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HSBC HSBC








FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a - 16 or 15d - 16 of
 
the Securities Exchange Act of 1934
 
For the month of April 2020

Commission File Number: 001-14930

HSBC Holdings plc
 
42nd Floor, 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 ......
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):   ______


 
This Report on Form 6-K with respect to our quarterly results for the three-month period ended March 31, 2020 is hereby incorporated by reference in the following HSBC Holdings plc registration statements: Registration Statements on Form F-3 (Nos. 333-92024, 333-135007, 333-158065, 333-180288, 333-202420, 333-223191) and Registration Statement on Form F-4 (No. 333-126531).

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




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28 APRIL 2020
HSBC HOLDINGS PLC
1Q20 EARNINGS RELEASE
Noel Quinn, Group Chief Executive, said:
"The economic impact of the Covid-19 pandemic on our customers has been the main driver of the change in our financial performance since the turn of the year. The resultant increase in expected credit losses in the first quarter contributed to a material fall in reported profit before tax compared with the same period last year.
HSBC has always been there for our customers in times of crisis, and we are working hard to support them during this unprecedented period of disruption. We do so from a position of strength, with robust levels of capital, funding and liquidity. The market-specific support measures that we are offering our personal and business customers have had strong take-up, and we remain responsive to their changing needs. We are also working closely with governments around the world to channel fiscal support to the real economy quickly and efficiently.
I take the well-being of our people extremely seriously. We have therefore paused the vast majority of redundancies related to the transformation we announced in February to reduce the uncertainty they are facing at this difficult time. We continue to press forward with the other areas of our transformation with the aim of delivering a stronger and leaner business that is better equipped to help our customers prosper in the recovery still to come."
Financial performance (vs. 1Q19)
Reported profit before tax down 48% to $3.2bn from higher expected credit losses and other credit impairment charges (‘ECL’) and lower revenue. The reduction primarily reflected the global impact of the Covid-19 outbreak and weakening oil prices.
Reported revenue down 5% as a result of adverse market impacts in life insurance manufacturing and adverse valuation adjustments in Global Banking and Markets ('GB&M'), offsetting a resilient revenue performance, notably in Asia, Global Markets, Retail Banking and Global Private Banking ('GPB').
Net interest margin ('NIM') of 1.54%, down 2 basis points ('bps') from 4Q19 and down 5bps from 1Q19. We expect material downward pressure on NIM in future quarters as we incur the full impact of 1Q20 market interest rate reductions.
Reported ECL increased by $2.4bn to $3.0bn due to the impact of Covid-19 and weakening oil prices on the forward economic outlook and a significant charge related to a corporate exposure in Singapore. Allowance for ECL increased from $9.2bn at 31 December 2019 to $11.1bn at 31 March 2020.
During the quarter, lending increased by $41bn and deposits grew by $47bn on a constant currency basis. Lending and deposit growth included the effects of corporate customers drawing on existing and new credit lines and re-depositing these to increase cash balances. Deposit balances also reflected continued growth in Retail Banking and Wealth Management ('RBWM').
Reported operating expenses down 5% and adjusted operating expenses down 3%, despite continued investment, due to lower performance-related pay and reduced discretionary costs.
Common equity tier 1 capital (‘CET1’) ratio of 14.6% (4Q19: 14.7%), including the impact of the cancellation of the final dividend in respect of 2019. Liquidity coverage ratio (‘LCR’) of 156% (4Q19: 150%) and a deposit surplus – the excess of deposit balances over lending balances – of over $400bn.
2020 outlook
The outlook for world economies in 2020 has substantially worsened in the past two months. The impact and duration of the Covid-19 crisis will likely lead to higher ECL and put pressure on revenue due to lower customer activity levels and reduced global interest rates. We plan to reduce operating expenses to partly mitigate the reduction in revenue and we intend to continue to exercise cost discipline, while maintaining strategic investment. These factors are expected to lead to materially lower profitability in 2020, relative to 2019.
We have temporarily delayed parts of our transformation, including some elements of our cost and risk-weighted asset ('RWA') reduction programme, and expect restructuring costs for 2020 to be lower than indicated in our 2019 annual results.
We also expect mid-to-high single digit percentage growth in RWAs in 2020, including as a result of the effects of negative credit rating migration movements, impacting our CET1 ratio.
During 2020, we will continue to assess the impact of the Covid-19 crisis and review our financial performance and business plan accordingly. We will assess the appropriateness of our medium-term financial targets during that period, and will review our dividend policy at, or ahead of, our year-end results for 2020.

HSBC Holdings plc Earnings Release 1Q20
1


Earnings Release – 1Q20


Key financial metrics

Quarter ended

31 Mar
31 Dec
31 Mar

2020
2019
2019
Reported results   
Reported revenue ($m)13,686
13,371
14,428
Reported profit before tax ($m)3,229
(3,897)6,213
Reported profit after tax ($m)2,508
(5,024)4,910
Profit attributable to the ordinary shareholders of the parent company ($m)1,785
(5,509)4,134
Basic earnings per share ($)0.09
(0.27)0.21
Diluted earnings per share ($)0.09
(0.27)0.21
Return on average ordinary shareholders' equity (annualised) (%)4.4
(13.3)10.2
Return on average tangible equity (annualised) (%)4.2
5.2
10.6
Net interest margin (%)1.541.56
1.59
Adjusted results   
Adjusted revenue ($m)13,32713,586
14,149
Adjusted profit before tax ($m)3,0424,343
6,246
Adjusted cost efficiency ratio (%)57.6
66.6
55.9
Expected credit losses and other credit impairment charges (‘ECL’) (annualised) as % of average gross loans and advances to customers (%)1.18
0.28
0.24
  At
  31 Mar
31 Dec
31 Mar
 Footnotes2020
2019
2019
Balance sheet    
Total assets ($m) 2,917,810
2,715,152
2,658,996
Net loans and advances to customers ($m) 1,040,282
1,036,743
1,005,279
Customer accounts ($m) 1,440,529
1,439,115
1,356,511
Average interest-earning assets, year to date ($m) 1,991,702
1,922,822
1,902,912
Loans and advances to customers as % of customer accounts (%) 72.2
72.0
74.1
Total shareholders’ equity ($m) 189,771
183,955
188,362
Tangible ordinary shareholders’ equity ($m) 150,019
144,144
141,648
Net asset value per ordinary share at period end ($)18.30
8.00
8.20
Tangible net asset value per ordinary share at period end ($) 7.44
7.13
7.05
Capital, leverage and liquidity    
Common equity tier 1 capital ratio (%)214.6
14.7
14.3
Risk-weighted assets ($m)2857,078
843,395
879,485
Total capital ratio (%)220.3
20.4
20.2
Leverage ratio (%)25.3
5.3
5.4
High-quality liquid assets (liquidity value) ($bn) 617
601
535
Liquidity coverage ratio (%) 156
150
143
Share count    
Period end basic number of $0.50 ordinary shares outstanding (millions) 20,172
20,206
20,082
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions) 20,245
20,280
20,177
Average basic number of $0.50 ordinary shares outstanding (millions) 20,161
20,158
20,036
Dividend per ordinary share (in respect of the period) ($) 
0.30
0.10
1The definition of net asset value per ordinary share is total shareholders' equity, less non-cumulative preference shares and capital securities, divided by the number of ordinary shares in issue excluding shares the company has purchased and are held in treasury.
2Unless otherwise stated, regulatory capital ratios and requirements are calculated in accordance with the transitional arrangements of the Capital Requirements Regulation in force in the EU at the time, including the regulatory transitional arrangements for IFRS 9 ‘Financial Instruments’ in article 473a. The capital ratios and requirements are reported in accordance with the revised Capital Requirements Regulation and Directive
(‘CRR II’), as implemented. Leverage ratios are calculated using the end point definition of capital.


2
HSBC Holdings plc Earnings Release 1Q20




Contents
 Page  Page
Highlights Credit risk
Key financial metrics Capital adequacy
Covid-19 Leverage
Adjusted performance Risk-weighted assets
Financial performance Summary information – global businesses
Cautionary statement regarding forward-looking statements Summary information – geographical regions
Summary consolidated income statement Dividend on preference shares
Summary consolidated balance sheet Terms and abbreviations
HSBC Holdings plc will be conducting a trading update conference call with analysts and investors today to coincide with the publication of its Earnings Release. The call will take place at 07.30am BST. Details of how to participate in the call and the live audio webcast can be found at www.hsbc.com/investors.
Note to editors
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in
64 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of $
2,918bn at 31 March 2020, HSBC is one of the world’s largest banking and financial services organisations.
Covid-19
Impact on our business
The outbreak of Covid-19 has had, and continues to have, a material impact on businesses around the world and the economic environments in which they operate. The outbreak has caused disruption to our customers, suppliers and staff globally. A number of jurisdictions in which we operate have implemented severe restrictions on the movement of populations, with a resultant significant impact on economic activity. These restrictions are being determined by the governments of individual jurisdictions, including through the implementation of emergency powers. The impacts of these restrictions, including the subsequent lifting of restrictions, may vary from jurisdiction to jurisdiction. We have invoked our business continuity plans at many of our sites to help ensure the safety and well-being of our staff, as well as our ability to support our customers and maintain our business operations. Many of our staff have continued to provide critical services in branches, contact and service centres, and in offices, all with heightened safety measures, and we have equipped the majority of our staff to work remotely. It remains unclear how this will evolve through 2020 and we continue to monitor the situation closely.
In many of our markets we have initiated market-specific measures to support our personal and business customers through these challenging times, including mortgage assistance, payment holidays, the waiving of certain fees and charges, and liquidity relief for businesses facing market uncertainty and supply chain disruption. These measures have been well received and we remain responsive to our customers' changing needs. We are also working closely with governments and supporting national schemes that focus on the parts of the economy most impacted by Covid-19.
The actions taken by the various governments and central banks, in particular in the UK, mainland China, Hong Kong and the US, provide an indication of the potential severity of the downturn and post-recovery environment, which from a commercial, regulatory and risk perspective could be significantly different to past crises and persist for a prolonged period. An immediate financial impact of the outbreak is an increase in ECL, driven by a change in the economic scenarios used to calculate ECL. The outbreak has led to a weakening in GDP in many of our markets, a key input used for calculating ECL, and the probability of a more adverse economic scenario for at least the short term is substantially higher than at 31 December 2019. Furthermore, ECL will arise from other parts of our business impacted by the disruption to supply chains. The impact will vary by sectors of the economy, with heightened risk to the oil and gas, transport and discretionary consumer sectors being observed in the first stages of the outbreak. The impact of the outbreak on the long-term prospects of businesses in these sectors is uncertain and may lead to significant ECL charges on specific exposures, which may not be fully captured by ECL modelling techniques. In addition, in times of crisis, fraudulent activity is often more prevalent, leading to potentially significant ECL charges.
Should the Covid-19 outbreak continue to cause disruption to economic activity globally through 2020, there could be further adverse impacts on our income due to lower lending and transaction volumes and lower wealth and insurance manufacturing revenue due to equity markets volatility. Lower interest rates globally will negatively impact net interest income and increase the cost of guarantees for insurance manufacturing, and there could also be adverse impacts on other assets, such as our investment in Bank of Communications Co., Limited.
The Covid-19 outbreak will also have material impacts on capital and liquidity. This may include downward customer credit rating migration, which could negatively impact our risk-weighted assets and capital position, and potential liquidity stress due, among other factors, to increased customer drawdowns, notwithstanding the significant initiatives that governments and central banks have put in place to support funding and liquidity. Central banks in some markets have also initiated a series of capital measures, including the reduction of certain regulatory capital buffers, to support the ability of banks to supply credit to businesses and households through this period of economic disruption.
Central bank and government actions and support measures may result in restrictions in relation to capital. These may limit management’s flexibility in managing the business and taking action in relation to capital distribution and capital allocation. In response to a written request from the UK's Prudential Regulation Authority ('PRA'), we cancelled the fourth interim dividend of $0.21 per ordinary share. Similar requests were also made to other UK incorporated banking groups. We also announced that until the end of 2020 we will make no quarterly or interim dividend payments or accruals in respect of ordinary shares. As previously disclosed in our Annual Report and Accounts 2019, we also plan to suspend share buy-backs in respect of ordinary shares in 2020 and 2021.


HSBC Holdings plc Earnings Release 1Q20
3


Earnings Release – 1Q20


Approach to risk management
We have maintained a consistent approach to risk throughout our history and have in place a comprehensive risk management framework to manage such risks. We operate a wide-ranging stress testing programme at legal entity, regional and overall Group level that is a key part of our capital and liquidity risk management and planning. Stress testing provides management with key insights into the impact of severely adverse events on the Group, and provides confidence to regulators on the Group's financial stability. As well as undertaking regulatory-driven stress tests, we conduct our own stress tests to understand the nature of material risks, quantify the impact of such risks and develop plausible business-as-usual mitigating actions. Given the novel or prolonged nature of the current crisis, additional mitigating actions may be required.
At 31 March 2020, our common equity tier 1 ('CET1') ratio was 14.6%, compared with 14.7% at 31 December 2019, and our liquidity coverage ratio ('LCR') was 156%. Our capital, funding and liquidity position will help us to continue supporting our customers throughout the Covid-19 outbreak.
There remain significant uncertainties in assessing the duration of the Covid-19 outbreak and its impact. A prolonged period of significantly reduced economic activity as a result of the impact of the outbreak would have a material adverse effect on our financial condition, results of operations, prospects, liquidity, capital position and credit ratings. This would, in turn, have an impact on our ability to meet our financial targets as set out in our business update in February 2020 and also adversely affect our future dividend policy.
Adjusted performance
Adjusted performance is computed by adjusting reported results for the effects of foreign currency translation differences and significant items, which both distort period-on-period comparisons.
We consider adjusted performance to provide useful information for investors by aligning internal and external reporting, identifying and quantifying items management believes to be significant, and providing insight into how management assesses period-on-period performance.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the US dollar against most major currencies. 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 understand better the underlying trends in the business.
Foreign currency translation differences
Foreign currency translation differences for 1Q20 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates:
the income statements for 4Q19 and 1Q19 at the average rates of exchange for 1Q20; and
the closing prior period balance sheets at the prevailing rates of exchange on 31 March 2020.
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 Argentinian subsidiaries 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.
Significant items
‘Significant items’ refers collectively to the items that management and investors would ordinarily identify and consider separately to understand better the underlying trends in the business.
The tables on pages 23 to 28 detail the effects of significant items on each of our global business segments and geographical regions during 1Q20, 4Q19 and 1Q19.
Adjusted performance – foreign currency translation of significant items
The foreign currency translation differences related to significant items are presented as a separate component of significant items. This is considered a more meaningful presentation as it allows better comparison of period-on-period movements in performance.
Global business performance
The Group Chief Executive, supported by the rest of the Group Executive Committee (‘GEC’) (previously the Group Management Board), is considered to be the Chief Operating Decision Maker (‘CODM’) for the purposes of identifying the Group‘s reportable segments.
The Group Chief Executive and the rest of the GEC review operating activity on a number of bases, including by global business and geographical region. Global businesses are our reportable segments under IFRS 8 ‘Operating Segments’. Global business results are assessed by the CODM on the basis of adjusted performance, which removes the effects of significant items and currency translation from reported results. We therefore present these results on an adjusted basis as required by IFRSs.
A reconciliation of the Group’s adjusted results to the Group’s reported results is presented below. Supplementary reconciliations of adjusted to reported results by global business are presented on pages 23 to 25 for information purposes.
Management view of adjusted revenue
Our global business segment commentary includes tables that provide breakdowns of adjusted revenue by major product. These reflect the basis on which revenue performance of the businesses is assessed and managed.

4
HSBC Holdings plc Earnings Release 1Q20




Reconciliation of reported and adjusted results
  Quarter ended
  31 Mar
31 Dec
31 Mar
  2020
2019
2019
 Footnotes$m
$m
$m
Revenue    
Reported113,686
13,371
14,428
Currency translation 

(66)(257)
Significant items (359)281
(22)
– customer redress programmes 
45

– disposals, acquisitions and investment in new businesses 7
55

– fair value movement on financial instruments2(357)176
(22)
– restructuring and other related costs (9)

– currency translation of significant items 

5

Adjusted 13,327
13,586
14,149
Change in expected credit losses and other credit impairment charges 





Reported (3,026)(733)(585)
Currency translation 

11
16
Adjusted (3,026)(722)(569)
Operating expenses    
Reported (7,852)(17,053)(8,222)
Currency translation 

54
156
Significant items 172
7,956
155
– cost of structural reform3
32
53
– customer redress programmes 1
183
56
– goodwill impairment 
7,349

– restructuring and other related costs 170
400
50
– settlements and provisions in connection with legal and regulatory matters 1
5

– currency translation of significant items 

(13)(4)
Adjusted (7,680)(9,043)(7,911)
Share of profit in associates and joint ventures 





Reported 421
518
592
Currency translation 

4
(15)
Adjusted 421
522
577
Profit/(loss) before tax 





Reported 3,229
(3,897)6,213
Currency translation 

3
(100)
Significant items (187)8,237
133
– revenue (359)281
(22)
– operating expenses 172
7,956
155
Adjusted 3,042
4,343
6,246
Loans and advances to customers (net)    
Reported 1,040,282
1,036,743
1,005,279
Currency translation  (37,012)(29,133)
Adjusted 1,040,282
999,731
976,146
Customer accounts    
Reported 1,440,529
1,439,115
1,356,511
Currency translation  (45,453)(33,626)
Adjusted 1,440,529
1,393,662
1,322,885
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Includes fair value movements on non-qualifying hedges and debt valuation adjustments on derivatives.
3Comprises costs associated with preparations for the UK’s exit from the European Union.

HSBC Holdings plc Earnings Release 1Q20
5


Earnings Release – 1Q20


Financial performance
Distribution of results by global business 
 Quarter ended
 31 Mar
31 Dec
31 Mar
 2020
2019
2019
 $m
$m
$m
Adjusted profit/(loss) before tax   
Retail Banking and Wealth Management357
1,914
2,195
Commercial Banking611
1,646
1,992
Global Banking and Markets823
1,272
1,611
Global Private Banking121
86
98
Corporate Centre1,130
(575)350
Total3,042
4,343
6,246
Distribution of results by geographical region
 Quarter ended
 31 Mar
31 Dec
31 Mar
 2020
2019
2019
 $m
$m
$m
Reported profit/(loss) before tax   
Europe(511)(3,709)(14)
Asia3,740
4,037
5,006
Middle East and North Africa44
286
465
North America(111)(278)379
Latin America67
(271)377
Global GB&M goodwill impairment
(3,962)
Total3,229
(3,897)6,213
Adjusted profit/(loss) before tax   
Europe(685)(516)54
Asia3,643
4,117
5,022
Middle East and North Africa43
392
471
North America(10)265
386
Latin America51
85
313
Total3,042
4,343
6,246
Tables showing adjusted profit before tax by global business and region are presented to support the commentary on adjusted performance on the following pages.
The tables on pages 23 to 28 reconcile reported to adjusted results for each of our global business segments and geographical regions.
Group
1Q20 compared with 1Q19 – reported results
Movement in reported profit before tax compared with 1Q19

 Quarter ended
 31 Mar
31 Mar
Variance
 2020
2019
1Q20 vs. 1Q19
 $m
$m
$m
%
Revenue13,686
14,428
(742)(5)
ECL(3,026)(585)(2,441)(417)
Operating expenses(7,852)(8,222)370
5
Share of profit from associates and JVs421
592
(171)(29)
Profit before tax3,229
6,213
(2,984)(48)
Tax expense(721)(1,303)582
45
Profit after tax2,508
4,910
(2,402)(49)
Reported profit
Reported profit after tax of $2.5bn was $2.4bn or 49% lower than in 1Q19.
Reported profit before tax of $3.2bn was $3.0bn or 48% lower, reflecting higher reported ECL and lower reported revenue. While performance in the first two months delivered good results, the global impact of the Covid-19 outbreak and weakening oil prices had a significant adverse impact on performance in March.
Results in 1Q20 included adverse market impacts in insurance manufacturing in RBWM of $689m following a weakening of global equity prices and lower interest rates (1Q19: $183m favourable), while GB&M included an adverse movement in credit and funding valuation adjustments of $346m (1Q19: $46m favourable), adverse bid-offer adjustments of $310m (1Q19: $3m favourable) and losses in Principal Investments of $235m (1Q19: gains of $83m). Results also included favourable fair value movements on our long-term debt and associated swaps in Corporate Centre of $259m (1Q19: $50m favourable). In 1Q19, results included gains on disposals in Latin America of $157m and a release of a provision in Equities in GB&M of $106m.

6
HSBC Holdings plc Earnings Release 1Q20




The reduction in reported profit before tax included a net favourable movement in significant items between the periods of $0.3bn, mainly from favourable fair value movements on financial instruments of $0.3bn. Significant items in reported operating expenses were broadly unchanged and included higher restructuring and other related costs of $0.1bn, which were broadly offset by lower structural reform costs of $0.1bn and a decrease in customer redress programmes of $0.1bn.
Excluding net favourable movements in significant items of $0.3bn and adverse foreign currency translation differences of $0.1bn, profit before tax decreased by $3.2bn or 51%.
Reported revenue
Reported revenue of $13.7bn was $0.7bn or 5% lower than in 1Q19, and included a net favourable movement in significant items of $0.3bn, mainly from fair value movements on financial instruments, which were broadly offset by adverse foreign currency translation differences of $0.3bn. The remaining reduction reflected decreases in RBWM, GB&M and Commercial Banking ('CMB'), partly offset by higher revenue in Corporate Centre.
Lower revenue in RBWM was primarily driven by adverse market impacts in life insurance manufacturing of $689m following a weakening of global equity prices and lower interest rates. This compared with favourable market impacts in 1Q19. In GB&M, lower revenue was due to adverse movements in credit and funding valuation adjustments of $346m (1Q19: $46m favourable), and losses in Principal Investments of $235m, compared with gains in 1Q19 of $83m. These reductions were partly offset by growth in Global Markets, reflecting increased client activity as a result of higher volatility, notwithstanding adverse bid-offer adjustments of $310m (1Q19: $3m favourable). In CMB, lower revenue was mainly in Global Liquidity and Cash Management ('GLCM') due to the effects of lower interest rates. These decreases were partly offset by higher revenue in Corporate Centre, driven by favourable fair value movements on our long-term debt and associated swaps and from higher revenue in Balance Sheet Management.
Excluding foreign currency translation differences and significant items, revenue decreased by $0.8bn or 6%.
Reported ECL
Reported ECL of $3.0bn were $2.4bn higher than in 1Q19, mainly from charges relating to the global impact of Covid-19 and weakening oil prices on the forward economic outlook. ECL in 1Q20 included a significant charge related to a corporate exposure in Singapore, which was the primary driver of the $0.7bn increase in ECL in CMB in Asia. We also incurred ECL charges relating to a small number of clients in GB&M.
Adjusted ECL (annualised) as a percentage of average gross loans and advances to customers was 1.18%, compared with 0.24% at 1Q19.
The estimated impact of Covid-19 was incorporated in the ECL through additional scenario analysis, which considered differing severity and duration assumptions relating to the global pandemic. This included probability-weighted shocks to annual GDP and consequential impacts on unemployment and other economic variables, with differing economic recovery assumptions. The impact of using additional scenarios to address the impact of Covid-19 was an additional ECL charge of $1.5bn, consisting of $630m in the retail portfolio and $882m in the wholesale portfolio.
Applying a range of weightings to our sensitivity analysis, our severe ECL scenario, together with historical loss experience for the remaining quarters, could result in an ECL charge for 2020 in the range of $7bn to $11bn. The severe ECL scenario is described on page 19 and considers a longer period of negative economic impacts. However, as noted on pages 3 and 4, there is significant uncertainty over the path of the pandemic, the range and duration of economic impacts (including the effects of various government support packages), and its impact on customers' ability to repay their debt obligations and, therefore, the ECL charge for the year.
For more information on the economic scenarios, see page 19.
Reported operating expenses
Reported operating expenses of $7.9bn were $0.4bn or 5% lower than in 1Q19 and included favourable foreign currency translation differences of $0.2bn. The remaining reduction reflected lower performance-related pay of $0.4bn and a reduction of $0.2bn from our cost-saving initiatives, partly offset by increased investment in business growth, including investment in digital.
Significant items remained broadly unchanged compared with 1Q19, and included restructuring and other related costs of $0.2bn, which included $125m in relation to our cost reduction plan, of which $22m related to severance.
Excluding significant items and foreign currency translation differences, operating expenses of $7.7bn were $0.2bn or 3% lower than in 1Q19. We continue to manage our costs closely and have reduced discretionary expenditure, and we are reviewing and reprioritising our spending plans in response to the current economic uncertainty resulting from Covid-19.
The number of employees expressed in full-time equivalent staff (‘FTEs’) at 31 March 2020 was 235,047, a decrease of 304 from
31 December 2019. Additionally, the number of contractors at 31 March 2020 was 6,979, a decrease of 432 from 31 December 2019.
Reported share of profit from associates and JVs
Reported share of profit from associates and joint ventures of $0.4bn decreased by $0.2bn or 29%, primarily from a reduction in income from an associate in the UK reflecting the impact of Covid-19.
Tax expense
The effective tax rate for 1Q20 of 22.3% was higher than 21.0% in 1Q19 as a result of the effect of changes in profit mix and the remeasurement of deferred tax balances in light of the cancellation of the planned reduction in the UK corporation tax rate from 19% to 17% from 1 April 2020.

HSBC Holdings plc Earnings Release 1Q20
7


Earnings Release – 1Q20


Group
1Q20 compared with 4Q19 – reported results
 Movement in reported profit before tax compared with 4Q19
 
Quarter ended

 31 Mar
31 Dec
Variance
 2020
2019
1Q20 vs. 4Q19
 $m
$m
$m
%
Revenue13,686
13,371
315
2
ECL(3,026)(733)(2,293)(313)
Operating expenses(7,852)(17,053)9,201
54
Share of profit from associates and JVs421
518
(97)(19)
Profit before tax3,229
(3,897)7,126
183
Tax expense(721)(1,127)406
36
Profit after tax2,508
(5,024)7,532
150
Reported profit
Reported profit after tax of $2.5bn compared with a loss of $5.0bn in 4Q19, primarily due to the non-recurrence of a goodwill impairment of $7.3bn.
Reported profit before tax of $3.2bn compared with a loss of $3.9bn in 4Q19, reflecting lower reported operating expenses from the non-recurrence of a goodwill impairment of $7.3bn, and as 4Q19 included the UK bank levy of $1.0bn. These movements were partly offset by an increase in ECL, mainly from charges relating to the global impact of Covid-19 and weakening oil prices on the forward economic outlook.
Reported revenue in 1Q20 included adverse market impacts in insurance manufacturing in RBWM of $689m following a weakening of global equity prices and lower interest rates (4Q19: $202m favourable), while GB&M included an adverse movement in credit and funding valuation adjustments of $346m (4Q19: $189m favourable), adverse bid-offer adjustments of $310m (4Q19: $15m favourable) and losses in Principal Investments of $235m (4Q19: gains of $45m). Results also included favourable fair value movements on our long-term debt and associated swaps in Corporate Centre of $259m (4Q19: $73m adverse).
Excluding net favourable movements in significant items of $8.4bn and a minimal effect of foreign currency translation differences, profit before tax decreased by $1.3bn or 30%.
Reported revenue
Reported revenue of $13.7bn was $0.3bn or 2% higher than in 4Q19, mainly due to a net favourable movement in significant items of $0.6bn, primarily from favourable fair value movements on financial instruments, partly offset by adverse foreign currency translation differences of $0.1bn.
Excluding foreign currency translation differences and significant items, revenue decreased by $0.3bn or 2%.
This reduction was mainly in RBWM due to adverse movements in market impacts in life insurance manufacturing following a weakening of global equity prices and lower interest rates. This compared with favourable market impacts in 4Q19. In addition, revenue in GB&M was lower from adverse movements in credit and funding valuation adjustments and losses in Principal Investments, partly offset by higher revenue in Global Markets reflecting increased client activity as a result of higher volatility, notwithstanding adverse bid-offer adjustments of $310m (4Q19: $15m favourable). In Corporate Centre, revenue increased from favourable fair value movements on our long-term debt and associated swaps and from a rise in revenue in Balance Sheet Management.
Reported ECL
Reported ECL of $3.0bn were $2.3bn higher than in 4Q19, mainly from charges relating to the global impact of Covid-19 and weakening oil prices on the forward economic outlook. In addition, ECL in 1Q20 included a significant charge in CMB related to a corporate exposure in Singapore.
Adjusted ECL (annualised) as a percentage of average gross loans and advances to customers was 1.18%, compared with 0.28% at 4Q19.
Reported operating expenses
Reported operating expenses of $7.9bn were $9.2bn or 54% lower than in 4Q19, reflecting a $7.8bn decrease in significant items. These included the non-recurrence of a goodwill impairment of $7.3bn and charges related to customer redress programmes, which were $182m lower.
Excluding significant items and foreign currency translation differences, operating expenses of $7.7bn decreased by $1.4bn or 15%, with the reduction mainly attributable to the non-recurrence of a 4Q19 charge of $1.0bn related to the UK bank levy, a reduction in performance-related pay of $0.2bn and lower discretionary expenditure. The impact of our cost-saving initiatives contributed a further $0.1bn reduction.
Reported share of profit from associates and JVs
Reported income from associates and joint ventures of $0.4bn decreased by $97m or 19%, primarily from a reduction in income from a UK associate reflecting the impact of the Covid-19 outbreak.


8
HSBC Holdings plc Earnings Release 1Q20




Retail Banking and Wealth Management
1Q20 compared with 1Q19 – adjusted results
Management view of adjusted revenue
  Quarter ended
  31 Mar
31 Dec
31 Mar
Variance
  2020
2019
2019
1Q20 vs. 1Q19
 Footnotes$m
$m
$m
$m
%
Retail Banking 3,831
3,969
3,778
53
1
– current accounts, savings and deposits 2,274
2,421
2,172
102
5
– personal lending 1,557
1,548
1,606
(49)(3)
    mortgages 423
386
423

0
    credit cards 675
701
744
(69)(9)
    other personal lending 459
461
439
20
5
Wealth Management 912
1,652
1,895
(983)(52)
– investment distribution 883
719
851
32
4
– life insurance manufacturing (206)676
788
(994)>(100)
– asset management 235
257
256
(21)(8)
Other1126
207
182
(56)(31)
Net operating income24,869
5,828
5,855
(986)(17)
RoTE excluding significant items and UK bank levy (annualised) (%)

 1.5
 22.1
  
1‘Other’ 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 changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $0.4bn was $1.8bn or 84% lower than in 1Q19. This reflected a reduction in adjusted revenue of $1.0bn, driven by adverse market impacts in life insurance manufacturing in 1Q20 of $689m following a weakening of global equity prices and lower interest rates (1Q19: $183m favourable), while retail banking and investment distribution performance remained resilient in difficult economic conditions. In addition, adjusted ECL increased by $0.8bn, mainly due to the global impact of Covid-19 on the forward economic outlook. Adjusted operating expenses rose by $0.1bn as the impact of inflation and continued investment in the business was partly offset by lower discretionary expenditure.
Commercial Banking
1Q20 compared with 1Q19 – adjusted results
Management view of adjusted revenue
  Quarter ended
  31 Mar
31 Dec
31 Mar
Variance
  2020
2019
2019
1Q20 vs. 1Q19
 Footnotes$m
$m
$m
$m
%
Global Trade and Receivables Finance 469
431
461
8
2
Credit and Lending 1,382
1,322
1,337
45
3
Global Liquidity and Cash Management 1,333
1,422
1,486
(153)(10)
Markets products, Insurance and Investments, and Other1478
496
574
(96)(17)
Net operating income

23,662
3,671
3,858
(196)(5)
RoTE excluding significant items and UK bank levy (annualised) (%)

 4.1
 13.9
  
1Includes revenue from Foreign Exchange, insurance manufacturing and distribution, interest rate management and Global Banking products.
2
‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $0.6bn was $1.4bn or 69% lower than in 1Q19. Adjusted revenue fell by $0.2bn, mainly in GLCM (down $0.2bn) due to the lower interest rate environment, partly offset by a 6% growth in average balances. Revenue was higher in Credit and Lending, reflecting balance growth from increased customer drawdowns. Adjusted ECL increased by $1.1bn, reflecting the global impact of Covid-19 on the forward economic outlook, and from a significant charge related to a corporate exposure in Singapore. Adjusted operating expenses were $0.1bn higher, reflecting increased investment in digital capabilities to improve the client experience, partly offset by lower discretionary expenditure.

HSBC Holdings plc Earnings Release 1Q20
9


Earnings Release – 1Q20


Global Banking and Markets
1Q20 compared with 1Q19 – adjusted results
Management view of adjusted revenue
  Quarter ended
  31 Mar
31 Dec
31 Mar
Variance
  2020
2019
2019
1Q20 vs. 1Q19
 Footnotes$m
$m
$m
$m
%
Global Markets 2,133
1,241
1,712
421
25
– FICC 1,844
1,067
1,340
504
38
Foreign Exchange 1,129
665
684
445
65
Rates 675
274
481
194
40
Credit 40
128
175
(135)(77)
– Equities 289
174
372
(83)(22)
Securities Services 510
516
472
38
8
Global Banking 942
982
921
21
2
Global Liquidity and Cash Management 608
670
677
(69)(10)
Global Trade and Receivables Finance 193
196
205
(12)(6)
Principal Investments (235)45
83
(318)>(100)
Credit and funding valuation adjustments (346)189
46
(392)>(100)
Other1(142)(120)(119)(23)(19)
Net operating income23,663
3,719
3,997
(334)(8)
RoTE excluding significant items and UK bank levy (annualised) (%) 6.9
 11.3
  
1‘Other’ in GB&M includes allocated funding costs. Additionally, within the management view of total operating income, notional tax credits are allocated to the businesses to reflect the economic benefit generated by certain activities that are not reflected within operating income, such as notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included within ‘Other’.
2‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $0.8bn was $0.8bn or 49% lower than in 1Q19. Adjusted revenue fell by $0.3bn, mainly from adverse movements in credit and funding valuation adjustments of $0.4bn and from a reduction in Principal Investments revenue of $0.3bn, mainly due to valuation losses in 1Q20. Revenue in Global Markets increased by $0.4bn, primarily due to increased client activity as a result of higher volatility, partly offset by adverse bid-offer adjustments of $0.3bn. Adjusted ECL were $0.5bn higher from charges relating to the global impact of Covid-19 on the forward economic outlook, and from charges against a small number of clients. Adjusted operating expenses fell by $0.1bn, primarily from lower performance-related pay.
Global Private Banking
1Q20 compared with 1Q19 – adjusted results
Management view of adjusted revenue
  Quarter ended
  31 Mar
31 Dec
31 Mar
Variance
  2020
2019
2019
1Q20 vs. 1Q19
 Footnotes$m
$m
$m
$m
%
Investment revenue 255
188
185
70
38
Lending 113
111
97
16
16
Deposit 103
111
121
(18)(15)
Other 40
44
48
(8)(17)
Net operating income1511
454
451
60
13
RoTE excluding significant items and UK bank levy (annualised) (%) 15.8
 10.9
  
1‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $0.1bn increased by $23m or 23% compared with 1Q19. Adjusted revenue increased by $60m, mainly from growth in investment and lending revenue in Asia and in Europe, driven by high volatility in equity markets. This increase was partly offset by higher adjusted ECL from a charge relating to a single client. Adjusted operating expenses were $10m lower as we invested in the business in Asia, while reducing costs in Switzerland.
In 1Q20, we attracted $5.3bn of net new money inflows, mainly in Asia and Europe.

10
HSBC Holdings plc Earnings Release 1Q20




Corporate Centre
1Q20 compared with 1Q19 – adjusted results
Management view of adjusted revenue
  Quarter ended
  31 Mar
31 Dec
31 Mar
Variance
  2020
2019
2019
1Q20 vs. 1Q19
 Footnotes$m
$m
$m
$m
%
Central Treasury 699
(19)269
430
>100
– Balance Sheet Management1829
450
608
221
36
– Holdings net interest expanses (321)(318)(338)17
5
– valuation differences on long-term debt and associated swaps 259
(73)50
209
>100
– other central treasury (68)(78)(51)(17)(33)
Legacy portfolios (91)13
(70)(21)(30)
Other 14
(80)(211)225
>100
Net operating income2622
(86)(12)634
>100
RoTE excluding significant items and UK bank levy (annualised) (%) 0.9
 (6.7)  
1Balance Sheet Management revenue includes other internal allocations to reflect the economic benefit generated by certain activities, which is not reflected within operating income, such as notional credits on income earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating income on an IFRS basis, the offset to these tax credits is included in 'other central treasury'.
2‘Net operating income’ means net operating income before changes in expected credit losses and other credit impairment charges (also referred to as ‘Revenue’).
Adjusted profit before tax of $1.1bn was $0.8bn higher than in 1Q19. Adjusted revenue increased by $0.6bn, primarily reflecting higher disposal gains in Balance Sheet Management and favourable fair value movements of $209m relating to the economic hedging of interest rate and exchange rate risk on our long-term debt with associated swaps. Adjusted operating expenses decreased by $0.3bn due to lower discretionary expenditure. Share of profit from associates and joint ventures fell by $0.1bn, mainly from a reduction in income from a UK associate due to the impact of the Covid-19 outbreak.
Balance sheet – 31 March 2020 compared with 31 December 2019
At 31 March 2020, our total assets of $2.9tn were $203bn higher on a reported basis.
The increase in total assets included growth in derivative assets (up $128bn), mainly in Europe, reflecting mark-to-market gains on interest rate and foreign exchange derivatives and increased client activity. The increase in derivative assets was consistent with the increase in derivative liabilities as the underlying risk is broadly matched. In addition, cash collateral and settlement accounts, included within other assets, increased by $73bn due to the seasonal reduction at 31 December 2019, as clients settled trades prior to the year end.
On a constant currency basis, our total assets were $289bn higher.
Loans and advances to customers as a percentage of customer accounts were 72.2%, an increase of 0.2% compared with 31 December 2019.
Loans and advances to customers
Reported loans and advances to customers of $1,040bn were $4bn higher, which included adverse effects of foreign currency translation differences of $37bn. On a constant currency basis, customer lending increased by $41bn or 4% as we continued to support new and existing customers during the current economic uncertainty.
In GB&M, lending of $262bn was $24bn higher, mainly in the UK, Hong Kong and the US from increased term lending. In CMB, lending of $351bn was $16bn higher, mainly in term lending in the US, UK and across Asia. The growth in GB&M and CMB included the effect of customers drawing down on credit facilities and partially redeploying these funds into their customer accounts to increase cash balances during the Covid-19 outbreak. In RBWM, lending of $379bn was broadly unchanged as growth in mortgages was offset by a reduction in credit card balances.
Customer accounts
Customer accounts of $1,441bn increased by $1bn on a reported basis, including adverse foreign currency translation differences of $45bn. On a constant currency basis, customer accounts increased by $47bn or 3%. Customer accounts grew in all our global businesses and regions as corporate and personal customers consolidated their funds and redeployed them into cash, and as corporate clients drew down on credit facilities and partially redeployed the funds into their customer accounts, as a result of uncertainty due to the Covid-19 outbreak.
In GB&M, customer accounts of $307bn were $26bn higher, reflecting growth in Europe, Asia and the US. In RBWM, balances increased by $13bn to $683bn, with growth notably in the UK, Hong Kong and North America. In CMB, balances increased by $4bn to $378bn, as increases in Europe of $13bn and North America of $2bn were largely offset by a reduction in Hong Kong of $12bn due to a managed reduction in short-term time deposits and a seasonal outflow.
Risk-weighted assets – 31 March 2020 compared with 31 December 2019
Risk-weighted assets (‘RWAs’) totalled $857.1bn at 31 March 2020, a $13.7bn increase compared with 4Q19. Excluding foreign currency translation differences, RWAs increased by $40.0bn.
A $35.8bn increase in RWAs due to asset size movements reflected lending growth in GB&M and CMB, including an increase in the drawdown of facilities as a result of the Covid-19 outbreak, and increased market risk. Changes in asset quality increased RWAs by $4.3bn.

HSBC Holdings plc Earnings Release 1Q20
11


Earnings Release – 1Q20


Net interest margin

 Quarter endedFull year to

 31 Mar
31 Dec
31 Mar
31 Dec

 2020
2019
2019
2019

Footnotes$m
$m
$m
$m
Net interest income 7,612
7,654
7,468
30,462
Average interest-earning assets 1,991,702
1,945,596
1,902,912
1,922,822

 %
%
%
%
Gross interest yield12.55
2.70
2.89
2.84
Less: cost of funds1(1.19)(1.34)(1.53)(1.48)
Net interest spread21.36
1.36
1.36
1.36
Net interest margin31.54
1.56
1.59
1.58
1Gross interest yield is the average annualised interest rate earned on average interest-earning assets (‘AIEA’). Cost of funds is the average annualised interest cost as a percentage of average interest-bearing liabilities.
2Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds.
3Net interest margin is net interest income expressed as an annualised percentage of AIEA.
Net interest margin ('NIM') of 1.54% was down 2bps from 4Q19. Market interest rates have fallen during 1Q20 and we expect material downward pressure on NIM in future quarters as we incur the full impact of these reductions. As disclosed in our Annual Report and Accounts 2019, a 100bps reduction in market interest rates would reduce projected net interest income by over $3bn (for more information on net interest income sensitivity, see page 140 of the Annual Report and Accounts 2019). This sensitivity does not incorporate projections of changes in balance sheet size, product mix nor product pricing strategies.
Return on Equity and Return on Tangible Equity
We provide Return on Tangible Equity (‘RoTE’) in addition to Return on Equity (‘RoE’) as a way of assessing our performance which is closely aligned to our capital position.
RoTE is computed by adjusting reported ‘profit attributable to the ordinary shareholders of the parent company’ for the post-tax movements in the present value of in-force long-term insurance business (‘PVIF’) and adjusting the reported equity for goodwill, intangibles and PVIF, net of deferred tax. The adjustment to reported results and reported equity excludes amounts attributable to other equity instrument holders and non-controlling interests.
For our global businesses, we provide RoTE excluding significant items and the UK bank levy which is more closely aligned to the basis on which the global business performance is assessed by the Chief Operating Decision Maker (further information on the basis of preparation for our global businesses is provided on page 263 of the Annual Report and Accounts 2019).
RoTE excluding significant items and UK bank levy is computed by adjusting ‘profit attributable to the ordinary shareholders, excluding PVIF’ for significant items (net of tax) and the bank levy, and adjusting the ‘average tangible equity’ for the change in fair value on our long-term debt attributable to credit spread through other comprehensive income (‘fair value of own debt’), and debt valuation adjustments (‘DVA’).
The following table details the adjustments made to the reported results and equity:
Return on Equity and Return on Tangible Equity
 Quarter ended
 31 Mar
31 Dec
31 Mar
 2020
2019
2019
 $m
$m
$m
Profit   
Profit attributable to the ordinary shareholders of the parent company1,785
(5,509)4,134
Goodwill impairment
7,349

Increase in PVIF (net of tax)(254)42
(446)
Profit attributable to the ordinary shareholders, excluding goodwill impairment and PVIF1,531
1,882
3,688
Significant items (net of tax) and bank levy11
 105
Profit attributable to the ordinary shareholders, excluding goodwill impairment, PVIF, significant items and UK bank levy1,542


3,793
Equity   
Average ordinary shareholders’ equity164,566
163,822
163,769
Effect of goodwill, PVIF and other intangibles (net of deferred tax)(17,484)(20,724)(22,683)
Average tangible equity147,082
143,098
141,086
Fair value of own debt, DVA and other adjustments(373)

423
Average tangible equity excluding fair value of own debt, DVA and other adjustments146,709


141,509
 %
%
%
Ratio   
Return on equity4.4
(13.30)10.2
Return on tangible equity (annualised)4.2
5.2
10.6
Return on tangible equity excluding significant items and UK bank levy (annualised)4.2


10.9

12
HSBC Holdings plc Earnings Release 1Q20




Earnings Release – 1Q20


Return on Tangible Equity by global business
 Quarter ended 31 Mar 2020
 Retail Banking and Wealth Management
Commercial Banking
Global Banking and Markets
Global Private Banking
Corporate Centre
Total
 $m
$m
$m
$m
$m
$m
Profit before tax343
609
995
120
1,162
3,229
Tax expense(38)(149)(167)(21)(346)(721)
Profit after tax305
460
828
99
816
2,508
Less attributable to: preference shareholders, other equity holders, non-controlling interests(149)(168)(120)(3)(283)(723)
Profit attributable to ordinary shareholders of the parent company156
292
708
96
533
1,785
Increase in PVIF (net of tax)(241)(16)
4
(1)(254)
Significant items (net of tax) and UK bank levy11
2
(133)
(63)(183)
Balance Sheet Management allocation and other adjustments166
180
240
16
(408)194
Profit attributable to ordinary shareholders, excluding PVIF, significant items and UK bank levy92
458
815
116
61
1,542
Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments24,905
44,623
47,727
2,958
26,496
146,709
RoTE excluding significant items and UK bank levy (annualised) (%)1.5
4.1
6.9
15.8
0.9
4.2
 
 Quarter ended 31 Mar 2019
Profit before tax2,174
2,012
1,535
96
396
6,213
Tax expense(410)(430)(307)(18)(138)(1,303)
Profit after tax1,764
1,582
1,228
78
258
4,910
Less attributable to: preference shareholders, other equity holders, non-controlling interests(230)(241)(164)(5)(136)(776)
Profit attributable to ordinary shareholders of the parent company1,534
1,341
1,064
73
122
4,134
Increase in PVIF (net of tax)(424)(22)


(446)
Significant items (net of tax) and UK bank levy41
3
79
2
(20)105
Balance Sheet Management allocation and other adjustments147
147
184
14
(492)
Profit attributable to ordinary shareholders, excluding PVIF, significant items and bank levy1,298
1,469
1,327
89
(390)3,793
Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments23,800
42,916
47,743
3,330
23,720
141,509
RoTE excluding significant items and UK bank levy (annualised) (%)22.1
13.9
11.3
10.9
(6.7)
10.9
Notes
Income statement comparisons, unless stated otherwise, are between the quarter ended 31 March 2020 and the quarter ended
31 March 2019. Balance sheet comparisons, unless otherwise stated, are between balances at 31 March 2020 and the corresponding balances at 31 December 2019.
The financial information on which this Earnings Release is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with our significant accounting policies as described on pages 240 to 251 of our Annual Report and Accounts 2019.
On 31 March 2020, HSBC announced that, in response to a request from the Bank of England through the UK's Prudential Regulation Authority (‘PRA’), the Board had cancelled the fourth interim dividend of $0.21 per ordinary share, which was scheduled to be paid on 14 April 2020. The Board also announced that until the end of 2020 HSBC will make no quarterly or interim dividend payments or accruals in respect of ordinary shares. As previously disclosed on 18 February 2020 in the Annual Report and Accounts 2019, we also plan to suspend share buy-backs in respect of ordinary shares in 2020 and 2021.
The Board will review our dividend policy at or ahead of the year-end results for 2020, when the economic impact of the pandemic is better understood. We will also take into account the views of our shareholders, the interests of our other stakeholders and other factors, including our financial performance and capital position.
Cautionary statement regarding forward-looking statements
This Earnings Release contains certain forward-looking statements with respect to HSBC’s financial condition, results of operations and business, including the strategic priorities and 2020 financial, investment and capital targets described herein.
Statements that are not historical facts, including statements about HSBC’s beliefs and expectations, are forward-looking statements. Words such as ‘expects’, ‘targets’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, 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.

13
HSBC Holdings plc Earnings Release 1Q20




Earnings Release – 1Q20


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 continuing or deepening recessions and fluctuations in employment and creditworthy customers beyond those factored into consensus forecasts (including, without limitation, as a result of the Covid-19 outbreak); the Covid-19 outbreak, which could have adverse impacts on our income due to lower lending and transaction volumes, lower wealth and insurance manufacturing revenue, and lower interest rates globally, as well as, more generally, material adverse impacts on 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 Covid-19 outbreak); potential changes in future dividend policy; changes in foreign exchange rates and interest rates, including the accounting impact resulting from financial reporting in respect of hyperinflationary economies; volatility in equity markets; lack of liquidity in wholesale funding or capital markets, which may affect our ability to meet our obligations under financing facilities or to fund new loans, investments and businesses; other unfavourable political or diplomatic developments producing social instability or legal uncertainty, such as the unrest in Hong Kong, which in turn may affect demand for our products and services; climate change, which may cause both idiosyncratic and systemic risks resulting in potential 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; 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 expected discontinuation of certain key Ibors and the development of alternative risk-free benchmark rates, which may require us to enhance our capital position and/or position additional capital in specific subsidiaries; and price competition in the market segments we serve;
changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which we operate and the consequences thereof (including, without limitation, actions taken as a result of the Covid-19 outbreak); 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; 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 exit from the EU, which may result in a prolonged period of uncertainty, unstable economic conditions and market volatility, including currency fluctuations; 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 targets which may result in our failure to achieve any of the expected benefits of our strategic initiatives; model limitations or failure, which may require us to hold additional capital and incur losses; changes to the judgments, 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 rating 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; changes in insurance customer behaviour and insurance claim rates; our dependence on loan payments and dividends from subsidiaries to meet our obligations; changes in accounting standards, which may have a material impact on the way we prepare our financial statements; 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; and changes in skill requirements, ways of working and talent shortages, which may affect our ability to recruit and retain senior management and skilled personnel. 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; and our success in addressing operational, legal and regulatory, and litigation challenges; and other risks and uncertainties we identify in ‘Top and emerging risks’ on pages 76 to 81 of the Annual Report and Accounts 2019.

For further information contact:
Investor RelationsMedia Relations
UK – Richard O’ConnorUK – Heidi Ashley
Tel: +44 (0) 20 7991 6590Tel: +44 (0) 20 7992 2045
  
Hong Kong – Mark PhinHong Kong – Patrick Humphris
Tel: +852 2822 4908Tel: +852 2822 2052

14
HSBC Holdings plc Earnings Release 1Q20




Summary consolidated income statement
 Quarter ended
 31 Mar
31 Dec
31 Mar
 2020
2019
2019
 $m
$m
$m
Net interest income7,612
7,654
7,468
Net fee income3,123
2,938
3,026
Net income from financial instruments held for trading or managed on a fair value basis3,364
2,354
2,881
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss(3,580)1,160
1,710
Changes in fair value of designated debt and related derivatives1
246
(59)11
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss(373)195
270
Gains less losses from financial investments312
19
99
Net insurance premium income2,910
1,589
3,296
Other operating income404
22
858
Total operating income14,018
15,872
19,619
Net insurance claims and benefits paid and movement in liabilities to policyholders(332)(2,501)(5,191)
Net operating income before change in expected credit losses and other credit impairment charges2
13,686
13,371
14,428
Change in expected credit losses and other credit impairment charges(3,026)(733)(585)
Net operating income10,660
12,638
13,843
Total operating expenses excluding goodwill impairment(7,852)(9,704)(8,222)
Goodwill impairment

(7,349)
Operating profit/(loss)2,808
(4,415)5,621
Share of profit in associates and joint ventures421
518
592
Profit/(loss) before tax3,229
(3,897)6,213
Tax expense(721)(1,127)(1,303)
Profit/(loss) after tax2,508
(5,024)4,910
Attributable to: 

 
– ordinary shareholders of the parent company1,785
(5,509)4,134
– preference shareholders of the parent company22
23
22
– other equity holders441
176
410
– non-controlling interests260
286
344
Profit/(loss) after tax2,508
(5,024)4,910

$
$
$
Basic earnings per share0.09
(0.27)0.21
Diluted earnings per share0.09
(0.27)0.21
Dividend per ordinary share (in respect of the period)3


0.10

%
%
%
Return on average ordinary shareholders’ equity (annualised)4.4
(13.3)10.2
Return on average tangible equity (annualised)
4.2
5.2
10.6
Cost efficiency ratio57.4
127.5
57.0
1The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
2Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3
Dividends recorded in the financial statements are dividends per ordinary share declared in a period and are not dividends in respect of, or for, that period.


HSBC Holdings plc Earnings Release 1Q20
15


Earnings Release – 1Q20


Summary consolidated balance sheet
 At
 31 Mar
31 Dec
 2020
2019
 $m
$m
Assets  
Cash and balances at central banks187,386
154,099
Trading assets215,634
254,271
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss40,650
43,627
Derivatives371,283
242,995
Loans and advances to banks84,547
69,203
Loans and advances to customers1
1,040,282
1,036,743
Reverse repurchase agreements – non-trading222,774
240,862
Financial investments446,668
443,312
Other assets308,586
230,040
Total assets2,917,810
2,715,152
Liabilities and equity



Liabilities



Deposits by banks75,504
59,022
Customer accounts1,440,529
1,439,115
Repurchase agreements – non-trading150,243
140,344
Trading liabilities74,410
83,170
Financial liabilities designated at fair value155,184
164,466
Derivatives356,616
239,497
Debt securities in issue99,410
104,555
Liabilities under insurance contracts94,979
97,439
Other liabilities272,664
194,876
Total liabilities2,719,539
2,522,484
Equity

 
Total shareholders’ equity189,771
183,955
Non-controlling interests8,500
8,713
Total equity198,271
192,668
Total liabilities and equity2,917,810
2,715,152
1Net of impairment allowances.


16
HSBC Holdings plc Earnings Release 1Q20




Credit risk
A summary of our current policies and practices for the management of credit risk is set out in ‘Credit risk management’ on page 84 of the Annual Report and Accounts 2019.
Summary of credit risk
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 March 2020
 
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
Stage1Stage2Stage3
POCI2

Total
 $m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%
%
%
%
%
Loans and advances to customers934,252
101,714
14,401
300
1,050,667
(1,498)(3,078)(5,713)(96)(10,385)0.2
3.0
39.7
32.0
1.0
Personal395,313
16,860
4,839

417,012
(708)(1,697)(1,274)
(3,679)0.2
10.1
26.3

0.9
– Europe175,659
7,592
2,319

185,570
(132)(820)(659)
(1,611)0.1
10.8
28.4

0.9
of which: UK143,239
6,111
1,513

150,863
(110)(792)(406)
(1,308)0.1
13.0
26.8

0.9
of which:
UK first lien
mortgages
128,177
1,802
1,036

131,015
(14)(17)(111)
(142)
0.9
10.7

0.1
of which: UK
other personal
lending
15,062
4,309
477

19,848
(96)(775)(295)
(1,166)0.6
18.0
61.8

5.9
– Asia169,782
5,764
751

176,297
(258)(359)(177)
(794)0.2
6.2
23.6

0.5
of which: Hong
Kong
117,050
2,665
248

119,963
(108)(224)(51)
(383)0.1
8.4
20.6

0.3
of which:
Hong Kong
first lien
mortgages
86,745
1,002
42

87,789
(1)


(1)




of which: Hong
Kong other
personal
lending
30,305
1,663
206

32,174
(107)(224)(51)
(382)0.4
13.5
24.8

1.2
– MENA5,469
353
277

6,099
(60)(86)(176)
(322)1.1
24.4
63.5

5.3
– North America38,996
2,316
1,271

42,583
(122)(174)(150)
(446)0.3
7.5
11.8

1.0
– Latin America5,407
835
221

6,463
(136)(258)(112)
(506)2.5
30.9
50.7

7.8
Corporate and
commercial
469,067
79,770
9,267
299
558,403
(742)(1,334)(4,321)(95)(6,492)0.2
1.7
46.6
31.8
1.2
– Europe152,308
18,765
4,563
120
175,756
(274)(513)(1,508)(43)(2,338)0.2
2.7
33.0
35.8
1.3
of which: UK107,267
14,144
3,263
73
124,747
(226)(447)(954)(32)(1,659)0.2
3.2
29.2
43.8
1.3
– Asia232,818
40,215
2,081
132
275,246
(248)(330)(1,422)(35)(2,035)0.1
0.8
68.3
26.5
0.7
of which: Hong Kong147,390
24,993
616
49
173,048
(122)(193)(408)(25)(748)0.1
0.8
66.2
51.0
0.4
– MENA17,272
5,658
1,853
18
24,801
(61)(164)(1,048)(12)(1,285)0.4
2.9
56.6
66.7
5.2
– North America55,380
13,737
483

69,600
(60)(266)(172)
(498)0.1
1.9
35.6

0.7
– Latin America11,289
1,395
287
29
13,000
(99)(61)(171)(5)(336)0.9
4.4
59.6
17.2
2.6
Non-bank
financial
institutions
69,872
5,084
295
1
75,252
(48)(47)(118)(1)(214)0.1
0.9
40.0
100.0
0.3
– Europe27,709
1,014
227
1
28,951
(16)(16)(75)(1)(108)0.1
1.6
33.0
100.0
0.4
of which: UK20,184
874
105

21,163
(12)(14)(5)
(31)0.1
1.6
4.8

0.1
– Asia29,178
3,669
18

32,865
(24)(26)(18)
(68)0.1
0.7
100.0

0.2
of which: Hong Kong17,599
3,010
18

20,627
(9)(20)(18)
(47)0.1
0.7
100.0

0.2
– MENA284
51
34

369

(1)(12)
(13)
2.0
35.3

3.5
– North America11,314
313
6

11,633
(4)(3)(5)
(12)
1.0
83.3

0.1
– Latin America1,387
37
10

1,434
(4)(1)(8)
(13)0.3
2.7
80.0

0.9
Loans and advances to banks84,208
353


84,561
(13)(1)

(14)
0.3



Other financial assets at amortised cost701,322
3,078
149
1
704,550
(48)(74)(47)
(169)
2.4
31.5


Loan and other credit-related commitments586,262
27,208
831
1
614,302
(152)(220)(112)
(484)
0.8
13.5

0.1
– personal223,368
1,712
191

225,271
(13)(1)

(14)
0.1



– corporate and commercial222,187
24,443
637
1
247,268
(131)(218)(112)
(461)0.1
0.9
17.6

0.2
– financial140,707
1,053
3

141,763
(8)(1)

(9)
0.1



Financial guarantees16,478
2,651
148
4
19,281
(19)(33)(6)
(58)0.1
1.2
4.1

0.3
– personal769
1
1

771










– corporate and commercial11,597
2,344
142
4
14,087
(17)(32)(5)
(54)0.1
1.4
3.5

0.4
– financial4,112
306
5

4,423
(2)(1)(1)
(4)
0.3
20.0

0.1
At 31 Mar 20202,322,522
135,004
15,529
306
2,473,361
(1,730)(3,406)(5,878)(96)(11,110)0.1
2.5
37.9
31.4
0.4

HSBC Holdings plc Earnings Release 1Q20
17


Earnings Release – 1Q20


Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at
31 December 2019
 
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 1Stage 2Stage 3
POCI2
Total
 $m
$m
$m
$m
$m
$m
$m
$m
$m
$m
%%%%%
Loans and advances to customers951,583
80,182
13,378
332
1,045,475
(1,297)(2,284)(5,052)(99)(8,732)0.12.837.829.80.8
Personal413,669
15,751
4,851

434,271
(583)(1,336)(1,215)
(3,134)0.18.525.00.7
– Europe186,561
6,854
2,335

195,750
(112)(538)(578)
(1,228)0.17.824.80.6
of which: UK153,313
5,455
1,612

160,380
(104)(513)(370)
(987)0.19.423.00.6
of which:
UK first lien
mortgages
134,914
1,890
1,181

137,985
(16)(19)(124)
(159)1.010.50.1
of which: UK
other personal
lending
18,399
3,565
431

22,395
(88)(494)(246)
(828)0.513.957.13.7
– Asia173,523
5,855
717

180,095
(223)(339)(170)
(732)0.15.823.70.4
of which: Hong
Kong
117,013
2,751
189

119,953
(90)(220)(44)
(354)0.18.023.30.3
of which:
Hong Kong
first lien
mortgages
85,732
1,116
43

86,891
(1)


(1)
of which: Hong
Kong other
personal
lending
31,281
1,635
146

33,062
(89)(220)(44)
(353)0.313.530.11.1
– MENA5,671
247
299

6,217
(50)(58)(189)
(297)0.923.563.24.8
– North America41,148
1,930
1,238

44,316
(56)(119)(141)
(316)0.16.211.40.7
– Latin America6,766
865
262

7,893
(142)(282)(137)
(561)2.132.652.37.1
Corporate and
commercial
472,253
59,599
8,315
332
540,499
(672)(920)(3,747)(99)(5,438)0.11.545.129.81.0
– Europe151,378
19,191
4,517
129
175,215
(288)(447)(1,524)(45)(2,304)0.22.333.734.91.3
of which: UK108,052
15,346
3,283
79
126,760
(234)(379)(984)(32)(1,629)0.22.530.040.51.3
– Asia237,553
28,607
1,401
148
267,709
(208)(237)(966)(38)(1,449)0.10.869.025.70.5
of which: Hong
Kong
147,162
20,515
655
48
168,380
(111)(156)(455)(28)(750)0.10.869.558.30.4
– MENA18,476
3,302
1,651
18
23,447
(55)(86)(934)(12)(1,087)0.32.656.666.74.6
– North America51,953
7,274
453

59,680
(43)(94)(137)
(274)0.11.330.20.5
– Latin America12,893
1,225
293
37
14,448
(78)(56)(186)(4)(324)0.64.663.510.82.2
Non-bank
financial
institutions
65,661
4,832
212

70,705
(42)(28)(90)
(160)0.10.642.50.2
– Europe25,345
1,000
153

26,498
(19)(9)(53)
(81)0.10.934.60.3
of which: UK17,613
874
58

18,545
(14)(7)(5)
(26)0.10.88.60.1
– Asia28,530
3,607
19

32,156
(17)(16)(19)
(52)0.10.4100.00.2
of which: Hong
Kong
16,589
3,168
19

19,776
(6)(15)(19)
(40)0.5100.00.2
– MENA254

34

288


(13)
(13)38.24.5
– North America9,852
220
6

10,078
(3)(3)(5)
(11)1.483.30.1
– Latin America1,680
5


1,685
(3)


(3)0.20.2
Loans and advances to banks67,769
1,450


69,219
(14)(2)

(16)0.1
Other financial assets at amortised cost613,200
1,827
151
1
615,179
(38)(38)(42)
(118)2.127.8
Loan and other credit-related commitments577,631
21,618
771
9
600,029
(137)(133)(59)
(329)0.67.70.1
– personal221,490
1,630
194

223,314
(13)(2)

(15)0.1
– corporate and commercial259,138
18,804
573
9
278,524
(118)(130)(59)
(307)0.710.30.1
– financial97,003
1,184
4

98,191
(6)(1)

(7)0.1
Financial guarantees17,684
2,340
186
4
20,214
(16)(22)(10)
(48)0.10.95.40.2
– personal802
1
1

804
(1)


(1)0.10.1
– corporate and commercial12,540
2,076
184
4
14,804
(14)(21)(9)
(44)0.11.04.90.3
– financial4,342
263
1

4,606
(1)(1)(1)
(3)0.4100.00.1
At 31 Dec 20192,227,867
107,417
14,486
346
2,350,116
(1,502)(2,479)(5,163)(99)(9,243)0.12.335.628.60.4
1Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2Purchased or originated credit-impaired ('POCI').

18
HSBC Holdings plc Earnings Release 1Q20




Covid-19
Methodology
Our methodology in relation to the adoption and generation of economic scenarios is described on page 92 of the Annual Report and Accounts 2019. We continue to follow this methodology in generating our consensus probability-weighted ECL, with alternative or additional scenarios and management adjustments supplementing this ECL where, in management's opinion, the consensus forecast does not fully capture the extent of recent credit or economic events.
Description of economic scenarios
The economic assumptions presented in this section have been formed internally specifically for the purpose of calculating ECL.
Economic scenarios incorporating the economic impacts of Covid-19
The outbreak of Covid-19 has had, and continues to have, a material impact on businesses around the world and the economic environments in which the Group operates. In light of this, management has noted a significant broadening of the distribution of economic forecasts. Given the rapidly changing economic impact, including the initiation of substantial government and central bank relief actions and support measures in many countries, management has made various judgements to best reflect the range of outcomes at the reporting date. The Group has formed three internally generated economic scenarios (mild, moderate and severe) based on the duration and severity of economic impacts across various markets, fiscal and policy responses and oil price volatility. These Covid-19 scenarios have been generated for each of the Group’s key markets and have been probability weighted in the calculation of ECL with greater weighting to the mild and moderate scenarios.
The overall impact of the Covid-19 scenarios and other related judgemental management adjustments on the ECL is shown below:
Impact of Covid-19 on allowance for ECL
 At 31 March 2020At 31 Dec 2019
 
Consensus probability-weighted ECL2

Covid-19 scenarios and other management adjustments2

Allowance for ECL
Allowance for ECL
 $m
$m
$m
$m
Retail2,961
630
3,591
3,118
Wholesale6,396
882
7,278
5,981
Other1
241

241
144
Total9,598
1,512
11,110
9,243
1Includes Insurance and other central Group portfolios.
2The consensus probability-weighted ECL includes adjustments related to the 4Q19 UK alternative Downside scenario of $311m and Asia-Pacific alternative Downside scenario of $180m. The 1Q20 incremental Covid-19 scenario impact is shown net of the removal of these adjustments.
The three scenarios used for the purpose of calculating ECL at 31 March 2020 replaced the UK alternative Downside and Asia-Pacific alternative Downside scenarios used at 31 December 2019.
These three scenarios are based on 31 March 2020 data and differentiated by the severity and duration of the associated economic impact of Covid-19, with a greater number of infections coinciding with longer periods of restrictions in activity and greater economic impact. Monetary and fiscal stimulus is assumed in all three scenarios. The three scenarios are:
Mild: This scenario models brief recessions in most of our major markets followed by an extended period of low growth. Temporary restrictions in activity lead to a rise in unemployment, a short-lived contraction in equity markets and a slowdown in house price growth. Hong Kong GDP growth is expected to have reached a low point in 1Q20, with positive GDP growth expected by 3Q20, while UK and US GDP growth are expected to reach a low point in 2Q20, with positive GDP growth expected by 1Q21.
Moderate: This scenario models a deeper and longer recession across our major markets. There is a strong rise in unemployment across some of our major markets and significant contractions in equity markets and house prices in 2020. Hong Kong GDP growth is expected to have reached a low point in 1Q20, with positive GDP growth expected by 4Q20, while UK and US GDP growth are expected to reach a low point in 2Q20 and 3Q20, respectively, with positive GDP growth expected by 1Q21.
Severe: The severe scenario models a deep and more prolonged recession, with a slow recovery across our major markets. Restrictions in activity and a more prolonged recession lead to a sharp rise in unemployment across our major markets. House prices and equity markets undergo very significant contractions in 2020. Hong Kong GDP growth is expected to have reached a low point in 2Q20, with positive GDP growth expected by 2Q21, while UK and US GDP growth is expected to reach a low point in 2Q20 and 3Q20, respectively, with positive GDP growth expected by 2Q21.
The table below shows the range of worst points in annualised economic indicators across the three scenarios within individual quarters in 2020 to 2021:
Forecast range of quarterly worst point of economic measures for key markets in 2020 to 2021
 Hong KongUKUS
 
1Q201

Worst point
1Q201

Worst point
1Q201

Worst point
 %
%%
%%
%
GDP growth rate (%) – low point(7.5)(7.5)–(8.6)0.6
(13.8)–(14.9)1.2
(8.9)–(11.8)
Unemployment (%) – high point3.5
3.5–5.74.0
6.0–8.53.6
11.3–14.2
House price growth annualised (%) – low point(6.2)(6.2)–(26.3)1.9
(5.6)–(15.7)4.3
(2.9)–(10.1)
1Based on 4Q19 estimates.
The ECL impact of economic scenarios, including for the UK and the US, were performed in part through management adjustments. Further, additional judgemental management adjustments have been applied in certain markets and portfolios at 31 March 2020 where management has considered that the impact of applying the Covid-19 scenarios in the calculation of ECL does not fully capture the extent of recent credit events.

HSBC Holdings plc Earnings Release 1Q20
19


Earnings Release – 1Q20


The ECL impact of the scenarios and judgemental management adjustments are highly sensitive to movements in economic forecasts, including the efficacy of government support measures. If the ECL were estimated solely on the basis of the severe scenario at 31 March 2020, which assumes a slower economic recovery, the allowance for ECL would increase by approximately $4bn.
Capital adequacy
Capital adequacy metrics
 At
 31 Mar
31 Dec
 2020
2019
Risk-weighted assets ('RWAs') ($bn)  
Credit risk (excluding counterparty credit risk)685.6
676.6
Counterparty credit risk47.5
44.1
Market risk34.8
29.9
Operational risk89.2
92.8
Total risk-weighted assets857.1
843.4
Capital on a transitional basis ($bn)  
Common equity tier 1 (‘CET1’) capital125.2
124.0
Tier 1 capital149.2
148.4
Total capital174.0
172.2
Capital ratios on a transitional basis (%)  
CET114.6
14.7
Tier 117.4
17.6
Total capital20.3
20.4
Capital on an end point basis ($bn)  
Common equity tier 1 (‘CET1’) capital125.2
124.0
Tier 1 capital146.1
144.8
Total capital161.1
159.3
Capital ratios on an end point basis (%)  
CET114.6
14.7
Tier 117.0
17.2
Total capital18.8
18.9
Liquidity coverage ratio (‘LCR’)  
Total high-quality liquid assets ($bn)617.2
601.4
Total net cash outflow ($bn)395.0
400.5
LCR ratio (%)156.3
150.2
Capital figures and ratios in the table above are calculated in accordance with the revisions to the 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. The end point figures in the table above take into account the regulatory transitional arrangements in CRR II for IFRS 9, which are more fully described below.
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. Our capital and ratios are presented under these arrangements throughout the table above. Without their application, our CET1 ratio would be 14.5%.
The IFRS 9 regulatory transitional arrangements allow banks to add back to their capital base a proportion (currently 70%) of the impact that IFRS 9 has upon their loan loss allowances during the first five years of use. The impact is defined as:
the increase in loan loss allowances on day one of IFRS 9 adoption; and
any subsequent increase in expected credit losses (‘ECL’) in the non-credit-impaired book thereafter.
Any add-back must be tax affected and accompanied by a recalculation of capital deduction thresholds, exposure and RWAs. The impact is calculated separately for portfolios using the standardised (‘STD’) and internal ratings based (‘IRB’) approaches. For IRB portfolios, there is no add-back to capital unless loan loss allowances exceed regulatory 12-month expected losses.
In the current period, the add-back to the capital base amounted to $0.8bn under the STD approach with a tax impact of $0.2bn and a capital deduction threshold impact of $0.1bn. We made no add-back for portfolios on the IRB approach as our loan loss allowances remained lower than regulatory expected losses.
Capital
At 31 March 2020, our CET1 ratio was 14.6%, down from 14.7% at 31 December 2019.
CET1 capital increased during the quarter by $1.2bn, mainly as a result of:
the cancellation of the 4Q19 unpaid dividend of $3.4bn at the PRA’s request;
capital generation of $1.9bn through profits;
a $0.9bn increase in FVOCI reserves; and
a fall in the deduction for excess expected loss of $0.7bn.
These increases were partly offset by:
foreign currency translation differences of $4.7bn; and
a $0.5bn increase in the deduction for prudent valuation adjustment.

20
HSBC Holdings plc Earnings Release 1Q20




These movements reflected the impact of the Covid-19 outbreak on our CET1 ratio at 31 March 2020 in a number of ways. The cancellation of the unpaid dividend for 4Q19 at the PRA’s request strengthened our CET1 ratio by 0.4%. This, and our decision not to pay an interim dividend on ordinary shares, have offset the negative impacts of lower profitability, FX movements and the rise in the deduction for prudent valuation adjustment.
The Group’s countercyclical capital buffer requirement fell by $3.3bn, mainly as a result of the decision of the Bank of England's Financial Policy Committee and the Hong Kong Monetary Authority to reduce their requirements with immediate effect during March to mitigate the impacts of the outbreak.
Leverage
Leverage ratio
   At
   31 Mar
31 Dec
   2020
2019
Ref Footnotes$bn
$bn
20Tier 1 capital 146.1
144.8
21Total leverage ratio exposure 2,782.7
2,726.5
   %
%
22Leverage ratio 5.3
5.3
EU-23Choice of transitional arrangements for the definition of the capital measure Fully phased-in
Fully phased-in
 UK leverage ratio exposure – quarterly average12,585.2
2,535.4
   %
%
 UK leverage ratio – quarterly average15.6
5.8
 UK leverage ratio – quarter end15.7
5.7
1UK leverage ratio denotes the Group’s leverage ratio calculated under the PRA’s UK leverage framework and excludes qualifying central bank balances from the calculation of exposure.
Our leverage ratio calculated in accordance with the Capital Requirements Regulation in force was 5.3% at 31 March 2020, unchanged from 31 December 2019. The rise in total leverage ratio exposure was primarily due to an increase in settlement accounts and customer lending.
At 31 March 2020, our UK minimum leverage ratio requirement of 3.25% was supplemented by an additional leverage ratio buffer of 0.7% and a countercyclical leverage ratio buffer of 0.1%. These additional buffers translated into capital values of $17.9bn and $1.9bn respectively. We exceeded these leverage requirements.
Risk-weighted assets
RWAs by global business

RBWM
CMB
GB&M
GPB
Corporate
Centre

Total

$bn
$bn
$bn
$bn
$bn
$bn
Credit risk102.2
291.8
165.3
11.2
115.1
685.6
Counterparty credit risk

45.9
0.2
1.4
47.5
Market risk

28.3

6.5
34.8
Operational risk29.1
25.0
29.6
2.7
2.8
89.2
At 31 Mar 2020131.3
316.8
269.1
14.1
125.8
857.1
       
Credit risk103.8
290.8
161.1
11.0
109.9
676.6
Counterparty credit risk

42.7
0.2
1.2
44.1
Market risk

23.6

6.3
29.9
Operational risk30.2
25.9
30.8
2.8
3.1
92.8
At 31 Dec 2019134.0
316.7
258.2
14.0
120.5
843.4
RWA movement by global business by key driver
 Credit risk, counterparty credit risk and operational risk  
 RBWM
CMB
GB&M
GPB
Corporate
Centre

Market risk
Total RWAs
 $bn
$bn
$bn
$bn
$bn
$bn
$bn
RWAs at 1 Jan 2020134.0
316.7
234.6
14.0
114.2
29.9
843.4
Asset size0.7
8.5
15.0
0.3
6.7
4.6
35.8
Asset quality0.3
2.5
2.1

(0.6)
4.3
Model updates0.4
0.1
(0.6)


(0.1)
Methodology and policy0.6
1.0
(3.3)
1.4
0.3

Foreign exchange movements(4.7)(12.0)(7.0)(0.2)(2.4)
(26.3)
Total RWA movement(2.7)0.1
6.2
0.1
5.1
4.9
13.7
RWAs at 31 Mar 2020131.3
316.8
240.8
14.1
119.3
34.8
857.1

HSBC Holdings plc Earnings Release 1Q20
21


Earnings Release – 1Q20


Risk-weighted assets (‘RWAs’) rose by $13.7bn during 1Q20, including a reduction of $26.3bn due to foreign currency translation differences. The $40.0bn increase (excluding foreign currency translation differences) comprised the movements described by the following comments.
Asset size
The $35.8bn increase in RWAs due to asset size movements was predominantly due to lending growth in GB&M and CMB, with a further $4.6bn increase in market risk RWAs.
GB&M RWAs rose by $15bn, of which $10.0bn came from lending growth – mostly in Europe, Asia and North America. Facility drawdowns within this increase included the effects of the Covid-19 outbreak. Lending growth was partly offset by active portfolio management measures of $1.0bn in the same regions. GB&M counterparty credit risk RWAs rose by $6.6bn as a result of mark-to-market movements and increased derivative trading volumes. This rise was partly offset by a $0.6bn reduction due to trade actions.
In CMB, an RWA increase of $9.9bn was mostly the result of lending growth in North America, Asia and Europe. Facility drawdowns within this increase included the effects of the outbreak. Lending growth was partly offset by a $1.4bn reduction of RWAs in Europe and MENA through management actions.
The $6.7bn increase in Corporate Centre RWAs was mostly in North America, Asia and MENA, and comprised increases mainly in government placements and money market deposits.
Market risk RWAs increased by $4.6bn. The majority of the increase was due to higher sovereign exposures and recent market volatility in Asia and Europe.
Asset quality
Changes in asset quality led to an RWA increase of $4.3bn, mainly in CMB and GB&M. These changes included credit rating downgrades caused by the Covid-19 outbreak, mostly in North America and Asia. Offsetting this, favourable portfolio mix changes in Europe reduced GB&M RWAs by $1.1bn, and the $0.6bn drop in Corporate Centre RWAs largely resulted from an improvement in portfolio quality in North America.
Model updates
The $0.1bn RWA decrease due to model updates mainly comprised a $0.6bn decrease in GB&M, mostly due to global corporate model updates, and an increase of $0.4bn in RBWM, following an adjustment to Hong Kong credit models.
Methodology and policy
Management initiatives in GB&M and CMB reduced RWAs by $6.6bn. These included risk parameter refinements, improved collateral linkage and a change in the treatment of undrawn private equity fund commitments.
With effect from 1 January 2020, we implemented two changes in approach to our wholesale credit risk exposures. Application of the new securitisation framework to the pre-existing book caused RWAs to rise by $3.4bn, mainly in Corporate Centre and GB&M. Following the conclusion of discussions with the PRA, we also transferred several UK corporate portfolios onto a Foundation IRB approach – causing a $3bn rise in RWAs in CMB and GB&M.


22
HSBC Holdings plc Earnings Release 1Q20




Summary information – global businesses
Analysis of significant items by global business is presented below.
Reconciliation of reported results to adjusted results – global businesses


Quarter ended 31 Mar 2020


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate Centre
Total

Footnotes$m
$m
$m
$m
$m
$m
Revenue1











Reported 4,862
3,662
3,851
511
800
13,686
Significant items
7

(188)
(178)(359)
– disposals, acquisitions and investment in new businesses
7




7
– fair value movement on financial instruments2

(188)
(169)(357)
– restructuring and other related costs 



(9)(9)
Adjusted
4,869
3,662
3,663
511
622
13,327
ECL












Reported
(1,059)(1,374)(543)(49)(1)(3,026)
Adjusted
(1,059)(1,374)(543)(49)(1)(3,026)
Operating expenses












Reported
(3,456)(1,679)(2,313)(342)(62)(7,852)
Significant items
7
2
16
1
146
172
– customer redress programmes
1




1
– restructuring and other related costs
6
2
14
1
147
170
– settlements and provisions in connection with legal and regulatory matters


2

(1)1
Adjusted
(3,449)(1,677)(2,297)(341)84
(7,680)
Share of profit in associates and joint ventures












Reported
(4)


425
421
Adjusted
(4)


425
421
Profit before tax












Reported
343
609
995
120
1,162
3,229
Significant items
14
2
(172)1
(32)(187)
– revenue
7

(188)
(178)(359)
– operating expenses
7
2
16
1
146
172
Adjusted
357
611
823
121
1,130
3,042
Loans and advances to customers (net)












Reported
378,537
350,507
262,225
47,037
1,976
1,040,282
Adjusted
378,537
350,507
262,225
47,037
1,976
1,040,282
Customer accounts












Reported
683,033
377,639
307,458
64,677
7,722
1,440,529
Adjusted
683,033
377,639
307,458
64,677
7,722
1,440,529
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.


HSBC Holdings plc Earnings Release 1Q20
23


Earnings Release – 1Q20


Reconciliation of reported results to adjusted results – global businesses (continued)
  Quarter ended 31 Dec 2019
  Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate Centre
Total
 Footnotes$m
$m
$m
$m
$m
$m
Revenue1      
Reported 5,758
3,687
3,697
452
(223)13,371
Currency translation (24)(13)(21)2
(10)(66)
Significant items 94
(3)43

147
281
– customer redress programmes 47
(2)


45
– disposals, acquisitions and investment in new businesses 48



7
55
– fair value movements on financial instruments2

43

133
176
– currency translation on significant items (1)(1)

7
5
Adjusted 5,828
3,671
3,719
454
(86)13,586
ECL 











Reported (401)(277)(32)3
(26)(733)
Currency translation 8
2
(1)
2
11
Adjusted (393)(275)(33)3
(24)(722)
Operating expenses 











Reported (3,824)(4,740)(6,484)(811)(1,194)(17,053)
Currency translation 25
12
14
2
1
54
Significant items 273
2,978
4,056
438
211
7,956
– costs of structural reform
3

5

27
32
– customer redress programmes 181
2



183
– goodwill impairment 
2,956
3,962
431

7,349
– restructuring and other related costs 98
24
88
12
178
400
– settlements and provisions in connection with legal and regulatory matters 

2
(4)7
5
– currency translation on significant items (6)(4)(1)(1)(1)(13)
Adjusted (3,526)(1,750)(2,414)(371)(982)(9,043)
Share of profit in associates and joint ventures 











Reported 4



514
518
Currency translation 1



3
4
Adjusted 5



517
522
Profit/(loss) before tax 











Reported 1,537
(1,330)(2,819)(356)(929)(3,897)
Currency translation 10
1
(8)4
(4)3
Significant items 367
2,975
4,099
438
358
8,237
– revenue 94
(3)43

147
281
– operating expenses 273
2,978
4,056
438
211
7,956
Adjusted 1,914
1,646
1,272
86
(575)4,343
Loans and advances to customers (net) 










Reported 395,393
346,060
246,266
47,593
1,431
1,036,743
Currency translation (16,403)(11,995)(7,764)(782)(68)(37,012)
Adjusted 378,990
334,065
238,502
46,811
1,363
999,731
Customer accounts 











Reported 689,283
386,522
292,284
62,943
8,083
1,439,115
Currency translation (19,667)(12,403)(11,205)(1,404)(774)(45,453)
Adjusted 669,616
374,119
281,079
61,539
7,309
1,393,662
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.
3Comprises costs associated with preparations for the UK’s exit from the European Union.


24
HSBC Holdings plc Earnings Release 1Q20




Reconciliation of reported results to adjusted results – global businesses (continued)


Quarter ended 31 Mar 2019


Retail Banking
and Wealth
Management

Commercial
Banking

Global Banking
and Markets

Global Private
Banking

Corporate
Centre

Total

Footnotes$m
$m
$m
$m
$m
$m
Revenue1











Reported
5,971
3,921
4,015
450
71
14,428
Currency translation
(116)(63)(70)1
(9)(257)
Significant items


52

(74)(22)
– fair value movement on financial instruments2

53

(75)(22)
– currency translation on significant items


(1)
1

Adjusted
5,855
3,858
3,997
451
(12)14,149
ECL












Reported
(302)(247)(40)(2)6
(585)
Currency translation
8
7
1


16
Adjusted
(294)(240)(39)(2)6
(569)
Operating expenses












Reported
(3,508)(1,662)(2,440)(352)(260)(8,222)
Currency translation
74
32
43
(1)8
156
Significant items
56
4
50
2
43
155
– costs of structural reform
3
2
13

38
53
– customer redress programmes
56




56
– restructuring and other related costs
1
2
38
2
7
50
– currency translation on significant items
(1)
(1)
(2)(4)
Adjusted
(3,378)(1,626)(2,347)(351)(209)(7,911)
Share of profit in associates and joint ventures












Reported
13



579
592
Currency translation
(1)


(14)(15)
Adjusted
12



565
577
Profit before tax












Reported
2,174
2,012
1,535
96
396
6,213
Currency translation
(35)(24)(26)
(15)(100)
Significant items
56
4
102
2
(31)133
– revenue


52

(74)(22)
– operating expenses
56
4
50
2
43
155
Adjusted
2,195
1,992
1,611
98
350
6,246
Loans and advances to customers (net)












Reported
369,178
339,729
252,180
42,497
1,695
1,005,279
Currency translation
(12,158)(9,682)(7,013)(221)(59)(29,133)
Adjusted
357,020
330,047
245,167
42,276
1,636
976,146
Customer accounts












Reported
653,969
349,352
281,462
64,489
7,239
1,356,511
Currency translation
(13,483)(8,909)(9,767)(807)(660)(33,626)
Adjusted
640,486
340,443
271,695
63,682
6,579
1,322,885
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.
3Comprises costs associated with preparations for the UK’s exit from the European Union.


HSBC Holdings plc Earnings Release 1Q20
25


Earnings Release – 1Q20


Summary information – geographical regions
Analysis of significant items by geographical regions is presented below.
Reconciliation of reported results to adjusted results – geographical regions 


Quarter ended 31 Mar 2020


Europe
Asia
MENA
North
America

Latin
America

Total

Footnotes$m
$m
$m
$m
$m
$m
Revenue1











Reported24,420
7,559
690
1,704
863
13,686
Significant items (229)(98)(1)(15)(16)(359)
– disposals, acquisitions and investment in new businesses 


7

7
– fair value movement on financial instruments3(229)(98)(1)(13)(16)(357)
– restructuring and other related costs 


(9)
(9)
Adjusted24,191
7,461
689
1,689
847
13,327
ECL 





Reported (868)(1,000)(333)(508)(317)(3,026)
Adjusted (868)(1,000)(333)(508)(317)(3,026)
Operating expenses 





Reported2(3,962)(3,284)(369)(1,307)(480)(7,852)
Significant items 55
1

116

172
– customer redress programmes 1




1
– restructuring and other related costs 53
1

116

170
– settlements and provisions in connection with legal and regulatory matters 1




1
Adjusted2(3,907)(3,283)(369)(1,191)(480)(7,680)
Share of profit in associates and joint ventures 





Reported (101)465
56

1
421
Adjusted (101)465
56

1
421
Profit/(loss) before tax 





Reported (511)3,740
44
(111)67
3,229
Significant items (174)(97)(1)101
(16)(187)
– revenue (229)(98)(1)(15)(16)(359)
– operating expenses 55
1

116

172
Adjusted (685)3,643
43
(10)51
3,042
Loans and advances to customers (net) 











Reported 386,221
481,512
29,651
122,858
20,040
1,040,282
Adjusted 386,221
481,512
29,651
122,858
20,040
1,040,282
Customer accounts 











Reported 531,992
690,917
40,553
153,893
23,174
1,440,529
Adjusted 531,992
690,917
40,553
153,893
23,174
1,440,529
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Amounts are non-additive across geographical regions due to intercompany transactions within the Group.
3Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.




26
HSBC Holdings plc Earnings Release 1Q20




Reconciliation of reported to adjusted results – geographical regions (continued)
  Quarter ended 31 Dec 2019
  Europe
Asia
MENA
North
America

Latin
America

Total
 Footnotes$m
$m
$m
$m
$m
$m
Revenue1      
Reported24,575
7,245
764
1,603
937
13,371
Currency translation2(34)11
(1)(8)(38)(66)
Significant items 208
14

56
3
281
– customer redress programmes 45




45
– disposals, acquisitions and investment in new businesses 


55

55
– fair value movement on financial instruments3158
15

1
2
176
– currency translation on significant items 5
(1)

1
5
Adjusted24,749
7,270
763
1,651
902
13,586
ECL       
Reported (128)(182)(52)(97)(274)(733)
Currency translation (1)
1

11
11
Adjusted (129)(182)(51)(97)(263)(722)
Operating expenses       
Reported2, 5(8,126)(3,502)(497)(1,784)(935)(17,053)
Currency translation232
(2)2
4
22
54
Significant items52,988
53
104
491
358
7,956
– costs of structural reform431
1



32
– customer redress programmes 183




183
– goodwill impairment52,522

97
431
337
7,349
– restructuring and other related costs

 260
51
7
61
21
400
– settlements and provisions in connection with legal and regulatory matters 5




5
– currency translation on significant items (13)1

(1)
(13)
Adjusted2, 5(5,106)(3,451)(391)(1,289)(555)(9,043)
Share of profit in associates and joint ventures 











Reported (30)476
71

1
518
Currency translation 
4



4
Adjusted (30)480
71

1
522
Profit/(loss) before tax 











Reported5(3,709)4,037
286
(278)(271)(3,897)
Currency translation (3)13
2
(4)(5)3
Significant items53,196
67
104
547
361
8,237
– revenue 208
14

56
3
281
– operating expenses52,988
53
104
491
358
7,956
Adjusted (516)4,117
392
265
85
4,343
Loans and advances to customers (net)       
Reported 393,850
477,727
28,556
113,474
23,136
1,036,743
Currency translation (20,041)(8,143)(258)(4,199)(4,371)(37,012)
Adjusted 373,809
469,584
28,298
109,275
18,765
999,731
Customer accounts 











Reported 528,718
697,358
38,126
146,676
28,237
1,439,115
Currency translation (27,950)(7,806)(335)(4,262)(5,100)(45,453)
Adjusted 500,768
689,552
37,791
142,414
23,137
1,393,662
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Amounts are non-additive across geographical regions due to intercompany transactions within the Group.
3Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.
4Comprises costs associated with preparations for the UK’s exit from the European Union.
5Amounts are non-additive across geographical regions due to goodwill impairment recognised on the Global Banking and Markets cash-generating unit, which is monitored on a global basis.




HSBC Holdings plc Earnings Release 1Q20
27


Earnings Release – 1Q20


Reconciliation of reported to adjusted results – geographical regions (continued) 


Quarter ended 31 Mar 2019


Europe
Asia
MENA
North
America

Latin
America

Total

Footnotes$m
$m
$m
$m
$m
$m
Revenue1      
Reported24,605
7,819
702
1,676
971
14,428
Currency translation2(95)(27)6
(5)(147)(257)
Significant items (59)27

4
6
(22)
– fair value movement on financial instruments3(60)27

4
7
(22)
– currency translation on significant items 1



(1)
Adjusted24,451
7,819
708
1,675
830
14,149
ECL       
Reported (303)(158)(6)(3)(115)(585)
Currency translation 6
1
(1)
10
16
Adjusted (297)(157)(7)(3)(105)(569)
Operating expenses       
Reported2(4,318)(3,131)(345)(1,294)(479)(8,222)
Currency translation275
24
1
3
64
156
Significant items 139
7
1
5
3
155
– costs of structural reform
452
1



53
– customer redress programmes 56




56
– restructuring and other related costs 35
6
1
5
3
50
– currency translation on significant items (4)



(4)
Adjusted2(4,104)(3,100)(343)(1,286)(412)(7,911)
Share of profit in associates and joint ventures       
Reported 2
476
114


592
Currency translation 2
(16)(1)

(15)
Adjusted 4
460
113


577
Profit/(loss) before tax       
Reported (14)5,006
465
379
377
6,213
Currency translation (12)(18)5
(2)(73)(100)
Significant items 80
34
1
9
9
133
– revenue (59)27

4
6
(22)
– operating expenses 139
7
1
5
3
155
Adjusted 54
5,022
471
386
313
6,246
Loans and advances to customers (net)       
Reported 384,129
461,508
27,823
109,923
21,896
1,005,279
Currency translation (15,279)(6,748)(212)(2,571)(4,323)(29,133)
Adjusted 368,850
454,760
27,611
107,352
17,573
976,146
Customer accounts       
Reported 507,459
656,566
35,941
129,934
26,611
1,356,511
Currency translation (20,840)(4,431)(124)(2,720)(5,511)(33,626)
Adjusted 486,619
652,135
35,817
127,214
21,100
1,322,885
1Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2Amounts are non-additive across geographical regions due to intercompany transactions within the Group.
3Fair value movements on financial instruments include non-qualifying hedges and debt valuation adjustments on derivatives.
4Comprises costs associated with preparations for the UK’s exit from the European Union.






28
HSBC Holdings plc Earnings Release 1Q20




Dividend on preference shares
A quarterly dividend of $15.50 per 6.20% non-cumulative US dollar preference share, Series A (‘Series A dollar preference share’), (equivalent to a dividend of $0.3875 per Series A American Depositary Share, each of which represents one-fortieth of a Series A dollar preference share), and £0.01 per Series A sterling preference share is payable on 15 March, 15 June, 15 September and 15 December 2020 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 June 2020 to holders of record on 29 May 2020.


For and on behalf of
HSBC Holdings plc


Aileen Taylor
Group Company Secretary and Chief Governance Officer


The Board of Directors of HSBC Holdings plc as at the date of this announcement are: Mark Tucker*, Noel Quinn, Ewen Stevenson, Laura Cha, Henri de Castries, Irene Lee, José Antonio Meade Kuribreña, Heidi Miller, David Nish, Jackson Taiand Pauline van der Meer Mohr.
*Non-executive Group Chairman
Independent non-executive Director


HSBC Holdings plc Earnings Release 1Q20
29


Earnings Release – 1Q20


Terms and abbreviations
1Q20First quarter of 2020
1Q19First quarter of 2019
4Q19Fourth quarter of 2019
AIEA
Average interest-earning assets

Bps

Basis points. One basis point is equal to one-hundredth of a percentage point

BSMBalance Sheet Management
C&LCredit and Lending
CET1Common equity tier 1
CMBCommercial Banking, a global business
CODMChief Operating Decision Maker
Corporate Centre
Corporate Centre comprises Central Treasury, including Balance Sheet Management, our legacy businesses, interests in our associates and joint ventures, central stewardship costs and the UK bank levy

CRR IIRevised Capital Requirements Regulation and Directive, as implemented
ECLExpected 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
FTEFull-time equivalent staff
FVOCIFair value through other comprehensive income
GB&MGlobal Banking and Markets, a global business
GECGroup Executive Committee
GLCM

Global Liquidity and Cash Management

GPBGlobal Private Banking, a global business
GroupHSBC Holdings together with its subsidiary undertakings
GTRF

Global Trade and Receivables Finance
Hong Kong
Hong Kong Special Administrative Region of the People’s Republic of China

HSBC
HSBC Holdings together with its subsidiary undertakings

HSBC Bank

HSBC Bank plc, also known as the non-ring-fenced bank

HSBC HoldingsHSBC Holdings plc, the parent company of HSBC
HSBC UKHSBC UK Bank plc, also known as the ring-fenced bank
IASInternational Accounting Standards
IFRSsInternational Financial Reporting Standards
IRBInternal ratings based
JVJoint venture
LCRLiquidity coverage ratio
Mainland China
People’s Republic of China excluding Hong Kong

MENAMiddle East and North Africa
Net operating income
Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue

NIMNet interest margin
POCIPurchased or originated credit-impaired financial assets
PRAPrudential Regulation Authority (UK)
RBWMRetail Banking and Wealth Management, a global business
RevenueNet operating income before ECL
RoEReturn on equity
RoTEReturn on average tangible equity
RWAsRisk-weighted assets
ServCo group
Separately incorporated group of service companies set up in response to UK ring-fencing proposals

$m/$bn/$tnUnited States dollar millions/billions/trillions. We report in US dollars



Registered Office and Group Head Office: 8 Canada Square, London, E14 5HQ, United Kingdom
Web: www.hsbc.com
Incorporated in England with limited liability. Registered number 617987




Paste the following link into your web browser, to view the associated PDF document.
https://www.rns-pdf.londonstockexchange.com/rns/0465L_1-2020-4-27.pdf


30
HSBC Holdings plc Earnings Release 1Q20




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/ Ewen Stevenson
Name:Ewen Stevenson
Title:Group Chief Financial Officer

 
Date: 28 April 2020