23 February 2021

HSBC HOLDINGS PLC
2020 RESULTS – HIGHLIGHTS
Noel Quinn, Group Chief Executive, said:“In 2020, our people delivered an exceptional level of support for our customers in very tough circumstances, while our strong balance
sheet and liquidity gave reassurance to those who rely on us. We achieved this while delivering a solid financial performance in thecontext of the pandemic – particularly in Asia – and laying firm foundations for our future growth. I am proud of everything our people
achieved and grateful for the loyalty of our customers during a very turbulent year.
The growth plans we are announcing today aim to establish HSBC as a dynamic, efficient and agile global bank with a digital-firstmindset, capable of providing a world-leading service to our customers and strong returns for our investors. We intend to deliver them atpace.”

2020 financial performance (vs 2019)•

Reported profit after tax down 30% to $6.1bn and reported profit before tax down 34% to $8.8bn from higher expectedcredit losses and other credit impairment charges (‘ECL’) and lower revenue, partly offset by a fall in operating expenses. Reported
results in 2020 included a $1.3bn impairment of software intangibles, while reported results in 2019 included a $7.3bn impairment of
goodwill. Adjusted profit before tax down 45% to $12.1bn.

•

Reported revenue down 10% to $50.4bn, primarily due to the progressive impact of lower interest rates across our global
businesses, in part offset by higher revenue in Global Markets. Adjusted revenue down 8% to $50.4bn.

•

Net interest margin (‘NIM’) of 1.32% in 2020, down 26 basis points (‘bps’) from 2019, due to the impact of lower global
interest rates.

•

Reported ECL up $6.1bn to $8.8bn, mainly due to the impact of the Covid-19 outbreak and the forward economic outlook.
Allowance for ECL on loans and advances to customers up from $8.7bn at 31 December 2019 to $14.5bn at 31 December 2020.

•

Reported operating expenses down 19% to $34.4bn, mainly due to the non-recurrence of a $7.3bn impairment of goodwill.
Adjusted operating expenses down 3% to $31.5bn, as cost-saving initiatives and lower performance-related pay anddiscretionary expenditure more than offset the growth in investment spend.

• During 2020, deposits grew by $204bn on a reported basis and $173bn on a constant currency basis, with growth in all
global businesses.

• Common equity tier 1 (‘CET1’) ratio of 15.9%, up 1.2 percentage points from 14.7% at 31 December 2019, which
included the impact of the cancellation of the fourth interim dividend of 2019 and changes to the capital treatment of software assets.
•

After considering the requirements set out in the UK Prudential Regulation Authority’s ('PRA') temporary approach to shareholder
distributions for 2020, the Board has announced an interim dividend for 2020 of $0.15 per ordinary share, to be paid in cashwith no scrip alternative.

4Q20 financial performance (vs 4Q19)• Reported profit after tax up $6.0bn to $0.9bn and reported profit before tax up $5.3bn to $1.4bn, primarily due to the nonrecurrence of a $7.3bn impairment of goodwill in 4Q19. Adjusted profit before tax down 50% to $2.2bn.
• Reported revenue down 12% and adjusted revenue down 14%, primarily due to the impact of lower global interest rates. NIM
of 1.22% in 4Q20 increased by 2bps compared with 3Q20.
• Reported ECL up 60% to $1.2bn, reflecting UK economic uncertainty and higher charges related to specific exposures in
Commercial Banking (‘CMB’).
• Reported operating expenses down 42% to $9.9bn, due to the non-recurrence of a $7.3bn goodwill impairment. Adjusted
operating expenses of $9.1bn down $0.1bn.

Outlook and strategic update
We recognise a number of fundamental changes, including the prospect of prolonged low interest rates, the significant increase in digital
engagement from customers and the enhanced focus on the environment, and we have aligned our strategy accordingly.
We intend to increase our focus on areas where we are strongest, increase and accelerate our investments, and continue toprogress with the transformation of our underperforming businesses. As part of our climate ambitions, we have also set out ourplans to capture the opportunities presented by the transition to a low-carbon economy.
We will continue to target an adjusted cost base of $31bn or less in 2022. This reflects a further reduction in our cost base, which
has been broadly offset by the adverse impact of foreign currency translation due to the weakening US dollar towards the end of 2020. In
addition, we will continue to target a gross risk-weighted assets (‘RWA’) reduction of over $100bn by the end of 2022. We nolonger expect to reach our return on average tangible equity (‘RoTE’) target of between 10% and 12% in 2022, as
originally planned and will now target a RoTE of greater than or equal to 10% in the medium term.
We intend to maintain a CET1 ratio above 14%, managing in the range of 14% to 14.5% in the medium term and managing thisrange down in the longer term. The Board has adopted a policy to provide sustainable dividends going forward. We intend to transition
towards a target payout ratio of between 40% and 55% of reported earnings per ordinary share (‘EPS’) from 2022 onwards,
with the flexibility to adjust EPS for non-cash significant items, such as goodwill or intangibles impairments.

January trading
We have had a good start to 2021, and we are cautiously optimistic for the year ahead.

Key financial metrics
For the year ended

Reported results

2020

2019

2018

Reported revenue ($m)
Reported profit before tax ($m)

50,4298,777

56,09813,34753,78019,890

Reported profit after tax ($m)
Profit attributable to the ordinary shareholders of the parent company ($m)

6,099
3,898

8,708
5,969

15,025
12,608

Cost efficiency ratio (%)
Basic earnings per share ($)

68.3
0.19

75.5
0.30

64.4
0.63

Diluted earnings per share ($)
Net interest margin (%)

0.19
1.32

0.30
1.58

0.63
1.66

Alternative performance measures
Adjusted revenue ($m)

50,36654,94452,098Adjusted profit before tax ($m)
Adjusted cost efficiency ratio (%)

12,14962.5

22,14959.2

21,19960.9

Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans andadvances to customers (%)

0.81

0.25

0.16

Return on average ordinary shareholders’ equity (%)

2.3

3.6

7.7

3.1

8.4

8.6

Return on average tangible equity (%)

Footnotes

1

At 31 Dec

Balance sheet
Total assets ($m)
Net loans and advances to customers ($m)
Customer accounts ($m)
Average interest-earning assets ($m)
Loans and advances to customers as % of customer accounts (%)
Total shareholders’ equity ($m)
Tangible ordinary shareholders’ equity ($m)
Net asset value per ordinary share at period end ($)
Tangible net asset value per ordinary share at period end ($)
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)
Risk-weighted assets ($m)
Total capital ratio (%)
Leverage ratio (%)
High-quality liquid assets (liquidity value) ($bn)
Liquidity coverage ratio (%)
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions)

2

3
3
3
3

2020

2019

2018

2,984,164
1,037,987
1,642,780
2,092,900
63.2
196,443
156,423
8.62
7.75

2,715,152
1,036,743
1,439,115
1,922,822
72.0
183,955
144,1448.00
7.13

2,558,124
981,696
1,362,643
1,839,346
72.0
186,253
140,056
8.13
7.01

15.9
857,520
21.5
5.5
678
139

14.7
843,395
20.4
5.3
601
150

14.0
865,318
20.0
5.5
567
154

20,18420,206

19,981

Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares(millions)

20,272

20,28020,059Average basic number of $0.50 ordinary shares outstanding (millions)
Dividend per ordinary share (in respect of the period) ($)

20,1690.15

20,1580.30

19,896
0.51

4

For reconciliations of our reported results to an adjusted basis, including lists of significant items, see page 85 of the Annual Report andAccounts 2020. Definitions and calculations of other alternative performance measures are included in our ‘Reconciliation of alternative
performance measures’ on page 103 of the Annual Report and Accounts 2020.
1 Profit attributable to ordinary shareholders, excluding impairment of goodwill and other intangible assets and changes in present value of in-force
insurance contracts (‘PVIF’) (net of tax), divided by average ordinary shareholders’ equity excluding goodwill, PVIF and other intangible assets (netof deferred tax).
2 Excludes impact of $0.10 per share dividend in the first quarter of 2019, following a June 2019 change in accounting practice on the recognitionof interim dividends, from the date of declaration to the date of payment.
3 Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements
Regulation in force at the time. These include the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’, which are explained
further on page 173 of the Annual Report and Accounts 2020. Leverage ratios are calculated using the end point definition of capital and the IFRS
9 regulatory transitional arrangements. Following the end of the transition period after the UK’s withdrawal from the EU, any reference to EU
regulations and directives (including technical standards) should be read as a reference to the UK’s version of such regulation and/or directive, as
onshored into UK law under the European Union (Withdrawal) Act 2018, as amended.
4 The fourth interim dividend of 2019, of $0.21 per ordinary share, was cancelled in response to a written request from the UK’s Prudential
Regulation Authority (‘PRA’). 2019 has been re-presented accordingly.

2

HSBC Holdings plc 2020 Results

Highlights
Year ended 31 Dec
2020

2019

$m

$m

50,429(8,817)56,098(2,756)(34,432)
1,597(42,349)
2,354

8,777

13,34750,366(8,817)54,944(2,627)

Operating expenses
Share of profit in associates and joint ventures(31,459)
2,059(32,519)
2,351

Profit before tax

12,14922,149

Revenue
Customer redress programmes

(21)

(163)

Disposals, acquisitions and investment in new businesses
Fair value movements on financial instruments

3

(10)
264

768
84

Restructuring and other related costs
Operating expenses

4

(170)

—

Costs of structural reform
Customer redress programmes
Impairment of goodwill and other intangibles
Past service costs of guaranteed minimum pension benefits equalisation
Restructuring and other related costs
Settlements and provisions in connection with legal matters and other regulatory matters
Share of profit in associates and joint ventures
Impairment of goodwill

5—54(1,090)(17)(1,908)(12)(158)(1,281)(7,349)
—
(827)
61

(462)

—

Footnotes

Reported
Revenue
ECL

1Operating expenses
Share of profit in associates and joint ventures
Profit before tax
Adjusted
Revenue
ECL

2
1

Significant items affecting adjusted performance

6

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Adjusted performance is computed by adjusting reported results for the year-on-year effects of foreign currency translation differences andsignificant items which distort year-on-year comparisons.
3 Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
4 Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.
5 Comprises costs associated with preparations for the UK’s exit from the European Union.
6 Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment oftangible assets of $197m.

HSBC Holdings plc 2020 Results

3Statement by Mark E Tucker, Group Chairman
In 2020, we experienced economic and social upheaval on a scale unseen in living memory. Even before the year began, the external
environment was being reshaped by a range of factors – including the impact of trade tensions between the US and China, Brexit, lowinterest rates and rapid technological development. The spread of the Covid-19 virus made that environment all the more complex andchallenging.
The Covid-19 pandemic has severely impacted our customers, our colleagues, our shareholders and the communities we serve. The firstpriority was, and remains, dealing with the public health crisis, but the economic crisis that unfolded simultaneously has also been
unprecedented in recent times. The financial services industry has been at the forefront of helping businesses and individuals through thedifficulties they have faced, working with governments and regulators towards expected recovery and future growth. I am enormously
proud of the professionalism, dedication and energy that my colleagues around the world have demonstrated as they helped ensure ourcustomers received the support they needed – all the while managing their own, at times extremely difficult, situations at home. On
behalf of the Board, I would like to express my deepest thanks to them all for the exceptional way they are responding to these mostchallenging circumstances.
Against this backdrop, HSBC demonstrated a resilient performance. Reported profit before tax was $8.8bn, a fall of 34%, and adjusted
profit before tax was $12.1bn, down 45%. Within this, Global Banking and Markets performed particularly well, while Asia was once
again by far the most profitable region. Deposits also increased significantly across the Group, reinforcing the strength of our funding andliquidity positions.
In response to a request from the UK’s Prudential Regulation Authority, we cancelled the fourth interim dividend for 2019. We alsoannounced that, until the end of 2020, we would make no quarterly or interim dividend payments or accruals in respect of ordinary
shares. This was a difficult decision and we deeply regret the impact it has had on our shareholders. We are therefore pleased to restart
dividend payments at the earliest opportunity. The Board has announced an interim dividend of $0.15 for 2020, and adopted a policy
designed to provide sustainable dividends in the future.

Board of Directors
The confirmation of Noel Quinn as permanent Group Chief Executive underlined the Board’s belief that he is the best person to lead thedelivery of the strategic plan. We look forward to working closely with Noel and the management team as they focus on executing ourstrategic priorities in 2021.
Jamie Forese, Steve Guggenheimer and Eileen Murray joined the Board as independent non-executive Directors in 2020. All three havealready demonstrated the valuable skills, expertise and experience they bring across a wide range of areas, including technology. We
have also announced that Dame Carolyn Fairbairn will join the Board as an independent non-executive Director. Carolyn will bring a
wealth of relevant experience, and her appointment will be effective from 1 September 2021.
As reported in the Annual Report and Accounts 2019, Sir Jonathan Symonds and Kathleen Casey retired from the Board last year. Today
we also announced that Laura Cha will step down from the Board immediately after our 2021 Annual General Meeting (‘AGM’) in May. I
would like to thank Jon, Kathy and Laura for the enormous contributions they made to HSBC during their years of service. We are now in
the advanced stages of a search for suitable candidates to join and strengthen the Board, and I will update further on the outcome of thissearch in due course.
Like the rest of the Group, the Board had to adapt its ways of working in 2020. We met virtually for much of the year, which brought
benefits including less travel and more frequent, shorter meetings. It will be important for us to consider how we retain what has worked
well over the last year once restrictions are lifted and it becomes possible to travel once again.
The Board enjoys the constructive discussions that we have with shareholders at the AGM in the UK and the Informal Shareholders’Meeting in Hong Kong, so it was a matter of regret that we did not meet in person in 2020. While we did maintain regular contact withshareholders throughout the year, we will resume our face-to-face engagement with shareholders in the UK, Hong Kong and more
widely, as soon as is practicable.

External environment
After the significant deterioration in global economic conditions in the first half of the year due to the Covid-19 pandemic, there weresigns of improvement in the second half, especially in Asia. The most impressive economic recovery has been in China – still the biggest
driver of global growth – where international trade is rebounding most strongly. The signing of the Regional Comprehensive Economic
Partnership should further boost intra-regional activity across Asia, while the recent political agreement between the EU and China on an
investment deal should, once ratified, bolster the already significant two-way investment flows.
Covid-19 infection levels remain very high in Europe, the US and Latin America, and new variants of the virus have spread quickly. This
has necessitated new lockdown measures in the UK and other countries. While the deployment of multiple vaccines means we are more
optimistic about the future, there is clearly still some way to go before life can return to something like normality. Recovery will therefore
take longer in these economies, with growth more likely later in 2021 in these economies.
The agreement of a trade deal between the UK and EU prior to the end of 2020 provides some certainty for cross-border trade. However,
the reduced access for financial services under these new arrangements means that further work is needed to maintain the level playing
field that has existed until now. Given the many benefits that the UK financial services industry brings to the UK and EU economies,
equivalence must be a key priority for both parties.
The geopolitical environment remains challenging – in particular for a global bank like HSBC – and we continue to be mindful of thepotential impact that it could have on our strategy. We continue to engage fully and frequently with all governments as we seek to do
everything we possibly can to help our customers navigate an increasingly complex world.

Capturing future opportunities
Given the external environment, it is vital we stay focused on what we can control. The Board is confident there are many opportunities
ahead for a bank with HSBC’s competitive strengths. This makes it all the more important that we position ourselves to capture them.
While we prioritised supporting our customers and our people during the pandemic, we made good progress against the three strategic
priorities announced in February 2020 – reallocating capital from underperforming parts of the business, reducing costs and simplifying
the organisation. In particular, the Board worked closely with the management team over the course of the year on plans to accelerate
4

HSBC Holdings plc 2020 Results

progress and investment in key areas of growth, which include our Asian franchise, our wealth business and new technology across theGroup.
We are today unveiling the outcome of extensive consultation with our people and customers on the Group’s purpose and values. Being
clear about who we are, what we stand for and how this connects to our strategy is an important part of how we align and energise theorganisation to create long-term value for all those we work with and for – our investors, customers, employees, suppliers and thecommunities we serve. The Board fully endorses the outcome of this work.
Our commitment to create sustainable value is demonstrated by the new climate ambitions we announced in October 2020. The mostsignificant contribution that HSBC can make to the fight against climate change is to bring our customers with us on the transition to a
low-carbon future. Our goal of being net zero for our financed emissions by 2050 sends an important signal to our investors, ourcustomers and our people - if our clients are prepared to change their business models and make that transition, we will help and support
them to do so. HSBC was also delighted to be one of the founding signatories of the Terra Carta, which was launched last month by HRH
The Prince of Wales’ Sustainable Markets Initiative. Further details about all of the steps we are taking towards a more sustainable future
are set out in the ESG review, which for the first time is included within the Annual Report and Accounts 2020.
Finally, 2020 underlined once again that our people are the driving force behind our business. I would like to reiterate how enormously
grateful I am to my colleagues for the great dedication and care they showed to our customers and to each other during such testingtimes. Further empowering and enabling them to do their jobs and execute our strategic priorities is the key to our future success.

HSBC Holdings plc 2020 Results

5

Review by Noel Quinn, Group Chief Executive
In 2020, HSBC had a very clear mandate – to provide stability in a highly unstable environment for our customers, communities andcolleagues. I believe we achieved that in spite of the many challenges presented by the Covid-19 pandemic and heightened geopoliticaluncertainty.
Our people delivered an exceptional level of support for our customers in very tough circumstances, while our strong balance sheet andliquidity gave reassurance to those who rely on us. We achieved this while delivering a solid financial performance in the context of thepandemic – particularly in Asia – and laying firm foundations for our future growth. I am proud of everything our people achieved andgrateful for the loyalty of our customers during a very turbulent year.

2020
Helping our customers emerge from the Covid-19 pandemic in a sustainable position was our most pressing priority. We did this byequipping our colleagues to work from home at the height of the pandemic, and keeping the vast majority of our branches and all of ourcontact centres open. Our investment in our digital capabilities – both in 2020 and in previous years – enabled our customers to accessmore services remotely, and we worked closely with our regulators around the world to open new digital channels in a safe and secureway. In total, we provided more than $26bn of relief to our personal customers and more than $52bn to our wholesale customers, boththrough government schemes and our own relief initiatives. We also played a vital role in keeping capital flowing for our clients,
arranging more than $1.9tn of loan, debt and equity financing for our wholesale customers during 2020.
Even in the middle of the pandemic, we continued to look to the future. In October, we announced our ambition to become a net zerobank by 2050, supporting customers through the transition to a low-carbon economy and helping to unlock next-generation climate
solutions. If the Covid-19 pandemic provided a shock to the system, a climate crisis has the potential to be much more drastic in its
consequences and longevity. We are therefore stepping up support for our clients in a material way, working together to build a thriving
low-carbon economy and focusing our business on helping achieve that goal.
The actions we outlined in February 2020 are largely on track or ahead of where we intended them to be, despite the complications of thepandemic. We renewed and re-energised the senior management team, with around three-quarters of the Group Executive Committee inpost for just over a year or less. Our business is more streamlined than it was a year ago, with three global businesses instead of four andincreased back-office consolidation. Costs are down materially, with over $1bn of gross operating costs removed during 2020. We arealso already more than half-way towards our target to reduce at least $100bn of gross risk-weighted assets by 2022.
Unfortunately, the changed interest-rate environment means we are no longer able to achieve a return on tangible equity of 10% to 12%
by 2022. We will now target a return on tangible equity of 10% or above over the medium term.
The world around us changed significantly in 2020. Central bank interest rates in many countries fell to record lows. Pandemic-related
lockdowns led to a rapid acceleration in the shift from physical to digital banking. Like many businesses, we learned that our people
could be just as productive working from home as in the office. Also, as the world resolved to build back responsibly from the pandemic,
governments, businesses and customers united to accelerate a low-carbon transition that works for all.
All of these things caused us to adjust and reinforce elements of our strategy to fit this new environment. The growth plans that we havedeveloped are a natural progression of our February 2020 plans. They aim to play to our strengths, especially in Asia; to accelerate ourtechnology investment plans to deliver better customer service and increased productivity; to energise our business for growth; and toinvest further in our own low-carbon transition and that of our customers. They are also designed to deliver a 10% return on tangible
equity over the medium term in the current low interest-rate environment.

Our purpose
As we charted the next stage of HSBC’s journey, we also reflected on our purpose as a business. We consulted widely both internallyand externally, speaking to thousands of colleagues and customers, and looked deeply into our history. The same themes came up again
and again.
HSBC has always focused on helping customers pursue the opportunities around them, whether as individuals or businesses. Sometimes
those opportunities are clear and visible, and sometimes they are far from obvious. Sometimes they arise in the next street, andsometimes on the next continent. Sometimes they exist in the status quo, and sometimes they are a product of great social or economicchange. But always, they represent a chance for our customers to grow and to help those close to them – protecting, nurturing, building.
'Opening up a world of opportunity' both captures this aim and lays down a challenge for the future. Opportunity never stands still. Itchanges and evolves with the world around us. It is our job to keep making the most of it, and to find and capture it with a spirit ofentrepreneurialism, innovation and internationalism that represents HSBC at its very best. This is the essence of what our plans intend todeliver, and what we intend to keep delivering for our customers, colleagues and communities as we navigate change and complexity
together.

Financial performance
The pandemic inevitably affected our 2020 financial performance. The shutdown of much of the global economy in the first half of theyear caused a large rise in expected credit losses, and cuts in central bank interest rates reduced revenue in rate-sensitive business lines.
We responded by accelerating the transformation of the Group, further reducing our operating costs and moving our focus from interestrate sensitive business lines towards fee-generating businesses. Our expected credit losses stabilised in the second half of the year in linewith the changed economic outlook, but the revenue environment remained muted.
As a consequence, the Group delivered $8.8bn of reported profit before tax, down 34% on 2019, and $12.1bn of adjusted profits, down
45%. Our Asia business was again the major contributor, delivering $13bn of adjusted profit before tax in 2020.
Adjusted revenue was 8% lower than in 2019. This was due mainly to the impact of interest rate cuts at the start of the year on ourdeposit franchises in all three global businesses. By contrast, our Global Markets business benefited from increased customer activity due
to market volatility throughout the year, growing adjusted revenue by 27%.
We made strong progress in reducing our operating expenses. A combination of our cost-saving programmes, cuts in performancerelated pay and lower discretionary spending due to the Covid-19 pandemic helped to reduce our adjusted operating expenses by $1.1bn
or 3%.

6

HSBC Holdings plc 2020 ResultsOur investment plans remain essential to the future of the business. We continued to invest heavily in technology while managing costs
down, spending $5.5bn during 2020.
Our funding, liquidity and capital remain strong. We grew deposits by $173bn on a constant currency basis, with increases across all
three global businesses. Our common equity tier one ratio was 15.9% on 31 December 2020.

Our shareholders
It was a difficult year for our shareholders. The Covid-19 pandemic and the impact of geopolitics weighed heavily on our share pricethroughout 2020. In March, we cancelled the payment of our fourth interim dividend for 2019 at the request of our lead regulator, andalso agreed not to make any quarterly or interim dividend payments until the end of 2020. This particularly affected shareholders who rely
on our dividend for income. It was a priority for the management team to get back to being able to pay dividends by the end of the year,
and we were pleased to be able to recommend the payment of an interim dividend for 2020.
Dividends are hugely important, but so is capacity for growth. To deliver both, we are adopting a new policy designed to provide
sustainable dividends, offering good income while giving management the flexibility to reinvest capital to grow the firm over the medium
term. We will consider share buy-backs, over time and not in the near term, where no immediate opportunity for capital redeployment
exists. We will also no longer offer a scrip dividend option, and will pay dividends entirely in cash.
The last 12 months were tough, but I am highly focused on turning our performance around in 2021 and beyond. I strongly believe thatthe combination of our growth plans and our new dividend policy will unlock greater value for our shareholders in the years to come.

Opening up a world of opportunity‘Opening up a world of opportunity’ is more than a purpose – it is a statement of intent. Everything that we plan to do over the next
decade is designed to unlock opportunity for our stakeholders, whether customers, colleagues, shareholders or communities. We intend
to do this by building a dynamic, efficient and agile global bank with a digital-first mindset, capable of providing a world-leading service
to our customers and strong returns for our investors. We will also need to focus intently on the areas where we excel, and to foster acommercial and entrepreneurial culture with a conviction to get things done. We believe we can achieve this in four ways.
First, we plan to focus on and invest in the areas in which we are strongest. In Wealth and Personal Banking, we aim to become amarket-leader for high net worth and ultra high net worth clients in Asia and the Asian diaspora, and to invest in our biggest retailmarkets where the opportunity is greatest. In Commercial Banking, we want to remain a global leader in cross-border trade, and to leadthe world in serving mid-market corporates internationally. In Global Banking and Markets, we intend to invest to capture trade andcapital flows into and across Asia, while connecting global clients to Asia and the Middle East through our international network.
Second, we intend to increase the pace at which we digitise HSBC through higher levels of technology investment. This underpins
everything that we want to achieve. It is how we intend to win new customers and retain them, to become more agile and efficient, tocreate richer, seamless customer journeys, and to build strong and innovative partnerships that deliver excellent benefits for ourcustomers. We have an opportunity to meet the growing market need for sophisticated, robust and rapid payment solutions, and to leadour industry in applying digital solutions to analogue services, such as trade. We therefore intend to protect technology investment
throughout the cycle, even as we reduce spending elsewhere.
Third, we want to energise HSBC for growth through a strong culture, simple ways of working, and by equipping our colleagues with the
future skills they need. Giving life to our purpose will be critical to building the dynamic, entrepreneurial and inclusive culture that wewant to create, as will removing the remaining structural barriers that sometimes stop our people from delivering for our customers. We
need to change the way we hire to build skills and capabilities in areas that are different to what we have needed historically, including
data, artificial intelligence, and sustainable business models. Our expanded HSBC University will also help to upskill and reskill our
people, while fostering more of the softer skills that technology can never replace.
Fourth, we will seek to help our customers and communities to capture the opportunities presented by the transition to a low-carbon
economy. Accelerating this transition is the right thing to do for the environment, but also the right thing commercially. We intend tobuild on our market-leading position in sustainable finance, supporting our clients with $750bn to $1tn of sustainable financing andinvestment over the next 10 years. We also intend to unlock new climate solutions by building one of the world’s leading climate
managers – HSBC Pollination Climate Asset Management – and helping to transform sustainable infrastructure into a global asset class.
These will help us achieve our ambition to align our portfolio of financed emissions to the Paris Agreement goal to achieve net zero by
2050.

Championing inclusion
I believe passionately in building an inclusive organisation in which everyone has the opportunity to fulfil their potential. Failing to do so
isn’t just wrong, it is totally self-defeating. It means you don’t get the best out of the talent you have, and sends the wrong signals to thepeople you want to recruit. An inclusive environment is the foundation of a truly diverse organisation, with all of the rewards that brings.
There is much still to do, but we are moving in the right direction. More than 30% of our senior leaders are female, in line with the goal
we set to achieve by the end of 2020. I want that number to increase to at least 35% by 2025, and we have a number of initiatives inplace to help achieve it. In May, we launched a new global ethnicity inclusion programme to better enable careers and career progression
for colleagues from ethnic minorities, and in July, we made a series of commitments to address feedback from Black colleagues inparticular. These included a commitment to more than double our number of Black senior leaders by 2025.
I am particularly proud that during a difficult year, which included a large-scale redundancy programme, employee sentiment improved
within HSBC. Around 71% of my colleagues said that they found HSBC to be a great place to work, up from 66% in 2019. However, theview varies across employees from different groups. We know, for example, that employees with disabilities or who identify as ethnic
minorities do not feel as engaged as others. I take these gaps very seriously. Better demographic data globally will help us benchmark
and measure our progress more effectively, and we are taking concerted steps to be able to capture that information where possible.

2021 outlook
We have had a good start to 2021, and I am cautiously optimistic for the year ahead. While a spike in Covid-19 infection rates led torenewed lockdown measures in many places at the start of 2021, the development of multiple vaccines gives us hope that the world will
return to some form of normality before long. Nonetheless, we remain reactive to the ebb and flow of the Covid-19 virus and prepared totake further steps to manage the economic impact where necessary.

HSBC Holdings plc 2020 Results

7

The geopolitical uncertainty that prevailed during 2020 remains a prominent feature of our operating environment. We are hopeful that
this will reduce over the course of 2021, but mindful of the potential impact on our business if levels remain elevated. We remain focusedon serving the needs of our customers, colleagues and communities in all our markets.

Our people
I would like to pay tribute to my colleagues and all those who supported them throughout a difficult year. HSBC is a community ofaround 226,000 colleagues – but it relies just as much on the family, friends and support networks that help them be the best they canbe. Our people did extraordinary things in 2020, but it asked a lot of those around them. I am hugely grateful to everyone who helped
HSBC – whether directly or indirectly – in supporting our customers, communities and each other over the last 12 months.

8

HSBC Holdings plc 2020 Results

Financial summaryYear ended 31 Dec
2020

2019

$m

$m

8,777

13,347

3,898
—

5,969
10,269196,443
184,423

183,955
172,150

Customer accounts
Total assets

1,642,780
2,984,164

1,439,115
2,715,152

Risk-weighted assets

857,520

843,395

Footnotes

For the year
Profit before tax
Profit attributable to:– ordinary shareholders of the parent company
Dividends declared on ordinary shares

1

At the year-end
Total shareholders’ equity
Total regulatory capital

Per ordinary share
Basic earnings per share
Dividend per ordinary share (in respect of the period)
Net asset value per ordinary share at period end

$

$

0.19

0.30

0.15
8.62

0.51
8.00

7.75

7.13

20,694
20,184
20,272

20,63920,206
20,2802

Tangible net asset value per ordinary share at period end
Share information
Number of $0.50 ordinary shares in issue (millions)
Basic number of $0.50 ordinary shares outstanding (millions)
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)

1 Dividends recorded in the financial statements are dividends per ordinary share declared and paid in the period and are not dividends in respectof, or for, that period.
2 The definition of net asset value per ordinary share is total shareholders' equity less non-cumulative preference shares and capital securities,
divided by the number of ordinary shares in issue excluding shares the company has purchased and are held in treasury.

Distribution of results by global business
Adjusted profit before tax
Year ended 31 Dec
20191

2020

Wealth and Personal Banking
Commercial Banking
Global Banking and Markets
Corporate Centre
Profit before tax

1

$m

%

$m

%

4,140
1,868
4,830
1,311
12,149

34.1
15.4
39.7
10.8
100.0

8,883
7,170
5,172
924
22,149

40.1
32.4
23.4
4.2
100.0

A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10:
Segmental analysis on page 311 of the Annual Report and Accounts 2020.

Distribution of results by geographical region
Reported profit/(loss) before tax
Year ended 31 Dec
2020

EuropeAsia
Middle East and North Africa
North America
Latin America
Global GBM goodwill impairment
Profit before tax

2019

$m

%

$m

%

(4,205)
12,832
19
168
(37)
—
8,777

(47.9)
146.2
0.2
1.9
(0.4)
—
100.0

(4,653)
18,468
2,327
767
400
(3,962)
13,347(34.9)
138.4
17.4
5.7
3.0
(29.6)
100.0

HSBC Holdings plc 2020 Results

9

HSBC adjusted profit before tax and balance sheet data
2020

Footnotes

Net operating income/(expense) before change in expectedcredit losses and other credit impairment charges

Wealth andPersonal
Banking

Commercial
BankingGlobalBanking andMarkets

Corporate
Centre

Total

$m

$m

$m

$m

$m

22,013

13,312

15,303(262)

50,366– external– inter-segment

19,9902,023

13,741(429)

18,162(2,859)(1,527)1,265

50,366—of which: net interest income/(expense)
Change in expected credit losses and other credit impairment charges

15,090(2,855)

9,317(4,754)

4,518(1,209)(1,326)
1

27,599(8,817)

Net operating income/(expense)
Total operating expenses

19,158(15,024)

8,558(6,689)14,094(9,264)

(261)
(482)

41,549(31,459)

Operating profit/(loss)
Share of profit in associates and joint ventures

4,134
6

1,869
(1)

4,830
—

(743)
2,054

10,0902,059

Adjusted profit before tax

4,140

1,868

4,830

1,311

12,149

%

%

%

%

%

34.1
68.3

15.4
50.2

39.7
60.5

10.8
(184.0)

100.0
62.5

1

Share of HSBC’s adjusted profit before tax
Adjusted cost efficiency ratio
Adjusted balance sheet data
Loans and advances to customers (net)

$m

$m

$m

$m

$m

469,186

343,182

224,364

1,255

1,037,987

Interests in associates and joint ventures
Total external assets
Customer accounts
Adjusted risk-weighted assets

447
881,918
834,759
172,78714
570,295
470,428
327,734143
1,347,440
336,983
265,147

26,080184,511
610
91,852

26,684
2,984,164
1,642,780
857,5203

20192

Footnotes

Net operating income/(expense) before change in expected credit losses
and other credit impairment charges

1– external– inter-segmentof which: net interest income/(expense)

25,565

15,164

14,869(654)

54,944

21,252
4,313
17,42316,094(930)
10,957

20,314(5,445)
5,223(2,716)
2,062(3,264)54,944—30,339Change in expected credit losses and other credit impairment (charges)/recoveries(1,348)(1,162)(153)

36(2,627)

Net operating income
Total operating expenses
Operating profit/(loss)
Share of profit in associates and joint ventures
Adjusted profit before tax

24,217(15,388)
8,829
54
8,883

14,002(6,832)
7,170
—
7,170

14,716(9,544)
5,172
—
5,172

(618)
(755)
(1,373)2,297
924

52,317(32,519)
19,7982,351
22,149

Share of HSBC’s adjusted profit before tax
Adjusted cost efficiency ratio
Adjusted balance sheet data
Loans and advances to customers (net)
Interests in associates and joint ventures
Total external assets
Customer accounts
Adjusted risk-weighted assets

3

%

%

%

%

%

40.1
60.2

32.4
45.1

23.4
64.2

4.2
(115.4)

100.0
59.2

$m

$m

$m

$m

$m

455,618
449
793,100
768,151
164,567

353,78114
523,585
397,182
332,543

252,13116
1,310,772
304,094
276,804

1,166
24,941
156,354780
81,9791,062,696
25,4202,783,811
1,470,207
855,893

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 A change in reportable segments was made in 2020. Comparative data have been re-presented accordingly. For further guidance, see Note 10:
Segmental analysis on page 311 of the Annual Report and Accounts 2020.
3 Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences andsignificant items.

10

HSBC Holdings plc 2020 Results

Consolidated income statement
for the year ended 31 December
2020

2019

$m

$m

27,57841,75630,462
54,695(14,178)
11,874(24,233)
12,023– fee income– fee expense

15,051(3,177)

15,439(3,416)

Net income from financial instruments held for trading or managed on a fair value basis

9,582

10,231

2,081

3,478

231
455

90
812

Gains less losses from financial investments
Net insurance premium income

653
10,093335
10,636

Other operating income
Total operating income

527
63,074

2,957
71,024(12,645)
50,429(14,926)
56,098(8,817)
41,612(18,076)(11,115)(2,681)(2,519)(41)(34,432)
7,180
1,597
8,777
(2,678)6,099(2,756)53,342(18,002)(13,828)(2,100)(1,070)(7,349)(42,349)
10,993
2,354
13,347(4,639)
8,708

3,898
90
1,241
870
6,099

5,969
90
1,324
1,325
8,708

Footnotes

Net interest income– interest income

1,2– interest expense
Net fee income

3

Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fairvalue through profit or loss
Changes in fair value of designated debt and related derivatives
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss

Net insurance claims and benefits paid and movement in liabilities to policyholders
Net operating income before change in expected credit losses and other credit impairment charges
Change in expected credit losses and other credit impairment charges
Net operating income
Employee compensation and benefits
General and administrative expenses
Depreciation and impairment of property, plant and equipment and right-of-use assets
Amortisation and impairment of intangible assets
Goodwill impairment
Total operating expenses
Operating profit
Share of profit in associates and joint ventures
Profit before tax
Tax expense
Profit for the year
Attributable to:– ordinary shareholders of the parent company– preference shareholders of the parent company– other equity holders– non-controlling interests
Profit for the year
Basic earnings per ordinary share
Diluted earnings per ordinary share

4

5

6

$

$

0.19
0.19

0.30
0.30

1 Interest income includes $35,293m (2019: $45,708m) of interest recognised on financial assets measured at amortised cost and $5,614m (2019:$8,259m) of interest recognised on financial assets measured at fair value through other comprehensive income.
2 Interest revenue calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised costor fair value through other comprehensive income.
3 Interest expense includes $12,426m (2019: $21,922m) of interest on financial instruments, excluding interest on financial liabilities held for tradingor designated or otherwise mandatorily measured at fair value.
4 The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
5 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
6 Includes depreciation of the right-of-use assets of $1,029m (2019: $912m). Right-of-use assets have been recognised from 1 January 2019
following the adoption of IFRS 16. Comparatives have not been restated.

HSBC Holdings plc 2020 Results

11Consolidated statement of comprehensive income
for the year ended 31 December
2020

2019

$m

$m

6,099

8,708

Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income

1,750

1,152

– fair value gains/(losses)– fair value gains transferred to the income statement on disposal

2,947
(668)

1,793
(365)

– expected credit (recoveries)/losses recognised in the income statement– income taxes

48
(577)

109
(385)

Cash flow hedges– fair value gains/(losses)

471
(157)

206
551

– fair value losses/(gains) reclassified to the income statement– income taxes

769
(141)

(286)
(59)

Share of other comprehensive income/(expense) of associates and joint ventures– share for the year

(73)
(73)

21
21

Exchange differences
Items that will not be reclassified subsequently to profit or loss:

4,855

1,044

Remeasurement of defined benefit asset/liability– before income taxes

834
1,223

13
(17)

– income taxes
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own
credit risk

(389)

30

167

(2,002)

190
(23)
212
212
—
193
8,409
14,508(2,639)
637
366
364
2
217
1,017
9,725

12,146
90
1,241
1,031
14,508

6,838
90
1,324
1,473
9,725

Profit for the year
Other comprehensive income/(expense)– before income taxes– income taxes
Equity instruments designated at fair value through other comprehensive income– fair value gains/(losses)– income taxes
Effects of hyperinflation
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income for the year
Attributable to:– ordinary shareholders of the parent company– preference shareholders of the parent company– other equity holders– non-controlling interests
Total comprehensive income for the year

12

HSBC Holdings plc 2020 Results

Consolidated balance sheet
At
31 Dec31 Dec

2020

2019

$m

$m

AssetsCash and balances at central banks

304,481

154,099

Items in the course of collection from other banks
Hong Kong Government certificates of indebtedness

4,094
40,4204,956
38,380

Trading assets
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss

231,990
45,553

254,271
43,627

Derivatives
Loans and advances to banks

307,726
81,616242,995
69,203

1,037,987
230,628

1,036,743
240,862

Financial investments

490,693443,312Prepayments, accrued income and other assets

156,412

136,680

Current tax assets
Interests in associates and joint ventures

954
26,684755
24,474

Goodwill and intangible assets
Deferred tax assets

20,443
4,483

20,163
4,632

2,984,164

2,715,152

40,42082,0801,642,780
111,901
4,343
75,266
157,439
303,001
95,492
128,624690
107,191
3,678
4,313
21,9512,779,169

38,38059,022
1,439,115
140,344
4,817
83,170164,466
239,497
104,555
118,156
2,150
97,4393,398
3,375
24,6002,522,484

10,347
14,27722,414
8,833
140,572
196,443
8,552
204,995
2,984,164

10,31913,95920,871
2,127
136,679
183,955
8,713
192,668
2,715,152

Loans and advances to customers
Reverse repurchase agreements – non-trading

Total assets
Liabilities and equity
Liabilities
Hong Kong currency notes in circulation
Deposits by banks
Customer accounts
Repurchase agreements – non-trading
Items in the course of transmission to other banks
Trading liabilities
Financial liabilities designated at fair value
Derivatives
Debt securities in issue
Accruals, deferred income and other liabilities
Current tax liabilities
Liabilities under insurance contracts
Provisions
Deferred tax liabilities
Subordinated liabilities
Total liabilities
EquityCalled up share capital
Share premium account
Other equity instruments
Other reserves
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity

HSBC Holdings plc 2020 Results

13Consolidated statement of cash flows
for the year ended 31 December
2020

2019

$m

$m

Profit before tax
Adjustments for non-cash items:

8,777

13,347

Depreciation, amortisation and impairment
Net gain from investing activities

5,241
(541)

10,519(399)

Share of profits in associates and joint ventures
Gain on disposal of subsidiaries, businesses, associates and joint ventures(1,597)—(2,354)(929)

Change in expected credit losses gross of recoveries and other credit impairment charges
Provisions including pensions

9,096
1,164

3,012
2,423

Share-based payment expense
Other non-cash items included in profit before tax

433
(906)

478
(2,297)(25,749)(3,742)

Change in net trading securities and derivatives
Change in loans and advances to banks and customers

13,150(14,131)(18,910)(53,760)

Change in reverse repurchase agreements – non-trading
Change in financial assets designated and otherwise mandatorily measured at fair value

9,950(1,962)(7,390)(2,308)Change in other assets
Change in deposits by banks and customer accounts(19,610)
226,723(21,863)
79,163

Change in repurchase agreements – non-trading
Change in debt securities in issue
Change in financial liabilities designated at fair value
Change in other liabilities
Dividends received from associates
Contributions paid to defined benefit plans
Tax paid
Net cash from operating activities
Purchase of financial investments
Proceeds from the sale and maturity of financial investments
Net cash flows from the purchase and sale of property, plant and equipment
Net cash flows from purchase/(disposal) of customer and loan portfolios
Net investment in intangible assets
Net cash flow from acquisition and disposal of subsidiaries, businesses, associates and joint ventures
Net cash from investing activities
Issue of ordinary share capital and other equity instruments
Cancellation of shares
Net sales/(purchases) of own shares for market-making and investment purposes
Redemption of preference shares and other equity instruments
Subordinated loan capital repaid
Dividends paid to shareholders of the parent company and non-controlling interests
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 Jan
Exchange differences in respect of cash and cash equivalents
Cash and cash equivalents at 31 Dec
Cash and cash equivalents comprise:– cash and balances at central banks– items in the course of collection from other banks– loans and advances to banks of one month or less– reverse repurchase agreements with banks of one month or less– treasury bills, other bills and certificates of deposit less than three months– cash collateral and net settlement accounts– less: items in the course of transmission to other banks
Cash and cash equivalents at 31 Dec

3(28,443)(9,075)(6,630)20,323761(495)(4,259)182,220(496,669)
476,990(1,446)
1,362(2,064)(603)(22,430)
1,497
—
(181)
(398)
(3,538)(2,023)(4,643)
155,147
293,742
19,434
468,323(25,540)
19,26820,06823,124633(533)(2,267)29,743(445,907)
413,186(1,343)
1,118(2,289)(83)(35,318)—(1,000)141—(4,210)(9,773)(14,842)(20,417)
312,911
1,248
293,7423

304,481
4,094
51,78865,08630,023
17,194(4,343)
468,323

154,099
4,956
41,62665,37020,132
12,376(4,817)
293,742

Footnotes

Elimination of exchange differences
Changes in operating assets and liabilities

12

1 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, asdetails cannot be determined without unreasonable expense.
2 Subordinated liabilities changes during the year are attributable to repayments of $(3.5)bn (2019: $(4.2)bn) of securities. Non-cash changes during
the year included foreign exchange gains/(losses) of $0.5bn (2019: $0.6bn) and fair value gains/(losses) of $1.1bn (2019: $1.4bn).
3 At 31 December 2020, $41,912m (2019: $35,735m) was not available for use by HSBC, of which $16,935m (2019: $19,353m) related to
mandatory deposits at central banks.

14

HSBC Holdings plc 2020 Results

Consolidated statement of changes in equity
for the year ended 31 December
Other reserves
Called up
sharecapitalandshare
premium

Other
equityinstruments

Retainedearnings3,4

Financialassetsat
FVOCI
reserveCashflowhedging
reserve

Foreignexchangereserve

Mergerand otherreserves4,5

Total
shareholders’equityNoncontrollinginterests

Total
equity

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

24,27820,871

136,679

(108)

(2)

(25,133)

27,370183,955

8,713

192,668

Profit for the year

—

—

5,229

—

—

—

—

5,229

870

6,099

Other comprehensive income (netof tax)

—

—

1,118

1,913

459

4,758

—

8,248

161

8,409

– debt instruments at fair value
through other comprehensive
income

—

—

—

1,746

—

—

—

1,746

4

1,750

– equity instruments designated atfair value through othercomprehensive income

—

—

—

167

—

—

—

167

45

212

– cash flow hedges

—

—

—

—

459

—

—

459

12

471

– changes in fair value of financial
liabilities designated at fair value
upon initial recognition arisingfrom changes in own credit risk

—

—

167

—

—

—

—

167

—

167

– remeasurement of defined
benefit asset/liability

—

—

831

—

—

—

—

831

3

834

– share of other comprehensive
income of associates and joint
ventures

—

—

(73)

—

—

—

—

(73)

—

(73)

– effects of hyperinflation– exchange differences

—
—

—
—

193
—

—
—

—
—

—
4,758

—
—

193
4,758

—
97

193
4,855

Total comprehensive income
for the year

—

—

6,347

1,913

459

4,758

—

13,477

1,031

14,508

Shares issued under employee
remuneration and share plans

At 1 Jan 2020

346

—

(339)

—

—

—

—

7

—

7

Capital securities issued7
Dividends to shareholders
Redemption of securities2
Transfers6

—
—
—
—

1,500
—
—
—

(3)
(1,331)(1,450)
435

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
(435)

1,497
(1,331)(1,450)
—

—
(692)
—
—

1,497
(2,023)(1,450)—

Cost of share-based payment
arrangements

—

—

434

—

—

—

—

434

—

434

—
24,62443
22,414(200)
140,572

11
1,816

—
457

—
(20,375)—
26,935(146)
196,443

(500)
8,552

(646)
204,995

Other movements
At 31 Dec 2020

HSBC Holdings plc 2020 Results

15

Consolidated statement of changes in equity (continued)
Other reserves
Called up
sharecapital andshare
premium

Other
equityinstruments

Retainedearnings2,3

Financialassets at
FVOCI
reserve

Cash flow
hedging
reserve

Foreignexchangereserve

Mergerand otherreserves3,4

Total
shareholders’equityNoncontrollinginterests

Total
equity

$m

$m

$m

$m

$m

$m

$m

$m

$m

$m

23,78922,367138,191(1,532)(206)(26,133)

29,777

186,253

7,996

194,249

Profit for the year

—

—

7,383

—

—

—

—

7,383

1,325

8,708

Other comprehensive income (netof tax)——(1,759)

1,424

204

1,000

—

869

148

1,017

– debt instruments at fair value
through other comprehensive
income

—

—

—

1,146

—

—

—

1,146

6

1,152

– equity instruments designatedat fair value through othercomprehensive income

—

—

—

278

—

—

—

278

88

366

– cash flow hedges

—

—

—

—

204

—

—

204

2

206

– changes in fair value of financial
liabilities designated at fairvalue upon initial recognition
arising from changes in own
credit risk——

(2,002)

—

—

—

—

(2,002)—(2,002)– remeasurement of defined
benefit asset/liability

—

—

5

—

—

—

—

5

8

13

– share of other comprehensive
income of associates and joint
ventures

—

—

21

—

—

—

—

21

—

21

– effects of hyperinflation– exchange differences

—
—

—
—

217
—

—
—

—
—

—
1,000

—
—

217
1,000

—
44

217
1,044

Total comprehensive income forthe year

—

—

5,624

1,424

204

1,000

—

8,252

1,473

9,725

Shares issued under employee
remuneration and share plans

557

—

(495)

—

—

—

—

62

—

62

Shares issued in lieu of dividends
and amounts arising thereon

—

—

2,687

—

—

—

—

2,687

—

2,687

Dividends to shareholders
Redemption of securities1
Transfers5

—
—
—

—
(1,496)—(11,683)
(12)
2,475

—
—
—

—
—
—

—
—
—

—
—
(2,475)(11,683)(1,508)
—

(777)
—
—

(12,460)(1,508)
—

—

—

478

—

—

—

—

478

—

478

(68)
—
24,278——20,871(1,000)414
136,679

—
—
(108)

—
—
(2)

—
—
(25,133)

68—
27,370(1,000)414
183,955

—
21
8,713

(1,000)435
192,668

At 1 Jan 2019

Cost of share-based payment
arrangements
Cancellation of shares6
Other movements
At 31 Dec 20191 During 2020, HSBC Holdings called $1,450m 6.20% non-cumulative US dollar preference shares. For further details, see Note 31 in the Annual
Report and Accounts 2020. In 2019, HSBC Holdings redeemed $1,500m 5.625% perpetual subordinated capital securities on which there were$12m of external issuance costs. Under IFRSs external issuance costs are classified as equity.
2 At 31 December 2020, retained earnings included 509,825,249 treasury shares (2019: 432,108,782). In addition, treasury shares are also held
within HSBC’s Insurance business retirement funds for the benefit of policyholders or beneficiaries within employee trusts for the settlement ofshares expected to be delivered under employee share schemes or bonus plans, and the market-making activities in Global Markets.
3 Cumulative goodwill amounting to $5,138m has been charged against reserves in respect of acquisitions of subsidiaries prior to 1 January 1998,
including $3,469m charged against the merger reserve arising on the acquisition of HSBC Bank plc. The balance of $1,669m has been charged
against retained earnings.
4 Statutory share premium relief under section 131 of the Companies Act 1985 (the ‘Act’) was taken in respect of the acquisition of HSBC Bank plc
in 1992, HSBC Continental Europe in 2000 and HSBC Finance Corporation in 2003, and the shares issued were recorded at their nominal value
only. In HSBC’s consolidated financial statements, the fair value differences of $8,290m in respect of HSBC Continental Europe and $12,768m in
respect of HSBC Finance Corporation were recognised in the merger reserve. The merger reserve created on the acquisition of HSBC FinanceCorporation subsequently became attached to HSBC Overseas Holdings (UK) Limited (‘HOHU’), following a number of intra-Groupreorganisations. During 2009, pursuant to section 131 of the Companies Act 1985, statutory share premium relief was taken in respect of therights issue and $15,796m was recognised in the merger reserve.
5 In 2019, an impairment of $2,475m was recognised and a permitted transfer of this amount was made from the merger reserve to retained
earnings. During 2020, a further impairment of $435m was recognised and a permitted transfer of this amount was made from the merger
reserve to retained earnings.
6 For further details, see Note 31 in the Annual Report and Accounts 2020. In August 2019, HSBC announced a share buy-back of up to $1.0bn,
which was completed in September 2019.
7 During 2020 HSBC Holdings issued $1,500m of perpetual subordinated contingent convertible securities.

16

HSBC Holdings plc 2020 Results

1Basis of preparation and significant accounting policies

The basis of preparation and summary of significant accounting policies applicable to the consolidated financial statements of HSBC andthe separate financial statements of HSBC Holdings can be found in Note 1, or the relevant Note, in the Financial Statements in the
Annual Report and Accounts 2020.

(a)Compliance with International Financial Reporting Standards

The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings comply with international
accounting standards in conformity with the requirements of the Companies Act 2006 and have also applied international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements
are also prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the International AccountingStandards Board (‘IASB’), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differencesfrom IFRSs as issued by the IASB for the periods presented. ‘Interest Rate Benchmark Reform – Phase 2’, which amends IFRS 9, IAS 39‘Financial Instruments,’ IFRS 7 ‘Financial Instruments,’ IFRS 4 ‘Insurance Contracts’ and IFRS 16 ‘Leases’, was adopted for use in the UK
and the EU in January 2021 and has been early adopted as set out below. Therefore, there were no unendorsed standards effective forthe year ended 31 December 2020 affecting these consolidated and separate financial statements.

Standards adopted during the year ended 31 December 2020
Interest Rate Benchmark Reform – Phase 2Interest Rate Benchmark Reform Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 issued in August 2020 represents
the second phase of the IASB’s project on the effects of interest rate benchmark reform, addressing issues affecting financial statements
when changes are made to contractual cash flows and hedging relationships as a result of the reform.
Under these amendments, changes made to a financial instrument measured at other than fair value through profit or loss that areeconomically equivalent and required by interest rate benchmark reform do not result in the derecognition or a change in the carrying
amount of the financial instrument, but instead require the effective interest rate to be updated to reflect the change in the interest ratebenchmark. In addition, hedge accounting will not be discontinued solely because of the replacement of the interest rate benchmark if
the hedge meets other hedge accounting criteria.
These amendments apply from 1 January 2021 with early adoption permitted. HSBC adopted the amendments from 1 January 2020 andmade the additional disclosures as required by the amendments. Further information is included in Note 15 and in ‘Financial instruments
impacted by Ibor reform’ on page 113 of the Annual Report and Accounts 2020.

Other changes
In addition, HSBC adopted a number of interpretations and amendments to standards, which had an insignificant effect on the
consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings.

(b)

Differences between IFRSs and Hong Kong Financial Reporting Standards

There are no significant differences between IFRSs and Hong Kong Financial Reporting Standards in terms of their application to HSBC,
and consequently there would be no significant differences had the financial statements been prepared in accordance with Hong Kong
Financial Reporting Standards. The ‘Notes on the financial statements’, taken together with the ‘Report of the Directors’, include theaggregate of all disclosures necessary to satisfy IFRSs and Hong Kong reporting requirements.

(c)

Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company havethe 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 andcapital resources. These considerations include stressed scenarios that reflect the increasing uncertainty that the global Covid-19
outbreak has had on HSBC’s operations, as well as considering potential impacts from other top and emerging risks, and the related
impact on profitability, capital and liquidity.

2

Tax

Tax expense
2020
Footnotes

Current tax– for this year
– adjustments in respect of prior years
Deferred tax– origination and reversal of temporary differences– effect of changes in tax rates– adjustments in respect of prior years
Year ended 31 Dec

1

2

2019

$m

$m

2,700
2,883
(183)
(22)
(341)
58
261
2,678

3,768
3,689
79
871
684
(11)
198
4,639

1 Current tax included Hong Kong profits tax of $888m (2019: $1,413m). The Hong Kong tax rate applying to the profits of subsidiaries assessable inHong Kong was 16.5% (2019: 16.5%).
2 In addition to amounts recorded in the income statement, a tax charge of $7m (2019: charge of $6m) was recorded directly to equity.

Tax reconciliation
The tax charged to the income statement differs from the tax charge that would apply if all profits had been taxed at the UK corporation
tax rate as follows:
HSBC Holdings plc 2020 Results

17

2020
$m

2019
$m

%

8,777

Profit before tax%

13,347

Tax expense

Taxation at UK corporation tax rate of 19.00% (2019: 19.00%; 2018: 19.00%)

1,668

19.0

2,536

19.0

Impact of differently taxed overseas profits in overseas locations
Items increasing tax charge in 2020:

178

2.0

253

1.9

– non-UK movements in unrecognised deferred tax– UK tax losses not recognised

608
444

6.9
5.1

12
364

0.1
2.7

– other permanent disallowables– local taxes and overseas withholding taxes

322
228

3.6
2.6

481
484

3.6
3.6

– bank levy
– adjustments in respect of prior period liabilities

202
78

2.3
0.9

184
277

1.4
2.1

– impacts of hyperinflation– impact of changes in tax rates

65
58

0.7
0.6

29
(11)

0.2
(0.1)

– non-deductible regulatory settlements– non-deductible goodwill write-down

33
—

0.4
—

5
1,421

—
10.7

Items reducing tax charge in 2020:– non-taxable income and gains

(515)

(5.8)

(844)

(6.3)

– deductions for AT1 coupon payments– effect of profits in associates and joint ventures

(310)
(250)

(3.5)
(2.8)

(263)
(467)

(2.0)
(3.5)

– UK banking surcharge– non-deductible UK customer compensation

(113)
(18)

(1.3)
(0.2)

29
382

0.2
2.9

– non-taxable gain on dilution of shareholding in SABB
– other items
Year ended 31 Dec

—
—
2,678

—
—
30.5

(181)
(52)
4,639

(1.3)
(0.4)
34.8

The Group’s profits are taxed at different rates depending on the country or territory in which the profits arise. The key applicable tax
rates for 2020 include Hong Kong (16.5%), the US (21%) and the UK (19%). If the Group’s profits were taxed at the statutory rates of thecountries in which the profits arose, then the tax rate for the year would have been 21.00% (2019: 20.90%). The effective tax rate for theyear of 30.5% (2019: 34.8%) was lower than for 2019. The effective tax rate for 2019 included a non-deductible impairment of goodwill of$7.3bn(10.7% increase in effective tax rate) and a higher level of non-deductible customer compensation (3.1% increase in effective tax
rate compared to 2020), both of which are non-recurring items. This was partly offset by the impact of non-recognition of deferred tax,
mainly in the UK ($0.4bn) and France ($0.4bn), being greater in 2020 than 2019 (9.2% increase in effective tax rate compared to 2019).
Following an amendment to IAS 12 effective 1 January 2019, the income tax consequences of distributions, including AT1 coupon
payments, were recorded in the income statement tax expense. The 2018 reconciliation has not been restated.
Accounting for taxes involves some estimation because the tax law is uncertain and its application requires a degree of judgement, whichauthorities may dispute. Liabilities are recognised based on best estimates of the probable outcome, taking into account external advice
where appropriate. We do not expect significant liabilities to arise in excess of the amounts provided. HSBC only recognises current anddeferred tax assets where recovery is probable.
Movement of deferred tax assets and liabilities
Loan
impairment
provisions

Unused tax
losses andtax credits

Derivatives,
FVOD1
and otherinvestments

Insurancebusiness

Expenseprovisions

Fixed
assetsRetirement
obligations

Other

$m

$m

$m

$m

$m

$m

$m

$m

$m

983
—
983
295
—
—
(36)

1,414
—
1,414
355
—
—
52

979
(558)
421
(274)
(23)
—
(281)

—
(1,621)(1,621)
(32)
—
—
31

650
—
650
(81)
—
—
(4)

1,002
—
1,002
(112)
—
—
11

—
(1,613)(1,613)
(190)
(387)
—
(116)

422
(401)
21
61
(660)
—
304

5,450
(4,193)1,257
22(1,070)
—
(39)

1,242
1,242
—

1,821
1,821
—

(157)
548
(705)

(1,622)—(1,622)

565
565
—

901
901
—

(2,306)—(2,306)(274)
960(1,234)170
6,037(5,867)

982
—
982
45
—
—
(44)
983
983
—

1,156
—
1,156
266
—
—
(8)
1,414
1,414
—

492
(376)
116
(386)
544
—
147
421
979
(558)

—
(1,271)(1,271)
(303)
—
—
(47)
(1,621)—(1,621)

629
—
629
(18)
—
—
39
650
650
—

1,151
—
1,151
(185)
—
—
36
1,002
1,002
—

—
(1,387)(1,387)
(149)
30
—
(107)
(1,613)—(1,613)

738
(283)
455
(141)
(391)
—
98
21
422
(401)

5,148
(3,317)
1,831
(871)
183
—
114
1,257
5,450
(4,193)

AssetsLiabilities
At 1 Jan 2020
Income statement
Other comprehensive income
EquityForeign exchange and other adjustments
At 31 Dec 2020
Assets2
Liabilities2
AssetsLiabilities
At 1 Jan 2019
Income statement
Other comprehensive income
EquityForeign exchange and other adjustments
At 31 Dec 2019
Assets2
Liabilities2

Total

1 Fair value of own debt.
2 After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets $4,483m (2019: $4,632m)
and deferred tax liabilities $4,313m (2019: $3,375m).

18

HSBC Holdings plc 2020 Results

In applying judgement in recognising deferred tax assets, management has critically assessed all available information, including futurebusiness profit projections and the track record of meeting forecasts.
The Group’s net deferred tax asset of $0.2bn (2019: $1.3bn) included $2.4bn (2019: $2.8bn) of deferred tax assets relating to the US, ofwhich $1bn related to US tax losses that expire in 13 to 17 years. Management expects the US deferred tax asset to be substantially
recovered in seven to eight years, with the majority recovered in the first five years. During 2020, the Group derecognised $250m ofdeferred tax asset relating to US state tax losses as management did not consider there to be sufficient evidence of future taxable profits
against which to recover these losses before they expire. Management’s assessment of the likely availability of future taxable profits
against which to recover the US deferred tax assets takes into consideration the reversal of existing taxable temporary differences, pastbusiness performance and forecasts of future business performance. The most recent financial forecasts approved by management covera five-year period and the forecasts have been extrapolated beyond five years by assuming that performance remains constant after thefifth year.
The Group’s net deferred tax asset of $0.2bn (2019: $1.3bn) also includes a net UK deferred tax asset of $0.6bn (2019: liability of $0.5bn),of which $0.5bn relates to UK banking tax losses created in 2020. The net UK deferred tax asset of $0.6bn excludes the deferred tax
liability arising on the UK pension scheme surplus, the reversal of which is not taken into account when estimating future taxable profits.
The UK deferred tax asset is supported by forecasts of taxable profit, also taking into consideration the history of profitability in the
combined UK banking entities and the fact that the loss arising in 2020 arose due to an identifiable and non-recurring reason, being the
economic impacts of Covid-19.

Unrecognised deferred tax
The amount of gross temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in thebalance sheet was $15.6bn (2019: $9.9bn). This amount included unused UK corporation tax losses of $9.3bn (2019: $7.3bn. Of the total
amounts unrecognised, $11.5bn (2019: $7.4bn) had no expiry date, $0.7bn (2019: $1.3bn) was scheduled to expire within 10 years andthe remaining balance is expected to expire after 10 years.
Deferred tax is not recognised in respect of the Group’s investments in subsidiaries and branches where HSBC is able to control thetiming of remittance or other realisation and where remittance or realisation is not probable in the foreseeable future. The aggregate
temporary differences relating to unrecognised deferred tax liabilities arising on investments in subsidiaries and branches is $12.1bn(2019: $13.4bn) and the corresponding unrecognised deferred tax liability was $0.7bn (2019: $1.0bn).

3

Dividends

Dividends to shareholders of the parent company
2020
Per
share

2019

Total

Settledin scrip

Per
share

Total

Settledin scrip

$

$m

$m

$

$m

$m

– fourth interim dividend
In respect of current year:

—

—

—

0.21

4,206

1,160

– first interim dividend– second interim dividend

—
—

—
—

—
—

0.10
0.10

2,013
2,021

375
795

– third interim dividend
Total

—
—

—
—

—
—

0.10
0.51

2,029
10,269

357
2,687

62.00

90
1,241

62.00

90
1,324

Dividends paid on ordinary shares
In respect of previous year:

Total dividends on preference shares classified as equity (paid quarterly)
Total coupons on capital securities classified as equity
Dividends to shareholders

1,331

11,683

On 4 January 2021, HSBC paid a coupon on its €1,250m subordinated capital securities, representing a total distribution of €30m ($36m).
No liability was recorded in the balance sheet at 31 December 2020 in respect of this coupon payment.
The distributable reserves of HSBC Holdings at 31 December 2020 were $31.3bn.

Interim dividend for 2020
After the end of the year, the Directors approved an interim dividend in respect of the financial year ended 31 December 2020 of $0.15
per ordinary share, a distribution of approximately $3,055m. The interim dividend will be payable on 29 April 2021 to holders on the
Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 12 March 2021. No
liability was recorded in the financial statements in respect of the interim dividend for 2020.
The dividend will be payable in US dollars, or in pounds sterling or Hong Kong dollars at the forward exchange rates quoted by HSBCBank plc in London at or about 11.00am on 19 April 2021, or a combination of these currencies. Particulars of these arrangements will besent to shareholders on or about 24 March 2021 and changes to currency elections must be received by 15 April 2021. The ordinary
shares in London, Hong Kong and Bermuda, and American Depositary Shares (‘ADSs’) in New York will be quoted ex-dividend on 11
March 2021. The Group has decided to discontinue the scrip dividend option as it is dilutive, including to dividend per share progression
over time.
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 29 April 2021 to holders of record on 12 March
2021. The dividend of $0.75 per ADS will be payable by the depositary in US dollars. Alternatively, the cash dividend may be invested inadditional ADSs by participants in the dividend reinvestment plan operated by the depositary, elections must be received by 9 April 2021.
Any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register orthe Bermuda Overseas Branch Register but who has not lodged the share transfer with the Principal Registrar, Hong Kong or Bermuda
Overseas Branch registrar should do so before 4.00pm local time on 12 March 2021 in order to receive the dividend.
Ordinary shares may not be removed from or transferred to the Principal Register in the United Kingdom, the Hong Kong Overseas
Branch Register or the Bermuda Overseas Branch Register on 12 March 2021. Any person wishing to remove ordinary shares to or fromeach register must do so before 4.00pm local time on 11 March 2021.
HSBC Holdings plc 2020 Results

19Transfer of ADSs must be lodged with the depositary by 11.00am on 12 March 2021 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.

4

Earnings per share

Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by theweighted average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculatedby 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 the ordinary shareholders of the parent company
2020

Profit attributable to shareholders of the parent company
Dividend payable on preference shares classified as equity
Coupon payable on capital securities classified as equity
Year ended 31 Dec

2019

$m

$m

5,229
(90)
(1,241)
3,898

7,383
(90)
(1,324)
5,969

Basic and diluted earnings per share

Footnotes

2020

2019

ProfitNumber ofshares

Per share

ProfitNumber ofshares$m(millions)$$m(millions)$

Per share

Basic
Effect of dilutive potential ordinary shares

1

3,898

20,169
73

0.19

5,969

20,15875

0.30

Diluted1

3,898

20,242

0.19

5,969

20,2330.30

1 Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted).

The number of anti-dilutive employee share options excluded from the weighted average number of dilutive potential ordinary shares is
14.6 million(2019: 1.1 million).

5

Adjusted balance sheet reconciliationAt
31 Dec 2020

Loans and advances to customers (net)
Interests in associates and joint ventures
Total external assets
Customer accounts

20

HSBC Holdings plc 2020 Results

31 Dec 2019

Reported andAdjusted

Adjusted

Currencytranslation

$m

$m

$m

$m

1,037,987
26,684
2,984,164
1,642,780

1,062,696
25,4202,783,811
1,470,207(25,953)(946)(68,659)(31,092)

1,036,743
24,474
2,715,152
1,439,115

Reported6

Reconciliation of reported and adjusted items

Footnotes

Revenue
Reported

2020

2019

$m

$m

1

50,42956,098Currency translation
Significant items

(63)

(471)
(683)

– customer redress programmes– disposals, acquisitions and investment in new businesses

21
10

163
(768)

(264)
170

(84)
—

– currency translation on significant items
Adjusted

50,366

6
54,944

ECL
Reported(8,817)(2,756)

Currency translation
Adjusted(8,817)129(2,627)

Operating expenses
Reported(34,432)(42,349)

Currency translation
Significant items

2,973

223
9,607

– fair value movements on financial instruments– restructuring and other related costs– costs of structural reform– customer redress programmes– impairment of goodwill and other intangibles– past service costs of guaranteed minimum pension benefits equalisation– restructuring and other related costs– settlements and provisions in connection with legal and regulatory matters– currency translation on significant items
Adjusted
Share of profit in associates and joint ventures
Reported
Currency translation
Significant items– impairment of goodwill– currency translation on significant items
Adjusted
Profit before tax
Reported
Currency translation
Significant items– revenue– operating expenses– share of profit in associates and joint ventures
Adjusted

2
3

4

5

—
(54)
1,090
17
1,908
12
(31,459)
1,597

6

462
462
2,059
8,777
3,372
(63)
2,973
462
12,149

158
1,281
7,349
—
827
(61)
53
(32,519)
2,354
(3)
—
—
—
2,351
13,347
(122)
8,924
(683)
9,607
—
22,14912345Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
Comprises losses associated with the RWA reduction commitments and gains relating to the business update in February 2020.
Comprises costs associated with preparations for the UK’s exit from the European Union.
Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment oftangible assets of $197m.
6 During the year, The Saudi British Bank ('SABB'), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bankin 2019. HSBC's post-tax share of the goodwill impairment was $462m.

HSBC Holdings plc 2020 Results

21

7

Contingent liabilities, contractual commitments and guarantees
2020

2019

$m

$m

Guarantees and other contingent liabilities:– financial guarantees

18,384

20,214– performance and other guarantees– other contingent liabilities

78,114
1,219

75,933
1,576

At 31 Dec
Commitments1:

97,717

97,723– documentary credits and short-term trade-related transactions– forward asset purchases and forward deposits placed

7,178
66,506

6,316
56,326– standby facilities, credit lines and other commitments to lend
At 31 Dec

771,086
844,770

734,966
797,608

1 Includes $659,783m of commitments at 31 December 2020 (31 December 2019: $600,029m), 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 clients default. As a significant portion ofguarantees and commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is notindicative of future liquidity requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 isdisclosed in Note 27 of the Annual Report and Accounts 2020.
The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to
HSBC’s annual credit review process.
Contingent liabilities arising from legal proceedings, regulatory and other matters against Group companies are excluded from this note
but are disclosed in Notes 27 and 34 of the Annual Report and Accounts 2020.

Financial Services Compensation Scheme
The Financial Services Compensation Scheme (‘FSCS’) provides compensation, up to certain limits, to eligible customers of financial
services firms that are unable, or likely to be unable, to pay claims against them. The FSCS may impose a further levy on the Group to theextent the industry levies imposed to date are not sufficient to cover the compensation due to customers in any future possible collapse.
The ultimate FSCS levy to the industry as a result of a collapse cannot currently be estimated reliably. It is dependent on various
uncertain factors including the potential recoveries of assets by the FSCS, changes in the level of protected products (including deposits
and investments) and the population of FSCS members at the time.

Associates
HSBC’s share of associates’ contingent liabilities, contractual commitments and guarantees amounted to $53.1bn at 31 December 2020(2019: $46.7bn). No matters arose where HSBC was severally liable.

8

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. Apartfrom the matters described below, HSBC considers that none of these matters are material. The recognition of provisions is determinedin accordance with the accounting policies set out in Note 1 of the Annual Report and Accounts 2020. While the outcomes of legal
proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it,
appropriate provisions have been made in respect of these matters as at 31 December 2020 (see Note 27 of the Annual Report andAccounts 2020). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to theextent 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 aclass of contingent liabilities.

Bernard L. Madoff Investment Securities LLC
Bernard L. Madoff (‘Madoff’) was arrested in December 2008 and later pleaded guilty to running a Ponzi scheme. His firm, Bernard L.
Madoff Investment Securities LLC (‘Madoff Securities’), is being liquidated in the US by a trustee (the ‘Trustee’).
Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside theUS whose assets were invested with 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 havebeen named as defendants in lawsuits arising out of Madoff Securities’ fraud.
US litigation: The Trustee has brought lawsuits against various HSBC companies and others in the US Bankruptcy Court for theSouthern 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. HSBC and other parties to the actions have moved to dismiss the Trustee’s claims. The US Bankruptcy
Court granted HSBC’s motion to dismiss with respect to certain of the Trustee’s claims in November 2016. In February 2019, the US
Court of Appeals for the Second Circuit (the ‘Second Circuit Court of Appeals’) reversed that dismissal. Following the US Supreme
Court’s denial of certiorari in June 2020, 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) havebrought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitutionof redemption payments. In December 2018, the US Bankruptcy Court issued an opinion, which ruled in favour of the defendants’ motion
to dismiss in respect of certain claims by the liquidators for Fairfield and granted a motion by the liquidators to file amended complaints.
22

HSBC Holdings plc 2020 ResultsAs a result of that opinion, all claims against one of the HSBC companies, and certain claims against the remaining HSBC defendants,
were dismissed. In May 2019, the liquidators appealed certain issues from the US Bankruptcy Court to the US District Court for theSouthern District of New York (the ’New York District Court’) and, in January 2020, the liquidators filed amended complaints on theclaims remaining in the US Bankruptcy Court. In March 2020, HSBC and other parties to the action moved to dismiss the amended
complaints in the US Bankruptcy Court. In December 2020, the US Bankruptcy Court granted in part and denied in part the defendants’
motion. This action remains pending in the US Bankruptcy Court and the New York District Court.
UK litigation: The Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recoveryof 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 2021 for UK-based defendants and November 2021 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 Appealof 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, which has listed the first of two possible hearings for April 2021.
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
claim and its claim for money damages. Herald has appealed this judgment to the Luxembourg Court of Appeal, where the matter ispending. 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.
Ireland litigation: In November 2013, Defender Limited brought an action against HSBC Institutional Trust Services (Ireland) Limited(‘HTIE’) and others, based on allegations of breach of contract and claiming damages and indemnification for fund losses. The trial
commenced in October 2018. In December 2018, the Irish High Court issued a judgment in HTIE’s favour on a preliminary issue, holdingthat Defender Limited had no effective claim against HTIE. This judgment concluded the trial without further issues in dispute being
heard. In February 2019, Defender Limited appealed the decision. In July 2020, the Irish Supreme Court ruled in part in favour of
Defender Limited and returned the case to the High Court for further proceedings, which will resume in April 2021.
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. Basedupon 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 up to or exceeding $500m, excluding costs and interest. Due to uncertainties andlimitations 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 ceaseand-desist order with the US Federal Reserve Board (‘FRB’), both of which contained certain forward-looking anti-money laundering(‘AML’) and sanctions-related obligations. HSBC also agreed to retain an independent compliance monitor (who was, for FCA purposes, a‘Skilled Person’ under section 166 of the Financial Services and Markets Act and, for FRB purposes, an ‘Independent Consultant’) to
produce periodic assessments of the Group’s AML and sanctions compliance programme. In 2020, HSBC’s engagement with theindependent compliance monitor, acting in his roles as both Skilled Person and Independent Consultant, concluded. The role of FCA
Skilled Person was assigned to a new individual in the second quarter of 2020. Separately, a new FRB Independent Consultant will be
appointed pursuant to the cease-and-desist order. The roles of each of the FCA Skilled Person and the FRB Independent Consultant are
discussed on page 188 of the Annual Report and Accounts 2020.
The FCA is conducting an investigation into HSBC Bank plc’s and HSBC UK Bank plc’s compliance with UK money laundering regulations
and financial crime systems and controls requirements. HSBC continues to cooperate with the FCA’s investigation, which is at or nearing
completion.
In May 2014, a shareholder derivative action was filed by a shareholder of HSBC Holdings purportedly on behalf of HSBC Holdings,
HSBC Bank USA N.A. (‘HSBC Bank USA’), HSBC North America Holdings Inc. and HSBC USA Inc. (the ‘Nominal Corporate Defendants’)in New York state court against certain current and former directors and officers of the Nominal Corporate Defendants (the ‘Individual
Defendants’). The complaint alleges that the Individual Defendants breached their fiduciary duties to the Nominal Corporate Defendants
and caused a waste of corporate assets by allegedly permitting and/or causing the conduct underlying the five-year deferred prosecutionagreement with the US Department of Justice (‘DoJ’), entered into in December 2012. In November 2015, the New York state court
granted the Nominal Corporate Defendants’ motion to dismiss, but the appellate court reversed the decision in November 2018 andreinstated the action. In June 2020, the parties reached an agreement to resolve this derivative action, under which HSBC has received apayment from directors and officers liability insurance providers and will continue for a period of time certain corporate governancepractices. In November 2020, the court issued an order granting final settlement approval and dismissing the action. This matter is now
concluded.
Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others onbehalf of plaintiffs who are, or are related to, victims of terrorist attacks in the Middle East or of cartel violence in Mexico. 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, 10 actions remain pending in federal courts in New York or the District of Columbia. In March, September and October
HSBC Holdings plc 2020 Results

23

2019, the courts granted HSBC’s motions to dismiss in three of these cases. In October 2020, the appellate court affirmed the dismissalof one of the actions on appeal. An appeal remains pending in another case, and plaintiffs are seeking certification to appeal in the thirdcase. HSBC filed motions to dismiss in three further cases, with two of the motions granted in June 2020, and the third granted in
November 2020. These dismissals are subject to appeal. The four remaining actions are at a very early stage.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could besignificant.

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 (the ‘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. HSBC appealed the decision and, 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 have both appealed the General Court’s decision to the European Court of Justice.
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 andracketeering 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.
In 2017 and 2018, HSBC reached agreements with plaintiffs to resolve putative class actions brought on behalf of the following fivegroups of plaintiffs: persons who purchased US dollar Libor-indexed bonds; persons who purchased US dollar Libor-indexed exchangetraded instruments; US-based lending institutions that made or purchased US dollar Libor-indexed loans; persons who purchased US
dollar Libor-indexed interest rate swaps and other instruments directly from the defendant banks and their affiliates; and persons whopurchased US dollar Libor-indexed interest rate swaps and other instruments from certain financial institutions that are not the defendantbanks or their affiliates. The New York District Court has granted final approval of each of the five referenced settlements. Additionally, anumber of other US dollar Libor-related actions remain pending against HSBC in the New York District Court and the Second Circuit
Court of Appeals.
Intercontinental Exchange (‘ICE’) Libor: Between January and March 2019, HSBC and other panel banks were named as defendants
in three putative class actions filed in the New York District Court on behalf of persons and entities who purchased instruments paying
interest indexed to US dollar ICE Libor from a panel bank. The complaints allege, among other things, misconduct related to the
suppression of this benchmark rate in violation of US antitrust and state law. In July 2019, the three putative class actions wereconsolidated, and the plaintiffs filed a consolidated amended complaint. In March 2020, the court granted the defendants’ joint motion todismiss in its entirety. This matter is on appeal.
Singapore interbank offered rate (‘Sibor’), Singapore swap offer rate (‘SOR’) and Australia bank bill swap rate (‘BBSW’):
In July and August 2016, HSBC and other panel banks were named as defendants in two putative class actions filed in the New York
District Court on behalf of persons who transacted in products related to the Sibor, SOR and BBSW benchmark rates. The complaints
allege, among other things, misconduct related to these benchmark rates in violation of US antitrust, commodities and racketeering laws,
and state law.
In the Sibor/SOR litigation, following a decision on the defendants’ motion to dismiss in October 2018, the claims against a number of
HSBC entities were dismissed, and The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’) remained as the only HSBC
defendant in this action. In October 2018, HBAP filed a motion for reconsideration of the decision based on the issue of personal
jurisdiction. This motion was denied in April 2019. Also in October 2018, the plaintiffs filed a third amended complaint naming only theSibor panel members, including HBAP, as defendants. The court dismissed the third amended complaint in its entirety in July 2019against all defendants. In August 2019, the plaintiffs filed an appeal to the Second Circuit Court of Appeals, which remains pending.
In the BBSW litigation, in November 2018, the court dismissed all foreign defendants, including all the HSBC entities, on personal
jurisdiction grounds. In April 2019, the plaintiffs filed an amended complaint, which the defendants moved to dismiss. In February 2020,
the court again dismissed the plaintiffs’ amended complaint against all the HSBC entities.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could besignificant.

Foreign exchange-related investigations and litigation
Since at least 2014, the EC has been conducting an investigation into trading activities by a number of banks, including HSBC, in theforeign exchange spot market. HSBC is cooperating with this investigation.
In January 2021, HSBC Holdings exited its three-year deferred prosecution agreement with the Criminal Division of the DoJ (the ‘FXDPA’), regarding fraudulent conduct in connection with two particular transactions in 2010 and 2011. HSBC Holdings entered into the FX
DPA in January 2018, following the conclusion of the DoJ’s investigation into HSBC’s historical foreign exchange activities. Under theterms of the FX DPA, the DoJ is expected to file a motion to dismiss the charges deferred by the FX DPA in due course.
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 HSBCBank USA, for alleged anti-competitive behaviour in the South African foreign exchange market. In August 2020, HSBC Bank plc and
HSBC Bank USA filed an application to dismiss the revised complaint, which remains pending.
In late 2013 and early 2014, various HSBC companies and other banks were named as defendants in various putative class actions
consolidated in the New York District Court. The consolidated complaint alleged, among other things, that the defendants conspired tomanipulate the WM/Reuters foreign exchange benchmark rates. In September 2015, HSBC reached an agreement with the plaintiffs
to resolve the consolidated action, and the court granted final approval of the settlement in August 2018.
A putative class action complaint making similar allegations on behalf of retail customers of foreign exchange products was filed in the
US District Court for the Northern District of California in 2015, and was subsequently transferred to the New York District Court where it
remains pending. In 2017, putative class action complaints making similar allegations on behalf of purported indirect purchasers of
24

HSBC Holdings plc 2020 Resultsforeign exchange products were filed in New York and were subsequently consolidated in the New York District Court. In April 2020,
HSBC reached an agreement with the plaintiffs to resolve the indirect purchaser action. In November 2020, the New York District Court
granted final approval of the settlement.
In September 2018, various HSBC companies and other banks were named as defendants in two motions for certification of class actions
filed in Israel alleging foreign exchange-related misconduct. In July 2019, the Tel Aviv Court allowed the plaintiffs to consolidate theirclaims and, in September 2019, the plaintiffs filed a motion for certification of the consolidated class action. In August 2020, HSBC Bankplc filed a motion to dismiss and, in January 2021, HSBC Holdings filed a motion seeking to challenge the service of the motion forcertification on defendants outside Israel. These motions remain 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 US class action
settlement. In May 2020, the New York District Court granted in part and denied in part the defendants’ motion to dismiss the US opt-out
actions. These matters remain at an early stage. It is possible that additional civil actions will be initiated against HSBC in relation to its
historical foreign exchange activities.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of these matters, which could besignificant.

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 forthe 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 allege that, from January 2004 to June 2013, the defendants conspired to manipulate the price ofgold and gold derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. The actions
were consolidated in the New York District Court. The defendants’ motion to dismiss the consolidated action was granted in part anddenied in part in October 2016. In June 2017, the court granted the plaintiffs leave to file a third amended complaint, naming a new
defendant. In October 2020, HSBC reached a settlement in principle with the plaintiffs to resolve the consolidated action. The settlement
remains subject to court approval.
Beginning in December 2015, numerous putative class actions under Canadian law were filed in the Ontario and Quebec Superior Courtsof 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 CanadianCompetition 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 othermembers of The London Silver Market Fixing Limited as defendants. The complaints 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. The actions were consolidated in the New York District Court. The defendants’ motion todismiss the consolidated action was granted in part and denied in part in October 2016. In June 2017, the court granted the plaintiffs
leave to file a third amended complaint, which names several new defendants. The court has denied the pre-existing defendants’ request
for leave to file a joint motion to dismiss, and discovery is proceeding.
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, thedefendants 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’) andPGM-based financial products for their collective benefit in violation of US antitrust laws and the US CEA. In March 2017, the defendants’
motion to dismiss the second amended consolidated complaint was granted in part and denied in part. In June 2017, the plaintiffs filed athird amended complaint. In March 2020, the court granted the defendants' motion to dismiss the 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 thetiming 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 Courtof 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. These actions are ongoing.
In December 2018, a separate action was brought against PBGB in the High Court of England and Wales by multiple claimants seeking
damages for alleged unlawful means conspiracy and dishonest assistance in connection with lending provided by PBGB to third parties inrespect of certain Ingenious film finance schemes in which the claimants participated. In June 2019, a similar claim was issued against
PBGB in the High Court of England and Wales by additional claimants. These actions are ongoing.
In June 2020, two separate claims were issued against HSBC UK Bank plc (as successor to PBGB’s business) by two separate groups ofinvestors in Eclipse film finance schemes in connection with PBGB’s role in the development of such schemes. These matters are at an
early stage.
In February 2020, a claim was issued against HSBC UK Bank plc (as successor to PBGB’s business) by two individuals in relation to theZeus film finance schemes. The claimants failed to serve the claim on time, and this claim has now lapsed. Separately, in June 2020,
HSBC UK Bank plc received an application for disclosure of documents by a law firm acting on behalf of a number of investors in the
Zeus film finance schemes. This application was dismissed by the court in November 2020.
It is possible that additional actions or investigations will be initiated against HSBC UK Bank plc as a result of PBGB’s historicalinvolvement in the provision of certain film finance-related services.
Based on the facts currently known, it is not practicable to predict the resolution of these matters, including the timing or any possible
impact on HSBC, which could be significant.
HSBC Holdings plc 2020 Results

25

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 andcompetition 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 withallegations 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 bondissuances;• an investigation by the FCA in connection with collections and recoveries operations in the UK;• an information request from the UK Competition and Markets Authority concerning the financial services sector;• 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 primarilyon (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 besignificant.

9

Events after the balance sheet date

An interim dividend for 2020 of $0.15 per ordinary share (a distribution of approximately $3,055m) was declared by the Directors after 31
December 2020. 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. These accounts were approved by the Board of Directors on 23 February 2021 andauthorised for issue.

10

Capital structure

Capital ratios
At 31 Dec
2020

2019

%

%

Transitional basis
Common equity tier 1 ratio
Tier 1 ratio
Total capital ratio

15.9
18.7
21.5

14.7
17.6
20.4

End point basis
Common equity tier 1 ratio
Tier 1 ratio
Total capital ratio

15.9
18.5
20.2

14.7
17.2
18.9

Total regulatory capital and risk-weighted assets
At 31 Dec
2020

2019

$m

$m

Transitional basis
Common equity tier 1 capital
Additional tier 1 capital
Tier 2 capital
Total regulatory capital
Risk-weighted assets

136,050
24,12324,250184,423
857,520

123,966
24,393
23,791
172,150
843,395

End point basis
Common equity tier 1 capital
Additional tier 1 capital
Tier 2 capital
Total regulatory capital
Risk-weighted assets

136,050
22,411
14,743
173,204
857,520

123,966
20,87014,473
159,309843,395

26

HSBC Holdings plc 2020 Results

Leverage ratio1
At 31 Dec
2020

Ref*
20

Tier 1 capital

21

Total leverage ratio exposure

22
EU-23

Leverage ratio
Choice of transitional arrangements for the definition of the capital measure
UK leverage ratio exposure – quarterly average2
UK leverage ratio – quarterly average2
UK leverage ratio – quarter end2

2019

$bn

$bn

158.5

144.8

2,897.1

2,726.5%%

5.5
Fully phased-in

5.3
Fully phased-in

2,555.5

2,535.4

%

%

6.1
6.2

5.8
5.7

* The references identify the lines prescribed in the EBA template.
1 The CRR II regulatory transitional arrangements for IFRS 9 are applied in both leverage ratio calculations.
2 UK leverage ratio denotes the Group’s leverage ratio calculated under the PRA’s UK leverage framework. This measure excludes qualifying central
bank balances and loans under the UK Bounce Back Loan scheme from the calculation of exposure.

11

Statutory accounts

The information in this news release does not constitute statutory accounts within the meaning of section 434 of the Companies
Act 2006 (‘the Act’). The statutory accounts for the year ended 31 December 2020 will be delivered to the Registrar of Companies
in England and Wales in accordance with section 441 of the Act. The auditor has reported on those accounts. Its report was unqualified
and did not contain a statement under section 498(2) or (3) of the Act.

12

Dealings in HSBC Holdings plc listed securities

The Group has policies and procedures that, except where permitted by statute and regulation, prohibit specified transactions in respectof its securities listed on The Stock Exchange of Hong Kong Limited. Except for dealings as intermediaries or as trustees by subsidiaries
of HSBC Holdings, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on
The Stock Exchange of Hong Kong Limited during the year ended 31 December 2020.

13

Interim dividends for 2021

In December 2020, the PRA announced that it intends to transition back to its standard approach to capital setting and shareholder
distributions through 2021. In the meantime, for 2021 dividends the PRA is content for appropriately prudent dividends to be accrued but
not paid out and the PRA aims to provide a further update ahead of the 2021 half-year results of large UK banks. As a result, the Groupwill not be paying quarterly dividends during 2021 but will consider whether to announce an interim dividend at the 2021 half-year resultsin August.
The Group will review whether to revert to paying quarterly dividends at or ahead of its 2021 results announcement in February 2022.
The Board has adopted a policy designed to provide sustainable dividends going forward. We intend to transition towards a target payout
ratio of between 40% and 55% of reported earnings per ordinary share (‘EPS’) for 2022 onwards, with the flexibility to adjust EPS for noncash significant items such as goodwill or intangibles impairments. The dividend policy could be supplemented by buybacks or special
dividends, over time and not in the near-term, should the Group find itself in an excess capital position absent compelling investment
opportunities to deploy that excess.
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. The Group has decided to discontinue the scrip dividend option as it is dilutive, including todividend per share progression over time.

14

Earnings releases and interim results

First and third quarter results for 2021 will be released on 27 April 2021 and 25 October 2021 respectively. The interim results for the six
months to 30 June 2021 will be issued on 2 August 2021.

15

Corporate governance codes

HSBC is subject to corporate governance requirements in both the UK and Hong Kong. During 2020, save to the extent referred to below,
HSBC complied with the provisions and requirements of both the UK and Hong Kong Corporate Governance Codes.
Following the UK Government’s introduction of social distancing measures and prohibition on non-essential travel and public gatherings,
it was not possible for shareholders to attend the 2020 Annual General Meeting (‘AGM’) in person. The Board was fully informed of all
relevant AGM and shareholder matters but only a limited number of Directors and essential personnel attended the AGM to ensure themeeting was quorate and to enable the business of the meeting to be conducted. Shareholders were advised to vote by submitting a
proxy in advance of the AGM and that they should only appoint the Chairman of the AGM to act as their proxy. To ensure thatshareholders did not lose the opportunity to raise questions, shareholders were encouraged to submit questions for the Board via email inadvance of the AGM. Responses to the most frequent questions across key themes were published on the HSBC website after due
consideration by the Board. None of the questions submitted covered a topic that required consideration by the auditor. Given thesemeasures, not all of the persons set out in paragraphs A.6.7 and E.1.2 of the Hong Kong Corporate Governance Code were able to attend
the AGM.
HSBC Holdings plc 2020 Results27Under the Hong Kong Code, the audit committee should be responsible for the oversight of all risk management and internal control
systems. HSBC’s Group Risk Committee is responsible for oversight of internal control, other than internal control over financial
reporting, and risk management systems. This is permitted under the UK Corporate Governance Code.
Notwithstanding that Laura Cha has served on the Board for more than nine years, the Board has determined that she continues to be
independent when taking into consideration all other relevant circumstances that are likely to impair, or could appear to impair,
independence. Laura will not be standing for re-election at the 2021 AGM.
HSBC Holdings has codified obligations for transactions in Group securities in accordance with the requirements of the UK Market Abuse
Regulation and the rules governing the listing of securities on HKEx, save that the HKEx has granted waivers from strict compliance withthe rules that take into account accepted practices in the UK, particularly in respect of employee share plans. During the year, all
Directors were reminded of their obligations in respect of transacting in HSBC Group securities and, except as disclosed on page 258 of
the Annual Report and Accounts 2020, following specific enquiry all Directors have confirmed that they have complied with their
obligations.
The Group Audit Committee has reviewed the annual results for 2020.
The Company has codified obligations for transactions in HSBC 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 enquiry, all Directors have confirmed that they have complied with their obligations in respect of transacting in Group securities
during the year.
The Directors of HSBC Holdings plc as at the date of this announcement comprise:Mark Tucker*, Noel Quinn, Laura Cha†, Henri de Castries†, James Forese†, Steven Guggenheimer†, José Antonio Meade Kuribreña†, Irene
Lee†, Heidi Miller†, Eileen Murray† David Nish†, Ewen Stevenson, Jackson Tai†, and Pauline van der Meer Mohr†.
* Non-executive Group Chairman†

Independent non-executive Director

16

Cautionary statement regarding forward-looking statements

This news release may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking
statements with respect to the financial condition, results of operations, capital position, strategy and business of the Group which canbe identified by the use of forward-looking terminology such as ‘may’, ‘will’, ‘should’, ‘expect’, ‘anticipate’, ‘project’, ‘estimate’, ‘seek’,‘intend’, ‘target’, ‘plan’, ‘believe’, ‘potential’ or ‘reasonably possible’, or the negatives thereof or other variations thereon or comparable
terminology (together, “forward-looking statements”), including the strategic priorities and any financial, investment and capital targets
described herein.
Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant stated or implied
assumptions and subjective judgements which may or may not prove to be correct. There can be no assurance that any of the mattersset out in forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. The assumptions
and judgments may prove to be incorrect and involve known and unknown risks, uncertainties, contingencies and other importantfactors, many of which are outside the control of the Group. Actual achievements, results, performance or other future events orconditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks,
uncertainties and other factors (including without limitation those which are referable to general market conditions or regulatory changes
or due to the impact of the Covid-19 outbreak).
Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at the date the statements are
made, and the Group does not assume, and hereby disclaims, any obligation or duty to update, revise or supplement them if
circumstances or management’s beliefs, expectations or opinions should change. For these reasons, recipients should not place relianceon, and are cautioned about relying on, any forward-looking statements. No representations or warranties, expressed or implied, aregiven by or on behalf of the Group as to the achievement or reasonableness of any projections, estimates, forecasts, targets, prospects orreturns contained herein.
Additional detailed information concerning important factors that could cause actual results to differ materially from this news release isavailable in our Annual Report and Accounts for the fiscal year ended 31 December 2020 which we expect to file with the SEC on Form
20-F on or around 24 February 2021.

17

Use of alternative performance measures

This news release contains non-IFRS measures used by management internally that constitute alternative performance measures underEuropean Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with SEC
rules and regulations (‘alternative performance measures’). The primary alternative performance measures we use are presented on an‘adjusted performance’ basis which is computed by adjusting reported results for the period-on-period effects of foreign currencytranslation differences and significant items which distort period-on-period comparisons. Significant items are those items which
management and investors would ordinarily identify and consider separately when assessing performance in order to better understandthe underlying trends in the business. Reconciliations between alternative performance measures and the most directly comparable
measures under IFRS are provided in our 2020 Form 20-F, when filed, which will be available at www.hsbc.com.

18

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
28

HSBC Holdings plc 2020 Results

Holdings classified as equity. The abbreviations ‘$m’and ‘$bn’ represent millions and billions (thousands of millions) of US dollars,
respectively.

19

For further information contact:

Media Relations
UK – Heidi Ashley
Telephone: +44 (0) 20 7992 2045

Investor Relations
UK – Richard O’Connor
Telephone: +44 (0) 20 7991 6590
Email: investorrelations@hsbc.com

Hong Kong – Patrick Humphris
Telephone: +852 2822 2052

Hong Kong – Mark Phin
Telephone: +852 2822 4908
Email: investorrelations@hsbc.com.hk

20

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

HSBC Holdings plc 2020 Results

29

HSBC Holdings plc
8 Canada Square
London E14 5HQ
United Kingdom
Telephone: 44 020 7991 8888
www.hsbc.com
Incorporated in England with limited liability
Registered number 617987