株探米国株
英語
エドガーで原本を確認する
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eeContractsMember2023-06-300001089113ifrs-full:FinancialInstrumentsPurchasedOrOriginatedCreditimpairedMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialGuaranteeContractsMemberifrs-full:AccumulatedImpairmentMember2023-06-300001089113ifrs-full:FinancialInstrumentsPurchasedOrOriginatedCreditimpairedMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialGuaranteeContractsMember2023-06-300001089113ifrs-full:GrossCarryingAmountMemberhsbc:StrongMember2023-06-300001089113ifrs-full:GrossCarryingAmountMemberhsbc:GoodMember2023-06-300001089113hsbc:SatisfactoryMemberifrs-full:GrossCarryingAmountMember2023-06-300001089113hsbc:Substandard1Memberifrs-full:GrossCarryingAmountMember2023-06-300001089113ifrs-full:GrossCarryingAmountMemberhsbc:CreditImpairedMember2023-06-3000010891132023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMemberhsbc:StrongMember2023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMemberhsbc:GoodMember2023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberhsbc:SatisfactoryMemberifrs-full:GrossCarryingAmountMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113hsbc:Substandard1Memberifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberhsbc:CreditImpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMemberifrs-full:AccumulatedImpairmentMember2023-06-300001089113ifrs-full:TwelvemonthExpectedCreditLossesMemberifrs-full:DebtSecuritiesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMemberhsbc:StrongMember2023-06-300001089113ifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMemberhsbc:GoodMember2023-06-300001089113ifrs-full:DebtSecuritiesMemberhsbc:SatisfactoryMemberifrs-full:GrossCarryingAmountMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113hsbc:Substandard1Memberifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberhsbc:CreditImpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:DebtSecuritiesMemberifrs-full:GrossCarryingAmountMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeCategoryMember2023-06-300001089113ifrs-full:DebtSecuritiesMemberifrs-full:LifetimeExpectedCreditLossesMemberifrs-full:FinancialInstrumentsNotCreditimpairedMemberifrs-full:FinancialAssetsMeasuredAtFairValueThroughOth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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K
 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of August 2023

Commission File Number: 001-14930

HSBC Holdings plc
 
8 Canada Square, London E14 5HQ, England
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).
 
Form 20-F   X             Form 40-F ......
 

 
This Report on Form 6-K with respect to our interim results for the six-month period ended June 30, 2023 is hereby incorporated by reference in HSBC Holdings plc’s registration statement on Form F-3 (File No. 333-253632).


Neither our website referred to herein, nor any of the information contained on our website, is incorporated by reference in the Form 6-K.                                                                                          




Opening up a world of opportunity

Our ambition is to be the preferred
international financial partner for our clients.
Our purpose, ambition and values reflect our
strategy and support our focus on execution.

> Read more on our values on page 4 of our Annual Report and Accounts 2022.
> Read more on our strategy on page 7.


Contents

Overview
1a Cautionary statement regarding forward-looking statements
1b Alternative performance measure for Insurance manufacturing value of new business
1b Certain defined terms
2
 Highlights
4
Group Chief Executive’s review
7
 Our strategy
10
 ESG overview
11
 Financial overview
17
 Global businesses
25
 Risk overview

Interim management report
28
 Financial summary
39
 Global businesses
49
 Legal entities
57
 Reconciliation of alternative performance measures
61
 Risk
61
– Key developments in the first half of 2023
61
– Areas of special interest
64
– Credit risk
93
– Treasury risk
103
– Market risk
104
 – Insurance manufacturing operations risk




Interim condensed financial statements
106
 Interim condensed financial statements
113
 Notes on the interim condensed financial statements

Additional information
139
 Shareholder information
148
 Abbreviations



Our global businesses
We serve customers through three global businesses. On pages 17 to 24 we provide an overview of our performance in the first half of 2023 for each of the global businesses, as well as our Corporate Centre.
Wealth and Personal Banking (’WPB’)
We help millions of our customers look after their day-to-day finances and manage, protect and grow their wealth.
Commercial Banking (‘CMB’)
Our global reach and expertise help domestic and international businesses around the world unlock their potential.
Global Banking and Markets (’GBM’)
We provide a comprehensive range of financial services and products to corporates, governments and institutions.

A reminder
The currency we report in is US dollars.
Constant currency performance
We supplement our IFRSs figures with non-IFRSs measures used by management internally that constitute alternative performance measures under European Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with US Securities and Exchange Commission rules and regulations. These measures are highlighted with the following symbol: <>
> Further explanation may be found on page 13.
None of the websites referred to in this Interim Report on Form 6-K for the half-year ended June 30, 2023 (the ‘Form 6-K’), including where a link is provided, nor any of the information contained on such websites is incorporated by reference in the Form 6-K.
Cover image: Opening up a world of opportunity
Our cover features Stitt, one of HSBC’s two bronze lions. Touching the lion’s paw was said to bring good luck, and that tradition continues today. The lions, Stephen and Stitt, designed by British sculptor Henry Poole, were commissioned to celebrate the opening of the newly-rebuilt HSBC building on the Bund in Shanghai in 1923. Stephen and Stitt represent the strength and endurance that is part of our heritage. Loyal and proud, they stand guard outside our offices in Hong Kong, London and Shanghai, and symbolise good fortune and stability.









Overview

Cautionary statement regarding forward-looking statements
This Form 6-K contains certain forward-looking statements with respect to HSBC’s: financial condition; results of operations and business, including the strategic priorities; financial, investment and capital targets; and ESG targets, commitments and ambitions described herein.
Statements that are not historical facts, including statements about HSBC’s beliefs and expectations, are forward-looking statements. Words such as ‘may’, ‘will’, ‘should’, ‘expects’, ‘targets’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, or the negative thereof, other variations thereon or similar expressions are intended to identify forward-looking statements. These statements are based on current plans, information, data, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.
Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC’s Directors, officers or employees to third parties, including financial analysts.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.
These include, but are not limited to:
–changes in general economic conditions in the markets in which we operate, such as new, continuing or deepening recessions, prolonged inflationary pressures and fluctuations in employment levels and the creditworthiness of customers beyond those factored into consensus forecasts (including, without limitation, as a result of the Russia-Ukraine war); the Russia-Ukraine war and its impact on global economies and the markets where HSBC operates, which could have a material adverse effect on (among other things) our financial condition, results of operations, prospects, liquidity, capital position and credit ratings; deviations from the market and economic assumptions that form the basis for our ECL measurements (including, without limitation, as a result of the Russia-Ukraine war and inflationary pressures);
– potential changes in HSBC’s dividend policy; changes and volatility in foreign exchange rates and interest rates levels, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding or capital markets, which may affect our ability to meet our obligations under financing facilities or to fund new loans, investments and businesses; geopolitical tensions or diplomatic developments producing social instability or legal uncertainty, such as the Russia-Ukraine war (including the continuation and escalation thereof) and the related imposition of sanctions and trade restrictions, supply chain restrictions and disruptions, sustained increases in energy prices and key commodity prices, claims of human rights violations, diplomatic tensions, including between China and the US, the UK, the EU, India and other countries, and developments in Hong Kong and Taiwan, alongside other potential areas of tension, which may adversely affect HSBC by creating regulatory, reputational and market risks; the efficacy of government, customer and HSBC’s actions in managing and mitigating ESG risks, in particular climate risk, nature-related risks and human rights risks, and in supporting the global transition to net zero carbon emissions, each of which can impact HSBC both directly and indirectly through our customers and which may result in potential financial and non-financial impacts; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks’ policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private defined benefit pensions; societal shifts in customer financing and investment needs, including consumer perception as to the continuing availability of credit; exposure to counterparty risk, including third parties using us as a conduit for illegal activities without our knowledge; the discontinuation of certain key Ibors and the development of near risk-free benchmark rates, as well as the transition of legacy Ibor contracts to near risk-free benchmark rates, which continues to expose HSBC to execution risks, including in relation to the effectiveness of its Ibor remediation strategy, and increases some financial and non-financial risks; and price competition in the market segments we serve;
–changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which we operate and the consequences thereof (including, without limitation, actions taken as a result of the impact of the Russia-Ukraine war on inflation); initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks, which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; changes to tax laws and tax rates applicable to HSBC, including the imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; the UK’s relationship with the EU, which continues to be characterised by uncertainty and political disagreement, particularly with respect to the regulation of financial services, despite the signing of the Trade and Cooperation Agreement between the UK and the EU; changes in UK macroeconomic and fiscal policy, which may result in fluctuations in the value of the pound sterling; general changes in government policy that may significantly influence investor decisions; the costs, effects and outcomes of regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies; and
–factors specific to HSBC, including our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques); our ability to achieve our financial, investment, capital and ESG targets, commitments and ambitions (including with respect to the commitments set forth in our thermal coal phase-out policy and our energy policy and our targets to reduce our on-balance sheet financed emissions in eight high-emitting sectors), which may result in our failure to achieve any of the expected benefits of our strategic priorities; model limitations or failure, including, without limitation, the impact that high inflationary pressures and rising interest rates have had on the performance and usage of financial models, which may require us to hold additional capital, incur losses and/or use
1a HSBC Holdings plc


Overview
compensating controls, such as judgemental post-model adjustments, to address model limitations; changes to the judgements, estimates and assumptions we base our financial statements on; changes in our ability to meet the requirements of regulatory stress tests; a reduction in the credit ratings assigned to us or any of our subsidiaries, which could increase the cost or decrease the availability of our funding and affect our liquidity position and net interest margin; changes to the reliability and security of our data management, data privacy, information and technology infrastructure, including threats from cyber-attacks, which may impact our ability to service clients and may result in financial loss, business disruption and/or loss of customer services and data; the accuracy and effective use of data, including internal management information that may not have been independently verified; changes in insurance customer behaviour and insurance claim rates; our dependence on loan payments and dividends from subsidiaries to meet our obligations; changes in our reporting frameworks and
accounting standards, which have had and may continue to have a material impact on the way we prepare our financial statements; our success in adequately integrating SVB UK into our CMB business; changes in our ability to manage third-party, fraud and reputational risks inherent in our operations; employee misconduct, which may result in regulatory sanctions and/or reputational or financial harm; changes in skill requirements, ways of working and talent shortages, which may affect our ability to recruit and retain senior management and diverse and skilled personnel; and changes in our ability to develop sustainable finance and climate-related products consistent with the evolving expectations of our regulators, and our capacity to measure the climate impact from our financing activity (including as a result of data limitations and changes in methodologies), which may affect our ability to achieve our climate ambition, our targets to reduce financed emissions in our high-emitting sectors portfolio and the commitments set forth in our thermal coal phase-out policy and our energy policy, and increase the risk of greenwashing.
Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in ‘Areas of Special Interest’ on pages 61 to 63 of this Form 6-K.
Additional detailed information concerning important factors, including but not limited to ESG-related factors, that could cause actual results to differ materially from those anticipated or implied in any forward-looking statement in this Interim Report 2023 is available in our Annual Report and Accounts for the fiscal year ended 31 December 2022 which was filed with the SEC on Form 20-F on 22 February 2023.




Alternative performance measure for Insurance manufacturing value of new business
In addition to IFRS Accounting Standards based results, HSBC also discloses Insurance manufacturing value of new business (‘Insurance Manufacturing VNB’) as an alternative performance measure within its filings to the London Stock Exchange and Hong Kong Stock Exchange. This measure provides information about value generation from new business sold during the period.
Insurance Manufacturing VNB is calculated as the sum of the IFRS 17 new business CSM and loss component adjusted for:
–a full attribution of expenses incurred within our manufacturing operations. In contrast, IFRS 17 considers only directly attributable acquisition expenses within the new business CSM measurement; and
–incorporating long-term asset spreads expected to be generated over the contract term. Under IFRS 17, new business CSM is in contrast calculated on a risk neutral basis.
Insurance Manufacturing VNB is measured before tax and after inclusion of the impact of reinsurance.

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










HSBC Holdings plc 1b




Performance in 1H23


HSBC is one of the world’s leading
international banks.
We have a clear strategy to deliver revenue
and profit growth, enhance customer service
and improve returns to shareholders.



Delivery against our financial targets
In assessing the Group’s financial performance, we use a range of financial measures that focus on the delivery of sustainable returns for our shareholders and maintaining our financial strength.
> For our financial targets, we define medium term as three to four years and long term as five to six years, commencing 1 January 2020.
> Further explanation of performance against Group financial targets can be found on page 11.
Return on average tangible equity (annualised) <>
22.4%
Revised target: Mid-teens for 2023 and 2024, excluding the impact of material acquisitions and disposals.
(Updated from ≥12% from 2023 onwards.)
(1H22: 10.6%)

Target basis operating expenses growth compared with 1H22 <>
4.3%
Target: Growth of approximately 3% compared with 2022. This measure excludes from constant currency operating expenses: notable items, the impact of retranslating the results of hyperinflationary economies at constant currency and the impact of our acquisition of SVB UK and the related investments internationally.


Common equity tier 1 capital ratio
14.7%
Target: >14%, managing in the range of 14% to 14.5% in the medium term; and manage the range down further long term.
(31 December 2022: 14.2%)

Second interim dividend per ordinary share for 1H23
$0.10
Target: Dividend payout ratio of 50% for 2023 and 2024, excluding material notable items.
Strategic performance indicators
Our strategy supports our ambition of being the preferred international financial partner for our clients.
We are committed to building a business for the long term, developing relationships that last.

> Read more on our strategic progress on page 7.
> Read more on our approach to environmental, social and governance matters on page 10.


Commercial Banking net fee income
$2.0bn
Growth of 2% compared with 1H22.

Net new invested assets
$34bn
Generated in 1H23, of which $27bn were in Asia.



Gender diversity
33.6%
Women in senior leadership roles.
(31 December 2022: 33.3%)

Sustainable finance and investment
$255.7bn
Cumulative total provided and facilitated since January 2020.
(31 December 2022: $210.7bn)


HSBC Holdings plc
1

Overview
Highlights

Financial performance reflected the impact of global interest rate rises on revenue and strong cost and balance sheet discipline. Our strategic approach has now changed from transformation to value creation.
Financial performance (1H23 vs 1H22)
–Profit before tax rose by $12.9bn to $21.7bn. This included a $2.1bn reversal of an impairment relating to the planned sale of our retail banking operations in France and a provisional gain of $1.5bn on the acquisition of Silicon Valley Bank UK Limited (‘SVB UK‘). On a constant currency basis, profit before tax increased by $13.3bn to $21.7bn. Reported profit after tax increased by $9.1bn to $18.1bn.
–Revenue increased by $12.3bn to $36.9bn. The increase was driven by higher net interest income in all of our global businesses due to interest rate rises. It also included the impacts related to the planned sale in France and the acquisition in the UK. On a constant currency basis, revenue rose by $13.2bn to $36.9bn.
–Net interest margin (‘NIM’) of 1.70% increased by 46 basis points (‘bps‘).
–Expected credit losses and other credit impairment charges (‘ECL‘) of $1.3bn reflected a more stable outlook in most markets, although inflationary pressures remain. The 1H23 charge included $0.3bn relating to the commercial real estate sector in mainland China and charges in Commercial Banking (‘CMB’) in the UK. The 1H22 charge of $1.1bn reflected heightened economic uncertainty, mainly due to the Russia-Ukraine war and inflationary pressures, and also included $0.3bn relating to the commercial real estate sector in mainland China, partly offset by releases of Covid-19-related allowances.
–Operating expenses of $15.5bn were $0.7bn or 4% lower than in 1H22,
primarily due to lower restructuring and other related costs following the completion of our cost-saving programme at the end of 2022 and from a $0.2bn impact from a reversal of historical asset impairments. This was partly offset by higher technology costs, an increase in performance-related pay, severance of $0.2bn in 1H23 and the effects of rising inflation. Target basis operating expenses rose by 4.3%.
–Customer lending balances increased by $36bn since 31 December 2022. On a constant currency basis, lending balances grew by $23bn, mainly due to the reclassification of balances associated with our retail banking operations in France from held for sale during the period, and $7bn of additional balances following our acquisition of SVB UK during 1Q23. These were partly offset by the reclassification of our business in Oman as held for sale, which resulted in a $3bn reduction. Excluding these factors, customer lending fell, reflecting weaker customer demand for wholesale lending, notably in Hong Kong and Europe.
–Customer accounts increased by $25bn since 31 December 2022. On a constant currency basis, customer accounts increased by $3bn, mainly due to the reclassification of balances associated with our retail banking operations in France from held for sale during the period. In addition, our acquisition of SVB UK resulted in growth of $7bn, and in 1H23, we reclassified our business in Oman as held for sale, resulting in a $5bn reduction. Excluding these factors, deposits fell,
reflecting reductions in Wealth and Personal Banking (‘WPB‘) and CMB in HSBC UK, as well as in Global Banking and Markets (‘GBM‘).
–Annualised return on average tangible equity (‘RoTE’) of 22.4% compared with 10.6% in 1H22. Excluding the annualised impacts related to the planned sale in France and the acquisition in the UK, annualised RoTE was 18.5%.
–Common equity tier 1 (‘CET1’) capital ratio of 14.7% increased by 0.5 percentage points compared with 4Q22, which was driven by capital generation net of the dividend accrual, and included an approximately 0.3 percentage point impact from the reversal of an impairment on the planned sale of our retail banking operations in France and the provisional gain on the acquisition of SVB UK. This was partly offset by increased risk-weighted assets (‘RWAs’) and the impact of the share buy-back announced with our 1Q23 results in May 2023.
–The Board has approved a second interim dividend of $0.10 per share. We also intend to initiate a further share buy-back of up to $2bn, which we expect to commence shortly and complete within three months.
–From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts‘, which replaced IFRS 4 ‘Insurance Contracts‘. Comparative data have been restated. For further details of our adoption of IFRS 17, see page 28.
Financial performance (2Q23 vs 2Q22)
–Reported profit before tax increased by $4.1bn to $8.8bn.
–Revenue rose by $4.5bn to $16.7bn, with growth across all of our global businesses, primarily reflecting interest rate rises. There were good performances in insurance in WPB and in Debt Capital Markets in GBM, which offset reductions in Global Foreign Exchange and Equities.
–NIM of 1.72% increased by 3bps, compared with 1Q23.
–ECL of $0.9bn increased by $0.5bn. ECL in 2Q23 included $0.3bn of charges in the commercial real estate sector in mainland China, and $0.3bn in the UK, mainly in CMB.
–Operating expenses of $7.9bn fell by $0.1bn. This was driven by lower restructuring and other related costs following the completion of our cost-saving programme at the end of 2022 and the reversal of historical asset impairments. This reduction was partly offset by $0.2bn of severance costs incurred in 2Q23, as well as higher technology spend, an increase in our performance-related pay accrual and the effects of rising inflation.
–Customer lending decreased by $9bn compared with 31 March 2023, which included a reduction of $3bn related to a reclassification of our business in Oman to held for sale. The remaining reduction was mainly in GBM in HSBC Bank plc, reflecting
client deleveraging and weaker demand as interest rates rose.
–Customer accounts decreased by $18bn compared with 31 March 2023, which included a reduction of $5bn related to the reclassification of our business in Oman to held for sale. The remaining reduction was in GBM in Europe, as corporate customers used deposits to pay down their loans, and in HSBC UK, reflecting higher cost of living and competitive pressures.
2
 HSBC Holdings plc

Highlights
Outlook
–Our strategy has enabled us to further strengthen our balance sheet, providing us with a good platform for growth in the current interest rate cycle, while maintaining cost discipline. This has given us the confidence to revise our returns guidance for 2023 and 2024. Based on the current path implied by the market for global policy rates, we are now targeting a RoTE in the mid-teens for 2023 and 2024, which excludes the impact of material acquisitions and disposals.

–Given the current market consensus for global central bank rates, we have raised our 2023 full-year guidance for net interest income to above $35bn. While the interest rate outlook remains positive, we expect continued migration to term deposits as short-term interest rates rise.
–We continue to expect ECL charges of around 40bps of average gross loans in 2023 (including lending balances transferred to held for sale). There remains a degree of uncertainty in the forward economic outlook, particularly in the UK, and we are monitoring risks related to our exposures in mainland China’s commercial real estate sector. Over the medium to long term, we continue to use a range of 30bps to 40bps of average loans for planning our ECL charges.

–We remain highly focused on maintaining cost discipline. We continue to target operating expense growth of approximately 3% for 2023, excluding the impact of foreign currency translation differences, notable items and the impact of retranslating the 2022 results of hyperinflationary economies at constant
currency. Our target also excludes the impact of our acquisition of SVB UK, and the related investments internationally, which are expected to add approximately 1% to the Group‘s operating expenses. In 2Q23, we incurred severance costs of $0.2bn, with the benefits expected to be realised towards the end of 2023 and into 2024.

–We intend to manage the CET1 ratio within our medium term target range of 14% to 14.5%, and we aim to manage this range down in the long term. In addition, our dividend payout ratio is 50% for 2023 and 2024, excluding material notable items. We have announced a second interim dividend of $0.10 per share and intend to initiate a further share buy-back of up to $2bn, which we expect to commence shortly and complete within three months. Further buy-backs for 2023 and beyond will be subject to appropriate capital levels.


Strategic progress
–In March 2023, we acquired SVB UK. This acquisition strengthens our CMB franchise and enhances our ability to serve innovative and fast-growing firms in the technology and life science sectors in the UK, and internationally. In June 2023, we launched HSBC Innovation Banking, which includes SVB UK together with newly formed teams in the US, Hong Kong and Israel. This newly formed proposition will deliver a globally connected, specialised banking proposition to support innovation businesses and their investors.
–During 1Q23, the significant interest rate rises in France resulted in the completion of the planned sale of our retail operations in France becoming less certain, as the capital required to be held by the buyer at completion of the transaction will increase significantly. As a

result we were required to change the accounting classification of our retail banking operations in France to no longer be classified as held for sale. In June, we agreed new terms for the sale of these operations that will involve HSBC retaining a portfolio of home and other loans. The transaction remains subject to information and consultation processes with respective works councils and regulatory approvals, and the parties aim to complete on 1 January 2024. An estimated pre-tax loss of up to $2.2bn is expected to be recognised in the second half of 2023 upon reclassification to held for sale.
–The plan to sell our banking business in Canada remains a key priority, as we reshape the organisation to focus on our international customer base. The transaction is now expected to complete in the first quarter of 2024, subject to regulatory and governmental approval, and we continue to classify these operations as held for sale.
–We remain committed to consider the payment of a special dividend of $0.21 per share as a priority use of the proceeds from the sale of our banking business in Canada in the first half of 2024. The remaining proceeds will accrue into CET1 capital in consideration for organic growth and investment, and we intend to use any excess capital to supplement share buy-backs.
–We remain focused on investing and growing in our areas of strength, and we have continued to make progress in executing our Wealth strategy, notably in Asia. We attracted net new invested assets of $34bn in the first half of 2023, of which $27bn was from Asia.

ESG highlights
Transition to net zero
–Our net zero transition plan, which we expect to publish later this year, will bring together our strategic approach to net zero, our science-based targets for financed emissions and our operations, and details on how we plan to embed climate considerations into our business processes, policies, risk management and governance. We intend to report annually on our implementation progress in our Annual Report and Accounts.
–In the second half of 2023, we expect to complete assessments of transition plans for remaining customers in scope of our thermal coal phase-out policy. We also expect to complete assessments for major oil and gas, and power and utilities customers globally, as well as other customers in EU and OECD markets in scope of our updated energy policy.
–As part of our ambition to support our customers in their transition to net zero and a sustainable future, we aim to provide and facilitate $750bn to $1tn of sustainable finance and investments by 2030. In 1H23, we provided and facilitated $45bn of sustainable finance and investments, bringing our cumulative amount since 1 January 2020 to $255.7bn.

Build inclusion and resilience
–We have continued to focus on building a workplace for our colleagues that is fit for the future and provides teams with the flexibility and resources to deliver for our customers. More of our colleagues are working in a hybrid way than in 1H22, and in the 2022 Snapshot survey, 71% of colleagues said they have everything they needed to feel equipped for success at work. Flexible working practices are also
helping us to attract and retain talented employees, with one-third of new joiners saying it influenced their decision to join HSBC.
–Developing the skills of colleagues plays a pivotal role in achieving our strategic goals and growth ambitions. We have continued to focus on programmes critical to our strategy such as those in wealth, sustainability, and leadership development.


HSBC Holdings plc
3

Overview
Group Chief Executive’s review

Noel Q.jpg
Noel Quinn
Group Chief Executive
We have repositioned HSBC over the last three and a half years to enable it to reach its true potential.

Return on average tangible equity
(annualised) <>
22.4%
(1H22: 10.6%)

Constant currency revenue <>
$36.9bn
(1H22: $23.6bn)
By the time we completed the first phase of our strategy at the end of 2022, the changes we had made were delivering an improved financial performance. Six months into 2023, our financial performance has continued to improve, aided by the interest rate environment. As we move further into the next phase of our strategy focused on value creation, I am optimistic about our ability to continue to deliver strong returns for our investors.

Our purpose of ‘opening up a world of opportunity’ underpins everything we do for our customers, colleagues and the communities we serve. In the first half of 2023, we continued to deliver on that promise by launching new products and services, and developing our capabilities to meet the international needs of our diverse customer base. From the new international proposition for Wealth and Personal Banking customers launched in March and the continued development of our Global Money and Global Wallet products, to the digitisation of international account opening and the globally connected HSBC Innovation Banking business launched in June, there are many examples of how my colleagues are truly living our purpose.

Many of these achievements contributed to our strong first-half performance, as we saw continued good revenue growth across all our global businesses, supported by higher interest rates. We delivered a strong annualised return on tangible equity of 22.4%, including the reversal of an impairment relating to the planned sale of our retail banking operations in France and a provisional gain on the acquisition of SVB UK, both of which were reported in the first quarter. Excluding them, we achieved an annualised return on tangible equity of 18.5%. Our strategy is working. The Board, my colleagues and our shareholders are all focused on the shared objectives of supporting our customers, driving stronger performance and creating more value for our investors.
The biggest challenge we all face remains the uncertainty within the external environment. High inflation remains a significant concern for many of our customers. Even though headline inflation rates are now falling in most countries, they remain persistently high in some markets. In the UK, we have seen limited signs of stress in the mortgage book, although we are acutely aware of the day-to-day financial challenges that some of our customers face. With more mortgage customers due to roll off fixed-term deals in the next six months, and further rate rises expected, tougher times are ahead. We will continue to communicate regularly with our customers, listen to their concerns, seek to offer them help should they want it and ensure they are aware of the range of products available to them.
Across the global economy, growth remains uneven. China’s reopening at the start of the year lifted both its economy and the prospects for global GDP growth in 2023, although weaker recent data underlines that its recovery may be slower than previously expected. Other parts of Asia, such as India and the ASEAN region, are growing robustly, as is the Middle East.

From transformation to value creation
At the end of 2022, we completed the first phase of our strategy. As a result of the work done to transform HSBC, including to reposition our portfolio, create broad-based profit generation, maintain strong cost discipline and introduce a sustainable dividend, we built a strong platform for growth. This work helped to put HSBC on track to achieve a return on tangible equity of 12%+ in 2023.
4
 HSBC Holdings plc

Group Chief Executive’s review

“As we move further into the next phase of our strategy focused on value creation, I am optimistic about our ability to continue to deliver strong returns for our investors.“









In the first half of 2023, our strategic approach has changed from transformation to value creation. While there have been – and will continue to be – opportunities to further simplify HSBC, we have shifted our focus to driving growth, while maintaining strong returns.
First, we have further leveraged our international connectivity. Our ability to connect the world’s major trading and investment blocs has always been, and remains, our greatest strength. In the first-half, our wholesale cross-border client business increased by around 50%, with growth across all regions, due mainly to rising interest rates. In Wealth and Personal Banking, we now have 6.3 million international customers, which is up 8% on the same period last year. There was also strong revenue growth in global transaction banking, which was up by 63%. Within global transaction banking, there were good performances in Foreign Exchange and in Global Payments Solutions, due to higher rates. Trade was slightly down in line with global trade volumes, although HSBC was recently named ‘Best Bank for Trade Finance’ by Euromoney for the second year in a row, while also being named ‘Best Bank in Asia’.
Second, we made further progress towards the redeployment of capital from less strategic or low-connectivity businesses into high-growth international opportunities. We are pleased to have agreed revised terms for the sale of our French retail banking operations, which we now expect to complete in early 2024. The sale of our banking operations in Canada also remains on track to complete in early 2024. We have also completed the disposal of our Greek business, and announced the planned exit of Russia, a change to the nature of our presence in Oman, and the wind-down of Wealth and Personal Banking in New Zealand.
At the same time, we are investing in growth in a strategic and targeted way. We have invested further in our Wealth business in Asia. We now have a total of 1,400 digitally enabled wealth planners in our Pinnacle business in mainland China, while we launched Global Private Banking in India in July. In June, following our acquisition of SVB UK, we also launched a new strengthened, globally connected proposition – HSBC Innovation Banking. Through it, we are building similar businesses to the former SVB UK in the US, Hong Kong and Israel, and using our international network and balance sheet strength to offer new opportunities to expand globally to our clients in the technology and life sciences sectors.

Third, we are working to diversify our revenue. A key strategic priority has been to grow fee income by investing in our Wealth business, especially in Asia. We saw the continuing benefit of this in the first-half as we grew net new invested assets by $34bn, of which $27bn were in Asia. Fee income in Commercial Banking, which is another priority area, was also up in the first-half by 6%, while collaboration revenue from referrals between our global businesses also increased by 5%.
Fourth, we have maintained tight cost discipline. Costs of $15.5bn in the first-half were $0.7bn or 4% lower than the same period last year, primarily due to lower restructuring costs following the end of our cost-saving programme at the end of 2022. On the basis of our target to limit cost growth to around 3% in 2023, operating expenses increased by 4% in the first-half, including the expected severance costs booked in the second quarter. We remain committed to disciplined cost management.
Fifth, we have reinvested cost savings in technology. Spending on technology increased by 12.8% in the first-half, and now accounts for almost a quarter of total operating expenses. Delivering faster services, reducing friction and offering more competitive products has been critical to improving the customer experience. For example, we have now migrated over 26,000 business customers in Hong Kong and the UK to our next generation digital trade platform, which is enabling us to future-proof a market-leading business.
Investing in technology is also key to enhancing our capabilities and building the bank of the future. We now have a range of ‘test and learn’ use cases for generative AI across HSBC, and are in the process of scaling those up. Last month, HSBC became the first bank to join BT’s and Toshiba’s quantum-secured metro network employing quantum technology for secure transmission of data, which will enable us to evaluate how best to use this technology against future cyber threats. We are also pleased to be working with the Hong Kong Monetary Authority on two pilots to test the e-HKD in a new payments ecosystem and to trial tokenised deposits.
HSBC Holdings plc
5

Overview I Group Chief Executive’s review

Future growth levers
In the first half of 2023, we continued to build new sources of value creation.
We brought in
$34bn
of net new invested assets in Wealth.

We provided and facilitated
$45bn
of sustainable finance and investment in 1H23.

Finally, we continued to build on our position as an enabler of the net zero transition by supporting our customers’ transition plans. In the first-half, we provided and facilitated $45bn of sustainable finance and investments, which consisted of capital markets financing and lending to clients as we continued to work closely with them on their transitions. This included a number of key deals in Asia and the Middle East. We have also continued to help unlock new climate solutions, including through our Climate Tech Venture Capital strategy. HSBC was named ‘Best Bank for Sustainable Finance in Asia’ by Euromoney for the sixth consecutive year.
Translating into strong financial performance
Our strong first-half featured good broad-based profit generation around the world. There was also higher revenue in our global businesses driven by strong net interest income, supported by continued tight cost control. We achieved an annualised return on tangible equity of 22.4%, or 18.5% excluding the two material notable items reported with our first quarter results.
Profit before tax for the first half of 2023 was $21.7bn, which was an increase of $12.9bn on the first half of 2022. This included a $2.1bn reversal of an impairment relating to the planned sale of our retail banking operations in France and a provisional gain of $1.5bn on the acquisition of SVB UK. Profit after tax increased by $9.1bn to $18.1bn.
Revenue increased by $12.3bn to $36.9bn, driven mainly by higher net interest income in all three global businesses due to interest rate rises. It also included gains related to the two aforementioned transactions in the first quarter.
Expected credit losses and other credit impairment charges were $1.3bn, which was a $0.3bn increase on the first half of 2022.
Our CET1 ratio at the end of the first-half was 14.7%. We have announced a second interim dividend of $0.10 per share, further to the $0.10 per share dividend already paid in respect of the first quarter. We are also announcing a second share buy-back of up to $2bn. We continue to expect to have substantial distribution capacity going forward.


Our strong performance in the first half of 2023 and our continued strategic progress mean that we now expect to achieve a return on tangible equity in the mid-teens for 2023 and 2024.
Thank you to my colleagues
Over the last six months, I had the opportunity to spend time with colleagues in France, Hong Kong, mainland China, Mexico, Saudi Arabia, the United Arab Emirates and the UK. I have been constantly impressed by their commitment, dedication and tireless efforts to support our customers – all of which are evident in our many achievements. I am especially grateful to those colleagues who have faced serious challenges so far this year, including the earthquakes in Türkiye in February and, of course, the ongoing cost of living crisis in many markets.
Overall, we have delivered a strong first-half performance and are confident of delivering our revised return on tangible equity target for 2023 and 2024. I am also pleased that we can reward our shareholders with strong capital returns, with substantial further distribution capacity still expected ahead.
There is still much work to do, especially given the many challenges in the global economy, but I am confident about our future as we move further into the next phase of our strategy and focus on opportunities to drive value creation, diversify our revenue and retain tight cost control.


Noel Quinn
Group Chief Executive
1 August 2023







6
 HSBC Holdings plc

Our strategy
Our strategy
We are implementing our strategy across the four strategic pillars
aligned to our purpose, values and ambition.

Our strategy remains anchored around our four strategic pillars, aligned to our purpose, values and ambition, which are:
–focus on our areas of strength;
–digitise at scale to adapt our operating model for the future;
–energise our organisation for growth; and
–support the transition to a net zero global economy.

In our Annual Report and Accounts 2022, we shared our progress in our transformation journey, which has resulted in improved financial performance and a strong foundation as we look ahead.
Our strong first-half featured broad-based profit generation around the world. There was also higher revenue across our global businesses supported by strong net interest income.
We achieved an annualised return on tangible equity of 22.4%, or 18.5% excluding the annualised impacts related to the planned sale in France and the acquisition in the UK. In our global businesses, Wealth and Personal Banking (’WPB’) revenue was up 61% on a constant currency basis, Commercial Banking (’CMB’) up 73% and Global Banking and Markets (’GBM’) up 14%.

Focus on our strengths
Across the Group, three cross-cutting themes – international connectivity, capital deployment and cost discipline – underpin our strategy upon which our global businesses execute.
Cross-cutting themes
International connectivity
Our strength in international connectivity, including taking advantage of our deep liquidity pools in the UK and Hong Kong, remains our key differentiator. In each of our global businesses, international connectivity is core to who we serve. In our wholesale business, driven mainly by interest rates, cross-border client business increased to approximately $7bn in 1H23, compared with approximately $5bn in 1H22. In addition, across wholesale transaction banking, a cornerstone of our international connectivity, revenue grew by 63%, similarly due to interest rates. Within WPB, international clients remain our most attractive client base, with an average customer providing over double the revenue compared with a domestic customer. In 1H23, we grew our international WPB client base to 6.3 million from 5.8 million customers in 1H22, with new-to-bank international customers increasing by 34%.
Capital deployment
We are repositioning our portfolio by exiting unprofitable, sub-scale or less internationally connected portfolios and investing in growth opportunities. The planned sale of our banking business in Canada, and of our retail banking operations in France, as well as the planned exits of our operations in Russia, and wind-down of our WPB business in New Zealand are all in process. We have also completed the disposal of our branch operations in Greece. In Oman, we are changing the nature of our presence, with the planned merger of our business underway with plans to establish a new branch in its place subject to regulatory approvals.
From an acquisition perspective, we acquired SVB UK in March 2023. This acquisition
strengthens our CMB franchise and enhances our ability to serve innovative and fast-growing firms in the technology and life science sectors in the UK, and internationally. We have made significant progress since then, launching HSBC Innovation Banking – a stand-alone entity supported by dedicated bankers across the UK, the US, Israel and Hong Kong, with the purpose of bridging people, products and propositions across the bank.
Within our Asian Wealth business, Pinnacle now has approximately 1,400 personal wealth planners digitally enabled, and has witnessed a positive momentum in business growth in 2Q23. In India, we launched Global Private Banking in July 2023 to serve high net worth and ultra high net worth customers onshore. We have also continued to diversify our business with more than 35% of net new invested assets in Asia originating outside Hong Kong.
Cost discipline
We remain committed to disciplined cost management. Costs of $15.5bn in 1H23 were $0.7bn or 4% lower than the same period last year, primarily due to lower restructuring costs following the end of our cost to achieve programme at the end of 2022. On a 2023 target basis, the Group’s operating expense increased by 4.3% in 1H23, including severance costs which accounted for 1.4%.
We continue to use cost savings to increase investment in our efforts to further digitise HSBC. Our spending on technology increased by 12.8% in 1H23 on a target basis, and now accounts for 23% of total operating expenses.
International
customers in WPB
6.3m
Up 8% since 1H22.
Cross-border wholesale
client business
c.$7bn
Up approximately 50% since 1H22.
Wholesale transaction
banking revenue
$13.5bn
Up 63% since 1H22.
Technology spend
+12.8%
vs 1H22.
HSBC Holdings plc
7

Overview I Our Strategy
Focus on our strengths continued

In our global businesses
In each of our global businesses, we continue to focus on areas where we are strongest and have opportunities to grow. We aim to diversify revenue streams with a focus on growing Wealth, fee-income streams and collaborating across businesses.
Wealth and Personal Banking
In WPB, we continued to make progress in executing our wealth, asset management and insurance strategy. Constant currency revenue in 1H23 was $16.2bn, up 61% compared with 1H22. Personal Banking performed strongly, with 57% growth during the same period. We recorded net new invested assets of $34bn, with $27bn coming from Asia.
We continue to develop our Global Money proposition, which is now live in eight markets with over 140 features released so far this year. We also launched our faster, fees-free payments rails for Global Money transfers in Hong Kong and the US, giving customers access to cheaper, faster payments. Global Money won ’Outstanding FX Services Solution’ at The Digital Banker's Middle East and Africa Innovation Awards 2023.
Net new invested assets in Asia in 1H23
$27bn
Up 21% since 1H22.

Commercial Banking
We saw strong performance in CMB, with constant currency revenue reaching $12.2bn, a 73% increase compared with 1H22, driven by Global Payments Solutions (’GPS’). Overall fee income, a key area of our focus, rose by 6% to $2.0bn, driven by our GPS and Global Trade and Receivables Finance businesses.
Our digital propositions continue to gain traction. We have migrated over 26,000 customers in Hong Kong and the UK to our next generation trade platform, HSBC Trade Solutions, enabling the digitisation of trade and trade-as-a-service via enhanced API connectivity. Global Wallet, a digital wallet that allows customers to transact across currencies without the need of local accounts, has launched Merchant Box in Hong Kong, a one-stop digital payments solution to help e-commerce merchants manage payments across different platforms. Kinetic, our digital business account for SMEs in the UK, now has onboarded over 66,000 customers.
CMB fee income in 1H23
$2.0bn
Up 6% since 1H22.
Global Banking and Markets
We saw sustained performance in GBM, with constant currency revenue increasing by 14% compared with 1H22, reaching $8.5bn. Collaboration revenue with our other global businesses, which remains a key opportunity for us, increased by 5% to approximately $2.0bn. GBM continues to drive international connectivity across regions, with our Western clients facilitating approximately $1.4bn of client business into Asia and the Middle East, an increase of approximately 60% compared with 1H22.1
Within our Markets and Securities Services business, we launched AI Markets, a Cloud-hosted global digital service that uses natural language processing to enable institutional investors to generate bespoke financial market analytics, browse the latest market insights and access real-time and historical data. We also went live on SwapConnect, enabling clients to enter into onshore deliverable Chinese yuan interest rate swap deals settled from outside China.
Collaboration revenue between GBM and other global businesses in 1H23
c.$2.0bn
Up 5% since 1H22.


1 Client business differs from reported revenue as it relates to certain client-specific income, and excludes certain products (including Principal Investments, CMB and GBM Other and Asset Management), Group allocations, recoveries and other non-client-related and portfolio level revenue. It also excludes Hang Seng. CMB client business excludes Business Banking customers. GBM client business includes an estimation of client-specific day one trade-specific revenue from Markets and Securities Services products, which excludes ongoing mark-to-market revenue and portfolio level revenue such as hedging. Cross-border client business represents the income earned from a client’s entity domiciled in a different geography than from where the client group’s global relationship is managed.
8
 HSBC Holdings plc

Our strategy
Digitise at scale
We are continuing to invest in innovative digital solutions and deploying them rapidly, delivering better banking services for our customers and improving our operational efficiency. In 1H23, approximately $3.5bn or 23% of our overall operating expenses on a target basis were dedicated to technology, up from approximately 21% in 1H22.
We are making digital banking more seamless and efficient for our customers and building digital solutions to enable international customers to take their bank with them wherever they are in the world.
As a result, more of our customers are engaging with us through digital channels. At the end of May 2023, 51% of our WPB customers were active on our mobile services, compared with 45% at the end of May 2022. A total of 48% of WPB sales were also made digitally at the end of May 2023, compared with 40% at the end of May 2022. Within CMB, 82% of our customers were digitally active at the end of May 2023, compared with 76% at the end of May 2022.

To improve our operational efficiency, we are digitising our processes and modernising our systems across the bank. We are using the power of the Cloud to process large volumes of data. Our Cloud adoption rate, which is the percentage of our technology services on the private or public Cloud, increased from 31% at the end of 1H22 to 37% at the end of 1H23.

We are embracing disruptive technologies to help enhance our services, strengthen our cybersecurity, and unlock future innovation. These include artificial intelligence (’AI’), central bank digital currencies, and quantum computing to develop and harness their potential to help reshape banking.
Our award-winning anti-money laundering AI solution is now deployed in five markets, covering over 75% of our customers. We also have a range of ‘test and learn’ use cases of generative AI, as we explore the potential of this technology.

We are participating in two digital currency pilots with the Hong Kong Monetary Authority. The first will develop a new payments ecosystem to trial the use of eHKD, with the potential to lower transaction costs and reduce fraud. The second will test tokenised deposits with Visa in Asia.
We are leading research into quantum computing for financial services. In 1H23, we became the first bank to join BT’s and Toshiba’s quantum-secured metro network, employing quantum key distribution to securely connect our headquarters to our data centre using data encryption keys.
Our aim is to deliver world-class digital banking, now and for the future.




Energise for growth
Empowering and energising our colleagues is crucial for inspiring a dynamic culture. We remained focused on creating a diverse and inclusive environment, especially in senior leadership roles. We achieved 33.6% female representation in senior leadership positions by the end of 1H23, and are on track to achieve our target of 35% by 2025.1
In 2022, we also set a Group-wide ethnicity strategy to better represent the communities we serve. We are making good progress to meet this, with 2.8% of leadership roles in the UK and US held by colleagues of Black heritage in 1H23.

We have strengthened the development programmes offered to our most senior leaders through the continuation of our Enterprise Leadership Programme and the launch of a new range of interventions designed to build the knowledge, skills and networks of our Managing Directors.
We outline how we put our purpose and values into practice in the following ‘ESG overview‘ section.

1 This data excludes Saudi Arabia due to local data restrictions and Canada due to the agreed sale of the banking business.

Transition to net zero
As part of our ambition to support our customers through the transition to net zero and to a sustainable future, we aim to provide and facilitate $750bn to $1tn of sustainable finance and investments by 2030. In 1H23, we provided and facilitated $45bn of sustainable finance and investments, bringing our cumulative amount since 1 January 2020 to $255.7bn.
We also continued to demonstrate progress towards our net zero ambition. In December 2022 we published our updated energy policy, which is now extended to the wider energy sector.
We continue to help unlock new climate solutions, focusing on supporting innovation in critical areas such as green technologies.
We are expanding the number of sectors where we plan to provide, and make progress towards, 2030 on-balance sheet financed emissions targets. These include the shipping, agriculture, commercial real estate and residential real estate sectors, and will be in addition to the carbon-intensive sectors we have already set targets for, as published in our Annual Report and Accounts 2022 in February.

Our aim to support our customers through their own journeys to transition to net zero remains a key area of focus and we continue to work towards it through the facilitation of sustainable finance and investments.
> For further details on our climate ambition, see the following ‘ESG overview’ section.
HSBC Holdings plc
9

Overview
ESG overview
We are committed to embedding strong environmental,
social and governance principles in the way we do business.

Our approach
Our approach to ESG is shaped by our purpose and values, and a desire to create sustainable long-term value for our stakeholders. As an international bank with significant breadth and scale, we understand that we can have a significant impact in helping to tackle ESG challenges and realise opportunities. We also recognise the complexity of ESG issues. Our ESG efforts are focused on the areas which align most closely to our strategy, purpose and values, and where we can help make a significant difference: the transition to net zero, building inclusion and resilience, and acting responsibly.
Transition to net zero
We continue to make progress on our net zero ambition of becoming net zero in our operations and supply chain by 2030 and aligning our financed emissions to net zero by 2050, recognising we have a significant role to play in enabling the transition to a net zero global economy.
We are expanding the number of sectors where we plan to provide, and make progress towards, 2030 on-balance sheet financed emissions targets. These include the shipping, agriculture, commercial real estate and residential real estate sectors, and will be in addition to the carbon-intensive sectors we have already set targets for, as published in our Annual Report and Accounts 2022 in February.
Our updated thermal coal exposures dating back to 31 December 2020 are expected to be made available for reporting in 2023, although this continues to be dependent on availability and quality of data. We aim to update our baseline facilitated emissions from our capital markets activities for the oil and gas, and power and utilities sectors following the publication of the Partnership for Carbon Accounting Financials (‘PCAF’) standard for capital markets, which is expected later this year.
In December 2022, we published an updated energy policy covering the broader energy system including upstream oil and gas, oil and gas power generation, hydrogen, renewables and hydropower, nuclear, biomass and energy from waste. We also updated our thermal coal phase-out policy.
For further details of our policies, see page 65 of our Annual Report and Accounts 2022. We continue to focus on the implementation of these policies through customer engagement and assessment of their transition plans.
We continue to unlock new climate solutions, focusing on supporting innovation in critical areas such as climate technologies. HSBC Asset Management’s Climate Tech Venture Capital strategy has deployed $30m of capital to date including investing in Chargetrip, a European start-up developing electric vehicle routing and range technology. In 2Q23, HSBC Asset Management launched a ‘Purpose’ share class, designed to align with the corporate social objectives of our customers. The share class focuses on addressing gender, racial and ethnic inequality in our societies.
In the first half of 2023, we undertook an analysis of the agri-food sector in Europe using the draft Taskforce on Nature-related Financial Disclosures’ (‘TNFD’) framework. We aim to use this analysis to inform the next steps in expanding our risk management framework to incorporate nature considerations.
Build inclusion and resilience
We are committed to building an inclusive workplace where the best want to work. We place a strong focus on recruiting and retaining diverse talent to better represent our communities. Data is core to this and we have enabled 91% of our colleagues to disclose their ethnicity, with 58% currently choosing to do so.
We have continued to develop the skills of our colleagues to support the achievement of our strategic priorities. Our Sustainability Academy was launched in 2022 to improve the skills of key groups of colleagues in support of our net zero ambitions. The academy has been strengthened with external partnerships with Imperial College London and the Global Association of Risk Professionals. The Accelerating Wealth Programme has continued to support our business growth ambitions in Asia, by attracting and developing individuals with transferable skills into front-line wealth management roles through an immersive re-skilling programme.

Cost of living pressures have continued to be felt around the world, and we have provided a range of resources for colleagues, including financial guidance and assistance programmes. Our 2022 reward survey showed a nine percentage-point improvement in colleagues believing they are paid fairly for the work they do. While this is encouraging progress, we continue to review our approach to performance and pay to ensure we are able to motivate colleagues in a way that is authentic to our culture and values.
We know that many of our customers around the world are also facing increasing cost of living pressures, and we are committed to helping them. We continue to proactively take steps to help prevent customers from falling into financial difficulty, and work closely with those who could benefit from additional assistance. We have developed a range of initiatives and tools designed to support financial resilience and build the financial capability of our customers.
We drive inclusion for our customers by identifying and addressing barriers to finance and financial markets. We aim to simplify the banking experience by providing tools to help customers manage their finances more easily, as well as provide education and support to help them make the most of their money. We also provide finance to our clients in a way that aims to help them improve their social outcomes. We engage with the communities we operate within through philanthropic giving, disaster relief and volunteering.
Act responsibly
Our purpose-led conduct approach guides us to do the right thing and to focus on the impact we have for our customers and the financial markets in which we operate. It is incorporated into the way we design, approve, market and manage products and services. It complements our purpose and values and, together with more formal policies and the tools we have to do our jobs, provides an enterprise-wide, outcome-focused conduct method.

10
 HSBC Holdings plc

Financial overview
Financial overview
In assessing the Group’s financial performance, management uses a range of
financial measures that focus on the delivery of sustainable returns for our
shareholders and maintaining our financial strength.
Executive summary
Financial performance in the first half of 2023 benefited from the impact of interest rate rises while operating expenses continued to reflect ongoing cost discipline, despite inflationary pressures.
Reported profit before tax of $21.7bn increased by $12.9bn compared with 1H22. This included a $2.1bn reversal of an impairment relating to the planned sale of our retail banking operations in France, and a provisional gain of $1.5bn on the acquisition of SVB UK in March. The increase in reported profit before tax also reflected revenue growth from the impact of interest rate rises. Lower reported operating expenses mainly reflected reduced restructuring costs following the completion of our cost-saving programme at the end of 2022 and favourable foreign currency translation differences. Meanwhile ECL increased, with 1H23 including charges relating to the commercial real estate sector in mainland China and to CMB in the UK, while 1H22 benefited from releases of Covid-19-related allowances.
Our annualised return on average tangible equity (‘RoTE’) for 1H23 was 22.4%, which included the annualised impact of our provisional gain on the acquisition of SVB UK and the reversal of an impairment on the planned sale of our retail banking operations in France. After excluding these transactions, annualised RoTE was 18.5%. The annualised RoTE in 1H23 is expected to be higher than in the second half of 2023, due to the impacts of these transactions, as well as other seasonal factors.
At 30 June 2023, the Group’s CET1 ratio of 14.7% increased by 0.5 percentage points from 31 December 2022. The Board has announced a second interim dividend of $0.10 per ordinary share.













Delivery against Group financial targets
Return on average tangible equity (annualised) (%) Arrowss.jpg
22.4%
(1H22: 10.6%)
We achieved an annualised RoTE of 22.4%, compared with 10.6% in 1H22. Our 1H23 RoTE annualised the impact of our provisional gain on the acquisition of SVB UK and the reversal of an impairment on the planned sale of our retail banking operations in France. Excluding the impacts related to these transactions, annualised RoTE was 18.5%.
Our strategy has enabled us to further strengthen our balance sheet, providing us with a good platform for growth in the current interest rate cycle, while maintaining cost discipline. This has given us the confidence to revise our returns guidance for 2023 and 2024. Based on the current path implied by the market for global policy rates, we are now targeting a RoTE in the mid-teens for 2023 and 2024, which excludes the impact of material acquisitions and disposals.
Target basis operating expenses growth compared with 1H22 <>
4.3%
(1H23: $15.3bn; 1H22: $14.7bn)
In 2023, the Group is targeting to limit cost growth to approximately 3%, excluding the impact of foreign currency translation differences, notable items and the impact of retranslating the 2022 results of hyperinflationary economies at constant currency. Our target also excludes the impact of our acquisition of SVB UK, and the related investments internationally, which are expected to add approximately 1% to the Group‘s operating expenses.
On this basis, the Group’s operating expenses increased by $0.6bn or 4.3% compared with 1H22.
We announced at our 2022 full-year results that we intend to incur up to $0.3bn severance costs during 2023, with the benefits expected to be realised towards the end of 2023 and into 2024. During 1H23, we incurred severance costs of $0.2bn.

Capital and dividends
CET1 ratio
14.7%
(31 December 2022: 14.2%)
At 30 June 2023, our CET1 ratio was 14.7%, up 0.5 percentage points from 31 December 2022. This was driven by capital generation net of the dividend accrual, and included an approximately 0.3 percentage point impact from the reversal of an impairment on the planned sale of our retail banking operations in France and the provisional gain on the acquisition of SVB UK. This was partly offset by increased RWAs and the impact of the share buy-back announced with our 1Q23 results in May 2023.
We intend to manage the CET1 ratio within our medium term target range of 14% to 14.5%, and we aim to manage this range down in the long term. We intend to continue to manage capital efficiently, returning excess capital to shareholders where appropriate. Our capital distributions remain independent of the reversal of the impairment of our retail banking operations in France and our provisional gain on the acquisition of SVB UK.
Alongside our 1H23 results, the Board has announced a second interim dividend of $0.10 per ordinary share. The total dividend in respect of 1H23 was $0.20 per ordinary share. We also intend to initiate a share buy-back of up to $2bn, which we expect to commence shortly and complete within three months.
Given our current forecast returns trajectory, we are targetting a dividend payout ratio of 50% for 2023 and 2024, excluding material notable items, comprising the impacts of the planned sale of our retail banking operations in France, the agreed sale of our banking business in Canada and the provisional gain following the acquisition of SVB UK. Our dividend payout ratio also excludes the earnings of our Canada business from 30 June 2022 until completion of the agreed sale.
Second interim dividend per ordinary share in respect of 2023
$0.10
HSBC Holdings plc
11

Overview | Financial overview
Key financial metrics
Half-year to
30 Jun 30 Jun
2023 2022
Reported results
Profit before tax ($m)
 21,657  8,780 
Profit after tax ($m)
 18,071  8,931 
Cost efficiency ratio (%)
 41.9  65.7 
Net interest margin (%) 1.70  1.24 
Basic earnings per share ($) 0.86  0.40
Diluted earnings per share ($)
 0.86  0.40 
Dividend per ordinary share (in respect of the period) ($) 0.20  0.09 
Alternative performance measures <>
Constant currency profit before tax ($m)
 21,657  8,404 
Constant currency cost efficiency ratio (%)
 41.9  65.7 
Expected credit losses and other credit impairment charges (annualised) as % of average gross loans and advances to customers (%)
 0.28  0.21 
Expected credit losses and other credit impairment charges (annualised) as % of average gross loans and advances to customers, including held for sale (%)
 0.26  0.21 
Basic earnings per share excluding material notable items ($)1
 0.70  0.29 
Return on average ordinary shareholders’ equity (annualised) (%)
 20.8  9.9 
Return on average tangible equity (annualised) (%)
 22.4  10.6 
Return on average tangible equity excluding strategic transactions (annualised) (%)2
 18.5  10.6 
Target basis operating expenses ($m)3
 15,319  14,683 
At
30 Jun 31 Dec
2023 2022
Balance sheet
Total assets ($m)
 3,041,476  2,949,286 
Net loans and advances to customers ($m)
 959,558  923,561 
Customer accounts ($m)
 1,595,769  1,570,303 
Average interest-earning assets, year to date ($m) 2,162,662  2,143,754 
Loans and advances to customers as % of customer accounts (%)
 60.1  58.8 
Total shareholders’ equity ($m)
 184,170  177,833 
Tangible ordinary shareholders’ equity ($m)
 153,234  146,927 
Net asset value per ordinary share at period end ($) 8.44  8.01 
Tangible net asset value per ordinary share at period end ($) 7.84  7.44 
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)4,5
 14.7  14.2 
Risk-weighted assets ($m)4,5
 859,545  839,720 
Total capital ratio (%)4,5
 19.8  19.3 
Leverage ratio (%)4,5
 5.8  5.8 
High-quality liquid assets (liquidity value, average) ($bn)5,6
 631  647 
Liquidity coverage ratio (average) (%)5,6
 132  132 
Share count
Period end basic number of $0.50 ordinary shares outstanding (millions)
 19,534  19,739 
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions)
 19,679  19,876 
Average basic number of $0.50 ordinary shares outstanding (millions)
 19,693  19,849 
For reconciliations of our reported results to a constant currency basis, including lists of notable items, see page 39. Definitions and calculations of other alternative performance measures are included in our ‘Reconciliation of alternative performance measures’ on page 57.
1 At 2Q23, earnings per share included the impact of the provisional gain recognised in respect of the acquisition of SVB UK of $0.08 (2Q22: nil); the reversal of the impairment loss related to the planned sale of our retail banking operations in France of $0.08 (2Q22: nil); and the agreed sale of our banking business in Canada of $nil (2Q22: $nil). Additionally, the earnings per share at 2Q22 included the impact of the recognition of certain tax assets of $0.11.
2 Excludes impacts of the reversal of the impairment loss of $1.6bn (net of tax) relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale, and the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK, both recognised in 1Q23.
3 Excluding the impact of retranslating prior year costs of hyperinflationary economies at constant currency.
4 Unless otherwise stated, regulatory capital ratios and requirements are based on the transitional arrangements of the Capital Requirements Regulation in force at the time. At 30 June 2023, the IFRS 9 add-back to CET1 capital was immaterial. References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the UK‘s version of such regulation or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently amended under UK law.
5 Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those subsequently submitted in regulatory filings. Where differences are significant, we will restate in subsequent periods.
6 The liquidity coverage ratio is based on the average month-end values over the preceding 12 months.
12
 HSBC Holdings plc

Financial overview
Basis of presentation
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As required by the standard, the Group applied the requirements retrospectively with comparative data previously published under IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022 transition date.
For more information, see ‘Changes to presentation from 1 January 2023’ on page 28.
Changes to our reporting framework
On 1 January 2023, we updated our financial reporting framework. We no longer report ‘adjusted’ results, which exclude the impact of both foreign currency translation differences and significant items. Instead, we
compute constant currency performance by adjusting comparative reported results only for the effects of foreign currency translation differences between the relevant periods.
Constant currency performance
Constant currency performance is computed by adjusting reported results of comparative periods for the effects of foreign currency translation differences, which distort period-on-period comparisons.
We consider constant currency performance to provide useful information for investors by aligning internal and external reporting, and reflecting how management assesses period-on-period performance.
Notable items
We separately disclose ‘notable items‘, which are components of our income statement
that management would consider as outside the normal course of business and generally non-recurring in nature.
The tables on pages 39 to 41 and pages 51 to 54 detail the effects of notable items on each of our global business segments and legal entities during 1H23 and 1H22.
Management view of revenue on a constant currency basis
Our global business segment commentary includes tables that provide breakdowns of revenue on a constant currency basis by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed.


Reported results
1H23 compared with 1H22 – reported performance
Half-year to
Variance
Reported results
30 Jun 2023
30 Jun 2022
1H23 vs 1H22
Impact of FX
$m
$m
$m
%
%
Net operating income before change in expected credit losses and other credit impairment charges (‘revenue’)
 36,876  24,545  12,331  50  (6)
ECL
 (1,345) (1,087) (258) (24) 2 
Net operating income
 35,531  23,458  12,073  51  (6)
Total operating expenses
 (15,457) (16,127) 670  4  4 
Operating profit/(loss)
 20,074  7,331  12,743  >100 (11)
Share of profit in associates and joint ventures
 1,583  1,449  134  9  (7)
Profit before tax
 21,657  8,780  12,877  >100 (11)
Tax income/(expense)
 (3,586) 151  (3,737) >(100) >(100)
Profit/(loss) after tax
 18,071  8,931  9,140  >100 (7)


Half-year to
30 Jun 2023 30 Jun 2022
Notable items $m $m
Revenue
Disposals, acquisitions and related costs 3,321  (288)
Fair value movements on financial instruments 15  (371)
Restructuring and other related costs —  68 
Currency translation on revenue notable items —  14 
Operating expenses
Disposals, acquisitions and related costs (118) — 
Restructuring and other related costs 47  (1,040)
Currency translation on operating expenses notable items —  31 



HSBC Holdings plc
13

Overview | Financial overview
1H23 compared with 1H22 – reported performance continued
Reported profit
Reported profit before tax of $21.7bn was $12.9bn higher than in 1H22. This was primarily driven by an increase in revenue due to continued growth in net interest income, reflecting the impact of interest rate rises. Revenue growth also included a $2.1bn reversal of an impairment relating to the planned sale of our retail banking operations in France, and a provisional gain of $1.5bn recognised on the acquisition of SVB UK. Reported operating expenses were lower, mainly reflecting reduced restructuring and other related costs following the completion of our cost-saving programme at the end of 2022.
Reported profit after tax of $18.1bn was $9.1bn higher than in 1H22. This included a higher tax expense, notably as 1H22 included a net $1.8bn gain, mainly on the recognition of a deferred tax asset.
Reported revenue
Reported revenue of $36.9bn was $12.3bn or 50% higher, and included the reversal of an impairment relating to the planned sale of our retail banking operations in France and a provisional gain on the acquisition of SVB UK, as described above.
The increase also reflected the impact of interest rate rises, mainly in Global Payments Solutions (‘GPS‘) in CMB and GBM, and in Personal Banking and Global Private Banking in WPB.
In GBM, revenue increased in Markets and Securities Services (‘MSS’), mainly in Global Debt Markets reflecting favourable primary market conditions and a better trading performance, and also in Securities Services and Global Foreign Exchange.
There was a good performance in our insurance business in WPB, while the increase in revenue in Corporate Centre included higher revenue in Central Treasury and lower losses relating to the restructuring of our business in Europe.
These factors were partly offset by lower Credit and Lending revenue in CMB, primarily driven by margin compression, and
in GBM, reflecting an enhanced focus on returns and weaker client demand. In MSS in GBM, Equities revenue fell due to lower customer activity. Revenue also reduced in Markets Treasury due to the impact of rising interest rates on our funding costs and flattening yield curves. This revenue is allocated to our global businesses.
Reported ECL
Reported ECL of $1.3bn were $0.3bn or 24% higher. The 1H23 charge included stage 3 charges of $1.1bn. There were charges of $0.3bn related to the commercial real estate sector in mainland China and charges in CMB in the UK. The 1H23 charge reflected a more stable outlook in most markets, although inflationary pressures remain.
In 1H22, ECL included charges of $0.3bn relating to the commercial real estate sector in mainland China, as well as Russia-related exposures. It also included additional stage 1 and stage 2 allowances to reflect heightened levels of economic uncertainty and inflationary pressures, in part offset by the release of most of our remaining Covid-19-related allowances.
Reported operating expenses 
Reported operating expenses of $15.5bn were $0.7bn or 4% lower, mainly due to a reduction in restructuring and other related costs of $1.1bn following the completion of our cost-saving programme, which concluded at the end of 2022. The reduction also included a $0.2bn impact from the reversal of historical asset impairments, the impact of our continued cost discipline, and favourable foreign currency translation differences between the periods of $0.6bn.
These factors were partly offset by higher technology spend of $0.5bn, an increase in our performance-related pay accrual of $0.2bn and severance payments of $0.2bn. Our operating expenses also rose due to the impact of higher inflation and incremental costs following our acquisition of SVB UK.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of $1.6bn was $0.1bn or 9%
higher, reflecting an increase in the share of profit from Saudi Awwal Bank (‘SAB’), formerly The Saudi British Bank, and Bank of Communications Co., Limited (‘BoCom’).
Tax expense
Tax in 1H23 was a charge of $3.6bn, representing an effective tax rate of 16.6%. The effective tax rate for 1H23 was reduced by 1.9 percentage points by the non-taxable provisional gain on the acquisition of SVB UK and by 2.1 percentage points by the release of provisions for uncertain tax positions. Tax in 1H22 was a credit of $151m. This was mainly due to a $2.1bn credit arising from the recognition of a deferred tax asset on historical tax losses of HSBC Holdings as a result of improved profit forecasts for the UK tax group and a charge of $0.3bn for uncertain tax positions. Excluding these items, the effective tax rate for 1H22 was 18.4%.
Return on average tangible equity
In 1H23, our annualised RoTE was 22.4%. Excluding the impact of the reversal of an impairment relating to the planned sale of our retail banking operations in France and the provisional gain of $1.5bn on the acquisition of SVB UK, annualised RoTE was 18.5%.

Reported profit after tax in 1H23
$18.1bn
(1H22: $8.9bn)

Reported net interest income in 1H23
$18.3bn
Up 36% compared with 1H22.

14
 HSBC Holdings plc

Financial overview
Reported performance – 2Q23 vs 2Q22

Quarter ended
Reported results
30 Jun 2023
30 Jun 2022
31 Mar 2023
2Q23 vs 2Q22
Impact of FX
$m
$m
$m
$m
%
%
Net operating income before change in expected credit losses and other credit impairment charges (‘revenue’)
 16,705  12,240  20,171  4,465  36  (2)
ECL
 (913) (447) (432) (466) (104) 3 
Net operating income
 15,792  11,793  19,739  3,999  34  (2)
Total operating expenses
 (7,871) (7,949) (7,586) 78  1  2 
Operating profit/(loss)
 7,921  3,844  12,153  4,077  106  (2)
Share of profit in associates and joint ventures
 850  792  733  58  7  (6)
Profit before tax
 8,771  4,636  12,886  4,135  89  (3)
Tax income/(expense)
 (1,726) 863  (1,860) (2,589) 300 
Profit/(loss) after tax
 7,045  5,499  11,026  1,546  28 

Quarter ended
30 Jun 2023 30 Jun 2022 31 Mar 2023
Notable items $m $m $m
Revenue
Disposals, acquisitions and related costs (241) (288) 3,562 
Fair value movements on financial instruments —  (171) 15 
Restructuring and other related costs —  (12) — 
Currency translation on revenue notable items —  23  77 
Operating expenses
Disposals, acquisitions and related costs (57) —  (61)
Restructuring and other related costs 47  (589) — 
Currency translation on operating expenses notable items —  1  (2)

Reported profit
Reported profit before tax of $8.8bn was $4.1bn higher than in 2Q22, reflecting an increase in revenue driven by rising interest rates. Growth also reflected the non-recurrence of losses related to the planned restructure of our businesses in Europe.
Reported profit after tax of $7.0bn was $1.5bn higher than in 2Q22. This included a higher tax expense, notably as 2Q22 included a $1.8bn deferred tax gain.
Reported revenue
Reported revenue grew by $4.5bn to $16.7bn. Net interest income increased in all global businesses, mainly as a result of higher interest rates, a good performance in life insurance manufacturing in WPB and increased activity in debt capital markets in GBM.
These increases were partly offset by reductions in revenue in Global Foreign Exchange, compared with a strong 2Q22, and in Equities. There was also a reduction in Markets Treasury revenue from lower net interest income due to the impact of rising interest rates on our funding costs and
flattening yield curves. This revenue is allocated to our global businesses.
‘Disposals, acquisitions and related costs’ in 2Q23 primarily related to fair value losses on the foreign exchange hedging of the proceeds from the agreed sale of our banking business in Canada.
Reported ECL
Reported ECL in 2Q23 of $0.9bn were $0.5bn higher. ECL in 2Q23 included $0.3bn of charges against exposures in the commercial real estate sector in mainland China and charges in the UK in CMB.
Reported operating expenses
Reported operating expenses of $7.9bn were $0.1bn lower, mainly due to the favourable impact of foreign currency translation differences of $0.1bn. The non-recurrence of restructuring and other related costs following the completion of our cost-reduction programme at the end of 2022 and a $0.2bn impact from the reversal of historical asset impairments, together with continued cost discipline, broadly offset increases in technology spend, a higher performance-related pay accrual, increased severance costs and inflationary impacts.
Reported profit after tax in 2Q23
$7.0bn
(2Q22: $5.5bn)

Net interest margin in 2Q23
1.72%
Up 3 basis points from 1Q23.
HSBC Holdings plc
15

Overview | Financial overview

Constant currency results
1H23 compared with 1H22 – constant currency basis
Results – on a constant currency basis <>
Half-year to
 1H23 vs 1H22
30 Jun 2023
$m
30 Jun 2022
 $m
$m
%
Revenue
 36,876  23,647  13,229  56 
ECL
 (1,345) (1,074) (271) (25)
Total operating expenses
 (15,457) (15,532) 75  — 
Operating profit
 20,074  7,041  13,033  >100
Share of profit in associates and joint ventures
 1,583  1,363  220  16 
Profit before tax
 21,657  8,404  13,253  >100

Profit before tax of $21.7bn was $13.3bn higher than in 1H22 on a constant currency basis.
Revenue increased by $13.2bn or 56%, and included a $2.1bn reversal of an impairment relating to the planned sale of our retail banking operations in France, and a provisional gain of $1.5bn recognised on the acquisition of SVB UK. The increase in revenue was also due to higher net interest income reflecting the impact of global interest rates rises and revenue growth in MSS in GBM, despite a weaker performance
in Equities. There was also a good performance from our insurance business in WPB and higher revenue in Corporate Centre.
ECL were $0.3bn higher. In 1H23, ECL included charges relating to the commercial real estate sector in mainland China and stage 3 charges in CMB in the UK. This compared with 1H22 charges, which reflected heightened economic uncertainty mainly due to the Russia-Ukraine war, inflationary pressures and charges related to the commercial real estate sector in mainland China, although it benefited from releases of Covid-19-related allowances.
Operating expenses remained stable, as the non-recurrence of restructuring and other related costs following the completion of our cost-saving programme at the end of 2022 broadly offset other cost growth. The impact of retranslating the prior year results of our operations in hyperinflationary economies at 1H23 average rates of foreign exchange resulted in cost growth of $160m.




Balance sheet and capital
Balance sheet strength
Total assets of $3.0tn were $92bn higher than at 31 December 2022 on a reported basis, and included the favourable impact of foreign currency translation differences of $46bn. On a constant currency basis, total assets increased by $46bn, mainly from an increase in financial investments and higher trading asset balances. In addition, there was growth in loans and advances to customers.
Reported loans and advances to customers of $1.0tn increased by $36bn. On a constant currency basis, loans and advances to customers grew by $23bn including the reclassification of lending balances from ‘assets held for sale‘ relating to the planned sale of our retail banking operations in France and increases following the acquisition of SVB UK. While our near-term outlook on lending growth remains cautious, we expect mid-single-digit percentage annual loan growth in the medium to long term.
Reported customer accounts of $1.6tn increased by $25bn. On a constant currency basis, customer accounts increased by $3bn, which also included the reclassification of balances from held for sale relating to the planned sale of our retail banking operations in France and increases following the acquisition of SVB UK. These increases were partly offset by reductions in deposit balances in HSBC UK.
Loans and advances to customers as a percentage of customer accounts was 60%, compared with 59% at 31 December 2022.

Distributable reserves
The distributable reserves of HSBC Holdings at 30 June 2023 were $25.7bn, compared with $35.2bn at 31 December 2022. The decrease was primarily driven by ordinary dividend payments and additional tier 1 coupon distributions of $7.1bn, a share buy-back programme of $2bn and a reduction in other reserves of $0.4bn. The profits generated of $6.3bn in 1H23 will be reflected in the distributable reserves as at 31 December 2023.

Capital position
We actively manage the Group’s capital position to support our business strategy and meet our regulatory requirements at all times, including under stress, while optimising our capital efficiency. To do this, we monitor our capital position using a number of measures. These include our capital ratios and the impact on our capital ratios as a result of stress.
Our CET1 ratio at 30 June 2023 was 14.7%, up from 14.2% at 31 December 2022, reflecting an increase in CET1 capital of $7.1bn including the reversal of an impairment on the planned sale of our retail banking operations in France and the provisional gain on the acquisition of SVB UK. This was partly offset by an increase in RWAs of $19.8bn and the impact of the share buy-back announced with our 1Q23 results.
Liquidity position
We actively manage the Group’s liquidity and funding to support our business strategy and meet regulatory requirements at all times, including under stress. To do this, we monitor our position using a wider set of measures, including the liquidity coverage ratio (‘LCR’) and the net stable funding ratio. At 30 June 2023, the Group’s LCR was 132% and we held high-quality liquid assets of $631bn. For further details, see page 99.
16
 HSBC Holdings plc

Global Businesses
Wealth and Personal Banking
We serve around 40 million customers globally,
including over 6 million who are international, from retail
customers to ultra high net worth individuals and their families.

Contribution to Group 1H23
profit before tax <>
89
To meet our customers’ needs, we offer a full suite of products and services across transactional banking, lending and wealth.
WPB continued to make strategic investments in our digital capabilities and colleagues, to expand our Wealth franchise in Asia, and enhance our offering to customers with international needs. Performance benefited from our product diversification, as the rise in interest rates, and growth in
lending and wealth deposits, as well as a good performance in our insurance business, offset lower revenue in equities and mutual funds.
Results – on a constant currency basis <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
$m
%
Net operating income
 16,200  10,058  6,142  61 
ECL
 (502) (584) 82  14 
Operating expenses
 (7,141) (6,995) (146) (2)
Share of profit in associates and JVs
 35  8  27  >100
Profit before tax
 8,592  2,487  6,105  >100
RoTE (annualised)1 (%)
 43.1  11.5 
1 RoTE (annualised) in 1H23 included a 10.5 percentage point favourable impact of the reversal of the impairment losses relating to the planned sale of our retail banking operations in France.

Divisional highlights
$34bn
WPB net new invested assets, a decrease of 13% compared with 1H22.

Constant currency profit before tax <> ($bn)
$8.6bn
Half-year to
15942918742935

6.3 million
International customers at 30 June 2023, an increase of 8% compared with 1H22.


Constant currency net operating income <> ($bn)
$16.2bn
Half-year to
15942918743230

> International customers are those who bank in more than one market, those whose address is different from the market we bank them in and customers whose nationality, or country of birth for non-resident Indians and overseas Chinese, is different to the market we bank them in. Customers may be counted more than once when banked in multiple countries. Customer numbers include 1.7 million customers acquired through our purchase of L&T Investment Management.
HSBC Holdings plc
17

Overview I Global businesses I Wealth and Personal Banking
Management view of revenue <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
 $m %
Wealth
 3,921  3,382  539  16 
– investment distribution
1,281  1,263  18  1 
– Global Private Banking
 1,141  941  200  21 
net interest income
 580  387  193  50 
non-interest income
 561  554  7  1 
– life insurance 875  651  224  34 
– asset management
 624  527  97  18 
Personal Banking
 10,217  6,500  3,717  57 
– net interest income
 9,557  5,858  3,699  63 
– non-interest income
 660  642  18  3 
Other1
 2,062  176  1,886  >100
– of which: reversal of impairment loss relating to the planned sale of our retail banking operations in France 2,034  —  2,034  100 
Net operating income2
 16,200  10,058  6,142  61 
1 ‘Other’ includes Markets Treasury, HSBC Holdings interest expense and hyperinflation. It also includes the distribution and manufacturing (where applicable) of retail and credit protection insurance, disposal gains and other non-product-specific income.
2 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
Half-year to
30 Jun 2023 30 Jun 2022
Notable items $m $m
Revenue
Disposals, acquisitions and related costs 2,034  — 
Restructuring and other related costs —  93 
Currency translation on revenue notable items —  (1)
Operating expenses
Disposals, acquisitions and related costs (23) — 
Restructuring and other related costs —  (113)
Currency translation on operating expenses notable items —  4 
Financial performance 
Profit before tax of $8.6bn was $6.1bn higher than in 1H22 on a constant currency basis, including a $2.0bn reversal of an impairment relating to the sale of our retail banking operations in France. The growth in profit before tax reflected an increase in revenue of $6.1bn, notably from higher net interest income due to wider margins from rising interest rates, and a fall in ECL of $0.1bn, partly offset by a $0.1bn increase in operating expenses.
Revenue of $16.2bn was $6.1bn or 61% higher on a constant currency basis. This included the impact of a reversal of an impairment relating to the planned sale of our retail banking operations in France included within ‘Other‘. There was strong growth in Personal Banking net interest income of $3.7bn, due to wider margins from rising interest rates, higher revenue of $0.2bn in life insurance, a rise of $0.2bn in Global Private Banking net interest income and a $0.1bn increase in revenue in asset management. These were partly offset by a reduction in revenue allocated from Corporate Centre of $0.4bn, including from Markets Treasury.
In Wealth, revenue of $3.9bn was $0.5bn or 16% higher.
–Life insurance revenue was $0.2bn or 34% higher.1 The new business contractual service margin written of $0.7bn in 1H23 was up $0.1bn, mainly in Hong Kong due to the mainland China border reopening and the launch of new products in 1H23.
–Global Private Banking revenue was $0.2bn or 21% higher due to the positive impact of wider margins from rising interest rates on net interest income.
–Asset management revenue was $0.1bn or 18% higher, driven by increased assets under management and positive market movements in the seed investment portfolio. Performance continued to be impacted by market volatility.
In Personal Banking, revenue of $10.2bn was up $3.7bn or 57%.
–Net interest income was $3.7bn or 63% higher due to the benefit of wider margins following interest rate rises and balance sheet growth, excluding the impact of transfers to held for sale. Lending grew in HSBC UK, and in Hong Kong, Mexico and the US. Mortgage lending rose in HSBC UK by $5bn and in Hong Kong by $5bn. Compared with 1H22, unsecured lending increased by $1bn, notably in Mexico by $1bn, and in Hong Kong by $1bn, partly offset by the closure of the John Lewis cards portfolio.

ECL of $0.5bn were $0.1bn lower than in 1H22 on a constant currency basis. The modest reduction was primarily due to higher charges in 1H22 relating to the Russia-Ukraine war. Credit performance in 1H23 remained resilient as delinquencies and write-offs remained broadly stable, despite a significant rise in inflationary pressures.
Operating expenses of $7.1bn were 2% higher on a constant currency basis, reflecting continued investment in Wealth in Asia, higher technology spend and from the impact of higher inflation. These were partly offset by continued cost discipline, the non-recurrence of restructuring and other related costs following the completion of our cost-saving programme at the end of 2022, and a $0.1bn reversal related to historical asset impairments.
1.From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts‘, which replaced IFRS 4 ‘Insurance Contracts‘. Under IFRS 17, the future profits from new business are capitalised in the contractual service margin, and not recognised immediately in the income statement, as was the case for the value of new business measure under IFRS 4.
18
 HSBC Holdings plc

Global Businesses
Commercial Banking
We support businesses in 55 countries and territories,
ranging from small enterprises to large corporates operating globally.

Contribution to Group 1H23
profit before tax Image-2.jpg
80
We help businesses grow by supporting their financial needs, facilitating cross-border trade and payments, and providing access to products and services. We help them access international markets, provide expert financial advice and offer access to a full suite of HSBC solutions from across the Group’s other businesses.

In the first half of 2023, CMB acquired SVB UK, demonstrating our continued commitment to the UK economy.
The subsequent launch of HSBC Innovation Banking has strengthened our Commercial Banking franchise by enhancing our ability to serve innovative and fast-growing firms in the innovation ecosystem with an international proposition for businesses in the technology and life science sectors.
CMB delivered a strong revenue performance in 1H23, reflecting interest rate rises and growth in collaboration revenue with GBM, while ECL and operating expenses both increased.
Results – on a constant currency basis <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
$m
%
Net operating income
 12,216  7,055  5,161  73 
ECL
 (704) (278) (426) >(100)
Operating expenses
 (3,572) (3,345) (227) (7)
Share of profit in associates and JVs
 (1) —  (1) — 
Profit before tax
 7,939  3,432  4,507  >100
RoTE (annualised)1 (%)
 28.8  12.2 
1 RoTE (annualised) in 1H23 included a 6.2 percentage point favourable impact of the provisional gain on the acquisition of SVB UK.


Divisional highlights
154%
Increase in GPS revenue.

Constant currency profit before tax <>
($bn)
$7.9bn
Half-year to
15942918691465


11%
Increase in collaboration income from the sale of products to CMB clients.
Constant currency net operating income <>
($bn)
$12.2bn
Half-year to
15942918691578




HSBC Holdings plc
19

Overview I Global businesses I Commercial Banking

Management view of revenue <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
 $m %
Global Trade and Receivables Finance
 1,026  1,053  (27) (3)
Credit and Lending
 2,745  2,908  (163) (6)
Global Payments Solutions
 5,967  2,352  3,615  >100
GBM products, Insurance and Investments, and Other1
 2,478  742  1,736  >100
– of which: share of revenue from Markets and Securities Services and Banking products 658  592  66  11 
– of which: provisional gain on the acquisition of Silicon Valley Bank UK Limited 1,507  —  1,507  100 
Net operating income2
 12,216  7,055  5,161  73 
1 Includes CMB‘s share of revenue from the sale of Markets and Securities Services and Banking products to CMB customers. GBM‘s share of revenue
from the sale of these products to CMB customers is included within the corresponding lines of the GBM management view of revenue. Also
includes allocated revenue from Markets Treasury, HSBC Holdings interest expense and hyperinflation.
2 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as
‘revenue’).
Half-year to
30 Jun 2023 30 Jun 2022
Notable items $m $m
Revenue
Disposals, acquisitions and related costs 1,507  — 
Currency translation on revenue notable items —  (1)
Operating expenses
Disposals, acquisitions and related costs (15) — 
Restructuring and other related costs 29  (66)
Currency translation on operating expenses notable items —  2 

Financial performance
Profit before tax of $7.9bn was $4.5bn higher than in 1H22 on a constant currency basis, primarily driven by an increase in revenue in all of our main legal entities. This reflected a $3.5bn increase in net interest income in Global Payments Solutions (‘GPS‘). It also included a provisional gain of $1.5bn from HSBC UK‘s acquisition of SVB UK. These increases were partly offset by a higher ECL charge and growth in operating expenses.
Revenue of $12.2bn was $5.2bn or 73% higher on a constant currency basis:
–In GPS, revenue rose by $3.6bn, with growth in all main legal entities, reflecting wider margins from interest rate rises and business actions, while average balances decreased marginally. There was also a 9% increase in fee income, notably in cards and payments, with growth in most of our main legal entities, mainly in the UK and Asia.
–In Global Trade and Receivables Finance (‘GTRF‘), revenue was down 3%, driven by
lower balances reflecting the softer trade cycle, notably in our main legal entity in Asia. This was partly offset by growth in HSBC UK from higher average balances and improved margins. Fee income was broadly stable.
–In Credit and Lending, revenue decreased by $0.2bn or 6%, primarily in our legal entities in Europe and Asia due to lower balances as rising interest rates softened demand, and from higher funding costs.
–In GBM products, Insurance and Investments, and Other, revenue increased by $1.7bn, reflecting the provisional gain of $1.5bn on the acquisition of SVB UK, and an 11% increase in collaboration revenue from GBM products, notably Foreign Exchange. These increases were partly offset by a fall in Markets Treasury revenue and the adverse impacts of hyperinflation accounting, which are allocated to the global businesses.
ECL of $0.7bn were $0.4bn higher than in 1H22 on a constant currency basis. The increase was mainly due to releases in 1H22 of our remaining Covid-19-related allowances, and from higher charges in 1H23, mainly in the UK. The 1H23 period included charges of $0.2bn relating to the commercial real estate sector in mainland China, compared with charges of $0.2bn in 1H22.
Operating expenses of $3.6bn were $0.2bn higher on a constant currency basis, largely driven by an increase in the performance-related pay accrual, incremental costs of $0.1bn following the acquisition of SVB UK, investment in technology and inflationary impacts. These increases were partly mitigated by the impact of our continued cost discipline around hiring and strategic cost-saving initiatives.

20
 HSBC Holdings plc

Global Businesses
Global Banking and Markets
We support multinational corporates, financial institutions and institutional
clients, as well as public sector and government bodies.

Contribution to Group 1H23
profit before tax<>
88
We are a leader in facilitating global trade and payments, particularly into and within Asia and the Middle East, enabling our clients in the East and West to achieve their objectives by accessing our expertise and geographical reach. Our product specialists deliver a comprehensive range of transaction banking, financing, capital markets and advisory, and risk management services.




GBM delivered a strong performance in 1H23, achieving a RoTE of 14.2%. We grew revenue by 14%, while maintaining cost discipline, even as we continued to invest in technology and people to improve operating resilience and support our clients. Revenue growth was driven by higher interest rates and good client activity. We also had a reduction in ECL, reflecting a stable credit performance.

Results – on a constant currency basis <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
$m
%
Net operating income
 8,501  7,459  1,042  14 
ECL
 (136) (210) 74  35 
Operating expenses
 (4,785) (4,557) (228) (5)
Share of profit in associates and JVs
 —  —  —  — 
Profit before tax
 3,580  2,692  888  33 
RoTE (annualised) (%)
 14.2  11.5 




Divisional highlights
14.2%
RoTE in 1H23, up 2.7 percentage points compared with 1H22.

Constant currency profit before tax <>
($bn)
$3.6bn
Half-year to
15942918723780



111%
Increase in GPS revenue.


Constant currency net operating income <>
($bn)
$8.5bn
Half-year to15942918723879
HSBC Holdings plc
21

Overview I Global businesses I Global Banking and Markets

Management view of revenue <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
 $m %
Markets and Securities Services 4,763  4,658  105  2 
– Securities Services 1,220  933  287  31 
– Global Debt Markets 588  423  165  39 
– Global Foreign Exchange 2,225  2,138  87  4 
– Equities 236  594  (358) (60)
– Securities Financing 513  458  55  12 
– Credit and funding valuation adjustments (19) 112  (131) >(100)
Banking 4,273  3,097  1,176  38 
– Global Trade and Receivables Finance 341  333  8  2 
– Global Payments Solutions 2,197  1,043  1,154  >100
– Credit and Lending 987  1,170  (183) (16)
– Capital Markets and Advisory 558  424  134  32 
– Other1
 190  127  63  50 
GBM Other (535) (296) (239) (81)
– Principal Investments 13  78  (65) (83)
– Other2
 (548) (374) (174) (47)
Net operating income3
 8,501  7,459  1,042  14 
1 Includes portfolio management, earnings on capital and other capital allocations on all Banking products.
2 Includes notional tax credits and Markets Treasury, HSBC Holdings interest expense and hyperinflation.
3 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
Half-year to
30 Jun 2023 30 Jun 2022
Notable items $m $m
Revenue
Restructuring and other related costs —  (26)
Currency translation on revenue notable items —  — 
Operating expenses
Disposals, acquisitions and related costs 3  — 
Restructuring and other related costs —  (87)
Currency translation on operating expenses notable items —  3 
Financial performance
Profit before tax of $3.6bn was $0.9bn or 33% higher than in 1H22 on a constant currency basis. This was driven by an increase in revenue of $1.0bn or 14%, notably from higher net interest income and a lower ECL charge compared with 1H22. Operating expenses increased by $0.2bn.
Revenue of $8.5bn was $1.0bn or 14% higher on a constant currency basis.
In Markets and Securities Services, revenue increased by $0.1bn or 2%, despite adverse movements in credit and funding valuation adjustments of $0.1bn which included methodology changes.
–In Securities Services, revenue grew by $0.3bn or 31% due to higher net interest income as global interest rates rose.
–In Global Debt Markets, revenue increased by $0.2bn or 39% from more favourable primary market conditions, and due to the reopening of mainland China’s borders, and a better trading performance. The 1H22 period was impacted by lower primary activity and client flow due to uncertainty and challenging market conditions.
–In Global Foreign Exchange, revenue growth of $0.1bn or 4% reflected strong client activity and trading performance due to market-wide volatility, and the macroeconomic impacts from rising inflation and increasing interest rates.
–In Securities Financing, revenue increased by $0.1bn or 12% due to strong prime trading performance and from the reopening of mainland China’s borders.
–In Equities, revenue fell by $0.4bn or 60% in the context of a strong 1H22, and due to lower client activity as a result of reduced market volatility.
In Banking, revenue increased by $1.2bn or 38%.
–In GPS, revenue increased by $1.2bn from higher global interest rates.
–Capital Markets and Advisory revenue increased by $0.1bn or 32%. Investment banking fees were stable, despite a reduction in the global market fee pool, due to an increase in capital markets activity. Issuer Services revenue also increased due to higher interest rates.
–Credit and Lending revenue decreased by $0.2bn or 16%, due to weaker client
demand and an enhanced focus on returns.
In GBM Other, Principal Investments revenue declined by $0.1bn, as 1H23 included lower revaluation gains compared with 1H22. There was also a reduction in revenue from Markets Treasury and from adverse impacts of hyperinflationary accounting, which are allocated to the global businesses.
ECL were $0.1bn, compared with charges of $0.2bn in 1H22 on a constant currency basis, reflecting a stable credit performance.
Operating expenses of $4.8bn increased by $0.2bn or 5% on a constant currency basis, due to the impact of higher inflation, partly offset by the impact of our cost-saving initiatives.
22
 HSBC Holdings plc

Global Businesses
Corporate Centre

Contribution to Group 1H23 profit before tax <>
79
The results of Corporate Centre primarily comprise the share of profit from our interests in our associates and joint ventures. It also includes Central Treasury, stewardship costs and consolidation adjustments.
Corporate Centre performance in 1H23 primarily reflected the non-recurrence of adverse fair value movements on financial instruments, restructuring of our business in Europe, including losses on the completed sale of our branch operations in Greece, planned sale of our operations in Russia, and the non-recurrence of restructuring and other related costs following the completion of our cost-saving programme at the end of 2022. In addition, our share of profit from associates and joint ventures increased.

Results – on a constant currency basis <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
$m
%
Net operating income
 (41) (925) 884  96 
ECL
 (3) (2) (1) (50)
Operating expenses
 41  (635) 676  >100
Share of profit in associates and JVs
 1,549  1,355  194  14 
Profit before tax
 1,546  (207) 1,753  >100
RoTE (annualised) (%)
 8.0  7.3 



Divisional highlights

Constant currency profit before tax <>
($bn)
$1.5bn
Half-year to
15942918647318





Constant currency net operating income <>
($m)
$(41)m
Half-year to15942918647414

HSBC Holdings plc
23

Overview I Global businesses I Corporate Centre
Management view of revenue <>
Half-year to
1H23 vs 1H22
30 Jun
2023
$m
30 Jun
2022
$m
$m
%
Central Treasury1
 81  (378) 459  >100
Legacy portfolios
 (11) 6  (17) >(100)
Other2,3
 (111) (553) 442  80 
Net operating income4
 (41) (925) 884  96 
1 Central Treasury comprises valuation differences on issued long-term debt and associated swaps and fair value movements on financial instruments.
2 Other comprises consolidation adjustments, funding charges on property and technology assets, revaluation gains and losses on investment properties and property disposals, gains and losses on certain planned business disposals, and other revenue items not allocated to global businesses.
3 Revenue from Markets Treasury, HSBC Holdings net interest expense and hyperinflation are allocated out to the global businesses, to align them better with their revenue and expense. The total Markets Treasury revenue component of this allocation for 1H23 was $450m (1H22: $822m; 2H22: $624m).
4 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).

Half-year to
30 Jun 2023 30 Jun 2022
Notable items $m $m
Revenue
Disposals, acquisitions and related costs (220) (288)
Fair value movements on financial instruments 15  (371)
Restructuring and other related costs —  1 
Currency translation on revenue notable items —  16 
Operating expenses
Disposals, acquisitions and related costs (83) — 
Restructuring and other related costs 18  (774)
Currency translation on operating expenses notable items —  27 

Financial performance
Profit before tax of $1.5bn compared with a loss before tax of $0.2bn in 1H22, on a constant currency basis. This increase primarily reflected higher revenue and lower restructuring and other related costs, together with an increase in the share of profit from associates and joint ventures.
Revenue was $0.9bn or 96% higher on a constant currency basis. This reflected the non-recurrence of adverse fair value movements on financial instruments, favourable valuation differences on long-term debt and associated swaps, and valuation gains on structural hedging. In addition, the increase reflected the impacts of the restructuring of our business in Europe, including the non-recurrence of 1H22 losses associated with the completed sale of our branch operations in Greece and lower losses related to the planned disposal of our operations in Russia. These were partly offset by fair value losses in 1H23 of $0.3bn relating to the foreign exchange hedging of the expected proceeds from the agreed sale of our banking business in Canada.

Operating expenses decreased by $0.7bn on a constant currency basis, primarily driven by the non-recurrence of restructuring and other related costs following the completion of our cost-saving programme at the end of 2022, partly offset by costs related to the planned disposals of our retail banking operation in France and our banking business in Canada.
Share of profit from associates and joint ventures of $1.5bn rose by $0.2bn or 14% on a constant currency basis, primarily driven by increases in the share of profit from SAB and BoCom.
24
 HSBC Holdings plc

Risk overview
Risk overview

Active risk management helps us to achieve our strategy, serve our customers and communities and grow our business safely.
Managing risk
The economic outlook improved in most markets during the first half of 2023, although there remained key economic and regulatory risks. While the Russia-Ukraine war has continued to have far-reaching geopolitical implications, the global economy has adapted to the resulting imposition of significant sanctions and trade restrictions. In particular, European countries have diversified their energy sources to reduce dependence on Russian energy supplies.
However, the continuation of – or any further escalation in – the Russia-Ukraine war could have additional economic, social and political consequences. These include further sanctions and trade restrictions, longer-term changes in the macroeconomic environment with the risk of higher and sustained inflation, and a continued volatility in energy prices.
The relationship between China and several countries, including the US and the UK, remains complex. Efforts across a variety of sectors have been undertaken to decrease vulnerabilities to geopolitical shocks through de-risking supply chains. The US, the UK, the EU and other countries have imposed various sanctions and trade restrictions on Chinese persons and companies. In response, China has imposed sanctions and introduced new laws and trade restrictions that could impact the Group and its customers. Further sanctions or counter-sanctions, whether in connection with Russia or China, may affect the Group and its customers by creating regulatory, reputational and market risks.
Central banks in both developed and emerging markets continued to tighten monetary policy in the first half of 2023, and with further tightening expected in the second half. While accumulated policy tightening has increased the risks of recession and financial instability, and even though inflation has started to fall in most developed markets, central banks are expected to sustain higher interest rates to address persistent underlying inflation pressures through to mid-2024.
Fiscal policies are likely to remain relatively generous in both developed and emerging markets, as demand increases for public spending on items including social welfare, defence and decarbonisation initiatives. Against a backdrop of slower economic growth, volatile energy prices and high interest rates, this could increase the strains on highly indebted sovereigns, corporates and households in both emerging and developed markets.


Key risk appetite metrics
Component
Measure
Risk appetite
1H23
Capital
CET1 ratio – end point basis
≥13.0%
 14.7  %
Change in expected credit losses and other credit impairment charges
Change in expected credit losses and other credit impairment charges as a % of advances: Retail (WPB)
≤0.50%
0.23%
Change in expected credit losses and other credit impairment charges as a % of advances: Wholesale (GBM, CMB)
≤0.45%
 0.46%
The mainland China commercial real estate market showed signs of recovery and stabilisation in early 2023, but recent market data remains mixed, suggesting both an uncertain and protracted recovery. Chinese government policy measures introduced in late 2022 have resulted in improved financial support for onshore borrowers, although offshore financial market conditions remain challenged with a continued shortage of liquidity. Corporates operating in this sector are likely to face continued challenges and the risk of further credit deterioration.
We continue to closely monitor the impact of the increasing cost of living on our retail customers. Our primary concern is to ensure that we offer the right support to our customers in line with regulatory, government and wider stakeholder expectations. As part of the ongoing support to our retail mortgage customers, specifically in the UK, we have accepted and implemented the government’s commitments outlined in the Mortgage Charter, released in June 2023, which will help provide additional assistance options to customers that may need help. For further details in relation to the full range of support available to our UK customers, see www.hsbc.co.uk.
We are engaging closely with our key regulators to help ensure we continue to meet their expectations of financial institutions’ activities during times of market volatility.
For IFRS 9 ‘Financial Instruments’, our approach to macroeconomic scenarios remained unchanged in the second quarter, but the shift in UK interest rate expectations resulted in updates to key scenario variables.













In addition, management adjustments to ECL were applied to reflect persisting uncertainty in certain sectors, driven by inflation, interest rate volatility and other macroeconomic risks, which were not fully captured by our models.
We continue to monitor, and seek to manage, the potential implications of all the above developments on our customers and our business. While the financial performance of our operations varied in different geographies, our balance sheet and liquidity remained strong.
> For further details on our approach to geopolitical and macroeconomic risks, see ‘Areas of special interest’ on page 61.
> For further details of our Central and other scenarios, see ‘Measurement uncertainty and sensitivity analysis of ECL estimates’ on page 69.
Our risk appetite
Our risk appetite defines our desired forward-looking risk profile and informs the strategic and financial planning process. It provides an objective baseline to guide strategic decision making, helping to ensure that planned business activities provide an appropriate balance of return for the risk assumed, while remaining within acceptable risk levels. Risk appetite supports senior management in allocating capital, funding and liquidity optimally to finance growth, while monitoring exposure to non-financial risks.
At 30 June 2023, our CET1 ratio and retail ECL charges were within their defined risk appetite thresholds. Wholesale ECL charges were outside of appetite, reflecting the default of several mainland China commercial real estate developer clients and a number of UK borrowers. During the first half of 2023, we enhanced the coverage of interest rate risk in the banking book within the Group’s appetite statement.
HSBC Holdings plc
25

Overview I Risk overview
Managing risk continued
Stress tests
We regularly conduct stress tests to assess the resilience of our balance sheet and our capital adequacy, as well as to provide actionable insights into how key elements of our portfolios may behave during a crisis. We use the outcomes to calibrate our risk appetite and to review the robustness of our strategic and financial plans, helping to improve the quality of management’s decision making. The results from the stress tests also drive recovery and resolution planning to help enhance the Group’s financial stability under various macroeconomic scenarios. The selection of stress scenarios is based upon the identification and assessment of our top risks, emerging risks and our risk appetite.
On 12 July 2023 the Bank of England published the Financial Stability Report, which sets out the view of its Financial Policy Committee on the UK financial system. This report incorporates the results from the 2022 annual cyclical scenario stress test of the UK banking system. The stress scenario explored the potential impacts of a global economic contraction, persistently higher inflation and interest rates in advanced economies with materially increased unemployment, and a sharp fall in asset prices. The 2022 annual cyclical scenario outcomes will be used by the Bank of England as a direct input for setting stress capital buffers.
The Bank of England judged that this 2022 annual cyclical scenario stress test did not reveal any capital inadequacies for HSBC given its balance sheet as of 30 June 2022.
Under this stress scenario, the Bank of England’s results indicated that HSBC Holdings is sufficiently capitalised, with the Group’s CET1 capital ratio on an IFRS 9 transitional basis projected to fall to a low point of 10.7%, which is above the Group’s CET1 reference rate of 7.0%. On an IFRS 9 non-transitional basis the Group’s CET1 capital ratio is projected to reach a low point of 9.9%, which is above its IFRS 9 non-transitional CET1 reference rate of 6.2%.
For the 2022 annual cyclical scenario, HSBC was asked to submit results for HSBC UK, our ring-fenced bank, on a stand-alone basis for the first time. The stand-alone results also showed that HSBC UK is sufficiently capitalised, indicating that its CET1 capital ratio on an IFRS 9 transitional basis would fall to a low point of 10.1%, above its CET1
reference rate of 6.2%. On an IFRS 9 non-transitional basis, HSBC UK’s CET1 capital ratio is projected to reach a low point of 8.9%, which is above its IFRS 9 non-transitional CET1 reference rate of 6.4%.
Both the Group’s and HSBC UK’s results incorporated strategic management actions. In practice, under such adverse economic circumstances, the Group would consider a variety of management actions depending on the prevailing circumstances at the time.
Climate stress tests
To support the requirements for assessing the impacts of climate change, we have developed a set of capabilities to execute climate stress testing and scenario analysis. These are used to help improve our understanding of our risk exposures for risk management and business decision making.
In the second half of 2022, we ran an internal climate scenario analysis to help identify challenges and opportunities to our net zero strategy, and risks posed to our business model by transition and physical risk, as well as to inform capital planning and risk appetite. The internal climate scenario analysis outcomes were used to test our capital adequacy under the internal capital adequacy assessment process, and management concluded that the Group remains adequately capitalised.
In the second half of 2023, we will run a new internal climate scenario analysis with improved models and expanded scenarios for internal use as part of our strategic planning, as well as to respond to climate stress tests for regulators such as those from the Hong Kong Monetary Authority and Central Bank of the United Arab Emirates.
> For further details of our approach to climate risk stress testing, see ‘Insights from scenario analysis’ on page 67 of our Annual Report and Accounts 2022.
Climate risk
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a greener economy. Climate risk can impact us either directly or through our relationships with our clients. These include the potential risks arising as a result of our net zero ambition, which could lead to reputational concerns, and potential legal and/or regulatory action if we are perceived to mislead stakeholders on our business activities or if we fail to achieve
our stated net zero targets. Our most material exposure to climate risk relates to corporate client financing activities and retail mortgages within our banking portfolio. We also have significant responsibilities in relation to asset ownership by our insurance business, employee pension plans and asset management business.
We seek to manage climate risk across all our businesses in line with our Group-wide risk management framework, and are incorporating climate considerations within our existing risk types.
> For further details of our approach to climate risk management, see ‘Climate risk‘ on page 221 of our Annual Report and Accounts 2022.
> For further details of our TCFD disclosures, see the ‘ESG review‘ on page 44 of our Annual Report and Accounts 2022.
Our operations
We remain committed to investing in the reliability and resilience of our IT systems and critical services, including those provided by third parties, that support all parts of our business. We do so to help protect our customers, affiliates and counterparties, and to help ensure that we minimise any disruption to services that could result in reputational, legal and regulatory consequences. In our approach to defending against these threats, we invest in business and technical controls to help us detect, manage and recover from issues in a timely manner.
We continue to focus on improving the quality and timeliness of the data used to inform management decisions, through measures such as early warning indicators, prudent active management of our risk appetite, and ensuring regular communication with our Board and key stakeholders.
We continue to make progress with the implementation of our business and risk transformation plans. We seek to manage change execution risk so we can prioritise, manage and deliver change initiatives effectively and safely, and at the scale, complexity and pace required.
> For further details on our risk management framework and risks associated with our banking and insurance manufacturing operations, see pages 133 and 142 of the Annual Report and Accounts 2022, respectively.
Top and emerging risks
Our top and emerging risks report identifies forward-looking risks so that they can be considered in determining whether any incremental action is needed to either prevent them from materialising or to limit their effect. Top risks are those that have the potential to have a material adverse impact on the financial results, reputation or
business model of the Group. We actively manage and take actions to mitigate our top risks. Emerging risks are those that, while they could have a material impact on our risk profile were they to occur, are not considered immediate and are not under active management. Our suite of top and emerging risks is subject to regular review by
senior governance forums. We continue to monitor closely the identified risks and ensure management actions are in place, as required.
> For further details on our top and emerging risks see pages 135 to 141 of the Annual Report and Accounts 2022.
26
 HSBC Holdings plc

Risk overview
Risk Trend Description
Externally driven
Geopolitical and macroeconomic risks } Our operations and portfolios are subject to risks associated with political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. While global supply chain disruptions have abated, geopolitical tensions remain high and global interest rates and the uncertain economic outlook for China are nevertheless prompting a global slowdown that may affect our credit portfolio.
Technology and cybersecurity risk } We face a risk of service disruption or loss of data resulting from technology failures or malicious activities by internal or external threats. We continue to monitor ongoing geopolitical events and changes to the threat landscape. We operate a continuous improvement programme to help protect our technology operations and to counter a fast-evolving cyber threat environment.
Evolving regulatory environment risk ~ The regulatory and compliance risk environment is becoming increasingly complex, in part driven by heightened geopolitical tensions. Regulatory scrutiny of financial institutions following recent banking failures, alongside other regulatory priorities, may result in change requirements across the Group in the short to medium term. We continue to monitor regulatory and wider industry developments closely, engaging with regulators as appropriate.
Financial crime risk ~ We are exposed to financial crime risk from our customers, staff and third parties engaging in criminal activity. The financial crime risk environment continues to evolve, due to increasingly complex geopolitical challenges, the macroeconomic outlook, evolving sanctions regulations, rapid technological developments, an increasing number of national data privacy requirements and the increasing sophistication of fraud. As a result, we will continue to face the possibility of regulatory enforcement and reputational risk.
Ibor transition risk
Ä
 We remain exposed to regulatory compliance, legal and resilience risks as contracts transition away from the remaining demising Ibor benchmarks to new reference rates. We continue to consider the fairness of client outcomes, our compliance with regulatory expectations and the operation of our systems and processes. The key risks have diminished as the majority of contracts in the remaining demising Ibors, specifically US dollar Libor, have been successfully transitioned.
Environmental, social and governance (‘ESG’) risks ~ We are subject to ESG risks relating to climate change, nature and human rights. These risks have increased owing to the pace and volume of regulatory developments globally, and due to stakeholders placing more emphasis on financial institutions’ actions and investment decisions in respect of ESG matters. Failure to meet these evolving expectations may result in financial and non-financial costs, including adverse reputational consequences.
Digitalisation and technological advances ~ Developments in technology and changes in regulations have enabled new entrants to the banking industry, and new products and services offered by competitors. This challenges us to continue to innovate with new digital capabilities to best serve our customers by adapting our products, and to attract and retain customers and colleagues. Along with opportunities, new technology can introduce risks. We continue to ensure these are understood and managed with appropriate controls.
Internally driven
Risks associated with workforce capability, capacity and environmental factors with potential impact on growth } Our businesses, functions and geographies are exposed to risks associated with employee retention and talent availability, and compliance with employment laws and regulations. While high employee attrition has eased generally, some markets continue to experience heightened inflation, turnover and labour market difficulties. We monitor hiring activities and levels of employee attrition, and each business and function has workforce plans in place to aim to ensure effective workforce forecasting to meet business demands.
Risks arising from the receipt of services from third parties } We procure goods and services from a range of third parties. It is critical that we have appropriate risk management policies and processes to select and govern third parties, including third parties’ supply networks, particularly for key activities that could affect our operational resilience. Any deficiency in the management of risks associated with our third parties could affect our ability to support our customers and meet regulatory expectations.
Model risk ~ Model risk arises whenever business decision making includes reliance on models. We use models in both financial and non-financial contexts, as well as in a range of business applications. Evolving regulatory requirements are driving material changes to the way model risk is managed across the banking industry, with particular focus on capital models. New technologies including generative artificial intelligence (‘AI’) and large language models utilising AI are driving a need for enhanced model risk controls.
Data risk } We use data to serve our customers and run our operations, often in real-time within digital experiences and processes. If our data is not accurate and timely, our ability to serve customers, operate with resilience or meet regulatory requirements could be impacted. We need to ensure that non-public data is kept confidential, and that we comply with the growing number of regulations that govern data privacy and cross-border movement of data.
Change execution risk } Failure to effectively prioritise, manage and/or deliver transformation across the organisation impacts our ability to achieve our strategic objectives. We aim to monitor, manage and oversee change execution risk to ensure our change portfolios and initiatives continue to deliver the right outcomes for our customers, people, investors and communities.
~ Risk heightened during the first half of 2023 Ä Risk decreased during the first half of 2023 } Risk remained at the same level as 2022
HSBC Holdings plc
27

Financial summary
Financial summary
Contents
Changes to presentation from 1 January 2023
Use of alternative performance measures
Summary consolidated income statement
Distribution of results by global business and legal entity
Income statement commentary
Net interest income
Tax expense
Summary consolidated balance sheet
Balance sheet commentary compared with 31 December 2022
Changes to presentation from 1 January 2023
Changes to our reporting framework
On 1 January 2023, we updated our financial reporting framework. We no longer report ‘adjusted’ results, which exclude the impact of both foreign currency translation differences and significant items. Instead, we compute constant currency performance by adjusting comparative reported results only for the effects of foreign currency translation differences between the relevant periods. This will enable users to understand the impact of foreign currency translation differences on the Group’s performance. We separately disclose ‘notable items‘, which are components of our income statement that management would consider as outside the normal course of business and generally non-recurring in nature. While our primary segmental reporting by global business remains unchanged, effective from 1 January 2023, the Group changed the supplementary presentation of results from geographical regions to main legal entities to better reflect the Group’s structure.
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As required by the standard, the Group applied the requirements retrospectively with comparative data previously published under IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022 transition date. Under IFRS 17 there is no present value of in-force business (‘PVIF’) asset recognised up front. Instead the measurement of the insurance contract liability takes into account fulfilment cash flows and a contractual service margin (‘CSM’) representing the unearned profit. In contrast to the Group’s previous IFRS 4 accounting where profits are recognised up front, under IFRS 17 they are deferred and systematically recognised in revenue as services are provided over the life of the contract. The CSM also includes attributable cost, which had previously been expensed as incurred and which is now incorporated within the insurance liability measurement and recognised over the life of the contract.
In conjunction with the implementation of IFRS 17, the Group has made use of the option to re-designate to fair value through profit or loss assets that were previously held at amortised cost totalling $55.1bn, and assets previously held at fair value through other comprehensive income totalling $1.1bn. The re-designation of amortised cost assets generated a net increase to assets of $4.9bn because the fair value measurement on transition was higher than the previous amortised cost carrying amount.
The impact of the transition was a reduction of $0.7bn on the Group’s 1H22 reported revenue and a reduction of $0.4bn on 1H22 reported profit before tax. The Group’s total equity at 1 January 2022 reduced by $10.5bn to $196.3bn on the transition, and tangible equity reduced by $2.4bn to $155.8bn. For further details of our adoption of IFRS 17, see our Report on Transition to IFRS 17 ‘Insurance Contracts’ at www.hsbc.com/investors and Note 16 ‘Effects of adoption of IFRS 17’ on page 135.

Cost target
At our full-year 2022 results, we set a target for our ‘adjusted‘ operating expenses of approximately 3% growth for 2023 compared with 2022. While our new reporting framework no longer presents ‘adjusted‘ results, we make an exception for operating expenses, where we will adjust reported results for notable items and the period-on-period effects of foreign currency translation differences. We also exclude the impact of re-translating comparative period financial information at the latest rates of foreign exchange in hyperinflationary economies, which we consider to be outside of our control, and the incremental costs associated with our acquisition of SVB UK and related international investments. We consider that this target basis operating expense measure provides useful information to investors by quantifying and excluding the items that management considered separately when setting and assessing cost-related targets.
Resegmentation
In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our Global Banking customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly. Similar smaller transfers from GBM to CMB were also undertaken within our entities in Australia and Indonesia, where comparative data have not been re-presented.
Use of alternative performance measures
Our reported results are prepared in accordance with IFRSs as detailed in the interim condensed financial statements starting on page 106.
To measure our performance, we supplement our IFRSs figures with non-IFRSs measures, which constitute alternative performance measures under European Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with US Securities and Exchange Commission rules and regulations. These measures include those derived from our reported results that eliminate factors that distort period-on-period comparisons. The ‘constant currency performance’ measure used in this report is described below. Definitions and calculations of other alternative performance measures are included in our ‘Reconciliation of alternative performance measures’ on page 57. All alternative performance measures are reconciled to the closest reported performance measure.
The global business segmental results are presented on a constant currency basis in accordance with IFRS 8 ‘Operating Segments’ as detailed in Note 5: ‘Segmental analysis’ on page 116.
Constant currency performance
Constant currency performance is computed by adjusting reported results for the effects of foreign currency translation differences, which distort period-on-period comparisons.
We consider constant currency performance to provide useful information for investors by aligning internal and external reporting, and reflecting how management assesses period-on-period performance.
Notable items
We separately disclose ‘notable items’, which are components of our income statement that management would consider as outside the normal course of business and generally non-recurring in nature.
The tables on pages 39 to 40 and pages 51 to 54 detail the effects of notable items on each of our global business segments, legal entities and selected countries/territories in 1H23 and 1H22.
28
HSBC Holdings plc


Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US dollar against most major currencies during 2023.
We exclude them to derive constant currency data, allowing us to assess balance sheet and income statement performance on a like-for-like basis and to better understand the underlying trends in the business.
Foreign currency translation differences for the half-year to 30 June 2023 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
–the income statement for the half-year to 30 June 2022 at the average rate of exchange for the half-year to 30 June 2023; and
–the balance sheets at 30 June 2022 and 31 December 2022 at the prevailing rates of exchange on 30 June 2023.
No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC’s Argentina subsidiaries have not been adjusted further for the impacts of hyperinflation. Since 1 June 2022, Türkiye has been deemed a hyperinflationary economy for accounting purposes. HSBC has an operating entity in Türkiye and the constant currency data have not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC’s operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.



Summary consolidated income statement
Half-year to1
30 Jun 30 Jun
2023 2022
$m $m
Net interest income 18,264  13,385 
Net fee income 6,085  6,228 
Net income from financial instruments held for trading or managed on a fair value basis 8,112  4,856 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss 4,304  (11,849)
Insurance finance income/(expense) (4,234) 11,773 
Insurance service result 524  370 
Gain on acquisitions2
 1,507  — 
Reversal of impairment loss relating to the planned sale of our retail banking operations in France3
 2,130  — 
Other operating income 184  (218)
Net operating income before change in expected credit losses and other credit impairment charges4
 36,876  24,545 
Change in expected credit losses and other credit impairment charges (1,345) (1,087)
Net operating income 35,531  23,458 
Total operating expenses (15,457) (16,127)
Operating profit 20,074  7,331 
Share of profit in associates and joint ventures 1,583  1,449 
Profit before tax 21,657  8,780 
Tax (charge)/credit (3,586) 151 
Profit for the period 18,071  8,931 
Attributable to:
– ordinary shareholders of the parent company 16,966  7,966 
– other equity holders 542  626 
– non-controlling interests 563  339 
Profit for the period 18,071  8,931 
$ $
Basic earnings per share 0.86  0.40 
Diluted earnings per share 0.86  0.40 
Dividend per ordinary share (paid in the period)5
 0.33  0.18 
% %
Post-tax return on average total assets (annualised) 1.2  0.6 
Return on average ordinary shareholders’ equity (annualised) 20.8  9.9 
Return on average tangible equity (annualised) 22.4  10.6 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2    Provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.
3    Reversal of the $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.
4 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
5    The $0.33 dividend paid during the period consisted of a second interim dividend of $0.23 per ordinary share in respect of the financial year ended 31 December 2022 paid in April 2023 and a first interim dividend of $0.10 per ordinary share in respect of the financial year ending 31 December 2023.

HSBC Holdings plc
29

Financial summary
Distribution of results by global business and legal entity
Distribution of results by global business
Half year to
30 Jun 30 Jun
2023 2022
$m $m
Constant currency revenue1
Wealth and Personal Banking 16,200  10,058 
Commercial Banking2
 12,216  7,055 
Global Banking and Markets2
 8,501  7,459 
Corporate Centre (41) (925)
Total 36,876  23,647 
Constant currency profit/(loss) before tax
Wealth and Personal Banking 8,592  2,487 
Commercial Banking2
 7,939  3,432 
Global Banking and Markets2
 3,580  2,692 
Corporate Centre 1,546  (207)
Total 21,657  8,404 
1    Constant currency net operating income before change in expected credit losses and other credit impairment charges including the effects of foreign currency translation differences, also referred to as constant currency revenue.
2    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
Distribution of results by legal entity
Half year to
30 Jun 30 Jun
2023 2022
$m $m
Reported profit/(loss) before tax
HSBC UK Bank plc 4,791  2,270 
HSBC Bank plc 3,498  252 
The Hongkong and Shanghai Banking Corporation Limited 10,917  5,734 
HSBC Bank Middle East Limited 673  378 
HSBC North America Holdings Inc. 701  424 
HSBC Bank Canada 475  385 
Grupo Financiero HSBC, S.A. de C.V. 436  239 
Other trading entities1
 1,282  532 
– of which: other Middle East entities (including Oman, Türkiye, Egypt and Saudi Arabia)
 420  264 
– of which: Saudi Awwal Bank 272  117 
Holding companies, shared service centres and intra-Group eliminations (1,116) (1,434)
Total 21,657  8,780 
Constant currency profit/(loss) before tax
HSBC UK Bank plc 4,791  2,159 
HSBC Bank plc 3,498  295 
The Hongkong and Shanghai Banking Corporation Limited 10,917  5,531 
HSBC Bank Middle East Limited 673  379 
HSBC North America Holdings Inc. 701  423 
HSBC Bank Canada 475  363 
Grupo Financiero HSBC, S.A. de C.V. 436  267 
Other trading entities1
 1,282  455 
– of which: other Middle East entities (including Oman, Türkiye, Egypt and Saudi Arabia)
 420  198 
– of which: Saudi Awwal Bank 272  117 
Holding companies, shared service centres and intra-Group eliminations (1,116) (1,468)
Total
 21,657  8,404 
1    Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. Supplementary analysis is provided on page 56 for a fuller picture of the Middle East, North Africa and Türkiye (‘MENAT’) regional performance.
30
HSBC Holdings plc


Income statement commentary
For further financial performance data of our global business segments, see pages 39 to 48. For further financial performance data by major legal entity, see pages 49 to 55.

Net interest income
Half-year to Quarter to
30 Jun 30 Jun 30 Jun 31 Mar 30 Jun
2023 2022 2023 2023 2022
$m $m $m $m $m
Interest income 46,955  19,788  24,863  22,092  10,643 
Interest expense (28,691) (6,403) (15,558) (13,133) (3,733)
Net interest income 18,264  13,385  9,305  8,959  6,910 
Average interest-earning assets 2,162,662  2,174,796  2,172,324  2,152,893  2,148,983 
% % % % %
Gross interest yield1
 4.38  1.83  4.59  4.16  1.99 
Less: gross interest payable1
 (3.12) (0.71) (3.33) (2.91) (0.83)
Net interest spread2
 1.26  1.12  1.26  1.25  1.16 
Net interest margin3
 1.70  1.24  1.72  1.69  1.29 
1    Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Gross interest payable is the average annualised interest cost as a percentage of average interest-bearing liabilities.
2    Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing liabilities.
3    Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Banking net interest income
Banking net interest income is defined as Group net interest income after deducting:
–the internal cost to fund trading and fair value net assets for which associated revenue is reported in ‘Net income from financial instruments held for trading or managed on a fair value basis’, also referred to as ‘trading and fair value income’. These funding costs reflect proxy overnight or term interest rates as applied by internal funds transfer pricing;
–the funding cost of foreign exchange swaps in Markets Treasury, where an offsetting income or loss is recorded in trading and fair value income. These instruments are used to manage foreign currency deployment and funding in our entities; and
–third-party net interest income in our insurance business.
In our segmental disclosures, the funding costs of trading and fair value net assets are predominantly recorded in GBM in ‘net income from financial instruments held for trading or managed on a fair value basis’. On consolidation, this funding is eliminated in Corporate Centre, resulting in an increase in the funding cost reported in net interest income with an equivalent offsetting increase in ‘net income from financial instruments held for trading or managed on a fair value basis’ in this segment. During 2Q23 we implemented a consistent reporting approach across the 14 most material entities that contribute to our trading and fair value net assets, which resulted in an increase to the 1H23 associated funding costs reported through the intersegment elimination in Corporate Centre of approximately $0.4bn, recognised in 2Q23. In the consolidated Group results, the cost to fund these trading and fair value net assets is reported in net interest income.
The internally allocated funding cost of $3.8bn, which was incurred in 1H23 to generate trading and fair value income, related to trading, fair value and associated net asset balances predominantly in GBM. At 30 June 2023, these stood at approximately $130bn. We expect these centrally allocated funding costs to be at least $7bn in 2023.

Half-year to Quarter to
30 Jun 30 Jun 30 Jun 31 Mar 30 Jun
2023 2022 2023 2023 2022
$bn $bn $bn $bn $bn
Net interest income 18.3  13.4  9.3  9.0  6.9 
Banking book funding costs used to generate ‘net income from financial instruments held for trading or managed on a fair value basis’ 3.8  0.4  2.4  1.4  0.3 
Third-party net interest income from insurance (0.2) (0.2) (0.1) (0.1) (0.1)
Banking net interest income 21.9  13.6  11.6  10.3  7.1 

Summary of interest income by type of asset
Half-year to Full-year to
30 Jun 2023 30 Jun 2022 31 Dec 2022
Average
balance
Interest
income
 Yield
Average
balance
Interest
income
 Yield
Average
balance
Interest
income
 Yield
$m $m % $m $m % $m $m %
Short-term funds and loans and advances to banks 425,103  6,961  3.30  457,709  1,344  0.59  445,657  5,577  1.25 
Loans and advances to customers 954,171  22,747  4.81  1,054,657  13,848  2.65  1,022,320  32,543  3.18 
Reverse repurchase agreements – non-trading 239,945  6,173  5.19  228,231  1,093  0.97  231,058  4,886  2.11 
Financial investments 382,384  7,378  3.89  384,368  2,838  1.49  372,702  7,704  2.07 
Other interest-earning assets 161,059  3,696  4.63  49,831  665  2.69  72,017  2,116  2.94 
Total interest-earning assets 2,162,662  46,955  4.38  2,174,796  19,788  1.83  2,143,754  52,826  2.46 
HSBC Holdings plc
31

Financial summary
Summary of interest expense by type of liability
Half-year to Full-year to
30 Jun 2023 30 Jun 2022 31 Dec 2022
Average
balance
Interest
expense
 Cost
Average
balance
Interest
expense
 Cost
Average
balance
Interest
expense
 Cost
$m $m % $m $m % $m $m %
Deposits by banks1
 61,901  1,117  3.64  82,232  195  0.48  75,739  770  1.02 
Customer accounts2
 1,317,536  14,722  2.25  1,369,088  2,834  0.42  1,342,342  10,903  0.81 
Repurchase agreements – non-trading 134,936  4,550  6.80  122,883  584  0.96  118,308  3,085  2.61 
Debt securities in issue – non-trading 181,682  5,199  5.77  182,067  2,053  2.27  179,776  5,608  3.12 
Other interest-bearing liabilities 157,218  3,103  3.98  70,948  737  2.10  87,965  2,083  2.37 
Total interest-bearing liabilities 1,853,273  28,691  3.12  1,827,218  6,403  0.71  1,804,130  22,449  1.24 
1    Including interest-bearing bank deposits only.
2    Including interest-bearing customer accounts only.
Net interest income (‘NII’) for 1H23 was $18.3bn, an increase of $4.9bn or 36% compared with 1H22. This reflected higher average market interest rates across the major currencies compared with 1H22.
Excluding the unfavourable impact of foreign currency translation differences, NII increased by $5.4bn or 42%.
NII for 2Q23 was $9.3bn, up 35% compared with 2Q22, and up 4% compared with 1Q23. This was driven by the impact of higher market interest rates across our asset book, notably in the UK and our main legal entities in Asia. This was partly offset by higher funding costs across our liability book, which included the impact of deposit migration mainly in our main legal entities in Asia and Europe.
We have introduced a new banking net interest income metric, which is derived by deducting the centrally allocated funding cost to generate trading and fair value income. These funding costs were $3.8bn in 1H23, an increase of $3.4bn compared with 1H22. Banking net interest income also deducts third-party net interest income related to our insurance business, which was $0.2bn in 1H23, broadly stable compared with 1H22.
In 1H23, banking net interest income of $21.9bn was up $8.3bn or 61% compared with 1H22. The growth in banking net interest income was in all of our global businesses, mainly in WPB (up $3.6bn), reflecting wider margins and growth in mortgages and unsecured lending, excluding the impact of transfers to held for sale. It also grew in CMB (up $3.3bn) and GBM (up $1.4bn), notably from wider deposit margins in Global Payments Solutions.
Net interest margin (‘NIM’) of 1.70% was 46 basis points (‘bps’) higher compared with 1H22, as the rise in the yield on AIEA of 254bps was partly offset by the rise in the funding cost of average interest-bearing liabilities of 242bps. The increase in NIM in 1H23 included the unfavourable impact of foreign currency translation differences. Excluding this, NIM increased by 48bps.
NIM for 2Q23 was 1.72%, up 43bps year-on-year, and up 3bps compared with the previous quarter, predominantly driven by the impact of higher market interest rates.
Interest income of $47bn increased by $27.2bn, compared with 1H22. This was primarily due to higher average interest rates, partly offset by a reduction in term lending of $41bn, predominantly in our main legal entities in Asia and Europe, and a reduction in central bank placements of $38bn, notably in our main legal entities in the UK and the US. The central bank placements declined due to the reduction in deposit balances. The change in interest income included $0.9bn from the adverse effect of foreign currency translation differences. Excluding this, interest income increased by $28.1bn.
Interest income of $24.9bn in 2Q23 was up $14.2bn compared with 2Q22, and up $2.8bn compared with 1Q23. This was predominantly driven by the impact of higher market interest rates, partly offset by a reduction in term lending and central bank placements.

Interest expense of $28.7bn increased by $22.3bn or 348% compared with 1H22. This reflected an increase in funding costs of 242bps, mainly due to the impact of higher interest rates on our liabilities. In addition, money market deposits increased by $42bn and ‘repurchase agreements – non-trading’ balances rose by $12bn, mainly in Asia, compounded by the impact of deposit migration,
notably in Asia and Europe. The rise in interest expense included the favourable effects of foreign currency translation differences of $0.3bn. Excluding this, interest expense increased by $22.6bn.
Interest expense of $15.6bn in 2Q23 was up $11.8bn compared with 2Q22, and up $2.5bn compared with 1Q23. This was predominantly driven by the impact of higher market interest rates, and the impact of deposit migration.
Net fee income of $6.1bn was $0.1bn lower than in 1H22, and included a $0.1bn adverse impact from foreign currency translation differences. On a constant currency basis, net fee income was broadly unchanged as an increase in CMB was largely offset by a reduction in GBM.
In CMB, fee income grew, mainly in cards and account services as customer activity increased.
In GBM, fee income fell in broking income in our main entities in Europe and Hong Kong, and corporate finance income was lower in Europe and the US as clients’ refinancing activities fell. These reductions were mitigated by growth in underwriting fees in Europe due to the completion of a number of debt capital markets deals in 1H23.
In WPB, fee income was broadly stable, excluding the impact of foreign currency translation differences. Income from broking and funds under management fell, notably in Hong Kong, reflecting weaker equity markets and muted customer sentiment. This reduction was partly offset by higher cards income, notably in our main entity in Hong Kong and also in Mexico, as customer spending increased. The growth in cards activity resulted in a rise in fee expense.
Net income from financial instruments held for trading or managed on a fair value basis of $8.1bn was $3.3bn higher. There was a favourable movement on non-qualifying hedges in Corporate Centre of $0.3bn due to the non-recurrence of fair value losses in 1H22, and higher income in CMB, reflecting increased collaboration revenue with GBM, mainly in Global Foreign Exchange.
In GBM, trading and fair value income fell by $0.7bn, which was inclusive of an increase of $3.4bn relating to internally allocated funding costs. Trading activity decreased in Equities, as customer demand was muted, although this was partly offset by Global Debt Markets and Global Foreign Exchange.

Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss of $4.3bn compared with a net expense of $11.8bn in 1H22. This increase was mainly in Hong Kong and France, primarily reflecting favourable fair value movements on both debt and equity securities in the portfolio.
This favourable movement resulted in a corresponding movement in insurance finance expense, which has an offsetting impact for the related liabilities to policyholders.
Insurance finance expense of $4.2bn compared with an income of $11.8bn in 1H22, reflecting the impact of investment returns on underlying assets on the value of liabilities to policyholders, which moves inversely with ‘net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss’.
32
HSBC Holdings plc

Insurance service result of $0.5bn increased by $0.2bn compared with 1H22, primarily due to an increase in the release of the contractual service margin (‘CSM’). This primarily reflected a higher CSM balance from higher new business written, favourable experience variances and updates to lapse rate assumptions, as well as the impact of interest rates on the CSM duration profile. The increase also reflected a reduction in losses from onerous contracts.
Under IFRS 17, the measurement of the insurance contract liability takes into account fulfilment cash flows and a CSM representing the unearned profit. In contrast to the Group’s previous IFRS 4 accounting where profits are recognised up front, under IFRS 17 they are deferred and systematically recognised in revenue as services are provided over the life of the contract. The CSM also includes attributable cost, which had previously been expensed as incurred and which is now incorporated within the insurance liability measurement and recognised over the life of the contract.
Gain on acquisitions of $1.5bn related to the provisional gain recognised in respect of the acquisition of Silicon Valley Bank UK Limited in 1Q23.
Reversal of impairment loss relating to the planned sale of our retail banking operations in France was $2.1bn, as the sale became less certain during 1Q23. In June, we agreed new terms for the sale of these operations that will involve HSBC retaining a portfolio of home and other loans. The parties are aiming to complete the transaction on 1 January 2024, subject to information and consultation processes with respective works councils and regulatory approvals, with an estimated pre-tax loss of up to $2.2bn expected to be recognised in the second half of 2023 upon reclassification to held for sale.
Change in expected credit losses and other credit impairment charges (‘ECL’) of $1.3bn were $0.3bn higher than in 1H22.
The 1H23 charge included stage 3 charges of $1.1bn. There were charges of $0.3bn related to the commercial real estate sector in mainland China and charges in CMB in the UK. The 1H23 charge reflected a more stable outlook in most markets, although inflationary pressures remain.
In 1H22, ECL included charges of $0.3bn relating to the commercial real estate sector in mainland China, as well as Russia-related exposures. It also included additional stage 1 and stage 2 allowances to reflect heightened levels of economic uncertainty and inflationary pressures, in part offset by the release of most of our remaining Covid-19-related allowances.
For further details on the calculation of ECL, including the measurement uncertainties and significant judgements applied to such calculations, the impact of economic scenarios and management judgemental adjustments, see pages 69 to 77.

Operating expenses
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Gross employee compensation and benefits 9,433  9,326
Capitalised wages and salaries (479) (430)
Property and equipment 2,047  2,419
Amortisation and impairment of intangibles 809  822
Legal proceedings and regulatory matters 56  94
Other operating expenses1
 3,591  3,896
Reported operating expenses 15,457  16,127
Currency translation (595)
Constant currency operating expenses 15,457  15,532
1    Other operating expenses includes professional fees, contractor costs, transaction taxes, marketing and travel. The decrease was driven by favourable currency translation differences and lower restructuring and other related costs following the completion of our cost-saving programme at the end of 2022.
Staff numbers (full-time equivalents)
At
30 Jun 30 Jun 31 Dec
2023 2022 2022
Global businesses
Wealth and Personal Banking 129,188  127,638  128,764 
Commercial Banking 46,006  44,183  43,640 
Global Banking and Markets 46,247  46,624  46,435 
Corporate Centre 323  421  360 
Total staff numbers 221,764  218,866  219,199 
Operating expenses of $15.5bn were $0.7bn or 4% lower than in 1H22, mainly due to the non-recurrence of restructuring and other related costs of $1.1bn, following the completion of our cost-saving programme, which concluded at the end of 2022. The reduction also included a $0.2bn impact from the reversal of historical asset impairments, the impact of our continued cost discipline and favourable foreign currency translation differences between the periods of $0.6bn.
These factors were partly offset by higher technology spend of $0.5bn, an increase in our performance-related pay accrual of $0.2bn and severance payments of $0.2bn. Our operating expenses also rose
due to the impact of higher inflation and incremental costs following our acquisition of SVB UK.
We continue to target operating expense growth of approximately 3% for 2023, excluding the impact of foreign currency translation differences, notable items and the impact of retranslating the 2022 results of hyperinflationary economies at constant currency. Our target also excludes the impact of our acquisition of SVB UK, and the related investments internationally, which are expected to add approximately 1% to the Group‘s operating expenses.
While we remain committed to disciplined cost management, we expect continued pressure from persistently high levels of inflation. In addition, the impact of the proposed special assessment from the
HSBC Holdings plc
33

Financial summary
Federal Deposit Insurance Corporation in the US is not expected to be known until the second half of the year.
The number of employees expressed in full-time equivalent staff (‘FTEs’) at 30 June 2023 was 221,764, an increase of 2,565 from 31 December 2022. Additionally, the number of contractors at 30 June 2023 was 5,198, a decrease of 849 from 31 December 2022.

Share of profit in associates and joint ventures of $1.6bn was $0.1bn or 9% higher, reflecting an increase in the share of profit from
Saudi Awwal Bank (‘SAB’) and Bank of Communications Co., Limited (‘BoCom’).
In relation to BoCom, we continue to be subject to a risk of impairment in the carrying value of our investment. We have performed an impairment test on the carrying amount of our investment and confirmed there was no impairment at 30 June 2023. For further details of our impairment review process, see Note 10 on the interim condensed financial statements.

Tax expense
Tax
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Tax (charge)/credit
Reported (3,586) 151 
Currency translation 76 
Constant currency tax (charge)/credit (3,586) 227 

Notable items
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Tax
Tax (charge)/credit on notable items (500) 242 
Recognition of losses —  2,082 
Uncertain tax positions 427  (317)
Tax in 1H23 was a charge of $3.6bn, representing an effective tax rate of 16.6%. The effective tax rate for 1H23 was reduced by 1.9 percentage points by the non-taxable provisional gain recognised on the acquisition of SVB UK and by 2.0 percentage points by the release of provisions for uncertain tax positions. A deferred tax charge of $0.4bn was recorded on the temporary difference in tax and accounting treatment relating to the planned sale of our retail banking operations in France. The resulting deferred tax liability will reverse upon classification as held for sale.

Tax in 1H22 was a credit of $151m. This was mainly due to a $2.1bn credit arising from the recognition of a deferred tax asset on historical tax losses of HSBC Holdings as a result of improved profit forecasts for the UK tax group and a charge of $0.3bn for uncertain tax positions. Excluding these items, the effective tax rate for 1H22 was 18.4%.
34
HSBC Holdings plc

Summary consolidated balance sheet
At1
30 Jun 31 Dec
2023 2022
$m $m
Assets
Cash and balances at central banks 307,733  327,002 
Trading assets 255,387  218,093 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 104,303  100,101 
Derivatives 272,595  284,159 
Loans and advances to banks 100,921  104,475 
Loans and advances to customers 959,558  923,561 
Reverse repurchase agreements – non-trading 258,056  253,754 
Financial investments 407,933  364,726 
Assets held for sale 95,480  115,919 
Other assets 279,510  257,496 
Total assets 3,041,476  2,949,286 
Liabilities and equity
Liabilities
Deposits by banks 68,709  66,722 
Customer accounts 1,595,769  1,570,303 
Repurchase agreements – non-trading 170,110  127,747 
Trading liabilities 81,228  72,353 
Financial liabilities designated at fair value 139,618  127,321 
Derivatives 269,560  285,762 
Debt securities in issue 85,471  78,149 
Insurance contract liabilities 115,756  108,816 
Liabilities of disposal groups held for sale 87,241  114,597 
Other liabilities 236,363  212,319 
Total liabilities 2,849,825  2,764,089 
Equity
Total shareholders’ equity 184,170  177,833 
Non-controlling interests 7,481  7,364 
Total equity 191,651  185,197 
Total liabilities and equity 3,041,476  2,949,286 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
HSBC Holdings plc
35

Financial summary
Selected financial information
At
30 Jun 31 Dec
2023 2022
$m $m
Called up share capital 10,073 10,147
Capital resources1
 170,021 162,423
Undated subordinated loan capital 918 1,967
Preferred securities and dated subordinated loan capital2
 32,810 29,921
Risk-weighted assets 859,545 839,720
Total shareholders’ equity 184,170 177,833
Less: preference shares and other equity instruments (19,392) (19,746)
Total ordinary shareholders’ equity 164,778 158,087
Less: goodwill and intangible assets (net of tax) (11,544) (11,160)
Tangible ordinary shareholders’ equity 153,234 146,927
Financial statistics
Loans and advances to customers as a percentage of customer accounts (%) 60.1  58.8
Average total shareholders’ equity to average total assets (%) 5.91  5.98
Net asset value per ordinary share at period end ($)3
 8.44 8.01
Tangible net asset value per ordinary share at period end ($)4
 7.84 7.44
Tangible net asset value per fully diluted ordinary share at period end ($)
 7.79 7.39
Number of $0.50 ordinary shares in issue (millions) 20,147 20,294 
Basic number of $0.50 ordinary shares outstanding (millions) 19,534 19,739
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions) 19,679 19,876
Closing foreign exchange translation rates to $:
$1: £ 0.786 0.830
$1: € 0.915 0.937
1    Capital resources are total regulatory capital, the calculation of which is set out on page 95.
2    Including perpetual preferred securities.
3    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 own shares held by the company, including those purchased and held in treasury.
4    The definition of tangible net asset value per ordinary share is total ordinary shareholder’s equity excluding goodwill and other intangible assets (net of deferred tax), divided by the number of basic ordinary shares in issue, excluding own shares held by the company, including those purchased and held in treasury.
A more detailed consolidated balance sheet is contained in the interim condensed financial statements on page 108.
Combined view of customer lending and customer deposits
At
30 June 31 Dec
2023 2022
$m $m
Loans and advances to customers 959,558  923,561 
–of which HSBC Innovation Bank Limited (formerly SVB UK)
 7,040  — 
Loans and advances to customers of disposal groups reported in ‘Assets held for sale’ 59,210  80,576 
–banking business in Canada
 55,932  55,197 
–retail banking operations in France
 —  25,029 
–other
 3,278  350 
Non-current assets held for sale1
 659  112 
Combined customer lending 1,019,427  1,004,249 
Currency translation —  15,070 
Combined customer lending at constant currency 1,019,427  1,019,319 
Customer accounts 1,595,769  1,570,303 
–of which HSBC Innovation Bank Limited (formerly SVB UK)
 7,220  — 
Customer accounts reported in ‘Liabilities of disposal groups held for sale’ 66,154  85,274 
–banking business in Canada
 59,813  60,606 
–retail banking operations in France
 —  22,348 
–other
 6,341  2,320 
Combined customer deposits 1,661,923  1,655,577 
Currency translation —  24,227 
Combined customer deposits at constant currency 1,661,923  1,679,803 
1    Largely relates to US commercial real estate loans classified as held for sale at 30 June 2023.
36
HSBC Holdings plc

Balance sheet commentary compared with 31 December 2022
At 30 June 2023, our total assets were $3.0tn, an increase of $92bn or 3% on a reported basis, and $46bn or 2% on a constant currency basis.
Our asset base included higher financial investments as we increased our holdings of treasury bills and debt securities, and a rise in trading assets in HSBC Bank plc and Hong Kong. In addition, there was growth in loans and advances to customers due to reclassifications from ’assets held for sale’, while higher other assets reflected seasonal reductions in settlement accounts at 31 December 2022. These increases were partly offset by reductions in cash and balances at central banks and lower derivative assets.
Our ratio of loans and advances to customers as a percentage of customer accounts of 60% was broadly in line with 31 December 2022.
Assets
Cash and balances at central banks decreased by $19bn or 6%, mainly in HSBC UK due to a fall in customer accounts and an increase in financial investments, and in HSBC Bank plc as we manage liquidity in the context of developing market conditions. This was partly offset by favourable foreign currency translation differences of $11bn.
Trading assets rose by $37bn or 17%, reflecting an increase in holdings of debt and equity securities, particularly in our main legal entities in Europe and Hong Kong.
Derivative assets decreased by $12bn or 4%, reflecting a reduction in foreign exchange contracts, mainly in HSBC Bank plc, as a result of lower client demand and foreign exchange rate movements. This was partly offset by favourable foreign currency translation differences of $11bn. The decrease in derivative assets was consistent with the fall in derivative liabilities, as the underlying risk is broadly matched.
Loans and advances to customers of $1.0tn were $36bn higher on a reported basis. This included:
–a favourable impact from foreign currency translation differences of $13bn;
–an increase from the reclassification of $26bn of lending balances, on a constant currency basis, that were classified as ‘assets held for sale’ at 31 December 2022 relating to the planned sale of our retail banking operations in France;
–an increase in lending balances through the acquisition of SVB UK of $7bn; and
–a decrease from the classification of $3bn of lending balances to ‘assets held for sale’ relating to the planned merger of our business in Oman.
Excluding these factors, customer lending balances were $7bn lower, reflecting the following movements:
Customer lending balances decreased in GBM by $12bn, including the transfer of a portfolio of Global Banking clients to CMB in our legal entities in Australia and Indonesia. The reduction also reflected lower term lending, mainly in our legal entities in Hong Kong (down $4bn) and HSBC Bank plc (down $3bn), reflecting muted demand and repayments.
In CMB, customer lending was $2bn lower, reflecting a decrease in term lending balances, notably in our main legal entities in Hong Kong and the UK. This was partly offset by the transfer of a portfolio of Global Banking clients to CMB referred to above and an increase in overdraft balances, primarily in HSBC Bank plc and HSBC UK.
In WPB, customer lending balances increased by $8bn, mainly from higher mortgage balances, notably in our legal entities in Hong Kong (up $4bn), the UK (up $1bn), Mexico (up $1bn) and Australia (up $1bn).
Financial investments increased by $43bn or 12%, mainly as we increased our holdings of treasury bills and debt securities in most of our key legal entities, notably in Hong Kong and Europe.
Assets held for sale decreased by $20bn or 18%, from the reclassification of asset balances from ‘assets held for sale‘ relating to
the planned sale of retail banking operations in France, partly offset by the transfer of asset balances in Oman into ‘assets held for sale’.
Other assets grew by $22bn or 9%, primarily due to an increase of $18bn in settlement accounts in HSBC Bank plc, from higher trading activity, compared with the seasonal reduction in December 2022.
Liabilities
Customer accounts of $1.6tn increased by $25bn on a reported basis. This included:
–a favourable impact from foreign currency translation differences of $22bn;
–an increase from the reclassification of $23bn of customer account balances, on a constant currency basis, that were classified as ‘liabilities of disposal groups held for sale’ at 31 December 2022 relating to the planned sale of our retail banking operations in France;
–an increase in customer accounts through the acquisition of SVB UK of $7bn; and
–a decrease from the classification of $5bn of customer account balances to ‘liabilities of disposal groups held for sale’ relating to the planned merger of our business in Oman.
Excluding these factors, customer accounts were $22bn lower, reflecting the following movements:
In GBM, customer accounts were $16bn lower, including the transfer of a portfolio of Global Banking clients to CMB in our legal entities in Australia and Indonesia. The reduction also reflected lower interest-bearing and non-interest-bearing balances, notably in HSBC Bank plc and in our main legal entities in Hong Kong and the US.
In CMB, customer accounts decreased by $4bn, reflecting net outflows in HSBC UK and in our main legal entity in Hong Kong. These reductions were partly offset by the transfer of a portfolio of Global Banking clients to CMB referred to above and growth in our main legal entity in the US.
Customer accounts decreased in WPB by $2bn, primarily driven by a reduction in HSBC UK of $9bn, reflecting higher cost of living and competitive pressures. They also fell in Hong Kong (down $3bn) and the US (down $3bn). These reductions were partly offset by growth in a number of other markets, notably HSBC Bank plc and Singapore.
Financial liabilities designated at fair value increased by $12bn or 10%, primarily due to an increase in debt securities in issue, together with the reclassification of liability balances from ‘liabilities of disposal groups held for sale’ relating to the planned sale of our retail banking operations in France.
Repurchase agreements – non trading increased by $42bn or 33%, primarily in our main legal entities in Hong Kong, Europe and the US as client demand increased.
Derivative liabilities decreased by $16bn or 6%, which is consistent with the decrease in derivative assets, since the underlying risk is broadly matched.
Liabilities of disposal groups held for sale decreased by $27bn or 24%, notably from the reclassification of liability balances from ‘liabilities of disposal groups held for sale’ relating to the planned sales of our retail banking operations in France, partly offset by the transfer of liability balances in Oman into ‘liabilities of disposal groups held for sale’.
Other liabilities increased by $24bn or 11%, notably from a rise of $23bn in settlement accounts in our main legal entities in Europe, Hong Kong, Mexico and the US from an increase in trading activity, compared with the seasonal reduction in December 2022.
Equity
Total shareholders’ equity, including non-controlling interests, increased by $6bn or 3% compared with 31 December 2022.
Profits generated of $18bn were partly offset by dividends paid of $8bn and the impact of our up to $2bn share buy-back announced at our 1Q23 results in May 2023, as well as net losses through other comprehensive income (‘OCI’) of $1bn and other movements of $1bn.
HSBC Holdings plc
37

Financial summary
Financial investments
As part of our interest rate hedging strategy, we hold a portfolio of debt instruments, reported within financial investments, which are classified as hold-to-collect-and-sell. As a result, the change in value of these instruments is recognised through ‘debt instruments at fair value through other comprehensive income’ in equity.
At 30 June 2023, we had recognised a cumulative unrealised loss reserve through other comprehensive income of $6.5bn, of which a pre-tax unrealised loss of $6.2bn related to these hold-to-collect-and-sell positions, reflecting a $0.3bn pre-tax gain in 1H23, inclusive of movements on related fair value hedges. Overall, the Group is positively exposed to rising interest rates through net interest income, although there is an adverse impact on our capital base in the early stages of a rising interest rate environment due to the fair value of hold-to-collect-and-sell instruments. After the initial negative effect materialising through reserves, the net interest income of the Group is expected to result in a net benefit over time, provided policy rates follow market implied rates. Over time, these adverse movements will unwind as the instruments reach maturity, although not all will necessarily be held to maturity.
We also hold a portfolio of financial investments measured at amortised cost, which are classified as hold-to-collect. At 30 June 2023, there was a cumulative unrealised loss of $3.5bn. Within this, $2.8bn related to debt instruments held to manage our interest rate exposure, representing a $0.9bn deterioration during 1H23.

Customer accounts by country/territory
At
30 Jun 31 Dec
  2023 2022
$m $m
UK 508,052  493,028 
France 60,283  33,726 
Germany 25,445  28,949 
Switzerland 4,081  5,167 
Hong Kong 529,574  542,543 
Singapore 68,189  61,475 
Mainland China 53,835  56,948 
Australia 28,189  28,506 
India 24,147  22,636 
Malaysia 15,207  16,008 
Taiwan 15,219  15,316 
Indonesia 5,728  5,840 
United Arab Emirates 24,469  23,331 
Egypt 5,265  6,045 
Türkiye 3,953  3,497 
US 99,303  100,404 
Mexico 28,402  25,531 
Other 96,428  101,353 
At end of period 1,595,769  1,570,303 

Risk-weighted assets
Risk-weighted assets (‘RWAs’) rose by $19.8bn during the first half of the year. Excluding foreign currency translation differences, RWAs increased by $15.4bn, largely as a result of the following:
–a $19.7bn increase due to asset size movements. This was predominantly driven by a $9.0bn movement in credit risk, mainly attributable to sovereign exposures, in Argentina, Asia and North America and growth in retail mortgages, notably in Hong Kong; a $6.6bn increase from heightened market volatility on market risk RWAs, including hedges related to the agreed sale of our banking business in Canada; and a $3.5bn increase from mark-to-market movements in counterparty credit risk mainly in HSBC Bank plc, Asia and Mexico; and
–a $9.6bn increase through the acquisition of SVB UK.
These were partly offset by:
–a $11.5bn decrease due to changes in methodology and policy, including a $7.7bn fall due to a regulatory change to the Hong Kong Monetary Authority’s risk-weight floor for residential mortgages, which became effective 1 January 2023 and further decreases attributed to risk parameter refinements.
38
HSBC Holdings plc


Global businesses
Contents
Summary
Basis of preparation
Supplementary analysis of constant currency results and notable items by global business
Reconciliation of reported risk-weighted assets to constant currency risk-weighted assets
Supplementary tables for WPB
Summary
The Group Chief Executive, supported by the rest of the Group Executive Committee (‘GEC’), reviews operating activity on a number of bases, including by global business and legal entities. Our global businesses – Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets – along with Corporate Centre are our reportable segments under IFRS 8 ‘Operating Segments’, and are presented below and in Note 5: ‘Segmental analysis’ on page 116.
Descriptions of the global businesses are provided in the Overview section on pages 17 to 24.

Basis of preparation
The Group Chief Executive, supported by the rest of the GEC, is considered the Chief Operating Decision Maker (‘CODM’) for the purposes of identifying the Group’s reportable segments. Global business results are assessed by the CODM on the basis of constant currency performance. We separately disclose ‘notable items’, which are components of our income statement that management would consider as outside the normal course of business and generally non-recurring in nature. Constant currency performance information for 1H22 is presented as described on page 28.


As required by IFRS 8, reconciliations of the total constant currency global business results to the Group’s reported results are presented on page 117.
Supplementary reconciliations from reported to constant currency results by global business are presented on pages 39 to 40 for information purposes.
Global business performance is also assessed using return on tangible equity (‘RoTE’). A reconciliation of global business RoTE to the Group’s RoTE is provided on page 57.
Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses and legal entities. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm’s length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.
HSBC Holdings incurs the liability of the UK bank levy, with the cost being recharged to its UK operating subsidiaries. The current year expense will be reflected in the fourth quarter as it is assessed on our balance sheet position as at 31 December.
The results of main legal entities are presented on a reported and constant currency basis, including HSBC UK Bank plc, HSBC Bank plc, The Hong Kong and Shanghai Banking Corporation Limited, HSBC Bank Middle East Limited, HSBC North America Holdings Inc. and Grupo Financiero HSBC, S.A. de C.V.
In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly. Similar smaller transfers from Global Banking and Markets to Commercial Banking were also undertaken within our entities in Australia and Indonesia, where comparative data have not been re-presented.
Supplementary analysis of constant currency results and notable items by global business
Constant currency results1


 Half-year to 30 Jun 2023


Wealth and
Personal
Banking
Commercial
Banking3
Global
Banking and
Markets3
 Corporate
Centre		 Total
$m $m $m $m $m
Revenue2
 16,200  12,216  8,501  (41) 36,876 
ECL (502) (704) (136) (3) (1,345)
Operating expenses (7,141) (3,572) (4,785) 41  (15,457)
Share of profit in associates and joint ventures 35  (1) —  1,549  1,583 
Profit before tax 8,592  7,939  3,580  1,546  21,657 
Loans and advances to customers (net) 463,836  319,246  176,182  294  959,558 
Customer accounts 809,864  472,146  313,126  633  1,595,769 
1    In the current period, constant currency results are equal to reported as there is no currency translation.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.

HSBC Holdings plc
39

Global businesses
Notable items
Half-year to 30 Jun 2023
Wealth and Personal Banking Commercial Banking Global
Banking and Markets		 Corporate Centre Total
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs1,2
 2,034  1,507  —  (220) 3,321 
Fair value movements on financial instruments3
 —  —  —  15  15 
Operating expenses
Disposals, acquisitions and related costs (23) (15) 3  (83) (118)
Restructuring and other related costs4
 —  29  —  18  47 
    
1    Includes the reversal of a $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.
2    Includes the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.
3    Fair value movements on non-qualifying hedges in HSBC Holdings.
4 In 2Q23, we recognised $47m of reversals relating to restructuring provisions recognised during 2022.
Reconciliation of reported results to constant currency results – global businesses
Half-year to 30 Jun 2022
Wealth and
Personal
Banking
Commercial
Banking2
Global
Banking and
Markets2
 Corporate
Centre		 Total
$m $m $m $m $m
Revenue1
Reported 10,322  7,324  7,793  (894) 24,545 
Currency translation (264) (269) (334) (31) (898)
Constant currency 10,058  7,055  7,459  (925) 23,647 
ECL
Reported (571) (279) (234) (3) (1,087)
Currency translation (13) 1  24  1  13 
Constant currency (584) (278) (210) (2) (1,074)
Operating expenses
Reported (7,216) (3,485) (4,736) (690) (16,127)
Currency translation 221  140  179  55  595 
Constant currency (6,995) (3,345) (4,557) (635) (15,532)
Share of profit in associates and joint ventures
Reported 8  —  —  1,441  1,449 
Currency translation —  —  —  (86) (86)
Constant currency 8  —  —  1,355  1,363 
Profit/(loss) before tax
Reported 2,543  3,560  2,823  (146) 8,780 
Currency translation (56) (128) (131) (61) (376)
Constant currency 2,487  3,432  2,692  (207) 8,404 
Loans and advances to customers (net)
Reported 474,181  352,136  200,163  541  1,027,021 
Currency translation 8,781  2,137  (81) 16  10,853 
Constant currency 482,962  354,273  200,082  557  1,037,874 
Customer accounts
Reported 836,026  484,626  330,087  562  1,651,301 
Currency translation 10,948  6,489  2,386  27  19,850 
Constant currency 846,974  491,115  332,473  589  1,671,151 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.

40
HSBC Holdings plc


Notable items (continued)
Half-year to 30 Jun 2022
Wealth and Personal
Banking		 Commercial Banking Global
 Banking and Markets		 Corporate
Centre		 Total
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs1
 —  —  —  (288) (288)
Fair value movements on financial instruments2
 —  —  —  (371) (371)
Restructuring and other related costs3
 93  —  (26) 1  68 
Operating expenses
Restructuring and other related costs (113) (66) (87) (774) (1,040)
1 Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business.
2 Fair value movements on non-qualifying hedges in HSBC Holdings.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Reconciliation of reported risk-weighted assets to constant currency risk-weighted assets
At 30 Jun 2023
Wealth and
Personal
Banking
Commercial
Banking1
Global
Banking and
Markets1
 Corporate
Centre		 Total
$bn $bn $bn $bn $bn
Risk-weighted assets
Reported 186.6  353.8  227.0  92.1  859.5 
Constant currency 186.6  353.8  227.0  92.1  859.5 
At 30 Jun 2022
Risk-weighted assets
Reported 186.1  348.9  234.1  82.6  851.7 
Currency translation 1.2  (1.3) (1.9) (0.2) (2.2)
Constant currency 187.3  347.6  232.2  82.4  849.5 
At 31 Dec 2022
Risk-weighted assets
Reported 182.9  342.4  225.9  88.5  839.7 
Currency translation 2.1  2.7  (0.6) —  4.2 
Constant currency 185.0  345.1  225.3  88.5  843.9 
1    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
HSBC Holdings plc
41

Global businesses
Supplementary tables for WPB
WPB performance by business unit (constant currency)
A breakdown of WPB by business unit is presented below to reflect the basis of how the revenue performance of the business units is assessed and managed.
WPB – summary (constant currency basis)
Total
WPB		 Consists of
Banking
operations		 Life insurance Global Private
Banking		 Asset
management
$m $m $m $m $m
Half-year to 30 Jun 2023
Net operating income before change in expected credit losses and other credit impairment charges1
 16,200  13,560  875  1,141  624 
– net interest income/(expense) 10,299  9,587  137  580  (5)
– net fee income 2,692  1,636  79  393  584 
– other income 3,209  2,337  659  168  45 
ECL (502) (501) (3) 2  — 
Net operating income 15,698  13,059  872  1,143  624 
Total operating expenses (7,141) (5,557) (351) (778) (455)
Operating profit 8,557  7,502  521  365  169 
Share of profit in associates and joint ventures 35  7  28  —  — 
Profit before tax 8,592  7,509  549  365  169 
Half-year to 30 Jun 20222
Net operating income before change in expected credit losses and other credit impairment charges1
 10,058  7,939  651  941  527 
– net interest income/(expense) 6,493  5,932  175  387  (1)
– net fee income 2,706  1,650  83  424  549 
– other income/(expense) 859  357  393  130  (21)
ECL (584) (576) (4) (4) — 
Net operating income 9,474  7,363  647  937  527 
Total operating expenses (6,995) (5,518) (391) (678) (408)
Operating profit 2,479  1,845  256  259  119 
Share of profit in associates and joint ventures 8  5  3  —  — 
Profit before tax 2,487  1,850  259  259  119 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
42
HSBC Holdings plc


Life insurance business performance
The following table provides an analysis of the performance of our life insurance business for the period. It comprises income earned by our insurance manufacturing operations within our WPB business, as well as income earned and costs incurred within our Wealth insurance distribution channels and consolidation and inter-company elimination entries.
Results of WPB’s life insurance business unit (constant currency basis)
Half-year to 30 Jun 2023
Insurance manufac-turing operations
Wealth insurance and other1
 Life insurance
$m $m $m
Net interest income 136  1  137 
Net fee income/(expense) (25) 104  79 
Other income 651  8  659 
– insurance service results 558  (25) 533 
– net investment returns (excluding net interest income) 4  —  4 
– other income 89  33  122 
Net operating income before change in expected credit losses and other credit impairment charges2
 762  113  875 
ECL (3) —  (3)
Net operating income 759  113  872 
Total operating expenses (266) (85) (351)
Operating profit 493  28  521 
Share of profit/(loss) in associates and joint ventures 28  —  28 
Profit before tax 521  28  549 
Half-year to 30 Jun 20223
Net interest income 175  —  175 
Net fee income/(expense) (17) 100  83 
Other income 393  —  393 
– insurance service results 378  (3) 375 
– net investment returns (excluding net interest income) (126) (5) (131)
– other income 141  8  149 
Net operating income before change in expected credit losses and other credit impairment charges2
 551  100  651 
ECL (5) 1  (4)
Net operating income 546  101  647 
Total operating expenses (261) (130) (391)
Operating profit 285  (29) 256 
Share of profit/(loss) in associates and joint ventures 3  —  3 
Profit before tax 288  (29) 259 
1 ‘Wealth insurance and other’ includes fee income earned and operating expenses incurred within our Wealth distribution channels. It also includes the IFRS 17 consolidation entries arising from transactions between our insurance manufacturing operations and Wealth distribution channels and with the wider Group, as well as allocations of central costs benefiting life insurance.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
HSBC Holdings plc
43

Global businesses
WPB insurance manufacturing (constant currency basis)
The following table shows the results of our insurance manufacturing operations for our WPB business and for all global business segments in aggregate.
Results of insurance manufacturing operations1,2,3
Half-year to
30 Jun 30 Jun
2023 2022
WPB All global
businesses		 WPB All global
businesses
$m $m $m $m
Net interest income  136  155  175  187 
Net fee expense (25) (18) (17) (9)
Other income 651  643  393  378 
Insurance service result 558  557  378  378 
–release of contractual service margin
 524  524  431  431 
–risk adjustment release
 19  19  22  22 
–experience variance and other
 2  1  29  29 
–loss from onerous contracts
 13  13  (104) (104)
Net investment returns (excluding net interest income)4
 4  —  (126) (128)
–insurance finance income/(expense)
 (4,236) (4,235) 11,765  11,767 
–other investment income
 4,240  4,235  (11,891) (11,895)
Other operating income 89  86  141  128 
Net operating income before change in expected credit losses and other credit impairment charges5
 762  780  551  556 
Change in expected credit losses and other credit impairment charges (3) (3) (5) (4)
Net operating income 759  777  546  552 
Total operating expenses (266) (270) (261) (250)
Operating profit 493  507  285  302 
Share of profit in associates and joint ventures 28  28  3  3 
Profit before tax of insurance business operations6
 521  535  288  305 
Additional information
Insurance manufacturing new business contractual service margin (reported basis) 747  747  599  599 
Consolidated Group new business contractual service margin (reported basis) 811  811  637  637 
Annualised new business premiums of insurance manufacturing operations 1,861  1,890  1,274  1,314 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2    Constant currency results are derived by adjusting for period-on-period effects of foreign currency translation differences. The impact of foreign currency translation differences on ‘All global businesses’ profit before tax was nil for 1H22.
3    The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance operations. The ‘All global businesses‘ result consists primarily of WPB business, as well as a small proportion of CMB business.
4    Net investment return for all global businesses for the half-year to 30 June 2023 was $155m (30 June 2022: $59m), which consisted of net interest income, net income/(expenses) on assets held at fair value through profit or loss, and insurance finance income/(expense).
5    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
6    The effect on insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in a decrease in WPB revenue in 1H23 of $27m (1H22: decrease of $13m) and a decrease in WPB profit before tax in 1H23 of $27m (1H22: decrease of $13m).



44
HSBC Holdings plc


Insurance manufacturing
The following commentary, unless otherwise stated, relates to the constant currency results for ‘All global businesses’.
Profit before tax of $0.5bn increased by $0.2bn compared with 1H22. This primarily reflected the following:
–Insurance service result of $0.6bn in 1H23 increased by $0.2bn compared with 1H22. This was driven by an increase to the release of CSM of $0.1bn as a result of a higher closing CSM balance from the effect of new business written, favourable experience variances, and updates to lapse rate assumptions impacting the CSM measurement, as well as the impact of higher interest rates on the CSM duration profile. The improved insurance service result also reflected a reduction to losses from onerous contracts of $0.1bn, mainly in Hong Kong and Singapore, in part due to improved economic conditions in 1H23.
–Net investment return (excluding net interest income) increased by $0.1bn, with higher asset returns in 1H23 compared with losses in the prior period.
Insurance equity plus CSM net of tax represents a measure of our insurance manufacturing operations’ net asset value plus the future earnings from in-force business. At 30 June 2023, insurance equity plus CSM net of tax on a reported basis was $16,310m (31 December 2022: $14,646m; 30 June 2022: $14,663m).
At 30 June 2023, Insurance equity plus CSM net of tax was calculated as insurance manufacturing operations equity of $7,661m plus CSM of $10,571m less tax of $1,922m. At 31 December 2022, it was calculated as insurance manufacturing operations equity of $7,236m plus CSM of $9,058m less tax of $1,648m. At 30 June 2022, it was calculated as insurance manufacturing operations equity of $7,116m plus CSM of $9,233m less tax of $1,686m.

HSBC Holdings plc
45

Global businesses
WPB: Wealth balances
The following table shows the wealth balances, which include invested assets and wealth deposits. Invested assets comprise
customer assets either managed by our Asset Management business or by external third-party investment managers, as well as self-directed investments by our customers.
WPB – reported wealth balances1
Half-year to
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
Global Private Banking client assets 341  311  312 
– managed by Global Asset Management 64  57  57 
– external managers, direct securities and other 277  254  255 
Retail wealth balances 372  393  363 
– managed by Global Asset Management 207  218  198 
– external managers, direct securities and other 165  175  165 
Asset Management third-party distribution 384  310  340 
Reported invested assets1
 1,097  1,014  1,015 
Wealth deposits (Premier, Jade and Global Private Banking)2
 533  542  503 
Total reported wealth balances 1,630  1,556  1,518 
1    Invested assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager.
2    Premier and Global Private Banking deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts balance of $810bn (30 June 2022: $836bn; 31 December 2022: $779bn) on page 39.
Asset Management: Funds under management
The following table shows the funds under management of our Asset Management business. Funds under management represents assets managed, either actively or passively, on behalf of our customers.
Asset Management – reported funds under management1
Half-year to
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
Opening balance 595  630  585 
Net new invested assets 9  20  25 
Net market movements 15  (33) (3)
Foreign exchange and others 9  (32) (12)
Closing balance 628  585  595 
Asset Management – reported funds under management by legal entities
At
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
HSBC Bank plc 141  134  134 
The Hongkong and Shanghai Banking Corporation Limited 188  166  184 
HSBC North America Holdings Inc. 55  69  60 
HSBC Bank Canada —  15  — 
Grupo Financiero HSBC, S.A. de C.V. 11  8  8 
Other trading entities2
 233  193  209 
Closing balance 628  585  595 
1    Funds under management are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager.
2    Funds under management of $164m related to our Asset Management entity in the UK are reported under ‘other trading entities’ in the table above.
At 30 June 2023, Asset Management funds under management were $628bn, an increase of $33bn or 6% compared with 31 December 2022. The increase was driven by favourable market performances and net new invested assets received, notably in the UK and Hong Kong.
We delivered robust net new invested assets of $9bn, primarily from passive investment products, developed market fixed income and private equity investment products, and benefited from a favourable impact of foreign currency translation differences.
46
HSBC Holdings plc


Global Private Banking client assets1
The following table shows the client assets of our Global Private Banking business.
Global Private Banking – reported client assets2
Half-year to
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
Opening balance 383  423  382 
Net new invested assets 17  13  4 
Increase/(decrease) in deposits 3  (2) 1 
Net market movements 14  (43) (10)
Foreign exchange and others 2  (9) 6 
Closing balance 419  382  383 
Global Private Banking – reported client assets by legal entities
At
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
HSBC UK Bank plc 29  27  28 
HSBC Bank plc 62  67  58 
The Hongkong and Shanghai Banking Corporation Limited 187  167  174 
HSBC North America Holdings Inc. 65  61  56 
Grupo Financiero HSBC, S.A. de C.V. 2  —  — 
Other trading entities 74  60  67 
Closing balance 419  382  383 
1    Client assets are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately.
2    Client assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager. Customer deposits included in these client assets are recorded on our balance sheet.
Retail invested assets
The following table shows the invested assets of our retail customers. These comprise customer assets either managed by our Asset Management business or by external third-party investment
managers as well as self-directed investments by our customers. Retail invested assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as investment manager.
Retail invested assets
Half-year to
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
Opening balance 363  434  393 
Net new invested assets1
 14  12  14 
Net market movements 6  (32) (15)
Foreign exchange and others (11) (21) (29)
Closing balance 372  393  363 
Retail invested assets by legal entities
At
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
HSBC UK Bank plc 29  27  27 
HSBC Bank plc 36  34  27 
The Hongkong and Shanghai Banking Corporation Limited 280  283  284 
HSBC Bank Middle East Limited 3  2  2 
HSBC North America Holdings Inc. 13  11  12 
HSBC Bank Canada —  26  — 
Grupo Financiero HSBC, S.A. de C.V. 8  7  7 
Other trading entities 3  3  4 
Closing balance 372  393  363 
1    ‘Retail net new invested assets’ covers nine markets, comprising Hong Kong including Hang Seng Bank (Hong Kong), mainland China, Malaysia, Singapore, HSBC UK, UAE, the US, Canada and Mexico. The ‘net new invested assets’ related to all other geographies is reported in ‘Foreign exchange and other’.

HSBC Holdings plc
47

Global businesses
WPB invested assets
‘Net new invested assets’ represents the net customer inflows from retail invested assets, Asset Management third-party distribution and Global Private Banking invested assets. It excludes all customer
deposits. The ‘net new invested assets’ in the table below is non-additive from the tables above, as net new invested assets managed by Asset Management that are generated by retail clients or Global Private Banking will be recorded in both businesses.
WPB: Invested assets
Half-year to
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
Opening balance 1,015  1,119  1,014 
Net new invested assets 34  39  41 
Net market movements 29  (90) (28)
Foreign exchange and others 19  (54) (12)
Closing balance 1,097  1,014  1,015 
WPB: Net new invested assets by legal entities
At
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
HSBC UK Bank plc 0  1  1 
HSBC Bank plc 1  2  4 
The Hongkong and Shanghai Banking Corporation Limited 27  22  37 
HSBC Bank Middle East Limited 0  0  0 
HSBC North America Holdings Inc. (7) 17  (9)
HSBC Bank Canada —  0  (1)
Grupo Financiero HSBC, S.A. de C.V. 1  0  1 
Other trading entities 12  (3) 8 
Total 34  39  41 
48
HSBC Holdings plc

Legal entities
Contents
Analysis of reported results by legal entities
Summary information – legal entities and selected countries
Analysis by country/territory
On 1 January 2023, we updated our financial reporting framework and changed the supplementary presentation of results from geographical regions to main legal entities to better reflect the Group’s structure.
Analysis of reported results by legal entities
HSBC reported profit/(loss) before tax and balance sheet data
Half-year to 30 Jun 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Financiero HSBC, S.A. de C.V. Other trading entities Holding companies, shared service centres and intra-Group eliminations Total
$m $m $m $m $m $m $m $m $m $m
Net interest income 4,779  1,407  8,398  764  933  663  998  1,424  (1,102) 18,264 
Net fee income 801  832  2,555  243  624  284  274  565  (93) 6,085 
Net income from financial instruments held for trading or managed on a fair value basis 235  2,053  4,740  212  380  50  226  494  (278) 8,112 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss —  782  3,446  —  —  —  3  83  (10) 4,304 
Insurance finance income/(expense) —  (780) (3,402) —  —  —  —  (64) 12  (4,234)
Insurance service result —  91  399  —  —  —  41  4  (11) 524 
Other income/(expense)1
 1,574  2,318  397  (21) 205  11  32  (289) (406) 3,821 
Net operating income before change in expected credit losses and other credit impairment charges2
 7,389  6,703  16,533  1,198  2,142  1,008  1,574  2,217  (1,888) 36,876 
Change in expected credit losses and other credit impairment charges (418) (73) (456) —  (62) (11) (264) (71) 10  (1,345)
Net operating income 6,971  6,630  16,077  1,198  2,080  997  1,310  2,146  (1,878) 35,531 
Total operating expenses (2,180) (3,089) (6,507) (525) (1,379) (522) (880) (1,139) 764  (15,457)
Operating profit 4,791  3,541  9,570  673  701  475  430  1,007  (1,114) 20,074 
Share of profit/(loss) in associates and joint ventures —  (43) 1,347  —  —  —  6  275  (2) 1,583 
Profit before tax 4,791  3,498  10,917  673  701  475  436  1,282  (1,116) 21,657 
% % % % % % % % % %
Share of HSBC’s profit before tax 22.1  16.2  50.4  3.1  3.2  2.2  2.0  5.9  (5.1) 100.0 
Cost efficiency ratio 29.5  46.1  39.4  43.8  64.4  51.8  55.9  51.4  40.6  41.9 
Balance sheet data $m $m $m $m $m $m $m $m $m $m
Loans and advances to customers (net) 266,694  112,408  464,546  18,804  53,410  —  24,507  19,189  —  959,558 
Total assets 425,833  920,578  1,318,640  51,664  251,755  91,646  46,382  66,548  (131,570) 3,041,476 
Customer accounts 345,835  282,041  775,430  31,262  99,303  —  28,402  33,313  183  1,595,769 
Risk-weighted assets3,4
 125,782  127,402  391,470  24,187  73,140  31,382  30,657  66,317  11,285  859,545 

HSBC Holdings plc
49

Legal entities
HSBC reported profit/(loss) before tax and balance sheet data (continued)
Half-year to 30 Jun 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo Financiero HSBC, S.A. de C.V. Other trading entities Holding companies, shared service centres and intra-Group eliminations Total
$m $m $m $m $m $m $m $m $m $m
Net interest income 3,563  1,285  5,766  353  896  555  871  884  (788) 13,385 
Net fee income 774  858  2,636  239  679  308  218  557  (41) 6,228 
Net income from financial instruments held for trading or managed on a fair value basis 224  2,001  2,273  195  237  40  136  280  (530) 4,856 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss —  (1,707) (10,130) —  —  —  (10) 2  (4) (11,849)
Insurance finance income —  1,503  10,253  —  —  —  1  16  —  11,773 
Insurance service result —  79  287  —  —  —  13  (8) (1) 370 
Other income/(expense)1
 96  (193) 229  13  328  16  36  (241) (502) (218)
Net operating income before change in expected credit losses and other credit impairment charges2
 4,657  3,826  11,314  800  2,140  919  1,265  1,490  (1,866) 24,545 
Change in expected credit losses and other credit impairment charges (48) (252) (528) 68  (21) (31) (243) (34) 2  (1,087)
Net operating income 4,609  3,574  10,786  868  2,119  888  1,022  1,456  (1,864) 23,458 
Total operating expenses (2,339) (3,294) (6,403) (490) (1,695) (503) (788) (1,046) 431  (16,127)
Operating profit 2,270  280  4,383  378  424  385  234  410  (1,433) 7,331 
Share of profit in associates and joint ventures —  (28) 1,351  —  —  —  5  122  (1) 1,449 
Profit before tax 2,270  252  5,734  378  424  385  239  532  (1,434) 8,780 
% % % % % % % % % %
Share of HSBC’s profit before tax 25.9  2.9  65.3  4.3  4.8  4.4  2.7  6.1  (16.4) 100.0 
Cost efficiency ratio 50.2  86.1  56.6  61.3  79.2  54.7  62.3  70.2  23.1  65.7 
Balance sheet data $m $m $m $m $m $m $m $m $m $m
Loans and advances to customers (net) 245,310  114,905  491,213  20,658  56,819  57,550  18,996  21,569  1  1,027,021 
Total assets 423,703  862,478  1,295,484  48,944  262,701  96,830  37,218  68,330  (125,207) 2,970,481 
Customer accounts 347,845  267,788  779,153  28,960  101,137  58,241  23,659  44,517  1  1,651,301 
Risk-weighted assets3,4
 109,943  139,873  408,110  22,922  77,428  31,870  24,998  59,491  4,526  851,743 
1    Other income/(expense) in this context comprises gain on acquisitions, reversal of impairment loss relating to the planned sale of our retail banking operations in France and other operating income.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    Risk-weighted assets are non-additive across the principal entities due to market risk diversification effects within the Group.
4    Balances are on a third-party Group consolidated basis.


50
HSBC Holdings plc

Summary information – legal entities and selected countries
Legal entity reported and constant currency results¹
Half-year to 30 Jun 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo-
ration Limited		 HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo
Financiero
HSBC, S.A.
de C.V.
Other trading entities2
 Holding
companies,
shared
service
centres and
intra-Group
eliminations		 Total
$m $m $m $m $m $m $m $m $m $m
Revenue3
 7,389  6,703  16,533  1,198  2,142  1,008  1,574  2,217  (1,888) 36,876 
ECL (418) (73) (456) —  (62) (11) (264) (71) 10  (1,345)
Operating expenses (2,180) (3,089) (6,507) (525) (1,379) (522) (880) (1,139) 764  (15,457)
Share of profit in associates and joint ventures —  (43) 1,347  —  —  —  6  275  (2) 1,583 
Profit/(loss) before tax 4,791  3,498  10,917  673  701  475  436  1,282  (1,116) 21,657 
Loans and advances to customers (net) 266,694  112,408  464,546  18,804  53,410  —  24,507  19,189  —     959,558 
Customer accounts 345,835  282,041  775,430  31,262  99,303  —  28,402  33,313  183  1,595,769 
1    In the current period, constant currency results are equal to reported, as there is no currency translation.
2    Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit before tax of $692m. Supplementary analysis is provided on page 56 to provide a fuller picture of the MENAT regional performance.
3    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entity results: notable items
Half-year to 30 Jun 2023
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo-
ration Limited		 HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo
Financiero
HSBC, S.A.
de C.V.		 Other trading entities Holding
companies,
shared
service
centres and
intra-Group
eliminations		 Total
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs1,2
 1,507  2,101  —  —  —  —  —  —  (287) 3,321 
Fair value movements on financial instruments3
 —  —  —  —  —  —  —  —  15  15 
Operating expenses
Disposals, acquisitions and related costs (15) (45) —  —  (2) (54) —  —  (2) (118)
Restructuring and other related costs4
 —  —  —  —  —  —  —  —  47  47 
1 Includes the reversal of a $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.
2 Includes the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.
3    Fair value movements on non-qualifying hedges in HSBC Holdings.
4 In 2Q23, we recognised $47m of reversals relating to restructuring provisions recognised during 2022.
HSBC Holdings plc
51

Legal entities
Country results1
Half-year to 30 Jun 2023
UK2
 Hong
Kong		 Mainland
China		 US Mexico
$m $m $m $m $m
Revenue3
 10,478  10,574  2,030  2,090  1,574 
ECL (484) (489) 24  (62) (264)
Operating expenses (5,851) (3,964) (1,314) (1,379) (880)
Share of profit/(loss) in associates and joint ventures (44) 16  1,318  —  6 
Profit before tax 4,099  6,137  2,058  649  436 
Loans and advances to customers (net) 305,923  288,917  45,694  53,410  24,507 
Customer accounts 508,052  529,574  53,835  99,303  28,402 
1    In the current period, constant currency results are equal to reported, as there is no currency translation.
2 UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
3    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Country results: notable items
Half-year to 30 Jun 2023
UK1
 Hong
Kong		 Mainland
China		 US Mexico
$m $m $m $m $m
Revenue
Disposals, acquisitions and related costs2
 1,220  —  —  —  — 
Fair value movements on financial instruments3
 15  —  —  —  — 
Operating expenses
Disposals, acquisitions and related costs (12) —  —  (2) — 
1    UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
2 Includes the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.
3 Fair value movements on non-qualifying hedges in HSBC Holdings.
52
HSBC Holdings plc

 Legal entity reported and constant currency results (continued)
Half-year to 30 Jun 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and Shanghai Banking Corpo-
ration Limited		 HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo
Financiero
HSBC, S.A.
de C.V.
Other trading entities1
 Holding
companies,
shared
service
centres and
intra-Group
eliminations		 Total
$m $m $m $m $m $m $m $m $m $m
Revenue2
Reported 4,657  3,826  11,314  800  2,140  919  1,265  1,490  (1,866) 24,545 
Currency translation (216) (92) (234) 1  —  (51) 149  (299) (156) (898)
Constant currency 4,441  3,734  11,080  801  2,140  868  1,414  1,191  (2,022) 23,647 
ECL
Reported (48) (252) (528) 68  (21) (31) (243) (34) 2  (1,087)
Currency translation (8) 21  7  —  —  1  (29) 21  —  13 
Constant currency (56) (231) (521) 68  (21) (30) (272) (13) 2  (1,074)
Operating expenses
Reported (2,339) (3,294) (6,403) (490) (1,695) (503) (788) (1,046) 431  (16,127)
Currency translation 113  112  112  —  (1) 28  (92) 200  123  595 
Constant currency (2,226) (3,182) (6,291) (490) (1,696) (475) (880) (846) 554  (15,532)
Share of profit/(loss) in associates and joint ventures
Reported —  (28) 1,351  —  —  —  5  122  (1) 1,449 
Currency translation —  2  (88) —  —  —  —  1  (1) (86)
Constant currency —  (26) 1,263  —  —  —  5  123  (2) 1,363 
Profit/(loss) before tax
Reported 2,270  252  5,734  378  424  385  239  532  (1,434) 8,780 
Currency translation (111) 43  (203) 1  (1) (22) 28  (77) (34) (376)
Constant currency 2,159  295  5,531  379  423  363  267  455  (1,468) 8,404 
Loans and advances to customers (net)
Reported 245,310  114,905  491,213  20,658  56,819  57,550  18,996  21,569  1  1,027,021 
Currency translation 11,292  5,332  (6,106) 36  —  (1,347) 3,412  (1,765) (1) 10,853 
Constant currency 256,602  120,237  485,107  20,694  56,819  56,203  22,408  19,804  —  1,037,874 
Customer accounts
Reported 347,845  267,788  779,153  28,960  101,137  58,241  23,659  44,517  1  1,651,301 
Currency translation 16,011  11,905  (5,774) 51  —  (1,363) 4,250  (5,228) (2) 19,850 
Constant currency 363,856  279,693  773,379  29,011  101,137  56,878  27,909  39,289  (1) 1,671,151 
1    Other trading entities includes the results of entities located in Oman, Türkiye, Egypt and Saudi Arabia (including our share of the results of Saudi Awwal Bank) which do not consolidate into HSBC Bank Middle East Limited. These entities had an aggregated impact on the Group’s reported profit before tax of $381m and constant currency profit before tax of $315m. Supplementary analysis is provided on page 56 to provide a fuller picture of the MENAT regional performance.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Legal entity results: notable items (continued)
Half-year to 30 Jun 2022
HSBC UK Bank plc HSBC Bank plc The Hongkong and
Shanghai
Banking
Corporation
Limited		 HSBC Bank Middle East Limited HSBC North America Holdings Inc. HSBC Bank Canada Grupo
Financiero
HSBC, S.A.
de C.V.		 Other trading entities Holding
companies,
shared
service
centres and
intra-Group
eliminations		 Total
$m $m $m $m $m $m $m $m $m $m
Revenue
Disposals, acquisitions and related costs1
 —  (278) —  —  —  —  —  —  (10) (288)
Fair value movements on financial instruments2
 —  —  —  —  —  —  —  —  (371) (371)
Restructuring and other related costs3
 1  (21) 4  —  96  —  (1) —  (11) 68 
Operating expenses
Restructuring and other related costs (212) (250) (227) (19) (126) (22) (36) (39) (109) (1,040)
1    Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business.
2    Fair value movements on non-qualifying hedges in HSBC Holdings.
3    Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
HSBC Holdings plc
53

Legal entities
Country results (continued)
Half-year to 30 Jun 2022
UK1
 Hong
Kong		 Mainland
China		 US Mexico
$m $m $m $m $m
Revenue2
Reported 8,805  6,604  2,108  2,122  1,265 
Currency translation (424) (9) (137) —  149 
Constant currency 8,381  6,595  1,971  2,122  1,414 
ECL
Reported (196) (418) (138) (21) (243)
Currency translation —  —  11  —  (29)
Constant currency (196) (418) (127) (21) (272)
Operating expenses
Reported (6,471) (3,907) (1,356) (1,695) (789)
Currency translation 300  6  89  (1) (91)
Constant currency (6,171) (3,901) (1,267) (1,696) (880)
Share of profit/(loss) in associates and joint ventures
Reported (23) (1) 1,343  —  4 
Currency translation 2  —  (87) —  1 
Constant currency (21) (1) 1,256  —  5 
Profit before tax
Reported 2,115  2,278  1,957  406  237 
Currency translation (122) (3) (124) (1) 30 
Constant currency 1,993  2,275  1,833  405  267 
Loans and advances to customers (net)
Reported 285,097  309,445  52,922  56,819  18,996 
Currency translation 13,123  430  (4,123) —  3,412 
Constant currency 298,220  309,875  48,799  56,819  22,408 
Customer accounts
Reported 505,195  543,400  55,580  101,137  23,659 
Currency translation 23,255  756  (4,330) —  4,250 
Constant currency 528,450  544,156  51,250  101,137  27,909 
1    UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Country results: notable items (continued)
Half-year to 30 Jun 2022
UK1
 Hong
Kong		 Mainland
China		 US Mexico
$m $m $m $m $m
Revenue
Fair value movements on financial instruments2
 (371) —  —  —  — 
Restructuring and other related costs3
 205  (40) 36  97  (2)
Operating expenses
Restructuring and other related costs (699) (132) (15) (127) (36)
1    UK includes HSBC UK Bank plc (ring-fenced bank) and HSBC Bank plc (non-ring-fenced bank).
2    Fair value movements on non-qualifying hedges in HSBC Holdings.
3    Comprises gains and losses relating to the business update in February 2020, including losses associated with RWA reduction commitments.
54
HSBC Holdings plc

Analysis by country/territory
Profit/(loss) before tax by country/territory within global businesses
Wealth and
Personal Banking
Commercial
Banking1
Global Banking
and Markets1
Corporate
Centre
 Total
$m $m $m $m $m
UK2
 1,341  2,789  (115) 84  4,099 
– of which: HSBC UK Bank plc (ring-fenced bank) 1,520  3,171  69  31  4,791 
– of which: HSBC Bank plc (non-ring-fenced bank) 460  382  592  (186) 1,248 
– of which: Holdings and other (639) (764) (776) 239  (1,940)
France 2,019  192  41  51  2,303 
Germany 20  77  65  (2) 160 
Switzerland 28  15  —  8  51 
Hong Kong 3,567  1,816  881  (127) 6,137 
Australia 102  157  40  (18) 281 
India 35  209  408  114  766 
Indonesia 16  57  39  (2) 110 
Mainland China (12) 245  374  1,451  2,058 
Malaysia 55  74  109  (6) 232 
Singapore 255  233  248  (17) 719 
Taiwan 61  39  98  (5) 193 
Egypt 65  44  121  (16) 214 
UAE 175  135  208  (49) 469 
Saudi Arabia —  —  53  273  326 
US 259  347  153  (110) 649 
Canada 167  299  68  (54) 480 
Mexico 196  263  11  (34) 436 
Other3
 243  948  778  5  1,974 
Half-year to 30 Jun 2023 8,592  7,939  3,580  1,546  21,657 
UK2
 601  1,203  (54) 365  2,115 
– of which: HSBC UK Bank plc (ring-fenced bank) 843  1,515  71  (159) 2,270 
– of which: HSBC Bank plc (non-ring-fenced bank) 99  113  264  (208) 268 
– of which: Holdings and other (341) (425) (389) 732  (423)
France (45) 143  53  (63) 88 
Germany 4  36  93  (64) 69 
Switzerland 11  (42) (1) (13) (45)
Hong Kong 1,375  547  518  (162) 2,278 
Australia 60  84  91  (22) 213 
India 33  156  324  132  645 
Indonesia 8  44  52  (2) 102 
Mainland China (38) 137  310  1,548  1,957 
Malaysia 45  34  115  (15) 179 
Singapore 52  73  144  (20) 249 
Taiwan 19  15  68  (7) 95 
Egypt 48  15  94  (3) 154 
UAE 38  76  187  (39) 262 
Saudi Arabia 12  —  54  117  183 
US 92  220  255  (161) 406 
Canada 98  263  54  (25) 390 
Mexico 95  179  18  (55) 237 
Other 35  377  448  (1,657) (797)
Half-year to 30 Jun 2022 2,543  3,560  2,823  (146) 8,780 
1    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
2    UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo Group’).
3    Corporate Centre includes inter-company debt eliminations of $62m.
HSBC Holdings plc
55

Legal entities
Middle East, North Africa and Türkiye supplementary information
The following tables show the results of our Middle East, North Africa and Türkiye business operations on a regional basis (including results of all the legal entities operating in the region and our share of the results of Saudi Awwal Bank). It also shows the profit before tax of each of the global businesses and Corporate Centre.
Middle East, North Africa and Türkiye regional performance
Half year to
30 Jun 30 Jun
2023 2022
$m $m
Revenue1
 1,854  1,338 
Change in expected credit losses and other credit impairment charges (4) 49 
Operating expenses (773) (756)
Share of profit from associates and joint ventures 272  117 
Profit before tax 1,349  748 
Loans and advances to customers (net)2
 21,901  28,348 
Customer accounts2
 40,480  44,008 
1    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Loans and advances to customers of $2,975m have been classified as ‘Assets held for sale’ and Customer accounts of $4,878m have been classified as ‘Liabilities of disposal groups held for sale’ at 30 June 2023, in respect of the planned merger of our business in Oman.
Profit before tax by global business
Half year to
30 Jun 30 Jun
2023 2022
$m $m
Wealth and Personal Banking 301  114 
Commercial Banking 276  120 
Global Banking and Markets 571  442 
Corporate Centre 201  72 
Total 1,349  748 
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Reconciliation of alternative performance measures
Contents
Use of alternative performance measures
Return on average ordinary shareholders’ equity and return on average tangible equity
Net asset value and tangible net asset value per ordinary share
Post-tax return and average total shareholders’ equity on average total assets
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers
Target basis operating expenses
Earnings per share excluding material notable items
Use of alternative performance measures
Our reported results are prepared in accordance with IFRSs as detailed in our interim condensed financial statements starting on page 106.
As described on page 28, we use a combination of reported and alternative performance measures, including those derived from our reported results that eliminate factors that distort period-on-period comparisons. These are considered alternative performance measures (non-GAAP financial measures).
The following information details the adjustments made to the reported results and the calculation of other alternative performance
measures. All alternative performance measures are reconciled to the closest reported performance measure.
On 1 January 2023, HSBC adopted IFRS 17 ‘Insurance Contracts’. As required by the standard, the Group applied the requirements retrospectively with comparative data previously published under IFRS 4 ‘Insurance Contracts’ restated from the 1 January 2022 transition date.

Return on average ordinary shareholders’ equity and return on average tangible equity
Return on average ordinary shareholders’ equity (‘RoE’) is computed by taking profit attributable to the ordinary shareholders of the parent company (‘reported results’), divided by average ordinary shareholders’ equity (‘reported equity’) for the period. The adjustment to reported results and reported equity excludes amounts attributable to non-controlling interests and holders of preference shares and other equity instruments.
Return on average tangible equity (‘RoTE’) is computed by adjusting reported results for impairment of goodwill and other intangible assets (net of tax), divided by average reported equity adjusted for goodwill and intangibles for the period.
We provide RoTE ratios in addition to RoE as a way of assessing our performance, which is closely aligned to our capital position.

Return on average ordinary shareholders’ equity and return on average tangible equity
Half-year ended
30 Jun 30 Jun
2023 2022
$m $m
Profit
Profit attributable to the ordinary shareholders of the parent company 16,966  7,966 
Impairment of goodwill and other intangible assets (net of tax) 29  37 
Profit attributable to ordinary shareholders, excluding goodwill and other intangible assets impairment 16,995  8,003 
Impact of strategic transactions1
 (3,117) — 
Profit attributable to the ordinary shareholders, excluding goodwill, other intangible assets impairment and strategic transactions 13,878  8,003 
Equity
Average total shareholders’ equity 184,033 185,022 
Effect of average preference shares and other equity instruments (19,510) (22,173)
Average ordinary shareholders’ equity 164,523  162,849 
Effect of goodwill and other intangibles (net of deferred tax) (11,316) (10,845)
Average tangible equity 153,207 152,004 
Average impact of strategic transactions (2,102) — 
Average tangible equity excluding strategic transactions 151,105  152,004 
Ratio % %
Return on average ordinary shareholders’ equity (annualised) 20.8  9.9 
Return on average tangible equity (annualised) 22.4  10.6 
Return on average tangible equity excluding strategic transactions (annualised) 18.5  10.6 
1    Includes the reversal of a $1.6bn (net of tax) impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale, and the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.

HSBC Holdings plc
57

Reconciliation of alternative performance measures
Return on average tangible equity by global business
Half-year ended 30 Jun 2023
Wealth and
Personal
Banking		 Commercial
Banking		 Global
Banking and
Markets		 Corporate
Centre		 Total
$m $m $m $m $m
Profit before tax 8,592  7,939  3,580  1,546  21,657 
Tax expense (1,740) (1,532) (683) 369  (3,586)
Profit after tax 6,852  6,407  2,897  1,915  18,071 
Less attributable to: preference shareholders, other equity holders, non-controlling interests (428) (293) (275) (109) (1,105)
Profit attributable to ordinary shareholders of the parent company 6,424  6,114  2,622  1,806  16,966 
Other adjustments (91) 206  112  (198) 29 
Profit attributable to ordinary shareholders 6,333  6,320  2,734  1,608  16,995 
Average tangible shareholders’ equity 29,646  44,224  38,824  40,513  153,207 
RoTE (%) (annualised) 43.1 28.8 14.2 8.0 22.4
Half-year ended 30 Jun 2022
Profit before tax 2,543  3,560  2,823  (146) 8,780 
Tax expense (473) (926) (387) 1,937  151 
Profit after tax 2,070  2,634  2,436  1,791  8,931 
Less attributable to: preference shareholders, other equity holders, non-controlling interests (316) (233) (273) (143) (965)
Profit attributable to ordinary shareholders of the parent company 1,754  2,401  2,163  1,648  7,966 
Other adjustments (21) 187  148  (277) 37 
Profit attributable to ordinary shareholders 1,733  2,588  2,311  1,371  8,003 
Average tangible shareholders’ equity 30,507  42,880  40,603  38,014  152,004 
RoTE (%) (annualised) 11.5  12.2  11.5  7.3  10.6 

Net asset value and tangible net asset value per ordinary share
Net asset value per ordinary share is total shareholders’ equity less non-cumulative preference shares and capital securities (‘total ordinary shareholders’ equity’), divided by the number of ordinary shares in issue excluding shares that the company has purchased and are held in treasury.

Tangible net asset value per ordinary share is total ordinary shareholders’ equity excluding goodwill and other intangible assets (net of deferred tax) (‘tangible ordinary shareholders’ equity’), divided by the number of basic ordinary shares in issue excluding shares that the company has purchased and are held in treasury.
Net asset value and tangible net asset value per ordinary share
At
30 Jun 31 Dec
2023 2022
$m $m
Total shareholders’ equity 184,170  177,833 
Preference shares and other equity instruments (19,392) (19,746)
Total ordinary shareholders’ equity 164,778  158,087 
Goodwill and intangible assets (net of deferred tax) (11,544) (11,160)
Tangible ordinary shareholders’ equity 153,234  146,927 
Basic number of $0.50 ordinary shares outstanding 19,534  19,739 
Value per share $ $
Net asset value per ordinary share 8.44  8.01 
Tangible net asset value per ordinary share 7.84  7.44 
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Post-tax return and average total shareholders’ equity on average total assets
Post-tax return on average total assets is profit after tax divided by average total assets for the period. Average total shareholders’ equity to average total assets is average total shareholders’ equity divided by average total assets for the period.
Post-tax return and average total shareholders’ equity on average total assets
Half-year ended
30 Jun 30 Jun
2023 2022
$m $m
Profit after tax 18,071  8,931 
Average total shareholders’ equity 184,033  185,022 
Average total assets 3,116,401  3,052,565 
Ratio % %
Post-tax return on average total assets (annualised) 1.2 0.6 
Average total shareholders’ equity to average total assets 5.9 6.1 
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers is the annualised constant currency ECL divided by constant currency average gross loans and advances to customers for the period. The constant currency numbers are derived by adjusting reported ECL and average loans and advances to customers for the effects of foreign currency translation differences.
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers
Half-year ended
30 Jun 30 Jun
2023 2022
$m $m
Expected credit losses and other credit impairment charges (‘ECL’) (1,345) (1,087)
Currency translation 13 
Constant currency (1,345) (1,074)
Average gross loans and advances to customers 960,452  1,053,459 
Currency translation 6,276  (20,196)
Constant currency 966,728  1,033,263 
Average gross loans and advances to customers, including held for sale 1,026,201  1,054,420 
Currency translation 7,395  (20,189)
Constant currency 1,033,596  1,034,231 
Ratios % %
Expected credit losses and other credit impairment charges (annualised) as % of average gross loans and advances to customers 0.28  0.21 
Expected credit losses and other credit impairment charges (annualised) as % of average gross loans and advances to customers, including held for sale 0.26  0.21 
HSBC Holdings plc
59

Reconciliation of alternative performance measures
Target basis operating expenses
Target basis operating expenses is computed by excluding the impact of notable items and foreign exchange translation impacts from reported results. We also exclude the impact of re-translating comparative period financial information at the latest rates of foreign exchange in hyperinflationary economies, which we consider to be outside of our control, and the incremental costs associated with our acquisition of SVB UK and related international investments. We consider this measure to provide useful information to investors by quantifying and excluding the notable items that management considered when setting and assessing cost-related targets.
Target basis operating expenses
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Reported operating expenses 15,457  16,127 
Notable items (71) (1,040)
– disposals, acquisitions and related costs (118) — 
– restructuring and other related costs1
 47  (1,040)
Excluding the impact of SVB UK and related international investments (67) — 
Currency translation2
 (564)
Excluding the impact of retranslating prior year costs of hyperinflationary economies at a constant currency foreign exchange rate 160 
Target basis operating expenses 15,319  14,683 
1    In 2Q23, we recognised $47m of reversals relating to restructuring provisions recognised during 2022.
2 Currency translation on reported operating expenses, excluding currency translation on notable items.
Earnings per share excluding material notable items
Basic earnings per ordinary share excluding material notable items is calculated by dividing the profit attributable to ordinary shareholders of the parent company, excluding the impacts of material M&A transactions and the 1H22 deferred tax adjustment in HSBC Holdings, by the weighted average number of ordinary shares outstanding, excluding own shares held.
Earnings per share excluding material notable items
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Profit attributable to shareholders of company 17,508  8,592 
Coupon payable on capital securities classified as equity (542) (626)
Profit attributable to ordinary shareholders of company 16,966  7,966 
Provisional gain on acquisition of SVB UK (1,507) — 
Reversal of impairment loss relating to the planned sale of our retail banking operations in France1
 (1,629) — 
Impact of the agreed sale of our banking business in Canada2
 (54) — 
Recognition of a deferred tax asset from historical tax losses in HSBC Holdings —  (2,082)
Profit attributable to ordinary shareholders of company excluding material notable items 13,776  5,884 
Number of shares
Basic number of ordinary shares (millions) 19,693  19,954 
Basic earnings per share excluding material notable items 0.70  0.29 
Basic earnings per share 0.86  0.40 
1 Net of deferred tax of $501m.
2 Represents the earnings recognised by the banking business in Canada, net of gains and losses on foreign exchange hedges held at Group level, that will reduce the gain on sale recognised by the Group on completion.

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Risk
Contents
Key developments in the first half of 2023
Areas of special interest
Credit risk
Treasury risk
Market risk
Insurance manufacturing operations risk
We recognise that the primary role of risk management is to protect our customers, business, colleagues, shareholders and the communities that we serve, while ensuring we are able to support our strategy and provide sustainable growth.
All our people are responsible for the management of risk, with the ultimate accountability residing with the Board. Our Group Risk and Compliance function, led by the Group Chief Risk and Compliance Officer, plays an important role in reinforcing our culture and values. We are focused on creating an environment that encourages our people to speak up and do the right thing.
Group Risk and Compliance is independent from the global businesses, including our sales and trading functions, to provide challenge, oversight and appropriate balance in risk/reward decisions.
We aim to use a comprehensive risk management approach across the organisation and across all risk types, underpinned by our culture and values. This is outlined in our risk management framework, including the key principles and practices that we employ in managing material risks, both financial and non-financial. The framework fosters continuous monitoring, promotes risk awareness, and encourages sound operational and strategic decision making. It also supports a consistent approach to identifying, assessing, managing and reporting the risks we accept and incur in our activities. We continue to actively review and develop our risk management framework and enhance our approach to managing risk through our activities with regard to: people and capabilities; governance; reporting and management information; credit risk management models; and data.
A summary of our current policies and practices regarding the management of risk is set out in the ‘Risk management’ section on pages 132 to 135 of the Annual Report and Accounts 2022.

Key developments in the first half of 2023
We continued to actively manage the risks related to macroeconomic and geopolitical uncertainties, as well as other key risks described in this section. In addition, we sought to enhance our risk management in the following areas:
–We enhanced our management of concentration risk at country and single customer group levels by implementing new frameworks to strengthen our control of risk tolerance and appetite.
–We have continued to strengthen our third-party risk policy and enhanced the way third-party risk is overseen and managed across all non-financial risks. Our processes, framework and reporting capabilities have been enhanced to improve the control and oversight of our material third parties, to help maintain our operational resilience and meet new and evolving regulatory requirements.
–We continued to make progress with our comprehensive regulatory reporting programme to strengthen our global processes, improve consistency and enhance controls.
–We continued our programme to enhance our framework for managing risks associated with machine learning and artificial intelligence (‘AI’).
–Through our climate risk programme, we continued to embed climate considerations throughout the organisation, including enhancing our approach to assessing the impact of climate on
capital, and continued the development of risk metrics to manage our exposure to climate risk.
–We deployed industry-leading technology and advanced analytics capabilities into new markets to improve our ability to identify suspicious activities and prevent financial crime. We continue to monitor regulatory changes.
–We continued to develop and enhance our electronic communication policies and standards, to help ensure escalations and follow-up actions can better focus on substantive issues.
Areas of special interest
During the first half of 2023, a number of areas were considered as part of our top and emerging risks because of the effect they have on the Group. In this section we have focused on risks related to geopolitical and macroeconomic risk and the interbank offered rate (‘Ibor’) transition.
Geopolitical and macroeconomic risk
The Russia-Ukraine war has had far-reaching geopolitical and economic implications. HSBC is monitoring the impacts of the war, and continues to respond to the significant sanctions and trade restrictions imposed against Russia by the UK, the US and the EU, as well as other countries. In response to such sanctions and trade restrictions, as well as to asset flight, Russia has implemented certain countermeasures. The global economy has largely adapted to the imposition of significant sanctions and trade restrictions, with European countries diversifying their energy sources to reduce their dependence on Russian energy supplies.
Further sanctions-related matters, including sanctions evasion by parties in third countries and Russian countermeasures may adversely impact the Group, its customers and the markets in which it operates. Our business in Russia, which principally serves multinational corporate clients headquartered in other countries, is not accepting new business or customers and is consequently on a declining trend. Following a strategic review in 2022, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) entered into an agreement to sell its wholly-owned subsidiary HSBC Bank Russia (RR) (Limited Liability Company), subject to regulatory and governmental approvals.
Global supply chain disruptions caused by the war in Ukraine have eased, although inflation is likely to remain high in several regions as the demand for services remains relatively strong. This has prompted central banks to continue tightening monetary policies. Since the beginning of 2023, the US Federal Reserve Board (‘FRB’) has delivered a cumulative 75 basis point (‘bps’) increase in the Federal Funds rate. The European Central Bank and the Bank of England have each tightened their policy rates by 150 bps over the same period. All three central banks and their counterparts in other developed markets are expected to increase rates further in the near term. While the peak in rates may be getting closer, as of early-July 2023, interest-rate futures did not suggest that central banks in developed markets (with the possible exception of the FRB) will begin to ease monetary policy until well into 2024. This may change if inflation moderates more significantly than expected, or if recession concerns increase. Some central banks in emerging markets have already begun to ease on monetary policy.
Fiscal policies are likely to remain relatively generous in coming years as demand increases for public spending on items including social welfare, defence and decarbonisation initiatives. This may increasingly happen against a backdrop of slower growth, volatile energy prices and high interest rates. Financial markets are showing a degree of forbearance, with long-term yields relatively contained. However, this may be tested by the acceleration in the coming months of central bank sales of government securities accumulated over several years of quantitative easing. Sovereigns with high public debt burdens could come under renewed focus as investors question the sustainability of that debt. We continue to monitor our risk profile closely in the context of uncertainty over global macroeconomic policies.
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61

Risk
Higher inflation and interest rate expectations around the world – and the resulting economic uncertainty – have had an impact on expected credit losses and other credit impairment charges (‘ECL’) during the first half of 2023. In certain markets, the combined pressure of higher inflation and interest rates may impact the ability of our customers to repay their debt. Our Central scenario, which has the highest probability weighting in our IFRS 9 ‘Financial Instruments’ calculations of ECL, assumes low growth and a higher inflation environment across many of our key markets.
The Central scenario has been assigned our standard weighting across all of our major markets, reflecting narrowing forecast dispersion, reduced uncertainty, and a view that forecasts now sufficiently capture the weak growth outlook. Our approach to macroeconomic scenarios remained unchanged in 2Q23, but the shift in UK interest rate expectations in June resulted in updates to key scenario variables. There remains continued uncertainty with respect to the relationship between the economic drivers and the historical loss experience, which has required adjustments to modelled ECL in cases where we determined that our models were unable to capture the material underlying risks. For retail portfolios where models do not sufficiently capture the interest rate and inflation risks, there has been a globally consistent approach developed that is utilised for assessing the affordability pressure on potentially affected customers and the consequential impact this would have on ECL. This is incorporated into ECL via management judgemental adjustments.
For further details of our Central and other scenarios, see ‘Measurement uncertainty and sensitivity analysis of ECL estimates’ on page 69.
Given that key sectors of the global economy such as trade and manufacturing are underperforming, and the risk of recessions remains, the demand for Chinese exports may also diminish. While the mainland China commercial real estate market showed signs of recovery and stabilisation in early 2023, recent market data remains mixed, suggesting both an uncertain and protracted recovery. China’s government policy measures relating to the mainland China commercial real estate market introduced in late 2022 have resulted in improved financial support for onshore borrowers, although offshore financial market conditions remain challenging in light of a continued shortage of liquidity. Corporates operating in this sector are therefore facing continued challenges and are becoming increasingly divided, with state-owned enterprises and certain privately-owned enterprises likely to see some improvements in their performances and allocations of investments and liquidity, while other entities may still remain subject to performance uncertainty and material market pressure. We will continue to monitor the sector closely, notably the risk of further credit migration and idiosyncratic defaults.
Global tensions over trade, technology and ideology are manifesting themselves in divergent regulatory standards and compliance regimes, presenting long-term strategic challenges for multinational businesses.
The US-China relationship remains complex. In addition to the US, the UK, the EU and other countries have also imposed certain sanctions and trade restrictions on Chinese persons and companies. There is a continued risk of additional sanctions and trade restrictions being imposed by the US and other governments in relation to human rights, advanced technology, and other issues with China, and this could create a more complex operating environment for the Group and its customers.
China has in turn announced a number of its own sanctions and trade restrictions that target, or provide authority to target, foreign individuals and companies, and materials for technology production.
These and any future measures and countermeasures that may be taken by the US, China and other countries may affect the Group, its customers and the markets in which the Group operates.
The conclusion of the Windsor Framework between the UK and the EU introduced a new system of checks on goods moving from the UK to Northern Ireland, and removed a major area of friction. On 27 June 2023, the UK and the EU also signed a memorandum of understanding on regulatory cooperation in financial services, potentially paving the way for closer coordination of policymaking for the sector.
Over the medium to long term, the UK’s withdrawal from the EU may impact markets and increase economic risk, particularly in the UK, which could adversely impact our profitability and prospects for growth in this market. We are monitoring the situation closely, including the potential impacts on our customers.
As the geopolitical landscape evolves, compliance by multinational corporations with their legal or regulatory obligations in one jurisdiction may be seen as supporting the law or policy objectives of that jurisdiction over another, creating additional compliance, reputational and political risks for the Group. We maintain dialogue with our regulators in various jurisdictions on the impact of legal and regulatory obligations on our business and customers.
It remains the Group‘s policy to comply with all applicable laws and regulations of all jurisdictions in which it operates, although geopolitical risks and tensions, and potential ambiguities in the Group’s compliance obligations will continue to present challenges and risks for the Group. These could have a material adverse impact on the Group‘s business, financial condition, results of operations, prospects and strategy, as well as on the Group’s customers.
Expanding data privacy, national security and cybersecurity laws in a number of markets could pose potential challenges to intra-Group data sharing. These developments may affect our ability to manage financial crime risks across markets due to limitations on cross-border transfers of personal information.
Ibor transition
Interbank offered rates (‘Ibors’) were previously used extensively to set interest rates on different types of financial transactions and for valuation purposes, risk measurement and performance benchmarking.
Following the UK’s Financial Conduct Authority (‘FCA’) announcement in July 2017 that it would no longer continue to persuade or require panel banks to submit rates for the London interbank offered rate (‘Libor’) after 2021, we have been actively working to transition legacy contracts from Ibors to products linked to near risk-free replacement rates (‘RFRs’) or alternative reference rates.
The publication of sterling, Swiss franc, euro and Japanese yen Libor interest rate benchmarks, as well as Euro Overnight Index Average (‘Eonia’), and two US dollar Libor settings ceased from the end of 2021. Following this, the publication of all remaining settings of US dollar Libor ceased from 30 June 2023. To support any remaining contracts referencing these benchmarks, the FCA has compelled the ICE Benchmark Administration Limited to publish the three-month sterling Libor setting using an alternative ‘synthetic’ methodology until 31 March 2024, and one-month, three-month and six-month US dollar Libor settings until 30 September 2024. We continue to support our customers in the transition of the limited number of outstanding contracts relying on ‘synthetic’ Libor benchmarks in line with these dates.
Our Ibor transition programme – which is tasked with the development of RFR products and the transition of legacy Ibor products – has implemented the required processes, technology and RFR product capabilities in support of the benchmark cessation events. As a result, the transition of the majority of legacy contracts was undertaken successfully throughout 1H23 with the remaining contracts expected to largely complete in 3Q23. Specifically, our derivatives portfolio was largely transitioned through clearing house conversion mechanisms, and the use of industry legal fall-back provisions at cessation, leaving a limited number of trades that continue to be discussed with customers. Our wholesale and private bank lending portfolios for both uncommitted and committed facilities have been repapered with client consent, albeit a small number of wholesale contracts will continue repapering activities until their first interest rate fixing date after cessation. Where applicable, our structured notes and certain MREL instruments of the Group are being transitioned in line with jurisdictional legislative solutions and through client and investor notification. In respect of HSBC’s regulatory capital and other MREL instruments that include references to legacy Ibors (including indirect references) in their terms, HSBC expects to be able to remediate or mitigate these risks by the relevant calculation dates, which may occur post-cessation of
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HSBC Holdings plc

the relevant Ibor. HSBC remains committed to seeking to remediate or mitigate relevant risks relating to Ibor-demise, as appropriate.
While the majority of our legacy contracts referencing demised Ibors have been transitioned, as a result of other demising benchmarks or remaining contracts, we continue to be exposed to, and actively monitor, risks including:
–regulatory compliance and conduct risks, as the use of ‘synthetic’ Libor rates, transition of legacy contracts to RFRs or alternative rates, or sales of products referencing RFRs, may not deliver fair client outcomes; and
–legal risk, as issues arising from the use of legislative solutions and from legacy contracts that the Group is unable to transition may result in unintended or unfavourable outcomes for clients and market participants, which could potentially increase the risk of disputes.
While the level of risk has diminished in line with our process implementation and continued transition of contracts, we will monitor these risks through the remainder of the transition of legacy contracts. Throughout 2023, we plan to continue to engage with our clients and investors to complete an orderly transition of contracts
that reference the remaining demising Ibors. Additionally, plans and policies are in place to help us to react to any future regulatory notification of the intention to demise an interest rate benchmark.
Financial instruments impacted by Ibor reform
Interest Rate Benchmark Reform Phase 2, the amendments to IFRSs issued in August 2020, represents the second phase of the IASB’s project on the effects of interest rate benchmark reform. The amendments address issues affecting financial statements when changes are made to contractual cash flows and hedging relationships.
Under these amendments, changes made to a financial instrument measured at other than fair value through profit or loss that are economically equivalent and required by interest rate benchmark reform, do not result in the derecognition or a change in the carrying amount of the financial instrument. Instead they require the effective interest rate to be updated to reflect the change in the interest rate benchmark. 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.

Financial instruments impacted by Ibor reform
Financial instruments yet to transition to alternative benchmarks, by main benchmark
USD Libor GBP Libor JPY Libor
Others1
At 30 Jun 2023 $m $m $m $m
Non-derivative financial assets
Loans and advances to customers 22,805  154  —  6,571 
Other financial assets 2,676  —  —  1,914 
Total non-derivative financial assets2
 25,481  154  —  8,485 
Non-derivative financial liabilities
Financial liabilities designated at fair value 688  1,871  1,096  — 
Debt securities in issue 2,410  —  —  — 
Other financial liabilities 1,896  —  —  181 
Total non-derivative financial liabilities 4,994  1,871  1,096  181 
Derivative notional contract amount
Foreign exchange 389,263  —  —  16,322 
Interest rate 787,566  —  —  181,389 
Total derivative notional contract amount 1,176,829  —  —  197,711 
At 31 Dec 2022
Non-derivative financial assets
Loans and advances to customers 49,632  262  —  7,912 
Other financial assets 4,716  42  —  1,562 
Total non-derivative financial assets2
 54,348  304  —  9,474 
Non-derivative financial liabilities
Financial liabilities designated at fair value 17,224  1,804  1,179  — 
Debt securities in issue 5,352  —  —  — 
Other financial liabilities 2,988  —  —  176 
Total non-derivative financial liabilities 25,564  1,804  1,179  176 
Derivative notional contract amount
Foreign exchange 140,223  —  —  7,337 
Interest rate 2,208,189  68  —  186,952 
Total derivative notional contract amount 2,348,412  68  —  194,289 
1    Comprises financial instruments referencing other significant benchmark rates yet to transition to alternative benchmarks (euro Libor, SOR, THBFIX, MIFOR, Sibor, CDOR and TIIE). An announcement was made by the South African regulator during the first half of 2023 on the cessation of the Johannesburg interbank average rate (‘JIBAR’). Therefore, JIBAR is also included in ‘Others‘ during the current period.
2    Gross carrying amount excluding allowances for expected credit losses.
The amounts in the above table relate to HSBC’s main operating entities where HSBC has material exposures impacted by Ibor reform, including in the UK, Hong Kong, France, the US, Mexico, Canada, Singapore, the UAE, Bermuda, Australia, Qatar, Germany, Thailand, India and Japan. The amounts provide an indication of the extent of the Group’s exposure to the Ibor benchmarks that are due to be replaced. Amounts are in respect of financial instruments that:

–contractually reference an interest rate benchmark that is planned to transition to an alternative benchmark;
–have a contractual maturity date beyond the date by which the reference interest rate benchmark is expected to cease; and
–are recognised on HSBC’s consolidated balance sheet.
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63

Risk
Credit risk
Overview
Credit risk in the first half of 2023
Summary of credit risk
Stage 2 decomposition
Assets held for sale
Measurement uncertainty and sensitivity analysis of ECL estimates
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers
Credit quality of financial instruments
Personal lending
Wholesale lending
Commercial real estate
Supplementary information
Overview
Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products, such as guarantees and derivatives.
Credit risk in the first half of 2023
There were no material changes to credit risk policy in the first half of 2023.
A summary of our current policies and practices for the management of credit risk is set out in ‘Credit risk management’ on page 145 of the Annual Report and Accounts 2022.
At 30 June 2023, gross loans and advances to customers and banks of $1,072bn increased by $32.7bn, compared with 31 December 2022. This included favourable foreign exchange movements of $12.3bn.
Excluding foreign exchange movements, growth was driven by a $29.3bn increase in personal loans and advances to customers. This was partly offset by a $6.4bn decrease in wholesale loans and advances to customers and a $2.6bn decrease in loans and advances to banks.
The underlying increase in personal loans and advances to customers was driven mainly by an increase in France (up $22.3bn) due to our retail banking operations in France no longer being classified as assets held for sale. It also comprised increases in Hong Kong (up $4.4bn), in the UK (up $1.8bn), in Mexico (up $1.2bn) and in Australia (up $1.0bn) driven mainly by mortgage growth. These were partly offset by a decrease in Oman (down $1.2bn) from the reclassification of our business in the country into ‘assets held for sale’.

The underlying decrease in wholesale loans and advances to customers was driven mainly by lower commercial real estate exposures in Hong Kong (down $8.3bn) and mainland China (down $1.5bn). It also comprised a decrease in Oman (down $2.1bn) from the reclassification of our business in the country into ‘assets held for sale’. These were partly offset by increases in France (up $2.1bn) and in the UK (up $2.1bn). The increase in the UK included loans and advances to customers of $7.1bn from HSBC Innovation Bank Limited (formerly SVB UK).
At 30 June 2023, the allowance for ECL of $12.8bn increased by $0.2bn compared with 31 December 2022, including adverse foreign exchange movements of $0.1bn. The $12.8bn allowance comprised $12.3bn in respect of assets held at amortised cost, $0.4bn in respect of loan commitments and financial guarantees, and $0.1bn in respect of debt instruments measured at fair value through other comprehensive income (‘FVOCI’).
Excluding foreign exchange movements, the allowance for ECL in relation to loans and advances to customers increased by $0.1bn from 31 December 2022. This was attributable to:
–a $0.1bn increase in wholesale loans and advances to customers, which included a $0.4bn increase driven by stage 3, offset by a $0.3bn decrease driven by stages 1 and 2; and
–broadly unchanged allowances for ECL in personal loans and advances to customers across all stages.
In wholesale lending, mainland China‘s commercial real estate sector continued to deteriorate in 2023, resulting in new and additional stage 3 charges.
In personal lending, stable allowances reflected customer resilience during the period, despite significant inflationary pressures.
The Group ECL charge for the first six months of 2023 was $1.3bn, inclusive of recoveries. This was driven by higher stage 3 charges, notably in the Hong Kong commercial real estate sector, as well as continued economic uncertainty and inflationary pressures.
The ECL charge comprised: $0.5bn in respect of personal lending, of which the stage 3 charge was $0.3bn; and $0.8bn in respect of wholesale lending, of which the stage 3 and POCI charge was $0.7bn.

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HSBC Holdings plc

Summary of credit risk
The following disclosure presents the gross carrying/nominal amount of financial instruments to which the impairment requirements in IFRS 9 are applied and the associated allowance for ECL.
The following tables analyse loans by industry sector and represent the concentration of exposures on which credit risk is managed. The allowance for ECL increased from $12.6bn at 31 December 2022 to $12.8bn at 30 June 2023.
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
At 30 Jun 2023 At 31 Dec 2022
Gross carrying/
nominal amount
Allowance for
ECL1
 Gross
 carrying/
nominal amount
Allowance for
ECL1
$m $m $m $m
Loans and advances to customers at amortised cost 971,296  (11,738) 935,008  (11,447)
– personal 453,447  (3,026) 414,882  (2,870)
– corporate and commercial 441,258  (8,401) 453,202  (8,320)
– non-bank financial institutions 76,591  (311) 66,924  (257)
Loans and advances to banks at amortised cost 100,995  (74) 104,544  (69)
Other financial assets measured at amortised cost 960,249  (489) 954,934  (493)
– cash and balances at central banks 307,734  (1) 327,005  (3)
– items in the course of collection from other banks 10,649  —  7,297  — 
– Hong Kong Government certificates of indebtedness 42,407  —  43,787  — 
– reverse repurchase agreements – non-trading 258,056  —  253,754  — 
– financial investments 131,277  (27) 109,086  (20)
– assets held for sale2
 80,244  (402) 102,556  (415)
– prepayments, accrued income and other assets3
 129,882  (59) 111,449  (55)
Total gross carrying amount on-balance sheet 2,032,540  (12,301) 1,994,486  (12,009)
Loans and other credit-related commitments 649,526  (348) 618,788  (386)
– personal 253,764  (25) 244,006  (27)
– corporate and commercial 265,552  (301) 269,187  (340)
– financial 130,210  (22) 105,595  (19)
Financial guarantees 18,882  (51) 18,783  (52)
– personal 1,188  —  1,135  — 
– corporate and commercial 13,613  (47) 13,587  (50)
– financial 4,081  (4) 4,061  (2)
Total nominal amount off-balance sheet4
 668,408  (399) 637,571  (438)
2,700,948  (12,700) 2,632,057  (12,447)
Fair
value
Memorandum
allowance for
ECL5
 Fair
 value
Memorandum
allowance for
ECL5
$m $m $m $m
Debt instruments measured at fair value through other comprehensive income (‘FVOCI’) 287,195  (125) 265,147  (126)
1    Total ECL is recognised in the loss allowance for the financial asset unless total ECL exceeds the gross carrying amount of the financial asset, in which case the ECL is recognised as a provision.
2    For further details on gross carrying amounts and allowances for ECL related to assets held for sale, see ‘Assets held for sale’ on page 68.
3    Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’, as presented within the consolidated balance sheet on page 108, includes both financial and non-financial assets.    
4    Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5    Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in ‘Change for expected credit losses and other credit impairment charges’ in the income statement.
The following table provides an overview of the Group’s credit risk by stage and industry, and the associated ECL coverage. The financial assets recorded in each stage have the following characteristics:
–Stage 1: These financial assets are unimpaired and without a significant increase in credit risk for which a 12-month allowance for ECL is recognised.
–Stage 2: A significant increase in credit risk has been experienced on these financial assets since initial recognition for which a lifetime ECL is recognised.
–Stage 3: There is objective evidence of impairment and the financial assets are therefore considered to be in default or otherwise credit impaired for which a lifetime ECL is recognised.
–POCI: Financial assets that are purchased or originated at a deep discount are seen to reflect the incurred credit losses on which a lifetime ECL is recognised.
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Risk
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
30 June 2023
Gross carrying/nominal amount1
 Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3
POCI2
 Total Stage 1 Stage 2 Stage 3
POCI2
 Total Stage 1 Stage 2 Stage 3
POCI2
 Total
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and advances to customers at amortised cost 808,376  142,843  20,016  61  971,296  (1,106) (3,269) (7,338) (25) (11,738) 0.1  2.3  36.7  41.0  1.2 
– personal 391,701  58,160  3,586  —  453,447  (576) (1,567) (883) —  (3,026) 0.1  2.7  24.6  —  0.7 
– corporate and commer-cial 345,116  80,274  15,807  61  441,258  (468) (1,630) (6,278) (25) (8,401) 0.1  2.0  39.7  41.0  1.9 
– non-bank financial institutions 71,559  4,409  623  —  76,591  (62) (72) (177) —  (311) 0.1  1.6  28.4  —  0.4 
Loans and advances to banks at amortised cost 99,623  1,288  84  —  100,995  (18) (33) (23) —  (74) —  2.6  27.4  —  0.1 
Other financial assets measured at amortised cost 945,902  13,580  757  10  960,249  (96) (147) (237) (9) (489) —  1.1  31.3  90.0  0.1 
Loans and other credit-related commit-ments 610,072  37,849  1,605  —  649,526  (135) (150) (63) —  (348) —  0.4  3.9  —  0.1 
– personal 243,830  8,936  998  —  253,764  (22) (1) (2) —  (25) —  —  0.2  —  — 
– corporate and commer-cial 240,799  24,184  569  —  265,552  (105) (137) (59) —  (301) —  0.6  10.4  —  0.1 
– financial 125,443  4,729  38  —  130,210  (8) (12) (2) —  (22) —  0.3  5.3  —  — 
Financial guarantees 16,135  2,535  212  —  18,882  (8) (12) (31) —  (51) —  0.5  14.6  —  0.3 
– personal 1,173  15  —  —  1,188  —  —  —  —  —  —  —  —  —  — 
– corporate and commer-cial 11,698  1,704  211  —  13,613  (7) (10) (30) —  (47) 0.1  0.6  14.2  —  0.3 
– financial 3,264  816  1  —  4,081  (1) (2) (1) —  (4) —  0.2  100.0  —  0.1 
At 30 Jun 2023 2,480,108  198,095  22,674  71  2,700,948  (1,363) (3,611) (7,692) (34) (12,700) 0.1  1.8  33.9  47.9  0.5 
1    Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2    Purchased or originated credit-impaired (‘POCI‘).
Unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when they are 30 days past due (‘DPD’) and are transferred from stage 1 to stage 2.
The following disclosure presents the ageing of stage 2 financial assets by those less than 30 and greater than 30 DPD and therefore presents those financial assets classified as stage 2 due to ageing (30 DPD) and those identified at an earlier stage (less than 30 DPD).
Stage 2 days past due analysis at 30 June 2023
Gross carrying/nominal amount Allowance for ECL ECL coverage %
Stage 2 Up-to-date
1 to 29
 DPD1,2
30 and >
DPD1,2
 Stage 2 Up-to-date
1 to 29
 DPD1,2
30 and >
DPD1,2
 Stage 2 Up-to-date
1 to 29
 DPD1,2
30 and >
DPD1,2
$m $m $m $m $m $m $m $m % % % %
Loans and advances to customers at amortised cost 142,843  138,163  2,667  2,013  (3,269) (2,761) (261) (247) 2.3  2.0  9.8  12.3 
– personal 58,160  55,633  1,656  871  (1,567) (1,134) (214) (219) 2.7  2.0  12.9  25.1 
– corporate and commercial 80,274  78,356  1,006  912  (1,630) (1,555) (47) (28) 2.0  2.0  4.7  3.1 
– non-bank financial institutions 4,409  4,174  5  230  (72) (72) —  —  1.6  1.7  —  — 
Loans and advances to banks at amortised cost 1,288  1,286  —  2  (33) (33) —  —  2.6  2.6  —  — 
Other financial assets measured at amortised cost 13,580  13,380  122  78  (147) (126) (7) (14) 1.1  0.9  5.7  17.9 
1    Days past due (‘DPD‘).
2    The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.
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HSBC Holdings plc

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2022
Gross carrying/nominal amount1
 Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3
POCI2
 Total Stage 1 Stage 2 Stage 3
POCI2
 Total Stage 1 Stage 2 Stage 3
POCI2
 Total
$m $m $m $m $m $m $m $m $m $m % % % % %
Loans and advances to customers at amortised cost 776,299  139,076  19,504  129  935,008  (1,092) (3,488) (6,829) (38) (11,447) 0.1  2.5  35.0  29.5  1.2 
– personal 362,677  48,866  3,339  —  414,882  (561) (1,504) (805) —  (2,870) 0.2  3.1  24.1  —  0.7 
– corporate and commercial 351,885  85,492  15,696  129  453,202  (488) (1,907) (5,887) (38) (8,320) 0.1  2.2  37.5  29.5  1.8 
– non-bank financial institutions 61,737  4,718  469  —  66,924  (43) (77) (137) —  (257) 0.1  1.6  29.2  —  0.4 
Loans and advances to banks at amortised cost 102,723  1,739  82  —  104,544  (18) (29) (22) —  (69) —  1.7  26.8  —  0.1 
Other financial assets
measured at amortised cost		 938,798  15,339  797  —  954,934  (95) (165) (233) —  (493) —  1.1  29.2  —  0.1 
Loans and other credit-related commitments 583,383  34,033  1,372  —  618,788  (141) (180) (65) —  (386) —  0.5  4.7  —  0.1 
– personal 239,521  3,686  799  —  244,006  (26) (1) —  —  (27) —  —  —  —  — 
– corporate and commercial 241,313  27,323  551  —  269,187  (111) (166) (63) —  (340) —  0.6  11.4  —  0.1 
– financial 102,549  3,024  22  —  105,595  (4) (13) (2) —  (19) —  0.4  9.1  —  — 
Financial guarantees 16,071  2,463  249  —  18,783  (6) (13) (33) —  (52) —  0.5  13.3  —  0.3 
– personal 1,123  11  1  —  1,135  —  —  —  —  —  —  —  —  —  — 
– corporate and commercial 11,547  1,793  247  —  13,587  (5) (12) (33) —  (50) —  0.7  13.4  —  0.4 
– financial 3,401  659  1  —  4,061  (1) (1) —  —  (2) —  0.2  —  —  — 
At 31 Dec 2022 2,417,274  192,650  22,004  129  2,632,057  (1,352) (3,875) (7,182) (38) (12,447) 0.1  2.0  32.6  29.5  0.5 
1    Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2    Purchased or originated credit impaired (‘POCI‘).
Stage 2 days past due analysis at 31 December 2022
Gross carrying amount Allowance for ECL ECL coverage %
Stage 2 Up-to-date
1 to 29
DPD1,2
30 and > DPD1,2
 Stage 2 Up-to-date
1 to 29
DPD1,2
30 and > DPD1,2
 Stage 2 Up-to-date
1 to 29
DPD1,2
30 and > DPD1,2
$m $m $m $m $m $m $m $m % % % %
Loans and advances to customers at amortised cost 139,076  134,680  2,410  1,986  (3,488) (3,017) (234) (237) 2.5  2.2  9.7  11.9 
– personal 48,866  46,378  1,682  806  (1,504) (1,080) (214) (210) 3.1  2.3  12.7  26.1 
– corporate and commercial 85,492  83,976  712  804  (1,907) (1,860) (20) (27) 2.2  2.2  2.8  3.4 
– non-bank financial institutions 4,718  4,326  16  376  (77) (77) —  —  1.6  1.8  —  — 
Loans and advances to banks at amortised cost 1,739  1,729  —  10  (29) (29) —  —  1.7  1.7  —  — 
Other financial assets measured at amortised cost 15,339  15,103  140  96  (165) (141) (8) (16) 1.1  0.9  5.7  16.7 
1    Days past due (‘DPD‘).
2    The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.
Stage 2 decomposition
The following table presents the stage 2 decomposition of gross carrying amount and allowances for ECL for loans and advances to customers. It also sets out the reasons why an exposure is classified as stage 2 and therefore presented as a significant increase in credit risk at 30 June 2023.
The quantitative classification shows gross carrying values and allowances for ECL for which the applicable reporting date probability of default (‘PD’) measure exceeds defined quantitative thresholds for
retail and wholesale exposures, as set out in Note 1.2 ‘Summary of significant accounting policies’, on page 342 of the Annual Report and Accounts 2022.
The qualitative classification primarily accounts for customer risk rating (‘CRR’) deterioration, watch-and-worry and retail management judgemental adjustments.
A summary of our current policies and practices for the significant increase in credit risk is set out in ‘Summary of significant accounting policies’ on page 342 of the Annual Report and Accounts 2022.
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Risk
Loans and advances to customers at 30 June 20231
Gross carrying amount Allowance for ECL ECL coverage
Personal Corporate and commercial Non-bank financial institutions Total Personal Corporate and commercial Non-bank financial institutions Total Total
$m $m $m $m $m $m $m $m %
Quantitative 48,337  63,306  3,667  115,310  (1,369) (1,393) (67) (2,829) 2.5 
Qualitative 9,756  16,454  717  26,927  (195) (230) (5) (430) 1.6 
30 DPD backstop2
 67  514  25  606  (3) (7) —  (10) 1.7 
Total stage 2 58,160  80,274  4,409  142,843  (1,567) (1,630) (72) (3,269) 2.3 

Loans and advances to customers at 31 December 20221
Gross carrying amount Allowance for ECL ECL coverage
Personal Corporate and commercial Non-bank financial institutions Total Personal Corporate and commercial Non-bank financial institutions Total Total
$m $m $m $m $m $m $m $m %
Quantitative 41,610  66,421  3,679  111,710  (1,302) (1,642) (66) (3,010) 2.7 
Qualitative 7,209  18,555  878  26,642  (200) (262) (11) (473) 1.8 
30 DPD backstop2
 47  516  161  724  (2) (3) —  (5) 0.7 
Total stage 2 48,866  85,492  4,718  139,076  (1,504) (1,907) (77) (3,488) 2.5 
1    Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross exposure and ECL have been assigned in order of categories presented.
2    Days past due (‘DPD’).
Assets held for sale
At 30 June 2023, the most material balances held for sale came from our banking business in Canada. During the first half of 2023 the planned sale of our retail banking operations in France became less certain and no longer met the definition of held for sale.
‘Loans and other credit-related commitments’ and ‘financial guarantees’, as reported in credit disclosures, also include exposures and allowances relating to financial assets classified as ‘assets held for sale’.
Loans and advances to customers and banks measured at amortised cost
At 30 Jun 2023 At 31 Dec 2022
Total gross loans and advances Allowance
for ECL		 Total gross loans and advances Allowance
for ECL
$m $m $m $m
As reported 1,072,291  (11,812) 1,039,552  (11,516)
Reported in ‘Assets held for sale’ 60,739  (379) 81,221  (392)
Total 1,133,030  (12,191) 1,120,773  (11,908)
At 30 June 2023, gross loans and advances of our banking business in Canada were $56.3bn, and the related allowances for ECL were $0.2bn.
Lending balances held for sale continue to be measured at amortised cost less allowances for impairment and, therefore, such carrying amounts may differ from fair value.
These lending balances are part of associated disposal groups that are measured in their entirety at the lower of carrying amount and fair
value less costs to sell. Any difference between the carrying amount of these assets and their sales price is part of the overall gain or loss on the associated disposal group as a whole.
For further details of the carrying amount and the fair value at 30 June 2023 of loans and advances to banks and customers classified as held for sale, see Note 15 on the interim condensed financial statements.
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HSBC Holdings plc

Gross loans and allowance for ECL on loans and advances to customers and banks reported in ‘Assets held for sale’
Banking business in Canada Retail banking operations in France
Other1
 Total
Gross carrying value Allowance for ECL Gross carrying value Allowance for ECL Gross carrying value Allowance for ECL Gross carrying value Allowance for ECL
$m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 56,178  (247) —  —  3,410  (130) 59,588  (377)
– personal 26,908  (87) —  —  1,463  (61) 28,371  (148)
– corporate and commercial 27,732  (155) —  —  1,947  (69) 29,679  (224)
– non-bank financial institutions 1,538  (5) —  —  —  —  1,538  (5)
Loans and advances to banks at amortised cost 76  —  —  —  1,075  (2) 1,151  (2)
At 30 Jun 2023 56,254  (247) —  —  4,485  (132) 60,739  (379)
Loans and advances to customers at amortised cost 55,431  (234) 25,121  (92) 412  (62) 80,964  (388)
– personal 26,637  (75) 22,691  (88) 305  (47) 49,633  (210)
– corporate and commercial 27,128  (154) 2,379  (4) 107  (15) 29,614  (173)
– non-bank financial institutions 1,666  (5) 51  —  —  —  1,717  (5)
Loans and advances to banks at amortised cost 100  —  —  —  157  (4) 257  (4)
At 31 Dec 2022 55,531  (234) 25,121  (92) 569  (66) 81,221  (392)
1    Comprising assets held for sale relating to the planned merger of our business in Oman, and the planned sales of our branch operations in Greece and our business in Russia.
Measurement uncertainty and sensitivity analysis of ECL estimates
The recognition and measurement of ECL involves the use of significant judgement and estimation. We form multiple economic scenarios based on economic forecasts, apply these assumptions to credit risk models to estimate future credit losses, and probability-weight the results to determine an unbiased ECL estimate. Management judgemental adjustments are used to address late-breaking events, data and model limitations, model deficiencies and expert credit judgements.
At 30 June 2023, management recognised a reduction in uncertainty in most markets. It was management's view that the Central scenario sufficiently reflected the muted global economic environment and that the probability weightings assigned to this scenario for each of our major markets should increase and revert to the standard weight of 75%.
Methodology
At 30 June 2023, four economic scenarios were used to capture the current economic environment and to articulate management’s view of the range of potential outcomes. Each scenario is updated with new forecasts and estimates each quarter.
The Upside, Central and Downside scenarios are drawn from external consensus forecasts, market data and distributional estimates of the entire range of economic outcomes.
The fourth scenario, the Downside 2, represents management’s view of severe downside risks.
Economic scenarios produced to calculate ECL are aligned to HSBC’s top and emerging risks.
In June 2023, following a significant shift in UK policy interest rate expectations, the Central scenario for the UK was updated and key economic and financial variables were updated. Outer scenario economic variables for the UK were changed in parallel with these Central scenario adjustments.
Description of economic scenarios
In the Central scenario, global economic forecasts have improved since 1Q23. In western Europe and North America, GDP and employment have proved resilient to higher inflation and interest rates, as well as the failure of several US banks. In Hong Kong and mainland China, the post-pandemic reopening has led to a faster than expected improvement in growth and expectations, which has now been reflected in forecasts.
Stronger than expected growth means that inflation has declined at a slower pace than projected. For many markets, inflation forecasts have been raised. Further monetary tightening is also expected although interest rates are, in most markets, thought to be at, or close to, their peak. The UK and China are key exceptions.
In the UK, interest rates are expected to rise over the remainder of 2023. There remains uncertainty around the speed and extent of the increases, which may impose additional downside risks. In China, policy interest rates have been cut.
The Upside and Downside scenarios are designed to encompass the potential crystallisation of a number of key macro-financial risks. Higher inflation, tighter monetary policy and financial conditions, and an escalation of geopolitical risks pose key downside risks to the outlook. To the upside, a swifter decline in inflation, a cut to interest rates and greater cooperation between the US and China on trade and investment are assumed to drive faster economic growth.
The scenarios used to calculate ECL are described below.
The consensus Central scenario
HSBC’s Central scenario features a slowdown in GDP growth and a rise in unemployment across our major markets in 2023, relative to 2022, with the exception of Hong Kong and mainland China.
Global GDP forecasts have been raised in recent quarters due to stronger-than-expected growth in 1Q23, underpinned by resilience in household consumption. Nevertheless, the outlook for the remainder of 2023 and the beginning of 2024 remains subdued as high inflation continues to erode disposable income and curtail investment. In Hong Kong and mainland China, higher growth expectations reflect the removal of pandemic-related restrictions.
The Central scenario assumes that inflation gradually declines through 2023 and only reverts to central bank target ranges in 2025.
Global GDP is expected to grow by 2.0% in 2023 in the Central scenario. The average rate of global GDP growth is expected to be 2.6% over the forecast period, slightly below the 2.8% average five-year growth rate expectation prior to the onset of the pandemic.

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Risk
Across the key markets, the Central scenario assumes the following:
–GDP growth in mainland China is expected to continue at a rate above the official target of 5% in 2023, with policy stimulus offsetting headwinds from a weak property sector and lower external demand. In Hong Kong, the resumption of international travel and tourism, and the recovery in mainland China are expected to sustain the rapid rebound in GDP, led by the services sector and high employment.
–In the UK, persistently high inflation and wage growth have caused a significant reappraisal of interest rate expectations. A substantially higher terminal rate for interest rates implies a bigger impact on confidence, discretionary income and investment. We have sought to reflect this in an updated Central scenario, which incorporates a recession for the UK that begins in the second half of 2023 and persists into 2024.
–In the remainder of western Europe and North America, economic growth is expected to slow in the second half of 2023, as tighter monetary policy and elevated inflation squeeze corporate margins and households’ real disposable income. Tighter financial conditions are expected to weigh on credit growth.
–Unemployment is expected to rise gradually in most of our key markets from 2022 levels as economic growth slows. It is forecast to fall in mainland China and Hong Kong as the economic recovery continues.
–Inflation is expected to remain above central bank targets in our key markets in 2023 as core inflation and food prices remain high. Inflation is subsequently expected to converge back to central bank targets over the next two years of the forecast. Mainland China is expected to be an exception as inflation remains low throughout the forecast horizon.
–Policy interest rates in key markets are expected to peak later this year following rapid tightening cycles over the past 18 months to bring inflation rates back towards their targets. Thereafter, they are expected to fall slowly and remain at higher levels than they were pre-pandemic. In the UK, policy interest rates are forecast to rise until the end of the year and remain high for an extended period of time.
–The Brent crude oil price is expected to average $77 per barrel in 2023, before dropping back as demand weakens. Over the entire projection the oil price is expected to average $69 per barrel.
The Central scenario was created from consensus forecasts available in May, and market-based projections updated in June. For the UK, significant UK variables, including GDP, unemployment and policy rates were updated in late June.


The following table describes key macroeconomic variables in the consensus Central scenario.
Consensus Central scenario
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP (annual average growth rate, %)
2023 0.0  1.0  4.5  5.4  1.2  0.5  3.2  1.9 
2024 (0.6) 0.9  3.2  4.9  1.0  1.0  3.8  1.7 
2025 1.0  2.2  2.7  4.7  2.2  1.5  4.1  2.2 
2026 1.6  2.1  2.6  4.6  2.0  1.6  3.7  2.2 
2027 1.4  2.0  2.5  4.3  1.9  1.5  3.3  2.2 
5-year average1
 0.8  1.7  3.1  4.6  1.7  1.3  3.6  2.0 
Unemployment rate (%)
2023 4.2  3.9  3.3  5.2  5.7  7.4  2.9  3.3 
2024 4.7  4.6  3.2  5.1  6.1  7.4  2.6  3.6 
2025 4.5  4.4  3.3  5.1  6.0  7.2  2.4  3.5 
2026 4.4  4.2  3.2  5.1  5.8  7.3  2.4  3.5 
2027 4.5  4.1  3.3  5.0  5.7  7.0  2.3  3.5 
5-year average1
 4.5  4.3  3.3  5.1  5.9  7.2  2.5  3.5 
House prices (annual average growth rate, %)
2023 (1.3) 1.3  (6.4) (2.0) (12.9) 0.7  11.1  10.2 
2024 (5.7) 1.1  0.4  5.5  (3.1) 0.6  4.4  5.3 
2025 (1.9) 2.8  1.8  3.8  4.1  3.1  4.5  4.3 
2026 3.2  2.6  3.0  2.9  2.8  3.8  3.9  4.0 
2027 2.7  2.8  3.3  3.6  0.6  3.7  3.3  3.9 
5-year average1
 (0.6) 2.2  1.8  3.5  (0.1) 2.5  4.5  4.8 
Inflation (annual average growth rate, %)
2023 7.5  4.3  2.4  1.8  3.7  5.3  3.4  5.9 
2024 2.8  2.6  2.3  2.3  2.2  2.6  2.2  4.2 
2025 1.8  2.2  2.1  2.1  2.0  1.9  2.1  3.7 
2026 1.9  2.2  2.2  2.1  2.0  1.9  2.1  3.6 
2027 2.1  2.2  2.3  2.0  2.0  1.9  2.1  3.6 
5-year average1
 2.5  2.4  2.3  2.1  2.2  2.3  2.2  3.9 
1 The five-year average is calculated over a projected period of 20 quarters from 3Q23 to 2Q28.
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The graphs compare the respective Central scenario with current economic expectations beginning in the second quarter of 2023.
GDP growth: Comparison of Central scenarios
UK
ukgdp.jpg
Note: Real GDP shown as year-on-year percentage change.

Hong Kong
hkggdp.jpg
Note: Real GDP shown as year-on-year percentage change.
US
usgdp.jpg
Note: Real GDP shown as year-on-year percentage change.
Mainland China
chngdp.jpg
Note: Real GDP shown as year-on-year percentage change.

The consensus Upside scenario
The consensus Upside scenario features stronger growth, lower unemployment and a faster fall in inflation compared with the Central
scenario. Asset prices, including housing, also rise more quickly in this scenario. Other upside risk themes include a de-escalation of geographical tensions and looser financial conditions.
The following table describes key macroeconomic variables in the consensus Upside scenario.
Consensus Upside scenario (3Q23–2Q28)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (%, start-to-peak)1
 8.7  (2Q28) 14.7  (2Q28) 22.5  (2Q28) 33.3  (2Q28) 15.2  (2Q28) 10.1  (2Q28) 28.8  (2Q28) 17.3  (2Q28)
Unemployment rate (%, min)2
 3.0  (2Q25) 3.0  (1Q24) 2.5  (2Q24) 4.6  (1Q24) 5.1  (2Q25) 6.2  (2Q25) 1.8  (2Q25) 2.8  (1Q24)
House price index (%, start-to-peak)1
 5.7  (2Q28) 22.1  (2Q28) 17.2  (2Q28) 27.2  (2Q28) 13.7  (2Q28) 17.1  (2Q28) 28.3  (2Q28) 31.2  (2Q28)
Inflation rate (YoY % change, min)3
 1.0  (2Q24) 1.3  (2Q24) 0.4  (2Q24) 0.6  (3Q24) 1.0  (3Q24) 1.4  (3Q24) 1.1  (3Q24) 2.8  (3Q24)
1    Cumulative change to the highest level of the series during the 20-quarter projection.
2     Lowest projected unemployment rate in the scenario.
3    Lowest projected year-on-year percentage change in inflation in the scenario.
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Downside scenarios
Downside scenarios explore the intensification and crystallisation of a number of key economic and financial risks. High inflation and the monetary policy response to it remain key concerns for global growth. While supply chain disruptions caused by the Covid-19 pandemic and the Russia-Ukraine war are easing, helping to reduce headline price inflation across many markets, core inflation remains high. This reflects tight labour markets, which is putting upward pressure on wages, and resilience in demand. In turn, it raises the risk of a more forceful policy response from central banks, encompassing a steeper trajectory for interest rates, a higher terminal rate and ultimately, economic recession.
The rapid increase in interest rates has already led to a repricing of asset valuations, as corporate and household borrowers face steep increases in debt service costs. Policymakers have also raised
concerns that, following the collapse of several US regional banks, financial conditions could tighten further, acting as another constraint on activity. Insolvencies and default rates could rise sharply as businesses find it difficult to refinance, and cash buffers diminish amid weaker demand.
In addition, mainland China’s recovery from the pandemic may be weaker than expected, with negative implications for global growth and Hong Kong in particular.
In the consensus Downside scenario, economic activity is considerably weaker compared with the Central scenario, driven by an intensification of geopolitical risks that aggravate supply chain disruptions and cause global energy and other commodity prices to rise. In this scenario, the economies of our key markets experience moderate recession, unemployment rates increase, and asset prices fall.
The following table describes key macroeconomic variables in the consensus Downside scenario.
Consensus Downside scenario (3Q23–2Q28)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (%, start-to-trough)1
 (3.2) (3Q25) (3.1) (1Q24) (2.4) (1Q24) (1.2) (4Q23) (3.3) (1Q24) (0.4) (2Q24) 0.0  (3Q23) (2.2) (1Q24)
Unemployment rate (%, max)2
 6.2  (4Q24) 6.1  (3Q24) 5.0  (2Q25) 6.3  (4Q24) 7.5  (1Q24) 8.5  (1Q24) 3.9  (1Q24) 4.4  (2Q24)
House price index (%, start-to-trough)1
 (16.6) (2Q25) (2.6) (1Q24) (2.9) (4Q23) 1.0  (3Q23) (16.1) (3Q24) (1.3) (2Q24) (1.9) (4Q23) 1.4  (3Q23)
Inflation rate (YoY % change, max)3
 7.0  (3Q23) 4.1  (4Q23) 4.0  (2Q24) 4.3  (1Q24) 3.9  (1Q24) 5.6  (3Q23) 3.9  (4Q23) 6.6  (2Q24)
1    Cumulative change to the lowest level of the series during the 20-quarter projection.
2    The highest projected unemployment rate in the scenario.
3    The highest projected year-on-year percentage change in inflation in the scenario.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and reflects management’s view of the tail of the economic risk distribution. It incorporates the simultaneous crystallisation of a number of risks. The narrative features an escalation in geopolitical

tensions, which leads to further disruptions to supply chains. This creates additional upward pressure on inflation, prompting central banks to keep interest rates higher than in the Central scenario. However, demand subsequently falls sharply and unemployment rises before inflation pressures begin to subside.

The following table describes key macroeconomic variables in the Downside 2 scenario.
Downside 2 scenario (3Q23–2Q28)
UK US Hong Kong Mainland China Canada France UAE Mexico
GDP level (%, start-to-trough)1
 (7.7) (4Q24) (4.3) (2Q24) (6.9) (3Q24) (8.3) (2Q24) (5.9) (4Q24) (7.1) (3Q24) (5.4) (4Q24) (8.9) (4Q24)
Unemployment rate (%, max)2
 9.0  (4Q24) 9.6  (2Q25) 6.3  (2Q24) 6.8  (2Q25) 12.2  (4Q24) 10.0  (3Q25) 4.4  (1Q24) 5.7  (4Q24)
House price index (%, start-to-trough)1
 (40.8) (3Q25) (15.3) (2Q24) (16.1) (4Q26) (21.4) (2Q25) (45.1) (2Q25) (12.1) (4Q25) (4.8) (4Q24) 1.3  (3Q23)
Inflation rate (YoY % change, max)3
 10.3  (4Q23) 4.5  (4Q23) 4.5  (2Q24) 5.3  (1Q24) 5.0  (4Q23) 9.9  (4Q23) 4.4  (4Q23) 6.9  (2Q24)
1    Cumulative change to the lowest level of the series during the 20-quarter projection.
2     The highest projected unemployment rate in the scenario.
3     The highest projected year-on-year percentage change in inflation in the scenario.

Scenario weightings
In reviewing the economic situation, as well as the level of uncertainty and risk, management has considered both global and country-specific factors. This has led management to assigning scenario probabilities that are tailored to its view of uncertainty in individual markets.
In 2Q23, the level of certainty attached to the Central scenario was assessed to have increased compared with previous quarters. It was noted that:
–the dispersion of external economic forecasts had narrowed;
–there has been stabilisation of a number of key risk drivers; and
–the current Central scenario forecasts were sufficiently reflective of weak GDP growth prospects.

As a result, it was decided that having previously reduced the probability weights assigned to the Central scenario for each of our major markets, the weightings should increase and revert to the standard weight of 75%.
Scenario weightings for Hong Kong and mainland China, are now aligned to the consensus probability distribution. The upside potential in other major markets is considered to be limited by current inflation and monetary policy trends. Management therefore assigned only 5% to the Upside scenario in these markets. The remaining 20% weighting is assigned across our two Downside scenarios to reflect the continued downside risks posed by inflation and monetary policy.
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For the UK, uncertainty generated by shifting interest rate expectations was addressed with revisions to scenario variables.
The weighting assigned to the UK Central scenario therefore aligns to the standard weight.
The following table describes the probabilities assigned in each scenario.
Scenario weightings, %
Standard weights UK US Hong
Kong		 Mainland China Canada France UAE Mexico
2Q23
Upside 10.0  5.0 5.0  10.0  10.0  5.0  5.0  5.0  5.0 
Central 75.0  75.0 75.0  75.0  75.0  75.0  75.0  75.0  75.0 
Downside 10.0  15.0 15.0  10.0  10.0  15.0  15.0  15.0  15.0 
Downside 2 5.0  5.0 5.0  5.0  5.0  5.0  5.0  5.0  5.0 
4Q22
Upside 10.0  5.0  5.0  20.0  20.0  5.0  5.0  5.0  5.0 
Central 75.0  60.0  70.0  55.0  55.0  70.0  60.0  70.0  70.0 
Downside 10.0  25.0  20.0  20.0  20.0  15.0  25.0  20.0  20.0 
Downside 2 5.0  10.0  5.0  5.0  5.0  10.0  10.0  5.0  5.0 

The following graphs show the historical and forecasted GDP growth rate for the various economic scenarios in our four largest markets.
US
usa.jpg
UK
uk.jpg











Hong Kong
hkg.jpg
Mainland China
chn.jpgNote: Real GDP shown as year-on-year percentage change.

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Critical accounting estimates and judgements
The calculation of ECL under IFRS 9 involved significant judgements, assumptions and estimates at 30 June 2023. These included:
–the selection of economic scenarios, given rapidly changing economic conditions and a wide distribution of economic forecasts; and
–estimating the economic effects of those scenarios on ECL, particularly the effect of interest rates and inflationary pressures on specific sectors.

How economic scenarios are reflected in ECL calculations
The methodologies for the application of forward economic guidance into the calculation of ECL for wholesale and retail portfolios are set out on page 158 of the Annual Report and Accounts 2022. Models are used to reflect economic scenarios on ECL estimates. These models are based largely on historical observations and correlations with default.
Economic forecasts and ECL model responses to these forecasts are subject to a degree of uncertainty. The models continue to be supplemented by management judgemental adjustments where required.

Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are typically increases or decreases to the modelled ECL at either a customer, segment or portfolio level to account for late-breaking
events, model and data limitations and deficiencies, and expert credit judgement applied during management review and challenge. These include refining model inputs and outputs, and using adjustments to ECL based on management judgement and higher levels of quantitative analysis for impacts that are difficult to model. The effects of management judgemental adjustments are considered for both balances and ECL, and will consider any changes to stage allocation where appropriate. This is in accordance with the internal adjustments framework.
The wholesale and retail management judgemental adjustments are presented as part of the internal review and challenge committees, and are subject to a further second line review, where significant. This is in line with the governance process for IFRS 9 as set out on page 145 of the Annual Report and Accounts 2022. We have internal governance in place to monitor management judgemental adjustments regularly and, where possible, to reduce the reliance on these through model recalibration or redevelopment, as appropriate.
The drivers of management judgemental adjustments continue to evolve with the economic environment as new risks emerge.
At 30 June 2023, management judgemental adjustments reduced by $0.6bn compared with 31 December 2022. Adjustments reflected macroeconomic uncertainty at a portfolio and sector level, and operational limitations.


Management judgemental adjustments made in estimating the reported ECL at 30 June 2023 are set out in the following table.
Management judgemental adjustments to ECL at 30 June 20231
Retail Wholesale Total
$bn $bn $bn
Banks, sovereigns, government entities and low-risk counterparties (0.1) (0.1)
Corporate lending adjustments —  — 
Retail lending inflation-related adjustments 0.1  0.1 
Other macroeconomic-related adjustments — 
Other retail lending adjustments 0.2  0.2 
Total 0.3  (0.1) 0.2 
Management judgemental adjustments to ECL at 31 December 20221
Retail Wholesale Total
$bn $bn $bn
Banks, sovereigns, government entities and low-risk counterparties —  — 
Corporate lending adjustments 0.5  0.5 
Retail lending inflation-related adjustments 0.1  0.1 
Other macroeconomic-related adjustments 0.1  0.1 
Other retail lending adjustments 0.2  0.2 
Total 0.3  0.5  0.8 
1    Management judgemental adjustments presented in the table reflect increases or (decreases) to modelled ECL, respectively.
In the wholesale portfolio, management judgemental adjustments were a decrease to modelled ECL of $50m (31 December 2022: $0.5bn increase).
–Adjustments to sovereigns, government entities and low-risk counterparties were a decrease to modelled ECL of $83m at 30 June 2023 (31 December 2022: $22m increase), mostly to reflect amendments to data and management judgemental adjustments to reflect geopolitical uncertainty and late-breaking events.
–Adjustments to corporate exposures increased modelled ECL by $33m at 30 June 2023 (31 December 2022: $0.5bn increase). These included an increase to modelled ECL of $190m, mostly due to management judgements to reflect heightened uncertainty in specific sectors and geographies, including adjustments to exposures to the real estate sector in mainland China and the US, and offsetting adjustments to specific sectors in the UK.
Management judgemental adjustments were offset by a decrease to modelled ECL of $157m to adjust for amendments to data and known model limitations. The decrease in the adjustments compared with 31 December 2022 reflected a crystallisation of
downgrades and defaults for high-risk exposures, and the effect of offsetting adjustments.
In the retail portfolio, management judgemental adjustments were an increase to modelled ECL of $0.3bn at 30 June 2023 (31 December 2022: $0.3bn increase).
–Inflation-related adjustments increased ECL by $0.1bn (31 December 2022: $0.1bn). These adjustments addressed where country-specific inflation risks were not fully captured by the modelled output.
–Other retail lending adjustments increased ECL by $0.2bn (31 December 2022: $0.2bn increase), reflecting operational, data and model adjustments.
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Economic scenarios sensitivity analysis of ECL estimates
Management considered the sensitivity of the ECL outcome against the economic forecasts as part of the ECL governance process by recalculating the ECL under each scenario described above for selected portfolios, applying a 100% weighting to each scenario in turn. The weighting is reflected in both the determination of a significant increase in credit risk and the measurement of the resulting ECL.
The ECL calculated for the Upside and Downside scenarios should not be taken to represent the upper and lower limits of possible ECL outcomes. The impact of defaults that might occur in the future under different economic scenarios is captured by recalculating ECL for loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in numbers representing tail risk scenarios when assigned a 100% weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes ECL and financial instruments related to defaulted (stage 3) obligors. The measurement of stage 3 ECL is relatively more sensitive to credit factors specific to the obligor than future economic scenarios, and therefore the effect of macroeconomic factors are not necessarily the key consideration when performing individual assessments of ECL for obligors in default. Loans to defaulted obligors are a small portion of the overall wholesale lending exposure, even if representing the majority of the allowance for ECL. Due to the range and specificity of
the credit factors to which the ECL is sensitive, it is not possible to provide a meaningful alternative sensitivity analysis for a consistent set of risks across all defaulted obligors.
For retail credit risk exposures, the sensitivity analysis includes ECL for loans and advances to customers related to defaulted obligors. This is because the retail ECL for secured mortgage portfolios, including loans in all stages, is sensitive to macroeconomic variables.
Wholesale and retail sensitivity
The wholesale and retail sensitivity analysis is stated inclusive of management judgemental adjustments, as appropriate to each scenario and scope of sensitivity. The results tables exclude portfolios held by the insurance and private banking businesses and small portfolios, and as such cannot be directly compared with personal and wholesale lending presented in other credit risk tables. In both the wholesale and retail analysis, the comparative period results for Downside 2 scenarios are also not directly comparable with the current period, because they reflect different risks relative to the consensus scenarios for the period end.
For both retail and wholesale portfolios, the gross carrying amount and nominal amount of financial instruments are the same under each scenario. For exposures with similar risk profile and product characteristics, the sensitivity impact is therefore largely the result of changes in macroeconomic assumptions.

Wholesale analysis
IFRS 9 ECL sensitivity to future economic conditions1,2
Gross carrying and nominal amount Reported
ECL		 Consensus Central scenario ECL Consensus Upside scenario ECL Consensus Downside scenario ECL Downside 2 scenario ECL
By geography at 30 Jun 2023 $m $m $m $m $m $m
UK 424,186  940  811  587  1,098  2,965 
US 196,193  295  263  258  359  755 
Hong Kong 430,282  609  565  395  866  1,325 
Mainland China 123,776  236  188  106  347  1,265 
Canada3
 83,083  94  74  50  127  540 
Mexico 28,445  69  63  49  86  232 
UAE 48,637  26  25  21  31  47 
France 166,451  74  70  61  86  106 
By geography at 31 Dec 2022
UK 421,685  769  624  484  833  2,240 
US 190,858  277  241  227  337  801 
Hong Kong 415,875  925  819  592  1,315  2,161 
Mainland China 125,466  295  242  144  415  1,227 
Canada3
 83,274  126  80  60  148  579 
Mexico 26,096  88  80  67  116  313 
UAE 45,064  45  41  30  55  93 
France 173,146  110  102  90  121  145 
1    ECL sensitivity includes off-balance sheet financial instruments that are subject to significant measurement uncertainty.
2    Includes low credit-risk financial instruments such as debt instruments at FVOCI, which have high carrying amounts but low ECL under all the above scenarios.
3    Classified as ‘assets held for sale’ at 31 December 2022 and 30 June 2023.
At 30 June 2023, the highest level of 100% scenario-weighted ECL was observed in the UK and Hong Kong. This higher ECL impact was largely driven by significant exposure in these regions. In the wholesale portfolio, off-balance sheet financial instruments have a lower likelihood to be fully converted to a funded exposure at the point of default, and consequently the ECL sensitivity impact is lower in relation to its nominal amount when compared with an on-balance sheet exposure with similar risk profile.

Compared with 31 December 2022, the Downside 2 ECL impact was higher in the UK and lower in Hong Kong. In the UK, the increase in the Downside 2 ECL impact was mostly reflective of the heightened macroeconomic uncertainty driven by the high inflation and interest rate environment. In Hong Kong, the reduction in the Downside 2 ECL impact reflected the crystallisation of defaults for certain high-risk exposures and decrease of the associated downside uncertainty.
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Risk
Retail analysis
IFRS 9 ECL sensitivity to future economic conditions1
Gross carrying amount Reported
ECL		 Consensus Central scenario ECL Consensus Upside scenario ECL Consensus Downside scenario ECL Downside 2 scenario ECL
By geography at 30 Jun 2023 $m $m $m $m $m $m
UK
Mortgages 157,016  214  201  195  215  421 
Credit cards 6,958  428  418  365  433  702 
Other 8,156  403  374  272  452  727 
Mexico
Mortgages 7,937  172  158  124  225  340 
Credit cards 2,039  233  220  154  297  365 
Other 4,110  494  479  400  557  629 
Hong Kong
Mortgages 102,533  —  —  —  —  1 
Credit cards 8,249  268  254  216  385  496 
Other 6,418  95  92  80  110  129 
UAE
Mortgages 2,048  40  40  39  40  41 
Credit cards 437  39  36  18  67  86 
Other 700  19  17  11  24  29 
France
Mortgages 21,112  51  50  50  51  52 
Other 1,390  49  48  47  50  53 
US
Mortgages 13,854  10  10  9  10  14 
Credit cards 209  21  20  18  22  26 
Canada2
Mortgages 25,353  60  58  56  64  99 
Credit cards 307  10  10  9  12  12 
Other 1,383  13  12  11  16  44 
By geography at 31 Dec 2022
UK
Mortgages 147,306  204  188  183  189  399 
Credit cards 6,518  455  434  396  442  719 
Other 7,486  368  333  274  383  605 
Mexico
Mortgages 6,319  152  127  102  183  270 
Credit cards 1,616  198  162  97  233  289 
Other 3,447  438  400  318  503  618 
Hong Kong
Mortgages 100,107  1  1  —  1  1 
Credit cards 8,003  261  227  180  417  648 
Other 5,899  85  81  74  100  123 
UAE
Mortgages 2,170  37  37  36  38  38 
Credit cards 441  41  37  21  68  86 
Other 718  17  17  15  19  22 
France
Mortgages 21,440  51  50  50  51  52 
Other 1,433  54  53  52  55  59 
US
Mortgages 13,489  7  6  6  8  15 
Credit cards 219  26  25  23  27  36 
Canada2
Mortgages 25,163  45  44  43  46  58 
Credit cards 299  10  9  8  11  11 
Other 1,399  16  14  13  17  36 
1    ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2 Classified as ‘assets held for sale’ at 31 December 2022 and 30 June 2023.
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At 30 June 2023, the highest level of 100% scenario-weighted ECL was observed in the UK, Mexico and Hong Kong. Mortgages reflected the lowest level of ECL across most markets and scenarios, as collateral values remained resilient. Hong Kong mortgages had low levels of reported ECL due to the credit quality of the portfolio, and so ECL under the remaining scenarios were also negligible. Credit cards and ‘Other’ portfolios contributed to the largest proportion of ECL, as they generally have higher ECL and are more sensitive to economic forecasts. ECL sensitivity in Mexico increased under each of the scenarios aligned to the observed lending growth.
Group ECL sensitivity results
The ECL impact of the scenarios and management judgemental adjustments are highly sensitive to movements in economic forecasts. Based upon the sensitivity tables presented above, if the Group ECL balance (excluding wholesale stage 3, which is assessed individually) was estimated solely on the basis of the Central scenario, Upside scenario, Downside 1 scenario or the Downside 2 scenario at 30 June 2023, it would increase/(decrease) as presented in the below table.
Retail1
Wholesale1
Total Group ECL at 30 Jun 2023 $bn $bn
Reported ECL 3.1  2.7 
Scenarios
100% consensus Central scenario (0.1) (0.3)
100% consensus Upside scenario (0.6) (0.9)
100% consensus Downside scenario 0.5  0.8 
100% Downside 2 scenario 1.9  5.5 
Total Group ECL at 31 Dec 2022
Reported ECL 3.0  3.1 
Scenarios
100% consensus Central scenario (0.2) (0.5)
100% consensus Upside scenario (0.6) (1.1)
100% consensus Downside scenario 0.4  0.8 
100% Downside 2 scenario 1.8  5.5 
1    On the same basis as retail and wholesale sensitivity analysis.
At 30 June 2023, the Group reported ECL increased by $0.1bn in retail and decreased by $0.4bn in wholesale compared with 31 December 2022.
In both the retail and wholesale portfolios, the reduction in the Central scenario ECL was observed due to a higher assigned weighting to the scenario at 30 June 2023. For retail, there was minimal ECL change observed in the remaining scenarios.
In the wholesale portfolio, the uncertainty in relation to high inflation and interest rates was offset in some markets by the crystallisation of defaults in Hong Kong and the decrease of the corresponding downside uncertainty.




Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers
The following disclosure provides a reconciliation by stage of the Group’s gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. Movements are calculated on a quarterly basis and therefore fully capture stage movements between quarters. If movements were calculated on a year-to-date basis they would only reflect the opening and closing position of the financial instrument.
The transfers of financial instruments represent the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL.
The net remeasurement of ECL arising from stage transfers represents the increase or decrease due to these transfers, for example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis. Net remeasurement excludes the underlying customer risk rating (‘CRR’)/probability of default (‘PD’) movements of the financial instruments transferring stage. This is captured, along with other credit quality movements in the ‘changes in risk parameters – credit quality’ line item.
Changes in ‘New financial assets originated or purchased’, ‘assets derecognised (including final repayments)’ and ‘changes to risk parameters – further lending/repayments’ represent the impact from volume movements within the Group’s lending portfolio.
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77

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Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL
$m $m $m $m $m $m $m $m $m $m
At 1 Jan 2023 1,433,643  (1,257) 177,223  (3,710) 21,207  (6,949) 129  (38) 1,632,202  (11,954)
Transfers of financial instruments: (22,336) (491) 18,284  1,120  4,052  (629) —  —  —  — 
– transfers from stage 1 to stage 2 (82,829) 196  82,829  (196) —  —  —  —  —  — 
– transfers from stage 2 to stage 1 61,112  (665) (61,112) 665  —  —  —  —  —  — 
– transfers to stage 3 (1,045) 4  (4,146) 718  5,191  (722) —  —  —  — 
– transfers from stage 3 426  (26) 713  (67) (1,139) 93  —  —  —  — 
Net remeasurement of ECL arising from transfer of stage —  437  —  (532) —  (62) —  —  —  (157)
New financial assets originated or purchased 207,739  (325) —  —  —  —  —  —  207,739  (325)
Assets derecognised (including final repayments) (137,067) 113  (18,659) 163  (2,216) 170  (14) —  (157,956) 446 
Changes to risk parameters – further lending/repayments (47,927) 102  2,882  97  (65) 187  (44) 1  (45,154) 387 
Changes to risk parameters – credit quality —  212  —  (494) —  (1,432) —  13  —  (1,701)
Changes to models used for ECL calculation —  (7) —  (6) —  —  —  —  —  (13)
Assets written off —  —  —  —  (1,378) 1,378  —  —  (1,378) 1,378 
Foreign exchange 16,358  (47) 3,260  (107) 252  (90) —  —  19,870  (244)
Other1,2
 18,386  (4) 1,373  5  65  (28) (10) (1) 19,814  (28)
At 30 Jun 2023 1,468,796  (1,267) 184,363  (3,464) 21,917  (7,455) 61  (25) 1,675,137  (12,211)
ECL income statement change for the period 532  (772) (1,137) 14  (1,363)
Recoveries 136 
Other (115)
Total ECL income statement change for the period (1,342)
At 30 Jun 2023 6 months ended 30 Jun 2023
Gross carrying/nominal amount Allowance for
ECL		 ECL release/(charge)
  $m $m $m
As above 1,675,137  (12,211) (1,342)
Other financial assets measured at amortised cost 960,249  (489) (32)
Non-trading reverse purchase agreement commitments 65,562  —  — 
Performance and other guarantees not considered for IFRS 9 —  —  25 
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement 2,700,948  (12,700) (1,349)
Debt instruments measured at FVOCI 287,195  (125) 4 
Total allowance for ECL/total income statement ECL change for the period n/a (12,825) (1,345)
1    Total includes $25.1bn of gross carrying loans and advances, which were classified from assets held for sale, and a corresponding allowance for ECL of $92m, reflecting the planned sale of our retail banking operations in France no longer meeting the definition of held for sale. For further details, see ‘Assets held for sale’ on page 68.
2    Total includes $3.9bn of gross carrying loans and advances to customers and banks, which were classified to assets held for sale, and corresponding allowance for ECL of $75m, reflecting the planned merger of our business in Oman. For further details, see ‘Assets held for sale’ on page 68.
As shown in the previous table, the allowance for ECL for loans and advances to customers and banks and relevant loan commitments and financial guarantees increased by $257m during the period, from $11,954m at 31 December 2022 to $12,211m at 30 June 2023.
This increase was driven by:
–$1,701m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages;
–foreign exchange and other movements of $272m;
–$157m relating to the net remeasurement impact of stage transfers; and
–$13m relating to changes to models used for ECL calculation.
These were partly offset by:
–$1,378m of assets written off; and
–$508m relating to volume movements, which included the ECL allowance associated with new originations, assets derecognised and further pending repayment.
78
HSBC Holdings plc

The ECL charge for the period of $1,363m presented in the previous table consisted of $1,701m relating to underlying credit quality changes, including the credit quality impact of financial instruments transferring between stages, $157m relating to the net
remeasurement impact of stage transfers and $13m relating to changes to models used for ECL calculation. These were partly offset by $508m relating to underlying net book volume.
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees (continued)
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL Gross carrying/ nominal amount Allowance for ECL
$m $m $m $m $m $m $m $m $m $m
At 1 Jan 2022 1,575,808  (1,552) 155,654  (3,323) 19,796  (6,928) 275  (64) 1,751,533  (11,867)
Transfers of financial instruments: (98,940) (794) 88,974  1,616  9,966  (822) —  —  —  — 
– transfers from stage 1 to
stage 2
 (225,458) 469  225,458  (469) —  —  —  —  —  — 
– transfers from stage 2 to
stage 1
 128,170  (1,211) (128,170) 1,211  —  —  —  —  —  — 
– transfers to stage 3 (2,392) 9  (10,083) 1,132  12,475  (1,141) —  —  —  — 
– transfers from stage 3 740  (61) 1,769  (258) (2,509) 319  —  —  —  — 
Net remeasurement of ECL arising from transfer of stage —  735  —  (948) —  (148) —  —  —  (361)
New financial assets originated or purchased 483,484  (547) —  —  —  —  26  (2) 483,510  (549)
Assets derecognised (including final repayments) (318,585) 147  (37,900) 343  (2,806) 416  (98) —  (359,389) 906 
Changes to risk parameters – further lending/repayment (65,646) 225  (6,977) 92  (593) 258  (61) 5  (73,277) 580 
Changes to risk parameters – credit quality —  400  —  (1,671) —  (3,019) —  32  —  (4,258)
Changes to models used for ECL calculation —  4  —  (151) —  13  —  —  —  (134)
Assets written off —  —  —  —  (2,791) 2,791  (10) 10  (2,801) 2,801 
Credit-related modifications that resulted in derecognition —  —  —  —  (32) 9  —  —  (32) 9 
Foreign exchange (81,954) 59  (8,811) 170  (1,395) 323  (3) 1  (92,163) 553 
Other1,2
 (60,524) 66  (13,717) 162  (938) 158  —  (20) (75,179) 366 
At 31 Dec 2022 1,433,643  (1,257) 177,223  (3,710) 21,207  (6,949) 129  (38) 1,632,202  (11,954)
ECL income statement change for the period 964  (2,335) (2,480) 35  (3,816)
Recoveries 316 
Other (28)
Total ECL income statement change for the period3
 (3,528)
At 31 Dec 2022 12 months ended 31 Dec 2022
Gross carrying/nominal amount Allowance for
 ECL		 ECL charge
$m $m $m
As above 1,632,202  (11,954) (3,528)
Other financial assets measured at amortised cost 954,934  (493) (38)
Non-trading reverse purchase agreement commitments 44,921  —  — 
Performance and other guarantees not considered for IFRS 9 —  —  39 
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement 2,632,057  (12,447) (3,527)
Debt instruments measured at FVOCI 265,147  (126) (57)
Total allowance for ECL/total income statement ECL change for the period n/a (12,573) (3,584)
1    Total includes $82.7bn of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding allowance for ECL of $426m, reflecting business disposals as disclosed on page 68.
2    Includes $8.9bn of gross carrying amounts of stage 1 loans and advances to banks, representing the balance maintained with the Bank of England to support Bacs along with Faster Payments and the cheque-processing Image Clearing System in the UK. This balance was previously reported under ‘Cash and balances at central banks’. Comparatives have not been restated.
3    The 31 December 2022 total ECL income statement change of $3,528m is attributable to $1,069m for the six months ended 30 June 2022 and $2,459m to the six months ended 31 December 2022.
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79

Risk
Credit quality of financial instruments
We assess the credit quality of all financial instruments that are subject to credit risk. The credit quality of financial instruments is a point-in-time assessment of PD, whereas stages 1 and 2 are determined based on relative deterioration of credit quality since initial recognition. Accordingly, for non-credit-impaired financial instruments, there is no direct relationship between the credit quality assessment and stages 1 and 2, though typically the lower credit quality bands exhibit a higher proportion in stage 2.
The five credit quality classifications each encompass a range of granular internal credit rating grades assigned to wholesale and personal lending businesses and the external ratings attributed by external agencies to debt securities, as shown in the following table. Personal lending credit quality is disclosed based on a 12-month point-in-time PD adjusted for multiple economic scenarios. The credit quality classifications for wholesale lending are based on internal credit risk ratings.
Credit quality classification
Sovereign debt
securities
and bills		 Other debt
securities
and bills		 Wholesale lending
and derivatives		 Retail lending
External credit
rating		 External credit
rating		 Internal credit
rating		 12-month Basel
probability of
default %		 Internal credit
rating		 12 month probability- weighted PD %
Quality classification1,2
Strong BBB and above A- and above CRR 1 to CRR 2 0 – 0.169 Band 1 and 2 0.000 – 0.500
Good BBB- to BB BBB+ to BBB- CRR 3 0.170 – 0.740 Band 3 0.501 – 1.500
Satisfactory BB- to B and unrated BB+ to B and unrated CRR 4 to CRR 5 0.741 – 4.914 Band 4 and 5 1.501 – 20.000
Sub-standard B- to C B- to C CRR 6 to CRR 8 4.915 – 99.999 Band 6 20.001 – 99.999
Credit impaired Default Default CRR 9 to CRR 10 100 Band 7 100
1    Customer risk rating (‘CRR’).
2    12-month point-in-time probability-weighted probability of default (‘PD’).
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
Gross carrying/nominal amount Allowance
for ECL		 Net
Strong Good Satisfac-tory
Sub-standard
 Credit
impaired		 Total
$m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 514,425  210,675  199,372  26,747  20,077  971,296  (11,738) 959,558 
– stage 1 484,205  173,801  145,995  4,375  —  808,376  (1,106) 807,270 
– stage 2 30,220  36,874  53,377  22,372  —  142,843  (3,269) 139,574 
– stage 3 —  —  —  —  20,016  20,016  (7,338) 12,678 
– POCI —  —  —  —  61  61  (25) 36 
Loans and advances to banks at amortised cost 89,733  4,282  5,614  1,282  84  100,995  (74) 100,921 
– stage 1 89,658  4,181  5,467  317  —  99,623  (18) 99,605 
– stage 2 75  101  147  965  —  1,288  (33) 1,255 
– stage 3 —  —  —  —  84  84  (23) 61 
– POCI —  —  —  —  —  —  —  — 
Other financial assets measured at amortised cost 814,096  80,611  60,807  3,968  767  960,249  (489) 959,760 
– stage 1 813,916  78,629  53,012  345  —  945,902  (96) 945,806 
– stage 2 180  1,982  7,795  3,623  —  13,580  (147) 13,433 
– stage 3 —  —  —  —  757  757  (237) 520 
– POCI —  —  —  —  10  10  (9) 1 
Loans and other credit-related commitments 412,775  144,157  83,471  7,518  1,605  649,526  (348) 649,178 
– stage 1 401,616  134,384  71,762  2,310  —  610,072  (135) 609,937 
– stage 2 11,159  9,773  11,709  5,208  —  37,849  (150) 37,699 
– stage 3 —  —  —  —  1,605  1,605  (63) 1,542 
– POCI —  —  —  —  —  —  —  — 
Financial guarantees 8,195  4,846  4,810  819  212  18,882  (51) 18,831 
– stage 1 8,020  4,466  3,502  147  —  16,135  (8) 16,127 
– stage 2 175  380  1,308  672  —  2,535  (12) 2,523 
– stage 3 —  —  —  —  212  212  (31) 181 
– POCI —  —  —  —  —  —  —  — 
At 30 Jun 2023 1,839,224  444,571  354,074  40,334  22,745  2,700,948  (12,700) 2,688,248 
Debt instruments at FVOCI1
– stage 1 278,748  12,202  7,362  —  —  298,312  (74) 298,238 
– stage 2 107  13  229  1,732  —  2,081  (50) 2,031 
– stage 3 —  —  —  —  5  5  (1) 4 
– POCI —  —  —  —  2  2  —  2 
At 30 Jun 2023 278,855  12,215  7,591  1,732  7  300,400  (125) 300,275 
1    For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI will not reconcile to the balance sheet as it excludes fair value gains and losses.
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HSBC Holdings plc

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(continued)
Gross carrying/notional amount
Strong Good Satisfa-ctory
Sub- standard
 Credit impaired Total Allowance for ECL  Net
$m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 492,711  196,735  196,486  29,443  19,633  935,008  (11,447) 923,561 
– stage 1 458,706  170,055  142,408  5,130  —  776,299  (1,092) 775,207 
– stage 2 34,005  26,680  54,078  24,313  —  139,076  (3,488) 135,588 
– stage 3 —  —  —  —  19,504  19,504  (6,829) 12,675 
– POCI —  —  —  —  129  129  (38) 91 
Loans and advances to banks at amortised cost 92,675  4,833  5,643  1,311  82  104,544  (69) 104,475 
– stage 1 92,377  4,465  5,466  415  —  102,723  (18) 102,705 
– stage 2 298  368  177  896  —  1,739  (29) 1,710 
– stage 3 —  —  —  —  82  82  (22) 60 
– POCI —  —  —  —  —  —  —  — 
Other financial assets measured at amortised cost 808,573  75,298  67,462  2,804  797  954,934  (493) 954,441 
– stage 1 807,893  70,794  59,887  224  —  938,798  (95) 938,703 
– stage 2 680  4,504  7,575  2,580  —  15,339  (165) 15,174 
– stage 3 —  —  —  —  797  797  (233) 564 
– POCI —  —  —  —  —  —  —  — 
Loans and other credit-related commitments 402,972  132,402  74,410  7,632  1,372  618,788  (386) 618,402 
– stage 1 398,120  121,581  60,990  2,692  —  583,383  (141) 583,242 
– stage 2 4,852  10,821  13,420  4,940  —  34,033  (180) 33,853 
– stage 3 —  —  —  —  1,372  1,372  (65) 1,307 
– POCI —  —  —  —  —  —  —  — 
Financial guarantees 8,281  4,669  4,571  1,013  249  18,783  (52) 18,731 
– stage 1 8,189  4,245  3,488  149  —  16,071  (6) 16,065 
– stage 2 92  424  1,083  864  —  2,463  (13) 2,450 
– stage 3 —  —  —  —  249  249  (33) 216 
– POCI —  —  —  —  —  —  —  — 
At 31 Dec 2022 1,805,212  413,937  348,572  42,203  22,133  2,632,057  (12,447) 2,619,610 
Debt instruments at FVOCI1
– stage 1 260,411  9,852  5,446  —  —  275,709  (66) 275,643 
– stage 2 243  105  284  1,910  —  2,542  (60) 2,482 
– stage 3 —  —  —  —  5  5  (1) 4 
– POCI —  —  —  —  2  2  —  2 
At 31 Dec 2022 260,654  9,957  5,730  1,910  7  278,258  (127) 278,131 
1    For the purposes of this disclosure, gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss allowance. As such, the gross carrying value of debt instruments at FVOCI will not reconcile to the balance sheet as it excludes fair value gains and losses.
Personal lending
This section provides further details on the regions, countries and products driving the increase in personal loans and advances to customers. Additionally, Hong Kong and UK mortgage book
loan-to-value (‘LTV’) data are provided.
Further product granularity is also provided by stage, with geographical data presented for loans and advances to customers, loans and other credit-related commitments, and financial guarantees and similar contracts.
At 30 June 2023, total personal lending for loans and advances to customers of $453.4bn increased by $38.5bn compared with 31 December 2022. This increase included favourable foreign exchange movements of $9.2bn. Excluding foreign exchange movements, the increase was mainly due to an increase of $22.3bn from our retail banking operations in France being no longer classified as assets held for sale. In addition, our personal lending increased by $4.4bn in Hong Kong, $1.8bn in the UK, $1.2bn in Mexico and $1.0bn in Australia. This was partly offset by a $1.2bn decline by the reclassification of our business in Oman as held for sale.
The allowance for ECL attributable to personal lending, excluding off-balance sheet loan commitments and guarantees, increased by $0.1bn to $3.0bn at 30 June 2023. This was mostly due to adverse foreign exchange movements.
Excluding foreign exchange movements, mortgage lending balances increased by $9.9bn to $354.7bn at 30 June 2023. Mortgages grew by $4.0bn in Hong Kong, $1.1bn in the UK, $1.1bn in Mexico, $1.0bn in Australia and $0.6m in the US. In addition, mortgage lending balances increased by $2.2bn from the recognition of our retail
banking operations in France being no longer classified as held for sale. This was partly offset by a $0.3bn decline by the reclassification of our business in Oman as held for sale.
The allowance for ECL attributable to mortgages remained broadly stable at $0.6bn when compared with 31 December 2022.
Total personal lending gross carrying amounts in stage 2 increased by $9.3bn compared with 31 December 2022. Excluding favourable foreign exchange movements of $2.2bn and the reversal of our retail banking operations in France being classified as held for sale of $2.2bn, the increase was mainly due to $5.0bn growth in HSBC UK. The rise in stage 2 balances was largely explained by the deterioration in the economic outlook on account of rising interest rates and inflationary pressures. This was partly offset by transfers to stage 1.
The quality of both our Hong Kong and UK mortgage books remained high, with low levels of impairment allowances. The average LTV ratio on new mortgage lending in Hong Kong was 67%, compared with an estimated 54% for the overall mortgage portfolio. The average LTV ratio on new lending in the UK was 64%, compared with an estimated 52% for the overall mortgage portfolio.
Excluding foreign exchange movements, other personal lending balances increased by $19.4bn compared with 31 December 2022. The increase of $20.1bn was due to our retail banking operations in France being no longer classified as held for sale. This was partly offset by a $0.9bn decline by the reclassification of our business in Oman as held for sale. At 30 June 2023, the allowance for ECL attributable to other personal lending remained broadly stable at $2.4bn.
HSBC Holdings plc
81

Risk
Total personal lending for loans and advances to customers by stage distribution
Gross carrying amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
By portfolio
First lien residential mortgages 305,349  47,161  2,224  354,734  (103) (224) (277) (604)
– of which: interest only (including offset) 20,236  7,348  227  27,811  (7) (29) (49) (85)
– affordability (including US adjustable rate mortgages) 15,200  373  262  15,835  (5) (1) (6) (12)
Other personal lending 86,352  10,999  1,362  98,713  (473) (1,343) (606) (2,422)
– second lien residential mortgages 335  13  25  373  (1) (2) (3) (6)
– guaranteed loans in respect of residential
property
 17,703  1,803  172  19,678  (4) (6) (22) (32)
– other personal lending which is secured 31,567  538  165  32,270  (15) (9) (31) (55)
– credit cards 17,855  4,569  277  22,701  (227) (759) (180) (1,166)
– other personal lending which is unsecured 17,001  3,874  712  21,587  (213) (548) (363) (1,124)
– motor vehicle finance 1,891  202  11  2,104  (13) (19) (7) (39)
At 30 Jun 2023 391,701  58,160  3,586  453,447  (576) (1,567) (883) (3,026)
By legal entity
HSBC UK Bank plc 132,652  44,460  1,094  178,206  (150) (662) (249) (1,061)
HSBC Bank plc 25,924  3,528  331  29,783  (16) (26) (102) (144)
The Hong Kong and Shanghai Banking Corporation Limited 189,301  7,987  958  198,246  (140) (380) (162) (682)
HSBC Bank Middle East Limited 3,546  175  70  3,791  (35) (35) (44) (114)
HSBC North America Holdings Inc. 17,386  369  367  18,122  (9) (16) (10) (35)
Grupo Financiero HSBC, S.A. de C.V. 11,873  1,318  488  13,679  (197) (407) (236) (840)
Other trading entities 11,019  323  278  11,620  (29) (41) (80) (150)
At 30 Jun 2023 391,701  58,160  3,586  453,447  (576) (1,567) (883) (3,026)
Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution
Nominal amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
HSBC UK Bank plc 49,093  4,800  82  53,975  (12) (1) (2) (15)
HSBC Bank plc 2,343  41  3  2,387  —  —  —  — 
The Hong Kong and Shanghai Banking Corporation Limited 174,742  3,905  873  179,520  (3) —  —  (3)
HSBC Bank Middle East Limited 1,892  22  1  1,915  (1) —  —  (1)
HSBC North America Holdings Inc. 3,955  19  7  3,981  —  —  —  — 
HSBC Bank Canada 6,419  117  29  6,565  —  —  —  — 
Grupo Financiero HSBC, S.A. de C.V. 4,053  —  —  4,053  (6) —  —  (6)
Other trading entities 2,506  47  3  2,556  —  —  —  — 
At 30 Jun 2023 245,003  8,951  998  254,952  (22) (1) (2) (25)
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HSBC Holdings plc

Total personal lending for loans and advances to customers by stage distribution (continued)
Gross carrying amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
By portfolio
First lien residential mortgages 294,919  39,860  2,042  336,821  (74) (231) (270) (575)
– of which: interest only (including offset) 19,636  4,485  169  24,290  (3) (46) (41) (90)
– affordability (including US adjustable rate mortgages) 14,773  369  240  15,382  (5) (3) (4) (12)
Other personal lending 67,758  9,006  1,297  78,061  (487) (1,273) (535) (2,295)
– second lien residential mortgages 353  20  6  379  (1) (2) (3) (6)
– guaranteed loans in respect of residential
property
 1,121  121  125  1,367  (1) (3) (30) (34)
– other personal lending which is secured 31,306  594  206  32,106  (15) (10) (30) (55)
– credit cards 16,705  4,423  260  21,388  (225) (776) (160) (1,161)
– other personal lending which is unsecured 16,512  3,681  687  20,880  (234) (469) (305) (1,008)
– motor vehicle finance 1,761  167  13  1,941  (11) (13) (7) (31)
At 31 Dec 2022 362,677  48,866  3,339  414,882  (561) (1,504) (805) (2,870)
By legal entity
HSBC UK Bank plc 128,590  37,394  1,012  166,996  (135) (688) (227) (1,050)
HSBC Bank plc 6,377  740  127  7,244  (10) (18) (38) (66)
The Hong Kong and Shanghai Banking Corporation Limited 185,723  8,698  1,117  195,538  (138) (362) (187) (687)
HSBC Bank Middle East Limited 3,657  184  86  3,927  (26) (37) (52) (115)
HSBC North America Holdings Inc. 16,906  375  270  17,551  (12) (23) (6) (41)
Grupo Financiero HSBC, S.A. de C.V. 9,542  1,099  377  11,018  (213) (331) (194) (738)
Other trading entities 11,882  376  350  12,608  (27) (45) (101) (173)
At 31 Dec 2022 362,677  48,866  3,339  414,882  (561) (1,504) (805) (2,870)

Total personal lending for loans and other credit-related commitments and financial guarantees by stage distribution (continued)
Nominal amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
$m $m $m $m $m $m $m $m
HSBC UK Bank plc 50,535  439  104  51,078  (11) (1) —  (12)
HSBC Bank plc 2,440  131  7  2,578  —  —  —  — 
The Hong Kong and Shanghai Banking Corporation Limited 170,104  2,916  634  173,654  (2) —  —  (2)
HSBC Bank Middle East Limited 1,717  8  1  1,726  (1) —  —  (1)
HSBC North America Holdings Inc. 3,914  24  17  3,955  (1) —  —  (1)
HSBC Bank Canada 6,346  115  30  6,491  —  —  —  — 
Grupo Financiero HSBC, S.A. de C.V. 3,198  —  —  3,198  (9) —  —  (9)
Other trading entities 2,390  64  7  2,461  (2) —  —  (2)
At 31 Dec 2022 240,644  3,697  800  245,141  (26) (1) —  (27)
Wholesale lending    
This section provides further details on the regions, countries and industries driving the decrease in wholesale loans and advances to customers and banks, with the impact of foreign exchange separately identified. Industry granularity is also provided by stage, with geographical data presented for loans and advances to customers, banks, other credit commitments, financial guarantees and similar contracts.
At 30 June 2023, wholesale lending for loans and advances to banks and customers of $618.8bn decreased by $5.8bn since 31 December 2022. This included adverse foreign exchange movements of $3.1bn.
Excluding foreign exchange movements, the total wholesale lending decrease of $8.9bn was driven by a $15.7bn decrease in corporate and commercial balances. This can be attributed to a $10.5bn decrease in Hong Kong, a $3.0bn decrease in the UK and a $2.1bn decrease from the reclassification of our business in Oman into ‘assets held for sale’.
A further decline in wholesale lending was driven by a $2.6bn decrease in loans and advances to banks, including a $5.0bn decrease in mainland China, a $1.3bn decrease in the UAE, a $0.9bn decrease in Switzerland and a $0.6bn decrease from the reclassification of our business in Oman into ‘assets held for sale’. These were partly offset by a $2.8bn increase in Hong Kong and a $2.6bn increase in Singapore.
Loans and advances to non-bank financial institutions grew by $9.4bn, including a $5.1bn increase in the UK and a $2.2bn increase in Hong Kong.
Loan commitments and financial guarantees increased by $21bn since 31 December 2022 to $413.5bn at 30 June 2023. Excluding favourable foreign exchange movements of $6.3bn, loan commitments and financial guarantees grew by $14.8bn. This can be mainly attributed to a $19.6bn increase in unsettled reverse repurchase agreements, partly offset by a decrease of $7.9bn in loan commitments with corporate and commercial customers.
The allowance for ECL attributable to loans and advances to banks and customers of $8.8bn at 30 June 2023 increased from $8.6bn at 31 December 2022. This included adverse foreign exchange movements of $64m.
Excluding foreign exchange movements, the total increase in the wholesale ECL allowance for loans and advances to customers and banks was mostly driven by a $47m growth in loans to non-bank financial institutions and a $24m rise in corporate and commercial balances.
The allowance for ECL attributable to loan commitments and financial guarantees at 30 June 2023 remained at $0.4bn from 31 December 2022.
HSBC Holdings plc
83

Risk
Total wholesale lending for loans and advances to banks and customers by stage distribution
Gross carrying amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 345,116  80,274  15,807  61  441,258  (468) (1,630) (6,278) (25) (8,401)
– agriculture, forestry and fishing 5,075  1,714  310  —  7,099  (11) (46) (61) —  (118)
– mining and quarrying 6,957  829  360  1  8,147  (6) (17) (117) (1) (141)
– manufacturing 68,475  15,594  1,932  24  86,025  (89) (213) (807) (22) (1,131)
– electricity, gas, steam and air-conditioning supply 13,690  1,510  298  —  15,498  (14) (24) (80) —  (118)
– water supply, sewerage, waste management and remediation 2,345  636  29  —  3,010  (4) (14) (16) —  (34)
– construction 10,550  2,324  843  —  13,717  (21) (43) (424) —  (488)
– wholesale and retail trade, repair of motor vehicles and motorcycles 64,397  13,484  2,484  4  80,369  (90) (168) (1,237) (2) (1,497)
– transportation and storage 18,996  4,825  439  —  24,260  (23) (57) (142) —  (222)
– accommodation and food 8,674  6,962  882  —  16,518  (25) (171) (87) —  (283)
– publishing, audiovisual and broadcasting 16,602  1,552  311  —  18,465  (17) (48) (137) —  (202)
– real estate 67,095  20,976  5,223  18  93,312  (75) (578) (2,322) —  (2,975)
– professional, scientific and technical activities 16,679  2,128  647  —  19,454  (21) (67) (214) —  (302)
– administrative and support services 21,010  4,453  935  14  26,412  (29) (83) (330) —  (442)
– public administration and defence, compulsory social security 1,043  9  —  —  1,052  —  (1) —  —  (1)
– education 1,139  282  86  —  1,507  (3) (7) (26) —  (36)
– health and care 3,285  595  165  —  4,045  (3) (26) (23) —  (52)
– arts, entertainment and recreation 1,329  397  112  —  1,838  (4) (13) (42) —  (59)
– other services 9,701  1,736  489  —  11,926  (31) (40) (207) —  (278)
– activities of households 776  1  —  —  777  —  —  —  —  — 
– extra-territorial organisations and bodies activities —  —  —  —  —  —  —  —  —  — 
– government 7,278  254  262  —  7,794  (2) (1) (6) —  (9)
– asset-backed securities 20  13  —  —  33  —  (13) —  —  (13)
Non-bank financial institutions 71,559  4,409  623  —  76,591  (62) (72) (177) —  (311)
Loans and advances to banks 99,623  1,288  84  —  100,995  (18) (33) (23) —  (74)
At 30 Jun 2023 516,298  85,971  16,514  61  618,844  (548) (1,735) (6,478) (25) (8,786)
By legal entity
HSBC UK Bank plc 70,737  24,049  4,161  —  98,947  (174) (593) (759) —  (1,526)
HSBC Bank plc 83,612  10,101  2,959  3  96,675  (65) (168) (1,099) —  (1,332)
The Hong Kong and Shanghai Banking Corporation Limited 286,821  40,313  7,357  54  334,545  (204) (677) (3,498) (22) (4,401)
HSBC Bank Middle East Limited 20,978  1,393  852  4  23,227  (12) (12) (620) (3) (647)
HSBC North America Holdings Inc. 29,482  6,792  260  —  36,534  (33) (197) (55) —  (285)
Grupo Financiero HSBC, S.A. de C.V. 12,068  1,583  441  —  14,092  (36) (64) (242) —  (342)
Other trading entities 12,569  1,740  484  —  14,793  (24) (24) (205) —  (253)
Holding companies, shared service centres and intra-Group eliminations 31  —  —  —  31  —  —  —  —  — 
At 30 Jun 2023 516,298  85,971  16,514  61  618,844  (548) (1,735) (6,478) (25) (8,786)

84
HSBC Holdings plc

Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1
Nominal amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 252,497  25,888  780  —  279,165  (112) (147) (89) —  (348)
Financial 128,707  5,545  39  —  134,291  (9) (14) (3) —  (26)
At 30 Jun 2023 381,204  31,433  819  —  413,456  (121) (161) (92) —  (374)
By legal entity
HSBC UK Bank plc 29,661  7,134  222  —  37,017  (23) (48) (44) —  (115)
HSBC Bank plc 159,850  11,389  248  —  171,487  (14) (33) (32) —  (79)
The Hong Kong and Shanghai Banking Corporation Limited 68,226  4,151  69  —  72,446  (49) (37) (10) —  (96)
HSBC Bank Middle East Limited 5,889  732  10  —  6,631  (5) —  —  —  (5)
HSBC North America Holdings Inc. 86,911  4,767  162  —  91,840  (19) (34) (2) —  (55)
HSBC Bank Canada 26,695  2,826  100  —  29,621  (9) (7) (2) —  (18)
Grupo Financiero HSBC, S.A. de C.V. 2,426  60  1  —  2,487  (1) (1) (1) —  (3)
Other trading entities 1,546  374  7  —  1,927  (1) (1) (1) —  (3)
At 30 Jun 2023 381,204  31,433  819  —  413,456  (121) (161) (92) —  (374)
1    Included in loans and other credit-related commitments and financial guarantees is $66bn relating to unsettled reverse repurchase agreements, which once drawn are classified as ‘Reverse repurchase agreements – non-trading’.                                    
Total wholesale lending for loans and advances to banks and customers by stage distribution (continued)
Gross carrying amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 351,885  85,492  15,696  129  453,202  (488) (1,907) (5,887) (38) (8,320)
– agriculture, forestry and fishing 4,805  1,505  261  —  6,571  (10) (44) (68) —  (122)
– mining and quarrying 6,424  1,463  232  1  8,120  (5) (21) (145) (1) (172)
– manufacturing 70,144  15,251  2,016  49  87,460  (93) (164) (867) (29) (1,153)
– electricity, gas, steam and air-conditioning supply 14,402  1,799  277  —  16,478  (10) (31) (67) —  (108)
– water supply, sewerage, waste management and remediation 2,690  277  26  —  2,993  (3) (5) (13) —  (21)
– construction 9,678  2,742  791  7  13,218  (21) (51) (368) (3) (443)
– wholesale and retail trade, repair of motor vehicles and motorcycles 63,752  15,867  2,805  5  82,429  (97) (225) (1,341) (3) (1,666)
– transportation and storage 19,068  5,062  556  —  24,686  (30) (65) (153) —  (248)
– accommodation and food 9,862  6,523  787  2  17,174  (23) (139) (81) (1) (244)
– publishing, audiovisual and broadcasting 16,574  1,537  249  28  18,388  (22) (36) (58) (1) (117)
– real estate 72,152  24,362  4,834  19  101,367  (86) (903) (1,861) —  (2,850)
– professional, scientific and technical activities 15,164  2,229  542  —  17,935  (21) (51) (200) —  (272)
– administrative and support services 20,592  3,505  962  18  25,077  (25) (90) (293) —  (408)
– public administration and defence, compulsory social security 1,166  14  —  —  1,180  —  (1) —  —  (1)
– education 1,325  181  87  —  1,593  (4) (5) (22) —  (31)
– health and care 2,993  643  266  —  3,902  (6) (17) (67) —  (90)
– arts, entertainment and recreation 1,264  452  146  —  1,862  (4) (16) (57) —  (77)
– other services 10,335  1,547  589  —  12,471  (25) (30) (219) —  (274)
– activities of households 730  14  —  —  744  —  —  —  —  — 
– extra-territorial organisations and bodies activities 47  —  —  —  47  —  —  —  —  — 
– government 8,699  506  270  —  9,475  (3) —  (7) —  (10)
– asset-backed securities 19  13  —  —  32  —  (13) —  —  (13)
Non-bank financial institutions 61,737  4,718  469  —  66,924  (43) (77) (137) —  (257)
Loans and advances to banks 102,723  1,739  82  —  104,544  (18) (29) (22) —  (69)
At 31 Dec 2022 516,345  91,949  16,247  129  624,670  (549) (2,013) (6,046) (38) (8,646)
By legal entity
HSBC UK Bank plc 64,930  18,856  4,439  28  88,253  (165) (445) (643) (1) (1,254)
HSBC Bank plc 83,174  9,175  2,631  3  94,983  (56) (181) (1,075) —  (1,312)
The Hong Kong and Shanghai Banking Corporation Limited 292,022  50,708  6,934  80  349,744  (216) (1,074) (3,125) (24) (4,439)
HSBC Bank Middle East Limited 21,922  1,777  946  4  24,649  (11) (21) (684) (3) (719)
HSBC North America Holdings Inc. 30,816  6,861  211  —  37,888  (24) (194) (22) —  (240)
Grupo Financiero HSBC, S.A. de C.V. 9,969  1,979  399  —  12,347  (48) (62) (225) —  (335)
Other trading entities 13,343  2,593  687  14  16,637  (27) (36) (272) (10) (345)
At 31 Dec 2022 516,345  91,949  16,247  129  624,670  (549) (2,013) (6,046) (38) (8,646)
HSBC Holdings plc
85

Risk
Total wholesale lending for loans and other credit-related commitments and financial guarantees by stage distribution1 (continued)
Nominal amount
Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Corporate and commercial 252,860  29,116  798  —  282,774  (116) (178) (96) —  (390)
Financial 105,950  3,683  23  —  109,656  (5) (14) (2) —  (21)
At 31 Dec 2022 358,810  32,799  821  —  392,430  (121) (192) (98) —  (411)
By legal entity
HSBC UK Bank plc 26,036  5,527  208  —  31,771  (24) (45) (38) —  (107)
HSBC Bank plc 142,100  11,710  291  —  154,101  (16) (41) (47) —  (104)
The Hong Kong and Shanghai Banking Corporation Limited 67,473  6,081  114  —  73,668  (54) (53) (9) —  (116)
HSBC Bank Middle East Limited 6,683  231  14  —  6,928  (2) (2) —  —  (4)
HSBC North America Holdings Inc. 88,039  3,959  87  —  92,085  (13) (32) (2) —  (47)
HSBC Bank Canada 24,395  4,671  84  —  29,150  (8) (15) —  —  (23)
Grupo Financiero HSBC, S.A. de C.V. 2,468  240  3  —  2,711  (1) —  —  —  (1)
Other trading entities 1,616  380  20  —  2,016  (3) (4) (2) —  (9)
At 31 Dec 2022 358,810  32,799  821  —  392,430  (121) (192) (98) —  (411)
1    Included in loans and other credit-related commitments and financial guarantees is $45bn relating to unsettled reverse repurchase agreements, which once drawn are classified as ‘Reverse repurchase agreements – non-trading’.
Commercial real estate
Commercial real estate lending includes the financing of corporate, institutional and high net worth customers who are investing primarily in income-producing assets and, to a lesser extent, in their construction and development. The portfolio is globally diversified with larger concentrations in Hong Kong, the UK, mainland China and the US.
Our global exposure is centred largely on cities with economic, political or cultural significance. In more developed markets, our exposure mainly comprises the financing of investment assets, the redevelopment of existing stock and the augmentation of both
commercial and residential markets to support economic and population growth. In less developed commercial real estate markets, our exposures comprise lending for development assets on relatively short tenors with a particular focus on supporting larger, better capitalised developers involved in residential construction or assets supporting economic expansion.
Excluding favourable foreign exchange movements of $0.5bn, commercial real estate lending decreased by $8.4bn, mainly from $5.7bn in Hong Kong due to loan repayments, in addition to reclassifications of $0.5bn to assets held for sale in the US.
Commercial real estate lending to customers
of which:
HSBC UK Bank plc HSBC Bank plc The Hong Kong and Shanghai Banking Corpora-tion Limited HSBC Bank Middle East Limited
HSBC North America Holdings Inc.1,2
 Grupo Financiero HSBC, S.A. de C.V. Other trading entities Total UK Hong Kong
$m $m $m $m $m $m $m $m $m $m
Gross loans and advances
Stage 1 12,827  4,181  42,242  1,118  1,918  877  839  64,002  13,621  30,218 
Stage 2 1,385  650  13,588  313  2,662  65  44  18,707  1,553  10,447 
Stage 3 593  214  3,712  173  63  34  45  4,834  731  3,385 
POCI —  —  18  —  —  —  —  18  —  18 
At 30 Jun 2023 14,805  5,045  59,560  1,604  4,643  976  928  87,561  15,905  44,068 
– of which: forborne loans 272  154  1,227  378  508  58  —  2,597  410  1,138 
Allowance for ECL (240) (144) (2,326) (68) (84) (21) (13) (2,896) (363) (2,121)
Gross loans and advances
Stage 1 11,409  5,083  46,700  1,094  2,096  832  906  68,120  12,209  35,905 
Stage 2 2,763  828  16,311  323  3,249  43  91  23,608  3,008  11,068 
Stage 3 702  277  3,320  264  —  28  57  4,648  827  3,029 
POCI —  —  19  —  —  —  —  19  —  19 
At 31 Dec 2022
 14,874  6,188  66,350  1,681  5,345  903  1,054  96,395  16,044  50,021 
– of which: forborne loans 215  143  763  449  428  47  23  2,068  336  654 
Allowance for ECL (216) (153) (2,094) (153) (93) (24) (13) (2,746) (323) (1,878)
1 The figures for 30 June 2023 exclude gross loans and advances of $0.5bn, and an associated allowance for ECL of $4m, corresponding to individual assets which were reported as held for sale by HSBC North America Holdings Inc.
2 During 1Q23, we aligned the classification of commercial real estate across the Group and re-presented commercial real estate exposure in HSBC North America Holdings Inc. at 31 December 2022 as $5.3bn, which had a corresponding ECL charge of $0.1bn.
86
HSBC Holdings plc

Refinance risk in commercial real estate
Commercial real estate lending tends to require the repayment of a significant proportion of the principal at maturity. Typically, a customer will arrange repayment through the acquisition of a new loan to settle the existing debt. Refinance risk is the risk that a customer, being
unable to repay the debt on maturity, fails to refinance it at commercial terms. We monitor our commercial real estate portfolio closely, assessing indicators for signs of potential issues with refinancing.
Commercial real estate gross loans and advances to customers maturity analysis
of which:
HSBC UK Bank plc HSBC Bank plc The Hong Kong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc. Grupo Financiero HSBC, S.A. de C.V. Other trading entities Total UK Hong Kong
$m $m $m $m $m $m $m $m $m $m
< 1 year 4,522  1,684  23,350  403  1,363  279  828  32,429  5,393  18,929 
1–2 years 4,296  717  16,651  290  1,164  234  10  23,362  4,321  13,013 
2–5 years 5,416  1,745  16,763  526  2,099  378  34  26,961  5,609  10,080 
> 5 years 571  899  2,796  385  17  85  56  4,809  582  2,046 
At 30 Jun 2023 14,805  5,045  59,560  1,604  4,643  976  928  87,561  15,905  44,068 

< 1 year 8,315  2,059  23,468  423  1,883  241  703  37,092  9,211  18,675 
1–2 years 3,518  1,503  18,007  218  810  115  228  24,399  3,678  13,873 
2–5 years 2,385  1,644  21,804  664  2,624  449  60  29,630  2,472  14,963 
> 5 years 656  982  3,071  376  28  98  63  5,274  683  2,510 
At 31 Dec 2022 14,874  6,188  66,350  1,681  5,345  903  1,054  96,395  16,044  50,021 
The following table presents the Group’s exposure to borrowers classified in the commercial real estate sector where the ultimate parent is based in mainland China, as well as all commercial real
estate exposures booked on mainland China balance sheets. The exposures at 30 June 2023 are split by country/territory and credit quality including allowances for ECL by stage.
Mainland China commercial real estate
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers1
 7,835  4,700  960  13,495 
Guarantees issued and others2
 241  464  79  784 
Total mainland China commercial real estate exposure at 30 Jun 2023
 8,076  5,164  1,039  14,279 
Distribution of mainland China commercial real estate exposure by credit quality
– Strong 1,161  1,836  205  3,202 
– Good 747  908  355  2,010 
– Satisfactory 973  1,756  252  2,981 
– Sub-standard 1,891  456  214  2,561 
– Credit impaired 3,304  208  13  3,525 
At 30 Jun 2023
 8,076  5,164  1,039  14,279 
Allowance for ECL by credit quality
– Strong —  (2) —  (2)
– Good —  (3) (1) (4)
– Satisfactory (2) (87) (1) (90)
– Sub-standard (205) (17) (3) (225)
– Credit impaired (1,774) (82) —  (1,856)
At 30 Jun 2023
 (1,981) (191) (5) (2,177)
Allowance for ECL by stage distribution
– Stage 1 —  (6) (1) (7)
– Stage 2 (207) (103) (4) (314)
– Stage 3 (1,774) (82) —  (1,856)
At 30 Jun 2023 (1,981) (191) (5) (2,177)
ECL coverage % 24.5  3.7  0.5  15.2 
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent liabilities.
HSBC Holdings plc
87

Risk
Mainland China commercial real estate (continued)
Hong Kong Mainland China Rest of the Group Total
$m $m $m $m
Loans and advances to customers1
 9,129  5,752  860  15,741 
Guarantees issued and others2
 249  755  18  1,022 
Total mainland China commercial real estate exposure at 31 Dec 2022 9,378  6,507  878  16,763 
Distribution of mainland China commercial real estate exposure by credit quality
– Strong 1,425  2,118  220  3,763 
– Good 697  1,087  370  2,154 
– Satisfactory 1,269  2,248  77  3,594 
– Sub-standard 2,887  779  193  3,859 
– Credit impaired 3,100  275  18  3,393 
At 31 Dec 2022 9,378  6,507  878  16,763 
Allowance for ECL by credit quality
– Strong —  (5) —  (5)
– Good —  (8) (1) (9)
– Satisfactory (20) (81) —  (101)
– Sub-standard (458) (42) (3) (503)
– Credit impaired (1,268) (105) —  (1,373)
At 31 Dec 2022 (1,746) (241) (4) (1,991)
Allowance for ECL by stage distribution
– Stage 1 (1) (9) (1) (11)
– Stage 2 (477) (127) (3) (607)
– Stage 3 (1,268) (105) —  (1,373)
– POCI —  —  —  — 
At 31 Dec 2022 (1,746) (241) (4) (1,991)
ECL coverage % 18.6  3.7  0.5  11.9 
1 Amounts represent gross carrying amount.
2 Amounts represent nominal amount for guarantees and other contingent liabilities.
Commercial real estate financing refers to lending that focuses on commercial development and investment in real estate and covers commercial, residential and industrial assets. Commercial real estate financing can also be provided to a corporate or financial entity for the purchase or financing of a property which supports the overall operations of the business.
The exposures in the table are related to companies whose primary activities are focused on residential, commercial and mixed-use real estate activities. Lending is generally focused on tier 1 and 2 cities.
The table above shows 57% of total exposure with a credit quality of 'satisfactory' or above, which was unchanged compared with 31 December 2022. Total ‘credit impaired’ exposures have nevertheless increased to 26% (31 December 2022: 21%), reflecting sustained stress in the China commercial real estate market, including weakness in both property market fundamentals and financing conditions for borrowers operating in this sector.
Allowances for ECL are substantially against unsecured exposures. For secured exposures, allowances for ECL are minimal, reflecting the nature and value of the security held.
Facilities booked in Hong Kong continue to represent the largest proportion of mainland China commercial real estate exposures, although total exposures reduced to $8.1bn, down $1.3bn since
31 December 2022, as a result of de-risking measures and repayments. This portfolio remains relatively higher risk, with 36% (31 December 2022: 36%) of exposure booked with a credit quality of ‘satisfactory’ or above and 41% ‘credit impaired’ (31 December 2022: 33%). This reflected a further credit deterioration during the first half of the year. At 30 June 2023, the Group had allowances for ECL of $2bn (31 December 2022: $1.7bn) held against mainland China commercial real estate exposures booked in Hong Kong.
Approximately half of the unimpaired exposure in the Hong Kong portfolio is lending to state-owned enterprises and relatively strong private-owned enterprises. This is reflected in the relatively low ECL allowance in this part of the portfolio.
Market conditions are likely to remain stressed with a protracted and uncertain recovery as sentiment and domestic residential demand remain weak. There is potential for a further deterioration in credit conditions during the second half of the year given the heightened uncertainty around liquidity support and ongoing weakness in property market fundamentals.
The Group has additional exposures to mainland China commercial real estate as a result of lending to multinational corporates booked outside of mainland China. These are not incorporated in the table above.


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HSBC Holdings plc

Supplementary information
The following disclosure presents the gross carrying/nominal amount of financial instruments to which the impairment requirements in IFRS 9 are applied by global business and the associated allowance for ECL.
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied – by global business
Gross carrying/nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 808,376  142,843  20,016  61  971,296  (1,106) (3,269) (7,338) (25) (11,738)
– WPB 403,926  58,906  4,107  —  466,939  (589) (1,575) (939) —  (3,103)
– CMB 244,261  69,186  12,745  46  326,238  (423) (1,441) (5,103) (25) (6,992)
– GBM 159,915  14,718  3,164  15  177,812  (94) (240) (1,296) —  (1,630)
– Corporate Centre 274  33  —  —  307  —  (13) —  —  (13)
Loans and advances to banks at amortised cost 99,623  1,288  84  —  100,995  (18) (33) (23) —  (74)
– WPB 27,291  422  2  —  27,715  (4) (1) (2) —  (7)
– CMB 26,328  331  —  —  26,659  (4) —  —  —  (4)
– GBM 43,273  423  82  —  43,778  (10) (32) (21) —  (63)
– Corporate Centre 2,731  112  —  —  2,843  —  —  —  —  — 
Other financial assets measured at amortised cost 945,902  13,580  757  10  960,249  (96) (147) (237) (9) (489)
– WPB 163,096  3,946  275  —  167,317  (26) (75) (73) —  (174)
– CMB 205,866  8,913  437  10  215,226  (45) (63) (160) (9) (277)
– GBM 500,442  644  41  —  501,127  (23) (9) (4) —  (36)
– Corporate Centre 76,498  77  4  —  76,579  (2) —  —  —  (2)
Total gross carrying amount on-balance sheet at 30 Jun 2023 1,853,901  157,711  20,857  71  2,032,540  (1,220) (3,449) (7,598) (34) (12,301)
Loans and other credit-related commitments 610,072  37,849  1,605  —  649,526  (135) (150) (63) —  (348)
– WPB 242,869  9,324  984  —  253,177  (23) (1) (2) —  (26)
– CMB 129,160  16,511  473  —  146,144  (80) (107) (60) —  (247)
– GBM 237,911  12,014  148  —  250,073  (32) (42) (1) —  (75)
– Corporate Centre 132  —  —  —  132  —  —  —  —  — 
Financial guarantees 16,135  2,535  212  —  18,882  (8) (12) (31) —  (51)
– WPB 1,245  14  —  —  1,259  —  —  —  —  — 
– CMB 7,291  1,818  121  —  9,230  (7) (4) (25) —  (36)
– GBM 7,599  703  91  —  8,393  (1) (8) (6) —  (15)
– Corporate Centre —  —  —  —  —  —  —  —  —  — 
Total nominal amount off-balance sheet at 30 Jun 2023 626,207  40,384  1,817  —  668,408  (143) (162) (94) —  (399)
WPB 117,142  903  —  1  118,046  (12) (14) —  —  (26)
CMB 83,149  841  —  1  83,991  (11) (14) —  —  (25)
GBM 81,178  162  1  —  81,341  (13) (7) —  —  (20)
Corporate Centre 3,611  206  —  —  3,817  (38) (16) —  —  (54)
Debt instruments measured at FVOCI at 30 Jun 2023 285,080  2,112  1  2  287,195  (74) (51) —  —  (125)
HSBC Holdings plc
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Risk
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied – by global business (continued)
Gross carrying/nominal amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
$m $m $m $m $m $m $m $m $m $m
Loans and advances to customers at amortised cost 776,299  139,076  19,504  129  935,008  (1,092) (3,488) (6,829) (38) (11,447)
– WPB 372,691  49,045  3,501  —  425,237  (569) (1,510) (850) —  (2,929)
– CMB 235,293  70,654  12,815  112  318,874  (444) (1,538) (4,896) (38) (6,916)
– GBM 167,990  19,334  3,188  17  190,529  (79) (427) (1,083) —  (1,589)
– Corporate Centre 325  43  —  —  368  —  (13) —  —  (13)
Loans and advances to banks at amortised cost 102,723  1,739  82  —  104,544  (18) (29) (22) —  (69)
– WPB 25,770  295  —  —  26,065  (3) (1) —  —  (4)
– CMB 24,107  695  4  —  24,806  (5) —  (2) —  (7)
– GBM 46,778  606  78  —  47,462  (9) (28) (20) —  (57)
– Corporate Centre 6,068  143  —  —  6,211  (1) —  —  —  (1)
Other financial assets measured at amortised cost 938,798  15,339  797  —  954,934  (95) (165) (233) —  (493)
– WPB 194,963  3,962  458  —  199,383  (30) (75) (130) —  (235)
– CMB 181,238  10,738  253  —  192,229  (35) (82) (90) —  (207)
– GBM 485,499  637  78  —  486,214  (28) (8) (13) —  (49)
– Corporate Centre 77,098  2  8  —  77,108  (2) —  —  —  (2)
Total gross carrying amount on-balance sheet at 31 Dec 2022 1,817,820  156,154  20,383  129  1,994,486  (1,205) (3,682) (7,084) (38) (12,009)
Loans and other credit-related commitments 583,383  34,033  1,372  —  618,788  (141) (180) (65) —  (386)
– WPB 238,161  4,377  769  —  243,307  (25) (1) —  —  (26)
– CMB 123,512  18,484  512  —  142,508  (78) (128) (55) —  (261)
– GBM 221,462  11,171  91  —  232,724  (38) (51) (10) —  (99)
– Corporate Centre 248  1  —  —  249  —  —  —  —  — 
Financial guarantees 16,071  2,463  249  —  18,783  (6) (13) (33) —  (52)
– WPB 1,196  11  1  —  1,208  —  —  —  —  — 
– CMB 6,830  1,564  130  —  8,524  (5) (8) (26) —  (39)
– GBM 8,045  888  118  —  9,051  (1) (5) (7) —  (13)
– Corporate Centre —  —  —  —  —  —  —  —  —  — 
Total nominal amount off-balance sheet at 31 Dec 2022 599,454  36,496  1,621  —  637,571  (147) (193) (98) —  (438)
WPB 112,591  1,066  —  1  113,658  (17) (17) —  —  (34)
CMB 71,445  735  —  —  72,180  (9) (14) —  —  (23)
GBM 75,228  434  —  1  75,663  (10) (8) —  —  (18)
Corporate Centre 3,347  299  —  —  3,646  (31) (19) (1) —  (51)
Debt instruments measured at FVOCI at 31 Dec 2022 262,611  2,534  —  2  265,147  (67) (58) (1) —  (126)

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HSBC Holdings plc

Wholesale lending – loans and advances to customers at amortised cost by country/territory
Gross carrying amount Allowance for ECL
Corporate and commercial
of which: real estate1
 Non-bank financial institutions Total Corporate and commercial
of which: real estate1
 Non-bank financial institutions Total
$m $m $m $m $m $m $m $m
UK
107,700  14,800  18,507  126,207  (1,813) (358) (175) (1,988)
– of which: HSBC UK Bank plc (ring-fenced bank) 82,258  13,620  8,815  91,073  (1,487) (229) (37) (1,524)
– of which: HSBC Bank plc (non-ring-fenced bank) 25,442  1,180  9,692  35,134  (326) (129) (138) (464)
France 29,789  4,293  4,829  34,618  (564) (29) (5) (569)
Germany 7,329  240  864  8,193  (159) —  (2) (161)
Switzerland 1,227  625  346  1,573  (11) —  —  (11)
Hong Kong 133,025  49,326  22,843  155,868  (3,203) (2,211) (37) (3,240)
Australia 12,165  3,637  1,253  13,418  (44) (1) (1) (45)
India 10,323  1,868  5,011  15,334  (54) (5) (7) (61)
Indonesia 3,449  122  317  3,766  (202) (1) —  (202)
Mainland China 28,956  4,748  8,223  37,179  (277) (150) (22) (299)
Malaysia 5,212  1,005  290  5,502  (83) (10) —  (83)
Singapore 16,009  3,253  1,170  17,179  (328) (10) —  (328)
Taiwan 4,575  45  102  4,677  —  —  —  — 
Egypt 1,038  20  77  1,115  (108) (9) —  (108)
UAE 11,964  1,129  689  12,653  (610) (61) —  (610)
US 26,824  5,362  8,786  35,610  (242) (85) (43) (285)
Mexico 11,022  913  988  12,010  (340) (17) (3) (343)
Other 30,651  1,926  2,296  32,947  (363) (28) (16) (379)
At 30 Jun 2023 441,258  93,312  76,591  517,849  (8,401) (2,975) (311) (8,712)
UK 104,775  14,309  12,662  117,437  (1,522) (329) (131) (1,653)
– of which: HSBC UK Bank plc (ring-fenced bank) 78,249  13,041  2,980  81,229  (1,247) (193) (6) (1,253)
– of which: HSBC Bank plc (non-ring-fenced bank) 26,526  1,268  9,682  36,208  (275) (136) (125) (400)
France 27,571  4,216  4,152  31,723  (621) (36) (4) (625)
Germany 6,603  252  713  7,316  (154) —  (3) (157)
Switzerland 988  635  298  1,286  (8) —  —  (8)
Hong Kong 144,256  56,093  20,798  165,054  (2,997) (1,965) (35) (3,032)
Australia 11,641  3,106  1,157  12,798  (97) (1) —  (97)
India 9,052  1,711  4,267  13,319  (80) (22) (10) (90)
Indonesia 3,214  85  226  3,440  (187) (1) —  (187)
Mainland China 31,790  5,752  8,908  40,698  (327) (167) (30) (357)
Malaysia 5,986  1,081  180  6,166  (133) (15) —  (133)
Singapore 15,905  3,812  1,192  17,097  (387) (12) (1) (388)
Taiwan 4,701  20  65  4,766  (1) —  —  (1)
Egypt 1,262  77  101  1,363  (117) (5) (1) (118)
UAE 13,503  1,569  149  13,652  (674) (152) —  (674)
US 28,249  5,714  8,640  36,889  (214) (94) (26) (240)
Mexico 9,784  903  717  10,501  (334) (24) (1) (335)
Other 33,922  2,032  2,699  36,621  (467) (27) (15) (482)
At 31 Dec 2022 453,202  101,367  66,924  520,126  (8,320) (2,850) (257) (8,577)
1    Real estate lending within this disclosure corresponds solely to the industry of the borrower on the same basis as the ‘Total wholesale lending for loans and advances to banks and customers by stage distribution‘ on page 84.
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Risk
Personal lending – loans and advances to customers at amortised cost by country/territory
Gross carrying amount Allowance for ECL
First lien residential mortgages Other personal of which: credit cards Total First lien residential mortgages Other personal of which: credit cards Total
$m $m $m $m $m $m $m $m
UK
164,322  18,452  7,483  182,774  (231) (841) (422) (1,072)
– of which: HSBC UK Bank plc (ring-fenced bank) 160,792  17,414  7,405  178,206  (227) (834) (420) (1,061)
– of which: HSBC Bank plc (non-ring-fenced bank) 3,530  1,038  78  4,568  (4) (7) (2) (11)
France1
 2,243  20,163  329  22,406  (34) (70) (3) (104)
Germany —  176  —  176  —  —  —  — 
Switzerland 1,447  5,762  —  7,209  (1) (20) —  (21)
Hong Kong 105,000  31,633  8,384  136,633  —  (371) (265) (371)
Australia 22,062  439  383  22,501  (6) (21) (20) (27)
India 1,356  627  169  1,983  (5) (15) (11) (20)
Indonesia 66  285  140  351  (2) (11) (7) (13)
Mainland China 8,098  801  323  8,899  (3) (53) (42) (56)
Malaysia 2,275  2,073  795  4,348  (24) (86) (32) (110)
Singapore 8,060  5,433  436  13,493  —  (38) (16) (38)
Taiwan 5,420  1,288  298  6,708  —  (16) (4) (16)
Egypt —  295  81  295  —  (2) (1) (2)
UAE 1,969  1,329  416  3,298  (19) (80) (38) (99)
US 17,458  664  197  18,122  (12) (24) (19) (36)
Mexico 8,079  5,599  2,136  13,678  (162) (677) (234) (839)
Other 6,879  3,694  1,131  10,573  (105) (97) (52) (202)
At 30 Jun 2023 354,734  98,713  22,701  453,447  (604) (2,422) (1,166) (3,026)
UK
154,519  16,793  6,622  171,312  (227) (838) (449) (1,065)
– of which: HSBC UK Bank plc (ring-fenced bank) 151,188  15,808  6,556  166,996  (222) (828) (447) (1,050)
– of which: HSBC Bank plc (non-ring-fenced bank) 3,331  985  66  4,316  (5) (10) (2) (15)
France1
 30  76  9  106  (14) (8) —  (22)
Germany —  234  —  234  —  —  —  — 
Switzerland 1,378  5,096  —  6,474  —  (20) —  (20)
Hong Kong 101,478  31,409  8,644  132,887  (1) (352) (258) (353)
Australia 21,372  456  396  21,828  (11) (18) (18) (29)
India 1,078  590  162  1,668  (4) (18) (13) (22)
Indonesia 70  278  141  348  (1) (17) (12) (18)
Mainland China 9,305  921  378  10,226  (3) (61) (49) (64)
Malaysia 2,292  2,437  843  4,729  (27) (92) (31) (119)
Singapore 7,501  6,264  422  13,765  —  (35) (14) (35)
Taiwan 5,428  1,189  284  6,617  —  (18) (5) (18)
Egypt —  310  83  310  —  (2) (1) (2)
UAE 2,104  1,339  426  3,443  (14) (84) (41) (98)
US 16,847  704  213  17,551  (10) (31) (23) (41)
Mexico 6,124  4,894  1,615  11,018  (145) (593) (196) (738)
Other 7,295  5,071  1,150  12,366  (118) (108) (51) (226)
At 31 Dec 2022 336,821  78,061  21,388  414,882  (575) (2,295) (1,161) (2,870)
1    Included in other personal lending as at 30 June 2023 is $18,403m (31 December 2022: nil) guaranteed by Crédit Logement.
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HSBC Holdings plc

Treasury risk
Overview
Treasury risk management
Capital risk in the first half of 2023
Liquidity and funding risk in the first half of 2023
Sources of funding
Interest rate risk in the banking book in the first half of 2023

Overview
Treasury risk is the risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, together with the financial risks arising from the provision of pensions and other post-employment benefits to staff and their dependants. Treasury risk also includes the risk to our earnings or capital due to non-trading book foreign exchange exposures and changes in market interest rates.
Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment.
Approach and policy
Our objective in the management of treasury risk is to maintain appropriate levels of capital, liquidity, funding, foreign exchange and market risk to support our business strategy, and meet our regulatory and stress testing-related requirements.
Our approach to treasury management is driven by our strategic and organisational requirements, taking into account the regulatory, economic and commercial environment. We maintain a strong capital and liquidity base to support the risks inherent in our business and invest in accordance with our strategy, meeting both consolidated and local regulatory requirements at all times.
Our policy is underpinned by our risk management framework, our internal capital adequacy assessment process (‘ICAAP’) and our internal liquidity adequacy assessment process (‘ILAAP’). The risk framework incorporates a number of measures aligned to our assessment of risks for both internal and regulatory purposes. These risks include credit, market, operational, pensions, non-trading book foreign exchange risk, and interest rate risk in the banking book.
A summary of our current policies and practices regarding the management of treasury risk is set out on pages 202 to 217 of the Annual Report and Accounts 2022.
Treasury risk management
Key developments in the first half of 2023
–All of the Group’s material operating entities were above regulatory minimum levels of capital, liquidity and funding at 30 June 2023.
–Following high-profile US and Swiss banking failures in the first quarter of 2023, we validated our existing risk management practices including stress testing and limit setting. We also reviewed our liquidity monitoring and metric assumptions as part of our ILAAP cycle to ensure they continued to cover observed and emerging risks.
–We continued to improve our analysis and understanding of the drivers of capital volatility and the underlying sensitivities, ensuring these are actively considered in our risk appetite and limit setting processes.
–As announced in the first quarter of 2023, we reverted to a policy of paying quarterly dividends, with the Board approving an interim dividend of $0.10 per share. On 10 May 2023, we initiated a share buy-back of up to $2bn with an approximately 0.25 percentage point impact on the CET1 capital ratio. This buy-back was completed in July 2023. The Board has announced a further dividend of $0.10 per share, and intends to initiate a further share buy-back of up to $2bn, which is expected to commence shortly.
–We enhanced the Group consolidation methodology regarding the liquidity available to the Group from underlying subsidiaries. This resulted in a change to the available liquidity reported in the
liquidity coverage ratio (‘LCR’) and increased the Group LCR by approximately 6%, on a spot basis, at 30 June 2023.
–As announced by the Bank of England’s Financial Policy Committee, the UK countercyclical capital buffer rate increased from 1% to 2%, effective July 2023 in line with the usual 12‑month implementation lag. The change is expected to increase our CET1 requirement by approximately 0.2 percentage points.
–We continued to increase the stabilisation of our net interest income (‘NII’) as interest rate expectations fluctuated, driven by central bank rate increases and a reassessment of the trajectory of inflation in major economies.
–Following the acquisition of SVB UK in the first quarter of 2023, we launched HSBC Innovation Banking in June, combining the expertise of SVB UK with our international network. We are in the process of integrating the staff, assets and liabilities of SVB UK into the Group. The acquisition was funded from existing resources, and the impact on our Group LCR and CET1 ratio is minimal.
–During 1Q23, the significant interest rate rises in France resulted in the completion of the planned sale of our retail banking operations in France becoming less certain, as the capital required to be held by the buyer at completion of the transaction was expected to increase significantly. As a result, we were required to change the accounting classification of our retail banking operations in France to no longer be classified as held for sale. The impairment on classifying the disposal as held for sale, which had resulted in an approximately 0.3 percentage point reduction in the Group’s CET1 ratio last year, was reversed. In June 2023, we agreed new terms for the sale of these operations that will involve HSBC retaining a portfolio of loans. The transaction remains subject to information and consultation processes with respective works councils and regulatory approvals, and the parties aim to complete the transaction on 1 January 2024. An estimated pre-tax loss of up to $2.2bn would be recognised in the second half of 2023 if the retail operations in France were reclassified as held for sale.
–We entered into an agreement to sell our banking business in Canada to the Royal Bank of Canada in 2022. The transaction is now expected to complete in the first quarter of 2024, subject to regulatory and governmental approvals. We continue to classify our banking business in Canada as held for sale. We remain committed to consider the payment of a special dividend of $0.21 per share as a priority use of the proceeds from the sale of our banking business in Canada in the first half of 2024. The remaining sale proceeds are expected to accrue into CET1 capital. We intend to use any excess capital to supplement share buy-backs.
For quantitative disclosures on capital ratios, own funds and RWAs, see pages 95 to 98. For quantitative disclosures on liquidity and funding metrics, see pages 98 to 100. For quantitative disclosures on interest rate risk in the banking book, see pages 101 to 102.
Capital, liquidity and funding risk management processes
Assessment and risk appetite
Our capital management policy is supported by a global capital management framework. The framework sets out our approach to determining key capital risk appetites including CET1, total capital, minimum requirements for own funds and eligible liabilities (‘MREL’), leverage ratio and double leverage. Our ICAAP is an assessment of the Group’s capital position, outlining both regulatory and internal capital resources and requirements resulting from HSBC’s business model, strategy, risk profile and management, performance and planning, risks to capital, and the implications of stress testing. Our assessment of capital adequacy is driven by an assessment of risks. These risks include credit, market, operational, pensions, insurance, structural foreign exchange, interest rate risk in the banking book and Group risk. Climate risk is also considered as part of the ICAAP, and we are continuing to develop our approach. Subsidiaries prepare ICAAPs in line with global guidance, while considering their local regulatory regimes to determine their own risk appetites and ratios.
HSBC Holdings is the provider of equity capital and MREL-eligible debt to its subsidiaries, and also provides them with non-equity capital
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Risk
where necessary. These investments are funded by HSBC Holdings’ own equity capital and MREL-eligible debt. MREL includes own funds and liabilities that can be written down or converted into capital resources in order to absorb losses or recapitalise a bank in the event of its failure. In line with our existing structure and business model, HSBC has three resolution groups – the European resolution group, the Asian resolution group and the US resolution group. There are some smaller entities that fall outside these resolution groups.
HSBC Holdings seeks to maintain a prudent balance between the composition of its capital and its investments in subsidiaries.
As a matter of long-standing policy, the holding company retains a substantial holdings capital buffer comprising high-quality liquid assets (‘HQLA’), which at 30 June 2023 was in excess of $26bn and within risk appetite.
We aim to ensure that management has oversight of our liquidity and funding risks at Group and entity level through robust governance, in line with our risk management framework. We manage liquidity and funding risk at an operating entity level, in accordance with globally consistent policies, procedures and reporting standards. This ensures that obligations can be met in a timely manner, in the jurisdiction where they fall due.
Operating entities are required to meet internal minimum requirements and any applicable regulatory requirements at all times. These requirements are assessed through our ILAAP, which ensures that operating entities have robust strategies, policies, processes and systems for the identification, measurement, management and monitoring of liquidity risk over an appropriate set of time horizons, including intra-day. The ILAAP informs the validation of risk tolerance and the setting of risk appetite. It also assesses the capability to manage liquidity and funding effectively in each major entity. These metrics are set and managed locally but are subject to robust global review and challenge to ensure consistency of approach and application of the Group’s policies and controls.
Planning and performance
Capital and risk-weighted asset (‘RWA‘) plans, as well as funding and liquidity plans, form part of the annual financial resource plan that is approved by the Board.
Capital and RWA forecasts are submitted to the Group Executive Committee on a monthly basis, and capital and RWAs are monitored and managed against the plan. The responsibility for global capital allocation principles rests with the Group Chief Financial Officer, supported by the Group Capital Management Meeting. This is a specialist forum addressing capital management, reporting into the HSBC Holdings Asset Liability Management Committee.
The Board-level appetite measures for funding and liquidity are the LCR and net stable funding ratio (‘NSFR’), together with an internal liquidity metric. In addition, we use a wider set of measures to manage an appropriate funding and liquidity profile, including legal entity depositor concentration limits, intra-day liquidity, forward-looking funding assessments and other key measures.
Through our internal governance processes, we seek to strengthen discipline over our investment and capital allocation decisions, and to ensure that returns on investment meet management’s objectives. Our strategy is to allocate capital to businesses and entities to support growth objectives where returns above internal hurdle levels have been identified, and in order to meet their regulatory and economic capital needs. We evaluate and manage business returns by using a return on average tangible equity measure.
Risks to capital and liquidity
Outside the stress testing framework, other risks may be identified that have the potential to affect our RWAs, capital and/or liquidity position. Downside and Upside scenarios are assessed against our management objectives, and mitigating actions are assigned as necessary. We closely monitor future regulatory changes, and continue to evaluate the impact of these upon our capital and liquidity requirements, particularly those related to the UK’s implementation of the outstanding measures to be implemented from the Basel III reforms (‘Basel 3.1‘).

Regulatory developments
Future changes to our ratios will occur with the implementation of Basel 3.1. The Prudential Regulation Authority (‘PRA‘) has published its consultation paper on the UK’s implementation, with a proposed implementation date of 1 January 2025. We currently do not foresee a material net impact on our ratios from the initial implementation. The RWA output floor under Basel 3.1 is proposed to be subject to a five-year transitional provision. Any impact from the output floor would be towards the end of the transition period.
The PRA has published a consultation paper to remove the CET1 deduction requirement in the PRA Rulebook regarding non-performing exposures that are treated as insufficiently covered by firms’ accounting provisions. The changes are anticipated to come into force in the second half of 2023, with an estimated marginal increase to the capital base based on initial assessment.
Regulatory reporting processes and controls
The quality of regulatory reporting remains a key priority for management and regulators. We are progressing with a comprehensive programme to strengthen our processes, improve consistency and enhance controls across regulatory reports, focusing on our prudential regulatory reporting and other priority regulatory reports globally.
Our ongoing programme of work on our prudential regulatory reports is being phased over a number of years, prioritising RWA, capital and liquidity reporting. This programme includes both data enhancement and the transformation of the reporting systems that they flow into. While this programme continues, there may be further impacts on some of our regulatory ratios, such as CET1, LCR and NSFR, as we implement recommended changes and continue to enhance our controls. We are also establishing enhanced risk stewardship and assurance over our regulatory reports and have developed a strategic inventory and tooling to drive consistent standards and accountability.
Stress testing and recovery and resolution planning
The Group uses stress testing to inform management of the capital and liquidity needed to withstand internal and external shocks, including a global economic downturn or a systems failure. Stress testing results are also used to inform risk mitigation actions, allocation of financial resources, and recovery and resolution planning, as well as to re-evaluate business plans where analysis shows capital, liquidity and/or returns do not meet their target.
In addition to a range of internal stress tests, we are subject to supervisory stress testing in many jurisdictions. These include the programmes of the Bank of England, the US Federal Reserve Board, the European Banking Authority, the European Central Bank and the Hong Kong Monetary Authority. The results of regulatory stress testing and our internal stress tests are used when assessing our internal capital and liquidity requirements through the ICAAP and ILAAP. The outcomes of stress testing exercises carried out by the PRA and other regulators feed into the setting of regulatory minimum ratios and buffers.
We maintain recovery plans for the Group and material entities, which set out potential options management could take in a range of stress scenarios that could result in a breach of capital or liquidity buffers. The Group recovery plan sets out the framework and governance arrangements to support restoring HSBC to a stable and viable position, and so lowering the probability of failure from either idiosyncratic company-specific stress or systemic market-wide issues. Our material entities’ recovery plans provide detailed actions that management would consider taking in a stress scenario should their positions deteriorate and threaten to breach risk appetite and regulatory minimum levels. This is to help ensure that HSBC entities can stabilise their financial position and recover from financial losses in a stress environment.
The Group also has capabilities, resources and arrangements in place to address the unlikely event that HSBC might not be recoverable and would therefore need to be resolved by regulators. The Group performed the inaugural Resolvability Assessment Framework self-assessment during 2021 to meet the Bank of England’s requirements, which came into effect on 1 January 2022.
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Overall, HSBC’s recovery and resolution planning helps safeguard the Group’s financial and operational stability. The Group is committed to further developing its recovery and resolution capabilities, including in relation to the Bank of England’s Resolvability Assessment Framework.
Measurement of interest rate risk in the banking book processes
Assessment and risk appetite
Interest rate risk in the banking book is the risk of an adverse impact to earnings or capital due to changes in market interest rates. It is generated by our non-traded assets and liabilities, specifically loans, deposits and financial instruments that are not held for trading intent or in order to hedge positions held with trading intent. Interest rate risk that can be economically hedged may be transferred to Global Treasury.
Hedging is generally executed through interest rate derivatives or fixed-rate government bonds. Any interest rate risk that Global Treasury cannot economically hedge is not transferred and will remain within the global business where the risks originate.
HSBC uses a number of measures to monitor and control interest rate risk in the banking book, including:
–net interest income sensitivity; and
–economic value of equity sensitivity;
Net interest income sensitivity
A principal part of our management of non-traded interest rate risk is to monitor the sensitivity of expected net interest income (‘NII’) under varying interest rate scenarios (i.e. simulation modelling), where all other economic variables are held constant. This monitoring is undertaken at an entity level, where entities calculate both one-year and five-year NII sensitivities across a range of interest rate scenarios.
NII sensitivity figures represent the effect of pro forma movements in projected yield curves based on a static balance sheet size and structure, except for certain mortgage products where balances are impacted by interest rate sensitive prepayment. These sensitivity calculations do not incorporate actions that would be taken by Global Treasury or in the business that originates the risk to mitigate the effect of interest rate movements.
The NII sensitivity calculations assume that interest rates of all maturities move by the same amount in the ‘up-shock’ scenario. The sensitivity calculations in the ‘down-shock’ scenarios reflect no floors to the shocked market rates. However, customer product-specific interest rate floors are recognised where applicable.
Economic value of equity sensitivity
Economic value of equity (‘EVE’) represents the present value of the future banking book cash flows that could be distributed to equity holders under a managed run-off scenario. This equates to the current book value of equity plus the present value of future NII in this scenario. EVE can be used to assess the economic capital required to support interest rate risk in the banking book. An EVE sensitivity represents the expected movement in EVE due to pre-specified interest rate shocks, where all other economic variables are held constant. Operating entities are required to monitor EVE sensitivities as a percentage of capital resources.
Hold-to-collect-and-sell stressed value at risk
Hold-to-collect-and-sell stressed value at risk (‘VaR’) is a quantification of the potential losses to a 99% confidence level of the portfolio of high-quality liquid assets held under a hold-to-collect-and-sell business model in the Markets Treasury business. The portfolio is accounted for at fair value through other comprehensive income together with the derivatives held in designated hedging relationships with these securities. The mark-to-market of this portfolio therefore has an impact on CET1.

Stressed VaR is quantified based on the worst losses over a one-year period, using a historical time series stretching back to the beginning of 2007, and the assumed holding period is 60 days. At the end of June 2023, the stressed VaR of the portfolio was $3.4bn (31 December 2022: $2.15bn). The increase was primarily due to an increase in duration risk in this portfolio during the period.

Capital risk in the first half of 2023
Capital overview
Capital adequacy metrics
At
30 Jun 31 Dec
2023 2022
Risk-weighted assets (‘RWAs’) ($bn)
Credit risk1
 690.5  679.1 
Counterparty credit risk1
 38.6  37.1 
Market risk
 43.0  37.6 
Operational risk
 87.4  85.9 
Total RWAs 859.5  839.7 
Capital on a transitional basis ($bn)
Common equity tier 1 capital 126.4  119.3 
Tier 1 capital
 145.8  139.1 
Total capital
 170.0  162.4 
Capital ratios on a transitional basis (%)
Common equity tier 1 ratio
 14.7  14.2 
Tier 1 ratio 17.0  16.6 
Total capital ratio 19.8  19.3 
Capital on an end point basis ($bn)
Common equity tier 1 capital 126.4  119.3 
Tier 1 capital
 145.8  139.1 
Total capital
 165.9  157.2 
Capital ratios on an end point basis (%)
Common equity tier 1 ratio
 14.7  14.2 
Tier 1 ratio
 17.0  16.6 
Total capital ratio 19.3  18.7 
Liquidity coverage ratio (‘LCR’)2
Total high-quality liquid assets ($bn) 631.2  647.0 
Total net cash outflow ($bn) 477.7  490.8 
LCR (%) 132.1  131.8 
1 From 1 January 2023, RWAs related to free deliveries have been allocated to credit risk, having previously been classified under counterparty credit risk.
2 The LCR figures presented in the above table are based on average values. The LCR is the average month-end values over the preceding 12 months.
References to EU regulations and directives (including technical standards) should, as applicable, be read as references to the UK’s version of such regulation or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently amended under UK law.
Capital figures and ratios in the table above are calculated in accordance with the revised Capital Requirements Regulation and Directive, as implemented (‘CRR II’). The table presents them under the transitional arrangements in CRR II for capital instruments and after their expiry, known as the end point.
Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those subsequently submitted in regulatory filings. Where differences are significant, we will restate in subsequent periods.
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Own funds
Own funds disclosure
At
30 Jun 31 Dec
2023 2022
Ref*
 $m $m
6
Common equity tier 1 capital before regulatory adjustments1
 164,015  158,092 
28
Total regulatory adjustments to common equity tier 11
 (37,597) (38,801)
29 Common equity tier 1 capital 126,418  119,291 
36 Additional tier 1 capital before regulatory adjustments 19,442  19,836 
43 Total regulatory adjustments to additional tier 1 capital (60) (60)
44 Additional tier 1 capital 19,382  19,776 
45 Tier 1 capital 145,800  139,067 
51 Tier 2 capital before regulatory adjustments 25,668  24,779 
57 Total regulatory adjustments to tier 2 capital (1,447) (1,423)
58 Tier 2 capital 24,221  23,356 
59 Total capital 170,021  162,423 
60 Total risk-weighted assets 859,545  839,720 
Capital ratios % %
61 Common equity tier 1 ratio 14.7  14.2 
62 Tier 1 ratio 17.0  16.6 
63 Total capital ratio 19.8  19.3 
*    These are references to lines prescribed in the Pillar 3 ‘Own funds disclosure’ template.
1 On adoption of IFRS 17 ‘Insurance Contracts’, comparative data previously published under IFRS 4 ‘Insurance Contracts’ have been restated from the 1 January 2022 transition date, with no impact on CET1 and total capital.
At 30 June 2023, our common equity tier 1 (‘CET1’) capital ratio increased to 14.7% from 14.2% at 31 December 2022, reflecting an increase in CET1 capital of $7.1bn, partly offset by an increase in RWAs of $19.8bn. The key drivers of the overall rise in our CET1 ratio during the period were:
–a 0.7 percentage point increase from the $7.0bn capital generation through profits less dividends, adjusted for the $2.0bn share buy-back announced with our 1Q23 results and completed in July 2023;
–a 0.3 percentage point increase from the reversal of the impairment relating to the planned sale of our retail banking operations in France, and the provisional gain on the acquisition of SVB UK;
–a 0.1 percentage point increase, driven by regulatory change that reduced the risk weighting of residential mortgages in Hong Kong; and

–a 0.6 percentage point fall in the CET1 ratio, driven mainly by an increase in the underlying RWAs and deductions for investment in financial sector entities, intangible assets and excess expected loss.
At 30 June 2023, our Pillar 2A requirement, set by the PRA’s Individual Capital Requirement based on a point-in-time assessment, was equivalent to 2.6% of RWAs, of which 1.5% was met by CET1 capital. Throughout the first half of 2023, we complied with the PRA’s regulatory capital adequacy requirements.
Risk-weighted assets
RWAs by global business
WPB
CMB1
GBM1
 Corporate
Centre		 Total RWAs
$bn $bn $bn $bn $bn
Credit risk 152.1  324.1  135.8  78.5  690.5 
Counterparty credit risk 1.7  1.1  34.7  1.1  38.6 
Market risk 1.3  1.4  27.2  13.1  43.0 
Operational risk 31.5  27.2  29.3  (0.6) 87.4 
At 30 Jun 2023 186.6  353.8  227.0  92.1  859.5 
At 31 Dec 2022 182.9  342.4  225.9  88.5  839.7 
1 In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
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RWAs by legal entities1
HSBC UK Bank plc HSBC Bank plc The Hong Kong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada Grupo Financiero HSBC, S.A.
de C.V.		 Other trading entities Holding companies, shared service centres and intra-Group eliminations Total RWAs
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
Credit risk 109.2  72.7  318.4  17.8  59.3  27.1  24.4  53.2  8.4  690.5 
Counterparty credit risk 0.5  18.7  10.1  0.8  3.3  0.5  0.8  3.9  —  38.6 
Market risk2
 0.2  21.0  23.6  2.6  3.1  0.7  0.7  3.7  9.5  43.0 
Operational risk 15.8  15.0  39.4  3.0  7.4  3.1  4.8  5.5  (6.6) 87.4 
At 30 Jun 2023 125.7  127.4  391.5  24.2  73.1  31.4  30.7  66.3  11.3  859.5 
At 31 Dec 2022 110.9  127.0  407.0  22.5  72.5  31.9  26.7  60.3  8.1  839.7 
1    Balances are on a third-party Group consolidated basis.
2    Market risk RWAs are non-additive across the principal entities due to diversification effects within the Group.
RWA movement by global businesses by key driver
Credit risk, counterparty credit risk and operational risk
WPB
CMB1
GBM1
 Corporate Centre Market risk Total RWAs
$bn $bn $bn $bn $bn $bn
RWAs at 1 Jan 2023 181.2  341.3  202.3  77.3  37.6  839.7 
Asset size 7.8  (0.4) 1.1  4.6  6.6  19.7 
Asset quality 0.5  (0.2) —  (1.7) —  (1.4)
Model updates (0.9) —  —  —  (0.1) (1.0)
Methodology and policy (5.3) (0.7) (3.1) (1.2) (1.2) (11.5)
Acquisitions and disposals —  9.5  —  —  0.1  9.6 
Foreign exchange movements2
 2.0  2.9  (0.5) —  —  4.4 
Total RWA movement 4.1  11.1  (2.5) 1.7  5.4  19.8 
RWAs at 30 Jun 2023 185.3  352.4  199.8  79.0  43.0  859.5 
1    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
2    Credit risk foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying transactional currencies.
RWA movement by legal entities by key driver1
Credit risk, counterparty credit risk and operational risk
HSBC UK Bank plc HSBC Bank plc The Hong Kong and Shanghai Banking Corporation Limited HSBC Bank Middle East Limited HSBC North America Holdings Inc HSBC Bank Canada Grupo Financiero HSBC, S.A.
de C.V.		 Other trading entities Holding companies, shared service centres and intra-Group eliminations Market risk Total RWAs
$bn $bn $bn $bn $bn $bn $bn $bn $bn $bn $bn
RWAs at 1 Jan 2023 110.8  106.5  378.4  20.8  69.5  31.1  26.2  58.0  0.8  37.6  839.7 
Asset size 1.2  (0.4) 4.4  1.6  0.7  (0.7) 0.8  4.8  0.7  6.6  19.7 
Asset quality 0.5  (1.1) (3.3) (0.5) 0.4  0.2  0.1  2.2  0.1  —  (1.4)
Model updates (0.8) 0.1  (0.2) —  —  —  —  —  —  (0.1) (1.0)
Methodology and policy (1.7) (0.7) (8.1) (0.3) (0.6) (0.5) —  1.5  0.1  (1.2) (11.5)
Acquisitions and disposals 9.5  —  —  —  —  —  —  —  —  0.1  9.6 
Foreign exchange movements2
 6.0  2.0  (3.3) —  —  0.6  2.9  (3.9) 0.1  —  4.4 
Total RWA movement 14.7  (0.1) (10.5) 0.8  0.5  (0.4) 3.8  4.6  1.0  5.4  19.8 
RWAs at 30 Jun 2023 125.5  106.4  367.9  21.6  70.0  30.7  30.0  62.6  1.8  43.0  859.5 
1    Balances are on a third-party Group consolidated basis.
2    Credit risk foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying transactional currencies.
RWAs rose by $19.8bn during the first half of the year. Excluding foreign currency translation differences of $4.4bn, RWAs increased by $15.4bn, predominantly due to the acquisition of SVB UK, and RWA asset size growth. This was partly offset by reductions due to a regulatory change to the risk weighting of residential mortgages in Hong Kong.
Asset size
WPB RWAs rose by $7.8bn, primarily due to sovereign exposures in other trading entities and retail lending and mortgage growth, mainly in Hong Kong, Mexico and HSBC UK.
The $6.6bn increase in market risk RWAs was mainly attributed to heightened market volatility impacting value at risk averages. Additional RWAs were primarily driven by an incremental risk charge resulting from higher exposures at risk and the hedges related to the agreed sale of our banking business in Canada.
Corporate Centre RWAs rose by $4.6bn, which was driven by increased sovereign exposures mainly in Asia, North America and HSBC Bank plc, and higher thresholds for the recognition of significant investments in financial sector entities in Asia.
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Risk
GBM RWAs increased by $1.1bn, largely as a result of mark-to-market movements in counterparty credit risk in HSBC Bank plc, Asia and Mexico. These movements were partly offset by a decline in corporate exposures, mainly in Asia and HSBC Bank plc.
The $0.4bn fall in CMB RWAs reflected lower corporate lending mainly in Asia and HSBC Bank plc, which was partly offset by a rise in overdrafts in HSBC UK and HSBC Bank plc.
The RWAs of our global businesses also included the RWAs of other trading entities, which reflected an increase of $4.8bn, primarily due to increased sovereign, corporate and central counterparty exposures.
Asset quality
The $1.4bn RWA decrease was mostly driven by portfolio mix changes, mainly in Asia and HSBC Bank plc, which were partly offset by unfavourable movements due to sovereign rating downgrades in Argentina and Egypt.
Model updates
The $1.0bn fall in RWAs was mainly due to the implementation of a new retail mortgage model, notably in HSBC UK, and the application
of a new model for premium financing and wealth portfolio lending in Asia.
Acquisitions and disposals
The acquisition of SVB UK led to an RWA increase of $9.6bn.
Methodology and policy
Regulatory changes related to the risk weighting of residential mortgages in Hong Kong led to a $7.7bn fall in RWAs in WPB.
A further decline of RWAs across our global businesses was caused by risk parameter refinements, which was partly offset by changes to risk weights on certain exposures in SAB.
Allocation methodology changes related to investments in insurance subsidiaries led to a transfer of RWAs from Corporate Centre to WPB. In addition, the transfer of Global Banking clients in Australia and Indonesia increased RWAs in CMB, and decreased RWAs in GBM.
The $1.2bn decrease in market risk RWAs mainly reflected a change in capitalisation methodology of white metals and a reduction in transactional foreign exchange exposures relating to a pension surplus.

Leverage ratio1
At
30 Jun 31 Dec
2023 2022
$bn $bn
Tier 1 capital (leverage) 145.8  139.1 
Total leverage ratio exposure 2,497.9  2,417.2 
% %
Leverage ratio 5.8  5.8 
1 Leverage ratio calculation is in line with the PRA’s UK leverage rules. This includes IFRS 9 transitional arrangement and excludes central bank claims. At 30 June 2023, the IFRS 9 add-back to CET1 capital and the related tax charge were immaterial.
Our leverage ratio was 5.8% at 30 June 2023, unchanged from 31 December 2022. The increase in tier 1 capital was offset by a rise in the leverage exposure, primarily due to growth in the balance sheet.
At 30 June 2023, our UK minimum leverage ratio requirement of 3.25% was supplemented by a leverage ratio buffer of 0.9%, made up of an additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of 0.2%.
These buffers translated into capital values of $17.5bn and $5.0bn respectively. We exceeded these leverage requirements.
Regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’
We have adopted the regulatory transitional arrangements in CRR II for IFRS 9, including paragraph four of article 473a. These allow banks to add back to their capital base a proportion of the impact that IFRS 9 has upon their loan loss allowances. Our capital and ratios are presented under these arrangements throughout the tables in this section, including the end point figures. At 30 June 2023, the add-back to CET1 capital and the related tax charge were immaterial.
Regulatory disclosures
Pillar 3 disclosure requirements
Pillar 3 of the Basel regulatory framework is related to market discipline and aims to make financial services firms more transparent by requiring publication of wide-ranging information on their risks, capital and management.
For further details, refer to our Pillar 3 Disclosures at 30 June 2023, which is expected to be published on or around 8 August 2023 at www.hsbc.com/investors.

Liquidity and funding risk in the first half of 2023
Liquidity metrics
At 30 June 2023, all of the Group’s material operating entities were above regulatory minimum levels.
Each entity maintains sufficient unencumbered liquid assets to comply with local and regulatory requirements. The liquidity value of these liquid assets for each entity is shown in the following table along with the individual LCR levels on a local regulatory requirements basis wherever applicable. Where local regulatory requirements are not applicable, the PRA LCR is shown. The local basis may differ from PRA measures due to differences in the way regulators have implemented the Basel III standards.
Each entity maintains a sufficient stable funding profile and it is assessed by using the PRA NSFR or other appropriate metrics.
In addition to regulatory metrics, HSBC uses a wide set of measures to manage its liquidity and funding profile.

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The Group liquidity and funding position on an average basis is analysed in the following sections.
Operating entities’ liquidity
At 30 Jun 2023
LCR6
 HQLA Net outflows
 NSFR6
% $bn $bn %
HSBC UK Bank plc (ring-fenced bank)1
 213  131  61  162 
HSBC Bank plc (non-ring-fenced bank)2
 149  138  93  117 
The Hongkong and Shanghai Banking Corporation – Hong Kong branch3
 180  146  81  127 
HSBC Singapore4
 258  23  9  170 
Hang Seng Bank 255  55  21  159 
HSBC Bank China 177  25  14  135 
HSBC Bank USA 169  81  48  130 
HSBC Continental Europe5
 159  70  44  136 
HSBC Middle East – UAE branch 278  12  4  166 
HSBC Canada 162  22  13  125 
HSBC Mexico 144  8  6  125 
At 31 Dec 2022
HSBC UK Bank plc (ring-fenced bank)1
 226  136  60  164 
HSBC Bank plc (non-ring-fenced bank)2
 143  128  90  115 
The Hongkong and Shanghai Banking Corporation – Hong Kong branch3
 179  147  82  130 
HSBC Singapore4
 247  21  9  173 
Hang Seng Bank 228  50  22  156 
HSBC Bank China 183  23  13  132 
HSBC Bank USA 164  85  52  131 
HSBC Continental Europe5
 151  55  37  132 
HSBC Middle East – UAE branch 239  12  5  158 
HSBC Canada 149  22  15  122 
HSBC Mexico 155  8  5  129 
1    HSBC UK Bank plc refers to the HSBC UK liquidity group, which comprises five legal entities: HSBC UK Bank plc, Marks and Spencer Financial Services plc, HSBC Private Bank (UK) Ltd, HSBC Innovation Bank Limited and HSBC Trust Company (UK) Limited, managed as a single operating entity, in line with the application of UK liquidity regulation as agreed with the PRA.
2    HSBC Bank plc includes overseas branches and special purpose entities consolidated by HSBC for financial statements purposes.
3    The Hongkong and Shanghai Banking Corporation – Hong Kong branch represents the material activities of The Hongkong and Shanghai Banking Corporation. It is monitored and controlled for liquidity and funding risk purposes as a stand-alone operating entity.
4    HSBC Singapore includes HSBC Bank Singapore Limited and The Hongkong and Shanghai Banking Corporation – Singapore branch. Liquidity and funding risk is monitored and controlled at country level in line with the local regulator’s approval.
5 In response to the requirement for an intermediate parent undertaking in line with EU Capital Requirements Directive (‘CRD V’), HSBC Continental Europe acquired control of HSBC Germany and HSBC Bank Malta on 30 November 2022. The averages for LCR and NSFR include the impact of the inclusion of the two entities from November 2022.
6    The LCR and NSFR ratios presented in the above table are based on average values. The LCR is the average of the preceding 12 months. The NSFR is the average of the preceding four quarters. Prior period numbers have been restated for consistency.
Consolidated liquidity metrics
Liquidity coverage ratio
At 30 June 2023, the average HQLA held at entity level amounted to $796bn (31 December 2022: $812bn), a decrease of $16bn. HSBC has maintained a revised approach to the application of the requirements under the EC Delegated Act and the PRA Rulebook. This approach was used to assess the limitations in the fungibility of entity liquidity around the Group and resulted in an adjustment of $165bn to LCR HQLA and $7bn to LCR inflows. The change in methodology was designed to better incorporate local regulatory restrictions on the transferability of liquidity.
At1
30 Jun 30 Jun 31 Dec
2023 2022 2022
$bn $bn $bn
High-quality liquid assets (in entities) 796 848 812
EC Delegated Act/PRA Rulebook adjustment2
 (172) (181) (174)
Group LCR HQLA 631 676 647
Net outflows 478 500 491
Liquidity coverage ratio 132  % 135  % 132  %
1    Group LCR numbers above are based on average month-end values of the preceding 12 months.
2    This includes adjustments made to high-quality liquidity assets and inflows in entities to reflect liquidity transfer restrictions.

Liquid assets
After the $165bn adjustment, the Group LCR HQLA of $631bn (31 December 2022: $647bn) was held in a range of asset classes and currencies. Of these, 97% were eligible as level 1 (31 December 2022: 97%).
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The following tables reflect the composition of the liquidity pool by asset type and currency at 30 June 2023:
Liquidity pool by asset type1
Liquidity pool Cash
Level 12
Level 22
$bn $bn $bn $bn
Cash and balance at central bank 321  321  —  — 
Central and local government bonds 296  —  282  14 
Regional government and public sector entities 2  —  2  — 
International organisation and multilateral development banks 8  —  8  — 
Covered bonds 3  —  1  2 
Other 1  —  —  1 
Total at 30 Jun 2023 631  321  293  17 
Total at 31 Dec 2022 647 344 284 19
1    Group liquid assets numbers are based on average month-end values over the preceding 12 months.
2    As defined in EU and PRA regulation, level 1 assets means ‘assets of extremely high liquidity and credit quality’, and level 2 assets means ‘assets of high liquidity and credit quality’.
Liquidity pool by currency1
$
£
€
HK$
Other
Total
$bn
$bn
$bn
$bn
$bn
$bn
Liquidity pool at 30 Jun 2023 173  179  104  48  127  631 
Liquidity pool at 31 Dec 2022 167 191 98 54 137 647
1 Group liquid assets numbers are based on average month-end values over the preceding 12 months.
Sources of funding
Our primary sources of funding are customer current accounts and savings deposits payable on demand or at short notice. We issue secured and unsecured wholesale securities to supplement customer deposits, meet regulatory obligations and to change the currency mix, maturity profile or location of our liabilities.
The following ‘Funding sources’ and ‘Funding uses’ tables provide a view of how our consolidated balance sheet is funded. In practice, all the principal operating entities are required to manage liquidity and funding risk on a stand-alone basis.
The tables analyse our consolidated balance sheet according to the assets that primarily arise from operating activities and the sources of funding primarily supporting these activities. Assets and liabilities that do not arise from operating activities are presented as a net balancing source or deployment of funds.
In 1H23, the level of customer accounts continued to exceed the level of loans and advances to customers. The positive funding gap was predominantly deployed in liquid assets.
Funding sources
At
30 Jun 31 Dec
2023 2022
$m $m
Customer accounts 1,595,769  1,570,303 
Deposits by banks 68,709  66,722 
Repurchase agreements – non-trading 170,110  127,747 
Debt securities in issue 85,471  78,149 
Cash collateral, margin and settlement accounts 104,521  88,476 
Liabilities of disposal groups held for sale1
 87,241  114,597 
Subordinated liabilities 23,286  22,290 
Financial liabilities designated at fair value 139,618  127,321 
Insurance contract liabilities 115,756  108,816 
Trading liabilities 81,228  72,353 
– repos 16,727  16,254 
– stock lending 3,890  3,541 
– other trading liabilities 60,611  52,558 
Total equity 191,651  185,197 
Other balance sheet liabilities 378,116  387,315 
3,041,476  2,949,286 

Funding uses
At
30 Jun 31 Dec
2023 2022
$m $m
Loans and advances to customers 959,558  923,561 
Loans and advances to banks 100,921  104,475 
Reverse repurchase agreements – non-trading 258,056  253,754 
Cash collateral, margin and settlement accounts 99,060  82,984 
Assets held for sale1
 95,480  115,919 
Trading assets 255,387  218,093 
– reverse repos 16,961  14,798 
– stock borrowing 9,381  10,706 
– other trading assets 229,045  192,589 
Financial investments 407,933  364,726 
Cash and balances with central banks 307,733  327,002 
Other balance sheet assets 557,348  558,772 
3,041,476  2,949,286 
1 ‘Liabilities of disposal groups held for sale’ includes $80bn and ‘Assets held for sale’ includes $87bn in respect of the planned sale of our banking business in Canada.
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HSBC Holdings plc

Interest rate risk in the banking book in the first half of 2023

Net interest income sensitivity
The following tables set out the assessed impact to a hypothetical base case projection of our net interest income (‘NII’), excluding pensions, insurance and investment in subsidiaries, under the following scenarios:
–an immediate shock of 25 basis points (‘bps’) to the current market-implied path of interest rates across all currencies on 1 July 2023 (effects over one year and five years); and
–an immediate shock of 100bps to the current market-implied path of interest rates across all currencies on 1 July 2023 (effects over one year and five years).
The sensitivities shown represent a hypothetical simulation of the
base case NII, assuming a static balance sheet (specifically no assumed migration from current account to term deposits), no management actions from Global Treasury and a simplified 50% pass-on assumption applied for material entities. This also incorporates the
effect of interest rate behaviouralisation, hypothetical managed rate
product pricing assumptions, prepayment of mortgages and deposit
stability. The sensitivity calculations exclude pensions, insurance and
investments in subsidiaries.
The NII sensitivity analysis performed in the case of a down-shock
does not include floors to market rates, and it does not include floors
on some wholesale assets and liabilities. However, floors have been
maintained for deposits and loans to customers where this is
contractual or where negative rates would not be applied.

As market and policy rates move, the degree to which these changes are passed on to customers will vary based on a number of factors, including the absolute level of market rates, regulatory and contractual frameworks, and competitive dynamics in particular markets. To aid comparability between markets, we have simplified the basis of preparation for our disclosure, and have used a 50% pass-on assumption for major entities on certain interest-bearing deposits. Our pass-through asset assumptions are largely in line with our contractual agreements or established market practice, which typically results in a significant portion of interest rate changes being passed on.
Immediate interest rate rises of 25bps and 100bps would increase projected NII for the 12 months to 30 June 2024 by $550m and $2,168m, respectively. Conversely, falls of 25bps and 100bps would decrease projected NII for the 12 months to 30 June 2024 by $615m and $2,604m, respectively.
The sensitivity of NII for 12 months decreased by $1,367m in the plus 100bps parallel shock and decreased by $1,365m in the minus 100bps parallel shock, comparing 30 June 2023 with 31 December 2022.
The decrease in the sensitivity of NII for 12 months in the minus 100bps parallel shock was mainly driven by management actions to stabilise NII, coupled with deposit migration and reduction in the net interest-bearing banking book.
The sensitivities broken down by currency in the tables below do not include the impact of vanilla FX swaps used to optimise cash management across the Group.


NII sensitivity to an instantaneous change in yield curves (12 months) – 1 year NII sensitivity by currency
Currency
US dollar HK dollar Sterling Euro Other Total
$m $m $m $m $m $m
Change in Jul 2023 to Jun 2024 (based on balance sheet at 30 Jun 2023)
+25bps (187) 125  140  147  325  550 
-25bps 187  (132) (173) (165) (332) (615)
+100bps (747) 471  575  596  1,273  2,168 
-100bps 695  (556) (703) (657) (1,383) (2,604)
Change in Jan 2023 to Dec 2023 (based on balance sheet at 31 Dec 2022)
+25bps (66) 107  245  167  431  884 
-25bps 64  (115) (289) (194) (439) (973)
+100bps (267) 413  1,026  674  1,689  3,535 
-100bps 236  (476) (1,177) (765) (1,787) (3,969)

NII sensitivity to an instantaneous change in yield curves (5 years) – cumulative 5 years NII sensitivity by currency
Currency
US dollar HK dollar Sterling Euro Other Total
$m $m $m $m $m $m
Change in Jul 2023 to Jun 2028 (based on balance sheet at 30 Jun 2023)
+25bps (70) 804  1,816  900  2,130  5,580 
-25bps 49  (911) (1,851) (918) (2,194) (5,825)
+100bps (694) 3,059  7,320  3,605  8,337  21,627 
-100bps 43  (4,800) (7,444) (3,755) (8,991) (24,947)
Change in Jan 2023 to Dec 2027 (based on balance sheet at 31 Dec 2022)
+25bps 192  668  2,315  924  2,500  6,599 
-25bps (282) (688) (2,336) (1,044) (2,498) (6,848)
+100bps 673  2,401  9,254  3,764  9,765  25,857 
-100bps (1,522) (3,004) (9,454) (4,173) (10,317) (28,470)
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Risk
NII sensitivity to an instantaneous change in yield curves (5 years) – NII sensitivity by years
Year 1 Year 2 Year 3 Year 4 Year 5 Total
$m $m $m $m $m $m
Change in Jul 2023 to Jun 2028 (based on balance sheet at 30 Jun 2023)
+25bps 550  854  1,172  1,409  1,595  5,580 
-25bps (615) (892) (1,221) (1,450) (1,647) (5,825)
+100bps 2,168  3,307  4,523  5,444  6,185  21,627 
-100bps (2,604) (3,909) (5,310) (6,188) (6,936) (24,947)
Change in Jan 2023 to Dec 2027 (based on balance sheet at 31 Dec 2022)
+25bps 884  1,145  1,378  1,550  1,642  6,599 
-25bps (973) (1,178) (1,420) (1,579) (1,699) (6,848)
+100bps 3,535  4,565  5,367  5,962  6,429  25,857 
-100bps (3,969) (4,944) (5,925) (6,565) (7,067) (28,470)

Non-trading portfolios
Value at risk of the non-trading portfolios
Non-trading portfolios comprise positions that primarily arise from the interest rate management of our retail and wholesale banking assets and liabilities, financial investments measured at fair value through other comprehensive income or at amortised cost, and exposures arising from our insurance operations.
The VaR for non-trading activity was broadly unchanged at 30 June 2023, compared with 31 December 2022. This followed increases in
the second half of 2022 that were primarily due to higher duration risk exposures in Global Treasury, as well as from more volatile interest rate tail scenarios.
Non-trading VaR includes non-trading financial instruments held in portfolios managed by Markets Treasury. The management of interest rate risk in the banking book is described further in ‘Net interest income sensitivity’ on page 95.
The Group non-trading VaR for the half-year to 30 June 2023 is shown in the following table.

Non-trading VaR, 99% 1 day
Interest rate Credit spread
Portfolio diversification1
 Total
$m $m $m $m
Half-year to 30 Jun 2023 156.3  84.3  (66.6) 173.9 
Average 134.8  69.0  (49.8) 153.9 
Maximum 158.9  84.3  185.7 
Minimum 108.8  55.2  127.0 
Half-year to 30 Jun 2022 113.3  53.3  (45.7) 120.8 
Average 148.4  61.9  (36.7) 173.7 
Maximum 225.5  84.7  265.3 
Minimum 109.2  50.3  119.1 
Half-year to 31 Dec 2022 159.8  56.6  (45.3) 171.1 
Average 121.2  52.1  (35.1) 138.2 
Maximum 159.8  59.1  183.7 
Minimum 98.3  43.4  106.3 
1    When VaR is calculated at a portfolio level, natural offsets in risk can occur when compared with aggregating VaR at the asset class level. This difference is called portfolio diversification. The asset class VaR maxima and minima reported in the table occurred on different dates within the reporting period. For this reason, we do not report an implied portfolio diversification measure between the maximum (minimum) asset class VaR measures and the maximum (minimum) total VaR measures in this table.
Non-trading VaR excludes equity risk on securities held at fair value, non-trading book foreign exchange risk and the risks managed in HSBC Holdings arising from long-term capital issuance.
HSBC’s management of market risk in the non-trading book is described in the ‘Treasury risk’ section on page 93.

For disclosure of the stressed value at risk of the Markets Treasury hold-to-collect-and-sell portfolio, see page 95. This portfolio of financial instruments is measured at fair value through other comprehensive income and is included in the non-trading VaR above. The stressed VaR quantitative disclosure provides the discrete potential capital impact from this portfolio.
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HSBC Holdings plc

Market risk
Overview
Market risk is the risk of adverse financial impact on trading activities arising from changes in market parameters such as interest rates, foreign exchange rates, asset prices, volatilities, correlations and credit spreads. Exposure to market risk is separated into two portfolios: trading portfolios and non-trading portfolios.
Market risk in the first half of 2023
There were no material changes to the policies and practices for the management of market risk in the first half of 2023.
A summary of our current policies and practices for the management of market risk is set out in ‘Market risk management’ on page 218 of the Annual Report and Accounts 2022.
During the first half of 2023, global financial markets continued to be driven by the inflation outlook, expectations of monetary policy tightening and recession risks, coupled with banking distress during March and negotiations over the US debt ceiling in May. Major central banks maintained their restrictive monetary policies throughout 1H23, while falling headline inflation in the US led the Federal Reserve Board (‘FRB‘) to signal that it may be approaching the end of its tightening cycle. Short-term yields in key interest rate markets rose during 2Q23, after falling rapidly in the wake of the banking crisis in March. Sentiment in global equity markets was driven by resilient corporate earnings and changes in the monetary policy outlook. Main US indices reached their highest in over one year in 2Q23, with large gains in the technology sector and relatively subdued volatility. In foreign
exchange markets, the US dollar fluctuated against most other major currencies, in response to FRB monetary policy and due to movements in the bond markets. Investor sentiment remained mostly resilient in credit markets. High-yield and investment-grade credit spreads tended to narrow as the banking sector stabilised and likelihood of a US debt downgrade receded.
We continued to manage market risk prudently in the first half of 2023. Sensitivity exposures and VaR remained mostly within appetite as the business pursued its core market-making activity in support of our customers. Market risk was managed using a complementary set of risk measures and limits, including stress testing and scenario analysis.

Trading portfolios
Value at risk of the trading portfolios
Trading VaR was predominantly generated by Markets and Securities Services. Trading VaR at 30 June 2023 increased compared with 31 December 2022. The VaR increase peaked in June 2023 and was mainly driven by:
–interest rate risk exposures in currencies held across the Fixed Income and Foreign Exchange business lines to facilitate client-driven activity; and
–the effects of relatively large short-term interest rate shocks for key currencies which are captured in the VaR scenario window.
The Group trading VaR for the half-year is shown in the table below.

Trading VaR, 99% 1 day
Foreign exchange
and commodity		 Interest
rate		 Equity Credit
spread
Portfolio
diversification1
 Total
$m $m $m $m $m $m
Half-year to 30 Jun 2023 18.9  64.9  23.5  16.1  (55.6) 67.8 
Average 16.7  51.9  17.5  11.1  (41.5) 55.7 
Maximum 23.5  74.8  23.5  16.1  82.4 
Minimum 10.6  33.9  14.9  7.7  42.2 
Half-year to 30 Jun 2022 11.3  26.8  14.6  16.1  (32.5) 36.3 
Average 14.2  26.3  14.5  19.1  (35.1) 39.1 
Maximum 29.2  33.9  19.2  27.9  55.6 
Minimum 5.7  20.3  11.5  12.0  29.1 
Half-year to 31 Dec 2022 15.4  40.0  18.6  11.9  (36.4) 49.5 
Average 13.0  32.7  17.7  14.6  (33.1) 45.0 
Maximum 18.3  73.3  24.8  23.9  78.3 
Minimum 9.1  20.2  13.9  9.1  34.0 
1    When VaR is calculated at a portfolio level, natural offsets in risk can occur when compared with aggregating VaR at the asset class level. This difference is called portfolio diversification. The asset class VaR maxima and minima reported in the table occurred on different dates within the reporting period. For this reason, we do not report an implied portfolio diversification measure between the maximum (minimum) asset class VaR measures and the maximum (minimum) total VaR measures in this table.
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Risk
The table below shows trading VaR at a 99% confidence level compared with trading VaR at a 95% confidence level at 30 June 2023.
This comparison facilitates the benchmarking of the trading VaR, which can be stated at different confidence levels, with financial institution peers. The 95% VaR is unaudited.
Comparison of trading VaR, 99% 1 day vs trading VaR, 95% 1 day
Trading VaR,
99% 1 day		 Trading VaR,
95% 1 day
$m $m
Half-year to 30 Jun 2023 67.8  44.5 
Average 55.7  34.5 
Maximum 82.4  47.8 
Minimum 42.2  26.2 
Half-year to 30 Jun 2022 36.3  21.1 
Average 39.1  22.1 
Maximum 55.6  28.4 
Minimum 29.1  17.5 
Half-year to 31 Dec 2022 49.5  31.7 
Average 45.0  27.1 
Maximum 78.3  49.0 
Minimum 34.0  20.1 

Back-testing
We routinely validate the accuracy of our VaR models by back-testing the VaR metric against both actual and hypothetical profit and loss. Hypothetical profit and loss excludes non-modelled items such as fees, commissions and revenue related to intra-day transactions. The hypothetical profit and loss reflects the profit and loss that would be realised if positions were maintained and held constant from the end of one trading day to the end of the next. This measure of profit and loss does not align with how risk is dynamically hedged and is not, therefore, necessarily indicative of the actual performance of the business.
The number of hypothetical loss back-testing exceptions, together with a number of other indicators, is used to assess model performance and to consider whether enhanced internal monitoring or recalibration of the VaR model is required. We back-test our VaR at set levels of our Group entity hierarchy.
During the first half of 2023, the Group experienced no loss back-testing exceptions against actual and hypothetical profit and losses.

Insurance manufacturing operations risk
Overview
The key risks for our insurance manufacturing operations are market risks, in particular interest rate, growth asset and credit risks, as well as insurance underwriting and operational risks. Liquidity risk, while significant for other parts of the Group, is relatively minor for our insurance operations.
Insurance manufacturing operations risk in the first half of 2023
There have been no material changes to the policies and practices for the management of risks arising in our insurance operations described in the Annual Report and Accounts 2022.
A summary of our policies and practices regarding the risk management of insurance operations, our insurance model and the main contracts we manufacture is provided on page 233 of the Annual Report and Accounts 2022.
The risk profile of our insurance manufacturing operations are assessed in the Group’s ICAAP based on their financial capacity to support the risks to which they are exposed.
Capital adequacy is assessed on both the Group’s economic capital basis, and the relevant local insurance regulatory basis. The Group’s economic capital basis is largely aligned to European Solvency II regulations, other than in Asia where it is based on the draft Hong Kong risk-based capital regulations. Risk appetite buffers are set to ensure that the operations are able to remain solvent on both bases, allowing for business-as-usual volatility and extreme but plausible stress events. In addition, the insurance manufacturing operations manage their market, liquidity, credit, underwriting and non-financial risk exposures to Board-approved risk appetite limits. Overall, at 30 June 2023, the majority of the capital and financial risk positions of our insurance operations were within risk appetite. We continue to monitor these risks closely in the current volatile economic climate.

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HSBC Holdings plc

The following table shows the composition of assets and liabilities by contract type.
Balance sheet of insurance manufacturing subsidiaries by type of contract
Life direct participating and investment DPF contracts
Life
other1
Other
contracts2
 Shareholder assets
and liabilities		 Total
$m $m $m $m $m
Financial assets 109,737  4,245  5,734  7,204  126,920 
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss
 95,693  3,915  4,137  1,202  104,947 
– derivatives 272  6  —  7  285 
– financial investments – at amortised cost 1,296  87  1,200  4,338  6,921 
– financial assets at fair value through other comprehensive income 9,099  —  3  621  9,723 
– other financial assets 3,377  237  394  1,036  5,044 
Insurance contract assets 5  174  —  —  179 
Reinsurance contract assets —  4,928  —  —  4,928 
Other assets and investment properties 2,717  67  31  1,394  4,209 
Total assets at 30 Jun 2023 112,459  9,414  5,765  8,598  136,236 
Liabilities under investment contracts designated at fair value —  —  5,131  —  5,131 
Insurance contract liabilities 111,427  3,868  —  —  115,295 
Reinsurance contract liabilities —  780  —  —  780 
Deferred tax 24  8  —  1  33 
Other liabilities —  —  —  7,336  7,336 
Total liabilities 111,451  4,656  5,131  7,337  128,575 
Total equity —  —  —  7,661  7,661 
Total liabilities and equity at 30 Jun 2023 111,451  4,656  5,131  14,998  136,236 
Financial assets 102,539  4,398  6,543  7,109  120,589 
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss 89,671  3,749  4,916  1,088  99,424 
– derivatives 432  9  21  15  477 
– financial investments – at amortised cost 981  165  1,221  4,660  7,027 
– financial assets at fair value through other comprehensive income 9,030  —  —  569  9,599 
– other financial assets 2,425  475  385  777  4,062 
Insurance contract assets 4  130  —  —  134 
Reinsurance contract assets —  4,413  —  —  4,413 
Other assets and investment properties 2,443  60  30  1,666  4,199 
Total assets at 31 Dec 2022 104,986  9,001  6,573  8,775  129,335 
Liabilities under investment contracts designated at fair value —  —  5,374  —  5,374 
Insurance contract liabilities 104,662  3,766  —  —  108,428 
Reinsurance contract liabilities —  748  —  —  748 
Deferred tax 23  —  —  2  25 
Other liabilities —  —  —  7,524  7,524 
Total liabilities 104,685  4,514  5,374  7,526  122,099 
Total equity —  —  —  7,236  7,236 
Total liabilities and equity at 31 Dec 2022
 104,685  4,514  5,374  14,762  129,335 
1    ‘Life other’ mainly includes protection insurance contracts as well as reinsurance contracts. The reinsurance contracts primarily provide diversification benefits over the life participating and investment discretionary participation feature ('DPF') contracts.
2    ‘Other contracts’ includes investment contracts for which HSBC does not bear significant insurance risk.
3    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.

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Interim condensed financial statements (unaudited)

Interim condensed financial statements

Contents
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Consolidated income statement
Half-year to1
30 Jun 30 Jun
2023 2022
Notes* $m $m
Net interest income 18,264  13,385 
– interest income 46,955  19,788 
– interest expense (28,691) (6,403)
Net fee income 2 6,085  6,228 
– fee income 7,947  7,913 
– fee expense (1,862) (1,685)
Net income from financial instruments held for trading or managed on a fair value basis 8,112  4,856 
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss 4,304  (11,849)
Insurance finance income/(expense) (4,234) 11,773 
Insurance service result 524  370 
– insurance revenue 1,104  980 
– insurance service expense (580) (610)
Gain on acquisitions2
 15 1,507  — 
Reversal of impairment loss relating to the planned sale of our retail banking operations in France3
 15 2,130  — 
Other operating income 184  (218)
Net operating income before change in expected credit losses and other credit impairment charges4
 36,876  24,545 
Change in expected credit losses and other credit impairment charges (1,345) (1,087)
Net operating income 35,531  23,458 
Employee compensation and benefits (8,954) (8,896)
General and administrative expenses (4,912) (5,337)
Depreciation and impairment of property, plant and equipment and right-of-use assets (782) (1,072)
Amortisation and impairment of intangible assets (809) (822)
Total operating expenses (15,457) (16,127)
Operating profit 20,074  7,331 
Share of profit in associates and joint ventures 1,583  1,449 
Profit before tax 21,657  8,780 
Tax (charge)/credit (3,586) 151 
Profit for the period 18,071  8,931 
Attributable to:
– ordinary shareholders of the parent company 16,966  7,966 
– other equity holders 542  626 
– non-controlling interests 563  339 
Profit for the period 18,071  8,931 
$ $
Basic earnings per ordinary share 4 0.86  0.40 
Diluted earnings per ordinary share 4 0.86  0.40 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2    Provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.
3    Reversal of the $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.
4 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
*    For Notes on the interim condensed financial statements, see page 113.

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HSBC Holdings plc

Consolidated statement of comprehensive income
Half-year to1
30 Jun 30 Jun
2023 2022
$m $m
Profit for the period 18,071  8,931 
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income 549  (6,246)
– fair value gains/(losses) 804  (8,120)
– fair value gains transferred to the income statement on disposal (63) (52)
– expected credit (recoveries)/losses recognised in the income statement (3) 17 
– income taxes (189) 1,909 
Cash flow hedges (1,062) (2,063)
– fair value losses (1,700) (1,646)
– fair value (gains)/losses reclassified to the income statement 227  (1,127)
– income taxes and other movements 411  710 
Share of other comprehensive income/(expense) of associates and joint ventures 101  (142)
– share for the period 101  (142)
Net finance income/(expense) from insurance contracts2
 (101) 1,360 
– before income taxes (136) 1,833 
– income taxes 35  (473)
Exchange differences (347) (8,382)
Items that will not be reclassified subsequently to profit or loss:
Fair value gains on property revaluation 1  — 
Remeasurement of defined benefit asset/(liability) (112) 95 
– before income taxes (105) (132)
– income taxes (7) 227 
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk (653) 2,263 
– before income taxes (867) 3,030 
– income taxes 214  (767)
Equity instruments designated at fair value through other comprehensive income 7  158 
– fair value gains 7  158 
Effects of hyperinflation 578  428 
Other comprehensive expense for the period, net of tax (1,039) (12,529)
Total comprehensive income/(expense) for the period 17,032  (3,598)
Attributable to:
– ordinary shareholders of the parent company 15,986  (4,405)
– other equity holders 542  626 
– non-controlling interests 504  181 
Total comprehensive income/(expense) for the period 17,032  (3,598)
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2    Net finance income/(expense) from insurance contracts in other comprehensive income is the amount that offsets the effective interest rate and expected credit losses on supporting assets that have been designated at fair value through other comprehensive income. In the first half of 2023, movements in net finance income/(expense) from insurance contracts of $(101)m (1H22: $1,360m) was booked, and offsetting fair value through other comprehensive income (‘OCI‘) movements on supporting assets of $108m was recorded (1H22: ($1,439m)).
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Interim condensed financial statements (unaudited)
Consolidated balance sheet
At1
30 Jun 31 Dec
2023 2022
Notes* $m $m
Assets
Cash and balances at central banks 307,733  327,002 
Items in the course of collection from other banks 10,649  7,297 
Hong Kong Government certificates of indebtedness 42,407  43,787 
Trading assets 255,387  218,093 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 104,303  100,101 
Derivatives 8 272,595  284,159 
Loans and advances to banks 100,921  104,475 
Loans and advances to customers 959,558  923,561 
Reverse repurchase agreements – non-trading
258,056  253,754 
Financial investments 9 407,933  364,726 
Assets held for sale 95,480  115,919 
Prepayments, accrued income and other assets 175,473  156,149 
Current tax assets 1,262  1,230 
Interests in associates and joint ventures 10 29,546  29,254 
Goodwill and intangible assets 11,925  11,419 
Deferred tax assets 8,248  8,360 
Total assets 3,041,476  2,949,286 
Liabilities and equity
Liabilities
Hong Kong currency notes in circulation 42,407  43,787 
Deposits by banks 68,709  66,722 
Customer accounts 1,595,769  1,570,303 
Repurchase agreements – non-trading
 170,110  127,747 
Items in the course of transmission to other banks 10,776  7,864 
Trading liabilities 81,228  72,353 
Financial liabilities designated at fair value 139,618  127,321 
Derivatives 8 269,560  285,762 
Debt securities in issue 85,471  78,149 
Liabilities of disposal groups held for sale 87,241  114,597 
Accruals, deferred income and other liabilities 155,275  134,313 
Current tax liabilities 1,921  1,135 
Insurance contract liabilities 115,756  108,816 
Provisions 11 1,722  1,958 
Deferred tax liabilities 976  972 
Subordinated liabilities 23,286  22,290 
Total liabilities 2,849,825  2,764,089 
Equity
Called up share capital 10,073  10,147 
Share premium account 14,737  14,664 
Other equity instruments 19,392  19,746 
Other reserves (9,935) (9,133)
Retained earnings 149,903  142,409 
Total shareholders’ equity 184,170  177,833 
Non-controlling interests 7,481  7,364 
Total equity 191,651  185,197 
Total liabilities and equity 3,041,476  2,949,286 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
*    For Notes on the interim condensed financial statements, see page 113.
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Consolidated statement of changes in equity

Other reserves
Called up share
capital
and share premium		 Other
equity
instru-ments		 Retained
earnings
Financial assets at FVOCI reserve
Cash
flow
hedging
reserve
Foreign
exchange
reserve
 Merger and other
reserves
Insura-nce
finance
reserve1
 Total share-holders’ equity
Non-
controlling
interests
 Total equity
$m $m $m $m $m $m $m $m $m $m $m
At 1 Jan 2023 24,811  19,746  142,409  (7,038) (3,808) (32,575) 33,209  1,079  177,833  7,364  185,197 
Profit for the period —  —  17,508  —  —  —  —  —  17,508  563  18,071 
Other comprehensive income (net of tax) —  —  (92) 560  (1,077) (271) 1  (101) (980) (59) (1,039)
– debt instruments at fair value through other comprehensive income —  —  —  546  —  —  —  —  546  3  549 
– equity instruments designated at fair value through other comprehensive income —  —  —  14  —  —  —  —  14  (7) 7 
– cash flow hedges —  —  —  —  (1,077) —  —  —  (1,077) 15  (1,062)
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk —  —  (654) —  —  —  —  —  (654) 1  (653)
– property revaluation —  —  —  —  —  —  1  —  1  —  1 
– remeasurement of defined benefit asset/liability —  —  (117) —  —  —  —  —  (117) 5  (112)
– share of other comprehensive income of associates and joint ventures —  —  101  —  —  —  —  —  101  —  101 
– effects of hyperinflation —  —  578  —  —  —  —  —  578  —  578 
– insurance finance income/
   (expense) recognised in other comprehensive income
 —  —  —  —  —  —  —  (101) (101) —  (101)
– exchange differences —  —  —  —  —  (271) —  —  (271) (76) (347)
Total comprehensive income for the period —  —  17,416  560  (1,077) (271) 1  (101) 16,528  504  17,032 
Shares issued under employee remuneration and share plans 78  —  (78) —  —  —  —  —  —  —  — 
Capital securities issued2
 —  1,996  —  —  —  —  —  —  1,996  —  1,996 
Dividends to shareholders —  —  (7,133) —  —  —  —  —  (7,133) (375) (7,508)
Redemption of securities3
 —  (2,350) —  —  —  —  —  —  (2,350) —  (2,350)
Cost of share-based payment arrangements —  —  228  —  —  —  —  —  228  —  228 
Share buy-back4
 —  —  (2,007) —  —  —  —  —  (2,007) —  (2,007)
Cancellation of shares (79) —  —  —  —  —  79  —  —  —  — 
Other movements5
 —  —  (932) 6  —  —  1  —  (925) (12) (937)
At 30 Jun 2023 24,810  19,392  149,903  (6,472) (4,885) (32,846) 33,290  978  184,170  7,481  191,651 
HSBC Holdings plc
109

Interim condensed financial statements (unaudited)
Consolidated statement of changes in equity (continued)
Other reserves
Called up
share capital
and share premium
Other
equity
instru-
ments
Retained
earnings
 Financial assets at FVOCI reserve
Cash
flow
hedging
reserve
 Foreign exchange reserve Merger and other reserves
Insurance
finance
reserve1
Total
share-
holders’
equity
Non-
controlling
interests
Total
equity
$m $m $m $m $m $m $m $m $m $m $m
At 31 Dec 2021 (IFRS 4) 24,918  22,414  144,458  (634) (197) (22,769) 30,060  —  198,250  8,527  206,777 
Impact on transition to IFRS 176
 —  —  (9,222) 683  —  —  —  (696) (9,235) (1,224) (10,459)
At 1 Jan 2022 24,918  22,414  135,236  49  (197) (22,769) 30,060  (696) 189,015  7,303  196,318 
Profit for the period —  —  8,592  —  —  —  —  —  8,592  339  8,931 
Other comprehensive income (net of tax) —  —  2,647  (6,062) (2,035) (8,282) —  1,360  (12,372) (157) (12,529)
– debt instruments at fair value through other comprehensive income —  —  —  (6,183) —  —  —  —  (6,183) (63) (6,246)
– equity instruments designated at fair value through other comprehensive income —  —  —  121  —  —  —  —  121  37  158 
– cash flow hedges —  —  —  —  (2,035) —  —  —  (2,035) (28) (2,063)
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk —  —  2,263  —  —  —  —  —  2,263  —  2,263 
– remeasurement of defined benefit asset/liability —  —  98  —  —  —  —  —  98  (3) 95 
– share of other comprehensive income of associates and joint ventures —  —  (142) —  —  —  —  —  (142) —  (142)
– effects of hyperinflation —  —  428  —  —  —  —  —  428  —  428 
– insurance finance income/ (expense) recognised in other comprehensive income —  —  —  —  —  —  —  1,360  1,360  —  1,360 
– exchange differences —  —  —  —  —  (8,282) —  —  (8,282) (100) (8,382)
Total comprehensive income for the period —  —  11,240  (6,062) (2,035) (8,282) —  1,360  (3,779) 181  (3,598)
Shares issued under employee remuneration and share plans 65  —  (65) —  —  —  —  —  —  —  — 
Dividends to shareholders —  —  (4,202) —  —  —  —  —  (4,202) (295) (4,497)
Redemption of securities3
 —  (723) —  —  —  —  —  —  (723) —  (723)
Cost of share-based payment arrangements —  —  177  —  —  —  —  —  177  —  177 
Share buy-back4
 —  —  (1,000) —  —  —  —  —  (1,000) —  (1,000)
Cancellation of shares (133) —  —  —  —  —  133  —  —  —  — 
Other movements —  —  (525) 2  —  —  11  —  (512) (60) (572)
At 30 Jun 2022 24,850  21,691  140,860  (6,011) (2,232) (31,051) 30,204  664  178,975  7,130  186,105 
110
HSBC Holdings plc

Consolidated statement of changes in equity (continued)
Other reserves
Called up
share capital
and share premium
Other
equity
instru-
ments
 Retained
earnings		 Financial assets at FVOCI reserve
Cash
flow
hedging
reserve
 Foreign exchange reserve Merger and other reserves
Insura-nce
finance
reserve1
Total
share-
holders’
equity
Non-
controlling
interests
 Total
equity
$m $m $m $m $m $m $m $m $m $m $m
At 1 Jul 2022 24,850  21,691  140,860  (6,011) (2,232) (31,051) 30,204  664  178,975  7,130  186,105 
Profit for the period —  —  6,967  —  —  —  —  —  6,967  351  7,318 
Other comprehensive income (net of tax) —  —  (1,244) (1,027) (1,578) (1,524) 174  415  (4,784) 71  (4,713)
– debt instruments at fair value through other comprehensive income —  —  —  (998) —  —  —  —  (998) 12  (986)
– equity instruments designated at fair value through other comprehensive income —  —  —  (29) —  —  —  —  (29) (22) (51)
– cash flow hedges —  —  —  —  (1,578) —  —  —  (1,578) (14) (1,592)
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk —  —  (341) —  —  —  —  —  (341) —  (341)
– property revaluation —  —  —  —  —  —  174  —  174  106  280 
– remeasurement of defined benefit asset/liability —  —  (1,127) —  —  —  —  —  (1,127) 1  (1,126)
– share of other comprehensive income of associates and joint ventures —  —  (225) —  —  —  —  —  (225) —  (225)
– effects of hyperinflation —  —  449  —  —  —  —  —  449  —  449 
– insurance finance income/ (expense) recognised in other comprehensive income —  —  —  —  —  —  —  415  415  —  415 
– exchange differences —  —  —  —  —  (1,524) —  —  (1,524) (12) (1,536)
Total comprehensive income for the period —  —  5,723  (1,027) (1,578) (1,524) 174  415  2,183  423  2,606 
Shares issued under employee remuneration and share plans 2  —  (2) —  —  —  —  —  —  —  — 
Dividends to shareholders —  —  (2,342) —  —  —  —  —  (2,342) (131) (2,473)
Redemption of securities3
 —  (1,945) 402  —  —  —  —  —  (1,543) —  (1,543)
Cost of share-based payment arrangements —  —  223  —  —  —  —  —  223  —  223 
Transfers7
 —  —  (2,499) —  —  —  2,499  —  —  —  — 
Cancellation of shares (41) —  —  —  —  —  41  —  —  —  — 
Other movements —  —  44  —  2  —  291  —  337  (57) 280 
At 31 Dec 2022 24,811  19,746  142,409  (7,038) (3,808) (32,575) 33,209  1,079  177,833  7,364  185,197 
1    The insurance finance reserve reflects the unwinding of the discount rate on insurance liabilities for which the OCI option has been elected for our insurance business in France. It is recorded after excluding the amount that offsets the effective interest rate and expected credit losses on supporting assets that have been designated at fair value through other comprehensive income.
2    During 2023, HSBC Holdings issued $2,000m of contingent convertible securities on which there were $4m of external issue costs.
3    During 2023, HSBC Holdings redeemed $2,350m contingent convertible securities. In 2022, HSBC Holdings redeemed €1,500m 5.250% and SGD1,000m 5.875% contingent convertible securities.
4    In February 2022 HSBC announced a share buy-back of up to $1.0bn, which concluded in July 2022. Additionally, in May 2023, HSBC Holdings announced a share buy-back of up to $2.0bn.
5 Includes a payment of $749m (1H22: $435m) to the HSBC Holdings Employee Benefit Trust 2001 (No. 2) to purchase shares in order to settle liabilities on Group share plans.
6 The impact of IFRS 17 on previously reported total equity was $(10,585)m at 30 June 2022 and $(10,831)m at 31 December 2022.
7    Permitted transfers from the merger reserve to retained earnings were made when the investment in HSBC Overseas Holdings (UK) Limited was previously impaired. In 2022, part-reversals of these impairments resulted in transfers from retained earnings back to the merger reserve of $2,499m.

HSBC Holdings plc
111

Interim condensed financial statements (unaudited)
Consolidated statement of cash flows
Half-year to1
30 Jun 30 Jun
2023 2022
$m $m
Profit before tax 21,657  8,780 
Adjustments for non-cash items:
Depreciation, amortisation and impairment 1,591  1,894 
Net loss/(gain) from investing activities (41) 173 
Share of profits in associates and joint ventures (1,583) (1,449)
(Gain)/loss on disposal of subsidiaries, businesses, associates and joint ventures (3,604) (71)
Change in expected credit losses gross of recoveries and other credit impairment charges 1,482  1,242 
Provisions including pensions 148  201 
Share-based payment expense 228  177 
Other non-cash items included in profit before tax (1,661) 82 
Elimination of exchange differences2
 (6,558) 48,921 
Change in operating assets (52,745) 19,713 
Change in operating liabilities 72,836  (35,752)
Dividends received from associates 124  60 
Contributions paid to defined benefit plans (87) (102)
Tax paid (1,664) (1,264)
Net cash from operating activities 30,123  42,605 
Purchase of financial investments (298,182) (265,427)
Proceeds from the sale and maturity of financial investments 263,838  247,517 
Net cash flows from the purchase and sale of property, plant and equipment (329) (589)
Net cash flows from purchase/(disposal) of customer deposits and loan portfolios —  (3,756)
Net investment in intangible assets (1,123) (1,240)
Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures3
 1,228  (525)
Net cash from investing activities (34,568) (24,020)
Issue of ordinary share capital and other equity instruments 1,996  — 
Cancellation of shares (1,273) (1,840)
Net sales/(purchases) of own shares for market-making and investment purposes (823) (443)
Net cash flow from change in stakes of subsidiaries —  (197)
Redemption of preference shares and other equity instruments (2,350) (723)
Subordinated loan capital issued 2,744  2,659 
Subordinated loan capital repaid (1,044) (11)
Dividends paid to shareholders of the parent company and non-controlling interests (7,508) (4,497)
Net cash from financing activities (8,258) (5,052)
Net increase in cash and cash equivalents (12,703) 13,533 
Cash and cash equivalents at the beginning of the period 521,671  574,032 
Exchange differences in respect of cash and cash equivalents 8,565  (40,243)
Cash and cash equivalents at the end of the period4
 517,533  547,322 
Interest received was $46,817m (1H22: $20,957m), interest paid was $29,222m (1H22: $7,146m) and dividends received (excluding dividends received from associates, which are presented separately above) were $751m (1H22: $800m).
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2    Adjustments to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be determined without unreasonable expense.
3    The ‘Net cash flow on (acquisition)/disposal of subsidiaries, businesses, associates and joint ventures’ includes $1.2bn of net cash inflow on acquisition of Silicon Valley Bank UK Limited in March 2023.
4 Includes $7.5bn (1H22: $1.7bn) of cash and cash equivalents classified as held for sale.
112
HSBC Holdings plc

Notes on the interim condensed financial statements
Contents
1  Basis of preparation and material accounting policies 11  Provisions
2  Net fee income 12  Contingent liabilities, contractual commitments and guarantees
3  Dividends 13 Legal proceedings and regulatory matters
4  Earnings per share 14  Transactions with related parties
5  Segmental analysis 15  Assets held for sale, liabilities of disposal groups held for sale and business acquisitions
6  Fair values of financial instruments carried at fair value
7  Fair values of financial instruments not carried at fair value 16  Effects of adoption of IFRS 17
8  Derivatives 17  Events after the balance sheet date
9  Financial investments 18 Interim Report 2023 and statutory accounts
10  Interests in associates and joint ventures

1
Basis of preparation and material accounting policies
(a) Compliance with International Financial Reporting Standards
Our interim condensed consolidated financial statements have been prepared on the basis of the policies set out in the 2022 annual financial statements, except for those relating to IFRS 17 ‘Insurance Contracts’ and amendments to IAS 12 ‘Income Taxes’ as set out below. They have also been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the UK, IAS 34 ‘Interim Financial Reporting’ as issued by the International Accounting Standards Board (‘IASB’), IAS 34 ‘Interim Financial Reporting’ as adopted by the EU, and the Disclosure Guidance and Transparency Rules sourcebook of the UK’s Financial Conduct Authority. Therefore, they include an explanation of events and transactions that are significant to an understanding of the changes in HSBC’s financial position and performance since the end of 2022.
These financial statements should be read in conjunction with the Annual Report and Accounts 2022, which was prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These financial statements were also prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee. These financial statements should be read in conjunction with the information about the application of IFRS 17 ‘Insurance Contracts’ as set out below and the new policies for insurance contracts as described on pages 7 to 9 of our Report on Transition to IFRS 17 ‘Insurance Contracts’ issued on 2 May 2023.
At 30 June 2023, there were no IFRSs effective for the half-year to 30 June 2023 affecting these financial statements that were not approved for adoption in the UK by the UK Endorsement Board. With the exception of amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’, which is expected to be endorsed by the EU in the second half of 2023, there was no difference between IFRSs adopted by the UK, IFRSs as adopted by the EU, and IFRSs issued by the IASB in terms of their application to HSBC.
Standards applied during the half-year to 30 June 2023
IFRS 17 ‘Insurance Contracts’
On 1 January 2023, the Group adopted the requirements of IFRS 17 ‘Insurance Contracts’ retrospectively with comparatives restated from the transition date, 1 January 2022. At transition, the Group’s total equity reduced by $10,459m.
On adoption of IFRS 17, balances based on IFRS 4, including the present value of in-force long-term insurance business (‘PVIF’) asset in relation to the upfront recognition of future profits of in-force insurance contracts, were derecognised. Insurance contract liabilities have been remeasured under IFRS 17 based on groups of insurance contracts, which include the fulfilment cash flows comprising the best estimate of the present value of the future cash flows (for example premiums and payouts for claims, benefits, and expenses), together with a risk adjustment for non-financial risk, as well as the contractual service margin (‘CSM’). The CSM represents the unearned profits that will be released and systematically recognised in insurance revenue as services are provided over the expected coverage period.
In addition, the Group has made use of the option under the standard to re-designate certain eligible financial assets held to support insurance contract liabilities, which were predominantly measured at amortised cost, as financial assets measured at fair value through profit or loss, with comparatives restated from the transition date.

HSBC Holdings plc
113

Notes on the interim condensed financial statements (unaudited)
The key differences between IFRS 4 and IFRS 17 are summarised in the following table:
IFRS 4 IFRS 17
Balance sheet
–Insurance contract liabilities for non-linked life insurance contracts are calculated by local actuarial principles. Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, by reference to the value of the relevant underlying funds or indices. Grouping requirements follow local regulations.
–An intangible asset for the PVIF is recognised, representing the upfront recognition of future profits associated with in-force insurance contracts.
–Insurance contract liabilities are measured for groups of insurance contracts at current value, comprising the fulfilment cash flows and the CSM.
–The fulfilment cash flows comprise the best estimate of the present value of the future cash flows, together with a risk adjustment for non-financial risk.
–The CSM represents the unearned profit.
Profit emergence/ recognition
–The value of new business is reported as revenue on Day 1 as an increase in PVIF.
–The impact of the majority of assumption changes is recognised immediately in the income statement.
–Variances between actual and expected cash flows are recognised in the period they arise.
–The CSM is systematically recognised in revenue as services are provided over the expected coverage period of the group of contracts (i.e. no Day 1 profit).
–Contracts are measured using the general measurement model (‘GMM’) or the variable fee approach (‘VFA’) model for insurance contracts with direct participation features upon meeting the eligibility criteria. Under the VFA model, the Group’s share of the investment experience and assumption changes are absorbed by the CSM and released over time to profit or loss. For contracts measured under GMM, the Group’s share of the investment volatility is recorded in profit or loss as it arises.
–Losses from onerous contracts are recognised in the income statement immediately.
Investment return assumptions (discount rate)
–PVIF is calculated based on long-term investment return assumptions based on assets held. It therefore includes investment margins expected to be earned in future.
–Under the market consistent approach, expected future investment spreads are not included in the investment return assumption. Instead, the discount rate includes an illiquidity premium that reflects the nature of the associated insurance contract liabilities.
Expenses
–Total expenses to acquire and maintain the contract over its lifetime are included in the PVIF calculation.
–Expenses are recognised across operating expenses and fee expense as incurred and the allowances for those costs released from the PVIF simultaneously.
–Projected lifetime expenses that are directly attributable costs are included in the insurance contract liabilities and recognised in the insurance service result.
–Non-attributable costs are reported in operating expenses.
Transition
In applying IFRS 17 for insurance contracts retrospectively, the full retrospective approach (‘FRA’) has been used unless it has been impracticable. When the FRA is impracticable such as when there is a lack of sufficient and reliable data, an entity has an accounting policy choice to use either the modified retrospective approach (‘MRA’) or the fair value approach (‘FVA’). The Group has applied the FRA for new business from 2018 at the earliest, subject to practicability, and the FVA for the majority of contracts for which the FRA is impracticable.
Under the FVA, the valuation of insurance liabilities on transition is based on the applicable requirements of IFRS 13 ‘Fair Value Measurement’. This requires consideration of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The CSM is calculated as the difference between what a market participant would demand for assuming the unexpired risk associated with insurance contracts, including required profit, and the fulfilment cash flows that are determined using IFRS 17 principles.
In determining the fair value, the Group considered the estimated profit margin that a market participant would demand in return for assuming the insurance liabilities with the consideration of the level of capital that a market participant would be required to hold, and the discount rate with an allowance for an illiquidity premium that takes into account the level of ‘matching’ between the Group’s assets and related liabilities. These assumptions were set taking into account the assumptions that a hypothetical market participant operating in each local jurisdiction would consider.
Amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’
On 23 May 2023, the IASB issued amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’, which became effective immediately and were approved for adoption by all members of the UK Endorsement Board on 19 July 2023. On 20 June 2023, legislation was substantively enacted in the UK to introduce the OECD’s Pillar Two global minimum tax rules and a UK qualified domestic minimum top-up tax, with effect from 1 January 2024. The Group has applied the IAS 12 exception from recognising and disclosing information on associated deferred tax assets and liabilities. As noted above, the EU has not yet endorsed these IAS 12 amendments but is expected to do so in the second half of 2023.
There were no other new standards or amendments to standards that had an effect on these interim condensed financial statements.
(b)    Use of estimates and judgements
Management believes that the critical accounting estimates and judgements applicable to the Group are those that relate to impairment of amortised cost and FVOCI debt financial assets, the valuation of financial instruments, deferred tax assets, provisions, interests in associates, impairment of goodwill and non-financial assets, post-employment benefit plans, and non-current assets and disposal groups held for sale.
There were no material changes in the current period to any of the critical accounting estimates and judgements disclosed in 2022, which are stated on pages 99 and 337 to 347 of the Annual Report and Accounts 2022.

(c)    Composition of the Group
There were no material changes in the composition of the Group in the half-year to 30 June 2023. For further details of future business acquisitions and disposals, see Note 15 ‘Assets held for sale, liabilities of disposal groups held for sale and business acquisitions’.
114
HSBC Holdings plc

(d)    Going concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios, as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.
(e) Accounting policies
The accounting policies that we applied for these interim condensed consolidated financial statements are consistent with those described on pages 335 to 348 of the Annual Report and Accounts 2022, as are the methods of computation, with the exception of those relating to IFRS 17 and amendments to IAS 12 as described above.
2
Net fee income
Half-year to1,2
30 Jun 30 Jun
2023 2022
$m $m
Net fee income by product
Funds under management 1,176  1,222 
Cards 1,351  1,201 
Credit facilities 798  790 
Account services 765  720 
Broking income 555  707 
Unit trusts 386  408 
Underwriting 345  257 
Global custody 432  471 
Remittances 405  394 
Imports/exports 328  322 
Insurance agency commission 159  162 
Other 1,247  1,259 
Fee income 7,947  7,913 
Less: fee expense (1,862) (1,685)
Net fee income 6,085  6,228 
Net fee income by global business
Wealth and Personal Banking 2,694  2,753 
Commercial Banking 2,009  1,972 
Global Banking and Markets 1,382  1,503 
1 In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
2    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
3
Dividends
On 1 August 2023, the Directors approved a second interim dividend for 2023 of $0.10 per ordinary share in respect of the financial year ending 31 December 2023. This distribution amounts to approximately $1.974bn and will be payable on 21 September 2023. No liability is recognised in the financial statements in respect of these dividends.
Dividends paid to shareholders of HSBC Holdings plc
Half-year to
30 Jun 2023 30 Jun 2022
Per share Total Per share Total
$ $m $ $m
Dividends paid on ordinary shares
In respect of previous year:
– second interim dividend 0.23  4,590  0.18  3,576 
In respect of current year:
– first interim dividend 0.10  2,001  —  — 
Total 0.33  6,591  0.18  3,576 
Total coupons on capital securities classified as equity 542  626 
Dividends to shareholders 7,133  4,202 
HSBC Holdings plc
115

Notes on the interim condensed financial statements (unaudited)
4
Earnings per share
Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculated by dividing the basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on conversion of dilutive potential ordinary shares.
Basic and diluted earnings per share
Half-year to1
30 Jun 2023 30 Jun 2022
Profit Number
of shares		 Amount per share Profit Number
of shares		 Amount per share
$m (millions) $ $m (millions) $
Basic2
 16,966  19,693  0.86  7,966  19,954  0.40 
Effect of dilutive potential ordinary shares 136  131 
Diluted2
 16,966  19,829  0.86  7,966  20,085  0.40 
1From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2Weighted average number of ordinary shares outstanding (basic) or assuming dilution (diluted).
5
Segmental analysis
The Group Chief Executive, supported by the rest of the Group Executive Committee (‘GEC’), is considered the Chief Operating Decision Maker (‘CODM’) for the purposes of identifying the Group’s reportable segments. Global business results are assessed by the CODM on the basis of constant currency performance that removes the effects of currency translation from reported results. Therefore, we disclose these results on a constant currency basis as required by IFRSs. The income statement for the half-year to 30 June 2022 is converted at the average rate of exchange for 2023, and the balance sheets at 30 June 2022 and 31 December 2022 at the prevailing rates of exchange on 30 June 2023.
Our operations are closely integrated and, accordingly, the presentation of data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and global functions to the extent that they can be meaningfully attributed to global businesses. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity. Costs that are not allocated to global businesses are included in Corporate Centre.
Where relevant, income and expense amounts presented include the results of inter-segment funding along with inter-company and inter-business line transactions. All such transactions are undertaken on arm’s length terms. The intra-Group elimination items for the global businesses are presented in Corporate Centre.
Resegmentation
In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our Global Banking customers within our entities in Latin America was transferred from Global Banking and Markets to Commercial Banking for reporting purposes. Comparative data have been re-presented accordingly. Similar smaller transfers from Global Banking and Markets to Commercial Banking were also undertaken within our entities in Australia and Indonesia, where comparative data have not been re-presented.
Our global businesses
We provide a comprehensive range of banking and related financial services to our customers in our three global businesses. The products and services offered to customers are organised by these global businesses:
–Wealth and Personal Banking (‘WPB’) provides a full range of retail banking and wealth products to our customers from personal banking to ultra high net worth individuals. Typically, customer offerings include retail banking products, such as current and savings accounts, mortgages and personal loans, credit cards, debit cards and local and international payment services. We also provide wealth management services, including insurance and investment products, global asset management services, investment management and private wealth solutions for customers with more sophisticated and international requirements.
–Commercial Banking (‘CMB’) offers a broad range of products and services to serve the needs of our commercial customers, including small and medium-sized enterprises, mid-market enterprises and corporates. These include credit and lending, international trade and receivables finance, treasury management and liquidity solutions (payments and cash management and commercial cards), commercial insurance and investments. CMB also offers customers access to products and services offered by other global businesses, such as Global Banking and Markets, which include foreign exchange products, raising capital on debt and equity markets and advisory services.
–Global Banking and Markets (‘GBM’) provides tailored financial solutions to major government, corporate and institutional clients and private investors worldwide. The client-focused business lines deliver a full range of banking capabilities, including financing, advisory and transaction services, a markets business that provides services in credit, rates, foreign exchange, equities, money markets and securities services, and principal investment activities.
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HSBC Holdings plc

HSBC constant currency profit before tax and balance sheet data
Half-year to 30 Jun 2023
Wealth and Personal Banking
Commercial
Banking3
Global
Banking and
Markets3
 Corporate
Centre		 Total
$m $m $m $m $m
Net operating income/(expense) before change in expected credit losses and other credit impairment charges2
 16,200  12,216  8,501  (41) 36,876 
– external 12,416  12,897  13,939  (2,376) 36,876 
– inter-segment 3,784  (681) (5,438) 2,335  — 
– of which: net interest income/(expense)4
 10,299  8,375  3,546  (3,956) 18,264 
Change in expected credit losses and other credit impairment charges (502) (704) (136) (3) (1,345)
Net operating income/(expense) 15,698  11,512  8,365  (44) 35,531 
Total operating expenses (7,141) (3,572) (4,785) 41  (15,457)
Operating profit/(loss) 8,557  7,940  3,580  (3) 20,074 
Share of profit/(loss) in associates and joint ventures 35  (1) —  1,549  1,583 
Constant currency profit before tax 8,592  7,939  3,580  1,546  21,657 
% % % % %
Share of HSBC’s constant currency profit before tax 39.7  36.7  16.5  7.1  100.0 
Constant currency cost efficiency ratio 44.1  29.2  56.3  100.0  41.9 
Constant currency balance sheet data $m $m $m $m $m
Loans and advances to customers (net) 463,836  319,246  176,182  294  959,558 
Interests in associates and joint ventures 555  24  107  28,860  29,546 
Total external assets 900,370  654,474  1,342,110  144,522  3,041,476 
Customer accounts 809,864  472,146  313,126  633  1,595,769 
Half-year to 30 Jun 20221
Net operating income/(expense) before change in expected credit losses and other credit impairment charges2
 10,058  7,055  7,459  (925) 23,647 
– external 9,665  7,199  8,357  (1,574) 23,647 
– inter-segment 393  (144) (898) 649  — 
– of which: net interest income/(expense)4
 6,493  4,817  2,009  (473) 12,846 
Change in expected credit losses and other credit impairment charges (584) (278) (210) (2) (1,074)
Net operating income/(expense) 9,474  6,777  7,249  (927) 22,573 
Total operating expenses (6,995) (3,345) (4,557) (635) (15,532)
Operating profit/(loss) 2,479  3,432  2,692  (1,562) 7,041 
Share of profit in associates and joint ventures 8  —  —  1,355  1,363 
Constant currency profit/(loss) before tax 2,487  3,432  2,692  (207) 8,404 
% % % % %
Share of HSBC’s constant currency profit before tax 29.6  40.8  32.0  (2.4) 100.0 
Constant currency cost efficiency ratio 69.5  47.4  61.1  (68.6) 65.7 
Constant currency balance sheet data $m $m $m $m $m
Loans and advances to customers (net) 482,962  354,273  200,082  557  1,037,874 
Interests in associates and joint ventures 487  31  104  27,468  28,090 
Total external assets 884,333  628,040  1,330,747  167,390  3,010,510 
Customer accounts 846,974  491,115  332,473  589  1,671,151 
1     From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3    In the first quarter of 2023, following an internal review to assess which global businesses were best suited to serve our customers’ respective needs, a portfolio of our customers within our entities in Latin America was transferred from GBM to CMB for reporting purposes. Comparative data have been re-presented accordingly.
4 Net interest expense recognised in the Corporate Centre includes $3.8bn (1H22: $0.4bn) of interest expense in relation to the internal cost to fund trading and fair value net assets; and the funding cost of foreign exchange swaps in our Markets Treasury function. During 2Q23 we implemented a consistent reporting approach across the 14 most material entities that contribute to our trading and fair value net assets, which resulted in an increase to the 1H23 associated funding costs reported through the intersegment elimination in Corporate Centre of approximately $0.4bn, recognised in 2Q23.
Reported external net operating income is attributed to countries and territories on the basis of the location of the branch responsible for reporting the results or advancing the funds:
Half-year to1
30 Jun 2023 30 Jun 2022
$m $m
Reported external net operating income by country/territory2
 36,876  24,545 
– UK
 6,762  6,547 
– Hong Kong
 10,325  6,471 
– US
 2,112  1,964 
– France
 4,107  950 
– other countries/territories 13,570  8,613 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2    Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
HSBC Holdings plc
117

Notes on the interim condensed financial statements (unaudited)
Constant currency results reconciliation
30 Jun 2023
30 Jun 20221
Reported and constant currency Constant currency Currency translation Reported
$m $m $m $m
Revenue2
 36,876  23,647  (898) 24,545 
ECL (1,345) (1,074) 13  (1,087)
Operating expenses (15,457) (15,532) 595  (16,127)
Share of profit in associates and joint ventures 1,583  1,363  (86) 1,449 
Profit before tax 21,657  8,404  (376) 8,780 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
Constant currency balance sheet reconciliation
At 30 Jun 2023
At 30 June 20221
At 31 Dec 20221
Reported and constant currency Constant currency Currency translation Reported Constant currency Currency translation Reported
$m $m $m $m $m $m $m
Loans and advances to customers (net) 959,558  1,037,874  10,853  1,027,021  936,613  13,052  923,561 
Interests in associates and joint ventures 29,546  28,090  (1,356) 29,446  28,384  (870) 29,254 
Total external assets 3,041,476  3,010,510  40,029  2,970,481  2,995,590  46,304  2,949,286 
Customer accounts 1,595,769  1,671,151  19,850  1,651,301  1,592,396  22,093  1,570,303 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
Notable items
Half-year to
30 Jun 2023 30 Jun 2022
$m $m
Notable items
Revenue
Disposals, acquisitions and related costs1,2
 3,321  (288)
Fair value movements on financial instruments3
 15  (371)
Restructuring and other related costs4
 —  68 
Operating expenses
Disposals, acquisitions and related costs (118) — 
Restructuring and other related costs5
 47  (1,040)
1    Includes the reversal of a $2.1bn impairment loss relating to the planned sale of our retail banking operations in France, which is no longer classified as held for sale.
2    Includes the provisional gain of $1.5bn recognised in respect of the acquisition of SVB UK.
3    Fair value movements on non-qualifying hedges in HSBC Holdings.
4    Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
5 In 2Q23, we recognised $47m of reversals relating to restructuring provisions recognised during 2022.

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HSBC Holdings plc

6
Fair values of financial instruments carried at fair value
The accounting policies, control framework and hierarchy used to determine fair values at 30 June 2023 are consistent with those applied for the Annual Report and Accounts 2022.
Financial instruments carried at fair value and bases of valuation
Valuation techniques
Quoted
market price
 Level 1		 Using
observable inputs
Level 2		 With significant
unobservable inputs
Level 3		 Total
Recurring fair value measurements $m $m $m $m
At 30 Jun 2023
Assets
Trading assets 177,730  73,585  4,072  255,387 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 25,199  60,724  18,380  104,303 
Derivatives 2,434  268,389  1,772  272,595 
Financial investments 198,345  75,332  3,006  276,683 
Liabilities
Trading liabilities 55,039  25,738  451  81,228 
Financial liabilities designated at fair value 1,210  128,259  10,149  139,618 
Derivatives 2,856  264,389  2,315  269,560 
At 31 Dec 20221
Assets
Trading assets 148,592  64,684  4,817  218,093 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 23,146  59,548  17,407  100,101 
Derivatives 2,917  279,278  1,964  284,159 
Financial investments 181,659  71,040  2,961  255,660 
Liabilities
Trading liabilities 44,787  27,092  474  72,353 
Financial liabilities designated at fair value 1,125  115,764  10,432  127,321 
Derivatives 2,399  280,443  2,920  285,762 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
The table below provides the fair value levelling of assets held for sale and liabilities of disposal groups that have been classified as held for sale in accordance with IFRS 5. For further details, see Note 15.
Financial instruments carried at fair value and bases of valuation – assets and liabilities held for sale
Valuation techniques
Quoted
market price
 Level 1		 Using
observable inputs
Level 2		 With significant
unobservable inputs
Level 3		 Total
Recurring fair value measurements $m $m $m $m
At 30 Jun 2023
Assets
Trading assets 2,152  127  —  2,279 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss —  15  —  15 
Derivatives —  585  —  585 
Financial investments 11,599  520  —  12,119 
Liabilities
Trading liabilities 1,750  155  —  1,905 
Financial liabilities designated at fair value —  —  —  — 
Derivatives —  788  —  788 
At 31 Dec 2022
Assets
Trading assets 2,932  244  —  3,176 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss —  14  47  61 
Derivatives —  866  —  866 
Financial investments 11,184  —  —  11,184 
Liabilities
Trading liabilities 2,572  182  —  2,754 
Financial liabilities designated at fair value —  3,523  —  3,523 
Derivatives —  813  —  813 
HSBC Holdings plc
119

Notes on the interim condensed financial statements (unaudited)
Transfers between Level 1 and Level 2 fair values
Assets Liabilities
Financial investments Trading assets Designated and otherwise mandatorily measured at fair value Derivatives Trading liabilities Designated at fair value Derivatives
$m $m $m $m $m $m $m
At 30 Jun 2023
Transfers from Level 1 to Level 2 5,667  4,139  801  —  41  —  — 
Transfers from Level 2 to Level 1 2,432  2,495  1,197  —  147  —  — 
At 31 Dec 2022
Transfers from Level 1 to Level 2 4,721  5,284  2,565  —  113  —  — 
Transfers from Level 2 to Level 1 8,208  5,964  3,340  —  233  —  — 
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency.
Fair value adjustments
We adopt the use of fair value adjustments when we take into consideration additional factors not incorporated within the valuation model that would otherwise be considered by a market participant. We classify fair value adjustments as either ‘risk-related’ or ‘model-related’. The majority of these adjustments relate to GBM. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income statement. For example, as models are enhanced, fair value adjustments may no longer be required. Similarly, fair value adjustments will decrease when the related positions are unwound, but this may not result in profit or loss.
Global Banking and Markets fair value adjustments
At 30 Jun 2023 At 31 Dec 2022
GBM Corporate Centre GBM Corporate Centre
$m $m $m $m
Type of adjustment
Risk-related 626  50  650  40 
– bid-offer 400  —  426  — 
– uncertainty 72  2  86  — 
– credit valuation adjustment 195  45  245  35 
– debit valuation adjustment (103) —  (175) — 
– funding fair value adjustment 62  3  68  5 
– other —  —  —  — 
Model-related 74  —  61  — 
– model limitation 74  —  61  — 
– other —  —  —  — 
Inception profit (Day 1 P&L reserves)1
 84  —  97  — 
Total 784  50  808  40 
1    See Note 9 on the interim condensed financial statements on page 126.
The reduction in fair value adjustments was predominantly driven by changes to exposure, and tightening of credit and liquidity market spreads, with the reduction in the debit valuation adjustment including a consideration of the overlap with the funding fair value adjustment.
120
HSBC Holdings plc

Fair value valuation bases
Financial instruments measured at fair value using a valuation technique with significant unobservable inputs – Level 3
Assets Liabilities
Financial investments Trading assets Designated and otherwise mandatorily measured at fair value through profit or loss Derivatives Total Trading liabilities Designated at fair value Derivatives Total
$m $m $m $m $m $m $m $m $m
Private equity including strategic investments 679  69  16,644  —  17,392  128  —  —  128 
Asset-backed securities 371  376  —  —  747  —  —  —  — 
Structured notes —  —  3  —  3  —  10,149  —  10,149 
Other derivatives —  —  —  1,772  1,772  —  —  2,315  2,315 
Other portfolios 1,956  3,627  1,733  —  7,316  323  —  —  323 
At 30 Jun 2023 3,006  4,072  18,380  1,772  27,230  451  10,149  2,315  12,915 
Private equity including strategic investments 647  19  15,653  —  16,319  92  —  —  92 
Asset-backed securities 438  208  95  —  741  —  —  —  — 
Structured notes —  —  —  —  —  —  10,432  —  10,432 
Other derivatives —  —  —  1,964  1,964  —  —  2,920  2,920 
Other portfolios 1,876  4,590  1,659  —  8,125  382  —  —  382 
At 31 Dec 2022 2,961  4,817  17,407  1,964  27,149  474  10,432  2,920  13,826 
The basis for determining the fair value of the financial instruments in the table above is explained on page 366 of the Annual Report and Accounts 2022.
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy
Movement in Level 3 financial instruments
Assets Liabilities
Financial investments Trading assets Designated and otherwise mandatorily measured at fair value through profit or loss Derivatives Trading liabilities Designated at fair value Derivatives
$m $m $m $m $m $m $m
At 1 Jan 2023 2,961  4,817  17,407  1,964  474  10,432  2,920 
Total gains or losses recognised in profit or loss (15) 65  706  237  25  60  478 
– net income or losses from financial instruments held for trading or managed on a fair value basis —  65  —  237  25  —  478 
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss —  —  706  —  —  60  — 
– gains less losses from financial investments held at fair value through other comprehensive income (15) —  —  —  —  —  — 
Total gains or losses recognised in other comprehensive income (‘OCI’) 138  92  11  75  21  323  98 
– financial investments: fair value gains or losses 83  —  —  —  —  234  — 
– exchange differences 55  92  11  75  21  89  98 
Purchases 215  761  1,660  —  115  —  — 
New issuances —  —  —  —  2  2,313  — 
Sales (122) (1,353) (303) —  (181) (2) — 
Settlements (202) (487) (963) (517) (9) (1,479) (1,164)
Transfers out (108) (377) (140) (85) (32) (1,821) (138)
Transfers in 139  554  2  98  36  323  121 
At 30 Jun 2023 3,006  4,072  18,380  1,772  451  10,149  2,315 
Unrealised gains or losses recognised in profit or loss relating to assets and liabilities held at 30 Jun 2023 —  (58) 232  734  (4) (189) (560)
– net income or losses from financial instruments held for trading or managed on a fair value basis —  (58) —  734  (4) —  (560)
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss —  —  232  —  —  (189) — 
HSBC Holdings plc
121

Notes on the interim condensed financial statements (unaudited)
Movement in Level 3 financial instruments (continued)
Assets Liabilities
Financial investments Trading assets Designated and otherwise mandatorily measured at fair value through profit or loss Derivatives Trading liabilities Designated at fair value Derivatives
$m $m $m $m $m $m $m
At 1 Jan 2022 3,389  2,662  14,238  2,478  785  7,880  3,088 
IFRS 17 impacts (12) —  1,468  —  —  —  — 
At 1 Jan 2022 (as restated) 3,377  2,662  15,706  2,478  785  7,880  3,088 
Total gains or losses recognised in profit or loss (7) (22) 285  408  (45) (1,103) 165 
– net income or losses from financial instruments held for trading or managed on a fair value basis —  (22) —  408  (45) —  165 
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss —  —  285  —  —  (1,103) — 
– gains less losses from financial investments held at fair value through other comprehensive income (7) —  —  —  —  —  — 
Total losses recognised in other comprehensive income (‘OCI’) (287) (165) (336) (191) (12) (398) (231)
– financial investments: fair value losses (140) —  —  —  —  (18) — 
– exchange differences (147) (165) (336) (191) (12) (380) (231)
Purchases 506  1,026  1,704  —  13  —  — 
New issuances —  —  —  —  4  2,511  — 
Sales (186) (698) (317) —  (95) (22) — 
Settlements (273) (373) (613) (509) (636) (723) (580)
Transfers out (489) (287) (48) (290) (7) (549) (437)
Transfers in 38  833  70  215  344  869  315 
At 30 Jun 2022 2,679  2,976  16,451  2,111  351  8,465  2,320 
Unrealised gains or losses recognised in profit or loss relating to assets and liabilities held at 30 Jun 2022 —  (37) 276  929  1  423  3,494 
– net income or losses from financial instruments held for trading or managed on a fair value basis —  (37) —  929  1  —  3,494 
– changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss —  —  276  —  —  423  — 

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

Effect of changes in significant unobservable assumptions to reasonably possible alternatives
The following table shows the sensitivity of Level 3 fair values to reasonably possible alternative assumptions:
Sensitivity of fair values to reasonably possible alternative assumptions
Reflected in profit or loss Reflected in OCI
Favourable
changes		 Unfavourable
changes		 Favourable
changes		 Unfavourable
changes
$m $m $m $m
Derivatives, trading assets and trading liabilities1
 332  (434) —  — 
Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss 1,009  (1,009) —  — 
Financial investments 10  (10) 61  (63)
At 30 Jun 2023 1,351  (1,453) 61  (63)
Derivatives, trading assets and trading liabilities1
 172  (179) —  — 
Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss 1,049  (1,047) —  — 
Financial investments 12  (6) 140  (141)
At 30 Jun 2022 1,233  (1,232) 140  (141)
Derivatives, trading assets and trading liabilities1
 264  (291) —  — 
Financial assets and liabilities designated and otherwise mandatorily measured at fair value through profit or loss 981  (978) —  — 
Financial investments 11  (11) 65  (55)
At 31 Dec 2022 1,256  (1,280) 65  (55)
1    ‘Derivatives, trading assets and trading liabilities’ is presented as one category to reflect the manner in which these financial instruments are risk-managed.

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HSBC Holdings plc

The sensitivity analysis aims to measure a range of fair values consistent with the application of a 95% confidence interval. Methodologies take account of the nature of the valuation technique employed, as well as the availability and reliability of observable proxy and historical data.
When the fair value of a financial instrument is affected by more than one unobservable assumption, the table above reflects the most favourable or the most unfavourable change from varying the assumptions individually.
Key unobservable inputs to Level 3 financial instruments
The following table lists key unobservable inputs to Level 3 financial instruments and provides the range of those inputs at 30 June 2023. There has been no change to the key unobservable inputs to Level 3 financial instruments and inter-relationships therein, which are detailed on pages 368 and 369 of the Annual Report and Accounts 2022.
Quantitative information about significant unobservable inputs in Level 3 valuations
Fair value Valuation techniques Key unobservable inputs 30 Jun 2023 31 Dec 2022
Assets Liabilities Full range of inputs Full range of
inputs
$m $m Lower Higher Lower Higher
Private equity including strategic investments 17,392  128  See footnote 1 See footnote 1
Asset-backed securities (‘ABS’) 747  — 
– collateralised loan/debt obligation 76  — 
Market proxy Bid quotes —  89 —  92 
– other ABSs 671  —  Market proxy Bid quotes —  98 —  99 
Structured notes 3  10,149 
– equity-linked notes 3  6,281  Model – Option model Equity volatility 6% 95% 6% 142%
Model – Option model Equity correlation 22% 99% 32% 99%
– Foreign exchange (‘FX’)-linked notes —  2,778  Model – Option model FX volatility 2% 36% 3% 37%
– other2
 —  1,090 
Other derivatives 1,772  2,315 
– interest rate derivatives 511  718 
securitisation swaps
114  160  Model – Discounted cash flow Prepayment rate 5% 10% 5% 10%
long-dated swaptions
64  75  Model – Option model Interest rate volatility 9% 34% 8% 53%
    other2
 333  483 
– FX derivatives 308  388 
FX options
271  318  Model – Option model FX volatility 2% 44% 1% 46%
    other2
 37  70 
– equity derivatives 737  941 
long-dated single stock options
520  713  Model – Option model Equity volatility 7% 77% 7% 153%
    other2
 217  228 
– credit derivatives 216  268 
    other2
 216  268 
Other portfolios 7,316  323 
– repurchase agreements 763  295  Model – Discounted cash flow Interest rate curve 0% 10% 1% 9%
– other2
 6,553  28 
At 30 Jun 2023 27,230  12,915 
1    Given the bespoke nature of the analysis in respect of each private equity holding, it is not practical to quote a range of key unobservable inputs.
2    ’Other’ includes a range of smaller holdings with multiple inputs.
HSBC Holdings plc
123

Notes on the interim condensed financial statements (unaudited)
7 Fair values of financial instruments not carried at fair value
The bases for measuring the fair values of loans and advances to banks and customers, financial investments, deposits by banks, customer accounts, debt securities in issue, subordinated liabilities and non-trading repurchase and reverse repurchase agreements are explained on pages 370 and 371 of the Annual Report and Accounts 2022.
Fair values of financial instruments not carried at fair value on the balance sheet
At 30 Jun 2023
At 31 Dec 20221
Carrying
amount		 Fair
value		 Carrying
amount		 Fair
value
$m $m $m $m
Assets
Loans and advances to banks 100,921  100,939  104,475  104,459 
Loans and advances to customers 959,558  944,187  923,561  911,898 
Reverse repurchase agreements – non-trading 258,056  258,050  253,754  253,668 
Financial investments – at amortised cost 131,250  127,779  109,066  106,412 
Liabilities
Deposits by banks 68,709  68,733  66,722  66,831 
Customer accounts 1,595,769  1,595,379  1,570,303  1,570,209 
Repurchase agreements – non-trading 170,110  170,123  127,747  127,500 
Debt securities in issue 85,471  84,966  78,149  77,021 
Subordinated liabilities 23,286  24,784  22,290  22,723 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
Fair values of financial instruments not carried at fair value on the balance sheet – assets and disposal groups held for sale
At 30 Jun 2023 At 31 Dec 2022
Carrying
amount		 Fair
value		 Carrying
amount		 Fair
value
$m $m $m $m
Assets
Loans and advances to banks 1,149  1,151  253  257 
Loans and advances to customers 59,869  59,126  80,687  78,159 
Reverse repurchase agreements – non-trading 3,379  3,379  4,646  4,646 
Financial investments – at amortised cost 6,744  6,577  6,165  6,042 
Liabilities
Deposits by banks 253  253  64  64 
Customer accounts 66,154  66,543  85,274  85,303 
Repurchase agreements – non-trading 2,615  2,615  3,266  3,266 
Debt securities in issue 9,127  8,794  12,928  12,575 
Subordinated liabilities 8  7  8  7 

Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly, their carrying amount is a reasonable approximation of fair value.
124
HSBC Holdings plc

8 Derivatives
Notional contract amounts and fair values of derivatives by product contract type held by HSBC
Notional contract amount Fair value amount
Assets and liabilities Assets Liabilities
Trading Hedging Trading Hedging Total Trading Hedging Total
$m $m $m $m $m $m $m $m
Foreign exchange 9,257,418  55,396  104,136  1,211  105,347  96,805  184  96,989 
Interest rate 15,641,544  344,757  297,598  5,297  302,895  302,192  4,546  306,738 
Equities 697,994  —  15,580  —  15,580  17,563  —  17,563 
Credit 162,699  —  1,466  —  1,466  1,614  —  1,614 
Commodity and other 85,366  —  1,976  —  1,976  1,325  —  1,325 
Gross total fair values 25,845,021  400,153  420,756  6,508  427,264  419,499  4,730  424,229 
Offset (154,669) (154,669)
At 30 Jun 2023 25,845,021  400,153  420,756  6,508  272,595  419,499  4,730  269,560 
Foreign exchange 8,434,453  38,924  122,206  525  122,731  123,088  166  123,254 
Interest rate 15,213,232  276,589  285,449  5,066  290,515  287,876  3,501  291,377 
Equities 570,410  —  9,325  —  9,325  9,176  —  9,176 
Credit 183,995  —  1,091  —  1,091  1,264  —  1,264 
Commodity and other 78,414  —  1,484  —  1,484  1,678  —  1,678 
Gross total fair values 24,480,504  315,513  419,555  5,591  425,146  423,082  3,667  426,749 
Offset (140,987) (140,987)
At 31 Dec 20221
 24,480,504  315,513  419,555  5,591  284,159  423,082  3,667  285,762 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk. Derivative assets and liabilities decreased during 1H23, reflecting changes in yield curves and the market environment.
Derivatives valued using models with unobservable inputs
The following table shows the difference between the fair value at initial recognition, which is the transaction price, and the value that would have been derived had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases.
Unamortised balance of derivatives valued using models with significant unobservable inputs
Half-year to
30 Jun 30 Jun
2023 2022
$m $m
Unamortised balance at beginning of period 97  106 
Deferral on new transactions 84  100 
Recognised in the income statement during the period (100) (99)
– amortisation
 (53) (61)
– subsequent to unobservable inputs becoming observable
 (10) — 
– maturity, termination or offsetting derivative
(37) (38)
Exchange differences 3  (8)
Unamortised balance at end of period1
 84  99 
1 This amount is yet to be recognised in the consolidated income statement.
Hedge accounting derivatives
The notional contract amounts of derivatives held for hedge accounting purposes indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk.
Notional contract amounts of derivatives held for hedging purposes by product type
At 30 Jun 2023 At 31 Dec 2022
Cash flow
hedges		 Fair value
hedges		 Cash flow
hedges		 Fair value
hedges
$m $m $m $m
Foreign exchange 20,927  —  8,781  — 
Interest rate 166,589  178,168  114,527  162,062 
Total 187,516  178,168  123,308  162,062 
The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using forward foreign exchange contracts or by financing with foreign currency borrowings. At 30 June 2023, the notional contract values of outstanding financial instruments designated as hedges of net investments in foreign operations were $34,469m (31 December 2022: $30,143m).
HSBC Holdings plc
125

Notes on the interim condensed financial statements (unaudited)
Interest rate benchmark reform: Amendments to IFRS 9 and IAS 39 ‘Financial Instruments’
HSBC has applied both the first set of amendments (‘Phase 1’) and the second set of amendments (‘Phase 2’) to IFRS 9 and IAS 39 applicable to hedge accounting. The items in hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the balance sheet as ‘Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income’, ‘Loans and advances to customers’, ‘Debt securities in issue’ and ‘Deposits by banks’. The notional value of the derivatives impacted by the Ibor reform, including those designated in hedge accounting relationships, is disclosed on page 63 in the section ‘Financial instruments impacted by Ibor reform’. For further details on Ibor transition, see ’Ibor transition’ under ’Areas of special interest’ on page 62.
During 2023, the Group transitioned all of its hedging instruments referencing US dollar Libor. This transition did not necessitate any new approaches compared with the mechanisms used so far for transition, and it will not be necessary to change the transition risk management strategy.
For some of the Ibors included under the ‘Other’ header in the table below, judgement has been needed to establish whether a transition is required. This is because there are Ibor benchmarks subject to computation improvements and insertion of fallback provisions where their administrators have yet to provide full clarity on whether or when these Ibor benchmarks will be demised.
The notional amounts of interest rate derivatives designated in hedge accounting relationships do not represent the extent of the risk exposure managed by the Group but they are expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 amendments and are shown in the table below. The cross-currency swaps designated in hedge accounting relationships and affected by Ibor reform are not significant and have not been presented below:
Hedging instrument impacted by Ibor reform
Hedging instrument
Impacted by Ibor reform Not impacted by Ibor reform
Notional
amount3
€1
 $
Other2
 Total
$m $m $m $m $m $m
Fair value hedges 18,019  —  11,804  29,823  148,345  178,168 
Cash flow hedges 11,157  —  30,469  41,626  124,963  166,589 
At 30 Jun 2023 29,176  —  42,273  71,449  273,308  344,757 
Fair value hedges 12,756  2,015  12,643  27,414  134,648  162,062 
Cash flow hedges 8,865  —  27,830  36,695  77,832  114,527 
At 31 Dec 2022 21,621  2,015  40,473  64,109  212,480  276,589 
    
1    The notional contract amounts of euro interest rate derivatives impacted by Ibor reform mainly comprise hedges with a Euribor benchmark, which are ‘Fair value hedges’ of $18,019m (31 December 2022: $12,756m) and ‘Cash flow hedges’ of $11,157m (31 December 2022: $8,865m).
2    Other benchmarks impacted by Ibor reform comprise mainly of Canadian dollar offered rate (‘CDOR’), Hong Kong interbank offered rate (‘HIBOR’) and Mexican interbank equilibrium interest rate (‘TIIE’)-related derivatives.
3    The notional contract amounts of interest rate derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date. They do not represent amounts at risk.
9
Financial investments
Carrying amounts of financial investments
30 Jun
31 Dec1
2023 2022
$m $m
Financial investments measured at fair value through other comprehensive income 276,683  255,660 
– treasury and other eligible bills 102,704  86,749 
– debt securities 172,280  167,107 
– equity securities 1,606  1,696 
– other instruments 93  108 
Debt instruments measured at amortised cost 131,250  109,066 
– treasury and other eligible bills 30,627  34,507 
– debt securities 100,623  74,559 
At the end of the period 407,933  364,726 
1    From 1 January 2023, we adopted IFRS 17 ‘Insurance Contracts’, which replaced IFRS 4 ‘Insurance Contracts’. Comparative data have been restated accordingly.
10
Interests in associates and joint ventures
At 30 June 2023, the carrying amount of HSBC’s interests in associates and joint ventures was $29,546m (31 December 2022: $29,254m).
Principal associates of HSBC
At 30 Jun 2023 At 31 Dec 2022
Carrying amount
Fair value1
 Carrying amount
Fair value1
$m $m $m $m
Bank of Communications Co., Limited 23,344  9,363  23,307  8,141 
Saudi Awwal Bank 4,704  6,479  4,494  6,602 
1Principal associates are listed on recognised stock exchanges. The fair values are based on the quoted market prices of the shares held (Level 1 in the fair value hierarchy).
126
HSBC Holdings plc

Share of profit in associates and joint ventures
Half year to
30 Jun 30 Jun
2023 2022
$m $m
Bank of Communications Co., Limited 1,317  1,344 
Saudi Awwal Bank 272  117 
Other associates and joint ventures (6) (12)
Share of profit in associates and joint ventures 1,583  1,449 

Bank of Communications Co., Limited
The Group’s investment in Bank of Communications Co., Limited (‘BoCom’) is classified as an associate. Significant influence in BoCom was established with consideration of all relevant factors, including representation on BoCom’s Board of Directors and participation in a resource and experience sharing agreement (‘RES’). Under the RES, HSBC staff have been seconded to assist in the maintenance of BoCom’s financial and operating policies. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28 ‘Investments in Associates and Joint Ventures’, whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group’s share of BoCom’s net assets. An impairment test is required if there is any indication of impairment.
Impairment testing
At 30 June 2023, the fair value of the Group’s investment in BoCom had been below the carrying amount for approximately 11 years. As a result, the Group performed an impairment test on the carrying amount, which confirmed that there was no impairment at 30 June 2023 as the recoverable amount as determined by a value-in-use (‘VIU’) calculation was higher than the carrying value.
At 30 Jun 2023 At 31 Dec 2022
VIU Carrying value Fair value VIU Carrying value Fair value
$bn $bn $bn $bn $bn $bn
BoCom 23.9  23.3  9.4  23.5  23.3  8.1 
The headroom, which is defined as the extent to which the VIU exceeds the carrying value, increased by $0.4bn compared with 31 December 2022. The increase in headroom was principally due to the movement in the discount rate which was market driven, partly offset by revisions to management’s best estimates of BoCom’s future earnings in the short to medium term.
In future periods, the VIU may increase or decrease depending on the effect of changes to model inputs. The main model inputs are described below and are based on factors observed at the period-end. The factors that could result in a change in the VIU and an impairment include a short-term underperformance by BoCom, a change in regulatory capital requirements, or an increase in uncertainty regarding the future performance of BoCom resulting in a downgrade of the forecast of future asset growth or profitability. An increase in the discount rate could also result in a reduction of VIU and an impairment.
If the Group did not have significant influence in BoCom, the investment would be carried at fair value rather than the current carrying value.
Basis of recoverable amount
The impairment test was performed by comparing the recoverable amount of BoCom, determined by a VIU calculation, with its carrying amount. The VIU calculation uses discounted cash flow projections based on management’s best estimates of future earnings available to ordinary shareholders prepared in accordance with IAS 36 ’Impairment of Assets’. Significant management judgement is required in arriving at the best estimate.
There are two main components to the VIU calculation. The first component is management’s best estimate of BoCom’s earnings. Forecast earnings growth over the short to medium term are lower than recent (within the last five years) historical actual growth and reflect the uncertainty arising from the current economic outlook. Reflecting management’s intent to continue to retain its investment, earnings beyond the short to medium term are then extrapolated into perpetuity using a long-term growth rate to derive a terminal value, which comprises the majority of the VIU. The second component is the capital maintenance charge (‘CMC’), which is management’s forecast of the earnings that need to be withheld in order for BoCom to meet capital requirements over the forecast period, meaning that CMC is deducted when arriving at management’s estimate of future earnings available to ordinary shareholders. The principal inputs to the CMC calculation include estimates of asset growth, the ratio of risk-weighted assets to total assets and the expected capital requirements. An increase in the CMC as a result of a change to these principal inputs would reduce VIU. Additionally, management considers other qualitative factors, to ensure that the inputs to the VIU calculation remain appropriate.
Key assumptions in value-in-use calculation
We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:
–Long-term profit growth rate: 3% (31 December 2022: 3%) for periods after 2026, which does not exceed forecast GDP growth in mainland China and is similar to forecasts by external analysts.
–Long-term asset growth rate: 3% (31 December 2022: 3%) for periods after 2026, which is the rate that assets are expected to grow to achieve long-term profit growth of 3%.
–Discount rate: 9.80% (31 December 2022: 10.04%), which is based on a capital asset pricing model (‘CAPM’), using market data. The discount rate used is within the range of 8.0% to 9.8% (31 December 2022: 8.4% to 10.4%) indicated by the CAPM, and decreased as a consequence of a market driven reduction in beta. While the CAPM range sits at the lower end of the range adopted by selected external analysts of 8.8% to 13.5% (31 December 2022: 8.8%% to 13.5%), we continue to regard the CAPM range as the most appropriate basis for determining this assumption.
–Expected credit losses (‘ECL’) as a percentage of customer advances: ranges from 0.87% to 0.94% (31 December 2022: 0.99% to 1.05%) in the short to medium term, reflecting reported credit experience through the recovery from the Covid-19 pandemic in mainland China. For periods after 2026, the ratio is 0.97% (31 December 2022: 0.97%), which is higher than BoCom’s average ECL as a percentage of customer advances in recent years prior to the pandemic.
HSBC Holdings plc
127

Notes on the interim condensed financial statements (unaudited)
–Risk-weighted assets as a percentage of total assets: ranges from 61.0% to 63.7% (31 December 2022: 61.0% to 64.4%) in the short to medium term, reflecting higher risk-weights in the short term followed by an expected reversion to recent historical levels. For periods after 2026, the ratio is 61.0% (31 December 2022: 61.0%), which is similar to BoCom’s actual results in recent years.
–Operating income growth rate: ranges from 1.7% to 9.4% (31 December 2022: 1.9% to 7.7%) in the short to medium term, which is similar to BoCom’s actual results in recent years, and is heavily influenced by projections of net interest income in future periods. This reflects BoCom’s most recent actual results, global trade tensions and industry developments in mainland China.
–Cost-income ratio: ranges from 35.5% to 36.8% (31 December 2022: 35.5% to 36.3%) in the short to medium term. These ratios are similar to BoCom’s actual results in recent years and forecasts disclosed by external analysts.
–Effective tax rate: ranges from 5.3% to 15.0% (31 December 2022: 4.4% to 15.0%) in the short to medium term, reflecting BoCom’s actual results and an expected increase towards the long-term assumption through the forecast period. For periods after 2026, the rate is 15.0% (31 December 2022: 15.0%), which is higher than the recent historical average, and aligned to the minimum tax rate as proposed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.
–Capital requirements: capital adequacy ratio of 12.5% (31 December 2022: 12.5%) and tier 1 capital adequacy ratio of 9.5% (31 December 2022: 9.5%), based on BoCom’s capital risk appetite and capital requirements respectively.
The following table shows the change to each key assumption in the VIU calculation that on its own would reduce the headroom to nil:
Key assumption Changes to key assumption to reduce headroom to nil
–Long-term profit growth rate
Decrease by 13 basis points
–Long-term asset growth rate
Increase by 11 basis points
–Discount rate
Increase by 17 basis points
–Expected credit losses as a percentage of customer advances
Increase by 2 basis points
–Risk-weighted assets as a percentage of total assets
Increase by 90 basis points
–Operating income growth rate
Decrease by 24 basis points
–Cost-income ratio
Increase by 53 basis points
–Long-term effective tax rate
Increase by 153 basis points
–Capital requirements – capital adequacy ratio
Increase by 18 basis points
–Capital requirements – tier 1 capital adequacy ratio
Increase by 162 basis points

The following table further illustrates the impact on VIU of reasonably possible changes to key assumptions. This reflects the sensitivity of the VIU to each key assumption on its own and it is possible that more than one favourable and/or unfavourable change may occur at the same time. The selected rates of reasonably possible changes to key assumptions are based on external analysts’ forecasts, statutory requirements and other relevant external data sources, which can change period to period.
Sensitivity of VIU to reasonably possible changes in key assumptions
Favourable change Unfavourable change
Increase in VIU VIU Decrease in VIU VIU
bps $bn $bn bps $bn $bn
At 30 Jun 2023
Long-term profit growth rate1
62
 3.1
27.0
(72)
(3.0)
20.9
Long-term asset growth rate1
(72)
3.4
27.3
62
(3.6)
20.3
Discount rate (180) 8.2  32.1  210  (5.3) 18.6 
Expected credit losses as a percentage of customer advances
 2023 to 2026: 83
2027 onwards: 91
 2.0  25.9 
  2023 to 2026: 120
2027 onwards: 104
 (3.6) 20.3 
Risk-weighted assets as a percentage of total assets (77) 0.1  24.0  280  (2.2) 21.7 
Operating income growth rate 56  1.4  25.3  (116) (2.9) 21.0 
Cost-income ratio (131) 0.9  24.8  164  (2.3) 21.6 
Long-term effective tax rate (426) 1.6  25.5  1,000  (3.7) 20.2 
Capital requirements – capital adequacy ratio —  —  23.9  229  (7.8) 16.1 
Capital requirements – tier 1 capital adequacy ratio —  —  23.9  257  (3.9) 20.0 
At 31 Dec 2022
Long-term profit growth rate1
 75
 3.6
27.1
(71)
 (2.7)
 20.8
Long-term asset growth rate1
(71)
3.1
26.6
75
(4.1)
19.4
Discount rate (164) 6.9  30.4  136  (3.7) 19.8 
Expected credit losses as a percentage of customer advances
2022 to 2026: 95
2027 onwards: 91
 1.9  25.4 
2022 to 2026: 120
2027 onwards: 104
 (2.9) 20.6 
Risk-weighted assets as a percentage of total assets (118) 0.1  23.6  239  (2.3) 21.2 
Operating income growth rate 44  1.3  24.8  (83) (2.5) 21.0 
Cost-income ratio (122) 1.0  24.5  174  (2.1) 21.4 
Long-term effective tax rate (426) 1.5  25.0  1,000  (3.6) 19.9 
Capital requirements – capital adequacy ratio —  —  23.5  191  (6.3) 17.2 
Capital requirements – tier 1 capital adequacy ratio —  —  23.5  266  (3.2) 20.3 
1    The reasonably possible ranges of the long-term profit growth rate and long-term asset growth rate assumptions reflect the close relationship between these assumptions, which would result in offsetting changes to each assumption.
128
HSBC Holdings plc

Considering the interrelationship of the changes set out in the table above, management estimates that the reasonably possible range of VIU is $16.2bn to $29.3bn (31 December 2022: $16.9bn to $28.7bn). The range is based on impacts set out in the table above arising from the favourable/unfavourable change in the earnings in the short to medium term, the long-term expected credit losses as a percentage of customer advances and a 50bps increase/decrease in the discount rate. All other long-term assumptions, and the basis of the CMC have been kept unchanged when determining the reasonably possible range of the VIU. Impairment, if determined, would be recognised in the income statement. The impact on the Group’s CET1 ratio is expected to be minimal in the event of an impairment, as the adverse impact on CET1 capital from the impairment would be offset by the favourable impact from a lower carrying value.
Saudi Awwal Bank
The Group’s investment in Saudi Awwal Bank (‘SAB’) is classified as an associate. HSBC is the largest shareholder in SAB with a shareholding of 31%. Significant influence in SAB is established via representation on the Board of Directors. Investments in associates are recognised using the equity method of accounting in accordance with IAS 28, as described previously for BoCom.
Impairment testing
There were no indicators of impairment at 30 June 2023. The fair value of the Group’s investment in SAB of $6.5bn was above the carrying amount of $4.7bn.
11
Provisions

Restructuring
costs		 Legal proceedings
and regulatory
matters		 Customer
remediation		 Other
provisions		 Total
$m $m $m $m $m
Provisions (excluding contractual commitments)
At 31 Dec 2022 445  409  195  397  1,446 
Additions 152  78  9  86  325 
Amounts utilised (147) (171) (35) (34) (387)
Unused amounts reversed (45) (19) (34) (49) (147)
Exchange and other movements 23  (6) 8  6  31 
At 30 Jun 2023 428  291  143  406  1,268 
Contractual commitments1
At 31 Dec 2022 512 
Net change in expected credit loss provision and other movements (58)
At 30 Jun 2023 454 
Total provisions
At 31 Dec 2022 1,958 
At 30 Jun 2023 1,722 
1    Contractual commitments include the expected credit loss provision in relation to off-balance sheet financial guarantee contracts and commitments where HSBC has become party to an irrevocable commitment, as defined under IFRS 9 ‘Financial Instruments’; and provisions for performance and other guarantee contracts.
Further details of ‘Legal proceedings and regulatory matters’ are set out in Note 13. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (whether by way of claim or counterclaim); or civil disputes that may, if not settled, result in court, arbitration or tribunal proceedings. ‘Regulatory matters’ refers to investigations, reviews and other actions carried out by, or in response to, the actions of regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC.
Customer remediation refers to HSBC’s activities to compensate customers for losses or damages associated with a failure to comply with regulations or to treat customers fairly. Customer remediation is often initiated by HSBC in response to customer complaints and/or industry developments in sales practices, and is not necessarily initiated by regulatory action.
For further details of the impact of IFRS 9 on undrawn loan commitments and financial guarantees, presented in ‘Contractual commitments’, see Note 12. Further analysis of the movement in the expected credit loss provision is disclosed within the ‘Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees‘ table on page 78.
Brazil PIS and COFINS tax matters
Beginning in the late 1990s, HSBC Bank Brasil S.A. – Banco Múltiplo (‘HSBC Brazil’) and other financial services firms brought legal proceedings in Brazil challenging the assessment of PIS and COFINS taxes, which are federal taxes imposed on gross revenues earned by legal entities in Brazil. The Supreme Court of Brazil selected three cases – one involving an insurer, in 2007, and two involving other banks, in 2011 – to set standards that would apply to all of these proceedings. In June 2023, the court ruled against the financial services firms in all three cases. The standards set by the court in this ruling have not yet been applied to HSBC Brazil’s legacy cases, liability for which remained with HSBC after the sale of HSBC’s operations in Brazil to Bradesco in 2016. There are many factors that may affect the range of outcomes and any resulting financial impact for HSBC. Based upon the information currently available, a provision was recognised in respect of one legacy case. The remaining additional tax liability subject to challenge on all legacy PIS and COFINS cases is up to $0.4bn.

HSBC Holdings plc
129

Notes on the interim condensed financial statements (unaudited)
12
Contingent liabilities, contractual commitments and guarantees
At
30 Jun 31 Dec
2023 2022
$m $m
Guarantees and other contingent liabilities:
– financial guarantees 18,882  18,783 
– performance and other guarantees 89,758  88,240 
– other contingent liabilities 590  676 
At the end of the period 109,230  107,699 
Commitments:1
– documentary credits and short-term trade-related transactions 7,698  8,241 
– forward asset purchases and forward deposits placed 72,340  50,852 
– standby facilities, credit lines and other commitments to lend 793,256  768,761 
At the end of the period 873,294  827,854 
1    Includes $649,526m of commitments at 30 June 2023 (31 December 2022: $618,788m), to which the impairment requirements in IFRS 9 are applied where HSBC has become party to an irrevocable commitment.
The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the Group, which represent the maximum amounts at risk should the contracts be fully drawn upon and the clients default. As a significant portion of guarantees and commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 11. The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to HSBC’s annual credit review process.
Contingent liabilities arising from legal proceedings and regulatory and other matters against Group companies are excluded from this note but are disclosed in Note 13.

13
Legal proceedings and regulatory matters
HSBC is party to legal proceedings and regulatory matters in a number of jurisdictions arising out of its normal business operations. Apart from the matters described below, HSBC considers that none of these matters are material. The recognition of provisions is determined in accordance with the accounting policies set out in Note 1 of the Annual Report and Accounts 2022. While the outcomes of legal proceedings and regulatory matters are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of these matters as at 30 June 2023 (see Note 11). Where an individual provision is material, the fact that a provision has been made is stated and quantified, except to the extent that doing so would be seriously prejudicial. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.
Bernard L. Madoff Investment Securities LLC
Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US whose assets were invested with Bernard L. Madoff Investment Securities LLC (‘Madoff Securities’). Based on information provided by Madoff Securities as at 30 November 2008, the purported aggregate value of these funds was $8.4bn, including fictitious profits reported by Madoff. Based on information available to HSBC, the funds’ actual transfers to Madoff Securities minus their actual withdrawals from Madoff Securities during the time HSBC serviced the funds are estimated to have totalled approximately $4bn. Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities’ fraud.
US litigation: The Madoff Securities Trustee has brought lawsuits against various HSBC companies and others, seeking recovery of transfers from Madoff Securities to HSBC in an amount not specified, and these lawsuits remain pending in the US Bankruptcy Court for the Southern District of New York (the ‘US Bankruptcy Court’).
Certain Fairfield entities (together, ‘Fairfield’) (in liquidation since July 2009) have brought a lawsuit in the US against fund shareholders, including HSBC companies that acted as nominees for clients, seeking restitution of redemption payments. In August 2022, the US District Court for the Southern District of New York affirmed earlier decisions by the US Bankruptcy Court that dismissed the majority of the liquidators’ claims (against most of the HSBC companies). In September 2022, the remaining defendants before the US Bankruptcy Court sought leave to appeal and the liquidators filed appeals to the US Court of Appeals for the Second Circuit, which are currently pending. Meanwhile, proceedings before the US Bankruptcy Court with respect to the remaining claims are ongoing.
UK litigation: The Madoff Securities Trustee has filed a claim against various HSBC companies in the High Court of England and Wales, seeking recovery of transfers from Madoff Securities to HSBC. The claim has not yet been served and the amount claimed has not been specified.
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 monetary damages. Following dismissal of Primeo’s action by the lower and appellate courts in the Cayman Islands, in 2019, Primeo appealed to the UK Privy Council. During 2021, the UK Privy Council held two separate hearings in connection with Primeo’s appeal. Judgment was given against HSBC in respect of the first hearing and judgment is pending in respect of the second hearing.
Luxembourg litigation: In April 2009, Herald Fund SPC (‘Herald’) (in liquidation since July 2013) brought an action against HSSL before the Luxembourg District Court, seeking restitution of cash and securities that Herald purportedly lost because of Madoff Securities’ fraud, or money damages. The Luxembourg District Court dismissed Herald’s securities restitution claim, but reserved Herald’s cash restitution and money
130
HSBC Holdings plc

damages claims. Herald has appealed this judgment to the Luxembourg Court of Appeal, where the matter is pending. In late 2018, Herald brought additional claims against HSSL and HSBC Bank plc before the Luxembourg District Court, seeking further restitution and damages.
In October 2009, Alpha Prime Fund Limited (‘Alpha Prime’) brought an action against HSSL before the Luxembourg District Court, seeking the restitution of securities, or the cash equivalent, or money damages. In December 2018, Alpha Prime brought additional claims 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. In December 2018, Senator brought additional claims against HSSL and HSBC Bank plc Luxembourg branch, seeking restitution of Senator’s securities or money damages. These matters are currently pending before the Luxembourg District Court.
There are many factors that may affect the range of possible outcomes, and any resulting financial impact, of the various Madoff-related proceedings described above, including but not limited to the multiple jurisdictions in which the proceedings have been brought. Based upon the information currently available, management’s estimate of the possible aggregate damages that might arise as a result of all claims in the various Madoff-related proceedings is around $600m, excluding costs and interest. Due to uncertainties and limitations of this estimate, any possible damages that might ultimately arise could differ significantly from this amount.
Anti-money laundering and sanctions-related matters
Since November 2014, a number of lawsuits have been filed in federal courts in the US against various HSBC companies and others on behalf of plaintiffs who are, or are related to, victims of terrorist attacks in the Middle East. In each case, it is alleged that the defendants aided and abetted the unlawful conduct of various sanctioned parties in violation of the US Anti-Terrorism Act. Nine actions remain pending in federal courts and HSBC’s motions to dismiss have been granted in five of these cases. In September 2022 and January 2023, respectively, the appellate courts affirmed the dismissals of two of the cases, and the plaintiffs are seeking review of these decisions by the US Supreme Court. The dismissals in the other cases are subject to appeal. The four remaining actions are at an early stage.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.
Interbank offered rates investigation and litigation
Euro interest rate derivatives: In December 2016, the European Commission (‘EC’) issued a decision finding that HSBC, among other banks, engaged in anti-competitive practices in connection with the pricing of euro interest rate derivatives, and the EC imposed a fine on HSBC based on a one-month infringement in 2007. The fine was annulled in 2019 and a lower fine was imposed in 2021. In January 2023, the European Court of Justice dismissed an appeal by HSBC and upheld the EC’s findings on HSBC’s liability. A separate appeal by HSBC concerning the amount of the fine remains pending before the General Court of the European Union.
US dollar Libor: Beginning in 2011, HSBC and other panel banks have been named as defendants in a number of private lawsuits filed in federal and state courts in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US federal and state laws, including antitrust and racketeering laws and the Commodity Exchange Act (‘US CEA’). The lawsuits include individual and putative class actions, most of which have been transferred and/or consolidated for pre-trial purposes before the US District Court for the Southern District of New York. HSBC has reached class settlements with five groups of plaintiffs, and the court has approved these settlements. HSBC has also resolved several of the individual actions, although a number of other US dollar Libor-related actions remain pending.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.
Foreign exchange-related investigations and litigation
In December 2016, Brazil’s Administrative Council of Economic Defense initiated an investigation into the onshore foreign exchange market and identified a number of banks, including HSBC, as subjects of its investigation, which remains ongoing.
In June 2020, the Competition Commission of South Africa, having initially referred a complaint for proceedings before the South African Competition Tribunal in February 2017, filed a revised complaint against 28 financial institutions, including HSBC Bank plc and HSBC Bank USA N.A. (‘HSBC Bank USA’), for alleged anti-competitive behaviour in the South African foreign exchange market. In March 2023, HSBC Bank plc’s and HSBC Bank USA’s applications to dismiss the revised complaint were denied and, in April 2023, HSBC Bank plc and HSBC Bank USA appealed the decision to the South African Competition Appeal Court.
Beginning in 2013, various HSBC companies and other banks have been named as defendants in a number of putative class actions filed in, or transferred to, the US District Court for the Southern District of New York arising from allegations that the defendants conspired to manipulate foreign exchange rates. HSBC has reached class settlements with two groups of plaintiffs, including direct and indirect purchasers of foreign exchange products, and the court has granted final approval of these settlements. A putative class action by a group of retail customers of foreign exchange products remains pending.
In 2018, complaints alleging foreign exchange-related misconduct were filed in the US District Court for the Southern District of New York and the High Court of England and Wales against HSBC and other defendants by certain plaintiffs that opted out of the direct purchaser class action settlement in the US. HSBC has reached a settlement with the plaintiffs to resolve these claims. These matters are now closed. In January 2023, HSBC reached a settlement-in-principle with plaintiffs in Israel to resolve a class action filed in the local courts alleging foreign exchange-related misconduct. The settlement remains subject to the negotiation of definitive documentation and court approval. Lawsuits alleging foreign exchange-related misconduct remain pending against HSBC and other banks in courts in Brazil. 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 the pending matters, which could be significant.
Precious metals fix-related litigation
Gold: Since 2015, numerous putative class actions have been filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs allege that, among other things, from January 2004 to March 2014, the defendants conspired to manipulate the price of gold and gold derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.
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Notes on the interim condensed financial statements (unaudited)
Silver: HSBC and other members of The London Silver Market Fixing Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2007 to December 2013, the defendants conspired to manipulate the price of silver and silver derivatives for their collective benefit in violation of US antitrust laws, the US CEA and New York state law. In May 2023, the court granted the defendants’ motion to dismiss. The plaintiffs have appealed the dismissal, and this appeal remains pending.
In April 2016, two putative class actions were filed in the Ontario and Quebec Superior Courts of Justice against various HSBC companies and other financial institutions. The plaintiffs in both actions allege that, from January 1999 to August 2014, the defendants conspired to manipulate the price of silver and silver derivatives in violation of the Canadian Competition Act and common law. These actions are ongoing.
Platinum and palladium: HSBC and other members of The London Platinum and Palladium Fixing Company Limited are defending a class action pending in the US District Court for the Southern District of New York alleging that, from January 2008 to November 2014, the defendants conspired to manipulate the price of platinum group metals and related financial products for their collective benefit in violation of US antitrust laws and the US CEA. In February 2023, the court reversed an earlier dismissal of the plaintiffs’ third amended complaint, and this matter is proceeding.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.
Gilts trading investigation and litigation
Since 2018, the UK Competition and Markets Authority (‘CMA’) has been investigating HSBC and four other banks for suspected anti-competitive conduct in relation to the historical trading of gilts and related derivatives. In May 2023, the CMA announced its case against HSBC Bank plc and HSBC Holdings, and both HSBC companies are contesting the CMA’s allegations.
In June 2023, HSBC Bank plc and HSBC Securities (USA) Inc., among other banks, were named as defendants in a putative class action filed in the US District Court for the Southern District of New York by plaintiffs alleging anti-competitive conduct in the gilts market. This matter is at an early stage. It is possible that additional civil actions will be initiated against HSBC in relation to its historical gilts trading activities.
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these matters, including the timing or any possible impact on HSBC, which could be significant.
Other regulatory investigations, reviews and litigation
HSBC Holdings and/or certain of its affiliates are subject to a number of other investigations and reviews by various regulators and competition and law enforcement authorities, as well as litigation, in connection with various matters relating to the firm’s businesses and operations, including:
–an investigation by the PRA in connection with depositor protection arrangements in the UK;
–an investigation by the FCA in connection with collections and recoveries operations in the UK;
–investigations by prosecuting authorities in Germany and France in connection with the dividend withholding tax treatment of certain trading activities;
–an investigation by the US Commodity Futures Trading Commission (‘CFTC’) regarding interest rate swap transactions related to bond issuances, among other things. HSBC has reached a settlement with the CFTC to resolve this investigation, and this matter is now closed;
–investigations by the CFTC and the US Securities and Exchange Commission (‘SEC‘) concerning compliance with records preservation requirements relating to the use of unapproved electronic messaging platforms for business communications. HSBC has reached settlements with the CFTC and SEC to resolve these investigations, and these matters are now closed;
–investigations by tax administration, regulatory and law enforcement authorities in various countries in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation;
–a lawsuit brought in the US District Court for the Northern District of California, by First-Citizens Bank & Trust Company (‘First Citizens’) against various HSBC companies and seven HSBC US employees who had previously worked for Silicon Valley Bank (‘SVB’) alleging, among other things, that HSBC conspired with the individual defendants to solicit employees from First Citizens and that the individual defendants took confidential information belonging to SVB and/or First Citizens;
–litigation brought against various HSBC companies in New York State court relating to residential mortgage-backed securities, based primarily on (a) claims brought against HSBC Bank USA in connection with its role as trustee on behalf of various securitisation trusts; and (b) claims against several HSBC companies seeking to have the defendants repurchase various mortgage loans;
–a putative class action brought in the US District Court for the Southern District of New York relating to the Mexican government bond market;
–claims issued by two separate investor groups against HSBC UK Bank plc (as successor to HSBC Private Bank (UK) Limited (‘PBGB’)) in the High Court of England and Wales in connection with PBGB’s role in the development of Eclipse film finance schemes; and
–two group actions pending in federal courts in the US 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. HSBC Bank plc has reached settlements with the plaintiffs in the US and UK to resolve these claims. The US settlement is subject to court approval and the UK settlement has concluded.
There are many factors that may affect the range of outcomes, and the resulting financial impact, of the pending matters, which could be significant.
14
Transactions with related parties
There were no changes in the related party transactions described in the Annual Report and Accounts 2022 that have had a material effect on the financial position or performance of HSBC in the half-year to 30 June 2023. All related party transactions that took place in the half-year to 30 June 2023 were similar in nature to those disclosed in the Annual Report and Accounts 2022.
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15
Assets held for sale, liabilities of disposal groups held for sale and business acquisitions
At
30 Jun 31 Dec
2023 2022
$m $m
Disposal groups 94,995  118,055 
Unallocated impairment losses1
 (298) (2,385)
Non-current assets held for sale2
 783  249 
Assets held for sale 95,480  115,919 
Liabilities of disposal groups held for sale 87,241  114,597 
1 This represents impairment losses in excess of the carrying value of the non-current assets included in the measurement scope of IFRS 5.
2 Includes $0.5bn of US commercial real estate loans classified as held for sale at 30 June 2023.
Disposal groups
Planned sale of our retail banking operations in France
On 25 November 2021, HSBC Continental Europe signed a framework agreement with Promontoria MMB SAS (‘My Money Group’) and its subsidiary Banque des Caraïbes SA, regarding the planned sale of HSBC Continental Europe’s retail banking operations in France. The sale, which is subject to information and consultation processes with respective works councils, regulatory approvals and the satisfaction of other relevant conditions, included: HSBC Continental Europe’s French retail banking operations; the Crédit Commercial de France (‘CCF’) brand; and HSBC Continental Europe’s 100% ownership interest in HSBC SFH (France) and its 3% ownership interest in Crédit Logement.
During 1Q23, the completion of the planned transaction became less certain. This was due to a significant rise in interest rates in France, which is expected to increase the amount of capital required by the buyer on completion. Given the completion of the sale had become less certain, we were required by IFRS 5 to change the accounting classification of our retail banking operations in France to be no longer classified as held for sale, resulting in a $2.1bn reversal of the previously recognised impairment in respect of the sale. The related $0.4bn impairment of goodwill previously recognised was not reversed.
On 14 June 2023, HSBC Continental Europe signed a further memorandum of understanding with the buyer regarding certain potential changes to the terms of the sale, which are designed to enable the buyer to satisfy its future capital requirements and to obtain regulatory approval for the transaction. The potential changes foresee: the retention of $7.5bn of home and other loans by HSBC Continental Europe that were originally planned to transfer as part of the sale, the inclusion in the perimeter for sale of a cash amount equivalent to the carrying value of the retained portfolio of loans, and the setting of the net asset value of the transferred business by reference to relevant prevailing market rates at completion. In addition, depending on the prevailing market rates at completion, HSBC Continental Europe may receive a profit participation interest in exchange for investing capital into the top holding company of My Money Group, such that the aggregate of the actual net asset value delivered at completion and the investment made in the profit participation interest would not exceed €1.768bn. The potential changes also foresee the retention of the CCF brand, the entry into a long-term agreement to license it to the buyer and certain enhancements to the insurance and asset management distribution agreements with the buyer. The transaction remains subject to information and consultation processes with respective works councils and regulatory approvals, and the parties aim to complete on 1 January 2024.
Taking into account the potential changes, the transaction is expected to result in the recognition of a pre-tax loss on sale estimated up to €2.0bn ($2.2bn) upon reclassification of the business as held for sale. This is expected during the second half of 2023 provided sufficient progress is demonstrated to support the appropriate level of probability of successful completion. Once that threshold is achieved, the disposal group will be reclassified as held for sale and will be remeasured at the lower of carrying amount and fair value less costs to sell at each reporting period. Any remaining gains or losses not previously recognised and the reversal of any remaining deferred tax assets and liabilities, will be recognised on completion.
At 30 June 2023, a deferred tax liability of $0.4bn was recognised as a consequence of the temporary difference in tax and accounting treatment in respect of the provision for loss on disposal, which was deductible in the French tax return in 2021 but will be accounted for when the disposal group is classified as held for sale in accordance with IFRS 5, at which time the deferred tax liability will reverse.
Agreed sale of our banking business in Canada
On 29 November 2022, HSBC Holdings plc announced that its wholly-owned subsidiary, HSBC Overseas Holdings (UK) Limited, had entered into an agreement for the sale of its banking business in Canada to Royal Bank of Canada. Completion of the transaction is expected to occur in the first quarter of 2024, subject to regulatory and governmental approvals.
The majority of the estimated gain on sale of $5.3bn will be recognised on completion, reduced by earnings recognised by the Group in the period to completion. The estimated pre-tax profit on the sale will be recognised through a combination of the consolidation of HSBC Canada’s results into the Group’s financial statements (between the 30 June 2022 net asset reference date and until completion), and the remaining gain on sale recognised at completion. There would be no tax on the gain recognised at completion. At 30 June 2023, total assets of $87.2bn and total liabilities of $80.4bn met the criteria to be classified as held for sale in accordance with IFRS 5.
Planned sale of our branch operations in Greece
On 24 May 2022, HSBC Continental Europe signed a sale and purchase agreement for the sale of its branch operations in Greece to Pancreta Bank SA. In the second quarter of 2022, we recognised a loss of $0.1bn, including goodwill impairment, upon reclassification as held for sale in accordance with IFRS 5. At 30 June 2023, the disposal group included $0.3bn of loans and advances to customers and $1.5bn of customer accounts.

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Notes on the interim condensed financial statements (unaudited)
Planned sale of our business in Russia
On 30 June 2022, following a strategic review of our business in Russia, HSBC Europe BV (a wholly-owned subsidiary of HSBC Bank plc) entered into an agreement for the planned sale of its wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company). Completion of the transaction is subject to regulatory and governmental approvals. In 2022, a $0.3bn loss on the planned sale was recognised, upon reclassification as held for sale in accordance with IFRS 5. Completion is currently expected to occur in the second half of 2023. At 30 June 2023, the business remained classified as held for sale.
Planned merger of our business Oman
On 15 November 2022, HSBC Bank Oman SAOG entered into a binding merger agreement with Sohar International Bank SAOG, under which the two banks agreed to take the necessary steps to implement a merger by incorporation, whereby HSBC Bank Oman would merge into Sohar International Bank. On 5 February 2023, HSBC Bank Oman received approval from the Central Bank of Oman for the proposed merger. On 20 June 2023, the merger was approved by the shareholders of HSBC Bank Oman and Sohar International Bank through their respective Extraordinary General Meetings. The merger is expected to be completed in the third quarter of 2023. Upon completion of the merger, all of the assets and liabilities of HSBC Bank Oman would be transferred to Sohar International Bank, and HSBC Bank Oman would be dissolved with the shareholders of HSBC Bank Oman entitled to receive consideration in cash and/or shares in Sohar International Bank. In addition, HSBC Bank Middle East Limited is planning to establish a new wholesale banking branch in Oman subject to regulatory approvals. At 30 June 2023, $6.0bn in assets and $5.3bn in liabilities were reclassified as held for sale in accordance with IFRS 5.

At 30 June 2023, the major classes of assets and associated liabilities of disposal groups held for sale, including allocated impairment losses, were as follows:
Canada Oman Other Total
$m $m $m $m
Assets of disposal groups held for sale
Cash and balances at central banks 3,541  576  1,109  5,226 
Trading assets 2,273  —  6  2,279 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 15  —  —  15 
Derivatives 584  —  1  585 
Loans and advances to banks 76  891  182  1,149 
Loans and advances to customers 55,932  2,975  303  59,210 
Reverse repurchase agreements – non-trading 3,254  —  125  3,379 
Financial investments1
 17,424  1,418  21  18,863 
Goodwill 225  —  —  225 
Prepayments, accrued income and other assets 3,913  128  23  4,064 
Total assets at 30 Jun 2023 87,237  5,988  1,770  94,995 
Liabilities of disposal groups held for sale
Trading liabilities 1,903  —  2  1,905 
Deposits by banks 175  77  1  253 
Customer accounts 59,813  4,878  1,463  66,154 
Repurchase agreements – non-trading 2,615  —  —  2,615 
Derivatives 788  —  —  788 
Debt securities in issue 9,127  —  —  9,127 
Subordinated liabilities 8  —  —  8 
Accruals, deferred income and other liabilities 5,975  383  33  6,391 
Total liabilities at 30 Jun 2023 80,404  5,338  1,499  87,241 
Expected date of completion First half of 2024 Second half of 2023
Operating segment All global businesses All global businesses
1 Includes financial investments measured at fair value through other comprehensive income of $12,119m and debt instruments measured at amortised cost of $6,744m.
Business acquisitions
Silicon Valley Bank UK Limited (now HSBC Innovation Bank Limited)
In March 2023, HSBC UK Bank plc acquired Silicon Valley Bank UK Limited (‘SVB UK’), and in June 2023 changed its legal entity name to HSBC Innovation Bank Limited. The acquisition was funded from existing resources and brought the staff, assets and liabilities of SVB UK into the HSBC portfolio. On acquisition, we performed a preliminary assessment of the fair value of the assets and liabilities purchased. We established an opening balance sheet on 13 March 2023 and applied the result of the fair value assessment, which resulted in a reduction in net assets of $0.2bn. The provisional gain on acquisition of $1.5bn represents the difference between the consideration paid of £1 and the net assets acquired. This gain could change as further due diligence is performed within 12 months of the acquisition, as allowed by IFRS 3 ‘Business Combinations’.
HSBC Innovation Bank Limited contributed $146m of revenue and $66m to the Group profit after tax for the period from the 13 March 2023 to 30 June 2023. As per the disclosure requirement set out in IFRS 3 ‘Business Combinations’, if HSBC Innovation Bank Limited had been acquired on 1 January 2023 and included in the Group results, management estimates that for the six months to 30 June 2023 the Group consolidated revenue would have been $37,024m and the Group consolidated profit after tax would have been $18,149m. In determining these, management has assumed that the fair value adjustments that arose on acquisition would have been the same if the acquisition had occurred on 1 January 2023.

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The details of the business combination are as follows:
At
13 March
2023
$m
Fair value of assets acquired 11,291 
Fair value of liabilities acquired (9,784)
Fair value of net assets acquired 1,507 
Provisional gain on acquisition 1,507 
Consideration transferred settled in cash — 
Cash and cash equivalents acquired 1,243 
Net cash inflow on acquisition 1,243 
16 Effects of adoption of IFRS 17
On 1 January 2023, the Group adopted IFRS 17 ‘Insurance Contracts’, and as required by the standard applied the requirements retrospectively, with comparatives restated from the transition date, 1 January 2022. Under IFRS 17 there is no PVIF intangible asset recognised. Instead, the measurement of the insurance contract liability is based on groups of insurance contracts and includes fulfilment cash flows, as well as the CSM unearned profit. The impact of transitioning to IFRS 17 on the consolidated financial statements of the Group was a reduction to total equity of $10,459m at 1 January 2022. In contrast to the Group’s IFRS 4 accounting where profits are recognised upfront, under IFRS 17 they are deferred within the CSM which is systematically recognised in revenue as services are provided over the expected coverage period of groups of insurance contracts. Losses resulting from the recognition of onerous contracts are not deferred but recognised in the income statement as they arise. The impact on the Group’s consolidated balance sheet, income statement and other comprehensive income are set out in the tables below.
Further information about the effect of the adoption of IFRS 17 is provided in Note 1 ‘Basis of preparation of material accounting policies’ on page 113 and in the Report on Transition to IFRS 17 ‘Insurance Contracts’ issued on 2 May 2023.

IFRS 17 transition impact on the Group consolidated balance sheet at 1 January 2022
IFRS 4 Removal of PVIF and IFRS 4 Remeasure-ment effect of IFRS 9 re-designations IFRS 17
fulfilment cash flows		 IFRS 17
CSM		 Tax effect IFRS 17 Total
movements
$m $m $m $m $m $m $m $m
Assets
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 49,804  —  60,991  —  —  —  110,795  60,991 
Loans and advances to banks 83,136  —  (569) —  —  —  82,567  (569)
Loans and advances to customers 1,045,814  —  (1,280) —  —  —  1,044,534  (1,280)
Financial investments 446,274  —  (54,269) —  —  —  392,005  (54,269)
Goodwill and intangible assets 20,622  (9,453) —  —  —  —  11,169  (9,453)
Deferred tax assets 4,624  —  —  —  —  808  5,432  808 
All other assets 1,307,665  (4,468) —  4,198  (105) —  1,307,290  (375)
Total assets
 2,957,939  (13,921) 4,873  4,198  (105) 808  2,953,792  (4,147)
Liabilities and equity
Liabilities
Insurance contract liabilities 112,745  (112,745) —  109,393  9,914  —  119,307  6,562 
Deferred tax liabilities 4,673  —  —  —  —  (1,379) 3,294  (1,379)
All other liabilities 2,633,744  78  —  1,102  (51) —  2,634,873  1,129 
Total liabilities 2,751,162  (112,667) —  110,495  9,863  (1,379) 2,757,474  6,312 
Total shareholders’ equity 198,250  92,738  4,558  (99,631) (8,847) 1,947  189,015  (9,235)
Non-controlling interests 8,527  6,008  315  (6,666) (1,121) 240  7,303  (1,224)
Total equity 206,777  98,746  4,873  (106,297) (9,968) 2,187  196,318  (10,459)
Total liabilities and equity 2,957,939  (13,921) 4,873  4,198  (105) 808  2,953,792  (4,147)

Transition drivers
Removal of PVIF and IFRS 4 balances
The PVIF intangible asset of $9,453m previously reported under IFRS 4 within ‘Goodwill and intangible assets’ arose from the upfront recognition of future profits associated with in-force insurance contracts. The PVIF intangible asset is no longer reported following the transition to IFRS 17, as future profits are deferred within the CSM. Other IFRS 4 insurance contract assets (shown above within ‘All other assets’) and insurance contract liabilities are removed on transition, to be replaced with IFRS 17 balances.
IFRS 9 asset re-designation
Loans and advances of $1,849m and debt securities of $53,201m, both supporting associated insurance liabilities, were re-designated from an amortised cost classification to fair value through profit and loss. Debt securities supporting the associated insurance liabilities of $1,068m were reclassified from fair value through other comprehensive income to fair value through profit or loss. The re-designations were made in order to more closely align the asset accounting with the valuation of the associated insurance liabilities. The re-designation of amortised cost assets generated a net increase to assets of $4,873m because the fair value measurement on transition was higher than the previous amortised cost carrying amount.
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Notes on the interim condensed financial statements (unaudited)
Recognition of the IFRS 17 fulfilment cash flows
The measurement of the insurance contracts liabilities under IFRS 17 is based on groups of insurance contracts and includes a liability for fulfilling the insurance contracts, such as premiums, expenses, insurance benefits and claims including policyholder returns and the cost of guarantees. These are recorded within the fulfilment cash flow component of the insurance contract liability, together with the risk adjustment for non-financial risk.
Recognition of the IFRS 17 CSM
The CSM is a component of the insurance contract liability and represents the future unearned profit associated with insurance contracts which will be released to the profit and loss over the expected coverage period.
Tax effect
The removal of deferred tax liabilities primarily results from the removal of the associated PVIF intangible asset, and new deferred tax assets are reported, where appropriate, on temporary differences between the new IFRS 17 accounting balances and their associated tax bases.
IFRS 17 transition impact on the reported Group consolidated income statement for the 6 months ended 30 June 2022

IFRS 4 Removal of PVIF and IFRS 4 Remeasure-ment effect of IFRS 9 re-designations Insurance finance income/expense IFRS 17 CSM Onerous contracts Experience variance and other Attribut-
able expenses		 Tax effect IFRS 17
$m $m $m $m $m $m $m $m $m $m
Net interest income 14,451  —  (1,066) —  —  —  —  —  —  13,385 
Net fee income 6,064  —  —  —  —  —  —  164  —  6,228 
Net income from financial instruments held for trading or managed on a fair value basis 4,921  —  (65) —  —  —  —  —  —  4,856 
Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss (3,051) —  (8,798) —  —  —  —  —  —  (11,849)
Net insurance premium income 7,646  (7,646) —  —  —  —  —  —  —  — 
Insurance finance income/(expense) —  —  —  11,773  —  —  11,773 
Insurance service result —  —  —  —  459  (120) 31  —  —  370 
– insurance revenue —  —  —  —  459  521  —  —  980 
– insurance service expense —  —  —  —  (120) (490) —  —  (610)
Other operating income/(loss) 654  (892) 52  (32) (218)
Total operating income 30,685  (8,538) (9,929) 11,825  459  (120) (1) 164  —  24,545 
Net insurance claims and benefits paid and movement in liabilities to policyholders (5,449) 5,449  —  —  —  —  —  —  —  — 
Net operating income before change in expected credit losses and other credit impairment charges 25,236  (3,089) (9,929) 11,825  459  (120) (1) 164  —  24,545 
Change in expected credit losses and other credit impairment charges (1,090) —  3  —  —  —  —  —  —  (1,087)
Net operating income 24,146  (3,089) (9,926) 11,825  459  (120) (1) 164  —  23,458 
Total operating expenses (16,419) —  —  —  —  —  292  —  (16,127)
Operating profit 7,727  (3,089) (9,926) 11,825  459  (120) (1) 456  —  7,331 
Share of profit in associates and joint ventures 1,449  —  —  —  —  —  —  —  —  1,449 
Profit before tax 9,176  (3,089) (9,926) 11,825  459  (120) (1) 456  —  8,780 
Tax expense 39  —  —  —  —  —  —  —  112  151 
Profit for the period 9,215  (3,089) (9,926) 11,825  459  (120) (1) 456  112  8,931 
Transition drivers
Removal of IFRS 4-based revenue items
As a result of the removal of the PVIF intangible asset and IFRS 4 results, the associated revenue of $892m for the six months to 30 June 2022 that was previously reported within ‘Other operating income’ is no longer reported under IFRS 17. This includes the removal of the value of new business and changes to PVIF intangible asset from valuation adjustments and experience variances.
On the implementation of IFRS 17, new income statement line items associated with insurance contract accounting were introduced. Consequently, the previously reported IFRS 4 line items ‘Net insurance premium income’ and ‘Net insurance claims and benefits paid and movement in liabilities to policyholders’ were also removed.
IFRS 9 re-designations
Following the re-designation of financial assets supporting associated insurance liabilities to fair value through profit or loss classification, the related income statement reporting also changed. Under our previous IFRS 4-based reporting convention, these assets generated interest income of $1,066m for the six months to 30 June 2022, which is no longer reported in ‘Net interest income’ under IFRS 17. To the extent that this interest income was shared with policyholders, the corresponding policyholder sharing obligation was previously included within the ‘net insurance claims and benefits paid and movement in liabilities to policyholders’ line.
Following re-designation to fair value through profit or loss, gains and losses from changes in the fair value of underlying assets, together with interest income earned, are both reported within ‘Net expense from assets and liabilities of insurance businesses, including related derivatives,
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measured at fair value through profit or loss’. Similar to an IFRS 4 basis, IFRS 17 accounting provides for an offset. While this offset was reported within the claims line under IFRS 4, under IFRS 17 it is reported within the ‘Insurance finance income/(expense)’ line described below.
Introduction of IFRS 17 income statement
Insurance finance income/(expense)
Insurance finance income/(expense) of $11,773m for the six months to 30 June 2022 represents the change in the carrying amount of insurance contracts arising from the effect of, and changes in, the time value of money and financial risk. For variable fee approach contracts, which represent more than 90% of HSBC’s insurance contracts, the insurance finance income/(expense) includes the changes in the fair value of underlying items (excluding additions and withdrawals). It therefore has an offsetting impact to investment income earned on underlying assets supporting insurance contracts. This includes an offsetting impact to the gains and losses on assets re-designated on transition to fair value through profit or loss, and which is now included in ‘Net expense from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss’.
CSM
Revenue is recognised for the release of the CSM associated with the in-force business, which was allocated at a rate of approximately 9% during 2022. The CSM release is largely impacted by the constant measure allocation approach for investment services, but may vary over time primarily due to changes in the total amount of CSM reported on the balance sheet from factors such as new business written, changes to levels of actual returns earned on underlying assets, or changes to assumptions.
Onerous contracts
Losses on onerous contracts are taken to the income statement as incurred.
Experience variance and other
‘Experience variance and other’ represents the expected expenses, claims and recovery of acquisition cash flows, which are reported as part of the insurance revenue. This is offset with the actual expenses and claims incurred in the period and amortisation of acquisition cash flows, which are reported as part of insurance service expense.
Attributable expenses
Directly attributable expenses are the costs associated with originating and fulfilling an identified portfolio of insurance contracts. These costs include distribution fees paid to third parties as part of originating insurance contracts together with appropriate allocations of fixed and variable overheads, which are included within the fulfilment cash flows and are no longer shown on the operating expenses line.
IFRS 17 transition impact on the Group comprehensive income

Half year to
31 Dec 31 Dec 30 Jun 30 Jun
2022 2022 2022 2022
IFRS 17 IFRS 4 IFRS 17 IFRS 4
$m $m $m $m
Opening total equity for the period 186,105  196,690  196,318  206,777 
of which
– retained earnings 140,860  150,417  135,236  144,458 
– financial assets at FVOCI reserve (6,011) (5,354) 49  (634)
– insurance finance reserve 664  —  (696) — 
Profit for the period 7,318  7,455  8,931  9,215 
Debt instruments at fair value through other comprehensive income (986) (561) (6,246) (4,907)
Equity instruments designated at fair value through other comprehensive income (51) (51) 158  158 
Insurance finance income recognised in other comprehensive income 415  —  1,360  — 
Other comprehensive expense for the period, net of tax (4,090) (3,990) (7,801) (7,950)
Total comprehensive (expense)/income for the period 2,606  2,853  (3,598) (3,484)
Other movements (3,514) (3,515) (6,615) (6,603)
Closing total equity for the period 185,197  196,028  186,105  196,690 
Transition drivers
Insurance finance reserve
The insurance finance reserve reflects the impact of the adoption of the other comprehensive income option for our insurance business in France. Underlying assets supporting these contracts are measured at fair value through other comprehensive income. Under this option, only the amount that matches income or expenses recognised in profit or loss on underlying items is included in finance income or expenses, resulting in the elimination of income statement accounting mismatches. The remaining amount of finance income or expenses for these insurance contracts is recognised in OCI. At the transition date an insurance finance reserve of $696m was recognised and following transition, gains net of tax of $1,360m were recorded in the six months to 30 June 2022 and $415m for the six-month period to 31 December 2022. An offsetting fair value through other comprehensive income reserve of $683m recorded on transition represents the accumulated fair value movements on assets supporting these insurance liabilities, with associated losses net of tax of $1,439m recorded within the fair value through other comprehensive income reserve for the six months to 30 June 2022 and $459m for the six months to 31 December 2022.
HSBC Holdings plc
137

Notes on the interim condensed financial statements (unaudited)
Group‘s consolidated balance sheet as at the transition date and at 31 December 2022
IFRS 17 IFRS 4
31 Dec 1 Jan 31 Dec 31 Dec
2022 2022 2022 2021
$m $m $m $m
Assets
Cash and balances at central banks 327,002  403,018  327,002  403,018 
Items in the course of collection from other banks 7,297  4,136  7,297  4,136 
Hong Kong Government certificates of indebtedness 43,787  42,578  43,787  42,578 
Trading assets 218,093  248,842  218,093  248,842 
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 100,101  110,795  45,063  49,804 
Derivatives 284,159  196,882  284,146  196,882 
Loans and advances to banks 104,475  82,567  104,882  83,136 
Loans and advances to customers 923,561  1,044,534  924,854  1,045,814 
Reverse repurchase agreements – non-trading 253,754  241,648  253,754  241,648 
Financial investments 364,726  392,005  425,564  446,274 
Assets held for sale 115,919  3,411  115,919  3,411 
Prepayments, accrued income and other assets 156,149  136,196  156,866  136,571 
Current tax assets 1,230  970  1,230  970 
Interests in associates and joint ventures 29,254  29,609  29,254  29,609 
Goodwill and intangible assets 11,419  11,169  21,321  20,622 
Deferred tax assets 8,360  5,432  7,498  4,624 
Total assets 2,949,286  2,953,792  2,966,530  2,957,939 
Liabilities and equity
Liabilities
Hong Kong currency notes in circulation 43,787  42,578  43,787  42,578 
Deposits by banks 66,722  101,152  66,722  101,152 
Customer accounts 1,570,303  1,710,574  1,570,303  1,710,574 
Repurchase agreements – non-trading 127,747  126,670  127,747  126,670 
Items in the course of transmission to other banks 7,864  5,214  7,864  5,214 
Trading liabilities 72,353  84,904  72,353  84,904 
Financial liabilities designated at fair value 127,321  145,503  127,327  145,502 
Derivatives 285,762  191,064  285,764  191,064 
Debt securities in issue 78,149  78,557  78,149  78,557 
Liabilities of disposal groups held for sale 114,597  9,005  114,597  9,005 
Accruals, deferred income and other liabilities 134,313  115,900  133,240  114,773 
Current tax liabilities 1,135  699  1,135  698 
Insurance contract liabilities 108,816  119,307  114,844  112,745 
Provisions 1,958  2,566  1,958  2,566 
Deferred tax liabilities 972  3,294  2,422  4,673 
Subordinated liabilities 22,290  20,487  22,290  20,487 
Total liabilities 2,764,089  2,757,474  2,770,502  2,751,162 
Equity
Called up share capital 10,147  10,316  10,147  10,316 
Share premium account 14,664  14,602  14,664  14,602 
Other equity instruments 19,746  22,414  19,746  22,414 
Other reserves (9,133) 6,447  (9,141) 6,460 
Retained earnings 142,409  135,236  152,068  144,458 
Total shareholders‘ equity
 177,833  189,015  187,484  198,250 
Non-controlling interests 7,364  7,303  8,544  8,527 
Total equity 185,197  196,318  196,028  206,777 
Total liabilities and equity 2,949,286  2,953,792  2,966,530  2,957,939 

17 Events after the balance sheet date
On 28 July 2023, HSBC Continental Europe completed the sale of its branch operations in Greece to Pancreta Bank SA. A loss of $0.1bn, including goodwill impairment, was recognised upon reclassification to held for sale, in accordance with IFRS 5 in the second quarter of 2022.
A second interim dividend for 2023 of $0.10 per ordinary share in respect of the financial year ending 31 December 2023 was approved by the Directors on 1 August 2023, as described in Note 3. On 1 August 2023, HSBC Holdings announced a share buy-back programme to purchase its ordinary shares up to a maximum consideration of $2.0bn, which is expected to commence shortly and complete within three months.
18
Interim Report 2023 and statutory accounts
The information in this Interim Report 2023 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This Interim Report 2023 was approved by the Board of Directors on 1 August 2023. The statutory accounts of HSBC Holdings plc for the year ended 31 December 2022 have been delivered to the Registrar of Companies in England and Wales in accordance with section 447 of the Companies Act 2006.
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Shareholder information
Contents
1  Directors’ interests 10  Earnings release
2  Employee share plans 11  Final results
3  Share buy-back 12 Corporate governance
4  Other equity instruments 13 Changes in Directors’ details
5  Notifiable interests in share capital 14 Going concern basis
6  Dealings in HSBC Holdings listed securities 15 Telephone and online share dealing service
7  Second interim dividend for 2023 16 Stock symbols
8  Dividend on preference share 17 Copies of the Interim Report 2023 and shareholder enquiries and communications
9  Proposed interim dividends for 2023

1
Directors’ interests
According to the register of Directors’ interests maintained by HSBC Holdings pursuant to section 352 of the Securities and Futures Ordinance of Hong Kong, at 30 June 2023 the Directors of HSBC Holdings had the following interests, all beneficial unless otherwise stated, in the shares or debentures of HSBC Holdings and its associated corporations:
Directors’ interests – shares and debentures
At 1 Jan 2023 or date of appointment, if later
 At 30 Jun 2023 or date of retirement, if earlier
Total interests Beneficial
owner		 Child
under 18
or spouse		 Jointly with another person Trustee Total
interests
HSBC Holdings ordinary shares
Geraldine Buckingham1
 15,000  15,000  —  —  —  15,000 
Rachel Duan1
 15,000  15,000  —  —  —  15,000 
Georges Elhedery2 (appointed to the Board on 1 Jan 2023)
 572,575  689,181  —  —  —  689,181 
Dame Carolyn Fairbairn 15,000  15,000  —  —  —  15,000 
James Forese1
 115,000  115,000  —  —  —  115,000 
Steven Guggenheimer1
 15,000  —  —  15,000  —  15,000 
José Antonio Meade Kuribreña1
 15,000  15,000  —  —  —  15,000 
Kalpana Morparia (appointed to the Board on 1 Mar 2023) —  —  —  —  —  — 
Eileen Murray1
 75,000  75,000  —  —  —  75,000 
David Nish 50,000  —  50,000  —  —  50,000 
Noel Quinn2
 1,422,650  1,620,739  —  —  —  1,620,739 
Jackson Tai1,3 (retired on 5 May 2023)
 66,515  32,800  11,965  21,750  —  66,515 
Mark Tucker 307,352  307,352  —  —  —  307,352 
1    Geraldine Buckingham has an interest in 3,000, Rachel Duan in 3,000, James Forese in 23,000, Steven Guggenheimer in 3,000, José Antonio Meade Kuribreña in 3,000, Eileen Murray in 15,000 and Jackson Tai had an interest in 13,303 listed American Depositary Shares (‘ADSs’), which are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.
2    Executive Directors’ other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC Share Plan 2011 are set out on the following pages. At 30 June 2023, the aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee share plans, were: Noel Quinn – 4,892,153 and Georges Elhedery – 1,878,652. Each Director’s total interests represents approximately 0.02% of the shares in issue and 0.01% of the shares in issue excluding treasury shares.
3    Jackson Tai’s holding included a non-beneficial interest in 11,965 shares of which he is custodian.
HSBC Holdings plc
139

Additional information

HSBC Holdings Savings-Related Share Option Plan (UK)
Currently no executive Directors participate in a Savings-Related Share Option Plan. For further details of the Savings-Related Share Option Plan, see page 141.
HSBC Share Plan 2011
Conditional awards of deferred shares
Vesting of deferred share awards is normally subject to the Director remaining an employee on the vesting date. The awards may vest at an earlier date in certain circumstances. Under the Securities and Futures Ordinance of Hong Kong, interests in conditional share awards are categorised as the interests of the beneficial owner.
Deferred share awards
HSBC Holdings ordinary shares
Date of
award		 Year in which
awards may
vest		 Awards
held at		 Awards made during
the period to 30 Jun 2023
Awards vested during
the period to 30 Jun 2023
 Awards
held at
1 Jan 2023 Number Monetary value Number Monetary value 30 Jun 2023
£000 £000
Noel Quinn
27/2/20171
 2020–2024 37,086  —  —  19,097  110 
19,3752
26/2/20183
 2021–2025 64,515  —  —  21,504  122  43,011 
25/2/20194
 2022–2026 112,468  —  —  28,117  161  84,351 
24/2/20205
 2023–2027 201,702  —  —  40,340  231  161,362 
27/2/20236
 2023 —  170,206  1,077  170,206  1,077  — 
Georges Elhedery (appointed 1 Jan 2023)
25/2/20197
 2020–2024 34,386  —  —  17,193  99  17,193 
24/2/20205
 2023–2027 147,661  —  —  29,532  169  118,129 
01/3/20218
 2024–2028 305,523  —  —  —  —  305,523 
28/2/20229
 2025–2029 273,163  —  —  —  —  273,163 
27/2/20236
 2023 —  112,568  712  112,568  712  — 
1At the date of the award (27 February 2017), the market value per share was £6.5030. The award will vest in five equal annual tranches. The fourth tranche vested on 13 March 2023 at a market value of £5.7362. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.
2Includes any additional shares arising from dividend equivalents.
3At the date of the award (26 February 2018), the market value per share was £7.2340. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The third tranche vested on 14 March 2023 at a market value of £5.6710. The closing price of the shares immediately before the date on which the awards were vested was £5.6810.
4At the date of the award (25 February 2019), the market value per share was £6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The second tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.
5At the date of the award (24 February 2020), the market value per share was £5.6220. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The award will vest in five equal annual tranches. The first tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.
6The non-deferred award vested immediately on 27 February 2023 and was based on the market value of £6.3277. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date. The closing price of the shares immediately before 27 February 2023 on which the awards were granted was £6.3570. The fair value of the awards granted on 27 February 2023 was £6.3180 based on IFRS 2 accounting standards. The closing price of the shares immediately before the date on which the awards were vested was £6.3570.
7At the date of the award (25 February 2019), the market value per share was £6.2350. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for six months from the vesting date. The award will vest in five equal annual tranches. The fourth tranche vested on 13 March 2023 at a market value of £5.7362. The closing price of the shares immediately before the date on which the awards were vested was £5.9260.
8At the date of the award (1 March 2021), the market value per share was £4.2620. The award will vest in five equal annual tranches commencing in 2024. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.
9At the date of the award (28 February 2022), the market value per share was £5.3800. The award will vest in five equal annual tranches commencing in 2025. Shares equivalent in number to those that vest under the award (net of tax liabilities) must be retained for one year from the vesting date.
140
HSBC Holdings plc

Long-term incentive awards
The long-term incentive award is an award of shares with a three-year performance period. At the end of this performance period and subject to the award terms, the number of shares that vest will be determined based on an assessment against financial and non-financial measures. Subject to that assessment, the shares will vest in five equal annual instalments. On vesting, awards are subject to a retention period of up to one year. Under the Securities and Futures Ordinance of Hong Kong, interests in share awards are categorised as interests of the beneficial owner.
Long-term incentive awards
HSBC Holdings ordinary shares
Date of
award		 Year in which
awards may
vest		 Awards
held at		 Awards made during
the period to 30 Jun 2023		 Awards vested during
the period to 30 Jun 2023		 Awards
held at
1 Jan 2023 Number Monetary value Number Monetary value 30 Jun 2023
£000 £000
Noel Quinn
1 Mar 20211
 2024–2028 1,118,554  —  —  —  —  1,118,554 
28 Feb 20221
 2025–2029 983,339  —  —  —  —  983,339 
27 Feb 20232
 2026–2030 —  861,422  5,451  —  —  861,422 
Georges Elhedery
28 Feb 20221
 2025–2029 223,989  —  —  —  —  223,989 
27 Feb 20232
 2026–2030 —  251,474  1,591  —  —  251,474 
1    Awards made on 1 March 2021 were based on the market value of £4.2620, awards made on 28 February 2022 were based on the market value of £5.3800 and awards made on 27 February 2023 were based on the market value of £6.357.
2    The closing price of the shares on the day before the grant date was £6.357. The fair value of the awards was £4.6930 based on IFRS 2 accounting standards.
No Directors held any short position (as defined in the Securities and Futures Ordinance of Hong Kong) in the shares or debentures of HSBC Holdings and its associated corporations. Save as stated in the tables above, none of the Directors had an interest in any shares or debentures of HSBC Holdings or any associates at the beginning or at the end of the period, and none of the Directors or members of their immediate families were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the period.
There have been no changes in the shares or debentures of the Directors from 30 June 2023 to the date of this report.
2
Employee share plans
Share options and discretionary awards of shares are granted under HSBC share plans to help align the interests of employees with those of shareholders. The following are particulars of share options and share awards, including those held by, or to be granted to, employees working under employment contracts that are regarded as ‘continuous contracts’ for the purposes of the Hong Kong Employment Ordinance, or former employees. The options and share awards were granted for nil consideration. No options or share awards have been granted to substantial shareholders, suppliers of goods or services, or those with an amount in excess of the 1% individual limit for each share plan. No options or share awards were cancelled by HSBC during the six months to 30 June 2023. The options and share awards were granted only to employees. Particulars of options and share awards held by Directors of HSBC Holdings are set out on page 139.
The number of shares available for the grant of options or share awards under each limit set out in the HSBC share plans at the beginning of 1H23 were 1,038,335,768 and 290,981,959. At the end of 1H23, the number of shares available were 1,017,612,461 and 272,087,852 under each limit. The number of shares that may be issued in respect of options or awards granted under all HSBC share plans divided by the weighted average number of shares of the relevant class in issue for 1H23 is 5.02% and 1.34% under each limit set out in the HSBC share plans.
Summaries of the total number of options and share awards granted, exercised/vested or lapsed during 1H23 are shown in the tables below. Further details required to be disclosed pursuant to Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited are available on our website at www.hsbc.com, and on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. Copies may be obtained upon request from the Group Company Secretary and Chief Governance Officer, 8 Canada Square, London E14 5HQ.
All-employee share plans
The HSBC Holdings Savings-Related Share Option Plan (UK) is an all-employee share option plan under which eligible employees have been granted options to acquire HSBC Holdings ordinary shares. The HSBC International Employee Share Purchase Plan was introduced in 2013 and now includes employees based in 31 jurisdictions. No options are granted under this plan but matching share awards are granted in the form of conditional awards that vest after three years. During 2022, approximately 189,000 employees were offered participation in these plans. During 1H23, no employee was offered participation in the plans. No options or awards under these plans are subject to performance targets. 
For options granted under the HSBC Holdings Savings-Related Share Option Plan (UK) employees may make contributions of up to £500 each month over a period of three or five years. The contributions may be used within six months following the third or fifth anniversary of the commencement of the relevant savings contract, at the employee’s election, to exercise the options. Alternatively, the employee may elect to have the savings, plus (where applicable) any interest or bonus, repaid in cash. In the case of redundancy, ceasing employment on grounds of injury or disability, retirement, death, the transfer of the employing business to another party, or a change of control of the employing company, options may be exercised before completion of the relevant savings contract. In certain circumstances, the exercise period of options awarded under the all-employee share option plans may be extended; for example, on the death of a participant, the executors may exercise the option up to six months beyond the normal exercise period or, if a participant has chosen to defer up to 12 contributions, the start of the normal exercise period will be delayed by up to 12 months.
Under the HSBC Holdings Savings-Related Share Option Plan (UK) the option exercise price is determined by reference to the average market value of the HSBC Holdings ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20%. The HSBC Holdings Savings-Related Share Option Plan (UK) has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.
HSBC Holdings plc
141

Additional information

Under the HSBC International Employee Share Purchase Plan, shares are purchased on behalf of participants (using their own funds) in the market each quarter up to a maximum annual value of £3,000, or equivalent in local currency, per participant. No options are granted under the HSBC International Employee Share Purchase Plan. However, matching awards in the form of conditional share awards are granted to participants for nil consideration at a ratio of one free share for every three purchased. Matching awards vest subject to continued employment and the retention by the participant of the purchased shares for a maximum period of two years and nine months. The HSBC International Employee Share Purchase Plan has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.
HSBC Holdings Savings-Related Share Option Plan (UK)
HSBC Holdings ordinary share options
Dates of award Exercise price (£) Usually exercisable 1 Jan 2023 Granted
in period
Exercised
in period1
 Lapsed
in period		 Cancelled in period 30 Jun 2023
from to from to from to
21 Sep 2017 27 Sep
2022		 (£)
2.6270		 (£)
5.9640		 1 Nov 2020 28 April 2028 115,650,723  —  2,773,354  3,680,465  —  109,196,904 
1The weighted average closing price of the shares immediately before the dates on which options were exercised was £5.9183.
HSBC International Employee Share Purchase Plan – awards of matching shares
HSBC Holdings ordinary shares under award
Dates of award Purchase price Usually vesting 1 Jan 2023 Granted
in period		 Vested
in period		 Lapsed
in period		 Cancelled in period 30 Jun 2023
from to from to
2020 2022 £0 2023 2025 2,347,806  —  —  85,841  —  2,261,965 
2020 2022 HK$0 2023 2025 2,854,482  —  —  75,227  —  2,779,255 
11 Jan 20231
 £0 —  288,546  —  13,386  —  275,160 
11 Jan 20232
 HK$0 —  301,397  —  8,149  —  293,248 
14 Mar 20233
 £0 —  42  —  —  —  42 
13 Apr 20234
 £0 —  277,730  —  7,422  —  270,308 
13 Apr 20235
 HK$0 —  284,890  —  4,079  —  280,811 
1The closing price of the shares on the day before the grant date was £5.6410. The fair value of the awards granted was £5.0580 based on IFRS 2 accounting standards.
2 The closing price of the shares on the day before the grant date was HK$53.30. The fair value of the awards granted was £5.0580 based on IFRS 2 accounting standards.
3 The closing price of the shares on the day before the grant date was £5.6810. The fair value of the awards granted was £5.1237 based on IFRS 2 accounting standards.
4 The closing price of the shares on the day before the grant date was £5.6160. The fair value of the awards granted was £4.9941 based on IFRS 2 accounting standards.
5 The closing price of the shares on the day before the grant date was HK$54.75. The fair value of the awards granted was £5.0376 based on IFRS 2 accounting standards.
Awards under HSBC Share Plan 2011
Conditional share awards may be granted on a discretionary basis to employees and former employees. A conditional award of deferred shares defines the number of shares to which the employee will become entitled, which is generally up to three, four, five or seven years from the date of the award, and normally subject to the individual remaining in employment. In some cases, the employee’s entitlement depends upon the satisfaction of a performance condition. The long-term incentive awards and fixed pay allowances are incorporated in the HSBC Share Plan 2011. The maximum value of awards or options that may be granted to an employee in any one year under the HSBC Share Plan 2011 is 600% of the employee’s annual salary. For the purpose of the limit, any deferred share awards made on or shortly after the commencement of employment or in substitution for all or any part of any bonus to which the employee would otherwise have been entitled, are excluded. Participants do not need to pay any consideration for the grant or vesting of an award. The HSBC Share Plan 2011 has an expiry date of 24 April 2030 (by which time the plan may be extended with approval from shareholders) unless the Directors resolve to terminate the plan at an earlier date.
142
HSBC Holdings plc

HSBC Share Plan 2011 – particulars of awards
HSBC Holdings ordinary shares under award.
Dates of award Purchase price (£) Usually vesting 1 Jan 2023 Granted
in period
Vested
in period1
 Lapsed in period Cancelled
in period		 30 Jun 2023
from to from to
1 Jan 2013 31 Dec 2022 0 1 Mar 2023 30 Mar 2030 119,879,459  —  43,913,965  2,003,869  —  73,961,625 
27 Feb 20232
 0 27 Feb 2023 30 Mar 2030 —  59,835,210  19,477,610  159,369  7,612  40,190,619 
27 Feb 20233
 0 27 Feb 2023 30 Mar 2030 —  3,800,403  —  —  —  3,800,403 
20 Mar 20234
 0 20 Mar 2023 30 Mar 2030 —  2,486,251  760,095  —  —  1,726,156 
15 May 20235
 0 15 May 2023 30 Mar 2029 —  1,283,921  391,767  1,662  —  890,492 
15 May 20236
 0 15 May 2023 30 May 2028 —  50,946  —  5,738  —  45,208 
1 Mar 20237
 0 1 Mar 2023 31 Aug 2026 —  644,298  344,620  1,869  —  297,809 
1The weighted average closing price of the shares immediately before the dates on which the awards were vested was £5.9679.
2The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.3180, £5.4370, £5.3450, £5.3110, £5.2410, £5.1860, £5.1300, £5.1050, £5.0570, £4.9310, £4.9210 and £4.6930.
3The closing price on the day before the grant date was £6.3570. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.3180 and £4.6930. Vesting of these awards, which are made up of LTI awards and retention awards, are subject to satisfaction of performance conditions. LTI awards are subject to a combination of financial and non-financial metrics that are detailed in the Directors’ remuneration report in the Annual Report and Accounts. Retention awards are subject to the completion of a strategically important project.
4The closing price on the day before the grant date was £5.4210. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £5.4170, £4.6650, £4.6620, £4.5830, £4.5540, £4.4480, £4.4460 and £4.0230.
5The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair values, which vary based on the length of the vesting period, are £6.1100, £5.5310, £5.2720, £5.2600, £5.1710, £5.1380, £5.0160 and £5.0110.
6The closing price on the day before the grant date was £5.9970. The fair values of the awards were calculated according to the IFRS 2 accounting standard. The fair value of the awards is £6.1100. Vesting of these awards, which relate to retention awards, are subject to the satisfaction of performance conditions. These retention awards are subject to the completion of a strategically important project.
7Relates to the allocation of dividend equivalent shares in relation to eligible awards.
3
Share buy-back
On 10 May 2023, HSBC Holdings commenced a share buy-back programme to purchase its ordinary shares up to a maximum consideration of $2.0bn. As part of the buy-back programme, shares were repurchased on UK trading venues, including London Stock Exchange, Turquoise, Aquis Exchange and Cboe Europe Limited through the BXE and CXE order books, as well as The Stock Exchange of Hong Kong Limited. The purpose of the buy-back programme is to reduce HSBC’s number of outstanding ordinary shares.
At 30 June 2023, 83,545,603 ordinary shares had been purchased and cancelled from the UK register, representing a nominal value of $41,772,802 and an aggregate consideration paid by HSBC of £507,452,886. The shares cancelled represented 0.415% of the shares in issue and 0.421% of the shares in issue, excluding treasury shares.
At 30 June 2023, 88,400,000 ordinary shares had been purchased from the Hong Kong register, representing a nominal value of $44,200,000 and an aggregate consideration paid by HSBC of HK$5,269,455,949. The shares purchased represented 0.439% of the shares in issue and 0.446% of the shares in issue, excluding treasury shares. The shares purchased are cancelled in batches, with 74,000,000 shares cancelled at 30 June 2023.
At 30 June 2023, the Company held 325,273,407 shares in treasury which were repurchased during the 2016 buy-back and were not cancelled at the time. All shares repurchased pursuant to subsequent buy-backs have been cancelled. The Board intends to consider the cancellation of the treasury shares in due course.
The table that follows outlines details of the shares purchased and cancelled on a monthly basis during 2023.
Share buy-back – UK venues
Number of shares purchased and cancelled Highest price
paid per share		 Lowest price
paid per share		 Average price
paid per share		 Aggregate
price paid
£ £ £ £
May 2023 31,169,005  6.2000 5.8710  6.0716  189,244,725 
Jun 2023 52,376,598  6.1900  5.8810  6.0754  318,208,161 
Total 83,545,603  507,452,886 
Share buy-back – Hong Kong venues
Number of shares purchased Highest price
paid per share		 Lowest price
paid per share		 Average price
paid per share		 Aggregate
price paid
HK$ HK$ HK$ HK$
May 2023 37,500,000  59.9500  57.2000  59.0377  2,213,913,666 
Jun 2023 50,900,000  61.4500  57.1000  60.0303  3,055,542,283 
Total 88,400,000  5,269,455,949 
HSBC Holdings plc
143

Additional information

4
Other equity instruments
Additional tier 1 capital – contingent convertible securities
HSBC Holdings continues to issue contingent convertible securities that are included in its capital base as fully CRR II-compliant additional tier 1 capital securities on an end point basis. These securities are marketed principally and subsequently allotted to corporate investors and fund managers. The net proceeds of the issuances are typically used for HSBC Holdings’ general corporate purposes and to further strengthen its capital base to meet requirements under CRR II. These securities bear a fixed rate of interest until their initial call dates. After the initial call dates, if they are not redeemed, the securities will bear interest at rates fixed periodically in advance for five-year periods based on credit spreads, fixed at issuance, above prevailing market rates. Interest on the contingent convertible securities will be due and payable only at the sole discretion of HSBC Holdings, and HSBC Holdings has sole and absolute discretion at all times to cancel for any reason (in whole or part) any interest payment that would otherwise be payable on any payment date. Distributions will not be paid if they are prohibited under UK banking regulations or if the Group has insufficient reserves or fails to meet the solvency conditions defined in the securities’ terms.
The contingent convertible securities are undated and are repayable at the option of HSBC Holdings in whole typically at the initial call date or on any fifth anniversary after this date. In addition, the securities are repayable at the option of HSBC Holdings in whole for certain regulatory or tax reasons. Any repayments require the prior consent of the PRA. These securities rank pari passu with HSBC Holdings’ sterling preference share and therefore rank ahead of ordinary shares. The contingent convertible securities will be converted into fully paid ordinary shares of HSBC Holdings at a predetermined price, should HSBC’s consolidated non-transitional CET1 ratio fall below 7.0%. Therefore, in accordance with the terms of the securities, if HSBC’s non-transitional CET1 ratio breaches the 7.0% trigger, the securities will convert into ordinary shares at the fixed contractual conversion prices in the issuance currencies of the relevant securities, equivalent to £2.70 at the prevailing rate of exchange on the issuance date, subject to anti-dilution adjustments. During the first half of 2023, HSBC Holdings issued $2,000m contingent convertible securities and called and repaid $2,350m contingent convertible securities.
5
Notifiable interests in share capital
Between 1 January 2023 and 30 June 2023, HSBC Holdings did not receive any notification of major holdings of voting rights pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules, which had not been amended or withdrawn. No further notifications had been received between 30 June 2023 and 20 July 2023.
Previous notifications received, which have not been amended or withdrawn, are as follows:
–BlackRock, Inc. gave notice on 3 March 2020 that on 2 March 2020 it had the following: an indirect interest in HSBC Holdings ordinary shares of 1,235,558,490; qualifying financial instruments with 7,294,459 voting rights that may be acquired if the instruments are exercised or converted; and financial instruments with a similar economic effect to qualifying financial instruments, which refer to 2,441,397 voting rights, representing 6.07%, 0.03% and 0.01%, respectively, of the total voting rights at 2 March 2020.
–Ping An Asset Management Co., Ltd. gave notice on 6 December 2017 that on 4 December 2017 it had an indirect interest in HSBC Holdings ordinary shares of 1,007,946,172, representing 5.04% of the total voting rights at that date.
At 30 June 2023, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong, the following notifications of major holdings have been made to HSBC Holdings and have not been amended or withdrawn:
–BlackRock, Inc. gave notice on 9 March 2022 that on 4 March 2022 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,701,656,169 shares and a short position of 19,262,061 shares, representing 8.27% and 0.09%, respectively, of the ordinary shares in issue at that date.
–Ping An Asset Management Co., Ltd. gave notice on 25 September 2020 that on 23 September 2020 it had a long position of 1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00% of the ordinary shares in issue at that date.
6
Dealings in HSBC Holdings listed securities
HSBC has policies and procedures that, except where permitted by statute and regulation, prohibit it undertaking specified transactions in respect of its securities listed on The Stock Exchange of Hong Kong Limited (‘HKEx’). Except for dealings as intermediaries or as trustees by subsidiaries of HSBC Holdings, or in relation to the HSBC Holdings ordinary share buy-back, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on HKEx during the half-year ended 30 June 2023.
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HSBC Holdings plc

7
Second interim dividend for 2023
On 1 August 2023, the Directors approved a second interim dividend in respect of the financial year ending 31 December 2023 of $0.10 per ordinary share, a distribution of approximately $1.974bn. The dividend will be payable on 21 September 2023 to holders on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 11 August 2023.
The dividend will be payable in US dollars, or in pounds sterling or Hong Kong dollars at the forward exchange rates quoted by HSBC Bank plc in London at or about 11.00am on 11 September 2023. Particulars of these arrangements will be sent to shareholders on or about 18 August 2023 and changes to currency elections must be received by 7 September 2023. The ordinary shares in London, Hong Kong and Bermuda, and American Depositary Shares (‘ADSs’) in New York will be quoted ex-dividend on 10 August 2023.
The dividend will be payable on ADSs, each of which represents five ordinary shares, on 21 September 2023 to holders of record on 11 August 2023. The dividend of $0.50 per ADS will be payable by the depositary in US dollars. Alternatively, the cash dividend may be invested in additional ADSs by participants in the dividend reinvestment plan operated by the depositary. Elections must be received by 1 September 2023.
Any person who has acquired ordinary shares registered on the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register but who has not lodged the share transfer with the Principal Registrar in the UK, Hong Kong Overseas Branch Registrar or Bermuda Overseas Branch Registrar should do so before 4.00pm local time on 11 August 2023 in order to receive the dividend.
Ordinary shares may not be removed from or transferred to the Principal Register in the UK, the Hong Kong Overseas Branch Register or the Bermuda Overseas Branch Register on 11 August 2023. Any person wishing to remove ordinary shares to or from each register must do so before 4.00pm local time on 10 August 2023.
Transfer of ADSs must be lodged with the depositary by 11.00am on 11 August 2023 in order to receive the dividend. ADS holders who receive a cash dividend will be charged a fee, which will be deducted by the depositary, of $0.005 per ADS per cash dividend.
8
Dividend on preference share
A quarterly dividend of £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2023 for the quarter then ended at the sole and absolute discretion of the Board of HSBC Holdings plc. Accordingly, the Board of HSBC Holdings plc has approved a quarterly dividend to be payable on 15 September 2023 to holders of record on 31 August 2023.
9
Proposed interim dividends for 2023
As previously communicated, given our current returns trajectory, we have established a dividend payout ratio of 50% of reported earnings per share for 2023 and 2024, excluding material significant items (including the planned sale of our retail banking operations in France and the agreed sale of our banking business in Canada). The Group has reverted to a policy of paying quarterly dividends from the first quarter of 2023. The dividend policy has the flexibility to adjust reported earnings per ordinary share (‘EPS‘) for material significant items such as goodwill or intangibles impairments and may be supplemented from time to time by buy-backs or special dividends, 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 US dollars, pounds sterling or Hong Kong dollars.
10
Earnings release
An earnings release for the three-month period ending 30 September 2023 is expected to be issued on 30 October 2023.
11
Final results
The results for the year to 31 December 2023 are expected to be announced on 21 February 2024.
12
Corporate governance
We are subject to corporate governance requirements in both the UK and Hong Kong. Throughout the six months ended 30 June 2023, we complied with the applicable provisions of the UK Corporate Governance Code, and also the requirements of the Hong Kong Corporate Governance Code. The UK Corporate Governance Code is available at www.frc.org.uk and the Hong Kong Corporate Governance Code is available at www.hkex.com.hk.
Under the Hong Kong Code, the Group Audit Committee should be responsible for the oversight of all risk management and internal control systems, unless expressly addressed by a separate risk committee. Our Group Risk Committee is responsible for oversight of internal control, other than internal financial controls, and risk management systems.
The Board has codified obligations for transactions in Group securities in accordance with the requirements of the Market Abuse Regulation and the rules governing the listing of securities on the HKEx, save that the HKEx has granted waivers from strict compliance with the rules that take into account accepted practices in the UK, particularly in respect of employee share plans.
Following specific enquiries all Directors have confirmed that they have complied with their obligations in respect of transacting in Group securities throughout the period.
There have been no material changes to the information disclosed in the Annual Report and Accounts 2022 in respect of the remuneration of employees, remuneration policies, bonus and share option plans and training schemes. Details of the number of employees are provided on page 33 of the Interim Report 2023.
HSBC Holdings plc
145

Additional information

13 Changes in Directors’ details
Changes in current Directors’ details since the date of the Annual Report and Accounts 2022, which are required to be disclosed pursuant to Rule 13.51(2) and Rule 13.51B(1) of the Hong Kong Listing Rules, are set out below.
Georges Elhedery
Appointed to the Board on 1 January 2023.
James Anthony Forese
Appointed Chair of the Group Risk Committee and to the Group Audit Committee on 5 May 2023. He also stepped down from the Group Remuneration Committee.
Kalpana Morparia
Appointed to the Board, Group Risk Committee and Nomination & Corporate Governance Committee on 1 March 2023.
Eileen K Murray
Appointed to the Group Remuneration Committee on 5 May 2023.
Jackson Tai
Retired from the Board, Group Risk Committee, Nomination & Corporate Governance Committee and Group Audit Committee on 5 May 2023.
14
Going concern basis
As mentioned in Note 1 ‘Basis of preparation and material accounting policies’ on page 113, the financial statements are prepared on a going concern basis as the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources. These considerations include high interest and inflationary stress scenarios that reflect the intensification of ongoing global energy supply issues, the impact of the Russia-Ukraine war, structural changes from the Covid-19 pandemic, and ongoing vulnerabilities in China, as well as the potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity.
In particular, HSBC’s principal activities, business and operating models, strategic direction, and top and emerging risks are addressed in the Overview section. A financial summary, including a review of the consolidated income statement and consolidated balance sheet, is provided in the ‘Interim management report’ section. HSBC’s objectives, policies and processes for managing credit, liquidity and market risk are described in the ‘Risk review’ section of the Annual Report and Accounts 2022. HSBC’s approach to capital management and allocation is described in the ‘Treasury risk’ section of the Annual Report and Accounts 2022.
15
Telephone and online share dealing service
For shareholders on the Principal Register who are resident in the UK, with a UK postal address, and who hold an HSBC Bank plc personal current account, the HSBC InvestDirect share dealing service is available for buying and selling HSBC Holdings plc ordinary shares. Details are available from: HSBC InvestDirect, Forum 1, Parkway, Whiteley PO15 7PA; or UK telephone: +44 (0) 3456 080848, or from an overseas telephone: +44 (0) 1226 261090; or website: www.hsbc.co.uk/investments/products-and-services/invest-direct.
16
Stock symbols
HSBC Holdings plc ordinary shares trade under the following stock symbols:
London Stock Exchange
 HSBA
Hong Kong Stock Exchange
 5
New York Stock Exchange (ADS)
 HSBC
Bermuda Stock Exchange
 HSBC.BH
17
Copies of the Interim Report 2023 and shareholder enquiries and communications
Further copies of the Interim Report 2023 may be obtained from Global Communications, HSBC Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; from Communications (Asia), The Hongkong and Shanghai Banking Corporation Limited, 1 Queen’s Road Central, Hong Kong; or from US Communications, HSBC Bank USA, N.A., 1 West 39th Street, 9th Floor, New York, NY 10018, USA. The Interim Report 2023 may also be downloaded from the HSBC website, www.hsbc.com.
Shareholders may at any time choose to receive corporate communications in printed form or to receive notifications of their availability on HSBC’s website. To receive notifications of the availability of a corporate communication on HSBC’s website by email, or to revoke or amend an instruction to receive such notifications by email, go to www.hsbc.com/ecomms. If you provide an email address to receive electronic communications from HSBC, we will also send notifications of any future dividend entitlements by email. If you received a notification of the availability of this document on HSBC’s website and would like to receive a printed copy or, if you would like to receive future corporate communications in printed form, please write or send an email (quoting your shareholder reference number) to the appropriate Registrar at the address given below. Printed copies will be provided without charge.
Any enquiries relating to your shareholdings on the share register (for example transfers of shares, change of name or address, lost share certificates or dividend cheques) should be sent to the Registrar at the address given below. The Registrars offer an online facility, Investor Centre, which enables shareholders to manage their shareholding electronically.
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HSBC Holdings plc Interim Report 2023

Principal Register
Hong Kong Overseas Branch Register
Bermuda Overseas Branch Register
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Computershare Hong Kong Investor
Services Limited
Rooms 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Hong Kong
Investor Relations Team
HSBC Bank Bermuda Limited
37 Front Street
Hamilton HM 11
Bermuda
Telephone: +44 (0) 370 702 0137
Email: web.queries@computershare.co.uk
Web: www.investorcentre.co.uk/contactus
Telephone: +852 2862 8555
Email: hsbc.ecom@computershare.com.hk
Web: www.investorcentre.com/hk
Email: hbbm.shareholder.services@hsbc.bm
Web: www.investorcentre.com/bm
Any enquiries relating to ADSs should be sent to the depositary at:
The Bank of New York Mellon
Shareowner Services
P.O. Box 43006
Providence RI 02940-3078
USA
Telephone (US): +1 877 283 5786
Telephone (international): +1 201 680 6825
Email: shrrelations@cpushareownerservices.com
Web: www.mybnymdr.com
A Chinese translation of this and future documents may be obtained on request from the Registrar. Please also contact the Registrar if you have received a Chinese translation of this document and do not wish to receive such translations in future.
Persons whose shares are held on their behalf by another person may have been nominated to receive communications from HSBC pursuant to section 146 of the UK Companies Act 2006 (‘nominated person’). The main point of contact for a nominated person remains the registered shareholder (for example your stockbroker, investment manager, custodian or other person who manages the investment on your behalf). Any changes or queries relating to a nominated person’s personal details and holding (including any administration thereof) must continue to be directed to the registered shareholder and not HSBC’s Registrar. The only exception is where HSBC, in exercising one of its powers under the UK Companies Act 2006, writes to nominated persons directly for a response.
本中期業績報告及日後的相關文件均備有中譯本，如有需要，請向適當的股份登記處索取。股東如收到本報告的中譯本，但不希望再收取此等中譯本，亦請聯絡股份登記處。



HSBC Holdings plc Interim Report 2023
147

Additional information
Abbreviations
Currencies
£ British pound sterling
CA$ Canadian dollar
€ Euro
HK$ Hong Kong dollar
RMB Chinese renminbi
SGD Singapore dollar
$ United States dollar
Abbreviation
1H22 First half of 2022
1H23 First half of 2023
1Q22 First quarter of 2022
1Q23 First quarter of 2023
2H22 Second half of 2022
2Q22 Second quarter of 2022
2Q23 Second quarter of 2023
4Q22 Fourth quarter of 2022
A
ABS Asset-backed security
ADS American Depositary Share
AI Artificial intelligence
AIEA Average interest-earning assets
ALCO Asset and Liability Management Committee
ANP Annualised new business premiums
ASEAN Association of Southeast Asian Nations
AT1 Additional tier 1
B
Basel Basel Committee on Banking Supervision
Basel III Basel Committee’s reforms to strengthen global capital and liquidity rules
Basel 3.1
 Outstanding measures to be implemented from the Basel III reforms
BoCom Bank of Communications Co., Limited, one of China’s largest banks
BoE Bank of England
Bps Basis points. One basis point is equal to one hundredth of a percentage point
C
CAPM Capital asset pricing model
CDOR Canadian dollar offered rate
CEA Commodity Exchange Act (US)
CET1 Common equity tier 1
CMB Commercial Banking, a global business
CMC Capital maintenance charge
CODM Chief Operating Decision Maker
COFINS Contribution for the Financing of Social Security, a Brazilian federal corporation tax
CRD IV Capital Requirements Regulation and Directive
CRR Customer risk rating
CRR II Revised Capital Requirements Regulation and Directive, as implemented
CSM Contractual service margin
D
DPD Days past due
DPF Discretionary participation feature of insurance and investment contracts
DVA Debit valuation adjustment
E
EBA European Banking Authority
EC European Commission
ECB European Central Bank
ECL Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied.
EEA European Economic Area
Eonia Euro Overnight Index Average
EPS Earnings per ordinary share
ESG Environmental, social and governance
EU European Union
Euribor Euro interbank offered rate
EVE Economic value of equity
F
FCA Financial Conduct Authority (UK)
FRB Federal Reserve Board (US)
FTE Full-time equivalent staff
FVOCI Fair value through other comprehensive income
FX Foreign exchange
G
GAAP Generally accepted accounting principles
GBM Global Banking and Markets, a global business
GDP Gross domestic product
GEC Group Executive Committee
GPS Global Payments Solutions, the business formerly known as Global Liquidity and Cash Management
Group HSBC Holdings together with its subsidiary undertakings
GTRF Global Trade and Receivables Finance
H
HIBOR Hong Kong interbank offered rate
HKEx The Stock Exchange of Hong Kong Limited
HKMA Hong Kong Monetary Authority
Holdings ALCO HSBC Holdings Asset and Liability Management Committee
Hong Kong Hong Kong Special Administrative Region of the People’s Republic of China
HQLA High-quality liquid assets
HSBC HSBC Holdings together with its subsidiary undertakings
HSBC Bank plc HSBC Bank plc, also known as the non-ring-fenced bank
HSBC Bank Middle East HSBC Bank Middle East Limited
HSBC Canada The sub-group, HSBC Bank Canada, HSBC Trust Company Canada, HSBC Mortgage Corporation Canada and HSBC Securities Canada, consolidated for liquidity purposes
HSBC Continental Europe HSBC Continental Europe
HSBC Holdings HSBC Holdings plc, the parent company of HSBC
HSBC UK HSBC UK Bank plc, also known as the ring-fenced bank
HSSL HSBC Securities Services (Luxembourg)
I
IAS International Accounting Standards
IASB International Accounting Standards Board
Ibor Interbank offered rate
ICAAP Internal capital adequacy assessment process
IFRSs International Financial Reporting Standards
ILAAP Internal liquidity adequacy assessment process
J
JV Joint venture
L
LCR Liquidity coverage ratio
Libor London interbank offered rate
LTI Long-term incentive
LTV Loan to value
M
M&A Mergers and acquisitions
Mainland China People’s Republic of China excluding Hong Kong
and Macau
MENAT Middle East, North Africa and Türkiye
MREL Minimum requirement for own funds and eligible liabilities
MSS Markets and Securities Services, HSBC’s capital markets and securities services businesses in Global Banking and Markets
148
HSBC Holdings plc Interim Report 2023


N
Net operating income Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue
NII Net interest income
NIM Net interest margin
NSFR Net stable funding ratio
O
OCI Other comprehensive income
OECD Organisation of Economic Co-operation and Development
OTC Over-the-counter
P
PCAF Partnership for Carbon Accounting Financials
PD Probability of default
PIS Contibution to the Social Integration Programme, a Brazilian federal corporation tax
POCI Purchased or originated credit-impaired financial assets
PRA Prudential Regulation Authority (UK)
Premier HSBC Premier, HSBC’s premium personal global banking service
PVIF Present value of in-force long-term insurance business and long-term investment contracts with DPF
PwC The member firms of the PwC network, including PricewaterhouseCoopers LLP
R
RFR Risk-free rate
RoE Return on average ordinary shareholders’ equity
RoTE Return on average tangible equity
RWA Risk-weighted asset
S
SAB Saudi Awwal Bank
SEC Securities and Exchange Commission (US)
ServCo group Separately incorporated group of service companies established in response to UK ring-fencing requirements
Sibor Singapore interbank offered rate
SME Small and medium-sized enterprise
SOFR Secured Overnight Financing Rate
SVB UK Silicon Valley Bank UK Limited, now HSBC Innovation Bank Limited
T
TNFD Taskforce on Nature-related Financial Disclosures
U
UAE United Arab Emirates
UK United Kingdom
UN United Nations
US United States of America
V
VaR Value at risk
VIU Value in use
W
WPB Wealth and Personal Banking, a global business


This document comprises the Interim Report 2023 and information herein has been filed on Form 6-K with the US Securities and Exchange Commission for HSBC Holdings plc and its subsidiary and associated undertakings.
HSBC Holdings plc
Incorporated in England with limited liability. Registered in England: number 617987
Registered Office and Group Head Office
8 Canada Square, London E14 5HQ, United Kingdom
Web: www.hsbc.com
© Copyright HSBC Holdings plc 2023
All rights reserved
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Holdings plc.
Published by Global Finance, HSBC Holdings plc, London
Designed by Superunion, London (cover and ‘Overview’ section) and by Global Finance, HSBC Holdings plc, London (rest of the Interim Report 2023)




HSBC Holdings plc Interim Report 2023
149


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HSBC Holdings plc
By:
/s/ Georges Elhedery
Name:Georges Elhedery
Title: Group Chief Financial Officer

Dated: August 1, 2023