# The Hongkong and Shanghai Banking Corporation Limited ## Annual Report and Accounts 2024 ### Contents 1 Certain defined terms 1 Cautionary statement regarding forward-looking statements 1 Chinese translation 2 Financial Highlights 3 Report of the Directors 10 Task Force on Climate-related Financial Disclosures 15 Financial Review 19 Risk 66 Independent Auditor’s Report ### Consolidated Financial Statements 71 Consolidated income statement 72 Consolidated statement of comprehensive income 73 Consolidated balance sheet 74 Consolidated statement of changes in equity 76 Consolidated statement of cash flows ### Notes on the Consolidated Financial Statements 77 1 Basis of preparation and material accounting policies 87 2 Operating profit 90 3 Insurance business 95 4 Employee compensation and benefits 99 5 Tax 100 6 Dividends 101 7 Trading assets 101 8 Derivatives 104 9 Financial assets designated and otherwise mandatorily measured at fair value through profit or loss 104 10 Loans and advances to customers 105 11 Financial investments 106 12 Assets pledged, assets transferred and collateral received 107 13 Investments in subsidiaries 107 14 Interests in associates and joint ventures 110 15 Goodwill and intangible assets 111 16 Property, plant and equipment 112 17 Prepayments, accrued income and other assets 112 18 Customer accounts 112 19 Trading liabilities 112 20 Financial liabilities designated at fair value 112 21 Debt securities in issue 113 22 Accruals and deferred income, other liabilities and provisions 113 23 Share capital 114 24 Other equity instruments 114 25 Maturity analysis of assets and liabilities 117 26 Analysis of cash flows payable under financial liabilities by remaining contractual maturities 118 27 Contingent liabilities, contractual commitments and guarantees 118 28 Other commitments 118 29 Offsetting of financial assets and financial liabilities 120 30 Segmental analysis 121 31 Related party transactions 124 32 Fair values of financial instruments carried at fair value 130 33 Fair values of financial instruments not carried at fair value 131 34 Structured entities 133 35 Bank balance sheet and statement of changes in equity 135 36 Business acquisitions and disposals 135 37 Legal proceedings and regulatory matters 135 38 Ultimate holding company 135 39 Events after the balance sheet date 135 40 Approval of financial statements 136 Additional information ### Certain defined terms This document comprises the Annual Report and Accounts 2024 for The Hongkong and Shanghai Banking Corporation Limited (‘the Bank’) and its subsidiaries (together ‘the group’). References to ‘HSBC’, ‘the Group’ or ‘the HSBC Group’ within this document mean HSBC Holdings plc together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People’s Republic of China is referred to as ‘Hong Kong’. The abbreviations ‘HK$m’ and ‘HK$bn’ represent millions and billions (thousands of millions) of Hong Kong dollars respectively. ### Cautionary statement regarding forward-looking statements This Annual Report and Accounts 2024 contains certain forward-looking statements with respect to the financial condition, environmental, social and governance (‘ESG’)-related matters, results of operations and business of the group, including the strategic priorities; financial, investment and capital targets; and the group's ability to contribute to the Group's (including the group’s) ESG ambitions, targets and commitments described herein. Statements that are not historical facts, including statements about the group’s beliefs and expectations, are forward-looking statements. Words such as ‘expects’, ‘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 no undue reliance should be placed on them. Forward-looking statements apply only as of the date they are made. The group 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 statement. Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors, including ESG-related factors, could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. Please see pages 137 to 138 for the additional cautionary statement regarding ESG and climate-related data, metrics and forward-looking statements. ### Chinese translation A Chinese translation of the Annual Report and Accounts 2024 is available upon request from: Communications (Asia), Level 32, HSBC Main Building, 1 Queen’s Road Central, Hong Kong. The report is also available, in English and Chinese, on the Bank’s website at www.hsbc.com.hk. --- # Financial Highlights | | 2024 HK$m | 2023 HK$m | | :--- | :--- | :--- | | **For the year** | | | | Net operating income before change in expected credit losses and other credit impairment charges | 265,695 | 249,679 | | Profit before tax | 153,932 | 121,443 | | Profit attributable to shareholders | 122,363 | 90,747 | | **At the year-end** | | | | Total shareholders’ equity | 819,049 | 812,726 | | Total equity | 878,008 | 872,586 | | Total capital$^{1}$ | 643,455 | 631,701 | | Customer accounts | 6,564,606 | 6,261,051 | | Total assets | 10,948,940 | 10,500,393 | | **Ratios** | **%** | **%** | | Return on average ordinary shareholders’ equity | 15.3 | 11.3 | | Return on tangible equity (‘ROTE’)$^{2}$ | 18.2 | 13.5 | | Post-tax return on average total assets | 1.2 | 0.9 | | Cost efficiency ratio | 44.3 | 44.1 | | Net interest margin | 1.63 | 1.81 | | Advances-to-deposits ratio | 53.2 | 56.8 | | **Capital ratios** | | | | Common Equity Tier 1 ('CET1') capital | 16.3 | 15.8 | | Tier 1 capital | 18.4 | 17.5 | | Total capital | 20.3 | 19.7 | 1. Capital is calculated in accordance with the Banking (Capital) Rules issued by the Hong Kong Monetary Authority (‘HKMA’) under section 97C(1) of the Banking Ordinance. 2. The group's ROTE is calculated as part of the Group ROTE framework and is based on IFRS financials. --- # Report of the Directors ### Principal Activities The group provides a comprehensive range of domestic and international banking and related financial services, principally in the Asia–Pacific region. ### Asia Strategy The Asia region has strong and sustained underlying fundamentals of economic growth, trade, and wealth creation. HSBC’s strategy in Asia builds on 160 years of experience in the region. Our strategy is aligned to the biggest opportunities to create further shareholder value. Our ambition is to be the leading international wealth, corporate and institutional bank by market share across Asia. We are well positioned to further extend the strengths of our leading Hong Kong franchise into other key growth markets, including mainland China, India and the Association of Southeast Asian Nations ('ASEAN') region. We continue to invest in our people and technology. We remain focused on connecting Asian markets to each other and the world through HSBC’s global network, supporting the transition to a low-carbon economy through sustainable finance solutions, and improving customer experience while continually streamlining our organisation to realise greater operating efficiencies through technology. ### Consolidated Financial Statements The consolidated financial statements of the group are set out on pages 71 to 135. ### Subordinated Liabilities, Share Capital and Other Equity Instruments Details on subordinated liabilities issued by the group are set out in Notes 31. Details on share capital and other equity instruments of the Bank are set out in Notes 23 and 24 on the consolidated financial statements. ### Dividends The interim dividends paid in respect of 2024 are set out in Note 6 on the consolidated financial statements. ### Directors The Directors at the date of this report are set out below: **Dr Peter Tung Shun WONG, GBS, JP** *Non-executive Chairman (since June 2021)* **David Gordon ELDON, GBS, CBE, JP** *Independent* non-executive Deputy Chairman (since June 2021)* **David Yi Chien LIAO, JP** *Co-Chief Executive Officer (since June 2021)* **Surendranath Ravi ROSHA** *Co-Chief Executive Officer (since June 2021)* **Paul Jeremy BROUGH** *Independent non-executive Director (since June 2023)* **Judy Lai Kun CHAU** *Independent non-executive Director (since April 2024)* --- # Financial Review ## Results for 2024 (Unaudited) Profit before tax for 2024 reported by The Hongkong and Shanghai Banking Corporation Limited (‘the Bank’) and its subsidiaries (together ‘the group’) increased by HK$32,489m, or 27%, to HK$153,932m. ### Consolidated income statement by reportable segments (Audited) | | Wealth and Personal Banking HK$m | Commercial Banking HK$m | Global Banking HK$m | Markets and Securities Services HK$m | Corporate Centre$^{1}$ HK$m | Other (GBM other)$^{2}$ HK$m | Total HK$m | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Year ended 31 Dec 2024** | | | | | | | | | Net interest income/(expense) | 80,480 | 59,528 | 24,408 | 6,352 | (55,004) | 1,873 | 117,637 | | Net fee income/(expense) | 24,042 | 10,827 | 5,318 | 2,020 | 318 | (8) | 42,517 | | Net income from financial instruments measured at fair value through profit or loss | 42,243 | 4,240 | 187 | 28,010 | 53,110 | 164 | 127,954 | | Insurance finance income/(expense) | (35,684) | — | — | — | 21 | — | (35,663) | | Insurance service result | 8,142 | — | — | — | (11) | — | 8,131 | | Other operating income/(expense) | 2,439 | 501 | 429 | 1,505 | 504 | (259) | 5,119 | | **Net operating income/(expense) before change in expected credit losses and other credit impairment charges** | **121,662** | **75,096** | **30,342** | **37,887** | **(1,062)** | **1,770** | **265,695** | | – of which: external | 63,994 | 75,783 | 41,673 | 77,604 | (18,256) | 24,897 | 265,695 | | inter-segment | 57,668 | (687) | (11,331) | (39,717) | 17,194 | (23,127) | — | | Change in expected credit losses and other credit impairment charges | (2,770) | (6,863) | (2,142) | — | (165) | (6) | (11,946) | | **Net operating income/(expense)** | **118,892** | **68,233** | **28,200** | **37,887** | **(1,227)** | **1,764** | **253,749** | | Operating expenses | (54,524) | (23,647) | (11,601) | (16,338) | (9,297) | (2,185) | (117,592) | | **Operating profit/(loss)** | **64,368** | **44,586** | **16,599** | **21,549** | **(10,524)** | **(421)** | **136,157** | | Share of profit in associates and joint ventures | 261 | — | — | — | 17,514 | — | 17,775 | | **Profit/(loss) before tax** | **64,629** | **44,586** | **16,599** | **21,549** | **6,990** | **(421)** | **153,932** | | **Balance sheet data at 31 Dec 2024** | | | | | | | | | Loans and advances to customers (net) | 1,541,986 | 1,134,555 | 782,831 | 31,096 | 972 | 2,858 | 3,494,298 | | Customer accounts | 3,812,451 | 1,754,192 | 759,249 | 224,938 | 14 | 13,762 | 6,564,606 | 1. Includes inter-segment elimination. 2. Mainly comprises other business activities which are jointly managed by GB and Markets and Securities Services ('MSS'). --- # Risk ### Our approach to risk (Unaudited) #### Our risk appetite Our risk appetite defines the level and types of risk that we are willing to take, while informing the financial planning process and guiding strategic decision making. Our risk appetite is defined as the aggregate level of risk that the bank is comfortable to take to achieve its strategic objectives. Risk appetite also provides a mechanism for non-executive directors and executive directors to collectively establish the bank’s willingness to engage in certain activities and assess these activities. #### Enterprise-wide application Our risk appetite is expressed holistically through various risk management mechanisms and activities, in both quantitative and qualitative terms. The Board reviews and approves the group’s risk appetite regularly to make sure it remains fit for purpose. The group’s risk appetite is considered, developed and enhanced through the following principles: * alignment with our strategy, purpose, values, external risk environment, reputational and customer needs; * compliance with applicable laws, regulations and regulatory priorities; * forward-looking insights into future risk exposure; * sufficiency of available capital, liquidity and balance sheet leverage to absorb risks; * capacity and capabilities of people to manage the risk landscape; * functionality, capacity and resilience of available systems to manage the risk landscape; * effectiveness of the applicable control environment to mitigate risk; and * internally and externally disclosed commitments. --- # Independent Auditor’s Report ### To the Shareholder of The Hongkong and Shanghai Banking Corporation Limited (incorporated in Hong Kong with limited liability) #### Opinion **What we have audited** The consolidated financial statements of The Hongkong and Shanghai Banking Corporation Limited (the 'Bank’) and its subsidiaries (the 'group’), which are set out on pages 71 to 135, comprise: * the consolidated balance sheet as at 31 December 2024; * the consolidated income statement for the year then ended; * the consolidated statement of comprehensive income for the year then ended; * the consolidated statement of changes in equity for the year then ended; * the consolidated statement of cash flows for the year then ended; and * the notes$^{1}$ on the consolidated financial statements, comprising material accounting policies and other explanatory information. #### Our opinion In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the group as at 31 December 2024, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (‘HKFRSs’) issued by the Hong Kong Institute of Certified Public Accountants (‘HKICPA’) and have been properly prepared in compliance with the Hong Kong Companies Ordinance. --- ### Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters identified in our audit are summarised as follows: * Allowances for expected credit losses on loans and advances to customers * Impairment assessment of investment in associate – Bank of Communications Co., Ltd (‘BoCom’) --- # Consolidated Financial Statements ## Consolidated income statement for the year ended 31 December | | Notes | 2024 HK$m | 2023 HK$m | | :--- | :--- | :--- | :--- | | Net interest income | 2a | **117,637** | 130,780 | | – interest income | | **315,868** | 295,212 | | – interest expense | | **(198,231)** | (164,432) | | Net fee income | 2b | **42,517** | 38,043 | | – fee income | | **56,219** | 51,025 | | – fee expense | | **(13,702)** | (12,982) | | Net income from financial instruments held for trading or managed on a fair value basis | 2c | **91,930** | 74,435 | | Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | 2c | **36,024** | 48,959 | | Insurance finance expense | | **(35,663)** | (48,798) | | Insurance service result | 3 | **8,131** | 6,558 | | – Insurance revenue | | **16,533** | 13,007 | | – Insurance service expense | | **(8,402)** | (6,449) | | Other operating income/(expense) | 2d | **5,119** | (298) | | **Net operating income before change in expected credit losses and other credit impairment charges** | | **265,695** | 249,679 | | Change in expected credit losses and other credit impairment charges | 2e | **(11,946)** | (12,843) | | **Net operating income** | | **253,749** | 236,836 | | Employee compensation and benefits | 4 | **(40,028)** | (38,547) | | General and administrative expenses | 2f | **(57,967)** | (54,538) | | Depreciation and impairment of property, plant and equipment | 2g | **(10,925)** | (9,724) | | Amortisation and impairment of intangible assets | | **(8,672)** | (7,184) | | **Total operating expenses** | | **(117,592)** | (109,993) | | **Operating profit** | | **136,157** | 126,843 | | Share of profit in associates and joint ventures | 14 | **17,775** | 18,555 | | Impairment of interest in associate | 14 | **—** | (23,955) | | **Profit before tax** | | **153,932** | 121,443 | | Tax expense | 5 | **(24,681)** | (23,916) | | **Profit for the year** | | **129,251** | 97,527 | | **Attributable to:** | | | | | – ordinary shareholders of the parent company | | **118,787** | 87,191 | | – other equity holders | | **3,576** | 3,556 | | – non-controlling interests | | **6,888** | 6,780 | | **Profit for the year** | | **129,251** | 97,527 | --- ```mermaid mermaid graph TD A[Start] --> B{Process}; B --> C[End]; ```