TIDM48CF
RNS Number : 5912Q
HSBC Bank plc
21 February 2023
Financial statements
Page
Consolidated income statement 114
----------------------------------------- ----
Consolidated statement of comprehensive
income 115
----------------------------------------- ----
Consolidated balance sheet 116
----------------------------------------- ----
Consolidated statement of cash
flows 117
----------------------------------------- ----
Consolidated statement of changes
in equity 118
----------------------------------------- ----
HSBC Bank plc balance sheet 120
HSBC Bank plc statement of cash
flows 121
----------------------------------------- ----
HSBC Bank plc statement of changes
in equity 122
----------------------------------------- ----
Notes on the financial
statements
----------------------------------------- ----
Basis of preparation and
1 significant accounting policies 124
--- ------------------------------------ ----
2 Net fee income 136
--- ------------------------------------ ----
Net income from financial
instruments measured at fair
3 value through profit or loss 137
--- ------------------------------------ ----
4 Insurance business 137
Employee compensation and
5 benefits 138
--- ------------------------------------ ----
6 Auditors' remuneration 145
--- ------------------------------------ ----
7 Tax 145
--- ------------------------------------ ----
8 Dividends 149
--- ------------------------------------ ----
9 Segmental analysis 149
--- ------------------------------------ ----
10 Trading assets 151
--- ------------------------------------ ----
Fair values of financial
instruments carried at fair
11 value 151
--- ------------------------------------ ----
Fair values of financial
instruments not carried at
12 fair value 160
--- ------------------------------------ ----
Financial assets designated
and otherwise mandatorily
measured at fair value through
13 profit or loss 161
--- ------------------------------------ ----
14 Derivatives 162
--- ------------------------------------ ----
15 Financial investments 168
--- ------------------------------------ ----
Assets pledged, collateral
16 received and assets transferred 169
--- ------------------------------------ ----
Interests in associates and
17 joint ventures 170
--- ------------------------------------ ----
18 Investments in subsidiaries 170
--- ------------------------------------ ----
19 Structured entities 171
--- ------------------------------------ ----
20 Goodwill and intangible assets 174
--- ------------------------------------ ----
Prepayments, accrued income
21 and other assets 175
--- ------------------------------------ ----
22 Trading liabilities 175
--- ------------------------------------ ----
Financial liabilities designated
23 at fair value 176
--- ------------------------------------ ----
Accruals, deferred income
24 and other liabilities 176
--- ------------------------------------ ----
25 Provisions 177
--- ------------------------------------ ----
26 Subordinated liabilities 178
--- ------------------------------------ ----
Maturity analysis of assets,
liabilities and off-balance
27 sheet commitments 180
--- ------------------------------------ ----
Offsetting of financial assets
28 and financial liabilities 182
--- ------------------------------------ ----
Called up share capital and
29 other equity instruments 183
--- ------------------------------------ ----
Contingent liabilities, contractual
commitments, guarantees and
30 contingent assets 185
--- ------------------------------------ ----
31 Finance lease receivables 186
--- ------------------------------------ ----
Legal proceedings and regulatory
32 matters 186
--- ------------------------------------ ----
33 Related party transactions 188
Assets held for sale and
liabilities of disposal groups
34 held for sale 191
--- ------------------------------------ ----
Events after the balance
35 sheet date 192
--- ------------------------------------ ----
HSBC Bank plc's subsidiaries,
36 joint ventures and associates 192
--- ------------------------------------ ----
Consolidated income statement
for the year ended 31 December
-----------------------
2022 2021 2020
Notes* GBPm GBPm GBPm
------------------------------------- ------ --------------------- ----------------------- -----------------------
Net interest income 1,904 1,754 1,898
------------------------------------- ------ --------------------- ----------------------- -----------------------
* interest income(1,2) 6,535 3,149 4,086
------------------------------------- ------
- interest expense(3) (4,631) (1,395) (2,188)
------------------------------------- ------ --------------------- -----------------------
Net fee income 2 1,261 1,413 1,400
------------------------------------- ------ --------------------- ----------------------- -----------------------
* fee income 2,606 2,706 2,674
------------------------------------- ------
* fee expense (1,345) (1,293) (1,274)
------------------------------------- ------ --------------------- -----------------------
Net income from financial instruments
held for
trading or managed on a fair value
basis 3 2,875 1,733 1,758
------------------------------------- ------ --------------------- ----------------------- -----------------------
Net (expense)/ income from assets and
liabilities
of insurance businesses, including
related derivatives,
measured at fair value through
profit or loss 3 (1,369) 1,214 254
------------------------------------- ------ --------------------- ----------------------- -----------------------
Changes in fair value of long-term
debt and related
derivatives 3 102 (8) 17
------------------------------------- ------ --------------------- ----------------------- -----------------------
Changes in fair value of other
financial instruments
mandatorily measured at fair value
through profit
or loss 3 143 493 285
------------------------------------- ------ --------------------- ----------------------- -----------------------
Gains less losses from financial
investments (60) 60 95
------------------------------------- ------ --------------------- ----------------------- -----------------------
Net insurance premium income 4 1,787 1,906 1,559
------------------------------------- ------ --------------------- ----------------------- -----------------------
(Losses)/gains recognised on Assets
held for sale(4) (1,947) 67 -
------------------------------------- ------ --------------------- ----------------------- -----------------------
Other operating income 356 527 417
------------------------------------- ------ --------------------- ----------------------- -----------------------
Total operating income 5,052 9,159 7,683
------------------------------------- ------ --------------------- ----------------------- -----------------------
Net insurance claims, benefits paid
and movement
in liabilities to policyholders 4 (406) (3,039) (1,783)
------------------------------------- ------ --------------------- ----------------------- -----------------------
Net operating income before change in
expected
credit losses and other credit
impairment charges(5) 4,646 6,120 5,900
------------------------------------- ------ --------------------- ----------------------- -----------------------
Change in expected credit losses and
other credit
impairment charges (222) 174 (808)
------------------------------------- ------ --------------------- ----------------------- -----------------------
Net operating income 4,424 6,294 5,092
Total operating expenses (5,353) (5,462) (6,705)
------------------------------------- ------ --------------------- ----------------------- -----------------------
- employee compensation and benefits 5 (1,762) (2,023) (2,340)
------------------------------------- ------
- general and administrative expenses (3,463) (3,265) (3,092)
------------------------------------- ------
- depreciation and impairment of
property, plant
and equipment and right of use
assets (103) (110) (372)
------------------------------------- ------
- amortisation and impairment of
intangible assets 20 (25) (64) (901)
Operating (loss)/profit (929) 832 (1,613)
------------------------------------- ------ --------------------- ----------------------- -----------------------
Share of (loss)/profit in associates
and joint
ventures 17 (30) 191 (1)
------------------------------------- ------ --------------------- ----------------------- -----------------------
(Loss)/profit before tax (959) 1,023 (1,614)
------------------------------------- ------ --------------------- ----------------------- -----------------------
Tax credit 7 561 23 136
------------------------------------- ------ --------------------- ----------------------- -----------------------
(Loss)/profit for the year (398) 1,046 (1,478)
------------------------------------- ------ --------------------- ----------------------- -----------------------
(Loss)/profit attributable to the
parent company (408) 1,041 (1,488)
------------------------------------- ------ --------------------- ----------------------- -----------------------
Profit attributable to
non-controlling interests 10 5 10
------------------------------------- ------ --------------------- ----------------------- -----------------------
* For Notes on the financial statements, see page 124.
1 Interest income includes GBP5,512m (2021: GBP1,986m; 2020:
GBP2,773m) of interest recognised on financial assets measured at
amortised cost; GBP422m (2021: GBP659m; 2020: GBP656m) of negative
interest recognised on financial liabilities and GBP601m (2021:
GBP504m; 2020: GBP657m) of interest recognised on financial assets
measured at fair value through other comprehensive income. Include
within this is GBP59m (2021: GBP61m; 2020: GBP57m) interest
recognised on impaired financial assets.
2 Interest revenue calculated using the effective interest
method comprises interest recognised on financial assets measured
at either amortised cost or fair value through other comprehensive
income.
3 Interest expense includes GBP3,740m (2021: GBP616m; 2020:
GBP1,299) of interest on financial liabilities, excluding interest
on financial liabilities held for trading or designated or
otherwise mandatorily measured at fair value.
4 2022 balances include losses on disposal of businesses
classified as held-for-sale as part of a broader restructuring of
our European business .
5 Net operating income before change in expected credit losses
and other credit impairment charges is also referred to as
'revenue'.
Consolidated statement of comprehensive income
for the year ended 31 December
------------------
2022 2021 2020
GBPm GBPm GBPm
---------------------------------------------------------- ------------------ ------------------ ------------------
(Loss)/profit for the year (398) 1,046 (1,478)
---------------------------------------------------------- ------------------ ------------------ ------------------
Other comprehensive (expense)/income
---------------------------------------------------------- ------------------ ------------------ ------------------
Items that will be reclassified subsequently to profit
or loss when specific conditions are met:
---------------------------------------------------------- ------------------ ------------------ ------------------
Debt instruments at fair value through other comprehensive
income (454) (237) 213
---------------------------------------------------------- ------------------ ------------------ ------------------
- fair value (losses)/gains (698) (247) 366
----------------------------------------------------------
- fair value losses/(gains) transferred to the income
statement on disposal 59 (63) (90)
----------------------------------------------------------
- expected credit losses/(recoveries) recognised in
the income statement 6 (5) 8
----------------------------------------------------------
- income taxes 179 78 (71)
---------------------------------------------------------- ------------------ ------------------
Cash flow hedges (943) (165) 118
---------------------------------------------------------- ------------------ ------------------ ------------------
- fair value (losses)/gains (1,418) (40) 86
----------------------------------------------------------
- fair value losses/(gains) reclassified to the income
statement 127 (202) 72
----------------------------------------------------------
- income taxes 348 77 (40)
---------------------------------------------------------- ------------------ ------------------
Exchange differences 701 (603) 467
---------------------------------------------------------- ------------------ ------------------ ------------------
Items that will not be reclassified subsequently to
profit or loss:
---------------------------------------------------------- ------------------ ------------------ ------------------
Remeasurement of defined benefit asset/liability 38 44 (8)
---------------------------------------------------------- ------------------ ------------------ ------------------
- before income taxes 56 61 (18)
----------------------------------------------------------
- income taxes (18) (17) 10
---------------------------------------------------------- ------------------ ------------------
Equity instruments designated at fair value through
other comprehensive income - 2 2
---------------------------------------------------------- ------------------ ------------------ ------------------
- fair value gains - 2 2
----------------------------------------------------------
- income taxes - - -
---------------------------------------------------------- ------------------ ------------------
Changes in fair value of financial liabilities designated
at fair value upon initial recognition arising from
changes in own credit risk 329 2 67
---------------------------------------------------------- ------------------ ------------------ ------------------
- fair value gains 462 3 93
----------------------------------------------------------
- income taxes (133) (1) (26)
---------------------------------------------------------- ------------------ ------------------
Other comprehensive (expense)/income for the year,
net of tax (329) (957) 859
---------------------------------------------------------- ------------------ ------------------ ------------------
Total comprehensive (expense)/income for the year (727) 89 (619)
---------------------------------------------------------- ------------------ ------------------ ------------------
Attributable to:
---------------------------------------------------------- ------------------ ------------------ ------------------
- shareholders of the parent company (739) 93 (653)
----------------------------------------------------------
- non-controlling interests 12 (4) 34
---------------------------------------------------------- ------------------ ------------------
Total comprehensive (expense)/income for the year (727) 89 (619)
---------------------------------------------------------- ------------------ ------------------ ------------------
Consolidated balance sheet
at 31 December
2022 2021
Notes* GBPm GBPm
------------------------------------------------------ ------ ------------------ ---------------------
Assets
------------------------------------------------------ ------ ------------------ ---------------------
Cash and balances at central banks 131,433 108,482
------------------------------------------------------ ------ ------------------ ---------------------
Items in the course of collection from other banks 2,285 346
Trading assets 10 79,878 83,706
------------------------------------------------------ ------ ------------------ ---------------------
Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 13 15,881 18,649
Derivatives 14 225,238 141,221
------------------------------------------------------ ------ ------------------ ---------------------
Loans and advances to banks 17,109 10,784
------------------------------------------------------ ------ ------------------ ---------------------
Loans and advances to customers 72,614 91,177
------------------------------------------------------ ------ ------------------ ---------------------
Reverse repurchase agreements - non-trading 53,949 54,448
------------------------------------------------------ ------ ------------------ ---------------------
Financial investments 15 32,604 41,300
------------------------------------------------------ ------ ------------------ ---------------------
Assets held for sale(1) 34 21,214 9
------------------------------------------------------ ------ ------------------ ---------------------
Prepayments, accrued income and other assets 21 61,379 43,118
------------------------------------------------------ ------ ------------------ ---------------------
Current tax assets 595 1,135
------------------------------------------------------ ------ ------------------ ---------------------
Interests in associates and joint ventures 17 728 743
------------------------------------------------------ ------ ------------------ ---------------------
Goodwill and intangible assets 20 1,167 894
------------------------------------------------------ ------ ------------------ ---------------------
Deferred tax assets 7 1,279 599
------------------------------------------------------ ------ ------------------ ---------------------
Total assets 717,353 596,611
------------------------------------------------------ ------ ------------------ ---------------------
Liabilities and equity
------------------------------------------------------ ------ ------------------ ---------------------
Liabilities
Deposits by banks 20,836 32,188
------------------------------------------------------ ------ ------------------ ---------------------
Customer accounts 215,948 205,241
------------------------------------------------------ ------ ------------------ ---------------------
Repurchase agreements - non-trading 32,901 27,259
------------------------------------------------------ ------ ------------------ ---------------------
Items in the course of transmission to other banks 2,226 489
------------------------------------------------------ ------ ------------------ ---------------------
Trading liabilities 22 41,265 46,433
------------------------------------------------------ ------ ------------------ ---------------------
Financial liabilities designated at fair value 23 27,287 33,608
------------------------------------------------------ ------ ------------------ ---------------------
Derivatives 14 218,867 139,368
------------------------------------------------------ ------ ------------------ ---------------------
Debt securities in issue 7,268 9,428
------------------------------------------------------ ------ ------------------ ---------------------
Liabilities of disposal groups held for sale(1) 34 24,711 -
------------------------------------------------------ ------ ------------------ ---------------------
Accruals, deferred income and other liabilities 24 66,945 43,456
------------------------------------------------------ ------ ------------------ ---------------------
Current tax liabilities 130 97
------------------------------------------------------ ------ ------------------ ---------------------
Liabilities under insurance contracts 4 19,987 22,264
------------------------------------------------------ ------ ------------------ ---------------------
Provisions 25 424 562
------------------------------------------------------ ------ ------------------ ---------------------
Deferred tax liabilities 7 14 15
------------------------------------------------------ ------ ------------------ ---------------------
Subordinated liabilities 26 14,528 12,488
------------------------------------------------------ ------ ------------------ ---------------------
Total liabilities 693,337 572,896
------------------------------------------------------ ------ ------------------ ---------------------
Equity
------------------------------------------------------ ------ ------------------ ---------------------
Total shareholders' equity 23,875 23,584
------------------------------------------------------ ------ ------------------ ---------------------
- called up share capital 29 797 797
------------------------------------------------------ ------
- share premium account 420 -
------------------------------------------------------ ------
- other equity instruments 29 3,930 3,722
------------------------------------------------------ ------
- other reserves (6,368) (5,670)
------------------------------------------------------ ------
- retained earnings 25,096 24,735
------------------------------------------------------ ------ ------------------
Non-controlling interests 141 131
------------------------------------------------------ ------ ------------------ ---------------------
Total equity 24,016 23,715
------------------------------------------------------ ------ ------------------ ---------------------
Total liabilities and equity 717,353 596,611
------------------------------------------------------ ------ ------------------ ---------------------
1 Includes businesses classified as held-for-sale as part of a
broader restructuring of our European business. Refer to Note 34
'Assets held for sale and liabilities of disposal groups held for
sale' on page 186.
* For Notes on the financial statements, see page 124.
The accompanying notes on pages 124 to 190 , and the audited
sections of the 'Report of the Directors' on pages 26 to 102 form
an integral part of these financial statements.
The financial statements were approved by the Board of Directors
on 20 February 2023 and signed on its behalf by:
David Watts
Director
Consolidated statement of cash flows
for the year ended 31 December
-------------------------------
2022 2021 2020
GBPm GBPm GBPm
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
(Loss)/profit before tax (959) 1,023 (1,614)
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Adjustments for non-cash items
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Depreciation, amortisation and impairment(1) 128 174 1,273
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Net loss/(gain) from investing activities(2) 2,002 (62) (99)
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Share of loss/(profit) in associates and joint
ventures 30 (191) 1
Change in expected credit losses gross of recoveries
and other credit impairment charges 253 (171) 810
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Provisions including pensions 192 104 424
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Share-based payment expense 46 96 78
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Other non-cash items included in loss/(profit)
before tax (242) (198) 135
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Elimination of exchange differences(3) (6,714) 4,926 (2,527)
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Changes in operating assets and liabilities 37,454 9,602 35,418
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
* change in net trading securities and derivatives (6,213) 8,157 8,070
-------------------------------------------------------------
* change in loans and advances to banks and customers (2,717) 11,149 6,780
-------------------------------------------------------------
* change in reverse repurchase agreements - non-trading 6,251 9,538 16,084
-------------------------------------------------------------
- change in financial assets designated and otherwise
mandatorily measured at fair value 2,729 (2,429) 735
-------------------------------------------------------------
* change in other assets (7,329) 10,924 (7,513)
-------------------------------------------------------------
* change in deposits by banks and customer accounts 19,835 7,940 28,262
-------------------------------------------------------------
* change in repurchase agreements - non-trading 5,641 (7,643) (14,482)
-------------------------------------------------------------
* change in debt securities in issue (1,060) (7,943) (7,668)
-------------------------------------------------------------
* change in financial liabilities designated at fair
value (1,822) (7,191) (402)
-------------------------------------------------------------
* change in other liabilities 21,297 (12,295) 5,432
-------------------------------------------------------------
7 - -
* dividend received from associates
-------------------------------------------------------------
* contributions paid to defined benefit plans (10) (24) (22)
-------------------------------------------------------------
* tax received/(paid) 845 (581) 142
------------------------------------------------------------- ------------------------------ -------------------------------
Net cash from operating activities 32,190 15,303 33,899
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
* purchase of financial investments (13,227) (18,890) (21,037)
-------------------------------------------------------------
* proceeds from the sale and maturity of financial
investments 20,490 25,027 17,417
-------------------------------------------------------------
* net cash flows from the purchase and sale of property,
plant and equipment (20) 52 (70)
-------------------------------------------------------------
* net investment in intangible assets (28) (45) (150)
-------------------------------------------------------------
- net cash outflow from investment in associates
and acquisition of businesses and subsidiaries (29) (85) (371)
-------------------------------------------------------------
* net cash flow on disposal of subsidiaries, businesses,
associates and joint ventures - - 57
------------------------------------------------------------- ------------------------------ -------------------------------
Net cash from investing activities 7,186 6,059 (4,154)
- redemption of preference shares and other equity
instruments 628 - (318)
-------------------------------------------------------------
- subordinated loan capital issued 3,111 10,466 -
-------------------------------------------------------------
- subordinated loan capital repaid(4) (2,248) (10,902) (18)
-------------------------------------------------------------
* dividends to the parent company (1,052) (194) (263)
-------------------------------------------------------------
- funds received from the parent company 1,465 - 1,000
- dividends paid to non-controlling interests (2) (1) -
------------------------------------------------------------- ------------------------------ -------------------------------
Net cash from financing activities 1,902 (631) 401
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Net increase in cash and cash equivalents 41,278 20,731 30,146
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents at 1 Jan 140,923 125,304 92,338
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Exchange difference in respect of cash and cash
equivalents 7,706 (5,112) 2,820
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents at 31 Dec(5) 189,907 140,923 125,304
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents comprise of
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- cash and balances at central banks 131,433 108,482 85,092
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- items in the course of collection from other
banks 2,285 346 243
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- loans and advances to banks of one month or
less 13,801 7,516 8,676
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- reverse repurchase agreement with banks of
one month or less 23,182 17,430 21,020
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- treasury bills, other bills and certificates
of deposit less than three months 294 235 685
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- cash collateral and net settlement accounts 19,213 7,403 9,878
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- cash and cash equivalents held for sale(6) 1,925 - -
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- less: items in the course of transmission to
other banks (2,226) (489) (290)
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents at 31 Dec(5) 189,907 140,923 125,304
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
1 Included within 2020 are the impact of impairment and
write-offs related principally to our businesses in the UK and HSBC
Continental Europe GBP(994)m.
2 2022 balances include losses on disposal of businesses
classified as held-for-sale as part of a broader restructuring of
our European business.
3 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.
4 Subordinated liabilities changes during the year are
attributable to cash flows from issuance GBP3,111m (2021:
GBP10,466m; 2020: nil) and repayment of GBP(2,248)m (2021:
GBP(10,902)m; 2020: GBP(18)m) of securities as presented in the
Consolidated statement of cash flows. Non-cash changes during the
year included foreign exchanges gains/(losses) GBP711m (2021:
GBP(512)m; 2020: GBP351m) and fair value gains/(losses) GBP(427)m
(2021: GBP(82)m; 2020: GBP69m).
5 At 31 December 2022, GBP23,395m (2021: GBP9,410m; 2020:
GBP11,828m) was not available for use by the group, of which
GBP1,601m (2021: GBP1,393m; 2020: GBP2,460m) related to mandatory
deposits at central banks.
6 Includes GBP1,562m of cash and balances at central banks
(excluding the expected cash contribution as part of the planned
sale of our retail banking operations in France. For further
details, see Note 34); GBP208m of reverse repurchase agreements
with banks of one month or less, GBP114m of loans and advances to
banks of one month or less and remaining GBP41m relates to other
cash and cash equivalents.
Interest received was GBP7,668m (2021: GBP4,285m; 2020 :
GBP5,424m ), interest paid was GBP5,284m (2021: GBP2,919m; 2020:
GBP3,725m) and dividends received were GBP431m (2021: GBP704m;
2020: GBP423m).
Consolidated statement of changes in equity
for the year ended 31 December
Other reserves
----------------------------------------------------------------------------
Called
up Financial Group
share assets Cash reorganisa- Total
capital Other at flow Foreign tion share- Non-
& share equity Retained FVOCI hedging exchange reserve holders' controlling Total
premium instruments earnings reserve reserve reserve ('GRR')(7) equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 Jan 2022 797 3,722 24,735 1,081 (7) 948 (7,692) 23,584 131 23,715
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
Loss for the year - - (408) - - - - (408) 10 (398)
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
Other comprehensive
(expense)/income
(net of tax) - - 367 (449) (943) 694 - (331) 2 (329)
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
* debt instruments at fair value through other
comprehensive income - - - (449) - - - (449) (5) (454)
- cash flow hedges - - - - (943) - - (943) - (943)
-------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value due to movement in own
credit risk(1) - - 329 - - - - 329 - 329
-------------------------------------------------------
* remeasurement of defined benefit asset/liability - - 38 - - - - 38 - 38
-------------------------------------------------------
* exchange differences - - - - - 694 - 694 7 701
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- --------------------
Total comprehensive
(expense)/ income
for the year - - (41) (449) (943) 694 - (739) 12 (727)
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
Capital securities
issued during the
period 420 208 - - - - - 628 - 628
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
Dividends to the
parent company(2) - - (1,052) - - - - (1,052) (2) (1,054)
Net impact of equity-settled
share-based payments - - 5 - - - - 5 - 5
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
Capital contribution(3) - - 1,465 - - - - 1,465 - 1,465
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
Change in business
combinations and
other movements - - (16) - - - - (16) - (16)
At 31 Dec 2022 1,217 3,930 25,096 632 (950) 1,642 (7,692) 23,875 141 24,016
------------------------------------------------------- ----------------- ---------------------- ---------------- ----------------- ----------------- ---------------- -------------------- ----------------- -------------------- ------------------
At 1 Jan 2021 797 3,722 23,829 1,309 158 1,543 (7,692) 23,666 183 23,849
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ --------------------- -------------------
Profit for the year - - 1,041 - - - - 1,041 5 1,046
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ --------------------- -------------------
Other comprehensive
(expense)/income
(net of tax) - - 46 (234) (165) (595) - (948) (9) (957)
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ --------------------- -------------------
* debt instruments at fair value through other
comprehensive income - - - (236) - - - (236) (1) (237)
----------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - 2 - - - 2 - 2
----------------------------------------------------------
- cash flow hedges - - - - (165) - - (165) - (165)
----------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value due to movement in own
credit risk(1) - - 2 - - - - 2 - 2
----------------------------------------------------------
* remeasurement of defined benefit asset/liability - - 44 - - - - 44 - 44
----------------------------------------------------------
- exchange differences - - - - - (595) - (595) (8) (603)
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ ---------------------
Total comprehensive
income/(expense)
for the year - - 1,087 (234) (165) (595) - 93 (4) 89
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ --------------------- -------------------
Capital securities - - - - - - - - - -
issued during the
period
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ --------------------- -------------------
Dividends to the
parent company(2) - - (194) - - - - (194) (1) (195)
Net impact of equity-settled
share-based payments - - (10) - - - - (10) - (10)
Change in business
combinations and
other movements(5) - - 23 6 - - - 29 (47) (18)
At 31 Dec 2021 797 3,722 24,735 1,081 (7) 948 (7,692) 23,584 131 23,715
---------------------------------------------------------- ------------------ ---------------------- ----------------- ------------------- ------------------ ---------------- -------------------- ------------------ --------------------- -------------------
Consolidated statement of changes in equity (continued)
for the year ended 31 December
Other reserves
------------------------------------------------------
Called
up Financial Group
share assets Cash reorganisa- Total
capital Other at flow Foreign tion share- Non-
& share equity Retained FVOCI hedging exchange reserve holders' controlling Total
premium instruments earnings reserve reserve reserve ('GRR')(7) equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 Jan 2020 797 3,722 24,449 1,089 40 1,098 (7,692) 23,503 509 24,012
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- ------------------- -------------------
Loss for the year - - (1,488) - - - - (1,488) 10 (1,478)
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- ------------------- -------------------
Other comprehensive
income (net of tax) - - 56 216 118 445 - 835 24 859
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- ------------------- -------------------
* debt instruments at fair value through other
comprehensive income - - - 214 - - - 214 (1) 213
----------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - 2 - - - 2 - 2
----------------------------------------------------------
- cash flow hedges - - - - 118 - - 118 - 118
----------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value due to movement in own
credit risk(1) - - 67 - - - - 67 - 67
----------------------------------------------------------
* remeasurement of defined benefit asset/liability - - (11) - - - - (11) 3 (8)
----------------------------------------------------------
- exchange differences - - - - - 445 - 445 22 467
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- -------------------
Total comprehensive
(expense)/income for
the year - - (1,432) 216 118 445 - (653) 34 (619)
Dividends to the parent
company(2) - - (263) - - - - (263) - (263)
Net impact of equity-settled
share-based payments - - 11 - - - - 11 - 11
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- ------------------- -------------------
Capital contribution(4) - - 1,000 - - - - 1,000 - 1,000
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- ------------------- -------------------
Change in business
combinations and other
movements(6) - - 64 4 - - - 68 (360) (292)
At 31 Dec 2020 797 3,722 23,829 1,309 158 1,543 (7,692) 23,666 183 23,849
---------------------------------------------------------- ---------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ------------------- ------------------- -------------------
1 The cumulative amount of change in fair value attributable to
changes in own credit risk of financial liabilities designated at
fair value was a gain of GBP292m (2021: loss of GBP165m and 2020:
loss of GBP189m).
2 The dividends to the parent company includes dividend on
ordinary share capital GBP850m (2021: nil and 2020: nil), coupon
payment on additional tier 1 instrument GBP202m (2021: GBP194m and
2020: GBP212m) & dividend on preference share capital nil
(2021: nil and 2020: GBP51m).
3 HSBC Holdings plc injected GBP1.5bn of CET1 capital into HSBC
Bank plc during November 2022 which in turn injected into HSBC
Continental Europe for funding the acquisition of HSBC Bank Malta
plc and HSBC Trinkaus & Burkhardt GmbH.
4 HSBC UK Holdings Limited (during 2021, parent company of the
bank changed to HSBC Holdings plc) injected GBP1bn of CET1 capital
into HSBC Bank plc during March 2020 to improve the capital base of
the group, impacted by Covid-19. There was no new issuance of share
capital.
5 Additional shares were acquired in HSBC Trinkaus &
Burkhardt GmbH and HSBC Bank Armenia cjsc, in 2021 increasing the
group's interest to 100%.
6 Additional shares were acquired in HSBC Trinkaus &
Burkhardt GmbH in May 2020, increasing the group's interest from
80.67% to 99.33%.
7 The Group reorganisation reserve ('GRR') is an accounting
reserve resulting from the ring-fencing implementation. The GRR
does not form part of regulatory capital.
HSBC Bank plc balance sheet
at 31 December
2022 2021
Notes* GBPm GBPm
----------------------------------------------- ------ ---------------------------- -------------------------------
Assets
----------------------------------------------- ------ ---------------------------- -------------------------------
Cash and balances at central banks 78,441 63,008
----------------------------------------------- ------ ---------------------------- -------------------------------
Items in the course of collection from other
banks 1,863 211
Trading assets 10 67,623 70,790
----------------------------------------------- ------ ---------------------------- -------------------------------
Financial assets designated and otherwise
mandatorily
measured at fair value through profit or loss 13 1,618 3,215
Derivatives 14 196,714 125,787
----------------------------------------------- ------ ---------------------------- -------------------------------
Loans and advances to banks 14,486 6,778
----------------------------------------------- ------ ---------------------------- -------------------------------
Loans and advances to customers 36,992 33,936
----------------------------------------------- ------ ---------------------------- -------------------------------
Reverse repurchase agreements - non-trading 43,055 39,708
----------------------------------------------- ------ ---------------------------- -------------------------------
Financial investments 15 18,639 26,542
----------------------------------------------- ------ ---------------------------- -------------------------------
Prepayments, accrued income and other assets 21 43,907 31,490
----------------------------------------------- ------ ---------------------------- -------------------------------
Current tax assets 394 1,071
Investments in subsidiary undertakings 18 10,646 6,479
----------------------------------------------- ------ ---------------------------- -------------------------------
Goodwill and intangible assets 20 41 34
----------------------------------------------- ------ ---------------------------- -------------------------------
Deferred tax assets 7 608 509
----------------------------------------------- ------ ---------------------------- -------------------------------
Total assets 515,027 409,558
----------------------------------------------- ------ ---------------------------- -------------------------------
Liabilities and equity
----------------------------------------------- ------ ---------------------------- -------------------------------
Liabilities
Deposits by banks 13,594 14,655
----------------------------------------------- ------ ---------------------------- -------------------------------
Customer accounts 141,714 124,706
----------------------------------------------- ------ ---------------------------- -------------------------------
Repurchase agreements - non-trading 29,638 22,344
----------------------------------------------- ------ ---------------------------- -------------------------------
Items in the course of transmission to other
banks 1,758 172
----------------------------------------------- ------ ---------------------------- -------------------------------
Trading liabilities 22 25,765 31,161
----------------------------------------------- ------ ---------------------------- -------------------------------
Financial liabilities designated at fair value 23 19,415 20,869
----------------------------------------------- ------ ---------------------------- -------------------------------
Derivatives 14 193,336 127,651
----------------------------------------------- ------ ---------------------------- -------------------------------
Debt securities in issue 4,656 5,658
----------------------------------------------- ------ ---------------------------- -------------------------------
Accruals, deferred income and other liabilities 24 47,982 30,170
----------------------------------------------- ------ ---------------------------- -------------------------------
Current tax liabilities 21 5
Provisions 25 167 250
Subordinated liabilities 26 14,252 12,218
----------------------------------------------- ------ ---------------------------- -------------------------------
Total liabilities 492,298 389,859
----------------------------------------------- ------ ---------------------------- -------------------------------
Equity
----------------------------------------------- ------ ---------------------------- -------------------------------
Called up share capital 29 797 797
----------------------------------------------- ------ ---------------------------- -------------------------------
Share premium account 420 -
----------------------------------------------- ------ ---------------------------- -------------------------------
Other equity instruments 29 3,930 3,722
----------------------------------------------- ------ ---------------------------- -------------------------------
Other reserves (6,073) (5,173)
----------------------------------------------- ------ ---------------------------- -------------------------------
Retained earnings 23,655 20,353
----------------------------------------------- ------ ---------------------------- -------------------------------
Total equity 22,729 19,699
----------------------------------------------- ------ ---------------------------- -------------------------------
Total liabilities and equity 515,027 409,558
----------------------------------------------- ------ ---------------------------- -------------------------------
* For Notes on the financial statements, see page 124.
Profit after tax for the year was GBP2,743m (2021: GBP455m;
2020: loss after tax GBP(644)m.
The accompanying notes on pages 124 to 190. , and the audited
sections of the 'Report of the Directors' on pages 26 to 102 form
an integral part of these financial statements.
The financial statements were approved by the Board of Directors
on 20 February 2023 and signed on its behalf by:
David Watts
Director
HSBC Bank plc statement of cash flows
for the year ended 31 December
-------------------------------
2022 2021 2020
GBPm GBPm GBPm
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Profit/(loss) before tax 2,548 273 (936)
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Adjustments for non-cash items
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Depreciation, amortisation and impairment(1) 17 18 635
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Net gain from investing activities(2) (1,669) (34) (67)
Change in expected credit losses gross of
recoveries and other credit impairment charges 130 (216) 457
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Provisions including pensions 91 42 154
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Share-based payment expense 27 71 56
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Other non-cash items included in loss/(profit)
before tax (21) (7) 8
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Elimination of exchange differences(3) (2,109) 1,073 108
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Changes in operating assets and liabilities 18,609 4,150 27,197
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
* change in net trading securities and derivatives (9,551) 11,761 11,580
--------------------------------------------------------------
* change in loans and advances to banks and customers (3,870) 9,712 8,568
--------------------------------------------------------------
* change in reverse repurchase agreements - non-trading 791 5,651 5,890
--------------------------------------------------------------
* change in financial assets designated and otherwise
mandatorily measured at fair value 1,597 (1,350) 1,264
--------------------------------------------------------------
* change in other assets(4) (10,912) 4,383 (3,771)
--------------------------------------------------------------
* change in deposits by banks and customer accounts 15,947 1,903 12,062
--------------------------------------------------------------
* change in repurchase agreements - non-trading 7,294 (4,652) (9,331)
--------------------------------------------------------------
* change in debt securities in issue (1,002) (9,698) 318
--------------------------------------------------------------
* change in financial liabilities designated at fair
value (116) (3,831) 500
--------------------------------------------------------------
* change in other liabilities 17,343 (9,357) (71)
--------------------------------------------------------------
* contributions paid to defined benefit plans (10) (21) (22)
--------------------------------------------------------------
* tax received/(paid) 1,098 (351) 210
-------------------------------------------------------------- ------------------------------ -------------------------------
Net cash from operating activities 17,623 5,370 27,612
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
* purchase of financial investments (8,535) (15,185) (13,882)
--------------------------------------------------------------
* proceeds from the sale and maturity of financial
investments 17,022 18,285 11,791
--------------------------------------------------------------
* net cash flows from the purchase and sale of property,
plant and equipment (2) (4) (9)
--------------------------------------------------------------
* net investment in intangible assets (176) (8) (98)
Net cash from investing activities 8,309 3,088 (2,198)
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- issue of ordinary share capital and other 628 -
equity instruments
* subordinated loan capital issued(5) 3,111 10,466 -
--------------------------------------------------------------
* subordinated loan capital repaid(5) (2,240) (10,791) (313)
--------------------------------------------------------------
* funds received from the parent company 1,465 - 1,000
--------------------------------------------------------------
* dividends to the parent company (1,052) (194) (263)
-------------------------------------------------------------- ------------------------------ -------------------------------
Net cash from financing activities 1,912 (519) 424
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Net increase in cash and cash equivalents 27,844 7,939 25,838
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents at 1 Jan 83,814 77,605 51,235
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Exchange difference in respect of cash and
cash equivalents 3,652 (1,730) 532
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents at 31 Dec 115,310 83,814 77,605
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents comprise of:
------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- cash and balances at central banks 78,441 63,008 48,777
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- items in the course of collection from other
banks 1,863 211 37
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- loans and advances to banks of one month
or less 11,353 4,323 5,338
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- reverse repurchase agreement with banks
of one month or less 13,917 9,779 14,558
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- treasury bills, other bills and certificates
of deposit less than three months 150 175 279
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- cash collateral and net settlement accounts 11,344 6,490 8,630
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
- less: items in the course of transmission
to other banks (1,758) (172) (14)
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
Cash and cash equivalents at 31 Dec 115,310 83,814 77,605
-------------------------------------------------------------- ------------------------------ ------------------------------- -------------------------------
1 Included within 2020 is the impact of impairment related to our business in the UK (GBP531m).
2 Included within 2022 is the impact of impairment reversal
booked in Paris branch for investment in subsidiary.
3 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.
4 Includes additional investment in subsidiaries (2021: GBP17m; 2020: GBP443m).
5 Subordinated liabilities changes during the year are
attributable to cash flows from issuance GBP3,111m (2021:
GBP10,466m; 2020: nil) and repayment of GBP(2,240)m (2021:
GBP10,791m; 2020: GBP313m) of securities as presented in the HSBC
Bank plc statement of cash flows. Non-cash changes during the year
included foreign exchange gains(losses) GBP696m (2021: GBP489m;
2020: GBP329m) and fair value gains GBP(427)m (2021: GBP(82)m;
2020: GBP69m).
Interest received was GBP5,023m (2021: GBP2,321m ; 2020:
GBP3,211m), interest paid was GBP3,891m (2021: GBP1,827m ; 2020:
GBP2,539m) and dividends received was GBP936m (2021: GBP902m ;
2020: GBP555m).
HSBC Bank plc statement of changes in equity
for the year ended 31 December
Other reserves
---------------------------------------------------------------------------------------------------
Called
up Financial
share assets Cash Group
capital Other at flow Foreign reorganisation Total
& share equity Retained FVOCI hedging exchange reserve shareholders'
premium instruments earnings reserve reserve reserve ('GRR')(7) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
At 1 Jan 2022 797 3,722 20,353 135 (82) 22 (5,248) 19,699
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
Profit for the year - - 2,743 - - - - 2,743
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
Other comprehensive
income/(expense) (net
of tax) - - 141 (257) (714) 71 - (759)
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
* debt instruments at fair value through other
comprehensive income - - - (258) - - - (258)
----------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - 1 - - - 1
----------------------------------------------------------
- cash flow hedges - - - - (714) - - (714)
----------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value due to movement in own
credit risk(1) - - 156 - - - - 156
----------------------------------------------------------
* remeasurement of defined benefit asset/liability - - (15) - - - - (15)
----------------------------------------------------------
- exchange differences - - - - - 71 - 71
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- --------------------------
Total comprehensive
income/(expense) for
the period - - 2,884 (257) (714) 71 - 1,984
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
Capital securities
issued during the
period 420 208 - - - - - 628
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
Dividends to the parent
company(2) - - (1,052) - - - - (1,052)
Net impact of equity-settled
share-based payments - - 5 - - - - 5
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
Capital contribution(3) 1,465 1,465
At 31 Dec 2022 1,217 3,930 23,655 (122) (796) 93 (5,248) 22,729
---------------------------------------------------------- ------------------------ ---------------------- ----------------------- ----------------------- ---------------------- ---------------------- -------------------------- --------------------------
At 1 Jan 2021 797 3,722 20,099 351 55 43 (5,248) 19,819
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ---------------------- -------------------------- --------------------------
Profit for the year - - 455 - - - - 455
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ---------------------- -------------------------- --------------------------
Other comprehensive
income/(expense) (net
of tax) - - 14 (216) (137) (21) - (360)
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ---------------------- -------------------------- --------------------------
* debt instruments at fair value through other
comprehensive income - - - (215) - - - (215)
----------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - (1) - - - (1)
----------------------------------------------------------
* cash flow hedges - - - - (137) - - (137)
----------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value due to movement in own
credit risk(1) - - - - - - - -
----------------------------------------------------------
* remeasurement of defined benefit asset/liability - - 14 - - - - 14
----------------------------------------------------------
* exchange differences - - - - - (21) - (21)
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ---------------------- --------------------------
Total comprehensive
income/(expense) for
the period - - 469 (216) (137) (21) - 95
Dividends to the parent
company(2) - - (194) - - - - (194)
Net impact of equity-settled
share-based payments - - (10) - - - - (10)
Change in business
combinations and other
movements(5) - - (11) - - - - (11)
At 31 Dec 2021 797 3,722 20,353 135 (82) 22 (5,248) 19,699
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ---------------------- -------------------------- --------------------------
HSBC Bank plc statement of changes in equity (continued)
for the year ended 31 December
Other reserves
------------------------------------------------------------------------------------------------------
Called
up
share Financial Cash Group
capital Other assets flow Foreign reorganisation Total
& share equity Retained at FVOCI hedging exchange reserve shareholders'
premium instruments earnings reserve reserve reserve ('GRR') equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 Jan 2020 797 3,722 19,876 182 (32) 77 (5,248) 19,374
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ -------------------------- --------------------------
Loss for the year - - (644) - - - - (644)
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ -------------------------- --------------------------
Other comprehensive
income/(expense) (net
of tax) - - 107 170 87 (28) - 336
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ -------------------------- --------------------------
* debt instruments at fair value through other
comprehensive income - - - 168 - - - 168
----------------------------------------------------------
* equity instruments designated at fair value through
other comprehensive income - - - 2 - - - 2
----------------------------------------------------------
* cash flow hedges - - - - 87 - - 87
----------------------------------------------------------
* changes in fair value of financial liabilities
designated at fair value due to movement in own
credit risk(1) - - 92 - - - - 92
----------------------------------------------------------
* remeasurement of defined benefit asset/liability - - 15 - - - - 15
----------------------------------------------------------
* exchange differences - - - - - (28) - (28)
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ --------------------------
Total comprehensive
(expense)/income for
the period - - (537) 170 87 (28) - (308)
Dividends to the parent
company(2) - - (263) - - - - (263)
Net impact of equity-settled
share-based payments - - 11 - - - - 11
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ -------------------------- --------------------------
Capital contribution(4) - 1,000 - - - - 1,000
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ -------------------------- --------------------------
Change in business
combinations and other
movements(6) - 12 (1) - (6) - 5
At 31 Dec 2020 797 3,722 20,099 351 55 43 (5,248) 19,819
---------------------------------------------------------- ------------------------ ---------------------- ---------------------- ------------------------ ---------------------- ------------------------ -------------------------- --------------------------
1 The cumulative amount of change in fair value attributable to
changes in own credit risk of financial liabilities designated at
fair value was a gain of GBP139m (2021: loss of GBP72m and 2020:
loss of GBP76m).
2 The dividends to the parent company includes dividend on
ordinary share capital GBP850m (2021: nil and 2020: nil), coupon
payment on additional tier 1 instrument GBP222m (2021: GBP194m and
2020: GBP212m) & dividend on preference share capital nil
(2021: nil and 2020: GBP51m).
3 HSBC Holdings plc injected GBP1.5bn of CET1 capital into HSBC
Bank plc during November 2022 which in turn injected into HSBC
Continental Europe for funding the acquisition of HSBC Bank Malta
plc and HSBC Trinkaus & Burkhardt GmbH.
4 HSBC UK Holdings Limited (during 2021, parent company of the
bank changed to HSBC Holdings plc) injected GBP1bn of CET1 capital
into HSBC Bank plc during March 2020 to improve the capital base of
the group, impacted by Covid-19. There was no new issuance of share
capital.
5 Additional shares were acquired in HSBC Trinkaus &
Burkhardt GmbH in Feb 2021, increasing the group's interest from
99.33% to 100.00%.
6 Additional shares were acquired in HSBC Trinkaus &
Burkhardt GmbH in May 2020, increasing the group's interest from
80.67% to 99.33%.
7 The Group reorganisation reserve ('GRR') is an accounting
reserve resulting from the ring-fencing implementation. The GRR
does not form part of regulatory capital.
Notes on the Financial Statements
1 Basis of preparation and significant accounting policies
--------------------------------------------------------
1.1 Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of the group and the
separate financial statements of HSBC Bank plc 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 ('IFRSs') as issued by
the International Accounting Standards Board ('IASB'), including
interpretations issued by the IFRS Interpretations Committee, as
there are no applicable differences from IFRSs as issued by the
IASB for the periods presented. There were no unendorsed standards
effective for the year ended
31 December 2022 affecting these consolidated and separate
financial statements.
Standards adopted during the year ended 31 December 2022
There were no new accounting standards or interpretations that
had a significant effect on the group in 2022. Accounting policies
have been consistently applied.
(b) Future accounting developments
Minor amendments to IFRSs
The IASB has not published any minor amendments effective from 1
January 2022 that are applicable to the group. However, the IASB
has published a number of minor amendments to IFRSs that are
effective from 1 January 2023 and 1 January 2024. The group expects
they will have an insignificant effect, when adopted, on the
consolidated financial statements of the group and the separate
financial statements of HSBC Bank plc.
New IFRSs
IFRS 17 'Insurance Contracts'
IFRS 17 'Insurance Contracts' was issued in May 2017, with
amendments to the standard issued in June 2020 and December 2021.
Following the amendments, IFRS 17 is effective for annual reporting
periods beginning on or after 1 January 2023 and is applied
retrospectively, with comparatives restated from 1 January 2022.
IFRS 17 has been adopted in its entirety for use in the UK while it
has been adopted by the EU subject to certain optional
exemptions.
IFRS 17 sets out the requirements that the group will apply in
accounting for insurance contracts it issues, reinsurance contracts
it holds, and investment contracts with discretionary participation
features.
The group is at an advanced stage in the implementation of IFRS
17, having put in place accounting policies, data and models, and
made progress with preparing 2022 comparative data. Below are set
out our expectations of the impact of IFRS 17 compared with our
current accounting policy for insurance contracts, which is set out
in policy 1.2(j) on page 344.
Under IFRS 17, no present value of in-force business ('PVIF')
asset is recognised. Instead, the measurement of the insurance
contracts liability is based on groups of insurance contracts and
will include fulfilment cash flows, as well as the contractual
service margin ('CSM'), which represents the unearned profit.
To identify groups of insurance contracts, individual contracts
subject to similar dominant risk and managed together are
identified as a portfolio of insurance contracts. Each portfolio is
further separated by profitability group and issue date into
periodic cohorts.
The fulfilment cash flows comprise:
-- the best estimates of future cash flows, including amounts
expected to be collected from premiums and payouts for claims,
benefits and expenses, which are projected using assumptions based
on demographic and operating experience;
-- an adjustment for the time value of money and financial risks
associated with the future cash flows; and
-- an adjustment for non-financial risk that reflects the
uncertainty about the amount and timing of future cash flows.
In contrast to the group's IFRS 4 accounting where profits are
recognised upfront, the CSM will be systematically recognised in
revenue, as services are provided over the expected coverage period
of the group of contracts without any change to the overall profit
of the contracts. Losses resulting from the recognition of onerous
contracts are recognised in the income statement immediately.
The CSM is adjusted depending on the measurement model of the
group of insurance contracts. While the general measurement model
('GMM') is the default measurement model under IFRS 17, the group
expects that the majority of its contracts will be accounted for
under the variable fee approach ('VFA'), which is mandatory to
apply for insurance contracts with direct participation features
upon meeting the eligibility criteria.
IFRS 17 requires entities to apply IFRS 17 retrospectively as if
IFRS 17 had always been applied, using the full retrospective
approach ('FRA') unless it is impracticable. When FRA is
impracticable such as when there is a lack of sufficient and
reliable data, an entity has an accounting policy choice to use
either the modified retrospective approach ('MRA') or the fair
value approach ('FVA'). The group will primarily apply the MRA for
new business where FRA is impracticable. The group will make use of
the other comprehensive income ('OCI') option for some
contracts.
Impact of IFRS 17
Changes to equity on transition are driven by the elimination of
the PVIF asset, the re-designation of certain eligible financial
assets in the scope of IFRS 9, the remeasurement of insurance
liabilities and assets under IFRS 17, and the recognition of the
CSM.
IFRS 17 requires the use of current market values for the
measurement of insurance liabilities. The shareholder's share of
the investment experience and assumption changes will be absorbed
by the CSM and released over time to profit or loss under VFA. For
contracts measured under GMM, the shareholder's share of the
investment volatility is recorded in profit or loss as it arises.
Under IFRS 17, operating expenses will be lower as directly
attributable costs will be incorporated in the CSM and recognised
in the insurance service result.
While the profit over the life of an individual contract will be
unchanged, its emergence will be later under IFRS 17.
All of these impacts will be subject to deferred tax.
Estimates of the opening balance sheet as at 1 January 2022 have
been calculated and are presented below, showing separately the
impact on the total assets, liabilities and equity of our insurance
manufacturing operations. These estimates are based on accounting
policies, assumptions, judgements and estimation techniques that
remain subject to change.
Total assets Total liabilities Total equity
Impact of
transition to
IFRS 17, at
1 January 2022 GBPbn GBPbn GBPbn
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Balance sheet
values at 1
January 2022
under IFRS 4 27.1 25.5 1.6
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Removal of PVIF (0.8) - (0.8)
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Replacement of
IFRS 4
liabilities with
IFRS 17 - - -
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Removal of IFRS
4 liabilities
and recording
of IFRS 17
fulfilment cash
flows - (0.9) 0.9
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
IFRS 17
contractual
service margin - 0.9 (0.9)
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Re-measurement
effect of IFRS 9
re-designations - - -
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Tax effect - (0.2) 0.2
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
Estimated
balance sheet
values at
1 January 2022
under IFRS 17 26.3 25.3 1.0
---------------- ---------------------------------------------- ---------------------------------------------- ----------------------------------------------
PVIF of GBP812m less deferred tax of GBP175m constitute the
overall estimated reduction in intangible assets, after tax, of
GBP637m on transition to IFRS 17.
(c) Foreign currencies
The functional currency of the bank is sterling, which is also
the presentational currency of the consolidated financial
statements of the group.
Transactions in foreign currencies are recorded at the rate of
exchange on 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.
In the consolidated financial statements, the assets and
liabilities of branches, subsidiaries, joint ventures and
associates whose functional currency is not sterling are translated
into the group's presentation currency at the rate of exchange at
the balance sheet date, while their results are translated into
sterling 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.
(d) Presentation of information
Certain disclosures required by IFRSs have been included in the
audited sections of this Annual Report and Accounts 2022 as
follows:
-- disclosures concerning the nature and extent of risks
relating to financial instruments and insurance contracts are
included in the 'Report of the Directors: Risk' on pages 26 to
93;
-- the 'Own funds' disclosure is included in the 'Report of the
Directors: Capital Risk in 2022' on page 80; and
-- in publishing the parent company financial statements
together with the group financial statements, the bank has taken
advantage of the exemption in section 408(3) of the Companies Act
2006 not to present its individual income statement and related
notes.
(e) Critical accounting 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 accounting 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 the group'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 2022
management do 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 impact of climate-related risks of associated judgements
and estimates in our value in use calculations.
(f) Segmental analysis
HSBC Bank plc's chief operating decision maker is the group
Chief Executive, supported by the group Executive Committee, and
operating segments are reported in a manner consistent with the
internal reporting provided to the group Chief Executive and the
group Executive Committee.
Measurement of segmental assets, liabilities, income and
expenses is in accordance with the bank's accounting policies.
Segmental income and expenses include transfers between segments
and these transfers are conducted at arm's length. Shared costs are
included in segments on the basis of the actual recharges made.
The types of products and services from which each reportable
segment derives its revenue are discussed in the 'Strategic Report
- Our global businesses' on page 9
(g) Going concern
The financial statements are prepared on a going concern basis,
as the Directors are satisfied that the group and the 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, cash flows, capital
requirements and capital resources. These considerations include
stressed scenarios that reflect the uncertainty in structural
changes from the Covid-19
pandemic, the Russia-Ukraine war, disrupted supply chains
globally, climate change and other top and emerging risks, as well
as from the related impacts on profitability, capital and
liquidity.
1.2 Summary of significant accounting policies
(a) Consolidation and related policies
Investments in subsidiaries
Where an entity is governed by voting rights, the group
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.
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.
The bank's 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 a
cash-generating unit with its carrying amount.
Critical accounting 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:
* The accuracy of forecast cash flows is subject to a * The future cash flows of each investment are
high degree of uncertainty in volatile market sensitive to the cash flows projected for the periods
conditions. Where such circumstances are determined for which detailed forecasts are available and to
to exist, management re-tests for impairment more assumptions regarding the long-term pattern of
frequently than once a year when indicators of sustainable cash flows thereafter. Forecasts are
impairment exist. This ensures that the assumptions compared with actual performance and verifiable
on which the cash flow forecasts are based continue economic data, but they reflect management's view of
to reflect current market conditions and management's future business prospects at the time of the
best estimate of future business prospects. 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 are described in Note 18.
=========================================================== ===========================================================
Group sponsored structured entities
The group 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. The group 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 the group, together
with one or more parties, has joint control. Depending on the
group's rights and obligations, the joint arrangement is classified
as either a joint operation or a joint venture. The group
classifies investments in entities over which it has significant
influence, and those that are neither subsidiaries nor joint
arrangements, as associates.
The group 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 are included in the consolidated financial
statements of the group 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. 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.
(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, are 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 the group 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 using
the rate of interest used to discount the future cash flows for the
purpose of measuring the impairment loss.
Non-interest income and expense
The group generates fee income from services provided at a fixed
price over time, such as account service and card fees, or when the
group 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.
The group acts as principal in the majority of contracts with
customers, with the exception of broking services. For most
brokerage trades, the group acts as agent in the transaction and
recognises broking income net of fees payable to other parties in
the arrangement.
The group 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 the group 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, such as those including both account and insurance
services, 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. This is the ex-dividend date for listed equity
securities, and usually the date when shareholders approve the
dividend for unlisted equity securities.
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 income,
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, expense and dividends, 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 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 the 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 premium income are
disclosed in Note 1.2(j).
(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,
the group 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 either until the
transaction matures or is closed out or the valuation inputs become
observable.
The fair value of financial instruments is generally measured on
an individual basis. However, in cases where the group 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 11, 'Fair values of
financial instruments carried at fair value'.
Critical accounting 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:
* An instrument in its entirety is classified as valued * Details on the group's level 3 financial instruments
using significant unobservable inputs if, in the and the sensitivity of their valuation to the effect
opinion of management, greater than 5% of the of applying reasonably possible alternative
instrument's valuation is driven by unobservable assumptions in determining their fair value are set
inputs. out in Note 11.
* '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).
=========================================================== ==========================================================
(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. The group accounts for regular way
amortised cost financial instruments using trade date accounting.
The carrying value of these financial assets at initial recognition
includes any directly attributable transactions costs.
The group 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 the group intends to hold the loan, the loan commitment is
included in the impairment calculations set out below.
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 held for 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 the trade date when HSBC enters into contractual
arrangements to purchase and are normally derecognised when they
are either sold or redeemed. They are subsequently remeasured at
fair value and changes therein (except for those relating to
impairment, interest income and foreign currency exchange gains and
losses) are 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.
(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; and
-- 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 criterion, 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. If no fair value designation
was made for the related assets, at least some of the assets would
otherwise be measured at either fair value through other
comprehensive income or amortised cost. 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, with
changes in fair value generally recorded in the income statement.
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. The
group 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 the hedged item 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 trading
income'. 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.
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 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 fair value through other comprehensive income
('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
required for ECL resulting from default events that are possible
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
required 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 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)
The group 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,
even where regulatory rules permit default to be defined based on
180 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 amount, i.e. gross carrying amount
less
ECL allowance.
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 the group 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 cure 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.
In 2022, the group adopted the EBA Guidelines on the application
of definition of default for our retail portfolios, which affects
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 37.
Performing forborne loans are initially stage 2 and remain
classified as forborne until they meet applicable cure 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
restructure 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.
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'), macro-economic 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 reporting date. The quantitative
measure of significance varies depending on the credit quality at
origination as follows:
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:
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 37.
For Retail portfolios, default risk is assessed using a
reporting date 12-month PD derived from credit scores, 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.
As additional data becomes available, the retail transfer
criteria approach continues to be refined to utilise a more
relative approach for certain portfolios. 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.
These enhancements resulted in significant migrations of loans to
customers gross carrying amounts from stage 1 to stage 2, but did
not have a significant impact on the overall ECL for these
portfolios in 2022 due to low loan-to-value ratios.
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.
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 Basel II IRB framework where possible,
with recalibration to meet the differing IFRS 9 requirements as set
out in the following table:
PD
* Through the cycle (represents long-run average PD * Point in time (based on current conditions, adjusted
throughout a full economic cycle). to take into account estimates of future conditions
that will impact PD).
* The definition of default includes a backstop of 90+
days past due, although this has been modified to * Default backstop of 90+ days past due for all
180+ days past due for some portfolios, particularly portfolios.
UK and US mortgages.
----- ----------------------------------------------------------- ------------------------------------------------------------
EAD
* Cannot be lower than current balance * Amortisation captured for term products
----- ----------------------------------------------------------- ------------------------------------------------------------
LGD
* Downturn LGD (consistent losses expected to be * Expected LGD (based on estimate of loss given default
suffered during a severe but plausible economic including the expected impact of future economic
downturn). conditions such as changes in value of collateral).
* Regulatory floors may apply to mitigate risk of * No floors.
underestimating downturn LGD due to lack of
historical data.
* Discounted using the original effective interest rate
of the loan.
* Discounted using cost of capital.
* Only costs associated with obtaining/selling
* All collection costs included. collateral included.
----- ----------------------------------------------------------- ------------------------------------------------------------
Other
* Discounted back from point of default to balance
sheet date.
----- ----------------------------------------------------------- ------------------------------------------------------------
While 12-month PDs are recalibrated from Basel 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 on an individual
basis using a discounted cash flow ('DCF') methodology. The
expected future cash flows are based on the credit risk officer's
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 four different scenarios are probability-weighted by
reference to the economic scenarios applied more generally by HSBC
Group and the judgement of the credit risk officer in relation to
the likelihood of the workout strategy succeeding or receivership
being required. For less significant cases, the effect of different
economic scenarios and work-out strategies is approximated and
applied as an adjustment to the most likely outcome.
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
loss 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 48.
Critical accounting 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:
==========================================================================================================================
* Defining what is considered to be a significant * The section 'Measurement uncertainty and sensitivity
increase in credit risk. analysis of ECL estimates', marked as audited from
page 48 sets out the assumptions used in determining
ECL, and provides an indication of the sensitivity of
* Selecting and calibrating the PD, LGD and EAD models the result to the application of different weightings
, being applied to different economic assumptions.
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 loss.
* Making management judgemental 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.
========================================================== ==============================================================
(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 on the occurrence of 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 for as insurance contracts as
required by IFRS 4 'Insurance Contracts'.
Net insurance premium income
Premiums for life insurance contracts are accounted for when
receivable, except in unit-linked insurance contracts where
premiums are accounted for when liabilities are established.
Reinsurance premiums are accounted for in the same accounting
period as the premiums for the direct insurance contracts to which
they relate.
Net insurance claims and benefits paid and movements in
liabilities to policyholders
Gross insurance claims for life insurance contracts reflect the
total cost of claims arising during the year, including claim
handling costs and any policyholder bonuses allocated in
anticipation of a bonus declaration.
Maturity claims are recognised when due for payment. Surrenders
are recognised when paid or at an earlier date on which, following
notification, the policy ceases to be included within the
calculation of the related insurance liabilities. Death claims are
recognised when notified.
Reinsurance recoveries are accounted for in the same period as
the related claim.
Liabilities under insurance contracts
Liabilities under non-linked life insurance contracts are
calculated by each life insurance operation based on local
actuarial principles. Liabilities under unit-linked life insurance
contracts are at least equivalent to the surrender or transfer
value, which is calculated by reference to the value of the
relevant underlying funds or indices.
Future profit participation on insurance contracts with DPF
Where contracts provide discretionary profit participation
benefits to policyholders, liabilities for these contracts include
provisions for the future discretionary benefits to policyholders.
These provisions reflect the actual performance of the investment
portfolio to date and management's expectation of the future
performance of the assets backing the contracts, as well as other
experience factors such as mortality, lapses and operational
efficiency, where appropriate. The benefits to policyholders may be
determined by the contractual terms, regulation or past
distribution policy.
Investment contracts with DPF
While investment contracts with DPF are financial instruments,
they continue to be treated as insurance contracts as required by
IFRS 4. The group therefore recognises the premiums for these
contracts as revenue and recognises as an expense the resulting
increase in the carrying amount of the liability.
In the case of net unrealised investment gains on these
contracts, whose discretionary benefits principally reflect the
actual performance of the investment portfolio, the corresponding
increase in the liabilities is recognised in either the income
statement or other comprehensive income, following the treatment of
the unrealised gains on the relevant assets. In the case of net
unrealised losses, a deferred participating asset is recognised
only to the extent that its recoverability is highly probable.
Movements in the liabilities arising from realised gains and losses
on relevant assets are recognised in the income statement.
Present value of in-force long-term insurance business
The group recognises the value placed on insurance contracts,
and investment contracts with DPF, that are classified as long-term
and
in-force at the balance sheet date, as an asset. The asset
represents the present value of the equity holders' interest in the
issuing insurance companies' profits expected to emerge from these
contracts written at the balance sheet date. The present value
of
in-force long-term insurance business ('PVIF') is determined by
discounting those expected future profits using appropriate
assumptions in assessing factors such as future mortality, lapse
rates and levels of expenses, and a risk discount rate that
reflects the risk premium attributable to the respective contracts.
The PVIF incorporates allowances for both non-market risk and the
value of financial options and guarantees. The PVIF asset is
resented gross of attributable tax in the balance sheet and
movements in the PVIF asset are included in 'Other operating
income' on a gross of tax basis.
(k) Employee compensation and benefits
Share-based payments
The group 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.
Post-employment benefit plans
The group operates a number of pension schemes including defined
benefit, defined contribution and 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, 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.
(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 in which 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. The group provides for potential current tax
liabilities that may arise on the basis of the amounts expected to
be paid to the tax authorities. Payments associated with any
incremental base erosion and anti-abuse tax are reflected in tax
expense in the period incurred.
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 as the assets will be realised or the
liabilities settled.
In assessing the probability and sufficiency of future taxable
profit, we consider 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. We also consider 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 accounting judgements
The recognition of deferred tax assets depends on judgements and estimates
==================================================================================================
The recognition of deferred tax assets
* Specific judgements supporting deferred tax assets is sensitive to estimates of future
are described in Note 7. 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.
========================================================= =======================================
The Group does not consider there to be a significant risk of a
material adjustment to the carrying amount of the 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.
Critical accounting 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:
===========================================================================================================================
* Determining whether a present obligation exists. * Provisions for legal proceedings and regulatory
Professional advice is taken on the assessment of matters remain very sensitive to the assumptions used
litigation and similar obligations. 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
* Provisions for legal proceedings and regulatory not practicable to quantify a range of possible
matters typically require a higher degree of outcomes for individual matters. It is also not
judgement than other types of provisions. When practicable to meaningfully quantify ranges of
matters are at an early stage, accounting judgements potential outcomes in aggregate for these types of
can be difficult because of the high degree of provisions, because of the diverse nature and
uncertainty associated with determining whether a circumstances of such matters and the wide range of
present obligation exists, and estimating the uncertainties involved.
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.
=========================================================== ==============================================================
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.
The bank has issued financial guarantees and similar contracts
to other group entities. The group elects to account for certain
guarantees as insurance contracts in the bank's financial
statements, in which case they are measured and recognised as
insurance liabilities. This election is made on a contract by
contract basis, and is irrevocable.
(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 value 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. 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 loss recognised in prior periods for non-financial
assets is 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.
(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 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 value of the
non-current assets in scope of IFRS 5 for measurement is recognised
against the total assets of the disposal group.
Critical accounting estimates and judgements
The classification as held for sale depends on certain judgements
==============================================================================
Management judgement is required in determining whether the IFRS 5
held for sale criteria are met, including whether a sale is highly
probable and expected to complete within one year of classification.
The exercise of judgement will normally consider the likelihood of
successfully securing any necessary regulatory or political approvals
which are almost always required for sales of banking businesses. For
large and complex plans judgement will also include an assessment of
the enforceability of any binding sale agreement, the nature and magnitude
of any disincentives for non-performance, and the ability of the counterparty
to undertake necessary pre-completion preparatory work, comply with
conditions precedent, and otherwise be able to comply with contractual
undertakings to achieve completion within the expected timescale. Once
classified as held for sale, judgement is required to be applied on
a continuous basis to ensure that classification remains appropriate
in future accounting periods.
==============================================================================
2 Net fee income
--------------
Net fee income by product type
2022 2021 2020
GBPm GBPm GBPm
----------------------------------- ------------------------- -------------------------- --------------------------
Account services 302 271 239
----------------------------------- ------------------------- -------------------------- --------------------------
Funds under management 433 465 424
----------------------------------- ------------------------- -------------------------- --------------------------
Cards 56 44 44
----------------------------------- ------------------------- -------------------------- --------------------------
Credit facilities 235 246 250
----------------------------------- ------------------------- -------------------------- --------------------------
Broking income 354 368 369
Imports/exports 44 40 41
----------------------------------- ------------------------- -------------------------- --------------------------
Remittances 101 84 62
----------------------------------- ------------------------- -------------------------- --------------------------
Underwriting 171 286 360
----------------------------------- ------------------------- -------------------------- --------------------------
Global custody 203 200 220
Corporate finance 124 132 85
----------------------------------- ------------------------- -------------------------- --------------------------
Securities others - (including
stock lending) 81 76 -
----------------------------------- ------------------------- -------------------------- --------------------------
Trust income 49 43 45
----------------------------------- ------------------------- -------------------------- --------------------------
Other 453 451 535
----------------------------------- ------------------------- -------------------------- --------------------------
Fee income 2,606 2,706 2,674
----------------------------------- ------------------------- -------------------------- --------------------------
Less: fee expense (1,345) (1,293) (1,274)
----------------------------------- ------------------------- -------------------------- --------------------------
Net fee income 1,261 1,413 1,400
----------------------------------- ------------------------- -------------------------- --------------------------
Net fee income by global business
GBM Corporate
MSS GB Other CMB WPB Centre Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Year
ended 31
Dec 2022
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Fee
income 1,301 817 70 425 592 (599) 2,606
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Less:
fee
expense (1,439) (173) (55) (26) (246) 594 (1,345)
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Net fee
income (138) 644 15 399 346 (5) 1,261
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Year
ended 31
Dec 2021
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Fee
income 1,251 861 89 415 633 (543) 2,706
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Less:
fee
expense (1,245) (188) (83) (54) (255) 532 (1,293)
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Net fee
income 6 673 6 361 378 (11) 1,413
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Year
ended 31
Dec 2020
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Fee
income 1,243 857 94 407 603 (530) 2,674
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Less:
fee
expense (1,209) (172) (123) (51) (245) 526 (1,274)
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Net fee
income 34 685 (29) 356 358 (4) 1,400
-------- ---------------------------- ------------------------- ---------------------------- -------------------------- ------------------------- ---------------------------- -----------------------
Net fee income includes GBP778m of fees earned on financial
assets that are not at fair value through profit or loss (other
than amounts included in determining the effective interest rate)
(2021: GBP935m; 2020 GBP883m), GBP229m of fees payable on financial
liabilities that are not at fair value through profit of loss
(other than amounts included in determining the effective interest
rate) (2021: GBP221m; 2020: GBP176m), GBP687m of fees earned on
trust and other fiduciary activities (2021: GBP709m; 2020:
GBP688m), and GBP69m of fees payable relating to trust and other
fiduciary activities (2021: GBP61m; 2020 GBP68m).
3 Net income from financial instruments measured at fair value through
profit or loss
--------------------------------------------------------------------
2022 2021 2020
GBPm GBPm GBPm
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Net income
arising on:
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Net Trading
activities (2,840) 3 1,948
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Other instruments
managed on a
fair value
basis 5,715 1,730 (190)
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Net income from
financial
instruments held
for trading or
managed on a
fair value basis 2,875 1,733 1,758
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Financial assets
held to meet
liabilities
under insurance
and investment
contracts (1,436) 1,305 290
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Liabilities to
customers under
investment
contracts 67 (91) (36)
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Net
(expense)/income
from assets and
liabilities
of insurance
businesses,
including
related
derivatives,
measured at fair
value through
profit or loss (1,369) 1,214 254
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Derivatives
managed in
conjunction with
the
group's issued
debt securities (736) (337) 112
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Other changes in
fair value 838 329 (95)
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Changes in fair
value of
designated debt
and related
derivatives 102 (8) 17
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Changes in fair
value of other
financial
instruments
mandatorily
measured at fair
value through
profit or loss 143 493 285
----------------- ----------------------------------- -------------------------------------- ------------------------------------
Year ended 31 Dec 1,751 3,432 2,314
----------------- ----------------------------------- -------------------------------------- ------------------------------------
4 Insurance business
------------------
Net insurance premium income
Investment
Non-linked Linked contracts
insurance life insurance with DPF(1) Total
GBPm GBPm GBPm GBPm
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Gross
insurance
premium
income 214 432 1,238 1,884
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Reinsurers' (96) (1) - (97)
share of
gross
insurance
premium
income
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Year ended
31 Dec 2022 118 431 1,238 1,787
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Gross 218 429 1,360 2,007
insurance
premium
income
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Reinsurers' (100) (1) - (101)
share of
gross
insurance
premium
income
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Year ended 118 428 1,360 1,906
31 Dec 2021
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Gross 205 274 1,185 1,664
insurance
premium
income
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Reinsurers' (100) (5) - (105)
share of
gross
insurance
premium
income
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
Year ended 105 269 1,185 1,559
31 Dec 2020
------------ ----------------------------------- -------------------------------------- --------------------------------------------- --------------------------------
1 Discretionary participation features.
Net insurance claims and benefits paid and movement in liabilities
to policyholders
Investment
Non-linked Linked contracts
insurance life insurance with DPF(1) Total
GBPm GBPm GBPm GBPm
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
Gross claims
and
benefits
paid
and
movement in
liabilities 44 238 177 459
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
- claims,
benefits
and
surrenders
paid 122 129 1,491 1,742
------------
- movement
in
liabilities (78) 109 (1,314) (1,283)
------------ -------------------------------------- -------------------------------------- ---------------------------------------------
Reinsurers' (64) 11 - (53)
share of
claims and
benefits
paid and
movement in
liabilities
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
- claims, (57) (2) - (59)
benefits
and
surrenders
paid
------------
- movement (7) 13 - 6
in
liabilities
------------ -------------------------------------- -------------------------------------- ---------------------------------------------
Year ended (20) 249 177 406
31 Dec 2022
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
Gross claims 120 550 2,420 3,090
and
benefits
paid
and
movement in
liabilities
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
- claims, 126 106 1,554 1,786
benefits
and
surrenders
paid
------------
- movement (6) 444 866 1,304
in
liabilities
------------ -------------------------------------- -------------------------------------- ---------------------------------------------
Reinsurers' (45) (6) - (51)
share of
claims and
benefits
paid and
movement in
liabilities
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
- claims, (68) (1) - (69)
benefits
and
surrenders
paid
------------
- movement 23 (5) - 18
in
liabilities
------------ -------------------------------------- -------------------------------------- ---------------------------------------------
Year ended 75 544 2,420 3,039
31 Dec 2021
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
Gross claims 143 300 1,404 1,847
and
benefits
paid
and
movement in
liabilities
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
- claims, 102 93 1,578 1,773
benefits
and
surrenders
paid
------------
- movement 41 207 (174) 74
in
liabilities
------------ -------------------------------------- -------------------------------------- ---------------------------------------------
Reinsurers' (64) - - (64)
share of
claims and
benefits
paid and
movement in
liabilities
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
- claims, (62) (3) - (65)
benefits
and
surrenders
paid
------------
- movement (2) 3 - 1
in
liabilities
------------ -------------------------------------- -------------------------------------- ---------------------------------------------
Year ended 79 300 1,404 1,783
31 Dec 2020
------------ -------------------------------------- -------------------------------------- --------------------------------------------- ----------------------------------
1 Discretionary participation features.
Liabilities under insurance contracts
Investment
Non-linked Linked contracts
insurance life insurance with DPF(1) Total
GBPm GBPm GBPm GBPm
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Gross
liabilities
under
insurance
contracts at
1 Jan 2022 556 1,938 19,770 22,264
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Claims and
benefits paid (122) (129) (1,491) (1,742)
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Increase in 44 238 177 459
liabilities to
policyholders
Exchange
differences
and other
movements(2) 20 15 (1,029) (994)
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Gross
liabilities
under
insurance
contracts at
31 Dec 2022 498 2,062 17,427 19,987
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Reinsurers' (100) (40) - (140)
share of
liabilities
under
insurance
contracts
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Net
liabilities
under
insurance
contracts at
31 Dec 2022 398 2,022 17,427 19,847
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Gross
liabilities
under
insurance
contracts at
1 Jan 2021 594 1,512 20,710 22,816
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Claims and (126) (106) (1,554) (1,786)
benefits paid
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Increase in 120 550 2,420 3,090
liabilities to
policyholders
Exchange (32) (18) (1,806) (1,856)
differences
and other
movements(2)
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Gross
liabilities
under
insurance
contracts at
31 Dec 2021 556 1,938 19,770 22,264
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Reinsurers' (93) (53) - (146)
share of
liabilities
under
insurance
contracts
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Net
liabilities
under
insurance
contracts at
31 Dec 2021 463 1,885 19,770 22,118
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Gross
liabilities
under
insurance
contracts at
1 Jan 2020 576 1,295 19,638 21,509
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Claims and (102) (93) (1,578) (1,773)
benefits paid
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Increase in 143 300 1,404 1,847
liabilities to
policyholders
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Exchange (23) 10 1,246 1,233
differences
and other
movements(2)
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Gross
liabilities
under
insurance
contracts at
31 Dec 2020 594 1,512 20,710 22,816
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Reinsurers' (118) (47) - (165)
share of
liabilities
under
insurance
contracts
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
Net
liabilities
under
insurance
contracts at
31 Dec 2020 476 1,465 20,710 22,651
-------------- ------------------------------------ ------------------------------------ --------------------------------------------- -------------------------------
1 Discretionary participation features.
2 'Exchange differences and other movements' includes movements
in liabilities arising from net unrealised investment gains
recognised in other comprehensive income.
The key factors contributing to the movement in liabilities to
policyholders included movement in the market value of assets
supporting policyholder liabilities, death claims, surrenders,
lapses, new business, the declaration of bonuses and other amounts
attributable to policyholders.
5 Employee compensation and benefits
----------------------------------
2022 2021 2020
GBPm GBPm GBPm
---------------- ----------------------------------- ------------------------------------ ------------------------------------
Wages and
salaries 1,423 1,609 1,917
---------------- ----------------------------------- ------------------------------------ ------------------------------------
Social security
costs 282 341 367
---------------- ----------------------------------- ------------------------------------ ------------------------------------
Post-employment
benefits(1) 57 73 56
---------------- ----------------------------------- ------------------------------------ ------------------------------------
Year ended 31
Dec 1,762 2,023 2,340
---------------- ----------------------------------- ------------------------------------ ------------------------------------
1 Includes GBP42m (2021: GBP37m; 2020: GBP36m) in employer
contributions to the defined contribution pension plans.
Average number of persons employed by the group during the year by
global business(1)
2022 2021 2020
---------- ----------------------------------- ----------------------------------- ------------------------------------
MSS 3,722 4,322 4,590
---------- ----------------------------------- ----------------------------------- ------------------------------------
GB 2,155 2,458 2,857
---------- ----------------------------------- ----------------------------------- ------------------------------------
GBM Other 81 140 158
---------- ----------------------------------- ----------------------------------- ------------------------------------
CMB 2,748 3,023 3,396
---------- ----------------------------------- ----------------------------------- ------------------------------------
WPB 6,484 6,709 6,807
---------- ----------------------------------- ----------------------------------- ------------------------------------
Corporate
Centre 215 171 58
---------- ----------------------------------- ----------------------------------- ------------------------------------
Year ended
31 Dec 15,405 16,823 17,866
---------- ----------------------------------- ----------------------------------- ------------------------------------
1 Average numbers of headcount in corporate centre are allocated
in respective businesses on the basis of amounts charged to the
respective global businesses.
Share-based payments
'Wages and salaries' includes the effect of share-based payments
arrangements, of which GBP45m were equity settled (2021: GBP96m ;
2020: GBP76m), as follows:
2022 2021 2020
GBPm GBPm GBPm
---------------- ------------------------------------- -------------------------------------- --------------------------------------
Restricted share
awards 45 96 77
---------------- ------------------------------------- -------------------------------------- --------------------------------------
Savings-related
and other share
award option
plans 1 1 2
---------------- ------------------------------------- -------------------------------------- --------------------------------------
Year ended 31
Dec 46 97 79
---------------- ------------------------------------- -------------------------------------- --------------------------------------
HSBC share awards
Deferred share
awards (including * An assessment of performance over the relevant period
annual incentive ending on 31 December is used to determine the amount
awards, long-term of the award to be granted.
incentive ('LTI')
awards delivered
in shares) and * Deferred awards generally require employees to remain
Group Performance in employment over the vesting period and are
Share Plan ('GPSP') generally not subject to performance conditions after
the grant date. An exception to these are the 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 subject to malus and clawback.
-------------------- ------------------------------------------------------------
International
Employee Share * The plan was first introduced in Hong Kong in 2013
Purchase Plan and now includes employees based in 31 jurisdictions.
('ShareMatch')
* Shares are purchased in the market each quarter up to
a maximum value of GBP750, or the equivalent in local
currency.
* Matching awards are added at a ratio of one free
share for every three purchased.
* 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
2022 2021 2020
Number Number Number
(000s) (000s) (000s)
-------------------- ------------------------------ ------------------------------- -------------------------------
Restricted share
awards outstanding
at 1 Jan 21,828 24,367 24,578
Additions during the
year(1) 11,651 15,479 16,823
-------------------- ------------------------------ ------------------------------- -------------------------------
Released in the
year(1) (12,279) (16,690) (16,024)
-------------------- ------------------------------ ------------------------------- -------------------------------
Forfeited in the
year (746) (1,328) (1,010)
-------------------- ------------------------------ ------------------------------- -------------------------------
Restricted share
awards outstanding
at 31
Dec 20,454 21,828 24,367
-------------------- ------------------------------ ------------------------------- -------------------------------
Weighted average
fair value of
awards granted
(GBP) 4.96 4.49 5.58
-------------------- ------------------------------ ------------------------------- -------------------------------
1 Includes a number of share option plans transferred from or to
other subsidiaries of HSBC Holdings plc.
HSBC share option plans
Savings-related
share option * From 2014, eligible employees for the UK plan can
plans ('Sharesave') save up to GBP500 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 years or five years
contract, respectively.
* The exercise price is set at a 20% (2021: 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 WAEP(1)
(000s) GBP
-------------------------------------------------- --------------------------------- -------------------------------
Outstanding at 1 Jan 2022 6,936 2.87
-------------------------------------------------- --------------------------------- -------------------------------
Granted during the year(2) (179) 3.96
-------------------------------------------------- --------------------------------- -------------------------------
Exercised during the year (173) 3.36
-------------------------------------------------- --------------------------------- -------------------------------
Expired during the year (177) 4.72
-------------------------------------------------- --------------------------------- -------------------------------
Forfeited during the year (625) 2.98
-------------------------------------------------- --------------------------------- -------------------------------
Outstanding at 31 Dec 2022 5,782 2.91
-------------------------------------------------- --------------------------------- -------------------------------
Weighted average remaining contractual life
(years) 2.18
-------------------------------------------------- --------------------------------- -------------------------------
Outstanding at 1 Jan 2021 7,206 2.96
-------------------------------------------------- --------------------------------- -------------------------------
Granted during the year(2) 984 3.25
-------------------------------------------------- --------------------------------- -------------------------------
Exercised during the year (227) 3.97
-------------------------------------------------- --------------------------------- -------------------------------
Expired during the year (99) 4.70
-------------------------------------------------- --------------------------------- -------------------------------
Forfeited during the year (928) 3.68
-------------------------------------------------- --------------------------------- -------------------------------
Outstanding at 31 Dec 2021 6,936 2.87
-------------------------------------------------- --------------------------------- -------------------------------
Weighted average remaining contractual life
(years) 2.98
-------------------------------------------------- --------------------------------- -------------------------------
Outstanding at 1 Jan 2020 4,245 4.78
-------------------------------------------------- --------------------------------- -------------------------------
Granted during the year(2) 5,909 2.56
-------------------------------------------------- --------------------------------- -------------------------------
Exercised during the year (107) 4.43
-------------------------------------------------- --------------------------------- -------------------------------
Expired during the year (78) 4.64
-------------------------------------------------- --------------------------------- -------------------------------
Forfeited during the year (2,763) 4.79
-------------------------------------------------- --------------------------------- -------------------------------
Outstanding at 31 Dec 2020 7,206 2.96
-------------------------------------------------- --------------------------------- -------------------------------
Weighted average remaining contractual life
(years) 3.64
-------------------------------------------------- --------------------------------- -------------------------------
1 Weighted average exercise price.
2 Includes a number of share option plans transferred from or to
other subsidiaries of HSBC Holdings plc.
Post-employment benefit plans
We operate a number of pension plans throughout Europe for our
employees. Some are defined benefit plans, of which HSBC Trinkaus
& Burkhardt Pension Plan is the most prominent within the
group.
The group's balance sheet includes the net surplus or deficit,
being 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, the group 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.
HSBC Trinkaus & Burkhardt Pension Plan
The plan is a final salary scheme and is calculated based on the
employee length of service multiplied by a predefined benefit
accrual and earnings. The pension is paid when the benefit falls
due and is a specified pension payment, lump-sum or combination
thereof. 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 strategic aim of the investment is to achieve, as
continuously as possible, an increase in value over time. For this
purpose, the fund invests mainly in government bonds, corporate
bonds, investment funds and equities. It invests predominantly in
developed regions. Overall, emphasis is placed on having a high
degree of diversification.
Plan assets were created to fund the pension obligations and
separated through what is known as a contractual trust agreement
('CTA'). HSBC Trinkaus Vermögenstreu--händer e. V. and HSBC
Trinkaus Mitarbeitertreuhänder e. V. assume the role of trustee.
Active members of the trustee constitute members of the Management
Board, of the Supervisory Board and Bank employees.
The Bank regularly aims to comprehensively finance the committed
benefits externally. There is no obligation to allocate
contributions to the CTA. The Bank is entitled to assets that are
not needed to fund the committed benefits. No further additions to
the plan assets are envisaged at the present time.
In accordance with the Memorandum and Articles of Association,
the revenues may only be used, for example, for pension payments or
for reinvestment. Similarly, withdrawals may only be made in
accordance with the Memorandum and Articles of Association. In so
far as the benefits are directly committed and there is a shortfall
in the CTA, provisions are created for these.
The latest measurement of the defined benefit obligation of the
plan at 31 December 2022 was carried out by Tim Voetmann and
Hans-Peter Kieselmann, at Willis Towers Watson GmbH, who are
Fellows of the German Association of Actuaries ('DAV'), using the
projected unit credit method. The next measurement will have an
effective date of 31 December 2023.
Net assets/(liabilities) recognised on the balance sheet in respect
of defined benefit plans
Present
Fair value
value of defined
of plan benefit
assets obligations Total
GBPm GBPm GBPm
------------------------- ---------------------------- ----------------------------- ------------------------------
Defined benefit pension
plans 534 (531) 3
------------------------- ---------------------------- ----------------------------- ------------------------------
Defined benefit
healthcare plans - (51) (51)
------------------------- ---------------------------- ----------------------------- ------------------------------
At 31 Dec 2022 534 (582) (48)
------------------------- ---------------------------- ----------------------------- ------------------------------
Total employee benefit
liabilities (within
'Accruals,
deferred income and
other liabilities') (121)
------------------------- ---------------------------- ----------------------------- ------------------------------
Total employee benefit
assets (within
'Prepayments,
accrued income and other
assets') 73
------------------------- ---------------------------- ----------------------------- ------------------------------
Defined benefit pension
plans 668 (742) (74)
------------------------- ---------------------------- ----------------------------- ------------------------------
Defined benefit
healthcare plans - (68) (68)
------------------------- ---------------------------- ----------------------------- ------------------------------
At 31 Dec 2021 668 (810) (142)
------------------------- ---------------------------- ----------------------------- ------------------------------
Total employee benefit
liabilities (within
'Accruals,
deferred income and
other liabilities') (196)
------------------------- ---------------------------- ----------------------------- ------------------------------
Total employee benefit
assets (within
'Prepayments,
accrued income and other
assets') 54
------------------------- ---------------------------- ----------------------------- ------------------------------
Defined benefit pension plans
Net asset/(liability) under defined benefit pension plans
Present value
Fair value of of defined benefit Net defined benefit
plan assets obligations asset/(liability)
--------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------
HSBC Trinkaus HSBC Trinkaus HSBC Trinkaus
& & &
Burkhardt Burkhardt Burkhardt
Pension Other Pension Other Pension Other
Plan(2) plans Plan(2) plans Plan(2) plans
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
At 1 Jan 2022 434 234 (438) (304) (4) (70)
Service cost - - 4 (8) 4 (8)
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
- current service cost - - 3 (9) 3 (9)
--------------------------------------------------------
- past service cost
and gains from settlements - - 1 1 1 1
Net interest income/(cost)
on the net defined
benefit asset/(liability) (3) 5 (4) (5) (7) -
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
Remeasurement effects
recognised in other
comprehensive income (51) (99) 94 98 43 (1)
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
* return on plan assets (excluding interest income) (51) (99) - - (51) (99)
- actuarial gains/(losses)
financial assumptions - - 94 106 94 106
--------------------------------------------------------
- actuarial gains/(losses)
demographic assumptions - - - (2) - (2)
--------------------------------------------------------
- actuarial gains/(losses)
experience assumptions - - - (6) - (6)
--------------------------------------------------------
- other changes - - - - - -
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------
Exchange differences 22 1 (20) (3) 2 (2)
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
Benefits paid - (7) 10 13 10 6
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
Other movements(1) 3 (5) (3) 35 - 30
At 31 Dec 2022 405 129 (357) (174) 48 (45)
-------------------------------------------------------- --------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ----------------------------------
At 1 Jan 2021 435 258 (489) (387) (54) (129)
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Service cost - - (7) (27) (7) (27)
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
- current service cost - - (8) (11) (8) (11)
--------------------------------------------------------
- past service cost
and gains from settlements - - 1 (16) 1 (16)
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Net interest income/(cost)
on the net defined
benefit asset/(liability) 3 4 (3) (3) - 1
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Remeasurement effects
recognised in other
comprehensive income 17 (2) 26 16 43 14
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
* return on plan assets (excluding interest income) 17 (2) - - 17 (2)
- actuarial gains/(losses)
financial assumptions - - 26 7 26 7
--------------------------------------------------------
- actuarial gains/(losses)
demographic assumptions - - - - - -
--------------------------------------------------------
- actuarial gains/(losses)
experience assumptions - - - 9 - 9
--------------------------------------------------------
- other changes - - - - - -
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Exchange differences (28) (1) 29 9 1 8
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Benefits paid - (15) 10 19 10 4
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
Other movements(1) 7 (10) (4) 69 3 59
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
At 31 Dec 2021 434 234 (438) (304) (4) (70)
-------------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ----------------------------------
1 Other movements include contributions by the group,
contributions by employees, administrative costs and tax paid by
plan.
2 The HSBC Trinkaus & Burkhardt Pension Plan and its
comparatives have been disclosed as it is considered to be a
prominent plan within the group. Figures disclosed comprise this
prominent plan and other plans in Germany.
HSBC Trinkaus & Burkhardt GmbH has not made contributions to
the HSBC Trinkaus & Burkhardt Pension Plan during 2022.
Benefits expected to be paid from the HSBC Trinkaus & Burkhardt
Pension Plan 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
2023 2024 2025 2026 2027 2028-2032
GBPm GBPm GBPm GBPm GBPm GBPm
---------- ------------------------ -------------------------- -------------------------- -------------------------- -------------------------- --------------------------
HSBC
Trinkaus
&
Burkhardt
Pension
Plan(1) 11 10 12 11 12 66
---------- ------------------------ -------------------------- -------------------------- -------------------------- -------------------------- --------------------------
1 The duration of the defined benefit obligation is 13.7 Years
for the HSBC Trinkaus & Burkhardt Pension Plan under the
disclosure assumptions adopted (2021: 17.1).
Fair value of plan assets by asset classes
31 Dec 2022 31 Dec 2021
----------------------------------------------------------------------------------------------
Quoted No quoted Quoted No quoted
market market market market
price price price price
in active in active Thereof in active in active Thereof
Value market market HSBC Value market market HSBC
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ----------------- -------------------------- ------------------------- -------------------------- ---------------- ------------------------- ------------------------- ----------------------
HSBC
Trinkaus &
Burkhardt
Pension
Plan
---------- ----------------- -------------------------- ------------------------- -------------------------- ---------------- ------------------------- ------------------------- ----------------------
Fair value
of plan
assets 405 352 53 - 434 377 57 -
---------- ----------------- -------------------------- ------------------------- -------------------------- ---------------- ------------------------- ------------------------- ----------------------
- equities 8 8 - - 11 11 - -
----------
- bonds 199 199 - - 112 112 - -
- other 198 145 53 - 311 254 57 -
---------- ----------------- -------------------------- ------------------------- -------------------------- ---------------- ------------------------- -------------------------
Post-employment defined benefit plans' principal actuarial
financial assumptions
The group 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
Rate
of
increase Rate
Discount Inflation for of pay
rate rate pensions increase
% % % %
--------------------------------------- --------------- --------------- --------------- ---------------
HSBC Trinkaus & Burkhardt Pension Plan
--------------------------------------- --------------- --------------- --------------- ---------------
At 31 Dec 2022 3.71 2.25 2.25 2.25
At 31 Dec 2021 1.14 1.75 1.75 1.75
--------------------------------------- --------------- --------------- --------------- ---------------
Mortality tables and average life expectancy at age 60
Life expectancy Life expectancy
at age 60 for at age 60 for
Mortality a male member a female member
table currently: currently:
----------------- ------------------
Aged Aged Aged Aged
60 40 60 40
---------------------------------- ------------- -------- ------- -------- --------
HSBC Trinkaus & Burkhardt Pension
Plan
---------------------------------- ------------- -------- ------- -------- --------
At 31 Dec 2022 RT 2018G1(1) 25.2 28.2 28.9 31.2
At 31 Dec 2021(2) RT 2018G1(1) 20.6 23.4 24.0 26.3
---------------------------------- ------------- -------- ------- -------- --------
1 Heubeck tables: RT 2018G. These are generally accepted and
used mortality tables for occupational pension plans in Germany,
taking into account future mortality improvements and lighter
mortality for higher-paid pensioners.
2 2021 data provided based on Heubeck tables for Life expectancy
at age 65 for male/female members currently aged 65 or 45.
The effect of changes in key assumptions
HSBC Trinkaus & Burkhardt Pension Plan
Obligation
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Financial impact of Financial impact of
increase decrease
2022 2021 2020 2022 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------------------------- ---------------------------- ---------------------------- --------------------------- ---------------------------- ----------------------------
Discount rate -
increase/decrease
of 0.25% (7) (13) (15) 8 13 16
------------------ --------------------------- ---------------------------- ---------------------------- --------------------------- ---------------------------- ----------------------------
Inflation rate -
increase/decrease
of 0.25% 7 11 16 (5) (9) (12)
------------------ --------------------------- ---------------------------- ---------------------------- --------------------------- ---------------------------- ----------------------------
Pension payments
and deferred
pensions -
increase/decrease
of 0.25% 5 9 10 (5) (8) (10)
------------------ --------------------------- ---------------------------- ---------------------------- --------------------------- ---------------------------- ----------------------------
Pay -
increase/decrease
of
0.25% 1 2 4 (1) (2) (4)
------------------ --------------------------- ---------------------------- ---------------------------- --------------------------- ---------------------------- ----------------------------
Change in
mortality -
increase
of 1 Year 10 16 19 N/A N/A N/A
------------------ --------------------------- ---------------------------- ---------------------------- --------------------------- ---------------------------- ----------------------------
The above sensitivity analyses are based on a change in an
assumption while holding all other assumptions constant. In
practice, this in 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 to the prior period.
Directors' emoluments
The aggregate emoluments of the Directors of the bank, computed
in accordance with the Companies Act 2006 as amended by statutory
instrument 2008 No.410, were:
2022 2021 2020
GBP000 GBP000 GBP000
--------------------------------- ------------------------ ------------------------- -------------------------
Fees(1) 1,410 1,525 1,256
--------------------------------- ------------------------ ------------------------- -------------------------
Salaries and other emoluments(2) 2,294 3,569 2,321
--------------------------------- ------------------------ ------------------------- -------------------------
Annual incentives(3) 979 694 576
--------------------------------- ------------------------ ------------------------- -------------------------
Long-term incentives(4) 779 511 727
--------------------------------- ------------------------ ------------------------- -------------------------
Year ended 31 Dec 5,462 6,299 4,880
--------------------------------- ------------------------ ------------------------- -------------------------
1 Fees paid to non-executive Directors.
2 Salaries and other emoluments include Fixed Pay Allowances.
3 Discretionary annual incentives for executive Directors are
based on a combination of individual and corporate performance, and
are determined by the Remuneration Committee of the bank's parent
company, HSBC Holdings plc. Incentive awards made to executive
directors are delivered in the form of cash and HSBC Holdings plc
shares. The total amount shown is comprised of GBP489,285 (2021:
GBP346,959) in cash and GBP489,285 (2021: GBP346,959) in Restricted
Shares, which is the upfront portion of the annual incentive
granted in respect of performance year 2022.
4 The amount shown is comprised of GBP380,893 (2021: GBP274,177)
in deferred cash, GBP398,162 (2021: GBP237,259) in deferred
Restricted Shares. These amounts relate to the portion of the
awards that will vest following the substantial completion of the
vesting condition attached to these awards in 2022. The total
vesting period of deferred cash and share awards is no less than
three years, with 33% of the award vesting on each of the first and
second anniversaries of the date of the award, and the balance
vesting on the third anniversary of the date of the award. The
deferred share awards are subject to at least a six-month retention
period upon vesting. Details of the Plans are contained within the
Directors' Remuneration Report of HSBC Holdings plc. The cost of
any awards subject to service conditions under the HSBC Share Plan
2011 are recognised through an annual charge based on the fair
value of the awards, apportioned over the period of service to
which the award relates.
No Director exercised share options over HSBC Holdings plc
ordinary shares during the year.
No Director is accruing retirement benefits under a money
purchase scheme in respect of Directors' qualifying services (2021:
one Director).
In addition, there were payments during 2022 under unfunded
retirement benefit agreements to former Directors of GBP394,334
(2021: GBP396,363). The provision at 31 December 2022 in respect of
unfunded pension obligations to former Directors amounted to
GBP4,286,951 (2021: GBP5,387,505).
Of these aggregate figures, the following amounts are
attributable to the highest paid Director:
2022 2021 2020
GBP000 GBP000 GBP000
------------------ -------------------------------- ------------------------------- -------------------------------
Salaries and other
emoluments 1,641 1,399 1,392
------------------ -------------------------------- ------------------------------- -------------------------------
Annual
incentives(1) 859 558 417
------------------ -------------------------------- ------------------------------- -------------------------------
Long-term
incentives(2) 677 390 677
------------------ -------------------------------- ------------------------------- -------------------------------
Year ended 31 Dec 3,177 2,347 2,486
------------------ -------------------------------- ------------------------------- -------------------------------
1 Awards made to the highest paid Director are delivered in the
form of cash and HSBC Holdings plc shares. The amount shown
comprises GBP429,285 (2021: GBP279,225) in cash and GBP429,285
(2021: GBP279,225) in Restricted Shares.
2 The amount shown comprises GBP330,687 (2021: GBP209,492) in
deferred cash, GBP345,818 (2021: GBP180,147) in deferred Restricted
Shares. These amounts relate to a portion of the awards that will
vest following the substantial completion of the vesting condition
attached to these awards in 2022. The total vesting period of
deferred cash and share awards is no less than three years, with
33% of the award vesting on each of the first and second
anniversaries of the date of the award, and the balance vesting on
the third anniversary of the date of the award. The share awards
are subject to a six-month retention period upon vesting.
No pension contributions were made by the bank in respect of
services by the highest paid Director during the
year (2021: GBP0 ).
6 Auditors' remuneration
----------------------
2022 2021 2020
GBPm GBPm GBPm
---------------- -------------------------------- -------------------------------- --------------------------------
Audit fees
payable to PwC 11.3 10.4 11.3
---------------- -------------------------------- -------------------------------- --------------------------------
Other audit fees
payable 0.7 0.4 0.4
---------------- -------------------------------- -------------------------------- --------------------------------
Year ended 31
Dec 12.0 10.8 11.7
---------------- -------------------------------- -------------------------------- --------------------------------
Fees payable by the group to PwC
2022 2021 2020
GBPm GBPm GBPm
---------------- -------------------------------- -------------------------------- --------------------------------
Fees for HSBC
Bank plc's
statutory
audit(1) 5.5 4.8 5.3
----------------- -------------------------------- -------------------------------- --------------------------------
Fees for other
services
provided to the
group 15.6 14.3 13.1
----------------- -------------------------------- -------------------------------- --------------------------------
- audit of the
group's
subsidiaries(2) 5.8 5.6 6.0
-----------------
- audit-related
assurance
services(3) 5.3 5.7 4.2
- other assurance
services(4) 4.5 3.0 2.9
Year ended 31 Dec 21.1 19.1 18.4
----------------- -------------------------------- -------------------------------- --------------------------------
1 Fees payable to PwC for the statutory audit of the
consolidated financial statements of the group and the separate
financial statements of HSBC Bank plc. They exclude amounts payable
for the statutory audit of the bank's subsidiaries which have been
included in 'Fees for other services provided to the group'.
2 Including fees payable to PwC for the statutory audit of the bank's subsidiaries.
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 user, including comfort
letters.
Fees payable for non-audit services for HSBC Bank plc are not
disclosed separately because such fees are disclosed on a
consolidated basis for the group.
7 Tax
---
Tax expense
----------------------------------
2022 2021 2020
GBPm GBPm GBPm
------------- -------------------------------- --------------------------------- ----------------------------------
Current tax (283) (187) 195
------------- -------------------------------- --------------------------------- ----------------------------------
- for this
year (243) (245) 186
-------------
- adjustments
in respect
of prior
years (40) 58 9
------------- -------------------------------- ---------------------------------
Deferred tax (278) 164 (331)
------------- -------------------------------- --------------------------------- ----------------------------------
- origination
and reversal
of temporary
differences (444) 248 (339)
-------------
- effect of
changes in
tax rates 33 (56) (26)
-------------
- adjustments
in respect
of prior
years 133 (28) 34
------------- -------------------------------- ---------------------------------
Year ended 31
Dec(1) (561) (23) (136)
------------- -------------------------------- --------------------------------- ----------------------------------
1 In addition to amounts recorded in the income statement, a tax
credit of GBP393m (2021: credit of GBP135m; 2020 charge of GBP135m)
was recorded directly to equity.
The group's profits are taxed at different rates depending on
the country in which the profits arise. The key applicable
corporate tax rates in 2022 included the UK and France. The UK tax
rate applying to HSBC Bank plc and its banking subsidiaries was 27%
(2021: 27%), comprising 19% corporation tax plus 8% surcharge on UK
banking profits. The applicable tax rate in France was 26% (2021:
28%). Other overseas subsidiaries and overseas branches provided
for taxation at the appropriate rates in the countries in which
they operate.
During 2022, legislation was enacted to reduce the UK banking
surcharge rate from 8% to 3% from 1 April 2023, decreasing the tax
credit for 2021 by GBP33m due to the remeasurement of deferred tax
balances. The main rate of UK corporation tax will increase from
19% to 25% from 1 April 2023.
In December 2021, the OECD published model rules that provided a
template for countries to implement a new global minimum tax rate
of 15%. These rules are due to be effective from 2024. In January
2022, the UK government opened a consultation on how the UK
implements the rules. The impact on HSBC will depend on exactly how
the UK implements the model rules, as well as the profitability and
local tax liabilities of HSBC's operations in each tax jurisdiction
from 2024. In addition, potential changes to tax legislation and
tax rates in the countries and territories in which we operate
could increase our effective tax rate in the future.
Tax reconciliation
The tax charged to the income statement differs from the tax
expense that would apply if all profits had been taxed at the UK
corporation tax rate as follows:
2022 2021 2020
GBPm % GBPm % GBPm %
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
(Loss)/profit
before tax (959) 1,023 (1,615)
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
Tax expense
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
Taxation at UK
corporation
tax rate (182) 19.0 194 19.0 (307) 19.0
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
Impact of
taxing
overseas
profits
at different
rates (75) 7.8 7 0.7 (75) 4.6
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
UK banking
surcharge (47) 4.9 (2) (0.2) (100) 6.2
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
Items
increasing the
tax charge
in 2022:
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- adjustment
in respect of
prior
years 93 (9.7) 30 2.9 45 (2.8)
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- UK and
European Bank
levies 50 (5.2) 72 7.0 31 (1.9)
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- impact of
held for sale
adjustments 47 (4.9) - - - -
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- adjustment
to deferred
tax on
insurance
contracts 36 (3.8) - - - -
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- impact of
changes in
tax rates 33 (3.4) (56) (5.5) (26) 1.6
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- effect of
profits in
associates
and joint
ventures 5 (0.5) (43) (4.2) (3) 0.2
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- local taxes
and overseas
withholding
taxes 4 (0.4) (4) (0.4) 49 (3.0)
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- impact of
temporary
differences
between
French tax
returns and
IFRS - - 324 31.7 - -
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- other 1 (0.1) (34) (3.4) 34 (2.1)
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
Items reducing
the tax charge
in
2022:
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- movements in
unrecognised
deferred
tax (268) 27.9 (47) (4.6) 321 (19.9)
- movement in
uncertain tax
positions (110) 11.5 5 0.5 1 (0.1)
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- non-taxable
income and
gains (93) 9.7 (92) (9.0) (55) 3.4
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
- deductions
for AT1
coupon
payments (55) 5.7 (53) (5.2) (51) 3.2
- tax impact
of planned
sale of
French retail
banking
business - - (324) (31.7) - -
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
Year ended 31
Dec (561) 58.5 (23) (2.3) (136) 8.4
-------------- ----------------------- ---------------------------- ------------------------ ----------------------------- ------------------------ -----------------------------
The effective tax rate for the year was 58.5% (2021: (2.3)%;
2020: 8.4%), reflecting a tax credit arising on a loss before tax.
The tax credit for 2022 was driven by underlying losses before tax
and non-recurring items, including recognition of previously
unrecognised deferred tax assets in France and a tax credit of
GBP110m from movement in provisions for uncertain tax positions.
The tax credit for 2021 included favourable non-recurring items in
respect of tax rate changes, prior period adjustments and the
recognition of previously unrecognised deferred tax assets in
France.
In 2021, the signing of a framework agreement for the planned
sale of the French retail banking business resulted in a tax
deduction (tax value of GBP324m) for a provision for loss on
disposal which was recorded in the French tax return. A deferred
tax liability of the same amount arose as a consequence of the
temporary difference between the French tax basis and IFRS in
respect of this provision. This temporary difference reversed in
2022 upon application of held for sale accounting for IFRS,
resulting in the reversal of this deferred tax liability to the
income statement.
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. We do not expect significant liabilities
to arise in excess of the amounts provided. The current tax asset
includes an estimate of tax recoverable from HMRC with regards to
past dividends received from EU resident companies. The ultimate
resolution of this matter involves litigation for which the outcome
is uncertain.
Movement of deferred tax assets and liabilities
Loan Property, Relief
Retirement impairment plant FVOCI Goodwill for tax
benefits provisions and equipment investments and intangibles losses(2) Other(1) Total
The group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
Assets 74 53 215 - 212 381 - 935
----------------
Liabilities - (4) - (58) - - (289) (351)
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- ---------------------------
At 1 Jan 2022 74 49 215 (58) 212 381 (289) 584
Income statement (11) - 22 3 (201) 243 222 278
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
Other
comprehensive
income (18) - - 179 - - 215 376
Foreign exchange
and other
adjustments - - (1) 18 - 4 6 27
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
At 31 Dec 2022 45 49 236 142 11 628 154 1,265
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
Assets(3) 45 50 236 142 11 628 154 1,266
----------------
Liabilities(3) - (1) - - - - - (1)
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- ---------------------------
Assets 63 66 171 - 157 418 - 875
----------------
Liabilities - (9) (6) 166) - - (117) (298)
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- ---------------------------
At 1 Jan 2021 63 57 165 166) 157 418 (117) 577
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
Income statement 28 (10) 51 3 55 (37) (254) (164)
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
Other
comprehensive
income (17) 2 (1) 105 - - 82 171
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
At 31 Dec 2021 74 49 215 (58) 212 381 (289) 584
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- --------------------------- ---------------------------
Assets(3) 74 53 215 - 212 381 - 935
----------------
Liabilities(3) - (4) - (58) - - (289) (351)
---------------- -------------------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- --------------------------- ---------------------------
1 Other deferred tax assets and liabilities relate to
share-based payments, cash flow hedges and temporary differences
arising between IFRS and French tax returns.
2 The deferred tax asset recognised in respect of tax losses
mainly relates to France GBP(588)m, and US State tax losses of the
New York branch of HSBC Bank plc GBP(28)m, all of which are
supported by future profit forecasts.
3 After netting off balances within countries, the balances as
disclosed in the financial statements are as follows: deferred tax
assets GBP1,279m (2021: GBP599m); and deferred tax liabilities
GBP14m (2021:GBP15m).
Management has assessed the likely availability of future
taxable profits against which to recover the deferred tax assets of
the Company and the Group, taking into consideration the reversal
of existing taxable temporary differences, past business
performance and forecasts of future business performance.
The group's net deferred tax asset of GBP1,265m (2021: GBP584m)
included a net UK deferred tax asset of GBP498m (2021: GBP448m) and
a net deferred asset of GBP597m (2021: GBP7m) in France, of which
GBP588m (2021: GBP294m) related to tax losses which are expected to
be substantially recovered within 10 years.
Management is satisfied that although the Company recorded a UK
tax loss in the year, the aforementioned evidence is sufficient to
support recognition of all UK deferred tax assets. These deferred
tax assets are supported by future profit forecasts for the whole
of HSBC's UK tax group. This includes a number of companies which
are not part of the HSBC Bank plc group, in particular HSBC UK Bank
plc and its subsidiaries.
Following the signing of a framework agreement in 2021 for the
planned sale of the French retail banking business, that business
is now excluded from our deferred tax recognition analysis as its
sale is considered probable. Although the French consolidated tax
group recorded a tax loss in 2020 and 2021, this would have been
taxable profit if the effects of the retail banking business and
other non-recurring items, mainly related to the restructuring of
the European business, were excluded. The accounting loss for
France in 2022 is driven by the loss on assets held for sale.
Excluding this amount, the business in France recorded a profit in
2022. The French net deferred tax asset is supported by forecasts
of taxable profit, also taking into consideration the history of
profitability in the remaining businesses.
Movement of deferred tax assets and liabilities
Property, Relief
Retirement plant Goodwill for tax
benefits and equipment FVOCI and intangibles losses(2) Other(1) Total
The bank GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Assets(2) 17 207 - 191 69 48 532
----------------
Lliabilities(2) - - (23) - - - (23)
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- -----------------------------
At 1 Jan 2022 17 207 (23) 191 69 48 509
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Income statement (4) 24 - (191) (41) (6) (218)
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Other
comprehensive
income 1 - 98 - - 210 309
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Foreign exchange
and
other
adjustments - - - - 8 8
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
At 31 Dec 2022 14 231 75 - 28 260 608
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Assets(3) 14 231 75 - 28 260 608
----------------
Liabilities(3) - - - - - - -
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- -----------------------------
Assets 16 162 - 156 416 - 750
----------------
Liabilities - - (100) - - (104) (204)
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- -----------------------------
At 1 Jan 2021 16 162 (100) 156 416 (104) 546
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Income statement 2 45 - 35 (347) 73 (192)
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Other
comprehensive
income (1) - 77 - - 77 153
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Foreign exchange
and
other
adjustments - - - - - 2 2
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
At 31 Dec 2021 17 207 (23) 191 69 48 509
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- ----------------------------- -----------------------------
Assets(3) 17 207 - 191 69 48 532
----------------
Liabilities(3) - - (23) - - - (23)
---------------- ----------------------------- ---------------------------- --------------------------- --------------------------- --------------------------- -----------------------------
1 Other deferred tax assets and liabilities relate to fair value
of own debt, loan impairment allowances, share-based payments and
cash flow hedges.
2 The deferred tax asset recognised in respect of losses mainly
relates to US State tax losses of the New York branch of HSBC Bank
plc,which are supported by future profit forecasts.
3 After netting off balances within countries, the balances as
disclosed in the accounts are as follows: deferred tax assets
GBP608m (2021: GBP509m) and deferred tax liabilities nil
(2021:nil).
Unrecognised deferred tax
The group
The amount of temporary differences, unused tax losses and tax
credits for which no deferred tax asset is recognised in the
balance sheet was GBP1,017m (2021: GBP1,944m). These amounts
include unused tax losses, tax credits and temporary differences of
GBP912m (2021: GBP1,141m) arising in the New York branch of HSBC
Bank plc and of nil (2021: GBP782m) arising in France. Of the
unrecognised losses, GBP502m expire within 10 years (2021:
GBP394m), and the remainder expire after 10 years or do not
expire.
The bank
The amount of temporary differences, unused tax losses and tax
credits for which no deferred tax asset is recognised in the
balance sheet was GBP912m (2021: GBP1,141m). These amounts include
unused tax losses, tax credits and temporary differences arising in
the New York branch of HSBC Bank plc of GBP912m (2021: GBP1,141m).
Of the unrecognised losses, GBP402m expire within 10 years (2021:
GBP394m), and the remainder expire after 10 years.
There are no unrecognised deferred tax liabilities arising from
the group's investments in subsidiaries and branches.
8 Dividends
---------
Dividends to the parent company
2022 2021 2020
GBP per GBPm GBP per GBPm GBP per GBPm
share share share
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Dividends paid
on ordinary
shares
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
In respect of
previous year:
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Previous year: - - - -
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
- first special - -
dividend
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
In respect of
current year:
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Current year: - - - -
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
- first special
dividend(1) 1.067 850
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
- second - - - -
special
dividend
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Total 1.067 850 - -
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Dividends on
preference
shares
classified as
equity
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Dividend on
HSBC Bank plc
non-cumulative
third dollar
preference
shares(2) 0.001 - 0.001 - 1.47 51
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Total 0.001 - 0.001 - 1.47 51
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Total coupons
on capital
securities
classified as
equity - 202 - 194 0 212
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
Dividends to
parent - 1,052 - 194 0 263
--------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------------ --------------------------
1 Special dividend declared/paid on CET1 capital in 2022.
2 In 2021, the liquidation value of USD third dollar preference
shares reduced to $0.01 per share.
Total coupons on capital securities classified as equity
2022 2021 2020
First GBPm GBPm GBPm
call date
----------- ---- -------------------------- --------------------------
Undated Subordinated additional Tier 1
instruments
----
Undated Subordinated Resettable Additional
Tier 1 instrument 2015 Dec 2020 87 84 103
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2016 Jan 2022 11 12 11
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2018 Mar 2023 28 10 10
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2018 Mar 2023 10 28 28
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2019 Nov 2024 24 24 24
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2019 Nov 2024 8 7 8
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2019 Dec 2024 20 20 20
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional
Tier 1 instrument 2019 Jan 2025 8 9 8
----------- ---- -------------------------- --------------------------
Undated Subordinated Resettable Additional Mar 2027 6 - -
Tier 1 instrument 2022
----------- ---- -------------------------- --------------------------
Total 202 194 212
---- -------------------------- --------------------------
9 Segmental analysis
------------------
The Chief Executive, supported by the rest of the Executive
Committee, is considered the Chief Operating Decision Maker
('CODM') for the purposes of identifying the group's reportable
segments. Business results are assessed by the CODM on the basis of
adjusted performance that removes the effects of significant items
from reported results. We therefore present a reconciliation
between reported and adjusted results as required by IFRSs.
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 functions to the extent that they can
be meaningfully attributed to businesses and countries. 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 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 businesses are presented in Corporate Centre.
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END
ACSFFLFLXLLFBBV
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