for those risks to be
successfully managed and mitigated.
Changes in market conditions/
practices
Processes are in place to identify new risks arising from changes in
market conditions/practices or customer behaviours, which could
expose the Group to heightened risk of loss or reputational damage.
The Group employs both a top and emerging risks process to provide
forward-looking views of issues with the potential to threaten the
execution of our strategy or operations over the medium to long term.
We remain committed to investing in the reliability and resilience of
our IT systems and critical services, including those provided by third
parties, that support all parts of our business. We do so to help
protect our customers, affiliates and counterparties, and to help
ensure that we minimise any disruption to services that could result in
reputational and regulatory consequences. In our approach to defend
against these threats, we invest in business and technical controls to
help us detect, manage and recover from issues, including data loss,
in a timely manner.
We continue our focus on the quality and timeliness of the data used
to inform management decisions, through measures such as early
warning indicators, prudent active risk management of our risk
appetite, and ensuring regular communication with our Board and
other key stakeholders.
Responsibility for risk management
All employees are responsible for identifying and managing risk within
the scope of their role as part of the three lines of defence model.
This is an activity-based model to delineate management
accountabilities and responsibilities for risk management and the
control environment. The second line of defence sets the policy and
guidelines for managing specific risk areas, provides advice and
guidance in relation to the risk, and challenges the first line of defence
(the risk owners) on effective risk management.
The Board delegated authority to the GAC to annually review the
independence, autonomy and effectiveness of the Group’s policies
and procedures on whistleblowing, including the procedures for the
protection of staff who raise concerns of detrimental treatment.
Strategic plans
Strategic plans are prepared for global businesses, global functions
and geographical regions within the framework of the Group’s overall
strategy. Financial resource plans, informed by detailed analysis of
risk appetite describing the types and quantum of risk that the Group
is prepared to take in executing its strategy, are prepared and adopted
by all major Group operating companies and set out the key business
initiatives and the likely financial effects of those initiatives.
Internal control over financial
reporting
HSBC is required to comply with section 404 of the US Sarbanes-
Oxley Act of 2002 and assess its effectiveness of internal control over
financial reporting at 31 December 2024. In 2014, the GAC endorsed
the adoption of the principles of the Committee of Sponsoring
Organizations of the Treadway Commission (’COSO’) 2013
framework for the monitoring of risk management and internal control
systems to satisfy the requirements of section 404 of the Sarbanes-
Oxley Act.
The primary mechanism through which comfort over risk
management and internal control systems is achieved is through
annual assessments of the effectiveness of controls to manage risk,
and the reporting of issues on a regular basis through the various risk
management and risk governance forums, including regular updates
to GAC.
The key risk management and internal control procedures over
financial reporting include the following:
Entity level controls
Entity level controls are a defined suite of internal controls that have a
pervasive influence over the entity as a whole and meet the principles
of the COSO framework. They include controls related to the control
environment, such as the Group’s values and ethics, the promotion of
effective risk management and the overarching governance exercised
by the Board and its non-executive committees. The design and
operational effectiveness of entity level controls are assessed on an
ongoing basis. If issues are significant to the Group, they are
escalated to the GRC and / or the GAC.
Process level transactional controls
Key process level controls that mitigate the risk of financial
misstatement are identified, recorded and monitored in accordance
with the risk framework. This includes the identification and
assessment of relevant control issues against which action plans are
tracked through to remediation. Further details of HSBC’s approach to
risk management can be found on page 127.
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HSBC Holdings plc Annual Report and Accounts 2024
Financial reporting controls
The Group’s financial reporting process is controlled using
documented accounting policies and reporting formats, supported by
detailed instructions and guidance on reporting requirements, issued
to all reporting entities within the Group in advance of each reporting
period end. The submission of financial information from each
reporting entity is supported by a certification by the responsible
financial officer and analytical review procedures at reporting entity
and Group levels.
Group Disclosure and Controls
Committee
Chaired by the Group CFO, the Group Disclosure and Controls
Committee supports the discharge of the Group’s obligations under
relevant legislation and regulation including the UK and Hong Kong
listing rules, the UK Market Abuse Regulation and US Securities and
Exchange Commission rules. In so doing, the Group Disclosure and
Controls Committee is empowered to determine whether a new
event or circumstance should be disclosed, including the form and
timing of such disclosure, and review certain material disclosures
made or to be made by the Group. The membership of the Group
Disclosure and Controls Committee consists of senior management,
including the Group CFO, Group Chief Risk and Compliance Officer;
Group Chief Legal Officer; and Group Chief People and Governance
Officer. The Group’s external auditors are standing attendees, while
the Group's brokers and external legal counsel are consulted on
relevant matters and attend as required. The integrity of disclosures is
underpinned by structures and processes within the Global Finance
and Group Risk and Compliance functions that support rigorous
analytical review of financial reporting and the maintenance of proper
accounting records. As required by the Sarbanes-Oxley Act, the Group
CEO and the Group CFO have certified that the Group’s disclosure
controls and procedures were effective as at the end of the period
covered by the Annual Report and Accounts 2024.
The annual review of the effectiveness of the Group’s system of risk
management and internal control over financial reporting was
conducted with reference to the COSO 2013 framework. Based on
the assessment performed, the Directors concluded that for the year
ended 31 December 2024, the Group’s internal control over financial
reporting was effective.
PwC has audited the effectiveness of HSBC’s internal control over
financial reporting and has given an unqualified opinion.
Other information included in the
Annual Report and Accounts 2024
We include other non-statutory information in the Annual Report and
Accounts to enable a broader perspective of our performance for the
period, including ESG and regulatory capital and liquidity information.
On page 43 we highlight the challenges we face in our sustainability
and climate reporting alongside the key changes we have made to our
2024 climate disclosures. Strengthening our global regulatory
reporting processes with an aim to enhance data, consistency, and
controls remains a key priority for the Group and regulatory
authorities. See page 201 for further details. The GAC provides
oversight to our reporting across these areas, including the disclosure
risks in relation to sustainability and climate reporting, and monitoring
of the programme of work to address the quality and reliability of
regulatory reporting. See page 265 for further details.
Going concern
The Board, having made appropriate enquiries, is satisfied that the
Group as a whole has adequate resources to continue operations for a
period of at least 12 months from the date of this report, and it
therefore continues to adopt the going concern basis in preparing the
financial statements.
For further details, see page 40.
Employees
At 31 December 2024, HSBC had a total workforce equivalent to
211,000 full-time employees compared with 221,000 at the end of
2023. Our main centres of employment were India with
approximately 44,000 employees, the UK with 35,000, mainland
China with 33,000, Hong Kong with 27,000, and Mexico with 16,000.
Our business spans many cultures, communities and continents. We
aspire to provide a high-performing environment where our
colleagues can fulfil their potential by building their skills and
capabilities while focusing on the development of a diverse and
inclusive culture. We use employee surveys to assess progress and
make changes. We want to provide an open culture, where our
colleagues feel connected and supported to speak up, and where our
leaders encourage and use feedback. Where we make organisational
changes, we support our colleagues, in particular where there are job
impacts.
Employee relations
We consult with and, where appropriate, negotiate with employee
representative bodies where we have them. It is our policy to
maintain well-developed communications and consultation
programmes with all employee representative bodies. There have
been no material disruptions to our operations from labour disputes
during the past five years.
We are committed to complying with the applicable employment laws
and regulations in the jurisdictions in which we operate, including in
relation to working hours and rest periods. HSBC’s employment
practices and relations policy provides the framework and controls
through which we seek to uphold that commitment.
Inclusion
Our customers, colleagues and communities span many cultures and
continents. We value difference and believe that an inclusive culture
makes us stronger. We are dedicated to building a connected
workforce where everyone feels a sense of belonging.
We expect all colleagues at HSBC to treat each other with dignity and
respect to ensure an inclusive environment. Our policies make it clear
that we do not tolerate unlawful discrimination, bullying or
harassment on any grounds. We are transparent in sharing our data
through external disclosures and we participate in benchmarking to
measure our progress across the industry.
Our approach to inclusion is set out on page 64 alongside our
ambitions and progress.
For further details of our representation data, pay gap data, and actions, see
www.hsbc.com/who-we-are/our-people/inclusion-at-hsbc and the ESG Data
Pack at www.hsbc.com/esg
Employment of people with a
disability
We strongly believe in providing equal opportunities for our
employees. The employment of people with a disability is included in
this commitment. We are committed to retaining disabled employees
in the workplace and to providing reasonable adjustments to enable
this.
HSBC Holdings plc Annual Report and Accounts 2024
325
Corporate governance
Employee development
Employee development energises our colleagues for growth and
helps to equip them with the skills they need today whilst also
preparing them to meet future challenges. We remain committed to
delivering a high-quality learning experience by adopting a data-driven
approach that targets our learning investment to meet the most
critical skill needs.
By leveraging our strategic workforce blueprints, we have focused our
efforts on critical skill shifts, including digitally enabling our frontline
colleagues and developing the sustainability and wealth expertise of
our relationship managers, providing a variety of learning opportunities
through our Enterprise Skills Academies.
We have launched our new AI Academy to support advanced skills
development aligned with HSBC’s AI strategy, expanded our 'Doing
Business in India and China' programmes to include Saudi Arabia, and
increased our focus on building capabilities beyond foundational skills
through our Sustainability Academy. In our global Wealth and Personal
Banking business we have focused our attention on developing
customer centricity and product expertise, and we have created
opportunities for colleagues to develop new skills and collaborate
more broadly through our transition to a value stream delivery model
as part of our bank wide Digital Acceleration Programme.
We remain committed to our global mandatory training to complete
annually, as it is essential for shaping our culture and maintaining a
focus on critical issues, such as sustainability and financial crime risk.
In line with this commitment, we have maintained our focus on senior
leaders by launching new programs centred on Enterprise Risk
Leadership, which are designed to equip them with the skills
necessary to navigate an evolving risk environment.
Effective leadership is essential for empowering our colleagues to
develop critical skills, fostering a robust talent pipeline, and supporting
our strategic ambitions. To facilitate this, we have introduced the
Career Academy, which enables our colleagues to explore their
aspirations, and continued to evolve our flagship Enterprise
Leadership Programs, including uGrow, Accelerating Women’s
Leadership, and Accelerating into Leadership.
We have also expanded our Managing Director leadership offering,
supported by a Leadership 360 survey, to ensure comprehensive
development and alignment with our strategic goals.
Health and safety
We are committed to providing a safe and healthy working
environment for everyone. We have adopted global policies,
mandatory procedures, and incident and information reporting
systems across the organisation that reflect our core values and are
aligned to international standards. Our global health and safety
performance is subject to ongoing monitoring and assurance to
ensure we are compliant with relevant laws and regulations.
Our chief operating officers have overall responsibility for engendering
a positive health and safety culture and ensuring that global policies,
procedures and systems are put into practice locally. They also have
responsibility for ensuring all local legal requirements are met.
We delivered a range of activities in 2024 to help us understand and
manage our health and safety risks:
–
We achieved the WELL Health and Safety Rating from the
International WELL Building Institute at 54 of our global offices as
a demonstration of our commitment to the provision of safe and
healthy workplaces for our employees, customers and
stakeholders.
–
We reinforced our advice and risk assessment and control
methodology on working from home for employees adopting a
hybrid work style, providing more awareness and best practices on
good ergonomics and well-being.
–
We delivered health and safety training and awareness to 228,000
of our employees and contractors globally, ensuring roles and
responsibilities were clear and understood.
–
We completed the annual safety inspection on all of our buildings
globally, to ensure we were meeting our standards and
continuously improving our safety performance.
–
We maintained measures in our workplaces globally to minimise
the risks from the spread of respiratory disease, including through
the provision of hand sanitiser, improved ventilation and guidance
on good hygiene practices.
–
We extended the reach of our Workplace Adjustments programme
to include all colleagues in India, providing tools and
technologies which contribute to making work-life manageable for
employees with disability (including physical or sensory), long
term / mental health condition or a neurodiversity, and will
continue the expansion of this programme to further Regions.
–
We continued to hold health & safety themed awareness campaigns
and facilitate CPR and first aid training for our colleagues.
–
We continued to provide our guidance and training programme for
our construction partners, focusing on our key markets globally to
reduce the likelihood of accidents occurring by helping them
understand and deliver industry-leading health and safety
performance. More than 7,200 construction workers received
safety passport training across 13 countries.
–
In 2024, we achieved full implementation of the Eat Well Live Well
programme across 100% of catered HSBC sites, driving global
healthy food sales to 32% with over 10% of all dishes sold globally
being plant-based. These results were supported by monthly Eat
Well Live Well events, and virtual teaching kitchens accessible to
all employees.
–
Protection of our colleagues and operations is of critical importance,
and we have effective controls in place to protect our people from
natural disasters (such as storms and earthquakes). In 2024, there
were 40 named storms that passed over 3,127 of our buildings,
resulting in no injuries and only a minor impact on 3 of our buildings.
Employee health and safety
2024
2023
2022
Rate of workplace fatalities per 100,000 employees
—
—
—
Number of major injuries to employees1
14
12
7
All injury rate per 100,000 employees
91
110
70
Lost days due to work injury
335
594
485
1
Fractures, dislocation, concussion, loss of consciousness, overnight
admission to hospital.
Remuneration
HSBC’s pay and performance strategy is designed to reward
competitively the achievement of long-term sustainable performance
and attract and motivate the very best people, regardless of gender,
ethnicity, age, disability or any other factor unrelated to performance
or experience with the Group, while performing their role in the long-
term interests of our stakeholders.
For further details of the Group’s approach to remuneration, see page 301.
Employee share plans
Summaries of the share options and share awards granted, exercised/
vested or lapsed during the year and other details required to be
disclosed pursuant to Chapter 17 of the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited, including
detailed summaries of the HSBC share plans, are available on our
website at www.hsbc.com/investors/results-and-announcements and
on the website of The Stock Exchange of Hong Kong Limited at
www.hkex.com.hk, or can be obtained upon request from the
Company Secretary, 8 Canada Square, London E14 5HQ.
Particulars of options held by Directors of HSBC Holdings are set out on
page 310.
Note 5 on the financial statements gives details of share-based payments,
including discretionary awards of shares granted under HSBC share plans.
Report of the Directors | Corporate governance report
326
HSBC Holdings plc Annual Report and Accounts 2024
Statement of compliance
The statement of corporate governance practices set out on pages
236 to 328 and the information referred to therein constitutes the
’Corporate governance report’ and ’Report of the Directors’ of HSBC
Holdings for 2024. Further details of the relevant corporate
governance codes, role profiles and policies can be obtained from the
websites referenced in the table below. The websites referred to do
not form part of this report.
Relevant corporate governance codes, role profiles and policies
UK Corporate Governance Code
www.frc.org.uk
Hong Kong Corporate
Governance Code (set out in
Appendix C1 to the Rules
Governing the Listing of
Securities on the Stock
Exchange of Hong Kong Limited
(’HKEx’))
www.hkex.com.hk
Descriptions of the roles and
responsibilities of the:
– Group Chairman
– Group Chief Executive Officer
– Senior Independent Director
– Board
www.hsbc.com/who-we-are/our-
people/board-of-directors/board-
responsibilities
Board and senior management
www.hsbc.com/who-we-are/our-
people
Roles and responsibilities of the
Board’s committees
www.hsbc.com/who-we-are/our-
people/board-of-directors/board-
committees
Board’s policies on:
– diversity and inclusion
– shareholder communication
– human rights
– remuneration practices and
governance
www.hsbc.com/who-we-are/our-
people/board-of-directors/board-
responsibilities
Global Internal Audit Charter
www.hsbc.com/who-we-are/esg-
and-responsible-business/
governance/internal-control
HSBC is subject to corporate governance requirements in both the UK
and Hong Kong. During 2024, HSBC complied with the provisions and
requirements of both the UK and Hong Kong Corporate Governance
Codes.
Under the Hong Kong Corporate Governance Code, the audit
committee should be responsible for the oversight of all risk
management and internal control systems. During 2024, the Board
approved changes to the scope of the Group Audit Committee’s
responsibilities in relation to internal controls to extend these to cover
oversight of the effectiveness of all internal controls. HSBC’s Group
Risk Committee retains oversight of internal controls relating to risk
management and risk management systems and provides input to the
Group Audit Committee on these.
HSBC Holdings has codified obligations for transactions in Group
securities in accordance with the requirements of the UK Market
Abuse Regulation and the rules governing the listing of securities on
HKEx. The Group has been granted certain waivers by HKEx from
strict compliance with the rules that take into account accepted
practices in the UK, particularly in respect of employee share plans.
During the year, all Directors were reminded of their obligations in
respect of transacting in HSBC Group securities. Following specific
enquiry all Directors have confirmed that they have complied with
their obligations.
The Group Audit Committee has reviewed and provided assurance to
support the HSBC Holdings Board’s approval and publication of the
Annual Report and Accounts 2024.
On behalf of the Board
Sir Mark E Tucker
Group Chairman
HSBC Holdings plc
Registered number 617987
19 February 2025
HSBC Holdings plc Annual Report and Accounts 2024
327
Corporate governance
Directors’ responsibility statement
The Directors are responsible for preparing the Annual Report and
Accounts 2024, the Directors’ remuneration report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law, the Directors have prepared
the parent company (‘Company’) and the Group financial statements
in accordance with UK-adopted international accounting standards.
The company has also prepared financial statements in accordance
with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. In
preparing these financial statements, the Directors have complied
with International Financial Reporting Standards issued by the
International Accounting Standards Board (’IFRS Accounting
Standards’). Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Company and Group, and of the
profit or loss of the Company and the Group for that period. In
preparing these financial statements, the Directors are required to:
–
select suitable accounting policies and then apply them
consistently;
–
make judgements and accounting estimates that are reasonable
and prudent;
–
state whether applicable UK-adopted international accounting
standards, international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and IFRS Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
–
prepare the financial statements on a going concern basis unless it
is inappropriate to presume that the Company and Group will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions, and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors’ remuneration
report comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the
Annual Report and Accounts 2024 as they appear on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
The Directors consider that the Annual Report and Accounts 2024,
taken as a whole, is fair, balanced and understandable, and provides
the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
‘Report of the Directors: Corporate governance report’ on pages 237
to 241 of the Annual Report and Accounts 2024, confirms that, to the
best of their knowledge:
–
the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards
and with the requirements of the Companies Act 2006,
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and IFRS Accounting Standards, give a true and fair view of the
assets, liabilities, financial position, and profit or loss of the Group;
and
–
the management report represented by the Report of the
Directors includes a fair review of the development and
performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties
that it faces.
The Group Audit Committee has responsibility, delegated to it from
the Board, for overseeing all matters relating to external financial
reporting. The Group Audit Committee report on page 263 sets out
how the Group Audit Committee discharges its responsibilities.
Disclosure of information to auditors
In accordance with section 418 of the Companies Act 2006, the
Directors’ report includes a statement, in the case of each Director in
office as at the date the Report of the Directors is approved, that:
–
so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
–
they have taken all the steps they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
On behalf of the Board
Sir Mark E Tucker
Group Chairman
HSBC Holdings plc
Registered number 617987
19 February 2025
Report of the Directors | Corporate governance report
328
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings plc Annual Report and Accounts 2024
329
Financial
statements
The financial statements provide detailed
information and notes on our income, balance
sheet, cash flows and changes in equity,
alongside a report from our independent auditors.
330
Independent auditors’ report to the members of
HSBC Holdings plc
341
Financial statements
341
– Consolidated income statement
342
– Consolidated statement of comprehensive income
343
– Consolidated balance sheet
344
– Consolidated statement of changes in equity
347
– Consolidated statement of cash flows
349
– HSBC Holdings financial statements
353
Notes on the financial statements
Hong Kong, 2019. Colleague Collaboration.
Financial statements
Independent auditors’ report to the
members of HSBC Holdings plc
Report on the audit of the financial statements
Opinion
In our opinion, HSBC Holdings plc’s Group financial statements
and parent company financial statements (the ‘financial
statements’):
–
give a true and fair view of the state of the Group’s and of the
parent company’s affairs as at 31 December 2024 and of the
Group’s and parent company’s profit and the Group’s and
parent company’s cash flows for the year then ended;
–
have been properly prepared in accordance with UK-adopted
international accounting standards; and
–
have been prepared in accordance with the requirements of
the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Accounts 2024 (the ‘Annual Report’), which
comprise:
–
the consolidated and parent company balance sheets as at
31 December 2024;
–
the consolidated and parent company income statements; the
consolidated and parent company statements of
comprehensive income; the consolidated and parent company
statements of changes in equity; and the consolidated and
parent company statements of cash flows for the year then
ended; and
–
the notes on the financial statements, comprising material
accounting policy information and other explanatory
information.
Certain notes on the financial statements have been presented
elsewhere in the Annual Report and have been cross referenced
from the financial statements and marked as ‘Audited’. These are
described further in note 1.1 (e) Presentation of information.
Our opinion is consistent with our reporting to the Group Audit
Committee (‘GAC’).
As explained in note 1.1(a) on the financial statements the Group and
parent company have also applied International Financial Reporting
Standards (‘IFRS’) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and IFRSs as issued by the
International Accounting Standards Board (‘IASB’).
In our opinion, the Group and parent company financial statements
have been properly prepared in accordance with IFRSs adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, and have been properly prepared in accordance with
IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (‘ISAs (UK)’), International Standards on Auditing issued by
the International Auditing and Assurance Standards Board (‘ISAs’) and
applicable law. Our responsibilities under ISAs (UK) and ISAs are further
described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence and appointment
This is the first year that it has been my responsibility to form this
opinion on behalf of PricewaterhouseCoopers LLP, who, following
the recommendation of the GAC, were first appointed as auditor on
31 March 2015 by the members for the year ended 31 December
2015 and subsequent financial periods. Following re-tender, we were
then reappointed as auditor for the year ended 31 December 2025.
Total period of uninterrupted engagement
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as
applicable to listed public interest entities, and the International Code
of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics
Standards Board for Accountants (IESBA Code), and we have fulfilled
our other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by either the FRC’s Ethical Standard or Article 5(1)
of Regulation (EU) No 537/2014 were not provided.
Other than those disclosed in note 6, we have provided no non-audit
services to the parent company or its controlled undertakings in the
period under audit.
Independent auditors’ report to the members of HSBC Holdings plc
330
HSBC Holdings plc Annual Report and Accounts 2024
31 Mar
2015
31 Dec
2015
Period of total
uninterrupted engagement
(10 years)
31 Dec
2024
31 Dec
2025
Appointed
First
year-end
Current
year-end
First year-
end
following
re-tender
Our audit approach
Overview
Audit scope
Key audit matters
Our risk assessment and scoping identified six entities (collectively the
‘Significant Components’) for which we obtained audit opinions.
Expected credit losses – Loans and advances
to customers (Group)
Year on year:
Consistent
We performed full scope audits of four Significant Components: The Hongkong and
Shanghai Banking Corporation Limited, HSBC Holdings plc, HSBC Bank plc and
HSBC UK Bank plc.
For two Significant Components, we obtained audit opinions over specific
balances based on either the size or risk profile of those balances: HSBC North
America Holdings Inc and HSBC Mexico S.A..
Impairment of investment in associate – Bank
of Communications Co., Ltd ('BoCom') (Group)
Year on year:
Consistent
In addition, for a further three components, we performed audit work over centralised
functions supporting specific balances.
Specific audit procedures in relation to various Group activities, including IT general
controls, IT dependencies, forward looking economic scenarios for expected credit
losses (‘ECL’), operating expenses, intangible assets, payroll and consolidation were
performed by the Group team centrally.
Valuation of defined benefit pension
obligations (Group)
Year on year:
Consistent
•••• •• •••
Investments in subsidiaries (parent company)
Year on year:
Consistent
4
full scope component
audits
2
components with audit
opinions over specific
balances
3
components with audit
work over centralised
functions
Materiality
Overall Group materiality
Based on 5% of profit before tax excluding notable items.
$1.5bn
Overall parent company materiality
Based on 0.75% of total assets. This would result in an overall
materiality of $2.06bn and was therefore reduced below the
Group materiality.
$1.4bn
Performance materiality
Group
Parent
$1.1bn
$1.1bn
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks or other matters identified by our audit. During our engagement with the GAC we also provided written
and verbal observations on other areas of accounting judgement including the valuation of financial instruments, legal proceedings and
regulatory matters, the impact of acquisitions and disposals, tax-related judgements and the related control considerations arising from our
audit.
The key audit matters below are consistent with last year, although the specific test plans have evolved to take account of developments at
HSBC and in its operating environment. Examples of HSBC specific developments included the change in CEO and the strategic initiatives
subsequently announced. Examples of operating environment changes include macro-economic developments in key markets and government
actions to manage economic conditions.
HSBC Holdings plc Annual Report and Accounts 2024
331
Financial statements
Expected credit losses - Loans and advances to customers (Group)
Background
Procedures performed
Relevant references in the Annual Report and Accounts 2024: Refer
to the Audited credit risk disclosures, Group Audit Committee Report,
Note 1.2(d): Financial instruments measured at amortised cost and
Note 1.2(i): Impairment of amortised cost and FVOCI financial assets.
Determining ECL involves management judgement and is subject to a
high degree of estimation uncertainty. Management makes various
assumptions when estimating ECL. We performed a risk assessment
to identify those assumptions with significant levels of management
judgement and for which variations had the most material impact on
ECL.
Assumptions were made in determining economic scenarios and their
probability weightings (specifically the central and downside scenarios
given these have the most material impact on ECL) and estimating
discounted cash flows for significant credit impaired exposures in
relation to the mainland China commercial real estate portfolio. The
level of estimation uncertainty and judgement in these areas has
remained elevated during 2024 as a result of continued uncertainties
in the macroeconomic and geopolitical environment and the higher
interest rate environment, as well as developments in mainland
China's commercial real estate sector and economy more broadly.
Macroeconomic conditions vary between territories and industry
sectors, requiring judgement in determining the severity and
probability weighting of economic scenarios used in ECL models.
The modelling methodologies used to estimate ECL are developed
using historical experience. We assess the impact of limitations in
these methodologies when forecasting the extent and timing of
future customer defaults or when responding to emerging risks, such
as climate risk. The focus of our assessment of the impact of climate
risk on ECL was to evaluate management’s risk assessment process
for identifying, quantifying and concluding that the impact of climate
risk on ECL for the year end was immaterial.
We assessed the design and effectiveness of governance and
controls over the estimation of ECL. We observed management's
review and challenge in governance forums for (1) the determination
of economic scenarios and their probability weightings, and (2) the
assessment of ECL for Retail and Wholesale portfolios.
We also tested controls over:
–
model validation and monitoring;
–
the identification of credit impaired triggers;
–
the input of critical data into source systems and the flow and
transformation of critical data from source systems to impairment
models; and
–
approval of significant individual impairments.
We involved our economic experts in assessing the significant
assumptions made in determining the severity and probability
weighting of economic scenarios. These assessments considered the
sensitivity of ECL to variations in the severity and probability weighting
of economic scenarios. We also involved our modelling specialists in
assessing the appropriateness of the significant assumptions and
methodologies used for the ECL models. We independently re-
performed the calculations for a sample of those models. In respect of
the mainland China commercial real estate portfolio, we had oversight
of the audit work performed by our component team in Hong Kong.
This work included involving business recovery experts in assessing
the discounted cash flows for a sample of significant credit impaired
exposures. We further considered whether the judgements made in
selecting the significant assumptions would give rise to indicators of
possible management bias.
We evaluated management’s risk assessment in respect of the impact
of climate change on the ECL provision, including involving our
modelling specialists to evaluate the stress testing and scenario analysis
methodology used and sensitising key assumptions. Finally, we tested
the Audited credit risk disclosures made in the Annual Report.
Overall, we found the ECL on loans and advances to customers to be
reasonable.
Observations discussed with the Group Audit Committee
We reported to the GAC our observations covering governance and controls, the assumptions used and the modelling methodologies
implemented by management in determining ECL, with a significant focus on the uncertain prevailing macroeconomic conditions and
developments in mainland China's commercial real estate sector. Our observations regarded:
–
the severity of economic scenarios, and their related probability weightings, across territories;
–
significant assumptions used to estimate the discounted cash flow projections for defaulted exposures in relation to the mainland China
commercial real estate portfolio; and
–
the disclosures made in relation to ECL.
Independent auditors’ report to the members of HSBC Holdings plc
332
HSBC Holdings plc Annual Report and Accounts 2024
Impairment of investment in associate - Bank of Communications Co., Ltd ('BoCom') (Group)
Background
Procedures performed
Relevant references in the Annual Report and Accounts 2024: Refer
to the Group Audit Committee Report, Note 1.2(a): Consolidation and
related policies and Note 18: Interests in associates and joint
ventures.
2024 is the first annual reporting period after the Group impaired its
investment in BoCom, the carrying value of which amounted to
$22.4bn at 31 December 2024. The estimation uncertainty related to
the investment remained high in 2024 and further policy
announcements were made in relation to fiscal stimulus packages by
the government in China.
The carrying value is required to be assessed for indicators of
potential further impairment and reversal of previous impairment. No
indicators of further impairment or reversal of previous impairment in
the investment in BoCom have been identified at 31 December 2024.
Management’s assessment of impairment or reversal of previous
impairment indicators is supported by an estimation of the
recoverable amount using a value in use (‘VIU’) model. The VIU model
estimates future cash flows expected to be derived from the
investment in BoCom in its current condition and does not reflect the
impact of future capital transactions. The VIU model continues to be a
permissible method to estimate the recoverable amount.
The methodology applied in the VIU model is dependent on various
assumptions, both short to medium term and long term in nature.
These assumptions, which are subject to estimation uncertainty, are
derived from a combination of management's judgement, analysts'
forecasts, market data or other relevant information.
The assumptions that we focused our audit on were those with
greater levels of management judgement and subjectivity, and for
which variations had the most significant impact on the VIU.
Specifically, these significant assumptions included:
–
the discount rate;
–
short to medium term assumptions for operating income growth
rate, loans and advances to customers growth rate, cost-income
ratio, and expected credit losses as a percentage of loans and
advances to customers;
–
long-term assumptions for profit growth rate, asset growth rate,
expected credit losses as a percentage of loans and advances to
customers, and effective tax rates; and
–
capital related assumptions (risk-weighted assets as a percentage
of total assets and capital adequacy ratios).
We had oversight of the audit work performed by our component
audit team in Hong Kong in relation to the impairment indicator
assessment of BoCom. This work included:
–
testing controls in place over the significant assumptions, the
methodology and its consistent application period over period
used in the impairment indicator assessment, assessing the
appropriateness of the methodology used, its application, and the
mathematical accuracy of the calculations;
–
challenging the appropriateness of the significant assumptions
and, where relevant, their interrelationships;
–
obtaining evidence to corroborate and challenge the data
supporting significant assumptions, which included past
experience, external market information, third-party sources
including analyst reports, information from BoCom management
and historical publicly available BoCom financial information;
–
determining an independent reasonable range for the discount
rate assumption, with the assistance of our valuation experts, and
comparing it to the discount rate used by management;
–
assessing whether the judgements made in determining the
significant assumptions would give rise to indicators of possible
management bias;
–
attending certain meetings alongside management and BoCom
management to identify facts and circumstances impacting
significant assumptions relevant to the determination of the VIU;
and
–
evaluating and testing the disclosures in relation to BoCom in the
Annual Report.
Representations were obtained from management that assumptions
used were consistent with information currently available to the
Group.
Overall, we found management’s assessment of impairment, or
reversal of previous impairment, indicators to be reasonable.
Observations discussed with the Group Audit Committee
We reported to the GAC our observations on the appropriateness of the methodology, the consistency of its application period over period
and significant assumptions. This included our observations regarding management’s approach to ongoing impairment monitoring including
whether there are indicators of further impairment or reversal to previous impairment, the appropriateness of significant assumptions used
in the VIU, and the disclosures made in relation to BoCom, including the use of sensitivity analysis to explain estimation uncertainty.
HSBC Holdings plc Annual Report and Accounts 2024
333
Financial statements
Valuation of defined benefit pension obligations (Group)
Background
Procedures performed
Relevant references in the Annual Report and Accounts 2024: Refer to
the Group Audit Committee Report, Note 1.2(k): Employee
compensation and benefits and Note 5: Employee compensation and
benefits.
The Group has a defined benefit obligation of US$24.0bn, of which
US$17.2bn relates to HSBC Bank (UK) pension scheme ('the principal
plan').
The valuation of the defined benefit obligation for the principal plan is
dependent on a number of actuarial assumptions. Management uses an
actuarial expert to determine the valuation of the defined benefit
obligations. The valuation methodology uses a number of market based
inputs and other financial and demographic assumptions. The significant
assumptions that we focused our audit on were those with greater
levels of management judgement and for which variations had the most
significant impact on the liability. Specifically, these included the
discount rate, inflation rate and mortality rate.
We had oversight of the audit work performed by our component
audit team in the UK in relation to the valuation of the defined benefit
obligation. This work included:
–
assessing the design and testing the effectiveness of controls in
place over methodologies and significant assumptions, including in
the use of management's experts.
–
evaluating the objectivity and competence of management's
expert involved in the valuation of the principal plan’s defined
benefit obligation.
–
engaging actuarial experts to understand the judgements made by
management and their actuarial expert in determining the
significant assumptions, and comparing these assumptions to
independently compiled expected ranges based on market
observable indices and the knowledge and opinions of experts.
–
evaluating and testing the appropriateness of disclosures made in
the Annual Report.
Overall, we found the valuation of the defined benefit pension
obligations to be reasonable.
Observations discussed with the Group Audit Committee
We reported to the GAC our observations covering governance and controls, the assumptions used and the methodologies implemented by
management in determining the valuation of the defined benefit obligations with a significant focus on discount, inflation and mortality rates.
Investments in subsidiaries (parent company)
Background
Procedures performed
Relevant references in the Annual Report and Accounts 2024: Refer
to the Group Audit Committee Report, Note 1.2(a): Consolidation and
related policies and Note 19: Investments in subsidiaries
Management reviewed the carrying values of the investments in
subsidiaries to evaluate whether any adjustment was required,
including additional consideration for impacts resulting from the
announced organisational changes and strategic refocus. Where
indicators have been identified management estimated the
recoverable amount using the higher of value in use ('VIU') or fair
value less cost to sell.
Management’s assessment resulted in an impairment charge of
US$11.4bn in relation to the investment in HSBC Overseas Holdings
(UK) Limited.
The methodology used to estimate the recoverable amount is
dependent on various assumptions. These assumptions, which are
subject to estimation uncertainty, are derived from a combination of
management's judgement, experts engaged by management and
market data. The significant assumptions that we focused our audit
on were those with greater levels of management judgement and for
which variations had the most significant impact on the recoverable
amount. Specifically, these included the relevant business plan, long
term growth rates, discount rates, and the impact of HSBC’s strategy
on those cash flows.
We assessed the design and tested the effectiveness of controls in
place over significant assumptions and the model used to determine
the recoverable amount. We assessed the appropriateness of the
methodology used, and tested the mathematical accuracy of the
calculations, to estimate the recoverable amounts.
In respect of the significant assumptions, our testing included the
following:
–
challenging management's business plan, including the impacts
resulting from the announced organisational restructure, as well as
considering the achievement of historic forecasts;
–
obtaining and evaluating evidence relating to significant
assumptions, from a combination of historical experience and
external market and other financial information;
–
assessing whether the cash flows included in the model were in
compliance with the relevant accounting standard;
–
assessing the sensitivity of the recoverable amount to reasonable
variations in significant assumptions, both individually and in
aggregate; and
–
determining a reasonable range for the discount rate used within
the model, with the assistance of our valuation experts, and
comparing it to the discount rate used by management.
We also evaluated and tested the disclosures made in the Annual
Report in relation to investment in subsidiaries (Note 19).
Overall, we found management’s impairment assessment in relation
to the investment in HSBC Overseas Holdings (UK) Limited to be
reasonable.
Observations discussed with the Group Audit Committee
We reported to the GAC our observations covering governance and controls, the assumptions used and the methodologies implemented by
management in determining the impairment charge for the HSBC Overseas Holdings (UK) Limited investment, with a significant focus on
the relevant business plan for FY25 to FY29, discount rates, long term growth rates, and the impact of HSBC's strategy on those forecast
cash flows.
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HSBC Holdings plc Annual Report and Accounts 2024
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the parent company, the accounting processes and controls, and the industry in
which they operate.
A focus on risk factors
The risks that HSBC faces are diverse, with the interdependencies between them being numerous and complex. In performing our risk
assessment we engaged with a number of stakeholders to ensure we appropriately understood and considered these risks and their
interrelationships. This included stakeholders within HSBC and our own experts within PwC. This engagement covered external factors across
the geopolitical, macroeconomic, regulatory and accounting landscape, and the impact of climate risk. It also covered the strategy and
transformation-driven internal environment at HSBC, with particular attention to the announced Group reorganisation. The impact of this
reorganisation on financial reporting will primarily be in later reporting periods.
Scoping
The risks of material misstatement can be reduced to an acceptable level by testing the entities that are significant due to their size and those
that drive particular significant risks identified as part of our risk assessment. We continually assessed risks and changed the scope of our audit
where necessary. Our risk assessment and scoping identified certain entities (collectively the 'Significant Components') for which we obtained
audit opinions.
Full scope
audit opinion
Audit opinions
over specific
balances
HSBC Holdings plc*
u
The Hongkong and Shanghai Banking Corporation Limited**
u
HSBC Bank plc**
u
HSBC UK Bank plc*
u
HSBC North America Holdings Inc**
u
HSBC Mexico S.A.*
u
* Opinion for the company financial position and performance.
** Opinion for the consolidated financial position and performance.
We instructed other PwC network firms to perform the audits of The Hongkong and Shanghai Banking Corporation Limited, HSBC North
America Holdings Inc and HSBC Mexico S.A.. The audits for HSBC Bank plc and HSBC UK Bank plc were performed by PwC teams in the UK,
who themselves then instructed other PwC network firms to perform work in certain areas.
We also performed audit work over centralised functions supporting specific balances in other components. These components are HSBC Global
Services (UK) Limited, HSBC Group Management Services Limited, and HSBC Global Services (HK) Limited. This work was performed by PwC teams
in the UK.
Significant Components audit approach
We instructed the component auditors reporting to us on the Significant Components to work to assigned materiality levels reflecting the size
of the operations they audited. Certain Significant Component auditors performed their work to a local statutory audit materiality that was a
lower level than our allocated Group materiality.
We designed global audit approaches for the products and services that substantially make up HSBC's global businesses, such as lending,
deposits and derivatives. These approaches were provided to the engagement partners and teams performing audit testing for the Significant
Components.
We were in active dialogue throughout the year with the component auditors of the Significant Components, including directing how they
planned and performed their work. Senior members of our team undertook at least one in-person site visit where a full scope audit was
requested and we had oversight over certain areas of audit work performed. We attended Audit Committee meetings for some of the
Significant Components. We also attended meetings with management for each of these Significant Components at the year end.
In planning and executing our oversight plan, we considered where reliance was placed on PwC network firms to perform a full scope audit.
Given the relative financial significance of The Hongkong and Shanghai Banking Corporation Limited to the Group, we concluded this
component required a full scope audit. As a result, we placed specific focus on the direction, supervision and review of the work performed by
our teams in Hong Kong and China. The frequency of dialogue with these teams was substantial throughout all stages of our audit, we also;
performed additional site visits with component auditors and management, held workshops in several areas where their work supported the
Group audit and increased the nature and extent of review over the audit work performed by these teams.
Overall coverage
The components where
we performed audit procedures
covered approximately:
Net operating income
Total assets
HSBC Holdings plc Annual Report and Accounts 2024
335
72%
82%
Financial statements
Group-wide audit approach
HSBC has entity level controls that have a pervasive influence across the Group, as well as other global and regional governance and controls
over aspects of financial reporting, such as those operated by the Global Risk function for expected credit losses. A significant amount of IT and
operational processes and controls relevant to financial reporting are undertaken in operations centres run by Digital Business Services ('DBS').
Whilst these operations centres are not separate components, the IT and operational processes and controls are relevant to the financial
information of the Components. Financial reporting processes and controls are also performed centrally in HSBC's Group Finance function and
finance operation centres ('Finance Operations'), including the impairment assessment of goodwill and intangible assets, held for sale
classifications and the consolidation of the Group's results, the preparation of financial statements, and management's oversight controls
relevant to the Group's financial reporting.
Group-wide processes or processes in DBS and Finance Operations are subject to specified audit procedures or an audit over specific financial
statement line items. For these areas, we either performed audit work ourselves, or directed and provided oversight of the audit work
performed by PwC teams in the UK, Poland, China, Malaysia, India, France, Hong Kong and the Philippines. This audit work, together with
analytical review procedures and assessing the outcome of local external audits, also addressed the risk of material misstatement for balances
in entities that were not part of a Significant Component.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group
Parent Company
Overall materiality $1.5bn
(FY23 $1.6bn)
$1.4bn
(FY23 $1.5bn)
How we
determined it
5%
of profit before tax adjusted for notable items
0.75%
of total assets then capped to 95% of the group materiality.
Rationale for
benchmark applied
We believe a benchmark based on 5% of profit before tax
excluding notable items is an appropriate quantitative indicator of
materiality, although certain items could also be material for
qualitative reasons. This benchmark is consistent with our
approach for listed entities.
A benchmark of total assets has been used, as the parent
company's primary purpose is to act as a holding parent company
with investments in the Group's subsidiaries, not to generate
operating profits and therefore a profit-based measure is not
relevant.
Performance
materiality
$1.1bn
(FY23 $1.2bn)
$1.1bn
(FY23 $1.1bn)
How we
determined it
75%
of overall materiality
75%
of overall materiality
Level above which
we report to the
Group Audit
Committee
$75m
(FY23 $80m)
$75m
(FY23 $80m)
We agreed we would also report misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
For each Significant Component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between $0.1bn and $1.4bn.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
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HSBC Holdings plc Annual Report and Accounts 2024
The impact of climate risk on our audit
In considering the impact of climate risk on our audit, we:
Made enquiries of management to understand the extent of the potential impact of climate risk on the financial statements and we
remained alert when performing our audit procedures for any indicators of the impact of climate risk.
Evaluated and challenged management's assessment of the impact of climate risk, set out on page 43, which includes the potential
impact on ECL, classification and measurement of financial instruments, goodwill and other intangible assets, and assumptions
used in making the long-term viability statement and going concern assumption.
Read the disclosures in relation to climate risk made in the other information within the Annual Report to ascertain whether the
disclosures are materially consistent with the financial statements and our knowledge from our audit. Our responsibility over other
information is further described in the Reporting on other information section of our report.
Our procedures did not identify any material incremental adjustments needed to capture climate impacts on the Group and parent company
financial statements.
Our ability to detect irregularities, including fraud, and our response
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined below, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to breaches of financial crime laws and regulations and regulatory compliance, including regulatory reporting requirements and conduct
of business, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also
considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006 and relevant tax
legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk
of override of controls) and determined that the principal risks were related to posting inappropriate journal entries in relation to cost targets,
and management bias in accounting estimates, particularly those related to the valuation of certain financial instruments. The Group
engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in
response to such risks in their work.
Audit procedures performed by the Group engagement team and/or component auditors included:
Review of correspondence with and reports from regulators, including the Prudential Regulation Authority ('PRA') and Financial
Conduct Authority ('FCA').
Review of reporting to the GAC and the Group Risk Committee in respect of compliance and legal matters.
Enquiry of management and those charged with governance, and review of internal audit reports insofar as they related to the
financial statements.
Obtaining legal confirmations from legal advisors relating to material litigation and compliance matters.
Assessing matters reported on the Group's whistleblowing programmes and the results of management's investigation of such
matters, insofar as they related to the financial statements.
Challenging assumptions and judgements made by management in its significant accounting estimates, in particular in relation to
the determination of the valuation of certain financial instruments, ECL, and the impairment assessment of investment in
subsidiaries.
Obtaining confirmations from third parties to confirm the existence of a sample of transactions and balances.
Identifying and testing journal entries, including those posted with certain descriptions, posted to certain account combinations, or
posted by unexpected users.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
HSBC Holdings plc Annual Report and Accounts 2024
337
Financial statements
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and
the parent company’s ability to continue to adopt the going
concern basis of accounting included:
Performing a risk assessment to identify factors that
could impact the going concern basis of accounting,
including both internal risks (e.g. strategy execution) and
external risks (e.g. macroeconomic conditions).
Understanding and evaluating the Group's financial
forecasts.
Understanding and evaluating the Group's stress testing
of liquidity and regulatory capital, including the severity of
the stress scenarios that were used.
Understanding and evaluating credit rating agency ratings
and actions.
Reading and evaluating the adequacy of the disclosures
made in the financial statements in relation to going
concern.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group's and the
parent company’s ability to continue as a going concern for a period
of at least twelve months from when the financial statements are
authorised for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group's and
the parent company's ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a
material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
Where PwC has provided independent assurance over other parts of
the annual report (specifically, certain ESG data), that is the subject of
a separate assurance report and does not fall within the scope of this
audit report.
With respect to the Strategic report and Report of the Directors, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included. Based on our work
undertaken in the course of the audit, the Companies Act 2006
requires us also to report certain opinions and matters as described
below.
Strategic report and Report of the
Directors
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Report of the
Directors for the year ended 31 December 2024 is consistent with
the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and parent
company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic report
and Report of the Directors.
Directors' Remuneration
In our opinion, the part of the Directors' Remuneration Report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
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HSBC Holdings plc Annual Report and Accounts 2024
Corporate governance statement
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the parent company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities with
respect to the corporate governance statement as other information
are described in the Reporting on other information section of this
report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
–
The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
–
The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and
an explanation of how these are being managed or mitigated;
–
The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of
any material uncertainties to the Group’s and parent company’s
ability to continue to do so over a period of at least twelve months
from the date of approval of the financial statements;
–
The directors’ explanation as to their assessment of the Group's
and parent company’s prospects, the period this assessment
covers and why the period is appropriate; and
–
The directors’ statement as to whether they have a reasonable
expectation that the parent company will be able to continue in
operation and meet its liabilities as they fall due over the period of
its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the Group and parent company was substantially less in
scope than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements
and our knowledge and understanding of the Group and parent
company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
–
The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the Group’s and parent company's position, performance,
business model and strategy;
–
The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
–
The section of the Annual Report describing the work of the GAC.
We have nothing to report in respect of our responsibility to report
when the directors’ statement relating to the parent company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for
the financial statements
As explained more fully in the Directors' responsibility statement, the
directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The directors are
also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the parent company
or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for
the audit of the financial statements
(encompassing our responsibilities under ISAs
and our additional responsibilities under ISAs
(UK)) is located on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for
the parent company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
HSBC Holdings plc Annual Report and Accounts 2024
339
Financial statements
Other required reporting
Companies Act 2006 exception
reporting
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
–
we have not obtained all the information and explanations we
require for our audit; or
–
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
–
certain disclosures of directors’ remuneration specified by law are
not made; or
–
the parent company financial statements and the part of the
Directors' Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Other matter
The company is required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rules to include these
financial statements in an annual financial report prepared under the
structured digital format required by DTR 4.1.15R - 4.1.18R and filed
on the National Storage Mechanism of the Financial Conduct
Authority. This auditors’ report provides no assurance over whether
the structured digital format annual financial report has been prepared
in accordance with those requirements.
Matthew Falconer (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP Chartered
Accountants and Statutory Auditors London
19 February 2025
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HSBC Holdings plc Annual Report and Accounts 2024
Financial statements
Consolidated income statement
for the year ended 31 December 2024
2024
2023
2022
Notes*
$m
$m
$m
Net interest income
32,733
35,796
30,377
– interest income1,2
108,631
100,868
52,826
– interest expense3
(75,898)
(65,072)
(22,449)
Net fee income
2
12,301
11,845
11,770
– fee income
16,266
15,616
15,124
– fee expense
(3,965)
(3,771)
(3,354)
Net income from financial instruments held for trading or managed on a fair value basis4
3
21,116
16,661
10,278
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives,
measured at fair value through profit or loss
3
5,901
7,887
(13,831)
Insurance finance (expense)/income
4
(5,978)
(7,809)
13,799
Insurance service result
4
1,310
1,078
809
– insurance revenue
2,752
2,259
1,977
– insurance service expense
(1,442)
(1,181)
(1,168)
Gain on acquisition5
—
1,591
—
Gains/(losses) recognised on sale of business operations6
(1,752)
(61)
(2,678)
Other operating income/(expense)7
223
(930)
96
Net operating income before change in expected credit losses and other credit impairment charges8
65,854
66,058
50,620
Change in expected credit losses and other credit impairment charges
(3,414)
(3,447)
(3,584)
Net operating income
62,440
62,611
47,036
Employee compensation and benefits
5
(18,465)
(18,220)
(18,003)
General and administrative expenses
(10,498)
(10,383)
(10,848)
Depreciation and impairment of property, plant and equipment and right-of-use assets9
(1,845)
(1,640)
(2,149)
Amortisation and impairment of intangible assets
(2,235)
(1,827)
(1,701)
Total operating expenses
(33,043)
(32,070)
(32,701)
Operating profit
29,397
30,541
14,335
Share of profit in associates and joint ventures
18
2,912
2,807
2,723
Impairment of interest in associate
18
—
(3,000)
—
Profit before tax
32,309
30,348
17,058
Tax expense
7
(7,310)
(5,789)
(809)
Profit for the year
24,999
24,559
16,249
Attributable to:
– ordinary shareholders of the parent company
22,917
22,432
14,346
– preference shareholders of the parent company
—
—
—
– other equity holders
1,062
1,101
1,213
– non-controlling interests
1,020
1,026
690
Profit for the year
24,999
24,559
16,249
$
$
$
Basic earnings per ordinary share
9
1.25
1.15
0.72
Diluted earnings per ordinary share
9
1.24
1.14
0.72
For Notes on the financial statements, see page 353.
1 Interest income includes $93,388m (2023: $88,657m; 2022: $45,994m) of interest recognised on financial assets measured at amortised cost and $15,273m
(2023: $12,134m; 2022: $6,293m) of interest recognised on financial assets measured at fair value through other comprehensive income. It also includes a net
$237m loss related to the early redemption of legacy securities.
2 Interest income is calculated using the effective interest method and comprises interest recognised on financial assets measured at either amortised cost or fair
value through other comprehensive income.
3 Interest expense includes $72,594m (2023: $62,095m; 2022: $20,798m) of interest on financial instruments, excluding interest on debt instruments issued by
HSBC for funding purposes that are designated under the fair value option to reduce an accounting mismatch and on derivatives managed in conjunction with
those debt instruments included in interest expense.
4
Includes a $255m gain (2023: $315m loss) on the foreign exchange hedging of the proceeds from the sale of our banking business in Canada and a $114m
mark-to-market gain (2023:nil) on interest rate hedging of the portfolio of retained loans post sale of our retail banking business in France.
5
Gain recognised in respect of the acquisition of SVB UK.
6
This line item has been updated to include amounts from Other operating income relating to all sales of business operations; in the 2023 Annual Report and Accounts,
this line item only reflected the disposal of our France retail banking business. The amount in 2024 includes a $1.0bn loss on disposal and a $5.2bn loss on the recycling
in foreign currency translation reserve losses and other reserves arising on sale of our business in Argentina. This was partly offset by a gain of $4.6bn, inclusive of the
recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn of other reserves losses but excluding the $255m gain on the foreign exchange hedging
(see footnote 4 above) on the sale of our banking business in Canada. The amount in 2023 primarily reflected losses due to restrictions impacting the recoverability of
assets in Russia, partly offset by a gain on sale of our retail banking operations in France. The amount in 2022 included losses from classifying businesses as held for
sale as part of a broader restructuring of our European business.
7
Other operating income/(expense) includes a loss on net monetary positions of $1,187m (2023: $1,667m; 2022: $678m) as a result of applying IAS 29 ‘Financial
Reporting in Hyperinflationary Economies’.
8
Net operating income before change in expected credit losses and other credit impairment charges also referred to as revenue.
9
Includes depreciation of the right-of-use assets of $711m (2023: $663m; 2022: $717m).
HSBC Holdings plc Annual Report and Accounts 2024
341
Financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2024
2024
2023
2022
$m
$m
$m
Profit for the year
24,999
24,559
16,249
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income
163
2,599
(7,232)
– fair value gains/(losses)
41
2,381
(9,618)
– fair value losses/(gains) transferred to the income statement on disposal
69
905
(18)
– expected credit (recoveries)/losses recognised in the income statement
(6)
59
56
– disposal of subsidiary
85
—
—
– income taxes
(26)
(746)
2,348
Cash flow hedges
(52)
2,953
(3,655)
– fair value gains/(losses)
(282)
2,534
(4,207)
– fair value (gains)/losses reclassified to the income statement
(135)
1,463
(758)
– disposal of subsidiary
262
—
—
– income taxes
103
(1,044)
1,310
Share of other comprehensive income/(expense) of associates and joint ventures
462
47
(367)
– share for the year
462
47
(367)
Net finance income/(expenses) from insurance contracts
(142)
(364)
1,775
– before income taxes
(191)
(491)
2,393
– income taxes
49
127
(618)
Exchange differences
833
(204)
(9,918)
– foreign exchange losses reclassified to the income statement on disposal of a foreign operation
5,816
—
—
– other exchange differences
(4,983)
(204)
(9,918)
Items that will not be reclassified subsequently to profit or loss:
Fair value gains on property revaluation
5
1
280
Remeasurement of defined benefit asset/(liability)
(228)
(314)
(1,031)
– before income taxes
(342)
(413)
(1,723)
– income taxes
114
99
692
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in
own credit risk
(439)
(1,219)
1,922
– before income taxes
(579)
(1,617)
2,573
– income taxes
140
398
(651)
Equity instruments designated at fair value through other comprehensive income
99
(120)
107
– fair value gains/(losses)
141
(120)
107
– income taxes
(42)
—
—
Effects of hyperinflation
1,239
1,604
877
Other comprehensive income/(expense) for the year, net of tax
1,940
4,983
(17,242)
Total comprehensive income/(expense) for the year
26,939
29,542
(993)
Attributable to:
– ordinary shareholders of the parent company
24,833
27,397
(2,810)
– other equity holders
1,062
1,101
1,213
– non-controlling interests
1,044
1,044
604
Total comprehensive income/(expense) for the year
26,939
29,542
(993)
Financial statements
342
HSBC Holdings plc Annual Report and Accounts 2024
Consolidated balance sheet
at 31 December 2024
At
31 Dec 2024
31 Dec 2023
Notes*
$m
$m
Assets
Cash and balances at central banks
267,674
285,868
Hong Kong Government certificates of indebtedness
42,293
42,024
Trading assets
11
314,842
289,159
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss
14
115,769
110,643
Derivatives
15
268,637
229,714
Loans and advances to banks
102,039
112,902
Loans and advances to customers
930,658
938,535
Reverse repurchase agreements – non-trading
252,549
252,217
Financial investments
16
493,166
442,763
Assets held for sale
23
27,234
114,134
Prepayments, accrued income and other assets1
22
152,740
171,597
Current tax assets
1,313
1,536
Interests in associates and joint ventures
18
28,909
27,344
Goodwill and intangible assets
21
12,384
12,487
Deferred tax assets
7
6,841
7,754
Total assets
3,017,048
3,038,677
Liabilities
Hong Kong currency notes in circulation
42,293
42,024
Deposits by banks
73,997
73,163
Customer accounts
1,654,955
1,611,647
Repurchase agreements – non-trading
180,880
172,100
Trading liabilities
24
65,982
73,150
Financial liabilities designated at fair value
25
138,727
141,426
Derivatives
15
264,448
234,772
Debt securities in issue
26
105,785
93,917
Liabilities of disposal groups held for sale
23
29,011
108,406
Accruals, deferred income and other liabilities1
27
130,340
143,901
Current tax liabilities
1,729
2,777
Insurance contract liabilities
4
107,629
120,851
Provisions
28
1,724
1,741
Deferred tax liabilities
7
1,317
1,238
Subordinated liabilities
29
25,958
24,954
Total liabilities
2,824,775
2,846,067
Equity
Called up share capital
32
8,973
9,631
Share premium account
32
14,810
14,738
Other equity instruments
19,070
17,719
Other reserves
(10,282)
(8,907)
Retained earnings
152,402
152,148
Total shareholders’ equity
184,973
185,329
Non-controlling interests
19
7,300
7,281
Total equity
192,273
192,610
Total liabilities and equity
3,017,048
3,038,677
* For Notes on the financial statements, see page 353.
1 In 2023 ‘Items in the course of collection from other banks’ ($6.3bn) were presented on the face of the balance sheet but are now reported within
‘Prepayments, accrued income and other assets’ in the Annual Report and Accounts 2024. Similarly, ‘Items in the course of transmission to other
banks’ ($7.3bn) are now presented within ‘Accruals, deferred income and other liabilities’.
The accompanying notes on pages 353 to 438 and the audited sections in the Risk review on pages 126 to 235 and ‘Directors’ remuneration
report’ on pages 279 to 317 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 19 February 2025 and signed on its behalf by:
Sir Mark E Tucker
Pam Kaur
Group Chairman
Group Chief Financial Officer
HSBC Holdings plc Annual Report and Accounts 2024
343
Financial statements
for the year ended 31 December 2024
Other reserves
Called up
share
capital
and share
premium
Other
equity
instru-
ments
Financial
assets at
FVOCI
reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
Merger
and
other
reserves
1,2
Insurance
finance
reserve3
Retained
earnings
1,4
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
24,369 17,719
(3,507)
(1,033)
(33,753)
28,601
785
152,148 185,329
7,281 192,610
Profit for the year
—
—
—
—
—
—
—
23,979
23,979
1,020 24,999
Other comprehensive income
(net of tax)
—
—
259
(46)
863
5
(183)
1,018
1,916
24 1,940
– debt instruments at fair value
through other
comprehensive income
—
—
62
—
—
—
—
—
62
16
78
– equity instruments
designated at fair value
through other
comprehensive income
—
—
75
—
—
—
—
—
75
24
99
– cash flow hedges
—
—
—
(312)
—
—
—
—
(312)
(2)
(314)
– changes in fair value of
financial liabilities designated
at fair value upon initial
recognition arising from
changes in own credit risk
—
—
—
—
—
—
—
(439)
(439)
—
(439)
– property revaluation
—
—
—
—
—
5
—
—
5
—
5
– remeasurement of defined
benefit asset/liability
—
—
—
—
—
—
—
(244)
(244)
16
(228)
– share of other
comprehensive income of
associates and joint ventures
—
—
—
—
—
—
—
462
462
—
462
– effects of hyperinflation
—
—
—
—
—
—
—
1,239
1,239
— 1,239
– foreign exchange reclassified
to income statement on
disposal of a foreign
operation5
—
—
—
—
5,816
—
—
—
5,816
— 5,816
– other reserves reclassified to
income statement on
disposal of a foreign
operation
—
—
85
262
—
—
—
—
347
—
347
– insurance finance income/
(expense) recognised in
other comprehensive income
—
—
—
—
—
—
(142)
—
(142)
—
(142)
– exchange differences
—
—
37
4
(4,953)
—
(41)
—
(4,953)
(30) (4,983)
Total comprehensive income
for the year
—
—
259
(46)
863
5
(183)
24,997
25,895
1,044 26,939
Shares issued under employee
remuneration and share plans
77
—
—
—
—
—
—
(77)
—
—
—
Capital securities issued6
— 3,601
—
—
—
—
—
—
3,601
— 3,601
Dividends to shareholders
—
—
—
—
—
—
—
(16,410) (16,410)
(690) (17,100)
Redemption of securities7
— (2,250)
—
—
—
—
—
—
(2,250)
— (2,250)
Transfers8
—
—
—
—
—
(2,945)
—
2,945
—
—
—
Cost of share-based payment
arrangements
—
—
—
—
—
—
—
529
529
—
529
Share buy-back9
—
—
—
—
—
—
—
(11,043) (11,043)
— (11,043)
Cancellation of shares
(663)
—
—
—
—
663
—
—
—
—
—
Other movements
—
—
2
—
3
4
—
(687)
(678)
(335) (1,013)
At 31 Dec 2024
23,783 19,070
(3,246)
(1,079)
(32,887)
26,328
602
152,402 184,973
7,300 192,273
Consolidated statement of changes in equity
Financial statements
344
HSBC Holdings plc Annual Report and Accounts 2024
for the year ended 31 December 2023
Other reserves
Called up
share
capital and
share
premium
Other
equity
instru-
ments
Financial
assets at
FVOCI
reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
Merger
and
other
reserves
1,2
Insurance
finance
reserve3
Retained
earnings
1,4
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2023
24,811 19,746
(7,038)
(3,808)
(32,575)
33,209
1,079
142,409 177,833
7,364 185,197
Profit for the year
—
—
—
—
—
—
—
23,533
23,533
1,026 24,559
Other comprehensive income
(net of tax)
—
—
2,402
3,030
(211)
1
(371)
114
4,965
18 4,983
– debt instruments at fair value
through other
comprehensive income
—
—
2,574
—
—
—
—
—
2,574
25 2,599
– equity instruments
designated at fair value
through other
comprehensive income
—
—
(93)
—
—
—
—
—
(93)
(27)
(120)
– cash flow hedges
—
—
—
2,919
—
—
—
—
2,919
34 2,953
– changes in fair value of
financial liabilities designated
at fair value upon initial
recognition arising from
changes in own credit risk
—
—
—
—
—
—
—
(1,220)
(1,220)
1 (1,219)
– property revaluation
—
—
—
—
—
1
—
—
1
—
1
– remeasurement of defined
benefit asset/liability
—
—
—
—
—
—
—
(317)
(317)
3
(314)
– share of other
comprehensive income of
associates and joint ventures
—
—
—
—
—
—
47
47
—
47
– effects of hyperinflation
—
—
—
—
—
—
—
1,604
1,604
— 1,604
– insurance finance income/
(expense) recognised in
other comprehensive income
—
—
—
—
—
—
(364)
—
(364)
—
(364)
– exchange differences
—
—
(79)
111
(211)
—
(7)
—
(186)
(18)
(204)
Total comprehensive income
for the year
—
—
2,402
3,030
(211)
1
(371)
23,647
28,498
1,044 29,542
Shares issued under employee
remuneration and share plans
79
—
—
—
—
—
—
(79)
—
—
—
Capital securities issued
— 1,996
—
—
—
—
—
—
1,996
— 1,996
Dividends to shareholders
—
—
—
—
—
—
—
(11,593) (11,593)
(603) (12,196)
Redemption of securities
— (4,023)
—
—
—
—
—
20
(4,003)
— (4,003)
Transfers8
—
—
—
—
—
(5,130)
—
5,130
—
—
—
Cost of share-based payment
arrangements
—
—
—
—
—
—
—
482
482
—
482
Share buy-back
—
—
—
—
—
—
—
(7,025)
(7,025)
— (7,025)
Cancellation of shares
(521)
—
—
—
—
521
—
—
—
—
—
Other movements
—
—
1,129
(255)
(967)
—
77
(843)
(859)
(524) (1,383)
At 31 Dec 2023
24,369 17,719
(3,507)
(1,033)
(33,753)
28,601
785
152,148 185,329
7,281 192,610
Consolidated statement of changes in equity (continued)
HSBC Holdings plc Annual Report and Accounts 2024
345
Financial statements
for the year ended 31 December 2022
Other reserves
Called up
share
capital and
share
premium
Other
equity
instru-
ments
Financial
assets at
FVOCI
reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
Merger
and
other
reserves
1,2
Insurance
finance
reserve3
Retained
earnings
1,4
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2022
24,918 22,414
49
(197)
(22,769)
30,060
(696)
135,236 189,015
7,303 196,318
Profit for the year
—
—
—
—
—
—
—
15,559
15,559
690 16,249
Other comprehensive income
(net of tax)
—
—
(7,089)
(3,613)
(9,806)
174
1,775
1,403 (17,156)
(86) (17,242)
– debt instruments at fair value
through other
comprehensive income
—
—
(7,181)
—
—
—
—
—
(7,181)
(51) (7,232)
– equity instruments
designated at fair value
through other
comprehensive income
—
—
92
—
—
—
—
—
92
15
107
– cash flow hedges
—
—
—
(3,613)
—
—
—
—
(3,613)
(42) (3,655)
– changes in fair value of
financial liabilities designated
at fair value upon initial
recognition arising from
changes in own credit risk
—
—
—
—
—
—
—
1,922
1,922
— 1,922
– property revaluation
—
—
—
—
—
174
—
—
174
106
280
– remeasurement of defined
benefit asset/liability
—
—
—
—
—
—
—
(1,029)
(1,029)
(2) (1,031)
– share of other
comprehensive income of
associates and joint ventures
—
—
—
—
—
—
—
(367)
(367)
—
(367)
– effects of hyperinflation
—
—
—
—
—
—
—
877
877
—
877
– insurance finance income/
(expense) recognised in
other comprehensive income
—
—
—
—
—
—
1,775
—
1,775
— 1,775
– exchange differences
—
—
—
—
(9,806)
—
—
—
(9,806)
(112) (9,918)
Total comprehensive income
for the year
—
—
(7,089)
(3,613)
(9,806)
174
1,775
16,962
(1,597)
604
(993)
Shares issued under employee
remuneration and share plans
67
—
—
—
—
—
—
(67)
—
—
—
Dividends to shareholders
—
—
—
—
—
—
—
(6,544)
(6,544)
(426) (6,970)
Redemption of securities
— (2,668)
—
—
—
—
—
402
(2,266)
— (2,266)
Transfers8
—
—
—
—
—
2,499
—
(2,499)
—
—
—
Cost of share-based payment
arrangements
—
—
—
—
—
—
—
400
400
—
400
Share buy-back
—
—
—
—
—
—
—
(1,000)
(1,000)
— (1,000)
Cancellation of shares
(174)
—
—
—
—
174
—
—
—
—
—
Other movements
—
—
2
2
—
302
—
(481)
(175)
(117)
(292)
At 31 Dec 2022
24,811 19,746
(7,038)
(3,808)
(32,575)
33,209
1,079
142,409 177,833
7,364 185,197
Consolidated statement of changes in equity (continued)
1
Cumulative goodwill amounting to $5,138m was charged against reserves in respect of acquisitions of subsidiaries prior to 1 January 1998, including $3,469m
charged against the merger reserve arising on the acquisition of HSBC Bank plc. The balance of $1,669m was charged against retained earnings.
2 Statutory share premium relief under section 131 of the Companies Act 1985 was taken in respect of the acquisition of HSBC Bank plc in 1992,
HSBC Continental Europe in 2000 and HSBC Finance Corporation in 2003, and the shares issued were recorded at their nominal value only. In HSBC’s
consolidated financial statements, the fair value differences of $8,290m in respect of HSBC Continental Europe and $12,768m in respect of HSBC Finance
Corporation were recognised in the merger reserve. The merger reserve created on the acquisition of HSBC Finance Corporation subsequently became
attached to HSBC Overseas Holdings (UK) Limited, following a number of intra-Group reorganisations, and has since been transferred to retained earnings as
part of the impairment recognised in respect of HSBC Overseas Holding (UK) Limited. During 2009, pursuant to section 131 of the Companies Act 1985,
statutory share premium relief was taken in respect of the rights issue and $15,796m was recognised in the merger reserve.
3 The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France. Underlying
assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount that matches income or
expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the elimination of income statement accounting
mismatches. The remaining amount of finance income or expenses for these insurance contracts is recognised in other comprehensive income (‘OCI’).
4 At 31 December 2024, retained earnings included 28,744,609 own shares held. These include own shares held within HSBC’s insurance business’s retirement
funds for the benefit of policyholders or beneficiaries within employee trusts for the settlement of shares expected to be delivered under employee share
schemes or bonus plans, and the market-making activities in Markets and Securities Services.
5 At 31 December 2024, accumulated foreign currency translation reserve losses of $5,816m were recycled to the income statement, including $5,166m upon
completion of the sale of our business in Argentina and $564m upon completion of the sale of our banking business in Canada.
6 HSBC Holdings issued SGD1,500m 5.250% contingent convertible securities in June 2024, and a further $1,350m 6.875% and $1,150m 6.950% contingent
convertible securities in September 2024. All instruments were recorded net of issuance costs.
7
In September 2024, HSBC Holdings redeemed its $2,250m 6.375% contingent convertible securities.
8 At 31 December 2024, an impairment of $11,442m (2023: $5,512m) of HSBC Overseas Holdings (UK) Limited was recognised, resulting in a permitted transfer
of $2,945m (2023: $5,130m) from the remaining historical merger reserve to retained earnings, and a realisation of nil share-based payment reserve (2023:
$382m) within retained earnings. In 2022, a part-reversal of the impairment resulted in a transfer from retained earnings back to the merger reserve of $2,499m.
9
HSBC Holdings announced the following share buy-backs during the year: a share buy-back of up to $2.0bn in February 2024, which was completed in April
2024; a share buy-back of up to $3.0bn in April 2024, which was completed in July 2024; a share buy-back of up to $3.0bn in July 2024, which was completed in
October 2024; and a share buy-back of up to $3.0bn in October 2024, which was completed in February 2025.
Financial statements
346
HSBC Holdings plc Annual Report and Accounts 2024
Profit before tax
32,309
30,348
17,058
Adjustments for non-cash items:
Depreciation, amortisation and impairment
4,080
3,466
3,850
Net loss from investing activities
180
1,213
11
Share of profit in associates and joint ventures
(2,912)
(2,807)
(2,723)
Impairment of interest in associate
—
3,000
—
(Gain)/loss on acquisition/disposal of subsidiaries, businesses, associates and joint ventures
1,704
(1,775)
2,554
Change in expected credit losses gross of recoveries and other credit impairment charges
3,674
3,717
3,898
Provisions including pensions
299
266
638
Share-based payment expense
529
482
400
Other non-cash items included in profit before tax
(5,290)
(4,299)
(774)
Elimination of exchange differences1
26,734
(10,678)
48,718
Changes in operating assets and liabilities
Change in net trading securities and derivatives
(41,385)
(63,247)
20,166
Change in loans and advances to banks and customers
7,275
(14,145)
31,649
Change in reverse repurchase agreements – non-trading
(4,227)
(2,095)
(23,405)
Change in financial assets designated and otherwise mandatorily measured at fair value
(20,662)
(9,994)
14,164
Change in other assets2
7,685
(10,254)
(12,858)
Change in deposits by banks and customer accounts
44,237
45,021
(91,194)
Change in repurchase agreements – non-trading
8,700
43,366
4,344
Change in debt securities in issue
11,942
11,945
12,518
Change in financial liabilities designated at fair value
(2,248)
10,097
(13,654)
Change in other liabilities
(1,603)
8,742
6,021
Dividends received from associates
1,062
1,067
944
Contributions paid to defined benefit plans
(167)
(208)
(194)
Tax paid
(6,611)
(4,117)
(2,776)
Net cash from operating activities
65,305
39,111
19,355
Purchase of financial investments2
(523,454)
(563,561)
(511,097)
Proceeds from the sale and maturity of financial investments2
453,502
504,174
492,624
Net cash flows from the purchase and sale of property, plant and equipment
(1,344)
(1,145)
(1,284)
Net cash flows from disposal of loan portfolio and customer accounts
—
623
(3,530)
Net investment in intangible assets
(2,542)
(2,550)
(3,125)
Net cash inflow on acquisition/disposal of subsidiaries, businesses, associates and joint ventures3
9,891
1,239
—
Net cash outflow on acquisition/disposal of subsidiaries, businesses, associates and joint ventures4
(12,617)
(1,692)
(989)
Net cash from investing activities
(76,564)
(62,912)
(27,401)
Issue of ordinary share capital and other equity instruments
3,602
1,996
—
Cancellation of shares
(11,348)
(5,812)
(2,285)
Net purchases of own shares for market-making and investment purposes
(541)
(614)
(91)
Net cash flow from change in stake of subsidiaries
—
(19)
(197)
Redemption of preference shares and other equity instruments
(3,433)
(4,003)
(2,266)
Subordinated loan capital issued
4,361
5,237
7,300
Subordinated loan capital repaid5
(2,000)
(2,147)
(1,777)
Dividends paid to shareholders of the parent company and non-controlling interests
(17,100)
(12,196)
(6,970)
Net cash from financing activities
(26,459)
(17,558)
(6,286)
Net decrease in cash and cash equivalents
(37,718)
(41,359)
(14,332)
Cash and cash equivalents at 1 Jan
490,933
521,671
574,032
Exchange differences in respect of cash and cash equivalents
(18,275)
10,621
(38,029)
Cash and cash equivalents at 31 Dec6
434,940
490,933
521,671
Consolidated statement of cash flows
for the year ended 31 December 2024
2024
2023
2022
$m
$m
$m
HSBC Holdings plc Annual Report and Accounts 2024
347
Financial statements
Cash and cash equivalents comprise:
– cash and balances at central banks
267,674
285,868
327,002
– loans and advances to banks of one month or less
69,803
76,620
72,295
– reverse repurchase agreements with banks of one month or less
58,290
64,341
68,682
– treasury bills, other bills and certificates of deposit less than three months8
27,307
33,303
26,727
– cash collateral, net settlement accounts and items in course of collection from/transmission to other banks
9,827
14,866
18,878
– cash and cash equivalents held for sale7
2,039
15,935
8,087
Cash and cash equivalents at 31 Dec6
434,940
490,933
521,671
Consolidated statement of cash flows (continued)
for the year ended 31 December 2024
2024
2023
2022
$m
$m
$m
Interest received was $110,106m (2023: $98,910m; 2022: $55,664m), interest paid was $81,680m (2023: $65,980m; 2022: $22,856m) and
dividends received (excluding dividends received from associates, which are presented separately above) were $2,812m (2023: $1,869m; 2022:
$1,638m).
1
Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be
determined without unreasonable expense.
2
Post adoption of IFRS 17 ‘Insurance Contracts’, certain assets have been reclassified from ‘Investing activities’ to ‘Operating activities’. The comparative data
for 2022 have not been re-presented.
3 This includes $9.3bn from the sale of our banking business in Canada.
4
This includes $10.6bn from the sale of our retail banking business in France and $1.8bn from the sale of our business in Argentina.
5
Subordinated liabilities changes during the year are attributable to repayments of $(2.0)bn (2023: $(2.1)bn; 2022: $(1.8)bn) of securities. Non-cash changes
during the year included foreign exchange gains/losses of $1.6bn gain (2023: $0.6bn loss; 2022: $1.1bn gain) and fair value gains/losses of $1.0bn gain (2023:
$0.8bn loss; 2022: $3.1bn gain).
6
At 31 December 2024, $50.4bn (2023: $61.8bn; 2022: $59.3bn) was not available for use by HSBC due to a range of restrictions, including currency exchange
and other restrictions.
7
Includes $1.9bn (2023: $5.6bn, 2022: $6.5bn) of cash and balances at central banks and $0.1bn (2023: $10.5bn, 2022: $0.2bn) of loans and advances to banks of
one month or less. There is nil balance in 2024 for reverse repurchase agreements with banks of one month or less (2023: $0.2bn, 2022: $1.3bn) and cash
collateral, net settlement accounts and items in course of collection from/transmission to other banks (2023: $(0.4)bn, 2022: $(0.2)bn).
8 The amount in this line is included in the ‘Financial investments’ and ‘Financial assets designated and otherwise mandatorily measured at fair value through profit
or loss’ line items in the Consolidated balance sheet on page 343.
Financial statements
348
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings income statement
for the year ended 31 December 2024
2024
2023
2022
Notes*
$m
$m
$m
Net interest expense
(5,758)
(5,339)
(3,074)
– interest income
3,053
2,864
937
– interest expense
(8,811)
(8,203)
(4,011)
Net fee (expense)/income
(10)
2
(3)
Net income from financial instruments held for trading or managed on a fair value basis
3
2,899
1,063
2,129
Changes in fair value of designated debt and related derivatives1
3
(125)
(1,468)
2,144
Changes in fair value of other financial instruments mandatorily measured at fair value through
profit or loss
3
2,086
3,692
(2,409)
Gains less losses from financial investments
2
45
58
Dividend income from subsidiaries3
33,846
16,824
9,478
Other operating income
276
332
91
Total operating income
33,216
15,151
8,414
Employee compensation and benefits
5
(29)
(15)
(41)
General and administrative expenses
(1,148)
(1,327)
(1,586)
(Impairment) of subsidiaries/reversal of impairment3
19
(11,490)
(5,574)
2,493
Total operating expenses
(12,667)
(6,916)
866
Profit before tax
20,549
8,235
9,280
Tax credit2,3
499
977
3,077
Profit for the year
21,048
9,212
12,357
* For Notes on the financial statements, see page 353.
1 The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
2 The tax credit in 2022 includes $2.2bn arising from the recognition of a deferred tax asset from historical tax losses in HSBC Holdings. This was a result of
improved profit forecasts for the UK tax group, which accelerated the expected utilisation of these losses and reduced uncertainty regarding their recoverability.
3 The amounts recorded within profit before tax with respect to dividend income from subsidiaries and impairment/reversal of impairment of subsidiaries are not
subject to tax.
HSBC Holdings statement of comprehensive income
for the year ended 31 December 2024
2024
2023
2022
$m
$m
$m
Profit for the year
21,048
9,212
12,357
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit or loss:
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes
in own credit risk
21
(124)
326
– before income taxes
32
(166)
435
– income taxes
(11)
42
(109)
Other comprehensive income/(expense) for the year, net of tax
21
(124)
326
Total comprehensive income for the year
21,069
9,088
12,683
HSBC Holdings plc Annual Report and Accounts 2024
349
Financial statements
HSBC Holdings balance sheet
31 Dec 2024
31 Dec 2023
Notes*
$m
$m
Assets
Cash and balances with HSBC undertakings
2,548
7,029
Financial assets with HSBC undertakings designated and otherwise mandatorily measured at fair value
61,286
59,879
Derivatives
15
3,054
3,344
Loans and advances to HSBC undertakings
37,677
27,354
Trading Assets
709
—
Financial investments
16
10,328
19,558
Prepayments, accrued income and other assets
4,353
5,341
Current tax assets
305
924
Investments in subsidiaries
19
152,337
159,478
Intangible assets
162
180
Deferred tax assets
1,498
2,082
Total assets at 31 Dec
274,257
285,169
Liabilities and equity
Liabilities
Amounts owed to HSBC undertakings
231
168
Financial liabilities designated at fair value
25
41,582
43,638
Derivatives
15
5,340
6,090
Debt securities in issue
26
64,320
65,239
Accruals, deferred income and other liabilities
3,097
4,289
Subordinated liabilities
29
23,548
24,439
Total liabilities
138,118
143,863
Equity
Called up share capital
32
8,973
9,631
Share premium account
32
14,810
14,738
Other equity instruments
32
19,024
17,703
Merger and other reserves
33,664
35,946
Retained earnings
59,668
63,288
Total equity
136,139
141,306
Total liabilities and equity at 31 Dec
274,257
285,169
* For Notes on the financial statements, see page 353.
The accompanying notes on pages 353 to 438, the audited sections in the Risk review on pages 126 to 235 and ‘Directors’ remuneration
report’ on pages 279 to 317 form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 19 February 2025 and signed on its behalf by:
Sir Mark E Tucker
Pam Kaur
Group Chairman
Group Chief Financial Officer
Financial statements
350
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings statement of changes in equity
for the year ended 31 December 2024
Other
reserves
Called up
share
capital
Share
premium
Other
equity
instruments
Retained
earnings1,2
Merger
and other
reserves
Total
shareholders’
equity
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
9,631
14,738
17,703
63,288
35,946
141,306
Profit for the year
—
—
—
21,048
—
21,048
Other comprehensive income (net of tax)
—
—
—
21
—
21
– changes in fair value of financial liabilities designated at fair value due to
movement in own credit risk
—
—
—
21
—
21
Total comprehensive income for the year
—
—
—
21,069
—
21,069
Shares issued under employee share plans
5
72
—
(181)
—
(104)
Capital securities issued3
—
—
3,571
—
—
3,571
Purchase and cancellation of shares4
(663)
—
—
(11,043)
663
(11,043)
Dividends to shareholders
—
—
—
(16,410)
—
(16,410)
Redemption of capital securities5
—
—
(2,250)
—
—
(2,250)
Transfers6
—
—
—
2,945
(2,945)
—
At 31 Dec 2024
8,973
14,810
19,024
59,668
33,664
136,139
At 1 Jan 2023
10,147
14,664
19,746
67,996
40,555
153,108
Profit for the year
—
—
—
9,212
—
9,212
Other comprehensive income (net of tax)
—
—
—
(124)
—
(124)
– changes in fair value of financial liabilities designated at fair value due to
movement in own credit risk
—
—
—
(124)
—
(124)
Total comprehensive income for the year
—
—
—
9,088
—
9,088
Shares issued under employee share plans
5
74
—
(328)
—
(249)
Capital securities issued
—
—
1,980
—
—
1,980
Purchase and cancellation of shares
(521)
—
—
(7,025)
521
(7,025)
Dividends to shareholders
—
—
—
(11,593)
—
(11,593)
Redemption of capital securities
—
—
(4,023)
20
—
(4,003)
Transfers6
—
—
—
5,130
(5,130)
—
At 31 Dec 2023
9,631
14,738
17,703
63,288
35,946
141,306
At 1 Jan 2022
10,316
14,602
22,414
65,116
37,882
150,330
Profit for the year
—
—
—
12,357
—
12,357
Other comprehensive income (net of tax)
—
—
—
326
—
326
– changes in fair value of financial liabilities designated at fair value due to
movement in own credit risk
—
—
—
326
—
326
Total comprehensive income for the year
—
—
—
12,683
—
12,683
Shares issued under employee share plans
5
62
—
(161)
—
(94)
Capital securities issued
—
—
—
—
—
—
Purchase and cancellation of shares
(174)
—
—
(1,001)
174
(1,001)
Dividends to shareholders
—
—
—
(6,544)
—
(6,544)
Redemption of capital securities
—
—
(2,668)
402
—
(2,266)
Transfers6
—
—
—
(2,499)
2,499
—
At 31 Dec 2022
10,147
14,664
19,746
67,996
40,555
153,108
Dividends per ordinary share at 31 December 2024 were $0.82 (2023: $0.53; 2022: $0.27).
1 Retained earnings include unrealised profits from intercompany transactions and share-based payment reserves, which are excluded from distributable
reserves. Distributable reserves include the distributable portions of retained earnings and the merger reserve. Distributable reserves are reduced by ordinary
dividend payments, distributions on additional tier 1 instruments, share buy-backs and impairments in investments in subsidiaries. They are increased by profits
and the realisation of retained earnings or merger reserves upon impairment of an associated investment in subsidiary.
2 At 31 December 2024, retained earnings included 29,739,384 own shares held. These include own shares held by HSBC Holdings for the benefit of
beneficiaries within employee trusts for the settlement of shares expected to be delivered under employee share schemes or bonus plans.
3 HSBC Holdings issued SGD1,500m 5.250% contingent convertible securities in June 2024, and a further $1,350m 6.875% and $1,150m 6.950% contingent
convertible securities in September 2024. All instruments were recorded net of issuance cost.
4 HSBC Holdings announced the following share buy-backs during the year: a share buy-back of up to $2.0bn in February 2024, which was completed in April
2024; a share buy-back of up to $3.0bn in April 2024, which was completed in July 2024; a share buy-back of up to $3.0bn in July 2024, which was completed in
October 2024; and a share buy-back of up to $3.0bn in October 2024, which was completed in February 2025.
5 In September 2024, HSBC Holdings redeemed its $2,250m 6.375% contingent convertible securities.
6 At 31 December 2024, an impairment of $11,442m (2023: $5,512m) of HSBC Overseas Holdings (UK) Limited was recognised, resulting in a permitted transfer
of $2,945m (2023: $5,130m) from the remaining historical associated merger reserve to retained earnings, and a realisation of nil share-based payment reserves
(2023: $382m) to retained earnings. In 2022, a part-reversal of the impairment resulted in a transfer from retained earnings back to the merger reserve of
$2,499m.
HSBC Holdings plc Annual Report and Accounts 2024
351
Financial statements
HSBC Holdings statement of cash flows
for the year ended 31 December 2024
2024
2023
2022
$m
$m
$m
Profit before tax
20,549
8,235
9,280
Adjustments for non-cash items
11,721
5,611
(2,500)
– depreciation, amortisation and impairment/expected credit losses
11,552
5,629
(2,428)
– share-based payment expense
1
—
1
– other non-cash items included in profit before tax
53
(38)
(73)
– elimination of exchange differences1
115
20
—
Changes in operating assets and liabilities
Change in loans and advances to HSBC undertakings
(2,753)
(1,267)
(1,657)
Change in financial assets with HSBC undertakings designated and otherwise mandatorily measured at fair value
(1,978)
(7,767)
(914)
Change in net trading securities and net derivatives
(1,537)
(529)
4,712
Change in other assets
603
363
51
Change in financial investments
—
—
196
Change in debt securities in issue
469
1,964
(5,625)
Change in financial liabilities designated at fair value
292
3,096
(4,755)
Change in other liabilities
(1,897)
1,947
(3,394)
Tax received
1,691
577
215
Net cash from operating activities
27,160
12,230
(4,391)
Purchase of financial investments
(29,812)
(7,803)
(21,481)
Proceeds from the sale and maturity of financial investments
31,779
20,074
17,165
Net cash outflow from acquisition of or increase in stake of subsidiaries
(7,473)
(2,517)
(5,696)
Repayment of capital from subsidiaries
2,963
4,993
3,860
Net investment in intangible assets
(43)
(46)
(39)
Net cash from investing activities
(2,586)
14,701
(6,191)
Issue of ordinary share capital and other equity instruments
3,648
2,059
67
Redemption of preference shares and other equity instruments
(2,250)
(4,003)
(2,266)
Purchase of own shares
(532)
(855)
(438)
Cancellation of shares
(11,204)
(5,812)
(2,298)
Subordinated loan capital issued
4,268
5,270
7,300
Subordinated loan capital repaid
(3,994)
—
—
Debt securities issued
16,102
17,180
18,076
Debt securities repaid
(18,179)
(13,047)
(10,094)
Dividends paid on ordinary shares
(15,348)
(10,492)
(5,330)
Dividends paid to holders of other equity instruments
(1,062)
(1,101)
(1,214)
Net cash from financing activities
(28,551)
(10,801)
3,803
Net increase/(decrease) in cash and cash equivalents
(3,977)
16,130
(6,779)
Cash and cash equivalents at 1 January
22,814
6,756
13,535
Exchange differences in respect of cash and cash equivalents2
(144)
(72)
—
Cash and cash equivalents at 31 Dec
18,693
22,814
6,756
Cash and cash equivalents comprise:
– cash at bank with HSBC undertakings
2,548
7,029
3,210
– cash collateral and net settlement accounts
2,544
3,422
3,544
– loans and advances to HSBC undertakings of one month or less
8,500
—
—
– treasury and other eligible bills
5,101
12,363
2
Interest received was $6,624m (2023: $5,695m; 2022: $2,410m), interest paid was $8,800m (2023: $7,754m; 2022: $3,813m) and dividends
received were $33,846m (2023: $16,824m; 2022: $9,478m).
1 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be
determined without unreasonable expense. As this change has immaterial impact, 2022 prior period comparatives have not been restated.
2 In 2023, additional disclosure has been made in respect of exchange differences on cash and cash equivalents. As this change has immaterial impact, 2022 prior
period comparatives have not been restated.
Financial statements
352
HSBC Holdings plc Annual Report and Accounts 2024
Notes on the financial statements
Contents
353
1 Basis of preparation and material accounting policies
366
2 Net fee income
367
3 Net income/(expense) from financial instruments measured at
fair value through profit or loss
367
4 Insurance business
374
5 Employee compensation and benefits
379
6 Auditor’s remuneration
380
7 Tax
382
8 Dividends
383
9 Earnings per share
383
10 Segmental analysis
386
11 Trading assets
386
12 Fair values of financial instruments carried at fair value
393
13 Fair values of financial instruments not carried at fair value
395
14 Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
395
15 Derivatives
399
16 Financial investments
400
17 Assets pledged, collateral received and assets
transferred
401
18 Interests in associates and joint ventures
405
19 Investments in subsidiaries
407
20 Structured entities
409
21 Goodwill and intangible assets
411
22 Prepayments, accrued income and other assets
411
23 Assets held for sale, liabilities of disposal groups held for sale
and business acquisitions
413
24 Trading liabilities
414
25 Financial liabilities designated at fair value
414
26 Debt securities in issue
414
27 Accruals, deferred income and other liabilities
415
28 Provisions
416
29 Subordinated liabilities
417
30 Maturity analysis of assets, liabilities and off-balance sheet
commitments
422
31 Offsetting of financial assets and financial liabilities
423
32 Called up share capital and other equity instruments
425
33 Contingent liabilities, contractual commitments and guarantees
426
34 Finance lease receivables
426
35 Legal proceedings and regulatory matters
429
36 Related party transactions
430
37 Events after the balance sheet date
430
38 HSBC Holdings’ subsidiaries, joint ventures and associates
1
Basis of preparation and material accounting policies
1.1 Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings comply with UK-adopted international
accounting standards and with the requirements of the Companies Act 2006, and have also applied international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements are also prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IFRS Accounting
Standards’), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS
Accounting Standards for the periods presented. There were no unendorsed standards effective for the year ended 31 December 2024
affecting these consolidated and separate financial statements.
IFRS Accounting Standards adopted during the year ended 31 December 2024
There were no new standards, amendments to standards or interpretations that had an effect on these financial statements. Accounting
policies have been applied consistently.
(b) Differences between IFRS Accounting Standards and Hong Kong Financial Reporting
Standards
There are no significant differences between IFRS Accounting Standards and Hong Kong Financial Reporting Standards in terms of their
application to HSBC, and consequently there would be no significant differences had the financial statements been prepared in accordance
with Hong Kong Financial Reporting Standards. The ‘Notes on the financial statements’, taken together with the ‘Report of the Directors’,
include the aggregate of all disclosures necessary to satisfy IFRS Accounting Standards and Hong Kong Financial Reporting Standards.
(c) Future accounting developments
Minor amendments to IFRS Accounting Standards
The International Accounting Standards Board (‘IASB’) has published a number of minor amendments to IFRS Accounting Standards that are
effective from 1 January 2025. HSBC expects they will have an insignificant effect, when adopted, on the consolidated financial statements of
HSBC and the separate financial statements of HSBC Holdings.
Other amendments and new IFRS Accounting Standards
Amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’
In May 2024, the IASB issued amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’, effective for
annual reporting periods beginning on, or after, 1 January 2026. In addition to guidance as to when certain financial liabilities can be deemed
settled when using an electronic payment system, the amendments also provide further clarification regarding the classification of financial
assets that contain contractual terms that change the timing or amount of contractual cash flows, including those arising from ESG-related
contingencies, and financial assets with certain non-recourse features. The Group is undertaking an assessment of the potential impact.
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Financial statements
IFRS 18 ‘Presentation and Disclosure in Financial Statements’
In April 2024, the IASB issued IFRS 18 ‘Presentation and Disclosure in Financial Statements’, effective for annual reporting periods beginning
on or after 1 January 2027. The new accounting standard aims to give users of financial statements more transparent and comparable
information about an entity’s financial performance. It will replace IAS 1 ‘Presentation of Financial Statements’ but carries over many
requirements from that IFRS Accounting Standard unchanged. In addition, there are three sets of new requirements relating to the structure of
the income statement, management-defined performance measures and the aggregation and disaggregation of financial information.
While IFRS 18 will not change recognition criteria or measurement bases, it may have an impact on presenting information in the financial
statements, in particular the income statement and to a lesser extent the cash flow statement. HSBC are currently assessing impacts and data
readiness before developing a more detailed implementation plan.
(d) Foreign currencies
HSBC’s consolidated financial statements are presented in US dollars because the US dollar and currencies linked to it form the major currency
bloc in which HSBC transacts and funds its business. The US dollar is also HSBC Holdings’ functional currency because the US dollar and
currencies linked to it are the most significant currencies relevant to the underlying transactions, events and conditions of its subsidiaries, as
well as representing a significant proportion of its funds generated from financing activities.
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Assets and liabilities denominated in
foreign currencies are translated at the rate of exchange at the balance sheet date, except non-monetary assets and liabilities measured at
historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in other
comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised. Except for
subsidiaries operating in hyperinflationary economies, in the consolidated financial statements, the assets and liabilities of branches,
subsidiaries, joint ventures and associates whose functional currency is not US dollars are translated into the Group’s presentation currency at
the rate of exchange at the balance sheet date, while their results are translated into US dollars at the average rates of exchange for the
reporting period. Exchange differences arising are recognised in other comprehensive income. On disposal of a foreign operation, exchange
differences previously recognised in other comprehensive income are reclassified to the income statement.
(e) Presentation of information
Certain disclosures required by IFRS Accounting Standards have been included in the sections marked as (‘Audited’) in the Annual Report and
Accounts 2024 as follows:
–
Disclosures concerning the nature and extent of risks relating to insurance contracts and financial instruments are included in the ‘Risk
review’ on pages 126 to 235.
–
The ‘Own funds disclosure’ is included in the ‘Risk review’ on page 205.
HSBC follows the UK Finance Disclosure Code. The UK Finance Disclosure Code aims to increase the quality and comparability of UK banks’
disclosures and sets out five disclosure principles together with supporting guidance agreed in 2010. In line with the principles of the UK
Finance Disclosure Code, HSBC assesses good practice recommendations issued from time to time by relevant regulators and standard
setters, and will assess the applicability and relevance of such guidance, enhancing disclosures where appropriate.
(f) Critical estimates and judgements
The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent
uncertainties and the high level of subjectivity involved in the recognition or measurement of items, highlighted as the ‘critical estimates and
judgements’ in section 1.2 below, it is possible that the outcomes in the next financial year could differ from those on which management’s
estimates are based. This could result in materially different estimates and judgements from those reached by management for the purposes
of these financial statements. Management’s selection of HSBC’s accounting policies that contain critical estimates and judgements reflects
the materiality of the items to which the policies are applied and the high degree of judgement and estimation uncertainty involved.
Management has considered the impact of climate-related risks on HSBC’s financial position and performance. While the effects of climate
change are a source of uncertainty, as at 31 December 2024 management did not consider there to be a material impact on our critical
judgements and estimates from the physical, transition and other climate-related risks in the short to medium term. In particular, management
has considered the known and observable potential impacts of climate-related risks of associated judgements and estimates in our value in use
calculations.
(g) Going concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company have the
resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of
information relating to present and future conditions, including future projections of profitability, liquidity, capital requirements and capital
resources.
These considerations include stressed scenarios that reflect the uncertainty in the macroeconomic environment following uncertain inflation,
rapidly changing interest rates, slower Chinese economic activity, and disrupted supply chains as a result of the Russia-Ukraine war, conflict in
the Middle East and US-China tensions. They also included other top and emerging risks, including climate change, as well as the related
impacts on profitability, capital and liquidity.
1.2 Summary of material accounting policies
(a) Consolidation and related policies
Investments in subsidiaries
Where an entity is governed by voting rights, HSBC consolidates when it holds – directly or indirectly – the necessary voting rights to pass
resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors,
including having exposure to variability of returns, power to direct relevant activities, and whether power is held as agent or principal.
Notes on the financial statements
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HSBC Holdings plc Annual Report and Accounts 2024
Business combinations are accounted for using the acquisition method. The amount of non-controlling interest is measured either at fair value
or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. This election is made for each business
combination. HSBC Holdings’ investments in subsidiaries are stated at cost less impairment losses.
Impairment testing is performed where there is an indication of impairment, by comparing the recoverable amount of the relevant investment
to its carrying amount. Indicators of impairment include both external and internal sources of information. Similarly, assessments are made as
to whether an impairment loss recognised in prior periods may no longer exist or may have decreased. Where this is the case, such an
impairment loss is reversed if there has been a change in the estimate used to determine the relevant recoverable amount since the last
impairment loss was recognised, and to the extent that it does not increase the carrying amount above that had no impairment loss been
previously recognised.
Critical estimates and judgements
Investments in subsidiaries are tested for impairment when there is an indication that the investment may be impaired, which involves estimations of value in use
reflecting management’s best estimate of the future cash flows of the investment and the rates used to discount these cash flows, both of which are subject to
uncertain factors as follows:
Judgements
Estimates
– The accuracy of forecast cash flows is subject to a high
degree of uncertainty in volatile market conditions.
Where such circumstances are determined to exist,
management re-tests for impairment or reversal more
frequently than once a year when indicators exist. This
ensures that the assumptions on which the cash flow
forecasts are based continue to reflect current market
conditions and management’s best estimate of future
business prospects.
– The future cash flows of each investment are sensitive to the cash flows projected for the periods
for which detailed forecasts are available and to assumptions regarding the long-term pattern of
sustainable cash flows thereafter. Forecasts are compared with actual performance and verifiable
economic data, but they reflect management’s view of future business prospects at the time of the
assessment.
– The rates used to discount future expected cash flows can have a significant effect on their
valuation, and are based on the costs of equity assigned to the investment. The cost of equity
percentage is generally derived from a capital asset pricing model and the market implied cost of
equity, which incorporates inputs reflecting a number of financial and economic variables, including
the risk-free interest rate in the country concerned and a premium for the risk of the business being
evaluated. These variables are subject to fluctuations in external market rates and economic
conditions beyond management’s control.
– Key assumptions used in estimating impairment in subsidiaries and their reversal where relevant are
described in Note 19.
Goodwill
Goodwill is allocated to cash-generating units (’CGUs’) for the purpose of impairment testing, which is undertaken at the lowest level at which
goodwill is monitored for internal management purposes. HSBC’s CGUs are based on its main legal entities subdivided by global business,
except for Global Banking and Markets, for which goodwill is monitored on a global basis.
Impairment testing is performed at least once a year, or whenever there is an indication of impairment, by comparing the recoverable amount
of a CGU with its carrying amount.
Goodwill is included in a disposal group if the disposal group is a CGU to which goodwill has been allocated or it is an operation within such a
CGU. The amount of goodwill included in a disposal group is measured on the basis of the relative values of the operation disposed of and the
portion of the CGU retained.
Critical estimates and judgements
The review of goodwill and non-financial assets (see Note 1.2(n)) for impairment reflects management’s best estimate of the future cash flows of the CGUs and the
rates used to discount these cash flows, both of which are subject to uncertain factors as follows:
Judgements
Estimates
– The accuracy of forecast cash flows is subject to a
high degree of uncertainty in volatile market
conditions. Where such circumstances are
determined to exist, management re-tests goodwill
for impairment more frequently than once a year
when indicators of impairment exist. This ensures
that the assumptions on which the cash flow
forecasts are based continue to reflect current
market conditions and management’s best estimate
of future business prospects.
– The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for which
detailed forecasts are available and to assumptions regarding the long-term pattern of sustainable cash
flows thereafter. Forecasts are compared with actual performance and verifiable economic data, but
they reflect management’s view of future business prospects at the time of the assessment.
– The rates used to discount future expected cash flows can have a significant effect on their valuation,
and are based on the costs of equity assigned to individual CGUs. The cost of equity percentage is
generally derived from a capital asset pricing model and market implied cost of equity, which
incorporates inputs reflecting a number of financial and economic variables, including the risk-free
interest rate in the country concerned and a premium for the risk of the business being evaluated.
These variables are subject to fluctuations in external market rates and economic conditions beyond
management’s control.
– Key assumptions used in estimating goodwill and non-financial asset impairment are described in Note
21.
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of goodwill in the next financial year,
but does consider this to be an area that is inherently judgemental. The Group’s consideration of this risk includes taking account of the
potential implications for CGUs arising from the revised organisational structure effective from 1 January 2025.
HSBC sponsored structured entities
HSBC is considered to sponsor another entity if, in addition to ongoing involvement with the entity, it had a key role in establishing that entity or
in bringing together relevant counterparties so the transaction that is the purpose of the entity could occur. HSBC is generally not considered a
sponsor if the only involvement with the entity is merely administrative.
Interests in associates and joint arrangements
Joint arrangements are investments in which HSBC, together with one or more parties, has joint control. Depending on HSBC’s rights and
obligations, the joint arrangement is classified as either a joint operation or a joint venture.
HSBC classifies investments in entities over which it has significant influence, and those that are neither subsidiaries nor joint arrangements, as
associates.
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Financial statements
HSBC recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and interests in joint ventures are
recognised using the equity method. The attributable share of the results and reserves of joint ventures and associates is included in the
consolidated financial statements of HSBC based on either financial statements made up to 31 December or pro-rated amounts adjusted for
any material transactions or events occurring between the date the financial statements are available and 31 December.
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the
investment may be impaired, by comparing the recoverable amount of the relevant investment to its carrying amount. Goodwill on acquisition
of interests in joint ventures and associates is not tested separately for impairment, but is assessed as part of the carrying amount of the
investment. Previously recognised impairments are assessed for reversal when there are indicators that they may no longer exist or have
decreased. Any reversal, which may arise only from changes in estimates used to determine the prior impairment loss, is recognised to the
extent that it does not increase the carrying amount above that had no impairment loss been previously recognised.
Critical estimates and judgements
The most significant critical estimates relate to the assessment of impairment or its reversal of our investment in Bank of Communications Co., Limited (‘BoCom’),
which involves estimations of value in use:
Judgements
Estimates
– The value in use calculation uses discounted cash flow projections based on
management’s best estimate of future earnings available to ordinary shareholders
prepared in accordance with IAS 36 ‘Impairment of Assets’. Those cash flows use
estimates based on BoCom’s current condition and so do not include estimated cash
flows arising from uncommitted future actions that may affect the performance of the
investment which will be considered at the relevant time should they arise.
– Key assumptions used in estimating BoCom’s value in use and the sensitivity of the
value in use calculations to different assumptions are described in Note 18.
(b) Income and expense
Operating income
Interest income and expense
Interest income and expense for all financial instruments, excluding those classified as held for trading or designated at fair value, is recognised
in ‘Interest income’ and ‘Interest expense’ in the income statement using the effective interest method. However, as an exception to this,
interest on debt instruments issued by HSBC for funding purposes that are designated under the fair value option to reduce an accounting
mismatch and on derivatives managed in conjunction with those debt instruments is included in interest expense.
Interest on credit-impaired financial assets is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount
of the asset less allowance for expected credit losses).
Non-interest income and expense
HSBC generates fee income from services provided over time, such as account service and card fees, or when HSBC delivers a specific
transaction at a point in time, such as broking services and import/export services. With the exception of certain fund management and
performance fees, all other fees are generated at a fixed price. Fund management and performance fees can be variable depending on the size
of the customer portfolio and HSBC’s performance as fund manager. Variable fees are recognised when all uncertainties are resolved. Fee
income is generally earned from short-term contracts with payment terms that do not include a significant financing component.
HSBC acts as principal in the majority of contracts with customers, with the exception of broking services. For most brokerage trades, HSBC
acts as agent in the transaction and recognises broking income net of fees payable to other parties in the arrangement.
HSBC recognises fees earned on transaction-based arrangements at a point in time when it has fully provided the service to the customer.
Where the contract requires services to be provided over time, income is recognised on a systematic basis over the life of the agreement.
Where HSBC offers a package of services that contains multiple non-distinct performance obligations, such as those included in account
service packages, the promised services are treated as a single performance obligation. If a package of services contains distinct performance
obligations, the corresponding transaction price is allocated to each performance obligation based on the estimated stand-alone selling prices.
Dividend income is recognised when the right to receive payment is established.
Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:
–
‘Net income from financial instruments held for trading or managed on a fair value basis’: This comprises net trading activities, which
includes all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other financial
instruments managed on a fair value basis, together with the related interest income, interest expense and dividend income, excluding the
effect of changes in the credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the fair
value of derivatives that are managed in conjunction with financial assets and liabilities measured at fair value through profit or loss.
–
‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit
or loss’: This includes all gains and losses from changes in the fair value, together with related interest income, interest expense and
dividend income in respect of financial assets and liabilities measured at fair value through profit or loss, and those derivatives managed in
conjunction with the above that can be separately identifiable from other trading derivatives.
–
‘Changes in fair value of designated debt instruments and related derivatives’: Interest paid on debt instruments and interest cash flows on
related derivatives is presented in interest expense where doing so reduces an accounting mismatch.
–
‘Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss’: This includes interest on
instruments that fail the solely payments of principal and interest (‘SPPI’) test, see (d) below.
The accounting policies for insurance service result and insurance finance income/(expense) are disclosed in Note 1.2(j).
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HSBC Holdings plc Annual Report and Accounts 2024
(c) Valuation of financial instruments
All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument on initial recognition is
generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference between the transaction
price and the fair value of financial instruments whose fair value is based on a quoted price in an active market or a valuation technique that uses
only data from observable markets, HSBC recognises the difference as a trading gain or loss at inception (a ‘day 1 gain or loss’). In all other cases,
the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the transaction until the transaction matures, is
closed out, the valuation inputs become observable or HSBC enters into an offsetting transaction.
The fair value of financial instruments is generally measured on an individual basis. However, in cases where HSBC manages a group of financial
assets and liabilities according to its net market or credit risk exposure, the fair value of the group of financial instruments is measured on a net basis
but the underlying financial assets and liabilities are presented separately in the financial statements, unless they satisfy the IFRS offsetting criteria.
Financial instruments are classified into one of three fair value hierarchy levels, described in Note 12, ‘Fair values of financial instruments
carried at fair value‘.
Critical estimates and judgements
The majority of valuation techniques employ only observable market data. However, certain financial instruments are classified on the basis of valuation techniques
that feature one or more significant market inputs that are unobservable, and for them, the measurement of fair value is more judgemental:
Judgements
Estimates
– An instrument in its entirety is classified as valued using significant unobservable
inputs if, in the opinion of management, greater than 5% of the instrument’s valuation
is driven by unobservable inputs.
– ‘Unobservable’ in this context means that there is little or no current market data
available from which to determine the price at which an arm’s length transaction would
be likely to occur. It generally does not mean that there is no data available at all upon
which to base a determination of fair value (consensus pricing data may, for example,
be used).
– Details on the Group’s Level 3 financial instruments and the
sensitivity of their valuation to the effect of applying reasonably
possible alternative assumptions in determining their fair value are
set out in Note 12.
(d) Financial instruments measured at amortised cost
Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash
flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances
to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. HSBC accounts for
regular way amortised cost financial instruments using trade date accounting. The carrying amount of these financial assets at initial recognition
includes any directly attributable transactions costs.
HSBC may commit to underwriting loans on fixed contractual terms for specified periods of time. When the loan arising from the lending
commitment is expected to be sold shortly after origination, the commitment to lend is recorded as a derivative. When HSBC intends to hold
the loan, the loan commitment is included in the impairment calculations set out below.
Financial assets are reclassified only when the business model for their management changes. Such changes, which are expected to be
infrequent, are determined by senior management as a result of external or internal changes and must be significant to operations and
demonstrable to external parties. Reclassifications are applied prospectively from the first day of the first reporting period following the change
of business model. Where a financial asset is reclassified out of the amortised cost measurement category and into the fair value through other
comprehensive income measurement category its fair value is measured at the date of reclassification. Any gain or loss arising from a
difference between the previous amortised cost and fair value is recognised in other comprehensive income. The effective interest rate and the
measurement of expected credit losses are not adjusted as a result of the reclassification.
Non-trading reverse repurchase, repurchase and similar agreements
When debt securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the balance
sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell (‘reverse repos’) are
not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading repos and reverse repos
are measured at amortised cost. The difference between the sale and repurchase price or between the purchase and resale price is treated as
interest and recognised in net interest income over the life of the agreement.
Contracts that are economically equivalent to reverse repo or repo agreements (such as sales or purchases of debt securities entered into
together with total return swaps with the same counterparty) are accounted for similarly to, and presented together with, reverse repo or repo
agreements.
(e) Financial assets measured at fair value through other comprehensive income
Financial assets managed within a business model that is achieved by both collecting contractual cash flows and selling and which contain
contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at fair value
through other comprehensive income (‘FVOCI’). These comprise primarily debt securities. They are recognised on trade date when HSBC
enters into contractual arrangements to purchase and are generally derecognised when they are either sold or redeemed. They are
subsequently remeasured at fair value with changes therein (except for those relating to impairment, interest income and foreign currency
exchange gains and losses) recognised in other comprehensive income until the assets are sold. Upon disposal, the cumulative gains or losses
in other comprehensive income are recognised in the income statement as ‘Gains less losses from financial instruments’. Financial assets
measured at FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.
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Financial statements
(f)
Equity securities measured at fair value with fair value movements presented in other
comprehensive income
The equity securities for which fair value movements are shown in other comprehensive income are business facilitation and other similar
investments where HSBC holds the investments other than to generate a capital return. Dividends from such investments are recognised in
profit or loss. Gains or losses on the derecognition of these equity securities are not transferred to profit or loss. Otherwise, equity securities
are measured at fair value through profit or loss.
(g) Financial instruments designated at fair value through profit or loss
Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below and
are so designated irrevocably at inception:
–
The use of the designation removes or significantly reduces an accounting mismatch.
–
A group of financial assets and liabilities or a group of financial liabilities is managed and its performance is evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy.
–
The financial liability contains one or more non-closely related embedded derivatives.
Designated financial assets are recognised when HSBC enters into contracts with counterparties, which is generally on trade date, and are
normally derecognised when the rights to the cash flows expire or are transferred. Designated financial liabilities are recognised when HSBC
enters into contracts with counterparties, which is generally on settlement date, and are normally derecognised when extinguished.
Subsequent changes in fair values are recognised in the income statement in ‘Net income from financial instruments held for trading or
managed on a fair value basis’ or ‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives,
measured at fair value through profit or loss’ or ‘Changes in fair value of designated debt and related derivatives’ except for the effect of
changes in the liabilities’ credit risk, which is presented in ‘Other comprehensive income’, unless that treatment would create or enlarge an
accounting mismatch in profit or loss.
Under the above criteria, the main classes of financial instruments designated by HSBC are:
–
Debt instruments for funding purposes that are designated to reduce an accounting mismatch: The interest and/or foreign exchange
exposure on certain fixed-rate debt securities issued has been matched with the interest and/or foreign exchange exposure on certain
swaps as part of a documented risk management strategy.
–
Financial assets and financial liabilities under unit-linked and non-linked investment contracts: A contract under which HSBC does not accept
significant insurance risk from another party is not classified as an insurance contract, other than investment contracts with discretionary
participation features (‘DPF’), but is accounted for as a financial liability. Customer liabilities under linked and certain non-linked investment
contracts issued by insurance subsidiaries are determined based on the fair value of the assets held in the linked funds or by a valuation
method. The related financial assets and liabilities are managed and reported to management on a fair value basis. Designation at fair value
of the financial assets and related liabilities allows changes in fair values to be recorded in the income statement and presented in the same
line.
–
Financial liabilities that contain both deposit and derivative components: These financial liabilities are managed and their performance
evaluated on a fair value basis.
(h) Derivatives
Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other indices.
Derivatives are recognised initially and are subsequently measured at fair value through profit or loss. Derivatives are classified as assets when
their fair value is positive or as liabilities when their fair value is negative. This includes embedded derivatives in financial liabilities, which are
bifurcated from the host contract when they meet the definition of a derivative on a stand-alone basis.
Where the derivatives are managed with debt securities issued by HSBC that are designated at fair value where doing so reduces an
accounting mismatch, the contractual interest is shown in ‘Interest expense’ together with the interest payable on the issued debt.
Hedge accounting
When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge
accounting relationships where the required criteria for documentation and hedge effectiveness are met. HSBC uses these derivatives or,
where allowed, other non-derivative hedging instruments in fair value hedges, cash flow hedges or hedges of net investments in foreign
operations as appropriate to the risk being hedged.
Fair value hedge
Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results in
recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be recognised in
the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the
cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income
statement on a recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income
statement immediately.
Cash flow hedge
The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income and the ineffective portion of
the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the
income statement within ‘Net income from financial instruments held for trading or managed on a fair value basis’. The accumulated gains and
losses recognised in other comprehensive income are reclassified to the income statement in the same periods in which the hedged item
affects profit or loss. When a hedge relationship is discontinued, or partially discontinued, any cumulative gain or loss recognised in other
comprehensive income remains in equity until the forecast transaction is recognised in the income statement. When a forecast transaction is
no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is immediately reclassified to
the income statement.
Notes on the financial statements
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HSBC Holdings plc Annual Report and Accounts 2024
Net investment hedge
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. The effective portion of gains and
losses on the hedging instrument is recognised in other comprehensive income and other gains and losses are recognised immediately in the
income statement. Gains and losses previously recognised in other comprehensive income are reclassified to the income statement on the
disposal, or part-disposal, of the foreign operation.
Derivatives that do not qualify for hedge accounting
Non-qualifying hedges are derivatives entered into as economic hedges of assets and liabilities for which hedge accounting was not applied.
(i) Impairment of amortised cost and FVOCI financial assets
Expected credit losses (‘ECL’) are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements,
other financial assets held at amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee
contracts. At initial recognition, an allowance (or provision in the case of some loan commitments and financial guarantees) is recognised for
ECL resulting from possible default events within the next 12 months, or less, where the remaining life is less than 12 months (’12-month
ECL’). In the event of a significant increase in credit risk, an allowance (or provision) is recognised for ECL resulting from all possible default
events over the expected life of the financial instrument (‘lifetime ECL’). Financial assets where 12-month ECL is recognised are considered to
be ‘stage 1’; financial assets which are considered to have experienced a significant increase in credit risk are in ‘stage 2’; and financial assets
for which there is objective evidence of impairment, and so are considered to be in default or otherwise credit impaired are in ‘stage 3’.
Purchased or originated credit-impaired financial assets (‘POCI’) are treated differently as set out below.
Credit impaired (stage 3)
HSBC determines that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether
contractual payments of either principal or interest are past due for more than 90 days, there are other indications that the borrower is unlikely
to pay such as that a concession has been granted to the borrower for economic or legal reasons relating to the borrower’s financial condition,
or the loan is otherwise considered to be in default.
If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due. Therefore, the
definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or
otherwise credit impaired.
Interest income is recognised by applying the effective interest rate to the amortised cost (i.e. gross carrying amount less allowance for ECL).
Write-off
Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic prospect of
recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the
net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.
Forbearance
Loans are identified as forborne and classified as either performing or non-performing when HSBC modifies the contractual terms due to
financial difficulty of the borrower. Non-performing forborne loans are stage 3 and classified as non-performing until they meet the curing
criteria, as specified by applicable credit risk policy (for example, when the loan is no longer in default and no other indicators of default have
been present for at least 12 months). Any amount written off as a result of any modification of contractual terms upon entering forbearance
would not be reversed.
The Group applies the EBA Guidelines on the application of definition of default for our retail portfolios, which affect credit risk policies and our
reporting in respect of the status of loans as credit impaired principally due to forbearance (or curing thereof). Further details are provided under
‘Forborne loans and advances’ on page 140.
Performing forborne loans are initially stage 2 and remain classified as forborne until they meet applicable curing criteria (for example, they
continue to not be in default and no other indicators of default are present for a period of at least 24 months). At this point, the loan is either
stage 1 or stage 2 as determined by comparing the risk of a default occurring at the reporting date (based on the modified contractual terms)
and the risk of a default occurring at initial recognition (based on the original, unmodified contractual terms).
A forborne loan is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the
terms of an existing agreement are modified such that the forborne loan is a substantially different financial instrument. Any new loans that
arise following derecognition events in these circumstances would generally be classified as POCI and will continue to be disclosed as
forborne.
Loan modifications other than forborne loans
Loan modifications that are not identified as forborne are considered to be commercial restructurings. Where a commercial restructuring results
in a modification (whether legalised through an amendment to the existing terms or the issuance of a new loan contract) such that HSBC’s
rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. The
rights to cash flows are generally considered to have expired if the commercial restructuring is at market rates and no payment-related
concession has been provided. Modifications of certain higher credit risk wholesale loans are assessed for derecognition, having regard to
changes in contractual terms that either individually or in combination are judged to result in a substantially different financial instrument.
Mandatory and general offer loan modifications that are not borrower specific, for example market-wide customer relief programmes, generally
do not result in derecognition, but their stage allocation is determined considering all available and supportable information under our ECL
impairment policy. Changes made to these financial instruments that are economically equivalent and required by interest rate benchmark
reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effective
interest rate to be updated to reflect the change of the interest rate benchmark.
HSBC Holdings plc Annual Report and Accounts 2024
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Financial statements
Significant increase in credit risk (stage 2)
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering
the change in the risk of default occurring over the remaining life of the financial instrument.
The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that at initial recognition,
taking into account reasonable and supportable information, including information about past events, current conditions and future economic
conditions. The assessment is unbiased, probability-weighted, and to the extent relevant, uses forward-looking information consistent with that
used in the measurement of ECL. The analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its
weight compared with other factors depends on the type of product, the characteristics of the financial instrument and the borrower, and the
geographical region. Therefore, it is not possible to provide a single set of criteria that will determine what is considered to be a significant
increase in credit risk, and these criteria will differ for different types of lending, particularly between retail and wholesale. However, unless
identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when 30 days past due. In
addition, wholesale loans that are individually assessed, which are typically corporate and commercial customers, and included on a watch or
worry list, are included in stage 2.
For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime probability of default (‘PD’), which encompasses a
wide range of information including the obligor’s customer risk rating (‘CRR’), macroeconomic condition forecasts and credit transition
probabilities. For origination CRRs up to 3.3, significant increase in credit risk is measured by comparing the average PD for the remaining term
estimated at origination with the equivalent estimation at the reporting date. The quantitative measure of significance varies depending on the
credit quality at origination as follows:
Origination CRR
Significance trigger – PD to increase by
0.1–1.2
15bps
2.1–3.3
30bps
For CRRs greater than 3.3 that are not impaired, a significant increase in credit risk is considered to have occurred when the origination PD has
doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit migrations and to
relative changes in external market rates.
For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of future
macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD must be
approximated assuming through-the-cycle PDs and through-the-cycle migration probabilities, consistent with the instrument’s underlying
modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional CRR deterioration-
based thresholds, as set out in the table below:
Origination CRR
Additional significance criteria – number of CRR grade notches
deterioration required to identify as significant credit
deterioration (stage 2) (> or equal to)
0.1
5 notches
1.1–4.2
4 notches
4.3–5.1
3 notches
5.2–7.1
2 notches
7.2–8.2
1 notch
8.3
0 notch
Further information about the 23-grade scale used for CRR can be found on page 139.
For retail portfolios, default risk is assessed using a reporting date 12-month PD derived from internal models, which incorporate all available
information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than 12 months and is
considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogenous portfolios,
generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an adjusted 12-month PD
greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The expert credit risk
judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold therefore identifies loans with a PD higher than
would be expected from loans that are performing as originally expected and higher than that which would have been acceptable at origination.
It therefore approximates a comparison of origination to reporting date PDs.
We continue to refine the retail transfer criteria approach for certain portfolios as additional data becomes available, in order to utilise a more
relative approach. These enhancements take advantage of the increase in origination-related data in the assessment of significant increases in
credit risk by comparing remaining lifetime PD to the comparable remaining term lifetime PD at origination based on portfolio-specific
origination segments.
Unimpaired and without significant increase in credit risk (stage 1)
ECL resulting from default events that are possible within the next 12 months (‘12-month ECL’) are recognised for financial instruments that
remain in stage 1.
Purchased or originated credit impaired
Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI. This
population includes new financial instruments recognised in most cases following the derecognition of forborne loans. The amount of change in
lifetime ECL for a POCI loan is recognised in profit or loss until the POCI loan is derecognised, even if the lifetime ECL are less than the amount
of ECL included in the estimated cash flows on initial recognition.
Movement between stages
Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk since
initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased
since initial recognition based on the assessments described above. In the case of non-performing forborne loans, such financial instruments
are transferred out of stage 3 when they no longer exhibit any evidence of credit impairment and meet the curing criteria as described above.
Notes on the financial statements
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HSBC Holdings plc Annual Report and Accounts 2024
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information which
is relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future
events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money and
considers other factors such as climate-related risks.
In general, HSBC calculates ECL using three main components: a probability of default (‘PD’), a loss given default (’LGD’) and the exposure at
default (‘EAD’).
The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated using the lifetime PD instead. The
12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the instrument
respectively.
The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to
the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the
event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and
the time value of money.
HSBC makes use of the IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the following
table:
Model
Regulatory capital
IFRS 9
PD
– Represents long-run average PD throughout a full economic cycle
(for mortgage portfolios a hybrid approach, which sits between the
extremes of point in time and through the cycle, is used for
calculating long-run averages as required by the PRA)
– Default backstop of 90+ days past due for all portfolios (includes
unlikely to pay (‘UTP’) criteria in line with internal policy)
– May be subject to a sovereign cap
– Represents current portfolio quality and performance, adjusted for
the impact of multiple forward-looking macroeconomic scenarios
– Default backstop of 90+ days past due for all portfolios (includes
UTP criteria in line with internal policy)
EAD
– Cannot be lower than current balance
– Amortisation captured for term products
– Future drawdown captured for revolving products
LGD
– Downturn LGD (consistent with losses we would expect to suffer
during a severe but plausible economic downturn)
– Regulatory floors may apply to mitigate risk of underestimating
downturn LGD due to lack of historical data
– Discounted using appropriate index (minimum 9%)
– All collection costs included
– LGD based on recent portfolio performance data and includes the
expected impact of future economic conditions such as change in
the value of collateral
– No floors applied, discounted using the original effective interest rate
– Only costs associated with selling collateral and certain third-party
costs are included
Other
– Discounted back from point of default to balance sheet date
While 12-month PDs are recalibrated from IRB models where possible, the lifetime PDs are determined by projecting the 12-month PD using a
term structure. For the wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating through the
CRR bands over its life.
The ECL for wholesale stage 3 is determined primarily on an individual basis using a discounted cash flow (‘DCF’) methodology. The expected
future cash flows are based on estimates as of the reporting date, reflecting reasonable and supportable assumptions and projections of future
recoveries and expected future receipts of interest.
Collateral is taken into account if it is likely that the recovery of the outstanding amount will include realisation of collateral based on its
estimated fair value of collateral at the time of expected realisation, less costs for obtaining and selling the collateral.
The cash flows are discounted at a reasonable approximation of the original effective interest rate. For significant cases, cash flows under up to
four different scenarios are probability-weighted by reference to the status of the borrower, economic scenarios applied more generally by the
Group and judgement in relation to the likelihood of the work-out strategy succeeding or receivership being required. For less significant cases
where an individual assessment is undertaken, the effect of different economic scenarios and work-out strategies results in an ECL calculation
based on a most likely outcome which is adjusted to capture losses resulting from less likely but possible outcomes. For certain less significant
cases, the bank may use an LGD-based modelled approach to ECL assessment, which factors in a range of economic scenarios.
Period over which ECL is measured
Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL (be it
12-month or lifetime ECL) is the maximum contractual period over which HSBC is exposed to credit risk. However, where the financial
instrument includes both a drawn and undrawn commitment and the contractual ability to demand repayment and cancel the undrawn
commitment does not serve to limit HSBC’s exposure to credit risk to the contractual notice period, the contractual period does not determine
the maximum period considered. Instead, ECL is measured over the period HSBC remains exposed to credit risk that is not mitigated by credit
risk management actions. This applies to retail overdrafts and credit cards, where the period is the average time taken for stage 2 exposures to
default or close as performing accounts, determined on a portfolio basis and ranging from between two and six years. In addition, for these
facilities it is not possible to identify the ECL on the loan commitment component separately from the financial asset component. As a result,
the total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial
asset, in which case the ECL is recognised as a provision. For wholesale overdraft facilities, credit risk management actions are taken no less
frequently than on an annual basis.
Forward-looking economic inputs
HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions representative of
its view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected credit losses in most economic
environments. In certain economic environments, additional analysis may be necessary and may result in additional scenarios or adjustments,
to reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed methodology is disclosed in ‘Measurement
uncertainty and sensitivity analysis of ECL estimates’ on page 147.
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Financial statements
Critical estimates and judgements
The calculation of the Group’s ECL under IFRS 9 requires the Group to make a number of judgements, assumptions and estimates. The most significant are set
out below:
Judgements
Estimates
– Defining what is considered to be a significant increase in credit risk
– Determining the lifetime and point of initial recognition of overdrafts and credit cards
– Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including
making reasonable and supportable judgements about how models react to current and future
economic conditions
– Selecting model inputs and economic forecasts, including determining whether sufficient and
appropriately weighted economic forecasts are incorporated to calculate unbiased expected credit loss
– Making management adjustments to account for late-breaking events, model and data limitations and
deficiencies, and expert credit judgements
– Selecting applicable recovery strategies for certain wholesale credit-impaired loans
– The section ‘Measurement uncertainty and
sensitivity analysis of ECL estimates’, marked as
audited from page 147, sets out the assumptions
used in determining ECL, and provides an indication
of the sensitivity of the result to the application of
different weightings being applied to different
economic assumptions
(j)
Insurance contracts
A contract is classified as an insurance contract where the Group accepts significant insurance risk from another party by agreeing to
compensate that party if it is adversely affected by a specified uncertain future event. An insurance contract may also transfer financial risk, but
is accounted for as an insurance contract if the insurance risk is significant. In addition, the Group issues investment contracts with
discretionary participation features ('DPF’), which are also accounted under IFRS 17 ’Insurance Contracts’.
Aggregation of insurance contracts
Individual insurance contracts that are managed together and subject to similar risks are identified as a portfolio. Contracts that are managed
together usually belong to the same product group, and have similar characteristics such as being subject to a similar pricing framework or
similar product management, and are issued by the same legal entity. If a contract is exposed to more than one risk, the dominant risk of the
contract is used to assess whether the contract features similar risks. Each portfolio is further separated by the contract’s expected profitability.
The portfolios are split by their profitability into: (i) contracts that are onerous at initial recognition; (ii) contracts that at initial recognition have no
significant possibility of becoming onerous subsequently; and (iii) the remaining contracts. These profitability groups are then divided by issue
date, with most contracts the Group issues after the transition date being grouped into calendar quarter cohorts. For multi-currency groups of
contracts, the Group considers its groups of contracts as being denominated in a single currency.
The measurement of the insurance contract liability is based on groups of insurance contracts as established at initial recognition, and will
include fulfilment cash flows as well as the CSM representing the unearned profit. The Group’s accounting policy is to update the estimates
used in the measurement on a year-to-date basis.
Fulfilment cash flows
The fulfilment cash flows comprise the following:
Best estimates of future cash flows
The cash flows within the contract boundary of each contract in the Group include amounts expected to be collected from premiums and
payouts for claims, benefits and expenses, and are projected using a range of scenarios and assumptions in an unbiased way based on the
Group’s demographic and operating experience along with external mortality data where the Group’s own experience data is not sufficiently
large in size to be credible.
Adjustment for the time value of money and financial risks associated with the future cash flows
The estimates of future cash flows are adjusted to reflect the time value of money (i.e. discounting) and the financial risks to derive an
expected present value. The Group generally makes use of stochastic modelling techniques in the estimation for products with options and
guarantees.
A bottom-up approach is used to determine the discount rate to be applied to a given set of expected future cash flows. This is derived as the
sum of the risk-free yield and an illiquidity premium. The risk-free yield is determined based on observable market data, where such markets
are considered to be deep, liquid and transparent. When information is not available, management judgement is applied to determine the
appropriate risk-free yield. Illiquidity premiums reflect the liquidity characteristics of the associated insurance contracts.
Risk adjustment for non-financial risk
The risk adjustment reflects the compensation required for bearing the uncertainty about the amount and timing of future cash flows that arises
from non-financial risk. It is calculated as a 75th percentile level of stress over a one-year period. The level of the stress is determined with
reference to external regulatory stresses and internal economic capital stresses.
For the main insurance manufacturing entity in these locations, the one-year 75th percentile level of stress corresponds to the following
percentiles based on an ultimate view of risk over all future years:
–
Asia-Pacific (Hong Kong): 60th percentile (2023: 60th percentile).
–
Europe (France): 60th percentile (2023: 60th percentile).
–
Latin America (Mexico): 64th percentile (2023: 65th percentile).
The Group does not disaggregate changes in the risk adjustment between insurance service result (comprising insurance revenue and
insurance service expense) and insurance finance income or expenses. All changes are included in the insurance service result.
Notes on the financial statements
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HSBC Holdings plc Annual Report and Accounts 2024
Measurement models
The variable fee approach (‘VFA’) measurement model is used for most of the contracts issued by the Group, which is mandatory upon
meeting the following eligibility criteria at inception:
–
the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
–
the Group expects to pay to the policyholder a substantial share of the fair value returns on the underlying items. The Group considers that a
substantial share is a majority of returns; and
–
the Group expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value
of the underlying items. The Group considers that a substantial proportion is a majority proportion of change on a present value probability-
weighted average of all scenarios.
For some contracts measured under VFA, the other comprehensive income (‘OCI’) option is used. The OCI option is applied where the
underlying items held by the Group are not accounted for at fair value through profit or loss. Under this option, only the amount that matches
income or expenses recognised in profit or loss on underlying items is included in finance income or expenses for these insurance contracts,
and hence results in the elimination of accounting mismatches. The remaining amount of finance income or expenses for these insurance
contracts issued for the period is recognised in OCI. In addition, the risk mitigation option is used for a number of economic offsets against the
instruments that meet specific requirements.
The remaining contracts issued and the reinsurance contracts held are accounted for under the general measurement model (‘GMM’).
CSM and coverage units
The CSM represents the unearned profit and results in no income or expense at initial recognition when the group of contracts is profitable.
The CSM is adjusted at each subsequent reporting period for changes in fulfilment cash flows relating to future service (e.g. changes in non-
economic assumptions, including mortality and morbidity rates). For initial recognition of onerous groups of contracts and when groups of
contracts become onerous subsequently, losses are recognised in insurance service expense immediately.
For groups of contracts measured using the VFA, changes in the Group’s share of the underlying items, and economic experience and
economic assumption changes adjust the CSM, whereas these changes do not adjust the CSM under the GMM, but are recognised in profit or
loss as they arise. However, under the risk mitigation option for VFA contracts, the changes in the fulfilment cash flows and the changes in the
Group’s share in the fair value return on underlying items that the instruments mitigate are not adjusted in CSM but recognised in profit or loss.
The risk mitigating instruments are primarily reinsurance contracts held.
The CSM is systematically recognised in insurance revenue to reflect the insurance contract services provided, based on the coverage units of
the group of contracts. Coverage units are determined by the quantity of benefits and the expected coverage period of the contracts.
The Group identifies the quantity of the benefits provided as follows:
–
Insurance coverage: This is based on the expected net policyholder insurance benefit at each period after allowance for decrements, where
net policyholder insurance benefit refers to the amount of sum assured less the fund value or surrender value.
–
Investment services (including both investment-return service and investment-related service): This is based on a constant measure basis
which reflects the provision of access for the policyholder to the facility.
For contracts that provide both insurance coverage and investment services, coverage units are weighted according to the expected present
value of the future cash outflows for each service.
Insurance service result
Insurance revenue reflects the consideration to which the Group expects to be entitled in exchange for the provision of coverage and other insurance
contract services (excluding any investment components). Insurance service expenses comprise the incurred claims and other incurred insurance
service expenses (excluding any investment components), and losses on onerous groups of contracts and reversals of such losses.
Insurance finance income and expenses
Insurance finance income and expenses comprise the change in the carrying amount of the group of insurance contracts arising from the
effects of the time value of money, financial risk and changes therein. For VFA contracts, changes in the fair value of underlying items
(excluding additions and withdrawals) are recognised in insurance finance income or expenses.
(k) Employee compensation and benefits
Share-based payments
HSBC enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation for the
provision of their services.
The vesting period for these schemes may commence before the legal grant date if the employees have started to render services in respect
of the award before the legal grant date, where there is a shared understanding of the terms and conditions of the arrangement. Expenses are
recognised when the employee starts to render service to which the award relates.
Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of vesting
recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a cancellation, and the
amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.
HSBC Holdings plc Annual Report and Accounts 2024
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Financial statements
Post-employment benefit plans
HSBC operates a number of pension schemes including defined benefit, defined contribution and other post-employment benefit schemes.
Payments to defined contribution schemes are charged as an expense as the employees render service.
Defined benefit pension obligations are calculated using the projected unit credit method. The net charge to the income statement mainly
comprises the service cost and the net interest on the net defined benefit asset or liability, and is presented in operating expenses.
Remeasurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The net
defined benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets (see Note
1.2(c)), after applying the asset ceiling test, where the net defined benefit surplus is limited to the present value of available refunds and
reductions in future contributions to the plan.
The costs of obligations arising from other post-employment plans are accounted for on the same basis as defined benefit pension plans.
Critical estimates and judgements
The most significant critical estimates relate to the determination of key assumptions applied in calculating the defined benefit pension obligation for the principal
plan.
Judgements
Estimates
– A range of assumptions could be applied, and different assumptions could
significantly alter the defined benefit obligation and the amounts
recognised in profit or loss or OCI.
– The calculation of the defined benefit pension obligation includes
assumptions with regard to the discount rate, inflation rate, pension
payments and deferred pensions, pay and mortality. Management
determines these assumptions in consultation with the plan’s actuaries.
– Key assumptions used in calculating the defined benefit pension
obligation for the principal plan and the sensitivity of the calculation to
different assumptions are described in Note 5.
(l)
Tax
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to
items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related
item appears.
Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous
years. HSBC provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the
amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods
in which the assets will be realised or the liabilities settled.
In assessing the probability and sufficiency of future taxable profit, management considers the availability of evidence to support the
recognition of deferred tax assets, taking into account the inherent risks in long-term forecasting, including climate change-related, and drivers
of recent history of tax losses where applicable. Management also considers the future reversal of existing taxable temporary differences and
tax planning strategies, including corporate reorganisations.
Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.
Critical estimates and judgements
The recognition of deferred tax assets depends on judgements and estimates.
Judgements
Estimates
– Specific judgements supporting deferred tax assets are described in Note 7.
– The recognition of deferred tax assets is sensitive to estimates of future
cash flows projected for periods for which detailed forecasts are available
and to assumptions regarding the long-term pattern of cash flows
thereafter, on which forecasts of future taxable profit are based, and
which affect the expected recovery periods and the pattern of utilisation
of tax losses and tax credits. See Note 7 for further detail.
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of deferred tax assets in the next
financial year, but does consider this to be an area that is inherently judgemental.
(m) Provisions, contingent liabilities and guarantees
Provisions
Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or constructive
obligation that has arisen as a result of past events and for which a reliable estimate can be made.
Notes on the financial statements
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HSBC Holdings plc Annual Report and Accounts 2024
Critical estimates and judgements
The recognition and measurement of provisions requires the Group to make a number of judgements, assumptions and estimates. The most significant are set out
below:
Judgements
Estimates
– Determining whether a present obligation exists. Professional advice is taken on
the assessment of litigation and similar obligations.
– Provisions for legal proceedings and regulatory matters typically require a higher
degree of judgement than other types of provisions. When matters are at an
early stage, accounting judgements can be difficult because of 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. As matters
progress, management and legal advisers evaluate on an ongoing basis whether
provisions should be recognised, revising previous estimates as appropriate. At
more advanced stages, it is typically easier to make estimates around a better
defined set of possible outcomes.
– Provisions for legal proceedings and regulatory matters remain very
sensitive to the assumptions used in the estimate. There could be a wider
range of possible outcomes for any pending legal proceedings,
investigations or inquiries. As a result it is often not practicable to quantify
a range of possible outcomes for individual matters. It is also not
practicable to meaningfully quantify ranges of potential outcomes in
aggregate for these types of provisions because of the diverse nature and
circumstances of such matters and the wide range of uncertainties
involved.
Contingent liabilities, contractual commitments and guarantees
Contingent liabilities
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related to
legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of settlement is
remote.
Financial guarantee contracts
Liabilities under financial guarantee contracts that are not classified as insurance contracts are recorded initially at their fair value, which is
generally the fee received or present value of the fee receivable.
(n) Impairment of non-financial assets
Software under development is tested for impairment at least annually. Other non-financial assets are property, plant and equipment, intangible
assets (excluding goodwill) and right-of-use assets. They are tested for impairment at the individual asset level when there is indication of
impairment at that level, or at the CGU level for assets that do not have a recoverable amount at the individual asset level. In addition,
impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are considered to be the
principal operating legal entities divided by global business. Impairment testing compares the carrying amount of the non-financial asset or CGU
with its recoverable amount, which is the higher of the fair value less costs of disposal or the value in use. The carrying amount of a CGU
comprises the carrying amount of its assets and liabilities, including non-financial assets that are directly attributable to it and non-financial
assets that can be allocated to it on a reasonable and consistent basis. Non-financial assets that cannot be allocated to an individual CGU are
tested for impairment at an appropriate grouping of CGUs. The recoverable amount of the CGU is the higher of the fair value less costs of
disposal of the CGU, which is determined by independent and qualified valuers where relevant, and the value in use, which is calculated based
on appropriate inputs (see Note 21).
When the recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognised in the income statement to the
extent that the impairment can be allocated on a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of
their respective individual recoverable amount or nil. Impairment is not allocated to the financial assets in a CGU.
Impairment losses recognised in prior periods for non-financial assets are reversed when there has been a change in the estimate used to
determine the recoverable amount. The impairment loss is reversed to the extent that the carrying amount of the non-financial assets would
not exceed the amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised in prior
periods.
Critical estimates and judgements
The review of goodwill and other non-financial assets for impairment reflects management’s best estimate of the future cash flows of the CGUs and the rates
used to discount these cash flows, both of which are subject to uncertain factors as described in the ‘Critical estimates and judgements’ in Note 1.2(a).
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of goodwill and non-financial assets
in the next financial year, but does consider this to be an area that is inherently judgemental.
(o) Non-current assets and disposal groups held for sale
HSBC classifies non-current assets or disposal groups (including assets and liabilities) as held for sale when their carrying amounts will be
recovered principally through sale rather than through continuing use. To be classified as held for sale, the non-current asset or disposal group
must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or
disposal groups), and the sale must be highly probable. For a sale to be highly probable, the appropriate level of management must be
committed to a plan to sell the asset (or disposal group) and an active programme to locate a buyer and complete the plan must have been
initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value.
In addition, the sale should be expected to qualify as a completed sale within one year from the date of classification and actions required to
complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Held for sale assets and disposal groups are measured at the lower of their carrying amount and fair value less costs to sell except for those
assets and liabilities that are not within the scope of the measurement requirements of IFRS 5. If the carrying amount of the non-current asset
(or disposal group) is greater than the fair value less costs to sell, an impairment loss for any initial or subsequent write-down of the asset or
disposal group to fair value less costs to sell is recognised. Any such impairment loss is first allocated against the non-current assets that are in
scope of IFRS 5 for measurement. This first reduces the carrying amount of any goodwill allocated to the disposal group, and then to the other
non-current assets of the disposal group pro rata on the basis of the carrying amount of each asset in the disposal group. Thereafter, any
impairment loss in excess of the carrying amount of the non-current assets in scope of IFRS 5 for measurement is recognised against the total
assets of the disposal group.
HSBC Holdings plc Annual Report and Accounts 2024
365
Financial statements
2 Net fee income
Net fee income by global business
2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Funds under management
1,864
78
497
—
2,439
Cards
2,448
351
44
—
2,843
Credit facilities
85
722
621
—
1,428
Broking income
561
13
716
—
1,290
Account services
348
791
360
—
1,499
Unit trusts
1,060
10
1
—
1,071
Underwriting
—
8
683
—
691
Global custody
120
7
704
—
831
Remittances
77
387
361
—
825
Imports/exports
—
463
182
—
645
Insurance agency commission
329
18
—
—
347
Other
1,551
1,249
2,725
(3,168)
2,357
Fee income
8,443
4,097
6,894
(3,168)
16,266
Less: fee expense
(2,513)
(245)
(4,348)
3,141
(3,965)
Net fee income
5,930
3,852
2,546
(27)
12,301
2023
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Funds under management
1,763
71
539
—
2,373
Cards
2,385
353
38
—
2,776
Credit facilities
103
856
615
—
1,574
Broking income
463
22
592
—
1,077
Account services
402
788
347
—
1,537
Unit trusts
727
10
1
—
738
Underwriting
—
3
583
—
586
Global custody
128
6
730
—
864
Remittances
86
389
347
1
823
Imports/exports
—
470
154
—
624
Insurance agency commission
280
18
—
—
298
Other
1,433
1,161
2,458
(2,706)
2,346
Fee income
7,770
4,147
6,404
(2,705)
15,616
Less: fee expense
(2,416)
(210)
(3,858)
2,713
(3,771)
Net fee income
5,354
3,937
2,546
8
11,845
2022
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Funds under management
1,765
107
500
(12)
2,360
Cards
2,146
313
32
—
2,491
Credit facilities
100
783
591
—
1,474
Broking income
576
40
635
—
1,251
Account services
337
730
344
1
1,412
Unit trusts
682
14
—
—
696
Underwriting
1
2
443
(5)
441
Global custody
140
19
762
—
921
Remittances
72
380
346
1
799
Imports/exports
—
493
141
—
634
Insurance agency commission
283
16
1
—
300
Other
1,330
1,102
2,376
(2,463)
2,345
Fee income
7,432
3,999
6,171
(2,478)
15,124
Less: fee expense
(2,128)
(212)
(3,459)
2,445
(3,354)
Net fee income
5,304
3,787
2,712
(33)
11,770
Net fee income included $6,816m of fees earned on financial assets that were not at fair value through profit or loss, other than amounts
included in determining the effective interest rate (2023: $6,971m; 2022: $6,410m), $1,951m of fees payable on financial liabilities that were
not at fair value through profit or loss, other than amounts included in determining the effective interest rate (2023: $1,872m; 2022: $1,613m),
$3,480m of fees earned on trust and other fiduciary activities (2023: $3,452m; 2022: $3,492m) and $401m of fees payable relating to trust and
other fiduciary activities (2023: $333m; 2022: $370m).
Notes on the financial statements
366
HSBC Holdings plc Annual Report and Accounts 2024
3 Net income/(expense) from financial instruments measured at fair value
through profit or loss
2024
2023
2022
$m
$m
$m
Net income/(expense) arising on:
Net trading activities
23,186
20,391
2,372
Other instruments managed on a fair value basis
(2,070)
(3,730)
7,906
Net income from financial instruments held for trading or managed on a fair value basis
21,116
16,661
10,278
Financial assets held to meet liabilities under insurance and investment contracts
6,210
8,086
(14,392)
Liabilities to customers under investment contracts
(309)
(199)
561
Net income/(expense) from assets and liabilities of insurance businesses, including related
derivatives, measured at fair value through profit or loss
5,901
7,887
(13,831)
HSBC Holdings
2024
2023
2022
$m
$m
$m
Net income/(expense) arising on:
Net trading activities
984
(546)
2,094
Other instruments managed on a fair value basis
1,915
1,609
35
Net income from financial instruments held for trading or managed on a fair value basis
2,899
1,063
2,129
Derivatives managed in conjunction with HSBC Holdings-issued debt securities
93
426
(1,529)
Other changes in fair value
(218)
(1,894)
3,673
Changes in fair value of designated debt and related derivatives
(125)
(1,468)
2,144
Changes in fair value of other financial instruments mandatorily measured at fair value through profit
or loss
2,086
3,692
(2,409)
Year ended 31 Dec
4,860
3,287
1,864
4
Insurance business
Insurance service result
Year ended 31 Dec 2024
Year ended 31 Dec 2023
Life direct
participating
and investment
DPF contracts1
Life other
contracts2
Total
Life direct
participating and
investment DPF
contracts1
Life other
contracts2
Total
$m
$m
$m
$m
$m
$m
Insurance revenue
Amounts relating to changes in liabilities for remaining coverage
1,890
566
2,456
1,626
470
2,096
– Contractual service margin recognised for services provided
1,143
188
1,331
975
151
1,126
– Change in risk adjustment for non-financial risk for risk expired
46
20
66
21
15
36
– Expected incurred claims and other insurance service expenses
698
358
1,056
594
304
898
– Other
3
—
3
36
—
36
Recovery of insurance acquisition cash flows
195
101
296
109
54
163
Total insurance revenue
2,085
667
2,752
1,735
524
2,259
Insurance service expenses
Incurred claims and other insurance service expenses
(616)
(428)
(1,044)
(615)
(292)
(907)
Losses and reversal of losses on onerous contracts
(50)
(73)
(123)
(32)
(77)
(109)
Amortisation of insurance acquisition cash flows
(195)
(101)
(296)
(109)
(54)
(163)
Adjustments to liabilities for incurred claims
(6)
27
21
(1)
(1)
(2)
Total insurance service expenses
(867)
(575)
(1,442)
(757)
(424)
(1,181)
Total insurance service result
1,218
92
1,310
978
100
1,078
1 ‘Life direct participating and investment DPF contracts’ are substantially measured under the variable fee approach measurement model.
2 ‘Life other contracts’ are measured under the general measurement model.
HSBC Holdings plc Annual Report and Accounts 2024
367
Financial statements
Net investment return
Year ended 31 Dec 2024
Year ended 31 Dec 2023
Life direct
participating
and
investment
DPF contracts
Life other
contracts
Total
Life direct
participating
and
investment
DPF contracts
Life other
contracts
Total
$m
$m
$m
$m
$m
$m
Investment return
Amounts recognised in profit or loss1
5,644
273
5,917
7,663
214
7,877
Amounts recognised in OCI2
185
—
185
493
—
493
Total investment return (memorandum)
5,829
273
6,102
8,156
214
8,370
Net finance expense
Changes in fair value of underlying items of direct participating contracts
(5,805)
—
(5,805)
(7,995)
—
(7,995)
Effect of risk mitigation option
44
—
44
(35)
—
(35)
Interest accreted
—
(110)
(110)
—
(127)
(127)
Effect of changes in interest rates and other financial assumptions
—
(298)
(298)
(12)
(121)
(133)
Effect of measuring changes in estimates at current rates and adjusting
the CSM at rates on initial recognition
—
—
—
—
(10)
(10)
Total net finance expense from insurance contracts
(5,761)
(408)
(6,169)
(8,042)
(258)
(8,300)
Represented by:
Amounts recognised in profit or loss
(5,570)
(408)
(5,978)
(7,551)
(258)
(7,809)
Amounts recognised in OCI
(191)
—
(191)
(491)
—
(491)
Total net investment return
68
(135)
(67)
114
(44)
70
Represented by:
Amounts recognised in profit or loss
74
(135)
(61)
112
(44)
68
Amounts recognised in OCI
(6)
—
(6)
2
—
2
1 Total Group ‘Net income/(expense) from assets and liabilities of insurance business, including related derivatives, measured at fair value through profit or loss’ of
$5,901m gain (2023: $7,886m gain) includes returns on assets and liabilities supporting insurance policies of $5,685m (2023: $7,627m loss) and on shareholder
assets of $216m (2023: $259m gain). Investment returns of $5,917m (2023: $7,877m gain) include gains of $5,685m (2023: $7,627m gain) on underlying assets
supporting insurance liabilities reported in ‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at
fair value through profit or loss’, $235m gains (2023: $257m gain) reported in ‘Net interest income’ and $3m loss (2023: $7m loss) reported in ‘Other operating
income’.
2 ‘Amounts recognised in OCI’ insurance investment income comprises of fair value gains of $185m (2023: $497m gain) and expected credit (recoveries)/losses
of nil (2023: $4m loss). The Group statement of comprehensive income statement ‘Debt instruments at fair value through other comprehensive income – fair
value gains/(losses)’ gain of $41m (2023: $2,381m gain) includes insurance investment income recognised in OCI of $185m gain (2023: $497m gain) and ‘Debt
instruments at fair value through other comprehensive income - expected credit (recoveries)/losses recognised in the income statement’ recovery of $6m (2023:
$59m loss) includes insurance expected credit (recoveries)/losses recognised in OCI of nil (2023: $4m loss).
Reconciliation of amounts included in other comprehensive income for financial assets measured at fair value through other comprehensive
income – assets supporting contracts measured under the modified retrospective approach
2024
2023
$m
$m
Balance at 1 Jan
(670)
(973)
Net change in fair value
(153)
451
Net amount reclassified to profit or loss
3
(6)
Related income tax
39
(115)
Foreign exchange and other
45
(27)
Balance at 31 Dec
(736)
(670)
Notes on the financial statements
368
HSBC Holdings plc Annual Report and Accounts 2024
Movements in carrying amounts of insurance contracts – analysis by remaining coverage and incurred claims
Year ended 31 Dec 2024
Life direct participating and investment DPF
contracts
Life other contracts
Liabilities for remaining
coverage:
Liabilities for remaining
coverage:
Excluding
loss
component
Loss
component
Incurred
claims
Total
Excluding
loss
component
Loss
component
Incurred
claims
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
(15)
1
1
(13)
(279)
(16)
56
(239)
(252)
Opening liabilities
116,546
121
370 117,037
3,400
191
223
3,814 120,851
Net opening balance at 1 Jan 2024
116,531
122
371 117,024
3,121
175
279
3,575 120,599
Changes in the consolidated income
statement and statement of
comprehensive income
Insurance revenue
Contracts under the fair value approach1
(715)
—
—
(715)
(217)
—
—
(217)
(932)
Contracts under the modified
retrospective approach
(141)
—
—
(141)
(18)
—
—
(18)
(159)
Other contracts2
(1,229)
—
—
(1,229)
(432)
—
—
(432)
(1,661)
Total insurance revenue
(2,085)
—
—
(2,085)
(667)
—
—
(667)
(2,752)
Insurance service expenses
Incurred claims and other insurance
service expenses
—
(7)
623
616
—
(49)
477
428
1,044
Amortisation of insurance acquisition
cash flows
195
—
—
195
101
—
—
101
296
Losses and reversal of losses on
onerous contracts
—
50
—
50
—
73
—
73
123
Adjustments to liabilities for incurred
claims
—
—
6
6
—
—
(27)
(27)
(21)
Total insurance service expenses
195
43
629
867
101
24
450
575
1,442
Investment components
(8,284)
—
8,284
—
(1,058)
—
1,058
—
—
Insurance service result
(10,174)
43
8,913
(1,218)
(1,624)
24
1,508
(92)
(1,310)
Net finance expense from insurance
contracts3
5,720
41
—
5,761
405
3
—
408
6,169
Other movements recognised in the
statement of profit or loss
—
—
—
—
—
—
—
—
—
Effect of movements in exchange rates
(1,162)
(5)
(9)
(1,176)
(76)
1
(24)
(99)
(1,275)
Total changes in the consolidated
income statement and statement of
comprehensive income
(5,616)
79
8,904
3,367
(1,295)
28
1,484
217
3,584
Cash flows
Premiums received
16,442
—
—
16,442
1,950
—
—
1,950
18,392
Claims, other insurance service
expenses paid and other cash flows
2
—
(9,020)
(9,018)
2
—
(1,508)
(1,506) (10,524)
Insurance acquisition cash flows
(835)
—
—
(835)
(260)
—
—
(260)
(1,095)
Total cash flows
15,609
—
(9,020)
6,589
1,692
—
(1,508)
184
6,773
Other movements4
(23,495)
(54)
(31) (23,580)
53
8
60
121 (23,459)
Net closing balance at 31 Dec 2024
103,029
147
224 103,400
3,571
211
315
4,097 107,497
Closing assets
(16)
1
1
(14)
(177)
(13)
72
(118)
(132)
Closing liabilities
103,045
146
223 103,414
3,748
224
243
4,215 107,629
Net closing balance at 31 Dec 2024
103,029
147
224 103,400
3,571
211
315
4,097 107,497
HSBC Holdings plc Annual Report and Accounts 2024
369
Financial statements
Movements in carrying amounts of insurance contracts – analysis by remaining coverage and incurred claims (continued)
Year ended 31 Dec 2023
Life direct participating and investment DPF
contracts
Life other contracts
Liabilities for remaining
coverage:
Liabilities for remaining
coverage:
Excluding
loss
component
Loss
component
Incurred
claims
Total
Excluding
loss
component
Loss
component
Incurred
claims
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
(5)
—
—
(5)
(187)
21
35
(131)
(136)
Opening liabilities
104,676
114
355 105,145
3,359
109
203
3,671 108,816
Net opening balance at 1 Jan 2023
104,671
114
355 105,140
3,172
130
238
3,540 108,680
Changes in the consolidated income
statement and statement of comprehensive
income
Insurance revenue
Contracts under the fair value approach1
(508)
—
—
(508)
(196)
—
—
(196)
(704)
Contracts under the modified retrospective
approach
(148)
—
—
(148)
(22)
—
—
(22)
(170)
Other contracts2
(1,079)
—
—
(1,079)
(306)
—
—
(306)
(1,385)
Total insurance revenue
(1,735)
—
—
(1,735)
(524)
—
—
(524)
(2,259)
Insurance service expenses
Incurred claims and other insurance service
expenses
—
(6)
621
615
—
(24)
316
292
907
Amortisation of insurance acquisition cash
flows
109
—
—
109
54
—
—
54
163
Losses and reversal of losses on onerous
contracts
—
32
—
32
—
77
—
77
109
Adjustments to liabilities for incurred claims
—
—
1
1
—
—
1
1
2
Total insurance service expenses
109
26
622
757
54
53
317
424
1,181
Investment components
(8,104)
—
8,104
—
(818)
—
818
—
—
Insurance service result
(9,730)
26
8,726
(978)
(1,288)
53
1,135
(100)
(1,078)
Net finance expense from insurance
contracts3
8,042
—
—
8,042
254
3
1
258
8,300
Other movements recognised in the
statement of profit or loss
513
(5)
(214)
294
(8)
4
(13)
(17)
277
Effect of movements in exchange rates
942
1
6
949
25
(2)
8
31
980
Total changes in the consolidated income
statement and statement of comprehensive
income
(233)
22
8,518
8,307
(1,017)
58
1,131
172
8,479
Cash flows
Premiums received
12,616
—
—
12,616
1,256
—
—
1,256
13,872
Claims, other insurance service expenses
paid and other cash flows
(15)
—
(8,502)
(8,517)
1
—
(1,112)
(1,111)
(9,628)
Insurance acquisition cash flows
(522)
—
—
(522)
(282)
—
—
(282)
(804)
Total cash flows
12,079
—
(8,502)
3,577
975
—
(1,112)
(137)
3,440
Acquisition of subsidiaries and other
movements
14
(14)
—
—
(9)
(13)
22
—
—
Net closing balance at 31 Dec 2023
116,531
122
371 117,024
3,121
175
279
3,575 120,599
Closing assets
(15)
1
1
(13)
(279)
(16)
56
(239)
(252)
Closing liabilities
116,546
121
370 117,037
3,400
191
223
3,814 120,851
Net closing balance at 31 Dec 2023
116,531
122
371 117,024
3,121
175
279
3,575 120,599
1 On transition to IFRS 17 the Group applied the full retrospective approach to new business written from 2018 at the earliest. Where applying the full
retrospective approach was impracticable, the Group primarily applied the fair value approach.
2 ‘Other contracts’ are those contracts measured by applying IFRS 17 from inception of the contracts. These include contracts measured under the full
retrospective approach at transition and contracts incepted after transition.
3 ‘Net finance expense from insurance contracts’ expense of $6,169m (2023: $8,300m expense) comprises expense of $5,978m (2023: $7,809m expense)
recognised in the income statement and expense of $191m (2023: $491m expense) recognised in other comprehensive income.
4 The ‘Other movements‘ reduction of $23,459m in insurance contracts includes $21,811m in respect of our French insurance business, classified as held for sale
at 31 December 2024. Further details are provided on page 412.
Notes on the financial statements
370
HSBC Holdings plc Annual Report and Accounts 2024
Movements in carrying amounts of insurance contracts – analysis by measurement component
Year ended 31 Dec 2024
Life direct participating and investment DPF contracts
Life other contracts
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Contracts
under the
fair value
approach
1
Contracts
under the
modified
retros-
pective
approach
Other
contracts
2
Total
Contracts
under the
fair value
approach1
Contracts
under the
modified
retros-
pective
approach
Other
contracts
2 Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
(30)
3
—
14
(13)
(339)
36
—
64 (239)
(252)
Opening liabilities
106,440
4,679
715
5,203 117,037
3,113
361
19
321 3,814 120,851
Net opening balance at
1 Jan 2024
106,410
4,682
715
5,217 117,024
2,774
397
19
385 3,575 120,599
Changes in the
consolidated income
statement and
statement of
comprehensive income
Changes that relate to
current services
Contractual service
margin recognised for
services provided
—
(488)
(59)
(596) (1,143)
—
(77)
(6)
(105) (188) (1,331)
Change in risk adjustment
for non-financial risk
expired
(46)
—
—
—
(46)
(20)
—
—
—
(20)
(66)
Experience adjustments
(82)
—
—
—
(82)
70
—
—
—
70
(12)
Other movements
recognised in insurance
service result
—
52
—
(55)
(3)
—
—
—
—
—
(3)
Changes that relate to
future services
Contracts initially
recognised in the year
(2,384)
—
—
2,400
16
(201)
—
—
220
19
35
Changes in estimates that
adjust the contractual
service margin3
(914)
229
(6)
691
—
(7)
30
7
(30)
—
—
Changes in estimates that
result in losses and
reversal of losses on
onerous contracts
34
—
—
—
34
54
—
—
—
54
88
Changes that relate to
past services
Adjustments to liabilities
for incurred claims
6
—
—
—
6
(27)
—
—
—
(27)
(21)
Insurance service result
(3,386)
(207)
(65)
2,440 (1,218)
(131)
(47)
1
85
(92) (1,310)
Net finance expense from
insurance contracts4
5,761
—
—
— 5,761
380
12
—
16 408 6,169
Other movements
recognised in the
statement of profit or loss
—
—
—
—
—
—
—
—
—
—
—
Effect of movements in
exchange rates
(1,167)
51
(24)
(36) (1,176)
(50)
(11)
—
(38)
(99) (1,275)
Total changes in the
consolidated income
statement and
statement of
comprehensive income
1,208
(156)
(89)
2,404 3,367
199
(46)
1
63 217 3,584
Cash flows
Premiums received
16,442
—
—
— 16,442
1,950
—
—
— 1,950 18,392
Claims, other insurance
service expenses paid and
other cash flows
(9,018)
—
—
— (9,018)
(1,506)
—
—
— (1,506) (10,524)
Insurance acquisition cash
flows
(835)
—
—
—
(835)
(260)
—
—
— (260) (1,095)
Total cash flows
6,589
—
—
— 6,589
184
—
—
— 184 6,773
Other movements5
(22,736)
(23)
(626)
(195) (23,580)
153
2
(20)
(14) 121 (23,459)
Net closing balance at
31 Dec 2024
91,471
4,503
—
7,426 103,400
3,310
353
—
434 4,097 107,497
Closing assets
(27)
3
—
10
(14)
(359)
73
—
168 (118)
(132)
Closing liabilities
91,498
4,500
—
7,416 103,414
3,669
280
—
266 4,215 107,629
Net closing balance at
31 Dec 2024
91,471
4,503
—
7,426 103,400
3,310
353
—
434 4,097 107,497
HSBC Holdings plc Annual Report and Accounts 2024
371
Financial statements
Movements in carrying amounts of insurance contracts – analysis by measurement component (continued)
Year ended 31 Dec 2023
Life direct participating and investment DPF contracts
Life other contracts
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Estimates
of present
value of
future cash
flows and
risk
adjustment
Contractual service margin
Contracts
under the
fair value
approach1
Contracts
under the
modified
retros-
pective
approach
Other
contracts
2
Total
Contracts
under the
fair value
approach
1
Contracts
under the
modified
retros-
pective
approach
Other
contracts
2
Total
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Opening assets
(18)
3
—
10
(5)
(308)
86
—
91 (131)
(136)
Opening liabilities
96,174
4,364
792
3,815 105,145
3,162
325
18
166 3,671 108,816
Net opening balance at 1 Jan
2023
96,156
4,367
792
3,825 105,140
2,854
411
18
257 3,540 108,680
Changes in the consolidated
income statement and
statement of comprehensive
income
Changes that relate to current
services
Contractual service margin
recognised for services provided
—
(188)
(70)
(717)
(975)
—
(69)
(6)
(76) (151) (1,126)
Change in risk adjustment for
non-financial risk expired
(21)
—
—
—
(21)
(15)
—
—
—
(15)
(36)
Experience adjustments
21
—
—
—
21
(12)
—
—
—
(12)
9
Other movements recognised in
insurance service result
(36)
—
—
—
(36)
—
—
—
—
—
(36)
Changes that relate to future
services
Contracts initially recognised in
the year
(1,606)
—
—
1,619
13
(176)
—
—
207
31
44
Changes in estimates that adjust
contractual service margin3
(771)
368
(33)
436
—
21
26
6
(53)
—
—
Changes in estimates that result
in losses and reversal of losses
on onerous contracts
19
—
—
—
19
46
—
—
—
46
65
Changes that relate to past
services
Adjustments to liabilities for
incurred claims
1
—
—
—
1
1
—
—
—
1
2
Insurance service result
(2,393)
180
(103)
1,338
(978)
(135)
(43)
—
78 (100) (1,078)
Net finance expense from
insurance contracts4
8,042
—
—
—
8,042
235
11
—
12
258 8,300
Other movements recognised in
the statement of profit or loss
145
133
(1)
17
294
(43)
6
—
20
(17)
277
Effect of movements in
exchange rates
883
2
27
37
949
—
12
1
18
31
980
Total changes in the
consolidated income statement
and statement of
comprehensive income
6,677
315
(77)
1,392
8,307
57
(14)
1
128
172 8,479
Cash flows
Premiums received
12,616
—
—
— 12,616
1,256
—
—
— 1,256 13,872
Claims, other insurance service
expenses paid and other cash
flows
(8,517)
—
—
— (8,517)
(1,111)
—
—
— (1,111) (9,628)
Insurance acquisition cash flows
(522)
—
—
—
(522)
(282)
—
—
— (282)
(804)
Total cash flows
3,577
—
—
—
3,577
(137)
—
—
— (137) 3,440
Other movements
—
—
—
—
—
—
—
—
—
—
—
Net closing balance at
31 Dec 2023
106,410
4,682
715
5,217 117,024
2,774
397
19
385 3,575 120,599
Closing assets
(30)
3
—
14
(13)
(339)
36
—
64 (239)
(252)
Closing liabilities
106,440
4,679
715
5,203 117,037
3,113
361
19
321 3,814 120,851
Net closing balance at
31 Dec 2023
106,410
4,682
715
5,217 117,024
2,774
397
19
385 3,575 120,599
1 On transition to IFRS 17 the Group applied the full retrospective approach to new business written from 2018 at the earliest. Where applying the full
retrospective approach was impracticable, the Group primarily applied the fair value approach.
2 ‘Other contracts' are those contracts measured by applying IFRS 17 from inception of the contracts. These include contracts measured under the full
retrospective approach at transition and contracts incepted after transition.
3 ‘Changes in estimates that adjust contractual service margin’ increase of $921m (2023: $750m increase) includes an increase of $651m (2023: $233m increase)
from economic factors and an increase of $270m (2023: $517m increase) from non-economic factors.
4 ‘Net finance expense from insurance contracts’ expense of $6,169m (2023: $8,300m expense) comprises expense of $5,978m (2023: $7,809m expense)
recognised in the income statement and expense of $191m (2023: $491m expense) recognised in other comprehensive income.
5 ‘Other movements‘ $23,459m reduction in insurance contracts includes $21,811m in respect of the classification of the France insurance business to held for
sale at 31 December 2024. Further details are provided on page 412.
Notes on the financial statements
372
HSBC Holdings plc Annual Report and Accounts 2024
Effect of contracts initially recognised in the year
Year ended 31 Dec 2024
Year ended 31 Dec 2023
Profitable
contracts
issued
Onerous
contracts
issued
Total
Profitable
contracts
issued
Onerous
contracts
issued
Total
$m
$m
$m
$m
$m
$m
Life direct participating and investment DPF contracts
Estimates of present value of cash outflows
16,878
495
17,373
12,418
215
12,633
– insurance acquisition cash flows
805
38
843
602
21
623
– claims and other insurance service expenses payable
16,073
457
16,530
11,816
194
12,010
Estimates of present value of cash inflows
(19,326)
(481)
(19,807)
(14,074)
(204)
(14,278)
Risk adjustment for non-financial risk
48
2
50
37
2
39
Contractual service margin
2,400
—
2,400
1,619
—
1,619
(Losses) recognised on initial recognition
—
(16)
(16)
—
(13)
(13)
Life other contracts
Estimates of present value of cash outflows
1,484
476
1,960
1,116
464
1,580
– insurance acquisition cash flows
125
65
190
106
50
156
– claims and other insurance service expenses payable
1,359
411
1,770
1,010
414
1,424
Estimates of present value of cash inflows
(1,731)
(460)
(2,191)
(1,350)
(438)
(1,788)
Risk adjustment for non-financial risk
27
3
30
27
5
32
Contractual service margin
220
—
220
207
—
207
(Losses) recognised on initial recognition
—
(19)
(19)
—
(31)
(31)
Present value of expected future cash flows of insurance contract liabilities and contractual service margin
Less
than 1
year
1–2
years
2–3
years
3–4
years
4–5
years
5–10
years
10–20
years
Over 20
years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
2024
Insurance liability future cash flows1
Life direct participating and investment DPF contracts
(3,526)
(455)
2,464
2,968
3,219 11,332 22,005 53,120
91,127
Life other contracts
971
(96)
(101)
(53)
7
63
279
2,529
3,599
Insurance liability future cash flows at 31 Dec
(2,555)
(551)
2,363
2,915
3,226 11,395 22,284 55,649
94,726
Remaining contractual service margin1
Life direct participating and investment DPF contracts
1,052
961
880
810
746
2,892
2,954
1,634
11,929
Life other contracts
128
104
85
69
53
159
127
62
787
Remaining contractual service margin at 31 Dec
1,180
1,065
965
879
799
3,051
3,081
1,696
12,716
2023
Insurance liability future cash flows
Life direct participating and investment DPF contracts
(2,620)
(545)
2,321
2,419
3,344 11,695 23,351 65,897 105,862
Life other contracts
1,276
362
(347)
4
(45)
36
102
1,628
3,016
Insurance liability future cash flows at 31 Dec
(1,344)
(183)
1,974
2,423
3,299 11,731 23,453 67,525 108,878
Remaining contractual service margin
Life direct participating and investment DPF contracts
917
848
783
722
666
2,597
2,653
1,428
10,614
Life other contracts
172
113
84
74
61
141
115
41
801
Remaining contractual service margin at 31 Dec
1,089
961
867
796
727
2,738
2,768
1,469
11,415
1 ‘Insurance liability future cash flows’ and ‘Remaining contractual service margin’ at 31 December 2024 exclude the French insurance business that was
classified as held for sale at 31 December 2024. Further details are provided on page 412.
Discount rates
The discount rates applied to expected future cash flows are determined through a bottom-up approach as set out in Note 1.2(j) ‘Summary of
material accounting policies – Insurance contracts’ on page 354. The blended average of discount rates used within our most material
manufacturing entities are as follows:
HSBC Life (International) Ltd
Hang Seng Insurance Co Ltd
HSBC Assurances
Vie (France)
HK$
US$
HK$
US$
€
At 31 Dec 2024
10-year discount rate (%)
4.32
5.16
4.43
5.25
2.97
20-year discount rate (%)
4.42
5.51
4.53
5.60
2.95
At 31 Dec 2023
10-year discount rate (%)
4.02
4.47
4.16
4.62
2.96
20-year discount rate (%)
4.21
4.91
4.34
5.06
2.97
HSBC Holdings plc Annual Report and Accounts 2024
373
Financial statements
5 Employee compensation and benefits
2024
2023
2022
$m
$m
$m
Employee compensation and benefits1
18,465
18,220
18,003
Capitalised wages and salaries2
1,688
1,403
1,285
Gross employee compensation and benefits for the year ended 31 Dec
20,153
19,623
19,288
Consists of:
Wages and salaries
17,815
17,359
16,970
Social security costs
1,487
1,507
1,403
Post-employment benefits
851
757
915
Year ended 31 Dec
20,153
19,623
19,288
1 Employee compensation and benefits are presented in the income statement net of software capitalisation costs and costs included in the insurance contract
fulfilment cash flow liabilities under IFRS 17.
2 Comprises $1,118m (2023: $1,043m; 2022: $922m) software capitalisation costs and $570m (2023: $360m; 2022: $363m) costs included in the insurance
contract fulfilment cash flow liabilities under IFRS 17.
Average number of persons employed by HSBC during the year by global business1
2024
2023
2022
Wealth and Personal Banking
125,068
132,336
135,676
Commercial Banking
47,135
46,826
48,004
Global Banking and Markets
48,351
48,043
48,597
Corporate Centre
374
347
365
Year ended 31 Dec
220,928
227,552
232,642
1 Average number of persons employed represents the number of persons with contracts of service with the Group.
Average number of persons employed by HSBC during the year by legal entity1
2024
2023
2022
HSBC UK Bank plc
20,034
20,415
20,501
HSBC Bank plc
11,456
14,809
15,405
The Hongkong and Shanghai Banking Corporation Limited
54,478
54,321
54,792
HSBC Bank Middle East Limited
3,344
3,316
3,338
HSBC North America Holdings Inc.
5,928
6,046
6,749
HSBC Bank Canada
758
4,354
4,241
Grupo Financiero HSBC, S.A. de C.V.
13,928
14,412
14,484
Other trading entities2
8,393
9,247
10,026
Holding companies, shared service centres and intra-Group eliminations
102,609
100,632
103,106
Year ended 31 Dec
220,928
227,552
232,642
1 Average number of persons employed represents the number of persons with contracts of service with the Group.
2 Other trading entities includes entities located in Türkiye, Egypt and Saudi Arabia.
Reconciliation of total incentive awards granted to income statement charge
2024
2023
2022
$m
$m
$m
Total incentive awards approved for the current year
3,800
3,774
3,359
Less: deferred bonuses awarded, expected to be recognised in future periods
(381)
(353)
(343)
Total incentives awarded and recognised in the current year
3,419
3,421
3,016
Add: current year charges for deferred bonuses from previous years
439
375
239
Other
(97)
(56)
(22)
Income statement charge for incentive awards
3,761
3,740
3,233
Share-based payments
‘Wages and salaries’ includes the effect of share-based payments arrangements, of which $529m (2023: $482m; 2022: $400m) was equity
settled, as follows:
2024
2023
2022
$m
$m
$m
Conditional share awards
551
499
402
Savings-related and other share award option plans
27
23
22
Year ended 31 Dec
578
522
424
Notes on the financial statements
374
HSBC Holdings plc Annual Report and Accounts 2024
HSBC share awards
Award
Policy
Deferred share awards
(including annual incentive
awards, long-term incentive
(‘LTI’) awards delivered in
shares)
An assessment of performance over the relevant period ending on 31 December is used to determine the amount of the award
to be granted.
– Deferred awards generally require employees to remain in employment over the vesting period and are generally not subject
to performance conditions after the grant date. An exception to these are LTI awards, which are subject to performance
conditions.
– Deferred share awards generally vest over a period of three, four, five or seven years.
– Vested shares may be subject to a retention requirement post-vesting.
– Awards are generally subject to malus and clawback provisions.
International Employee Share
Purchase Plan (‘ShareMatch’)
The plan was first introduced in Hong Kong in 2013 and now includes employees based in 30 jurisdictions.
– Shares are purchased in the market each quarter up to a maximum value of £750, or the equivalent in local currency.
– Matching awards are added at a ratio of one free share for every three purchased. In mainland China, matching awards are
settled in cash.
– Matching awards vest subject to continued employment and the retention of the purchased shares for a maximum period of
two years and nine months.
Movement on HSBC share awards
2024
2023
Number
Number
(000s)
(000s)
Conditional share awards outstanding at 1 Jan
125,023
126,246
Additions during the year
84,930
72,289
Released in the year
(71,849)
(70,054)
Forfeited in the year
(4,461)
(3,458)
Conditional share awards outstanding at 31 Dec
133,643
125,023
Weighted average fair value of awards granted ($)
6.08
5.84
HSBC share option plans
Main plans
Policy
Savings-related share option
plans (‘Sharesave’)
– From 2014, employees eligible for the UK plan could save up to £500 per month with the option to use the savings to acquire
shares.
– These are generally exercisable within six months following either the third or fifth anniversary of the commencement of a
three-year or five-year contract, respectively.
– The exercise price is set at a 20% (2023: 20%) discount to the market value immediately preceding the date of invitation.
Calculation of fair values
The fair values of share options are calculated using a Black-Scholes model. The fair value of a share award is based on the share price at the
date of the grant.
Movement on HSBC share option plans
Savings-related
share option plans
Number
WAEP1
(000s)
£
Outstanding at 1 Jan 2024
83,994
3.42
Granted during the year2
11,845
5.30
Exercised during the year3
(16,776)
2.94
Expired during the year
(2,454)
4.20
Forfeited during the year
(1,274)
3.48
Outstanding at 31 Dec 2024
75,335
3.81
– of which exercisable
1,446
3.34
Weighted average remaining contractual life (years)
2.10
Outstanding at 1 Jan 2023
115,651
2.89
Granted during the year2
23,382
4.70
Exercised during the year3
(49,007)
2.73
Expired during the year
(3,832)
3.78
Forfeited during the year
(2,200)
2.88
Outstanding at 31 Dec 2023
83,994
3.42
– of which exercisable
7,165
2.70
Weighted average remaining contractual life (years)
2.41
1 Weighted average exercise price.
2 The weighted average fair value of options granted during the year was $1.66 (2023: $1.92).
3 The weighted average share price at the date the options were exercised was $8.54 (2023: $7.39).
HSBC Holdings plc Annual Report and Accounts 2024
375
Financial statements
Post-employment benefit plans
The Group operates pension plans throughout the world for its employees. ‘Pension risk management processes’ on page 203 contains details
of the policies and practices associated with these pension plans, some of which are defined benefit plans. The largest defined benefit plan is
the HSBC UK section of the HSBC Bank (UK) Pension Scheme (‘the principal plan’), created as a result of the HSBC Bank (UK) Pension Scheme
being fully sectionalised in 2018 to meet the requirements of the Banking Reform Act. For further details of how the trustee of the HSBC Bank
(UK) Pension Scheme manages climate risk, see ’Managing climate risk’ on page 60.
HSBC holds on its balance sheet the net surplus or deficit, which is the difference between the fair value of plan assets and the discounted
value of scheme liabilities at the balance sheet date for each plan. Surpluses are only recognised to the extent that they are recoverable
through reduced contributions in the future or through potential future refunds from the schemes. In assessing whether a surplus is
recoverable, HSBC has considered its current right to obtain a future refund or a reduction in future contributions together with the rights of
third parties such as trustees.
The principal plan
The principal plan has a defined benefit section and a defined contribution section. The defined benefit section was closed to future benefit
accrual in 2015, with defined benefits earned by employees at that date continuing to be linked to their salary while they remain employed by
HSBC. The plan is overseen by an independent corporate trustee, who has a fiduciary responsibility for the operation of the plan. Its assets are
held separately from the assets of the Group.
The investment strategy of the plan is to hold the majority of assets in bonds, with the remainder in a diverse range of investments. It also
includes some interest rate swaps to reduce interest rate risk, inflation swaps to reduce inflation risk and longevity swaps to reduce the impact
of longer life expectancy.
The principal plan is subject to the statutory funding objective requirements of the UK Pensions Act 2004, which requires that it be funded to at
least the level of technical provisions (an actuarial estimate of the assets needed to provide for the benefits already built up under the plan).
Where a funding valuation is carried out and identifies a deficit, the employer and trustee are required to agree to a deficit recovery plan.
The latest funding valuation of the plan at 31 December 2022 was carried out by Towers Watson Limited, using the projected unit credit
method. At that date, the market value of the plan’s assets was £23.9bn ($28.8bn) and this exceeded the value placed on its liabilities on an
ongoing basis by £3.7bn ($4.4bn), giving a funding level of 118%. These figures include defined contribution assets amounting to £3.0bn
($3.6bn). The main differences between the assumptions used for assessing the defined benefit liabilities for this funding valuation and those
used for IAS 19 are that an element of prudence is contained in the funding valuation assumptions for discount rate, inflation rate and life
expectancy. The funding valuation is used to judge the amount of cash contributions the Group needs to put into the pension scheme. It will
always be different to the IAS 19 accounting surplus, which is an accounting rule concerning employee benefits and shown on the balance
sheet of our financial statements. The next funding valuation will be performed in 2026, with an effective date of 31 December 2025.
The actuary also assessed the value of the liabilities if the plan were to have been stopped and an insurance company asked to secure all future
pension payments. This is generally larger than the amount needed on the ongoing basis described above because an insurance company
would use more prudent assumptions, which would allow for reserves and include an explicit allowance for the future administrative expenses
of the plan. Under this approach, the amount of assets needed was estimated to be £21.3bn ($25.7bn) at 31 December 2022.
The trust deed gives the ability for HSBC UK to take a refund of surplus assets after the plan has been run down such that no further
beneficiaries remain. In assessing whether a surplus is recoverable, HSBC UK has considered its right to obtain a future refund together with
the rights of third parties such as trustees. On this basis, any net surplus in the HSBC UK section of the plan is recognised in HSBC UK’s
financial statements and the Group’s financial statements.
Income statement charge/(credit)
2024
2023
2022
$m
$m
$m
Defined benefit pension plans
(116)
(151)
42
Defined contribution pension plans
933
874
845
Pension plans
817
723
887
Defined benefit and contribution healthcare plans
34
34
28
Year ended 31 Dec
851
757
915
Net assets/(liabilities) recognised on the balance sheet in respect of defined benefit plans
Fair value of
plan assets
Present value of defined
benefit obligations
Effect of limit on plan
surpluses
Total
$m
$m
$m
$m
Defined benefit pension plans
30,758
(23,959)
—
6,799
Defined benefit healthcare plans
80
(348)
—
(268)
At 31 Dec 2024
30,838
(24,307)
—
6,531
Total employee benefit liabilities (within Note 27 ‘Accruals, deferred
income and other liabilities’)
(1,017)
Total employee benefit assets (within Note 22 ‘Prepayments,
accrued income and other assets’)
7,548
Defined benefit pension plans
33,897
(27,011)
—
6,886
Defined benefit healthcare plans
107
(403)
—
(296)
At 31 Dec 2023
34,004
(27,414)
—
6,590
Total employee benefit liabilities (within Note 27 ‘Accruals, deferred
income and other liabilities’)
(1,160)
Total employee benefit assets (within Note 22 ‘Prepayments,
accrued income and other assets’)
7,750
Notes on the financial statements
376
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Holdings
Employee compensation and benefit expense in respect of HSBC Holdings’ employees in 2024 amounted to $29m (2023: $15m). The average number
of persons employed during 2024 was 28 (2023: 29). A small number of employees are members of defined benefit pension plans. These employees
are members of the HSBC Bank (UK) Pension Scheme. HSBC Holdings pays contributions to such plan for its own employees in accordance with the
schedules of contributions determined by the trustees of the plan and recognises these contributions as an expense as they fall due.
Defined benefit pension plans
Net asset/(liability) under defined benefit pension plans
Fair value of plan
assets
Present value of
defined benefit
obligations
Effect of the asset
ceiling
Net defined benefit
asset/(liability)
Principal1
plan
Other
plans
Principal1
plan
Other
plans
Principal1
plan
Other
plans
Principal1
plan
Other
plans
$m
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
26,590
7,307
(19,782)
(7,229)
—
—
6,808
78
Service cost
—
(1)
(35)
(144)
—
—
(35)
(145)
– current service cost
—
—
(9)
(140)
—
—
(9)
(140)
– past service cost and gains/(losses) from settlements
—
(1)
(26)
(4)
—
—
(26)
(5)
Net interest income/(cost) on the net defined benefit asset/
(liability)
1,213
277
(896)
(265)
—
—
317
12
Remeasurement effects recognised in other
comprehensive income
(2,665)
(6)
2,156
186
—
—
(509)
180
– return on plan assets (excluding interest income)
(2,665)
(6)
—
—
—
—
(2,665)
(6)
– actuarial gains/(losses) financial assumptions
—
—
1,771
204
—
—
1,771
204
– actuarial gains/(losses) demographic assumptions
—
—
161
(5)
—
—
161
(5)
– actuarial gains/(losses) experience adjustments
—
—
224
(13)
—
—
224
(13)
– other changes
—
—
—
—
—
—
—
—
Exchange differences
(387)
(145)
281
191
—
—
(106)
46
Benefits paid
(1,082)
(496)
1,082
561
—
—
—
65
Other movements2
(17)
170
(29)
(36)
—
—
(46)
134
At 31 Dec 2024
23,652
7,106
(17,223)
(6,736)
—
—
6,429
370
At 1 Jan 2023
25,121
7,050
(18,787)
(6,906)
—
—
6,334
144
Service cost
—
—
(10)
(150)
—
—
(10)
(150)
– current service cost
—
—
(14)
(135)
—
—
(14)
(135)
– past service cost and losses from settlements
—
—
4
(15)
—
—
4
(15)
Net interest income/(cost) on the net defined benefit asset/
(liability)
1,247
298
(925)
(286)
—
—
322
12
Remeasurement effects recognised in other
comprehensive income
(225)
110
7
(300)
—
—
(218)
(190)
– return on plan assets (excluding interest income)
(225)
110
—
—
—
—
(225)
110
– actuarial gains/(losses) financial assumptions
—
—
(123)
(327)
—
—
(123)
(327)
– actuarial gains/(losses) demographic assumptions
—
—
357
17
—
—
357
17
– actuarial gains/(losses) experience adjustments
—
—
(227)
10
—
—
(227)
10
– other changes
—
—
—
—
—
—
—
—
Exchange differences
1,472
228
(1,098)
(190)
—
—
374
38
Benefits paid
(1,063)
(548)
1,063
629
—
—
—
81
Other movements2
38
169
(32)
(26)
—
—
6
143
At 31 Dec 2023
26,590
7,307
(19,782)
(7,229)
—
—
6,808
78
1 For further details of the principal plan, see page 376.
2 Other movements include contributions by HSBC, contributions by employees, administrative costs and taxes paid by plan.
HSBC expects to make $97m of contributions to defined benefit pension plans during 2025, consisting of $nil for the principal plan and $97m
for other plans. Benefits expected to be paid from the plans to retirees over each of the next five years, and in aggregate for the five years
thereafter, are as follows:
Benefits expected to be paid from plans
2025
2026
2027
2028
2029
2030-2034
$m
$m
$m
$m
$m
$m
The principal plan1,2
1,094
1,129
1,165
1,203
1,242
6,837
Other plans1
437
423
438
432
428
2,223
1 The duration of the defined benefit obligation is 11.8 years for the principal plan under the disclosure assumptions adopted (2023: 12.9 years) and 9.8 years for
all other plans combined (2023: 10.3 years).
2 For further details of the principal plan, see page 376.
HSBC Holdings plc Annual Report and Accounts 2024
377
Financial statements
Fair value of plan assets by asset classes
31 Dec 2024
31 Dec 2023
Value
Quoted
market price
in active
market
No quoted
market price
in active
market
Thereof
HSBC1
Value
Quoted
market price
in active
market
No quoted
market price
in active
market
Thereof
HSBC1
$m
$m
$m
$m
$m
$m
$m
$m
The principal plan2
Fair value of plan assets
23,652
13,903
9,749
421
26,590
15,006
11,584
547
– equities3
65
—
65
—
83
—
83
—
– bonds fixed income
5,864
5,372
492
—
5,262
4,739
523
—
– bonds index-linked
8,253
8,253
—
—
10,300
10,300
—
—
– derivatives
295
—
295
421
1,061
—
1,061
547
– property
833
—
833
—
830
—
830
—
– pooled investment vehicles
8,064
—
8,064
—
9,087
—
9,087
—
– other
278
278
—
—
(33)
(33)
—
—
Other plans
Fair value of plan assets
7,106
6,407
699
19
7,307
5,361
1,946
39
– equities
587
587
—
4
556
556
—
3
– bonds fixed income
3,671
3,671
—
4
3,624
3,623
1
5
– bonds index-linked
33
33
—
—
90
90
—
—
– bonds other
473
473
—
—
447
415
32
—
– derivatives
2
(3)
5
—
2
(1)
3
—
– property
103
98
5
—
112
108
4
—
– other
2,237
1,548
689
11
2,476
570
1,906
31
1 The fair value of plan assets includes derivatives entered into with HSBC Bank plc as detailed in Note 36.
2 For further details of the principal plan, see page 376.
3 Includes $65m (2023: $83m) in relation to private equities.
Post-employment defined benefit plans’ principal actuarial financial assumptions
HSBC determines the discount rates to be applied to its obligations in consultation with the plans’ local actuaries, on the basis of current
average yields of high-quality (AA-rated or equivalent) debt instruments with maturities consistent with those of the defined benefit obligations.
Key actuarial assumptions for the principal plan1
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Rate of increase for pensions
Rate of pay increase
%
%
%
%
%
UK
At 31 Dec 2024
5.54
3.33
2.88
3.22
3.63
At 31 Dec 2023
4.65
3.23
2.67
3.14
3.42
1 For further details of the principal plan, see page 376.
Mortality tables and average life expectancy at age 60 for the principal plan1
Mortality
table
Life expectancy at age 60 for
a male member currently:
Life expectancy at age 60 for
a female member currently:
Aged 60
Aged 40
Aged 60
Aged 40
UK
At 31 Dec 2024
SAPS S32
26.1
27.7
28.3
29.9
At 31 Dec 2023
SAPS S33
26.2
27.7
28.3
29.8
1 For further details of the principal plan, see page 376.
2 Self-administered pension scheme (‘SAPS’) S3 table, with different tables and multipliers adopted based on gender, pension amount and member status,
reflecting the Scheme’s actual mortality experience. Improvements are projected in accordance with the Continuous Mortality Investigation's CMI 2023 core
projection model with an initial addition to improvement of 0.25% per annum, and a long-term rate of improvement of 1.25% per annum and with a 0%
weighting to 2020 and 2021 mortality experience and a 15% weighting to 2022 and 2023, reflecting long-term view on mortality improvements post-pandemic.
3 Self-administered pension scheme (‘SAPS’) S3 table, with different tables and multipliers adopted based on gender, pension amount and member status,
reflecting the Scheme’s actual mortality experience. Improvements are projected in accordance with the Continuous Mortality Investigation’s CMI 2022 core
projection model with an initial addition to improvement of 0.25% per annum, a long-term rate of improvement of 1.25% per annum, with a 0% weighting to
2020 and 2021, mortality experience and a 25% weighting to 2022, reflecting updated long-term view on mortality improvements post-pandemic.
The effect of changes in key assumptions on the principal plan1
Impact on HSBC UK section of the
HSBC Bank (UK) Pension Scheme obligation
Financial impact of increase
Financial impact of decrease
2024
2023
2024
2023
$m
$m
$m
$m
Discount rate – increase/decrease of 0.25%
(473)
(599)
496
631
Inflation rate (RPI and CPI) – increase/decrease of 0.25%
389
500
(391)
(497)
Pension payments and deferred pensions – increase/decrease of 0.25%
487
622
(478)
(590)
Pay – increase/decrease of 0.25%
6
8
(6)
(6)
Change in mortality – increase/decrease of 1 year
483
613
(464)
(613)
1 For further details of the principal plan, see page 376.
Notes on the financial statements
378
HSBC Holdings plc Annual Report and Accounts 2024
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely
to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to
significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit
method at the end of the reporting period) has been applied as when calculating the defined benefit asset recognised in the balance sheet. The
methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the prior period.
Directors’ emoluments
Details of Directors’ emoluments, pensions and their interests are disclosed in the Directors’ remuneration report on page 279.
6
Auditor’s remuneration
2024
2023
2022
$m
$m
$m
Audit fees payable to PwC1
102.8
109.8
97.6
Other audit fees payable
1.6
2.2
1.6
Year ended 31 Dec
104.4
112.0
99.2
Fees payable by HSBC to PwC
2024
2023
2022
$m
$m
$m
Fees for HSBC Holdings’ statutory audit2
22.0
24.1
21.9
Fees for other services provided to HSBC
124.6
131.8
126.2
– audit of HSBC’s subsidiaries
80.8
85.7
75.7
– audit-related assurance services3
25.0
26.0
26.4
– other assurance services4,5
18.8
20.1
24.1
Year ended 31 Dec
146.6
155.9
148.1
1 Audit fees payable to PwC in 2024 included adjustments made to the prior year audit fee after finalisation of the 2023 financial statements.
2 Fees payable to PwC for the statutory audit of the consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings. They
include amounts payable for services relating to the consolidation returns of HSBC Holdings’ subsidiaries, which are clearly identifiable as being in support of the
Group audit opinion.
3 Including services for assurance and other services that relate to statutory and regulatory filings, including interim reviews.
4 Including permitted services relating to attestation reports on internal controls of a service organisation primarily prepared for and used by third-party end users,
including comfort letters.
5 Includes reviews of PRA regulatory reporting returns.
No fees were payable by HSBC to PwC as principal auditor for the following types of services: internal audit services and services related to
litigation, recruitment and remuneration.
Fees payable by HSBC’s associated pension schemes to PwC
2024
2023
2022
$000
$000
$000
Audit of HSBC’s associated pension schemes
320
297
480
Year ended 31 Dec
320
297
480
No fees were payable by HSBC’s associated pension schemes to PwC as principal auditor for the following types of services: internal audit
services, other assurance services, services related to corporate finance transactions, valuation and actuarial services, litigation, recruitment
and remuneration, and information technology.
In addition to the above, the estimated fees paid to PwC by third parties associated with HSBC amounted to $9.9m (2023: $12.3m;
2022: $13.1m). In these cases, HSBC was connected with the contracting party and may therefore have been involved in appointing PwC.
These fees arose from services such as auditing mutual funds managed by HSBC and reviewing the financial position of corporate concerns
that borrow from HSBC.
Fees payable for non-audit services for HSBC Holdings are not disclosed separately because such fees are disclosed on a consolidated basis for
the Group.
HSBC Holdings plc Annual Report and Accounts 2024
379
Financial statements
7
Tax
Tax expense
2024
2023
2022
$m
$m
$m
Current tax1
6,115
5,718
2,984
– for this year
5,863
5,737
3,264
– adjustments in respect of prior years
31
(19)
(280)
– Pillar 2 and qualifying domestic top-up taxes
221
—
—
Deferred tax
1,195
71
(2,175)
– origination and reversal of temporary differences
1,288
19
(2,278)
– effect of changes in tax rates
(2)
17
(293)
– adjustments in respect of prior years
(91)
35
396
Year ended 31 Dec2
7,310
5,789
809
1 Current tax included Hong Kong profits tax of $1,615m (2023: $1,328m; 2022: $604m). The Hong Kong tax rate applying to the profits of subsidiaries assessable
in Hong Kong was 16.5% (2023: 16.5%; 2022: 16.5%).
2 In addition to amounts recorded in the income statement, a tax credit of $12m (2023: credit of $41m) was recorded directly to equity.
Tax reconciliation
The tax charged to the income statement differs from the tax charge that would apply if all profits had been taxed at the UK corporation tax rate
as follows:
2024
2023
2022
$m
%
$m
%
$m
%
Profit before tax
32,309
30,348
17,058
Tax expense
Taxation at UK corporation tax rate of 25.0% (2023: 23.5%, 2022: 19.0%)
8,077
25.0
7,132
23.5
3,241
19.0
Impact of differently taxed overseas profits in overseas locations
(1,351)
(4.2)
(612)
(2.0)
459
2.7
UK banking surcharge
215
0.7
350
1.2
283
1.7
Items increasing tax charge in 2024:
– tax impact of sale of HSBC Argentina
1,536
4.8
—
—
—
—
– local taxes and overseas withholding taxes
584
1.8
419
1.4
346
2.0
– other permanent disallowables
344
1.0
227
0.7
363
2.1
– impacts of hyperinflation
327
1.0
348
1.1
171
1.0
– movements in unrecognised deferred tax
259
0.7
(22)
(0.1)
(2,503)
(14.7)
– Global Minimum Tax top-up charge
221
0.7
—
—
—
—
– bank levy
73
0.2
112
0.4
59
0.3
– movements in provisions for uncertain tax positions
38
0.1
(472)
(1.6)
27
0.2
– impact of changes in tax rates
6
—
17
0.1
(293)
(1.7)
– impairment of interest in associate
—
—
705
2.3
—
—
Items reducing tax charge in 2024:
– non-taxable gain on disposal of HSBC Canada
(1,174)
(3.6)
—
—
—
—
– non-taxable income and gains
(1,079)
(3.3)
(1,189)
(3.9)
(825)
(4.8)
– effect of profits in associates and joint ventures
(456)
(1.4)
(571)
(1.9)
(504)
(3.1)
– deductions for AT1 coupon payments
(249)
(0.8)
(229)
(0.7)
(246)
(1.4)
– adjustments in respect of prior period
(46)
(0.1)
16
0.1
116
0.7
– tax impact of sale of French retail banking business
(15)
—
—
—
115
0.7
– accounting gain on acquisition of SVB UK
—
—
(442)
(1.5)
—
—
Year ended 31 Dec
7,310
22.6
5,789
19.1
809
4.7
The Group’s profits are taxed at different rates depending on the country or territory in which the profits arise. The key applicable tax rates for
2024 include Hong Kong (16.5%), the US (21%) and the UK (25%). If the Group’s profits were taxed at the statutory rates of the countries in
which the profits arose, then the tax rate for the year would have been 21.4% (2023: 22.6%).
The effective tax rate for the year of 22.6% was higher than in the previous year (2023: 19.1%). The effective tax rate for the year was reduced
by 3.6% by the non-taxable gain arising on the disposal of HSBC Canada, increased by 4.8% by the non-deductible loss arising on the disposal
of HSBC Argentina, increased by 70.0% by movements in unrecognised deferred tax, primarily relating to French tax losses, and increased by
70.0% by the Group’s Pillar 2 Global Minimum Tax charge. The effective tax rate for 2023 was increased by 2.3% by the non-taxable
impairment of the Group’s investment in BoCom, reduced by 1.6% by the release of provisions for uncertain tax positions and reduced by
1.5% by the non-taxable accounting gain on the acquisition of SVB UK.
In July 2023, the UK enacted legislation to introduce the ‘Pillar Two’ global minimum tax model rules of the OECD’s Inclusive Framework on
Base Erosion and Profit Shifting (’BEPS’) and a UK qualified domestic minimum top-up tax, with effect from 1 January 2024. Under the Pillar
Two rules, a top-up tax liability arises where the Group’s effective tax rate in a jurisdiction is below 15%. The Group has recorded a Pillar Two
global minimum tax charge of $221m for the period, primarily related to the non-taxation of dividends and income on government bonds in
Hong Kong (which have the effect of reducing the effective tax rate from the statutory rate of 16.5% to below 15%) and low or nil statutory tax
rates in jurisdictions such as Bermuda and the Channel Islands. For the current period, this tax expense will be substantially payable in the UK
by HSBC Holdings.
Many jurisdictions have introduced or announced the introduction of domestic minimum tax rules that are closely aligned to the OECD’s Pillar
Two model rules, as well as new or amended corporate income tax rules, with effect from 2024 or 2025. As and when such taxes are
introduced, they will have the effect of increasing local tax liabilities, eliminating or reducing the top-up tax liability payable in the UK by HSBC
Notes on the financial statements
380
HSBC Holdings plc Annual Report and Accounts 2024
Holdings in respect of those jurisdictions. Hong Kong, Bermuda and the Channel Islands have introduced such new tax rules with effect from
1 January 2025.
Accounting for taxes involves some estimation because tax law is uncertain and its application requires a degree of judgement, which
authorities may dispute. Liabilities are recognised based on best estimates of the probable outcome, taking into account external advice where
appropriate. Exposures relating to legacy tax cases were reassessed during 2024, resulting in a charge of $38m to the income statement. We
do not expect significant liabilities to arise in excess of the amounts provided. HSBC only recognises current and deferred tax assets where
recovery is probable.
Movement of deferred tax assets and liabilities
Loan
impairment
provisions
Unused tax
losses and
tax credits
Financial
assets at
FVOCI
Cash flow
hedges
Retirement
obligations
Other
Total
$m
$m
$m
$m
$m
$m
$m
Assets
1,158
4,544
876
419
—
2,933
9,930
Liabilities
—
—
—
—
(1,814)
(1,600)
(3,414)
At 1 Jan 2024
1,158
4,544
876
419
(1,814)
1,333
6,516
Income statement
(74)
(640)
100
—
(85)
(431)
(1,130)
Other comprehensive income
—
—
(49)
84
114
189
338
Foreign exchange and other adjustments
(14)
(40)
(311)
(61)
18
208
(200)
At 31 Dec 2024
1,070
3,864
616
442
(1,767)
1,299
5,524
Assets1
1,070
3,864
616
442
—
2,906
8,898
Liabilities1
—
—
—
—
(1,767)
(1,607)
(3,374)
Assets
1,062
4,397
850
1,271
—
3,048
10,628
Liabilities
—
—
—
—
(1,673)
(1,567)
(3,240)
At 1 Jan 2023
1,062
4,397
850
1,271
(1,673)
1,481
7,388
Income statement
(39)
102
541
1
(114)
(562)
(71)
Other comprehensive income
—
—
(598)
(974)
99
399
(1,074)
Foreign exchange and other adjustments
135
45
83
121
(126)
15
273
At 31 Dec 2023
1,158
4,544
876
419
(1,814)
1,333
6,516
Assets1
1,158
4,544
876
419
—
2,933
9,930
Liabilities1
—
—
—
—
(1,814)
(1,600)
(3,414)
1 After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets of $6,841m (2023: $7,754m) and
deferred tax liabilities of $1,317m (2023: $1,238m).
In applying judgement in recognising deferred tax assets, management has assessed all relevant information, including future business profit
projections and the track record of meeting forecasts. Management’s assessment of the likely availability of future taxable profits against which
to recover deferred tax assets is based on the most recent financial forecasts approved by management, which cover a five-year period and are
extrapolated where necessary, and takes into consideration the reversal of existing taxable temporary differences and past business
performance. When forecasts are extrapolated beyond five years, a number of different scenarios are considered, reflecting different
downward risk adjustments, in order to assess the sensitivity of our recognition and measurement conclusions in the context of such longer-
term forecasts.
The Group’s net deferred tax asset of $5.5bn (2023: $6.5bn) included $2.6bn (2023: $3.3bn) of deferred tax assets relating to the UK, $3.0bn
(2023: $3.1bn) of deferred tax assets relating to the US and a net deferred asset of $0.5bn (2023: $0.9bn) in France.
The UK deferred tax asset of $2.6bn excluded a $1.8bn deferred tax liability arising on the UK pension scheme surplus, the reversal of which is
not taken into account when estimating future taxable profit due to the level of uncertainty as to the timing and manner of its reversal. The UK
deferred tax assets are supported by forecasts of taxable profit, also taking into consideration the history of profitability in the relevant
businesses. The majority of the deferred tax asset relates to tax attributes which do not expire and are forecast to be recovered within 3 years
and as such are less sensitive to changes in long-term profit forecasts.
The net US deferred tax asset of $3.0bn included $1.2bn related to US tax losses, of which $0.9bn expire in 10 to 15 years. Management
expects the US deferred tax asset to be substantially recovered within 13 years, with the majority recovered in the first 5 years.
The net deferred tax asset in France of $0.5bn included $0.5bn related to tax losses, which are expected to be substantially recovered within
12 years. Unused tax losses with a tax value of $0.2bn have not been recognised due to the absence of convincing evidence regarding the
availability of sufficient future taxable profits against which to recover them.
Unrecognised deferred tax
The amount of gross temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance
sheet was $11.0bn (2023: $10.4bn). This amount included unused US state tax losses of $3.8bn (2023: $4.0bn) which are forecast to expire
before they are recovered, unused French tax losses of $0.7bn (2023: nil) for which there is insufficient evidence of future taxable profits to
support recognition, and unused UK tax losses of $3.5bn (2023: $4.5bn), which arose prior to 1 April 2017 and can only be recovered against
future taxable profits of HSBC Holdings. No deferred tax was recognised on these losses due to the absence of convincing evidence regarding
the availability of sufficient future taxable profits against which to recover them. Deferred tax asset recognition is reassessed at each balance
sheet date based on the available evidence. Of the total amounts on which deferred tax was not recognised, $6.0bn (2023: $5.1bn) had no
expiry date, $1.0bn (2023: $0.5bn) was scheduled to expire within 10 years and the remaining balance is expected to expire after 10 years.
Deferred tax is not recognised in respect of the Group’s investments in subsidiaries and branches where HSBC is able to control the timing of
remittance or other realisation and where remittance or realisation is not probable in the foreseeable future. The aggregate temporary
differences relating to unrecognised deferred tax liabilities arising on investments in subsidiaries and branches was $15.2bn (2023: $14.4bn)
and the corresponding unrecognised deferred tax liability was $0.7bn (2023: $0.7bn).
HSBC Holdings plc Annual Report and Accounts 2024
381
Financial statements
8
Dividends
Dividends to shareholders of the parent company
2024
2023
2022
Per
share
Total
Per
share
Total
Per
share
Total
$
$m
$
$m
$
$m
Dividends paid on ordinary shares
In respect of previous year:
– second interim dividend
—
—
0.23
4,589
0.18
3,576
– fourth interim dividend
0.31
5,872
—
—
—
—
In respect of current year:
– first interim dividend
0.10
1,877
0.10
2,001
0.09
1,754
– special dividend
0.21
3,942
—
—
—
—
– second interim dividend
0.10
1,852
0.10
1,956
—
—
– third interim dividend
0.10
1,805
0.10
1,946
—
—
Total
0.82
15,348
0.53
10,492
0.27
5,330
Total coupons on capital securities classified as equity
1,062
1,101
1,214
Dividends to shareholders
16,410
11,593
6,544
Total coupons on capital securities classified as equity
2024
2023
2022
Total
Total
Total
First call date
Per security
$m
$m
$m
Perpetual subordinated contingent convertible securities1
$2,250m issued at 6.375%2
Sep 2024
$63.750
122
143
143
$2,450m issued at 6.375%
Mar 2025
$63.750
156
156
156
$3,000m issued at 6.000%
May 2027
$60.000
180
180
180
$2,350m issued at 6.250%3
Mar 2023
$62.500
—
52
147
$1,800m issued at 6.500%
Mar 2028
$65.000
117
117
117
$1,500m issued at 4.600%
Dec 2030
$46.000
69
69
69
$1,000m issued at 4.000%
Mar 2026
$40.000
40
40
40
$1,000m issued at 4.700%
Mar 2031
$47.000
47
47
47
$2,000m issued at 8.000%4
Mar 2028
$80.000
160
80
—
$1,350m issued at 6.875%5
Sep 2029
$68.750
—
—
—
$1,150m issued at 6.950%6
Mar 2034
$69.500
—
—
—
€1,500m issued at 5.250%7
Sep 2022
€52.500
—
—
76
€1,000m issued at 6.000%8
Sep 2023
€60.000
—
56
63
€1,250m issued at 4.750%
Jul 2029
€47.500
65
64
65
£1,000m issued at 5.875%
Sep 2026
£58.750
77
72
70
SGD1,000m issued at 4.700%9
Jun 2022
SGD47.000
—
—
14
SGD750m issued at 5.000%10
Sep 2023
SGD50.000
—
25
27
SGD1,500m issued at 5.250%11
Jun 2029
SGD52.500
29
—
—
Total
1,062
1,101
1,214
1
Discretionary coupons are paid semi-annually, based on the denominations of each security.
2
This security was called by HSBC Holdings on 23 July 2024 and was redeemed and cancelled on 17 September 2024.
3
This security was called by HSBC Holdings on 30 January 2023 and was redeemed and cancelled on 23 March 2023.
4
This security was issued by HSBC Holdings on 7 March 2023. The first call period commences six calendar months prior to the reset date of 7 September 2028.
5
This security was issued by HSBC Holdings on 11 September 2024. The first call period commences six calendar months prior to the reset date of 11 March
2030.
6
This security was issued by HSBC Holdings on 11 September 2024. The first call period commences six calendar months prior to the reset date of
11 September 2034.
7
This security was called by HSBC Holdings on 9 August 2022 and was redeemed and cancelled on 16 September 2022.
8
This security was called by HSBC Holdings on 3 August 2023 and was redeemed and cancelled on 29 September 2023.
9
This security was called by HSBC Holdings on 4 May 2022 and was redeemed and cancelled on 8 June 2022.
10 This security was called by HSBC Holdings on 3 August 2023 and was redeemed and cancelled on 25 September 2023.
11 This security was issued by HSBC Holdings on 14 June 2024. The first call period commences six calendar months prior to the reset date of 14 December 2029.
On 19 February 2025, the Directors approved a fourth interim dividend in respect of the financial year ended 31 December 2024 of $0.36 per
ordinary share (the ‘dividend’), an expected distribution of approximately $6.4bn. The dividend will be payable on 25 April 2025 to holders of
record on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on
7 March 2025. No liability was recorded in the financial statements in respect of the fourth interim dividend for 2024.
On 6 January 2025, HSBC paid a coupon on its €1,250m subordinated capital securities, representing a total distribution of €30m ($31m). No
liability was recorded in the balance sheet at 31 December 2024 in respect of this coupon payment.
Notes on the financial statements
382
HSBC Holdings plc Annual Report and Accounts 2024
9 Earnings per share
Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the
weighted average number of ordinary shares outstanding, after deducting own shares held. Diluted earnings per ordinary share is calculated by
dividing the basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number
of ordinary shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on
conversion of dilutive potential ordinary shares.
Basic and diluted earnings per share
2024
2023
2022
Profit
Number
of shares
Per
share
Profit
Number
of shares
Per
share
Profit
Number
of shares
Per
share
$m
(millions)
$
$m
(millions)
$
$m
(millions)
$
Basic1
22,917
18,357
1.25
22,432
19,478
1.15
14,346
19,849
0.72
Effect of dilutive potential
ordinary shares
128
122
137
Diluted1
22,917
18,485
1.24
22,432
19,600
1.14
14,346
19,986
0.72
1
Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted) after deducting own shares held.
The number of anti-dilutive employee share options excluded from the weighted average number of dilutive potential ordinary shares was Nil
(2023: 23 million; 2022: 9.4 million).
10 Segmental analysis
The Group CEO, supported by the rest of the Group Executive Committee (‘GEC’), was considered the Chief Operating Decision Maker
(‘CODM’) during the reporting period for the purposes of identifying the Group’s reportable segments. As the reorganisation only took effect
from 1 January 2025, it has no effect on the 2024 segmental reporting. Global business results were assessed by the CODM on the basis of
constant currency performance that removes the effects of currency translation from reported results. Therefore, we disclose these results on
a constant currency basis as required by IFRS Accounting Standards. The 2023 and 2022 income statements are converted at the average rates
of exchange for 2024, and the balance sheets at 31 December 2023 and 31 December 2022 at the prevailing rates of exchange on
31 December 2024.
Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and
expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully
attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they involve a certain degree of
subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-
business line transactions. All such transactions are undertaken on arm’s length terms. Measurement of segmental assets, liabilities, income
and expenses is in accordance with the Group’s accounting policies. Shared costs are included in segments on the basis of actual recharges.
The intra-group elimination items for the global businesses are presented in Corporate Centre.
Our global businesses
We provide a comprehensive range of banking and related financial services to our customers in our three global businesses. The products and
services offered to customers are organised by these global businesses.
–
Wealth and Personal Banking (‘WPB’) provides a full range of retail banking and wealth products to our customers from personal banking to
ultra high net worth individuals. Typically, customer offerings include retail banking products, such as current and savings accounts,
mortgages and personal loans, credit cards, debit cards and local and international payment services. We also provide wealth management
services, including insurance and investment products, global asset management services, investment management and private wealth
solutions for customers with more sophisticated and international requirements.
–
Commercial Banking (‘CMB’) offers a broad range of products and services to serve the needs of our commercial customers, including small
and medium-sized enterprises, mid-market enterprises and corporates. These include credit and lending, international trade and receivables
finance, treasury management and liquidity solutions (payments and cash management and commercial cards), commercial insurance and
investments. CMB also offers customers access to products and services offered by other global businesses, such as Global Banking and
Markets, which include foreign exchange products, raising capital on debt and equity markets and advisory services.
–
Global Banking and Markets (‘GBM’) provides tailored financial solutions to major government, corporate and institutional clients and private
investors worldwide. The client-focused business lines deliver a full range of banking capabilities, including financing, advisory and
transaction services, a markets business that provides services in credit, rates, foreign exchange, equities, money markets and securities
services, and principal investment activities.
HSBC Holdings plc Annual Report and Accounts 2024
383
Financial statements
HSBC constant currency profit before tax and balance sheet data
2024
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Net operating income/(expense) before change in expected credit losses
and other credit impairment charges1
28,674
21,580
17,529
(1,929)
65,854
– external
20,460
21,565
30,698
(6,869)
65,854
– inter-segment
8,214
15
(13,169)
4,940
—
– of which: net interest income/(expense)2
20,352
17,261
7,488
(12,368)
32,733
Change in expected credit losses and other credit impairment charges
(1,335)
(1,815)
(235)
(29)
(3,414)
Net operating income/(expense)
27,339
19,765
17,294
(1,958)
62,440
Total operating expenses
(15,204)
(7,906)
(10,231)
298
(33,043)
Operating profit/(loss)
12,135
11,859
7,063
(1,660)
29,397
Share of profit in associates and joint ventures less impairment
47
1
—
2,864
2,912
Constant currency profit before tax
12,182
11,860
7,063
1,204
32,309
%
%
%
%
%
Share of HSBC’s constant currency profit before tax
37.7
36.7
21.9
3.7
100.0
Constant currency cost efficiency ratio
53.0
36.6
58.4
15.4
50.2
Constant currency balance sheet data
$m
$m
$m
$m
$m
Loans and advances to customers (net)
447,085
306,926
169,516
7,131
930,658
Interests in associates and joint ventures
558
25
108
28,218
28,909
Total external assets
890,080
603,841
1,388,845
134,282
3,017,048
Customer accounts
823,267
490,475
340,898
315
1,654,955
2023
Net operating income/(expense) before change in expected credit losses and
other credit impairment charges1
26,848
22,396
15,771
(103)
64,912
– external
18,669
23,686
27,618
(5,061)
64,912
– inter-segment
8,179
(1,290)
(11,847)
4,958
—
– of which: net interest income/(expense)2
19,902
16,289
6,860
(8,899)
34,152
Change in expected credit losses and other credit impairment charges
(935)
(2,006)
(317)
(1)
(3,259)
Net operating income/(expense)
25,913
20,390
15,454
(104)
61,653
Total operating expenses
(14,352)
(7,234)
(9,872)
(36)
(31,494)
Operating profit/(loss)
11,561
13,156
5,582
(140)
30,159
Share of profit/(loss) in associates and joint ventures3
64
(1)
—
(319)
(256)
Constant currency profit/(loss) before tax
11,625
13,155
5,582
(459)
29,903
%
%
%
%
%
Share of HSBC’s constant currency profit before tax
38.9
44.0
18.7
(1.6)
100.0
Constant currency cost efficiency ratio
53.5
32.3
62.6
(35.0)
48.5
Constant currency balance sheet data
$m
$m
$m
$m
$m
Loans and advances to customers (net)
444,856
301,103
170,868
262
917,089
Interests in associates and joint ventures
539
23
107
26,226
26,895
Total external assets
915,062
613,124
1,298,065
146,296
2,972,547
Customer accounts
792,710
465,095
321,226
582
1,579,613
Notes on the financial statements
384
HSBC Holdings plc Annual Report and Accounts 2024
HSBC constant currency profit before tax and balance sheet data (continued)
2022
Wealth and
Personal
Banking
Commercial
Banking
Global
Banking and
Markets
Corporate
Centre
Total
$m
$m
$m
$m
$m
Net operating income/(expense) before change in expected credit losses and
other credit impairment charges1
20,772
16,207
14,542
(1,934)
49,587
– external
18,176
16,834
18,704
(4,127)
49,587
– inter-segment
2,596
(627)
(4,162)
2,193
—
– of which: net interest income/(expense)2
15,887
11,584
4,602
(2,633)
29,440
Change in expected credit losses and other credit impairment charges
(1,160)
(1,868)
(578)
(9)
(3,615)
Net operating income/(expense)
19,612
14,339
13,964
(1,943)
45,972
Total operating expenses
(14,141)
(6,810)
(9,403)
(1,875)
(32,229)
Operating profit/(loss)
5,471
7,529
4,561
(3,818)
13,743
Share of profit/(loss) in associates and joint ventures
29
1
(2)
2,531
2,559
Constant currency profit/(loss) before tax
5,500
7,530
4,559
(1,287)
16,302
%
%
%
%
%
Share of HSBC’s constant currency profit before tax
33.7
46.2
28.0
(7.9)
100.0
Constant currency cost efficiency ratio
68.1
42.0
64.7
(96.9)
65.0
Constant currency balance sheet data
$m
$m
$m
$m
$m
Loans and advances to customers (net)
425,072
309,224
186,653
350
921,299
Interests in associates and joint ventures
503
27
90
27,676
28,296
Total external assets
873,688
602,624
1,305,319
161,872
2,943,503
Customer accounts
781,881
462,806
323,420
443
1,568,550
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Net interest expense recognised in Corporate Centre includes $11.4bn (2023: $8.7bn; 2022: $2.5bn) of interest expense in relation to the internal cost to fund
trading and fair value net assets; and the funding cost of foreign exchange swaps in our Markets Treasury function.
3 Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom in 2023.
Reported external net operating income is attributed to countries and territories on the basis of the location of the branch responsible for
reporting the results or advancing the funds:
2024
2023
2022
$m
$m
$m
Reported external net operating income/(expense) by country/territory1
65,854
66,058
50,620
– UK2
12,307
11,027
11,710
– Hong Kong
20,811
20,185
15,454
– US
4,233
3,816
3,893
– France
3,804
4,208
(177)
– other countries/territories
24,699
26,822
19,740
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 UK includes HSBC UK Bank plc (ring-fenced bank), HSBC Bank plc (non-ring-fenced bank), the ultimate holding company, HSBC Holdings plc, and the separately
incorporated group of service companies (‘ServCo Group’).
Constant currency results reconciliation
2024
2023
2022
Reported and
constant
currency
Constant
currency
Currency
translation
Reported
Constant
currency
Currency
translation
Reported
$m
$m
$m
$m
$m
$m
$m
Revenue1
65,854
64,912
(1,146)
66,058
49,587
(1,033)
50,620
ECL
(3,414)
(3,259)
188
(3,447)
(3,615)
(31)
(3,584)
Operating expenses
(33,043)
(31,494)
576
(32,070)
(32,229)
472
(32,701)
Share of profit/(loss) in associates and
joint ventures less impairment2
2,912
(256)
(63)
(193)
2,559
(164)
2,723
Profit before tax
32,309
29,903
(445)
30,348
16,302
(756)
17,058
1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom in 2023.
Constant currency balance sheet reconciliation
2024
2023
2022
Reported and
constant
currency
Constant
currency
Currency
translation
Reported
Constant
currency
Currency
translation
Reported
$m
$m
$m
$m
$m
$m
$m
Loans and advances to customers (net)
930,658
917,089
21,446
938,535
921,299
2,262
923,561
Interests in associates and joint ventures
28,909
26,895
449
27,344
28,296
958
29,254
Total external assets
3,017,048
2,972,547
66,130
3,038,677
2,943,503
5,783
2,949,286
Customer accounts
1,654,955
1,579,613
32,034
1,611,647
1,568,550
1,753
1,570,303
HSBC Holdings plc Annual Report and Accounts 2024
385
Financial statements
Notable items
2024
2023
2022
$m
$m
$m
Year ended 31 Dec
Notable items
Revenue
Disposals, acquisitions and related costs1,2
(1,343)
1,298
(2,737)
Fair value movements on financial instruments3
—
14
(618)
Restructuring and other related costs
—
—
(247)
Disposal losses on Markets Treasury repositioning
—
(977)
—
Early redemption of legacy securities
(237)
—
—
Operating expenses
Disposals, acquisitions and related costs
(199)
(321)
(18)
Restructuring and other related costs4
(34)
136
(2,882)
Impairment of interests in associates5
—
(3,000)
—
1 Amounts in 2024 include a $1.0bn loss on disposal and a $5.2bn loss on the recycling in foreign currency translation reserve losses and other reserves arising on
sale of our business in Argentina. This is partly offset by a $4.8bn gain on disposal of our banking business in Canada, inclusive of a $0.3bn gain on the foreign
exchange hedging of the sales proceeds, the recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn of other reserves losses.
2 Amounts in 2023 include the gain of $1.6bn recognised in respect of the acquisition of SVB UK, as well as the impact of the sale of our retail banking operations
in France.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
4 Amounts in 2024 relate to restructuring provisions recognised in 2024 and reversals of restructuring provisions recognised during 2022. Amounts in 2023 relate
to reversals of restructuring provisions recognised during 2022.
5 Relates to an impairment loss of $3.0bn recognised in respect of the Group’s investment in BoCom in 2023.
11 Trading assets
2024
2023
$m
$m
Treasury and other eligible bills
32,022
24,433
Debt securities
97,275
106,108
Equity securities
155,194
123,663
Trading securities
284,491
254,204
Loans and advances to banks1
6,123
9,761
Loans and advances to customers1
24,228
25,194
Year ended 31 Dec
314,842
289,159
1 Loans and advances to banks and customers include reverse repos, stock borrowing and other accounts.
12 Fair values of financial instruments carried at fair value
Control framework
Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the
risk taker.
Where fair values are determined by reference to externally quoted prices or observable pricing inputs to models, independent price
determination or validation is used. For inactive markets, HSBC sources alternative market information, with greater weight given to
information that is considered to be more relevant and reliable. Examples of the factors considered are price observability, instrument
comparability, consistency of data sources, underlying data accuracy and timing of prices.
For fair values determined using valuation models, the control framework includes development or validation by independent support functions
of the model logic, inputs, model outputs and adjustments. Valuation models are subject to a process of due diligence before becoming
operational and are calibrated against external market data on an ongoing basis.
Changes in fair value are generally subject to a profit and loss analysis process and are disaggregated into high-level categories including
portfolio changes, market movements and other fair value adjustments.
The majority of financial instruments measured at fair value are in GBM. GBM’s fair value governance structure comprises its Finance function,
Valuation Committees and a Valuation Committee Review Group. Finance is responsible for establishing procedures governing valuation and
ensuring fair values are in compliance with accounting standards. The fair values are reviewed by the Valuation Committees, which consist of
independent support functions. These committees are overseen by the Valuation Committee Review Group, which considers all material
subjective valuations.
Financial liabilities measured at fair value
In certain circumstances, HSBC records its own debt in issue at fair value, based on quoted prices in an active market for the specific
instrument. When quoted market prices are unavailable, the own debt in issue is valued using valuation techniques, the inputs for which are
either based on quoted prices in an inactive market for the instrument or are estimated by comparison with quoted prices in an active market
for similar instruments. In both cases, the fair value includes the effect of applying the credit spread that is appropriate to HSBC’s liabilities. The
change in fair value of issued debt securities attributable to the Group’s own credit spread is computed as follows: for each security at each
reporting date, an externally verifiable price is obtained or a price is derived using credit spreads for similar securities for the same issuer. Then,
using discounted cash flow, each security is valued using an appropriate market discount curve. The difference in the valuations is attributable
to the Group’s own credit spread. This methodology is applied consistently across all securities.
Notes on the financial statements
386
HSBC Holdings plc Annual Report and Accounts 2024
Structured notes issued and certain other hybrid instruments are reported as financial liabilities designated at fair value. The credit spread
applied to these instruments is derived from the spreads at which HSBC issues structured notes.
Gains and losses arising from changes in the credit spread of liabilities issued by HSBC, recorded in other comprehensive income, reverse over
the contractual life of the debt, provided that the debt is not repaid at a premium or a discount.
Fair value hierarchy
Fair values of financial assets and liabilities are determined according to the following hierarchy:
–
Level 1 – valuation technique using quoted market price. These are financial instruments with quoted prices for identical instruments in
active markets that HSBC can access at the measurement date.
–
Level 2 – valuation technique using observable inputs. These are financial instruments with quoted prices for similar instruments in active
markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all
significant inputs are observable.
–
Level 3 – valuation technique with significant unobservable inputs. These are financial instruments valued using valuation techniques where
one or more significant inputs are unobservable.
Financial instruments carried at fair value and bases of valuation
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
Recurring fair value measurements at 31 Dec
Assets
Trading assets
236,593
71,574
6,675
314,842
202,020
82,833
4,306
289,159
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
39,331
56,694
19,744
115,769
27,030
63,825
19,788
110,643
Derivatives
1,859
264,629
2,149
268,637
931
226,714
2,069
229,714
Financial investments
258,371
78,088
2,734
339,193
215,228
76,591
2,618
294,437
Liabilities
Trading liabilities
42,038
23,160
784
65,982
53,354
19,318
478
73,150
Financial liabilities designated at fair value
2,152
127,458
9,117
138,727
1,266
129,232
10,928
141,426
Derivatives
1,088
260,518
2,842
264,448
1,918
230,285
2,569
234,772
The table below provides the fair value levelling of assets held for sale and liabilities of disposal groups that have been classified as held for sale
in accordance with IFRS 5. For further details, see Note 23.
Financial instruments carried at fair value and bases of valuation – assets and liabilities held for sale
2024
2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
Recurring fair value measurements at 31 Dec
Assets
Trading assets
—
—
—
—
2,403
61
—
2,465
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
2,967
9,018
2,575
14,560
—
15
49
64
Derivatives
—
36
—
36
—
528
—
528
Financial investments
2,651
5,345
504
8,500
9,357
—
28
9,385
Liabilities
Trading liabilities
—
—
—
—
1,352
64
—
1,417
Financial liabilities designated at fair value
—
130
—
130
—
2,370
—
2,370
Derivatives
—
19
—
19
—
615
—
615
Transfers between Level 1 and Level 2 fair values
Assets
Liabilities
Financial
investments
Trading
assets
Designated and otherwise
mandatorily measured
at fair value
Derivatives
Trading
liabilities
Designated
at fair
value
Derivatives
$m
$m
$m
$m
$m
$m
$m
At 31 Dec 2024
Transfers from Level 1 to Level 2
13,511
9,246
1,540
—
191
—
—
Transfers from Level 2 to Level 1
10,752
6,060
3,042
—
159
—
—
At 31 Dec 2023
Transfers from Level 1 to Level 2
13,200
8,066
1,709
—
54
—
—
Transfers from Level 2 to Level 1
9,975
5,758
2,477
—
309
—
—
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers are primarily
attributable to changes in price transparency and in the assessment of observability.
HSBC Holdings plc Annual Report and Accounts 2024
387
Financial statements
Fair value adjustments
Fair value adjustments take into consideration additional factors not incorporated within the primary product valuation model that would
otherwise be considered by a market participant. Adjustments are calculated using model infrastructure including those within primary valuation
systems. We classify fair value adjustments as either ‘risk-related’ or ‘model-related’. The majority of these adjustments relate to MSS.
Movements in the amount of fair value adjustments do not necessarily translate in equivalent movements of profits or losses within the
income statement, as these movements can be compensated by other related profits or loss effects. For example, as models are enhanced,
fair value adjustments may no longer be required. Similarly, fair value adjustments will decrease when the related positions are unwound, but
this may not result in profit or loss.
Fair value adjustments
2024
2023
GBM
Corporate
Centre
GBM
Corporate
Centre
$m
$m
$m
$m
Type of adjustment
Risk-related
634
35
692
41
– bid-offer
366
2
414
—
– uncertainty
98
3
75
3
– credit valuation adjustment
126
27
164
35
– debit valuation adjustment
(24)
—
(54)
—
– funding fair value adjustment
68
3
93
3
Model-related
50
—
63
—
– model limitation
50
—
63
—
Inception profit (Day 1 P&L reserves)
92
—
86
—
At 31 Dec
776
35
841
41
The net reduction in fair value adjustments was predominantly driven by changes to exposure, and tightening of credit and liquidity market
spreads.
Bid-offer
IFRS 13 ‘Fair Value Measurement’ requires the use of the price within the bid-offer spread that is most representative of fair value. Valuation
models will typically generate mid-market values. The bid-offer adjustment reflects the extent to which bid-offer costs would be incurred if
substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding the position.
Uncertainty
Certain model inputs may be less readily determinable from market data and/or the choice of model itself may be more subjective. In these
circumstances, an adjustment may be necessary to reflect the likelihood that market participants would adopt more conservative values for
uncertain parameters and/or model assumptions than those used in HSBC’s valuation model.
Credit and debit valuation adjustments
The credit valuation adjustment (‘CVA’) is an adjustment to the valuation of over-the-counter (‘OTC’) derivative contracts to reflect the possibility
that the counterparty may default and that HSBC may not receive the full market value of the transactions.
The debit valuation adjustment (‘DVA’) is an adjustment to the valuation of OTC derivative contracts to reflect the possibility that HSBC may
default, and that it may not pay the full market value of the transactions. The DVA considers the overlap with the funding fair value adjustment.
HSBC calculates a separate CVA and DVA for each legal entity, and for each counterparty to which the entity has exposure. With the exception
of central clearing parties, all third-party counterparties are included in the CVA and DVA calculations, and these adjustments are not netted
across Group entities.
HSBC calculates the CVA by applying the probability of default (‘PD’) of the counterparty, conditional on the non-default of HSBC, to HSBC’s
expected positive exposure to the counterparty and multiplying the result by the loss expected in the event of default. Conversely, HSBC calculates
the DVA by applying the PD of HSBC, conditional on the non-default of the counterparty, to the expected positive exposure of the counterparty to
HSBC and multiplying the result by the loss expected in the event of default. Both calculations are performed over the life of the potential exposure.
For most products HSBC uses a simulation methodology, which incorporates a range of potential exposures over the life of the portfolio, to
calculate the expected positive exposure to a counterparty. The simulation methodology includes credit mitigants, such as counterparty netting
agreements and collateral agreements with the counterparty.
The methodologies do not, in general, account for ‘wrong-way risk’. Wrong-way risk is an adverse correlation between the counterparty’s probability of
default and the mark-to-market value of the underlying transaction. The risk can either be general, perhaps related to the currency of the issuer country,
or specific to the transaction concerned. When there is significant wrong-way risk, a trade-specific approach is applied to reflect this risk in the valuation.
Funding fair value adjustment
The funding fair value adjustment (‘FFVA’) is calculated by applying future market funding spreads to the expected future funding exposure of
any uncollateralised component of the OTC derivative portfolio. The expected future funding exposure is calculated by a simulation
methodology, where available, and is adjusted for events that may terminate the exposure, such as the default of HSBC or the counterparty.
Model limitation
Models used for portfolio valuation purposes may be based upon a simplified set of assumptions that do not capture all current and future
material market characteristics. In these circumstances, model limitation adjustments are adopted.
Notes on the financial statements
388
HSBC Holdings plc Annual Report and Accounts 2024
Inception profit (Day 1 P&L reserves)
Inception profit adjustments are adopted when the fair value estimated by a valuation model is based on one or more significant unobservable
inputs. The accounting for inception profit adjustments is discussed in Note 1.
Fair value valuation bases
Financial instruments measured at fair value using a valuation technique with significant unobservable inputs – Level 3
Assets
Liabilities
Financial
investments
Trading
assets
Designated and
otherwise mandatorily
measured at fair value
through profit or loss
Derivatives
Total
Trading
liabilities
Designated
at fair
value Derivatives
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Private equity including
strategic investments
552
1
17,705
— 18,258
—
1
—
1
Asset-backed securities
182
198
—
—
380
—
—
—
—
Structured notes
—
—
3
—
3
—
9,113
—
9,113
Other derivatives
—
—
—
2,149
2,149
—
—
2,842
2,842
Other portfolios
2,000
6,476
2,036
— 10,512
784
3
—
787
At 31 Dec 2024
2,734
6,675
19,744
2,149 31,302
784
9,117
2,842 12,743
Private equity including
strategic investments
507
7
17,640
— 18,154
—
1
—
1
Asset-backed securities
309
128
8
—
445
—
—
—
—
Structured notes
—
—
3
—
3
—
10,331
— 10,331
Other derivatives
—
—
—
2,069
2,069
—
—
2,569
2,569
Other portfolios
1,802
4,171
2,137
—
8,110
478
596
—
1,074
At 31 Dec 2023
2,618
4,306
19,788
2,069 28,781
478
10,928
2,569 13,975
Level 3 instruments are present in both ongoing and legacy businesses. Loans held for securitisation, derivatives with monolines, certain ‘other
derivatives’ and predominantly all Level 3 asset-backed securities are legacy positions. HSBC has the capability to hold these positions.
Private equity including strategic investments
The fair value of a private equity investment (including strategic investments) is estimated on the basis of an analysis of the investee’s financial
position and results, risk profile, prospects and other factors; by reference to market valuations for similar entities quoted in an active market;
the price at which similar companies have changed ownership; or from published net asset values (‘NAV’) received. If necessary, adjustments
are made to the NAV of funds to obtain the best estimate of fair value.
Asset-backed securities
While quoted market prices are generally used to determine the fair value of the asset-backed securities (‘ABSs’), valuation models are used to
substantiate the reliability of the limited market data available and to identify whether any adjustments to quoted market prices are required.
For certain ABSs, such as residential mortgage-backed securities, the valuation uses an industry standard model with assumptions relating to
prepayment speeds, default rates and loss severity based on collateral type, and performance, as appropriate. The valuations output is
benchmarked for consistency against observable data for securities of a similar nature.
Structured notes
The fair value of Level 3 structured notes is derived from the fair value of the underlying debt security, and the fair value of the embedded derivative is
determined as described in the paragraph below on derivatives. These structured notes comprise principally equity-linked notes issued by HSBC,
which provide the counterparty with a return linked to the performance of equity securities and other portfolios. Examples of the unobservable
parameters include long-dated equity volatilities and correlations between equity prices, and interest and foreign exchange rates.
Derivatives
OTC derivative valuation models calculate the present value of expected future cash flows, based upon ‘no arbitrage’ principles. For many
vanilla derivative products, the modelling approaches used are standard across the industry. For more complex derivative products, there may
be some differences in market practice. Inputs to valuation models are determined from observable market data wherever possible, including
prices available from exchanges, dealers, brokers or providers of consensus pricing. Certain inputs may not be observable in the market
directly, but can be determined from observable prices via model calibration procedures or estimated from historical data or other sources.
HSBC Holdings plc Annual Report and Accounts 2024
389
Financial statements
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy
Movement in Level 3 financial instruments
Assets
Liabilities
Financial
investments
Trading
assets
Designated and
otherwise
mandatorily
measured at fair
value through
profit or loss
Derivatives
Trading
liabilities
Designated
at fair
value
Derivatives
$m
$m
$m
$m
$m
$m
$m
At 1 Jan 2024
2,618
4,306
19,788
2,069
478
10,928
2,569
Total gains/(losses) recognised in profit or loss
(9)
280
896
1,037
18
496
1,268
– net income/(losses) from financial instruments
held for trading or managed on a fair value basis
—
280
—
1,037
18
496
1,268
– net income from assets and liabilities of insurance
businesses, including related derivatives,
measured at fair value through profit or loss
—
—
684
—
—
—
—
– changes in fair value of other financial instruments
mandatorily measured at fair value through profit
or loss
—
—
212
—
—
—
—
– gains less losses from financial investments at fair
value through other comprehensive income
(9)
—
—
—
—
—
—
Total gains/(losses) recognised in other
comprehensive income (‘OCI’)1
(78)
(115)
(39)
(36)
(18)
(45)
(53)
– financial investments: fair value gains/(losses)
18
—
—
—
—
33
—
– exchange differences
(96)
(115)
(39)
(36)
(18)
(78)
(53)
Purchases
1,670
4,170
6,261
—
924
—
—
New issuances
—
—
—
—
—
6,521
—
Sales
(97)
(1,477)
(649)
—
(295)
—
—
Settlements2
(1,011)
(967)
(6,476)
(897)
(307)
(4,750)
(568)
Transfers out3
(438)
(429)
(278)
(777)
(29)
(6,048)
(1,346)
Transfers in3
79
907
241
753
13
2,015
972
At 31 Dec 2024
2,734
6,675
19,744
2,149
784
9,117
2,842
Unrealised gains/(losses) recognised in profit or loss
relating to assets and liabilities held at 31 Dec 2024
—
(150)
11
(1,377)
(6)
(94)
(1,343)
– net income/(losses) from financial instruments
held for trading or managed on a fair value basis
—
(150)
—
(1,377)
(6)
—
(1,343)
– changes in fair value of other financial instruments
mandatorily measured at fair value through profit
or loss
—
—
11
—
—
(94)
—
At 1 Jan 2023
2,961
4,817
17,407
1,964
474
10,432
2,920
Total gains/(losses) recognised in profit or loss
(44)
266
921
692
75
97
910
– net income/(losses) from financial instruments
held for trading or managed on a fair value basis
—
266
—
692
75
97
910
– net income from assets and liabilities of insurance
businesses, including related derivatives,
measured at fair value through profit or loss
—
—
—
—
—
—
—
– changes in fair value of other financial instruments
mandatorily measured at fair value through profit
or loss
—
—
921
—
—
—
—
– gains less losses from financial investments at fair
value through other comprehensive income
(44)
—
—
—
—
—
—
Total gains/(losses) recognised in other
comprehensive income (‘OCI’)1
28
108
87
81
24
523
111
– financial investments: fair value gains/(losses)
(44)
—
—
—
—
335
—
– exchange differences
72
108
87
81
24
188
111
Purchases
353
2,276
3,555
—
291
—
—
New issuances
—
2
—
—
2
5,389
—
Sales
(290)
(2,478)
(658)
—
(320)
(2)
—
Settlements
(352)
(872)
(1,886)
(1,018)
(74)
(3,258)
(1,565)
Transfers out
(662)
(922)
(156)
(240)
(45)
(2,881)
(358)
Transfers in
624
1,109
518
590
51
628
551
At 31 Dec 2023
2,618
4,306
19,788
2,069
478
10,928
2,569
Unrealised gains/(losses) recognised in profit or loss
relating to assets and liabilities held at 31 Dec 2023
—
(152)
82
737
—
(433)
(903)
– net income/(losses) from financial instruments
held for trading or managed on a fair value basis
—
(152)
—
737
—
—
(903)
– changes in fair value of other financial instruments
mandatorily measured at fair value through profit
or loss
—
—
82
—
—
(433)
—
1 Included in ‘financial investments: fair value gains/(losses)’ in the current year and ‘exchange differences’ in the consolidated statement of comprehensive income.
2 Includes $3.1bn decrease from classification of the assets of our French Life Insurance business as assets held for sale.
3 Includes $4.4bn of transfers out and $1.5bn of transfers in relating to enhancement of observability assessments on equity structured notes.
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers are primarily
attributable to changes in price transparency and in the assessment of observability.
Notes on the financial statements
390
HSBC Holdings plc Annual Report and Accounts 2024
Effect of changes in significant unobservable assumptions to reasonably
possible alternatives
Sensitivity of fair values to reasonably possible alternative assumptions
2024
2023
Reflected in profit or loss
Reflected in OCI
Reflected in profit or loss
Reflected in OCI
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
Favourable
changes
Un-
favourable
changes
$m
$m
$m
$m
$m
$m
$m
$m
Derivatives, trading assets and trading
liabilities1
481
(313)
—
—
492
(531)
—
—
Financial assets and liabilities designated
and otherwise mandatorily measured at
fair value through profit or loss
1,434
(1,141)
—
—
1,092
(1,100)
—
—
Financial investments
21
(21)
47
(50)
13
(12)
61
(66)
At 31 Dec
1,936
(1,475)
47
(50)
1,597
(1,643)
61
(66)
1 ‘Derivatives, trading assets and trading liabilities’ are presented as one category to reflect the manner in which these instruments are risk-managed.
The sensitivity analysis for certain private equity positions has been enhanced in order to reduce dependency on historical observations and
focus on current valuation uncertainty, resulting in some increases in favourable sensitivities.
The sensitivity analysis aims to measure a range of fair values consistent with the application of a 95% confidence interval. Methodologies take
account of the nature of the valuation technique employed, as well as the availability and reliability of observable proxy and historical data.
When the fair value of a financial instrument is affected by more than one unobservable assumption, the above table reflects the most
favourable or the most unfavourable change from varying the assumptions individually.
Key unobservable inputs to Level 3 financial instruments
The following table lists key unobservable inputs to Level 3 financial instruments and provides the range of those inputs at 31 December 2024.
Quantitative information about significant unobservable inputs in Level 3 valuations
Fair value
2024
2023
Assets
Liabilities Key valuation
techniques
Key unobservable
inputs
Full range
of inputs
Full range
of inputs
$m
$m
Lower
Higher
Lower
Higher
Private equity including strategic
investments2
18,258
1 Price – Net asset value
Current Value/Cost
0
291
See footnote 2
Asset-backed securities
380
—
– collateralised loan/debt obligation
100
— Market proxy
Price
0
97
0
94
– other ABSs
280
— Market proxy
Price
0
248
0
220
Structured notes
3
9,113
– equity-linked notes
3
5,739 Model – Option model
Equity volatility
6%
70%
6%
154%
Model – Option model
Equity correlation
15%
100%
34%
100%
– Foreign exchange-linked notes
—
1,833 Model – Option model
Foreign exchange
volatility
3%
35%
1%
34%
– other structured notes
—
1,541
Derivatives
2,149
2,842
– interest rate derivatives
1,102
1,066
securitisation swaps
196
186 Model – Discounted cash flow
Prepayment rate
5%
10%
5%
10%
long-dated swaptions
71
76 Model – Option model
Interest rate
volatility
9%
30%
11%
37%
other interest rate derivatives
835
804
– Foreign exchange derivatives
202
212
Foreign exchange options
154
174 Model – Option model
Foreign exchange
volatility
1%
26%
1%
31%
other foreign exchange derivatives
48
38
– equity derivatives
460
638
long-dated single stock options
145
166 Model – Option model
Equity volatility
6%
118%
6%
110%
other equity derivatives
315
472
– credit derivatives
376
922
total return swaps
349
847 Market proxy
Price
0
104
0
104
other credit derivatives
27
75
– other derivatives
9
4
Other portfolios
10,512
787
– repurchase agreements
1,739
742 Model – Discounted cash flow
Interest rate curve
0%
26%
3%
8%
– bonds
4,300
27 Market proxy
Price
0
140
0
101
– other1
4,473
18
At 31 Dec 2024
31,302
12,743
1 ‘Other’ includes a range of asset holdings including loans and deposits, syndicated loans and infrastructure debt.
2 ‘Private equity including strategic investments’ includes private equity, private credit and private equity fund, primarily held as part of our Insurance business and
for strategic investments. The analysis for private equity positions has been enhanced with the range of key unobservable inputs now quoted.
HSBC Holdings plc Annual Report and Accounts 2024
391
Financial statements
The range of values above shows the highest and lowest unobservable inputs that have been used to value significant Level 3 exposures and
reflects the diversity of the underlying financial instruments in scope and subsequent differentiation in pricing.
Private equity including strategic investments
The ‘private equity’ holdings include private equity investments and private equity funds held as limited partners. The key unobservable input is
the current value of the underlying positions, determined using valuation techniques in line with the International Capital Valuation Guidelines.
The inputs represented are an appropriate range of inputs normalised across different exposure types.
Prepayment rates
Prepayment rates are a measure of the anticipated future speed at which a loan portfolio will be repaid in advance of the due date. They vary
according to the nature of the loan portfolio and expectations of future market conditions, and may be estimated using a variety of evidence,
such as prepayment rates implied from proxy observable security prices, current or historical prepayment rates and macroeconomic modelling.
Market proxy
Market proxy pricing may be used for an instrument when specific market pricing is not available but there is evidence from instruments with
common characteristics. In some cases it might be possible to identify a specific proxy, but more generally evidence across a wider range of
instruments will be used to understand the factors that influence current market pricing and the manner of that influence.
Volatility
Volatility is a measure of the anticipated future variability of a market price. It varies by underlying reference market price, and by strike and
maturity of the option. Certain volatilities, typically those of a longer-dated nature, are unobservable and are estimated from observable data.
The range of unobservable volatilities reflects the wide variation in volatility inputs by reference market price.
Correlation
Correlation is a measure of the inter-relationship between two market variables and is expressed as a number between minus one and one. It
is used to value more complex instruments where the payout is dependent upon more than one market variable. There is a wide range of
instruments for which correlation is an input, and consequently a wide range of both same-asset correlations and cross-asset correlations is
used. In general, the range of same-asset correlations will be narrower than the range of cross-asset correlations.
Unobservable correlations may be estimated based upon a range of evidence, including consensus pricing services, HSBC trade prices, proxy
correlations and examination of historical price relationships. The range of unobservable correlations quoted in the table reflects the wide
variation in correlation inputs by market variable pair.
Credit spread
Credit spread is the premium over a benchmark interest rate required by the market to accept lower credit quality. In a discounted cash flow
model, the credit spread increases the discount factors applied to future cash flows, thereby reducing the value of an asset. Credit spreads may
be implied from market prices and may not be observable in more illiquid markets.
Inter-relationships between key unobservable inputs
Key unobservable inputs to Level 3 financial instruments may not be independent of each other. As described above, market variables may be
correlated. This correlation typically reflects the manner in which different markets tend to react to macroeconomic or other events.
Furthermore, the effect of changing market variables on the HSBC portfolio will depend on HSBC’s net risk position in respect of each variable.
HSBC Holdings
Basis of valuing HSBC Holdings’ financial assets and liabilities measured at fair value
2024
2023
Level 1
Level 2
Total
Level 1
Level 2
Total
$m
$m
$m
$m
$m
$m
Recurring fair value measurement
Assets at 31 Dec
Trading assets
709
—
709
—
—
—
Financial assets with HSBC undertakings designated and
otherwise mandatorily measured at fair value
—
61,286
61,286
—
59,879
59,879
Derivatives
—
3,054
3,054
—
3,344
3,344
Liabilities at 31 Dec
Financial liabilities designated at fair value
—
41,582
41,582
—
43,638
43,638
Derivatives
—
5,340
5,340
—
6,090
6,090
Notes on the financial statements
392
HSBC Holdings plc Annual Report and Accounts 2024
13 Fair values of financial instruments not carried at fair value
Fair values of financial instruments not carried at fair value and bases of valuation
Fair value
Carrying
amount
Quoted market
price Level 1
Observable
inputs Level 2
Significant
unobservable
inputs Level 3
Total
$m
$m
$m
$m
$m
At 31 Dec 2024
Assets
Loans and advances to banks
102,039
—
101,007
1,048
102,055
Loans and advances to customers1
930,658
—
11,435
906,208
917,643
Reverse repurchase agreements – non-trading
252,549
—
252,598
—
252,598
Financial investments – at amortised cost
153,973
120,843
29,493
724
151,060
Liabilities
Deposits by banks
73,997
—
74,025
—
74,025
Customer accounts
1,654,955
—
1,655,151
—
1,655,151
Repurchase agreements – non-trading
180,880
—
180,873
—
180,873
Debt securities in issue
105,785
—
105,689
954
106,643
Subordinated liabilities
25,958
—
28,262
—
28,262
At 31 Dec 2023
Assets
Loans and advances to banks
112,902
2
111,263
1,479
112,744
Loans and advances to customers
938,535
—
13,258
911,124
924,382
Reverse repurchase agreements – non-trading
252,217
—
252,243
—
252,243
Financial investments – at amortised cost
148,326
115,383
30,765
440
146,588
Liabilities
Deposits by banks
73,163
—
73,176
—
73,176
Customer accounts
1,611,647
—
1,611,795
—
1,611,795
Repurchase agreements – non-trading
172,100
—
172,081
—
172,081
Debt securities in issue
93,917
—
93,196
706
93,902
Subordinated liabilities
24,954
—
27,151
—
27,151
1 Includes retained portfolio of French home and other loans following the sale of retail banking operations in France, with carrying amount of $6.9bn (2023:
$7.9bn). We reclassified the portfolio to a hold-to-collect-and-sell business model from 1 January 2025 and will measure it prospectively from the first quarter of
2025 at fair value through other comprehensive income. We expect to recognise an estimated $1bn fair value pre-tax loss in other comprehensive income on
the remeasurement of these financial instruments. The valuation of this portfolio of loans may be substantially different in the event of a sale due to entity and
deal-specific factors, including funding costs and the value of customer relationships (refer Note 23 for details).
Fair values of financial instruments not carried at fair value and bases of valuation – assets and disposal groups held for sale
Fair value
Carrying
amount
Quoted market
price Level 1
Observable
inputs Level 2
Significant
unobservable
inputs Level 3
Total
$m
$m
$m
$m
$m
At 31 Dec 2024
Assets
Loans and advances to banks
144
—
144
—
144
Loans and advances to customers
977
—
11
966
977
Reverse repurchase agreements – non-trading
—
—
—
—
—
Financial investments – at amortised cost
—
—
—
—
—
Liabilities
Deposits by banks
—
—
—
—
—
Customer accounts
5,399
—
5,399
—
5,399
Repurchase agreements – non-trading
—
—
—
—
—
Debt securities in issue
—
—
—
—
—
Subordinated liabilities
—
—
—
—
—
At 31 Dec 2023
Assets
Loans and advances to banks
10,487
—
10,487
—
10,487
Loans and advances to customers
73,376
—
90
72,200
72,290
Reverse repurchase agreements – non-trading
2,723
—
2,723
—
2,723
Financial investments – at amortised cost
7,624
7,530
—
5
7,535
Liabilities
Deposits by banks
78
—
78
—
78
Customer accounts
85,950
—
86,475
—
86,475
Repurchase agreements – non-trading
2,768
—
2,768
—
2,768
Debt securities in issue
9,084
—
8,820
—
8,820
Subordinated liabilities
8
—
7
—
7
HSBC Holdings plc Annual Report and Accounts 2024
393
Financial statements
Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly,
their carrying amount is a reasonable approximation of fair value. They include cash and balances at central banks, Hong Kong Government
certificates of indebtedness and Hong Kong currency notes in circulation, all of which are measured at amortised cost.
Valuation
Fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. This may be different from the theoretical economic value attributed from an instrument’s cash
flows over its expected future life. Our valuation methodologies and assumptions in determining fair values for which no observable market
prices are available may differ from those of other companies.
Loans and advances to banks and customers
To determine the fair value of loans and advances to banks and customers, loans are segregated into portfolios of similar characteristics. Fair
values are based on observable market transactions, when available. When they are unavailable, fair values are estimated using valuation
models incorporating a range of input assumptions. These assumptions may include: value estimates from third-party brokers reflecting over-
the-counter trading activity; forward-looking discounted cash flow models, taking account of expected customer prepayment rates, using
assumptions that HSBC believes are consistent with those that would be used by market participants in valuing such loans; recent origination
pricing for similar loans; and trading inputs from other market participants including observed primary and secondary trades. From time to time,
we may engage a third-party valuation specialist to measure the fair value of a pool of loans.
The fair value of loans reflects expected credit losses at the balance sheet date and estimates of market participants’ expectations of credit
losses over the life of the loans, and the fair value effect of repricing between origination and the balance sheet date. For credit-impaired loans,
fair value is estimated by discounting the future cash flows over the time period they are expected to be recovered.
Financial investments
The fair values of listed financial investments are determined using bid market prices. The fair values of unlisted financial investments are
determined using valuation techniques that incorporate the prices and future earnings streams of equivalent quoted securities.
Deposits by banks and customer accounts
The fair values of on-demand deposits are approximated by their carrying amount. For deposits with longer-term maturities, fair values are
estimated using discounted cash flows, applying current rates offered for deposits of similar remaining maturities.
Debt securities in issue and subordinated liabilities
Fair values in debt securities in issue and subordinated liabilities are determined using quoted market prices at the balance sheet date where
available, or by reference to quoted market prices for similar instruments.
Repurchase and reverse repurchase agreements – non-trading
Carrying amounts of repurchase and reverse repurchase agreements that are held on a non-trading basis provide approximate fair values. This
is due to the fact that balances are generally short dated.
HSBC Holdings
The methods used by HSBC Holdings to determine fair values of financial instruments for the purposes of measurement and disclosure are
described above.
Fair values of HSBC Holdings’ financial instruments not carried at fair value on the balance sheet
2024
2023
Carrying amount
Fair value1
Carrying amount
Fair value1
$m
$m
$m
$m
Assets at 31 Dec
Loans and advances to HSBC undertakings
37,677
38,359
27,354
27,878
Financial investments – at amortised cost
10,328
10,335
19,558
19,531
Liabilities at 31 Dec
Debt securities in issue
64,320
65,123
65,239
65,172
Subordinated liabilities
23,548
25,911
24,439
26,651
1 Fair values (other than Financial investments which are Level 1) were determined using valuation techniques with observable inputs (Level 2).
Notes on the financial statements
394
HSBC Holdings plc Annual Report and Accounts 2024
14 Financial assets designated and otherwise mandatorily measured at fair
value through profit or loss
2024
2023
Designated at
fair value
Mandatorily
measured at
fair value
Total
Designated
at fair value
Mandatorily
measured at
fair value
Total
$m
$m
$m
$m
$m
$m
Securities
2,406
104,093
106,499
2,353
101,152
103,505
– treasury and other eligible bills
732
393
1,125
695
724
1,419
– debt securities
1,674
59,904
61,578
1,658
60,045
61,703
– equity securities
—
43,796
43,796
—
40,383
40,383
Loans and advances to banks and customers
951
6,120
7,071
371
5,495
5,866
Other
—
2,199
2,199
—
1,272
1,272
At 31 Dec
3,357
112,412
115,769
2,724
107,919
110,643
15
Derivatives
Notional contract amounts and fair values of derivatives by product contract type held by HSBC
Notional contract amount
Fair value – Assets
Fair value – Liabilities
Trading
Hedging
Trading
Hedging
Total
Trading
Hedging
Total
$m
$m
$m
$m
$m
$m
$m
$m
Foreign exchange
11,706,591
82,161
142,055
2,738
144,793
133,910
75
133,985
Interest rate
17,316,173
406,109
209,794
4,790
214,584
212,980
4,930
217,910
Equities
768,732
—
17,116
—
17,116
20,643
—
20,643
Credit
143,136
—
1,756
—
1,756
1,769
—
1,769
Commodity and other
118,180
—
3,134
—
3,134
2,887
—
2,887
Gross total fair values
30,052,812
488,270
373,855
7,528
381,383
372,189
5,005
377,194
Offset (Note 31)
(112,746)
(112,746)
At 31 Dec 2024
30,052,812
488,270
373,855
7,528
268,637
372,189
5,005
264,448
Foreign exchange
9,463,768
63,547
99,014
935
99,949
99,949
780
100,729
Interest rate
14,853,397
361,312
223,534
5,119
228,653
225,443
4,080
229,523
Equities
677,149
—
14,427
—
14,427
17,603
—
17,603
Credit
153,606
—
1,351
—
1,351
1,861
—
1,861
Commodity and other
90,007
—
1,820
—
1,820
1,542
—
1,542
Gross total fair values
25,237,927
424,859
340,146
6,054
346,200
346,398
4,860
351,258
Offset (Note 31)
(116,486)
(116,486)
At 31 Dec 2023
25,237,927
424,859
340,146
6,054
229,714
346,398
4,860
234,772
The notional contract amounts of derivatives held for trading purposes and derivatives designated in hedge accounting relationships indicate the
nominal value of transactions outstanding at the balance sheet date. They do not represent amounts at risk.
Notional contract amounts and fair values of derivatives by product contract type held by HSBC Holdings with subsidiaries
Notional contract amount
Assets
Liabilities
Trading
Hedging
Trading
Hedging
Total
Trading
Hedging
Total
$m
$m
$m
$m
$m
$m
$m
$m
Foreign exchange
51,437
—
796
—
796
1,015
—
1,015
Interest rate
30,535
90,074
1,544
714
2,258
487
3,838
4,325
At 31 Dec 2024
81,972
90,074
2,340
714
3,054
1,502
3,838
5,340
Foreign exchange
66,711
—
486
—
486
1,705
—
1,705
Interest rate
33,480
92,268
1,730
1,128
2,858
747
3,638
4,385
At 31 Dec 2023
100,191
92,268
2,216
1,128
3,344
2,452
3,638
6,090
Use of derivatives
For details regarding the use of derivatives, see page 218 under ‘Market risk’.
Trading derivatives
Most of HSBC’s derivative transactions relate to sales and trading activities. Sales activities include the structuring and marketing of derivative
products to customers to enable them to take, transfer, modify or reduce current or expected risks. Trading activities include market-making
and risk management. Market-making entails quoting bid and offer prices to other market participants for the purpose of generating revenue
based on spread and volume. Risk management activity is undertaken to manage the risk arising from client transactions, with the principal
purpose of retaining client margin. Other derivatives classified as held for trading include non-qualifying hedging derivatives.
Substantially all of HSBC Holdings’ derivatives entered into with subsidiaries are managed in conjunction with financial liabilities.
HSBC Holdings plc Annual Report and Accounts 2024
395
Financial statements
Hedge accounting derivatives
HSBC applies hedge accounting to manage the following risks: interest rate and foreign exchange risks. Further details of how these risks arise
and how they are managed by the Group can be found in the ‘Risk review’.
Hedged risk components
HSBC designates a portion of cash flows of a financial instrument or a group of financial instruments for a specific interest rate or foreign
currency risk component in a fair value or cash flow hedge. The designated risks and portions are either contractually specified or otherwise
separately identifiable components of the financial instrument that are reliably measurable. Risk-free or benchmark interest rates generally are
regarded as being both separately identifiable and reliably measurable, except for the Interest Rate Benchmark Reform Phase 2 transition
where HSBC designates alternative benchmark rates as the hedged risk which may not have been separately identifiable upon initial
designation, provided HSBC reasonably expects it will meet the requirement within 24 months from the first designation date. The designated
risk components account for a significant portion of the overall changes in fair value or cash flows of the hedged items.
HSBC uses net investment hedges to hedge the structural foreign exchange risk related to net investments in foreign operations including
subsidiaries and branches whose functional currencies are different from that of the parent. When hedging with foreign exchange forward
contracts, the spot rate component of the foreign exchange risk is designated for an amount of net assets as the hedged risk.
Sources of hedge ineffectiveness may arise from basis risk, including but not limited to the discount rates used for calculating the fair value of
derivatives, hedges using instruments with a non-zero fair value, and notional and timing differences between the hedged items and hedging
instruments.
Fair value hedges
HSBC enters into fixed-for-floating interest rate swaps to manage the exposure to changes in fair value caused by movements in market
interest rates on certain fixed-rate financial instruments that are not measured at fair value through profit or loss, including debt securities held
and issued.
HSBC hedging instrument by hedged risk
Hedging instrument
Carrying amount
Notional amount1,2
Assets
Liabilities
Balance sheet
presentation
Change in fair value3
Hedged risk
$m
$m
$m
$m
Interest rate4
190,332
4,180
4,411
Derivatives
(449)
At 31 Dec 2024
190,332
4,180
4,411
(449)
Interest rate4
172,985
3,729
2,965
Derivatives
(1,043)
At 31 Dec 2023
172,985
3,729
2,965
(1,043)
1
The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at
the balance sheet date. They do not represent amounts at risk.
2
The notional amount of non-dynamic fair value hedges is equal to $71,916m (2023: $62,480m), of which the weighted-average maturity date is March 2031 and
the weighted-average swap rate is 3.24% (2023: 3.04%).
3
Used in effectiveness testing, which uses the full fair value change of the hedging instrument not excluding any component.
4
The hedged risk ‘interest rate’ includes inflation risk.
HSBC hedged item by hedged risk
Hedged item
Ineffectiveness
Carrying amount
Accumulated fair value
hedge adjustments
included in carrying
amount1
Change in
fair value2
Recognised
in profit
and loss
Assets
Liabilities
Assets
Liabilities
Balance sheet
presentation
Profit and loss
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Interest rate3
93,055
(2,701)
Financial investments -
measured at fair value
through other
comprehensive income
(728)
(8)
Net income from
financial instruments
held for trading or
managed on a fair
value basis
492
11
Financial investments -
measured at amortised
cost
(14)
13,915
(104)
—
Loans and advances to
customers
16
—
—
Reverse repurchase
agreements – non-
trading
—
72,576
(1,800)
Debt securities in issue
1,110
207
—
Customer accounts
—
1,205
(266)
Subordinated liabilities
57
At 31 Dec 2024
107,462
73,988
(2,794)
(2,066)
441
(8)
Notes on the financial statements
396
HSBC Holdings plc Annual Report and Accounts 2024
HSBC hedged item by hedged risk (continued)
Hedged item
Ineffectiveness
Carrying amount
Accumulated fair value
hedge adjustments
included in carrying
amount1
Change in fair
value2
Recognised
in profit
and loss
Assets
Liabilities
Assets
Liabilities
Balance sheet presentation
Profit and loss
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Interest rate3
82,321
(2,282)
Financial investments -
measured at fair value through
other comprehensive income
2,053
5
Net income from
financial instruments
held for trading or
managed on a fair
value basis
514
32
Financial investments -
measured at amortised cost
32
4,701
(18)
Loans and advances to
customers
122
—
—
Reverse repurchase
agreements – non-trading
15
64,269
(2,147)
Debt securities in issue
(1,179)
—
—
Deposits by banks
—
—
—
Subordinated liabilities
5
At 31 Dec 2023
87,536
64,269
(2,268)
(2,147)
1,048
5
1
The accumulated amount of fair value hedge adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for
hedging gains and losses were liabilities of $311m (2023: $136m) for FVOCI assets and liabilities of $745m (2023: $1,256m) for debt issued.
2
Used in effectiveness testing, which comprise an amount attributable to the designated hedged risk that can be a risk component.
3
The hedged risk ‘interest rate’ includes inflation risk.
HSBC Holdings hedging instrument by hedged risk
Hedging instrument
Carrying amount
Notional amount1,2
Assets
Liabilities
Balance sheet
presentation
Change in fair value3
Hedged risk
$m
$m
$m
$m
Interest rate4
90,074
714
3,838
Derivatives
(1,103)
At 31 Dec 2024
90,074
714
3,838
(1,103)
Interest rate4
92,268
1,128
3,638
Derivatives
1,426
At 31 Dec 2023
92,268
1,128
3,638
1,426
1
The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at
the balance sheet date. They do not represent amounts at risk.
2
The notional amount of non-dynamic fair value hedges is equal to $90,074m (2023: $92,268m), of which the weighted-average maturity date is May 2030 and
the weighted-average swap rate is 2.78% (2023: 2.46%). The majority of these hedges are internal to the Group.
3
Used in effectiveness testing, comprising the full fair value change of the hedging instrument not excluding any component.
4
The hedged risk ‘interest rate’ includes foreign exchange risk.
HSBC Holdings hedged item by hedged risk
Hedged item
Ineffectiveness
Carrying amount
Accumulated fair value
hedge adjustments
included in carrying
amount1
Change in
fair value2
Recognised
in profit
and loss
Assets
Liabilities
Assets
Liabilities
Balance sheet
presentation
Profit and loss
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Interest rate3
78,402
(2,423)
Debt securities
in issue
861
(9)
Net income from
financial instruments
held for trading or
managed on a fair value
basis
7,769
(244)
Loans and
advances to banks
233
At 31 Dec 2024
7,769
78,402
(244)
(2,423)
1,094
(9)
Interest rate3
80,889
(2,971)
Debt securities
in issue
(1,716)
29
Net income from financial
instruments held for
trading or managed on a
fair value basis
7,772
(490)
Loans and
advances to banks
319
At 31 Dec 2023
7,772
80,889
(490)
(2,971)
(1,397)
29
1
The accumulated amount of fair value hedge adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for
hedging gains and losses were liabilities of $1,216m (2023: $1,299m) for debt issued.
2
Used in effectiveness testing, comprising amount attributable to the designated hedged risk that can be a risk component.
3
The hedged risk ‘interest rate’ includes foreign exchange risk.
For some debt securities held, HSBC manages interest rate risk in a dynamic risk management strategy. The assets in scope of this strategy
are high-quality fixed-rate debt securities, which may be sold to meet liquidity and funding requirements.
The interest rate risk of the HSBC fixed-rate debt securities issued is managed in a non-dynamic risk management strategy.
HSBC Holdings plc Annual Report and Accounts 2024
397
Financial statements
Cash flow hedges
HSBC’s cash flow hedging instruments consist principally of interest rate swaps and cross-currency swaps that are used to manage the
variability in future interest cash flows of non-trading financial assets and liabilities, arising due to changes in market interest rates and foreign-
currency basis.
HSBC applies macro cash flow hedging for interest rate risk exposures on portfolios of replenishing current and forecasted issuances of non-
trading assets and liabilities that bear interest at variable rates, including rolling such instruments. The amounts and timing of future cash flows,
representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities on the basis of their contractual
terms and other relevant factors, including estimates of prepayments and defaults. The aggregate cash flows representing both principal
balances and interest cash flows across all portfolios are used to determine the effectiveness and ineffectiveness. Macro cash flow hedges are
considered to be dynamic hedges.
HSBC also hedges the variability in future cash flows on foreign-denominated financial assets and liabilities arising due to changes in foreign
exchange market rates with cross-currency swaps, which are considered dynamic hedges.
Hedging instrument by hedged risk
Hedging instrument
Hedged item
Ineffectiveness
Carrying amount
Change in
fair value2
Change in fair
value3
Recognised
in profit
and loss
Profit and loss
presentation
Notional
amount1
Assets
Liabilities
Balance
sheet
presentation
Hedged risk
$m
$m
$m
$m
$m
$m
Foreign currency
47,194
2,088
68
Derivatives
2,451
2,451
—
Net income from
financial instruments
held for trading or
managed on a fair
value basis
Interest rate
215,777
619
519
Derivatives
(2,954)
(2,964)
10
At 31 Dec 2024
262,971
2,707
587
(503)
(513)
10
Foreign currency
29,772
935
257
Derivatives
977
977
—
Net income from
financial instruments
held for trading or
managed on a fair
value basis
Interest rate
188,327
1,390
1,116
Derivatives
1,542
1,512
30
At 31 Dec 2023
218,099
2,325
1,373
2,519
2,489
30
1
The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at
the balance sheet date. They do not represent amounts at risk.
2
Used in effectiveness testing, comprising the full fair value change of the hedging instrument not excluding any component.
3
Used in effectiveness assessment, comprising amount attributable to the designated hedged risk that can be a risk component.
Reconciliation of equity and analysis of other comprehensive income by risk type
Interest rate
Foreign currency
$m
$m
Cash flow hedging reserve at 1 Jan 2024
(901)
(132)
Fair value gains/(losses)
(2,964)
2,451
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of:
Hedged items that have affected profit or loss1
2,529
(2,430)
Income taxes
81
1
Others
199
87
Cash flow hedging reserve at 31 Dec 2024
(1,056)
(23)
Cash flow hedging reserve at 1 Jan 2023
(3,387)
(421)
Fair value gains/(losses)
1,512
977
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of:
Hedged items that have affected profit or loss1
2,196
(718)
Income taxes
(937)
(29)
Others
(285)
59
Cash flow hedging reserve at 31 Dec 2023
(901)
(132)
1 Hedged items that have affected profit or loss are primarily recorded within interest income.
Notes on the financial statements
398
HSBC Holdings plc Annual Report and Accounts 2024
Net investment hedges
The Group applies hedge accounting in respect of certain net investments in non-US dollar functional currency foreign operations for changes in
spot exchange rates only. Hedging could be undertaken for Group structural exposure to changes in the US dollar to foreign currency exchange
rates using forward foreign exchange contracts or by financing with foreign currency borrowings. An economic relationship exists between the
hedged net investment and hedging instrument due to the shared foreign currency risk exposure. For further details of our structural foreign
exchange exposures, see page 212.
The aggregate positions at the reporting date and the performance indicators of both live and de-designated hedges are summarised below.
Hedges of net investment in foreign operations
Carrying amount
Nominal
amount
Amounts
recognised
in OCI1
Change in
fair value2
Hedge ineffectiveness
recognised in income
statement
Derivative
assets
Derivative
liabilities
Description of hedged risk
$m
$m
$m
$m
$m
$m
2024
Pound sterling-denominated structural foreign exchange
397
(1)
15,407
833
229
—
Swiss franc-denominated structural foreign exchange
10
—
556
89
40
—
Hong Kong dollar-denominated structural foreign exchange
1
(3)
5,844
(27)
(26)
—
Other structural foreign exchange3
242
(3)
13,160
907
499
—
Total
650
(7)
34,967
1,803
742
—
2023
Pound sterling-denominated structural foreign exchange
(404)
16,415
604
(843)
—
Swiss franc-denominated structural foreign exchange
(23)
526
49
(62)
—
Hong Kong dollar-denominated structural foreign exchange
—
5,792
—
2
—
Other structural foreign exchange3
(96)
11,042
477
102
—
Total
—
(523)
33,775
1,130
(801)
—
1 Amount recognised in OCI for Swiss franc includes $110m (2023: $110m) related to de-designated hedge.
2 Used in effectiveness assessment, comprising amount attributable to the designated hedged risk that can be a risk component.
3 Other currencies include Euro, New Taiwan dollar, Singapore dollar, Canadian dollar, Omani rial, South Korean won, UAE dirham, Indian rupee, Chinese
renminbi, Kuwaiti dinar, Qatari riyal, Saudi riyal, Indonesian rupiah, Thai baht and Philippine peso.
16 Financial investments
Carrying amount of financial investments
2024
2023
$m
$m
Financial investments measured at fair value through other comprehensive income
339,193
294,437
– treasury and other eligible bills
112,705
102,438
– debt securities
224,496
190,119
– equity securities
1,569
1,447
– other instruments
423
433
Debt instruments measured at amortised cost
153,973
148,326
– treasury and other eligible bills
22,148
30,733
– debt securities
131,825
117,593
At 31 Dec
493,166
442,763
Equity instruments measured at fair value through other comprehensive income
Fair value
Dividends
recognised
Type of equity instruments
$m
$m
Investments required by central institutions
620
29
Business facilitation
886
29
Others
63
2
At 31 Dec 2024
1,569
60
Investments required by central institutions
609
27
Business facilitation
793
35
Others
45
2
At 31 Dec 2023
1,447
64
HSBC Holdings plc Annual Report and Accounts 2024
399
Financial statements
Weighted average yields of investment debt securities
Up to 1
year
1 to 5
years
5 to 10
years
Over 10
years
Yield
Yield
Yield
Yield
%
%
%
%
Debt securities measured at fair value through other comprehensive income
US Treasury
2.9
3.4
2.5
2.3
US Government agencies
0.8
—
3.1
3.1
US Government-sponsored agencies
1.7
3.5
1.6
1.8
UK Government
3.8
3.8
2.3
2.4
Hong Kong Government
—
1.9
2.0
—
Other governments
2.7
4.1
3.7
2.3
Asset-backed securities
3.4
3.0
5.4
4.3
Corporate debt and other securities
2.7
3.5
3.2
1.9
Debt securities measured at amortised cost
US Treasury
3.5
3.8
3.8
2.1
US Government agencies
0.7
0.7
1.1
4.6
US Government-sponsored agencies
—
2.8
3.7
2.9
UK Government
3.5
2.9
2.8
—
Hong Kong Government
—
2.7
—
—
Other governments
2.8
4.1
5.2
—
Asset-backed securities
—
—
7.7
—
Corporate debt and other securities
2.7
2.9
3.2
4.8
The maturity distributions of ABSs are presented in the above table on the basis of contractual maturity dates. The weighted average yield for
each range of maturities is calculated by dividing the annualised interest income for the year ended 31 December 2024 by the book amount of
debt securities at that date. The yields do not include the effect of related derivatives.
HSBC Holdings
HSBC Holdings carrying amount of financial investments
2024
2023
$m
$m
Debt instruments measured at amortised cost
– treasury and other eligible bills
9,556
15,629
– debt securities
772
3,929
At 31 Dec
10,328
19,558
Weighted average yields of investment debt securities
Up to 1
year
1 to 5
years
5 to 10
years
Over 10
years
Yield
Yield
Yield
Yield
%
%
%
%
Debt securities measured at amortised cost
US Treasury
4.3
—
—
—
The weighted average yield for each range of maturities is calculated by dividing the annualised interest income for the year ended
31 December 2024 by the book amount of debt securities at that date. The yields do not include the effect of related derivatives.
17 Assets pledged, collateral received and assets transferred
Assets pledged1
Financial assets pledged as collateral
2024
2023
$m
$m
Treasury bills and other eligible securities
17,713
20,504
Loans and advances to banks
14,880
13,636
Loans and advances to customers
24,524
27,490
Debt securities
91,975
88,367
Equity securities
51,642
40,280
Other
63,386
61,223
Assets pledged at 31 Dec
264,120
251,500
Notes on the financial statements
400
HSBC Holdings plc Annual Report and Accounts 2024
The value of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, in the case of
securitisations and covered bonds, the amount of liabilities issued plus mandatory over-collateralisation is less than the book value of the pool
of assets available for use as collateral. This is also the case where assets are placed with a custodian or a settlement agent that has a floating
charge over all the assets placed to secure any liabilities under settlement accounts.
These transactions are conducted under terms that are usual and customary for collateralised transactions including, where relevant, standard
securities lending and borrowing, repurchase agreements and derivative margining. HSBC places both cash and non-cash collateral in relation to
derivative transactions.
Hong Kong currency notes in circulation are secured by the deposit of funds in respect of which the Hong Kong Government certificates of
indebtedness are held.
Financial assets pledged as collateral which the counterparty has the right to sell or repledge
2024
2023
$m
$m
Trading assets
84,863
77,847
Financial investments
47,248
39,324
At 31 Dec
132,111
117,171
Collateral received1
The fair value of assets accepted as collateral relating primarily to standard securities lending, reverse repurchase agreements, swaps of
securities and derivative margining that HSBC is permitted to sell or repledge in the absence of default was $515,267m (2023: $495,653m).
The fair value of any such collateral sold or repledged was $293,460m (2023: $284,108m).
HSBC is obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard
securities lending, reverse repurchase agreements and derivative margining.
Assets transferred1
The assets pledged include transfers to third parties that do not qualify for derecognition, including secured borrowings such as debt securities
held by counterparties as collateral under repurchase agreements and equity securities lent under securities lending agreements, as well as
swaps of equity and debt securities. For secured borrowings, the transferred asset collateral continues to be recognised in full while a related
liability, reflecting the Group’s obligation to repurchase the assets for a fixed price at a future date, is also recognised on the balance sheet.
Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash collateral
received is not recognised on the balance sheet. The Group is unable to use, sell or pledge the transferred assets for the duration of the
transaction, and remains exposed to interest rate risk and credit risk on these pledged assets.
Transferred financial assets not qualifying for full derecognition and associated financial liabilities
Carrying amount of:
Transferred
assets
Associated
liabilities
$m
$m
At 31 Dec 2024
Repurchase agreements
83,585
75,625
Securities lending agreements
58,232
4,361
At 31 Dec 2023
Repurchase agreements
81,486
74,517
Securities lending agreements
46,663
3,826
1 Excludes assets classified as held for sale.
18 Interests in associates and joint ventures
Carrying amount of HSBC’s interests in associates and joint ventures
2024
2023
$m
$m
Interests in associates
28,777
27,200
Interests in joint ventures
132
144
Interests in associates and joint ventures
28,909
27,344
Principal associates of HSBC
2024
2023
Carrying amount
Fair value1
Carrying amount
Fair value1
$m
$m
$m
$m
Bank of Communications Co., Limited
22,367
11,631
21,210
8,812
Saudi Awwal Bank
5,027
5,705
4,659
6,438
1
Principal associates are listed on recognised stock exchanges. The fair values are based on the quoted market prices of the shares held (Level 1 in the fair value
hierarchy).
HSBC Holdings plc Annual Report and Accounts 2024
401
Financial statements
Principal associates of HSBC (continued)
At 31 Dec 2024
Jurisdiction of incorporation
and principal place of
business
Principal activity
HSBC’s interest1
%
Bank of Communications Co., Limited
Mainland China
Banking services
19.03
Saudi Awwal Bank
Saudi Arabia
Banking services
31.00
1 There has been no percentage change in HSBC’s shareholding interest in the principal associates when compared with 2023.
Share of profit in associates and joint ventures
2024
2023
$m
$m
Bank of Communications Co., Limited
2,241
2,250
Saudi Awwal Bank
596
538
Other associates and joint ventures
75
19
Share of profit in associates and joint ventures
2,912
2,807
Less: Impairment of interest in BoCom
—
(3,000)
A list of all associates and joint ventures is set out in Note 38.
Bank of Communications Co., Limited
The Group maintains a 19.03% interest in Bank of Communications Co., Limited (‘BoCom’). The Group’s investment in BoCom is classified as
an associate. Significant influence in BoCom was established with consideration of all relevant factors, including representation on BoCom’s
Board of Directors and participation in a resource and experience sharing agreement (‘RES’). Under the RES, HSBC staff have been seconded
to assist in the maintenance of BoCom’s financial and operating policies. Investments in associates are recognised using the equity method of
accounting in accordance with IAS 28 ‘Investments in Associates and Joint Ventures’, whereby the investment is initially recognised at cost
and adjusted thereafter for the post-acquisition change in the Group’s share of associate’s net assets. An impairment test is required if there is
any indication of impairment or reversal.
At 31 December 2023, the Group performed an impairment test on the carrying amount, which resulted in an impairment of $3.0bn, as the
recoverable amount as determined by a value in use (‘VIU’) calculation was lower than the carrying amount. No further impairment was
required for the year ended 31 December 2024.
If the Group did not have significant influence in BoCom, the investment would be carried at fair value rather than the current carrying amount.
On 24 September 2024, the People’s Bank of China, National Financial Regulatory Administration and China Securities Regulatory Commission
announced several policies aimed at promoting growth and economic development. These included monetary stimulus, property market
support and capital market strengthening measures, as well as measures to recapitalise the largest commercial banks. In the absence of
further details on how the recapitalisation of the largest commercial banks may be enacted, there is no change to the impairment test result at
31 December 2024. As further details become available, the impairment test will be updated to reflect their impact and may result in a change
to the carrying value of our investment in BoCom. These developments have the potential to impact on the Group‘s reported earnings, but are
unlikely to have an impact on HSBC's capital or capital ratios.
We remain supportive of our relationship with BoCom and will consider any broader implications on the carrying value of our investment as
further details become available.
Impairment testing
At 31 December 2024, the carrying amount of the investment was $22.4bn (2023: $21.2bn) with fair value of $11.6bn (2023: $8.8bn). The
Group has concluded there is no indication of further impairment (or indication that an impairment may no longer exist or may have decreased)
since 31 December 2023. As part of this assessment, the Group updated the VIU calculation which supported that there was no significant
change to the 31 December 2023 impairment position. As a result, no additional impairment to the carrying amount (or reversal of impairment)
was made at 31 December 2024.
Basis of recoverable amount
The VIU calculation uses discounted cash flow projections based on management’s best estimates of future earnings available to ordinary
shareholders prepared in accordance with IAS 36 ’Impairment of Assets’. Those cash flows used estimates based on BoCom’s current
condition and so do not include estimated cash flows arising from uncommitted future actions that may affect the performance of the
investment which will be considered at the relevant time should they arise. Significant management judgement is required in arriving at the
best estimate.
The VIU may increase or decrease depending on the effect of changes to model inputs. The main model inputs are described below and are
based on factors observed at period-end. The factors that could result in increases or reductions in the VIU include changes in BoCom’s short-
term performance, a change in regulatory capital requirements or revisions to the forecast of BoCom’s future profitability.
There are two main components to the VIU calculation. The first component is management’s best estimate of BoCom’s earnings. Forecast
earnings growth over the short to medium term continues to be lower than recent (within the last five years) actual growth, and reflects the
impact of recent macroeconomic, policy and industry factors in mainland China. As a result of management‘s intent to continue to retain its
investment for the long term, earnings beyond the short to medium term are extrapolated into perpetuity using a long-term growth rate to
derive a terminal value, which comprises the majority of the VIU. The second component is the capital maintenance charge (‘CMC’), which is
management’s forecast of the earnings that need to be withheld in order for BoCom to meet capital requirements over the forecast period,
meaning that CMC is deducted when arriving at management’s estimate of future earnings available to ordinary shareholders. The CMC
reflects the revised capital requirements arising from revisions of the ratio of risk-weighted assets to total assets assumption. The principal
inputs to the CMC calculation include estimates of asset growth, the ratio of risk-weighted assets to total assets and the expected capital
requirements. An increase in the CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers
other qualitative factors, to ensure that the inputs to the VIU calculation remain appropriate.
Notes on the financial statements
402
HSBC Holdings plc Annual Report and Accounts 2024
Key assumptions in value in use calculation
We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:
–
Long-term profit growth rate: 3.00% (2023: 3.00%) for periods after 2028, which does not exceed forecast GDP growth in mainland China
and is similar to forecasts by external analysts.
–
Long-term asset growth rate: 3.25% (2023: 3.00%) for periods after 2028, which is the rate that assets are expected to grow to achieve long-term
profit growth of 3.00%. The increase of long-term asset growth rate was supported by historical data, which is expected to continue.
–
Discount rate: 8.53% (2023: 9.00%), which is based on a capital asset pricing model (‘CAPM’), using market data. The discount rate used is
within the range of 7.1% to 8.8% (2023: 7.9% to 9.7%) indicated by the CAPM, and decreased as a consequence of a market-driven
reduction in the risk-free rate.
–
Expected credit losses (‘ECL’) as a percentage of loans and advances to customers: ranges from 0.74% to 0.93% (2023: 0.80% to 0.97%)
in the short to medium term, reflecting reported credit experience in mainland China. For periods after 2028, the ratio is 0.97% (2023:
0.97%), which is higher than BoCom’s average ECL as a percentage of loans and advances to customers in recent years prior to the
Covid-19 pandemic.
–
Risk-weighted assets as a percentage of total assets: ranges from 62.0% to 62.5% (2023: 62.0% to 63.7%) in the short to medium term,
reflecting higher risk-weights in the short term followed by an expected reversion to recent historical levels. For periods after 2028, the ratio
is 62.0% (2023: 62.0%), which continues to be similar to BoCom’s actual results in recent years.
–
Loans and advances to customers growth rate: ranges from 7.5% to 9.5% (2023: 9.0% to 10.0%) in the short to medium term, which is
similar to BoCom’s actual results in recent years. Changes in the forecast growth rate of loans and advances to customers are likewise
reflected in the forecast ECL.
–
Operating income growth rate: ranges from 0.1% to 9.9% (2023: -0.4% to 9.7%) in the short to medium term, which is similar to BoCom’s
actual results in recent years, and is impacted by projections of net interest income in the short term as a consequence of recent
macroeconomic, policy and industry factors in mainland China.
–
Cost-income ratio: ranges from 34.6% to 39.8% (2023: 35.5% to 39.8%) in the short to medium term. These ratios are similar to BoCom’s
actual results in recent years.
–
Long-term effective tax rate: 15.0% (2023: 15.0%) for periods after 2028, which is higher than the recent historical average, and aligned to
the minimum tax rate as proposed by the OECD/Group of 20 (‘G20’) Inclusive Framework on Base Erosion and Profit Shifting.
–
Capital requirements: capital adequacy ratio of 12.5% (2023: 12.5%) and tier 1 capital adequacy ratio of 9.5% (2023: 9.5%), based on
BoCom’s capital risk appetite and capital requirements respectively.
The changes in VIU would impact the carrying amount if there is an indication of further impairment (or indication that an impairment may no
longer exist or may have decreased, to the extent of impairment loss previously recognised). The following table illustrates the impact on the
carrying amount of reasonably possible changes to key assumptions used in the VIU calculation. This reflects the sensitivity of each key
assumption on its own and it is possible that more than one favourable and/or unfavourable change may occur at the same time. The selected
rates of reasonably possible changes to key assumptions are based on external analysts’ forecasts, statutory requirements and other relevant
external data sources, which can change period to period. Unless specified, favourable and unfavourable changes are consistently applied
throughout short-to-medium and long-term forecast years, based on a straight-line average of the base case assumption.
Sensitivity of the carrying amount to the key VIU assumptions
Favourable change
Unfavourable change
Reversal of impairment /
VIU headroom
Impairment
bps
$bn
bps
$bn
At 31 Dec 2024
Long-term profit growth rate
55
4.0
(96)
(5.4)
Long-term asset growth rate
(121)
8.6
30
(2.8)
Discount rate
(143)
5.4
287
(6.4)
Expected credit losses as a percentage of loans and advances to
customers
2024 to 2028: 66
2029 onwards: 91
4.0
2024 to 2028: 108
2029 onwards: 104
(4.3)
Risk-weighted assets as a percentage of total assets
(132)
0.8
234
(1.7)
Loans and advances to customers growth rate
(217)
3.4
340
(6.1)
Operating income growth rate
76
2.7
(81)
(3.3)
Cost-income ratio
(190)
0.2
380
(7.1)
Long-term effective tax rate
(426)
1.6
1,000
(4.0)
Capital requirements – capital adequacy ratio
—
—
372
(14.3)
Capital requirements – tier 1 capital adequacy ratio
—
—
270
(6.7)
At 31 Dec 2023
Long-term profit growth rate
58
3.3
(79)
(3.4)
Long-term asset growth rate
(79)
4.5
58
(4.0)
Discount rate
(110)
4.5
280
(6.1)
Expected credit losses as a percentage of loans and advances to
customers
2023 to 2027: 78
2028 onwards: 91
2.9
2023 to 2027: 120
2028 onwards: 104
(4.4)
Risk-weighted assets as a percentage of total assets
(150)
0.9
216
(1.6)
Loans and advances to customers growth rate
(213)
3.2
207
(2.9)
Operating income growth rate
57
2.6
(81)
(2.6)
Cost-income ratio
(212)
0.8
99
(2.9)
Long-term effective tax rate
(426)
1.6
1,000
(3.5)
Capital requirements – capital adequacy ratio
—
—
215
(7.5)
Capital requirements – tier 1 capital adequacy ratio
—
—
248
(3.7)
HSBC Holdings plc Annual Report and Accounts 2024
403
Financial statements
Considering the interrelationship of the changes set out in the table above, management estimates that the reasonably possible range of VIU is
$13.5bn to $30.8bn (2023: $13.1bn to $28.8bn), acknowledging that the fair value of the Group’s investment has ranged from $6.8bn to
$11.6bn over the last five years as at the date of the impairment tests. The possible range of VIU is based on impacts set out in the table above
arising from the favourable/unfavourable change in the earnings in the short to medium term, the expected credit losses as a percentage of
loans and advances to customers, and a 50bps increase/decrease in the discount rate. All other long-term assumptions, and the basis of the
CMC have been kept unchanged when determining the reasonably possible range of the VIU.
Selected financial information of BoCom
The statutory accounting reference date of BoCom is 31 December. For the year ended 31 December 2024, HSBC included the associate’s
results on the basis of the financial statements for the 12 months ended 30 September 2024, taking into account any known changes in the
subsequent period from 1 October 2024 to 31 December 2024 that would have materially affected the results.
Selected balance sheet information of BoCom
At 30 Sep
At 30 Sep
2024
2023
$m
$m
Cash and balances at central banks
99,663
112,800
Due from and placements with banks and other financial institutions
122,607
100,464
Loans and advances to customers
1,128,603
1,087,613
Other financial assets
587,721
587,949
Other assets
61,086
59,215
Total assets
1,999,680
1,948,041
Due to and placements from banks and other financial institutions
326,742
292,065
Deposits from customers
1,195,590
1,216,611
Other financial liabilities
282,894
251,246
Other liabilities
38,082
36,766
Total liabilities
1,843,308
1,796,698
Total equity
156,372
151,343
Reconciliation of BoCom’s total shareholders’ equity to the carrying amount in HSBC’s consolidated financial statements
At 30 Sep
2024
2023
$m
$m
Equity attributable to shareholders
154,748
149,713
Other equity instruments
(23,946)
(24,616)
Equity attributable to shareholders less other equity instruments
130,802
125,097
The Group's share of equity1
25,284
24,210
Impairment2
(2,917)
(3,000)
Carrying amount
22,367
21,210
1 This balance includes goodwill originally arising on acquisition.
2 This balance includes the impact of foreign exchange movements on the $3bn impairment booked in the financial year ended 31 December 2023.
Selected income statement information of BoCom
For the 12 months ended 30 Sep
2024
2023
$m
$m
Net interest income
23,180
23,432
Net fee and commission income
5,315
6,221
Credit and impairment losses
(7,410)
(8,099)
Depreciation and amortisation
(2,589)
(2,560)
Tax expense
(835)
(1,007)
Profit for the year
12,922
13,211
Other comprehensive income
1,361
686
Total comprehensive income
14,283
13,897
Dividends received from BoCom
745
736
Saudi Awwal Bank
The Group’s investment in Saudi Awwal Bank (‘SAB’) is classified as an associate. HSBC is the largest shareholder in SAB with a shareholding
of 31%. Significant influence in SAB is established via representation on the Board of Directors. Investments in associates are recognised using
the equity method of accounting in accordance with IAS 28, as described previously for BoCom.
Impairment testing
There were no indicators of impairment at 31 December 2024. The fair value of the Group’s investment in SAB of $5.7bn was above the
carrying amount of $5.0bn.
Notes on the financial statements
404
HSBC Holdings plc Annual Report and Accounts 2024
19 Investments in subsidiaries
Main subsidiaries of HSBC Holdings1
At 31 Dec 2024
Place of
incorporation or
registration
HSBC’s
interest
%
Share class
Europe
HSBC Bank plc
England and Wales
100
£1 Ordinary, $0.01 Non-Cumulative Third Dollar
Preference
HSBC UK Bank plc
England and Wales
100
£1 Ordinary
HSBC Continental Europe
France
99.99
€5 Actions
Asia
Hang Seng Bank Limited2,3
Hong Kong
63.12
HK$5 Ordinary
HSBC Bank (China) Company Limited
People’s Republic of
China
100
CNY1 Ordinary
HSBC Bank Malaysia Berhad
Malaysia
100
Ordinary no par value
HSBC Life (International) Limited
Bermuda
100
HK$1 Ordinary
The Hongkong and Shanghai Banking Corporation Limited
Hong Kong
100
Ordinary no par value
Middle East, North Africa and Türkiye
HSBC Bank Middle East Limited
United Arab Emirates
100
$1 Ordinary and $1 Preference shares
North America
HSBC Bank USA, N.A.
US
100
$100 Common and $0.01 Preference
Latin America
HSBC Mexico, S.A., Institución de Banca Múltiple,
Grupo Financiero HSBC
Mexico
99.99
MXN2 Ordinary
1 Main subsidiaries are either held directly or indirectly via intermediate holding companies. During 2024, we completed the sale of HSBC Bank Canada to the
Royal Bank of Canada, therefore it is no longer an indirect subsidiary of HSBC Holdings. There has been no material percentage change in HSBC’s shareholding
for its existing main subsidiaries since 2023.
2 In addition to the strategic holding disclosed above, the Group held 0.06% (2023: 0.09%) shareholding as part of its trading books.
3 Based on the latest corporate substantial shareholding notice filed with Hong Kong Exchange and Clearing Limited on 21 June 2024, the Group’s shareholding in
Hang Seng Bank Limited on 18 June 2024 was 63.04%. Movements in our shareholding since 18 June 2024 are reflected in the above table.
Details of the debt, subordinated debt and preference shares issued by the main subsidiaries to parties external to the Group are included in
Note 26 ‘Debt securities in issue’ and Note 29 ‘Subordinated liabilities’, respectively.
A list of all related undertakings is set out in Note 38. The principal countries and territories of operation are the same as the countries and
territories of incorporation except for HSBC Life (International) Limited, which operates mainly in Hong Kong.
HSBC is structured as a network of regional banks and locally incorporated regulated banking entities. Each bank is separately capitalised in
accordance with applicable prudential requirements and maintains a capital buffer consistent with the Group’s risk appetite for the relevant
country or region. HSBC’s capital management process is incorporated in the financial resource plan, which is approved by the Board.
HSBC Holdings is the primary provider of equity capital to its subsidiaries and also provides them with non-equity capital where necessary.
These investments are substantially funded by HSBC Holdings’ issuance of equity and non-equity capital, and by profit retention.
As part of its capital management process, HSBC Holdings seeks to maintain a balance between the composition of its capital and its
investment in subsidiaries. Subject to this, there is no current or foreseen impediment to HSBC Holdings’ ability to provide funding for such
investments. During 2024, consistent with the Group’s capital plan, the Group’s material subsidiaries did not experience any significant
restrictions on paying dividends or repaying loans and advances. Also, there are no foreseen restrictions envisaged with regard to planned
dividends or payments from material subsidiaries. However, the ability of subsidiaries to pay dividends or advance monies to HSBC Holdings
depends on, among other things, their respective local regulatory capital and banking requirements, exchange controls, statutory reserves, and
financial and operating performance.
The amount of guarantees by HSBC Holdings in favour of other Group entities is set out in Note 33.
Information on structured entities consolidated by HSBC where HSBC owns less than 50% of the voting rights is included in Note 20
‘Structured entities’. In each of these cases, HSBC controls and consolidates an entity when it is exposed, or has rights, to variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Impairment testing of investments in subsidiaries
At each reporting period end, HSBC Holdings reviews investments in subsidiaries for indicators of impairment. An impairment is recognised
when the carrying amount exceeds the recoverable amount for that investment. The recoverable amount is the higher of the investment’s fair
value less costs of disposal and its VIU, in accordance with the requirements of IAS 36. The VIU is calculated by discounting management’s
cash flow projections for the investment. The cash flows represent the free cash flows based on the subsidiary’s binding capital requirements.
We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:
–
Management’s judgement in estimating future cash flows: The cash flow projections for each investment are based on the latest approved
plans, which include forecast capital available for distribution based on the capital requirements of the subsidiary, taking into account
minimum and core capital requirements and factoring in reasonably possible uncertainties. For the impairment test as at 31 December 2024,
cash flow projections until the end of 2029 were considered in line with our internal planning horizon. Our cash flow projections include
known and observable climate-related opportunities and costs associated with our sustainable products and operating model.
–
Long-term growth rates: The long-term growth rate is used to extrapolate the free cash flows in perpetuity because of the long-term
perspective of the legal entity. The growth rate reflects long-term inflation for the country or territory within which the investment operates.
HSBC Holdings plc Annual Report and Accounts 2024
405
Financial statements
–
Discount rates: The rate used to discount the cash flows is based on the cost of capital assigned to each investment, which is derived using
a CAPM and market implied cost of equity. CAPM depends on a number of inputs reflecting financial and economic variables, including the
risk-free rate and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s
assessment of the economic variables and management’s judgement. The discount rates for each investment are refined to reflect the
rates of inflation for the countries or territories within which the investment operates. In addition, for the purposes of testing investments
for impairment, management supplements this process by comparing the discount rates derived using the internally generated CAPM, with
cost of capital rates produced by external sources for businesses operating in similar markets. The impacts from climate risk are included to
the extent that they are observable in discount rates and asset prices.
As at 31 December 2024, the carrying amount of HSBC Holdings’ investments in subsidiaries was $152.3bn (2023: $159.5bn). The year-on-year
reduction was predominantly due to the recognition of an $11.4bn impairment of HSBC Holdings’ investment in HSBC Overseas Holdings (UK)
Limited.
The recoverable amount of HSBC Overseas Holdings (UK) Limited is assessed as the aggregate of the recoverable amounts of its subsidiaries.
During the year HSBC Overseas Holdings (UK) Limited sold its stake in its direct subsidiary HSBC Bank Canada to Royal Bank of Canada, and
transferred HSBC Private Bank (Suisse) SA, its indirect subsidiary (via HSBC Private Banking Holdings (Suisse) SA), to HSBC Bank plc.
Following these disposals HSBC Overseas Holdings (UK) Limited paid $12.1bn in dividend income to HSBC Holdings, which mainly drove the
recognition of an $11.4bn impairment in its investment in HSBC Overseas Holdings (UK) Limited, offset by a higher recoverable amount of
HSBC Overseas Holdings (UK) Limited’s principal remaining subsidiary as at 31 December 2024, HSBC North America Holdings Inc, driven by
higher projected profits and lower projected capital requirements. As at 31 December 2024, HSBC Holdings had recognised for HSBC
Overseas Holdings (UK) Limited a cumulative impairment of $21.6bn (2023: $10.2bn), and a carrying amount of $14.0bn (2023: $25.8bn).
Impairment test results
Investments
Recoverable
amount
Discount
rate
Long-term
growth rate
$m
%
%
HSBC North America Holdings Inc.
At 31 Dec 2024
13,264
11.00
2.25
At 31 Dec 2023
12,756
10.50
2.17
Sensitivities of key assumptions in calculating VIU
At 31 December 2024, the recoverable amount of HSBC Overseas Holdings (UK) Limited remained sensitive to reasonably possible changes in
key assumptions impacting its principal subsidiary, HSBC North America Holdings Inc.
In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in respect of each input
to the model. These include the external range of observable discount rates, historical performance against forecast, and risks attached to the
key assumptions underlying cash flow.
The following table presents a summary of the key assumptions underlying the most sensitive inputs to the model for HSBC North America
Holdings Inc., the key risks attached to each, and details of a reasonably possible change to assumptions where, in the opinion of management,
these could result in a change in VIU.
Reasonably possible changes in key assumptions
Input
Key assumptions
Associated risks
Reasonably possible
change
Investment
HSBC North America Holdings Inc.
(subsidiary of HSBC Overseas
Holdings (UK) Limited)
Free cash flows projections
– Level of interest rates and
yield curves.
– Competitors’ positions
within the market.
– Strategic actions
relating to revenue and
costs are not achieved.
– Free cash flow
projections decrease
by 10%.
Discount rate
– Discount rate used is a
reasonable estimate of a
suitable market rate for
the profile of the
business.
– External evidence arises
to suggest that the rate
used is not appropriate
to the business.
– Discount rate
decreases by 1%.
– Discount rate increases
by 1%.
Sensitivity of VIU to reasonably possible changes in key assumptions
In $bn (unless otherwise stated)
At 31 Dec 2024
At 31 Dec 2023
HSBC North America Holdings Inc.
VIU
13.3
12.8
Impact on VIU
100bps decrease in the discount rate – single variable1
1.5
1.6
100bps increase in the discount rate – single variable1
(1.2)
(1.2)
10% decrease in forecast profitability – single variable1
(1.3)
(1.3)
1 The recoverable amount of HSBC Overseas Holdings (UK) Limited represents the aggregate of recoverable amounts of the underlying subsidiaries. Single
variable sensitivity analysis on a single subsidiary may therefore not be representative of the aggregate impact of the change in the variable.
Notes on the financial statements
406
HSBC Holdings plc Annual Report and Accounts 2024
Subsidiaries with significant non-controlling interests
2024
2023
Hang Seng Bank Limited
Proportion of ownership interests and voting rights held by non-controlling interests (%)1
36.88
37.86
Place of business
Hong Kong
Hong Kong
$m
$m
Profit attributable to non-controlling interests
905
889
Accumulated non-controlling interests of the subsidiary
6,879
6,877
Dividends paid to non-controlling interests
620
490
Summarised financial information:
– total assets
229,069
214,321
– total liabilities
208,908
194,621
– net operating income before changes in expected credit losses and other credit impairment charges
5,249
5,210
– profit for the year
2,434
2,356
– total comprehensive income for the year
2,482
2,723
1 This includes the Group’s shareholding held under trading books 0.06% (2023: 0.09%).
20 Structured entities
HSBC is mainly involved with both consolidated and unconsolidated structured entities through the securitisation of financial assets, conduits
and investment funds, established either by HSBC or a third party.
Consolidated structured entities
Total assets of HSBC’s consolidated structured entities, split by entity type
Conduits
Securitisations
HSBC managed funds
Other
Total
$bn
$bn
$bn
$bn
$bn
At 31 Dec 2024
2.4
7.0
7.2
1.8
18.4
At 31 Dec 2023
3.6
7.8
5.5
8.2
25.1
Conduits
HSBC has established and manages two types of conduits: securities investment conduits (‘SICs’) and multi-seller conduits.
Securities investment conduits
The SICs purchase highly rated ABSs to facilitate tailored investment opportunities.
–
At 31 December 2024, Solitaire, HSBC’s principal SIC, held $0.7bn of ABSs (2023: $1.0bn). It is currently funded entirely by commercial
paper (‘CP’) issued to HSBC. At 31 December 2024, HSBC held $1.0bn of CP (2023: $1.3bn).
Multi-seller conduit
HSBC’s multi-seller conduit was established to provide access to flexible market-based sources of finance for its clients. Currently, HSBC bears
risk equal to the transaction-specific facility offered to the multi-seller conduit, amounting to $5.2bn at 31 December 2024 (2023: $6.1bn). First
loss protection is provided by the originator of the assets, and not by HSBC, through transaction-specific credit enhancements. A layer of loss
protection is provided by HSBC in the form of a programme-wide enhancement facility.
Securitisations
HSBC uses structured entities to securitise customer loans and advances it originates in order to diversify its sources of funding for asset
origination and capital efficiency purposes. The loans and advances are transferred by HSBC to the structured entities for cash or synthetically,
and the structured entities issue debt securities to investors. Where synthetic securitisations are used, the credit risk associated with the loan
portfolio of assets is transferred to the structured entities through loan portfolio financial guarantees.
HSBC managed funds
HSBC has established a number of money market and non-money market funds. Where it is deemed to be acting as principal rather than agent
in its role as investment manager, HSBC controls these funds.
Other
HSBC has entered into a number of transactions in the normal course of business, which include asset and structured finance transactions
where it has control of the structured entity. In addition, HSBC is deemed to control a number of third-party managed funds through its
involvement as a principal in the funds.
HSBC Holdings plc Annual Report and Accounts 2024
407
Financial statements
Unconsolidated structured entities
The term ‘unconsolidated structured entities’ refers to all structured entities not controlled by HSBC. The Group enters into transactions with
unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific investment
opportunities.
Nature and risks associated with HSBC interests in unconsolidated structured entities
Securitisations
HSBC managed
funds
Non-HSBC
managed funds
Other
Total
Total asset values of the entities ($m)
0–500
167
344
1,215
46
1,772
500–2,000
2
75
911
2
990
2,000–5,000
—
30
348
1
379
5,000–25,000
—
21
212
—
233
25,000+
—
2
33
—
35
Number of entities at 31 Dec 2024
169
472
2,719
49
3,409
$bn
$bn
$bn
$bn
$bn
Total assets in relation to HSBC’s interests in the unconsolidated
structured entities
5.4
12.1
25.4
2.4
45.3
– trading assets
—
0.1
—
—
0.1
– financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
—
7.8
22.2
—
30.0
– loans and advances to customers
5.4
—
0.7
1.5
7.6
– financial investments
—
0.2
0.4
—
0.6
– assets held for sale
—
4.0
2.1
—
6.1
– other assets
—
—
—
0.9
0.9
Total liabilities in relation to HSBC’s interests in the
unconsolidated structured entities
—
—
—
0.4
0.4
– other liabilities
—
—
—
0.4
0.4
Other off-balance sheet commitments
—
1.0
8.1
1.3
10.4
HSBC’s maximum exposure at 31 Dec 2024
5.4
13.1
33.5
3.3
55.3
Total asset values of the entities ($m)
0–500
120
337
1,271
42
1,770
500–2,000
4
96
1,069
3
1,172
2,000–5,000
—
39
418
—
457
5,000–25,000
—
24
217
—
241
25,000+
—
3
11
—
14
Number of entities at 31 Dec 2023
124
499
2,986
45
3,654
$bn
$bn
$bn
$bn
$bn
Total assets in relation to HSBC’s interests in the unconsolidated
structured entities
3.2
13.9
20.7
3.3
41.1
– trading assets
—
0.6
—
—
0.6
– financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
—
12.6
19.7
—
32.3
– loans and advances to customers
3.2
—
0.6
2.5
6.3
– financial investments
—
0.7
0.4
—
1.1
– other assets
—
—
—
0.8
0.8
Total liabilities in relation to HSBC’s interests in the
unconsolidated structured entities
—
—
—
0.3
0.3
– other liabilities
—
—
—
0.3
0.3
Other off-balance sheet commitments
0.1
1.9
5.0
1.2
8.2
HSBC’s maximum exposure at 31 Dec 2023
3.3
15.8
25.7
4.2
49.0
The maximum exposure to loss from HSBC’s interests in unconsolidated structured entities represents the maximum loss it could incur as a
result of its involvement with these entities regardless of the probability of the loss being incurred.
–
For commitments, guarantees and written credit default swaps, the maximum exposure to loss is the notional amount of potential future
losses.
–
For retained and purchased investments and loans to unconsolidated structured entities, the maximum exposure to loss is the carrying
amount of these interests at the balance sheet reporting date.
The maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements that HSBC has entered into in order to
mitigate the Group’s exposure to loss.
Securitisations
HSBC has interests in unconsolidated securitisation vehicles through holding notes issued by these entities. In addition, HSBC has investments
in ABSs issued by third-party structured entities.
HSBC managed funds
HSBC establishes and manages money market funds and non-money market investment funds to provide customers with investment
opportunities. Further information on funds under management is provided on page 107.
HSBC, as fund manager, may be entitled to receive management and performance fees based on the assets under management. HSBC may
also retain units in these funds.
Notes on the financial statements
408
HSBC Holdings plc Annual Report and Accounts 2024
Non-HSBC managed funds
HSBC purchases and holds units of third-party managed funds in order to facilitate business and meet customer needs.
Other
HSBC has established structured entities in the normal course of business, such as structured credit transactions for customers, to provide
finance to public and private sector infrastructure projects, and for asset and structured finance transactions.
In addition to the interests disclosed above, HSBC enters into derivative contracts, reverse repos and stock borrowing transactions with
structured entities. These interests arise in the normal course of business for the facilitation of third-party transactions and risk management
solutions.
HSBC sponsored structured entities
The amount of assets transferred to and income received from such sponsored structured entities during 2024 and 2023 was not significant.
21 Goodwill and intangible assets
2024
2023
$m
$m
Goodwill
4,118
4,323
Other intangible assets1
8,266
8,164
At 31 Dec
12,384
12,487
1 Included within other intangible assets is internally generated software with a net carrying amount of $7,100m (2023: $6,895m). During the year, capitalisation
of internally generated software was $2,476m (2023: $2,306m), impairment was $67m (2023: reversal impairment of $285m) and amortisation was $1,995m
(2023: $1,877m).
Movement analysis of goodwill
2024
2023
$m
$m
Gross amount
At 1 Jan
19,560
18,965
Exchange differences
(962)
523
Reclassified to held for sale and additions1
28
73
Other
—
(1)
At 31 Dec
18,626
19,560
Accumulated impairment losses
At 1 Jan
(15,237)
(14,809)
Exchange differences
716
(428)
Reclassified to held for sale1
13
—
At 31 Dec
(14,508)
(15,237)
Net carrying amount at 31 Dec
4,118
4,323
1
Includes goodwill arising from acquisition of Silkroad, offset by goodwill reclassified to held for sale associated with sales of HSBC Bank Armenia, private
banking business in Germany, and planned sale of HSBC Assurances Vie (France). For further details, see Note 23.
Goodwill
Impairment testing
The Group’s impairment test in respect of goodwill allocated to each cash-generating unit (‘CGU’) is performed at 1 October each year. A
review for indicators of impairment is undertaken at each subsequent quarter-end and at 31 December 2024. No indicators of impairment were
identified as part of these reviews.
Basis of the recoverable amount
The recoverable amount of all CGUs to which goodwill has been allocated was equal to its value in use (‘VIU’) at each respective testing date.
The VIU is calculated by discounting management’s cash flow projections for the CGU. The key assumptions used in the VIU calculation for
each individually significant CGU that is not impaired are discussed below.
Key assumptions in VIU calculation – significant CGUs at 1 October 20241
Carrying
amount at
1 Oct 2024
of which
goodwill
Value in
use at
1 Oct 2024
Discount
rate
Growth
rate
beyond
initial
cash flow
Carrying
amount at
1 Oct 2023
of which
goodwill
Value in
use at
1 Oct 2023
Discount
rate
Growth
rate
beyond initial
cash flow
projections
$m
$m
$m
%
%
$m
$m
$m
%
%
HSBC UK
Bank plc –
WPB
12,785
2,843
27,118
10.6
2.0
11,167
2,597
27,933
10.4
2.0
1 For impacts arising from the revised organisational structure effective from 1 January 2025, see Note 1.2(a).
At 1 October 2024, aggregate goodwill of $1,493m (1 October 2023: $1,599m) had been allocated to CGUs that were not considered
individually significant. The Group’s CGUs do not carry on their balance sheets any significant intangible assets with indefinite useful lives, other
than goodwill.
HSBC Holdings plc Annual Report and Accounts 2024
409
Financial statements
Management’s judgement in estimating the cash flows of a CGU
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of goodwill in the next financial year,
but does consider this to be an area that is inherently judgemental. The cash flow projections for each CGU are based on forecast profitability
plans approved by the Board and minimum capital levels required to support the business operations of a CGU. The Board challenges and
endorses planning assumptions in light of internal capital allocation decisions necessary to support our strategy, current market conditions and
macroeconomic outlook. For the 1 October 2024 impairment test, cash flow projections until the end of 2029 were considered, in line with our
internal planning horizon. Key assumptions underlying cash flow projections reflect management’s outlook on interest rates and inflation, as
well as business strategy, including the scale of investment in technology and automation. Our cash flow projections include known and
observable climate-related opportunities and costs associated with our sustainable products and operating model. As required by IFRS
Accounting Standards, estimates of future cash flows exclude estimated cash inflows or outflows that are expected to arise from restructuring
initiatives before an entity has a constructive obligation to carry out the plan, and would therefore have recognised a provision for restructuring
costs.
Discount rate
The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a capital asset pricing
model (‘CAPM’) and market implied cost of equity. CAPM depends on a number of inputs reflecting financial and economic variables, including
the risk-free rate and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s
assessment of the economic variables and management’s judgement. The discount rates for each CGU are refined to reflect the rates of
inflation for the countries within which the CGU operates. In addition, for the purposes of testing goodwill for impairment, management
supplements this process by comparing the discount rates derived using the internally generated CAPM, with the cost of equity rates produced
by external sources for businesses operating in similar markets. The impacts of climate risk are included to the extent that they are observable
in discount rates and asset prices.
Long-term growth rate
The long-term growth rate is used to extrapolate the cash flows in perpetuity because of the long-term perspective within the Group of
business units making up the CGUs. These growth rates reflect inflation for the countries within which the CGU operates or from which it
derives revenue.
Sensitivities of key assumptions in calculating VIU
At 1 October 2024, given the extent by which VIU exceeds carrying amount, the HSBC UK WPB CGU was not sensitive to reasonably possible
adverse changes in key assumptions supporting the recoverable amount. In making an estimate of reasonably possible changes to
assumptions, management considers the available evidence in respect of each input to the VIU calculation, such as the external range of
discount rates observable, historical performance against forecast and risks attaching to the key assumptions underlying cash flow projections.
None of the remaining CGUs are individually significant.
Other intangible assets
Impairment testing
Impairment of other intangible assets is assessed in accordance with our policy explained in Note 1.2(n) by comparing the net carrying amount
of CGUs containing intangible assets with their recoverable amounts. Recoverable amounts are determined by calculating an estimated VIU or
fair value, as appropriate, for each CGU. No significant impairment was recognised during the year.
Key assumptions in VIU calculation
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of other intangible assets in the next
financial year, but does consider this to be an area that is inherently judgemental. We used a number of assumptions in our VIU calculation, in
accordance with the requirements of IAS 36:
–
Management’s judgement in estimating future cash flows: We considered past business performance, current market conditions and our
macroeconomic outlook to estimate future earnings. As required by IFRS Accounting Standards, estimates of future cash flows exclude
estimated cash inflows or outflows that are expected to arise from restructuring initiatives before an entity has a constructive obligation to
carry out the plan, and would therefore have recognised a provision for restructuring costs. For some businesses, this means that the
benefit of certain strategic actions may not be included in the impairment assessment, including capital releases. Our cash flow projections
include known and observable climate-related opportunities and costs associated with our sustainable products and operating model.
–
Long-term growth rates: The long-term growth rate is used to extrapolate the cash flows in perpetuity because of the long-term perspective
of the businesses within the Group.
–
Discount rates: Rates are based on a combination of CAPM and market-implied calculations considering market data for the businesses and
geographies in which the Group operates. The impacts of climate risk are included to the extent that they are observable in discount rates
and asset prices.
Sensitivity of estimates relating to non-financial assets
As explained in Note 1.2(a), estimates of future cash flows for CGUs are made in the review of goodwill and non-financial assets for
impairment. Non-financial assets include other intangible assets shown above, and owned property, plant and equipment and right-of-use
assets (see Note 22). The most significant sources of estimation uncertainty are in respect of the goodwill balances disclosed above. There are
no non-financial asset balances relating to individual CGUs which involve estimation uncertainty that represents a significant risk of resulting in
a material adjustment to the results and financial position of the Group within the next financial year.
Non-financial assets are widely distributed across CGUs within the legal entities of the Group, including Corporate Centre assets that cannot be
allocated to CGUs and are therefore tested for impairment at consolidated level. The recoverable amounts of other intangible assets, owned
property, plant and equipment, and right-of-use assets cannot be lower than individual asset fair values less costs to dispose, where relevant.
At 31 December 2024 none of the CGUs were sensitive to reasonably possible adverse changes in key assumptions supporting the
recoverable amount. In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in
respect of each input to the VIU calculation, such as the external range of discount rates observable, historical performance against forecast
and risks attaching to the key assumptions underlying cash flow projections.
Notes on the financial statements
410
HSBC Holdings plc Annual Report and Accounts 2024
22 Prepayments, accrued income and other assets
2024
2023
$m
$m
Prepayments and accrued income
13,781
13,854
Settlement accounts and items in course of collection from other banks
19,050
39,195
Cash collateral and margin receivables
59,488
57,058
Bullion
16,841
13,701
Endorsements and acceptances
8,093
7,939
Insurance contract assets (Note 4)
132
252
Reinsurance contract assets
4,798
4,728
Employee benefit assets (Note 5)
7,548
7,750
Right-of-use assets
2,205
2,456
Owned property, plant and equipment
9,407
10,478
Other accounts
11,397
14,186
At 31 Dec1
152,740
171,597
1 Prepayments, accrued income and other assets include $109,336m (2023: $129,203m) of financial assets, the majority of which are measured at amortised
cost.
23 Assets held for sale, liabilities of disposal groups held for sale and
business acquisitions
2024
2023
$m
$m
Held for sale at 31 Dec
Disposal groups
27,126
115,836
Unallocated impairment losses1
(31)
(1,975)
Non-current assets held for sale
139
273
Assets held for sale
27,234
114,134
Liabilities of disposal groups held for sale
29,011
108,406
1 This represents impairment losses in excess of the carrying value of the non-current assets, excluded from the measurement scope of IFRS 5.
Disposal groups
France retail banking operations
On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking business in France to CCF, a subsidiary of Promontoria
MMB SAS (‘My Money Group’). The sale also included HSBC Continental Europe’s 100% ownership interest in HSBC SFH (France) and its 3%
ownership interest in Crédit Logement.
Upon completion and in accordance with the terms of the sale, HSBC Continental Europe received a €0.1bn ($0.1bn) profit participation interest
in the ultimate holding company of My Money Group. The associated impacts on initial recognition of this stake at fair value were recognised as
part of the pre-tax loss on disposal in 2023, upon the reclassification of the disposal group as held for sale. In accordance with the terms of the
sale, HSBC Continental Europe retained a portfolio of €7.1bn ($7.4bn) at the time of the sale, consisting of home and certain other loans, and
the CCF brand, which it licensed to the buyer under a long-term licence agreement. Additionally, HSBC Continental Europe’s subsidiaries,
HSBC Assurances Vie (France) and HSBC Global Asset Management (France), entered into distribution agreements with the buyer.
The customer lending balances and associated income statement impacts of the portfolio of retained loans, together with the profit
participation interest and the licence agreement of the CCF brand, were reclassified from WPB to Corporate Centre, with effect from 1 January
2024.
During the fourth quarter of 2024, we began the process of marketing the retained home and other loan portfolio for sale, which had a carrying
value of €6.7bn ($6.9bn) at 31 December 2024. As a result, we reclassified the portfolio to a hold-to-collect-and-sell business model from
1 January 2025 and will measure it prospectively from the first quarter of 2025 at fair value through other comprehensive income. We expect to
recognise an estimated $1bn fair value pre-tax loss in other comprehensive income on the remeasurement of the financial instruments. The
valuation of this portfolio of loans may be substantially different in the event of a sale due to entity and deal-specific factors, including funding
costs and the value of customer relationships. In the event of a sale, upon completion, the cumulative fair value changes recognised through
other comprehensive income, which would reflect the terms of an agreed sale, would reclassify to the income statement. In December 2024,
we entered into non-qualifying economic hedges, hedging interest rate risk on the portfolio and recognised a $0.1bn mark-to-market gain year-
to-date.
Canada banking business
On 28 March 2024, HSBC Overseas Holdings (UK) Limited, a direct subsidiary of HSBC Holdings plc, completed the sale of HSBC Bank Canada
to the Royal Bank of Canada.
The completion of the transaction resulted in a gain on sale of $4.8bn, inclusive of the recycling of $0.6bn in foreign currency translation reserve
losses and $0.4bn in other reserves losses. The gain on sale also included $0.3bn in fair value gains recognised on the related foreign exchange
hedges in the first quarter of 2024. There was no tax on the gain recognised at completion due to the substantial shareholding exemption rule
in the UK.
Following the completion of this transaction, the Board approved a special dividend of $0.21 per share, which was paid in June 2024 alongside
the first interim dividend.
HSBC Holdings plc Annual Report and Accounts 2024
411
Financial statements
Argentina business
On 6 December 2024, HSBC Latin America B.V. completed the sale of its business in Argentina to Grupo Financiero Galicia (‘Galicia‘).
Galicia acquired all of HSBC Argentina’s business covering banking, asset management and insurance, together with $100m of subordinated
debt issued by HSBC Argentina and held by HSBC Latin America Holdings (UK) Limited for a base consideration of $550m. The consideration
was adjusted for the results of the business and fair value gains or losses on HSBC Argentina’s securities portfolios during the period between
31 December 2023 and 30 November 2024. HSBC received the purchase consideration in a combination of cash and Galicia’s American
Depositary Receipts (‘ADRs‘), with ADRs representing less than a 10% economic interest in Galicia. At 31 December 2024, the fair value of the
ADRs received and held as fair value through profit and loss was $0.7bn.
For the year ended 31 December 2024, we recognised a $1.0bn pre-tax loss and we recycled $5.2bn foreign currency reserve and other
reserve losses to the income statement on completion. There was no tax deduction on the loss recognised.
Other disposals
On 30 May 2024, HSBC Europe BV, a wholly-owned subsidiary of HSBC Bank plc, completed the sale of HSBC Bank (RR) (Limited Liability
Company) to Expobank. Foreign currency translation reserve losses of $0.1bn were recognised in the income statement upon completion.
On 6 July 2024, The Hongkong and Shanghai Banking Corporation Limited (acting through its Mauritius branch) completed the sale of its
Wealth and Personal Banking business in Mauritius to Absa Bank (Mauritius) Limited, a wholly-owned subsidiary of Absa Group Limited. The
financial impact of the sale was not significant for the Group.
On 23 September 2024, HSBC Continental Europe, a wholly owned subsidiary of HSBC Bank plc, reached an agreement to sell its private
banking business in Germany to BNP Paribas and the disposal group met the held for sale criteria at 31 December 2024. This sale, which
remains subject to works council consultation, is expected to be completed in the second half of 2025. The sale is expected to generate an
estimated pre-tax gain on disposal of $0.2bn, which will be recognised on completion.
On 25 September 2024, HSBC reached an agreement to transfer its business in South Africa to local lender FirstRand Bank Ltd and the
disposal group met the held for sale criteria at 31 December 2024. The transaction, which is subject to regulatory and governmental approvals,
is expected to complete in the second half of 2025. At closing, cumulative foreign currency translation reserves and other reserves will recycle
to the income statement. At 31 December 2024, foreign currency translation reserve and other reserve losses stood at $0.2bn.
On 29 November 2024, HSBC Europe BV completed the sale of HSBC Bank Armenia to Ardshinbank with a year-to-date loss of $0.1bn
recognised.
On 20 December 2024, HSBC Continental Europe signed a Memorandum of Understanding (‘MoU’) for the planned sale of its French life
insurance business, HSBC Assurances Vie (France), to Matmut Société d’Assurance Mutuelle. The transaction, which is subject to regulatory
approvals and employee consultation, is expected to complete in the second half of 2025. The disposal group met the held for sale criteria at
31 December 2024, resulting in the reclassification of $24.2bn in assets and $23.4bn in liabilities to held for sale, and the recognition of an
immaterial loss on disposal. The total pre-tax loss at completion is estimated at $0.2bn inclusive of migration costs and the recycling of
cumulative foreign currency translation reserves, insurance finance reserves and other reserves which stood at a net loss of $0.1bn as at
31 December 2024.
At 31 December 2024, the major classes of assets and associated liabilities of disposal groups held for sale, excluding allocated impairment
losses, were as follows:
French Life
Insurance Business
German Private
Banking Business
South Africa1
Other
Total
$m
$m
$m
$m
$m
Assets of disposal groups held for sale
Cash and balances at central banks
—
1,896
—
—
1,896
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss
14,560
—
—
—
14,560
Derivatives
26
—
10
—
36
Loans and advances to banks
144
—
—
—
144
Loans and advances to customers
—
309
656
—
965
Financial investments2
8,500
—
—
—
8,500
Goodwill
—
5
—
—
5
Prepayments, accrued income and other assets
992
21
7
—
1,020
Total assets at 31 Dec 2024
24,222
2,231
673
—
27,126
Liabilities of disposal groups held for sale
Customer accounts
—
2,085
3,294
20
5,399
Financial liabilities designated at fair value
11
119
—
—
130
Derivatives
—
—
19
—
19
Insurance contract liabilities
21,811
—
—
—
21,811
Accruals, deferred income and other liabilities
1,598
22
32
—
1,652
Total liabilities at 31 Dec 2024
23,420
2,226
3,345
20
29,011
Expected date of completion
Second half of 2025
Second half of 2025
Second half of 2025
Operating segment
WPB
WPB
GBM and
Corporate Centre
1 Under the financial terms of the sale of our South Africa business, HSBC Bank plc will transfer the business with a net asset value of $0.7bn for a book value
less any provisions. The purchase price will be satisfied by the transfer of agreed liabilities of $3.3bn. Any required increase to the net asset value of the
business to achieve this will be satisfied by the inclusion of additional cash. Based upon the net liabilities of the disposal group at 31 December 2024, HSBC
would be expected to include a cash contribution of $2.6bn.
2 Represents financial investments measured at fair value through other comprehensive income.
Notes on the financial statements
412
HSBC Holdings plc Annual Report and Accounts 2024
At 31 December 2023, the major classes of assets and associated liabilities of disposal groups held for sale, excluding allocated impairment
losses, were as follows:
Canada
Retail banking
operations in France
Other
Total
$m
$m
$m
$m
Assets of disposal groups held for sale
Cash and balances at central banks
5,370
226
—
5,596
Trading assets
2,465
—
—
2,465
Financial assets designated and otherwise mandatorily measured at fair value through
profit or loss
15
49
—
64
Derivatives
528
—
—
528
Loans and advances to banks
154
10,333
—
10,487
Loans and advances to customers
56,129
16,902
254
73,285
Reverse repurchase agreements – non-trading
2,723
—
—
2,723
Financial investments1
16,978
33
—
17,011
Goodwill
225
—
—
225
Prepayments, accrued income and other assets
3,318
132
2
3,452
Total assets at 31 Dec 2023
87,905
27,675
256
115,836
Liabilities of disposal groups held for sale
Trading liabilities
1,417
—
—
1,417
Deposits by banks
78
—
—
78
Customer accounts
63,001
22,307
642
85,950
Repurchase agreements – non-trading
2,768
—
—
2,768
Financial liabilities designated at fair value
—
2,370
—
2,370
Derivatives
608
7
—
615
Debt securities in issue
7,707
1,377
—
9,084
Subordinated liabilities
8
—
—
8
Accruals, deferred income and other liabilities
5,916
196
4
6,116
Total liabilities at 31 Dec 2023
81,503
26,257
646
108,406
Date of completion
28 March 2024
1 January 2024
Operating segment
All global
businesses
WPB
1 Includes financial investments measured at fair value through other comprehensive income of $9.4bn and debt instruments measured at amortised cost of
$7.6bn.
Business acquisitions
In October 2023, HSBC Global Asset Management Singapore Limited, a wholly-owned subsidiary of The Hongkong and Shanghai Banking
Corporation Limited, entered into an agreement to acquire 100% of the shares of Silkroad Property Partners Pte Ltd (‘Silkroad’) and for HSBC
Global Asset Management Limited to acquire Silkroad’s affiliated General Partner entities. Silkroad is a Singapore headquartered Asia-Pacific-
focused, real estate investment manager. The acquisition was completed on 31 January 2024.
In October 2023, HSBC Bank (China) Company Limited, a wholly-owned subsidiary of The Hongkong and Shanghai Banking Corporation
Limited, entered into an agreement to acquire Citibank China’s retail wealth management portfolio in mainland China. The portfolio comprises
assets under management and deposits and the associated wealth customers. The acquisition was completed on 7 June 2024.
The financial impact of these business acquisitions was not significant for the Group.
24 Trading liabilities
2024
2023
$m
$m
Deposits by banks1
7,671
6,779
Customer accounts1
10,709
8,955
Other debt securities in issue (Note 26)
73
27
Other liabilities – net short positions in securities
47,529
57,389
At 31 Dec
65,982
73,150
1
‘Deposits by banks’ and ‘Customer accounts’ include repos, stock lending and other amounts.
HSBC Holdings plc Annual Report and Accounts 2024
413
Financial statements
25 Financial liabilities designated at fair value
HSBC
2024
2023
$m
$m
Deposits by banks and customer accounts1
23,773
21,043
Liabilities to customers under investment contracts
5,931
5,103
Debt securities in issue (Note 26)
99,706
103,803
Subordinated liabilities (Note 29)
9,317
11,477
At 31 Dec
138,727
141,426
1 Structured deposits placed at HSBC Bank USA are insured by the Federal Deposit Insurance Corporation, a US government agency, up to $250,000 per
depositor.
The carrying amount of financial liabilities designated at fair value was $4,365m less than the contractual amount at maturity (2023: $4,421m
less). The cumulative amount of change in fair value attributable to changes in credit risk was a loss of $1,655m (2023: loss of $1,286m).
HSBC Holdings
2024
2023
$m
$m
Debt securities in issue (Note 26)
33,268
35,189
Subordinated liabilities (Note 29)
8,314
8,449
At 31 Dec
41,582
43,638
The carrying amount of financial liabilities designated at fair value was $17m less than the contractual amount at maturity (2023: $246m less).
The cumulative amount of change in fair value attributable to changes in credit risk was a loss of $540m (2023: $682m).
26 Debt securities in issue
HSBC
2024
2023
$m
$m
Bonds and medium-term notes
163,903
160,632
Other debt securities in issue
41,661
37,115
Total debt securities in issue
205,564
197,747
Included within:
– trading liabilities (Note 24)
(73)
(27)
– financial liabilities designated at fair value (Note 25)
(99,706)
(103,803)
At 31 Dec
105,785
93,917
HSBC Holdings
2024
2023
$m
$m
Debt securities
97,588
100,428
Included within:
– financial liabilities designated at fair value (Note 25)
(33,268)
(35,189)
At 31 Dec
64,320
65,239
27 Accruals, deferred income and other liabilities
2024
2023
$m
$m
Accruals and deferred income
16,277
16,814
Settlement accounts and items in course of transmission to other banks
24,692
35,718
Cash collateral and margin payables
58,040
56,832
Endorsements and acceptances
8,102
7,911
Employee benefit liabilities (Note 5)
1,017
1,160
Reinsurance contract liabilities
701
819
Lease liabilities
2,459
2,813
Other liabilities
19,052
21,834
At 31 Dec1
130,340
143,901
1 Accruals, deferred income and other liabilities include $122,051m (2023: $136,696m) of financial liabilities, the majority of which are measured at amortised
cost.
Notes on the financial statements
414
HSBC Holdings plc Annual Report and Accounts 2024
28 Provisions
Restructuring
costs
Legal
proceedings
and regulatory
matters
Customer
remediation
Other
provisions
Total
$m
$m
$m
$m
$m
Provisions (excluding contractual commitments)
At 1 Jan 2024
284
380
130
420
1,214
Additions
181
205
36
203
625
Amounts utilised
(193)
(228)
(48)
(105)
(574)
Unused amounts reversed
(63)
(63)
(35)
(82)
(243)
Exchange and other movements
(10)
1
2
21
14
At 31 Dec 2024
199
295
85
457
1,036
Contractual commitments1
At 1 Jan 2024
527
Net change in expected credit loss provision and other movements
161
At 31 Dec 2024
688
Total provisions
At 31 Dec 2023
1,741
At 31 Dec 2024
1,724
Provisions (excluding contractual commitments)
At 1 Jan 2023
445
409
195
397
1,446
Additions
255
236
37
170
698
Amounts utilised
(288)
(231)
(69)
(68)
(656)
Unused amounts reversed
(149)
(30)
(41)
(95)
(315)
Exchange and other movements
21
(4)
8
16
41
At 31 Dec 2023
284
380
130
420
1,214
Contractual commitments1
At 1 Jan 2023
512
Net change in expected credit loss provision and other movements
15
At 31 Dec 2023
527
Total provisions
At 31 Dec 2022
1,958
At 31 Dec 2023
1,741
1 Contractual commitments include the expected credit loss provision in relation to off-balance sheet financial guarantee contracts and commitments where
HSBC has become party to an irrevocable commitment, as defined under IFRS 9 ‘Financial Instruments’; and provisions for performance and other guarantee
contracts.
Further details of ‘Legal proceedings and regulatory matters’ are set out in Note 35. Legal proceedings include civil court, arbitration or tribunal
proceedings brought against HSBC companies (whether by way of claim or counterclaim); or civil disputes that may, if not settled, result in
court, arbitration or tribunal proceedings. ‘Regulatory matters’ refers to investigations, reviews and other actions carried out by, or in response
to, the actions of regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.
Customer remediation refers to HSBC’s activities to compensate customers for losses or damages associated with a failure to comply with
regulations or to treat customers fairly. Customer remediation is often initiated by HSBC in response to customer complaints and/or industry
developments in sales practices, and is not necessarily initiated by regulatory action.
For further details of the impact of IFRS 9 on undrawn loan commitments and financial guarantees, presented in ‘Contractual commitments’,
see Note 33. Further analysis of the movement in the expected credit loss provision is disclosed within the ‘Reconciliation of changes in gross
carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees‘
table on page 161.
Brazil PIS and COFINS tax matters
Beginning in the late 1990s, HSBC Bank Brasil S.A. – Banco Múltiplo (‘HSBC Brazil’) and other financial services firms brought legal proceedings
in Brazil challenging the assessment of PIS and COFINS taxes, which are federal taxes imposed on gross revenues earned by legal entities in
Brazil. The Supreme Court of Brazil selected three cases – one involving an insurer, in 2007, and two involving other banks, in 2011 – to set
standards that would apply to all of these proceedings. In June 2023, the court ruled against the financial services firms in all three cases. The
standards set by the court in this ruling have not yet been applied to HSBC Brazil’s legacy cases, liability for which remained with HSBC after
the sale of HSBC’s operations in Brazil to Bradesco in 2016. There are many factors that may affect the range of outcomes and any resulting
financial impact for HSBC. Based upon the information currently available, a provision was recognised in respect of one legacy case. The
remaining additional tax liability subject to challenge on all legacy PIS and COFINS cases is up to $0.4bn. As at 31 December 2024, no provision
has been booked for this amount.
HSBC Holdings plc Annual Report and Accounts 2024
415
Financial statements
29 Subordinated liabilities
HSBC’s subordinated liabilities
2024
2023
$m
$m
At amortised cost
25,958
24,954
– subordinated liabilities
25,080
23,149
– preferred securities
878
1,805
Designated at fair value (Note 25)
9,317
11,477
– subordinated liabilities
9,317
11,477
– preferred securities
—
—
At 31 Dec
35,275
36,431
Issued by HSBC subsidiaries
3,144
4,154
Issued by HSBC Holdings
32,131
32,277
Subordinated liabilities rank behind senior obligations and generally count towards the capital base of HSBC. Capital securities may be called
and redeemed by HSBC subject to prior notification to the PRA and, where relevant, the consent of the local banking regulator. If not redeemed
at the first call date, coupons payable may reset or become floating rate based on relevant market rates. On subordinated liabilities other than
floating rate notes, interest is payable at fixed rates of up to 8.201%.
The balance sheet amounts disclosed in the following table are presented on an IFRS basis and do not reflect the amount that the instruments
contribute to regulatory capital, principally due to regulatory amortisation and regulatory eligibility limits.
HSBC’s subordinated liabilities: subsidiaries
2024
2023
$m
$m
Additional tier 1 capital securities issued by HSBC subsidiaries1
732
1,672
Tier 2 securities issued by HSBC subsidiaries
– Tier 2 securities issued by HSBC Bank plc
715
764
– Tier 2 securities issued by The Hongkong and Shanghai Banking Corporation Limited
—
– Tier 2 securities issued by HSBC Bank USA Inc
223
223
– Tier 2 securities issued by HSBC Bank USA N.A.
1,431
1,449
Securities issued by other HSBC subsidiaries
43
46
Subordinated liabilities issued by HSBC subsidiaries at 31 Dec
3,144
4,154
1 The $900m 10.176% security issued by HSBC Capital Funding (Dollar 1) L.P. was redeemed on 31 October 2024.
HSBC Holdings’ subordinated liabilities
2024
2023
$m
$m
At amortised cost
23,548
24,439
Designated at fair value (Note 25)
8,314
8,449
At 31 Dec
31,862
32,888
HSBC Holdings’ subordinated liabilities in issue
2024
2023
$m
$m
Tier 2 securities issued by HSBC Holdings
Amounts owed to third parties
31,862
31,975
Amounts owed to HSBC undertakings1
—
913
Subordinated liabilities issued by HSBC Holdings at 31 Dec
31,862
32,888
1 The $900m 10.176% security issued by HSBC Holdings to HSBC Capital Funding (Dollar 1) L.P. was redeemed on 31 October 2024.
Notes on the financial statements
416
HSBC Holdings plc Annual Report and Accounts 2024
Guaranteed by HSBC Holdings or HSBC Bank plc
Capital securities guaranteed by HSBC Holdings or HSBC Bank plc were issued by the Jersey limited partnerships. The proceeds of these were
lent to the respective guarantors by the limited partnerships in the form of subordinated notes. They qualified as additional tier 1 capital for
HSBC under CRR II until 31 December 2021 by virtue of the application of grandfathering provisions. The capital securities guaranteed by HSBC
Bank plc also qualified as additional tier 1 capital for HSBC Bank plc (on a solo and a consolidated basis) under CRR II until 31 December 2021
by virtue of the same grandfathering process. Since 31 December 2021, these securities have no longer qualified as regulatory capital for HSBC
Holdings or HSBC Bank plc. On 31 October 2024, the capital securities guaranteed by HSBC Holdings were redeemed.
As at 31 December 2024 the preferred securities guaranteed by HSBC Bank plc are intended to provide investors with rights to income and
capital distributions, as well as distributions upon liquidation of the issuer that are equivalent to the rights that they would have had if they had
purchased non-cumulative perpetual preference shares of the issuer. There are limitations on the payment of distributions if such payments are
prohibited under UK banking regulations or other requirements, if a payment would cause a breach of HSBC Bank plc’s capital adequacy
requirements, or if HSBC Bank plc has insufficient distributable reserves (as defined).
HSBC Bank plc have covenanted that, if prevented under certain circumstances from paying distributions on the preferred securities in full, they
will not pay dividends or other distributions in respect of their ordinary shares, or repurchase or redeem their ordinary shares, until the
distribution on the preferred securities has been paid in full.
If the preferred securities guaranteed by HSBC Bank plc are outstanding in November 2048, or if the total capital ratio of HSBC Bank plc (on a
solo or consolidated basis) falls below the regulatory minimum required, or if the Directors expect it to do so in the near term, provided that
proceedings have not been commenced for the liquidation, dissolution or winding up of HSBC Bank plc, the holders’ interests in the preferred
security guaranteed by HSBC Bank plc will be exchanged for interests in preference shares issued by HSBC Bank plc that have economic
terms which are in all material respects equivalent to the preferred security and its guarantee.
Tier 2 securities
Tier 2 capital securities are either perpetual or dated subordinated securities on which there is an obligation to pay coupons. These capital
securities are included within HSBC’s regulatory capital base as tier 2 capital under CRR II, either as fully eligible capital or by virtue of the
application of grandfathering provisions. In accordance with CRR II, the capital contribution of all tier 2 securities is amortised for regulatory
purposes in their final five years before maturity.
30 Maturity analysis of assets, liabilities and off-balance sheet commitments
The table on page 418 provides an analysis of consolidated total assets, liabilities and off-balance sheet commitments by residual contractual
maturity at the balance sheet date. These balances are included in the maturity analysis as follows:
–
Trading assets and liabilities (including trading derivatives but excluding reverse repos, repos and debt securities in issue) are included in the
‘Due not more than 1 month’ time bucket because trading balances are typically held for short periods of time.
–
Financial assets and liabilities with no contractual maturity (such as equity securities) are included in the ‘Due over 5 years’ time bucket.
Undated or perpetual instruments are classified based on the contractual notice period, which the counterparty of the instrument is entitled
to give. Where there is no contractual notice period, undated or perpetual contracts are included in the ‘Due over 5 years’ time bucket.
–
Non-financial assets and liabilities with no contractual maturity are included in the ‘Due over 5 years’ time bucket.
–
Financial instruments included within assets and liabilities of disposal groups held for sale are classified on the basis of the contractual
maturity of the underlying instruments and not on the basis of the disposal transaction.
–
Liabilities under insurance contracts included in ‘non-financial liabilities’ are irrespective of contractual maturity included in the ‘Due over 5
years’ time bucket in the maturity table provided below. An analysis of the present value of expected future cash flows of insurance contract
liabilities and contractual service margin is provided on page 373. Liabilities under investment contracts are classified in accordance with
their contractual maturity. Undated investment contracts are included in the ‘Due over 5 years’ time bucket, although such contracts are
subject to surrender and transfer options by the policyholders.
–
Loan and other credit-related commitments are classified on the basis of the earliest date they can be drawn down.
HSBC Holdings plc Annual Report and Accounts 2024
417
Financial statements
HSBC
Maturity analysis of assets, liabilities and off-balance sheet commitments
Due not
more
than
1 month
Due over
1 month
but not
more
than
3 months
Due over
3 months
but not
more
than
6 months
Due over
6 months
but not
more
than
9 months
Due over
9 months
but not
more
than
1 year
Due over
1 year
but not
more
than
2 years
Due over
2 years
but not
more
than
5 years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Cash and balances at central banks
267,674
—
—
—
—
—
—
—
267,674
Hong Kong Government certificates of
indebtedness
42,293
—
—
—
—
—
—
—
42,293
Trading assets
311,277
1,374
679
337
774
401
—
—
314,842
Financial assets designated and otherwise
mandatorily measured at fair value through profit
or loss
6,329
1,497
1,218
810
1,570
4,010
11,503
88,832
115,769
Derivatives
264,689
401
709
377
164
364
524
1,409
268,637
Loans and advances to banks
69,778
16,300
3,871
4,264
2,922
2,276
2,236
392
102,039
Loans and advances to customers
135,250
69,955
53,557
36,945
38,985
89,061
176,645
330,260
930,658
– personal
45,221
10,236
7,634
6,705
6,197
19,683
53,434
295,588
444,698
– corporate and commercial
78,170
52,618
38,440
22,858
25,292
54,832
102,637
29,102
403,949
– financial
11,859
7,101
7,483
7,382
7,496
14,546
20,574
5,570
82,011
Reverse repurchase agreements – non-trading
179,590
36,552
15,054
3,715
6,659
7,400
3,579
—
252,549
Financial investments
35,780
74,850
50,650
15,907
20,465
54,125
143,870
97,519
493,166
Assets held for sale1
2,711
170
215
401
711
513
2,465
19,170
26,356
Accrued income and other financial assets
94,803
6,831
4,127
648
579
498
346
1,504
109,336
Financial assets at 31 Dec 2024
1,410,174
207,930
130,080
63,404
72,829
158,648
341,168
539,086 2,923,319
Non-financial assets
—
—
—
—
—
—
—
93,729
93,729
Total assets at 31 Dec 2024
1,410,174
207,930
130,080
63,404
72,829
158,648
341,168
632,815 3,017,048
Off-balance sheet commitments received
Loan and other credit-related commitments
41,875
—
—
—
—
—
—
—
41,875
Financial liabilities
Hong Kong currency notes in circulation
42,293
—
—
—
—
—
—
—
42,293
Deposits by banks
54,714
1,595
2,227
653
3,924
507
9,919
458
73,997
Customer accounts
1,382,204
168,423
58,928
19,062
17,389
6,482
2,353
114 1,654,955
– personal
640,031
111,341
41,429
13,429
11,109
3,983
1,981
—
823,303
– corporate and commercial
564,693
45,047
14,708
3,991
4,748
1,968
332
106
635,593
– financial
177,480
12,035
2,791
1,642
1,532
531
40
8
196,059
Repurchase agreements – non-trading
168,075
10,340
1,176
450
473
171
—
195
180,880
Trading liabilities
58,069
4,933
2,873
7
100
—
—
—
65,982
Financial liabilities designated at
fair value
19,037
8,732
5,890
4,765
5,600
17,013
43,274
34,416
138,727
– debt securities in issue: covered bonds
—
—
—
—
—
—
—
—
—
– debt securities in issue: unsecured
8,431
4,148
3,557
2,885
4,362
14,660
38,259
22,866
99,168
– subordinated liabilities and preferred
securities
—
—
—
1,011
—
886
1,871
5,548
9,316
– other
10,606
4,584
2,333
869
1,238
1,467
3,144
6,002
30,243
Derivatives
262,928
2
6
3
1
43
192
1,273
264,448
Debt securities in issue
5,761
10,915
10,330
7,332
7,239
14,724
22,311
27,173
105,785
– covered bonds
—
—
—
—
—
—
1,253
—
1,253
– otherwise secured
511
47
67
64
61
664
520
2,236
4,170
– unsecured
5,250
10,868
10,263
7,268
7,178
14,060
20,538
24,937
100,362
Liabilities of disposal groups held for sale2
5,356
223
42
2
107
—
—
1,448
7,178
Accruals and other financial liabilities
99,424
11,827
5,415
1,013
1,241
902
1,489
738
122,049
Subordinated liabilities
—
—
1,719
16
—
—
861
23,362
25,958
Total financial liabilities at 31 Dec 2024
2,097,861
216,990
88,606
33,303
36,074
39,842
80,399
89,177 2,682,252
Non-financial liabilities
—
—
—
—
—
—
—
142,523
142,523
Total liabilities at 31 Dec 2024
2,097,861
216,990
88,606
33,303
36,074
39,842
80,399
231,700 2,824,775
Off-balance sheet commitments given
Loan and other credit-related commitments
861,181
74
12
85
49
6
57
114
861,578
– personal
253,522
—
—
—
—
—
—
—
253,522
– corporate and commercial
460,762
74
12
85
49
6
57
114
461,159
– financial
146,897
—
—
—
—
—
—
—
146,897
Notes on the financial statements
418
HSBC Holdings plc Annual Report and Accounts 2024
Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)
Due not
more
than
1 month
Due over
1 month
but not
more
than
3 months
Due over
3 months
but not
more
than
6 months
Due over
6 months
but not
more than
9 months
Due over
9 months
but not
more than
1 year
Due over
1 year
but not
more than
2 years
Due over
2 years
but not
more than
5 years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Cash and balances at central banks
285,868
—
—
—
—
—
—
—
285,868
Hong Kong Government certificates of
indebtedness
42,024
—
—
—
—
—
—
—
42,024
Trading assets
284,865
2,010
637
363
555
165
564
—
289,159
Financial assets designated and otherwise
mandatorily measured at fair value through profit
or loss
5,530
697
821
753
581
4,839
11,917
85,505
110,643
Derivatives
227,343
138
134
71
35
383
570
1,040
229,714
Loans and advances to banks
76,524
18,662
6,487
2,689
3,281
2,756
2,328
175
112,902
Loans and advances to customers
142,803
66,425
52,218
40,135
36,323
94,206
175,381
331,044
938,535
– personal
44,105
9,558
6,960
6,422
6,127
19,606
54,365
297,512
444,655
– corporate and commercial
83,281
50,268
38,250
24,685
24,566
61,612
106,598
30,592
419,852
– financial
15,417
6,599
7,008
9,028
5,630
12,988
14,418
2,940
74,028
Reverse repurchase agreements – non-trading
164,826
43,893
23,840
6,708
5,126
6,113
1,711
—
252,217
Financial investments
48,969
69,816
44,493
16,348
18,603
46,124
106,117
92,293
442,763
Assets held for sale1
39,882
2,929
7,041
4,176
3,261
17,085
33,015
7,943
115,332
Accrued income and other financial assets
114,480
6,574
4,404
550
698
220
764
1,513
129,203
Financial assets at 31 Dec 2023
1,433,114
211,144
140,075
71,793
68,463
171,891
332,367
519,513 2,948,360
Non-financial assets
—
—
—
—
—
—
—
90,317
90,317
Total assets at 31 Dec 2023
1,433,114
211,144
140,075
71,793
68,463
171,891
332,367
609,830 3,038,677
Off-balance sheet commitments received
Loan and other credit-related commitments
39,836
—
—
—
—
—
—
—
39,836
Financial liabilities
Hong Kong currency notes in circulation
42,024
—
—
—
—
—
—
—
42,024
Deposits by banks
52,747
2,758
2,324
381
94
1,458
13,064
337
73,163
Customer accounts
1,343,858
138,117
78,611
20,832
17,724
7,785
4,616
104 1,611,647
– personal
621,112
84,909
61,286
14,794
12,465
5,507
2,742
2
802,817
– corporate and commercial
545,207
43,562
14,525
4,605
3,393
2,165
1,527
92
615,076
– financial
177,539
9,646
2,800
1,433
1,866
113
347
10
193,754
Repurchase agreements – non-trading
158,882
10,311
1,759
300
847
1
—
—
172,100
Trading liabilities
66,548
6,302
300
—
—
—
—
—
73,150
Financial liabilities designated at fair value
22,080
8,366
7,823
7,197
6,239
16,679
39,497
33,545
141,426
– debt securities in issue: covered bonds
—
—
—
—
—
—
—
—
—
– debt securities in issue: unsecured
10,383
2,760
5,748
6,225
5,390
14,090
34,757
23,898
103,251
– subordinated liabilities and preferred
securities
—
1,995
—
—
—
1,471
3,429
4,581
11,476
– other
11,697
3,611
2,075
972
849
1,118
1,311
5,066
26,699
Derivatives
233,134
113
25
9
47
73
1,223
148
234,772
Debt securities in issue
6,891
6,664
10,816
6,896
6,427
6,317
27,452
22,454
93,917
– covered bonds
—
—
—
—
—
—
1,273
—
1,273
– otherwise secured
447
44
62
58
55
188
861
1,679
3,394
– unsecured
6,444
6,620
10,754
6,838
6,372
6,129
25,318
20,775
89,250
Liabilities of disposal groups held for sale2
69,868
5,231
5,479
6,728
6,541
4,730
7,918
1,511
108,006
Accruals and other financial liabilities
111,559
11,827
6,007
1,205
1,414
1,053
1,491
2,137
136,693
Subordinated liabilities
—
13
—
—
—
1,790
897
22,254
24,954
Total financial liabilities at 31 Dec 2023
2,107,591
189,702
113,144
43,548
39,333
39,886
96,158
82,490 2,711,852
Non-financial liabilities
—
—
—
—
—
—
—
134,215
134,215
Total liabilities at 31 Dec 2023
2,107,591
189,702
113,144
43,548
39,333
39,886
96,158
216,705 2,846,067
Off-balance sheet commitments given
Loan and other credit-related commitments
895,140
95
126
72
171
439
807
300
897,150
– personal
256,272
21
30
46
107
279
745
192
257,692
– corporate and commercial
472,507
74
26
26
64
160
62
108
473,027
– financial
166,361
—
70
—
—
—
—
—
166,431
1 Unallocated impairment losses in relation to disposal groups of $0.03bn (2023: $2.0bn) and non-financial assets of $0.9bn (2023: $0.9bn) that are presented
within assets held for sale on the balance sheet have been included within non-financial assets in the table above.
2 A total of $21.8bn (2023: $0.4bn) of non-financial liabilities that are presented within liabilities of disposal groups held for sale on the balance sheet have been
included within non-financial liabilities in the table above.
HSBC Holdings plc Annual Report and Accounts 2024
419
Financial statements
HSBC Holdings
Maturity analysis of assets, liabilities and off-balance sheet commitments
Due not
more
than
1 month
Due over
1 month
but not
more than
3 months
Due over
3 months
but not
more than
6 months
Due over
6 months
but not
more than
9 months
Due over
9 months
but not
more than
1 year
Due over
1 year
but not
more than
2 years
Due over
2 years
but not
more than
5 years
Due
over
5 years
Total
$m
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Cash at bank and in hand:
– balances with HSBC undertakings
2,548
—
—
—
—
—
—
— 2,548
Financial assets with HSBC undertakings
designated and otherwise mandatorily
measured at fair value
—
—
—
—
—
5,835
31,547 23,904 61,286
Derivatives
2,339
—
24
—
—
243
162
286 3,054
Loans and advances to HSBC undertakings
8,500
—
120
—
13
1,640
6,739 20,665 37,677
Trading assets
709
—
—
—
—
—
—
—
709
Financial investments
6,141
4,187
—
—
—
—
—
— 10,328
Accrued income and other financial assets
2,719
856
292
203
11
—
—
— 4,081
Total financial assets at 31 Dec 2024
22,956
5,043
436
203
24
7,718
38,448 44,855 119,683
Non-financial assets
—
—
—
—
—
—
— 154,574 154,574
Total assets at 31 Dec 2024
22,956
5,043
436
203
24
7,718
38,448 199,429 274,257
Financial liabilities
Amounts owed to HSBC undertakings
—
231
—
—
—
—
—
—
231
Financial liabilities designated at fair value
—
—
—
1,012
—
3,641
16,907 20,022 41,582
– debt securities in issue
—
—
—
—
—
2,755
15,036 15,476 33,267
– subordinated liabilities and preferred
securities
—
—
—
1,012
—
886
1,871
4,546 8,315
Derivatives
1,502
89
144
44
45
209
794
2,513 5,340
Debt securities in issue
—
—
—
—
—
14,897
24,395 25,028 64,320
Accruals and other financial liabilities
351
1,713
831
129
31
—
—
20 3,075
Subordinated liabilities
—
—
1,541
—
—
—
836 21,171 23,548
Total financial liabilities 31 Dec 2024
1,853
2,033
2,516
1,185
76
18,747
42,932 68,754 138,096
Non-financial liabilities
—
—
—
—
—
—
—
22
22
Total liabilities at 31 Dec 2024
1,853
2,033
2,516
1,185
76
18,747
42,932 68,776 138,118
Financial assets
Cash at bank and in hand:
– balances with HSBC undertakings
7,029
—
—
—
—
—
—
—
7,029
Financial assets with HSBC undertakings
designated and otherwise mandatorily
measured at fair value
—
—
—
—
—
3,815
26,284
29,780
59,879
Derivatives
2,217
—
—
—
—
18
675
434
3,344
Loans and advances to HSBC undertakings
—
—
120
—
—
1,016
6,783
19,435
27,354
Financial investments
10,365
6,017
898
750
757
771
—
—
19,558
Accrued income and other financial assets
3,511
860
254
229
5
—
—
—
4,859
Total financial assets at 31 Dec 2023
23,122
6,877
1,272
979
762
5,620
33,742
49,649
122,023
Non-financial assets
—
—
—
—
—
—
—
163,146
163,146
Total assets at 31 Dec 2023
23,122
6,877
1,272
979
762
5,620
33,742
212,795
285,169
Financial liabilities
Amounts owed to HSBC undertakings
—
168
—
—
—
—
—
—
168
Financial liabilities designated at fair value
—
—
—
—
—
5,287
19,604
18,747
43,638
– debt securities in issue
—
—
—
—
—
3,816
16,175
15,198
35,189
– subordinated liabilities and preferred
securities
—
—
—
—
—
1,471
3,429
3,549
8,449
Derivatives
2,452
209
7
59
75
558
1,318
1,412
6,090
Debt securities in issue
—
—
816
2,158
—
4,920
33,735
23,610
65,239
Accruals and other financial liabilities
1,437
1,599
1,049
127
34
—
—
23
4,269
Subordinated liabilities
—
1,987
—
—
—
1,600
880
19,972
24,439
Total financial liabilities at 31 Dec 2023
3,889
3,963
1,872
2,344
109
12,365
55,537
63,764
143,843
Non-financial liabilities
—
—
—
—
—
—
—
20
20
Total liabilities at 31 Dec 2023
3,889
3,963
1,872
2,344
109
12,365
55,537
63,784
143,863
Notes on the financial statements
420
HSBC Holdings plc Annual Report and Accounts 2024
Contractual maturity of financial liabilities
The following table shows, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for trading
liabilities and derivatives not treated as hedging derivatives). For this reason, balances in the following table do not agree directly with those in
our consolidated balance sheet. Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their
contractual maturities. Trading liabilities and derivatives not treated as hedging derivatives are included in the ‘Due not more than 1 month’ time
bucket and not by contractual maturity.
In addition, loan and other credit-related commitments and financial guarantees are generally not recognised on our balance sheet. The
undiscounted cash flows potentially payable under loan and other credit-related commitments and financial guarantees are classified on the
basis of the earliest date they can be called.
Cash flows payable by HSBC under financial liabilities by remaining contractual maturities
Due not
more
than 1
month
Due over
1 month but
not more
than
3 months
Due over
3 months but
not more than
1 year
Due over
1 year but
not
more than
5 years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
Deposits by banks
54,819
1,759
7,381
11,242
511
75,712
Customer accounts
1,382,666
171,917
97,667
10,089
113
1,662,452
Repurchase agreements – non-trading
168,633
10,425
2,195
188
196
181,637
Trading liabilities
65,982
—
—
—
—
65,982
Financial liabilities designated at fair value
19,139
9,042
18,462
70,587
45,767
162,997
Derivatives
262,014
531
1,008
2,034
2,765
268,352
Debt securities in issue
5,780
11,309
27,103
45,725
32,129
122,046
Subordinated liabilities
39
120
2,959
7,373
35,512
46,003
Other financial liabilities1
138,319
9,754
5,421
2,206
608
156,308
2,097,391
214,857
162,196
149,444
117,601
2,741,489
Loan and other credit-related commitments
861,193
78
146
63
98
861,578
Financial guarantees2
16,998
—
—
—
—
16,998
At 31 Dec 2024
2,975,582
214,935
162,342
149,507
117,699
3,620,065
Proportion of cash flows payable in period
83%
6%
4%
4%
3%
Deposits by banks
52,938
2,898
3,304
17,123
362
76,625
Customer accounts
1,345,006
141,348
119,660
13,423
109
1,619,546
Repurchase agreements – non-trading
159,264
10,457
2,996
1
—
172,718
Trading liabilities
73,150
—
—
—
—
73,150
Financial liabilities designated at fair value
22,262
9,156
26,033
63,960
44,886
166,297
Derivatives
232,598
609
1,295
2,445
2,910
239,857
Debt securities in issue
6,837
7,407
24,117
43,513
27,119
108,993
Subordinated liabilities
39
135
1,465
9,020
34,920
45,579
Other financial liabilities1
149,904
9,752
5,943
2,555
2,109
170,263
2,041,998
181,762
184,813
152,040
112,415
2,673,028
Loan and other credit-related commitments
895,156
95
371
1,437
91
897,150
Financial guarantees2
16,966
4
39
—
—
17,009
At 31 Dec 2023
2,954,120
181,861
185,223
153,477
112,506
3,587,187
Proportion of cash flows payable in period
83%
5%
5%
4%
3%
1 Excludes financial liabilities of disposal groups.
2 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
HSBC Holdings
HSBC Holdings’ primary sources of liquidity are dividends received from subsidiaries, interest on and repayment of intra-Group loans and
securities, and interest earned on its own liquid funds. HSBC Holdings also raises funds in the debt capital markets to meet the Group’s
minimum requirement for own funds and eligible liabilities and maintain an appropriate liquidity buffer. HSBC Holdings uses this liquidity to
meet its obligations, including interest and principal repayments on external debt liabilities, operating expenses and collateral on derivative
transactions.
HSBC Holdings is also subject to contingent liquidity risk by virtue of credit-related commitments and guarantees and similar contracts issued
relating to its subsidiaries. Such commitments and guarantees are only issued after due consideration of HSBC Holdings’ ability to finance the
commitments and guarantees and the likelihood of the need arising.
HSBC Holdings actively manages the cash flows from its subsidiaries to optimise the amount of cash held at the holding company level. During
2024, consistent with the Group’s capital plan, the Group’s material subsidiaries did not experience any significant restrictions on paying
dividends or repaying loans and advances. Also, there are no foreseen restrictions envisaged with regard to planned dividends or payments
from material subsidiaries. However, the ability of subsidiaries to pay dividends or advance monies to HSBC Holdings depends on, among other
things, their respective local regulatory capital and banking requirements, exchange controls, statutory reserves, and financial and operating
performance.
HSBC Holdings currently has sufficient liquidity to meet its present and forecast requirements.
HSBC Holdings plc Annual Report and Accounts 2024
421
Financial statements
The following table shows, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for trading
liabilities and derivatives not treated as hedging derivatives). For this reason, balances in the following table do not agree directly with those in
HSBC Holdings balance sheet. Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their
contractual maturities. Trading liabilities and derivatives not treated as hedging derivatives are included in the ‘Due not more than 1 month’ time
bucket and not by contractual maturity.
In addition, loan and other credit-related commitments and financial guarantees are generally not recognised on our balance sheet. The
undiscounted cash flows potentially payable under loan and other credit-related commitments and financial guarantees are classified on the
basis of the earliest date they can be called.
Cash flows payable by HSBC Holdings under financial liabilities by remaining contractual maturities
Due not
more
than 1
month
Due over 1
month but
not
more than 3
months
Due over 3
months but
not more
than
1 year
Due over 1
year but not
more than 5
years
Due over
5 years
Total
$m
$m
$m
$m
$m
$m
Amounts owed to HSBC undertakings
—
231
—
—
—
231
Financial liabilities designated at fair value
2
133
2,254
26,335
26,788
55,512
Derivatives
669
202
1,344
2,591
1,658
6,464
Debt securities in issue
—
254
1,697
47,771
29,706
79,428
Subordinated liabilities
—
105
2,627
6,794
31,773
41,299
Other financial liabilities
351
1,735
991
—
20
3,097
At 31 Dec 2024
1,022
2,660
8,913
83,491
89,945
186,031
Amounts owed to HSBC undertakings
—
168
—
—
—
168
Financial liabilities designated at fair value
23
405
1,437
31,050
25,610
58,525
Derivatives
1,244
556
1,651
2,227
726
6,404
Debt securities in issue
—
680
4,787
46,909
27,745
80,121
Subordinated liabilities
46
2,163
1,360
8,239
30,862
42,670
Other financial liabilities
1,436
1,620
1,210
—
23
4,289
At 31 Dec 2023
2,749
5,592
10,445
88,425
84,966
192,177
31 Offsetting of financial assets and financial liabilities
In the offsetting of financial assets and financial liabilities, the net amount is reported in the balance sheet when the offset criteria are met. This
is achieved when there is a legally enforceable right to offset the recognised amounts and there is either an intention to settle on a net basis, or
realise the asset and settle the liability simultaneously.
In the following table, the ‘Amounts not set off in the balance sheet’ include transactions where:
–
the counterparty has an offsetting exposure with HSBC and a master netting or similar arrangement is in place with a right to set off only in
the event of default, insolvency or bankruptcy, or the offset criteria are otherwise not satisfied; and
–
cash and non-cash collateral (debt securities and equities) has been received/pledged for derivatives and reverse repurchase/repurchase,
stock borrowing/lending and similar agreements to cover net exposure in the event of a default or other predetermined events.
The effect of over-collateralisation is excluded.
‘Amounts not subject to enforceable netting agreements’ include contracts executed in jurisdictions where the rights of offset may not be
upheld under the local bankruptcy laws, and transactions where a legal opinion evidencing enforceability of the right of offset may not have
been sought, or may have been unable to obtain.
For risk management purposes, the net amounts of loans and advances to customers are subject to limits, which are monitored and the
relevant customer agreements are subject to review and updated, as necessary, to ensure the legal right to set off remains appropriate.
Notes on the financial statements
422
HSBC Holdings plc Annual Report and Accounts 2024
Offsetting of financial assets and financial liabilities
Amounts subject to enforceable netting arrangements
Amounts not
subject to
enforceable
netting
arrangements1
Total
Amounts not set off in the
balance sheet
Gross
amounts
Amounts
offset
Net
amounts
in the
balance
sheet
Financial
instruments,
including
non-cash
collateral
Cash
collateral
Net
amount
$m
$m
$m
$m
$m
$m
$m
$m
Financial assets
Derivatives (Note 15)2
372,699
(112,746)
259,953
(230,133)
(22,730)
7,090
8,684
268,637
Reverse repos, stock borrowing and
similar agreements classified as:3
– trading assets
25,077
(637)
24,440
(24,428)
(10)
2
757
25,197
– non-trading assets
386,124
(154,133)
231,991
(230,584)
(332)
1,075
20,602
252,593
Loans and advances to customers4
34,582
(16,540)
18,042
(15,313)
(75)
2,654
4
18,046
At 31 Dec 2024
818,482
(284,056)
534,426
(500,458)
(23,147)
10,821
30,047
564,473
Derivatives (Note 15)2
341,473
(116,486)
224,987
(198,743)
(22,926)
3,318
4,727
229,714
Reverse repos, stock borrowing and
similar agreements classified as:3
– trading assets
29,152
(602)
28,550
(28,513)
(34)
3
2,633
31,183
– non-trading assets
365,922
(135,210)
230,712
(230,240)
(80)
392
21,653
252,365
Loans and advances to customers4
34,173
(15,792)
18,381
(15,613)
(93)
2,675
2
18,383
At 31 Dec 2023
770,720
(268,090)
502,630
(473,109)
(23,133)
6,388
29,015
531,645
Financial liabilities
Derivatives (Note 15)2
369,287
(112,746)
256,541
(221,232)
(30,334)
4,975
7,907
264,448
Repos, stock lending and similar
agreements classified as:3
– trading liabilities
18,482
(157)
18,325
(18,326)
—
(1)
6
18,331
– non-trading liabilities
287,648
(154,613)
133,035
(131,719)
(164)
1,152
47,845
180,880
Customer accounts5
41,409
(16,540)
24,869
(15,313)
(75)
9,481
17
24,886
At 31 Dec 2024
716,826
(284,056)
432,770
(386,590)
(30,573)
15,607
55,775
488,545
Derivatives (Note 15)2
344,799
(116,486)
228,313
(198,640)
(23,748)
5,925
6,459
234,772
Repos, stock lending and similar
agreements classified as:3
– trading liabilities
15,686
(172)
15,514
(15,453)
—
61
6
15,520
– non-trading liabilities
270,493
(135,640)
134,853
(134,095)
(669)
89
37,247
172,100
Customer accounts5
42,522
(15,792)
26,730
(15,613)
(93)
11,024
13
26,743
At 31 Dec 2023
673,500
(268,090)
405,410
(363,801)
(24,510)
17,099
43,725
449,135
1 These exposures continue to be secured by financial collateral, but we may not have sought or been able to obtain a legal opinion evidencing enforceability of
the right of offset.
2 At 31 December 2024, the amount of cash margin received that had been offset against the gross derivatives assets was $5,303m (2023: $5,105m). The
amount of cash margin paid that had been offset against the gross derivatives liabilities was $5,614m (2023: $7,142m).
3 For the amount of repos, reverse repos, stock lending, stock borrowing and similar agreements recognised on the balance sheet within ‘Trading assets’ of
$25,197m (2023: $31,183m) and ‘Trading liabilities’ of $18,331m (2023: $15,520m), see the ‘Funding sources and uses’ table on page 209.
4 At 31 December 2024, the total amount of ‘Loans and advances to customers’ was $930,658m (2023: $938,535m), of which $18,042m (2023: $18,381m) was
subject to offsetting.
5 At 31 December 2024, the total amount of ‘Customer accounts’ was $1,654,955m (2023: $1,611,647m), of which $24,869m (2023: $26,730m) was subject to
offsetting.
32 Called up share capital and other equity instruments
Called up share capital and share premium
HSBC Holdings ordinary shares of $0.50 each, issued and fully paid
2024
2023
Number
$m
Number
$m
At 1 Jan
19,262,728,193
9,631
20,293,607,410
10,147
Shares issued under HSBC employee share plans
10,283,430
5
10,778,479
5
Shares issued in lieu of dividends
—
—
—
—
Less: shares repurchased and cancelled
1,326,061,041
663
716,384,289
358
Less: treasury shares cancelled
—
—
325,273,407
163
At 31 Dec1
17,946,950,582
8,973
19,262,728,193
9,631
1 All HSBC Holdings ordinary shares in issue confer identical rights, including in respect of capital, dividends and voting.
HSBC Holdings plc Annual Report and Accounts 2024
423
Financial statements
HSBC Holdings share premium
2024
2023
$m
$m
At 31 Dec
14,810
14,738
Total called up share capital and share premium
2024
2023
$m
$m
At 31 Dec
23,783
24,369
HSBC Holdings non-cumulative preference share of £0.01
The one non-cumulative sterling preference share of £0.01 (‘sterling preference share’) has been in issue since 29 December 2010 and is held
by a subsidiary of HSBC Holdings. Dividends are paid quarterly at the sole and absolute discretion of the Board. The sterling preference share
carries no rights of conversion into ordinary shares of HSBC Holdings and no right to attend or vote at shareholder meetings of HSBC Holdings.
These securities can be redeemed by HSBC Holdings at any time, subject to prior approval by the PRA.
Other equity instruments
HSBC Holdings has included two types of additional tier 1 capital securities in its tier 1 capital, including the contingent convertible securities
described below. These are accounted for as equity because HSBC does not have an obligation to transfer cash or a variable number of its own
ordinary shares to holders under any circumstances outside its control. See Note 29 for additional tier 1 securities accounted for as liabilities.
Additional tier 1 capital – contingent convertible securities
HSBC Holdings continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1
capital securities on an end point basis. These securities are marketed principally and subsequently allotted to corporate investors and fund
managers. The net proceeds of the issuances are typically used for HSBC Holdings’ general corporate purposes and to further strengthen its
capital base to meet requirements under CRR II. These securities bear a fixed rate of interest until their initial call dates. After the initial call
dates, if they are not redeemed, the securities will bear interest at rates fixed periodically in advance for five-year periods based on credit
spreads, fixed at issuance, above prevailing market rates. Interest on the contingent convertible securities will be due and payable only at the
sole discretion of HSBC Holdings, and HSBC Holdings has sole and absolute discretion at all times to cancel for any reason (in whole or part)
any interest payment that would otherwise be payable on any payment date. Distributions will not be paid if they are prohibited under UK
banking regulations or if the Group has insufficient reserves or fails to meet the solvency conditions defined in the securities’ terms.
The contingent convertible securities are undated and are repayable at the option of HSBC Holdings in whole typically at the initial call date or
on any fifth anniversary after this date. In addition, the securities are repayable at the option of HSBC in whole for certain regulatory or tax
reasons. Any repayments require the prior consent of the PRA. These securities rank pari passu with HSBC Holdings’ sterling preference
shares and therefore rank ahead of ordinary shares. The contingent convertible securities will be converted into fully paid ordinary shares of
HSBC Holdings at a predetermined price, should HSBC’s consolidated non-transitional CET1 ratio fall below 7.0%. Therefore, in accordance
with the terms of the securities, if the non-transitional CET1 ratio breaches the 7.0% trigger, the securities will convert into ordinary shares at
fixed contractual conversion prices in the issuance currencies of the relevant securities, subject to anti-dilution adjustments.
HSBC’s additional tier 1 capital – contingent convertible securities in issue which are accounted for in equity
Original nominal
amount (LCY)
First call
date
2024
2023
$m
$m
$2,250m
6.375% Perpetual Subordinated Contingent Convertible Securities1
Sept 2024
—
2,250
$2,450m
6.375% Perpetual Subordinated Contingent Convertible Securities
Mar 2025
2,450
2,450
$3,000m
6.000% Perpetual Subordinated Contingent Convertible Securities
May 2027
3,000
3,000
$1,800m
6.500% Perpetual Subordinated Contingent Convertible Securities
Mar 2028
1,800
1,800
$1,500m
4.600% Perpetual Subordinated Contingent Convertible Securities2
Dec 2030
1,500
1,500
$1,000m
4.000% Perpetual Subordinated Contingent Convertible Securities3
Mar 2026
1,000
1,000
$1,000m
4.700% Perpetual Subordinated Contingent Convertible Securities4
Mar 2031
1,000
1,000
$2,000m
8.000% Perpetual Subordinated Contingent Convertible Securities5
Mar 2028
1,980
1,980
€1,250m
4.750% Perpetual Subordinated Contingent Convertible Securities
Jul 2029
1,422
1,422
£1,000m
5.875% Perpetual Subordinated Contingent Convertible Securities
Sept 2026
1,301
1,301
$1,350m
6.875% Perpetual Subordinated Contingent Convertible Securities6
Sept 2029
1,337
—
$1,150m
6.950% Perpetual Subordinated Contingent Convertible Securities7
Mar 2034
1,138
—
SGD1,500m
5.250% Perpetual Subordinated Contingent Convertible Securities8
Jun 2029
1,096
—
At 31 Dec
19,024
17,703
1 This security was called by HSBC Holdings on 23 July 2024 and redeemed and cancelled on 17 September 2024.
2 This security was issued by HSBC Holdings on 17 December 2020. The first call period commences six months prior to reset date of 17 June 2031.
3 This security was issued by HSBC Holdings on 9 March 2021. The first call period commences six months prior to reset date of 9 September 2026.
4 This security was issued by HSBC Holdings on 9 March 2021. The first call period commences six months prior to reset date of 9 September 2031.
5 This security was issued by HSBC Holdings on 7 March 2023. The first call period commences six months prior to reset date of 7 September 2028. This security
has been accounted for net of directly attributable transaction costs.
6 This security was issued by HSBC Holdings on 11 September 2024. The first call period commences six months prior to reset date of 11 March 2030. This
security has been accounted for net of directly attributable transaction costs.
7 This security was issued by HSBC Holdings on 11 September 2024. The first call period commences six months prior to reset date of 11 September 2034. This
security has been accounted for net of directly attributable transaction costs.
8 This security was issued by HSBC Holdings on 14 June 2024. The first call period commences six months prior to reset date of 14 December 2039.
Notes on the financial statements
424
HSBC Holdings plc Annual Report and Accounts 2024
Shares under option
For details of the options outstanding to subscribe for HSBC Holdings ordinary shares under the HSBC Holdings Savings-Related Share Option
Plan (UK), see Note 5.
Aggregate options outstanding under these plans
31 Dec 2024
31 Dec 2023
Number of
HSBC Holdings
ordinary shares
Usual period of
exercise
Exercise price
Number of
HSBC Holdings
ordinary shares
Usual period of
exercise
Exercise price
75,335,399
2023 to 2030
£2.6270–£5.4490
83,993,678
2022 to 2029
£2.6270–5.4490
Maximum obligation to deliver HSBC Holdings ordinary shares
At 31 December 2024, the maximum obligation to deliver HSBC Holdings ordinary shares under all of the above option arrangements and the
HSBC International Employee Share Purchase Plan, together with long-term incentive awards and deferred share awards granted under the
HSBC Share Plan 2011, was 209,683,768 (2023: 208,539,316). The total number of shares at 31 December 2024 held by employee benefit
trusts that may be used to satisfy such obligations to deliver HSBC Holdings ordinary shares was 9,305,925 (2023: 20,902,218).
33 Contingent liabilities, contractual commitments and guarantees
HSBC
HSBC Holdings1
2024
2023
2024
2023
$m
$m
$m
$m
Guarantees and other contingent liabilities:
– financial guarantees
16,998
17,009
—
—
– performance and other guarantees
92,723
94,277
7,327
7,723
– other contingent liabilities
298
636
—
—
At 31 Dec
110,019
111,922
7,327
7,723
Commitments:2
– documentary credits and short-term trade-related transactions
7,096
7,818
—
—
– forward asset purchases and forward deposits placed
61,017
78,535
—
—
– standby facilities, credit lines and other commitments to lend
793,465
810,797
—
—
At 31 Dec
861,578
897,150
—
—
1 Guarantees by HSBC Holdings are in favour of other Group entities. These include contracts that provide protection against credit risk on a specified exposure
but do not meet the definition of financial guarantees.
2 Includes $619,367m of commitments at 31 December 2024 (31 December 2023: $661,015m), to which the impairment requirements in IFRS 9 are applied
where HSBC has become party to an irrevocable commitment.
The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the Group, which represent
the maximum amounts at risk should the contracts be fully drawn upon and the clients default. As a significant portion of guarantees and
commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity
requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 28.
The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to HSBC’s
annual credit review process.
Contingent liabilities arising from legal proceedings, regulatory and other matters against Group companies are excluded from this note but are
disclosed in Notes 28 and 35.
Financial Services Compensation Scheme
The Financial Services Compensation Scheme (‘FSCS’) provides compensation, up to certain limits, to eligible customers of financial services
firms that are unable, or likely to be unable, to pay claims against them. The FSCS may impose a further levy on the Group to the extent the
industry levies imposed to date are not sufficient to cover the compensation due to customers in any future possible collapse. The ultimate
FSCS levy to the industry as a result of a collapse cannot be estimated reliably. It is dependent on various uncertain factors including the
potential recovery of assets by the FSCS, changes in the level of protected products (including deposits and investments) and the population of
FSCS members at the time.
Associates
HSBC’s share of associates’ contingent liabilities, contractual commitments and guarantees amounted to $74.5bn at 31 December 2024 (2023:
$69.9bn). No matters arose where HSBC was severally liable.
HSBC Holdings plc Annual Report and Accounts 2024
425
Financial statements
34 Finance lease receivables
HSBC leases a variety of assets to third parties under finance leases, including transport assets (such as aircraft), property and general plant
and machinery. At the end of lease terms, assets may be sold to third parties or leased for further terms. Rentals are calculated to recover the
cost of assets less their residual value, and earn finance income.
The table below excludes finance lease receivables reclassified on the balance sheet to ‘Assets held for sale’ in accordance with IFRS 5. Net
investment in finance leases of $1,595m was reclassified to ‘Assets held for sale’ in 2023 as a result of the sale of our banking business in
Canada. There was no net investment in finance leases classified as held-for-sale at 31 December 2024.
2024
2023
Total future
minimum
payments
Unearned
finance
income
Present
value
Total future
minimum
payments
Unearned
finance
income
Present
value
$m
$m
$m
$m
$m
$m
Lease receivables:
No later than one year
2,331
(295)
2,036
2,355
(308)
2,047
One to two years
1,787
(226)
1,561
1,954
(249)
1,705
Two to three years
1,290
(171)
1,119
1,380
(189)
1,191
Three to four years
839
(134)
705
930
(153)
777
Four to five years
766
(147)
619
593
(132)
461
Later than one year and no later than five years
4,682
(678)
4,004
4,857
(723)
4,134
Later than five years
3,518
(639)
2,879
4,116
(838)
3,278
At 31 Dec
10,531
(1,612)
8,919
11,328
(1,869)
9,459
35 Legal proceedings and regulatory matters
HSBC is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from
the matters described below, HSBC considers that none of these matters are material. The recognition of provisions is determined in
accordance with the accounting policies set out in Note 1. While the outcomes of legal proceedings and regulatory matters are inherently
uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these
matters as at 31 December 2024 (see Note 28). Where an individual provision is material, the fact that a provision has been made is stated and
quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of
wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory
matters as a class of contingent liabilities.
Bernard L. Madoff Investment Securities LLC
Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US
whose assets were invested with Bernard L. Madoff Investment Securities LLC (‘Madoff Securities’). Based on information provided by Madoff
Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff.
Based on information available to HSBC, the funds’ actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities
during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as
defendants in lawsuits arising out of Madoff Securities’ fraud.
Trustee litigation: The Madoff Securities trustee (the ‘Trustee’) has brought lawsuits in the US against various HSBC companies and others
seeking recovery of alleged transfers from Madoff Securities to the HSBC companies in the amount of $543m (plus interest), and these
lawsuits remain pending in the US Bankruptcy Court for the Southern District of New York.
The Trustee has filed a claim against various HSBC companies in the High Court of England and Wales seeking recovery of alleged transfers
from Madoff Securities to the HSBC companies. The claim has not yet been served and the amount claimed has not been specified.
Fairfield Funds litigation: Fairfield Sentry Limited, Fairfield Sigma Limited and Fairfield Lambda Limited (together, the ‘Fairfield Funds’) (in
liquidation) have brought lawsuits in the US against various HSBC companies and others seeking recovery of alleged transfers from the Fairfield
Funds to the HSBC companies (that acted as nominees for clients) in the amount of $382m (plus interest). Fairfield Funds’ claims against most
of the HSBC companies have been dismissed, but remain pending on appeal before the US Court of Appeals for the Second Circuit. Fairfield
Funds’ claims against HSBC Private Bank (Suisse) SA (‘PBRS’) and HSBC Securities Services Luxembourg (‘HSSL’) have not been dismissed
and are ongoing before the US Bankruptcy Court for the Southern District of New York. PBRS and HSSL have appealed the decision not to
dismiss them and these appeals are pending before the US Court of Appeals for the Second Circuit.
Herald Fund SPC (‘Herald’) litigation: HSSL and HSBC Bank plc are defending an action brought by Herald (in liquidation) before the
Luxembourg District Court seeking restitution of securities and cash in the amount of $2.5bn (plus interest), or damages in the amount of
$5.6bn (plus interest). In 2013, the Luxembourg District Court dismissed Herald’s securities restitution claim and stayed the cash restitution
and damages claims. In December 2024, the Luxembourg Court of Appeal reversed the Luxembourg District Court’s dismissal and determined
that Herald’s claims for restitution of securities and cash were founded in principle. HSSL has appealed this decision. Herald’s claim against
HSBC Bank plc is pending.
Alpha Prime Fund Limited (‘Alpha Prime’) litigation: Various HSBC companies are defending a number of actions brought by Alpha Prime in
the Luxembourg District Court seeking damages for alleged breach of contract and negligence in the amount of $1.16bn (plus interest). These
matters are currently pending before the Luxembourg District Court.
In November 2024, Alpha Prime served various HSBC companies with a lawsuit filed in the Bermuda Supreme Court seeking damages for
unspecified amounts for alleged breach of contract and negligence. This claim is currently stayed.
Notes on the financial statements
426
HSBC Holdings plc Annual Report and Accounts 2024
Senator Fund SPC (‘Senator’) litigation: HSSL and the Luxembourg branch of HSBC Bank plc are defending a number of actions brought by
Senator before the Luxembourg District Court seeking restitution of securities in the amount of $625m (plus interest), or damages in the
amount of $188m (plus interest). These matters are currently pending before the Luxembourg District Court.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
US Anti-Terrorism Act litigation
Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf
of plaintiffs who are, or are related to, alleged victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided
and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act, or provided banking services to
customers alleged to have connections to terrorism financing. Seven actions, which seek damages for unspecified amounts, remain pending
and HSBC’s motions to dismiss have been granted in three of these cases. These dismissals are subject to appeals and/or the plaintiffs re-
pleading their claims. The four other actions are at an early stage.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Interbank offered rates investigation and litigation
Euro interest rate derivatives: In December 2016, the European Commission (‘EC’) issued a decision finding that HSBC, among other banks,
engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on HSBC based
on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021, which has been paid. In January
2023, the European Court of Justice dismissed an appeal by HSBC and upheld the EC’s findings on HSBC’s liability. In November 2024, the
General Court of the European Union rejected a separate appeal by HSBC concerning the amount of the fine. This matter is now closed.
US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of individual and putative class
action lawsuits filed in federal and state courts in the US with respect to the setting of US dollar Libor. The complaints assert claims under
various US federal and state laws, including antitrust and racketeering laws and the Commodity Exchange Act (‘US CEA’). HSBC has concluded
class settlements with five groups of plaintiffs, and several class action lawsuits brought by other groups of plaintiffs have been voluntarily
dismissed. Two individual US dollar Libor-related actions seeking damages from HSBC for unspecified amounts remain pending.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of the pending matters, including the
timing or any possible impact on HSBC, which could be significant.
Foreign exchange-related investigations and litigation
In December 2016, Brazil’s Administrative Council of Economic Defense initiated an investigation into the onshore foreign exchange market
and identified a number of banks, including HSBC, as subjects of its investigation, which remains ongoing. Lawsuits alleging foreign exchange-
related misconduct remain pending against HSBC and other banks in courts in Brazil.
Since 2017, HSBC Bank plc, among other financial institutions, has been defending a complaint filed by the Competition Commission of South
Africa before the South African Competition Tribunal for alleged anti-competitive behaviour in the South African foreign exchange market. In
2020, a revised complaint was filed which also named HSBC Bank USA N.A. (‘HSBC Bank USA’) as a defendant. In January 2024, the South
African Competition Appeal Court dismissed HSBC Bank USA from the revised complaint but denied HSBC Bank plc’s application to dismiss.
Both the Competition Commission and HSBC Bank plc have appealed to the Constitutional Court of South Africa.
HSBC Bank plc and HSBC Holdings have reached a settlement with plaintiffs in Israel to resolve a class action filed in the local courts alleging
foreign exchange-related misconduct. The settlement remains subject to court approval.
In February 2024, HSBC Bank plc and HSBC Holdings were joined to an existing claim brought in the UK Competition Appeals Tribunal against
various other banks alleging historical anti-competitive behaviour in the foreign exchange market and seeking approximately £3bn in damages
from all the defendants. This matter is at an early stage.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Precious metals fix-related litigation
US litigation: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District
Court for the Southern District of New York alleging that, from January 2007 to December 2013, the defendants conspired to manipulate the
price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In May
2023, this action, which seeks damages for unspecified amounts, was dismissed but remains pending on appeal.
HSBC and other members of The London Platinum and Palladium Fixing Company Limited have been defending a class action in the US District
Court for the Southern District of New York alleging that, from January 2008 to November 2014, the defendants conspired to manipulate the
price of platinum group metals and related financial products for their collective benefit in violation of US antitrust laws and the US CEA. In
January 2025, the court approved a settlement reached with the plaintiffs to resolve this action. This matter is now closed.
Canada litigation: HSBC and other financial institutions are defending putative class actions filed in the Ontario and Quebec Superior Courts of
Justice alleging that the defendants conspired to manipulate the price of silver, gold and related derivatives in violation of the Canadian
Competition Act and common law. These actions each seek CA$1bn in damages plus CA$250m in punitive damages. Two of the actions are
proceeding and the others have been stayed.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of the pending matters, including the
timing or any possible impact on HSBC, which could be significant.
HSBC Holdings plc Annual Report and Accounts 2024
427
Financial statements
Tax-related investigations
Since 2023, the French National Financial Prosecutor has been investigating a number of banks, including HSBC Continental Europe and the
Paris branch of HSBC Bank plc, in connection with alleged tax fraud related to the dividend withholding tax treatment of certain trading
activities. HSBC Bank plc and the German branch of HSBC Continental Europe also continue to cooperate with investigations by the German
public prosecutor into numerous financial institutions and their employees, in connection with the dividend withholding tax treatment of certain
trading activities.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Gilts trading investigation and litigation
Since 2018, the UK Competition and Markets Authority has been investigating HSBC and four other banks for suspected anti-competitive
conduct in relation to the historical trading of gilts and related derivatives. This matter is nearing conclusion. The impact on HSBC is not
expected to be significant.
In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks, were named as defendants in a putative class action filed in
the US District Court for the Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market and seeking
damages for unspecified amounts. Certain of the defendants, including HSBC Bank plc and HSBC Securities (USA) Inc., have reached a
settlement with the plaintiffs to resolve this matter. The settlement remains subject to court approval. Based on the facts currently known, it is
not practicable at this time for HSBC to predict the resolution of this matter, including the timing or any possible impact on HSBC, which could
be significant.
Korean short selling indictment
In March 2024, the Korean Prosecutors’ Office issued a criminal indictment against The Hongkong and Shanghai Banking Corporation Limited
(‘HBAP’) and three current and former employees for breaching short selling rules under the Financial Investment Services and Capital Markets
Act in connection with trades carried out between August 2021 and December 2021. In February 2025, the Korean court acquitted HBAP of all
charges. The Korean Prosecutors’ Office has the right to appeal this decision. Proceedings against the individual defendants have been
suspended.
First Citizens litigation
In May 2023, First-Citizens Bank & Trust Company (‘First Citizens’) brought a lawsuit in the US District Court for the Northern District of
California against various HSBC companies and seven US-based HSBC employees who had previously worked for Silicon Valley Bank (‘SVB’).
The lawsuit seeks $1bn in damages and alleges, among other things, that the various HSBC companies conspired with the individual
defendants to solicit employees from First Citizens and that the individual defendants took confidential information belonging to SVB and/or
First Citizens. In July 2024, the court dismissed several of First Citizens’ claims and also dismissed certain defendants for lack of jurisdiction,
but allowed limited discovery into whether some of these defendants may be subject to jurisdiction. The remaining claims are proceeding
against certain defendants.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or
any possible impact on HSBC, which could be significant.
US mortgage securitisation litigation
Beginning in 2014, a number of lawsuits were filed in various state and federal courts in the US against HSBC Bank USA, as a trustee of more
than 280 mortgage securitisation trusts, seeking unspecified damages for losses in collateral value allegedly sustained by the trusts. Nearly all
of these lawsuits have either been settled or dismissed; one action remains pending in a New York state court.
HSBC Bank USA and certain of its affiliates continue to defend a mortgage loan repurchase action seeking unspecified damages and specific
performance brought by the trustee of a mortgage securitisation trust in New York state court.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or
any possible impact on HSBC, which could be significant.
Mexican government bond litigation
HSBC Mexico S.A. and other banks are named as defendants in a consolidated putative class action pending in the US District Court for the
Southern District of New York alleging anti-competitive conduct in the Mexican government bond market between 2010 and 2014 and seeking
unspecified damages. In January 2025, the court denied the defendants’ motion to dismiss the plaintiffs’ third amended complaint, and this
action is proceeding.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or
any possible impact on HSBC, which could be significant.
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are also subject to a number of other enquiries and examinations, requests for information,
investigations and reviews by various tax authorities, regulators, competition and law enforcement authorities, as well as legal proceedings
including litigation, arbitration and other contentious proceedings, in connection with various matters arising out of their businesses and
operations.
At the present time, HSBC does not expect the ultimate resolution of any of these matters to be material to the Group’s financial position;
however, given the uncertainties involved in legal proceedings and regulatory matters, there can be no assurance regarding the eventual
outcome of a particular matter or matters.
Notes on the financial statements
428
HSBC Holdings plc Annual Report and Accounts 2024
36 Related party transactions
Related parties of the Group and HSBC Holdings include subsidiaries, associates, joint ventures, post-employment benefit plans for HSBC
employees, Key Management Personnel (‘KMP’) as defined by IAS 24, close family members of KMP and entities that are controlled or jointly
controlled by KMP or their close family members. KMP are defined as those persons having authority and responsibility for planning, directing
and controlling the activities of HSBC Holdings. These individuals also constitute ‘senior management’ for the purposes of the Hong Kong
Listing Rules. In applying IAS 24, it was determined that for this financial reporting period KMP included Directors, former Directors and senior
management listed on pages 237 to 243 except for the roles of Group Chief Legal Officer, Group Head of Internal Audit, Group Chief Human
Resources Officer, Group Chief Sustainability Officer, Group Chief Communications and Brand Officer, and Group Chief People & Governance
Officer who do not meet the criteria for KMP as provided for in the standard.
Particulars of transactions with related parties are tabulated below. The disclosure of the year-end balance and the highest amounts outstanding during
the year is considered to be the most meaningful information to represent the amount of the transactions and outstanding balances during the year.
Key Management Personnel
Details of Directors’ remuneration and interests in shares are disclosed in the ‘Directors’ remuneration report’ on pages 279 to 317.
IAS 24 ‘Related Party Disclosures’ requires the following additional information for key management compensation.
Compensation of Key Management Personnel
2024
2023
2022
$m
$m
$m
Short-term employee benefits
53
51
52
Post-employment benefits
1
1
1
Other long-term employee benefits
12
10
8
Share-based payments
29
29
26
Year ended 31 Dec
95
91
87
Shareholdings, options and other securities of Key Management Personnel
2024
2023
(000s)
(000s)
Number of options held over HSBC Holdings ordinary shares under employee share plans
20
32
Number of HSBC Holdings ordinary shares held beneficially and non-beneficially
17,455
20,409
Number of other HSBC securities held
228
228
At 31 Dec
17,703
20,669
Advances and credits, guarantees and deposit balances during the year with Key Management Personnel
2024
2023
Balance at
31 Dec
Highest amounts
outstanding
during year
Balance at
31 Dec
Highest amounts
outstanding
during year
$m
$m
$m
$m
Key Management Personnel
Advances and credits1
9
12
11
16
Deposits
78
191
60
130
1 Advances and credits entered into by subsidiaries of HSBC Holdings plc during 2024 with Directors and former Directors, disclosed pursuant to section 413 of
the Companies Act 2006, totalled $1.3m (2023: $2.6m).
Unless previously disclosed, there were no connected transactions during the reporting period that fell outside the exemptions provided by the
Companies Act 2006, the UK Financial Conduct Authority’s Listing Rules and the Rules Governing The Listing of Securities on The Stock
Exchange of Hong Kong Limited. The transactions conducted were in the ordinary course of business and on substantially the same terms,
including interest rates and security, as for comparable transactions with parties of a similar standing or, where applicable, with other
employees. These transactions did not involve more than the normal risk of repayment or present other unfavourable features.
Associates and joint ventures
The Group provides certain banking and financial services to associates and joint ventures including loans, overdrafts, interest and non-interest
bearing deposits and current accounts. Details of the interests in associates and joint ventures are given in Note 18.
Transactions and balances during the year with associates and joint ventures
2024
2023
Highest balance
during the year
Balance at
31 Dec
Highest balance
during the year
Balance at
31 Dec
$m
$m
$m
$m
Unsubordinated amounts due from joint ventures
104
72
98
94
Unsubordinated amounts due from associates
8,097
5,011
7,907
5,910
Amounts due to associates
2,992
1,844
3,002
1,668
Amounts due to joint ventures
101
85
95
61
Fair value of derivative assets with associates
919
763
1,514
795
Fair value of derivative liabilities with associates
3,718
2,641
4,388
2,962
Guarantees and commitments
569
577
503
331
The above outstanding balances arose in the ordinary course of business and on substantially the same terms, including interest rates and
security, as for comparable transactions with third-party counterparties.
HSBC Holdings plc Annual Report and Accounts 2024
429
Financial statements
Post-employment benefit plans
At 31 December 2024, $3.4bn (2023: $3.1bn) of HSBC post-employment benefit plan assets were under management by HSBC companies,
earning management fees of $14m in 2024 (2023: $13m). At 31 December 2024, HSBC’s post-employment benefit plans had placed deposits
of $395m (2023: $402m) with its banking subsidiaries, earning interest payable to the schemes of $2m (2023: $2m). The above outstanding
balances arose from the ordinary course of business and on substantially the same terms, including interest rates and security, as for
comparable transactions with third-party counterparties.
The combined HSBC Bank (UK) Pension Scheme enters into swap transactions with HSBC to manage inflation and interest rate sensitivity of
its liabilities and selected assets. At 31 December 2024, the gross notional value of the swaps was $6.4bn (2023: $7.1bn). These swaps had a
positive fair value to the scheme of $0.4bn (2023: $0.5bn); and HSBC had delivered collateral of $0.4bn (2023: $0.6bn) to the scheme in respect
of these arrangements. All swaps were executed at prevailing market rates and within standard market bid/offer spreads.
HSBC Holdings
Details of HSBC Holdings’ subsidiaries are shown in Note 38.
Transactions and balances during the year with subsidiaries
2024
2023
Highest balance
during the year
Balance at
31 Dec
Highest balance
during the year
Balance at
31 Dec
$m
$m
$m
$m
Assets
Cash and balances with HSBC undertakings
9,342
2,548
8,396
7,029
Financial assets with HSBC undertakings designated and otherwise mandatorily
measured at fair value
66,030
61,286
60,309
59,879
Derivatives
3,391
3,054
4,010
3,344
Loans and advances to HSBC undertakings
37,677
37,677
28,213
27,354
Prepayments, accrued income and other assets
7,108
4,216
7,417
5,145
Investments in subsidiaries
160,805
152,337
167,542
159,478
Total related party assets at 31 Dec
284,353
261,118
275,887
262,229
Liabilities
Amounts owed to HSBC undertakings
231
231
179
168
Derivatives
7,944
5,340
9,309
6,090
Accruals, deferred income and other liabilities
399
194
505
341
Subordinated liabilities
1,202
—
927
913
Total related party liabilities at 31 Dec
9,776
5,765
10,920
7,512
Guarantees and commitments
7,440
7,327
7,723
7,723
The above outstanding balances arose in the ordinary course of business and on substantially the same terms, including interest rates and
security, as for comparable transactions with third-party counterparties.
Some employees of HSBC Holdings are members of the HSBC Bank (UK) Pension Scheme, which is sponsored by a separate Group company.
HSBC Holdings incurs a charge for these employees equal to the contributions paid into the scheme on their behalf. Disclosure in relation to
the scheme is made in Note 5.
37 Events after the balance sheet date
A fourth interim dividend for 2024 of $0.36 per ordinary share (a distribution of approximately $6.4bn was approved by the Directors after
31 December 2024. On 19 February 2025, HSBC Holdings announced a share buy-back to purchase its ordinary shares up to a maximum
consideration of $2.0bn, which is expected to commence shortly and complete by our first quarter 2025 results announcement. On 30 January
2025, HSBC Holdings called $1,750m 2.999% fixed rate/floating rate senior unsecured and $500m floating rate senior unsecured securities.
These securities are expected to be redeemed and cancelled on 10 March 2025. On 7 February 2025, HSBC Holdings called $2,450m 6.375%
perpetual subordinated contingent convertible securities which are expected to be redeemed and cancelled on 30 March 2025. The accounts
were approved by the Board of Directors on 19 February 2025 and authorised for issue.
38 HSBC Holdings’ subsidiaries, joint ventures and associates
In accordance with section 409 of the Companies Act 2006 a list of HSBC Holdings plc subsidiaries, joint ventures and associates, the
registered office addresses and the effective percentages of equity owned at 31 December 2024 are disclosed below.
Unless otherwise stated, the share capital comprises ordinary or common shares that are held by Group subsidiaries. The ownership
percentage is provided for each undertaking. The undertakings below are consolidated by HSBC unless otherwise indicated.
Notes on the financial statements
430
HSBC Holdings plc Annual Report and Accounts 2024
Subsidiaries
AI Nominees (UK) One Limited
100.00
12
AI Nominees (UK) Two Limited
100.00
12
Almacenadora Banpacifico S.A. (In
Liquidation)
N/A
1, 13
Assetfinance December (F) Limited
100.00
14
Assetfinance December (H) Limited
100.00
12
Assetfinance December (P) Limited
100.00
12
Assetfinance December (R) Limited
100.00
12
Assetfinance June (A) Limited
100.00
12
Assetfinance June (D) Limited
100.00
14
Assetfinance March (B) Limited
100.00
15
Assetfinance March (D) Limited
100.00
14
Assetfinance March (F) Limited
100.00
12
Assetfinance September (F) Limited
100.00
12
Assetfinance September (G) Limited
100.00
14
B&Q Financial Services Limited
100.00
12
Banco HSBC S.A.
100.00
16
Banco Nominees (Guernsey) Limited
100.00
17
Banco Nominees 2 (Guernsey) Limited
100.00
17
Banco Nominees Limited
100.00
18
Beau Soleil Limited Partnership
N/A
1, 19
Beijing HSBC Real Estate Leasing Company
Limited
N/A
1, 20
Beijing Miyun HSBC Rural Bank Company
Limited
100.00
11, 21
BentallGreenOak China Real Estate
Investments, L.P.
N/A
1, 22
Canada Crescent Nominees (UK) Limited (In
Liquidation)
100.00
23
Canada Square Nominees (UK) Limited
100.00
12
Capco/Cove, Inc.
100.00
24
Card-Flo #3, Inc.
100.00
25
CC&H Holdings LLC
N/A
1, 26
CCF & Partners Asset Management Limited
100.00
(99.99)
12
Charterhouse Administrators (D.T.) Limited
100.00
(99.99)
12
Charterhouse Management Services Limited
100.00
(99.99)
12
Charterhouse Pensions Limited
100.00
12
Chongqing Dazu HSBC Rural Bank Company
Limited
100.00
11, 28
Chongqing Fengdu HSBC Rural Bank
Company Limited
100.00
11, 29
Chongqing Rongchang HSBC Rural Bank
Company Limited
100.00
11, 30
CI 10 LP Inc
N/A
107
COIF Nominees Limited
N/A
1, 12
Corsair IV Financial Services Capital Partners -
B L.P
N/A
1, 31
D9 LP Inc
N/A
107
Dalian Pulandian HSBC Rural Bank Company
Limited
100.00
11, 32
Decision One Mortgage Company, LLC
N/A
1, 33
Dempar 1
100.00
(99.99)
5, 34
Desarrollo Turistico, S.A. de C.V. (In
Liquidation)
100.00
(99.99)
13
Electronic Data Process México, S.A. de C.V.
100.00
35
ERISA Actions Europe N°2
N/A
1, 175
ERISA Actions Grandes Valeurs
N/A
1, 175
ERISA Opportunities
N/A
1, 175
Eton Corporate Services Limited
100.00
17
Flandres Contentieux S.A.
100.00
(99.99)
5, 34
Foncière Elysées
100.00
(99.99)
5, 34
Fujian Yongan HSBC Rural Bank Company
Limited
100.00
11, 36
Fulcher Enterprises Company Limited
100.00
(63.12)
37
Fundacion HSBC, A.C.
100.00
(99.99)
2, 9, 13
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Giller Ltd.
100.00
24
GPIF Co-Investment, LLC
N/A
1, 25
Griffin International Limited
100.00
12
Grupo Financiero HSBC, S. A. de C. V.
99.99
13
Guangdong Enping HSBC Rural Bank
Company Limited
100.00
11, 38
Guangzhou HSBC Real Estate Company Ltd
100.00
11, 39
H5 LP Inc
N/A
107
H8 LP Inc
N/A
107
H9 LP Inc
N/A
107
Hang Seng (Nominee) Limited
100.00
(63.12)
37
Hang Seng Bank (China) Limited
100.00
(63.12)
11, 40
Hang Seng Bank (Trustee) Limited
100.00
(63.12)
37
Hang Seng Bank Limited
63.12
37
Hang Seng Bullion Company Limited
100.00
(63.12)
37
Hang Seng Credit Limited
100.00
(63.12)
37
Hang Seng Data Services Limited
100.00
(63.12)
37
Hang Seng Finance Limited
100.00
(63.12)
37
Hang Seng Financial Information Limited
100.00
(63.12)
37
Hang Seng Indexes (Netherlands) B.V.
N/A
1, 41
Hang Seng Indexes Company Limited
100.00
(63.12)
37
Hang Seng Insurance Company Limited
100.00
(63.12)
37
Hang Seng Investment Management Limited
100.00
(63.12)
37
Hang Seng Investment Services Limited
100.00
(63.12)
37
Hang Seng Japan Topix 100 Index ETF
66.43
19
Hang Seng Qianhai Fund Management
Company Limited
70.00
(43.86)
11, 42
Hang Seng Real Estate Management Limited
100.00
(63.12)
37
Hang Seng Securities Limited
100.00
(63.12)
37
Hang Seng Security Management Limited
100.00
(63.12)
37
HASE Wealth Limited
N/A
137
Haseba Investment Company Limited
100.00
(63.12)
37
HBPH Corporation (In Dissolution)
99.99
43
HFC Bank Limited (In Liquidation)
100.00
44
High Time Investments Limited
100.00
(63.12)
37
HLF
100.00
(99.99)
5, 34
Honey Blue Enterprises Limited (亨京企業有
限公司)
100.00
19
Honey Green Enterprises Ltd.
100.00
45
Honey Grey Enterprises Limited (亨穗企業有
限公司)
100.00
19
Honey Silver Enterprises Limited
100.00
19
Household International Europe Limited (In
Liquidation)
100.00
44
Household Pooling Corporation
100.00
47
Housing (USA) LLP
N/A
1, 25
HSBC (BGF) Investments Limited
100.00
12
HSBC (General Partner) Limited
100.00
3, 48
HSBC (Guernsey) GP PCC Limited
100.00
17
HSBC (Kuala Lumpur) Nominees Sdn Bhd
100.00
49
HSBC (Malaysia) Trustee Berhad
100.00
50
HSBC (Singapore) Nominees Pte Ltd
100.00
51
HSBC Actions Europe
50.66
175
HSBC Agency (India) Private Limited
100.00
52
HSBC Alternative Investments Limited
100.00
12
HSBC Amanah Malaysia Berhad
100.00
49
HSBC Americas Corporation (Delaware)
100.00
25
HSBC Asia Holdings B.V.
100.00
12
HSBC Asia Holdings Limited
100.00
3, 19
HSBC Asia Pacific Holdings (UK) Limited
100.00
6, 12
HSBC Asset Finance (UK) Limited
100.00
12
HSBC Asset Finance M.O.G. Holdings (UK)
Limited
100.00
12
HSBC Asset Management (Fund Services UK)
Limited
100.00
12
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Holdings plc Annual Report and Accounts 2024
431
Financial statements
HSBC Asset Management (India) Private
Limited
99.99
53
HSBC Asset Management (Japan) Limited
100.00
54
HSBC Assurances Vie (France)
100.00
(99.99)
5, 55
HSBC Australia Holdings Pty Limited
100.00
6, 56
HSBC BANK (CHILE)
100.00
57
HSBC Bank (China) Company Limited
100.00
11, 58
HSBC Bank (General Partner) Limited
100.00
48
HSBC Bank (Mauritius) Limited
100.00
59
HSBC Bank (Singapore) Limited
100.00
51
HSBC Bank (Taiwan) Limited
100.00
60
HSBC Bank (Uruguay) S.A.
100.00
61
HSBC Bank (Vietnam) Ltd.
100.00
62
HSBC Bank A.S.
100.00
63
HSBC Bank Australia Limited
100.00
56
HSBC Bank Bermuda Limited
100.00
18
HSBC Bank Capital Funding (Sterling 1) LP
N/A
1, 48
HSBC Bank Egypt S.A.E
94.54
64
HSBC Bank Malaysia Berhad
100.00
4, 49
HSBC Bank Malta p.l.c.
70.03
65
HSBC Bank Middle East Limited
100.00
4, 66
HSBC Bank Middle East Limited
Representative Office Morocco SARL (In
Liquidation)
100.00
67
HSBC Bank Pension Trust (UK) Limited
100.00
12
HSBC Bank plc
100.00
3, 4, 12
HSBC Bank USA, National Association
100.00
4, 68
HSBC Branch Nominee (UK) Limited
100.00
14
HSBC Brasil Holding S.A.
100.00
16
HSBC Broking Forex (Asia) Limited
100.00
19
HSBC Broking Futures (Asia) Limited
100.00
19
HSBC Broking Futures (Hong Kong) Limited
100.00
19
HSBC Broking Securities (Asia) Limited
100.00
19
HSBC Broking Securities (Hong Kong) Limited
100.00
19
HSBC Broking Services (Asia) Limited
100.00
19
HSBC Capital (USA), Inc.
100.00
25
HSBC Capital Funding (Dollar 1) L.P.
N/A
1, 48
HSBC Card Services Inc.
100.00
25
HSBC Casa de Bolsa, S.A. de C.V., Grupo
Financiero HSBC
100.00
(99.99)
13
HSBC Cayman Limited
100.00
69
HSBC Cayman Services Limited
100.00
69
HSBC Client Holdings Nominee (UK) Limited
100.00
12
HSBC Client Nominee (Jersey) Limited
100.00
2, 70
HSBC Climate Tech Venture Capital Fund
SCSp
87.15
177
HSBC Columbia Funding, LLC
N/A
125
HSBC Continental Europe
99.99
5, 34
HSBC Corporate Advisory (Malaysia) Sdn Bhd
100.00
49
HSBC Corporate Finance (Hong Kong) Limited
100.00
19
HSBC Corporate Secretary (UK) Limited
100.00
3, 12
HSBC Corporate Services (Shanghai) Co., Ltd.
N/A
1, 71
HSBC Corporate Trustee Company (UK)
Limited
100.00
12
HSBC Custody Nominees (Australia) Limited
100.00
56
HSBC Custody Services (Guernsey) Limited
100.00
17
HSBC Daisy Investments (Mauritius) Limited
100.00
72
HSBC Diversified Loan Fund General Partner
Sarl
N/A
1, 73
HSBC Diversified Loan SCSp-RAIF
N/A
73
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Electronic Data Processing
(Guangdong) Limited
100.00
11, 74
HSBC Electronic Data Processing (Malaysia)
Sdn Bhd
100.00
75
HSBC Electronic Data Processing
(Philippines), Inc.
99.99
76
HSBC Electronic Data Processing India
Private Limited
100.00
77
HSBC Electronic Data Processing Lanka
(Private) Limited
100.00
78
HSBC Electronic Data Service Delivery
(Egypt) S.A.E
100.00
79
HSBC Equipment Finance (UK) Limited
100.00
14
HSBC Equity (UK) Limited
100.00
12
HSBC EURO Protect 80+
78.06
55
HSBC Europe B.V.
100.00
12
HSBC European Senior Direct Lending Fund
2023 RAIF SICAV-S.A.
43.00
91
HSBC Executor & Trustee Company (UK)
Limited
100.00
14
HSBC Factoring (France)
100.00
(99.99)
5, 34
HSBC Finance (Netherlands)
100.00
3, 12
HSBC Finance Corporation
100.00
25
HSBC Finance Limited
100.00
12
HSBC Finance Transformation (UK) Limited
100.00
12
HSBC Financial Advisors Singapore Pte. Ltd.
100.00
2, 51
HSBC Financial Services (Lebanon) S.A.L
99.83
80
HSBC Financial Technology Venture Capital
Fund SCSp
100.00
177
HSBC FinTech Services (Shanghai) Company
Limited
N/A
1, 2, 81
HSBC Global Asset Management (Bermuda)
Limited
100.00
4, 18
HSBC Global Asset Management
(Deutschland) GmbH
100.00
(99.99)
7, 82
HSBC Global Asset Management (France)
100.00
(99.99)
5, 55
HSBC Global Asset Management (Hong
Kong) Limited
100.00
83
HSBC Global Asset Management (Malta)
Limited
100.00
(70.03)
84
HSBC Global Asset Management (México),
S.A. de C.V., Sociedad Operadora de Fondos
de Inversión, Grupo Financiero HSBC
100.00
(99.99)
13
HSBC Global Asset Management (Singapore)
Limited
100.00
51
HSBC Global Asset Management
(Switzerland) AG
100.00
5, 171
HSBC Global Asset Management (Taiwan)
Limited
100.00
86
HSBC Global Asset Management (UK)
Limited
100.00
12
HSBC Global Asset Management (USA) Inc.
100.00
87
HSBC Global Asset Management Holdings
(Bahamas) Limited
100.00
88
HSBC Global Asset Management Limited
100.00
3, 12
HSBC Global Custody Nominee (UK) Limited
100.00
12
HSBC Global Custody Proprietary Nominee
(UK) Limited
100.00
12
HSBC Global Funds ICAV - Digital Leaders
Equity Fund
100.00
27
HSBC Global Funds ICAV - Euro Lower
Carbon Government 10+ Year Bond UCITS
ETF
100.00
27
HSBC Global Funds ICAV - Euro Lower
Carbon Government 1-3 Year Bond UCITS
ETF
100.00
27
HSBC Global Funds ICAV - Global Aggregate
Bond ESG UCITS ETF
100.00
27
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Notes on the financial statements
432
HSBC Holdings plc Annual Report and Accounts 2024
HSBC Global Funds ICAV - Global Equity
Index Fund -ACEUR
N/A
1, 176
HSBC Global Funds ICAV - Japan Equity Index
Fund
99.77
105
HSBC Global Infrastructure Debt Fund Feeder
SCA SICAV-RAIF- Global Infrastructure Debt
EUR
N/A
1, 91
HSBC GLOBAL INVESTMENT FUNDS - ASIA
ESG BOND
93.03
129
HSBC Global Investment Funds – ESG Short
Duration Credit Bond
74.22
129
HSBC GLOBAL INVESTMENT FUNDS -
GLOBAL EMERGING MARKETS EQUITY
56.47
129
HSBC Global Investment Funds - Strategic
Duration and Income Bond
100.00
129
HSBC Global Multi-asset Seeding course
(Stable Type)
67.39
54
HSBC Global Services (Canada) Limited
100.00
89
HSBC Global Services (China) Holdings
Limited
100.00
12
HSBC Global Services (Hong Kong) Limited
100.00
19
HSBC Global Services (UK) Limited
100.00
12
HSBC Global Services Limited
100.00
3, 12
HSBC Global Transition Infrastructure Debt
Fund RAIF SICAV-S.A.
31.00
91
HSBC Group Management Services Limited
100.00
12
HSBC Group Nominees UK Limited
100.00
3, 12
HSBC Holdings B.V.
100.00
12
HSBC Horizon 2034 2036 A 3D
76.72
175
HSBC India Small Cap Equity Fund (QII）
40.38
54
HSBC Infrastructure Debt GP 1 S.à r.l.
N/A
1, 91
HSBC Infrastructure Debt GP 2 S.à r.l.
N/A
1, 91
HSBC Innovation Bank Limited
100.00
92
HSBC INSN (Non Operating) Pte. Ltd. (In
Liquidation)
100.00
51
HSBC Institutional Trust Services (Asia)
Limited
100.00
19
HSBC Institutional Trust Services (Bermuda)
Limited
100.00
18
HSBC Institutional Trust Services (Mauritius)
Limited
100.00
93
HSBC Institutional Trust Services (Singapore)
Limited
100.00
51
HSBC Insurance (Asia) Limited
100.00
95
HSBC Insurance (Asia-Pacific) Holdings
Limited
100.00
83
HSBC Insurance (Bermuda) Limited
100.00
96
HSBC Insurance Agency (USA) Inc.
100.00
97
HSBC Insurance Brokerage Company Limited
N/A
1,2, 98
HSBC Insurance Brokers Greater China
Limited
100.00
83
HSBC Insurance SAC 1 (Bermuda) Limited
100.00
18
HSBC Insurance SAC 2 (Bermuda) Limited
100.00
18
HSBC Insurance Services Holdings Limited
(In Liquidation)
100.00
23
HSBC International Finance Corporation
(Delaware)
100.00
100
HSBC International Trustee (BVI) Limited
100.00
10, 101
HSBC International Trustee (Holdings) Pte.
Limited
100.00
51
HSBC International Trustee Limited
100.00
102
HSBC Inversiones S.A.
100.00
57
HSBC InvestDirect (India) Private Limited
99.99
53
HSBC InvestDirect Financial Services (India)
Limited
99.99
53
HSBC InvestDirect Sales & Marketing (India)
Private Limited
98.99
(98.98)
103
HSBC InvestDirect Securities (India) Private
Limited
99.99
53
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Investment and Insurance Brokerage,
Philippines Inc.
99.99
104
HSBC Investment Bank Holdings B.V.
100.00
12
HSBC Investment Bank Holdings Limited
100.00
12
HSBC Investment Company Limited
100.00
3, 12
HSBC Investment Funds (Hong Kong) Limited
100.00
83
HSBC Investment Funds (Luxembourg) SA
100.00
105
HSBC Invoice Finance (UK) Limited
100.00
14
HSBC Issuer Services Common Depositary
Nominee (UK) Limited
100.00
12
HSBC Latin America B.V.
100.00
12
HSBC Latin America Holdings (UK) Limited
100.00
3, 12
HSBC Leasing (Asia) Limited
100.00
19
HSBC Legacy Partnership Limited
100.00
12
HSBC Life (Bermuda) Limited
100.00
18
HSBC Life (Cornell Centre) Limited
100.00
95
HSBC Life (Edwick Centre) Limited
100.00
95
HSBC Life (International) Limited
100.00
18
HSBC Life (Property) Limited
100.00
95
HSBC Life (Singapore) Pte. Ltd.
100.00
51
HSBC Life (Tsing Yi Industrial) Limited
100.00
95
HSBC Life (UK) Limited
100.00
12
HSBC Life (Workshop) Limited
100.00
95
HSBC Life Assurance (Malta) Ltd.
100.00
(70.03)
84
HSBC Life Insurance Company Limited
100.00
11, 106
HSBC LU Nominees Limited
100.00
12
HSBC Management (Guernsey) Limited
100.00
107
HSBC Markets (USA) Inc.
100.00
25
HSBC Marking Name Nominee (UK) Limited
100.00
12
HSBC Master Trust Trustee Limited (In
Liquidation)
100.00
23
HSBC Mexico, S.A., Institucion de Banca
Multiple, Grupo Financiero HSBC
99.99
13
HSBC Middle East Asset CO. LLC
100.00
108
HSBC Middle East Holdings B.V.
100.00
3, 4, 66
HSBC Middle East Leasing Partnership
N/A
1, 109
HSBC Middle East Securities L.L.C
100.00
110
HSBC Mix Dynamique
58.13
55
HSBC Mortgage Corporation (USA)
100.00
25
HSBC Multi-Asset Style Factors S
N/A
1, 175
HSBC Nominees (Asing) Sdn Bhd
100.00
49
HSBC Nominees (Hong Kong) Limited
100.00
19
HSBC Nominees (New Zealand) Limited
100.00
111
HSBC Nominees (Tempatan) Sdn Bhd
100.00
49
HSBC North America Holdings Inc.
100.00
4, 25
HSBC Operational Services GmbH
100.00
(99.99)
7, 82
HSBC Overseas Holdings (UK) Limited
100.00
3, 12
HSBC Overseas Investments Corporation
(New York)
100.00
112
HSBC Overseas Nominee (UK) Limited
100.00
12
HSBC PB Corporate Services 1 Limited
100.00
113
HSBC PB Services (Suisse) SA
100.00
114
HSBC Pension Trust (Ireland) DAC
100.00
115
HSBC Pensiones, S.A. (In Liquidation)
100.00
(99.99)
13
HSBC PI Holdings (Mauritius) Limited
100.00
116
HSBC Portfolios – World Selection 5 (Part
ACHEUR)
N/A
1, 105
HSBC Portfoy Yonetimi A.S.
100.00
117
HSBC Preferential LP (UK)
100.00
12
HSBC Private Bank (Luxembourg) S.A.
100.00
(99.99)
105
HSBC Private Bank (Suisse) SA
100.00
114
HSBC Private Bank (UK) Limited
100.00
12
HSBC Private Banking Holdings (Suisse) SA
100.00
114
HSBC Private Banking Nominee 3 (Jersey)
Limited
100.00
113
HSBC Private Equity Investments (UK)
Limited
100.00
12
HSBC Private Markets Management SARL
N/A
1, 2, 118
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Holdings plc Annual Report and Accounts 2024
433
Financial statements
HSBC Private Trustee (Hong Kong) Limited
100.00
19
HSBC Professional Services (India) Private
Limited
100.00
119
HSBC Property (UK) Limited
100.00
12
HSBC Property Funds (Holding) Limited
100.00
12
HSBC Provident Fund Trustee (Hong Kong)
Limited
100.00
19
HSBC Qianhai Securities Limited
90.00
11, 120
HSBC RCF Partnership Fund RAIF SICAV-S.A.
11.00
175
HSBC Real Estate Leasing (France)
100.00
(99.99)
5, 34
HSBC REGIO Fund General Partner S.à r.l.
100.00
91
HSBC REIM (France)
100.00
(99.99)
5, 55
HSBC Responsible Investment Funds - SRI
Balanced
64.14
55
HSBC Responsible Investment Funds - SRI
Dynamic
72.79
55
HSBC Resposible Investment Funds - SRI
Global Equity A
N/A
1, 175
HSBC Retirement Benefits Trustee (UK)
Limited
100.00
3, 12
HSBC Retirement Services Limited (In
Liquidation)
100.00
23
HSBC Saudi Arabia, Closed Joint Stock
Company
100.00
(66.19)
121
HSBC Securities (Egypt) S.A.E. (In
Liquidation)
100.00
(94.65)
122
HSBC Securities (Japan) Co., Ltd.
100.00
54
HSBC Securities (Singapore) Pte Limited
100.00
51
HSBC Securities (South Africa) (Pty) Limited
100.00
123
HSBC Securities (Taiwan) Corporation Limited
100.00
60
HSBC Securities (USA) Inc.
100.00
25
HSBC Securities and Capital Markets (India)
Private Limited
99.99
6, 103
HSBC Securities Brokers (Asia) Limited
100.00
19
HSBC Securities Investments (Asia) Limited
100.00
19
HSBC Securities Services (Bermuda) Limited
100.00
18
HSBC Securities Services (Guernsey) Limited
100.00
17
HSBC Securities Services (Ireland) DAC
100.00
115
HSBC Securities Services (Luxembourg) S.A.
100.00
105
HSBC Securities Services Holdings (Ireland)
DAC
100.00
115
HSBC Securities Services Nominees Limited
100.00
19
HSBC Seguros, S.A de C.V., Grupo Financiero
HSBC
100.00
(99.99)
13
HSBC Select Dynamic
80.59
55
HSBC Select Equity
86.38
55
HSBC Select Flexible
63.93
55
HSBC Semfi Limited
75.00
12
HSBC Senior UK Direct Lending 2020 RAIF
SICAV-S.A
N/A
91
HSBC Senior UK Direct Lending Fund II RAIF
SICAV-S.A.
72.46
91
HSBC Service Company Germany GmbH
100.00
(99.99)
7, 82
HSBC Service Delivery (Polska) Sp. z o.o.
100.00
124
HSBC Services (France)
100.00
(99.99)
5, 34
HSBC Services Japan Limited
100.00
88
HSBC Services USA Inc.
100.00
125
HSBC Servicios Financieros, S.A. de C.V
100.00
(99.99)
13
HSBC Servicios, S.A. DE C.V., Grupo
Financiero HSBC
100.00
(99.99)
13
HSBC SFT (C.I.) Limited
100.00
17
HSBC Singapore Dollar Liquidity Fund
76.37
51
HSBC Small Cap France
52.70
55
HSBC Software Development (Guangdong)
Limited
100.00
11, 126
HSBC Software Development (India) Private
Limited
100.00
127
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
HSBC Software Development (Malaysia) Sdn
Bhd
100.00
75
HSBC Specialist Investments Limited
100.00
6, 12
HSBC Technology & Services (China) Limited
(In Liquidation)
N/A
1, 128
HSBC Technology & Services (USA) Inc.
100.00
25
HSBC Transaction Services GmbH
100.00
(99.99)
7, 82
HSBC Trinkaus & Burkhardt (International)
S.A.
100.00
(99.99)
129
HSBC Trinkaus & Burkhardt Gesellschaft fur
Bankbeteiligungen mbH
100.00
(99.99)
82
HSBC Trinkaus & Burkhardt GmbH
100.00
(99.99)
7, 82
HSBC Trinkaus Family Office GmbH
100.00
(99.99)
7, 82
HSBC Trinkaus Real Estate GmbH
100.00
(99.99)
7, 82
HSBC Trust Company (Delaware), National
Association
100.00
100
HSBC Trust Company (UK) Limited
100.00
12
HSBC Trustee (C.I.) Limited
100.00
113
HSBC Trustee (Cayman) Limited
100.00
69
HSBC Trustee (Guernsey) Limited
100.00
17
HSBC Trustee (Hong Kong) Limited
100.00
19
HSBC Trustee (Singapore) Limited
100.00
51
HSBC Trustees (India) Private Limited
99.99
103
HSBC UK Bank plc
100.00
3, 14
HSBC UK Client Nominee Limited
100.00
14
HSBC UK Covered Bonds LLP
N/A
1, 14
HSBC UK Societal Projects Limited
N/A
1, 14
HSBC USA Inc.
100.00
4, 112
HSBC Ventures USA Inc.
100.00
25
HSBC Violet Investments (Mauritius) Limited
100.00
72
HSBC Wealth Client Nominee Limited
100.00
14
HSBC World Equity Protect 80
98.87
55
HSBC Yatirim Menkul Degerler A.S.
100.00
63
HSI Asset Securitization Corporation
100.00
25
HSI International Limited
100.00
(63.12)
37
HSIL Investments Limited
100.00
12
Hubei Macheng HSBC Rural Bank Company
Limited
100.00
11, 131
Hubei Suizhou Cengdu HSBC Rural Bank
Company Limited
100.00
11, 132
Hubei Tianmen HSBC Rural Bank Company
Limited
100.00
11, 133
Hunan Pingjiang HSBC Rural Bank Company
Limited
100.00
11, 134
I3 LP Inc.
N/A
107
Imenson Limited
100.00
(63.12)
37
INHK PC LP Inc
100.00
17
INHK PE LP Inc
100.00
17
Inmobiliaria Bisa, S.A. de C.V.
99.99
13
Inmobiliaria Grufin, S.A. de C.V.
100.00
(99.99)
13
Inmobiliaria Guatusi, S.A. de C.V.
100.00
(99.99)
13
Internationale Kapitalanlagegesellschaft mit
beschränkter Haftung
100.00
(99.99)
82
J6 LP Inc
N/A
107
James Capel (Nominees) Limited
100.00
12
James Capel (Taiwan) Nominees Limited
100.00
12
Keyser Ullmann Limited
100.00
(99.99)
12
L1 LP Inc
N/A
107
Lion Corporate Services Limited
100.00
19
Lion International Corporate Services Limited
100.00
135
Lion International Management Limited
100.00
135
Lion Management (Hong Kong) Limited
100.00
19
Lyndholme Limited
100.00
19
Marks and Spencer Financial Services plc
100.00
136
Marks and Spencer Unit Trust Management
Limited
100.00
136
Midcorp Limited
100.00
12
Midland Bank (Branch Nominees) Limited
100.00
14
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Notes on the financial statements
434
HSBC Holdings plc Annual Report and Accounts 2024
Midland Nominees Limited
100.00
14
MP Payments Group Limited
100.00
12
MP Payments Middle East AE L.L.C.
100.00
137
MP Payments Netherlands B.V.
100.00
138
MP Payments Operations Limited
100.00
12
MP Payments Singapore Pte. Ltd.
100.00
51
MP Payments UK Limited
100.00
12
P2 LP Inc
N/A
107
Prudential Client HSBC GIS Nominee (UK)
Limited
100.00
12
PT Bank HSBC Indonesia
98.94
139
PT HSBC Sekuritas Indonesia
85.00
140
R/CLIP Corp.
100.00
25
Real Estate Collateral Management Company
100.00
25
Red Hexagon Energy Transition Asia GP S.à
r.l.
100.00
2, 91
Republic Nominees Limited
100.00
17
RLUKREF Nominees (UK) One Limited
100.00
12
RLUKREF Nominees (UK) Two Limited
100.00
12
S.A.P.C. - Ufipro Recouvrement
99.99
9, 34
Saf Baiyun
100.00
(99.99)
5, 34
Saf Guangzhou
100.00
(99.99)
5, 34
SCI HSBC Assurances Immo
100.00
(99.99)
9, 55
SCPI Elysees Grand Large
98.50
175
Select INKA
N/A
1, 82
Serai Limited
100.00
19
SFM
100.00
(99.99)
5, 34
SFSS Nominees (Pty) Limited
100.00
123
Shandong Rongcheng HSBC Rural Bank
Company Limited
100.00
11, 141
Shenzhen HSBC Development Company Ltd
100.00
11, 142
Sico Limited
100.00
143
SilkRoad Fund Management S.à.r.l
100.00
2, 144
Silkroad GP II Limited
100.00
2, 145
Silkroad GP II S.a.r.l.
100.00
2, 144
Silkroad GP Limited
100.00
2, 69
Silkroad GP SC S.a r.l
100.00
2, 146
Silkroad Property Partners K.K. (In Liquidation)
100.00
147
Silkroad Property Partners Limited
100.00
148
Silkroad Property Partners Management
Consultancy Limited
N/A
1, 149
Silkroad Property Partners PTE. LTD.
100.00
150
SNC Les Oliviers D'Antibes
60.00
(59.99)
9, 55
SNCB/M6-2007 A
100.00
(99.99)
2, 5, 34
SNCB/M6-2007 B
100.00
(99.99)
2, 5, 34
SNCB/M6-2008 A
100.00
(99.99)
2, 5, 34
Société Française et Suisse
100.00
(99.99)
5, 34
Somers Dublin DAC
100.00
(99.99)
115
Somers Nominees (Far East) Limited
100.00
18
Sopingest
100.00
(99.99)
5, 34
South Yorkshire Light Rail Limited
100.00
12
St Cross Trustees Limited
100.00
14
Sun Hung Kai Development (Lujiazui III)
Limited
100.00
11, 151
The Hongkong and Shanghai Banking
Corporation Limited
100.00
19
Tooley Street View Limited
100.00
3, 12
Trinkaus Europa Immobilien-Fonds Nr.3
Objekt Utrecht Verwaltungs-GmbH
100.00
(99.99)
7, 82
Trinkaus Immobilien-Fonds
Geschaeftsfuehrungs-GmbH
100.00
(99.99)
7, 82
Trinkaus Immobilien-Fonds Verwaltungs-
GmbH
100.00
(99.99)
7, 82
Trinkaus Private Equity Management GmbH
100.00
(99.99)
7, 82
Trinkaus Private Equity Verwaltungs GmbH
100.00
(99.99)
7, 82
Turnsonic (Nominees) Limited
100.00
14
Valeurs Mobilières Elysées
100.00
(99.99)
5, 34
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
W4 LP Inc
N/A
107
WARDLEY LIMITED
100.00
19
Wayfoong Nominees Limited
100.00
19
Westminster House, LLC
N/A
1, 25
Woodex Limited
100.00
18
Yan Nin Development Company Limited
100.00
(63.12)
37
Subsidiaries
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Footnotes
Joint ventures
The undertakings below are joint ventures and equity accounted.
Joint ventures
% of share class
held by immediate
parent company (or
by the Group
where this varies)
Footnotes
Climate Asset Management Limited
N/A
1,2, 152
Global Payments Technology México, S.A. de
C.V.
50.00
(49.99)
2, 153
MK HoldCo Limited
50.32
2, 154
Pentagreen Capital Pte. Ltd
50.00
155
ProServe Bermuda Limited
50.00
156
The London Silver Market Fixing Limited
N/A
1,2, 157
Vaultex UK Limited
50.00
158
Non-Profit Foundation
The undertakings below are Non-Profit Foundation.
Non-Profit Foundation
% of share class
held by
immediate parent
company (or by
the Group where
this varies)
Footnotes
HSBC Philanthropy Foundation Beijing
N/A
1, 175
HSBC Holdings plc Annual Report and Accounts 2024
435
Financial statements
Associates
The undertakings below are associates and equity accounted.
Associates
% of share class
held by
immediate parent
company (or by
the Group where
this varies)
Footnotes
Bank of Communications Co., Ltd.
19.03
2, 159
Barrowgate Limited
24.64
(15.53)
160
BGF Group plc
24.62
161
Bud Financial Limited
4.50
4, 162
CANARA HSBC LIFE INSURANCE
COMPANY LIMITED
26.00
163
Divido Financial Services Limited (In
Administration)
7.85
164
Electronic Payment Services Company (Hong
Kong) Limited
38.69
2, 19
Episode Six Inc.
5.69
4, 165
EPS Company (Hong Kong) Limited
38.69
19
HQLAX S.à r.l.
6.10
4, 90
HSBC Jintrust Fund Management Company
Limited
49.00
2, 11, 166
HSBC UK Covered Bonds (LM) Limited
N/A
1,2, 167
Lightico Ltd
2.80
4, 85
LiquidityMatch LLC
N/A
1, 168
London Precious Metals Clearing Limited
30.00
2, 169
Marketnode PTE. Ltd.
12.60
4, 46
MENA Infrastructure Fund (GP) Ltd
33.33
170
Quantexa Limited
9.36
4, 99
Radiant Global Investors LLC
N/A
1, 2, 172
Saudi Awwal Bank
31.00
173
The London Gold Market Fixing Limited
N/A
1, 157
Threadneedle Software Holdings Limited
7.10
4, 174
Trade Information Network Limited
12.76
152
Trinkaus Europa Immobilien-Fonds Nr. 7
Frankfurt Mertonviertel KG
N/A
182
We Trade Innovation Designated Activity
Company (In Liquidation)
9.88
2, 130
Footnotes for Note 38
Description of shares
1
Where an entity is governed by voting rights, HSBC consolidates when
it holds – directly or indirectly – the necessary voting rights to pass
resolutions by the governing body. In all other cases, the assessment
of control is more complex and requires judgement of other factors,
including having exposure to variability of returns, power to direct
relevant activities, and whether power is held as an agent or principal.
HSBC’s consolidation policy is described in Note 1.2(a).
2
Management has determined that these undertakings are excluded
from consolidation in the Group accounts as these entities do not meet
the definition of subsidiaries in accordance with IFRS. HSBC’s
consolidation policy is described in Note 1.2(a).
3
Directly held by HSBC Holdings plc
4
Preference Shares
5
Actions
6
Redeemable Preference Shares
7
GmbH Anteil
8
Nominal Shares
9
Parts
10
Non-Participating Voting
11
Registered Capital Shares
12
8 Canada Square, London, United Kingdom, E14 5HQ
13
Paseo de la Reforma 347 Col. Cuauhtemoc, Mexico, 06500
14
1 Centenary Square, Birmingham, United Kingdom, B1 1HQ
Registered offices
15
5 Donegal Square South, Northern Ireland, Belfast, United Kingdom,
BT1 5JP
16
1909 Avenida Presidente Juscelino Kubitschek, 19° andar, Torre
Norte, São Paulo Corporate Towers, São Paulo, Brazil, 04551-903
17
Arnold House St Julians Avenue, St Peter Port, Guernsey, GY1 3NF
18
37 Front Street, Harbourview Centre, Ground Floor, Hamilton,
Pembroke, Bermuda, HM 11
19
1 Queen's Road Central, Hong Kong
20
2401-55 24/F, Office Tower Two 1 Jianguomenwai Street, Chaoyang
District, Beijing, China
21
First Floor, Xinhua Bookstore Xindong Road (SE of roundabout),
Miyun District, Beijing, China
22
Oak House Hirzel Street, St Peter Port, Guernsey, GY1 2NP
23
c/o Teneo Financial Advisory Limited, The Colmore Building, 20
Colmore Circus, Queensway, Birmingham, United Kingdom, B4 6AT
24
239 Van Rensselaer Street,, Buffalo, New York, United States of
America, 14210
25
c/o The Corporation Trust Company 1209 Orange Street, Wilmington,
Delaware, United States of America, 19801
26
Corporation Service Company 251 Little Falls Drive, Wilmington,
Delaware, United States of America, 19808
27
25/28 North Wall Quay, IFSC, Dublin 1, Leinster
28
No 1, Bei Huan East Road Dazu County, Chongqing, China
29
No 107 Ping Du Avenue (E), Sanhe Town, Fengdu County,
Chongqing, China
30
No. 3, 5, 7, Haitang Erzhi Road Changyuan, Rongchang, Chongqing,
China, 402460
31
c/o Walkers Corporate Services Limited, Walker House, 87 Mary
Street, George Town, Grand Cayman, Cayman Islands, KY1-9005
32
First & Second Floor No.3 Nanshan Road, Pulandian, Dalian, Liaoning,
China
33
160 Mine Lake CT, Ste 200, Raleigh, North Carolina, United States of
America, 27615-6417
34
38 avenue Kléber, Paris, France, 75116
35
Avenida de las Granjas 972, Building A, Floor 2, Colonia Santa
Bárbara, Alcaldía Azcapotzalco, Mexico City, Mexico, 02230
36
No. 1 1211 Yanjiang Zhong Road, Yongan, Fujian, China
37
83 Des Voeux Road Central, Hong Kong
38
No. 44 Xin Ping Road Central, Encheng, Enping, Guangdong, China,
529400
39
Room 311, Cheng Hui No. 2, Nan Sha Street, Nan Sha District,
Guangzhou, Guangdong, China
40
34/F, 36/F and 46/F, Hang Seng Bank Tower 1000 Lujiazui Ring Road,
Pilot Free Trade Zone, Shanghai, China, 200120
41
Gustav Mahlerplein 2 1082 MA, Amsterdam, Netherlands
42
1001 T2 Office Building, Qianhai Kerry Business Center, Qianhai
Avenue, Nanshan Street, Qianhai Shenzhen-Hong Kong Cooperation
Zone, Shenzhen, Guangdong, China
43
Unit 1 GF The Commerical Complex Madrigal Avenue, Ayala Alabang
Village, Muntinlupa City, Philippines, 1780
44
C/O Teneo Financial Advisory Limited The Colmore Building, 20
Colmore Circus, Queensway, Birmingham, United Kingdom, B4 6AT
45
Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town,
Tortola, British Virgin Islands, VG1110
46
1 Harbourfront Avenue, #14-07 Keppel Bay Tower, Singapore, 098632
47
701 S CARSON ST STE 200, Carson City, Nevada, United States of
America, 89701
48
HSBC House Esplanade, St. Helier, Jersey, JE4 8UB
49
Level 21 Menara IQ, Lingkaran TRX, Tun Razak Exchange, Kuala
Lumpur, Malaysia, 55188
50
Level 19, Menara IQ, Lingkaran TRX, Tun Razak Exchange, Kuala
Lumpur, Malaysia, 55188
51
10 Marina Boulevard #48-01 Marina Bay Financial Centre, Singapore,
018983
52
52/60, M G Road Fort, Mumbai, India, 400 001
Registered offices
Notes on the financial statements
436
HSBC Holdings plc Annual Report and Accounts 2024
53
9-11 Floors, NESCO IT Park Building No. 3 Western Express
Highway, Goregaon (East), Mumbai, India, 400063
54
HSBC Building 11-1, Nihonbashi 3-chome, Chuo-ku, Tokyo, Japan,
103-0027
55
Immeuble Cœur Défense 110 esplanade du Général de Gaulle,
Courbevoie, France, 92400
56
Level 36, Tower 1, International Towers Sydney, 100 Barangaroo
Avenue, Sydney, New South Wales, Australia, 2000
57
Isidora Goyenechea 2800 23rd floor, Las Condes, Santiago, Chile,
7550647
58
HSBC Building Shanghai ifc, 8 Century Avenue, Pudong, Shanghai,
China, 200120
59
IconEbene, Level 5 Office 1 (West Wing), Rue de L’institut, Ebene,
Mauritius
60
54F, 7 Xinyi Road Sec. 5 Xinyi district, Taipei, Taiwan
61
1266 Dr Luis Bonativa 1266 Piso 30 (Torre IV WTC), Montevideo,
Uruguay, CP 11.000
62
Level 1, 2, 6 The Metropolitan, 235 Dong Khoi, Ben Nghe Ward,
District 1, Ho Chi Minh, Vietnam
63
Esentepe Mah. Büyükdere Caddesi No.128 Şişli, Istanbul, Turkiye,
34394
64
306 Corniche El Nil Street, Maadi, Cairo, Egypt
65
116 Archbishop Street, Valletta, Malta, VLT1444
66
Unit 401, Level 4 Gate Precinct Building 2, Dubai International
Financial Centre, P. O. Box 30444, Dubai, United Arab Emirates
67
Majer Consulting, Office 54/44, Building A1, Residence Ryad Anfa,
Boulevard Omar El Khayam, Casa Finance City (CFC), Casablanca,
Morocco
68
1800 Tysons Boulevard Suite 50, Tysons, Virginia, United States of
America, 22102
69
P.O. Box 309 Ugland House, Grand Cayman, Cayman Islands,
KY1-1104
70
HSBC House Esplanade, St. Helier, Jersey, JE1 1HS
71
Room 2703, 27F, Tower A, No.8 Century Avenue, China (Shanghai)
Pilot Free Trade Zone, Shanghai, China, 200120
72
c/o Rogers Capital St. Louis Business Centre, Cnr Desroches & St
Louis Streets, Port Louis, Mauritius
73
49 avenue J.F. Kennedy, Luxembourg, Luxembourg, 1855
74
4-17/F, Office Tower 2 TaiKoo Hui Development, No. 381 Tian He
Road, Guangzhou, Guangdong, China
75
Suite 1005, 10th Floor, Wisma Hamzah Kwong, Hing No. 1, Leboh
Ampang, Kuala Lumpur, Malaysia, 50100
76
Building C-1 UP Ayala Technohub, Commonwealth Avenue,, Diliman,
Quezon City, Metro Manila, Philippines
77
HSBC House Plot No.8 Survey No.64 (Part), Hightec City Layout
Madhapur, Hyderabad, India, 500081
78
Mireka City 324/9 Havelock Road, Colombo 05, Sri Lanka, 00500
79
Smart Village 28th Km Cairo- Alexandria Desert Road Building, Cairo,
Egypt
80
Centre Ville 1341 Building - 4th Floor Patriarche Howayek Street, PO
Box Riad El Solh, Lebanon, 9597
81
Room 405 Odd House Number of 859-863, Huanhu West 1st Road,
Lingang New Area, China (Shanghai) Pilot Free Trade Zone, Shanghai,
China, 201306
82
Hansaallee 3, Düsseldorf, Germany, 40549
83
HSBC Main Building 1 Queen's Road Central, Hong Kong
84
80 Mill Street, Qormi, Malta, QRM 3101
85
121 HaHashmonaim St., Tel Aviv, Israel, 6713328
86
36F., No. 68 Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City, Taiwan,
110419
87
452 Fifth Avenue, New York, United States of America, NY10018
88
Mareva House 4 George Street, Nassau, Bahamas
89
150 King Street West, Suite 200, Toronto, Ontario, Canada, M5H 1J9
90
9 rue du Laboratoire, Grand Duchy of Luxembourg, Luxembourg,
L-1911
Registered offices
91
4, rue Peternelchen, Howald, Grand Duchy of Luxembourg,
Luxembourg, L-2370
92
Alphabeta 14-18 Finsbury Square, London, United Kingdom, EC2A
1BR
93
IConEbene Rue de L’institut, Ebene, Mauritius
94
Meeting Room 18.R005, 18/F Fortune Financial Center No. 5
Dongsanhuan Zhong Road, Chaoyang District, Beijing, China, 100020
95
18th Floor Tower 1, HSBC Centre 1 Sham Mong Road, Kowloon,
Hong Kong
96
37 Front Street, Harbourview Center, Ground Floor, Hamilton,
Pembroke, Bermuda, HM 11
97
CT Corporation System 28 Liberty Street, New York, New York,
United States of America, 10005
98
Unit 201, Floor 2, Building 3 No. 12, Anxiang Street, Shunyi District,
Beijing, Beijing, China
99
C/O Company Secretarial Department, 280 Bishopsgate, London,
United Kingdom, EC2M 4AG
100
300 Delaware Avenue Suite 1401, Wilmington, Delaware, United
States of America, 19801
101
Woodbourne Hall, Road Town, Tortola, British Virgin Islands, P.O. Box
916
102
Craigmuir Chambers, Road Town Tortola, British Virgin Islands,
VG1110
103
52/60 M G Road Fort, Mumbai, India, 400 001
104
5/F HSBC Centre 3058 Fifth Ave West, Bonifacio Global City, Taguig
City, Philippines
105
18 Boulevard de Kockelscheuer, Luxembourg, Luxembourg, 1821
106
Unit 2002 of 20/F, Unit 2101 of 21/F HSBC Building, 8 Century
Avenue, China (Shanghai) Pilot Free Trade Zone, Shanghai, China,
200120
107
Arnold House St Julians Avenue, St Peter Port, Guernsey, GY1 1WA
108
HSBC Tower, Downtown Dubai, P O Box 66, Dubai, United Arab
Emirates
109
Unit 401, Level 4, Gate Precinct Building 2, Dubai International
Financial Centre, P. O. Box 506553, Dubai, United Arab Emirates
110
Level 16, HSBC Tower, Downtown Dubai, P.O. Box 66, Dubai, United
Arab Emirates
111
HSBC Tower, Level 21, 188 Quay Street, Auckland, New Zealand,
1010
112
The Corporation Trust Incorporated, 2405 York Road, Suite 201,
Lutherville Timonium, Maryland, United States of America, 21093
113
HSBC House Esplanade, St. Helier, Jersey, JE1 1GT
114
9-17 Quai des Bergues, Geneva, Switzerland, 1201
115
1 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland, D02
P820
116
6th floor HSBC Centre 18, Cybercity, Ebene, Mauritius, 72201
117
Esentepe Mah. Büyükdere Caddesi No.128, 34394, Şişli, Istanbul,
Turkiye
118
5 rue Heienhaff, Senningerberg, Luxembourg, L-1736
119
52/60 M G Road, Fort, Mumbai, India, 400 001
120
Unit 2201, 22/F, Qianhai Chow Tai Fook Finance Tower (Phase I) No.
66 Shu Niu Avenue, Nanshan Subdistrict, the Shenzhen Qianhai
Shenzhen-Hong Kong Cooperation Zone, the PRC, Shenzhen, China,
518054
121
HSBC Building 7267 Olaya - Al Murrooj, Riyadh, Saudi Arabia, 12283 -
2255
122
306 Corniche El Nil, HSBC Building, Maadi, Cairo, Egypt
123
1 Mutual Place, 107 Rivonia Road, Sandton, Gauteng, South Africa,
2196
124
Kapelanka 42A, Krakow, Poland, 30-347
125
C T Corporation System 820 Bear Tavern Road, West Trenton, New
Jersey, United States of America, 08628
126
22/F, Tower 2, Taikoo Hui Building, No. 381 Tianhe Road, Tianhe
District, Guangzhou, China
127
Business Bay, Wing 2 Tower B, Survey no 103, Hissa no. 2, Airport
road, Yerwada, Pune, India, 411006
Registered offices
HSBC Holdings plc Annual Report and Accounts 2024
437
Financial statements
128
Room 3102, L31 HSBC Building, Shanghai ifc, 8 Century Avenue,
China (Shanghai) Free Trade Zone, Shanghai, China, 200120
129
16 Boulevard d'Avranches, Luxembourg, L-1160
130
10 Earlsfort Terrace, Dublin, Ireland, D02 T380
131
No. 56 Yu Rong Street, Macheng, China, 438300
132
No. 205 Lie Shan Road Suizhou, Hubei, China
133
Building 3, Yin Zuo Di Jing Wan Tianmen New City, Tianmen, Hubei
Province, China
134
RM101, 102 & 106 Sunshine Fairview, Sunshine Garden, Pedestrian
Walkway, Pingjiang, China
135
Craigmuir Chambers, Road Town, Tortola, British Virgin Islands,
VG1110
136
Kings Meadow Chester Business Park, Chester, United Kingdom,
CH99 9FB
137
Level 15 HSBC Tower, Downtown Dubai, Dubai, United Arab
Emirates, PO Box 66
138
De Entrée 201, Amsterdam, Netherlands, 1101 HG
139
World Trade Center 3, 9th Floor, Jalan Jendral Sudirman Kaveling
29-31, Karet, Setiabudi, South Jakarta, DKI Jakarta, Indonesia, 12920
140
5th Floor, World Trade Center 1, Jl. Jend. Sudirman Kav. 29-31,
Jakarta, Indonesia, 12920
141
No.198-2 Chengshan Avenue (E), Rongcheng, China, 264300
142
Room 601, 6/F Phase 1 Qianhai Chow Tai Fook Finance Tower, 66
Shuniu Avenue, Nanshan Community, Qianhai Shenzhen-Hong Kong
Corporation Zone, Shenzhen, Guangdong, China
143
Woodbourne Hall, Road Town, Tortola, British Virgin Islands, P.O. Box
3162
144
1 Côte d'Eich, Luxembourg, 1450
145
P.O. Box 3119 Grand Pavilion, Hibiscus Way, 802 West Bay Road,
Grand Cayman, Cayman Islands, KY1 – 1205
146
17 Boulevard F.W Raiffeisen, Luxembourg, 2411
147
Tokyo Club Building 11F, 3-2-6 Kasumigaseki, Chiyoda-ku, Tokyo,
Japan
148
27/F, Alexandra House, 18 Chater Road Central, Hong Kong
149
Unit 2017, Floor 20, Tower 1 No.288, Shimen 1st Road, Jing An
District, Shanghai, China, 200041
150
10 Collyer Quay, #10-01 Ocean Financial Centre, Singapore,
Singapore, 049315
151
RM 2112, HSBC Building, Shanghai ifc No. 8 Century Road, Pudong,
Shanghai, China, 200120
152
3 More London Riverside, London, United Kingdom, SE1 2AQ
153
296, floor 18, office A Paseo de la Reforma, Mexico City, Mexico,
06600
154
35 Ballards Lane, London, United Kingdom, N3 1XW
155
1 Raffles Quay #23-01, Singapore, 048583
156
c/o Mayfair Corporate Services Ltd., 26 Burnaby Street, Hamilton,
Bermuda, HM11
157
27 Old Gloucester Street, London, United Kingdom, WC1N 3AX
158
All Saints Triangle Caledonian road, London, United Kingdom, N19UT
159
188 Yin Cheng Zhong Lu (Shanghai) Pilot Free Trade Zone, China
160
50/F, Lee Garden One, 33 Hysan Avenue, Hong Kong
161
13-15 York Buildings, London, United Kingdom, WC2N 6JU
162
167-169 Great Portland Street, 5th Floor, London, United Kingdom,
W1W 5PF
163
8th Floor Unit No. 808-814, Ambadeep Building, Plot No. 14, Kasturba
Gandhi Marg, New Delhi, India, 110001
164
C/O Interpath Ltd, 10 Fleet Place, London, United Kingdom, EC4M
7RB
165
251 Little Falls Drive, New Castle, Wilmington, United States of
America, 19808
166
17F, HSBC Building, Shanghai ifc 8 Century Avenue, Pudong,
Shanghai, China
167
10th Floor 5 Churchill Place, London, United Kingdom, E14 5HU
168
111 Town Square Place, Suite 840, Jersey City, New Jersey, United
States of America, 07310
Registered offices
169
7th Floor, 62 Threadneedle Street, London, United Kingdom, EC2R
8HP
170
Unit 306,307, 308, Gate Village Building 05, Dubai International
Financial Centre, Dubai, United Arab Emirates
171
Gartenstrasse 26, Zurich, Switzerland, 8002
172
4482 Deer Ridge Road, Danville, CA, Delaware, United States of
America, 94506
173
7383 King Fahad Branch Rd, 2338 - Al Yasmeen Dist., Riyadh, Saudi
Arabia, 13325
174
2nd Floor, Regis House, 45 King William Street, London, United
Kingdom, EC4R 9AN
175
Coeur Défense - 110, esplanade du Général de Gaulle - La Défense 4
– 92400 Courbevoie
176
3 Dublin Landings, North Wall Quay, Dublin 1, Ireland
177
3, rue Jean Piret,L-2350 Luxembourg,Grand Duchy of Luxembourg
Registered offices
Notes on the financial statements
438
HSBC Holdings plc Annual Report and Accounts 2024
Shareholder information
Contents
439
Fourth interim dividend for 2024
439
Interim dividends for 2025
439
Other equity instruments
440
2024 Annual General Meeting
440
Earnings releases and interim results
440
Shareholder enquiries and communications
440
Stock symbols
441
Investor relations
441
Where more information about HSBC is available
441
Taxation of shares and dividends
443
Approach to ESG reporting
451
Cautionary statement regarding forward-looking statements
453
Certain defined terms
454
Abbreviations
This section gives important information for our shareholders, including contact information. It also includes an overview of key abbreviations
and terminology used throughout the Annual Report and Accounts.
A glossary of terms used in the Annual Report and Accounts can be found in the Investors section of www.hsbc.com.
Fourth interim dividend for 2024
The Directors have approved a fourth interim dividend for 2024 of $0.36 per ordinary share. Information on the currencies in which shareholders
may elect to have the cash dividend paid can be viewed at www.hsbc.com/investors. The interim dividend will be paid in cash. The timetable for
the interim dividend is:
Announcement
19 February 2025
Shares quoted ex-dividend in London, Hong Kong and Bermuda
6 March 2025
American Depositary Shares (‘ADS’) quoted ex-dividend in New York
7 March 2025
Record date – London, Hong Kong, New York, Bermuda1
7 March 2025
Mailing of Annual Report and Accounts 2024 and/or Strategic Report 2024
21 March 2025
Final date for dividend election changes including Investor Centre electronic instructions and revocations of standing instructions for dividend elections
10 April 2025
Exchange rate determined for payment of dividends in pounds sterling and Hong Kong dollars
14 April 2025
Payment date
25 April 2025
1
Removals to and from the Overseas Branch register of shareholders in Hong Kong or Bermuda will not be permitted on this date.
Interim dividends for 2025
As previously communicated, we established and achieved a target dividend payout ratio of 50% of earnings per ordinary share (‘EPS’) for 2023
and 2024, excluding the special dividend. EPS for this purpose excludes material notable items and related impacts. Material notable items in
2023 and 2024 included the sale of our businesses in Canada and Argentina, the sale of our retail banking operations in France, the gain
following the acquisition of SVB UK and the impairment of our investment in BoCom. We also exclude HSBC Bank Canada‘s financial results
from the 30 June 2022 net asset reference date until completion on 29 March 2024, as the gain on sale recognised through a combination of
the consolidation of HSBC Bank Canada‘s results in the Group‘s results since this date, and the remaining gain on sale was recognised at
completion, inclusive of the recycling of related reserves and fair value gains on related hedges.
The Board has adopted a dividend policy designed to provide sustainable cash dividends, while retaining the flexibility to invest and grow the
business in the future, supplemented by additional shareholder distributions, if appropriate. The Board has established a target dividend payout
ratio of 50% for 2025, subject to meeting capital requirements.
Dividends are approved in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, pounds
sterling and Hong Kong dollars.
Other equity instruments
Additional tier 1 capital – contingent convertible securities
HSBC continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1 capital
securities. For further details on these securities, see Note 32 on the financial statements.
HSBC Holdings issued SGD1,500m 5.250% perpetual subordinated contingent convertible securities on 14 June 2024. In addition, HSBC
Holdings issued US$1,350m 6.875% and US$1,150m 6.950% perpetual subordinated contingent convertible securities on 11 September 2024.
HSBC Holdings plc Annual Report and Accounts 2024
439
Additional information
2024 Annual General Meeting
With the exception of the shareholder requisitioned Resolution 17, which the Board recommended that shareholders vote against, all
resolutions considered at the 2024 AGM held at 11:00am on 3 May 2024 at InterContinental London O2, 1 Waterview Drive, London SE10 0TW,
UK, were passed on a poll.
Earnings releases and interim results
First and third quarter results for 2025 will be released on 29 April 2025 and 28 October 2025, respectively. The interim results for the six
months to 30 June 2025 will be issued on 30 July 2025.
Shareholder enquiries and communications
Enquiries
Any enquiries relating to shareholdings on the share register (for example, transfers of shares, changes of name or address, lost share
certificates or dividend cheques) should be sent to the Registrars at the address given below. The Registrars offer an online facility, Investor
Centre, which enables shareholders to manage their shareholding electronically.
Principal Register:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ,
United Kingdom
Telephone: +44 (0) 370 702 0137
www.investorcentre.co.uk/contactus
Investor Centre: www.investorcentre.co.uk
Hong Kong Overseas Branch
Register:
Computershare Hong Kong Investor Services Limited
Rooms 1712–1716, 17th Floor Hopewell Centre, 183
Queen’s Road East, Hong Kong
Telephone: +852 2862 8555
hsbc.ecom@computershare.com.hk
Investor Centre: www.investorcentre.com/hk
Bermuda Overseas Branch Register:
Investor Relations Team
HSBC Bank Bermuda Limited, 37 Front Street,
Hamilton, HM 11, Bermuda
hbbm.shareholder.services@hsbc.bm
Investor Centre: www.investorcentre.com/bm
ADS Depositary:
The Bank of New York Mellon
Shareowner Services, P.O. Box 43006, Providence RI
02940-3078, USA
Telephone (US): +1 877 283 5786
Telephone (International): +1 201 680 6825
shrrelations@cpushareownerservices.com
If your shareholding is not recorded directly on the share register, it is important to remember that your main contact for all matters relating to
your investment remains the registered shareholder, or custodian or broker, who administers the investment on your behalf. This is the case
even if you have elected to receive information rights directly from HSBC Holdings. Any changes or queries relating to your personal details and
holding (including any administration of it) should be directed to your existing contact at your investment manager or custodian or broker. HSBC
Holdings cannot guarantee dealing with matters directed to it in error.
Shareholders who wish to receive a hard copy of the Annual Report and Accounts 2024 should contact HSBC’s Registrars. Please visit
www.hsbc.com/investors/investor-contacts for further information. You can also download an online version of the report from www.hsbc.com.
Electronic communications
Shareholders may at any time choose to receive corporate communications in printed form or to receive notifications of their availability on
HSBC’s website. To receive notifications of the availability of a corporate communication on HSBC’s website by email, or revoke or amend an
instruction to receive such notifications by email, go to www.hsbc.com/investors/shareholder-information/manage-your-shareholding. If you
received a notification of the availability of this document on HSBC’s website and would like to receive a printed copy, or if you would like to
receive future corporate communications in printed form, please write or send an email (quoting your shareholder reference number) to the
appropriate Registrars at the address given above. Printed copies will be provided without charge.
Chinese translation
A Chinese translation of the Annual Report and Accounts 2024 will be available upon request after 21 March 2025 from the Registrars (contact
details above). Please also contact the Registrars if you wish to receive Chinese translations of future documents, or if you have received a
Chinese translation of this document and do not wish to receive them in future.
《2024 年報及賬目》備有中譯本，各界人士可於2025年3月21日之後，向上列股份登記處索閱。
閣下如欲於日後收取相關文件的中譯本，或已收到本文件的中譯本但不希望繼續收取有關譯本，均請聯絡股份登記處。
Stock symbols
HSBC Holdings ordinary shares trade under the following stock symbols:
London Stock Exchange
HSBA*
New York Stock Exchange (ADS)
HSBC
Hong Kong Stock Exchange
5
Bermuda Stock Exchange
HSBC.BH
∗ HSBC’s Primary market
Additional information
440
HSBC Holdings plc Annual Report and Accounts 2024
Investor relations
Enquiries relating to HSBC’s strategy or operations may be directed to:
Neil Sankoff, Global Head of Investor Relations
Yafei Tian, Head of Investor Relations, Asia-Pacific
HSBC Holdings plc
The Hongkong and Shanghai Banking
8 Canada Square
Corporation Limited
London E14 5HQ
1 Queen’s Road Central
United Kingdom
Hong Kong
Telephone: +44 (0) 20 7991 5072
Telephone: +852 2899 8909
Email: investorrelations@hsbc.com
Email: investorrelations@hsbc.com.hk
Where more information about HSBC is available
The Annual Report and Accounts 2024 and other information on HSBC may be downloaded from HSBC’s website: www.hsbc.com.
Reports, statements and information that HSBC Holdings files with the Securities and Exchange Commission are available at www.sec.gov.
Investors can also request hard copies of these documents upon payment of a duplicating fee by writing to the SEC at the Office of Investor
Education and Advocacy, 100 F Street N.E., Washington, DC 20549-0213 or by emailing PublicInfo@sec.gov. Investors should call the
Commission at (1) 202 551 8090 if they require further assistance. Investors may also obtain the reports and other information that HSBC
Holdings files at www.nyse.com (telephone number (1) 212 656 3000).
HM Treasury has transposed the requirements set out under CRD IV and issued the Capital Requirements Country-by-Country Reporting
Regulations 2013. The legislation requires HSBC Holdings to publish additional information in respect of the year ended 31 December 2024 by
31 December 2025. This information will be available on HSBC’s website: www.hsbc.com/tax.
Taxation of shares and dividends
Taxation – UK residents
The following is a summary, under current law (unless otherwise
noted) and the current published practice of HM Revenue and
Customs (‘HMRC’), of certain UK tax considerations that are likely to
be material to the ownership and disposition of HSBC Holdings
ordinary shares. The summary does not purport to be a
comprehensive description of all the tax considerations that may be
relevant to a holder of shares. In particular, the summary deals with
shareholders who are resident solely in the UK for UK tax purposes
and only with holders who hold the shares as investments and who
are the beneficial owners of the shares, and does not address the tax
treatment of certain classes of holders such as dealers in securities.
Holders and prospective purchasers should consult their own
advisers regarding the tax consequences of an investment in shares
in light of their particular circumstances, including the effect of any
national, state or local laws.
Taxation of dividends
Currently, no tax is withheld from dividends paid by HSBC Holdings.
UK resident individuals
UK resident individuals are generally entitled to a tax-free annual
allowance in respect of dividends received. The amount of the
allowance for the tax year beginning 6 April 2024 is £500. To the
extent that dividend income received by an individual in the relevant
tax year does not exceed the allowance, a nil tax rate will apply.
Dividend income in excess of this allowance will be taxed at 8.75%
for basic rate taxpayers, 33.75% for higher rate taxpayers and
39.35% for additional rate taxpayers.
UK resident companies
Shareholders that are within the charge to UK corporation tax should
generally be entitled to an exemption from UK corporation tax on any
dividends received from HSBC Holdings. However, the exemptions
are not comprehensive and are subject to anti-avoidance rules.
If the conditions for exemption are not met or cease to be satisfied,
or a shareholder within the charge to UK corporation tax elects for an
otherwise exempt dividend to be taxable, the shareholder will be
subject to UK corporation tax on dividends received from HSBC
Holdings at the rate of corporation tax applicable to that shareholder.
Taxation of capital gains
The computation of the capital gains tax liability arising on disposals
of shares in HSBC Holdings by shareholders subject to UK tax on
capital gains can be complex, partly depending on whether, for
example, the shares were purchased since April 1991, acquired in
1991 in exchange for shares in The Hongkong and Shanghai Banking
Corporation Limited, or acquired subsequent to 1991 in exchange for
shares in other companies.
For capital gains tax purposes, the acquisition cost for ordinary shares
is adjusted to take account of subsequent rights and capitalisation
issues. Any capital gain arising on a disposal of shares in HSBC
Holdings by a UK company may also be adjusted to take account of
indexation allowance if the shares were acquired before 1 January
2018, although the level of indexation allowance that is given in
calculating the gain would be frozen at the value that would have
been applied to a disposal of those shares in December 2017. If in
doubt, shareholders are recommended to consult their professional
advisers.
Stamp duty and stamp duty reserve tax
Transfers of shares by a written instrument of transfer generally will
be subject to UK stamp duty at the rate of 0.5% of the consideration
paid for the transfer (rounded up to the next £5), and such stamp duty
is generally payable by the transferee. An agreement to transfer
shares, or any interest therein, normally will give rise to a charge to
stamp duty reserve tax at the rate of 0.5% of the consideration.
However, provided an instrument of transfer of the shares is
executed pursuant to the agreement and duly stamped before the
date on which the stamp duty reserve tax becomes payable, under
the current published practice of HMRC it will not be necessary to
pay the stamp duty reserve tax, nor to apply for such tax to be
cancelled. Stamp duty reserve tax is generally payable by the
transferee.
Paperless transfers of shares within CREST, the UK’s paperless share
transfer system, are liable to stamp duty reserve tax at the rate of
0.5% of the consideration. In CREST transactions, the tax is
calculated and payment made automatically. Deposits of shares into
CREST generally will not be subject to stamp duty reserve tax, unless
the transfer into CREST is itself for consideration.
HSBC Holdings plc Annual Report and Accounts 2024
441
Additional information
Taxation – US residents
The following is a summary, under current law, of the principal UK tax
and US federal income tax considerations that are likely to be material
to the ownership and disposition of shares or American Depositary
Shares (‘ADSs’) by a holder that is a US holder, as defined below, and
who is not resident in the UK for UK tax purposes.
The summary does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a holder of shares
or ADSs. In particular, the summary deals only with US holders that
hold shares or ADSs as capital assets, and does not address the tax
treatment of holders that are subject to special tax rules. These
include banks, tax-exempt entities, insurance companies, dealers in
securities or currencies, persons that hold shares or ADSs as part of
an integrated investment (including a ‘straddle’ or ‘hedge’) comprised
of a share or ADS and one or more other positions, and persons that
own directly or indirectly 10% or more (by vote or value) of the stock
of HSBC Holdings. This discussion is based on laws, treaties, judicial
decisions and regulatory interpretations in effect on the date hereof,
all of which are subject to change.
For the purposes of this discussion, a ‘US holder’ is a beneficial
holder that is a citizen or resident of the United States, a US domestic
corporation or otherwise is subject to US federal income taxes on a
net income basis in respect thereof.
Holders and prospective purchasers should consult their own
advisers regarding the tax consequences of an investment in shares
or ADSs in light of their particular circumstances, including the effect
of any national, state or local laws.
Any US federal tax advice included in the Annual Report and
Accounts 2024 is for informational purposes only. It was not intended
or written to be used, and cannot be used, for the purpose of
avoiding US federal tax penalties.
Taxation of dividends
Currently, no tax is withheld from dividends paid by HSBC Holdings.
For US tax purposes, a US holder must include cash dividends paid
on the shares or ADSs in ordinary income on the date that such
holder or the ADS depositary receives them, translating dividends
paid in UK pounds sterling into US dollars using the exchange rate in
effect on the date of receipt. A US holder that elects to receive
shares in lieu of a cash dividend must include in ordinary income the
fair market value of such shares on the dividend payment date, and
the tax basis of those shares will equal such fair market value.
Subject to certain exceptions for positions that are held for less than
61 days, and subject to a foreign corporation being considered a
‘qualified foreign corporation’ (which includes not being classified for
US federal income tax purposes as a passive foreign investment
company), certain dividends (‘qualified dividends’) received by an
individual US holder generally will be subject to US taxation at
preferential rates.
Based on the company’s audited financial statements and relevant
market and shareholder data, HSBC Holdings does not believe that it
was a passive investment company for its 2024 taxable year and
does not anticipate becoming a passive foreign investment company
in 2025 or the foreseeable future. Accordingly, dividends paid on the
shares or ADSs generally should be eligible for qualified dividends
treatment.
Taxation of capital gains
Gains realised by a US holder on the sale or other disposition of
shares or ADSs normally will not be subject to UK taxation unless at
the time of the sale or other disposition the holder carries on a trade,
profession or vocation in the UK through a branch or agency or
permanent establishment and the shares or ADSs are or have been
used, held or acquired for the purposes of such trade, profession,
vocation, branch or agency or permanent establishment. Such gains
will be included in income for US tax purposes, and will be long-term
capital gains if the shares or ADSs were held for more than one year.
A long-term capital gain realised by an individual US holder generally
will be subject to US tax at preferential rates.
Inheritance tax
Shares or ADSs held by an individual whose domicile is determined
to be the US for the purposes of the United States–United Kingdom
Double Taxation Convention relating to estate and gift taxes (the
‘Estate Tax Treaty’) and who is not for such purposes a national of
the UK will not, provided any US federal estate or gift tax chargeable
has been paid, be subject to UK inheritance tax on the individual’s
death or on a lifetime transfer of shares or ADSs except in certain
cases where the shares or ADSs (i) are comprised in a settlement
(unless, at the time of the settlement, the settlor was domiciled in
the US and was not a national of the UK), (ii) are part of the business
property of a UK permanent establishment of an enterprise, or (iii)
pertain to a UK fixed base of an individual used for the performance
of independent personal services. In such cases, the Estate Tax
Treaty generally provides a credit against US federal tax liability for
the amount of any tax paid in the UK in a case where the shares or
ADSs are subject to both UK inheritance tax and to US federal estate
or gift tax.
Stamp duty and stamp duty reserve tax –
ADSs
If shares are transferred to a clearance service or American
Depositary Receipt (‘ADR’) issuer (which will include a transfer of
shares to the depositary) UK stamp duty and/or stamp duty reserve
tax will be payable unless the transfer is, or is treated as being, in the
course of a capital raising arrangement. The stamp duty or stamp
duty reserve tax is generally payable on the consideration for the
transfer (or, if there is no consideration in money or money’s worth,
the value of the shares being transferred) and is payable at the
aggregate rate of 1.5%.
The amount of stamp duty reserve tax payable on such a transfer will
be reduced by any stamp duty paid in connection with the same
transfer.
No stamp duty will be payable on the transfer of, or agreement to
transfer, an ADS, provided that the ADR and any separate instrument
of transfer or written agreement to transfer remain at all times
outside the UK, and provided further that any such transfer or written
agreement to transfer is not executed in the UK. No stamp duty
reserve tax will be payable on a transfer of, or agreement to transfer,
an ADS effected by the transfer of an ADR.
US information reporting and backup
withholding tax
Distributions made on shares or ADSs and proceeds from the sale of
shares or ADSs that are paid within the US, or through certain
financial intermediaries to US holders, are subject to US information
reporting and may be subject to a US ‘backup’ withholding tax.
General exceptions to this rule happen when the US holder:
establishes that it is a corporation (other than an S corporation) or
other exempt holder; or provides a correct taxpayer identification
number, certifies that no loss of exemption from backup withholding
has occurred and otherwise complies with the applicable
requirements of the backup withholding rules. Holders that are not
US persons (as defined in the US Internal Revenue Code of 1986, as
amended) generally are not subject to US information reporting or
backup withholding tax, but may be required to comply with
applicable certification procedures to establish that they are not US
persons in order to avoid the application of such US information
reporting requirements or backup withholding tax to payments
received within the US or through certain financial intermediaries.
Additional information
442
HSBC Holdings plc Annual Report and Accounts 2024
Approach to ESG reporting
The information set out in the ESG review on pages 41 to 84, taken
together with other information relating to ESG issues included in this
Annual Report and Accounts 2024, aims to provide key ESG
information and data relevant to our operations for the year ended
31 December 2024. The data is compiled for the financial year
1 January to 31 December 2024 unless otherwise specified.
Measurement techniques and calculations are explained next to data
tables where necessary. There are no significant changes from the
previous reporting period in terms of scope, boundary or
measurement of our reporting of ESG matters. Where relevant,
rationale is provided for any restatement of information or data that
has been previously published.
How we decide what to measure
We listen to our stakeholders in a number of different ways, which
we set out in more detail within the ‘ESG overview’ on page 16. We
use the information they provide us to identify the issues that are
most important to them and consequently also matter to our own
business. Our ESG Committee and other relevant governance bodies
regularly discuss the new and existing themes and issues that matter
to our stakeholders. Our management team then uses this insight,
alongside the framework of the ESG Guide (which refers to our
obligations under the Environmental, Social and Governance
Reporting Guide contained in Appendix C2 to The Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong
Limited), and the UKLR 6.6.6R(8) of the Financial Conduct Authority’s
(‘FCA’) Listing Rules, Sections 414CA and 414CB of the UK
Companies Act 2006, and other applicable laws and regulations to
choose what we measure and publicly report in our ESG review. We
will continue to develop and refine our reporting and disclosures on
ESG matters in line with feedback received from our investors and
other stakeholders, and in view of our obligations under the ESG
Guide and the FCA’s Listing Rules.
Under the ESG Guide, ’materiality’ is considered to be the threshold
at which ESG issues become sufficiently important to our investors
and other stakeholders that they should be publicly reported. Our
approach to materiality also considers disclosure standards and other
applicable rules and regulations as part of our materiality assessment
for specific ESG topics and relevant disclosures.
Given ongoing developments in the ESG regulatory environment
across various jurisdictions in which we operate, combined with the
relative immaturity of processes, systems, data quality and controls,
our focus remains on supporting a globally consistent set of
mandatory sustainability standards. We aim to continue to evolve our
reporting to recognise market developments, such as the
International Sustainability Standards Board (‘ISSB’) or the Corporate
Sustainability Reporting Directive (‘CSRD’), and support the efforts to
harmonise the disclosures. In this Annual Report and Accounts 2024,
we continue to report against the core World Economic Forum
(‘WEF’), Stakeholder Capitalism Metrics and Sustainability Accounting
Standards Board (‘SASB’) metrics, and will continue to review our
approach as the regulatory landscape evolves.
Consistent with the scope of financial information presented in our
Annual Report and Accounts, the ESG review covers the operations
of HSBC Holdings plc and its subsidiaries. Given the relative
immaturity of ESG-related data and methodologies in general, we are
on a journey towards improving completeness and robustness.
For further details of our material ESG topics, see ‘Engaging with our
stakeholders and our material ESG topics’ on page 16.
Our reporting around ESG
We report on ESG matters throughout our Annual Report and
Accounts 2024, including the ’ESG overview’ section of the Strategic
Report (pages 15 to 19), ESG review (pages 41 to 84), and the
‘Climate risk’ and ‘Insights from climate scenario analysis’ sections of
the Risk review (pages 219 to 228). In addition, we have other
supplementary materials, including our ESG Data Pack, which
provides a more granular breakdown of ESG information.
Detailed data
Additional reports
ESG Data Pack 2024,
including SASB Index
2024 and WEF Index
2024
UK Pay Gap Report 2024
Modern Slavery and Human Trafficking Statement
2024
Green Bond Report 2024
HSBC UN Sustainable Development Goals Bond
Report 2024
For further details of our supplementary materials, see our ESG reporting
centre at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-
reporting-centre.
ESG Guide
We comply with the ‘comply or explain’ provisions in the ESG Guide,
save for certain items, which we describe in more detail below:
–
A1(b) on relevant laws/regulations relating to air and greenhouse
gas emissions, discharges into water and land, and generation of
hazardous and non-hazardous waste, and on emissions: taking into
account the nature of our business, we do not believe that there
are relevant laws and regulations in these areas that have
significant impacts on our operations. Nevertheless, we are fully
compliant with our publication of information regarding scope 1
and 2 carbon emissions, while we only partially publish
information on scope 3 carbon emissions, as the data required for
that publication is not yet fully available.
–
A1.3 on total hazardous waste produced, A1.4 on total non-
hazardous waste produced: Taking into account the nature of our
business, we do not consider hazardous waste to be a material
issue for our stakeholders. As such, we report only on total waste
produced, which includes hazardous and non-hazardous waste.
–
A1.6 on handling hazardous and non-hazardous waste: Taking into
account the nature of our business, we do not consider this to be
a material issue for our stakeholders. Notwithstanding this, we
continue to focus on the reduction and recycling of all waste.
Building on the success of our previous operational environmental
strategy, we are continuing to seek to identify key opportunities
where we can lessen our wider environmental impact, including
waste management. For further details, please see our ESG
review on page 58.
–
A2.4 on sourcing water issue and water efficiency target: Taking
into account the nature of our business, we do not consider this to
be a material issue for our stakeholders. Notwithstanding this, we
have implemented measures to further reduce water consumption
through the installation of flow restrictors, auto-taps and low or
zero flush sanitary fittings and continue to track our water
consumption.
–
A2.5 on packaging material, B6(b) on issues related to health and
safety and labelling relating to products and services provided,
B6.1 on percentage of total products sold or shipped subject to
recalls for safety and health reasons and B6.4 in recall procedures:
Taking into account the nature of our business, we do not
consider these to be material issues for our stakeholders.
This is aligned with the materiality reporting principle that is set out in
the ESG Guide. See ‘How we decide what to measure’ for further
information on how we determine what matters are material to our
stakeholders.
HSBC Holdings plc Annual Report and Accounts 2024
443
Additional information
Task Force on Climate-related Financial Disclosures (‘TCFD’)
As noted on page 18, we have considered our ‘comply or explain’ obligation under both UKLR 6.6.6(8) of the Financial Conduct Authority’s
(‘FCA’) Listing Rules and Sections 414CA and 414CB of the UK Companies Act 2006. We perform an assessment to ascertain the appropriate
level of detail to be included in the climate-related financial disclosures that are set out in our Annual Report and Accounts, as part of
considering what to measure and publicly report. Our assessment takes into account factors such as the level of our exposure to climate-
related risks and opportunities, the scope and objectives of our climate-related strategy, transitional challenges, and the nature, size and
complexity of our business. See ‘How we decide what to measure’ for further information.
We confirm that we have made disclosures consistent with 11 TCFD Recommendations and Recommended Disclosures, including its annexes
and supplemental guidance, which we summarise in the table below:
Recommendation
Response
Disclosure
location
Governance
a) Describe the Board’s oversight of climate-related risks and opportunities (Companies Act 2006 - Sections 414CA and 414CB 2A (a))
Process, frequency and
training
– The Board takes overall responsibility for ESG strategy, overseeing executive management in developing the
approach, execution and associated reporting. ESG strategies were considered at eight Board meetings during the
year.
Pages 74
and 253
– Board members receive ESG-related training as part of their induction and ongoing development, and seek out further
opportunities to build their skills and experience in this area.
Page 74
Sub-committee
accountability,
processes and
frequency
– The Group Audit Committee (‘GAC’) considered ESG and climate reporting matters at six meetings during 2024.
Furthermore, as an area of expanded assurance, the GAC, supported by the executive-level ESG Committee, provided
close oversight of the disclosure risks in relation to sustainability and climate reporting, amid rising stakeholder
expectations. The work will continue throughout 2025 in partnership with the Sustainability Working Group.
Page 264
– The Group Risk Committee (‘GRC’) remained focused on climate risk and greenwashing risk. The GRC received reports
on climate risk management and sustainability risk policies, while maintaining oversight of delivery plans and risk appetite
breaches to help ensure that the Group continues to develop and maintains robust climate risk management capabilities.
Reputation risk considerations have also formed part of these discussions. It considered climate risk at four meetings in
2024.
Pages 272
and 275
– The diagram on page 74 provides an illustration of our ESG governance process, including how the Board’s strategy
on climate is cascaded and implemented throughout the organisation. It identifies examples of forums that manage
both climate-related opportunities and risks, along with their responsibilities and the responsible chair.
Page 74
Examples of the Board
and relevant Board
committees taking
climate into account
– The Board has overall responsibility for ESG strategy, overseeing executive management in developing the approach,
execution, and associated reporting.
Page 251
– We enhanced our ESG governance with the establishment of a new Sustainability Working Group (‘SWG’) of the HSBC
Holdings Board. This working group has an initial remit to provide oversight and guidance in relation to the Group’s
sustainability activities, including the targets and timelines set out in the net zero transition plan, key sustainability risk
policies and communication with key stakeholder groups.
Pages 22
and 74
– In 2024, the Board oversaw the implementation of ESG strategy through regular dashboard reports and detailed
updates including: review and approval of the net zero transition plan; deep dives on the sustainability execution
programme; and updates on human rights.
Page 251
b) Describe management’s role in assessing and managing climate-related risks and opportunities (Companies Act 2006 - Sections 414CA and 414CB 2A (a))
Who manages climate-
related risks and
opportunities
– The Sustainability Working Group, established in 4Q24, oversees and provides guidance on the Group-wide medium
and longer-term sustainability strategy. The ESG Committee has oversight of ESG strategy, policy, material
commitments and external disclosure. It is co-chaired by the Group CEO and the Group Chief Sustainability Officer.
Page 220
– The Group Chief Risk and Compliance Officer is the senior manager responsible for the management of climate risk
under the UK Senior Managers Regime, holding overall accountability for the Group’s climate risk programme.
Page 220
How management
reports to the Board
– The Board delegates day-to-day management of the business and implementation of strategy to the Group CEO. During the
year, the incumbent Group CEO was supported in his management of the Group by recommendations and advice from the
Group Executive Committee (’GEC’), an executive forum comprising members of senior management that include chief
executive officers of the global businesses and regions, as well as functional heads.
Page 247
– During the year, the Board also oversaw the rationalisation of the ESG Committee and Sustainability Execution
Committee into a single governance body (named the ESG Committee). These Board and executive level governance
forums support senior management in the operationalisation of the Group’s sustainability strategy, through the oversight
of the sustainability execution programme. For further details see page 74.
Page 251
Processes used to
inform management
– The Group Risk Management Meeting oversees the enterprise-wide management of all risks, including updates
relating to the Group’s climate risk profile and risk appetite, top and emerging climate risks, and key climate initiatives.
Page 74
Strategy
a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term (Companies Act 2006 -
Sections 414CA and 414CB 2A (d))
Processes used to
determine material
risks and opportunities
– When assessing our long-term scenarios, climate-related losses are expected to remain minimal in the short term and
likely to increase in the medium and longer time horizon, driven by the transition to a net zero economy and greater
physical risk impacts.
Page 224
– Our models continue to incorporate a range of climate-specific metrics that could potentially impact our customers,
including expected production volumes, revenue, costs and capital expenditure.
Page 224
Relevant short-,
medium-, and long-term
time horizons
– Our annual climate risk materiality assessment helps us to understand how climate risk may impact HSBC’s risk
taxonomy. The assessment considers short-term (up to 2026), medium-term (2027-2035) and long-term (2036-2050)
periods.
Page 219
Additional information
444
HSBC Holdings plc Annual Report and Accounts 2024
TCFD
Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Recommendation
Response
Disclosure
location
Transition or physical
climate-related issues
identified
– We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between
$750bn and $1tn of sustainable finance and investment by 2030. Our Sustainable Finance and Investment Data
Dictionary 2024 includes a detailed definition of contributing activities.
Page 45
– For transition risk, we have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six
high transition risk sectors. As at 31 December 2024, the overall exposure to six high transition risk sectors was 18% of
total gross carrying amount of wholesale loans and advances. Our relationship managers engage with our key wholesale
customers, including those in higher transition risk sectors, through a transition engagement questionnaire (‘TEQ’). In
2024, the TEQ was expanded to cover all geographies. The TEQ helps to gather information and assess our wholesale
customers’ business model alignment to a net zero transition and their exposure to physical and transition risks.
Page 221
– The impact on our wholesale portfolios is demonstrated by the table on page 225 which shows the size of exposures by
sector in 2024 and the cumulative change in ECL compared with a counterfactual scenario (expressed as a multiple).
The size of our exposure in each sector is represented by our exposure at default (‘EAD’) relative to one another.
Page 225
– The table on page 227 demonstrates the impact on our commercial real estate (‘CRE’) portfolio for specific markets,
including the three biggest markets – Hong Kong, the UK and the US. This shows the increase in cumulative ECL over
different time horizons, under each scenario, compared with a counterfactual scenario (expressed as a multiple).
Page 227
– We measure the impacts of climate and weather events on our buildings on an ongoing basis using historical, current
and scenario-modelled forecast data. In 2024, there were 40 major storms that had a minor impact on three of our
buildings.
Page 228
Risks and
opportunities by
sector and/or
geography
– For transition risk, we have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six
high transition risk sectors. These are automotive, chemicals, construction, contracting & building materials, metals and
mining, oil and gas, and power and utilities.
Page 221
– Within our mortgage portfolios, properties or areas with potentially heightened physical risk are identified and assessed
locally with exposure monitored using risk indicators. A reduction in property value, higher insurance costs and insurance
availability are potential future negative financial impacts for properties with higher physical risk. Geographically, for the
UK lending balances, our highest flood risk exposures are the Greater London and South-East regions.
Page 221
– Development of clean power generation is critical to achieving net zero. We supported Abu Dhabi Future Energy
Company (Masdar) towards its equity commitments on new greenfield projects in renewable energy and energy
efficiency, by acting as joint lead manager and bookrunner in raising $1bn through its second green bond issuance.
Page 46
– We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between
$750bn and $1tn of sustainable finance and investment by 2030. Additional detailed information on our sustainable
finance and investment progress can be found in the ESG Data Pack.
Page 45
Concentrations of
credit exposure to
carbon-related assets
(supplemental
guidance for banks)
– We report our exposure to the six high transition risk sectors in the wholesale portfolio, which are automotive,
chemicals, construction, contracting & building materials, metals and mining, oil and gas, and power and utilities. For
details, see the ESG Data Pack.
Page 221
– We monitor the energy performance certificate (‘EPC’) ratings of individual properties from A (highest efficiency) through
to G (least efficient) as EPCs are commonly used as an indicator of transition risk in the UK mortgage book.
Page 221
Climate-related risks
(transition and
physical) in lending
and other financial
intermediary business
activities
(supplemental
guidance for banks)
– Our material exposure to climate risk relates to wholesale and retail client financing activity within our banking portfolio.
Page 60
– We are also exposed to climate risk in relation to asset ownership by our insurance business and employee pension
plans.
Page 60
– HSBC Asset Management recognises that climate-related risks may impact the operational and financial performance of
investee companies. The impact of these risks will vary depending on characteristics such as asset class, sector,
business model and geography. HSBC Asset Management continues to integrate climate analysis into its actively
managed product offerings and seeks to assess climate-related risks that could impact investment performance, where
applicable and relevant.
Page 60
– Our relationship managers engage with our key wholesale customers, including those in higher transition risk sectors,
through a transition engagement questionnaire (‘TEQ’). In 2024, the TEQ was expanded to cover all geographies. The
TEQ helps to gather information and assess our wholesale customers’ business model alignment to a net zero transition
and their exposure to physical and transition risks. We use the responses to the questionnaire to risk-assess our key
wholesale customers.
Page 221
– Under the Current Commitments scenario, our modelled outputs predict that ECL will not be more than 25% higher than the
counterfactual scenario for any of the assessed sectors. The highest impacts are seen in the chemicals, construction and
building materials, power and utilities and agriculture and soft commodities sectors. Greater climate risks would crystallise
in the Below 2 Degrees scenario with its gradually increasing transition to net zero, driven by pockets of customers in higher-
emitting sectors that are continuously exposed to larger climate-related losses.
Page 225
– The UK is our largest mortgage market, and as of November 2024, made up 46.7% of our global mortgage portfolio. Our
ESG Data Pack includes our climate risk exposures for this portfolio across regions. The maturity profile of the UK mortgage
book shows that the average remaining contractual term in the UK is 21.8 years. This means our strategic approach to
climate risk considers both present day risk and long-term forward-looking risk, given that customers may choose to remain
with us over the lifespan of the loan. For the UK mortgage book, flood data is available for 93.7% of the mortgage book of
which 0.9% is at a very high risk of flooding, with 2.7% of the book at a high risk of flooding.
Page 221
HSBC Holdings plc Annual Report and Accounts 2024
445
Additional information
Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Recommendation
Response
Disclosure
location
b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning (Companies Act 2006
- Sections 414CA and 414CB 2A (e))
Impact on strategy,
business, and
financial planning
– We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between $750bn
and $1tn of sustainable finance and investment by 2030.
Page 42
– Climate scenario analysis supports our strategy by assessing our potential exposures to risks and vulnerabilities under a range
of climate scenarios. It is one of the key tools used to support the evaluation of portfolios in line with our net zero ambition.
Our 2024 scenarios considered the key regions in which we operate and were designed to assess the impact on our balance
sheet across three distinct periods: short term up to 2026; medium term from 2027 to 2035; and long term from 2036 to
2050.
Page 223
– From a financial and capital planning perspective, we use climate scenario analysis to support the Group’s internal capital
adequacy assessment process (‘ICAAP’) to understand the amount of capital the Group should hold to meet identified
climate risks, including integration of climate impacts into the Group’s internal stress testing exercises.
Page 223
– We have assessed the impact of climate risk on our balance sheet and have concluded that no incremental adjustments were
needed to capture climate impacts in our financial statements for the year ended 31 December 2024.
Page 43
– We have used climate scenarios to inform our organisation’s business, strategy and financial planning. In 2024, we
continued to incorporate certain aspects of sustainable finance within our financial planning process.
– We do not fully disclose impacts from climate-related opportunities on financial planning and performance including on
revenue, costs and the balance sheet, quantitative scenario analysis, detailed climate risk exposures for all sectors and
geographies or physical risk metrics. This is due to transitional challenges in relation to data limitations, although nascent
work is ongoing in these areas. We expect these data limitations to be addressed in the medium term as more reliable
data becomes available and technology solutions are implemented.
Impact on products
and services
– We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between $750bn
and $1tn of sustainable finance and investment by 2030.
Page 45
– Thermal coal mining: In 2021, absolute on-balance sheet financed emissions decreased by 71% to 1.38 Mt CO2e relative
to the re-baselined 2020 figure. In 2022, the absolute on-balance sheet financed emissions of our portfolio decreased by
69% to 1.44 Mt CO2e relative to the re-baselined 2020 figure, and they rose by 4% from 2021 to 2022. The reduction
from the 2020 re-baselined figure was due to strategic decisions and temporary factors, such as low loan drawdown
levels.
Page 56
Impact on supply
chain and/or value
chain
– In 2024 we incorporated an additional supply chain data source to complement data from CDP (formerly the Carbon
Disclosure Project). We continue to improve the measurement, quality and reporting of our supply chain emissions data to
generate insights to drive targeted reduction activities.
Page 58
– Our supply chain contributes c.81% of our operational emissions and is the area in which we face the most significant
decarbonisation challenge. Many suppliers are still in the early phase of their decarbonisation journey. We have stepped
up targeted efforts to support decarbonisation across our supply chain.
Page 58
– We focus on building strategic partnerships that can help to create an enabling environment for mobilising finance, and
support development and scaling-up of solutions for the net zero transition. In 2024 we donated approximately $9m in
grant funding to help establish a portfolio of partnerships aligned to the strategic focus areas set out in our net zero
transition plan: transitioning industry, catalysing the new economy, and decarbonising trade and supply chains. We are
also supporting initiatives focused on driving progress on cross-cutting issues, such as nature and the just transition.
Page 47
– As part of its stewardship activities, HSBC Asset Management engages on climate change issues with investee companies
on a priority list, as defined in its Stewardship Plan.
Page 60
Impact on adaptation
and mitigation
activities
– In 2024 we achieved a 30.5% reduction in our energy consumption compared with 2019 (2023: 26.3%). This has been
achieved through optimising the use of our real estate portfolio and carrying out a reduction in our office space and data
centres. We continue to optimise our assets to ensure greater efficiency and capitalise on new energy technologies. In 2024
we increased our purchase of electricity from renewable sources to 75.4% from 58.4% in 2023. This included increasing our
coverage of green tariffs in India and mainland China. Renewable electricity can help unlock our emissions reduction
potential, and we aim to achieve 100% renewable electricity across our own operations by 2030.
Page 58
– This forward-looking data along with historical data helps inform real estate planning. We will continue to enhance our
understanding of how extreme weather events impact our buildings portfolio as climate risk assessment tools improve and
evolve. We buy insurance for property damage and business interruption and consider insurance as a loss-mitigation
strategy depending on its availability and price. We regularly review and enhance our building selection process and global
engineering standards and will continue to assess historical claims data to help ensure our building selection and design
standards address the potential impacts of climate change.
Page 228
Impact on operations
– We measure the impacts of climate and weather events on our buildings on an ongoing basis using historical, current and
scenario-modelled forecast data. In 2024, there were 40 major storms that had a minor impact on three of our buildings.
We use stress testing to evaluate the potential impact on our owned or leased premises. Our 2024 scenario stress test
analysed how nine climate change-related hazards – comprising coastal flooding, fluvial flooding, pluvial flooding, soil
movement due to drought, temperature extremes, water stress, wildfires, landslides and tropical cyclones – could impact
2,719 of our properties.
Page 228
Impact on
investment in
research and
development
– Our five-year Climate Solutions Partnership with the World Resources Institute, WWF and over 50 local partners,
continues to support nature-based solutions and energy transition in Asia. Since 2020, $105m in funding has been
deployed to our NGO partners. The energy programmes have engaged companies across Asia to help set new standards
in climate commitments for their industries and mobilised finance to support the uptake of renewables. The nature
programmes supported the Asia Sustainable Palm Oil Links programme, focused on promoting sustainable palm oil
production, consumption and trade across Asia, and the Nature-based Solutions Accelerator, which supported projects to
reach investment readiness.
Page 47
– We are a founding funder of the Just Transition Finance Lab, hosted at the LSE’s Grantham Research Institute, which
aims to accelerate solutions to achieve progress on climate and wider environmental goals through a people-centred
approach. Since its launch in early 2024, the Lab has produced a range of outputs including: mapping just transition
policies to a set of metrics, exploration of the role investors can play in facilitating a just transition in India, a case study of
the coal-to-clean shift in Chile, and a detailed examination of the financial path to a just transition in the critical minerals
sector.
Page 47
Additional information
446
HSBC Holdings plc Annual Report and Accounts 2024
Impact on acquisitions
or divestments
– Our mergers and acquisitions process considers potential climate and sustainability-related targets, net zero transition
plans and climate strategy, and how this relates to HSBC.
Page 219
Impact on access to
capital
– We have considered the impact of climate-related issues on our businesses, strategy and financial planning. Our access to
capital may be impacted by reputational concerns as a result of climate action or inaction. In addition, if we are perceived
to mislead stakeholders on our business activities or if we fail to achieve our stated net zero ambitions, we could
potentially face reputational damage, impacting our revenue-generating ability and our access to capital markets. We
expect to make the disclosure in the medium term as more data becomes available. To manage these risks we have
integrated climate risk into our existing risk taxonomy, and incorporated it within the risk management framework through
the policies and controls for the existing risks where appropriate.
Transition plan to a low-
carbon economy
– In 2020, we set an ambition to become a net zero bank by 2050. Since then, we have taken various actions across our
organisation to support implementation as set out in our net zero transition plan. We continue to review both our transition
plan and associated GHG targets to, where possible, ensure they remain consistent with assumptions used in our financial
planning, including related financial approach for the implementation of the transition plan in the medium term (e.g. amount
of capital and other expenditures supporting our decarbonisation strategy). The reference pathways we consider are global
and we do not currently set GHG targets for individual countries or entities; however, we continue to explore the use of
multiple climate-related scenarios to test achievability of the financed emissions targets and own operations ambition.
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario
(Companies Act 2006 - Sections 414CA and 414CB 2A (f))
Embedding climate into
scenario analysis
– Climate scenario analysis supports our strategy by assessing our potential exposures to risks and vulnerabilities under
a range of climate scenarios. It is one of the key tools used to support the evaluation of portfolios in line with our net
zero ambition.
Page 223
– Our 2024 scenarios considered the key regions in which we operate and were designed to assess the impact on our
balance sheet across three distinct periods: short term up to 2026; medium term from 2027 to 2035; and long term
from 2036 to 2050.
Page 223
Key drivers of
performance and how
these have been taken
into account
– The 2024 climate scenario analysis exercise was designed to examine the climate risks and vulnerabilities of corporate
counterparties, across high transition risk sectors under climate scenarios of varying severity. Specifically, we
measured the modelled effect on our projected ECL change over the short-, medium- and long-term horizons under
each scenario. This was compared to a counterfactual scenario that excludes climate change impacts to isolate the
climate only changes in ECL. Our analysis shows that over the longer term, we expect minimal losses to materialise
when considering the Current Commitments scenario.
Pages 225
and 226
– From a financial and capital planning perspective, we use climate scenario analysis to support the Group’s internal
capital adequacy assessment process (‘ICAAP’) to understand the amount of capital the Group should hold to meet
identified climate risks, including integration of climate impacts into the Group’s internal stress testing exercises.
Page 223
– Climate scenario analysis also informs strategic planning by providing insights on the size and timing of financial
impacts, and IFRS 9 loss provisioning to ensure climate risks are adequately provisioned for in our balance sheet, such
as expected credit losses (‘ECL’).
Page 223
Scenarios used and how
they factored in
government policies
– Our scenarios are: Downside Physical Risk scenario, Severe Climate Stress scenario, Current Commitments scenario,
Below 2 Degrees scenario and Delayed Transition Risk scenario.
Page 223
– Our 2024 scenarios considered the key regions in which we operate and were designed to assess the impact on our
balance sheet across three distinct periods: short term up to 2026; medium term from 2027 to 2035; and long term
from 2036 to 2050.
Page 223
– We have chosen these scenarios to provide a holistic view that supplements the Group’s current and future strategic
thinking. The 2024 climate scenarios are underpinned by well-established industry bodies such as Network for
Greening Finance Phase IV, the Intergovernmental Panel on Climate Change (‘IPCC’) and International Energy Agency
(‘IEA’), which are further enriched for additional granularity, ensuring consistency with industry-recognised work, and
reflecting the latest climate policy and economic outlook.
Page 223
– The scenarios developed for climate scenario analysis are designed to examine HSBC’s financial performance and
capital resilience across a wide range of potential climate outcomes. They are sufficiently diverse to enable HSBC’s
key physical and transition risk vulnerabilities to be explored. To meet our global regulatory needs, we produced
several climate stress tests for regulators around the world, including the Hong Kong Monetary Authority (‘HKMA’).
Page 223
How our strategies may
change and adapt
– The analysis supports our approach to supporting our clients in the transition to net zero through assessing, where
available, client level financial and credit risk metrics, and identifying where further analysis and climate risk focus is
required.
Page 223
– In our net zero transition plan published in January 2024 we committed to continually calibrate our approach to take
into consideration the latest scientific methodologies, climate-related policies and developments in the real world
given that our sector portfolios reflect progress in the regional economies where we operate. See page 15 for details.
Page 42
– Our target-setting approach to date for on-balance sheet financed emissions and facilitated emissions, has been to
utilise a single reference scenario – IEA’s NZE 2021 – to underpin both energy supply-related sectors (oil and gas;
power and utilities; and thermal coal mining), and our published targets for demand-side sectors in transport (aviation
and automotive) and heavy industry (cement; and iron, steel and aluminium).
Page 48
– We do not currently fully disclose the impacts of transition and physical risk quantitatively, due to transitional
challenges including data limitations and evolving science and methodologies. In 2024, we disclosed the potential
impairment impacts for our wholesale and commercial real estate portfolios in different climate scenarios. We also
disclose our exposure to flooding in our retail mortgage book for specific markets. For our wholesale book, we
disclose potential implications on our expected credit losses for 11 sectors under two scenarios. These are
accompanied with a heat map, illustrating how we expect the potential risks to evolve over time under a variety of
scenarios.
Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Recommendation
Response
Disclosure
location
HSBC Holdings plc Annual Report and Accounts 2024
447
Additional information
Risk management
a) Describe the organisation’s processes for identifying and assessing climate-related risks (Companies Act 2006 - Sections 414CA and 414CB 2A (b))
Process
– The scenarios developed for climate scenario analysis are designed to examine HSBC’s financial performance and
capital resilience across a wide range of potential climate outcomes. They are sufficiently diverse to enable HSBC’s
key physical and transition risk vulnerabilities to be explored. We continue to enhance our climate scenario analysis
exercises so that we can have a more comprehensive understanding of climate headwinds, risks and opportunities to
support our strategic planning, actions and risk management.
Page 223
– We continue to review policy implementation as we apply our sustainability risk policies in practice, and our
operationalisation of such policies continues to be enhanced. We take a risk-based approach when identifying
transactions and clients to which our sustainability risk policies apply and, where relevant, when reporting on relevant
exposures, adopting approaches proportionate to risk and materiality.
Page 61
Integration into policies
and procedures
– We continue to integrate climate risk into policies, processes and controls across many areas of our organisation, and
we will continue to update these as our climate risk management capabilities mature over time.
Page 220
Consider climate-related
risks in traditional
banking industry risk
categories
(supplementary guidance
for banks)
– We provide further details of how we have embedded the management of climate risk across key risk types, including
wholesale credit risk, retail credit risk, treasury risk, traded risk, reputational risk, regulatory compliance risk, resilience
risk, model risk, and financial reporting risk.
Page 221
b) Describe the organisation’s processes for managing climate-related risks (Companies Act 2006 - Sections 414CA and 414CB 2A (b))
Process and how we
make decisions
– The Group Risk Management Meeting and the Group Risk Committee receive regular updates on our climate risk
profile and the progress of our climate risk programme.
Page 220
– The Environmental Risk Steering Meeting (formerly the Environmental Risk Oversight Forum) provides oversight of
environmental risk and the risk of greenwashing. Equivalent forums have been established at a regional level.
Page 220
c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management
framework (Companies Act 2006 - Sections 414CA and 414CB 2A (c))
How we have aligned
and integrated our
approach
– Our climate risk approach is aligned to our Group-wide risk management framework and three lines of defence model,
which sets out how we identify, assess and manage our risks.
Page 219
– We continue to develop our approach and climate risk capabilities across our businesses, by prioritising sectors,
portfolios and counterparties with the highest impacts, and recognise that this is a long-term iterative process.
Page 219
– Our annual climate risk materiality assessment helps us to understand how climate risk may impact HSBC’s risk
taxonomy.
Page 219
– In addition to this assessment, we also consider climate risk in our emerging risk reporting and scenario analysis.
Page 219
How we take into
account
interconnections
between entities and
functions
– Our climate risk approach is aligned to our Group-wide risk management framework and three lines of defence model,
which sets out how we identify, assess and manage our risks.
Page 219
– Through our climate risk programme, we have made progress on embedding climate considerations throughout our
organisation. We also developed risk metrics to monitor and manage exposures, and further enhanced our internal
climate scenario analysis. We continue to implement our climate risk programme to complete our annual materiality
assessment and make changes to our policies, processes and capabilities to better embed climate considerations
throughout our organisation.
Page 130
– This includes increasing coverage and incorporating more mature data, climate analytics, frameworks and tools, and
responding to emerging industry best practice and climate-related regulations. This also necessitates reflecting on
how climate risk continues to evolve in the real world, and improving how we embed climate risk factors into strategic
planning, transactions and decision making across our businesses.
Page 219
Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Recommendation
Response
Disclosure
location
Additional information
448
HSBC Holdings plc Annual Report and Accounts 2024
Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Recommendation
Response
Disclosure
location
Metrics and targets
a) Disclose the metrics used by the organisation to assess climate-related risk and opportunities in line with its strategy and risk management process
(Companies Act 2006 - Sections 414CA and 414CB 2A (h))
Metrics used to assess
the impact of climate-
related risks on our loan
portfolio
– We have metrics in place to monitor the exposure of our wholesale corporate lending portfolio to six high transition
risk sectors. As at 31 December 2024, the overall exposure to the six high transition risk sectors was 18% of total
gross carrying amount of wholesale loans and advances.
Page 221
– The UK is our largest mortgage market, and as of November 2024, made up 46.7% of our global mortgage portfolio.
Our ESG Data Pack includes our climate risk exposures for this portfolio across regions. The maturity profile of the UK
mortgage book shows that the average remaining contractual term in the UK is 21.8 years. However, with some
customers undertaking refinancing options during this term, the average term of the mortgage can be reduced to
between five and eight years. For the UK mortgage book, flood data is available for 93.7% of the mortgage book of
which 0.9% is at a very high risk of flooding, with 2.7% of the book at a high risk of flooding. We monitor the energy
performance certificate (‘EPC’) ratings of individual properties from A (highest efficiency) through to G (least efficient)
as EPCs are commonly used as an indicator of transition risk in the UK mortgage book.
Page 221
– We have started to enhance our approach to managing net zero alignment risk in our wholesale portfolio, through
developing portfolio steering capabilities and revenue assessments. While we have made progress, further work
remains, including the need to develop additional metrics and tools to measure our exposure to climate-related risks.
Page 220
Metrics used to assess
progress against
opportunities
– Since 1 January 2020, we have provided and facilitated a cumulative $352.5bn of sustainable finance and $41.1bn of
ESG and sustainable investing, as defined in our Sustainable Finance and Investment Data Dictionary 2024. This
included 39% where the use of proceeds was dedicated to green financing, 12% to social financing, and 15% to
other sustainable financing. It also included 24% of sustainability-linked financing and 10% of net new investment
flows managed and distributed on behalf of investors.
Page 45
– We do not currently fully disclose the proportion of revenue or proportion of assets, capital deployment or other
business activities aligned with climate-related opportunities, including revenue from products and services designed
for a low-carbon economy, forward-looking metrics consistent with our business or strategic planning time horizons.
In relation to sustainable finance revenue and assets, we are disclosing certain elements. We expect the data and
system limitations related to financial planning and performance, and climate-related opportunities metrics to be
addressed in the medium term as more reliable data becomes available and technology solutions are implemented.
We expect to further enhance this disclosure in the medium term.
Board or senior
management incentives
– To help us achieve our ESG ambitions, a number of measures are included in the annual incentive and long-term
incentive scorecards of the Group CEO, Group CFO and Group Executives that underpin the ESG metrics in the table
on page 17.
Page 17
Internal carbon price
– We do not currently disclose internal carbon prices due to transitional challenges, such as data challenges. However,
we considered carbon prices as an input for our climate scenario analysis exercise. We expect to further enhance this
disclosure in the medium term.
Metrics used to assess
the impact of climate
risk on lending and
financial intermediary
business (supplemental
guidance for banks)
– As part of our 2024 climate scenario analysis exercise, we completed a detailed retail mortgage risk assessment for
the UK, US, Singapore and Malaysia. In our 2023 exercise we also assessed Hong Kong, Australia and mainland
China. Our coverage represented 91% of the balances in our global retail mortgage portfolio, across the two
exercises. For our Hong Kong portfolio, we completed a short- and long-term scenario analysis exercise during late
2023 and early 2024 at the request of the HKMA. Our analysis shows that over the longer term, we expect minimal
losses to materialise when considering the Current Commitments scenario.
Page 226
– The impact on our wholesale portfolios is demonstrated by the table on page 225 which shows the size of exposures
by sector in 2024 and the cumulative change in ECL compared with a counterfactual scenario (expressed as a
multiple). The size of our exposure in each sector is represented by our exposure at default (‘EAD’) relative to one
another.
Page 225
– We do not fully disclose metrics used to assess the impact of climate-related physical (chronic) and transition (policy and
legal, technology and market) risks on retail lending, parts of wholesale lending and other financial intermediary business
activities (specifically credit exposure, equity and debt holdings, or trading positions, broken down by industry,
geography, credit quality and average tenor). We are aiming to develop the appropriate systems, data and processes to
provide these disclosures in future years. We disclose the exposure to six, high-transition risk wholesale sectors as a
proportion of total wholesale loans and advances and the flood risk exposure and Energy Performance Certificate (‘EPC’)
breakdown for the UK retail mortgage portfolio.
HSBC Holdings plc Annual Report and Accounts 2024
449
Additional information
Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Recommendation
Response
Disclosure
location
b) Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse gas emissions and the related risks (Companies Act 2006 - Sections 414CA and
414CB 2A (h))
Our own operations
– Our supply chain contributes c.81% of our operational emissions and is the area in which we face the most significant
decarbonisation challenge. Many suppliers are still in the early phase of their decarbonisation journey. We have
stepped up targeted efforts to support decarbonisation across our supply chain.
Page 58
– We report GHG emissions associated with the energy used in our premises and employees’ business travel and our
supply chain in tonnes of CO2 equivalent. As more of our suppliers report their emissions, we should be able to
include more accurate data and fewer industry averages in the calculation. We have applied a data quality score to the
sources of data we used to determine counterparty emissions.
Page 59
Greenhouse gas
emissions for lending
and financial
intermediary business
(supplemental guidance
for banks)
– Our analysis of financed emissions comprises ‘on-balance sheet financed emissions’ and ‘facilitated emissions’, which
we distinguish where necessary in our reporting. Our on-balance sheet financed emissions include emissions related to
on-balance sheet lending, such as project finance and direct lending. Our facilitated emissions include emissions related
to financing we help clients to raise through capital markets activities. Our analysis covers financing from Global Banking
and Markets, and Commercial Banking.
Page 48
– HSBC Asset Management recognises that climate-related risks may impact the operational and financial performance of
investee companies. The impact of these risks will vary depending on characteristics such as asset class, sector,
business model and geography. HSBC Asset Management continues to integrate climate analysis into its actively
managed product offerings and seeks to assess climate-related risks that could impact investment performance, where
applicable and relevant.
Page 60
– We currently disclose partial scope 3 greenhouse gas emissions. We currently focus on disclosing only four out of
fifteen categories of scope 3 greenhouse gas emissions, including business travel, supply chain and financed
emissions, following our internal materiality assessment. In relation to financed emissions, we publish on-balance
sheet financed emissions for a number of sectors, covering 2.7% of our loans and advances to customers at
31 December 2023, as detailed on page 56. We also publish facilitated emissions for the oil and gas, and power and
utilities sectors. Data quality of future disclosures on financed emissions and related risks are reliant on our customers
publicly disclosing their greenhouse gas emissions, targets and plans, and related risks. We recognise the need to
provide early transparency on climate disclosures but balance this with the recognition that existing data and reporting
processes continue to require significant enhancements.
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets (Companies Act
2006 - Sections 414CA and 414CB 2A (g))
Details of targets set
and whether they are
absolute or intensity
based
– We aim to help our customers transition to net zero and a sustainable future by providing and facilitating between
$750bn and $1tn of sustainable finance and investment by 2030.
Page 45
– We set interim 2030 financed emissions targets. However, we use different time horizons for climate risk
management. For climate risk, we define short term as time periods up to 2026; medium term is between 2027 and
2035; and long term is between 2036 and 2050. For financed emissions we do not plan to set 2026 targets. In 2024,
we disclose interim 2030 financed emissions targets for seven sectors comprising five on-balance sheet and two
combined financed emissions targets, as we outline on page 52. We have set combined on-balance sheet financed
emissions and facilitated emissions targets for two emissions-intensive sectors: oil and gas; and power and utilities;
and report the combined progress for both sectors. In 2025, we plan to review our targets to consider the latest net
zero-aligned scenarios available. For further details on the restatements and targets and progress of financed
emissions, see ’Our approach to emissions re-baselines and restatements’ and ‘Targets and progress’ on pages 51
and 52 respectively.
– We do not currently disclose a target for capital deployment. In relation to capital deployment, since 2015, we have
issued more than $2bn of our own green bonds and structured green bonds with the capital invested into a variety of
green projects, including: green buildings; and renewable energy and clean transportation projects. Following
extensive internal and external review of HSBC’s green issuance framework, we published the updated HSBC Green
Financing Framework in October 2024. This Green Financing Framework forms part of our sustainability strategy and
sets out our approach to allocating amounts equivalent to the net proceeds raised through certain instruments and
transactions against financing for businesses and projects that meet certain eligibility criteria. See the HSBC Green
Financing Framework at www.hsbc.com/investors/fixed-income-investors/green-financing-framework for further
information.
– We do not currently disclose an internal carbon pricing target due to transitional challenges, such as developing the
appropriate systems and processes, but we considered carbon prices as an input for our climate scenario analysis
exercise. We expect to further enhance the disclosure in the medium term as more data becomes available.
– We do not currently disclose targets used to measure and manage physical risk. This is due to transitional challenges,
including the data limitations of physical risk metrics. For retail, we do not use targets to measure and manage
physical risk. In 2024, we continued to use an internally developed global ‘soft trigger’ monitoring and review process
for physical risk exposure where a market reaches or exceeds a set threshold, as this ensures markets are actively
considering their balance sheet risk exposure to peril events. We also consider physical and transition risk as an input
for our climate scenario analysis exercise. We expect to further enhance our disclosures as our data, quantitative
scenario analysis, risk metrics and physical risk targets evolve, and technology solutions are implemented in the
medium term.
– We have described the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets. However, taking into account the nature of our business, we do not consider water
usage to be a material target for our business and, therefore, we have not included a target in this year’s disclosure.
Other key performance
indicators used
– In 2024 we achieved a 30.5% reduction in our energy consumption compared with 2019 (2023: 26.3%).
Page 58
– In 2024 we increased our purchase of electricity from renewable sources to 75.4% from 58.4% in 2023. This included
increasing our coverage of green tariffs in India and mainland China. Renewable electricity can help unlock our
emissions reduction potential, and we aim to achieve 100% renewable electricity across our own operations by 2030.
Page 58
Additional information
450
HSBC Holdings plc Annual Report and Accounts 2024
Cautionary statement regarding forward-looking statements
This Annual Report and Accounts 2024 contains certain forward-
looking statements with respect to HSBC’s financial condition; results
of operations and business, including the strategic priorities; financial,
investment and capital targets; and ESG ambitions, targets and
commitments described herein.
Statements that are not historical facts, including statements about
HSBC’s beliefs and expectations, are forward-looking statements.
Words such as ‘may’, ‘will’, ‘should’, ‘expects’, ‘targets’, ‘anticipates’,
‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and
‘reasonably possible’, or the negative thereof, other variations
thereon or similar expressions are intended to identify forward-
looking statements. These statements are based on current plans,
information, data, 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, 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 new, continuing or deepening recessions,
prolonged inflationary pressures and fluctuations in employment
levels and the creditworthiness of customers beyond those
factored into consensus forecasts; the Russia-Ukraine war and the
conflict in the Middle East and their impact on global economies
and the markets where HSBC operates, which could have a
material adverse effect on (among other things) our financial
condition, results of operations, prospects, liquidity, capital
position and credit ratings; deviations from the market and
economic assumptions that form the basis for our ECL
measurements (including, without limitation, as a result of the
Russia-Ukraine war and the conflict in the Middle East, inflationary
pressures, commodity price changes, and ongoing developments
in the commercial real estate sector in mainland China); potential
changes in HSBC’s dividend policy; changes and volatility in
foreign exchange rates and interest rates levels, including the
accounting impact resulting from financial reporting in respect of
hyperinflationary economies; volatility in equity markets; lack of
liquidity in wholesale funding or capital markets, which may affect
our ability to meet our obligations under financing facilities or to
fund new loans, investments and businesses; geopolitical
tensions or diplomatic developments producing social instability or
legal uncertainty, such as the Russia-Ukraine war or the conflict in
the Middle East (including the resurgence, continuation or
escalation thereof) and the related imposition of sanctions and
trade restrictions, supply chain restrictions and disruptions,
sustained increases in energy prices and key commodity prices,
claims of human rights violations, diplomatic tensions between
China and the US, which may extend to and involve other
countries, and developments in Hong Kong and Taiwan, alongside
other potential areas of tension, which may adversely affect HSBC
by creating regulatory, reputational and market risks; the efficacy
of government, customer, and HSBC’s actions in managing and
mitigating ESG risks, in particular climate risk, nature-related risks
and human rights risks, and in supporting the global transition to
net zero carbon emissions, each of which can impact HSBC both
directly and indirectly through our customers and which may result
in potential financial and non-financial impacts; 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; societal shifts in customer financing and
investment needs, including consumer perception as to the
continuing availability of credit; exposure to counterparty risk,
including third parties using us as a conduit for illegal activities
without our knowledge; the discontinuation of certain key Ibors
and the transition of the remaining legacy Ibor contracts to near
risk-free benchmark rates, which continues to expose HSBC to
some financial and non-financial risks; and price competition in the
market segments we serve;
–
changes in government policy and regulation, including trade and
tariff policies, as well as monetary, interest rate and other policies
of central banks and other regulatory authorities in the principal
markets in which we operate and the consequences thereof
(including, without limitation, actions taken as a result of changes
in government following national elections in the markets where
the Group operates); 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; changes to tax laws and tax
rates applicable to HSBC, including the imposition of levies or
taxes designed to change business mix and risk appetite; the
practices, pricing or responsibilities of financial institutions serving
their consumer markets; expropriation, nationalisation,
confiscation of assets and changes in legislation relating to foreign
ownership; the UK’s relationship with the EU, particularly with
respect to the potential divergence of UK and EU law on the
regulation of financial services; changes in government approach
and regulatory treatment in relation to ESG disclosures and
reporting requirements, and the current lack of a single
standardised regulatory approach to ESG across all sectors and
markets; changes in UK macroeconomic and fiscal policy, which
may result in fluctuations in the value of the pound sterling;
general changes in government policy (including, without
limitation, actions taken as a result of changes in government
following national elections in the markets where the Group
operates) that may significantly influence investor decisions; the
costs, effects and outcomes of regulatory reviews, actions or
litigation, including any additional compliance requirements; and
the effects of competition in the markets where we operate
including increased competition from non-bank financial services
companies; 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); our ability to achieve
our financial, investment, capital and ESG ambitions, targets and
commitments (including the positions set forth in our thermal coal
phase-out policy and our energy policy and our targets to reduce
our on-balance sheet financed emissions and, where applicable,
facilitated emissions in our portfolio of selected high-emitting
sectors), which may result in our failure to achieve any of the
expected outcomes of our strategic priorities; evolving regulatory
requirements and the development of new technologies, including
artificial intelligence, affecting how we manage model risk; model
limitations or failure, including, without limitation, the impact that
high inflationary pressures and rising interest rates have had on
the performance and usage of financial models, which may require
us to hold additional capital, incur losses and/or use compensating
controls, such as judgemental post-model adjustments, to address
model limitations; changes to the judgements, estimates and
assumptions we base our financial statements on; changes in our
ability to meet the requirements of regulatory stress tests; a
reduction in the credit ratings assigned to us or any of our
subsidiaries, which could increase the cost or decrease the
availability of our funding and affect our liquidity position and net
interest margin; changes to the reliability and security of our data
management, data privacy, information and technology
HSBC Holdings plc Annual Report and Accounts 2024
451
Additional information
infrastructure, including threats from cyber-attacks, which may
impact our ability to service clients and may result in financial loss,
business disruption and/or loss of customer services and data; the
accuracy and effective use of data, including internal management
information that may not have been independently verified;
changes in insurance customer behaviour and insurance claim
rates; our dependence on loan payments and dividends from
subsidiaries to meet our obligations; changes in our reporting
frameworks and accounting standards, which have had and may
continue to have a material impact on the way we prepare our
financial statements; our ability to successfully execute planned
strategic acquisitions and disposals; our success in adequately
integrating acquired businesses into our business; our ability to
successfully execute and implement the announced strategic
reorganisation of the Group; changes in our ability to manage third-
party, fraud, financial crime and reputational risks inherent in our
operations; employee misconduct, which may result in regulatory
sanctions and/or reputational or financial harm; changes in skill
requirements, ways of working and talent shortages, which may
affect our ability to recruit and retain senior management and an
inclusive and skilled workforce; and changes in our ability to
develop sustainable finance and ESG-related products consistent
with the evolving expectations of our regulators, and our capacity
to measure the environmental and social impacts from our
financing activity (including as a result of data limitations and
changes in methodologies), which may affect our ability to achieve
our ESG ambitions, targets and commitments, including our net
zero ambition, our targets to reduce on-balance sheet financed
emissions and, where applicable, facilitated emissions in our
portfolio of selected high-emitting sectors and the positions set
forth in our thermal coal phase-out policy and our energy policy,
and increase the risk of greenwashing. 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 it uses; our success in
addressing operational, legal and regulatory, and litigation
challenges; and other risks and uncertainties we identify in ‘Top
and emerging risks’ on pages 131 to 136.
This Annual Report and Accounts 2024 contains a number of images,
graphics, infographics, text boxes and illustrative case studies and
credentials which aim to give a high-level overview of certain
elements of our disclosures and to improve accessibility for readers.
These images, graphics, infographics, text boxes and illustrative case
studies and credentials are designed to be read within the context of
the Annual Report and Accounts 2024 as a whole.
Additional cautionary statement
regarding ESG data, metrics and
forward-looking statements
The Annual Report and Accounts 2024 contains a number of forward-
looking statements (as defined above) with respect to HSBC’s ESG
ambitions, targets, commitments, climate-related pathways,
processes and plans, and the methodologies and scenarios we use,
or intend to use, to assess our progress in relation to these (‘ESG-
related forward-looking statements’).
In preparing the ESG-related information contained in the Annual
Report and Accounts 2024, HSBC has made a number of key
judgements, estimations and assumptions, and the processes and
issues involved are complex. We have used ESG (including climate)
data, models and methodologies that we consider, as of the date on
which they were used, to be appropriate and suitable to understand
and assess climate change risk and its impact, to analyse financed
emissions - and operational and supply chain emissions, to set ESG-
related targets and to evaluate the classification of sustainable
finance and investments. However, these data, models and
methodologies are often new, are rapidly evolving and are not of the
same standard as those available in the context of other financial
information, nor are they subject to the same or equivalent disclosure
standards, historical reference points, benchmarks or globally
accepted accounting principles. In particular, it is not possible to rely
on historical data as a strong indicator of future trajectories in the
case of climate change and its evolution. Outputs of models,
processed data and methodologies are also likely to be affected by
underlying data quality, which can be hard to assess and we expect
industry guidance, market practice, and regulations in this field to
continue to change. We also face challenges in relation to our ability
to access data on a timely basis, lack of consistency and
comparability between data that is available and our ability to collect
and process relevant data. Consequently, the ESG-related forward-
looking statements and ESG metrics disclosed in the Annual Report
and Accounts 2024 carry an additional degree of inherent risk and
uncertainty.
Due to the unpredictable evolution of climate change and its future
impact and the uncertainty of future policy and market response to
ESG-related issues and the effectiveness of any such response,
HSBC may have to re-evaluate its progress towards its ESG
ambitions, targets and commitments in the future, update the
methodologies it uses or alter its approach to ESG (including climate)
analysis and may be required to amend, update and recalculate its
ESG disclosures and assessments in the future, as market practice
and data quality and availability develop.
No assurance can be given by or on behalf of HSBC as to the
likelihood of the achievement or reasonableness of any projections,
estimates, forecasts, ambitions, targets, commitments, prospects or
returns contained herein. Readers are cautioned that a number of
factors, both external and those specific to HSBC, could cause actual
achievements, results, performance or other future events or
conditions to differ, in some cases materially, from those stated,
implied and/or reflected in any ESG-related forward-looking statement
or metric due to a variety of risks, uncertainties and other factors
(including without limitation those referred to below):
–
Climate change projection risk: this includes, for example, the
evolution of climate change and its impacts, changes in the
scientific assessment of climate change impacts, transition
pathways and future risk exposure and limitations of climate
scenario forecasts;
–
ESG projection risk: ESG metrics are complex and are still subject
to development. In addition, the scenarios employed in relation to
them, and the models that analyse them have limitations that are
sensitive to key assumptions and parameters, which are
themselves subject to some uncertainty, and cannot fully capture
all of the potential effects of climate, policy and technology-driven
outcomes;
–
Changes in the ESG regulatory landscape: this involves changes in
government approach and regulatory treatment in relation to ESG
disclosures and reporting requirements, and the current lack of a
single standardised regulatory approach to ESG across all sectors
and markets;
–
Variation in reporting standards: ESG reporting standards are still
developing and are not standardised or comparable across all
sectors and markets, new reporting standards in relation to
different ESG metrics are still emerging;
–
Data availability, accuracy, verifiability and data gaps: our
disclosures are limited by the availability of high quality data in
some areas and our own ability to timely collect and process such
data as required. Where data is not available for all sectors or
consistently year on year, there may be an impact to our data
quality scores. While we expect our data quality scores to improve
over time, as companies continue to expand their disclosures to
meet growing regulatory and stakeholder expectations, there may
be unexpected fluctuations within sectors year on year, and/or
differences between the data quality scores between sectors. Any
such changes in the availability and quality of data over time, or
our ability to collect and process such data, could result in
revisions to reported data going forward, including on financed
emissions, meaning that such data may not be reconcilable or
comparable year-on year;
Additional information
452
HSBC Holdings plc Annual Report and Accounts 2024
–
Developing methodologies and scenarios: the methodologies and
scenarios HSBC uses to assess financed emissions and set ESG-
related targets may develop over time in line with market practice,
regulation and/or developments in science, where applicable. Such
developments could result in revisions to reported data, including
on financed emissions or the classification of sustainable finance
and investments, meaning that data outputs may not be
reconcilable or comparable year-on year; and
–
Risk management capabilities: global actions, including HSBC’s
own actions, may not be effective in transitioning to net zero and
in managing relevant ESG risks, including in particular climate,
nature-related and human rights risks, each of which can impact
HSBC both directly and indirectly through our customers, and
which may result in potential financial and non-financial impacts to
HSBC. In particular:
–
we may not be able to achieve our ESG ambitions, targets and
commitments (including with respect to the positions set forth in
our thermal coal phase-out policy and our energy policy, and our
targets to reduce our on-balance sheet financed emissions and,
where applicable, facilitated emissions in our portfolio of selected
high-emitting sectors), which may result in our failure to achieve
some or all of the expected outcomes of our strategic priorities;
and
–
we may not be able to develop sustainable finance and ESG-
related products consistent with the evolving expectations of our
regulators, and our capacity to measure the environmental and
social impacts from our financing activity may diminish (including
as a result of data and model limitations and changes in
methodologies), which may affect our ability to achieve our ESG
ambitions, targets and commitments, including our net zero
ambition, our targets to reduce our on-balance sheet financed
emissions and, where applicable, facilitated emissions in our
portfolio of selected high-emitting sectors and the positions set
forth in our thermal coal phase-out policy and energy policy, and
increase the risk of greenwashing.
Any forward-looking statements made by or on behalf of HSBC speak
only as of the date they are made. HSBC expressly disclaims any
obligation to revise or update these ESG forward-looking statements,
other than as expressly required by applicable law.
Written and/or oral ESG-related forward-looking statements may also
be made in our 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.
Our data dictionaries and methodologies for preparing the above
ESG-related metrics and third-party limited assurance reports can be
found on: www.hsbc.com/who-we-are/esg-and-responsible-business/
esg-reporting-centre.
Certain defined terms
Unless the context requires otherwise, ‘HSBC Holdings’ means
HSBC Holdings plc and ‘HSBC’, the ‘Group’, ‘we’, ‘us’ and ‘our’ refer
to HSBC Holdings together with its subsidiaries. Within this
document the Hong Kong Special Administrative Region of the
People’s Republic of China is referred to as ‘Hong Kong’.
When used in the terms ‘shareholders’ equity’ and ‘total
shareholders’ equity’, ‘shareholders’ means holders of HSBC
Holdings ordinary shares and those preference shares and capital
securities issued by HSBC Holdings classified as equity. The
abbreviations ‘$m’, ‘$bn’ and ‘$tn’ represent millions, billions
(thousands of millions) and trillions of US dollars, respectively.
HSBC Holdings plc Annual Report and Accounts 2024
453
Additional information
Abbreviations
Currencies
£
British pound sterling
CA$
Canadian dollar
€
Euro
HK$
Hong Kong dollar
MXN
Mexican peso
RMB
Chinese renminbi
SGD
Singapore dollar
$
United States dollar
Abbreviations
1H24
First half of 2024
1Q24
First quarter of 2024
2Q24
Second quarter of 2024
3Q24
Third quarter of 2024
4Q24
Fourth quarter of 2024
9M24
Nine months of 2024
A
ABS¹
Asset-backed security
ADR
American Depositary Receipt
ADS
American Depositary Share
AGM
Annual General Meeting
AI
Artificial intelligence
AIBL
Average interest-bearing liabilities
AIEA
Average interest-earning assets
ALCO
Asset and Liability Management Committee
AML
Anti-money laundering
AML DPA
Five-year deferred prosecution agreement with the US
Department of Justice, entered into in December 2012
ANP
Annualised new business premium
ASEAN
Association of Southeast Asian Nations
AT1
Additional tier 1
B
Banking NII
Banking net interest income
Basel
Committee
Basel Committee on Banking Supervision
Basel II¹
2006 Basel Capital Accord
Basel III¹
Basel Committee’s reforms to strengthen global capital and
liquidity rules
Basel 3.1
Outstanding measures to be implemented from the Basel
III reforms
BEPS
Base Erosion and Profit Shifting
BGF
Business Growth Fund, an investment firm that provides
growth capital for small and mid-sized businesses in the UK
and Ireland
BoCom
Bank of Communications Co., Limited, one of China’s
largest banks
BoE
Bank of England
Bps¹
Basis points. One basis point is equal to one-hundredth of a
percentage point
BVI
British Virgin Islands
C
CAPM
Capital asset pricing model
CDS¹
Credit default swap
CEA
Commodity Exchange Act (US)
CET1¹
Common equity tier 1
CGUs
Cash-generating units
CIB
Corporate and Institutional Banking
CMB
Commercial Banking, a global business
CMC
Capital maintenance charge
CODM
Chief Operating Decision Maker
COSO
2013 Committee of Sponsoring Organizations of the
Treadway Commission (US)
Corporate
Centre
Corporate Centre comprises Central Treasury, our legacy
businesses, interests in our associates and joint ventures,
central stewardship costs and consolidation adjustments
CP¹
Commercial paper
CRD IV¹
Capital Requirements Regulation and Directive
CRR¹
Customer risk rating
CRR II¹
The regulatory requirements of the Capital Requirements
Regulation and Directive, the CRR II regulation and the PRA
Rulebook
CSA
Credit support annex
CSM
Contractual service margin
CVA¹
Credit valuation adjustment
D
DECL
Disclosures about Expected Credit Losses
Deferred shares
Awards of deferred shares define the number of HSBC
Holdings ordinary shares to which the employee will
become entitled, generally between one and seven years
from the date of the award, and normally subject to the
individual remaining in employment
DPD
Days past due
DPF
Discretionary participation feature of insurance and
investment contracts
DVA¹
Debit valuation adjustment
E
EAD¹
Exposure at default
EBA
European Banking Authority
EC
European Commission
ECB
European Central Bank
ECL
Expected credit losses. In the income statement, ECL is
recorded as a change in expected credit losses and other
credit impairment charges. In the balance sheet, ECL is
recorded as an allowance for financial instruments to which
only the impairment requirements in IFRS 9 are applied
EEA
European Economic Area
Eonia
Euro Overnight Index Average
EPC
Energy performance certificate
EPS
Earnings per ordinary share
ESG
Environmental, social and governance
EU
European Union
Euribor
Euro interbank offered rate
EVE
Economic value of equity
F
FAST-Infra
Finance to Accelerate the Sustainable Transition-
Infrastructure
FCA
Financial Conduct Authority (UK)
FDIC
Federal Deposit Insurance Corporation
FFVA
Funding fair value adjustment estimation methodology on
derivative contracts
FPA
Fixed pay allowance
FRB
Federal Reserve Board (US)
FRC
Financial Reporting Council
FSCS
Financial Services Compensation Scheme
FTE
Full-time equivalent staff
FTSE
Financial Times Stock Exchange index
FVOCI¹
Fair value through other comprehensive income
FX
Foreign exchange
G
GAAP
Generally accepted accounting principles
GAC
Group Audit Committee
GBM
Global Banking and Markets, a global business
GDP
Gross domestic product
GEC
Group Executive Committee
GHG
Greenhouse Gas
GMP
Guaranteed minimum pension
GPS
Global Payments Solutions, the business formerly known as
Global Liquidity and Cash Management
GPSP
Group Performance Share Plan
GRC
Group Risk Committee
Additional information
454
HSBC Holdings plc Annual Report and Accounts 2024
Group
HSBC Holdings together with its subsidiary undertakings
GTS
Global Trade Solutions, the business formerly known as
Global Trade and Receivables Finance
H
Hang Seng Bank Hang Seng Bank Limited, one of Hong Kong’s largest banks
HKEx
The Stock Exchange of Hong Kong Limited
HKMA
Hong Kong Monetary Authority
HMRC
HM Revenue and Customs
Holdings ALCO
HSBC Holdings Asset and Liability Management Committee
Hong Kong
Hong Kong Special Administrative Region of the People’s
Republic of China
HQLA
High-quality liquid assets
HSBC
HSBC Holdings together with its subsidiary undertakings
HSBC Bank plc
HSBC Bank plc, also known as the non-ring-fenced bank
HSBC Bank
Middle East
HSBC Bank Middle East Limited
HSBC Bank
USA
HSBC Bank USA, N.A., HSBC’s retail bank in the US
HSBC Canada
The sub-group, HSBC Bank Canada, HSBC Trust Company
Canada, HSBC Mortgage Corporation Canada and HSBC
Securities Canada, consolidated for liquidity purposes
HSBC
Continental
Europe
HSBC Continental Europe
HSBC Finance
HSBC Finance Corporation, the US consumer finance
company (formerly Household International, Inc.)
HSBC Holdings
HSBC Holdings plc, the parent company of HSBC
HSBC Private
Bank (Suisse)
HSBC Private Bank (Suisse) SA, HSBC’s private bank in
Switzerland
HSBC UK
HSBC UK Bank plc, also known as the ring-fenced bank
HSBC USA
The sub-group, HSBC USA Inc (the holding company of
HSBC Bank USA) and HSBC Bank USA, consolidated for
liquidity purposes
HSI
HSBC Securities (USA) Inc.
HSSL
HSBC Securities Services (Luxembourg)
I
IAS
International Accounting Standards
IASB
International Accounting Standards Board
IBE
Independent Board Evaluation
Ibor
Interbank offered rate
ICAAP
Internal capital adequacy assessment process
ICMA
International Capital Market Association
IEA
International Energy Agency
IFRS Accounting
Standards
International Financial Reporting Standards as issued by the
International Accounting Standards Board
ILAAP
Internal liquidity adequacy assessment process
IMA
Internal model approach
IMM
Internal model method
IRB¹
Internal ratings-based
ISDA
International Swaps and Derivatives Association
ISSB
International Sustainability Standard Board
IVB
HSBC Innovation Banking
IWPB
International Wealth and Premier Banking
J
JV
Joint venture
K
KMP
Key Management Personnel
L
LCR
Liquidity coverage ratio
LGBTQ+
Lesbian, gay, bisexual, transgender and queer. The plus
sign denotes other non-mainstream groups on the
spectrums of sexual orientation and gender identity
LGD¹
Loss given default
Libor
London interbank offered rate
Long term
For our financial targets, we define long term as five to six
years, commencing 1 January 2025
LTI
Long-term incentive
LTV¹
Loan to value
M
Mainland China
People’s Republic of China excluding Hong Kong and
Macau
Medium term
For our financial targets, we define medium term as three
to four years, commencing 1 January 2025
MENAT
Middle East, North Africa and Türkiye
MREL
Minimum requirement for own funds and eligible liabilities
MRT¹
Material Risk Taker
MSS
Markets and Securities Services, HSBC’s capital markets
and securities services businesses in Global Banking and
Markets
N
Net operating
income
Net operating income before change in expected credit
losses and other credit impairment charges
NGO
Non-governmental organisation
NII
Net interest income
NIM
Net interest margin
NPS
Net promoter score
NSFR
Net stable funding ratio
NYSE
New York Stock Exchange
O
OCI
Other comprehensive income
OECD
Organisation of Economic Co-operation and Development
OTC¹
Over-the-counter
P
PBT
Profit before tax
PCAF
Partnership for Carbon Accounting Financials
PD¹
Probability of default
Performance
shares¹
Awards of HSBC Holdings ordinary shares under employee
share plans that are subject to corporate performance
conditions
Ping An
Ping An Insurance (Group) Company of China, Ltd, the
second-largest life insurer in the PRC
POCI
Purchased or originated credit-impaired financial assets
PRA
Prudential Regulation Authority (UK)
PRC
People’s Republic of China
Principal plan
HSBC Bank (UK) Pension Scheme
PVIF
Present value of in-force long-term insurance business and
long-term investment contracts with DPF
PwC
The member firms of the PwC network, including
PricewaterhouseCoopers LLP
R
RAS
Risk appetite statement
Repo¹
Sale and repurchase transaction
Revenue
Net operating income before ECL
Reverse repo
Security purchased under commitments to sell
RNIV
Risk not in VaR
RoE
Return on average ordinary shareholders’ equity
RoTE
Return on average tangible equity
RWA¹
Risk-weighted asset
S
SAB
Saudi Awwal Bank
SAPS
Self-administered pension scheme
SASB
Sustainability Accounting Standards Board
SBTi
Science Based Targets initiative
SDG
United Nation’s Sustainable Development Goals
SEC
Securities and Exchange Commission (US)
ServCo group
Separately incorporated group of service companies
established in response to UK ring-fencing requirements
Sibor
Singapore interbank offered rate
SIC
Securities investment conduit
SME
Small and medium-sized enterprise
Solitaire
Solitaire Funding Limited, a special purpose entity managed
by HSBC
SPE¹
Special purpose entity
SVB UK
Silicon Valley Bank UK Limited, now HSBC Innovation Bank
Limited
T
TCFD¹
Task Force on Climate-related Financial Disclosures
THBFIX
Thai Baht Interest Rate Fixing
TNFD
Taskforce on Nature-related Financial Disclosures
TSR¹
Total shareholder return
U
UAE
United Arab Emirates
UK
United Kingdom
HSBC Holdings plc Annual Report and Accounts 2024
455
Additional information
UN
United Nations
US
United States of America
V
VaR¹
Value at risk
VIU
Value in use
W
WEF
World Economic Forum
WPB
Wealth and Personal Banking, a global business
1 A full definition is included in the glossary to the Annual Report and
Accounts 2024 which is available at www.hsbc.com/investors.
HSBC Holdings plc
Incorporated in England and Wales on 1 January 1959 with
limited liability under the UK Companies Act
Registration number 617987
Registered Office and Group Head Office
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 020 7991 8888
Facsimile: 44 020 7992 4880
Web: www.hsbc.com
Corporate Brokers
Morgan Stanley & Co. International plc
25 Cabot Square
London E14 4QA
United Kingdom
Bank of America Securities
2 King Edward Street
London EC1A 1HQ
United Kingdom
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
Additional information
456
HSBC Holdings plc Annual Report and Accounts 2024
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HSBC Holdings plc
8 Canada Square
London E14 5HQ
United Kingdom
T: +44 (0)20 7991 8888
www.hsbc.com