Annual Results 2018

Our Annual Report and Accounts 2018 and other key financial documents are available to download.

At a glance

Our international network, access to high-growth markets and balance sheet strength help us deliver long-term value for our stakeholders.

Our operating model consists of four global businesses and a Corporate Centre, supported by HSBC Operations, Services and Technology, and 11 global functions.

For year ended 31 December 2018

$19.9bn
US DOLLARS
Reported profit before tax<br> (2017: $17.2bn)
$21.7bn
US DOLLARS
Adjusted profit before tax<br> (2017: $21.1bn)
$53.8bn
US DOLLARS
Reported revenue<br> (2017: $51.4bn)

At 31 December 2018

$865bn
US DOLLARS
Reported risk-weighted assets<br> (31 Dec 2017: $871bn)
14.0
PER CENT
Common equity tier 1 ratio<br> (31 Dec 2017: 14.5%)
$2,558bn
US DOLLARS
Total assets<br> (31 Dec 2017: $2,522bn)

Strategy highlights

  • All four global businesses grew adjusted revenue in 2018
  • Increased customer numbers and captured market share in our scale markets
  • Grew adjusted revenue in Asia by 11%, and transaction banking revenue by 14%
  • We have improved capital efficiency, growing revenue and lending faster than risk-weighted assets
  • Return on tangible equity of 8.6%, up from 6.8% in 2017

Group Chairman’s statement

“HSBC is in a strong position. Our performance in 2018 demonstrated the underlying health of the business and the potential of the strategy that John Flint, our Group Chief Executive, announced in June.”

Mark E Tucker, HSBC Group Chairman
19 February 2019

Group Chief Executive’s review

“Revenue growth in our four global businesses helped deliver higher Group reported and adjusted profit before tax. Group return on tangible equity – our headline measure – was also up significantly from 6.8% in 2017 to 8.6%. This is a good first step towards meeting our return on tangible equity target of more than 11% by 2020.”

John Flint, HSBC Group Chief Executive
19 February 2019

Our businesses

Retail Banking and Wealth Management
$7.1bn
US dollars
<p>2018 adjusted profit before tax</p> <p>(2017: $6.5bn)</p> <br> <p>We help 38 million customers across the world to manage their finances, buy their homes, and save and invest for the future. In 2018 we:</p> <ul> <li>Increased active customers by 1.2 million</li> <li>Grew our mortgage book by more than US$20bn in the UK and Hong Kong</li> <li>Upgraded our wealth proposition in Asia, including the launch of HSBC Life in Hong Kong</li> <li>Continued to invest in digital technology to make it easier for customers to bank with us, including through mobile apps such as PayMe (Hong Kong) and Connected Money (UK)</li> </ul>
Commercial Banking

$7.7bn
US Dollars
<p>2018 adjusted profit before tax</p> <p>(2017: $6.8bn)</p> <br> <p>We support approximately 1.5 million business customers in 53 countries and territories, ranging from small enterprises focused primarily on their domestic markets, through to large companies operating globally. In 2018 we:</p> <ul> <li>Achieved double-digit growth in adjusted revenue and profit before tax</li> <li>Continued to improve customer experience and satisfaction, taking more than 100 actions to address customer feedback</li> <li>Invested further in our digital capabilities, including making HSBCnet easier to use for around 41,000 clients across 36 countries and territories</li> <li>Contributed more than US$4bn to the Group&rsquo;s sustainable financing target </li> </ul>
Global Banking and Markets
$6.1bn
US Dollars
<p>2018 adjusted profit before tax</p> <p>(2017: $5.8bn)</p> <br> <p>We serve approximately 4,100 clients in more than 50 countries and territories, including major government, corporate and institutional clients. In 2018 we:</p> <ul> <li>Increased adjusted revenue and profit before tax while reducing risk-weighted assets</li> <li>Achieved strong growth in transaction banking products, including in Global Liquidity and Cash Management (up 20%) and Securities Services (up 11%)</li> <li>Continued to expand the capabilities of our securities joint venture in China</li> <li>Acted as sole green structuring adviser on the first ever international offering of green securities by an Asian sovereign</li> </ul>
Global Private Banking

$0.3bn
US dollars
<p>2018 adjusted profit before tax</p> <p>(2017: $0.3bn)</p> <br> <p>We serve high net worth and ultra high net worth individuals and families, including those with international banking needs. In 2018 we:</p> <ul> <li>Achieved a 10% adjusted revenue increase in key markets targeted for growth, particularly in Asia (up 18%) </li> <li>Were named Best Private Bank in both Hong Kong and the UK at the PWM/The Banker Private Banking awards 2018</li> <li>Recorded net new money inflows of US$15bn in key markets targeted for growth &ndash; of which almost 60% came from collaboration with our other global businesses</li> </ul>

Our strategy

Our strategy enables us to connect customers to opportunities. It is supported by long-term global trends and our strong combination of strategic advantages.

Our industry continues to be affected by several long-term and global trends:

Trade growth

Global trade growth is expected to continue and trade within regions is expected to be a key driver, accounting for more than 40% of goods volume growth.

Global trade volume growth of goods, 2017-2025 (US$ trillion)
Global trade volume growth of goods, 2017-2025 (US$ trillion)
Within regions growth US$4.7 trillion
Across regions growth US$6.6 trillion

Increasing connectivity

The world is expected to continue to become more connected as global flows of trade, finance and data continue to grow.

Global services exports (US$ trillion)
Global services exports (US$ trillion)
2030 US$12.3 trillion
2018 US$5.6 trillion

Global middle classes

Half of the world’s population is now considered middle class or wealthier, and this proportion is expected to grow to approximately two-thirds by 2030. Almost nine in 10 of the next billion middle-class consumers will be Asian.

Global population by income segment (% of total)
Vulnerable or poor Middle class or wealthier
2030 33% 67%
2018 50% 50%

Low-carbon investment

Climate change is accelerating and global temperatures are trending significantly higher. Investment in renewable energy capacity will be needed to limit the global temperature increase to 2 degrees Celsius.

Renewables share of installed capacity in G20 countries (%)
Renewables share of installed capacity in G20 countries (%)
Required in 2050 71%
2017 33%

Financial targets

Return on tangible equity (%)

Our target is to achieve a reported return on tangible equity (RoTE) of more than 11% by the end of 2020. We intend to do this while maintaining a common equity tier 1 ratio of greater than 14%.

RoTE is calculated as reported profit attributable to ordinary shareholders less changes in goodwill and the present value of in-force long-term insurance business, divided by average tangible shareholders’ equity. A targeted reported RoTE of 11% in 2020 is broadly equivalent to a reported return on equity of 10%.

In 2018, we achieved a RoTE of 8.6% compared with 6.8% in 2017.

Return on tangible equity (%)
2018 8.6%
2017 6.8%
2016 2.6%

Adjusted jaws (%)

Adjusted jaws measures the difference between the rates of change in adjusted revenue and adjusted operating expenses. Our target is to maintain positive adjusted jaws on an annual basis, while noting the sensitivity of the impact on adjusted jaws of unexpected movements in revenue or operating expenses growth.

Positive jaws occurs when the percentage change in revenue is higher than, or less negative than, the corresponding rate for operating expenses.

In 2018, adjusted revenue increased by 4.4% and our adjusted operating expenses increased by 5.6%. Adjusted jaws was therefore negative 1.2%.

Dividends

We plan to sustain ordinary dividends at the current level for the foreseeable future. Growing our dividend will depend on the overall profitability of the Group, delivering further release of less efficiently deployed capital and meeting regulatory capital requirements in a timely manner.

Total dividends declared in respect of the year (US$bn)
Total dividends declared in respect of the year (US$bn)
2018 US$10.2 billion
2017 US$10.2 billion
2016 US$10.1 billion

To achieve these financial targets by 2020, we aim to deliver mid-single digit growth in revenue, low- to mid-single digit growth in operating expenses, and approximately 1-2% annual growth in risk-weighted assets. Given the current economic environment, we will seek to offset some or all of any possible weaker-than-planned revenue growth with actions to manage operating expenses and investments.

Video


HSBC Group Chief Executive John Flint discusses the Group’s performance in 2018 and the outlook for the year ahead.

John Flint, HSBC Group Chief Executive (duration 2:56)

Notes

1 Revenue from international clients is derived from an allocation of adjusted revenue based on internal management information. International clients are businesses and individuals with an international presence.
2 Adjusted basis, geographical view; Group total and regional % composition excludes Holdings; regional % composition calculated with regional figures that include intra-Group revenues.

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