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Share Name Share Symbol Market Type Share ISIN Share Description
Hsbc Holdings Plc LSE:HSBA London Ordinary Share GB0005405286 ORD $0.50 (UK REG)
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.60 0.12% 498.50 498.90 499.00 499.10 488.30 492.95 23,700,573 16:35:09
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Banks 47,281.9 13,980.5 45.8 9.9 99,540

HSBC Holdings PLC Half-year Report - 2022 Interim Report - Part 4

01/08/2022 4:37pm

UK Regulatory (RNS & others)


TIDMHSBA

RNS Number : 5086U

HSBC Holdings PLC

01 August 2022

 
Independent review report to HSBC Holdings plc 
 
 
Report on the interim condensed financial statements 
 

Our conclusion

We have reviewed HSBC Holdings plc's interim condensed financial statements (the 'interim financial statements') in the interim report of HSBC Holdings plc and its subsidiaries (the 'Group') for the 6 month period ended 30 June 2022 (the 'period').

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34, 'Interim Financial Reporting', International Accounting Standard 34, 'Interim Financial Reporting' as issued by the IASB, International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

   --    the consolidated balance sheet as at 30 June 2022; 

-- the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

   --    the consolidated statement of cash flows for the period then ended; 
   --    the consolidated statement of changes in equity for the period then ended; and 
   --    the notes to the interim financial statements and certain other information(1) . 

The interim financial statements included in the interim report of the Group have been prepared in accordance with, UK-adopted International Accounting Standard 34, 'Interim Financial Reporting', International Accounting Standard 34, 'Interim Financial Reporting' as issued by the IASB, International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report of the Group and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with this ISRE. However, future events or conditions may cause the Group to cease to continue as a going concern.

 
Responsibilities for the interim financial statements and the review 
 

Our responsibilities and those of the directors

The interim report of the Group, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report of the Group in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the interim report of the Group, including the interim financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the interim report of the Group based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

London

1 August 2022

 
 
 

1 'Certain other information' comprises the following tables: 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' and 'Distribution of financial instruments to which the impairment requirements of IFRS 9 are applied, by credit quality and stage allocation'.

 
Interim condensed financial 
 statements 
                                          Page 
Consolidated income statement              115 
----------------------------------------  ---- 
Consolidated statement of comprehensive 
 income                                    116 
----------------------------------------  ---- 
Consolidated balance sheet                 117 
----------------------------------------  ---- 
Consolidated statement of cash 
 flows                                     118 
----------------------------------------  ---- 
Consolidated statement of changes 
 in equity                                 119 
----------------------------------------  ---- 
 
 
Consolidated income statement 
                                                                      Half-year to 
                                                      30 Jun                        30 Jun                      31 Dec 
                                                        2022                          2021                        2021 
                         Notes*                           $m                            $m                          $m 
-----------------------  -------  --------------------------  ----------------------------  -------------------------- 
Net interest income                                   14,451                        13,098                      13,391 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
- interest income                                     20,855                        17,960                      18,228 
-------------------------------- 
- interest expense                                   (6,404)                       (4,862)                     (4,837) 
--------------------------------  --------------------------  ---------------------------- 
Net fee income              2                          6,064                         6,674                       6,423 
-----------------------  -------  --------------------------  ----------------------------  -------------------------- 
- fee income                                           7,949                         8,458                       8,330 
-------------------------------- 
- fee expense                                        (1,885)                       (1,784)                     (1,907) 
--------------------------------  --------------------------  ---------------------------- 
Net income from financial 
 instruments held 
 for trading or managed on a 
 fair value basis                                      4,921                         4,184                       3,560 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Net income/(expense) from assets 
 and liabilities 
 of insurance businesses, 
 including related 
 derivatives, measured at fair 
 value through 
 profit or loss                                      (3,051)                         2,795                       1,258 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Change in fair value of 
 designated debt and 
 related derivatives                                   (158)                          (67)                       (115) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Changes in fair value of other 
 financial instruments 
 mandatorily measured at fair 
 value through 
 profit or loss                                           68                           548                         250 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Gains less losses from financial 
 investments                                              21                           433                         136 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Net insurance premium income                           7,646                         5,663                       5,207 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Other operating income                                   723                           155                         347 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Total operating income                                30,685                        33,483                      30,457 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Net insurance claims and 
 benefits paid and 
 movement in liabilities to 
 policyholders                                       (5,449)                       (7,932)                     (6,456) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Net operating income before 
 change in expected 
 credit losses and other credit 
 impairment charges                                   25,236                        25,551                      24,001 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Change in expected credit losses 
 and other 
 credit impairment charges                           (1,090)                           719                         209 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Net operating income                                  24,146                        26,270                      24,210 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Employee compensation and 
 benefits                                            (9,071)                       (9,610)                     (9,132) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
General and administrative 
 expenses                                            (5,445)                       (5,675)                     (5,917) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Depreciation and impairment of 
 property, plant 
 and equipment and right-of-use 
 assets                                              (1,075)                       (1,160)                     (1,101) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Amortisation and impairment of 
 intangible assets                                     (828)                         (642)                       (796) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Goodwill impairment                                        -                             -                       (587) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Total operating expenses                            (16,419)                      (17,087)                    (17,533) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Operating profit                                       7,727                         9,183                       6,677 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Share of profit in associates 
 and joint ventures                                    1,449                         1,656                       1,390 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Profit before tax                                      9,176                        10,839                       8,067 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Tax credit/(charge)                                       39                       (2,417)                     (1,796) 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Profit for the period                                  9,215                         8,422                       6,271 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
Attributable to: 
-----------------------  -------  --------------------------  ----------------------------  -------------------------- 
- ordinary shareholders of the 
 parent company                                        8,289                         7,276                       5,331 
-------------------------------- 
- preference                                               -                             7                           - 
shareholders of the 
parent company 
-----------------------  ------- 
- other equity holders                                   626                           666                         637 
-------------------------------- 
- non-controlling interests                              300                           473                         303 
--------------------------------  --------------------------  ---------------------------- 
Profit for the period                                  9,215                         8,422                       6,271 
--------------------------------  --------------------------  ----------------------------  -------------------------- 
                                                           $                             $                           $ 
-----------------------  -------  --------------------------  ----------------------------  -------------------------- 
Basic earnings per 
 ordinary share             4                           0.42                          0.36                        0.26 
-----------------------  -------  --------------------------  ----------------------------  -------------------------- 
Diluted earnings per 
 ordinary share             4                           0.41                          0.36                        0.26 
-----------------------  -------  --------------------------  ----------------------------  -------------------------- 
 
   *     For Notes on the interim condensed financial statements, see page 110. 
 
Consolidated statement of comprehensive income 
                                                                     Half-year to 
                                                    30 Jun                        30 Jun                        31 Dec 
                                                      2022                          2021                          2021 
                                                        $m                            $m                            $m 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Profit for the period                                9,215                         8,422                         6,271 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Other comprehensive 
income/(expense) 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Items that will be 
reclassified subsequently to 
profit or loss when specific 
conditions are met: 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Debt instruments at fair value 
 through other comprehensive 
 income                                            (4,907)                       (1,368)                         (771) 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- fair value losses                                (6,328)                       (1,392)                         (878) 
------------------------------ 
- fair value gains transferred 
 to the income statement 
 on disposal                                          (53)                         (375)                          (89) 
------------------------------ 
- expected credit 
 recoveries/(losses) 
 recognised 
 in the income statement                                20                          (26)                          (23) 
------------------------------ 
- income taxes                                       1,454                           425                           219 
------------------------------  --------------------------  ---------------------------- 
Cash flow hedges                                   (2,063)                         (238)                         (426) 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- fair value gains/(losses)                        (1,646)                           877                         (282) 
------------------------------ 
- fair value gains 
 reclassified to the income 
 statement                                         (1,127)                       (1,195)                         (319) 
------------------------------ 
- income taxes and other 
 movements                                             710                            80                           175 
------------------------------  --------------------------  ---------------------------- 
Share of other comprehensive 
 income/(expense) of 
 associates and joint ventures                       (141)                           104                           (1) 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- share for the period                               (141)                           104                           (1) 
Exchange differences                               (8,521)                         (449)                       (1,944) 
Items that will not be 
reclassified subsequently 
to profit or loss: 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Remeasurement of defined 
 benefit asset/(liability)                              95                         (747)                           473 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- before income taxes                                (132)                         (775)                           668 
------------------------------ 
- income taxes                                         227                            28                         (195) 
------------------------------  --------------------------  ---------------------------- 
Changes in fair value of 
 financial liabilities 
 designated at fair value upon 
 initial recognition 
 arising from changes in own 
 credit risk                                         2,263                           155                           376 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- before income taxes                                3,030                           (2)                           514 
------------------------------ 
- income taxes                                       (767)                           157                         (138) 
------------------------------  --------------------------  ---------------------------- 
Equity instruments designated 
 at fair value through 
 other comprehensive income                            158                         (348)                          (98) 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- fair value gains/(losses)                            158                         (345)                          (98) 
------------------------------ 
- income taxes                                           -                           (3)                             - 
------------------------------  --------------------------  ---------------------------- 
Effects of hyperinflation                              417                           166                           149 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Other comprehensive expense 
 for the period, net 
 of tax                                           (12,699)                       (2,725)                       (2,242) 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Total comprehensive 
 (expense)/income for the 
 period                                            (3,484)                         5,697                         4,029 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
Attributable to: 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
- ordinary shareholders of the 
 parent company                                    (4,246)                         4,612                         3,153 
------------------------------ 
- preference shareholders of                             -                             7                             - 
the parent company 
------------------------------ 
- other equity holders                                 626                           666                           637 
------------------------------ 
- non-controlling interests                            136                           412                           239 
------------------------------  --------------------------  ---------------------------- 
Total comprehensive 
 (expense)/income for the 
 period                                            (3,484)                         5,697                         4,029 
------------------------------  --------------------------  ----------------------------  ---------------------------- 
 
 
Consolidated balance sheet 
                                                                                        At 
                                                                                  30 Jun                     31 Dec 
                                                                                    2022                       2021 
                                                        Notes*                        $m                         $m 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Assets 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Cash and balances at central banks                                               363,608                    403,018 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Items in the course of collection from other banks                                 8,073                      4,136 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Hong Kong Government certificates of indebtedness                                 43,866                     42,578 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Trading assets                                                                   217,350                    248,842 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Financial assets designated and otherwise mandatorily 
 measured at fair value through profit or loss                                    45,873                     49,804 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Derivatives                                               8                      262,923                    196,882 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Loans and advances to banks                                                       96,429                     83,136 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Loans and advances to customers                                                1,028,356                  1,045,814 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Reverse repurchase agreements - non-trading                                      244,451                    241,648 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Financial investments                                     9                      430,796                    446,274 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Prepayments, accrued income and other assets                                     185,823                    139,982 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Current tax assets                                                                 1,151                        970 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Interests in associates and joint ventures                10                      29,446                     29,609 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Goodwill and intangible assets                                                    21,625                     20,622 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Deferred tax assets                                                                5,650                      4,624 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Total assets                                                                   2,985,420                  2,957,939 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Liabilities and equity 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Liabilities 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Hong Kong currency notes in circulation                                           43,866                     42,578 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Deposits by banks                                                                105,275                    101,152 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Customer accounts                                                              1,651,301                  1,710,574 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Repurchase agreements - non-trading                                              129,707                    126,670 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Items in the course of transmission to other banks                                 9,673                      5,214 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Trading liabilities                                                               80,569                     84,904 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Financial liabilities designated at fair value                                   126,006                    145,502 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Derivatives                                               8                      251,469                    191,064 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Debt securities in issue                                                          87,944                     78,557 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Accruals, deferred income and other liabilities                                  163,600                    123,778 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Current tax liabilities                                                              685                        698 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Liabilities under insurance contracts                                            113,130                    112,745 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Provisions                                                11                       1,900                      2,566 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Deferred tax liabilities                                                           2,894                      4,673 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Subordinated liabilities                                                          20,711                     20,487 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Total liabilities                                                              2,788,730                  2,751,162 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Equity 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Called up share capital                                                           10,188                     10,316 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Share premium account                                                             14,662                     14,602 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Other equity instruments                                                          21,691                     22,414 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Other reserves                                                                   (8,576)                      6,460 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Retained earnings                                                                150,417                    144,458 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Total shareholders' equity                                                       188,382                    198,250 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Non-controlling interests                                                          8,308                      8,527 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Total equity                                                                     196,690                    206,777 
------------------------------------------------------  ------  ------------------------  ------------------------- 
Total liabilities and equity                                                   2,985,420                  2,957,939 
------------------------------------------------------  ------  ------------------------  ------------------------- 
 
   *     For Notes on the interim condensed financial statements, see page 110. 
 
Consolidated statement of cash flows 
                                                                     Half-year to 
                                                     30 Jun                        30 Jun                       31 Dec 
                                                       2022                          2021                         2021 
                                                         $m                            $m                           $m 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Profit before tax                                     9,176                        10,839                        8,067 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Adjustments for non-cash items: 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Depreciation, amortisation and 
 impairment                                           1,903                         1,802                        2,484 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net (gain)/loss from investing 
 activities                                             174                         (485)                        (162) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Share of profits in associates 
 and joint ventures                                 (1,449)                       (1,656)                      (1,390) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Gain on acquisition of                                 (71)                             -                            - 
subsidiary 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Change in expected credit 
 losses gross of recoveries 
 and other credit impairment 
 charges                                              1,246                         (484)                         (35) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Provisions including pensions                           208                           301                          762 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Share-based payment expense                             177                           254                          213 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Other non-cash items included 
 in profit before 
 tax                                                  (866)                           205                          305 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Change in operating assets                           15,987                       (3,811)                        (232) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Change in operating liabilities                    (27,501)                        49,015                       22,161 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Elimination of exchange 
 differences(1)                                      49,417                         5,212                       13,725 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Dividends received from 
 associates                                              60                            10                          798 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Contributions paid to defined 
 benefit plans                                        (102)                         (342)                        (167) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Tax paid                                            (1,264)                         (997)                      (2,080) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net cash from operating 
 activities                                          47,095                        59,863                       44,449 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Purchase of financial 
 investments                                      (271,382)                     (263,198)                    (229,844) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Proceeds from the sale and 
 maturity of financial 
 investments                                        248,983                       298,596                      222,594 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net cash flows from the 
 purchase and sale of property, 
 plant and equipment                                  (590)                         (375)                        (711) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net cash flows from 
 (purchase)/disposal of 
 customer 
 and loan portfolios                                (3,756)                         1,063                        1,996 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net investment in intangible 
 assets                                             (1,240)                       (1,011)                      (1,468) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net cash flow on 
 (acquisition)/disposal of 
 subsidiaries, 
 businesses, associates and 
 joint ventures                                       (525)                          (84)                         (22) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net cash from investing 
 activities                                        (28,510)                        34,991                      (7,455) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Issue of ordinary share capital                           -                         1,996                            - 
and other equity 
instruments 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Cancellation of shares                              (1,840)                             -                        (707) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net sales/(purchases) of own 
 shares for market-making 
 and investment purposes                              (443)                             1                      (1,387) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Purchase of non-controlling                           (197)                             -                            - 
interest in subsidiary 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Redemption of preference shares 
 and other equity 
 instruments                                          (723)                       (3,450)                            - 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Subordinated loan capital                             2,659                             -                            - 
issued 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Subordinated loan capital 
 repaid                                                (11)                         (852)                         (12) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Dividends paid to shareholders 
 of the parent company 
 and non-controlling interests                      (4,497)                       (4,121)                      (2,262) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net cash from financing 
 activities                                         (5,052)                       (6,426)                      (4,368) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Net increase in cash and cash 
 equivalents                                         13,533                        88,428                       32,626 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Cash and cash equivalents at 
 the beginning of the 
 period                                             574,032                       468,323                      551,933 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Exchange differences in respect 
 of cash and cash 
 equivalents                                       (40,243)                       (4,818)                     (10,527) 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
Cash and cash equivalents at 
 the end of the period                              547,322                       551,933                      574,032 
-------------------------------  --------------------------  ----------------------------  --------------------------- 
 

Interest received was $22,011m (1H21: $19,761m; 2H21: $20,414m), interest paid was $7,146m (1H21: $6,552m; 2H21: $6,143m) and dividends received (excluding dividends received from associates, which are presented separately above) were $800m (1H21: $801m; 2H21: $1,097m).

1 Adjustments 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.

 
Consolidated statement of changes in equity 
                                                                                                                                                        Other reserves 
                                                                                                                         ---------------------------------------------------------------------------- 
                                                                          Called 
                                                                        up share 
                                                                         capital                                                      Financial              Cash                              Merger 
                                                                             and             Other                                       assets              flow             Foreign             and                 Total                   Non- 
                                                                           share            equity             Retained                at FVOCI           hedging            exchange           other        share-holders'            controlling              Total 
                                                                         premium      instru-ments             earnings                 reserve           reserve             reserve        reserves                equity              interests             equity 
                                                                              $m                $m                   $m                      $m                $m                  $m              $m                    $m                     $m                 $m 
At 1 Jan 2022                                                             24,918            22,414              144,458                   (634)             (197)            (22,769)          30,060               198,250                  8,527            206,777 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Profit for the period                                                          -                 -                8,915                       -                 -                   -               -                 8,915                    300              9,215 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Other comprehensive 
 income (net of tax)                                                           -                 -                2,637                 (4,723)           (2,035)             (8,414)               -              (12,535)                  (164)           (12,699) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                                    -                 -                    -                 (4,844)                 -                   -               -               (4,844)                   (63)            (4,907) 
------------------------------------------------------------ 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                              -                 -                    -                     121                 -                   -               -                   121                     37                158 
------------------------------------------------------------ 
- cash flow hedges                                                             -                 -                    -                       -           (2,035)                   -               -               (2,035)                   (28)            (2,063) 
------------------------------------------------------------ 
 
  *    changes in fair value of financial liabilities 
       designated at fair value upon initial recognition 
       arising from changes in own credit risk                                 -                 -                2,263                       -                 -                   -               -                 2,263                      -              2,263 
------------------------------------------------------------ 
 
  *    remeasurement of defined benefit asset/liability                        -                 -                   98                       -                 -                   -               -                    98                    (3)                 95 
------------------------------------------------------------ 
 
  *    share of other comprehensive income of associates and 
       joint ventures                                                          -                 -                (141)                       -                 -                   -               -                 (141)                      -              (141) 
- effects of hyperinflation                                                    -                 -                  417                       -                 -                   -               -                   417                      -                417 
------------------------------------------------------------ 
- exchange differences                                                         -                 -                    -                       -                 -             (8,414)               -               (8,414)                  (107)            (8,521) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  --------------------- 
Total comprehensive 
 income for the period                                                         -                 -               11,552                 (4,723)           (2,035)             (8,414)               -               (3,620)                    136            (3,484) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Shares issued under 
 employee remuneration 
 and share plans                                                              65                 -                 (65)                       -                 -                   -               -                     -                      -                  - 
Dividends to shareholders                                                      -                 -              (4,202)                       -                 -                   -               -               (4,202)                  (295)            (4,497) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Redemption of securities                                                       -             (723)                    -                       -                 -                   -               -                 (723)                      -              (723) 
Cost of share-based 
 payment arrangements                                                          -                 -                  177                       -                 -                   -               -                   177                      -                177 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Cancellation of shares(4)                                                  (133)                 -              (1,000)                       -                 -                   -             133               (1,000)                      -            (1,000) 
Other movements                                                                -                 -                (503)                       3                 -                   -               -                 (500)                   (60)              (560) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
At 30 Jun 2022                                                            24,850            21,691              150,417                 (5,354)           (2,232)            (31,183)          30,193               188,382                  8,308            196,690 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
 
At 1 Jan 2021                                                             24,624            22,414              140,572                   1,816               457            (20,375)          26,935               196,443                  8,552            204,995 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Profit for the period                                                          -                 -                7,949                       -                 -                   -               -                 7,949                    473              8,422 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Other comprehensive 
 income (net of tax)                                                           -                 -                (337)                 (1,629)             (234)               (464)               -               (2,664)                   (61)            (2,725) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                                    -                 -                    -                 (1,351)                 -                   -               -               (1,351)                   (17)            (1,368) 
------------------------------------------------------------ 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                              -                 -                    -                   (278)                 -                   -               -                 (278)                   (70)              (348) 
------------------------------------------------------------ 
- cash flow hedges                                                             -                 -                    -                       -             (234)                   -               -                 (234)                    (4)              (238) 
------------------------------------------------------------ 
 
  *    changes in fair value of financial liabilities 
       designated at fair value upon initial recognition 
       arising from changes in own credit risk                                 -                 -                  155                       -                 -                   -               -                   155                      -                155 
------------------------------------------------------------ 
 
  *    remeasurement of defined benefit asset/liability                        -                 -                (762)                       -                 -                   -               -                 (762)                     15              (747) 
------------------------------------------------------------ 
 
  *    share of other comprehensive income of associates and 
       joint ventures                                                          -                 -                  104                       -                 -                   -               -                   104                      -                104 
- effects of hyperinflation                                                    -                 -                  166                       -                 -                   -               -                   166                      -                166 
------------------------------------------------------------ 
- exchange differences                                                         -                 -                    -                       -                 -               (464)               -                 (464)                     15              (449) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  --------------------- 
Total comprehensive 
 income for the period                                                         -                 -                7,612                 (1,629)             (234)               (464)               -                 5,285                    412              5,697 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Shares issued under 
 employee remuneration 
 and share plans                                                             352                 -                (335)                       -                 -                   -               -                    17                      -                 17 
Capital securities 
 issued(1)                                                                     -             2,000                  (4)                       -                 -                   -               -                 1,996                      -              1,996 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Dividends to shareholders                                                      -                 -              (3,732)                       -                 -                   -               -               (3,732)                  (389)            (4,121) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Redemption of securities(2)                                                    -           (2,000)                    -                       -                 -                   -               -               (2,000)                      -            (2,000) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
Cost of share-based 
 payment arrangements                                                          -                 -                  254                       -                 -                   -               -                   254                      -                254 
Other movements                                                                -                 -                 (48)                       3                 -                   -               -                  (45)                   (29)               (74) 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
At 30 Jun 2021                                                            24,976            22,414              144,319                     190               223            (20,839)          26,935               198,218                  8,546            206,764 
------------------------------------------------------------  ------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  --------------  --------------------  ---------------------  ----------------- 
 
 
Consolidated statement of changes in equity (continued) 
                                                                                                                                                          Other reserves 
                                                                                                                           ----------------------------------------------------------------------------- 
                                                                            Called 
                                                                                up 
                                                                             share 
                                                                           capital             Other                                    Financial              Cash                               Merger                  Total 
                                                                               and            equity                                       assets              flow             Foreign              and                 share-                   Non- 
                                                                             share           instru-             Retained                at FVOCI           hedging            exchange            other               holders'            controlling                Total 
                                                                           premium             ments             earnings                 reserve           reserve             reserve         reserves                 equity              interests               equity 
                                                                                $m                $m                   $m                      $m                $m                  $m               $m                     $m                     $m                   $m 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
At 1 Jul 2021                                                               24,976            22,414              144,319                     190               223            (20,839)           26,935                198,218                  8,546              206,764 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
Profit for the period                                                            -                 -                5,968                       -                 -                   -                -                  5,968                    303                6,271 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
Other comprehensive 
 income 
 (net of tax)                                                                    -                 -                  998                   (826)             (420)             (1,930)                -                (2,178)                   (64)              (2,242) 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
 
  *    debt instruments at fair value through other 
       comprehensive income                                                      -                 -                    -                   (754)                 -                   -                -                  (754)                   (17)                (771) 
------------------------------------------------------------ 
 
  *    equity instruments designated at fair value through 
       other comprehensive income                                                -                 -                    -                    (72)                 -                   -                -                   (72)                   (26)                 (98) 
------------------------------------------------------------ 
- cash flow hedges                                                               -                 -                    -                       -             (420)                   -                -                  (420)                    (6)                (426) 
------------------------------------------------------------ 
 
  *    changes in fair value of financial liabilities 
       designated at fair value upon initial recognition 
       arising from changes in own credit risk                                   -                 -                  376                       -                 -                   -                -                    376                      -                  376 
------------------------------------------------------------ 
 
  *    remeasurement of defined benefit asset/liability                          -                 -                  474                       -                 -                   -                -                    474                    (1)                  473 
------------------------------------------------------------ 
 
  *    share of other comprehensive income of associates and 
       joint ventures                                                            -                 -                  (1)                       -                 -                   -                -                    (1)                      -                  (1) 
- effects of hyperinflation                                                      -                 -                  149                       -                 -                   -                -                    149                      -                  149 
------------------------------------------------------------ 
- exchange differences                                                           -                 -                    -                       -                 -             (1,930)                -                (1,930)                   (14)              (1,944) 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  --------------------- 
Total comprehensive 
 income for the period                                                           -                 -                6,966                   (826)             (420)             (1,930)                -                  3,790                    239                4,029 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
Shares issued under 
 employee remuneration 
 and share plans                                                                 2                 -                  (1)                       -                 -                   -                -                      1                      -                    1 
Dividends to shareholders                                                        -                 -              (2,058)                       -                 -                   -                -                (2,058)                  (204)              (2,262) 
Transfers(3)                                                                     -                 -              (3,065)                       -                 -                   -            3,065                      -                      -                    - 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
Cost of share-based 
 payment arrangements                                                            -                 -                  213                       -                 -                   -                -                    213                      -                  213 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
Cancellation of shares                                                        (60)                 -              (2,004)                       -                 -                   -               60                (2,004)                      -              (2,004) 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
Other movements                                                                  -                 -                   88                       2                 -                   -                -                     90                   (54)                   36 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
At 31 Dec 2021                                                              24,918            22,414              144,458                   (634)             (197)            (22,769)           30,060                198,250                  8,527              206,777 
------------------------------------------------------------  --------------------  ----------------  -------------------  ----------------------  ----------------  ------------------  ---------------  ---------------------  ---------------------  ------------------- 
 

1 In 2021, HSBC Holdings issued $2,000m of additional tier 1 instruments on which there were $4m of external issue costs.

2 During 2021, HSBC Holdings redeemed $2,000m 6.875% perpetual subordinated contingent convertible securities.

3 Permitted transfers from the merger reserve to retained earnings were made when the investment in HSBC Overseas Holdings (UK) Limited was previously impaired.

4 HSBC announced a share buy-back of $2.0bn in 2021 which was completed in April 2022. Additionally, HSBC announced a share buy-back of up to $1.0bn in February 2022, which concluded on 28 July 2022. At 30 June 2022, 264,942,444 ordinary shares had been purchased and cancelled, representing a nominal value of $133m, which has been transferred from share capital to capital redemption reserve within merger and other reserves.

 
Notes on the interim condensed financial statements 
                                         Page                                             Page 
   Basis of preparation and significant              Interests in associates and 
1   accounting policies                   121    10   joint ventures                       133 
   ------------------------------------  ----        -----------------------------------  ---- 
2  Net fee income                         122    11  Provisions                            136 
   ------------------------------------  ----        -----------------------------------  ---- 
                                                     Contingent liabilities, contractual 
3  Dividends                              122    12   commitments and guarantees           136 
   ------------------------------------  ----        -----------------------------------  ---- 
                                                     Legal proceedings and regulatory 
4  Earnings per share                     123    13   matters                              137 
   ------------------------------------  ----        -----------------------------------  ---- 
5  Segmental analysis                     123    14  Transactions with related parties     139 
   ------------------------------------  ----        -----------------------------------  ---- 
   Fair values of financial instruments 
6   carried at fair value                 127    15  Business acquisitions and disposals   139 
   ------------------------------------  ----        -----------------------------------  ---- 
   Fair values of financial instruments              Events after the balance sheet 
7   not carried at fair value             131    16   date                                 140 
   ------------------------------------  ----        -----------------------------------  ---- 
                                                     Interim Report 2022 and statutory 
8  Derivatives                            132    17   accounts                             140 
   ------------------------------------  ----        -----------------------------------  ---- 
9  Financial investments                  133 
   ------------------------------------  ---- 
 
 
1  Basis of preparation and significant accounting policies 
   -------------------------------------------------------- 
 
 
   (a)    Compliance with International Financial Reporting Standards 

Our interim condensed consolidated financial statements have been prepared on the basis of the policies set out in the 2021 annual financial statements and in accordance with IAS 34 'Interim Financial Reporting' as adopted by the UK, IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB'), IAS 34 'Interim Financial Reporting' as adopted by the EU, and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. Therefore, they include an explanation of events and transactions that are significant to an understanding of the changes in HSBC's financial position and performance since the end of 2021.

These financial statements should be read in conjunction with the Annual Report and Accounts 2021, which were prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements were also prepared in accordance with International Financial Reporting Standards ('IFRSs') as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee.

At 30 June 2022, there were no unendorsed standards effective for the half-year to 30 June 2022 affecting these financial statements, and there was no difference between IFRSs adopted by the UK, IFRSs as adopted by the EU, and IFRSs issued by the IASB in terms of their application to HSBC.

Standards applied during the half-year to 30 June 2022

There were no new standards or amendments to standards that had an effect on these interim condensed financial statements.

   (b)     Use of estimates and judgements 

Management believes that our critical accounting estimates and judgements are those that relate to impairment of amortised cost and FVOCI debt financial assets, the valuation of financial instruments, deferred tax assets, provisions, interests in associates, impairment of goodwill and non-financial assets, and post-employment benefit plans. Management's judgement with respect to the recognition of a deferred tax asset on the historical tax losses of HSBC Holdings changed during the period and a deferred tax asset of $1.8bn was recognised at 1H22. Management's view is that improved profit forecasts for the UK, which reflect higher market interest rates and expectations of future increases, as well as the results for 1H22, represent convincing evidence that sufficient future taxable profits will be available to support recognition of the deferred tax asset. The improved forecasts reduced the expected recovery period of these tax losses, reducing the estimation uncertainty such that recognition of a deferred tax asset was considered appropriate.

Apart from the above deferred tax matter and estimates relating to ECL impairment, there were no material changes in the current period to any of the other critical accounting estimates and judgements disclosed in 2021, which are stated on pages 90 and 319 of the Annual Report and Accounts 2021.

   (c)     Composition of the Group 

There were no material changes in the composition of the Group in the half-year to 30 June 2022. For further details of future business acquisitions and disposals, see Note 15 'Business acquisitions and disposals'.

   (d)     Future accounting developments 

IFRS 17 'Insurance Contracts' was issued in May 2017, with amendments to the standard issued in June 2020 and December 2021. It has been adopted in its entirety for use in the UK. IFRS 17 has been adopted by the EU subject to certain optional exemptions, except for the December 2021 requirements which are pending adoption.

The standard sets out the requirements that an entity should apply in accounting for insurance contracts it issues and reinsurance contracts it holds. Following the amendments, IFRS 17 will be effective from 1 January 2023. The Group is in the process of implementing IFRS 17. Industry practice and interpretation of the standard are still developing. Therefore, the likely impact of its implementation remains uncertain. However, compared with the Group's current accounting policy for insurance, there will be no present value of in-force long-term insurance business ('PVIF') asset recognised. Instead, the estimated future profit will be included in the measurement of the insurance contract liability as the contractual service margin and gradually recognised in revenue as services are provided over the duration of the insurance contract.

   (e)     Going concern 

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios, as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

   (f)      Accounting policies 

The accounting policies that we applied for these interim condensed consolidated financial statements are consistent with those described on pages 318 to 328 of the Annual Report and Accounts 2021, as are the methods of computation.

 
2  Net fee income 
   -------------- 
 
 
                                                                      Half-year to 
                                                      30 Jun                       30 Jun                       31 Dec 
                                                        2022                         2021                         2021 
                                                          $m                           $m                           $m 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Net fee income by product 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Funds under management                                 1,224                        1,304                        1,352 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Cards                                                  1,201                        1,035                        1,178 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Credit facilities                                        790                          827                          800 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Account services                                         720                          714                          738 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Broking income                                           707                          895                          706 
Unit trusts                                              408                          603                          485 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Underwriting                                             257                          576                          441 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Global custody                                           471                          500                          478 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Remittances                                              394                          361                          414 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Imports/exports                                          321                          300                          320 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Insurance agency commission                              163                          176                          165 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Other                                                  1,293                        1,167                        1,253 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Fee income                                             7,949                        8,458                        8,330 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Less: fee expense                                    (1,885)                      (1,784)                      (1,907) 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Net fee income                                         6,064                        6,674                        6,423 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Net fee income by global 
business 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Wealth and Personal Banking                            2,619                        3,042                        2,852 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Commercial Banking                                     1,919                        1,786                        1,853 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
Global Banking and Markets                             1,526                        1,857                        1,746 
Corporate Centre                                           -                         (11)                         (28) 
--------------------------------  --------------------------  ---------------------------  --------------------------- 
 
 
3  Dividends 
   --------- 
 

On 1 August 2022, the Directors approved an interim dividend for the 2022 half-year of $0.09 per ordinary share in respect of the financial year ending 31 December 2022. This distribution amounts to approximately $1,800m and will be payable on 29 September 2022. No liability is recognised in the financial statements in respect of these dividends.

 
Dividends paid to shareholders of HSBC Holdings plc 
                                                                                                                         Half-year to 
                                ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 
                                                           30 Jun 2022                                                      30 Jun 2021                                                    31 Dec 2021 
                                -----------------------------------------------------------------  --------------------------------------------------------------  ------------------------------------------------------------ 
                                             Per             Total                        Settled               Per               Total                   Settled               Per             Total                   Settled 
                                           share                                         in scrip             share                                      in scrip             share                                    in scrip 
                                               $                $m                             $m                 $                  $m                        $m                 $                $m                        $m 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
Dividends paid on 
 ordinary shares 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
In respect of previous 
 year: 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
- interim dividend                             -                 -                              -              0.15               3,059                         -                 -                 -                         - 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
 
  *    second interim dividend              0.18             3,576                              -                 -                   -                         -                 -                 -                         - 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
In respect of current 
 year: 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
- interim dividend                             -                 -                              -                 -                   -                         -              0.07             1,421                         - 
Total                                       0.18             3,576                              -              0.15               3,059                         -              0.07             1,421                         - 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
Total dividends on 
 preference shares 
 classified as equity 
 (paid quarterly)(1)                           -                 -                                             4.99                   7                                           -                 - 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
Total coupons on capital 
 securities classified 
 as equity                                                     626                                                                  666                                                           637 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
Dividends to shareholders                                    4,202                                                                3,732                                                         2,058 
------------------------------  ----------------  ----------------  -----------------------------  ----------------  ------------------  ------------------------  ----------------  ----------------  ------------------------ 
 

1 HSBC Holdings called $1,450m 6.20% non-cumulative US dollar preference shares on 10 December 2020. The security was redeemed and cancelled on 13 January 2021.

 
Total coupons on capital securities classified as equity 
                                                                        Half-year to 
                                       ------------------------------------------------------------------------------- 
                                                          30 Jun                     30 Jun                     31 Dec 
                                                            2022                       2021                       2021 
                     First        Per                         $m                         $m                         $m 
                 call date   security 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
Perpetual 
subordinated 
contingent 
convertible 
securities(1) 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $2,000m 
 issued at 
 6.875%(2)        Jun 2021    $68.750                          -                         69                          - 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $2,250m 
 issued at 
 6.375%           Sep 2024    $63.750                         72                         72                         71 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $2,450m 
 issued at 
 6.375%           Mar 2025    $63.750                         78                         78                         78 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $3,000m 
 issued at 
 6.000%           May 2027    $60.000                         90                         90                         90 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $2,350m 
 issued at 
 6.250%           Mar 2023    $62.500                         73                         73                         74 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $1,800m 
 issued at 
 6.500%           Mar 2028    $65.000                         59                         59                         58 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $1,500m 
 issued at 
 4.600%           Dec 2030    $46.000                         34                         35                         34 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $1,000m 
 issued at 
 4.000%(3)        Mar 2026    $40.000                         20                          -                         20 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- $1,000m 
 issued at 
 4.700%(4)        Mar 2031    $47.000                         24                          -                         24 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- EUR1,500m 
 issued at 
 5.250%           Sep 2022  EUR52.500                         44                         47                         46 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- EUR1,000m 
 issued at 
 6.000%           Sep 2023  EUR60.000                         33                         34                         36 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- EUR1,250m 
 issued at 
 4.750%          July 2029  EUR47.500                         34                         36                         36 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- GBP1,000m 
 issued at 
 5.875%           Sep 2026  GBP58.750                         37                         41                         39 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- SGD1,000m 
 issued at 
 4.700%(5)        Jun 2022  SGD47.000                         14                         18                         17 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
- SGD750m 
 issued at 
 5.000%           Sep 2023  SGD50.000                         14                         14                         14 
--------------  ----------  ---------  -------------------------  -------------------------  ------------------------- 
Total                                                        626                        666                        637 
--------------------------  ---------  -------------------------  -------------------------  ------------------------- 
 

1 Discretionary coupons are paid twice a year on the perpetual subordinated contingent convertible securities, in denominations of 1,000 per security in each security's issuance currency.

2 This security was called by HSBC Holdings on 15 April 2021 and was redeemed and cancelled on 1 June 2021.

3 This security was issued by HSBC Holdings on 9 March 2021. The first call date commences six calendar months prior to the reset date of 9 September 2026.

4 This security was issued by HSBC Holdings on 9 March 2021. The first call date commences six calendar months prior to the reset date of 9 September 2031.

5 This security was called by HSBC Holdings on 4 May 2022 and was redeemed and cancelled on 8 June 2022.

5

 
4  Earnings per share 
   ------------------ 
 

Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculated by dividing the basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on conversion of dilutive potential ordinary shares.

 
Profit attributable to ordinary shareholders of the parent company 
                                                                                Half-year to 
                                                       --------------------------------------------------------------- 
                                                                        30 
                                                                       Jun                 30 Jun               31 Dec 
                                                                      2022                   2021                 2021 
                                                                        $m                     $m                   $m 
-----------------------------------------------------  -------------------  ---------------------  ------------------- 
Profit attributable to shareholders of the parent 
 company                                                             8,915                  7,949                5,968 
-----------------------------------------------------  -------------------  ---------------------  ------------------- 
Dividend payable on preference shares classified as                      -                    (7)                    - 
 equity 
-----------------------------------------------------  -------------------  ---------------------  ------------------- 
Coupon payable on capital securities classified as 
 equity                                                              (626)                  (666)                (637) 
-----------------------------------------------------  -------------------  ---------------------  ------------------- 
Profit attributable to ordinary shareholders of the 
 parent company                                                      8,289                  7,276                5,331 
-----------------------------------------------------  -------------------  ---------------------  ------------------- 
 
 
Basic and diluted earnings per share 
                                                                                        Half-year to 
             ------------------------------------------------------------------------------------------------------------------------------------------------------------------ 
                                30 Jun 2022                                            30 Jun 2021                                             31 Dec 2021 
             --------------------------------------------------  -------------------------------------------------------  ----------------------------------------------------- 
                                       Number            Amount                                                   Amount                                                 Amount 
                                           of               per                                Number                per                              Number                per 
                     Profit            shares             share           Profit            of shares              share           Profit          of shares              share 
                         $m        (millions)                 $               $m           (millions)                  $               $m         (millions)                  $ 
-----------  --------------  ----------------  ----------------  ---------------  -------------------  -----------------  ---------------  -----------------  ----------------- 
Basic(1)              8,289            19,954              0.42            7,276               20,211               0.36            5,331             20,183               0.26 
-----------  --------------  ----------------  ----------------  ---------------  -------------------  -----------------  ---------------  -----------------  ----------------- 
Effect of 
 dilutive 
 potential 
 ordinary 
 shares                                   130                                                      97                                                    103 
-----------  --------------  ----------------  ----------------  ---------------  -------------------  -----------------  ---------------  -----------------  ----------------- 
Diluted(1)            8,289            20,084              0.41            7,276               20,308               0.36            5,331             20,286               0.26 
-----------  --------------  ----------------  ----------------  ---------------  -------------------  -----------------  ---------------  -----------------  ----------------- 
 
   1   Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted). 

1

 
5  Segmental analysis 
   ------------------ 
 

The Group Chief Executive, supported by the rest of the Group Executive Committee ('GEC'), is considered the Chief Operating Decision Maker ('CODM') for the purposes of identifying the Group's reportable segments. Global business results are assessed by the CODM on the basis of adjusted performance that removes the effects of significant items and currency translation from reported results. Therefore, we disclose these results as required by IFRSs. The 2021 adjusted performance information is presented on a constant currency basis. The income statements for the half-years to 30 June 2021 and 31 December 2021 are converted at the average rates of exchange for 2022, and the balance sheets at 30 June 2021 and 31 December 2021 at the prevailing rates of exchange on 30 June 2022.

Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.

Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.

Our global businesses

We provide a comprehensive range of banking and related financial services to our customers in our three global businesses. The products and services offered to customers are organised by these global businesses:

-- Wealth and Personal Banking ('WPB') provides a full range of retail banking and wealth products to our customers from personal banking to ultra high net worth individuals. Typically, customer offerings include retail banking products, such as current and savings accounts, mortgages and personal loans, credit cards, debit cards and local and international payment services. We also provide wealth management services, including insurance and investment products, global asset management services, investment management and Private Wealth Solutions for customers with more sophisticated and international requirements.

-- Commercial Banking ('CMB') offers a broad range of products and services to serve the needs of our commercial customers, including small and medium-sized enterprises, mid-market enterprises and corporates. These include credit and lending, international trade and receivables finance, treasury management and liquidity solutions (payments and cash management and commercial cards), commercial insurance and investments. CMB also offers customers access to products and services offered by other global businesses, such as Global Banking and Markets, which include foreign exchange products, raising capital on debt and equity markets and advisory services.

-- Global Banking and Markets ('GBM') provides tailored financial solutions to major government, corporate and institutional clients and private investors worldwide. The client-focused business lines deliver a full range of banking capabilities, including financing, advisory and transaction services, a markets business that provides services in credit, rates, foreign exchange, equities, money markets and securities services, and principal investment activities.

 
HSBC adjusted profit before tax and balance sheet data 
                                                                                 Half-year to 30 Jun 2022 
                       --------------------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                    Global 
                                            Wealth                                                 Banking 
                                      and Personal                  Commercial                         and                     Corporate 
                                           Banking                     Banking                     Markets                        Centre                       Total 
                                                $m                          $m                          $m                            $m                          $m 
Net operating 
 income/(expense) 
 before 
 change in expected 
 credit losses and 
 other credit 
 impairment 
 charges(1)                                 10,922                       7,217                       7,841                         (290)                      25,690 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
- external                                  10,569                       7,281                       8,867                       (1,027)                      25,690 
--------------------- 
- inter-segment                                353                        (64)                     (1,026)                           737                           - 
---------------------  ---------------------------  --------------------------  --------------------------  ---------------------------- 
- of which: net 
 interest 
 income/(expense)                            7,658                       5,007                       2,296                         (496)                      14,465 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Change in expected 
 credit losses and 
 other credit 
 impairment 
 (charges)/recoveries                        (573)                       (288)                       (227)                           (2)                     (1,090) 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Net operating income                        10,349                       6,929                       7,614                         (292)                      24,600 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Total operating 
 expenses                                  (7,411)                     (3,351)                     (4,735)                           121                    (15,376) 
Operating profit                             2,938                       3,578                       2,879                         (171)                       9,224 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Share of profit in 
 associates and 
 joint ventures                                  8                           -                           -                         1,441                       1,449 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Adjusted profit 
 before tax                                  2,946                       3,578                       2,879                         1,270                      10,673 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
                                                 %                           %                           %                             %                           % 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Share of HSBC's 
 adjusted profit 
 before 
 tax                                          27.6                        33.5                        27.0                          11.9                       100.0 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Adjusted cost 
 efficiency ratio                             67.9                        46.4                        60.4                          41.7                        59.9 
Adjusted balance                                $m                          $m                          $m                            $m                          $m 
sheet data 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Loans and advances to 
 customers (net)                           475,464                     348,253                     204,097                           542                   1,028,356 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Interests in 
 associates and joint 
 ventures                                      484                          14                         121                        28,827                      29,446 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Total external assets                      882,490                     619,490                   1,318,425                       165,015                   2,985,420 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
Customer accounts                          836,026                     479,680                     335,033                           562                   1,651,301 
---------------------  ---------------------------  --------------------------  --------------------------  ----------------------------  -------------------------- 
 
 
HSBC adjusted profit before tax and balance sheet data (continued) 
                                                                              Half-year to 30 Jun 2021 
                   ---------------------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                 Global 
                                       Wealth                                                   Banking 
                                 and Personal                    Commercial                         and                     Corporate 
                                      Banking                       Banking                     Markets                        Centre                       Total 
                                           $m                            $m                          $m                            $m                          $m 
Net operating 
 income/(expense) 
 before 
 change in 
 expected credit 
 losses and 
 other credit 
 impairment 
 charges(1)                            10,980                         6,353                       7,518                         (117)                      24,734 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
- external                             10,782                         6,326                       8,305                         (679)                      24,734 
----------------- 
- inter-segment                           198                            27                       (787)                           562                           - 
-----------------  --------------------------  ----------------------------  --------------------------  ---------------------------- 
- of which: net 
 interest 
 income/(expense)                       6,807                         4,172                       1,937                         (374)                      12,542 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Change in 
 expected credit 
 losses and 
 other credit 
 impairment 
 charges                                   38                           228                         405                             4                         675 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Net operating 
 income/(expense)                      11,018                         6,581                       7,923                         (113)                      25,409 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Total operating 
 expenses                             (7,277)                       (3,371)                     (4,724)                         (148)                    (15,520) 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Operating 
 profit/(loss)                          3,741                         3,210                       3,199                         (261)                       9,889 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Share of profit 
 in associates 
 and 
 joint ventures                            10                             1                           -                         1,638                       1,649 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Adjusted profit 
 before tax                             3,751                         3,211                       3,199                         1,377                      11,538 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
                                            %%                                                        %%                                                        % 
-----------------  --------------------------   ---------------------------  --------------------------   ---------------------------  -------------------------- 
Share of HSBC's 
 adjusted profit 
 before 
 tax                                     32.5                          27.8                        27.7                          12.0                       100.0 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Adjusted cost 
 efficiency ratio                        66.3                          53.1                        62.9                       (126.5)                        62.7 
Adjusted balance 
sheet data                                 $m                            $m                          $m                            $m                          $m 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Loans and 
 advances to 
 customers (net)                      458,573                       329,873                     205,044                         1,065                     994,555 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Interests in 
 associates and 
 joint 
 ventures                                 467                            15                         121                        27,315                      27,918 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Total external 
 assets                               859,383                       581,741                   1,164,916                       184,436                   2,790,476 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
Customer accounts                     793,277                       455,006                     316,865                           794                   1,565,942 
-----------------  --------------------------  ----------------------------  --------------------------  ----------------------------  -------------------------- 
 
 
                                                                                 Half-year to 31 Dec 2021 
Net operating 
 income/(expense) 
 before 
 change in expected 
 credit losses and 
 other credit 
 impairment 
 charges(1)                                10,439                       6,556                        6,878                         (296)                      23,577 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
- external                                 10,354                       6,460                        7,676                         (913)                      23,577 
--------------------- 
- inter-segment                                85                          96                        (798)                           617                           - 
---------------------  --------------------------  --------------------------  ---------------------------  ---------------------------- 
- of which: net 
 interest 
 income/(expense)                           6,955                       4,387                        2,032                         (353)                      13,021 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Change in expected 
 credit losses and 
 other credit 
 impairment 
 (charges)/recoveries                         215                          40                         (80)                           (1)                         174 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Net operating 
 income/(expense)                          10,654                       6,596                        6,798                         (297)                      23,751 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Total operating 
 expenses                                 (7,574)                     (3,355)                      (4,831)                           313                    (15,447) 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Operating profit                            3,080                       3,241                        1,967                            16                       8,304 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Share of profit in 
 associates and 
 joint ventures                                24                           -                            -                         1,353                       1,377 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Adjusted profit 
 before tax                                 3,104                       3,241                        1,967                         1,369                       9,681 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
                                                %%                                                       %%                                                        % 
---------------------  --------------------------   -------------------------  ---------------------------   ---------------------------  -------------------------- 
Share of HSBC's 
 adjusted profit 
 before 
 tax                                         32.1                        33.5                         20.3                          14.1                       100.0 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Adjusted cost 
 efficiency ratio                            72.6                        51.2                         70.2                         105.7                        65.5 
Adjusted balance                               $m                          $m                           $m                            $m                          $m 
sheet data 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Loans and advances to 
 customers (net)                          462,452                     332,710                      198,854                           686                     994,702 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Interests in 
 associates and joint 
 ventures                                     490                          13                          119                        27,938                      28,560 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Total external assets                     889,349                     589,834                    1,157,478                       175,688                   2,812,349 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
Customer accounts                         820,564                     481,781                      324,239                           590                   1,627,174 
---------------------  --------------------------  --------------------------  ---------------------------  ----------------------------  -------------------------- 
 

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

Reported external net operating income is attributed to countries and territories on the basis of the location of the branch responsible for reporting the results or advancing the funds:

 
                                                                           Half-year to 
                                             ------------------------------------------------------------------------- 
                                                            30 Jun                   30 Jun                     31 Dec 
                                                              2022                     2021                       2021 
                                                                $m                       $m                         $m 
-------------------------------------------  ---------------------  -----------------------  ------------------------- 
Reported external net operating income by 
 country/territory(1)                                       25,236                   25,551                     24,001 
-------------------------------------------  ---------------------  -----------------------  ------------------------- 
 
  *    UK                                                    6,554                    5,610                      5,299 
------------------------------------------- 
 
  *    Hong Kong                                             6,837                    7,476                      6,769 
------------------------------------------- 
 
  *    US                                                    1,964                    1,993                      1,802 
------------------------------------------- 
 
  *    France                                                1,158                    1,228                        951 
------------------------------------------- 
 
  *    other countries/territories                           8,723                    9,244                      9,180 
-------------------------------------------  ---------------------  ----------------------- 
 

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

 
Adjusted results reconciliation 
                                                                                                   Half-year to 
             ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 
                               30 Jun 2022                                                30 Jun 2021                                                         31 Dec 2021 
             ------------------------------------------------  -----------------------------------------------------------------  -------------------------------------------------------------------- 
                                   Significant                                         Currency       Significant                                         Currency         Significant 
                 Adjusted                items       Reported      Adjusted         translation             items       Reported       Adjusted        translation               items        Reported 
                       $m                   $m             $m            $m                  $m                $m             $m             $m                 $m                  $m              $m 
-----------  ------------  -------------------  -------------  ------------  ------------------  ----------------  -------------  -------------  -----------------  ------------------  -------------- 
Revenue(1)         25,690                (454)         25,236        24,734               1,069             (252)         25,551         23,577                711               (287)          24,001 
-----------  ------------  -------------------  -------------  ------------  ------------------  ----------------  -------------  -------------  -----------------  ------------------  -------------- 
ECL               (1,090)                    -        (1,090)           675                  44                 -            719            174                 35                   -             209 
-----------  ------------  -------------------  -------------  ------------  ------------------  ----------------  -------------  -------------  -----------------  ------------------  -------------- 
Operating 
 expenses        (15,376)              (1,043)       (16,419)      (15,520)               (749)             (818)       (17,087)       (15,447)              (510)             (1,576)        (17,533) 
-----------  ------------  -------------------  -------------  ------------  ------------------  ----------------  -------------  -------------  -----------------  ------------------  -------------- 
Share of 
 profit 
 in 
 associates 
 and 
 joint 
 ventures           1,449                    -          1,449         1,649                   7                 -          1,656          1,377                 13                   -           1,390 
-----------  ------------  -------------------  -------------  ------------  ------------------  ----------------  -------------  -------------  -----------------  ------------------  -------------- 
Profit 
 before 
 tax               10,673              (1,497)          9,176        11,538                 371           (1,070)         10,839          9,681                249             (1,863)           8,067 
-----------  ------------  -------------------  -------------  ------------  ------------------  ----------------  -------------  -------------  -----------------  ------------------  -------------- 
 

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.

 
Adjusted balance sheet reconciliation 
                                          At 30                             At 31 Dec 2021 
                                       Jun 2022 
                     --------------------------  --------------------------------------------------------------------- 
                                       Reported                                        Currency 
                                   and adjusted               Adjusted              translation               Reported 
                                             $m                     $m                       $m                     $m 
-------------------  --------------------------  ---------------------  -----------------------  --------------------- 
Loans and advances 
 to customers (net)                   1,028,356                994,702                   51,112              1,045,814 
-------------------  --------------------------  ---------------------  -----------------------  --------------------- 
Interests in 
 associates and 
 joint ventures                          29,446                 28,560                    1,049                 29,609 
-------------------  --------------------------  ---------------------  -----------------------  --------------------- 
Total external 
 assets                               2,985,420              2,812,349                  145,590              2,957,939 
-------------------  --------------------------  ---------------------  -----------------------  --------------------- 
Customer accounts                     1,651,301              1,627,174                   83,400              1,710,574 
-------------------  --------------------------  ---------------------  -----------------------  --------------------- 
 
 
Adjusted profit reconciliation 
                                                                    Half-year to 
                               --------------------------------------------------------------------------------------- 
                                                     30 Jun                       30 Jun                        31 Dec 
                                                       2022                         2021                          2021 
                                                         $m                           $m                            $m 
Adjusted profit before tax                           10,673                       11,538                         9,681 
-----------------------------  ----------------------------  ---------------------------  ---------------------------- 
Significant items                                   (1,497)                      (1,070)                       (1,863) 
-----------------------------  ----------------------------  ---------------------------  ---------------------------- 
- customer redress programmes 
 (revenue)                                             (14)                           18                           (7) 
----------------------------- 
- disposals, acquisitions and                         (288)                            -                             - 
investment in new 
businesses (revenue)(1) 
----------------------------- 
- fair value movements on 
 financial instruments(2)                             (220)                        (194)                          (48) 
----------------------------- 
- restructuring and other 
 related costs (revenue)(3)                              68                         (70)                         (237) 
- customer redress programmes 
 (operating expenses)                                     6                         (17)                          (32) 
- impairment of goodwill and 
 other intangible assets                                (9)                            -                         (587) 
----------------------------- 
- restructuring and other 
 related costs (operating 
 expenses)                                          (1,040)                        (848)                         (988) 
- currency translation on 
 significant items                                                                    41                            36 
-----------------------------  ----------------------------  --------------------------- 
Currency translation                                                                 371                           249 
-----------------------------  ----------------------------  ---------------------------  ---------------------------- 
Reported profit before tax                            9,176                       10,839                         8,067 
-----------------------------  ----------------------------  ---------------------------  ---------------------------- 
 

1 Includes losses from classifying businesses as held-for-sale as part of a broader restructuring of our European business.

2 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.

3 Comprises gains and losses relating to the business update in February 2020, including losses associated with RWA reduction commitments.

 
6  Fair values of financial instruments carried at fair value 
   ---------------------------------------------------------- 
 

The accounting policies, control framework and hierarchy used to determine fair values at 30 June 2022 are consistent with those applied for the Annual Report and Accounts 2021.

 
Financial instruments carried at fair value and bases of valuation 
                                                            Valuation techniques 
                                    --------------------------------------------------------------------- 
                            Quoted                          Using 
                            market                     observable                        With significant 
                             price                         inputs                            unobservable 
                             Level                          Level                                  inputs 
                                 1                              2                                 Level 3          Total 
Recurring                       $m                             $m                                      $m             $m 
fair value 
measurements 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
At 30 Jun 
2022 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Assets 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Trading 
 assets                    148,156                         66,218                                   2,976        217,350 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Financial 
 assets 
 designated 
 and 
 otherwise 
 mandatorily 
 measured at 
 fair value 
 through 
 profit or 
 loss                       15,558                         15,252                                  15,063         45,873 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Derivatives                  2,556                        258,256                                   2,111        262,923 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Financial 
 investments               191,631                         82,237                                   2,709        276,577 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Liabilities 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Trading 
 liabilities                60,623                         19,595                                     351         80,569 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Financial 
 liabilities 
 designated 
 at fair 
 value                       1,135                        116,406                                   8,465        126,006 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Derivatives                  2,758                        246,391                                   2,320        251,469 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
 
At 31 Dec 
2021 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Assets 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Trading 
 assets                    180,423                         65,757                                   2,662        248,842 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Financial 
 assets 
 designated 
 and 
 otherwise 
 mandatorily 
 measured at 
 fair value 
 through 
 profit or 
 loss                       17,937                         17,629                                  14,238         49,804 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Derivatives                  2,783                        191,621                                   2,478        196,882 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Financial 
 investments               247,745                         97,838                                   3,389        348,972 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Liabilities 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Trading 
 liabilities                63,437                         20,682                                     785         84,904 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Financial 
 liabilities 
 designated 
 at fair 
 value                       1,379                        136,243                                   7,880        145,502 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
Derivatives                  1,686                        186,290                                   3,088        191,064 
-------------  -------------------  -----------------------------  --------------------------------------  ------------- 
 
 
Transfers between Level 1 and Level 2 fair values 
                                                                   Assets                                                                                          Liabilities 
            ---------------------------------------------------------------------------------------------------------------------  ---------------------------------------------------------------------------- 
                                                                                               Designated 
                                                                                            and otherwise 
                                                                                              mandatorily                                                                    Designated 
                           Financial               Trading                                    measured at                                           Trading                     at fair 
                         investments                assets                                     fair value             Derivatives               liabilities                       value             Derivatives 
                                  $m                    $m                                             $m                      $m                        $m                          $m                      $m 
----------  ------------------------  --------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
At 30 Jun 
2022 
----------  ------------------------  --------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
Transfers 
 from 
 Level 
 1 to 
 Level 2                       2,407                 1,937                                            538                       -                        55                           -                       - 
----------  ------------------------  --------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
Transfers                      4,066                 3,488                                             99                       -                       203                           -                       - 
 from 
 Level 
 2 to 
 Level 1 
----------  ------------------------  --------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
 
At 31 Dec 2021 
----------------------------------------------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
Transfers                      8,477                 6,553                                          1,277                     103                       181                           -                     212 
 from 
 Level 
 1 to 
 Level 2 
----------  ------------------------  --------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
Transfers                      6,007                 4,132                                            768                       -                       638                           -                       - 
 from 
 Level 
 2 to 
 Level 1 
----------  ------------------------  --------------------  ---------------------------------------------  ----------------------  ------------------------  --------------------------  ---------------------- 
 

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.

Fair value adjustments

We adopt the use of fair value adjustments when we take into consideration additional factors not incorporated within the valuation model that would otherwise be considered by a market participant. We classify fair value adjustments as either 'risk-related' or 'model-related'. The majority of these adjustments relate to GBM. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income statement. For example, as models are enhanced, fair value adjustments may no longer be required. Similarly, fair value adjustments will decrease when the related positions are unwound, but this may not result in profit or loss.

 
Global Banking and Markets fair value adjustments 
                                            At 30 Jun                                      At 31 Dec 
                                               2022                                           2021 
                          ---------------------------------------------  --------------------------------------------- 
                                                              Corporate                                      Corporate 
                                            GBM                  Centre                    GBM                  Centre 
                                             $m                      $m                     $m                      $m 
------------------------  ---------------------  ----------------------  ---------------------  ---------------------- 
Type of adjustment 
------------------------  ---------------------  ----------------------  ---------------------  ---------------------- 
Risk-related                                800                      28                    868                      42 
------------------------  ---------------------  ----------------------  ---------------------  ---------------------- 
- bid-offer                                 427                       -                    412                       - 
------------------------ 
- uncertainty                                78                       1                     66                       1 
------------------------ 
- credit valuation 
 adjustment                                 300                      21                    228                      35 
------------------------ 
- debt valuation 
 adjustment                               (204)                       -                   (92)                       - 
------------------------ 
- funding fair value 
 adjustment                                 199                       6                    254                       6 
------------------------ 
- other                                       -                       -                      -                       - 
------------------------  ---------------------  ----------------------  --------------------- 
Model-related                                61                       -                     57                       - 
------------------------  ---------------------  ----------------------  ---------------------  ---------------------- 
- model limitation                           61                       -                     57                       - 
------------------------ 
- other                                       -                       -                      -                       - 
------------------------  ---------------------  ----------------------  --------------------- 
Inception profit (Day 1 
 P&L reserves)(1)                            99                       -                    106                       - 
------------------------  ---------------------  ----------------------  ---------------------  ---------------------- 
Total                                       960                      28                  1,031                      42 
------------------------  ---------------------  ----------------------  ---------------------  ---------------------- 
 
   1     See Note 8 on the interim condensed financial statements on page 121. 

The reduction in fair value adjustments was predominantly driven by changes in the rates and credit environment.

For further details of our risk-related and model-related adjustments, see pages 345 and 346 of the Annual Report and Accounts 2021.

Fair value valuation bases

 
Financial instruments measured at fair value using a valuation technique 
 with significant unobservable inputs - Level 3 
                                                                                  Assets                                                                                                              Liabilities 
               --------------------------------------------------------------------------------------------------------------------------------------------  ---------------------------------------------------------------------------------------------- 
                                                                                                      Designated 
                                                                                                   and otherwise 
                                                                                                     mandatorily 
                                                                                                     measured at 
                                                                                                      fair value                                                                                     Designated 
                            Financial                   Trading                                   through profit                                                              Trading                   at fair 
                          investments                    assets                                          or loss           Derivatives                Total               liabilities                     value           Derivatives                 Total 
                                   $m                        $m                                               $m                    $m                   $m                        $m                        $m                    $m                    $m 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Private 
 equity 
 including 
 strategic 
 investments                      647                        90                                           14,704                     -               15,441                        91                         -                     -                    91 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Asset-backed                      468                       114                                               29                     -                  611                         -                         -                     -                     - 
 securities 
Structured 
 notes                              -                         -                                                -                     -                    -                         -                     8,465                     -                 8,465 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Derivatives                         -                         -                                                -                     -                    -                         -                         -                     -                     - 
with 
monolines 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Other 
 derivatives                        -                         -                                                -                 2,111                2,111                         -                         -                 2,320                 2,320 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Other                           1,594                     2,772                                              330                     -                4,696                       260                         -                     -                   260 
portfolios 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
At 30 Jun 
 2022                           2,709                     2,976                                           15,063                 2,111               22,859                       351                     8,465                 2,320                11,136 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
 
Private 
 equity 
 including 
 strategic 
 investments                      544                         2                                           13,732                     -               14,278                         9                         -                     -                     9 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Asset-backed                    1,008                       132                                                1                     -                1,141                         -                         -                     -                     - 
 securities 
Structured 
 notes                              -                         -                                                -                     -                    -                         -                     7,879                     -                 7,879 
Other 
 derivatives                        -                         -                                                -                 2,478                2,478                         -                         -                 3,088                 3,088 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
Other                           1,837                     2,528                                              505                     -                4,870                       776                         1                     -                   777 
portfolios 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
At 31 Dec 
 2021                           3,389                     2,662                                           14,238                 2,478               22,767                       785                     7,880                 3,088                11,753 
-------------  ----------------------  ------------------------  -----------------------------------------------  --------------------  -------------------  ------------------------  ------------------------  --------------------  -------------------- 
 

The basis for determining the fair value of the financial instruments in the table above is explained on page 347 of the Annual Report and Accounts 2021.

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy

 
Movement in Level 3 financial instruments 
                                                                                                                Assets                                                                                    Liabilities 
                                                             ------------------------------------------------------------------------------------------------------------  ------------------------------------------------------------------------- 
                                                                                                                                       Designated 
                                                                                                                                    and otherwise 
                                                                                                                                      mandatorily 
                                                                                                                                         measured 
                                                                                                                                          at fair 
                                                                                                                                    value through                                                                   Designated 
                                                                            Financial                  Trading                             profit                                           Trading                    at fair 
                                                                          investments                   assets                            or loss             Derivatives               liabilities                      value           Derivatives 
                                                                                   $m                       $m                                 $m                      $m                        $m                         $m                    $m 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
At 1 Jan 2022                                                                   3,389                    2,662                             14,238                   2,478                       785                      7,880                 3,088 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
Total gains/(losses) recognised 
 in profit or loss                                                                (7)                     (22)                                310                     408                      (45)                    (1,103)                   165 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
 
  *    net income/(losses) from financial instruments held 
       for trading or managed on a fair value basis                                 -                     (22)                                  -                     408                      (45)                          -                   165 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                                         -                        -                                310                       -                         -                    (1,103)                     - 
----------------------------------------------------------- 
 
  *    gains less losses from financial investments held at 
       fair value through other comprehensive income                              (7)                        -                                  -                       -                         -                          -                     - 
Total gains/(losses) recognised 
 in other comprehensive 
 income ('OCI')                                                                 (287)                    (165)                              (336)                   (191)                      (12)                      (398)                 (231) 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
 
  *    financial investments: fair value losses                                 (140)                        -                                  -                       -                         -                       (18)                     - 
 
  *    exchange differences                                                     (147)                    (165)                              (336)                   (191)                      (12)                      (380)                 (231) 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  ------------------------- 
Purchases                                                                         506                    1,026                              1,707                       -                        13                          -                     - 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
New issuances                                                                       -                        -                                  -                       -                         4                      2,511                     - 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
Sales                                                                           (186)                    (698)                              (299)                       -                      (95)                       (22)                     - 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
Settlements                                                                     (273)                    (373)                              (561)                   (509)                     (636)                      (723)                 (580) 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
Transfers out                                                                   (501)                    (287)                               (36)                   (290)                       (7)                      (549)                 (437) 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
Transfers in                                                                       68                      833                                 40                     215                       344                        869                   315 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
At 30 Jun 2022                                                                  2,709                    2,976                             15,063                   2,111                       351                      8,465                 2,320 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
Unrealised gains/(losses) 
 recognised in profit or 
 loss relating to assets 
 and liabilities held at 
 30 Jun 2022                                                                        -                     (37)                                291                     929                         1                        423                 3,494 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  -------------------------  -------------------- 
 
  *    net income/(losses) from financial instruments held 
       for trading or managed on a fair value basis                                 -                     (37)                                  -                     929                         1                          -                 3,494 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                                         -                        -                                291                       -                         -                        423                     - 
-----------------------------------------------------------  ------------------------  -----------------------  ---------------------------------  ----------------------  ------------------------  ------------------------- 
 
 
At 1 Jan 2021                                                                   3,654                    2,499                            11,477                    2,670                        162                       5,306                    4,188 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
Total gains/(losses) recognised 
 in profit or loss                                                                  2                    (155)                             1,038                      195                         15                       (456)                      466 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
 
  *    net income/(losses) from financial instruments held 
       for trading or managed on a fair value basis                                 -                    (155)                                 -                      195                         15                           -                      466 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                                         -                        -                             1,038                        -                          -                       (456)                        - 
----------------------------------------------------------- 
 
  *    gains less losses from financial investments held at 
       fair value through other comprehensive income                                2                        -                                 -                        -                          -                           -                        - 
Total losses recognised 
 in other comprehensive 
 income ('OCI')                                                                 (391)                       23                             (114)                       23                        (3)                           2                       29 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
                                                                                (360)                        -                                 -                        -                          -                           -                        - 
  *    financial investments: fair value losses 
 
  *    exchange differences                                                      (31)                       23                             (114)                       23                        (3)                           2                       29 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  -------------------------- 
Purchases                                                                         390                    1,094                             1,631                        -                        482                           -                        - 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
New issuances                                                                       -                        -                                 -                        -                         24                       2,725                        - 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
Sales                                                                           (214)                    (244)                             (499)                        -                          -                           -                        - 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
Settlements                                                                     (177)                    (494)                             (436)                    (359)                        (8)                       (896)                  (1,537) 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
Transfers out                                                                   (311)                    (512)                             (159)                    (126)                        (1)                       (339)                    (221) 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
Transfers in                                                                      290                      298                                50                      274                        186                         895                      496 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
At 30 Jun 2021                                                                  3,243                    2,509                            12,988                    2,677                        857                       7,237                    3,421 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
Unrealised gains/(losses) 
 recognised in profit or 
 loss relating to assets 
 and liabilities held at 
 30 Jun 2021                                                                        -                     (99)                               885                      175                          2                         106                      (4) 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  --------------------------  ----------------------- 
 
  *    net income/(losses) from financial instruments held 
       for trading or managed on a fair value basis                                 -                     (99)                                 -                      175                          2                           -                      (4) 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                                         -                        -                               885                        -                          -                         106                        - 
-----------------------------------------------------------  ------------------------  -----------------------  --------------------------------  -----------------------  -------------------------  -------------------------- 
 
 
Movement in Level 3 financial instruments (continued) 
                                                                                                                Assets                                                                                      Liabilities 
                                                             ------------------------------------------------------------------------------------------------------------  ----------------------------------------------------------------------------- 
                                                                                                                                      Designated 
                                                                                                                                   and otherwise 
                                                                                                                                     mandatorily 
                                                                                                                                        measured 
                                                                                                                                         at fair 
                                                                                                                                   value through                                                                      Designated 
                                                                           Financial                  Trading                             profit                                             Trading                     at fair 
                                                                         investments                   assets                            or loss              Derivatives                liabilities                       value             Derivatives 
                                                                                  $m                       $m                                 $m                       $m                         $m                          $m                      $m 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
At 1 Jul 2021                                                                  3,243                    2,509                             12,988                    2,677                        857                       7,237                   3,421 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
Total gains recognised 
 in profit or loss                                                              (12)                    (223)                                715                    2,042                          1                       (380)                   2,117 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
 
  *    net income from financial instruments held for 
       trading or managed on a fair value basis                                    -                    (223)                                  -                    2,042                          1                           -                   2,117 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                                        -                        -                                715                        -                          -                       (380)                       - 
----------------------------------------------------------- 
 
  *    gains less losses from financial investments held at 
       fair value through other comprehensive income                            (12)                        -                                  -                        -                          -                           -                       - 
Total gains recognised 
 in other comprehensive 
 income ('OCI')                                                                (130)                     (41)                              (171)                     (50)                        (5)                        (63)                    (55) 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
- financial investments:                                                        (68)                        -                                  -                        -                          -                           -                       - 
 fair value gains 
- exchange differences                                                          (62)                     (41)                              (171)                     (50)                        (5)                        (63)                    (55) 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  -------------------------- 
Purchases                                                                        635                      894                              2,061                        -                        532                           1                       - 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
New issuances                                                                      -                        -                                  -                        -                         11                       3,244                       - 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
Sales                                                                          (366)                    (229)                              (717)                        -                        (4)                        (27)                       - 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
Settlements                                                                    (159)                    (253)                              (613)                  (1,988)                      (673)                     (2,026)                 (2,425) 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
Transfers out                                                                   (72)                    (515)                               (25)                    (292)                        (6)                       (365)                   (513) 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
Transfers in                                                                     250                      520                                  -                       89                         72                         259                     543 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
At 31 Dec 2021                                                                 3,389                    2,662                             14,238                    2,478                        785                       7,880                   3,088 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
Unrealised gains/(losses) 
 recognised in profit or 
 loss relating to assets 
 and liabilities held at 
 31 Dec 2021                                                                       -                    (309)                              1,509                    1,298                          -                         166                   (969) 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  --------------------------  ---------------------- 
 
  *    net income/(losses) from financial instruments held 
       for trading or managed on a fair value basis                                -                    (309)                                  -                    1,298                          -                           -                   (969) 
 
  *    changes in fair value of other financial instruments 
       mandatorily measured at fair value through profit or 
       loss                                                                        -                        -                              1,509                        -                          -                         166                       - 
-----------------------------------------------------------  -----------------------  -----------------------  ---------------------------------  -----------------------  -------------------------  -------------------------- 
 

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.

Effect of changes in significant unobservable assumptions to reasonably possible alternatives

The following table shows the sensitivity of Level 3 fair values to reasonably possible alternative assumptions:

 
Sensitivity of fair values to reasonably possible alternative assumptions 
                                          Reflected in                                                   Reflected in 
                                         profit or loss                                                       OCI 
                 --------------------------------------------------------------  ------------------------------------------------------------ 
                                    Favourable                     Unfavourable                     Favourable                   Unfavourable 
                                       changes                          changes                        changes                        changes 
                                            $m                               $m                             $m                             $m 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Derivatives, 
 trading assets 
 and trading 
 liabilities(1)                            172                            (179)                              -                              - 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Financial 
 assets and 
 liabilities 
 designated 
 and otherwise 
 mandatorily 
 measured at 
 fair value 
 through profit 
 or loss                                   979                            (977)                              -                              - 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Financial 
 investments                                12                              (6)                            142                          (143) 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
At 30 Jun 2022                           1,163                          (1,162)                            142                          (143) 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
 
Derivatives, 
 trading assets 
 and trading 
 liabilities(1)                            179                            (197)                              -                              - 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Financial 
 assets and 
 liabilities 
 designated 
 and otherwise 
 mandatorily 
 measured at 
 fair value 
 through profit 
 or loss                                   795                            (793)                              -                              - 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Financial 
 investments                                24                             (24)                            105                          (104) 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
At 30 Jun 2021                             998                          (1,014)                            105                          (104) 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
 
Derivatives, 
 trading assets 
 and trading 
 liabilities(1)                            143                            (146)                              -                              - 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Financial 
 assets and 
 liabilities 
 designated 
 and otherwise 
 mandatorily 
 measured at 
 fair value 
 through profit 
 or loss                                   849                            (868)                              -                              - 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
Financial 
 investments                                20                             (20)                            113                          (112) 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
At 31 Dec 2021                           1,012                          (1,034)                            113                          (112) 
---------------  -----------------------------  -------------------------------  -----------------------------  ----------------------------- 
 

1 'Derivatives, trading assets and trading liabilities' is presented as one category to reflect the manner in which these financial instruments are risk-managed.

The sensitivity analysis aims to measure a range of fair values consistent with the application of a 95% confidence interval. Methodologies take account of the nature of the valuation technique employed, as well as the availability and reliability of observable proxy and historical data.

When the fair value of a financial instrument is affected by more than one unobservable assumption, the table above reflects the most favourable or the most unfavourable change from varying the assumptions individually.

Key unobservable inputs to Level 3 financial instruments

The following table lists key unobservable inputs to Level 3 financial instruments and provides the range of those inputs at 30 June 2022. There has been no change to the key unobservable inputs to Level 3 financial instruments and inter-relationships therein, which are detailed on pages 349 and 350 of the Annual Report and Accounts 2021.

 
Quantitative information about significant unobservable inputs in Level 
 3 valuations 
                                                            Fair value                                              30 Jun                 31 Dec 2021 
                                                                                                                      2022 
                                             ----------------------------------------  ----------  ------------  -------------  ---------------------------------- 
                                                          Assets          Liabilities                             Full range                Full range 
                                                                                                                   of inputs                 of inputs 
                                                                                                                 -------------  ---------------------------------- 
                                                              $m                   $m              Key           Lower  Higher             Lower            Higher 
                                                                                       Valuation   unobservable 
                                                                                       techniques  inputs 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Private equity                                                                         See 
 including strategic                                                                   footnote    See footnote 
 investments                                              15,441                   91  1            1 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Asset-backed securities                                      611                    - 
 ('ABS') 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
- collateralised                                              25                    -  Market      Prepayment                                  -                 - 
 loan/debt obligation                                                                  proxy        rate 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Market 
                                                                                       proxy       Bid quotes        -      98                 -               100 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Market 
- other ABSs                                                 586                    -  proxy       Bid quotes        -      97                 -               100 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Loans held for                                                 -                    - 
 securitisation 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Structured notes                                               -                8,465 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model - 
- equity-linked                                                                        Option      Equity 
 notes                                                         -                6,648  model        volatility      6%     95%                6%              124% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model - 
                                                                                       Option      Equity 
                                                                                       model        correlation    30%     98%               22%               99% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model - 
                                                                                       Option      FX 
  *    Foreign exchange ('FX')-linked notes                    -                  994  model       volatility       3%     40%                1%               99% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
- other                                                        -                  823 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Derivatives with                                               -                    -  Model -     Credit            -       -                 -                 - 
 monolines                                                                             Discounted   spread 
                                                                                       cash flow 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Other derivatives                                          2,111                2,320 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
- interest rate 
 derivatives                                                 448                  588 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model - 
  securitisation                                                                       Discounted  Prepayment 
   swaps                                                     260                  367  cash flow    rate            5%     10%                5%               10% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model -     Interest 
                                                                                       Option      rate 
  long-dated swaptions                                        31                   50  model       volatility      10%     42%               15%               35% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
  other                                                      157                  171 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
- FX derivatives                                             291                  354 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model - 
                                                                                       Option      FX 
  FX options                                                 112                  193  model       volatility       1%     40%                1%               99% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
  other                                                      179                  161 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
- equity derivatives                                       1,232                1,154 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
                                                                                       Model - 
  long-dated single                                                                    Option      Equity 
   stock options                                             537                  703  model        volatility      6%    124%                4%              138% 
-------------------------------------------                                            ----------  ------------  -----  ------  ----------------  ---------------- 
  other                                                      695                  451 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
- credit derivatives                                         140                  224 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
  other                                                      140                  224 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
Other portfolios                                           4,696                  260 
                                                                                       Model - 
                                                                                       Discounted  Interest 
- repurchase agreements                                      993                  232  cash flow    rate curve      1%      5%                1%                5% 
-------------------------------------------                                                        ------------  -----  ------  ----------------  ---------------- 
- other(2)                                                 3,703                   28 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
At 30 Jun 2022                                            22,859               11,136 
-------------------------------------------  -------------------  -------------------  ----------  ------------  -----  ------  ----------------  ---------------- 
 

1 Given the bespoke nature of the analysis in respect of each private equity holding, it is not practical to quote a range of key unobservable inputs .

   2     'Other' includes a range of smaller holdings. 
 
7  Fair values of financial instruments not carried at fair value 
   -------------------------------------------------------------- 
 

The bases for measuring the fair values of loans and advances to banks and customers, financial investments, deposits by banks, customer accounts, debt securities in issue, subordinated liabilities and non-trading repurchase and reverse repurchase agreements are explained on pages 350 and 351 of the Annual Report and Accounts 2021.

 
Fair values of financial instruments not carried at fair value on the 
 balance sheet 
                                            At 30 Jun 2022                               At 31 Dec 2021 
                              ------------------------------------------  -------------------------------------------- 
                                          Carrying                  Fair               Carrying                   Fair 
                                            amount                 value                 amount                  value 
                                                $m                    $m                     $m                     $m 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Assets 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Loans and advances to banks                 96,429                96,445                 83,136                 83,293 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Loans and advances to 
 customers                               1,028,356             1,021,944              1,045,814              1,044,575 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Reverse repurchase 
 agreements - non-trading                  244,451               244,381                241,648                241,652 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Financial investments - at 
 amortised cost                            154,219               148,456                 97,302                102,267 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Liabilities 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Deposits by banks                          105,275               105,197                101,152                101,149 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Customer accounts                        1,651,301             1,651,234              1,710,574              1,710,733 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Repurchase agreements - 
 non-trading                               129,707               129,705                126,670                126,670 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Debt securities in issue                    87,944                85,581                 78,557                 79,243 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
Subordinated liabilities                    20,711                21,683                 20,487                 26,206 
----------------------------  --------------------  --------------------  ---------------------  --------------------- 
 

Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly, their carrying amount is a reasonable approximation of fair value.

 
8  Derivatives 
   ----------- 
 
 
Notional contract amounts and fair values of derivatives by product 
 contract type held by HSBC 
                            Notional contract                                                                                      Fair value amount 
                                  amount 
            -------------------------------------------------  ---------------------------------------------------------------------------------------------------------------------------------------------------------- 
                               Assets and                                                         Assets                                                                     Liabilities 
                               liabilities 
            -------------------------------------------------  ----------------------------------------------------------------------------  ---------------------------------------------------------------------------- 
                          Trading                     Hedging                  Trading                     Hedging                    Total                  Trading                     Hedging                    Total 
                               $m                          $m                       $m                          $m                       $m                       $m                          $m                       $m 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Foreign 
 exchange               8,856,919                      38,611                  127,897                       2,187                  130,084                  122,431                         247                  122,678 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Interest 
 rate                  15,558,726                     237,907                  220,316                       3,620                  223,936                  220,007                       1,181                  221,188 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Equities                  573,332                           -                   11,919                           -                   11,919                   10,843                           -                   10,843 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Credit                    199,195                           -                    3,255                           -                    3,255                    3,321                           -                    3,321 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Commodity 
 and 
 other                    102,053                           -                    1,815                           -                    1,815                    1,525                           -                    1,525 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Gross 
 total 
 fair 
 values                25,290,225                     276,518                  365,202                       5,807                  371,009                  358,127                       1,428                  359,555 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Offset                                                                                                                            (108,086)                                                                     (108,086) 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
At 30 Jun 
 2022                  25,290,225                     276,518                  365,202                       5,807                  262,923                  358,127                       1,428                  251,469 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
 
Foreign 
 exchange               7,723,034                      43,839                   79,801                       1,062                   80,863                   77,670                         207                   77,877 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Interest 
 rate                  14,470,539                     162,921                  151,631                       1,749                  153,380                  146,808                         966                  147,774 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Equities                  659,142                           -                   12,637                           -                   12,637                   14,379                           -                   14,379 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Credit                    190,724                           -                    2,175                           -                    2,175                    3,151                           -                    3,151 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Commodity 
 and 
 other                     74,159                           -                    1,205                           -                    1,205                    1,261                           -                    1,261 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Gross 
 total 
 fair 
 values                23,117,598                     206,760                  247,449                       2,811                  250,260                  243,269                       1,173                  244,442 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
Offset                                                                                                                             (53,378)                                                                      (53,378) 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
At 31 Dec 
 2021                  23,117,598                     206,760                  247,449                       2,811                  196,882                  243,269                       1,173                  191,064 
----------  ---------------------  --------------------------  -----------------------  --------------------------  -----------------------  -----------------------  --------------------------  ----------------------- 
 

The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk. Derivative assets and liabilities increased during 1H22, reflecting changes in yield curves and the market environment.

Derivatives valued using models with unobservable inputs

The following table shows the difference between the fair value at initial recognition, which is the transaction price, and the value that would have been derived had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases.

 
Unamortised balance of derivatives valued using models with significant 
 unobservable inputs 
                                                                    Half-year to 
                                                    30 Jun                        30 Jun                        31 Dec 
                                                      2022                          2021                          2021 
                                                        $m                            $m                            $m 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
Unamortised balance at 
 beginning of period                                   106                           104                           120 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
Deferral on new transactions                           100                           187                           124 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
Recognised in the income 
 statement during the period                          (99)                         (172)                         (136) 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
- amortisation                                        (61)                          (89)                          (88) 
---------------------------- 
- subsequent to unobservable 
 inputs becoming observable                              -                           (3)                           (1) 
---------------------------- 
- maturity, termination or 
 offsetting derivative                                (38)                          (80)                          (47) 
----------------------------  ----------------------------  ---------------------------- 
Exchange differences                                   (8)                             1                           (2) 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
Unamortised balance at end 
 of period(1)                                           99                           120                           106 
----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
   1   This amount is yet to be recognised in the consolidated income statement. 

Hedge accounting derivatives

The notional contract amounts of derivatives held for hedge accounting purposes indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk.

 
Notional contract amounts of derivatives held for hedging purposes 
 by product type 
                                 At 30 Jun 2022                                      At 31 Dec 2021 
                -------------------------------------------------  --------------------------------------------------- 
                                Cash                         Fair 
                                flow                        value              Cash flow                    Fair value 
                              hedges                       hedges                 hedges                        hedges 
                                  $m                           $m                     $m                            $m 
--------------  --------------------  ---------------------------  ---------------------  ---------------------------- 
Foreign 
 exchange                     12,150                            4                 17,930                             4 
--------------  --------------------  ---------------------------  ---------------------  ---------------------------- 
Interest rate                100,673                      137,234                 72,365                        90,556 
--------------  --------------------  ---------------------------  ---------------------  ---------------------------- 
Total                        112,823                      137,238                 90,295                        90,560 
--------------  --------------------  ---------------------------  ---------------------  ---------------------------- 
 

The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using forward foreign exchange contracts or by financing with foreign currency borrowings. At 30 June 2022, the notional contract values of outstanding financial instruments designated as hedges of net investments in foreign operations were $26,457m (31 December 2021: $25,905m).

Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 'Financial Instruments'

HSBC has applied both the first set of amendments ('Phase 1') and the second set of amendments ('Phase 2') to IFRS 9 and IAS 39 applicable to hedge accounting. The items in hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance sheet as 'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and advances to customers', 'Debt securities in issue' and 'Deposits by banks'. The notional value of the derivatives impacted by the Ibor reform, including those designated in hedge accounting relationships, is disclosed on page 62 in the section 'Financial instruments impacted by Ibor reform'. For further details on Ibor transition, see 'Areas of special interest' on page 61.

The most significant Ibor benchmark in which the Group continues to have hedging instruments is US dollar Libor. During 2022 those instruments continued to be transitioned. It is expected that the transition out of US dollar Libor hedging derivatives will be largely completed by the end of 2022. This transition does not necessitate any new approaches compared with the mechanisms used so far for transition and it will not be necessary to change the transition risk management strategy. There is no significant judgement required for US dollar Libor to determine whether and when the transition uncertainty has been resolved.

For some of the Ibors included under the 'Other' header in the table below, judgement has been needed to establish whether a transition is required. This is because there are Ibor benchmarks subject to computation improvements and insertion of fallback provisions where their administrators have yet to provide full clarity on whether or when these Ibor benchmarks will be demised.

The notional amounts of interest rate derivatives designated in hedge accounting relationships do not represent the extent of the risk exposure managed by the Group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 amendments and are shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not significant and have not been presented below:

 
Hedging instrument impacted by Ibor reform 
                                                                                                Hedging instrument 
         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 
                                                                    Impacted by Ibor reform 
                             EUR(1)                            GBP                             $                    Other(2)                     Total              Not impacted 
                                                                                                                                                                         by Ibor                  Notional 
                                                                                                                                                                          reform                 amount(3) 
                                 $m                             $m                            $m                          $m                        $m                        $m                        $m 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
Fair 
 value 
 hedges                       9,094                              -                         7,903                      10,461                    27,458                   109,776                   137,234 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
Cash 
 flow 
 hedges                       6,342                              -                           100                      21,058                    27,500                    73,173                   100,673 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
At 30 
 Jun 
 2022                        15,436                              -                         8,003                      31,519                    54,958                   182,949                   237,907 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
 
Fair 
 value 
 hedges                       6,178                              -                        18,525                       6,615                    31,318                    59,238                    90,556 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
Cash 
 flow 
 hedges                       7,954                              -                           100                       8,632                    16,686                    55,679                    72,365 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
At 31 
 Dec 
 2021                        14,132                              -                        18,625                      15,247                    48,004                   114,917                   162,921 
-------  --------------------------  -----------------------------  ----------------------------  --------------------------  ------------------------  ------------------------  ------------------------ 
 

1 The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which are 'Fair value hedges' of $9,094m (31 December 2021: $6,178m) and 'Cash flow hedges' of $6,342m (31 December 2021: $7,954m).

2 Other benchmarks impacted by Ibor reform comprise mainly of Canadian dollar offered rate ('CDOR'), Hong Kong interbank offered rate ('HIBOR') and Mexican interbank equilibrium interest rate ('TIIE') related derivatives.

3 The notional contract amounts of interest rate derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date. They do not represent amounts at risk.

 
9  Financial investments 
   --------------------- 
 
 
Carrying amounts of financial investments 
                                                                                 30 Jun                      31 Dec 
                                                                                   2022                        2021 
                                                                                     $m                          $m 
Financial investments measured at fair value through other 
 comprehensive income                                                           276,577                     348,972 
-----------------------------------------------------------  --------------------------  -------------------------- 
- treasury and other eligible bills                                              59,602                     100,158 
----------------------------------------------------------- 
- debt securities                                                               215,163                     246,998 
----------------------------------------------------------- 
- equity securities                                                               1,812                       1,770 
----------------------------------------------------------- 
- other instruments                                                                   -                          46 
-----------------------------------------------------------  -------------------------- 
Debt instruments measured at amortised cost                                     154,219                      97,302 
-----------------------------------------------------------  --------------------------  -------------------------- 
- treasury and other eligible bills                                              55,392                      21,634 
----------------------------------------------------------- 
- debt securities                                                                98,827                      75,668 
-----------------------------------------------------------  -------------------------- 
 At the end of the period                                                       430,796                     446,274 
-----------------------------------------------------------  --------------------------  -------------------------- 
 
 
10  Interests in associates and joint ventures 
    ------------------------------------------ 
 

At 30 June 2022, the carrying amount of HSBC's interests in associates and joint ventures was $29,446m (31 December 2021: $29,609m).

 
Principal associates of HSBC 
                                       At 30 Jun 2022                                  At 31 Dec 2021 
                       ----------------------------------------------  ----------------------------------------------- 
                                         Carrying                Fair                    Carrying                 Fair 
                                           amount            value(1)                      amount             value(1) 
                                               $m                  $m                          $m                   $m 
---------------------  --------------------------  ------------------  --------------------------  ------------------- 
Bank of 
 Communications Co., 
 Limited                                   23,559               9,764                      23,616                8,537 
---------------------  --------------------------  ------------------  --------------------------  ------------------- 
The Saudi British 
 Bank                                       4,472               6,910                       4,426                5,599 
---------------------  --------------------------  ------------------  --------------------------  ------------------- 
 

1 Principal associates are listed on recognised stock exchanges. The fair values are based on the quoted market prices of the shares held (Level 1 in the fair value hierarchy).

Bank of Communications Co., Limited

The Group's investment in Bank of Communications Co., Limited ('BoCom') is classified as an associate. Significant influence in BoCom was established with consideration of all relevant factors, including representation on BoCom's Board of Directors and participation in a resource and experience sharing agreement ('RES'). Under the RES, HSBC staff have been seconded to assist in the maintenance of BoCom's financial and operating policies. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28 whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group's share of BoCom's net assets. An impairment test is required if there is any indication of impairment.

Impairment testing

At 30 June 2022, the fair value of the Group's investment in BoCom had been below the carrying amount for approximately 10 years. As a result, the Group performed an impairment test on the carrying amount, which confirmed that there was no impairment at 30 June 2022 as the recoverable amount as determined by a value-in-use ('VIU') calculation was higher than the carrying value.

 
                                    At 30 Jun 2022                                                           At 31 Dec 2021 
        ----------------------------------------------------------------------  ------------------------------------------------------------------------ 
                         VIU                  Carrying                    Fair                                          Carrying                    Fair 
                                                 value                   value                    VIU                      value                   value 
                         $bn                       $bn                     $bn                    $bn                        $bn                     $bn 
------  --------------------  ------------------------  ----------------------  ---------------------  -------------------------  ---------------------- 
BoCom                   24.3                      23.6                     9.8                   24.8                       23.6                     8.5 
------  --------------------  ------------------------  ----------------------  ---------------------  -------------------------  ---------------------- 
 

The headroom, which is defined as the extent to which the VIU exceeds the carrying value, decreased by $0.5bn compared with 31 December 2021. The decrease in headroom was principally due to revisions to management's best estimates of BoCom's future earnings in the short to medium term, partly offset by the impact on the VIU from BoCom's actual performance, which was better than earlier estimates.

In future periods, the VIU may increase or decrease depending on the effect of changes to model inputs. The main model inputs are described below and are based on factors observed at period-end. The factors that could result in a change in the VIU and an impairment include a short-term underperformance by BoCom, a change in regulatory capital requirements, or an increase in uncertainty regarding the future performance of BoCom resulting in a downgrade of the forecast of future asset growth or profitability. An increase in the discount rate could also result in a reduction of VIU and an impairment. At the point where the carrying value exceeds the VIU, impairment would be recognised.

If the Group did not have significant influence in BoCom, the investment would be carried at fair value rather than the current carrying value.

Basis of recoverable amount

The impairment test was performed by comparing the recoverable amount of BoCom, determined by a VIU calculation, with its carrying amount. The VIU calculation uses discounted cash flow projections based on management's best estimates of future earnings available to ordinary shareholders prepared in accordance with IAS 36. Significant management judgement is required in arriving at the best estimate. There are two main components to the VIU calculation. The first component is management's best estimate of BoCom's earnings, which is based on explicit forecasts over the short to medium term. This results in forecast earnings growth that is lower than recent historical actual growth and also reflects the uncertainty arising from the current economic outlook. Reflecting management's intent to continue to retain its investment, earnings beyond the short to medium term are then extrapolated into perpetuity using a long-term growth rate to derive a terminal value, which comprises the majority of the VIU. The second component is the capital maintenance charge ('CMC'), which is management's forecast of the earnings that need to be withheld in order for BoCom to meet capital requirements over the forecast period, meaning that CMC is deducted when arriving at management's estimate of future earnings available to ordinary shareholders. The principal inputs to the CMC calculation include estimates of asset growth, the ratio of risk-weighted assets to total assets, and the expected capital requirements. An increase in the CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers other qualitative factors, to ensure that the inputs to the VIU calculation remain appropriate.

Key assumptions in value-in-use calculation

We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:

-- Long-term profit growth rate: 3% (31 December 2021: 3%) for periods after 2025, which does not exceed forecast GDP growth in mainland China and is similar to forecasts by external analysts.

-- Long-term asset growth rate: 3% (31 December 2021: 3%) for periods after 2025, which is the rate that assets are expected to grow to achieve long-term profit growth of 3%.

-- Discount rate: 10.03% (31 December 2021: 10.03%), which is based on a capital asset pricing model ('CAPM'), using market data. The discount rate used is within the range of 8.2% to 10.2% (31 December 2021: 8.7% to 10.1%) indicated by the CAPM. While the CAPM range sits at the lower end of the range adopted by selected external analysts of 9.9% to 13.5% (31 December 2021: 9.9% to 13.5%), we continue to regard the CAPM range as the most appropriate basis for determining this assumption.

-- Expected credit losses ('ECL') as a percentage of customer advances: ranges from 0.99% to 1.15% (31 December 2021: 0.98% to 1.12%) in the short to medium term, reflecting reported credit experience through the ongoing Covid-19 pandemic in mainland China followed by an expected reversion to recent historical levels. For periods after 2025, the ratio is 0.97% (31 December 2021: 0.97%), which is higher than BoCom's average ECL as a percentage of customer advances in recent years prior to the Covid-19 pandemic.

-- Risk-weighted assets as a percentage of total assets: ranges from 61.0% to 63.2% (31 December 2021: 61.0% to 62.4%) in the short to medium term, reflecting reductions that may arise from a subsequent lowering of ECL and a continuation of the trend of strong retail loan growth. For periods after 2025, the ratio is 61.0% (31 December 2021: 61.0%). These rates are similar to BoCom's actual results in recent years and forecasts disclosed by external analysts.

-- Operating income growth rate: ranges from 4.6% to 7.3% (31 December 2021: 5.1% to 6.2%) in the short to medium term, and is lower than BoCom's actual results in recent years and the forecasts disclosed by external analysts, reflecting BoCom's most recent actual results, global trade tensions and industry developments in mainland China.

-- Cost-income ratio: ranges from 35.5% to 35.8% (31 December 2021: 35.5% to 36.1%) in the short to medium term. These ratios are similar to BoCom's actual results in recent years and forecasts disclosed by external analysts.

-- Effective tax rate: ranges from 7.6% to 15.0% (31 December 2021: 6.8% to 15.0%) in the short to medium term, reflecting BoCom's actual results and an expected increase towards the long-term assumption through the forecast period. For periods after 2025, the rate is 15.0% (31 December 2021: 15.0%), which is higher than the recent historical average, and aligned to the minimum tax rate as proposed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

-- Capital requirements: capital adequacy ratio of 12.5% (31 December 2021: 12.5%) and tier 1 capital adequacy ratio of 9.5% (31 December 2021: 9.5%), based on BoCom's capital risk appetite and capital requirements respectively.

The following table shows the change to each key assumption in the VIU calculation that on its own would reduce the headroom to nil:

 
Key assumption                                               Changes to key assumption to reduce 
                                                              headroom to nil 
                                                             Decrease by 17 basis points 
  *    Long-term profit growth rate 
                                                             Increase by 15 basis points 
  *    Long-term asset growth rate 
                                                             Increase by 23 basis points 
  *    Discount rate 
                                                             Increase by 2 basis points 
  *    Expected credit losses as a percentage of customer 
       advances 
                                                             Increase by 122 basis points 
  *    Risk-weighted assets as a percentage of total assets 
                                                             Decrease by 31 basis points 
  *    Operating income growth rate 
                                                             Increase by 70 basis points 
  *    Cost-income ratio 
                                                             Increase by 203 basis points 
  *    Long-term effective tax rate 
                                                             Increase by 25 basis points 
  *    Capital requirements - capital adequacy ratio 
                                                             Increase by 169 basis points 
  *    Capital requirements - tier 1 capital adequacy ratio 
===========================================================  =================================== 
 

The following table further illustrates the impact on VIU of reasonably possible changes to key assumptions. This reflects the sensitivity of the VIU to each key assumption on its own and it is possible that more than one favourable and/or unfavourable change may occur at the same time. The selected rates of reasonably possible changes to key assumptions are based on external analysts' forecasts, statutory requirements and other relevant external data sources, which can change period to period.

 
Sensitivity of VIU to reasonably possible changes in key assumptions 
                                                                    Favourable change                                                                                            Unfavourable change 
                         --------------------------------------------------------------------------------------------------------  ---------------------------------------------------------------------------------------------------------------- 
                                                                                         Increase                                                                                                          Decrease 
                                                                                           in VIU                             VIU                                                                            in VIU                             VIU 
                                                               bps                            $bn                             $bn                                        bps                                    $bn                             $bn 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
At 30 Jun 2022 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Long-term asset/profit                                      (75) /                          3.3 /                            27.6                                                                             (4.5)                            19.8 
 growth rate(1)                                                 82                            4.0                          / 28.3                                  82 / (75)                                / (2.9)                          / 21.4 
Discount rate                                                (183)                            8.0                            32.3                                        207                                  (5.2)                            19.1 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
                                                           2022 to                                                                                                   2022 to 
                                                         2025: 103                                                                                                 2025: 123 
Expected credit 
 losses as a percentage                              2026 onwards:                                                                                             2026 onwards: 
 of customer advances                                           91                            1.6                            25.9                                        105                                  (2.8)                            21.5 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Risk-weighted assets 
 as a percentage 
 of total assets                                             (110)                            0.1                            24.4                                        247                                  (2.1)                            22.2 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Operating income                                                51                            1.2                            25.5                                       (69)                                  (1.7)                            22.6 
 growth rate 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Cost-income ratio                                            (113)                            1.1                            25.4                                        188                                  (2.0)                            22.3 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Long-term effective 
 tax rate                                                    (426)                            1.5                            25.8                                      1,000                                  (3.6)                            20.7 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Capital requirements 
 - capital adequacy 
 ratio                                                           -                              -                            24.3                                        274                                  (8.8)                            15.5 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Capital requirements 
 - tier 1 capital 
 adequacy ratio                                                  -                              -                            24.3                                        304                                  (5.2)                            19.1 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
 
At 31 Dec 2021 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Long-term asset/profit                                                                      2.9 /                          27.7 /                                                                           (4.7) /                          20.1 / 
 growth rate(1)                                          (69) / 87                            4.2                            29.0                                  87 / (69)                                  (2.7)                            22.1 
Discount rate                                                (133)                            5.4                            30.2                                        207                                  (5.3)                            19.5 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
                                                           2021 to                                                                                                   2021 to 
                                                         2025: 103                                                                                                 2025: 121 
Expected credit 
 losses as a percentage                              2026 onwards:                                                                                             2026 onwards: 
 of customer advances                                           91                            1.5                            26.3                                        105                                  (2.7)                            22.1 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Risk-weighted assets 
 as a percentage 
 of total assets                                             (111)                            0.2                            25.0                                        280                                  (2.1)                            22.7 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Operating income                                                37                            1.0                            25.8                                       (58)                                  (1.8)                            23.0 
 growth rate 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Cost-income ratio                                            (152)                            1.7                            26.5                                        174                                  (1.7)                            23.1 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Long-term effective 
 tax rate                                                    (104)                            0.3                            25.1                                      1,000                                  (3.6)                            21.2 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Capital requirements 
 - capital adequacy 
 ratio                                                           -                              -                            24.8                                        325                                 (10.0)                            14.8 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
Capital requirements 
 - tier 1 capital 
 adequacy ratio                                                  -                              -                            24.8                                        364                                  (6.5)                            18.3 
-----------------------  -----------------------------------------  -----------------------------  ------------------------------  -----------------------------------------  -------------------------------------  ------------------------------ 
 

1 The reasonably possible ranges of the long-term profit growth rate and long-term asset growth rate assumptions reflect the close relationship between these assumptions, which would result in offsetting changes to each assumption.

Considering the interrelationship of the changes set out in the table above, management estimates that the reasonably possible range of VIU is $18.5bn to $29.0bn (31 December 2021: $19.0bn to $29.3bn). The range is based on impacts set out in the table above arising from the favourable/unfavourable change in the earnings in the short to medium term, the long-term expected credit losses as a percentage of customer advances and a 50bps increase/decrease in the discount rate. All other long-term assumptions, and the basis of the CMC have been kept unchanged when determining the reasonably possible range of the VIU.

The Saudi British Bank

The Group's investment in The Saudi British Bank ('SABB') is classified as an associate. HSBC is the largest shareholder in SABB with a shareholding of 31%. Significant influence in SABB is established via representation on the Board of Directors. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28, as described previously for BoCom.

Impairment testing

There were no indicators of impairment at 30 June 2022. The fair value of the Group's investment in SABB of $6.9bn was above the carrying amount of $4.5bn.

 
11  Provisions 
    ---------- 
 
 
                                                                                Legal 
                                                                          proceedings 
                                         Restructuring                 and regulatory                       Customer                          Other 
                                                 costs                        matters                    remediation                     provisions                          Total 
                                                    $m                             $m                             $m                             $m                             $m 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Provisions (excluding 
contractual 
commitments) 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
At 31 Dec 2021                                     383                            619                            386                            558                          1,946 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Additions                                          105                            110                             34                            104                            353 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Amounts utilised                                 (147)                          (275)                           (49)                          (132)                          (603) 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Unused amounts reversed                           (41)                           (74)                           (38)                           (66)                          (219) 
Exchange and other 
 movements                                          12                           (10)                           (34)                           (55)                           (87) 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
At 30 Jun 2022                                     312                            370                            299                            409                          1,390 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Contractual 
commitments(1) 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
At 31 Dec 2021                                                                                                                                                                 620 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Net change in expected 
 credit loss 
 provision and other 
 movements                                                                                                                                                                   (110) 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
At 30 Jun 2022                                                                                                                                                                 510 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
Total provisions 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
At 31 Dec 2021                                                                                                                                                               2,566 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
At 30 Jun 2022                                                                                                                                                               1,900 
-----------------------  -----------------------------  -----------------------------  -----------------------------  -----------------------------  ----------------------------- 
 

1 Contractual commitments include the provision for contingent liabilities measured under IFRS 9 'Financial Instruments' in respect of financial guarantees and the expected credit loss provision on off-balance sheet guarantees and commitments.

Further details of 'Legal proceedings and regulatory matters' are set out in Note 13. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim); or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. 'Regulatory matters' refers to investigations, reviews and other actions carried out by, or in response to, the actions of regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.

Customer remediation refers to HSBC's activities to compensate customers for losses or damages associated with a failure to comply with regulations or to treat customers fairly. Customer remediation is often initiated by HSBC in response to customer complaints and/or industry developments in sales practices, and is not necessarily initiated by regulatory action. Further details of customer remediation are set out in this note.

At 30 June 2022, $123m (31 December 2021: $173m) of the customer remediation provision related to the estimated liability for redress in respect of the possible mis-selling of payment protection insurance ('PPI') policies in previous years. Payments totalling $18m were made during the first six months of 2022, and the provision was decreased by $16m coupled with favourable foreign exchange movements of $16m.

At 30 June 2022, a provision of $83m (31 December 2021: $87m) was held relating to the liability for redress payable to customers following a review of collections and recoveries practices in the UK. During the first six months of 2022, redress payments and incurred operating costs totalled $14m and the provision was increased by $19m and saw favourable foreign exchange movements of $9m.

For further details of the impact of IFRS 9 on undrawn loan commitments and financial guarantees, presented in 'Contractual commitments', see Note 12. Further analysis of the movement in the expected credit loss provision is disclosed within the 'Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees' table on page 75.

 
12  Contingent liabilities, contractual commitments and guarantees 
    -------------------------------------------------------------- 
 
 
                                                                                     At 
                                                       --------------------------------------------------------------- 
                                                                               30 Jun                           31 Dec 
                                                                                 2022                             2021 
                                                                                   $m                               $m 
-----------------------------------------------------  ------------------------------  ------------------------------- 
Guarantees and contingent liabilities: 
-----------------------------------------------------  ------------------------------  ------------------------------- 
 
   *    financial guarantees                                                   17,586                           27,795 
-----------------------------------------------------  ------------------------------  ------------------------------- 
- performance and other guarantees                                             84,103                           85,534 
-----------------------------------------------------  ------------------------------  ------------------------------- 
- other contingent liabilities                                                    816                              858 
-----------------------------------------------------  ------------------------------  ------------------------------- 
At the end of the period                                                      102,505                          114,187 
-----------------------------------------------------  ------------------------------  ------------------------------- 
Commitments:(1) 
-----------------------------------------------------  ------------------------------  ------------------------------- 
- documentary credits and short-term trade-related 
 transactions                                                                   9,972                            8,827 
-----------------------------------------------------  ------------------------------  ------------------------------- 
- forward asset purchases and forward deposits placed                          76,144                           47,184 
-----------------------------------------------------  ------------------------------  ------------------------------- 
- standby facilities, credit lines and other 
 commitments 
 to lend                                                                      740,313                          759,463 
-----------------------------------------------------  ------------------------------  ------------------------------- 
At the end of the period                                                      826,429                          815,474 
-----------------------------------------------------  ------------------------------  ------------------------------- 
 

1 Includes $633,091m of commitments at 30 June 2022 (31 December 2021: $627,637m), to which the impairment requirements in IFRS 9 are applied where HSBC has become party to an irrevocable commitment.

The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the Group, which represent the maximum amounts at risk should the contracts be fully drawn upon and the clients default. As a significant portion of guarantees and commitments is expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 11.

The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to HSBC's annual credit review process.

Contingent liabilities arising from legal proceedings and regulatory and other matters against Group companies are excluded from this note but are disclosed in Note 13.

 
13  Legal proceedings and regulatory matters 
    ---------------------------------------- 
 

HSBC is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from the matters described below, HSBC considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1 of the Annual Report and Accounts 2021. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 30 June 2022 (see Note 11). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

Bernard L. Madoff Investment Securities LLC

Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Bernard L. Madoff Investment Securities LLC ('Madoff Securities'). Based on information provided by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff. Based on information available to HSBC, the funds' actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud.

US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others in the US Bankruptcy Court for the Southern District of New York (the 'US Bankruptcy Court'), seeking recovery of transfers from Madoff Securities to HSBC in an amount not yet pleaded or determined. Following an initial dismissal of certain claims, which was later reversed on appeal, the cases were remanded to the US Bankruptcy Court, where they are now pending.

Fairfield Sentry Limited, Fairfield Sigma Limited and Fairfield Lambda Limited (together, 'Fairfield') (in liquidation since July 2009) have brought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitution of redemption payments. In December 2018, the US Bankruptcy Court dismissed certain claims by the Fairfield liquidators and granted a motion by the liquidators to file amended complaints. In May 2019, the liquidators appealed certain issues from the US Bankruptcy Court to the US District Court for the Southern District of New York (the 'New York District Court'), and these appeals remain pending.

In January 2020, the Fairfield liquidators filed amended complaints on the claims remaining in the US Bankruptcy Court. In December 2020, the US Bankruptcy Court dismissed the majority of those claims. In March 2021, the liquidators and defendants appealed the US Bankruptcy Court's decision to the New York District Court, and these appeals are currently pending. In May 2022, the liquidators voluntarily dismissed their claims against HSBC Bank USA N.A. ('HSBC Bank USA') in the US Bankruptcy Court. Meanwhile, proceedings before the US Bankruptcy Court with respect to the remaining claims and other HSBC companies that were not dismissed are ongoing.

UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recovery of transfers from Madoff Securities to HSBC in an amount not yet pleaded or determined. The deadline for service of the claim has been extended to September 2022 for UK-based defendants and November 2022 for all other defendants.

Cayman Islands litigation: In February 2013, Primeo Fund ('Primeo') (in liquidation since April 2009) brought an action against HSBC Securities Services Luxembourg ('HSSL') and Bank of Bermuda (Cayman) Limited (now known as HSBC Cayman Limited), alleging breach of contract and breach of fiduciary duty and claiming damages and equitable compensation. The trial concluded in February 2017 and, in August 2017, the court dismissed all claims against the defendants. In September 2017, Primeo appealed to the Court of Appeal of the Cayman Islands and, in June 2019, the Court of Appeal of the Cayman Islands dismissed Primeo's appeal. In August 2019, Primeo filed a notice of appeal to the UK Privy Council. Two hearings before the UK Privy Council took place during 2021. Judgment was given against HSBC in respect of the first hearing and judgment is pending in respect of the second hearing.

Luxembourg litigation: In April 2009, Herald Fund SPC ('Herald') (in liquidation since July 2013) brought an action against HSSL before the Luxembourg District Court, seeking restitution of cash and securities that Herald purportedly lost because of Madoff Securities' fraud, or money damages. The Luxembourg District Court dismissed Herald's securities restitution claim, but reserved Herald's cash restitution and money damages claims. Herald has appealed this judgment to the Luxembourg Court of Appeal, where the matter is pending. In late 2018, Herald brought additional claims against HSSL and HSBC Bank plc before the Luxembourg District Court, seeking further restitution and damages.

In October 2009, Alpha Prime Fund Limited ('Alpha Prime') brought an action against HSSL before the Luxembourg District Court, seeking the restitution of securities, or the cash equivalent, or money damages. In December 2018, Alpha Prime brought additional claims before the Luxembourg District Court seeking damages against various HSBC companies. These matters are currently pending before the Luxembourg District Court.

In December 2014, Senator Fund SPC ('Senator') brought an action against HSSL before the Luxembourg District Court, seeking restitution of securities, or the cash equivalent, or money damages. In April 2015, Senator commenced a separate action against the Luxembourg branch of HSBC Bank plc asserting identical claims before the Luxembourg District Court. In December 2018, Senator brought additional claims against HSSL and HSBC Bank plc Luxembourg branch before the Luxembourg District Court, seeking restitution of Senator's securities or money damages. These matters are currently pending before the Luxembourg District Court.

There are many factors that may affect the range of possible outcomes, and any resulting financial impact, of the various Madoff-related proceedings described above, including but not limited to the multiple jurisdictions in which the proceedings have been brought. Based upon the information currently available, management's estimate of the possible aggregate damages that might arise as a result of all claims in the various Madoff-related proceedings is around $600m, excluding costs and interest. Due to uncertainties and limitations of this estimate, any possible damages that might ultimately arise could differ significantly from this amount.

Anti-money laundering and sanctions-related matters

In December 2012, HSBC Holdings entered into a number of agreements, including an undertaking with the UK Financial Services Authority (replaced with a Direction issued by the UK Financial Conduct Authority ('FCA') in 2013 and again in 2020) as well as a cease-and-desist order with the US Federal Reserve Board ('FRB'), both of which contained certain forward-looking anti-money laundering ('AML') and sanctions-related obligations. For several years thereafter, HSBC retained a Skilled Person under section 166 of the Financial Services and Markets Act and an Independent Consultant under the FRB cease-and-desist order to produce periodic assessments of the Group's AML and sanctions compliance programme. The Skilled Person completed its engagement in the second quarter of 2021, and the FCA determined that no further Skilled Person work is required. Separately, the Independent Consultant has completed its latest review pursuant to the FRB cease-and-desist order, which remains in place. The roles of each of the FCA Skilled Person and the FRB Independent Consultant are discussed on page 209 of the Annual Report and Accounts 2021.

Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf of plaintiffs who are, or are related to, victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act. Currently, nine actions remain pending in federal courts in New York or the District of Columbia. The courts have granted HSBC's motions to dismiss in five of these cases; appeals remain pending in two cases, and the remaining three dismissals are also subject to appeal. The four remaining actions are at an early stage.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

London interbank offered rates, European interbank offered rates and other benchmark interest rate investigations and litigation

Euro interest rate derivatives: In December 2016, the European Commission ('EC') issued a decision finding that HSBC, among other banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives in early 2007. The EC imposed a fine on HSBC based on a one-month infringement. In September 2019, the General Court of the European Union (the 'General Court') issued a decision largely upholding the EC's findings on liability but annulling the fine. HSBC and the EC both appealed the General Court's decision to the European Court of Justice (the 'Court of Justice'). In June 2021, the EC adopted a new fining decision for an amount that was 5% less than the previously annulled fine, and subsequently withdrew its appeal to the Court of Justice. HSBC has appealed the EC's June 2021 fining decision to the General Court, and its appeal to the Court of Justice on liability also remains pending.

US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of private lawsuits filed in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US laws, including US antitrust and racketeering laws, the US Commodity Exchange Act ('US CEA') and state law. The lawsuits include individual and putative class actions, most of which have been transferred and/or consolidated for pre-trial purposes before the New York District Court. HSBC has reached class settlements with five groups of plaintiffs, and the court has approved these settlements. HSBC has also resolved several of the individual actions, although a number of other US dollar Libor-related actions remain pending against HSBC in the New York District Court.

Singapore interbank offered rate ('Sibor') and Singapore swap offer rate ('SOR'): In 2016, HSBC and other panel banks were named as defendants in a putative class action filed in the New York District Court on behalf of persons who transacted in products related to the Sibor and SOR benchmark rates. The complaint alleges, among other things, misconduct related to these benchmark rates in violation of US antitrust, commodities and racketeering laws, and state law.

In October 2021, The Hongkong and Shanghai Banking Corporation Limited reached a settlement in principle with the plaintiffs to resolve this action, the agreement for which was executed in May 2022. The settlement received preliminary court approval in June 2022, and the final approval hearing is scheduled for November 2022.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could be significant.

Foreign exchange-related investigations and litigation

In December 2021, the EC issued a settlement decision finding that a number of banks, including HSBC, had engaged in anti-competitive practices in an online chatroom between 2011 and 2012 in the foreign exchange spot market. The EC imposed a EUR174.3m fine on HSBC in connection with this matter, which has been paid.

In December 2016, Brazil's Administrative Council of Economic Defense initiated an investigation into the onshore foreign exchange market and identified a number of banks, including HSBC, as subjects of its investigation.

In June 2020, the Competition Commission of South Africa, having initially referred a complaint for proceedings before the South African Competition Tribunal in February 2017, filed a revised complaint against 28 financial institutions, including HSBC Bank plc and HSBC Bank USA, for alleged anti-competitive behaviour in the South African foreign exchange market. In December 2021, a hearing on HSBC Bank plc's and HSBC Bank USA's applications to dismiss the revised complaint took place before the South African Competition Tribunal, where a decision remains pending.

Beginning in 2013, various HSBC companies and other banks have been named as defendants in a number of putative class actions filed in, or transferred to, the New York District Court arising from allegations that the defendants conspired to manipulate foreign exchange rates. HSBC has reached class settlements with two groups of plaintiffs, including direct and indirect purchasers of foreign exchange products, and the court has granted final approval of these settlements. A putative class action by a group of retail customers of foreign exchange products remains pending.

In November and December 2018, complaints alleging foreign exchange-related misconduct were filed in the New York District Court and the High Court of England and Wales against HSBC and other defendants by certain plaintiffs that opted out of the direct purchaser class action settlement in the US. The High Court claim has since been transferred to the Competition Appeals Tribunal and these matters remain pending. Additionally, lawsuits alleging foreign exchange-related misconduct remain pending against HSBC and other banks in courts in Brazil and Israel. It is possible that additional civil actions will be initiated against HSBC in relation to its historical foreign exchange activities.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Precious metals fix-related litigation

Gold: Beginning in March 2014, numerous putative class actions were filed in the New York District Court and the US District Courts for the District of New Jersey and the Northern District of California, naming HSBC and other members of The London Gold Market Fixing Limited as defendants. The complaints, which were consolidated in the New York District Court, allege that, from January 2004 to June 2013, the defendants conspired to manipulate the price of gold and gold derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In October 2020, HSBC reached a settlement with the plaintiffs to resolve the consolidated action, and the court granted final approval of the settlement in May 2022.

Beginning in December 2015, numerous putative class actions under Canadian law were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs allege that, among other things, from January 2004 to March 2014, the defendants conspired to manipulate the price of gold and gold derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Silver: Beginning in July 2014, numerous putative class actions were filed in federal district courts in New York, naming HSBC and other members of The London Silver Market Fixing Limited as defendants. The complaints, which were consolidated in the New York District Court, allege that, from January 2007 to December 2013, the defendants conspired to manipulate the price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In February 2022, following the conclusion of pre-class certification discovery, the defendants filed a motion seeking to dismiss the plaintiffs' antitrust claims, which remains pending.

In April 2016, two putative class actions under Canadian law were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs in both actions allege that, from January 1999 to August 2014, the defendants conspired to manipulate the price of silver and silver derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.

Platinum and palladium: Between late 2014 and early 2015, numerous putative class actions were filed in the New York District Court, naming HSBC and other members of The London Platinum and Palladium Fixing Company Limited as defendants. The complaints allege that, from January 2008 to November 2014, the defendants conspired to manipulate the price of platinum group metals ('PGM') and PGM-based financial products for their collective benefit in violation of US antitrust laws and the US CEA. In March 2020, the court granted the defendants' motion to dismiss the plaintiffs' third amended complaint but granted the plaintiffs leave to re-plead certain claims. The plaintiffs have filed an appeal.

Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.

Film finance litigation

In July and November 2015, two actions were brought by individuals against HSBC Private Bank (UK) Limited ('PBGB') in the High Court of England and Wales seeking damages on various alleged grounds, including breach of duty to the claimants, in connection with their participation in certain Ingenious film finance schemes. In December 2018 and June 2019, two further actions were brought against PBGB in the High Court of England and Wales by multiple claimants in connection with lending provided by PBGB to third parties in respect of certain Ingenious film finance schemes in which the claimants participated. In January 2022, the parties reached an agreement to resolve these disputes and, in February 2022, the actions against HSBC UK Bank plc (as successor to PBGB) were discontinued.

In June 2020, two separate claims were issued against HSBC UK Bank plc (as successor to PBGB) in the High Court of England and Wales by two separate groups of investors in Eclipse film finance schemes in connection with PBGB's role in the development of such schemes. These actions are ongoing.

In April 2021, HSBC UK Bank plc (as successor to PBGB) was served with a claim issued in the High Court of England and Wales in connection with PBGB's role in the development of the Zeus film finance schemes. This action is at an early stage.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could be significant.

Other regulatory investigations, reviews and litigation

HSBC Holdings and/or certain of its affiliates are subject to a number of other investigations and reviews by various regulators and competition and law enforcement authorities, as well as litigation, in connection with various matters relating to the firm's businesses and operations, including:

-- investigations by tax administration, regulatory and law enforcement authorities in Argentina, India and elsewhere in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation;

-- an investigation by the US Commodity Futures Trading Commission regarding interest rate swap transactions related to bond issuances, among other things;

-- investigations by US regulators concerning compliance with records preservation requirements relating to the use of unapproved electronic messaging platforms for business communications;

   --    an investigation by the PRA in connection with depositor protection arrangements in the UK; 

-- an investigation by the FCA in connection with collections and recoveries operations in the UK;

-- an investigation by the UK Competition and Markets Authority into potentially anti-competitive arrangements involving historical trading activities relating to certain UK-based fixed income products and related financial instruments;

-- a putative class action brought in the New York District Court relating to the Mexican government bond market;

-- two group actions pending in the US courts and a claim issued in the High Court of England and Wales in connection with HSBC Bank plc's role as a correspondent bank to Stanford International Bank Ltd from 2003 to 2009; and

-- litigation brought against various HSBC companies in the US courts relating to residential mortgage-backed securities, based primarily on (a) claims brought against HSBC Bank USA in connection with its role as trustee on behalf of various securitisation trusts; and (b) claims against several HSBC companies seeking that the defendants repurchase various mortgage loans.

There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could be significant.

 
14  Transactions with related parties 
    --------------------------------- 
 

There were no changes in the related party transactions described in the Annual Report and Accounts 2021 that have had a material effect on the financial position or performance of HSBC in the half-year to 30 June 2022. All related party transactions that took place in the half-year to 30 June 2022 were similar in nature to those disclosed in the Annual Report and Accounts 2021.

 
15  Business acquisitions and disposals 
    ----------------------------------- 
 

Business acquisitions

The following recently announced acquisitions form part of our strategy to become a market leader in Asian wealth management:

-- On 23 December 2021, HSBC Asset Management (India) Private Ltd, a subsidiary of the Group, entered into an agreement with L&T Finance Holdings Limited to fully acquire L&T Investment Management Limited for $0.4bn. Completion is expected to occur during 4Q22. L&T Investment Management Limited is a wholly-owned subsidiary of L&T Finance Holdings Limited and the investment manager of the L&T Mutual Fund, with assets under management of $8.9bn at 31 May 2022 and over 2.4 million active folios.

-- On 28 January 2022, HSBC Insurance (Asia-Pacific) Holdings Limited, a subsidiary of the Group, notified the shareholders of Canara HSBC Life Insurance Company Limited ('Canara HSBC') of its intention to increase its shareholding in Canara HSBC up to 49%. HSBC currently has a 26% shareholding, which is accounted for as an associate. Any increase in shareholding is subject to agreement with other shareholders in Canara HSBC, as well as internal and regulatory approvals. Established in 2008, Canara HSBC is a life insurance company based in India.

-- On 11 February 2022, HSBC Insurance (Asia-Pacific) Holdings Limited completed the acquisition of 100% of AXA Insurance Pte Limited (AXA Singapore) for $0.5bn. A provisional gain on acquisition of $0.1bn was recorded, reflecting the excess of the fair value of net assets acquired (gross assets of $4.5bn and gross liabilities of $3.9bn) over the acquisition price.

-- On 6 April 2022, The Hongkong and Shanghai Banking Corporation Limited, a subsidiary of the Group, announced it had increased its shareholding in HSBC Qianhai Securities Limited, a partially-owned subsidiary, from 51% to 90%.

-- On 23 June 2022, HSBC Insurance (Asia) Limited, a subsidiary of the Group, acquired the remaining 50% equity interest in HSBC Life Insurance Company Limited. Headquartered in Shanghai, HSBC Life Insurance Company Limited offers a comprehensive range of insurance solutions covering annuity, whole life, critical illness and unit-linked insurance products.

Business disposals

In 2021 and 2022, we accelerated the pace of execution on our strategic ambition to be the preferred international financial partner for our clients with the announcements of the planned sales of our retail banking businesses in France and branch operations in Greece, as well as the exit of domestic mass market retail banking in the US. The planned sales in France and Greece are expected to complete in 2023, and the US exit has since completed.

US retail banking business

On 26 May 2021, we announced our intention to exit our US mass market retail banking business, including our Personal and Advance propositions, as well as retail business banking, and rebranding approximately 20 to 25 of our retail branches into international wealth centres to serve our Premier and Jade customers. In conjunction with the execution of this strategy, HSBC Bank USA, N.A. entered into definitive sale agreements with Citizens Bank and Cathay Bank to sell 90 of our retail branches along with substantially all residential mortgage, unsecured and retail business banking loans and all deposits in our branch network not associated with our Premier, Jade and Private Banking customers. As a result of entering into these sale agreements, assets and liabilities related to the agreements were transferred to held for sale during the second quarter of 2021.

In February 2022, we completed the sale of the branch disposal group and recognised a net gain on sale of approximately $0.1bn, which is subject to customary closing adjustments. Included in the sale were $2.1bn of loans and advances to customers and $6.9bn of customer accounts. Certain assets under management associated with our mass market retail banking operations were also transferred. The remaining branches not sold or rebranded have been closed.

Planned sale of the retail banking business in France

HSBC Continental Europe signed a framework agreement with Promontoria MMB SAS ('My Money Group') and its subsidiary Banque des Caraïbes SA, regarding the planned sale of HSBC Continental Europe's retail banking business in France.

The sale, which is subject to regulatory approvals and the satisfaction of other relevant conditions, includes: HSBC Continental Europe's French retail banking business; the Crédit Commercial de France ('CCF') brand; and HSBC Continental Europe's 100% ownership interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement. The disposal group is currently expected to be classified as held for sale in 2H22 and the sale would generate an estimated loss before tax including related transaction costs for the Group of $2.1bn, together with an additional $0.5bn impairment of goodwill.

At 30 June 2022, a deferred tax liability of $0.4bn was recognised as a consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible in the French tax return in 2021 but will be accounted for when the disposal group is classified as held for sale in accordance with IFRS 5, at which time the deferred tax liability will reverse. The vast majority of the estimated loss for the write-down of the disposal group to fair value less costs to sell will also be recognised when it is classified as held for sale. Subsequently, the disposal group classified as held for sale will be remeasured at the lower of carrying amount and fair value less costs to sell at each reporting period. Any remaining gain or loss not previously recognised will be recognised at closing, which is currently anticipated to be in 2023.

At 30 June 2022, the disposal group included total assets of $25.6bn.

Planned sale of the retail banking business in Greece

On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta Bank SA. Completion of the transaction is subject to regulatory approval and is currently expected to occur in the first half of 2023. At 30 June 2022, the disposal group included $0.4bn of loans and advances to customers and $2.3bn of customer accounts which met the criteria to be classified as held for sale. In 2Q22, we recognised a loss of $0.1bn, including goodwill impairment, upon reclassification as held for sale in accordance with IFRS 5.

Planned sale of the business in Russia

Following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) has entered into an agreement to sell its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company), subject to regulatory approvals.

 
16  Events after the balance sheet date 
    ----------------------------------- 
 

In its assessment of events after the balance sheet date, HSBC has considered and concluded that no material events have occurred resulting in adjustments to the financial statements.

An interim dividend for the 2022 half-year in respect of the financial year ending 31 December 2022 was approved by the Directors on 1 August 2022, as described in Note 3.

 
17  Interim Report 2022 and statutory accounts 
    ------------------------------------------ 
 

The information in this Interim Report 2022 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This Interim Report 2022 was approved by the Board of Directors on 1 August 2022. The statutory accounts of HSBC Holdings plc for the year ended 31 December 2021 have been delivered to the Registrar of Companies in England and Wales in accordance with section 447 of the Companies Act 2006. The Group's auditor PricewaterhouseCoopers LLP ('PwC') has reported on those accounts. Its report was unqualified, did not include a reference to any matters to which PwC drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 
Shareholder information 
                                  Page                                            Page 
1  Directors' interests            131    10  Earnings release                     135 
   -----------------------------  ----        ----------------------------------  ---- 
2  Employee share plans            133    11  Final results                        135 
   -----------------------------  ----        ----------------------------------  ---- 
3  Share buy-back                  133    12  Corporate governance                 135 
   -----------------------------  ----        ----------------------------------  ---- 
4  Other equity instruments        134    13  Changes in Directors' details        136 
   -----------------------------  ----        ----------------------------------  ---- 
   Notifiable interests in share 
5   capital                        134    14  Going concern basis                  136 
   -----------------------------  ----        ----------------------------------  ---- 
   Dealings in HSBC Holdings                  Telephone and online share dealing 
6   listed securities              134    15   service                             136 
   -----------------------------  ----        ----------------------------------  ---- 
   Interim dividend for the 2022 
7   half-year                      134    16  Stock symbols                        136 
   -----------------------------  ----        ----------------------------------  ---- 
8  Dividend on preference shares   135    17 
   -----------------------------  ----        ----------------------------------  ---- 
                                              Copies of the Interim Report 
   Proposed interim dividends                  2022 and shareholder enquiries 
9   for 2022                       135         and communications                  136 
   -----------------------------  ----        ----------------------------------  ---- 
 
 
 
1  Directors' interests 
   -------------------- 
 

According to the register of Directors' interests maintained by HSBC Holdings pursuant to section 352 of the Securities and Futures Ordinance of Hong Kong, at 30 June 2022 the Directors of HSBC Holdings had the following interests, all beneficial unless otherwise stated, in the shares or debentures of HSBC Holdings and its associated corporations:

 
Directors' interests - shares and debentures 
                                          At 1                                                 At 30 Jun 2022 or date of retirement, 
                                      Jan 2022                                                               if earlier 
                                       or date 
                               of appointment, 
                                      if later 
 
                                         Total 
                                     interests 
                    --------------------------  ------------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                 Child 
                                                                                                 under                     Jointly 
                                                                Beneficial                          18                with another                                             Total 
                                                                     owner                   or spouse                      person                     Trustee             interests 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
HSBC Holdings 
ordinary shares 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Geraldine 
 Buckingham(1) 
 (appointed 
 to the Board on 1 
 May 2022)                                   -                      15,000                           -                           -                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Rachel Duan(1)                               -                      15,000                           -                           -                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Dame Carolyn 
 Fairbairn                                   -                      15,000                           -                           -                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
James Forese(1)                        115,000                     115,000                           -                           -                           -               115,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Steven 
 Guggenheimer(1)                        15,000                           -                           -                      15,000                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Irene Lee (retired 
 on 29 Apr 
 2022)                                  15,000                      15,000                           -                           -                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
José Antonio 
 Meade 
 Kuribreña(1)                      15,000                      15,000                           -                           -                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Eileen Murray(1)                        75,000                      75,000                           -                           -                           -                75,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
David Nish                              50,000                           -                      50,000                           -                           -                50,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Noel Quinn(2)                        1,131,278                   1,305,310                           -                           -                           -             1,305,310 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Ewen Stevenson(2)                      838,154                     989,735                           -                           -                           -               989,735 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Jackson Tai(1,3)                        66,515                      32,800                      11,965                      21,750                           -                66,515 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Mark Tucker                            307,352                     307,352                           -                           -                           -               307,352 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
Pauline van der 
 Meer Mohr 
 (retired 
 on 29 Apr 2022)                        15,000                      15,000                           -                           -                           -                15,000 
------------------  --------------------------  --------------------------  --------------------------  --------------------------  --------------------------  -------------------- 
 

1 Geraldine Buckingham has an interest in 3,000, Rachel Duan has an interest in 3,000, James Forese has an interest in 23,000, Steven Guggenheimer has an interest in 3,000, José Antonio Meade Kuribreña has an interest in 3,000, Eileen Murray has an interest in 15,000 and Jackson Tai has an interest in 13,303 listed American Depositary Shares ('ADSs'), which are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.

2 Executive Directors' other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC Share Plan 2011 are set out on the following pages. At 30 June 2022, the aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee share plans, were: Noel Quinn - 3,822,453 and Ewen Stevenson - 3,060,950. Each Director's total interests represents approximately 0.02% of the shares in issue and 0.02% of the shares in issue excluding treasury shares.

3 Jackson Tai's holding includes a non-beneficial interest in 11,965 shares of which he is custodian.

HSBC Holdings Savings-Related Share Option Plan (UK)

Currently no executive Directors participate in a Savings-Related Share Option Plan. For further details on the Savings-Related Share Option Plan, see page 133.

HSBC Share Plan 2011

Conditional awards of deferred shares

Vesting of deferred share awards is normally subject to the Director remaining an employee on the vesting date. The awards may vest at an earlier date in certain circumstances. Under the Securities and Futures Ordinance of Hong Kong, interests in conditional share awards are categorised as the interests of the beneficial owner.

 
Deferred share awards 
                                                                                                                HSBC Holdings ordinary shares 
                                       -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 
                                                                                            Awards made                                               Awards vested 
                                                             Awards                            during                                                     during                                                 Awards 
                                                               held                          the period                                                 the period                                                 held 
                                                                 at                        to 30 Jun 2022                                             to 30 Jun 2022                                                 at 
                                                                     ---------------------------------------------------------  --------------------------------------------------------- 
                              Year in                         1 Jan                    Number                         Monetary                    Number                         Monetary                        30 Jun 
                                which                          2022                                                      value                                                      value                          2022 
                               awards 
                  Date of         may 
                    award        vest 
                                                                                                                        GBP000                                                     GBP000 
  27/2/2017(1)              2020-2024                        53,328                         -                                -                    18,229                               89                     36,565(2) 
 -------------  ---------------------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
  26/2/2018(3)              2021-2025                        86,019                         -                                -                    21,504                              103                        64,515 
 -------------  ---------------------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
  25/2/2019(4)              2022-2026                       140,585                         -                                -                    28,117                              137                       112,468 
 -------------  ---------------------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
  24/2/2020(5)              2023-2027                       201,702                         -                                -                         -                                -                       201,702 
 -------------  ---------------------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
Noel Quinn   28/2/2022(6)        2022                             -                   147,769                              795                   147,769                              795                             - 
----------  -------------  ----------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
  28/5/2019(7)              2020-2025                       264,755                         -                                -                    74,759                              365                       189,996 
 -------------  ---------------------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
  28/5/2019(8)              2022-2026                       241,988                         -                                -                    48,397                              236                       193,591 
 -------------  ---------------------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
Ewen 
 Stevenson   28/2/2022(6)        2022                             -                    90,892                              489                    90,892                              489                             - 
----------  -------------  ----------  ----------------------------  ------------------------  -------------------------------  ------------------------  -------------------------------  ---------------------------- 
 

1 At the date of the award (27 February 2017), the market value per share was GBP6.5030. The award will vest in five equal annual tranches. The third tranche vested on 14 March 2022 at a market value of GBP4.8772. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date.

   2   Includes any additional shares arising from dividend equivalents. 

3 At the date of the award (26 February 2018), the market value per share was GBP7.2340. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The second tranche vested on 15 March 2022 at a market value of GBP4.7884.

4 At the date of the award (25 February 2019), the market value per share was GBP6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The first tranche vested on 14 March 2022 at a market value of GBP4.8772.

5 At the date of the award (24 February 2020), the market value per share was GBP5.6220. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches commencing in March 2023.

6 The non-deferred award vested immediately on 28 February 2022 and was based on the market value of GBP5.3800. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.

7 The award was granted on 28 May 2019 using a market value per share of GBP6.6430 as at 30 November 2018. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for up to one year from the vesting date. The third tranche vested on 14 March 2022 at a market value of GBP4.8772. The award replaced the 2015 to 2018 long-term incentive ('LTI') plans forfeited by the Royal Bank of Scotland Group plc ('RBS') (now renamed as NatWest Group plc ('NatWest')), and is subject to any performance adjustments assessed and disclosed in the relevant annual report and accounts of NatWest.

8 The award was granted on 28 May 2019 using a market value per share of GBP6.2350 as at 22 February 2019. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for up to one year from the vesting date. The award will vest in five annual tranches. The first tranche vested on 14 March 2022 at a market value of GBP4.8772. The award is in respect of the 2018 performance year granted based on Ewen Stevenson's maximum opportunity under NatWest's policy and the outcome of the 2018 scorecard as disclosed in NatWest's Annual Report and Accounts 2018. The number of shares that vest may be adjusted based on any 'pre-vest performance test' assessed and disclosed in NatWest's Annual Report and Accounts.

8

Long-term incentive awards

The long-term incentive award is an award of shares with a three-year performance period. At the end of this performance period and subject to the award terms, the number of shares that vest will be determined based on an assessment against financial and non-financial measures. Subject to that assessment, the shares will vest in five equal annual instalments. On vesting, awards are subject to a retention period of up to one year. Under the Securities and Futures Ordinance of Hong Kong, interests in share awards are categorised as interests of the beneficial owner.

 
Long-term incentive awards 
                                                                                           HSBC Holdings ordinary shares 
                                   ---------------------------------------------------------------------------------------------------------------------------------------------- 
                                                                              Awards made                                        Awards vested 
                                                   Awards                        during                                              during                                Awards 
                                                     held                      the period                                          the period                                held 
                                                       at                    to 30 Jun 2022                                      to 30 Jun 2022                                at 
                                                           --------------------------------------------------  -------------------------------------------------- 
                             Year                   1 Jan                                            Monetary                                            Monetary          30 Jun 
                         in which                    2022                                               value                                               value            2022 
                 Date      awards 
                   of         may 
             award(1)        vest 
                                                                        Number                         GBP000               Number                         GBP000 
     1 Mar 
      2021              2024-2028               1,118,554                    -                              -                    -                              -       1,118,554 
 ---------  ---------------------  ----------------------  -------------------  -----------------------------  -------------------  -----------------------------  -------------- 
               28 Feb 
Noel Quinn       2022   2025-2029                       -              983,339                          5,290                                                             983,339 
----------  ---------  ----------  ----------------------  -------------------  -----------------------------  -------------------  -----------------------------  -------------- 
    24 Feb 
      2020              2023-2027                 476,757                    -                              -                    -                              -         476,757 
 ---------  ---------------------  ----------------------  -------------------  -----------------------------  -------------------  -----------------------------  -------------- 
     1 Mar 
      2021              2024-2028                 637,197                    -                              -                    -                              -         637,197 
 ---------  ---------------------  ----------------------  -------------------  -----------------------------  -------------------  -----------------------------  -------------- 
Ewen           28 Feb 
 Stevenson       2022   2025-2029                       -              573,674                          3,086                                                             573,674 
----------  ---------  ----------  ----------------------  -------------------  -----------------------------  -------------------  -----------------------------  -------------- 
 

1 Awards made on 24 February 2020 were based on the market value of GBP5.6220, awards made on 1 March 2021 were based on the market value of GBP4.2620, and awards made on 28 February 2022 were based on the market value of GBP5.3800.

No Directors held any short position (as defined in the Securities and Futures Ordinance of Hong Kong) in the shares or debentures of HSBC Holdings and its associated corporations. Save as stated in the tables above, none of the Directors had an interest in any shares or debentures of HSBC Holdings or any associates at the beginning or at the end of the period, and none of the Directors or members of their immediate families were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the period.

There have been no changes in the shares or debentures of the Directors from 30 June 2022 to the date of this report.

 
2  Employee share plans 
   -------------------- 
 

Share options and discretionary awards of shares are granted under HSBC share plans to help align the interests of employees with those of shareholders. The following are particulars of outstanding share options, including those held by employees working under employment contracts that are regarded as 'continuous contracts' for the purposes of the Hong Kong Employment Ordinance. The options were granted at nil consideration. No options have been granted to substantial shareholders, suppliers of goods or services, or in excess of the individual limit for each share plan. No options were cancelled by HSBC during the period to 30 June 2022.

A summary of the total number of options granted, exercised or lapsed during the period is shown in the table below. Particulars of options held by Directors of HSBC Holdings are set out on page 131. Further details required to be disclosed pursuant to Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited are available on our website at www.hsbc.com, and on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. Copies may be obtained upon request from the Group Company Secretary and Chief Governance Officer, 8 Canada Square, London E14 5HQ.

All-employee share plans

The HSBC Holdings Savings-Related Share Option Plan (UK) is an all-employee share option plan under which eligible employees have been granted options to acquire HSBC Holdings ordinary shares. The HSBC International Employee Share Purchase Plan was introduced in 2013 and now includes employees based in 28 jurisdictions, although no options are granted under this plan. During 2021, approximately 190,000 employees were offered participation in these plans.

For options granted under the HSBC Holdings Savings-Related Share Option Plan (UK), employees may make contributions of up to GBP500 each month over a period of three or five years. The contributions may be used within six months following the third or fifth anniversary of the commencement of the relevant savings contract, at the employee's election, to exercise the options. Alternatively, the employee may elect to have the savings, plus (where applicable) any interest or bonus, repaid in cash. In the case of redundancy, ceasing employment on grounds of injury or disability, retirement, death, the transfer of the employing business to another party, or a change of control of the employing company, options may be exercised before completion of the relevant savings contract. In certain circumstances, the exercise period of options awarded under the all-employee share option plans may be extended; for example, on the death of a participant, the executors may exercise the option up to six months beyond the normal exercise period or, if a participant has chosen to defer up to 12 contributions, the start of the normal exercise period will be delayed by up to 12 months.

Under the HSBC Holdings Savings-Related Share Option Plan (UK), the option exercise price is determined by reference to the average market value of the HSBC Holdings ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20%. The HSBC Holdings Savings-Related Share Option Plan (UK) has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.

 
HSBC Holdings all-employee share option plan 
                                                                                             HSBC Holdings ordinary share options 
                                                        -------------------------------------------------------------------------------------------------------------- 
    Dates of          Exercise           Usually 
      award             price          exercisable 
----------------  ----------------  ------------------  ----------------  ------------------------------  --------------------  --------------------  ---------------- 
   from       to     from       to   from           to             1 Jan                         Granted             Exercised                Lapsed            30 Jun 
                                                                    2022                       in period          in period(1)             in period              2022 
-------  -------  -------  -------  -----  -----------  ----------------  ------------------------------  --------------------  --------------------  ---------------- 
HSBC Savings-Related Share Option 
 Plan (UK) 
                                                        ----------------  ------------------------------  --------------------  --------------------  ---------------- 
          22 Sep    (GBP)    (GBP) 
 22 Sep                             1 Nov     30 April 
   2015     2021   2.6270   5.9640   2020         2027       123,196,850                               -             1,533,755             8,078,210       113,584,885 
-------  -------  -------  -------  -----  -----------  ----------------  ------------------------------  --------------------  --------------------  ---------------- 
 

1 The weighted average closing price of the shares immediately before the dates on which options were exercised was GBP5.1506.

1

 
3  Share buy-back 
   -------------- 
 

On 20 April 2022, HSBC Holdings completed a share buy-back programme of its ordinary shares of $0.50 each, which commenced on 26 October 2021. A total of 311,832,807 ordinary shares were repurchased for cancellation at a volume weighted average price of GBP4.8128 per ordinary share for a total consideration of approximately $2bn. On 3 May 2022, HSBC Holdings commenced a new share buy-back to purchase its ordinary shares up to a maximum consideration of $1.0bn. This programme concluded on 28 July 2022. In addition to repurchasing shares on UK trading venues, the second buy-back also purchased shares on The Stock Exchange of Hong Kong Limited. The purpose of the buy-back programmes is to reduce HSBC's number of outstanding ordinary shares.

As at 30 June 2022, 243,996,444 ordinary shares had been purchased and cancelled from the UK register, representing a nominal value of $121,998,222 and an aggregate consideration paid by HSBC of GBP1,247,447,284. The shares cancelled represented 1.20% of the shares in issue and 1.22% of the shares in issue, excluding treasury shares.

As at 30 June 2022, 36,827,200 ordinary shares had been purchased from the Hong Kong register, representing a nominal value of $18,413,600 and an aggregate consideration paid by HSBC of HK$1,873,178,838. The shares purchased represented 0.181% of the shares in issue and 0.184% of the shares in issue, excluding treasury shares. The shares purchased are cancelled in batches, with 20,946,000 shares cancelled as at 30 June 2022.

The table that follows outlines details of the shares purchased and cancelled on a monthly basis during 2022.

 
Share buy-back 
                                                                             Highest price                                   Lowest price                              Average price 
                                                                                  paid per                                       paid per                                   paid per                          Aggregate 
                                                                                     share                                          share                                      share                         price paid 
        ----------------------------------- 
                                  Number of                                            GBP                                            GBP                                        GBP                                GBP 
                           shares purchased 
                              and cancelled 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
Jan 
 2022                            25,382,519                                           5.27                                         4.4555                                     4.9784                        126,363,981 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
Feb                              19,064,151                                          5.551                                          5.153                                     5.3395                        101,793,492 
2022 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
Mar                              72,125,062                                          5.404                                         4.4935                                     4.9129                        354,343,000 
2022 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
Apr                              74,894,361                                           5.41                                          5.146                                     5.2608                        394,002,122 
2022 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
May                              21,447,447                                           5.27                                           4.78                                     4.9911                        107,047,291 
2022 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
Jun                              31,082,904                                          5.496                                          4.978                                     5.2729                        163,897,398 
2022 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
Total                           243,996,444                                                                                                                                                               1,247,447,284 
------  -----------------------------------  ---------------------------------------------  ---------------------------------------------  -----------------------------------------  --------------------------------- 
 
 
Share buy-back (continued) 
                                                                               Highest price                                   Lowest price                            Average price 
                                                                                    paid per                                       paid per                                 paid per                          Aggregate 
                                                                                       share                                          share                                    share                         price paid 
        ------------------------------------- 
                                    Number of                                            HK$                                            HK$                                      HK$                                HK$ 
                             shares purchased 
------  -------------------------------------  ---------------------------------------------  ---------------------------------------------  ---------------------------------------  --------------------------------- 
May 
 2022                               5,244,800                                          52.85                                           46.5                                  50.8537                        266,717,438 
------  -------------------------------------  ---------------------------------------------  ---------------------------------------------  ---------------------------------------  --------------------------------- 
Jun                                31,582,400                                           52.7                                          48.25                                  50.8657                      1,606,461,400 
2022 
------  -------------------------------------  ---------------------------------------------  ---------------------------------------------  ---------------------------------------  --------------------------------- 
Total                              36,827,200                                                                                                                                                             1,873,178,838 
------  -------------------------------------  ---------------------------------------------  ---------------------------------------------  ---------------------------------------  --------------------------------- 
 
 
4  Other equity instruments 
   ------------------------ 
 

Additional tier 1 capital - contingent convertible securities

HSBC Holdings continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1 capital securities on an end point basis. These securities are marketed principally and subsequently allotted to corporate investors and fund managers. The net proceeds of the issuances are typically used for HSBC Holdings' general corporate purposes and to further strengthen its capital base to meet requirements under CRR II. These securities bear a fixed rate of interest until their initial call dates. After the initial call dates, if they are not redeemed, the securities will bear interest at rates fixed periodically in advance for five-year periods based on credit spreads, fixed at issuance, above prevailing market rates. Interest on the contingent convertible securities will be due and payable only at the sole discretion of HSBC Holdings, and HSBC Holdings has sole and absolute discretion at all times to cancel for any reason (in whole or part) any interest payment that would otherwise be payable on any payment date. Distributions will not be paid if they are prohibited under UK banking regulations or if the Group has insufficient reserves or fails to meet the solvency conditions defined in the securities' terms.

The contingent convertible securities are undated and are repayable at the option of HSBC Holdings in whole typically at the initial call date or on any fifth anniversary after this date. In addition, the securities are repayable at the option of HSBC Holdings in whole for certain regulatory or tax reasons. Any repayments require the prior consent of the PRA. These securities rank pari passu with HSBC Holdings' sterling preference share and therefore rank ahead of ordinary shares. The contingent convertible securities will be converted into fully paid ordinary shares of HSBC Holdings at a predetermined price, should HSBC's consolidated non-transitional CET1 ratio fall below 7.0%. Therefore, in accordance with the terms of the securities, if HSBC's non-transitional CET1 ratio breaches the 7.0% trigger, the securities will convert into ordinary shares at the fixed contractual conversion prices in the issuance currencies of the relevant securities, equivalent to GBP2.70 at the prevailing rate of exchange on the issuance date, subject to anti-dilution adjustments. During the first half of 2022, HSBC issued no contingent convertible securities.

 
5  Notifiable interests in share capital 
   ------------------------------------- 
 

Between 1 January 2022 and 30 June 2022, HSBC Holdings did not receive any notification of major holdings of voting rights pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules. No further notifications had been received between 30 June 2022 and 20 July 2022.

Previous notifications received are as follows:

-- BlackRock, Inc. gave notice on 3 March 2020 that on 2 March 2020 it had the following: an indirect interest in HSBC Holdings ordinary shares of 1,235,558,490; qualifying financial instruments with 7,294,459 voting rights that may be acquired if the instruments are exercised or converted; and financial instruments with a similar economic effect to qualifying financial instruments, which refer to 2,441,397 voting rights, representing 6.07%, 0.03% and 0.01%, respectively, of the total voting rights at 2 March 2020.

-- Ping An Asset Management Co., Ltd. gave notice on 6 December 2017 that on 4 December 2017 it had an indirect interest in HSBC Holdings ordinary shares of 1,007,946,172, representing 5.04% of the total voting rights at that date.

At 30 June 2022, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong:

-- BlackRock, Inc. gave notice on 9 March 2022 that on 4 March 2022 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,701,656,169 shares and a short position of 19,262,061 shares, representing 8.27% and 0.09%, respectively, of the ordinary shares in issue at that date.

-- Ping An Asset Management Co., Ltd, gave notice on 25 September 2020 that on 23 September 2020 it had a long position of 1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00% of the ordinary shares in issue at that date.

--

 
6  Dealings in HSBC Holdings listed securities 
   ------------------------------------------- 
 

HSBC has policies and procedures that, except where permitted by statute and regulation, prohibit it undertaking specified transactions in respect of its securities listed on The Stock Exchange of Hong Kong Limited ('HKEx'). Except for dealings as intermediaries or as trustees by subsidiaries of HSBC Holdings, or in relation to the HSBC Holdings ordinary share buy-back, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on HKEx during the half-year ended 30 June 2022.

 
7  Interim dividend for the 2022 half-year 
   --------------------------------------- 
 

On 1 August 2022, the Directors approved an interim dividend for the 2022 half-year of $0.09 per ordinary share in respect of the financial year ending 31 December 2022. The dividend will be payable on 29 September 2022 to holders on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 19 August 2022.

The dividend will be payable in US dollars, or in pounds sterling or Hong Kong dollars at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 19 September 2022, or a combination of these currencies. Particulars of these arrangements will be sent to shareholders on or about 26 August 2022 and changes to currency elections must be received by 15 September 2022. The ordinary shares in London, Hong Kong and Bermuda, and American Depositary Shares ('ADSs') in New York will be quoted ex-dividend on 18 August 2022. As announced on 23 February 2021, the Group has decided to discontinue the scrip dividend option.

The dividend will be payable on ADSs, each of which represents five ordinary shares, on 29 September 2022 to holders of record on 19 August 2022. The dividend of $0.45 per ADS will be payable by the depositary in US dollars. Alternatively, the cash dividend may be invested in additional ADSs by participants in the dividend reinvestment plan operated by the depositary. Elections must be received by 9 September 2022.

Any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register but who has not lodged the share transfer with the Principal Registrar in the UK, Hong Kong Overseas Branch Registrar or Bermuda Overseas Branch registrar should do so before 4.00pm local time on 19 August 2022 in order to receive the dividend.

Ordinary shares may not be removed from or transferred to the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 19 August 2022. Any person wishing to remove ordinary shares to or from each register must do so before 4.00pm local time on 18 August 2022.

Transfer of ADSs must be lodged with the depositary by 11.00am on 19 August 2022 in order to receive the dividend. ADS holders who receive a cash dividend will be charged a fee, which will be deducted by the depositary, of $0.005 per ADS per cash dividend.

 
8  Dividend on preference share 
   ---------------------------- 
 

A quarterly dividend of GBP0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2022 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has approved a quarterly dividend to be payable on 15 September 2022 to holders of record on 31 August 2022.

 
9  Proposed interim dividends for 2022 
   ----------------------------------- 
 

We announced on 22 February 2022 that the Group was not intending to pay quarterly dividends during 2022. We now expect to revert to quarterly dividends in 2023. The Board has adopted a policy designed to provide sustainable cash dividends, while retaining the flexibility to invest and grow the business in the future, supplemented by additional shareholder distributions, if appropriate. Our target dividend payout ratio is 40% to 55% of reported earnings per ordinary share ('EPS'), with the flexibility to adjust EPS for non-cash significant items. Given our current forecast returns trajectory, we now expect a dividend payout ratio of around 50% for 2023 and 2024. In line with our dividend policy, in 2022 we intend to exclude the $1.8bn gain following the recognition of a deferred tax asset when calculating our dividend payout ratio. As previously disclosed, we also intend to exclude the 2H22 forecast loss on the sale of our retail banking operations in France when calculating our dividend payout ratio.

Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, pounds sterling and Hong Kong dollars.

 
10  Earnings release 
    ---------------- 
 

An earnings release for the three-month period ending 30 September 2022 is expected to be issued on 25 October 2022.

 
11  Final results 
    ------------- 
 

The results for the year to 31 December 2022 are expected to be announced on 21 February 2023.

 
12  Corporate governance 
    -------------------- 
 

We are subject to corporate governance requirements in both the UK and Hong Kong. Throughout the six months ended 30 June 2022, we complied with the applicable provisions of the UK Corporate Governance Code, save to the extent referred to in the next paragraph, and also the requirements of the Hong Kong Corporate Governance Code. The UK Corporate Governance Code is available at www.frc.org.uk and the Hong Kong Corporate Governance Code is available at www.hkex.com.hk.

Dame Carolyn Fairbairn was appointed as Chair to the Group Remuneration Committee on 29 April 2022. In approving Dame Carolyn Fairbairn's appointment, the Board considered the UK Corporate Governance Code expectation that the Chair has served at least 12 months as a member on the committee before assuming the position of Chair. Given her previous experience as both a member and chair of the remuneration committees of other UK listed companies, the Board approved the appointment of Dame Carolyn Fairbairn as Chair.

Under the Hong Kong Code, the Group Audit Committee should be responsible for the oversight of all risk management and internal control systems, unless expressly addressed by a separate risk committee. Our Group Risk Committee is responsible for oversight of internal control, other than internal financial controls, and risk management systems.

The Board has codified obligations for transactions in Group securities in accordance with the requirements of the Market Abuse Regulation and the rules governing the listing of securities on the HKEx, save that the HKEx has granted waivers from strict compliance with the rules that take into account accepted practices in the UK, particularly in respect of employee share plans.

Following specific enquiries all Directors have confirmed that they have complied with their obligations in respect of transacting in Group securities throughout the period.

There have been no material changes to the information disclosed in the Annual Report and Accounts 2021 in respect of the remuneration of employees, remuneration policies, bonus and share option plans and training schemes. Details of the number of employees are provided on page 33 of the Interim Report 2022.

 
13  Changes in Directors' details 
    ----------------------------- 
 

Changes in current Directors' details since the date of the Annual Report and Accounts 2021, which are required to be disclosed pursuant to Rule 13.51(2) and Rule 13.51B(1) of the Hong Kong Listing Rules, are set out below.

Geraldine Buckingham

Appointed to the Board and the Nomination & Corporate Governance Committee on 1 May 2022 and appointed to the Group Remuneration Committee and the Group Risk Committee on 1 June 2022.

Rachel Duan

Appointed to the Group Audit Committee on 1 June 2022.

Dame Carolyn Fairbairn

Appointed as Chair to the Group Remuneration Committee on 29 April 2022.

James Anthony Forese

Stepped down from the Group Audit Committee on 1 June 2022.

Irene Lee

Retired from the Board and the Nomination & Corporate Governance Committee on 29 April 2022.

Eileen K Murray

Appointed to the Group Audit Committee and stepped down from the Group Risk Committee on 1 June 2022.

José Antonio Meade Kuribreña

Appointed as Independent non-executive Director with responsibility for workforce engagement and stepped down from the Group Risk Committee on 1 June 2022.

Pauline van der Meer Mohr

Retired from the Board, Group Audit Committee, Nomination & Corporate Governance Committee and Group Remuneration Committee on 29 April 2022.

 
14  Going concern basis 
    ------------------- 
 

As mentioned in Note 1 'Basis of preparation and significant accounting policies' on page 110, the financial statements are prepared on a going concern basis as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors 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 inflationary pressures and uncertainty that the global Covid-19 pandemic has had on HSBC's operations, as well as the potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.

In particular, HSBC's principal activities, business and operating models, strategic direction, and top and emerging risks are addressed in the Overview section. A financial summary, including a review of the consolidated income statement and consolidated balance sheet, is provided in the 'Interim management report' section. HSBC's objectives, policies and processes for managing credit, liquidity and market risk are described in the 'Risk review' section of the Annual Report and Accounts 2021. HSBC's approach to capital management and allocation is described in the 'Treasury risk' section of the Annual Report and Accounts 2021.

 
15  Telephone and online share dealing service 
    ------------------------------------------ 
 

For shareholders on the Principal Register who are resident in the UK, with a UK postal address, and who hold an HSBC Bank plc personal current account, the HSBC InvestDirect share dealing service is available for buying and selling HSBC Holdings plc ordinary shares. Details are available from: HSBC InvestDirect, Forum 1, Parkway, Whiteley PO15 7PA; or UK telephone: +44 (0) 3456 080848, or from an overseas telephone: +44 (0) 1226 261090; or website: www.hsbc.co.uk/investments/products-and-services/invest-direct.

 
16  Stock symbols 
    ------------- 
 

HSBC Holdings plc ordinary shares trade under the following stock symbols:

 
London Stock Exchange           HSBA 
Hong Kong Stock Exchange        5 
New York Stock Exchange (ADS)   HSBC 
Bermuda Stock Exchange          HSBC.BH 
 
 
 
17  Copies of the Interim Report 2022 and shareholder enquiries and 
     communications 
    --------------------------------------------------------------- 
 

Further copies of the Interim Report 2022 may be obtained from Global Communications, HSBC Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; from Communications (Asia), The Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; or from US Communications, HSBC Bank USA, N.A., 1 West 39th Street, 9th Floor, New York, NY 10018, USA. The Interim Report 2022 may also be downloaded from the HSBC website, www.hsbc.com.

Shareholders may at any time choose to receive corporate communications in printed form or to receive notifications of their availability on HSBC's website. To receive notifications of the availability of a corporate communication on HSBC's website by email, or to revoke or amend an instruction to receive such notifications by email, go to www.hsbc.com/ecomms. If you provide an email address to receive electronic communications from HSBC, we will also send notifications of any future dividend entitlements by email. If you received a notification of the availability of this document on HSBC's website and would like to receive a printed copy or, if you would like to receive future corporate communications in printed form, please write or send an email (quoting your shareholder reference number) to the appropriate Registrar at the address given below. Printed copies will be provided without charge.

Any enquiries relating to your shareholdings on the share register (for example transfers of shares, change of name or address, lost share certificates or dividend cheques) should be sent to the Registrar at the address given below. The Registrars offer an online facility, Investor Centre, which enables shareholders to manage their shareholding electronically.

 
                                        Hong Kong Overseas Branch               Bermuda Overseas Branch 
Principal Register                       Register                                Register 
Computershare Investor                  Computershare Hong Kong                 Investor Relations Team 
 Services PLC                            Investor                                HSBC Bank Bermuda Limited 
 The Pavilions                           Services Limited                        37 Front Street 
 Bridgwater Road                         Rooms 1712-1716, 17th                   Hamilton HM 11 
 Bristol BS99 6ZZ                        Floor                                   Bermuda 
 United Kingdom                          Hopewell Centre 
                                         183 Queen's Road East 
                                         Hong Kong 
Telephone: +44 (0) 370                  Telephone: +852 2862 8555               Telephone: +1 441 299 
702 0137                                 Email: hsbc.ecom@computershare.com.hk  6737 
Email: web.queries@computershare.co.uk   Web: www.investorcentre.com/hk         Email: 
Web:                                                                            hbbm.shareholder.services@hsbc.bm 
www.investorcentre.co.uk/contactus                                              Web: www.investorcentre.com/bm 
 

Any enquiries relating to ADSs should be sent to the depositary at:

 
The Bank of New York Mellon  Telephone (US): +1 877 283 5786 
 Shareowner Services          Telephone (international): +1 201 680 6825 
 PO Box 505000                Email: shrrelations@cpushareownerservices.com 
 Louisville, KY 40233-5000    Web: www.mybnymdr.com 
 USA 
 

A Chinese translation of this and future documents may be obtained on request from the Registrar. Please also contact the Registrar if you have received a Chinese translation of this document and do not wish to receive such translations in future.

Persons whose shares are held on their behalf by another person may have been nominated to receive communications from HSBC pursuant to section 146 of the UK Companies Act 2006 ('nominated person'). The main point of contact for a nominated person remains the registered shareholder (for example your stockbroker, investment manager, custodian or other person who manages the investment on your behalf). Any changes or queries relating to a nominated person's personal details and holding (including any administration thereof) must continue to be directed to the registered shareholder and not HSBC's Registrar. The only exception is where HSBC, in exercising one of its powers under the UK Companies Act 2006, writes to nominated persons directly for a response.

 
Cautionary statement regarding 
 forward- 
 looking statements 
 

This Interim Report 2022 contains certain forward-looking statements with respect to HSBC's: financial condition; results of operations and business, including the strategic priorities; financial, investment and capital targets; and ESG targets, commitments and ambitions described herein.

Statements that are not historical facts, including statements about HSBC's beliefs and expectations, are forward-looking statements. Words such as 'may', 'will', 'should', 'expects', 'targets', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', or the negative thereof, other variations thereon or similar expressions are intended to identify forward-looking statements. These statements are based on current plans, information, data, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.

Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC's Directors, officers or employees to third parties, including financial analysts.

Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. These include, but are not limited to:

-- changes in general economic conditions in the markets in which we operate, such as new, continuing or deepening recessions, inflationary pressures and fluctuations in employment and creditworthy customers beyond those factored into consensus forecasts (including, without limitation, as a result of the Russia-Ukraine war and the Covid-19 pandemic); the Covid-19 pandemic and its impact on global economies could have a material adverse effect on (among other things) our financial condition, results of operations, prospects, liquidity, capital position and credit ratings; deviations from the market and economic assumptions that form the basis for our ECL measurements (including, without limitation, as a result of the Russia-Ukraine war, inflationary pressures and the Covid-19 pandemic); potential changes in HSBC's dividend policy; changes in foreign exchange rates and interest rates, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding or capital markets, which may affect our ability to meet our obligations under financing facilities or to fund new loans, investments and businesses; geopolitical tensions or diplomatic developments producing social instability or legal uncertainty, such as the Russia-Ukraine war and the related imposition of sanctions, the US's approach to strategic competition with China, supply chain restrictions, claims of human rights violations, diplomatic tensions, including between China and the US, the UK, the EU, Australia and India and other countries, and developments in Hong Kong and Taiwan, alongside other potential areas of tension, which may affect HSBC by creating regulatory, reputational and market risks; the efficacy of government, customer and HSBC's actions in managing and mitigating ESG risks, in particular climate risk, nature-related risks and human rights risks, and in supporting the global transition to net zero carbon emissions, each of which can impact HSBC both directly and indirectly through our customers and which may cause both idiosyncratic and systemic risks resulting in potential financial and non-financial impacts; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks' policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; societal shifts in customer financing and investment needs, including consumer perception as to the continuing availability of credit; exposure to counterparty risk, including third parties using us as a conduit for illegal activities without our knowledge; the discontinuation of certain key Ibors and the development of near risk-free benchmark rates, as well as the transition of legacy Ibor contracts to near risk-free benchmark rates, which exposes HSBC to material execution risks, and increases some financial and non-financial risks; and price competition in the market segments we serve;

-- changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which we operate and the consequences thereof (including, without limitation, actions taken as a result of the Covid-19 pandemic and the impact of the Russia-Ukraine war on inflation); initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks, which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; changes to tax laws and tax rates applicable to HSBC, including the imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; the UK's relationship with the EU following the UK's withdrawal from the EU, which continues to be characterised by uncertainty despite the signing of the Trade and Cooperation Agreement between the UK and the EU; passage of the Hong Kong national security law and restrictions on telecommunications, as well as the US Hong Kong Autonomy Act, which have caused tensions between China, the US and the UK; general changes in government policy that may significantly influence investor decisions; the costs, effects and outcomes of regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies; and

-- factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques); our ability to achieve our financial, investment, capital and ESG targets, commitments and ambitions (including with respect to the commitments set forth in our thermal coal phase-out policy and our targets to reduce our on-balance sheet financed emissions in the oil and gas, and power and utilities sectors), which may result in our failure to achieve any of the expected benefits of our strategic priorities; model limitations or failure, including, without limitation, the impact that high inflationary concerns and the consequences of the Covid-19 pandemic have had on the performance and usage of financial models, which may require us to hold additional capital, incur losses and/or use compensating controls, such as judgemental post-model adjustments, to address model limitations; changes to the judgements, estimates and assumptions we base our financial statements on; changes in our ability to meet the requirements of regulatory stress tests; a reduction in the credit ratings assigned to us or any of our subsidiaries, which could increase the cost or decrease the availability of our funding and affect our liquidity position and net interest margin; changes to the reliability and security of our data management, data privacy, information and technology infrastructure, including threats from cyber-attacks, which may impact our ability to service clients and may result in financial loss, business disruption and/ or loss of customer services and data; the accuracy and effective use of data, including internal management information that may not have been independently verified; changes in insurance customer behaviour and insurance claim rates; our dependence on loan payments and dividends from subsidiaries to meet our obligations; changes in accounting standards, including the implementation of IFRS 17 'Insurance Contracts', which may have a material impact on the way we prepare our financial statements and (with respect to IFRS 17) may negatively affect the profitability of HSBC's insurance business; changes in our ability to manage third-party, fraud and reputational risks inherent in our operations; employee misconduct, which may result in regulatory sanctions and/or reputational or financial harm; changes in skill requirements, ways of working and talent shortages, which may affect our ability to recruit and retain senior management and diverse and skilled personnel; and changes in our ability to develop sustainable finance and climate-related products consistent with the evolving expectations of our regulators, and our capacity to measure the climate impact from our financing activity (including as a result of data limitations and changes in methodologies), which may affect our ability to achieve our climate ambition, our targets to reduce financed emissions in our oil and gas, and power and utilities portfolio and the commitments set forth in our thermal coal phase-out policy, and increase the risk of greenwashing. Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in 'Top and emerging risks' on pages 27 to 28 of the Interim Report 2022.

 
Certain defined terms 
 

Unless the context requires otherwise, 'HSBC Holdings' means HSBC Holdings plc and 'HSBC', the 'Group', 'we', 'us' and 'our' refer to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People's Republic of China is referred to as 'Hong Kong'. When used in the terms 'shareholders' equity' and 'total shareholders' equity', 'shareholders' means holders of HSBC Holdings ordinary shares and those preference shares and capital securities issued by HSBC Holdings classified as equity. The abbreviations '$m', '$bn' and '$tn' represent millions, billions (thousands of millions) and trillions of US dollars, respectively.

 
Abbreviations 
 
 
Currencies 
----------------  ---------------------------------------------- 
GBP               British pound sterling 
----------------  ---------------------------------------------- 
CA$               Canadian dollar 
----------------  ---------------------------------------------- 
EUR               Euro 
----------------  ---------------------------------------------- 
HK$               Hong Kong dollar 
----------------  ---------------------------------------------- 
RMB               Chinese renminbi 
----------------  ---------------------------------------------- 
SGD               Singapore dollar 
----------------  ---------------------------------------------- 
$                 United States dollar 
----------------  ---------------------------------------------- 
Abbreviation 
----------------  ---------------------------------------------- 
1H21              First half of 2021 
----------------  ---------------------------------------------- 
1H22              First half of 2022 
----------------  ---------------------------------------------- 
1Q21              First quarter of 2021 
----------------  ---------------------------------------------- 
1Q22              First quarter of 2022 
----------------  ---------------------------------------------- 
2H21              Second half of 2021 
----------------  ---------------------------------------------- 
2Q21              Second quarter of 2021 
----------------  ---------------------------------------------- 
2Q22              Second quarter of 2022 
----------------  ---------------------------------------------- 
4Q21              Fourth quarter of 2021 
----------------  ---------------------------------------------- 
A 
----------------  ---------------------------------------------- 
ABS               Asset-backed security 
----------------  ---------------------------------------------- 
ADS               American Depositary Share 
----------------  ---------------------------------------------- 
AGM               Annual General Meeting 
----------------  ---------------------------------------------- 
AIEA              Average interest-earning 
                   assets 
----------------  ---------------------------------------------- 
ALCO              Asset and Liability Management 
                   Committee 
----------------  ---------------------------------------------- 
AML               Anti-money laundering 
----------------  ---------------------------------------------- 
ANP               Annualised new business 
                   premiums 
----------------  ---------------------------------------------- 
AT1               Additional tier 1 
----------------  ---------------------------------------------- 
B 
----------------  ---------------------------------------------- 
Basel             Basel Committee on Banking 
                   Supervision 
----------------  ---------------------------------------------- 
Basel III         Basel Committee's reforms 
                   to strengthen global capital 
                   and liquidity rules 
----------------  ---------------------------------------------- 
Basel 3.1         Outstanding measures to 
                   be implemented from the 
                   Basel III reforms 
----------------  ---------------------------------------------- 
BGF               Business Growth Fund, an 
                   investment firm that provides 
                   growth capital for small 
                   and mid-sized businesses 
                   in the UK and Ireland 
----------------  ---------------------------------------------- 
BoCom             Bank of Communications Co., 
                   Limited, one of China's 
                   largest banks 
----------------  ---------------------------------------------- 
BoE               Bank of England 
----------------  ---------------------------------------------- 
Bps               Basis points. One basis 
                   point is equal to one hundredth 
                   of a percentage point 
----------------  ---------------------------------------------- 
C 
----------------  ---------------------------------------------- 
CAPM              Capital asset pricing model 
----------------  ---------------------------------------------- 
CDOR              Canadian dollar offered 
                   rate 
----------------  ---------------------------------------------- 
CEA               Commodity Exchange Act (US) 
----------------  ---------------------------------------------- 
CET1              Common equity tier 1 
----------------  ---------------------------------------------- 
CMB               Commercial Banking, a global 
                   business 
----------------  ---------------------------------------------- 
CMC               Capital maintenance charge 
----------------  ---------------------------------------------- 
CODM              Chief Operating Decision 
                   Maker 
----------------  ---------------------------------------------- 
CRD IV            Capital Requirements Regulation 
                   and Directive 
----------------  ---------------------------------------------- 
CRR               Customer risk rating 
----------------  ---------------------------------------------- 
CRR II            Revised Capital Requirements 
                   Regulation and Directive, 
                   as implemented 
----------------  ---------------------------------------------- 
D 
----------------  ---------------------------------------------- 
DoJ               US Department of Justice 
----------------  ---------------------------------------------- 
DPD               Days past due 
----------------  ---------------------------------------------- 
DPF               Discretionary participation 
                   feature of insurance and 
                   investment contracts 
----------------  ---------------------------------------------- 
DVA               Debt valuation adjustment 
----------------  ---------------------------------------------- 
E 
----------------  ---------------------------------------------- 
EBA               European Banking Authority 
----------------  ---------------------------------------------- 
EC                European Commission 
----------------  ---------------------------------------------- 
ECB               European Central Bank 
----------------  ---------------------------------------------- 
ECL               Expected credit losses. 
                   In the income statement, 
                   ECL is recorded as a change 
                   in expected credit losses 
                   and other credit impairment 
                   charges. In the balance 
                   sheet, ECL is recorded as 
                   an allowance for financial 
                   instruments to which only 
                   the impairment requirements 
                   in IFRS 9 are applied. 
----------------  ---------------------------------------------- 
EEA               European Economic Area 
----------------  ---------------------------------------------- 
Eonia             Euro Overnight Index Average 
----------------  ---------------------------------------------- 
EPC               Energy performance certificate 
----------------  ---------------------------------------------- 
EPS               Earnings per ordinary share 
----------------  ---------------------------------------------- 
ESG               Environmental, social and 
                   governance 
----------------  ---------------------------------------------- 
EU                European Union 
----------------  ---------------------------------------------- 
Euribor           Euro interbank offered rate 
----------------  ---------------------------------------------- 
EVE               Economic value of equity 
----------------  ---------------------------------------------- 
F 
----------------  ---------------------------------------------- 
FCA               Financial Conduct Authority 
                   (UK) 
----------------  ---------------------------------------------- 
FRB               Federal Reserve Board (US) 
----------------  ---------------------------------------------- 
FTE               Full-time equivalent staff 
----------------  ---------------------------------------------- 
FVOCI             Fair value through other 
                   comprehensive income 
----------------  ---------------------------------------------- 
FX                Foreign exchange 
----------------  ---------------------------------------------- 
G 
----------------  ---------------------------------------------- 
GAAP              Generally accepted accounting 
                   principles 
----------------  ---------------------------------------------- 
GBM               Global Banking and Markets, 
                   a global business 
----------------  ---------------------------------------------- 
GDP               Gross domestic product 
----------------  ---------------------------------------------- 
GEC               Group Executive Committee 
----------------  ---------------------------------------------- 
GLCM              Global Liquidity and Cash 
                   Management 
----------------  ---------------------------------------------- 
Group             HSBC Holdings together with 
                   its subsidiary undertakings 
----------------  ---------------------------------------------- 
GTRF              Global Trade and Receivables 
                   Finance 
----------------  ---------------------------------------------- 
H 
----------------  ---------------------------------------------- 
HIBOR             Hong Kong interbank offered 
                   rate 
----------------  ---------------------------------------------- 
HKEx              The Stock Exchange of Hong 
                   Kong Limited 
----------------  ---------------------------------------------- 
HKMA              Hong Kong Monetary Authority 
----------------  ---------------------------------------------- 
HNAH              HSBC North America Holdings 
                   Inc. 
----------------  ---------------------------------------------- 
Holdings          HSBC Holdings Asset and 
 ALCO              Liability Management Committee 
----------------  ---------------------------------------------- 
Hong Kong         Hong Kong Special Administrative 
                   Region of the People's Republic 
                   of China 
----------------  ---------------------------------------------- 
HQLA              High-quality liquid assets 
----------------  ---------------------------------------------- 
HSBC              HSBC Holdings together with 
                   its subsidiary undertakings 
----------------  ---------------------------------------------- 
HSBC Bank         HSBC Bank plc, also known 
 plc               as the non-ring-fenced bank 
----------------  ---------------------------------------------- 
HSBC Bank         HSBC Bank Middle East Limited 
 Middle 
 East 
----------------  ---------------------------------------------- 
HSBC Canada       The sub-group, HSBC Bank 
                   Canada, HSBC Trust Company 
                   Canada, HSBC Mortgage Corporation 
                   Canada and HSBC Securities 
                   Canada, consolidated for 
                   liquidity purposes 
----------------  ---------------------------------------------- 
HSBC Continental  HSBC Continental Europe 
 Europe 
----------------  ---------------------------------------------- 
HSBC Holdings     HSBC Holdings plc, the parent 
                   company of HSBC 
----------------  ---------------------------------------------- 
HSBC UK           HSBC UK Bank plc, also known 
                   as the ring-fenced bank 
----------------  ---------------------------------------------- 
HSBC USA          The sub-group, HSBC USA 
                   Inc and HSBC Bank USA, consolidated 
                   for liquidity purposes 
----------------  ---------------------------------------------- 
HSI               HSBC Securities (USA) Inc. 
----------------  ---------------------------------------------- 
HSSL              HSBC Securities Services 
                   (Luxembourg) 
----------------  ---------------------------------------------- 
I 
----------------  ---------------------------------------------- 
IAS               International Accounting 
                   Standards 
----------------  ---------------------------------------------- 
IASB              International Accounting 
                   Standards Board 
----------------  ---------------------------------------------- 
Ibor              Interbank offered rate 
----------------  ---------------------------------------------- 
ICAAP             Internal capital adequacy 
                   assessment process 
----------------  ---------------------------------------------- 
IFRSs             International Financial 
                   Reporting Standards 
----------------  ---------------------------------------------- 
ILAAP             Internal liquidity adequacy 
                   assessment process 
----------------  ---------------------------------------------- 
IRB               Internal ratings-based 
J 
----------------  ---------------------------------------------- 
JV                Joint venture 
----------------  ---------------------------------------------- 
L 
----------------  ---------------------------------------------- 
LCR               Liquidity coverage ratio 
----------------  ---------------------------------------------- 
LGD               Loss given default 
----------------  ---------------------------------------------- 
Libor             London interbank offered 
                   rate 
----------------  ---------------------------------------------- 
LTI               Long-term incentive 
----------------  ---------------------------------------------- 
LTV               Loan to value 
----------------  ---------------------------------------------- 
M 
----------------  ---------------------------------------------- 
Mainland          People's Republic of China 
 China             excluding Hong Kong 
                   and Macau 
----------------  ---------------------------------------------- 
MENA              Middle East and North Africa 
----------------  ---------------------------------------------- 
MREL              Minimum requirement for 
                   own funds and eligible liabilities 
----------------  ---------------------------------------------- 
MSS               Markets and Securities Services, 
                   HSBC's capital markets and 
                   securities services businesses 
                   in Global Banking and Markets 
----------------  ---------------------------------------------- 
N 
----------------  ---------------------------------------------- 
Net operating     Net operating income before 
 income            change in expected credit 
                   losses and other credit 
                   impairment charges, also 
                   referred to as revenue 
----------------  ---------------------------------------------- 
NII               Net interest income 
----------------  ---------------------------------------------- 
NIM               Net interest margin 
----------------  ---------------------------------------------- 
NSFR              Net stable funding ratio 
----------------  ---------------------------------------------- 
O 
----------------  ---------------------------------------------- 
OCI               Other comprehensive income 
----------------  ---------------------------------------------- 
OECD              Organisation of Economic 
                   Co-operation and Development 
----------------  ---------------------------------------------- 
OTC               Over-the-counter 
----------------  ---------------------------------------------- 
P 
----------------  ---------------------------------------------- 
PBT               Profit before tax 
----------------  ---------------------------------------------- 
PD                Probability of default 
----------------  ---------------------------------------------- 
POCI              Purchased or originated 
                   credit-impaired financial 
                   assets 
----------------  ---------------------------------------------- 
PPI               Payment protection insurance 
----------------  ---------------------------------------------- 
PRA               Prudential Regulation Authority 
                   (UK) 
----------------  ---------------------------------------------- 
Premier           HSBC Premier, HSBC's premium 
                   personal global banking 
                   service 
----------------  ---------------------------------------------- 
PVIF              Present value of in-force 
                   long-term insurance business 
                   and long-term investment 
                   contracts with DPF 
----------------  ---------------------------------------------- 
PwC               The member firms of the 
                   PwC network, including PricewaterhouseCoopers 
                   LLP 
----------------  ---------------------------------------------- 
R 
----------------  ---------------------------------------------- 
RFR               Risk-free rate 
----------------  ---------------------------------------------- 
RNIV              Risk not in VaR 
----------------  ---------------------------------------------- 
RoE               Return on average ordinary 
                   shareholders' equity 
----------------  ---------------------------------------------- 
RoTE              Return on average tangible 
                   equity 
----------------  ---------------------------------------------- 
RWA               Risk-weighted asset 
----------------  ---------------------------------------------- 
S 
----------------  ---------------------------------------------- 
SABB              The Saudi British Bank 
----------------  ---------------------------------------------- 
SEC               Securities and Exchange 
                   Commission (US) 
----------------  ---------------------------------------------- 
ServCo            Separately incorporated 
 group             group of service companies 
                   established in response 
                   to UK ring-fencing requirements 
----------------  ---------------------------------------------- 
Sibor             Singapore interbank offered 
                   rate 
----------------  ---------------------------------------------- 
SME               Small and medium-sized enterprise 
----------------  ---------------------------------------------- 
SOFR              Secured Overnight Financing 
                   Rate 
----------------  ---------------------------------------------- 
U 
----------------  ---------------------------------------------- 
UAE               United Arab Emirates 
----------------  ---------------------------------------------- 
UK                United Kingdom 
----------------  ---------------------------------------------- 
UN                United Nations 
----------------  ---------------------------------------------- 
US                United States of America 
----------------  ---------------------------------------------- 
V 
----------------  ---------------------------------------------- 
VaR               Value at risk 
----------------  ---------------------------------------------- 
VIU               Value in use 
----------------  ---------------------------------------------- 
W 
----------------  ---------------------------------------------- 
WPB               Wealth and Personal Banking, 
                   a global business 
----------------  ---------------------------------------------- 
Y 
----------------  ---------------------------------------------- 
YTD               Year to date 
----------------  ---------------------------------------------- 
 

Registered Office and Group Head Office:

8 Canada Square

London E14 5HQ

United Kingdom

Web: www.hsbc.com

Incorporated in England with limited liability.

Registered number 617987

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